The Stock Exchange of Hong Kong Limited and the Securities and Futures Commission take no responsibility for the contents of this Application Proof, 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 Application Proof.
Application Proof of HONG KONG MEDICAL CONSULTANTS HOLDINGS LIMITED (a company incorporated in the Cayman Islands with limited liability) WARNING
The publication of this Application Proof is required by The Stock Exchange of Hong Kong Limited (the ‘‘Exchange’’) and the Securities and Futures Commission (the ‘‘Commission’’) solely for the purpose of providing information to the public in Hong Kong.
This Application Proof is in draft form. The information contained in it is incomplete and is subject to change which can be material. By viewing this document, you acknowledge, accept and agree with Hong Kong Medical Consultants Holdings Limited (the ‘‘Company’’), its sponsors, advisers or members of the underwriting syndicate that:
(a) this document is only for the purpose of providing information about the Company to the public in Hong Kong and not for any other purposes. No investment decision should be based on the information contained in this document;
(b) the publication of this document or supplemental, revised or replacement pages on the Exchange’swebsite does not give rise to any obligation of the Company, its sponsors, advisers or members of the underwriting syndicate to proceed with an offering in Hong Kong or any other jurisdiction. There is no assurance that the Company will proceed with the offering;
(c) the contents of this document or supplemental, revised or replacement pages may or may not be replicated in full or in part in the actual final listing document;
(d) this Application Proof is not the final listing document and may be updated or revised by the Company from time to time in accordance with the Listing Rules;
(e) this document does not constitute a prospectus, offering circular, notice, circular, brochure or advertisement offering to sell any securities to the public in any jurisdiction, nor is it an invitation to the public to make offers to subscribe for or purchase any securities, nor is it calculated to invite offers by the public to subscribe for or purchase any securities;
(f) this document must not be regarded as an inducement to subscribe for or purchase any securities, and no such inducement is intended;
(g) neither the Company nor any of its affiliates, advisers or underwriters is offering, or is soliciting offers to buy, any securities in any jurisdiction through the publication of this document;
(h) no application for the securities mentioned in this document should be made by any person nor would such application be accepted;
(i) the Company has not and will not register the securities referred to in this document under the United States Securities Act of 1933, as amended, or any state securities laws of the United States;
(j) as there may be legal restrictions on the distribution of this document or dissemination of any information contained in this document, you agree to inform yourself about and observe any such restrictions applicable to you; and
(k) the application to which this document relates has not been approved for listing and the Exchange and the Commission may accept, return or reject the application for the subject public offering and/or listing.
If an offer or an invitation is made to the public in Hong Kong in due course, prospective investors are reminded to make their investment decisions solely based on the Company’s prospectus registered with the Registrar of Companies in Hong Kong, copies of which will be distributed to the public during the offer period. THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THAT THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED ‘‘WARNING’’ ON THE COVER OF THIS DOCUMENT.
IMPORTANT
If you are in any doubt about any of the contents of this document, you should obtain independent professional advice.
HONG KONG MEDICAL CONSULTANTS HOLDINGS LIMITED 中 卓 醫 務 控 股 有 限 公 司 (incorporated in the Cayman Islands with limited liability)
[REDACTED]
Number of [REDACTED] under the : [REDACTED] Shares (subject to the [REDACTED] [REDACTED]) Number of [REDACTED] : [REDACTED] Shares (subject to reallocation) Number of [REDACTED] : [REDACTED] Shares (subject to reallocation and the [REDACTED]) [REDACTED] : HK$[REDACTED] per [REDACTED], plus brokerage fee of 1.0%, SFC transaction levy of 0.0027% and the Stock Exchange trading fee of 0.005% (payable in full on application in Hong Kong dollars and subject to refund) Nominal Value : HK$[0.00001] per Share [REDACTED] : [.]
Sole Sponsor, [REDACTED], [REDACTED] and [REDACTED]
Hong Kong Exchanges and Clearing Limited, The Stock Exchange of Hong Kong Limited and Hong Kong Securities Clearing Company Limited take no responsibility for the contents of this document, 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 document.
A copy of this document, having attached thereto the documents specified in the section headed ‘‘Documents Delivered to the Registrar of Companies and Available for Inspection’’ in Appendix VI to this document, has been registered by the Registrar of Companies in Hong Kong as required by Section 342C of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Chapter 32 of the Laws of Hong Kong). The Securities and Futures Commission and the Registrar of Companies in Hong Kong take no responsibility for the contents of this document or any other document referred to above.
The [REDACTED] is expected to be determined by agreement between the [REDACTED] (for itself and on behalf of the [REDACTED]) and our Company on the [REDACTED]. The [REDACTED] is expected to be on or about [REDACTED], (Hong Kong time) and, in any event, not later than [REDACTED] (Hong Kong time) unless otherwise announced. The [REDACTED] will not be more than HK$[REDACTED] and is currently expected to be not less than HK$[REDACTED] per [REDACTED]. If, for any reason, the [REDACTED] is not agreed between the [REDACTED] (for itself and on behalf of the [REDACTED]) and our Company on or before [REDACTED] (Hong Kong time) or such other date as announced, the [REDACTED] will not proceed and will lapse.
Prior to making an investment decision, prospective investors should consider carefully all of the information set out in this document, including the risk factors set out in the section headed ‘‘Risk Factors’’.
The obligations of the [REDACTED] under the [REDACTED] are subject to termination by the [REDACTED] (for itself and on behalf of the [REDACTED]) if certain grounds arise prior to 8:00 a.m. on the day that trading in the [REDACTED] commences on the Stock Exchange. Such grounds are set out in the section headed ‘‘[REDACTED] — [REDACTED] Arrangements and Expenses — [REDACTED] — Grounds for termination’’.
The [REDACTED] have not been, and will not be, registered under the Securities Act or the securities laws of any state of the United States and may not be [REDACTED] or sold in the United States, except pursuant to an exemption from, or in transactions not subject to, the registration requirements of the Securities Act. The [REDACTED] will be [REDACTED] and sold only outside the United States in offshore transactions in accordance with [REDACTED] under the Securities Act.
[REDACTED] THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THAT THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED ‘‘WARNING’’ ON THE COVER OF THIS DOCUMENT.
EXPECTED TIMETABLE
[REDACTED]
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EXPECTED TIMETABLE
[REDACTED]
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EXPECTED TIMETABLE
[REDACTED]
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CONTENTS
IMPORTANT NOTICE TO INVESTORS
This document is issued by our Company solely in connection with the [REDACTED] and the [REDACTED] and does not constitute an [REDACTED] to sell or a solicitation of an [REDACTED] to buy any securities other than the [REDACTED]. This document may not be used for the purpose of, and does not constitute, an [REDACTED] to sell or a solicitation of an [REDACTED] to buy in any other jurisdiction or in any other circumstances. No action has been taken to permit a [REDACTED] of the [REDACTED] or the distribution of this document in any jurisdiction outside Hong Kong. The distribution of this document and the [REDACTED] and sale of the [REDACTED] in other jurisdictions are subject to restrictions and may not be made except as permitted under the applicable securities laws of such jurisdictions pursuant to registration with or authorisation by the relevant securities regulatory authorities or an exemption therefrom.
You should rely only on the information contained in this document to make your investment decision. We have not authorised anyone to provide you with information that is different from the information contained in this document. Any information or representation not included in this document must not be relied on by you as having been authorised by us, the Sole Sponsor, the [REDACTED], the [REDACTED], the [REDACTED], the [REDACTED], any of our or their respective directors, officers, employees, agents, affiliates or advisors or any other party involved in the [REDACTED]. Information contained in our website, located at https:// www.hkmedicalconsultants.com or https://www.hk-imaging.com, does not form part of this document.
Page
Expected Timetable ...... i
Contents ...... iv
Summary ...... 1
Definitions ...... 14
Forward-Looking Statements ...... 28
Risk Factors ...... 29
Information About This Document and the [REDACTED] ...... 44
Directors and Parties Involved in the [REDACTED] ...... 47
Corporate Information ...... 50
Industry Overview ...... 52
Regulatory Overview ...... 64
History, Reorganisation and Corporate Structure ...... 74
Business ...... 96
Relationship with Our Controlling Shareholders ...... 151
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CONTENTS
Page
Continuing Connected Transactions ...... 158
Directors and Senior Management ...... 163
Substantial Shareholders ...... 176
Share Capital ...... 179
Financial Information ...... 181
Future Plans and [REDACTED] ...... 226
[REDACTED] ...... 236
Structure of the [REDACTED] ...... 248
How to Apply for [REDACTED] ...... 257
Appendix I — Accountant’sReport ...... I-1
Appendix II — Unaudited Pro Forma Financial Information ...... II-1
Appendix III — Property Valuation Report ...... III-1
Appendix IV — Summary of the Constitution of the Company and Cayman Islands Company Law ...... IV-1
Appendix V — Statutory and General Information ...... V-1
Appendix VI — Documents Delivered to the Registrar of Companies and Available for Inspection ...... VI-1
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SUMMARY
This summary is intended to provide you with an overview of the information contained in this document. As it is a summary, it does not contain all the information that may be important to you. You should read this document, including the appendices, in its entirety before you decide whether to invest in the [REDACTED]. There are risks associated with any investment. Some of the particular risks of investing in the [REDACTED] are set out in the section headed ‘‘Risk Factors’’ in this document. You should read that section carefully before you decide to invest in the [REDACTED].
OVERVIEW We are an integrated private medical services provider in Hong Kong with specialist doctors renowned in their respective fields of expertise, providing specialist medical services and complemented by various allied health services and medical management services. According to Frost & Sullivan, we ranked sixth as a multi-specialties medical centre operator in Hong Kong with a market share of approximately 1.3% in terms of revenue generated from provision of specialist services (including internal medicine and surgery related specialist services) in 2019. We also ranked third in terms of revenue generated from provision of internal medicine specialty services amongst all private multi- specialties medical centre operators in Hong Kong, according to Frost & Sullivan. As at the Latest Practicable Date, we operated six medical centres, which comprise of three multi- specialties clinics, one psychiatric centre, one geriatric medical centre, and one paediatric centre under our brand ‘‘Hong Kong Medical Consultants’’, and logo ; and we operated two imaging and diagnoses centres and one laboratory under the our sub-brand ‘‘Hong Kong Imaging and Diagnostic Centre’’, and logo , all of which are located in Central, Hong Kong. Our clients mainly include individuals seeking high quality medical treatment from our well regarded specialists. We are committed to delivering efficient and exemplary medical services across specialties and disciplines. Our medical services business operates under two main service streams: 1. Specialist medical services: we provide a wide range of specialty services including cardiology, respiratory medicine, gastroenterology & hepatology, nephrology, neurology, psychiatry, endocrinology, diabetes & metabolism, geriatric medicine, oncology, paediatrics and rheumatology at our Medical Centres as well as inpatient services at private hospitals in Hong Kong; and 2. Allied health services: we provide various allied health services including clinical psychology, speech therapy, nutritional therapy and psychological counselling at our Medical Centres as well as imaging, diagnostic and laboratory services at our Diagnostic Centres. To a much lesser extent, we provide medical management services to certain medical practitioners in relation to administrative and operational functions. By offering medical management services to selected medical practitioners, we are able to extend and build relationships, and enhance our ability to attract and recruit specialist doctors that we believe would be able to complement our business. As at the Latest Practicable Date, our medical team consisted of 15 specialist doctors who have a significant amount of experience with an average of approximately 19 years of specialist qualification and work for us on an exclusive basis, covering 11 medical specialties. We also have 13 Panel Specialists that work for us on a non-exclusive basis, covering ten specialties. The following table sets out the breakdown of our revenue by service stream for the years indicated: Year ended 31 March 2019 2020 2021 HK$’000 % HK$’000 % HK$’000 %
Medical Services: — Specialist medical services 192,273 98.3 232,427 93.6 218,006 86.7 — Allied health services 12 0.0 13,137 5.3 36,483 14.5 192,285 98.3 245,564 98.9 254,489 101.2 Elimination of inter-segment revenue ——(1,768) (0.7) (7,586) (3.0) Total Medical Services 192,285 98.3 243,796 98.2 246,903 98.2
Medical management services 3,375 1.7 4,598 1.8 4,531 1.8
Total 195,660 100.0 248,394 100.0 251,434 100.0
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SUMMARY
Note: (1) Prior to November 2017, our business comprised mainly of medical management services. Our medical services business started in November 2017 when our Founding Doctors joined our platform as specialist doctors. We also acquired Hong Kong Imaging in October 2019, which is part of our allied health services. For further details, please see the section headed ‘‘History, Reorganisation and Corporate Structure’’. OUR COMPETITIVE STRENGTHS We believe that our success is mainly attributable to the following competitive strengths: (i) we are one of the leading multi-specialties medical centre operators in Hong Kong and we are able to attract and retain highly skilled medical practitioners leveraging on our strong brand name and medical platform; (ii) our multi-disciplinary specialist medical services enhances our brand and generates significant business synergy; (iii) our medical platform is under centralised management with standardised operation procedures and stringent quality control; and (iv) we have a doctor-led management team and our healthcare professional team comprises experienced specialist doctors, nurses and allied health professionals. For further information on our competitive strengths, please see the section headed ‘‘Business — Our Competitive Strengths’’. OPPORTUNITIES AND STRATEGIES We strive to continue to become one of the best specialist medical service providers in Hong Kong and we plan to take advantage of the following opportunities and implement the following strategies: (i) expand our medical team to provide a wider span of specialist medical services; (ii) recruit talented medical practitioners by taking advantage of the trend towards consolidation of smaller medical practices in Hong Kong; (iii) establish an integrated flagship medical centre, and reduce reliance and risks associated with the rental of properties by establishing an integrated diagnostic centre; and (iv) expand our allied health services network and develop complementary services. For further information on our opportunities and strategies, please see the section headed ‘‘Business — Opportunities and Strategies’’. OUR BUSINESS MODEL We mainly provide medical services to our clients through our specialist medical services and allied health services, and to a much lesser extent, we provide medical management services to certain medical practitioners. Our services are provided at our Medical Centres and Diagnostic Centres as well as private hospitals in Hong Kong through our professional team. Our Services Specialist medical services During the Track Record Period, we have grown our business to offer a wide range of specialist medical services under our brand. We aim to provide a full spectrum of specialist medical services through (i) clinical services provided at our Medical Centres, including tertiary care such as providing support and second opinions to other medical professionals for complicated conditions; and (ii) inpatient services provided at private hospital in Hong Kong to clients that require advanced medical management and treatments. For details of the medical specialties covered by our medical team as at the Latest Practicable Date, please see the section headed ‘‘ Business — Our Services — Medical Services’’. Allied health services We also provide allied health services at our Medical Centres and imaging and diagnoses services at our Diagnostic Centres to facilitate our clients’ rehabilitation, diagnostics and other health needs. Our allied health services mainly include clinical psychology, speech therapy, nutritional therapy, psychological counselling provided by non-doctor panel specialists at Medical Centres, and imaging and diagnostic services provided by staff at Hong Kong Imaging. Starting in February 2021, we also provided COVID-19 vaccination services at the Community Vaccination Centre at the Kowloon Bay Sports Centre (‘‘CVC Centre’’); and our contract with the Hong Kong government to provide such services is expected to end around September 2021 depending on the on-going COVID-19 situation.
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SUMMARY
Medical management services During the Track Record Period, we provided medical management services to certain medical practitioners in relation to administrative and operational functions such as clinic management, accounting and finance, human resources, central procurement of pharmaceuticals and clinical supplies, facilities and lease management, regulatory compliance, marketing and business development, medical record management and information technology systems for maintaining patient and financial records. We currently provide medical management services to the HKMC Ophthalmologists. Our Professional Team Our professional team comprises of our medical team and allied health services team along with a team of pharmacists, nurses and medical assistants. Our specialist medical services are provided by our medical team which comprises of (i) 15 specialist doctors covering 11 medical specialties and (ii) nine doctor panel specialists covering six specialties. Our allied health services are provided by our allied health service team, which comprises of (i) four non-doctor panel specialists covering four specialties at Medical Centres; and (ii) doctors, radiologists, nurses, healthcare assistants and other technicians at Hong Kong Imaging. For details, please see the section headed ‘‘Business — Our Professional Team’’. Compensation arrangements with our Founding Doctors and Equity Partner Doctors Of our 15 specialist doctors as at the Latest Practicable Date, five are Founding Doctors, eight are Equity Partner Doctors, and two are Employee Doctors. The service fees we pay to our specialist doctors that are Founding Doctors and Equity Partner Doctors has had a significant impact on our financial results during the Track Record Period and this is expected to continue after the [REDACTED]. During the Track Record Period, we paid no service fees to our Founding Doctors. Our Founding Doctors were willing to accept no service fees for the medical services they provided to us because as founding shareholders, they were willing to take up the risk and rewards of the business, and future earnings generated by the Group. As Founding Doctors, they rely mainly on dividends distributed by us as their primary source of income. During the Track Record Period, the amount of dividends declared that was attributable to the Founding Doctors amounted to HK$103.1 million. Should we have paid service fees to the Founding Doctors during the Track Record Period, our profit during the Track Record Period would have be substantially lower. Please see the section headed ‘‘Business — Our Professional Team — Hypothetical Net Profit Taking into Account Market Compensation of our Founding Doctors’’ for further information. In contrast to our Founding Doctors, our Equity Partner Doctors’ service fees were calculated as the difference between his/her annual fee contribution (e.g. EBITDA or net revenue) and his/her committed fee contribution to us. The service fee arrangements that our Equity Partner Doctors have with us effectively caps the potential profitability that the Group can retain from them to approximately the total amount of Fixed Committed Fee Contributions, which is currently HK$9.3 million per year (excluding Dr. Stanley Yu, who provides a Variable Committed Fee Contribution); and this is expected to continue to limit our profitability attributable to them for the foreseeable future. Please see the section headed ‘‘Business — Our Professional Team — Compensation Arrangements with Specialist Doctors and Panel Specialists’’ for further information on our compensation arrangements. Please also see the section headed ‘‘Risk Factors — Risks Relating to Our Business — The service fees we pay to our specialist doctors that are Founding Doctors and Equity Partner Doctors have had, and are expected to continue to have, a significant impact on our business, financial position and profitability’’. New service agreements with Founding Doctors and Equity Partner Doctors All of our Founding Doctors and Equity Partner Doctors will enter into New Service Agreements with us, which will become effective upon the [REDACTED] to (i) extend the termination date of their existing service agreement to 31 March 2026 and (ii) pay us an early termination fee should they terminate their services to us prior to 31 March 2026 or we terminate the New Service Agreements prior to 31 March 2026 upon the occurrence of any termination event caused by these doctors, including, without limitation, (a) their inability to provide medical services to our Group due to termination or suspension of their medical licence; and (b) material breach of the terms of the New Service Agreements resulting from their fraud, wilful default or gross negligence. The key terms of the New Service
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SUMMARY
Agreements for each of our Founding Doctors and Equity Partner Doctors, including with respect to service fees, will remain the same as their existing service agreements, except with respect to the extended term and termination fee. Please see the section headed ‘‘Business — Our Professional Team — New Service Agreements with Founding Doctors and Equity Partner Doctors’’ for further information. Pricing Our medical services primarily include consultation fees, medication fees, treatment fees and laboratory and diagnostic fees. Our management takes into account various factors such as (i) market price range charged by our competitors, (ii) operating costs, (iii) time costs and complexity of the treatment, (iv) the type of specialty involved and (v) the level of seniority of our medical practitioners, when determining our rates chargeable to our individual clients. For our corporate clients, we may offer discounts for certain medical schemes and insurance companies, subject to negotiation. We generally adopt a cost-plus basis of our cost in providing medical management services. OUR CLIENTS AND SUPPLIERS During the Track Record Period, our clients primarily consisted of individual clients and corporate clients for our medical services, and medical practitioners for our medical management services. For the year ended 31 March 2019, our single largest client was an individual patient and the revenue generated from this patient was HK$8.1 million, representing 4.2% of our total revenue during the year. For the year ended 31 March 2020, our single largest client was an insurance provider, and the revenue generated from this corporate client was HK$8.2 million, representing 3.3% of our total revenue during the year. For the year ended 31 March 2021, our single largest client was an insurance provider, and the revenue generated from this corporate client was HK$8.9 million, representing 3.5% of our total revenue during the period. For the years ended 31 March 2019, 2020 and 2021, revenue from our five largest clients, included individual and corporate clients, and doctors that we provided medical management services to, amounted to HK$16.9 million, HK$18.0 million and HK$18.9 million, respectively, representing 8.7%, 7.3% and 7.5% of our total revenue, respectively. During the Track Record Period, our suppliers mainly consisted of pharmaceutical distributors and laboratories and imaging centres located in Hong Kong. For the years ended 31 March 2019, 2020 and 2021, purchases from our single largest supplier, which was a provider of pharmaceutical products, amounted to HK$15.8 million, HK$20.1 million and HK$20.8 million, respectively, representing 33.9%, 33.4% and 35.9% of our total purchase costs, respectively. For the years ended 31 March 2019, 2020 and 2021, purchases from our five largest suppliers amounted to HK$37.1 million, HK$47.0 million and HK$49.1 million, respectively, representing 79.6%, 78.1% and 84.8% of our total purchase costs, respectively. RISK FACTORS Our Directors believe there are certain risks involved in our operations, which may be broadly categorised into (a) risks relating to our business, (b) risks relating to our industry, and (c) risks relating to the [REDACTED] and shares. A detailed discussion of the risk factors that we believe are particularly relevant to us is set out in the section headed ‘‘Risk Factors’’. Set out below are some of the major risks that investors should be aware of: (i) we are dependent on our professional team of specialist doctors and our ability to attract and retain skilled and qualified healthcare professionals; (ii) the service fees we pay to our specialist doctors that are Founding Doctors and Equity Partner Doctors have had, and are expected to continue to have, a significant impact on our business, financial position and profitability; (iii) we rely on our brand and reputation within the healthcare service industry in Hong Kong, which may be adversely affected by malpractice claims and negative publicity; (iv) our business has been and is likely to be adversely affected by the outbreak of COVID-19, and may be affected by other communicable diseases in the future; and (v) our financial statements during the Track Record Period may not be easily comparable and past performance is not necessarily indicative of future results. FINANCIAL AND OPERATIONAL INFORMATION The following table sets out selected financial data from our consolidated statements of comprehensive income during the Track Record Period, details of which are set out in the Accountant’s Report in Appendix I to this document. Our historical results presented below are not necessarily indicative of the results that may be expected for any future period. Please see the section headed ‘‘Financial Information — Results of Operation of Our Group’’ for further information.
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SUMMARY
Year ended 31 March 2019 2020 2021 HK$’000 HK$’000 HK$’000
Revenue 195,660 248,394 251,434 Cost of sales (111,145) (172,814) (185,504)
Gross profit 84,515 75,580 65,930
Selling and marketing expenses (913) (1,212) (2,328) Administrative expenses (6,747) (16,421) (36,371) Provision for impairment losses on financial assets (4,622) (150) (200)
Operating profit 72,233 57,797 27,031
Finance (costs)/income, net (614) 1,385 (242)
Profit before income tax 71,619 59,182 26,789
Income tax expenses (11,659) (9,489) (6,396)
Profit for the year 59,960 49,693 20,393
Profit attributable to: Owners of the Company 59,960 50,194 21,643 Non-controlling interests — (501) (1,250)
Profit for the year 59,960 49,693 20,393
Revenue Our revenue increased from HK$195.7 million for the year ended 31 March 2019 to HK$248.4 million for the year ended 31 March 2020. The increase in our revenue was primarily due to the increase in revenue generated from specialist medical services. Our revenue generated from the provision of services by specialists increased by HK$40.1 million, or 20.9%, from HK$192.3 million for the year ended 31 March 2019 to HK$232.4 million for the year ended 31 March 2020, which was primarily due to increase in patient visits/admissions. The increase in patient visits/admissions was primarily driven by the full-year service contribution from the five Equity Partner Doctors in FY2020 that joined at various dates during FY2019; coupled with the fact that Dr. Eddie Cheung (paediatrics) joined us as a doctor in August 2019. Our revenue generated from the provision of services by specialists decreased by HK$14.4 million, or 6.2%, from HK$232.4 million for the year ended 31 March 2020 to HK$218.0 million for the year ended 31 March 2021, which was primarily due a slight decrease in patient visits/admissions coupled with lower average revenue per patient visit/admission. The decrease in patient visits/admissions was primarily driven lower number of patient visits/admissions for Dr. Kenneth Tsang (respiratory medicine), Dr. Adam Leung (cardiology), Dr. Jason Fong (neurology), Dr. Clement Lee (cardiology), Dr. Mathew Ng (gastroenterology & hepatology) and Dr. Ada Ma (oncology) because of the COVID-19 outbreak along with the related delays in seeking non-urgent medical treatment; partly offset by increased patient visits/admission because Dr. Eddie Cheung (paediatrics) joined us in August 2019 and Dr. Stanley Yu (oncology) joined us in August 2020. Overall average revenue per patient visit/ admission decreased from HK$5,661 for the year ended 31 March 2020 to HK$5,364 for year ended 31 March 2021 mainly because (i) Dr. Eddie Cheung’s average revenue per patient is substantially lower than other specialist doctors and (ii) change in service mix, with a lower proportion of in-patient hospital admissions which generally have a higher revenue per admission.
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SUMMARY
Gross Profit Our gross profit decreased by HK$8.9 million, or 10.6%, from HK$84.5 million for the year ended 31 March 2019 to HK$75.6 million for the year ended 31 March 2020 primarily due to increased service fees provided to our Equity Partner Doctors. Our gross profit margin decreased from 43.2% in FY2019 to 30.4% in FY2020 mainly due to the addition of the five Equity Partner Doctors, starting in FY2019, which resulted in greater service fees paid to them. Under their service agreements with us, the Equity Partner Doctors contributed only a fixed amount to our profit before tax during the Track Record Period. Please see the section headed ‘‘Business — Our Professional Team — Compensation Arrangements with Specialist Doctors and Panel Specialists’’ for further details. Our gross profit decreased by HK$9.7 million, or 12.8%, from HK$75.6 million for the year ended 31 March 2020 to HK$65.9 million for the year ended 31 March 2021 primarily due to (i) lower revenue from specialist medical services as a result of COVID-19 outbreak as discussed above and (ii) increased cost of sales, including employee benefit expenses, depreciation and reporting fees. Our gross profit margin decreased from 30.4% in the year ended 31 March 2020 to 26.2% in the year ended 31 March 2021 mainly due to lower revenue from specialist medical services while we incurred greater fixed costs such as employment benefit expenses and depreciation expenses as a percentage of revenue. Operating Profit Our operating profit decreased by HK$14.4 million, or 20.0%, from HK$72.2 million for the year ended 31 March 2019 to HK$57.8 million for the year ended 31 March 2020 driven by lower gross profit as a result of increased service fees paid to our Equity Partner Doctors coupled with greater administrative expenses to support our business growth. In addition, we recorded an operating loss from our allied health services segment for the year ended 31 March 2020 of HK$2.4 million due to losses from Hong Kong Imaging, which we acquired in October 2019, due to a slow down of its business from the COVID-19 outbreak coupled with higher repair and maintenance cost for diagnostic equipment. Our operating profit margin decreased from 36.9% for the year ended 31 March 2019 to 23.3% for the year ended 31 March 2020, mainly due to lower gross profit margins as a result of service fees paid to our Equity Partner Doctors. Our operating profit decreased by HK$30.8 million, or 53.2%, from HK$57.8 million for the year ended 31 March 2020 to HK$27.0 million for the year ended 31 March 2021 driven by lower gross profit as a result of lower revenues due to the COVID-19 outbreak coupled with greater administrative expenses for the [REDACTED] and to support our business growth. We recorded an operating loss from our allied health services segment of HK$1.8 million for the year ended 31 March 2021. Accordingly, our operating profit margin decreased from 23.3% for the year ended 31 March 2020 to 10.8% for the year ended 31 March 2021. Profit for the year Changes in our net profit during the Track Record Period were mainly driven by changes in operating profit as discussed above. Our net profit for the year ended 31 March 2020 and the year ended 31 March 2021 include net losses attributable to non-controlling interest of HK$0.5 million and HK$1.3 million, respectively. These net losses relate to minority interest held under our subsidiary, HKID Limited, which operates our imaging and diagnostic business.
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SUMMARY
The following table sets out our condensed consolidated balance sheet as at the dates indicated: As at 31 March 2019 2020 2021 HK$’000 HK$’000 HK$’000
Total non-current assets 27,457 56,766 298,262
Inventories 7,935 10,112 12,351 Trade receivables 16,099 16,107 19,108 Other receivables, deposits and prepayments 847 5,852 10,347
Amounts due from shareholders 137,143 36,116 4,145 Amounts due from directors 27,130 51,535 1,600 Amount due from the ultimate holding company 20 36 4 Amount due from the immediate holding company 10 18 — Income tax recoverable — 336 849 Cash and cash equivalents 39,771 159,860 95,267 Total current assets 228,955 279,972 143,671
Total assets 256,412 336,738 441,933
Total non-current liabilities 10,491 10,292 76,620
Trade payables 5,444 6,307 6,111 Contract liabilities 411 431 2,947 Accruals and other payables 8,081 19,262 25,077 Lease liabilities 7,349 15,327 17,551 Provision of re-instatement costs for leasehold improvements ——2,101 Amount due to a shareholder 279 —— Amount due to a related company 100 —— Dividend payable — 66,720 — Bank borrowing ——75,000 Current income tax payable 8,304 3,943 496 Total current liabilities 29,968 111,990 129,283
Total liabilities 40,459 122,282 205,903
Net current assets 198,987 167,982 14,388
Capital and reserves attributable to equity holders of the Company 215,953 209,944 232,768 Non-controlling interests — 4,512 3,262
Net assets/Total equity 215,953 214,456 236,030
Total non-current assets and liabilities significantly increased from 31 March 2020 to 31 March 2021 mainly due to the acquisition of the 6th floor of Euro Trade Centre (i.e. the Integrated Diagnostic Centre) on 31 March 2021 and the new lease of the entire 9th floor of Central Building (i.e. the Integrated Flagship Medical Centre) in February 2021. Net current assets decreased from HK$168.0 million as at 31 March 2020 to HK$14.4 million as at 31 March 2021 primarily due to cash used and bank borrowing for the acquisition of the Integrated Diagnostic Centre. Changes to our net assets during the Track Record Period were mainly due to increased reserves as a result of Pre-[REDACTED] Investments and increased retained earnings due to net profits partly offset by dividend payments. Non- controlling interests represent minority shareholding interest held under HKID Limited. Please see the section headed ‘‘Financial Information — Description of Selected Consolidated Statement of Financial Position Items’’ for further information.
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SUMMARY
NUMBER OF CLIENT VISITS/ADMISSIONS AND AVERAGE REVENUE The table below sets out the key operational information of the Group during the Track Record Period: Year ended 31 March 2019 2020 2021
Number of patient visits/admissions Clinical services provided at our Medical Centres 28,505 33,048 32,490 Inpatient services provided at private hospitals 5,477 8,013 8,156 Allied health services provided at our Medical Centres and Diagnostic Centres(1) 10 7,794 19,453
Total 33,992 48,855 60,099
Year ended 31 March 2019 2020 2021 HK$ HK$ HK$
Average revenue per patient visit/admission(2) Clinical services provided at our Medical Centres 3,598 4,253 4,241 Inpatient services provided at private hospitals 16,380 11,465 9,837 Allied health services provided at our Medical Centres and Diagnostic Centres 1,200 1,686 1,875
Notes:
(1) We acquired Hong Kong Imaging in October 2019 which led to the significant increase in patient visits for the years ended 31 March 2020 and 2021.
(2) Average revenue per visit is calculated by dividing the revenue generated from the particular category of service by the total number of patient visits/admissions under the same category. Changes to our average revenue per patient visit/admission during the Track Record Period were primarily due to changes in type of specialist medical services provided as well as the addition of specialist doctors that joined us during the period. For further information, please see the section headed ‘‘Business — Our Services — Medical Services — Operational Information’’. LIQUIDITY AND CAPITAL RESOURCES The following table sets out selected cash flow data from the consolidated statements of cash flows for the years indicated: Year ended 31 March 201920202021 HK$’000 HK$’000 HK$’000
Operating cash flow before changes in working capital 87,889 79,296 55,722 Changes in working capital (8,735) 10,385 (29) Income taxes paid (8,260) (15,343) (11,589)
Net cash generated from operating activities 70,894 74,338 44,104
Net cash used in investing activities (34,507) (62,115) (177,753) Net cash (used in)/generated from financing activities (10,722) 107,866 69,056
Net increase/(decrease) in cash and cash equivalents 25,665 120,089 (64,593) Cash and cash equivalents at beginning of the year 14,106 39,771 159,860
Cash and cash equivalents at end of the year 39,771 159,860 95,267
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SUMMARY
For the year ended 31 March 2020, we had net cash generated from financing activities of HK$107.9 million, which primarily consists of [REDACTED] of HK$125.0 million from issuance of shares to our Pre-[REDACTED] Investors, partially offset by the principal and interest payments of lease liabilities of HK$15.4 million. The decrease in net cash generated from operating activities for the year ended 31 March 2021 as compared the same period in 2020 was mainly due to lower profit for the year; and the increase in net cash used in investing activities for the year ended 31 March 2021 was primarily due to the acquisition of the Integrated Diagnostic Centre. Please see the section headed ‘‘Financial Information — Liquidity and Capital Resources’’ for further information. KEY FINANCIAL RATIOS As at/Year ended 31 March 2019 2020 2021
Profitability ratios Gross profit margin (%) 43.2 30.4 26.2 Net profit margin (%) 30.6 20.0 8.1 Return on equity (%) 48.6 23.3 9.6 Return on total assets (%) 38.3 16.9 5.6
Liquidity ratios Current ratio (times) 7.6 2.5 1.1 Quick ratio (times) 7.4 2.4 1.0
Capital adequacy ratios Gearing ratio (%) 7.9 10.5 71.2
The decreases to our gross profit margin during the Track Record Period were primarily due to the addition of Equity Partner Doctors and greater service fees paid to them as they only contribute a fixed amount to our profit before tax, and for the year ended 31 March 2021, greater fixed cost such as employment benefit expenses and depreciation expenses. The decreases in our net profit margin during the Track Record Period were mainly driven by decreases in gross profit margin as discussed above as well as higher administrative expenses, and particularly [REDACTED] expenses for the year ended 31 March 2021. The decreases to the return on equity and return on assets during the Track Record Period were primarily due to decreases in net profit coupled with increases in total equity and total assets as a result of Pre-[REDACTED] Investments and new lease of the Integrated Flagship Medical Centre, and the acquisition of the Integrated Diagnostic Centre during the year ended 31 March 2021. The decreases to the current and quick ratiosfrom31March2019to31March2020were primarily due to a significant increase in current liabilities mainly due to dividends declared and accruals for service fees and lease liabilities as a result of business growth. These ratios decreased from 31 March 2020 to 31 March 2021 mainly due to increase in short-term bank borrowing for the acquisition of the Integrated Diagnostic Centre, partly offset by the settlement of dividend payables during the year ended 31 March 2021. The increases to the gearing ratio during the Track Record Period were primarily driven by increased lease liabilities, particularly for the Integrated Flagship Medical Centre, and increased bank borrowings for the purchase of Integrated Diagnostic Centre. Please see the section headed ‘‘Financial Information — Key Financial Ratios’’ for calculation formula of key financial ratios and further information. DIVIDENDS During the Track Record Period, we declared a dividend in the amount of HK$66.7 million in February 2020, which was subsequently paid in April 2020 and we declared an additional dividend of HK$60.0 million (the ‘‘Pre-[REDACTED] Dividend’’) in October 2020, all of which has been settled as at 31 March 2021. We do not have any fixed dividend policy or dividend pay-out ratio to be adopted after the [REDACTED]. Any dividends to be declared by the Company after the [REDACTED] will be
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SUMMARY determined at the discretion of our Directors. Our Directors may recommend or declare dividends in the future after taking into account the Group’s operating performance and cash flows over the preceding year, operating plans moving forward, planned capital expenditures, as well as other use of funds that may affect or are deemed relevant to the Group’s financial position. The dividend distribution record in the past may not be used as a reference or basis to determine the level of dividends that may be declared or paid by the Company in the future. Please see the section headed ‘‘Financial Information — Dividends and Dividend Policy’’ for further information. PROPERTY INTERESTS AND PROPERTY VALUATION Knight Frank Petty Limited, an independent property valuer, has valued our property interests as at 31 March 2021 and is of the opinion that the total market value of the property in which we had an interest as at such date was HK$165.0 million and the attributable market value to us was HK$165.0 million. The full text of the letter and summary disclosure of property valuation with regard to our property interests are set out in ‘‘Appendix III — Property Valuation Report’’ to this document. OUR CONTROLLING SHAREHOLDERS Immediately following the [REDACTED] and the [REDACTED] (without taking into account any Shares which may be allotted and issued pursuant to the exercise of the [REDACTED] or any options which may be granted under the Share Option Scheme), our Company will be directly owned as to [REDACTED]% by CHG, which is in turn owned as to 42.42% by Peak Summit (a company wholly owned by Dr. Kenneth Tsang), 23.74% by Heroic Wealth (a company wholly owned by Dr. Adam Leung), 10.74% by Mastermind Intelligence (a company wholly owned by Dr. Jason Fong), 2.46% by Grateful Mind (a company wholly owned by Dr. Chu Leung Wing), 6.54% by Property Linkage (a company wholly owned by Dr. Jenny Tsang), 9.10% by Wealth Basin (a company wholly owned by Mr. Shiu) and 5.00% by Les Trois (a company wholly owned by Mrs. Chen), respectively. On 23 October 2020, CHG, Dr. Kenneth Tsang, Dr. Adam Leung, Dr. Jason Fong, Dr. Chu Leung Wing, Dr. Jenny Tsang, Mr. Shiu and Mrs. Chen, together with Peak Summit, Heroic Wealth, Mastermind Intelligence, Grateful Mind, Property Linkage, Wealth Basin and Les Trois entered into the Concert Party Deed, confirming, among others, that they have been acting and will continue to act in concert with each other to obtain and/or to consolidate effective control of our Group. Accordingly, CHG, Dr. Kenneth Tsang, Dr. Adam Leung, Dr. Jason Fong, Dr. Chu Leung Wing, Dr. Jenny Tsang, Mr. Shiu, Mrs. Chen, Peak Summit, Heroic Wealth, Mastermind Intelligence, Grateful Mind, Property Linkage, Wealth Basin and Les Trois are a group of our Controlling Shareholders. For further details, please refer to the section headed ‘‘Relationship with Our Controlling Shareholders — Controlling Shareholders of Our Company’’ in this document. PRE-[REDACTED] INVESTMENTS Our Group entered into agreements with the Pre-[REDACTED] Investors in five tranches, which were completed on 31 March 2019, 23 August 2019, 30 October 2019, 1 August 2020 and 27 August 2020 (together with a supplemental agreement dated 15 September 2020), respectively. The Pre- [REDACTED] Investments involve a total of 18 Pre-[REDACTED] Investors in five tranches. The Tranche 1 Pre-[REDACTED] Investors are companies beneficially owned by individuals who are all Independent Third Parties. The Tranche 2 Pre-[REDACTED] Investor is a company beneficially owned by Dr. Eddie Cheung, a specialist in paediatrics and an Equity Partner Doctor. The Tranche 3 Pre- [REDACTED] Investors are Dr. Ooi Gaik Cheng, Ms. Tang Wan Yin, Mr, Lo Wai Keung, Peter, Dr. Lau Chu Pak and Dr. Liu Chi Leung, who are a specialist in radiology, a registered radiographer (diagnostic), a practising solicitor of Hong Kong, a specialist in cardiology and a specialist in general surgery, respectively. The Tranche 4 Pre-[REDACTED] Investors are companies beneficially owned by Dr. Stanley Yu, a specialist in oncology, and Dr. Michele Yuen, a specialist in endocrinology, diabetes and metabolism, respectively. Both Dr. Stanley Yu and Dr. Michele Yuen are Equity Partner Doctors. The Tranche 5 Pre-[REDACTED] Investor is a company beneficially by Mr. Li Kai Sing, Mr. Hong Ching Wei and Mr. Yeung Wan Yiu. Among these 18 Pre-[REDACTED] Investors, each of Dr. Ooi Gaik Cheng and Ms. Tang Wan Yin is a core connected person of our Company and the remaining ones are Independent Third Parties. Upon [REDACTED], the Pre-[REDACTED] Investors will be interested in approximately [REDACTED]% of the issued share capital of our Company. For further details, please refer to the section headed ‘‘History, Reorganisation and Corporate Structure — The Pre-[REDACTED] Investments’’ in this document.
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SUMMARY
THE SHARE OPTION SCHEME Pursuant to the written resolutions of our Shareholders on [.], we have conditionally adopted the Share Option Scheme, which will be effective upon [REDACTED]. As at the date of this document, no option had been granted by our Company under the Share Option Scheme. The principal terms of the Share Option Scheme are set out in the section headed ‘‘Statutory and General Information — G. Share Option Scheme’’ in Appendix V to this document. [REDACTED] STATISTICS The statistics below are based on the assumption that [REDACTED] [REDACTED] are issued under the [REDACTED]: Basedonthelowendofthe Basedonthehighendofthe indicative [REDACTED] of indicative [REDACTED] of HK$[REDACTED] per HK$[REDACTED] per [REDACTED] [REDACTED]
Market capitalisation of our Shares(1) HK$[REDACTED] million HK$[REDACTED] million Unaudited pro forma adjusted consolidated net tangible asset value per Share(2) HK$[REDACTED] HK$[REDACTED]
Notes:
(1) The calculation of market capitalisation is based on [REDACTED] Shares expected to be in issue immediately upon completion of the [REDACTED] and the [REDACTED] (assuming the [REDACTED] is not exercised).
(2) For details of the bases and assumptions, please see ‘‘Unaudited Pro Forma Financial Information’’ in Appendix II to this document. No adjustment has been made to the unaudited pro forma adjusted combined net tangible assets of the Group to reflect any trading results or other transactions of the Group entered into subsequent to 31 March 2021. [REDACTED] Assuming that the [REDACTED] is not exercised, the [REDACTED] expenses in relation to the [REDACTED] (including [REDACTED] fees, professional fees and other fees) are estimated to be HK$[REDACTED] million (based on the mid-point of the indicative [REDACTED] for the [REDACTED]), of which approximately HK$[REDACTED] million were charged to the consolidated statements of comprehensive income for the year ended 31 March 2021. We expect that approximately HK$[REDACTED] million will be further charged to the consolidated statements of comprehensive income for the year ending 31 March 2022 and HK$[REDACTED] million will be accounted for as a deduction from equity upon completion of the [REDACTED]. Our [REDACTED] expenses as a percentage of [REDACTED] (assuming the mid-point of the indicative [REDACTED] for the [REDACTED] of HK$[REDACTED] per [REDACTED] and the [REDACTED] is not exercised) is estimated to be approximately [REDACTED]%. [REDACTED] The aggregate [REDACTED] that we expect to receive from the [REDACTED] will be approximately HK$[REDACTED] million (assuming an [REDACTED] of HK$[REDACTED] per [REDACTED], being the mid-point of the indicative [REDACTED] range of HK$[REDACTED] to HK$[REDACTED] per Share), after deducting [REDACTED] and estimated expenses payable by us in connectionwiththe[REDACTED]andassumingthe [REDACTED] is not exercised. We currently intend to use such [REDACTED] for the following purposes: 1. Approximately [REDACTED]%, or HK$[REDACTED] million, will be used for the establishment of an integrated diagnostic centre (‘‘Integrated Diagnostic Centre’’), including (i) the repayment of the mortgage loan relating to the Property Purchase, (ii) the purchase of new equipment, and (iii) the hiring of a few doctors and other necessary support staff to operate this centre; 2. Approximately [REDACTED]%, or HK$[REDACTED] million, will be used to repay bank loans to replenish and restore the Group’s cash resources used for or associated with the Property Purchase (including the purchase price, stamp duties and real estate commissions); 3. Approximately [REDACTED]%, or HK$[REDACTED] million, will be used for the establishment and development of a main integrated medical centre (‘‘Integrated Flagship Medical Centre’’), including (i) for its renovation, (ii) the purchase of new equipment, and (iii) the hiring of doctors and other necessary support staff;
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SUMMARY
4. Approximately [REDACTED]%, or HK$[REDACTED] million, will be used for the establishment of a new oncology centre under our brand (‘‘HKMC Oncology Centre’’), including the hiring of a couple new doctors and several support staff, and entering into a new lease agreement with GFA of approximately 5,000 sq.ft. in Central, Hong Kong; 5. Approximately [REDACTED]%, or HK$[REDACTED] million, will be used for the establishment of a new dental centre under our brand (‘‘HKMC Dental Centre’’), including the hiring of a couple new dentists and several support staff, and entering into a new lease agreement with GFA of approximately 1,500 sq.ft. in Central, Hong Kong; 6. Approximately [REDACTED]%, or HK$[REDACTED] million, will be used for the establishment of a new dermatology centre under our brand (‘‘HKMC SKIN Centre’’), including the hiring of a few dermatologists and several support staff, and entering into a new lease agreement with GFA of approximately 1,500 sq.ft. in Admiralty or Central, Hong Kong; and 7. Approximately [REDACTED]%, or HK$[REDACTED] million, will be used for working capital and general corporate purpose. Further information on the use of [REDACTED] from the [REDACTED] is discussed in the section headed ‘‘Future Plans and [REDACTED]’’. RECENT DEVELOPMENTS AND MATERIAL ADVERSE CHANGE Subsequent to the Track Record Period and up to the Latest Practicable Date, our revenues from our Medical Centres, inpatient services provided at private hospitals and from Hong Kong Imaging remained lower than normal due to the outbreak of COVID-19. Save for estimated [REDACTED] as discussed above, the Directors confirm that there has been no material adverse change in the financial or trading position of our Group since 31 March 2021 and no event had occurred since 31 March 2021 that would materially and adversely affect the information in the Accountant’s Report included in Appendix I to this document. On 31 March 2021, we purchased from an independent third party the entire 6th floor of Euro Trade Centre, Central, Hong Kong with GFA of approximately 5,200 sq.ft. at a purchase price of HK$150.0 million, which will be used as our Integrated Diagnostic Centre (the ‘‘Property Purchase’’). With respect to the Property Purchase, we paid HK$75.0 million in cash and financed the remaining HK$75.0 million through a mortgage loan. The mortgage loan will be repaid with the [REDACTED] from the [REDACTED], please see section headed ‘‘Future Plans and [REDACTED]’’ for details. We were also responsible for paying for our portion of real estate agent commissions of HK$1.5 million and Hong Kong stamp duties of HK$12.8 million. In April 2021, we engaged two dental surgeons (the ‘‘Dental Surgeons’’) as independent contractors that joined us starting on 31 May 2021. The service fee arrangements for the Dental Surgeons are as follows: . The first Dental Surgeon has a fee splitting arrangement with us whereby he shall be entitled to: (i) for all outpatient consultations, procedures and examinations — a profit sharing percentage that increases progressively from 50% to 80% based on different thresholds and (ii) for all hospital income — 80% of such income. . The second Dental Surgeon shall be entitled to a fixed salary, plus incentive profit sharing, if any. The profit sharing percentage increases progressively from 25% to 50% based on different thresholds. Impact of COVID-19 Although the COVID-19 outbreak did have some impact on our business and result of operations, it did not have a material adverse effect. From February 2020 to July 2020, the number of patient visits at our Medical Centres have, on average, decreased mainly due to the COVID-19 outbreak along with the related delays in seeking non- urgent medical treatment, travel restrictions and the slowdown in the Hong Kong economy. Our number of patient visits at our Medical Centres decreased to an average of 2,592 visits per month for the six months ended 31 July 2020 from an average of 2,912 visits per month for the six months ended 31 January 2020. However, average spending per patient at our Medical Centres increased from approximately HK$4,091 for the six months ended 31 January 2020 to approximately HK$4,378 for the six months ended 31 July 2020 mainly due to the increase in dosage of medication as requested by patients in anticipation of longer visit intervals due to the uncertainty of the COVID-19 outbreak.
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SUMMARY
Accordingly, our average revenue from medical services at our Medical Centres from 1 February 2020 to 31 July 2020 was HK$11.3 million per month, while our average revenue from 1 August 2019 to 31 January 2020 was HK$11.9 million per month. From February 2020 to July 2020, the number of inpatient hospital admissions for which we provided medical services have, on average, decreased mainly due to the COVID-19 outbreak. Our number of patient admissions at private hospitals decreased to an average of 617 admissions per month for the six months ended 31 July 2020 from an average of 753 admissions per month for the six months ended 31 January 2020 mainly due to general apprehension of going to hospitals and resulting delays for non-urgent medical treatment. Average spending per patient admission decreased from approximately HK$10,509 for the six months ended 31 January 2020 to approximately HK$10,043 for the six months ended 31 July 2020 mainly due to lower average revenue per inpatient admission of Dr. Jason Fong, Dr. Clement Lee and Dr. Boron Cheng as they provided relatively lower priced services for the six months ended 31 July 2020. Accordingly, our average revenue from medical services at hospitals from 1 February 2020 to 31 July 2020 was HK$6.2 million per month, while our average revenue from 1 August 2019 to 31 January 2020 was HK$7.9 million per month. In addition, since February 2020, our number of clients at Hong Kong Imaging has decreased mainly due to the COVID-19 outbreak. Our number of client visits at our Diagnostic Centres decreased to an average of 1,373 visits per month for the six months ended 31 July 2020 from an average of 2,061 visits per month for the six months ended 31 January 2020. Accordingly, our average revenue at our Diagnostic Centres from 1 February 2020 to 31 July 2020 was HK$2.4 million per month, while our average revenue at our Diagnostic Centres from 1 August 2019 to 31 January 2020 was HK$3.1 million per month. We believe the decrease in client visits at our Diagnostic Centres was mainly due to a decrease in third-party doctor referrals caused by the COVID-19 outbreak, which contributed a significant portion of its business during the Track Record Period. In addition, laboratory and diagnostic testing is often used for preventative purposes, such as health-checks; and the COVID-19 outbreak has temporarily curtailed the demand for such non-urgent medical treatment. Since 1 August 2020, our average number of patient visits have improved due to less restrictive containment measures implemented by the Hong Kong government. From 1 August 2020 to 31 March 2021, our number of patient visits at our Medical Centres increased to an average of 2,789 visits per month, and the number of clients at Hong Kong Imaging increased to an average of 1,652 visits per month. The number of hospital admissions during this period increased to an average of 710 per month despite patients continuing to avoid going to hospitals due to the on-going COVID-19 situation. However, it is uncertain whether this improvement will continue as Hong Kong may face a new wave of COVID-19 outbreaks. Please see ‘‘Risk Factors — Our business has been and is likely to be adversely affect by the outbreak of COVID-19, and may be affected by other communicable diseases in the future’’. We believe that the negative impact of COVID-19 outbreak on our business and the private healthcare sector in Hong Kong is temporary and limited, and once an effective vaccine is widely distributed and implemented in Hong Kong, our business will continue to grow. The COVID-19 outbreak has increased public awareness of the need to maintain good health and wellness, and we believe this would positively impact the demand for private healthcare in Hong Kong going forward. As such, our Directors confirm that the COVID-19 outbreak is not expected to have a material adverse effect on our business strategies and we will utilise the [REDACTED] from the [REDACTED] in accordance with the section headed ‘‘Future Plans and [REDACTED]’’ in this document. Assuming we were forced to completely suspend our operations indefinitely starting on 1 January 2021 due to the COVID-19 outbreak, we estimate that our financial resources (including cash and cash equivalents) can sustain our business until February 2022. Key assumptions for the above estimate include (i) we do not generate any operating cash inflow from customers, (ii) operating cash outflows include only necessary costs including rent and rates, employee benefit expenses, utilities and other miscellaneous expenses, (iii) the [REDACTED] from the [REDACTED] will be reserved and unavailable for use except for [REDACTED] of the approximately HK$[REDACTED] million, being approximately [4.2]% of the [REDACTED] from the [REDACTED], will be available for general business operations and working capital purposes, (iv) we suspend our expansion plans as discussed under the section headed ‘‘Future Plans and [REDACTED]’’ except with respect to the purchase of the 6th floor of Euro Trade Centre for HK$150.0 million (‘‘Property Purchase’’) and payment of related stamp duties of HK$12.8 million, (v) a mortgage loan of HK$75.0 million was obtained for the Property Purchase in March 2021, and (vi) the existing trade receivables will be recovered based on historical settlement patterns. The above mentioned estimate is hypothetical and is for illustrative purposes only; and our Directors currently assess the likelihood of such situation to be extremely remote.
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DEFINITIONS
In this document, unless the context otherwise requires, the following terms and expressions shall have the following meanings.
‘‘Ace Alliance’’ Ace Alliance Global Limited, a company incorporated in the BVI with limited liability on 25 May 2020 and an indirect wholly- owned subsidiary of our Company
‘‘Affiliate’’ with respect to any person, any other person, directly or indirectly, controlling, controlled by or under common control with such person
‘‘Articles’’ or ‘‘Articles of the articles of association of our Company, which was Association’’ conditionally adopted on [.] with effect from the [REDACTED], as amended or supplemented from time to time
‘‘Associate’’ has the meaning ascribed to it under the Listing Rules
‘‘Board’’ or ‘‘Board of Directors’’ the board of directors of our Company
‘‘Business Day’’ a day on which banks in Hong Kong are generally open for business to the public and which is not a Saturday, Sunday or public holiday in Hong Kong
‘‘BVI’’ the British Virgin Islands
‘‘CAGR’’ compound annual growth rate
‘‘[REDACTED]’’ the issue of [REDACTED] Shares to be made on the capitalisation of certain sums standing to the credit of the share premiumaccountofourCompanyreferredtointhesection headed ‘‘Statutory and General Information — A. Further Information about our Company — 3. Resolutions in writing passed by our Shareholders on [.]’’ in this document
‘‘Cayman Companies Act’’ or the Companies Act, Cap. 22 (Act 3 of 1961, as consolidated and ‘‘Companies Act’’ revised) of the Cayman Islands
‘‘CCASS’’ the Central Clearing and Settlement System established and operated by HKSCC
‘‘CCASS Clearing Participant’’ a person admitted to participate in CCASS as a direct clearing participant or general clearing participant
‘‘CCASS Custodian Participant’’ a person admitted to participate in CCASS as a custodian participant
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DEFINITIONS
‘‘CCASS Investor Participant’’ a person admitted to participate in CCASS as an investor participant who may be an individual or joint individuals or a corporation
‘‘CCASS Operational Procedures’’ the operational procedures of HKSCC in relation to CCASS, containing the practices, procedures and administrative requirements relating to the operation and functions of CCASS, as from time to time in force
‘‘CCASS Participant’’ a CCASS Clearing Participant, a CCASS Custodian Participant or a CCASS Investor Participant
‘‘Central Healthcare Limited’’ Central Healthcare Limited, a company incorporated in Hong Kong with limited liability on 17 August 2017 and an indirect wholly-owned subsidiary of our Company
‘‘Central Medical Consultants’’ Central Medical Consultants Company Limited (formerly known as Central Healthcare Consultants Limited) (中卓醫療有限公司), a company incorporated in Hong Kong with limited liability on 1 December 2016 and an indirect wholly-owned subsidiary of our Company, and the name of which has been changed to ‘‘HKMC Dental & Maxillofacial Centre Limited (中卓醫務牙科及口腔頜 面中心有限公司)’’ with effect from 28 April 2021
‘‘Central Medical Management’’ Central Medical Management Company Limited, a company incorporated in the BVI with limited liability on 2 November 2017, which is owned as to 51% by Dr. Kenneth Tsang, 41% by Mr. Shiu and 8% by Dr. Adam Leung, respectively
‘‘CentralPharm’’ CentralPharm Company Limited (formerly known as Central Pharmacy Company Limited) (中卓藥業有限公司), a company incorporated in Hong Kong with limited liability on 12 September 2017 and an indirect wholly-owned subsidiary of our Company
‘‘CHG’’ Central Healthcare Group Limited, a company incorporated in the BVI with limited liability on 29 November 2016 and a controlling shareholder of our Company
‘‘China’’ or ‘‘PRC’’ the People’s Republic of China, excluding, for the purpose of this document, Hong Kong, Macau and Taiwan
‘‘close associate(s)’’ has the meaning ascribed to it under the Listing Rules
‘‘CMH’’ Central Medical Holdings Limited, a company incorporated in the BVI with limited liability on 2 November 2017 and a wholly- owned subsidiary of our Company
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DEFINITIONS
‘‘CMI’’ Central Medical Investment Limited, a company incorporated in the BVI with limited liability on 20 December 2018, which would not form part of our Group upon completion of the Reorganisation
‘‘Companies Ordinance’’ the Companies Ordinance (Chapter 622 of the Laws of Hong Kong), as amended, supplemented or otherwise modified from time to time
‘‘Companies (Winding Up and the Companies (Winding Up and Miscellaneous Provisions) Miscellaneous Provisions) Ordinance (Chapter 32 of the Laws of Hong Kong), as amended, Ordinance’’ supplemented or otherwise modified from time to time
‘‘Company’’, ‘‘the Company’’ or Hong Kong Medical Consultants Holdings Limited (中卓醫務控 ‘‘our Company’’ 股有限公司), an exempted company with limited liability incorporated under the laws of the Cayman Islands on 21 September 2020
‘‘Concert Party Deed’’ a confirmatory deed entered into among CHG, Dr. Kenneth Tsang, Dr. Adam Leung, Dr. Jason Fong, Dr. Chu Leung Wing, Dr. Jenny Tsang, Mr. Shiu, Mrs. Chen, Peak Summit, Heroic Wealth, Mastermind Intelligence, Grateful Mind, Property Linkage, Wealth Basin and Les Trois dated 23 October 2020, details of which are set out in the section headed ‘‘Relationship with Our Controlling Shareholders — Acting in Concert’’
‘‘connected person’’ has the meaning ascribed to it under the Listing Rules
‘‘connected transaction’’ has the meaning ascribed to it under the Listing Rules
‘‘Controlling Shareholder(s)’’ has the meaning ascribed to it under the Listing Rules and, unless the context otherwise requires, refers to the parties entering into the Concert Party Deed
‘‘core connected person’’ has the meaning ascribed to it under the Listing Rules
‘‘CVC Centre’’ the Community Vaccination Centre at the Kowloon Bay Sports Centre where the Group provided COVID-19 vaccination services startinginFebruary2021
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DEFINITIONS
‘‘Deed of Indemnity’’ the deed of indemnity dated [.]executedbyDr.KennethTsang, Dr. Adam Leung, Dr. Jason Fong, Dr. Chu Leung Wing, Dr. Jenny Tsang, Mr. Shiu, Mrs. Chen, Peak Summit, Heroic Wealth, Mastermind Intelligence, Grateful Mind, Property Linkage, Wealth Basin, Les Trois and CHG in favour of our Company (for itself and as trustee for each of its subsidiaries), details of which are set out in the section headed ‘‘Statutory and General Information — H. Other Information — 4. Tax and other indemnities’’ in Appendix V to this document
‘‘Deed of Non-competition’’ the deed of non-competition dated [.]executedbyDr.Kenneth Tsang, Dr. Adam Leung, Dr. Jason Fong, Dr. Chu Leung Wing, Dr. Jenny Tsang, Mr. Shiu, Mrs. Chen, Peak Summit, Heroic Wealth, Mastermind Intelligence, Grateful Mind, Property Linkage, Wealth Basin, Les Trois and CHG in favour of our Company, details of which are set out in the section headed ‘‘Relationship with Our Controlling Shareholders — Non- Competition Undertakings’’
‘‘Diagnostic Centres’’ our two imaging and diagnoses centres and one laboratory operating under our brand ‘‘Hong Kong Imaging and Diagnostic Centre’’
‘‘Director’’ a director of our Company
‘‘Dr. Ada Ma’’ Dr. Ma Tin Wei, Ada, an Equity Partner Doctor
‘‘Dr. Adam Leung’’ Dr. Leung Wing Hung, our executive Director and one of our Controlling Shareholders
‘‘Dr. Barbara Tam’’ Dr. Tam Sau Man, Barbara
‘‘Dr. Boron Cheng’’ Dr. Cheng Cheung Wah, Boron, an Equity Partner Doctor
‘‘Dr. Catherine Yuen’’ Dr. Yuen Ka Yan Catherine
‘‘Dr. Chu Leung Wing’’ one of our Controlling Shareholders
‘‘Dr. Clement Lee’’ Dr. Lee Pui Yin, an Equity Partner Doctor
‘‘Dr. David But’’ Dr. But Yiu Kuen, David
‘‘Dr. Eddie Cheung’’ Dr. Cheung Wai Yin Eddie, an Equity Partner Doctor
‘‘Dr. Gordon Chau’’ Dr.ChauKwokOn,Gordon
‘‘Dr. Jason Fong’’ Dr. Fong Ka Yeung, one of our Controlling Shareholders
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DEFINITIONS
‘‘Dr. Jenny Tsang’’ Dr. Tsang Suk Kwan Jenny, one of our Controlling Shareholders
‘‘Dr. Kenneth Ng’’ Dr.NgWingHo
‘‘Dr. Kenneth Tsang’’ Dr. Tsang Wah Tak, Kenneth, our executive Director, chairman of the Board, chief executive officer, one of our Controlling Shareholders and the spouse of Mrs. Tsang
‘‘Dr. Lo Wai Kei’’ an Equity Partner Doctor
‘‘Dr. Matthew Ng’’ Dr. Matthew Ng, an Equity Partner Doctor
‘‘Dr. Michele Yuen’’ Dr. Yuen Mae Ann Michele, an Equity Partner Doctor
‘‘Dr. Stanley Yu’’ Dr. Yu Ka Tung Stanley, an Equity Partner Doctor
‘‘Employee Doctor(s)’’ Dr. David But and Dr. Catherine Yuen
‘‘Equity Partner Doctor(s)’’ Dr. Clement Lee, Dr. Boron Cheng, Dr. Matthew Ng, Dr. Lo Wai Kei, Dr. Ada Ma, Dr. Eddie Cheung, Dr. Stanley Yu and Dr. Michele Yuen
‘‘Founding Doctor(s)’’ Dr. Kenneth Tsang, Dr. Adam Leung, Dr. Jason Fong, Dr. Jenny Tsang and Dr. Chu Leung Wing
‘‘Frost & Sullivan’’ Frost & Sullivan Limited, our industry consultant and an Independent Third Party
‘‘FY2019’’, ‘‘FY2020’’ and the financial year ended 31 March 2019, 2020 and 2021, ‘‘FY2021’’ respectively
‘‘GDP’’ gross domestic product
‘‘[REDACTED]’’ [REDACTED]
‘‘Grateful Mind’’ Grateful Mind International Limited, a company incorporated in the BVI with limited liability on 10 September 2020 and one of our Controlling Shareholders, which is wholly owned by Dr. Chu Leung Wing
‘‘Group’’, ‘‘our Group’’, ‘‘we’’, our Company and its subsidiaries or, in respect of the period ‘‘our’’ or ‘‘us’’ before our Company became the holding company of its present subsidiaries, the businesses operated by such subsidiaries or their predecessors, as the case may be
‘‘Heroic Wealth’’ Heroic Wealth Capital Investments Limited, a company incorporated in the BVI with limited liability on 10 September 2020 and one of our Controlling Shareholders, which is wholly owned by Dr. Adam Leung
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DEFINITIONS
‘‘[REDACTED]’’ [REDACTED]
‘‘[REDACTED]’’ [REDACTED]
‘‘HK$’’ or ‘‘Hong Kong dollars’’ or Hong Kong dollars, the lawful currency of Hong Kong ‘‘HK dollars’’
‘‘HK Brain Memory’’ Hong Kong Brain Memory Centre Limited (formerly known as Hintor Limited) (香港腦記憶中心有限公司), a company incorporated in Hong Kong with limited liability on 6 October 2017 and an indirect wholly-owned subsidiary of our Company
‘‘HKFRS’’ Hong Kong Financial Reporting Standards, Hong Kong Accounting Standards, amendments and the related interpretations issued by the Hong Kong Institute of Certified Public Accountants
‘‘HKID Limited’’ Hong Kong Imaging and Diagnostic Centre Limited (formerly known as Central Imaging and Diagnostic Centre Limited) (香港 醫療診斷中心有限公司), a company incorporated in Hong Kong with limited liability on 11 December 2008 and an indirect wholly-owned subsidiary of our Company
‘‘HKID (Lab)’’ Hong Kong Imaging and Diagnostic Centre (Lab) Limited (香港 醫療診斷中心(化驗所)有限公司), a company incorporated in Hong Kong with limited liability on 30 May 2012 and an indirect non-wholly-owned subsidiary of our Company
‘‘HKID (MRI)’’ Hong Kong Imaging and Diagnostic Centre (MRI) Limited (香港 醫療診斷中心(磁力共振)有限公司), a company incorporated in Hong Kong with limited liability on 24 April 2012 and an indirect non-wholly-owned subsidiary of our Company
‘‘HKMC Dental Centre’’ our proposed new dental centre as further described under the section headed ‘‘Future Plans and [REDACTED]’’
‘‘HKMC Geriatric Medicine our medical centre located at Room 606, Manning House, 48 Centre’’ Queen’s Road Central, Central, Hong Kong
‘‘HKMC I’’ our medical centre located at Rooms 811 and 812, Central Building, 1–3 Pedder Street, Central, Hong Kong
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DEFINITIONS
‘‘HKMC II’’ our medical centre located at Room 1202, Central Building, 1–3 Pedder Street, Central, Hong Kong
‘‘HKMC III’’ our medical centre located at Room 503, Central Building, 1–3 Pedder Street, Central, Hong Kong
‘‘HKMC Dental’’ HKMC Dental & Maxillofacial Centre Limited (formerly known as Central Medical Consultants Company Limited and Central Healthcare Consultants Limited) (中卓醫務牙科及口腔頜面中心 有限公司), a company incorporated in Hong Kong with limited liability on 1 December 2016 and an indirect wholly-owned subsidiary of our Company
‘‘HKMC Medical Products’’ HKMC Medical Products Limited (中卓醫療產品有限公司), a company incorporated in Hong Kong with limited liability on 1 April 2020 and an indirect wholly-owned subsidiary of our Company
‘‘HKMC Oncology Centre’’ our proposed new oncology centre as further described under the section headed ‘‘Future Plans and [REDACTED]’’
‘‘HKMC Ophthalmologist(s)’’ Dr. Gordon Chau, Dr. Kenneth Ng and Dr. Barbara Tam
‘‘HKMC Ophthalmology Centre’’ our affiliated medical centre operated by the HKMC Ophthalmologists located at Rooms 1416–1421, Prince’s Building, 10 Chater Road, Central, Hong Kong
‘‘HKMC Paediatric Centre’’ our medical centre located at Room 810, Central Building, 1–3 Pedder Street, Central, Hong Kong
‘‘HKMC Psychiatric Centre’’ our medical centre located at Room 306, Central Building, 1–3 Pedder Street, Central, Hong Kong
‘‘HKMC SKIN Centre’’ our proposed new dermatology centre as further described under the section headed ‘‘Future Plans and [REDACTED]’’
‘‘HKSCC’’ Hong Kong Securities Clearing Company Limited, a wholly- owned subsidiary of Hong Kong Exchanges and Clearing Limited
‘‘HKSCC Nominees’’ HKSCC Nominees Limited, a wholly-owned subsidiary of HKSCC
‘‘Hong Kong’’ the Hong Kong Special Administrative Region of the PRC
‘‘Hong Kong Imaging’’ the group comprising HKID Limited, HKID (Lab) and HKID (MRI)
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DEFINITIONS
‘‘Hong Kong Medical Consultants’’ Hong Kong Medical Consultants Limited (中卓醫務有限公司), a company incorporated in Hong Kong with limited liability on 25 October 2013 and an indirect wholly-owned subsidiary of our Company
‘‘[REDACTED]’’ [REDACTED]
‘‘[REDACTED]’’ [REDACTED]
‘‘[REDACTED]’’ [REDACTED]
‘‘[REDACTED]’’ [REDACTED]
‘‘[REDACTED]’’ [REDACTED]
‘‘Independent Third Party’’ any entity or person who, to the best knowledge of our Directors, is not a connected person of our Company within the meaning ascribed thereto under the Listing Rules
‘‘Integrated Diagnostic Centre’’ our proposed new diagnostic centre in Central, Hong Kong and as further described under the section headed ‘‘Future Plans and [REDACTED]’’
‘‘Integrated Flagship Medical our proposed new medical centre to be located on the 9th floor of Centre’’ Central Building, in Central, Hong Kong and as further described under the section headed ‘‘Future Plans and [REDACTED]’’
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DEFINITIONS
‘‘[REDACTED]’’ [REDACTED]
‘‘[REDACTED]’’ [REDACTED]
‘‘[REDACTED]’’ [REDACTED]
‘‘[REDACTED]’’ [REDACTED]
‘‘[REDACTED]’’ [REDACTED]
‘‘Latest Practicable Date’’ 11 June 2021, being the latest practicable date for the purpose of ascertaining certain information contained in this document prior to its publication
‘‘Les Trois’’ Les Trois Bonheurs (2018) Limited, a company incorporated in the BVI with limited liability on 19 October 2018 and one of our Controlling Shareholders, which is wholly owned by Mrs. Chen
‘‘[REDACTED]’’ [REDACTED]
‘‘[REDACTED]’’ [REDACTED]
‘‘[REDACTED]’’ [REDACTED]
‘‘Listing Rules’’ the Rules Governing the Listing of Securities on the Stock Exchange, as amended, supplemented or otherwise modified from time to time
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DEFINITIONS
‘‘Main Board’’ the stock exchange (excluding the option market) operated by the Stock Exchange which is independent from and operated in parallel with the GEM of the Stock Exchange
‘‘Mastermind Intelligence’’ Mastermind Intelligence Limited, a company incorporated in the BVI with limited liability on 10 September 2020 and one of our Controlling Shareholders, which is wholly owned by Dr. Jason Fong
‘‘Medical Centre(s)’’ our six medical centres including HKMC I, HKMC II, HKMC III, HKMC Geriatric Medicine Centre, HKMC Paediatric Centre and HKMC Psychiatric Centre operating under our brand ‘‘Hong Kong Medical Consultants’’
‘‘Medical Concierge Holding’’ Medical Concierge Holding Limited, a company incorporated in the BVI with limited liability on 16 August 2019 and an indirect wholly-owned subsidiary of our Company
‘‘Medical Concierge Limited’’ Medical Concierge Limited, a company incorporated in the BVI with limited liability on 16 August 2019 and an indirect non- wholly-owned subsidiary of our Company
‘‘Medical Concierge Management’’ Medical Concierge Management Limited, a company incorporated in the BVI with limited liability on 16 August 2019 and an indirect wholly-owned subsidiary of our Company
‘‘Memorandum’’ or ‘‘Memorandum the memorandum of association of our Company, which was of Association’’ conditionally adopted on [.] with effect from the [REDACTED], as amended or supplemented from time to time
‘‘Mr. Shiu’’ Mr. Shiu Shu Ming, our executive Director and one of our Controlling Shareholders
‘‘Mrs. Chen’’ Mrs. Chen Chou Mei Mei Vivien, our executive Director, chief operating officer and one of our Controlling Shareholders
‘‘Mrs. Tsang’’ Mrs. Janette Elizabeth Tsang, our director of operations and the spouse of Dr. Kenneth Tsang
‘‘New Service Agreement(s)’’ the new service agreement(s) to be entered into on [.]betweenus and each of our Founding Doctors and Equity Partner Doctors that will become effective upon the [REDACTED], the details of which are further described under the section headed ‘‘Business — Our Professional Team — New Service Agreements with Founding Doctors and Equity Partner Doctors’’
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DEFINITIONS
‘‘[REDACTED]’’ [REDACTED]
‘‘[REDACTED]’’ [REDACTED]
‘‘[REDACTED]’’ [REDACTED]
‘‘Panel Specialist(s)’’ medical practitioners including specialist doctors and non-doctor health specialists currently working for the Group on an non- exclusive basis covering Respiratory Medicine, Orthopedics & Traumatology, Psychiatry, Oncology, General Surgery, Clinical Psychology, Speech Therapy, Nutritional Therapy and Psychology Counselling
‘‘Peak Summit’’ Peak Summit Development Limited, a company incorporated in the BVI with limited liability on 10 September 2020 and one of our Controlling Shareholders, which is wholly owned by Dr. Kenneth Tsang
‘‘PHFO’’ Private Healthcare Facilities Ordinance (Chapter 633 of the Laws of Hong Kong)
‘‘Pre-[REDACTED] Investments’’ [REDACTED]
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DEFINITIONS
‘‘Pre-[REDACTED] Investors’’ [REDACTED]
‘‘[REDACTED]’’ [REDACTED]
‘‘[REDACTED]’’ [REDACTED]
‘‘Property Linkage’’ Property Linkage Limited, a company incorporated in the BVI with limited liability on 14 September 2020 and one of our Controlling Shareholders, which is wholly owned by Dr. Jenny Tsang
‘‘Regulation S’’ Regulation S under the Securities Act
‘‘Renminbi’’ or ‘‘RMB’’ Renminbi yuan, the lawful currency of the PRC
‘‘Reorganisation’’ the reorganisation arrangements undergone by us in preparation for the [REDACTED], details of which are set out in the section headed ‘‘History, Reorganisation and Corporate Structure — Reorganisation’’ in this document
‘‘Securities Act’’ the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder
‘‘Seychelles’’ the Republic of Seychelles
‘‘SFC’’ the Securities and Futures Commission of Hong Kong
‘‘SFO’’ the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong), as amended, supplemented or otherwise modified from time to time
‘‘Share(s)’’ Share(s) in the share capital of our Company, with a nominal value of HK$0.00001 each
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DEFINITIONS
‘‘Share Option Scheme’’ the share option scheme conditionally adopted by our Company on [.], the principal terms of which are summarised in the section headed ‘‘Statutory and General Information — G. Share Option Scheme’’ in Appendix V to this document
‘‘Shareholder’’ holder of the Shares
‘‘Smart Winner’’ Smart Winner Investments Limited, a company incorporated in Seychelles with limited liability on 26 July 2019 and an indirect wholly-owned subsidiary of our Company
‘‘[REDACTED]’’ [REDACTED]
‘‘Sole Sponsor’’ China International Capital Corporation Hong Kong Securities Limited
‘‘sq.ft.’’ square foot
‘‘sq.m.’’ square metre
‘‘[REDACTED]’’ [REDACTED]
‘‘[REDACTED]’’ [REDACTED]
‘‘Stock Exchange’’ The Stock Exchange of Hong Kong Limited
‘‘subsidiary(ies)’’ has the meaning ascribed to it under the Listing Rules
‘‘substantial shareholder’’ has the meaning ascribed to it under the Listing Rules
‘‘Takeovers Code’’ the Hong Kong Code on Takeovers and Mergers issued by the SFC, as amended or supplemented from time to time
‘‘Track Record Period’’ the years ended 31 March 2019, 2020 and 2021
‘‘U.S. dollars’’ or ‘‘US$’’ United States dollars, the lawful currency of the United States
‘‘[REDACTED]’’ [REDACTED]
‘‘[REDACTED]’’ [REDACTED]
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DEFINITIONS
‘‘United States’’ or ‘‘U.S.’’ the United States of America, its territories, its possessions and all areas subject to its jurisdiction
‘‘Wealth Basin’’ Wealth Basin Limited, a company incorporated in the BVI with limited liability on 19 June 2017 and one of our Controlling Shareholders, which is wholly owned by Mr. Shiu
‘‘%’’ per cent
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FORWARD-LOOKING STATEMENTS
This document contains forward-looking statements that are, by their nature, subject to significant risks and uncertainties. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from performance or achievements expressed or implied by the forward-looking statements. In some cases, these forward-looking statements can be identified by words or phrases such as ‘‘anticipate’’, ‘‘believe’’, ‘‘continue’’, ‘‘likely’’, ‘‘could’’, ‘‘should’’, ‘‘ought to’’, ‘‘estimate’’, ‘‘expect’’, ‘‘intend’’, ‘‘may’’, ‘‘might’’, ‘‘aim’’, ‘‘plan’’, ‘‘seek’’, ‘‘will’’, ‘‘would’’, ‘‘assume’’, ‘‘going forward’’, ‘‘project’’, ‘‘propose’’, ‘‘potential’’, ‘‘predict’’ and other similar expressions, or their negatives. These forward- looking statements relate to, among others:
. our operations and business prospects;
. our future business development, financial condition and results of operations;
. our ability to successfully implement our business plans and strategies;
. the competitive landscape for our business and the development and actions of our existing and future competitors;
. our ability to attract and retain skilled and qualified healthcare professionals;
. consumer behaviour and preferences and market trends for medical services;
. the regulatory environment and industry outlook for the medical sector or our medical service business;
. general political, economic, legal and social conditions and government policies in Hong Kong, and other overseas markets;
. our proposed [REDACTED] from the [REDACTED];
. our future capital needs and capital expenditure plans;
. our dividend payout;
. other statements in this document that are not historical facts; and
. other factors beyond our control.
The forward-looking statements contained in this document relate only to events or information as at the date of on which the statements are made in this document. We do not undertake to update or otherwise revise any forward-looking statements, whether as a result of new information, future events or otherwise. You should not place undue reliance on any forward-looking statements.
All forward-looking statements contained in this document are qualified by reference to the cautionary statements set out in this section.
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RISK FACTORS
You should carefully consider all of the information in this document, including the risks and uncertainties described below, before making an investment in our Shares. Our business, financial condition and results of operations could be materially and adversely affected by any of these risks and uncertainties. The trading price of our Shares could decline due to any of these risks, and you may lose all or part of your investment. Additional risks and uncertainties not presently known to us or not described below could also harm our business, financial condition and results of operations.
RISKS RELATING TO OUR BUSINESS
We are dependent on our professional team of specialist doctors and our ability to attract and retain skilled and qualified healthcare professionals.
We generate revenue mainly from the provision of specialist medical services and allied health services. Accordingly, our Group’s performance largely depends on our ability to attract and retain the services of our specialist doctors, including other medical practitioners that support our allied health services. Our revenue generated from specialist medical services accounted for 98.3%, 93.6% and 86.7% of our total revenue for the years ended 31 March 2019, 2020 and 2021, respectively; while our revenue from allied health services represented nil, 5.3% and 14.5% of our total revenue over the same respective periods. For details, please refer to the section headed ‘‘Business — Our Professional Team’’. Our Group relies on the services of these healthcare professionals to provide the current spectrum of healthcare services to our clients. Our Group believes key competitive factors that are important in recruiting and retaining our healthcare professionals include our remuneration package, our brand and reputation, existing doctors on our platform, and number of client visits.
As at the Latest Practicable Date, we had 15 specialist doctors that work for us on an exclusive basis. The compensation arrangements for these doctors differ based on whether the doctor is a Founding Doctor, Equity Partner Doctor, or Employee Doctor. Please see the section headed ‘‘Business — Our Professional Team — Compensation Arrangements with Specialist Doctors and Panel Specialists’’ for further details on the various compensation arrangements we have with them. Competition for skilled and qualified healthcare professionals is intense. While our key doctors, including our Founding Doctors and Equity Partner Doctors, will enter into the New Service Agreements with us effective upon the [REDACTED] that do not expire until 31 March 2026, there is no guarantee that we will be able to continue to retain them for the entire term. Under the New Service Agreements, our Founding Doctors and Equity Partner Doctors are liable for paying us an early termination fee should any of them terminate their services prior to 31 March 2026; however, such a fee would not apply in case of death, incapacity or critical illness. In addition, it is possible that our specialist doctors and other healthcare professionals may decide to cease serving our Group and work for our competitors for reasons beyond our control. For further details surrounding the New Service Agreements and termination fee, please see the section headed ‘‘Business — Our Professional Team — New Service Agreements with Founding Doctors and Equity Partner Doctors’’.
Given the competitive landscape of the private healthcare services industry, we have to ensure the attractiveness of our remuneration package in order to attract and retain skilled and qualified healthcare professionals. In particular, the service fees that we pay to our specialist doctors depend on their respective medical specialty, experience, qualifications, services provided, prior remuneration package; as well as commercial negotiation with the respective medical practitioner to attract or retain him/her in
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RISK FACTORS light of the competitive healthcare services market in Hong Kong, where there is shortage of medical practitioners. For the years ended 31 March 2019, 2020 and 2021, the total remuneration (which mainly consists of service fees and/or salaries) paid to our specialist doctors and Panel Specialists amounted to HK$44.7 million, HK$70.0 million and HK$70.1 million, respectively, accounting for 40.2%, 40.5% and 37.8% of our total cost of sales for the same respective periods. We cannot assure you that our remuneration costs will not increase or that we will be able to transfer such costs to our clients, which may in turn materially and adversely affect the profitability of our business operations.
The service fees we pay to our specialist doctors that are Founding Doctors and Equity Partner Doctors have had, and are expected to continue to have, a significant impact on our business, financial position and profitability.
During the Track Record Period, we paid no service fees to our five Founding Doctors, all of which work for us on an exclusive basis. As Founding Doctors, they rely mainly on dividends distributed by us as their primary source of income. Our Founding Doctors will agree to maintain this arrangement under the New Service Agreements. The New Service Agreements with our Founding Doctors provide for substantially the same terms as their existing service agreements (including that they will not be entitled to any service fees), except that the term has been extended to 31 March 2026 upon the [REDACTED] and each of our Founding Doctors would be subject to an early termination fee should he/she decide to terminate his/her services with us. During the Track Record Period, the amount of dividends declared that was attributable to the Founding Doctors amounted to HK$103.1 million. Should we have included the Founding Doctors’ market salaries as service fees during the Track Record Period, our profit attributable to owners of the Company during the Track Record Period would have been substantially lower, and the hypothetical net profit attributable to owners of the Company (excluding [REDACTED] expenses) would have been HK$30.3 million, HK$27.0 million and HK$25.1 million for the years ended 31 March 2019, 2020 and 2021, respectively. Please see the section headed ‘‘Business — Our Professional Team — Hypothetical Net Profit Taking into Account Market Compensation of Our Founding Doctors’’ for further information.
In addition, a significant portion of our profit had historically been attributable to the services of our Founding Doctors, and we expect this to continue. Our Founding Doctors’ contribution to our profit before tax (before [REDACTED] expenses) amounted to HK$59.2 million, HK$46.3 million and HK$21.7 million during the years ended 31 March 2019, 2020 and 2021, respectively; representing 82.6%, 78.2% and 52.7% of our total profit before tax (before [REDACTED] expenses), respectively. Should our Founding Doctors become unwilling or unable to provide services to us, our business and financial results may be materially and adversely affected. Despite the New Service Agreements, we cannot assure you that our Founding Doctors will not be attracted by compensation packages offered by our competitors, try to renegotiate their service agreements with us, or leave for reasons beyond our control.
We currently have eight Equity Partner Doctors, all of which work for us on an exclusive basis, and are small passive shareholders of the Group. In contrast to our Founding Doctors, the Equity Partner Doctors rely mainly on profit sharing from the net revenue that they generate with us as their primary source of income from us, and not on any dividends declared by us. Seven out of eight of our Equity Partner Doctors have an arrangement with us whereby they only contribute a fixed dollar amount to our profit before tax (i.e., the Fixed Committed Fee Contribution) under their respective service agreements. Therefore, any excess in income over the Fixed Committed Fee Contribution that was generated by any one of these seven Equity Partner Doctors was paid out to him/her as service fees. This effectively
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RISK FACTORS places a cap on the amount of profit before tax that we can derive from them to the total amount of Fixed Committed Fee Contributions, which is currently HK$9.3 million per year. The remaining Equity Partner Doctor has an arrangement with us whereby he contributes a variable amount to our profit before tax with a fixed minimum amount (i.e. the Variable Committed Fee Contribution), so accordingly, there is no cap on the amount of profit that we can derive from him. Please see section headed ‘‘Business — Our Professional Team — Compensation Arrangements with Specialist Doctors and Panel Specialists’’ for further information on the service fee arrangements with our Equity Partner Doctors. The service fee arrangements that our Equity Partner Doctors have with us effectively limits the profit that the Group can derive from them, and this is expected to continue for the foreseeable future.
During the years ended 31 March 2019, 2020 and 2021, the total service fees paid by us to our Equity Partner Doctors amounted to HK$40.9 million, HK$62.5 million and HK$62.9 million, respectively, while their contribution to our profit before tax (before [REDACTED] expenses) amounted to HK$6.3 million, HK$8.6 million and HK$9.9 million over the same respective periods; representing 8.8%, 14.5% and 24.0% of our total profit before tax (before [REDACTED] expenses), respectively. The service agreements that we negotiated with our Equity Partner Doctors were on an arms-length basis and they have agreed to enter into the New Service Agreements which provide for substantially the same terms as their existing service agreements, except the term has been extended until 31 March 2026 upon the [REDACTED] and each of our Equity Partner Doctors would be subject to an early termination fee should he/she decide to terminate his/her services with us. Whilst the service fees we paid to our Equity Partner Doctors under their service agreements exceeded the market rate, we cannot guarantee that certain of our Equity Partner Doctors will not be attracted by potentially even higher compensation packages offered by our competitors or leave for reasons beyond our control. Should our Equity Partner Doctors become unwilling or unable to provide services to us, our business and financial results may be materially and adversely affected.
We rely on our brand and reputation within the healthcare service industry in Hong Kong, which may be adversely affected by malpractice claims and negative publicity.
Our Directors consider that our Group’s success depends, to a significant extent, on the recognition of our brand and reputation in the healthcare service industry as a reliable service provider. Medical negligence or malpractice claims, or complaints from patients in relation to the quality of services provided by us may adversely affect our reputation and image, which may in turn, materially and adversely affect the demand for our services.
Various factors, some of which are beyond our control, may lead to an adverse impact on our brand and reputation, including:
. any failure to effectively manage our service quality and to monitor the performance of our healthcare professional team and other staff;
. client dissatisfaction leading to medical malpractice, negligence, or other claims against our specialist doctors and/or other healthcare professionals, whether justified or not; and
. our doctors’ inability to adopt new medical skills or meet emerging industry standards to maintain high-level standards in patient care.
Where undesirable complications or outcomes are caused by our services or where the relevant treatment or medication does not fully meet the expectation of our clients, they may express negative comments through media such as the internet or newspapers or lodge complaints with the Hong Kong Consumer Council, the Medical Council and/or pursue a claim against our Group and our healthcare professionals, which may adversely affect our brand and reputation as well as our financial performance.
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RISK FACTORS
We cannot assure you that we or any of our specialist doctors or allied health professionals will not encounter malpractice, medical negligence or misconduct claims in the future. These claims may be brought against us or any of our medical practitioners by way of legal proceedings or lodging of formal complaints with the relevant licensing regulatory bodies. In any of these cases, we may be required to pay monetary compensation or damages or the qualifications or licences of our medical practitioners or allied health professionals may be suspended or revoked; or otherwise they may be subject to other disciplinary action. An assertion of malpractice, medical negligence, misconduct or negative publicity relating to the healthcare services provided by us, regardless of its merits or eventual outcome, could adversely affect our business and financial conditions and our operating results and business prospects and reputation.
In addition, during the course of our services, our specialist doctors and other healthcare professionals may prescribe medication and/or recommend treatments to our patients with their own professional judgment. We cannot guarantee the quality of the pharmaceutical drugs as they are not manufactured by us. Our reputation could also be harmed if our services or facilities fail to meet the expectation of our clients or we fail to maintain our established standards, which could also lead to negative media coverage.
Our business has been and is likely to be adversely affected by the outbreak of COVID-19, and may be affected by other communicable diseases in the future.
In response to the outbreak of COVID-19, the Hong Kong government has since February 2020 taken a number of actions such as temporarily closing government offices and public facilities, restricting travel internationally, including between Hong Kong and Mainland China, tracing, quarantining and otherwise treating individuals in Hong Kong who had contracted COVID-19, requiring residents to wear masks, asking residents to remain at home and to avoid gathering in public, among other actions. The outbreak of COVID-19 in Hong Kong also resulted in the temporary closure of many corporate offices and retail stores.
For the six months ended 31 July 2020, our number of patient visits and hospital admissions have, on average, decreased as compared to the previous six months period mainly due to the COVID-19 outbreak along with the related delays in seeking non-urgent medical treatment, travel restrictions and the slowdown in the Hong Kong economy.
For further information, please see the section headed ‘‘Financial Information — Recent Developments and Material Adverse Change — Impact of COVID-19’’. While the COVID-19 outbreak did not have a material adverse effect on our business operations, it is uncertain as to whether the impact on the economy and our business will improve or worsen, and any recovery in number of patient visits may only be temporary. There continues to be great uncertainty as to the future progress of the disease. Although there has been recent news of viable vaccines or anti-viral treatments for COVID-19, there remains great uncertainty as to when such medicines will be widely available and implemented in Hong Kong and elsewhere, the actual efficacy, and when herd-immunity will develop. Relaxation of restrictions on economic and social life may lead to new cases which may lead to imposition of further restrictions. It is unclear when international travel will resume or when local clients with non-urgent disease will once again feel comfortable visiting hospitals and clinics. Accordingly, our business and financial performance may be further impacted for the remainder of our financial year, if not longer.
In addition to COVID-19, our business may be affected by outbreaks of other communicable diseases. Any mutation of COVID-19, a recurrence of Severe Acute Respiratory Syndrome (or SARS) or
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RISK FACTORS an outbreak of any other epidemics in Hong Kong or Mainland China, such as the avian influenza A (H5N1 and H7N9) virus or the influenza A (H1N1) virus, Middle East Respiratory Syndrome (or MERS), or other communicable diseases could have a material adverse effect on our Group’soperations and financial performance.
In the event such outbreaks occur at any of our Medical Centres or Diagnosis Centres, there is a possibility of temporary closures of the affected centre and quarantine of all affected healthcare professionals. There can be no assurance that our Group’s crisis management measures can be implemented on a timely manner or will be effective. Any failure by us to manage the spread of communicable diseases may also damage our reputation.
Our financial statements during the Track Record Period may not be easily comparable and past performance is not necessarily indicative of future results.
Our revenue increased from HK$195.7 million for the year ended 31 March 2019 to HK$251.4 million for the year ended 31 March 2021, representing a CAGR of approximately 13.4%. Our financial statements during the Track Record Period may not be easily comparable between each period. Our core business, which involves the provision of medical services, did not start until November 2017 when our Founding Doctors joined our platform as specialist doctors. In addition, five of our Equity Partner Doctors joined us as doctors at various dates during the year ended 31 March 2019, which contributed significantly to our revenue growth for both the years ended 31 March 2019 and 2020. For further details, please see the section headed ‘‘History, Reorganisation and Corporate Structure’’. In October 2019, we acquired Hong Kong Imaging, which has two imaging and diagnoses centres and one laboratory located in Central in order to supplement our medical services. The acquisition of Hong Kong Imaging did not constitute a major transaction for the purposes of Main Board Listing Rule 4.05A. However, due to the combination of the above factors, changes in our financial statements during the Track Record Period were significant, and they may not be easily comparable.
In addition, although our revenue has increased during the Track Record Period, such financial data only reflect our past performance. Past performance is not necessarily indicative of future results. The effects of the changing regulatory, economic and other unpredictable factors, such as the on-going COVID-19 pandemic and deterioration of China and United States relations, may have a material effect on our business and hence affect our future financial performance. Moreover, our financial and operating results may not meet the expectation of public market analysts or investors, which could cause the future price of the Shares to decline. Our revenue, expenses and operating results may vary from period to period in response to a variety of factors beyond our control. You should not rely on our historical results to predict the future performance of our Shares.
Our business operations are affected by competition from other healthcare services providers and other corporate healthcare solutions providers.
The healthcare services industry in which we operate is highly competitive. We are a multi- disciplinary healthcare services provider covering various specialist medical services as well as allied health services. Nonetheless, we face intense competition from other healthcare services providers and corporate healthcare solutions providers in both the public and private sectors in Hong Kong. We compete against our competitors over a number of factors, including the skills and experience of our specialist doctors, brand recognition, operating history, range of equipment, financial resources, geographical coverage, and price. Increase in market competition may result in a reduction of profit margin or loss of market share for our Group. If we cannot compete effectively or maintain or grow our market share, our business, results of operations and financial condition may be materially and adversely affected.
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RISK FACTORS
We may not be able to implement our business strategies on schedule or within our budget or at all. Such uncertainty could result in fluctuations in our financial performance.
The growth of our business depends on the implementation of our business strategies to a large extent. The successful implementation of our business strategies is subject to significant business, economic and competitive uncertainties and contingencies, including, among others, our ability to attract new experienced specialist doctors, the continued growth of healthcare services and market conditions in Hong Kong.
Our operating results may be affected by the actual timing and costs associated with finding suitable specialist doctors and other healthcare professionals, as well as establishing and developing new medical centres, such as our Integrated Flagship Medical Centre, Integrated Diagnostic Centre, HKMC Oncology Centre, HKMC Dental Centre and HKMC SKIN Centre. For further information on our business strategies and future plans, please see the section headed ‘‘Future Plans and [REDACTED]’’.In particular, we expect that we will require significant amounts of capital for our expansion plans, including the purchase and lease of suitable office space, the purchase of equipment and hiring of doctors and other healthcare support staff as well as other initial operating costs. During the start-up period, we will have to pay fixed costs such as rental and salary even when we may not generate sufficient revenue to cover them from the provision of medical services. In addition, our investment payback periods can fluctuate significantly for reasons beyond our control. Moreover, we may not be able to replicate our business model into new speciality services that we currently do not cover and plan to expand into areas such as dental services at the HKMC Dental Centre and dermatology services at the HKMC SKIN Centre. Accordingly, any uncertainty in establishing new medical centres may have a significant impact on our operating results.
Whether we can successfully implement our business strategies depends on various factors including, among others, our ability to attract suitable medical professionals, the availability of suitable locations for setting up of new medical centres and our ability to attract clients, compliance with applicable laws and regulations, changes in economic and market conditions. Delay or failure to successfully implement our business strategies could result in additional costs and/or delayed revenue, which may adversely affect our business, operational results and financial conditions.
We expect that the investment cost for the implementation of our currently planned future strategies will be approximately HK$[380.5] million in aggregate, which will be funded by the [REDACTED] from the [REDACTED]. In the event that our expansion plans require additional capital, there can be no assurance that we will have adequate internal resources or obtain additional financing to implement our future strategies.
We lease the premises in which our Medical Centres and Diagnostic Centres are located; any non- renewal of leases or substantial increase in rent my affect our business and financial performance.
We currently lease offices for our six Medical Centres and three Diagnostic Centres as well as our corporate administration office, all of which are located in the Central district of Hong Kong. For the years ended 31 March 2019, 2020 and 2021, we recorded depreciation of right-of-use assets amounting to HK$8.2 million, HK$14.7 million and HK$19.1 million, representing 4.2%, 5.9% and 7.6% of our revenue, respectively.
Our leased properties have lease terms ranging from 10 months to 6 years with monthly rents ranging from approximately HK$59 thousand to HK$1.4 million. The landlords may exercise early termination of our leases or may refuse to renew our leases following expiration. We cannot assure you
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RISK FACTORS that we will be able to enter into new leases or renew our leases on commercially acceptable terms in the future. The availability of commercially suitable and convenient locations is important to our business. Should we be required to relocate, for whatever reasons, we may incur substantial time and expense such as moving costs and renovation costs in addition to significant business disruption. Accordingly, if we are unable to maintain operations at our current locations, our business and financial conditions and operating results could be materially and adversely affected.
On 1 February 2021, we started a new lease for the entire office space on the 9th floor of Central Building, 1–3 Pedder Street, Central, Hong Kong for a term of six years and expiring on 31 January 2027. This new office space has approximately 16,000 sq.ft. and we plan to move HKMC I, HKMC III andHKMCPaediatricCentre(whicharelocatedonthe8thand5thfloorsinthesamebuilding)and HKMC Geriatric Medical Centre (which is located at Manning House, Central) to this new office on the 9th floor after renovation is completed, which we estimate would be around June 2021. As our offices in the Central Building have the same landlord, we have negotiated that our existing leases in the Central Building will expire at around the same time as our move to the 9th floor. After the relocation, we expect our total monthly rental expenses to be approximately HK$2.4 million. In addition to covering our existing office usage, our new office on the 9th floor is expected to provide us with the extra space necessary for our expansion in the near future. However, we cannot assure you that our relocation plans will not be delayed or that we would be able to efficiently utilise the extra space by successfully implementing our expansion plans. Should we fail to do so, our operations, business and financial condition may be adversely impacted.
We rely on the HKMC Ophthalmologists for our medical management services business.
During the Track Record Period, we provided medical management services for doctors in relation to administrative and operational functions. By offering medical management services to selected medical practitioners, we have been able to extend and build relationships, and enhance our ability to attract and recruit specialist doctors that we believe would be able to complement our business. However, there is no assurance we can continue to do so in the future. During the years ended 31 March 2019, 2020 and 2021, our management fee income generated from the provision of medical management services amounted to HK$3.4 million, HK$4.6 million and HK$4.5 million, respectively, representing 1.7%, 1.9% and 1.8% of our total revenue. Currently, we rely on the three HKMC Ophthalmologists for our medical management services business. Please see the section headed ‘‘Business — Our Services — Medical Management Services’’ for further information. Should our arrangement with the HKMC Ophthalmologists terminate, or should we fail to obtain new customers for our medical management business, our business and ability to attract and recruit specialist doctors may be adversely affected.
Our financial results are expected to be affected by expenses in connection with the share-based payment for Shares issued to certain of our Equity Partners.
In consideration of recruiting certain of our Equity Partner Doctors as specialist doctors to provide services to us, we issued Shares to Dr. Eddie Cheung, Dr. Stanley Yu and Dr. Michele Yuen for a nominal amount per Share. Immediately after completion of the [REDACTED], they will in aggregate hold 9,239,122 Shares or approximately 1.43% of the then total issued share capital of our Company. The issue of such Shares to these Equity Partner Doctors constitute share-based payments according to HKFRS. It is estimated that approximately HK$4.1 million will be charged to our Group’s consolidated statements of comprehensive income for each year for the five years ending 31 March 2026. In view of the above, we anticipate that the net profit margin and net profit of our Group for each of the five years ending 31 March 2026 will be affected. For reasons of the share-based payment and other details, please see the section headed ‘‘History, Reorganisation and Corporate Structure — Pre-[REDACTED] Investments’’.
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RISK FACTORS
Insurance coverage may not sufficiently cover risks arising from our business operations.
We have purchased and maintain insurance to cover, among others, employees’ compensation, property, public liability, medical malpractice liability and medical insurance for our employees. For the years ended 31 March 2019, 2020 and 2021, our insurance expenses were HK$0.5 million, HK$0.4 million and HK$0.6 million, respectively. We also ensure our medical practitioners purchase their own medical liability insurance. Although our Founding Doctors and most of our Panel Specialists have agreed to indemnify us in case of negligence or malpractice in relation to services carried out by them, we have not obtained such indemnities from our other doctors such as our Equity Partner Doctors and Employee Doctors and must rely on our medical malpractice insurance. However, our Group’s financial position may be adversely affected in the event claims exceed the coverage or the scope of our insurance policies or our insurance policies do not cover such claims. In addition, although our medical practitioners are primarily liable for claims of negligence or malpractice against them, we may also face claims from patients and be held liable due to our employment relationship with the medical practitioner, for contributory negligence or our own negligence. If we suffer losses which are not covered by our insurance policies or the amount of compensation we receive from our insurers for our losses is less than the actual losses suffered by us, our financial position and result of operations may be materially and adversely affected.
We mainly serve individual clients at our Medical Centres located in Central, Hong Kong, any significant downturn in the economy may adversely affect the demand for our services.
During the Track Record Period, we derived a majority of our revenue from individual clients. For the years ended 31 March 2019, 2020 and 2021, individual clients accounted for approximately 92.6%, 90.4% and 90.1% of our total revenue. On the other hand, only 5.6%, 7.8% and 8.1% of our total revenue were generated from our Group’s corporate clients for the same respective periods.
The demand from individual clients, especially business professionals, largely depends on their financial ability and willingness to pay. A slowdown in the economy may lead to a decrease in demand as individual clients opt for subsidised public healthcare services available at government hospitals and/ or deferring non-essential healthcare services. Their willingness to pay may also depends on our reputation and service quality. On the contrary, the demand from corporate clients is less vulnerable to the change of economy as the employees from corporate clients are eligible to request healthcare services from us through the healthcare benefits plans already joined by their employers.
As individual clients account for significant portion of revenue of our Group, any decrease in demand from individual clients may have a material and adverse effect on our Group’s business, results of operations and financial condition.
In addition, we derived all of our revenue during the Track Record Period from operations in Central, Hong Kong. Any material adverse events, which could impact business in Central, such as material social unrest and civil disobedience, as well as natural disasters, would negatively impact the demand for our healthcare services and disrupt our business operations. Due to the limited geographical coverage of the our operations, we may not be able to effectively manage any potential losses arising from these adverse events, which may materially and adversely affect our business, results of operations and financial condition.
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RISK FACTORS
We may incur impairment losses on intangible assets such as goodwill.
As at 31 March 2021, we recorded intangible assets of HK$17.8 million, including HK$17.7 million of goodwill due to our acquisition of Hong Kong Imaging in October 2019. Goodwill is not amortised but it is tested for impairment annually, or more frequently if events or changes in circumstances indicate that it might be impaired. For further details on our intangible assets, including our impairment testing of goodwill, please see the section headed ‘‘Financial Information — Description of Selected Consolidated Statement of Financial Position Items — Goodwill’’ andNote13tothe Accountant’s Report in Appendix I to this document. Should the expected growth rates for Hong Kong Imaging significantly decrease as part of our future impairment testing of goodwill, we may incur significant impairment losses on our goodwill, which in turn would adversely affect our results of operations and financial condition.
We recorded operating losses for our allied health services segment and this may continue.
Our allied health services segment incurred operating losses of HK$2.4 million for the year ended 31 March 2020 and HK$1.8 million for the year ended 31 March 2021 primarily due to a slowdown of business at Hong Kong Imaging due to lower number of patient visits as a result of the COVID-19 outbreak. For further information, please see the section headed ‘‘Financial Information — Recent Developments and Material Adverse Change — Impact of COVID-19’’. We expect that COVID-19 will continue to adversely affect Hong Kong Imaging, and the extent of the impact will depend on the severity of the on-going situation. Please also see the section headed ‘‘— Our Business has been and is likely to be adversely affected by the outbreak of COVID-19, and may be affected by other communicable diseases in the future’’.
We are exposed to credit losses on trade receivables.
We recorded gross trade receivables of HK$20.7 million, HK$20.9 million and HK$24.1 million as at 31 March 2019, 2020 and 2021, respectively; and recorded allowance for impairment losses of HK$4.6 million, HK$4.8 million and HK$5.0 million as at the same respective dates. In particular, we recorded HK$4.6 million in impairment losses for the year ended 31 March 2019 mainly due to the fact that one of our high-value hospital patients failed to pay for his medical services rendered. Please see the section headed ‘‘Financial Information — Results of Operations of Our Group — Comparison of the YearEnded31March2020totheYearEnded31March2019— Provision of impairment losses on financial assets’’ for further information. Whilst most of our patients would not normally incur or accumulate such a significant amount of in-patient hospital admission fees as the case above, we cannot guarantee that we will not experience a similar impairmentorahighernumberofsmallervalue impairment losses on our trade receivables in the future from hospital patients, which in turn may have a material and adverse impact on our business, results of operations and financial condition.
We are subject to risk of system failure caused by unexpected network interruptions, security breaches, attack by hackers or computer virus, and business interruption due to natural or man- made disasters.
Our business operation depends significantly on the reliability of our information system for medical centre administration, management of client information and financial information. There is no assurance that we can successfully maintain the satisfactory performance, reliability, security, and availability of our information technology infrastructure. Such failure may be caused by unexpected network interruptions, security breaches, attacks by hackers or computer virus.
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RISK FACTORS
Further, our operations may be interrupted if any of our Medical Centres or information technology infrastructure suspends operations due to the occurrence of events such as fire, flood, hardware and software failure, loss of power, telecommunication failure, terrorist attack or other natural or man-made disasters.
If any of the above events occur, our business operation may be disrupted for an indefinite period of time, thereby damaging our reputation and materially and adversely affecting our business.
We have limitations in promoting or marketing our business.
We are required to comply with the Code of Professional Conduct for the Guidance of Registered Medical Practitioners issued by the Medical Council. For details, please see the section headed ‘‘Regulatory Overview — Overview of Hong Kong Laws and Regulations — Undesirable Medical Advertisements Ordinance (Chapter 231 of the Laws of Hong Kong)’’.
The limitation in promoting the business of our Group may affect our ability to further enhance our brand recognition or secure new business opportunities in the future. Moreover, there is no guarantee that our existing practices of monitoring our information dissemination process and publication can continue to be effective. Should there be any change in the guidance, or change of interpretation thereof, our professional team may be regarded as breaching the relevant codes and may be subject to relevant disciplinary actions. Should there be any disciplinary actions against our professional team, our reputation, business and results of operations could be materially and adversely affected.
We have not entered into any long term supply agreements with our suppliers.
Currently, a majority of our pharmaceuticals and laboratory and imaging services are procured from a limited number of suppliers. For the years ended 31 March 2019, 2020 and 2021, purchases from our five largest suppliers amounted to HK$37.1 million, HK$47.0 million and HK$49.1 million, respectively, representing 79.6%, 78.1% and 84.8% of our total purchase costs, respectively. For the same periods, our largest supplier, accounted for 33.9%, 33.4% and 35.9% of our total purchases, respectively.
We have not entered into any long term supply agreements with our suppliers and there is no assurance that they will continue to supply pharmaceuticals or laboratory and imaging services to us on commercially reasonable terms, or at all, which could affect our ability to secure future supply and provision of services. Further, we may not be able to find suitable alternative suppliers within a short period of time, and as such, any shortage of or delay in the supply of the pharmaceuticals or laboratory and imaging services to us may materially and adversely affect our operations. As a result, our financial condition and results of operations could be materially and adversely affected.
RISKS RELATING TO OUR INDUSTRY
Our business operation is subject to extensive government regulations and any failure to comply with government laws, regulations or licensing requirements could harm our business, results of operations, financial condition, brand and reputation.
Our Group’s business operations, our medical practitioners and allied health professionals in Hong Kong are subject to extensive laws, regulations and licensing requirements. Please refer to the section headed ‘‘Regulatory Overview’’ for further information. If we fail to comply with such laws, regulations and licensing requirements, our existing business operations and future expansion plans may be
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RISK FACTORS negatively affected. Government policies governing the healthcare services industry may evolve and change over time, and new or more stringent policies may be introduced. If we fail to comply with new policies and regulations, or if such policy changes disrupt our Group’s business prospects or cause it to incur additional costs, our Group’s business, results of operations and financial condition will be negatively affected. In addition, there are various licensing requirements governing different aspects of our Group’s business. Any failure to renew licences or any withdrawal of licences may result in the imposition of penalties on our Group, or the suspension of our operations, which could materially and adversely affect our business, results of operations and financial condition.
Further, the medical practitioners in Hong Kong have to comply with the codes of professional conduct or discipline as applicable to them (the ‘‘Codes’’) which set out (i) the restrictions on the promotion of the professional services and practice carried out by them or their group practice (with certain exceptions, such as publication of service information on the website of a bona fide medical practice group or in doctors directories); and (ii) restrictions on publication or marketing efforts for the predominant purpose of promoting their products or services to customers or potential customers. Practice promotion is interpreted in the broadest sense to include the failure to take adequate steps to prevent publicity in circumstances which would call for caution. Should there be any inadvertent breach, change in the guidance, or change of interpretation of the Codes, our medical practitioners may be regarded as breaching the Codes and may be subject to relevant disciplinary actions. This could in turn materially and adversely affect our Group’s reputation, business, results of operations and financial condition.
Demand for our healthcare services is affected by macroeconomic conditions that are outside of our control.
We operate in the private sector of the healthcare industry in Hong Kong. The demand for our healthcare services is affected and will continue to be affected by a number of factors outside our control. These factors include our competitiveness against our competitors in Hong Kong in terms of, amongst others, fee levels, service network and variety of healthcare services provided. In addition, certain macroeconomic factors, such as the overall affluence level and more importantly, the quality of the public healthcare services provided by the government, are crucial to the performance in private sector healthcare industry. We believe the increasing number of affluent population and the middle-class will increase the demand for private healthcare services. If the public sector is able to provide quality healthcare services competitively, both in terms of fee levels and waiting time for treatment, it will affect the demand for healthcare services in the private sector. In such event, our business and financial conditions as well as our operating results could be adversely affected.
Our business may be materially and adversely affected by the increasing trade and political tensions between the United States and China or Hong Kong.
As trade and political tensions continue to rise between the United States and China, including with respect to Hong Kong itself, concerns exist among businesses in Hong Kong surrounding the severity and scope of the adverse economic impact on Hong Kong. The trade and political frictions between the United States and the China began to escalate in 2018. On 6 July 2018, the United States began imposing additional tariffs on certain products that are manufactured in Mainland China, which were subsequently increased to include various lists of products. In addition to the additional tariffs imposed against the backdrop of the Sino-U.S. tradewar,on14July2020,UnitedStatesPresident Donald Trump signed the Hong Kong Autonomy Act 2020 and issued the Executive Order on Hong Kong Normalisation (the ‘‘EO’’). The EO rescinds the separate status that Hong Kong had enjoyed
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RISK FACTORS under a variety of U.S. laws, including but not limited to extradition treaty, export controls and separate travel territory. Furthermore, on 7 August 2020, the U.S. Department of Treasury imposed sanctions on 11 individuals, including certain Hong Kong government officials, pursuant to the EO. As a result of these increasing tensions and sanctions, some Western business and their employees may decide to relocate outside of Hong Kong, and we cannot assure you that our client base will not be adversely affected. In addition, we cannot assure you that demand for our services will not decrease, as a result of an economic downturn in Hong Kong driven by increasing trade tensions between the United States and China or Hong Kong, as well as by adverse changes in diplomatic relations between the countries. As a result, our business, financial condition, results of operations and prospects could be materially and adversely affected.
We are subject to laws and regulations relating to the personal information of our clients. Any failure to adequately protect our clients’ personal data could expose us to liability.
All medical practitioners are required by the code of professional conduct applicable to them not to disclose medical information of patients to any third party without the client’s consent, except in certain specific circumstances.
In Hong Kong, we are also subject to the Personal Data (Privacy) Ordinance (Chapter 486 of the Laws of Hong Kong), which limits the use of personal data of individual clients collected by us to such purposes for which the personal data were collected, or for a directly related purpose.
We rely on certain internal control measures we have in place and on our medical practitioners and our staff to abide by the relevant laws, and there was no incident on clients’ information leakage in the past. Nevertheless, we cannot assure you that the confidentiality measures can completely prevent the leakage of the clients’ information or prevent such information from being used for improper purposes. Any breach of our confidentiality obligations towards the clients could expose us to potential claims or litigation or breach of the relevant laws and regulations, which could have a material impact on our business and financial conditions, operating results and business prospects.
RISKS RELATING TO THE [REDACTED] AND SHARES
There has not been any prior public market for the Shares and an active trading market may not develop.
An active trading market for the Shares may not develop and the trading price of the Shares may fluctuate significantly. Prior to the [REDACTED], there has been no public market for the Shares. The [REDACTED] range has been determined through negotiation between our Company and the [REDACTED] (for itself and on behalf of the [REDACTED]) and the final [REDACTED] may not be indicative of the price at which the Shares will be traded following the completion of the [REDACTED]. In addition, there is no assurance that an active trading market for the Shares will develop, or, if it does develop, that it will be sustained following completion of the [REDACTED], or that the trading price of the Shares will not decline below the [REDACTED].
The trading price of the Shares may also be subject to significant volatility in response to, among others, the following factors:
. variations in our operating results;
. changes in the analysis and recommendations of securities analysts;
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RISK FACTORS
. announcements made by us or our competitors;
. changes in investors’ perception of our Group and the investment environment;
. developments in the healthcare industry;
. changes in pricing made by us or our competitors;
. the liquidity of the market for the Shares; and
. general economic and other factors.
The trading volume and share price of the Shares may fluctuate.
The price and trading volume of the Shares may be highly volatile. Factors such as variations in our revenue, earnings and cash flow, announcements of new technologies, strategic alliances or acquisitions, loss of key personnel, changes in ratings by financial analysts and credit rating agencies, litigation or fluctuations in the market prices for the merchandise sold could cause large and sudden changes in the volume and price at which the Shares will trade. In addition, the Stock Exchange and other securities markets from time to time experience significant price and volume fluctuations that are not related to the operating performance of any particular company. These fluctuations may also materially and adversely affect the market price of the Shares.
Future sales of substantial amounts of the Shares in the public market may adversely affect the prevailing market price of the Shares.
Except for the Shares issued in the [REDACTED], our Company has agreed with the [REDACTED] not to issue any of the Shares or securities convertible into or exchangeable for the Shares during the period beginning from the date of this document and continuing through the date which is six months from the date on which dealings in the Shares commence on the Stock Exchange. Further, the Shares held by our Controlling Shareholders are subject to certain lock-up undertakings for periods commencing on the date of this document and up to 12 months after the [REDACTED]. Please refertothesectionheaded‘‘[REDACTED] — [REDACTED] Arrangements and Expenses’’ for a more detailed discussion of restrictions that may apply to future sale of the Shares. After these restrictions lapse, the market price of the Shares may decline as a result of sale of substantial amounts of the Shares or other securities relating to the Shares in the public market, the issuance of the new Shares or other securities relating to the Shares, or the perception that such sales or issuances may occur. This may also materially and adversely affect our ability to raise capital in the future at a time and at a price we deem appropriate.
You may experience immediate dilution and may experience further dilution if we issue additional Shares in the future.
If the final [REDACTED] of our [REDACTED] is higher than the net tangible assets value per Share immediately prior to the [REDACTED], subscribers and purchasers of our [REDACTED] will experience an immediate dilution in the pro forma adjusted consolidated net tangible asset value per Share.
In addition, we may consider [REDACTED] and issuing additional Shares in the future for expansion of our business or to the extent that our Shares are issued upon the exercise of Share options. In this regard, you may experience further dilution in the consolidated net tangible asset per Share if we issue additional Shares in the future at a price which is lower than the consolidated net tangible asset per Share.
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RISK FACTORS
Our Controlling Shareholders have substantial control over our Company and their interests may not be aligned with the interests of the other Shareholders.
Prior to and immediately following the completion of the [REDACTED], our Controlling Shareholders will continue to have substantial control over our Company. Subject to the Articles of Association, the Companies Ordinance and the Listing Rules, the Controlling Shareholders by virtue of their controlling beneficial ownership of the share capital of our Company, will be able to exercise significant control and exert significant influence over our business or otherwise on matters of significance to us and other Shareholders by voting at the general meeting of the Shareholders. The interests of the Controlling Shareholders may differ from the interests of other Shareholders and the Shareholders are free to exercise their votes according to their interests. To the extent that the interests of the Controlling Shareholders conflict with the interests of other Shareholders, the interests of other Shareholders can be disadvantaged and harmed.
The laws of the Cayman Islands relating to the protection of the interests of minority shareholders may differ from the laws of Hong Kong and other jurisdictions.
Our corporate affairs are governed by, among other things, our Memorandum of Association and Articles of Association, the Cayman Companies Act, and the common law of the Cayman Islands. The rights of our Shareholders to take action against our Directors, the rights of minority shareholders to instigate actions and the fiduciary responsibilities of our Directors to us under Cayman Islands law are to a large extent governed by the common law of the Cayman Islands. The common law of the Cayman Islands is derived in part from comparatively limited judicial precedent in the Cayman Islands as well as from English common law, which has persuasive, but not binding, authority on a court in the Cayman Islands. The rights of our Shareholders and the fiduciary responsibilities of our Directors under Cayman Islands law may not be the same as they would be under statutes or judicial precedent in Hong Kong or other jurisdictions. In particular, the Cayman Islands have different securities laws as compared to Hong Kong and may not provide the same protection to investors. Furthermore, shareholders of Cayman Islands companies may not have standing to initiate a shareholder derivative action in a Hong Kong court.
We may not declare dividends on our Shares in the future.
During the Track Record Period, we had declared and paid dividend to our Shareholders. The amount of dividends actually distributed to our Shareholders will depend upon our earnings and financial position, operating requirements, capital requirements and any other conditions that our Directors may deem relevant and will be subject to the approval of our Shareholders. There is no assurance that dividends of any amount will be declared or distributed in any year in the future. For further details, see the section headed ‘‘Financial Information — Dividends and Dividend Policy’’.
There can be no guarantee as to the accuracy of facts and other statistics contained in this document with respect to the economies and the industry in which we operate.
Certain facts and other statistics in this document are derived from various sources including various official government publications and communications with various official government agencies. Whilst our Group has exercised reasonable care to ensure that such facts and statistics presented are accurately reproduced from their respective sources, the quality or reliability of such source materials cannot be guaranteed and have not been prepared or independently verified by us, the Sole Sponsor, the [REDACTED] or any of their respective directors, affiliates or advisers. Therefore we make no representation as to the accuracy of such facts and statistics, which may not be consistent with other information compiled within or outside Hong Kong and the PRC. Due to possibly flawed or ineffective
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RISK FACTORS collection methods or discrepancies between published information, market practice and other problems, the official government statistics and unofficial statistics referred to or contained in this document may be inaccurate or may not be comparable to statistics produced for other publications or purposes and should not be relied upon. Furthermore, there is no assurance that they are stated or compiled on the same basis or with the same degree of accuracy as may be the case elsewhere. In all cases, investors should give consideration as to how much weight or importance they should attach to, or place on, such facts or statistics.
You should rely on this document, and not place any reliance on any information contained in press articles or other media, in making your investment decision.
You should rely only on the information contained in this document to make your investment decision. We have not authorised anyone to provide you with information that is not contained in, or is different from what is contained in, this document. Prior or subsequent to the publication of this document, there has been or may be press and media coverage regarding us and the [REDACTED], in addition to marketing materials published by us in compliance with the Listing Rules. We have not authorised any such press and media reports, and the financial information, financial projections, valuations and other information purportedly about us contained in such unauthorised press and media coverage may be untrue and may not reflect what is disclosed in this document. We make no representation as to the appropriateness, accuracy, completeness or reliability of any such information or publication, and accordingly do not accept any responsibility for any such press or media coverage or the inaccuracy or incompleteness of any such information. To the extent that any such information appearing in the press and media is inconsistent or conflicts with the information contained in this document, we disclaim it, and accordingly you should not rely on any such information. In making your decision as to whether to purchase our Shares, you should rely only on the information included in this document.
Forward-looking statements contained in this document are subject to risks and uncertainties.
This document contains certain statements that are ‘‘forward-looking’’ and indicated by the use of forward-looking terms such as ‘‘aim’’, ‘‘anticipate’’, ‘‘believe’’, ‘‘could’’, ‘‘estimate’’,‘‘expect’’, ‘‘intend’’, ‘‘ought to’’, ‘‘may’’, ‘‘plan’’, ‘‘potential’’, ‘‘project’’, ‘‘seek’’, ‘‘should’’, ‘‘will’’ or ‘‘would’’ or similar expressions. You are cautioned that any forward-looking statement involves risks and uncertainties and any or all of the assumptions relating to the forward-looking statements could prove to be inaccurate. As a result, the forward-looking statement could be incorrect. The inclusion of forward-looking statements in this document should not be regarded as a representation by us that the plans and objectives will be achieved, and you should not place undue reliance on such statements.
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INFORMATION ABOUT THIS DOCUMENT AND THE [REDACTED]
[REDACTED]
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INFORMATION ABOUT THIS DOCUMENT AND THE [REDACTED]
[REDACTED]
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INFORMATION ABOUT THIS DOCUMENT AND THE [REDACTED]
[REDACTED]
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DIRECTORS AND PARTIES INVOLVED IN THE [REDACTED]
DIRECTORS
Name Address Nationality
Executive Directors Dr. Kenneth Tsang Lower Town House 4 Chinese (曾華德醫生) La Hacienda 27–33 Mount Kellett Road The Peak Hong Kong
Dr. Adam Leung 27/F, Argenta Chinese (梁永雄醫生) 63 Seymour Road Mid-levels Hong Kong
Mrs. Chen Chou Mei Mei Vivien 3/F, 24 Oxford Road Chinese (陳周薇薇女士) Kowloon Tong, Kowloon Hong Kong
Mr. Shiu Shu Ming House C11 Chinese (蕭恕明先生) Fortune Garden 72 Ting Kok Road Tai Po, New Territories Hong Kong
Independent non-executive Directors Mr. David Michael Norman House A6, Mount Davis Village British 6–10 Mount Davis Road Pokfulam Hong Kong
Mr. Ip Koon Wing Ernest Flat C, 26/F, Block 5 Chinese (葉冠榮先生) The Legend 23 Tai Hang Drive Hong Kong
Mr. Wong Kwok Shing Thomas Flat B, 4/F, Tower 5 Chinese (汪國成先生) Jubilant Place 99 Pau Chung Street Tokwawan, Kowloon Hong Kong
For further information regarding our Directors, please refer to the section headed ‘‘Directors and Senior Management’’.
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DIRECTORS AND PARTIES INVOLVED IN THE [REDACTED]
PARTIES INVOLVED IN THE [REDACTED]
Sole Sponsor and [REDACTED] China International Capital Corporation Hong Kong Securities Limited 29/F, One International Finance Centre 1 Harbour View Street Central Hong Kong
[REDACTED] [REDACTED]
Legal Advisers to our Company As to Hong Kong law K. B. Chau & Co. Unit B, 31/F, United Centre No. 95 Queensway Admiralty Hong Kong
As to Hong Kong law in relation to our business operations in Hong Kong Hectar Pun S.C. Barrister-at-law and senior counsel of Hong Kong 9th Floor One Lippo Centre 89 Queensway Admiralty Hong Kong
As to Cayman Islands law Conyers Dill & Pearman 29th Floor One Exchange Square 8 Connaught Place Central Hong Kong
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DIRECTORS AND PARTIES INVOLVED IN THE [REDACTED]
Legal Advisers to the Sole Sponsor and As to Hong Kong law the [REDACTED] Norton Rose Fulbright Hong Kong 38/F, Jardine House 1 Connaught Place Central Hong Kong
Auditor and Reporting Accountant PricewaterhouseCoopers Certified Public Accountants Registered Public Interest Entity Auditor 22/F, Prince’s Building Central Hong Kong
Industry Consultant Frost & Sullivan Limited 1706, One Exchange Square 8 Connaught Place Central Hong Kong
Property Valuer Knight Frank Petty Limited 4/F, Shui On Centre 6–8 Harbour Road Wanchai Hong Kong
[REDACTED] [.]
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CORPORATE INFORMATION
Registered Office in the Cayman Islands Cricket Square Hutchins Drive P.O. Box 2681 Grand Cayman KY1-1111 Cayman Islands
Head Office and Principal Place of 13/F, Pacific House Business in Hong Kong 20 Queen’s Road Central Hong Kong
Company’s Website Address http://www.hkmedicalconsultants.com (The contents on this website do not form part of the document)
Company Secretary Ms. Kwan Wai Ling (HKICPA)
Authorised Representatives Mr. Shiu Shu Ming House C11 Fortune Garden 72 Ting Kok Road Tai Po, New Territories Hong Kong
Ms. Kwan Wai Ling Flat E, 17/F, The Spectacle 8 Cho Yuen Street Yau Tong, Kowloon Hong Kong
Audit Committee Mr. Ip Koon Wing Ernest (Chairman) Mr. David Michael Norman Mr. Wong Kwok Shing Thomas
Remuneration Committee Mr. Wong Kwok Shing Thomas (Chairman) Mr. David Michael Norman Mr. Ip Koon Wing Ernest Dr. Kenneth Tsang Mr. Shiu Shu Ming
Nomination Committee Dr. Kenneth Tsang (Chairman) Mr. David Michael Norman Mr. Ip Koon Wing Ernest Mr. Wong Kwok Shing Thomas Mr. Shiu Shu Ming
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CORPORATE INFORMATION
[REDACTED] [REDACTED]
[REDACTED] [REDACTED]
Compliance Adviser China Everbright Capital Limited 12/F, Everbright Centre 108 Gloucester Road Wan Chai Hong Kong
Principal Banks Shanghai Commercial Bank Limited Shanghai Commercial Bank Tower 12 Queen’s Road Central Hong Kong
Hang Seng Bank Limited 83 Des Voeux Road Central Central Hong Kong
Bank of Communications (Hong Kong) Limited Shop 2–3, G/F., Tung Fai Building 161–165 Shau Kei Wan Main Street East Hong Kong
Bank of China (Hong Kong) Limited 2/F, Wing On House 71 Des Voeux Road Central Hong Kong
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INDUSTRY OVERVIEW
The information contained in this section, unless otherwise indicated, has been derived from various official government publications and other publications generally believed to be reliable and the market research report prepared by Frost & Sullivan which we commissioned. We believe that the sources of such information are appropriate sources for such information and have taken reasonable care in extracting and reproducing such information. We have no reason to believe that such information is false or misleading in any material respect or that any fact has been omitted that would render such information false or misleading in any material respect. None of our Company, the Sole Sponsor, the [REDACTED], the [REDACTED] and the [REDACTED] or any of our or their respective directors, officers or representatives or any other person involved in the [REDACTED], except for Frost & Sullivan, has independently verified such information or gives any representation as to the accuracy or completeness of such information. As such, you should not unduly rely upon such information in making, or refraining from making, any investment decision.
SOURCE OF INFORMATION We have commissioned Frost & Sullivan, an independent market research and consulting company, to conduct an analysis of, and to prepare a report on the private specialist medical centre market in Hong Kong. The report prepared by Frost & Sullivan for us is referred to in this document as the Frost & Sullivan Report. We agreed to pay Frost & Sullivan a fee of HK$480,000 which we believe reflects market rates for reports of this type. Founded in 1961, Frost & Sullivan has 45 offices with more than 1,200 industry consultants, market research analysts, technology analysts and economists globally. Frost & Sullivan’sservices include technology research, independent market research, economic research, corporate best practices advising, training, client research, competitive intelligence and corporate strategy. We have included certain information from the Frost & Sullivan Report in this document because we believe this information facilitates an understanding of the private specialist medical centre market in Hong Kong for the prospective investors. The Frost & Sullivan Report includes information about the private specialist medical centre market in Hong Kong as well as other economic data, which have been quoted in the document. Frost & Sullivan’s independent research consists of both primary and secondary research obtained from various sources in respect of the private specialist medical centre market in Hong Kong. Primary research involved in-depth interviews with leading industry participants and industry experts. Secondary research involved reviewing company reports, independent research reports and data based on Frost & Sullivan’s own research database. Projected data were obtained from historical data analysis plotted against macroeconomic data with reference to specific industry-related factors. Except as otherwise noted, all of the data and forecasts contained in this section are derived from the Frost & Sullivan Report, various official government publications and other publications. In compiling and preparing the research, save for the foreseeable impact of the COVID-19 outbreak, Frost & Sullivan assumed that the social, economic and political environments in Hong Kong are likely to remain stable in the forecast period, which ensures the steady development of the private specialist medical centre market in Hong Kong. Frost & Sullivan also assumed that the outbreak of COVID-19 in Hong Kong would be under effective control in 2021 with a gradual resumption of economic performance thereafter, as supported by (i) declining trend of newly reported COVID-19 cases in Hong Kong since the second quarter of 2021 and (ii) commencement of COVID-19 vaccination programme in Hong Kong since first quarter of 2021, with a increasing vaccination rate thereafter. As at the Latest Practicable Date, industry information for the private specialist medical market in Hong Kong for 2020 is not yet fully available, according to Frost & Sullivan. OVERVIEW OF MACROECONOMIC ENVIRONMENT IN HONG KONG Population and Age Structure Due to the rising number of new borns and immigrants, as well as an increase in life expectancy, the total population in Hong Kong has experienced a growth from 7.3 million in 2015 to 7.5 million in 2019, representing a CAGR of approximately 0.7%. It is forecast that total population will continuously rise at a CAGR of approximately 0.8% from 2020 to 2024.
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INDUSTRY OVERVIEW
An ageing population along with the continuous increase in life expectancy are expected to contribute to higher demand for healthcare services in Hong Kong. In particular, the population aged 65 and above increased considerably from 1.1 million in 2015 to 1.4 million in 2019, representing a CAGR of approximately 4.2%, and this number is expected to increase at a CAGR of approximately 5.4% from 2020 to 2024. In addition, Hong Kong has been one of the top ranked cities in terms of life expectancy. According to Food and Health Bureau of Hong Kong, the average life expectancy of population recordedasteadygrowthfrom84.4yearsin2015to84.9yearsin2019. Health Expenditure The total health expenditure in Hong Kong increased at a CAGR of approximately 6.6% from HK$137.5 billion in 2015 to HK$177.4 billion in 2019, largely driven by both rising public and private health expenditure during the period. Public health expenditure and private health expenditure was HK$90.5 billion and HK$86.9 billion, respectively in 2019, representing a CAGR of approximately 7.7% and 5.5%, respectively from 2015 to 2019. Looking forward, the total health expenditure in Hong Kong is expected to rise at a CAGR of approximately 7.5% from 2020 to 2024, mainly driven by the ageing population and rising demand for healthcare services. In particular, private expenditure on healthcare is forecasted to witness a CAGR of approximately 7.6% from 2020 to 2024, benefiting from increased purchase of insurance and the Voluntary Health Insurance Scheme promoted by the government. Total health expenditure by sector (Hong Kong), at current price, 2015–2024E
CAGR 2015−2019 2020E−2024E Public Billion HK$ Overall 6.6% 7.5% Private Public Sector 7.7% 7.4% 300 Private Sector 5.5% 7.6% 253.9 235.5 250 218.9 204.0 190.0 200 177.4 129.2 156.9 166.9 119.6 148.0 111.9 150 137.5 104.5 90.5 97.0 80.0 85.1 100 67.4 75.5 99.6 107.1 115.9 124.7 50 70.1 72.5 76.9 81.8 86.9 93.0 0 2015 2016 2017 2018 2019 2020E 2021E 2022E 2023E 2024E Source: Food and Health Bureau of Hong Kong, Frost & Sullivan Gross Insurance Premiums for Accident and Health The growth and availability of health insurance products are likely to increase the affordability and use of private medical services for the general public in Hong Kong. Due to growing health consciousness and penetration of health insurance, the gross premiums of general accident and health insurance has registered considerable growth from HK$13.6 billion in 2015 to HK$18.3 billion in 2019, representing a CAGR of approximately 7.8%. To relieve the pressure on the public sector and broaden the source of healthcare financing, the Food and Health Bureau launched the Voluntary Health Insurance Scheme in April 2020, offering tax incentives for individuals to purchase insurance products. Therefore, the gross premiums for accident and health insurance are projected to rise at a CAGR of approximately 8.3%, from HK$19.8 billion in 2020 to HK$27.1 billion in 2024. Gross Premiums for General Accident and Health Insurance Business (Hong Kong), 2015–2024E
Billion HK$ 2015−2019 2020E−2024E 30 CAGR 7.8% 8.3% 27.1 25.1 25 23.1 21.3 19.8 20 17.1 18.3 15.7 15 13.6 14.0 10 5 0 2015 2016 2017 2018 2019 2020E 2021E 2022E 2023E 2024E Source: Insurance Authority, Frost & Sullivan
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INDUSTRY OVERVIEW
OVERVIEW OF PRIVATE SPECIALIST MEDICAL CENTRE MARKET IN HONG KONG Classification of Private Medical Service Providers Private hospitals and private medical centres are the major healthcare service providers under the private sector in Hong Kong. Private medical centres in Hong Kong are generally operated by individual doctors or by an affiliated medical network of clinics, in which their services can be further classified as private general practice services, private specialist services and private allied health services. 1. Private general practice services include care services to chronic diseases patients with stable conditions and episodic disease patients with relatively mild symptoms. 2. Private specialty medical services cover particular healthcare services, including advanced diagnostic or treatment for specific diseases or specialised curative services to a certain part of the body of patients. 3. Private allied health services cover extended care services offered by healthcare professionals in specialised field apart from general practice and specialist medical services. Examples of allied health services include non-medical doctor provided medical services such as clinical psychology, speech therapy, nutritional therapy, psychological counselling and imaging, diagnostic and laboratory services.
Healthcare service providers in Hong Kong
Private healthcare institutions Public healthcare institutions
Private hospital Private medical centre Private nursing home
Private general practice services Private specialist services Private allied health services
denotes market segments of our Group Source: Frost & Sullivan Operation Models of Private Medical Centre Private medical centres can be further categorised into two groups by type of business models, namely individual private medical centre and private medical platform. An individual private medical centre is usually operated by an individual as a sole proprietor. Private medical platform refers to a network of affiliated medical centres with multiple locations. Larger-scale private medical platforms usually consist of both general practice services and a variety of specialist practice services, with medical practitioners under different specialties offering a range of services to patients. The key features of individual private medical centres and private medical platforms are set out below: Individual private medical centre Private medical platforms
. Recurrent patients in close proximity to . Private medical platforms usually offer residential or commercial areas are the target comprehensive healthcare services under a customers of individual private medical single brand, such as general practice centres. Therefore, the good reputation of the service, specialist practice service in one medical practitioner is important and will centre or through affiliated centres and attract more patients. options of cross-specialist treatments.
. Due to the large number of individual private . Large-scale medical platforms offer services medical centre in Hong Kong, individual through a widespread network of medical private medical centres usually provide an centres to cater for patients in different alternative option and certain degree of geographical areas. flexibility for patients in respect of location, waiting time and appointment. . Private medical platforms usually have adopted quality assurance and enhancement . The medical practitioner in an individual measures for their medical centres to ensure private medical centre is required to bear all standard operation procedures and quality the costs including rental and administrative control, which will increase the confidence cost, and other miscellaneous operational of patients. expenses.
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INDUSTRY OVERVIEW
Individual private medical centre Private medical platforms
. Due to the larger number of medical practitioners and increased size of patient base, private medical platforms are usually better able to manage financial risks and provide employee benefits, with enough resources to purchase advanced medical equipment, drugs and/or consumables.
. Medical platforms are under centralised management which can achieve economies of scale with cost savings by sharing rental expenses and administrative cost amongst medical practitioners; and provides enhanced brand awareness to attract talented medical practitioners and for referral of patients through allied practitioners. . Medical platforms are able to more readily fulfil regulatory requirements, especially the new regulations such as PHFO and the day procedure centre requirements thereunder that came into operation in January 2021. Source: Frost & Sullivan Industry Practice of Insurance Coverage for Medical Practitioners and Private Medical Centres According to the Code of Professional Conduct issued by the Medical Council of Hong Kong, although it is not a mandatory requirement, a medical practitioner should assess the risks of his or her practice and ability to pay the potential compensation awards and the legal costs of defending the medical negligence claims, and obtain proper insurance coverage (i.e. professional indemnity insurance), and some areas of medical practice involve statistically higher risks of claim than others. In addition, it is an industry norm for individual medical specialists at both individual private medical centres and private medical platforms to purchase professional indemnity insurance on their own behalf. Total Outpatient Volume in Private Medical Centres Outpatient visits generally refer to patients who visit a hospital or a medical centre for treatment without staying overnight. Private general practice medical centres and private specialist medical centres account for the largest share of outpatient visits in the private healthcare market. Driven by the ageing population, limited capacity of public healthcare institutions and increasing affordability for patients in recent years due to insurance, the number of outpatient visits in private general practice medical centres and private specialist medical centres in Hong Kong recorded a moderate growth at a CAGR of 1.7% and 2.0%, respectively during 2015 to 2019, and it is expected to increase further at a CAGR of 1.6% and 2.1%, respectively during 2020 to 2024. The chart below sets out the total number of outpatient visits in private medical centres in Hong Kong for the period indicated. Total number of outpatient visits in private medical centres (Hong Kong), 2015–2024E
CAGR 2015−2019 2020E−2024E Private general practice medical centres 1.7% 1.6% Private general practice medical centres Million visits Private specialist medical centres 2.0% 2.1% Private specialist medical centres 30 27.3 27.7 28.1 25.9 26.2 26.4 26.9 24.5 24.9 25.4 25 20 15
10 7.4 7.5 7.7 7.9 8.0 8.1 8.3 8.5 8.7 8.8 5 0 2015 2016 2017 2018 2019 2020E 2021E 2022E 2023E 2024E Note: (1) The chart includes outpatient visit in Western medicine related institutions only. Source: Frost & Sullivan
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INDUSTRY OVERVIEW
Revenue of Private Specialist Medical Centres and Average Spending of Patients Despite the relatively lower outpatient volume as compared to private general practice medical centres, the market revenue of private specialist medical centres in Hong Kong is higher than that of private general practice medical centres due to provision of more diverse medical services from consultation, diagnosis, examination, and different options of treatment from medications to procedures under one or more specialties to patients with generally a higher service fee. With the increasing affordability, average patient spending and demand for specialist medical services, the market revenue of private specialist medical centres increased from approximately HK$13.9 billion in 2015 to HK$17.6 billion in 2019, representing a CAGR of 6.1% and is expected to increase further at a CAGR of 6.4% from 2020 to 2024. The growth rate of revenue of private specialist medical centres in Hong Kong is higher than that of private general practice medical centres primarily due to the increasing spending of specialist services by patients, coupled with the preference of patients to obtain specialist medical advice and growing affordability for specialist medical services. The following charts set out the revenue of private medical centres and average spending of patient in private medical centres per visit in Hong Kong. Revenue of private medical centres (Hong Kong), 2015–2024E
CAGR 2015−2019 2020E−2024E Private general practice medical centres 2.2% 2.2% Private general practice medical centres Billion HK$ Private specialist medical centres 6.1% 6.4% Private specialist medical centres 25 22.4 23.6 21.0 20 19.6 17.6 18.4 15.5 16.8 13.9 14.5 15 12.4 12.6 12.9 13.2 10.9 11.2 11.5 11.7 11.9 12.1 10
5
0 2015 2016 2017 2018 2019 2020E 2021E 2022E 2023E 2024E Notes: (1) The revenue of private general practice medical centres and private specialist medical centres include revenue generated from outpatient services only. (2) The chart includes revenue of Western medicine related institutions only. Source: Frost & Sullivan Average spending per patient visit in private medical centres (Hong Kong), 2015–2024E
CAGR 2015−2019 2020E−2024E Private general practice medical centres 0.7% 0.6% Private general practice medical centres HK$ Private specialist medical centres 3.9% 4.3% Private specialist medical centres 3000 2,575 2,684 2,365 2,469 2,125 2,195 2,272 1,935 2,015 2000 1,881
1000 443 450 451 453 455 458 460 463 466 469
0 2015 2016 2017 2018 2019 2020E 2021E 2022E 2023E 2024E Source: Frost & Sullivan As compared to private medical centres with only general practitioners, private specialist medical centres generally have advanced equipment, facilities and supplies, and provide targeted medical diagnosis, treatment and minor surgery to address illness, which generally involves a longer treatment course as compared to general practitioners. In contrast, general practitioners typically offer a primary level of consultation and treatment to patients and refer patients to specialist for a more advanced and detailed diagnostic, consultation and/or treatment through outpatient services in medical centre and inpatient services in private hospitals, which is common in the market. In addition, medical appointments are often required for private specialist medical centres especially for those operated by experienced and reputable specialists, and such renowned private specialist medical centres are generally located in prime areas such as Central, Tsim Sha Tsui and Mong Kok in Hong Kong.
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INDUSTRY OVERVIEW
Market Size of Dermatology Centres, Dental Centres and Diagnostic Centres in Hong Kong Dermatology centres The market demand for dermatological services in Hong Kong is likely to increase in future. Skin diseases, such as eczema or dermatitis, are common in Hong Kong due to the humid weather and stressful lifestyle of residents. According to the Hong Kong Allergy Association, one in five people in Hong Kong suffers from eczema. In addition, similar to other medical specialties, demand for dermatologist remains high with limited capacity in Hong Kong. According to the Department of Health, although there were over 300,000 patients seeking treatment from the public sector and the majority of current market demand needs to be addressed by the private sector. Apart from treatment of skin diseases, aesthetic dermatology, which also involve treatments or procedures to improve the skin appearance of patients is in high demand. Revenue, average spending per patient visit and patient volume of dermatology centre in Hong Kong, 2015–2024E CAGR CAGR (2015– (2020E– Unit 2015 2016 2017 2018 2019 2020E 2021E 2022E 2023E 2024E 2019) 2024E)
Revenue Million HK$ 1,133.3 1,202.7 1,260.4 1,368.9 1,432.9 1,441.5 1,557.7 1,658.9 1,755.7 1,868.6 6.0% 6.7% Average spending per patient visit HK$ 1,384.6 1,384.6 1,437.2 1,494.7 1,550.0 1,598.1 1,654.0 1,716.8 1,788.9 1,874.8 2.9% 4.1% Patient volume Million 0.8 0.9 0.9 0.9 0.9 0.9 0.9 1.0 1.0 1.0 3.0% 2.7%
Source: Frost & Sullivan Dental centres The market demand for dental services in Hong Kong has been growing along with (i) the increasing awareness towards the importance of dental care, (ii) an ageing population and (iii) an increasing demand for orthodontic services, a sub-specialty of dentistry that involves diagnosis, prevention and correction of mal-positioned teeth and jaws. In particular, demand for orthodontic services for beauty and aesthetic purposes such as teeth alignment have been on the rise for younger individuals. Visitors from Mainland China seeking orthodontic services in Hong Kong is also expected to increase in the future. Revenue, average spending per patient visit and patient volume of dental centre in Hong Kong, 2015–2024E CAGR CAGR (2015– (2020E– Unit 2015 2016 2017 2018 2019 2020E 2021E 2022E 2023E 2024E 2019) 2024E)
Revenue Million HK$ 1,366.3 1,443.8 1,510.9 1,602.8 1,706.8 1,818.4 1,923.3 2,048.2 2,181.1 2,327.2 5.7% 6.4% Average spending per patient visit HK$ 580.0 600.3 617.1 642.4 669.4 699.5 726.8 757.3 789.9 823.8 3.6% 4.2% Patient volume Million 2.4 2.4 2.4 2.5 2.5 2.6 2.6 2.7 2.8 2.8 2.0% 2.1%
Source: Frost & Sullivan Diagnostic centres The growing awareness toward general health and wellness amongst Hong Kong residents, ageing population as well as drive the demand for health checks and diagnostic services for detection of illness and disorders. In recent years, the emergence of diagnostic centres equipped with specialised and advanced machines for specimen testing, CT scan, magnetic resonance imaging and ultrasound can offer patients a comprehensive and professional diagnostic services with convenience of being diagnosed based on their medical needs.
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INDUSTRY OVERVIEW
Revenue, average spending per patient visit and patient volume of diagnostic centre in Hong Kong, 2015–2024E CAGR CAGR (2015– (2020E– Unit 2015 2016 2017 2018 2019 2020E 2021E 2022E 2023E 2024E 2019) 2024E)
Revenue Million HK$ 1,366.3 1,443.8 1,510.9 1,602.8 1,706.8 1,818.4 1,923.3 2,048.2 2,181.1 2,327.2 5.7% 6.4% Average spending per patient visit HK$ 580.0 600.3 617.1 642.4 669.4 699.5 726.8 757.3 789.9 823.8 3.6% 4.2% Patient volume Million 2.4 2.4 2.4 2.5 2.5 2.6 2.6 2.7 2.8 2.8 2.0% 2.1%
Source: Frost & Sullivan Demand and Supply of Medical Practitioners in Hong Kong With the steady growth and an ageing population, the demand for medical services remains strong in Hong Kong. The total number of medical practitioners witnessed moderate growth from approximately 13,726 in 2015 to 15,050 in 2019, representing a CAGR of 2.3% while the number of specialist practice practitioners increased from approximately 6,520 in 2015 to 7,300 in 2019, representing a CAGR of 3.8%. According to Food and Health Bureau of Hong Kong, there is only approximately 2.0 medical practitioners per thousand population in Hong Kong, which is lower than other developed countries such as the United States and United Kingdom, which have ratios of 2.6 and 2.8 per thousand, respectively. This ratio is even lower for specialist medical practitioners with only 1.0 specialist per thousand population in Hong Kong. In particular, the number of experienced medical specialists is highly limited in Hong Kong due to strict regulations taken by the Medical Council of Hong Kong for introducing foreign medical practitioners, and the demand for specialist practice practitioners and, especially practitioners in certain specialties such as geriatrics, oncology, ophthalmology and neurosurgery has grown significantly in recent years. To relieve the shortage of medical practitioners, the Hong Kong Government and Hospital Authority have taken different initiatives to maintain sufficient manpower, which includes the implementation of Special Retired and Rehire Scheme (SRRS) in 2015 to rehire medical practitioners reaching the retirement age, increase in quota of internship training for medical graduates and other measures to attract and retain medical practitioners. Market Drivers and Opportunities Limited capacity in public healthcare institutions A rapidly expanding and ageing population is putting strain on healthcare service providers. Limited capacity and manpower in the public healthcare sector will contribute to the shifting demand from the public healthcare sector to private healthcare sector. According to Hospital Authority, the average inpatient bed occupancy rate in 2019/20 was 88.9%. In particular, total occupancy rate of inpatient beds topped 100% during the peak season of seasonal influenza, which reflects that some public hospitals were operating beyond maximum capacity. In addition, the over-reliance on public healthcare services has resulted in the long waiting time for healthcare services in the public sector. For example, from 1 July 2019 to 30 June 2020, the waiting time for stable new case booking at specialist outpatient clinics generally exceeded 50 weeks for most specialties. In particular, the waiting time for internal medicine outpatient services ranged from 104 weeks to 157 weeks. In order to reduce the burden of public healthcare sector, the General Outpatient Medical Centre Public-Private Partnership Programme (GOPC PPP) was launched in mid-2014 which provides an option for patients with stable conditions in public general outpatient medical centre to receive treatment from private medical practitioners. Accordingly, the limited capacity and long waiting hours of public healthcare institutions are driving the shift in demand from the public healthcare sector towards the private healthcare sector. Increasing financial incentives and government-subsidised schemes The rapidly ageing population in Hong Kong is helping drive the demand for private medical services as the prevalence and incidence of disorders and chronic diseases among the elderly grow. In order to supplement existing public healthcare services (e.g. general and specialist outpatient clinics), and enhance the primary care services to the elderly, the government launched the Elderly Health Care Voucher (‘‘EHV’’) Pilot Scheme in 2009 by providing financial incentive for elderly people to choose private healthcare services for both curative and preventive care. The EHV Scheme was subsequently
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INDUSTRY OVERVIEW converted into a recurrent programme in 2014 and the amount of the voucher increased subsequently. According to the Research Office of Legislative Council, government expenditure on elderly health services rose from HK$960.3 million in 2014/15 to HK$3,418.1 million in 2019/20, representing a CAGR of approximately 37.4%. Meanwhile, the Colorectal Cancer Screening Programme was regularised in 2018 to subsidise residents aged 50 to 75 to receive screening services from the private medical service sector for the prevention of colorectal cancer. In addition, the Vaccination Subsidy Scheme enables private medical centres to provide pneumococcal vaccination for the elderly. Therefore, the increasing amount of financial incentives and government schemes and subsidises available in Hong Kong have been a driving force in private medical service market. Expansion of medical insurance coverage Driven by the growing health consciousness and penetration of health insurance, the gross premium of general accident and health insurance rose from HK$13.6 billion in 2015 to HK$18.3 billion in 2019, representing a CAGR of approximately 7.8%. To cater for the rising demand for premium healthcare services and specialist healthcare services, insurance companies are also expanding the coverage of medical insurance packages. The expansion of medical insurance encourages people to pursue premium healthcare and the use of private healthcare service, which brings business opportunities for private medical service providers. Recovery of medical tourism Hong Kong has been an established destination for medical tourism, which is primarily attributable to (i) high-quality of medical services and modern procedures, (ii) well-trained multi-lingual medical professionals, (iii) first-class medical infrastructure, (iv) exceptional geographical location in close proximity to the PRC and other cities in Asia and (v) well established infrastructure and attractions for tourism. Specifically, Hong Kong has also been one of the leading cities with an efficient healthcare system, and is renowned for cancer treatment with availability of full range of medical procedures available in the private and public sector, as well as the combination of Chinese-Western medical treatments. The private medical service sector in Hong Kong has been gaining popularity amongst Mainland Chinese visitors demanding high-quality medical services such as consultation and treatment by reputable specialists, health check-ups and access to a wide variety of authentic medications and vaccines. Historically, the total visitor arrivals from the Mainland China recorded an overall growth from approximately 45.8 million in 2015 to 51.0 million in 2018, followed by a decline to approximately 43.8 million in 2019 due to the social unrest in Hong Kong. The outlook of medical tourism in Hong Kong is expected to be positive in a long term after the end of the COVID-19 outbreak and social unrest that have been hindering tourist arrivals. Economic recovery after the COVID-19 outbreak subsides is expected to benefit the business of private specialist medical centres in Hong Kong. Market Trends Development of telemedicine and health promotion channels The development of leading technologies is stimulating innovation to improve the efficiency and effectiveness of healthcare services. For example, high smartphone penetration rate, rapid development of mobile applications with growing popularity, and increasing health awareness have contributed to the emergence of telemedicine services including over-the phone and video consultations. The provision of telemedicine is expected to be a key trend amongst private medical services providers in Hong Kong. In December 2019, the Medical Council of Hong Kong issued specific ethical guidelines on practice of telemedicine in Hong Kong and the outbreak of COVID-19 has further contributed to the popularity of telemedicine due to social-distancing measures and patients screening measures adopted by medical centres. On the other hand, the rapid growth of social media platforms and forums facilitate the sharing of health information between medical centre operators, medical practitioners and patients, which further increased the overall health awareness in Hong Kong. Increasing awareness in health and demand for premium healthcare service High education levels and income in Hong Kong drive the increasing awareness towards the importance of quality healthcare services among Hong Kong residents. People are willing to spend more on premium and high-quality healthcare services. Private medical centres are generally considered to be of higher quality as compared to public ones and are preferred by patients seeking premium healthcare services. Recent years have witnessed the emergence of medical concierge services within private medical centres targeting patients with busy schedules that demand premium services. Medical concierge
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INDUSTRY OVERVIEW services provide patients with a one-stop health check-up and medical care solution with personalised assistance. Furthermore, in view of the growing medical tourism from Mainland China tourists who seek professional healthcare and medical consultation in Hong Kong, especially for specialist services such as dermatology, oncology, gynaecology and obstetrics, the provision of medical concierge services is expected to be a key market trend. Growth of integrated specialty medical platforms Private specialist medical centres are becoming increasingly popular among Hong Kong residents with healthcare revenue rising from HK$23.1 billion in 2015 to HK$28.6 billion in 2019, representing a CAGR of approximately 5.4%. The growth was largely driven by the long waiting time in the public sector due to limited capacity and the complicated procedures to obtain diagnosis and treatment. In addition, relatively wealthy residents have shown a strong preference towards renowned and experienced specialists in certain specialties including dermatology, oncology, ophthalmology, neurosurgery, cardiology, etc. With the expanding coverage and use of medical insurance, people emphasise time value and quality, and are more willing to choose private medical centres for treatment. Integrated healthcare service providers with a network of medical centres usually have various specialties and larger geographical coverage, and such medical centres lead the private medical centre market in Hong Kong. Facing increased competition, smaller private medical centres are seeking to join medical platforms and affiliated network of medical centres for better resources and access to potential patients. Therefore, market consolidation and growth of integrated specialty medical platform is a major market trend in Hong Kong. Remuneration Model and Average Monthly Income of Private Specialist Doctors The remuneration rate payable to a specialist doctor, being the percentage of total service fee to net revenue (i.e. revenue derived by a specialist doctor, after deduction of consumables and expenses directly attributable to the relevant specialist doctor’s practice) varies depending on the seniority, expertise and qualification of the specialist doctor. Different healthcare service providers offer different forms of remuneration (for example, fixed salary, profit-sharing at certain ratio or amount, and/or a combination of the above) to the specialist doctor, and the remuneration packages vary greatly amongst specialties and seniority of specialists which also is subject to commercial negotiation between the medical practitioners and the healthcare service providers. In the case of profit-sharing, the service fee to profit ratio between the specialist doctor and the private medical centre generally fall into the range between 50:50 and 60:40 subject to seniority and profit-making potential of the particular specialist doctor. On average, the monthly income of specialist doctors grew from approximately HK$180,000 in 2015 to approximately HK$204,500 in 2019, representing a CAGR of 3.2%. The income level of the specialist doctor generally varies with his or her number of patient visits or hospital admissions. In general, the annual percentage change in remuneration payable to a specialist doctor in Hong Kong range from 1% to 5%. Going forward, the average monthly income of specialist doctors in Hong Kong is expected to grow at a CAGR of 3.3% from 2020 to 2024. COMPETITIVE LANDSCAPE OF THE PRIVATE MEDICAL CENTRE MARKET IN HONG KONG Overview of Market Competition The private medical centre market is highly competitive and fragmented. According to Frost & Sullivan, there were approximately 2,400 private healthcare service providers in Hong Kong registered on the electronic health record sharing system of Department of Health in 2019 and the majority are operated as private medical centres. In addition, there were more than 60 medical networks (i.e. service providers with operations of more than two medical centre outlets) in Hong Kong in 2019. According to Frost & Sullivan, the top 10 private multi-specialties medical centre operators accounted for an approximate market share of 18.8% in terms of revenue in 2019.
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INDUSTRY OVERVIEW
Top 10 private multi-specialties medical centre operators in Hong Kong by revenue generated from provision of specialist medical services, 2019
Approximate number of Approximate self-operated number of medical centres in specialists Market participants 2019 in 2019 Revenue (million HK$) Market share (%)
Company A 745.9 4.2% Company A 75 89 Company B 694.6 3.9% Company B 17 64 Company C 301.9 1.7% Company C 126 40 Company D 295.6 1.7% Company D 23 33 Company E 275.0 1.6% Company E 5 26 Our Group 232.4 1.3% Our Group 621 Company F 211.0 1.2% Company F 2 21 Company G 206.7 1.2% Company G 5 21 Company H 196.5 1.1% Company H 2 17 Company I 168.9 1.0% Company I 11 21
Notes: (1) The market share above is calculated based on revenue generated from operation of privately owned medical centres, and include inpatient services provided at private hospitals by specialist doctors from medical centres and revenue generated from sales of pharmaceuticals to patients. Revenue generated from managed care services, diagnostic and imaging service is excluded in the calculation of market share. The revenue of the respective market participants is compiled with reference to the factors such as number of medical specialists including internists and surgeons, year of practice, and service fee. (2) Company A is a leading chained private medical group in Hong Kong founded in 1998 with approximately over 80 medical specialists in 2019 and is a part of an international healthcare and insurance group based in United Kingdom. (3) Company B was established in 2018 with approximately over 60 specialists offering multi-disciplinary medical services in medical centres located in Central and Tsim Sha Tsui. (4) Company C was founded in 1989 with its core businesses in healthcare business investment, provision and management of healthcare and related services with approximately 40 medical specialists. Company C was listed on the Main Board of the Stock Exchange of Hong Kong in 2008. (5) Company D was founded in 1990 with approximately over 30 medical specialists providing customised healthcare solutions to corporations, institutions and insurance companies in Hong Kong with joint ventures in the PRC. Company D was listed on the Main Board of the Stock Exchange of Hong Kong in 2015. (6) Company E was established in 2006 as a multi-specialty medical group with approximately over 25 medical specialists offering a wide range of specialist medical services through their centres in Central and Tsim Sha Tsui. (7) Company F was founded in 2004 and comprise over approximately 20 medical specialists mainly in the surgical specialties such as breast surgery, cardiothoracic surgery and colorectal surgery. (8) Company G was founded in 2015 with approximately over 20 medical specialists offering comprehensive medical services under general practice and different specialties, as well as allied health services through the medical centre in Central. (9) Company H was founded in 2005 and comprises a team of approximately over 15 experienced medical specialists in different specialties, especially in orthopaedics and traumatology and general surgery, practising in Hong Kong and major cities of Mainland China. (10) Company I was founded in 1986 with approximately over 20 medical specialists and service centres located in over seven districts in Hong Kong offering general practice medical services, specialist medical services, dental and optometry services. (11) Revenue of the Group is based on revenue of HK$232.4 million generated by 21 specialist doctors for the year ended 31 March 2020. Source: Frost & Sullivan Market Ranking of Our Group As compared to other leading private multi-specialties medical centre operators, the medical specialists of our Group are all specialist in various fields of internal medicine (i.e. internists) and are different from surgeons which mainly conduct surgeries at hospitals. They are also distinguishable in respect of qualifications, scope of service, service fee and number of patients per day. According to Frost & Sullivan, our Group (i) ranked first in terms of revenue per internist, (ii) ranked third in terms of total revenue generated by internists and (iii) ranked sixth in terms of total revenue generated by provision of specialist medical services (which includes both internal medicine and surgery related specialty services), with a market share of approximately 1.3% amongst all the top 10
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INDUSTRY OVERVIEW private multi-specialties medical centre operators in Hong Kong by revenue in 2019. According to Frost & Sullivan, our Group has an estimated market share of approximately 0.7% and 0.5% in the allied health services and medical management services market, respectively, in 2019. Top 10 private multi-specialties medical centre operators in Hong Kong by revenue per internist and total revenue generated by internists, 2019
Revenue per internist (million HK$) Total revenue generated by internists (million HK$)
Our Group 11.1 Company A 528.5 Company H 10.1 Company B 448.3 Company B 9.5 Our Group 232.4 Company E 9.5 Company E 219.4 Company G 7.8 Company C 216.1 Company A 7.1 Company D 191.3 Company D 7.1 Company H 131.6 Company C 6.0 Company G 109.3 Company F 5.8 Company I 82.0 Company I 5.5 Company F 17.3
Notes: (1) Surgeons refer to specialists with fellowships of the Hong Kong Academy of Medicine in one of the following specialties: cardiothoracic surgery, general surgery, neurosurgery, paediatric surgery, urology, and plastic surgery. Internists refer to specialists with fellowship from the Hong Kong Academy of Medicine in other non-surgical streams. (2) The revenue of the respective market participants is compiled with reference to the factors such as number of medical specialists including internists and surgeons, year of practice of specialists, and service fee charged. (3) Revenue of the Group is based on revenue of HK$232.4 million generated by 21 specialist doctors for the year ended 31 March 2020. (4) The comparison and ranking is based on the top 10 private multi-specialties medical centre operators in Hong Kong by revenue of specialist medical services in Hong Kong in 2019. Source: Frost & Sullivan Key Factors Relevant to Competition Talent retention and recruitment The operation of private medical centres in Hong Kong highly relies on an experienced and qualified healthcare team sharing similar goals, values and objectives. Medical practitioners joining a medical platform typically seek resources, including but not limited to, patient referrals, peer support, cost sharing and administration support as well as centralised management of an established medical centre. The retention and recruitment of medical practitioners with substantial professional training, qualification, medical knowledge and clinical experience in the provision of medical consultation and treatment are crucial for sustainability of private medical centres. Furthermore, renowned medical practitioners will contribute to the strong brand name and high-quality services that allows the private medical centre to stand out from competitors. Location and network of medical centres Private medical centres are generally established in prime locations or near residential or commercial areas in order to provide convenience to patients. Large scale private medical platforms usually demonstrate extensive geographical coverage for wide client base or focuses in one or two central locations to better serve target clients. Convenient location of private medical centre serves as competitive advantage to gain patient visits. Partnership of medical centres with other industry players Successful private medical centres are often in partnership with reputable physicians and operate in an affiliated medical network in order to possess strong presence in the market and gain awareness. In order to expand service offering and improve service quality, some leading market participants bring medical practitioners to partner with insurance and pharmaceutical companies, educational institutions and etc. to develop innovative and customised healthcare services to patients.
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INDUSTRY OVERVIEW
Entry Barriers Reputation and brand Reputation is one of the entry barriers of private medical centre market in Hong Kong due to the highly competitive and fragmented market. Individual private medical centres usually rely more on word-of-mouth referrals from recurrent patients, while sizable private medical centres attract and retain patients with their own strong reputations and brands. As reputation and brand are usually built up with renowned medical practitioners with extensive specialties and a medical platform, new market entrants may be hindered from entering the market. Economies of scale The operation of a private specialist medical centre typically demonstrate economies of scale and the business performance of medical centre is dependent on the number and profit generating ability of specialists. In addition, experienced and reputable specialists generally command a higher service fee and the pool of talent is limited. As such, it is relatively common for medical specialists in Hong Kong to join a well-established private specialist medical centre instead of setting up a new one. Capital requirement Due to the significant expenditure on procurement of drugs and consumables, expenses of rental and equipment and salary of healthcare professionals, including medical practitioners, nurses and other supporting staff, abundant initial capital investment is required to enter the private medical centre market in Hong Kong. In particular, large scale private medical platforms usually own advanced equipment and devices, and provide appealing and competitive remuneration packages to attract and retain talented medical practitioners. In addition, small medical practices may find it difficult to cope with increased administrative costs under the PHFO and to recruit experienced and qualified personnel in order to remain competitive in the future. Capital return efficiency also poses a barrier for new entrants without sufficient financial resources. COMPETITIVE STRENGTHS OF OUR GROUP The Group is an integrated private medical services provider in Hong Kong with specialist doctors renowned in their respective field of expertise, complemented by various allied health services and medical management services. Please refer to the section headed ‘‘Business — Our Competitive Strengths’’ for further details. DIRECTORS’ CONFIRMATION Our Directors, after due and reasonable consideration, are of the view that there has been no adverse change in the market information since the date of the Frost & Sullivan Report which may qualify, contradict or have an impact on the information therein.
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REGULATORY OVERVIEW
The following is a brief summary of the laws and regulations in Hong Kong that currently materially affect our business. The principal objective of this summary is to provide potential investors with an overview of the key laws and regulations applicable to us. This summary does not purport to be a comprehensive description of all laws and regulations applicable to our business and operations which may be important to potential investors. Investors should note that the following summary is based on the laws and regulations in force as at the date of this document, which may be subject to change.
OVERVIEW OF HONG KONG LAWS AND REGULATIONS
In relation to our operations in Hong Kong, we aresubjecttothefollowingkeyHongKonglaws and regulations.
PHFO
The main purpose of the PHFO is to regulate premises in which registered medical practitioners and registered dentists practise.
Prior to the enactment of the PHFO, the scope of legislation regulating private healthcare facilities in Hong Kong was relatively narrow. While private hospitals, nursing homes and maternity homes were governed by the Hospital, Nursing Homes and Maternity Homes Registration Ordinance (Chapter 165 of the Laws of Hong Kong) (the ‘‘Hospital, Nursing Homes and Maternity Homes Registration Ordinance’’), non-profit-sharing medical clinics were governed by the Medical Clinics Ordinance (Chapter 343 of the Laws of Hong Kong) (the ‘‘Medical Clinics Ordinance’’). Nevertheless, many private healthcare facilities (including the facilities of our Company) such as private clinics operated by medical groups or individual medical practitioners and ambulatory medical centres were not subject to the Hospital, Nursing Homes and Maternity Homes Registration Ordinance and Medical Clinics Ordinance i.e. these private healthcare facilities were not regulated directly by legislation in Hong Kong prior to the implementation of the PHFO.
Facilities subject to the PHFO
Upon the PHFO being gazetted on 30 November 2018, it creates a new regulatory framework regarding private healthcare facilities in Hong Kong. In particular, four types of private healthcare facilities, including hospitals, day procedure centres, clinics and health services establishments, fall within the scope of the PHFO and are required to obtain different licence respectively. Under Section 10 of the PHFO, a person must not operate a private healthcare facility without a licence, contravening which, upon conviction, is liable to (i) a fine of $5,000,000 and to imprisonment for five years if the facility is a hospital, or (ii) to a fine of $100,000 and to imprisonment for three years if the facility is not a hospital.
Hospital
According to Section 4 of the PHFO, hospital refers to any premises used or intended to be used to provide medical procedures to patients with lodging, carrying out medical procedures on patients with lodging or receiving pregnant women for and immediately after childbirth.
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REGULATORY OVERVIEW
Dayprocedurecentre
In accordance with Section 5 of the PHFO, day procedure centre refers to any premises that do not form part of the premises of a hospital, used or intended to be used for carrying out scheduled medical procedures on patients without lodging, whether or not the premises are also used or intended to be used for providing medical services to patients without lodging or carrying out minor medical procedures on patients without lodging. Scheduled medical procedures are listed in Column 2 of Schedule 3 to the PHFO.
Clinic
As stated in Section 6 of the PHFO, clinic refers to any premises that do not form part of the premises of a hospital, a day procedure centre or an outreach facility and used or intended to be used for providing medical services to patients or carrying out minor medical procedures on patients, without lodging. Minor medical procedures are specified in Column 3 of Schedule 3 to the PHFO, which are exceptions to medical procedures described in Column 2 of the same Schedule. A small practice clinic may request the Director of Health for a letter of exemption to operate the small practice clinic without a licence, provided that it meets the requirements of Part 4 of the PHFO. Our Company’spremisesin terms of operational scale do not fulfil one of the main conditions to be small practice clinics as each small practice clinic may only allow no more than five medical practitioners under full registration or registered dentists practising therein when Part 4 of the PHFO comes into operation.
Health service establishment
Pursuant to Section 7 of the PHFO, health service establishment refers to any premises that fall within a category specified in Schedule 9 to the PHFO, do not form part of the premises of a hospital, a day procedure centre or a clinic and used, or intended to be used in relation to assessing, maintaining or improving the health of patients or diagnosing or treating illnesses or disabilities, or suspected illnesses or disabilities, of patients. According to the Schedule 9 to the PHFO, currently this category of facilities only includes premises of an education or scientific (or both) research institution in which medical services with lodging are provided to patients for the purpose of conducting clinical trials.
The licensing status of our operations
In respect of our Group’s operations, HKMC II and Imaging and Cardiovascular Centre are used for carrying out scheduled medical procedures (as listed in Column 2 of Schedule 3 to the PHFO) on patients, without lodging. Moreover, HKMC II and Imaging and Cardiovascular Centre are not used to carry out hospital-only medical procedures (as listed in the Code of Practice for Day Procedure Centres). Accordingly, each of HKMC II and Imaging and Cardiovascular Centre is classified as a day procedure centre under the PHFO and is required to apply for a day procedure centre licence pursuant to the PHFO. We applied to the Department of Health for provisional and full day procedure centre licences for HKMC II and Imaging and Cardiovascular Centre on 3 March 2020 and 14 April 2020, respectively, pursuant to Section 135 of the PHFO. HKMC II and Imaging and Cardiovascular Centre obtained their respective provisional licences issued by the Director of Health on 14 December 2020. Both provisional licences took effect from 1 January 2021.
HKMC I, HKMC III, HKMC Geriatric Medicine Centre, HKMC Paediatric Centre and HKMC Psychiatric Centre are used for providing medical services (as defined in the PHFO) and/or carrying out minor medical procedures (as defined in the PHFO) on patients, without lodging. No scheduled medical procedures and hospital-only medical procedures are carried out in these centres. Accordingly, these
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REGULATORY OVERVIEW centres are classified as clinics under the PHFO. However, as Section 136 and certain sub-sections under Section 13 of the PHFO in respect of clinics, which relate to the application for clinic licences, have not come into operation, our Group is not required to take any action regarding the application for clinic licences (whether provisional or full clinic licences) in respect of these centres until these relevant sections come into effect. Our Group will make any requisite application for the clinic licences pursuant to the PHFO in due course. As advised by our legal adviser in relation to our business operations as to Hong Kong law, he is not aware of any legal impediments for our Group to obtain the provisional and full clinic licences when Section 136 and sub-sections under Section 13 of the PHFO in respect of clinics come into operation. Hence, our Group has been in compliance with the licensing requirements under the PHFO.
Requirements under the PHFO
The new statutory control under the PHFO provides private healthcare facilities with mainly four licensing requirements:
(i) appointment of chief medical executive;
(ii) complying with the requirements of the PHFO, conditions of licence and code of practice to be issued by the Director of Health;
(iii) putting in place a complaints management system; and
(iv) adopting price transparency measures.
Chief medical executive
While a licensee of a private healthcare facility is wholly responsible for the operation of the facility, to ensure compliance with the license conditions and code of practice, and to set up and enforce relevant rules, policies and procedures, under Section 49 of the PHFO, a chief medical executive must also be appointed by the licensee, in order to take charge of the day to day administration of the facility and the adoption and implementation of rules, policies and procedures concerning the healthcare services provided in the facility.
AsshowninSection51ofthePHFO,achiefmedical executive must possess the qualifications and experience necessary for administering a facility of that type, be physically and mentally fit to administer a facility of that type, and be a person of integrity and good character.
Code of practice
Although there will be different sets of code of practice for different private healthcare facilities, codes of practice, as provided in Section 102 of the PHFO, generally include standards and specifications in relation to the equipment, fittings and furnishing in private healthcare facilities, the management and staffing arrangement of private healthcare facilities, and the quality of care for, and the safety of, patients in private healthcare facilities. They may be revised or revoked by the Director of Health from time to time.
On 9 August 2019, the Director of Health issued the Code of Practice for Day Procedure Centres, which has come into effect since 2 January 2020, stating a set of core standards applicable to all day procedure centres and procedure-specific standards for day procedure centres carrying out relevant procedures. In relation to the code of practice for clinics, the Director of Health issued a draft Standards for Medical Clinics in January 2018 for reference, and it will form the code of practice for clinics when the relevant sections of the PHFO come into force.
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REGULATORY OVERVIEW
Complaints management system
The licensee of a private healthcare facility must put in place a complaints handling procedure for receiving, managing and responding to complaints that are received against the facility, as specified in Section 64 of the PHFO. Upon receiving a complaint against the facility, the licensee must ensure that:
(i) an investigation of the complaint is conducted and findings made;
(ii) if the case requires, an improvement measure, whether general or specific to the complaint, is implemented; and
(iii) the complainant is informed of the findings of the investigation and any improvement measure and, if the case requires, of any follow-up action taken or to be taken.
Unresolved complaints may be handled according to a centralised mechanism, namely the Committee on Complaints against Private Healthcare Facilities, which has statutory power under Part 6 of the PHFO to investigate into complaints by obtaining information and documents relevant to the complaint, and by conducting interviews with any person who is able to provide information or other assistance in relation to the complaint.
Price transparency
According to Section 61 of the PHFO, the licensee of a private healthcare facility must make available to the public information about the prices of chargeable items and services provided in the facility. By Sections 62 and 63 of the PHFO, in addition to price information, the licensee of a hospital must put in place a budget estimate system to provide estimates of the fees and charges of the hospital for the treatments and procedures, and publish historical statistics on the fees and charges for the specified treatments and procedures.
Consequences of contravening the PHFO
The Director of Health authorised by Section 28 of the PHFO has the power to order suspension for an appropriate period or cancellation of a licence granted to a private healthcare facility for various reasons under Section 38 of the PHFO as he thinks fit. For example, the Director of Health may do so if he considers the licensee or the chief medical executive breaches the licensing requirements of the PHFO as discussed, or the practice carried on in the facility is a practice other than that specified in the licence.
Medical Registration Ordinance (Chapter 161 of the Laws of Hong Kong)
General Register
According to the Medical Registration Ordinance (Chapter 161 of the Laws of Hong Kong) (the ‘‘Medical Registration Ordinance’’), all practising medical practitioners shall be registered with the Medical Council as registered medical practitioners, and shall practise medicine, surgery or midwifery in Hong Kong, or any branch of medicine or surgery in Hong Kong, only if he holds a practising certificate currently in force, as stipulated in Section 20A of the Medical Registration Ordinance.
Under Sections 7A, 8 and 14 of the Medical Registration Ordinance, in order to register with the Medical Council, a medical practitioner must:
(i) complete not less than five years full time approved medical training (including internship) and obtain a medical qualification;
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REGULATORY OVERVIEW
(ii) pass in a licensing examination;
(iii) not have been convicted of any offence punishable with imprisonment;
(iv) not been guilty of misconduct in a professional respect; and
(v) be of good character.
Registered medical practitioners are included in a General Register as provided in the Medical Registration Ordinance to be kept by the Registrar i.e. the Director of Health. According to Section 20A of the Medical Registration Ordinance, a practising certificate effective for 12 months will be issued to a registered medical practitioner upon application, and he has to renew his practising certificate every year in order to continue his medical practice.
Specialist Register
Specialist Register, another register provided in the Medical Registration Ordinance, contains particulars of persons approved by the Medical Council to have their names included, such as addresses, qualifications and experience. According to Section 20K of the Medical Registration Ordinance, to have one’s name included in the Specialist Register, a registered medical practitioner has to satisfy the Registrar that:
(a) (i) he has been awarded a Fellowship of the Academy of Medicine, and (ii) certified by the Academy of Medicine that he has completed the postgraduate medical training and has satisfied the continuing medical education requirements for the relevant specialty; or
(b) (i) has been certified by the Academy of Medicine that he has achieved a professional standard comparable to that recognised by the Academy for the award of its fellowship, and (ii) has completed the postgraduate medical training and satisfied the continuing medical education requirements comparable to those recommended by the Academy, for the relevant specialty.
It is one of the functions of the Education and Accreditation Committee of the Medical Council under Section 20I of the Medical Registration Ordinance to determine the specialties under which names of registered medical practitioners may be included in the Specialist Register, upon the recommendation of the Academy of Medicine. Provided in Section 20J of the Medical Registration Ordinance, the Education and Accreditation Committee may also, upon the recommendation of the Academy of Medicine, recommend to the Medical Council the qualification, experience and any other attributes that qualify a registered medical practitioner to have his name included in the Specialist Register under a particular specialty.
A registered medical practitioner included in the Specialist Register may only hold himself out as a specialist and use a specialist title as provided in the Specialist Register. He is also required to undergo continuing medical education relevant to his specialty as determined by the Academy of Medicine.
Code of Professional Conduct
The Medical Council issued a Code of Professional Conduct for the Guidance of Registered Medical Practitioners for all registered medical practitioners in Hong Kong. While the Code of
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REGULATORY OVERVIEW
Professional Conduct may be revised from time to time by the Medical Council, it includes different aspects of guidance requiring full compliance by all registered medical practitioners, for instance:
(i) Professional responsibilities towards patients, such as:
a. Confidentiality obligations;
b. Obligations to act in the interest of patients; and
c. To consult with or refer to another doctor having the necessary ability when an examination or treatment is beyond his capacity;
(ii) Communication in professional practice, such as restriction on practice promotion from being carried out by registered medical practitioners;
(iii) Requirements regarding prescription and labelling of dispensed drugs and medicines;
(iv) Financial arrangements;
(v) Relationship with other practitioners and organisations;
(vi) Rules regarding new medical procedures, clinical research and alternative medicine;
(vii) Prohibitions against abuse of professional position; and
(viii) Regulations in relation to serious infectious disease.
Supplementary Medical Professions Ordinance (Chapter 359 of the Laws of Hong Kong)
The Supplementary Medical Professions Ordinance (Chapter 359 of the Laws of Hong Kong (the ‘‘Supplementary Medical Professions Ordinance’’) provides for registration, discipline and the better control of persons engaged in occupations and professions supplementary to medicine. These occupations and professions include medical laboratory technologists and radiographers.
Pursuant to Part III of the of the Supplementary Medical Professions Ordinance, persons in the relevant profession are required to be registered with the board of the relevant profession established under Section 5.
Pursuant to Section 16(1) of the Supplementary Medical Professions Ordinance, no person shall practice in the relevant profession in Hong Kong unless he is the holder of a practising certificate which is then in force issued by the board of the relevant profession.
Under Section 20(2) of the Supplementary Medical Professions Ordinance, a company registered under the Companies Ordinance (Chapter 622 or 32 of the Laws of Hong Kong) may carry on the business of practising the profession if at least one director thereof is a ‘professionally qualified director’ (a director who is registered in respect of that profession and satisfies any requirements imposed by any regulations made under the Supplementary Medical Professions Ordinance as to qualifications, experience or training necessary for a person registered in respect of that profession to practise without supervision) and all persons practising the profession who are employed by the company are registered in respect of that profession.
Under Section 26 of the Supplementary Medical Professions Ordinance, a board of the relevant profession may prepare and revise Codes of Practice for the relevant profession prescribing standards of conduct and practice for persons practising that profession, regulating the activities of persons practising
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REGULATORY OVERVIEW that profession, regulating the activities of persons who are required to be supervised by regulations made under Supplementary Medical Professions Ordinance and prohibiting specified activities. A person, who contravenes any Code of Practice applicable to his profession, may be subject to inquiries by the board.
Undesirable Medical Advertisements Ordinance (Chapter 231 of the Laws of Hong Kong)
The Undesirable Medical Advertisements Ordinance (Chapter 231 of the Laws of Hong Kong) (the ‘‘Undesirable Medical Advertisements Ordinance’’) prohibits and restricts advertisements which have a possibility of inducing the seeking of improper management of various health conditions, so that public health will not be harmed.
Advertisement is defined in Section 2 of the Undesirable Medical Advertisements Ordinance as any notice, poster, circular, label, wrapper or document, and any announcement made orally or by any means of producing or transmitting light or sound. The scope is wide enough to encompass advertisements published by numerous means, from newspapers, magazines, leaflets, broadcast, television and internet, to labels on a package or container promoting any medicine, surgical appliance, treatment or orally consumed product.
Pursuant to Section 3 of the Undesirable Medical Advertisements Ordinance, no person shall publish, or cause to be published any advertisements likely to lead to the use of any medicine, surgical appliance or treatment for:
(a) the purpose of treating human beings for, or preventing them from contracting any of the diseases or conditions specified in Schedule 1 to the Undesirable Medical Advertisements Ordinance, unless for certain purpose specified; or
(b) treating human beings for any purpose specified in Schedule 2 to the Undesirable Medical Advertisements Ordinance.
Where in an advertisement published in contravention of the prohibition set out in the Undesirable Medical Advertisements Ordinance, a person named in that advertisement is held out (a) as being a manufacturer or supplier of medicine or surgical appliances; or (b) as being able to provide any treatment, that person is presumed, until the contrary is proved, to have caused the advertisement to be published. Upon conviction, this person shall be liable up to a fine of HK$100,000 and imprisonment for one year.
Dangerous Drugs Ordinance (Chapter 134 of the Laws of Hong Kong)
The Dangerous Drugs Ordinance (Chapter 134 of the Laws of Hong Kong) (the ‘‘Dangerous Drugs Ordinance’’) governs mainly the trafficking (i.e. import, export, procuring, supply, dealing in or with, or possession for the purpose of trafficking) of drugs or substances classified as dangerous drugs by the Dangerous Drugs Ordinance.
Under Section 5 of the Dangerous Drugs Ordinance, no person shall supply or procure, or offer to supply or procure, a dangerous drug to or for any person in Hong Kong, unless:
(i) the latter person is authorised by or licensed under the Dangerous Drugs Ordinance to be in possession of that dangerous drug;
(ii) the dangerous drug is to be supplied or procured in accordance with the Dangerous Drugs Ordinance; and
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REGULATORY OVERVIEW
(iii) in the case of a person licensed under this Ordinance to be in possession of the dangerous drug, the dangerous drug is to be supplied or procured in accordance with the conditions of his licence.
In particular, the administration of a dangerous drugs by or under the direct personal supervision of, and in the presence of, a registered medical practitioner is deemed not to be supplying the dangerous drug. Any person contravening the regulation under Section 5 of the Dangerous Drugs Ordinance shall be liable on conviction on indictment up to a fine of $100,000 and to imprisonment for 15 years.
Under Section 22 of the Dangerous Drugs Ordinance, a registered medical practitioner is authorised so far as may be necessary for the practice or exercise of his profession, function or employment, and in his capacity as such, to be in possession of and to supply a dangerous drug. Furthermore, under Section 27 of the Dangerous Drugs Ordinance, a registered medical practitioner is authorised to possess equipment and apparatus fit and intended for injection of a dangerous drug, so far as may be necessary for the purposes of the practice or exercise of his profession, function or employment.
Pharmacy and Poisons Ordinance (Chapter 138 of the Laws of Hong Kong)
The Pharmacy and Poisons Ordinance (Chapter 138 of the Laws of Hong Kong) (the ‘‘Pharmacy and Poisons Ordinance’’) governs pharmacy, pharmaceutical products and poison. The Pharmacy and Poisons Ordinance request all pharmacists in Hong Kong, in order to practise in Hong Kong, to be registered with the Pharmacy and Poisons Board and obtain a valid practising certificate.
Pharmaceutical products and medicine are defined in the Pharmacy and Poisons Ordinance as any substance or mixture of substances which:
(a) presented as having properties for treating or preventing disease in human beings or animals; or
(b) that may be used in, or administered to, human beings or animals, either with a view to (i) restoring, correcting or modifying physiological functions by exerting a pharmacological, immunological or metabolic action; or (ii) making a medical diagnosis.
As stipulated in the Pharmacy and Poisons Regulations (Chapter 138A of the Laws of Hong Kong) (the ‘‘Pharmacy and Poisons Regulations’’), pharmaceutical products must be registered before they can be sold, offered for sale, distributed or possessed for the purposes of sales, distribution or other use in Hong Kong.
Poisons refer to a substance specified in the Poisons List set out in Schedule 10 to the Pharmacy and Poisons Regulations. Poisons are divided into 2 categories, namely ‘‘Part 1’’ and ‘‘Part 2’’, according to their potency, toxicity and potential side effects, in which the levels of control differ from each another. However, registered medical practitioners are exempted from restrictions of the regulations in the Pharmacy and Poisons Ordinance in terms of supplying medicine and poison for the purposes of medical treatment.
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REGULATORY OVERVIEW
The sale of pharmaceutical products and poisons requires various licence, certificate or permit as provided in the Pharmacy and Poisons Ordinance, the Dangerous Drugs Ordinance and the Antibiotics Ordinance (Chapter 137 of the Laws of Hong Kong), as summarised in the table below:
Licence, certificate or permit requirement Relevant trade of pharmaceutical products and poisons
Wholesale Dealer Licence: for person dealing in wholesale and/or import/ export of poisons and/or pharmaceutical products
Certificate for Registration of Premises of for premises of an authorised seller of poisons an Authorised Seller of Poisons: where poisons are kept for retail purposes
Licence for Listed Sellers of Poisons: for person dealing in retail sale of Part 2 poisons
Antibiotics Permit: for person dealing in and/or to possess antibiotics
Wholesale Dealer’s Licence to Supply for person dealing in wholesale of dangerous drugs Dangerous Drug:
Any person who is guilty of an offence under the Pharmacy and Poisons Ordinance, unless a penalty is otherwise expressly provided, be liable on conviction to a fine of HK$100,000 and to imprisonment for two years.
Radiation Ordinance (Chapter 303 of the Laws of Hong Kong)
Pursuant to Section 7 of the Radiation Ordinance (Chapter 303 of the Laws of Hong Kong), no person shall, without a licence issued by the Radiation Board, manufacture or otherwise produce, sell or otherwise deal in or with or have in his possession or use any irradiating apparatus.
Any person who contravenes Section 7 shall be guilty of an offence and shall be liable to a fine of $50,000 and to imprisonment for two years.
Waste Disposal Ordinance (Chapter 354 of the Laws of Hong Kong)
The Waste Disposal Ordinance (Chapter 354 of the Laws of Hong Kong) (the ‘‘Waste Disposal Ordinance’’) and the Waste Disposal (Clinical Waste) (General)Regulation(Chapter354OoftheLaws of Hong Kong) (the ‘‘Waste Disposal Regulation’’) regulate and control the production, storage, collection and disposal of clinical waste.
According to Section 2 of the Waste Disposal Ordinance, clinical waste includes waste consisting of any substance, matter or thing:
(i) belonging to any of the groups specified in Schedule 8 to the Waste Disposal Ordinance, including:
a. Used or contaminated sharps;
b. Laboratory waste;
c. Human and animal tissues;
d. Infectious materials;
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REGULATORY OVERVIEW
e. Dressings; or
f. Other wastes as specified by the Director of Environmental Protection; and
(ii) generated in connection with a dental or medical practice, research or laboratory practice (excluding chemical waste and radioactive waste).
It is required by Regulation 3 of the Waste Disposal Regulation that a person who produces or causes to be produced any clinical waste, or who has possession or custody of any clinical waste, must dispose of it in a proper manner or cause or arrange for it to be disposed of in a proper manner, such as:
(i) by consigning the clinical waste to a licensed waste collector for delivery from the land or premises to a reception point i.e. any land or premises that are authorised under a waste disposal licence or an authorisation to be used for the disposal of clinical waste; or
(ii) by delivering by a healthcare professional the clinical waste from the land or premises to a receptionpointorcollectionpointi.e.anylandorpremisesauthorisedtobeusedbya licensed or authorised waste collector for the receipt of clinical waste, under a waste collection licence or an authorisation; or any land or premises authorised to be used as an on- site collection point.
Under Regulation 7 of the Waste Disposal Regulation, any person who stores, collects, removes, delivers, transports, receives, transfers, disposes of, imports, exports or otherwise handles clinical waste must take all such precautions as are necessary to prevent danger to public health or safety, pollution to the environment and nuisance to the neighbouring area. If that person is convicted of contravening this Regulation 7, he is liable to a fine of $200,000 and to imprisonment for six months.
Regulation 12 of the Waste Disposal Regulation requires a person to keep records in respect of clinical waste produced or caused to be produced by the person, or in the person’s possession or custody, and to produce the records to the Director of Environment Protection for inspection when required. A person contravening this Regulation 12 is liable on conviction to a fine of HK$100,000.
The Secretary of Environment published, under Section 35 of the Waste Disposal Ordinance, 2 sets of Code of Practice for the Management of Clinical Waste, one for major clinical waste producers (such as hospitals, public clinics and government laboratories) and waste collectors, and one for small clinical waste producers (such as private clinics, private laboratories, universities with medical teaching or research, and nursing homes), with a view to providing guidance to clinical waste producers to assist them to comply with the legal requirements of the Waste Disposal Ordinance and the Waste Disposal Regulation.
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HISTORY, REORGANISATION AND CORPORATE STRUCTURE
OUR HISTORY The history of our Group can be traced back to October 2013 when Dr. Kenneth Tsang, our executive Director, chairman of the Board, chief executive officer and Controlling Shareholder, founded Hong Kong Medical Consultants, our principal operating subsidiary. We commenced our business operations in January 2014 through the establishment of our medical management service business and Dr. Kenneth Tsang, our founder, took a managerial role. We provided medical management service for Dr. Kenneth Tsang from January 2014, Dr. Matthew Ng from January 2014 and Dr. Lo Wai Kei from June 2017, respectively, before each of them joined our Group as a specialist doctor. Accumulating his abundant experience in his medical practice as well as in the medical service industry, Dr. Kenneth Tsang directed and managed the business of our Group. Aiming to develop our business as an integrated medical service provider, we decided to further strengthen our clinic brand and introduce specialists and management personnel to our Group. Dr. Kenneth Tsang played the role of liaising with potential partners. In 2017, Dr. Kenneth Tsang, Dr. Adam Leung, Dr. Jason Fong, Dr. Chu Leung Wing, Dr. JennyTsang,Dr.MatthewNg,Dr.BoronCheng,Dr.LoWaiKei,Dr.ClementLee,Dr.AdaMa,Dr. Gordon Chau, Dr. Barbara Tam, Dr. Kenneth Ng, Mr. Shiu and Mrs. Chen (each a ‘‘Primary Shareholder’’, and collectively ‘‘Primary Shareholders’’) had a series of discussions. As part of the discussions, the Primary Shareholders agreed to develop our business to include not only medical management services, but to primarily focus on the provision of medical services. In November 2017, the Primary Shareholders, under the leadership of Dr. Kenneth Tsang, agreed to develop our one-stop medical platform business together by becoming shareholders and contributing to our Group as medical practitioners and/or management personnel. Given that it took time for us to arrange the setting up of the clinics, the Primary Shareholders also agreed that the doctors would commence their medical practice at our Group upon the availability of the respective consultation areas and medical equipment. The Primary Shareholders further agreed on the respective beneficial interests as well as the respective roles and responsibilities in our Group in November 2017, which have been documented one after another since then. With the joining of Dr. Kenneth Tsang, Dr. Adam Leung, Dr. Jason Fong, Dr. Chu Leung Wing and Dr. Jenny Tsang as doctors in November 2017, we offered our medical and clinical services in various fields of expertise including respiratory medicine, cardiology, neurology, geriatric medicine and psychiatry. Following this, Dr. Matthew Ng, Dr. Boron Cheng, Dr. Lo Wai Kei, Dr. Clement Lee and Dr. Ada Ma commenced their medical practice at the Group as Equity Partner Doctors in 2018. It was originally envisioned that Dr. Gordon Chau, Dr. Barbara Tam and Dr. Kenneth Ng, all being ophthalmologists and our shareholders, would join us as specialist doctors with terms similar to those offered to the aforesaid five specialist doctors. However, during the discussions, we foresaw that if we were to include the HKMC Ophthalmologists in our Group as a service provider, regular capital expenditures and depreciation would arise from their deployment of expensive medical equipment. In order for this to make commercial sense for our Group, we had requested that the HKMC Ophthalmologists increase their patient volume to maximise the usage of such equipment, however, the HKMC Ophthalmologists wanted to maintain their autonomy and patient volume flexibility of their medical practices and reduce their effort spent on administrative matters. After further discussions and negotiation, we agreed that it would be in the best interest of both parties that we provide the HKMC Ophthalmologists with a licence to use our brand and medical management services in exchange for an annual fixed fee. Such arrangement is in line with our Group’s development strategy in that we can further broaden the specialty medical services offered. With the joining of the five specialist doctors and the HKMC Ophthalmologists, our Group has expanded its fields of medical specialty to include gastroenterology & hepatology, nephrology, oncology as well as ophthalmology. In addition, Mr. Shiu and Mrs. Chen joined our Group as management personnel in 2017. For details of the roles and responsibilities of our specialist doctors, please refer to the section headed ‘‘Business — Our Professional Team’’. For details of the roles and responsibilities of Mr. Shiu and Mrs. Chen, please refer to the section headed ‘‘Directors and Senior Management’’. Over the years of our operation, our Group has steadily grown. We recruit specialist doctors and panel specialists when we come across suitable candidates. To date, our Group is operating under a medical team of specialist doctors working for us on an exclusive basis and panel doctors working for us on a non-exclusive basis, and our medical team covers 11 medical specialties. To bring greater convenience to our clients, we decided to complement our specialist medical services with allied health services. We have been providing allied health services, which include physiotherapy, speech therapy, clinical psychology as well as imaging, diagnostic and laboratory services since 2017. As at the Latest Practicable Date, our Group operated six Medical Centres, comprising three multi-specialties clinics, the HKMC Psychiatric Centre, the HKMC Geriatric Medicine Centre and the HKMC Paediatric Centre.
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HISTORY, REORGANISATION AND CORPORATE STRUCTURE
We continue to take steps to further our development plan. In October 2019, through the acquisition of Hong Kong Imaging, we enhanced our imaging, diagnostic and laboratory services. Our Group acquired Hong Kong Imaging at a consideration of HK$31,875,481, which was determined with reference to its net current asset value and price-earning ratio, and as a result of an arm’slength negotiation. Please see the section headed ‘‘— Acquisition of Hong Kong Imaging’’ below for further information. Operating our medical services under two main service streams as well as offering imaging and diagnostic services, one-stop medical check-up services and drug dispensing services, we strive to offer our clients healthcare services as an integrated healthcare service provider. BUSINESS MILESTONES We set out below our key business milestones since the inception of our Group’s business: Year Event
2013 Hong Kong Medical Consultants, our principal operating subsidiary, was incorporated 2014 We commenced our medical management service business 2017 We set up HKMC II We set up the HKMC Psychiatric Centre We set up the HKMC Geriatric Medicine Centre 2018 We set up HKMC I 2019 We set up the HKMC Paediatric Centre Our Group acquired Hong Kong Imaging for the provision of imaging, diagnostic and laboratory services 2020 We set up HKMC III
HISTORICAL SHAREHOLDING CHANGES OF OUR CORPORATE SHAREHOLDERS PRIOR TO THE REORGANISATION We set out below details of the incorporation and significant changes in the shareholding interests of our corporate shareholders, CHG and CMI, prior to the Reorganisation. CHG CHG was incorporated in the BVI on 29 November 2016. As at the date of incorporation, CHG allotted and issued 100 shares at par, of which 90 shares, representing 90% of the total issued shares of CHG, were allotted and issued to Dr. Kenneth Tsang, as fully paid, and 10 shares, representing 10% of the total issued shares of CHG, were allotted and issued to Mr. Shiu, as fully paid, respectively. On 1 September 2017, (i) the 90 shares of CHG then held by Dr. Kenneth Tsang were cancelled. 300,000 shares of CHG, representing 30% of the total issued shares in CHG, were allotted and issued at par to Dr. Kenneth Tsang, as fully paid; (ii) 300,000 shares of CHG, representing 30% of the total issued shares in CHG, were allotted and issued at par to Dr. Jason Fong, as fully paid; (iii) 300,000 shares of CHG, representing 30% of the total issued shares in CHG, were allotted and issued at par to Dr. Adam Leung, as fully paid; (iv) the 10 shares of CHG then held by Mr. Shiu were cancelled. 50,000 shares of CHG, representing 5% of the total issued shares in CHG, were allotted and issued at par to a limited company (the ‘‘Shiu Trustee’’), as fully paid, which held the shares of CHG on trust for the benefit of Mr. Shiu; and (v) 50,000 shares of CHG, representing 5% of the total issued shares in CHG, were allotted and issued at par to Mrs. Chen, as fully paid. Upon completion of the aforesaid share cancellation, allotments and issuances, CHG was held as to 30%, 30%, 30%, 5% and 5% by Dr. Kenneth Tsang, Dr. Jason Fong, Dr. Adam Leung, the Shiu Trustee and Mrs. Chen, respectively. On 28 December 2018, (i) 2,685,261 shares of CHG were allotted and issued at par to Dr. Kenneth Tsang, as fully paid. The total number of shares of CHG then held by Dr. Kenneth Tsang thus became 2,985,261, representing 37.32% of the total issued shares in CHG; (ii) 1,535,355 shares of CHG were allotted and issued at par to Dr. Adam Leung, as fully paid. The total number of shares of CHG held by Dr. Adam Leung thus became 1,835,355, representing 22.94% of the total issued shares in CHG; (iii) 559,176 shares of CHG were allotted and issued at par to Dr. Jason Fong, as fully paid. The total number of shares of CHG held by Dr. Jason Fong thus became 859,176, representing 10.74% of the total issued shares in CHG; (iv) 800,000 shares of CHG, representing 10% of the total issued shares in CHG, were allotted and issued at par to Central Medical Management, as fully paid; (v) 523,182 shares of CHG, representing 6.54% of the total issued shares in CHG, were allotted and issued at par to Dr. Jenny Tsang, as fully paid; (vi) the 50,000 shares of CHG then held by the Shiu Trustee were cancelled.
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HISTORY, REORGANISATION AND CORPORATE STRUCTURE
400,000 shares of CHG, representing 5% of the total issued shares in CHG, were allotted and issued at par to Wealth Basin (which is wholly owned by Mr. Shiu), as fully paid; (vii) the 50,000 shares of CHG then held by Mrs. Chen were cancelled. 400,000 shares of CHG, representing 5% of the total issued shares in CHG, were allotted and issued at par to LesTrois(whichiswhollyownedbyMrs.Chen),as fully paid; and (viii) 197,057 shares of CHG, representing 2.46% of the total issued shares in CHG, were allotted and issued at par to Dr. Chu Leung Wing, as fully paid. Upon completion of the aforesaid share cancellations, allotments and issuances, CHG was held as to 37.32% by Dr. Kenneth Tsang, 22.94% by Dr. Adam Leung, 10.74% by Dr. Jason Fong, 10.00% by Central Medical Management, 6.54% by Dr. Jenny Tsang, 5.00% by Wealth Basin, 5.00% by Les Trois and 2.46% by Dr. Chu Leung Wing, respectively. To consolidate the individual Controlling Shareholders’ interest in the Company, CHG underwent the following share transfers. On 23 October 2020, (i) 408,000 shares of CHG then held by Central Medical Management, representing 5.1% of the total issued shares in CHG, were transferred to Dr. Kenneth Tsang at a consideration of HK$408,000; (ii) 328,000 shares of CHG then held by Central Medical Management, representing 4.1% of the total issued shares in CHG, were transferred to Wealth Basin at a consideration of HK$328,000; and (iii) 64,000 shares of CHG then held by Central Medical Management, representing 0.8% of the total issued shares in CHG, were transferred to Dr. Adam Leung at a consideration of HK$64,000. Upon completion of the aforesaid share transfers, CHG was held as to 42.42% by Dr. Kenneth Tsang, 23.74% by Dr. Adam Leung, 10.74% by Dr. Jason Fong, 9.10% by Wealth Basin, 6.54% by Dr. Jenny Tsang, 5.00% by Les Trois and 2.46% by Dr. Chu Leung Wing, respectively. On 23 October 2020, (i) 3,393,261 shares of CHG then held by Dr. Kenneth Tsang, representing 42.42% of the total issued shares in CHG, were transferred to Peak Summit at a consideration of HK$3,393,261; (ii) 1,899,355 shares of CHG then held by Dr. Adam Leung, representing 23.74% of the total issued shares in CHG, were transferred to Heroic Wealth at a consideration of HK$1,899,355; (iii) 859,176 shares of CHG then held by Dr. Jason Fong, representing 10.74% of the total issued shares in CHG, were transferred to Mastermind Intelligence at a consideration of HK$859,176; (iv) 523,182 shares of CHG then held by Dr. Jenny Tsang, representing 6.54% of the total issued shares in CHG, were transferred to Property Linkage at a consideration of HK$523,182; and (v) 197,057 shares of CHG then held by Dr. Chu Leung Wing, representing 2.46% of the total issued shares in CHG, were transferred to Grateful Mind at a consideration of HK$197,057. Upon completion of the aforesaid share transfers, CHG was held as to 42.42% by Peak Summit, 23.74% by Heroic Wealth, 10.74% by Mastermind Intelligence, 9.10% by Wealth Basin, 6.54% by Property Linkage, 5.00% by Les Trois and 2.46% by Grateful Mind, respectively. The considerations for the aforesaid share transfers in respect of CHG were determined with reference to the par value of HK$1 of each share of CHG. CMI CMI was incorporated in the BVI on 20 December 2018. As at the date of incorporation, 100 shares of CMI, representing 100% of the total issued shares in CMI, were allotted and issued at a consideration of HK$100 to Mr. Shiu, as fully paid. On 28 December 2018, (i) the 100 shares of CMI then held by Mr. Shiu were cancelled; and (ii) 20,750, 875, 875, 500, 500, 500, 500, 250 and 250 shares of CMI, representing 83.0%, 3.5%, 3.5%, 2.0%, 2.0%, 2.0%, 2.0%, 1.0% and 1.0%, respectively, of the total issued shares in CMI were allotted and issued to CHG, Dr. Clement Lee, Dr. Boron Cheng, Dr. Ada Ma, Dr. Kenneth Ng, Dr. Gordon Chau, Dr. Barbara Tam, Dr. Matthew Ng and Dr. Lo Wai Kei, respectively, at a consideration of HK$8,000,031, HK$350,000, HK$350,000, HK$200,000, HK$200,000, HK$200,000, HK$200,000, HK$100,000 and HK$100,000, respectively, as fully paid. Upon completion of the aforesaid share cancellation, allotments and issuances, CMI was held as to 83.0% by CHG, 3.5% by Dr. Clement Lee, 3.5% by Dr. Boron Cheng, 2.0% by Dr. Ada Ma, 2.0% by Dr. Kenneth Ng, 2.0% by Dr. Gordon Chau, 2.0% by Dr. Barbara Tam, 1.0% by Dr. Matthew Ng and 1.0% by Dr. Lo Wai Kei, respectively, immediately prior to the Reorganisation. The equity interests in CMI allotted and issued to the HKMC Ophthalmologists, namely, Dr. Gordon Chau, Dr. Barbara Tam and Dr. Kenneth Ng, were determined with reference to the importance of the ophthalmology services to the intended specialty service offerings of our Group, according to our business plan the reputation and the then business scale of the HKMC Ophthalmologists and the possible economies of scale in operation. Upon completion of the Reorganisation, CMI ceased to be a shareholder of our Group.
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HISTORY, REORGANISATION AND CORPORATE STRUCTURE
OUR CORPORATE HISTORY Our Group comprises our Company, CMH, Hong Kong Medical Consultants, Central Healthcare Limited, HK Brain Memory, Central Medical Consultants (currently known as HKMC Dental), CentralPharm, Medical Concierge Holding, Medical Concierge Management, Medical Concierge Limited, Smart Winner, HKMC Medical Products, HKID Limited, HKID (Lab) and HKID (MRI). We set out the particulars of the major companies of our Group below: Our Company Our Company was incorporated in the Cayman Islands as an exempted company with limited liability on 21 September 2020. Upon completion of the Reorganisation, our Company became the ultimate holding company of our Group. Our Company is an investment holding company of our subsidiaries. CMH Being a predecessor holding company of our Group and currently the intermediate holding company of our Group, CMH was incorporated in the BVI with limited liability on 2 November 2017, and is a direct wholly-owned subsidiary of our Company. As at the date of incorporation, nine shares of CMH, representing 100% of the then total issued shares in CMH, were allotted and issued at par to Mr. Shiu, as fully paid. On 28 December 2018, the nine shares of CMH then held by Mr. Shiu were cancelled and 875,000 shares of CMH, representing 100% of the total issued shares in CMH, were allotted and issued at par to CMI. Upon completion of the aforesaid share cancellation, allotment and issuance, CMH was wholly owned by CMI. On 29 March 2019, 23 August 2019, 30 October 2019, 1 August 2020, 27 August 2020 and 15 September 2020, respectively, our Group entered into Pre-[REDACTED] Investment Agreements (including a supplemental agreement to the subscription agreement for the Tranche 5 Pre-[REDACTED] Investment) with the Pre-[REDACTED] Investors in five tranches, pursuant to which a total of 198,307 shares in CMH, representing approximately 18.48% in aggregate of the total issued shares in CMH, were allotted and issued to the Pre-[REDACTED] Investors. For further details, please refer to the section headed ‘‘— Pre-[REDACTED] Investments’’ below. Immediately prior to the Reorganisation, CMH was held as to 81.52% by CMI and 18.48% by the Pre-[REDACTED] Investors, respectively. Upon completion of the Reorganisation, CMH became the intermediate holding company of our Group. Hong Kong Medical Consultants Hong Kong Medical Consultants, which is our Group’s principal operating subsidiary, is principally engaged in the provision of medical services. Hong Kong Medical Consultants was incorporated in Hong Kong as a limited company on 25 October 2013. As at the date of incorporation, 50 shares of Hong Kong Medical Consultants, representing 50% of the total issued share capital of Hong Kong Medical Consultants, were allotted and issued as fully paid to Dr. Kenneth Tsang at a consideration of HK$50, and 50 shares of Hong Kong Medical Consultants, representing 50% of the total issued share capital of Hong Kong Medical Consultants, were allotted and issued as fully paid to Mrs. Tsang at a consideration of HK$50, who held such shares of Hong Kong Medical Consultants on trust for the benefit of Dr. Kenneth Tsang. On 31 March 2018, the 50 shares of Hong Kong Medical Consultants then held by Dr. Kenneth Tsang, representing 50% of the total issued share capital of Hong Kong Medical Consultants, were transferred to Central Medical Consultants (currently known as HKMC Dental) at a consideration of HK$50, which was determined with reference to the par value of HK$1 per share, and the 50 shares of Hong Kong Medical Consultants then held by Mrs. Tsang, who held such shares of Hong Kong Medical Consultants on trust for the benefit of Dr. Kenneth Tsang, representing 50% of the total issued share capital of Hong Kong Medical Consultants, were transferred to Central Medical Consultants (currently known as HKMC Dental) at a consideration of HK$50, which was determined with reference to the par value of HK$1 per share. Upon completion of the aforesaid share transfers, Hong Kong Medical Consultants was wholly owned by Central Medical Consultants (currently known as HKMC Dental). On 4 January 2019, 100 shares of Hong Kong Medical Consultants then held by Central Medical Consultants (currently known as HKMC Dental), representing 100% of the issued share capital of Hong Kong Medical Consultants, were transferred to CMH at a consideration of HK$100, which was
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HISTORY, REORGANISATION AND CORPORATE STRUCTURE determined with reference to the par value of HK$1 per share. Upon completion of the aforesaid share transfer and up to the Latest Practicable Date, Hong Kong Medical Consultants was wholly owned by CMH. Central Healthcare Limited Central Healthcare Limited is principally engaged in provision of psychiatric service. Central Healthcare Limited was incorporated in Hong Kong as a limited company on 17 August 2017. As at the date of incorporation, one share of Central Healthcare Limited, representing 100% of the issued share capital of Central Healthcare Limited, was allotted and issued at a consideration of HK$1 to Dr. Jenny Tsang as fully paid. On 31 March 2018, the one share of Central Healthcare Limited then held by Dr. Jenny Tsang, representing 100% of the issued share capital of Central Healthcare Limited, was transferred to Hong Kong Medical Consultants at a consideration of HK$1, which was determined with reference to the total amount of share capital initially subscribed for by Dr. Jenny Tsang. Upon completion of the aforesaid share transfer and up to the Latest Practicable Date, Central Healthcare Limited was wholly owned by Hong Kong Medical Consultants. Immediately prior to the Reorganisation, Central Healthcare Limited was wholly owned by Hong Kong Medical Consultants. HKID Limited HKID Limited is principally engaged in provision of medical diagnostic services. HKID Limited was incorporated in Hong Kong as a limited company on 11 December 2008. Immediately prior to the acquisition of Hong Kong Imaging, 10,200 shares and 9,800 shares of HKID Limited, representing 51% and 49% of the total issued share capital of HKID Limited, respectively, were held by Pixel and Pegasus, respectively. HKID Limited holds 51% and 51% of the issued share capital of HKID (Lab) and HKID (MRI), respectively. On 30 October 2019, the entire issued share capital of each of Pixel and Pegasus was acquired by Smart Winner. Please refer to the section headed ‘‘— Acquisition of Hong Kong Imaging’’ below for details of the acquisition. Immediately prior to the Reorganisation, HKID Limited was wholly owned by Smart Winner. ACQUISITION OF HONG KONG IMAGING As part of our plan to develop our Group into an integrated medical service provider and to supplement our medical services with imaging, diagnostic and laboratory services, we acquired Pixel Investments Limited (‘‘Pixel’’) and Pegasus Investments Limited (‘‘Pegasus’’) (together with their subsidiaries, the ‘‘Hong Kong Imaging’’) in October 2019, each of which in turn respectively held 51% and 49% interest in HKID Limited (the holding company of Hong Kong Imaging) at the time of acquisition. Pixel and Pegasus were acquired at a consideration of HK$16,256,496 and HK$15,618,985, respectively. Accordingly, our Group acquired Hong Kong Imaging at an aggregate consideration of HK$31,875,481. The considerations for the assignment of shareholders’ loans in respect of Pixel and Pegasus were HK$3 and HK$9, respectively. Please see below for the individual considerations with respect to such acquisition. Pixel On 30 October 2019, we acquired through Smart Winner 5,100 shares of Pixel from Dr. Ooi Gaik Cheng. The 5,100 shares of Pixel then held by Dr. Ooi Gaik Cheng, representing 51% of the total issued shares of Pixel, together with a shareholder’s loan in the sum of HK$606,135 advanced by Dr. Ooi Gaik Cheng to Pixel, were transferred and assigned to Smart Winner at a consideration of HK$8,290,813 and HK$1, respectively, which were determined with reference to (i) the net current asset value of Pixel as at 31 March 2019; and (ii) the price-earnings ratio of Pixel for the year ended 31 March 2019. 50% of the consideration for the 5,100 shares of Pixel was settled by the allotment and issuance of 4,145 shares of CMH, credited as fully paid, representing approximately 0.41% of the then total issued shares of CMH, to Dr. Ooi Gaik Cheng. The remaining 50% of the consideration for the 5,100 shares of Pixel and the consideration of HK$1 for the assignment of the shareholder’sloanweresettledincash. On 30 October 2019, we acquired through Smart Winner 4,300 shares of Pixel from Ms. Tang Wan Yin. The 4,300 shares of Pixel then held by Ms. Tang Wan Yin, representing 43% of the total issued shares of Pixel, together with a shareholder’s loan in the sum of HK$511,055 advanced by Ms.
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HISTORY, REORGANISATION AND CORPORATE STRUCTURE
Tang Wan Yin, were transferred and assigned to Smart Winner at a consideration of HK$5,990,293 and HK$1, respectively, which were determined with reference to (i) the net current asset value of Pixel as at 31 March 2019; and (ii) the price-earnings ratio of Pixel for the year ended 31 March 2019, and as a result of an arm’s length negotiation between Smart Winner and Ms. Tang Wan Yin. Approximately 33.51% of the consideration for the 4,300 shares of Pixel was settled by the allotment and issuance of 2,007 shares of CMH, credited as fully paid, representing approximately 0.20% of the then total issued shares of CMH, to Ms. Tang Wan Yin. The remaining approximately 66.49% of the consideration for the 4,300 shares of Pixel and the consideration of HK$1 for the assignment of the shareholder’sloan were settled in cash. On 30 October 2019, we acquired through Smart Winner 600 shares of Pixel from Mr. Lo Wai Keung, Peter as vendor. The 600 shares of Pixel then held by Mr. Lo Wai Keung, Peter, representing 6% of the total issued shares of Pixel, together with a shareholder’s loan in the sum of HK$71,310 advanced by Mr. Lo Wai Keung, Peter, were transferred and assigned to Smart Winner at a consideration of HK$1,975,390 and HK$1, respectively, which were determined with reference to (i) the net current asset value of Pixel as at 31 March 2019; and (ii) the price-earnings ratio of Pixel for the year ended 31 March 2019, and as a result of an arm’s length negotiation between Smart Winner and Mr. Lo Wai Keung, Peter. The considerations for the 600 shares of Pixel and the shareholder’sloan were settled by the allotment and issuance 1,975 shares of CMH, credited as fully paid, representing approximately 0.20% of the then total issued shares of CMH, to Mr. Lo Wai Keung, Peter. Pegasus On 30 October 2019, we acquired through Smart Winner 3,400 shares, 1,400 shares, 600 shares, 600 shares, 600 shares, 600 shares and 600 shares of Pegasus, from Mr. Fok Manson, Mr. Yiu Sing Nam, Mrs. Tsang, Dr. Chu Kin Wah, Hong Kong Oncology Centre Company Limited, Ms. Liu Pik Ching Emma (as executrix of the estate of Mr. Hu Hsing Cheng Wayne James) and Mr. Teo Man Lung Peter, respectively. These 7,800 shares of Pegasus in aggregate represent 78% of the total issued shares of Pegasus. The 3,400 shares, 1,400 shares, 600 shares, 600 shares, 600 shares, 600 shares and 600 shares then held by Mr. Fok Manson, Mr. Yiu Sing Nam, Mrs. Tsang, Dr. Chu Kin Wa, Hong Kong Oncology Centre Company Limited, Ms. Liu Pik Ching Emma (as executrix of the estate of Mr. Hu Hsing Cheng Wayne James) and Mr. Teo Man Lung Peter, respectively, representing 34%, 14%, 6%, 6%, 6%, 6% and 6% of the total issued shares of Pegasus, together with the shareholders’ loans in the sums of HK$428,910, HK$176,610, HK$75,690, HK$75,690, HK$75,690, HK$147,720 and HK$75,690, respectively, were transferred and assigned to Smart Winner at a consideration of HK$5,310,455, HK$2,186,658, HK$937,139, HK$937,139, HK$937,139, HK$937,139 and HK$937,139, respectively, for the shares, and at a consideration of HK$1, HK$1, HK$1, HK$1, HK$1, HK$1 and HK$1, respectively, for the shareholders’ loans, which were all determined with reference to (i) the net current asset value of Pegasus as at 31 March 2019; and (ii) the price-earnings ratio of Pegasus for the year ended 31 March 2019 and were settled in cash. On 30 October 2019, we acquired through Smart Winner 1,600 shares of Pegasus from Dr. Lau Chu Pak. The 1,600 shares of Pegasus then held by Dr. Lau Chu Pak, representing 16% of the total issued shares of Pegasus, together with a shareholder’s loan in the sum of HK$201,840 advanced by Dr. Lau Chu Pak, were transferred and assigned to Smart Winner at a consideration of HK$2,499,038 and HK$1, respectively, which were determined with reference to (i) the net current asset value of Pegasus as at 31 March 2019; and (ii) the price-earnings ratio of Pegasus for the year ended 31 March 2019. 50% of the consideration for the 1,600 shares of Pegasus was settled by the allotment and issuance of 1,249 shares of CMH, credited as fully paid, representing approximately 0.12% of the then total issued shares of CMH, to Dr. Lau Chu Pak. The remaining 50% of the consideration for the 1,600 shares of Pegasus and the consideration of HK$1 for the assignment of the shareholder’s loan were settled in cash. On 30 October 2019, we acquired through Smart Winner 600 shares of Pegasus from Dr. Liu Chi Leung. The 600 shares of Pegasus then held by Dr. Liu Chi Leung, representing 6% of the total issued shares of Pegasus, together with a shareholder’s loan in the sum of HK$75,690 advanced by Dr. Liu Chi Leung to Pegasus, were transferred and assigned to Smart Winner at a consideration of HK$937,139 and HK$1, respectively, which were determined with reference to (i) the net current asset value of Pegasus as at 31 March 2019; and (ii) the price-earnings ratio of Pegasus for the year ended 31 March 2019. 50% of the consideration for the 600 shares of Pegasus was settled by the allotment and issuance of 468 shares of CMH, credited as fully paid, representing approximately 0.05% of the then total issued shares of CMH, to Dr. Liu Chi Leung. The remaining 50% of the consideration for the 600 shares of Pegasus and the consideration of HK$1 for the assignment of the shareholder’s loan were settled in cash.
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HISTORY, REORGANISATION AND CORPORATE STRUCTURE
These transfers of shares of Pixel and shares of Pegasus have been properly and legally completed. Upon completion of the aforesaid share transfers, Smart Winner became the holding company of Pixel and Pegasus, and the acquisition of Hong Kong Imaging was completed on 30 October 2019. As the applicable percentage ratios for the acquisition of Hong Kong Imaging are all less than 25%, such acquisition does not constitute a major transaction as defined under Chapter 14 of the Listing Rules, and hence is not subject to the disclosure requirement pursuant to Rule 4.05A of the Listing Rules. A simplified Group structure upon completion of the acquisition of Hong Kong Imaging is set out below:
Smart Winner (Seychelles)
100% 100%
Pixel Pegasus (HK) (HK)
51% 49%
HKID Limited (HK)
51% 51%
HKID (Lab) HKID (MRI) (HK) (HK)
To simplify the structure of Hong Kong Imaging, we transferred out Pixel and Pegasus, being the intermediate holding companies of our Group. Upon completion of the aforesaid share transfers, (i) HKID Limited was wholly owned by Smart Winner, a direct wholly-owned subsidiary of CMH; (ii) HKID (Lab) became an indirect non-wholly-owned subsidiary of CMH. HKID (Lab) was held as to 51% by HKID Limited, 13% by Dr. Ooi Gaik Cheng, 10% by Ms. Tang Wan Yin, 10% by Mr. Teo Man Lung Peter, 8% by Ms. Wong Ching Ying Isobel, 5% by Mr. Fung Wing Tak and 3% by Dr. Kenneth Tsang jointly with Mrs. Tsang, respectively; (iii) HKID (MRI) became an indirect non-wholly-owned subsidiary of CMH. HKID (MRI) was held as to 51% by HKID Limited, 8% by Ms. Wong Ching Ying Isobel, 8% by Eastern Summit Enterprise Limited, 8% by Mr. Teo Man Lung Peter, 6% by Dr. Ooi Gaik Cheng, 5% by Mr. Fung Wing Tak, 5% by Hong Kong Oncology Centre Company Limited, 3% by Ms. Tang Wan Yin, 3% by Mr. Wong Chun Kuen and 3% by Dr. Kenneth Tsang jointly with Mrs. Tsang, respectively; and (iv) Pixel and Pegasus ceased to be members of our Group.
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HISTORY, REORGANISATION AND CORPORATE STRUCTURE
OUR GROUP STRUCTURE PRIOR TO THE REORGANISATION The chart below sets out the corporate structure of our Group immediately prior to the Reorganisation: 100%
HKMC Dental 37.32% Dr. Kenneth Tsang(1) (HK)
22.94% Dr. Adam Leung(1)
10.74% (1) (Cayman Islands) Dr. Jason Fong Our Company 100% CentralPharm 2.46% (HK) 100% Dr. Chu Leung Wing(1) CHG (BVI) Central Healthcare 100% 100% (1) Limited 6.54% (HK) (1) 83% Dr. Jenny Tsang
5.0% Hong Kong Medical Wealth Basin(1)(2) 100% Consultants (HK)
5.00% (1)(3)
(BVI) Les Trois
81.52% CMI
10.0% Central Medical HK Brain Memory Management(4) (HK) 3.5% Dr. Clement Lee(5)
3.5% (BVI) CMH Dr. Boron Cheng(5) Medical Concierge
95% 2.0% Dr. Ada Ma(5) Limited (BVI)
2.0% (11) Dr. Kenneth Ng
Medical Concierge 2.0% 100% Dr. Gordon Chau Holding (BVI)
2.0% Dr. Barbara Tam Medical Concierge 100%
Management 1.0% Dr. Matthew Ng(5) (BVI)
1.0% Dr. Lo Wai Kei(5) HKMC Medical 100% Products (HK) 11.65% HKID (Lab)
51% 51%51% Tranche 1 Pre-[REDACTED] Investors(6) (HK)
(12) 0.47% Tranche 2 Pre-[REDACTED] Investor(7) 100% HKID Limited Smart Winner (Seychelles)
(HK) 0.92% Tranche 3 Pre-[REDACTED] 100% Investors(8)
HKID (MRI) 1.44% Tranche 4 Pre-[REDACTED] (9) (HK) Investors
(13) 4.00% Tranche 5 Pre-[REDACTED] Investor(10)
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HISTORY, REORGANISATION AND CORPORATE STRUCTURE
Notes: (1) Pursuant to the Concert Party Deed, CHG, Dr. Kenneth Tsang, Dr. Adam Leung, Dr. Jason Fong, Dr. Chu Leung Wing, Dr. Jenny Tsang, Mr. Shiu, Wealth Basin, Mrs. Chen and Les Trois are parties acting in concert. (2) Wealth Basin is a company wholly owned by Mr. Shiu. (3) Les Trois is a company wholly owned by Mrs. Chen. (4) Central Medical Management is held as to 51%, 41% and 8% by Dr. Kenneth Tsang, Mr. Shiu and Dr. Adam Leung, respectively. (5) Each of Dr. Clement Lee, Dr. Boron Cheng, Dr. Ada Ma, Dr. Matthew Ng and Dr. Lo Wai Kei is an Equity Partner Doctor. (6) The breakdown of the respective shareholding interests held by the Tranche 1 Pre-[REDACTED] Investors in CMH is as follows: (i) Double Expert Limited: 2.33%; (ii) Joyous Rainbow Holdings Limited: 2.14%; (iii) Hong Kong Dashenlin Trade and Investment Limited: 1.86%; (iv) Asmex Investment Limited: 1.68%; (v) Goldstone Investment Capital Limited: 1.30%; (vi) Cheung Hing Holdings Limited: 0.93%; (vii) Star List Limited: 0.47%; (viii) Clear Trillion Limited: 0.47%; and (ix) Pine Treasure Holdings Limited: 0.47%. Please refer to the section headed ‘‘— Pre-[REDACTED] Investments — Information about the Pre-[REDACTED] Investors’’ for further details of the Tranche 1 Pre-[REDACTED] Investors. (7) The shareholding interest held by the Tranche 2 Pre-[REDACTED] Investor, namely, CEKA Limited, a company wholly owned by Dr. Eddie Cheung, an Equity Partner Doctor, in CMH, is 0.47%. Please refer to the section headed ‘‘— Pre- [REDACTED] Investments — Information about the Pre-[REDACTED] Investors’’ for further details of the Tranche 2 Pre- [REDACTED] Investor. (8) The breakdown of the respective shareholding interests held by the Tranche 3 Pre-[REDACTED] Investors in CMH is as follows: (i) Dr. Ooi Gaik Cheng: 0.39%; (ii) Ms. Tang Wan Yin: 0.19%; (iii) Mr. Lo Wai Keung Peter: 0.18%; (iv) Dr. Lau Chu Pak: 0.12%; and (v) Dr. Liu Chi Leung: 0.04%. Please refer to the section headed ‘‘— Pre-[REDACTED] Investments — Information about the Pre-[REDACTED] Investors’’ for further details of the Tranche 3 Pre-[REDACTED] Investors. (9) The breakdown of the respective shareholding interests held by the Tranche 4 Pre-[REDACTED] Investors in CMH is as follows: (i) Hong Kong Clinical Oncology Limited, a company wholly owned by Dr. Stanley Yu, an Equity Partner Doctor: 0.96%; and (ii) Centre for Obesity, Diabetes and Endocrinology (CODE) Limited, a company wholly owned by Dr. Michele Yuen, an Equity Partner Doctor: 0.48%. Please refer to the section headed ‘‘— Pre-[REDACTED] Investments — Information about the Pre-[REDACTED] Investors’’ for further details of the Tranche 4 Pre-[REDACTED] Investors. (10) The shareholding interest held by the Tranche 5 Pre-[REDACTED] Investor, namely, Unicorn Link Group Limited, in CMH is 4%. Please refer to the section headed ‘‘— Pre-[REDACTED] Investments — Information about the Pre-[REDACTED] Investors’’ for further details of the Tranche 5 Pre-[REDACTED] Investor. (11) Medical Concierge Limited is held as to 95% and 5% by Medical Concierge Holding Limited and Real Energetic Limited, respectively. Real Energetic Limited is wholly owned by Ms. Yeung Kit Shun, who is a member of our senior management. (12) HKID (Lab) is held as to 51% by HKID Limited, 13% by Dr. Ooi Gaik Cheng, 10% by Ms. Tang Wan Yin, 10% by Mr. Teo Man Lung Peter, 8% by Ms. Wong Ching Ying Isobel, 5% by Mr. Fung Wing Tak and 3% by Dr. Kenneth Tsang jointly with Mrs. Tsang, respectively. Each of Dr. Ooi Gaik Cheng and Ms. Tang Wan Yin is a Pre-[REDACTED] Investor; Mrs. Tsang is the spouse of Dr. Kenneth Tsang; and each of Ms. Wong Ching Ying Isobel and Mr. Fung Wing Tak is an Independent Third Party. (13) HKID (MRI) is held as to 51% by HKID Limited, 8% by Ms. Wong Ching Ying Isobel, 8% by Eastern Summit Enterprise Limited, 8% by Mr. Teo Man Lung Peter, 6% by Dr. Ooi Gaik Cheng, 5% by Mr. Fung Wing Tak, 5% by Hong Kong Oncology Centre Company Limited, 3% by Ms. Tang Wan Yin, 3% by Mr. Wong Chun Kuen and 3% by Dr. Kenneth Tsang jointly with Mrs. Tsang, respectively. Each of Dr. Ooi Gaik Cheng and Ms. Tang Wan Yin is a Pre-[REDACTED] Investor of our Group; Mrs. Tsang is the spouse of Dr. Kenneth Tsang; and each of Mr. Fung Wing Tak, Ms. Wong Ching Ying Isobel, Mr. Wong Chun Kuen, Hong Kong Oncology Centre Company Limited and Eastern Summit Enterprise Limited is an Independent Third Party.
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HISTORY, REORGANISATION AND CORPORATE STRUCTURE
REORGANISATION In preparation for the [REDACTED], our Group underwent the Reorganisation, the major steps of which are set out below: Incorporation of Our Company and Changes in Its Shareholding Structure (1) Our Company was incorporated in the Cayman Islands as an exempted company with limited liability on 21 September 2020 with an authorised share capital of HK$380,000 comprising 38,000,000,000 Shares with a par value of HK$0.00001 each. One fully paid Share was allotted and issued to the initial subscriber, an Independent Third Party, which was subsequently transferred to CHG at par value on the same day. Upon completion of the aforesaid transfer, our Company became wholly owned by CHG. (2) On 23 October 2020, our Company as purchaser, and CMI and the Pre-[REDACTED] Investors as vendors, entered into a share swap agreement, whereby our Company acquired 1,073,307 shares of CMH, representing 100% of the total issued shares of CMH, at a consideration of HK$1,073,307, which was settled through the allotment and issue of 1,073,306 Shares at par, credited as fully paid, at the direction of CMI and the Pre- [REDACTED] Investors, to the following subscribers (the ‘‘Share Swap’’): (a) 726,249 Shares were allotted and issued to CHG; (b) 30,625 Shares were allotted and issued to Wealth Splendour Limited; (c) 30,625 Shares were allotted and issued to Dr. Boron Cheng; (d) 17,500 Shares were allotted and issued to Cambridge Oncology Limited; (e) 17,500 Shares were allotted and issued to Dr. Gordon Chau; (f) 17,500 Shares were allotted and issued to Dr. Kenneth Ng; (g) 17,500 Shares were allotted and issued to Dr. Barbara Tam; (h) 8,750 Shares were allotted and issued to Dr. Lo Wai Kei; (i) 8,750 Shares were allotted and issued to Dr. Matthew Ng; (j) 25,000 Shares were allotted and issued to Double Expert Limited; (k) 23,000 Shares were allotted and issued to Joyous Rainbow Holdings Limited; (l) 20,000 Shares were allotted and issued to Hong Kong Dashenlin Trade and Investment Limited; (m) 18,000 Shares were allotted and issued to Asmex Investment Limited; (n) 14,000 Shares were allotted and issued to Goldstone Investment Capital Limited; (o) 10,000 Shares were allotted and issued to Cheung Hing Holdings Limited; (p) 5,000 Shares were allotted and issued to Star List Limited; (q) 5,000 Shares were allotted and issued to Pine Treasure Holdings Limited; (r) 5,000 Shares were allotted and issued to Clear Trillion Limited; (s) 5,075 Shares were allotted and issued to CEKA Limited; (t) 4,145 Shares were allotted and issued to Dr. Ooi Gaik Cheng; (u) 2,007 Shares were allotted and issued to Ms. Tang Wan Yin; (v) 1,975 Shares were allotted and issued to Mr. Lo Wai Keung Peter; (w) 1,249 Shares were allotted and issued to Dr. Lau Chu Pak; and (x) 468 Shares were allotted and issued to Dr. Liu Chi Leung; (y) 10,304 Shares were allotted and issued to Hong Kong Clinical Oncology Limited;
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HISTORY, REORGANISATION AND CORPORATE STRUCTURE
(z) 5,152 Shares were allotted and issued to Centre for Obesity, Diabetes and Endocrinology (CODE) Limited; and (aa) 42,932 Shares were allotted and issued to Unicorn Link Group Limited. Upon completion of the Share Swap, CMH became wholly owned by our Company. No order, consent, approval, licence, authorisation or validation of or exemption by any government or public body or authority of the Cayman Islands or any sub-division thereof is required to authorise or is required in connection with the execution, delivery, performance and enforcement of the share swap agreement. (3) Upon completion of the Share Swap, our Company became the ultimate holding company of our Group. The table below sets out details of the shareholding interests held in our Company immediately before the [REDACTED] and the [REDACTED]: Percentage of Shareholders Number of Shares shareholding (%)
CHG 726,250 67.66
Equity Partner Doctors Wealth Splendour Limited 30,625 2.85 Dr. Boron Cheng 30,625 2.85 Dr. Matthew Ng 8,750 0.82 Dr. Lo Wai Kei 8,750 0.82 Cambridge Oncology Limited 17,500 1.63 Dr. Gordon Chau 17,500 1.63 Dr. Kenneth Ng 17,500 1.63 Dr. Barbara Tam 17,500 1.63
Tranche 1 Pre-[REDACTED] Investors Double Expert Limited 25,000 2.33 Joyous Rainbow Holdings Limited 23,000 2.14 Hong Kong Dashenlin Trade and Investment Limited 20,000 1.86 Asmex Investment Limited 18,000 1.68 Goldstone Investment Capital Limited 14,000 1.30 Cheung Hing Holdings Limited 10,000 0.93 Star List Limited 5,000 0.47 Clear Trillion Limited 5,000 0.47 Pine Treasure Holdings Limited 5,000 0.47
Tranche 2 Pre-[REDACTED] Investor CEKA Limited 5,075 0.47
Tranche 3 Pre-[REDACTED] Investors Dr. Ooi Gaik Cheng 4,145 0.39 Ms. Tang Wan Yin 2,007 0.19 Mr. Lo Wai Keung, Peter 1,975 0.18 Dr. Lau Chu Pak 1,249 0.12 Dr. Liu Chi Leung 468 0.04
Tranche 4 Pre-[REDACTED] Investors Hong Kong Clinical Oncology Limited 10,304 0.96 Centre for Obesity, Diabetes and Endocrinology (CODE) Limited 5,152 0.48
Tranche 5 Pre-[REDACTED] Investor Unicorn Link Group Limited 42,932 4.00
Total 1,073,307 100.00
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HISTORY, REORGANISATION AND CORPORATE STRUCTURE
PRE-[REDACTED] INVESTMENTS Overview Our Group entered into agreements with the Pre-[REDACTED] Investors in five tranches, which were completed on 31 March 2019 (the ‘‘Tranche 1 Pre-[REDACTED] Investment Agreement’’), 23 August 2019 (the ‘‘Tranche 2 Pre-[REDACTED] Investment Agreement’’), 30 October 2019 (the ‘‘Tranche 3 Pre-[REDACTED] Investment Agreements’’), 1 August 2020 (the ‘‘Tranche 4 Pre- [REDACTED] Investment Agreements’’) and 27 August 2020 (together with a supplemental agreement dated 15 September 2020, the ‘‘Tranche 5 Pre-[REDACTED] Investment Agreement’’) (collectively, the ‘‘Pre-[REDACTED] Investment Agreements’’), respectively. Upon completion of the Pre- [REDACTED] Investments, the Pre-[REDACTED] Investors held in aggregate approximately 18.48% of the total issued shares in CMH on an ‘‘as enlarged’’ basis. Pursuant to the Share Swap that took place on 23 October 2020, the Pre-[REDACTED] Investors transferred their respective entire shareholding interests, which in aggregate represented approximately 18.48% of the then total issued shares in CMH to our Company in consideration of our Company’s allotment and issuance of approximately 18.48% in aggregate of the total issued shares of our Company to the Pre-[REDACTED] Investors pro rata to their respective interests in CMH. As a result, the Pre-[REDACTED] Investors held in aggregate approximately 18.48% of the total issued shares of our Company upon completion of the Share Swap and as at the Latest Practicable Date, and will hold [REDACTED] immediately after completion of the [REDACTED] and the [REDACTED]. Our Directors believe that our Group will benefit from the additional capital provided by the Pre-[REDACTED] Investors for the development, growth and expansion of our Group’s business and operation. Tranche 1 Pre-[REDACTED] Investment in CMH by the Tranche 1 Pre-[REDACTED] Investors Pursuant to the Tranche 1 Pre-[REDACTED] Investment Agreement dated 29 March 2019 entered into between CMH and Double Expert Limited, Joyous Rainbow Holdings Limited, Hong Kong Dashenlin Trade and Investment Limited, Asmex Investment Limited, Goldstone Investment Capital Limited, Cheung Hing Holdings Limited, Star List Limited, Clear Trillion Limited and Pine Treasure Holdings Limited, each an Independent Third Party (collectively, the ‘‘Tranche 1 Pre-[REDACTED] Investors’’), respectively, Double Expert Limited, Joyous Rainbow Holdings Limited, Hong Kong Dashenlin Trade and Investment Limited, Asmex Investment Limited, Goldstone Investment Capital Limited, Cheung Hing Holdings Limited, Star List Limited, Clear Trillion Limited and Pine Treasure Holdings Limited subscribed for, and CMH allotted and issued, 25,000, 23,000, 20,000, 18,000, 14,000, 10,000, 5,000, 5,000 and 5,000 shares in CMH, respectively, at a consideration of HK$25,000,000, HK$23,000,000, HK$20,000,000, HK$18,000,000, HK$14,000,000, HK$10,000,000, HK$5,000,000, HK$5,000,000 and HK$5,000,000, respectively, representing 2.5%, 2.3%, 2.0%, 1.8%, 1.4%, 1.0%, 0.5%, 0.5% and 0.5%, respectively, of the then total issued shares of CMH (the ‘‘Tranche 1 Pre- [REDACTED] Investment’’). The Tranche 1 Pre-[REDACTED] Investors subscribed for a total of 125,000 shares in CMH at a total consideration of HK$125,000,000. The total consideration of HK$125,000,000 was determined based on arm’s length negotiation with reference to our Group’s profit for the year ended 31 March 2018. The proceeds from the Tranche 1 Pre-[REDACTED] Investment were intended to be used in three areas in the proportions indicated: (i) approximately 3.0% on the development of our Group’s proprietary management system; (ii) approximately 61.0% on general working capital (19.9%) and funding for mergers and acquisitions (41.1%); and (iii) approximately 36.0% on the expenses in relation to the [REDACTED]. The subscriptions under the Tranche 1 Pre- [REDACTED] Investment were completed and fully settled on 31 March 2019. As at the Latest Practicable Date, the proceeds from the Tranche 1 Pre-[REDACTED] Investment had been fully utilised: (i) a new proprietary management system, including the setting up of a new accounting system, website development and IT system upgrade, has been implemented with an objective to facilitate more efficient management of our Group’s operations and the system is currently in operation; (ii) the proceeds for general working capital have been utilised for various purposes, including renovations, purchase of office and medical equipment, salaries and rental payments. As for the funding for mergers and acquisitions, the acquisition of Hong Kong Imaging was completed in October 2019 and the remaining portion designated for such purpose has been allocated for the settlement of expenses incurred pertinent to the purchase of the 6th floor of Euro Trade Centre, including deposit, stamp duties and real estate agent commissions; and (iii) the proceeds for expenses in relation to the [REDACTED] have been allocated in settlement of such expenses.
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HISTORY, REORGANISATION AND CORPORATE STRUCTURE
Tranche 2 Pre-[REDACTED] Investment in CMH by the Tranche 2 Pre-[REDACTED] Investor Pursuant to the Tranche 2 Pre-[REDACTED] Investment Agreement dated 23 August 2019 entered into between CMH and CEKA Limited (the ‘‘Tranche 2 Pre-[REDACTED] Investor’’), a company wholly owned by Dr. Eddie Cheung, an Equity Partner Doctor, CEKA Limited subscribed for, and CMH allotted and issued, 5,075 shares in CMH, at a consideration of HK$5,075, representing approximately 0.5% of the then total issued shares of CMH (the ‘‘Tranche 2 Pre-[REDACTED] Investment’’). The total consideration of HK$5,075wasdeterminedbasedonarm’s length negotiation and in consideration of our recruiting Dr. Eddie Cheung to join our Group as an Equity Partner Doctor. A higher discount was offered to the Tranche 2 Pre-[REDACTED] Investor compared with other Pre-[REDACTED] Investors (excluding Tranche 4 Pre-[REDACTED] Investors) in view of the contribution to be made by Dr. Eddie Cheung upon his joining us as an Equity Partner Doctor. Our Directors believe that the granting of such a discount to Dr. Eddie Cheung in respect of the Tranche 2 Pre-[REDACTED] Investment would offer an added incentive to increase his loyalty and commitment to serving as a medical practitioner in our Group. The proceeds from the Tranche 2 Pre-[REDACTED] Investment were to be used for general working capital. The subscription under the Tranche 2 Pre-[REDACTED] Investment was completed and settled on 23 August 2019. As at the Latest Practicable Date, the proceeds from the Tranche 2 Pre-[REDACTED] Investment had been fully utilised. The Tranche 2 Pre-[REDACTED] Investment is in the form of share-based payments. The share- based payment expense in respect of the Tranche 2 Pre-[REDACTED] Investment is calculated as the fair value of shares issued on the grant date less subscription money received from Dr. Eddie Cheung, which was approximately HK$5.1 million, and is amortised over the service period (until the [REDACTED] plus five years). The fair value of such shares subscribed by Dr. Eddie Cheung was based on the Group’s valuation as at the subscription date. For details of the relevant accounting treatment, please see Notes 2.21 and 23(b) to our consolidated financial statements set out in the Accountant’s Report included in Appendix I to this document. Tranche 3 Pre-[REDACTED] Investment in CMH by the Tranche 3 Pre-[REDACTED] Investors As consideration for the acquisition of Hong Kong Imaging, pursuant to the related sale and purchase agreements all dated 30 October 2019, on 30 October 2019, 4,145, 2,007, 1,975, 1,249 and 468 shares, representing approximately 0.41%, 0.20%, 0.20%, 0.12% and 0.05% of the then total issued shares of CMH, respectively, in CMH were allotted and issued to Dr. Ooi Gaik Cheng, Ms. Tang Wan Yin, Mr. Lo Wai Keung, Peter, Dr. Lau Chu Pak and Dr. Liu Chi Leung (collectively, the ‘‘Tranche 3 Pre-[REDACTED] Investors’’), respectively, at a consideration of HK$4,145,406, HK$2,007,452, HK$1,975,390, HK$1,249,519 and HK$468,570, respectively, (the ‘‘Tranche 3 Pre-[REDACTED] Investment’’). Pursuant to the sale and purchase agreements, the Tranche 3 Pre-[REDACTED] Investors subscribed for a total of 9,844 shares representing 0.98% in CMH at a total consideration of HK$9,846,337. The total consideration of HK$9,846,337 was determined based on arm’slength negotiation with reference to the valuation of the Hong Kong Imaging. The subscriptions under the Tranche 3 Pre-[REDACTED] Investment were completed and fully settled on 30 October 2019. Tranche 4 Pre-[REDACTED] Investment in CMH by the Tranche 4 Pre-[REDACTED] Investors Pursuant to the Tranche 4 Pre-[REDACTED] Investment Agreements both dated 1 August 2020, entered into between CMH and each of Hong Kong Clinical Oncology Limited (a company wholly owned by Dr. Stanley Yu, an Equity Partner Doctor of our Group) and Centre for Obesity, Diabetes and Endocrinology (CODE) Limited (a company wholly owned by Dr. Michele Yuen, an Equity Partner Doctor of our Group) (collectively, the ‘‘Tranche 4 Pre-[REDACTED] Investors’’), respectively, Hong Kong Clinical Oncology Limited and Centre for Obesity, Diabetes and Endocrinology (CODE) Limited subscribed for, and CMH allotted and issued to Hong Kong Clinical Oncology Limited and Centre for Obesity, Diabetes and Endocrinology (CODE) Limited 10,304 and 5,152 shares in CMH, respectively, at a consideration of HK$10,304 and HK$5,152, respectively, representing 1.0% and 0.5% of the then total issued shares of CMH (the ‘‘Tranche 4 Pre-[REDACTED] Investment’’). The Tranche 4 Pre- [REDACTED] Investors subscribed for a total of 15,456 shares in CMH at a total consideration of HK$15,456. The total consideration of HK$15,456 was determined based on arm’s length negotiation and the consideration of recruiting Dr. Stanley Yu and Dr. Michele Yuen to join our Group as our Equity Partner Doctors. A higher discount was offered to the Tranche 4 Pre-[REDACTED] Investors compared with other Pre-[REDACTED] Investors (excluding Tranche 2 Pre-[REDACTED] Investor) in view of the contribution to be made by each of Dr. Stanley Yu and Dr. Michele Yuen upon their joining us as Equity Partner Doctors. Our Directors believe that the granting of such a discount to Dr. Stanley Yu and Dr. Michele Yuen in respect of the Tranche 4 Pre-[REDACTED] Investment would offer an
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HISTORY, REORGANISATION AND CORPORATE STRUCTURE added incentive to increase their loyalty and commitment to serving as medical practitioners in our Group. The proceeds from the Tranche 4 Pre-[REDACTED] Investment shall be used for general working capital. The subscriptions under the Tranche 4 Pre-[REDACTED] Investment were completed and settled on 1 August 2020. As at the Latest Practicable Date, the proceeds from the Tranche 4 Pre- [REDACTED] Investment had been fully utilised. The Tranche 4 Pre-[REDACTED] Investment is in the form of share-based payments. The share- based payment expenses in respect of the Tranche 4 Pre-[REDACTED] Investment are calculated as the fair value of shares issued on the grant date less subscription money received from Dr. Stanley Yu and Dr. Michele Yuen, which were approximately HK$13.4 million and HK$6.7 million, respectively, and is amortised over the service period (until the [REDACTED] plus five years). The fair value of such shares respectively subscribed by Dr. Stanley Yu and Dr. Michele Yuen was based on the Group’s valuation as at the subscription date. For details of the relevant accounting treatment, please see Notes 2.21 and 23(b) to our consolidated financial statements set out in the Accountant’s Report included in Appendix I to this document. Tranche 5 Pre-[REDACTED] Investment in CMH by the Tranche 5 Pre-[REDACTED] Investor Pursuant to the Tranche 5 Pre-[REDACTED] Investment Agreement dated 27 August 2020, (as amended by a supplemental agreement dated 15 September 2020) entered into between CMH and Unicorn Link Group Limited (the ‘‘Tranche 5 Pre-[REDACTED] Investor’’), Unicorn Link Group Limited subscribed for, and CMH allotted and issued to Unicorn Link Group Limited 42,932 shares in CMH, at a consideration of HK$60,000,000, representing approximately 4.00% of the then total issued shares of CMH (the ‘‘Tranche 5 Pre-[REDACTED] Investment’’). The total consideration of HK$60,000,000 was determined based on arm’s length negotiation with reference to the price-earnings ratio of CMH for the year ended 31 March 2020. The proceeds from the Tranche 5 Pre-[REDACTED] Investment are to be used for (i) expenses in relation to the [REDACTED]; and (ii) funding for mergers and acquisitions. The subscription under the Tranche 5 Pre-[REDACTED] Investment was completed and settled on 15 September 2020. As at the Latest Practicable Date, the proceeds from the Tranche 5 Pre-[REDACTED] Investment had not been utilised. No special rights conferred under the Pre-[REDACTED] Investment Agreements will survive upon [REDACTED]. The tables below summarise the details of the Pre-[REDACTED] Investments: Hong Kong Joyous Dashenlin Goldstone Cheung Pine Double Rainbow Trade and Asmex Investment Hing Clear Treasure Name of Pre-[REDACTED] Expert Holdings Investment Investment Capital Holdings Star List Trillion Holdings Investor Limited Limited Limited Limited Limited Limited Limited Limited Limited
Date of the Pre- 29 March 29 March 29 March 29 March 29 March 29 March 29 March 29 March 29 March [REDACTED] 2019 2019 2019 2019 2019 2019 2019 2019 2019 Investment Agreement Settlement date 31 March 31 March 31 March 31 March 31 March 31 March 31 March 31 March 31 March 2019 2019 2019 2019 2019 2019 2019 2019 2019 Amount of consideration 25,000,000 23,000,000 20,000,000 18,000,000 14,000,000 10,000,000 5,000,000 5,000,000 5,000,000 (HK$) Number of Shares owned [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] immediately upon [REDACTED] Approximate cost per Share [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] immediately upon [REDACTED] (HK$) Shareholding interest of the [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] Pre-[REDACTED] Investor in our Company immediately upon [REDACTED](1) [REDACTED]/(premium) [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] over mid-point of the [REDACTED](2)
Notes: (1) For illustration purposes only, on the basis of our enlarged issued shares immediately upon completion of the [REDACTED] and the [REDACTED] (without taking into account the Shares which may be issued pursuant to the exercise of the [REDACTED] and any Shares to be issued upon the exercise of any options which may be granted under the Share Option Scheme). (2) For illustration purposes only, assuming that the [REDACTED] is HK$[REDACTED] per [REDACTED] (being the mid- point of the [REDACTED] range between HK$[REDACTED] and HK$[REDACTED] per [REDACTED]).
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HISTORY, REORGANISATION AND CORPORATE STRUCTURE
Centre for Obesity, Hong Kong Diabetes and Mr. Lo Clinical Endocrinology Unicorn Name of Pre-[REDACTED] CEKA Dr. Ooi Ms. Tang Wai Keung, Dr. Lau Dr. Liu Oncology (CODE) Link Group Investor Limited Gaik Cheng Wan Yin Peter Chu Pak Chi Leung Limited Limited Limited
Date of the Pre- 23 August 30 October 30 October 30 October 30 October 30 October 1 August 1 August 27 August [REDACTED] Investment 2019 2019 2019 2019 2019 2019 2020 2020 2020 Agreement Settlement date 23 August 30 October 30 October 30 October 30 October 30 October 1 August 1 August 27 August 2019 2019 2019 2019 2019 2019 2020 2020 2020 Amount of consideration 5,075 4,145,406 2,007,452 1,975,390 1,249,519 468,570 10,304 5,152 60,000,000 (HK$) Number of Shares owned [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] immediately upon [REDACTED] Approximate cost per Share [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] immediately upon [REDACTED] (HK$) Shareholding interest of the [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] Pre-[REDACTED] Investor in our Company immediately upon [REDACTED](1) [REDACTED]/(premium) [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] over mid-point of the [REDACTED] range(2) Notes: (1) For illustration purposes only, on the basis of our enlarged issued shares immediately upon completion of the [REDACTED] and the [REDACTED] (without taking into account the Shares which may be issued pursuant to the exercise of the [REDACTED] and any Shares to be issued upon the exercise of any options which may be granted under the Share Option Scheme). (2) For illustration purposes only, assuming that the [REDACTED] is HK$[REDACTED] per [REDACTED] (being the mid- point of the [REDACTED] range between HK$[REDACTED] and HK$[REDACTED] per [REDACTED]). Pursuant to their respective Pre-[REDACTED] Investment Agreements, the Pre-[REDACTED] Investors are not subject to any lock-up arrangements. However, Tranche 1 Pre-[REDACTED] Investors, Tranche 2 Pre-[REDACTED] Investor, Tranche 4 Pre-[REDACTED] Investors and Tranche 5 Pre- [REDACTED] Investor subsequently signed a lock-up undertaking, pursuant to which each of them unconditionally and irrevocably undertakes not to, during the six-month period from the [REDACTED], dispose of, nor enter into any agreement to dispose of or otherwise create any options, rights, interests or encumbrances in respect of, any of those securities of the Company held by them. Tranche 3 Pre- [REDACTED] Investors are not subject to any lock-up arrangements. Among the Pre-[REDACTED] Investors, each of Dr.OoiGaikChengandMs.TangWanYinisa core connected person of our Company. Hence, other than the [REDACTED] Shares in aggregate held by Dr. Ooi Gaik Cheng and Ms. Tang Wan Yin, all the Shares held by the other Pre-[REDACTED] Investors (being Independent Third Parties) will be counted as [REDACTED] for the purpose of Rule 8.08 of the Listing Rules. Immediately after completion of the [REDACTED] and the [REDACTED] (without taking into account the Shares which may be issued pursuant to the exercise of the [REDACTED] and any Shares to be issued upon the exercise of any Options which may be granted under the Share Option Scheme), the Pre-[REDACTED] Investors will hold in aggregate [REDACTED] shareholding in our Company and the breakdown of the shareholding of each of the Pre-[REDACTED] Investorsisasfollows: Percentage of Shareholders Number of Shares shareholding (%) Tranche 1 Pre-[REDACTED] Investors Double Expert Limited [REDACTED] [REDACTED] Joyous Rainbow Holdings Limited [REDACTED] [REDACTED] Hong Kong Dashenlin Trade and Investment Limited [REDACTED] [REDACTED] Asmex Investment Limited [REDACTED] [REDACTED] Goldstone Investment Capital Limited [REDACTED] [REDACTED] Cheung Hing Holdings Limited [REDACTED] [REDACTED] Star List Limited [REDACTED] [REDACTED] Clear Trillion Limited [REDACTED] [REDACTED] Pine Treasure Holdings Limited [REDACTED] [REDACTED]
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HISTORY, REORGANISATION AND CORPORATE STRUCTURE
Number of Percentage of Shareholders Shares shareholding (%) Tranche 2 Pre-[REDACTED] Investor CEKA Limited [REDACTED] [REDACTED] Tranche 3 Pre-[REDACTED] Investors Dr. Ooi Gaik Cheng [REDACTED] [REDACTED] Ms. Tang Wan Yin [REDACTED] [REDACTED] Mr. Lo Wai Keung, Peter [REDACTED] [REDACTED] Dr. Lau Chu Pak [REDACTED] [REDACTED] Dr. Liu Chi Leung [REDACTED] [REDACTED] Tranche 4 Pre-[REDACTED] Investors Hong Kong Clinical Oncology Limited [REDACTED] [REDACTED] Centre for Obesity, Diabetes and Endocrinology (CODE) Limited [REDACTED] [REDACTED] Tranche 5 Pre-[REDACTED] Investor Unicorn Link Group Limited [REDACTED] [REDACTED]
Total: [REDACTED] [REDACTED]
Information About the Pre-[REDACTED] Investors Tranche 1 Pre-[REDACTED] Investors Double Expert Limited Double Expert Limited (‘‘Double Expert’’) was incorporated in the BVI with limited liability and is established as a special purpose company. Double Expert is in turn held as follows: 66% by Express Glow Limited (a company incorporated in Hong Kong with limited liability) (‘‘Express Glow’’), 20% by Ironwood Asia Limited (a company incorporated in the BVI with limited liability) (‘‘Ironwood Asia’’), 10% by Max Giant Investment Holdings Limited (a company incorporated in the BVI with limited liability) (‘‘Max Giant’’) and 4% by Ms. Xu Huihui (‘‘Ms. Xu’’), respectively. Express Glow is wholly owned by Asia Explorer Holdings Limited (a company incorporated in the BVI with limited liability) (‘‘Asia Explorer’’) and the ultimate beneficial owner of Express Glow is Mr. Hao Zhanwei (‘‘Mr. Hao’’). Mr. Hao is chairman and a controlling shareholder of Shenzhen Hengbang Weiye Investment Group (深圳恆邦偉業投資集團). The ultimate beneficial owner of Ironwood Asia is Ms. Lisa Chow (‘‘Ms. Chow’’). Ms. Chow is senior director and deputy chairman of Sotheby’s Hong Kong and she has been with the company for over 15 years. The ultimate beneficial owner of Max Giant is Ms. Sun Yen Sian Elaine (‘‘Ms. Sun’’). Ms. Sun is a jewellery designer and she runs her own jewellery business in Hong Kong. Mr. Hao, Ms. Chow and Ms. Sun became acquainted with our Group through Max Giant. To the best knowledge of our Company, (i) each of Express Glow, Asia Explorer, Ironwood Asia, Max Giant, Mr. Hao, Ms. Chow, Ms. Sun and Ms. Xu comprise financial investors entitled to share in the economic returns from Double Expert; (ii) Mr. Hao, Ms. Chow, Ms. Sun and Ms. Xu are high net worth individuals with substantial investment experience in various sectors and industries; and (iii) each of Double Expert, Express Glow, Asia Explorer, Ironwood Asia, Max Giant, Mr. Hao, Ms. Chow, Ms. Sun and Ms. Xu are Independent Third Parties. Joyous Rainbow Holdings Limited Joyous Rainbow Holdings Limited is incorporated in the BVI with limited liability and is established as a special purpose company, which is wholly owned by a discretionary trust with Mr. Adam Kwok and his certain family members as discretionary beneficiaries. Joyous Rainbow Holdings Limited and its beneficial owners are Independent Third Parties. Hong Kong Dashenlin Trade and Investment Limited Hong Kong Dashenlin Trade and Investment Limited was incorporated in Hong Kong with limited liability and is a wholly-owned subsidiary of DaShenLin Pharmaceutical Group Co., Ltd. (大參林醫藥集 團股份有限公司), the shares of which are listed on the Shanghai Stock Exchange (stock code: 603233). To the best knowledge of our Company, Hong Kong Dashenlin Trade and Investment Limited and the controlling shareholders of DaShenLin Pharmaceutical Group Co., Ltd. are Independent Third Parties.
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HISTORY, REORGANISATION AND CORPORATE STRUCTURE
Asmex Investment Limited Asmex Investment Limited was incorporated in the BVI with limited liability and is established as a special purpose company, which is wholly owned by Ms. Kwok Yue Yee. To the best knowledge of our Company, Asmex Investment Limited and Ms. Kwok Yue Yee are Independent Third Parties. Goldstone Investment Capital Limited Goldstone Investment Capital Limited was incorporated in the BVI with limited liability and is established as a special purpose company, which is owned as to 50% and 50% by Mr. Tsang Chi Wah Terrence and Mr. Lau Hiu Fung, respectively. Each of Mr. Tsang Chi Wah Terrence and Mr. Lau Hiu Fung is an experienced investor in various investments including property investments. Immediately prior to the Reorganisation, Goldstone Investment Capital Limited was a director of each of CMH, Central Healthcare Limited, Central Medical Consultants (currently known as HKMC Dental), CentralPharm, Hong Kong Medical Consultants and HK Brain Memory. On 20 October 2020, Goldstone Investment Capital Limited tendered its resignation as a director of each of CMH, Central Healthcare Limited, Central Medical Consultants (currently known as HKMC Dental), CentralPharm, Hong Kong Medical Consultants and HK Brain Memory. Goldstone Investment Capital Limited is a connected person of our Group by virtue of Rule 14A.07(2) of the Listing Rules. To the best knowledge of our Company, Goldstone Investment Capital Limited, Mr. Tsang Chi Wah Terrence and Mr. Lau Hiu Fung are Independent Third Parties. Cheung Hing Holdings Limited Cheung Hing Holdings Limited was incorporated in the BVI with limited liability and is established as a special purpose company, which is wholly owned by Mr. Wang Lishan. Mr. Wang Lishan is a substantial shareholder of Jutal Offshore Oil Services Limited, the shares of which are listed on the Main Board of the Stock Exchange (stock code: 3303). To the best knowledge of our Company, Cheung Hing Holdings Limited and Mr. Wang Lishan are Independent Third Parties. Star List Limited Star List Limited was incorporated in the BVI with limited liability and is established as a special purpose company, which is wholly owned by Mr. Luk Ka Luen, Tony. Mr. Luk Ka Luen, Tony is a merchant in the retail and design industry. To the best knowledge of our Company, Star List Limited and Mr. Luk Ka Luen, Tony are Independent Third Parties. Clear Trillion Limited Clear Trillion Limited was incorporated in the BVI with limited liability and is established as a special purpose company, which is wholly owned by Mr. Mok Man Fung, Carter. Mr. Mok Man Fung, Carter is an experienced investor in financial investments. To the best knowledge of our Company, Clear Trillion Limited and Mr. Mok Man Fung, Carter are Independent Third Parties. Pine Treasure Holdings Limited Pine Treasure Holdings Limited is incorporated in the BVI with limited liability and is established as a special purpose company, which is wholly owned by a discretionary trust with Mr. Dominic Kwok and his certain family members as discretionary beneficiaries. Pine Treasure Holdings Limited and its beneficial owners are Independent Third Parties. Tranche 2 Pre-[REDACTED] Investor CEKA Limited CEKA Limited is a company wholly owned by Dr. Eddie Cheung, who is a specialist in paediatrics, an Equity Partner Doctor. CEKA Limited and Dr. Eddie Cheung are Independent Third Parties. Tranche 3 Pre-[REDACTED] Investors Dr. Ooi Gaik Cheng Dr. Ooi Gaik Cheng is a specialist in radiology, a substantial shareholder of HKID (Lab) and a former director of each of HKID Limited, HKID (Lab) and HKID (MRI). Dr. Ooi Gaik Cheng is a connected person of our Company.
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HISTORY, REORGANISATION AND CORPORATE STRUCTURE
Ms. Tang Wan Yin Ms. Tang Wan Yin is a registered radiographer (diagnostic), a substantial shareholder of HKID (Lab)andaformerdirectorofeachofHKIDLimited,HKID(Lab)andHKID(MRI).Ms.TangWan Yin is a connected person of our Company. Mr. Lo Wai Keung, Peter Mr. Lo Wai Keung, Peter is a practising solicitor of Hong Kong and a former shareholder of Pixel prior to the acquisition of Hong Kong Imaging detailed in this section. Mr. Lo Wai Keung, Peter is an Independent Third Party. Dr. Lau Chu Pak Dr. Lau Chu Pak is a specialist in cardiology, a former substantial shareholder of Pegasus and a former director of HKID Limited prior to the acquisition of Hong Kong Imaging detailed in this section. Dr. Lau Chu Pak is an Independent Third Party. Dr. Liu Chi Leung Dr. Liu Chi Leung is a specialist in general surgery, a former shareholder of Pegasus and a former director of HKID Limited prior to the acquisition of Hong Kong Imaging detailed in this section. Dr. Liu Chi Leung is an Independent Third Party. Tranche 4 Pre-[REDACTED] Investors Hong Kong Clinical Oncology Limited Hong Kong Clinical Oncology Limited is a company wholly owned by Dr. Stanley Yu, a specialist in oncology and an Equity Partner Doctor. Hong Kong Clinical Oncology Limited and Dr. Stanley Yu are Independent Third Parties. Centre for Obesity, Diabetes and Endocrinology (CODE) Limited Centre for Obesity, Diabetes and Endocrinology (CODE) Limited is a company wholly owned by Dr. Michele Yuen, a specialist in endocrinology, diabetes and metabolism and an Equity Partner Doctor. Centre for Obesity, Diabetes and Endocrinology (CODE) Limited and Dr. Michele Yuen are Independent Third Parties. Tranche 5 Pre-[REDACTED] Investor Unicorn Link Group Limited UnicornLinkGroupLimited(‘‘Unicorn Link’’) was incorporated in the BVI with limited liability. Unicorn Link Group Limited is established as a special purpose company and is a wholly-owned subsidiary of Xi Yue Cultural Industry Investment Fund L.P. (‘‘Xi Yue Fund L.P.’’), an exempted limited partnership incorporated in the Cayman Islands which is engaged in various investments. The limited partner of Xi Yue Fund L.P. is United Wealth Ventures Limited (a company incorporated in the BVI with limited liability) (‘‘United Wealth’’), which is in turn owned as to 51% and 49% by Mr. Li Kai Sing (‘‘Mr. Li’’) and Glorious Maple Limited (‘‘Glorious Maple’’), respectively. Glorious Maple is owned as to 30% by Mr. Hong Ching Wei (‘‘Mr. Hong’’) and 70% by Rainbow Lead Ventures Limited (‘‘Rainbow Lead’’), which is wholly owned by Mr. Yeung Wan Yiu (‘‘Mr. Yeung’’). The general partner of Xi Yue Fund L.P. is Vital Vision Limited (a company incorporated in the Cayman Islands with limited liability) (‘‘Vital Vision’’), which is responsible for the day to day management of Xi Yue Fund L.P. and its investment activities. Vital Vision is owned as to 55% and 45% by Red Carpet Investments Limited (‘‘Red Carpet’’), a company wholly owned by Mr. Li, and Glorious Maple, respectively. Each of Mr. Li and Mr. Yeung is an experienced investor in various sectors. To the best knowledge of our Company, Unicorn Link, Xi Yue Fund L.P., United Wealth, Vital Vision, Glorious Maple, Rainbow Lead, Red Carpet, Mr. Li, Mr. Hong and Mr. Yeung are Independent Third Parties. Compliance with Interim Guidance and Guidance Letters The Sole Sponsor confirms that the investments of the Pre-[REDACTED] Investors are in compliance with the Guidance Letter HKEx-GL29-12 issued by the Stock Exchange in January 2012 (as updated in March 2017), the Guidance Letter HKEx-GL43-12 issued by the Stock Exchange in October 2012 and as updated in July 2013 and March 2017, and the Guidance Letter HKEx-GL44-12 issued by the Stock Exchange in October 2012 and as updated in March 2017.
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HISTORY, REORGANISATION AND CORPORATE STRUCTURE
CORPORATE AND SHAREHOLDING STRUCTURE Upon completion of the Reorganisation and the Pre-[REDACTED] Investments, our Company became the holding company of our Group. The chart below sets out the corporate and shareholding structure of our Group immediately after the Reorganisation and the Pre-[REDACTED] Investments but prior to the [REDACTED] and the [REDACTED]: 100%
HKMC Dental 42.42% Peak Summit(1) (HK)
23.74% Heroic Wealth(1)
10.74% Mastermind Intelligence(1) 100% CentralPharm 2.46% (HK) Grateful Mind(1) CHG (BVI) Central Healthcare 67.66% 100% 100% (1) Limited 6.54% (HK) Property Linkage(1)
9.10% Hong Kong Medical Wealth Basin(1) 100% Consultants (HK) 5.00% Les Trois(1) HK Brain Memory (HK) 2.85% Wealth Splendour Limited(5) (Cayman Islands) 100% Our Company (BVI) CMH 2.85% Dr. Boron Cheng(3) Medical Concierge 95%
Limited 0.82% (3) BI (BVI) (BVI) Dr. Matthew Ng (10) 0.82% Dr. Lo Wai Kei(3) Medical Concierge 100% Holding (BVI) 1.63% Cambridge Oncology Limited(4)
1.63% Medical Concierge
100% Dr. Kenneth Ng Management
1.63% Dr. Gordon Chau HKMC Medical 100% 100% Ace Alliance
Products 1.63% (BVI) (HK) Dr. Barbara Tam HKID (Lab) 51% 51%51%
(HK) 11.65% Tranche 1 Pre-[REDACTED] Investors(5) (11)
0.47% 100% HKID Limited
Smart Winner Tranche 2 Pre-[REDACTED] (Seychelles) Investor(6) (HK)
100% 0.92% Tranche 3 Pre-[REDACTED] Investors(7) HKID (MRI) 1.44% Tranche 4 Pre-[REDACTED] (HK) Investors(8)
(12) 4.00% Tranche 5 Pre-[REDACTED] Investor(9)
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HISTORY, REORGANISATION AND CORPORATE STRUCTURE
Notes: (1) Pursuant to the Concert Party Deed, CHG, Dr. Kenneth Tsang, Peak Summit (a company wholly owned by Dr. Kenneth Tsang), Dr. Adam Leung, Heroic Wealth (a company wholly owned by Dr. Adam Leung), Dr. Jason Fong, Mastermind Intelligence (a company wholly owned by Dr. Jason Fong), Dr. Chu Leung Wing, Grateful Mind (a company wholly owned by Dr. Chu Leung Wing), Dr. Jenny Tsang, Property Linkage (a company wholly owned by Dr. Jenny Tsang), Mr. Shiu, Wealth Basin (a company wholly owned by Mr. Shiu), Mrs. Chen and Les Trois (a company wholly owned by Mrs. Chen) are parties acting in concert. (2) Wealth Splendour Limited is a company wholly owned by Dr. Clement Lee, an Equity Partner Doctor. (3) Each of Dr. Boron Cheng, Dr. Matthew Ng and Dr. Lo Wai Kei is and an Equity Partner Doctor. (4) Cambridge Oncology Limited is a company owned as to 50% and 50% by Dr. Ada Ma, an Equity Partner Doctor, and Ms. Tong Duen Ming Catherine, the mother of Dr. Ada Ma, respectively. (5) The breakdown of the shareholding interests held by the Tranche 1 Pre-[REDACTED] Investors in our Company was as follows: (i) Double Expert Limited: 2.33%; (ii) Joyous Rainbow Holdings Limited: 2.14%; (iii) Hong Kong Dashenlin Trade and Investment Limited: 1.86%; (iv) Asmex Investment Limited: 1.63%; (v) Goldstone Investment Capital Limited: 1.30%; (vi) Cheung Hing Holdings Limited: 0.93%; (vii) Star List Limited: 0.47%; (viii) Clear Trillion Limited: 0.47%; and (ix) Pine Treasure Holdings Limited: 0.47%. (6) The shareholding interest held by the Tranche 2 Pre-[REDACTED] Investor, namely, CEKA Limited, a company wholly owned by Dr. Eddie Cheung, an Equity Partner Doctor, in our Company, is 0.47%. (7) The breakdown of the shareholding interests held by the Tranche 3 Pre-[REDACTED] Investors in our Company is as follows: (i) Dr. Ooi Gaik Cheng: 0.39%; (ii) Ms. Tang Wan Yin: 0.19%; (iii) Mr. Lo Wai Keung Peter: 0.18%; (iv) Dr. Lau Chu Pak: 0.12%; and (v) Dr. Liu Chi Leung: 0.04%. (8) The breakdown of the shareholding interests held by the Tranche 4 Pre-[REDACTED] Investors in our Company was as follows: (i) Hong Kong Clinical Oncology Limited, a company wholly owned by Dr. Stanley Yu, an Equity Partner Doctor: 0.96%; and (ii) Centre for Obesity, Diabetes and Endocrinology (CODE) Limited, a company wholly owned by Dr. Michele Yuen, an Equity Partner Doctor: 0.48%. (9) The shareholding interest held by the Tranche 5 Pre-[REDACTED] Investor, namely, Unicorn Link Group Limited, in our Company is 4.00%. (10) Medical Concierge Limited is held as to 95% and 5% by Medical Concierge Holding Limited and Real Energetic Limited, respectively. Real Energetic Limited is wholly owned by Ms. Yeung Kit Shun, who is a member of our senior management. (11) HKID (Lab) is held as to 51% by HKID Limited, 13% by Dr. Ooi Gaik Cheng, 10% by Ms. Tang Wan Yin, 10% by Mr. Teo Man Lung Peter, 8% by Ms. Wong Ching Ying Isobel, 5% by Mr. Fung Wing Tak and 3% by Dr. Kenneth Tsang jointly with Mrs. Tsang, respectively. Each of Dr. Ooi Gaik Cheng and Ms. Tang Wan Yin is a Pre-[REDACTED] Investor; Mrs. Tsang is the spouse of Dr. Kenneth Tsang; and each of Ms. Wong Ching Ying Isobel and Mr. Fung Wing Tak is an Independent Third Party. (12) HKID (MRI) was held as to 51% by HKID Limited, 8% by Ms. Wong Ching Ying Isobel, 8% by Eastern Summit Enterprise Limited, 8% by Mr. Teo Man Lung Peter, 6% by Dr. Ooi Gaik Cheng, 5% by Mr. Fung Wing Tak, 5% by Hong Kong Oncology Centre Company Limited, 3% by Ms. Tang Wan Yin, 3% by Mr. Wong Chun Kuen and 3% by Dr. Kenneth Tsang jointly with Mrs. Tsang, respectively. Each of Dr. Ooi Gaik Cheng and Ms. Tang Wan Yin is a Pre-[REDACTED] Investor; Mrs. Tsang is the spouse of Dr. Kenneth Tsang; and each of Mr. Fung Wing Tak, Ms. Wong Ching Ying Isobel, Mr. Teo Man Lung Peter, Mr. Wong Chun Kuen, Hong Kong Oncology Centre Company Limited and Eastern Summit Enterprise Limited is an Independent Third Party.
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HISTORY, REORGANISATION AND CORPORATE STRUCTURE
[REDACTED] AND [REDACTED] The Company is authorised to issue up to [REDACTED] Shares with a par value of HK$0.00001 each. Assuming the [REDACTED] becomes unconditional and all the [REDACTED] are issued, [REDACTED] Shares will be in issue and [REDACTED] Shares will remain unissued (assuming that the [REDACTED] is not exercised and taking no account of any Shares to be issued upon the exercise of any share options that may be granted under the Share Option Scheme). The chart below sets out the corporate and shareholding structure immediately after completion of the [REDACTED] and the [REDACTED] (assuming that the [REDACTED] is not exercised and taking no account of any Shares to be issued upon the exercise of any share options that may be granted under the Share Option Scheme): 100%
HKMC Dental 42.42% Peak Summit(1) (HK)
23.74% Heroic Wealth(1)
10.74% Mastermind Intelligence(1) 100% CentralPharm 2.46% (HK) (1) CHG Grateful Mind [REDACTED]% (BVI) Central Healthcare 100% 100% Note 1
Limited 6.54% (HK) Property Linkage(1)
9.10% Hong Kong Medical Wealth Basin(1) 100% Consultants (HK) 5.00% Les Trois(1) HK Brain Memory (HK)
[REDACTED]% Wealth Splendour (5) (Cayman Islands) Limited 100% Our Company (BVI) CMH [REDACTED]% Dr. Boron Cheng(3) Medical Concierge (BVI) 95% Limited [REDACTED]% Dr. Matthew Ng(3) (10)
Medical Concierge [REDACTED]% (5) 100% Dr. Lo Wai Kei Holding (BVI) [REDACTED]% Cambridge Oncology Limited(4) Medical Concierge 100% Management [REDACTED]% (BVI) Dr. Kenneth Ng
[REDACTED]% Dr. Gordon Chau
[REDACTED]% HKMC Medical 100% 100% 100% Dr. Barbara Tam Ace Alliance Products (BVI) (HK) [REDACTED]% HKID (Lab)
51% 51%51% Tranche 1 Pre-[REDACTED] Investors(5) (HK)
[REDACTED]% Tranche 2 Pre-[REDACTED] (11) Investor(6) 100% HKID Limited Smart Winner [REDACTED]% (Seychelles) Tranche 3 Pre-[REDACTED]
(HK) Investors(7)
100% [REDACTED]% Tranche 4 Pre-[REDACTED] Investors(8) HKID (MRI) [REDACTED]%
(HK) Tranche 5 Pre-[REDACTED] Investor(9)
(12) [REDACTED]% Other Public Shareholders
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HISTORY, REORGANISATION AND CORPORATE STRUCTURE
Notes: (1) Pursuant to the Concert Party Deed, CHG, Dr. Kenneth Tsang, Peak Summit (a company wholly owned by Dr. Kenneth Tsang), Dr. Adam Leung, Heroic Wealth (a company wholly owned by Dr. Adam Leung), Dr. Jason Fong, Mastermind Intelligence (a company wholly owned by Dr. Jason Fong), Dr. Chu Leung Wing, Grateful Mind (a company wholly owned by Dr. Chu Leung Wing), Dr. Jenny Tsang, Property Linkage (a company wholly owned by Dr. Jenny Tsang), Mr. Shiu, Wealth Basin (a company wholly owned by Mr. Shiu), Mrs. Chen and Les Trois (a company wholly owned by Mrs. Chen) are parties acting in concert. (2) Wealth Splendour Limited is a company wholly owned by Dr. Clement Lee, an Equity Partner Doctor. (3) Each of Dr. Clement Lee, Dr. Boron Cheng, Dr. Matthew Ng and Dr. Lo Wai Kei is an Equity Partner Doctor. (4) Cambridge Oncology Limited is a company owned as to 50% and 50% by Dr. Ada Ma, an Equity Partner Doctor, and Ms. Tong Duen Ming Catherine, the mother of Dr. Ada Ma. (5) The breakdown of the shareholding interests held by the Tranche 1 Pre-[REDACTED] Investors in our Company will be as follows: (i) Double Expert Limited: [REDACTED]%; (ii) Joyous Rainbow Holdings Limited: [REDACTED]%; (iii) Hong Kong Dashenlin Trade and Investment Limited: [REDACTED]%; (iv) Asmex Investment Limited: [REDACTED]%; (v) Goldstone Investment Capital Limited: [REDACTED]%; (vi) Cheung Hing Holdings Limited: [REDACTED]%; (vii) Star List Limited: [REDACTED]%; (viii) Clear Trillion Limited: [REDACTED]%; and (ix) Pine Treasure Holdings Limited: [REDACTED]%. (6) The shareholding interest held by the Tranche 2 Pre-[REDACTED] Investor, namely, CEKA Limited, a company wholly owned by Dr. Eddie Cheung, an Equity Partner Doctor, in our Company, is [REDACTED]%. (7) The breakdown of the shareholding interests held by the Tranche 3 Pre-[REDACTED] Investors in our Company is as follows: (i) Dr. Ooi Gaik Cheng: [REDACTED]%; (ii) Ms. Tang Wan Yin: [REDACTED]%; (iii) Mr. Lo Wai Keung Peter: [REDACTED]%; (iv) Dr. Lau Chu Pak: [REDACTED]%; and (v) Dr. Liu Chi Leung: [REDACTED]%. (8) The breakdown of the shareholding interests held by the Tranche 4 Pre-[REDACTED] Investors in our Company will be as follows: (i) Hong Kong Clinical Oncology Limited, a company wholly owned by Dr. Stanley Yu, an Equity Partner Doctor: [REDACTED]%; and (ii) Centre for Obesity, Diabetes and Endocrinology (CODE) Limited, a company wholly owned by Dr. Michele Yuen, an Equity Partner Doctor: [REDACTED]%. (9) The shareholding interest held by the Tranche 5 Pre-[REDACTED] Investor, namely, Unicorn Link Group Limited, in our Company is [REDACTED]%. (10) Medical Concierge Limited is held as to 95% and 5% by Medical Concierge Holding Limited and Real Energetic Limited, respectively. Real Energetic Limited is wholly owned by Ms. Yeung Kit Shun, who is a member of our senior management. (11) HKID (Lab) is held as to 51% by HKID Limited, 13% by Dr. Ooi Gaik Cheng, 10% by Ms. Tang Wan Yin, 10% by Mr. Teo Man Lung Peter, 8% by Ms. Wong Ching Ying Isobel, 5% by Mr. Fung Wing Tak and 3% by Dr. Kenneth Tsang jointly with Mrs. Tsang, respectively. Each of Dr. Ooi Gaik Cheng and Ms. Tang Wan Yin is a Pre-[REDACTED] Investor; Mrs. Tsang is the spouse of Dr. Kenneth Tsang; and each of Ms. Wong Ching Ying Isobel and Mr. Fung Wing Tak is an Independent Third Party. (12) HKID (MRI) was held as to 51% by HKID Limited, 8% by Ms. Wong Ching Ying Isobel, 8% by Eastern Summit Enterprise Limited, 8% by Mr. Teo Man Lung Peter, 6% by Dr. Ooi Gaik Cheng, 5% by Mr. Fung Wing Tak, 5% by Hong Kong Oncology Centre Company Limited, 3% by Ms. Tang Wan Yin, 3% by Mr. Wong Chun Kuen and 3% by Dr. Kenneth Tsang jointly with Mrs. Tsang, respectively. Each of Dr. Ooi Gaik Cheng and Ms. Tang Wan Yin is a Pre-[REDACTED] Investor; Mrs. Tsang is the spouse of Dr. Kenneth Tsang; and each of Mr. Fung Wing Tak, Ms. Wong Ching Ying Isobel, Mr. Teo Man Lung Peter, Mr. Wong Chun Kuen, Hong Kong Oncology Centre Company Limited and Eastern Summit Enterprise Limited is an Independent Third Party.
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BUSINESS
OVERVIEW
We are an integrated private medical services provider in Hong Kong with specialist doctors renowned in their respective fields of expertise, complemented by various allied health services and medical management services. According to Frost & Sullivan, we ranked sixth as a multi-specialties medical centre operator in Hong Kong with a market share of approximately 1.3%, and ranked third in terms of total revenue generated from provision of internal medicine specialty services, amongst all private multi-specialties medical centre operators in Hong Kong in 2019. We also offer allied health services such as clinical psychology, speech therapy, nutritional therapy, psychological counselling, and imaging and diagnostic services in order to provide holistic care to our clients.
We endeavour to provide high quality clinical service by applying advanced technology, adopting internationally accredited clinical protocols and offering patient-centred support to improve the health and well-being of our clients. Our business can be traced back to 2013 when our Founding Doctor, Dr. Kenneth Tsang, a renowned respiratory medicine specialist, established our subsidiary, Hong Kong Medical Consultants Ltd. In order to meet the increasing demand for high quality and efficient healthcare services, we developed a multi-disciplinary medical services model through our network of specialist doctors and allied health professionals from different specialties. As our business expanded, we developed rapidly in terms of the number of specialty services. We provide these specialty services and certain allied health services under the brand of ‘‘Hong Kong Medical Consultants’’, and logo .
In October 2019, we acquired Hong Kong Imaging and Diagnostic Centre Ltd (‘‘Hong Kong Imaging’’), which has two imaging and diagnoses centres and one laboratory located in Central in order to supplement our medical services. Hong Kong Imaging operates under our sub-brand ‘‘Hong Kong Imaging and Diagnostic Centre’’, and logo ; and provides X-ray, CT-Scan, MRI, ultrasound and other diagnostic and laboratory services.
As at the Latest Practicable Date, we operated six medical centres (the ‘‘Medical Centres’’), which comprise of three multi-specialties clinics, one psychiatric centre, one geriatric medical centre, and one paediatric centre under our brand ‘‘Hong Kong Medical Consultants’’; and we operated two imaging and diagnoses centres and one laboratory under our sub-brand ‘‘Hong Kong Imaging and Diagnostic Centre’’ (together, the ‘‘Diagnostic Centres’’), all of which are located in Central, Hong Kong. Our clients mainly include individuals seeking high quality medical treatment from our well regarded specialists.
We are committed to delivering efficient and exemplary medical services across specialties and disciplines. Our medical services business operates under two main service streams:
1. Specialist medical services: we provide a wide range of specialty services including cardiology, respiratory medicine, gastroenterology & hepatology, nephrology, neurology, psychiatry, endocrinology, diabetes & metabolism, geriatric medicine, oncology, paediatrics and rheumatology at our Medical Centres as well as inpatient services at private hospitals in Hong Kong; and
2. Allied health services: we provide various allied health services including clinical psychology, speech therapy, nutritional therapy and psychological counselling at our Medical Centres as well as imaging, diagnostic and laboratory services at our Diagnostic Centres.
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BUSINESS
To a much lesser extent, we provide medical management services to certain medical practitioners in relation to administrative and operational functions such as clinic management, accounting and finance, human resources, central procurement of pharmaceuticals and clinical supplies, facilities and lease management, regulatory compliance, marketing and business development, medical record management and information technology systems. By offering medical management services to selected medical practitioners, we are able to extend and build relationships, and enhance our ability to attract and recruit specialist doctors that we believe would be able to complement our business.
As at the Latest Practicable Date, our medical team consisted of 15 specialist doctors that work for us on an exclusive basis, who have a significant amount of experience with an average of approximately 19 years of specialist qualification. In particular, our five Founding Doctors are senior specialists that have on average approximately 25 years of specialist qualification covering respiratory medicine, cardiology, neurology, psychiatry and geriatric medicine, and all of them had attained professor or consultant ranks at hospitals in Hong Kong. In addition, the majority of our specialist doctors are honorary associate professors at universities in Hong Kong with publications made in medical journals, and approximately half of our specialist doctors are chairman or chairlady of a medical professional body in Hong Kong.
The 15 specialist doctors that work for us on an exclusive basis cover 11 medical specialties and we also have 13 Panel Specialists that work for us on a non-exclusive basis, covering ten specialties. For details, please refer to ‘‘— Our Professional Team’’. In addition, we provide ophthalmology services under our brand through our management services arrangement with three ophthalmologists operating at the HKMC Ophthalmology Centre. During the Track Record Period, we recorded revenues of HK$195.7 million, HK$248.4 million and HK$251.4 million for the years ended 31 March 2019, 2020 and 2021, respectively.
The following table sets out the breakdown of our revenue by business segment for the years indicated:
Year ended 31 March 2019 2020 2021 HK$’000 % HK$’000 % HK$’000 %
Medical Services: — Specialist medical services 192,273 98.3 232,427 93.6 218,006 86.7 — Allied health services 12 0.0 13,137 5.3 36,483 14.5 192,285 98.3 245,564 98.9 254,489 101.2 Elimination of inter-segment revenue ——(1,768) (0.7) (7,586) (3.0) Total Medical Services 192,285 98.3 243,796 98.2 246,903 98.2
Medical management services 3,375 1.7 4,598 1.8 4,531 1.8
Total 195,660 100.0 248,394 100.0 251,434 100.0
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BUSINESS
OUR COMPETITIVE STRENGTHS
We believe that our success is mainly attributable to the following competitive strengths:
We are one of the leading multi-specialties medical centre operators in Hong Kong and we are able to attract and retain highly skilled medical practitioners leveraging on our strong brand name and medical platform
According to Frost & Sullivan, we ranked sixth in terms of revenue generated from provision of specialty services (including internal medicine and surgery related specialty services), with a market share of approximately 1.3%, and ranked third in terms of total revenue generated from provision of internal medicine specialty services, amongst all private multi-specialties medical centre operators in Hong Kong in 2019. We attribute this success to our strong brand and group of talented specialist doctors. In addition, we have an experienced team of allied healthcare professionals contributing to improvement of clinical care, which leads to positive patient referrals and facilitates the recruitment of qualified and talented medical practitioners, making us a leading competitor in Hong Kong. As at the Latest Practicable Date, we operated six Medical Centres and three Diagnostic Centres, all of which are located in Central, the core central business district in Hong Kong. Our clients mainly include individuals seeking high quality medical treatment from our well regarded specialists.
Our medical team includes 15 specialist doctors that have a significant amount of experience, with an average of approximately 19 years of specialist qualification; and our five Founding Doctor are senior specialists that have on average approximately 25 years of specialist qualification. Leveraging on our strong brand name and scale of operations, we have attracted and expect to continue to attract highly-skilled doctors to join our professional team because our platform is able to provide competitive compensation and a supportive working environment, which is conducive to professional growth. Our medical network provides a platform for our professional team to develop their respective specialised fields since we have minimised their administrative time through our established infrastructure and centralised administrative and operational support. In addition, our medical platform, with multi- specialties medical services and a patient-centric culture, enables our professional team to have access to and to retain a large pool of clients.
We believe that having strong brand name with quality services is crucial to our business in order to attract and retain talent. It is therefore essential to cultivate and foster a culture of knowledge sharing among the professionals that encourage discussion and sharing of expertise and experience in order to enhance our service quality and brand name. Our doctors closely collaborate with local universities and professional bodies to obtain up-to-date information and to keep themselves up to international standards. In addition, we hold knowledge sharing sessions among our specialists to share up-to-date information on medical advances periodically. We also encourage our healthcare professional team and staff to attend internal and external training programmes. Through these learning sessions and external seminars, our healthcare professional team can keep abreast of the latest developments in various specialties, which in turn enables us to retain and maintain highly skilled medical practitioners.
Our multi-disciplinary specialist medical services enhances our brand and generates significant business synergy
We believe our platform of specialist medical services enhances our brand awareness and generates significant business synergy across our different business lines and enables us to expand our clientele to address their different medical needs.
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BUSINESS
Our medical services mainly consists of (i) specialist medical services covering 11 specialties and (ii) allied health services covering four specialties, including clinical psychology, speech therapy, nutritional therapy, psychological counselling, and imaging and diagnostic services. Leveraging our wide scope of specialties and services provided as well as our quality brand, many of our clients directly seek our services in relation to their specific health problems, while external general practice and specialist doctors also refer their clients to us, in order to receive more targeted diagnosis and treatment of disease by our experienced specialists. Our multi-disciplinary practice also allows our specialist doctors to cross-refer clients to each other and to other allied services in order to provide seamless and comprehensive treatment for our patients. By fostering long-term relationship with our clients, we have a more comprehensive understanding of the medical history of our clients, which in turn enables us to provide more precise and personalised treatments for their particular needs.
In addition, through our knowledge sharing and internal communications among our medical practitioners and allied health professionals, each of our service streams creates synergies, which are beneficial to our overall operations and provision of holistic and quality healthcare for our clients. We are able to provide client-centred and personalised healthcare services to our clients and they can enjoy the convenience of receiving various healthcare services from a single service provider. We believe our focus on providing a medical platform with renowned and experienced specialist doctors and our ability in providing high quality and integrated medical services allows us to increase our brand awareness and to attract and retain clients from all walks of life.
Our medical platform is under centralised management with standardised operation procedures and stringent quality control
Through having a team of experienced specialist doctors in one platform and under centralised management and administrative operations, we are able to achieve economies of scale and benefit from significant costs savings while maintaining a high-level of quality control. Our doctors can also focus on providing quality healthcare services to our client, which is the core of our business.
Unlike solo medical practitioners and small private medical practices, our medical platform have a scale of operation that allows us to provide a full spectrum of administrative and operational assistance to our medical practitioners, including but not limited to clinic management, accounting and finance, human resources, central procurement of pharmaceuticals and clinical supplies, facilities and lease management, regulatory compliance, marketing and business development, medical record management and information technology systems for maintaining patient and financial records. The sharing of resources allows us not only to enjoy significant cost savings, but also frees our doctors and allied health professionals to focus on providing quality healthcare to patients and facilitate their provision of services. In addition, we enjoy economies of scale through centralising all these administrative and operational functions and we are able to optimise our costs through various means such as (i) negotiating better lease terms for our Medical Centres, Diagnostic Centres and office space; (ii) better utilisation of spaces in our multi-specialties clinics by sharing examination rooms and pharmacy; (iii) regular bulk purchase of pharmaceutical and clinical supplies with better pricing and credit terms; and (iv) through engaging and sharing medical support personnel such as nurses, pharmacists and receptionists, we are able to provide better on-the-job training while reducing the risk and costs associated with insufficient medical and clinic support due to the regular turnover of employees.
Under our centralised management, our senior management promotes a corporate culture with standard operating procedures and policies to provide consistent and quality services to our patients. We have adopted various management practices and implemented more than 70 standard operation
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BUSINESS procedures at our Medical Centres and Diagnostic Centres. We have also established a computer infrastructure with various information technology systems, which are implemented at our Medical Centres and Diagnostic Centres to ensure compatibility amongst others, to safeguard our patients’ medical records and to allow timely access to such information. Moreover, we have our own pharmacists and quality control team so that we are able to properly administer pharmaceuticals and ensure the correct use and dosage of pharmaceuticals and other clinical supplies, thus enhancing our service quality. Further, our senior management holds regular meetings with our healthcare professional team and staff to discuss the development and implementation of various quality control measures to enhance the quality of our healthcare services. By adhering to our standard operation procedures and stringent quality control, we are able to better ensure the quality of the services provided to our clients. For further details of our quality control system, please see the section headed ‘‘— Quality Control and Complaint Handling’’ below.
We have a doctor-led management team and our healthcare professional team comprises experienced specialist doctors, nurses and allied health professionals
Our Group is run by a doctor-led management team with extensive management experience. We strive to continuously improve our clinical care and client experience with a commitment to provide effective treatment and excellent care, which we believe are vital to our long-term success.
Our senior management team includes Dr. Kenneth Tsang, Dr. Adam Leung, Mr. Shiu along with our Chief Operating Officer, director of operations, director of marketing & business development and director of finance, who have abundant operational and financial management experience. We also have established a medical committee (‘‘Medical Committee’’) which is led by Dr. Adam Leung, and includes selected senior doctors and the director of operations that is responsible for establishing and implementing internal policies as well as reviewing medical complaints to ensure client satisfaction. Please see the section headed ‘‘— Quality Control and Complaint Handling’’ below for further details. In addition, most of our doctors are either Founding Doctors or Equity Partner Doctors with a small equity stake in our Group. Although many of these doctors are passive shareholders that do not manage our day-to-day business, they do provide invaluable input or suggestions as to how to improve our business operations as experienced medical practitioners and are highly motivated in ensuring the success of our business. For further details of our shareholding structure, please see the section headed ‘‘History, Reorganisation and Corporate Structure’’.
We believe that our team of specialists, nurses and allied health professionals is key to our success in gaining market share and maintaining our market position. We have a team of medical professionals that share our values and culture, which is imperative for the continuous improvement of clinical care and enhancement of our clients’ experience. All of our specialist doctors have obtained their accreditation as specialists in their discipline with significant professional experience. In addition to providing medical services to our clients, they are able to provide guidance and second opinions to our healthcare professional team for complicated conditions at our Medical Centres. In addition, the majority of our specialist doctors are honorary associate professors at universities in Hong Kong with publications made in medical journals and approximately half of our specialist doctors are chairmen or chairladies of a medical professional body in Hong Kong.
As at the Latest Practicable Date, our medical team is supported by our allied health service team comprising of non-doctor panel specialists and staff of Hong Kong Imaging along with a team of pharmacists, registered nurses and medical assistants. Our pharmacist and senior nurses are registered professionals with extensive experience in their relevant fields. We believe that our healthcare
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BUSINESS professional team’s profile, experience and reputation has built up our brand name and network with both upstream and downstream industry players, which facilitates our attraction and retention of qualified medical practitioners in the industry. Our experienced and reputable healthcare professional team has built up our clients’ confidence in our medical platform throughout the years which helps consolidate and expand our clientele from all walks of life.
We believe that our doctor-led management team with a focus on upholding the safety and quality of our client-care has been instrumental to our growth and success and that our business will continue to thrive under the leadership of our Directors and senior management team.
OPPORTUNITIES AND STRATEGIES
We strive to continue to become one of the best specialist medical service providers in Hong Kong and we plan to take advantage of the following opportunities and implement the following strategies:
Expand our medical team to provide a wider span of specialist medical services
Due to the growing demand for specialist medical services, we believe that by expanding our team of specialist doctors and the addition of new specialist services, we will be able to provide a greater spectrum of services and care to our clients.
The need for private specialist medical service providers, like us, continues to increase. The burdens placed on Hong Kong’s public healthcare system remains very high due to limited capacity, insufficient funding, the shortage of skilled doctors and their inability to retain specialists, all of which have led to an increasing demand for private specialist medical services. The over-reliance on public healthcare services has resulted in long wait times for medical services in the public sector; for example, the average wait time for non-emergency cases for internal medicine ranged from 104 weeks to 157 weeks between 1 July 2019 and 30 June 2020, according to the Frost & Sullivan Report.
In addition, Hong Kong’s ageing population continues to drive the demand for different types of specialty services, and the increasing public awareness of health maintenance has resulted in Hong Kong residents willing to spend more on private healthcare services, which is considered to be in better quality compared to Hong Kong’s public medical system. Indeed, Hong Kong residents have increasingly purchased private medical insurance in order to obtain private healthcare services and insurance companies have expanded the coverage of their packages to include more specialist medical services. According to the Frost & Sullivan Report, the number of individuals in Hong Kong entitled to employer or corporate medical benefits increased from 3.3 million in 2015 to 3.5 million in 2019, and the number of individuals having purchased private medical insurance increased from 2.2 million in 2015 to 2.5 million in 2019 driven by growing health consciousness and availability of medical insurance products. The Hong Kong government has also launched the Voluntary Health Insurance Scheme in April 2020, offering tax incentives for individuals to purchase insurance products, and accordingly, the gross premium of accident and health insurance in Hong Kong is projected to rise at a CAGR of 8.3% from HK$18.3 billion in 2019 to HK$27.1 billion in 2024, according to the Frost & Sullivan Report.
Further, tourists from Mainland China have also been increasingly seeking professional healthcare and medical consultation in Hong Kong, particularly for specialty services such as dermatology, oncology, cardiology and dental services creating growth potential for specialist medical service providers like us. According to Frost & Sullivan, it is estimated that revenue from private specialist service providers will increase at a CAGR of 5.8% from HK$29.7 billion in 2020 to HK$37.3 billion in 2024.
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BUSINESS
In response to the heightening demand for private specialty services, we aim to further develop our specialist medical services to capture anticipated business growth. In the near term, we plan to continue to expand our operations, especially for oncology and specialist areas that have strong demand but we currently do not cover such as dermatology and dental services. We believe through our strong brand, reputation and existing client base, we can extend our medical services to meet Hong Kong’svarious medical needs. Accordingly, we intend to use part of our [REDACTED] from the [REDACTED] to establish:
. A new oncology centre under our brand (‘‘HKMC Oncology Centre’’) and hire a couple of oncologists as employee doctors along with necessary healthcare support staff, and enter into a new lease agreement for office space with GFA of approximately 5,000 sq.ft. in Central, Hong Kong to establish the HKMC Oncology Centre. We currently have two oncologists, (Dr. Ada Ma and Dr. Stanley Yu) and we plan to expand our oncology services through the addition of a couple of oncologists and the establishment of the HKMC Oncology Centre. We believe creating the HKMC Oncology Centre will lead to our further growth because there is strong demand for such services. According to the Frost & Sullivan Report, cancer is one of the major non-communicable diseases in Hong Kong with a trend of rising incidence at an average rate of approximately 2.9% per annum in the past decade. Based on estimates from the Hong Kong Cancer Registry, the number of new cancer cases in Hong Kong is projected to increase from approximately 33,000 in 2018 to more than 42,000 by 2030 with reference to the prevailing trends in incidence of cancers and population structure. Going forward, driven by the factors such as (i) increasing population base, (ii) an ageing population and (iii) recovery of medical tourism that encourages visitors from mainland China to seek cancer treatment in Hong Kong due to the availability of treatments and medicines not readily available in the PRC, the market demand for private specialist medical services for cancer in Hong Kong is expected to increase in future.
. A new dental centre under our brand (‘‘HKMC Dental Centre’’) and hire a couple of dentists as employee doctors along with necessary healthcare support staff, and enter into a new lease agreement for office space with GFA of approximately 1,500 sq.ft. in Central, Hong Kong to establish the HKMC Dental Centre. We believe creating the HKMC Dental Centre will lead to our further growth because there is strong demand for dental services, including for beauty and aesthetic purposes. According to the Frost & Sullivan Report, the market demand for dental services in Hong Kong has been growing along with (i) the increasing awareness towards the importance of dental care, (ii) an ageing population and (iii) an increasing demand for orthodontic services, a sub-specialty of dentistry that involves diagnosis, prevention and correction of mal-positioned teeth and jaws. In particular, demand for orthodontic services for beauty and aesthetic purposes such as teeth alignment have been on the rise for younger individuals. Visitors from Mainland China seeking orthodontic services in Hong Kong is also expected to increase in the future.
. A new dermatology centre under our brand (‘‘HKMC SKIN Centre’’) and hire a couple of dermatologists as employee doctors along with necessary healthcare support staff, and enter into a new lease agreement for office space with GFA of approximately 1,500 sq.ft. in Central, Hong Kong to establish the HKMC SKIN Centre. We believe creating the HKMC SKIN Centre will lead to our further growth because there is strong demand for dermatology services for both medical and aesthetic purposes. According to the Frost & Sullivan Report, the market demand for dermatological services in Hong Kong is likely to increase in future.
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BUSINESS
Skin diseases, such as eczema or dermatitis, are common in Hong Kong due to the humid weather and stressful lifestyle of residents. According to the Hong Kong Allergy Association, one in five people in Hong Kong suffers from eczema. In addition, similar to other medical specialties, demand for dermatologist remains high with limited capacity in Hong Kong. According to the Department of Health, although there were over 300,000 patients seeking treatment from the public sector, the majority of current market demand needs to be addressed by the private sector. Apart from treatment of skin diseases, aesthetic dermatology, which also involve treatments or procedures to improve the skin appearance of patients is in high demand. According to the Frost & Sullivan Report, the market size of medical aesthetic services by revenue in Hong Kong grew from approximately HK$3.3 billion in 2013 to approximately HK$5.9 billion in 2017, representing a CAGR of approximately 15.6%. As a result, the market demand for dermatological services, especially medical aesthetic services, in Hong Kong is expected to continue to increase in the future.
For details, please see the section headed ‘‘Future Plans and [REDACTED]’’.
We believe that the new oncologists, dentists and dermatologists that join our Group will be able to benefit from our brand and referral of services from our existing doctors. In addition to the strong market demand for such services as mentioned above, we are expanding our collaboration with different insurance companies as their designated medical provider to provide a wide spectrum of specialists medical and diagnostic services. This will help to introduce new patients to the Group and provide us with a stable and sustainable source of income. Recently, we started developing this business line and have come to an agreement with certain large insurance companies to provide services to its members. These agreements generally provide that the insurance company will employ the medical services (including in-patient and out-patient clinical services) of the Group as part of their network of medical providers at agreed upon fees for differing types of medical services provided to the insurance company’s eligible members. Moreover, with our medical concierge services, we plan to provide health check services to customers in Hong Kong and China as well as to individual medical tourists. Please see the section headed ‘‘— Expand our allied health services network and develop complementary services’’ for further information on our medical concierge services. These initiatives are expected to open up new customer channels for our expansion, including for our new dermatology and dental services.
Recruit talented medical practitioners by taking advantage of the trend towards consolidation of smaller medical practices in Hong Kong
With high rental costs, greater difficulty in hiring and maintaining support staff, along with increasing regulatory compliance, we believe that operating costs for small medical practices in Hong Kong will increase, which may weaken their competitiveness and threaten their viability in the future. According to the Frost & Sullivan Report, small medical practices may find it difficult to cope with increased administrative costs under the Private Healthcare Facilities Ordinance (the ‘‘PHFO’’)andto recruit experienced and qualified personnel in order to remain competitive in the future. In November 2018, the PHFO was enacted in Hong Kong, which provides for a new regulatory regime for private healthcare facilities, including hospitals, day procedure centres, clinics and health service establishments. The PHFO requires private healthcare facilities to (except qualified small practice clinics as defined under the PHFO), amongst other things, (i) appoint a chief medical executive, (ii) comply with requirements under the PHFO, including codes of practice with respect to standards and specifications of private healthcare facilities in relation to equipment, fittings and furnishings, the
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BUSINESS management and staffing arrangements, and the quality of care for and safety of patients and any other matters for protecting the health and interests of individuals receiving healthcare services in private healthcare facilities, (iii) put in place a complaints management system and (iv) adopt price transparency measures. The licensing requirements for day procedure centres under the PHFO came into effect in January 2021; and while the requirements for clinics is currently yet to be determined, draft standards have already been issued by the Hong Kong Director of Health since January 2018. For further details, please see the section headed ‘‘Regulatory Overview — Overview of Hong Kong Laws and Regulations — PHFO’’. While we anticipate the PHFO will place a heavy burden on smaller sized medical practices, we plan to seize this industry opportunity to recruit talented medical practitioners from these smaller practices and to further increase our scale and grow our business. We intend to be in touch with these talented medical practitioners through our network on a case by case basis. We plan to be opportunistic in recruiting medical practitioners that are able to complement our existing medical services or broaden the type of specialised medical services that we provide.
Establish an integrated flagship medical centre and reduce reliance and risks associated with the rental of properties by establishing an integrated diagnostic centre
As at the Latest Practicable Date, we operated six medical centres in Hong Kong. In order to support our continuous growth including our expansion of our medical professional team as above mentioned, we intend to use part of our [REDACTED] from the [REDACTED] to establish an integrated flagship medical centre (‘‘Integrated Flagship Medical Centre’’) in Central. On 1 February 2021, we started a new lease agreement for the entire 9th floor of Central Building, with GFA of approximately 16,000 sq.ft., for a term of six years. We plan to move certain of our current Medical Centres to this Integrated Flagship Medical Centre after renovation, starting around June 2021, to support our expansion as well as to consolidate and better optimise the use of existing office space, particularly HKMC I, HKMC III and the HKMC Paediatric Centre, which are located on the 8th and 5th floors of the same building, as well as the HKMC Geriatric Medicine Centre, which is located at another building in Central.
The rental cost for premium office space in central locations remains very high in Hong Kong. As we expand our medical team to provide a wider span of specialist medical services, we plan to acquire a property suitable for the growing needs of our Group. While we plan to continue to lease a certain amount of properties in the core locations that we operate, the acquisition of a property will provide us the flexibility to reorganise and move around certain of our operations when necessary, and to reduce the risk of relocation should we fail to renew the leases with the landlord and/or the risk of exorbitant increases in rental price. In particular, certain of our Diagnostic Centres hold very heavy and high-value medical equipment (such as our MRI machine and CT Scan machine) that would be costly and difficult for us to relocate, and we believe acquiring our own property will help alleviate the risk of business disruption in the longer term. As such, we intend to use part of our [REDACTED] from the [REDACTED] for the establishment of an integrated diagnostic centre (‘‘Integrated Diagnostic Centre’’), including funding (i) the Property Purchase; (ii) its renovation costs; (iii) the purchase of new equipment; and (iv) the hiring of a few doctors and necessary support staff to operate this new centre. We plan to obtain the necessary day procedure centre licence and move most of the Imaging & Cardiovascular Centre and the entire MRI Centre to the newly acquired property. While we intend to keep our main operations in our Integrated Flagship Medical Centre, we plan to refer our patients to the Integrated Diagnostic Centre for follow up health checks and establish our wholesale pharmacy there.
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BUSINESS
We believe the purchase of this property will enable us to better allocate our resources and lower our cost of operations in the long term. For details, please see the section headed ‘‘Future Plans and [REDACTED]’’.
On 31 March 2021, we purchased the entire 6th floor of Euro Trade Centre, Central, Hong Kong with GFA of approximately 5,200 sq. ft. at a purchase price of HK$150.0 million (the ‘‘Property Purchase’’), which will be used as our Integrated Diagnostic Centre. We conducted an analysis to determine whether the Property Purchase would be in the best interest of the Group and its shareholders.
According to the statistics from 2000 to 2020 published by the Rating and Valuation Department of the HKSAR Government, the market rentals of Grades A and B offices(1) in the Central district have increased by around 205.3% and 181.5%, respectively, over the last twenty years, which are equivalent to a CAGR of approximately 5.7% and 5.3%, respectively. Over the same period, the market prices of Grades A and B offices have increased by approximately 361.7% and 394.2%, respectively, which are equivalent to a CAGR of approximately 8.0% and 8.3%, respectively. The Group studied 10 office buildings in Central, and found seven of them are held by single owners which are not available for sale. In addition, only six buildings have direct access to the upper floors from street level. There are only limited options of commercial premises available to a medical practice. Moreover, the estimated weight (the machine itself with the shielding) for the CT Scan machine and MRI machine are 9 tonnes and 10 tonnes, respectively, and the installation of the machine requires special procedures (i.e. the assembled machine are lifted by a crane from the street level to the building floor and temporary removal of external wall and windows are required). According to our past experience on finding suitable premise to house the CT Scan machine and MRI machine, there are only a limited number of commercial buildings in the Central district that can fulfil the location and structural criteria.
In Hong Kong, the normal commercial lease is three years of a fixed term plus three years of flexible term. During the flexible term, the rental would be subject to the prevailing market rental adjustment and either the lessor or lessee can terminate the lease after the three years’ fixed term by serving one month to six months of notice in lieu of the termination of the lease by each other subject to the conditions of the lease. In view of the substantial capital expenditure invested by a medical practice, the market norm of the Hong Kong lease term is not favourable for a medical practice to pursue a stable and sustainable business. In addition, most of the office buildings are wholly-owned by a single owner and a medical practice is not the most preferable tenant for the owners amid of the hygienic risk bought to the building, especially after the Covid-19 pandemic. Hence, the acquisition of a self-owned premise helps with the sustainability of a medical practice.
There are around 410 commercial building in Central and Sheung Wan district, and only 29% of those buildings are able to provide a single floor up to 5,000 sq. ft. In addition, as a medical services provider, the premise requirements are different from an ordinary office tenants; and the following considerations are key to our patients:
1. whether the building is accessible for wheelchairs;
2. the walking distance from the drop off point;
3. public transport accessibility;
4. the escalators and lifts management for patients (cannot be too fast due to the slow movement of the patients); and
5. hygiene condition of the building and its surrounding environments.
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BUSINESS
Based on the above reasons, we concluded the requirements of a medical services provider like us are different compared to the normal office user, and finding a stable premise for a medical services provider may be difficult under a normal rental arrangement. After evaluating the risks, costs and benefits of the above, we determined that the Property Purchase not only provides a stable location for operation of our Integrated Diagnostic Centre, but the rental cost savings and expected price stability in the long-term are beneficial for the Group and its shareholders.
Note:
(1) Grade A — modern with high quality finishes; flexible layout; large floor plates; spacious, well-decorated lobbies and circulation areas; effective central air-conditioning; good lift services zoned for passengers and goods deliveries; professional management; parking facilities normally available.
Grade B — ordinary design with good quality finishes; flexible layout; average-sized floor plates; adequate lobbies; central or free-standing air-conditioning; adequate lift services, good management; parking facilities not essential.
Expand our allied health services network and develop complementary services
We endeavour to provide comprehensive healthcare services to our clients. As such, while we are expanding our medical professional team and establishing our Integrated Flagship Medical Centre, we also strive to further develop our allied health services and expand our business to cover other complementary services. With our registered whole-sale pharmacy licence obtained in July 2020, we plan to establish a wholesale pharmacy at our Integrated Diagnostic Centre where we can store and distribute medicine to our Medical Centres as well as to other third-party private medical practitioners on a wholesale basis. Only licensed medical practitioners (i.e. doctors) can legally prescribe prescription medicine to patients in Hong Kong. The wholesale pharmacy is expected to take up no more than 300 sq.ft. and to have an on-site staff to manage the inventory. Please see the section headed ‘‘— Inventory Control’’ for controls we have to prevent over-prescription by doctors.
We also intend to establish a health check centre within our Integrated Diagnostic Centre to accommodate our upcoming health check programmes under our medical concierge services. According to Frost & Sullivan Report, the market size of health check services in Hong Kong is expected to increase at a CAGR of approximately 7% between 2020 to 2024, driven by increased domestic demand due to an ageing population and greater insurance coverage and medical tourists from Mainland China. Our medical concierge services will be a value-added service targeting medical tourist customers from all around the world. According to the Frost & Sullivan Report, Hong Kong has been an established destination for medical tourism, which is primarily attributable to (i) high-quality medical services and modern procedures, (ii) well-trained multilingual medical professionals, (iii) top class medical infrastructure, (iv) exceptional geographic location with close proximity to Mainland China and other major cities in Asia, and (v) well established infrastructure and attractions for tourism. Specifically, Hong Kong has been one of the leading destinations for cancer treatment and medical check-ups in Asia; and the demand for high-quality medical services by reputable specialists is expected to continue to increase after the COVID-19 pandemic subsides. According to the Frost & Sullivan Report, the number of medical tourists from Mainland China coming to Hong Kong is expected to increase at a CAGRofapproximately40%between2020to2024mainlydrivenbythesustaineddemandfor comprehensive high-end medical and diagnostic services from and high spending power of residents in Mainland China, and on the assumption that travel restrictions between Hong Kong and Mainland China will be lifted by end of 2021, as supported by forthcoming implementation of prevention and control measures such as vaccination programme and health code under mutual recognition system for cross- border travel.
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In view of this opportunity, we seek to expand our client base by developing a series of health check programmes to cater for disease prevention, diagnosis, treatment and rehabilitation and such programmes will be conducted by our specialist doctors as well as panel specialists. Our medical concierge services is intended to assist with the promotion as well as the arrangement of medical check- up at our Medical Centres and Diagnostic Centres. It aims to be an one-stop service provider for clients that are in need of medical check-up, and provide services from information distribution to liaison and arrangement of health check schedules with us. Although our medical concierge services have not yet started, we are in the process of collaborating with reputable companies in order to expand our clientele for our such services. We have recently entered into service agreements with certain marketing partners pursuant to which they will refer and accompany new clients to obtain medical concierge services from us in exchange for a percentage of the revenue that we receive from the client.
We believe that in the future through our expanded allied health network and development of complementary medical services, such as our medical concierge services, we can ultimately bring together our medical professionals to partner with pharmaceutical and insurance companies as well as education and financial institutions to create an innovative and holistic healthcare ecosystem.
OUR SERVICES
We mainly provide medical services to our clients through our specialist medical services and allied health services, and to a much lesser extent, we provide medical management services to certain medical practitioners.
Medical Services
Specialist medical services
During the Track Record Period, we have grown our business to offer a wide range of specialist medical services under our brand. Together with our inpatient services provided at private hospitals in Hong Kong, we aim to provide a full spectrum of specialist medical services through services provided at our Medical Centres and at private hospitals; including tertiary care such as providing support and second opinions to other medical professionals for complicated conditions and inpatient services at private hospitals to clients that require advanced medical management and treatments. We provide these specialist medical services primarily through our medical team which includes 15 specialist doctors that work for us on a full time and an exclusive basis and nine doctor panel specialists that work for us on a non-exclusive basis. During the Track Record Period, medical practitioners who worked for us on an exclusive basis contributed to 99.0%, 96.9% and 98.6% of our revenue from specialist medical services for the years ended 31 March 2019, 2020 and 2021, respectively.
Clinical services
Clients can either directly seek our specialist doctors through our medical platform for consultation to diagnose and treat their specific health problems or external general practice or specialist doctors can refer their clients to our specialist doctors in order to receive more targeted diagnosis and treatment of disease by our experienced specialists. Our specialist doctors also refer clients to our other specialists when necessary in order to provide seamless and comprehensive treatment to our clients.
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BUSINESS
The follow table sets out the medical specialties covered by our medical team as at the Latest Practicable Date.
Specialty Description
1 Cardiology An area of medicine which deals with disorders of the heart.
2 Respiratory Medicine An area of medicine which deals with disease of the respiratory system such as lung cancer detection, bronchoscopy, lung function.
3 Gastroenterology & An area of medicine which deals with the study of structure, Hepatology functions, and disease of digestive organs and the liver
4 Nephrology An area of medicine that deals with the physiology and diseases of the kidneys.
5 Neurology An area of medicine that deals with the anatomy, functions, and organic disorders of nerves and the nervous system.
6 Psychiatry An area of medicine which deals with the treatment of mental illness, emotional disturbance, and abnormal behaviour.
7 Endocrinology, Diabetes & An area of medicine the deals with disorders of the internal glands, Metabolism such as the thyroid and adrenal glands, as well as disorders such as diabetes, metabolic and nutritional disorders, obesity, pituitary diseases, and menstrual and sexual problems.
8 Geriatric Medicine An area of medicine that focuses on the care and well-being of older people.
9 Oncology An area of medicine that deals with the prevention, diagnosis, and treatment of cancer.
10 Paediatrics An area of medicine that involves the medical care of infants, children, and adolescents.
11 Rheumatology An area of medicine and paediatrics that deals with the joints, soft tissues, autoimmune diseases and heritable connective tissue disorders.
12 Doctor panel specialists(1) Specialist medical practitioners working for the Group on an non- exclusive basis covering Respiratory Medicine, Orthopedics & Traumatology, Psychiatry, Oncology, General Surgery and Dental Surgery.
Note:
(1) Doctor panel specialists work for the Group on an non-exclusive basis and provide services to us on an as-need-basis only. The amount of revenue that our doctor panel specialists contributed to the Group for the years ended 31 March 2019, 2020 and 2021 was HK$2.0 million, HK$7.2 million and HK$3.0 million, respectively.
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Inpatient service
For clients who require further investigation, monitoring, surgeries or other inpatient services, we can arrange for private hospital admissions as requested by the clients or upon the recommendation of our medical practitioners.
We help facilitate the inpatient admission process of our clients by streamlining the necessary administrative procedures. Through our referral booking system and our working relationships with the private hospitals, our clients are generally able to reserve bed space for hospital admission and promptly receive treatment and obtain emergency medical services at local private hospitals. Our medical practitioners will visit our patients regularly at the hospitals, and for those with emergency medical conditions, our specialist doctors will visit and discuss with them even during after-work hours and public holidays. For details of our operational flow of inpatient admission, please refer to ‘‘— Operational Flow’’.
We provide assistance to our medical practitioners to obtain admission rights at the local private hospitals in Hong Kong. It enables our medical practitioners to utilise the facilities at these private hospitals to perform consultations, treatments and surgeries for our clients. While the admission rights belong to the respective medical practitioners, all fees payable to us for rendering inpatient services will be received by the hospitals on behalf of us and were regularly transferred to us directly from the respective hospitals (after deducting relevant hospital fees and bank charges).
Allied health services
We also provide allied health services at our Medical Centres and imaging and diagnoses services at our Diagnostic Centres to facilitate our clients’ rehabilitation, diagnostics and other health needs. Our allied health services mainly include clinical psychology, speech therapy, nutritional therapy, psychological counselling provided by four non-doctor panel specialists, and imaging and diagnostic services provided by staff of Hong Kong Imaging. Starting in February 2021, we also provided COVID- 19 vaccination services at the Community Vaccination Centre at the Kowloon Bay Sports Centre (‘‘CVC Centre’’); and our contract with the Hong Kong government to provide such services is expected to end around September 2021 depending on the on-going COVID-19 situation.
The follow table sets out the allied health services provided during the Track Record Period:
Service Description
1 Clinical Psychology Our experts integrate science, theory, and clinical knowledge for the purpose of understanding, preventing, and relieving psychologically- based distress or dysfunction of individuals in order to promote their well-being and personal development.
2 Speech therapy We assist patients with swallowing problems or communication disorders caused by brain injuries, strokes, hearing loss, birth defects or a wide variety of other medical diagnoses that may cause difficulties swallowing or speech impairment.
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Service Description
3 Nutritional therapy We adopt a holistic approach to wellness that focuses on the importance of promoting individual health, balanced life-style and self- care by applying nutritional science and necessary dietary interventions.
4 Psychological counselling Our counselling psychologists assist patients with physical, emotional and mental distress to improve their psychological well‐ being, alleviate feelings of distress and resolve crises. We also provide assessment, diagnosis, and treatment of more severe psychological symptoms.
5 Imaging and diagnoses We provide imaging and diagnoses through Hong Kong Imaging, which includes CT Scan, MRI, Ultrasound, X-ray, Mammogram, Bone densitometry, cardiovascular investigations and other laboratory services.
The following table sets out the revenue generated from our medical services by service stream and location, for the years indicated:
Year ended 31 March 2019 2020 2021 HK$’000 % HK$’000 % HK$’000 %
Specialist medical services provided at our Medical Centres(1) 102,562 53.3 140,559 57.6 137,774 55.8 Specialist medical services provided at private hospitals 89,711 46.7 91,868 37.7 80,232 32.5
192,273 100.0 232,427 95.3 218,006 88.3
Allied health services provided at our Medical Centres and Diagnostic Centres(1)(2) 12 0.0 13,137 5.4 36,483 14.8
Total before elimination 192,285 100.0 245,564 100.7 254,489 103.1 Elimination of inter-segment revenue ——(1,768) (0.7) (7,586) (3.1)
Total 192,285 100.0 243,796 100.0 246,903 100.0
Notes:
(1) We added five Equity Partner Doctors at various times during the year ended 31 March 2019 and acquired Hong Kong Imaging in October 2019 which led to the significant increase in revenue during the Track Record Period.
(2) Includes approximately HK$2.9 million in revenue from the CVC Centre for the year ended 31 March 2021.
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Operational information
The table below sets out the key operational information of the Group during the Track Record Period:
Year ended 31 March 2019 2020 2021
Number of patient visits/admissions Clinical services provided at our Medical Centres 28,505 33,048 32,490 Inpatient services provided at private hospitals 5,477 8,013 8,156 Allied health services provided at our Medical Centres and Diagnostic Centres(1) 10 7,794 19,453
Total 33,992 48,855 60,099
Average revenue per patient visit/admission(2) HK$ HK$ HK$
Clinical services provided at our Medical Centres 3,598 4,253 4,241 Inpatient services provided at private hospitals 16,380 11,465 9,837 Allied health services provided at our Medical Centres and Diagnostic Centres 1,200 1,686 1,875
Notes:
(1) We acquired Hong Kong Imaging in October 2019 which led to the significant increase in patient visits for the years ended 31 March 2020 and 2021.
(2) Average revenue per visit is calculated by dividing the revenue generated from the particular category of service by the total number of patient visits/admissions under the same category.
Changes to our average revenue per patient visit/admission during the Track Record Period were primarily due to changes in type of medical services provided as well as the addition of specialist doctors that joined us during the period.
Average revenue per patient visit for our clinical services provided at our Medical Centres increased from HK$3,598 per visit for the year ended 31 March 2019 to HK$4,253 per visit for the year ended 31 March 2020. This change was mainly due to the addition of five Equity Partner Doctors who joined us as specialist doctors at various times during the year ended 31 March 2019 covering various specialties. In particular, Dr. Matthew Ng (gastroenterology & hepatology) and Dr. Lo Wai Kei (nephrology) joined us as a specialist doctor in April 2018, Dr. Clement Lee (cardiology) joined us as a specialist doctor in May 2018, Dr. Boron Cheng (cardiology) joined us as a specialist doctor in July 2018, and Dr. Ada Ma (oncology) joined us as a specialist doctor in October 2018. In particular, the average revenue per patient visit from our oncologist was significantly higher than from other doctors, leading to the increase. Average revenue per patient visit for our specialist medical services at our Medical Centres decreased slightly from HK$4,253 per visit for the year ended 31 March 2020 to HK$4,241 per visit for the year ended 31 March 2021 mainly due to changes in the mix of services provided between the periods.
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Average revenue per patient admissions for our inpatient services provided at private hospitals decreased from HK$16,380 per admission for the year ended 31 March 2019 to HK$11,465 per admission for the year ended 31 March 2020. This decrease was mainly driven by greater patient admissions by doctors that charged relatively lower fees per admission for their services, particularly, our specialist doctor in nephrology and one of our cardiologists. The decrease between the years ended 31 March 2019 and 31 March 2020 was also due to the addition of Dr. Eddie Cheung, our paediatric specialist, during FY2020, whose average revenue per patient admission was significantly lower than that of our other specialist doctors. Average revenue per patient visit for our inpatient services provided at private hospitals decreased from HK$11,465 per admission for the year ended 31 March 2020 to HK$9,837 per admission for the year ended 31 March 2021 also mainly due to the addition of Dr. Eddie Cheung in August 2019 whose average revenue per inpatient admission is substantially lower than other specialist doctors as his paediatric specialty mainly involves consultations of new borns and children at hospitals with less medical procedures, coupled with lower average revenue per inpatient admission for Dr. Lo Wai Kei (nephrology), Dr. Kenneth Tsang (respiratory), Dr. Adam Leung (cardiology) and Dr. Jason Fong (neurology) as they provided more lower priced services during the year ended 31 March 2021 due to the mix of patients they received.
Medical Management Services
During the Track Record Period, we provided medical management services to certain medical practitioners in relation to administrative and operational functions such as clinic management, accounting and finance, human resources, centralised procurement of pharmaceuticals and clinical supplies, facilities and lease management, regulatory compliance, marketing and business development, medical record management and information technology systems for maintaining patient and financial records. During the years ended 31 March 2019, 2020 and 2021, our management fee income generated from the provision of medical management services amounted to HK$3.4 million, HK$4.6 million and HK$4.5 million, respectively, representing 1.7%, 1.9% and 1.8% of our total revenue.
For the year ended 31 March 2018, we provided medical management services to Dr. Kenneth Tsang, Dr. Matthew Ng and Dr. Lo Wai Kei before they joined our Group as specialist doctors and provided medical services to us. Dr. Kenneth Tsang joined us as a specialist doctor in November 2017; while Dr. Matthew Ng and Dr. Lo Wai Kei both joined us as specialist doctors in April 2018. We did not provide such services to them during the years ended 31 March 2019, 2020 and 2021.
Prior to the setup of our medical services business in November 2017 and Dr. Kenneth Tsang, Dr. Matthew Ng and Dr. Lo Wai Kei joining us as specialist doctors, we shared our costs between these three doctors as this provided economies of scale, increased patient referrals, and helped established the HKMC brand. The costs incurred by us included, but was not limited to, office rent, salaries, the purchase of medicines, negotiation with the medical suppliers, business contract negotiation and other administrative functions. The management service fees charged to them was primarily determined with reference to the costs incurred by the Group. Accordingly, we did not record any significant profit from the provision of medical management services to them.
Starting from 30 June 2018, we provided on-going management services to three ophthalmologists, namely Dr. Gordon Chau, Dr. Kenneth Ng and Dr. Barbara Tam (the ‘‘HKMC Ophthalmologists’’ and each a ‘‘HKMC Ophthalmologist’’), who operate a ophthalmology centre under our Hong Kong Medical Consultants brand at the HKMC Ophthalmology Centre. Under this management services arrangement with the HKMC Ophthalmologists, they pay us a fixed fee for using our brand and platform
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BUSINESS services and they do not provide medical services to us or our patients. Medical management fee income recognised from the HKMC Ophthalmologists was HK$3.4 million, HK$4.6 million and HK$4.5 million for the years ended 31 March 2019, 2020 and 2021, respectively.
The key terms of our medical management service agreements entered into with the HKMC Ophthalmologists are as follows:
HKMC Ophthalmologists
Period of service: Five years commencing 30 June 2018, automatically renewed for a succeeding term of another five years unless 90 days prior notice is given.
Management services . Licensing the trade name and mark of ‘‘Hong Kong Medical provided: Consultants’’ for the medical practice’suse.
The Group acts as an independent contractor in providing the following services:
. Assist in securing and maintaining space and equipment as reasonably necessary for the medical practice;
. Carry out activities related to the expansion and development of patient base, including development of policies and procedures to promote the medical practice;
. Assist with initial patient inquires and complaints;
. Assist with contract supervision and management, such as: business contract review and negotiation, recruitment and negotiating agreements with physicians, negotiating agreements with medical suppliers; negotiating agreements with landlords; and
. Assist with business development, marketing, public relations, regulatory compliance and the provision of professional services.
Management Fees: HK$1.5 million per year for each HKMC Ophthalmologist
Termination: . Material breach of the terms and conditions of the agreement by either party which remains uncured for 30 days after written notice is provided;
. The medical practice fails to use reasonable effort to perform the patient care and medical services as required by the Medical Council of Hong Kong; or is no longer qualified to provide medical services in Hong Kong; or
. Either party becomes insolvent or bankrupt, or goes into receivership; or required under any government authority or court order.
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Restrictive covenants: The Group shall not provide or otherwise engage in services or activities which constitute the practice of medicine for the HKMC Ophthalmologist.
The HKMC Ophthalmologists are granted a licence to use our ‘‘Hong Kong Medical Consultants’’ trade name and mark for their medical practice. We also provide various services to the HKMC Ophthalmologists, including, but not limited to, the assistance with initial patient inquiries and bookings, business contract review and negotiation, business development, marketing and public relations in broadening the customer base, and regular review of compliance with relevant rules and regulations. The HKMC Ophthalmologists were of the view that by leveraging our platform and business network, there would be more business opportunities for them and would ease their administrative burdens.
We agreed to the annual management fee of HK$1.5 million for each HKMC Ophthalmologist after taking into consideration (i) the costs to be incurred by us for the provision of such medical management services; (ii) the benefits received by the HKMC Ophthalmologists by using our brand; (iii) the referral of business between us and the HKMC Ophthalmologists; (iv) the benefits of reduction of time and effort of the HKMC Ophthalmologists on tedious administrative matters and the reduction of risk of non-compliance with the rules and regulations relevant to the medical practice of the HKMC Ophthalmologists; and (v) the reputation and the then scale of business of the HKMC Ophthalmologists. Because the negotiation with the HKMC Ophthalmologists took place at around the same time we were in discussions with the other Primary Shareholders to join the Group, we also made reference to the Fixed Committed Fee Contribution arrangement for the original five Equity Partner Doctors when determining the annual fixed fee for the HKMC Ophthalmologists. Please see the section headed ‘‘History, Reorganisation and Corporate Structure — Our History’’ for further information on the discussions amongst the Primary Shareholders.
By offering medical management services to selected medical practitioners, we are able to extend and build relationships, and enhance our ability to attract and recruit specialist doctors that we believe would be able to complement our services. Medical management service fees were not material to our business during the Track Record Period, and represented only 1.8% of our total revenue in FY2021; and such fees are expected to continue to remain insignificant. Although we currently have no plans to expand this service, should the opportunity arise, we may agree to expand this service to selected doctors in the future, in which case, we will charge such doctor(s) either a fixed fee or on a cost plus a profit margin basis, the amount of which depends on the expected cost and extent of services required by the doctor(s).
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OUR MEDICAL CARE SERVICES NETWORK
Our Medical Centres and Diagnostic Centres
As at the Latest Practicable Date, we operated six Medical Centres and three Diagnostic Centres, all of which are located in Central. The following table sets out the basic information, types of services provided and facilities at each of our Medical Centres as at the Latest Practicable Date:
HKMC HKMC Geriatric HKMC Psychiatric Medicine Paediatric HKMC I HKMC II HKMC III Centre Centre Centre
Commencement of January November March November November August business with the Group 2018 2017 2020 2017 2017 2019
Approximate GFA (sq.ft.) 4,415 2,092 688 300 900 542
Specialist Medical Services(1) Cardiology ✓ Respiratory Medicine ✓ Gastroenterology & ✓✓ Hepatology Nephrology ✓ Neurology ✓ Psychiatry ✓ Endocrinology, Diabetes ✓ & Metabolism Geriatric Medicine ✓ Oncology ✓ Paediatrics ✓ Rheumatology ✓
Allied Health Services(1) Clinical Psychology ✓✓ Psychological ✓✓ Counselling Speech therapy ✓ Nutritional therapy ✓
Main facilities — Consultation room(s) Eight Three Two One One One — Minor procedures Four Two One One room(s)
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The following table sets out the basic information, types of services provided and key equipment at each of our Diagnostic Centres as at the Latest Practicable Date:
Diagnostic Centres Imaging and Cardiovascular Centre MRI Centre Medical Laboratory Centre
Commencement of business with October 2019 October 2019 October 2019 the Group
Approximate GFA (sq.ft.) 3,003 1,500 1,700
Services CT Scan, Ultrasound, X-ray, MRI Blood and other specimen Mammogram, Blood and laboratory testing services Cardiovascular services
Key Equipment One CT Scan machine One MRI machine Six testing machines One X-ray machine Two Ultrasound machines One Mammogram machine One DEXA machine
Our Diagnostic Centres
During the Track Record Period, we generally engaged third party imaging and diagnoses providers to conduct supplementary services for our clients including laboratory, imaging and diagnostic services as requested by our specialist doctors. In view of our business expansion, in October 2019, we acquired Hong Kong Imaging, which has two imaging and diagnoses centres and one laboratory, all of which are located in Central. The acquisition of Hong Kong Imaging provides our specialist doctors with a trusted and stable source to obtain diagnostic services, and provides our patients with a more seamless service experience. Our specialist doctors currently refer laboratory, imaging and diagnostic services to Hong Kong Imaging to the extent practicable, as well as to other third-party imaging and diagnoses providers to the extent Hong Kong Imaging does not provide such services. Hong Kong Imaging also get referrals from other third-party medical practitioners and provide services to their clients. For the years ended 31 March 2020 and 2021, Hong Kong Imaging contributed HK$12.9 million and HK$32.5 million to our revenue, respectively, representing 5.2% and 12.9% of our total revenue, respectively.
Historically, Hong Kong Imaging had been profitable. Hong Kong Imaging recorded a net profit of HK$4.1 million for the year ended 31 March 2018 and HK$4.2 million for the year ended 31 March 2019. Prior to our acquisition on 30 October 2019, Hong Kong Imaging recorded a loss of HK$0.3 million for the period from 1 April 2019 to 29 October 2019 mainly due to (i) fewer customers from Mainland China as a result of the social unrest and protests in Hong Kong and (ii) increased repair and maintenance costs of HK$0.6 million for its CT Scan machine due to the expiry of the warranty period for the machine. Hong Kong Imaging recorded a loss of HK$2.6 million for the full year ended 31 March 2020 mainly due to the same reasons above coupled with the COVID-19 outbreak which adversely impacted Hong Kong Imaging since the beginning of 2020. The social unrest and protests in Hong Kong have subsided in light of the enactment of the National Security Law (i.e. the Law of the People’s Republic of China on Safeguarding National Security in the Hong Kong Special Administrative Region enacted on 30 June 2020). The Directors’ believe that once the COVID-19 pandemic is over, and business and travel returns to normal, Hong Kong Imaging’s business will improve and return to profitability. Please also see the section headed ‘‘Financial Information — Recent Developments and Material Adverse Change — Impact of COVID-19’’.
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The following table provides the commencement date, renovation costs and staffing at our Medical Centres and Diagnostic Centres:
HKMC HKMC Geriatric HKMC Imaging & Medical Psychiatric Medicine Paediatric Cardiovascular Laboratory
HKMC I HKMC II HKMC III Centre Centre Centre Centre MRI Centre DOCUMENT. IS Centre
October October October Commencement of business with the Group January 2018 November 2017 March 2020 November 2017 November 2017 August 2019 2019 2019 2019
Renovation costs incurred during the Track Record Period (HK$’000) 6,434 1,932 1,063 ——1,018 19 ——
Number of Staffing: As at 31 March 2019 — Specialist doctors 9 2 N/A 1 1 N/A N/A N/A N/A — Non-doctor specialists 2 — N/A ——N/A N/A N/A N/A — Nurses — 2N/A ——N/A N/A N/A N/A BUSINESS — Healthcare assistants 14 1 N/A 2 1 N/A N/A N/A N/A
— – Pharmacists and dispensers 5 2 N/A ——N/A N/A N/A N/A 117 — Other clinical support staff 9 3 N/A ——N/A N/A N/A THE THAT AND CHANGE TO SUBJECT AND LETE N/A
As– at 31 March 2020 — Specialistdoctors 12313113—— — Non-doctor specialists 3 ————— 32— — Nurses — 2 ——————— — Healthcareassistants 19112115—— — Pharmacists and dispensers 5 2 ——————— — Other clinical support staff 9 3 ——— 1321
As at 31 March 2021 — Specialistdoctors 12323113—— — Non-doctor specialists 4 ————— 32— — Nurses — 3 ——— 1 ——— — Healthcareassistants 14222116—— ‘‘ WARNING
— Pharmacists and dispensers 4 2 ——————— — Other clinical support staff 11 3 ——— 1511 ’’ ON THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THAT THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED ‘‘WARNING’’ ON THE COVER OF THIS DOCUMENT.
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The following tables provide details of our key equipment at our Medical Centres and Diagnostic Centres:
Net book HKMC I value ’ Age (years) (HK$ 000) as at Remaining as at 31 March useful life 31 March Description of key equipment: 2021 (years) 2021
1 GE CASE Performance Stress Test System with 5 —— Treadmill and BP 2 Nicolet 3 channels UltraPro EMG/NCS + Software 3 2 82 3 ECG Analyzer & ECG Electrode 3 2 12 4 Pharmacy Refrigerator Fiocchetti Labor-400 with 329 ECT-F display panel (002270) (2keys) 5 Pharmacy Fridge (Labor 140) 3 2 13 6 1 IQAIR HP100 AIR CLEANER 3 2 8 7 2 IQAir HealthPro 100 2 3 24
Net book HKMC II value ’ Age (years) (HK$ 000) as at Remaining as at 31 March useful life 31 March Description of key equipment: 2021 (years) 2021
1 Model NTE797, Negative Pressure Total Exhaust 3287 Sterile Isolator 2 Pharmacy Fridge (Medika-200) 3 2 17 3 6 sets of Plum 360 CE 3.0 Modu Le New 3 2 44 4 AED Defibrillator 2 3 7
Net book HKMC III value ’ Age (years) (HK$ 000) as at Remaining as at 31 March useful life 31 March Description of key equipment: 2021 (years) 2021
1 Fitmate WM C09066-01-99 2 3 34 2 GE Logiq S8 XDClear 2.0 Digital Ultrasound System 14464 Console Design
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Net book HKMC Paediatric Centre value ’ Age (years) (HK$ 000) as at Remaining as at 31 March useful life 31 March Description of key equipment: 2021 (years) 2021
1 Drager Jaundice meter JM-105 2 3 30 2 RAD-97 with non-invasive blood pressure, pediatric reusable 2316 sensor, adhesive sensor 3 1 IQAir HealthPro 100 2 3 12 4 Flu test instrument 2 3 27
Imaging and Net book Cardiovascular Centre value ’ Age (years) (HK$ 000) as at Remaining as at 31 March useful life 31 March Description of key equipment: 2021 (years) 2021
1 PHILIPS ICT Elite System, Optivantage DH Pedestal System 5 —— (CT SCAN) 2 FUJIFILM MAMMO machine model No. 399Y100004 5 1 — 3 GE Medical Systems HK Ltd — Detector for 1456 GE Lunar DPX-NT System 4 GE LOGIQ9 Ultrasound 11 —— 5 PHILIPS AFFINITI 70 Multi-specialty Diagnostic 41— Ultrasound System 6 X-RAY Tube for TOSHIBA AQUILION CT Scanner 9 —— 7 FUJIFILM Imaging Machine, FCR PRIMA T2 5 —— 8 FUJIFLIM FDR D-EV02 G35 Wireless X-ray Machine 2 3 128
Net book MRI Centre value ’ Age (years) (HK$ 000) as at Remaining as at 31 March useful life 31 March Description of key equipment: 2021 (years) 2021
1 Philips Ingenia 1.5T S MRI System 5 ——
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The following table provides our revenue at our Medical Centres and Diagnostic Centres during the Track Record Period:
Year ended 31 March 2019 2020 2021 HK$’000 % HK$’000 % HK$’000 %
Medical Centres: HKMC I 146,855 75.0 141,934 57.1 121,213 48.2 HKMC II 25,347 13.0 67,114 27.0 65,932 26.2 HKMC III —— 4 0.0 5,723 2.3 HKMC Psychiatric Centre 12,886 6.6 12,703 5.1 14,494 5.8 HKMC Geriatric Medicine Centre 7,197 3.7 6,088 2.5 5,529 2.2 HKMC Paediatric Centre ——4,890 2.0 6,159 2.4
192,285 98.3 232,733 93.7 219,051 87.1
Diagnostic Centres ——12,831 5.2 32,503 12.9 CVC Centre —— ——2,870 1.1 Others(1) —— —— 97 0.0 Medical management services 3,375 1.7 4,598 1.8 4,500 1.8 Less: Elimination of inter-segment revenue ——(1,768) (0.7) (7,586) (3.0)
Total 195,660 100.0 248,394 100.0 251,434 100.0
Note:
(1) Represents revenue from wholesale of pharmaceutical products.
The following table provides our revenue by type of medical practitioners at our Medical Centres during the Track Record Period:
Year ended 31 March Type of medical practitioner 2019 2020 2021 HK$’000 % HK$’000 % HK$’000 %
Founding Doctors 107,281 55.8 92,653 39.8 75,905 34.7 Equity Partner Doctors 77,709 40.4 124,413 53.5 128,436 58.6 Employee Doctors 5,277 2.7 8,140 3.5 10,552 4.8 Doctor panel specialist 2,006 1.1 7,221 3.1 3,017 1.4 Non-doctor panel specialists 12 0.0 306 0.1 1,141 0.5
Total 192,285 100.0 232,733 100.0 219,051 100.0
Note:
(1) One of our Doctor panel specialists (Dr. Michele Yuen) became an Equity Partner Doctor starting in August 2020.
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OPERATIONAL FLOW
The following flow charts illustrate the operation flow at (i) our Medical Centres for medical services and allied health services, and (ii) inpatient medical services at private hospitals:
Medical Centres for Specialist Medical Services and Allied Health Services
Step 1 Step 2 Step 3 Step 4 Step 5 Step 6
Registration Pre-consultation Consulation Treatment, drug Drug dispensing Payment and assessment prescription, (if applicable) arrange follow-up and/or referral (if applicable) arragement
Step 1: Our medical centre assistant registers the patient at the reception.
Step 2: Our medical centre assistant collects pre-consultation information such as blood pressure and/or body temperature of patient.
Step 3: Medical practitioner provides consultation and treatment plan to patient.
Step 4: Medical practitioner provides treatment or procedure to patient, or provides (i) prescription to patient; and/or (ii) referral to other specialists; and/or (iii) hospital admission services (if applicable) to patient. If hospital admission is required, treatment may be performed at the hospital.
Step 5: Patient receives medication prescribed by medical practitioner (if applicable).
Step 6: Patient proceeds to payment and arranges for follow-up appointment (if applicable).
Inpatient Admission at Private Hospitals
Step 1 Step 2 Step 3 Step 4 Step 5 Step 6
Admission Investigation, drug dispensing Discharge from Payment Arrange registration treatment or surgery (if applicable) hospital remittance follow-up (if applicable)
Step 1: Our clients may receive pre-treatment consultation by our medical practitioners before their admission to hospitals. After confirming the need for hospital admission with patient, we will check the availability of private hospitals and prepare the patient for admission. In order to do so, we will prepare and submit admission letters ahead of the admission date to the relevant private hospital, which specify information including the patient’s general conditions, preliminary diagnosis and the facilities and services required.
Step 2: Patient receives investigation, treatment or surgery at hospital performed by our medical practitioners, and followed by the post-treatment check-up.
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Step 3: Patient receives medication prescribed by medical practitioner (if applicable).
Step 4: When the patient is discharged from the hospital, he/she will settle the total fees, including the consultation and treatment fees charged by our medical practitioners directly with the hospital.
Step 5: The relevant hospital will then remit our fees to us through bank transfer (after deducting the relevant hospital fees and bank charges).
Step 6: Our medical practitioner will arrange follow-up consultation for the patient at our Medical Centres as necessary. Our nurses and healthcare assistants also follows up with the patient and addresses any needs the client may have after the procedures
OUR PROFESSIONAL TEAM
Our professional team comprises of our medical team and allied health services team along with a team of pharmacists, nurses and medical assistants.
Our specialist medical services are provided by our medical team which comprises of (i) 15 specialist doctors covering cardiology, respiratory medicine, gastroenterology & hepatology, nephrology, neurology, psychiatry, endocrinology, diabetes & metabolism, geriatric medicine, oncology, rheumatology and paediatrics and (ii) nine doctor panel specialists covering respiratory medicine, orthopedics & traumatology, psychiatry, oncology, general surgery and dental surgery.
Our allied health services are provided by our allied health service team, which comprises of (i) four non-doctor panel specialists covering clinical psychology, speech therapy, nutritional therapy and psychology counselling at Medical Centres; and (ii) doctors, radiologists, nurses, healthcare assistants and other technicians at Hong Kong Imaging.
Our Specialist Doctors and Panel Specialists
Our success is attributable to our experienced professional medical team. Our medical team provides a wide range of specialist medical services; and our exclusive specialist doctors have on average approximately 19 years of specialist qualification.
All of our medical practitioners are registered in Hong Kong under the Medical Registration Ordinance (Chapter 161 of the Laws of Hong Kong) and our specialists are fellows of the respective academy or college of their specialties in Hong Kong and overseas. Each of our specialist doctors and Panel Specialists, is covered by medical liability insurance in respect of his or her own practice. Our operations department is responsible to verify the annual practising certificate issued by the Medical Council for each specialist doctors and Panel Specialists and to ensure that our specialist doctors and Panel Specialists purchase their own medical liability insurance. We have also purchased medical liability insurance in order to ensure we are also protected against any malpractice claims against us.
During recruitment and negotiation with potential candidates for our medical team in determining the agreed rate of service, we will take into account various factors such as area of specialty, number of consultation hours and patients, responsibility, qualification, experience, reputation, and revenue expected to be generated. Upon expiration and/or renewal of service contracts with our medical practitioners, our senior management team will review and renegotiate their service agreements based on
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BUSINESS their performance with the Group. Our Medical Committee also conducts periodic reviews to help ensure our doctors are performing up to professional standards, including investigating any ethical issues and complaints.
The following tables sets out the details of our specialist doctors and Panel Specialists as at the Latest Practicable Date:
Specialist doctors
Number of Expiry dates of medical Name of medical Date of joining existing service Specialty practitioner(s) practitioners the Group agreements(1)
Founding Doctors Respiratory medicine 1 Dr. Kenneth Tsang November 2017 November 2022 Cardiology 1 Dr. Adam Leung January 2018 November 2022 Neurology 1 Dr. Jason Fong November 2017 November 2022 Psychiatry 1 Dr. Jenny Tsang November 2017 November 2022 Geriatric medicine 1 Dr. Chu Leung Wing November 2017 November 2022
Equity Partner Doctors Cardiology 2 Dr. Clement Lee May 2018 March 2023 Dr. Boron Cheng July 2018 March 2023 Gastroenterology & 1 Dr. Matthew Ng April 2018 March 2023 Hepatology Nephrology 1 Dr. Lo Wai Kei April 2018 March 2023 Oncology 2 Dr. Ada Ma October 2018 March 2023 Dr. Stanley Yu August 2020 July 2025 Paediatrics 1 Dr. Eddie Cheung August 2019 May 2024 Endocrinology, Diabetes 1 Dr. Michele Yuen May 2018 June 2025 &Metabolism
Employee Doctors Gastroenterology & 1 Dr. David But March 2018 None Hepatology Rheumatology 1 Dr. Catherine Yuen March 2020 None
Total 15
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Panel Specialists
Number of Panel Expiry dates of existing service Specialty Specialists(2) agreements
Doctors Respiratory medicine 2 April 2024 and June 2024 Orthopedics & Traumatology 1 None(3) Psychiatry 2 January 2024 and May 2025 Oncology 1 None(3) General surgery 1 None(3) Dental surgery 2 None
Non-doctors Clinical Psychology 1 May 2025 Speech therapy 1 May 2025 Nutritional therapy 1 August 2024 Psychological counselling 1 April 2025
Total 13
Notes:
(1) We entered into service agreements with our Founding Doctors, Equity Partner Doctors and Employee Doctors. Please see below for further details of the respective service agreements.
(2) We generally have partnership service agreements with the Panel Specialists. Panel Specialists work for the Group on an non-exclusive basis and provide services to us on an as-need-basis only. The amount of revenue that our Panel Specialists contributed to the Group for the years ended 31 March 2019, 2020 and 2021 was HK$2.0 million, HK$7.5 million, and HK$4.2 million, respectively.
(3) Whilst no written service agreement were signed with these Panel Specialists, they provide services to us on an as needed basis.
Compensation Arrangements with Specialist Doctors and Panel Specialists
As at the Latest Practicable Date, we had 15 specialist doctors that work for us on an exclusive basis and 13 Panel Specialists, that work for us on an non-exclusive basis. The compensation arrangements for them differ based on whether the doctor is a Founding Doctor, Equity Partner Doctor, Employee Doctor or Panel Specialist.
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BUSINESS
The following table provides the number of our specialist doctors and Panel Specialists as at the dates indicated and the service fees and/or salaries paid to such medical practitioners for the years indicated:
As at 31 March As at the Latest 2019 2020 2021 Practicable Date
Founding Doctors 5 5 5 5 Equity Partner Doctors 5 6 8 8 Employee Doctors 1 2 2 2 Panel Specialists(1) 4111113
Total 15242628
Year ended 31 March 2019 2020 2021 HK$’000 HK$’000 HK$’000
Founding Doctors ——— Equity Partner Doctors 40,879 62,508 62,855 Employee Doctors 2,853 3,912 5,947 Panel Specialists 968 3,620 1,306
Total 44,700 70,040 70,108
Note:
(1) Two dental surgeons joined us as Panel Specialists starting 31 May 2021.
The Founding Doctors consider themselves as the founding members and major business owners of our Group, and that their economic interests are aligned with that of our Group’s overall profitability and performance. As such, the Founding Doctors had agreed to structure their financial return to correlate with the Founding Doctors’ capacities as major business owners of our Group (i.e. the long term growth and financial return from their equity ownership in the Group) rather than service fees payable on regular basis for our Founding Doctors’ provision of medical services in their capacities as specialist doctors.
As mentioned in the section headed ‘‘History, Reorganisation and Corporate Structure — Our History’’, with the aim to develop our business as an integrated medical service provider, we decided to introduce, in addition to the Founding Doctors, other specialist doctors to our Group, with Dr. Kenneth Tsang playing the role of liaising with potential partners. In consideration of our Group’sstageof development at the time, and in order to fulfil various developmental needs (which included, among other things, the strengthening of our clinic brand and attaining the targeted scale of operations), it was crucial that leading specialist doctors with their own successful and profitable medical practices be recruited to join our Group. As such, five of the eight Equity Partner Doctors (namely, Dr. Matthew Ng, Dr. Boron Cheng, Dr. Lo Wai Kei, Dr. Clement Lee, Dr. Ada Ma) were identified by Dr. Kenneth Tsang to engage in discussions to join our Group in 2017. As each of the five Equity Partner Doctors was a leading specialist who, prior to joining us, had his/her own established, successful and profitable
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BUSINESS medical practice, it was necessary for us to offer the Equity Partner Doctors a sufficiently attractive remuneration package, structured at better than prevailing market rates, to incentivize their leaving their successful medical practices to join our Group at its then early stage of development. Details of the remuneration and service terms of the Equity Partner Doctors are set out below. After the joining of the five Equity Partner Doctors, to further expand our specialist doctors team, we subsequently recruited the other three Equity Partner Doctors (namely, Dr. Eddie Cheung, Dr. Michelle Yuen and Dr. Stanley Yu) on terms similar to those adopted for the five Equity Partner Doctors.
We currently have two Employee Doctors, Dr. David But and Dr. Catherine Yuen, who joined us in March 2018 and March 2020, respectively. In contrast to the Equity Partner Doctors (who, prior to joining us, already had their own established and successful medical practices), the Employee Doctors did not have any previous experience in the private medical sector prior to joining us, and had joined our Group to provide them with a medical platform in order to grow his/her medical practice in the private sector. In contrast to the Founding Doctors and the Equity Partner Doctors, the Employee Doctors have no equity interest in the Group and rely on a fixed salary and the profit sharing bonus as their primary source of income. Details of the remuneration and service terms of the Employee Doctors are set out below.
During the Track Record Period, we entered into different service agreements with our specialist doctors and Panel Specialists. The key terms of our typical service agreements are as follows:
Founding Doctors
Term: Five years
Work scope: Provision of medical services to the Group with respect to his or her medical specialty as an independent contractor.
Qualifications: The doctor must be a registered specialist of the Hong Kong Medical Council or a recognised professional body of equivalent standing which entitles him/her to legally practise as a medical practitioner in Hong Kong, and shall at all times maintain his/her specialist registration.
Exclusivity: Each of the Founding Doctors is engaged on an exclusive basis, and they shall practise at our Medical Centres or any other locations as mutually agreed at all material times.
Service fees: No service fees are provided to any of the Founding Doctors.
Termination: Either party may give written notice to the other party to terminate the agreement with no less than 90 days prior written notice.
The Group may terminate the agreement if the relevant Founding Doctor:
. breaches any terms of the agreement capable of remedy but is not remedied within 21 days after notice provided by the Group;
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. becomes incompetent, guilty of gross misconduct and/or any serious or persistent negligence in respect of a doctor’s obligations;
. fails or refuses after written warning to carry out his/her duties reasonably and property required;
. becomes charged, indicted or convicted of a criminal offence;
. becomes involved in a disciplinary inquiry hearing at the Medical Council of Hong Kong as a defendant and sentenced; or indicted in a death inquest of a deceased who was the doctor’s patient; or
. becomes unable to practise as a medical practitioner for any reason.
Restrictive covenants: Each of the Founding Doctors shall not directly or indirectly solicit or aid any person in soliciting any of the Group’s patients during or after the term of the agreement; and shall indemnify the Group for all fees, costs or expenses (including legal fees) incurred by the Group for enforcing this covenant.
During the Track Record Period, we paid no service fees to our Founding Doctors, all of which joined us as specialist doctors on an exclusive basis starting on 3 November 2017. Our Founding Doctors were willing to accept no service fees for the medical services they provided to us because as founding shareholders, they were willing to take up the risk and rewards of the business, and future earnings generated by the Group. As exclusive doctors, they each have an obligation to notify us and obtain our approval if he/she provides medical services for a fee at other hospitals or locations that have not been registered with the Group; and we are not aware of such instances or any breach of this notification requirement during the Track Record Period. As Founding Doctors, they rely mainly on dividends distributed by us as their primary source of income. During the Track Record Period, the amount of dividends declared that was attributable to the Founding Doctors amounted to HK$103.1 million (representing nil for the year ended 31 March 2019, HK$60.2 million for the year ended 31 March 2020 and HK$42.9 million for the year ended 31 March 2021).
The following table provides the contribution to our profit before tax (before [REDACTED] expenses) by each of our Founding Doctors during the Track Record Period:
Year ended 31 March Founding Doctor 2019 2020 2021 HK$’000 % HK$’000 % HK$’000 %
Doctor A 24,000 33.5 18,368 31.1 4,544 11.1 Doctor B 18,402 25.7 13,904 23.5 7,076 17.2 Doctor C 7,301 10.2 5,113 8.6 1,376 3.3 Doctor D 5,917 8.3 6,102 10.3 6,478 15.8 Doctor E 3,542 4.9 2,781 4.7 2,206 5.4
Total 59,162 82.6 46,268 78.2 21,680 52.7
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BUSINESS
The Founding Doctors’ contribution to our profit before tax (before [REDACTED] expenses) amounted to approximately HK$59.2 million, HK$46.3 million and HK$21.7 million during the years ended 31 March 2019, 2020 and 2021, respectively, representing 82.6%, 78.2% and 52.7% of our total profit before tax (before [REDACTED] expenses), respectively. Should we have paid service fees to the Founding Doctors during the Track Record Period, our profit for years/period during the Track Record Period would have be substantially lower. Please see the section headed ‘‘— Hypothetical Net Profit Taking into Account Market Compensation of Our Founding Doctors’’ below for further information. Please also see the section headed ‘‘Risk Factors — Risk Relating to Our Business — The service fees we pay to our specialist doctors that are Founding Doctors and Equity Partner Doctors have had, and is expected to continue to have, a significant impact on our business, financial position and profitability’’.
Equity Partner Doctors
Term: Five years
Work scope: Provision of medical services to the Group with respect to his or her medical specialty as an independent contractor.
Qualifications: The doctor must be a registered specialist of the Hong Kong Medical Council or a recognised professional body of equivalent standing which entitles him/her to legally practise as a medical practitioner in Hong Kong, and shall at all times maintain his/her specialist registration.
Exclusivity: Each of the Equity Partner Doctors is engaged on an exclusive basis, and they shall practise at our Medical Centres or any other locations as mutually agreed at all material times.
Service fees: Depending on the Equity Partner Doctor, whose service agreement was negotiated at an arms-length basis with the Group, the service fees payable to each of the Equity Partner Doctor is calculated by the following formula:
Service Fee = Annual Fee Contribution – Committed Fee Contribution
The Annual Fee Contribution is:
(i) the total amount derived from medical services that the relevant Equity Partner Doctor directly contributed to the Group’s earnings before interest, taxes, depreciation and amortisation (‘‘EBITDA’’)forthe particular year, or
(ii) the total amount of revenue and income derived from medical services that the relevant Equity Partner Doctor directly contributed to the Group for the particular year less associated direct costs including rental expenses, dedicated medical staff costs and other direct expenses;
in each case, as calculated based on the audited financial statements and in accordance with HKFRS.
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Seven out of eight of our current Equity Partner Doctors are required to contribute a fixed dollar amount (‘‘Fixed Committed Fee Contribution’’)to the Group’s profit before tax per year, which ranged from HK$0.5 million to HK$2.6 million under his/her respective agreement. The remaining Equity Partner Doctor is required to contribute the greater of a fixed amount (i.e. HK$1.1 million) to the Group’s profit before tax per year or 11.25% of his Annual Fee Contribution (‘‘Variable Committed Fee Contribution’’,and together with the Fixed Committed Fee Contribution, each a ‘‘Committed Fee Contribution’’). The fixed portion of the Committed Fee Contribution foreachEquityPartnerDoctorwaspredetermined by his/her equity interest held in the Group at the relevant time he/she joined the Group.
For the year ended 31 March 2021, the service fees paid to each of our Equity Partner Doctors ranged from HK$2.1 million to HK$19.5 million. For the year ended 31 March 2020, the service fees paid to each of our Equity Partner Doctors ranged from HK$2.3 million to HK$21.3 million. For the year ended 31 March 2019, the service fees paid to each of our Equity Partner Doctors ranged from HK$4.0 million to HK$12.8 million.
Termination: Either party may give a written notice to the other party to terminate the agreement with no less than 3-months prior written notice.
The Company may terminate the agreement if the relevant Equity Partner Doctor:
. breaches any material term of the agreement;
. fails to perform medical services up to professional standards required by the Medical Council of Hong Kong or is not qualified to provide medical services in Hong Kong; or
. becomes insolvent or bankrupt or is not able to carry out the medical services or duties under the agreement in compliance with all applicable laws.
Restrictive covenants: Each of the Equity Partner Doctors shall not:
. divulge or communicate with any person or use for any purpose the Group’s trade secrets and other confidential information;
. for a period of 6-months after termination of the agreement, directly contact and/or solicit in Hong Kong any client/patient of the Group for which he/she provided medical services during the last 12-months prior to the termination of the agreement; and
. for a period of 6-months after termination of the agreement, solicit or entice away from the Group, any individual who is or has been an employee or director during the last 12-months prior to the termination of the agreement, except for dedicated medical staff (such as nurses and assistants) that are specifically employed for the doctor.
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We currently have eight Equity Partner Doctors, all of whom work for us on an exclusive basis, and are small passive shareholders of the Group. Five Equity Partner Doctors joined us as specialist doctors starting from the year ended 31 March 2019 and one additional Equity Partner Doctor (Dr. Eddie Cheung) joined us as a specialist doctor during the year ended 31 March 2020. On 1 August 2020, Dr. Stanley Yu joined our Group as a specialist doctor and Equity Partner Doctor; while Dr. Michele Yuen joined us as a specialist doctor on 1 July 2020, and became an Equity Partner Doctor on 1 August 2020. As exclusive doctors, they each have an obligation to notify us and obtain our approval if he/she provides medical services for a fee at other hospitals or locations that have not been registered with the Group; and we are not aware of such instances or any breach of this notification requirement during the Track Record Period.
The Equity Partner Doctor’s service fees are determined by subtracting his/her Annual Fee Contribution (e.g. EBITDA or net revenue) and Committed Fee Contribution to us. Seven out of eight of our Equity Partner Doctors have an arrangement with us whereby they only contribute a fixed dollar amount to our profit before tax (i.e., the Fixed Committed Fee Contribution) under their respective service agreements. Therefore, any excess in income over the Committed Fee Contribution that was generated by these seven Equity Partner Doctors was paid out to him/her as service fees, which in turn effectively places a cap on the amount of profit that we can derive from them to the total amount of the Fixed Committed Fee Contributions, which is currently HK$9.3 million per year. The remaining Equity Partner Doctor has an arrangement with us whereby he contributes a variable amount to our profit before tax with a fixed minimum amount of HK$1.1 million (i.e. the Variable Committed Fee Contribution), so accordingly, there is no cap on the amount of profit that we can derive from him.
During the years ended 31 March 2019, 2020 and 2021, the total service fees paid by us to our Equity Partner Doctors amounted to HK$40.9 million, HK$62.5 million and HK$62.9 million, respectively. During the Track Record Period, the dividends declared that were attributable to the Equity Partner Doctors amounted to HK$10.2 million. The Equity Partner Doctors’ contribution to our revenue amounted to HK$77.7 million, HK$124.4 million and HK$128.4 million for the years ended 31 March 2019, 2020 and 2021, respectively. The Equity Partner Doctors’ contribution to our profit before tax (before [REDACTED] expenses) amounted to HK$6.3 million, HK$8.6 million and HK$9.9 million during the years ended 31 March 2019, 2020 and 2021, respectively; representing 8.8%, 14.5% and 24.0% of our total profit before tax (before [REDACTED] expenses), respectively. The service fee arrangements that our Equity Partner Doctors have with us effectively caps the potential profitability that the Group can retain from them, and is expected to continue to limit our profitability attributable to them for the foreseeable future. Please see the section headed ‘‘Risk Factors — Risks Relating to Our Business — The service fees we pay to our specialist doctors that are Founding Doctors and Equity Partner Doctors have had, and are expected to continue to have, a significant impact on our business, financial position and profitability’’.
Going forward, we plan to mainly recruit specialist doctors with compensation arrangements that provide a fixed base salary plus incentive profit sharing or fee split arrangements, except for exceptional opportunities where we find a doctor whose medical practice justifies adding him/her as an equity partner doctor, in which case, we shall adopt a Variable Committed Fee Contribution model for such a new equity partner doctor that joins us.
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Employee Doctors
Terms: The agreement remains effective unless otherwise terminated by either party.
Work scope: Provision of medical services to the Group with respect to his or her medical specialty as an employee.
Qualifications: The doctor must be a registered specialist of the Hong Kong Medical Council or a recognised professional body of equivalent standing which entitles him/her to legally practise as a medical practitioner in Hong Kong, and shall at all times maintain his/her specialist registration.
Exclusivity: Each Employee Doctor is engaged on an exclusive basis, and they shall practise at our Medical Centres or any other locations as mutually agreed at all material times.
Service fees: A fixed base salary plus incentive profit sharing, if any.
The incentive profit sharing scheme provides that the Employee Doctor is entitled to share a percentage of any profit surplus, which is determined by the revenue generated by the Employee Doctor over the sum of his/her own base salary and the direct costs associated the such revenue generated. The profit sharing percentage increases progressively from 25% to 50% based on different thresholds.
Termination: Either party may give a written notice to the other party to terminate the agreement with no less than 3 months prior written notice.
The Group may terminate the agreement if the relevant Employee Doctor:
. commits any serious or wilful or persistent breach of the agreement, and to the extent such breach if capable of remedy fails to be remedied within 30 days notice from the Group;
. is guilty of dishonesty or any grave misconduct or wilful neglect in his/ her performance, and to the extent such breach, if capable of remedy, fails to be remedied within 30 days notice from the Group;
. is constantly in breach of the agreement or conduct is likely to bring disrepute to the Group;
. becomes of unsound mind, or bankrupt or subject to receivership, or is otherwise prohibited by law from fulfiling his/her duties under the agreement; or
. is convicted of any criminal office that affects his/her position in the Group; or is guilty of such conduct, which in the Group’s opinion brings disrepute to the Group.
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BUSINESS
Restrictive covenants: Each of the Employee Doctors shall not:
. Unless with the prior written consent of the Company, be engaged in any other competing business within 3 kilometres of the Group’s clinics;
. Solicit business from of the Group’s customers or other parties that has dealt with the Group;
. Employ any of the Group’s employees that is likely to possess the Group’s confidential information;
. Solicit or entice away any of the Group’s employees or directors; or
. Engage in other medical practice outside his/her employment without the consent of the Group.
We currently have two Employee Doctors and they joined us in March 2018 and March 2020, respectively and work for us on an exclusive basis. As exclusive doctors, they each have an obligation to notify us and obtain our approval if he/she provides medical services for a fee at other hospitals or locations that have not been registered with the Group; and we are not aware of such instances or any breach of this notification requirement during the Track Record Period. These Employee Doctors have no equity interest in our Group and rely on a fixed salary and the profit sharing bonus as their primary source of income from us. During the years ended 31 March 2019, 2020 and 2021, the Employee Doctors’ contribution to our profit before tax (before [REDACTED] expenses) amounted to HK$1.6 million, HK$2.9 million and HK$2.3 million, respectively, representing 2.2%, 4.9% and 5.5% of our total profit before tax (before [REDACTED] expenses), respectively.
Panel Specialists
Term: One to five years.
Work scope: Provision of medical services to the Group with respect to his or her medical specialty as an independent contractor.
Qualifications: The specialist must be a registered specialist of the Hong Kong Medical Council or a recognised professional body of equivalent standing which entitles him/her to legally practise as a medical practitioner in Hong Kong, and shall at all times maintain his/her specialist registration.
Exclusivity: All Panel Specialists are engaged on a non-exclusive basis, they shall practise at our Medical Centres or other designated locations during times when we require their service in order to provide flexibility to our operations.
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Service fees: Depending on the Panel Specialist:
. 70% of the actual fees received by the Group for all medical services provided and, if applicable, 70% of the gross profit from sales of medication and ancillary services such as diagnostic and laboratory tests;
. a fee splitting arrangement with us whereby he shall be entitled to: (i) for all outpatient consultations, procedures and examinations — a profit sharing percentage that increases progressively from 50% to 80% based on different thresholds and (ii) for all hospital income — 80% of such income; or
. a fixed salary, plus incentive profit sharing, if any. The profit sharing percentage increases progressively from 25% to 50% based on different thresholds.
Termination: Either party may give a written notice to the other party to terminate the agreement with no less than 90 days’ prior written notice.
The Group may terminate the agreement if the relevant Panel Specialist:
. breaches any terms of the agreement capable of remedy but is not remedied within 21 days after notice provided by the Group;
. becomes incompetent, guilty of gross misconduct and/or any serious or persistent negligence in respect of a doctor’s obligations;
. fails or refuses after written warning to carry out his/her duties reasonably and property required;
. becomes charged, indicted or convicted of a criminal offence;
. becomes involved in a disciplinary inquiry hearing at the Medical Council of Hong Kong or similar regulatory entity as a defendant and sentenced; or indicted in a death inquest of a deceased who was the doctor’s patient; or
. becomes unable to practise a medical practitioner for any reason.
Restrictive covenants: Each of the Panel Specialists shall not directly or indirectly solicit or aid any person in soliciting any of the Group’s patients during or after the term of the agreement; and shall indemnify the Group for all fees, costs or expenses (including legal fees) incurred by the Group for enforcing this covenant.
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BUSINESS
Our Panel Specialists include specialist doctors and non-doctor health specialists that works for us on a non-exclusive basis. In addition, prior to becoming one of our Equity Partner Doctors in August 2020, we engaged Dr. Michele Yuen as a Panel Specialist. The Panel Specialists do not have any equity interest in our Group and rely mainly on profit sharing from the revenue that they generate with us as their primary source of income from us. In addition, unlike our Equity Partner Doctors, the revenue sharing ratio derived from services provided by these doctors was approximately 70% during the Track Record Period, and the profits that we can derive from their services are not capped at any fixed amounts. During the years ended 31 March 2019, 2020 and 2021, their contribution to our profit before tax (before [REDACTED] expenses) amounted to HK$0.4 million, HK$1.5 million and HK$0.8 million, respectively, representing 0.6%, 2.5% and 1.9% of our total profit before tax (before [REDACTED] expenses), respectively.
New Service Agreements with Founding Doctors and Equity Partner Doctors
All of our Founding Doctors and Equity Partner Doctors will enter into a new service agreement with us, which will become effective upon the [REDACTED] (‘‘New Service Agreements’’)to(i) extend the termination date of their existing service agreement to 31 March 2026 and (ii) pay us an early termination fee (‘‘Termination Fee’’) should (i) any Founding Doctor or Equity Partner Doctor terminate his/her services to us prior to 31 March 2026; or (ii) we terminate his/her services upon the occurrence of any ‘‘termination event’’ caused by the relevant Founding Doctor or Equity Partner Doctor (including, without limitation, (a) inability to provide medical services to the Group due to termination or suspension of his/her medical licence; and (b) material breach of the terms of the New Service Agreement resulting from fraud, willful default or gross negligence of the relevant doctor). With respect to the amount of the Termination Fee, the New Service Agreements provide that (i) each of our Founding Doctors shall pay us a termination fee equivalent to the annual average of his/her contribution to our profit before tax for the prior three financial years prorated for the remaining term of his/her contract and (ii) each of our Equity Partner Doctors shall pay us a termination fee equivalent to his/her annual Committed Fee Contribution prorated for the remaining term of his/her contract. The Termination Fee does not apply in case of death, incapacity or critical illness of the respective Founding Doctor or Equity Partner Doctor leading to his/her inability to reasonably provide us with his/her services. Accordingly, the key terms of the New Service Agreements for each of our Founding Doctors and Equity Partner Doctors, including with respect to service fees, will remain the same as their existing service agreements described above, except with respect to the extended term and Termination Fee.
During the term of the New Service Agreements, any proposed revision of the existing terms of the New Service Agreements will be subject to and conditional upon the approval of the Shareholders. Upon expiry of the New Service Agreements, any renewal of the New Service Agreements (whether on their existing terms of otherwise) will also be subject to and conditional upon the approval of the Shareholders.
Hypothetical Net Profit Taking into Account Market Compensation of Our Founding Doctors
We incurred no service fees for our Founding Doctors’ services during the Track Record Period and up to the Latest Practicable Date. We have no plans to pay service fees to our Founding Doctors for the foreseeable future, and as discussed above, our Founding Doctors will not be entitled to any service fees after the [REDACTED] pursuant to the New Service Agreements.
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The service fees and salaries paid to our other specialist doctors during the Track Record Period, including Equity Partner Doctors, Employee Doctors and Panel Specialists were all fair and reasonable and were either in-line with or exceeded the market rate in Hong Kong for such doctors based on their respective qualifications, specialisation, experience and level of seniority. The service fees and salaries for these doctors were negotiated on an independent arms-length basis in order to retain these highly skilled and experienced medical practitioners.
According to the Frost & Sullivan Report, the market rate of service fees in Hong Kong for specialist doctors with similar qualifications, specialisation, experience and level of seniority as our Founding Doctors, was between 50% to 60% of the profit before tax generated by such doctors. Based on the high-end range of the service fee ratio under the Frost & Sullivan Report of 60%, the hypothetical net profit attributable to owners of the Company (excluding [REDACTED] expenses) during the Track Record Period is as follows:
Year ended 31 March 2019 2020 2021
Net profit attributable to owners of the Company for the year (audited) 59,960 50,194 21,643 Subtract: Hypothetical additional service fees for the Founding Doctors net of income tax(1) (29,638) (23,163) (10,862) Add: [REDACTED] expenses ——14,317
Hypothetical net profit attributable to owners of the Company(1) 30,322 27,031 25,098
Note:
(1) The hypothetical additional service fees and hypothetical net profit are for illustrative purposes only, and do not reflect the actual amount of net profit attributable to owners of the Company during the Track Record Period under HKFRS.
OUR SUPPLIERS
Our suppliers primarily include pharmaceutical manufacturers and distributors as well as laboratories and imaging centres.
Pharmaceutical Manufacturers And Distributors
Our pharmaceutical suppliers mainly include manufacturers and distributors of pharmaceuticals. We do not enter into long term supply agreements with such suppliers and there is no minimum purchase commitments under our contracts. Orders are placed on an as-need basis. The credit and payment terms granted by our pharmaceutical suppliers are generally between 30 and 60 days.
When selecting our suppliers, we perform assessment based on various criteria, including quality and source of products, reputation in the industry, price and delivery time. For details on the quality control measures we imposed on the products we procured, please refer to ‘‘— Quality Control and Complaint Handling’’.
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The pharmaceuticals used by us are produced by different manufacturers under different brands. In the event that any of the existing pharmaceutical suppliers is no longer able to provide supplies to our Group, we believe that we will be able to identify suitable substitute pharmaceutical suppliers in a timely manner.
We have put in place inventory control measures to control our supplies procurement processes, post-delivery management and maintain a stable level of inventory for our daily operations. For details, please refer to ‘‘— Inventory Control’’. During the Track Record Period, we did not encounter any difficulty, shortage or quality issues with our pharmaceutical suppliers or the products we procured from them that could materially and adversely affect our business operations.
Laboratories and Imaging Centres
During the Track Record Period, our suppliers also include third party laboratories and imaging centres, which provide services such as X-ray, CT Scan, MRI, as well as blood and other specimen testing. Typically, fees are prepaid by the patients to us, and we will in turn pay the third party suppliers for the services rendered. To ensure the quality and efficiency of the services provided by laboratories and imaging centres to us, we select them by considering their scope of service, the quality of their services and the convenience of their locations. After our acquisition of Hong Kong Imaging in October 2019, we normally rely on third party laboratories and imaging centres only to the extent Hong Kong Imaging does not provide such services.
Major Suppliers
During the Track Record Period, our top five suppliers were pharmaceutical distributors, and laboratories and imaging centres located in Hong Kong. For the years ended 31 March 2019, 2020 and 2021, purchases from our single largest supplier, which was a provider of pharmaceutical products, amounted to HK$15.8 million, HK$20.1 million and HK$20.8 million, respectively, representing 33.9%, 33.4% and 35.9% of our total purchase costs, respectively. For the years ended 31 March 2019, 2020 and 2021, purchases from our five largest suppliers amounted to HK$37.1 million, HK$47.0 million and HK$49.1 million, respectively, representing 79.6%, 78.1% and 84.8% of our total purchase costs, respectively.
The tables below set out certain details of our five largest suppliers during the Track Record Period:
For the year ended 31 March 2019
%ofour Purchase total Products/Services Length of Rank Supplier Background amount purchase purchased relationship (HK$’000)
1 Supplier A Supplier of pharmaceutical 15,772 33.9% Pharmaceutical Since November products products 2013 2 Supplier B Supplier of pharmaceutical 10,218 21.9% Pharmaceutical Since November products products 2013 3 Supplier C Supplier of pharmaceutical 7,546 16.2% Pharmaceutical Since October products products 2017 4 Hong Kong Imaging Provision of diagnostic and 2,227 4.8% Diagnostic and Since November laboratory services laboratory 2013 services 5 Supplier D Provision of professional medical 1,308 2.8% Diagnostic and Since December services laboratory 2018 services
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For the year ended 31 March 2020
%ofour Purchase total Products/Services Length of Rank Supplier Background amount purchase purchased relationship (HK$’000)
1 Supplier A Supplier of pharmaceutical 20,065 33.4% Pharmaceutical Since November products products 2013 2 Supplier B Supplier of pharmaceutical 12,860 21.4% Pharmaceutical Since November products products 2013 3 Supplier C Supplier of pharmaceutical 10,863 18.1% Pharmaceutical Since October products products 2017 4 Supplier E Supplier of pharmaceutical 1,756 2.9% Pharmaceutical Since May 2017 products products 5 Hong Kong Imaging Provision of diagnostic and 1,473 2.4% Diagnostic and Since November laboratory services laboratory 2013 services
For the year ended 31 March 2021
%ofour Purchase total Products/Services Length of Rank Supplier Background amount purchase purchased relationship (HK$’000)
1 Supplier A Supplier of pharmaceutical 20,790 35.9% Pharmaceutical Since November products products 2013 2 Supplier C Supplier of pharmaceutical 11,526 19.9% Pharmaceutical Since October products products 2017 3 Supplier B Supplier of pharmaceutical 10,256 17.7% Pharmaceutical Since November products products 2013 4 Supplier F Provision of laboratory services 5,100 8.8% Laboratory Since December services 2018 5 Supplier E Supplier of pharmaceutical 1,473 2.5% Pharmaceutical Since May 2017 products products
To the best knowledge and belief of our Directors, except for Hong Kong Imaging, our five largest suppliers during the Track Record Period were independent third parties and none of our Directors or their close associates or any Shareholders (which to the best knowledge of our Directors beneficially own more than 5.0% of our Shares) had any interests in any of our top five suppliers during the Track Record Period. The purchase amounts for Hong Kong Imaging as set out in the above tables were for purchases made before our acquisition of Hong Kong Imaging in October 2019. During the Track Record Period, none of our Group’s major suppliers was also one of our Group’s major clients.
OUR CLIENTS
During the Track Record Period, our clients primarily consisted of individual clients and corporate clients for our medical services; and medical practitioners for our medical management services. Our individual clients represented a significant portion of our client base and the amount of revenue generated from them represented 92.6%, 90.4% and 90.1% of our total revenue for the years ended 31 March 2019, 2020 and 2021, respectively. For the same periods, revenue generated from our corporate clients represented 5.6%, 7.8% and 8.1% of our total revenue, respectively. Revenue generated from medical management services represented 1.7%, 1.9% and 1.8% of our total revenue for the years ended 31 March 2019, 2020 and 2021, respectively.
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Individual clients generally settle their own medical payments by cash or cash equivalent, and their payments include (i) where they are not covered by any medical scheme or insurance plan, the fee incurred for the consultation and treatment received and (ii) where clients are under a medical scheme or insurance plan, the co-payment amount for the treatment received as required under the scheme.
We generally enter into contractual arrangements with corporate clients including medical schemes and insurance companies, who settle medical payments for their policy members or staff members who are our patients. Medical scheme and insurance companies structure and administer corporate healthcare benefit plans to their members. We provide these members with medical and allied health services. Under our service contracts with the medical schemes and insurance companies, we offer services to their members in return for a service fee at an agreed rate based on the number of treatments to be received. A credit term of up to six months is generally granted to medical schemes and insurance companies.
Medical practitioners generally settle their management service fees on demand after we invoice them, which is on a quarterly basis.
Major Clients
For the year ended 31 March 2019, our single largest client was an individual patient and the revenue generated from this patient was HK$8.1 million, representing 4.2% of our total revenue during the year. For the year ended 31 March 2020, our single largest client was an insurance provider, and the revenue generated from this corporate client was HK$8.2 million, representing 3.3% of our total revenue during the year. For the year ended 31 March 2021, our single largest client was an insurance provider, and the revenue generated from this corporate client was HK$8.9 million, representing 3.5% of our total revenue during the period.
For the years ended 31 March 2019, 2020 and 2021, revenue from our five largest clients, included individual and corporate clients, and doctors that we provided medical management services to, amounted to HK$16.9 million, HK$18.0 million and HK$18.9 million, respectively, representing 8.7%, 7.3% and 7.5% of our total revenue, respectively.
To the best knowledge and belief of our Directors, all of our five largest clients during the Track Record Period were independent third parties and none of our Directors or their close associates or any Shareholders (which to the best knowledge of our Directors beneficially own more than 5.0% of our Shares) had any interests in any of our five largest clients during the Track Record Period. During the Track Record Period, none of our major clients was also one of our major suppliers.
Client Relationship Management
We aim to offer comprehensive and personalised healthcare services to our clients based on their specific needs and treatment options. To this end, our nurses and other medical assistants are trained to be client-care managers, and play a crucial role in promoting client satisfaction by ensuring that their needs are properly addressed. In our daily operations, when we are first approached by potential clients, our client-care managers can help answer enquiries and understand their specific needs. If they decide to receive healthcare services from us, our client-care managers can arrange appointments for medical services at our Medical Centres or for inpatient admission as applicable. They also provide assistance pertaining to any necessary administrative procedures regarding inpatient admissions at private hospitals, liaise with our specialists and allied health professionals, arrange subsequent follow-up consultations and handle any peripheral requests that clients may have. Placing strong emphasis on client relationship
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BUSINESS management allows us to provide client-centred and personalised healthcare services. Designating our client-care managers on client relationship management also alleviates the workload of our medical practitioners and allows them to focus on providing quality healthcare services.
Pricing
Our clients mainly include people seeking the best quality medical care and services. To compete effectively with other medical care service providers in the market, we position our medical services to be mid-to-high end in terms of our pricing. Our medical service fees primarily include consultation fees, medication fees, treatment fees and laboratory and diagnostic fees.
When determining our rates chargeable to our individual clients, our management takes into account various factors such as (i) market price range charged by our competitors, (ii) operating costs, (iii) time costs and complexity of the treatment, (iv) the type of specialty involved and (v) the level of seniority of our medical practitioners as well as the following factors:
. for consultation fees: cost-plus basis of our cost in engaging members of our medical and allied health service team;
. for medication fees: the reference retail price of the pharmaceutical drugs, price charged by distributors for the pharmaceutical drugs, and relevant administration costs;
. for treatment fees: determined based on the risk and complexity in delivering the procedures, the materials and equipment involved, time required for delivering the treatment and the number of treatments involved; and
. for laboratory and diagnostic fees: cost-plus basis which covers Hong Kong Imaging or third party laboratory and diagnostic costs as well as our administration costs.
Subject to the final approval of our senior management team, our charging rates are revised periodically with reference to the market rates. When there is an increase in the price of the pharmaceutical drugs, we are generally able to pass on the cost increase to our clients by price adjustment.
For our corporate clients, subject to negotiation, we may offer a discount as compared to fees chargeable to individual clients for certain medical schemes and insurance companies.
For our management service fees, we generally adopt a cost-plus basis of our cost in providing such management services.
CASH AND CREDIT MANAGEMENT
Our corporate clients generally settle their fees by way of bank transfers or cheque. For patients who receive medical services from us under the policies provided by our corporate clients, we will seek payments directly from the relevant medical scheme and insurance companies. In such instance, fees receivable from medical scheme and insurance companies are settled by bank transfer or cheques with a credit period of up to six months after our date of invoice.
For revenue generated from our clients’ stay at the private hospitals, payments from these clients will be collected by the respective hospitals on behalf of us and such hospitals will generally transfer the amount to us via bank transfer within 60 days. Our finance department reconciles between the bank statements and hospital statements of our medical practitioners on a monthly basis to check if there are any irregularities in the income records.
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Most of our individual clients settle their medical payments by way of credit card or other electronic means (such as EPS and Alipay), and occasionally we receive cash payment. As part of our cash handling policy, all cash received from our clients is kept in the locked cabinet in the drug dispensing counter or cashier at each of our Medical Centres and Diagnostic Centres. Our finance department personnel and receptionists are responsible for performing a daily check on the amount of cash against the payment record in our information technology system and reconcile any inconsistency. After confirming all amounts are correct, the cash received at our Medical Centres and Diagnostic Centres will be deposited to our bank account by our finance team.
MARKETING
We are subject to certain professional and ethical guidelines prescribed by the Medical Council in respect of advertising and promotion of medical practice and services by medical practitioners. We believe that a significant number of clients come to us on account of our brand and reputation and referrals from our former or existing clients. Medical practitioners are generally prohibited from promotion of the medical practice through advertisements. For details, please see the section headed ‘‘Regulatory Overview — Overview of Hong Kong Laws and Regulations — Undesirable Medical Advertisements Ordinance (Chapter 231 of the Laws of Hong Kong)’’.
While our medical practitioners are subject to certain prohibition from promotion of their individual medical practice, our Group plans to grow by enhancing our reputation through covering additional medical specialties, providing medical concierge services and exploring business opportunities with more corporate clients. Our Directors believe that our business strategies would further strengthen our position as a highly recognised specialty medical platform in Hong Kong.
Referral Model
We believe our business is dependent on our brand and reputation, which in turn comes from the quality of healthcare services that our experienced medical practitioners provide. Leveraging our reputation and expertise in certain specialties, previous and existing patients refer clients to us and third- party general practices or specialist doctors also refer their patients to us for targeted diagnosis and treatment. In addition, our medical platform allows our services to complement each other and creates synergistic benefits. For example, our specialist doctors in one specialty can refer their patients to our other specialist doctors when necessary, and can refer patients to our allied health services, including imaging and diagnostic procedures. We do not receive or pay referral fees, and the service fees that our specialist doctors receive do not vary based on whether the patient is referred to that doctor from a third-party or internally. Accordingly, the service fees to a specialist doctor includes only the revenue generated by the services provided by such doctor.
For clients who require further management, surgeries and other inpatient services, we can arrange for private hospital admissions and our doctors will provide consultations, treatments or surgeries to our clients at the private hospital. Where necessary, our allied health services could also facilitate our clients’ rehabilitation after clients are discharged from hospitals. We believe this allows us to provide comprehensive care to our clients and enhance their overall wellbeing.
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The following chart sets out the relationship among our various service streams during the Track Record Period:
At our Medical and Diagnostic Centres At private hospitals
Arrange hospital admission Our specialist Inpatient services medical services Arrange follow-up consultation
Referral(Client relationship Referral Management)
3rd party general or Allied health specialist practice services
COMPETITION
The private healthcare service industry in Hong Kong is highly competitive and fragmented. According to the Frost & Sullivan Report, there were approximately 2,400 private healthcare service providers in Hong Kong registered with the Department of Health in 2019. In general, leading private healthcare providers compete based on their ability to: (i) recruit and retain talented medical practitioners with substantial professional training, qualification, medical knowledge and clinical experience, (ii) open medical centres in prime locations and (iii) provide a wide variety of medical services under different specialties through their widespread network of medical centres, in particular in term of specialty services. According to the Frost & Sullivan Report, there is likely to be an increasing trend of consolidation among independent medical centre operators. For a discussion on the landscape of the Hong Kong medical industry, please see the section headed ‘‘Industry Overview’’.
We believe we are well positioned to capitalise on the growth in this industry through our existing platform of resources and capabilities. We intend to leverage our leading position, extensive service spectrum, established brand and reputation with renowned specialist doctors, and experienced management team to continue to be one of the leading private multi-specialties medical centre operators in Hong Kong.
QUALITY CONTROL AND COMPLAINT HANDLING
Providing quality healthcare services is one of our Group’s management priorities. To this end, we have established a medical committee and have adopted quality assurance and enhancement measures for our medical and allied health service team and our staff to ensure standard operation procedures for our services. As at the Latest Practicable Date, we haveestablishedmorethan70standardoperation procedures in relation to the operations of our pharmacy, oncology, administration and clinics. We believe prioritising quality training and adoption of standard operation procedures within our Group could strengthen our position in the market.
Our Medical Committee is led by Dr. Adam Leung, and includes selected senior doctors and the director of operations; and is responsible to establish and implement internal policies and review medical complaints and ensure client satisfaction. The Medical Committee, along with our operational
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BUSINESS personnel, established and implemented internal policies and standard operations procedures to reduce operational risk and to oversee our internal controls. Our Medical Committee with the assistance of the human resources department, reviews our established standard operations procedures periodically and conducts update of our internal guidelines and policies governing various aspects of our operations, including but not limited to medical centre operation procedures, handling of dangerous drugs, inventory control and clinical waste disposal. In addition, from time to time, the Medical Committee launches experience sharing sessions to our medical and allied health service team and staff on the development and implementation of quality control measures as well as discusses and reviews the quality control measures of our Medical Centres. Our Medical Committee uphold standards and regularly communicate and discuss important issues from update of key medical development to daily operation issues in order to continuously enhance the quality of service provided by our medical and allied health service team and staff.
As a measure to enhance service quality, our Medical Committee has set up an efficient complaint handling mechanism whereby any complaints are recorded by our client-care managers. We have also placed questionnaires in relation to our service quality at the reception of each Medical Centre for our patients to provide feedback. Complaints concerning our medical and allied health service team will be reported to the Medical Committee for follow-up. The Medical Committee and other personnel will then investigate the incident and suggest solutions to implement and prevent reoccurrence. For serious cases, we may seek legal counsel.
During the Track Record Period and up to the Latest Practicable Date, we have not received any material claims or complaints with respect to our medical services provided to clients.
MEDICAL PRACTITIONERS AND EMPLOYEES
As at the Latest Practicable Date, we had 136 medical practitioners and employees in Hong Kong, who work for us on exclusive and non-exclusive basis. The table below sets out a breakdown of our medical practitioners and employees by function as at the Latest Practicable Date:
Executive Directors and senior management(1)(2) 7 Specialist doctors (excluding doctors who are also our executive Directors and/or senior management)(3) 15 Panel Specialists(3) 13 Radiologists, radiographers and MRI specialists 7 Nurses and healthcare assistants 35 Pharmacists and Dispensers 7 Finance and accounting, human resources and administration(2) 19 Others(4) 33
Total 136
Notes:
(1) Two of our executive Directors and senior management are also our specialist doctors. They are Dr. Kenneth Tsang and Dr. Adam Leung.
(2) Two members of our senior management are also our staff who is responsible for overseeing (i) human resources and administration and (ii) accounting and finance, respectively.
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(3) Our Founding Doctors, Equity Partner Doctors and Panel Specialists are independent contractors and are not employees under our service agreements with them.
(4) Include support staff such as receptionists, secretaries, janitors and drivers.
We offer our employees remuneration packages based on their experience and position. Generally, remuneration to all our employees comprises basic salary, performance-based incentive bonus and medical benefits. For a discussion of the compensation arrangements with our specialist doctors and Panel Specialists, refer to ‘‘— Our Professional Team — Compensation arrangements with our Specialist Doctors and Panel Specialists’’. Our Medical Committee is responsible for the recruitment of new specialists and other healthcare professionals. We recruit personnel from the open market and we formulate our recruitment policy based on market conditions, our business demand and expansion plans. Our Medical Committee periodically review our employees’ performance. To enhance the quality of our services, we adopt standard assessment criteria when selecting our Group’s professional team members including specialist doctors, allied healthcare practitioners and registered and enrolled nurses, which take into account a number of factors such as experience, skills and competencies. We assess their credentials and suitability through interviews and provide regular training upon hiring.
Our Training Systems And Knowledge Management
The Hong Kong Academy of Medicine imposes mandatory continuous education requirements on medical practitioners practising in Hong Kong. Other professional bodies such as those for psychologists and therapists impose certain continuous education requirements for their respective fields or encourage them to obtain continuous education on a voluntary basis. Our medical practitioners fulfil such requirements by attending external conferences or training programmes. Newly recruited medical practitioners would be under supervision of the Medical Committee for the first 6 months after joining our Group to help them familiarise themselves with our service standards, policies and procedures. We provide written guidelines, instruction manuals, internal training, on-the-job guidance to our client-care managers and newly recruited healthcare assistants.
We also believe that it is crucial to cultivate and foster a culture of knowledge sharing among the professionals that encourage discussion and sharing of expertise and experience as well as exchange of clinical findings in different areas at expertise. We strive to be a learning organisation that facilitates the continuous learning of our medical and allied health service team. To this end, we hold regular knowledge sharing sessions among our specialists. We place great emphasis and encourage our medical and allied health service team and staff to attend internal and external training programmes. Through these regular peers learning sessions and external seminars, our medical and allied health service team can keep abreast of the latest development in various specialties and in turn allow them to provide quality healthcare solutions to our clients.
INVENTORY CONTROL
Our inventory typically consists of pharmaceuticals and clinical supplies and are stored at our Medical Centres. We carry out regular physical inventory taking and assessments to verify the accuracy of our inventory record. We closely monitor the pharmaceutical expiry dates to minimise the risk of dispensing expired items. We maintain strict control over inventory and have implemented an inventory control policy to meet procurement needs. The objective of such policy is to provide guidelines to our staff in the management and control of inventory including safeguarding and disposal of inventory, to eliminate any potential misuse and misappropriation of inventory as well as to control the cost of pharmaceutical drugs.
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In addition, we have implemented and imposed strict safety guidelines for dispensing procedures and the storage of pharmaceutical drugs. Our pharmacists play an important supervisory role in the drug ordering and dispensing process, which includes checking the identity and dose of the specific drug against the prescription, and are responsible for proper storage and keeping records of the stock of our pharmaceutical drugs. Information is provided to doctors regularly to remind them of the appropriate usage/dosage of vaccine/drugs to patients. We regularly review our measures and policies in relation to the prevention of medical incidents, which covers dispensary and dangerous drug management.
Our doctors are subject to the Code of Professional Conduct issued by the Medical Council, which include the Guidelines on Proper Prescription and Dispensing of Dangerous Drugs (‘‘Prescription Guidelines’’). Only licensed medical practitioners (i.e. doctors) can legally prescribe prescription medicine to patients in Hong Kong. Our pharmacists and dispensers are also familiar with the Prescription Guidelines and help ensure that the drugs prescribed by our doctors are dispensed correctly, and they would consult with the prescribing doctor, as necessary, to ensure the prescription and dosage is accurate or appropriate. Upon receipt of a prescription issued by our specialist doctors, our licensed pharmacists would review the prescription to ensure the prescription and any drug combinations are appropriate and safe by verifying the patient’s record as well as drug indications and interactions. Our pharmacists freely communicates with our specialist doctors to ensure the prescription is appropriate. Our doctors and pharmacists follow the Prescription Guidelines, which require that dangerous drugs (such as psychoactive substances with known potential for abuse) be prescribed with due caution in order to avoid misuse or patient dependence. Dangerous drugs are prescribed only after proper clinic assessment and diagnosis and only in amounts within the range of therapeutic dosage and limited to such duration as necessary for proper treatment of the patient. Our doctors keep adequate and proper medical records of the patient and evaluate their treatment history to help avoid stock piling, resale or other inappropriate uses by the patient; and require regular follow-up assessments of patients that are provided with dangerous drugs. These controls help mitigate the risk of over-prescription of drugs, especially dangerous drugs, to our patients. Since the founding of our business, we have not received any complaints from any patients or the Medical Council or any other professional body that our specialist doctors have ‘‘over-prescribed’’ medicine.
During the Track Record Period and as at the Latest Practicable Date, we were in full compliance with the applicable laws and regulations in relation to the storage of pharmaceuticals and medical supplies in all material aspects. During the Track Record Period up to the Latest Practicable Date, we had not experienced any significant write-offs of our inventory.
FACILITY MANAGEMENT
We understand that facility management is essential for our Group to maintain a clean and healthy environment at our medical centres. Effective management of our medical facilities is crucial to ensure imminent and efficient response to service requests and minimum interruption to our operations for scheduled maintenance.
We have implemented strategic management on our facilities that help to extend asset life of our medical facilities, track and lower maintenance costs, prevent and predict equipment failures, improve labour productivity and reduce costly downtimes. We have also set up maintenance procedures for managing medical facilities and equipment at each of our medical centres.
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INFORMATION TECHNOLOGY
Our operations rely on the efficiency of our information technology system. Our information technology system is designed for recording data of our patients, internal control and workflow procedure and assists the management of our Medical Centres and Diagnostic Centres. The system manages various facets of our operations, for instance, appointment booking, client registration, prescriptions, billing and the management of our clients’ other data. It also has regular automatic dataset backup and is designed to ensure the security of our client’s information. The system also maintains detailed information regarding each of the pharmaceutical drugs in our inventory.
DATA PRIVACY MANAGEMENT
In view of the importance of maintaining confidentiality of personal information of our patients, we implement appropriate levels of access control rights for our medical and allied health service team and staff as security shields for computer systems to safeguard our patients’ medical records and personal information. Our patient’s medical records and personal information are not connected with the Internet in order to uphold the security of data collected by us. We regularly review and strengthen the integrity of our system security.
We also seek our patients’ consent before collecting their personal data and other information such as past medical history and known drugs allergies. Our information and data protection policy, which governs the collection, transfer, and subsequent processing of data, ensures that our medical and allied health service team and our staff would properly handle, store and dispose information relating to our patients.
All patients’ medical records, reports, medical laboratory and other diagnostic reports are not allowed to be disclosed to the public. When the medical records of a patient is required to be obtained by a third party such as medical practitioners outside our Group (or non-referring doctors with respect to Hong Kong Imaging), a written consent with our patient’s signature must be obtained prior to disclosure to ensure that no unauthorised person has access to the medical records.
ENVIRONMENTAL, SOCIAL RESPONSIBILITY AND GOVERNANCE
We are subject to various laws and regulations in Hong Kong in relation to environmental matters with respect to disposal of clinical waste according to the Waste Disposal Ordinance (Chapter 354 of the Laws of Hong Kong) and the Waste Disposal (Clinical Waste) (General) Regulation (Chapter 354O of the Laws of Hong Kong). For further information on the relevant laws and regulations, please see the section headed ‘‘Regulatory Overview — Overview of Hong Kong Laws and Regulations — Waste Disposal Ordinance (Chapter 354 of the Laws of Hong Kong)’’.
We have established policies to ensure that we meet the statutory requirements in relation to environmental matters and the disposal of clinical waste. We believe that we are in compliance in all material respects with applicable environmental regulations in Hong Kong. During the Track Record Period and as at the Latest Practicable Date, we had engaged qualified service providers in Hong Kong for the disposal of clinical waste. During the Track Record Period and up to the Latest Practicable Date, we have not received any material fines or penalties associated with the breach of any environmental laws or regulations.
We value utilising our resources efficiently and encourage energy, water and resources conservation at our workplace. To this end, we issue written guidelines and encourage our staff to implement energy-efficient measures such as double-sided printing, turning off unused room appliances and maintaining optimal temperature when air conditioners are in use.
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We also value social responsibility and are devoted to educating the general public to bring awareness to different aspects of health management. To this end, we from time to time hold educational seminars for the public to bring awareness about the prevention and early detection of different health conditions.
We do not tolerate any corruption, fraud and other behaviours violating work ethics or in breach of the Prevention of Bribery Ordinance (Chapter 201 of the Laws of Hong Kong). We value and uphold integrity, honesty and fairness in how we conduct business. All employees should decline an offer of advantage if acceptance of it could affect their objectivity in conducting our business. Employees will be subject to disciplinary actions for their misconduct including verbal or written warnings, demotion and dismissal, and the case may be reported to law-enforcement authorities for possible prosecution, depending on the situation.
In addition to this, we have implemented a whistleblowing policy. This policy allows all our employees to report any possible improprieties, misconducts, malpractices or irregularities. Reports and complaints received will be handled in a prompt and fair manner. Such policy also aims at protecting whistleblowers from unfair dismissal, victimisation and unwarranted disciplinary actions. To the best knowledge of our Directors, during the Track Record Period and as at the Latest Practicable Date, we did not have any litigation involving the allegation of corruption of our Group or our employees, and we were not aware of any material non-compliance with laws and regulations relating to bribery, extortion, fraud and money laundering in Hong Kong.
IMPACT OF OUTBREAK OF COVID-19 ON OUR BUSINESS
We are engaged in the provision of medical services and management services in Hong Kong and substantially all of our revenue is generated from clients located in Hong Kong during the Track Record Period. An outbreak of respiratory illness caused by the novel coronavirus (COVID-19) first emerged in late 2019 and continues to expand globally. As at the Latest Practicable Date, COVID-19 had spread to over 220 countries and territories globally with the death toll and number of infected cases continuing to rise. In response to the outbreak of COVID-19, the Hong Kong government has taken since February 2020 a number of actions such as temporarily closing government offices and public facilities, restricting travel internationally, including between Hong Kong and Mainland China, tracing, quarantining and otherwise treating individuals in Hong Kong who had contracted COVID-19, requiring residents to wear masks, asking residents to remain at home and to avoid gathering in public, among other actions. The outbreak of COVID-19 in Hong Kong have also resulted in the temporary closure of many corporate offices and retail stores.
Since February 2020, we have introduced enhanced hygiene and precautionary measures across our Medical Centres and Diagnostic Centres to ensure the safety of all our medical practitioners, staff and patients. A set of standard operating procedures was developed and implemented, and internal training was provided to all relevant personnel. For details of these measures, please refer to ‘‘— Occupational Health and Safety’’.
From February 2020 to July 2020, the number of patient visits at our Medical Centres and Diagnostic Centres as well as in-patient admissions at private hospitals for which our specialist doctors provide medical services, have, on average, decreased mainly due to the COVID-19 outbreak along with the related delays in seeking non-urgent medical treatment, travel restrictions and the slowdown in the Hong Kong economy. For a more detailed discussion on the impact the COVID-19 outbreak had on our business, please see the section headed ‘‘Financial Information — Recent Developments and Material Adverse Change — Impact of COVID-19’’.
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OCCUPATIONAL HEALTH AND SAFETY
We are subject to the health and safety requirements under Hong Kong law. As such, we have internal policies and systems in place designed with a view to implement and ensure strict compliance with such requirements. We provide written guidelines to our staff on health and safety-related requirements, such as handling medical equipment and clinical wastes. During the Track Record Period and up to the Latest Practicable Date, we did not experience any material accidents in the course of our business operations.
In view of the outbreak of COVID-19 in Hong Kong, we have implemented enhanced hygiene and precautionary measures at our Medical Centres and Diagnostic Centres, which include:
. Temperature screening at entry of centres;
. Requiring clients to answer questions on travel and recent activities;
. Placing hand sanitising products in our centres;
. Regularly cleaning and disinfecting our centres;
. Provision of face masks to employees and clients;
. Promoting personal hygiene among our employees and clients.
Accordingly, all employees are required to familiarise themselves with requirements of our contingency plan for pandemic outbreak and ensure that all measures are properly implemented.
INSURANCE
We have purchased and maintain insurance to cover, among others, employees’ compensation, property, public liability, medical malpractice liability and medical insurance for our employees. We also ensure our medical practitioners purchase their own medical liability insurance.
We are of the view that the insurance policies maintained are adequate for our existing business and operations and in-line with the industry norm. We will review and procure the necessary additional insurance coverage as and when the need arises. During the Track Record Period and up to the Latest Practicable Date, we did not make any material claims under our insurance policies. For the years ended 31 March 2019, 2020 and 2021, our insurance expenses were HK$0.5 million, HK$0.4 million and HK$0.6 million, respectively.
INTERNAL CONTROL AND RISK MANAGEMENT
Our Medical Committee is responsible for establishing our internal control system and reviewing its effectiveness. In accordance with the applicable laws and regulations, we have established procedures for developing and maintaining our internal control system, covering areas such as corporate governance, operations, management, legal, finance and audit. We believe that our internal control system is sufficient in terms of comprehensiveness, practicability and effectiveness for our current business operation. We have also established a set of comprehensive risk management policies and measures to identify, evaluate and manage risks arising from our operations.
In terms of day-to-day operations, we strictly follow labelling guidelines as required under the applicable laws and regulations to ensure that human errors in drugs dispensary are minimised. We have also established a stringent quality control system and complaint handling mechanism to ensure that we proactively minimise operational risks and promptly handle client complaints when they arise. For details, please see ‘‘— Quality Control and Complaint Handling’’.
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PROPERTIES
As at the Latest Practicable Date, we have leased 12 properties in Hong Kong for our operations with an aggregate GFA of approximately 38,000 sq.ft. Our leased properties have a lease term ranging from 10 months to 6 years. As at the Latest Practicable Date, our total rental expenses were approximately HK$2.9 million per month (including the Integrated Flagship Medical Centre). The following table provides a list of our leased properties as at the Latest Practicable Date.
Approximate Address Usage GFA (sq.ft.)
1. HKMC Group Central administration 3,690 13/F, Pacific House, office 20 Queen’s Road Central, Hong Kong
2. HKMC I Medical centre 4,415 Rooms 811 and 812, Central Building, 1–3 Pedder Street, Central, Hong Kong
3. HKMC II Medical centre 2,092 Room 1202, Central Building, 1–3 Pedder Street, Central, Hong Kong
4. HKMC III Medical centre 688 Room 503, Central Building, 1–3 Pedder Street, Central, Hong Kong
5. HKMC Psychiatric Centre Medical centre 300 Room 306, Central Building, 1–3 Pedder Street, Central, Hong Kong
6. HKMC Paediatric Centre Medical centre 542 Room 810, Central Building, 1–3 Pedder Street, Central, Hong Kong
7. HKMC Geriatric Medicine Centre Medical centre 900 Room 606, Manning House, 48 Queen’s Road Central, Central, Hong Kong
8. Imaging and Cardiovascular Centre Imaging and test 3,003 Suite 515–519, 5th Floor, centre Central Building, 1–3 Pedder Street, Central, Hong Kong
9. MRI Centre Imaging centre 1,500 Unit 703, Euro Trade Centre, 21–23 Des Voeux Road Central, Central, Hong Kong
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BUSINESS
Approximate Address Usage GFA (sq.ft.)
10. Medical Laboratory Centre Laboratory centre 1,700 Suite 901–902, 9/F, Silver Fortune Plaza, 1 Wellington Street, Central, Hong Kong
11. Integrated Flagship Medical Centre(1) Medical centre 16,000 Suite 901, Central Building, 1–3 Pedder Street, Central, Hong Kong
12. Staff Quarters(2) Residential 3,220 Villa Cecil, 216 Victoria Road, PokFuLam,HongKong
Notes:
(1) On 1 February 2021, we started a new lease agreement for suite 901 consisting of the entire office space on the 9th floor of Central Building, 1–3 Pedder Street, Central, Hong Kong for a term of six years and expiring on 31 January 2027. This new office space has approximately 16,000 sq.ft. and we plan to move HKMC I, HKMC III and HKMC Paediatric Centre (which are located on the 8th and 5th floors in the same building) and HKMC Geriatric Medical Centre (which is located at Manning House, Central) to this new office on the 9th floor after renovation is completed, which we estimate would be around June 2021. As our offices in the Central Building have the same landlord, we have negotiated that our existing leases in the Central Building will expire at around the same time as our move to the 9th floor. In addition to covering our existing office usage, our new office on the 9th floor is expected to provide us with the extra space necessary for our expansion in the near future. Please see the section headed ‘‘Future Plans and [REDACTED]’’ for further details. As a result of this move, we estimate that our rental expenses will increase by approximately HK$1.0 million per month after the relocation.
(2) During the Track Record Period and as at the Latest Practicable Date, we leased one residential property in Hong Kong with lease term of two years as our staff quarters, with rental expense of HK$85,000 per month for use by one of our Founding Doctors representing benefit-in-kind for director fees for one of our subsidiaries.
On 31 March 2021, we purchased from an independent third party the entire 6th floor of Euro Trade Centre, Central, Hong Kong with GFA of approximately 5,200 sq.ft. at a purchase price of HK$150.0 million, which will be used as our Integrated Diagnostic Centre (the ‘‘Property Purchase’’). With respect to the Property Purchase, we paid HK$75.0 million in cash and financed the remaining HK$75.0 million through a mortgage loan. The mortgage loan will be repaid with the [REDACTED] from the [REDACTED], please see section headed ‘‘Future Plans and [REDACTED]’’ for details. We were also responsible for paying for our portion of real estate agent commissions of HK$1.5 million and Hong Kong stamp duties of HK$12.8 million.
PROPERTY INTERESTS AND PROPERTY VALUATION
Knight Frank Petty Limited, an independent property valuer, has valued our property interests as at 31 March 2021 and is of the opinion that the total market value of the property in which we had an interest as at such date was HK$165.0 million and the attributable market value to us was HK$165.0 million. The full text of the letter and summary disclosure of property valuation with regard to our property interests are set out in ‘‘Appendix III — Property Valuation Report’’ to this document.
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BUSINESS
INTELLECTUAL PROPERTY
As at the Latest Practicable Date, we had registered five trademarks in Hong Kong which are material to our business. We had also registered seven domain names. For details, please see the section headed ‘‘Statutory and General Information — E. Further Information about Our Business — 2. Our Intellectual Property Rights’’ in Appendix V to this document.
During the Track Record Period, we did not engage in any research and development activities.
REGULATORY COMPLIANCE AND LEGAL PROCEEDINGS
During the Track Record Period and up to the Latest Practicable Date, we had obtained all material licences and permits necessary for the operation of our business and such licences and permits are still valid and in force. We have not experienced any refusal of the renewal application of any material licences and permits necessary for the operation of our business.
During the Track Record Period and up to the Latest Practicable Date, we had complied with the relevant laws and regulations in relation to our business in all material respects and there were no material breaches or violations of laws or regulations applicable to us.
We may from time to time be subject to various legal or administrative proceedings arising in the ordinary course of business, such as proceedings in respect of disputes with suppliers or clients and labour disputes. During the Track Record Period and up to the Latest Practicable Date, there had not been any material litigation or claim or arbitration made or pending or threatened against us.
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RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS
CONTROLLING SHAREHOLDERS OF OUR COMPANY
Immediately following the [REDACTED] and the [REDACTED] (without taking into account any Shares which may be allotted and issued pursuant to the exercise of the [REDACTED] or any options which may be granted under the Share Option Scheme), our Company will be directly owned as to [REDACTED]% by CHG, which is in turn owned as to 42.42% by Peak Summit (a company wholly owned by Dr. Kenneth Tsang), 23.74% by Heroic Wealth (a company wholly owned by Dr. Adam Leung), 10.74% by Mastermind Intelligence (a company wholly owned by Dr. Jason Fong), 2.46% by Grateful Mind (a company wholly owned by Dr. Chu Leung Wing), 6.54% by Property Linkage (a company wholly owned by Dr. Jenny Tsang), 9.10% by Wealth Basin (a company wholly owned by Mr. Shiu) and 5.00% by Les Trois (a company wholly owned by Mrs. Chen), respectively. On 23 October 2020, CHG, Dr. Kenneth Tsang, Dr. Adam Leung, Dr. Jason Fong, Dr. Chu Leung Wing, Dr. Jenny Tsang, Mr. Shiu and Mrs. Chen, together with Peak Summit, Heroic Wealth, Mastermind Intelligence, Grateful Mind, Property Linkage, Wealth Basin and Les Trois (collectively, the ‘‘Concert Parties’’), entered into the Concert Party Deed, confirming, among others, that they have been acting and will continue to act in concert with each other to obtain and/or to consolidate effective control of our Group. Accordingly, CHG, Dr. Kenneth Tsang, Dr. Adam Leung, Dr. Jason Fong, Dr. Chu Leung Wing, Dr. Jenny Tsang, Mr. Shiu, Mrs. Chen, Peak Summit, Heroic Wealth, Mastermind Intelligence, Grateful Mind, Property Linkage, Wealth Basin and Les Trois are a group of our Controlling Shareholders.
Save as disclosed above, there is no other person who will, immediately following the completion of the [REDACTED] and the [REDACTED] (without taking into account any Shares which may be allotted and issued pursuant to the Share Option Scheme), be directly or indirectly interested in 30% or more of the Shares then in issue or have a direct or indirect equity interest in any member of our Group representing 30% or more of the equity in such entity.
Save as disclosed below, each of our Controlling Shareholders, our Directors and their respective close associates confirmed that they do not have any interest in a business apart from our Group’s business which competes or is likely to complete, directly or indirectly, with our Group’s business, which would require disclosure pursuant to Rule 8.10 of the Listing Rules.
ACTING IN CONCERT
On 23 October 2020, CHG, Dr. Kenneth Tsang, Dr. Adam Leung, Dr. Jason Fong, Dr. Chu Leung Wing, Dr. Jenny Tsang, Mr. Shiu, Mrs. Chen, Peak Summit, Heroic Wealth, Mastermind Intelligence, Grateful Mind, Property Linkage, Wealth Basin and Les Trois entered into the Concert Party Deed, confirming that since the date on which they first became interested (whether directly or indirectly) in our Group, (i) they have been and undertake to continue to act in concert and collectively for all material commercial decisions, including but not limited to financial and operational matters and strategic decisions, of our Group; (ii) they have reached consensus on, and have unanimously approved, consented to or rejected, all material issues and decisions in relation to our Group and our business; and (iii) they have been cooperating with each other to obtain and maintain the control and the management of our Group. The Concert Parties further confirm and agree that if they are unable to reach unanimous decisions on any material matter or issue relating to our Group after good faith discussions, Dr. Kenneth Tsang shall be entitled to make the conclusive decision, which shall be binding on the others.
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RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS
DELINEATION OF BUSINESS
As at the Latest Practicable Date, as confirmed by each of our Controlling Shareholders and Directors and so far as our Directors are aware, (1) apart from the interest in our Group, none of our Controlling Shareholders or their respective close associates was engaged or had any interest in any business which, directly or indirectly, competes or may compete with the business of our Group, which would require disclosure under Rule 8.10 of the Listing Rules; and (2) none of our Directors had any interest in any business which competes or is likely to compete, either directly or indirectly, with the business of our Group, which would require disclosure under Rule 8.10 of the Listing Rules.
INDEPENDENCE FROM OUR CONTROLLING SHAREHOLDERS
Our Directors consider that our Group is capable of carrying on our business independently from our Controlling Shareholders and their respective associates (other than the members of our Group) after [REDACTED] for the following reasons:
Management Independence
Notwithstanding the fact that our Controlling Shareholders will maintain controlling interests in our Company upon the [REDACTED], our management and operational decisions are made by our Board as well as our senior management. Our Board comprises four executive Directors and three independent non-executive Directors. None of our executive Directors currently holds any directorship or senior management role in any of the entities engaging in the excluded businesses. We consider that our Board and senior management will function independently from our Controlling Shareholders because:
(i) each of our Directors is aware of his/her fiduciary duties as a Director which require, among others, that he/she acts for the benefit and in the best interest of our Company and does not allow any conflict between his/her duties as a Director and his/her personal interests;
(ii) in the event that a potential conflict arises out of any transaction to be entered into between our Group and our Directors or their respective associates, the interested Director(s) shall abstain from voting at the relevant board meetings of our Company in respect of such transactions and shall not be counted in the quorum as required in the Articles;
(iii) all of our executive Directors and senior management have substantial experience in the industry in which we are engaged and have served our Group for a period of time during which they have demonstrated their capability of discharging their duties independently from our Controlling Shareholders as well as making decisions that are in the best interest of our Group. In addition, we have an independent senior management team with no members playing any managerial role or having any beneficial interest in our Controlling Shareholders or any of their respective associates. Our Group’s business had been operated under substantially the same management during the Track Record Period and up to the Latest Practicable Date; and
(iv) our Board has formed an audit committee, a remuneration committee and a nomination committee, each of which consists of independent non-executive Directors. We believe that these independent non-executive Directors, who are responsible for monitoring the operations of our Group, will be able to safeguard the interests of our Shareholders by exercising their independent judgment and providing professional advice to our Board.
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RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS
In view of the above, our Directors believe that they are capable of performing their roles in our Company independently and that our Company is able to manage our Group’s business independently from our Controlling Shareholders and their respective associates.
Operational Independence
Our Group has sufficient operational resources, including capital, general administrative resources, facilities and employees to operate our business independently. We have established our own organisational structure made up of individual departments, each with specific areas of responsibilities. We are the holders of all relevant licences and qualifications material to our business.
During the Track Record Period, Dr. Kenneth Tsang, Dr. Adam Leung, Dr. Jason Fong, Dr. Chu Leung Wing and Dr. Jenny Tsang, each a Controlling Shareholder of our Group, were our specialist doctors, specialising in respiratory medicine, cardiology, neurology, geriatric medicine and psychiatry, respectively. The aggregate revenue generated from the aforesaid five specialist doctors for the three years ended 31 March 2021 was HK$107.3 million, HK$92.7 million and HK$75.9 million, respectively, representing approximately 55.8%, 39.9% and 34.8% of the total revenue of specialist medical services for the corresponding periods. The aggregate revenue our Group generated from the aforesaid five specialists during the Track Record Period indicated a reducing extent of reliance our Group had on them. Apart from the aforesaid five specialist doctors, more specialist doctors and panel specialists are joining our Group, which should prevent us from relying on any single specialist doctor or broaden our income source in terms of the number of doctors with our Group. For details, please see the section headed ‘‘Business — Our Professional Team’’. As such, we believe that our Group is able to operate independently of our Controlling Shareholders.
Save as disclosed above, our Group had not shared any operational resources such as office premises, facilities and general administration resources with our Controlling Shareholders or their respective associates during the Track Record Period. Our Group has also established a set of internal control procedures for the effective operation of our business.
Our Directors confirm that our top five customers and top five suppliers for each period during the Track Record Period are all independent from our Controlling Shareholders and their respective associates. We do not rely on our Controlling Shareholders or their respective associates and have independent access to our customers and suppliers for the provision of services or materials.
Taking into account the above, our Directors are satisfied that our Group can operate independently from our Controlling Shareholders after [REDACTED].
Financial Independence
Our Group has an independent financial reporting system and make financial decisions based on our own business needs. We have sufficient capital to operate our business independently and have adequate resources to support our daily operations. During the Track Record Period, none of our Controlling Shareholders or their respective associates financed our operations. We do not intend to obtain any borrowings, guarantees, pledges or mortgages from any of our Controlling Shareholders or entities controlled by our Controlling Shareholders following [REDACTED]. Hence, our Group does not have financial dependence on our Controlling Shareholders or their respective associates.
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RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS
Having considered the above, our Directors are of the view that we will be financially independent from our Controlling Shareholders and their respective associates upon [REDACTED] and we are able to obtain financing from external sources without reliance on our Controlling Shareholders and their respective associates.
LOCK-UP UNDERTAKING BY OUR CONTROLLING SHAREHOLDERS
Each of our Controlling Shareholders, collectively a group of controlling shareholders (as defined under the Listing Rules), has undertaken to the [REDACTED], our Company and the Stock Exchange that, as a controlling shareholder or a group of controlling shareholders, he, she or it shall not, at any time during (i) the first six-month period commencing on the [REDACTED] (the ‘‘First Six-month Period’’), which is required under the Listing Rules, dispose of, or enter into any agreement to dispose of or otherwise create any options, rights, interests or encumbrances in respect of any of the Shares in respect of which, he, she or it is shown in this document to be the beneficial owner (as defined in Rule 10.07(2) of the Listing Rules (the ‘‘Relevant Securities’’); and (ii) the second six-month period commencing on the date on which the First Six-month Period expires (the ‘‘Second Six-month Period’’), which is required under the Listing Rules, dispose of, or enter into any agreement to dispose of or otherwise create any options, rights, interests or encumbrances in respect of any of the Relevant Securities if, immediately following such disposal or upon exercise or enforcement of such options, rights, interests or encumbrances, our Controlling Shareholders would cease to be a controlling shareholder or a group of controlling shareholders (as defined under the Listing Rules) of our Company.
NON-COMPETITION UNDERTAKINGS
Our Controlling Shareholders have given non-competition undertakings in favour of our Company under the Deed of Non-competition, pursuant to which each of our Controlling Shareholders warrants and undertakes with our Company that, from [REDACTED] and for as long as he/she/it:
(a) is or is otherwise deemed to be our Controlling Shareholder;
(b) individually owns and/or is deemed to own, directly or indirectly, 10% or more of the issued shares in our Company; or
(c) is or remains a Director, he/she/it shall not, and shall use all reasonable endeavours to procure that his/her/its close associates (‘‘Controlled Persons’’) and any companies directly or indirectly controlled by him/her/it (excluding any members of our Group) (‘‘Controlled Companies’’) not to, either on his/her/its own account or with each other or in conjunction with or on behalf of any body corporate, partnership, joint venture or other contractual arrangement, whether directly or indirectly, whether for profit or not, carry on, participate in, hold, engage in, acquire or operate, or provide any form of assistance to any person, firm or company (except the members of our Group) to conduct business which, directly or indirectly, competes or may compete with the business presently carried on by our Company or any of our subsidiaries, namely, the provision of medical services and medical management services in the private sector, in Hong Kong or such other place as our Company or any of our subsidiaries may conduct or carry on business from time to time (the ‘‘Restricted Activity’’), and/or use the trademarks owned by our Group. Such non- competition undertakings, however, do not apply to:
(i) the holding of the Shares or other securities issued by our Company or any of our subsidiaries from time to time;
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RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS
(ii) the holding of shares or other securities in any company which has an involvement in the Restricted Activity, provided that such shares or securities are listed on a recognised stock exchange and the aggregate interest of our Controlling Shareholders and his/her/its associates (as ‘‘interest’’ is construed in accordance with the provisions contained in Part XV of the SFO) does not amount to more than 5% of the relevant share capital of the company in question;
(iii) the contracts and other agreements entered into between our Group and our Controlling Shareholders and/or their associates; and
(iv) the involvement, participation or engagement of our Controlling Shareholders and/or his/her/ its associates in the Restricted Activity in relation to which our Company has agreed in writing to such involvement, participation or engagement, following a decision by our independent non-executive Directors to allow such involvement, participation or engagement.
New Business Opportunity
In the event that any Controlling Shareholder is offered or becomes aware of any business or investment opportunity within the scope of the Restricted Activity (‘‘New Business Opportunity’’):
(a) he/she/it shall promptly notify our Company of such New Business Opportunity in writing;
(b) he/she/it shall not, and shall use all reasonable endeavours to procure that his/her/its Controlled Persons and Controlled Companies not to, invest or participate in such New Business Opportunity, unless such New Business Opportunity is rejected by the independent committee of our Board (the ‘‘Independent Board Committee’’), comprising our independent non-executive Directors from time to time who do not have any material interest in the Restricted Activity and the New Business Opportunity, and the principal terms of which our Controlling Shareholder(s) and/or his/her/its Controlled Persons or Controlled Companies invest or participate in are no more favourable than those made available to our Company;
(c) he/she/it may only engage in the New Business Opportunity if a notice is received from the Independent Board Committee confirming that the New Business Opportunity is not accepted by our Company and/or does not constitute competition with the business of our Group; and
(d) if any material change occurs in the nature, terms and/or conditions of such New Business Opportunity, he/she/it shall refer such New Business Opportunity as so revised to our Company, in the manner outlined above as if it were a fresh New Business Opportunity.
General Undertakings
To ensure the performance of the aforementioned non-competition undertakings given under the Deed of Non-competition, our Controlling Shareholders shall, among other things:
(a) when required by our Company, provide all information necessary for the Independent Board Committee to conduct annual review on the compliance with the terms of the Deed of Non- competition and the enforcement thereof;
(b) where the Independent Board Committee has rejected the New Business Opportunity referred to by our Controlling Shareholder(s), regardless of whether our Controlling Shareholder(s) would invest or participate in such New Business Opportunity thereafter, procure our
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RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS
Company to disclose to the public either in the annual or interim reports of our Company or an announcement the decision of the Independent Board Committee with respect to the New Business Opportunity, including its decision and the basis thereof; and
(c) do all such acts and things and execute all such deeds and documents as may be required to carry into effect or give legal effect to the provisions of the Deed of Non-competition and the transactions contemplated thereunder.
In respect of the undertakings stated above, our Company confirms that if the Independent Board Committee rejects the New Business Opportunity referred to by our Controlling Shareholders, regardless of whether our Controlling Shareholder(s) would invest or participate in such New Business Opportunity thereafter, it will disclose to the public either in the annual or interim report of our Company or an announcement the decision of the Independent Board Committee with respect to the New Business Opportunity, including its decision and the basis thereof.
Each of our Controlling Shareholders have undertaken to our Company that he/she/it will abstain from voting on the board level or the shareholder level of our Company and will not be counted in the quorum if there arises any actual or potential conflict of interest in relation to the Restricted Activity and the New Business Opportunity.
To ensure that the terms of the Deed of Non-competition are observed, our independent non- executive Directors will, based on the information available to them, review on an annual basis (i) the compliance with and the enforcement of the non-competition undertakings given under the Deed of Non- competition; and (ii) all the decisions made by our Group in relation to whether take up any New Business Opportunity.
CORPORATE GOVERNANCE MEASURES
Our Company will adopt the following corporate governance measures to monitor the compliance with the Deed of Non-competition and to safeguard the interests of our Shareholders:
(a) our independent non-executive Directors will annually review the compliance with and the enforcement of the non-competition undertakings given under the Deed of Non-competition;
(b) our Controlling Shareholders undertake to provide, upon our Company’srequest,all information that is necessary for the annual review conducted by our independent non- executive Directors and the enforcement of the Deed of Non-competition;
(c) our Company will disclose decisions on matters reviewed by our independent non-executive Directors in relation to the compliance with and the enforcement of the Deed of Non- competition in the annual reports of our Company;
(d) our Controlling Shareholders will provide confirmation on compliance with their undertaking under the Deed of Non-competition in the annual reports of our Company;
(e) our Company has appointed three independent non-executive Directors to ensure the effective exercise of independent judgment on the decision-making process of our Board and provide independent advice to our independent Shareholders;
(f) our Company has appointed China Everbright Capital Limited as our compliance adviser to advise on compliance matters according to the Listing Rules; and
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RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS
(g) if any potential conflict of interests arises between our Group and our Controlling Shareholders in relation to our Group’s business, the interested Directors, or as the case may be, our Controlling Shareholders, would, according to the Articles or the Listing Rules, be required to declare his/her/its interests and, where required, abstain from participating in the relevant board meeting or general meeting as well as voting on the transaction, and shall not be counted in the quorum where required.
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CONTINUING CONNECTED TRANSACTIONS
Priorto[REDACTED],wehaveenteredintocertain transactions with parties who are connected persons or deemed connected persons as defined under Chapter 14A of the Listing Rules. Upon [REDACTED], these transactions will constitute continuing connected transactions pursuant to Rule 14A.31 of the Listing Rules. Details of such transactions are set out below.
CONNECTED PERSONS
Upon [REDACTED], the following parties, with which our Group has entered into certain transactions in the ordinary and usual course of business, will become connected persons of our Group:
Name Description of Connected Relationship
Dr. Kenneth Tsang Our executive Director and Controlling Shareholder Dr. Adam Leung Our executive Director and Controlling Shareholder Dr. Jason Fong Our Controlling Shareholder Dr. Chu Leung Wing Our Controlling Shareholder Dr. Jenny Tsang Our Controlling Shareholder Dr. Ooi Gaik Cheng Director of Hong Kong Imaging, HKID (Lab) and HKID (MRI), and a (‘‘Dr. Ooi’’) substantial shareholder of HKID (Lab), which are non-wholly-owned subsidiaries of our Company Vision One Company VisionOneisalimitedcompanyheldasto50%and50%byMs.Tan Limited (‘‘Vision One’’) Shoon Chi, the mother of Dr. Ooi, and Mr. James Francis Griffith, the spouse of Dr. Ooi, respectively Ms.TsangWahSin,Margie Ms. Margie Tsang is the sister of Dr. Kenneth Tsang, our executive (‘‘Ms. Margie Tsang’’) Director and one of our Controlling Shareholders M&MProduction M & M Production is a limited company held as to 80% by Ms. Margie Company Limited Tsang, 10% by Mrs. Tsang Hung Yim Wan, the mother of Dr. Kenneth (‘‘M&MProduction’’) Tsang and Ms. Margie Tsang, and 10% by Mr. Lam Ho Yin Martin, the son of Ms. Margie Tsang
FULLY-EXEMPT CONTINUING CONNECTED TRANSACTIONS
Service Agreements with Each of Dr. Kenneth Tsang, Dr. Adam Leung, Dr. Jason Fong, Dr. Chu LeungWingandDr.JennyTsang
Description of the transaction
Our Group has been engaging Dr. Kenneth Tsang, Dr. Adam Leung, Dr. Jason Fong, Dr. Chu Leung Wing and Dr. Jenny Tsang (collectively, the ‘‘Practising Primary Shareholders’’)toprovide medical services to our Group as set out below:
Practising Primary Shareholders Scope of service
Dr. Kenneth Tsang Specialist in Respiratory Medicine Dr. Adam Leung Specialist in Cardiology Dr. Jason Fong Specialist in Neurology Dr. Chu Leung Wing Specialist in Geriatric Medicine Dr. Jenny Tsang Specialist in Psychiatry
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CONTINUING CONNECTED TRANSACTIONS
Pursuant to the service agreements entered into between our Group and each of the Practising Primary Shareholders, the Practising Primary Shareholders agreed to irrevocably and unconditionally provide the medical services as shown above to our Group. Prior to [REDACTED], no fees or other payments were made by our Group to the Practising Primary Shareholders. Our Group will enter into new service agreements with each of the Practising Primary Shareholders (the ‘‘New Service Agreements’’) commencing on the [REDACTED] and effective until 31 March 2026 to provide medical services to our Group at a nominal fee of HK$1 each year.
Considering that (i) the entering into of the New Service Agreements with a term of more than three years promotes stability and continuity in our operations; (ii) the strategic plan of our Group to have the Practising Primary Shareholders provides various specialist medical services; and (iii) such term is sufficiently long to provide better protection to our Group taking into account the nature of our Group’s business and the nature of services provided by the Practising Primary Shareholders, our Directors are of the view that the New Service Agreements are beneficial to the interests of our Shareholders as a whole.
Historical transaction amounts
There was no historical transaction amount paid by our Group to the Practising Primary Shareholders in consideration of their medical services provided to our Group for the three years ended 31 March 2021.
Annual caps and basis
Our Directors estimate that for each of the years ending 31 March 2021, 31 March 2022 and 31 March 2023, the annual fees payable by our Group to each of the Practising Primary Shareholders will not exceed HK$1, being the nominal fees payable to each of the Practising Primary Shareholders under the New Service Agreements.
Implications under the Listing Rules
Since each of the applicable percentage ratios (other than the profits ratio) for the New Service Agreements is expected to be less than 0.1%, the transaction under the New Service Agreements will constitute de minimis continuing connected transaction under Rule 14A.76(1)(a) of the Listing Rules, and will be fully exempted from independent shareholders’ approval, annual review and all disclosure requirements.
Service Agreement with Vision One
Description of the transaction
Our Group has been engaging Vision One to provide medical imaging and diagnostic consultation and related services to our Group for a term of three years commencing from 1 May 2019.
Pursuant to the service agreement entered into between our Group and Vision One, qualified medical practitioners (including Dr. Ooi) specified in the agreement are required to provide medical imaging and diagnostic consultation services at the clinics operated by our Group, and our Group is required to provide administrative and operational support to Vision One. We shall pay Vision One 25% of our Group’s radiology revenue monthly. Such service agreement shall be extended automatically for a term of three years on the same terms and conditions unless either party serves a prior written notice indicating its intention not to extend the agreement.
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CONTINUING CONNECTED TRANSACTIONS
Pricing policy
Under the service agreement with Vision One, the fees payable to Vision One by our Group are calculated by multiplying our Group’s radiology revenue (subject to adjustment due to discounts) by 25%. In determining the percentage, the parties made reference to the qualifications of the medical practitioners specified in the agreement and the scope of services rendered by Vision One. From our perspective, the terms were no more favourable to Vision One than those which would otherwise have been provided by our Group to an independent medical consultant company.
Historical transaction amounts
The aggregate fees paid by our Group to Vision One for medical imaging and diagnostic consultation and related services for the five months ended 31 March 2020 and the year ended 31 March 2021 amounted to HK$3.3 million and HK$8.1 million, respectively.
Annual caps and basis
Our Directors estimate that for each of the years ending 31 March 2022 and 31 March 2023, the annual fees payable by our Group to Vision One under the service agreement with Vision One will not exceed HK$15.0 million. The annual caps are determined with reference to (i) the historical fees paid by our Group to Vision One for the year ended 31 March 2020; and (ii) the expected increase in our radiology revenue attributable to the synergy achieved from our Group’s acquisition of Hong Kong Imaging as well as in line with our Group’s business growth.
Implications under the Listing Rules
Since each of the applicable percentage ratios (other than the profits ratio) for the service agreement with Vision One is expected to be less than 1% and it constitutes a connected transaction only because it involves Dr. Ooi, who is a connected person at the subsidiary level, the transaction under the service agreement with Vision One will constitute de minimis continuing connected transaction under Rule 14A.76(1)(b) of the Listing Rules, and will be fully exempted from independent shareholders’ approval, annual review and all disclosure requirements.
Commercial Endorsement Agreement with M & M Production
Description of the transaction
Our Group has been engaging M & M Production to procure Ms. Margie Tsang to act as our Group’s commercial endorser since 1 December 2019 for a term of three years.
Pursuant to the commercial endorsement agreement entered into between our Group and M & M Production, Ms. Margie Tsang is required to participate in the filming of our Group’s commercials as our Group’s commercial endorser, and our Group shall pay Ms. Margie Tsang a consideration of HK$1,000,000.
Pricing policy
The terms of and the fees payable under the commercial endorsement agreement with M & M Production were determined through commercial negotiations on an arm’s length basis and were based on the scope of services rendered by Ms. Margie Tsang. From our perspective, the terms were no more favourable to Ms. Margie Tsang than those which would otherwise have been provided by our Group to an independent celebrity.
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CONTINUING CONNECTED TRANSACTIONS
Historical transaction amounts
The total fees paid by our Group for Ms. Margie Tsang, being our commercial endorser, for the year ended 31 March 2020 and 31 March 2021 were HK$1,000,000 and HK$150,000, respectively.
Annual caps and basis
Our Directors estimate that the annual fees payable by our Group to Ms. Margie Tsang under the commercial endorsement agreement with M & M Production for each of the years ending 31 March 2022 and 31 March 2023 will be nil and HK$1,000,000, respectively, as the payment to M & M Production for the current commercial endorsement agreement have been completed, and such commercial endorsement agreement may be renewed on 30 November 2022.
Implications under the Listing Rules
Since each of the applicable percentage ratios (other than the profits ratio) for the commercial endorsement agreement with M & M Production is expected to be less than 0.1%, the transaction under the commercial endorsement agreement with M & M Production will constitute de minimis continuing connected transaction under Rule 14A.76(1)(a) of the Listing Rules, and will be fully exempted from independent shareholders’ approval, annual review and all disclosure requirements.
Tenancy Agreement in Which Dr. Chu Leung Wing Provided Guarantee to the Landlord
Description of the transaction
During the Track Record Period, our Group had entered into a tenancy agreement of Room 606 Manning House, 48 Queen’s Road Central, Central, Hong Kong with Pridemax Limited (an independent third party) for clinic use and for a term of one year commencing from 1 July 2020, in which Dr. Chu Leung Wing provided guarantee to the landlord beneficial to our Group (the ‘‘Tenancy Agreement’’). The annual rental and service charge are approximately HK$686,162.
At the landlord’s request, Dr. Chu Leung Wing, who had entered into the preceding tenancy agreements with the landlord since 2014 and thus earned the landlord’s trust, acted as the guarantor under the Tenancy Agreement. Dr. Chu Leung Wing, being the guarantor, shall procure our Group to (i) pay the rental and any other sums payable to the landlord; and (ii) observe and perform the obligations of our Group, being the tenant, under the Tenancy Agreement. In addition, Dr. Chu Leung Wing shall, in case of our Group’s default or delay, be primarily obliged to pay the landlord any sum which ought to be paid and make good any breaches of our Group’s obligations under the Tenancy Agreement. In the event that our Group renews the Tenancy Agreement in the future and a guarantee is required from the landlord, we plan to provide a corporate guarantee to replace the current arrangement.
Pricing policy
The terms of and the fees payable under the Tenancy Agreement were determined through commercial negotiations on an arm’s length basis. From our perspective, the provision of guarantee under the Tenancy Agreement by Dr. Chu Leung Wing to the landlord for our benefit was on normal commercial terms where no security over our Group’s assets was granted in respect of such guarantee.
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CONTINUING CONNECTED TRANSACTIONS
Historical transaction amounts
The aggregate fees paid by our Group to the landlord in July 2020 and for the year ended 31 March 2021 amounted to HK$5,107 and HK$470,000, respectively, being the basic rent, service charge and tenancy deposit prescribed by the Tenancy Agreement.
Annual caps and basis
Our Directors estimate that for each of the years ending 31 March 2022 and 31 March 2023, the annual fees payable by our Group to the landlord under the Tenancy Agreement will not exceed HK$1,000,000 (assuming the term is renewed), being the fees payable to the landlord projected by our Directors in consideration of the historical figures and the potential increase in the rent and service charge.
Implications under the Listing Rules
Since each of the applicable percentage ratios (other than the profits ratio) for the Tenancy Agreement is expected to be less than 0.1%, the transaction under the Tenancy Agreement will constitute de minimis continuing connected transaction under Rule 14A.76(1)(a) of the Listing Rules, and will be fully exempted from independent shareholders’ approval, annual review and all disclosure requirements.
THE DIRECTORS’ VIEWS
Our Directors (including independent non-executive Directors) are of the view that it is in the interests of our Group to continue with the continuing connected transactions described in this section after [REDACTED], and that the transactions contemplated under (i) the New Service Agreements; (ii) the service agreement with Vision One; (iii) the commercial endorsement agreement with M & M Production; and (iv) the tenancy agreement in which Dr. Chu Leung Wing provided guarantee to the landlord, have been and will continue to be conducted on normal commercial terms that are fair and reasonable and are in the interests of our Company and our Shareholders as a whole and are carried out in the ordinary and usual course of business of our Group. In addition, the proposed annual caps for the fully-exempt continuing connected transactions described above are fair and reasonable and in the interests of our Company and our Shareholders as a whole.
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DIRECTORS AND SENIOR MANAGEMENT
OVERVIEW
Our Board currently consists of seven Directors, comprising four executive Directors and three independent non-executive Directors. Our Directors are supported by our senior management in the day- to-day management of our business.
DIRECTORS
The table below sets out the information relating to the members of our Board:
Relationship with other Date of Directors and Date of joining appointment senior Name Age Position our Group as Director Role and responsibilities management
Executive Directors
Dr. Kenneth Tsang 59 Executive Director, October 2013 21 September Overseeing the corporate Spouse of (曾華德醫生) chairman of the 2020 planning, business Mrs. Tsang Board and chief (re-designated development and executive officer as an executive management of operations Director on 23 of our Group October 2020)
Dr. Adam Leung 60 Executive Director November 2017 21 September Overseeing the business N/A (梁永雄醫生) 2020 development and (re-designated management of operations as an executive of our Group Director on 23 October 2020)
Mrs. Chen Chou 71 Executive Director and November 2017 21 September Overseeing the overall N/A Mei Mei Vivien chief operating 2020 operations of our Group (陳周薇薇女士) officer (re-designated as an executive Director on 23 October 2020)
Mr. Shiu Shu Ming 51 Executive Director November 2017 21 September Financial planning and N/A (蕭恕明先生) 2020 strategic development of (re-designated our Group as an executive Director on 23 October 2020)
Independent non-executive Directors
Mr. David Michael 64 Independent [.][.] Bringing independent N/A Norman non-executive judgment to our Board Director
Mr. Ip Koon Wing 60 Independent [.][.] Bringing independent N/A Ernest non-executive judgment to our Board (葉冠榮先生) Director
Mr. Wong Kwok 66 Independent [.][.] Bringing independent N/A Shing Thomas non-executive judgment to our Board (汪國成先生) Director
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DIRECTORS AND SENIOR MANAGEMENT
Executive Directors
Dr. Kenneth Tsang (曾華德醫生), aged 59, is our executive Director, chairman of our Board and our chief executive officer. Dr. Kenneth Tsang is also our founder and one of our Controlling Shareholders. Dr. Kenneth Tsang is primarily responsible for overseeing the corporate planning, business development and management of operations of our Group. Dr. Kenneth Tsang is also the chairman of the nomination committee and a member of the remuneration committee of our Company. Dr. Kenneth Tsang is the spouse of Mrs. Tsang, our director of operations.
Dr. Kenneth Tsang graduated from the University of Glasgow with degrees of Bachelor in Medicine and Surgery in July 1986. He later obtained the degree of Doctor of Medicine from the University of Glasgow in December 1995. Dr. Kenneth Tsang obtained the membership of the Royal Colleges of Physicians of London and Edinburgh and Royal College of Physicians and Surgeons of Glasgow (MRCP (UK)) in November 1989. Dr. Kenneth Tsang was awarded fellowships by the Hong Kong College of Physicians in January 1996, Hong Kong Academy of Medicine (Medicine) in October 1996, Royal College of Physicians of Edinburgh in March 1999, Royal College of Physicians and Surgeons of Glasgow in March 2001, and Royal College of Physicians of London in May 2001, respectively. Dr. Kenneth Tsang obtained his specialist qualification in respiratory medicine in 1996.
Dr. Kenneth Tsang is an Honorary Clinical Professor in the Faculty of Medicine of The University of Hong Kong. He has been serving as a member of the Grant Review Board of the Health and Medical Research Fund Research Council, Food and Health Bureau of the Hong Kong government and Vice- President of the Society of Physicians of Hong Kong. Dr. Kenneth Tsang is a Past President (2001 to 2003) and currently a council member of the Hong Kong Thoracic Society. Dr. Kenneth Tsang was chairman of the Hong Kong Lung Foundation from 2007 to 2009. Dr. Kenneth Tsang served as the Assistant Dean in External Affairs and Fund Raising of the Faculty of Medicine of The University of Hong Kong, National Delegate for China to the European Respiratory Society and a Section Head in the respiratory disorders faculty of Faculty of 1000 Medicine. Dr. Kenneth Tsang was Distinguished Professor at Guangzhou Medical University, PRC from November 2011 to October 2014. Dr. Kenneth Tsang was an associate editor of Respirology, the indexed official journal of the Asian Pacific Society of Respirology.
Dr. Kenneth Tsang was a director of each of the following companies at the time of or within the twelve months prior to their respective dissolutions:
Place of Nature of business incorporation/ immediately prior to Date of Means of Reason for Name of company establishment dissolution dissolution dissolution dissolution
University Medical Hong Kong Dormant 22 July 2011 Dissolved by Dormant Specialists Limited deregistration (大學專科醫療中心 有限公司)
Hong Kong Medical Hong Kong Provision of 23 September Dissolved by Cessation of Specialists Limited management 2016 deregistration business (香港專科醫療中心 services for a 有限公司) medical clinic
Sharp Wealthy Limited Hong Kong Dormant 3 November 2017 Dissolved by Dormant deregistration
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DIRECTORS AND SENIOR MANAGEMENT
Dr. Kenneth Tsang confirmed that the aforementioned companies were solvent immediately prior to their respective dissolution; that there was no wrongful act on his past leading to the dissolution of his companies; and that he is not aware of any actual or potential claim that has been or will be made against him as a result of such dissolution.
Dr. Kenneth Tsang is not and has not been a director of any other listed company in Hong Kong or overseas in the past three years preceding the Latest Practicable Date.
Dr. Adam Leung (梁永雄醫生), aged 60, is our executive Director and one of our Controlling Shareholders. Dr. Adam Leung joined our Group in November 2017 and is primarily responsible for overseeing the business development and management of operations of our Group.
Dr. Adam Leung obtained his Bachelor of Medicine and Bachelor of Surgery degrees from The University of Hong Kong in November 1984. Dr. Adam Leung obtained a Doctor of Medicine degree from The University of Hong Kong in November 1993. Dr. Adam Leung has been a member of the Royal Colleges of Physicians of London and Edinburgh and Royal College of Physicians and Surgeons of Glasgow (MRCP (UK)) since November 1987. He was awarded a fellowship by the Hong Kong College of Physicians in June 1993, a fellowship by the American College of Cardiology in August 1994, a fellowship by the Hong Kong College of Cardiology in March 1995 and a fellowship by the Royal College of Physicians of Edinburgh in March 1997, respectively. In addition, Dr. Adam Leung is a foundation fellow of the Hong Kong Academy of Medicine (Medicine). Dr. Adam Leung has been a registered medical practitioner in Hong Kong specialising in cardiology since March 1998.
Dr. Adam Leung is currently an honorary consultant in cardiology at the Department of Medicine and Geriatrics of Kwong Wah Hospital. He is also the co-chairman of the Heart Program Committee, and the doctor-in-charge and medical advisor of the Heart Center and Cardiac Catheterization and Interventional Center of the Hong Kong Adventist Hospital.
Dr. Adam Leung is not and has not been a director of any other listed company in Hong Kong or overseas in the past three years preceding the Latest Practicable Date.
Mrs. Chen Chou Mei Mei Vivien (陳周薇薇女士), aged 71, is our executive Director and chief operating officer. Mrs. Chen is also one of our Controlling Shareholders. Mrs. Chen joined our Group in November 2017 and is responsible for overseeing the overall operations of our Group.
Mrs. Chen has been a non-executive director of Wing Tai Properties Limited, a company listed on the Main Board of the Stock Exchange (stock code: 0369) since September 2012, and an independent non-executive director of New Silkroutes Group Ltd, a company listed on the Singapore Exchange Limited (stock code: NSG:SP) since June 2015. Mrs. Chen is currently the school supervisor of Yan Chai Hospital No. 2 Secondary School and a vice president of Hong Kong Health Food Association Limited. Mrs. Chen was a member of the Advisory Council on Food and Environmental Hygiene (ACFEH) from April 2015 to April 2019.
Save as disclosed above, Mrs. Chen is not and has not been a director of any other listed company in Hong Kong or overseas in the past three years preceding the Latest Practicable Date.
Mr. Shiu Shu Ming (蕭恕明先生), aged 51, is our executive Director. Mr. Shiu is also one of our Controlling Shareholders. Mr. Shiu joined our Group in November 2017 and is responsible for the financial planning and strategic development of our Group.
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DIRECTORS AND SENIOR MANAGEMENT
Mr. Shiu graduated from the City University of Hong Kong (formerly known as City Polytechnic of Hong Kong) in November 1993 with a bachelor’s degree in accountancy. Mr. Shiu has been a member of the Hong Kong Institute of Certified Public Accountants since May 2016. Mr. Shiu has been an ordinary member of the Hong Kong Securities Institute since August 2008. He is a responsible officer licensed to conduct Type 6 (advising on corporate finance) regulated activity under the SFO.
Mr. Shiu has over 20 years of experience in corporate finance, including mergers and acquisitions, investments, initial public offering and fundraising exercise in various ventures and projects with deal portfolios covering private entities, state-owned enterprises and listed companies in Hong Kong, the PRC, Malaysia, Singapore and Indonesia. Prior to joining our Group, Mr. Shiu was a director, a responsible officer and head of corporate finance of South China Capital Limited, a member of South China Group from April 2008 to August 2010. From August 2010 to September 2013, Mr. Shiu was a director and a responsible officer of Vinco Capital Limited, which is a member of Vinco Financial Group Limited, a company listed on GEM of the Stock Exchange (stock code: 8340). From May 2014 to April 2015, Mr. Shiu was a responsible officer of each of Upbest Assets Management Limited and Upbest Securities Company Limited, both of which are members of Upbest Group Limited, a company listed on the Main Board of the Stock Exchange (stock code: 0335). During the period when Mr. Shiu was a responsible officer of each of the aforesaid four companies, he was primarily responsible for providing corporate advisory services in relation to pre-IPO restructuring and fund-raising exercise, mergers and acquisitions, equity placement and debt financing. In August 2014, Mr. Shiu founded Euto Capital Partners Limited, a boutique financial advisory firm focusing on providing corporate finance advisory services to clients in the Hong Kong, PRC and South East Asian markets, and has been the responsible officer of the firm since then. Mr. Shiu’s major responsibilities include, among others, conducting pre-IPO planning, restructuring and fund-raising exercise and advising on compliance matters. Mr. Shiu was an executive director and the chief investment officer of Agritrade Resources Limited, a company listed on the Main Board of the Stock exchange (stock code: 1131) from November 2010 to March 2014 and from August 2013 to March 2014, respectively, during which he was primarily responsible for the financial and accounting functions of the company, including reviewing the planning and execution of the merger and acquisition activities. Mr. Shiu was re-designated as a non-executive director of Agritrade Resources Limited in 2014 and acted in such capacity from April 2014 to October 2016. Mr. Shiu has been a non-executive director of Golden Century International Holdings Group Limited (formerly known as International Standard Resources Holdings Limited), a company listed on the Main Board of the Stock Exchange (stock code: 0091) since March 2020. Moreover, during the period between 2015 and 2019, Mr. Shiu had been engaged in trading of commodities, primarily crude palm oil.
Mr. Shiu was a director of each of the following companies at the time of or within the twelve months prior to their respective dissolutions:
Place of Nature of business incorporation/ immediately prior to Date of Means of Reason for Name of company establishment dissolution dissolution dissolution dissolution
Information Security Systems Hong Kong Provision of 6 July 2007 Dissolved by Cessation of Consultant Limited information deregistration business technology service
Top Praise Technology Hong Kong Provision of 11 January 2008 Dissolved by Cessation of Limited information deregistration business (啓譽科技有限公司) technology service
Fulcrum Holding Limited Hong Kong Investment holding 6 February 2009 Dissolved by Cessation of (富勤控股有限公司) deregistration business
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DIRECTORS AND SENIOR MANAGEMENT
Mr. Shiu confirmed that the aforementioned companies were solvent immediately prior to their respective dissolution; that there was no wrongful act on his part leading to the dissolution of these companies; and that he is not aware of any actual or potential claim that has been or will be made against him as a result of such dissolution.
Save as disclosed above, Mr. Shiu is not and has not been a director of any other listed company in Hong Kong or overseas in the past three years preceding the Latest Practicable Date.
Independent Non-executive Directors
Mr. David Michael Norman, aged 64, was appointed as our independent non-executive Director on [.]. Mr. Norman is primarily responsible for bringing independent judgment to our Board. Mr. Norman is also a member of each of the audit committee, the remuneration committee and the nomination committee of our Company.
Mr. Norman was awarded a bachelor of arts degree in psychology, philosophy and physiology by the University of Oxford in 1978. Mr. Norman was admitted as a solicitor in England and as a solicitor in Hong Kong in December 1981 and July 1984, respectively. Mr. Norman has been resident in Hong Kong and practising as a solicitor since 1984. Since June 2011, Mr. Norman has been a sole legal practitioner under the name David Norman & Co.
Mr. Norman has over 35 years of experience in mergers and acquisitions and corporate finance for companieslistedinHongKongandelsewhere.Mr.Norman has also extensively advised on listings, secondary debt and equity offerings, takeover matters and both disciplinary and non-disciplinary proceedings of the Stock Exchange. Mr. Norman has been a member of each of the Takeovers and Mergers Panel and the Takeovers Appeal Committee since April 2012 and chairman of the Share Registrars’ Disciplinary Committee since April 2015.
Mr. Norman currently serves as an independent non-executive director of Guoco Group Limited, a company listed on the Main Board of the Stock Exchange (stock code: 0053) and a non-executive director of South China Holdings Company Limited (formerly known as South China (China) Limited), a company listed on the Main Board of the Stock Exchange (stock code: 0413).
Save as disclosed above, Mr. Norman is not and has not been a director of any other listed company in Hong Kong or overseas in the past three years.
Mr. Norman was not a director of any company at the time of or within the twelve months prior to its dissolution.
Mr.IpKoonWingErnest(葉冠榮先生), aged 60, was appointed as our independent non- executive Director on [.]. Mr. Ip is primarily responsible for bringing independent judgment to our Board. He is also the chairman of the audit committee and a member of each of the remuneration committee and the nomination committee of our Company.
Mr. Ip graduated from the Hong Kong Polytechnic University (formerly known as Hong Kong Polytechnic) in 1984 with a professional diploma in accountancy. Mr. Ip is a fellow member of each of the Hong Kong Institute of Certified Public Accountants and Association of Chartered Certified Accountants.
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DIRECTORS AND SENIOR MANAGEMENT
Mr. Ip has over 35 years of experience in accounting and auditing. Mr. Ip joined PricewaterhouseCoopers in April 1985 and became a partner in November 1993. Mr. Ip retired from PricewaterhouseCoopers in July 2019. In August 2019, Mr. Ip joined the Fung Group, which comprises Li & Fung Limited (a company formerly listed on the Main Board of the Stock Exchange), Fung (1937) Management Limited, Global Brands Group Holding Limited (a company listed on the Main Board of the Stock Exchange (stock code: 0787)) and Convenience Retail Asia Limited (a company listed on the Main Board of the Stock Exchange (stock code: 0831)). Mr. Ip is currently the group chief financial officer of the Fung Group.
Mr. Ip has held various key positions in regulatory authorities and business associations. Mr. Ip was a member of the Listing Committee of the Stock Exchange from 2003 to 2009. Mr. Ip was a member of the Dual Filing Advisory Group of the SFC from 2008 to 2014. Currently, Mr. Ip is a member of the Takeovers and Mergers Panel and the Takeovers Appeal Committee. Mr. Ip is a vice president of the Hong Kong Business Accountants Association. He is also a member of the Guangdong Provincial Committee of the Chinese People’s Political Consultative Conference and a vice president of the Council for the Promotion of Guangdong–Hong Kong–Macao Cooperation.
Mr. Ip will be serving as an independent non-executive director of Media Chinese International Limited, a company listed on the Main Board of the Stock Exchange (stock code: 685) and the Main Market of Bursa Malaysia Securities Berhad in Malaysia (stock code: 5090), with effect from 1 July 2021.
Save as disclosed above, Mr. Ip is not and has not been a director of any other listed company in Hong Kong or overseas in the past three years preceding the Latest Practicable Date.
Mr. Wong Kwok Shing Thomas (汪國成先生), Justice of the Peace, aged 66, was appointed as our independent non-executive Director on [.]. Mr. Wong is primarily responsible for bringing independent judgment to our Board. Mr. Wong is also the chairman of the remuneration committee and a member of each of the audit committee and the nomination committee of our Company.
Mr. Wong was awarded a general nursing certificate by the Hong Kong Government Hospitals’ School of General Nursing in March 1976 and a geriatric and rehabilitation nursing certificate by the South Australian Health Commission in July 1979. He then obtained a diploma of teaching (nurse education) and a bachelor of education degree from South Australian College of Advanced Education in April 1982 and February 1984, respectively. Mr. Wong obtained a doctor of philosophy degree from Glasgow Caledonian University in the United Kingdom in October 1995.
Mr. Wong has been a registered nurse in Hong Kong and Australia since March 1976 and January 1977, respectively. Apart from his career as a nurse, Mr. Wong is dedicated to academic teaching. During the period between 1986 and 1999, Mr. Wong held various teaching posts at The Hong Kong Polytechnic University (formerly known as Hong Kong Polytechnic). Mr. Wong was a Professor for the School of Nursing (formerly known as the Department of Nursing and Health Sciences) of The Hong Kong Polytechnic University from September 1999 to July 2003. He was Chair Professor of School of Nursing of The Hong Kong Polytechnic University from August 2003 to August 2008 and a vice president (management) of the offices of the president of the Hong Kong Polytechnic University from April 2009 to January 2011, respectively. Mr. Wong is currently the Acting President of Hong Kong Nang Yan College of Higher Education.
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DIRECTORS AND SENIOR MANAGEMENT
Mr. Wong was a director of Sunway Design Limited, a company incorporated in Hong Kong, within the twelve months prior to its dissolution. Mr. Wong confirmed that Sunway Design Limited was solvent immediately prior to its dissolution, and that he is not aware of any actual or potential claim that has been or will be made against him as a result of such dissolution.
Mr. Wong is not and has not been a director of any other listed company in Hong Kong or overseas in the past three years preceding the Latest Practicable Date.
Other Disclosure Pursuant to Rule 13.51(2) of the Listing Rules
Save as disclosed above, each of our Directors (i) did not hold other positions in our Company or other members of our Group as at the Latest Practicable Date; (ii) had no other relationship with any Directors, senior management or substantial or Controlling Shareholders of our Company as at the Latest Practicable Date; and (iii) did not hold any other directorships in listed companies in the three years prior to the date of this document. Immediately following completion of the [REDACTED] and the [REDACTED], save for the interests in the Shares which are disclosed in the section headed ‘‘Substantial Shareholders’’, each of our Directors will not have any interest in the Shares within the meaning of Part XV of the SFO.
Save as disclosed in this document, none of our Directors have any interest in any business, apart from the business of our Group, which competes or is likely to compete, directly or indirectly, with our business. Please refer to Appendix V for further information about our Directors, including details of the interests of our Directors in the shares and underlying shares of our Company (within the meaning of Part XV of the SFO) and particulars of the service contracts and remuneration.
Save as disclosed herein, to the best of the knowledge, information and belief of our Directors having made all reasonable enquiries, there were no other matters with respect to the appointment of our Directors that need to be brought to the attention of our Shareholders and there was no information concerning our Directors that is required to be disclosed pursuant to Rules 13.51(2)(h) to (v) of the Listing Rules as at the Latest Practicable Date.
SENIOR MANAGEMENT
The table below sets out the information relating to our senior management:
Relationship with Date of joining other Directors and Name Age Position our Group Roles and responsibilities senior management
Mrs. Janette Elizabeth Tsang 55 Director of October 2013 Supervising the clinical Spouse of operations governance and Dr. Kenneth administrative aspects of Tsang our Group
Ms. Kwan Wai Ling 49 Director of finance May 2018 Overseeing the day-to-day N/A (關慧玲女士) finance and accounting operations of our Group
Ms. Yeung Kit Shun 45 Director of business January 2020 Overseeing the business N/A (楊傑遜女士) development and development and marketing marketing of our Group
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DIRECTORS AND SENIOR MANAGEMENT
Mrs. Janette Elizabeth Tsang, aged 55, is our director of operations. Mrs. Tsang joined our Group in October 2013 and is responsible for supervising the clinical governance and administrative aspects of our Group. Mrs. Tsang is the spouse of Dr. Kenneth Tsang, our executive Director, chairman of the Board and chief executive officer.
Mrs. Tsang has been a registered nurse since 1987. She was awarded a certificate of completion for her pre-registration training by the National Board for Nursing, Midwifery and Health Visiting for Scotland, the United Kingdom in April 1987.
Mrs. Tsang has over 30 years of experience in the nursing profession. Prior to joining our Group, Mrs. Tsang had worked in the United Kingdom. She worked as a staff nurse at the Hepatobiliary Professorial Surgical Unit at Glasgow Royal Infirmary, University of Glasgow Medical School from April 1987 to November 1988, Princess Royal Hospital, North Humberside in the United Kingdom from March 1989 to July 1989, Princess Royal Hospital, Telford, Shropshire in the United Kingdom from August 1989 to January 1990, and City General Hospital, University of Keele Medical School, where she was trained as an operating theatre nurse from July 1990 to February 1991, respectively. Mrs. Tsang was a team leader and a senior staff nurse on an acute Hepatobiliary surgical ward and Liver Transplant Unit at the Hammersmith Hospital, Royal Postgraduate Medical School in London, the United Kingdom from February 1991 to May 1993 and a part-time staff nurse at the University of Cambridge Teaching Hospital from July 1995 to October 1995, respectively. Mrs. Tsang also had work experience in Hong Kong. She worked as an out-patient department nurse at the Hong Kong Adventist Hospital from October 1996 to April 2001 and a clinic nurse at Dr. Lauren Bramley and Partners from June 2006 to June 2008, respectively.
Ms. Kwan Wai Ling (關慧玲女士), aged 49, is our director of finance. Ms. Kwan joined our Group as the financial controller in May 2018 and was promoted to our director of finance in November 2020. Ms. Kwan is responsible for overseeing the day-to-day finance and accounting operations of our Group.
Ms. Kwan obtained a bachelor’s degree in business administration, majoring in professional accountancy, and a master’s degree in business administration from the Chinese University of Hong Kong in December 1994 and December 2006, respectively. Ms. Kwan was admitted as a member of the Hong Kong Institute of Certified Public Accountants in April 1998. She was also admitted as a fellow member of the Association of Chartered Certified Accountants in April 2003.
Ms. Kwan has over 20 years of experience in accounting and auditing. Prior to joining our Group, Ms. Kwan worked in various positions in the accounting and finance industry. Ms. Kwan worked for Glass Radcliffe Chan & Wee as an audit assistant and an audit senior from September 1994 to June 1995 and from July 1995 to February 1997. From February 1997 to June 2000, she worked as a senior accountant at Deloitte Touche Tohmatsu. From June 2000 to September 2014, Ms. Kwan worked at Vtech Holdings Limited, a company listed on the Main Board of the Stock Exchange (stock code: 0303), as a management accountant from June 2000 to March 2002, an assistant chief accountant from April 2002 to December 2006, a chief accountant from January 2007 to December 2007 and the financial controller of the group from January 2008 to September 2014, respectively. Ms. Kwan worked as a senior finance manager for The Sincere Company, Limited, a company listed on the Main Board of the Stock Exchange (stock code: 0244), from August 2016 to February 2017.
Ms. Yeung Kit Shun (楊傑遜女士), aged 45, is our director of business development and marketing. Ms. Yeung joined our Group in January 2020 and is responsible for overseeing the business development and marketing of our Group.
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DIRECTORS AND SENIOR MANAGEMENT
Ms. Yeung graduated from The University of Hong Kong with a bachelor’sdegreeinsocial sciences in December 1998. Ms. Yeung was awarded a course certificate in strategic public relations management and crisis communication from the Hong Kong Baptist University in October 2004 and a master’s degree in journalism from the Chinese University of Hong Kong in August 2006. Ms. Yeung also obtained a postgraduate diploma and a master of science degree in corporate governance and directorship from the Hong Kong Baptist University in October 2007 and November 2008, respectively. Ms. Yeung completed the Kellogg-HKUST Executive MBA programme jointly organised by the Kellogg School of Management at Northwestern University and the Hong Kong University of Science and Technology and obtained a master of business administration degree in December 2015.
Ms. Yeung has over 20 years of experience in the public relations industry. Prior to joining our Group, she worked for the Faculty of Medicine of The University of Hong Kong as an executive officer and an administrative assistant of communications (public relations and fundraising) from September 2001 to April 2005 and from May 2005 to January 2006. She worked for the HKU Centennial Campus Development Office, Registry as an administrative assistant of communications from February 2006 to August 2007. Ms. Yeung founded Mind Resource PR Consulting Limited in 2007 and was its director from April 2007 to March 2016. Ms. Yeung was the director of Mind Resource Ogilvy Limited during the period from December 2011 to October 2019. Ms. Yeung has been a strategic counsel of the Greater Bay Area Media Group and Guangdong–Hong Kong–Macao–BayAreaEconomicandTradeAssociation since August 2018.
Ms. Yeung was the third vice-president of the Lions Club of Tuen Mun from July 2017 to June 2018 and has been a member of the fundraising committee of the Hong Kong Society for Rehabilitation since 2017. Also, Ms. Yeung has been a mentor for Healthcare Startups from the Hong Kong Science and Technology Parks Corporation since July 2019. In addition, Ms. Yeung has been a vice-president of the Hong Kong Small and Medium Enterprises Association and the permanent member and the senior healthcare and technology development chairman of the Guangdong-Hong Kong-Macao-Bay Area Economic and Trade Association since July 2018 and August 2018, respectively.
Ms. Yeung was a director of Mind Resource PR Consulting Limited and Mind Resource Ogilvy Limited, each a company incorporated in Hong Kong, within the twelve months prior to their respective dissolutions on 18 March 2016 and 18 October 2019. Ms. Yeung confirmed that Mind Resource PR Consulting Limited and Mind Resource Ogilvy Limited were solvent immediately prior to their respective dissolutions, and that she is not aware of any actual or potential claim that has been or will be made against her as a result of such dissolutions.
None of our senior management members is not or has not been a director of any other listed company in Hong Kong or overseas in the past three years preceding the Latest Practicable Date.
COMPANY SECRETARY
Ms. Kwan Wai Ling (關慧玲女士) was appointed as our company secretary in October 2020. Please refer to the section headed ‘‘— Senior Management’’ above. Ms. Kwan is one of the members of our senior management.
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DIRECTORS AND SENIOR MANAGEMENT
COMPLIANCE ADVISER
We have appointed China Everbright Capital Limited as our compliance adviser pursuant Rule 3A.19 of the Listing Rules. Pursuant to Rule 3A.23 of the Listing Rules, the compliance adviser will advise us:
(i) before the publication of any regulatory announcements, circulars or financial reports under any applicable laws, rules, codes and guidelines;
(ii) whereweproposetousethe[REDACTED]ofthe [REDACTED] in a manner different from that detailed in this document or where our business activities, development or results deviate from any forecast, estimate or other information in this document; and
(iii) where the Stock Exchange makes an inquiry to us regarding unusual movements in the price or trading volume of our Shares or other issues under Rule 13.10 of the Listing Rules.
The term of appointment of the compliance adviser of our Company commences on the [REDACTED] and end on the date on which we comply with Rule 13.46 of the Listing Rules in respect of our financial results for the first full financial year commencing after the [REDACTED] and such appointment may be subject to extension by agreement.
BOARD COMMITTEES
Our Board appoints various board committees. We have formed three board committees in accordance with the corporate governance requirements under the Listing Rules, namely, the audit committee, the remuneration committee and the nomination committee.
Audit Committee
Our Company has established an audit committee with written terms of reference in compliance with Rule 3.21 of the Listing Rules and paragraphs C.3 and D.3 of the Corporate Governance Code as set out in Appendix 14 to the Listing Rules. The primary duties of the audit committee are to make recommendations to our Board on the appointment, re-appointment and replacement of external auditors; review the financial statements and material advice in respect of financial reporting; oversee the internal control system of our Company; and perform other duties and responsibilities as may be assigned by our Board.
The audit committee consists of three members, all of whom are independent non-executive Directors, namely, Mr. David Michael Norman, Mr. Ip Koon Wing Ernest and Mr. Wong Kwok Shing Thomas. Mr. Ip Koon Wing Ernest is the chairman of the audit committee.
Remuneration Committee
Our Company has established a remuneration committee with written terms of reference in compliance with Rule 3.25 of the Listing Rules and paragraph B1 of the Corporate Governance Code as set out in Appendix 14 to the Listing Rules. The primary duties of the remuneration committee are to make recommendations to our Board on the remuneration policy and structure relating to all Directors and the senior management of our Group; determine the terms of remuneration and benefit package of each of our executive Directors and senior management members; and review and approve performance- based remuneration.
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DIRECTORS AND SENIOR MANAGEMENT
The remuneration committee consists of five members, comprising all the independent non- executive Directors, namely, Mr. David Michael Norman, Mr. Ip Koon Wing Ernest and Mr. Wong Kwok Shing Thomas, and two executive Directors, namely, Dr. Kenneth Tsang and Mr. Shiu. Mr. Wong Kwok Shing Thomas is the chairman of the remuneration committee.
Nomination Committee
Our Company has established a nomination committee with written terms of reference in compliance with paragraph A.5 of the Corporate Governance Code as set out in Appendix 14 to the Listing Rules. The primary duties of the nomination committee are to review the structure, size and composition of our Board, assess the independence of the independent non-executive Directors and make recommendations to our Board about the relevant matters in relation to the appointment and re- appointment of Directors and the succession planning for our Directors.
The nomination committee consists of five members, comprising all the independent non-executive Directors, namely, Mr. David Michael Norman, Mr. Ip Koon Wing Ernest and Mr. Wong Kwok Shing Thomas, and two executive Directors, namely, Dr. Kenneth Tsang and Mr. Shiu. Dr. Kenneth Tsang is the chairman of the nomination committee.
BOARD DIVERSITY
With a view to enhancing the quality of our Board’s performance, we have adopted a board diversity policy, which sets out the approach to achieve diversity on our Board. The board diversity policy provides that our Company should endeavour to ensure that members of our Board have the appropriate skills, experience and diversity of perspectives that are required to support the execution of its business strategy. In accordance with the board diversity policy, we seek to achieve diversity on our Board through the consideration of a number of factors, including but not limited to, professional experience, skills and knowledge, gender, age, cultural and educational background, ethnicity and length of service. Upon [REDACTED], our nomination committee will review the board diversity policy from time to time. We will assess annually the diversity profile of our Board, including gender balance, and take opportunities to increase the proportion of female members over time. We will report the implementation of our board diversity policy on an annual basis.
COMPLIANCE WITH CORPORATE GOVERNANCE CODE
Our Board recognises the importance of good corporate governance in management and internal procedures. Code provision A.2.1 of the Corporate Governance Code as set out in Appendix 14 to the Listing Rules provides that the responsibilities between the chairman and the chief executive officer should be segregated and should not be performed by the same individual. However, we do not have a separate chairman and chief executive officer and Dr. Kenneth Tsang currently performs these two roles. Dr. Kenneth Tsang is our founder and has been managing our business and overall strategic development since the establishment of our Group. Given Dr. Kenneth Tsang’s familiarity with the operations of our Group, we will benefit from consistent leadership as well as effective and efficient management. Further, we have implemented a check-and-balance mechanism through our Board and the three independent non-executive Directors. In addition to Dr. Kenneth Tsang, our Board consists of three executive Directors who are also familiar with the overall operations and business management of our Company. The three independent non-executive Directors are able to retain independence of character and judgment and express their views and make their independent judgment without any constraint. Our Company will seek our Board’s views and advice on major issues. As such, our Directors are of the view that vesting the roles of both the chairman of our Board and the chief
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DIRECTORS AND SENIOR MANAGEMENT executive officer in Dr. Kenneth Tsang is in the best interest of our Group. Our Directors further consider that the balance of power and authority within our Group will not be impaired and hence the interest of minority Shareholders would not be adversely affected. We will continue to review and consider the separation of the roles of chairman of our Board and the chief executive officer at an appropriate time by taking the overall business development into account.
REMUNERATION OF DIRECTORS AND SENIOR MANAGEMENT
Our Directors and members of the senior management receive remuneration in the form of salaries and allowances, bonuses and other benefits in kind such as contributions to pension plans.
The aggregate amount of remuneration (including fees, salaries, contributions to pension schemes, discretionary bonuses, housing and other allowances and other benefits in kind) paid by us to our Directors for the three years ended 31 March 2021 was nil, nil and nil, respectively. Save as disclosed above, no other emoluments have been paid or are payable by our Company in respect of the three years ended 31 March 2021.
The aggregate amount of remuneration (including fees, salaries, contributions to pension schemes, discretionary bonuses, housing and other allowances and other benefits in kind) paid by us to our Directors and the five highest paid individuals for the three years ended 31 March 2021 was approximately HK$4.8 million, HK$7.1 million and HK$8.6 million, respectively.
During the Track Record Period, no remuneration was paid by our Company to, or receivable by, our Directors or the five highest paid individuals as an inducement to join or upon joining our Company. No compensation was paid by our Company to, or receivable by, our Directors or the five highest paid individuals during the Track Record Period for loss of office. None of our Directors waived or agreed to waive any remuneration during the Track Record Period.
Save as disclosed in this document, no other payments have been paid, or are payable, by our Group to our Directors or the five highest paid individuals during the Track Record Period. Under the arrangements currently in force, the aggregate remuneration (excluding payment pursuant to any discretionary benefits or bonuses or other fringe benefits) of our Directors for the year ending 31 March 2022 is estimated to be approximately HK$0.8 million.
For additional information on the remuneration of our Directors during the Track Record Period and information on the five highest paid individuals, please refer to Note 8 to the Accountant’s Report contained in Appendix I to this document.
OURSUCCESSIONPLAN
We have established a succession plan. The primary objective of our succession plan is to ensure the effective performance of our Group through leadership continuity and selection of suitable candidates for key positions. Our succession plan will be reviewed on a continuous basis, taking into account the recommendations made by our nomination committee.
In light of our succession plan, our nomination committee will perform the following:
. setting the criteria to be eligible for the candidacy, including professional qualifications, medical service experience, management experience;
. identifying potential individual(s) (whether within or outside our Group) who possess(es) the personality, competency and leadership skills that may duly serve our Company and its shareholders; and
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DIRECTORS AND SENIOR MANAGEMENT
. evaluating succession planning efforts, reporting the findings and making recommendations to our Board.
As advised by our executive Directors, each of them currently plays a positive role in overseeing the operations of our Group and has no plan or desire to step down in the next few years. In addition, our Directors believe that in the event that any of our executive Directors should become unable to perform his/her duties or retires from his/her directorship in due course, our succession plan will ensure that we will be able to seek candidates capable of taking on the leadership role. Pursuant to our present succession plan, we have potential candidates for the directorship of our Group if there is a need for a replacement.
THE SHARE OPTION SCHEME
We have conditionally adopted the Share Option Scheme. The principal terms of the Share Option Scheme are summarised under the section headed ‘‘Statutory and General Information — G. Share Option Scheme’’ in Appendix V to this document.
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SUBSTANTIAL SHAREHOLDERS
SUBSTANTIAL SHAREHOLDERS
So far as our Directors are aware, immediately following the completion of the [REDACTED] and the [REDACTED] (without taking into account any Shares which may be allotted and issued pursuant to the exercise of the [REDACTED] or any options which may be granted under the Share Option Scheme), based on the information available on the date of this document, each of the following persons/entities will have an interest or a short position in the Shares or underlying Shares which would be required to be disclosed to our Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO, or, directly or indirectly, be interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other member of our Group:
Interests in Our Company
Number of Shares Percentage of held immediately shareholding Percentage of after the immediately after Number of Shares shareholding as at [REDACTED] and the [REDACTED] Capacity/Nature held as at the date thedateofthis the and the Name of interest of this document(1) document [REDACTED](1) [REDACTED]
CHG(2) Beneficial owner 726,250 (L) 67.66%
Dr. Kenneth Tsang(2) Interest in a controlled 726,250 (L) 67.66% corporation/Interest of concert party
Peak Summit(2) Interest in a controlled 726,250 (L) 67.66% corporation/Interest of concert party
Dr. Adam Leung(2) Interest in a controlled 726,250 (L) 67.66% corporation/Interest of concert party
Heroic Wealth(2) Interest in a controlled 726,250 (L) 67.66% [REDACTED] corporation/Interest of concert party
Dr. Jason Fong(2) Interest in a controlled 726,250 (L) 67.66% corporation/Interest of concert party
Mastermind Intelligence(2) Interest in a controlled 726,250 (L) 67.66% corporation/Interest of concert party
Dr. Chu Leung Wing(2) Interest in a controlled 726,250 (L) 67.66% corporation/Interest of concert party
Grateful Mind(2) Interest in a controlled 726,250 (L) 67.66% corporation/Interest of concert party
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SUBSTANTIAL SHAREHOLDERS
Number of Shares Percentage of held immediately shareholding Percentage of after the immediately after Number of Shares shareholding as at [REDACTED] and the [REDACTED] Capacity/Nature held as at the date thedateofthis the and the Name of interest of this document(1) document [REDACTED](1) [REDACTED]
Dr. Jenny Tsang(2) Interest in a controlled 726,250 (L) 67.66% corporation/Interest of concert party
Property Linkage(2) Interest in a controlled 726,250 (L) 67.66% corporation/Interest of concert party
Mr. Shiu(2) Interest in a controlled 726,250 (L) 67.66% corporation/Interest of concert party [REDACTED] Wealth Basin(2) Interest in a controlled 726,250 (L) 67.66% corporation/Interest of concert party
Mrs. Chen(2) Interest in a controlled 726,250 (L) 67.66% corporation/Interest of concert party
Les Trois(2) Interest in a controlled 726,250 (L) 67.66% corporation/Interest of concert party
Notes:
(1) The letter ‘‘L’’ denotes the person’s/entity’s long position (as defined under Part XV of the SFO) in the Shares.
(2) CHG is beneficially owned as to 42.42% by Peak Summit (which is wholly owned by Dr. Kenneth Tsang), 23.74% by Heroic Wealth (which is wholly owned by Dr. Adam Leung), 10.74% by Mastermind Intelligence (which is wholly owned by Dr. Jason Fong), 2.46% by Grateful Mind (which is wholly owned by Dr. Chu Leung Wing), 6.54% by Property Linkage (which is wholly owned by Dr. Jenny Tsang), 9.10% by Wealth Basin (which is wholly owned by Mr. Shiu) and 5.00% by Les Trois (which is wholly owned by Mrs. Chen). On 23 October 2020, CHG, Dr. Kenneth Tsang, Dr. Adam Leung, Dr. Jason Fong, Dr. Chu Leung Wing, Dr. Jenny Tsang, Mr. Shiu, Mrs. Chen, Peak Summit, Heroic Wealth, Mastermind Intelligence, Grateful Mind, Property Linkage, Wealth Basin and Les Trois entered into the Concert Party Deed, confirming, among other things, that they are parties acting in concert sincethedateonwhichtheybecameinterested in our Group, and will continue to act in concert with each other after [REDACTED]. Accordingly, by virtue of the SFO, Dr. Kenneth Tsang, Dr. Adam Leung, Dr. Jason Fong, Dr. Chu Leung Wing, Dr. Jenny Tsang, Mr. Shiu, Mrs. Chen, Peak Summit, Heroic Wealth, Mastermind Intelligence, Grateful Mind, Property Linkage, Wealth Basin and Les Trois are deemed to be interested in all the Shares held by CHG.
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SUBSTANTIAL SHAREHOLDERS
Interests in Members of Our Group
Number of Percentage of Percentage of shares held shareholding Number of shareholding immediately immediately shares held as as at the after the after the Capacity/ at the Latest Latest [REDACTED] [REDACTED] Nature of Practicable Practicable and the and the Name Company concerned interest Date Date [REDACTED] [REDACTED]
Dr. Ooi Gaik Cheng HKID (Lab) Beneficial 1,300 13% owner
Mr. Teo Man Lung Peter HKID (Lab) Beneficial 1,000 10% [REDACTED] owner
Ms. Tang Wan Yin HKID (Lab) Beneficial 1,000 10% owner
Save as disclosed above, our Directors are not aware of any person/entity who/which will, immediately following the [REDACTED] and the [REDACTED] (without taking into account any Shares which may be allotted and issued pursuant to the exercise of the [REDACTED] or any options which may be granted under the Share Option Scheme), have an interest or a short position in the Shares or underlying Shares which would be required to be disclosed to our Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO, or, directly or indirectly, be interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any member of our Group.
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SHARE CAPITAL
SHARE CAPITAL
The following is a description of the share capital of our Company in issue and to be issued as fully paid or credited as fully paid immediately after the [REDACTED] and the [REDACTED] (without taking into account any Shares which may be allotted and issued pursuant to the exercise of the [REDACTED] or any options which may be granted under the Share Option Scheme):
Authorised share capital
Nominal value HK$
38,000,000,000 Shares of par value of HK$0.00001 each 380,000
Shares in issue and to be issued, fully paid or credited as fully paid immediately upon completion of the [REDACTED] and the [REDACTED]
Nominal value HK$
1,073,307 Shares in issue as at the date of this document 10.73307 [REDACTED] Shares to be issued pursuant to the [REDACTED] [REDACTED] [REDACTED] Shares to be issued pursuant to the [REDACTED] [REDACTED]
[REDACTED] Total [REDACTED]
Assuming the [REDACTED] is exercised in full, (i) the number of Shares to be issued pursuant to the [REDACTED] will be [REDACTED] Shares (with additional [REDACTED] Shares to be allotted and issued pursuant to the [REDACTED]); and (ii) the issued share capital of our Company immediately following completion of the [REDACTED] will be HK$[REDACTED] divided into [REDACTED] Shares.
ASSUMPTIONS
The table above assumes that the [REDACTED] becomes unconditional and the Shares are issued pursuant to the [REDACTED] and the [REDACTED]. It does not take into account any Shares which may be allotted and issued pursuant to the exercise of the [REDACTED] or the options which may be granted under the Share Option Scheme or any Shares which may be issued or repurchased by us pursuant to the general mandates granted to our Directors to issue or repurchase Shares as described below.
MINIMUM PUBLIC FLOAT
Pursuant to Rule 8.08(1) of the Listing Rules, at the time of the [REDACTED] and at all times thereafter, our Company must maintain the minimum prescribed percentage of 25% of our issued share capital in the hands of the public (as defined under the Listing Rules).
RANKING
The [REDACTED] are ordinary shares in the share capital of our Company and will rank pari passu in all respects with all the Shares currently in issue or to be issued as mentioned in this document, and in particular, will rank in full for all dividends or other distributions declared, made or paid on the Shares in respect of a record date which falls after the date of this document save for the entitlement under the [REDACTED].
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SHARE CAPITAL
THE SHARE OPTION SCHEME
Our Company has conditionally adopted the Share Option Scheme. The principal terms of the Share Option Scheme are summarised in the section headed ‘‘Statutory and General Information — G. Share Option Scheme’’ in Appendix V to this document.
Our Group did not have any outstanding share options, warrants, convertible instruments, pre- [REDACTED] share options or similar rights convertible into Shares as at the Latest Practicable Date.
[REDACTED]
Pursuant to the resolutions in writing of the Shareholders passed on [.], subject to the share premium account of our Company being credited as a result of the allotment and issue of the [REDACTED] pursuant to the [REDACTED], our Directors were authorised to allot and issue a total of [REDACTED] Shares credited as fully paid to our Shareholders on the register of members of our Company at the close of business of the business day immediately preceding the [REDACTED] (Hong Kong time), or such other time as a Director in his/her absolute discretion may determine, by way of capitalisation of the sum of HK$[REDACTED] standing to the credit of the share premium account of our Company, and the Shares to be allotted and issued pursuant to this resolution shall rank pari passu in all respects with the existing issued Shares. For further details, please see the section headed ‘‘Statutory and General Information — A. Further information about Our Company — 3. Resolutions in writing passed by our Shareholders on [.]’’ in Appendix V to this document.
CIRCUMSTANCES UNDER WHICH MEETING IS REQUIRED
As a matter of the Companies Act, an exempted company is not required by law to convene any general meetings or class meetings unless the articles of association otherwise provide. The holding of general meeting or class meeting is prescribed for under the articles of association of a company and the Companies Act. Accordingly, we will hold general meetings as prescribed under our Articles of Association and the Companies Act. A summary of our Articles of Association is set out in Appendix IV to this document.
GENERAL MANDATES GRANTED TO OUR DIRECTORS
Subject to the [REDACTED] becoming unconditional, general mandates have been granted to our Directors to allot and issue Shares and to repurchase Shares.
For further details of this general mandate. Please see the section headed ‘‘Statutory and General Information — A. Further Information about Our Company — 3. Resolutions in writing passed by our Shareholders on [.]’’ in Appendix V to this document.
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FINANCIAL INFORMATION
You should read this section in conjunction with our audited consolidated financial statements, including the notes thereto, as set out in the Accountant’s Report included in Appendix I to this document. Our Group’s consolidated financial statements have been prepared in accordance with the Hong Kong Financial Reporting Standards (‘‘HKFRS’’). You should read the entire Accountant’s Report and not merely rely on the information contained in this section.
The following discussion and analysis contains certain forward-looking statements that reflect the current views with respect to future events and financial performance. These statements are based on assumptions and analyses made by our Group in light of our experience and perception of historical trends, current conditions and expected future developments, as well as other factors our Group believes are appropriate under the circumstances. However, whether actual outcomes and developments will meet our Group’s expectations and projections depends on a number of risks and uncertainties over which our Group does not have control. For further information, you should see the section headed ‘‘Risk Factors’’.
The following discussion and analysis also contain certain amounts and percentage figures that have been subject to rounding adjustments. Accordingly, figures shown as totals in certain tables may not be an arithmetic aggregation of the figures preceding them and all monetary amounts shown are approximate amounts only.
For the purposes of this section, each of the years ended 31 March 2019, 2020 and 2021 is also respectively referred to and interchangeably used as ‘‘FY2019’’, ‘‘FY2020’’ and ‘‘FY2021’’.
OVERVIEW
We are an integrated private medical services provider in Hong Kong with specialist doctors renowned in their respective fields of expertise, providing specialist medical services and complemented by various allied health services and medical management services. According to Frost & Sullivan, we ranked sixth as a multi-specialties medical centre operator in Hong Kong with a market share of approximately 1.3% in terms of revenue generated from provision of specialty services (including internal medicine and surgery related specialty services) in 2019, and ranked third in terms of total revenue generated from provision of internal medicine specialty services, amongst all private multi- specialties medical centre operators in Hong Kong in 2019. As at the Latest Practicable Date, we operated six Medical Centres, which comprise of three multi-specialties clinics, one psychiatric centre, one geriatric medical centre, and one paediatric centre under our brand ‘‘Hong Kong Medical Consultants’’; and we operated three Diagnostic Centres, all of which are located in Central, Hong Kong. Our clients mainly include individuals seeking high quality medical treatment from our well regarded specialists.
We are committed to delivering efficient and exemplary medical services across specialties and disciplines. Our medical services business operates under two main service streams:
1. Specialist medical services: we provide a wide range of specialty services including cardiology, respiratory medicine, gastroenterology & hepatology, nephrology, neurology, psychiatry, endocrinology, diabetes & metabolism, geriatric medicine, oncology, paediatrics and rheumatology at our Medical Centres as well as inpatient services at private hospitals in Hong Kong; and
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FINANCIAL INFORMATION
2. Allied health services: we provide various allied health services including clinical psychology, speech therapy, nutritional therapy and psychological counselling at our Medical Centres as well as imaging, diagnostic and laboratory services at our Diagnostic Centres.
To a much lesser extent, we provide medical management services to certain medical practitioners in relation to administrative and operational functions such as clinic management, accounting and finance, human resources, central procurement of pharmaceuticals and clinical supplies, facilities and lease management, regulatory compliance, marketing and business development, medical record management and information technology systems.
As at the Latest Practicable Date, our professional team consisted of 15 specialist doctors working for us on a full time and an exclusive basis, covering 11 specialties and 13 Panel Specialists working for us on a non-exclusive basis, covering ten specialties. For details, please see the section headed ‘‘Business — Our Professional Team’’. In addition, we provide ophthalmology services under our brand through our management services arrangement with three ophthalmologists operating at the HKMC Ophthalmology Centre.
During the Track Record Period, we recorded revenue of HK$195.7 million, HK$248.4 million and HK$251.4 million for the years ended 31 March 2019, 2020 and 2021, respectively; and profit for the year of HK$60.0 million, HK$49.7 million and HK$20.4 million over the same respective periods.
BASIS OF PRESENTATION
Our Company was incorporated in the Cayman Islands on 21 September 2020 as an exempted company with limited liability under the Companies Act. In preparation of the [REDACTED], our Group underwent the Reorganisation. As a result of the Reorganisation, our Company became the holding company of the companies now comprising the Group which were under the control of our Controlling Shareholder, Dr. Kenneth Tsang. For further details of the Reorganisation, please see the section headed ‘‘History, Reorganisation and Corporate Structure’’ and Note 1 to our consolidated financial statements set out in the Accountant’s Report included in Appendix I to this document.
The Group’s historical financial information was prepared in accordance with HKFRS and consistently adopted throughout the Track Record Period all standards and amendments that were effective for accounting periods beginning on or before 1 August 2020, which include HKFRS 9 ‘‘Financial Instruments’’, HKFRS 15 ‘‘Revenue from contracts with customers, HKFRS 16 ‘‘Leases’’ and Amendment to HKFRS 16.
Our financial statements during the Track Record Period may not be easily comparable between each period. Our core business, which involves the provision of medical services, did not start until November 2017 when our Founding Doctors joined our platform as specialist doctors. Prior to November 2017, our business provided only medical management services to certain specialist doctors, including our Controlling Shareholder, Dr. Kenneth Tsang. In addition, five of our Equity Partner Doctors joined us as specialist doctors at various dates during the year ended 31 March 2019, which contributed significantly to our revenue growth for both FY2019 and FY2020. In October 2019, we acquired Hong Kong Imaging, which has two imaging and diagnoses centres and one laboratory located in Central in order to supplement our medical services. The acquisition of Hong Kong Imaging did not constitute a major transaction for the purposes of Main Board Listing Rule 4.05A. However, due to the combination of the above factors, changes in our financial statements during the Track Record Period were significant, and they may not be easily comparable.
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FINANCIAL INFORMATION
SIGNIFICANT FACTORS AFFECTING OUR FINANCIAL RESULTS
Our results of operations and financial performance have been and will continue to be affected by a number of factors, many of which may be beyond our control, including those factors set out in the section headed ‘‘Risk Factors’’ and those set out below.
Number of Patient Visits/Admissions and Average Spending Per Patient
The financial performance of our Group is primarily affected by the number of patient visits/ hospital admissions and their respective spending per visit/admission. During the Track Record Period, our number of patient visits and inpatient hospital admissions increased from 33,992 for the year ended 31 March 2019 to 60,099 for the year ended 31 March 2021, representing an increase of 76.8%, mainly because five Equity Partner Doctors joined us as specialist doctors at various times during the year ended 31 March 2019 and we acquired Hong Kong Imaging in October 2019. During FY2019, Dr. Matthew Ng (gastroenterology and hepatology) and Dr. Lo Wai Kei (nephrology) joined us as specialist doctors in April 2018, Dr. Clement Lee (cardiology) joined us as a specialist doctor in May 2018, Dr. Boron Cheng (cardiology) joined us as a specialist doctor in July 2018, and Dr. Ada Ma (oncology) joined us as a specialist doctor in October 2018.
Our number of patient visits/admissions increased from 33,992 for the year ended 31 March 2019 to 48,855 for the year ended 31 March 2020, representing an increase of 43.7%, mainly due to (i) the full-year of service contribution from the five Equity Partner Doctors in FY2020 that joined at various dates during FY2019, (ii) Dr. Eddie Cheung (paediatrics) joined us as a specialist doctor in August 2019 and (iii) we acquired Hong Kong Imaging in October 2019.
Our number of patient visits/admissions increased from 48,855 for year ended 31 March 2020 to 60,099 for the year ended 31 March 2021, representing an increase of 23.0%, mainly due to (i) Dr. Eddie Cheung joined us as a specialist doctor in August 2019 and (ii) we acquired Hong Kong Imaging in October 2019.
For further information on our number of patient visits/admissions and average spending per patient visit/admission, please see the section headed ‘‘— Description of Selected Items of the Consolidated Statements of Comprehensive Income — Revenue’’ below. Our revenue will continue to be affected by both number of patient visits/admissions and average spending per patient in the future. Thus, any changes to these two factors will affect our revenue and results of operation.
Ability to Attract and Retain Medical and Healthcare Professionals
We depend on our medical team to provide medical services to our clients who look for quality multi-disciplinary specialist medical services. Competition for skilled and qualified medical professionals is intense. While we have not experienced any material disputes with any of our specialist doctors during the Track Record Period and our key doctors, including our Founding Doctors and Equity Partner Doctors, will enter into the New Service Agreements that are effective upon the [REDACTED] and do not expire until 31 March 2026, there is no guarantee that we will be able to continue to retain them. In addition, it is possible that our specialist doctors and other healthcare professionals may decide to cease serving our Group for reasons beyond our control. In such event, our business and financial performance may be adversely affected. Our Group recruits new members for our medical and healthcare professional team on a continuous basis, and recruitment of suitable candidates can be competitive as we compete with both public and private healthcare sector, and the supply of specialists doctors and allied health professionals is limited. If we are not able to recruit suitable candidates, our business and
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FINANCIAL INFORMATION financial performance may be adversely affected. Please see the section headed ‘‘Risk Factors — Risks Relating to Our Business — We are dependent on our professional team of specialist doctors and our ability to attract and retain skilled and qualified healthcare professionals’’.
Fluctuation in Service Fees that We Pay Our Equity Partner Doctors and Panel Specialists
As at the Latest Practicable Date, we had 15 specialist doctors that work for us on an exclusive basis. Depending on the individual arrangements with each of our specialist doctors, we offer different remuneration packages based on various factors, which include but is not limited to, their respective medical specialty, experience, qualifications, services provided, prior remuneration package, as well as commercial negotiation with the respective medical practitioner to attract or retain him/her in light of the competitive healthcare services market in Hong Kong where there is shortage of medical practitioners. Accordingly, the compensation arrangements for these doctors differ based on whether the doctor is a Founding Doctor, Equity Partner Doctor, Employee Doctor or Panel Specialist. Our Founding Doctors, Equity Partner Doctors and Panel Specialists are considered independent contractors; and we paid service fees to our Equity Partner Doctors and Panel Specialists during the Track Record Period, but we did not pay any service fees to our Founding Doctors. Our Employee Doctors do not receive service fees, but instead are provided with wages and salaries, as they are our employees.
Please see the section headed ‘‘Business — Our Professional Team — Compensation Arrangements with Specialist Doctors and Panel Specialists’’ for further details on the various compensation arrangements we have with our specialist doctors and Panel Specialists. Please also see the section headed ‘‘Risk Factors — RisksRelatingtoOurBusiness— The service fees we pay to our specialist doctors that are Founding Doctors and Equity Partner Doctors have had, and are expected to continue to have, a significant impact on our business, financial position and profitability’’.
For each of the three years ended 31 March 2021, the total service fees paid to our specialist doctors amounted to approximately HK$41.9 million, HK$66.1 million, and HK$64.2 million, respectively, accounting for 21.4%, 26.6% and 25.5% of our total revenue for the same respective periods. We cannot assure you that our remuneration costs will not increase or that we will be able to transfer such costs to our clients, which may in turn materially and adversely affect our profitability of our business operations.
For illustration purposes only, the following sensitivity analysis shows the impact of hypothetical fluctuations in our service fees that we paid to our specialist doctors on our profit before tax during the Track Record Period, assuming the fluctuation of doctor fee to be 5% and 10% during each of the three years ended 31 March 2021 with other variables remaining constant:
Decrease/increase in our profit before tax Year ended 31 March 2019 2020 2021 HK$’000 HK$’000 HK$’000
Hypothetical fluctuation of service fees to our specialist doctors Assuming increase/decrease of 5.0% –/+ 2,092 –/+ 3,306 –/+ 3,212 Assuming increase/decrease of 10.0% –/+ 4,185 –/+ 6,613 –/+ 6,424
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FINANCIAL INFORMATION
Fluctuation in Employee Benefit Expenses
Our employee benefit expenses mainly represent wages and salaries and other remuneration paid to our Employee Doctors, pharmacists, nurses, healthcare assistants, as well as finance, administrative and other staff for the operation of Medical Centres and Diagnostic Centres. Employee benefit expenses exclude service fees we pay to our Equity Partner Doctors and Panel Specialists as discussed above. For each of the three years ended 31 March 2021, we incurred employee benefit expenses of HK$15.7 million, HK$28.1 million and HK$32.8 million, representing 8.0%, 11.3% and 13.0% of our revenue for the same periods, respectively. Employee benefit expenses were one of the major components of our cost of sales and administrative expenses during the Track Record Period. As a result, an increase in employee benefit expenses may have a significant impact on our result of operations.
For illustration purposes only, the following sensitivity analysis shows the impact of hypothetical fluctuations in our employee benefit expenses on our profit before tax during the Track Record Period, assuming the fluctuation of employee benefit expenses to be 5% and 10% during each of the three years ended 31 March 2021 with other variables remaining constant:
Decrease/increase in our profit before tax Year ended 31 March 2019 2020 2021 HK$’000 HK$’000 HK$’000
Hypothetical fluctuation of employee benefit expenses Assuming increase/decrease of 5.0% –/+ 785 –/+ 1,405 –/+ 1,639 Assuming increase/decrease of 10.0% –/+ 1,569 –/+ 2,810 –/+ 3,279
FluctuationinRentalExpenses
We lease various properties for our operations, including our Medical Centres and Diagnostic Centres. Leases are recognised as right-of-use assets with corresponding liabilities at the date of which the respective leased asset is available for use by the Group. Right-of-use assets are generally depreciated over the lease term on a straight-line basis. For each of the three years ended 31 March 2021, we recorded right-of-use assets of HK$16.9 million, HK$23.2 million and HK$225.8 million, representing 6.6%, 6.9% and 51.1% of our total assets for the same period, respectively. Right-of-use assets increased significantly in FY2021 mainly due to the new lease of the Integrated Flagship Medical Centre in February 2021 and the leasehold land portion of our purchase of Integrated Diagnostic Centre in March 2021. Depreciation of our right-of-use assets was HK$8.2 million, HK$14.7 million and HK$19.1 million for each of the three years ended 31 March 2021, respectively, and represented 4.2%, 5.9% and 7.6% of our revenue for the same period, respectively. Depreciation of right-of-use assets were one of the major components of our cost of sales and administrative expenses during the Track Record Period. As a result, an increase in such amounts may have a significant impact on our result of operations.
For illustration purposes only, the following sensitivity analysis shows the impact of hypothetical fluctuations in our depreciation right-of-use assets on our profit before tax during the Track Record
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FINANCIAL INFORMATION
Period, assuming the fluctuation of depreciation amount to be 5% and 10% during each of the three years ended 31 March 2021 with other variables remaining constant:
Decrease/increase in our profit before tax Year ended 31 March 2019 2020 2021 HK$’000 HK$’000 HK$’000
Hypothetical fluctuation of depreciation of right-of-use assets Assuming increase/decrease of 5.0% –/+ 409 –/+ 733 –/+ 957 Assuming increase/decrease of 10.0% –/+ 818 –/+ 1,467 –/+ 1,913
CRITICAL ACCOUNTING POLICIES, ESTIMATE AND JUDGEMENTS
Our Directors have identified certain accounting policies that are significant to the preparation of our consolidated financial statements. The significant accounting policies which are important for an understanding of our financial condition and results of operation are set out in detail in Note 2 to our consolidated financial statements set out in the Accountant’s Report included in Appendix I to this document. Some of the accounting policies involve subjective assumptions and estimates, as well as complex judgements relating to accounting items. The significant accounting estimates and judgements are set out in detail in Note 4 to our consolidated financial statements set out in the Accountant’s Report included in Appendix I to this document. The determination of these items requires management judgements based on information and financial data that may change in future periods.
ADOPTION OF HKFRS 9, HKFRS 15 AND HKFRS 16
To make our consolidated financial statements comparable on a period-to-period basis and allow the investors to better understand our financial performance and position, HKFRS 9 — Financial instruments (‘‘HKFRS 9’’), HKFRS 15 — Revenue from Contracts with Customers (‘‘HKFRS 15’’), and HKFRS 16 — Leases (‘‘HKFRS 16’’)havebeenadoptedandappliedconsistentlyinour consolidated financial statements since the beginning of, and throughout, the Track Record Period, in lieu of HKAS 39 — Financial instruments: Recognition and measurement (‘‘HKAS 39’’), HKAS 18 — Revenue (‘‘HKAS 18’’), and HKAS 17 — Leases (‘‘HKAS 17’’), respectively.
Based on our internal assessments, the adoption of HKFRS 9 and HKFRS 15, as compared to the requirements of HKAS 39 and HKAS 18, respectively, had no significant impact on our financial position and performance.
Impact of Adoption of HKFRS 16
Under HKAS 17, operating lease payments are charged to the combined income statements on a straight-line basis over the period of the lease, and operating lease commitments are disclosed separately in a note to the consolidated financial statements and are not recognised in the consolidated statements of financial position. Under HKFRS 16, all leases (except for those with lease term of less than 12 months or of low value) are recognised in the form of assets (being the right-of-use assets) and financial liabilities (being the lease liabilities) on our consolidated statements of financial position at the commencement of respective leases.
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FINANCIAL INFORMATION
Based on our internal assessments, if HKAS 17 had been adopted, the impact on profit for the Track Record Period would have been insignificant, and the impact on total assets and liabilities would have been significant. The table below summarises the impacts of the adoption of HKFRS 16 on certain key items of our consolidated financial statements and key ratios:
Currently reported under As if reported HKFRS 16 under HKAS 17 Difference (a) (b) (a)–(b)
Profit for the year (in HK$’000) — 31 March 2019 59,960 60,143 (183) — 31 March 2020 49,693 49,794 (101) — 31 March 2021 20,393 23,595 (3,202)
Total assets (in HK$’000) — As at 31 March 2019 256,412 239,573 16,839 — As at 31 March 2020 336,738 313,702 23,036 — As at 31 March 2021 441,933 351,914 90,019
Total liabilities (in HK$’000) — As at 31 March 2019 40,459 23,772 16,687 — As at 31 March 2020 122,282 99,297 22,985 — As at 31 March 2021 205,903 112,733 93,170
Net assets (in HK$’000) — As at 31 March 2019 215,953 215,801 152 — As at 31 March 2020 214,456 214,405 51 — As at 31 March 2021 236,030 239,181 (3,151)
Current ratio(1) — As at 31 March 2019 7.6 10.1 — As at 31 March 2020 2.5 2.9 — As at 31 March 2021 1.1 1.3
Quick ratio(2) — As at 31 March 2019 7.4 9.8 — As at 31 March 2020 2.4 2.8 — As at 31 March 2021 1.0 1.2
Gearing ratio(3) — As at 31 March 2019 7.9% 0.2% — As at 31 March 2020 10.5% 0.0% — As at 31 March 2021 71.2% 31.8%
Notes:
(1) Current ratio is calculated by dividing total current assets by total current liabilities.
(2) Quick ratio is calculated by dividing (total current assets minus inventory) by total current liabilities.
(3) Gearing ratio is calculated based on total indebtedness (including lease liabilities, amounts due to shareholders, amount due to the immediate holding company, amounts due to Directors and amounts due to related parties) divided by total equity and multiplied by 100%.
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FINANCIAL INFORMATION
Revenue Recognition
The Group’s revenue is primarily derived from:
. outpatient services in medical centres, including consultation and sales of pharmaceutical goods;
. provision of outpatient and inpatient services in hospitals;
. provision of imaging and diagnostic services; and
. provision of management services to medical centres.
Medical centre and hospital income are recognised in the accounting period in which the services are rendered over the period of the time by reference to the progress towards complete satisfaction of performance obligation. The progress towards the complete satisfaction of performance obligation is measured by direct measurement of the value of individual service transferred to the customer.
Revenue from sales of pharmaceutical goods is recognised when control of the pharmaceutical goods has transferred, being when the pharmaceutical goods are despatched to the customer and there is no unfulfilled obligation that could affect the client’s acceptance of the pharmaceutical goods.
Revenue from imaging and diagnostic services is recognised when the imaging and diagnostic reports are issued and passed to the customers.
Revenue from management services is recognised in the accounting period in which the related services are rendered.
Business Combinations and Goodwill
Business combinations are accounted for using the acquisition method. The consideration transferred for the acquisition of a subsidiary comprises the sum of the fair values of the assets transferred, liabilities incurred to the former owners of the acquired business, equity interests issued by the Group, fair value of any asset or liability resulting from a contingent consideration arrangement, and fair value of any pre-existing equity interest in the subsidiary.
Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions, measured initially at their fair values at the acquisition date. The Group recognises any non-controlling interest in the acquired entity on an acquisition-by-acquisition basis either at fair value or at the non-controlling interest’s proportionate share of the acquired entity’s net identifiable assets. Acquisition-related costs are expensed as incurred.
Goodwill is initially measured at cost, being the excess of the consideration transferred, amount of any non-controlling interest in the acquired entity, and acquisition-date fair value of any previous equity interest in the acquired entity over the fair value of the net identifiable assets acquired. If those amounts are less than the fair value of the net identifiable assets of the business acquired, the difference is recognised directly in profit or loss as a bargain purchase.
Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present value as at the date of exchange. The discount rate used is the entity’s incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an
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FINANCIAL INFORMATION independent financier under comparable terms and conditions. Contingent consideration is classified either as equity or a financial liability. Amounts classified as a financial liability are subsequently remeasured to fair value with changes in fair value recognised in profit or loss.
If the business combination is achieved in stages, the acquisition date carrying value of the acquirer’s previously held equity interest in the acquiree is remeasured to fair value at the acquisition date. Any gains or losses arising from such remeasurement are recognised in profit or loss.
Impairment of Financial Instruments
The Group assesses on a forward looking basis the expected credit losses associated with its financial assets carried at amortised cost. The impairment methodology applied depends on whether there has been a significant increase in credit risk.
For trade receivables, the Group applies the simplified approach permitted by HKFRS 9, which requires expected lifetime losses to be recognised from initial recognition of the receivables. The provision matrix is determined based on historical observed default rates over the expected life of the trade receivables with similar credit risk characteristics and is adjusted for forward-looking estimates. At every reporting date the historical observed default rates are updated and changes in the forward-looking estimates are analysed.
Impairment on other financial assets carried at amortised cost are measured as either 12-month expected credit losses or lifetime expected credit losses, depending on whether there has been a significant increase in credit risk since initial recognition. If a significant increase in credit risk of a receivable has occurred since initial recognition, then impairment is measured as lifetime expected credit losses. For further information, please see Note 3.1(b) to our consolidated financial statements set out in the Accountant’s Report included in Appendix I to this document.
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FINANCIAL INFORMATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
The following table sets out selected financial data from our consolidated statements of comprehensive income during the Track Record Period, details of which are set out in the Accountant’s Report included in Appendix I to this document. Our historical results presented below are not necessarily indicative of the results that may be expected for any future period.
Year ended 31 March 2019 2020 2021 HK$’000 HK$’000 HK$’000
Revenue 195,660 248,394 251,434 Cost of sales (111,145) (172,814) (185,504)
Gross profit 84,515 75,580 65,930
Selling and marketing expenses (913) (1,212) (2,328) Administrative expenses (6,747) (16,421) (36,371) Provision for impairment losses on financial assets (4,622) (150) (200)
Operating profit 72,233 57,797 27,031
Finance (costs)/income, net (614) 1,385 (242)
Profit before income tax 71,619 59,182 26,789
Income tax expenses (11,659) (9,489) (6,396)
Profit for the year 59,960 49,693 20,393
Profit attributable to: — Owners of the Company 59,960 50,194 21,643 — Non-controlling interests — (501) (1,250)
59,960 49,693 20,393
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FINANCIAL INFORMATION
DESCRIPTION OF SELECTED ITEMS OF THE CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Revenue
Our Group primarily generates revenue from the provision of specialist medical services and allied health services. Our revenue from such services for each of the three years ended 31 March 2021 was HK$195.7 million, HK$248.4 million and HK$251.4 million, respectively. The following table sets out the breakdown of our revenue by service stream for the years indicated:
Year ended 31 March 2019 2020 2021 HK$’000 % HK$’000 % HK$’000 %
Medical Services: — Specialist medical services 192,273 98.3 232,427 93.6 218,006 86.7 — Allied health services 12 0.0 13,137 5.3 36,483 14.5 192,285 98.3 245,564 98.9 254,489 101.2 Elimination of inter-segment revenue ——(1,768) (0.7) (7,586) (3.0) Total Medical Services 192,285 98.3 243,796 98.2 246,903 98.2
Medical management services 3,375 1.7 4,598 1.8 4,531 1.8
Total 195,660 100.0 248,394 100.0 251,434 100.0
– 191 – NOMTO UTB EDI OJNTO IHTESCINHEADED SECTION THE WITH TH CONJUNCTION OF IN COVER INCOMP THE READ FORM, BE DRAFT MUST IN INFORMATION IS DOCUMENT THIS The following table sets out the breakdown of our revenue generated from the provision of medical services with key operational information for the years indicated:
Year ended 31 March 2019 2020 2021 Number of Average patient visits/ revenue per Number of Average Number of Average Revenue admissions visit patient visits/ revenue per patient visits/ revenue per (1) (1) (1) DOCUMENT. IS Revenue admissions visit Revenue admissions visit
HK$’000 % HK$ HK$’000 % HK$ HK$’000 % HK$
Specialist medical services — at Medical Centres 102,562 53.3 28,505 3,598 140,559 57.6 33,048 4,253 137,774 INFORMATION FINANCIAL 55.8 32,490 4,241 — at private hospitals 89,711 46.7 5,477 16,380 91,868 37.7 8,013 11,465 80,232 32.5 8,156 9,837
Sub-total 192,273 100.0 33,982 5,658 232,427 95.3 41,061 5,661 218,006 88.3 40,646 5,364
Allied health services
– — Services provided by allied health 192 professionals 12 0.0 10 1,200 306 0.1 144 2,125 1,141 THE THAT AND CHANGE TO SUBJECT AND LETE 0.5 461 2,475 — CVC Centre —— —— 2,870 1.2 – — Laboratory & Diagnostic services ————12,831 5.3 7,650 1,677 32,472 13.1 18,992 1,710
Total before elimination 192,285 100.0 33,992 5,657 245,564 100.7 48,855 5,026 254,489 103.1 60,099 4,234 Elimination of inter-segment revenue ——— (1,768) (0.7) (1,171) (7,586) (3.1) (4,600)
Total 192,285 100.0 33,992 5,657 243,796 100.0 47,684 5,113 246,903 100.0 55,499 4,449 ‘‘
Note: WARNING
(1) Average revenue per visit is calculated by dividing the revenue generated from the particular category of service by the total number of patient visits/admissions under the same category. ’’ ON THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THAT THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED ‘‘WARNING’’ ON THE COVER OF THIS DOCUMENT.
FINANCIAL INFORMATION
Changes to our average revenue per patient visit/admission during the Track Record Period were primarily due to changes in type of specialist medical services provided as well as the addition of specialist doctors that joined us between the periods.
Average revenue per patient visit for our specialist medical services at our Medical Centres increased from HK$3,598 per visit for the year ended 31 March 2019 to HK$4,253 per visit for the year ended 31 March 2020. This change was mainly due to the addition of five Equity Partner Doctors who joined us as specialist doctors at various times during the year ended 31 March 2019 covering various specialties. In particular, the average revenue per patient visit from one of the five Equity Partner Doctors, Dr. Ada Ma (oncology) was significantly higher than that of other specialist doctors, leading to the increase. Average revenue per patient visit for our specialist medical services at our Medical Centres decreased slightly from HK$4,253 per visit for the year ended 31 March 2020 to HK$4,241 per visit for the year ended 31 March 2021 mainly due to changes in the mix of services provided between the periods.
Average revenue per patient admission for our specialist medical services at private hospitals decreased from HK$16,380 per admission for the year ended 31 March 2019 to HK$11,465 per admission for the year ended 31 March 2020. This decrease was mainly driven by greater patient admissions by doctors that charged relatively lower fees per admission for their services, particularly, our specialist doctor in nephrology and one of our cardiologists. The decrease between the years ended 31 March 2019 and 31 March 2020 was also due to the addition of Dr. Eddie Cheung, our paediatric specialist, during FY2020, whose average revenue per patient admission was significantly lower than that of our other specialist doctors. Average revenue per patient admission for our specialist medical services at private hospitals decreased from HK$11,465 per admission for the year ended 31 March 2020 to HK$9,837 per admission for the year ended 31 March 2021 also mainly due to the addition of Dr. Eddie Cheung in August 2019 whose average revenue per inpatient admission is substantially lower than other specialist doctors coupled with lower average revenue per patient admission for Dr. Lo Wai Kei (nephrology), Dr. Kenneth Tsang (respiratory), Dr. Adam Leung (cardiology) and Dr. Jason Fong (neurology) as they provided more lower priced services during the year ended 31 March 2021.
Cost of Sales
Our cost of sales primarily consists of (i) service fees to our specialist doctors, (ii) cost of pharmaceuticals and medical consumables, (iii) employment benefit expenses, (iv) laboratory examination and radiologist reporting fees, (v) depreciation of right-of-use assets, (vi) depreciation of property, plant and equipment, (vii) credit card charges, (viii) commission fee paid to hospitals and (ix) other expenses. Cost of sales was the largest component of our expenses during the Track Record Period. For each of the three years ended 31 March 2021, our cost of sales amounted to HK$111.1 million, HK$172.8 million and HK$185.5 million, respectively, representing 56.8%, 69.6% and 73.8% of our revenue for the same period, respectively.
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FINANCIAL INFORMATION
The following table sets out the breakdown of our cost of sales by nature for the years indicated:
Year ended 31 March 2019 2020 2021 %of %of %of HK$’000 revenue HK$’000 revenue HK$’000 revenue
Service fees to specialist doctors(1) 41,847 21.4 66,128 26.6 64,236 25.5 Cost of pharmaceuticals and medical consumables 33,502 17.1 49,165 19.8 46,019 18.3 Employee benefit expenses 13,078 6.7 22,968 9.3 27,051 10.8 Laboratory examination and radiologist reporting fee 8,775 4.5 13,394 5.4 18,207 7.2 Depreciation of right-of-use assets 7,390 3.8 11,251 4.5 15,461 6.2 Depreciation of property, plant and equipment 2,614 1.3 4,731 1.9 5,522 2.2 Credit card charges 1,111 0.6 1,595 0.6 1,659 0.7 Commission fee paid to hospitals 1,231 0.6 1,247 0.5 995 0.4 Other expenses(2) 1,597 0.8 2,335 0.9 6,354 2.5
111,145 56.8 172,814 69.5 185,504 73.8
Notes:
(1) During the Track Record Period, we did not pay any service fees to our Founding Doctors.
(2) Other expenses mainly include rental expenses for short-term operating leases.
Gross Profit
Our gross profit represents our revenue less cost of sales. Our gross profit was HK$84.5 million, HK$75.6 million and HK$65.9 million for each of the three years ended 31 March 2021, respectively, and our gross profit margin was 43.2%, 30.4% and 26.2% for the same periods, respectively. Decreases in gross profit margin between FY2019 and FY2020 was primarily driven by the addition of Equity Partner Doctors and greater service fees paid to them as they only contribute a fixed amount to our profit before tax. The service fee arrangements that our Equity Partner Doctors have with us effectively caps the potential profitability that the Group can retain from them to the total amount of Committed Fee Contributions. The decrease in gross profit margin between FY2020 and FY2021 was mainly due to lower revenue from specialist medical services while we incurred greater fixed costs such as employee benefit expenses and depreciation charges.
Administrative Expenses
Our administrative expenses primarily consist of (i) [REDACTED] expenses, (ii) employee benefit expenses, (iii) depreciation of right-of-use assets, (iv) share-based payment expenses, (v) professional fees, (vi) depreciation of property, plant and equipment, and (vii) others. For each of the three years ended 31 March 2021, our administrative expenses amounted to HK$6.7 million, HK$16.4 million and HK$36.4 million, respectively, representing 3.4%, 6.6% and 14.5% of our revenue for the same period, respectively.
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FINANCIAL INFORMATION
The following tables sets out the breakdown of our administrative expenses for the years indicated:
Year ended 31 March 2019 2020 2021 %of %of %of HK$’000 revenue HK$’000 revenue HK$’000 revenue
[REDACTED] expenses ————14,317 5.8 Employee benefit expenses 2,616 1.3 5,136 2.1 5,738 2.3 Depreciation of right-of-use assets 785 0.4 3,416 1.4 3,672 1.5 Share-based payment expenses ——530 0.2 2,963 1.2 Professional fees 1,069 0.5 2,146 0.8 2,102 0.8 Depreciation of property, plant and equipment 245 0.1 1,402 0.6 845 0.3 Other expenses(1) 2,032 1.1 3,791 1.5 6,734 2.6
6,747 3.4 16,421 6.6 36,371 14.5
Note:
(1) Other expenses mainly include director emoluments, insurance, repairs and maintenance, telephone, internet and utilities, and other miscellaneous administrative expenses.
Segment results
Our specialist medical services segment recorded an operating profit of HK$69.5 million, HK$56.8 million and HK$39.9 million for the years ended 31 March 2019, 2020 and 2021, respectively.
Our allied health services segment recorded an operating loss of HK$2.4 million and HK$1.8 million for the years ended 31 March 2020 and 2021, respectively, primarily due to the loss incurred by Hong Kong Imaging after the acquisition by the Group in October 2019 and as a result of a slow down of its business due to the COVID-19 outbreak. For the full year ended 31 March 2020, Hong Kong Imaging recorded a net loss of HK$2.6 million mainly due to (i) a decrease in customers as a result of the social unrest in Hong Kong and the COVID-19 outbreak and (ii) increased repair and maintenance costs of HK$1.0 million for its MRI machine and CT Scan machine due to the expiry of the warranty period for those machines.
Finance (Costs)/Income, Net
Our finance costs mainly represent interest expenses on lease liabilities and our finance income represents interest income from bank deposits. Our net finance costs amounted to HK$0.6 million for the year ended 31 March 2019. We recorded net finance income of HK$1.4 million for the year ended 31 March 2020 and net finance costs of HK$0.2 million for the year ended 31 March 2021.
Income Tax Expenses
Hong Kong profit tax has generally been provided for at the rate of 16.5% on the estimated assessable profit for the three years ended 31 March 2021. Our income tax expenses for each of the three years ended 31 March 2021 amounted to HK$11.7 million, HK$9.5 million and HK$6.4 million, respectively. Our effective tax rate was 16.3%, 16.0% and 23.9% for the same periods, respectively. Our
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FINANCIAL INFORMATION effective tax rate increased from 16.0% in FY2020 to 23.9% for the year ended 31 March 2021 mainly due to non-deductible [REDACTED] expenses, partly offset by non-taxable profits (employment support scheme) of HK$4.3 million for income tax purposes.
For details of our income tax expense, see Note 9 to our consolidated financial statements set out in the Accountant’s Report included in Appendix I to this document.
Profit for the year
Our net profit for the years ended 31 March 2019, 2020 and 2021 was HK$60.0 million, HK$49.7 million and HK$20.3 million, respectively.
Our net profit for the years ended 31 March 2020 and 2021 include net losses attributed to non- controlling interests of HK$0.5 million and HK$1.3 million, respectively. These net losses relate to minority interests held under our subsidiary, HKID Limited, which operates our Hong Kong Imaging business; and which generated net losses during those periods mainly due to a slow down in business as a result of the COVID-19 outbreak.
RESULTS OF OPERATION OF OUR GROUP
Comparison of the Year Ended 31 March 2021 to the Year Ended 31 March 2020
Revenue
Our revenue increased by HK$3.0 million, or 1.2%, from HK$248.4 million for the year ended 31 March 2020 to HK$251.4 million for the year ended 31 March 2021. The increase in our revenue was primarily due to the increase in revenue generated from allied health services, partly offset by a decrease in revenue from specialist medical services.
Specialist medical services
Our revenue generated from the provision of services by specialists decreased by HK$14.4 million, or 6.2%, from HK$232.4 million for the year ended 31 March 2020 to HK$218.0 million for the year ended 31 March 2021, which was primarily due a slight decrease in patient visits/admissions and lower average revenue per patient visit/admission. Patient visits/admissions decreased from 41,061 visits/ admissions for the year ended 31 March 2020 to 40,646 visits/admissions for the year ended 31 March 2021 primarily driven by the lower number of hospital admissions for Dr. Kenneth Tsang (respiratory medicine), Dr. Adam Leung (cardiology), Dr. Jason Fong (neurology) and Dr. Clement Lee (cardiology) because of the COVID-19 outbreak along with the related delays in seeking non-urgent medical treatment by patients; partly offset by increased patient visits/admission because Dr. Eddie Cheung (paediatrics) joined us in August 2019 and Dr. Stanley Yu (oncology) joined us in August 2020. Average revenue per patient visit/admission decreased from HK$5,661 for the year ended 31 March 2020 to HK$5,364 for the year ended 31 March 2021 mainly because (i) Dr. Eddie Cheung’s average revenue per patient is substantially lower than other specialist doctors and (ii) change in service mix, with a lower proportion of inpatient hospital admissions which generally have a higher revenue per admission.
Allied health services
Our revenue generated from our allied health services increased from HK$13.1 million for the year ended 31 March 2020 to HK$36.5 million for the year ended 31 March 2021, which was primarily due to the acquisition of Hong Kong Imaging in October 2019, which contributed HK$32.5 million to our
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FINANCIAL INFORMATION revenues for the year ended 31 March 2021. Excluding Hong Kong Imaging, revenue from allied health services increased by HK$3.7 million mainly due to an increase in revenue in clinical psychology and psychology counselling services as well as from COVID-19 vaccination services provided at the CVC Centre.
Medical management services
Our revenue generated from the provision medical management services to the HKMC Ophthalmologists for the year ended 31 March 2021 was HK$4.5 million which was the same as the year ended 31 March 2020.
Cost of sales
Our cost of sales increased by HK$12.7 million, or 7.3%, from HK$172.8 million for the year ended 31 March 2020 to HK$185.5 million for the year ended 31 March 2021, which was primarily driven by (i) an increase in employee benefit expenses of HK$4.1 million due to an increase in number of staff, (ii) an increase in depreciation of equipment and right-of-use assets of HK$5.0 million as a result of the acquisition of Hong Kong Imaging and our new lease of the Integrated Flagship Medical Centre, and (iii) an increase in radiologist reporting fee of HK$4.8 million as a result of increased diagnostic services provided to third-parties by Hong Kong Imaging.
Gross profit
Our gross profit decreased by HK$9.7 million, or 12.8%, from HK$75.6 million for the year ended 31 March 2020 to HK$65.9 million for the year ended 31 March 2021 primarily due to (i) lower revenue from specialist medical services as a result of COVID-19 outbreak as discussed above and (ii) increased cost of sales, including employee benefit expenses, depreciation and radiologist reporting fees for the reasons discussed above. Our gross profit margin decreased from 30.4% for the year ended 31 March 2020 to 26.2% for the year ended 31 March 2021 mainly due to lower revenue from specialist medical services while we incurred greater fixed costs such as employment benefit expenses and depreciation expenses as a percentage of revenue.
Selling and marketing expenses
Selling and marketing expenses increased by HK$1.1 million, or 92.1%, from HK$1.2 million for the year ended 31 March 2020 to HK$2.3 million for the year ended 31 March 2021 mainly due to the production of corporate videos and increased marketing activities.
Administrative expenses
Our administrative expenses increased by HK$20.0 million, or 121.5% from HK$16.4 million for the year ended 31 March 2020 to HK$36.4 million for the year ended 31 March 2021. As a percentage of revenue, administrative expenses increased from 6.6% for the year ended 31 March 2020 to 14.5% for the year ended 31 March 2021. The increase in our administrative expenses was mainly due to (i) an increase in [REDACTED] expenses of HK$14.3 million, (ii) an increase in other expenses by HK$2.9 million mainly relating to the repair and maintenance expenses associated with Hong Kong Imaging and (iii) an increase in share-based payment expenses of HK$2.4 million.
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FINANCIAL INFORMATION
Finance (cost)/income, net
We recorded net finance income of HK$1.4 million for the year ended 31 March 2020 and net finance costs of HK$0.2 million for the year ended 31 March 2021. The change was mainly due to an increase in interest expense from lease liabilities and a decrease in interest income from bank deposits.
Income tax expenses
Our income tax expenses decreased by HK$3.0 million, or 32.6%, from HK$9.5 million for the year ended 31 March 2020 to HK$6.4 million for the year ended 31 March 2021 mainly because our operating profit decreased from HK$57.8 million for the year ended 31 March 2020 to HK$27.0 million for the year ended 31 March 2021. Our effective tax rate increased from 16.0% for the year ended 31 March 2020 to 23.9% for the year ended 31 March 2021 mainly because [REDACTED] expenses were not deductible, partly offset by non-taxable profits (employment support scheme) for income tax purposes.
Profit for the year
As a result of the foregoing, our profit for the year decreased by HK$29.4 million, or 59.2%, from HK$49.7 million for the year ended 31 March 2020 to HK$20.3 million for the year ended 31 March 2021. Our net profit margin was 20.0% for the year ended 31 March 2020 as compared to 8.1% for the year ended 31 March 2021, the decrease was mainly due to a lower gross profit margin due to the COVID-19 outbreak and higher administrative expenses, including [REDACTED] expenses, as discussed above.
Comparison of the Year Ended 31 March 2020 to the Year Ended 31 March 2019
Revenue
Our revenue increased by HK$52.7 million, or 27.0%, from HK$195.7 million for the year ended 31 March 2019 to HK$248.4 million for the year ended 31 March 2020. The increase in our revenue was primarily due to an increase in revenue generated from the specialist medical services and allied health services.
Specialist medical services
Our revenue generated from the provision of services by specialists increased by HK$40.2 million, or 20.9%, from HK$192.3 million for the year ended 31 March 2019 to HK$232.4 million for the year ended 31 March 2020, which was primarily due to an increase in patient visits/admissions from 33,982 visits/admissions in FY2019 compared to 41,061 visits/admissions in FY2020. The increase in patient visits/admissions was primarily driven by the full-year service contribution from the five Equity Partner Doctors in FY2020 that joined as specialist doctors at various dates during FY2019; coupled with the fact that Dr. Eddie Cheung joined us as a doctor in August 2019. In particular, Dr. Matthew Ng and Dr. Lo Wai Kei joined us as a doctor in April 2018, Dr. Clement Lee joined us as a doctor in May 2018, Dr. Boron Cheng joined us as a doctor in July 2018, and Dr. Ada Ma joined us as a doctor in October 2018. The COVID-19 outbreak had some impact on the number of patient visits/admissions starting in February 2020 but did not have a significant impact on our results for the year. Average revenue per patient visit/admission increased slightly from HK$5,658 in FY2019 to HK$5,661 in FY2020.
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FINANCIAL INFORMATION
Allied health services
Our revenue generated from our allied health services increased from HK$12,000 for the year ended 31 March 2019 to HK$13.1 million for the year ended 31 March 2020, which was primarily due to the acquisition of Hong Kong Imaging in October 2019, which contributed HK$12.8 million to our revenue in FY2020. Excluding Hong Kong Imaging, revenue from allied health services increased by HK$0.3 million mainly due to revenue generated by our clinical psychologist.
Medical management services
Our revenue generated from the provision of medical management services increased by HK$1.2 million, or 36.2%, from HK$3.4 million for the year ended 31 March 2019 to HK$4.6 million for the year ended 31 March 2020 as we provided a full year of services to the HKMC Ophthalmologists in FY2020, while only provided nine months of such services in FY2019.
Cost of sales
Our cost of sales increased by HK$61.7 million, or 55.5%, from HK$111.1 million for the year ended 31 March 2019 to HK$172.8 million for the year ended 31 March 2020, which was primarily driven by (i) an increase in service fees paid to our specialist doctors of HK$24.3 million, (ii) an increase in cost of pharmaceuticals and medical consumables of HK$15.7 million, (iii) an increase in employee benefit expenses of HK$9.9 million due to an increase in number of staff, and (iv) an increase in depreciation of equipment and right-of-use assets as a result of the acquisition of Hong Kong Imaging. The increases in service fees paid to specialist doctors and increase in cost of pharmaceuticals and medical consumables were mainly attributable to the additional costs associated with the generation of additional revenue as a result of the full year contribution of services by the five Equity Partner Doctors that joined us as specialist doctors at various times in FY2019 coupled by the addition of Dr. Eddie Cheung in FY2020, as discussed above.
Gross profit
Our gross profit decreased by HK$8.9 million, or 10.6%, from HK$84.5 million for the year ended 31 March 2019 to HK$75.6 million for the year ended 31 March 2020 primarily due to increased service fees provided to our specialist doctors for the reasons discussed above. Our gross profit margin decreased from 43.2% in FY2019 to 30.4% in FY2020 mainly due to (i) the addition of the five Equity Partner Doctors starting in FY2019 resulting in greater service fees paid to them; and (ii) the Committed Fee Contributions effectively limits the profit we derive from their services. Please see the section headed ‘‘Business — Our Professional Team — Compensation Arrangements with Specialist Doctors and Panel Specialists’’ for further details on the Committed Fee Contributions.
Selling and marketing expenses
Selling and marketing expenses increased by HK$0.3 million, or 32.7%, from HK$0.9 million for the year ended 31 March 2019 to HK$1.2 million for the year ended 31 March 2020 mainly due to additional costs associated with updating our website and the media publication and grand opening of HKMC Paediatric Centre.
Administrative expenses
Our administrative expenses increased by HK$9.7 million, or 143.4%, from HK$6.7 million for the year ended 31 March 2019 to HK$16.4 million for the year ended 31 March 2020. As a percentage of
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FINANCIAL INFORMATION revenue, administrative expenses increased from 3.4% in FY2019 to 6.6% in FY2020. The increase in our administrative expenses was mainly due to (i) an increase in employee benefit expenses of HK$2.5 million as a result of the addition of corporate staff to support our business, (ii) an increase in depreciation of right-of-use assets of HK$2.6 million as we rented our new corporate offices in Central, and (iii) an increase in other expenses of HK$2.5 million mainly relating to the repair and maintenance expenses associated with Hong Kong Imaging and share based payment expenses.
Provision for impairment losses on financial assets
We recorded a provision of HK$150,000 against our trade receivables in FY2020 to reflect increase in amounts over-due. In particular, HK$96,000 was overdue for more than a year from a hospital because a certain patient failed to pay his medical expenses to the hospital. The remaining HK$54,000 in provisions were for other potential losses calculated under HKFRS 9.
Finance (cost)/income, net
We recorded net finance income of HK$1.4 million for the year ended 31 March 2020 as a result of interest income from bank deposits. We recorded net finance costs of HK$0.6 million for the year ended 31 March 2019 mainly due to interest expense on lease liabilities.
Income tax expenses
Our income tax expenses decreased by HK$2.2 million, or 18.6%, from HK$11.7 million for the year ended 31 March 2019 to HK$9.5 million for the year ended 31 March 2020 mainly because our operating profit decreased from HK$72.2 million in FY2019 to HK$57.8 million in FY2020. Our effective tax rate remained stable and was 16.3% in FY2019 and 16.0% in FY2020.
Profit for the year
As a result of the foregoing, our profit for the year decreased by HK$10.3 million, or 17.1%, from HK$60.0 million for the year ended 31 March 2019 to HK$49.7 million for the year ended 31 March 2020. Our net profit margin was 30.6% for FY2019 as compared to 20.0% for FY2020, the decrease was mainly due to a lower gross profit margin and higher administrative expenses as discussed above.
LIQUIDITY AND CAPITAL RESOURCES
We have historically funded our liquidity and capital requirements primarily through a combination of capital contributions from our shareholders and internally generated funds from our operating activities. As at 31 March 2019, 2020 and 2021, we had cash and cash equivalents of HK$39.8 million, HK$160.0 million and HK$95.3 million, respectively.
We mainly use cash to fund our operations, including for the payment of service fees, wages and salaries, and lease payments for our Medical Centres and Diagnostic Centres. We also use cash for purchases of property, plant and equipment, providing advances to Directors and shareholders and making dividend payments. Going forward, we expect to fund our working capital requirements from a combination of various sources, including but not limited to cash generated from our operations, the [REDACTED] from the [REDACTED] as well as other financing activities as and when appropriate.
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FINANCIAL INFORMATION
The following table sets out selected cash flow data from the consolidated statements of cash flows for the Track Record Period:
Year ended 31 March 2019 2020 2021 HK$’000 HK$’000 HK$’000
Operating cash flow before changes in working capital 87,889 79,296 55,722 Changes in working capital (8,735) 10,385 (29) Income taxes paid (8,260) (15,343) (11,589)
Net cash generated from operating activities 70,894 74,338 44,104
Net cash used in investing activities (34,507) (62,115) (177,753) Net cash (used in)/generated from financing activities (10,722) 107,866 69,056
Net increase/(decrease) in cash and cash equivalents 25,665 120,089 (64,593) Cash and cash equivalents at beginning of the year 14,106 39,771 159,860
Cash and cash equivalents at end of the year 39,771 159,860 95,267
Cash Flows from Operating Activities
Our cash inflow from operating activities is principally derived from the receipts from the provision of specialist medical services and allied health services. Our cash outflow from operating activities comprised mainly fees paid to medical practitioners, wages, salaries and allowances paid to our employees and procurement of pharmaceuticals supplies and laboratory and imaging services. During the Track Record Period, our net cash generated from operating activities represented profit before income tax for the year/period adjusted for (i) non-cash items such as depreciation, share-based payments and net finance income or costs, (ii) effect of changes in working capital, and (iii) income tax paid.
For the year ended 31 March 2021, we had net cash generated from operating activities of HK$44.1 million, which consists of cash generated from operations of HK$55.7 million less income tax paid of HK$11.6 million. Cash generated from operations include (i) operating cash flow before changes in working capital of HK$55.7 million which primarily consisted of profit before income tax of HK$26.8 million, adjusted for certain non-cash expenses, which mainly included (i) depreciation of right-of-use assets of HK$19.1 million and depreciation of property, plant and equipment of HK$6.4 million and (ii) changes in certain working capital items that negatively affected operating cash flow by HK$29,000 during the year, including (a) an increase in trade receivables of HK$3.2 million mainly due from hospitals, (b) an increase in inventories of HK$2.2 million, and (c) an increase in other receivables, deposits and prepayments of HK$1.2 million due to deposits for new lease of the Integrated Flagship Medical Centre; partly offset by (a) an increase in accruals and other payables of HK$4.3 million due to additional [REDACTED] expenses payable and (b) an increase in contract liabilities of HK$2.5 million due to our agreement to provide COVID-19 vaccination services at the CVC Centre with the Hong Kong government.
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FINANCIAL INFORMATION
For the year ended 31 March 2020, we had net cash generated from operating activities of HK$74.3 million, which consists of cash generated from operations of HK$89.7 million less income tax paid of HK$15.3 million. Cash generated from operations include (i) operating cash flow before changes in working capital of HK$79.3 million which primarily consisted of profit before income tax of HK$59.2 million, adjusted for certain non-cash expenses, which mainly included depreciation of right- of-use assets of HK$14.7 million and depreciation of property, plant and equipment of HK$6.1 million, and (ii) changes in certain working capital items that positively affected operating cash flow by HK$10.4 million during the year, including (a) an increase in accruals and other payables of HK$10.0 million due to increase in amounts due to consultants which are service fees for Equity Partner Doctors and (b) a decrease in trade receivables of HK$3.9 million due to settlement from customers; partly offset by (a) an increase in other receivables, deposits and prepayments of HK$2.2 million, and (b) an increase in inventories of HK$1.8 million as a result of increased demand for pharmaceuticals for our increase in number of specialist doctors.
For the year ended 31 March 2019, we had net cash generated from operating activities of HK$70.9 million, which consists of cash generated from operations of HK$79.2 million less income tax paid of HK$8.3 million. Cash generated from operations include (i) operating cash flow before changes in working capital of HK$87.9 million which primarily consisted of profit before income tax of HK$71.6 million, adjusted for certain non-cash expenses, which mainly included depreciation of right- of-use assets of HK$8.2 million and depreciation of property, plant and equipment of HK$2.9 million, and (ii) changes in certain working capital items that negatively affected operating cash flow by HK$8.7 million, which mainly included (a) an increase trade receivables of HK$12.7 million due to increase in the amounts due from hospital patients as a result of increased revenues from the five Equity Partner Doctors that joined the Group in FY2019 and (b) an increase in inventories of HK$4.4 million due to the anticipated increase in demand for pharmaceutical products as a result of the joining of the five Equity Partner Doctors; partly offset by (a) an increase in accruals and other payables of HK$7.3 million due to the increase in service fees due to Equity Partner Doctors, and (b) an increase in trade payables of HK$1.3 million due to the increase in purchase of drugs and laboratory test cost.
Cash Flows used in Investing Activities
Our cash inflow from investing activities primarily consists of interest received. Our cash outflow from investing activities primarily consists of advances made to our Directors and shareholders, purchase of property, plant and equipment and leasehold land for use in our Medical Centres and Diagnostic Centres, acquisition of a subsidiary, and prepayments for leasehold improvements for our offices.
For the year ended 31 March 2021, we had net cash used in investing activities of HK$177.8 million, which primarily consists of (i) purchases of property, plant and equipment of HK$30.6 million and purchase of leasehold land of HK$134.4 million relating to the acquisition of the Integrated Diagnostic Centre, (ii) prepayment of leasehold improvements of HK$8.3 million relating to the new lease of the Integrated Flagship Medical Centre, and (iii) increases in amounts due from our Directors of HK$10.5 million, partially offset by decreases to amounts due from shareholders of HK$5.2 million as a result of dividend payments to them.
For the year ended 31 March 2020, we had net cash used in investing activities of HK$62.1 million, which primarily consists of (i) advances made to our Directors of HK$24.4 million and advances made to shareholders of HK$24.0 million, both in anticipation of future dividends to be
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FINANCIAL INFORMATION declared to them, (ii) net cash used for the acquisition of Hong Kong Imaging of HK$9.3 million, and (iii) the purchase of equipment of HK$6.8 million, partially offset by interest received of HK$2.4 million.
For the year ended 31 March 2019, we had net cash used in investing activities of HK$34.5 million, which primarily reflects (i) advances made to our Directors of HK$17.7 million and advances made to shareholders of HK$10.8 million, both in anticipation of future dividends to be declared to them, and (ii) the purchase of equipment of HK$6.0 million for our Medical Centres.
Cash Flows used in/from Financing Activities
Our cash inflow from financing activities primarily consists of proceeds from issuance of shares to our Pre-[REDACTED] Investors and bank borrowings. Our cash outflow from financing activities mainly consists of principal and interest payments of lease liabilities and repayments to a Director and shareholders.
For the year ended 31 March 2021, we had net cash generated from financing activities of HK$69.1 million, which primarily consists of (i) proceeds from bank borrowing is of HK$75.0 million relating to the mortgage for the acquisition of the Integrated Diagnostic Centre, (ii) proceeds of HK$[REDACTED] from issuance of shares to Pre-[REDACTED] Investors, partially offset by (i) cash dividends paid of HK$39.5 million and (ii) principal and interest payments of lease liabilities of HK$16.9 million.
For the year ended 31 March 2020, we had net cash generated from financing activities of HK$107.9 million, which primarily consists of proceeds of HK$[REDACTED] from issuance of shares to our Pre-[REDACTED] Investors, partially offset by the principal and interest payments of lease liabilities of HK$15.4 million.
For the year ended 31 March 2019, we had net cash used in financing activities of HK$10.7 million, which primarily consists of (i) the principal and interest payments of lease liabilities of HK$8.5 million, and (ii) repayments to shareholders of HK$3.8 million, partially offset by proceeds of HK$1.7 million from issuance of shares to the Equity Partner Doctors.
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FINANCIAL INFORMATION
NET CURRENT ASSETS
The following table sets out the breakdown of our current assets and current liabilities as at 31 March 2019, 2020 and 2021 and 30 April 2021:
As at As at 31 March 30 April 2019 2020 2021 2021 HK$’000 HK$’000 HK$’000 HK$’000
Current assets Inventories 7,935 10,112 12,351 12,796 Trade receivables 16,099 16,107 19,108 20,155 Other receivables, deposits and prepayments 847 5,852 10,347 12,853
Amounts due from shareholders 137,143 36,116 4,145 4,702 Amounts due from Directors 27,130 51,535 1,600 1,600 Amount due from ultimate holding company 20 36 4 4 Amount due from immediate holding company 10 18 —— Income tax recoverable — 336 849 2,795 Cash and cash equivalents 39,771 159,860 95,267 94,100
Total current assets 228,955 279,972 143,671 149,005
Current liabilities Trade payables 5,444 6,307 6,111 5,902 Contract liabilities 411 431 2,947 2,653 Accruals and other payables 8,081 19,262 25,077 27,845 Lease liabilities 7,349 15,327 17,551 18,579 Provision of reinstatement costs for leasehold improvements ——2,101 2,188 Amount due to a shareholder 279 ——— Amount due to a related company 100 ——— Dividend payable — 66,720 —— Bank borrowing ——75,000 74,738 Current income tax payable 8,304 3,943 496 579
Total current liabilities 29,968 111,990 129,283 132,484
Net Current assets 198,987 167,982 14,388 16,521
Our net current assets increased slightly from HK$14.4 million as at 31 March 2021 to HK$16.5 million as at 30 April 2021. Our net current assets decreased from HK$168.0 million as at 31 March 2020 to HK$14.4 million as at 31 March 2021 primarily due to a decrease in current assets of HK$136.3 million and an increase in current liabilities of HK$17.3 million. The decrease in current assets of HK$136.3 million was driven by decreases in amounts due from shareholders and Directors mainly as a result of dividend payments to them and cash used for the acquisition of the Integrated Diagnostic
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FINANCIAL INFORMATION
Centre. Current liabilities increased by HK$17.3 million primarily due to increased bank borrowings of HK$75.0 million partly offset by a decrease in dividend payables of HK$66.7 million as a result of dividend payments.
Our net current assets decreased by HK$31.0 million from HK$199.0 million as at 31 March 2019 to HK$168.0 million as at 31 March 2020 primarily due to an increase in current liabilities of HK$82.0 million, partly offset by an increase in current assets of HK$51.0 million. The increase in current liabilities was primarily driven by (i) an increase in dividends payable of HK$66.7 million due to dividends declared in February 2020 that was not settled until April 2020, (ii) an increase in accruals and other payables mainly due to an increase in amounts due to consultants of HK$9.9 million reflecting higher service fees to Equity Partner Doctors as they generated more revenue, and (iii) an increase in lease liabilities of HK$8.0 million due to additional leases for office space. The increase in current assets was primarily driven by (i) an increase in cash and cash equivalents of HK$120.1 million due to increased cash generated from operations as well as payment received for issuance of shares to our Pre- [REDACTED] Investors, and (ii) an increase in amounts due from Directors of HK$24.4 million as a result of advances made to them in anticipation of future dividends to be declared to them; partly offset by a decrease in amounts due from shareholders of HK$101.0 million due to the payment from the Pre- [REDACTED] Investors.
WORKING CAPITAL
Our Directors confirm that, taking into consideration the financial resources presently available to us, including our existing cash and cash equivalents, net cash flow generated from operating activities, and [REDACTED] from the [REDACTED], we have sufficient working capital for our present working capital requirements for at least the next 12 months commencing on the date of this document.
DESCRIPTION OF SELECTED CONSOLIDATED STATEMENT OF FINANCIAL POSITION ITEMS
Property, Plant and Equipment
Our property, plant and equipment consists of building, medical equipment, leasehold improvements, office furniture and fixtures and computer equipment. We had property, plant and equipment of HK$7.7 million, HK$11.6 million and HK$36.1 million as at 31 March 2019, 2020 and 2021, respectively.
The following table sets out the breakdown of our property, plant and equipment as at the dates indicated:
As at 31 March 2019 2020 2021 HK$’000 HK$’000 HK$’000
Building ——28,766 Medical equipment 1,057 1,833 2,101 Leasehold improvements 5,794 7,650 3,340 Office furniture and fixtures 176 954 612 Computer equipment 627 1,134 1,238
7,654 11,571 36,057
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FINANCIAL INFORMATION
Our property, plant and equipment increased by HK$3.9 million, or 51.2%, from HK$7.7 million as at 31 March 2019 to HK$11.6 million as at 31 March 2020 primarily due to the addition of office furniture, computer equipment and leasehold improvements due to the opening of HKMC Paediatric Centre and corporate office and the acquisition of Hong Kong Imaging.
Our property, plant and equipment increased by HK$24.5 million, from HK$11.6 million as at 31 March 2020 to HK$36.1 million as at 31 March 2021 primarily due to the acquisition of the Integrated Diagnostic Centre partly offset by deprecation of leasehold improvements.
For details of our property, plant and equipment, see Note 11 to our consolidated financial statements set out in the Accountant’s Report included in Appendix I to this document.
Right-of-use Assets
Our right-of-use assets consist mainly of leasehold land, leases for our corporate office, Medical Centres, and Diagnostic Centres. We had right-of-use assets of HK$16.9 million, HK$23.2 million and HK$225.8 million as at 31 March 2019, 2020 and 2021, respectively.
Our right-of-use assets increased by HK$6.3 million, or 37.2%, from HK$16.9 million as at 31 March 2019 to HK$23.2 million as at 31 March 2020, primarily due to additional leases of properties including our corporate office, HKMC Paediatric Centre and HKMC III as well as right-of-use assets acquired as part of the purchase of Hong Kong Imaging in October 2019; partly offset by depreciation of right-of-use assets of HK$14.6 million in FY2020.
Our right-of-use assets increased by HK$202.6 million, from HK$23.2 million as at 31 March 2020 to HK$225.8 million as at 31 March 2021, primarily due to an increase in leasehold land of HK$135.6 million from the acquisition of the Integrated Diagnostic Centre, and new lease of the Integrated Flagship Medical Centre, partly offset by depreciation.
For details of our right-of-use assets, see Note 12 to our consolidated financial statements set out in the Accountant’s Report included in Appendix I to this document.
Goodwill
Our goodwill was attributable to the acquisition of Hong Kong Imaging in October 2019. We had goodwill of nil, HK$17.7 million and HK$17.7 million as at 31 March 2019, 2020 and 2021, respectively.
Goodwill is not amortised but it is tested for impairment annually, or more frequently if events or changes in circumstances indicate that it might be impaired. Based on the results of the impairment testing of goodwill, in the opinion of our Directors, no impairment is considered necessary for our goodwill as at 31 March 2021. Details of the impairment assessment performed by our Directors are as follows:
Impairment assessment of goodwill
Goodwill arising from business combination during the year ended 31 March 2020 is allocated to a group of CGUs consisting of HKID Limited and its subsidiaries (also referred to as ‘‘Imaging and Diagnostic CGU’’), and is monitored by management at the Imaging and Diagnostic CGU level for impairment testing. Impairment testing of goodwill is performed at each period end date, or whenever there is impairment indicator.
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FINANCIAL INFORMATION
The recoverable amount of the Imaging and Diagnostic CGU is determined by reference to the value-in-use calculation performed by an independent valuer, Vincorn Consulting and Appraisal Limited.
In assessing the value-in-use calculation, references were made to the calculations using pre-tax cash flow projections based on financial plans approved by management covering a forecast period of five years. Cash flows beyond the forecast period are extrapolated using the estimated terminal growth rates. Management assessed that no impairment provision is required as at 31 March 2020 and 31 March 2021. The key assumptions used for the cash flow projections (which are based on past experience of the Group and external sources of market information) and the sensitivity analysis are disclosed as follows:
Key assumptions As at 31 March 2020
Revenue growth rates (year on year) — Year ending 31 March 2021 –15.7% — Years ending 31 March 2022 to 2025 3.5% to 24.6%
Gross margin ratio — Year ending 31 March 2021 3.1% — Yearsending31March2022to2025 26.2%to29.2% — Terminal year 23.4%
Pre-tax discount rate 18.6%
Terminal growth rate 3.5%
Key assumptions As at 31 March 2021
Revenue growth rates (year on year) — Year ending 31 March 2022 17.1% — Years ending 31 March 2023 to 2026 3.5% to 10.4%
Gross margin ratio — Year ending 31 March 2022 19.6% — Yearsending31March2023to2026 23.9%to26.6% — Terminal year 24.9%
Pre-tax discount rate 18.0%
Terminal growth rate 3.5%
The recoverable amount of the Imaging and Diagnostic CGU is estimated to exceed its carrying amount by approximately HK$3.4 million and HK$12.7 million at 31 March 2020 and 31 March 2021, respectively.
Changing the discount rates and other assumptions selected by management in assessing impairment, including the growth rates assumption in the cash flow projections, could materially affect the net present value used in the impairment test.
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FINANCIAL INFORMATION
At 31 March 2020, if revenue growth rates (year on year), gross margin ratio, discount rate, and terminal growth rate for each of the forecast years for HKID Limited and its subsidiaries had been 1.0%, 1.3%, 1.6%, and 0.7%, respectively lower than management’s estimates with all other variables held constant, the recoverable amount of HKID Limited and its subsidiaries would have been equal to its carrying amount.
At 31 March 2021, if revenue growth rates (year on year), gross margin ratio, discount rate, and terminal growth rate for each of the forecast years for HKID Limited and its subsidiaries had been 3.5%, 4.2%, 7.2%, and 2.6%, respectively lower than management’s estimates with all other variables held constant, the recoverable amount of HKID Limited and its subsidiaries would have been equal to its carrying amount.
With reasonably possible changes in key assumptions with all other variables held constant for each of the forecast years, the carrying amount of the CGU would exceed its recoverable amount by:
As at 31 March 2020 2021 HK$’000 HK$’000
Revenue growth rates (year on year) decreased by 10% 842 — Gross margin ratio decreased by 10% 3,549 — Pre-tax discount rate increased by 10% 471 — Terminal growth rate decreased by 10% ——
For details of our goodwill, see Note 13 to our consolidated financial statements set out in the Accountant’s Report included in Appendix I to this document.
Inventories
Our inventories represent pharmaceutical goods and medical supplies and our inventories amounted to HK$7.9 million, HK$10.1 million and HK$12.4 million as at 31 March 2019, 2020 and 2021, respectively.
Our inventories increased by HK$2.2 million, or 27.4%, from HK$7.9 million as at 31 March 2019 to HK$10.1 million as at 31 March 2020 primarily due to higher demand of pharmaceutical goods and medical supplies because of an increase in number of specialist doctors from 11 as at 31 March 2019 to 13 as at 31 March 2020.
Our inventories increased by HK$2.3 million, or 22.1%, from HK$10.1 million as at 31 March 2020 to HK$12.4 million as at 31 March 2021 mainly due to an increase in demand of pharmaceutical goods for oncology patients as Dr. Stanley Yu joined us in August 2020.
The following table sets out our average inventories turnover days for the years indicated:
Year ended 31 March 2019 2020 2021
Average inventories turnover days(1) 55 63 85
Note:
(1) Average inventories turnover days were calculated based on the average of the beginning and ending balance of inventories of a given year divided by the cost of pharmaceutical goods and medical consumables for that corresponding year and multiplied by the number of days in the year.
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FINANCIAL INFORMATION
Our average inventories turnover days increased from 55 days for the year ended 31 March 2019 to 63 days for the year ended 31 March 2020 which was mainly due to an increase in purchase of pharmaceutical products to cater for future demand.
Our average inventories turnover days increased from 63 days for the year ended 31 March 2020 to 85 days for the year ended 31 March 2021 mainly due an increase in average inventories as we purchased more pharmaceutical products to cater for additional demand, and in anticipation of potential delay in deliveries as a result of the COVID-19 pandemic.
As at 30 April 2021, approximately HK$3.5 million or 28.0% of inventories as at 31 March 2021 had been sold or utilised.
Trade Receivables
Our trade receivables mainly consist of the receivables from insurance companies and hospitals. Our individual patients usually settle their payments after each doctor visit by payment through cash, credit cards or other electronic means. During the Track Record Period, trade receivables were non- interest bearing and settled by bank transfer with a credit period of around 60 to 180 days after invoice. As at 31 March 2019, 2020 and 2021, we had net trade receivables of HK$16.1 million, HK$16.1 million and HK$19.1 million, respectively.
Our gross trade receivables remained stable at HK$20.7 million as at 31 March 2019 and HK$20.9 million as at 31 March 2020. Our gross trade receivables increased from HK$20.9 million as at 31 March 2020 to HK$24.1 million as at 31 March 2021 mainly due to increased outstanding receivables from hospitals as a result of timing differences in collection.
The table below sets out an ageing analysis of trade receivables based on invoice date, as at the date indicated:
As at 31 March 2019 2020 2021 HK$’000 HK$’000 HK$’000
Within 90 days 14,323 12,309 16,709 91 to 180 days 2,405 1,753 1,678 181 to 365 days 3,973 1,681 433 Over 365 days 20 5,136 5,260 Gross trade receivables 20,721 20,879 24,080 Less: allowance for impairment (4,622) (4,772) (4,972)
Net Trade Receivables 16,099 16,107 19,108
Our trade receivables aged 181 days to 365 days as at 31 March 2021 amounting to HK$0.4 million was mainly due to overdue receivables from hospital patients for which we determined was recoverable. Our trade receivables aged over 365 days amounting to HK$5.3 million as at 31 March 2021 mainly relate to an individual patient that we made HK$4.6 million in provisions in FY2019. The remaining HK$0.7 million mainly relates to overdue receivables from insurance companies that we determined was recoverable as at 31 March 2021.
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FINANCIAL INFORMATION
During the Track Record Period, we applied the HKFRS 9 simplified approach in measuring expected credit losses which uses a lifetime expected loss allowance for all trade receivables. As at 31 March 2019, 2020 and 2021, we assessed that the total expected credit loss rate was HK$4.6 million, HK$4.8 million and HK$5.0 million, respectively, under a 24 months expected losses model. Please see Notes 18 and 3.1(b) to our consolidated financial statements set out in the Accountant’s Report included in Appendix I for further information.
The following table sets out our average net trade receivables turnover days for the years indicated:
Year ended 31 March 2019 2020 2021
Average net trade receivables turnover days(1) 22 24 26
Note:
(1) Average net trade receivables turnover days were calculated based on the average of the beginning and the ending balance of net trade receivables of a given year divided by revenue for that corresponding year or period multiplied by the number of days in that year.
Our average net trade receivables turnover days increased from 22 days in FY2019 to 24 days in FY2020 and 26 days in FY2021 mainly due to the change in the proportion of net trade receivables from insurance companies as compared to receivables from hospitals, which have shorter turnover days.
As at 30 April 2021, approximately HK$11.2 million or 46.5% of gross trade receivables as at 31 March 2021, have been settled by our customers.
Other Receivables, Deposits and Prepayments
Our other receivables, deposits and prepayments mainly consist of rental deposits and prepayments for leasehold improvements. As at 31 March 2019, 2020 and 2021, we had other receivables, deposits and prepayments of HK$2.9 million, HK$8.4 million and HK$26.2 million, respectively.
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FINANCIAL INFORMATION
The following table sets out the breakdown of our other receivables, deposits and prepayments as at the dates indicated:
As at 31 March 2019 2020 2021 HK$’000 HK$’000 HK$’000
Non-current portion Rental deposits 2,055 2,591 7,078 Prepayment for leasehold improvements ——8,744 2,055 2,591 15,822
Current portion Prepayments 169 2,533 1,924 Prepaid [REDACTED] expenses ——4,386 Other receivables and deposits 678 3,319 4,037 847 5,852 10,347
Total 2,902 8,443 26,169
Our deposits, prepayments and other receivables increased from HK$2.9 million as at 31 March 2019 to HK$8.4 million as at 31 March 2020 due to an increase in prepayments and other receivables and deposits due to deposits for the production of corporate videos and rental prepayments. Our deposits, prepayments and other receivables further increased to HK$26.2 million as at 31 March 2021 mainly due to rental deposits and prepayment for leasehold improvements provided for the newly leased Integrated Flagship Medical Centre as well as prepaid [REDACTED] expenses.
Amounts Due from Shareholders
Amounts due from shareholders represent interest-free advances provided to our shareholder doctors that are not Directors in anticipation of future dividends to be declared to them as well as outstanding amounts due from our Pre-[REDACTED] Investors. Our amounts due from shareholders as at 31 March 2019, 2020 and 2021 were HK$137.1 million, HK$36.1 million and HK$4.1 million, respectively; and the changes were due to additional advances made to them as well the outstanding amounts due from our Pre-[REDACTED] Investors agreement for share issuances and subsequent settlements. The HK$36.1 million due from shareholders as at 31 March 2020 decreased to HK$4.1 million as at 31 March 2021 mainly because of dividend payments during FY2021 and repayment from our shareholders of HK$5.1 million. The amounts due from shareholders of HK$4.1 million as at 31 March 2021 will be settled by cash payments prior to the [REDACTED].
Amounts Due from Directors
Amounts due from Directors mainly represent interest-free advances provided to Dr. Kenneth Tsang and Dr. Adam Leung in anticipation of future dividends to be declared to them. Our amounts due from Directors as at 31 March 2019, 2020 and 2021 were HK$27.1 million, HK$51.5 million and HK$1.6 million, respectively; and the changes were due to additional advances made to our Directors during the Track Record Period and subsequent settlements. The HK$51.5 million due from Directors as at 31 March 2020 decreased to HK$1.6 million as at 31 March 2021 because HK$60.5 million was
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FINANCIAL INFORMATION settled against amounts due from Directors as part of the HK$75.3 million dividend settlement made during FY2021; partly offset by HK$10.6 million in additional advances provided to our Directors. The amounts due from Directors of HK$1.6 million as at 31 March 2021 will be settled by cash payments prior to the [REDACTED].
Amounts Due from Ultimate and Immediate Holding Companies
Our amounts due from ultimate and immediate holding companies amounted to HK$30,000, HK$54,000 and HK$4,000 as at 31 March 2019, 2020 and 2021, respectively. These amounts represent expenses paid on behalf of our holding companies during the Track Record Period. All outstanding amounts due from ultimate and immediate holding companies will be settled by way of cash payment prior to the [REDACTED].
Trade Payables
Our trade payables mainly include amounts due to our pharmaceutical suppliers. During the Track Record Period, our trade payables were non-interest bearing and the normal trade credit terms granted to our Group range from 30 to 60 days from the date of invoice. As at 31 March 2019, 2020 and 2021, our trade payables increased from HK$5.4 million to HK$6.3 million, and decreased to HK$6.1 million, respectively mainly due to increased purchases of pharmaceutical products and laboratory test cost as more specialist doctors joined us.
The table below sets out an ageing analysis of trade payables based on the invoice date, as at the dates indicated:
As at 31 March 2019 2020 2021 HK$’000 HK$’000 HK$’000
0–30 days 4,588 5,415 4,854 31–60 days 815 875 1,134 61–90 days 18 14 97 Over 90 days 23 3 26
5,444 6,307 6,111
The following table sets out our average trade payables turnover days for the years indicated:
Year ended 31 March 2019 2020 2021
Average trade payables turnover days(1) 38 35 34
Note:
(1) Average trade payables turnover days were calculated based on the average of the beginning and the ending balance of trade payables of a given year divided by the cost of inventories and laboratory test costs for that corresponding year multiplied by the number of days in the year.
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FINANCIAL INFORMATION
Our average trade payables turnover days decreased from 38 days in FY2019 to 35 days in FY2020 primarily due to the increase in the proportion of trade payables with credit terms of 30 days. Our average trade payables turnover days slightly decreased to 34 days for FY2021.
As at 30 April 2021, approximately HK$5.4 million or 88.5% of our trade payables as at 31 March 2021 had been subsequently settled.
Accruals and Other Payables
Our accruals and other payables mainly represent payables to consultants for service fees due to our Equity Partner Doctors, accrued employee benefits, accrued auditors’ remuneration, [REDACTED] expense payables and other accrued operating expenses. As at 31 March 2019, 2020 and 2021, we had accruals and other payables of HK$8.1 million, HK$19.3 million and HK$25.1 million, respectively.
The following table sets out the breakdown of our accruals and other payables as at the dates indicated:
As at 31 March 2019 2020 2021 HK$’000 HK$’000 HK$’000
Payables to consultants 6,508 16,434 15,042 Accrued employee benefits 161 769 1,481 Payables for property, plant and equipment — 437 — Payables to radiologists — 188 593 Payable for property agency commission ——1,500 [REDACTED] expense payables ——4,678 Accrued auditors’ remuneration 1,079 835 896 Others 333 599 887
8,081 19,262 25,077
Accruals and other payables increased from HK$8.1 million as at 31 March 2019 to HK$19.3 million as at 31 March 2020 mainly due to an increase in amounts due to consultants for increased services fees and increased accruals for employee benefit expenses and operating expenses. Accruals and other payables further increased to HK$25.1 million as at 31 March 2021 mainly due to increased [REDACTED] expense payables and payables to a property agent for the acquisition of the Integrated Diagnostic Centre.
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FINANCIAL INFORMATION
INDEBTEDNESS
As at 31 March 2019, 2020 and 2021 and 30 April 2021, we had indebtedness of HK$17.1 million, HK$22.5 million, HK$168.1 million and HK$167.3 million, respectively. The following table set out the breakdown of our indebtedness as at the dates indicated:
As at As at 31 March 30 April 2019 2020 2021 2021 HK$’000 HK$’000 HK$’000 HK$’000 (unaudited)
Non-current Lease liabilities 9,328 7,199 75,541 73,951 Current Bank borrowing ——75,000 74,738 Lease liabilities(1) 7,349 15,327 17,551 18,579 Amounts due to shareholders and ultimate holding company 279 ——— Amounts due to related parties 100 ——— 7,728 15,327 92,551 93,317 Total 17,056 22,526 168,092 167,268
Note:
(1) Includes finance lease liabilities of HK$2.6 million, nil and nil as at 31 March 2020 and 2021 and 30 April 2021, respectively,relatingtoHongKongImaging’sMRImachine.
We have adopted HKFRS 16 ‘‘Leases’’ consistently throughout the Track Record Period. Under HKFRS 16, an asset (the right-of-use of the leased property) and a financial liability to pay rentals are recognised on our consolidated statements of financial position as ‘‘lease liabilities’’.
Our indebtedness increased from HK$17.1 million as at 31 March 2019 to HK$22.5 million as at 31 March 2020 mainly due to increased lease liabilities of HK$5.8 million because of additions to lease of medical centres and corporate office.
Our indebtedness increased from HK$22.5 million as at 31 March 2020 to HK$168.1 million as at 31 March 2021 mainly attributable to the Mortgage Loan as discussed below and an increase in lease liabilities mainly due to the new lease of the 9th Floor of Central Building for our Integrated Flagship Medical Centre.
Bank Borrowings
As disclosed above, we completed the Property Purchase on 31 March 2021 partly financed through a mortgage loan of HK$75.0 million from a bank in Hong Kong (the ‘‘Mortgage Loan’’). The Mortgage Loan contains the following key terms:
(i) Interest rate: one-month HIBOR + 1.65% per annum;
(ii) Repayment period: 240 monthly instalments;
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FINANCIAL INFORMATION
(iii) Legal charge: first legal charge and assignment of rentals over the underlying property (i.e. 6th Floor of Euro Trade Centre, Central, Hong Kong) of up to HK$150.0 million;
(iv) Corporate guarantee: continuing corporate guarantee by the Company in the amount of HK$105.0 million; and
(v) Prepayment penalty: the Mortgage Loan is subject to an prepayment penalty of 2% of the original principal amount (i.e. HK$75.0 million) during the first year and 1% of the original principal loan during the second year, there is no repayment penalty after the second year.
The Group expects to repay the Mortgage Loan in full after the prepayment penalty period is over (i.e. around April 2023) using the [REDACTED] from the [REDACTED]. Please see section headed ‘‘Future Plans and [REDACTED]’’ for details.
We also obtained a revolving loan facility of up to HK$30.0 million from a bank in Hong Kong (the ‘‘Revolving Loan’’) for working capital purposes, of which HK$30.0 million is expected to be drawn-down prior to the [REDACTED]. The Revolving Loan contains the following key terms:
(i) Interest period: borrower is entitled to choose the interest period (‘‘Interest Period’’)for each advance, being either one, two or three month(s);
(ii) Interest rate: 2.1% per annum + HIBOR for the relevant Interest Period;
(iii) Repayment period: all amounts shall be repaid or reborrowed at the end of each Interest Period or otherwise repaid upon demand;
(iv) Legal charge: first legal charge and assignment of rentals over the underlying property (i.e. 6th Floor of Euro Trade Centre, Central, Hong Kong) of up to HK$150.0 million; and
(v) Corporate guarantee: continuing corporate guarantee by the Company in the amount of HK$105.0 million.
In addition, we will obtain a overdraft facility of up to HK$60.0 million from a bank in Hong Kong (the ‘‘Bank Overdraft’’) for working capital purposes, of which HK$60.0 million is expected to be drawn-down prior to the [REDACTED]. The Bank Overdraft requires a charge on bank deposits of no less that the aggregate limit available under this facility.
The Group expects to repay the Revolving Loan and Bank Overdraft using the [REDACTED] from the [REDACTED]. Please see section ‘‘Future Plans and [REDACTED]’’ for details.
Our Directors confirmed that, as at 30 April 2021, being the latest practicable date for determining indebtedness, save as disclosed above or any intra-group liabilities, we did not have any banking facilities, any unutilised banking facilities or any outstanding or authorised but unissued debt securities, term loans, other borrowings or indebtedness in the nature of borrowing, acceptance credits, hire purchase commitments, mortgages and charges, contingent liabilities or guarantees outstanding. Our Directors confirm that there was no material change in the indebtedness, capital commitments and contingent liabilities of our Group since the latest date for liquidity disclosure and up to the Latest Practicable Date.
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FINANCIAL INFORMATION
CAPITAL EXPENDITURES AND COMMITMENTS
Historical Capital Expenditures
Our capital expenditures primarily related to additions to our property, plant and equipment mainly with respect to building, leasehold improvements, medical equipment and office equipment. Our additions to property, plant and equipment were HK$7.0 million, HK$7.3 million and HK$30.9 million for each of the three years ended 31 March 2021, respectively. In addition, we acquired Hong Kong Imaging in October 2019 for a total cash consideration of HK$22.0 million. For further information, please see Note 11 and Note 31 to our consolidated financial statements set out in the Accountant’s Report included in Appendix I to this document.
Capital Commitments
Our capital commitments primarily related to the contracted but not yet provided office equipment, medical equipment and leasehold improvements. As at 31 March 2021, we had capital commitments of HK$13.6 million.
Operating Lease Commitments
We lease certain premises under operating leases arrangements that are within one year. We had operating lease commitments of nil, HK$3.1 million and HK$0.7 million as at 31 March 2019, 2020 and 2021, respectively.
RELATED PARTY TRANSACTIONS
During the Track Record Period, our related party balances mainly consisted of amounts due from Directors and amounts due from shareholders, which are discussed above. As at 31 March 2021, our amounts due from Directors was HK$1.6 million and amounts due from shareholders was HK$4.1 million. Such amounts will be settled by the Pre-[REDACTED] Dividend and/or cash payments prior to the [REDACTED]. For further details, see Note 34 to our consolidated financial statements set out in the Accountant’s Report included in Appendix I to this document.
Our Directors confirm that all transactions with related parties described in Note 34 to our consolidated financial statements set out in the Accountant’s Report included in Appendix I to this document were conducted on normal commercial terms negotiated between the Group and the respective related parties at an arm’s length basis; and would not distort our financial results during the Track Record Period or make our historical results not reflective of our future performance.
PERFORMANCE GUARANTEE FOR HONG KONG IMAGING
In October 2019, Smart Winner, one of the indirectly wholly-owned subsidiaries of the Company, acquired 100% equity interest in Hong Kong Imaging through acquiring 100% equity interest in Pixel, 94% equity interest in Pegasus from several independent third parties, and 6% equity interest in Pegasus from Mrs. Tsang (the ‘‘Acquisition’’). After the completion of the Acquisition, Smart Winner directly holds 100% equity interest in Pixel and Pegasus, and indirectly holds 100% equity interest in HKID Limited, 51% equity interest in HKID (Lab) and 51% equity interest in HKID (MRI), respectively.
A performance guarantee arrangement arose as part of the Acquisition. An arrangement was entered into between the Group and Dr. Ooi, who was one of the selling shareholders, pursuant to which Dr. Ooi guaranteed that Hong Kong Imaging’s minimum aggregate consolidated net income for two years from the acquisition date (the ‘‘Original Measurement Period’’) would be at least HK$9.0
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FINANCIAL INFORMATION million (the ‘‘Performance Target’’). In the event Hong Kong Imaging fails to meet the Performance Target by the end of the Original Measurement Period, Smart Winner is entitled to receive cash compensation from Dr. Ooi, based on the formula of: the shortfall of amount of consolidated net income multiplied by 5 and 26.01%. The Original Measurement Period is subject to revision in case of certain conditions as stipulated in the sale and purchase agreement with respect to the Acquisition. In view of the social unrest in Hong Kong and COVID-19 pandemic, we agreed to revise the Measurement Period to start from 1 November 2020 to 31 October 2022 (the ‘‘Revised Measurement Period’’), subject to further development of the COVID-19 situation.
For each of the years ended 31 March 2018 and 2019, Hong Kong Imaging recorded revenue of approximately HK$48.0 million and HK$47.0 million, respectively. Due to the social unrest in Hong Kong and the COVID-19 pandemic, revenue decreased to approximately HK$38.0 million for the full year ended 31 March 2020 and HK$32.5 million for the year ended 31 March 2021.
In addition, Hong Kong Imaging’s key medical equipment was fully depreciated by March 2021. Hong Kong Imaging recorded depreciation expenses of HK$4.8 million, HK$3.4 million and HK$1.0 million for each of the years ended 31 March 2019, 2020 and 2021, respectively, and is expected to be none for the years thereafter. Accordingly, the depreciation expense for the Original Measurement Period (1 November 2019 to 31 October 2021) was HK$4.5 million, while the projected depreciation expense for the Revised Measurement Period (1 November 2020 to 31 October 2022) is expected to be around HK$1.0 million. The reduction in depreciation expenses contributed to the improvement of Hong Kong Imaging’s profitability for the year ended 31 March 2021 (net loss of HK$1.8 million for the year ended 31 March 2021 as compared with the net loss of HK$2.6 million for the full year ended 31 March 2020), and is expected to improve its net profit for the year ending 31 March 2022 as the key medical equipment has been fully depreciated by March 2021.
The Company believes that once the pandemic is over and business and travel returns to normal, Hong Kong Imaging’s business will gradually improve and return to its historical profitability. The average revenue and patient visits from April 2019 to December 2019 (before the COVID-19 pandemic) amounted to HK$3.5 million and 2,493 per month, respectively; whilst after the outbreak of COVID-19, Hong Kong Imaging recorded an average revenue and patient visits of HK$2.4 million and 1,373 per month, respectively, for the six months ended 31 July 2020. In light of the various precautionary and control measures of the pandemic, Hong Kong residents are gradually rebuilding confidence in visiting clinics and diagnostic centres during the COVID-19 outbreak, which is evidenced by the improved average revenue at Hong Kong Imaging of HK$2.8 million per month from 1 August 2020 to 31 March 2021, and the improved average number of patient visits of 1,652 per month over the same period. Accordingly, the Company currently expects that the Performance Target will be met by October 2022.
The Group classified the performance guarantee arrangement as a financial asset at fair value through profit or loss. As the Performance Target is expected to be met, the fair value of the performance guarantee was immaterial as at 31 March 2020 and 2021. Please also see Notes 3.3 and 31 to the Accountant’s Report included in Appendix I of this document.
CONTINGENT LIABILITIES AND OFF BALANCE SHEET ARRANGEMENTS
During the Track Record Period and up to the Latest Practicable Date, we did not have any material contingent liabilities nor any other material off-balance sheet arrangements, variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or research and development services with us.
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FINANCIAL INFORMATION
FINANCIAL RISK MANAGEMENT
Our activities expose us to financial risks including foreign exchange risks, credit risks and liquidity risks. Please also see Note 3.1 to our consolidated financial statements set out in the Accountant’s Report included in Appendix I to this document.
Foreign Exchange Risks
We did not have any significant foreign exchange risks as our sales and purchase transactions are denominated in Hong Kong dollars and our functional currency is the Hong Kong dollar.
Credit Risks
The credit risk of the Group mainly arises from cash and cash equivalents, trade receivables, other receivables, deposits, amounts due from directors, shareholders and related companies. The carrying amounts of these balances represent the Group’s maximum exposure to credit risk in relation to financial assets.
In order to minimise the credit risk arising from bank deposits, deposits are mainly placed with reputable banks. Management assesses the credit risk for other receivables, deposits, amounts due from directors, shareholders and related companies by assessing the nature of the financial assets and the financial condition of the counterparties. Management has closely monitored the credit qualities and the collectability of these financial assets.
During the Track Record Period, our clients primarily consisted of individual clients and corporate clients for our medical services. Our individual clients represented a significant portion of our client base and the amount of revenue generated from them represented 92.6%, 90.4% and 90.1% of our total revenue for the years ended 31 March 2019, 2020 and 2021, respectively. For the same periods, revenue generated from our corporate clients represented 5.6%, 7.8% and 8.1% of our total revenue, respectively.
Individual clients generally settle their own medical payments by cash or cash equivalent, and their payments include (i) where they are not covered by any medical scheme or insurance plan, the fee incurred for the consultation and treatment received and (ii) where clients are under a medical scheme or insurance plan, the co-payment amount for the treatment received as required under the scheme. For revenue generated from our clients’ stay at the private hospitals, payments from these clients will be collected by the respective hospitals on behalf of us and such hospitals will generally transfer the amount to us via bank transfer within 60 days.
We generally enter into contractual arrangements with corporate clients including medical schemes and insurance companies, who settle medical payments for their policy members or staff members who are our patients. Medical scheme and insurance companies structure and administer corporate healthcare benefit plans to their members. We provide these members with specialist medical services and allied health services. Under our service contracts with the medical schemes and insurance companies, we offer services to their members in return for a service fee at an agreed rate based on the number of treatments to be received. A credit term of up to six months is generally granted to medical schemes and insurance companies.
For information on our trade receivables, please see the section headed ‘‘— Description of Selected Consolidated Statement of Financial Position Items — Trade receivables’’ above.
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FINANCIAL INFORMATION
Liquidity Risks
We regularly monitor our liquidity risks and maintain adequate cash and cash equivalents to meet our working capital requirements. As at 31 March 2021, we had total financial liabilities of HK$139.5 million that was due on demand or within one year.
KEY FINANCIAL RATIOS
Year ended 31 March 2019 2020 2021 (%)
Profitability ratios Gross profit margin(1) 43.2 30.4 26.2 Net profit margin(2) 30.6 20.0 8.1 Return on equity(3) 48.6 23.3 9.6 Return on total assets(4) 38.3 16.9 5.6
As at 31 March 2019 2020 2021 (times)
Liquidity ratios Current ratio(5) 7.6 2.5 1.1 Quick ratio(6) 7.4 2.4 1.0
Capital adequacy ratios (%) Gearing ratio(7) 7.9 10.5 71.2
Notes:
(1) The calculation of gross profit margin is based on gross profit for the year divided by revenue for the year and multiplied by 100%.
(2) The calculation of net profit margin is based on profit for the year divided by revenue for the year and multiplied by 100%.
(3) The calculation of return on equity is based on profit for the year attributable to owners of the Company divided by average total equity for the year and multiplied by 100%.
(4) The calculation of return on total assets is based on profit for the year attributable to owners of the Company divided by average total assets for the year and multiplied by 100%.
(5) The calculation of current ratio is based on current assets divided by current liabilities.
(6) The calculation of quick ratio is based on current assets less inventories divided by current liabilities.
(7) The calculation of gearing ratio is based on total indebtedness (including lease liabilities, amounts due to shareholders, amount due to the immediate holding company, amounts due to Directors and amounts due to related parties) divided by total equity and multiplied by 100%.
Please see the section headed ‘‘— Results of Operation of Our Group’’ above for a discussion of the factors affecting our gross profit margin and net profit margin during the Track Record Period.
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FINANCIAL INFORMATION
Return on equity
Our return on equity decreased from 48.6% for the year ended 31 March 2019 to 23.3% for the year ended 31 March 2020 primarily due to a decrease in profit for the year attributable to owners of the Company from HK$60.0 million in FY2019 to HK$50.2 million in FY2020 due to lower gross profit, higher administrative expenses and provisions for trade receivables, while our average total equity increased significantly from HK$123.5 million as at 31 March 2019 to HK$215.2 million as at 31 March 2020 mainly due to additional Pre-[REDACTED] investments. Our return on equity decreased from 23.3% for the year ended 31 March 2020 to 9.6% for the year ended 31 March 2021 primarily due to a decrease in profit for year attributable to owners of the Company from HK$50.2 million in FY2020 to HK$21.6 million in FY2021 due to lower gross profit as a result of the COVID-19 outbreak and higher administrative expenses such as [REDACTED] expenses, while our average total equity increased from HK$215.2 million as at 31 March 2020 to HK$225.2 million as at 31 March 2021.
Return on total assets
Our return on total assets decreased from 38.3% the year ended 31 March 2019 to 16.9% for the year ended 31 March 2020 primarily due to a decrease in profit for the year from HK$60.0 million in FY2019 to HK$49.7 million in FY2020 due to lower gross profit and higher administrative expenses, while our average total assets increased significantly from HK$156.4 million as at 31 March 2019 to HK$296.6 million as at 31 March 2020 mainly due to additional Pre-[REDACTED] Investments. Our return on assets decreased from 16.9% for the year ended 31 March 2020 to 5.6% for the year ended 31 March 2021 primarily due to a decrease in profit for year attributable to owners of the Company from HK$50.2 million in FY2020 to HK$21.6 million in FY2021 due to lower gross profit as a result of the COVID-19 outbreak and higher administrative expenses such as [REDACTED] expenses, while our average total assets increased significantly from HK$296.6 million as at 31 March 2020 to HK$389.3 million as at 31 March 2021 mainly due the new lease of the Integrated Flagship Medical Centre and the acquisition of the Integrated Diagnostic Centre.
Current ratio and quick ratio
Our current ratio decrease from 7.6 as at 31 March 2019 to 2.5 as at 31 March 2020, and our quick ratio decreased from 7.4 as at 31 March 2019 to 2.4 as at 31 March 2020 primarily due to the significant increase in current liabilities from HK$30.0 million as at 31 March 2019 to HK$112.0 million as at 31 March 2020 mainly due to dividends declared and increase in accruals of service fees to consultants as well as lease liabilities as a result of business growth; partly offset by an increase in current assets mainly due to an increase in advances provided to the Directors and shareholders.
Our current ratio decreased from 2.5 as at 31 March 2020 to 1.1 as at 31 March 2021, and our quick ratio decreased from 2.4 as at 31 March 2020 to 1.0 as at 31 March 2021 primarily due to an increase in short-term bank borrowing of HK$75.0 million for the acquisition of the Integrated Diagnostic Centre, partly offset by the settlement of dividend payables during FY2021.
Gearing ratio
Our gearing ratio increased from 7.9% as at 31 March 2019 to 10.5% as at 31 March 2020 primarily due to an increase in lease liabilities as we rented more office space.
Our gearing ratio significantly increased from 10.5% as at 31 March 2020 to 71.2% as at 31 March 2021 primarily due to an increased lease liabilities, particularly for the Integrated Flagship Medical Centre and increased bank borrowing for the purchase of the Integrated Flagship Medical Centre.
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FINANCIAL INFORMATION
DIVIDENDS AND DIVIDEND POLICY
Historical Dividends
During the Track Record Period, we have declared a dividend of HK$66.7 million in February 2020 and an additional dividend of HK$60.0 million (the ‘‘Pre-[REDACTED] Dividend’’) in October 2020, all of which have been settled as at 31 March 2021. The following table sets out the movements of our dividends payable for the years ended 31 March 2020 and 2021, and from 1 April 2021 up to the Latest Practicable Date.
From 1 April 2021 Year ended 31 March up to the Latest 2020 2021 Practicable Date HK$’000 HK$’000 HK$’000
Dividends payable, as at beginning of the period — 66,720 — Dividends declared during the period 66,720 60,000 — Dividends paid to Directors (Dr. Kenneth Tsang and Dr. Adam Leung) — (75,288) — Dividends paid to shareholders (excluding Directors) — (51,432) —
Dividends payable, as at ending of the period 66,720 ——
Dividend Policy
The Directors may recommend or declare dividends in the future after taking into account the Group’s operating performance and cash flows over the preceding year, operating plans moving forward, planned capital expenditures, as well as other use of funds that may affect or are deemed relevant to the Group’s financial position. The dividend distribution record in the past may not be used as a reference or basis to determine the level of dividends that may be declared or paid by the Company in the future.
The amount and manner by which dividends will be declared will be subject to the Company’s constitutional documents and the Companies Act. No dividend shall be declared or payable except out of the Group’s profits and reserves lawfully available for distribution. The Board’s recommendation on future declarations of dividends may or may not reflect the Group’s historical declarations of dividends. Such recommendations are put forward at the absolute discretion of the Directors. The Company’s shareholders, in a general meeting, must also approve any declaration of dividends.
Under Cayman Islands law, dividends may be paid out of the profits of our Company or out of sums standing to the credit of our share premium account provided that under no circumstances may dividends be paid out of share premium account if this would result in the Company being unable to pay its debts as they fall due in the ordinary course of business. Our Shareholders may by ordinary resolution declare a dividend, but no dividend may exceed the amount recommended by our Directors.
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FINANCIAL INFORMATION
Subject to the above, the Directors expect that the Company may be relied upon to regularly declare dividends on an annual basis based on the profit attributable to equity holders of the Company from the preceding financial year. In addition, the Directors may, from time-to-time, declare special or interim dividends, as may be deemed justifiable by the Company’s operating performance, as well as its current and reasonable forward-looking estimates of financial condition.
DISTRIBUTABLE RESERVES
As at 31 March 2021, our Company had no reserves available for distribution to our Shareholders.
[REDACTED]
Assuming that the [REDACTED] is not exercised, the [REDACTED] expenses in relation to the [REDACTED] (including [REDACTED] fees, professional fees and other fees) are estimated to be HK$[REDACTED] (based on the mid-point of the indicative [REDACTED] for the [REDACTED]), of which approximately HK$[REDACTED] were charged to the consolidated statements of comprehensive income for the year ended 31 March 2021. We expect that approximately HK$[REDACTED] will be further charged to the consolidated statements of comprehensive income for the year ending 31 March 2022 and HK$[REDACTED] will be accounted for as a deduction from equity upon completion of the [REDACTED].
Our [REDACTED] expenses as a percentage of [REDACTED] (assuming the mid-point of the indicative [REDACTED] for the [REDACTED] of HK$[REDACTED] per [REDACTED] and the [REDACTED] is not exercised) is estimated to be approximately [REDACTED]%.
UNAUDITED PRO FORMA ADJUSTED NET TANGIBLE ASSETS
The following unaudited pro forma financial information prepared in accordance with Rule 4.29 of the Listing Rules is for illustrative purpose only, and is set out herein to provide the prospective investors with further illustrative financial information about the effect of the [REDACTED] on the combined net tangible assets of the Group attributable to the owners of the Company as at 31 March 2021 as if the [REDACTED] had taken place on 31 March 2021. Because of its hypothetical nature, the unaudited pro forma financial information may not give a true picture of the financial position of our Group had the [REDACTED] been completed on 31 March 2021 or at any future dates.
Unaudited pro Unaudited pro Audited forma adjusted forma adjusted consolidated net consolidated net consolidated net tangible assets of tangible assets of tangible assets the Group the Group of the Group attributable to the Estimated attributable to attributable to the owners of the [REDACTED] the owners of the owners of the Company as at from the Company as at Company per 31 March 2021 [REDACTED] 31 March 2021 Share HK$’000 HK$’000 HK$’000 HK$ (Note 1) (Note 2) (Note 3)
Basedonan[REDACTED]of HK$[REDACTED] per Share 214,951 [REDACTED] [REDACTED] [REDACTED]
Basedonan[REDACTED]of HK$[REDACTED] per Share 214,951 [REDACTED] [REDACTED] [REDACTED]
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FINANCIAL INFORMATION
Notes:
(1) The audited consolidated net tangible assets attributable to the owners of the Company as at 31 March 2021 is extracted from the Accountant’s Report included in Appendix I to this document, which is based on the audited consolidated net assets of the Group attributable to the owners of the Company as at 31 March 2021 of approximately HK$232,768,000 with an adjustment for the intangible assets of the Group as at 31 March 2021 of approximately HK$17,817,000.
(2) The estimated [REDACTED] from the [REDACTED] are based on [REDACTED] [REDACTED] and the indicative [REDACTED] of HK$[REDACTED] per Share and HK$[REDACTED] per Share, being low and high end of the indicative [REDACTED], after the deduction of the estimated [REDACTED] fees and other [REDACTED] related expenses paid/ payable by the Company (excluding [REDACTED] expenses of approximately HK$[REDACTED] which have been accounted for prior to 31 March 2021), and takes no account of any Shares which may be allotted and issued upon the exercise of the [REDACTED].
(3) The unaudited pro forma adjusted consolidated net tangible assets per Share is arrived at after the adjustments referred to in the preceding paragraphs and on the basis that [REDACTED] Shares were in issue assuming that the [REDACTED] and the [REDACTED] has been completed on 31 March 2021 but does not take into account of any Shares to be issued pursuant to the exercise of the [REDACTED], any Shares which may be granted under the Share Option Scheme and any Shares that may be issued and repurchased by the Company pursuant to the general mandates.
(4) No adjustment has been made to the unaudited pro forma adjusted combined net tangible assets of the Group to reflect any trading results or other transactions of the Group entered into subsequent to 31 March 2021.
RECENT DEVELOPMENTS AND MATERIAL ADVERSE CHANGE
Subsequent to the Track Record Period and up to the Latest Practicable Date, our revenues from our Medical Centres, inpatient services provided at private hospitals and from Hong Kong Imaging remained lower than normal due to the outbreak of COVID-19. Save for the estimated [REDACTED] expenses as discussed above, the Directors confirm that there has been no material adverse change in the financial or trading position of our Group since 31 March 2021 and no event had occurred since 31 March 2021 that would materially and adversely affect the information in the Accountant’s Report included in Appendix I to this document.
On 31 March 2021, we purchased from an independent third party the entire 6th floor of Euro Trade Centre, Central, Hong Kong with GFA of approximately 5,200 sq.ft. at a purchase price of HK$150.0 million, which will be used as our Integrated Diagnostic Centre (the ‘‘Property Purchase’’). With respect to the Property Purchase, we paid HK$75.0 million in cash and financed the remaining HK$75.0 million through a mortgage loan. The mortgage loan will be repaid with the [REDACTED] from the [REDACTED], please see section headed ‘‘Future Plans and [REDACTED]’’ for details. We were also responsible for paying for our portion of real estate agent commissions of HK$1.5 million and Hong Kong stamp duties of HK$12.8 million.
In April 2021, we engaged two dental surgeons (the ‘‘Dental Surgeons’’) as independent contractors that joined us starting on 31 May 2021. The service fee arrangements for the Dental Surgeons are as follows:
. The first Dental Surgeon has a fee splitting arrangement with us whereby he shall be entitled to: (i) for all outpatient consultations, procedures and examinations — a profit sharing percentage that increases progressively from 50% to 80% based on different thresholds and (ii) for all hospital income — 80% of such income.
. The second Dental Surgeon shall be entitled to a fixed salary, plus incentive profit sharing, if any. The profit sharing percentage increases progressively from 25% to 50% based on different thresholds.
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FINANCIAL INFORMATION
Impact of COVID-19
Although the COVID-19 outbreak did have some impact on our business and result of operations, it did not have a material adverse effect.
From February 2020 to July 2020, the number of patient visits at our Medical Centres have, on average, decreased mainly due to the COVID-19 outbreak along with the related delays in seeking non- urgent medical treatment, travel restrictions and the slowdown in the Hong Kong economy. Our number of patient visits at our Medical Centres decreased to an average of 2,592 visits per month for the six months ended 31 July 2020 from an average of 2,912 visits per month for the six months ended 31 January 2020. However, average spending per patient at our Medical Centres increased from approximately HK$4,091 for the six months ended 31 January 2020 to approximately HK$4,378 for the six months ended 31 July 2020 mainly due to the increase in dosage of medication as requested by patients in anticipation of longer visit intervals due to the uncertainty of the COVID-19 outbreak. Accordingly, our average revenue from medical services at our Medical Centres from 1 February 2020 to 31 July 2020 was HK$11.3 million per month, while our average revenue from 1 August 2019 to 31 January 2020 was HK$11.9 million per month.
From February 2020 to July 2020, the number of inpatient hospital admissions for which we provided medical services have, on average, decreased mainly due to the COVID-19 outbreak. Our number of patient admissions at private hospitals decreased to an average of 617 admissions per month for the six months ended 31 July 2020 from an average of 753 admissions per month for the six months ended 31 January 2020 mainly due to general apprehension of going to hospitals and resulting delays for non-urgent medical treatment. Average spending per patient admission decreased from approximately HK$10,509 for the six months ended 31 January 2020 to approximately HK$10,043 for the six months ended 31 July 2020 mainly due to lower average revenue per inpatient admission of Dr. Jason Fong, Dr. Clement Lee and Dr. Boron Cheng as they provided relatively lower priced services for the six months ended 31 July 2020. Accordingly, our average revenue from medical services at hospitals from 1 February 2020 to 31 July 2020 was HK$6.2 million per month, while our average revenue from 1 August 2019 to 31 January 2020 was HK$7.9 million per month.
In addition, since February 2020, our number of clients at Hong Kong Imaging has decreased mainly due to the COVID-19 outbreak. Our number of client visits at our Diagnostic Centres decreased to an average of 1,373 visits per month for the six months ended 31 July 2020 from an average of 2,061 visits per month for the six months ended 31 January 2020. Accordingly, our average revenue at our Diagnostic Centres from 1 February 2020 to 31 July 2020 was HK$2.4 million per month, while our average revenue at our Diagnostic Centres from 1 August 2019 to 31 January 2020 was HK$3.1 million per month. We believe the decrease in client visits at our Diagnostic Centres was mainly due to a decrease in third-party doctor referrals caused by the COVID-19 outbreak, which contributed a significant portion of its business during the Track Record Period. In addition, laboratory and diagnostic testing is often used for preventative purposes, such as health-checks; and the COVID-19 outbreak has temporarily curtailed the demand for such non-urgent medical treatment.
Since 1 August 2020, our average number of patient visits have improved due to less restrictive containment measures implemented by the Hong Kong government. From 1 August 2020 to 31 March 2021, our number of patient visits at our Medical Centres increased to an average of 2,789 visits per month and the number of clients at Hong Kong Imaging increased to an average of 1,652 visits per month. The number of hospital admissions during this period increased to an average of 710 per month despite patients continuing to avoid going to hospitals due to the on-going COVID-19 situation.
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FINANCIAL INFORMATION
However, it is uncertain whether this improvement will continue as Hong Kong may face a new wave of COVID-19 outbreaks. Please see the section headed ‘‘Risk Factors — Our business has been and is likely to be adversely affect by the outbreak of COVID-19, and may be affected by other communicable diseases in the future’’. We believe that the negative impact of COVID-19 outbreak on our business and the private healthcare sector in Hong Kong is temporary and limited, and once an effective vaccine is widely distributed and implemented in Hong Kong, our business will continue to grow. The COVID-19 outbreak has increased public awareness of the need to maintain good health and wellness, and we believe this would positively impact the demand for private healthcare in Hong Kong going forward. As such, our Directors confirm that the COVID-19 outbreak is not expected to have a material adverse effect on our business strategies and we will utilise the [REDACTED] from the [REDACTED] in accordance with the section headed ‘‘Future Plans and [REDACTED]’’.
Assuming we were forced to completely suspend our operations indefinitely starting on 1 January 2021 due to the COVID-19 outbreak, we estimate that our financial resources (including cash and cash equivalents) can sustain our business until February 2022. Key assumptions for the above estimate include (i) we do not generate any operating cash inflow from customers, (ii) operating cash outflows include only necessary costs including rent and rates, employee benefit expenses, utilities and other miscellaneous expenses, (iii) the [REDACTED] from the [REDACTED] will be reserved and unavailable foruseexceptfor[REDACTED]oftheapproximately HK$[REDACTED], being approximately 10% of the [REDACTED] from the [REDACTED], will be available for general business operations and working capital purposes, (iv) we suspend our expansion plans as discussed under the section headed ‘‘Future Plans and [REDACTED]’’ except with respect to the purchase of the 6th floor of Euro Trade Centre for HK$150.0 million (‘‘Property Purchase’’) and payment of related stamp duties of HK$12.8 million, (v) a mortgage loan of HK$75.0 million was obtained for the Property Purchase in March 2021, and (vi) the existing trade receivables will be recovered based on historical settlement patterns. The above mentioned estimate is hypothetical and is for illustrative purposes only; and our Directors currently assess the likelihood of such situation to be extremely remote.
NO ADDITIONAL DISCLOSURE REQUIRED UNDER THE LISTING RULES
Our Directors have confirmed that as at the Latest Practicable Date, there were no circumstances that would give rise to a disclosure required under Rules 13.13 to 13.19 in Chapter 13 of the Listing Rules had the Shares been [REDACTED] on the Stock Exchange on that date.
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FUTURE PLANS AND [REDACTED]
REASONS FOR THE [REDACTED]
Our Directors believe that the [REDACTED] will provide us with more diversified financial resources to better capture business opportunities and fulfil our external funding needs, especially in view of our establishment and development of our Integrated Diagnostic Centre, Integrated Flagship Medical Centre, HKMC Oncology Centre, HKMC Dental Centre and HKMC SKIN Centre, which are further discussed below. We believe the establishment and development of these medical centres will help our business grow by capturing new clients in Hong Kong and medical tourists from Mainland China. More importantly these new medical centres will help us take advantage of market opportunities, and when combined with our HKMC brand and platform, will help us attract talented and experienced doctors that will further drive our growth in the future. For further details, see the section headed ‘‘Business — Our Opportunities and Strategies’’.
Our Directors also believe the [REDACTED] will further broaden our shareholder base and provide us with the flexibility to adjust our capital structure from time to time, through accessing a wider spectrum of fund raising method, including debt and equity raising, and negotiating more favourable terms of financing from financial institutions, which in turn will enable us to better withstand external risks and market fluctuations.
In addition, as a publicly listed company on a major stock exchange, this position is expected to strengthen our corporate profile, our brand and reputation, which would enhance our competitiveness in Hong Kong’s medical industry. It would also help us improve our corporate governance because we will be subject to ongoing regulatory compliance requirements and supervision by the regulatory bodies. It can also help us to attract and retain quality doctors to support our future business development.
FUTURE PLANS
Please see the section headed ‘‘Business — Our Opportunities and Strategies’’ for a detailed description of our future plans and strategies.
[REDACTED]
The aggregate [REDACTED] that we expect to receive from the [REDACTED] will be approximately HK$[REDACTED] (assuming an [REDACTED] of HK$[REDACTED] per [REDACTED], being the mid-point of the indicative [REDACTED] of HK$[REDACTED] to HK$[REDACTED] per Share), after deducting [REDACTED] fees and estimated expenses payable by us in connection with the [REDACTED] and assuming the [REDACTED] is not exercised. We currently intend to use such [REDACTED] for the following purposes:
1. Approximately [REDACTED]%, or HK$[REDACTED] million, will be used for the establishment of an integrated diagnostic centre (‘‘Integrated Diagnostic Centre’’), including (i) the repayment of the mortgage loan relating to the Property Purchase, (ii) the purchase of new equipment, and (iii) the hiring of a few doctors and other necessary support staff to operate this centre. In particular, we intend to use:
. Approximately [REDACTED]%, or HK$[REDACTED] million, to repay the Mortgage Loan. We expect to repay the Mortgage Loan after the prepayment penalty period is over (around April 2022).
On 31 March 2021, we purchased from an independent third party the entire 6th floor of Euro Trade Centre, Central, Hong Kong with GFA of approximately 5,200 sq. ft. at a purchase price of HK$150.0 million, which will be used as our Integrated Diagnostic Centre (the ‘‘Property Purchase’’).
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FUTURE PLANS AND [REDACTED]
We were also responsible for paying for our portion of real estate commission of HK$1.5 million and estimated Hong Kong stamp duties of HK$12.8 million, and collectively with the HK$150.0 million purchase price, the total cost of the Property Purchase amounted to around HK$164.3 million. We partly financed the Property Purchase through obtaining a mortgage loan of HK$75.0 million (the ‘‘Mortgage Loan’’). Please see the section headed ‘‘Financial Information — Indebtedness — Bank Borrowings’’ for further details on the Mortgage Loan.
Once the Integrated Diagnostic Centre is established and ready for use, we plan to obtain the necessary day procedure centre licence and move our entire MRI Centre (which is located at Unit 703 Euro Trade Centre in Central) and move most of our Imaging and Cardiovascular Centre on the 5th floor, Central Building to the newly developed Integrated Diagnostic Centre.
We believe acquiring our own property will help us better optimise the use of existing office space as we grow, and alleviate our reliance and risks associated with rental of properties and business disruption in the longer term. Reasons for acquiring our own property include:
(i) the MRI and CT Scan machines are large, heavy and high-value equipment that would be costly and difficult to relocate;
(ii) only a limited number of office buildings in Central have the necessary loading capacity and elevator access suitable for us to locate our MRI and CT Scan machines, and such locations may not be readily available if and when we need to relocate;
(iii) any relocation would require us to expend considerable time, effort and expense for renovation; and the costs associated with and the risk of damage of moving such equipment may be significant or unfeasible;
(iv) owning our property provides us with a stable place to conduct and build our business and saves us from relocation, renovation and business interruption costs, which is expected to lower our cost of operations in the long-term;
(v) based on data from the Rating and Valuation Department of the HKSAR Government, the market price of Grade A and B offices in the Central district increased at a CAGR of 8.0% and 8.3%, respectively, over the past twenty years. Our Directors believe that the purchase of a property for our Integrated Diagnostic Centre is commercially beneficially to us because of rental savings and that the property will retain its value in the long-term; and
(vi) we estimate our rental recovery period for the purchase of the Integrated Diagnostic Centre (i.e. 6th floor, Euro Trade Centre, Central, Hong Kong) to be approximately 24 years; which is calculated by dividing the total cost of HK$164.4 million (including the purchase price of HK$150.0 million, real estate agent fees of HK$1.5 million and stamp duties of HK$12.8 million and transaction cost of HK$0.1 million) by existing rental expenses of around HK$4.6 million per year (for our Imaging and Cardiovascular Centre and MRI Centre) with an estimated annual increase in rental expenses of 5.31% after the first three years for
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FUTURE PLANS AND [REDACTED]
each six-year office lease term. The estimated annual increase of 5.31% is based on data from the Rating and Valuation Department of the HKSAR Government for rental offices in the Central district over the last twenty years. The normal office lease in Hong Kong provides for a three year fixed term plus a three year flexible term during which rental adjustments are allowed.
. Approximately [REDACTED]%, or HK$[REDACTED] million, to renovate and purchase equipment for the Integrated Diagnostic Centre. In particular: (i) HK$[REDACTED] million will be used for renovations and the Integrated Diagnostic Centre is expected to ready for move-in by around the fourth quarter of 2021 and (ii) HK$[REDACTED] million will be used to purchase new equipment.
The new equipment we plan to purchase for the Integrated Diagnostic Centre includes one new MRI machine, one new CT Scan machine, one new mammography machine, one new ultrasound machine and one new DEXA scanner, with an expected unit cost of HK$[REDACTED] million, HK$[REDACTED] million, HK$[REDACTED] million, HK$[REDACTED] million and HK$[REDACTED] million, respectively. Such machines are expected to have a useful life for depreciation purposes of five years. We expect the payback period for the new MRI machine to be 3.4 years and for the new year CT Scan machine to be 2.7 years.
Our existing MRI machine is owned subject to a finance lease with a remaining lease term until March 2021. We plan to eventually replace our MRI machine because it does not have the latest technological features and is becoming more expensive to maintain. Our existing MRI machine had an expected useful life for depreciation purpose of five years, currently has an age of approximately five years, and has been 100% depreciated under the straight-line method as at 31 March 2021. Hong Kong Imaging incurred costs of HK$2.2 million up to 31 March 2021 to maintain the MRI machine, and we expect to replace this machine by around mid-2022.
Our existing CT Scan machine is owned and has been fully paid-off. We plan to eventually replace our CT Scan machine because it also does not have the latest technological features and is becoming more expensive to maintain. Our existing CT Scan machine had an expected useful life for depreciation purposes of five years, currently has an age of approximately five years, and has been 100% depreciated under the straight-line method as at 31 March 2021. Hong Kong Imaging incurred costs of HK$2.3 million up to 31 March 2021 to maintain the CT Scan machine. We expect to purchase the new CT Scan machine around mid-2022.
. Approximately [REDACTED]%, or HK$[REDACTED] million to hire full-time employees including two new employee doctors on a part-time basis, such as radiologists for diagnosis and reporting purposes. We are in need of hiring these new employees as we plan to expand our scale and services to attract new clients for our health check and medical concierge services. Such amount represents approximately 18 months of wages and salaries for these employees to ensure we have sufficient funding for the start-up of the Integrated Diagnostic Centre. The average salaries for each of these doctors is expected to be around HK$2.2 million per year. The recruitment criteria for these doctors include mainly hiring consultants with six to eight years of post specialist experience and an established patient pool and clinic income of over three years of private practice. We plan to hire such doctors by around the fourth quarter of 2021.
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FUTURE PLANS AND [REDACTED]
. Approximately [REDACTED]%, or HK$[REDACTED] million to hire three radiographers, two nurses and seven healthcare assistants and receptionists to support our new operations. Such amount represents around 18 months of wages and salaries for these employees to ensure we have sufficient support for the Integrated Diagnostic Centre. The average salaries for each of the radiographers, nurses, and healthcare assistants and receptionists are expected to be around HK$0.5 million, HK$0.5 million and HK$0.3 million per year, respectively.
The recruitment criteria for the radiographers include registration with the Hong Kong Radiographers Board and relevant work experience; and the criteria for the nurses include registration with Hong Kong Nursing Council, with valid practising certificate; and the criteria for the healthcare assistants include relevant experience. We plan to hire such personnel at the same time as hiring the doctors. We expect to have one nurse and one to two healthcare assistants supporting each of our radiologists or radiographers at the Integrated Diagnostic Centre with the remainders being shared receptionists.
Based on our forecasts, the new Integrated Diagnostic Centre is expected to have positive cash flows starting the year ending 31 March 2027. This takes into account the renovation costs of approximately HK$[REDACTED] million and new machinery and equipment of approximately HK$[REDACTED] million as disclosed above as well as on-going operational expenses, but excludes the Property Purchase. We have excluded the Property Purchase in the forecast because the property is a capital asset and its value is expected to remain stable in the long-term as disclosed above. Other assumptions in the forecast includes: (i) the new Integrated Diagnostic Centre will commence operations in the fourth quarter of 2021, (ii) the new CT Scan machine and MRI machine will be purchased in mid-2022, (iii) two new doctors, three new radiographers, two nurses and seven healthcare assistants and clinic support staff will be hired as disclosed above, (iv) revenue from cases for ultrasound, x-ray, mammography will be moved to the new Integrated Diagnostic Centre starting during the fourth quarter of 2021 for FY2022 revenue, (v) revenue from cases for MRI and CT scans will be moved to the new Integrated Diagnostic Centre starting from mid-2022 for FY2023 revenue, (vi) the revenue growth rate will be 10% per year from FY2024 to FY2027 and (vii) the inflation rate will be 3.5% per year.
2. Approximately [REDACTED]%, or HK$[REDACTED] million, will be used to repay bank loans to replenish and restore the Group’s cash resources used for or associated with the Property Purchase. We have obtained a revolving loan facility of HK$30.0 million and will obtain a overdraft facility of HK$60.0 million and will draw-down a total of HK$90.0 million prior to the [REDACTED] (together, the ‘‘Bank Loans’’). Please see the section headed ‘‘Financial Information — Indebtedness — Bank Borrowings’’ for details. The economic environment in Hong Kong remains uncertain due to the COVID-19 outbreak and bank interest rates are expected to remain low in the near future and accordingly, we believe it is in the best interest of the Group and its shareholders that we also obtain the Bank Loans to ensure we have sufficient liquidity, since it is uncertain whether the expected [REDACTED] timetable may be delayed and or may not be materialised. The Company expects to repay the Bank Overdraft of HK$60.0 million by around December 2021 and the Revolving Loan of HK$30.0 million by around December 2022 using the [REDACTED] from the [REDACTED].
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FUTURE PLANS AND [REDACTED]
3. Approximately [REDACTED]%, or HK$[REDACTED] million, will be used for the establishment and development of a main integrated medical centre (‘‘Integrated Flagship Medical Centre’’). On 1 February 2021, we started a new lease agreement for the entire 9th floor of Central Building, with GFA of approximate 16,200 sq. ft., for a term of six years. We plan to move certain of our current Medical Centres to this Integrated Flagship Medical Centre after renovation, starting around June 2021, to support our expansion as well as to consolidate and better optimise the use of existing office space, particularly HKMC I, HKMC III and the HKMC Paediatric Centre, which are located on the 8th and 5th floors of the same building, as well as the HKMC Geriatric Medicine Centre, which is located at another building in Central. As such, we intend to use:
. Approximately [REDACTED]%, or HK$[REDACTED] million for rental payments and related management fees associated with leasing the Integrated Flagship Medical Centre. This amount covers around 18 months of rental and management fee payments to help ensure we have sufficient funding for the start up of this new medical centre.
. Approximately, [REDACTED]%, or HK$[REDACTED] million to renovate the newly leased Integrated Flagship Medical Centre. We expect the Integrated Flagship Medical Centre will be ready for move-in by around June 2021.
. Approximately [REDACTED]%, or HK$[REDACTED] million to purchase new equipment, including HK$[REDACTED] million for computer servers and network equipment as well as HK$[REDACTED] million for dental and other equipment for our new doctors and staff. The expected useful life for our computer servers, network equipment and medical equipment is five years.
. Approximately [REDACTED]%, or HK$[REDACTED] million to hire eight employee doctors relating to oncology, geriatric medicine, respiratory medicine, psychiatry, cardiology, neurology and dermatology. Such amount represents approximately 18 months of wages and salaries for these employees to ensure we have sufficient funding for the start-up of the Integrated Flagship Medical Centre. The average salaries for each of these doctors is expected to be around HK$2.2 million per year. The recruitment criteria for these doctors include mainly hiring consultants with six to eight years of post specialist experience and an established patient pool and clinic income of over three years of private practice. We plan to hire the oncologist, psychiatrist and dermatologist by around mid 2021 and other doctors by the fourth quarter of 2021.
. Approximately [REDACTED]%, or HK$[REDACTED] million to hire 28 healthcare assistants and/or receptionists to support the newly hired employee doctors. Such amount represents approximately 18 months of wages and salaries for these employees to ensure we have sufficient funding for the start-up of the Integrated Flagship Medical Centre. The average salaries for each of the healthcare assistants is expected to be around HK$0.3 million per year. The recruitment criteria for these individuals include having relevant clinical operational experience. We plan to hire such personnel at the same time as the doctors mentioned above. We expect to have one to two healthcare assistants to support each of our doctors, with the remainders being shared receptionists.
4. Approximately [REDACTED]%, or HK$[REDACTED] million, will be used for the establishment of a new oncology centre under our brand (‘‘HKMC Oncology Centre’’). We plan to hire a couple new doctors and several support staff, and enter into a new lease
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FUTURE PLANS AND [REDACTED]
agreement with GFA of approximately 5,000 sq. ft. in Central, Hong Kong to establish the HKMC Oncology Centre. We also plan to move HKMC II to the HKMC Oncology Centre when it is ready. As such, we intend to use:
. Approximately [REDACTED]%, or HK$[REDACTED] million for rental payments and related management fees associated with leasing the HKMC Oncology Centre. This amount covers around 18 months of rental and management fee payments to help ensure we have sufficient funding for the starting up this new medical centre.
. Approximately [REDACTED]%, or HK$[REDACTED] million to renovate the newly leased HKMC Oncology Centre. We expect the HKMC Oncology Centre to be ready for move-in by around September 2022.
. Approximately [REDACTED]%, or HK$[REDACTED] million to purchase new equipment, including IT and network equipment and special medical equipment for oncology patients. The expected useful life of such equipment is five years.
. Approximately [REDACTED]%, or HK$[REDACTED] million to hire two additional employee doctors specialising in oncology to start our operations. Such amount represents around 18 months of wages and salaries for these employees to ensure we have sufficient funding for the start-up of the HKMC Oncology Centre. The average salaries for each of these doctors is expected to be around HK$2.2 million per year. The recruitment criteria for these doctors include mainly hiring consultants with six to eight years of post specialist experience and an established patient pool and clinic income of over three years of private practice. We plan to hire these doctors by around September 2022.
. Approximately [REDACTED]%, or HK$[REDACTED] million to hire three nurses and three healthcare assistants and/or receptionists to support the employee doctors. Such amount represents around 18 months of wages and salaries for these employees to ensure we have sufficient funding for the start-up of the HKMC Oncology Centre. The average salaries for each of the nurses is expected to be around HK$0.5 million per year and for each of the healthcare assistants and receptionists is expected to be HK$0.3 million per year. The recruitment criteria for nurses included registration with the Hong Kong Nursing Council with valid practising certificate; and the criteria for the healthcare assistants include having relevant clinical operational experience. We plan to hire such personnel at the same time we have recruited the doctors mentioned above. We expect to have one nurse and one healthcare assistant to support each of our oncologists.
5. Approximately [REDACTED]%, or HK$[REDACTED] million, will be used for the establishment of a new dental centre under our brand (‘‘HKMC Dental Centre’’). We plan to hire a couple new dentists and several support staff, and enter into a new lease agreement with GFA of approximately 1,500 sq. ft. in Central, Hong Kong to establish the HKMC Dental Centre. As such, we intend to use:
. Approximately [REDACTED]%, or HK$[REDACTED] million for rental payments and related management fees associated with leasing the HKMC Dental Centre. This amount covers around 18 months of rental and management fee payments to help ensure we have sufficient funding for the starting up this new medical centre.
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FUTURE PLANS AND [REDACTED]
. Approximately [REDACTED]%, or HK$[REDACTED] million to renovate the newly leased HKMC Dental Centre. We expect the HKMC Dental Centre will be ready for move-in by around September 2022.
. Approximately [REDACTED]%, or HK$[REDACTED] million to purchase new equipment, including a SINIUS Dental unit, and IT network and hardware. The expected life of such equipment is five years.
. Approximately [REDACTED]%, or HK$[REDACTED] million to hire two dentists as employee doctors to start our operations. Such amount represents around 18 months of wages and salaries for these employees to ensure we have sufficient funding for the start-up of the HKMC Dental Centre. The average salaries for each of these doctors is expected to be around HK$2.2 million per year. The recruitment criteria for these doctors include hiring dentists with six to eight years of experience with an established patient pool and clinic income of over three years of practice. We plan to hire such dentists by around September 2022.
. Approximately [REDACTED]%, or HK$[REDACTED] million to hire three nurses or hygienists and two healthcare assistants and/or receptionists to support the dentists. Such amount represents around 18 months of wages and salaries for these employees to ensure we have sufficient funding for the start-up of the HKMC Dental Centre. The average salaries for each of the nurses or hygienists is expected to be around HK$0.5 million per year and for the healthcare assistants is expected to be HK$0.3 million per year. The recruitment criteria for these individuals include registration with Hong Kong Nursing Council, with relevant certifications and experience. We plan to hire such personnel around the same time as the doctors mentioned above. We expect to have one nurse or hygienist, and one healthcare assistant to support each of our dentists
6. Approximately [REDACTED]%, or HK$[REDACTED] million, will be used for the establishment of a new dermatology centre under our brand (‘‘HKMC SKIN Centre’’). We plan to hire a few dermatologists and several support staff, and enter into a new lease agreement with GFA of approximately 1,500 sq. ft. in Admiralty or Central, Hong Kong to establish the HKMC SKIN Centre. As such, we intend to use:
. Approximately [REDACTED]%, or HK$[REDACTED] million for rental payments and related management fees associated with leasing the HKMC SKIN Centre. This amount covers around 18 months of rental and management fee payments to help ensure we have sufficient funding for the starting up this new medical centre.
. Approximately [REDACTED]%, or HK$[REDACTED] million to renovate the newly leased HKMC SKIN Centre. We expect the HKMC Skin Centre to be ready for move-in by around December 2021.
. Approximately [REDACTED]%, or HK$[REDACTED] million to purchase new equipment, including facial treatment machines such as one Thermage, one Fotona Dynamis, one Pico laser, one Pulsed Dye Laser and other related machines and equipment. The expected useful life of the facial treatment machines is five years.
. Approximately [REDACTED]%, or HK$[REDACTED] million to hire two employee doctors specialising in dermatology start our operations. Such amount represents around
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FUTURE PLANS AND [REDACTED]
18 months of wages and salaries for these employees to ensure we have sufficient funding for the start-up of the HKMC SKIN Centre. The average salaries for each of these doctors is expected to be around HK$2.2 million per year. The recruitment criteria for these doctors include hiring consultants with six to eight years of post specialist experience and an established patient pool and clinic income of over three years of private practice. We plan to hire these doctors by December 2021.
. Approximately [REDACTED]%, or HK$[REDACTED] million to hire four healthcare assistants and/or receptionists to support the employee doctors. Such amount represents around 18 months of wages and salaries for these employees to ensure we have sufficient funding for the start-up of the HKMC SKIN Centre. The average salaries for each of the healthcare assistants or receptionists is expected to be HK$0.2 million per year. The recruitment criteria for healthcare assistants include those with relevant experience. We plan to hire such personnel around the same time as the doctors mentioned above. We expect to have one healthcare assistant support each of our dermatologists with the remainder being shared receptionists.
7. Approximately [REDACTED]%, or HK$[REDACTED] million, will be used for working capital and general corporate purpose. We expect to have increasing needs of working capital as a result of the rapid and organic expansion of our business and diversifying service offerings along with any investment or acquisition if and when suitable opportunities arise.
If the [REDACTED] is set at the high end or low end of the indicative [REDACTED], the estimated [REDACTED] from the [REDACTED], assuming that the [REDACTED] is not exercised, will increase to approximately HK$[REDACTED] million or decrease to approximately HK$[REDACTED] million, respectively. In such event, we will adjust the intended use of the [REDACTED] for the above purposes on a pro-rata basis.
If the [REDACTED] is exercised in full, the estimated [REDACTED] from the [REDACTED] will increase to approximately HK$[REDACTED] million, assuming an [REDACTED] of HK$[REDACTED] per Share, being the mid-point of the indicative [REDACTED]. If the [REDACTED] is set at the high-end or low-end of the indicative [REDACTED], the estimated [REDACTED] from the [REDACTED], including the [REDACTED] from the exercise of the [REDACTED], will increase to approximately HK$[REDACTED] million or decrease to approximately HK$[REDACTED] million, respectively. In each of these events, we will adjust the intended use of the [REDACTED] for the above purposes on a pro-rata basis.
To the extent that the [REDACTED] from the [REDACTED] are not sufficient to fund the purposes as set out above, we intend to fund the balance through a variety of means, including cash generated from operations, bank loans and other borrowings, as appropriate. Should our Directors decide to re-allocate the intended [REDACTED] to other business plans and/or new projects of our Group to a material extent and/or there is any material modification to the [REDACTED] as described above, we will make appropriate announcement(s) in due course.
To the extent that the [REDACTED] of the [REDACTED] are not immediately required for the above purposes and to the extent permitted by applicable laws and regulations, we intend to place the [REDACTED] on short-term demand deposit with licensed banks or other financial institutions in Hong Kong.
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FUTURE PLANS AND [REDACTED]
Staffing at our Medical Centres and Diagnostic Centres
As disclosed above, we plan to relocate (i) HKMC I, HKMC III, HKMC Paediatric Centre and HKMC Geriatric Medicine Centre to the Integrated Flagship Medical Centre, (ii) Imaging and Cardiovascular Centre and MRI Centre to the Integrated Diagnostic Centre and (iii) HKMC II to the HKMC Oncology Centre.
The following table provides a summary of our personnel at our Medical Centres and Diagnostic Centres as at 31 March 2021:
Imaging & Cardiovascular Centre, MRI HKMC Centre and HKMC Geriatric HKMC Medical Psychiatric Medicine Paediatric Laboratory HKMC I HKMC II HKMC III Centre Centre Centre Centre
Number of personnel as at 31 March 2021: — Specialistdoctors1232311 3 — Medical and support staff(1) 29 10 2 2 1 3 13
Ratio of medical and support stafftospecialistdoctors as at 31 March 2021 2.4 3.3 1.0 0.7 1.0 3.3 4.3
The following table provides a summary of the expected number of new personnel to be hired using the [REDACTED] from the [REDACTED] at our new medical centres:
Integrated Integrated Flagship HKMC HKMC Diagnostic Medical Oncology Dental HKMC Centre Centre Centre Centre SKIN Centre
Expected number of new personnel: — Specialistdoctors 28222 — Medical and support staff(1) 1228654
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FUTURE PLANS AND [REDACTED]
The following table provides a summary of the expected combined number of existing and new personnel to be hired at our Integrated Diagnostic Centre and various medical centres after the relocation:
Integrated Integrated Flagship HKMC HKMC HKMC HKMC Diagnostic Medical Oncology Dental SKIN Psychiatric Centre Centre Centre Centre Centre Centre
Expected number of personnel: — Specialist doctors 5 22 4 3 4 3 — Medical and support staff(1) 25 58 15 7 8 2
Expected ratio of medical and support stafftospecialistdoctors(2) 5.0(3) 2.6 3.8 1.8 2.0 0.7
Notes:
(1) Includes nurses, healthcare assistants, receptionists, pharmacists and dispensers, as the case may be.
(2) The size of and personnel at each Medical Centre differs because the number of medical and support staff necessary to manage each Medical Centre varies and the number of assistants needed to support each doctor varies with his/her specialty and size of medical practice.
(3) We expect the ratio of medical and support staff to be higher at our Integrated Diagnostic Centre as our diagnostic equipment are mostly operated by support staff such as radiographers and nurses. The increase also reflects the additional equipment and larger space at the Integrated Diagnostic Centre.
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HOW TO APPLY FOR [REDACTED]
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HOW TO APPLY FOR [REDACTED]
[REDACTED]
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APPENDIX I ACCOUNTANT’SREPORT
The following is the text of a report set out on pages I-1 to I-2, received from the Company’s reporting accountant, [PricewaterhouseCoopers], Certified Public Accountants, Hong Kong, for the purpose of incorporation in this document. It is prepared and addressed to the directors of the Company and to the Sponsor pursuant to the requirements of HKSIR 200 Accountants’ Reports on Historical Financial Information in Investment Circulars issued by the Hong Kong Institute of Certified Public Accountants.
[Letterhead of PricewaterhouseCoopers]
[DRAFT]
ACCOUNTANT’S REPORT ON HISTORICAL FINANCIAL INFORMATION TO THE DIRECTORS OF HONG KONG MEDICAL CONSULTANTS HOLDINGS LIMITED AND CHINA INTERNATIONAL CAPITAL CORPORATION HONG KONG SECURITIES LIMITED
Introduction
We report on the historical financial information of Hong Kong Medical Consultants Holdings Limited (the ‘‘Company’’) and its subsidiaries (together, the ‘‘Group’’) set out on pages I-3 to I-62, which comprises the consolidated statements of financial position as at 31 March 2019, 2020 and 2021, the statement of financial position of the Company as at 31 March 2021, the consolidated statements of comprehensive income, the consolidated statements of changes in equity and the consolidated statements of cash flows for each of the years ended 31 March 2019, 2020 and 2021 (the ‘‘Track Record Period’’) and a summary of significant accounting policies and other explanatory information (together, the ‘‘Historical Financial Information’’). The Historical Financial Information set out on pages I-3 to I-62 forms an integral part of this report, which has been prepared for inclusion in the document of the Company dated [Date] (the ‘‘Document’’) in connection with the initial [REDACTED] of shares of the Company on the Main Board of The Stock Exchange of Hong Kong Limited.
Directors’ responsibility for the Historical Financial Information
The directors of the Company are responsible for the preparation of the Historical Financial Information that gives a true and fair view in accordance with the basis of presentation and preparation set out in Notes 1.3 and 2.1 to the Historical Financial Information, and for such internal control as the directors determine is necessary to enable the preparation of the Historical Financial Information that is free from material misstatement, whether due to fraud or error.
Reporting accountant’s responsibility
Our responsibility is to express an opinion on the Historical Financial Information and to report our opinion to you. We conducted our work in accordance with Hong Kong Standard on Investment Circular Reporting Engagements 200, Accountants’ Reports on Historical Financial Information in Investment Circulars issued by the Hong Kong Institute of Certified Public Accountants (‘‘HKICPA’’). This standard requires that we comply with ethical standards and plan and perform our work to obtain reasonable assurance about whether the Historical Financial Information is free from material misstatement.
Our work involved performing procedures to obtain evidence about the amounts and disclosures in the Historical Financial Information. The procedures selected depend on the reporting accountant’s judgement, including the assessment of risks of material misstatement of the Historical Financial Information, whether due to fraud or error. In making those risk assessments, the reporting accountant
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APPENDIX I ACCOUNTANT’SREPORT considers internal control relevant to the entity’s preparation of Historical Financial Information that gives a true and fair view in accordance with the basis of presentation and preparation set out in Notes 1.3 and 2.1 to the Historical Financial Information in order to design procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Our work also included evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the Historical Financial Information.
We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Opinion
In our opinion, the Historical Financial Information gives, for the purposes of the accountant’s report, a true and fair view of the financial position of the Company as at 31 March 2021, the consolidated financial position of the Group as at 31 March 2019, 2020 and 2021 and of its consolidated financial performance and its consolidated cash flows of the Group for the Track Record Period in accordance with the basis of presentation and preparation set out in Notes 1.3 and 2.1 to the Historical Financial Information.
Report on matters under the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the ‘‘Listing Rules’’) and the Companies (Winding Up and Miscellaneous Provisions) Ordinance
Adjustments
In preparing the Historical Financial Information, no adjustments to the Underlying Financial Statements as defined on page I-3 have been made.
Dividends
We refer to Note 22 to the Historical Financial Information which states that no dividends have been paid by the Company in respect of the Track Record Period.
No statutory financial statements for the Company
No statutory financial statements have been prepared for the Company since its date of incorporation.
[PricewaterhouseCoopers] Certified Public Accountants Hong Kong [Date]
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APPENDIX I ACCOUNTANT’SREPORT
I HISTORICAL FINANCIAL INFORMATION OF THE GROUP
Preparation of Historical Financial Information
Set out below is the Historical Financial Information which forms an integral part of this accountant’s report.
The consolidated financial statements of the Group for the Track Record Period, on which the Historical Financial Information is based, were audited by PricewaterhouseCoopers in accordance with Hong Kong Standards on Auditing issued by the Hong Kong Institute of Certified Public Accountants (‘‘HKICPA’’)(the‘‘Underlying Financial Statements’’).
The Historical Financial Information is presented in Hong Kong dollars (‘‘HK$’’) and all values are rounded to the nearest thousand (‘‘HK$’000’’) except when otherwise indicated.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Year ended 31 March 2019 2020 2021 Note HK$’000 HK$’000 HK$’000
Revenue 5(a) 195,660 248,394 251,434 Cost of sales 6 (111,145) (172,814) (185,504)
Gross profit 84,515 75,580 65,930 Selling and marketing expenses 6 (913) (1,212) (2,328) Administrative expenses 6 (6,747) (16,421) (36,371) Provision for impairment losses on financial assets 3.1(b)(ii) (4,622) (150) (200)
Operating profit 72,233 57,797 27,031 Finance income 35 2,436 1,199 Finance costs (649) (1,051) (1,441)
Finance (costs)/income, net 7 (614) 1,385 (242)
Profit before income tax 71,619 59,182 26,789 Income tax expenses 9 (11,659) (9,489) (6,396)
Profit and total comprehensive income for the year 59,960 49,693 20,393
Profit/(loss) attributable to: Owners of the Company 59,960 50,194 21,643 Non-controlling interests — (501) (1,250)
59,960 49,693 20,393
Earnings per share for profit attributable to owners of the Company (express in HK$ per share) Basic and diluted 10 55.86 46.77 20.16
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APPENDIX I ACCOUNTANT’SREPORT
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
As at 31 March 2019 2020 2021 Note HK$’000 HK$’000 HK$’000
ASSETS Non-current assets Property, plant and equipment 11 7,654 11,571 36,057 Right-of-use assets 12 16,936 23,237 225,835 Intangible assets 13 — 17,862 17,817 Deposits and prepayments 15 2,055 2,591 15,822 Deferred tax assets 16 812 1,505 2,731
27,457 56,766 298,262
Current assets Inventories 17 7,935 10,112 12,351 Trade receivables 18 16,099 16,107 19,108 Other receivables, deposits and prepayments 15 847 5,852 10,347 Amounts due from shareholders 19 137,143 36,116 4,145 Amounts due from directors 34 27,130 51,535 1,600 Amount due from the ultimate holding company 34 20 36 4 Amount due from the immediate holding company 34 10 18 — Income tax recoverable — 336 849 Cash and cash equivalents 20 39,771 159,860 95,267
228,955 279,972 143,671
Total assets 256,412 336,738 441,933
EQUITY Capital and reserves attributable to equity holders of the Company Share capital 21 ——— Reserves 23 134,648 145,165 206,346 Retained earnings 23 81,305 64,779 26,422
215,953 209,944 232,768 Non-controlling interests — 4,512 3,262
Total equity 215,953 214,456 236,030
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APPENDIX I ACCOUNTANT’SREPORT
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (CONTINUED)
As at 31 March 2019 2020 2021 Note HK$’000 HK$’000 HK$’000
LIABILITIES Non-current liabilities Provision for re-instatement costs 24 1,163 3,059 1,052 Lease liabilities 25 9,328 7,199 75,541 Deferred tax liabilities 16 — 34 27
10,491 10,292 76,620
Current liabilities Trade payables 26 5,444 6,307 6,111 Contract liabilities 5(a) 411 431 2,947 Accruals and other payables 27 8,081 19,262 25,077 Lease liabilities 25 7,349 15,327 17,551 Provision for re-instatement costs 24 ——2,101 Amount due to a shareholder 28 279 —— Amount due to a related company 34 100 —— Dividend payable 22 — 66,720 — Bank borrowing 29 ——75,000 Current income tax payable 8,304 3,943 496
29,968 111,990 129,283
Total liabilities 40,459 122,282 205,903
Total equity and liabilities 256,412 336,738 441,933
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APPENDIX I ACCOUNTANT’SREPORT
STATEMENT OF FINANCIAL POSITION OF THE COMPANY
As at 31 March 2021 Note HK$’000
ASSETS Non-current assets Investment in subsidiaries 1.2 240,400
Current assets Prepayments 4,548
Total assets 244,948
EQUITY Capital and reserves attributable to equity holders of the Company Share capital 21 — Reserves 23(c) 240,400 Accumulated losses 23(c) (14,352)
Total equity 226,048
LIABILITIES Current liabilities Accruals 4,900 Amount due to a subsidiary 34(c)(ii) 14,000
Total liabilities 18,900
Total equity and liabilities 244,948
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APPENDIX I ACCOUNTANT’SREPORT
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Attributable to the owners of the Company Share Capital Reserves Retained Total (Note 21) (Note 23) earnings equity HK$’000 HK$’000 HK$’000 HK$’000
Balance at 1 April 2018 — 9,648 21,345 30,993
Comprehensive income Profit and total comprehensive income for the year ——59,960 59,960
Total comprehensive income ——59,960 59,960
Transactions with owners Capital contributions from the owners of the Group on 31 March 2019 — 125,000 — 125,000
Total transactions with owners — 125,000 — 125,000
Balance at 31 March 2019 and 1 April 2019 — 134,648 81,305 215,953
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APPENDIX I ACCOUNTANT’SREPORT
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (CONTINUED)
Attributable to the owners of the Company Share Non- Capital Reserves Retained controlling Total (Note 21) (Note 23) earnings Sub-total interests equity HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
Balance at 31 March 2019 and 1 April 2019 — 134,648 81,305 215,953 — 215,953
Comprehensive income Profit and total comprehensive income for the year ——50,194 50,194 (501) 49,693
Total comprehensive income ——50,194 50,194 (501) 49,693
Transactions with owners Capital contributions from an owner of the Group — 5 — 5 — 5 Share-based payment expense — 530 — 530 — 530 Dividend declared (Note 22) ——(66,720) (66,720) — (66,720)
Total transactions with owners — 535 (66,720) (66,185) — (66,185)
Issuance of shares for business combination (Note 32) — 9,982 — 9,982 5,013 14,995
Balance at 31 March 2020 and 1 April 2020 — 145,165 64,779 209,944 4,512 214,456
Comprehensive income Profit and total comprehensive income for the year ——21,643 21,643 (1,250) 20,393
Total comprehensive income ——21,643 21,643 (1,250) 20,393
Transactions with owners Share-based payment expense — 2,963 — 2,963 — 2,963 Capital contributions from the owners of the Group, net of transaction costs and tax — 58,218 — 58,218 — 58,218 Dividend declared (Note 22) ——(60,000) (60,000) — (60,000)
Total transactions with owners — 61,181 (60,000) 1,181 — 1,181
Balance at 31 March 2021 — 206,346 26,422 232,768 3,262 236,030
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APPENDIX I ACCOUNTANT’SREPORT
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended 31 March 2019 2020 2021 Note HK$’000 HK$’000 HK$’000
Cash flows from operating activities
Cash generated from operations 30(a) 79,154 89,681 55,693
Income tax paid (8,260) (15,343) (11,589)
Net cash generated from operating activities 70,894 74,338 44,104
Cash flows from investing activities
Purchases of property, plant and equipment (6,036) (6,814) (30,590) Purchase of leasehold land ——(134,373) Acquisition of subsidiaries, net of cash acquired 30(c), 32 — (9,335) — Prepayments for leasehold improvements ——(8,256) Prepayment for property, plant and equipment ——(488) Proceeds from disposal of property, plant and equipment 30(d) ——14 Interest income received 35 2,436 1,199 Amounts due from directors (17,699) (24,405) (10,516) Amounts due from shareholders (10,777) (23,973) 5,207 Amount due from the ultimate holding company (20) (16) 32 Amount due from the immediate holding company (10) (8) 18
Net cash used in investing activities (34,507) (62,115) (177,753)
Cash flows from financing activities
Principal and interest payments of lease liabilities (8,532) (15,438) (16,899) Amounts due to shareholders (3,778) (279) — Expenses paid in connection with the [REDACTED] of new shares ——(3,175) Dividends paid ——(39,505) Capital injections from shareholders 1,700 125,005 58,218 Payments of rental deposits (112) (1,422) (4,583) Proceeds from bank borrowing ——75,000
Net cash (used in)/generated from financing activities (10,722) 107,866 69,056
Net increase/(decrease) in cash and cash equivalents 25,665 120,089 (64,593)
Cash and cash equivalents at the beginning of the year 14,106 39,771 159,860
Cash and cash equivalents at the end of the year 20 39,771 159,860 95,267
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APPENDIX I ACCOUNTANT’SREPORT
II NOTES TO THE HISTORICAL FINANCIAL INFORMATION
1 GENERAL INFORMATION, REORGANISATION AND BASIS OF PRESENTATION
1.1 General information
The Company was incorporated in the Cayman Islands on 21 September 2020 as an exempted company with limited liability under the Companies Act (Cap. 22, Act 3 of 1961 as consolidated and revised) of the Cayman Islands. The address of the Company’s registered office is at the office of Conyers Trust Company (Cayman) Limited, Cricket Square, Hutchins Drive, PO Box 2681, Grand Cayman, KY1-1111, Cayman Islands.
The Company is an investment holding company and its subsidiaries are principally engaged in the provision of private specialty healthcare services and management services to medical centres (‘‘HKMC Business’’) and imaging and diagnostic services (‘‘HKID Business’’) in Hong Kong (collectively referred to as the ‘‘[REDACTED] Business’’).
The ultimate holding company of the Company is Central Healthcare Group Limited (‘‘CHG’’), which is owned by Dr. Tsang Wah Tak Kenneth (‘‘Dr. Kenneth Tsang’’), Dr. Fong Ka Yeung (‘‘Dr. Jason Fong’’), Dr. Leung Wing Hung (‘‘Dr. Adam Leung’’), Dr. Tsang Suk Kwan Jenny (‘‘Dr. Jenny Tsang’’), Dr. Chu Leung Wing, Mr. Shiu Shu Ming (‘‘Mr. Shiu’’) and Mrs. Chen Chou Mei Mei Vivien (‘‘Mrs. Chen’’) (collectively referred to as the ‘‘Founding Shareholders’’ and each a ‘‘Founding Shareholder’’).
On 23 October 2020, a deed of acting-in-concert was entered into among the Founding Shareholders and their respective wholly owned investment holding companies (collectively referred to as the ‘‘Concert Parties’’ and each a ‘‘Concert Party’’) pursuant to which all the Concert Parties confirmed that since the date on which they first became interested in the Group, they have been acting, and undertake to continue to act in concert with each other and reach unanimous consensus among themselves regarding all material commercial decisions, including but not limited to financial and operational matters and strategic decisions of the [REDACTED] Business conducted by CHG and its subsidiaries. In case unanimous decision cannot be reached, Dr. Kenneth Tsang has the right to make the conclusive decision which shall be binding on the other Concert Parties.
Accordingly, the ultimate controlling party of the Company is Dr. Kenneth Tsang (the ‘‘Controlling Shareholder’’).
1.2 History and Reorganisation
History
Prior to the incorporation of the Company and the completion of the reorganisation (the ‘‘Reorganisation’’)as described below, the [REDACTED] Business was carried out by Hong Kong Medical Consultants Limited (‘‘Hong Kong Medical Consultants’’) and its subsidiaries (Hong Kong Brain Memory Centre Limited (‘‘HK Brain Memory’’) and Central Healthcare Limited (‘‘Central Healthcare Limited’’)) (together referred to as ‘‘Hong Kong Medical Consultants and its subsidiaries’’), and Hong Kong Imaging and Diagnostic Centre Limited (‘‘HKID Limited’’)and its subsidiaries (together referred to as ‘‘Hong Kong Imaging’’) (collectively referred to as ‘‘Operating Companies’’) now comprising the Group. Hong Kong Medical Consultants is under the control of the Controlling Shareholder throughout the Track Record Period. HK Brain Memory, Central Healthcare Limited and Hong Kong Imaging are under the control of the Controlling Shareholder since the respective dates of acquisition by the Group (Note 30 and Note 32).
Prior to November 2017, Hong Kong Medical Consultants was principally engaged in the provision of management services to medical centres in Hong Kong.
In November 2017, the Founding Shareholders, Dr. Lee Pui Yin (‘‘Dr. Clement Lee’’), Dr. Cheng Cheung Wah Boron (‘‘Dr. Boron Cheng’’), Dr. Ma Tin Wei Ada (‘‘Dr. Ada Ma’’), Dr. Lo Wai Kei (‘‘Dr. Lo Wai Kei’’), and Dr. Ng Matthew (‘‘Dr. Matthew Ng’’) (collectively referred to as the ‘‘Equity Partners’’), and Dr. Chau Kwok On, Gordon (‘‘Dr. Gordon Chau’’),Dr.NgWingHo(‘‘Dr. Kenneth Ng’’) and Dr. Tam Sau Man, Barbara (‘‘Dr. Barbara Tam’’) (collectively referred to as the ‘‘Strategic Shareholders’’) concluded their earlier discussions under the leadership of Dr. Kenneth Tsang and reached a consensus to join the Group as medical specialists or management personnel, to expand the business of Hong Kong Medical Consultants to provide private specialty healthcare service, and to contribute additional capital to the Group. The roles and responsibilities of each party and their respective beneficial interests in the Group were then agreed such that the Group would be owned by the Founding Shareholders as to 83%, the Equity Partners as to 11% and the Strategic Shareholders as to 6% respectively.
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APPENDIX I ACCOUNTANT’SREPORT
To reflect the consensus reached above, the holding companies of Hong Kong Medical Consultants and its subsidiaries including CHG, Central Medical Investment Limited (‘‘CMI’’) and Central Medical Holdings Limited (‘‘CMH’’) were incorporated one after another. In November 2017 and thereafter, shares were gradually allotted and issued by these companies to the Founding Shareholders, the Equity Partners and the Strategic Shareholders to establish their respective beneficial interests in the Group. During the Track Record Period, two Operating Companies including HK Brain Memory and Central Healthcare Limited were acquired by Hong Kong Medical Consultants to conduct the HKMC Business (Note 30(c)).
Pursuant to a shareholders agreement signed on 31 March 2019 among CHG and the intermediate holding companies, the Founding Shareholders, the Equity Partners, the Strategic Shareholders and the new investors namely Asmex Investment Limited, Pine Treasure Holdings Limited, Joyous Rainbow Holdings Limited, Goldstone Investment Capital Limited, Double Expert Limited, Hong Kong Dashenlin Trade and Investment Limited, Cheung Hing Holdings Limited, Star List Limited and Clear Trillion Limited (collectively referred to as the ‘‘New Investors’’), 125,000 shares of CMH were issued to the New Investors at HK$1,000 each.
On 30 October 2019, the Group acquired 100% equity interests in Pixel Investments Limited (‘‘Pixel’’)and Pegasus Investments Limited (‘‘Pegasus’’), which directly hold 51% and 49% equity interests in HKID Limited respectively, which was accounted for as a business combination (Note 33). After the acquisition, the Group also indirectly holds 51% equity interests in two HKID Limited’s subsidiaries which, together with HKID Limited, conduct the HKID Business. Part of the purchase consideration for the business combination was satisfied by the issuance of 9,844 shares of CMH to Dr. Ooi Gaik Cheng, Dr. Liu Chi Leung, Dr. Lau Chu Pak, Mr. Lo Wai Keung, Peter and Ms. Tang Wan Yin.
On 27 August 2020, 49,857 fully paid shares of CMH, representing approximately 4.62% of the total issued shares of CMH, were allotted and issued at a consideration of HK$60,000,000 to Unicorn Link Group Limited (the ‘‘Unicorn’’). On 15 September 2020, Unicorn surrendered 6,925 shares of CMH. As a result, Unicorn held 42,932 shares of CMH representing approximately 4.00% of the total issued shares of CMH.
Reorganisation
In preparation for the [REDACTED] of the Company’s shares on the Main Board of The Stock Exchange of Hong Kong Limited (the ‘‘[REDACTED]’’), the Company was incorporated on 21 September 2020 in the Cayman Islands. On 23 October 2020, the Company acquired the entire equity interests inCMHbyissuing1,073,306 ordinary shares of HK$0.00001 each to its then shareholders in the proportion of their respective interests in CMH. The Company then became the holding company of the companies now comprising the Group.
Upon the completion of the Reorganisation and up to the date of this report, the Company has direct and indirect interests in the following subsidiaries:
Place and date of incorporation Principal activities and Name and kind of legal entity Particulars of issued and paid up capital as at Effective interest held as at place of operation 31 March the date of 31 March the date of 2019 2020 2021this report 2019 2020 2021 this report
Direct interest: Central Medical Holdings British Virgin Islands, HK$1,000,000 HK$1,014,919 HK$1,073,307 HK$1,073,307 100% 100% 100% 100% Investment holding, BVI Limited (Note a) 2 November 2017, a limited liability company
Indirect interests: Hong Kong Medical Hong Kong, HK$100 HK$100 HK$100 HK$100 100% 100% 100% 100% Provision of private specialty Consultants 25 October 2013, healthcare services and Company Limited a limited liability company management services to (Note b) medical centres in Hong Kong, HK
CentralPharm Company Hong Kong, HK$1 HK$1 HK$1 HK$1 100% 100% 100% 100% Wholesales of pharmaceutical Limited (Note c) 12 September 2017, products, HK a limited liability company
HKMC Dental & Hong Kong, HK$1 HK$1 HK$1 HK$1 100% 100% 100% 100% Inactive, HK Maxillofacial Centre 1 December 2016, Limited (formerly a limited liability company known as Central Medical Consultants Company Limited) (Note b and f)
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APPENDIX I ACCOUNTANT’SREPORT
Place and date of incorporation Principal activities and Name and kind of legal entity Particulars of issued and paid up capital as at Effective interest held as at place of operation 31 March the date of 31 March the date of 2019 2020 2021this report 2019 2020 2021 this report
Indirect interests: Smart Winner Seychelles, N/A US$1 US$1 US$1 N/A 100% 100% 100% Investment holding, Investments Limited 26 July 2019, Seychelles (‘‘Smart Winner’’) a limited liability company (Note a)
Medical Concierge British Virgin Islands, N/A US$100 US$100 US$100 N/A 100% 100% 100% Investment holding, BVI Holding Limited 20 August 2019, (Note a) a limited liability company
Hong Kong Brain Hong Kong, HK$1 HK$1 HK$1 HK$1 100% 100% 100% 100% Provision of private specialty Memory Centre 18 May 2018, healthcare services in Limited (Note c) a limited liability company Hong Kong, HK
Central Healthcare Hong Kong, HK$1 HK$1 HK$1 HK$1 100% 100% 100% 100% Provision of private specialty Limited (Note b) 17 August 2017, healthcare services in a limited liability company Hong Kong, HK
Hong Kong Imaging and Hong Kong, HK$20,000 HK$20,000 HK$20,000 HK$20,000 N/A 100% 100$ 100% Imaging and diagnostic Diagnostic Centre 11 December 2008, service in Hong Kong, Limited (Note d) a limited liability company HK
Hong Kong Imaging and Hong Kong, HK$10,000 HK$10,000 HK$10,000 HK$10,000 N/A 51% 51% 51% Medical laboratory service in Diagnostic Centre 30 May 2012, Hong Kong, HK (Lab) Limited a limited liability company (‘‘HKID (Lab)’’) (Note d)
Hong Kong Imaging and Hong Kong, HK$10,000 HK$10,000 HK$10,000 HK$10,000 N/A 51% 51% 51% Magnetic resonance imaging Diagnostic Centre 24 April 2012, service in Hong Kong, (MRI) Limited a limited liability company HK (‘‘HKID (MRI)’’) (Note d)
Medical Concierge British Virgin Islands, N/A US$100 US$100 US$100 N/A 100% 100% 100% Inactive, BVI Management Limited 20 August 2019, (Note a) a limited liability company
Medical Concierge British Virgin Islands, N/A US$100 US$100 US$100 N/A 70% 95% 95% Inactive, BVI Limited (Note a) 20 August 2019, a limited liability company
HKMC Medical Products Hong Kong, N/A N/A HK$1 HK$1 N/A N/A 100% 100% Inactive, HK Limited (Note e) 1 April 2020, a limited liability company
Ace Alliance Global British Virgin Islands, N/A N/A US$1 US$1 N/A N/A 100% 100% Inactive, BVI Limited (Note a) 25 May 2020, a limited liability company
Notes:
(a) There is no statutory audit requirement in its place of incorporation.
(b) The audited financial statements of the company for the years ended 31 March 2019 and 2020 were audited by PricewaterhouseCoopers.
(c) The audited financial statements of these companies for the period from the incorporation date to 31 March 2019 and for the year ended 31 March 2020 were audited by PricewaterhouseCoopers.
(d) The audited financial statements of these companies for the year ended 31 March 2019 were audited by James T. W. Kong & Co. and the year ended 31 March 2020 was audited by PricewaterhouseCoopers.
(e) No audited financial statements of the company since its incorporation date.
(f) The name of the company was changed since 28 April 2021.
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APPENDIX I ACCOUNTANT’SREPORT
1.3 Basis of presentation
Immediately prior to and after the Reorganisation, the HKMC Business is conducted by Hong Kong Medical Consultants and its subsidiaries for the Group throughout the Track Record Period which became subsidiaries of the Company pursuant to the Reorganisation. The Company has not been involved in any business prior to the Reorganisation and do not meet the definition of a business. The Reorganisation is merely a recapitalisation of the Hong Kong Medical Consultants and its subsidiaries with no change in management of such business and the Controlling Shareholder of the Hong Kong Medical Consultants and its subsidiaries remained the same.
The Group resulting from the Reorganisation is regarded as a continuation of the Hong Kong Medical Consultants and its subsidiaries and, for the purpose of this report, the Historical Financial Information has been prepared such that the income, expenses, assets and liabilities of the Hong Kong Medical Consultants and its subsidiaries are recognised and measured at the carrying amounts. Specifically, the financial information of Hong Kong Medical Consultants is included in the Historical Financial Information using their carrying values for all periods presented.
The financial information of HK Brain Memory, Central Healthcare Limited and HKID Limited is included in the Historical Financial Information since their respective dates of acquisition (Note 30(c) and 32).
Inter-company transactions and balances and unrealised gains/losses on transactions between companies now comprising the Group are eliminated.
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies applied in the preparation of the Historical Financial Information are set out below. These policies have been consistently applied to all the periods presented, unless otherwise stated.
2.1 Basis of preparation
The Historical Financial Information has been prepared in accordance with Hong Kong Financial Reporting Standards (‘‘HKFRS’’) issued by Hong Kong Institute of Certified Public Accountants (the ‘‘HKICPA’’).
The Historical Financial Information has been prepared under the historical cost convention, except that the financial assets at fair value through profit or loss are stated at fair value.
The preparation of Historical Financial Information in conformity with HKFRS requires the use of certain critical accounting estimates. It also requires management of the Group to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the Historical Financial Information are disclosed in Note 4.
In preparing the Historical Financial Information, the Group has consistently adopted throughout the Track Record Period all standards and amendments that were effective for accounting periods beginning on or before 1 April 2021, which include HKFRS 9 ‘‘Financial Instruments’’ (‘‘HKFRS 9’’), HKFRS 15 ‘‘Revenue from contracts with customers’’ (‘‘HKFRS 15’’), HKFRS 16 ‘‘Leases’’ (‘‘HKFRS 16’’) and Amendments to HKFRS 16.
The following new standards and amendments to standards have been published but are not yet effective for the Track Record Period and have not been early adopted by the Group:
Effective for annual periods beginning on or after
Amendments to HKFRS 3 Reference to the Conceptual Framework 1 January 2022 Amendments to HKAS 16 Proceeds before Intended Use 1 January 2022 Amendments to HKAS 37 Cost of Fulfilling a Contract 1 January 2022 Annual improvement project Annual Improvements 2018–2020 Cycle 1 January 2022 HKFRS 17 Insurance Contracts and related Amendments 1 January 2023 Amendments to HKAS 1 Classification of Liabilities as Current or Non-current 1 January 2023 Amendments to HKAS 8 Definition of accounting estimates 1 January 2023 Amendments to HKFRS 4 Extension of the temporary exemption from applying IFRS 9 1 January 2023 HKFRS 10 and HKAS 28 Sale or Contribution of Assets between an Investor and its To be determined (Amendments) Associate or Joint Venture
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APPENDIX I ACCOUNTANT’SREPORT
The Group will adopt the above new standards and amendments to standards when they become effective. The Group has commenced an assessment and does not anticipate any significant impact on the Group’s financial position and results of operations upon adopting these new standards and amendments to standards.
2.2 Principles of consolidation
(i) Subsidiary
A subsidiary is an entity (including a structured entity) over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.
The acquisition method of accounting is used to account for business combination by the Group.
Intra-group transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the transferred asset. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.
Non-controlling interests in the results and equity of subsidiaries are shown separately in the consolidated statements of comprehensive income, consolidated statements of changes in equity and consolidated statements of financial position respectively.
(ii) Changes in ownership interests in subsidiaries without change of control
The Group treats transactions with non-controlling interests that do not result in a loss of control as transactions with equity owners of the Company. A change in ownership results in an adjustment between the carrying amounts of the controlling and non-controlling interests to reflect their relative interests in the subsidiary. Any difference between the amount of the adjustment to non-controlling interests and any consideration paid or received is recognised in a separate reserve within equity attributable to owners of the Company.
When the Group ceases to combine or equity account for an investment because of a loss of control or significant influence, any retained interest in the entity is remeasured to its fair value with the change in carrying amount recognised in profit or loss. This fair value becomes the initial carrying amount for the purposes of subsequent accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in the other comprehensive income are reclassified to profit or loss or transferred to another category of equity as specified/permitted by applicable HKFRS.
2.3 Business combinations
The acquisition method of accounting is used to account for all business combinations, regardless of whether equity instruments or other assets are acquired. The consideration transferred for the acquisition of a subsidiary comprises the:
. fair values of the assets transferred,
. liabilities incurred to the former owners of the acquired business,
. equity interests issued by the Group,
. fair value of any asset or liability resulting from a contingent consideration arrangement, and
. fair value of any pre-existing equity interest in the subsidiary.
Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions, measured initially at their fair values at the acquisition date. The Group recognises any non-controlling interest in the acquired entity on an acquisition-by-acquisition basis either at fair value or at the non-controlling interest’s proportionate share of the acquired entity’s net identifiable assets.
Acquisition-related costs are expensed as incurred.
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APPENDIX I ACCOUNTANT’SREPORT
The excess of the:
. consideration transferred,
. amount of any non-controlling interest in the acquired entity, and
. acquisition-date fair value of any previous equity interest in the acquired entity
over the fair value of the net identifiable assets acquired is recorded as goodwill. If those amounts are less than the fair value of the net identifiable assets of the business acquired, the difference is recognised directly in profit or loss as a bargain purchase.
Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present value as at the date of exchange. The discount rate used is the entity’s incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an independent financier under comparable terms and conditions. Contingent consideration is classified either as equity or a financial liability. Amounts classified as a financial liability are subsequently remeasured to fair value with changes in fair value recognised in profit or loss.
If the business combination is achieved in stages, the acquisition date carrying value of the acquirer’spreviouslyheld equity interest in the acquiree is remeasured to fair value at the acquisition date. Any gains or losses arising from such remeasurement are recognised in profit or loss.
2.4 Separate financial statements
Investments in subsidiaries are accounted for at cost less impairment. Cost includes direct attributable costs of investment. The results of subsidiaries are accounted for by the Company on the basis of dividend received and receivable.
Impairment testing of the investments in subsidiaries is required upon receiving a dividend from these investments if the dividend exceeds the total comprehensive income of the subsidiary in the period the dividend is declared or if the carrying amount of the investment in the separate financial statements exceeds the carrying amount in the consolidated financial statements of the investee’s net assets including goodwill.
2.5 Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operations decision-maker (‘‘CODM’’). The CODM, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the executive directors of the Company (‘‘Executive Directors’’)whomake strategic decisions.
2.6 Foreign currency translation
(a) Functional and presentation currency
Items included in the consolidated financial statements of the Group are measured using the currency of the primary economic environment in which the entity operates (the ‘‘functional currency’’). The Historical Financial Information are presented in HK$, which is the Group’s functional and presentation currency.
(b) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are re-measured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss.
All foreign exchange gains and losses are presented within other gains, net in profit or loss.
2.7 Property, plant and equipment
Property, plant and equipment are stated at historical cost less accumulated depreciation and any impairment loss. Historical cost includes expenditure that is directly attributable to the acquisition of the items.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to profit or loss during the Track Record Period in which they are incurred.
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APPENDIX I ACCOUNTANT’SREPORT
Depreciation of property, plant and equipment is calculated using the straight-line method to allocate their costs to their residual values over their estimated useful lives, as follows:
Building 30 years Medical equipment 5 years Leasehold improvements Shorter of lease term and estimated useful lives up to 6 years Office furniture and fixtures 5 years Computer equipment 3 to 5 years Motor vehicles 3 to 4 years
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’scarryingamountis greater than its estimated recoverable amount (Note 2.9).
Gains and losses on disposal are determined by comparing the proceeds with the carrying amount and are recognised in profit or loss.
2.8 Intangible assets
Goodwill
Goodwill is measured as described in Note 2.3. Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill is not amortised but it is tested for impairment annually, or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.
Goodwill is allocated to cash-generating units (‘‘CGUs’’) for the purpose of impairment testing. The allocation is made to those CGUs or groups of CGUs that are expected to benefit from the business combination in which the goodwill arose. The units or groups of units are identified at the lowest level at which goodwill is monitored for internal management purposes, being the group of CGUs comprising Hong Kong Imaging.
Customer relationship
Customer relationships acquired in a business combination are recognised at fair value at the acquisition date. The customer relationships have a finite useful life and are carried at cost less accumulated amortisation. Amortisation is calculated using the straight-line method to allocate its cost over five years.
2.9 Impairment of non-financial assets
Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs of disposal and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets. Non-financial assets that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period.
2.10 Financial instruments
(i) Classification
The Group classifies its financial assets in the following measurement categories:
— those to be measured subsequently at fair value through profit or loss, and
— thosetobemeasuredatamortisedcost.
The classification depends on the entity’s business model for managing the financial assets and the contractual terms of the cash flows.
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APPENDIX I ACCOUNTANT’SREPORT
For assets measured at fair value, gains and losses will be recorded in profit or loss.
The Group reclassifies debt investments when and only when its business model for managing those assets changes.
(ii) Recognition and derecognition
Regular way purchases and sales of financial assets are recognised on trade-date, the date on which the Group commits to purchase or sell the asset. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Group has transferred substantially all the risks and rewards of ownership.
(iii) Measurement
At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a financial asset not carried at fair value through profit or loss (‘‘FVPL’’), transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at FVPL are expensed in profit or loss.
Debt instruments
Subsequent measurement of debt instruments depends on the Group’s business model for managing the asset and the cash flow characteristics of the asset. Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortised cost. Interest income from these financial assets is included in finance income using the effective interest rate method. Any gain or loss arising on derecognition is recognised directly in profit or loss and presented in other gains, net together with foreign exchange gains and losses. Impairment losses are presented as separate line item in profit or loss.
(iv) Impairment
The Group assesses on a forward looking basis the expected credit losses associated with its financial assets carried at amortised cost. The impairment methodology applied depends on whether there has been a significant increase in credit risk.
For trade receivables, the Group applies the simplified approach permitted by HKFRS 9, which requires expected lifetime losses to be recognised from initial recognition of the receivables. The provision matrix is determined based on historical observed default rates over the expected life of the trade receivables with similar credit risk characteristics and is adjusted for current market condition and forward-looking estimates. At every reporting date the historical observed default rates are updated and changes in the latest market condition and forward-looking estimates are analysed.
Impairment on other financial assets carried at amortised cost are measuredaseither12-monthexpectedcredit losses or lifetime expected credit losses, depending on whether there has been a significant increase in credit risk since initial recognition. If a significant increase in credit risk of a receivable has occurred since initial recognition, impairment is measured as lifetime expected credit losses.
2.11 Offsetting financial instruments
Financial assets and liabilities are offset and the net amount is reported in the consolidated statements of financial position when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in the normal course of business and in the event of default, insolvency or bankruptcy of the Group or the counterparty.
2.12 Inventories
Inventories are stated at the lower of cost and net realisable value. Inventories include pharmaceutical goods and supplies for medical centre operations. Inventory cost in the medical centres is determined using the weighted average method. Net realisable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses.
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APPENDIX I ACCOUNTANT’SREPORT
2.13 Trade and other receivables
Trade receivables are amounts due from customers for pharmaceutical goods sold or services performed in the ordinary course of business. If collection of trade and other receivables is expected in one year or less (or in the normal operating cycle of the business if longer), they are classified as current assets. If not, they are presented as non-current assets.
Trade receivables are recognised initially at the amount of consideration that is unconditional unless they contain significant financing components, when they are recognised at fair value. Other receivables are recognised initially at fair value. The Group holds the trade and other receivables with the objective to collect the contractual cash flows and therefore measures them subsequently at amortised cost using the effective interest method, less allowance for impairment.
2.14 Contract assets and liabilities
Upon entering into a contract with a customer, the Group obtains rights to receive consideration from customer and assumes performance obligations to transfer goods or services to the customer. The combination of those rights and performance obligations give rise to a net asset or a net liability depending on the relationship between the remaining rights and the performance obligations. When either party to a contract has performed its obligation, the Group presents the contract in the consolidated statements of financial position as a contract asset or a contract liability, depending on the relationship between the entity’s performance and the customer’s payment. A contract asset is the Group’s right to consideration in exchange for services that the Group has transferred to a customer. A receivable is recognised when the Group has an unconditional right to consideration. A right to consideration is unconditional if only the passage of time is required before the payment of the consideration is due. If a customer pays consideration or the Group has a right to an amount of consideration that is unconditional before the Group transfers service to the customer, the Group presents the contract liability when the payment is made by the customer or a receivable is recorded (whichever is earlier).
2.15 Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits held at call with banks, short-term time deposits, and other short-term highly liquid investments with original maturities of three months or less, if any.
2.16 Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.
2.17 Dividend distribution
Dividend distribution by the companies comprising the Group is recognised as a liability in the Group’s consolidated financial statements in the period in which the dividends are approved by the shareholders or directors of such companies, where appropriate.
2.18 Trade and other payables
Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Trade and other payables are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities.
Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.
2.19 Current and deferred income tax
The income tax expense or credit for the period is the tax payable on the current period’s taxable income based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses.
(a) Current income tax
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period in the countries where the Group operates and generates taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.
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APPENDIX I ACCOUNTANT’SREPORT
(b) Deferred income tax
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, the deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the end of the reporting period and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.
Deferred income tax assets are recognised only if it is probable that future taxable profit will be available to utilise those temporary differences and losses.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred income tax balances relate to the same taxation authority. Current income tax assets and liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
Current and deferred income tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.
2.20 Employee benefits
(a) Short-term obligations
Liabilities for wages and salaries, including non-monetary benefits that are expected to be settled wholly within 12 months after the end of the period in which the employees render the related service are recognised in respect of employees’ services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are settled. The liabilities are presented as current employee benefit obligations in the consolidated statements of financial position.
(b) Pension obligations
The Group participates in a defined contribution plan in Hong Kong. A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity. The Group has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods.
The Group pays contributions to publicly or privately administered pension insurance plans on a mandatory, contractual or voluntary basis. The Group has no further payment obligations once the contributions have been paid. The contributions are recognised as employee benefit expense when they are due.
Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available.
(c) Bonus plans
The expected cost of bonus payments is recognised as a liability and an expense when the Group has a present legal or constructive obligation as a result of services rendered by employees and a reliable estimate of the obligation can be made.
Liabilities for bonus plans are expected to be settled within 12 months and are measured at the amounts expected to be paid when they are settled.
2.21 Share-based payments
Share-based compensation benefits may be provided to the directors, employees or consultants of the Group via issuance of shares. Information relating to share issuance is set out in Note 23.
The fair value of shares issued to the directors, employees or consultants by the Company or group companies on grant date less respective capital contribution is recognised as an expense over the relevant service period pursuant to the respective service agreement. The fair value is measured at the grant date of the shares and is recognised in equity in the share-based payment reserve over the relevant service period (Note 23(b)).
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APPENDIX I ACCOUNTANT’SREPORT
Where the service period of the directors, employees or consultants is shortened due to their failure to satisfy the service conditions, any expenses not yet recognised in relation to such services are expensed off in profit or loss upon the failure to satisfy the service conditions.
2.22 Provisions
Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount has been reliably estimated. Provisions are not recognised for future operating losses.
Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small.
Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the present obligation at the end of the reporting period. The discount rate used to determine the present value is a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The increase in the provision due to the passage of time is recognised as interest expense.
2.23 Revenue recognition
(a) Revenue from contracts with customers
Revenue is recognised when or as the control of the goods or services is transferred to the customer. Depending on the terms of the contracts and the laws that apply to the contract, control of the goods and services may be transferred over time or at a point in time.
Control of the goods or services is transferred over time if the Group’s performance:
. provides all of the benefits received and consumed simultaneously by the customer;
. creates or enhances an asset that the customer controls as the Group performs; or
. does not create an asset with an alternative use to the Group and the Group has an enforceable right to payment for performance completed to date.
If control of the goods or services is transferred over time, revenue is recognised over the period of the contract by reference to the progress towards complete satisfaction of that performance obligation. Otherwise, revenue is recognised at a point in time when the customer obtains control of the goods or services.
If contracts involve the sale of multiple elements, the transaction price will be allocated to each performance obligation based on their relative stand-alone selling prices. If the stand-alone selling prices are not directly observable, they are estimated based on expected cost plus a margin or adjusted market assessment approach, depending on availability of observable information.
The Group’s revenue is primarily derived from:
. provision of outpatient services at medical centres, including consultation and sales of pharmaceutical goods;
. provision of outpatient and inpatient services at hospitals;
. provision of imaging and diagnostic services;
. provision of management services to medical centres;
. wholesales of pharmaceutical goods to private medical practitioners and licenced retailers; and
. provision of COVID-19 vaccination services.
Revenue from the provision of specialty medical services and allied health services at medical centres and hospitals are recognised in the accounting period in which the services are rendered over the period of the time by reference to the progress towards complete satisfaction of the performance obligation. The progress towards the complete satisfaction of the performance obligation is measured by direct measurement of the value of individual service transferred to the customer.
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APPENDIX I ACCOUNTANT’SREPORT
Revenue from sales and wholesales of pharmaceutical goods is recognised at a point in time when control of the pharmaceutical goods has been transferred, being when the pharmaceutical goods are despatched to the customers, private medical practitioners and licenced retailers, and there is no unfulfilled obligation that could affect their acceptance of the pharmaceutical goods.
Revenue from imaging and diagnostic services, of which the Group is entitled to right to payment upon issuance and passing the imaging and diagnostic reports to customers, are recognised at a point in time.
Revenue from medical centre management services is recognised over time in the accounting period in which the related services are rendered.
Revenue from the provision of COVID-19 vaccination services is recognised over time by reference to the progress towards complete satisfaction of the performance obligation.
The Group acts as a principal if it controls a promised good or service before transferring that good or service to the customer and reports revenue on the gross inflows of economic benefits. In evaluating whether the Group acts as a principal, the Group considers whether the Group (1) is primarily responsible for fulfilling the promise to provide the specified good or service; (2) has inventory risk before specified good or service has been transferred to acustomerorafterthetransferofcontrol to the customer; and (3) has discretion in establishing the price for the specified good or service. The Group recognises revenue as a principal for all the revenue streams.
The Group would adjust the transaction prices at initial recognition for the time value of money in respect of its revenue streams if the Group expects that the period between the transfer of the services to customers and the payment by the customers exceed one year, and vice versa.
(b) Interest income
Interest income is recognised on a time-proportion basis using the effective interest method.
2.24 Leases
The Group leases land, various properties and equipment to operate its business. Both property leases and equipment leases are typically made for fixed periods of one to six years. Lease terms are negotiated on an individual basis and contain various terms and conditions. The lease agreements do not impose any covenants, but leased assets may not be used as security for borrowing purposes.
Leases are recognised as right-of-use assets and the corresponding liabilities at the date of which the respective leased asset is available for use by the Group. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.
Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the fixed lease payments, less any lease incentive receivables.
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, which is generally the case for the leases of the Group, the lessee’s incremental borrowing rate is used, being the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar terms, security and conditions.
Right-of-use assets include the rights to use leasehold land, certain properties and equipment under leases which are measured at cost. The initial costs of right-of-use assets include the following:
. the amount of the initial measurement of lease liability,
. any lease payments made at or before the commencement date,
. any initial direct costs, and
. restoration costs.
Right-of-use assets including leasehold land are generally depreciated over the shorter of the asset’susefullifeand the lease term on a straight-line basis. If the Group is reasonably certain to exercise a purchase option, the right-of-use assets are depreciated over the underlying asset’susefullife.
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APPENDIX I ACCOUNTANT’SREPORT
Payments associated with short-term leases and leases of low-value assets are recognised on a straight-line basis as an expense in profit or loss. Short-term leases are leases with a lease term of less than 12 months.
For a lease modification that is not accounted for as a separate lease, at the effective date of the lease modification the Group remeasures the lease liability by discounting the revised lease payments using a revised discount rate and make the corresponding adjustment to the right-of-use asset.
2.25 Earnings per share
(i) Basic earnings per share
Basic earnings per share is calculated by dividing:
the profit attributed to owners of the Company, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the reporting period.
(ii) Diluted earnings per share
Diluted earnings per share adjusted the figures used in the determination of basis earnings per share to take into account:
the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares, and the weighted average number of additional ordinary shares that would have been outstanding assuming the conversion of all dilutive potential ordinary shares.
2.26 Government grants
Grants from the government are recognised at their fair value where there is a reasonable assurance that the grant will be received and the Group will comply with all attached conditions.
Government grants relating to costs are deferred and recognised in profit or loss over the period necessary to match them with the costs that they are intended to compensate.
2.27 Borrowings
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting period, in which case they are presented as non-current liabilities.
Borrowings are initially recognised at fair value, net of transaction costs incurred and subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in profit or loss over the periods of the borrowings using the effective interest method.
Borrowings are removed from the balance sheet when the obligation specified in the contract is discharged, cancelled or expired. The difference between the carrying amount of a financial liability that has been extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss as finance costs.
2.28 Borrowing costs
Borrowing costs are recognised in profit or loss using the effective interest method.
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APPENDIX I ACCOUNTANT’SREPORT
3 FINANCIAL RISK MANAGEMENT
3.1 Financial risk factors
The Group’s activities expose it to a variety of financial risks: foreign exchange risk, credit risk and liquidity risk and cash flow interest rate risk. The Group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group’s financial performance.
(a) Foreign exchange risk
Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities denominated in a currency that is not the Group’s functional currency. In the opinion of the directors, the Group has no significant foreign exchange risk as most of the sale and purchase transactions are denominated in Hong Kong dollars.
(b) Credit risk
(i) Risk Management
The credit risk of the Group mainly arises from cash and cash equivalents, trade receivables, other receivables, deposits, amounts due from directors, shareholders and related companies. The carrying amounts of these balances represent the Group’s maximum exposure to credit risk in relation to financial assets.
In order to minimise the credit risk arising from bank deposits, deposits are mainly placed with reputable banks.
For credit exposure to customers, where no single client contributing material revenue, the Group’s management divides customers into different categories. Category A represents receivables from hospitals for services rendered to credit-worthy customers who are required to undergo long surgery and rehabilitation process. Category B represents receivables from hospitals for services rendered to customers other than those classified as Category A. Category C represents receivables from insurance and health solution companies for revenue derived at medical centres. Category D represents receivables from credit card companies for revenue derived at medical centres. Category E represents receivables from third party medical centres for revenue derived at imaging and diagnostic centre. The Group assesses the credit quality of each category through past collection history and other relevant factors.
Management assesses the credit risk for other receivables, deposits, amounts due from directors, shareholders and related companies by assessing the nature of the financial assets and the financial condition of the counterparties. Management has closely monitored the credit qualities and the collectability of these financial assets.
(ii) Impairment of financial assets
Trade receivables
The Group applies the HKFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for all trade receivables.
To measure the expected credit losses, trade receivables have been grouped into five categories based on shared credit risk characteristics (Note 3.1(b)(i)).
As at 31 March 2019, the Group assessed a loss allowance amounted to HK$4,622,000 for Category A. The amount represented 100% of the trade receivable balance of Category A as at 31 March 2019, which mainly represented a full provision for receivables from a single patient who failed to make payment for over 10 months, due to the patient’s financial difficulties in settling the trade receivable balance. During the years ended 31 March 2020 and 2021, the Group continued to provide medical services to the patient under Category A while no revenue is recognised, because the collectability was assessed to be not probable.
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APPENDIX I ACCOUNTANT’SREPORT
The loss allowance for Category B as at 31 March 2019 was assessed as immaterial because the historical settlement pattern of the receivables under Category B for the year ended 31 March 2019 was satisfactory. The expected credit loss rates of Category B for the year ended 31 March 2019 was therefore close to zero. The loss allowances for Category B as at 31 March 2020 and 2021 are shown as follows:
1–30 31–60 61–90 91–180 181–270 271–360 361–720 days days days days days days days Current past due past due past due past due past due past due past due Total
31 March 2020 Category B Expected loss rate 0%* 0%* 1.8% 2.7% 4.4% 17.5% 26.2% 100% 1.7% Gross carrying amount (in HK$’000) 6,415 1,117 498 442 384 4 61 96 9,017 Loss allowance (in HK$’000) —— 91217—*1696150
*closetozero
1–30 31–60 61–90 91–180 181–270 271–360 361–720 days days days days days days days Current past due past due past due past due past due past due past due Total
31 March 2021 Category B Expected loss rate 0.1% 2.0% N/A 9.1% 19.5% N/A 50% 100% 1.4% Gross carrying amount (in HK$’000) 10,694 152 — 22 41 — 2 126 11,037 Loss allowance (in HK$’000) 9 4 — 28— 1 126 150
The loss allowance for Category C as at 31 March 2019 and 2020 were assessed as immaterial because the historical settlement pattern of the receivables under Category C for the years ended 31 March 2019 and 2020 were satisfactory. The expected credit loss rates of Category C for the years ended 31 March 2019 and 2020 were therefore close to zero. The loss allowances for Category C as at 31 March 2021 is shown as follow:
1–30 31–60 61–90 91–180 181–270 271–360 361–720 days days days days days days days Current past due past due past due past due past due past due past due Total
31 March 2021 Category C Expected loss rate 0.5% 1.1% 1.4% 2.5% 2.8% 4.3% 5.1% 43.6% 4.4% Gross carrying amount (in HK$’000) 3,679 187 73 17 71 70 39 390 4,526 Loss allowance (in HK$’000) 20 2 1 —* 2 3 2 170 200
*closetozero
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APPENDIX I ACCOUNTANT’SREPORT
The loss allowance for other categories as at 31 March 2019, 2020 and 2021 were assessed as immaterial because the historical settlement pattern of the receivables under other categories were satisfactory. The expected credit loss rates of other categories for the years ended 31 March 2019, 2020 and 2021 were therefore close to zero.
The expected loss rates are determined based on the payment profiles of customers over a period of 5 to 24 months depending on different categories of trade receivables, the corresponding historical credit losses experienced within such periods, and the management’s industry specific experience. The historical loss rates are adjusted to reflect current market condition and forward-looking information on macroeconomic factors affecting the ability of the customers to settle the receivables. The Group has identified the GDP of Hong Kong as the most relevant factor and adjusts the historical loss rates based on the expected changes of such factors.
Trade receivables are written off when there is no reasonable expectation of recovery. Indicators that there is no reasonable expectation of recovery include, amongst others, the bankruptcy of the debtor or the failure of a debtor to engage in a repayment plan with the Group.
Impairment losses on trade receivables are presented as provision for impairment losses on financial assets in the consolidated statements of comprehensive income. Subsequent recoveries of amounts previously written off are credited against the same line item.
Other financial assets carried at amortised cost
The Group’s other financial assets at amortised cost include deposits, other receivables, and amounts due from directors, shareholders and related companies. The loss allowance of other financial assets at amortised cost is measured based on the 12-month expected credit loss. The 12-month expected credit loss is the portion of lifetime expected credit loss that results from default events on a financial instrument that are possible within 12 months after the reporting date. However, when there has been a significant increase in credit risk since origination, the allowance will be based on the lifetime expected credit loss.
Management has performed assessment on the recoverability of these balances and do not identify events leading to significant increase in credit risk since origination. Management considers that the expected credit loss is immaterial as at the end of each reporting period.
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APPENDIX I ACCOUNTANT’SREPORT
(c) Liquidity risk
Prudent liquidity risk management implies maintaining sufficient cash and cash equivalents. Due to the dynamic nature of the underlying businesses, the policy of the Group is to regularly monitor the Group’s liquidity risk and to maintain adequate cash and cash equivalents to meet the Group’s liquidity requirements.
The table below analyses the Group’s financial liabilities into relevant maturity groupings based on their contractual maturity dates. The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying balances, as the impact of discounting is not significant.
On demand/ Between Between Total within 1and2 2and5 Over contractual Carrying 1year years years 5 years cash flows amount HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
At 31 March 2019 Trade payables 5,444 ———5,444 5,444 Other payables 6,841 ———6,841 6,841 Amount due to a shareholder 279 ———279 279 Amount due to a related company 100 ———100 100 Lease liabilities 7,853 7,633 1,958 — 17,444 16,677
20,517 7,633 1,958 — 30,108 29,341
At 31 March 2020 Trade payables 6,307 ———6,307 6,307 Other payables 17,658 ———17,658 17,658 Dividend payable 66,720 ———66,720 66,720 Lease liabilities 16,006 6,753 627 — 23,386 22,526
106,691 6,753 627 — 114,071 113,211
At 31 March 2021 Trade payables 6,111 ———6,111 6,111 Other payables 22,700 ———22,700 22,700 Bank borrowing 89,199 ———89,199 75,000 Lease liabilities 21,442 19,545 50,398 13,980 105,365 93,092
139,452 19,545 50,398 13,980 223,375 196,903
Hong Kong Interpretation 5 requires a term loan that contains a clause that gives the lender the unconditional right to call the loan at any time shall be classified in total by the borrower as current in the consolidated statements of financial position. This is irrespective of whether a default event has occurred and notwithstanding any other terms and maturity stated in the loan agreement. As at 31 March 2021, bank borrowing of HK$75,000,000 was classified as current liabilities due to this requirement.
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APPENDIX I ACCOUNTANT’SREPORT
Disregarding the clause that gives the lender the unconditional right to call the loan at any time, the Group’s borrowing will be repaid in accordance with the scheduled repayment dates set out in the loan agreement, details of which are set out in the table below.
Between Between Total Within 1and2 2and5 Over contractual Carrying 1year years years 5 years cash flows amount HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
At 31 March 2019 Bank borrowing ——————
At 31 March 2020 Bank borrowing ——————
At 31 March 2021 Bank borrowing 4,459 4,459 13,378 66,903 89,199 75,000
(d) Cash flow interest rate risk
As the Group has no significant interest-bearing assets except for the cash and cash equivalents, the Group’s income and operating cash flows are substantially independent of changes in market interest rates.
The Group’s interest rate risk mainly arises from the bank borrowing with variable rate, which exposes the Group to cash flow interest rate risk. The Group’s cash flow interest rate risk is mainly concentrated on the fluctuationofHongKongInterbankOfferedRate(‘‘HIBOR’’) arising from the Group’s bank borrowing.
At 31 March 2019, 2020 and 2021, if interest rate on borrowing had been 10 basis points higher/lower with all other variables held constant, post-tax profit for the year would have been HK$ Nil, HK$ Nil and HK$63,000 lower/higher respectively, mainly as a result of higher/lower interest expense on floating rate borrowing.
3.2 Capital risk management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern whilst seeking to maximise benefits to shareholders and other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.
The Group actively and regularly reviews and manages its capital structure to ensure optimal capital structure and shareholder returns, taking into consideration the future capital requirements of the Group and capital efficiency, prevailing and projected profitability, projected operating cash flows and projected capital expenditures.
Consistent with others in the industry, the Group monitors capital on the basis of gearing ratio. The ratio is calculated as net debt divided by total equity. The gearing ratios at 31 March 2019, 2020 and 2021 were as follows:
As at 31 March 2019 2020 2021 HK$’000 HK$’000 HK$’000
Net debt (Note 30(c)) ——72,825
Total equity 215,953 214,456 236,030
Gearing ratio N/A N/A 30.9%
3.3 Fair value estimation
The carrying amounts of the Group’s financial assets, including cash and cash equivalents, trade receivables, other receivables and deposits, and amounts due from related parties, and financial liabilities, including trade payables, other payables, and amounts due to related parties, are a reasonable approximation of their fair values due to their short-term maturities.
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APPENDIX I ACCOUNTANT’SREPORT
The fair value of bank borrowing for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Group for similar financial instruments.
This section explains the judgements and estimates made in determining the fair values of the financial instruments that are recognised and measured at fair value in the consolidated financial statements. To provide an indication about the reliability of the inputs used in determining fair value, the Group has classified its financial instruments in accordance with the three levels prescribed under the accounting standards.
Level 1: The fair value of financial instruments traded in active markets (such as publicly traded derivatives, and equity securities) is based on quoted market prices at the end of the reporting period. The quoted market price used for financial assets held by the Group is the current bid price. These instruments are included in level 1.
Level 2: The fair value of financial instruments that are not traded in an active market (for example, over-the- counter derivatives) is determined using valuation techniques which maximise the use of observable market data and rely as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.
Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3. This is the case for unlisted equity securities.
The Group has a performance guarantee arrangement arose from the acquisition of HKID Limited. The arrangement was entered into between the Group and one of the shareholders of HKID Limited (see Note 32 for details). The Group classified the performance guarantee arrangement as financial asset at fair value through profit or loss, under the level 3 criteria as mentioned above.
The finance department of the Group includes a team that performs the valuation of financial assets or liabilities carried at fair value through profit or loss required for financial reporting purposes, including level 3 fair values. This team reports directly to the board of directors. Discussions of the valuation process and results are held between the board of directors and the valuation team.
The fair value of the performance guarantee arrangement as at 31 March 2020 and 2021 were assessed by management with reference to the probability-weighted scenario analysis conducted by an independent valuer, Vincorn Consulting and Appraisal Limited. The significant unobservable inputs and relationship of the inputs to fair value of the performance guarantee arrangement are shown below:
Valuation dates Significant unobservable input Relationship of unobservable input to fair value
31 March 2020 Revenue growth rates —–15.7% to 24.6% The higher the growth rate, the lower the fair value 31 March 2021 Revenue growth rates — 3.5% to 17.1% The higher the growth rate, the lower the fair value
The fair value of the performance guarantee arrangement as at 31 March 2020 and 2021 were assessed as immaterial to the consolidated financial statements.
Sensitivity analysis
As at 31 March 2020, increasing the expected revenue growth rates by 10% would result in a change in fair value approximately close to zero, while decreasing the expected revenuegrowthratesby10%wouldresultinanincreaseinfair value by approximately HK$112,000.
As at 31 March 2021, increasing the expected revenue growth rates by 10% would result in a change in fair value approximately close to zero, while decreasing the expected revenue growth rate by 10% would result in an increase in fair value by approximately HK$177,000.
There were no transfers between levels 1, 2 and 3 for recurring fair value measurements during the Track Record Period.
4 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
The preparation of Historical Financial Information requires the use of accounting estimates which, by definition, will seldom equal the actual results. Management also needs to exercise judgement in applying the Group’s accounting policies.
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APPENDIX I ACCOUNTANT’SREPORT
Estimates and judgements are continually evaluated. They are based on historical experience and other factors, including expectations of future events that may have a financial impact on the entity and that are believed to be reasonable under the circumstances.
(a) Business combination
Accounting for acquisitions require the Group to allocate the cost of acquisition to specific assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition. The Group has undertaken processes to identify all assets and liabilities acquired/assumed, including acquired intangible assets. Judgements made in identifying all acquired assets, determining the estimated fair value assigned to each class of assets acquired and liabilities assumed, as well as asset’s useful lives, could materially impact the calculation of goodwill, bargain purchase and depreciation and amortisation charges in subsequent periods. Estimated fair values are based on information available near the acquisition date and on expectations and assumptions that have been deemed reasonable by management. Determining the estimated useful lives of tangible and intangible assets acquired also requires judgement.
The Group acquired certain imaging and diagnostic centres during the year ended 31 March 2020 (Note 32) in which certain imaging and diagnostic centres are not wholly owned by the Group after the business combination. Judgement is required in determining whether the Group has control over these acquired non-wholly-owned entities. The significant judgement includes referencing to the number of board seats and shareholdings controlled by the Group.
Different conclusions around these judgements may materially impact how these investments are presented and measured in the consolidated statements of financial position of the Group.
(b) Impairment of financial assets
The loss allowances for financial assets are based on assumptions about risk of default and expected loss rates. The Group uses judgement in making these assumptions and selecting the inputs to the impairment calculation, based on the Group’s past history, existing market conditions as well as forward looking estimates at the end of each reporting period.
(c) Income taxes and deferred income tax
Significant judgement is required in determining the provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be required. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred income tax provisions in the period in which such determination is made.
Deferred income tax assets relating to certain temporary differences and tax losses are recognised when management considers it is likely that future taxable profits will be available against which the temporary differences or tax losses can be utilised. When the expectations are different from the original estimates, such differences will impact the recognition of deferred income tax assets and income tax charges in the period in which such estimates have been changed.
(d) Useful lives of property, plant and equipment
The Group’s management determines the estimated useful lives and related depreciation charges for its property, plant and equipment. This estimate is based on the historical experience of the actual useful lives of property, plant and equipment of similar nature and functions. It could change significantly as a result of technical innovations and competitor actions in response to severe industry cycles. Management will increase the depreciation charge where useful lives are less than previously estimated, or will write-off or write-down technically obsolete or non-strategic assets that have been abandoned or sold.
(e) Impairment of goodwill
The Group performs impairment assessment at each reporting date to assess whether goodwill has suffered any impairment, in accordance with the accounting policy stated in Note 2.9. The recoverable amounts of CGUs have been determined based on value-in-use calculations. These calculations require the use of estimates and judgements. The key assumptions used in the value-in-use calculations were growth rate of revenue, budgeted gross margin ratio, pre-tax discount rate and terminal growth rate. Changes in the conditions affect the assessed result of goodwill impairment test. Details of impairment charge, key assumptions and impact of possible changes in key assumptions are disclosed in Note 13.
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APPENDIX I ACCOUNTANT’SREPORT
(f) Fair value of financial asset at fair value through profit or loss
The fair value of financial asset at fair value through profit or loss were determined by using various valuation techniques. The Group uses its judgement to select a variety of methods and make assumptions, including the revenue growth rates, which are mainly based on market conditions existing at the end of each reporting period. Changes in assumptions used could materially affect the fair value of these balances and as a result affect the Group’s financial condition and results of operation.
5 REVENUE AND SEGMENT INFORMATION
(a) Revenue
Revenue, which is also the Group’s turnover, represents amounts received and receivable from the provision of private specialty healthcare services, management services to medical centres and imaging and diagnostic services in Hong Kong, net of discount. An analysis of revenue is as follows:
Year ended 31 March 2019 2020 2021 HK$’000 HK$’000 HK$’000
Revenue Recognised over time from Customers at private hospitals 89,711 91,868 79,967 Customers at medical centres 42,053 54,182 57,195 Medical centre management services 3,375 4,598 4,531 Provision of COVID-19 vaccination services ——2,870
135,139 150,648 144,563 Recognised at a point in time from Sales of pharmaceutical goods 60,521 86,683 81,720 Imaging and diagnostic services — 11,063 25,151
60,521 97,746 106,871
Total revenue 195,660 248,394 251,434
The Group has recognised the following liabilities related to contracts with customers:
As at 31 March 2019 2020 2021 HK$’000 HK$’000 HK$’000
Contract liabilities — income from medical centres 411 431 2,947
The Group’s contracts with customers are for periods of one year or less. As permitted under HKFRS 15, the transaction price allocated to these unsatisfied contracts is not disclosed.
Contract liabilities have increased by HK$2,516,000 resulted from the provision of COVID-19 vaccination services.
(b) Segment information
Management has determined the operating segments based on the reports reviewed by the CODM that are used to making strategic decisions. The CODM is identified as the Executive Directors. The Executive Directors consider the [REDACTED] Business has three reporting segments and assess their performance based on respective revenue and results for the purposes of allocating resources and assessing performance. These reports are prepared on the same basis as these consolidated financial statements. Information relating to segment assets and liabilities are not disclosed as such information is not regularly reported to the CODM.
The [REDACTED] Business is mainly divided into three major lines of services which depending on how the patients are treated or what services are provided. Management has therefore identified the reportable segments based on the Group’s lines of services, namely specialist medical services, allied health services, and medical centre management
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APPENDIX I ACCOUNTANT’SREPORT
services. Specialist medical services are rendered by the Group’s medical practitioners registered with the Medical Council of Hong Kong. Allied health services include those rendered by the Group’s medical practitioners registered with other councils and those rendered at the Group’s diagnostic centres. Management services are rendered to a HKMC Ophthalmology Centre and several medical practitioners and an imaging and diagnostic centre.
The reportable segment revenue and results for the years ended 31 March 2019, 2020 and 2021 were as follows:
Medical centre Specialist Allied health management medical services services services Total HK$’000 HK$’000 HK$’000 HK$’000
For the year ended 31 March 2019 Timing of revenue recognition — Over time 131,752 12 3,375 135,139 — A point in time 60,521 ——60,521
Revenue from external sales 192,273 12 3,375 195,660
Segment results 69,482 4 2,747 72,233
Unallocated: Finance costs, net (614)
Profit before income tax 71,619
For the year ended 31 March 2020 Timing of revenue recognition — Over time 145,744 306 4,598 150,648 — A point in time 86,683 12,831 — 99,514
232,427 13,137 4,598 250,162
Elimination of inter-segment sales — (1,768) — (1,768)
Revenue from external sales 232,427 11,369 4,598 248,394
Segment results 56,786 (2,423) 3,434 57,797
Unallocated: Finance income, net 1,385
Profit before income tax 59,182
For the year ended 31 March 2021 Timing of revenue recognition — Over time 136,286 4,011 4,531 144,828 — A point in time 81,720 32,472 — 114,192
218,006 36,483 4,531 259,020
Elimination of inter-segment sales — (7,586) — (7,586)
Revenue from external sales 218,006 28,897 4,531 251,434
Segment results 39,860 (1,768) 3,256 41,348
Unallocated: [REDACTED] expenses [REDACTED] Finance costs, net (242)
Profit before income tax 26,789
All the revenue of the Group was generated in Hong Kong during the Track Record Period. All non-current assets were kept in Hong Kong during Track Record Period.
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APPENDIX I ACCOUNTANT’SREPORT
There is no other single external customer contributed more than 10% to the Group’s revenue for the years ended 31 March 2019, 2020 and 2021 respectively.
No geographical segment information is presented as all the revenue and operating profits of the Group are derived within Hong Kong and all the operating assets of the Group are located in Hong Kong, which is considered as one geographic location with similar risks and returns.
6 EXPENSES BY NATURE
Year ended 31 March 2019 2020 2021 HK$’000 HK$’000 HK$’000
Auditor’s remuneration — Audit services 600 830 891 — Non audit services 52 206 226 Amortisation of intangible asset (Note 13) — 19 45 Depreciation of property, plant and equipment (Note 11) 2,859 6,133 6,367 Depreciation of right-of-use assets (Note 12) 8,175 14,667 19,133 Laboratory examination and radiologist reporting fees 8,775 13,394 18,207 [REDACTED] expenses ——[REDACTED] Cost of pharmaceutical goods and medical consumables (Note 17) 33,502 49,165 46,019 Employee benefit expenses (including directors’ emoluments) (Note 6(i) and 8) 15,694 28,104 32,789 Short-term lease expenses 974 1,155 4,299 Legal and professional fees 417 1,110 985 Share-based payment expenses — 530 2,963 Services fees to consultants 41,847 66,128 64,236 Hospital service fees 1,231 1,247 995 Building management fees 901 1,409 1,652 Marketing expenses 913 1,212 2,328 Repair and maintenance expenses 7 831 2,758 Credit card charges 1,111 1,595 1,659 Other expenses 1,747 2,712 4,334
Total cost of sales, selling and marketing expenses and administrative expenses 118,805 190,447 224,203
Note:
(i) During the year ended 31 March 2021, subsidies from Employment Support Scheme of the Government of the Hong Kong Special Administrative Region amounting to HK$4,394,000 were received by the Group and offset against the employee benefit expenses.
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APPENDIX I ACCOUNTANT’SREPORT
7 FINANCE (COSTS)/INCOME, NET
Year ended 31 March 2019 2020 2021 HK$’000 HK$’000 HK$’000
Finance income: Interest income on bank deposits 35 2,436 1,199
Finance costs: Interest expense on lease liabilities (619) (998) (1,347) Provision: unwinding of discounting impact (Note 24) (30) (53) (94)
(649) (1,051) (1,441)
Finance (costs)/income, net (614) 1,385 (242)
8 EMPLOYEE BENEFIT EXPENSES (INCLUDING DIRECTORS’ EMOLUMENTS)
Year ended 31 March 2019 2020 2021 HK$’000 HK$’000 HK$’000
Wages and salaries 14,663 26,813 30,960 Pension costs — defined contribution plan 539 885 1,110 Directors’ emoluments ——— Others 492 406 719
15,694 28,104 32,789
(a) Pension costs — defined contribution plan
The Group has arranged for its Hong Kong employees to join the Mandatory Provident Fund Scheme (the ‘‘MPF Scheme’’), a defined contribution scheme managed by an independent trustee. Under the MPF Scheme, the Group and its employees make monthly contributions to the scheme at 5% of the employees’ earnings as defined under the Mandatory Provident Fund legislation. Both the Group’sandtheemployees’ contributions were subject to a monthly cap of HK$1,500 and thereafter contributions are voluntary.
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APPENDIX I ACCOUNTANT’SREPORT
(b) Directors’ and chief executive’semoluments
The remuneration of the directors and the chief executive officer for the year ended 31 March 2019 is set out below:
Emoluments paid or receivable in respect of a person’s service as a director, whether of the Company or its Emoluments paid or receivable in respect of director’sother subsidiary services in connection with the management of the affairs, undertakings whether of the Company or its subsidiary undertaking Other Defined allowances Discretionary contribution and benefits Fee Salaries bonuses pension costs in kind Total HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
Chief executive officer and executive director Dr. Kenneth Tsang (Note (i)) ——————
Executive directors Dr. Adam Leung (Note (i)) —————— Mr. Shiu (Note (i)) —————— Mrs. Chen (Note (i)) ——————
——————
The remuneration of the directors and the chief executive officer for the year ended 31 March 2020 is set out below:
Emoluments paid or receivable in respect of a person’s service as a director, whether of the Company or its Emoluments paid or receivable in respect of director’sother subsidiary services in connection with the management of the affairs, undertakings whether of the Company or its subsidiary undertaking Other Defined allowances Discretionary contribution and benefits Fee Salaries bonuses pension costs in kind Total HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
Chief executive officer and executive director Dr. Kenneth Tsang (Note (i)) ——————
Executive directors Dr. Adam Leung (Note (i)) —————— Mr. Shiu (Note (i)) —————— Mrs. Chen (Note (i)) ——————
——————
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APPENDIX I ACCOUNTANT’SREPORT
The remuneration of directors and chief executive officer for the year ended 31 March 2021 is set out below:
Emoluments paid or receivable in respect of a person’s service as a director, whether of the Company or its Emoluments paid or receivable in respect of director’sother subsidiary services in connection with the management of the affairs, undertakings whether of the Company or its subsidiary undertaking Other Defined allowances Discretionary contribution and benefits Fee Salaries bonuses pension costs in kind Total HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
Chief executive officer and executive director Dr. Kenneth Tsang (Note (i)) ——————
Executive directors Dr. Adam Leung (Note (i)) —————— Mr. Shiu (Note (i)) —————— Mrs. Chen (Note (i)) ——————
——————
Notes:
(i) Dr. Kenneth Tsang was appointed as the Company’s chief executive officer and executive director on 21 September 2020. Dr. Adam Leung, Mr. Shiu and Mrs. Chen were appointed as the Company’s executive directors on 21 September 2020.
(ii) During the Track Record Period, the independent non-executive directors had not yet been appointed and did not receive any remuneration in their capacity as the Company’s directors.
(c) Benefits and interests of directors
There were no benefits offered to the directors of the Company during the Track Record Period.
(d) Directors’ retirement and termination benefits
None of the directors of the Company received any retirement benefits or termination benefits in respect of their services to the Group for the Track Record Period.
(e) Consideration provided to third parties for making available directors’ services
During the Track Record Period, the Group had not paid any consideration to any third parties for making available directors’ services to the Group.
(f) Information about loans, quasi-loans and other dealings in favour of directors, controlled bodies corporate by and connected entities with such directors
Except for the advances to the directors of the Company during the Track Record Period as disclosed in Note 34(c)(i), which were interest-free, unsecured and repayable on demand, there were no other loans, quasi-loans and other dealings entered into by the Group in favour of the directors of the Company, or body corporate controlled by or entities connected with any of the directors of the Company as at 31 March 2019, 2020 and 2021 or at any time during the Track Record Period.
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APPENDIX I ACCOUNTANT’SREPORT
(g) Directors’ material interests in transactions, arrangements or contracts
Pursuant to the service agreements dated 3 November 2017 (the ‘‘Service Agreements’’) entered into between Hong Kong Medical Consultants and each of Dr. Kenneth Tsang and Dr. Adam Leung, Dr. Kenneth Tsang and Dr. Adam Leung agreed to provide specialist medical services to Hong Kong Medical Consultants in accordance with the terms of the Service Agreements. The consideration payable to each of Dr. Kenneth Tsang and Dr. Adam Leung was nil for each of the years ended 31 March 2019, 2020 and 2021.
Save for the abovementioned contracts and transactions, no other significant transactions, arrangements and contracts to which the Company was a party and in which a director of the Company had a material interest, whether directly or indirectly, subsisted as at 31 March 2019, 2020 and 2021 or at any time during the Track Record Period.
(h) Five highest paid individuals
The five individuals whose emoluments were the highest in the Group for each of the years ended 31 March 2019, 2020 and 2021 include Nil, Nil and Nil director whose emoluments are reflected in the analysis presented above, respectively. The aggregate amounts of emoluments for the remaining 5, 5 and 5 highest paid individuals for each of the years ended 31 March 2019, 2020 and 2021, respectively are as follows:
Year ended 31 March 2019 2020 2021 HK$’000 HK$’000 HK$’000
Wages, salaries and bonuses 4,732 7,020 8,543 Pension costs-defined contribution plan 90 72 90
4,822 7,092 8,633
The emoluments of those individuals fell within the following bands:
Year ended 31 March 2019 2020 2021
Emolument bands
Nil–HK$1,000,000 4 4 2 HK$1,000,001–HK$1,500,000 —— 1 HK$2,000,001–HK$2,500,000 —— 1 HK$2,500,001–HK$3,000,000 1 —— HK$3,500,001–HK$4,000,000 — 11
555
9 INCOME TAX EXPENSES
The Group’s principal applicable taxes and tax rates are as follows:
(a) Cayman Islands
Under the current laws of Cayman Islands, the Company is not subject to tax on income or capital gain. In addition, upon payments of dividends by the Company to its shareholders, no Cayman Islands withholding tax will be imposed.
(b) British Virgin Islands
The Group’s entities incorporated in the British Virgin Islands are not subject to tax on income or capital gains.
(c) Hong Kong
Hong Kong profits tax rate of 16.5% was applied on the total estimated assessable profits of the companies comprising the Group during the Track Record Period.
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APPENDIX I ACCOUNTANT’SREPORT
The amount of income tax charged to the consolidated statements of comprehensive income represents:
Year ended 31 March 2019 2020 2021 HK$’000 HK$’000 HK$’000
Current income tax expenses — Hong Kong profits tax (12,442) (9,991) (7,629) — Deferred income tax (Note 16) 783 502 1,233
(11,659) (9,489) (6,396)
The tax on the Group’s profit before income tax differs from the theoretical amount that would arise using the applicable tax rate as follows:
Year ended 31 March 2019 2020 2021 HK$’000 HK$’000 HK$’000
Profit before income tax 71,619 59,182 26,789
Calculated at a taxation rate of 16.5% (11,817) (9,765) (4,420) Expenses not deductible for tax purposes (73) (351) (3,051) Income not subject to tax 6 402 925 Under-provision in prior year ——(45) Tax concession 60 60 30 Effect of different tax rates (Note) 165 165 165
Income tax expenses (11,659) (9,489) (6,396)
Note: Under the two-tier tax rates in Hong Kong, the first HK$2,000,000 of assessable profit of one of the subsidiaries of the Group for the years ended 31 March 2019, 2020 and 2021 was taxed at a reduced rate of 8.25%, where the normal profits tax rate is 16.5%.
10 EARNINGS PER SHARE
Basic earnings per share is calculated by dividing the profit attributable to owners of the Company by the weighted average number of ordinary shares in issue during the Track Record Period.
In determining the weighted average number of shares in issue during the Track Record Period, 1,073,307 shares of the Company issued in connection with the Reorganisation, as disclosed in Note 1.2 above, were deemed to have been issued on 1 April 2018.
Year ended 31 March 2019 2020 2021
Profit attributable to equity owners of the Company (HK$’000) 59,960 50,194 21,643 Weighted average number of ordinary shares in issue (’000) 1,073 1,073 1,073 Basic earnings per share (in HK$/share) 55.86 46.77 20.16
Diluted earnings per share for the Track Record Period were the same as the basic earnings per share as there were no potential dilutive ordinary shares outstanding during the Track Record Period.
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APPENDIX I ACCOUNTANT’SREPORT
11 PROPERTY, PLANT AND EQUIPMENT
Office Medical Leasehold furniture and Computer Motor equipment improvements fixtures equipment vehicles Total HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
Year ended 31 March 2019 Opening net book amount 344 2,812 81 215 76 3,528 Additions 949 5,360 140 536 — 6,985 Depreciation (Note 6) (236) (2,378) (45) (124) (76) (2,859)
Closing net book amount 1,057 5,794 176 627 — 7,654
At 31 March 2019 Cost 1,351 9,273 309 840 1,507 13,280 Accumulated depreciation (294) (3,479) (133) (213) (1,507) (5,626)
Net book amount 1,057 5,794 176 627 — 7,654
Year ended 31 March 2020 Opening net book amount 1,057 5,794 176 627 — 7,654 Additions 368 5,590 577 716 — 7,251 Acquired from business combination (Note 32) 2,006 274 502 17 — 2,799 Depreciation (Note 6) (1,598) (4,008) (301) (226) — (6,133)
Closing net book amount 1,833 7,650 954 1,134 — 11,571
At 31 March 2020 Cost 3,725 15,137 1,388 1,573 1,507 23,330 Accumulated depreciation (1,892) (7,487) (434) (439) (1,507) (11,759)
Net book amount 1,833 7,650 954 1,134 — 11,571
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APPENDIX I ACCOUNTANT’SREPORT
Office Medical Leasehold furniture and Computer Motor Building equipment improvements fixtures equipment vehicles Total HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
Year ended 31 March 2021 Opening net book amount — 1,833 7,650 954 1,134 — 11,571 Additions 28,766 1,310 275 45 457 — 30,853 Depreciation (Note 6) — (1,042) (4,585) (387) (353) — (6,367)
Closing net book amount 28,766 2,101 3,340 612 1,238 — 36,057
At 31 March 2021 Cost 28,766 5,035 15,412 1,433 2,030 1,507 54,183 Accumulated depreciation — (2,934) (12,072) (821) (792) (1,507) (18,126)
Net book amount 28,766 2,101 3,340 612 1,238 — 36,057
Depreciation have been charged to the following categories of expenses in the consolidated statements of comprehensive income:
Year ended 31 March 2019 2020 2021 HK$’000 HK$’000 HK$’000
Cost of sales 2,614 4,731 5,522 Administrative expenses 245 1,402 845
2,859 6,133 6,367
The Group’s building and leasehold land (Note 12) with carrying amounts of approximately HK$28,766,000 and HK$135,610,000 respectively as at 31 March 2021 have been pledged to a bank for a mortgage loan granted to the Group (Note 29).
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APPENDIX I ACCOUNTANT’SREPORT
12 RIGHT-OF-USE ASSETS
Leasehold Medical Office land Properties equipment equipment Total HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
Year ended 31 March 2019 Opening net book amount — 11,284 ——11,284 Additions — 6,578 ——6,578 Effect of lease modification — 7,249 ——7,249 Depreciation (Note 6) — (8,175) ——(8,175)
Closing net book amount — 16,936 ——16,936
At 31 March 2019 Cost — 28,995 ——28,995 Accumulated depreciation — (12,059) ——(12,059)
Net book amount — 16,936 ——16,936
Year ended 31 March 2020 Opening net book amount — 16,936 ——16,936 Acquired from business combination (Note 32) — 5,457 3,588 498 9,543 Additions — 9,484 ——9,484 Effect of lease modification — 1,941 ——1,941 Depreciation (Note 6) — (13,568) (1,056) (43) (14,667)
Closing net book amount — 20,250 2,532 455 23,237
At 31 March 2020 Cost — 44,706 3,588 498 48,792 Accumulated depreciation — (24,456) (1,056) (43) (25,555)
Net book amount — 20,250 2,532 455 23,237
Year ended 31 March 2021 Opening net book amount — 20,250 2,532 455 23,237 Additions 135,610 86,118 — 114 221,842 Depreciation (Note 6) — (16,488) (2,532) (113) (19,133) Effect of lease modification ———(111) (111)
Closing net book amount 135,610 89,880 — 345 225,835
At 31 March 2021 Cost 135,610 130,824 3,588 464 270,523 Accumulated depreciation — (40,944) (3,588) (119) (44,688)
Net book amount 135,610 89,880 — 345 225,835
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APPENDIX I ACCOUNTANT’SREPORT
Depreciation have been charged to the following categories of expenses in the consolidated statements of comprehensive income:
Year ended 31 March 2019 2020 2021 HK$’000 HK$’000 HK$’000
Cost of sales 7,390 11,251 15,461 Administrative expenses 785 3,416 3,672
8,175 14,667 19,133
The Group’s leasehold land and building (Note 11) with carrying amounts of approximately HK$135,610,000 and HK$28,766,000 respectively as at 31 March 2021 have been pledged to a bank for a mortgage loan granted to the Group (Note 29).
13 INTANGIBLE ASSETS
Customer Goodwill relationship Total HK$’000 HK$’000 HK$’000
Year ended 31 March 2019 As at 1 April 2018 and 31 March 2019 Net book amount ———
Year ended 31 March 2020 Opening net book amount ——— Arising from business combination (Note 32) 17,655 226 17,881 Amortisation (Note 6) — (19) (19)
Closing net book amount 17,655 207 17,862
At 31 March 2020 Cost 17,655 226 17,881 Accumulated amortisation — (19) (19)
Net book amount 17,655 207 17,862
Year ended 31 March 2021 Opening net book amount 17,655 207 17,862 Amortisation (Note 6) — (45) (45)
Closing net book amount 17,655 162 17,817
At 31 March 2021 Cost 17,655 226 17,881 Accumulated amortisation — (64) (64)
Net book amount 17,655 162 17,817
On 30 October 2019, the Group completed the acquisition of three imaging and diagnostic centres in Hong Kong. In accordance with HKFRS 3 (Revised) Business Combinations, the Group is required to recognise the identifiable assets acquired, liabilities assumed and contingent liabilities that satisfy the recognition criteria at their fair value at the acquisition date. Accordingly, the Group undertook a purchase price allocation exercise to allocate the purchase consideration to the identifiable assets acquired, liabilities assumed and contingent consideration at the acquisition date (Note 32).
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APPENDIX I ACCOUNTANT’SREPORT
Impairment assessment of goodwill
Goodwill arising from business combination during the year ended 31 March 2020 is allocated to a group of CGUs consisting of Hong Kong Imaging (also referred to as ‘‘Imaging and Diagnostic CGU’’), and is monitored by management at the Imaging and Diagnostic CGU level for impairment test. Impairment test of goodwill is performed at each period end date, or whenever there is impairment indicator.
The recoverable amount of the Imaging and Diagnostic CGU is determined by reference to the value-in-use calculation performed by an independent valuer, Vincorn Consulting and Appraisal Limited.
In assessing the value-in-use calculation, references were made to the calculations using pre-tax cash flow projections based on financial plans approved by management covering a forecast period of 5 years. Cash flows beyond the forecast period are extrapolated using the estimated terminal growth rates. Management assessed that no impairment provision is required as at 31 March 2020 and 2021. The key assumptions used for the cash flow projections (which are based on past experience of the Group and external sources of market information) and the sensitivity analysis are disclosed as follows:
Key assumptions 31 March 2020
Revenue growth rates (year on year) — Year ending 31 March 2021 –15.7% — Years ending 31 March 2022 to 2025 3.5% to 24.6%
Gross margin ratio — Year ending 31 March 2021 3.1% — Years ending 31 March 2022 to 2025 26.2% to 29.2% — Terminal year 23.4%
Pre-tax discount rate 18.6%
Terminal growth rate 3.5%
Key assumptions 31 March 2021
Revenue growth rates (year on year) — Year ending 31 March 2022 17.1% — Years ending 31 March 2023 to 2026 3.5% to 10.4%
Gross margin ratio — Year ending 31 March 2022 19.6% — Years ending 31 March 2023 to 2026 23.9% to 26.6% — Terminal year 24.9%
Pre-tax discount rate 18.0%
Terminal growth rate 3.5%
The recoverable amount of the Imaging and Diagnostic CGU is estimated to exceed its carrying amount by approximately HK$3,436,000 and HK$12,699,000 at 31 March 2020 and 2021 respectively.
Changing the discount rates and other assumptions selected by management in assessing impairment, including the growth rates assumption in the cash flow projections, could materially affect the net present value used in the impairment test.
At 31 March 2020, if revenue growth rates (year on year), gross margin ratio, discount rate, and terminal growth rate for each of the forecast years for Hong Kong Imaging had been 1.0%, 1.3%, 1.6%, and 0.7% respectively lower, lower, higher and lower than management’s estimates with all other variables held constant, the recoverable amount of Hong Kong Imaging would have been equal to its carrying amount.
At 31 March 2021, if revenue growth rates (year on year), gross margin ratio, discount rate, and terminal growth rate for each of the forecast years for Hong Kong Imaging had been 3.5%, 4.2%, 7.2%, and 2.6% respectively lower, lower, higher and lower than management’s estimates with all other variables held constant, the recoverable amount of Hong Kong Imaging would have been equal to its carrying amount.
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APPENDIX I ACCOUNTANT’SREPORT
With reasonably possible changes in key assumptions with all other variables held constant for each of the forecast years, the carrying amount of the CGU would exceed its recoverable amount by:
31 March 2020 31 March 2021 HK$’000 HK$’000
Revenue growth rates (year on year) decreased by 10% 842 — Gross margin ratio decreased by 10% 3,549 — Pre-tax discount rate increased by 10% 471 — Terminal growth rate decreased by 10% ——
14 FINANCIAL INSTRUMENTS BY CATEGORY
The Group had the following financial instruments:
As at 31 March 2019 2020 2021 HK$’000 HK$’000 HK$’000
Financial assets, at amortised cost Non-current portion Deposits 2,055 2,591 7,078
Current portion Trade receivables 16,099 16,107 19,108 Deposits and other receivables 678 3,319 4,037 Amounts due from shareholders 137,143 36,116 4,145 Amounts due from directors 27,130 51,535 1,600 Amount due from the ultimate holding company 20 36 4 Amount due from the immediate holding company 10 18 — Cash and cash equivalents 39,771 159,860 95,267
220,851 266,991 124,161
222,906 269,582 131,239
Financial liabilities, at amortised cost Non-current portion Lease liabilities 9,328 7,199 75,541
Current portion Trade payables 5,444 6,307 6,111 Other payables 6,841 17,658 22,700 Lease liabilities 7,349 15,327 17,551 Bank borrowing ——75,000 Amount due to a shareholder 279 —— Amount due to a related party 100 —— Dividend payable — 66,720 —
20,013 106,012 121,362
29,341 113,211 196,903
The Group’s exposure to various risks associated with the financial instruments is discussed in Note 3.
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APPENDIX I ACCOUNTANT’SREPORT
15 OTHER RECEIVABLES, DEPOSITS AND PREPAYMENTS
As at 31 March 2019 2020 2021 HK$’000 HK$’000 HK$’000
Non-current portion Deposits 2,055 2,591 7,078 Prepayments ——8,744
2,055 2,591 15,822
Current portion Prepayments 169 2,533 1,924 Prepaid [REDACTED] expense ——[REDACTED] Other receivables and deposits 678 3,319 4,037
847 5,852 10,347
Total 2,902 8,443 26,169
As at 31 March 2019, 2020 and 2021, the carrying amounts of other receivables, deposits and prepayments approximated to their fair values and were denominated in HK$.
Other receivables, deposits and prepayments did not contain loss allowance and provision of impairment.
The maximum exposure to credit risk at the reporting date was the fair value of each class of receivables mentioned above. The Group did not hold any collateral as security.
16 DEFERRED INCOME TAX
The analysis of deferred tax assets and deferred tax liabilities is as follows:
As at 31 March 2019 2020 2021 HK$’000 HK$’000 HK$’000
Deferred tax assets Deferred tax assets to be recovered after more than 12 months 812 1,505 2,731
Deferred tax liabilities Deferred tax liabilities to be recovered after more than 12 months — (27) (20) Deferred tax liabilities to be recovered within 12 months — (7) (7)
— (34) (27)
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APPENDIX I ACCOUNTANT’SREPORT
Deferred income tax as at 31 March 2019, 2020 and 2021 are calculated in full on tax loss and temporary differences under the liability method using the current taxation rate of 16.5%. The net movements in the deferred income tax accounts are as follows:
Year ended 31 March 2019 2020 2021 HK$’000 HK$’000 HK$’000
As at 1 April 29 812 1,471 Credited to the consolidated statements of comprehensive income (Note 9) 783 502 1,233 Arising from business combination (Note 32) — 157 —
As at 31 March 812 1,471 2,704
The movements in deferred tax assets and liabilities without taking into consideration the offsetting of balances within the same tax jurisdiction are as follows:
(a) Deferred tax assets
Impairment Property, loss on plant and Financial equipment assets Tax loss Total HK$’000 HK$’000 HK$’000 HK$’000
As at 1 April 2018 29 ——29 Credited to the consolidated statements of comprehensive income 20 763 — 783
As at 31 March 2019 49 763 — 812 Arising from business combination (Note 32) 30 — 164 194 Credited to the consolidated statements of comprehensive income 448 — 51 499
As at 31 March 2020 527 763 215 1,505 Credited to the consolidated statements of comprehensive income 666 33 527 1,226
As at 31 March 2021 1,193 796 742 2,731
(b) Deferred tax liabilities
Intangible assets HK$’000
As at 1 April 2018 and 31 March 2019 — Arising from business combination (Note 32) 37 Credited to the consolidated statements of comprehensive income (3)
As at 31 March 2020 34 Credited to the consolidated statements of comprehensive income (7)
As at 31 March 2021 27
There is no unrecognised temporary differences for the Group. All the deferred tax assets recognised in respect of tax losses can be carried forward indefinitely to set off against future taxable income.
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APPENDIX I ACCOUNTANT’SREPORT
17 INVENTORIES
As at 31 March 2019 2020 2021 HK$’000 HK$’000 HK$’000
Pharmaceutical goods and medical supplies 7,935 10,112 12,351
Inventories recognised as cost of sales during the years ended 31 March 2019, 2020 and 2021 amounted to HK$33,502,000 and HK$49,165,000 and HK$46,019,000 respectively.
18 TRADE RECEIVABLES
As at 31 March 2019 2020 2021 HK$’000 HK$’000 HK$’000
Trade receivables 20,721 20,879 24,080 Less: allowance for impairment (Note 3.1(b)(ii)) (4,622) (4,772) (4,972)
Total trade receivables, net 16,099 16,107 19,108
(a) The credit terms of trade receivables granted by the Group is generally 60 to 180 days. Ageing analysis based on invoice date of the gross trade receivables at the respective reporting dates are as follows:
As at 31 March 2019 2020 2021 HK$’000 HK$’000 HK$’000
Within 90 days 14,323 12,309 16,709 91 to 180 days 2,405 1,753 1,678 181 days to 365 days 3,973 1,681 433 Over 365 days 20 5,136 5,260
20,721 20,879 24,080
As at 31 March 2019, 2020 and 2021, the carrying amounts of trade receivables approximated to their fair values and were denominated in HK$.
The increase in the loss allowance of trade receivables for the years ended 31 March 2019, 2020 and 2021 are included in the impairment loss on financial assets in the consolidated statements of comprehensive income. The Group applies the HKFRS 9 simplified approach to measure expected credit loss which uses a lifetime expected loss allowance for all trade receivables for the Track Record Period. The detailed impairment assessments for the Track Record Period are summarised in Note 3.1(b)(ii).
The maximum exposure to credit risk at the reporting date was the fair value of each class of receivables mentioned above. The Group did not hold any collateral as security.
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APPENDIX I ACCOUNTANT’SREPORT
19 AMOUNTS DUE FROM SHAREHOLDERS
As at 31 March 2019 2020 2021 HK$’000 HK$’000 HK$’000
Advances to Founding Shareholders (Note 34) 9,753 24,085 3,770 Advances to other shareholders 2,390 12,031 375 Capital contribution receivable from other shareholders (Note 23) 125,000 ——
Total 137,143 36,116 4,145
As at 31 March 2019, 2020 and 2021, the carrying amounts of amounts due from shareholders approximated to their fair values and were denominated in HK$.
The amounts due from shareholders were interest-free, unsecured, repayable on demand, and non-trade in nature. [The directors of the Company expect the balances to be settled in full before the [REDACTED].]
20 CASH AND CASH EQUIVALENTS
As at 31 March 2019 2020 2021 HK$’000 HK$’000 HK$’000
Cash at bank 39,706 63,636 95,230 Cash on hand 65 51 37 Short-term bank deposits — 96,173 —
39,771 159,860 95,267
The Group’s cash and cash equivalents as at 31 March 2019, 2020 and 2021 were denominated in HK$.
As at 31 March 2020, the effective interest rate of the Group’s short-term bank deposits was 2.32% per annum and the deposits were with original maturity of less than three months.
The maximum exposure to credit risk was the carrying value of cash at bank as at 31 March 2019, 2020 and 2021 and short-term bank deposits as at 31 March 2020.
The carrying amount of the Group’s cash and cash equivalents approximated to its fair value as at 31 March 2019, 2020 and 2021.
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APPENDIX I ACCOUNTANT’SREPORT
21 SHARE CAPITAL
Nominal value of Number of ordinary ordinary shares shares HK$’000
Ordinary shares of HK$0.00001 each Authorised As at 21 September 2020 (date of incorporation) and 31 March 2021 38,000,000,000 380
Issued and fully paid As at 21 September 2020 1 —* Issue of ordinary shares upon acquisition of the entire equity interests in CMH (Note) 1,073,306 —**
As at 31 March 2021 1,073,307 —**
* Approximates HK$0.
** Approximates HK$11.
Note: The Company was incorporated in the Cayman Islands on 21 September 2020 with authorised share capital of HK$380,000 divided into 38,000,000,000 shares of a par value of HK$0.00001 each. On 23 October 2020, the Company acquired the entire share capital of CMH of 1,073,307 shares through allotment and issue of 1,073,306 shares of a par value of HK$0.00001 each. For details, please refer to Note 1.2.
22 DIVIDENDS
Except for the dividends of HK$66,720,000 and HK$60,000,000 declared by CMH in February 2020 and October 2020 respectively, no other dividend was declared by the companies comprising the Group throughout the Track Record Period. The dividends declared were fully settled in October 2020.
No dividend was declared by the Company since its date of incorporation.
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APPENDIX I ACCOUNTANT’SREPORT
23 RESERVES
(a) Movement of the reserves
Attributable to the owners of the Company Share-based Capital reserve payment Retained (Note i) reserve (Note ii) earnings Total reserves HK$’000 HK$’000 HK$’000 HK$’000
Balance 1 April 2018 9,648 — 21,345 30,993
Comprehensive income Profit and total comprehensive income for the year ——59,960 59,960
Total comprehensive income ——59,960 59,960
Transactions with owners Capital contributions from the owners of the Group (Note iii) 125,000 ——125,000
Total transactions with owners 125,000 ——125,000
Balance at 31 March 2019 and 1 April 2019 134,648 — 81,305 215,953
Comprehensive income Profit and total comprehensive income for the year ——50,194 50,194
——50,194 50,194
Arising from business combination (Note v) 9,982 ——9,982
Transactions with owners Share-based payment expense — 530 — 530 Capital contributions from an owner of the Group (Note iv) 5 —— 5 Dividend declared ——(66,720) (66,720)
Total transactions with owners 5 530 (66,720) (66,185)
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APPENDIX I ACCOUNTANT’SREPORT
Attributable to the owners of the Company Share-based Capital reserve payment Retained (Note i) reserve (Note ii) earnings Total reserves HK$’000 HK$’000 HK$’000 HK$’000
Balance at 31 March 2020 and 1 April 2020 144,635 530 64,779 209,944
Comprehensive income Profit and total comprehensive income for the year ——21,643 21,643
Transactions with owners Share-based payment expense — 2,963 — 2,963 Capital contributions from the owners of the Group, net of transaction costs and tax (Note vi) 58,218 ——58,218 Dividend declared ——(60,000) (60,000)
Total transactions with owners 58,218 2,963 (60,000) 1,181
Balance at 31 March 2021 202,853 3,493 26,422 232,768
Notes:
(i) Capital reserve represents the share premium from capital contributions made by the Founding Shareholders, Equity Partners, Strategic Shareholders and New Investors during the Track Record Period.
(ii) Share-based payment reserve represents the recognition of share-based payment expense from the shares issued for consultants’ services to the Group. Details of the share issuance are disclosed in Note (b) below.
(iii) In March 2019, the New Investors subscribed for 125,000 newly issued shares of CMH at HK$125,000,000. The funds were fully received during the year ended 31 March 2020.
(iv) In August 2019, 5,075 shares of CMH were issued at par to an Equity Partner.
(v) In October 2019, 9,844 shares of CMH were issued as part of the consideration for the acquisition of the Hong Kong Imaging (Note 32).
(vi) In August 2020, the Group issued a total of 15,456 shares of CMH to two Equity Partners, and 42,932 shares of CMH to Unicorn.
(b) Share-based payment reserve
Year ended 31 March 2019 2020 2021 HK$’000 HK$’000 HK$’000
Arising from shares issued on 1 August 2019 and 1 August 2020 (Note (i)) — 530 3,493
Note:
(i) The share-based payment reserve represents the share-based payment expense relating to the shares issued to the consultants for their services rendered to Hong Kong Medical Consultants.
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APPENDIX I ACCOUNTANT’SREPORT
Share-based payment expense is measured as the fair value of the shares issued at grant date less respective capital contributions, if any, and is amortised over the service period, until the [REDACTED] plus 5 years, pursuant to the respective shareholder agreements with Hong Kong Medical Consultants. The fair values of the shares issued on 1 August 2019 and 1 August 2020 were assessed by management with reference to the valuation performed by an independent valuer, Vincorn Consulting and Appraisal Limited, using discounted cash flow model.
In assessing the fair value of the shares issued, references were made to the calculations using post-tax cash flow projections based on financial plans approved by management covering a forecast period of 5 years. Cash flows beyond the forecast period are extrapolated using the estimated terminal growth rate. The key assumptions applied are as follows:
Valuation date 1 August 2019
Revenue growth rates (year on year) 9.0% to 25.7% Gross margin ratio 29.7% to 35.8% Post-tax discount rates 12.2% Terminal growth rate 3.5%
Valuation date 1 August 2020
Revenue growth rates (year on year) 5.8% to 34.8% Gross margin ratio 21.4% to 33.4% Post-tax discount rates 10.9% Terminal growth rate 3.5%
(c) Reserves of the Company
Capital Accumulated Total reserves loss reserves HK$’000 HK$’000 HK$’000
Balance at 1 April 2020 ———
Comprehensive loss Loss and total comprehensive loss for the year — (14,352) (14,352)
Transactions with owners Capital reserves arising upon the acquisition of subsidiary group (Note) 240,400 — 240,400
Total transactions with owners 240,400 — 240,400
Balance at 31 March 2021 240,400 (14,352) 226,048
Note: As disclosed in Note 1.2, on 23 October 2020, the Company acquired the entire equity interests in CMH by issuing 1,073,306 ordinary shares of HK$0.00001 each to its then shareholders in the proportion of their respective interests in CMH. The Company then became the holding company of the companies now comprising the Group. Investment in the companies now comprising the Group are carried at cost on the acquisition date, the capital reserves represented the difference between the cost and the nominal value of the shares issued.
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APPENDIX I ACCOUNTANT’SREPORT
24 PROVISION FOR RE-INSTATEMENT COSTS
The Group is required to restore the leased premises of its medical centres and headquarter to their original condition at the end of the respective lease terms. A provision is recognised for the present value of the estimated expenditure required to remove any leasehold improvements. These costs are capitalised as part of the right-of-use assets and are amortised over the shorter of the term of the leases or the useful lives of the assets.
Movements of provision for re-instatement costs during the Track Record Period are set out below:
Year ended 31 March 2019 2020 2021 HK$’000 HK$’000 HK$’000
At beginning of the year 790 1,163 3,059 Arising from business combination (Note 32) — 1,164 — Provision for re-instatement costs recognised 343 679 —
1,133 3,006 3,059 Charged to consolidated statements of comprehensive income — unwinding of discounting impact (Note 7) 30 53 94
At end of the year 1,163 3,059 3,153
25 LEASE LIABILITIES
As at 31 March 2019 2020 2021 HK$’000 HK$’000 HK$’000
Minimum lease payments due — Within 1 year 7,853 16,006 21,442 — Between 1 and 2 years 7,633 6,753 19,545 — Between 2 and 5 years 1,958 627 50,398 — Over 5 years ——13,980
17,444 23,386 105,365 Less: future finance charges (767) (860) (12,273)
Present value of lease liabilities 16,677 22,526 93,092
As at 31 March 2019 2020 2021 HK$’000 HK$’000 HK$’000
Within 1 year 7,349 15,327 17,551 Between 1 and 2 years 7,405 6,589 16,509 Between 2 and 5 years 1,923 610 45,336 Over 5 years ——13,696
16,677 22,526 93,092
The total cash outflows for leases including payments of lease liabilities, payments of interest expenses on leases and payments of short-term lease expenses for the years ended 31 March 2019, 2020 and 2021 were HK$9,506,000, HK$16,593,000 and HK$21,198,000 respectively.
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APPENDIX I ACCOUNTANT’SREPORT
26 TRADE PAYABLES
Trade payables were non-interest-bearing.
The ageing analysis of trade payables based on recognition date is as follows:
As at 31 March 2019 2020 2021 HK$’000 HK$’000 HK$’000
0–30 days 4,588 5,415 4,854 31–60 days 815 875 1,134 61–90 days 18 14 97 Over 90 days 23 3 26
5,444 6,307 6,111
As at 31 March 2019, 2020 and 2021, the carrying amounts of trade payables approximated to their fair values.
The Group’s trade payables as at 31 March 2019, 2020 and 2021 were denominated in HK$.
27 ACCRUALS AND OTHER PAYABLES
As at 31 March 2019 2020 2021 HK$’000 HK$’000 HK$’000
Payables to consultants 6,508 16,434 15,042 Accrued employee benefits 161 769 1,481 Payables for property, plant and equipment — 437 — Payables to radiologists — 188 593 Payable for property agency commission ——1,500 [REDACTED] expense payables ——[REDACTED] Accrued auditors’ remuneration 1,079 835 896 Others 333 599 887
8,081 19,262 25,077
The Group’s accruals and other payables as at 31 March 2019, 2020 and 2021 were denominated in HK$.
The accruals and other payables as at 31 March 2019, 2020 and 2021 were interest-free, unsecured, and repayable on demand.
28 AMOUNT DUE TO A SHAREHOLDER
As at 31 March 2019 2020 2021 HK$’000 HK$’000 HK$’000
Amount due to a shareholder 279 ——
279 ——
As at 31 March 2019, 2020 and 2021, the carrying amounts of amount due to a shareholder approximated to their fair values and were denominated in HK$.
The amount due to a shareholder as at 31 March 2019 was interest-free, unsecured, repayable on demand, and non-trade in nature.
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APPENDIX I ACCOUNTANT’SREPORT
29 BANK BORROWING
As at 31 March 2019 2020 2021 HK$’000 HK$’000 HK$’000
Long-term mortgage loan ——75,000
Total borrowing, secured ——75,000 Less: amount due on demand or within one year shown under current liabilities ——(75,000)
Non-current portion ———
Bank borrowing as at 31 March 2021 is secured, interest-bearing at one-month HIBOR plus 1.65% per annum, which will mature in 2041, and is denominated in HK$.
The Group’s bank borrowing was repayable as follows:
As at 31 March 2019 2020 2021 HK$’000 HK$’000 HK$’000
Within 1 year ——3,151 Between 1 and 2 years ——3,207 Between 2 and 5 years ——9,967 Over 5 years ——58,675
——75,000
The above amount due is based on the scheduled repayment dates set out in the loan agreement and ignore the effect of any repayment on demand clause.
As at 31 March 2021, The Group has complied with the covenants of the loan facilities.
(a) Secured liabilities and assets pledged as security
As at 31 March 2021, the Group’s bank borrowing was secured by a corporate guarantee from the Company and charges over the Group’s leasehold land and building.
(b) Risk exposure
Details of the Group’s exposure to risks arising from the bank borrowing are set out in Note 3.1.
(c) Undrawn facilities
As at 31 March 2021, the Group had aggregate banking facilities of HK$105,000,000 for mortgage loan and revolving loan. Unused facility as at the same date amounted to HK$30,000,000.
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APPENDIX I ACCOUNTANT’SREPORT
30 CASH FLOW INFORMATION
(a) Cash generated from operations
Year ended 31 March 2019 2020 2021 HK$’000 HK$’000 HK$’000
Profit before income tax 71,619 59,182 26,789 Adjustments for: — Amortisation of intangible asset (Note 13) — 19 45 — Depreciation of property, plant and equipment (Note 11) 2,859 6,133 6,367 — Depreciation of right-of-use assets (Note 12) 8,175 14,667 19,133 — Provision for impairment losses on financial assets 4,622 150 200 — Share-based payment expenses — 530 2,963 — Finance income (Note 7) (35) (2,436) (1,199) — Finance costs (Note 7) 649 1,051 1,441 — Gain on disposal of property, plant and equipment ——(14) — Gain on lease modification —— (3)
87,889 79,296 55,722
Changes in working capital: — Inventories (4,369) (1,823) (2,239) — Trade receivables (12,702) 3,919 (3,201) — Other receivables, deposits and prepayments (685) (2,191) (1,224) — Contract liabilities 323 20 2,516 — Trade payables 1,275 559 (196) — Accruals and other payables 7,323 10,001 4,315 — Amount due to a related company 100 (100) —
Cash generated from operations 79,154 89,681 55,693
(b) Material non-cash transaction
In April and October 2020, dividend settlement of HK$44,742,000 and HK$42,473,000 respectively were net off with amounts due from shareholders and directors.
(c) Net debt reconciliation
As at 31 March 2019 2020 2021 HK$’000 HK$’000 HK$’000
Cash and cash equivalents (Note 20) 39,771 159,860 95,267 Lease liabilities (16,677) (22,526) (93,092) Bank borrowing ——(75,000) Amounts due to shareholders (279) —— Dividend payable — (66,720) —
Net cash/(debt) 22,815 70,614 (72,825)
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APPENDIX I ACCOUNTANT’SREPORT
Other assets Liabilities from financing activities Cash and Amount cash Bank due to Dividend Lease equivalents borrowing shareholders payable liabilities Total HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
As at 1 April 2018 14,106 — (4,057) — (11,106) (1,057) Net cash flows 25,665 — 3,778 — 8,532 37,975 Addition of lease liabilities ————(6,235) (6,235) Lease modification ————(7,249) (7,249) Other non-cash activities ————(619) (619)
As at 31 March 2019 39,771 — (279) — (16,677) 22,815
As at 1 April 2019 39,771 — (279) — (16,677) 22,815 Net cash flows 107,395 — 279 — 15,438 123,112 Addition of lease liabilities ————(8,805) (8,805) Arising from business combination (Note 32) 12,694 ———(9,543) 3,151 Lease modification ————(1,941) (1,941) Other non-cash activities ———(66,720) (998) (67,718)
As at 31 March 2020 159,860 ——(66,720) (22,526) 70,614
As at 1 April 2020 159,860 ——(66,720) (22,526) 70,614 Net cash flows (64,593) (75,000) — 39,505 16,899 (83,189) Addition of lease liabilities ————(86,232) (86,232) Dividend declared (Note 22) ———(60,000) — (60,000) Dividend settled by netting off with amounts due from shareholders and directors (Note 30(b)) ———87,215 — 87,215 Lease modification ————114 114 Other non-cash activities ————(1,347) (1,347)
As at 31 March 2021 95,267 (75,000) ——(93,092) (72,825)
Note: On 18 May 2018, the Group acquired HK Brain Memory at a consideration of HK$1. The acquisition of HK Brain Memory did not fulfil the definition of business combination as defined in HKFRS 3 (Revised) Business Combinations and the acquisition of Central Healthcare Limited is accounted for as assets acquisition. No cash and cash equivalents were acquired by the Group on 18 May 2018.
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APPENDIX I ACCOUNTANT’SREPORT
(d) Proceeds from disposal of property, plant and equipment
As at 31 March 2019 2020 2021 HK$’000 HK$’000 HK$’000
Net book amount ——— Gain on disposal of property, plant and equipment ——14
——14
31 CONTINGENCIES
The Group did not have any material contingent liabilities as at 31 March 2019, 2020 and 2021.
32 BUSINESS COMBINATION
It is the Group’s strategy to identify suitable investment opportunity to expand the business of the Group with good prospects and potential for stable returns through acquisition. On 30 October 2019, Smart Winner, one of the indirectly wholly- owned subsidiaries of the Company, acquired 100% equity interest in HKID Limited through acquiring 100% equity interest in Pixel, 94% equity interest in Pegasus from several independent third parties and 6% equity interest in Pegasus from Mrs. Tsang (the ‘‘Acquisition’’). After the completion of the acquisitions, Smart Winner directly holds 100% equity interest in Pixel and Pegasus, and indirectly holds 100% equity interest in HKID, 51% equity interest in HKID (Lab) and 51% equity interest in HKID (MRI), respectively.
The following summarises the consideration paid to acquire HKID Limited, and the fair values of the net assets acquired and liabilities assumed at the acquisition date:
HK$’000
Consideration (Note (i)) Cash 22,029 Equity instruments of the Group (Note (ii)) 9,982
32,011 Recognised amounts of fair value of identifiable assets acquired and liabilities assumed Property, plant and equipment 2,799 Right-of-use assets 9,543 Intangible asset — customer relationship 226 Deferred tax assets 194 Inventories 354 Trade receivables 4,077 Other receivables, deposits and prepayments 1,928 Cash and cash equivalents 12,694 Trade and other payables and accruals (1,047) Income tax payables (655) Lease liabilities (9,543) Provision for re-instatement costs (1,164) Deferred tax liabilities (37)
Total identifiable net assets 19,369 Non-controlling interests 5,013
Goodwill 17,655
Net cash outflow used in the acquisition Cash consideration (22,029) Cash and cash equivalents acquired 12,694
(9,335)
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APPENDIX I ACCOUNTANT’SREPORT
The goodwill is attributable to the workforce and the expected synergies from combining operations of the HKID Business and the HKMC Business. It will not be deductible for tax purposes.
There were no other material business combinations during the Track Record Period.
Note (i): The Acquisition consists of a contractual arrangement about performance guarantee with Dr. Ooi Gaik Cheng, who is the largest shareholder of Hong Kong Imaging before the Acquisition. Pursuant to the sale and purchase agreement of Pixel between Smart Winner and Dr. Ooi Gaik Cheng, Dr. Ooi Gaik Cheng irrevocably warrants and undertakes to Smart Winner for a minimum aggregate consolidated net income (‘‘Performance Target’’)of Hong Kong Imaging for the two financial years since the acquisition date (‘‘Measurement Period’’). The Measurement Period is subject to extension in case of certain conditions as stipulated in the sale and purchase agreement. In the event of failing to meet the Performance Target by the end of the Measurement Period, Smart Winner is entitled to receive cash compensation from Dr. Ooi Gaik Cheng. This arrangement is recognised as a financial asset at fair value through profit or loss since the date of the Acquisition and the fair value at acquisition date is minimal. For details of the assumptions and disclosure on the performance guarantee arrangement, please refer to Note 3.3.
Note (ii): The equity instruments of the Group represented 9,844 shares of CMH issued as part of the consideration paid for the Acquisition. The fair value of the equity instruments issued was assessed by management with reference to the valuation performed by an independent valuer, Vincorn Consulting and Appraisal Limited, using discounted cash flow model as at the acquisition date.
Note (iii): Acquired receivables
Both fair value and gross contractual amount of acquired receivables is HK$5,906,000. There is no loss allowance recognised on acquisition.
Note (iv): Accounting policy choice for non-controlling interests
The Group recognises non-controlling interests in an acquired entity either at fair value or at the non-controlling interest’s proportionate share of the acquired entity’s net identifiable assets. This decision is made on an acquisition-by-acquisition basis. For the non-controlling interests in Hong Kong Imaging, the Group elected to recognise the non-controlling interests at its proportionate share of the acquired net identifiable assets. See Note 2.3 for the Group’s accounting policies for business combinations.
Note (v): Revenue and profit contribution
The acquired business contributed revenues of HK$12,929,000 and net loss of HK$2,363,000 to the Group for the period from 30 October 2019 to 31 March 2020. Had the Hong Kong Imaging been consolidated from 1 April 2019, the Group’s consolidated statements of comprehensive income would show pro-forma revenue of HK$277,072,000 and profit of HK$49,424,000 for the year ended 31 March 2020.
Note (vi): Acquisition-related costs
Acquisition-related costs of HK$100,000 that were not directly attributable to the issue of shares are included in administrative expenses in the consolidated statements of comprehensive income and in operating cash flows in the consolidated statements of cash flow.
33 COMMITMENTS
(a) Capital commitments
As at 31 March 2021, the Group entered into contracts for the purchase of office equipment, medical equipment and leasehold improvements of a clinic, the amounts contracted but not provided for were approximately HK$455,000, HK$2,179,000 and HK$10,973,000 respectively.
Except for the above, there were no other capital commitments as at 31 March 2019, 2020 and 2021.
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APPENDIX I ACCOUNTANT’SREPORT
(b) Operating lease commitments
The future aggregate minimum lease payments under non-cancellable operating leases with lease term less than 1 year are as follows:
As at 31 March 2019 2020 2021 HK$’000 HK$’000 HK$’000
With lease terms within one year — 3,089 659
(c) Lease committed but not yet commenced
There were no lease committed but not yet commenced as at 31 March 2019, 2020 and 2021.
34 RELATED PARTY TRANSACTIONS
Parties are considered as related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Parties are also considered to be related if they are subject to common control or common significant influence.
In the opinion of the directors of the Company, the related party transactions were carried out in the normal course of business and at terms negotiated between the Company and the respective related parties.
The following companies are significant related parties of the Company that had transactions and/or balances with the GroupduringtheTrackRecordPeriodorasateachreportingdate.
Name Relationship with the Group
Dr. Kenneth Tsang Controlling Shareholder and Director of the Company Dr. Adam Leung Director of the Company Mr.Shiu DirectoroftheCompany Mrs. Chen Director of the Company Dr. Jason Fong One of the key management personnel of the Company Dr. Jenny Tsang One of the key management personnel of the Company Dr. Chu Leung Wing One of the key management personnel of the Company Euto Holdings Limited (‘‘Euto Holdings’’) Entity controlled by a director of the Company Mrs. Tsang A close family member of the Controlling Shareholder Hong Kong Imaging A group of companies in which the Controlling Shareholder held significant influence before business combination (Note 32)
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APPENDIX I ACCOUNTANT’SREPORT
The following transactions were carried out between the Group and its related parties duringtheTrackRecordPeriodat terms determined and agreed by the Group and the counter-parties:
(a) Provision of management services, purchases of consultancy services, purchase of imaging and diagnostic services, acquisition of subsidiaries, provision of benefits in kind
Year ended 31 March 2019 2020 2021 HK$’000 HK$’000 HK$’000
Consultancy fee paid to — Euto Holdings (Note (i)) 100 ——
Purchase of imaging and diagnostic services — Hong Kong Imaging (Note (ii)) 2,227 1,481 —
Purchase consideration for the acquisition of subsidiaries paid to — Mrs. Tsang (Note (iii)) — 937 —
Benefit-in-kind — Dr. Jenny Tsang (Note (iv)) 831 899 995
Notes:
(i) This represents consultancy fee paid to a related company for business consultation services provided by the related company.
(ii) This represents purchase of imaging and diagnostic services from Hong Kong Imaging during the years ended 31 March 2019 and 2020 respectively. The transactions for imaging and diagnostic services with Hong Kong Imaging are eliminated after the completion of business combination on 30 October 2019 (Note 32).
(iii) This represents cash paid to Mrs. Tsang for the acquisition of subsidiaries during the year ended 31 March 2020 (Note 32).
(iv) This represents the benefit-in-kind to Dr. Jenny Tsang for specialist medical services during the years ended 31 March 2019, 2020 and 2021 respectively.
(b) Key management compensation
Key management personnel are deemed to be the Chief Executive, Executive Director and Founding Shareholders who have the responsibilities for the planning, directing, controlling and the execution of the activities of the Group.
Year ended 31 March 2019 2020 2021 HK$’000 HK$’000 HK$’000
Fees, wages, salaries, bonus ——— Retirement benefits costs — defined contribution scheme ——— Allowances and benefits in kind 831 899 995
831 899 995
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APPENDIX I ACCOUNTANT’SREPORT
(c) Year-end balances with related parties
(i) Balances due from related parties
As at 31 March 2019 2020 2021 HK$’000 HK$’000 HK$’000
Amounts due from directors 27,130 51,535 1,600 Amounts due from Founding Shareholders (Note 19) 9,753 24,085 3,770 Amount due from the ultimate holding company 20 36 4 Amount due from the immediate holding company 10 18 —
36,913 75,674 5,374
Maximum balances outstanding during the years ended 31 March 2019, 2020 and 2021 were as follows:
Year ended 31 March 2019 2020 2021 HK$’000 HK$’000 HK$’000
Amounts due from directors 27,130 51,535 59,072 Amounts due from Founding Shareholders 9,753 24,085 16,907 Amount due from the ultimate holding company 20 36 36 Amount due from the immediate holding company 10 18 18
The amounts due from these related parties as at 31 March 2019. 2020 and 2021 were interest-free, unsecured, repayable on demand, and non-trade in nature. [The directors of the Company expect the balances to be settled in full before the [REDACTED].] No provisions were made against receivables from these related parties as at 31 March 2019, 2020 and 2021. The carrying values of amounts due from these related parties as at 31 March 2019, 2020 and 2021 approximated to their fair values and were denominated in HK$.
(ii) Balances due to related parties
Group
As at 31 March 2019 2020 2021 HK$’000 HK$’000 HK$’000
Amount due to a related company 100 ——
100 ——
The amount due to a related company as at 31 March 2019 was interest-free, unsecured, repayable on demand and trade in nature. The carrying value of amount due to a related company as at 31 March 2019 approximated to its fair value and was denominated in HK$.
Company
As at 31 March 2019 2020 2021 HK$’000 HK$’000 HK$’000
Amount due to a subsidiary ——14,000
The amount due to a related party was interest-free, unsecured and repayable on demand and denominated in HK$. The carrying amount of the balance as at 31 March 2021 approximated to fair value due to its short maturity.
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APPENDIX I ACCOUNTANT’SREPORT
35 SUBSEQUENT EVENTS
[.]
III SUBSEQUENT FINANCIAL STATEMENTS
No audited financial statements have been prepared by the Company since its date of incorporation and up to the date of this report. For other companies now comprising the Group, no audited financial statements have been prepared in respect of any period subsequent to 31 March 2021 and up to the date of this report.
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APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following information does not form part of the Accountant’s Report prepared by PricewaterhouseCoopers, Certified Public Accountants, the reporting accountant of the Company, as set out in Appendix I to this document, and is included herein for information only. The unaudited pro forma financial information should be read in conjunction with the section headed ‘‘Financial Information’’ and the Accountant’s Report set out in Appendix I to this document.
A. UNAUDITED PRO FORMA STATEMENT OF ADJUSTED CONSOLIDATED NET TANGIBLE ASSETS
The following unaudited pro forma statement of adjusted combined net tangible assets of the Group prepared in accordance with Rule 4.29 of the Listing Rules for illustrating purposes only, and is set out below to illustrate the effect of the [REDACTED] on the consolidated net tangible assets of the Group attributable to the owners of the Company as at 31 March 2021 as if the [REDACTED] had taken place on 31 March 2021.
The unaudited pro forma statement of adjusted combined net tangible assets has been prepared for illustrative purposes only and because of its hypothetical nature, it may not give a true picture of the consolidated net tangible assets of the Group had the [REDACTED] been completed as at 31 March 2021 or at any future dates.
Unaudited pro Unaudited pro Audited forma adjusted forma adjusted consolidated net consolidated net consolidated net tangible assets of tangible assets of tangible assets the Group the Group of the Group attributable to the Estimated attributable to attributable to the owners of the [REDACTED] the owners of the owners of the Company as at from the Company as at Company per 31 March 2021(1) [REDACTED](2) 31 March 2021 Share(3) HK$’000 HK$’000 HK$’000 HK$
Basedonan[REDACTED] of HK$[REDACTED] per Share 214,951 [REDACTED] [REDACTED] [REDACTED]
Basedonan[REDACTED] of HK$[REDACTED] per Share 214,951 [REDACTED] [REDACTED] [REDACTED]
Notes:
(1) The audited consolidated net tangible assets attributable to the owners of the Company as at 31 March 2021 is extracted from the Accountant’s Report included in Appendix I to this document, which is based on the audited consolidated net assets of the Group attributable to the owners of the Company as at 31 March 2021 of approximately HK$232,768,000 with an adjustment for the intangible assets of the Group as at 31 March 2021 of approximately HK$17,817,000.
(2) The estimated [REDACTED] from the [REDACTED] are based on [REDACTED] [REDACTED] and the indicative [REDACTED] of HK$[REDACTED] per Share and HK$[REDACTED] per Share, being low and high end of the indicative [REDACTED], after the deduction of the estimated [REDACTED] fees and other [REDACTED] related expenses paid/payable by the Company (excluding [REDACTED] expenses of approximately HK$[REDACTED] which have been accounted for prior to 31 March 2021), and takes no account of any Shares which may be allotted and issued upon the exercise of the [REDACTED].
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APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION
(3) The unaudited pro forma adjusted consolidated net tangible assets per Share is arrived at after the adjustments referred to in the preceding paragraphs and on the basis that [REDACTED] Shares were in issue assuming that the [REDACTED] and the [REDACTED] has been completed on 31 March 2021 but does not take into account of any Shares to be issued pursuant to the exercise of the [REDACTED], any Shares which may be granted under the Share Option Scheme and any Shares that may be issued and repurchased by the Company pursuant to the general mandates.
(4) No adjustment has been made to the unaudited pro forma adjusted consolidated net tangible assets of the Group to reflect any trading results or other transactions of the Group entered into subsequent to 31 March 2021.
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APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION
[REDACTED]
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APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION
[REDACTED]
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APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION
[REDACTED]
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APPENDIX III PROPERTY VALUATION REPORT
The following is the text of a valuation report prepared for the purpose of incorporation in this document received from Knight Frank Petty Limited (‘‘Knight Frank’’), an independent valuer, in connection with their valuation as at 31 March 2021 of the Property held by the Group.
Knight Frank Petty Limited 4/F, Shui On Centre 6–8 Harbour Road Wanchai, Hong Kong [.]
The Board of Director Hong Kong Medical Consultants Holdings Limited 13/F, Pacific House, No. 20 Queen’s Road Central, Hong Kong
Dear Sirs,
VALUATION IN RESPECT OF THE 6TH FLOOR, EURO TRADE CENTRE, NOS. 13–14 CONNAUGHT ROAD CENTRAL & NOS. 21–23 DES VOEUX ROAD CENTRAL, HONG KONG (THE ‘‘PROPERTY’’).
INSTRUCTIONS
In accordance with the instructions for us to value the Property held by Hong Kong Medical Consultants Holdings Limited (hereinafter referred to as the ‘‘Company’’, together with its subsidiaries, hereinafter together referred to as the ‘‘Group’’), we confirm that we have carried out inspection, made relevant enquiries and carried out searches and obtained such further information as we consider necessary for the purpose of providing you with our opinion of the market value of the Property in existing state as at 31 March 2021 (the ‘‘Valuation Date’’) for the purpose of incorporation in this document. Our valuation is undertaken by qualified valuer with relevant experiences as an independent valuer. Our valuation is prepared in unbiased and professional manner.
We confirm that we do not have any material connection or involvement giving rise to a conflict of interest and are providing an objective and unbiased valuation. Our valuation is based on 100% of the leasehold interest of the Property.
BASIS OF VALUATION
In arriving at our opinion of the market value, we followed ‘‘The HKIS Valuation Standards 2020’’ issued by The Hong Kong Institute of Surveyors (‘‘HKIS’’)and‘‘The RICS Valuation — Global Standards 2020’’ issued by the Royal Institution of Chartered Surveyors (‘‘RICS’’). Under the said standards, Market Value is defined as:
‘‘the estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm’s length transaction, after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion.’’
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APPENDIX III PROPERTY VALUATION REPORT
‘‘the estimated exchange price of an asset without regard to the seller’s costs of sale or the buyer’s costs of purchase and without adjustment for any taxes payable by either party as a direct result of the transaction.’’
Market value is the most probable price reasonably obtainable in the market on the valuation date in keeping with the market value definition. It is the best price reasonably obtainable by the seller and the most advantageous price reasonably obtainable by the buyer. This estimate specifically excludes an estimated price inflated or deflated by special terms or circumstances such as atypical financing, sale and leaseback arrangements, special considerations or concessions granted by anyone associated with the sale, or any element of value available only to a specific owner or purchaser.
Our valuation complies with the requirements set out in ‘‘The HKIS Valuation Standards 2020’’ issued by HKIS, ‘‘RICS Valuation — Global Standards 2020’’ issued by RICS and the Chapter 5 of the Rules Governing the Listing of Securities issued by The Stock Exchange of Hong Kong Limited.
VALUATION METHODOLOGY
Our valuation has been undertaken using appropriate valuation methodology and our professional judgement. In our valuation, we have adopted Market Approach by made reference to the recent market sales evidence which is available in the open market. Appropriate adjustments have been made in our valuation to reflect the differences in the characteristics between the Property and the comparable properties such as location, time, size, building age, layout, ancillary facilities and quality in arriving at our opinion on the market value.
VALUATION ASSUMPTIONS AND CONDITIONS
Our valuation is subject to the following assumptions and conditions.
Title Documents and Encumbrances
In our valuation, we have assumed a good and marketable title and that all documentation is satisfactorily drawn. We have also assumed that the Property is not subject to any unusual or onerous covenants, restrictions, encumbrances or outgoing.
Disposal Costs and Liabilities
No allowance has been made in our report for any charges, mortgages or amounts owing on the Property nor for any expenses or taxation which may be incurred in effecting a sale.
Sources of Information
We have relied to a very considerable extent on information given by the Company. We have accepted advice given to us on such matters as statutory notice, easement, land tenure, occupancy status, floor areas and all other relevant matters. We have not verified the correctness of any information, including their translation supplied to us concerning this Property, whether in writing or verbally by yourselves, your representatives or by your legal or professional advisers or by any (or any apparent) occupier of the Property or contained on the register of title. We assume that this information is complete and correct.
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APPENDIX III PROPERTY VALUATION REPORT
Inspection
We have inspected the Property on 23 November 2020 by Mr. Cyrus Fong, MRICS MHKIS MCIREA RPS(GP) RICS Registered Valuer. Nevertheless, we have assumed in our valuations that the Property was in satisfactory exterior and interior decorative order without any unauthorised extension or structural alterations or illegal uses as at the Valuation Date, unless otherwise stated.
Identity of the Property to be Valued
We have exercised reasonable care and skill to ensure that the Property, identified by the Property address in your instructions, is the Property inspected by us and contained within our valuation report. If there is ambiguity as to the Property address, or the extent of the Property to be valued, this should be drawn to our attention in your instruction or immediately upon receipt of our report.
Property Insurance
We have valued the Property on the assumption that, in all respects, it is insurable against all usual risks including terrorism, flooding and rising water table at normal, commercially acceptable premiums.
Areas and Age
In our valuations, we have relied upon areas provided to us. We have also assumed that the measurements and dimensions shown on the documents handed to us are correct and in approximations only. We have scaled off the floor areas from the approved building plans in accordance with the Code of Measuring Practice by the Hong Kong Institute of Surveyors.
Structural and Services Condition
We have carried out visual inspection only without any structural investigation or building survey. During our limited inspection, we did not inspect any inaccessible areas. We are unable to confirm whether the Property is free from urgent or significant defects or items of disrepair or any deleterious materials have been used in the construction of the Property. Our valuation has therefore been undertaken on the assumption that the Property was in satisfactory repair and condition and contains no deleterious materials and it is sound order and free from structural faults, rot, infestation or other defects, and that the services are in satisfactory condition.
Ground Condition
We have assumed there to be no unidentified adverse ground or soil conditions and that the load bearing qualities of the site of the Property are sufficient to support the building constructed or to be constructed thereon; and that the services are suitable for any existing or future development. Our valuation is therefore prepared on the basis that no extraordinary expenses or delays will be incurred in this respect.
Environmental Issues
We are not environmental specialists and therefore we have not carried out any scientific investigations of sites or buildings to establish the existence or otherwise of any environmental contamination, nor have we undertaken searches of public archives to seek evidence of past activities that might identify potential for contamination. In the absence of appropriate investigations and where
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APPENDIX III PROPERTY VALUATION REPORT there is no apparent reason to suspect potential for contamination, our valuation is prepared on the assumption that the Property is unaffected. Where contamination is suspected or confirmed, but adequate investigation has not been carried out and made available to us, then the valuation will be qualified.
Compliance with Relevant Ordinances and Regulations
We have assumed the Property was constructed, occupied and used in full compliance with, and without contravention of any ordinance, statutory requirement and notices except only where otherwise stated. We have further assumed that, for any use of the Property upon which this report is based, any and all required licences, permits, certificates, consents, approvals and authorisation have been obtained, expected only where otherwise stated.
Valuation assumption
We have assumed that the owner of the Property is free and uninterrupted rights to use and assign the Property during the whole of the unexpired land-lease term granted subject to the payment of usual Government Rent.
Remarks
Unless otherwise stated, all money amounts stated in our valuations are in Hong Kong Dollars (HK$).
Area Conversion
The area conversion factors in this report are taken as follows:
1 sq.m. = 10.764 sq.ft.
We enclose herewith our valuation report.
Limitations on Liability
This report is confidential to the addressee for the specific purpose to which it refers. It may be disclosed to other professional advisers assisting the addressee in respect of the purposes, but the addressee shall not disclose the report to any other person. Neither the whole, or any part of this report and valuation, nor any reference thereto may be included in any documents, circular or statement nor published in any way whatsoever whether in hard copy or electronically (including on any web site) without our written approval of the form and context in which it will appear.
No claim arising out of or in connection with this valuation report may be brought against any member, employee, partner, director or consultant of Knight Frank. Those individuals will not have a personal duty of care to any party and any claim for losses must be brought against Knight Frank.
In accordance with our standard practice, we must state that this report and valuation is for the use of the party to whom it is addressed and no responsibility is accepted to any third party for the whole or any part of its contents. We do not accept liability to any third party or for any direct or indirect consequential losses or loss of profits as a result of this report.
In our valuations, Knight Frank has prepared the valuation based on information and data available to us as at the Valuation Date. While current market is influenced by various policies and regulations, increased complexity in social movements and international trade tensions geopolitics, has also resulted in more fluctuations in real estate market. It must be recognised changes in policy direction, mortgage
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APPENDIX III PROPERTY VALUATION REPORT requirements, social and international tensions could be immediate and have sweeping impact on the real estate market apart from typical market variations. It should therefore be noted that any market violation, policy, geopolitical and social changes or other unexpected incidents after the valuation date may affect the value of the Property.
Yours faithfully, For and on behalf of Knight Frank Petty Limited
Cyrus Fong Thomas Lam MRICSMHKISMCIREARPS(GP)RICSRegisteredValuer FRICS FHKIS MCIREA RPS(GP) RICS Registered Valuer Senior Director, Valuation & Advisory Executive Director, Head of Valuation & Advisory
Note: Mr. Thomas Lam is a qualified valuer who has over 21 years of extensive experiences in market research, valuation and consultancy in the PRC, Hong Kong, Macau and Asia Pacific region.
Mr. Cyrus Fong is a qualified valuer who has 15 years of extensive experiences in valuation of properties in the PRC, Hong Kong, Macau and Asia Pacific region.
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APPENDIX III PROPERTY VALUATION REPORT
VALUATION
Market Value of the Property in existing state Property Description Particulars of occupancy as at 31 March 2021
6th Floor, Euro Trade The Property comprises an office floor of According to the HK$165,000,000 (Hong Centre, Nos. 13–14 a 25-storey office building, including information provided by Kong Dollars One Connaught Road a level of basement, known as Euro the Company, the Hundred and Sixty Five Central & Nos. 21– Trade Centre, located at Nos. 13–14 Property was owner Million) 23 Des Voeux Road Connaught Road Central & Nos. 21– occupied as at the Central, Hong Kong. 23 Des Voeux Road Central, Hong Valuation Date. Kong. The Property is situated on the (137/5,675 shares of northeastern side of Des Voeux Road and in the subject Central and southwestern side of lot). Connaught Road Central near its junction with World Wide Lane in Central in Hong Kong.
Euro Trade Centre was completed in 1982 according to Occupation Permit No H34/82. The saleable area of the Property is about 4,442.66 sq.ft. (or 412.73 sq.m.).
The Property is held under Government Lease for a term of 999 years commencing from 30 January 1900. The annual government rent of the subject lot is HK$166.
Notes:
(1) Pursuant to records obtained from the Land Registry and information provided by the Company, the registered owner of the Property as at the Valuation Date is HKMC Medical Products Limited.
(2) At the time of our recent search, the following encumbrances were registered against the Property:
(i) Deed of Mutual Covenant with Plans vide memorial no UB2313357 dated 3 September 1982;
(ii) Mortgage in favour of Bank of China (Hong Kong) Limited for a consideration of HK$150,000,000 vide memorial no 21042002510189 dated 31 March 2021 (Deeds pending registration and registration withheld); and
(iii) Assignment of Rentals in favour of Bank of China (Hong Kong) Limited vide memorial no 21042002510197 dated 31 March 2021 (Deeds pending registration).
(3) The Property falls within an area zoned ‘‘Commercial’’ under Draft Central District Outline Zoning Plan No. S/H4/17 exhibited on 24 May 2019.
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APPENDIX IV SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW
Set out below is a summary of certain provisions of the Memorandum and Articles of Association of the Company and of certain aspects of Cayman company law.
The Company was incorporated in the Cayman Islands as an exempted company with limited liability on 21 September 2020 under the Companies Act, Cap. 22 (Act 3 of 1961, as consolidated and revised) of the Cayman Islands (the ‘‘Companies Act’’). The Company’s constitutional documents consist of its Amended and Restated Memorandum of Association (the ‘‘Memorandum’’) and its Amended and Restated Articles of Association (the ‘‘Articles’’).
1. MEMORANDUM OF ASSOCIATION
(a) The Memorandum states, inter alia, that the liability of members of the Company is limited to the amount, if any, for the time being unpaid on the shares respectively held by them and that the objects for which the Company is established are unrestricted (including acting as an investment company), and that the Company shall have and be capable of exercising all the functions of a natural person of full capacity irrespective of any question of corporate benefit, as provided in section 27(2) of the Companies Act and in view of the fact that the Company is an exempted company that the Company will not trade in the Cayman Islands with any person, firm or corporation except in furtherance of the business of the Company carried on outside the Cayman Islands.
(b) The Company may by special resolution alter its Memorandum with respect to any objects, powers or other matters specified therein.
2. ARTICLES OF ASSOCIATION
The Articles were conditionally adopted on [.] with effect from the [REDACTED]. The following is a summary of certain provisions of the Articles:
(a) Shares
(i) Classes of shares
The share capital of the Company consists of ordinary shares.
(ii) Variation of rights of existing shares or classes of shares
Subject to the Companies Act, if at any time the share capital of the Company is divided into different classes of shares, all or any of the special rights attached to the shares or any class of shares may (unless otherwise provided for by the terms of issue of that class) be varied, modified or abrogated either with the consent in writing of the holders of not less than three-fourths in nominal value of the issued shares of that class or with the sanction of a special resolution passed at a separate general meeting of the holders of the shares of that class. To every such separate general meeting the provisions of the Articles relating to general meetings will mutatis mutandis apply, but so that the necessary quorum (other than at an adjourned meeting) shall be two persons holding or representing by proxy not less than one-third in nominal value of the issued shares of that class and at any adjourned meeting two holders present in person or by proxy (whatever the number of shares held by them) shall be a quorum. Every holder of shares of the class shall be entitled to one vote for every such share held by him.
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APPENDIX IV SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW
Any special rights conferred upon the holders of any shares or class of shares shall not, unless otherwise expressly provided in the rights attaching to the terms of issue of such shares, be deemed to be varied by the creation or issue of further shares ranking pari passu therewith.
(iii) Alteration of capital
The Company may by ordinary resolution of its members:
(i) increase its share capital by the creation of new shares;
(ii) consolidate all or any of its capital into shares of larger amount than its existing shares;
(iii) divide its shares into several classes and attach to such shares any preferential, deferred, qualified or special rights, privileges, conditions or restrictions as the Company in general meeting or as the directors may determine;
(iv) subdivide its shares or any of them into shares of smaller amount than is fixed by the Memorandum; or
(v) cancel any shares which, at the date of passing of the resolution, have not been taken and diminish the amount of its capital by the amount of the shares so cancelled.
The Company may reduce its share capital or any capital redemption reserve or other undistributable reserve in any way by special resolution.
(iv) Transfer of shares
All transfers of shares may be effected by an instrument of transfer in the usual or common form or in a form prescribed by The Stock Exchange of Hong Kong Limited (the ‘‘Stock Exchange’’)orinsuchotherformastheboardmayapproveandwhichmaybe under hand or, if the transferor or transferee is a clearing house or its nominee(s), by hand or by machine imprinted signature or by such other manner of execution as the board may approve from time to time.
Notwithstanding the foregoing, for so long as any shares are listed on the Stock Exchange, titles to such listed shares may be evidenced and transferred in accordance with the laws applicable to and the rules and regulations of the Stock Exchange (the ‘‘Listing Rules’’) that are or shall be applicable to such listed shares. The register of members in respect of its listed shares (whether the principal register or a branch register) may be kept by recording the particulars required by Section 40 of the Companies Act in a form otherwise than legible if such recording otherwise complies with the laws applicable to and the Listing Rules that are or shall be applicable to such listed shares.
The instrument of transfer shall be executed by or on behalf of the transferor and the transferee provided that the board may dispense with the execution of the instrument of transfer by the transferee. The transferor shall be deemed to remain the holder of the share until the name of the transferee is entered in the register of members in respect of that share.
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APPENDIX IV SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW
The board may, in its absolute discretion, at any time transfer any share upon the principal register to any branch register or any share on any branch register to the principal register or any other branch register.
The board may decline to recognise any instrument of transfer unless a fee (not exceeding the maximum sum as the Stock Exchange may determine to be payable) determined by the Directors is paid to the Company, the instrument of transfer is properly stamped (if applicable), it is in respect of only one class of share and is lodged at the relevant registration office or registered office or such other place at which the principal register is kept accompanied by the relevant share certificate(s) and such other evidence as the board may reasonably require to show the right of the transferor to make the transfer (and if the instrument of transfer is executed by some other person on his behalf, the authority of that person so to do).
The registration of transfers may be suspended and the register closed on giving notice by advertisement in any newspaper or by any other means in accordance with the requirements of the Stock Exchange or by electronic means or other means in such manner as may be accepted by the Stock Exchange, at such times and for such periods as the board may determine. The register of members must not be closed for periods exceeding in the whole thirty (30) days in any year. The period of thirty (30) days may be extended in respect of any year if approved by the members by ordinary resolution.
Subject to the above, fully paid shares are free from any restriction on transfer and free of all liens in favour of the Company.
(v) Power of the Company to purchase its own shares
The Company is empowered by the Companies Act and the Articles to purchase its own shares subject to certain restrictions and the board may only exercise this power on behalf of the Company subject to any applicable requirements imposed from time to time by the Stock Exchange.
Where the Company purchases for redemption a redeemable share, purchases not made through the market or by tender must be limited to a maximum price determined by the Company in general meeting. If purchases are by tender, tenders must be made available to all members alike.
The board may accept the surrender for no consideration of any fully paid share.
(vi) Power of any subsidiary of the Company to own shares in the Company
There are no provisions in the Articles relating to ownership of shares in the Company by a subsidiary.
(vii) Calls on shares and forfeiture of shares
The board may from time to time make such calls upon the members in respect of any monies unpaid on the shares held by them respectively (whether on account of the nominal value of the shares or by way of premium). A call may be made payable either in one lump sum or by instalments. If the sum payable in respect of any call or instalment is not paid on
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APPENDIX IV SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW
or before the day appointed for payment thereof, the person or persons from whom the sum is due shall pay interest on the same at such rate not exceeding twenty per cent. (20%) per annum as the board may agree to accept from the day appointed for the payment thereof to the time of actual payment, but the board may waive payment of such interest wholly or in part. The board may, if it thinks fit, receive from any member willing to advance the same, either in money or money’s worth, all or any part of the monies uncalled and unpaid or instalments payable upon any shares held by him, and upon all or any of the monies so advanced the Company may pay interest at such rate (if any) as the board may decide.
If a member fails to pay any call on the day appointed for payment thereof, the board may serve not less than fourteen (14) clear days’ notice on him requiring payment of so much of the call as is unpaid, together with any interest which may have accrued and which may still accrue up to the date of actual payment and stating that, in the event of non- payment at or before the time appointed, the shares in respect of which the call was made will be liable to be forfeited.
If the requirements of any such notice are not complied with, any share in respect of which the notice has been given may at any time thereafter, before the payment required by the notice has been made, be forfeited by a resolution of the board to that effect. Such forfeiture will include all dividends and bonuses declared in respect of the forfeited share and not actually paid before the forfeiture.
A person whose shares have been forfeited shall cease to be a member in respect of the forfeited shares but shall, notwithstanding, remain liable to pay to the Company all monies which, at the date of forfeiture, were payable by him to the Company in respect of the shares, together with (if the board shall in its discretion so require) interest thereon from the date of forfeiture until the date of actual payment at such rate not exceeding twenty per cent. (20%) per annum as the board determines.
(b) Directors
(i) Appointment, retirement and removal
At each annual general meeting, one third of the Directors for the time being (or if their number is not a multiple of three, then the number nearest to but not less than one third) shall retire from office by rotation provided that every Director shall be subject to retirement at an annual general meeting at least once every three years. The Directors to retire by rotation shall include any Director who wishes to retire and not offer himself for re-election. Any further Directors so to retire shall be those who have been longest in office since their last re-election or appointment but as between persons who became or were last re-elected Directors on the same day those to retire will (unless they otherwise agree among themselves) be determined by lot.
Neither a Director nor an alternate Director is required to hold any shares in the Company by way of qualification. Further, there are no provisions in the Articles relating to retirement of Directors upon reaching any age limit.
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APPENDIX IV SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW
The Directors have the power to appoint any person as a Director either to fill a casual vacancy on the board or as an addition to the existing board. Any Director appointed to fill a casual vacancy shall hold office until the first general meeting of members after his appointment and be subject to re-election at such meeting and any Director appointed as an addition to the existing board shall hold office only until the next following annual general meeting of the Company and shall then be eligible for re-election.
ADirectormayberemovedbyanordinaryresolutionoftheCompanybeforethe expiration of his period of office (but without prejudice to any claim which such Director may have for damages for any breach of any contract between him and the Company) and members of the Company may by ordinary resolution appoint another in his place. Unless otherwise determined by the Company in general meeting, the number of Directors shall not be less than two. There is no maximum number of Directors.
The office of director shall be vacated if:
(aa) he resigns by notice in writing delivered to the Company;
(bb) he becomes of unsound mind or dies;
(cc) without special leave, he is absent from meetings of the board for six (6) consecutive months, and the board resolves that his office is vacated;
(dd) he becomes bankrupt or has a receiving order made against him or suspends payment or compounds with his creditors;
(ee) he is prohibited from being a director by law; or
(ff) he ceases to be a director by virtue of any provision of law or is removed from office pursuant to the Articles.
The board may appoint one or more of its body to be managing director, joint managing director, or deputy managing director or to hold any other employment or executive office with the Company for such period and upon such terms as the board may determine and the board may revoke or terminate any of such appointments. The board may delegate any of its powers, authorities and discretions to committees consisting of such Director or Directors and other persons as the board thinks fit, and it may from time to time revoke such delegation or revoke the appointment of and discharge any such committees either wholly or in part, and either as to persons or purposes, but every committee so formed must, in the exercise of the powers, authorities and discretions so delegated, conform to any regulations that may from time to time be imposed upon it by the board.
(ii) Power to allot and issue shares and warrants
Subject to the provisions of the Companies Act and the Memorandum and Articles and to any special rights conferred on the holders of any shares or class of shares, any share may be issued (a) with or have attached thereto such rights, or such restrictions, whether with regard to dividend, voting, return of capital, or otherwise, as the Directors may determine, or (b) on terms that, at the option of the Company or the holder thereof, it is liable to be redeemed.
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APPENDIX IV SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW
The board may issue warrants or convertible securities or securities of similar nature conferring the right upon the holders thereof to subscribe for any class of shares or securities inthecapitaloftheCompanyonsuchtermsasitmaydetermine.
Subject to the provisions of the Companies Act and the Articles and, where applicable, the Listing Rules and without prejudice to any special rights or restrictions for the time being attached to any shares or any class of shares, all unissued shares in the Company are at the disposal of the board, which may offer, allot, grant options over or otherwise dispose of them to such persons, at such times, for such consideration and on such terms and conditions as it in its absolute discretion thinks fit, but so that no shares shall be issued at a discount to their nominal value.
Neither the Company nor the board is obliged, when making or granting any allotment of, offer of, option over or disposal of shares, to make, or make available, any such allotment, offer, option or shares to members or others with registered addresses in any particular territory or territories being a territory or territories where, in the absence of a registration statement or other special formalities, this would or might, in the opinion of the board, be unlawful or impracticable or that based on legal opinions provided by legal advisers, the board considers it necessary or expedient not to offer the shares to such members on account either of legal restrictions under the laws of the relevant place or the requirements of the relevant regulatory body or stock exchange in that place. Members affected as a result of the foregoing sentence shall not be, or be deemed to be, a separate class of members for any purpose whatsoever.
(iii) Power to dispose of the assets of the Company or any of its subsidiaries
There are no specific provisions in the Articles relating to the disposal of the assets of the Company or any of its subsidiaries. The Directors may, however, exercise all powers and do all acts and things which may be exercised or done or approved by the Company and which are not required by the Articles or the Companies Act to be exercised or done by the Company in general meeting.
(iv) Borrowing powers
The board may exercise all the powers of the Company to raise or borrow money, to mortgage or charge all or any part of the undertaking, property and assets and uncalled capital of the Company and, subject to the Companies Act, to issue debentures, bonds and other securities of the Company, whether outright or as collateral security for any debt, liability or obligation of the Company or of any third party.
(v) Remuneration
The ordinary remuneration of the Directors is to be determined by the Company in general meeting, such sum (unless otherwise directed by the resolution by which it is voted) to be divided amongst the Directors in such proportions and in such manner as the board may agree or, failing agreement, equally, except that any Director holding office for part only of theperiodinrespectofwhichtheremunerationispayableshallonlyrankinsuchdivisionin proportion to the time during such period for which he held office. The Directors are also entitled to be prepaid or repaid all travelling, hotel and incidental expenses reasonably
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APPENDIX IV SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW
expected to be incurred or incurred by them in attending any board meetings, committee meetings or general meetings or separate meetings of any class of shares or of debentures of the Company or otherwise in connection with the discharge of their duties as Directors.
Any Director who, by request, goes or resides abroad for any purpose of the Company or who performs services which in the opinion of the board go beyond the ordinary duties of a Director may be paid such extra remuneration as the board may determine and such extra remuneration shall be in addition to or in substitution for any ordinary remuneration as a Director. An executive Director appointed to be a managing director, joint managing director, deputy managing director or other executive officer shall receive such remuneration and such other benefits and allowances as the board may from time to time decide. Such remuneration may be either in addition to or in lieu of his remuneration as a Director.
The board may establish or concur or join with other companies (being subsidiary companies of the Company or companies with which it is associated in business) in establishing and making contributions out of the Company’s monies to any schemes or funds for providing pensions, sickness or compassionate allowances, life assurance or other benefits for employees (which expression as used in this and the following paragraph shall include any Director or past Director who may hold or have held any executive office or any office of profit with the Company or any of its subsidiaries) and ex-employees of the Company and their dependents or any class or classes of such persons.
The board may pay, enter into agreements to pay or make grants of revocable or irrevocable, and either subject or not subject to any terms or conditions, pensions or other benefits to employees and ex-employees and their dependents, or to any of such persons, including pensions or benefits additional to those, if any, to which such employees or ex- employees or their dependents are or may become entitled under any such scheme or fund as is mentioned in the previous paragraph. Any such pension or benefit may, as the board considers desirable, be granted to an employee either before and in anticipation of, or upon or at any time after, his actual retirement.
The board may resolve to capitalise all or any part of any amount for the time being standing to the credit of any reserve or fund (including a share premium account and the profit and loss account) whether or not the same is available for distribution by applying such sum in paying up unissued shares to be allotted to (i) employees (including directors) of the Company and/or its affiliates (meaning any individual, corporation, partnership, association, joint-stock company, trust, unincorporated association or other entity (other than the Company) that directly, or indirectly through one or more intermediaries, controls, is controlled by or is under common control with, the Company) upon exercise or vesting of any options or awards granted under any share incentive scheme or employee benefit scheme or other arrangement which relates to such persons that has been adopted or approved by the members in general meeting, or (ii) any trustee of any trust to whom shares are to be allotted and issued by the Company in connection with the operation of any share incentive scheme or employee benefit scheme or other arrangement which relates to such persons that has been adopted or approved by the members in general meeting.
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APPENDIX IV SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW
(vi) Compensation or payments for loss of office
Pursuant to the Articles, payments to any Director or past Director of any sum by way of compensation for loss of office or as consideration for or in connection with his retirement from office (not being a payment to which the Director is contractually entitled) must be approved by the Company in general meeting.
(vii) Loans and provision of security for loans to Directors
The Company must not make any loan, directly or indirectly, to a Director or his close associate(s) if and to the extent it would be prohibited by the Companies Ordinance (Chapter 622 of the laws of Hong Kong) as if the Company were a company incorporated in Hong Kong.
(viii) Disclosure of interests in contracts with the Company or any of its subsidiaries
A Director may hold any other office or place of profit with the Company (except that of the auditor of the Company) in conjunction with his office of Director for such period and upon such terms as the board may determine, and may be paid such extra remuneration therefor in addition to any remuneration provided for by or pursuant to the Articles. A Directormaybeorbecomeadirectororotherofficer of, or otherwise interested in, any company promoted by the Company or any other company in which the Company may be interested, and shall not be liable to account to the Company or the members for any remuneration, profits or other benefits received by him as a director, officer or member of, or from his interest in, such other company. The board may also cause the voting power conferred by the shares in any other company held or owned by the Company to be exercised in such manner in all respects as it thinks fit, including the exercise thereof in favour of any resolution appointing the Directors or any of them to be directors or officers of such other company, or voting or providing for the payment of remuneration to the directors or officers of such other company.
No Director or proposed or intended Director shall be disqualified by his office from contracting with the Company, either with regard to his tenure of any office or place of profit or as vendor, purchaser or in any other manner whatsoever, nor shall any such contract or any other contract or arrangement in which any Director is in any way interested be liable to be avoided, nor shall any Director so contracting or being so interested be liable to account to the Company or the members for any remuneration, profit or other benefits realised by any such contract or arrangement by reason of such Director holding that office or the fiduciary relationship thereby established. A Director who to his knowledge is in any way, whether directly or indirectly, interested in a contract or arrangement or proposed contract or arrangement with the Company must declare the nature of his interest at the meeting of the board at which the question of entering into the contract or arrangement is first taken into consideration, if he knows his interest then exists, or in any other case, at the first meeting of the board after he knows that he is or has become so interested.
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APPENDIX IV SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW
A Director shall not vote (nor be counted in the quorum) on any resolution of the board approving any contract or arrangement or other proposal in which he or any of his close associates is materially interested, but this prohibition does not apply to any of the following matters, namely:
(aa) any contract or arrangement for giving to such Director or his close associate(s) any security or indemnity in respect of money lent by him or any of his close associates or obligations incurred or undertaken by him or any of his close associates at the request of or for the benefit of the Company or any of its subsidiaries;
(bb) any contract or arrangement for the giving of any security or indemnity to a third party in respect of a debt or obligation of the Company or any of its subsidiaries for which the Director or his close associate(s) has himself/themselves assumed responsibility in whole or in part whether alone or jointly under a guarantee or indemnity or by the giving of security;
(cc) any contract or arrangement concerning an offer of shares or debentures or other securities of or by the Company or any other company which the Company may promote or be interested in for subscription or purchase, where the Director or his close associate(s) is/are or is/are to be interested as a participant in the underwriting or sub-underwriting of the offer;
(dd) any contract or arrangement in which the Director or his close associate(s) is/are interested in the same manner as other holders of shares or debentures or other securities of the Company by virtue only of his/their interest in shares or debentures or other securities of the Company; or
(ee) any proposal or arrangement concerning the adoption, modification or operation of a share option scheme, a pension fund or retirement, death, or disability benefits scheme or other arrangement which relates both to Directors, his close associates and employees of the Company or of any of its subsidiaries and does not provide in respect of any Director, or his close associate(s), as such any privilege or advantage not accorded generally to the class of persons to which such scheme or fund relates.
(c) Proceedings of the Board
The board may meet for the despatch of business, adjourn and otherwise regulate its meetings as it considers appropriate. Questions arising at any meeting shall be determined by a majority of votes. In the case of an equality of votes, the chairman of the meeting shall have an additional or casting vote.
(d) Alterations to constitutional documents and the Company’sname
The Articles may be rescinded, altered or amended by the Company in general meeting by special resolution. The Articles state that a special resolution shall be required to alter the provisions of the Memorandum, to amend the Articles or to change the name of the Company.
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APPENDIX IV SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW
(e) Meetings of members
(i) Special and ordinary resolutions
A special resolution of the Company must be passed by a majority of not less than three-fourths of the votes cast by such members as, being entitled so to do, vote in person or, in the case of such members as are corporations, by their duly authorised representatives or, where proxies are allowed, by proxy at a general meeting of which notice has been duly given in accordance with the Articles.
Under the Companies Act, a copy of any special resolution must be forwarded to the Registrar of Companies in the Cayman Islands within fifteen (15) days of being passed.
An ordinary resolution is defined in the Articles to mean a resolution passed by a simple majority of the votes of such members of the Company as, being entitled to do so, vote in person or, in the case of corporations, by their duly authorised representatives or, where proxies are allowed, by proxy at a general meeting of which notice has been duly given in accordance with the Articles.
(ii) Voting rights and right to demand a poll
Subject to any special rights or restrictions as to voting for the time being attached to any shares, at any general meeting on a poll every member present in person or by proxy or, in the case of a member being a corporation, by its duly authorised representative shall have one vote for every fully paid share of which he is the holder but so that no amount paid up orcreditedaspaiduponashareinadvanceofcalls or instalments is treated for the foregoing purposes as paid up on the share. A member entitled to more than one vote need not use all his votes or cast all the votes he uses in the same way.
At any general meeting a resolution put to the vote of the meeting is to be decided by way of a poll save that the chairman of the meeting may in good faith, allow a resolution which relates purely to a procedural or administrative matter to be voted on by a show of hands in which case every member present in person (or being a corporation, is present by a duly authorised representative), or by proxy(ies) shall have one vote provided that where more than one proxy is appointed by a member which is a clearing house (or its nominee(s)), each such proxy shall have one vote on a show of hands.
If a recognised clearing house (or its nominee(s)) is a member of the Company it may authorise such person or persons as it thinks fit to act as its representative(s) at any meeting of the Company or at any meeting of any class of members of the Company provided that, if more than one person is so authorised, the authorisation shall specify the number and class of shares in respect of which each such person is so authorised. A person authorised pursuant to this provision shall be deemed to have been duly authorised without further evidence of the facts and be entitled to exercise the same powers on behalf of the recognised clearing house (or its nominee(s)) as if such person was the registered holder of the shares of the Company held by that clearing house (or its nominee(s)) including, where a show of hands is allowed, the right to vote individually on a show of hands.
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APPENDIX IV SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW
Where the Company has any knowledge that any shareholder is, under the Listing Rules, required to abstain from voting on any particular resolution of the Company or restricted to voting only for or only against any particular resolution of the Company, any votes cast by or on behalf of such shareholder in contravention of such requirement or restriction shall not be counted.
(iii) Annual general meetings and extraordinary general meetings
The Company must hold an annual general meeting of the Company every year other thantheyearoftheCompany’s adoption of the Articles within a period of not more than fifteen (15) months after the holding of the last preceding annual general meeting or a period of not more than eighteen (18) months from the date of adoption of the Articles, unless a longer period would not infringe the Listing Rules. A meeting of members or any class thereof may be held by means of such telephone, electronic or other communication facilities and participation in such a meeting shall constitute presence at such meeting.
Extraordinary general meetings may be convened on the requisition of one or more shareholders holding, at the date of deposit of the requisition, not less than one-tenth of the paid up capital of the Company having the right of voting at general meetings. Such requisition shall be made in writing to the board or the secretary for the purpose of requiring an extraordinary general meeting to be called by the board for the transaction of any business specified in such requisition. Such meeting shall be held within 2 months after the deposit of such requisition. If within 21 days of such deposit, the board fails to proceed to convene such meeting, the requisitionist(s) himself/herself (themselves) may do so in the same manner, and all reasonable expenses incurred by the requisitionist(s) as a result of the failure of the board shall be reimbursed to the requisitionist(s) by the Company.
(iv) Notices of meetings and business to be conducted
An annual general meeting must be called by notice of not less than twenty-one (21) clear days and not less than twenty (20) clear business days. All other general meetings must be called by notice of at least fourteen (14) clear days and not less than ten (10) clear business days. The notice is exclusive of the day on which it is served or deemed to be served and of the day for which it is given, and must specify the time and place of the meeting and particulars of resolutions to be considered at the meeting and, in the case of special business, the general nature of that business.
In addition, notice of every general meeting must be given to all members of the Company other than to such members as, under the provisions of the Articles or the terms of issue of the shares they hold, are not entitled to receive such notices from the Company, and also to, among others, the auditors for the time being of the Company.
Any notice to be given to or by any person pursuant to the Articles may be served on or delivered to any member of the Company personally, by post to such member’s registered address or by advertisement in newspapers in accordance with the requirements of the Stock Exchange. Subject to compliance with Cayman Islands law and the Listing Rules, notice may also be served or delivered by the Company to any member by electronic means.
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APPENDIX IV SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW
All business that is transacted at an extraordinary general meeting and at an annual general meeting is deemed special, save that in the case of an annual general meeting, each of the following business is deemed an ordinary business:
(aa) the declaration and sanctioning of dividends;
(bb) the consideration and adoption of the accounts and balance sheet and the reports of the directors and the auditors;
(cc) the election of directors in place of those retiring;
(dd) the appointment of auditors and other officers; and
(ee) the fixing of the remuneration of the directors and of the auditors.
(v) Quorum for meetings and separate class meetings
No business shall be transacted at any general meeting unless a quorum is present when the meeting proceeds to business, but the absence of a quorum shall not preclude the appointment of a chairman.
The quorum for a general meeting shall be two members present in person (or, in the case of a member being a corporation, by its duly authorised representative) or by proxy and entitled to vote. In respect of a separate class meeting (other than an adjourned meeting) convened to sanction the modification of class rights the necessary quorum shall be two persons holding or representing by proxy not less than one-third in nominal value of the issued shares of that class.
(vi) Proxies
Any member of the Company entitled to attend and vote at a meeting of the Company is entitled to appoint another person as his proxy to attend and vote instead of him. A member who is the holder of two or more shares may appoint more than one proxy to represent him and vote on his behalf at a general meeting of the Company or at a class meeting. A proxy need not be a member of the Company and is entitled to exercise the same powers on behalf of a member who is an individual and for whom he acts as proxy as such member could exercise. In addition, a proxy is entitled to exercise the same powers on behalf of a member which is a corporation and for which he acts as proxy as such member could exercise as if it were an individual member. Votes may be given either personally (or, in the case of a member being a corporation, by its duly authorised representative) or by proxy.
(f) Accounts and audit
The board shall cause true accounts to be kept of the sums of money received and expended by the Company, and the matters in respect of which such receipt and expenditure take place, and of the property, assets, credits and liabilities of the Company and of all other matters required by the Companies Act or necessary to give a true and fair view of the Company’saffairsandto explain its transactions.
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APPENDIX IV SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW
The accounting records must be kept at the registered office or at such other place or places as the board decides and shall always be open to inspection by any Director. No member (other than a Director) shall have any right to inspect any accounting record or book or document of the Company except as conferred by law or authorised by the board or the Company in general meeting. However, an exempted company must make available at its registered office in electronic form or any other medium, copies of its books of account or parts thereof as may be required of it upon service of an order or notice by the Tax Information Authority pursuant to the Tax Information Authority Act of the Cayman Islands.
A copy of every balance sheet and profit and loss account (including every document required by law to be annexed thereto) which is to be laid before the Company at its general meeting, together with a printed copy of the Directors’ report and a copy of the auditors’ report, shall not less than twenty-one (21) days before the date of the meeting and at the same time as the notice of annual general meeting be sent to every person entitled to receive notices of general meetings of the Company under the provisions of the Articles; however, subject to compliance with all applicable laws, including the Listing Rules, the Company may send to such persons summarised financial statements derived from the Company’s annual accounts and the directors’ report instead provided that any such person may by notice in writing served on the Company, demand that the Company sends to him, in addition to summarised financial statements, a complete printed copy of the Company’s annual financial statement and the directors’ report thereon.
At the annual general meeting or at a subsequent extraordinary general meeting in each year, the members shall appoint an auditor to audit the accounts of the Company and such auditor shall hold office until the next annual general meeting. Moreover, the members may, at any general meeting, by special resolution remove the auditor at any time before the expiration of his terms of office and shall by ordinary resolution at that meeting appoint another auditor for the remainder of his term. The remuneration of the auditors shall be fixed by the Company in general meeting or in such manner as the members may determine.
The financial statements of the Company shall be audited by the auditor in accordance with generally accepted auditing standards which may be those of a country or jurisdiction other than the Cayman Islands. The auditor shall make a written report thereon in accordance with generally accepted auditing standards and the report of the auditor must be submitted to the members in general meeting.
(g) Dividends and other methods of distribution
TheCompanyingeneralmeetingmaydeclaredividendsinanycurrencytobepaidtothe members but no dividend shall be declared in excess of the amount recommended by the board.
The Articles provide dividends may be declared and paid out of the profits of the Company, realised or unrealised, or from any reserve set aside from profits which the directors determine is no longer needed. With the sanction of an ordinary resolution dividends may also be declared and paid out of share premium account or any other fund or account which can be authorised for this purpose in accordance with the Companies Act.
Except in so far as the rights attaching to, or thetermsofissueof,anysharemayotherwise provide, (i) all dividends shall be declared and paid according to the amounts paid up on the shares inrespectwhereofthedividendispaidbutnoamountpaiduponashareinadvanceofcallsshall
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APPENDIX IV SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW
for this purpose be treated as paid up on the share and (ii) all dividends shall be apportioned and paid pro rata according to the amount paid up on the shares during any portion or portions of the period in respect of which the dividend is paid. The Directors may deduct from any dividend or other monies payable to any member or in respect of any shares all sums of money (if any) presently payable by him to the Company on account of calls or otherwise.
Whenever the board or the Company in general meeting has resolved that a dividend be paid or declared on the share capital of the Company, the board may further resolve either (a) that such dividend be satisfied wholly or in part in the form of an allotment of shares credited as fully paid up, provided that the shareholders entitled thereto will be entitled to elect to receive such dividend (or part thereof) in cash in lieu of such allotment, or (b) that shareholders entitled to such dividend will be entitled to elect to receive an allotment of shares credited as fully paid up in lieu of the whole or such part of the dividend as the board may think fit.
The Company may also upon the recommendation of the board by an ordinary resolution resolve in respect of any one particular dividend of the Company that it may be satisfied wholly in the form of an allotment of shares credited as fully paid up without offering any right to shareholders to elect to receive such dividend in cash in lieu of such allotment.
Any dividend, interest or other sum payable in cash to the holder of shares may be paid by cheque or warrant sent through the post addressed to the holder at his registered address, or in the case of joint holders, addressed to the holder whose name stands first in the register of the Company in respect of the shares at his address as appearing in the register or addressed to such person and at such addresses as the holder or joint holders may in writing direct. Every such cheque or warrant shall, unless the holder or joint holders otherwise direct, be made payable to the order of the holder or, in the case of joint holders, to the order of the holder whose name stands first on the register in respect of such shares, and shall be sent at his or their risk and payment of the cheque or warrant by the bank on which it is drawn shall constitute a good discharge to the Company. Any one of two or more joint holders may give effectual receipts for any dividends or other moneys payable or property distributable in respect of the shares held by such joint holders.
Whenever the board or the Company in general meeting has resolved that a dividend be paid or declared the board may further resolve that such dividend be satisfied wholly or in part by the distribution of specific assets of any kind.
All dividends or bonuses unclaimed for one year after having been declared may be invested or otherwise made use of by the board for the benefit of the Company until claimed and the Company shall not be constituted a trustee in respect thereof. All dividends or bonuses unclaimed for six years after having been declared may be forfeited by the board and shall revert to the Company.
No dividend or other monies payable by the Company on or in respect of any share shall bear interest against the Company.
(h) Inspection of corporate records
Pursuant to the Articles, the register and branch register of members shall be open to inspection for at least two (2) hours during business hours by members without charge, or by any other person upon a maximum payment of HK$2.50 or such lesser sum specified by the board, at
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APPENDIX IV SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW
the registered office or such other place at which the register is kept in accordance with the Companies Act or, upon a maximum payment of HK$1.00 or such lesser sum specified by the board, at the office where the branch register of members is kept, unless the register is closed in accordance with the Articles.
(i) Rights of minorities in relation to fraud or oppression
There are no provisions in the Articles relating to rights of minority shareholders in relation to fraud or oppression. However, certain remedies are available to shareholders of the Company under Cayman Islands law, as summarised in paragraph 3(f) of this Appendix.
(j) Procedures on liquidation
A resolution that the Company be wound up by the court or be wound up voluntarily shall be a special resolution.
Subject to any special rights, privileges or restrictions as to the distribution of available surplus assets on liquidation for the time being attached to any class or classes of shares:
(i) if the Company is wound up and the assets available for distribution amongst the members of the Company shall be more than sufficient to repay the whole of the capital paid up at the commencement of the winding up, the excess shall be distributed pari passu amongst such members in proportion to the amount paid up on the shares held by them respectively; and
(ii) if the Company is wound up and the assets available for distribution amongst the members as such shall be insufficient to repay the whole of the paid-up capital, such assets shall be distributed so that, as nearly as may be, the losses shall be borne by the membersinproportiontothecapitalpaidup,orwhichoughttohavebeenpaidup,at the commencement of the winding up on the shares held by them respectively.
If the Company is wound up (whether the liquidation is voluntary or by the court) the liquidator may, with the authority of a special resolution and any other sanction required by the Companies Act divide among the members in specie or kind the whole or any part of the assets of the Company whether the assets shall consist of property of one kind or shall consist of properties of different kinds and the liquidator may, for such purpose, set such value as he deems fair upon any one or more class or classes of property to be divided as aforesaid and may determine how such division shall be carried out as between the members or different classes of members. The liquidator may, with the like authority, vest any part of the assets in trustees upon such trusts for the benefit of members as the liquidator, with the like authority, shall think fit, but so that no contributory shall be compelled to accept any shares or other property in respect of which there is a liability.
(k) Subscription rights reserve
The Articles provide that to the extent that it is not prohibited by and is in compliance with the Companies Act, if warrants to subscribe for shares have been issued by the Company and the Company does any act or engages in any transaction which would result in the subscription price
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APPENDIX IV SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW
of such warrants being reduced below the par value of a share, a subscription rights reserve shall be established and applied in paying up the difference between the subscription price and the par value of a share on any exercise of the warrants.
3. CAYMAN ISLANDS COMPANY LAW
The Company is incorporated in the Cayman Islands subject to the Companies Act and, therefore, operates subject to Cayman Islands law. Set out below is a summary of certain provisions of Cayman Islands company law, although this does not purport to contain all applicable qualifications and exceptions or to be a complete review of all matters of Cayman Islands company law and taxation, which may differ from equivalent provisions in jurisdictions with which interested parties may be more familiar:
(a) Company operations
As an exempted company, the Company’s operations must be conducted mainly outside the Cayman Islands. The Company is required to file an annual return each year with the Registrar of Companies of the Cayman Islands and pay a fee which is based on the amount of its authorised share capital.
(b) Share capital
The Companies Act provides that where a company issues shares at a premium, whether for cash or otherwise, a sum equal to the aggregate amount of the value of the premiums on those shares shall be transferred to an account, to be called the ‘‘share premium account’’. At the option of a company, these provisions may not apply to premiums on shares of that company allotted pursuant to any arrangement in consideration of the acquisition or cancellation of shares in any other company and issued at a premium.
The Companies Act provides that the share premium account may be applied by the company subject to the provisions, if any, of its memorandum and articles of association in (a) paying distributions or dividends to members; (b) paying up unissued shares of the company to be issued to members as fully paid bonus shares; (c) the redemption and repurchase of shares (subject to the provisions of section 37 of the Companies Act); (d) writing-off the preliminary expenses of the company; and (e) writing-off the expenses of, or the commission paid or discount allowed on, any issueofsharesordebenturesofthecompany.
No distribution or dividend may be paid to members out of the share premium account unless immediately following the date on which the distribution or dividend is proposed to be paid, the company will be able to pay its debts as they fall due in the ordinary course of business.
The Companies Act provides that, subject to confirmation by the Grand Court of the Cayman Islands (the ‘‘Court’’), a company limited by shares or a company limited by guarantee and having a share capital may, if so authorised by its articles of association, by special resolution reduce its share capital in any way.
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APPENDIX IV SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW
(c) Financial assistance to purchase shares of a company or its holding company
There is no statutory restriction in the Cayman Islands on the provision of financial assistance by a company to another person for the purchase of, or subscription for, its own or its holding company’s shares. Accordingly, a company may provide financial assistance if the directors of the company consider, in discharging their duties of care and acting in good faith, for a proper purpose and in the interests of the company, that such assistance can properly be given. Such assistance should be on an arm’s-length basis.
(d) Purchase of shares and warrants by a company and its subsidiaries
A company limited by shares or a company limited by guarantee and having a share capital may, if so authorised by its articles of association, issue shares which are to be redeemed or are liable to be redeemed at the option of the company or a shareholder and the Companies Act expressly provides that it shall be lawful for the rights attaching to any shares to be varied, subject to the provisions of the company’s articles of association, so as to provide that such shares are to be or are liable to be so redeemed. In addition, such a company may, if authorised to do so by its articles of association, purchase its own shares, including any redeemable shares. However, if the articles of association do not authorise the manner and terms of purchase, a company cannot purchase any of its own shares unless the manner and terms of purchase have first been authorised by an ordinary resolution of the company. At no time may a company redeem or purchase its shares unless they are fully paid. A company may not redeem or purchase any of its shares if, as a result of the redemption or purchase, there would no longer be any issued shares of the company other than shares held as treasury shares. A payment out of capital by a company for the redemption or purchase of its own shares is not lawful unless immediately following the date on which the payment is proposed to be made, the company shall be able to pay its debts as they fall due in the ordinary course of business.
Shares purchased by a company is to be treated as cancelled unless, subject to the memorandum and articles of association of the company, the directors of the company resolve to hold such shares in the name of the company as treasury shares prior to the purchase. Where shares of a company are held as treasury shares, the company shall be entered in the register of members as holding those shares, however, notwithstanding the foregoing, the company is not be treated as a member for any purpose and must not exercise any right in respect of the treasury shares, and any purported exercise of such a right shall be void, and a treasury share must not be voted, directly or indirectly, at any meeting of the company and must not be counted in determining the total number of issued shares at any given time, whether for the purposes of the company’s articles of association or the Companies Act.
A company is not prohibited from purchasing and may purchase its own warrants subject to and in accordance with the terms and conditions of the relevant warrant instrument or certificate. There is no requirement under Cayman Islands law that a company’s memorandum or articles of association contain a specific provision enabling such purchases and the directors of a company may rely upon the general power contained in its memorandum of association to buy and sell and deal in personal property of all kinds.
Under Cayman Islands law, a subsidiary may hold shares in its holding company and, in certain circumstances, may acquire such shares.
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APPENDIX IV SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW
(e) Dividends and distributions
The Companies Act permits, subject to a solvency test and the provisions, if any, of the company’s memorandum and articles of association, the payment of dividends and distributions out of the share premium account. With the exception of the foregoing, there are no statutory provisions relating to the payment of dividends. Based upon English case law, which is regarded as persuasive in the Cayman Islands, dividends may be paid only out of profits.
Nodividendmaybedeclaredorpaid,andnootherdistribution(whetherincashor otherwise) of the company’s assets (including any distribution of assets to members on a winding up) may be made to the company, in respect of a treasury share.
(f) Protection of minorities and shareholders’ suits
The Courts ordinarily would be expected to follow English case law precedents which permit a minority shareholder to commence a representative action against or derivative actions in the name of the company to challenge (a) an act which is ultra vires the company or illegal, (b) an act which constitutes a fraud against the minority and the wrongdoers are themselves in control of the company, and (c) an irregularity in the passing of a resolution which requires a qualified (or special) majority.
In the case of a company (not being a bank) having a share capital divided into shares, the Court may, on the application of members holding not less than one fifth of the shares of the company in issue, appoint an inspector to examine into the affairs of the company and to report thereon in such manner as the Court shall direct.
Any shareholder of a company may petition the Court which may make a winding up order if the Court is of the opinion that it is just and equitable that the company should be wound up or, as an alternative to a winding up order, (a) an order regulating the conduct of the company’s affairs in the future, (b) an order requiring the company to refrain from doing or continuing an act complained of by the shareholder petitioner or to do an act which the shareholder petitioner has complained it has omitted to do, (c) an order authorising civil proceedings to be brought in the name and on behalf of the company by the shareholder petitioner on such terms as the Court may direct, or (d) an order providing for the purchase of the shares of any shareholders of the company by other shareholders or by the company itself and, in the case of a purchase by the company itself, a reduction of the company’s capital accordingly.
Generally claims against a company by its shareholders must be based on the general laws of contract or tort applicable in the Cayman Islands or their individual rights as shareholders as established by the company’s memorandum and articles of association.
(g) Disposal of assets
The Companies Act contains no specific restrictions on the power of directors to dispose of assets of a company. However, as a matter of general law, every officer of a company, which includes a director, managing director and secretary, in exercising his powers and discharging his duties must do so honestly and in good faith with a view to the best interests of the company and exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances.
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APPENDIX IV SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW
(h) Accounting and auditing requirements
A company must cause proper books of account to be kept with respect to (i) all sums of money received and expended by the company and the matters in respect of which the receipt and expenditure takes place; (ii) all sales and purchases of goods by the company; and (iii) the assets and liabilities of the company.
Proper books of account shall not be deemed to be kept if there are not kept such books as are necessary to give a true and fair view of the state of the company’s affairs and to explain its transactions.
An exempted company must make available at its registered office in electronic form or any other medium, copies of its books of account or parts thereof as may be required of it upon service of an order or notice by the Tax Information Authority pursuant to the Tax Information Authority Act of the Cayman Islands.
(i) Exchange control
There are no exchange control regulations or currency restrictions in the Cayman Islands.
(j) Taxation
Pursuant to the Tax Concessions Act of the Cayman Islands, the Company has obtained an undertaking:
(1) that no law which is enacted in the Cayman Islands imposing any tax to be levied on profits, income, gains or appreciation shall apply to the Company or its operations; and
(2) that the aforesaid tax or any tax in the nature of estate duty or inheritance tax shall not be payable on or in respect of the shares, debentures or other obligations of the Company.
The undertaking for the Company is for a period of twenty years from 2 October 2020.
The Cayman Islands currently levy no taxes on individuals or corporations based upon profits, income, gains or appreciations and there is no taxation in the nature of inheritance tax or estate duty. There are no other taxes likely to be material to the Company levied by the Government of the Cayman Islands save for certain stamp duties which may be applicable, from time to time, on certain instruments executed in or brought within the jurisdiction of the Cayman Islands. The Cayman Islands are a party to a double tax treaty entered into with the United Kingdom in 2010 but otherwise is not party to any double tax treaties.
(k) Stamp duty on transfers
No stamp duty is payable in the Cayman Islands on transfers of shares of Cayman Islands companies except those which hold interests in land in the Cayman Islands.
(l) Loans to directors
There is no express provision in the Companies Act prohibiting the making of loans by a company to any of its directors.
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APPENDIX IV SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW
(m) Inspection of corporate records
The notice of registered office is a matter of public record. A list of the names of the current directors and alternate directors (if applicable) is made available by the Registrar of Companies for inspection by any person on payment of a fee. The register of mortgages is open to inspection by creditors and members.
Members of the Company have no general right under the Companies Act to inspect or obtain copies of the register of members or corporate records of the Company. They will, however, have such rights as may be set out in the Company’s Articles.
(n) Register of members
An exempted company may maintain its principal register of members and any branch registers at such locations, whether within or without the Cayman Islands, as the directors may, from time to time, think fit. The register of members shall contain such particulars as required by Section 40 of the Companies Act. A branch register must be kept in the same manner in which a principal register is by the Companies Act required or permitted to be kept. The company shall cause to be kept at the place where the company’s principal register is kept a duplicate of any branch register duly entered up from time to time.
There is no requirement under the Companies Act for an exempted company to make any returns of members to the Registrar of Companies of the Cayman Islands. The names and addresses of the members are, accordingly, not a matter of public record and are not available for public inspection. However, an exempted company shall make available at its registered office, in electronic form or any other medium, such register of members, including any branch register of members, as may be required of it upon service of an order or notice by the Tax Information Authority pursuant to the Tax Information Authority Act of the Cayman Islands.
(o) Register of Directors and Officers
The Company is required to maintain at its registered office a register of directors and officers which is not available for inspection by the public. A copy of such register must be filed with the Registrar of Companies in the Cayman Islands and any change must be notified to the Registrar within thirty (30) days of any change in such directors or officers.
(p) Beneficial Ownership Register
An exempted company is required to maintain a beneficial ownership register at its registered office that records details of the persons who ultimately own or control, directly or indirectly, 25% or more of the equity interests or voting rights of the company or have rights to appoint or remove a majority of the directors of the company. The beneficial ownership register is not a public document and is only accessible by a designated competent authority of the Cayman Islands. Such requirement does not, however, apply to an exempted company with its shares listed on an approved stock exchange, which includes the Stock Exchange. Accordingly, for so long as the shares of the Company are listed on the Stock Exchange, the Company is not required to maintain a beneficial ownership register.
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APPENDIX IV SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW
(q) Winding up
A company may be wound up (a) compulsorily by order of the Court, (b) voluntarily, or (c) under the supervision of the Court.
The Court has authority to order winding up in a number of specified circumstances including where the members of the company have passed a special resolution requiring the company to be wound up by the Court, or where the company is unable to pay its debts, or where it is, in the opinion of the Court, just and equitable to do so. Where a petition is presented by members of the company as contributories on the ground that it is just and equitable that the company should be wound up, the Court has the jurisdiction to make certain other orders as an alternative to a winding-up order, such as making an order regulating the conduct of the company’s affairs in the future, making an order authorising civil proceedings to be brought in the name and on behalf of the company by the petitioner on such terms as the Court may direct, or making an order providing for the purchase of the shares of any of the members of the company by other members or by the company itself.
A company (save with respect to a limited duration company) may be wound up voluntarily when the company so resolves by special resolution or when the company in general meeting resolves by ordinary resolution that it be wound up voluntarily because it is unable to pay its debts as they fall due. In the case of a voluntary winding up, such company is obliged to cease to carry on its business (except so far as it may be beneficial for its winding up) from the time of passing the resolution for voluntary winding up or upon the expiry of the period or the occurrence of the event referred to above.
For the purpose of conducting the proceedings in winding up a company and assisting the Court therein, there may be appointed an official liquidator or official liquidators; and the court may appoint to such office such person, either provisionally or otherwise, as it thinks fit, and if more persons than one are appointed to such office, the Court must declare whether any act required or authorised to be done by the official liquidator is to be done by all or any one or more of such persons. The Court may also determine whether any and what security is to be given by an official liquidator on his appointment; if no official liquidator is appointed, or during any vacancy in such office, all the property of the company shall be in the custody of the Court.
As soon as the affairs of the company are fully wound up, the liquidator must make a report and an account of the winding up, showing how the winding up has been conducted and how the property of the company has been disposed of, and thereupon call a general meeting of the company for the purposes of laying before it the account and giving an explanation thereof. This final general meeting must be called by at least 21 days’ noticetoeachcontributoryinanymanner authorised by the company’s articles of association and published in the Gazette.
(r) Reconstructions
There are statutory provisions which facilitate reconstructions and amalgamations approved by a majority in number representing seventy-five per cent. (75%) in value of shareholders or class of shareholders or creditors, as the case may be, as are present at a meeting called for such purpose and thereafter sanctioned by the Court. Whilst a dissenting shareholder would have the right to express to the Court his view that the transaction for which approval is sought would not provide
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APPENDIX IV SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW
the shareholders with a fair value for their shares, the Court is unlikely to disapprove the transaction on that ground alone in the absence of evidence of fraud or bad faith on behalf of management.
(s) Take-overs
Where an offer is made by a company for the shares of another company and, within four (4) months of the offer, the holders of not less than ninety per cent. (90%) of the shares which are the subject of the offer accept, the offeror may at any time within two (2) months after the expiration of the said four (4) months, by notice in the prescribed manner require the dissenting shareholders to transfer their shares on the terms of the offer. A dissenting shareholder may apply to the Court within one (1) month of the notice objecting to the transfer. The burden is on the dissenting shareholder to show that the Court should exercise its discretion, which it will be unlikely to do unless there is evidence of fraud or bad faith or collusion as between the offeror and the holders of the shares who have accepted the offer as a means of unfairly forcing out minority shareholders.
(t) Indemnification
Cayman Islands law does not limit the extent to which a company’s articles of association may provide for indemnification of officers and directors, except to the extent any such provision may be held by the Court to be contrary to public policy (e.g. for purporting to provide indemnification against the consequences of committing a crime).
(u) Economic Substance Requirements
Pursuant to the International Tax Cooperation (Economic Substance) Act, 2018 of the Cayman Islands (‘‘ES Act’’) that came into force on 1 January 2019, a ‘‘relevant entity’’ is required to satisfy the economic substance test set out in the ES Act. A ‘‘relevant entity’’ includes an exempted company incorporated in the Cayman Islands as is the Company; however, it does not include an entity that is tax resident outside the Cayman Islands. Accordingly, for so long as the Company is a tax resident outside the Cayman Islands, including in Hong Kong, it is not required to satisfy the economic substance test set out in the ES Act.
4. GENERAL
Conyers Dill & Pearman, the Company’s special legal counsel on Cayman Islands law, have sent to the Company a letter of advice summarising certain aspects of Cayman Islands company law. This letter, together with a copy of the Companies Act, is available for inspection as referred to in the section headed ‘‘Documents delivered to the Registrar of Companies and available for inspection’’ in Appendix VI to this document. Any person wishing to have a detailed summary of Cayman Islands company law or advice on the differences between it and the laws of any jurisdiction with which he is more familiar is recommended to seek independent legal advice.
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APPENDIX V STATUTORY AND GENERAL INFORMATION
A. FURTHER INFORMATION ABOUT OUR COMPANY
1. Incorporation
Our Company was incorporated on 21 September 2020 in the Cayman Islands under the Cayman Companies Act as an exempted company with limited liability. Our Company has established its principal place of business in Hong Kong at 13/F, Pacific House, 20 Queen’sRoad Central, Hong Kong and was registered as a non-Hong Kong company under Part 16 of the Companies Ordinance. Mr. Shiu and Ms. Kwan Wai Ling have been appointed as the authorised representatives of our Company for the acceptance of service of process and notices in Hong Kong. Our address for acceptance of service of process and notices on our Company in Hong Kong is the same as its registered place of business in Hong Kong.
As our Company is incorporated in the Cayman Islands, it operates subject to the relevant laws and regulations of the Cayman Islands and its constitution, comprising its Memorandum of Association and Articles of Association. A summary of the Cayman company law and of the Memorandum of Association and the Articles of Association is set out in ‘‘Summary of the Constitution of the Company and Cayman Islands Company Law’’ in Appendix IV to this document.
2. Changes in share capital of our Company
Save as disclosed in the section headed ‘‘History, Reorganisation and Corporate Structure’’ andinthesectionheaded‘‘— 3. Resolutions in writing passed by our Shareholders on [.]’’ below, there has been no alteration in the share capital of our Company since its incorporation up to the Latest Practicable Date.
3. Resolutions in writing passed by our Shareholders on [.]
Pursuant to the resolutions in writing passed by our Shareholders on [.] among others:
(a) our Company approved and adopted the Memorandum of Association and Articles of Association conditionally upon the fulfilment of the Conditions (as defined below) and with effect from the [REDACTED];
(b) conditional upon (i) the [REDACTED] granting the [REDACTED] of, and permission to deal in, the Shares in issue and to be issued pursuant to the [REDACTED] and the [REDACTED] and Shares to be issued as mentioned in this document (including the Shares which may be allotted and issued pursuant to the exercise of the [REDACTED] and the exercise of any options which may be granted under the Share Option Scheme); (ii) the [REDACTED] being fixed on or around the [REDACTED]; (iii) the execution and delivery of the [REDACTED] on or around the date specified in this document; and (iv) the obligations of the [REDACTED] under the [REDACTED] becoming unconditional and the [REDACTED] not being terminated in accordance with its terms or otherwise (the ‘‘Conditions’’), in each case on or before such dates as may be specified in the [REDACTED]:
(1) the [REDACTED] and the [REDACTED] were approved and our Directors were authorised to effect the same and to allot and issue the new Shares pursuant to the [REDACTED] and the [REDACTED] to rank pari passu with the then existing Shares in all respects;
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APPENDIX V STATUTORY AND GENERAL INFORMATION
(2) the proposed [REDACTED] was approved and our Directors were authorised to implement the [REDACTED];
(3) the [REDACTED] was approved;
(4) conditional upon the share premium account of our Company having sufficient balance, or otherwise being credited as a result of the allotment and issue of the [REDACTED] pursuant to the [REDACTED], our Directors were authorised to capitalise an amount of HK$[REDACTED] (or any such amount any one Director may determine) standing to the credit of the share premium account of our Company by applying such sum in paying up in full at par [REDACTED] Shares (or any such number of Shares any one Director may determine) for allotment and issue to our Shareholders whose names appeared on the register of members of our Company as at the close of business on the date which the said resolution is passed (or another date as our Directors may direct) in proportion to their respective shareholdings in our Company at that time (as near as possible without involving fractions so that no fraction of a Share shall be allotted and issued), each ranking pari passu in all respects with the then Shares in issue;
(5) the rules of the Share Option Scheme, the principal terms of which are set out in the section headed ‘‘— G. Share Option Scheme’’ below, were approved and adopted and our Directors were authorised to approve any amendment(s) to the rules of the Share Option Scheme as may be acceptable or not objected to by the Stock Exchange, and at their absolute discretion to grant options to subscribe for Shares thereunder and to allot, issue and deal with the Shares pursuant to the exercise of options which may be granted under the Share Option Scheme and to take all such actions as they consider necessary or desirable to implement the Share Option Scheme;
(6) a general unconditional mandate (the ‘‘Issue Mandate’’), pursuant to authority granted by our Shareholders, was given to our Directors to exercise all powers of our Company to allot, issue and deal with (including the power to make an offer or agreement, or to grant securities which would or might require Shares to be allotted and issued), otherwise than by way of rights issue, scrip dividend scheme or similar arrangements providing for allotment and issue of Shares in lieu of the whole or in part of any cash dividend in accordance with the Articles, or under the [REDACTED] or the [REDACTED], or upon the exercise of the [REDACTED] or any option(s) which may be granted under the Share Option Scheme or other arrangements regulated under Chapter 17 of the Listing Rules, Shares with an aggregate number not exceeding the sum of (aa) 20.0% of the aggregate number of Shares in issue immediately following completion of the [REDACTED] and the [REDACTED]; and (bb) the aggregate number of Shares which may be repurchasedbyourCompanypursuanttotheauthoritygrantedtoourDirectorsas referred to in sub-paragraph (8) below, until the conclusion of the next annual general meeting of our Company, or the date by which the next annual general meeting of our Company is required by the Articles or any applicable law(s) of
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APPENDIX V STATUTORY AND GENERAL INFORMATION
the Cayman Islands to be held, or the passing of an ordinary resolution by Shareholders in general meeting, renewing, revoking or varying the authority given to our Directors, whichever occurs first (the ‘‘Relevant Period’’);
(7) a general unconditional mandate (the ‘‘Repurchase Mandate’’) was given to our Directors to exercise all powers of our Company to repurchase on the Stock Exchange or on any other stock exchange on which the securities of our Company may be listed and which is recognised by the SFC and the Stock Exchange for this purpose, such number of Shares as will represent up to 10.0% of the aggregate number of Shares in issue immediately following completion of the [REDACTED] and the [REDACTED], such mandate to remain in effect during the Relevant Period; and
(8) the general unconditional mandate mentioned in sub-paragraph (6) above was extended by the addition to the aggregate number of Shares which may be allotted or agreed to be allotted by our Directors pursuant to the Issue Mandate of an amount representing the aggregate number of Shares repurchase by our Company pursuant to the Repurchase Mandate, provided that such extended amount shall not exceed 10.0% of the aggregate number of Shares in issue immediately following completion of the [REDACTED] and the [REDACTED].
B. OUR SUBSIDIARIES
The particulars of our operating subsidiary are provided in the Accountant’s Report, the text of which is set out in Appendix I to this document.
Save as disclosed in the section headed ‘‘History, Reorganisation and Corporate Structure’’ and below, there has been no alteration in the share capital of any of the subsidiaries of our Company within the two years immediately preceding the date of this document:
CMH
On 17 December 2018, CMH resolved written resolutions pursuant to the memorandum and articles of association of CMH to amend its memorandum of association to authorise CMH, which previously had a maximum of 50,000 shares of a single class to be issued each with a par value of US$1.00, to issue a maximum of 5,000,000 shares of a single class each with a par value of HK$1.00.
On 28 December 2018, the 9 shares of CMH then held by Mr. Shiu were cancelled, and 875,000 shares of CMH, representing 100% of the total issued shares in CMH, were allotted and issued at par to CMI, as fully paid.
On 31 March 2019, shares of CMH were allotted and issued as shown below:
(a) 25,000 shares of CMH, representing 2.5% of the total issued shares of CMH, were allotted and issued at a consideration of HK$25,000,000 to Double Expert Limited, as fully paid;
(b) 23,000 shares of CMH, representing 2.3% of the total issued shares of CMH, were allotted and issued at a consideration of HK$23,000,000 to Joyous Rainbow Holdings Limited, as fully paid;
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APPENDIX V STATUTORY AND GENERAL INFORMATION
(c) 20,000 shares of CMH, representing 2.0% of the total issued shares of CMH, were allotted and issued at a consideration of HK$20,000,000 to Hong Kong Dashenlin Trade and Investment Limited, as fully paid;
(d) 18,000 shares of CMH, representing 1.8% of the total issued shares of CMH, were allotted and issued at a consideration of HK$18,000,000 to Asmex Investment Limited, as fully paid;
(e) 14,000 shares of CMH, representing 1.4% of the total issued shares of CMH, were allotted and issued at a consideration of HK$14,000,000 to Goldstone Investment Capital Limited, as fully paid;
(f) 10,000 shares of CMH, representing 1.0% of the total issued shares of CMH, were allotted and issued at a consideration of HK$10,000,000 to Cheung Hing Holdings Limited, as fully paid;
(g) 5,000 shares of CMH, representing 0.5% of the total issued shares of CMH, were allotted and issued at a consideration of HK$5,000,000 to Star List Limited, as fully paid;
(h) 5,000 shares of CMH, representing 0.5% of the total issued shares of CMH, were allotted and issued at a consideration of HK$5,000,000 to Clear Trillion Limited, as fully paid; and
(i) 5,000 shares of CMH, representing 0.5% of the total issued shares of CMH, were allotted and issued at a consideration of HK$5,000,000 to Pine Treasure Holdings Limited, as fully paid.
On 23 August 2019, 5,075 fully paid shares of CMH, representing approximately 0.50% of the total issued shares of CMH, were allotted and issued at a consideration of HK$5,075 to CEKA Limited.
On 30 October 2019, shares of CMH were allotted and issued as shown below:
(a) 4,145 shares of CMH, representing approximately 0.41% of the total issued shares of CMH, were allotted and issued at a consideration of HK$4,145,406 to Dr. Ooi Gaik Cheng, credited as fully paid;
(b) 2,007 shares of CMH, representing approximately 0.20% of the total issued shares of CMH, were allotted and issued at a considerationofHK$2,007,452toMs.TangWan Yin, credited as fully paid;
(c) 1,975 shares of CMH, representing approximately 0.20% of the total issued shares of CMH, were allotted and issued at a consideration of HK$1,975,390 to Mr. Lo Wai Keung, Peter, credited as fully paid;
(d) 1,249 shares of CMH, representing approximately 0.12% of the total issued shares of CMH, were allotted and issued at a consideration of HK$1,249,519 to Dr. Lau Chu Pak, credited as fully paid; and
(e) 468 shares of CMH, representing approximately 0.05% of the total issued shares of CMH, were allotted and issued at a consideration of HK$468,570 to Dr. Liu Chi Leung, credited as fully paid.
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APPENDIX V STATUTORY AND GENERAL INFORMATION
On 1 August 2020, 10,304 shares of CMH, representing approximately 1.00% of the total issued shares of CMH, were allotted and issued at par to Hong Kong Clinical Oncology Limited, as fully paid, and 5,152 shares of CMH, representing approximately 0.50% of the total issued shares of CMH, were allotted and issued at par to Centre for Obesity, Diabetes and Endocrinology (CODE) Limited, as fully paid.
On 27 August 2020, 49,857 fully paid shares of CMH, representing approximately 4.62% of the total issued shares of CMH, were allotted and issued at a consideration of HK$60,000,000 to Unicorn Link Group Limited. On 15 September 2020, Unicorn Link Group Limited surrendered 6,925sharesofCMH.Asaresult,UnicornLinkGroupLimitedheld42,932sharesofCMH representing approximately 4.00% of the total issued shares of CMH.
Medical Concierge Holding
On 20 August 2019, Medical Concierge Holding was incorporated in the BVI with limited liability with the authority to issue up to 50,000 shares, each with a par value of US$1. On the same day, one (1) share of Medical Concierge Holding, representing 50% of the total issued shares of Medical Concierge Holding, was allotted and issued at par to Dr. Kenneth Tsang, credited as fully paid, and one (1) share of Medical Concierge Holding, representing 50% of the total issued shares of Medical Concierge Holding, was allotted and issued at par to Mr. Shiu, as fully paid.
On 2 March 2020, 98 shares of Medical Concierge Holding, representing 98% of the total issued shares of Medical Concierge Holding, were allotted and issued at par to CMH, as fully paid.
Medical Concierge Management
On 16 August 2019, Medical Concierge Management was incorporated in the BVI with limited liability with the authority to issue up to 50,000 shares, each with a par value of US$1.
On 20 August 2019, one (1) share of Medical Concierge Management, representing 50% of the total issued shares of Medical Concierge Management, was allotted and issued at par to Dr. Kenneth Tsang, as fully paid, and one (1) share of Medical Concierge Management, representing 50% of the total issued shares of Medical Concierge Management, was allotted and issued at par to Mr. Shiu, as fully paid.
On 2 March 2020, 98 shares of Medical Concierge Management, representing 98% of the total issued shares of Medical Concierge Management, were allotted and issued at par to Medical Concierge Holding, as fully paid.
Medical Concierge Limited
On 16 August 2019, Medical Concierge Limited was incorporated in the BVI with limited liability with the authority to issue up to 50,000 shares, each with a par value of US$1.
On 20 August 2019, one (1) share of Medical Concierge Limited, representing 50% of the total issued shares of Medical Concierge Limited, was allotted and issued at par to Dr. Kenneth Tsang, as fully paid, and one (1) share of Medical Concierge Limited, representing 50% of the total issued shares of Medical Concierge Limited, was allotted and issued at par to Mr. Shiu, as fully paid.
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APPENDIX V STATUTORY AND GENERAL INFORMATION
On 2 March 2020, shares of Medical Concierge Limited were allotted and issued as shown below:
(a) 68 shares of Medical Concierge Limited, representing 68% of the total issued shares of Medical Concierge Limited, in Medical Concierge Limited were allotted and issued at par to Medical Concierge Holding, as fully paid;
(b) 25 shares of Medical Concierge Limited, representing 25% of the total issued shares of Medical Concierge Limited, were allotted and issued at par to Eminent Plus Group Limited, an Independent Third Party, as fully paid; and
(c) 5 shares of Medical Concierge Limited, representing 5% of the total issued shares of Medical Concierge Limited, were allotted and issued at par to Real Energetic Limited, which is wholly owned by Ms. Yeung Kit Shun, a member of our senior management, as fully paid.
Smart Winner
On 26 July 2019, Smart Winner was incorporated in the Republic of Seychelles with limited liability with the authority to issue 1,000,000 shares, each with a par value of US$1. On the same day, one (1) share of Smart Winner, representing 100% of the total issued share, was allotted and issued at par to CMH, as fully paid.
Ace Alliance
On 25 May 2020, Ace Alliance was incorporated in the BVI with limited liability with the authority to issue up to 50,000 shares, each with a par value of US$1.
On 15 November 2020, one (1) share of Ace Alliance, representing 100% of the total issued share of Ace Alliance, was allotted and issued at par to CMH, as fully paid.
HKMC Medical Products
HKMC Medical Products was incorporated under the laws of Hong Kong as a limited company on 1 April 2020. On the same day, one (1) share of HKMC Medical Products, representing 100% of the total issued share capital of HKMC Medical Products, was allotted and issued at a consideration of HK$1 to the initial subscriber, an Independent Third Party, as fully paid.
On 19 February 2021, HKMC Medical Products allotted and issued 999 shares at HK$1 each to Ace Alliance Global Limited, as fully paid.
HKID Limited
On 20 February 2020, HKID Limited allotted and issued 80,000 ordinary shares at HK$1 each to Smart Winner, credited as fully paid.
C. REPURCHASE BY OUR COMPANY OF OUR OWN SECURITIES
This paragraph sets out information required by the Stock Exchange to be included in this document concerning the repurchase by our Company of our own securities.
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APPENDIX V STATUTORY AND GENERAL INFORMATION
1. Relevant legal and regulatory requirements
The Listing Rules permit a company whose primary listing is on the Stock Exchange to repurchase its securities on the Stock Exchange subject to certain restrictions, the more important of which are summarised below:
(a) Shareholders’ approval
All proposed repurchases of securities (which must be fully paid up in the case of shares) on the Stock Exchange by a company with a primary [REDACTED] on the Stock Exchange must be approved in advance by an ordinary resolution of our Shareholders, either by way of general mandate or by specific approval of a particular transaction.
Pursuant to the written resolutions of our Shareholders passed on [.], the Repurchase Mandate was given to our Directors to exercise all powers of our Company to repurchase up to 10% of the total number of the Shares of our Company in issue immediately following completion of the [REDACTED] on the Stock Exchange or on any other stock exchange on which the Shares may be listed (and which is recognised by the SFC and the Stock Exchange for this purpose). The Repurchase Mandate will remain in effect during the Relevant Period.
(b) Source of funds
Repurchases must be funded out of funds legally available for the purpose in accordance with the Articles of Association, the Listing Rules and the applicable laws of the Cayman Islands. A listed company may not repurchase its own securities on the Stock Exchange for a consideration other than cash or for settlement otherwise than in accordance with the trading rules of the Stock Exchange as amended from time to time. Subject to the foregoing, under the Cayman Companies Act, any repurchases by our Company may be made out of our Company’s profits, out of our Company’s share premium account, out of the proceeds of a new issue of Shares made for the purpose of the repurchase, or, if authorised by the Articles of Association and subject to the provisions of the Cayman Companies Act, out of capital. Any amount of premium payable on a repurchase over the par value of the Shares to be repurchased must be out of either or both our Company’s profits or our Company’s share premium account, or, if authorised by the Articles of Association and subject to the provisions of the Cayman Companies Act, out of capital.
(c) Trading restrictions
A listed company may not issue or announce a proposed issue of new securities for a period of 30 days immediately following a repurchase (other than an issue of securities pursuant to an exercise of warrants, share options or similar instruments requiring the company to issue securities which were outstanding prior to such repurchase) without the prior approval of the Stock Exchange. In addition, a listed company is prohibited from repurchasing its shares on the Stock Exchange if the purchase price is 5% or more than the average closing market price for the five preceding trading days on which its shares were traded on the Stock Exchange.
The Listing Rules also prohibit a listed company from repurchasing its securities on the Stock Exchange if the repurchase would result in the number of listed securities which are in the hands of the public falling below the relevant prescribed minimum percentage as required by the Stock Exchange.
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APPENDIX V STATUTORY AND GENERAL INFORMATION
A listed company is required to procure that the broker appointed by it to effect a repurchase of securities discloses to the Stock Exchange such information with respect to the repurchase as the Stock Exchange may require.
(d) Suspension of repurchase
Pursuant to the Listing Rules, a listed company may not make any repurchases of shares after inside information has come to its knowledge until the information has been made publicly available. In particular, during the period of one month immediately preceding the earlier of: (i) the date of the board meeting (as such date is first notified to the Stock Exchange in accordance with the Listing Rules) for the approval of a listed company’s results for any year, half-year, quarter-year or any other interim period (whether or not required by the Listing Rules); and (ii) the deadline for a listed company to publish an announcement of its results for any year, half-year or quarter-year period under the Listing Rules, or any other interim period (whether or not required under the Listing Rules), and in each case ending on the date of the results announcement, the listed company may not repurchase its shares on the Stock Exchange unless the circumstances are exceptional.
(e) Reporting requirements
Certain information relating to repurchases of securities on the Stock Exchange or otherwise must be reported to the Stock Exchange not later than 30 minutes before the earlier of the commencement of the morning trading session or any pre-opening session on the following business day. In addition, a listed company’s annual report is required to disclose details regarding repurchases of securities made during the year, including a monthly analysis of the number of securities repurchased, the purchase price per share or the highest and lowest price paid for all such purchase, where relevant, and the aggregate prices paid.
(f) Core connected persons
A listed company is prohibited from knowingly repurchasing securities on the Stock Exchange from a ‘‘core connected person’’ (as defined in the Listing Rules) and a core connected person is prohibited from knowingly selling his securities to the company on the Stock Exchange.
2. Reasons for repurchase
Our Directors believe that it is in our Company’s and our Shareholders’ best interests for our Directors to have general authority from our Shareholders to enable our Company to execute repurchases of the Shares in the market. Such repurchases may, depending on market conditions and funding arrangements at the time, lead to an enhancement of the net asset value per Share and/ or its earnings per Share and will only be made where our Directors believe that such repurchases will benefit our Company and our Shareholders.
3. Funding of repurchases
In repurchasing securities, we may only apply funds legally available for such purpose in accordance with the Articles of Association, the Listing Rules and the applicable laws of the Cayman Islands.
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APPENDIX V STATUTORY AND GENERAL INFORMATION
On the basis of our Company’s current financial position as disclosed in this document and taking into account our Company’s current working capital position, our Directors consider that, if the Repurchase Mandate were to be exercised in full, there might be a material adverse effect on our working capital and/or our gearing position as compared with the position disclosed in this document. However, our Directors do not propose to exercise the Repurchase Mandate to such an extent as would, in the circumstances, have a material adverse effect on our Company’s working capital requirements or the gearing levels which in the opinion of our Directors are from time to time appropriate for us.
4. General
The exercise in full of the Repurchase Mandate, on the basis of [REDACTED] Shares in issue immediately following the completion of the [REDACTED] and the [REDACTED] could accordingly result in up to [REDACTED] Shares being repurchased by our Company during the Relevant Period.
None of our Directors or, to the best of their knowledge having made all reasonable enquiries, any of their respective close associates currently intends to sell any Shares to us or our subsidiaries.
Our Directors have undertaken to the Stock Exchange that, so far as the same may be applicable, they will exercise the Repurchase Mandate in accordance with the Listing Rules and the applicable laws of the Cayman Islands.
If, as a result of a repurchase of Shares, a Shareholder’s proportionate interest in the voting rights of our Company increases, such increase will be treated as an acquisition for the purposes of the Takeovers Code. Accordingly, a Shareholder or a group of Shareholders acting in concert (within the meaning of the Takeovers Code), depending on the level of increase of our Shareholders’ interests, could obtain or consolidate control of our Company and become obliged to make a mandatory offer in accordance with Rule 26 of the Takeovers Code as a result of a repurchase of Shares made immediately after the [REDACTED] of Shares on the Stock Exchange. Save as aforesaid, our Directors are not aware of any consequences which would arise under the Takeovers Code as a consequence of any repurchases pursuant to the Repurchase Mandate.
Any repurchase of Shares that results in the number of Shares held by the public being reduced to less than 25% of the Shares then in issue could only be implemented if the Stock Exchange agrees to waive the Listing Rules requirements regarding the public shareholding referred to above. A waiver of this provision is not normally granted other than in exceptional circumstances.
No core connected person (as defined in the Listing Rules) of our Company has notified us that he or she or it has a present intention to sell Shares to us, or has undertaken not to do so, if the Repurchase Mandate is exercised.
D. CORPORATE REORGANISATION
The companies comprising our Group underwent the Reorganisation in preparation for the [REDACTED] of the Shares on the Stock Exchange. Please see the section headed ‘‘History, Reorganisation and Corporate Structure’’ for further details.
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APPENDIX V STATUTORY AND GENERAL INFORMATION
E. FURTHER INFORMATION ABOUT OUR BUSINESS
1. Summary of material contracts
The following contracts (not being contracts entered into in the ordinary course of business) have been entered into by members of our Group within the two years preceding the date of this document and are or may be material:
(a) the subscription agreement dated 29 March 2019 entered into between CMH, Asmex Investment Limited, Pine Treasure Holdings Limited, Joyous Rainbow Holdings Limited, Goldstone Investment Capital Limited, Double Expert Limited, Hong Kong Dashenlin Trade and Investment Limited, Cheung Hing Holdings Limited, Star List Limited and Clear Trillion Limited regarding the subscription of approximately 1.8%, 0.5%, 2.3%, 1.4%, 2.5%, 2.0%, 1.0%, 0.5%, and 0.5% of total issued shares in CMH, respectively;
(b) the shareholders’ agreement dated 31 March 2019 entered into between CMH, CHG, CMI, Dr. Kenneth Tsang, Dr. Adam Leung, Dr. Jason Fong, Dr. Chu Leung Wing, Dr. Jenny Tsang, Wealth Basin, Les Trois, Central Medical Management, Dr. Barbara Tam, Dr. Kenneth Ng, Dr. Gordon Chau, Dr. Ada Ma, Dr. Boron Cheng, Dr. Clement Lee, Dr. Lo Wai Kei, Dr. Matthew Ng, Asmex Investment Limited, Pine Treasure Holdings Limited, Joyous Rainbow Holdings Limited, Goldstone Investment Capital Limited, Double Expert Limited, Hong Kong Dashenlin Trade and Investment Limited, Cheung Hing Holdings Limited, Star List Limited, Clear Trillion Limited, the guarantor of Wealth Basin, the guarantor of Les Trois and the guarantors of Central Medical Management as supplemented by (i) a deed of adherence dated 23 August 2019 made between, among others, CMH, CEKA Limited and the guarantor of CEKA Limited; (ii) a deed of adherence dated 30 October 2019 made between, among others, CMH, Dr. Lau Chu Pak, Dr. Liu Chi Leung, Dr. Ooi Gaik Cheng, Ms. Tang Wan Yin and Mr. Lo Wai Keung, Peter; (iii) a deed of adherence dated 1 August 2020 made between, among others, CMH, Hong Kong Clinical Oncology Limited, Centre for Obesity, Diabetes and Endocrinology (CODE) Limited, the guarantor of Hong Kong Clinical Oncology Limited, and the guarantor of Centre for Obesity, Diabetes and Endocrinology (CODE) Limited; (iv) a deed of adherence dated 27 August 2020 made between, among others, CMH, Unicorn Link Group Limited and the guarantor of Unicorn Link Group Limited and (v) a supplemental agreement dated 22 October 2020 made between, among others, CMH, CHG, CMI, Dr. Kenneth Tsang, Dr. Adam Leung, Dr. Jason Fong, Dr. Chu Leung Wing, Dr. Jenny Tsang, Wealth Basin, Les Trois, Central Medical Management, Dr. Barbara Tam, Dr. Kenneth Ng, Dr. Gordon Chau, Dr. Ada Ma, Dr. Boron Cheng, Dr. Clement Lee, Dr. Lo Wai Kei, Dr. Matthew Ng, Asmex Investment Limited, Pine Treasure Holdings Limited, Joyous Rainbow Holdings Limited, Goldstone Investment Capital Limited, Double Expert Limited, Hong Kong Dashenlin Trade and Investment Limited, Cheung Hing Holdings Limited, Star List Limited, Clear Trillion Limited, CEKA Limited, Dr. Lau Chu Pak, Dr. Liu Chi Leung, Dr. Ooi Gaik Cheng, Ms. Tang Wan Yin, Mr. Lo Wai Keung, Peter, Hong Kong Clinical Oncology Limited, Centre for Obesity, Diabetes and Endocrinology (CODE)LimitedandUnicornLinkGroup Limited;
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APPENDIX V STATUTORY AND GENERAL INFORMATION
(c) the subscription agreement dated 23 August 2019 entered into between CMH and CEKA Limited regarding the subscription of approximately 0.50% of the total issued shares in CMH;
(d) the share sale and purchase agreement with the supplemental agreement both dated 30 October 2019 entered into between Dr. Lau Chu Pak and Dr. Liu Chi Leung, as vendors, and Smart Winner as purchaser regarding the sale of 22% of the issued share capital of, and shareholders’ loans to, Pegasus;
(e) the share sale and purchase agreement with the supplemental agreement both dated 30 October 2019 entered into between Mrs. Tsang, Dr. Chu Kin Wah, Mr. Fok Manson, Hong Kong Oncology Center Company Limited, Ms. Liu Pik Ching Emma as executrix of the will of Mr. Hu Hsing Cheng Wayne James, deceased, Mr. Teo Man Lung Peter and Mr. Yiu Sing Nam, as vendors, and Smart Winner as purchaser regarding the sale of 78% of the issued share capital of, and shareholders’ loans to, Pegasus;
(f) the share sale and purchase agreement with the supplemental agreement both dated 30 October 2019 entered into between Ms. Tang Wan Yin and Mr. Lo Wai Keung, Peter, as vendor, and Smart Winner as purchaser regarding the sale of 49% of the issued share capital of, and shareholders’ loans to, Pixel;
(g) the share sale and purchase agreement with the supplemental agreement both dated 30 October 2019 entered into between Dr. Ooi Gaik Cheng as vendor and Smart Winner as purchaser regarding the sale of 51% of the issued share capital of, and shareholders’ loans to, Pixel;
(h) the instrument of transfer and bought and sold note both dated 30 October 2019 entered into between Mr. Yiu Sing Nam as the seller and Pegasus as the purchaser regarding the sale and purchase of 0.005% of total issued shares in HKID Limited;
(i) the instrument of transfer dated 30 October 2019 entered into between Mr. Yiu Sing Nam as the seller and Pegasus as the purchaser regarding the sale and purchase of 48.995% of total issued shares in HKID Limited;
(j) the instrument of transfer and bought and sold note both dated 30 October 2019 entered into between Ms. Tang Wan Yin as the seller and Pixel as the purchaser regarding the sale and purchase of 0.005% of total issued shares in HKID Limited;
(k) the instrument of transfer dated 30 October 2019 entered into between Ms. Tang Wan Yin as the seller and Pixel as the purchaser regarding the sale and purchase of 50.995% of total issued shares in HKID Limited;
(l) the instrument of transfer dated 2 March 2020 entered into between Dr. Kenneth Tsang as the seller and CMH as the purchaser regarding the sale and purchase of 1% of total issued shares in Medical Concierge Holding;
(m) the instrument of transfer dated 2 March 2020 entered into between Mr. Shiu as the seller and CMH as the purchaser regarding the sale and purchase of 1% of total issued shares in Medical Concierge Holding;
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APPENDIX V STATUTORY AND GENERAL INFORMATION
(n) the instrument of transfer dated 2 March 2020 entered into between Dr. Kenneth Tsang as the seller and Medical Concierge Holding as the purchaser regarding the sale and purchase of 1% of total issued shares in Medical Concierge Management;
(o) the instrument of transfer dated 2 March 2020 entered into between Mr. Shiu as the seller and Medical Concierge Holding as the purchaser regarding the sale and purchase of 1% of total issued shares in Medical Concierge Management;
(p) the instrument of transfer dated 2 March 2020 entered into between Dr. Kenneth Tsang as the seller and Medical Concierge Holding as the purchaser regarding the sale and purchase of 1% of total issued shares in Medical Concierge Limited;
(q) the instrument of transfer dated 2 March 2020 entered into between Mr. Shiu as the seller and Medical Concierge Holding as the purchaser regarding the sale and purchase of 1% of total issued shares in Medical Concierge Limited;
(r) the instrument of transfer and bought and sold note both dated 25 March 2020 entered into between Pixel as the seller and Smart Winner as the purchaser regarding the sale and purchase of 51% of total issued shares in HKID Limited;
(s) the instrument of transfer and bought and sold note both dated 25 March 2020 entered into between Pegasus as the seller and Smart Winner as the purchaser regarding the sale and purchase of 49% of total issued shares in HKID Limited;
(t) the instrument of transfer and bought and sold note both dated 27 March 2020 entered into between Smart Winner as the seller and Capital Pilot Limited as the purchaser regarding the sale and purchase of 100% of total issued shares in Pegasus;
(u) the instrument of transfer and bought and sold note both dated 27 March 2020 entered into between Smart Winner as the seller and Capital Pilot Limited as the purchaser regarding the sale and purchase of 100% of total issued shares in Pixel;
(v) the instrument of transfer and bought and sold note both dated 1 June 2020 entered into between the initial subscriber as the seller and CMH as the purchaser regarding the sale and purchase of 100% of total issued shares in HKMC Medical Products;
(w) the subscription agreement dated 1 August 2020 entered into between the CMH and Hong Kong Clinical Oncology Limited regarding the subscription of approximately 1.0% of the total issued shares in CMH;
(x) the subscription agreement dated 1 August 2020 entered into between CMH and Centre for Obesity, Diabetes and Endocrinology (CODE) Limited regarding the subscription of approximately 0.50% of the total issued shares in CMH;
(y) the instrument of transfer and bought and sold note both dated 12 August 2020 entered into between Eminent Plus Group Limited as the seller and Medical Concierge Holding as the purchaser regarding the sale and purchase of 25% of total issued shares in Medical Concierge Limited;
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APPENDIX V STATUTORY AND GENERAL INFORMATION
(z) the subscription agreement dated 27 August 2020 together with the supplemental agreement dated 15 September 2020 entered into between CMH and Unicorn Group Link Limited regarding the subscription of approximately 4.00% of the total issued shares in CMH;
(aa) the share swap agreement dated 23 October 2020 entered into between, among others, our Company, CMI, Asmex Investment Limited, Pine Treasure Holdings Limited, Joyous Rainbow Holdings Limited, Goldstone Investment Capital Limited, Double Expert Limited, Hong Kong Dashenlin Trade and Investment Limited, Cheung Hing Holdings Limited, Star List Limited, Clear Trillion Limited, CEKA Limited, Dr. Lau Chu Pak, Dr. Liu Chi Leung, Dr. Ooi Gaik Cheng, Ms. Tang Wan Yin, Mr. Lo Wai Keung, Peter, Hong Kong Clinical Oncology Limited, Centre for Obesity, Diabetes and Endocrinology (CODE) Limited and Unicorn Link Group Limited, regarding the shares of CMH, upon completion of which CMH is held as to 100% by our Company;
(ab) the instrument of transfer and bought and sold note both dated 9 March 2021 entered into between CMH as the seller and Ace Alliance as the purchaser regarding the sale and purchase of 0.1% of the total issued shares in HKMC Medical Products;
(ac) the Deed of Indemnity;
(ad) the Deed of Non-competition; and
(ae) the [REDACTED].
2. Our intellectual property rights
As at the Latest Practicable Date, we had registered the following intellectual property rights which are material to our business.
(a) Domain name
As at the Latest Practicable Date, we had registered the following domain names which are material to our business:
Domain Name Registrant Expiry Date
hkmc.co Hosting Speed 16 October 2021 hkmedicalconsultants.com Hosting Speed 6 December 2021 hk-imaging.com Hosting Speed 28 December 2021 centralpharm.com.hk Marcaria.com 1 March 2022 centralpharm.hk Marcaria.com 27 February 2022 hkcentralpharm.com Marcaria.com 27 February 2026 hkmedicalconcierge.com Marcaria.com 30 March 2030
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APPENDIX V STATUTORY AND GENERAL INFORMATION
(b) Trademark
As at the Latest Practicable Date, we had registered the following trademarks, (in both colour, and black and white versions) which are material to our business:
Place of Registration Trademark Registration Registrant Class No. Expiry date
Hong Kong Central Medical 5, 10, 41, 44 304474053 26 March 2028 Consultants Company Limited (currently known as HKMC Dental & Maxillofacial Centre Limited)
Hong Kong Hong Kong Medical 5, 10, 41, 44 304458853 13 March 2028 Consultants Limited
Hong Kong Hong Kong Medical 44 303231693 10 December 2024 Consultants Limited
Hong Kong Hong Kong Imaging and 10, 44 303177063 23 October 2024 Diagnostic Centre Limited
Hong Kong CentralPharm Company 5, 10, 41, 44 305218308 12 March 2030 Limited
Save as disclosed above, there were no other trade or service marks, registered designs, patents, domain names or other intellectual or industrial property rights which are or may be material to the business of our Group as at the Latest Practicable Date.
F. FURTHER INFORMATION ABOUT DIRECTORS AND SUBSTANTIAL SHAREHOLDERS
1. Disclosure of interests
(a) Interests and short positions of our Directors and chief executives of our Company in the shares, underlying shares or debentures of our Company and our associated corporations
Immediately following the completion of the [REDACTED] and the [REDACTED] (without taking into account the Shares which may be issued pursuant to the exercise of the [REDACTED] and any Shares to be issued upon the exercise of any options which may be granted under the Share Option Scheme), the interests or short positions of our Directors and chief executive of our Company in the shares, underlying shares and debentures of our Company or our associated corporations (within the meaning of Part XV of the SFO) which will be required to be notified to our Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they were taken or deemed to have under such provisions of the SFO) or which will be required, pursuant to
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APPENDIX V STATUTORY AND GENERAL INFORMATION
Section 352 of the SFO, to be entered into in the register referred to in that section, or which will be required, pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers to be notified to our Company and the Hong Kong Stock Exchange, once the Shares are listed, are as follows:
(i) Interests in our Company immediately after completion of the [REDACTED] and the [REDACTED]
Approximate Number of Shares percentage of Name of Director Capacity/Nature of interest held/interested(1) shareholding
Dr. Kenneth Tsang Interest in a controlled corporation/ [REDACTED] [REDACTED] Interest of concert party(2)
Dr. Adam Leung Interest in a controlled corporation/ [REDACTED] [REDACTED] Interest of concert party(2)
Mr. Shiu Interest in a controlled corporation/ [REDACTED] [REDACTED] Interest of concert party(2)
Mrs. Chen Interest in a controlled corporation/ [REDACTED] [REDACTED] Interest of concert party(2)
Notes:
(1) The letter ‘‘L’’ denotes the person’s long position in the relevant shares.
(2) On 23 October 2020, CHG, Dr. Kenneth Tsang, Dr. Adam Leung, Dr. Jason Fong, Dr. Chu Leung Wing, Dr. Jenny Tsang, Mr. Shiu, Mrs. Chen, Peak Summit, Heroic Wealth, Mastermind Intelligence, Grateful Mind, Property Linkage, Wealth Basin and Les Trois entered into the Concert Party Deed, confirming, among other things, that they are parties acting in concert since the date on which they became interested in our Group, and will continue to act in concert with each other after [REDACTED]. Accordingly, by virtue of the SFO, Dr. Kenneth Tsang, Dr. Adam Leung, Dr. Jason Fong, Dr. Chu Leung Wing, Dr. Jenny Tsang, Mr. Shiu, Mrs. Chen, Peak Summit, Heroic Wealth, Mastermind Intelligence, Grateful Mind, Property Linkage, Wealth BasinandLesTroisaredeemedtobeinterestedinalltheSharesheldbyCHG.
(ii) Interests in our associated corporations
Name of associated corporation: CHG
Approximate percentage of Name of Director Number of shares held/interested shareholding
Dr. Kenneth Tsang(1) 3,393,261 42.42% Dr. Adam Leung(1) 1,899,355 23.74% Mr. Shiu(1) 728,000 9.10% Mrs. Chen(1) 400,000 5.00%
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APPENDIX V STATUTORY AND GENERAL INFORMATION
Name of associated corporation: Peak Summit
Approximate percentage of Name of Director Number of shares held/interested shareholding
Dr. Kenneth Tsang 1 100%
Name of associated corporation: Heroic Wealth
Approximate percentage of Name of Director Number of shares held/interested shareholding
Dr. Adam Leung 1 100%
Name of associated corporation: Wealth Basin
Approximate percentage of Name of Director Number of shares held/interested shareholding
Mr. Shiu 1 100%
Name of associated corporation: Les Trois
Approximate percentage of Name of Director Number of shares held/interested shareholding
Mrs. Chen 1 100%
Name of associated corporation: HKID (MRI)
Approximate percentage of Name of Director Number of shares held/interested shareholding
Dr. Kenneth Tsang (jointly 300 3% held with Mrs. Tsang)(2)
Name of associated corporation: HKID (Lab)
Approximate percentage of Name of Director Number of shares held/interested shareholding
Dr. Kenneth Tsang (jointly 300 3% held with Mrs. Tsang)(2)
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APPENDIX V STATUTORY AND GENERAL INFORMATION
Notes:
(1) On 23 October 2020, CHG, Dr. Kenneth Tsang, Dr. Adam Leung, Dr. Jason Fong, Dr. Chu Leung Wing, Dr. Jenny Tsang, Mr. Shiu, Mrs. Chen, Peak Summit, Heroic Wealth, Mastermind Intelligence, Grateful Mind, Property Linkage, Wealth Basin and Les Trois entered into the Concert Party Deed, confirming, among other things, that they are parties acting in concert since the date on which they became interested in our Group, and will continue to act in concert with each other after [REDACTED]. Accordingly, by virtue of the SFO, Dr. Kenneth Tsang, Dr. Adam Leung, Dr. Jason Fong, Dr. Chu Leung Wing, Dr. Jenny Tsang, Mr. Shiu, Mrs. Chen, Peak Summit, Heroic Wealth, Mastermind Intelligence, Grateful Mind, Property Linkage, Wealth BasinandLesTroisaredeemedtobeinterestedinalltheSharesheldbyCHG.
(2) Dr. Kenneth Tsang and Mrs. Tsang are spouses.
(b) Interests and short positions of substantial shareholders in the Shares or underlying Shares of our Company
Save as disclosed in the section headed ‘‘Substantial Shareholders’’, our Directors are not aware of any other person, not being a Director or chief executive of our Company, who will have an interest or short position in our Shares which would fall to be disclosed to our Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO, or who will be, directly or indirectly, interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other member of our Group.
2. Directors’ service contracts and letters of appointment
(a) Executive Directors’ service contracts
Each of our executive Directors has entered into a service contract with our Company. The terms and conditions of each of such service contracts are similar in all material aspects. Each service contract is for an initial term of three years with effect from the [REDACTED] and shall continue thereafter unless and until it is terminated by not less than three months’ notice in writing served by either party thereto. Under the service contracts, the initial annual salary payable to our executive Directors is as follows:
Name Amount (HK$)
Dr. Kenneth Tsang 120,000 Dr. Adam Leung 120,000 Mr. Shiu 120,000 Mrs. Chen 120,000
Each of our executive Directors is entitled to a discretionary bonus, the amount of which is determined with reference to the operating results of our Group and the performance of that executive Director. Each of our executive Directors shall abstain from voting and not be counted in the quorum in respect of any resolution of the Board regarding the amount of annual salary and discretionary bonus payable to himself or herself.
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APPENDIX V STATUTORY AND GENERAL INFORMATION
(b) Independent non-executive Directors’ letters of appointment
Each of our independent non-executive Directors has entered into a letter of appointment with our Company on [.]. Each letter of appointment is for an initial term of one year commencing from the [REDACTED] and shall continue thereafter unless terminated by either party giving at least one month’s notice in writing. Under the letters of appointment, the annual director’s fees payable to our independent non-executive Directors are as follows:
Name Amount (HK$)
Mr. David Michael Norman 240,000 Mr.IpKoonWingErnest 240,000 Mr. Wong Kwok Shing Thomas 240,000
3. Director’s remuneration
The aggregate remuneration (including salaries, bonuses, allowances and benefits in kind, and pension scheme contributions) paid to our Directors for the three years ended 31 March 2021 were nil, nil and nil, respectively.
There was no arrangement under which a Director waived or agreed to waive any remuneration for any of the three years ended 31 March 2021. Please see the section headed ‘‘Business’’ for details.
Save as disclosed above, no other payments have been made or are payable in respect of the three years ended 31 March 2021 by any member of our Group to any of our Directors.
Under the arrangements currently in force, our Company estimates the aggregate remuneration payable to, and benefits in kind receivable by (excluding any discretionary bonuses), our Directors in respect of the year ending 31 March 2022 to be approximately HK$0.8 million.
During the Track Record Period, no remuneration was paid by us to, or receivable by, our Directors or the five highest paid individuals as an inducement to join or upon joining our Company. No compensation was paid by us to, or receivable by, our Directors, former Directors, or the five highest-paid individuals for the Track Record Period for the loss of any office in connection with the management of the affairs of any subsidiary of our Company.
4. Personal guarantees
Save as disclosed in the section headed ‘‘Relationship with our Controlling Shareholders’’ in this document, as at the Latest Practicable Date, our Directors had not provided personal guarantees in favour of lenders in connection with banking facilities granted to our Group.
5. Agency fee or commission received
Save as disclosed in this document, no commissions, discounts, brokerages, or other special terms have been granted by our Group to any person (including our Directors and experts referred to in the section headed ‘‘— H. Other Information — 6. Qualifications of Experts’’ below) in connection with the issue or sales of any capital or security of our Company or any of member of our Group within the two years preceding the date of this document.
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APPENDIX V STATUTORY AND GENERAL INFORMATION
6. Related party transactions
Details of the related-party transactions are set out under Note 33 to the Accountant’s Report set out in Appendix I to this document.
7. Disclaimers
Save as disclosed in this document:
(i) none of our Directors or chief executives of our Company has any interest or short position in the shares, underlying shares and debentures of our Company or any of its associated corporations (within the meaning of Part XV of the SFO) which will have to be notified to our Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they are taken or deemed to have under such provisions of the SFO) or which will be required pursuant to Section 352 of the SFO, to be entered in the register referred to therein, or which will be required, pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers under the Listing Rules, to be notified to our Company and the Stock Exchange, in each case once the Shares are listed on the Stock Exchange;
(ii) so far as is known to any Director or chief executive of our Company, no person has an interest or short position in the shares and underlying Shares of our Company which would fall to be disclosed to our Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO, or is, directly or indirectly, interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other member of our Group;
(iii) none of our Directors nor any of the persons listed in the section headed ‘‘— H. Other Information — 6. Qualifications of Experts’’ below is interested in the promotion of, or in any assets which have been, within the two years immediately preceding the issue of this document, acquired or disposed of by or leased to any member of our Group, or are proposed to be acquired or disposed of by or leased to any member of our Group;
(iv) none of our Directors is materially interested in any contract or arrangement subsisting with our Group subsisting at the date of this document which is unusual in its nature or conditions or which is significant in relation to the business of our Group taken as a whole;
(v) save in connection with the [REDACTED], none of the persons listed in the section headed ‘‘— H. Other Information — 6. Qualifications of Experts’’ below has any shareholding in any member of our Group or the right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of our Group;
(vi) save for the [REDACTED], none of the persons listed in the section headed ‘‘— H. Other Information — 6. Qualifications of Experts’’ below is materially interested in any contract or arrangement subsisting at the date of this document which is significant in relation to the business of our Group taken as a whole;
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APPENDIX V STATUTORY AND GENERAL INFORMATION
(vii) within the two years preceding the date of this document, no share or loan capital of our Company or any of its subsidiaries is under option or is agreed conditionally or unconditionally to be put under option; and
(viii) so far as is known to our Directors, none of our Directors or their close associates or any Shareholder (which to the knowledge of our Directors owns 5% or more of the issued share capital of our Company) has any interest in any of the five largest suppliers or customers of our Group.
G. SHARE OPTION SCHEME
The followings are the principal terms of the Share Option Scheme conditionally adopted under the written resolutions of our Shareholders passed on [.]:
1. Conditions
(a) This Share Option Scheme is conditional upon:
(i) the [REDACTED] granting the [REDACTED] of and permission to deal in such number of Shares representing the General Scheme Limit (as defined in paragraph 7(b)) to be allotted and issued by the Company pursuant to the exercise of options in accordance with the terms and conditions of this Share Option Scheme; and
(ii) the passing of the necessary resolutions to approve and adopt this Share Option Scheme in general meeting or by way of written resolutions of the shareholder(s) of the Company.
(b) If the conditions referred to in paragraph 1(a) are not satisfied on or before the date falling 30 days after the date of this document, this Scheme shall forthwith determine and no person shall be entitled to any rights or benefits or be under any obligations under or in respect of this Share Option Scheme.
(c) Reference in paragraph 1(a)(i) to the [REDACTED] formally granting the [REDACTED] and permission referred to therein shall include any such [REDACTED] and permission which are granted subject to the fulfilment of any condition precedent or condition subsequent.
2. Purpose, duration and administration
(a) The purpose of this Share Option Scheme is to enable our Company to grant options to the Eligible Participants (as defined in paragraph 3(a) below) as incentives or rewards for their contribution to our Group.
(b) This Share Option Scheme shall be subject to the administration of the Directors whose decision on all matters arising in relation to this Share Option Scheme or their interpretation or effect shall (save for the grant of options referred to in paragraph 3(b) which shall be approved in the manner referred to therein and save as otherwise provided herein) be final and binding on all persons who may be affected thereby.
(c) Subject to paragraphs 1 and 13, this Scheme shall be valid and effective until the close of business of our Company on the date which falls 10 years (the ‘‘Termination Date’’) after the date on which the Share Option Scheme is adopted upon fulfilment of the condition (the ‘‘Adoption Date’’), after which period no further options may be issued
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APPENDIX V STATUTORY AND GENERAL INFORMATION
but the provisions of this Share Option Scheme shall remain in force to the extent necessary to give effect to the exercise of any Options granted or exercised prior thereto or otherwise as may be required in accordance with the provisions of this Share Option Scheme.
(d) An Eligible Participant who accepts the offer in accordance with the terms of the Share Option Scheme or (where the context so permits and as referred to in paragraph 5(d)(i)) his personal representative (the ‘‘Grantee’’) shall ensure that the acceptance of an Offer, the holding and exercise of his option in accordance with this Share Option Scheme, the allotment and issue of Shares to him upon the exercise of his option and the holding of such Shares are valid and comply with all laws, legislation and regulations including all applicable exchange control, fiscal and other laws to which he is subject. The Directors may, as a condition precedent of making an offer and allotting Shares upon an exercise of an option, require an Eligible Participant or a Grantee (as the case may be) to produce such evidence as it may reasonably require for such purpose.
3. Grant of options
(a) Subject to paragraph 3(b), the Directors shall, in accordance with the provisions of the Share Option Scheme and the Listing Rules, be entitled but shall not be bound at any time within a period of 10 years commencing from the Adoption Date to make an offer to any person belonging to the following classes of participants (the ‘‘Eligible Participants’’) to subscribe, and no person other than the Eligible Participant named in such offer may subscribe, for such number of Shares (being a board lot for dealings in the Shares on the Stock Exchange or an integral multiple thereof) at such price per Share at which a Grantee may subscribe for the Shares on the exercise of an option, as determined in accordance with paragraph 4 (the ‘‘Subscription Price’’), as the Directors shall, subject to paragraph 4, determine:
(i) any employee (whether full time or part time, including any executive director but excluding any non-executive director) of our Company, any subsidiary or any entity in which any member of our Group holds any equity interest (the ‘‘Invested Entity’’);
(ii) any non-executive directors (including independent non-executive directors) of the Company, any subsidiary or any Invested Entity;
(iii) any supplier of goods or services to any member of our Group or any Invested Entity;
(iv) any customer of any member of our Group or any Invested Entity;
(v) any person or entity that provides research, development or other technological support to any member of our Group or any Invested Entity;
(vi) any shareholder of any member of our Group or any Invested Entity or any holder of any securities issued by any member of our Group or any Invested Entity;
(vii) any adviser (professional or otherwise) or consultant to any area of business or business development of any member of our Group or any Invested Entity; and
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APPENDIX V STATUTORY AND GENERAL INFORMATION
(viii) any other group or classes of participants who have contributed or may contribute by way of joint venture, business alliance or other business arrangement to the development and growth of our Group,
and, for the purposes of this Scheme, the Offer may be made to any company wholly owned by one or more Eligible Participants.
For the avoidance of doubt, the grant of any options by the Company for the subscription of Shares or other securities of our Group to any person who falls within any of the above classes of Eligible Participants shall not, by itself, unless the Directors otherwise determine, be construed as a grant of option under this Share Option Scheme.
(b) Without prejudice to paragraph 7(d) below, the making of an offer to any Director, chief executive or substantial shareholder of the Company, or any of their respective associates must be approved by the independent non-executive Directors (excluding any independent non-executive Director who or whose associate is the proposed Grantee of an option).
(c) The eligibility of any of the Eligible Participants to an offer shall be determined by the Directors from time to time on the basis of the Directors’ opinion as to his contribution to the development and growth of our Group.
(d) An offer shall be made to an Eligible Participant in writing (and unless so made shall be invalid) in such form as the Directors may from time to time determine, either generally or on a case-by-case basis, specifying the number of Shares under the option and the ‘‘Option Period’’ (which means, in respect of any particular option, a period, (which may not expire later than 10 years from the offer date of that option) to be determined and notified by our Directors to the Grantee thereof and, in the absence of such determination, from the offer date to the earlier of (i) the date on which such option lapse under the provision of paragraph 6; and (ii) 10 years from the offer date of that option) in respect of which the offer is made and further requiring the Eligible Participant to undertake to hold the option on the terms on which it is to be granted and to be bound by the provisions of the Share Option Scheme and shall remain open for acceptance by the Eligible Participant concerned (and by no other person) for a period of up to 21 days from the offer date.
(e) An offer shall state, in addition to the matters specified in paragraph 3(d), the following:
(i) the name, address and position of the Eligible Participant;
(ii) the number of Shares under the option in respect of which the offer is made and the Subscription Price for such Shares;
(iii) the Option Period in respect of which the offer is made or, as the case may be, the Option Period in respect of separate parcels of Shares under the option comprised in the offer;
(iv) the last date by which the offer must be accepted (which may not be later than 21 days from the offer date);
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APPENDIX V STATUTORY AND GENERAL INFORMATION
(v) the procedure for acceptance;
(vi) the performance target(s) (if any) that must be attained by the Eligible Participant before any option can be exercised;
(vii) such other terms and conditions of the offer as may be imposed by the Directors as are not inconsistent with the Share Option Scheme; and
(viii) a statement requiring the Eligible Participant to undertake to hold the option on the terms on which it is to be granted and to be bound by the provisions of the Share Option Scheme including, without limitation, the conditions specified in, inter alia, paragraphs 2(d) and 5(a).
(f) An offer shall have been accepted by an Eligible Participant in respect of all Shares under the option which are offered to such Eligible Participant when the duplicate letter comprising acceptance of the offer duly signed by the Eligible Participant together with a remittance in favour of our Company of HK$1.00 by way of consideration for the grant thereof is received by our Company within such time as may be specified in the offer (which shall not be later than 21 days from the offer date). Such remittance shall in no circumstances be refundable.
(g) Any offer may be accepted by an Eligible Participant in respect of less than the number of Shares under the option which are offered provided that it is accepted in respect of a board lot for dealings in the Shares on the Stock Exchange or an integral multiple thereof and such number is clearly stated in the duplicate letter comprising acceptance of the offer duly signed by such Eligible Participant and received by our Company together with a remittance in favour of our Company of HK$1.00 by way of consideration for the grant thereof within such time as may be specified in the offer (which shall not be later than 21 days from the offer date). Such remittance shall in no circumstances be refundable.
(h)UponanofferbeingacceptedbyanEligible Participant in whole or in part in accordance with paragraph 3(f) or 3(g), an option in respect of the number of Shares in respect of which the offer was so accepted will be deemed to have been granted by our Company to such Eligible Participant on the offer date. To the extent that the offer is not accepted within the time specified in the offer in the manner indicated in paragraph 3(f) or 3(g), it will be deemed to have been irrevocably declined.
(i) The Option Period of an option may not end later than 10 years after the offer date of that option.
(j) Options will not be listed or dealt in on the Stock Exchange.
(k) For so long as the Shares are listed on the Stock Exchange:
(i) our Company may not grant any options after inside information has come to our knowledge until we have announced the information. In particular, we may not grant any option during the period commencing one month immediately before the earlier of:
(aa) the date of the board meeting (as such date is first notified to the Stock Exchange under the Listing Rules) for approving our Company’s results for any year, half-year, quarterly or any other interim period (whether or not required under the Listing Rules); and
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APPENDIX V STATUTORY AND GENERAL INFORMATION
(bb) the deadline for our Company to announce our results for any year or half- year under the Listing Rules, or quarterly or any other interim period (whether or not required under the Listing Rules), and ending on the date of the results; and
(ii) our Directors may not make any offer to an Eligible Participant who is a Director during the periods or times in which the Directors are prohibited from dealing in Shares pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers prescribed by the Listing Rules or any corresponding code or securities dealing restrictions adopted by the Company.
4. Subscription Price
The Subscription Price in respect of any option shall, subject to any adjustments made pursuant to paragraph 8, be at the discretion of our Directors, provided that it shall not be less than the highest of:
(a) the closing price of the Shares as stated in the Stock Exchange’s daily quotations sheet for trade in one or more board lots of the Shares on the offer date;
(b) the average closing price of the Shares as stated in the Stock Exchange’s daily quotations sheets for the five Business Days immediately preceding the offer date; and
(c) the nominal value of a Share,
except that for the purpose of calculating the Subscription Price under paragraph 4(b) above for an option offered within five Business Days of the date on which the Shares are listed on the Stock Exchange, the price at which the Shares are to be offered for subscription under the [REDACTED] shall be used as the closing price for any Business Day falling within the period before the [REDACTED].
5. Exercise of options
(a) An option shall be personal to the Grantee and shall not be transferable or assignable and no Grantee shall in any way sell, transfer, charge, mortgage, encumber or otherwise dispose of or create any interest whatsoever in favour of any third party over or in relationtoanyoptionorenterintoanyagreementsotodo.Anybreachoftheforegoing by a Grantee shall entitle our Company to cancel any option granted to such Grantee to the extent not already exercised.
(b) Unless otherwise determined by the Directors and stated in the offer to a Grantee, a Grantee is not required to hold an option for any minimum period nor achieve any performance targets before the exercise of an option granted to him.
(c) Subject to, inter alia, paragraph 2(d) and the fulfilment of all terms and conditions set out in the offer, including the attainment of any performance targets stated therein (if any), an option shall be exercisable in whole or in part in the circumstances and in the manner as set out in paragraphs 5(d) and 5(e) by giving notice in writing to our Company stating that the option is thereby exercised and the number of Shares in respect of which it is so exercised (which, except where the number of Shares in respect of which the option remains unexercised is less than one board lot or where the option
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APPENDIX V STATUTORY AND GENERAL INFORMATION
is exercised in full, must be for a board lot for dealings in Shares on the Stock Exchange or an integral multiple thereof). Each such notice must be accompanied by a remittance for the full amount of the Subscription Price for Shares in respect of which the notice is given. Within 21 days (seven (7) days in the case of an exercise pursuant to paragraph 5(d)(iii)) after receipt of the notice and, where appropriate, receipt of the certificate of the auditors or the independent financial advisers pursuant to paragraph 8, our Company shall accordingly allot and issue the relevant number of Shares to the Grantee (or, in the event of an exercise of option by a personal representative pursuant to paragraph 5(d)(i), to the estate of the Grantee) fully paid and issue to the Grantee (or his estate in the event of an exercise by his personal representative as aforesaid) a share certificate for every board lot of Shares so allotted and issued and a share certificate for the balance (if any) of the Shares so allotted and issued which do not constitute a board lot.
(d) Subject as hereinafter provided, an option may (and may only) be exercised by the Grantee at any time or times during the Option Period provided that:
(i) if the Grantee is an Eligible Employee and in the event of his ceasing to be an Eligible Employee by reason of his death, ill-health or retirement in accordance with his contract of employment before exercising the option in full, his personal representative(s) or, as appropriate, the Grantee may exercise the option (to the extent not already exercised) in whole or in part in accordance with the provisions of paragraph 5(c) within a period of 12 months following the date of cessation of employment which date shall be the last day on which the Grantee was at work with the Company or the relevant subsidiary or the Invested Entity whether salary is paid in lieu of notice or not, or such longer period as the Directors may determine or, if any of the events referred to in paragraph 5(d)(iii) or 5(d)(iv) occur during such period, exercise the option pursuant to paragraph 5(d)(iii) or 5(d)(iv) respectively;
(ii) if the Grantee is an Eligible Employee and in the event of his ceasing to be an Eligible Employee for any reason other than his death, ill-health or retirement in accordance with his contract of employment or the termination of his employment on one or more of the grounds specified in paragraph 6(a)(iv) before exercising the option in full, the option (to the extent not already exercised) shall lapse on the date of cessation or termination and not be exercisable unless the Directors otherwise determine in which event the Grantee may exercise the option (to the extent not already exercised) in whole or in part in accordance with the provisions of paragraph 5(c) within such period as the Directors may determine following the date of such cessation or termination or, if any of the events referred to in sub- paragraph 5(d)(iii) or 5(d)(iv) occur during such period, exercise the option pursuant to paragraph 5(d)(iii) or 5(d)(iv) respectively. The date of cessation or termination as aforesaid shall be the last day on which the Grantee was actually at work with the Company or the relevant subsidiary or the Invested Entity whether salary is paid in lieu of notice or not;
(iii) if a general or partial offer, whether by way of take-over offer, share re-purchase offer, or scheme of arrangement or otherwise in like manner is made to all the
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APPENDIX V STATUTORY AND GENERAL INFORMATION
holders of the Shares, or all such holders other than the offeror and/or any person controlled by the offeror and/or any person acting in association or concert with the offeror, our Company shall use all reasonable endeavours to procure that such offer is extended to all the Grantees on the same terms, mutatis mutandis,and assuming that they will become, by the exercise in full of the options granted to them, shareholders of our Company. If such offer becomes or is declared unconditional or such scheme of arrangement is formally proposed to shareholders in our Company, the Grantee shall, notwithstanding any other terms on which his options were granted, be entitled to exercise the option (to the extent not already exercised) to its full extent or to the extent specified in the Grantee’s notice to our Company in accordance with the provisions of paragraph 5(c) at any time thereafter and up to the close of such offer (or any revised offer) or the record date for entitlements under scheme of arrangement, as the case may be;
(iv) in the event of a resolution being proposed for the voluntary winding-up of our Company during the Option Period, the Grantee may, subject to the provisions of all applicable laws, by notice in writing to our Company at any time not less than two Business Days before the date on which such resolution is to be considered and/or passed, exercise his option (to the extent not already exercised) either to its full extent or to the extent specified in such notice in accordance with the provisions of paragraph 5(c) and our Company shall allot and issue to the Grantee the Shares in respect of which such Grantee has exercised his option not less than one day before the date on which such resolution is to be considered and/or passed whereupon he shall accordingly be entitled, in respect of the Shares allotted and issued to him in the aforesaid manner, to participate in the distribution of the assets of our Company available in liquidation pari passu with the holders of the Shares in issue on the day prior to the date of such resolution. Subject thereto, all options then outstanding shall lapse and determine on the commencement of the winding-up; and
(v) if the Grantee is a company wholly owned by one or more Eligible Participants:
(aa) the provisions of paragraphs 5(d)(i), 5(d)(ii), 6(a)(iv) and 6(a)(v) shall apply to the Grantee and to the options granted to such Grantee, mutatis mutandis, as if such options had been granted to the relevant Eligible Participant, and such options shall accordingly lapse or fall to be exercisable after the event(s) referred to in paragraphs 5(d)(i), 5(d)(ii), 6(a)(iv) and 6(a)(v) shall occur with respect to the relevant Eligible Participant; and
(bb) the options granted to the Grantee shall lapse and determine on the date the Grantee ceases to be wholly owned by the relevant Eligible Participant provided that the Directors may in their absolute discretion decide that such options or any part thereof shall not so lapse or determine subject to such conditions or limitations as they may impose.
(e) Shares to be allotted and issued upon the exercise of an option will be subject to all the provisions of the Articles for the time being in force and will rank pari passu in all respects with the then existing fully paid Shares in issue on the date on which the option is duly exercised or, if that date falls on a day when the register of members of
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APPENDIX V STATUTORY AND GENERAL INFORMATION
our Company is closed, the first day of the re-opening of the register of members (the ‘‘Exercise Date’’) and accordingly will entitle the holders thereof to participate in all dividends or other distributions paid or made on or after the Exercise Date other than any dividend or other distribution previously declared or recommended or resolved to be paid or made if the record date therefor shall be before the Exercise Date. A Share allotted and issued upon the exercise of an option shall not carry voting rights until the name of the Grantee has been duly entered on the register of members of our Company as the holder thereof.
6. Early termination of the Option Period
(a) The Option Period in respect of any option shall automatically terminate and that option (to the extent not already exercised) shall lapse on the earliest of:
(i) the expiry of the Option Period;
(ii) the expiry of any of the periods referred to in paragraph 5(d);
(iii) the date of commencement of the winding-up of our Company;
(iv) in respect of a Grantee who is an Eligible Employee, the date on which the Grantee ceases to be an Eligible Employee by reason of a termination of his employment on the grounds that he has been guilty of persistent or serious misconduct, or has committed any act of bankruptcy or has become insolvent or has made any arrangement or composition with his creditors generally, or has been convicted of any criminal offence (other than an offence which in the opinion of the Directors does not bring the Grantee or our Group or the Invested Entity into disrepute);
(v) in respect of a Grantee other than an Eligible Employee, the date on which the Directors shall at their absolute discretion determine that (aa) (1) such Grantee or his close associate has committed any breach of any contract entered into between such Grantee or his close associate on the one part and our Group or any Invested Entity on the other part; or (2) such Grantee has committed any act of bankruptcy or has become insolvent or is subject to any winding-up, liquidation or analogous proceedings or has made any arrangement or composition with his creditors generally; or (3) such Grantee could no longer make any contribution to the growth and development of our Group by reason of the cessation of its relations with our Group or by any other reason whatsoever; and (bb) the option shall lapse as a result of any event specified in sub-paragraph (1), (2) or (3) above; and
(vi) the date on which the Directors shall exercise our Company’s right to cancel the option by reason of a breach of paragraph 5(a) by the Grantee in respect of that or any other option.
(b) A resolution of the Directors to the effect that the employment of a Grantee has been terminated on one or more of the grounds specified in paragraph 6(a)(iv) or that any event referred to in paragraph 6(a)(v)(aa) has occurred shall be conclusive and binding on all persons who may be affected thereby.
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APPENDIX V STATUTORY AND GENERAL INFORMATION
(c) Transfer of employment of a Grantee who is an Eligible Employee from one member of our Group to another member of our Group shall not be considered a cessation of employment. It shall not be considered a cessation of employment if a Grantee who is an Eligible Employee is placed on such leave of absence which is considered by the directors of the relevant member of our Group not to be a cessation of employment of the Grantee.
7. Maximum number of Shares available for subscription
(a) The maximum number of Shares which may be allotted and issued upon exercise of all outstanding options granted and yet to be exercised under the Share Option Scheme and any other share option schemes adopted by our Group shall not exceed 30% of the share capital of our Company in issue from time to time. No options may be granted under the Share Option Scheme or any other share option scheme adopted by our Group if the grant of such option will result in the limit referred to in this paragraph 7(a) being exceeded.
(b) The total number of Shares which may be allotted and issued upon exercise of all options (excluding, for this purpose, options which have lapsed in accordance with the terms of the Share Option Scheme and any other share option scheme of our Group) to be granted under the Share Option Scheme and any other share option scheme of our Group must not in aggregate exceed 10% of the Shares in issue at the time dealings in the Shares first commence on the Stock Exchange, i.e. [REDACTED] shares (the ‘‘General Scheme Limit’’) provided that:
(i) subject to paragraph 7(a) and without prejudice to paragraph 7(b)(ii), our Company may seek approval of its shareholders in general meeting to refresh the General Scheme Limit provided that the total number of Shares which may be allotted and issued upon exercise of all options to be granted under the Share Option Scheme and any other share option scheme of the Group must not exceed 10% of the Shares in issue as at the date of approval of the limit and for the purpose of calculating the limit, options (including those outstanding, cancelled, lapsed or exercised in accordance with the Share Option Scheme and any other share option scheme of our Group) previously granted under the Share Option Scheme and any other share option scheme of our Group will not be counted; and
(ii) subject to paragraph 7(a) and without prejudice to paragraph 7(b)(i), our Company may seek separate shareholders’ approval in general meeting to grant options under the Share Option Scheme beyond the General Scheme Limit or, if applicable, the extended limit referredtoinparagraph7(b)(i)toEligible Participants specifically identified by our Company before such approval is sought.
(c) Subject to paragraph 7(d), the total number of Shares allotted and issued and which may fall to be allotted and issued upon exercise of the options and the options granted under any other share option scheme of our Group (including both exercised or outstandingoptions)toeachGranteeinany12-monthperiodshallnotexceed1%ofthe issued share capital of our Company for the time being. Where any further grant of options to a Grantee under the Share Option Scheme would result in the Shares allotted
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APPENDIX V STATUTORY AND GENERAL INFORMATION
and issued and to be allotted and issued upon exercise of all options granted and proposed to be granted to such person (including exercised, cancelled and outstanding options) under the Share Option Scheme and any other share option schemes of our Group in the 12-month period up to and including the date of such further grant representing in aggregate over 1% of the Shares in issue, such further grant must be separately approved by shareholders of our Company in general meeting with such Grantee and his close associates (or his associates if such Grantee is a connected person (as defined in the Listing Rules)) abstaining from voting.
(d) Without prejudice to paragraph 3(b), where any grant of options to a Substantial Shareholder or an independent non-executive Director or any of their respective associates, would result in the Shares allotted and issued and to be allotted and issued upon exercise of all options already granted and to be granted (including options exercised, cancelled and outstanding) to such person in the 12-month period up to and including the date of such grant:
(i) representing in aggregate over 0.1% of the Shares in issue; and
(ii) having an aggregate value, based on the closing price of the Shares at the offer date of each offer, in excess of HK$5 million;
such further grant of options must be approved by our Shareholders in general meeting.
(e) For the purpose of seeking the approval of the shareholders of our Company under paragraphs 7(b), 7(c) and 7(d), our Company must send a circular to the shareholders containing the information required under the Listing Rules and where the Listing Rules shall so require, the vote at the shareholders’ meeting convened to obtain the requisite approval shall be taken on a poll with those persons required under the Listing Rules abstaining from voting.
8. Adjustment to the Subscription Price
(a) In the event of any alteration in the capital structure of our Company whilst any option remains exercisable or this Scheme remains in effect, and such event arises from a capitalisation of profits or reserves, rights issue, consolidation or sub-division of the Shares, or reduction of the share capital of our Company, then, in any such case our Company shall instruct the Auditors or an independent financial adviser to certify in writing the adjustment, if any, that ought in their opinion fairly and reasonably to be made either generally or as regards any particular Grantee, to:
(i) the number or nominal amount of Shares to which the Share Option Scheme or any option(s) relates (insofar as it is/they are unexercised); and/or
(ii) the Subscription Price of any option; and/or
(iii) (unless the relevant Grantee elects to waive such adjustment) the number of Sharescomprisedinanoptionorwhichremaincomprisedinanoption,
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APPENDIX V STATUTORY AND GENERAL INFORMATION
and an adjustment as so certified by the Auditors or such independent financial adviser shall be made, provided that:
(i) any such adjustment shall give the Grantee the same proportion of the issued share capital of our Company for which such Grantee would have been entitled to subscribe had he exercised all the options held by him immediately prior to such adjustment;
(ii) no such adjustment shall be made the effect of which would be to enable a Share to be allotted and issued at less than its nominal value;
(iii) the issue of Shares or other securities of our Group as consideration in a transaction shall not be regarded as a circumstance requiring any such adjustment; and
(iv) any such adjustment shall be made in compliance with such rules, codes and guidance notes of the Stock Exchange from time to time.
In respect of any adjustment referred to in this paragraph 8(a), other than any adjustment made on a [REDACTED], the Auditors or such independent financial adviser must confirm to the Directors in writing that the adjustments satisfy the requirements of the relevant provisions of the Listing Rules.
(b) If there has been any alteration in the capital structure of our Company as referred to in paragraph 8(a), our Company shall, upon receipt of a notice from a Grantee in accordance with paragraph 5(c), inform the Grantee of such alteration and shall either inform the Grantee of the adjustment to be made in accordance with the certificate of the auditors or the independent financial adviser obtained by our Company for such purpose or, if no such certificate has yet been obtained, inform the Grantee of such fact and instruct the Auditors or the independent financial adviser as soon as practicable thereafter to issue a certificate in that regard in accordance with paragraph 8(a).
(c) In giving any certificate under this paragraph 8, the Auditors or the independent financial adviser appointed under paragraph 8(a) shall be deemed to be acting as experts and not as arbitrators and their certificate shall, in the absence of manifest error, be final, conclusive and binding on our Company and all persons who may be affected thereby.
9. Cancellation of options
(a) Subject to paragraph 5(a) and Chapter 17 of the Listing Rules, any option granted but not exercised may not be cancelled except with the prior written consent of the relevant grantee and the approval of the Directors.
(b) Where our Company cancels any option granted to a Grantee but not exercised and issues new option(s) to the same Grantee, the issue of such new option(s) may only be made with available unissued options (excluding, for this purpose, the options so cancelled) within the General Scheme Limit or the limits approved by our Shareholders pursuant to paragraph 7(b)(i) or 7(b)(ii).
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APPENDIX V STATUTORY AND GENERAL INFORMATION
10. Share capital
The exercise of any option shall be subject to our Shareholders in general meeting approving any necessary increase in the authorised share capital of our Company. Subject thereto, the Directors shall make available sufficient authorised but unissued share capital of our Company to allot and issue the Shares on the exercise of any option.
11. Disputes
Any dispute arising in connection with the number of Shares the subject of an option, or any adjustment under paragraph 8(a) shall be referred to the decision of the Auditors who shall act as experts and not as arbitrators and whose decision shall, in the absence of manifest error, be final, conclusive and binding on all persons who may be affected thereby.
12. Alteration of the Share Option Scheme
(a) Subject to paragraphs 12(b) and 12(d), the Share Option Scheme may be altered in any respect by a resolution of the Directors except that:
(i) the provisions of this Scheme as to the definitions of ‘‘Eligible Participants’’, ‘‘Grantee’’, ‘‘Option Period’’ and ‘‘Termination Date’’;and
(ii) the provisions of this Scheme relating to the matters governed by Rule 17.03 of the Listing Rules;
shall not be altered to the advantage of Grantees or prospective Grantees except with the prior sanction of a resolution of our Shareholders in general meeting, provided that no such alteration shall operate to affect adversely the terms of issue of any option grantedoragreedtobegrantedpriortosuch alteration except with the consent or sanction of such majority of the Grantees as would be required of the holders of the Shares under the articles of association for the time being of our Company for a variation of the rights attached to the Shares.
(b) Any alterations to the terms and conditions of the Share Option Scheme which are of a material nature or any change to the terms of options granted shall be approved by our Shareholders in general meeting except where the alterations take effect automatically under the existing terms of the Share Option Scheme.
(c) Any change to the authority of the Directors or the administrators of the Share Option Scheme in relation to any alteration to the terms of the Share Option Scheme must be approved by our Shareholders in general meeting.
(d) The amended terms of the Share Option Scheme and/or the options must continue to comply with the relevant rules, codes and guidance notes of the Stock Exchange from time to time.
13. Termination
Our Company by resolution in general meeting may at any time terminate the operation of the Share Option Scheme and in such event no further options will be offered but in all other respects the provisions of the Share Option Scheme shall remain in force to the extent necessary to give effect to the exercise of any options (to the extent not already exercised) granted prior thereto
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APPENDIX V STATUTORY AND GENERAL INFORMATION
or otherwise as may be required in accordance with the provisions of the Share Option Scheme and options (to the extent not already exercised) granted prior to such termination shall continue to be valid and exercisable in accordance with the Share Option Scheme.
Application has been made to the [REDACTED]ofthe[REDACTED]of,andpermissionto deal in, the Shares which may be allotted and issued upon the exercise of the options granted under the Share Option Scheme, being [REDACTED] Shares in total. As at the date of this document, no option had been granted by our Company under the Share Option Scheme.
H. OTHER INFORMATION
1. Litigation
As at the Latest Practicable Date, save as disclosed in this document, no member of our Group was engaged in any litigation, claim or arbitration of material importance and no litigation, claim or arbitration of material importance was known to our Directors to be pending or threatened against our Group, that would have a material adverse effect on its business, financial condition or results of operations.
2. Sole Sponsor
The Sole Sponsor satisfies the independence criteria applicable to sponsors set out in Rule 3A.07 of the Listing Rules. The Sole Sponsor’s fees payable by us in respect of the Sole Sponsor’s services as sponsor for the [REDACTED] is US$1,000,000.
The Sole Sponsor has made an application on behalf of our Company to the [REDACTED] for the [REDACTED] of, and permission to deal in, the Shares in issue and to be issued pursuant to the [REDACTED] (including any Shares which may be issued pursuant to the exercise of the [REDACTED] and any Shares to be issued upon the exercise of any options which may be granted under the Share Option Scheme). All necessary arrangements have been made to enable such Shares to be admitted into CCASS.
3. No Material Adverse Change
Our Directors confirm that there has been no material adverse change in the financial or trading position or prospects of our Group since 31 March 2020 (being the date to which the latest audited consolidated financial statements of our Group were prepared).
4. Tax and other indemnities
(a) Hong Kong
(i) Tax on Dividend
No tax is payable in Hong Kong in respectofdividendpaidbyus.
(ii) Profits Tax
No tax is imposed in Hong Kong in respect of capital gains from the sales of property such as the Shares. Trading gains from the sales of property by persons carrying on a trade, profession or business in Hong Kong where such gains are derived from or arise in Hong Kong from such trade, profession or business will be chargeable to Hong Kong profit tax, which is currently imposed at the rate of 16.5% on
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APPENDIX V STATUTORY AND GENERAL INFORMATION
corporations and at a rate of 15.0% on unincorporated businesses. Gains from sales of the Shares effected on the Stock Exchange will be considered to be derived from or arise in Hong Kong. Liability for Hong Kong profits tax would thus arise in respect of trading gains from sales of the Shares realised by persons carrying on a business of trading or dealing in securities in Hong Kong.
(iii) Stamp Duty
Hong Kong stamp duty will be payable by the purchaser on every purchase and by the seller on every sales of the Shares. The duty is charged at the current rate of 0.2% of the consideration or, if higher, the fair value of the Shares being sold or transferred (the buyer and seller each paying half of such stamp duty). In addition, a fixed duty of HK$5 is currently payable on any instrument of transfer of shares.
(iv) Estate Duty
There is no estate duty in Hong Kong.
(b) The Cayman Islands
No stamp duty is payable in the Cayman Islands on transfer of shares of Cayman Islands exempted companies except for those which hold interests in land in the Cayman Islands.
(c) Deed of Indemnity
Our Controlling Shareholders (collectively the ‘‘Indemnifiers’’) have entered into Deed of Indemnity with and in favour of our Company (for ourselves and for each of our subsidiaries) being the material contact referred to in the paragraph headed ‘‘E. Further Information about Our Business — 1. Summary of material contracts’’ in this Appendix.
Under the Deed of Indemnity, the indemnifiers will jointly and severally indemnify each member of our Group against:
(i) all damages, losses, claims, penalties, charges, fees, costs, interests, expenses and liabilities which our Group may suffer, incur, or be imposed by any regulatory authorities or courts in Hong Kong or any applicable jurisdiction as a result of any violation or non-compliance by any member of our Group with any applicable laws, rules or regulations on all matters subsisting prior to the date on which the conditions set out under the section headed ‘‘Structure of the [REDACTED] — Conditions of the [REDACTED]’’ in this document being fulfilled (the ‘‘Effective Date’’);
(ii) taxation, together with all reasonable costs, expenses or other liabilities which any member of our Group may incur in connection with (1) the investigation, assessment, contesting or settlement of any taxation claim under the Deed of Indemnity; (2) any legal proceeding in relation to taxation claim in which any member of our Group claims under or in respect of the Deed of Indemnity and in which judgment is given for any member of our Group; or (3) the enforcement of any such settlement or judgment falling on any member of our Group resulting
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APPENDIX V STATUTORY AND GENERAL INFORMATION
from or by reference to any income, profits or gains, transactions, events, acts, omissions, matters or things earned, accrued or received, entered into or occurring on or before the Effective Date;
(iii) any and all taxation including estate duty falling on any member of our Group and/or its associated companies whether in Hong Kong, or in any other part of the world resulting from or by reference to any income, profits or gains earned accrued or received on or before the Effective Date whether alone or in conjunction with other circumstances whether or not such taxation is chargeable against or attributable to any other person;
(iv) all damages, losses, claims, penalties, charges, fees, costs, interests, expenses and liabilities which our Group may sustain, suffer and incur as a result of directly or indirectly or in connection with any litigation, proceeding, claim, investigation, inquiry, enforcement proceeding or process by any governmental, administrative or regulatory body which (1) any member of our Group, their respective directors and/or representatives or any of them is/are involved; and (2) arises due to some act or omission of, or transaction voluntarily effected by, any member of our Group or any of them (whether alone or in conjunction with some other act, omission or transaction) on or before the Effective Date; and
(v) all damages, losses, claims, penalties, charges, fees, costs, interests, expenses and liabilities which our Group may sustain, suffer and incur arising from or in connection with the title defects of the properties owned by any member of our Group or any leases entered into by any member of our Group (either due to non- registration of the lease agreements or any other reasons) in any jurisdiction which were occurred on or before the Effective Date.
The Indemnifiers will, however, not be liable under the Deed of Indemnity to the extent that:
(i) allowance, provision or reserve has been made for taxation in the audited accounts of our Group for each of the three years ended 31 March 2021;
(ii) a taxation claim arises as a result of the imposition of taxation as a consequence of any introduction of new legislation or any retrospective change in law or the interpretation or practice by the relevant tax authority coming into force after the Effective Date or taxation claim arises or is increased by an increase in rates of taxation after the Effective Date with retrospective effect;
(iii) any member of our Group is liable as a result of any event occurring or income, profits earned, accrued or received or transactions entered into in the ordinary course of business on or before the Effective Date;
(iv) the taxation or liability would not have arisen but for any act or omission by any member of our Group (whether alone or in conjunction with some other act, omission or transaction, whenever occurring) voluntarily effected without the consent of the Indemnifiers and otherwise than in the ordinary course of business on or before the Effective Date;
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APPENDIX V STATUTORY AND GENERAL INFORMATION
(v) any allowance or provision or reserve made for taxation in the audited accounts of our Group for each of the three years ended 31 March 2021, which is finally established to be an over-allowance or over-provision or an excessive reserve provided that the amount of any such allowance or provision or reserve applied to reduce the Indemnifiers’ liability in respect of taxation shall not be available in respect of any such liability arising thereafter;
(vi) such claim or taxation claim arises or is incurred as a consequence of a change in any accounting policy or practice adopted by any other members of our Group after the Effective Date; or
(vii) any member of our Group shall have admitted liability in respect of the circumstances giving rise to the claim for taxation after the Effective Date.
(d) Consultation with professional advisors
Potential investors in the [REDACTED] are recommended to consult their professional advisors if they are doubt as to the tax implications of subscribing for, purchasing, holding or disposing of or dealing in the Shares. None of our Company, the Sole Sponsor, the [REDACTED], any of our/their respective directors, or any other person or party involved in the [REDACTED] accepts responsibility for any tax effects on, or liabilities of, any person resulting from the subscription for, purchase, holding or disposal of, or dealing in, the Shares.
5. Miscellaneous
(a) Save as disclosed in this document, within the two years immediately preceding the date of this document:
(i) no share or loan capital of our Company or any of its subsidiaries has been issued, agreed to be issued or is proposed or intended to be issued fully or partly paid either for cash or for a consideration other than cash;
(ii) no share or loan capital of our Company or any of our subsidiaries is under option or is agreed conditionally or unconditionally to be put under option;
(iii) no commissions, discounts, brokerages or other special terms have been granted in connection with the issue or sales of any shares or loan capital of any member of our Group;
(iv) no commission has been paid or payable (except to sub-[REDACTED]) for subscribing or agreeing to subscribe, procuring or agreeing to procure subscriptions, for any shares or debenture of our Company or any of its subsidiaries; and
(v) no founders, management or deferred shares or any debentures of our Company or any of its subsidiaries have been issued or agreed to be issued;
(b) no equity or debt securities of our Company is listed or dealt with in any other stock exchange nor is any listing or permission to deal being or proposed to be sought;
(c) our Company has no outstanding convertible debt securities or debentures;
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APPENDIX V STATUTORY AND GENERAL INFORMATION
(d) there has not been any interruption in the business of our Group which may have or has had a significant effect on the financial position of our Group in the 12 months preceding the date of this document;
(e) our Directors have been advised that the use by the Company of its English name and/ or Chinese name in abbreviated form for trading purposes on the Stock Exchange will not contravene the provisions of the Cayman Islands law;
(f) there is no arrangement in existence under which future dividends are waived or agreed to be waived;
(g) no company within our Group is presently listed on any stock exchange or traded on any trading system;
(h) subject to the provisions of the Cayman Companies Act, our Cayman Islands principal share register will be maintained by our principal share registrar, [REDACTED] in the Cayman Islands and our Hong Kong branch share registrar will be maintained by [REDACTED]. Unless our Directors otherwise agree, all transfer and other documents of title of Shares must be lodged for registration with and registered by our Company’s branch share registrar in Hong Kong and may not be lodged in the Cayman Islands.
6. Qualifications of experts
The following are the qualifications of experts who have opined or advised on information contained in this document:
Name Qualification
China International Capital A corporation licensed under the SFO to carry out Type 1 (dealing Corporation Hong Kong in securities), Type 2 (dealing in futures contracts), Type 4 (advising Securities Limited on securities), Type 5 (advising on futures contracts) and Type 6 (advising on corporate finance) regulated activities
Conyers Dill & Pearman Company’s Cayman Islands attorneys-at-law
Hectar Pun S.C. Barrister-at-law and senior counsel of Hong Kong
PricewaterhouseCoopers Certified Public Accountants under the Professional Accountants Ordinance (Cap. 50) and Registered Public Interest Entity Auditor under the Financial Reporting Council Ordinance (Cap. 588)
Frost & Sullivan Industry consultant
Knight Frank Petty Limited Property valuer
7. Consents of experts
Each of the experts named in the section headed ‘‘— H. Other Information — 6. Qualifications of Experts’’ above has given and has not withdrawn its written consent to the issue of this document, with the inclusion of its letters and/or reports and/or opinions and/or summary thereof (as the case may be) and/or references to its/his name included herein in the form and context in which they respectively appear.
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APPENDIX V STATUTORY AND GENERAL INFORMATION
8. Promoters
Our Company has no promoter for purpose of the Listing Rules. Save as disclosed in this document, within the two years immediately preceding the date of this document, no cash, securities or other benefit has been paid, allotted or given, nor are any proposed to be paid, allotted or given to any promoters in connection with the [REDACTED] and the related transactions described in this document.
9. Preliminary expenses
The preliminary expenses relating to the incorporation of our Company are approximately US$5,615 and are payable by our Company.
10. Binding effect
This document shall have the effect, if an application is made in pursuance hereof, of rendering all persons concerned bound by all of the provisions (other than the penal provisions) of sections 44A and 44B of the Companies (Winding Up and Miscellaneous Provisions) Ordinance so far as applicable.
11. Bilingual document
The English language and Chinese language versions of this document are being published separately in reliance upon the exemption providedinsection4oftheCompanies(Exemptionof Companies and Prospectuses from Compliance with Provisions) Notice (Chapter 32L of the Laws of Hong Kong).
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APPENDIX VI DOCUMENTS DELIVERED TO THE REGISTRAR OF COMPANIES AND AVAILABLE FOR INSPECTION
1. DOCUMENTS DELIVERED TO THE REGISTRAR OF COMPANIES IN HONG KONG
The documents attached to a copy of this document delivered to the Registrar of Companies in Hong Kong for registration were:
(a) a copy of each of the [REDACTED], [REDACTED] and [REDACTED];
(b) a copy of each of the material contracts referred to in the section headed ‘‘Statutory and General Information — E. Further Information about Our Business — 1. Summary of Material Contracts’’ in Appendix V to this document; and
(c) the written consents referredtointhesectionheaded‘‘ Statutory and General Information — H. Other Information — 6. Qualifications of Experts’’ in Appendix V to this document.
2. DOCUMENTS AVAILABLE FOR INSPECTION IN HONG KONG
Copies of the following documents will be available for inspection at the office of Messrs. K. B. Chau & Co. at Unit B, 31/F, United Centre, 95 Queensway, Admiralty, Hong Kong during normal business hours from 9:30 a.m. to 5:00 p.m. up to and including the date which is 14 days from the date of this document:
(a) the Memorandum of Association and the Articles of Association;
(b) the accountant’s report of our Group prepared by PricewaterhouseCoopers, the text of which is set out in Appendix I to this document;
(c) the audited consolidated financial statements of our Group for each of the three years ended 31 March 2021;
(d) the report on the unaudited pro forma financial information of our Group prepared by PricewaterhouseCoopers, the text of which is set out in Appendix II to this document;
(e) the property valuation report in respect of our Group’s property interests as at 31 March 2021 prepared by Knight Frank Petty Limited, the text of which is set out in Appendix III to this document;
(f) the letter of advice prepared by Conyers Dill & Pearman summarising certain aspects of the Cayman Islands company law referred to in Appendix IV to this document;
(g) the Cayman Companies Act;
(h) the industry report issued by Frost & Sullivan Limited, the text of which is summarised in the section headed ‘‘Industry Overview’’;
(i) the written consents referred to in the section headed ‘‘Statutory and General Information — H. Other Information — 7. Consents of Experts’’ in Appendix V to this document;
(j) the material contracts referred to in the section headed ‘‘Statutory and General Information — E. Further Information about Our Business — 1. Summary of Material Contracts’’ in Appendix V to this document;
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APPENDIX VI DOCUMENTS DELIVERED TO THE REGISTRAR OF COMPANIES AND AVAILABLE FOR INSPECTION
(k) the service contracts and letters of appointmentreferredtointhesectionheaded‘‘Statutory and General Information — F. Further Information about Directors and Substantial Shareholders — 2. Directors’ Service Contracts and Letters of Appointment’’ in Appendix V to this document;
(l) the rules of the Share Option Scheme; and
(m) this document.
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