ETS Group Limited — Interim / Quarterly Report 2017

Aug 3, 2017

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

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ETS GROUP LIMITED 易通訊集團有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 8031)

INTERIM RESULTS ANNOUNCEMENT FOR THE SIX MONTHS ENDED 30 JUNE 2017

CHARACTERISTICS OF THE GROWTH ENTERPRISE MARKET (“GEM”) OF THE STOCK EXCHANGE OF HONG KONG LIMITED (THE “STOCK EXCHANGE”)

GEM has been positioned as a market designed to accommodate companies to which a higher investment risk may be attached than other companies listed on the Stock Exchange. Prospective investors should be aware of the potential risks of investing in such companies and should make the decision to invest only after due and careful consideration. The greater risk profile and other characteristics of GEM mean that it is a market more suited to professional and other sophisticated investors.

Given the emerging nature of companies listed on GEM, there is a risk that securities traded on GEM may be more susceptible to high market volatility than securities traded on the Main Board and no assurance is given that there will be a liquid market in the securities traded on GEM.

This announcement, for which the directors (the “Directors”) of ETS Group Limited (the “Company”) collectively and individually accept full responsibility, includes particulars given in compliance with the Rules Governing the Listing of Securities on the GEM of the Stock Exchange (the “GEM Listing Rules”) for the purpose of giving information with regard to the Company. The Directors, having made all reasonable enquiries, confirm that to the best of their knowledge and belief the information contained in this announcement is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement herein or this announcement misleading.

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FINANCIAL SUMMARY

The Group’s total revenue for the six months ended 30 June 2017 was approximately HK$73,463,000, representing an increase of approximately 1.8% as compared with the total revenue of approximately HK$72,190,000 for the corresponding period in 2016.

Profit attributable to owners of the Company for the six months ended 30 June 2017 was approximately HK$1,419,000, representing a decrease of approximately 45.6% as compared with the profit attributable to owners of the Company of approximately HK$2,609,000 for the corresponding period in 2016.

Earnings per share for the six months ended 30 June 2017 was approximately HK0.5 cents (six months ended 30 June 2016: HK0.9 cents).

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UNAUDITED INTERIM RESULTS

The board of Directors (the “Board”) of the Company is pleased to announce the unaudited consolidated results of the Company and its subsidiaries (the “Group”) for the three months and six months ended 30 June 2017 together with the comparative figures for the corresponding periods ended 30 June 2016 as follows:

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)

For the three months and six months ended 30 June 2017

Notes Revenue 3 Other income Other gains/(losses) – net Employee benefits expenses 4 Depreciation and amortization Other operating expenses Operating profit Finance costs Profit before tax 5 Income tax expense 6 Profit for the period Total comprehensive income for the period Profit attributable to owners of the Company Total comprehensive income attributable to owners of the Company Earnings per share attributable to owners of the Company – Basic and diluted (HK cents) 8	Three months ended 30 June 2017 2016 HK$’000 HK$’000 (unaudited) (unaudited) 37,691 36,371 131 134 40 (132) (22,069) (20,727) (2,237) (2,024) (12,227) (11,467) 1,329 2,155 (114) (137) 1,215 2,018 (506) (589) 709 1,429 709 1,429 709 1,429 709 1,429 0.3 0.5	Six months ended 30 June 2017 2016 HK$’000 HK$’000 (unaudited) (unaudited) 73,463 72,190 266 335 155 32 (43,203) (41,871) (4,590) (4,155) (23,360) (22,798) 2,731 3,733 (224) (220) 2,507 3,513 (1,088) (904) 1,419 2,609 1,419 2,609 1,419 2,609 1,419 2,609 0.5 0.9

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CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION (UNAUDITED)

As at 30 June 2017

Notes Non-current assets Property, plant and equipment Intangible assets Available-for-sale financial asset 9 Investment in an associate Deferred income tax assets Current assets Trade and other receivables 10 Financial assets designated as at fair value through profit or loss Amount due from an associate Amounts due from related companies Pledged bank deposits Current income tax recoverable Cash and bank balances 11 Current liabilities Trade and other payables 12 Borrowings Amounts due to related companies Net current assets Total assets less current liabilities Non-current liabilities Borrowings Deferred income tax liabilities Net assets Equity attributable to the owners of the Company Share capital 13 Share premium Reserves Total equity	As at 30 June 2017 HK$’000 (unaudited) 8,514 7,541 11,200 – 686 27,941 53,832 7,146 10,834 784 5,259 353 24,780 102,988 14,461 5,152 19 19,632 83,356 111,297 – 353 110,944 2,800 25,238 82,906 110,944	As at 31 December 2016 HK$’000 (audited) 10,041 7,864 – – 686
		18,591
		44,639 7,054 10,576 154 4,797 849 47,218
		115,287
		16,105 6,366 –
		22,471
		92,816
		111,407
		409 353
		110,645
		2,800 25,238 82,607
		110,645

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CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)

For the six months ended 30 June 2017

Balance at 1 January 2016 (audited) Profit for the period Total other comprehensive income for the period Total comprehensive income for the period Interim dividend paid Balance at 30 June 2016 (unaudited) Balance at 1 January 2017 (audited) Profit for the period Total other comprehensive income for the period Total comprehensive income for the period Interim dividend paid Balance at 30 June 2017 (unaudited)		Attributable to owners of the Company	Attributable to owners of the Company	Attributable to owners of the Company	Total equity HK$’000 108,519 2,609 – 2,609 (2,688) 108,440 110,645 1419 – 1,419 (1,120) 110,944
	Share capital HK$’000 2,800 – – – – 2,800 2,800 – – – – 2,800	Share premium HK$’000 25,238 – – – – 25,238 25,238 – – – – 25,238	Merger reserve Translation HK$’000 HK$’000 25,624 – – – – – – – – – 25,624 – 25,624 – – – – – – – – – 25,624 –	Retained profits HK$’000 54,857 2,609 – 2,609 (2,688) 54,778 56,983 1,419 – 1,419 (1,120) 57,282

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CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)

For the six months ended 30 June 2017

Net cash (used in)/generated from operating activities Net cash used in investing activities Net cash used in financing activities Net decrease in cash, cash equivalents and bank overdrafts Cash, cash equivalents and bank overdrafts at beginning of the period Cash, cash equivalents and bank overdrafts at end of the period	Six months ended 30 June 2017 2016 HK$’000 HK$’000 (unaudited) (unaudited) (5,336) 11,610 (14,136) (8,304) (2,966) (4,283) (22,438) (977) 47,218 31,936 24,780 30,959

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NOTES TO THE FINANCIAL INFORMATION

For the six months ended 30 June 2017

1. GENERAL INFORMATION

The Company was incorporated in the Cayman Islands on 29 June 2011 as an exempted company with limited liability under the Companies Law of the Cayman Islands. The shares of the Company have been listed on the GEM of the Stock Exchange with effect from 9 January 2012 (the “Listing Date”).

2. BASIS OF PREPARATION AND PRINCIPAL ACCOUNTING POLICIES

The Group’s unaudited condensed consolidated interim financial information has been prepared in accordance with Hong Kong Accounting Standard 34 “Interim Financial Reporting” issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”) and the applicable disclosure requirements of the GEM Listing Rules.

The accounting policies and basis adopted in preparing the unaudited condensed consolidated interim financial information were consistent with those applied for the consolidated financial statements of the Group for the year ended 31 December 2016.

The HKICPA has issued certain new and revised Hong Kong Financial Reporting Standards (“HKFRSs”). For those which are effective for accounting periods beginning on or after 1 January 2017, the adoption has no material impact on how the results and financial positions of the Group for the current and prior periods have been prepared and presented. For those which are not yet effective and have not been early adopted in prior accounting periods, the Group is in the process of assessing their impact on the Group’s results and financial position.

3. SEGMENT INFORMATION AND REVENUE

The Directors review the Group’s internal financial reporting and other information and also obtain other relevant external information in order to assess performance and allocate resources, and operating segment is identified with reference to these.

The reportable operating segments derive their revenue primarily from the following business units in Hong Kong:

• (a) Outsourcing inbound contact service;

• (b) Outsourcing outbound contact service;

• (c) Staff insourcing service;

• (d) Contact service centre facilities management service; and

• (e) The “Others” segment which principally comprises licencing, system maintenance, sales of system and software and securities service income.

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For the six months ended 30 June 2017

Outsourcing inbound contact service HK$’000 (unaudited) Segment revenue 4,999 Segment results 530 Depreciation and amortization 161 Total segment assets 7,586 Total segment assets includes: Additions to non-current assets (other than financial instruments) 64 Total segment liabilities 185 For the six months ended 30 June 2016 Outsourcing inbound contact service HK$’000 (unaudited) Segment revenue 6,592 Segment results 803 Depreciation and amortization 192 Total segment assets 8,259 Total segment assets includes: Additions to non-current assets (other than financial instruments) 426 Total segment liabilities 158	Outsourcing outbound contact service HK$’000 (unaudited) 32,584 2,327 1,608 31,418 638 3,733 Outsourcing outbound contact service HK$’000 (unaudited) 30,890 1,774 1,536 29,121 3,406 3,510	Staff insourcing service HK$’000 (unaudited) 24,099 3,502 – 14,831 – 3,385 Staff insourcing service HK$’000 (unaudited) 20,226 2,171 – 9,051 – 2,881	Contact service centre facilities management service HK$’000 (unaudited) 8,140 1,629 1,447 9,211 574 1,251 Contact service centre facilities management service HK$’000 (unaudited) 11,130 2,256 1,472 13,403 3,264 821	Others HK$’000 (unaudited) 3,641 (1,980) 1,271 8,462 1,465 639 Others HK$’000 (unaudited) 3,352 911 847 9,580 1 1	Total HK$’000 (unaudited) 73,463
					6,008
					4,487
					71,508
					2,741
					9,193
					Total HK$’000 (unaudited) 72,190
					7,915
					4,047
					69,414
					7,097
					7,371

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A reconciliation of segment result to profit before tax is as follows:

Segment result for reportable segments Other segments results Total segments results Unallocated: Other income Other gains/(losses) – net Depreciation and amortization Finance costs Corporate and other unallocated expenses Profit before tax	Six months ended 30 June 2017 2016 HK$’000 HK$’000 (unaudited) (unaudited) 7,988 7,004 (1,980) 911 6,008 7,915 266 335 155 32 (103) (108) (224) (220) (3,595) (4,441) 2,507 3,513

4. EMPLOYEE BENEFITS EXPENSES

Salaries and allowances Pension costs – defined contribution plans Total employee benefits expenses, including Directors’ remuneration Less: Amounts capitalized in deferred development costs	Three months ended 30 June 2017 2016 HK$’000 HK$’000 (unaudited) (unaudited) 21,991 20,573 993 940 22,984 21,513 (915) (786) 22,069 20,727	Six months ended 30 June 2017 2016 HK$’000 HK$’000 (unaudited) (unaudited) 43,098 41,521 1,938 1,864 45,036 43,385 (1,833) (1,514) 43,203 41,871

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5. PROFIT BEFORE INCOME TAX

Profit before tax is stated after charging: Depreciation of owned property, plant and equipment Amortization of intangible assets Total depreciation and amortization Operating lease payments in respect of rented premises Research and development costs	Three months ended 30 June 2017 2016 HK$’000 HK$’000 (unaudited) (unaudited) 1,199 1,031 1,038 993 2,237 2,024 2,507 2,273 1,038 993	Six months ended 30 June 2017 2016 HK$’000 HK$’000 (unaudited) (unaudited) 2,435 2,051 2,155 2,104 4,590 4,155 5,015 4,568 2,155 2,104	Six months ended 30 June 2017 2016 HK$’000 HK$’000 (unaudited) (unaudited) 2,435 2,051 2,155 2,104 4,590 4,155 5,015 4,568 2,155 2,104
			4,155
			4,568 2,104

6. INCOME TAX EXPENSE

Hong Kong profits tax has been provided at a rate of 16.5% (2016: 16.5%) on the estimated assessable profits arising in or derived from Hong Kong for the six months period ended 30 June 2017. Taxation on overseas profits has been calculated on the estimated assessable profit for the six months period ended 30 June 2017 at the rates of taxation prevailing in the countries in which the Group operates.

Current income tax Deferred income tax	Three months ended 30 June 2017 2016 HK$’000 HK$’000 (unaudited) (unaudited) 506 589 – – 506 589	Six months ended 30 June 2017 2016 HK$’000 HK$’000 (unaudited) (unaudited) 1,088 904 – – 1,088 904	Six months ended 30 June 2017 2016 HK$’000 HK$’000 (unaudited) (unaudited) 1,088 904 – – 1,088 904
			904

No provision for deferred taxation has been made in the financial statements since there is no material timing differences.

7. INTERIM DIVIDENDS

The Board does not recommend the payment of any interim dividend for the six months ended 30 June 2017 (2016: nil).

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8. EARNINGS PER SHARE

The calculation of basic earnings per share for the six months ended 30 June 2017 is based on (i) the unaudited consolidated profit attributable to the owners of the Company of approximately HK$1,419,000 (six months ended 30 June 2016: approximately HK$2,609,000) and (ii) the weighted average number of 280,000,000 ordinary shares issued during the six months ended 30 June 2017 (during the six months ended 30 June 2016: weighted average number of 280,000,000 ordinary shares issued).

The diluted earnings per share is equal to the basic earnings per share as there were no dilutive potential ordinary shares in issue during the six months ended 30 June 2017 and 2016.

9. AVAILABLE-FOR-SALE FINANCIAL ASSET

Unlisted, at cost TRADE AND OTHER RECEIVABLES Trade receivables Other receivables, deposits and prepayments	As at 30 June 2017 HK$’000 (unaudited) 11,200 As at 30 June 2017 HK$’000 (unaudited) 44,494 9,338 53,832	As at 31 December 2016 HK$’000 (audited) – As at 31 December 2016 HK$’000 (audited) 37,494 7,145 44,639

10. TRADE AND OTHER RECEIVABLES

The average credit period on the Group’s sales is 30 days. The aging analysis of the trade receivables based on invoice date as follows:

0–30 days 31–60 days 61–90 days Over 90 days	As at 30 June 2017 HK$’000 (unaudited) 29,949 3,014 5,436 6,095 44,494	As at 31 December 2016 HK$’000 (audited) 20,944 6,179 4,603 5,768 37,494

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11. CASH AND BANK BALANCES

Cash at banks earns interest at floating rates based on daily bank deposit rates. The bank balances are deposited with creditworthy banks with no recent history of default. Cash and cash equivalents represents the cash deposit at bank and cash on hand.

12. TRADE AND OTHER PAYABLES

Trade payables Other payables and accruals	As at 30 June 2017 HK$’000 (unaudited) 3,124 11,337 14,461	As at 31 December 2016 HK$’000 (audited) 2,366 13,739 16,105

As at 30 June 2017, the aging analysis of the trade payables based on invoice date is as follows:

0–30 days 31–60 days 61–90 days Over 90 days	As at 30 June 2017 HK$’000 (unaudited) 2,393 412 318 1 3,124	As at 31 December 2016 HK$’000 (audited) 1,354 710 301 1 2,366

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13. SHARE CAPITAL

Number of Ordinary shares ordinary shares at HK$0.01 each HK$’000

Authorized share capital As at 31 December 2016 and 30 June 2017 Issued and fully paid up share capital As at 31 December 2016 and 30 June 2017	5,000,000,000 5,000,000,000 280,000,000 280,000,000	50,000
		50,000
		2,800
		2,800

14. OPERATING LEASE COMMITMENTS

The Group had commitments for future aggregate minimum lease payments under non-cancellable operating leases in respect of rented office premises as follows:

No later than 1 year Later than 1 year and no later than 5 years	As at 30 June 2017 HK$’000 (unaudited) 5,840 3,726 9,566	As at 31 December 2016 HK$’000 (audited) 8,185 6,545
		14,730

The Group leases office premises are under operating lease agreements. Lease for properties are for terms ranging from 1 to 3 years.

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15. RELATED PARTY TRANSACTIONS

In addition to the transactions and balances disclosed elsewhere in the condensed consolidated financial statements, the Group entered into the following significant related party transactions during the period:

		Three months ended 30 June	Three months ended 30 June	Six months ended	30 June
Name of	Nature of	2017	2016	2017	2016
related parties	transactions	HK$’000	HK$’000	HK$’000	HK$’000
		(unaudited)	(unaudited)	(unaudited)	(unaudited)
Always Beyond Limited	Premise rental expenses	698	–	1,395	–
Epro Career Limited	Insourcing fee expenses	3,511	4,423	7,143	8,794
168 Storage Limited	Outbound service income	(23)	–	(23)	–
East Ocean Gourmet Group	Outsourcing inbound contact service
	income	–	(114)	–	(228)
	Seasonal event expense	–	2	–	57
East Ocean Food (Hong Kong) Limited	Seasonal event expense	–	–	12	–
Gear Asset Management Limited	System installation service income	(500)	–	(1,000)	–
	Management income	(240)	–	(480)	–
H.K. Sources Finance Limited	System maintenance income	–	–	(70)	(75)
	System installation service income	–	(23)	–	(23)
SG Hotel Group Management Limited	Secondment income	–	(80)	–	(159)
SG Marketing Limited	Outsourcing outbound contact service
	income	(30)	–	(30)	–
Stan Group (Holdings) Limited	Premise rental expenses	624	490	1,248	1,023
	Seasonal event expense	51	–	3	–
	Subscription fee income	–	–	–	(10)
	Facilities management services income	(140)	–	(354)	–
	Insourcing service income	(240)	–	(705)	–
The Wave (Hing Yip Street) Corporation	Sales of software and system	–	(25)	(46)	(25)
	Premise rental expenses	62	–	62	–

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Key management personnel compensation

Salaries and short-term employee benefits Post employment benefits	Three months ended 30 June 2017 2016 HK$’000 HK$’000 (unaudited) (unaudited) 282 282 5 5 287 287	Six months ended 30 June 2017 2016 HK$’000 HK$’000 (unaudited) (unaudited) 561 564 11 11 572 575	Six months ended 30 June 2017 2016 HK$’000 HK$’000 (unaudited) (unaudited) 561 564 11 11 572 575
			575

16. CONTINGENT LIABILITIES

The Group did not have any contingent liabilities as at 30 June 2017.

17. APPROVAL OF THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION

The unaudited condensed consolidated interim financial information was approved by the Board on 3 August 2017.

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INTERIM DIVIDEND

The Board does not recommend the payment of any interim dividend for the six months ended 30 June 2017 (2016: nil).

MANAGEMENT DISCUSSION AND ANALYSIS

BUSINESS REVIEW

The Group is continuously engaged in the business of providing comprehensive multimedia contact services and contact centre system. The principle activities of the Group include outsourcing inbound contact service, outsourcing outbound contact service, staff insourcing service and contact service centre facilities management service. And the Group has also engaged in securities trading business in Hong Kong starting from January 2017.

With employment rate remained a high level during the reporting period, high labour cost continued to present challenge to the Group. The continuous tighten labour market plays a role on creating better prospect on our staff insourcing services. The Group recorded a steadily growth on our staff insourcing service segment in the period. In order to cope with increasing demand on staff insourcing service, the group has enhanced the capability of recruitment by increasing the manpower and broadened the recruitment network.

The Group began to provide securities trading services from January 2017, and business is gradually picking up during the reporting period. The Group has also applied for admission as Exchange Participant (EP) of The Stock Exchange of Hong Kong Limited and Direct Clearing Participant (DCP) of The Hong Kong Securities Clearing Company earlier and we are optimistic that the application will be approved in the near future. Although the securities trading business yet to have profit contribution at this early stage, the management of the Group is still confidence in the growth of the business with the continuous active capital market in Hong Kong.

SIGNIFICANT INVESTMENT

As at 30 June 2017, the Group held unlisted financial assets designated as at fair value through profit or loss of approximately HK$7.1 million and unlisted available-for-sale financial asset of approximately HK$11.2 million. Given that the aforementioned investments accounted for approximately 14.01% of the Company’s total assets as at 30 June 2017, the Directors consider that the aforementioned investments as significant investments (the “Significant Investments”). Further information in relation to the Significant Investments as at 30 June 2017 are set out as follows:

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Unlisted financial assets designated as at fair value through profit or loss

Description of the investments AB FCP I (AB Global High Yield Portfolio, Class AT) (“AB Global High Yield Portfolio (AT)”)(Note 1) Allianz Global Investors Fund (Allianz US High Yield, Class AM) (“Allianz US High Yield (AM)”)(Note 2) Total Notes:	Number of shares held as at 30 June 2017 133,161.385 41,350.726 –	Carrying amount as at 30 June 2017 HK$ (approximate) 4,522,000 2,624,000
		7,146,000

1. AB FCP I (named ACMBernstein until 4 February 2016) is a mutual investment fund (fonds commun de placement) organized under the laws of the Grand Duchy of Luxembourg.

2. Allianz Global Investors Fund is an investment company with variable capital (société d’investissement à capital variable).

For the six months ended 30 June 2017, the Group had recognised a gain of approximately HK$92,000 on change in fair value of its AB Global High Yield Portfolio (AT) shares and Allianz US High Yield (AM) shares based on the then bid prices offered by banker in Hong Kong. The performance and prospect of its AB Global High Yield Portfolio (AT) shares and Allianz US High Yield (AM) shares are set out as follows:

AB Global High Yield Portfolio (AT)

As at 30 June 2017, the Group held 133,161.385 AB Global High Yield Portfolio (AT) shares which amount to carrying amount of approximately HK$4,522,000. During the six months ended 30 June 2017, the Group had not acquired or disposed of any AB Global High Yield Portfolio (AT) shares. During the six months ended 30 June 2017, the Group had received dividend in the amount of approximately HK$140,900 from its investment in AB Global High Yield Portfolio (AT). For the six months ended 30 June 2017, the Group had recognised a gain HK$92,000 on change in fair value of its investment in AB Global High Yield Portfolio (AT).

– 17 –

As disclosed in the monthly NAV and dividend summary in relation to AB FCP I (AB Global High Portfolio), for the six months ended 30 June 2017, performance for AB Global High Yield Portfolio (AT) is approximately 5.11% calculated on an net-asset-value to net-assetvalue basis with dividend reinvested, which shows by how much AB Global High Yield Portfolio (AT) shares have increased in value during the six months ended 30 June 2017.

With regard to the future prospects of AB Global High Yield Portfolio (AT) based on the semi-annual report of AB FCP I for the six months ended 28 February 2017, the Directors noted the view of the management company of AB FCP I that global equities rose during the six-month period ended February 28, 2017 (in US dollar terms) and US stocks outperformed, while emerging-market and international equities both delivered solid results, and US dollar strength greatly enhanced returns in other currencies. The Directors further noted the management company’s view that in the fixed-income markets, global bonds decreased in absolute terms (bond yields move inversely to price) and global high yield rallied in the period. Given the above, the Company expects that its investment in AB Global High Yield Portfolio (AT) will continue to generate a return for the Company.

Allianz US High Yield (AM)

As at 30 June 2017, the Group held 41,350.726 Allianz US High Yield (AM) shares which amount to carrying amount of approximately HK$2,624,000. During the six months ended 30 June 2017, the Group had not acquired or disposed of any Allianz US High Yield (AM) shares. During the six months ended 30 June 2017, the Group had received dividend in the amount of approximately HK$110,700 from its investment in Allianz US High Yield (AM). For the six months ended 30 June 2017, the Group had no change in fair value of its investment in Allianz US High Yield (AM).

With regard to the future prospects of Allianz US High Yield (AM) based on the semiannual report of Allianz Global Investors Fund for the six months ended 31 March 2017, the Directors noted the view of Allianz Global Investors Fund that the prospects for the global economy appear quite favourable at the moment, which should continue to be supportive of equities. The Directors further noted Allianz Global Investors Fund’s view that in the bond segment, awareness of the risks of accelerated inflation could pick up, which might in turn mean higher interest rates in the medium term and from the point of view of current income, high-yield corporate and emerging-market bonds remain promising, as do dividend stocks. Given the above, the Company expects that its investment in Allianz US High Yield (AM) will continue to generate a return for the Company.

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Unlisted available-for-sale financial asset

Moreover, the Group also seeks to explore investment opportunity in information technology industry in order to capture the vast and fast growing video and live streaming market. During the period ended 30 June 2017, the Group subscribed for 40 shares in an invested company (“Invested Company”), representing approximately 3.7% of its total issued share capital as at 30 June 2017, at the total subscription price of HK$11,200,000. The Invested Company, principally engages in the provision of one-stop video solution with patented technology for encoding, live streaming and OTT platform. Invested Company recorded a remarkable growth in the past few years and the management of the Group believes that there is much potential in system development collaboration and valuable business co-operation in the future.

As at 30 June 2017, the carrying amount of the investment is HK$11,200,000.

FINANCIAL REVIEW

For the six months ended 30 June 2017, the Group’s unaudited total revenue was approximately HK$73.5 million, representing an increase of approximately HK$1.3 million as compared with the total revenue of the corresponding period in 2016 (six months ended 30 June 2016: approximately HK$72.2 million).

The gross profit margin of the Group decreased from approximately 11% for the six months ended 30 June 2016 to approximately 8.2% for the six months ended 30 June 2017. Profit attributable to owners of the Company decreased by approximately 45.6% from approximately HK$2.6 million for the six months ended 30 June 2016 to approximately HK$1.4 million for the six months ended 30 June 2017. The decrease of the gross profit margin of the Group mainly attributable to the gross loss generated from the start-up securities business.

REVENUE AND SEGMENT RESULT

The outsourcing inbound contact service, outsourcing outbound contact service, staff insourcing service, contact service centre facilities management service and others accounted for approximately 7%, 44%, 33%, 11% and 5% of the Group’s unaudited total revenue for the six months ended 30 June 2017 respectively.

Outsourcing Inbound Contact Service

For the six months ended 30 June 2017, the outsourcing inbound contact service recorded a revenue of approximately HK$5 million, representing a decrease of approximately 24.2% as compared to that of the corresponding period in 2016 (2016: approximately HK$6.6 million). The segment results for the six months ended 30 June 2017 was approximately HK$0.5 million. The gross profit margin for outsourcing inbound contact service decreased from approximately 12.2% for the six months ended 30 June 2016 to approximately 10.6% for the six months ended 30 June 2017.

– 19 –

The decrease in revenue from the outsourcing inbound contact service was mainly attributed to a few contracts came to an end and a delay in service launching of some customers’ new projects during the period. The smaller inbound operation scale limited the operating efficiency and resulted in a decrease in the gross profit margin of the outsourcing inbound contact service.

Outsourcing Outbound Contact Service

For the six months ended 30 June 2017, the outsourcing outbound contact service recorded a revenue of approximately HK$32.6 million, representing an increase of approximately 5.5% as compared to that of the corresponding period in 2016 (2016: approximately HK$31 million).

The segment results for the six months ended 30 June 2017 was approximately HK$2.3 million. The gross profit margin for outsourcing outbound contact service increased from approximately 5.7% for the six months ended 30 June 2016 to approximately 7.1% for the six months ended 30 June 2017.

The Group recorded a slightly growth in the revenue generated from the outsourcing outbound contact service during the period. A higher gross profit margin of the outsourcing outbound contact service was attributable to the economics of scale for the operation being enjoyed by the Group.

Staff Insourcing Service

For the six months ended 30 June 2017, the staff insourcing service segment recorded a revenue of approximately HK$24.1 million, representing an increase of approximately 19.1% as compared to that of the corresponding period in 2016 (2016: approximately HK$20.2 million).

The segment results of staff insourcing service for the six months ended 30 June 2017 was approximately HK$3.5 million. The gross profit margin for staff insourcing service increased from approximately 10.7% for the six months ended 30 June 2016 to approximately 14.5% for the six months ended 30 June 2017.

The increase in revenue from the staff insourcing service was mainly contributed by an increasing demand of staff insourcing service from the existing as well as new clients during the period. The increase in gross profit margin for the staff insourcing service was mainly attributable to the optimization of the recruiting management.

Contact Service Centre Facilities Management Service

For the six months ended 30 June 2017, the contact service centre facilities management service recorded a revenue of approximately HK$8.1 million, representing a decrease of approximately 26.9% as compared to that of the corresponding period in 2016 (2016: approximately HK$11.1 million). The decrease of the revenue of contact service centre facilities management service is mainly due to the loss of one of the contracts.

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The segment results for the six months ended 30 June 2017 was approximately HK$1.6 million. The gross profit margin for contact service centre facilities management service slightly decreased from approximately 20.3% for the six months ended 30 June 2016 to approximately 20% for the six months ended 30 June 2017.

Others

The “Others” segment principally comprises licencing and system maintenance service, sales of system and software in relation to Wise-xb Contact Centre System (“Other Services related to Wise”) and securities services income (“Other Services related to securities”). For the six months ended 30 June 2017, the Group recorded a revenue of Other Services related to Wise amounted to approximately HK$1.5 million (2016: approximately HK$3.4 million) and a revenue of Other Services related to securities amounted to approximately HK$2.2 million (2016: nil).

The segment results of “Others” regarding Other Services related to Wise amounted to approximately HK$0.1 million for the six months ended 30 June 2017 (2016: approximately HK$0.9 million). The Group recorded a loss in the segment results of Other Services related to securities amounted to approximately HK$2.1 million (2016: nil).

For the segment of Other Services related to Wise, the significant decrease in gross profit was mainly due to the absence of a major system sales as in 2016. For the segment of Other Services related to securities, the loss in segment result was mainly attributable to the capital expenditure incurred for setting up the business and on-going operating cost.

PROFIT ATTRIBUTABLE TO OWNERS OF THE COMPANY

Profit attributable to owners of the Company decreased by approximately 45.6% from approximately HK$2.6 million for the six months ended 30 June 2016 to approximately HK$1.4 million for the six months ended 30 June 2017. The decrease of profit was mainly attributed to the loss of the new startup securities business.

CAPITAL STRUCTURE

There has been no material change in the capital structure of the Company since the Listing Date. The capital of the Company comprises only ordinary shares.

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LIQUIDITY AND FINANCIAL POSITION

The Group adheres to a prudent financial management policy and has a healthy financial position. During the six months under review, the Group financed our operations with internally generated cash flows and banking facilities provided by banks. As at 30 June 2017, the Group had net current assets of approximately HK$83.4 million (as at 31 December 2016: approximately HK$92.8 million) including cash and bank balances of approximately HK$24.8 million (as at 31 December 2016: approximately HK$47.2 million). The decrease in cash and bank balances as at 30 June 2017 was mainly attributable to investing of an available-for-sale financial asset.

As at 30 June 2017, the Group’s current ratio (current assets/current liabilities) and gearing ratio (total debts/total assets) were 5.2 (as at 31 December 2016: 5.1) and 4% (as at 31 December 2016: 5.1%) respectively. The gearing ratio was defined as the borrowings divided by the total asset without deferred income tax assets.

PLEDGE OF ASSETS

As at 30 June 2017, the Group had pledged its bank deposits of approximately HK$5.3 million (as at 31 December 2016: approximately HK$4.8 million) and had pledged investment fund amounted to approximately HK$7.1 million (as at 31 December 2016: approximately HK$7.1 million) to secure its banking facilities and trade receivable financing.

CORPORATE GOVERNANCE

For the six months ended 30 June 2017, the Company has complied with all the code provisions as set out in the Corporate Governance Code (the “Code”) in Appendix 15 to the GEM Listing Rules except for the code provisions A.6.2(a) and A.5.1 of the Code, details of which are set out below.

According to code provision A.6.2(a) of the Code, the functions of non-executive directors should include participating in board meetings to bring an independent judgement to bear on issues of strategy, policy, performance, accountability, resources, key appointments and standards of conduct. During the period under review, Mr. Tang Shing Bor, a nonexecutive Director, was absent from one of the two board meetings held due to another important engagement in the relevant time. According to code provision A.5.1 of the Code, the nomination committee of the Company should comprise a majority of independent nonexecutive director. Owing to the pass away of Mr. Ngan Chi Keung (who was an independent non-executive director of the Company (“INED”) and a member of the nomination committee of the Company) on 15 October 2016, the Company deviated from this code provision as the nomination committee of the Company comprised two executive directors and two INEDs. Following the appointment of Mr. Wong Kam Tai as an INED and a member of the nomination committee of the Company with effect from 12 January 2017, the nomination committee of the Company comprises a majority of INEDs and the Company has complied with this code provision.

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CODE OF CONDUCT FOR DIRECTORS’ SECURITIES TRANSACTIONS

The Company has adopted a code of conduct regarding securities transactions by the Directors on terms no less exacting than the required standard of dealings as set out in Rules 5.48 to 5.67 of the GEM Listing Rules. Having made specified enquiry on the Directors, all Directors confirmed that they have complied with the required standard of dealings concerning securities transactions for the six months period ended 30 June 2017.

SHARE OPTION SCHEME

During the six months ended 30 June 2017, no share option was granted, exercised, expired or lapsed under the share option scheme approved on 21 December 2011 (the “Share Option Scheme”).

DIRECTORS’ RIGHTS TO ACQUIRE SHARES

Apart from the Share Option Scheme, at no time during the six months ended 30 June 2017 was any of the Company or any associated corporation a party to any arrangement to enable the Directors to acquire benefits by means of acquisition of shares in, or debentures of, the Company or any other body corporate, and none of the Directors, or their spouses or children under the age 18, had any right to subscribe for the Shares in, or debentures of, the Company, or had exercised any such rights.

DIRECTORS’ INTERESTS IN COMPETING BUSINESS

The following Director and his close associate are considered to have interests in the following business, which competes or is likely to compete, either directly or indirectly, with the business of the Group.

Mr. Tang Yiu Sing (“Mr. Tang”) is an executive Director and Mr. Tang Shing Bor is a nonexecutive Director. Mr. Tang is a director and the ultimate beneficial owner of Stan Group (Holdings) Limited (“Stan Group”) which is engaged in, among others, the operation of a comprehensive business platform in Hong Kong, including but not limited to co-working space business, and Mr. Tang Shing Bor is the father of Mr. Tang. In this regard, Mr. Tang is considered to have interests in businesses which compete, or is likely to compete, either directly or indirectly, with the business of the Group.

As disclosed before, the members of the Risk Management and Internal Control Committee (“RMICC”) and the Board considered that given the delineation in target customer, image, pricing segment and running model of the co-working space business of Stan Group and the Group’s Elite Business Centre, and in particular, the Group’s Elite Business Centre is located in a grade-A office building targeting multinational corporations and government authorities while the co-working space business of Stan Group is located in a revitalised industrial building targeting entrepreneurs and business start-ups, the Board considers that the potential

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competition is minimum and the interest of the Group is adequately protected. The co-working space business of the Stan Group and the Group’s Elite Business Centre is operated and managed by two distinct management teams except for Mr. Tang as aforementioned is an executive Director and a director of Stan Group.

The RMICC and the management of the Group will continue to review on a regular basis the businesses and operations of the Group to ensure that its businesses are run on the basis that they are independent of, and at arm’s length from, the Stan Group.

Save as disclosed above, as at 30 June 2017, so far as the Directors are aware of, none of the Directors or the substantial/controlling shareholders of the Company has any interest in a business which competes or may compete with the business of the Group or has any other conflict of interest with the Group for the six month ended 30 June 2017.

DIRECTORS’ AND CHIEF EXECUTIVES’ INTERESTS AND/OR SHORT POSITIONS IN SHARES, UNDERLYING SHARES AND DEBENTURES OF THE COMPANY AND/ OR ITS ASSOCIATED CORPORATIONS

As at 30 June 2017, the interests and short positions of the Directors and chief executives of the Company (the “Chief Executives”) in the shares, underlying shares and debentures of the Company or any of its associated corporations (within the meanings of Part XV of the Securities and Futures Ordinance (Chapter 571 of the laws of Hong Kong) (the “SFO”)) which were notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which any such Director or Chief Executive is taken or deemed to have under such provision of the SFO) or which were required pursuant to section 352 of the SFO, to be entered in the register required to be kept by the Company, or which were required, pursuant to Securities Transactions by Directors as referred to in Rules 5.46 to 5.67 of the GEM Listing Rules, to be notified to the Company and the Stock Exchange were as follows:

Long positions in the shares of the Company

				Percentage of
				the issued share
			Number of	capital of
			shares/	the Company
Name of Directors/			underlying	as at
Chief Executives	Capacity	Nature of interests	shares held	30 June 2017
Mr. Tang Shing Bor	Interest in a controlled	Corporate interest	210,000,000	75%
	corporation		(Note)

Note: These interests were held by Million Top Enterprises Limited which is wholly and beneficially owned by Mr. Tang Shing Bor. Mr. Tang Shing Bor is therefore deemed to be interested in such shares by virtue of Part XV of the SFO.

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Save as disclosed above, as at 30 June 2017, none of the Directors and/or Chief Executive had any other interests or short positions in any shares, underlying shares or debentures of the Company or its associated corporations (within the meaning of Part XV of the SFO) which were notified to the 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 were required, pursuant to section 352 of the SFO, to be entered in the register referred to therein, or which were required, pursuant to Rules 5.46 to 5.67 of the GEM Listing Rules relating to the Securities Transactions by Directors, to be notified to the Company and the Stock Exchange.

SUBSTANTIAL SHAREHOLDERS’ INTERESTS AND/OR SHORT POSITION IN SHARES AND/OR UNDERLYING SHARES OF THE COMPANY

So far as is known to the Directors, as at 30 June 2017, the following persons (not being a Director or Chief Executive) who had interests or short positions in the shares or underlying shares which would fall to be disclosed to the Company under provision of Divisions 2 and 3 of Part XV of the SFO, or which were recorded in the register required to be kept by the Company under section 336 of the SFO, or who is directly or indirectly interested in 5% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of the Company:

Long positions in the shares of the Company

			Approximate
			percentage of
			the issued share
		Number of	capital of
Name of substantial		Shares/underlying	the Company
shareholders	Capacity	Shares held	as at 30 June 2017
Million Top Enterprises	Beneficial owner	21,000,000	75%
Limited_(Note)_

Note: Million Top Enterprises Limited is wholly and beneficially owned by Mr. Tang Shing Bor, a nonexecutive Director.

Save as disclosed above, as at 30 June 2017, the Directors were not aware of any other persons (other than Directors or Chief Executive) who had interests and/or short positions in the shares or underlying shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO or which were recorded in the register required to be kept by the Company pursuant to section 336 of the SFO, or who is directly or indirectly interested in 5% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of the Company.

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AUDIT COMMITTEE

The Audit Committee has reviewed the unaudited interim results of the Group for the six months ended 30 June 2017 and is of the opinion that the accounting policies of the Group are in accordance with the generally accepted accounting practices in Hong Kong, the Stock Exchange and legal requirements, and that adequate disclosures have been made.

PRE-EMPTIVE RIGHTS

There is no provision for pre-emptive rights under the Company’s articles of association or the laws of the Cayman Islands which would oblige the Company to offer new shares on a pro rata basis to existing shareholders.

PURCHASE, SALE OR REDEMPTION OF THE COMPANY’S LISTED SECURITIES

The Company did not redeem any of its listed securities, and neither did the Company nor any of its subsidiaries purchase or sell any of the listed securities of the Company for the six months ended 30 June 2017.

By order of the Board ETS Group Limited Tang Yiu Sing Executive Director and Chief Executive Officer

Hong Kong, 3 August 2017

As at the date of this announcement, the executive directors of the Company are Mr. Tang Yiu Sing and Mr. Yeung Ka Wing; the non-executive director of the Company is Mr. Tang Shing Bor and the independent non-executive directors of the Company are Mr. Wong Sik Kei, Mr. Cheung Kong Ting and Mr. Wong Kam Tai.

This announcement will remain on the “Latest Company Announcements” page of the GEM website at www.hkgem.com for at least 7 days from the date of its posting and on the Company’s website at www.etsgroup.com.hk.

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