Future Data Group Limited — Annual Report 2020

Mar 22, 2021

FUTURE DATA GROUP LIMITED

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 8229)

ANNUAL RESULTS ANNOUNCEMENT FOR THE YEAR ENDED 31 DECEMBER 2020

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

GEM has been positioned as a market designed to accommodate small and mid-sized 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.

Given that the companies listed on GEM are generally small and mid-sized companies, 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.

Hong Kong Exchanges and Clearing Limited and the Stock Exchange 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.

This announcement, for which the directors (the “ Directors ”) of Future Data Group Limited (the “ Company ”) collectively and individually accept full responsibility, includes particulars given in compliance with the Rules Governing the Listing of Securities on GEM of the Stock Exchange (the “ GEM Listing Rules ”) for the purpose of giving information with regard to the Company and its subsidiaries (collectively referred to as the “ Group ”). 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 HIGHLIGHTS

For the year ended 31 December 2020

The Group’s revenue for the year ended 31 December 2020 was approximately HK$679.1 million representing an increase of approximately 5.0% as compared to that of approximately HK$646.5 million in 2019.

Profit for the year of the Group for the year ended 31 December 2020 was approximately HK$7.5 million representing an increase of approximately 85.9% as compared to that of approximately HK$4.0 million in 2019.

Basic and diluted earnings per share for the year ended 31 December 2020 was HK cents 1.97 (Basic and diluted earnings per share for 2019: HK cents 1.09).

Cash per share as at 31 December 2020 was HK cents 24.0 (Cash per share for 2019: HK cents 29.0).

Equity attributable to owners of the Company per share as at 31 December 2020 was HK cents 35.7 (Equity attributable to owners of the Company per share for 2019: HK cents 32.3).

The Board does not recommend the payment of a final dividend for the year ended 31 December 2020 (2019: Nil).

ANNUAL RESULTS

The board of directors (the “ Board ”) of the Company is pleased to present the audited results of the Group for the year ended 31 December 2020, together with comparative audited figures for the corresponding year in 2019 as follows.

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CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 31 December 2020

Notes Revenue 5 Cost of sales and services Gross profit Other income Selling and administrative expenses Finance costs Profit before income tax 6 Income tax expense 7 Profit for the year Other comprehensive income for the year Item that will not be reclassified subsequently to profit or loss: Recognition of actuarial losses on defined benefit obligations Item that may be reclassified subsequently to profit or loss: Exchange differences arising on translation of foreign operations Total other comprehensive income Total comprehensive income for the year Profit/(loss) attributable to: Owners of the Company Non-controlling interests Total comprehensive income attributable to: Owners of the Company Non-controlling interests Earnings per share attributable to owners of the Company – Basic and Diluted_(HK cents)_ 9	2020 HK$’000 (audited) 679,053 (602,131) 76,922 6,558 (73,707) (746) 9,027 (1,514) 7,513 (826) 6,533 5,707 13,220 7,876 (363) 7,513 13,583 (363) 13,220 1.97	2019 HK$’000 (audited) 646,470 (559,441) 87,029 4,974 (86,297) (1,445) 4,261 (220) 4,041 (1,631) (3,421) (5,052) (1,011) 4,373 (332) 4,041 (679) (332) (1,011) 1.09

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CONSOLIDATION STATEMENT OF FINANCIAL POSITION

As at 31 December 2020

Notes ASSETS AND LIABILITIES Non-current assets Property, plant and equipment Intangible assets 10 Goodwill 11 Other financial assets 12 Loan to ultimate holding company 15 Deposits for acquisition of properties Guarantee deposits Deferred tax assets Current assets Inventories 13 Trade and other receivables 14 Contract assets 16 Prepayments Pledged bank deposits Fixed bank deposits Cash and cash equivalents Current liabilities Trade and other payables 17 Contract liabilities 16 Lease liabilities Bank borrowings 18 Tax payable Net current assets Total assets less current liabilities	2020 HK$’000 (audited) 9,959 8,095 7,534 7,407 8,869 10,498 3,901 8,500 64,763 15,812 79,813 24,679 14,273 – 4,536 96,189 235,302 96,698 23,960 2,398 24,722 916 148,694 86,608 151,371	2019 HK$’000 (audited) 6,715 13,854 7,534 5,000 – – 4,671 7,160
		44,934
		9,729 89,794 21,623 10,748 3,372 4,316 116,075
		255,657
		115,966 30,443 993 20,582 239
		168,223
		87,434
		132,368

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Notes Non-current liabilities Lease liabilities Bank borrowings 18 Defined benefit obligations Deferred tax liabilities Net assets EQUITY Share capital Reserves Equity attributable to owners of the Company Non-controlling interests Total equity	2020 HK$’000 (audited) 2,052 5,568 166 217 8,003 143,368 4,000 138,710 142,710 658 143,368	2019 HK$’000 (audited) 661 – 1,181 378
		2,220
		130,148
		4,000 125,127
		129,127 1,021
		130,148

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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 31 December 2020

Balance at 1 January 2019 (audited) Profit for the year Recognition of actuarial losses on defined benefit obligations Exchange differences arising on translation of foreign operations Total comprehensive income Dividends paid in respect of the previous year_(Note 8)_ Acquisition of non-controlling interests Balance at 31 December 2019 (audited) Balance at 1 January 2020 (audited) Profit for the year Recognition of actuarial losses on defined benefit obligations Exchange differences arising on translation of foreign operations Total comprehensive income Appropriation Balance at 31 December 2020 (audited)	Share capital HK$’000 4,000 – – – – – – 4,000 4,000 – – – – – 4,000	Share premium HK$’000 41,598 – – – – (5,880) – 35,718 35,718 – – – – – 35,718*	Capital reserve Research and development reserve HK$’000 HK$’000 13,855 3,674 – – – – – – – – – – – – 13,855 3,674 13,855 3,674 – – – – – – – – – – 13,855 3,674**	Foreign exchange reserve HK$’000 (2,371) – – (3,421) (3,421) – – (5,792) (5,792) – – 6,533 6,533 – 741*	Legal reserve HK$’000 1,995 – – – – – – 1,995 1,995 – – – – 495 2,490*	Retained earnings Equity attributable to owners of the Company HK$’000 HK$’000 72,935 135,686 4,373 4,373 (1,631) (1,631) – (3,421) 2,742 (679) – (5,880) – – 75,677 129,127 75,677 129,127 7,876 7,876 (826) (826) – 6,533 7,050 13,583 (495) – 82,232 142,710*	Non- controlling interests HK$’000 – (332) – – (332) – 1,353 1,021 1,021 (363) – – (363) – 658	Total HK$’000 135,686 4,041 (1,631) (3,421)
								(1,011) (5,880) 1,353
								130,148
								130,148 7,513 (826) 6,533
								13,220 –
								143,368

• The total of these balances represents “Reserves” in the consolidated statement of financial position.

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CONSOLIDATED STATEMENT OF CASH FLOWS

For the year ended 31 December 2020

Cash flows from operating activities Profit before income tax expense Adjustments for: Bad debt expenses on write off of trade receivables Amortisation of intangible assets Depreciation of property, plant and equipment Exchange gain Finance costs Net provision/(reversal) for impairment of inventories Impairment of intangible assets Interest income Reversal of contingent consideration Net loss/(gain) on disposal of property, plant and equipment Fair value gain on other financial assets Net (reversal of)/provision for impairment of trade receivables Operating profit before working capital changes Increase in inventories Decrease in trade and other receivables (Increase)/decrease in contract assets Increase in prepayments Decrease in trade and other payables (Decrease)/increase in contract liabilities Decrease in net defined benefit obligations Cash (used in)/generated from operations Income taxes paid Income taxes refunded Interest received Net cash used in operating activities	2020 HK$’000 (audited) 9,027 192 4,848 4,695 (2,763) 746 1,919 911 (453) – 5 (127) (276) 18,724 (7,664) 12,879 (1,938) (2,894) (21,495) (6,975) (2,058) (11,421) (1,364) 1,161 453 (11,171)	2019 HK$’000 (audited) 4,261 – 4,180 5,761 (586) 1,445 (262) – (604) (32) (60) (118) 7,637 21,622 (3,365) 27,721 1,232 (4,285) (58,408) 19,186 (1,822) 1,881 (6,034) 108 612 (3,433)

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Cash flows from investing activities Net cash outflows from acquisition through business combination Research and development expenditures Purchases of property, plant and equipment Deposits paid for acquisition of properties Proceeds from deposits transferred upon disposal of properties Purchases of other financial assets Proceeds from disposal of property, plant and equipment Decrease in fixed bank deposits (Increase)/decrease in loan to/amount due from ultimate holding company Net cash used in investing activities Cash flows from financing activities Proceeds from bank borrowings Repayments of bank borrowings Interest paid Repayments of principal portion of the lease liabilities Dividends paid Net cash generated from/(used in) financing activities Net decrease in cash and cash equivalents Cash and cash equivalents at beginning of year Effect of exchange rate changes Cash and cash equivalents at end of year Analysis of balances of cash and cash equivalents Cash and bank balances	2020 HK$’000 (audited) – – (1,825) (15,562) 5,809 (1,873) 5 3,293 (8,239) (18,392) 138,475 (130,431) (746) (2,171) – 5,127 (24,436) 116,075 4,550 96,189 96,189	2019 HK$’000 (audited) (2,843) (2,854) (1,519) – – (228) 98 – 5,874 (1,472) 145,304 (146,834) (1,445) (1,941) (5,880) (10,796) (15,701) 136,134 (4,358) 116,075 116,075

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 2020

1. GENERAL

The Company was incorporated in the Cayman Islands on 4 January 2016 as an exempted company with limited liability under the Companies Law, Cap 22 (Law 3 of 1961, as revised and consolidated) of the Cayman Islands and its shares are listed on GEM of the Stock Exchange. The Company’s registered office is located at Cricket Square, Hutchins Drive, P.O. Box 2681, Grand Cayman, KY1-1111, Cayman Islands. The Company’s principal place of business is located at Suite 1507–08, 15/F, Two Chinachem Exchange Square, 338 King’s Road, North Point, Hong Kong.

The principal places of the Group’s business are located at Unit 801–809, 822, Mullae SKV1 Center, 10, Seonyu-ro9-gil, Yeongdeungpo-gu, Seoul, Korea and at the aforementioned address in Hong Kong.

The principal activity of the Company is investment holding. The Group is engaged in the provision of (i) integration of systems with network connectivity, cloud computing and security elements, (ii) maintenance services and (iii) cyber security services in Korea and Hong Kong.

As at 31 December 2020, the Directors of the Company considered the immediate holding company to be LiquidTech Limited (“ LiquidTech ”), incorporated in the British Virgin Islands, and the ultimate holding company to be Asia Media Systems Pte. Ltd. (“ AMS ”) incorporated in Singapore.

2. ADOPTION OF HONG KONG FINANCIAL REPORTING STANDARDS (“HKFRSs”)

(a) Adoption of new or amended HKFRSs

The Hong Kong Institute of Certified Public Accountants (the “ HKICPA ”) has issued a number of amended HKFRSs that are first effective for the current accounting period of the Group:

Amendments to HKFRS 3 Definition of a Business Amendments to HKAS 1 and HKAS 8 Definition of Material Amendments to HKAS 39, Interest Rate Benchmark Reform HKFRS 7 and HKFRS 9

The Group has not early applied any amended HKFRSs that is not yet effective for the current accounting period. None of these amended HKFRSs has a significant impact on the Group’s results and financial position for the current or prior period.

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(b) Revised HKFRSs that have been issued but are not yet effective

The following revised HKFRSs, potentially relevant to the Group’s financial statements, have been issued, but are not yet effective and have not been early adopted by the Group. The Group’s current intention is to apply these changes on the date they become effective.

Amendments to HKAS 1	Classification of Liabilities as Current or Non-current and
	Hong Kong Interpretation 5 (2020), Presentation of Financial
	Statements – Classification by the Borrower of a Term Loan
	that Contains a Repayment on Demand Clause5
Amendments to HKAS 16	Proceeds before Intended Use3
Amendments to HKAS 37	Onerous Contracts – Cost of Fulfilling a Contract3
Amendments to HKFRS 3	Reference to the Conceptual Framework4
Amendment to HKFRS 16	COVID-19-Related Rent Concessions1
Amendments to HKAS 39,	Interest Rate Benchmark Reform – Phase 22
HKFRS 4, HKFRS 7,
HKFRS 9 and HKFRS 16
Annual Improvements to	Amendments to HKFRS 9, Illustrative Examples accompanying
HKFRSs 2018–20202	HKFRS 16

• 1 Effective for annual periods beginning on or after 1 January 2020. 2 Effective for annual periods beginning on or after 1 January 2021. 3 Effective for annual periods beginning on or after 1 January 2022.

• 4 Effective for business combinations for which the date of acquisition is on or after the beginning of the first annual period beginning on or after 1 January 2022.

• 5 Effective for annual period beginning on or after 1 January 2023.

Amendments to HKAS 1, Classification of Liabilities as Current or Non-current and Hong Kong Interpretation 5 (2020), Presentation of Financial Statements – Classification by the Borrower of a Term Loan that Contains a Repayment on Demand Clause

The amendments clarify that the classification of liabilities as current or non-current is based on rights that are in existence at the end of the reporting period, specify that classification is unaffected by expectations about whether an entity will exercise its right to defer settlement of a liability and explain that rights are in existence if covenants are complied with at the end of the reporting period. The amendments also introduce a definition of ‘settlement’ to make clear that settlement refers to the transfer to the counterparty of cash, equity instruments, other assets or services.

Hong Kong Interpretation 5 (2020) was revised as a consequence of the amendments to HKAS 1 issued in August 2020. The revision to Hong Kong Interpretation 5 (2020) updates the wordings in the interpretation to align with the amendments to HKAS 1 with no change in conclusion and do not change the existing requirements.

The directors of the Company do not anticipate that the application of the amendments and revision in the future will have a significant impact on the consolidated financial statements.

Amendments to HKAS 16, Proceeds before Intended Use

The amendments prohibit deducting from the cost of an item of property, plant and equipment any proceeds from selling items produced while bringing that asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Instead, the proceeds from selling such items, and the cost of producing those items, is recognised in profit or loss.

The Directors of the Company do not anticipate that the application of the amendments in the future will have significant impact on the consolidated financial statements.

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Amendments to HKAS 37, Onerous Contracts – Cost of Fulfilling a Contract

The amendments specify that the ‘cost of fulfilling’ a contract comprises the ‘costs that relate directly to the contract’. Costs that relate directly to a contract can either be incremental costs of fulfilling that contract (e.g. direct labour and materials) or an allocation of other costs that relate directly to fulfilling contracts (e.g. the allocation of the depreciation charge for an item of property, plant and equipment used in fulfilling the contract).

The Directors of the Company is currently assessing the impact that the application of the amendments will have on the consolidated financial statements.

Amendment to HKFRS 16, COVID-19-Related Rent Concessions

HKFRS 16 was amended to provide a practical expedient to lessees in accounting for rent concessions arising as a result of the COVID-19 pandemic, by including an additional practical expedient in HKFRS 16 that permits entities to elect not to account for rent concessions as modifications. The practical expedient applies only to rent concessions occurring as a direct consequence of COVID-19 pandemic and only if all of the following criteria are satisfied:

• (a) the change in lease payments results in revised consideration for the lease that is substantially the same as, or less than, the consideration for the lease immediately preceding the change;

• (b) the reduction in lease payments affects only payments originally due on or before 30 June 2021; and

• (c) there is no substantive change to other terms and conditions of the lease.

Rent concessions that satisfy these criteria may be accounted for in accordance with this practical expedient, which means the lessee does not need to assess whether the rent concession meets the definition of lease modification. Lessees shall apply other requirements of HKFRS 16 in accounting for the rent concession.

Accounting for rent concessions as lease modifications would have resulted in the Group remeasuring the lease liability to reflect the revised consideration using a revised discount rate, with the effect of the change in the lease liability recorded against the right-of-use asset. By applying the practical expedient, the Group is not required to determine a revised discount rate and the effect of the change in the lease liability is reflected in profit or loss in the period in which the event or condition that triggers the rent concession occurs.

The Directors of the Company do not anticipate that the application of the amendment in the future will have a significant impact on the consolidated financial statements.

Amendments to HKFRS 3, Reference to the Conceptual Framework

The amendments update HKFRS 3 so that it refers to the revised Conceptual Framework for Financial Reporting 2018 instead of the version issued in 2010. The amendments add to HKFRS 3 a requirement that, for obligations within the scope of HKAS 37, an acquirer applies HKAS 37 to determine whether at the acquisition date a present obligation exists as a result of past events. For a levy that would be within the scope of HK(IFRIC)-Int 21 Levies, the acquirer applies HK(IFRIC)Int 21 to determine whether the obligating event that gives rise to a liability to pay the levy has occurred by the acquisition date. The amendments also add an explicit statement that an acquirer does not recognise contingent assets acquired in a business combination.

The Directors of the Company do not anticipate that the application of the amendments in the future will have a significant impact on the consolidated financial statements.

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Amendments to HKAS 39, HKFRS 4, HKFRS 7, HKFRS 9 and HKFRS 16, Interest Rate Benchmark Reform – Phase 2

The amendments address issues that might affect financial reporting when a company replaces the old interest rate benchmark with an alternative benchmark rate as a result of the interest rate benchmark reform (the “ Reform ”). The amendments complement those issued in November 2019 and relate to (a) changes to contractual cash flows in which an entity will not have to derecognise or adjust the carrying amount of financial instruments for changes required by the Reform, but will instead update the effective interest rate to reflect the change to the alternative benchmark rate; (b) hedge accounting in which an entity will not have to discontinue its hedge accounting solely because it makes changes required by the Reform, if the hedge meets other hedge accounting criteria; and (c) disclosures in which an entity will be required to disclose information about new risks arising from the Reform and how it manages the transition to alternative benchmark rates.

The Directors of the Company do not anticipate that the application of the amendments in the future will have a significant impact on the consolidated financial statements.

Annual Improvements to HKFRSs 2018–2020

Details of the amendments that are expected to be applicable to the Group are as follows:

• HKFRS 9, Financial Instruments, which clarify the fees included in the ‘10 per cent’ test in paragraph B3.3.6 of HKFRS 9 in assessing whether to derecognise a financial liability, explaining that only fees paid or received between the entity and the lender, including fees paid or received by either the entity or the lender on other’s behalf are included.

• HKFRS 16, Leases, which amend Illustrative Example 13 to remove the illustration of reimbursement of leasehold improvements by the lessor in order to resolve any potential confusion regarding the treatment of lease incentives that might arise because of how lease incentives are illustrated in that example.

The Directors of the Company do not anticipate that the application of the amendments in the future will have a significant impact on the consolidated financial statements.

3. BASIS OF PREPARATION

(a) Statement of compliance

The consolidated financial statements have been prepared in accordance with all applicable Hong Kong Financial Reporting Standards, Hong Kong Accounting Standards and Interpretations (hereinafter collectively referred to as the “ HKFRSs ”) issued by the HKICPA and the disclosure requirements of the Hong Kong Companies Ordinance. In addition, the financial statements include applicable disclosures required by the GEM Listing Rules.

(b) Basis of measurement

The consolidated financial statements have been prepared under the historical cost basis except for certain other financial assets which are measured at fair value as set out in note 12.

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(c) Functional and presentation currency

The functional currencies of the Company’s principal operating subsidiaries in Korea and Hong Kong, are South Korean Won (“ KRW ”), Hong Kong Dollars (“ HK$ ”) respectively, while the consolidated financial statements are presented in HK$ which is also the functional currency of the Company. As the Company’s shares are listed on GEM of the Stock Exchange, the Directors consider that it will be more appropriate to adopt HK$ as the Group’s presentation currency. The amounts stated are rounded to the nearest HK$1,000 unless otherwise stated.

4. SEGMENT INFORMATION

The executive directors of the Company are the Group’s chief operating decision-makers. Management has determined the operating segments based on the information reviewed by the executive directors for the purposes of allocating resources and assessing performance.

The executive directors review the performance of the Group mainly from the service perspective. The Group is organised into three segments engaged in:

• (i) System integration

• (ii) Maintenance services

• (iii) Cyber security services

The executive directors assess the performance of the operating segments based on a measure of gross profit of each segment, which is consistent with that of the consolidated financial statements. The revenue reported to the executive directors is measured in a manner consistent with that in the consolidated statement of comprehensive income.

There was no information regarding segment assets and liabilities provided to the executive directors as they do not use such information for the purpose of allocation of resources and segment performance assessment.

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The segment results are as follows:

(a) Business segments

For the year ended 31 December 2020

Total segment revenue Inter-segment revenue Revenue from external customers Gross profit/segment results Other income Selling and administrative expenses Finance costs Profit before income tax Income tax expense Profit for the year	System integration HK$’000 487,951 – 487,951 23,202	Maintenance services HK$’000 164,085 – 164,085 45,348	Cyber security services HK$’000 34,314 (7,297) 27,017 8,372	Total HK$’000 686,350 (7,297) 679,053 76,922 6,558 (73,707) (746) 9,027 (1,514) 7,513

For the year ended 31 December 2019

Total segment revenue Inter-segment revenue Revenue from external customers Gross profit/segment results Other income Selling and administrative expenses Finance costs Profit before income tax Income tax expense Profit for the year	System integration HK$’000 484,579 – 484,579 40,482	Maintenance services HK$’000 136,955 – 136,955 38,774	Cyber security services HK$’000 35,125 (10,189) 24,936 7,773	Total HK$’000 656,659 (10,189) 646,470 87,029 4,974 (86,297) (1,445) 4,261 (220) 4,041

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(b) Geographic information

The following table provides an analysis of the Group’s revenue from external customers and noncurrent assets excluding goodwill, other financial assets, loan to ultimate holding company, deposits for acquisition of properties, guarantee deposits and deferred tax assets (“ specified non-current assets ”).

Hong Kong Korea	Revenue from external customers (by customers location) 2020 2019 HK$’000 HK$’000 27,017 24,936 652,036 621,534 679,053 646,470	Specified non-current assets 2020 2019 HK$’000 HK$’000 9,580 14,915 8,474 5,654 18,054 20,569	Specified non-current assets 2020 2019 HK$’000 HK$’000 9,580 14,915 8,474 5,654 18,054 20,569
			20,569

The above specified non-current assets are analysed based on the principal places of the Group’s business operations.

The principal places of the Group’s operations are Korea and Hong Kong. The Group regarded Korea as its place of domicile.

5. REVENUE

Revenue mainly represents income from provision of system integration, maintenance services and cyber security services during the reporting period. An analysis of the Group’s revenue by category for the year ended 31 December 2020 was as follows:

• (a) An analysis of the Group’s revenue by business segments and timing of recognition:

Revenue from customers and recognised over time – Contract revenue from provision of system integration – Contract revenue from provision of maintenance services – Contract revenue from provision of cyber security services	2020 HK$’000 487,951 164,085 27,017 679,053	2019 HK$’000 484,579 136,955 24,936
		646,470

System integration, maintenance services and cyber security services represent performance obligations that the Group satisfies over time for each respective contract.

The following table provides information about trade receivables, contract assets and contract liabilities from contracts with customers:

	2020	2019
	HK$’000	HK$’000
– Trade receivables (net of impairment)(note 14)	74,507	85,830
– Contract assets (net of impairment)(note 16(a))	24,679	21,623
– Contract liabilities_(note 16(b))_	23,960	30,443

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(b) Disaggregation of revenue

The following tables disaggregate the Group’s revenue from contracts with customers:

Type of goods or services – Cloud infrastructure – Security – Software license Total revenue from contracts with customers Type of customers – Public sector – Private sector Total revenue from contracts with customers Contract duration – Within 12 months – Over 12 months but less than 24 months – Over 24 months Total revenue from contracts with customers	2020 System integration Maintenance services Cyber security services HK$’000 HK$’000 HK$’000 385,139 157,145 – 102,812 6,940 27,017 – – – 487,951 164,085 27,017 232,564 98,381 – 255,387 65,704 27,017 487,951 164,085 27,017 464,926 137,041 21,103 23,025 2,776 2,774 – 24,268 3,140 487,951 164,085 27,017	Total HK$’000 542,284 136,769 – 679,053 330,945 348,108 679,053 623,070 28,575 27,408 679,053	System integration HK$’000 386,199 98,380 – 484,579 201,286 283,293 484,579 482,773 1,666 140 484,579	2019 Maintenance services Cyber security services HK$’000 HK$’000 125,846 – 5,418 24,936 5,691 – 136,955 24,936 75,765 – 61,190 24,936 136,955 24,936 104,886 20,892 11,239 2,087 20,830 1,957 136,955 24,936	Total HK$’000 512,045 128,734 5,691
					646,470
					277,051 369,419
					646,470
					608,551 14,992 22,927
					646,470

(c) Transaction price allocated to the remaining performance obligations

The follow table shows the aggregate amount of the transaction price allocated to performance obligations that are unsatisfied (or partially unsatisfied) as at end of the reporting period:

Provision of system integration Provision of maintenance services Provision of cyber security services	2020 HK$’000 58,391 88,877 18,856 166,124	2019 HK$’000 86,931 70,697 17,520
		175,148

Based on the information available to the Group at the end of the reporting period, the management of the Group expects the transaction price amounting to HK$166,124,000 (2019: HK$175,148,000) allocated to the contracts under system integration, maintenance services and cyber security services as at 31 December 2020 will be recognised as revenue on or before 31 August 2023 (2019: on or before 31 January 2023).

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6. PROFIT BEFORE INCOME TAX

Profit before income tax is arrived at after charging/(crediting):

Carrying amount of inventories sold Net provision/(reversal) for impairment of inventories_(note i) Costs of inventories recognised as expenses Employee costs Depreciation charge: – Owned property, plant and equipment – Right-of-use assets Amortisation of intangible assets Auditor’s remuneration Research and development costs(note ii) Subcontracting costs Bad debt expenses on write off of trade receivables (Reversal)/provision for impairment of trade receivables Impairment on intangible assets Interest on lease liabilities Net loss on disposal of other financial assets Net (gain)/loss on foreign exchange Net loss/(gain) on disposal of property, plant and equipment Fair value gain on other financial assets Reversal of contingent consideration Reversal of provision for litigation claims(note iii)_ Short term leases expenses Low-value assets leases expenses	2020 HK$’000 514,261 1,919 516,180 98,812 2,338 2,357 4,695 4,848 1,028 5,146 27,320 192 (276) 911 83 11 (2,763) 5 (127) – – 645 32	2019 HK$’000 487,068 (262) 486,806 94,907 3,347 2,414 5,761 4,180 1,100 2,824 38,229 – 7,637 – 71 12 590 (60) (118) (32) (3,256) 407 23

Notes:

• (i) Write down of HK$262,000 made in prior year against the carrying value of inventories have been reversed. This reversal arose due to an increase in the estimated net realisable value of certain inventories as a result of a change in consumer preferences.

• (ii) Research and development costs included employee costs of approximately HK$2,897,000 (2019: HK$2,824,000) as disclosed above.

• (iii) Reversal of provision for litigation claims for the year ended 31 December 2019 arose due to the litigation was settled in the year.

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7. INCOME TAX EXPENSE

The amount of taxation in the consolidated statement of comprehensive income represents:

Current tax – Korea Deferred tax – Korea – Hong Kong Income tax expense	2020 HK$’000 2,339 (146) (679) (825) 1,514	2019 HK$’000 1,151 (757) (174) (931) 220

Global Telecom Company Limited (“ Global Telecom ”) is subject to Korean Corporate Income Tax which comprised national and local taxes (collectively “ Korean Corporate Income Tax ”). Korean Corporate Income Tax is charged at the progressive rate from 11% to 24.2% on the estimated assessable profit of Global Telecom derived worldwide during the year ended 31 December 2020. The Korean Corporate Income Tax rates applicable to Global Telecom for the year ended 31 December 2020 are as follows:

• 11% on assessable profit up to the first KRW200 million (equivalent to approximately HK$1.3 million for the year ended 31 December 2020 (2019: KRW200 million (equivalent to approximately HK$1.3 million));

• 22% on assessable profit in excess of KRW200 million (equivalent to approximately HK$1.3 million) for the year ended 31 December 2020 (2019: KRW200 million (equivalent to approximately HK$1.3 million)) and up to KRW20 billion (equivalent to approximately HK$131.7 million) for the year ended 31 December 2020 (2019: KRW20 billion (equivalent to approximately HK$134.7 million)); and

• 24.2% on assessable profit in excess of KRW20 billion (equivalent to approximately HK$131.7 million for the year ended 31 December 2020 (2019: KRW20 billion (equivalent to approximately HK$134.7 million)).

Subsidiaries operating in Hong Kong are subject to Hong Kong profits tax. Under two-tiered profits tax rates regime, if the entity has one or more connected entity, the two-tiered profits tax rates would only apply to the one which is nominated to be chargeable at the two-tiered rates. Hong Kong profits tax of the nominated entity is calculated at 8.25% on assessable profits up to HK$2 million and 16.5% on any part of assessable profits over HK$2 million.

For the subsidiary operating in Hong Kong which does not qualify for two-tiered profits tax rates, a profits tax rate of 16.5% on assessable profit shall remain in calculating Hong Kong profits tax.

– 18 –

The income tax expense for the year can be reconciled to the profit before income tax expense in the consolidated statement of comprehensive income as follows:

Profit before income tax Tax thereon at domestic rates applicable to profit or loss in the jurisdictions concerned Tax effect of expenses not deductible for tax purposes Withholding tax on dividend declared by a subsidiary Tax credit Others Income tax expense for the year 8. DIVIDENDS 2018 final dividend of HK cents 1.47 per ordinary share	2020 HK$’000 9,027 2,358 2,076 792 (3,713) 1 1,514 2020 HK$’000 –	2019 HK$’000 4,261
		975 2,506 – (2,801) (460)
		220
		2019 HK$’000 5,880

The final dividend of HK$5,880,000 for the year ended 31 December 2018 was paid on 6 June 2019. The Directors do not recommend the payment of a final dividend for the years ended 31 December 2020 and 2019.

9. BASIC AND DILUTED EARNINGS PER SHARE

The calculation of basic and diluted earnings per share is based on the following data.

Earnings Profit for the year attributable to owners of the Company Number of shares Weighted average number of ordinary shares	2020 HK$’000 7,876 2020 Number ’000 400,000	2019 HK$’000 4,373
		2019 Number ’000 400,000

Weighted average of 400,000,000 shares for the years ended 31 December 2020 and 2019 represent the number of shares in issue throughout the respective years.

Diluted earnings per share were the same as the basic earnings per share as the Group had no potential dilutive ordinary shares during the years ended 31 December 2020 and 2019.

– 19 –

10. INTANGIBLE ASSETS

Cost: At 1 January 2019 Additions Acquired through business combination At 31 December 2019 and 2020 Accumulated amortisation: At 1 January 2019 Amortisation charge for the year At 31 December 2019 Amortisation charge for the year Impairment recognised for the year_(note ii)_ At 31 December 2020 Net carrying Amount At 31 December 2020 At 31 December 2019	Reacquired right of software HK$’000 – – 1,950 1,950 – 350 350 600 – 950 1,000 1,600	Software platforms HK$’000 (note i) 16,503 2,854 911 20,268 4,184 3,830 8,014 4,248 911 13,173 7,095 12,254	Total HK$’000 16,503 2,854 2,861
			22,218
			4,184 4,180
			8,364 4,848 911
			14,123
			8,095
			13,854

Notes:

• (i) The software platforms acquired were for three distinct software platforms with cyber security, big data and internet of things (“ IoT ”) features.

• (ii) For the year ended 31 December 2020, an impairment loss of HK$911,000 (note 6) was recognised, which represented a full write-down of the carrying amount of one of the acquired software platforms with IoT features as it is not expected that it will generate any future economic benefit. The impairment loss was recognised in the consolidated statement of profit or loss and other comprehensive income and included in selling and administrative expenses.

11. GOODWILL

Net carrying amount At 1 January Acquired through business combination At 31 December	2020 HK$’000 7,534 – 7,534	2019 HK$’000 – 7,534
		7,534

– 20 –

Impairment testing on goodwill

For the purpose of impairment testing, goodwill is allocated to the cash generating unit (“ CGU ”) identified as follows:

	2020	2019
	HK$’000	HK$’000
Cyber security – Hong Kong	7,534	7,534

The recoverable amount of the CGU has been determined from value in use calculations based on cash flow projections from formally approved budgets covering a five-year period. The discount rate, which is pre-tax and reflects specific risks relating to the CGU, applied to the cash flow projections is 13.52% (2019: 15.18%). Cash flows beyond the five-year period are extrapolated using an estimated weighted average growth rate of 3% (2019: 3%), which does not exceed the long-term growth rate for the cyber security industry in Hong Kong.

As at 31 December 2020, the value in use of the CGU exceeded its carrying amount, and hence the goodwill and intangible assets (other than fully-impaired software platform with IoT features (note 10)) allocated to this CGU was not regarded as impaired.

12. OTHER FINANCIAL ASSETS – NON-CURRENT

Financial assets measured at fair value through profit or loss – Unlisted equity securities_(note (a)) – Investment in insurance policy(note (b))_	2020 HK$’000 4,821 2,586 7,407	2019 HK$’000 2,839 2,161
		5,000

(a) The investment represents Global Telecom’s equity interests (both of which are less than 20%) in two cooperatives in Korea:

Korea Software Financial Cooperative (“KSFC”) Korea Broadcasting & Communication Financial Cooperative (“KBCFC”)	2020 HK$’000 4,779 42 4,821	2019 HK$’000 2,799 40
		2,839

KSFC was established pursuant to the Software Industry Promotion Act of Korea. KSFC provides to its members, (i) loans and investments necessary to develop software, upgrade technologies and stabilise the management, (ii) guarantees for liabilities of any software business operator who intends to obtain loans from financial institutions for the purpose of developing software, upgrading technologies and stabilising his/her business management, (iii) performance guarantees necessary for business.

– 21 –

KBCFC was established under the provisions of the Small and Medium Enterprise Cooperatives Act of Korea with aims of promoting sound development of information communication industry and welfare of its members to encourage their independent economic activities for the improvement of their economic status and the balanced development of the national economy. Small and medium enterprises engaging in manufacturing telecommunication and broadcasting apparatuses and industrial cooperatives engaging in an identical or related type of business are eligible for membership in KBCFC.

As at 31 December, KSFC provided the following guarantees on behalf of Global Telecom:

Description of guarantees which are related to projects of Global Telecom – Bidding guarantees – Contract guarantees – Defect guarantees – Payment guarantees – Prepayment guarantees	2020 HK$’000 7,380 130,638 45,945 78 119,404 303,445	2019 HK$’000 6,987 105,989 37,500 – 77,050
		227,526

KSFC is entitled to be indemnified by Global Telecom under the terms and conditions of the above guarantees given by KSFC. The directors consider that the probability for Global Telecom to indemnify KSFC is remote based on historical experiences and the disclosure of contingent liabilities arising from such guarantees as of each reporting date is not required.

Although there is no quoted market price in active market for the investment in KSFC, the directors are of the opinion that the fair value of the investment in KSFC as at 31 December 2020 can be measured reliably given that KSFC is required under Article 35 of Software Industry Promotion Act, which became effective on 23 March 2016, to repurchase Global Telecom’s investment in KSFC at a value as set out in the statement provided by KSFC to Global Telecom as at 31 December 2020. In respect of the investment in KBCFC, the directors are of the opinion that its fair value approximates to its carrying value, which is very immaterial.

The Directors consider the Group does not have significant influence over these two cooperatives.

As at 31 December 2020, no fixed bank deposit (2019: KRW500 million (equivalent to approximately HK$3.4 million)) has been pledged with KSFC in return for the guarantees provided by KSFC above.

• (b) The Group invested in a savings-type insurance policy as detailed below:

Surrender value as at 31 December Insurance policy type Insured Insured sum Premium period	2020 2019 HK$’000 HK$’000 2,586 2,161 Life insurance plan Mr. Suh Seung Hyun HK$106,710 10 years	2019 HK$’000 2,161

– 22 –

During the insured periods covered by the insurance policy, Global Telecom can earn interest income which is linked to the then prevailing market saving interest rates. The Directors consider that the surrender value of this insurance policy provided by the insurance company approximates its fair value.

Global Telecom can terminate the insurance policy at any time and can receive cash based on the surrender value of the insurance policy at the date of withdrawal which is determined by the gross premium paid at inception plus accumulated interest earned and minus insurance policy expense and premium charged.

13. INVENTORIES

Inventories – Hardware and software 14. TRADE AND OTHER RECEIVABLES Trade receivables Less: Provision for impairment Trade receivables, net_(note (a)) Bills receivables Short-term loans to employees(note (b))_ Accrued interest Rental and other deposits Other receivables Total trade and other receivables	2020 HK$’000 15,812 2020 HK$’000 95,078 (20,571) 74,507 2,380 248 140 2,360 178 79,813	2019 HK$’000 9,729
		2019 HK$’000 106,064 (20,234)
		85,830 – 236 39 2,330 1,359
		89,794

(a) The credit term granted by the Group to its trade customers is normally 90 days. Based on the invoice dates, the ageing analysis of the Group’s trade receivables net of impairment provision is as follows:

0–90 days 91–180 days 181–365 days 1–2 years Over 2 years	2020 HK$’000 72,315 1,558 516 118 – 74,507	2019 HK$’000 81,594 930 2,577 643 86
		85,830

– 23 –

• (b) The loans to employees of Global Telecom are fully secured by the employees’ entitlement to retirement benefit, carry market interest rate at 6.9% (2019: 6.9%) per annum as at 31 December 2020 and repayable within one year from the respective dates of drawdown of loans.

15. LOAN TO ULTIMATE HOLDING COMPANY

Details of loan to ultimate holding company, AMS, are as follows:

			Maximum
	As at	As at	outstanding
1	January	31 December	amount during
	2020	2020	the year
	HK$’000	HK$’000	HK$’000
	–	8,869	8,869

Notes:

• (a) The loan to AMS is unsecured, interest bearing at 5% per annum and is repayable on 7 October 2022. The loan is denominated in United States Dollars (“ US$ ”).

• (b) As at 31 December 2020, Mr. Suh Seung Hyun, Mr. Phung Nhuong Giang and Mr. Lee Seung Han who are executive directors of the Company are also controlling shareholders of AMS, and the loan to AMS constituted a connected transaction under Chapter 20 of the GEM Listing Rules.

16. CONTRACT ASSETS AND CONTRACT LIABILITIES

(a) Contract assets

Contract assets Arising from performance under system integration Arising from performance under cyber security services	2020 HK$’000 22,137 2,542 24,679	2019 HK$’000 19,232 2,391
		21,623

Invoices on revenue from system integration and cyber security services are issued according to the payment certificates approved by customers once certain milestones are reached. If the Group recognises the related revenue before it being unconditionally entitled to the consideration (i.e. when invoices are issued), the entitlement to consideration is classified as contract asset. Similarly, a contract liability is recognised when a customer pays consideration, or is contractually required to pay consideration and the amount is already due, before the Group recognises the related revenue.

Contract assets are related to unbilled work in progress which have substantially the same characteristics as the trade receivables for the same types of contract. The Group has concluded that the expected loss rate for trade receivables are a reasonable approximation of the rates for the contract assets. Since the contract assets are related to contracts which are still in progress and the payment is not due, the expected loss rate of contract assets is assessed to be minimal.

– 24 –

(b) Contract liabilities

2020 HK$’000 Contract liabilities Billings in advance of performance under system integration 14,260 Billings in advance of performance under cyber security services 9,700 23,960 Set out below is the movement of contract liabilities during the respective years. 2020 HK$’000 Movements in contract liabilities Balance as at 1 January 30,443 Decrease as a result of recognising revenue during the year that was included in the contract liabilities at the beginning of the year (29,394) Acquired through business combination – Decrease as a result of recognising revenue during the year that was included in the contract liabilities at the acquisition date – Increase as a result of billing in advance of revenue recognition of system integration and cyber security services 24,123 Exchange adjustment (1,212) Balance as at 31 December 23,960 17. TRADE AND OTHER PAYABLES 2020 HK$’000 Trade payables 72,478 Accruals and other payables 20,965 Advance receipts 2,683 Value-added tax payables 572 96,698

2019 HK$’000 22,108 8,335 30,443 2019 HK$’000 5,563 (5,255) 5,848 (5,848) 30,443 (308) 30,443 2019 HK$’000 92,123 16,334 7,455 54 115,966

– 25 –

Credit periods granted by suppliers normally range from 30 days to 90 days. Based on the invoice dates, the ageing analysis of the trade payables is as follows:

0–30 days 31–60 days 61–90 days 91–180 days 181–365 days Over 1 year	2020 HK$’000 62,418 3,528 3,760 1,371 494 907 72,478	2019 HK$’000 78,296 5,643 3,238 4,167 83 696
		92,123

Due to short maturity periods, the carrying values of the Group’s trade and other payables are considered to be a reasonable approximation of their fair values.

18. BANK BORROWINGS

Current – unsecured: – Bank loans_(note (a)) Non-current – unsecured: – Bank loans(note (c))_ Total borrowings	2020 HK$’000 24,722 5,568 30,290	2019 HK$’000 20,582 –
		20,582

• (a) Bank loans are carried at amortised cost.

Details of the bank loans denominated in US$ are stated below:

	Amount	Interest rate	Repayable in
2020
Bank A	US$311,624	3-month LIBOR plus 2.07% per annum	July 2021
Bank B	US$477,413	3-month LIBOR plus 1.73% per annum	April 2021
Bank C	US$703,382	KORIBOR base rate plus 1.30%	September 2021
		per annum
Bank D	US$1,398,783	3-month LIBOR plus 0.5% per annum	April 2021
Bank E	US$314,622	3-month LIBOR plus 2.0% per annum	November 2021
2019
Bank A	US$301,675	3-month LIBOR plus 1.80% per annum	July 2020
Bank B	US$608,250	3-month LIBOR plus 1.58% per annum	April 2020
Bank C	US$1,016,007	KORIBOR base rate plus 1.30%	September 2020
		per annum
Bank D	US$709,984	3-month LIBOR plus 1.70% per annum	September 2020

– 26 –

• (b) As at 31 December 2020, Korea Credit Guarantee Fund, which is a public financial institution independent of the Group, provided foreign and local currency guarantees to certain banks in the amount of US$288,000 and KRW400 million (2019: US$320,000 and KRW400 million) for import financing facilities and bank loans provided to Global Telecom.

• (c) In accordance with the sales and purchase agreements of the acquisition of properties in Korea dated 14 May 2020, Global Telecom applied for loans from a financial institution designated by the vendor for the intermediate payments, and the interest on bank loans was borne by the vendor until the date of occupancy. The bank loans are denominated in KRW, interest bearing at 6-month COFIX plus 2.19% per annum, unsecured and due to be settled on or before 31 January 2023.

19. CAPITAL COMMITMENTS

	2020	2019
	HK$’000	HK$’000
Commitment for the acquisition of properties	44,542	–

– 27 –

MANAGEMENT DISCUSSION AND ANALYSIS

STATEMENT OF PROFIT OR LOSS ANALYSIS

For the year ended 31 December 2020

Revenue Cost of sales and services Gross profit Other income Selling and administrative expenses Finance costs Profit before income tax Income tax expense Profit for the year	2020 HK$’000 679,053 (602,131) 76,922 6,558 (73,707) (746) 9,027 (1,514) 7,513	2019 Change Change HK$’000 HK$’000 % 646,470 32,583 5.0% (559,441) 42,690 7.6% 87,029 (10,107) (11.6%) 4,974 1,584 31.8% (86,297) (12,590) (14.6%) (1,445) (699) (48.4%) 4,261 4,766 111.9% (220) 1,294 588.2% 4,041 3,472 85.9%

REVENUE

Despite the global economic environment challenge caused by viral of pandemic, the Directors are pleased to report that the Group recorded an increase in revenue by HK$32.6 million or 5.0% to HK$679.1 million for the year ended 31 December 2020 when compared to HK$646.5 million achieved in the corresponding period in last year. Our analysis on revenue is presented below:

• The increase in revenue was due to contribution from both Korea and Hong Kong operations. Korea contributed HK$652.0 million in revenue for the year ended 31 December 2020, which was HK$30.5 million or 4.9% higher compared to HK$621.5 million a year ago. During the year, Hong Kong operations contributed HK$27.0 million, which was HK$2.1 million or 8.3% higher compared to HK$24.9 million a year ago.

• The Group recorded an increase in revenue on all segments. Compared to last year, revenue from system integration, maintenance services and cyber security services for the year ended 31 December 2020 increased by HK$3.4 million, HK$27.1 million and HK$2.1 million respectively.

• Public sector contributed HK$330.9 million, which was HK$53.9 million or 19.5% growth while private sector contributed HK$348.1 million, which was HK$21.3 million decrease as compared to a year ago.

– 28 –

The increase in revenue has been driven by strong demand for online activities in Korea’s market. Examples of contracts awarded during the year included contracts from:

• A media foundation amounting to KRW3.2 billion (equivalent to HK$21.1 million)

• A finance corporation amounting to KRW2.6 billion (equivalent to HK$17.1 million)

• A Korean bank amounting to KRW2.3 billion (equivalent to HK$15.1 million)

• Korea’s leading mobile operator amounting to KRW1.4 billion (equivalent to HK$9.2 million)

• A Korean university amounting to KRW1.4 billion (equivalent to HK$9.2 million)

• Korea’s top search engine company amounting to KRW1.0 billion (equivalent to HK$6.6 million)

GROSS PROFIT AND GROSS PROFIT MARGIN

Gross profit shrank by approximately HK$10.1 million from HK$87.0 million for the year ended 31 December 2019 to HK$76.9 million for the year ended 31 December 2020. In terms of gross profit margin, the ratio decreased by 2.2% from 13.5% in 2019 to 11.3% in 2020. The decrease resulted from the acceptance of low margin system integration projects with strategic customers.

OTHER INCOME

Other income increased by HK$1.6 million or 31.8% to HK$6.6 million for the year ended 31 December 2020 mainly attributable to the year-end foreign currencies’ translation gain.

SELLING AND ADMINISTRATIVE EXPENSES

For the year ended 31 December 2020, the management team was able to lower selling and administrative expenses by HK$12.6 million or 14.6% from HK$86.3 million a year ago. The decrease was mainly attributable to impairment of trade receivables was not provided.

PROFIT FOR THE YEAR

Despite the lower gross profit, the Group’s profit before income tax stood at HK$9.0 million for the year ended 31 December 2020 which was HK$4.8 million or 111.9% higher than corresponding year in 2019.

After a provision of HK$1.5 million for tax expenses, the Group posted profit after tax for the year of HK$7.5 million, representing HK$3.5 million or 85.9% increase compared to a year ago. This profit is the highest record since the Company’s shares were successfully listed in 2016 and constitutes the fifth consecutive profitable year.

– 29 –

STATEMENT OF FINANCIAL POSITION ANALYSIS As at 31 December 2020

Property, plant and equipments Intangible assets Goodwill Other financial assets Loan to ultimate holding company Deposits for acquisition of properties Guarantee deposits Deferred tax assets Non-current assets Inventories Trade and other receivables Contract assets Prepayments Pledged fixed bank deposits Fixed bank deposits Cash and cash equivalents Current assets Trade and other payables Contract liabilities Lease liabilities Bank borrowings Tax payable Current liabilities Lease liabilities Long-term bank borrowings Defined benefit obligations Deferred tax liabilities Non-current liabilities Net assets	2020 HK$’000 9,959 8,095 7,534 7,407 8,869 10,498 3,901 8,500 64,763 15,812 79,813 24,679 14,273 – 4,536 96,189 235,302 96,698 23,960 2,398 24,722 916 148,694 2,052 5,568 166 217 8,003 143,368	2019 Change Change HK$’000 HK$’000 % 6,715 3,244 48.3% 13,854 (5,759) (41.6%) 7,534 – 0.0% 5,000 2,407 48.1% – 8,869 100.0% – 10,498 100.0% 4,671 (770) (16.5%) 7,160 1,340 18.7% 44,934 19,829 44.1% 9,729 6,083 62.5% 89,794 (9,981) (11.1%) 21,623 3,056 14.1% 10,748 3,525 32.8% 3,372 (3,372) (100.0%) 4,316 220 5.1% 116,075 (19,886) (17.1%) 255,657 (20,355) (8.0%) 115,966 (19,268) (16.6%) 30,443 (6,483) (21.3%) 993 1,405 141.5% 20,582 4,140 20.1% 239 677 283.3% 168,223 (19,529) (11.6%) 661 1,391 210.4% – 5,568 100.0% 1,181 (1,015) (85.9%) 378 (161) (42.6%) 2,220 5,783 260.5% 130,148 13,220 10.2%

– 30 –

NON-CURRENT ASSETS

As at 31 December 2020, the Group recorded non-current assets of HK$64.8 million representing an increase of approximately HK$19.8 million or 44.1% when compared to that as at 31 December 2019. This was mainly due to additions of a loan to ultimate holding company and deposits for acquisition of properties. Details of these transactions were disclosed in the Company’s announcements dated 7 July 2020, 10 August 2020 and 15 October 2020 respectively and circular dated 13 November 2020.

CURRENT ASSETS

As at 31 December 2020, the Group recorded HK$235.3 million in current asset which was HK$20.4 million lower than that as at 31 December 2019 of HK$255.7 million. This resulted from a combination of decrease in trade and other receivables and decrease in cash and cash equivalents.

The Group’s cash position stood at HK$96.2 million as at 31 December 2020. Cash to current liabilities ratio decreased slightly from 69.0% in 2019 to 64.7% in 2020. The ratio representing the Group has strong ability to settle its current liabilities obligation when they become due.

CURRENT LIABILITIES

The Group’s current liabilities decreased by approximately HK$19.5 million from HK$168.2 million as at 31 December 2019 to HK$148.7 million as at 31 December 2020. The decrease was due to a decrease in trade and other payables by HK$19.3 million.

NON-CURRENT LIABILITIES

The Group’s non-current liabilities significantly increased by HK$5.8 million or 260.5% was mainly attributable to bank borrowings granted to the Group for the payment of deposits for acquisition of properties as mentioned in non-current assets section.

NET ASSETS

The Group’s net assets stood at HK$143.4 million as at 31 December 2020 which was HK$13.2 million higher than HK$130.1 million as at 31 December 2019.

The Group recorded an exchange gain arising on translation of foreign operations of approximately HK$6.5 million due to favourable exchange rate change of KRW against US$ in the second half of 2020. As a result, total comprehensive income of the Group stood at HK$13.2 million.

– 31 –

STATEMENT OF CASH FLOWS ANALYSIS

For the year ended 31 December 2020

Profit before income tax expenses Total adjustments for operating activities Operating profit before working capital changes Changes on: – Inventories – Trade and other receivables – Contract assets – Prepayments – Trade and other payables – Contract liabilities – Defined benefit obligations Cash generated from operations Income taxes paid Income taxes refunded Interest received Net cash used in operating activities Net cash outflows from acquisition through business combination Research and development expenditures Purchases of property, plant and equipment Deposits paid for acquisition of properties Proceeds from deposits transferred upon disposals of properties Purchases of other financial assets Proceeds from disposal of property, plant and equipment Decrease in fixed bank deposits (Increase)/decrease in loan to/amount due from ultimate holding company Net cash used in investing activities	2020 HK$’000 9,027 9,505 18,532 (7,664) 13,071 (1,938) (2,894) (21,495) (6,975) (2,058) (11,421) (1,364) 1,161 453 (11,171) – – (1,825) (15,562) 5,809 (1,873) 5 3,293 (8,239) (18,392)	2019 Change Change HK$’000 HK$’000 % 4,261 4,766 111.9% 17,361 (7,856) (45.3%) 21,622 (3,090) (14.3%) (3,365) 4,299 127.8% 27,721 (14,650) (52.8%) 1,232 (3,170) (257.3%) (4,285) (1,391) (32.5%) (58,408) (36,913) (63.2%) 19,186 (26,161) (136.4%) (1,822) 236 13.0% 1,881 (13,302) (707.2%) (6,034) (4,670) (77.4%) 108 1,053 975.0% 612 (159) (26.0%) (3,433) 7,738 225.4% (2,843) (2,843) (100.0%) (2,854) (2,854) (100.0%) (1,519) 306 20.1% – (15,562) (100.0%) – 5,809 100.0% (228) 1,645 721.5% 98 (93) (94.9%) – 3,293 100.0% 5,874 (14,113) (240.3%) (1,472) 16,920 1149.5%

– 32 –

Proceeds from bank borrowings Repayments of bank borrowings Interest paid Repayments of principal portion of the lease liabilities Dividend paid Net cash generated from/(used in) financing activities Net increase in cash and cash equivalents Cash and cash equivalents at beginning of year Effect of exchange rate changes Cash and cash equivalents at end of year	2020 HK$’000 138,475 (130,431) (746) (2,171) – 5,127 (24,436) 116,075 4,550 96,189	2019 Change Change HK$’000 HK$’000 % 145,304 (6,829) (4.7%) (146,834) (16,403) (11.2%) (1,445) (699) (48.4%) (1,941) 230 11.8% (5,880) (5,880) (100.0%) (10,796) (15,923) (147.5%) (15,701) 8,735 55.6% 136,134 (20,059) (14.7%) (4,358) (8,908) (204.4%) 116,075 (19,886) (17.1%)

CASH FLOWS FROM OPERATING ACTIVITIES

The Group generated HK$18.5 million positive cash flows from operating activities before working capital changes and income tax paid in 2020, which is HK$3.1 million lower than that in 2019. After changes in working capital and income tax paid, cash outflows of HK$11.2 million was recorded.

Cash flows used in operating activities increased by HK$7.7 million from HK$3.4 million for the year ended 31 December 2019 to HK$11.2 million for the year ended 31 December 2020. The increase was mainly due to the cash used in settlement of trade and other payables has exceeded the cash generated from the collection of trade and other receivables during the year in 2020.

CASH FLOWS FROM INVESTING ACTIVITIES

The Group’s net cash outflow from investing activities rebounded to HK$18.4 million in 2020 from HK$1.5 million in 2019. The substantial increase is due to payments of deposits paid for acquisition of properties and a loan facility granted to ultimate holding company.

– 33 –

CASH FLOWS FROM FINANCING ACTIVITIES

The Group recorded net cash inflow from financing activities of HK$5.1 million for the year ended 31 December 2020 resulting from proceeds from bank borrowings exceeded repayments of bank borrowings, reversing a net cash outflow of HK$10.8 million in 2019.

As a result, the Group incurred a net decrease in cash and cash equivalents of HK$24.4 million for the year ended 31 December 2020. Mitigated by favourable exchange rate change of KRW against HK$, the Group’s cash and cash equivalents decreased by HK$19.9 million or 17.1% to approximately HK$96.2 million as at 31 December 2020 compared to that of 2019.

OTHER INFORMATION

Liquidity and Financial Resources

As at 31 December 2020, the Group’s net current assets of HK$86.6 million indicated a strong liquidity. The liquidity ratio, represented by a ratio of current assets over current liabilities, was 1.6 times (as at 31 December 2019: 1.5 times), reflecting the adequacy of financial resources.

The Group expresses its gearing ratio as a percentage of total debt over total equity. As at 31 December 2020, the gearing ratio increased to 21.1% (as at 31 December 2019: 17.1%). The Group had variable rate bank borrowings in US$ and KRW of approximately US$3.2 million and KRW785.5 million respectively, which were equivalent to approximately HK$30.3 million (as at 31 December 2019: approximately HK$20.6 million). Certain banking borrowings are guaranteed by Korea Credit Guarantee Fund which is a public financial institution independent of the Group.

As at 31 December 2020, the Group recorded cash and cash equivalents of approximately HK$96.2 million (as at 31 December 2019: approximately HK$116.1 million), which included approximately KRW11,978 million, HK$4.2 million, US$0.9 million and small amount of Singapore Dollars.

The above reflected that the Group has healthy liquidity and adequate financial resources.

Foreign Exchange Exposure

The Group’s business in Korea was exposed to currency risk that mainly arose from the currency difference between our revenue receipts (which are denominated in KRW) and some of our payments for purchases (which are in US$). In preparing the costing of our system integration project in which procurement of components in US$ is required, we would add on a margin to the relevant cost items of the project as a cushion to safeguard against any unfavourable foreign exchange movement in KRW against US$ between the costing date and the relevant settlement date. During the year of 2020, we experienced an unfavourable foreign exchange movement in the Korean operation, and hence, recorded an increase in cost of goods sold.

– 34 –

Revenue and cost of our Hong Kong operation are mainly denominated in HK$. Hence, there is no significant currency risk arising from it.

Charges on Group’s Assets

None of the Group’s assets were charged as at 31 December 2020 after the fixed deposits pledged with KSFC for bidding, contract, defect, prepayment and payment guarantees provided by KSFC on behalf of the Group were released in June 2020.

Material Investments and Capital Assets

On 14 May 2020, Global Telecom entered into seventeen agreements with Korea Trust Company Limited, SK D&D Company Limited and Taeyoung Engineering and Construction Company Limited to purchase seventeen properties. Details of these transactions were disclosed in the Company’s announcements dated 7 July 2020 and 10 August 2020 and circular dated 13 November 2020.

The Group did not have other material investments and capital assets for the year ended 31 December 2020.

As at 31 December 2020, the carrying amount of the Group’s unlisted equity securities accounted for approximately 1.6% of the Group’s total assets and was not significant. The unlisted equity securities mainly represent the investment in KSFC (a cooperative established pursuant to the Software Industry Promotion Act with the purpose of promoting the development of the IT industry in Korea) for its membership. Depending on the amount of investment in KSFC, a member of KSFC is granted a certain amount of guarantee limit by KSFC for use in its operation.

The Group did not have any plan for material investments or capital asset as at 31 December 2020 as well.

Significant Acquisitions and Disposals

As aforementioned, our wholly-owned Korean subsidiary, Global Telecom, purchased seventeen properties in Seoul. On 8 December 2020, Global Telecom disposed six properties out of these seventeen properties. Each of LeeHanNS Co., Ltd. and i-Cloud Co, Ltd. purchased three properties at a consideration of KRW473,960,000 and KRW461,586,000 respectively. Details of these transactions were disclosed in the Company’s announcement dated 8 December 2020 and circular dated 25 January 2021.

Save for the abovesaid purchase of properties made on 14 May 2020 and disposal of properties made on 8 December 2020, the Group had not made any significant acquisition or disposal for the year ended 31 December 2020.

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Contingent Liabilities

The Group did not have any significant contingent liabilities as at 31 December 2020.

Capital Commitment

As at 31 December 2020, the Group has outstanding capital commitments of KRW6,284,080,000 (equivalent to approximately HK$44.5 million) mainly related to the agreements entered for properties purchase in Korea which is not provided for in the Group’s financial statements.

Business Review

Opening backlog as at 1 January 2020 New booking during the year Revenue recognised during the year Closing backlog as at 31 December 2020	HK$’000 104,451 740,726 679,053
	166,124

Majority of the Group’s revenue was derived from the provision of system integration solution services. Revenue from this segment increased by HK$3.4 million or 0.7% to HK$488.0 million for the year ended 31 December 2020 when compared to HK$484.6 million for the year ended 31 December 2019. The major customers included Korea’s leading mobile operator, financial institutions and messaging app company.

Following the increase in system integration projects, it drove higher demand for maintenance services and an increase in revenue by HK$27.1 million to HK$164.1 million for the year ended 31 December 2020.

Cyber security services business was carried out by subsidiaries in Hong Kong. Even affected by containment measure, revenue from this segment continuously increased by HK$2.1 million or 8.3% from HK$24.9 million for the year ended 31 December 2019 to HK$27.0 million for the year ended 31 December 2020 while the backlog of this segment as at year-end date was approximately HK$18.9 million.

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Key performance indicators

	2020	2019	Change
	KRW’million	KRW’million	%
Average productivity per operating staff – Korea	739/employee	863/employee	– 14.4%
	HK$’000	HK$’000	%
Average productivity per operating staff – Hong Kong	1,501/employee	1,425/employee	+5.3%
	KRW’million	KRW’million	%
Average contract price for system integration project	102	94	+8.5%
	Number of	Number of	Number of
	projects	projects	projects
Number of new system integration projects awarded	511	867	-356

Under the pressure of economic downturn in 2020, the Group has accepted low profit margin system integration projects with strategic customers to gain higher market share. As a result, the Group awarded projects with higher average contract price. Meanwhile, the Group employed more engineers to accommodate contracts awarded which lower average productivity of each operating staff.

Prospects

The Directors are pleased to report that the Group has recorded profit for the year of approximately HK$7.5 million during the challenging period in 2020. This is the greatest performance since the Company has successfully listed its share in 2016.

Given the worldwide economic recovery is expected in light of the successful vaccine rollout, we are looking forward to another profitable fiscal year in 2021, barring any unforeseen circumstances.

Employees and Remuneration Policy

As at 31 December 2020, the Group had an aggregate of 220 (31 December 2019: 189) employees. Such increase represented the recruitment of more engineers deploying sizable projects in Korea.

The employees of the Group are remunerated according to their job scope and responsibilities. The employees are also entitled to discretionary bonus depending on their respective performance. The total employee costs, including Directors’ emoluments, amounted to approximately HK$98.8 million for the year ended 31 December 2020 (for the year ended 31 December 2019: approximately HK$94.9 million).

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The Group has adopted a share option scheme for the purpose of providing incentives and rewards to eligible persons who contributed to the success of the Group’s operation. As at 31 December 2020, no share option had been granted.

In enhancing the competitiveness and improving staff quality through continuous learning, the Group provides our staff with regular technical and on-the-job trainings and encourages our staff to attend external seminars and sit for examinations to develop their knowledge continuously.

CORPORATE GOVERNANCE PRACTICES OF THE COMPANY

The Company is committed to achieving high standards of corporate governance to safeguard the interest of the shareholders of the Company (the “ Shareholders ”) and to enhance the corporate value, accountability and transparency of the Company.

The Company’s corporate governance framework has been in place and established a set of policies and procedures based on the Corporate Governance Code (the “ CG Code ”) contained in Appendix 15 of the GEM Listing Rules. Such policies and procedures provide the infrastructure for enhancing the Board’s ability to implement governance and exercise proper oversight on business conduct and affairs of the Company.

The Company has applied the principles as set out in the CG Code. Throughout the year ended 31 December 2020, the Company has complied with the code provisions as set out in the CG Code which is adopted as its own code to govern its corporate governance practices. The Company will continue to enhance its corporate governance practices appropriate to the operation and growth of the business of the Group.

The Company will periodically review and improve its corporate governance practices with reference to its latest development.

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

During the year ended 31 December 2020, the Company did not redeem its listed securities, nor did the Company or any of its subsidiaries purchase or sell any of such listed securities.

SECURITIES TRANSACTIONS BY DIRECTORS

The Company has adopted its securities dealing code (“ Securities Dealing Code ”) which is no less exacting than the required standard of dealings regarding securities transactions by the Directors as set out in Rules 5.48 to 5.67 of the GEM Listing Rules. Following a specific enquiry made by the Company on the Directors, all of the Directors confirmed that they had complied with the Securities Dealing Code during the year.

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EVENT AFTER THE REPORTING DATE

The current coronavirus pandemic has not had a material adverse impact on the Group’s operations and financial position to date. Nevertheless, the Group will monitor closely and take appropriate action to mitigate the impact.

DIVIDENDS

The Board does not recommend the payment of a final dividend for the year ended 31 December 2020 (2019: Nil).

SUFFICIENCY OF PUBLIC FLOAT

Based on information that is publicly available to the Company and within the knowledge of the Directors, at least 25% of the Company’s total issued share capital was held by the public as required under the GEM Listing Rules during the year ended 31 December 2020 and up to the date of this announcement.

ANNUAL GENERAL MEETING (THE “AGM”)

The forthcoming AGM of the Company will be held on Friday, 7 May 2021 at 10:00 a.m. A notice convening the AGM will be published and despatched to the Shareholders in due course.

CLOSURE OF REGISTER OF MEMBERS

For attending and voting at the AGM

The register of members of the Company will be closed from Tuesday, 4 May 2021 to Friday, 7 May 2021 (both days inclusive, 4 business days in total) during which period no transfer of shares will be registered. In order to be eligible to attend and vote at the AGM, unregistered holders of shares of the Company shall ensure that all transfer documents accompanied by the relevant share certificates must be lodged with the Company’s branch share registrar in Hong Kong, Tricor Investor Services Limited, at Level 54, Hopewell Centre, 183 Queen’s Road East, Hong Kong for registration not later than 4:30 p.m. on Monday, 3 May 2021.

AUDIT COMMITTEE

The Company established an audit committee (“ Audit Committee ”) with written terms of reference in compliance with Rule 5.28 of the GEM Listing Rules and paragraph C.3 of the CG Code. For the year ended 31 December 2020, the Audit Committee consists of three independent non-executive Directors namely, Mr. Wong Sik Kei, Mr. Yung Kai Tai and Mr. Sum Chun Ho. Mr. Sum Chun Ho possesses the appropriate professional accounting qualifications and serves as the chairman of the Audit Committee.

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The primary duties of the Audit Committee are to assist the Board in providing an independent review of the effectiveness of our Group’s internal audit function, financial reporting process, internal control and risk management systems, and to oversee the audit process. The Audit Committee had reviewed the audited final results of the Company for the year ended 31 December 2020.

APPRECIATION

I would like to close by thanking the Board, management and every member of our committed staff for their dedication and hard work, and our Shareholders for their continued confidence and support.

By order of the Board Future Data Group Limited Suh Seung Hyun Chairman

Hong Kong, 22 March 2021

As at the date of this announcement, the executive Directors of the Company are Mr. Suh Seung Hyun, Mr. Phung Nhuong Giang, Mr. Lee Seung Han and Mr. Ryoo Seong Ryul; and the independent non-executive Directors of the Company are Mr. Wong Sik Kei, Mr. Sum Chun Ho and Mr. Yung Kai Tai.

This announcement will remain on the “Latest Listed Company Information” page of the GEM website at www.hkgem.com for at least 7 days from the date of its publication and on the Company’s website at www.futuredatagroup.com.

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