ISP Holdings Limited - Annual Report 2014

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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SYNERGIS HOLDINGS LIMITED 新昌管理集團有限公司 *

(Incorporated in Bermuda with limited liability)

(Stock code: 02340)

ANNOUNCEMENT OF ANNUAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2014

ANNUAL RESULTS

The board (the “Board”) of directors (the “Directors”) of Synergis Holdings Limited (the “Company” or “Synergis”) is pleased to announce the audited consolidated annual results of the Company and its subsidiaries (collectively, the “Group”) for the year ended 31 December 2014 with comparative figures for the last financial year.

CONSOLIDATED INCOME STATEMENT For the year ended 31 December 2014

Note Revenue 2 Cost of sales Gross profit Other income General and administrative expenses Amortisation of intangible assets Interest expenses Profit before taxation 3 Taxation 4 Profit for the year Profit attributable to: Equity holders of the Company Non-controlling interests Earnings per share for profit attributable to the equity holders of the Company - basic 6 - diluted 6 Dividends 5	2014 HK$’000 1,906,253 (1,720,107) 186,146 7,422 (121,427) (8,726) (7,317) 56,098 (10,756) 45,342 45,342 - 45,342 11.9 cents 10.8 cents 29,028	2013 HK$’000 1,680,076 (1,500,209)
		179,867 3,344 (121,903) (8,726) (6,778)
		45,804 (11,413)
		34,391
		34,392 (1)
		34,391
		9.0 cents
		8.5 cents
		22,660

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME For the year ended 31 December 2014

For the year ended 31 December 2014
Profit for the year Other comprehensive income: Items that will not be reclassified to profit or loss Actuarial (loss)/gain on long service payment liabilities Items that may be subsequently reclassified to profit or loss Exchange differences on translating foreign operations Other comprehensive income for the year Total comprehensive income for the year Total comprehensive income attributable to: Equity holders of the Company Non-controlling interests	2014 HK$’000 45,342 (1,524) (95) (1,619) 43,723 43,723 - 43,723	2013 HK$’000 34,391
		111 468
		579
		34,970
		34,971 (1)
		34,970

CONSOLIDATED BALANCE SHEET As at 31 December 2014

CONSOLIDATED BALANCE SHEET As at 31 December 2014
Note Non-current assets Property, plant and equipment Investment properties Intangible assets 7 Goodwill 7 Deferred tax assets Total non-current assets Current assets Contracting work-in-progress Receivables 8 Deposits and prepayments 8 Amounts due from fellow subsidiaries 9 Amounts due from ultimate holding company 9 Taxation recoverable Deposit, cash and cash equivalents Total current assets Current liabilities Payables and accruals 11 Bank loans 10 Amount due to ultimate holding company 9 Amount due to other partner of joint operations Amounts due to fellow subsidiaries 9 Taxation payable Total current liabilities Net current assets/(liabilities) Total assets less current liabilities Non-current liabilities Long service payment liabilities Deferred tax liabilities Total non-current liabilities Net assets Equity attributable to equity holders of the Company Share capital 12 Retained profits and other reserves Proposed dividends Non-controlling interests Total equity		2014 HK$’000 8,891 2,800 48,974 168,968 144 229,777 180,871 326,089 56,136 53,444 12,358 244 91,195 720,337 431,763 247,000 - 144 5,504 8,950 693,361 ------------------------ 26,976 256,753 1,940 8,859 10,799 ----------------------- 245,954 41,589 187,729 16,636 245,954 - 245,954	2013 HK$’000 11,005 3,170 57,700 168,968 381
			241,224 239,448 325,708 19,256 1,502 - 293 79,827
			666,034 382,279 276,000 5,366 186 938 5,999
	-		670,768 ----------------------- (4,734)

			236,490

			1,642 10,649
			12,291 ----------------------- 224,199
			41,200 168,354 14,420
			223,974 225
			224,199

Notes to the Financial Statements

1. Basis of Preparation and Accounting Policies

The consolidated financial statements have been prepared in accordance with Hong Kong Financial Reporting Standards (“HKFRSs”) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”). They have been prepared under the historical cost convention, as modified by the revaluation of investment properties which are carried at fair value.

In accordance with the transitional and saving arrangements for Part 9 of the Hong Kong Companies Ordinance (Cap. 622), “Accounts and Audit” as set out in sections 76 to 87 of Schedule 11 to the Hong Kong Companies Ordinance (Cap. 622), the consolidated financial statements are prepared in accordance with the applicable requirements of the predecessor Companies Ordinance (Cap. 32) for this financial year and the comparative period.

The preparation of financial statements in conformity with HKFRSs requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the group’s accounting policies.

(i) New and amended standards adopted by the Group

The adoption of the new/revised HKFRSs, amendments and interpretations that are relevant to the Group’s operations and mandatory the annual period beginning 1 January 2014 has had no material impact on the Group’s results and financial position.

(ii) New and amended standards have been issued and are relevant to the Group, but are not effective for the financial year beginning 1 January 2014 and have not been early adopted in preparing these consolidated financial statements

Annual Improvements	Annual Improvement 2010 - 2012 Cycle1
Project
Annual Improvements	Annual Improvement 2011 - 2013 Cycle1
Project
Annual Improvements	Annual Improvement 2012 - 2014 Cycle2
Project
Amendments to HKFRS 11	Accounting for acquisitions of Interest in Joint
	Operations2
Amendments to HKAS 16	Clarification of Acceptable Methods	of
and HKAS 38	Depreciation and Amortisation2
Amendments to HKAS 27	Equity Method in Separate Financial
	Statements2
Amendments to HKFRS 10	Sale or Contribution of Assets between	an
and HKAS 28	Investor and its Associate or Joint Venture2
HKFRS 9 (2014)	Financial Instruments4
HKFRS 15	Revenue from Contracts with Customers3

1Effective for annual periods beginning on 1 January 2015 2Effective for annual periods beginning on 1 January 2016 3Effective for annual periods beginning on 1 January 2017 4Effective for annual periods beginning on 1 January 2018

The Group is in the process of assessing the impact of the above new standards and amendments to existing standards on the Group’s consolidated financial statements.

2. Segment Information

In accordance with the Group’s internal financial reporting provided to the chief operating decision-maker, identified as the Executive Management Committee, who are responsible for allocating resources, assessing performance of the operating segments and making strategic decisions, the reportable operating segments are:

property and facility management services in Hong Kong;
property and facility management services in Chinese Mainland including leasing services;
interiors and special projects (“ISP”) ;
repair and maintenance; and
ancillary business including security, cleaning, laundry, etc.

During the year, the Group has changed the method of expenses allocation between its reportable segments. The corresponding items of segment results for the year ended 31 December 2013 have been restated.

(a) Segment results (in HK$’000)

(a) Segment results (in HK$’000)
Property and Facility Management Services Hong Kong Chinese Mainland Repair and Maintenance Ancillary Business 2014 Revenue 624,913 85,995 84,235 67,840	Property & Facility Management & Ancillary Business Interiors & Special Projects Corporate (Note 1) Total 862,983 1,043,270 - 1,906,253
Gross profit 67,100 18,656 11,926 15,030 Operating expenses (28,961) (20,788) (7,635) (7,534)	112,712 73,434 - 186,146 (64,918) (25,196) (21,099) (111,213)
Operating profit/(loss) 38,139 (2,132) 4,291 7,496 Amortisation of intangible assets Acquisition loan interest expenses Interest expenses Other expenses Other income	47,794 48,238 (21,099) 74,933 - - (8,726) (8,726) - - (5,370) (5,370) (148) (1,799) - (1,947) (2,162) (959) (7,093) (10,214) 4,472 2,950 - 7,422
Profit before taxation Taxation Profit for the year	49,956 48,430 (42,288) 56,098 (4,354) (6,402) - (10,756)
	45,602 42,028 (42,288) 45,342

Property and Facility Management Services Hong Kong Chinese Mainland Repair and Maintenance Ancillary Business 2013 Revenue 617,362 36,709 83,018 61,922	Property & Facility Management & Ancillary Business Interiors & Special Projects Corporate (Note 1) Total 799,011 881,065 - 1,680,076
Gross profit 78,231 12,175 13,150 15,233 Operatingexpenses (28,985) (26,779) (8,976) (6,166)	118,789 61,078 - 179,867 (70,906) (19,607) (20,682) (111,195)
Operating profit/(loss) 49,246 (14,604) 4,174 9,067 Amortisation of intangible assets Acquisition loan interest expenses Interest expenses Other expenses Other income	47,883 41,471 (20,682) 68,672 - - (8,726) (8,726) - - (6,279) (6,279) (132) (367) - (499) (2,405) (1,649) (6,654) (10,708) 3,231 113 - 3,344
Profit before taxation Taxation Profit for the year	48,577 39,568 (42,341) 45,804 (5,644) (5,769) - (11,413)
	42,933 33,799 (42,341) 34,391

Note 1: Corporate mainly represents corporate and administrative activities, and shared services.

(b) Customer information

For the year ended 31 December 2014, revenue of approximately HK$142,280,000 was derived from one single external customer which was attributable to property and facility management services (for the year ended 2013: HK$183,310,000 was derived from one single external customers which was attributable to the ISP business).

3. Profit before Taxation

rofit before Taxation
	2014	2013
	HK$’000	HK$’000
Profit before taxation is arrived after charging:
Staff costs, including directors’ emoluments	720,696	670,558
Depreciation	5,847	7,067
Auditor’s remuneration	1,325	1,283
Operating lease rental on land, buildings and office equipment	11,521	9,090

4. Taxation

Hong Kong profits tax has been provided at the rate of 16.5% on the estimated assessable profits for the year after application of available tax losses brought forward for both years. Taxation on overseas profits has been calculated on the estimated assessable profits for the year at the rates of taxation prevailing in the countries in which the Group operates.

The amount of tax charged/(credited) to the consolidated income statement represents:

Current taxation Hong Kong profits tax - provision for the year - under provision in prior years Overseas tax - provision for the year Deferred taxation	2014 HK$’000 10,698 10 1,601 (1,553) 10,756	2013 HK$’000 11,721 21 1,443 (1,772)
		11,413

5. Dividends

(a) Dividends attributable to the current year: Interim dividend paid of 3.0 HK cents (2013: 2.0 HK cents) Final dividend proposed of 4.0 HK cents (2013: 3.5 HK cents) (b) Dividends attributable to the previous year, approved and paid during the year: Final dividend of 3.5 HK cents (2013: 2.5 HK cents)	2014 HK$’000 12,392 16,636 29,028 14,420	2013 HK$’000 8,240 14,420
		22,660
		10,300

At a meeting held on 19 March 2015, the Company's board of directors resolved to recommend a final dividend of 4.0 HK cents for the year ended 31 December 2014. This proposed final dividend is not reflected as a dividend payable in these financial statements, until it has been approved by the shareholders at the forthcoming annual general meeting of the Company.

6. Earnings Per Share

(a) Basic earnings per share is calculated by dividing the Group’s profit attributable to the equity holders less dividends to convertible preference shareholders by the weighted average number of ordinary shares in issue during the year.

Profit attributable to equity holders (HK$’000) Less: dividends to convertible preference shareholders (HK$’000) Profit attributable to ordinary shareholders (HK$’000) Weighted-average ordinary shares issued (’000) Basic earnings per share (HK cents)	2014 45,342 (5,600) 39,742 332,952 11.9	2013 34,392 (4,400)
		29,992
		332,000
		9.0

(b) Diluted earnings per share is calculated by dividing the Group’s profit attributable to the equity holders by the weighted-average ordinary shares outstanding after adjusting for the potential dilutive effect in respect of outstanding employee share options and potential ordinary shares issued on convertible preference shares during the year.

Profit attributable to equity holders (HK$’000) Weighted-average ordinary shares issued (’000) Adjustments for share options (’000) Adjustments for potential ordinary shares to be issued (’000) Weighted-average ordinary shares for calculating diluted earnings per share (’000) Diluted earnings per share (HK cents)	2014 45,342 332,952 5,270 80,000 418,222 10.8	2013 34,392 332,000 958 71,759
		404,717
		8.5

7. Intangible Assets and Goodwill

Cost At 1 January 2013, 31 December 2013 & 31 December 2014 Accumulated amortisation At 1 January 2013 Amortisation for the year At 31 December 2013 Amortisation for the year At 31 December 2014 Net Book Value At 31 December 2013 At 31 December 2014	Goodwill HK$’000 168,968 ▬▬▬▬ - - ────── - - ────── - ▬▬▬▬ 168,968 ▬▬▬▬ 168,968 ▬▬▬▬		Trademark Backlog orders Non- competition agreement Total HK$’000 HK$’000 HK$’000 HK$’000 48,826 15,934 2,393 67,153 ▬▬▬▬ ▬▬▬▬ ▬▬▬▬ ▬▬▬▬ (271) (443) (13) (727) (3,255) (5,311) (160) (8,726) ────── ────── ────── ────── (3,526) (5,754) (173) (9,453) (3,255) (5,311) (160) (8,726) ────── ────── ────── ────── (6,781) (11,065) (333) (18,179) ▬▬▬▬ ▬▬▬▬ ▬▬▬▬ ▬▬▬▬ 45,300 10,180 2,220 57,700 ▬▬▬▬ ▬▬▬▬ ▬▬▬▬ ▬▬▬▬ 42,045 4,869 2,060 48,974 ▬▬▬▬ ▬▬▬▬ ▬▬▬▬ ▬▬▬▬

Goodwill is allocated to the Group’s cash-generating units that are expected to benefit from the business combination. Annual assessment of any impairment of goodwill is based on the recoverable amount of the Interiors & Special Projects segment derived from cash flow projections based on approved management budget over a three-year period. Cash flows beyond the three-year period are extrapolated with zero growth rate. A discount rate was adopted to reflect specific risk relating to the segment. The key assumptions adopted are the discount rates, growth rates and projected operating profit, which were determined based on past performance and management’s expectations for the market development. Management believes that any reasonably foreseeable changes in any of the above key assumptions will not cause the carrying amount of goodwill to excel the recoverable amount.

The trademark refers to the use of the “Hsin Chong” in Hong Kong. Other than the value included in the acquisition consideration, there is no on-going fee for utilizing the trademarks. Although there is no expiry date, management has adopted a 15 year useful life for amortisation purpose.

Backlog orders refers to the contractual sales that are outstanding at time of acquisition, totalling around HK$300 million, from which there is a set of expected benefits to be received and accordingly management has adopted amortisation over 3 years.

Based on the non-competition agreement, management has adopted amortisation over 15 years.

8. Receivables, Deposits and Prepayments

As of 31 December 2014, accounts receivable of HK$75,104,000 (2013: HK$88,537,000) were past due but not impaired. These related to a number of independent customers for whom there is no recent history of default. The credit period of the Group’s accounts receivable generally ranges from 30 to 60 days (2013: 30 to 60 days). The ageing analysis of accounts receivable by due date is as follows:

Accounts receivable Not yet due 1 to 30 days 31 to 60 days 61 to 90 days Over 90 days Retention receivables and other receivables Receivables Deposits and prepayments	2014 HK$’000 150,959 31,942 10,985 11,249 20,928 226,063 100,026 326,089 56,136 382,225	2013 HK$’000 146,950 60,754 8,618 7,030 12,135
		235,487 90,221
		325,708 19,256
		344,964

9. Balances with Fellow Subsidiaries and Ultimate Holding Company

Balances with fellow subsidiaries and ultimate holding company are unsecured, interest free, repayable on demand and mainly denominated in Hong Kong dollars.

Balances included trade receivable amounted to HK$6,686,000 (2013: HK$1,005,000) and HK$45,527,000 (2013: HK$7,413,000) due from ultimate holding company and fellow subsidiaries respectively, which are not yet due and fully performing.

10. Bank Loans

Portion due for repayment within one year Portion due for repayment after one year, but contains a clause of repayment on demand (i) in the second year (ii) in the third to fifth years, inclusive Total bank loans	2014 HK$’000 139,000 24,000 84,000 247,000	2013 HK$’000 144,000 24,000 108,000
		276,000

Notes:

(a) As at 31 December 2014, the Group has bank loan of HK$247,000,000 (2013: HK$276,000,000) denominated in Hong Kong dollars.
(b) The bank loans of the Group carried weighted average interest rates of 2.93% (2013: 3.43%) per annum.
(c) The Group’s bank loan of HK$132,000,000 (2013: HK$156,000,000) is subject to a floating charge over the assets of its subsidiaries.
(d) The carrying amounts of loans approximate their fair values.

11. Payables and Accruals

The credit period of the Group’s accounts payable generally ranges from 30 to 60 days (2013: 30 to 60 days). The ageing analysis of accounts payable by due date is as follows:

Accounts payable Not yet due 1 to 30 days 31 to 60 days 61 to 90 days Over 90 days Retention payables, other payables and accruals 12. Share Capital Authorised: Ordinary shares of HK$0.10 each Convertible preference shares of HK$0.10 each Issued and fully paid: Ordinary shares At 1 January and 31 December 2013 Share issued upon exercise of options granted under the Share Option Scheme At 31 December 2014 Convertible preference shares At 1 January 2013 Issuance of convertible preference shares At 31 December 2013 and 2014 Ordinary shares and convertible preference shares issued and fully paid At 31 December 2013 At 31 December 2014		2014 HK$’000 238,348 19,512 6,549 8,074 14,536 287,019 144,744 431,763 Number of shares ’000 9,000,000 1,000,000 10,000,000 332,000 3,890 335,890 58,667 21,333 80,000 412,000 415,890		2013 HK$’000 212,094 16,410 5,915 6,437 11,055
				251,911 130,368
				382,279
				Amount HK$’000 900,000 100,000
				1,000,000
				33,200 389
				33,589
				5,867 2,133
				8,000
				41,200
				41,589

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FINAL DIVIDEND

After giving due consideration to the enlarged scope of our business portfolio and the more workingcapital intensive nature of the interiors and special projects business, the reserves of the Company and the overall working capital requirement of the Group, the Board considers it appropriate to adopt a prudent dividend policy and hence a lower payout ratio than before. The payment of a final dividend of 4.0 HK cents per share (2013: 3.5 HK cents per share) for the year ended 31 December 2014 is hence recommended. Subject to shareholders’ approval at the forthcoming 2015 annual general meeting (the “2015 AGM”) of the Company, the proposed final dividend will be paid on or around Thursday, 11 June 2015 to shareholders of the Company whose names appear on the register of members of the Company on Tuesday, 2 June 2015 (Hong Kong time).

Together with the interim dividend of 3.0 HK cents per share (2013: 2.0 HK cents per share) already paid, total dividends for the financial year will amount to 7.0 HK cents per share (2013: 5.5 HK cents per share), representing a payout ratio of 64% (2013: 66%) on the earnings for the financial year.

CLOSURE OF REGISTER OF MEMBERS

The register of members of the Company will be closed for the following periods:

(i) from Tuesday, 19 May 2015 to Friday, 22 May 2015, both days inclusive (Hong Kong time), for the purpose of ascertaining shareholders’ entitlement to attend and vote at the 2015 AGM. In order to be eligible to attend and vote at the 2015 AGM, all share transfer documents accompanied by the relevant share certificates must be lodged for registration with the Company’s Hong Kong branch share registrar, Computershare Hong Kong Investor Services Limited, at Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong not later than 4:30 p.m. on Monday, 18 May 2015 (Hong Kong time); and
(ii) from Friday, 29 May 2015 to Tuesday, 2 June 2015, both days inclusive (Hong Kong time), for the purpose of ascertaining shareholders’ entitlement to the proposed final dividend. In order to qualify for the proposed final dividend (subject to members’ approval at the 2015 AGM), all share transfer documents accompanied by the relevant share certificates must be lodged for registration with the Company’s Hong Kong branch share registrar, Computershare Hong Kong Investor Services Limited, at the address as set out in subparagraph (i) above not later than 4:30 p.m. on Thursday, 28 May 2015 (Hong Kong time).

During the periods mentioned in sub-paragraphs (i) and (ii) above, no transfers of shares will be registered.

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MANAGEMENT DISCUSSION AND FINANCIAL ANALYSIS

FINANCIAL OVERVIEW

		2014	2013	Change
Revenue	HK$’ million	1,906.3	1,680.1	+13.5%
Gross Profit	HK$’ million	186.1	179.9	+3.4%
OperatingProfit	HK$’ million	74.9	68.7	+9.0%
Profit attributable toShareholders	HK$’ million	45.3	34.4	+31.7%
Earnings before interest, tax, depreciation and amortisation(“EBITDA”)	HK$’ million	78.0	68.4	+14.0%
Gross Profit Margin		9.8%	10.7%	-0.9%
Net Profit Margin		2.4%	2.0%	+0.4%
Basic Earnings Per Share	HK cents	11.9	9.0	+32.2%

EBITDA & Profit attributable to Shareholders

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CAGR 25%
CAGR 28%
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With a solid base derived from Interior and Special Projects (“ISP”) business achieved in 2013, Synergis recorded new high in both revenue and profits with a diversified business portfolio comprising property and facility management, interior and special projects and other ancillary business.

The Group reported a consolidated revenue of HK$1.9 billion for the year ended 31 December 2014, an increase of 13.5% as compared with 2013. Gross profit and operating profit increased by 3.4% and 9.0% to HK$186.1 million and HK$74.9 million respectively. After amortisation of intangible assets and interest on bank loan related to the ISP business, the profit attributable to shareholders was HK$45.3 million, an increase of 31.7% from 2013. Earnings per share was 11.9 HK cents (2013: 9.0 HK cents).

BUSINESS REVIEW AND PROSPECTS

BUSINESS OVERVIEW

The Property and Facility Management Services business remained stable and maintained its market position, whilst ISP business has achieved a steady growth over 2014. Management considers that the ISP business will continue to be a significant contributor for the Group’s growth in revenue and net profit.

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HK$ million HK$ million
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	Revenue (HK$’M)	Revenue (HK$’M)	Revenue (HK$’M)	Operating Profit/(Loss)(HK$’M)	Operating Profit/(Loss)(HK$’M)	Operating Profit/(Loss)(HK$’M)
	2014	2013	Change	2014	2013	Change
Property & Facility Management
– HongKong	625.0	617.4	1.2%	38.1	49.2	-22.6%

Repair & Maintenance
– HongKong	84.2	83.0	1.4%	4.3	4.2	2.4%

Ancillary business
– HongKong	67.8	61.9	9.5%	7.5	9.1	-17.6%

Synergis Management Services
Business – Hong Kong Sub-total	777.0	762.3	1.9%	49.9	62.5	-20.2%

Property & Facility Management
– Chinese Mainland	86.0	36.7	134.3%	(2.1)	(14.6)	85.6%

Synergis Management Services
Business Sub-total	863.0	799.0	8.0%	47.8	47.9	-0.2%

ISP Business	1,043.3	881.1	18.4%	48.2	41.5	16.1%

Corporate Overhead	-	-	-	(21.1)	(20.7)	-1.9%

Total	1,906.3	1,680.1	13.5%	74.9	68.7	9.0%

Management Services Business

“This segment has consistently generated revenue and profit with significant improvement in our Chinese Mainland Business in 2014”

Property and Facility Management Services

Hong Kong:

Property and Facility Management has maintained a well-diversified portfolio of contracts from government, public institutions and private clients.

(i) Hong Kong Housing Authority (HKHA)

The Group has secured new management contracts from the Hong Kong Housing Authority (“HKHA”) with total revenue of HK$31 million during the year including:

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the HKHA Block 1 and 2 Headquarters Building from January 2014;
Kwai Chung Shopping Centre from June 2014; and
43 nos. of Carparks and Control of Estate in both Kowloon East, Kowloon West & Hong Kong Regions from July 2014
(ii) Government and Public Institutions

During the year, we have obtained several facilities management contracts with total revenue of HK$16 million from Government and Public Institutions including HKSAR Government, MTR Corporation and Airport Authority:

Taxi Passenger Queue Management & Anti-touting Operation Services in the Airport from the Hong Kong Airport Authority in March 2014
the Security Service Contract for Le Prestige from the MTR Corporation Limited in September 2014
the Mid-Levels Escalator and Walkway System Management Contract in Central from the Electrical and Mechanical Services Department in September 2014; and
the Customer Service Centre and Backend Accountancy Services to the newly-established West Island Extension Line of the MTR in December 2014

(iii) Private clients

Several management contracts were also added to Property Management Portfolio during the year, some of the projects are listed below:

Man Kee Mansion (萬基大廈);
Smart A (薈學坊); and
Chun Wo Commercial Centre (俊和商業大廈

These new contracts generated additional revenue for the Group in 2014, but were offset by loss of revenue as a result of expiry of certain car park contracts, which fails to renew. The revenue of this business segment was stable. The operating profit however decreased by 22.6% to HK$38.1 million, was due to increase in labour cost resulting from shortage of labour in the market and keen competition in the market which led to a 2% reduction on gross margin. General inflation was also a burden on the general and administrative expenditure.

Look forward to 2015, the Group will focus on expanding the facility management (“FM”) business in view of the increasing demand for this type of services, which is a result of corporations’ cost saving strategies to outsource such services to professional managers. The Group has good credential and gathered sound experience in facility management. Apart from the airport area, the Group will also develop the FM business in the education sector and the public utilities corporations.

With our stable market position in the property management (“PM”) business segment, we will continue to explore opportunities in private residential projects, The Link Management Limited and the Hong Kong Housing Authority.

Chinese Mainland:

The performance of this segment was encouraging in 2014. Revenue generated from the existing contracts and new contracts have increased over 130% as compared with 2013. With the improvement in gross margins and the saving on expenses, the operating loss was substantially reduced from HK$14.6 million in 2013 to HK$2.1 million in the year.

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The China team has secured new research and retail consultancy contracts and leasing contracts with total revenue of HK$8.7 million during the year mainly includes:

Beijing Shibanfang (北京八家石板房項目);
Taizhou Daohe Street (泰州稻河古街區);
Hangzhou River Club (杭州華聯錢塘會館);
Beijing New Times SOHO (北京新年華 SOHO);
Dandong No. 9 Fashion Street (丹東時尚第九街); and
Lushang Centre (魯商中心) in Linyi (臨沂)

Research and retail consultancy services in the Chinese Mainland have been expanded. With high quality services provided to our client in Shenzhen, Foshan and Dongguan, the China team is confident to get more contracts from existing clients especially the higher margin Asset Management Service (“AMS”) contracts in future.

Repair and Maintenance

Revenue from this business segment was stable in 2014. Growth of this business segment has been affected by the Government’s review on the tendering process of the Operation Building Bright (“OBB”) Scheme. The Government’s review has slowed down jobs available in the market. The adverse effect was partially offset by the contribution of a large scale repair and maintenance contract from Yick Cheong Building and Fok Lin Building. The gross profit margin has slightly dropped to 14.2% this year but the operating profit almost remained the same as 2013.

In order to enhance the overall effectiveness in allocating resources with the shortage of labor supply in the construction and maintenance industry in Hong Kong, the Group has considered to strategically combine the current maintenance team with ISP team for better staff and resource deployment.

Ancillary business

Total revenue from ancillary business including security, cleaning and laundry achieved a 9.5% increase over 2013 to HK$67.8 million. Because of increase in general administrative expense for business development, the operating profit of this business segment reduced to HK$7.5 million this year.

Interiors & Special Projects

“ISP has consistently delivered good results and has secured over HK$2.3 billion new contracts during the year and the outstanding value of contracts on hand as at 31 December 2014 approaching HK$2.2 billion”

For the year ended 31 December 2014, the ISP business recorded HK$1.0 billion total revenue and HK$73.4 million gross profit, a 18.4% increase of revenue and a 20.2% increase of gross profits from 2013. The significant contribution came from the retail fitting out project at Galaxy Resort & Casino in Macau, building revitalization project in Wong Chuk Hang and Addition and Alternation (“A&A”) Works for Digital Realty Data Centre in Tseung Kwan O together with other newly awarded contracts during the year. The gross profit margin and operating profit margin was 7.0% and 4.6% respectively, similar to that of last year. The operating profit of the ISP business increased by 16.1% to HK$48.2 million.

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New Contracts Awarded

New contracts amounting to HK$2.3 billion have been secured in 2014 which is 3 times the contracts awarded in 2013.

A number of projects with significant contract sum has been secured in 2014. The projects are listed below:

Commercial development of a 31-storey commercial building in Wong Chuk Hang, and another 28-storey commercial building in Causeway Bay in Hong Kong;
Large-scale revitalization works for a building at Castle Peak Road, Tsuen Wan. The work involves installation of French window curtain walls, building maintenance, escalator refurbishment and improvement, ceiling protection and waterproofing, etc.;
Renovation contracts including Butterfly Plaza in Tuen Mun and Lee Gardens One, Causeway Bay; and
Fitting out works to guestroom floors for renovation and A&A of Macau Taipa Hotel at Macau SAR

The ISP business has also extended to hotel room refurbishment in 2014. Being the main contractor of the refurbishment project for Holiday Inn Golden Mile in Tsim Sha Tsui, ISP was responsible for refurbishing the hotel rooms, suites, lift lobbies and spa centre located in specific floors.

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CAGR 41% 227%
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Outstanding Workload

The total outstanding workload for contracts on hand, as of 31 December 2014, approaching HK$2.2 billion of which over 70% will be completed in 2015.

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CAGR 49%
182%
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With our performance track records in fitting out, renovation, A&A and special construction works in the past few years, the team will continue business expansion in these three sectors in 2015. The revenue has grown by over 8 times from HK$120 million in 2009 to over HK$1 billion in 2014.

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HK$ million
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ISP demonstrated its professionalism by delivering quality and seamless service in the past few years, and its reputation has readily built up as demonstrated, by the increased number of reputable clients especially within the retail sector. Starting from the few contracts for AEON Stores and Citistores as well as MUJI, ISP targeted to flex its muscles in the retail fitting out market in 2015.

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Financial Position and Financial Risk Management

After acquisition of the ISP business in November 2012, new banking facilities and liquidity lines have been obtained to support the increased scale of operations.

As of 31 December 2014, the total outstanding bank loan was HK$247 million, which is scheduled to be repaid over next three years. This includes an outstanding balance of HK$132 million relating to the banking facility drawn down for acquiring the ISP business in November 2012. The remaining part represents working capital loans to support mainly the ISP operations and business development. The management will continue to proactively monitor the financial positions of the Group so as to maintain sufficient buffer in our financial capacity while trying to take advantage of any good business opportunities.

Interest costs on bank borrowings are primarily charged based on a spread over HIBOR. With regard to the current portfolio of businesses, management expects that the financial requirements for future will be met from a combination of retained earnings and bank borrowings.

Financial position (HK$’000)	2014	2013

Total assets	950,114	907,258

Receivables,deposits andprepayments	629,142	586,207
Deposit,cash and cash equivalents	91,195	79,827
Current assets	720,337	666,034

Net assets	245,954	224,199

Current liabilities (include bank loans due in 1 year)	585,361	538,768

Bank loans due in 1year	139,000	144,000
Bank loans due over 1year	108,000	132,000
Total debt	247,000	276,000

Gearing ratios and liquidity
Net debt to net assets	63.3%	87.5%
Total debt to net assets	100.4%	123.1%
Current ratio(exclude borrowingdue after 1year)	1.2	1.2

Per share data
Shares in issue(all classes)	415,890,000	412,000,000
Basic earningsper share(HK cents)	11.9	9.0
Diluted earningsper share(HK cents)	10.8	8.5
Dividendper share(HK cents)	7.0	5.5
Net assetsper share(HK cents)	59.1	54.4

Other key ratios
Return on shareholders' equity (ROE)	18.4%	15.3%
Dividendpayout ratio	64%	66%

The Group adopts a conservative approach in the management of its financial risks and resources, under the supervision of the Executive Directors.

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Interest rate risk arises from bank borrowings as the interest rates are fixed for short-term periods, to take advantage of the lower rates thus available. The interest rates will be subject to fluctuation at the time of renewal.

The Group’s business is conducted primarily in Hong Kong, and the majority of its assets and liabilities are denominated in Hong Kong Dollars, and therefore it has minimal foreign currency exposure. The growth in Chinese Mainland has been funded via permanent capital injection, which is for long-term and as such foreign currency hedging is considered unnecessary.

It is the Group’s policy not to enter into derivative transactions for speculative purposes. It is also the Group’s policy not to invest its financial resources in financial products, including hedge funds or similar instruments, with significant underlying leverage or derivative exposure.

Cash Management

The Group operates a centralized cash management system. Cash balances surplus to immediate requirements are mainly placed as short-term bank deposits with a number of licensed banks in Hong Kong.

Human Resources

At 31 December 2014, the Group employed a total of 6,197 staff (2013: 6,179) in Hong Kong, Macau and the Chinese Mainland.

For meeting the operational needs and the Group’s sustainable business growth, series of staff retention initiatives were implemented with the focus on employee engagement and staff development. The Human Resources Effectiveness Committee (HREC), comprising senior management and operation unit representatives continuously reviewed the policies and worked out new initiatives for staff retention by making reference to the data collected from site visits, satisfaction survey, exit interview, resignation survey and various group meetings.

The Learning and Development Team has been working closely with the senior management on reviewing and investing in different learning and development initiatives over the past year with the aim to enhance staff competency for the HR needs of the Group’s long term growth. A new Manager Development Programme was introduced concentrating on Leadership, Strategic Thinking and Change Management, Positive Mind-set, Communication and Crisis Management skills. The Group also supports qualified staff to attain the Recognition of Prior Learning under Qualification Framework (QF). Up to year 2014, over 1,300 employees have been accredited the Qualification Framework of Level 2 and 3 with another 8 staff successfully achieved the Qualification of Housing Practitioner (PHKIH) through Qualifications Framework Level 4.

Taking into consideration of business growth, staff requirement in both Hong Kong and the Chinese Mainland is subject to continuous review. Besides external recruitment, internal talent pools are identified through staff work achievements and performance reviews. Personal development plans are developed to provide exposure to increased accountabilities before promotion assessment. The Group sets its remuneration policy by referencing prevailing market conditions and formulates a performance-based reward system with a view to maintaining market competitiveness for attracting and retaining high caliber staff. The remuneration packages of Hong Kong staff include basic salary, discretionary bonus and other benefits such as medical scheme and contribution to retirement funds. Such remuneration and benefits packages, as well as staff retention schemes from front line to management staff are reviewed systematically through our HREC, composed of senior management and divisional representatives.

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Incentive bonus schemes and a share options scheme are available to senior management staff to provide them with incentives to align their performance with the overall profitability and development of the Group. Such management bonus is calculated on a formula, tied to the Group’s earnings, approved by the Board. Employees in the Chinese Mainland are competitively remunerated in line with local market terms and conditions.

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

Neither the Company nor any of its subsidiaries purchased, sold or redeemed any of the Company’s listed securities during the year.

REVIEW BY AUDIT COMMITTEE

The Audit Committee of the Company comprises three members, namely, Mr. David Yu Hon To (chairman of the Audit Committee), Mr. Wong Tsan Kwong and Mr. Kan Fook Yee (appointed as a member with effect from 6 June 2014). The Audit Committee together with the participation of the management of the Company have reviewed the audited consolidated financial statements for the financial year ended 31 December 2014 of the Group.

REVIEW OF THIS ANNUAL RESULTS ANNOUNCEMENT

The figures in this annual results announcement, from pages 1 to 11, have been agreed by the Company’s external auditor, PricewaterhouseCoopers, to the amounts set out in the Group’s audited consolidated financial statements for the financial year ended 31 December 2014. The work performed by PricewaterhouseCoopers in this respect did not constitute an assurance engagement in accordance with Hong Kong Standards on Auditing, Hong Kong Standards on Review Engagements or Hong Kong Standards on Assurance Engagements issued by the Hong Kong Institute of Certified Public Accountants and, consequently, no assurance has been expressed by PricewaterhouseCoopers on this annual results announcement.

MODEL CODE FOR SECURITIES TRANSACTIONS BY DIRECTORS

The Board has adopted the Model Code for Securities Transactions by Directors of Listed Issuers (the “Model Code”) as set out in Appendix 10 of the Rules Governing the Listing of Securities (the “Listing Rules”) on The Stock Exchange of Hong Kong Limited (the “Stock exchange”) (as amended from time to time by the Stock Exchange) as its own code of conduct for regulating securities transactions by Directors. Having made specific enquiry of all Directors, all Directors confirmed they have complied with the required standard set out in the Model Code throughout the financial year ended 31 December 2014.

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COMPLIANCE WITH CORPORATE GOVERNANCE CODE

The Company has applied the principles in the code provisions and certain recommended best practices set out in the Corporate Governance Code (the “CG Code”) as set out in Appendix 14 of the Listing Rules throughout the financial year ended 31 December 2014. During the financial year ended 31 December 2014, the Company complied with all code provisions of the CG Code.

By order of the Board Synergis Holdings Limited Fan Cheuk Hung Managing Director

Hong Kong, 19 March 2015

As at the date of this announcement, the Board comprises Dr. Wilfred Wong Ying Wai (Chairman), and Dr. Fan Cheuk Hung (Managing Director) as Executive Directors; and Mr. Stephen Ip Shu Kwan, Mr. Kan Fook Yee, Mr. Wong Tsan Kwong and Mr. David Yu Hon To as Independent Nonexecutive Directors.

* for identification purposes only

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