2023-09-21-港交所-先丰服务集团_二零二三年中期报告_62页_6mb

2023 Interim Report Summary

Core Content

This document is the 2023 Interim Report of Frontier Services Group Limited, providing an overview of the Group's six-month performance ending on 30 June 2023, along with comparative figures from the same period in 2022. The report includes financial statements, board and committee structures, corporate information, employee policies, dividend and treasury policies, and currency risk exposure.

Main Points

1. Board and Committee Structure

• Non-Executive Directors:

  • Mr. Chang Zhenming (Chairman)
  • Mr. Fei Yiping
  • Mr. Chan Kai Kong
  • Mr. Dorian Barak
  • Mr. Zhang Yukuan

• Executive Directors:

  • Mr. Ko Chun Shun, Johnson (Deputy Chairman)
  • Mr. Luo Ning (Deputy Chairman)
  • Mr. Li Xiaopeng (Chief Executive Officer)

• Independent Non-Executive Directors:

  • Mr. Yap Fat Suan, Henry
  • Mr. Cui Liguo
  • Mr. Hooi Hing Lee
  • Dr. Chan Wing Mui, Helen

• Committees:

  • Audit Committee: Mr. Yap Fat Suan, Henry (Chairman), Mr. Cui Liguo, Mr. Hooi Hing Lee
  • Nomination Committee: Mr. Cui Liguo (Chairman), Mr. Ko Chun Shun, Johnson, Mr. Yap Fat Suan, Henry, Mr. Hooi Hing Lee
  • Remuneration Committee: Same members as the Nomination Committee
  • Risk Committee: Mr. Cui Liguo, Mr. Hooi Hing Lee, Mr. Yap Fat Suan, Henry

• Company Secretary: Mr. Chan Kam Kwan, Jason

2. Corporate Information

• Independent Auditor: PricewaterhouseCoopers
• Legal Advisers: Baker & McKenzie
• Principal Bankers:
  • Bank of Communications Co., Limited
  • China Everbright Bank
  • China CITIC Bank International Limited
  • Industrial and Commercial Bank of China
• Registered Office: Clarendon House, 2 Church Street, Hamilton HM11, Bermuda
• Principal Place of Business: Suite 3902, 39th Floor, Far East Finance Centre, 16 Harcourt Road, Admiralty, Hong Kong
• Share Registrars and Transfer Office:
  • Principal Registrar: MUFG Fund Services (Bermuda) Limited
  • Share Registrar and Transfer Office: Tricor Tengis Limited, Level 54, Hopewell Centre, 183 Queen's Road East, Hong Kong
• Investor Relations:
  • Contact: Frontier Services Group Limited, (852) 3766 1077, (852) 3007 0386, ir@fsgroup.com
  • Website: www.fsgroup.com, www.irasia.com/listco/hk/frontier

3. Financial Performance Overview

• Revenue from contracts with customers:
  • 2023: HK$429,140,000
  • 2022: HK$503,839,000
• Operating Profit:
  • 2023: HK$72,677,000
  • 2022: HK$-34,751,000
• Profit for the period:
  • 2023: HK$54,869,000
  • 2022: HK$-54,765,000

4. Key Business Segments

a. Security, Insurance and Infrastructure Business

• Security:
  • Revenue increased by 46% to HK$266,662,000
  • Net profit after amortisation: HK$31,335,000
  • Mainly driven by improved performance in Africa and Southeast Asia
• Insurance:
  • Net profit: HK$134,000 (vs. HK$650,000 in 2022)
  • Impact from USD appreciation
• Infrastructure:
  • Revenue: HK$44,709,000 (vs. HK$71,924,000 in 2022)
  • Project in Laos: 95% completed by 30 June 2023
  • Profit: HK$6,795,000 (vs. HK$12,872,000 in 2022)

b. Aviation and Logistics Business

• Aviation:
  • Revenue: HK$47,339,000
  • Profit: HK$3,744,000 (vs. HK$6,275,000 in 2022)
  • Due to termination of a major client's contract
• Logistics (TFF):
  • Net loss: HK$37,172,000 in 2022
  • Deconsolidated in 2023, resulting in a non-cash gain of HK$52,860,000
  • Business rescue and liquidation process initiated in 2022

c. Healthcare Business

• Revenue: HK$10,022,000 (vs. HK$23,837,000 in 2022)
• Net profit: HK$166,000 (vs. HK$7,910,000 in 2022)
• Decline attributed to reduced demand for medical products due to post-pandemic conditions

Key Financial Highlights

• Total Assets: HK$1,103,747,000 (vs. HK$1,091,440,000 in December 2022)
• Total Liabilities: HK$581,156,000 (vs. HK$620,865,000 in December 2022)
• Non-controlling Interests: HK$121,861,000 (vs. HK$118,837,000 in December 2022)
• Shareholders' Equity: HK$400,730,000 (vs. HK$351,738,000 in December 2022)
• Net Asset Value per Share: HK$0.17 (vs. HK$0.15 in December 2022)
• Available Cash and Bank Balances: HK$186,484,000 (vs. HK$186,790,000 in December 2022)
• Restricted Bank Balances: HK$249,000 (vs. HK$3,857,000 in December 2022)
• Total Borrowings: HK$199,567,000 (vs. HK$190,084,000 in December 2022)
• Gearing Ratio: 18.1% (vs. 17.5% in December 2022)

Strategic Developments and Prospects

• The Group has transitioned into the post-COVID era by December 2022, with cross-border activities resuming fully by 2023.
• Security business has become the core business and main profit generator, with notable growth in Africa and Southeast Asia.
• DeWe Group acquisition has enhanced the Group's focus in the security sector.
• GMC (GlobalMedicare Limited) continues to expand its medical networks in Hong Kong and China, aiming for improved performance in the second half of 2023.
• Aviation business is proactively expanding fleet capabilities to meet rising demand in Africa, with air charter and air ambulance services now available.
• The Group is working on financial restructuring due to the liquidation of TFF, which contributed a one-time non-cash gain of HK$52,860,000.
• The Group is implementing a new share scheme effective from 1 January 2023, replacing the old share option and award schemes.

Employee and Compensation Policies

• The Group has performance-based human resource policies and competitive compensation.
• Employees are rewarded based on performance, with discretionary year-end bonuses.
• Share Option Scheme:
  • Valid from 28 March 2012 to 28 March 2022
  • Outstanding options at 30 June 2023: 23,400,000
• Share Award Scheme:
  • Implemented since 10 December 2015
  • No unvested shares granted as of 30 June 2023
• New Share Scheme:
  • Adopted in 2023
  • Designed to grant share options and awards to participants
  • No share options or awards issued under the new scheme as of 30 June 2023
• Total Employees: 1,998 (vs. 1,816 in 2022)
• Employee Benefit Expenses: Increased due to expansion in security operations, particularly full-time security officers

Dividend Policy

• The Group may distribute dividends in cash or shares.
• Dividend decisions are subject to the Board's discretion and approval by shareholders.
• Factors considered include:
  • Financial performance
  • Shareholder interests
  • Retained earnings and financial covenants
  • Liquidity and future commitments
• No assurance of dividend proposal or declaration in any specific period.

Currency Risk Exposure

• Operations in Africa:
  • Transactions in US$, Kenyan Shillings, and Nigerian Naira
  • Exchange rates of KES and NN against HK$ decreased by 12% and 41%, respectively
  • No hedging instruments used due to high costs
• Operations in Southeast Asia:
  • Majority in US$ with some expenses in local currencies (MMK, BDT, LAK, KHR)
  • Group monitors currency fluctuations to manage risk
• Operations in Mainland China:
  • Transactions primarily in RMB
  • Conversion of RMB into other currencies not specified in the document

Conclusion

The Group has significantly improved its operating performance in the first half of 2023, driven by enhanced security operations and non-cash gains from the deconsolidation of TFF. Despite challenges in the logistics and healthcare sectors, the Group is strategically repositioning itself to capitalize on post-pandemic opportunities. The Group remains focused on long-term growth and financial stability through conservative treasury management, strategic acquisitions, and employee incentive programs.