OKG Technology : Annual Report 2017

LEAP Holdings Group Limited

前進控股集團有限公司

(Incorporated in the Cayman Islands with limited liability) Stock Code: 1499

ANNUAL REPORT 2017

CONTENTS

Corporate Information	2
Chairman's Statement	3
Management Discussion and Analysis	4
Biographical Details of Directors and Senior Management	15
Corporate Governance Report	19
Environmental, Social and Governance Report	33
Directors' Report	37
Independent Auditors' Report	47
Consolidated Statement of Profit or Loss and Other Comprehensive Income	51
Consolidated Statement of Financial Position	52
Consolidated Statement of Changes in Equity	54
Consolidated Statement of Cash Flows	55
Notes to the Consolidated Financial Statements	56
Five Years Financial Summary	112

LEAP Holdings Group Limited Annual Report 2017 1

CORPORATE INFORMATION

BOARD OF DIRECTORS

Executive Directors

Mr. Ip Ying Chau (Chairman)

Mr. Chan Wing Chung

Ms. Tung Ah Pui Athena

Mr. Chan Chiang Kan

Mr. Mui Wai Sum

Mr. Yip To Chun

(appointed on 12 July 2017)

Independent Non-executive Directors

Mr. Cheung Kwok Yan Wilfred

Mr. Feng Zhidong

Professor Ho Ho Ming

AUDIT COMMITTEE

Mr. Cheung Kwok Yan Wilfred (Chairman)

Mr. Feng Zhidong

Professor Ho Ho Ming

NOMINATION COMMITTEE

Mr. Ip Ying Chau (Chairman)

Professor Ho Ho Ming

Mr. Feng Zhidong

REMUNERATION COMMITTEE

Mr. Feng Zhidong (Chairman)

Mr. Ip Ying Chau

Professor Ho Ho Ming

COMPANY SECRETARY

Ms. So Hau Kit

AUTHORISED REPRESENTATIVES

Mr. Ip Ying Chau

Ms. Tung Ah Pui Athena

HEADQUARTERS AND PRINCIPAL PLACE OF BUSINESS IN HONG KONG

Units 2701-02, 27th Floor, Win Plaza, 9 Sheung Hei Street, San Po Kong, Kowloon, Hong Kong

PRINCIPAL SHARE REGISTRAR AND TRANSFER OFFICE IN THE CAYMAN ISLANDS

Estera Trust (Cayman) Ltd.

Clifton House, 75 Fort Street, PO Box 1350, Grand Cayman, KY1-1108, Cayman Islands

BRANCH SHARE REGISTRAR AND TRANSFER OFFICE IN HONG KONG

Union Registrars Limited

Suites 3301-04, 33/F,

Two Chinachem Exchange Square,

338 King's Road

North Point, Hong Kong

COMPLIANCE ADVISER

International Limited

Suites 1903-1904, 19th Floor, Tower 6, the Gateway, Harbour City, 9 Canton Road, Tsim Sha Tsui, Kowloon, Hong Kong

LEGAL ADVISER AS TO HONG KONG

Loong and Yeung

Solicitors of Hong Kong

Room 1603, 16/F,

China Building,

29 Queen's Road Central, Hong Kong

PRINCIPAL BANKS

The Hong Kong and Shanghai Banking Corporation

Limited

DBS Bank (Hong Kong) Limited

AUDITORS

HLB Hodgson Impey Cheng Limited

Certified Public Accountants

31st Floor, Gloucester Tower, The Landmark,

11 Pedder Street, Central, Hong Kong

COMPANY'S WEBSITE

www.leapholdings.hk

STOCK CODE

1499

2 LEAP Holdings Group Limited Annual Report 2017

CHAIRMAN'S STATEMENT

Dear Shareholders,

On behalf of the board (the "Board") of directors (the "Directors") of LEAP Holdings Group Limited (the "Company", together with subsidiaries of the Company, the "Group"), it is my pleasure to present to the shareholders the annual report of the Group for the year ended 31 March 2017 (the "Year").

Over the Year, our project works were on the downward trend, especially for our foundation works and ancillary services, with a decrease in revenue by approximately HK$67.6 million for the Year as compared to the previous year in this segment. Revenue from the construction wastes handling services was recorded at approximately HK$62.2 million the Year, representing a decrease of approximately HK$5.0 million as compared to the previous year.

The environment of the construction industry in Hong Kong is still uncertain. According to the 2017-18 Budget Speech, the Hong Kong government budgeted to invest approximately HK$86.8 billion in capital works expenditure. With many major public projects at their construction peaks, the government expected that the estimated annual capital works expenditure for the next few years will continue to stay at a high level. However, during the Year, the capital work projects were in slow progress due to filibustering in the Legislative Council causing delay in funding approval for public works. Despite the challenges environment in the construction industry, we managed to be awarded 7 new contracts with a total contract value of approximately HK$324.7 million.

During the Year, the Group commenced a new business segment of investments in securities in order to diversify the Group's business. The Group has invested in a portfolio of listed securities in Hong Kong. The Group will continue to seek investment opportunities in listed securities and other financial products in Hong Kong and other recognised financial markets in the overseas with a view to generate additional income and enhance the capital use of the Group.

Further to the commencement of new business segment of investments in securities, the Group obtained the money lenders licence in Hong Kong under the Money Lenders Ordinance (Chapter 163 of the Laws of Hong Kong) and commenced its money lending business since then. The Directors consider it will be beneficial to the Group to explore new opportunities in the money lending business to widen its revenue base and minimise the risks of the Group overall, in order to enhance the capital use of the Group as well as the interests of the Company and its shareholders overall.

On behalf of the Board, I would like to take this opportunity to extend my sincere appreciation to our shareholders, customers and suppliers for their continuous support, as well as the management team and the staff of the Group for their hard work and contributions in past year.

Ip Ying Chau

Chairman and Chief Executive Officer

LEAP Holdings Group Limited Annual Report 2017 3

MANAGEMENT DISCUSSION AND ANALYSIS

BUSINESS REVIEW

The Group's major sources of revenue were from foundation works and ancillary services and construction wastes handling services in Hong Kong. During the Year, the Group has commenced the investments in securities business and the money lending business in order to broaden the Group's investment strategy.

During the Year, except for the commencement of investments in securities business and money lending business, the Group had no material changes in its business nature and principal activities.

Foundation Works and Ancillary Services

The foundation works of the Group mainly included site formation works, excavation and lateral support ("ELS") works, piling construction, pile caps or footing construction and reinforced concrete structure works and ancillary services mainly included hoarding and demolition works and lease of machinery.

During the Year, revenue from this segment amounted to approximately HK$264.5 million, approximately HK$67.6 million less than that for the year ended 31 March 2016. Such decrease was mainly attributable to keen competition in the market resulting in the contract sum of the newly awarded projects during the Year was less than that of the comparable completed projects including major projects in Ma On Shan, Kau To and Kwun Tong, in which majority of revenue was recognised in the corresponding period in 2016.

Gross profit of this segment during the Year was approximately HK$7.9 million, which decreased approximately 87.1% as compared with approximately HK$61.4 million for the year ended 31 March 2016. Such decrease was mainly due to a decrease in revenue from foundation projects and the Group had to reduce the profit margin of new foundation projects in order to compete in the increasingly competitive market due to an increase in the number of competitors and a decrease in the number of capital works projects as discussed in the section headed "Prospects" below. Gross profit margin of this segment for the Year was approximately 3%, representing a decrease of 15.5 percentage points from approximately that of 18.5% for the year ended 31 March 2016. The decrease was mainly due to the completion of certain design and build projects, and no new awarded design and build projects during the Year. Such projects have higher gross profit margins.

As at the date of this report, the Group was awarded a site formation design and build project with contract sum of approximately HK$90 million. Going forward, the Group will focus on bidding for projects with higher gross profit margins including design and build projects.

Construction Wastes Handling Services

The Group's construction wastes handling services mainly included the management and operation of public fill reception facilities such as public fill banks and temporary construction waste sorting facilities, for construction and demolition materials.

During the Year, revenue from this segment amounted to approximately HK$62.2 million, which decreased approximately HK$5.0 million as compared with approximately HK$67.2 million for the year ended 31 March 2016.

4 LEAP Holdings Group Limited Annual Report 2017

MANAGEMENT DISCUSSION AND ANALYSIS (continued)

Gross profit of this segment for the Year was approximately HK$6.1 million, which decreased by approximately 32.2% as compared with approximately HK$9.0 million for the year ended 31 March 2016. Such decrease was mainly due to a decrease in revenue and an increase in certain cost of sales items including depreciation and transportation fees. The decrease in revenue is due to the completion of a construction wastes handling project in December 2016. As at the date of this report, we have been awarded a new construction wastes handling project in the Tuen Mun district which has commenced operations in May 2017. Gross profit margin of this segment for the Year was approximately 9.7%, representing a decrease of 3.7 percentage points from approximately 13.4% for the year ended 31 March 2016. Such decrease is mainly due to the increase in cost of sales items as mentioned above.

New Projects Awarded

During the Year, the Group had been awarded 7 new contracts with total contract value of approximately HK$324.7 million. The details of the new projects are as follows:

Type of Projects	Site Location	Type of Works
Foundation and Ancillary Works	Southern district	Foundation, pile cap and basement
		construction works
Foundation and Ancillary Works	Yau Tong district	Earthwork & steel platform
Foundation and Ancillary Works	Cheung Sha district	Excavation and structure works
Foundation and Ancillary Works	Tuen Mun district	Site formation, ELS and foundation works
Foundation and Ancillary Works	Kwai Chung district	Site formation & ELS works
Foundation and Ancillary Works	Chai Wan district	Bored piles construction works
Construction Wastes Handling	Tuen Mun district	Fill bank operation

Projects in Progress

As at 31 March 2017, the Group had 6 projects in progress with total contract value amounted to approximately HK$152.8 million. The details of projects in progress are as follows:

Type of Projects	Site Location	Type of Works
Foundation and Ancillary Works	Tuen Mun district	Demolition works
Foundation and Ancillary Works	Southern district	Site formation & mini-piling works
Foundation and Ancillary Works	Kowloon City district	Piling foundation works and ancillary works
Foundation and Ancillary Works	Yuen Long district	Site formation, ELS & concrete footing
		construction
Foundation and Ancillary Works	Wan Chai district	Hoarding & demolition works
Foundation and Ancillary Works	Yau Tsim Mong district	Disposal of excavated materials

LEAP Holdings Group Limited Annual Report 2017 5

MANAGEMENT DISCUSSION AND ANALYSIS (continued)

Completed Projects

During the Year, the Group completed 16 projects with total contract value amounted to approximately HK$525.4 million. The details of completed projects are as follows:

Type of Projects	Site Location	Type of Works
Foundation and Ancillary Works	Yau Tong district	Earthwork and steel platform
Foundation and Ancillary Works	Cheung Sha district	Excavation and structure works
Foundation and Ancillary Works	Tuen Mun district	Site formation, ELS and foundation works
Foundation and Ancillary Works	Kwai Chung district	Site formation & ELS works
Foundation and Ancillary Works	Pok Fu Lam district	Site preparation & working platform
Foundation and Ancillary Works	Chai Wan district	Bored piles construction works
Foundation and Ancillary Works	Tseung Kwan O district	Hoarding, pipe pile and king post works
Foundation and Ancillary Works	Aberdeen district	Piling foundation works and ancillary works
Foundation and Ancillary Works	Shau Kei Wan district	Hoarding, foundation and ELS works
Foundation and Ancillary Works	Ma On Shan district	Hoarding, foundation and ELS works
Foundation and Ancillary Works	Kwun Tong district	ELS works
Foundation and Ancillary Works	Kwai Chung district	Reinforced concrete structure works
Foundation and Ancillary Works	Kau To district	Site formation & ELS works
Foundation and Ancillary Works	Yau Ma Tei district	Excavation & lateral support and piling works
Foundation and Ancillary Works	Tsim Sha Tsui district	Excavation & lateral support and piling and
		structure works
Construction Wastes handling	Tseung Kwan O and	Operation of temporary construciton wastes
	Tuen Mun districts	sorting facilities

Investments in Securities

During the Year, the Group commenced a new business segment of investments in securities in order to diversify the Group's business. The Group has invested in a portfolio of listed securities in Hong Kong.

6 LEAP Holdings Group Limited Annual Report 2017

MANAGEMENT DISCUSSION AND ANALYSIS (continued)

As at 31 March 2017, the Group managed a portfolio of listed securities with aggregate market value of approximately HK$82.6 million. During the Year, the Group recorded a gross profit in the segment of investments in securities of approximately HK$24.1 million of which, approximately HK$23.6 million, fair value change on investments in securities and approximately HK$0.6 million is dividend income from investments in securities. Set out below are the significant investments as at 31 March 2017:

						Unrealized
						gain/(loss)
					% to the	on change in	Gain/(loss)	Dividend
				Market	Group's total	fair value for	on disposal for	received for
	Name of	Number of	Investment	value as at	assets as at	the year ended	the year ended	the year ended
	investee company	shares held	cost	31 March 2017	31 March 2017	31 March 2017	31 March 2017	31 March 2017
			(HK$'000)	(HK$'000)		(HK$'000)	(HK$'000)	(HK$'000)
1.	Master Glory Group Limited (275.HK)	31,200,000	5,629	6,427	1.55%	798	353	576
2.	Jia Meng Holdings Limited (8101.HK)	116,000,000	11,079	14,384	3.46%	3,305	546	0

3. China Candy Holdings Limited

(8182.HK)

64,180,000

9,646

12,066

2.90%

2,420

(6)

0

4. KOALA Financial Group Limited

(8226.HK)

128,800,000

18,938

21,510

5.17%

2,572

0

0

5. Deson Construction International

	Holdings Limited (8268.HK)	25,032,000	6,164	7,760	1.87%	1,596	210	0
6.	Other investments			20,424	4.91%
	Total			82,571	19.86%			576

LEAP Holdings Group Limited Annual Report 2017 7

MANAGEMENT DISCUSSION AND ANALYSIS (continued)

Brief description of principal business of the respective investee company of the investments

Name of investee company	Principal Business
Master Glory Group Limited	Trading of securities, industrial water supply business, property development
	and trading and other strategic investments.
Jia Meng Holdings Limited	Design, manufacture and sale of mattresses and soft bed products in the PRC
	and export of mattresses to overseas markets; securities investment in Hong
	Kong; and property investment.
China Candy Holdings Limited	Manufacturing of candies in China, products include jelly drops candies,
	aerated candies, hard candies and chocolate-made products.
KOALA Financial Group Limited	Securities brokerage, money lending, securities investment, trading of
	commodities, trading of garment accessories, and manufacturing and trading
	of LED digital display products.
Deson Construction International	Provide building construction works, electrical and mechanical engineering
Holdings Limited	works and alterations, addition, renovation, refurbishment and fitting-out
	works, mainly in Hong Kong, Mainland China and Macau.

The Board acknowledges that there are both uncertainties and opportunities to the outlook of the investment industry for global financial markets. Accordingly, in order to mitigate possible financial risks, the Company has been continuously evaluating the performance of its existing investment portfolio and looking for other investment opportunities. The Group will continue to seek investment opportunities in listed securities and other financial products in Hong Kong and other recognised financial markets in the overseas with a view to generate additional income and enhance the capital use of the Group.

Money Lending

During the Year, the Group obtained the money lenders licence in Hong Kong under the Money Lenders Ordinance (Chapter 163 of the Laws of Hong Kong) and commenced its money lending business since then. During the year, the Group generated approximately HK$2.2 million revenue and gross profit from this segment. The Directors consider it will be beneficial to the Group to explore new opportunities in the money lending business to widen its revenue base and minimise the risks of the Group overall, in order to enhance the capital use of the Group as well as the interests of the Company and its shareholders overall.

During the Year, except for the commencement of investments in securities business and money lending business, the Group had no material changes in its business nature and principal activities.

8 LEAP Holdings Group Limited Annual Report 2017

MANAGEMENT DISCUSSION AND ANALYSIS (continued)

FINANCIAL REVIEW

Revenue

Revenue decreased by approximately 11.6% from approximately HK$399.3 million for the year ended 31 March 2016 to approximately HK$353.0 million for the Year. The decline was mainly due to keen competition in the market of foundation works and ancillary services resulting in the contract sum of the newly awarded projects during the Year being less than that of the comparable completed projects including major projects in Ma On Shan, Kau To and Kwun Tong, in which a majority of revenue was recognised in the corresponding period in 2016.

Gross profit and gross margin

Gross profit decreased by approximately 42.8% from approximately HK$70.4 million for the year ended 31 March 2016 to approximately HK$40.3 million for the Year. The decrease in gross profit margin was mainly due to the decrease in revenue as discussed in the section headed "Revenue" above. Gross profit margin for the Year was approximately 11.4%, representing a decrease of 6.2 percentage points from approximately 17.6% for the year ended 31 March 2016. The decrease was mainly due to the decrease in revenue from foundation projects and the Group had to reduce the profit margin of new foundation projects in order to compete in the increasingly competitive market due to an increase in the number of competitors and a decrease in the number of capital works projects as discussed in the section headed "Prospects" below.

Other income, gains and losses

Other income, gains and losses mainly consisted of Government grants and gain on the disposal of property, plant and equipment. During the Year, other income, gains and losses amounted to approximately HK$5.2 million (2016: HK$0.9 million).

Administrative and other operating expenses

The administrative and other operating expenses of the Group for the Year amounted to approximately HK$29.5 million, representing a decrease of approximately 9.3% compared with approximately HK$32.6 million for the year ended 31 March 2016. Such decrease was mainly due to the absence of one-off listing expenses during the Year when compared to last year.

Finance costs

Finance costs decreased by approximately 9.1% from approximately HK$1.1 million for the year ended 31 March 2016 to approximately HK$1.0 million for the Year, which is mainly due to the repayment of finance leases during the Year, which was slightly offset by the bank borrowings drawn during the Year.

LEAP Holdings Group Limited Annual Report 2017 9