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.
(Incorporated in Bermuda with limited liability)
(Stock Code: 00418)
FINAL RESULTS ANNOUNCEMENT FOR THE YEAR ENDED 31 DECEMBER 2020
The board of directors (the "Board") of Founder Holdings Limited (the "Company") is pleased to announce the consolidated results and financial position of the Company and its subsidiaries (collectively the "Group") for the year ended 31 December 2020 together with the comparative figures.
CONSOLIDATED STATEMENT OF PROFIT OR LOSS YEAR ENDED 31 DECEMBER 2020
2020 | 2019 | ||
Notes | HK$'000 | HK$'000 | |
REVENUE | 4 | 936,545 | 1,058,424 |
Cost of sales | (492,689) | (536,786) | |
Gross profit | 443,856 | 521,638 | |
Other income and gains | 4 | 66,096 | 94,415 |
Selling and distribution expenses | (203,556) | (235,855) | |
Administrative expenses | (81,824) | (96,167) | |
Other expenses, net | (170,891) | (624,167) | |
Finance costs | 5 | (1,594) | (9,538) |
Share of profits of associates | 142 | 145 | |
PROFIT/(LOSS) BEFORE TAX | 6 | 52,229 | (349,529) |
Income tax | 7 | 1,668 | 110,739 |
PROFIT/(LOSS) FOR THE YEAR | 53,897 | (238,790) |
2020
Note
HK$'000
Attributable to:
Owners of the parentEARNINGS/(LOSS) PER SHARE
ATTRIBUTABLE TO ORDINARY EQUITY HOLDERS OF THE PARENT Basic and diluted
53,897
8
HK4.5 cents
2019
HK$'000
(238,790)HK(19.9) cents
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME YEAR ENDED 31 DECEMBER 2020
2020
2019
HK$'000
HK$'000
PROFIT/(LOSS) FOR THE YEAROTHER COMPREHENSIVE INCOME/(LOSS)Other comprehensive income/(loss) that may be reclassified to profit or loss in subsequent periods: Share of other comprehensive income/(loss) of associates
Exchange differences:
Exchange differences on translation of foreign operations
Net other comprehensive income/(loss) that may be reclassified to profit or loss in subsequent periods
53,897
(238,790)
335 (55)
335 (55)
42,717 (11,245)
42,717 (11,245)
43,052 (11,300)Other comprehensive income that will not be reclassified to profit or loss in subsequent periods: Changes in fair value of equity investments at fair value through other comprehensive income Revaluation surplus of land and buildings, net of tax
(747) (4,115)
8,666 9,886
Net other comprehensive income that will not be reclassified to profit or loss in subsequent periodsOTHER COMPREHENSIVE INCOME/(LOSS)
FOR THE YEAR, NET OF TAX
TOTAL COMPREHENSIVE INCOME/(LOSS)
FOR THE YEAR
Attributable to:
Owners of the parent
7,919 5,771
50,971 (5,529)
104,868 (244,319)
104,868 (244,319)
CONSOLIDATED STATEMENT OF FINANCIAL POSITION 31 DECEMBER 2020
2020 | 2019 | ||
Notes | HK$'000 | HK$'000 | |
NON-CURRENT ASSETS | |||
Property, plant and equipment | 336,072 | 324,301 | |
Investment properties | 142,923 | 146,184 | |
Right-of-use assets | 2,550 | 2,805 | |
Investments in associates | 3,111 | 2,634 | |
Equity investments at fair value through other | |||
comprehensive income | 1,902 | 2,641 | |
Intangible assets | - | - | |
Deferred tax assets | 125,038 | 115,793 | |
Pledged deposits | 3,188 | 4,109 | |
Total non-current assets | 614,784 | 598,467 | |
CURRENT ASSETS | |||
Inventories | 75,400 | 71,131 | |
Trade and bills receivables | 9 | 199,897 | 178,019 |
Contract assets | 16,317 | 17,334 | |
Prepayments, other receivables and other assets | 59,902 | 78,453 | |
Financial assets at fair value through profit or loss | 387 | 563 | |
Structured deposits | 178,359 | - | |
Pledged deposits | 6,777 | 10,123 | |
Cash and cash equivalents | 363,785 | 553,866 | |
Tax recoverable | - | 1,186 | |
Total current assets | 900,824 | 910,675 | |
CURRENT LIABILITIES | |||
Trade and bills payables | 10 | 67,950 | 62,040 |
Contract liabilities | 69,116 | 77,385 | |
Other payables and accruals | 264,549 | 255,080 | |
Interest-bearing bank borrowings | - | 107,093 | |
Lease liabilities | 1,724 | 1,979 | |
Tax payable | 4,785 | 7,157 | |
Total current liabilities | 408,124 | 510,734 | |
NET CURRENT ASSETS | 492,700 | 399,941 |
2020 | 2019 | |
HK$'000 | HK$'000 | |
TOTAL ASSETS LESS CURRENT LIABILITIES | 1,107,484 | 998,408 |
NON-CURRENT LIABILITIES | ||
Lease liabilities | 438 | 460 |
Deferred tax liabilities | 60,796 | 56,566 |
Total non-current liabilities | 61,234 | 57,026 |
Net assets | 1,046,250 | 941,382 |
EQUITY | ||
Equity attributable to owners of the parent | ||
Issued capital | 119,975 | 119,975 |
Reserves | 926,275 | 821,407 |
Total equity | 1,046,250 | 941,382 |
NOTES TO FINANCIAL STATEMENTS
31 DECEMBER 2020
1. BASIS OF PREPARATION
These financial statements have been prepared in accordance with Hong Kong Financial Reporting Standards ("HKFRSs") (which include all Hong Kong Financial Reporting Standards, Hong Kong Accounting Standards ("HKASs") and Interpretations) issued by the Hong Kong Institute of Certified Public Accountants ("HKICPA"), accounting principles generally accepted in Hong Kong and the disclosure requirements of the Hong Kong Companies Ordinance. They have been prepared under the historical cost convention, except for investment properties, land and buildings classified as property, plant and equipment, equity investments at fair value through other comprehensive income, bills receivable, structured deposits and financial assets at fair value through profit or loss which have been measured at fair value. These financial statements are presented in Hong Kong dollars and all values are rounded to the nearest thousand except when otherwise indicated.
2. CHANGES IN ACCOUNTING POLICIES AND DISCLOSURES
The Group has adopted the Conceptual Framework for Financial Reporting 2018 and the following revised HKFRSs for the first time for the current year's financial statements.
Amendments to HKFRS 3
Definition of a Business
Amendments to HKFRS 9, HKAS 39 and
Interest Rate Benchmark Reform
HKFRS 7
Amendment to HKFRS 16
COVID-19-Related Rent Concessions (early adopted)
Amendments to HKAS 19
Plan Amendment, Curtailment or Settlement
Amendments to HKAS 1 and HKAS 8
Definition of Material
The nature and the impact of the Conceptual Framework for Financial Reporting 2018 and the revised HKFRSs are described below:
(a) Conceptual Framework for Financial Reporting 2018 (the "Conceptual Framework") sets out a comprehensive set of concepts for financial reporting and standard setting, and provides guidance for preparers of financial statements in developing consistent accounting policies and assistance to all parties to understand and interpret the standards. The Conceptual Framework includes new chapters on measurement and reporting financial performance, new guidance on the derecognition of assets and liabilities, and updated definitions and recognition criteria for assets and liabilities.
It also clarifies the roles of stewardship, prudence and measurement uncertainty in financial reporting. The Conceptual Framework is not a standard, and none of the concepts contained therein override the concepts or requirements in any standard. The Conceptual Framework did not have any significant impact on the financial position and performance of the Group.
(b) Amendments to HKFRS 3 clarify and provide additional guidance on the definition of a business.
The amendments clarify that for an integrated set of activities and assets to be considered a business, it must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create output. A business can exist without including all of the inputs and processes needed to create outputs. The amendments remove the assessment of whether market participants are capable of acquiring the business and continue to produce outputs.
Instead, the focus is on whether acquired inputs and acquired substantive processes together significantly contribute to the ability to create outputs. The amendments have also narrowed the definition of outputs to focus on goods or services provided to customers, investment income or other income from ordinary activities. Furthermore, the amendments provide guidance to assess whether an acquired process is substantive and introduce an optional fair value concentration test to permit a simplified assessment of whether an acquired set of activities and assets is not a business.
The Group has applied the amendments prospectively to transactions or other events that occurred on or after 1 January 2020. The amendments did not have any impact on the financial position and performance of the Group.
(c) Amendments to HKFRS 9, HKAS 39 and HKFRS 7 address issues affecting financial reporting in the period before the replacement of an existing interest rate benchmark with an alternative risk-free rate ("RFR"). The amendments provide temporary reliefs which enable hedge accounting to continue during the period of uncertainty before the introduction of the alternative RFR. In addition, the amendments require companies to provide additional information to investors about their hedging relationships which are directly affected by these uncertainties. The amendments did not have any impact on the financial position and performance of the Group as the Group does not have any interest rate hedging relationships.
(d) Amendment to HKFRS 16 provides a practical expedient for lessees to elect not to apply lease modification accounting for rent concessions arising as a direct consequence of the COVID-19 pandemic. The practical expedient applies only to rent concessions occurring as a direct consequence of the pandemic and only if (i) 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; (ii) any reduction in lease payments affects only payments originally due on or before 30 June 2021; and (iii) there is no substantive change to other terms and conditions of the lease. The amendment is effective for annual periods beginning on or after 1 June 2020 with earlier application permitted and shall be applied retrospectively.
During the year ended 31 December 2020, a quarterly lease payment for the lease of the Group's warehouse has been reduced or waived by the lessor as a result of the COVID-19 pandemic and there are no other changes to the terms of the lease. The Group has early adopted the amendment on 1 January 2020 and elected not to apply lease modification accounting for all rent concessions granted by the lessors as a result of the pandemic during the year ended 31 December 2020. Accordingly, a reduction in the lease payments arising from the rent concessions of HK$301,129 has been accounted for as a variable lease payment by derecognising part of the lease liabilities and crediting to profit or loss for the year ended 31 December 2020.
(e) Amendments to HKAS 1 and HKAS 8 provide a new definition of material. The new definition states that information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements. The amendments clarify that materiality will depend on the nature or magnitude of information, or both. The amendments did not have any significant impact on the financial position and performance of the Group.
3.
OPERATING SEGMENT INFORMATION
The Group is primarily engaged in provision of software development, system integration and information products distribution. Given that the chief operating decision maker of the Company considers that the Group's business is operated and managed as a single segment, accordingly, no segment information is presented.
Geographical information
(a) Revenue from external customers
2020 | 2019 | |
HK$'000 | HK$'000 | |
Mainland China | 931,786 | 1,055,222 |
Hong Kong | 4,554 | 2,933 |
Others | 205 | 269 |
936,545 | 1,058,424 |
The revenue information above is based on the locations of the customers.
(b)Non-current assets
2020 | 2019 | |
HK$'000 | HK$'000 | |
Mainland China | 271,833 | 256,379 |
Hong Kong | 209,712 | 216,892 |
Others | 3,111 | 2,653 |
484,656 | 475,924 |
The non-current asset information above is based on the locations of the assets and excludes financial instruments, deferred tax assets and pledged deposits.
Information about major customers
During the year, there was no revenue derived from transactions with a single external customer which individually accounted for 10% or more of the Group's revenue (2019: Nil).
4.
REVENUE, OTHER INCOME AND GAINS
An analysis of revenue is as follows:
Revenue from contracts with customers Revenue from other sources
2019 | |
HK$'000 | |
1,053,829 | |
4,595 | |
1,058,424 | |
(i) | Disaggregated revenue information |
For the year ended 31 December 2020 | Total |
HK$'000 | |
Types of goods or services | |
Sale of information products and software | 898,199 |
Sale of software development and system integration service | 33,312 |
Total revenue from contracts with customers | 931,511 |
Geographical markets | |
Mainland China | 931,306 |
Others | 205 |
Total revenue from contracts with customers | 931,511 |
Timing of revenue recognition | |
Goods transferred at a point in time | 898,199 |
Services transferred over time | 33,312 |
Total revenue from contracts with customers | 931,511 |
2020
Rental income from investment property operating leases
Revenue from contracts with customers
HK$'000
931,511
5,034 936,545
For the year ended 31 December 2019 | Total |
HK$'000 | |
Type of goods or services | |
Sale of information products and software | 853,424 |
Sale of software development and system integration service | 200,405 |
Total revenue from contracts with customers | 1,053,829 |
Geographical markets | |
Mainland China | 1,053,560 |
Others | 269 |
Total revenue from contracts with customers | 1,053,829 |
Timing of revenue recognition | |
Goods transferred at a point in time | 853,424 |
Services transferred over time | 200,405 |
Total revenue from contracts with customers | 1,053,829 |
The following table shows the amounts of revenue recognised in the current reporting period that were included in the contract liabilities at the beginning of the reporting period and recognised from performance obligations satisfied in previous periods:
(ii)
2020 | 2019 | |
HK$'000 | HK$'000 | |
Revenue recognised that was included in contract liabilities | ||
at the beginning of the reporting period: | ||
Sale of information products and software | 43,256 | 43,008 |
Sale of software development and system integration service | 8,500 | 13,252 |
51,756 | 56,260 | |
Performance obligations |
Information about the Group's performance obligations is summarised below:
Sale of information products and software
The performance obligation is satisfied upon delivery of information products and software and payment is generally due within 90 days from the invoice date, except for new customers, where payment in advance is normally required. A certain percentage of payment is retained by customers until the end of the retention period as the Group's entitlement to the final payment is conditional on the satisfaction of the goods' quality by the customers over a certain period as stipulated in the contracts.
Software development and system integration services
The performance obligation is satisfied over time as services are rendered and payment is generally due within 15 days from the invoice date. A certain percentage of payment is retained by customers until the end of the retention period as the Group's entitlement to the final payment is conditional on the satisfaction of the service quality by the customers over a certain period as stipulated in the contracts.
The amounts of transaction prices allocated to the remaining performance obligations (unsatisfied or partially unsatisfied) as at 31 December are as follows:
2020 | 2019 | |
HK$'000 | HK$'000 | |
Amounts expected to be recognised as revenue: | ||
Within one year | 56,204 | 114,455 |
After one year | 2,677 | 9,023 |
58,881 | 123,478 |
The amounts of transaction prices allocated to the remaining performance obligations which are expected to be recognised as revenue after one year relate to software development and system integration services, of which the performance obligations are to be satisfied within three years. All the other amounts of transaction prices allocated to the remaining performance obligations are expected to be recognised as revenue within one year. The amounts disclosed above do not include variable consideration which is constrained.
2020 | 2019 | |
HK$'000 | HK$'000 | |
Other income | ||
Bank interest income | 7,314 | 6,315 |
Other interest income | 335 | 26,253 |
Government grants (note) | 50,457 | 55,360 |
Others | 4,032 | 5,878 |
62,138 | 93,806 | |
Gains | ||
Gain on disposal of items of property, plant and equipment | 26 | 609 |
Fair value gains on structured deposits | 1,305 | - |
Foreign exchange differences, net | 2,627 | - |
3,958 | 609 | |
66,096 | 94,415 |
Note: Various government grants have been received for the sale of software approved by the PRC tax authority and the development of software in Mainland China. The government grants have been recognised upon sales of approved software and completion of the development of related software. There are no unfulfilled conditions or contingencies relating to these grants.
5. | ||
2020 | 2019 | |
HK$'000 | HK$'000 | |
Interest on lease liabilities | 121 | 144 |
Interest on bank borrowings | 1,473 | 9,394 |
1,594 | 9,538 | |
6. | PROFIT/(LOSS) BEFORE TAX | |
The Group's profit/(loss) before tax is arrived at after charging/(crediting): | ||
2020 | 2019 | |
HK$'000 | HK$'000 | |
Cost of inventories sold** | 335,063 | 347,046 |
Cost of services provided** | 154,027 | 187,357 |
Depreciation of property, plant and equipment | 18,870 | 19,158 |
Depreciation of right-of-use assets | 2,739 | 2,209 |
Lease payments not included in the measurement of | ||
lease liabilities | 22,367 | 20,615 |
Impairment of trade receivables and contract assets* | 5,063 | 9,236 |
Impairment/(reversal of impairment) of other receivables* | (7,977) | 436,580 |
Loss on write-off of inventories* | 1,753 | 1,434 |
Provision for obsolete inventories** | 3,599 | 2,383 |
Research and development costs: | ||
Current year expenditure* | 157,428 | 163,452 |
Fair value (gains)/losses on financial assets at fair value | ||
through profit or loss | (14) | 240 |
Fair value losses on investment properties* | 3,756 | 4,985 |
Gain on disposal of financial assets at fair value through | ||
profit or loss | (248) | - |
Fair value gains on structured deposits | (1,305) | - |
FINANCE COSTS
An analysis of finance costs is as follows:
* **These items are included in "Other expenses, net" in the consolidated statement of profit or loss.
These items are included in "Cost of sales" in the consolidated statement of profit or loss.
7. INCOME TAX
2020
2019
HK$'000
HK$'000
Current - Hong Kong
Charge for the year
1
-
Current - Mainland China
Charge for the year
2,214
6,496
Overprovision in prior years
(521)
(2,109)
Deferred
(3,362)
(115,126)
Total tax credit for the year
(1,668)
(110,739)
Hong Kong profits tax has been provided at the rate of 16.5% (2019:16.5%) on the estimated assessable profits arising in Hong Kong during the year, except for the first HK$2,000,000 of assessable profits for Founder Electronics (HK) Limited which is taxed at the rate of 8.25% as Founder Electronics (HK) Limited elects the two-tiered profits tax rates in 2020 and 2019.
Taxes on profits assessable in Mainland China have been calculated at the statutory PRC corporate income tax ("CIT") rate of 25%. Certain subsidiaries of the Group are entitled to preferential tax treatments of reduction in the CIT rate to 5%, 10% or 15%.
The share of tax attributable to associates amounting to negative HK$28,000 (2019: negative HK$29,000) is included in "Share of profits of associates" in the consolidated statement of profit or loss.
8. EARNINGS/(LOSS) PER SHARE ATTRIBUTABLE TO ORDINARY EQUITY HOLDERS OF THE PARENT
The calculation of the basic earnings/loss per share amount is based on the earnings/loss for the year attributable to ordinary equity holders of the parent, and the weighted average number of ordinary shares of 1,199,746,993 (2019: 1,199,746,993) in issue during the year.
The Group had no potentially dilutive ordinary shares in issue during the years ended 31 December 2020
and 2019.
9. TRADE AND BILLS RECEIVABLES
The Group's trading terms with its customers are mainly on credit, except for new customers, where payment in advance is normally required. Payment is generally due within 90 days from the invoice date. Each customer has a maximum credit limit. The Group seeks to maintain strict control over its outstanding receivables. Overdue balances are reviewed regularly by senior management. In view of the aforementioned and the fact that the Group's trade receivables relate to a large number of diversified customers, there is no significant concentration of credit risk. The Group does not hold any collateral or other credit enhancements over its trade and bills receivable balances. Trade and bills receivables are non-interest-bearing.
An ageing analysis of the trade receivables and bills receivable, based on the invoice date or bills receipt date and net of loss allowance, is as follows:
10.
2020 | 2019 | |
HK$'000 | HK$'000 | |
Within 6 months | 168,172 | 140,853 |
7 to 12 months | 11,718 | 12,878 |
13 to 24 months | 16,294 | 12,153 |
Over 24 months | 3,713 | 12,135 |
199,897 | 178,019 | |
TRADE AND BILLS PAYABLES |
An ageing analysis of the trade and bills payables as at the end of the reporting period, based on the invoice date or bills payment date, is as follows:
2020 | 2019 | |
HK$'000 | HK$'000 | |
Within 6 months | 61,281 | 53,503 |
7 to 12 months | 994 | 1,866 |
13 to 24 months | 1,694 | 1,649 |
Over 24 months | 3,981 | 5,022 |
67,950 | 62,040 |
The trade payables are non-interest-bearing and are normally settled on terms of 15 to 90 days.
DIVIDEND
No interim dividend was paid during the year and previous year. The Board does not recommend the payment of any final dividend for the year (2019: Nil).
MANAGEMENT DISCUSSION AND ANALYSIS
PERFORMANCE
The Group reported a profit for the year ended 31 December 2020 of approximately HK$53.9 million (year ended 31 December 2019: loss of HK$238.8 million). The Group's turnover for the current year decreased by 11.5% to HK$936.5 million (year ended 31 December 2019: HK$1,058.4 million) due to the delay in completion of certain systems integration contracts and decrease in demand of font library and printing products under the impact of COVID-19 pandemic. Gross profit for the current year decreased by 14.9% to HK$443.9 million compared with last year's HK$521.6 million. Gross profit ratio decreased from 49.3% for the last year to 47.4% for the current year as a result of decrease in proportion of sales of font library business with higher gross profit margin.
The profit for the year was mainly the net results of:
a. a decrease in the gross profit by 14.9% to approximately HK$443.9 million (year ended 31 December 2019: HK$521.6 million);
b. impairment of loan receivables of approximately HK$436.1 million in prior year (year ended 31 December 2020: Nil) mainly due to default in entrusted loans to ̏ɽ˙͍ණྠ Ϟࠢʮ̡ (Peking University Founder Group Company Limited*) ("Peking Founder"), a substantial shareholder of the Company;
c. a decrease in other income and gains by 30.0% to HK$66.1 million (year ended 31 December 2019: HK$94.4 million) attributable to the decrease in other interest income as a result of decline in the interests from entrusted loans due to certain defaults;
d. a decrease in total selling and distribution expenses and administrative expenses by 14.0% to HK$285.4 million (year ended 31 December 2019: HK$332.0 million) as a result of strict control on expenses imposed by the management; and
e. a decrease in tax credit by HK$109.0 million to HK$1.7 million (year ended 31 December 2019: HK$110.7 million) as a result of decline in deferred tax effect on impairment of entrusted loan receivables.
Basic and diluted earnings per share for the year was HK4.5 cents (year ended 31 December 2019: loss of HK19.9 cents).
OPERATING REVIEW AND PROSPECTS
Operating Review
Font Library Business
Against the backdrop that China is vigorously propelling cultural creative industries, the value of fonts has been recognized by more and more enterprises and the public. Meanwhile, with increasingly intense competition in the industry, new font design companies and individual font designers came into the font library market one after another. In 2020, to cope with fierce domestic and overseas competition as well as the exceptional effect of the COVID-19 pandemic, Founder font library has made a number of attempts in terms of marketing methods:
1) Font library copyright aspect: As a leading enterprise in the field of copyright, ̏ɽ˙ ͍ཥɿϞࠢʮ̡ (Beijing Founder Electronics Co., Ltd.*) ("Founder Electronics"), the wholly-owned subsidiary of the Company, was recognized as a "National Copyright Demonstration Unit" by the National Copyright Administration. It organized a charitable activity by launching the "free authorized fonts for fighting COVID-19" (Ҥޥ܁ෂе ൬બᛆο) to the public during the pandemic, which was included in the "Copyright Gift Set for Fighting COVID-19" (Ҥޥوᛆɽᓿ̍) of the Capital Copyright Industry Alliance. The judgment for the suit against the "Fonts Web" (οၣ) filed by Founder Electronics for its infringement of our copyright of the font library came into effect. It was ruled that the unauthorized downloading of Founder fonts provided by the "Fonts Web" constituted an infringement of copyright, which has become a typical reference case for the protection of copyright of fonts.
2) Font design aspect: In 2020, the digitalization of classic calligraphy from different dynasties has become our priority in font design. Founder launched 15 exquisite Chinese font libraries, including the "Yan Zhenqing-style Regular Script Font (ᕙॆࡠฺࣣ)", "Liu Gongquan-style Regular Script Font (ݣʮᛆฺࣣ)" and "Su Shi-style Semi-cursive Script Font (ᘽ༲Бࣣ)". Based on the preference of young users and market demand, it designed dozens of creative handwriting fonts, such as the "Flying Glimpse Font (ᜓᒿ)" and the "Energetic Yan Zhenqing-style Font (ۊᕙ)". It also worked with "Hakusyu Font", which is a renowned Japanese creative handwriting font library. By joining hands with the famous Japanese font library company Fontworks, Founder developed the Chinese version of its classic Japanese fonts and rolled out 41 fonts under cooperation so far. In addition, it collaborated with niche font companies, such as Black[Foundry] and Cadson Demak, for the first time to introduce over 100 new fonts for Thai, Greek and other minority languages. In 2020, Founder added 321 fonts to its product portfolio, which now comprises 2,339 Chinese fonts in different encodings.
Furthermore, as enterprises increasingly recognized the importance of exclusive fonts in brand promotion, our customized font business grew significantly. In 2020, the font customization team of Founder font library provided services for 12 well-known customers from a wide range of industries, which included JD.com, Coca-Cola China, the Chinese Football Association Super League, Changan Auto, vivo and the One Foundation.
3) Font design technology aspect: A breakthrough in AI-assisted font design technology was achieved. Leveraging artificial intelligence, we ensured font quality and improved the development efficiency of key design projects, such as the "Exquisite Chinese Font Library Project (ʕശၚۜοࢫʈ)" and other font customization projects. Keeping pace with globalization, we strengthened the research and development and the application of variable font technology. To fully explore the use of this cutting-edge technology, we launched 12 different styles of variable fonts in 2020, which included the "Founder Variable Creative Gothic Font (˙͍̙ᜊ௴ල)", "Founder Variable Rounded Gothic Font (˙͍̙ᜊྜල)" and "Founder Variable Elegant Song-style Regular Script
Font (˙͍̙ᜊࠬඩฺ҂)".
4) Marketing and service aspect: On the basis of consolidating and expanding the cooperation with major corporate customers, Founder Electronics continued to scale up targeted marketing, increased collaboration with design companies and advertising firms, and enhanced the influence of its "Love-dynamic Font (ːਗο)" service model. It also pushed forward the establishment of the comprehensive three-in-one service system comprising the official website of Founder font library, "Font + (ο̋)" mobile APP and "Font +" PC client end.
5) Promotion aspect: Taking into account pandemic control and prevention, Founder Electronics made its first attempt in brand promotion through online streaming. In 2020, it held 8 live streams on Bilibili, with a peak viewer count exceeding 100,000 for each session. Combining online and offline means, Founder Electronics live-streamed the launch ceremony of "Beauty in Chinese Calligraphy-Exquisite Chinese Font Library Project Charity Program (οߕʕശÑʕശၚۜοࢫʈʮूᏐ͜ࠇྌ)" on Xinhuanet, Douyu and Bilibili, which attracted an online audience of more than 1.3 million. It also broadcasted the "Founder Font Design Convention 2020 (˙͍2020οணࠇɽึ)" live on Weibo, where over 4 million viewers joined the annual event via online and offline channels.
The above measures enhanced the professional image and industry-leading position of Founder font library. At the same time, they raised public awareness of our young and international brand. The increasing recognition and appreciation for Founder font library will lay a solid foundation for its future innovation and development.
Printing Business
The printing industry of China has entered a new window period of transformation and development, as well as new opportunity nurturing. Following the direction of development of the printing industry in a manner of "environmentalization, digitalization, intellectualization and integration" proposed in the 13th Five-Year Plan, the printing industry has adhered to the principle of integrity and innovation, in order to promote technological advancement and accelerate digital transformation and upgrade of the industry, with a view to facilitating high-quality industry development on an ongoing basis. Facing the new situation and the impact of the pandemic, the competent authority of the printing industry has proposed to "nurture new opportunity in difficulties and open new doors amid changes", with a view to taking initiative in industry development by giving guidance in turning obstacles into opportunities.
As a representative enterprise manufacturing printing equipment and providing general software and hardware solutions in China, ̏ԯ˙͍ΙઠᅰᇁҦஔϞࠢʮ̡ (Beijing Founder EasiPrint Digital Technical Co., Ltd.*) ("Founder EasiPrint"), the wholly-owned subsidiary of the Company, has captured the opportunity arising from the transformation of the printing industry by building cultural confidence of national brands and insisting on innovative strategies, thereby fully leveraging its strength of in-house research and development in printing technology accumulated since the times of Wang Xuan. Together with its sharp industry insight, Founder EasiPrint has made strenuous efforts in the market of high-speed inkjet printing.
For printing companies and the media, 2019 was the first year of high-speed inkjet printing for China. High-speed inkjet printing has broken through the market limitation of publishing and printing, which was originally and mainly subject to demand, and has been promoted and applied to different extents in the fields of commercial printing and digital fast printing. The Founder EagleJet P5600 and P4400 high-speed inkjet printers launched by Founder EasiPrint have become the market pioneers and leading products in this wave of inkjet printing. These models are able to ensure quality and stability while reducing the manufacturing cost and daily operation cost of high-speed inkjet printing, so as to build an ecosystem of inkjet printing, thereby helping printing enterprises realize profits with the use of high-speed inkjet printing equipment. According to the investigation of industry media, the domestic market share of Founder EagleJet high-speed inkjet printing equipment is over 50% now, indicating that it is well recognized by its users and the market.
1) Marketing aspect: In 2020, the printing industry was affected to a certain extent due to the sudden outbreak of the COVID-19 pandemic. In spite of it, Founder EasiPrint has adopted a prudent approach on its printing business and devoted strenuous efforts in the improvement of its capabilities and enhancement of technologies and products since its resumption of business in mid-February. Starting from late April 2020, equipment sales and installation orders began to grow steadily when the pandemic was still severe. From August 2020, the COVID-19 outbreak was slowing down in China and the market demand for new printing equipment rallied. With excellent printing quality, efficient and green production process, outstanding stability, and extensive sales and service network across the country, our black and white inkjet printers in the Founder EagleJet P series maintained the leading position in the domestic market of high-speed inkjet printing equipment.
2) Product and research and development aspect: In 2020, Founder EasiPrint has continued to invest in the research and development of inkjet printing technology and smart production system. It has made efforts in the research and development of Founder EagleJet high-speed inkjet production line, in order to enrich the product pipelines on an ongoing basis. In the second half of 2020, our products covered low-end and normal black and white printing to high-end and exquisite colour printing. On top of variable inkjet digital product series, Founder EasiPrint launched new equipment to satisfy market demands for high-speed coding, thereby further consolidating and developing its position in the variable coding market. Founder EasiPrint has enhanced and expanded
its digital printing capability in the government printing market by supporting domestic operation systems and upgrading two-colour machines. It has also cooperated with domestic and international companies by adopting the open software strategy, so as to maximize the core value of Founder software and significantly increase the market share. In addition, with further promotion of the Founder Yunshu Cloud Platform for Books and Periodicals Production (˙͍ථബࣣ̊ႡЪථ̨̻) among publishing press and continuous enhancement of production management tools and software, Founder EasiPrint will gradually establish a complete ecosystem in the fields of books and commercial printing to form an integrated competitive edge. In late August 2020, Founder EasiPrint officially introduced the high-speed inkjet printer in the Founder EagleJet Colour Inkjet P6600 series. This model supported printing widths of 440 mm, 560 mm and 660 mm in one to six colours, which can be chosen and combined freely by users to meet the requirements of diverse types of colour-print products for commercial, publishing and high-speed printing purposes. Besides, it greatly outperformed other similar digital printing equipment in the market in terms of total consumable costs and selling price.
3)Marketing aspect: Given the impact of the pandemic, printing and packaging exhibitions and information exchange activities nationwide were delayed or even cancelled in the first half of the year. Online exhibitions and live streaming have become common in the industry. Founder EasiPrint has rapidly responded to the changes in relation to the marketing environment. It was the first to conduct special live streaming regarding high-speed inkjet digital printing. It has also created a new account called "Founder EasiPrint" on TikTok and initiated the online evaluation of "Hardcore Captain of Founder EagleJet (˙͍ࣷࣨዚڗ)". The phase "Founder EasiPrint" was mentioned 710,000 times and more than 105,000 thumbs-up were received. This innovative way of interaction allowed Founder EasiPrint to build a close relationship with users and increase market penetration, which effectively tackled marketing difficulties during the pandemic and represented a successful attempt for building soft power of enterprises in post-pandemic times. In October 2020, Founder Electronics joined the 8th All in Print China as a key participant, where it introduced its latest colour inkjet printing solution, namely the Founder EagleJet colour inkjet printer. At the same time, it commenced the "Smart Printing Program (౽Ιࠇྌ)". By combining the core software and hardware capability as well as the innovation outputs of Founder Electronics, the program empowered the mutual growth and high-quality sustainable development of the printing industry. In December 2020, Founder Electronics formed the annual Hongyan Alliance (ᒿඨᑌ ຑ) and established strategic cooperation relationship with China National Publications Import & Export Corporation, where both parties agreed to commit to the building of a digital cloud platform for the production and publication process in the publishing industry. They strived to solve problems in relation to out-of-print books, delay in small-volume printing and high costs, so as to encourage domestic publishers to reduce their inventory significantly. This not only created a win-win environment for the print on demand business, but also accelerated the full transition of the printing industry towards the digital printing model.
Media Business
In September 2020, the central government issued the "Opinion on Accelerating In-depth Integration and Development of Media (ᗫ̋ҞપආదଉܓፄΥ೯࢝ٙจԈ)" as a macro-policy on media integration. It specified the overall requirements of in-depth media integration and development in terms of its significance, target and mission and working principle. The Opinion proposed to drive integration and development with advanced technology, while making full use of achievements from the IT revolution including 5G, big data, cloud computing, Internet of Things, blockchain and artificial intelligence. It also suggested to enhance the prospective research and application of new technology in the news dissemination field, and support the independent innovation of key and core technology. Meanwhile, it pushed forward the reform on mainstream media system and mechanism, so that an integrated organizational structure was established for all-rounded media to produce and disseminate content. Media was encouraged to adopt new reporting and editorial procedures to form an efficient and centralized content production and dissemination chain. By exploring and building the "News + Government affairs + Service + Business" operating model, the media shall develop new investment and financing policies to enhance competitiveness. On 3 November 2020, the central government released the "Proposal on the 14th Five-Year Plan and 2035 Long-term Objectives for National Economic and Social Development (ᗫՓ֛͏ ձٟึ೯࢝ୋɤ̬ࡈʞϋྌձɚཧɧʞϋჃ౻ͦᅺٙܔᙄ)", which detailed the key strategy on in-depth media integration, all-rounded media dissemination and the establishment of integrated media centres at county-level. Apart from advancing the in-depth integration of media, the government shall develop all-rounded media dissemination, strengthen new types of mainstream media and give full play to the integrated media centres at the county level. For all-rounded media dissemination, content creation shall be supported with state-of-the-art technology as well as reform and innovation measures, in the pursuit of centralized resources management, structure optimization, differential development and efficiency from synergy. In regard to market landscape, it was predicted that traditional media and new media shall co-exist, the Internet and new media shall be the main battlefield, and mobile media and online video shall become more popular. In terms of structure, the system will comprise four vertical levels ranging from central, provincial, municipal to county-level media, and horizontally cover mainstream media and business platform. As a result, central, provincial, local, industry media (or corporate media) and district or county-level integrated media centres shall continue to facilitate media integration and develop the integrated media and new media platform. This will lead to an increase in demand for the establishment of ministry-level integrated media centres and provincial new media platform for government affairs.
In regard to the integration of the publishing industry, the Ministry of Science and Technology, the Central Propaganda Department, the Cyberspace Administration, the Ministry of Finance, the Ministry of Culture and Tourism, and the National Radio and Television Administration jointly issued the "Guidance on Facilitating In-depth Integration between
Culture and Technology (ᗫڮආ˖ʷձ߅ҦଉܓፄΥܸٙኬจԈ)" in August 2019,which requested to accelerate the in-depth integration between culture and technology. In May 2020, the Cultural Reform Office of the Central Propaganda Department also published the "Notice on Proper Establishment of National Culture Big Data System (ᗫਂλ ˖ʷɽᅰኽӻܔணʈЪஷٝ)", which proposed a national culture big data system to be established as a key infrastructure for cultural development in the new era, and a major part in applying the outcomes of cultural digitization to develop network and intelligent technology. The Notice drove the development of the big data cloud platform and cultural database in the publishing industry, which enabled publishers to further centralize quality resources, enhance the construction of technology platform and expand boundaries for integration. As a result, the industry will reshape its production process to adapt to integrated publishing, reform the organizational model based on such procedure, and improve publishing quality and efficiency through the use of smart technology.
1)Products and solutions aspect: For in-depth media integration: To better facilitate the application of mobile network, big data, artificial intelligence, 5G and other advanced and emerging technologies in in-depth integration and development of media, Founder Electronics launched the "Founder Solution for Hyper-integration of Media 3.0" after upgrade and optimization. It focused on the research and development of data middle platform and AI middle platform by adopting a cloud computing-based, containerized and microservice structure to build the new generation of supporting platforms for media integration technologies. At the same time, it continuously improved the intelligence and video-oriented capabilities of various products, such as Founder all-rounded media interview and compilation and media cloud through a component-based research and development model with fast upgrades, so as to help with the development of smart media. "Founder Solution for Hyper-integration of Media 3.0" realized not only the integration of media businesses, management, users and data, but also the optimization of new mobile media platform and mobilization of core content creation businesses by adhering to our strategy that takes mobile media as the priority. Meanwhile, the solution strengthened and optimized the abilities of comprehensive and integrated production, comprehensive planning and interview, comprehensive compilation and editing and distribution from various ends for audios, videos and new media. It could help with the digitalization and intelligence of different application scenarios, including planning, interview, compilation, editing, publishing and distribution, through data middle platform and AI middle platform.
As for the publishing business, Founder Electronics has stepped up its efforts in the research and development of a new generation of digital joint compilation system, covering technologies and products in relation to joint compilation, smart review, automatic typesetting and others. In late 2020, Founder Electronics launched the smart review cloud service platform V2.0 and conducted the research and development of technologies and products in relation to the cloud-based digital publishing resources management platform and the knowledge service. At the same time, it actively participated in the establishment of the national cultural big data system.
2) Business model aspect: We actively promoted the transformation from software solution towards authorization service, SAAS service, software service and data service. The percentage of contracts in relation to the service-oriented business accounted for 37%, among which contracts in relation to authorization service and SAAS service business accounted for 25% of the newly signed contracts in 2020.
3) Marketing aspect: We committed to establishing model customers and projects in media integration and publishing integration and development: In 2020, Founder Electronics started new cooperation with various customers in the media market, including Xinhuanet, Fujian Daily Newspaper Group, Yangcheng Evening News Group, Heilongjiang News Group, Shaanxi News Group, Xinjiang Production Construction Bingtuan Wenguang Media Group, Phoenix Publishing and Media Group, Inner Mongolia Publishing Group and Anhui Time Publishing and Media Group. It undertook the construction of mobile platforms for new media, such as the big data platform for Xinhuanet, the integrated media platform and New Fujian client-end for Fujian Daily. It also took part in the development and launch of the integrated media platform of Heilongjiang News Group and the database platform of Shaanxi Daily News Group. While strengthening the work in relation to the inventory markets of central media, provincial media, district and county levels and industry media, we actively extended our footprint in new inventory markets, including corporate news centres, integrated media centres at district and county levels, new media for government affairs and integrated media for high schools leveraging our technologies and products. Besides, we cooperated with China Oil News, the Integrated Media Centre of Chaoyang District, Beijing, the Integrated Media Centre of Daxing District, Beijing and the Integrated Media Centre of Fengtai District, Beijing. Given the impact of the COVID-19 pandemic in the first half of 2020, the demand from media and publisher customers witnessed a substantial decrease. Many projects were suspended, delayed or even cancelled. The budget for projects was reduced significantly, which had a great impact on the progress of our project implementation. Under this circumstance, on the one hand, we actively expanded our business and promoted the implementation and acceptance of contracted projects, on the other hand, we stepped up efforts in the planning, research and development of new products, with a view to laying a solid foundation for development in the mid-to-long term. Our results of operation have rebounded in the fourth quarter of 2020. For the publishing market, Founder smart review system was promoted to and adopted by over 800 domestic publishers and cultural and media companies, and the new generation of joint compilation system was used by clients such as China Electric Power Press. Our cloud-based publishing resources management platform was well-received by Phoenix Publishing and Media Group and Anhui Time Publishing and Media Group, and the new generation of the knowledge service platform was adopted by publishers such as Gold
Wall Press and China Finance & Economic Publishing House.
PROSPECTS
The management of the Group will closely monitor changes in the economy and IT market of the People's Republic of China (the "PRC"). The Group will continue the development of innovative solutions and provide our customers with more cost-effective products and solutions to meet our customers' demands for enhancing their competitiveness. In addition, the Group will closely monitor the performance of each business sector to achieve effective cost control and maximise shareholders' value.
EMPLOYEES
The Group has developed its human resources policies and procedures based on performance and merit of employees. The Group ensures that the payments to its employees are competitive and the employees are rewarded based on their performance within the general framework of the Group's salary and bonus systems. The Group provides on-the-job training to its employees in addition to retirement benefit schemes and medical insurance. The Group maintained a share option scheme in place for the purpose of providing incentives and rewards to eligible directors and employees of the Group who contribute to the success of the Group's operations. The Group had not granted any share options to its eligible directors and employees during the current financial year.
As at 31 December 2020, the number of employees of the Group was 1,256 (31 December 2019: 1,260).
FINANCIAL REVIEW
Liquidity, financial resources and capital commitments
During the year, the Group generally financed its operations with internally generated resources and banking facilities provided by its principal bankers in Hong Kong and the PRC. As at 31 December 2020, the Group had nil interest-bearing bank borrowings (31 December 2019: HK$107.1 million) which were fixed interest bearing. The bank borrowings as at 31 December 2019 were denominated in Renminbi ("RMB"), and were repaid during the year. The Group's banking facilities were secured by corporate guarantees given by the Company, Peking Founder, certain of the Group's investment properties and bank deposits.
As at 31 December 2020, the Group recorded total assets of HK$1,515.6 million which were financed by liabilities of HK$469.3 million and equity of HK$1,046.3 million. The Group's net asset value per share as at 31 December 2020 amounted to HK$0.87 (31 December 2019: HK$0.78). The increase in net asset value per share was due to profit and exchange differences arising from translation of foreign operations during the year.
The Group had total cash and bank balances (including pledged deposits, structured deposits and cash and cash equivalents) of HK$552.1 million as at 31 December 2020 (31 December 2019: HK$568.1 million). After deducting total bank borrowings (31 December 2019: HK$107.1 million), the Group recorded net cash and bank balances of HK$552.1 million as at 31 December 2020 as compared to HK$461.0 million as at 31 December 2019. The Group's borrowings, which are subject to little seasonality, mainly consist of short term bank loans and trust receipt loans. As at 31 December 2020, the Group's gearing ratio, measured by the ratio of total borrowings to total shareholders' equity, was nil (31 December 2019: 0.11) while the Group's working capital ratio was 2.21 (31 December 2019: 1.78). The decrease in prepayments, other receivables and other assets by 23.7% to HK$59.9 million (31 December 2019: HK$78.5 million) was due to decline in prepayments arising from less purchase during the year. The increase in other payables and accruals by 3.7% to HK$264.5 million (31 December 2019: HK$255.1 million) was due to increase in accrual of subcontracting fee of system integration contracts.
As at 31 December 2020, the Group did not have any material capital expenditure commitments.
Treasury policies
The Group adopts conservative treasury policies and controls tightly over its cash and risk management. The Group's cash and cash equivalents are held mainly in Hong Kong Dollars ("HKD"), RMB and United States Dollars ("U.S. dollars"). Surplus cash is generally placed in banks as short term deposits denominated in HKD, RMB and U.S. dollars.
Exposure to fluctuations in exchange rates and related hedges
The Group operates mainly in Hong Kong and the PRC. For the operations in Hong Kong, most of the transactions are denominated in HKD and U.S. dollars. The exchange rate of U.S. dollars against HKD is relatively stable and the related currency exchange risk is considered minimal. For the operations in the PRC, most of the transactions are denominated in RMB. The conversion of RMB into foreign currencies is subject to the rules and regulations of the foreign exchange controls promulgated by the PRC government. The Group has minimal exposure to exchange rate fluctuation. No financial instrument was used for hedging purposes. The Group will closely monitor the currency exchange risk of RMB in the near term as a result.
Contracts
As at 31 December 2020, the major contracts in hand amounted to approximately HK$283.5 million (31 December 2019: HK$281.4 million), which are all expected to be completed within one year.
Material acquisitions and disposals of subsidiaries, associates and joint ventures
The Group had no material acquisition or disposal of subsidiaries, associates and joint ventures during the year ended 31 December 2020.
Charges on assets
As at 31 December 2020, the Group's investment properties in Hong Kong of approximately HK$75.6 million and bank deposits of approximately HK$10.0 million were pledged to banks to secure banking facilities granted.
Future plans for material investments or capital assets
The Group did not have any concrete future plans for material investments or capital assets as at 31 December 2020. However, the Group always seeks for new investment opportunities in the software development and system integration business to broaden the revenue and profit base of the Group and enhance shareholders' value in long term.
Contingent liabilities
At 31 December 2020, the Group did not have any significant contingent liabilities.
Events after the reporting period
The Company received a notification letter from Peking Founder on 25 January 2021, regarding a civil order received by the administrator of Peking University Founder Group Company Limited from The First Intermediate People's Court of Beijing on 22 January 2021. Pursuant to the civil order, the deadline for the submission of the restructuring proposal will be extended to 30 April 2021.
The Company received the "Notification letter in relation to determination of restructuring investors of Peking Founder" from the administrator of Peking University Founder Group Company Limited on 29 January 2021. It is stated in the notification letter that after multiple rounds of competitive selection, it is finally determined that Zhuhai Huafa Group Co., Ltd. (on behalf of Zhuhai State-owned Assets), Ping An Insurance (Group) Company of China, Ltd. and Shenzhen SDG Group Co., Ltd.* formed a consortium as investors of restructuring of Peking Founder. In the next step, the administrator of Peking University Founder Group Company Limited will proceed the signing of investment agreements and drafting of restructuring proposals in accordance with the laws.
AUDIT COMMITTEE
The Audit Committee of the Board has reviewed the accounting policies, accounting standards and practices adopted by the Group and the consolidated financial statements and results of the Group for the year ended 31 December 2020.
CORPORATE GOVERNANCE
In the opinion of the directors, the Company has fully complied with all the code provisions as set out in the Corporate Governance Code, contained in Appendix 14 to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the "Listing Rules"), throughout the year ended 31 December 2020.
MODEL CODE FOR SECURITIES TRANSACTIONS BY DIRECTORS
The Company has adopted the Model Code for Securities Transactions by directors of Listed Issuers (the "Model Code") set out in Appendix 10 of the Listing Rules as the Company's code of conduct and rules governing dealings by all directors in the securities of the Company. Upon being made specific enquiries by the Company, all directors of the Company confirmed that they have complied with the required standards set out in the Model Code throughout the year ended 31 December 2020.
PURCHASE, REDEMPTION OR SALE OF LISTED SECURITIES OF THE COMPANY
Neither the Company, nor any of its subsidiaries purchased, redeemed or sold any of the Company's listed securities during the year.
SCOPE OF WORK OF ERNST & YOUNG ON THE PRELIMINARY ANNOUNCEMENT
The figures in respect of the preliminary announcement of the Group's results for the year ended 31 December 2020 have been agreed by the Group's auditors, Ernst & Young, to the amounts set out in the Group's consolidated financial statements for the year. The work performed by Ernst & Young 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 HKICPA and consequently no assurance has been expressed by Ernst & Young on the preliminary announcement.
PUBLICATION OF FINAL RESULTS AND ANNUAL REPORT
The 2020 annual report of the Company containing all the information required by Appendix 16 of the Listing Rules will be dispatched to the shareholders of the Company and published on The Hong Kong Exchanges and Clearing Limited's website (www.hkexnews.hk) and the Company's website (www.founder.com.hk) in due course.
By Order of the Board Founder Holdings Limited
Cheung Shuen Lung
Chairman
Hong Kong, 30 March 2021
As at the date of this announcement, the Board comprises executive directors of Mr Cheung Shuen Lung (Chairman), Mr Shao Xing (President), Professor Xiao Jian Guo, Ms Zuo Jin, Mr Hu Bin and Ms Liao Hang, and the independent non-executive directors of Mr Chan Chung Kik, Lewis, Mr Lau Ka Wing and Mr Lai Nga Ming, Edmund.
*
For identification purpose only
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Founder Holdings Limited published this content on 30 March 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 30 March 2021 11:12:01 UTC.