14

EDICO Holdings Limited

# FINANCE COSTS

The Group did not incur any finance costs for the Year 2019 whereas finance costs on lease liabilities of approximately HK\$1.1 million were recorded for the Year due to the adoption of Hong Kong Financial Reporting Standard 16.

# INCOME TAX CREDIT / EXPENSE

There was no income tax expense for the Group for the Year as the Company and its operating subsidiaries either had no assessable profits for the Year or had available tax losses brought forward from prior years.

# PROFIT / (LOSS) FOR THE YEAR AND NET PROFIT / (LOSS) MARGIN

The Group recorded a loss after tax of approximately HK\$11.5 million for the Year 2019 and a profit after tax of approximately HK\$4.1 million for the Year. The change was primarily due to the increase of the Group’s revenue during the Year.

The net (loss)/profit margins were 19.2% for the Year 2019 and 5.6% for the Year respectively.

# INTEREST COVERAGE RATIO

Interest coverage ratio was not applicable to the Group for the Year 2019 and the Year as the Group did not have any borrowings and therefore, had not incurred any interest expenses during the respective years.

# RETURN ON TOTAL ASSETS

The return on total assets was approximately 13.8% negative for the Year 2019 and approximately 3.8% positive for the Year.

# RETURN ON EQUITY

The return on equity was approximately 16.8% negative for the Year 2019 and approximately 5.6% positive for the Year.

# DIVIDEND

The board of directors of the Company (the “Directors” and the “Board”, respectively) has resolved not to recommend the payment of a final dividend in respect of the Year (2019: Nil).

15

EDICO Holdings Limited

# KEY PERFORMANCE INDICATORS (“KPIs”) WITH THE STRATEGIES OF THE GROUP

The Group sets a number of KPIs to support the delivery of its strategies with its performance for the Year as below:

<table><tr><td>Objective</td><td>KPIs</td><td>Strategies</td></tr><tr><td>Maximise value for the shareholders</td><td>1Gross profi()
t margin= 48.6% (2019: 40.8%)
2R(eturn on total)
 assets= 3.8% (2019: (13.8%))
R(3eturn on equi)
ty= 5.6% (2019: (16.8%))</td><td>The Group has implemented effective 
cost control measures, pricing 
arrangement and capital expenditure.</td></tr><tr><td>Maintain the Gr’oups liquidity and 
monitor capital structure</td><td>Cash and cash equivalents
= approximately HK$69.7 million
(2019: approximately HK$47.4 million)
C(4urrent rati)
o= 2.9 times 
(2019: 5.3 times)
G(5)eari
ng ratio= N/A (2019: N/A)
6N
et deb()t to equity ratio= Net cash position
(2019: Net cash position)</td><td>The Group adopts a prudent financial 
management policy to regularly monitor 
its liquidity requirements and compliance 
with facilities arrangement so as to 
ensure that it maintains sufficient 
reserves of cash and adequate 
committed lines of funding from major 
financial institutions to meet the liquidity 
requirements of the Group in the short 
and long term.</td></tr></table>

Notes:

1. Gross profit margin is calculated by dividing the gross profit for the year by revenue and then multiplied by 100%.

2. Return on total assets is calculated by dividing the net profit/(loss) for the year by the total assets as at the respective year end and then multiplied by 100%.

3. Return on equity is calculated by dividing the net profit/(loss) for the year by the total equity as at the respective year end and then multiplied by 100%.

4. Current ratio is calculated by dividing the total current assets by the total current liabilities as at the respective year end.

5. Gearing ratio is calculated by dividing the total borrowings by the total equity as at the respective year end and then multiplied by 100%.

6. Net debt to equity ratio is calculated by dividing the net debt (all borrowings net of cash and cash equivalents) by the total equity as at the respective year end and then multiplied by 100%.