# Other Income

With the decrease in net exchange difference of approximately HK\$0.9 million and decrease in royalty income of approximately HK\$2.5 million from one of the Group’s branded timber products for a timber flooring project, the Group’s other income decreased significantly by approximately HK\$3.1 million, or approximately 62.0%, from approximately HK\$5.0 million for the year ended 31 March 2019 to approximately HK\$1.9 million for the year ended 31 March 2020.

# Selling and Distribution Expenses

The Group’s selling and distribution expenses mainly comprised business development expenses, transportation expenses and storage expenses. The total selling and distribution expenses increased by approximately HK\$2.3 million, or approximately 35.9%, from approximately HK\$6.4 million for the year ended 31 March 2019 to approximately HK\$8.7 million for the year ended 31 March 2020, mainly being an increase in business development expenses incurred to explore potential business opportunities and maintain business relationships.

# Administrative Expenses

The Group’s administrative expenses slightly increased by approximately HK\$2.2 million, or approximately 7.6%, from approximately HK\$28.8 million for the year ended 31 March 2019 to approximately HK\$31.0 million for the year ended 31 March 2020. Staff cost has increased by approximately HK\$1.1 million, as the average number of staff and average monthly salary has been increased during the year ended 31 March 2020. In addition, impairment and written off on assets has increased by approximately HK\$1.0 million.

# Finance Costs

The Group’s finance costs increased by approximately HK\$0.4 million, or approximately 30.8%, from approximately HK\$1.3 million for the year ended 31 March 2019 to approximately HK\$1.7 million for the year ended 31 March 2020. Despite the effective interest rate decreased as Hong Kong Monetary Authority reduced its base rate by 25 basis points to 2 percent in late October 2019, average bank borrowings increased and hence the finance costs for the year ended 31 March 2020 also increased.

# Income Tax Expenses and Effective Tax Rate

The Group’s income tax expenses decreased by approximately HK\$0.3 million, or approximately 60.0%, from approximately HK\$0.5 million for the year ended 31 March 2019 to approximately HK\$0.2 million for the year ended 31 March 2020. Such decrease was attributed to the turnaround effect from profits to loss for the year ended 31 March 2020.

The Group’s effective tax rates for the years ended 31 March 2020 and 2019 were approximately negative 0.6% and 41.3% respectively.

# Net (Loss)/Profit and Net Profit Margin

The Group’s net profit decreased by approximately HK\$24.6 million, from net profit of approximately HK\$0.8 million for the year ended 31 March 2019 to net loss of approximately HK\$23.8 million for the year ended 31 March 2020. The decrease in net profit was mainly due to decreases in revenue and gross profit as mentioned above.

The Group’s net profit margins were approximately negative 15.2% and 0.3% for the years ended 31 March 2020 and 2019 respectively, and the decrease was mainly due to reasons illustrated above.

# Liquidity and Financial Resources Review

The Group had normally funded its liquidity and capital requirements primarily through bank borrowings and net cash generated from operating activities.

# Total equity and net current assets

The total equity of the Group mainly comprises share capital, share premium and reserves. The total equity of the Group as at 31 March 2020 was approximately HK\$145.2 million (2019: approximately HK\$169.1 million).

As at 31 March 2020, the Group’s net current assets were approximately HK\$115.1 million (2019: approximately HK\$138.1 million).

# Cash and cash equivalents

As at 31 March 2020, the Group had cash and cash equivalents of approximately HK\$59.3 million (2019: approximately HK\$56.5 million).

# Bank borrowings

As at 31 March 2020, the Group had bank borrowings of approximately HK\$41.4 million (2019: approximately HK\$38.9 million), and all of the Group’s bank borrowings were at floating interest rates (2019: HK\$38.9 million).