# MANAGEMENT DISCUSSION AND ANALYSIS (CONTINUED)

# FINANCIAL REVIEW

# Revenue

Revenue in 2020 was approximately HK\$329.9 million, representing a decline of approximately 18.9% from the previous year (2019: approximately HK\$406.7 million). The reduction in revenue was mainly driven by the net effects of a number of the Group’s customers have reduced their printing orders as a result of the depressed government spending and the effect as COVID-19 related government restrictions came into force in Australia. On top of COVID-19 impact, one of the Group’s top five customers has decided not to renew its contract with the Group with effective from 2020. Such negative impact was partly offset by increasing trend of publishers to print their books locally for quicker turnaround time.

# Gross profit and gross profit margin

Our gross profit decreased by approximately HK\$45.3 million, or approximately 48.2%, from approximately HK\$93.8 million in 2019 to approximately HK\$48.5 million in 2020. Gross profit margin dropped by approximately 8.4% in comparison of the prior year. Such drop was mainly due to reduction of revenue as well as the fixed direct and indirect costs are difficult to alter in the short term.

# Other income

Other income significantly increased from approximately HK\$13.5 million in 2019 to approximately HK\$45.9 million in 2020. It was attributable to approximately HK\$40.9 million government subsidy from the JobKeeper Payment Scheme offered by the Australian Government which is a temporary subsidy for businesses significantly affected by COVID-19.

# Selling and distribution costs

Selling and distribution costs decreased by approximately HK\$5.1 million or 17.9% from approximately HK\$28.6 million in 2019 to approximately HK\$23.5 million in 2020. The decrease was greatly in line with the reduction in revenue during the year as freight costs dropped and reduction of sales staff headcount due to the implementation of cost control measures.

# Administrative expenses

Administrative expenses decreased by approximately HK\$2.5 million from approximately HK\$31.3 million in 2019 to approximately HK\$28.8 million in 2020, representing a year-on-year drop of approximately 8.1%. Various administrative expenses were reduced in the light of the implementation of cost control measures and reduction in the number of administrative staff headcount but partially offset by the industrial trend of increasing in insurance premium charges.

# Income tax expense

Income tax expense decreased from approximately HK\$13.8 million (effective income tax rate: 30.1%) in 2019 to approximately HK\$12.6 million (effective income tax rate: 31.0%) in 2020. Such decrease was consistent with the reduction in taxable income during the current year.

# Net profit

The Group reported a net profit of approximately HK\$28.1 million in 2020 compared to HK\$32.1 million in the prior year, which represented a decrease of approximately HK\$ 4.0 million or 12.7%. The profitability of the Group was impacted by COVID-19 when the government agencies and publishers have reduced their printing orders. The Group’s management has taken proactive measures to mitigate the Group’s operational risk, enhance operational efficiency and reduce costs. The Group received considerable financial support from the Australian government’s JobKeeper Payment Scheme, which has cushioned the impact of COVID-19 on the business.