Love
Online
Shopping
2017
Annual
Report
w w w . e C a r g o . c o m
We are an eCommerce enabler and business partner
for designer fashion, branded apparel and retail companies,
providing holistic eCommerce solutions and capabilities to
connect them online with the consumers in China,
Australia and around the world.
eOperation
Online shop development, setup, promotion, day-to-day management
and customer services
eCommerceIT
Bespoke front-end and middleware technology solutions, project
management and implementation
eFulfillment
Back-end logistics operations and customer order fulfillment
execution
eStudio
Digital asset production and product detail photography
eMarketing
Brand strategy, digital marketing and social media promotion
management and execution
eCommerceITeFulfillmenteStudioeMarketingeOperationFor personal use only 2
eCargoANNUAL REPORT 2017For personal use only ECG is a China-based eCommerce technology and specialist
execution group of companies, with operating companies in
China and Australia trading under the eCargo and Amblique
brands, providing on-demand digital commerce technology
development and related execution capabilities for retailers
and brands.
eCargo acts as a “one-stop” enabling partner for brands
and retailers seeking to sell their products online in China,
Australia and South-east Asia by providing integrated
online and offline technology and supply chain solutions.
Amblique is a leading digital commerce consultancy, providing
retail strategy, eCommerce platform implementation and
optimisation services in Australia and New Zealand.
ECG connects consumers with brands and retailers online and
offline through the development and marketing of eCommerce
platforms, brand transactional sites and major marketplace
platforms in China and in the region.
“The growth of cross-border trade
enhances ECG’s growth prospects and
enables ECG’s scale to plan for new
Daigou services to fulfill the strong
demand of Australia and New Zealand
products from Chinese consumers.”
Mr. John Lau,
Executive Chairman
1
your eCommerce PartnerABOUT ECGAbout ECGFor personal use only C O N T E N T
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About ECG
2017 Highlights
Chairman statement
Board of Directors and Executive Team
Corporate Governance Report
Directors’ Report
Independent Auditor’s Report
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
ASX Additional Information
Corporate Directory
For personal use only Selected financial data translated into
Australian dollars
The financial statements for eCargo Holdings Limited (the
“Company”) presented in this document are expressed in Hong
Kong dollars (“HK$”). Selected financial data has been translated
from HK$ into Australian dollars (“A$”) to enable Share/CHESS
Depository Interest (“CDI”) holders to interpret the financial
performance of the Company. Such foreign currency
translations are unaudited and have been provided
to Share/CDI holders for easier reference purposes
only and may not present the Company’s financial
position or performance in a fair manner.
For personal use only Revenue
HK$144.5
million
Revenue
up16%
Gross
Profit
HK$80.5
million
4
Gross
Profit
up29%
EBITDA loss
improvement
71%
For personal use only High light s
2017
• Achieved positive EBITDA and operating cash flow for the second half
of 2017, our first time for a six-month period, due to the successful
implementation of business transformation plan in mid-year
• Continued booming in China’s eCommerce market imputed the growth
of ECG clients online stores and ECG’s performance
• Acquisition of Jessica’s Suitcase subsequent to year-end enhances ECG
growth prospects and enables ECG to establish new strategic Daigou
services
•
ECG’s comprehensive one-stop eCommerce solution highly valued by
foreign retailers and brands
Revenue
up16%
EBITDA loss
improvement
71%
5
Highlights 2017For personal use only Chairman Statement
CREA TING 創
THE IMPOSSIBLE
造無
限
可
能
Dear Shareholders,
On behalf of the Board of Directors
(the “Board”), I am pleased to present
the Annual Report of eCargo Holdings
Limited (the “Company”) and its
subsidiaries, collectively “ECG” for the
year ended December 31, 2017.
2017 was an inspiring year of ECG. With
its investment in infrastructure, human
capital resources and IT technologies
in the past few years and the
successful implementation of business
transformation plan in mid-year, ECG
achieved positive EBITDA and operating
cash flow for the second half of 2017,
our first time for a six-month period.
Such improvement has been across the
board, with all divisions of both Greater
China and Australia business segments
either increasing profits or reducing
losses.
In the past decade, China’s economy
experienced a booming growth, leading
to the rise of educated middle-class.
Their demand on premium import goods
with the highest quality is significant.
The continual development and upgrade
of logistics infrastructure in China,
has facilitated the development of
its eCommerce retailing market, in
particular to the second and third tier
cities.
I believe that eCommerce retailing
market in China will continue to grow
strongly on the cross-border front,
especially on premium products. By
leveraging on our comprehensive end-
to-end solution with strong fulfillment
capabilities, best-in-class technology
infrastructure as well as international
and local knowledge of the online
retailing markets, we have the
comparative advantages over peers
to facilitate international brands and
retailers to establish their presence in
China’s online market.
Financial performance
ECG reported that the net loss has
reduced by 22% to HK$68.5 million
(2016: HK$87.7 million loss) and loss
6
eCargoANNUAL REPORT 2017For personal use only 7
Chairman StatementFor personal use only before interest, tax, depreciation
and amortisation excluding
impairment on and results from
associates (“EBITDA loss”) has
decreased by 71% to HK$15.3
million (2016: HK$52.7 million
loss).
The marked improvement in
results was evidenced by the
turnaround on EBITDA with
HK$7.3 million profit for the
second half of 2017 compared
to the HK$22.6 million loss for
2017 first half and the HK$17.8
million loss for 2016 second
half. The turnaround was mainly
attributable to the successful
implementation of the business
transformation plan in the
second half of the year. This
resulted in resources being more
focused on higher margin clients
and cost reductions through
streamlining processes and a
revised organisation structure to
enhance scalability of operations.
Consolidated revenue for the
year increased to HK$144.5
million (2016: HK$124.5 million)
of which HK$52.2 million (2016:
HK$52.6 million) was attributable
to eCommerce-enabling business
while HK$92.3 million (2016:
HK$71.9 million) was contributed
by Amblique, our operations in
Australia.
The revenue of the eCommerce-
enabling business was
maintained at a similar level
as last year. The increase in
revenue of eOperations business,
as evidenced by 73% increase in
Gross Merchandise Value (“GMV”)
generated from the online stores
for the year, was offset by the
decrease in revenue from the
eFulfillment business as lower
profit margin contracts were
terminated. With the continuous
improvement on GMV, we see
the growth momentum and
the receptiveness of Chinese
consumer to these global
retailers and international
brands.
Amblique’s revenue increased by
28% year-on-year, which was
mainly driven by the sharing
of clients sales generated from
websites built under the reseller
agreement. Revenue under the
reseller agreement represents an
income commitment from clients,
increasing yearly, for a defined
number of years after the brand
website goes live.
8
Gross profit for the year
increased by 29% to HK$80.5
million and gross profit margin
for the year was approximately
56%, an improvement over
year 2016’s 50%. The reason
for this improvement was the
success from agreeing better
commercial terms with both
new and existing clients.
Moreover, increased scalability
of operations has allowed ECG
to achieve greater margins
from business expansion while
operating within ECG’s existing
framework of resources.
The Company did not propose
any dividend distribution or
share buy back during the year.
eCargoANNUAL REPORT 2017For personal use only this strategy. I am confident
of our ability on helping these
foreign retailers and brands in
the China market as well as
within the region, and bringing
the convenient online shopping
experience to consumers with
diversified choices of high
quality products.
On behalf of ECG, I would like
to thank the Board of Directors,
the management and every
member of our committed staff
for their dedication and hard
work on turning around the
business, and our Shareholders
and Stakeholders for their
continued confidence and
support. I look forward to seeing
you at our upcoming Annual
General Meeting.
Mr. John Lau
Executive Chairman
through the experience and
reputation of Jessica’s Suitcase
in this space.
Furthermore, to leverage on
both companies’ in-depth
knowledge of the market, the
combined business offers ECG
a scale to plan for new Daigou
services against the strong
demand of Australia and New
Zealand products by Chinese
consumers. It also gives us
comparative advantages over
our competitors to facilitate the
entry of brands and retailers
from Australia, New Zealand and
around the World in the FMCG
category such as Foodstuffs and
Health Supplements, as well
as the Apparel and Accessories
categories, into the China online
market.
Looking forward
According to a Goldman Sachs
report1 issued in 2017, China’s
online retail market and online
retail penetration rate will reach
US$1.7 trillion and 25% by year
2020, more than double of the
size of year 2016 (23% CAGR
over year 2016 to year 2020)
and continuing to grow at nearly
triple the pace of offline retail.
An omni-channel strategy with
multiple channels including
China brand site development
supported by digital marketing
activities is our recommendation
for foreign retailers and brands
who wish to tap into the
China market. From recent
discussions with foreign
retailers and brands, we noted
strong receptiveness of this
strategy and the demand of
service providers who are able
to provide an integrated one-
stop solution for its successful
implementation.
ECG will continue to develop
its best-in-class technologies
and invest in people to support
1 China E+Commerce Shopping Re-
Imagined — Goldman Sachs, 2017
9
Evolving our strategy
ECG aims to increase
Shareholder’s value through
sustainable business growth,
with our vision to be a “one-
stop” eCommerce enabler and
business partner for designer
brands, retailers, and branded
manufacturers who wish to
develop or further enhance their
eCommerce businesses and help
consumers and businesses buy
and sell globally. I believe that
the aforementioned long-term
strategy is our cornerstone to
maintain sustainable results in
the future.
Apart from the continuous
investment in infrastructure,
human capital resources and IT
technologies, ECG invested in
Jessica’s Suitcase Pty Limited
(“Jessica’s Suitcase”) in January
2018. It has significantly
enhanced ECG’s growth
prospects and enabled ECG to
significantly benefit from the
cross-border trade between
Australia and China retailers
Chairman StatementFor personal use only Board of Directors
and Executive Team
The Board of Directors (the “Board”) currently consists of six Directors, comprising one Executive
Director, two Non-Executive Directors and three Independent Non-Executive Directors.
The Board has broad experience in the retail supply chain, eCommerce, logistics, finance and retail
management. The Board is well-positioned to develop and implement ECG’s strategic objectives.
In accordance with ASX Listing Rules 14.4, a Director of an entity must not hold office (without re-
election) past the third Annual General Meeting following the Director’s appointment or 3 years, and a
Director of an entity is appointed as an addition to the Board during the year, must not hold office (without
re-election) past the next Annual General Meeting following the Director’s appointment.
Mr. Rupert Myer AO, Ms. Jessica Rudd and Mr. Christopher Lau shall retire by rotation at the forthcoming
Annual General Meeting and, being eligible, offer themselves for re-election.
10
eCargoANNUAL REPORT 2017For personal use only Name
Position
Independence
date
Mr. John Lau
Executive Chairman,
Non-independent May 15, 2017
Executive Director
Mr. Christopher Lau# Non-Executive Director
Non-independent May 23, 2016
Ms. Jessica Rudd
Non-Executive Director
Non-independent
January 24, 2018
Re-appointment
Mr. Rupert Myer AO
Non-Executive Director
Independent
June 3, 2015
Mr. Christopher Ryan Non-Executive Director
Independent
May 23, 2016
Mr. Heath Zarin
Non-Executive Director
Independent
May 15, 2017
#: Re-designated from executive director to non-executive director on March 14, 2018
Mr. John Lau brings more
than 40 years of experience in
trading, shipping and logistics
in China. Over the years, he
cooperated successfully with
major financial sponsors in Asia
such as Prudential Asia and
HSBC Principal Investments.
His pursuit for excellence in
providing professional services is
well known and acknowledged by
many major retailers and brands
worldwide.
Mr. John Lau founded Cargo
Services in 1990 as an ocean
freight non-vessel operating
cargo carrier. He has led the
growth of Cargo Services
in becoming a leader in
international logistics. Today,
Cargo Services is the largest
privately owned integrated
logistics service provider and
freight forwarder in China and
Hong Kong.
Mr. John Lau founded Midstream
Holdings Limited (“MHL”) in
1995. He was Managing Director
of MHL from 1995 to 1997. MHL
was acquired by Hutchison Port
Holdings in 1997.
Mr. John Lau founded Wide Shine
Terminals Limited (“WST”) in
1990. He was Managing Director
and founder of WST from 1990
to 1995. WST was subsequently
acquired by MHL in 1995.
Mr. John Lau founded Hoi Kong
Terminals Limited (“Hoi Kong”)
in 1986. He was the Managing
Director from 1986 to 1990. Hoi
Kong was acquired by Jardines
Shipping Services Limited in
1990.
Mr. John Lau holds a Bachelor
of Social Sciences from the
University of Hong Kong, and
joined Dodwell & Co. in their
Hong Kong buying office working
with many international retailers
and trading companies sourcing
from China. He quickly rose to
become a director at Dodwell
& Co. He left Dodwell & Co. in
1983 to start his own businesses
in shipping and international
logistics.
Mr. John Lau is a member of the
People’s Consultative Conference
in Nanjing. He was a non-
executive director of Golden
Eagle Retail Group (SEHK: 3308)
from 1999 when it was first listed
on the Hong Kong Exchange until
2011.
11
Mr. John Lau
– Executive Chairman
Mr. John Lau is the Executive
Chairman, founder and
Executive Director of ECG. He
is Chairman and founder of
ECG’s largest shareholder, JL
Enterprises Holdings Limited
(“JL Enterprises”). He is Group
Managing Director and founder
of ECG’s strategic investor, CS
Logistics Holdings Limited (“CS
Logistic”). He is the Managing
Director and founder of Cargo
Services Far East Limited
(“Cargo Services”), a principal
operating subsidiary of the CS
Logistics group of companies and
Managing Director and founder
of Xin Hai Hua Enterprises.
Board of Directors and Executive TeamFor personal use only the acquisition of Allport Limited
together with HSBC’s strategic
investment in CS Logistics in
2010. He was an Executive
Director of CS Logistics from
2010 to 2012.
Mr. Christopher Lau holds a
Bachelor of Science in Accounting
and Finance from the Leonard
Stern School of Business at New
York University. He spent several
years with Ernst and Young LLP
and Deutsche Bank in New York
working in audit, structured
products and fixed income. He
was appointed as a member
of the 14th Nanjing Political
Consultative Conference in 2018,
an Honorary Member of the
Court at the Hong Kong Baptist
University since 2012 and is a
Vice-Chairman of the fundraising
committee of the Dragon
Foundation, a non-profit youth
organisation in Hong Kong.
influencer in the eCommerce
and digital marketing sectors,
with strong reach in both the
Australian and Chinese markets.
Ms. Rudd was appointed as the
first and only Australia and New
Zealand Lifestyle Ambassador for
Alibaba in 2016 and continues
to serve in that role. In 2017,
Ms. Rudd was appointed Non-
Executive Director of the ASX
listed Australian Agricultural
Company (ASX:AAC).
Having begun her career as a
media and intellectual property
lawyer, she later moved to
London where she worked as a
crisis management consultant
for global communications firm,
Hill & Knowlton. In 2009, Ms.
Jessica Rudd moved to Beijing
with her husband. In their 5
years living in Beijing, she wrote
two novels — Campaign Ruby
and its sequel Ruby Blues — and
worked as a columnist and media
commentator.
Ms. Jessica Rudd
– Non-Executive Director
Jessica Rudd is the chairman
and founder of Jessica’s
Suitcase, an Australian company
headquartered in Sydney, which
operates an eCommerce store on
Alibaba’s Tmall Global Platform,
offering quality Australia and
New Zealand products to Chinese
consumers through the cross-
border online channel.
Ms. Rudd is an Australian-born-
and-based Key Opinion Leader
(KOL), uniquely placed as an
Mr. Rupert Myer AO
– Independent Non-Executive Director
Mr. Rupert Myer AO is Director
of Healthscope Limited and Amcil
Limited. He serves as Chairman
of Nuco Pty Ltd and as a director
of The Myer Family Investments
Pty Ltd and Mutual Trust Pty Ltd.
He is Chair of the Commonwealth
Government’s Australia Council
for the Arts.
Since 1986, Mr. Rupert Myer AO
has served as a Non-Executive
Mr. Christopher Lau
– Non-Executive Director
Mr. Christopher Lau is a founder
of ECG. He was the CEO and
Executive Director of ECG
until March 14, 2018 and re-
designated to Non-Executive
Director of ECG on the same day.
He is also a founder and Vice-
Chairman of WWE & Company
and MyMM.com.
Mr. Christopher Lau possesses
more than 7 years of experience
in international retail supply
chain and logistics management
having worked closely with
many major retailers in Australia
and the United Kingdom in the
development of their global
supply chains including the setup
of eCommerce operations in
China, sourcing offices and QC
facilities.
Mr. Christopher Lau was the
Group Assistant Managing
Director and an Executive
Director at Cargo Services from
2006 to 2012. At Cargo Services,
he founded the GAM business in
2007.
Mr. Christopher Lau
was instrumental in the
transformation of Cargo Services
to become the leading integrated
retail supply chain solutions
service provider in Hong Kong,
contributed significantly in the
development and implementation
of the LIMA® platforms for many
retail brands and was involved in
12
eCargoANNUAL REPORT 2017For personal use only Board member on a diverse
range of organizations including
listed and unlisted public
companies, private companies,
community sector organisations,
State and Commonwealth
Government Boards and
philanthropic foundations.
Industries and sectors have
included retailing, funds
management, financial services,
visual and performing arts,
indigenous affairs, philanthropy
and youth employment.
Mr. Rupert Myer AO’s experience
as a Director has included IPO
listings, rights issues, special
purchase plans, dividend re-
investment plans and major re-
financings. He has served both
as Chair and as a member of
Audit and Finance Committees,
Remuneration and Nominations
Committees and Strategy
Committees.
Mr. Rupert Myer AO holds a
Master of Arts from Cambridge
University and a Bachelor of
Commerce with Honours from
the Melbourne University. He is a
fellow of the Australian Institute
of Company Directors.
Mr. Christopher Ryan is a non-
than USD450 million of assets
executive director of ASX
under management.
listed companies Propertylink
(Holdings) Limited, TTG FinTech
Mr. Heath Zarin was previously
Limited and 99 Wuxian Limited.
Managing Director and Head
of Principal Investments,
Mr. Christopher Ryan either
Asia-Pacific, for HSBC, with
chairs or is a member of these
responsibility for Asian
companies’ Remuneration and
proprietary private investment
Nomination, Audit, and Risk
activities. Previously, he founded
Management Committees.
and ran Emergent Investment
Group (“EIG”), a Hong Kong-
Mr. Christopher Ryan has acted
based private investment firm.
as lead adviser in corporate
Prior to founding EIG, Mr. Heath
acquisitions and divestments
Zarin held a series of senior
of large Australian and foreign
executive roles at Credit Suisse,
companies over a 25 year period.
including forming and managing
its Asian private equity business.
Mr. Christopher Ryan has advised
on ASX listings since 1986.
Mr. Heath Zarin practiced
corporate law with Schulte
Mr. Christopher Ryan holds
Roth & Zabel LLP in New York,
a Bachelor of Financial
where he formed and advised
Administration from the
hedge funds and private equity
University of New England,
funds. Mr. Heath Zarin’s current
is a Fellow of the Institute
and previous board service
of Chartered Accountants in
includes companies across Asia,
Australia and is a member of the
Europe and North America,
Australian Institute of Company
in diverse manufacturing and
Directors.
Mr. Christopher Ryan
– Independent Non-Executive Director
Mr. Christopher Ryan is an
Executive Director of Investorlink
Group Limited, a Sydney-based
corporate finance and advisory
firm.
Mr. Heath Zarin
– Independent Non-Executive Director
Mr. Heath Zarin is CEO
and Managing Director of
EmergeVest, a Hong Kong based
private equity firm with more
service industries. He currently
serves as Chairman of Allport
Cargo Services, CM Downton,
Palletforce, NFT Distribution and
Adjuno, as well as non-executive
director of CS Logistics.
Mr. Heath Zarin holds a Juris
Doctor from the Fordham
University School of Law and
graduated from the State
University of New York at
Binghamton. He is CFA, CMT
and CAIA charterholder and has
completed Certificate programs
at Harvard Business School.
13
Board of Directors and Executive TeamFor personal use only EXECUTIVE TEAM
Ms. Eva Zhang
– Chief Executive Officer
Mr. Garnok Cheung
– Chief Financial Officer
Mr. Lawrence Lun
– Chief Commercial Officer
Ms. Eva Zhang is CEO of Jessica’s
Suitcase, an entity in which ECG
has a 45% shareholding with an
option to acquire the balance.
Ms. Eva Zhang was Managing
Director of Wattle Hill Capital,
a China-growth-story-focused
private equity fund in Australia.
Ms. Eva Zhang has unique
knowledge of investments and
e-commerce retail in China and
is a pioneer of the Australia —
China cross-border e-commerce
industry. Ms. Zhang was also
instrumental in the launch on
the Jessica’s Suitcase platform
of iconic Australian brands such
as Penfolds, Sukin, Freedom
Foods, Caprilac, QV, Jack n’ Jill
and Aptamil, cementing Jessica’s
Suitcase as one of Alibaba’s most
important TMall Global stores
from Australia.
Prior to moving back to Australia
in 2014, Ms. Eva Zhang worked
in investment banking for
Macquarie Capital in Beijing and
Credit Suisse in Greater China.
Ms. Eva Zhang holds a Bachelor
of Commerce from the University
of New South Wales and was a
Scientia Scholar of the university.
Ms. Zhang is an Associate of the
Institute of Actuaries of Australia
(AIAA).
Mr. Garnok Cheung was an
experience financial professional,
he brings a depth of knowledge
and leadership experience
across all aspects of financial in
multinational corporations. Over
the last 19 years, he has held
various senior executive roles in
finance and accounting, auditing,
corporate governance, mergers
and acquisitions across various
industries including properties,
hotel, ports, constructions,
research and development.
Prior to his appointment to
ECG, Mr. Garnok Cheung was
the Chief Financial Officer at
ITC Corporation Limited (SEHK:
0372). He started his career
with the Hong Kong office of
Deloitte Touche Tohmatsu
and continued at the Hong
Kong and New York offices
of PricewaterhouseCoopers,
accumulating over 7 years of
experience with international Big
4 accounting firms.
Mr. Garnok Cheung received his
Bachelor degree in Finance from
the University of Hong Kong in
1998. He is a Certified Public
Accountant and also a Chartered
Global Management Accountant.
Mr. Lawrence Lun joined ECG
in February 2015. He is an
active entrepreneur who has
operated multiple businesses
prior to joining ECG. He
was co-Founder of Zingly,
a Social Visual Engagement
Platform that enables brands
to make better use of their
User Generated Photos from
Social Media Platforms to help
increase conversion rates.
He is responsible for leading
the Business Development,
Account Management and Digital
Marketing Function of ECG. Prior
to starting his company, he was
an Institutional Sales Manager
covering Europe and Asia based
investors at Value Partners
Limited, a Hong Kong Asset
Management firm. He has also
been in roles at J.P. Morgan and
Loblaws Companies Limited.
Mr. Lawrence Lun received
his Bachelor degree in
Business Administration with
specialisations in Strategic
Management and Finance from
the Schulich School of Business
at York University in Canada.
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eCargoANNUAL REPORT 2017For personal use only B
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For personal use only
Corporate
Governance Report
The Board is pleased to present this corporate governance report for the year ended December 31, 2017.
CORPORATE GOVERNANCE PRACTICES
The Company is committed to conduct its business consistent with the highest standards of corporate
governance practices and procedure. The Company recognises that sound corporate governance practices
are fundamental to the effective and transparent operation of the Company and it is vital to its ability to
protect the rights of its Shareholders and enhance Shareholders’ value.
The Company adopted the following policies and charters. Each of these policies and charters are set
out in the Corporate Governance Plan adopted by the Board on September 18, 2014. The Corporate
Governance Plan is incorporated by reference into this annual report and is prepared to fully address the
principles and provision set out in the ASX Corporate Governance Principles and Recommendations. The
2017 corporate governance report was approved by the Board on March 28, 2018.
A copy of each of the below policies and charters are available on the Company’s website at www.ecargo.
com/corporate-governance/.
THE BOARD CHARTER
This charter sets out the principles for the operation of the Board and the functions and responsibilities of
the Board and management of the Company. The Board Charter contains the Board skills matrix.
CODE OF CONDUCT
This policy sets out the standards of ethical behaviour that the Company expects from its Directors,
officers and employees.
16
eCargoANNUAL REPORT 2017For personal use only SECURITIES TRADING POLICY
This policy is designed to maintain investor confidence in the integrity of the Company’s internal controls
and procedures and to provide guidance on avoiding any breach of the insider trading laws in Australia.
AUDIT AND RISK MANAGEMENT COMMITTEE CHARTER
This charter sets out the principles for the operation of the Audit and Risk Management Committee.
NOMINATION AND REMUNERATION COMMITTEE CHARTER
This charter sets out the principles for the operation of the Nomination and Remuneration Committee.
CONTINUOUS DISCLOSURE POLICY AND COMMUNICATIONS STRATEGY
Rules and the Company Ordinance to ensure the Company discloses to ASX any information concerning
the Company which is not generally available and which a reasonable person would expect to have a
material effect on the price or value of the CDIs. This policy sets out certain procedures and measures
which are designed to ensure that the Company complies with its continuous disclosure obligations. This
policy also sets out practices which the Company will implement to ensure effective communication with
its Shareholders.
DIVERSITY POLICY
This policy sets out practices which the Company is committed to workplace diversity. Due to the relative
small size of the Company, the Board had not set any objectives on gender diversity during the financial
year ended December 31, 2017. The Board recognized the benefit arise from achieving various forms of
diversity and will continues to evaluate the setting of objectives on workplace diversity.
17
Corporate Governance ReportFor personal use only The table below shows the proportion of male and female representation across ECG, the senior
management and at the Board level as at December 31, 2017.
Job level
Board of Directors#
Management#
All employees
Male
100%
88%
44%
Female
0%
13%
56%
* Management represent General Manager grade or above
# As at the date of this report, the proportions under the Board of Directors and the Management are Male: 83%
versus Female: 17% and Male: 78% versus Female: 22% respectively, which are attributable to the appointments
of Ms. Jessica Rudd as non-executive director on January 24, 2018 and Ms. Eva Zhang as Chief Executive Officer on
March 14, 2018.
BOARD OF DIRECTORS
The Board is responsible for the overall corporate governance of the Company. Issues of substance
affecting the Company are considered by the Board, with advice from external advisors as required.
The Board’s role in risk oversight includes reviewing reports from management and the Audit and Risk
Management Committee on a regular basis regarding material risks faced by the Company and applicable
mitigation strategies and activities.
The reports detail the effectiveness of the risk management program and identify and address material
business risks such as technological, strategic, business, operational, financial, human resources and
legal/regulatory risks.
The Board and its committees consider these reports, discuss matters with the management and identify
and evaluate any potential strategic or operational risks, and appropriate activity to address those
risks. The responsibilities of the Board are set down in the Company’s Board Charter, which has been
prepared having regard to the ASX Corporate Governance Council, Corporate Governance Principles and
Recommendations, 3rd Edition (ASX Corporate Governance Principles and Recommendations).
COMPOSITION OF THE BOARD, NUMBER OF THE BOARD MEETINGS AND DIRECTORS
ATTENDANCE
The Company’s Memorandum and Articles of Association and the Hong Kong Companies Ordinance
provides that the minimum number of Directors is two and that this minimum may only be changed by
a majority vote of the Shareholders. The Company currently has six Directors serving on the Board,
including one Executive Director (“ED”), two Non-Executive Directors (“NED”) and three Independent
Non-Executive Directors (“INED”). The biographies detail of each Director are included in the “Board of
Directors and Executive Team” section of this Annual Report.
There were more than four meetings of the Board and the Committee held during the year ended
December 31, 2017. The following is the attendance record of the Directors at the Board and Committee
meetings, and at the Shareholder meeting held during the year.
18
eCargoANNUAL REPORT 2017For personal use only 19
Corporate Governance ReportFor personal use only 20
eCargoANNUAL REPORT 2017For personal use only Name
Position
Directors
Committee
Committee
Meeting
Audit and Risk
Nomination and
Annual
Board of
Management
Remuneration
General
Mr. John Lau
ED
Mr. Christopher Lau# ED
Mr. Rupert Myer AO
INED
Mr. Christopher Ryan INED
Mr. Heath Zarin
INED
5/5
5/5
5/5
5/5
4/5
N/A
N/A
5/5
5/5
4/5
N/A
N/A
4/4
4/4
3/4
1/1
1/1
1/1
1/1
1/1
#: Re-designated from executive director to non-executive director on March 14, 2018.
PRACTICES AND CONDUCT OF MEETINGS
Notice of the Board and Committee meetings is given to all the Directors at least 7 days in advance.
Annual meeting schedules and the draft agenda of each meeting are normally made available to the
Directors in advance. Arrangements are in place to allow the Directors to include items in the agenda,
and final agenda together with the Board papers are sent to the Directors within reasonable time. Each
Director also has separate and independent access to the senior management where necessary.
Minutes of the Board meetings are kept by the Company Secretary. Draft minutes are circulated to the
Directors for comment within a reasonable time after each meeting.
Each Director must bring an independent view and judgment to the Board and must declare all conflicts of
interest including confirmation of Director’s interests in securities and declaration of any trading activities.
Any issue concerning a Director must be brought to the attention of the Board as soon as practicable,
and unless a resolution has been passed by the non-interested Directors allowing the interested Director
to remain in the meeting and participate in discussions, Directors may not participate in discussions or
resolutions pertaining to any matter in which the Director has a material personal interest.
APPOINTMENT AND RE-ELECTION OF DIRECTORS
The Company uses a formal and transparent procedure for the appointment, election and removal of
Directors, which is set out in the Company’s Articles of Associations and is conducted by the Nomination
and Remuneration Committee, which will make recommendations on new Director appointment to the
Board for approval.
Each of the Director is engaged on services contract and subject to re-election. Further details of the
appointment, election and removal of Director are set out in the “Board of Directors and Executive Team”
section of this Annual Report.
INDUCTION AND ONGOING DEVELOPMENT
Each of the newly appointed Director receives a formal, comprehensive and tailored induction to ensure
his or her understanding of the business and operations of the Company and awareness of the Director’s
responsibilities and obligations.
The Company encourages all Directors participate in continuous professional development in order
to develop and refresh their knowledge and skills. During the year, the Directors had updated on the
development of statutory and regulatory regime and the business environment provided by the Company
and external parties.
BOARD COMMITTEES
The Board has established two standing committees to facilitate and assist the Board in fulfilling its
responsibilities as set out below. The Board may also establish other committees from time to time.
21
Corporate Governance ReportFor personal use only Each of these committees has the responsibilities described in the committee charters (which have been
prepared having regard to the ASX Corporate Governance Principles) adopted by the Company.
Committee
Overview
Member
Audit and Risk
Oversees the Company’s corporate accounting
Mr. Rupert Myer AO
Management
and financial reporting, including auditing of the
(Chairman)
Committee
Company’s financial statements, reviewing the
Mr. Heath Zarin
performance of the Company’s internal audit function
Mr. Chris Ryan
Nomination and
Remuneration
Committee
Mr. Heath Zarin
(Chairman)
Mr. Rupert Myer AO
Mr. Chris Ryan
and the qualifications, independence, performance
and terms of engagement of the Company’s external
auditor. Manages the process of identification and
management of risk.
Remuneration:
Establishes, amends, reviews and approves the
compensation and benefit plans with respect to
senior management and employees of the Company
including determining individual elements of total
compensation of the Chief Executive Officer and
other members of senior management.
The Nomination and Remuneration Committee
is responsible for forming a view and making
a recommendation to the Board on the most
appropriate compensation for key employees.
For instance, the Nomination and Remuneration
Committee may determine that non-monetary
compensation, such as employee options or
employee shares, is an appropriate compensation as
a way of:
• recognising ongoing contributions by key
employees to the achievement by the Company
of long term strategic goals;
• aligning the interests of participants with other
holders of shares in the Company through the
sharing of a personal interest in the future growth
and development of the Company; and
• providing a means of attracting and retaining
skilled and experienced employees.
The Nomination and Remuneration Committee is
also responsible for reviewing the performance of
the Company’s executive officers with respect to
these elements of compensation.
Nomination:
The Nomination and Remuneration and Committee
recommends the candidates nominated as a Director
at each Annual General Meeting and ensures that
the Audit and Risk Management, and Nomination
and Remuneration Committees of the Board have
the benefit of qualified and experienced independent
Directors.
22
eCargoANNUAL REPORT 2017For personal use only For personal use only ASX CORPORATE GOVERNANCE PRINCIPLES
The Board has evaluated the current corporate governance policies and practices in light of the ASX
Corporate Governance Principles.
The Board considers that the Company generally complies with the ASX Corporate Governance Principles
and, where the Company does not comply, this is primarily due to the current relative size of the
Company and scale of its current operations. Comments on compliance and departures are set out below.
Principles/
recommendations
Does the
Company
comply?
Particulars of compliance &
if not why not
Principle 1 – Lay solid foundations for management and oversight
Recommendation 1.1:
Complies
The Board’s responsibilities are
Companies should disclose:
• the respective roles and
responsibilities of its Board
and management; and
• those matters expressly
reserved to the Board
and those delegated to
management.
Complies
Recommendation 1.2:
Companies should:
• undertake appropriate checks
before appointing a person,
or putting forward to security
holders a candidate for
election, as a Director; and
• provide security holders with
all material information in
its possession relevant to a
decision on whether or not to
elect or re-elect a Director.
contained in the Company’s Board
Charter. The Company’s Board
Charter is contained in the Corporate
Governance Plan.
The functions of the Board and
Chairman are specifically set out in
the Board Charter. The functions
delegated to senior executives
are contained in the Delegation of
Authority Agreement, contained in
the Corporate Governance Plan.
The Board’s responsibilities in relation
to Director appointments are contained
in the Company’s Board Charter.
The Company’s Board Charter is
contained in the Corporate Governance
Plan. Appropriate checks, including
bankruptcy checks and police checks
are part of the listing process.
The requirement for the appropriate
checks prior to appointment a Director
or putting forward a candidate for
election as a Director as well as the
provision of all material information in
the Board’s possession to Shareholders
relevant to a decision on whether or
not to elect or re-elect a Director is
clearly mentioned in the Board Charter.
All material information in relation
whether to elect or re-elect a Director
is contained in the Company’s notice of
meeting and explanatory statement.
24
eCargoANNUAL REPORT 2017For personal use only Recommendation 1.3:
Companies should have a written
agreement with each Director
and senior executive setting out
the terms of their appointment.
Recommendation 1.4:
The Company Secretary must
be directly accountable to the
Board, through the chair on all
matters to do with the proper
functioning of the Board.
Recommendation 1.5:
Companies should:
• have a diversity policy which
includes requirements for
the Board or a relevant
committee of the Board to
set measurable objectives for
achieving gender diversity
and to assess annually both
the objectives and the entity’s
progress in achieving them;
• disclose that policy or a
summary of it; and
• disclose as at the end of
each reporting period the
measurable objectives for
achieving gender diversity set
by the Board or a relevant
committee of the Board in
accordance with the entity’s
diversity policy and its
progress towards achieving
them.
Recommendation 1.6:
Companies should:
• have and disclose a process
for periodically evaluating the
performance of the board,
its committees and individual
Directors; and
• disclose, in relation to each
reporting period, whether a
performance evaluation was
undertaken in the reporting
period in accordance with
that process.
Complies
Complies
Complies
The Company has entered into such
agreements with each Director and
senior executive.
The Company Secretary is accountable
directly to the Board, through the
Chairman, on all matters to do with the
proper functioning of the Board. The
accountability and details of the role of
the Company Secretary are contained
in the Company’s Board Charter.
The Board has established a Diversity
Policy. The Diversity Policy is contained
in the Corporate Governance Plan.
The Board considered the importance
of talent and concluded when recruiting
workforce, everyone should be provided
with equal opportunity; and there
should be no difference in gender, age,
ethnicity, race, disability and cultural
background. With the Company’s scale
of operation is small, the Board had not
set any objectives of gender diversity
during the financial year ended
December 31, 2017. However, the
Board recognized the benefit arise from
achieving various forms of diversity and
will continues to evaluate the setting of
objectives on workplace diversity.
Complies
The Board has established these
processes. A summary of the processes
are set out below.
The Board and each Board Committee
is responsible for the evaluating the
performance of the Board and Board
Committee on an annual basis by
referring to the requirements of the
Board Charter.
The Chairman is responsible for the
review of individual Directors. Each
Director is met privately with the
Chairman to discuss the assessment.
In addition to the annual review, the
Chairman regularly provides informal
feedback to individual Directors.
25
Corporate Governance ReportFor personal use only Complies
Recommendation 1.7:
Companies should:
• have and disclose a process
for periodically evaluating
the performance of its senior
executives; and
• disclose, in relation to each
reporting period, whether a
performance evaluation was
undertaken in the reporting
period in accordance with
that process.
The Board has established these
processes. A summary of the processes
are set out below.
The Chairman is responsible for the
review of the senior management
assessment processes from time
to time to ensure that they remain
consistent with the Company’s overall
objectives for the business.
All senior executives undergo a
performance and development review
on an annual basis, each senior
executive meets privately with the
Chairman to discuss the assessment
and provided with feedback on their
performance, when appropriate, a
development plan also agreed to
support the ongoing contribution of the
executive to the needs of business.
Principle 2 – Structure the Board to add value
Recommendation 2.1:
The Board should establish a
nomination committee which
• consists of a majority of
independent Directors;
• is chaired by an independent
chair; and
• has at least three members.
The board must disclose the
charter of the committee, the
members of the committee, the
number of times the committee
has met throughout a reporting
period and the individual
attendances of the members at
those meetings.
Complies
The Board has established a Nomination
and Remuneration Committee.
The function of the Nomination and
Remuneration Committee is contained
in the Nomination and Remuneration
Committee Charter. The Company’s
Nomination and Remuneration
Committee Charter is contained in the
Corporate Governance Plan.
The Nomination and Remuneration
Committee is chaired by Mr. Heath
Zarin, an independent Director, and
consists three non-executive Directors.
Of these members, all are independent
Non-Executive Directors, namely, Mr.
Heath Zarin, Mr. Rupert Myer AO and
Mr. Christopher Ryan.
For the individual attendances, please
refer to “Composition of the Board,
number of the Board meetings and
Directors Attendance” section of this
report.
26
eCargoANNUAL REPORT 2017For personal use only Complies
Complies
Recommendation 2.2:
Companies should have and
disclose a Board skills matrix
setting out the mix of skills and
diversity that the Board currently
has or is looking to achieve in its
membership.
Recommendation 2.3:
Companies should disclose:
• the names of the Directors
considered by the Board to
be independent Directors;
• if a Director has an interest,
position, association or
relationship of the type
described in Box 2.3 (Factors
relevant to assessing the
independence of a Director)
but the Board is of the opinion
that it does not compromise
the independence of the
Director, the nature of the
interest, position, association
or relationship in question
and an explanation of why
the Board is of that opinion;
and
• the length of service of each
Director.
Recommendation 2.4:
A majority of the Board should
be independent Directors.
Not Complies
The Board maintains a Board Skills
Matrix of the current Directors of the
Board. The Company’s Board Skills
Matrix is contained in the Board Charter
which is contained in the Corporate
Governance Plan.
Currently the Board consists of
six members, of which three are
independent Non-Executive Directors,
namely, Mr. Rupert Myer AO, Mr.
Christopher Ryan and Mr. Heath Zarin.
The Board has assessed, using
the criteria set out in the ASX
Corporate Governance Principles and
Recommendations, the independence
of Non-Executive Directors in light of
their interests and relationships and
considers them all to be independent.
The Board determines the size and
composition of the Board, subject
to limits imposed by the Company’s
Constitution.
Of the six Directors, only three Non-
Executive Directors namely, Mr. Rupert
Myer AO, Mr. Christopher Ryan and
Mr. Heath Zarin are considered by the
Board to be independent.
Due to the business expansion
and the development of ECG, the
Board concluded the existing mix of
independent Directors be appropriate
and fit for the Company.
The Board structure will continue to be
reviewed at the appropriate stages of
the Company’s development.
27
Corporate Governance ReportFor personal use only Recommendation 2.5:
The chair of the Board should
be an independent Director and
should not be the same person
as the Chief Executive Officer.
Partially Compiles
Complies
Recommendation 2.6:
Companies should have a
program for inducting new
Directors and providing
appropriate professional
development opportunities
for Directors to develop
and maintain the skills and
knowledge needed to perform
their role as Directors effectively.
Principle 3 – Act ethically and responsibly
Complies
Recommendation 3.1:
Companies should:
(a) establish a code of conduct
for its Directors, senior
executives and employees;
and
(b) disclose the code or a
summary of the code.
28
The current Chairman, Mr. John Lau,
is an Executive Director and is not
considered independent under the ASX
Corporate Governance Principles.
The Board considers that the Chairman,
as a founder, is key for the business
development and decision making
in Hong Kong and the Company has
adequate procedures to ensure the
independence of the Chairman’s
decisions. For example, the Chairman
will deal with any conflicts that arise,
address differences of opinion and
ensure contrary votes are recorded at
Board meetings and ensure Directors
or the Chairman himself with material
personal interests in a matter leave the
meeting while the matter is discussed,
unless a resolution has been passed by
the non-interested Directors allowing
the interested Director to remain in the
meeting and participate in discussions.
The Chairman is not the Chief Executive
Officer of the Company.
The Directors are expected to
undertake an appropriate continuing
professional development program
or education for the purpose of
developing and maintaining the skills
and knowledge for normal discharge of
their formal Director duties effectively.
During the year, the Directors are
continually updated on the development
of statutory and regulatory regime
and the business environment which
provided by the Company and external
parties.
The Board has established a Code of
Conduct, which is contained in the
Corporate Governance Plan.
The Code of Conduct provides that
the Directors will act with honesty and
integrity, will avoid conflicts of interest,
protect confidential and proprietary
information and treat others equitably
and with professionalism courtesy and
respect.
eCargoANNUAL REPORT 2017For personal use only 29
Corporate Governance ReportFor personal use only Principle 4 – Safeguard integrity in corporate reporting
Complies
The Board has established an Audit and
Risk Management Committee.
The function of the Audit and Risk
Management Committee is contained
in the Audit and Risk Management
Committee Charter. The Company’s
Audit and Risk Management Committee
Charter is contained in the Corporate
Governance Plan.
The Audit and Risk Management
Committee is chaired by Mr. Rupert
Myer AO, an independent Director who
is not Chairman of the Board.
The Audit and Risk Management
Committee consists of three members
namely, Mr. Rupert Myer AO, Mr.
Christopher Ryan and Mr. Heath Zarin.
Of these members, all are independent
Non-Executive Directors.
For the individual attendances, please
refer to “Composition of the Board,
number of the Board meetings and
Directors Attendance” section of this
report.
The Board has received the necessary
declaration from the Chief Executive
Officer, Mr. Christopher Lau and Chief
Financial officer, Mr. Garnok Cheung
prior to approving the unaudited and
audited financial statements. This
process will continue for any future
approval of the Company’s financial
statements.
Recommendation 4.1:
The Board should establish an
audit committee which:
• consists of at least three
members all of whom are
non-executive Directors,
the majority of independent
Directors;
• is chaired by an independent
chair who is not the chairman
of the Board.
The Board must disclose the
charter of the audit committee,
the relevant qualifications and
experience of the members of
the committee and the number
of times the committee has met
during a reporting period and
the individual attendances of the
members at those meetings.
Complies
Recommendation 4.2:
Before approving a Company’s
financials, the Board must
receive declarations from the
Company’s Chief Executive
Officer and Chief Financial Officer
that in their opinion, the financial
records of the entity have been
properly maintained and that
the financial statements comply
with the appropriate accounting
standards and give a true and
fair view of the financial position
and performance of the entity
and that the opinion has been
formed on the basis of a sound
system of risk management
and internal control which is
operating effectively.
30
eCargoANNUAL REPORT 2017For personal use only Complies
Recommendation 4.3:
Companies must ensure that
its external auditor attends its
Annual General Meeting and is
available to answer questions
from security holders relevant to
the audit.
Principle 5 – Make timely and balanced disclosure
Complies
Recommendation 5.1:
Companies should:
(a) have a written policy
for complying with its
continuous disclosure
obligations under the ASX
Listing Rules; and
(b) disclose that policy or a
summary of it.
The Company’s external auditor had
attended the Annual General Meeting
held on May 15, 2017.
The Company will invite external
auditor to attend its forthcoming Annual
General Meeting and any future Annual
General Meeting to answer questions
from security holders relevant to the
audit.
The Board has adopted a Continuous
Disclosure Policy and Communications
Strategy which is set out in the
Corporate Governance Plan.
The Company respects the rights of
its Shareholders and facilitates the
exercise of those rights, the Company
is committed to communicating
effectively with Shareholders, providing
Shareholders with ready access
to balanced and understandable
information about the Company and
corporate proposals and making it
easier for Shareholders to participate in
general meetings of the Company.
Principle 6 – Respect the rights of security holders
Recommendation 6.1:
A listed entity should provide
information about itself and its
governance to investors via its
website.
Complies
Complies
Recommendation 6.2:
Companies should design and
implement an investor relations
program to facilitate effective
two-way communication with
investors.
The Board aims to ensure that the
Shareholders are informed of all major
developments affecting the Company’s
state of affairs.
The Company has established on its
website, www.eCargo.com where
Shareholders can find information such
as financial statements and major
development of the Company as well
as all relevant corporate governance
material under the Media and News and
corporate governance landing pages.
Shareholders are encouraged to
fully participate at the Annual
General Meeting or other General
Meeting to ensure effective two way
communication.
Shareholders are also able to direct any
questions relating to the Company’s
securities to the share registry, Link
Market Services Limited.
31
Corporate Governance ReportFor personal use only Complies
Recommendation 6.3:
Companies should disclose
the policies it has in place
to facilitate and encourage
participation at meetings of
Shareholders.
Complies
Recommendation 6.4:
Companies should give security
holders the option to receive
communications from, and
send communications to, the
entity and its security registry
electronically.
The communication strategy
is contained in the Continuous
Disclosure Policy and Communications
Strategy is designed to ensure that
Shareholders are informed of all
relevant developments. Details of
the information can be found on the
Company’s website www.eCargo.com
under the corporate governance landing
page of the Investor Information
section.
The Company encourages full
participation of Shareholders at the
Annual General Meeting. The Chairman
encourages Shareholders to ask
reasonable questions at the Annual
General Meeting. The Board makes
itself available to all Shareholders both
before and after the Annual General
Meeting.
All Shareholders have the right to
access details of their holdings, provide
email address contacts and make
certain elections via the Company’s
share registry, Link Market Services
Limited by accessing the web site
www.linkmarketservices.com.au.
Shareholders have the right of option
of receiving all or a selection of
communication electronically.
32
eCargoANNUAL REPORT 2017For personal use only Principle 7 – Recognise and manage risk
Recommendation 7.1:
The Board should establish a risk
management committee which:
(a) has at least 3 members,
the majority of whom
independent Directors;
(b) is chaired by an
independent chair.
The Board must disclose the
charter of the risk management
committee, members of the risk
management committee, the
number of times the committee
has met during a reporting
period and the individual
attendances of the members at
those meetings
Complies
The Board has established an Audit and
Risk Management Committee.
The function of the Audit and Risk
Management Committee is contained
in the Audit and Risk Management
Committee Charter. The Company’s
Audit and Risk Management Committee
Charter is contained in the Corporate
Governance Plan.
The Audit and Risk Management
Committee is chaired by Mr. Rupert
Myer AO, an independent Director who
is not Chairman of the Board.
The Audit and Risk Management
Committee consists of three members
namely, Mr. Rupert Myer AO, Mr.
Christopher Ryan and Mr. Heath Zarin.
Of these members, all are independent
Non-Executive Directors.
For the individual attendances, please
refer to “Composition of the Board,
number of the Board meetings and
Directors Attendance” section of this
report.
Recommendation 7.2:
The Board should:
(a) review the Company’s risk
management framework
at least annually to satisfy
itself that it continues to be
sound; and
(b) disclose, in relation to each
reporting period, whether
such review has taken
place.
Complies
The Audit and Risk Management
Committee has reviewed the Risk
Management framework.
The Audit and Risk Management
Committee will continue the process to
review the risk management framework
at least annually; and will disclose such
review accordingly.
33
Corporate Governance ReportFor personal use only Complies
Recommendation 7.3:
Companies should disclose;
(a) their internal audit function,
how the function is
structured and what role it
performs; or
(b) if it does not have an
internal audit function,
that fact and the processes
it employs for evaluating
and continually improving
the effectiveness of its risk
management and internal
control processes.
Complies
Recommendation 7.4:
Companies should disclose
whether they have any
material exposure to economic,
environmental and social
sustainability risks and, if it
does, how it manages or intends
to manage those risks.
Principle 8 – Remunerate fairly and responsibly
The Company maintained an internal
audit function to ensure the Company
accomplish its objectives by bringing
a systematic, disciplined approach
to evaluating and continually
improving the effectiveness of its risk
management and internal control
processes.
The Board is ultimately responsible
for maintaining a sound and effective
system of internal control and risk
management of the Company and
considers that the identification and
management of key risk associated
with the business is vital.
The Company does not have any
material exposure to economic,
environmental and social sustainability
risks. The material risks are disclosed
at Directors’ Report of the Annual
Report.
Recommendation 8.1:
The Board should establish a
remuneration committee which:
• have at least 3 members,
the majority of whom
independent Directors;
• is chaired by an independent
chair.
The Board must disclose the
charter of the remuneration
committee, members of the
remuneration committee, the
number of times the committee
has met during a reporting
period and the individual
attendances of the members at
those meetings.
Complies
The Board has established a Nomination
and Remuneration Committee.
The function of the Nomination and
Remuneration Committee is contained
in the Nomination and Remuneration
Committee Charter contained in the
Corporate Governance Plan.
The Nomination and Remuneration
Committee is chaired by Mr. Heath
Zarin, an independent Director,
and consists of three non-executive
Directors. Of these members, all are
independent, Non-Executive Directors,
namely, Mr. Heath Zarin, Mr. Rupert
Myer AO and Mr. Christopher Ryan.
For the individual attendances, please
refer to “Composition of the Board,
number of the Board meetings and
Directors Attendance” section of this
report.
34
eCargoANNUAL REPORT 2017For personal use only Complies
Recommendation 8.2:
Companies should separately
disclose its policies and practices
regarding the remuneration of
non-executive Directors and
the remuneration of executive
Directors and other senior
executives.
The remuneration structure for the non-
executive Directors is not related to
performance. Non-executive Directors
receive fixed fees which reflect their
skills, responsibilities and the time
commitments required to discharge
their duties.
The remuneration structure for senior
executives reflects the Company’s
performance culture: there is a direct
correlation between the executive’s
reward and the Company’s performance
so as to seek to ensure that the
Company’s remuneration policy is
aligned with its long term business
objectives and the interests of
Shareholders and other stakeholders.
Not applicable
The Company does not have an equity
based remuneration scheme.
Recommendation 8.3:
Companies which have equity-
based remuneration schemes
should have and disclose a
policy on whether participants
are permitted to enter into
transactions (whether through
the use of derivatives or
otherwise) which limit the
economic risk of participating in
the scheme.
35
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363636
Directors’ Report
The Directors of eCargo Holdings Limited (the “Company”) submit their
report together with the audited consolidated financial statements of
the Company and its subsidiaries (collectively “ECG”) for the year ended
December 31, 2017.
The functional and presentation currency of the Company as of the reporting
date is Hong Kong Dollars (“HK$”).
PRINCIPAL ACTIVITIES
EQUITY-LINKED AGREEMENTS
The principal activities of ECG are the
development and provision of eCommerce
technologies, integrated offline and online
supply chain operations, and provision of
digital commerce solutions services in the
People’s Republic of China (the “PRC”),
Hong Kong, Australia and New Zealand.
The activities of the subsidiaries are set
out in Note 16 to the consolidated financial
statements.
RESULTS AND APPROPRIATIONS
The results of ECG for the year are set
out in the consolidated statement of
comprehensive income on page 52.
The Directors do not recommend the
payment of a dividend.
SHARE CAPITAL AND DEBENTURES
ISSUED
No shares and debentures were issued by
the Company in the year ended December
31, 2017.
No equity-linked agreements were entered
into by the Company at any time during the
year or subsisted at the end of the year.
DIRECTORS
(a) Directors of the Company (“Directors”,
or individually a “Director”)
The Directors during the year and up to the
date of this report are:
Executive Directors
Mr. John Lau
Non-Executive Directors
Ms. Jessica Rudd
(appointed on January 24, 2018)
Mr. Christopher Lau (re-designated from
executive director to non-executive
director on March 14, 2018)
Independent Non-Executive Directors
Mr. Rupert Myer AO
Mr. Christopher Ryan
Mr. Heath Zarin
(collectively, the “Board of Directors”)
REMUNERATION
The remuneration of Directors and key
management personnel are set out in Note
9 to the consolidated financial statements.
For personal use only
In accordance with Article 24
(b) Directors of the Company’s
Other Directors of the Company’s
of the Company’s Articles of
subsidiaries
Association, Mr. Rupert Myer
AO, Ms. Jessica Rudd and Mr.
During the year and up to
Christopher Lau retire by rotation
the date of this report, Mr.
subsidiaries during the year and
up to the date of this report
are: Mr. Jason Byrne, Mr. Gavin
Custance#, Mr. John Muir, Ms.
at the forthcoming Annual
Christopher Lau and Mr. John
Yip Sau Ling and Ms. Lau Ying.
General Meeting and, being
Lau are also Directors in certain
eligible, offer themselves for re-
subsidiaries of the Company.
election.
#: Ceased to be director after the subsidiary was dissolved in November 2017.
Financial and Operations Review
Year ended/As at
December 31
2017
HK$
Prior year
HK$
Revenue from ordinary operations
144,488,130
124,470,119
Loss after income tax expense
(68,511,523)
(87,717,542)
Total comprehensive loss
attributable to owners of the
Percentage
change
%
16%
-22%
Company
(62,723,394)
(88,117,208)
-29%
EBITDA loss excluding impairment
on and results from associates
(15,254,355)
(52,722,380)
Total assets
Net assets
183,545,579
215,806,217
87,308,192
150,031,586
-71%
-15%
-42%
37
Directors’ Report For personal use only The Chief Operating Decision
Makers (“CODM”) assesses
and measures the operating
performance of ECG based on the
revenue and EBITDA (excluding
impairment on and results from
associates) as CODM believes
that such information is the most
relevant in evaluating the results
of ECG.
Consolidated revenue for the
year increased to HK$144.5
million (2016: HK$124.5 million)
of which HK$52.2 million (2016:
HK$52.6 million) was attributable
to eCommerce-enabling business
while HK$92.3 million (2016:
HK$71.9 million) was contributed
total revenue. There is no single
double-page printing, promoting
by Amblique.
customer contributing 10% or
a paperless environment,
more of ECG’s total revenue.
installing energy-efficient lighting
fixtures and sectioned lighting,
and introducing energy-saving
equipment.
ECG does not carry out any
activities that have a material
influence on the environment. As
such, the Directors are not aware
of any material issues affecting
ECG or its compliance with the
relevant environment protection
agencies or related regulatory
authorities.
ECG reported an EBITDA loss
excluding impairment on and
results from associates of
HK$15.3 million, 71% less than
prior year. ECG incurred a loss
per share of HK$12.80 cents for
the year.
The Company did not propose
any dividend distribution or
share buy-back during the year
ended December 31, 2017.
For a more detailed review
of the performance of ECG,
please refer to its 2017 full year
financial results announcement
released on February 27, 2018
and Chairman Statement in this
Report.
MAJOR CUSTOMERS
ENVIRONMENTAL POLICY
AND REGULATION
ECG’s environmental
management policy is to
promote sustainable economic
development in all business
units, while, at the same time,
endeavouring to measure the
impact of activities on the
environment and improve
the results in terms of their
environment-friendliness;
lessen the consumption of
natural resources by re-use,
recycling or reduced use of
materials, and using products
that are recyclable or come from
sustainable sources; and apply
environment-friendly practices in
all our offices and facilities.
For the year ended December
ECG is implementing several
31, 2017, the five largest
initiatives at its offices and
customers of ECG accounted
facilities. Examples include using
for approximately 34% of ECG’s
recycling paper, promoting
38
eCargoANNUAL REPORT 2017For personal use only KEY RISK FACTORS
The key risk factors are risks that the Directors and Management focus on when managing the businesses of
ECG that may have the potential, if they occurred, to result in significant adverse consequences for ECG.
Risks related to ECG’s businesses and
risks related to the industry in which ECG operates.
Risk
Description of risk
Risk mitigation strategies
Risk that ECG’s
There are risks that ECG’s
ECG has a clear marketing strategy
marketing strategy to
marketing strategy to engage
in place. In the event such a
recruit Merchants is
Merchants is not successful. This
marketing strategy proves to be
not effective
would result in ECG failing to
unsuccessful, ECG shall refocus
Risk that ECG may
subject to liquidity
issue and might not
have the necessary
resources to fulfill its
funding obligations.
meet revenue targets and have a
and look to qualified professional
material and adverse effect on the
advisors in the industry to assist to
operating results of ECG.
refine its marketing strategy.
With ECG’s existing liquidity
and cash position, ECG relies on
standby facility from its major
shareholder to fund its short term
obligations as they fall due.
ECG is closely monitoring its working
capital and cash flow with regular
reporting to the Board of Directors of
ECG.
ECG had obtained the standby
facility from its major shareholder
in supporting the liquidity for daily
operations.
ECG will continue to evaluate its
business needs and performance of
its various business units and will
prioritise its resources in accordance
to the prospects of the various
business units.
39
Directors’ Report For personal use only Risk
Description of risk
Risk mitigation strategies
Risk that ECG’s
intellectual property
may be used without
authorisation or
stolen.
ECG relies on a combination
of copyright, nondisclosure
agreements and other methods
to protect its intellectual property
rights.
To protect its trade secrets and
other proprietary information,
employees, consultants, advisors
and collaborators are required
to enter into confidentiality
agreements. These agreements
might not provide meaningful
protection for the trade
secrets, know-how or other
proprietary information in the
event of any unauthorised use,
misappropriation or disclosure of
such trade secrets, know-how or
other proprietary information.
There is a risk that ECG’s
Merchants do not achieve
online revenues according to
expectations driven by a number
of factors including but not
limited to the marketing strategy
deployed, merchandise mix,
product availability and pricing.
This would result in ECG failing to
meet revenue targets and have
a material and adverse effect on
the operating results of ECG.
In recent years, wages
particularly in PRC’s eCommerce
industry have increased and may
continue to increase at a faster
rate. Wage increases will increase
ECG’s personnel cost and cost
of operations. As a result, ECG’s
gross margin and net profit may
decline.
Risk that ECG’s
merchants’ online
revenues are below
expectations.
Risk that increases in
wages will increase
net cash outflow and
gross margin and net
profit may decline.
ECG has only disclosed sensitive
intellectual property or related
information to particular employees,
consultants, advisors, collaborators
and Merchants on a “need-to-
know-basis”. ECG requires all such
employees, consultants, advisors,
collaborators and Merchants to enter
into confidentiality agreements or
through the confidentiality clauses in
employment agreements to protect
the confidentiality of such intellectual
property or related information.
Where necessary ECG will enforce its
intellectual property rights through
litigation or arbitration.
In regards to all new Merchants, ECG
will ensure that robust intellectual
property safeguards are contained in
their respective Service Agreements.
ECG mitigated this risk by redefining
its target Merchant pipeline and
focusing marketing efforts on
Merchants who have a proven
product and well-recognised brands
and a willingness to invest in
marketing activities, so that they are
relatively more likely to succeed in
generating online sales. ECG shall
continue to monitor this closely and
allocate appropriate resources in
accordance with Merchants’ online
sales activity and potential.
ECG will need to pay employees
market rate in order to attract and
retain skilled employees. ECG will,
however, try to offset increases in
wages by improving the efficiency
of work flows and productivity of
employees.
40
eCargoANNUAL REPORT 2017For personal use only Risk
Description of risk
Risk mitigation strategies
Uncertainties with
respect to the
PRC legal system
could have a material
adverse effect on ECG.
The continued growth
of the PRC’s internet
market depends on
the establishment
of an adequate
telecommunications
infrastructure.
Risk that ECG’s
management and
key personnel may
discontinue their
services.
ECG conducts its business
primarily through its subsidiaries
established in Hong Kong and
PRC. These subsidiaries are
generally subject to laws and
regulations applicable to foreign
investment in PRC. Despite the
legal system in PRC continues
to evolve, the interpretations
of many laws, regulations and
rules are not always uniform
and enforcement of these laws,
regulations and rules involves
uncertainties, which may limit
the legal protection available to
ECG.
Although private sector
internet service providers
currently exist in PRC, almost
all access to the internet is
maintained through state-owned
telecommunications operators
under the administrative control
and regulatory supervision
of the Ministry of Industry
and Information Technology.
eCommerce transactions
rely on this infrastructure to
provide data communications
capacity primarily through
local telecommunications
lines. Although the Chinese
Government has announced
plans to develop aggressively
the national information
infrastructure, ECG cannot assure
that this infrastructure will be
successfully developed.
ECG relies on the expertise
and experience of its Board of
Directors and its management
team to ensure its future
success. There is a risk that
if one or more of ECG’s
management or Directors were
unable or unwilling to continue
in their present position, ECG’s
business, financial condition and
results of operations may be
materially adversely affected and
employment costs may increase.
Uncertainties with respect to
PRC’s legal system are beyond
the control of ECG. That said, in
regards to eCommerce, the Chinese
Government has promulgated in its
most recent 5 year plan supporting
eCommerce as the future of retailing
in PRC.
Uncertainties with respect to
telecommunications infrastructure in
the PRC is a risk which is beyond the
control of ECG. That said, there is no
indication that there will be a severe
breakdown on the infrastructure.
In the event any key personnel were
to leave ECG, the Nomination and
Remuneration Committee would aim
to ensure a suitable replacement
were found within the timeframes
required and not at unreasonable
cost to ECG.
41
Directors’ Report For personal use only Risk
Description of risk
Risk mitigation strategies
Risk that the negative
indicator(s) on
intangible assets,
mainly on eCoreOS
and eCWMS, exist and
therefore impairment
is required.
According to the Accounting
Standards, intangible assets
are subject to impairment
assessment whenever events or
changes in circumstances indicate
that the carrying amount may
not be recoverable.
ECG had carried out a review over
the intangible assets as at December
31, 2017.
An impairment loss is recognised
for the amount by which the
asset’s carrying amount exceeds
its recoverable amount. The
recoverable amount is the higher
of an asset’s fair value less costs
to disposal and value in use.
If ECG failed to achieve the
budget or business plan, it will be
an indicator for impairment which
may adversely impact the bottom
line of ECG.
According to the Accounting
Standards, interest in associate
is subject to impairment
assessment whenever events or
changes in circumstances indicate
that the carrying amount may
not be recoverable.
The interest in associates
will be subject to impairment
assessment when the
performance of the associates
cannot meet the budget or
business plan proposed at
acquisition date.
Risk that the negative
indicator(s) on
interest in associates
and impairment is
required.
ECG had closely monitor the
performance and business
development of the associates.
ECG had reviewed the performance
and indicator as at December 31,
2017. The carrying value of interest
in associates had been properly
reflected.
42
eCargoANNUAL REPORT 2017For personal use only Directors’ Interest in Shares/Chess Depository Interests (“CDIs”)
As at the date of report, the Directors have the following interests in fully-paid shares/CDIs in the
Company.
Director
Mr. Christopher Lau
Mr. John Lau
Ms. Jessica Rudd
Mr. Rupert Myer AO
Mr. Christopher Ryan
Mr. Heath Zarin
Number of Shares
Number of Shares
and equivalent
and equivalent
CDIs held directly
CDIs held indirectly
8,142,460
Nil
Nil
Nil
Nil
Nil
Nil
396,872,460
35,382,225
9,000,000
225,000
Nil
None of the Directors hold any partly-paid shares or options at the date of this report.
DIRECTORS’ MATERIAL INTERESTS IN TRANSACTIONS, ARRANGEMENTS AND
CONTRACTS THAT ARE SIGNIFICANT IN RELATION TO ECG’S BUSINESS
No transactions, arrangements and contracts of significance in relation to ECG’s business to which the
specified undertaking of ECG was a party and in which a Director had a material interest, whether directly
or indirectly, subsisted at the end of the year or at any time during the year.
DIRECTORS’ INTEREST IN THE UNDERLYING SHARES OF THE COMPANY OR ANY
SPECIFIED UNDERTAKING OF THE COMPANY
At no time during the year was the Company, its subsidiaries, its fellow subsidiaries or its holding
companies a party to any arrangements to enable the Directors to hold any interests or in the shares, or
debentures, or underlying shares of the Company or its specified undertakings.
MANAGEMENT CONTRACTS
No contracts concerning the management and administration of the whole or any substantial part of the
business of the Company were entered into or existed during the year.
PERMITTED INDEMNITY PROVISIONS
At no time during the financial year and up to the date of this Directors’ Report, there was or is, any
permitted indemnity provision being in force for the benefit of any of the Directors (whether made by the
Company or otherwise) or an associated company (if made by the Company).
AUDITOR
The financial statements have been audited by PricewaterhouseCoopers who retire and, being eligible,
offer themselves for re-appointment.
On behalf of the Board of Directors,
Mr. John Lau
Executive Chairman
Hong Kong, March 28, 2018
43
Directors’ Report For personal use only your eCommerce Partner
For personal use only 2017
F I N A N C I A L S
For personal use only TO THE MEMBERS OF ECARGO HOLDINGS LIMITED
(incorporated in Hong Kong with limited liability)
OPINION
What we have audited
The consolidated financial statements of eCargo Holdings Limited (the “Company”) and its subsidiaries (the
“Group”) set out on pages 52 to 104, which comprise:
•
the consolidated statement of financial position as at 31 December 2017;
•
the consolidated statement of comprehensive income for the year then ended;
•
the consolidated statement of changes in equity for the year then ended;
•
the consolidated cash flow statement for the year then ended; and
•
the notes to the consolidated financial statements, which include a summary of significant accounting
policies.
Our opinion
In our opinion, the consolidated financial statements give a true and fair view of the consolidated financial
position of the Group as at 31 December 2017, and of its consolidated financial performance and its
consolidated cash flows for the year then ended in accordance with Hong Kong Financial Reporting
Standards (“HKFRSs”) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”) and
have been properly prepared in compliance with the Hong Kong Companies Ordinance.
BASIS FOR OPINION
We conducted our audit in accordance with Hong Kong Standards on Auditing (“HKSAs”) issued by the
HKICPA. Our responsibilities under those standards are further described in the Auditor’s Responsibilities
for the Audit of the Consolidated Financial Statements section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Independence
We are independent of the Group in accordance with the HKICPA’s Code of Ethics for Professional
Accountants (“the Code”), and we have fulfilled our other ethical responsibilities in accordance with the
Code.
46
eCargoANNUAL REPORT 2017IndependentAuditor’s ReportFor personal use only KEY AUDIT MATTERS
Key audit matters are those matters that, in our professional judgment, were of most significance in our
audit of the consolidated financial statements of the current period. These matters were addressed in
the context of our audit of the consolidated financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these matters.
Key audit matters identified in our audit are summarised as follows:
•
•
Goodwill impairment assessment
Assessment of working capital sufficiency
Key Audit Matter
How our audit addressed the Key Audit Matter
Goodwill impairment assessment
Refer to note 4 critical accounting
Our procedures in relation to management’s impairment
estimates and judgements and note 15 to
assessment included:
the consolidated financial statements of
the Group.
— Considering the reasonableness of the key assumptions,
As at 31 December 2017, the Group had
goodwill of HK$13,572,170 relating to
the eCommerce solutions services cash
generating unit in Australia (“Australia
CGU”).
An annual impairment assessment was
performed in respect of the goodwill of
the Australia CGU. In carrying out the
impairment assessment, management
calculates the value-in-use of the
Australia CGU to determine its recoverable
amount. Significant management
judgements and estimates are used to
estimate the future cash flows and to
determine the key assumptions, including
the compound annual growth rate
(“CAGR”) of revenue, EBITDA margin,
pre-tax discount rate and terminal
growth rate, underlying the value-in-use
calculation. Management has concluded
that no provision for impairment loss is
necessary as at 31 December 2017.
We focused on this area due to the
significant management judgement
to determine the key assumptions
underlying management’s impairment
assessment.
including CAGR of revenue, EBITDA margin, pre-tax
discount rate and terminal growth rate, with reference
to available market information, our knowledge of
the business and recent developments in the industry
relevant to the Australia CGU with the assistance from
our in-house valuation experts;
— Comparing the current year actual revenue growth
and EBITDA margin with the prior year projections to
consider if the projections included assumptions that
were overly optimistic; and
— Testing source data, on a sample basis, to supporting
evidence, such as approved budgets, service
contracts and available market data, to consider the
reasonableness of management’s revenue growth and
EBITDA margin estimates.
— Evaluating management’s sensitivity analysis around the
terminal growth rate and EBITDA margin to consider the
extent of changes in those assumptions that would result
in an impairment of goodwill.
We found the judgement and estimates used to determine
the key assumptions underlying management’s impairment
assessment of goodwill to be supported by available evidence.
47
Independent Auditor’s ReportFor personal use only Key Audit Matter
How our audit addressed the Key Audit Matter
Review of working capital sufficiency
Refer to Note 2 to the consolidated
Our procedures in relation to management’s assessment of
financial statements of the Group.
working capital sufficiency included:
As at 31 December 2017, the Group
had cash and cash equivalents of
HK$12,702,478 and net current assets
of HK$6,877,626. For the year ended 31
December 2017, the Group recorded net
loss of HK$68,511,523 and had operating
cash outflow of HK$15,905,697.
For the preparation of the Group’s
consolidated financial statements,
management performed an assessment
on working capital sufficiency, as
supported by cash flow projections, to
evaluate the Group’s ability to continue
as a going concern. The cash flow
projections have taken into account the
anticipated cash flows to be generated
from the Group’s operations as well as
the continuous availability of the existing
shareholder’s loan.
— Assessing the reasonableness of the anticipated cash
flows to be generated from the Group’s operations by
reference to the basis of estimating the revenue growth
rates, the projected margins, the estimated period to
collect receivables from customers and settle payables to
vendors.
— Comparing the current year actual cash flows with the
prior year cash flow projections to identify if the latest
projections includes any assumption that was overly
optimistic;
— Validating, on a sample basis, the input data to
management’s cash flow projections underlying the
assessment of working capital sufficiency to supporting
documents, such as approved budgets, service contracts,
historical and subsequent receipts and payments;
— Confirming the continuous availability of shareholder’s
Based on the cash flow projections,
loan facility; and
management concluded that the Group
will have sufficient financial resources
— Evaluating management’s sensitivity analysis by
to satisfy its future working capital
requirements and to meet its financial
obligations as and when they fall due
in the next twelve months from 31
considering possible adverse changes to the Group’s
operating performance, such as the possibility of increase
in operating costs and decline in revenues.
December 2017. As such, management
Based upon the above, we found the judgements and
considers that it is appropriate to prepare
assumptions used in management’s assessment of working
capital sufficiency to be supported by evidence we obtained.
the Group’s consolidated financial
statements on a going concern basis.
We focused on the evaluation of
management’s assessment of working
capital sufficiency as it involves significant
judgements and assumptions regarding
inherently uncertain outcomes of future
events and conditions.
48
eCargoANNUAL REPORT 2017For personal use only OTHER INFORMATION
The directors of the Company are responsible for the other information. The other information comprises
all of the information included in the annual report other than the consolidated financial statements and
our auditor’s report thereon.
Our opinion on the consolidated financial statements does not cover the other information and we do not
express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the
other information and, in doing so, consider whether the other information is materially inconsistent with
the consolidated financial statements or our knowledge obtained in the audit or otherwise appears to be
materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report in this regard.
RESPONSIBILITIES OF DIRECTORS AND AUDIT COMMITTEE FOR THE CONSOLIDATED
FINANCIAL STATEMENTS
The directors of the Company are responsible for the preparation of the consolidated financial statements
that give a true and fair view in accordance with HKFRSs issued by the HKICPA and the Hong Kong
Companies Ordinance, and for such internal control as the directors determine is necessary to enable the
preparation of consolidated financial statements that are free from material misstatement, whether due
to fraud or error.
In preparing the consolidated financial statements, the directors are responsible for assessing the Group’s
ability to continue as a going concern, disclosing, as applicable, matters related to going concern and
using the going concern basis of accounting unless the directors either intend to liquidate the Group or to
cease operations, or have no realistic alternative but to do so.
The Audit Committee is responsible for overseeing the Group’s financial reporting process.
AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE CONSOLIDATED FINANCIAL
STATEMENTS
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements
as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s
report that includes our opinion. We report our opinion solely to you, as a body, in accordance with
Section 405 of the Hong Kong Companies Ordinance and for no other purpose. We do not assume
responsibility towards or accept liability to any other person for the contents of this report. Reasonable
assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with
HKSAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or
error and are considered material if, individually or in the aggregate, they could reasonably be expected
to influence the economic decisions of users taken on the basis of these consolidated financial statements.
49
Independent Auditor’s ReportFor personal use only As part of an audit in accordance with HKSAs, we exercise professional judgment and maintain
professional scepticism throughout the audit. We also:
•
Identify and assess the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error, design and perform audit procedures responsive to those risks, and
obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk
of not detecting a material misstatement resulting from fraud is higher than for one resulting from
error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the
override of internal control.
•
Obtain an understanding of internal control relevant to the audit in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Group’s internal control.
•
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by the directors.
•
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If
we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s
report to the related disclosures in the consolidated financial statements or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to
the date of our auditor’s report. However, future events or conditions may cause the Group to cease
to continue as a going concern.
•
Evaluate the overall presentation, structure and content of the consolidated financial statements,
including the disclosures, and whether the consolidated financial statements represent the underlying
transactions and events in a manner that achieves fair presentation.
•
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the Group to express an opinion on the consolidated financial statements.
We are responsible for the direction, supervision and performance of the group audit. We remain
solely responsible for our audit opinion.
We communicate with Audit Committee regarding, among other matters, the planned scope and timing
of the audit and significant audit findings, including any significant deficiencies in internal control that we
identify during our audit.
We also provide Audit Committee with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other matters
that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
50
eCargoANNUAL REPORT 2017For personal use only From the matters communicated with Audit Committee, we determine those matters that were of most
significance in the audit of the consolidated financial statements of the current period and are therefore
the key audit matters. We describe these matters in our auditor’s report unless law or regulation
precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that
a matter should not be communicated in our report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such communication.
The engagement partner on the audit resulting in this independent auditor’s report is Leung Chi Hang,
Benson.
PricewaterhouseCoopers
Certified Public Accountants
Hong Kong, March 28, 2018
51
Independent Auditor’s ReportFor personal use only Revenue
Cost of sales
Gross profit
Selling and distribution expenses
Administrative expenses
Research and development expenses
Operating loss
Other gains/(losses) – net
Finance income
Finance expense
Finance (expense)/income – net
Share of results of associates
Provision for impairment of interest in an associate
Loss before income tax
Income tax credit
Loss for the year
Other comprehensive income
Item that may be reclassified to profit or loss
Note
2017
HK$
2016
HK$
6
7
7
7
7
10
11
11
11
17
17
12
144,488,130
124,470,119
(64,009,154)
(62,271,242)
80,478,976
62,198,877
(14,072,090)
(14,743,679)
(122,619,228)
(115,188,750)
(9,533,022)
(16,300,589)
(65,745,364)
(84,034,141)
1,143,879
(1,387,816)
41,235
571,100
(1,869,716)
(209,189)
(1,828,481)
(2,331,406)
361,911
153,853
-
(5,028,427)
(68,761,372)
(89,934,620)
249,849
2,217,078
(68,511,523)
(87,717,542)
Currency translation differences
5,788,129
(399,666)
Total comprehensive loss for the year
(62,723,394)
(88,117,208)
Loss per share for loss attributable to
owners of the Company
— Basic and diluted (HK cents per share)
13
(12.80)
(16.39)
The notes on pages 57 to 104 are an integral part of these consolidated financial statements.
52
eCargoANNUAL REPORT 2017Consolidated Statement of Comprehensive IncomeFor the Year Ended 31 December 2017For personal use only Assets
Non-current assets
Property, plant and equipment
Intangible assets
Interest in associates
Deferred income tax assets
Deposits
Current assets
Trade receivables
Prepayments, deposits and other receivables
Amounts due from related parties
Current income tax assets
Cash and cash equivalents
Total assets
Equity and liabilities
Equity attributable to owners of the Company
Note
2017
HK$
2016
HK$
14
15
17
23
20
19
20
28
21
3,330,325
4,526,109
50,877,676
95,381,946
72,504,113
70,459,815
256,553
856,251
2,778,187
869,850
127,824,918
174,015,907
33,635,520
23,602,377
1,345,832
7,269,334
767,497
12,702,478
1,683,986
8,301,962
1,815,019
6,386,966
55,720,661
41,790,310
183,545,579
215,806,217
Share capital
24
329,401,285
329,401,285
Currency translation reserve
Accumulated losses
Total equity
3,802,195
(1,985,934)
(245,895,288)
(177,383,765)
87,308,192
150,031,586
The notes on pages 57 to 104 are an integral part of these consolidated financial statements.
53
Consolidated Statement of Financial PositionConsolidated Statement of Financial PositionAs at 31 December 2017For personal use only Liabilities
Non-current liabilities
Deferred income tax liabilities
Borrowing
Current liabilities
Trade payables
Other payables and accruals
Amounts due to related parties
Total liabilities
Note
2017
HK$
2016
HK$
23
26
22
22
28
2,981,792
4,620,837
44,412,560
19,969,189
47,394,352
24,590,026
14,417,972
10,116,781
16,847,678
19,930,654
17,577,385
11,137,170
48,843,035
41,184,605
96,237,387
65,774,631
Total equity and liabilities
183,545,579
215,806,217
The notes on pages 57 to 104 are an integral part of these consolidated financial statements.
The financial statements on page 52 to 104 were approved by the Board of Directors on March 28, 2018
and were signed on its behalf by:
Mr. John Lau
Executive Chairman
Mr. Christopher Lau
Non-Executive Director
54
eCargoANNUAL REPORT 2017Consolidated Statement of Financial PositionAs at 31 December 2017For personal use only Currency
Share
translation
Accumulated
capital
HK$
reserve
HK$
losses
HK$
Total
equity
HK$
Balance at 1 January 2016
329,401,285
(1,586,268)
(89,666,223) 238,148,794
Comprehensive loss
Loss for the year
Other comprehensive loss
Currency translation differences
- ECG
- Associate
Total comprehensive loss for the year
-
-
-
-
-
(87,717,542)
(87,717,542)
(272,241)
(127,425)
-
-
(272,241)
(127,425)
(399,666)
(87,717,542)
(88,117,208)
Balance at 31 December 2016
329,401,285
(1,985,934) (177,383,765) 150,031,586
Balance at 1 January 2017
329,401,285
(1,985,934) (177,383,765) 150,031,586
Comprehensive loss
Loss for the year
Other comprehensive gain
Currency translation differences
- ECG
- Associate
Total comprehensive gain/(loss)
for the year
-
-
-
-
-
(68,511,523)
(68,511,523)
1,412,425
4,375,704
-
-
1,412,425
4,375,704
5,788,129
(68,511,523)
(62,723,394)
Balance at 31 December 2017
329,401,285
3,802,195 (245,895,288)
87,308,192
The notes on pages 57 to 104 are an integral part of these consolidated financial statements.
55
Consolidated Statement of Changes in EquityConsolidated Statement of Changes in EquityFor the Year Ended 31 December 2017For personal use only Cash flows from operating activities
Cash used in operations
Income tax refunded/(paid)
Note
2017
HK$
2016
HK$
25
(18,039,195)
(34,787,719)
2,133,498
(2,775,533)
Net cash used in operating activities
(15,905,697)
(37,563,252)
Cash flows from investing activities
Purchase of property, plant and equipment
Purchase of intangible assets
Proceeds of disposal of property,
plant and equipment
Investment in an associate
Interest received
14
15
25
17
11
(334,143)
(1,277,107)
(664,091)
(2,109,571)
8,450
240,235
-
(70,248,000)
41,235
571,100
Net cash used in investing activities
(948,549)
(72,823,343)
Cash flows from financing activities
Repayments of obligation under finance lease
-
(270,227)
Proceeds from borrowing
22,573,655
19,969,189
Net cash generated from financing activities
22,573,655
19,698,962
Net increase/(decrease) in cash and
cash equivalents
5,719,409
(90,687,633)
Cash and cash equivalents at beginning of year
6,386,966
97,332,110
Exchange gain/(loss) on cash and cash equivalents
596,103
(257,511)
Cash and cash equivalents at end of year
21
12,702,478
6,386,966
The notes on pages 57 to 104 are an integral part of these consolidated financial statements
56
eCargoANNUAL REPORT 2017Consolidated Statement of Cash FlowsFor the Year Ended 31 December 2017For personal use only 1 General information
eCargo Holdings Limited (the “Company”) and its subsidiaries (collectively, the “ECG”) are principally
engaged in the development and provision of eCommerce technologies, integrated offline and online
supply chain operations, and provision of digital commerce solutions and services.
The Company is a limited liability company incorporated in Hong Kong. The address of its registered
office is 13103N, ATL Logistics Centre B, 3 Kwai Chung Container Terminals, New Territories, Hong
Kong.
These consolidated financial statements are presented in Hong Kong dollars (“HK$”), unless
otherwise stated.
2 Basis of preparation and summary of significant accounting policies
2.1 Statement of compliance
The consolidated financial statements of ECG have been prepared in accordance with all applicable
Hong Kong Financial Reporting Standards, which is a collective term for all individual Hong Kong
Financial Reporting Standards (“HKFRSs”), Hong Kong Accounting Standards (“HKASs”) and
Interpretations (“Ints”) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”),
accounting principles generally accepted in Hong Kong and the disclosure requirement of the Hong
Kong Companies Ordinance (Cap.622).
2.2 Basis of preparation of the financial statements
The principal accounting policies applied in the preparation of these consolidated financial statements
are set out below. These policies have been consistently applied to all the years presented, unless
otherwise stated. The consolidated financial statements have been prepared under the historical cost
convention.
The preparation of financial statements in conformity with HKFRS requires the use of certain critical
accounting estimates. It also requires management to exercise its judgement in the process of
applying ECG’s accounting policies. The areas involving a higher degree of judgement or complexity,
or areas where assumptions and estimates are significant to the consolidated financial statements
are disclosed in Note 4 to the financial statements.
57
Notes to the Consolidated Financial StatementsNotes to the Consolidated Financial StatementsFor personal use only 2 Basis of preparation and summary of significant accounting policies (Continued)
2.2 Basis of preparation of the financial statements (Continued)
The Group had cash balance of HK$12.7 million and net current assets of HK$6.7 million as at 31
December 2017, and recorded net operating cash outflow of HK$15.9 million for the year then
ended. In view of these circumstances, the directors of the Company have reviewed the Group’s
cash flow projections prepared by management of the Company which cover a period of not less
than twelve months from 31 December 2017. Based on the cash flow projections and taking into
account the anticipated cash flows generated from the Group’s operations, possible changes in its
operating performance, the continuous availability of the Group’s existing credit facilities provided
by the Company’s shareholder, the directors of the Company are of the opinion that the Group will
have sufficient financial resources to satisfy its future working capital requirements and to meet its
financial obligations as and when they fall due within the next twelve months from 31 December
2017. Accordingly, the directors of the Company consider that it is appropriate to prepare the
Group’s consolidated financial statements on a going concern basis.
(a) The following new and amendments to standards are mandatory for the first time for the
financial year beginning on 1 January 2017, but do not have significant financial impact to ECG.
HKAS 12 (Amendment)
Income taxes
HKAS 7 (Amendment)
Statement of cash flows
HKFRS 12 (Amendment)
Disclosure of interest in other entities
58
eCargoANNUAL REPORT 2017For personal use only 2 Basis of preparation and summary of significant accounting policies (Continued)
2.2 Basis of preparation of the financial statements (Continued)
(b) The following new standards, amendments/revisions to standards and interpretation have been
issued, but are not effective for the financial year beginning on 1 January 2017 and have not
been early adopted by ECG.
Effective for
accounting
periods beginning
on or after
HKFRS 9
HKFRS 15
Financial instruments
1 January 2018
Revenue from contracts with customers
1 January 2018
HKAS 28 (Amendment)
Investments in associates and joint ventures
1 January 2018
HKAS 40 (Amendment)
Transfer of investment property
1 January 2018
HKFRS 2 (Amendment)
Classification and Measurement of
1 January 2018
Share-based Payment Transactions
HKFRS 4 (Amendment)
Insurance Contracts
1 January 2018
Applying HKFRS 9 Financial Instruments with
HKFRS 4 Insurance Contracts
HKFRS 1 (Amendment)
First time adoption of HKFRS
1 January 2018
HK (IFRIC) 22
Foreign Currency Transactions and
1 January 2018
Advance Consideration
HKFRS 16
Leases
1 January 2019
HK (IFRIC) 23
Uncertainty over income tax treatments
1 January 2019
HKFRS 10 and HKAS 28
Sale or contribution of assets between an
To be determined
(Amendments)
investor and its associate or joint venture
HKFRS 15, REVENUE FROM CONTRACTS WITH CUSTOMERS
HKFRS 15 replaces the previous revenue standards: HKAS 18 Revenue and HKAS 11
Construction Contracts, and the related Interpretations on revenue recognition. HKFRS 15
establishes a comprehensive framework for determining when to recognise revenue and
how much revenue to recognise through a 5-step approach: (1) Identify the contract(s) with
customer; (2) Identify separate performance obligations in a contract; (3) Determine the
transaction price; (4) Allocate transaction price to performance obligations; and (5) Recognise
revenue when performance obligation is satisfied. The core principle is that a company should
recognise revenue to depict the transfer of promised goods or services to the customer in an
amount that reflects the consideration to which ECG expects to be entitled in exchange for
those goods or services.
59
Notes to the Consolidated Financial StatementsFor personal use only 2 Basis of preparation and summary of significant accounting policies (Continued)
2.2 Basis of preparation of the financial statements (Continued)
(b) The following new standards, amendments/revisions to standards and interpretation have been
issued, but are not effective for the financial year beginning on 1 January 2017 and have not
been early adopted by ECG. (Continued)
HKFRS 15, REVENUE FROM CONTRACTS WITH CUSTOMERS (CONTINUED)
It moves away from a revenue recognition model based on an “earnings processes” to an
“asset-liability” approach based on transfer of control. HKFRS 15 provides specific guidance on
capitalisation of contract cost, license arrangements and principal versus agent commissions. It
also includes a cohesive set of disclosure requirements about the nature, amount, timing and
uncertainty of revenue and cash flows arising from the entity’s contracts with customers. HKFRS
15 is effective for annual periods beginning on or after 1 January 2018 and earlier application is
permitted. ECG has not early adopted HKFRS 15. ECG has performed an initial assessment on
the impact of the adoption of HKFRS 15 by analysing ECG’s key revenue streams against the
5-step approach and, based on this initial assessment, did not expect the adoption would have
a material impact other than presenting more disclosure.
HKFRS 9, Financial instruments
HKFRS 9, “Financial Instruments”, addresses the classification, measurement and recognition
of financial assets and financial liabilities. It replaces the guidance in HKAS 39 that relates to
the classification and measurement of financial instruments. HKFRS 9 retains but simplifies the
mixed measurement model and establishes three primary measurement categories for financial
assets: amortised cost, fair value through other comprehensive income and fair value through
profit or loss.
For financial liabilities, there were no changes to classification and measurement except for
the recognition of changes in own credit risk in other comprehensive income, for liabilities
designated at fair value through profit or loss. ECG assessed that adopting HKFRS 9 would not
have a material impact on ECG’s results of operations and financial position.
HKFRS 16, Leases
Under HKAS 17, lessees were required to make a distinction between a finance lease (on the
consolidated statement of financial position) and an operating lease (off balance sheet). HKFRS
16 requires lessees to recognise a lease liability reflecting future lease payments and a right-
of-use asset for virtually all lease contracts. The new standard will impact both the consolidated
statement of financial position and related ratios (capital adequacy ratio and leverage ratio), but
the impact will not be material. If ECG early adopts HKFRS 16, as at 31 December 2017, the
amount of operating leasing commitment amounted to HK$4,578,911 (2016: HK$4,193,805)
(Note 27) would be recognised on the consolidated statement of financial position as asset
and liability. As such, the Group’s total assets and liabilities would be affected by a similar
magnitude and have consequential effects on the Group’s capital adequacy ratio and leverage
ratio.
60
eCargoANNUAL REPORT 2017For personal use only 2 Basis of preparation and summary of significant accounting policies (Continued)
2.3 Subsidiaries
2.3.1 Consolidation
A subsidiary is an entity (including a structured entity) over which ECG has control. ECG
controls an entity when ECG is exposed to, or has rights to, variable returns from its
involvement with the entity and has the ability to affect those returns through its power over
the entity. Subsidiaries are consolidated from the date on which control is transferred to ECG.
They are deconsolidated from the date that control ceases.
Intra-group transactions, balances and unrealised gains on transactions between group
companies are eliminated.
2.3.2 Separate financial statements
Investments in subsidiaries are accounted for at cost less impairment. Cost includes direct
attributable costs of investment. The results of subsidiaries are accounted for by the Company
on the basis of dividend received and receivable.
Impairment testing of the investments in subsidiaries is required upon receiving a dividend from
these investments if the dividend exceeds the total comprehensive income of the subsidiary in
the year the dividend is declared or if the carrying amount of the investment in the separate
financial statements exceeds the carrying amount in the consolidated financial statements of
the investee’s net assets including goodwill.
2.4 Associates
An associate is an entity over which ECG has significant influence but not control, generally
accompanying a shareholding of between 20% and 50% of the voting rights. Investments in
associates are accounted for using the equity method of accounting. Under the equity method, the
investment is initially recognised at cost, and the carrying amount is increased or decreased to
recognise the investor’s share of the profit or loss of the investee after the date of acquisition. ECG’s
investments in associates include goodwill identified on acquisition. Upon the acquisition of the
ownership interest in an associate, any difference between the cost of the associate and ECG’s share
of the net fair value of the associate’s identifiable assets and liabilities is accounted for as goodwill.
If the ownership interest in an associate is reduced but significant influence is retained, only
a proportionate share of the amounts previously recognised in other comprehensive income is
reclassified to profit or loss where appropriate.
ECG’s share of post-acquisition profit or loss is recognised in the statement of comprehensive
income, and its share of post-acquisition movements in other comprehensive income is recognised
in other comprehensive income with a corresponding adjustment to the carrying amount of the
investment. When ECG’s share of losses in an associate equals or exceeds its interest in the
associate, including any other unsecured receivables, ECG does not recognise further losses, unless
it has incurred legal or constructive obligations or made payments on behalf of the associate.
61
Notes to the Consolidated Financial StatementsFor personal use only
2 Basis of preparation and summary of significant accounting policies (Continued)
2.4 Associates (Continued)
ECG determines at each reporting date whether there is any objective evidence that the investment
in the associate is impaired. If this is the case, ECG calculates the amount of impairment as the
difference between the recoverable amount of the associate and its carrying value and recognises
the amount adjacent to “share of profit of investments accounted for using equity method” in the
consolidated statement of comprehensive income.
Profits and losses resulting from upstream and downstream transactions between ECG and its
associate are recognised in ECG’s financial statements only to the extent of unrelated investor’s
interests in the associates. Unrealised losses are eliminated unless the transaction provides evidence
of an impairment of the asset transferred. Accounting policies of associates have been changed
where necessary to ensure consistency with the policies adopted by ECG.
Gain or losses on dilution of equity interest in associates are recognised in the consolidated
statement of comprehensive income.
2.5 Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to
the chief operating decision-makers, who are responsible for allocating resources and assessing
performance of the operating segments and making strategic decisions. The CODM are the key
management personnel of ECG and may include directors.
2.6 Foreign currency translation
(a) Functional and presentation currency
Items included in the financial statements of each of the entities of ECG are measured using
the currency of the primary economic environment in which the entities operate (the “functional
currency”). The consolidated financial statements are presented in HK$ which is the Company’s
functional and presentation currency and ECG’s presentation currency.
(b) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange
rates prevailing at the dates of the transactions or valuation where items are remeasured.
Foreign exchange gains and losses resulting from the settlement of such transactions and from
the translation at year-end exchange rates of monetary assets and liabilities denominated in
foreign currencies are recognised within administrative expenses in the consolidated statement
of comprehensive income.
Foreign exchange gains and losses that relate to cash and cash equivalents are presented in the
consolidated statement of comprehensive income within “other gains/(losses) – net”.
Translation differences on non-monetary financial assets and liabilities such as equities held
at fair value through profit or loss are recognised in profit or loss as part of the fair value gain
or loss. Translation differences on non-monetary financial assets, such as equities classified as
available for sale, are included in other comprehensive income.
62
eCargoANNUAL REPORT 2017For personal use only 2 Basis of preparation and summary of significant accounting policies (Continued)
2.6 Foreign currency translation (Continued)
(c) Group companies
The results and financial position of all ECG entities (none of which has the currency of a hyper-
inflationary economy) that have a functional currency different from the presentation currency
are translated into the presentation currency as follows:
(i) assets and liabilities for each statement of financial position presented are translated at
the closing rate at the date of that statement of financial position;
(ii)
income and expenses for each statement of comprehensive income are translated at
average exchange rates (unless this average is not a reasonable approximation of the
cumulative effect of the rates prevailing on the transaction dates, in which case income
and expenses are translated at the rate on the dates of the transactions); and
(iii) all resulting currency translation differences are recognised in other comprehensive
income.
2.7 Property, plant and equipment
Property, plant and equipment are stated at historical cost less accumulated depreciation and
accumulated impairment losses. Historical cost includes expenditure that is directly attributable to
the acquisition of the items.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset,
as appropriate, only when it is probable that future economic benefits associated with the item will
flow to ECG and that cost of the item can be measured reliably. The carrying amount of the replaced
part is recognised. All other repairs and maintenance are expensed in the consolidated statement of
comprehensive income during the financial year in which they are incurred.
Depreciation of property, plant and equipment is calculated using the straight-line method to allocate
their costs to their residual values over their estimated useful lives, as follows:
Leasehold improvements
over the shorter of remaining lease term and useful life
Furniture and fixtures
Office equipment
Computer equipment
Motor vehicle
20%
20%
33.33%
33.33%
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of
each reporting year.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s
carrying amount is greater than its estimated recoverable amount.
Gains and losses on disposals are determined by comparing proceeds with carrying amount and are
recognised within administrative expenses in the consolidated statement of comprehensive income.
63
Notes to the Consolidated Financial StatementsFor personal use only 2 Basis of preparation and summary of significant accounting policies (Continued)
2.8 Intangible assets
(a) Goodwill
Goodwill arises on the acquisition of subsidiaries represents the excess of the consideration
transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date
fair value of any previous equity interest in the acquiree over the fair value of the identified net
assets acquired.
For the purpose of impairment testing, goodwill acquired in a business combination is allocated
to each of the cash-generating units (“CGUs”), or groups of CGUs, that is expected to benefit
from the synergies of the combination. Each unit or group of units to which the goodwill is
allocated represents the lowest level within the entity at which the goodwill is monitored for
internal management purposes. Goodwill is monitored at the CGU level.
Goodwill impairment reviews are undertaken annually or more frequently if events or changes
in circumstances indicate a potential impairment. The carrying value of the CGU containing the
goodwill is compared to the recoverable amount, which is the higher of value in use and the fair
value less costs of disposal. Any impairment is recognised immediately as an expense and is
not subsequently reversed.
(b) Brand name
The brand name acquired in a business combination is recognised at fair value at the acquisition
date. The brand has a finite useful life and is carried at cost less accumulated amortisation.
Amortisation is calculated using the straight-line method over its estimated useful life of 10
years.
(c) Contractual customer relationships
Contractual customer relationships acquired in a business combination are recognised at fair
value at the acquisition date. The contractual customer relations have a finite useful life and are
carried at cost less accumulated amortisation. Amortisation is calculated using the straight-line
method over the expected life of the customer relationships of 5 years.
(d) Software
Costs associated with maintaining computer software programs are recognised as an expense
as incurred. Development costs that are directly attributable to the design and testing of
identifiable and unique software products controlled by ECG are recognised as intangible assets
when the following criteria are met:
•
It is technically feasible to complete the software product so that it will be available for
use;
• Management intends to complete the software product and use or sell it;
•
There is an ability to use or sell the software product;
•
It can be demonstrated how the software product will generate probable future economic
64
benefits;
eCargoANNUAL REPORT 2017For personal use only 2 Basis of preparation and summary of significant accounting policies (Continued)
2.8 Intangible assets (Continued)
(d) Software (Continued)
•
Adequate technical, financial and other resources to complete the development and to use
or sell the software product are available; and
•
The expenditure attributable to the software product during its development can be
reliably measured.
Directly attributable costs that are capitalised as part of the software product include the
software development employee costs and an appropriate portion of relevant overheads.
Other development expenditures that do not meet these criteria are recognised as an expense
as incurred. Development costs previously recognised as an expense are not recognised as an
asset in a subsequent period.
Computer software development costs recognised as assets are amortised over their estimated
useful lives, which does not exceed five years. The amortisation expense is recognised in
administrative expenses of the consolidated statement of comprehensive income.
2.9 Impairment of non-financial assets
Assets that are subject to amortisation are reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is
recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount.
The recoverable amount is the higher of an asset’s fair value less costs to disposal and value in
use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which
there are separately identifiable cash flows (cash-generating units). Non-financial assets other than
goodwill that suffered impairment are reviewed for possible reversal of the impairment at each
reporting date.
2.10 Financial assets
ECG classifies its financial assets as loans and receivables. The classification depends on the purpose
for which the financial assets were acquired. Management determines the classification of its
financial assets at initial recognition.
Loans and receivables are non-derivative financial assets with fixed or determinable payments that
are not quoted in an active market. They are included in current assets, except for the amounts
that are settled or expected to be settled more than 12 months after the end of the reporting year.
These are classified as non-current assets. ECG’s loans and receivables comprise trade receivables,
deposits and other receivables, amounts due from related parties and cash and cash equivalents in
the consolidated statement of financial position.
Loans and receivables are recognised initially at fair value and subsequently carried at amortised
cost using the effective interest method.
65
Notes to the Consolidated Financial StatementsFor personal use only 2 Basis of preparation and summary of significant accounting policies (Continued)
2.11 Impairment of financial assets — assets carried at amortised cost
ECG assesses at the end of each reporting year whether there is objective evidence that a financial
asset or group of financial assets is impaired. A financial asset or a group of financial assets is
impaired and impairment losses are incurred only if there is objective evidence of impairment as a
result of one or more events that occurred after the initial recognition of the asset (a “loss event”)
and that loss event (or events) has an impact on the estimated future cash flows of the financial
asset or group of financial assets that can be reliably estimated.
Evidence of impairment may include indications that the debtors or a group of debtors is
experiencing significant financial difficulty, default or delinquency in interest or principal payments,
the probability that they will enter bankruptcy or other financial reorganisation, and where
observable data indicate that there is a measurable decrease in the estimated future cash flows,
such as changes in arrears or economic conditions that correlate with defaults.
For loans and receivables category, the amount of the loss is measured as the difference between
the asset’s carrying amount and the present value of estimated future cash flows (excluding future
credit losses that have not been incurred) discounted at the financial asset’s original effective
interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised
in the consolidated statement of comprehensive income. If a loan has a variable interest rate, the
discount rate for measuring any impairment loss is the current effective interest rate determined
under the contract. As a practical expedient, ECG may measure impairment on the basis of an
instrument’s fair value using an observable market price.
If, in a subsequent year, the amount of the impairment loss decreases and the decrease can
be related objectively to an event occurring after the impairment was recognised (such as an
improvement in the debtor’s credit rating), the reversal of the previously recognised impairment loss
is recognised in the consolidated statement of comprehensive income.
2.12 Trade and other receivables
Trade receivables are amounts due from customers for services rendered in the ordinary course of
business. If collection of trade and other receivables is expected in one year or less (or in the normal
operating cycle of the business if longer), they are classified as current assets. If not, they are
presented as non-current assets.
Trade and other receivables are recognised initially at fair value and subsequently measured at
amortised cost using the effective interest method, less provision for impairment.
2.13 Cash and cash equivalents
In the consolidated statement of cash flows, cash and cash equivalents include cash in hand and
deposits held at call with banks with original maturities of three months or less.
66
eCargoANNUAL REPORT 2017For personal use only 2 Basis of preparation and summary of significant accounting policies (Continued)
2.14 Share capital
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a
deduction, net of tax from the proceeds.
2.15 Trade and other payables
Trade payables are obligations to pay for goods or services that have been acquired in the ordinary
course of business from suppliers. Trade payables are classified as current liabilities if payment is
due within one year or less (or in the normal operating cycle of the business if longer). If not, they
are presented as non-current liabilities.
Trade and other payables are recognised initially at fair value and subsequently measured at
amortised cost using the effective interest method.
2.16 Borrowings
Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are
subsequently carried at amortised cost; any difference between the proceeds (net of transaction
costs) and the redemption value is recognised in the statement of profit or loss over the period of
the borrowings using the effective interest method.
Borrowings are classified as current liabilities unless ECG has an unconditional right to defer
settlement of the liability for at least 12 months after the end of the reporting period.
2.17 Borrowing costs
General and specific borrowing costs directly attributable to the acquisition, construction or
production of qualifying assets, which are assets that necessarily take a substantial period of time to
get ready for their intended use or sale, are added to the cost of those assets, until such time as the
assets are substantially ready for their intended use or sale.
All other borrowing costs are recognised in profit or loss in the period in which they are incurred.
2.18 Current and deferred income tax
The tax expense for the year comprises current and deferred tax. Tax is recognised in the
consolidated statement of comprehensive income, except to the extent that it relates to items
recognised in other comprehensive income or directly in equity. In this case, the tax is also
recognised in other comprehensive income or directly in equity, respectively.
(a) Current income tax
The current income tax charge is calculated on the basis of the tax laws enacted or
substantively enacted at the date of statement of financial position in the countries where
ECG, its subsidiaries and its associates operate and generate taxable income. Management
periodically evaluates positions taken in tax returns with respect to situations in which
applicable tax regulation is subject to interpretation. It establishes provisions where appropriate
on the basis of amounts expected to be paid to the tax authorities.
67
Notes to the Consolidated Financial StatementsFor personal use only 2 Basis of preparation and summary of significant accounting policies (Continued)
2.18 Current and deferred income tax (Continued)
(b) Deferred income tax
(i) Inside basis differences
Deferred income tax is recognised, using the liability method, on temporary differences
arising between the tax bases of assets and liabilities and their carrying amounts in the
financial statements. However, deferred income tax is not recognised if it arises from
initial recognition of an asset or liability in a transaction other than a business combination
that at the time of the transaction affects neither accounting nor taxable profit or loss.
Deferred income tax is determined using tax rates (and laws) that have been enacted or
substantively enacted by the date of statement of financial position and are expected to
apply when the related deferred income tax asset is recognised or the deferred income tax
liability is settled.
Deferred income tax assets are recognised only to the extent that it is probable that future
taxable profit will be available against which the temporary differences can be utilised.
(ii) Outside basis differences
Deferred income tax liabilities are provided on taxable temporary differences arising
from investments in subsidiaries and associates, except for deferred income tax liability
where the timing of the reversal of the temporary difference is controlled by ECG and it is
probable that the temporary difference will not reverse in the foreseeable future.
Deferred income tax assets are recognised on deductible temporary differences arising
from investments in subsidiaries and associates only to the extent that it is probable
the temporary difference will reverse in the future and there is sufficient taxable profit
available against which the temporary difference can be utilised.
(c) Offsetting
Deferred income tax assets and liabilities are offset when there is a legally enforceable right
to offset current tax assets against current tax liabilities and when the deferred income taxes
assets and liabilities relate to income taxes levied by the same taxation authority on either the
taxable entity or different taxable entities where there is an intention to settle the balances on
a net basis.
2.19 Employee benefits
(a) Employee leave entitlements
Employee entitlements to annual leave are recognised when they accrue to employees. A
provision is made for the estimated liability for annual leave as a result of services rendered by
employees up to the date of statement of financial position. Employee entitlements to sick leave
and maternity leave are not recognised until the time of leave.
68
eCargoANNUAL REPORT 2017For personal use only 2 Basis of preparation and summary of significant accounting policies (Continued)
2.19 Employee benefits (Continued)
(b) Bonus plan
The expected cost of bonus payment is recognised as a liability when ECG has a present legal
or constructive obligation as a result of services rendered by employees and a reliable estimate
of the obligation can be made. Liabilities for bonus plan are expected to be settled within 12
months and are measured at the amounts expected to be paid when they are settled.
(c) Pension obligations
ECG companies incorporated in Hong Kong operate a defined contribution plan, which is the
Mandatory Provident Fund Scheme (“MPF Scheme”) established under and pursuant to the
Mandatory Provident Fund Ordinance.
The MPF Scheme is generally funded by the payments from employees and by ECG.
Contributions to the scheme by ECG and employees are calculated as a percentage of
employees’ basic salaries. ECG has no legal or constructive obligations to pay further
contributions if the fund does not hold sufficient assets to pay all employees the benefits
relating to employee service in the current and prior years.
ECG’s contributions to defined contribution plan are expensed as incurred and are reduced by
contributions forfeited by those employees who leave the scheme prior to vesting fully in the
contributions.
The assets of the scheme are held in separate trustee-administered funds.
ECG companies incorporated in the PRC and Australia contribute based on certain percentage
of the salaries of the employees to a defined contribution retirement benefit plan organised by
relevant government authorities in the PRC and Australia on a monthly basis. The government
authorities undertake to assume the retirement benefit obligations payable to all existing
and future retired employees under these plans and ECG has no further obligation for post-
retirement benefits beyond the contributions made. Contributions to these plans are expensed
as incurred. Assets of the plans are held and managed by government authorities and are
separate from those of ECG.
2.20 Provisions
Provisions are recognised when ECG has a present legal or constructive obligation as a result of past
events; it is probable that an outflow of resources will be required to settle the obligation; and the
amount has been reliably estimated. Provisions are not recognised for future operating losses.
Where there are a number of similar obligations, the likelihood that an outflow will be required in
settlement is determined by considering the class of obligations as a whole. A provision is recognised
even if the likelihood of an outflow with respect to any one item included in the same class of
obligations may be small.
69
Notes to the Consolidated Financial StatementsFor personal use only 2 Basis of preparation and summary of significant accounting policies (Continued)
2.20 Provisions (Continued)
Provisions are measured at the present value of the expenditures expected to be required to settle
the obligation using a pre-tax rate that reflects current market assessments of the time value of
money and the risks specific to the obligation. The increase in the provision due to passage of time
is recognised as interest expense.
2.21 Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable for the rendering
of services, in the ordinary course of ECG’s activities.
ECG recognises revenue when the amount of revenue can be reliably measured; when it is probable
that future economic benefits will flow to ECG; and when specific criteria have been met for each of
ECG’s activities, as described below.
(a) Sales of services
For sales of services, revenue is recognised in the accounting period in which the services are
rendered or by reference to stage of completion of the specific transaction and assessed on the
basis of actual services provided as a proportion of the total service to be provided.
2.22 Interest income
Interest income is recognised using the effective interest method. When a loan and receivable
is impaired, ECG reduces the carrying amount to its recoverable amount, being the estimated
future cash flow discounted at the original effective interest rate of the instrument, and continues
unwinding the discount as interest income. Interest income on impaired loans and receivables is
recognised using the original effective interest rate.
2.23 Leases
Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor
are classified as operating leases. Payments made under operating leases (net of any incentives
received from the lessor) are charged to the consolidated statement of comprehensive income on a
straight-line basis over the period of the lease.
ECG leases certain property, plant and equipment. Leases of property, plant and equipment where
ECG has substantially all the risks and rewards of ownership are classified as finance lease. Finance
leases are capitalised at the lease’s commencement at the lower of the fair value of the leased
property and the present value of the minimum lease payments.
Each lease payment is allocated between the liability and finance charges. The corresponding rental
obligations, net of finance charges, are included in other long-term payables. The interest element
of the finance cost is charged to the income statement over the lease period so as to produce a
constant periodic rate of interest on the remaining balance of the liability for each period. The
property, plant, and equipment acquired under finance leases is depreciated over the shorter of the
useful life of the asset and the lease term.
70
eCargoANNUAL REPORT 2017For personal use only 3 Financial risk management
3.1 Capital management
ECG’s objectives when managing capital are to safeguard ECG’s ability to continue as a going
concern in order to provide returns for shareholders and benefits for other stakeholders and to
maintain an optimal capital structure to reduce the cost of capital.
ECG actively and regularly reviews and manages its capital structure to ensure optimal capital
structure and shareholder returns, taking into consideration the future capital requirements of ECG
and capital efficiency, prevailing and projected profitability, projected operating cash flows, projected
capital expenditures and projected strategic investment opportunities. In order to maintain or adjust
the capital structure, ECG may adjust the amount of dividends paid to shareholders, return capital to
shareholders, issue new shares or sell assets to reduce debt.
3.2 Credit risk
At the date of the consolidated financial position, 27% (2016: 35%) of the total receivables was due
from ECG’s largest five debtors. Accordingly, ECG’s consolidated results would be heavily affected
by the financial capability of these debtors to fulfill their obligations with ECG. ECG’s credit risk
monitoring activities relating to the debtors include review of the credit profile, business prospects,
background and their financial capacity.
Substantially all of the bank deposits and cash at banks are held in a major financial institution,
which management believes are of high credit quality.
3.3 Liquidity risk
ECG adopts prudent liquidity risk management and maintains sufficient cash and the availability of
funding through an adequate amount of committed credit facilities.
The contractual undiscounted cash flows of ECG’s financial liabilities, which include trade and other
payables and amounts due to related parties, are due within 12 months and approximate their
carrying amounts as the impact of discounting is not significant.
3.4 Foreign exchange risk
ECG mainly operates in Hong Kong, the PRC and Australia, and is exposed to foreign exchange risk
arising from various currency exposures, primarily with respect to the Renminbi (“RMB”), Australian
Dollars (“A$”), United States Dollars (“US$”) and New Zealand Dollars (“NZ$”).
Foreign exchange risk arises mainly from future commercial transactions, recognised assets and
liabilities.
ECG manages its foreign exchange risks by performing regular review and monitoring its foreign
exchange exposure. ECG currently does not have a foreign currency hedging policy.
71
Notes to the Consolidated Financial StatementsFor personal use only 3 Financial risk management (Continued)
3.4 Foreign exchange risk (Continued)
At 31 December 2017, if HK$ had strengthened/weakened by 5% against the A$ with all other
variables held constant, post-tax loss for the year would change by approximately HK$183,000 (2016:
HK$89,000), mainly as a result of foreign exchange losses/gains on translation of trade receivables
and other receivables, trade and other payables and bank deposits denominated in the A$.
At 31 December 2017, if HK$ had strengthened/weakened by 5% against the RMB with all other
variables held constant, post-tax loss for the year would change by approximately HK$215,000 (2016:
HK$214,000), mainly as a result of foreign exchange losses/gains on translation of trade receivables
and other receivables, trade and other payables and bank deposits denominated in the RMB.
At 31 December 2017, if HK$ had strengthened/weakened by 5% against the NZ$ with all other
variables held constant, post-tax loss for the year would change by approximately HK$52,000 (2016:
HK$69,000), mainly as a result of foreign exchange losses/gains on translation of trade receivables,
trade and other payables and bank deposits denominated in the NZ$.
The foreign exchange exposure for the US$ is considered minimal as HK$ is pegged with the US$.
3.5 Cash flow and fair value interest rate risk
ECG’s interest rate risk arises from borrowing, which is issued at variable rate exposes ECG to
cash flow interest rate risk which is partially offset by cash held at variable rates. ECG currently
does not hedge its exposure to cash flow and fair value interest rate risk. ECG analyses its interest
rate exposure on a regular basis and will consider the interest rate exposure when enter into any
financing, renewal of existing positions and alternative financing transactions.
ECG’s practice is to manage its interest income/cost through monitoring and reviewing interest rate
changes in the market and its impact to the ECG’s financial performance. During the year, ECG’s
borrowing at variable rate was denominated in HK$.
At 31 December 2017, if interest rate on borrowing held at variable rate had been 50 basis points
higher/lower with all other variables held constant, post-tax loss for the year would have been
approximately HK$177,000 (2016: HK$82,000) higher/lower, mainly as a result of higher/lower
interest expense on floating rate borrowing.
3.6 Fair value estimation
ECG’s financial instruments include “cash and cash equivalents”, “trade receivables”, “deposits and
other receivables”, “amounts due from related parties”, “trade and other payables”, “amounts due
to related parties” and “borrowing”. The carrying amounts less impairment of these balances are a
reasonable approximation of their fair values due to their short term maturities.
72
eCargoANNUAL REPORT 2017For personal use only 4 Critical accounting estimates and judgments
Estimates and judgments are continually evaluated and are based on historical experiences and
other factors, including expectation of future events that are believed to be reasonable under the
circumstances.
ECG makes estimates and assumptions concerning the future. The resulting accounting estimates
will, by definition, seldom equal the related actual results. The estimates and assumptions that have
a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities
within the next financial year are addressed below.
(a) Impairment assessment of long-lived assets
At the end of each reporting period, ECG reviews internal and external sources of information to
identify indications that the following classes of asset may be impaired or, except in the case of
goodwill, an impairment loss previously recognised no longer exists or may have decreased:
•
Property, plant and equipment,
•
Intangible assets; and
•
Interest in associates.
If any such indication exists, the asset’s recoverable amount is estimated. In addition, for goodwill,
intangible assets that are not yet available for use and intangible assets that have indefinite useful
lives, the recoverable amount is estimated annually whether or not there is any indication of
impairment. An impairment loss is recognised in the statement of comprehensive income whenever
the carrying amount of an asset exceeds its recoverable amount.
The sources utilised to identify indications of impairment are often subjective in nature and ECG is
required to use judgment in applying such information to its business. ECG’s interpretation of this
information has a direct impact on whether an impairment assessment is performed as at the end of
any given reporting period.
If an indication of impairment is identified, such information is further subject to an exercise that
requires ECG to estimate the recoverable value, representing the greater of the asset’s fair value
less cost to sell or its value in use. Depending on ECG’s assessment of the overall materiality of the
asset under review and complexity of deriving reasonable estimates of the recoverable value, ECG
may perform such assessments utilising internal resources or ECG may engage external advisors for
counsel. Regardless of the resources utilised, ECG is required to make assumptions to make these
assessments, including the utilisation of such asset, the cash flows to be generated, appropriate
market discount rates and the projected market and regulatory conditions. Changes in any of these
assumptions could result in a material change to future estimates of the recoverable value of any
asset.
73
Notes to the Consolidated Financial StatementsFor personal use only 5 Segment information
Management have determined the operating segments based on the information reviewed by the
Board of Directors for the purpose of allocating resources and assessing performance.
The CODM considers the business from both geographic and services perspective and concluded
the segments as eCommerce Business Services in Greater China (“Greater China”) and eCommerce
Solution Services in Australia (“Australia”). The CODM assesses and measures the operating
performance of ECG based on the revenue, gross profit and EBITDA (excluding net foreign exchange
loss) as management believes that such information is the most relevant in evaluating the results of
ECG’s segments. EBITDA loss excluding impact of foreign exchange represents loss before income
tax, depreciation of property, plant and equipment, amortisation of intangible assets, gain or loss on
disposal of property, plant and equipment, net finance income, ECG’s share of results of associates
and provision for impairment of interest in an associate.
Information regarding ECG’s reportable segments as provided to ECG’s CODM is set out below:
2017
Greater
China
Australia
Eliminations
Consolidated
HK$
HK$
HK$
HK$
Revenue
External revenue
52,220,135
92,267,995
Gross profit
Results
EBITDA – excluding foreign
24,759,207
55,719,769
-
-
144,488,130
80,478,976
exchange loss
(21,608,896)
5,215,794
-
(16,393,102)
2016
Greater
China
HK$
Australia
Eliminations
Consolidated
HK$
HK$
HK$
Revenue
External revenue
52,577,840
71,892,279
Gross profit
Results
EBITDA – excluding foreign
19,638,827
42,560,050
-
-
124,470,119
62,198,877
exchange loss
(43,992,393)
(7,342,171)
-
(51,334,564)
74
eCargoANNUAL REPORT 2017For personal use only 5 Segment information (Continued)
A reconciliation of total segment EBITDA to loss before income tax is provided as follows:
2017
HK$
2016
HK$
Total segment EBITDA – excluding foreign
exchange loss
(16,393,102)
(51,334,564)
Net foreign exchange gain/(loss) (Note 10)
1,143,879
(1,387,816)
(Loss)/gain on disposal of property, plant and
equipment (Note 7)
(5,141)
41,257
Depreciation of property, plant and equipment
(Note 14)
(1,738,580)
(1,964,044)
Amortisation of intangible assets (Note 15)
(47,608,541)
(30,776,790)
Finance (expense)/income – net (Note 11)
Share of results of associates (Note 17)
(1,828,481)
(2,331,406)
361,911
153,853
Provision for impairment of interest in an associate
-
(5,028,427)
(68,761,372)
(89,934,620)
The following table sets out information about the geographical location of ECG’s revenue from
external customers.
Revenue from external customers
Greater China
Australia and New Zealand
Assets
Greater China
Australia
Deferred income tax assets
2017
HK$
2016
HK$
52,220,135
52,577,840
92,267,995
71,892,279
144,488,130
124,470,119
2017
Interest in
associates
HK$
Total assets
HK$
145,141,397
72,504,113
38,147,629
-
183,289,026
72,504,113
256,553
183,545,579
Additions to
non-current
assets
HK$
4,836
993,398
998,234
75
Notes to the Consolidated Financial StatementsFor personal use only 5 Segment information (Continued)
Assets (Continued)
Greater China
Australia
2016
Interest in
non-current
Additions to
Total assets
associates
HK$
HK$
158,338,791
70,459,815
54,689,239
-
213,028,030
70,459,815
assets
HK$
1,124,202
2,262,476
3,386,678
Deferred income tax assets
2,778,187
215,806,217
Information about major customer
For the year ended 31 December 2017, there was no single external customer contributing 10% or
more of ECG’s total revenue.
For the year ended 31 December 2016, the analysis of revenue from customer contributing 10% or
more of ECG’s total revenue is as follows:
Customer A
6 Revenue
Service income recognised during the year was as follows:
Year ended
31 December
2016
HK$
12,042,122
Revenue
- Service income
2017
HK$
2016
HK$
144,488,130
124,470,119
76
eCargoANNUAL REPORT 2017For personal use only 7 Expenses by nature
Outsourced services fulfilment expenses,
included in cost of sales
Outsourced web development and IT consultation costs,
2017
HK$
2016
HK$
21,329,593
27,399,255
included in cost of sales
6,131,336
5,539,758
Subscription expense for software application,
included in cost of sales
Auditor’s remuneration
36,548,225
29,332,229
1,000,000
1,490,000
Employee benefit expenses (Note 8)
81,607,439
88,704,579
Outsourced labour costs
614,020
2,079,889
Amortisation of intangible assets (Note 15)
47,608,541
30,776,790
Depreciation of property, plant and equipment (Note 14)
Legal and professional expenses
Travel expenses
Operating leases rental
IT expenses
Marketing expenses
Utilities and maintenance expenses
Telecommunication expenses
Insurance expenses
Loss/(gain) on disposal of property,
plant and equipment (Note 25)
Provision for impairment of trade receivables (Note 19)
Direct written off of trade receivables
1,738,580
2,101,756
2,343,038
4,039,133
1,315,920
632,404
1,007,107
575,282
188,559
5,141
255,824
13,449
1,964,044
4,244,701
3,888,714
4,518,449
2,774,404
1,112,783
427,026
499,106
170,902
(41,257)
708,897
-
Other expenses
1,178,147
2,913,991
8 Employee benefit expenses (including Directors’ emoluments)
Wages and salaries
Pension costs
Other employee benefits and welfare
2017
HK$
2016
HK$
75,776,656
80,176,145
4,802,557
1,028,226
5,278,503
3,249,931
81,607,439
88,704,579
77
Notes to the Consolidated Financial StatementsFor personal use only 9 Benefits and interests of Directors (disclosures required by section 383 of the
Hong Kong Companies Ordinance (Cap. 622) and Companies (Disclosure of
Information about Benefits of Directors) Regulation (Cap. 622G)
(a) Directors’ emoluments
The remuneration of each Director is set out below:
For the year ended 31 December 2017:
Emoluments paid or receivable in respect of a person’s services as a Director, whether of the
Company undertaking:
Emoluments
paid or
receivable
in respect
of Director’s
other services
in connection
Remunerations
with the
Employer’s
paid or
management
contribution
receivable in
of the affairs
to a
respect of
of the
retirement
accepting
Company or
benefit
office
its subsidiary
Salary
Others*
scheme
as Director
undertaking
Mr. John Lau
Mr. Christopher Lau
Mr. Rupert Myer AO#
Mr. Christopher Ryan#
Mr. Heath Zarin#
Fees
HK$
-
-
106,833
106,833
-
HK$
-
2,672,000
-
-
-
213,666
2,672,000
HK$
-
-
-
-
-
-
HK$
-
12,000
-
-
-
12,000
HK$
HK$
-
-
-
-
-
-
-
-
-
-
-
-
Total
HK$
-
2,684,000
106,833
106,833
-
2,897,666
#:
*:
Independent Non-Executive Directors
Included discretionary bonuses, housing allowance and estimated money value of other benefits
78
eCargoANNUAL REPORT 2017For personal use only 9 Benefits and interests of Directors (disclosures required by section 383 of the
Hong Kong Companies Ordinance (Cap. 622) and Companies (Disclosure of
Information about Benefits of Directors) Regulation (Cap. 622G) (Continued)
(a) Directors’ emoluments (Continued)
For the year ended 31 December 2016:
Emoluments paid or receivable in respect of a person’s services as a Director, whether of the
Company undertaking:
Emoluments
paid or
receivable
in respect
of Director’s
other services
in connection
Remunerations
with the
Employer’s
paid or
management
contribution
receivable in
of the affairs
to a
respect of
of the
retirement
accepting
Company or
benefit
office
its subsidiary
Salary
Others*
scheme
as Director
undertaking
Mr. John Lau
Fees
HK$
432,000
HK$
-
Mr. Christopher Lau
432,000
3,408,000
Mr. Rupert Myer AO#
Mr. Christopher Ryan#
Mr. Heath Zarin#
404,937
347,089
404,937
-
-
-
2,020,963
3,408,000
HK$
-
-
-
-
-
-
HK$
-
18,000
-
-
-
18,000
HK$
HK$
-
-
-
-
-
-
-
-
-
-
-
-
Total
HK$
432,000
3,858,000
404,937
347,089
404,937
5,446,963
#: Independent Non-Executive Directors
*: Included discretionary bonuses, housing allowance and estimated money value of other benefits
(b) Directors’ retirement benefits and termination benefits
None of the Directors received or will receive any retirement benefits or termination benefits during
the year (2016: Nil).
(c) Consideration provided to third parties for making available Directors’ services
The Company does not pay consideration to any third parties for making available Directors’ services
during the year (2016: Nil).
79
Notes to the Consolidated Financial StatementsFor personal use only 9 Benefits and interests of Directors (disclosures required by section 383 of the
Hong Kong Companies Ordinance (Cap. 622) and Companies (Disclosure of
Information about Benefits of Directors) Regulation (Cap. 622G) (Continued)
(d) Information about loans, quasi-loans and other dealings in favour of Directors,
controlled bodies corporate by and connected entities with such Directors
No loans, quasi-loans and other dealing were made in favour of Directors, controlled bodies
corporate by and connected entities with such Directors at the end of the year or at any time during
the year (2016: Nil).
(e) Directors’ material interests in transactions, arrangements or contracts
Other than those disclosed in Note 28 to the financial statements, no significant transactions,
arrangements and contracts in relation to ECG’s business to which the Company was a party and in
which a Director had a material interest, whether directly or indirectly, subsisted at the end of the
year or at any time during the year.
10 Other gains/(losses) — net
Net foreign exchange gain/(loss)
1,143,879
(1,387,816)
2017
HK$
2016
HK$
11 Finance (expense)/income — net
2017
HK$
2016
HK$
Interest income:
- Interest income on short-term bank deposits
41,235
571,100
Interest expense:
- Interest expense on borrowing (Note 28 (h))
(1,869,716)
(209,189)
Finance (expense)/income – net
(1,828,481)
361,911
12 Income tax credit
Australian corporate tax
- Current income tax
- Over-provision in prior year
Deferred income tax (Note 23)
Income tax credit
80
2017
HK$
2016
HK$
(399,681)
(1,515,557)
(567,600)
717,432
-
(701,521)
(249,849)
(2,217,078)
eCargoANNUAL REPORT 2017For personal use only 12 Income tax credit (Continued)
Subsidiaries established in Hong Kong are subject to Hong Kong profits tax at a rate of 16.5% (2016:
16.5%). Subsidiary established in the PRC is subject to PRC corporate income tax at a rate of 25%
(2016: 25%). No provision for Hong Kong profits tax and PRC corporate income tax has been made
as ECG had no assessable profits for the year ended 31 December 2017 in Hong Kong and in the
PRC (2016: Nil).
Subsidiaries established in Australia are subject to 30% income tax rate during the year (2016:
30%).
The tax on ECG’s losses before income tax differs from the theoretical amount that would arise using
the domestic tax rates applicable to losses in the respectively of ECG companies as follows.
2017
HK$
2016
HK$
Loss before income tax
(68,761,372)
(89,934,620)
Tax calculated at a domestic tax rates applicable loss in
the respective countries
Tax effect of:
(11,165,735)
(16,748,839)
- Associates’ results reported net of tax
- Income not subject to tax
384,682
(1,320)
(25,386)
(104,392)
- Expenses not deductible for tax purposes
7,319,237
3,577,989
- Over-provision in prior year
(567,600)
-
- Tax losses for which no deferred income tax
assets were recognised
Income tax credit
3,780,887
11,083,550
(249,849)
(2,217,078)
13 Loss per share
(a) Basic
Basic loss per share is calculated by dividing the loss attributable to owners of the Company by the
weighted average number of ordinary shares in issue during the year.
2017
HK$
2016
HK$
Loss attributable to owners of the Company
68,511,523
87,717,542
Weighted average number of ordinary shares in issue
535,000,000
535,000,000
Basic loss per share (HK$ cents per share)
12.80
16.39
(b) Diluted
Diluted loss per share for the year ended 31 December 2017 and 2016 are equal to the basic loss
per share as there are no potential dilutive ordinary shares outstanding during the year.
81
Notes to the Consolidated Financial StatementsFor personal use only 14 Property, plant and equipment
Furniture and
Computer
Office
Leasehold
fixtures
equipment
equipment
improvements
HK$
HK$
HK$
HK$
Motor
vehicles
HK$
Year ended 31 December 2017
Opening net book amount
440,144
727,326
873,294
2,485,345
Additions
Disposals
11,002
318,305
(5,197)
(8,394)
4,836
-
-
-
Depreciation charge (Note 7)
(74,338)
(503,286)
(171,885)
(989,071)
Currency translation differences
28,690
31,179
38,598
123,777
Closing net book amount
400,301
565,130
744,843
1,620,051
As at 31 December 2017
Cost
647,650
2,320,313
1,256,864
4,571,666
Accumulated depreciation and
impairment
Net book amount
Year ended 31 December 2016
(247,349)
(1,755,183)
(512,021)
(2,951,615)
400,301
565,130
744,843
1,620,051
-
-
-
-
-
-
-
-
-
Total
HK$
4,526,109
334,143
(13,591)
(1,738,580)
222,244
3,330,325
8,796,493
(5,466,168)
3,330,325
Opening net book amount
505,692
837,746
416,070
3,652,383
189,773
5,601,664
Additions
Disposals
11,791
598,293
619,380
47,643
-
1,277,107
-
-
-
-
(244,979)
(244,979)
Depreciation charge (Note 7)
(75,604)
(684,045)
(133,400)
(1,060,477)
(10,518)
(1,964,044)
Currency translation differences
(1,735)
(24,668)
(28,756)
(154,204)
65,724
(143,639)
Closing net book amount
440,144
727,326
873,294
2,485,345
As at 31 December 2016
Cost
610,210
1,966,437
1,203,614
4,360,602
Accumulated depreciation and
impairment
Net book amount
(170,066)
(1,239,111)
(330,320)
(1,875,257)
440,144
727,326
873,294
2,485,345
-
-
-
-
4,526,109
8,140,863
(3,614,754)
4,526,109
82
eCargoANNUAL REPORT 2017For personal use only 15 Intangible assets
Contractual
customer
Goodwill
relationship
Brand name
Software
HK$
HK$
HK$
HK$
Total
HK$
Year ended 31 December 2017
Opening net book amount
12,491,094
4,197,809
7,202,251
71,490,792
95,381,946
Additions
Amortisation charge (Note 7)
-
-
-
-
664,091
664,091
(1,445,461)
(945,979)
(45,217,101)
(47,608,541)
Currency translation differences
1,081,076
329,492
601,203
428,409
2,440,180
Closing net book value
13,572,170
3,081,840
6,857,475
27,366,191
50,877,676
As at 31 December 2017
Cost
13,572,170
7,396,412
9,681,141
119,195,601
149,845,324
Accumulated amortisation
-
(4,314,572)
(2,823,666)
(91,829,410)
(98,967,648)
Net book value
13,572,170
3,081,840
6,857,475
27,366,191
50,877,676
Contractual
customer
Goodwill
relationship
Brand name
Software
HK$
HK$
HK$
HK$
Total
HK$
Year ended 31 December 2016
Opening net book amount
13,526,539
5,594,559
8,144,633
97,917,239
125,182,970
Additions
Amortisation charge (Note 7)
-
-
-
-
2,109,571
2,109,571
(1,400,898)
(916,816)
(28,459,076)
(30,776,790)
Currency translation differences
(1,035,445)
4,148
(25,566)
(76,942)
(1,133,805)
Closing net book value
12,491,094
4,197,809
7,202,251
71,490,792
95,381,946
As at 31 December 2016
Cost
12,491,094
5,551,340
8,088,065
117,451,019
143,581,518
Accumulated amortisation
-
(1,353,531)
(885,814)
(45,960,227)
(48,199,572)
Net book value
12,491,094
4,197,809
7,202,251
71,490,792
95,381,946
83
Notes to the Consolidated Financial StatementsFor personal use only 15 Intangible assets (Continued)
Note:
(a) Goodwill is wholly attributable to the eCommerce Solutions Services CGU in Australia (“Australia CGU”). The
recoverable amount of the Australia CGU is determined based on value in use calculation. The calculation
uses pre-tax cash flow projections based on financial budget approved by management covering a five-
year period. Cash flows beyond the projection period are extrapolated using the terminal growth rate stated
below. The terminal growth rate does not exceed the long-term average growth rate for the business in
which the CGU operates.
The key assumptions used for value in use calculation in 2017 is as follows:
Compound annual growth rate (“CAGR”) of revenue for the five-year period
3.5%
Terminal growth rate
EBITDA margin
Pre-tax discount rate
3%
Between 8% to 11%
26.5%
Management determined budgeted EBITDA margin based on past performance and its expectations for
market development. The discount rate used is pre-tax and reflect specific risks relating to the Australia
CGU.
For the Australia CGU, the recoverable amount calculated based on value in use exceeded carrying value by
HK$16,300,000. As such, there was no indication of impairment arising from the review on goodwill as at
31 December 2017.
If the EBITDA margin was reduced by 10% and terminal growth rate was reduced by 1.5%, with all other
variables held constant, the change of result would not result in impairment of the asset.
84
eCargoANNUAL REPORT 2017For personal use only 15 Intangible assets (Continued)
Note: (Continued)
(b)
Impairment tests for CGUs
The carrying value of intangible assets other than goodwill is primarily comprised of the following CGUs:
Greater China eCommerce Business Services
- Software
Australia CGU
- Contractual customer relationship
- Brand name
- Software
2017
HK$
2016
HK$
18,070,651
61,440,217
3,081,840
6,857,475
9,295,540
37,305,506
4,197,809
7,202,251
10,050,575
82,890,852
(i)
eCommerce Business Services CGU in Greater China (“Greater China CGU”)
For the year ended 31 December 2017, the Greater China CGU recorded EBITDA loss of approximately
HK$21,600,000 which was largely in line with management’s forecast underlying the prior period
impairment assessment. In light of the operating results of the Greater China CGU and positive
improvements observed since the implementation of the business transformation initiatives in the
second half of the year, management has concluded there is no impairment indicator pertaining to the
Greater China CGU.
(ii) Australia CGU
Since no impairment indicator is identified for the Australia CGU for intangible assets other
than goodwill, no further impairment assessment was performed.
Amortisation expense of HK$47,608,541 (2016: HK$30,776,790) has been charged to
administrative expenses.
85
Notes to the Consolidated Financial StatementsFor personal use only 16 Subsidiaries
As at 31 December 2017, the Company has direct and indirect interests in the following subsidiaries:
Equity
Equity
interest
interest
Place of incorporation/
held by the
held by the
Particulars of
establishment and
Principal activities and
Company
Company
issued share capital/
Name
kind of legal entity
place of operation
directly
indirectly
registered capital
eCargo Enterprise Limited
Hong Kong, limited liability
Provision of eCommerce
100%
- 1,000 ordinary shares of
technologies services
in Hong Kong
HK$1 each
eCargo Limited
United Kingdom, limited liability Dormant in United Kingdom
100%
- 1 ordinary share of
GBP1 each
ECG Digital Holdings Limited
British Virgin Islands (“BVI”),
Investment holdings
100%
- 50,000 ordinary shares of
limited liability
in Hong Kong
US$1 each
ECG Digital Commerce Limited
Hong Kong, limited liability
Provision of eMarketplace
technology services
in Hong Kong
eCargo (China) Holdings Limited BVI, limited liability
Investment holdings in BVI
Enrich Technologies Limited
BVI, limited liability
Provision of eCommerce
solutions services
in Hong Kong
Amblique Pty Limited
Australia, limited liability
Provision of eCommerce
solutions services
in Australia
JLE (China) Limited
Hong Kong, limited liability
Investment holdings
in Hong Kong
深圳市嘉宏天成貿易發展有限公司
The PRC, limited liability
Provision of eCommerce
-
-
-
-
-
-
100% 10,000 ordinary shares of
HK$1 each
100% 1 ordinary share of
US$1 each
100% 1 ordinary share of
US$1 each
100% 134,410 ordinary shares of
A$1 each
100% 10,000 ordinary shares of
HK$0.01 each
100% RMB500,000 issued share
business services in the PRC
capital
86
eCargoANNUAL REPORT 2017For personal use only 17 Interest in associates
2017
HK$
2016
HK$
At beginning of the year
70,459,815
5,213,814
Investment in an associate (Note a)
-
70,248,000
Share of results of associates
(2,331,406)
153,853
Provision for impairment of interest in an associate
(Note b)
-
(5,028,427)
Currency translation differences
4,375,704
(127,425)
At end of the year
72,504,113
70,459,815
Note:
(a) On 25 July 2016, ECG entered into a deed with Walton Brown E-commerce Limited (“Walton Brown”) for an
investment of RMB60 million (equivalent to approximately HK$70.2 million) into MM E-commerce Limited
(“MM”). On the same date, MM entered into a deed with Novel Colour Limited (“WHL”) for an investment
of RMB150 million (equivalent to approximately HK$175.5 million) into WWE & company (BVI) Limited
(“WWE”), an investment holding company which primarily focuses on the launch of a new social shopping
mobile platform in China. ECG has an effective interest of 20% in WWE through its investment in MM.
(b) On 28 February 2015, ECG acquired 20.99% of the issued shares in Purecomm (UK) Limited, eCommerce
technology consultant and software developer in the United Kingdom, for a consideration of GBP520,000
(equivalent to approximately HK$6.2 million). During the year ended 31 December 2016, Purecomm (UK)
Limited continued to be loss making due to challenging conditions in its market. Since there was significant
uncertainty as to whether ECG will receive dividends or other returns from its investment in the future, ECG
made a full provision of impairment for the carrying value of its investment in the associate.
The particulars of ECG’s associates as at 31 December 2017 are as follows:
Place of business
Percentage of
and country of
ownership
Measurement
Name of company
incorporation
interest
Principal activities
method
Purecomm
The United Kingdom
20.99%
Provision of eCommerce
Equity
(UK) Limited
(“PureComm”)
technology consultation and
software development of an office-
to-office omni-channel retail
execution platform
MM E-Commerce
Hong Kong
40%
Investment holding
Equity
Limited
PureComm and MM are private companies and there is no quoted market price available for the
shares.
There are no contingent liabilities relating to ECG’s interest in the associates.
87
Notes to the Consolidated Financial StatementsFor personal use only 17 Interest in associates (Continued)
Summarised unaudited financial information for associates
Set out below is the summarised unaudited financial information of the associates which are
accounted for using the equity method.
Non-current assets
Current assets
Current liabilities
Revenue
(Loss)/profit after income tax
Currency translation differences
Dividend received from associates
MM
2017
HK$
2016
HK$
181,291,951
174,208,290
502
(32,171)
-
(5,828,515)
10,939,260
-
502
(16,755)
545,792
529,537
-
-
The information above reflects the amounts presented in the financial statements of the associates
not ECG’s share of those amounts.
Reconciliation of summarised financial information
Reconciliation of the summarised unaudited financial information presented to the carrying amount
of ECG’s in associates.
Net assets
Beginning of year
Investment in an associate
MM
2017
HK$
2016
HK$
176,149,537
-
-
175,620,000
(Loss)/profit for the year/since acquisition
(5,828,515)
529,537
Currency translation differences
10,939,260
-
End of year
181,260,282
176,149,537
Percentage of ownership interest
40%
40%
Interest in associates
72,504,113
70,459,815
88
eCargoANNUAL REPORT 2017For personal use only
18 Financial instruments by category
Loans and receivables
Assets as per statement of financial position
Trade and other receivables (excluding prepayments)
35,041,122
24,966,844
2017
HK$
2016
HK$
Amounts due from related parties
Cash and cash equivalents
Other financial liabilities at amortised cost
7,269,334
12,702,478
8,301,962
6,386,966
55,012,934
39,655,772
2017
HK$
2016
HK$
Liabilities as per statement of financial position
Trade and other payables
(excluding non-financial liabilities)
24,161,811
27,193,607
Amounts due to related parties
Borrowing
19 Trade receivables
Trade receivables
Less: Provision for impairment
17,577,385
11,137,170
44,412,560
19,969,189
86,151,756
58,299,966
2017
HK$
2016
HK$
33,891,344
23,602,377
(255,824)
-
33,635,520
23,602,377
The Directors consider the carrying amounts of trade receivables approximate their fair values.
89
Notes to the Consolidated Financial StatementsFor personal use only
19 Trade receivables (Continued)
Credit terms granted to customers are normally 30 days. The aging analysis of the trade receivables
based on invoice date is as follows:
1 – 30 days
31 – 60 days
61 – 90 days
Over 90 days
2017
HK$
2016
HK$
22,942,457
14,993,615
4,865,158
3,329,853
2,498,052
5,332,853
1,989,079
1,286,830
33,635,520
23,602,377
As of 31 December 2017, trade receivables of HK$255,824 (2016: HK$708,897) were impaired
and fully provided for. The individually impaired trade receivables relate to customers whose
creditworthiness has materially deteriorated and it is assessed that these receivables are not
expected to be recovered. ECG does not hold any collateral or other credit enhancements over these
balances.
Movements on the provision for impairment of trade receivables are as follows:
At 1 January
2017
HK$
-
Provision for impairment of trade receivables (Note 7)
255,824
Write off of provision
At 31 December
-
255,824
2016
HK$
3,016
708,897
(711,913)
-
The creation and release of provision for impaired receivables have been included in administrative
expenses in the statement of comprehensive income. Amounts charged to the allowance accounts
are generally written off when there is no expectation of recovery of additional cash.
90
eCargoANNUAL REPORT 2017For personal use only 19 Trade receivables (Continued)
As at 31 December 2017, trade receivables of HK$10,908,730 (2016: HK$11,432,887) were past
due but not impaired. These related to certain customers with no recent history of default, and as
such, Management believes that no significant impairment provision is necessary. The past due
aging analysis of these receivables is as follows:
1 – 30 days
31 – 60 days
61 – 90 days
Over 90 days
2017
HK$
4,917,321
3,645,019
1,195,010
1,151,380
2016
HK$
8,128,419
1,818,604
1,009,123
476,741
10,908,730
11,432,887
The carrying amounts of ECG’s trade receivables are denominated in the following currencies:
HK$
RMB
A$
US$
GBP
SG$
EUR
NZ$
2017
HK$
11,377,827
3,105,236
2016
HK$
3,819,009
2,911,175
15,331,287
13,793,141
245,113
3,595
-
590,804
261,864
273,798
598,084
152,572
2,981,658
1,792,734
33,635,520
23,602,377
The maximum exposure to credit risk at the reporting date is the carrying value of trade receivables
mentioned above.
91
Notes to the Consolidated Financial StatementsFor personal use only 20 Prepayments, deposits and other receivables
Prepayments
Rental and utility deposits
Other receivables
2017
HK$
796,481
1,353,353
52,249
2016
HK$
1,189,369
1,175,616
188,851
Prepayments, deposits and other receivables
2,202,083
2,553,836
Less: non-current portion
Deposits
Current portion
(856,251)
(869,850)
1,345,832
1,683,986
Certain deposits have been pledged to secure rental deposits owned by the Company.
Other receivables were neither past due nor impaired and they were interest-free and repayable on
demand as at 31 December 2017 and 2016. Management considers that the carrying amounts of
deposits and other receivables approximate their fair values.
The carrying amounts of ECG’s deposits and other receivables are denominated in the following
2017
HK$
378,863
162,798
863,941
2016
HK$
401,323
146,445
816,699
1,405,602
1,364,467
currencies:
HK$
RMB
A$
92
eCargoANNUAL REPORT 2017For personal use only 21 Cash and cash equivalents
Cash and cash equivalents are denominated in the following currencies:
Cash on hand
HK$
RMB
A$
USD
SGD
Cash at banks
HK$
RMB
A$
US$
GBP
NZ$
EUR
CAD
Total
2017
HK$
6,561
100,412
4,228
1,800
1,159
2016
HK$
10,038
28,051
-
-
-
114,160
38,089
426,148
2,750,738
9,030,759
48,715
16,004
12,679
299,345
3,930
852,073
1,791,326
2,715,427
810,183
153,859
14,887
11,122
-
12,588,318
6,348,877
12,702,478
6,386,966
As at 31 December 2017, the amount of cash at banks represented ECG’s maximum exposure to
credit risk.
93
Notes to the Consolidated Financial StatementsFor personal use only 22 Trade payables, other payables and accruals
Trade payables
Accrued expenses
Deferred revenue
Accrued employee benefit expenses
Other payables
2017
HK$
2016
HK$
14,417,972
10,116,781
3,634,415
2,324,144
7,103,839
3,785,280
3,696,837
6,489,087
7,612,189
2,132,541
16,847,678
19,930,654
31,265,650
30,047,435
The carrying amounts of ECG’s trade payables, other payables and accruals are denominated in the
following currencies:
2017
HK$
2016
HK$
4,769,475
8,404,477
986,132
653,166
21,592,881
20,216,680
1,757,080
1,895,853
220,829
43,400
428,759
309,401
1,344
33,608
31,265,650
30,047,435
HK$
RMB
A$
NZ$
US$
EUR
GBP
94
eCargoANNUAL REPORT 2017For personal use only 23 Deferred income tax
The analysis of deferred income tax assets and deferred income tax liabilities is as follows:
2017
HK$
2016
HK$
Deferred income tax assets:
- to be recovered after more than 12 months
256,553
2,778,187
Deferred income tax liabilities:
- to be recovered after more than 12 months
(2,981,792)
(4,620,837)
Deferred income tax liabilities – net
(2,725,239)
(1,842,650)
The movement on the deferred income tax account is as follows:
At 1 January
Credited to income statement (Note 12)
Currency translation differences
At 31 December
2017
HK$
2016
HK$
(1,842,650)
(2,540,437)
(717,432)
(165,157)
701,521
(3,734)
(2,725,239)
(1,842,650)
The movement in deferred income tax assets and liabilities during the year, without taking into
consideration the offsetting of balances within the same tax jurisdiction, is as follows:
Deferred income tax assets
At 1 January
(Charged)/credited to the income statement
Currency translation differences
At 31 December
2017
HK$
2016
HK$
2,778,187
(2,709,781)
188,147
256,553
1,581,322
1,241,817
(44,952)
2,778,187
95
Notes to the Consolidated Financial StatementsFor personal use only 23 Deferred income tax (Continued)
Deferred income tax liabilities
At 1 January
2017
HK$
2016
HK$
(4,620,837)
(4,121,759)
Credited/(charged) to the income statement
1,992,349
(540,296)
Currency translation differences
(353,304)
41,218
At 31 December
(2,981,792)
(4,620,837)
Deferred income tax assets are recognised for tax loss carried forward to the extent that the
realisation of the related tax benefit through future taxable profits is probable. ECG did not recognise
deferred income tax assets in respect of estimated tax losses amounting to HK$117,878,613 (2016:
HK$114,723,799) arising in Hong Kong and HK$13,296,953 (2016: HK$12,670,880) arising in the
PRC. The tax losses arising in Hong Kong can be carried forward indefinitely and the tax losses
arising in the PRC will expire in five years.
24 Share capital
Share issued
535,000,000
329,401,285
As at 31 December 2016, 1 January 2017 and
31 December 2017
535,000,000
329,401,285
Number of
shares
Share
capital
HK$
96
eCargoANNUAL REPORT 2017For personal use only 25 Notes to the consolidated statement of cash flows
Cash used in operations for the year comprises:
Loss before income tax
Adjustments for:
2017
HK$
2016
HK$
(68,761,372)
(89,934,620)
- Depreciation of property, plant and equipment
(Note 14)
1,738,580
1,964,044
- Amortisation of intangible assets (Note 15)
47,608,541
30,776,790
- Provision for impairment of interest in an associate
(Note 17)
-
5,028,427
- Net foreign exchange (gain)/loss on operating
activities (Note 10)
(1,143,879)
1,387,816
- Provision for impairment of trade receivables
- Written off of trade receivables
- Finance income (Note 11)
- Finance expense (Note 11)
- Share of results of associates (Note 17)
- Loss/(Gain) on disposal of property,
plant and equipment (Note 7)
Changes in working capital:
- Trade receivables
- Prepayments, deposits and other receivables
- Trade payables
- Other payables and accruals
- Balances with related parties
Cash used in operations
255,824
13,449
-
-
(41,235)
(571,100)
1,869,716
2,331,406
-
(153,853)
5,141
(41,257)
(16,123,829)
(51,543,753)
(8,869,613)
577,173
3,566,721
7,736,612
6,679,544
4,011,673
(4,287,266)
(4,003,195)
7,097,619
2,331,400
(18,039,195)
(34,787,719)
97
Notes to the Consolidated Financial StatementsFor personal use only 25 Notes to the consolidated statement of cash flows (Continued)
In the consolidated statement of cash flows, proceeds from sale of property, plant and equipment
comprise:
Net book amount
(Loss)/gain on disposal of property,
plant and equipment (Note 7)
Proceeds from disposal of property, plant and equipment
26 Borrowing
2017
HK$
13,591
(5,141)
8,450
2016
HK$
198,978
41,257
240,235
2017
HK$
2016
HK$
Loan from a shareholder
44,412,560
19,969,189
On 29 August 2016, ECG entered into an agreement with JL Enterprise Holdings Limited, the
Company’s major shareholder and a company wholly owned by Mr. John Lau, the Executive
Chairman of ECG, as to provide a loan facility in an aggregate amount of up to HK$50 million to
support the ECG’s working capital requirements. The loan facility is unsecured and bears interest at
prime rate quoted from the Hong Kong and Shanghai Banking Corporation Limited from time to time.
The loan facility can be utilised at ECG’s demand and is repayable in accordance with a separate
agreement to be made between ECG and JL Enterprises Holdings Limited.
The carrying amount of borrowing approximate to its fair value and is denominated in HK$.
Borrowing bears average coupon rate of 5% as at 31 December 2017.
27 Operating lease commitments — as lessee
As at 31 December 2017, ECG had future aggregate minimum lease payments in respect of office
premises under non-cancellable operating leases as follows:
No later than one year
Later than one year and no later than five years
2017
HK$
3,291,023
1,287,888
4,578,911
2016
HK$
2,293,719
1,900,086
4,193,805
98
eCargoANNUAL REPORT 2017For personal use only 28 Related party transactions
The Board of Directors are of the view that the following parties were considered related parties that
had transactions or balances with ECG:
Name of related party
Relationship with ECG
Mr. John Lau
Mr. Christopher Lau
Mr. Rupert Myer AO
Executive Director/Executive Chairman
Executive Director/Chief Executive Officer
Independent Non-Executive Director
Mr. Christopher Ryan
Independent Non-Executive Director
Mr. Heath Zarin
Independent Non-Executive Director
JL Enterprise Holdings Limited
Shareholder of the Company,
controlled by Mr. John Lau
Bo Lei Digital Limited
Subsidiary of an associate
CS China Logistics Limited
Shareholder of the Company,
controlled by Mr. John Lau
CS Packaging (Hong Kong) Limited
Controlled by Mr. John Lau
Cargo Services Far East Limited
Controlled by Mr. John Lau
CS Logistic Solutions Pty Limited
Controlled by Mr. John Lau
EC-GO eCommerce Limited
Controlled by Mr. John Lau
Allport Cargo Services Limited
Controlled by Mr. John Lau
CN Logistics Limited
Controlled by Mr. John Lau
Cargo Services (China) Limited
Controlled by Mr. John Lau
WWE Group Limited
Joint venture of an associate
MyMM (Shanghai) Commerce Limited
Subsidiary of joint venture of an associate
99
Notes to the Consolidated Financial StatementsFor personal use only 28 Related party transactions (Continued)
The following transactions were carried out with related parties:
2017
HK$
2016
HK$
(a) Sales of services – note (i)
Sales of software development services:
- Cargo Services Far East Limited
2,400,000
2,405,412
- Bo Lei Digital Limited
Sales of import, storage, and courier fulfillment
services:
- Cargo Services Far East Limited
- CN Logistics Limited
Sales of management services:
- WWE Group Limited
Sales of courier services:
-
-
-
14,477
2,082
24,763
2,800,000
5,550,000
- MyMM (Shanghai) Commerce Limited
620,764
-
5,820,764
7,996,734
(b) Purchases of services – note (i)
Purchase of outsourced labour services:
- Cargo Services Far East Limited
- CS Packaging (Hong Kong) Limited
- CS China Logistics Limited
Purchases of outsourced import, storage, and
courier fulfillment services:
600,000
14,020
-
614,020
-
-
2,079,889
2,079,889
- Allport Cargo Services Limited
92,440
-
- CS China Logistics Limited
8,456,067
16,365,039
- CS Logistic Solutions Pty Limited
-
2,471,279
- EC-GO eCommerce Limited
- Cargo Service (China) Limited
Purchase of management and administrative
services:
2,864,174
4,040,908
-
-
- Cargo Services Far East Limited
-
421,581
16,067,609
21,337,788
(c) Key Management compensation – note (ii)
Details of the Key Management compensation are disclosed in Note 9 to this consolidate
financial statements.
100
eCargoANNUAL REPORT 2017For personal use only
28 Related party transactions (Continued)
The following transactions were carried out with related parties (Continued):
2017
HK$
2016
HK$
(d) Payment on behalf of ECG by related parties
- Cargo Services Far East Limited
1,601,293
2,941,222
- Cargo Service (China) Limited
- CN Logistic Limited
-
-
7,177
14,390
1,601,293
2,962,789
(e) Payment on behalf of related party by ECG
- WWE Group Limited
1,939,688
3,631,855
- MyMM (Shanghai) Commerce Limited
22,475
-
1,962,163
3,631,855
As at
As at
31 December
31 December
2017
HK$
2016
HK$
(f) Amount due to Key Management – note (iii)
Mr. Christopher Lau
266,000
600,000
(g) Balances with related parties – note (iv)
- Allport Cargo Services Limited
- Bo Lei Digital Limited
64,952
-
51,540
14,477
- Cargo Services Far East Limited
6,255,130
6,730,981
- MyMM (Shanghai) Commerce Limited
- WWE Group Limited
- Cargo Services (China) Limited
- Cargo Tiancheng Technology Limited
- CN Logistics Limited
- CS China Logistics
- CS Packaging (Hong Kong) Limited
- EC-GO eCommerce Limited
110,568
838,684
7,269,334
-
1,504,964
8,301,962
(12,605,132)
(8,170,818)
(445)
(41,919)
(1,819,067)
(2,242,610)
(708,731)
(14,020)
(2,429,990)
(681,823)
-
-
(17,577,385)
(11,137,170)
101
Notes to the Consolidated Financial StatementsFor personal use only 28 Related party transactions (Continued)
The following transactions were carried out with related parties (Continued):
As at
As at
31 December
31 December
2017
HK$
2016
HK$
(h) Borrowing from a shareholder
At 1 January
19,969,189
-
Loan advanced during the year
22,573,655
19,760,000
Interest charged
Notes:
1,869,716
209,189
44,412,560
19,969,189
(i)
These transactions are carried out on terms agreed with the related parties.
(ii) Key Management are deemed to be the Directors who have responsibility for planning, directing, and
controlling the activities of the Company.
(iii) The payable balances with Directors are unsecured, interest free and are repayable on demand. The fair
values of these balances approximate their carrying values.
(iv) Balances with related parties arise mainly from sale and purchase transactions and are due one month
after the date of sale or purchase. The receivable balances and payable balances bear no interest and are
denominated in HK$.
102
eCargoANNUAL REPORT 2017For personal use only 29 Statement of financial position and reserve movement of the Company
Assets
Non-current assets
Property, plant and equipment
Intangible assets
Investment in subsidiaries
Current assets
Note
2017
HK$
2016
HK$
124,917
318,150
18,070,651
61,440,217
389,283
389,283
18,584,851
62,147,650
Amounts due from subsidiaries
232,189,087
207,870,079
Cash and cash equivalents
Total assets
Equity
Equity attributable to owners of the Company
1,007
107
232,190,094
207,870,186
250,774,945
270,017,836
Share capital
Accumulated losses
Total equity
Liabilities
Non-current liability
Loan from a shareholder
Current liabilities
Amounts due to subsidiaries
Other payables and accruals
329,401,285
329,401,285
a
(123,544,995)
(80,712,894)
205,856,290
248,688,391
44,412,560
19,969,189
195,660
310,435
506,095
387,540
972,716
1,360,256
Total liabilities
44,918,655
21,329,445
Total equity and liabilities
250,774,945
270,017,836
103
Notes to the Consolidated Financial StatementsFor personal use only 29 Statement of financial position and reserve movement of the Company (Continued)
Note:
(a) Reserve movement of the Company
As at 1 January 2016
Loss for the year
As at 31 December 2016 and 1 January 2017
Loss for the year
As at 31 December 2017
Accumulated
losses
HK$
(33,288,707)
(47,424,187)
(80,712,894)
(42,832,101)
(123,544,995)
30 Subsequent event
On 22 January 2018, ECG entered into an agreement with Jessica’s Suitcase Pty Ltd (“Jessica’s
Suitcase”) and agreed to acquire 45% equity interests in Jessica’s Suitcase in consideration of
issuance to the shareholders of Jessica’s Suitcase of such number of CHESS Depository Interests
(“CDIs”) equal to 15% of the CDIs in ECG, namely 80,250,000 CDIs. ECG completed the acquisition
on 24 January 2018. Pursuant to the agreement, ECG is also entitled to a call option to acquire the
remaining shares in Jessica’s Suitcase within 18 months following the date of the initial acquisition.
The exercise price of the call option is agreed at cash consideration of A$5 million plus issuance
additional 53,416,500 CDIs in ECG. ECG will account such investment as investment in associate
using the equity method.
104
eCargoANNUAL REPORT 2017For personal use only Issued Capital
As at March 16, 2018, the Company has 615,250,000 ordinary fully paid shares on issue, of which
615,250,000 are held by Chess Depositary Nominees Pty Ltd (“CDN”). CDN has issued 615,250,000
CHESS Depositary Interests (“CDIs”) in relation to these shares. CDN holds the legal title to shares on
behalf of holders of CHESS Depositary Receipts. Pursuant to the ASX Settlement Operating Rules, CDI
holders receive all of the economic benefits of actual ownership of the underlying shares.
CDIs are traded in a manner similar to shares of Australian companies listed on ASX. CDIs will be held
in uncertificated form and settled/transferred through CHESS. No share certificates will be issued to
CDI holders. Shareholders cannot trade their Shares on ASX without first converting their Shares into
CDIs.
A summary of all shares/CDIs showing restrictions is set out below:
Description
Voluntary restricted from trading until July 23, 2019
Voluntary restricted from trading until January 23, 2019
Unrestricted
There is currently no on-market buyback in place.
No. of Shares/
CDIs
226,593,821
113,496,999
275,159,180
Substantial Shareholders
The substantial holders of CDIs are the following CDI holders listed below who have notified the
Company that they are a substantial holder under the Corporations Act 2001 in Australia. In general,
under the Corporations Act (Australia), a person who holds a relevant interest in shares/CDIs of more
than 5% of the Company’s issued share capital is a substantial holder.
Holder
No of Shares/
CDIs
% of issued
capital
JL Enterprises Holdings Limited, CS China Logistics Limited
and Mr John Lau
396,872,460
64.51%
SB International Investments Pty Limited, Ms. Jessica Rudd
and Mr. Albert Tse
35,382,225
5.75%
105
ASX Additional InformationASX Additional InformationFor personal use only Top 20 shares/CDI Holders as at March 16, 2018.
Rank
Name
JL ENTERPRISES HOLDINGS LTD
Total Units
372,937,640
% Issued
Capital
60.62%
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
19
19
20
20
SB INTERNATIONAL INVESTMENTS PTY LTD
35,382,225
CS CHINA LOGISTICS LIMITED
MISS YIWEN ZHANG
TYCOON SMART LIMITED
NATIONAL NOMINEES LIMITED
INVESTORLINK CAPITAL PTY LTD
XIAOQING YE
TIGER WEALTH GLOBAL LIMITED
CHRISTOPHER LAU
GLOBAL GOURMET HOLDINGS LIMITED
CASTLE GIANT HOLDINGS LIMITED
WASHINGTON H SOUL PATTINSON &
COMPANY LTD
SHIYIBA PTY LIMITED
EXCEL PAN VENTURES LIMITED
MUTUAL TRUST PTY LTD
INSPIRING FUTURE LIMITED
VENSUP PTY LTD
FANDEXA NOMINEES PTY LTD
MR JUSTUS JOHANNES AURELIUS WILDE
MR KIN KWONG GARY KWOK
BNP PARIBAS NOMS PTY LTD
BROOKES FAMILY INVESTMENTS PTY LTD
23,934,820
22,871,250
17,500,000
17,000,000
16,902,322
14,035,725
13,410,000
8,142,460
7,960,800
7,500,000
5,625,000
4,921,060
3,500,000
2,000,000
1,577,000
1,400,000
1,310,293
1,310,293
1,300,008
1,228,346
1,200,000
5.75%
3.89%
3.72%
2.84%
2.76%
2.75%
2.28%
2.18%
1.32%
1.29%
1.22%
0.91%
0.80%
0.57%
0.33%
0.26%
0.23%
0.21%
0.21%
0.21%
0.20%
0.20%
Total Top 20 Holders
Total Remaining Holders Balance
582,949,242
32,300,758
94.75%
5.25%
106
eCargoANNUAL REPORT 2017For personal use only Distribution of Shareholders/CDI holders
There were 649 shareholders/CDI holders at March 16, 2018. Each Shareholder/CDI holder is entitled
to one vote for each security held.
Range
1–1,000
1,001–5,000
5,001–10,000
10,001–100,000
Over 100,000
Totals
Total Holders
32
160
104
261
92
Units
6,883
508,543
897,922
9,668,519
604,168,133
% of issued
capital
0.00%
0.08%
0.15%
1.57%
98.20%
649
615,250,000
100.00%
There are no CDI holders who hold less than a marketable parcel as at March 16, 2018.
Voting Rights
The voting rights are that each CDI holder is entitled to 1 vote per CDI at a meeting of members,
provided that a CDI Holder undertakes the following steps.
1.
Instructing CDN as the legal owner to vote the shares underlying in a particular manner. A
voting instruction form will be sent to CDI holders with the notice of meeting and this must be
completed and returned to the share registry prior to the meeting.
2.
Informing the Company that they wish to nominate themselves or another person to be appointed
as CDN’s proxy with respect to their shares underlying the CDIS for the purposes of attending
and voting at the general meeting or;
3. Converting their CDIs into a holding of these shares and voting these shares at the meeting.
Use of Cash Consistent with Business Objectives
The Company confirms that, for the whole financial year ended December 31, 2017, it has used cash
and other assets readily convertible to cash that it held at time of admission, in a way consistent with
its business objectives.
107
ASX Additional InformationFor personal use only The Company’s Place of Incorporation
As the Company is incorporated in Hong Kong and not established in Australia, its corporate activities
(apart from the offering of securities in Australia) are not regulated by the Corporations Act of the
Commonwealth of Australia or by the Australian Securities and Investments Commission but instead
are regulated by the Hong Kong Companies Ordinance and the Hong Kong Securities and Futures
Commission. The Company is not subjected to Chapters 6, 6A, 6B and 6C of the Corporations Act 2001
in Australia.
The following information is provided on an annual basis to comply with the conditions on listing on
ASX.
Takeovers
The Hong Kong Code on Takeovers and Mergers (the “Takeovers Code”) regulates takeovers and
mergers in Hong Kong and applies to public companies in Hong Kong. The Takeovers Code provides
that when a person, or two or more persons acting in concert collectively:
•
acquire 30% or more of the voting rights of a company; or
•
hold not less than 30% but not more than 50% of the voting rights of the company and acquires
more than 2% of the voting rights of a company from the lowest percentage holding of that
person or persons collectively within a 12 month period,
then a general offer must be made to all other shareholders of the company.
Compulsory Acquisition
Part 13 of the Hong Kong Companies Ordinance sets out the right to buy out minority shareholders.
If within four months of making an offer to buy shares, a company has acquired 90% in value of
the shares, the acquiring company may give notice to the remaining shareholders that it desires to
acquire their shares. Provided that notice is given within five months of the original offer, the acquiring
company is entitled and bound to acquire those shares on the same terms as the offer.
Substantial Share/CDI Holder notices
Part XV of the Hong Kong Securities and Futures Ordinance requires the disclosure by substantial
shareholders, directors, shadow directors and chief executives of a listed corporation (collectively
“Corporate Insiders”) of their interests in the securities of a listed corporation when their interests
reach the notifiable percentage level. The notifiable percentage level is an interest in shares of an
aggregate nominal value of 5% or more of the relevant shares in the listed corporation.
108
eCargoANNUAL REPORT 2017For personal use only 109
Notes To The Consolidated Financial Statement For personal use only Corporate
Directory
your eCommerce Partner
eCargo Holdings Limited
ARBN: 601 083 069
Hong Kong Company
Registration Number: 2088880
REGISTERED OFFICE - AUSTRALIA
C/-Investorlink Corporate Limited
Level 26. 56 Pitt Street Sydney
New South Wales 2000 Australia
Phone: +61 2 9276 2000
Fax: +61 2 9247 9977
REGISTERED OFFICE - HONG KONG
13103N ATL Logistics Centre B
3 Kwai Chung Container Terminals
New Territories, Hong Kong
Phone: +852 2481 8308
SHARE/CDI REGISTRY
LINK MARKET SERVICES LIMITED
Level 12, 680 George Street,
Sydney, New South Wales 2000 Australia
Phone: +1300 554 474 (Australia)
+61 1300 554 474 (outside Australia)
COMPANY SECRETARY
Irene Yip
STOCK EXCHANGE LISTING
eCargo Holdings Limited, CDIs are listed on
the Australian Securities Exchange (ASX)
110
eCargoANNUAL REPORT 2017For personal use only
205x280 20161107 OL.pdf 1 7/11/2016 3:38 PM
C
M
Y
CM
MY
CY
CMY
K
For personal use only Love
Online
Shopping
2017
Annual
Report
w w w . e C a r g o . c o m
We are an eCommerce enabler and business partner
for designer fashion, branded apparel and retail companies,
providing holistic eCommerce solutions and capabilities to
connect them online with the consumers in China,
Australia and around the world.
eOperation
Online shop development, setup, promotion, day-to-day management
and customer services
eCommerceIT
Bespoke front-end and middleware technology solutions, project
management and implementation
eFulfillment
Back-end logistics operations and customer order fulfillment
execution
eStudio
Digital asset production and product detail photography
eMarketing
Brand strategy, digital marketing and social media promotion
management and execution
eCommerceITeFulfillmenteStudioeMarketingeOperationFor personal use only