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Public company info - Freetech Road Recycling Technology (Holdings) Limited , 06888.HK
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Freetech Road Recycling Technology (Holdings) Limited, 06888.HK - Company Profile
Chairman Sze Wai Pan
Share Issued (share) 1,079,000,000
Par Currency Hong Kong Dollar
Par Value 0.1
Industry Road and Railway
Corporate Profile Business Summary: The Groupa is principally engaged in the manufacturing and sale of road maintenance equipment and provision of road maintenance services in the People’s Republic of China (the “PRC”). Performance for the year: In 2019, the Group’s operating revenue was approximately HK$487.3 million, representing a decrease of approximately 6.7% as compared to 2018. Since there was a reversal of expected credit loss of trade receivables and contract assets, the total profit attributable to owners of the Company was approximately HK$4.2 million, representing an increase of approximately 103.0% as compared to total loss attributable to owners of the Company of approximately HK$139.1 million for the year ended 31 December 2018. Business Review The year of 2019 is the 70th anniversary of the founding of new China. With strong determination, it is also a crucial year for the People’s Republic of China’s (the “PRC”) government to continue implementing the requirements put forth at the National Conference on Ecological and Environmental Protection in order to prevent and treat pollution. However, due to the escalation of trade war between the PRC and the United States, and the backdrop of slowed global economic growth, the economy in the PRC faced greater downward pressure. In order to reduce the operational cash flow risk of the Group, the Group has delayed some of the “Hot-in-Place” road maintenance projects until the customers’ funds for these projects are officially in place, the asphalt pavement maintenance (“APM”) services sector recorded a decrease in revenue. In addition, the APM equipment segment recorded an increase in revenue, contributed by the launching of the new APM product in the recent years, as well as the increase in the number of the standard series equipment sold in the PRC. The Group also recorded a reversal of expected credit loss of trade receivables and contract assets for the year ended 31 December 2019 due to collection of these outstanding balances had improved significantly in 2019 after Premier Li Keqiang has emphasised the settlement of overdue debts of local government to private enterprises during the State Council Executive Meeting of the People’s Republic of China on 30 January 2019. In 2019, the Group’s operating revenue was approximately HK$487.3 million, representing a decrease of approximately 6.7% as compared to 2018. Since there was a reversal of expected credit loss of trade receivables and contract assets, the total profit attributable to owners of the Company was approximately HK$4.2 million, representing an increase of approximately 103.0% as compared to total loss attributable to owners of the Company of approximately HK$139.1 million for the year ended 31 December 2018. As at 31 December 2019, the Group maintained a healthy financial position as it had cash on hand in the sum of approximately HK$256.0 million and the Group’s operating cash flow was significantly improved from cash outflow of approximately HK$10.9 million in 2018 to cash inflow of approximately HK$112.1 million in 2019. Asphalt Pavement Maintenance Services Revenue for this segment decreased in the year of 2019 compared to 2018 due to the decrease in the revenue of “Hot-in-Place” projects as the Group has delayed some of the road maintenance projects until the customers’ funds for these projects are officially in place in order to reduce the operational cash flow risk of the Group. Therefore, the total serviced area of “Hot-in-Place” projects decreased by 14.7% from 3.4 million square meters in 2018 to 2.9 million square meters in 2019. The revenue of non-“Hot-in-Place” projects contributed by Tianjin Expressway Maintenance was increased by 6.3% as more road maintenance projects were performed to cater for road inspections on highway in the second half of 2020. APM services segment of the Group recorded revenue of approximately HK$415.3 million, representing a decrease of 11.3% as against 2018. Despite the decrease in the total serviced area of “Hot-in-Place” projects, the Group has continued to be a leading integrated solution provider using “Hot-in-Place” recycling technology in the APM industry in the PRC. APM Equipment During the year under review, our APM equipment segment generated a revenue of HK$72.0 million, representing an increase of 32.3% as against 2018. This increase was attributable to the Group’s diversify product range strategy, more revenue contributed by the new product launched in the market in the recent years and the increase in the number of the standard series equipment sold in the PRC. Research and Development To maintain our leading position in the use of “Hot-in-Place” recycling technology in the APM industry, the Group continued to invest in technological innovation. New Patents The Group continued to pay efforts and invest significant resources in our research and development. As of 31 December 2019, we had registered 168 patents (2018: 148), of which 18 were invention patents (2018: 17), 127 were utility model patents (2018: 113) and 23 were design patents (2018: 18), and we had 24 pending patent applications, of which 10 are invention patents, 12 are utility model patents and 2 are design patent (2018: 18 pending patent applications, of which 7 are invention patents, 9 are utility model patents and 2 are design patent). During the year under review, the Group consistently enhanced its investment in research and development, further strengthening its research and development capabilities, and enabling it to overcome certain technological limitations in the APM service industry. The Group does not only keep improving its current products like pavement maintenance and safety attenuator vehicles, the Group also diversified its product range in road industry. During the year under review, high performance vacuum sweepers and snow removal vehicles were developed and targeted to high-end customers like airports, highways which are not satisfied with traditional domestic equipment. The Group embedded automated and smart functions in its products in order to reduce cost and provide higher quality services. Geopolymer Injection Road Base Repair technology provides a fast, durable with minimum invasion of pavement method to repair road base. Together with the Group’s designed equipment integrates drilling, mixing and injection functions, a new and independent business line is developed. In addition, a semi-flexible pavement material, its application process and equipment are developed. This pavement surface combines the driving comfort of asphalt pavement and excellent stiffness of concrete. With these equipment, it is also expected to expand the opportunities of the Group’s “Hot-in Place” technology application for the roads with base problems. Others With strong research and development capabilities, the Group is able to adopt the most advanced technologies in the APM industry, provides customised solutions to its clients and maintains its competitive edges and leading status in the APM industry by using the recycling technology. Prospects: 2020 is the last year of China’s “13th Five-year Plan”, it will be a crucial year for the building of ecological civilization by the PRC government. The ecological and environmental industry is also entering critical year which the environmental protection efforts are expected to enter into mature phase of the country’s battle against pollution. In addition, during the PRC State Council Executive Meeting on 8 January 2020, Premier Li Keqiang has reiterated that the settlement of overdue debts of local government to private enterprises must be cleared by the end of this year. Furthermore, the COVID-19 outbreak has brought additional uncertainties in the Group’s operating environment in China. As far as the Group’s businesses are concerned, the outbreak has so far caused operational delays. The Group has put in place contingency measures to reduce the impact arising from this outbreak. However, the situation remains fluid at this stage. However, with our patented Hot-in-Place recycling technology and other new products, the Group will benefit from the increasing demand for APM and the favourable environment in the PRC, especially those using the recycling technologies. First, as at 31 December 2018, the total mileage for expressway in the PRC was the longest in the world and the highway mileage was the second longest in the world. The overall growth of the APM industry in the PRC remains sustainable and the existing penetration rate of recycling technology (including the Group’s “Hot-in-Place” recycling technology) is still minimal and has significant potential for expansion. In addition, the Ministry of Transport will perform road inspections on highways in the second half of 2020 to inspect the quality and condition of the road maintenance work. Therefore, it offers us the largest road maintenance market and huge room to grow. Secondly, subsequent to the Company’s sale of a modular series equipment to a customer in the Republic of Korea and standard series equipment to customers in Macau, Malaysia and Taiwan, the Company will continue to explore the overseas business opportunities and strategic cooperation with other companies, such as some listed companies and large-scale or state-owned enterprises. Third, the Group will continue to leverage on its state-owned partners’ overseas channels to explore overseas business opportunities. The Group is making an effort to promote its overseas business opportunities in the countries along the “One Belt One Road” and four Asian tigers. In light of these, the Group is well positioned to benefit from the government’s policies and the positive development prospects in the environmental protection sector. As a leading provider of the “Hot-in-Place” recycling technology in the APM sector and a provider of one-stop solution covering “testing, planning, equipment and construction”, the Group will leverage on its competitive advantages and implement favourable policies to achieve a healthy growth in its business. The Group plans to enhance its market position, enter into new markets and enlarge its share in existing markets by the following means: first, it will increase market penetration, particularly in cities where the use of “Hot-in-Place” recycling technology is currently relatively limited; secondly, it will increase its investment on its testing and planning department by devoting more equipment and staff so as to enhance its one-stop solution; thirdly, it will focus on the cities which will hold major events to gain and complete projects of high awareness; fourthly, it will grasp the opportunities in the wave of state-owned enterprise reforms to acquire more maintenance companies in the express highway sector; fifthly, it will diversify its product range and developed new product in road industry; sixthly, it will further optimize its techniques and technologies to lower the construction costs; seventhly, it will leverage on its state-owned partners’ overseas channels to expand the international APM equipment and services market. In addition, the Group has started planning the development of the investment property acquired by the Group at lot 04-05 and 04-06 of Jiangxinzhou, Jianye District, Nanjing, the PRC (中國南京市建鄴區江心洲) in December 2016. The investment property will be developed into the global technology research and development centre of the Group. The investment property does not only enable the Group to enhance its research and development capabilities, but also has good potential as a long term investment. Looking into the future, the Group holds confidence in its business prospects and will strive to provide higher returns for its shareholders with the principle of “Efficient use of technology to create multi-win situations” (“善用科技，共創多贏”).

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