第一季度業績報告 2019 FIRST QUARTERLY REPORT 2019 Zhejiang United Investment Holdings Group Limited (Incorporated in the Cayman Islands with limited liability) Stock Code: 8366 香港聯合交易所有限公司（「聯交所」）GEM之特色 GEM乃為較於聯交所上市的其他公司帶有更高投資風險的公司提供上市的市場。 有意投資者應了解投資於此類公司的潛在風險，並應經過審慎周詳考慮後方作出投 資決定。GEM的較高風險及其他特色，表示GEM較適合專業及其他經驗豐富的投 資者。 由於GEM上市公司的新興性質使然，在GEM買賣的證券可能承受較於聯交所主板 買賣的證券為高的市場波動風險，同時亦無法保證在GEM買賣的證券會有高流通 量的市場。 香港交易及結算所有限公司及香港聯合交易所有限公司對本報告的內容概不負責， 對其準確性或完整性亦不發表任何聲明，並明確表示概不會就因本報告全部或任 何部分內容而產生或因倚賴該等內容而引致的任何損失承擔任何責任。 本報告乃遵照GEM證券上市規則（ ...

[Company Information](index=4&type=section&id=1.%20Company%20Information) The company's key information, including board members, committees, contact details, and stock code, is provided [Board Members and Committees](index=4&type=section&id=1.1%20Board%20Members%20and%20Committees) The board comprises executive and independent non-executive directors, with specific members assigned to audit, nomination, remuneration, and legal compliance committees - Executive directors include Mr. Zhou Ying (Chairman and CEO) and Ms. Meng Ying (Compliance Officer)[4](index=4&type=chunk) - Independent non-executive directors include Mr. Zheng Xuchen, Mr. Huang Wenxian, with Mr. Deng Yaorong having resigned on June 1, 2019[4](index=4&type=chunk) - Mr. Huang Wenxian chairs the Audit Committee, Mr. Zhou Ying chairs the Nomination Committee, and the chair of the Remuneration and Legal Compliance Committees, Mr. Deng Yaorong, has resigned[4](index=4&type=chunk) [Company Contact Information and Stock Code](index=4&type=section&id=1.2%20Company%20Contact%20Information%20and%20Stock%20Code) This section details the company's registered office, Hong Kong principal place of business, key banks, company secretary, independent auditor, and stock transfer office - The company's stock code is **8366**[5](index=5&type=chunk) - The independent auditor is Kaiyuan Xinde Certified Public Accountants Limited[4](index=4&type=chunk) - The Hong Kong share registrar is Tricor Investor Services Limited[5](index=5&type=chunk) [Chairman's Statement](index=5&type=section&id=2.%20Chairman's%20Statement) The Chairman's statement reviews the group's financial performance and business outlook for the fiscal year [Performance Review](index=5&type=section&id=2.1%20Performance%20Review) The Group achieved a 14.9% revenue increase to HK$158.4 million in FY2018/19, driven by more projects, but net loss attributable to equity holders grew 35.1% to HK$14.6 million due to rising costs FY2018/19 Performance Review | Metric | FY2018/19 (HK$ Million) | FY2017/18 (HK$ Million) | Change (HK$ Million) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Revenue | 158.4 | 137.8 | 20.6 | 14.9% | | Loss attributable to equity holders | 14.6 | 10.8 | 3.8 | 35.1% | - Revenue growth was primarily due to an increase in projects, offset by higher direct costs and administrative expenses, including rent and staff costs[7](index=7&type=chunk) [Business Review and Outlook](index=5&type=section&id=2.2%20Business%20Review%20and%20Outlook) Despite challenging market conditions and rising subcontracting fees in Hong Kong's construction sector, the Group remains optimistic about the local market, focusing on core business and exploring M&A opportunities in construction and the 5G telecommunications industry - Challenging market conditions in the Hong Kong construction industry and rising subcontracting fees adversely affected operations[8](index=8&type=chunk) - The Group remains optimistic about the local construction market, focusing on core business and seeking acquisition or cooperation opportunities in construction and related businesses in China and Hong Kong[9](index=9&type=chunk) - The Group is actively exploring opportunities in the telecommunications sector, particularly 5G communications and related services, aiming for it to become a core business[9](index=9&type=chunk) [Summary](index=6&type=section&id=3.%20Summary) This summary presents the Group's key financial data for FY2018/19, comparing revenue, gross profit, loss per share, and net loss with FY2017/18, indicating significant growth in revenue and gross profit alongside increased net loss and loss per share Summary of Key Financial Data for FY2018/19 | Metric | FY2018/19 | FY2017/18 | Change | | :--- | :--- | :--- | :--- | | Revenue | HK$158.4 Million | HK$137.8 Million | Increase of HK$20.6 Million | | Gross Profit | HK$5.4 Million | HK$1.8 Million | Increase of HK$3.6 Million | | Loss Per Share | HK 0.94 Cents | HK 0.75 Cents | Increase of HK 0.19 Cents | | Net Loss | HK$14.6 Million | HK$10.8 Million | Increase of HK$3.8 Million | | Gross Profit Margin | 3.4% | 1.3% | Increase of 2.1 Percentage Points | [Management Discussion and Analysis](index=7&type=section&id=4.%20Management%20Discussion%20and%20Analysis) This section provides a comprehensive review of the Group's business operations, financial performance, and strategic initiatives, along with an analysis of key risks and future outlook [Business Review and Outlook](index=7&type=section&id=4.1%20Business%20Review%20and%20Outlook) The Group, primarily engaged in slope, foundation, and general building works in Hong Kong, maintains cautious optimism despite market challenges and is diversifying into 5G communication technologies through strategic partnerships - The Group is an approved contractor by the Hong Kong Government's Development Bureau for slope/retaining wall landslide prevention/remedial works and land piling[16](index=16&type=chunk) - The Hong Kong construction industry faces intensified competition, slower approval of public works funding, and continuous increases in operating costs, particularly subcontracting fees[17](index=17&type=chunk) - The Board maintains cautious optimism regarding the Hong Kong slope engineering industry, anticipating increased demand from ongoing government infrastructure projects[17](index=17&type=chunk) - The Group has signed a Letter of Intent with Henderson Land Development Group Limited to explore strategic cooperation in 5G network technology and an authorization and service agreement with a globally renowned IC chip supplier, aiming to be among the first to mass-produce 5G mobile broadband products[18](index=18&type=chunk)[21](index=21&type=chunk) [Financial Review](index=8&type=section&id=4.2%20Financial%20Review) The Group's FY2018/19 revenue grew 14.9% to HK$158.4 million, with gross profit surging 195.4% to HK$5.4 million and gross profit margin improving to 3.4%; however, administrative expenses rose 59.3% due to increased staff costs and rent, expanding net loss to HK$14.6 million, while liquidity and gearing ratios decreased Overview of FY2018/19 Financial Performance | Metric | FY2018/19 (HK$ Thousand) | FY2017/18 (HK$ Thousand) | Change (%) | | :--- | :--- | :--- | :--- | | Revenue | 158,401 | 137,802 | 14.9% | | Gross Profit | 5,383 | 1,822 | 195.4% | | Gross Profit Margin | 3.4% | 1.3% | Increase of 2.1 Percentage Points | | Other Income | 3,189 | 1,012 | 215.1% | | Administrative Expenses | 21,456 | 13,480 | 59.3% | | Net Loss | 14,600 | 10,800 | 35.2% | | Current Assets | 135,800 | 118,000 | 15.1% | | Current Liabilities | 74,500 | 46,600 | 59.9% | | Current Ratio | 1.8 | 2.5 | Decrease | | Gearing Ratio | 1.9% | 3.2% | Decrease | | Total Staff Costs | 5,900 | 4,600 | 28.3% | - Revenue growth was primarily driven by an increase in slope engineering projects (**12.7%** growth) and foundation engineering projects (**32.1%** growth)[22](index=22&type=chunk)[24](index=24&type=chunk) - The increase in gross profit margin was mainly due to improved project cost control[25](index=25&type=chunk) - Other income significantly increased by **220%**, primarily from rental income for leased machinery and exchange gains[26](index=26&type=chunk) - The rise in administrative expenses was mainly due to a **HK$1.5 million** increase in staff costs and a **HK$5 million** increase in rent and fees for Hong Kong and China offices[27](index=27&type=chunk) - The Board does not recommend the payment of a final dividend[29](index=29&type=chunk) - Cash and bank balances decreased by **HK$5.4 million** to **HK$33.7 million**[33](index=33&type=chunk) - The Group has no significant asset pledges, capital commitments, or contingent liabilities[35](index=35&type=chunk)[39](index=39&type=chunk)[43](index=43&type=chunk) - The Group faces foreign exchange risk primarily involving RMB, but no derivative instruments were entered into for hedging during the year[37](index=37&type=chunk) - The number of employees increased to **59**, with total staff costs rising to **HK$5.9 million**; remuneration policy is reviewed annually, and bonuses are performance-based[40](index=40&type=chunk) [Key Risks and Uncertainties](index=12&type=section&id=4.3%20Key%20Risks%20and%20Uncertainties) The Group's primary risks include reliance on Hong Kong government and statutory body contracts, potential loss of senior management and engineers, and adverse impacts from project delays on cash flow and reputation - A significant portion of the Group's revenue comes from non-recurring contracts with the Hong Kong government and statutory bodies, and reduced government construction project spending could materially impact financial performance[49](index=49&type=chunk) - Failure to retain senior management and in-house engineers could adversely affect business operations[49](index=49&type=chunk) - Any project delays could impact cash flow and negatively affect business and reputation[49](index=49&type=chunk) [Environmental Policies and Performance](index=12&type=section&id=4.4%20Environmental%20Policies%20and%20Performance) The Group adheres to Hong Kong's environmental regulations, implementing measures for noise, air, water pollution, and waste disposal control, and reported no prosecutions or penalties for environmental breaches during the period - The Group's operations are subject to Hong Kong's environmental regulations concerning noise, air, water pollution, and waste disposal[49](index=49&type=chunk) - Environmental compliance measures for employees and subcontractors have been established, including noise assessment, construction noise permit applications, watering operations, wastewater treatment, and waste segregation[49](index=49&type=chunk)[50](index=50&type=chunk) - For the year ended April 30, 2019, the Group was not prosecuted or penalized for violating any applicable environmental regulations[50](index=50&type=chunk) [Compliance with Laws and Regulations](index=13&type=section&id=4.5%20Compliance%20with%20Laws%20and%20Regulations) The Group's operations comply with relevant Hong Kong laws and regulations, utilizing external compliance and legal advisors, and reported no material breaches during the period - The Group's business complies with relevant Hong Kong laws and regulations, and external compliance and legal advisors are engaged[52](index=52&type=chunk) - For the year ended April 30, 2019, the Group had no material breaches of relevant current laws and regulations in Hong Kong[52](index=52&type=chunk) [Relationships with Customers, Suppliers, Subcontractors, and Employees](index=14&type=section&id=4.6%20Relationships%20with%20Customers,%20Suppliers,%20Subcontractors,%20and%20Employees) The Group maintains long-term relationships with diverse clients, including government bodies and private companies, selects suppliers and subcontractors based on experience and cost, and values employees by offering competitive remuneration and development opportunities - Key clients include public bodies such as the Civil Engineering and Development Department, Lands Department, Architectural Services Department, and Hong Kong Housing Authority, as well as private companies[55](index=55&type=chunk) - For the year ended April 30, 2019, the Group was not reliant on any single client and maintained business relationships of **1 to over 10 years** with most major clients[55](index=55&type=chunk) - Suppliers and subcontractors are selected based on experience, scheduling, and fee quotations, with no significant difficulties or disputes encountered during the reporting period[56](index=56&type=chunk) - The Group offers competitive remuneration, reviews salaries regularly, and prioritizes employee training and development[57](index=57&type=chunk) [Future Plans for Material Investments or Capital Assets](index=15&type=section&id=4.7%20Future%20Plans%20for%20Material%20Investments%20or%20Capital%20Assets) As of April 30, 2019, the Group has no future plans for material investments or capital assets beyond those disclosed in the prospectus and this annual report - As of April 30, 2019, the Group had no other plans for material investments or capital assets beyond those disclosed in the prospectus and this annual report[59](index=59&type=chunk) [Comparison of Business Objectives with Actual Business Progress](index=15&type=section&id=4.8%20Comparison%20of%20Business%20Objectives%20with%20Actual%20Business%20Progress) The Group's business objectives to expand through more projects and enhanced human resources have progressed with active pursuit of new construction projects and increased staff recruitment and training Comparison of Business Objectives and Actual Progress | Business Objective | Business Objective as Stated in Prospectus | Actual Business Progress | | :--- | :--- | :--- | | Further develop business by undertaking more projects | Submit more tenders for public and private projects when suitable opportunities arise, primarily focusing on slope engineering | The Group is identifying suitable business opportunities among potential clients and has undertaken several new construction projects for the year ended April 30, 2019, to meet working capital needs | | Further enhance our human resources | Recruit more staff to cope with our business development and plans to undertake more projects; continue to provide training to existing and newly recruited staff | The Group has recruited more staff to cope with new projects and continues to sponsor employees for seminars and training courses | [Use of Proceeds](index=16&type=section&id=4.9%20Use%20of%20Proceeds) For the year ended April 30, 2019, the net proceeds from the placement were utilized as intended in the prospectus, primarily to meet working capital needs for new projects and to enhance human resources Comparison of Use of Proceeds | Purpose | Planned Use (HK$ Million) | Actual Use (HK$ Million) | | :--- | :--- | :--- | | Satisfy various working capital needs related to undertaking more projects | 25.77 | 25.77 | | Further enhance our human resources | 5.53 | 5.53 | - The net proceeds have been used in accordance with the intended purposes as set out and described in the prospectus[64](index=64&type=chunk) [Biographical Details of Directors and Senior Management](index=17&type=section&id=5.%20Biographical%20Details%20of%20Directors%20and%20Senior%20Management) This section provides detailed biographical information for the Group's executive directors, independent non-executive directors, senior management, and company secretary [Executive Directors](index=17&type=section&id=5.1%20Executive%20Directors) Mr. Zhou Ying serves as Chairman and CEO, bringing extensive experience in financial investment, while Ms. Meng Ying, as President, has rich experience in customer service and capital management - Mr. Zhou Ying (aged **37**) has served as Chairman of Zhejiang United SME Holding Group Co., Ltd. since March 2014, possessing extensive experience in financial investment, asset management, film entertainment, and cultural education[66](index=66&type=chunk) - Ms. Meng Ying (aged **38**) currently serves as President of Zhejiang United SME Holding Group Co., Ltd. and Zhejiang Zhongbang Equity Investment Co., Ltd., holding Bachelor's and Master's degrees in Sociology[67](index=67&type=chunk) [Independent Non-Executive Directors](index=18&type=section&id=5.2%20Independent%20Non-Executive%20Directors) Mr. Zheng Xuchen has over 30 years of construction industry experience and is Chairman of Hangzhou Municipal Engineering Group Co., Ltd., while Dr. Huang Wenxian is a US Certified Public Accountant with extensive accounting and financial management qualifications, serving on boards of several listed companies - Mr. Zheng Xuchen (aged **54**) has over **30 years** of experience in the construction industry, currently serving as Chairman of Hangzhou Municipal Engineering Group Co., Ltd. and holding the title of Professor-level Senior Engineer[70](index=70&type=chunk) - Dr. Huang Wenxian (aged **53**) is a US Certified Public Accountant and Certified Management Accountant, serving as executive or independent non-executive director for several Hong Kong listed companies[71](index=71&type=chunk) [Senior Management](index=19&type=section&id=5.3%20Senior%20Management) Mr. Li Haochang and Mr. He Zhiming, both Senior Project Managers, each possess over 23 years of experience in the Hong Kong construction industry, responsible for project management and supervision, holding relevant professional certificates and degrees - Mr. Li Haochang (aged **47**) is a Senior Project Manager with over **23 years** of experience in the Hong Kong construction industry, having completed training in construction supervision, construction safety officer, and environmental officer roles[73](index=73&type=chunk) - Mr. He Zhiming (aged **46**) is also a Senior Project Manager with over **23 years** of experience in the Hong Kong construction industry, a member of the Hong Kong Institution of Engineers, and holds a Bachelor of Applied Science degree in Construction Management and Economics[74](index=74&type=chunk)[75](index=75&type=chunk) [Company Secretary](index=19&type=section&id=5.4%20Company%20Secretary) Ms. Xu Huimin has served as Company Secretary since June 30, 2017, is a practicing accountant in Hong Kong, and holds senior memberships in various professional accounting and secretarial bodies - Ms. Xu Huimin (aged **52**) has served as Company Secretary since June 30, 2017, is a practicing accountant in Hong Kong, and is a fellow member of the Hong Kong Institute of Certified Public Accountants and the Association of Chartered Certified Accountants, among others[76](index=76&type=chunk) [Corporate Governance Report](index=20&type=section&id=6.%20Corporate%20Governance%20Report) This report details the Group's adherence to corporate governance principles, including compliance with codes, board structure, committee functions, risk management, and shareholder rights [Corporate Governance Code and Directors' Securities Transactions Code](index=20&type=section&id=6.1%20Corporate%20Governance%20Code%20and%20Directors'%20Securities%20Transactions%20Code) The Company complied with the GEM Listing Rules' Corporate Governance Code in FY2018/19, except for the combined roles of Chairman and CEO, which the Board believes provides strong leadership, and all directors confirmed adherence to the code for securities transactions - The Company complied with the Corporate Governance Code set out in Appendix 15 of the GEM Listing Rules, except for the combined roles of Chairman and Chief Executive Officer held by Mr. Zhou Ying, which deviates from Code Provision A.2.1[80](index=80&type=chunk) - The Board believes Mr. Zhou's dual role benefits business operations and provides strong, consistent leadership, with independent non-executive directors ensuring a balanced distribution of power[80](index=80&type=chunk) - All directors confirmed compliance with the Model Code for Securities Transactions by Directors during the reporting period[81](index=81&type=chunk) [Board Profile](index=21&type=section&id=6.2%20Board%20Profile) The Board, responsible for strategy and oversight, comprised two executive and two independent non-executive directors as of the reporting date, with a vacancy in independent non-executive directors to be filled promptly, and actively promotes diversity and continuous professional development - The Board's primary responsibilities include formulating the Group's overall strategy, management objectives, and monitoring management performance[83](index=83&type=chunk) - As of the reporting date, the Board comprised two executive directors (Mr. Zhou Ying, Ms. Meng Ying) and two independent non-executive directors (Mr. Zheng Xuchen, Mr. Huang Wenxian)[83](index=83&type=chunk) - Mr. Deng Yaorong resigned as an independent non-executive director on June 1, 2019, resulting in non-compliance with GEM Listing Rules regarding the number of independent non-executive directors, Audit Committee members, and the Remuneration Committee Chairman, which the Company will fill within three months[86](index=86&type=chunk)[89](index=89&type=chunk) - The Board has adopted a diversity policy and believes its diversity objectives have been met, with all directors considered independent[94](index=94&type=chunk) - The Board held **thirteen** meetings during the reporting period and encourages directors to attend training courses to acquire the latest corporate governance knowledge[90](index=90&type=chunk)[91](index=91&type=chunk)[95](index=95&type=chunk) [Board Committees](index=25&type=section&id=6.3%20Board%20Committees) The Board has established Audit, Remuneration, Nomination, and Legal Compliance Committees to assist in fulfilling its duties, each regularly convening to review financial performance, internal controls, remuneration policies, board structure, and legal compliance - The Audit Committee, comprising Mr. Huang Wenxian (Chairman) and Mr. Zheng Xuchen, is responsible for reviewing financial statements, internal controls, and monitoring the independence of external auditors[97](index=97&type=chunk)[99](index=99&type=chunk) - The Remuneration Committee, comprising Mr. Zheng Xuchen and Mr. Huang Wenxian, is responsible for making recommendations to the Board on the remuneration policy and structure for directors and senior management[105](index=105&type=chunk) - The Nomination Committee, comprising Mr. Zhou Ying (Chairman), Mr. Zheng Xuchen, and Mr. Huang Wenxian, is responsible for reviewing the Board structure, identifying suitable director candidates, and assessing the independence of independent non-executive directors[110](index=110&type=chunk)[111](index=111&type=chunk)[112](index=112&type=chunk) - The Legal Compliance Committee, comprising Mr. Zheng Xuchen and Mr. Huang Wenxian, assists in monitoring compliance with laws and regulations and reviewing the effectiveness of regulatory compliance procedures[117](index=117&type=chunk) Auditor's Remuneration (HK$ Thousand) | Service Type | 2019 (HK$ Thousand) | 2018 (HK$ Thousand) | | :--- | :--- | :--- | | Statutory Audit Services | 510 | 500 | | Non-Statutory Audit Services | 118 | 162 | | **Total** | **628** | **662** | [Company Secretary and Compliance Officer](index=31&type=section&id=6.4%20Company%20Secretary%20and%20Compliance%20Officer) Ms. Xu Huimin serves as Company Secretary, having completed the required professional training, while Executive Director Ms. Meng Ying acts as the Group's Compliance Officer - Ms. Xu Huimin, the Company Secretary, has completed no less than **15 hours** of relevant professional training[122](index=122&type=chunk) - Executive Director Ms. Meng Ying serves as the Group's Compliance Officer[123](index=123&type=chunk) [Risk Management and Internal Control](index=31&type=section&id=6.5%20Risk%20Management%20and%20Internal%20Control) The Board oversees risk management and internal control systems, delegating responsibilities to the Audit Committee, and has established a tiered risk management structure with defined procedures for identification, analysis, response, control, and monitoring, which the Board deems effective with adequate resources - The Board is responsible for risk management and internal control systems, delegating responsibilities to the Audit Committee[124](index=124&type=chunk) - The risk management framework includes the Board (setting strategic objectives, maintaining systems), the Audit Committee (monitoring risk levels, promoting risk assessment), and subsidiary management (ensuring effective risk assessment and management implementation)[129](index=129&type=chunk)[131](index=131&type=chunk) - Risk management procedures encompass risk identification, analysis, response, control measures, and risk monitoring[131](index=131&type=chunk) - The Board believes the Group's risk management and internal control systems have no material issues, with sufficient staff and resources, and are regularly reviewed by professional consultants[135](index=135&type=chunk) [Remuneration of Senior Management](index=34&type=section&id=6.6%20Remuneration%20of%20Senior%20Management) For the year ended April 30, 2019, four senior management personnel received remuneration between HK$500,001 and HK$1,000,000, with detailed disclosures for directors' remuneration and the five highest-paid individuals provided in the consolidated financial statements Senior Management Remuneration Range | Remuneration Range | Number of Individuals (2019) | | :--- | :--- | | HK$500,001 to HK$1,000,000 | 4 | - Details of directors' remuneration and the five highest-paid individuals are disclosed in Note 12 to the consolidated financial statements[136](index=136&type=chunk) [Responsibilities of Directors and Auditors for Consolidated Financial Statements](index=34&type=section&id=6.7%20Responsibilities%20of%20Directors%20and%20Auditors%20for%20Consolidated%20Financial%20Statements) Directors affirm responsibility for preparing consolidated financial statements that fairly represent the Group's financial position using the going concern basis, while the independent auditor's report outlines their responsibilities regarding these statements - Directors confirm responsibility for preparing consolidated financial statements that truly and fairly reflect the Group's state of affairs, results, and cash flows, in compliance with relevant accounting standards and regulations[137](index=137&type=chunk) - Directors continue to adopt the going concern basis in preparing the consolidated financial statements, as there are no material doubts regarding the ability to continue as a going concern[137](index=137&type=chunk) - The statement of auditors' responsibilities regarding the consolidated financial statements is contained in the independent auditor's report[138](index=138&type=chunk) [Shareholders' Meetings and Rights](index=35&type=section&id=6.8%20Shareholders'%20Meetings%20and%20Rights) Annual General Meetings serve as a platform for communication between the Board and shareholders, with directors and external auditors in attendance, and shareholders possess rights to requisition extraordinary general meetings, nominate directors, and submit inquiries - The Annual General Meeting serves as a direct communication platform between the Board and shareholders, attended by directors (including independent non-executive directors) and external auditors[140](index=140&type=chunk) - Shareholders holding not less than one-tenth of the Company's paid-up share capital carrying voting rights may requisition an extraordinary general meeting[142](index=142&type=chunk) - Shareholders nominating director candidates must submit written notice within a specified period[143](index=143&type=chunk) - Shareholders may submit inquiries and opinions in writing to the Company's head office or via email[144](index=144&type=chunk)[145](index=145&type=chunk) [Investor Relations and Constitutional Documents](index=36&type=section&id=6.9%20Investor%20Relations%20and%20Constitutional%20Documents) The Group communicates information to investors through various channels, including general meetings, announcements, and financial reports, encouraging shareholder participation, and reported no material changes to its constitutional documents for the year ended April 30, 2019 - The Group disseminates information to the public through various channels, including general meetings, announcements, and financial reports, and provides updates on its company website[148](index=148&type=chunk) - The Company encourages all shareholders to attend general meetings to maintain good and effective communication[149](index=149&type=chunk) - For the year ended April 30, 2019, there were no material changes to the Company's constitutional documents[150](index=150&type=chunk) [Directors' Report](index=37&type=section&id=7.%20Directors'%20Report) This report provides an overview of the Company's structure, business operations, financial performance, capital structure, director information, and key disclosures for the fiscal year [Company Profile and Business Review](index=37&type=section&id=7.1%20Company%20Profile%20and%20Business%20Review) The Company, an investment holding company incorporated in the Cayman Islands, primarily engages in slope, foundation, and general building works in Hong Kong through its subsidiaries, with detailed business review, risks, environmental policies, and compliance outlined in the Management Discussion and Analysis - The Company was incorporated as an exempted company in the Cayman Islands on May 20, 2015[153](index=153&type=chunk) - The Company is an investment holding company, with its subsidiaries primarily undertaking slope engineering, foundation engineering, and other general building works in Hong Kong[154](index=154&type=chunk) - An analysis of the Group's operating segment performance is provided in Note 5 to the consolidated financial statements[155](index=155&type=chunk) [Financial Results and Distributions](index=37&type=section&id=7.2%20Financial%20Results%20and%20Distributions) The Group recorded a loss for the year ended April 30, 2019, and the Board does not recommend a final dividend, with a summary of results and balance sheet available on page 104 of the annual report - The Group recorded a loss for the year ended April 30, 2019[157](index=157&type=chunk) - The Board does not recommend the payment of a final dividend to shareholders for the year ended April 30, 2019[158](index=158&type=chunk) [Assets and Share Capital Structure](index=38&type=section&id=7.3%20Assets%20and%20Share%20Capital%20Structure) The Group's property, plant, and equipment saw changes during the reporting period, with details of major subsidiaries disclosed, and as of April 30, 2019, the total issued share capital was 1.44 billion shares at HK$0.01 par value, with distributable reserves of approximately HK$31.7 million - Details of changes in property, plant, and equipment are provided in Note 13 to the consolidated financial statements[161](index=161&type=chunk) - Details of major subsidiaries are provided in Note 14 to the consolidated financial statements[162](index=162&type=chunk) - As of April 30, 2019, the total issued share capital of the Company was **1,440,000,000 shares**, with a par value of **HK$0.01** per share[163](index=163&type=chunk) - As of April 30, 2019, the Company's distributable reserves amounted to approximately **HK$31.7 million**[167](index=167&type=chunk) [Directors and Remuneration](index=38&type=section&id=7.4%20Directors%20and%20Remuneration) The Board has established a Remuneration Committee to review compensation policies, with directors' remuneration determined by economic conditions, market rates, responsibilities, and individual performance; all directors have service agreements effective July 26, 2017, and Ms. Meng Ying and Mr. Zheng Xuchen are eligible for re-election at the upcoming AGM - Directors' remuneration is determined by reference to economic conditions, market conditions, responsibilities, and individual performance, and is reviewed by the Remuneration Committee[165](index=165&type=chunk) - All directors have entered into service agreements with the Company, with terms commencing from July 26, 2017[172](index=172&type=chunk) - Ms. Meng Ying and Mr. Zheng Xuchen will retire from their directorships at the upcoming Annual General Meeting and are eligible and willing to offer themselves for re-election[172](index=172&type=chunk) [Disclosure of Interests](index=40&type=section&id=7.5%20Disclosure%20of%20Interests) As of April 30, 2019, Mr. Zhou Ying held a 75% long position in the Company's shares through controlled corporations, with United Financial Holdings Group Co., Ltd. and Century Investment Holdings Limited also holding 75% as major shareholders Directors' and Chief Executive's Long Positions in the Company's Shares | Director's Name | Capacity/Nature | Number of Shares Held/Interested | Percentage of Shareholding | | :--- | :--- | :--- | :--- | | Mr. Zhou Ying | Interest in controlled corporation | 1,080,000,000 | 75% | Substantial Shareholders' Long Positions in the Company's Shares | Name | Capacity/Nature | Number of Shares Held/Interested | Percentage of Shareholding | | :--- | :--- | :--- | :--- | | United Financial Holdings Group Co., Ltd. | Beneficial owner | 1,080,000,000 | 75% | | Century Investment Holdings Limited | Interest in controlled corporation | 1,080,000,000 | 75% | [Major Customers and Suppliers](index=41&type=section&id=7.6%20Major%20Customers%20and%20Suppliers) The Group exhibits high revenue concentration from its top five and largest customers, and similar procurement concentration from its top five and largest suppliers, indicating a degree of concentration risk, with no directors or major shareholders holding interests in these key entities Proportion of Major Customers and Suppliers | Metric | 2019 (%) | 2018 (%) | | :--- | :--- | :--- | | Revenue from five largest customers | 95.4 | 90.30 | | Revenue from largest customer | 50.6 | 48.70 | | Purchases from five largest suppliers | 94.5 | 91.54 | | Purchases from largest supplier | 50.3 | 45.94 | - To the best of the Directors' knowledge, none of the Directors, their close associates, or any shareholder holding more than **5%** of the Company's issued shares had any interest in the Group's five largest customers and suppliers[179](index=179&type=chunk) [Dividend Policy and Connected Transactions](index=42&type=section&id=7.7%20Dividend%20Policy%20and%20Connected%20Transactions) The Company has adopted a dividend policy aiming for continuity, stability, and sustainability, balancing profit distribution with retention, and while no disclosable connected transactions were entered into during the reporting period, related party transactions constituting fully exempt continuing connected transactions are disclosed in Note 25 to the consolidated financial statements - The Company's dividend policy aims for continuity, stability, and sustainability, balancing profit distribution with retention, while considering earnings per share, return on investment, financial position, and market sentiment[182](index=182&type=chunk) - During the reporting period, the Company did not enter into any connected transactions requiring disclosure under the GEM Listing Rules[185](index=185&type=chunk) - Note 25 to the consolidated financial statements discloses related party transactions that constitute fully exempt continuing connected transactions[185](index=185&type=chunk) [Share Option Scheme and Post-Reporting Period Events](index=43&type=section&id=7.8%20Share%20Option%20Scheme%20and%20Post-Reporting%20Period%20Events) The Company adopted a share option scheme on October 15, 2015, to attract and retain talent, though no options have been granted since its adoption; post-reporting period, new shares were placed on May 8, 2019, raising funds for 5G business expansion, existing construction business, and general working capital - The Company conditionally adopted a share option scheme on October 15, 2015, aimed at attracting and retaining high-caliber personnel, but no share options have been granted since its adoption[188](index=188&type=chunk) - Eligible participants of the share option scheme include Group employees, directors, consultants, suppliers, and customers[188](index=188&type=chunk) - On May 8, 2019, the Company allotted and issued **137,200,000** new ordinary shares, raising **HK$48.946 million** (net of expenses) for 5G business expansion, existing construction business, and general working capital[194](index=194&type=chunk) [Change of Auditors and Public Float](index=44&type=section&id=7.9%20Change%20of%20Auditors%20and%20Public%20Float) The Company changed its auditors on June 20, 2019, with Grant Thornton Hong Kong Limited resigning and Kaiyuan Xinde Certified Public Accountants Limited appointed, and maintained sufficient public float as required by GEM Listing Rules as of the annual report date - On June 20, 2019, Grant Thornton Hong Kong Limited resigned, and Kaiyuan Xinde Certified Public Accountants Limited was appointed as the Company's auditor[197](index=197&type=chunk) - As of the date of this annual report, the Company maintained a sufficient public float as required by the GEM Listing Rules[196](index=196&type=chunk) [Independent Auditor's Report](index=45&type=section&id=8.%20Independent%20Auditor's%20Report) This report presents the independent auditor's opinion on the Group's consolidated financial statements, outlining the basis of opinion, key audit matters, and responsibilities of both directors and auditors [Opinion and Basis for Opinion](index=45&type=section&id=8.1%20Opinion%20and%20Basis%20for%20Opinion) Independent auditor Kaiyuan Xinde Certified Public Accountants Limited opines that the Group's consolidated financial statements fairly present its financial position as of April 30, 2019, and its financial performance and cash flows for the year then ended, prepared in accordance with Hong Kong Financial Reporting Standards and the Hong Kong Companies Ordinance, with the audit conducted under Hong Kong Standards on Auditing and ethical codes - The auditor believes the consolidated financial statements truly and fairly reflect the Group's financial position, performance, and cash flows in accordance with Hong Kong Financial Reporting Standards[203](index=203&type=chunk) - The audit was conducted in accordance with Hong Kong Standards on Auditing, with the auditor independent of the Group and adhering to the Code of Ethics for Professional Accountants[204](index=204&type=chunk) [Key Audit Matters](index=45&type=section&id=8.2%20Key%20Audit%20Matters) Key audit matters include the accounting for construction contracts, which involves significant management estimates for revenue and cost recognition, and the impairment assessment of trade receivables and contract assets, requiring high-level judgment for expected credit losses - Accounting for construction contracts is a key audit matter due to the significance of revenue and direct costs to the consolidated financial statements, involving significant management estimates and judgments regarding contract revenue, costs, and variation orders[207](index=207&type=chunk) - Auditor procedures for construction contracts include sampling contract costs, assessing budget reasonableness, examining contract terms, and verifying progress certificates[208](index=208&type=chunk)[209](index=209&type=chunk) - Impairment assessment of trade receivables and contract assets is a key audit matter, requiring high-level judgment and estimation by management based on the expected credit loss model under HKFRS 9[210](index=210&type=chunk) - Auditor procedures for impairment assessment include reviewing collection process controls, confirming receivable balances, evaluating aging and management judgment, and reviewing post-year-end settlements[211](index=211&type=chunk) [Information Other Than the Consolidated Financial Statements and Auditor's Report](index=48&type=section&id=8.3%20Information%20Other%20Than%20the%20Consolidated%20Financial%20Statements%20and%20Auditor's%20Report) Directors are responsible for information in the annual report beyond the consolidated financial statements and auditor's report, which the auditor does not cover but reviews for material inconsistencies or misstatements - Directors are responsible for all other information in the annual report apart from the consolidated financial statements and the auditor's report[213](index=213&type=chunk) - The auditor's opinion does not cover other information, but they review it for material inconsistencies or misstatements with the consolidated financial statements[214](index=214&type=chunk) [Responsibilities of Directors and Auditors for the Consolidated Financial Statements](index=48&type=section&id=8.4%20Responsibilities%20of%20Directors%20and%20Auditors%20for%20the%20Consolidated%20Financial%20Statements) Directors are responsible for preparing fair consolidated financial statements under HKFRS and maintaining internal controls, while auditors aim to obtain reasonable assurance that the statements are free from material misstatement due to fraud or error, communicating audit scope and findings to the Audit Committee - Directors are responsible for preparing true and fair consolidated financial statements in accordance with Hong Kong Financial Reporting Standards and for internal controls[215](index=215&type=chunk) - The auditor's objective is to obtain reasonable assurance that the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error[216](index=216&type=chunk) - Auditors exercise professional judgment and maintain professional skepticism, identify and assess risks of material misstatement, and communicate audit scope, timing, and significant findings with the Audit Committee[218](index=218&type=chunk)[219](index=219&type=chunk) [Consolidated Statement of Profit or Loss and Other Comprehensive Income](index=51&type=section&id=9.%20Consolidated%20Statement%20of%20Profit%20or%20Loss%20and%20Other%20Comprehensive%20Income) This statement presents the Group's consolidated profit or loss and other comprehensive income for the year ended April 30, 2019, showing increased revenue but an expanded annual loss due to higher direct costs and administrative expenses, and the initial recognition of exchange differences from translating overseas operations' financial statements Summary of Consolidated Statement of Profit or Loss and Other Comprehensive Income (HK$ Thousand) | Metric | 2019 (HK$ Thousand) | 2018 (HK$ Thousand) | | :--- | :--- | :--- | | Revenue | 158,401 | 137,802 | | Direct Costs | (153,018) | (135,980) | | Gross Profit | 5,383 | 1,822 | | Other Income | 3,189 | 1,012 | | Administrative Expenses | (21,456) | (13,480) | | Finance Costs | (12) | (12) | | Loss Before Income Tax | (12,896) | (10,658) | | Income Tax Expense | (630) | (140) | | Loss for the Year | (13,526) | (10,798) | | Exchange differences on translation of financial statements of overseas operations | (1,027) | – | | Total Comprehensive Expense for the Year | (14,553) | (10,798) | | Basic and Diluted Loss Per Share (HK Cents) | (0.94) | (0.75) | [Consolidated Statement of Financial Position](index=52&type=section&id=10.%20Consolidated%20Statement%20of%20Financial%20Position) This statement presents the Group's consolidated financial position as of April 30, 2019, showing a slight increase in non-current assets, higher total current assets, but a significant rise in current liabilities, leading to a decrease in net current assets and total assets less current liabilities Summary of Consolidated Statement of Financial Position (HK$ Thousand) | Metric | 2019 (HK$ Thousand) | 2018 (HK$ Thousand) | | :--- | :--- | :--- | | **Non-current Assets** | | | | Property, Plant and Equipment | 1,809 | 1,506 | | **Current Assets** | | | | Trade and Other Receivables | 78,264 | 71,856 | | Contract Assets | 23,186 | – | | Amounts Due from Customers for Construction Contracts | – | 6,295 | | Cash and Bank Balances | 33,682 | 19,115 | | **Total Current Assets** | **135,752** | **118,036** | | **Current Liabilities** | | | | Trade and Other Payables | 70,790 | 42,920 | | Contract Liabilities | 2,490 | – | | Amounts Due to Customers for Construction Contracts | – | 1,413 | | Amounts Due to Directors | 1,202 | 2,261 | | **Total Current Liabilities** | **74,505** | **46,617** | | **Net Current Assets** | **61,247** | **71,419** | | **Net Assets** | **63,052** | **72,898** | | **Equity and Reserves** | | | | Share Capital | 14,400 | 14,400 | | Reserves | 48,652 | 58,498 | | **Total Equity Attributable to Owners of the Company** | **63,052** | **72,898** | [Consolidated Statement of Changes in Equity](index=53&type=section&id=11.%20Consolidated%20Statement%20of%20Changes%20in%20Equity) This statement outlines the Group's consolidated changes in equity for the year ended April 30, 2019, showing a decrease in total equity due to the annual loss and exchange differences, with the opening retained earnings balance restated due to the initial application of HKFRS 15 Summary of Consolidated Statement of Changes in Equity (HK$ Thousand) | Metric | Share Capital | Share Premium | Merger Reserve | Exchange Reserve | Retained Earnings | Total | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Balance at May 1, 2017 | 14,400 | 24,457 | 18,001 | – | 26,838 | 83,696 | | Loss and Total Comprehensive Expense for the Year (2017/18) | – | – | – | – | (10,798) | (10,798) | | Balance at April 30, 2018 | 14,400 | 24,457 | 18,001 | – | 16,040 | 72,898 | | Impact of applying HKFRS 15 (May 1, 2018) | – | – | – | – | 4,707 | 4,707 | | Balance at May 1, 2018 (Restated) | 14,400 | 24,457 | 18,001 | – | 20,747 | 77,605 | | Loss for the Year (2018/19) | – | – | – | – | (13,526) | (13,526) | | Other Comprehensive Expense for the Year (Exchange differences) | – | – | – | (1,027) | – | (1,027) | | Total Comprehensive Expense for the Year (2018/19) | – | – | – | (1,027) | (13,526) | (14,553) | | Balance at April 30, 2019 | 14,400 | 24,457 | 18,001 | (1,027) | 7,221 | 63,052 | - Due to the initial application of HKFRS 15, the opening retained earnings balance as of May 1, 2018, increased by **HK$4,707 thousand**[227](index=227&type=chunk) - FY2018/19 recorded a negative exchange reserve of **HK$1,027 thousand**, reflecting exchange differences from translating overseas operations' financial statements[227](index=227&type=chunk) [Consolidated Statement of Cash Flows](index=54&type=section&id=12.%20Consolidated%20Statement%20of%20Cash%20Flows) This statement presents the Group's consolidated cash flows for the year ended April 30, 2019, showing net cash outflow from operating activities, net cash inflow from investing activities, and net cash outflow from financing activities, resulting in a net increase in cash and cash equivalents, affected by foreign exchange rate changes Summary of Consolidated Statement of Cash Flows (HK$ Thousand) | Metric | 2019 (HK$ Thousand) | 2018 (HK$ Thousand) | | :--- | :--- | :--- | | Net Cash (Used in)/Generated from Operating Activities | (2,455) | 16,074 | | Net Cash Generated from/(Used in) Investing Activities | 19,143 | (66,210) | | Net Cash (Used in)/Generated from Financing Activities | (1,094) | 2,226 | | Net Increase/(Decrease) in Cash and Cash Equivalents | 15,594 | (47,910) | | Effect of Foreign Exchange Rate Changes | (1,027) | – | | Cash and Cash Equivalents at Beginning of Year | 19,115 | 67,025 | | Cash and Cash Equivalents at End of Year | 33,682 | 19,115 | - In 2019, operating activities shifted from net cash inflow to net cash outflow, primarily influenced by changes in trade and other receivables[231](index=231&type=chunk) - Investing activities shifted from a net outflow in 2018 to a net inflow in 2019, mainly due to a **HK$20 million** decrease in bank deposits with original maturity exceeding three months[231](index=231&type=chunk) - Net cash outflow from financing activities was primarily due to repayment of advances by directors[233](index=233&type=chunk) [Notes to the Consolidated Financial Statements](index=56&type=section&id=13.%20Notes%20to%20the%20Consolidated%20Financial%20Statements) This section provides detailed explanations and breakdowns of the figures presented in the consolidated financial statements, covering significant accounting policies, estimates, and financial risk management [1. General Information](index=56&type=section&id=13.1%20General%20Information) Zhejiang United Investment Holdings Group Co., Ltd., incorporated in the Cayman Islands and listed on GEM, primarily engages in slope, foundation, and general building works in Hong Kong, with Mr. Zhou Ying as its controlling shareholder - The Company was incorporated in the Cayman Islands on May 20, 2015, and listed on GEM of the Stock Exchange on November 2, 2015[235](index=235&type=chunk) - The Group primarily undertakes slope engineering, foundation engineering, and other general building works in Hong Kong[235](index=235&type=chunk) - Mr. Zhou Ying is the controlling shareholder of the Company, holding **75%** of the Company's issued shares through Century Investment Holdings Limited and United Financial Holdings Group Co., Ltd[235](index=235&type=chunk) [2. Summary of Significant Accounting Policies](index=56&type=section&id=13.2%20Summary%20of%20Significant%20Accounting%20Policies) This section outlines the Group's key accounting policies for preparing consolidated financial statements, including the basis of preparation, consolidation, property, plant and equipment, financial instruments, impairment, contract assets and liabilities, construction contracts, revenue recognition, and related party definitions - The consolidated financial statements are prepared in accordance with Hong Kong Financial Reporting Standards, presented in HKD, and on a historical cost basis[236](index=236&type=chunk)[238](index=238&type=chunk) - Financial assets are classified and measured at amortized cost, fair value through profit or loss, or fair value through other comprehensive income from May 1, 2018[246](index=246&type=chunk)[249](index=249&type=chunk) - Impairment of financial assets adopts the expected credit loss model under HKFRS 9, with trade receivables and contract assets using a simplified approach to recognize lifetime expected credit losses[259](index=259&type=chunk)[262](index=262&type=chunk) - Revenue from construction contracts is recognized over time, with progress measured by comparing costs incurred to total estimated costs[289](index=289&type=chunk) - The Group classifies leases as finance leases and operating leases, accounted for differently[277](index=277&type=chunk) [2.1 Basis of Preparation](index=56&type=section&id=2.1%20Basis%20of%20Preparation) The consolidated financial statements are prepared in HKD under Hong Kong Financial Reporting Standards on a historical cost basis, involving accounting estimates and assumptions where actual results may differ - The consolidated financial statements are prepared in accordance with Hong Kong Financial Reporting Standards and comply with the disclosure requirements of the Hong Kong Companies Ordinance and the GEM Listing Rules[236](index=236&type=chunk) - The statements are presented in HKD, with all amounts rounded to the nearest thousand, and prepared on a historical cost basis[238](index=238&type=chunk) [2.2 Basis of Consolidation](index=57&type=section&id=2.2%20Basis%20of%20Consolidation) The consolidated financial statements include the Company and its subsidiaries, with subsidiaries fully consolidated from the date control is transferred until it ceases, and intercompany transactions and unrealized gains are eliminated - Subsidiaries are fully consolidated from the date control is transferred and deconsolidated from the date control ceases[239](index=239&type=chunk) - Intercompany transactions, balances, and unrealized gains within the Group are eliminated[239](index=239&type=chunk) [2.3 Property, Plant and Equipment](index=58&type=section&id=2.3%20Property,%20Plant%20and%20Equipment) Property, plant, and equipment are recorded at cost less accumulated depreciation and impairment losses, with depreciation calculated using the straight-line method over estimated useful lives and reviewed at each reporting date - Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses[243](index=243&type=chunk) Annual Depreciation Rates for Property, Plant and Equipment | Asset Class | Annual Rate | | :--- | :--- | | Plant and Machinery | 30% | | Motor Vehicles | 30% | | Leasehold Improvements | 25% | | Furniture and Fixtures | 20% | [2.4 Financial Instruments](index=59&type=section&id=2.4%20Financial%20Instruments) Financial assets and liabilities are recognized when the Group becomes a party to contractual provisions; from May 1, 2018, financial assets are classified based on business model and contractual cash flow characteristics, while financial liabilities are initially measured at fair value and subsequently at amortized cost - Financial assets and financial liabilities are recognized when the Group becomes a party to the contractual provisions of the instrument[245](index=245&type=chunk) - From May 1, 2018, financial assets are classified based on the entity's business model for managing financial assets and the contractual cash flow characteristics of the financial assets[247](index=247&type=chunk) - The Group's trade and other receivables, and cash and bank balances are measured at amortized cost[250](index=250&type=chunk) - Financial liabilities are initially measured at fair value and subsequently measured at amortized cost using the effective interest method[255](index=255&type=chunk) [2.5 Impairment of Financial Assets](index=62&type=section&id=2.5%20Impairment%20of%20Financial%20Assets) From May 1, 2018, the Group adopted HKFRS 9's expected credit loss model for financial asset impairment, applying a simplified approach for trade receivables and contract assets to recognize lifetime expected credit losses, a change from the previous objective impairment evidence basis - From May 1, 2018, the expected credit loss model under HKFRS 9 is applied to continuously measure credit risk associated with financial assets[259](index=259&type=chunk)[260](index=260&type=chunk) - Trade receivables and contract assets adopt a simplified approach, recognizing provisions based on lifetime expected credit losses, adjusted for past credit loss experience and forward-looking factors[262](index=262&type=chunk) - Prior to May 1, 2018, financial asset impairment was based on objective evidence, such as debtor financial difficulty or breach of contract[264](index=264&type=chunk)[265](index=265&type=chunk) [2.6 Contract Assets and Contract Liabilities](index=64&type=section&id=2.6%20Contract%20Assets%20and%20Contract%20Liabilities) Contract assets are recognized when revenue is recognized before the Group has an unconditional right to consideration, reclassified to receivables once unconditional, while contract liabilities are recognized when customers pay consideration before the Group recognizes the related revenue - Contract assets are recognized when revenue is recognized before the Group has an unconditional right to consideration under the payment terms of the contract[269](index=269&type=chunk) - Contract liabilities are recognized when customers pay consideration before the Group recognizes the related revenue[269](index=269&type=chunk) [2.7 Impairment of Non-Financial Assets](index=65&type=section&id=2.7%20Impairment%20of%20Non-Financial%20Assets) Property, plant, and equipment and investments in subsidiaries are subject to impairment testing, with impairment losses immediately recognized as expenses when the asset's carrying amount exceeds its recoverable amount, which is the higher of fair value less costs to sell and value in use - Property, plant and equipment and investments in subsidiaries are subject to impairment testing[271](index=271&type=chunk) - Impairment losses are recognized immediately as an expense for the amount by which the asset's carrying amount exceeds its recoverable amount[271](index=271&type=chunk) [2.8 Construction Contracts](index=65&type=section&id=2.8%20Construction%20Contracts) The Group's construction contracts are fixed-price, with contract costs recognized as expenses by reference to the stage of completion at the reporting date if the outcome can be reliably estimated, and expected losses are recognized immediately - The Group's construction contracts are on a fixed-price basis[273](index=273&type=chunk) - Contract costs are recognized as expenses by reference to the stage of completion of the contract at the reporting date, and expected losses are recognized immediately[273](index=273&type=chunk) [2.9 Cash and Cash Equivalents](index=66&type=section&id=2.9%20Cash%20and%20Cash%20Equivalents) Cash and cash equivalents include cash at bank and in hand, demand deposits, and highly liquid short-term investments with original maturities of three months or less, readily convertible to known amounts of cash and subject to insignificant risk of changes in value - Cash and cash equivalents comprise cash at bank and in hand, demand deposits, and highly liquid short-term investments[275](index=275&type=chunk) [2.10 Leases](index=66&type=section&id=2.10%20Leases) The Group classifies leases as finance or operating leases; assets under finance leases are capitalized at the lower of fair value and the present value of minimum lease payments, while operating lease payments and income are recognized on a straight-line basis over the lease term - The Group classifies leases as finance leases if they transfer substantially all the risks and rewards of ownership to the Group, otherwise as operating leases[277](index=277&type=chunk) - Assets acquired under finance leases are capitalized at the lower of fair value and the present value of the minimum lease payments, and are included in property, plant and equipment[279](index=279&type=chunk) - Operating lease expenses and income are both recognized on a straight-line basis over the lease term[278](index=278&type=chunk)[281](index=281&type=chunk) [2.11 Provisions, Contingent Liabilities and Contingent Assets](index=67&type=section&id=2.11%20Provisions,%20Contingent%20Liabilities%20and%20Contingent%20Assets) Provisions are recognized when the Group has a present obligation from past events, an outflow of economic benefits is probable, and the amount can be reliably estimated; contingent liabilities are disclosed when an outflow is not probable or cannot be reliably estimated, and contingent assets represent possible economic inflows not yet meeting asset recognition criteria - Provisions are recognized when the Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation[282](index=282&type=chunk) - Contingent liabilities are disclosed when the possibility of an outflow of economic benefits is not probable or the amount cannot be reliably estimated[283](index=283&type=chunk) [2.12 Share Capital](index=67&type=section&id=2.12%20Share%20Capital) Ordinary shares are classified as equity, with share capital determined by the par value of issued shares, and transaction costs related to share issuance are deducted from share premium - Ordinary shares are classified as equity, and share capital is determined by the par value of issued shares[285](index=285&type=chunk) - Transaction costs directly attributable to the issue of new shares are deducted from share premium[285](index=285&type=chunk) [2.13 Revenue Recognition](index=68&type=section&id=2.13%20Revenue%20Recognition) Revenue, primarily from slope and foundation engineering in Hong Kong, is recognized using a five-step model when customers obtain control of promised goods and services, with construction contract revenue recognized over time, and interest and rental income recognized using the effective interest method and straight-line method, respectively - Revenue primarily arises from providing slope engineering and foundation engineering services in Hong Kong[287](index=287&type=chunk) - Revenue is recognized using a five-step model, and when customers obtain control of the promised goods and services[288](index=288&type=chunk) - Revenue from construction contracts is recognized over time as the Group creates and enhances an asset that the customer controls as the Group performs[289](index=289&type=chunk) - Interest income is accrued using the effective interest method, and rental income is recognized on a straight-line basis over the lease term[290](index=290&type=chunk)[291](index=291&type=chunk) [2.14 Employee Benefits](index=69&type=section&id=2.14%20Employee%20Benefits) The Group provides defined contribution retirement benefit plans (MPF) for Hong Kong employees and participates in local central pension schemes for China subsidiary employees, with contributions recognized as expenses when employees render service, and earned annual leave recognized when entitled - The Group participates in a defined contribution retirement benefit scheme (MPF) for its Hong Kong employees and a local central pension scheme for employees of its PRC subsidiaries[292](index=292&type=chunk) - Contributions are recognized as an expense in profit or loss as employees render services during the year[292](index=292&type=chunk) - Entitled annual leave for employees is recognized when it accrues, while non-accumulating compensated absences like sick leave and maternity leave are recognized when the absence occurs[293](index=293&type=chunk)[294](index=294&type=chunk) [2.15 Income Tax Accounting](index=69&type=section&id=2.15%20Income%20Tax%20Accounting) Income tax comprises current and deferred tax, with current income tax calculated on taxable profit for the year and all changes recognized in profit or loss; deferred tax is calculated on temporary differences between asset and liability carrying amounts and their tax bases, presented net under specific conditions - Income tax comprises current and deferred tax, with current income tax calculated on the taxable profit for the year[295](index=295&type=chunk) - Deferred tax is calculated using the liability method on temporary differences between the carrying amounts of assets and liabilities and their respective tax bases[295](index=295&type=chunk) - Current tax assets and liabilities and deferred tax assets and liabilities are only presented net under specific conditions[298](index=298&type=chunk) [2.16 Segment Reporting](index=71&type=section&id=2.16%20Segment%20Reporting) The Group identifies operating segments based on internal financial information regularly reported to the chief operating decision maker; for the year, its slope and

[Financial Summary](index=4&type=section&id=Financial%20Summary) The company's nine-month financial performance shows increased revenue but expanded losses, with no dividend proposed Financial Summary for the Nine Months Ended January 31, 2019 | Metric | Nine Months Ended Jan 31, 2019 | Nine Months Ended Jan 31, 2018 | Y-o-Y Change | | :--- | :--- | :--- | :--- | | Revenue | Approx. HK$111.0 Million | Approx. HK$86.9 Million | +27.7% | | Loss Attributable to Equity Holders | Approx. HK$7.2 Million | Approx. HK$3.7 Million | Loss expanded | | Basic Loss Per Share | Approx. HK$0.5 Cents | Approx. HK$0.26 Cents | Loss expanded | | Proposed Dividend | None | None | - | [Management Discussion and Analysis](index=5&type=section&id=Management%20Discussion%20and%20Analysis) This section reviews the Group's operational performance, financial position, and future outlook, highlighting key challenges and strategic initiatives [Business Review and Outlook](index=5&type=section&id=Business%20Review%20and%20Outlook) The Group's core business in Hong Kong's slope and foundation engineering faces intense competition and rising costs, prompting expansion into mainland China despite a terminated acquisition, with future focus on both markets - The core business involves undertaking slope, foundation, and general building works in Hong Kong, recognized as a specialist contractor for public works by the Hong Kong Government[7](index=7&type=chunk) - The Hong Kong construction market faces intense competition and rising operating costs, including subcontracting fees, posing challenges to the Group's operations[7](index=7&type=chunk)[15](index=15&type=chunk) - To expand business and revenue streams, the Group actively pursued opportunities in mainland China: terminated the acquisition of Gain Link Enterprises Limited, established a joint venture with Zhejiang Guangcheng Construction Co., Ltd. for construction projects, and entered a strategic cooperation agreement with Zhejiang Yunbo Technology Co., Ltd. for underground parking projects[9](index=9&type=chunk)[10](index=10&type=chunk)[11](index=11&type=chunk)[12](index=12&type=chunk) - The company attempted financing activities to support business development, but subsequently terminated an agreement to place up to **288 million shares**, and a letter of intent with Hangzhou Guohan Financial Holdings Group for **HK$50 million** convertible bonds also lapsed[13](index=13&type=chunk)[14](index=14&type=chunk)[15](index=15&type=chunk) [Financial Review](index=10&type=section&id=Financial%20Review) During the reporting period, total revenue increased by 27.7% to HK$111 million, driven by slope and foundation works, but gross profit declined by 41.1% due to rising costs, leading to an expanded loss of HK$7.2 million attributable to equity holders Revenue by Business Segment (Nine Months Ended January 31) | Business Type | 2019 (HK$ Million) | 2018 (HK$ Million) | Y-o-Y Change | | :--- | :--- | :--- | :--- | | Slope Works | 93.3 | 80.1 | +16.5% | | Foundation Works | 17.5 | 6.8 | +157.4% | | **Total Revenue** | **111.0** | **86.9** | **+27.7%** | - Gross profit decreased by approximately **41.1%** from **HK$5.6 million** to **HK$3.3 million**, with the gross margin falling from **6.5%** to **3.0%**, primarily due to increased subcontracting fees and overall contract costs from intensified competition in the Hong Kong construction market[18](index=18&type=chunk) - Administrative expenses significantly increased by **53.4%** year-on-year to **HK$13.5 million**, mainly due to additional rental and office expenses of approximately **HK$4.3 million** incurred in Hong Kong and China[20](index=20&type=chunk) - Cumulatively, the loss attributable to equity holders for the nine months ended January 31, 2019, expanded to approximately **HK$7.2 million**, compared to **HK$3.7 million** in the prior year period[21](index=21&type=chunk) [Disclosure of Interests](index=12&type=section&id=Disclosure%20of%20Interests) This section details the interests of directors, chief executives, and substantial shareholders in the company's shares and related securities [Directors' and Chief Executive's Interests](index=12&type=section&id=Directors'%20and%20Chief%20Executive's%20Interests%20in%20Shares%2C%20Underlying%20Shares%20and%20Debentures) As of January 31, 2019, Mr. Zhou Ying, through his wholly-owned controlled corporation, was deemed to hold an interest in 1,080,000,000 shares, representing 75% of the company's issued share capital Directors' Long Positions in the Company's Shares | Name of Director | Capacity/Nature of Interest | Number of Shares Held | Approximate Percentage of Shareholding | | :--- | :--- | :--- | :--- | | Mr. Zhou Ying | Interest in Controlled Corporation | 1,080,000,000 | 75% | [Major Shareholders' Interests](index=13&type=section&id=Major%20Shareholders'%20and%20Other%20Persons'%20Interests%20in%20Shares%2C%20Underlying%20Shares%20and%20Debentures) As of January 31, 2019, United Financial Holdings Group Limited and Century Investment Holdings Limited were major shareholders, each holding 75% of the company's equity as beneficial owner and through a controlled corporation, respectively Major Shareholders' Long Positions in the Company's Shares | Name | Capacity/Nature of Interest | Number of Shares Held | Approximate Percentage of Shareholding | | :--- | :--- | :--- | :--- | | United Financial Holdings Group Limited | Beneficial Owner | 1,080,000,000 | 75% | | Century Investment Holdings Limited | Interest in Controlled Corporation | 1,080,000,000 | 75% | [Other Information](index=14&type=section&id=Other%20Information) This section covers corporate governance practices, dividend policy, share option scheme status, and the audit committee's review [Corporate Governance](index=14&type=section&id=Corporate%20Governance%20Code) The company generally complied with the Corporate Governance Code, with one deviation where the roles of Chairman and Chief Executive Officer were not separated, both held by Mr. Zhou Ying, which the board believes provides strong leadership - The company complied with the Corporate Governance Code under the GEM Listing Rules, except for a deviation from Code Provision A.2.1, where the roles of Chairman and Chief Executive Officer were not segregated, both held by Mr. Zhou Ying[29](index=29&type=chunk) [Dividends](index=15&type=section&id=Dividends) The Board of Directors does not recommend the payment of any dividend for the nine months ended January 31, 2019 - The Board does not recommend the payment of any dividend for the nine months ended January 31, 2019 (2018: nil)[31](index=31&type=chunk) [Share Option Scheme](index=15&type=section&id=Share%20Option%20Scheme) The company adopted a share option scheme in 2015 but has not granted any options since its adoption, with no outstanding options at the end of the reporting period - No share options have been granted by the company since the adoption of the share option scheme in 2015[32](index=32&type=chunk) [Audit Committee](index=15&type=section&id=Audit%20Committee) The Audit Committee, comprising three independent non-executive directors, reviewed the unaudited condensed consolidated results for the quarter, confirming compliance with applicable accounting standards and listing rules, and adequate disclosure - The Audit Committee comprises three independent non-executive directors, with Mr. Wong Man Hin as Chairman[33](index=33&type=chunk) - The Audit Committee has reviewed the quarterly results and deemed them compliant with accounting standards and disclosure requirements[34](index=34&type=chunk) [Condensed Consolidated Financial Statements and Notes](index=17&type=section&id=Condensed%20Consolidated%20Financial%20Statements%20and%20Notes) This section presents the unaudited condensed consolidated financial statements and accompanying notes, providing detailed insights into the Group's financial performance and position [Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income](index=17&type=section&id=Condensed%20Consolidated%20Statement%20of%20Profit%20or%20Loss%20and%20Other%20Comprehensive%20Income%20(Unaudited)) This statement presents the unaudited financial performance for the three and nine months ended January 31, 2019, showing revenue of HK$111 million, gross profit of HK$3.32 million, and a total loss of HK$7.15 million for the nine-month period Summary of Results for the Nine Months Ended January 31 (HK$ Thousand) | Item | 2019 | 2018 | | :--- | :--- | :--- | | Revenue | 110,881 | 86,900 | | Gross Profit | 3,316 | 5,619 | | Administrative Expenses | (13,513) | (8,775) | | Loss Before Income Tax | (6,953) | (3,009) | | Loss for the Period | (7,153) | (3,699) | | Basic Loss Per Share (HK Cents) | (0.50) | (0.26) | [Condensed Consolidated Statement of Changes in Equity](index=18&type=section&id=Condensed%20Consolidated%20Statement%20of%20Changes%20in%20Equity%20(Unaudited)) This statement shows that the Group's total equity decreased from HK$72.90 million to HK$64.81 million for the nine months ended January 31, 2019, primarily due to a loss of HK$7.15 million and exchange differences of HK$0.93 million Summary of Changes in Equity (HK$ Thousand) | Item | Amount | | :--- | :--- | | As at May 1, 2018 | 72,898 | | Loss for the Period | (7,153) | | Exchange Differences on Translation of Financial Statements of Chinese Subsidiaries | (933) | | **As at January 31, 2019** | **64,812** | [Notes to the Condensed Consolidated Financial Statements](index=19&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) These notes provide supplementary explanations for key financial data, detailing revenue by business type, identifying major clients, listing significant expense items like staff costs and subcontracting expenses, and confirming no dividends were proposed for the period Revenue by Business Type (Nine Months Ended January 31, HK$ Thousand) | Business Type | 2019 | 2018 | | :--- | :--- | :--- | | Slope Works | 93,304 | 80,119 | | Foundation Works | 17,502 | 6,781 | | Others | 75 | – | | **Total** | **110,881** | **86,900** | - Significant customer concentration exists, with the Lands Department and Civil Engineering and Development Department being major revenue sources[47](index=47&type=chunk) Key Expense Items (Nine Months Ended January 31, HK$ Thousand) | Item | 2019 | 2018 | | :--- | :--- | :--- | | Total Staff Costs | 4,472 | 3,324 | | Subcontracting Expenses (Included in Direct Costs) | 106,502 | 79,637 | - The Directors do not recommend the payment of a dividend for the nine months ended January 31, 2019[51](index=51&type=chunk)