三和建筑集团(03822) - 2024 - 年度财报

Chairman's Statement The Hong Kong government's commitment to public housing and major infrastructure projects is expected to create significant opportunities for the construction market, despite global economic uncertainties Chairman's Statement The Hong Kong government's commitment to public housing and major infrastructure projects is expected to create significant opportunities for the construction market, despite global economic uncertainties - Hong Kong government actively promotes public housing and large-scale infrastructure projects, including the Northern Metropolis, Kau Yi Chau Artificial Islands, three major trunk roads, and three strategic railways, expected to bring huge opportunities to the construction industry[11][12][13] - The Northern Metropolis project is estimated to take 20 years, covering 300 square kilometers, and will involve extensive new infrastructure, residential, and commercial building construction, expected to accommodate one-third of Hong Kong's population[14] - The Board of Directors maintains a cautiously optimistic view on the long-term prospects of the construction market, believing the Group, as a reputable foundation contractor, will secure more landmark engineering projects[21] Management Discussion and Analysis This section provides an overview of the Group's operational and financial performance, market outlook, and key relationships Business Review The Group's revenue increased by 10% to HK$458 million, primarily driven by the Kai Tak Public Housing (2022) project, despite delays due to complex geological conditions - Kai Tak Public Housing (2022) project was the primary revenue source this year, contributing approximately 81% of the Group's total revenue[35] Annual Revenue Overview | Metric | FY2024 | FY2023 | YoY Change | | :--- | :--- | :--- | :--- | | Total Revenue | HK$458 million | HK$417 million | +10% | Status of Major Projects in Hand (as of March 31, 2024) | Project Name | Completion Status | Expected Completion Date | Estimated Remaining Contract Value (HK$ million) | | :--- | :--- | :--- | :--- | | Kai Tak Public Housing (2022) | 55% | Q1 2025 | 441 | | Kai Tak Public Housing (2024) | 2% | Q4 2024 | 445 | Business Outlook Management anticipates significant opportunities from government development plans, expecting improved equipment and labor utilization, while a property holding investment observes market developments - The Board believes the Hong Kong government will fully advance development plans, bringing immense opportunities to the construction industry, and expects the Group's equipment and labor utilization to further improve[39] - Golden Crown Enterprises, a property holding company in which the Group acquired a 5% equity stake in 2017, has received inquiries regarding land development or acquisition this year, but the company will patiently observe given the market slowdown[44] Financial Review and Analysis The Group recorded a gross profit of HK$32 million and a 7% gross profit margin, narrowing its net loss to HK$28 million despite increased expenses and rising loan interest rates - Capital expenditure for the year was HK$15 million, primarily for the acquisition of machinery and equipment, a decrease from HK$32 million last year[61] Profitability Analysis | Metric | FY2024 | FY2023 | | :--- | :--- | :--- | | Gross Profit/(Loss) | HK$32 million | (HK$1 million) | | Gross Profit Margin | 7% | Not Applicable | | Net Loss | HK$28 million | HK$31 million | Liquidity and Financial Resources (as of March 31, 2024) | Metric | 2024 | 2023 | | :--- | :--- | :--- | | Cash and Bank Balances | HK$86 million | HK$197 million | | Total Borrowings | HK$140 million | HK$196 million | | Net Current Assets | HK$80 million | HK$128 million | | Current Ratio | 1.4x | 1.5x | | Net Gearing Ratio | 33% | 20% | | Total Equity | HK$471 million | HK$500 million | Relationships with Customers, Suppliers and Employees The Group maintains high standards for customer and supplier relationships through ISO 9001 certification and pre-approved lists, while prioritizing employee safety and development - The Group ensures high-quality project delivery to clients through its ISO 9001 compliant quality management system and maintains regular communication to build strong relationships[78] - The Group collaborates with suppliers and subcontractors on a project-by-project basis, maintaining a pre-approved list to evaluate their track record, pricing, and quality[79] - As of March 31, 2024, the Group had approximately 325 employees, an increase from 301 in 2023. The Group prioritizes employee safety, with no fatal accidents reported during the year and an accident rate below the industry average[84][85] Environmental Policies The Group prioritizes environmental protection, holding ISO 14001 and ISO 50001 certifications, and reported no environmental law violations during the year - The Group has obtained ISO 14001 (Environmental Management System) and ISO 50001 (Energy Management System) certifications to ensure business activities comply with environmental and energy-saving standards[89] - The Group continuously monitors environmental compliance and was not prosecuted by any government authority for environmental law violations during the year[89] Corporate Governance Report This report details the company's commitment to maintaining high standards of corporate governance, including board structure, committee functions, and internal control systems Corporate Governance Practices The company maintained high corporate governance standards, complying with all code provisions, with a Board of 8 members and independent committees ensuring effective oversight - The company complied with all code provisions of the Corporate Governance Code as set out in Appendix C1 of the Hong Kong Stock Exchange Listing Rules for the year ended March 31, 2024[94] - The Board of Directors comprises 8 members, with independent non-executive directors accounting for 50%, ensuring independent judgment. The roles of Chairman and Chief Executive Officer are held by different individuals to maintain segregation of duties[101][102] - The Board has established an Audit Committee, Nomination Committee, and Remuneration Committee, responsible for overseeing financial reporting, director nominations, and remuneration policies, respectively, with each committee chaired by an independent non-executive director[114][121][133] - The company has appointed an internal control consultant to conduct an annual review of the Group's risk management and internal control systems, which the Board considers adequate and effectively implemented during the year[141][152] Directors' and Auditor's Responsibilities The Board confirms its responsibility for preparing true and fair financial statements, with no material uncertainties regarding the Group's going concern ability - The directors confirm their responsibility for preparing financial statements that give a true and fair view of the Group's affairs[158] Shareholders' Rights and Investor Relations The company protects shareholder rights and fosters investor relations through various communication channels, with dividend decisions based on financial performance and future prospects - Shareholders holding not less than 10% of the company's paid-up share capital have the right to request the Board to convene an extraordinary general meeting[163] - The company has a shareholder communication policy, ensuring timely dissemination of information to shareholders through annual general meetings, the company website, announcements, and reports[170] - The company has no pre-set dividend payout ratio, and the Board will decide on dividend distribution at its discretion based on financial position, cash levels, and future growth needs[172] Profile of Directors and Senior Management This section provides detailed profiles of the company's executive directors, independent non-executive directors, and senior management, highlighting their experience and expertise Profile of Directors and Senior Management This section outlines the extensive experience of the executive directors, primarily Lau family members, and the diverse professional expertise of the independent non-executive directors - The executive director team primarily consists of members of the Lau family, including Chairman Mr. Lau Chun Ming, CEO Mr. Lau Chun Kwok, Executive Director Mr. Lau Chun Ka, and CFO Ms. Lau Pui Shan, who possess long-term experience in the foundation industry[175][176][177][181] - Independent non-executive directors include Professor Wong Sze Chuen, Registered Architect Mr. Chu Tak Sum, and Chartered Accountant Mr. Yip Tin Chee, bringing academic, architectural, and financial expertise to the Board[182][183][187] Directors' Report This report covers the Group's principal activities, financial highlights, major customer and supplier relationships, and continuing connected transactions Principal Activities and Financials The Group primarily engaged in foundation engineering, with no final dividend recommended for the year, and reported HK$199 million in distributable reserves - The directors do not recommend a final dividend for the year ended March 31, 2024[204] - As of March 31, 2024, the company's distributable reserves amounted to HK$199 million[214] - During the year, the company did not purchase, sell, or redeem any of its listed securities[217] Major Customers and Suppliers The Group experienced high customer and supplier concentration, with the top five customers accounting for 100% of total revenue and the largest customer contributing 81% Customer and Supplier Concentration | Concentration Metric | FY2024 | FY2023 | | :--- | :--- | :--- | | Top Five Customers as % of Total Revenue | 100% | 96% | | Largest Customer as % of Total Revenue | 81% | 61% | | Top Five Suppliers as % of Total Purchases | 71% | 62% | | Largest Supplier as % of Total Purchases | 20% | 16% | Continuing Connected Transactions The Group engaged in continuing connected transactions, primarily property leases with related parties totaling HK$6,487,200, confirmed by independent non-executive directors as fair and reasonable - Independent non-executive directors have reviewed these continuing connected transactions and confirmed they were entered into on normal commercial terms in the Group's ordinary course of business, fair and reasonable, and in the overall interest of shareholders[282] Continuing Connected Transactions - Lease Agreements | Lease Purpose | Related Owner | Annual Rent (HKD) | | :--- | :--- | :--- | | Open Storage and Repair Yard | Ka Shun Limited | 4,320,000 | | Directors' Residence and Parking Spaces | Multiple Related Companies | 2,167,200 | | Total | | 6,487,200 | Independent Auditor's Report This report presents the independent auditor's opinion on the consolidated financial statements and highlights key audit matters requiring significant management judgment Auditor's Opinion and Key Audit Matters PricewaterhouseCoopers issued an unmodified opinion on the financial statements, highlighting accounting for construction contracts and machinery impairment as key audit matters - The auditor believes that the consolidated financial statements present a true and fair view of the Group's consolidated financial position and performance in accordance with Hong Kong Financial Reporting Standards and have been properly prepared in compliance with the disclosure requirements of the Hong Kong Companies Ordinance[308] - Key audit matters include: - Accounting for construction contracts: Involves significant judgment and estimation regarding progress of completion, total budgeted costs, and profit margins[317] - Impairment of machinery and equipment: Involves significant judgment and estimation regarding the recoverable amount of assets (higher of fair value less costs of disposal and value in use)[334] Consolidated Financial Statements This section presents the Group's comprehensive financial statements, including the statement of comprehensive income, balance sheet, and cash flow statement Consolidated Statement of Comprehensive Income The Group's revenue increased to HK$458 million, achieving a gross profit of HK$31.81 million, while narrowing its annual loss to HK$28.28 million Consolidated Statement of Comprehensive Income Summary (For the year ended March 31) | Metric (HK$ thousands) | 2024 | 2023 | | :--- | :--- | :--- | | Revenue | 457,875 | 416,854 | | Cost of Sales | (426,064) | (417,591) | | Gross Profit/(Loss) | 31,811 | (737) | | Operating Loss | (18,540) | (24,033) | | Loss Before Income Tax | (29,380) | (31,010) | | Loss for the Year | (28,281) | (31,455) | | Basic and Diluted Loss Per Share (HK cents) | (1.68) | (1.87) | Consolidated Balance Sheet Total assets decreased to HK$864 million, with total liabilities at HK$393 million and total equity at HK$471 million, primarily due to a decline in cash and cash equivalents Consolidated Balance Sheet Summary (As of March 31) | Metric (HK$ thousands) | 2024 | 2023 | | :--- | :--- | :--- | | Non-current Assets | 563,177 | 576,523 | | Of which: Machinery and Equipment | 513,843 | 527,186 | | Current Assets | 300,413 | 394,907 | | Of which: Cash and Cash Equivalents | 85,727 | 197,074 | | Total Assets | 863,590 | 971,430 | | Current Liabilities | 220,712 | 266,722 | | Non-current Liabilities | 172,275 | 204,754 | | Total Liabilities | 392,987 | 471,476 | | Total Equity | 470,603 | 499,954 | Consolidated Statement of Cash Flows The Group experienced net cash outflows from operating, investing, and financing activities, resulting in a net decrease of HK$111.35 million in cash and cash equivalents Consolidated Statement of Cash Flows Summary (For the year ended March 31) | Metric (HK$ thousands) | 2024 | 2023 | | :--- | :--- | :--- | | Net Cash Used in Operating Activities | (33,322) | (58,095) | | Net Cash Used in Investing Activities | (15,053) | (31,644) | | Net Cash (Used in)/From Financing Activities | (62,972) | 158,885 | | Net (Decrease)/Increase in Cash and Cash Equivalents | (111,347) | 69,146 | | Cash and Cash Equivalents at Beginning of Year | 197,074 | 127,928 | | Cash and Cash Equivalents at End of Year | 85,727 | 197,074 | Five Year Financial Summary This section provides a five-year overview of the Group's key financial performance indicators, including revenue, profitability, assets, liabilities, and equity Five Year Financial Summary Over five years, revenue fluctuated, the Group recorded losses in the last four fiscal years, and total assets and equity have consistently declined since 2020 Five-Year Financial Data Summary (For the year ended March 31) | Metric (HK$ thousands) | 2024 | 2023 | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | :--- | :--- | | Revenue | 457,875 | 416,854 | 362,514 | 356,211 | 916,831 | | Gross Profit/(Loss) | 31,811 | (737) | (57,522) | (4,053) | 126,666 | | Annual (Loss)/Profit | (28,281) | (31,455) | (100,697) | (33,751) | 73,018 | | Total Assets | 863,590 | 971,430 | 804,206 | 933,369 | 1,043,370 | | Total Liabilities | 392,987 | 471,476 | 272,107 | 302,383 | 345,443 | | Total Equity | 470,603 | 499,954 | 532,099 | 630,986 | 697,927 |