信星集团(01170) - 2024 - 年度财报

Corporate Information Corporate Information This section provides core corporate information, including board members, key dates, and listing details - The company's Executive Directors include Ms. Wong Hsiu-Tuen, Mr. Wong Ha-Chio, and Mr. Chan Yik-Mo[4] - The company's shares are listed on the Hong Kong Stock Exchange with the stock code 01170[8] - Key dates include the Annual General Meeting (August 28, 2024) and the proposed final and special final dividend payment date (around September 30, 2024)[9][11] Financial Highlights Financial Highlights The Group's revenue and profit declined significantly in FY2024, though it maintained a strong cash position and doubled its annual dividend Key Financial Indicators for FY2024 | Indicator | FY2024 | FY2023 | Change | | :--- | :--- | :--- | :--- | | Revenue | HK$689 million | HK$1,062 million | -35.1% | | Gross Profit | HK$29.11 million | HK$89.62 million | -67.5% | | Gross Margin | 4.2% | 8.4% | -4.2pp | | Profit Attributable to Equity Holders | HK$20.22 million | HK$53.41 million | -62.1% | | Basic Earnings Per Share | 3.00 HK Cents | 7.92 HK Cents | -62.1% | | Total Dividend Per Share for the Year | 9.0 HK Cents | 4.5 HK Cents | +100% | - As of the end of FY2024, the company held approximately HK$416 million in cash and cash equivalents[12] - Geographically, the revenue contribution from the US market decreased from 37.3% to 26.5%, while the shares from Europe and Asia & other regions increased[23][24] Chairman's Statement Chairman's Statement The Chairman's report highlights the Group's resilience amid macroeconomic challenges, focusing on six strategic areas for future growth and recovery - FY2024 marked the company's 30th anniversary of listing on the Main Board of the Hong Kong Stock Exchange[31] - The Group built operational resilience by optimizing its supply chain and maintaining healthy financial fundamentals amid weak consumption in key markets like the US and Europe[35][36] - The Group will continue to focus on six strategic action areas: enhancing business momentum, capacity planning, pursuing operational excellence, mitigating cost inflation, talent development, and resilience and sustainability[41] - Looking ahead to the second half of FY2025, customer procurement is expected to gradually recover as retail inventory levels improve, leading to a more positive outlook[37][79] Strategies and Outlook The Group's core strategy focuses on value over volume growth, supported by initiatives in R&D, capacity optimization, operational excellence, and cost control - Business and R&D: Relocated R&D facilities from Zhuhai to the southern Vietnam production base and established an outsole operation to provide one-stop product development services, successfully adding new brands to the portfolio[43][44] - Capacity and Capability: Prudently adjusted capacity utilization in Vietnam and Cambodia and increased investment in facility automation to enhance efficiency and quality[45][46] - Operational Excellence: Transformed manufacturing processes with most production lines adopting a small-line model to handle small-batch, quick-turnaround orders, and continuously upgraded the Manufacturing Execution System (MES)[51][52] - Cost Control: Implemented lean manufacturing, reduced unskilled labor, and focused resources on training skilled workers to manage costs[53][54] - Talent Development: Offers competitive remuneration and share incentive schemes, and is committed to cultivating local management teams[55][61] - Sustainability and Asset Management: Adheres to sustainable manufacturing and considers disposing of underutilized investment properties such as factory buildings, office assets, and industrial land[64][75] Management Discussion and Analysis Financial Results FY2024 revenue and net profit fell due to weak retail sentiment, but the Group maintained a zero gearing ratio and increased its total annual dividend Financial Performance Summary | Indicator | FY2024 | FY2023 | Change | | :--- | :--- | :--- | :--- | | Revenue | HK$689 million | HK$1,062 million | -35.1% | | Gross Profit | HK$29 million | HK$90 million | -67.5% | | Gross Margin | 4.2% | 8.4% | -4.2pp | | Net Profit | HK$20 million | HK$53 million | -62.1% | | Earnings Per Share | 3.00 HK Cents | 7.92 HK Cents | -62.1% | Key Financial Ratios | Indicator | FY2024 | FY2023 | | :--- | :--- | :--- | | Accounts Receivable Turnover Days | 80 days | 60 days | | Accounts Payable Turnover Days | 123 days | 86 days | | Inventory Turnover Days | 109 days | 109 days | | Net Cash on Hand | HK$416 million | HK$393 million | | Gearing Ratio | 0% | 0% | | Current Ratio | 3.2 | 2.8 | - To celebrate its 30th listing anniversary, the Board proposed a special final dividend of 6.8 HK cents per share, bringing the total annual dividend to 9.0 HK cents, a 100% year-on-year increase[104] Operational Review The Group operated 21 production lines with a 57.5% utilization rate, saw an increased output contribution from Cambodia, and added two new brands - The Group has a total of 21 production lines in southern Vietnam and Cambodia, with an annual capacity of approximately 7 million pairs and a utilization rate of 57.5% for the year (2023: 73.5%)[115] - The output contribution from the Cambodian production center increased to 52.7% from 41.2%, while the contribution from southern Vietnam decreased to 47.3% from 58.8%[124][127] - Major customers (Cat, Chaco, Dr. Martens, Merrell, Wolverine) contributed 95.0% of total revenue, with two new brands, Axion and Palladium, added during the year[122] - The associate company in central Vietnam (a joint venture with Apache Group) saw its revenue increase by 7.0% year-on-year to HK$1.024 billion, contributing HK$23.9 million in profit to the Group[133] - The investment property portfolio (excluding the newly vacated Zhuhai factory) was fully leased, generating a total rental income of approximately HK$27.8 million for the year[141][144] Financial Review The Group maintained a strong financial position with zero gearing, HK$416 million in cash, and initiated share buybacks and employee incentive schemes Liquidity and Financial Resources (as of March 31, 2024) | Indicator | Amount | | :--- | :--- | | Cash and Cash Equivalents | Approx. HK$416 million | | Interest-bearing Bank Borrowings | Zero | | Gearing Ratio | Zero | | Available Banking Facilities | Approx. HK$40 million | | Current Ratio | 3.2 | - Shareholders' equity decreased slightly to HK$1.173 billion from HK$1.205 billion in the prior year[158] - During the year, the company repurchased 194,000 shares in March 2024 for a total consideration of approximately HK$153,000, which have since been cancelled[162][165] - As of March 31, 2024, the Group had approximately 6,300 employees and granted 2.8 million share options and 3.598 million award shares to incentivize staff[169][170][171] Environmental, Social and Governance Report ESG Governance and Strategy The Group has established a three-tiered ESG governance structure and identified 16 material ESG topics through stakeholder engagement and materiality assessment - The ESG reporting scope covers manufacturing plants in Vietnam and Cambodia, consistent with the previous year[177][180] - The Group has established a three-tiered ESG governance structure: the Board provides oversight, an ESG working group (comprising executive directors and senior management) handles implementation and monitoring, and responsible units in Vietnam and Cambodia manage daily execution[189][190][191] - Through a materiality assessment, the Group identified 16 key ESG topics, with "Energy Consumption," "Labor Standards," "Anti-corruption," and "Environment and Natural Resources" deemed most significant to stakeholders and the company[200][201][202] Social Performance The Group employed approximately 6,100 staff, improved workplace safety by reducing work-related injuries, and strictly prohibited child or forced labor Employee Profile (as of March 31, 2024) | Category | 2023/24 | 2022/23 | | :--- | :--- | :--- | | Total Employees | 6,100 | 6,300 | | Female Employees | 4,900 (80.3%) | 5,000 (79.4%) | | Total Turnover Rate | 13% | 10% | Occupational Health and Safety | Indicator | 2023/24 | 2022/23 | 2021/22 | | :--- | :--- | :--- | :--- | | Work-related Fatalities | 0 | 0 | 0 | | Number of Work-related Injuries | 19 | 51 | 37 | | Lost Days due to Injury | 54 | 182 | 120 | - The Group strictly prohibits child and forced labor and has established special protection policies for young workers aged 15 to 18[265][266] - During the year, the Group donated HK$162,000 to World Vision Hong Kong to sponsor children in need[293] Environmental Performance The Group's total GHG emissions and resource consumption decreased due to lower business volume, though consumption intensity per product unit increased Greenhouse Gas Emissions (GHG) | Scope | 2023/24 (tonnes CO2e) | 2022/23 (tonnes CO2e) | | :--- | :--- | :--- | | Scope 1 (Direct) | 153.4 | 21.2 | | Scope 2 (Indirect - Electricity) | 6,584.0 | 9,362.9 | | Scope 3 (Other Indirect) | 24.5 | 38.5 | | Total Emissions | 6,761.9 | 9,543.3 | | Total Emission Intensity (tonnes/pair of shoes) | 0.002 | 0.002 | Resource Consumption | Indicator | 2023/24 | 2022/23 | | :--- | :--- | :--- | | Total Energy Consumption (kWh) | 11,965,023.7 | 13,857,306.0 | | Energy Intensity (kWh/pair of shoes) | 3.2 | 2.3 | | Total Water Consumption (m³) | 301,431.0 | 325,271.0 | | Water Intensity (m³/pair of shoes) | 0.08 | 0.05 | Waste Generation | Indicator | 2023/24 (kg) | 2022/23 (kg) | | :--- | :--- | :--- | | Total Hazardous Waste | 95,536.5 | 92,237.0 | | Total Non-hazardous Waste | 712,170.4 | 1,947,276.0 | - The Group has identified and developed strategies to address climate-related risks (both physical and transitional), such as establishing safety management systems and implementing energy-saving measures[362][364][367] Corporate Governance Report Board and Committees The company complied with all Corporate Governance Code provisions, maintaining a balanced board structure and three key committees led by independent directors - The company complied with all code provisions of the Corporate Governance Code throughout the review year[389] - The Board comprises 9 members, including 3 Executive Directors, 3 Non-executive Directors, and 3 Independent Non-executive Directors, meeting Listing Rules requirements, with the roles of Chairman (Ms. Wong Hsiu-Tuen) and Chief Executive Officer (Mr. Chan Yik-Mo) being separate[396][400] - The company has an Audit Committee, a Remuneration Committee, and a Nomination Committee, chaired by Mr. Tam King Ching, Kenny, Mr. Wong Hin Wing, and Ms. Wong Hsiu-Tuen, respectively[395][437][465][471] - The Audit Committee is responsible for corporate governance duties, including reviewing company policies, director training, compliance, and adherence to the Corporate Governance Code[472][473] Risk Management and Internal Controls The Board oversees a robust risk management system, utilizing a three-lines-of-defense model and an external professional firm for internal control reviews - The company has appointed an external independent professional firm, CHK Corporate-Pro Services Limited (the operating entity of TMF Hong Kong), for internal control reviews and risk assessments[487][489] - The Group adopts a "Three Lines of Defence" corporate governance structure and follows the COSO Enterprise Risk Management framework[503][493] - Key identified risks include economic recession, political instability in production locations, customer concentration, rising operating costs, and inflation/deflation risks[501] - The company has established a dividend policy, aiming to distribute approximately 30% to 60% of the annual consolidated net profit attributable to shareholders, with the possibility of special dividends[512] Shareholder Relations The company maintains active communication with shareholders through various channels and provides clear procedures for shareholder participation and inquiries - The company communicates with shareholders and investors through various channels including meetings, roadshows, reports, and its website (www.kingmaker-footwear.com)[519](index=519&type=chunk)[524] - The report specifies the procedures and requirements for shareholders to nominate directors, propose resolutions at general meetings, and convene special general meetings[530][531][532] - Shareholders can send inquiries to the Company Secretary by post or email (kingmkra@netvigator.com)[537] - In accordance with the Listing Rules, all resolutions at general meetings are put to a vote by poll[538] Directors and Senior Management Profiles Directors and Senior Management Profiles This section details the extensive experience of the company's directors and senior management in the footwear industry, finance, and corporate governance - Executive Director Ms. Wong Hsiu-Tuen, a co-founder of the Group, has over 47 years of experience in the footwear industry and is responsible for formulating the Group's overall business strategy[550] - Executive Director and Chief Executive Officer Mr. Chan Yik-Mo joined the Group in 2016 and is responsible for executing the Group's strategic planning and corporate development[553] - The senior management team possesses decades of industry experience in finance, operations, marketing, and production management, providing strong support for the Group's stable operations[585][588][590] Report of the Directors Business and Financial Summary The report outlines the Group's principal activities, a profit of HK$20.1 million, a proposed dividend, and a five-year financial performance summary - The company's principal activity is investment holding, while its subsidiaries are mainly engaged in footwear manufacturing and trading, and property investment[593] - The Board recommends a final dividend of 0.2 HK cents per share and a special final dividend of 6.8 HK cents per share, payable on or about September 30, 2024[603] Five-Year Performance Summary (HK$ million) | Fiscal Year | 2024 | 2023 | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | :--- | :--- | | Revenue | 689.3 | 1,062.0 | 842.7 | 804.7 | 1,050.1 | | Profit/(Loss) for the Year | 20.1 | 53.9 | (19.8) | 79.8 | (53.0) | Share Capital and Interests The report details changes in share capital, share buybacks, major shareholders' interests, and the operation of employee incentive schemes - During the year, the company repurchased 194,000 shares in March 2024 at prices ranging from HK$0.78 to HK$0.80 per share, which have since been cancelled[621][624] - As of March 31, 2024, the company's distributable reserves amounted to HK$499 million[627] - The five largest customers accounted for 98.4% of total sales, with the largest customer representing 77.5%, while the five largest suppliers accounted for less than 27% of total purchases[629] Major Shareholders' Interests (as of March 31, 2024) | Shareholder Name | Number of Shares | Percentage of Shareholding | | :--- | :--- | :--- | | King Strike Limited | 263,960,041 | 38.78% | | Mr. David Michael Webb | 47,986,000 | 7.05% | | DJE Investment S.A. | 44,907,000 | 6.60% | | Mr. Lee Chi Keung | 35,198,000 | 5.17% | | Fat Tat Assets Limited | 34,507,500 | 5.07% | Independent Auditor's Report Auditor's Opinion and Key Audit Matters The auditor, Ernst & Young, issued an unqualified opinion on the financial statements and highlighted three key audit matters for attention - The auditor, Ernst & Young, issued an unqualified opinion on the financial statements, concluding that they give a true and fair view of the Group's financial position[690] - Key Audit Matter 1: Provision for inventories: Due to significant management judgment in estimating inventory provisions (recoverability, marketability), the auditor tested the inventory aging analysis and assessed the reasonableness of the provisions[700][702] - Key Audit Matter 2: Fair value estimation of investment properties: As investment properties constitute 60% of total non-current assets, their valuation is highly dependent on assumptions; the auditor engaged internal valuation specialists to assess the methodology and key parameters[706][708] - Key Audit Matter 3: Taxation: The determination of tax provisions involves complexity and judgment due to the Group's operations across multiple tax jurisdictions; the auditor involved tax specialists to review the provisions and assess management's judgment[713][715] Audited Financial Statements Consolidated Financial Statements The Group's revenue and profit declined, but its financial structure remained solid with total assets of HK$1.51 billion and net assets of HK$1.19 billion Consolidated Statement of Profit or Loss Summary (HK$) | Item | FY2024 | FY2023 | | :--- | :--- | :--- | | Revenue | 689,269,000 | 1,061,974,000 | | Gross Profit | 29,106,000 | 89,623,000 | | Profit Before Tax | 12,622,000 | 50,320,000 | | Profit for the Year | 20,057,000 | 53,936,000 | Consolidated Statement of Financial Position Summary (HK$) | Item | March 31, 2024 | March 31, 2023 | | :--- | :--- | :--- | | Total Non-current Assets | 788,325,000 | 817,226,000 | | Total Current Assets | 721,120,000 | 770,733,000 | | Total Assets | 1,509,445,000 | 1,587,959,000 | | Total Current Liabilities | 226,197,000 | 271,883,000 | | Total Non-current Liabilities | 97,648,000 | 101,420,000 | | Total Liabilities | 323,845,000 | 373,303,000 | | Net Assets | 1,185,600,000 | 1,214,656,000 | Consolidated Statement of Cash Flows Summary (HK$) | Item | FY2024 | FY2023 | | :--- | :--- | :--- | | Net Cash Flows from Operating Activities | 45,041,000 | 136,580,000 | | Net Cash Flows from/(used in) Investing Activities | 2,907,000 | (213,757,000) | | Net Cash Flows used in Financing Activities | (28,816,000) | (45,970,000) | | Net Increase/(Decrease) in Cash and Cash Equivalents | 19,132,000 | (123,147,000) | Notes to Financial Statements The notes detail key accounting policies, judgments, and estimates, with a focus on segment information, revenue, related parties, and financial risk management - The Group operates in two reportable segments: manufacturing and sale of footwear products, and property investment, with footwear sales being the primary source of revenue, accounting for over 96% of the total[1003][1006][1009] - Revenue is primarily generated from the sale of footwear to external customers, with the United States, Europe, and Asia being the main markets, and two major customers contributing over 90% of sales revenue[1017][1022] - The company has implemented a share option scheme and a share award scheme, granting 2.8 million share options and exercising 150,000 during the year, while also granting 698,000 award shares and vesting 3.598 million[1217][1277] - The Group's main financial risks include foreign exchange risk (particularly RMB and VND), credit risk (high customer concentration), and liquidity risk, which are managed through continuous monitoring and prudent financial policies[1316][1319][1327][1341]