能源及能量环球(01142) - 2024 - 年度财报

Company Overview Energy & Power Global Holdings Limited is a company incorporated in the Cayman Islands and listed on the Hong Kong Stock Exchange with stock code 1142, primarily engaged in investment holding, with key subsidiaries involved in coal mining and exploration in Russia and trading of diesel and gasoline products in South Korea - Energy & Power Global Holdings Limited is a company incorporated in the Cayman Islands and listed on the Hong Kong Stock Exchange, stock code 1142[608][244] - The company's principal business is investment holding, with key subsidiaries engaged in coal mining and exploration in Russia and trading of diesel and gasoline products in South Korea[89][627] Chairman's Statement The Chairman's Statement reviews the fiscal year's performance, noting significant declines in turnover and profit before tax due to reduced oil product demand and lower reversal of impairment loss on exploration assets, while expressing cautious optimism for core businesses and future diversification opportunities amidst global economic and geopolitical challenges Annual Key Financial Indicators | Metric | FY2024 (thousand HKD) | FY2023 (thousand HKD) | Change | | :--- | :--- | :--- | :--- | | Turnover | 664,700 | 1,149,680 | -42.2% | | Profit before income tax | 108,660 | 528,930 | -79.5% | - The significant decrease in profit before tax was primarily due to a lower non-cash reversal of impairment loss on exploration and evaluation assets, amounting to approximately HKD 143 million in FY2024 compared to HKD 717 million in FY2023[32] - The Group's South Korean diesel and gasoline trading business contributed 100% of the annual turnover, which decreased due to suppressed demand from persistently high oil prices exacerbated by the Russia-Ukraine conflict[251][281] - Looking ahead, the Group will remain focused on its core businesses of (i) diesel and gasoline trading and (ii) coal mining, maintaining a cautiously optimistic outlook[217] Management Discussion and Analysis This section provides a comprehensive review of the Group's financial performance, operational highlights, future outlook, liquidity, and key risks, detailing the factors influencing its business segments and financial position Financial Review This fiscal year, the Group's total turnover decreased by 42.18% to HKD 665 million due to reduced oil product demand, while profit before tax significantly declined by 79.5% to HKD 109 million, primarily due to a lower non-cash reversal of impairment loss on Russian coal exploration assets FY2024 Turnover Composition | Product | Sales (thousand HKD) | Percentage of Total Turnover | | :--- | :--- | :--- | | Diesel | 510,960 | 76.87% | | Gasoline | 123,340 | 18.56% | | Other Petroleum Products and Services | 30,400 | 4.57% | | Total | 664,700 | 100.00% | - Profit before tax decreased from approximately HKD 529 million to HKD 109 million, mainly due to the reversal of impairment loss on exploration and evaluation assets decreasing from approximately HKD 717 million to HKD 143 million, partially offset by the absence of intangible asset amortization expenses this year (last year: HKD 176 million)[289][32] - The company emphasizes that the reversal of impairment loss on exploration and evaluation assets is a non-cash item, solely an accounting valuation activity, and does not impact the Group's cash flow position[14] Operations Review The Group's operations comprise South Korean oil product trading and Russian coal mining, with 100% of current year revenue from the former, maintained through various strategies, while the Russian coal project remains in development, focusing on environmental compliance and import substitution amidst global changes - The Group's sole market segment is South Korea, accounting for 100% of total revenue[17] - To stabilize its trading business, the Group implemented six key measures, including competitive pricing, maintaining stable supply, optimizing logistics, conducting 'non-contact marketing', active sales, and preparing inventory for the end of fuel tax reductions[15] - The Russian coal mining projects (Area 1, Area 1 Extension, and Area 2) remain in the development phase, with initial coal production anticipated around 2030, as the Group focuses on environmental compliance and assessing the feasibility of full import substitution for equipment[16][42] Outlook The Group anticipates a challenging year ahead due to global economic volatility from high interest rates, geopolitical conflicts, and trade tensions, which will pressure oil product trading and coal prices, yet plans to strengthen its South Korean trade business, prudently advance the Russian coal project, and explore diversification opportunities - The global economy faces multiple downside risks from high interest rates, geopolitical conflicts, and US-China trade tensions, posing challenges to the Group's diesel and gasoline trading business and coal prices[43] - The Group plans to strengthen its South Korean trading business through ten measures, including offering competitive prices, ensuring stable supply, enhancing product quality, and exploring other product trades[265][45] - For the Russian coal mining project, the Group will continue collaborating with local governments and communities to ensure environmental compliance and explore the introduction of automation tools to enhance production efficiency and reduce costs[20][46][266] Liquidity and Financial Resources As of March 31, 2024, the Group faced severe liquidity pressure with HKD 3.705 billion in net current liabilities and cash and cash equivalents reduced to approximately HKD 0.23 million, prompting management to implement cost controls and actively pursue equity financing and convertible note holder discussions to improve its financial position Key Liquidity Indicators (as at March 31, 2024) | Metric | Amount (thousand HKD) | | :--- | :--- | | Net current liabilities | 3,705,060 | | Cash and cash equivalents | 230 | | Interest-bearing borrowings | 62,100 | | Amounts due to shareholders | 172,660 | - The Group's current ratio (current assets/current liabilities) decreased from 0.64% last year to 0.39%, while the debt-to-asset ratio (total borrowings/total assets) decreased from 8.83% to 8.46%[220][83][84] - To improve liquidity, the company plans proactive measures, including equity fundraising activities (placing new shares) and engaging with convertible note holders to facilitate conversion, thereby enhancing its balance sheet[269][267] Principal Risks and Uncertainties The Group faces significant risks including high reliance on key customers and suppliers, concentration in the South Korean oil trading market, financial exposure to volatile international coal prices, geopolitical risks affecting Russian mining rights (e.g., license expiry in July 2025, sanctions), and ongoing legal proceedings - Business risks include high concentration of turnover and purchases with a few key customers and suppliers, 100% of business located in South Korea making it sensitive to local policies, and over-reliance on diesel and gasoline products[272][52][221] - Financial and asset risks include significant fluctuations in international coal prices materially impacting the accounting valuation of Russian coal mining assets and the Group's financial performance[27] - Geopolitical and operational risks include concentrated Russian mining rights susceptible to local policy changes, the Area 1 mining license expiring on July 1, 2025, with significant implications if not extended, and sanctions due to the Ukraine situation affecting normal remittances and financing for the Group's Russian subsidiaries[273][79][275] - Legal risks involve multiple pending lawsuits against the company and the Group, with unknown outcomes that could impact the Group[80][85] Directors' Report The Directors' Report outlines the company's principal activities, performance, share capital structure, key customer and supplier relationships, and major shareholder interests, providing an overview of corporate governance and compliance Principal Activities and Performance As an investment holding company, the Company's principal subsidiaries are engaged in two core businesses: coal mining and exploration rights in Russia, and trading of diesel and gasoline products in South Korea; the Board does not recommend any dividend for the year, with detailed business review available in the Management Discussion and Analysis - The company's principal business is investment holding, with core assets including Russian coal mining and exploration rights and South Korean oil product trading operations[89] - The Board does not recommend the payment of any dividend for the year ended March 31, 2024, consistent with the prior year[91] Share Capital and Convertible Notes Payable During the reporting period, the company completed a share capital reorganization effective October 3, 2023, involving capital reduction and share subdivision to adjust its capital structure, with no purchases, sales, or redemptions of the company's listed securities by the company or its subsidiaries - The company completed a share capital reorganization on October 3, 2023, which included reducing the par value per share from HKD 2.00 to HKD 0.50 and subdividing authorized unissued shares[25][232][117] - For the year ended March 31, 2024, neither the company nor any of its subsidiaries purchased, sold, or redeemed any of the company's listed securities[70] Major Customers and Suppliers The Group's business exhibits concentration with major customers and suppliers, as sales to the top five customers accounted for 39.06% of total turnover (largest customer: 11.30%), and purchases from the top five suppliers represented 48.42% of total purchases (largest supplier: 13.34%) Customer and Supplier Concentration | Concentration Metric | FY2024 | FY2023 | | :--- | :--- | :--- | | Sales to top five customers | 39.06% | 30.48% | | Sales to largest customer | 11.30% | 9.24% | | Purchases from top five suppliers | 48.42% | 54.05% | | Purchases from largest supplier | 13.34% | 14.77% | Interests of Major Shareholders in Shares and Related Shares of the Company The report discloses major shareholders holding 5% or more of the company's issued ordinary shares under the Securities and Futures Ordinance, with Space Hong Kong Enterprise Limited as the largest shareholder at 29.74%, followed by Onface Co., Limited (16.67%), Lucrezia Limited (6.21%), Token Century Limited (5.79%), and Kim Wuju (5.13%) Major Shareholder Holdings (as at March 31, 2024) | Shareholder Name | Shareholding Percentage | | :--- | :--- | | Space Hong Kong Enterprise Limited | 29.74% | | Onface Co., Limited | 16.67% | | Lucrezia Limited | 6.21% | | Token Century Limited | 5.79% | | Kim Wuju | 5.13% | Corporate Governance Report This report outlines the company's corporate governance practices, noting compliance with most code provisions but deviations including director attendance at general meetings and a period without D&O liability insurance due to Russia-related sanctions, while detailing the structure and functions of the Board and its committees, and emphasizing risk management and internal control Corporate Governance Practices The company strives for high corporate governance, but deviations during the period included certain independent non-executive directors and the Chairman missing general meetings due to scheduling conflicts, and a temporary inability to secure Directors and Officers liability insurance from December 2022 to August 2023 due to international sanctions on Russian assets, though coverage has since been obtained - Due to sanctions on Russian subsidiaries and assets, international insurers refused to renew the Group's coverage, leaving company directors without Directors and Officers liability insurance from December 22, 2022, to August 22, 2023, though new coverage was secured from August 2023[187] - Several independent non-executive directors and the Chairman of the Board were unable to attend the 2023 extraordinary general meeting and/or annual general meeting due to scheduling conflicts and other reasons[170][148] Board Committees The Board has three committees—Audit, Remuneration, and Nomination—each predominantly or entirely composed of independent non-executive directors, overseeing financial reporting, internal controls, remuneration policies, and board composition, with clear written terms of reference and regular meetings - The Remuneration Committee, comprising three independent non-executive directors, is responsible for reviewing director and senior management remuneration, and held one meeting during the year[183][203][208] - The Audit Committee, composed of three independent non-executive directors, is responsible for reviewing financial statements, internal control systems, and recommending auditors, and held three meetings during the year[205][206][211] - The Nomination Committee, consisting of the Chairman (an executive director) and three independent non-executive directors, is responsible for reviewing the Board's structure and member nominations, and held one meeting during the year[214][532] Accountability, Risk Management and Internal Control The Board is fully responsible for overseeing and annually reviewing the Group's risk management policies and internal control systems, engaging BDO Limited for independent internal audit services to review business processes, identify risks, and propose improvements, deeming the current systems appropriate and sufficient for the company's size - The Board confirms its responsibility for preparing true and fair financial statements on a going concern basis, while acknowledging significant uncertainties that may cast doubt on the Group's ability to continue as a going concern[554] - The company has engaged BDO Limited (an independent team, though sharing the same name as the external auditor) to provide internal audit services, enhancing risk management and internal control[554][555] - The company has adopted an inside information policy and procedures, ensuring compliant disclosure through measures such as restricting information access, signing confidentiality agreements, and designating spokespersons[549] Independent Auditor's Report BDO Limited issued an unmodified opinion on the Group's consolidated financial statements, but included 'Emphasis of Matter' paragraphs highlighting three significant uncertainties: the impact of the Russia-Ukraine conflict and sanctions on Russian operations, the uncertain outcomes of multiple lawsuits, and substantial doubt about the Group's going concern ability due to HKD 3.7 billion net current liabilities and HKD 1.75 billion net liabilities, with key audit matters being impairment assessment of exploration and evaluation assets and investment property valuation - The auditor issued an unmodified opinion, concluding that the financial statements present a true and fair view of the Group's financial position[917][570] - 【Emphasis of Matter - Material Uncertainty Related to Going Concern】The auditor highlighted that as of March 31, 2024, the Group recorded net current liabilities of approximately HKD 3.705 billion and net liabilities of approximately HKD 1.751 billion, conditions that may cast significant doubt on the Group's ability to continue as a going concern[579] - 【Emphasis of Matter - Others】The auditor also drew attention to geopolitical risks related to the Ukraine situation impacting Russian operations, and the uncertain outcomes of multiple lawsuits faced by the Group[572][573] - Key audit matters include the impairment assessment of Russian exploration and evaluation assets with a carrying amount of approximately HKD 2.1 billion, and the valuation of South Korean investment properties with a carrying amount of approximately HKD 28.19 million[581][592] Consolidated Financial Statements This section presents the Group's consolidated financial statements, including the statement of profit or loss and other comprehensive income, statement of financial position, and detailed notes, providing a comprehensive view of its financial performance and position Consolidated Statement of Profit or Loss and Other Comprehensive Income For the year ended March 31, 2024, the Group reported revenue of HKD 665 million, a 42.2% year-on-year decrease, with gross profit of HKD 7.65 million, and profit before tax of HKD 109 million primarily due to HKD 130 million in other income (mainly asset impairment reversal), resulting in profit for the year of HKD 106 million and profit attributable to owners of HKD 107 million, with basic earnings per share of HKD 0.74 Consolidated Statement of Profit or Loss Summary (for the year ended March 31) | Item (thousand HKD) | FY2024 | FY2023 | | :--- | :--- | :--- | | Revenue | 664,701 | 1,149,675 | | Gross profit | 7,652 | 12,286 | | Other income and losses | 129,734 | 718,350 | | Profit before income tax | 108,658 | 528,926 | | Profit for the year | 105,630 | 527,496 | | Profit attributable to owners of the Company | 106,899 | 550,211 | | Basic earnings per share (HKD) | 0.74 | 3.79 | Consolidated Statement of Financial Position As of March 31, 2024, the Group's total assets were HKD 2.164 billion, with non-current assets (primarily exploration and evaluation assets) at HKD 2.149 billion, while total liabilities reached HKD 3.914 billion, including HKD 3.719 billion in current liabilities mainly from convertible notes payable, resulting in severe insolvency with net current liabilities of HKD 3.705 billion and net liabilities (equity deficiency) of HKD 1.751 billion Consolidated Statement of Financial Position Summary (as at March 31) | Item (thousand HKD) | 2024 | 2023 | | :--- | :--- | :--- | | Assets | | | | Non-current assets | 2,149,147 | 2,021,177 | | Current assets | 14,448 | 23,833 | | Total assets | 2,163,595 | 2,045,010 | | Liabilities | | | | Current liabilities | 3,719,510 | 3,728,260 | | Non-current liabilities | 194,887 | 171,655 | | Total liabilities | 3,914,397 | 3,899,915 | | Net current liabilities | (3,705,062) | (3,704,427) | | Net liabilities/Equity deficiency | (1,750,802) | (1,854,905) | Notes to the Financial Statements The notes to the financial statements provide detailed explanations, highlighting significant doubts about the company's going concern ability due to substantial net current liabilities and equity deficiency, 100% of revenue from the South Korean trading segment, the HKD 2.1 billion Russian exploration assets and their impairment reversal as key non-cash items impacting profit, HKD 3.6 billion in convertible notes payable as the primary cause of insolvency, and numerous complex legal proceedings with uncertain outcomes - 【Material Uncertainty Related to Going Concern】Note 2 explicitly states that the Group has approximately HKD 3.7 billion in net current liabilities and HKD 1.75 billion in equity deficiency, raising significant doubt about its ability to continue as a going concern, which management is addressing through cost control and seeking financial support from shareholders and lenders[649][652][632] - 【Segment Information】All of the Group's revenue is derived from the 'Trading Segment' in South Korea, while the 'Mining Segment' holds substantial assets but generates no revenue, with its reported profit primarily from the reversal of impairment loss on exploration assets[829][830] - 【Exploration and Evaluation Assets】These assets have a carrying amount of approximately HKD 2.108 billion, with a HKD 143 million reversal of impairment loss recognized this year (last year: HKD 717 million), a significant non-cash item impacting the statement of profit or loss, whose valuation relies on highly uncertain assumptions regarding future coal prices, production, exchange rates, and discount rates[356][484] - 【Convertible Notes Payable】Note 36 details the third batch of convertible notes with a carrying amount of up to HKD 3.59 billion, representing the Group's most significant liability, with a complex history involving multiple amendments, conversions, cancellations, and legal disputes, serving as a core factor contributing to the company's severe financial condition[953][1068][1048] - 【Litigation】Note 44 discloses numerous legal proceedings involving the company as both defendant and plaintiff, with many related to convertible notes, company control, and former directors' actions, all with significant uncertain outcomes[950][1073][1113] Five-Year Financial Summary This section summarizes key financial data for the past five fiscal years, showing Group revenue ranging from HKD 660 million to HKD 1.24 billion, but highly volatile profitability swinging between significant profits and losses, with the Group consistently in a severe state of insolvency and substantial negative equity attributable to owners of the Company Five-Year Financial Data Summary (for the year ended March 31) | Item (thousand HKD) | 2024 | 2023 | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | :--- | :--- | | Revenue | 664,701 | 1,149,675 | 1,168,035 | 1,243,111 | 1,194,065 | | Profit (Loss) attributable to owners of the Company | 106,899 | 550,211 | (343,499) | 524,584 | (1,475,433) | | Total assets | 2,163,595 | 2,045,010 | 1,469,641 | 1,843,934 | 1,286,849 | | Total liabilities | 3,914,397 | 3,899,915 | 3,851,729 | 3,836,867 | 3,820,840 | | Equity attributable to owners of the Company | (1,714,719) | (1,818,656) | (2,368,641) | (1,988,443) | (2,517,114) |