Financial Performance - In 2024, the Group's revenue from corrugated packaging decreased by 5.7% year-on-year, with a 1.5% increase in the first half followed by a 12% decrease in the second half compared to the respective periods in 2023[23]. - The Group recorded a loss in 2024, although it was an alleviated loss compared to 2023, attributed to decreased procurement costs, reduced impairment losses, lower depreciation expenses, and a decrease in staff numbers[13]. - The Group recorded revenue of HK$211.5 million in 2024, a decrease of HK$12.9 million (5.7%) from HK$224.4 million in 2023 due to a reduction in customer orders[28][34]. - Cost of sales decreased from HK$210.4 million in 2023 to HK$193.7 million in 2024, primarily due to reduced overseas containerboard procurement and lower domestic containerboard prices[29][34]. - Gross profit increased from HK$13.9 million in 2023 to HK$17.8 million in 2024, with the gross profit margin rising from 6.2% to 8.4%[29][34]. - Other income fell from HK$6.7 million in 2023 to HK$2.7 million in 2024, mainly due to a decline in bank interest and service income[30][34]. - The Group recorded a loss of HK$95.2 million in 2024, an improvement of HK$5.6 million compared to a loss of HK$100.8 million in 2023, with the net loss margin increasing from 44.9% to 45.0%[38][43]. - As of December 31, 2024, the Group's bank balances and cash were HK$33.6 million, down from HK$47.3 million in 2023, while bank borrowings increased from HK$72.8 million to HK$92.4 million[39][44]. - The Group's net borrowings level rose to HK$58.2 million as of December 31, 2024, compared to HK$25.6 million in 2023, with a gearing ratio of 12.7%[40][44]. - Capital expenditures for property, plant, and equipment in China were HK$2.1 million in 2024, significantly lower than HK$8.5 million in 2023[41][45]. - Debtors, creditors, and inventory turnover improved to approximately 53 days, 43 days, and 33 days respectively in 2024, compared to 62 days, 52 days, and 46 days in 2023[42][45]. Business Environment - The business environment for the corrugated packaging industry is expected to remain challenging due to geopolitical tensions and sluggish demand in the post-pandemic era[19]. - The corrugated packaging industry is expected to face a challenging business environment due to rising manufacturing costs and weakening market demand[47]. - The Group anticipates that the upstream business will resume operations after transitioning from coal-fuel to gas-fuel boilers, enhancing competitive advantage through vertical integration[47]. - The growth of e-commerce is projected to increase the demand for corrugated packaging materials for safe and efficient product shipping[48]. Operational Strategies - The Group continues to purchase containerboard from third-party suppliers to ensure a stable supply for its downstream corrugated packaging business[24]. - Key strategies include enhancing pricing power, increasing sales volume, improving production efficiency, and reducing energy usage and raw material wastage[49]. - The Group's management emphasizes good capital management to enhance operational efficiency and cope with market volatility for long-term sustainable development[19]. Legal and Tax Matters - The Group has not made provisions for certain tax payments due to ongoing appeals, with management believing it is probable to succeed in these appeals[60]. - The independent auditor's report includes a qualified opinion regarding uncertainties related to tax payment assessments[56]. - The Group's management considers that uncertainties concerning tax obligations could be resolved by a court decision expected before December 31, 2025[63]. - The Company is awaiting a final decision from the Mainland China courts regarding tax liabilities, expected in 2025, which may resolve current audit issues[70]. - The Group's PRC legal advisor indicated that the State Administration of Taxation no longer has the right to appeal, leading to the removal of contingent liabilities related to the "Tax Matter Notice" this year[71]. - The Company filed a retrial application on August 10, 2023, against a judgment from July 5, 2023, regarding value-added tax invoices, which has been accepted for retrial by the Guangdong Higher People's Court[86][90]. - The Audit Committee has reviewed the management's position on audit issues and agreed that no provision should be made unless an irrevocable decision is reached by the courts[68]. - The auditor's view is that audit modifications can be removed if a final decision is made by the courts in 2025 and relevant provisions are recorded in the financial statements[77]. - The management believes that the audit issues will be resolved similarly to previous years, following effective action plans[71][78]. Corporate Governance - The Company has adopted the Corporate Governance Code as the basis for its governance practices[131]. - The Company has established a corporate governance framework based on the CG Code to enhance oversight on business conduct[132]. - The Company complied with all code provisions of the CG Code for the year ended December 31, 2024, except for provisions C.2.1, D.3.3, and E.1.2[133]. - The Company has a Code of Conduct for Directors' dealings in securities, which has been confirmed as complied with throughout the year[138]. - The Company has established policies and procedures to enhance the Board's ability to implement governance[132]. - The Company has confirmed that there are no financial, business, family, or other material relationships among the members of the Board[141]. - The Board comprises six Directors, including three Executive Directors and three Independent Non-executive Directors[140]. - The Company has established a Nomination Committee to identify suitable candidates for directorship, ensuring at least three independent non-executive directors represent one-third of the Board[145][149]. - The Board has reviewed the effectiveness of its mechanisms for ensuring independent views and considers them effective as of December 31, 2024[150]. - Each independent non-executive director has provided written annual confirmation of their independence in accordance with Listing Rules[154]. - The independent non-executive directors are appointed for a specific term of around two years, subject to renewal[155]. - The Board is responsible for leadership and control of the Company, overseeing strategic decisions and performance[157]. - The management is required to provide monthly updates to the Board on the Company's performance, position, and prospects[165]. - The Company has mechanisms in place to ensure compliance with internal control and risk management systems[158]. - The Chairman and Chief Executive Officer roles are held by Mr. Hui Sum Ping and Mr. Hui Sum Tai, respectively, with clear and distinctive responsibilities[147][148]. - The Company provided induction training and legal advice to newly appointed Directors to ensure understanding of business operations and responsibilities under Listing Rules[168]. - Continuous Professional Development (CPD) records for Directors included training sessions and relevant reading materials to keep them updated on regulatory developments[171]. - The Audit Committee held two meetings to review the interim and annual financial results for the year ended December 31, 2024, focusing on financial reporting and internal control systems[183]. - The Remuneration Committee met twice during the year to review the remuneration policy and structure for Directors, including the New Share Option Scheme[187]. - Directors' remuneration is determined based on their duties, responsibilities, performance, and the Group's results, with annual reviews conducted by the Remuneration Committee[188]. - The Company has established three Board committees: Audit Committee, Remuneration Committee, and Nomination Committee, each with defined terms of reference[174]. - The Audit Committee consists of three Independent Non-executive Directors, ensuring oversight of financial reporting and risk management[176]. - The Remuneration Committee is responsible for establishing transparent procedures for developing remuneration policies to prevent conflicts of interest[186]. - The Company provided e-learnings on updates related to Listing Rules for all Directors during the year ended December 31, 2024[170]. - The Company encourages all Directors to attend relevant external training courses at the Company's expense to enhance their skills[169]. - Senior management remuneration details for the year ended December 31, 2024, include 2 members earning between HK$0–HK$1,000,000, 1 member earning between HK$5,000,001–HK$5,500,000, and 1 member earning between HK$5,500,001–HK$6,000,000[197]. - The Nomination Committee consists of three Independent Non-executive Directors, with Mr. Tso Sze Wai serving as the chairman[198]. - The Nomination Committee's principal duties include reviewing Board composition and making recommendations on the appointment and succession planning of Directors[199]. - The Nomination Committee considers factors concerning Board diversity as outlined in the Company's Board Diversity Policy[200].
合丰集团(02320) - 2024 - 年度财报