MasterBeef Group(MB) - 2024 Q4 - Annual Report

PART I Item 3. Key Information This section outlines the company's holding structure, Hong Kong operations, and key risks including PRC oversight and HFCAA delisting A. Disclosures Regarding Having Our Operations in Hong Kong This section details the company's Cayman Islands holding structure, Hong Kong operations, HFCAA risks, and inter-company cash transfer policies * The company is a Cayman Islands holding company with all operations conducted by Hong Kong subsidiaries, subjecting it to potential PRC government oversight and intervention[24] * The company's auditor, Onestop Assurance PAC, is currently subject to PCAOB inspection, mitigating immediate delisting risk under HFCAA, but future risks exist if work papers become uninspectable[31][41] * The company has not paid any dividends for FY2022-2024 and does not anticipate future dividends, as earnings will be retained for business expansion[48][53] Inter-company Cash Transfers (FY 2022-2024, HK$) | Transfer Type | 2024 | 2023 | 2022 | | :--- | :--- | :--- | :--- | | Purchase of food ingredients | 190,154,000 | 187,730,000 | 154,934,000 | | Management fees | 161,651,000 | 160,902,000 | 135,812,000 | | Funding and deposits | 65,627,000 | 67,719,000 | 8,500,000 | | Miscellaneous | 9,945,000 | 7,713,000 | 2,510,000 | D. Risk Factors This section comprehensively outlines business, industry, Hong Kong operational, legal, regulatory, and public company risks * The company operates in the highly competitive Hong Kong restaurant industry, facing competition across Taiwanese cuisine, hotpot, and barbecue segments[59] * The PRC government may intervene in or influence the company's Hong Kong operations at any time, potentially causing a material change in operations and share value[111] * The HFCAA poses a significant delisting risk if the company's auditor cannot be fully inspected by the PCAOB for two consecutive years[130][132] * As a newly public company, it faces enhanced administrative and compliance requirements under SEC and Sarbanes-Oxley Act rules, potentially increasing costs and straining resources[169][191] * The company does not anticipate paying dividends in the foreseeable future, requiring investors to rely on share price appreciation for returns[181] Item 4. Information on the Company This section details the company's corporate history, structure, business operations, competitive strengths, and strategic plans in the Hong Kong restaurant market Corporate History and Structure This section outlines the company's Cayman Islands holding structure, its operational history in Hong Kong, recent brand divestitures, and its 2025 Nasdaq IPO * The company is a Cayman Islands holding company with all restaurant operations conducted through its Hong Kong subsidiaries[201][203] * On May 14, 2024, the Group divested its Chubby Bento, Chubby Noodles, and Bao Pot brands to streamline its corporate structure and focus on core brands[200][217] * The company completed its IPO on April 11, 2025, raising $8,000,000 by offering 2,000,000 Ordinary Shares at $4.00 per share on Nasdaq under the symbol 'MB'[208] Business of MasterBeef Group This section details the company's restaurant operations, market leadership in specialty hotpot, competitive strengths, and future strategies including expansion and digitalization * The company operates 12 restaurant outlets in Hong Kong under the 'Master Beef' (9) and 'Anping Grill' (3) brands[198][213] * The 'Master Beef' brand ranked first among specialty hotpot restaurant chains in Hong Kong in 2023 by revenue according to Frost & Sullivan[198][224] * Business strategies include organic growth, exploring overseas franchising, and enhancing operational efficiency through technology, including AI-powered robot waiters[237][233] * The company plans to leverage its central kitchen to produce and sell branded semi-finished food products, such as its signature hotpot soup base, through retail channels[235] Membership Growth | Date | Number of Members | | :--- | :--- | | Dec 31, 2022 | 437,000 | | Dec 31, 2023 | 526,000 | | Dec 31, 2024 | 566,000 | Regulatory Environment This section outlines the extensive Hong Kong regulatory framework governing the company's operations, including food safety, environmental, employment, and data privacy laws * Operations require various licenses in Hong Kong, including general restaurant licenses for outlets and a food factory license for its central kitchen, issued by the FEHD[299] * The company is subject to environmental laws like the WPCO and employment laws such as the MPFSO and ECO[309][319][324] * The company must comply with the Personal Data (Privacy) Ordinance (PDPO) in handling customer data, especially for its membership schemes[339] Item 5. Operating and Financial Review and Prospects This section analyzes the company's financial performance, including revenue trends, profitability drivers, liquidity, cash flows, and critical accounting estimates Results of Operations This section details the company's revenue trends and profitability, highlighting the impact of brand disposals and operational costs on net profit or loss Consolidated Results of Operations (HK$ in millions) | Metric | 2024 | 2023 | 2022 | | :--- | :--- | :--- | :--- | | Revenue | 504.0 | 532.3 | 456.7 | | Profit/(Loss) before tax | 35.6 | (29.8) | 37.8 | | Profit/(Loss) for the year | 32.9 | (37.4) | 33.4 | * The swing to profitability in FY2024 was mainly driven by a one-time gain of HK$58.7 million from the disposal of non-core brands[352][377] * The net loss in FY2023 was primarily due to an impairment loss of HK$23.5 million on assets held for sale and increased staff and operating costs from expansion[375][388][390] Revenue Breakdown by Brand (HK$ in millions) | Brand | 2024 | 2023 | 2022 | | :--- | :--- | :--- | :--- | | Master Beef | 397.9 | 425.1 | 373.8 | | Anping Grill | 63.0 | 74.0 | 65.3 | | Chubby Bento & Noodles | 14.1 | 28.8 | 16.1 | | Bao Pot | 3.1 | 4.0 | - | Liquidity and Capital Resources This section assesses the company's liquidity position, cash flow generation, working capital, and capital expenditure trends Key Balance Sheet and Cash Flow Data (HK$ in millions) | Metric | Dec 31, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | 117.3 | 146.2 | | Working capital | (36.3) | (87.0) | | Total assets | 308.3 | 393.1 | | Total liabilities | 279.8 | 397.5 | | Total equity/(deficit) | 28.5 | (4.4) | Consolidated Cash Flows (HK$ in millions) | Cash Flow | 2024 | 2023 | 2022 | | :--- | :--- | :--- | :--- | | From Operating Activities | 60.2 | 83.8 | 141.0 | | From Investing Activities | (12.2) | (44.5) | (32.3) | | From Financing Activities | (76.8) | (81.6) | 23.0 | * Capital expenditures were HK$12.0 million in FY2024 and HK$44.5 million in FY2023, primarily for leasehold improvements and restaurant renovations[422][423] Critical Accounting Estimates This section outlines the significant accounting estimates and judgments, including asset useful lives, impairment, revenue recognition, and lease liability measurement * Significant accounting estimates include the useful lives of property and equipment, impairment of long-lived assets, and assumptions for right-of-use assets[428] * Revenue recognition under IFRS 15 is critical, particularly for the customer loyalty program where future redemption values must be estimated[429][792] * The company uses an incremental borrowing rate (IBR) to measure lease liabilities, requiring estimation when observable rates are unavailable[706] Item 6. Directors, Senior Management and Employees This section introduces the company's leadership team, their compensation, and the composition and responsibilities of the Board's committees * The Board of Directors comprises seven members: three executive directors and four independent directors[453][476] * The company has established an audit committee, compensation committee, and nomination committee, each composed entirely of independent directors[490][491][494] Executive Compensation (Total Salary + Bonus, HK$) | Name | 2024 | 2023 | 2022 | | :--- | :--- | :--- | :--- | | Oi Wai Chau (Exec. Director) | 1,040,000 | 1,280,000 | 877,871 | | Oi Yee Chau (Exec. Director) | 1,040,000 | 1,280,000 | 731,559 | | Tsz Kiu So (Exec. Director) | 988,852 | 1,280,000 | 857,226 | | Ka Chun Lam (CEO) | 1,040,000 | 1,280,000 | 731,559 | | Shing Yan Lee (COO) | 1,040,000 | 1,280,000 | 731,559 | * The company adopted a compensation recovery (clawback) policy as required by Nasdaq, allowing recovery of incentive-based compensation upon financial restatement[504] Item 7. Major Shareholders and Related Party Transactions This section details the company's ownership structure, major shareholders, and significant transactions conducted with related parties Major Shareholders | Shareholder | Shares Beneficially Owned | Percentage of Class | | :--- | :--- | :--- | | Galaxy Shine Company Limited | 9,016,875 | 53.04% | | Thrivors Holdings Limited | 3,448,125 | 20.28% | * Executive Directors Ms. K Chau and Ms. E Chau are deemed to have shared voting power over the 53.04% stake held by Galaxy Shine Company Limited[513][515] * Significant related party transactions in FY2024 included HK$11.2 million in food ingredient sales to related companies and HK$3.7 million in rental expenses paid to related companies[516] Item 10. Additional Information This section provides supplementary details on the company's securities, corporate governance, and material tax considerations for investors * The company is an exempted company incorporated in the Cayman Islands, governed by the Cayman Islands Companies Act[519] * The company does not expect to be a Passive Foreign Investment Company (PFIC) for the current or foreseeable future, though this is an annual fact-intensive determination[602] * There are no Cayman Islands taxes on profits or gains, and Hong Kong does not impose withholding tax on dividends or capital gains from non-trading share sales[592][593] * The company adopted a dividend policy but has no predetermined distribution ratio and does not expect to pay dividends soon, prioritizing reinvestment for growth[625][626] Item 11. Quantitative and Qualitative Disclosures about Market Risk This section details the company's exposure to market risks, primarily interest rate risk, and assesses its currency and credit risk exposures * The primary market risk is interest rate risk related to long-term bank loans with floating interest rates[631] * A hypothetical 100 basis point (1%) change in interest rates would impact the Group's profit after tax by approximately HK$594,000 as of December 31, 2024[632] * Currency risk is considered minimal as the functional and presentation currency is the Hong Kong dollar, with most transactions denominated in HKD[630] PART II Item 15. Controls and Procedures This section reports on the ineffectiveness of the company's disclosure controls and internal financial reporting controls due to identified material weaknesses * Management concluded that the company's disclosure controls and procedures were ineffective as of December 31, 2024[638] * The ineffectiveness stemmed from material weaknesses in internal control over financial reporting[642] * Identified material weaknesses include insufficient financial reporting personnel with IFRS/SEC expertise, ineffective risk assessment, and inadequate internal control evaluations[649] * This annual report does not include an attestation report on internal control over financial reporting, as the company is exempt as a non-accelerated filer[644] Item 16. Corporate Governance and Other Matters This section details the company's corporate governance practices, including audit committee expertise, accountant fees, and adherence to foreign private issuer exemptions * The Board designated Mr. Man Fai Danny Liu as an "audit committee financial expert"[646][491] Principal Accountant Fees (FY 2024) | Fee Type | Amount ($) | | :--- | :--- | | Audit Fees | 200,000 | | Audit Related Fees | - | | All Other Fees | 515,875 | | Total | 715,875 | * As a foreign private issuer, the company follows home country practices instead of certain Nasdaq rules, such as not requiring regular executive sessions for independent directors[653][658] * The company adopted a Cybersecurity Policy, with oversight responsibility assigned to the Audit Committee[657][661] PART III Item 18. Financial Statements This section presents the audited consolidated financial statements for 2022-2024, prepared under IFRS, including the auditor's report and detailed notes * The financial statements were audited by Onestop Assurance PAC, a PCAOB-registered firm based in Singapore[668][673] * The financial statements were prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the IASB[668][690] * Notes to the financial statements indicate a material uncertainty regarding going concern, citing a net loss (excluding one-off gains) and working capital deficit, with management planning director financial support[695][700] * On May 14, 2024, the company disposed of its Chubby Bento and Bao Pot brands to principal shareholders for US$2,000, resulting in a HK$58.7 million gain on disposal[819][820][821]