快意智能(08040) - 2025 - 年度财报

Company Information This section details the company's board composition, committees, contact information, and service providers Board and Committee Composition The company's Board of Directors comprises executive, non-executive, and independent non-executive directors, with audit, remuneration, and nomination committees. Board membership changes occurred during the year, including resignations of executive, non-executive, and independent non-executive directors - Executive Directors include Mr. Cheng Tsang Fu (Chairman and CEO), Ms. Liu Li Li, Mr. Tsui Kai Tai, Mr. Li Chi Wai. Mr. Jiang Han Xing was appointed on May 3, 2024, and resigned on July 8, 2024, and Ms. Lin Xiao Ling resigned on June 21, 2024[27] - Non-executive Director is Professor Leung Yiu Cheung, with Professor Leung Kwok Hei resigning on May 3, 2024[27] - Independent Non-executive Directors include Mr. Hui Chi Keung, Mr. Chiu Wai Hon, Ms. Cheung Kong Hung. Mr. Chow Kwok Kei resigned on February 1, 2025[27] - Mr. Chiu Wai Hon chairs the Audit Committee and Remuneration Committee, while Mr. Cheng Tsang Fu chairs the Nomination Committee[27] Company Contact and Service Institutions Mr. Au Hok Man serves as Company Secretary, with the registered office in the Cayman Islands and principal place of business in Hong Kong Science Park. The independent auditor is Ascent Partners CPA Limited, legal counsel is Y.T. Hui, Chan & Co., and principal bankers include Hang Seng Bank Limited and Bank of Communications (Hong Kong) Limited - Mr. Au Hok Man is the Company Secretary, with Ms. Liu Li Li and Mr. Au Hok Man as authorized representatives, and Ms. Liu Li Li as compliance officer[27] - The registered office is in the Cayman Islands, and the headquarters and principal place of business in Hong Kong are located in Hong Kong Science Park[27][28] - The independent auditor is Ascent Partners CPA Limited, and the legal counsel is Y.T. Hui, Chan & Co[28][29] - Principal bankers include Hang Seng Bank Limited and Bank of Communications (Hong Kong) Limited[29] Chairman's Statement This section reviews the challenges and financial performance of the year, alongside the future outlook and strategic development of the nano-product business Challenges and Performance Review This year, the Group faced intense competition, rising material costs, labor shortages, and a slowdown in the Hong Kong property market. Consequently, the Group's revenue decreased by 10.7% year-on-year, gross profit significantly dropped by 88.6%, and losses widened - Hong Kong's decoration industry faces intense competition, with rising material costs, labor shortages, and project delays or postponements reducing construction industry profits[31] - High interest rates, weak investment sentiment, and a decline in new development projects led to a slowdown in Hong Kong's property market, reducing demand for renovation services[31] 2025 Fiscal Year vs. 2024 Fiscal Year Performance Comparison | Metric | 2025 Fiscal Year (HK$) | 2024 Fiscal Year (HK$) | Change (%) | | :--- | :--- | :--- | :--- | | Revenue | 308,500,000 | 345,600,000 | -10.7% | | Gross Profit | 1,400,000 | 12,000,000 | -88.6% | | Loss attributable to owners | 26,400,000 | 14,500,000 | +82.1% | - The decrease in gross profit was primarily due to lower gross profit margins on certain large-scale decoration projects undertaken this year and cost overruns on several large renovation projects[32] Future Outlook and Nano-Product Business Development Despite market challenges, the Group remains cautiously optimistic for the coming year, aiming to enhance operational efficiency through strict cost control, quality improvement, and customer base expansion. Concurrently, the Group is actively developing its nano-product R&D and sales business, achieving significant market growth, and plans to launch innovative nano-products and smart air conditioning systems, leveraging photocatalytic nano-technology to empower traditional industries - The Group will maintain strict cost-saving measures, strengthen quality control procedures, and focus on project management, supplier partnerships, and human resource development to navigate the current environment and achieve sustainable growth[33] - The nano-product R&D and sales business is actively expanding, having developed nano anti-fouling DIY spray paint and several nano anti-rust lubricating sprays, and improved the nozzle device of the nano anti-fouling DIY spray paint, achieving a "nano-coating + rapid construction" model, increasing construction efficiency by 50% and reducing paint costs by 30%[34] - Nano-product market sales performance is strong, with a distribution network covering all of Hong Kong, signing over 15 distributors; the mainland China market experienced explosive growth, with overseas orders accounting for 65%[34] - Three major new products will be launched in 2025-2026: nano glass cleaning liquid (90-day self-cleaning), nano comprehensive cleaning and sterilization agent (99.9% sterilization rate, long-lasting antibacterial), and smart air conditioning systems (40% energy consumption reduction, expected to be in production by 2026)[35][36] - China Classification Society (CCS) scientific research certification was obtained in March last year, and the exclusive sales license for Nano-AM (Nano-Photocatalytic Anti-fouling Material) was renewed in June this year. Preparations are underway to obtain US (TSCA) and EU (REACH) environmental certifications to enter the global market[36][38] Management Discussion and Analysis This section provides a comprehensive review of the Group's business operations, financial performance, liquidity, capital management, and risk factors, along with its employee policies Business Review and Outlook The Group primarily provides decoration, renovation, and Nano-AM application services in Hong Kong. Clients for decoration and renovation services include property developers, main contractors, and property owners. For Nano-AM application services, the Group has secured an exclusive sales license and successfully expanded into marine maintenance and repair, with plans to broaden its application in the construction materials market - The Group is primarily engaged in providing decoration services, renovation services, and Nano-AM application services in Hong Kong[42] - Clients for decoration and renovation services include property developers, main contractors or direct contractors, and property owners or tenants[43] - This year, four large-scale decoration projects were awarded (last year: eleven), with a total contract value of approximately HK$246.3 million (last year: HK$480.4 million), contributing revenue of approximately HK$37.7 million (last year: HK$148.3 million)[44] - An exclusive sales license for Nano-Photocatalytic Anti-fouling Material (Nano-AM) was obtained in 2023, successfully expanding into marine maintenance and repair business, and exploring its application opportunities in the construction materials market[45] Financial Review This year, the Group's total revenue was approximately HK$308.5 million, a 10.7% year-on-year decrease. Revenue from decoration works decreased by 6.3%, and renovation works decreased by 28.7%. Overall gross profit significantly decreased by 88.6% to approximately HK$1.4 million, mainly due to lower gross margins on large projects and cost overruns. The Group recorded a loss of approximately HK$26.4 million this year, an increase from last year's loss of HK$14.5 million Revenue by Operating Segment (HK$ thousand) | Operating Segment | 2025 | % | 2024 | % | | :--- | :--- | :--- | :--- | :--- | | Decoration Works | 239,837 | 77.7 | 255,786 | 74.0 | | Renovation Works | 61,183 | 19.9 | 85,776 | 24.8 | | Nano-AM Works | 4,652 | 1.5 | 4,068 | 1.2 | | Others | 2,830 | 0.9 | – | – | | Total | 308,502 | 100.0 | 345,630 | 100.0 | - Revenue from decoration works decreased by 6.3%, mainly because most of the work for certain large projects was carried out in the previous fiscal year. Revenue from renovation works decreased by 28.7%, mainly because most of the work for certain large projects was carried out in the previous fiscal year[49] Gross Profit and Gross Margin by Operating Segment | Operating Segment | 2025 Gross Profit (HK$ thousand) | 2025 Gross Margin (%) | 2024 Gross Profit (HK$ thousand) | 2024 Gross Margin (%) | | :--- | :--- | :--- | :--- | :--- | | Decoration Works | 4,018 | 1.7 | 10,516 | 4.1 | | Renovation Works | (3,721) | -6.1 | 39 | 0.0 | | Nano-AM Works | 940 | 20.2 | 1,432 | 35.2 | | Others | 128 | 4.5 | – | – | | Total | 1,365 | 0.4 | 11,987 | 3.5 | - Overall gross profit decreased by 88.6% to approximately HK$1.4 million, primarily attributable to a decrease in gross profit from decoration works and renovation works, which decreased by HK$6.5 million and HK$3.8 million respectively[51] - The loss attributable to owners of the company and total comprehensive expense for the year was approximately HK$26.4 million (last year: HK$14.5 million), mainly due to the decrease in gross profit[59] Liquidity and Capital Management As of March 31, 2025, the Group's total bank credit facilities increased to HK$37.5 million, but bank balances and cash decreased to HK$11.2 million. The current ratio decreased from 2.4 times to 1.8 times, and the gearing ratio decreased from 70.7% to 68.4%. Net proceeds from the placement were delayed in use due to cost-saving and efficiency-enhancing measures, with the remaining portion expected to be utilized by September 30, 2024 - As of March 31, 2025, the Group obtained credit facilities from banks of up to approximately HK$37.5 million (2024: HK$30 million)[60] - Bank balances and cash were approximately HK$11.2 million (2024: HK$23.3 million), with the decrease primarily due to net cash used in financing activities of approximately HK$22.8 million, partially offset by net cash generated from operating activities of approximately HK$11.8 million[61] Liquidity Ratios | Metric | March 31, 2025 | March 31, 2024 | | :--- | :--- | :--- | | Current Ratio | 1.8 times | 2.4 times | | Gearing Ratio | 68.4% | 70.7% | - Net proceeds from the placement of approximately HK$10.644 million, originally planned for working capital by March 31, 2024, had an unused portion (HK$1.971 million) deferred for use until September 30, 2024, due to cost-saving and efficiency-enhancing measures[64][65] Risk Management and Employee Policy The Group's primary business is denominated in HKD, resulting in minimal foreign exchange risk. Financial management is prudent, with a healthy liquidity position. Assets pledged include investments in life insurance policies. Total performance guarantees increased to HK$22.204 million. There were no significant capital commitments, investment plans, or acquisitions/disposals of subsidiaries this year. The number of employees was 76, with labor costs of approximately HK$45 million, and remuneration policy references market terms, offering discretionary bonuses and an MPF scheme - The Group does not face significant foreign exchange risk, as most business transactions are denominated in HKD[67] - As of March 31, 2025, investments in life insurance policies with a fair value of HK$3.7 million were pledged as collateral for bank financing[68] Outstanding Performance Guarantees (HK$ thousand) | Source | 2025 | 2024 | | :--- | :--- | :--- | | Issued by banks | 22,204 | 10,380 | - As of March 31, 2025, the Group had a total of 76 employees (2024: 80 employees), with labor costs of approximately HK$45 million (2024: HK$39.3 million)[74] - Remuneration is determined by reference to market terms and individual employee performance, qualifications, and experience, with year-end discretionary bonuses and a Mandatory Provident Fund (MPF) scheme in addition to basic salaries[74] Biographies of Directors and Senior Management This section provides detailed biographies of the company's executive directors, non-executive directors, independent non-executive directors, and senior management team Biographies of Executive Directors Mr. Cheng Tsang Fu, a co-founder, serves as Chairman and CEO with over 33 years of experience in the decoration and renovation industry. Ms. Liu Li Li, also a co-founder, oversees human resources and administration with over 36 years of experience. Mr. Tsui Kai Tai is responsible for Nano-AM application services business development, having previously served as Chief Surveyor at the Planning Department. Mr. Li Chi Wai has over 21 years of experience in AI and big data, holding positions on various technology advisory committees and universities - Mr. Cheng Tsang Fu (66 years old) is a co-founder and controlling shareholder of the Group, appointed CEO and Executive Director on May 29, 2017, responsible for daily management, business development, and operational oversight, with over 33 years of experience in the decoration and renovation industry[77] - Ms. Liu Li Li (64 years old) is a co-founder and controlling shareholder of the Group, re-designated as Executive Director and Compliance Officer on May 29, 2017, responsible for overseeing human resources and administrative matters, with over 36 years of experience in administration and human resource management[77] - Mr. Tsui Kai Tai (71 years old) was appointed Executive Director on December 23, 2021, primarily responsible for the development of the Nano-AM application services business segment, and previously served as Chief Surveyor at the Hong Kong Government Planning Department[78] - Mr. Li Chi Wai (46 years old) was appointed Executive Director on November 13, 2023, with over 21 years of experience in the artificial intelligence and big data industry, and holds positions on various technology advisory committees, universities, and industry associations[79] Biographies of Non-Executive and Independent Non-Executive Directors Professor Leung Yiu Cheung serves as a Non-Executive Director with over 32 years of engineering experience, formerly Head of the Department of Mechanical Engineering at the University of Hong Kong. Independent Non-Executive Directors include Mr. Hui Chi Keung (a former distinguished gymnast with over 22 years of experience in producing and selling environmentally friendly renewable energy products), Mr. Chiu Wai Hon (with over 19 years of experience in Hong Kong's banking and finance sector), and Ms. Cheung Kong Hung (with over 31 years of experience as a practicing nurse in public health) - Professor Leung Yiu Cheung (65 years old) was appointed Non-Executive Director on December 23, 2021, with over 32 years of engineering experience, and previously served as Head of the Department of Mechanical Engineering at the University of Hong Kong[80] - Mr. Hui Chi Keung (62 years old) was appointed Independent Non-Executive Director on November 4, 2022, a former World Gymnastics Champion and Olympic Silver Medalist, with over 22 years of experience in the production and sales of environmentally friendly renewable energy products[82] - Mr. Chiu Wai Hon (52 years old) was appointed Independent Non-Executive Director on February 7, 2023, with over 19 years of experience in Hong Kong's banking and finance sector, and serves as a director of Starlion Global Limited[82][83] - Ms. Cheung Kong Hung (56 years old) was appointed Independent Non-Executive Director on February 1, 2024, with over 31 years of experience as a practicing nurse in the public health sector[83] Biographies of Senior Management Senior management includes Mr. Cheng Tsang Hin, Financial Controller (with a diploma in accounting and extensive financial management experience), Mr. Li King Yin, Contracts Manager (with over 20 years of experience in quantity surveying and project management), and Mr. Au Hok Man, Company Secretary and Assistant Financial Controller (with over 20 years of experience in accounting and auditing) - Mr. Cheng Tsang Hin (78 years old) joined the Group in May 2010 as Financial Controller, holding a diploma in accounting and extensive financial management experience[84] - Mr. Li King Yin (48 years old) joined the Group in January 2017 as Contracts Manager, with over 20 years of experience in quantity surveying and project management[84] - Mr. Au Hok Man (44 years old) was appointed Company Secretary and Assistant Financial Controller on May 29, 2017, with over 20 years of experience in accounting and auditing[85] Directors' Report This section provides an overview of the Group's business, environmental policies, relationships with key stakeholders, major risks, financial position, board governance, shareholding structure, and auditor changes Business Overview and Environmental Policy The Company's principal business is investment holding, with its subsidiaries primarily providing decoration, renovation, and Nano-AM application services. The Group is committed to environmental sustainability, implementing measures for efficient resource utilization, energy saving, and waste reduction, while continuously complying with relevant laws and regulations - The Company's principal business is investment holding, with subsidiaries primarily engaged in providing decoration services, renovation services, and Nano-AM application services[87] - The Group is committed to maintaining long-term environmental and community sustainability, adopting effective measures to achieve efficient resource utilization, energy saving, and waste reduction[89] - During the year, the Directors were not aware of any non-compliance with relevant laws and regulations that would have a material impact on the Group's current operations[91] Relationships with Key Stakeholders The Group's success relies on the support of its customers, suppliers, employees, and shareholders. It builds a strong reputation with customers, maintains close relationships with suppliers for efficient and high-quality project completion, values employee talent by offering competitive remuneration and development opportunities, and strives to maximize shareholder returns - Customers include property developers, main contractors or direct contractors, and property owners or tenants, with the Group having established a good reputation for quality services[93] - Maintaining good relationships with subcontractors and material suppliers is a key success factor to ensure efficient and high-quality project completion[94] - The Group values employee talent, providing a harmonious and professional working environment, competitive remuneration packages, effective performance appraisal mechanisms, and social gathering activities[95] - The primary objective is to maximize shareholder returns, focusing on developing core businesses to achieve sustainable profit growth, and distributing dividends to shareholders after considering business development needs and financial soundness[96] Major Risks and Financial Position The Group faces several business risks, including reliance on key customers, non-recurring nature of projects, dependence on management and subcontractors, cost overrun risks, shortage of skilled labor, and collection uncertainties. No dividend is recommended for the current year. There is a high concentration of major customers and suppliers, with the top five customers accounting for 63.6% of sales and the top five suppliers accounting for 27.5% of purchases - Major risks include reliance on several key customers, the non-recurring nature of decoration and renovation projects, reliance on Board members, senior management team, and project management personnel, reliance on subcontractors to complete projects, failure to accurately estimate time and control costs leading to overruns, shortage of skilled labor and increasing labor costs, and uncertainties in collection[99] - The Board does not recommend the payment of any dividend (2024: nil)[101] - As of March 31, 2025, the Company's distributable reserves were zero[107] Concentration of Major Customers and Suppliers | Category | 2025 (%) | 2024 (%) | | :--- | :--- | :--- | | Largest Supplier | 7.5% | 11.2% | | Top Five Suppliers Total | 27.5% | 32.4% | | Largest Customer | 18.6% | 14.3% | | Top Five Customers Total | 63.6% | 60.7% | Board Governance and Shareholding Structure Directors' service contracts range from one to three years, with rotation and re-election mechanisms. There were no equity-linked agreements, pre-emptive rights provisions, or purchases, sales, or redemptions of listed securities during the year. Directors' remuneration is determined by the Board with reference to the Remuneration Committee's recommendations. Directors and chief executives hold interests in the company's shares, with Mr. Cheng Tsang Fu and Ms. Liu Li Li jointly holding 43.50% through their controlled corporation, Advance Goal. Subsequent to the reporting period, Advance Goal sold a portion of its shares and is no longer a controlling shareholder. The Group has received confirmation from the controlling shareholders regarding their compliance with the non-competition undertaking - Executive Directors' service agreements have an initial term of three years, Non-Executive Directors' appointment letters have an initial term of three years, and Independent Non-Executive Directors' appointment letters have an initial term of one year[110] - In accordance with the Company's Articles of Association, one-third of the Directors must retire by rotation at each annual general meeting, with each Director retiring at least once every three years[110] - The Company did not enter into any equity-linked agreements during the year, nor were any in existence at the end of the year[104] - Directors' remuneration is determined by the Board with reference to the recommendations of the Remuneration Committee, the Directors' duties, responsibilities, and performance, and the Group's results[118] Interests of Directors and Chief Executives in the Company's Ordinary Shares and Related Shares (March 31, 2025) | Name | Capacity/Nature of Interest | Shareholding | Approximate Percentage of Shareholding | | :--- | :--- | :--- | :--- | | Mr. Cheng Tsang Fu | Interest in controlled corporation/Spouse's interest | 147,900,000 | 43.50% | | Ms. Liu Li Li | Interest in controlled corporation/Spouse's interest | 147,900,000 | 43.50% | | Mr. Tsui Kai Tai | Beneficial owner | 12,800,000 | 3.76% | | Professor Leung Yiu Cheung | Beneficial owner | 2,700,000 | 0.79% | | Ms. Cheung Kong Hung | Beneficial owner | 385,000 | 0.11% | - On April 11, 2025, Advance Goal sold 50 million shares, representing approximately 14.71% of the issued share capital, to Mr. Poon Chi Hung. Following the completion of the sale, Advance Goal, together with Mr. Cheng Tsang Wai, Mr. Cheng Tsang Fu, and Ms. Liu Li Li, are no longer controlling shareholders, Mr. Poon Chi Hung has become a substantial shareholder, and no shareholder meets the definition of a controlling shareholder under the GEM Listing Rules[128][136] - The Group has received a confirmation letter from the controlling shareholders regarding their compliance with the terms of the non-competition undertaking during the year[135] Auditor Change and Tax Information Zhongzheng Tianheng CPA Limited resigned as auditor due to a failure to agree on audit fees, effective April 7, 2025. Ascent Partners CPA Limited was appointed as the new auditor. Share trading and transfers in Hong Kong are subject to stamp duty and profits tax, while the Cayman Islands exempts stamp duty - Zhongzheng Tianheng CPA Limited resigned as auditor due to a failure to agree on audit fees, effective April 7, 2025[143] - Ascent Partners CPA Limited was appointed as the Company's auditor, effective April 7, 2025, and will retire at the upcoming annual general meeting and be eligible for re-appointment[143] - Share trading and transfers in Hong Kong are subject to Hong Kong stamp duty (0.1% for both buyer and seller) and a fixed duty of HK$5.00, and may also be subject to Hong Kong profits tax[140] - Under current Cayman Islands law, transfers of shares and other disposals by the Company are exempt from Cayman Islands stamp duty[141] Corporate Governance Report This section outlines the company's commitment to good corporate governance, board operations, committee functions, risk management, and communication with shareholders Corporate Governance Practices and Board Operations The company is committed to maintaining good corporate governance, adhering to the Corporate Governance Code in Appendix C1 of the GEM Listing Rules. The Board is responsible for overall management, strategy formulation, and corporate governance, delegating daily management authority to the management. The roles of Board Chairman and Chief Executive Officer are held by the same person, representing a deviation from Code Provision C.2.1, but the Board believes this arrangement enhances operational efficiency. The Board holds regular meetings and ensures directors receive sufficient information and training - The Company has adopted and complied with the Corporate Governance Code set out in Appendix C1 of the GEM Listing Rules, ensuring business activities and decision-making processes are properly regulated[146] - The Board is responsible for overall management, strategic direction, and corporate governance, while management handles daily management and administrative matters[147] - The roles of Board Chairman and Chief Executive Officer are held by Mr. Cheng Tsang Fu, which deviates from Code Provision C.2.1, but the Board believes this arrangement enhances operational efficiency[154] - Seven Board meetings were held during the year, and the Board Chairman and Independent Non-Executive Directors held private meetings[156] - Each newly appointed Director receives formal induction training and continuously participates in professional development to update knowledge and skills[164] Board Committee Functions and Policies The company has an Audit Committee, Remuneration Committee, and Nomination Committee, each with clear terms of reference. The Audit Committee reviews financial statements, risk management, and internal controls. The Remuneration Committee formulates remuneration policies for directors and senior management. The Nomination Committee reviews board structure, identifies qualified director candidates, assesses independence, and has adopted a board diversity policy - The primary responsibilities of the Audit Committee are to provide recommendations on the appointment and removal of external auditors, review financial statements, and oversee risk management and internal control procedures[165] - The primary responsibilities of the Remuneration Committee are to provide recommendations to the Board on the overall remuneration policy and structure for Directors and senior management, and to ensure no Director determines their own remuneration[169] - The primary responsibilities of the Nomination Committee are to regularly review the Board's structure, size, and composition, identify qualified director candidates, assess the independence of Independent Non-Executive Directors, and provide recommendations on the appointment or re-appointment of Directors[171] - The Nomination Policy outlines criteria and procedures for nominating and appointing Directors, including integrity, professional qualifications, diversity factors, and independence[175][176] - The Board Diversity Policy considers various factors such as gender, age, cultural and educational background, ethnicity, professional experience, skills, knowledge, and length of service to enhance Board effectiveness[184] Accountability, Risk Management, and Shareholder Communication The Board is responsible for financial reporting and has reviewed the effectiveness of risk management and internal control systems. The Group has a disclosure policy to manage inside information. The Board delegates certain responsibilities to various Board committees and management. The controlling shareholders have confirmed compliance with the non-competition undertaking. The Group is committed to effective communication with shareholders and investors, publishing information on its website and answering questions at annual general meetings, while also having a dividend policy to balance growth and returns - The Board is responsible for preparing true and fair consolidated financial statements and has reviewed the effectiveness of risk management and internal control systems, deeming them effective and adequate[188][192][198] External Auditor's Remuneration (HK$ thousand) | Service Type | 2025 | 2024 | | :--- | :--- | :--- | | Audit Services | 400 | 530 | - The Group has adopted and implemented a disclosure policy aimed at providing guidance to Directors and senior management on handling confidential information and monitoring information disclosure, ensuring timely dissemination of inside information[199] - The controlling shareholders have confirmed compliance with the non-competition undertaking during the year[202] - Shareholders can request to convene extraordinary general meetings or propose resolutions in writing, and can send inquiries to the Board/Company Secretary via mail or the company website[208][209][211] - The Company has adopted a dividend policy aimed at maintaining sufficient cash reserves when recommending or declaring dividends to meet liquidity requirements, future growth, and shareholder value[212] - The Company is committed to maintaining effective communication with shareholders and potential investors, publishing all company information on its website, and meeting with shareholders at annual general meetings[214] Environmental, Social and Governance Report This report outlines the Group's environmental, social, and governance performance for the year ended March 31, 2025, aiming for sustainable development. The Board is fully responsible for ESG strategy and reporting, leading management through policy formulation, implementation oversight, and performance monitoring. The Group actively communicates with stakeholders and conducts materiality assessments to identify key ESG issues Report Overview and Governance Approach This Environmental, Social and Governance Report outlines the Group's ESG performance for the year ended March 31, 2025, aiming for sustainable development. The Board is fully responsible for ESG strategy and reporting, leading management through policy formulation, implementation oversight, and performance monitoring. The Group actively communicates with stakeholders and conducts materiality assessments to identify key ESG issues - This Environmental, Social and Governance Report is prepared in accordance with the Environmental, Social and Governance Reporting Guide in Appendix C2 of the GEM Listing Rules of the Stock Exchange[217] - The Board is fully responsible for the Group's environmental, social, and governance strategy and reporting, and ensures the establishment of appropriate and effective ESG risk management and internal control systems[222] - The Group actively collaborates with stakeholders, communicating through announcements, general meetings, employee appraisals, internal emails, the company website, and industry events[224][225] - A materiality assessment has been conducted to identify ESG issues crucial to stakeholders and the Group's business, and appropriate and effective management policies and internal control systems have been established[227][231] Environmental Performance The Group's core business has a minor environmental impact, with primary emissions being greenhouse gases from office electricity consumption and vehicle gasoline consumption. Total greenhouse gas emissions for the year were approximately 138.9 tons, or 2.0 tons per employee. The Group implements energy-saving measures, promotes low-carbon office practices, and complies with environmental regulations. Energy consumption for gasoline and electricity is relatively low, and water consumption is negligible - The Group's business operations primarily rely on electronic communication and the use of electronic equipment, and do not involve any manufacturing or production processes, thus generating no significant emissions, water pollution, or waste (except for greenhouse gas emissions)[233] Summary of Greenhouse Gas Emissions Performance (tons) | Greenhouse Gas Emission Scope | 2025 Total | 2025 Intensity (tons/employee) | 2024 Total | 2024 Intensity (tons/employee) | | :--- | :--- | :--- | :--- | :--- | | Direct Greenhouse Gas Emissions (Scope 1) – Gasoline Consumption | 29.7 | 0.4 | 32.1 | 0.4 | | Indirect Greenhouse Gas Emissions (Scope 2) – Electricity Consumption | 47.7 | 0.7 | 48.1 | 0.6 | | Other Indirect Greenhouse Gas Emissions (Scope 3) – Business Air Travel | 61.5 | 0.9 | 32.3 | 0.4 | | Total Greenhouse Gas Emissions | 138.9 | 2.0 | 112.5 | 1.4 | - The Group has implemented energy-saving measures, such as optimizing office air conditioning temperature settings, using energy-efficient products, turning off lights in unused areas, and powering down idle electronic products[233] - No significant non-compliance with laws and regulations concerning exhaust gas and greenhouse gas emissions, wastewater discharge into water sources and soil, and hazardous and non-hazardous waste emissions was found during the year[235] Energy Consumption (2025 vs. 2024) | Energy Category | 2025 Quantity | 2025 Unit | 2025 Intensity (Unit per employee) | 2024 Quantity | 2024 Unit | 2024 Intensity (Unit per employee) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Gasoline | 10,975 | liters | 156.8 | 11,847 | liters | 153.9 | | Electricity | 75,788 | kWh | 1,082.7 | 76,385 | kWh | 992.0 | - The Group's business has a minor impact on the environment and natural resources, and it continuously monitors and enhances control measures to mitigate impacts. Climate change affects the construction industry, and the Group is committed to reducing greenhouse gas emissions, non-hazardous waste, and energy consumption, and provides guidance to employees on addressing these issues[243][244] Social Performance The Group considers employees its most valuable asset, fully complying with Hong Kong labor regulations, providing competitive compensation and benefits, and training. The total number of employees is 70, with a turnover rate of approximately 6.1%. The Group highly values workplace health and safety and strictly prohibits child or forced labor. In supply chain management, the Group has a supplier selection policy and evaluates performance in terms of quality, pricing, reliability, social, and environmental awareness. The Group emphasizes service quality and safety, and has an anti-corruption policy and whistleblowing mechanism. Additionally, the Group actively participates in community investment, encouraging employee involvement in charitable and volunteer activities - The Group fully complies with Hong Kong statutory requirements, including the Companies Ordinance, Employment Ordinance, Minimum Wage Ordinance, Personal Data (Privacy) Ordinance, etc[246] Employee Statistics (March 31, 2025) | Category | Number | | :--- | :--- | | By Gender: | | | Male | 47 | | Female | 23 | | Total | 70 | | By Age: | | | Under 30 | 9 | | 30-50 | 41 | | Over 50 | 20 | | Total | 70 | | By Employment Type: | | | Permanent Staff | 70 | | Part-time/Contract Staff | 0 | | Total | 70 | - As of the year ended March 31, 2025, the employee turnover rate was approximately 6.1%[247] - The Group employs safety specialists to conduct regular training for employees and subcontractors, ensuring compliance with workplace safety policies and the Occupational Safety and Health Ordinance[248] - The Group strictly prohibits the employment of child or forced labor, ensuring no such situations exist in the workplace through careful recruitment and regular reviews[252] - The Group has a supplier selection policy, using evaluation forms to review new suppliers and continuously assess the performance of existing suppliers, with evaluation areas including work quality, pricing, reliability, social, and environmental awareness[253] - The Group has a project quality and safety inspection system to ensure service quality and safety, and complies with relevant laws and regulations[256] - The employee handbook and related policies stipulate that employees shall not solicit or accept benefits or bribes from business partners, and a whistleblowing mechanism is in place to encourage employees to report misconduct[257] - The Group encourages employees to participate in charitable and volunteer activities and will consider making donations to charitable organizations and participating in more community projects from time to time[258][259] Independent Auditor's Report This section presents the independent auditor's opinion on the consolidated financial statements, key audit matters, and the responsibilities of both directors and auditors Audit Opinion and Basis Independent auditor Ascent Partners CPA Limited believes that the consolidated financial statements truly and fairly reflect the Group's consolidated financial position as of March 31, 2025, and its consolidated financial performance and cash flows for the year then ended, prepared in accordance with Hong Kong Financial Reporting Standards issued by the Hong Kong Institute of Certified Public Accountants and properly compiled with the disclosure requirements of the Hong Kong Companies Ordinance. The audit was conducted in accordance with Hong Kong Standards on Auditing and maintained independence in compliance with the Code of Ethics for Professional Accountants - The consolidated financial statements truly and fairly reflect the Group's consolidated financial position as of March 31, 2025, and its consolidated financial performance and consolidated cash flows for the year then ended, prepared in accordance with Hong Kong Financial Reporting Standards issued by the Hong Kong Institute of Certified Public Accountants and properly compiled with the disclosure requirements of the Hong Kong Companies Ordinance[261] - The audit was conducted in accordance with Hong Kong Standards on Auditing issued by the Hong Kong Institute of Certified Public Accountants and maintained independence in compliance with the Code of Ethics for Professional Accountants[262] Key Audit Matters The auditor identified two key audit matters: the recognition of contract revenue, contract assets, and contract liabilities, and the impairment losses on trade receivables and contract assets. These matters are significant due to their importance to the consolidated financial statements and the judgments and estimates required by management in determining outcomes and impairment estimates - Key audit matters include the recognition of contract revenue, contract assets, and contract liabilities, and impairment losses on trade receivables and contract assets[263][265][267] - The recognition of contract revenue, contract assets, and contract liabilities is considered a key audit matter due to its significance to the consolidated financial statements and the judgments and estimates management must make in determining the outcome of each decoration and renovation project and its percentage of completion[265] - The impairment assessment of trade receivables and contract assets is considered a key audit matter due to its significance to the consolidated financial statements and the extent of estimates made by management[267] Responsibilities of Directors and Auditor Directors are responsible for preparing true and fair consolidated financial statements, implementing necessary internal controls, and assessing the Group's ability to continue as a going concern. The auditor's objective is to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement, exercising professional judgment and skepticism throughout the audit, evaluating the reasonableness of accounting policies, estimates, and disclosures, and concluding on the appropriateness of the going concern basis of accounting - Directors are responsible for preparing true and fair consolidated financial statements in accordance with Hong Kong Financial Reporting Standards issued by the Hong Kong Institute of Certified Public Accountants and the disclosure requirements of the Hong Kong Companies Ordinance, and for implementing necessary internal controls[270] - The auditor's objective is to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error[272] - The auditor exercises professional judgment and maintains professional skepticism throughout the audit, identifying and assessing risks of material misstatement, understanding internal controls, evaluating the appropriateness of accounting policies and estimates, and concluding on the appropriateness of the going concern basis of accounting[273][274] Consolidated Statement of Profit or Loss and Other Comprehensive Income For the year ended March 31, 2025, the Group's revenue was HK$308.5 million, and gross profit was HK$1.365 million. The loss before tax for the year was HK$26.803 million, an increase from last year's loss of HK$14.547 million. The loss for the year attributable to owners of the company was HK$26.419 million, with basic loss per share of 7.77 HK cents Summary of Consolidated Statement of Profit or Loss and Other Comprehensive Income (HK$ thousand) | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Revenue | 308,502 | 345,630 | | Cost of services | (307,137) | (333,643) | | Gross profit | 1,365 | 11,987 | | Other income and (losses)/gains, net | (32) | 32 | | Impairment losses | (6,292) | (5,015) | | Administrative expenses | (20,049) | (19,147) | | Finance costs | (1,795) | (2,404) | | Loss before tax | (26,803) | (14,547) | | Loss for the year | (26,803) | (14,547) | | Loss for the year attributable to owners of the company | (26,419) | (14,545) | | Basic loss per share (HK cents) | (7.77) | (4.28) | - Total loss and comprehensive expense for the year was HK$26.794 million, of which HK$26.41 million was attributable to owners of the company[278] Consolidated Statement of Financial Position As of March 31, 2025, the Group's total assets were HK$134.7 million, a decrease from HK$168.7 million last year. Net current assets decreased from HK$93.482 million to HK$55.251 million. Total liabilities were HK$91.931 million, and total equity was HK$42.724 million, with equity attributable to owners of the company being HK$41.768 million Summary of Consolidated Statement of Financial Position (HK$ thousand) | Metric | March 31, 2025 | March 31, 2024 | | :--- | :--- | :--- | | Non-current assets | 10,773 | 8,692 | | Current assets | 123,882 | 159,960 | | Current liabilities | (68,631) | (66,478) | | Net current assets | 55,251 | 93,482 | | Total assets less current liabilities | 66,024 | 102,174 | | Non-current liabilities | (23,300) | (33,822) | | Net assets | 42,724 | 68,352 | | Total equity | 42,724 | 68,352 | | Equity attributable to owners of the company | 41,768 | 68,178 | - The decrease in net current assets was primarily due to a decrease in trade receivables and a decrease in cash and cash equivalents[61] Consolidated Statement of Changes in Equity For the year ended March 31, 2025, equity attributable to owners of the company decreased from HK$68.178 million at the beginning of the year to HK$41.768 million at year-end, primarily due to a loss for the year of HK$26.419 million. Non-controlling interests increased, but total equity still showed a downward trend Summary of Consolidated Statement of Changes in Equity (HK$ thousand) | Item | As at April 1, 2024 | Loss for the year | Exchange differences | Contribution from non-controlling interests | Disposal of subsidiaries | As at March 31, 2025 | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Share capital | 3,400 | – | – | – | – | 3,400 | | Share premium | 58,541 | – | – | – | – | 58,541 | | Capital reserve | 10,010 | – | – | – | – | 10,010 | | Exchange reserve | – | – | 9 | – | – | 9 | | Retained profits/(accumulated losses) | (3,773) | (26,419) | – | – | – | (30,192) | | Sub-total attributable to owners of the company | 68,178 | (26,419) | 9 | – | – | 41,768 | | Non-controlling interests | 174 | (384) | – | 1,380 | (214) | 956 | | Total | 68,352 | (26,803) | 9 | 1,380 | (214) | 42,724 | - The loss for the year attributable to owners of the company was HK$26.419 million, leading to a further expansion of retained profits (accumulated losses)[284] - Non-controlling interests contributed HK$1.38 million to subsidiaries, partially offsetting the impact of losses and disposal of subsidiaries[284] Consolidated Statement of Cash Flows For the year ended March 31, 2025, net cash generated from operating activities was HK$11.8 million, a significant improvement from net cash used in operating activities of HK$27.462 million last year. Net cash used in investing activities was HK$1.077 million. Net cash used in financing activities was HK$22.836 million, resulting in a net decrease in cash and cash equivalents of HK$12.113 million, with bank balances and cash at year-end being HK$11.195 million Summary of Consolidated Statement of Cash Flows (HK$ thousand) | Activity Type | 2025 | 2024 | | :--- | :--- | :--- | | Net cash generated from/(used in) operating activities | 11,800 | (27,462) | | Net cash (used in)/generated from investing activities | (1,077) | 4,647 | | Net cash (used in)/generated from financing activities | (22,836) | 19,763 | | Net decrease in cash and cash equivalents | (12,113) | (3,052) | | Cash and cash equivalents at beginning of year | 23,274 | 26,326 | | Cash and cash equivalents at end of year | 11,195 | 23,274 | - Cash flow from operating activities turned from a net outflow last year to a net inflow, mainly due to a decrease in trade and other receivables, a decrease in contract assets, and an increase in contract liabilities[286] - Cash outflow from financing activities primarily included repayment of borrowings from the ultimate controlling company, borrowings from directors of the company, bank loans, and lease liabilities[287] Notes to the Consolidated Financial Statements This section provides detailed notes on the Group's general information, basis of preparation, application and changes in accounting standards, significant accounting policies, key sources of estimation uncertainty, revenue and segment information, other financial data, and details of assets and liabilities General Information and Basis of Preparation Smart Living Technology Holdings Limited is incorporated in the Cayman Islands, listed on GEM, with its principal business being investment holding, and its subsidiaries providing decoration, renovation, and Nano-AM application services. The consolidated financial statements are prepared on a historical cost basis, using the going concern basis of accounting, and presented in HKD - The Company is incorporated in the Cayman Islands, listed on GEM of The Stock Exchange of Hong Kong Limited, with its principal business being investment holding[288][289] - The Group is principally engaged in providing decoration services, renovation services, and Nano-AM application services in Hong Kong[289] - The consolidated financial statements have been prepared on a historical cost basis, using the going concern basis of accounting, and are presented in HKD[291][292][294] Application and Changes in Accounting Standards This year, the Group first applied several revised Hong Kong Financial Reporting Standards, including lease liabilities for sale and leaseback transactions, classification of liabilities as current or non-current, and non-current liabilities with covenants. These revisions had no significant impact on this year's financial position and performance. HKFRS 18 Presentation and Disclosure in Financial Statements, effective in future periods, is expected to affect the presentation and disclosure of the statement of profit or loss - This year, several revised Hong Kong Financial Reporting Standards were first applied, including amendments to HKFRS 16, HKAS 1, and HKAS 7 and HKFRS 7[295] - The application of the 2020 amendments and 2022 amendments (regarding classification of liabilities as current or non-current) will not result in reclassification of the Group's liabilities[298] - HKFRS 18 Presentation and Disclosure in Financial Statements will be effective for annual periods beginning on or after January 1, 2027, and is expected to affect the presentation and disclosure of the statement of profit or loss in future financial statements[301][302] Significant Accounting Policies This section details the Group's accounting policies for consolidation, revenue recognition (including over time and at a point in time), contract assets/liabilities, cash and cash equivalents, inventories, leases (as lessee), foreign currency translation, government grants, retirement benefit costs, short-term employee benefits, taxation, property, plant and equipment, impairment, borrowing costs, and provisions - The consolidated financial statements incorporate the financial statements of the Company and entities controlled by its subsidiaries, with control based on power, variable returns, and the ability to affect those returns[303][304] - Revenue is recognized when performance obligations are satisfied, i.e., when "control" of goods or services is transferred to the customer, which can be recognized over time or at a point in time[306][308] - Contract assets represent the Group's right to consideration for goods or services transferred (not yet unconditional), and contract liabilities represent the Group's obligation to transfer goods or services to a customer for which consideration has been received[311][312] - As a lessee, the Group applies recognition exemptions for short-term leases and leases of low-value assets, and recognizes right-of-use assets and lease liabilities[318][319][324] - Financial assets are classified as measured at fair value (through other comprehensive income or profit or loss) and at amortized cost; financial liabilities are classified as measured at amortized cost[348][351] Key Sources of Estimation Uncertainty The primary sources of estimation uncertainty faced by the Group in preparing financial statements include revenue recognition for construction contracts and impairment of trade and other receivables and contract assets. Revenue recognition involves judgment on total project revenue and percentage of completion, while impairment assessment is based on historical default rates, overdue status, financial capability, and forward-looking information - Revenue recognition for construction contracts involves management's estimation of total project revenue and judgment of the percentage of completion of construction contracts, where actual outcomes may be higher or lower than estimates, affecting recognized revenue and profit/loss[357] - Impairment assessment of trade and other receivables and contract assets is based on a lifetime expected credit loss provision under a simplified approach, considering historical default rates, overdue status, financial capability, and forward-looking information, and is subject to changes in estimates[359] Carrying Amounts of Trade Receivables, Other Receivables, and Contract Assets (HK$ thousand) | Item | March 31, 2025 | March 31, 2024 | | :--- | :--- | :--- | | Trade receivables | 28,181 | 43,382 | | Other receivables | 165 | 1 | | Contract assets | 81,662 | 91,651 | Revenue and Segment Information The Group's revenue primarily derives from decoration works, renovation works, and Nano-AM works. Total revenue for the year was HK$308.5 million, with the Hong Kong market contributing HK$305.7 million and the China market contributing HK$2.83 million. Revenue recognition is mainly over time. The Group divides its business into four reportable operating segments: decoration works, renovation works, Nano-AM works, and others. The top five customers accounted for 63.6% of sales this year Revenue Disaggregated by Major Product or Service Line (HK$ thousand) | Product/Service Line | 2025 | 2024 | | :--- | :--- | :--- | | Decoration Works | 239,837 | 255,786 | | Renovation Works | 61,183 | 85,776 | | Nano-AM and Maintenance Services | 2,761 | 2,390 | | Maintenance Services | 1,891 | 1,678 | | Others | 2,830 | – | | Total | 308,502 | 345,630 | Revenue Disaggregated by Geographical Market (HK$ thousand) | Geographical Market | 2025 | 2024 | | :--- | :--- | :--- | | Hong Kong | 305,672 | 345,630 | | People's Republic of China | 2,830 | – | | Total | 308,502 | 345,630 | - Regarding timing of revenue recognition, revenue recognized over time accounted for HK$302.9 million, and revenue recognized at a point in time accounted for HK$5.591 million[361] - The Group's reportable and operating segments include decoration works, renovation works, Nano-AM works, and others (R&D, manufacturing, and sales of environmental air purifiers)[364] Revenue Contribution from Major Customers (HK$ thousand) | Customer | Operating Segment | 2025 | 2024 | | :--- | :--- | :--- | :--- | | Customer A | Decoration Works | 57,306 | 38,166 | | Customer B | Decoration and Renovation Works | 40,966 | 49,383 | | Customer C | Decoration and Renovation Works | 41,487 | 43,228 | | Customer D | Decoration and Renovation Works | 36,318 | 44,610 | Other Financial Data This year, other income and net losses amounted to a HK$32 thousand loss, and finance costs were HK$1.795 million. Loss before tax was HK$26.803 million, with zero income tax expense. Total labor costs were HK$44.972 million, including directors' emoluments of HK$4.048 million. The total remuneration for the five highest-paid employees (non-directors) was HK$4.534 million. No dividend is recommended for the year, and basic loss per share was 7.77 HK cents Other Income and (Losses)/Gains, Net (HK$ thousand) | Item | 2025 | 2024 | | :--- | :--- | :--- | | Bank interest income | 99 | 232 | | Miscellaneous income | 45 | 24 | | Fair value gain on financial assets at fair value through profit or loss | 24 | 16 | | Gain on early termination of lease | 6 | – | | Loss on disposal of property, plant and equipment | – | (227) | | Loss on disposal of a subsidiary | (172) | – | | Net exchange loss | (34) | (13) | | Total | (32) | 32 | Finance Costs (HK$ thousand) | Item | 2025 | 2024 | | :--- | :--- | :--- | | Interest on amounts due to ultimate controlling company | 600 | 765 | | Interest on bank and other borrowings | 1,052 | 1,467 | | Interest on lease liabilities | 143 | 172 | | Total | 1,795 | 2,404 | Total Labor Costs (HK$ thousand) | Item | 2025 | 2024 | | :--- | :--- | :--- | | Directors' emoluments | 4,048 | 3,664 | | Other labor costs | 40,924 | 35,644 | | Total | 44,972 | 39,308 | - Income tax expense for the year was zero, with unused tax losses of approximately HK$40.132 million available to offset future profits[375][376] - The total remuneration for the five highest-paid employees (non-directors) for the year was HK$4.534 million[382] - The Directors do not recommend the payment of a dividend for the year ended March 31, 2025[383] - Basic loss per share attributable to owners of the Company was 7.77 HK cents (2024: 4.28 HK cents)[384] Details of Assets and Liabilities This section details the carrying amounts and changes in the Group's property, plant and equipment, right-of-use assets, financial assets at fair value through profit or loss, inventories, trade and other receivables, contract assets/liabilities, bank balances and cash, trade and other payables, amounts due to ultimate controlling company, bank and other borrowings, lease liabilities, and other non-current liabilities Carrying Amounts of Property, Plant and Equipment (HK$ thousand) | Item | March 31, 2025 | March 31, 2024 | | :--- | :--- | :--- | | Furniture and fixtures | 368 | 382 | | Decoration | 89 | 104 | | Machinery | 160 | – | | Motor vehicles | 1,573 | 1,545 | | Total | 2,190 | 2,031 | - The carrying amount of right-of-use assets was HK$4.764 million (2024: HK$2.944 million), primarily representing rights to leased properties[386][387] - Financial assets at fair value through profit or lo