裕丰昌控股(08631) - 2022 - 年度财报

Corporate Information Board of Directors Composition The Board of Directors comprises two executive directors and three independent non-executive directors, with Mr. Law Ming Yik as Chairman and Mr. Li Yi Hao as Chief Executive Officer, bringing diverse professional backgrounds and experience - The Board of Directors consists of 5 directors, including 2 executive directors and 3 independent non-executive directors[8] - Mr. Law Ming Yik serves as Chairman, and Mr. Li Yi Hao serves as Chief Executive Officer[8] - Independent non-executive directors include Mr. Fan Tak Wai, Mr. Wong Ka Chun, and Mr. Ho Cheung Kong, with Mr. Ho Cheung Kong serving as Chairman of the Audit Committee[8][10] Committees The company has established Audit, Remuneration, and Nomination Committees to ensure effective corporate governance, with independent non-executive directors serving as chairpersons or key members - The Audit Committee Chairman is Mr. Ho Cheung Kong, with members including Mr. Wong Ka Chun and Mr. Fan Tak Wai[10] - The Remuneration Committee Chairman is Mr. Fan Tak Wai, with members including Mr. Law Ming Yik and Mr. Ho Cheung Kong[10] - The Nomination Committee Chairman is Mr. Law Ming Yik, with members including Mr. Wong Ka Chun and Mr. Fan Tak Wai[10] Key Contacts and Information The company's authorised representatives are Mr. Law Ming Yik and Mr. Li Yi Hao, with Mr. Law also serving as Compliance Officer and Mr. Leung Cheuk Wai as Company Secretary; the company is registered in the Cayman Islands with Hong Kong headquarters in Yuen Long and stock code 8631 - Authorised Representatives: Mr. Law Ming Yik, Mr. Li Yi Hao[9] - Compliance Officer: Mr. Law Ming Yik[9] - Company Secretary: Mr. Leung Cheuk Wai (Practising Accountant)[9] - Company Website: www.skhl.com.hk, Stock Code: 8631[11] Chairman's Statement Performance Overview and Market Conditions Amidst the ongoing COVID-19 pandemic, Hong Kong and mainland China's economies deteriorated, and rising crude oil prices increased procurement and operating costs, leading to a slight revenue decrease but significantly narrowed losses - Hong Kong and mainland China's economies continued to deteriorate due to the COVID-19 pandemic, leading to major city lockdowns and slowed economic activity[14] - Crude oil prices continuously rose throughout the year, intensifying procurement and operating cost pressures[15] Key Financial Data for FY2022 (vs. FY2021) | Metric | FY2022 (HK$ million) | FY2021 (HK$ million) | Change | Change Rate | Original Chunk Ref | | :--- | :--- | :--- | :--- | :--- | :--- | | Revenue | 230.9 | 240.1 | ↓9.2 | ↓3.8% | [16] | | Loss Attributable to Owners | 3.1 | 7.5 | ↓4.4 | ↓58.7% | [16] | Future Outlook and Strategy Facing pandemic challenges, the company will strive to maintain stable business scale, enhance operational efficiency, and adapt flexibly to new challenges, gradually implementing strategies to solidify its position as a long-established diesel supplier in Hong Kong and create long-term shareholder value - The company will strive to maintain a stable business scale, enhance operational efficiency, and remain highly vigilant and flexible to adapt to new challenges[19] - Gradually implement business strategies to consolidate the Group's position as a long-established diesel supplier in Hong Kong, creating long-term value for shareholders[19] Management Discussion and Analysis Business Review The Group primarily sells diesel and related products in Hong Kong to logistics and construction companies; COVID-19 impacted cross-border logistics, reducing diesel sales, though Hong Kong construction recovery boosted some demand, while rising crude oil prices increased procurement costs and pressured cash flow - The Group primarily sells diesel and related products in Hong Kong, with services including procurement and transportation[23] - Major customers are logistics and construction companies, with eight diesel tanker trucks as of March 31, 2022[23] - The COVID-19 pandemic led to major city lockdowns in mainland China and slowed economic activity in Hong Kong, restricting cross-border transportation and reducing diesel demand in the logistics industry[24][26] - Crude oil prices surged, with Brent crude exceeding US$100/barrel, increasing diesel procurement costs and pressuring operating cash flow[25] - Hong Kong construction projects resumed, leading to improved diesel demand for construction site machinery[26] Future Prospects Amidst COVID-19 uncertainty, the Group will closely monitor the pandemic, strengthen cash flow management, integrate resources, and adjust business plans to ensure stable operations and prepare for post-pandemic recovery, while continuously implementing preventive measures for employee and partner safety - The Group will continue to closely monitor COVID-19 developments, focus on cash flow management, integrate existing resources, and actively adjust business plans[31] - Ensuring smooth operations through difficult times and being fully prepared for business recovery once the pandemic is under control[31] - Continuously and cautiously reviewing the pandemic situation to reduce business operating risks and implementing appropriate preventive measures to ensure the safety of employees and partners[32] Financial Review The Group's FY2022 revenue decreased by 3.8% to HK$230.9 million due to reduced diesel sales from the pandemic; despite lower volume, average diesel selling price rose 67.6%, gross profit surged 228.6% to HK$6.9 million, and gross margin improved from 0.9% to 3.0%, driven by increased sales to high-margin construction clients and lower maintenance costs, narrowing the annual loss to HK$3.1 million Revenue Overview | Metric | FY2022 (HK$ million) | FY2021 (HK$ million) | Change (HK$ million) | Change Rate | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | 230.9 | 240.1 | ↓9.2 | ↓3.8% | | Diesel Sales Revenue | 230.4 | 239.4 | ↓9.0 | ↓3.8% | | Urea Solution Sales Revenue | 0.5 | 0.5 | 0 | 0% | Sales Volume and Average Selling Price Changes | Product | FY2022 Sales Volume (thousand liters) | FY2021 Sales Volume (thousand liters) | Sales Volume Change Rate | FY2022 Average Selling Price (HK$/liter) | FY2021 Average Selling Price (HK$/liter) | Selling Price Change Rate | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Diesel | 50.0 | 87.1 | ↓42.6% | 4.61 | 2.75 | ↑67.6% | | Urea Solution | 120.2 | 102.0 | ↑17.8% | 4.00 | 4.51 | ↓11.3% | Costs and Profit | Metric | FY2022 (HK$ million) | FY2021 (HK$ million) | Change (HK$ million) | Change Rate | | :--- | :--- | :--- | :--- | :--- | | Cost of Sales | 224.0 | 238.0 | ↓14.0 | ↓5.9% | | Diesel Cost | 217.1 | 230.4 | ↓13.3 | ↓5.8% | | Average Unit Procurement Cost of Diesel (HK$/liter) | 4.34 | 2.65 | ↑1.69 | ↑63.8% | | Gross Profit | 6.9 | 2.1 | ↑4.8 | ↑228.6% | | Gross Profit Margin | 3.0% | 0.9% | ↑2.1% | - | | Administrative and Other Operating Expenses | 9.0 | 9.4 | ↓0.4 | ↓4.3% | | Loss for the Year | 3.1 | 7.5 | ↓4.4 | ↓58.7% | | Net Profit Margin | -1.36% | -3.12% | ↑1.76% | - | - The increase in gross profit margin was primarily due to higher diesel sales to more profitable construction clients and reduced maintenance costs for diesel tanker trucks[53][56] Liquidity and Capital Resources The Group funds operations through operating cash and bank financing; as of March 31, 2022, net current assets were HK$42.3 million, the current ratio was 3.2, available bank facilities were HK$11 million, with HK$10.5 million utilised, and the gearing ratio significantly increased from 2.3% to 20.1% - The Group funds its operations through cash generated from operating activities and bank financing[60] Liquidity Ratios | Metric | March 31, 2022 (HK$ million) | March 31, 2021 (HK$ million) | Change | | :--- | :--- | :--- | :--- | | Net Current Assets | 42.3 | 45.77 | ↓3.47 | | Current Assets | 61.8 | 55.185 | ↑6.649 | | Current Liabilities | 19.6 | 9.415 | ↑10.145 | | Current Ratio | 3.2 | 5.86 | ↓2.66 | | Available Banking Facilities | 11.0 | 5.0 | ↑6.0 | | Utilised Banking Facilities | 10.5 | 1.27 | ↑9.23 | | Gearing Ratio | 20.1% | 2.3% | ↑17.8% | Major Risks and Uncertainties Key risks include inaccurate oil and gas price assumptions, reliance on a single petroleum supplier, customer attrition due to price competition and economic slowdown, and operational disruptions from staff turnover, which the Group mitigates through risk management practices - If the Group uses incorrect oil and gas price assumptions to evaluate projects and business opportunities, its profitability, cash flow, and financial position may be adversely affected[72] - Diesel transportation services may be interrupted if the Group relies on a single petroleum supplier in Hong Kong[72] - Customer attrition due to price competition and global economic slowdown[72] - Operational disruptions due to difficulty in retaining employees[72] Foreign Currency Exposure Risk The Group primarily operates in Hong Kong and did not face any foreign exchange risk for the year ended March 31, 2022 - The Group primarily operates in Hong Kong and did not face any foreign exchange risk for the year ended March 31, 2022[73][77] Capital Structure As of March 31, 2022, the Group's capital structure included equity attributable to owners of approximately HK$52 million, with share capital consisting solely of ordinary shares, and no changes since its listing on January 8, 2019 - As of March 31, 2022, the Group's capital structure included equity attributable to owners of approximately HK$52.0 million[74][78] - The Group's share capital consists solely of ordinary shares, with no changes in its capital structure since its listing on January 8, 2019[74][78] Treasury Policies The Group adopts prudent financial management principles, maintaining a robust liquidity position by continuously assessing customer creditworthiness to mitigate credit risk and closely monitoring liquidity to meet funding requirements - The Group adopted prudent financial management principles, maintaining a robust liquidity position for the year ended March 31, 2022[75][79] - Credit risk is mitigated by continuously assessing customers' creditworthiness and financial standing[75][79] - The Board closely monitors the Group's liquidity position to ensure its asset, liability, and other commitment liquidity structure meets its funding needs at all times[75][79] Significant Investments, Acquisitions and Disposals For the year ended March 31, 2022, the Group did not undertake any significant investments, material acquisitions, or disposals of subsidiaries, associates, or joint ventures - For the year ended March 31, 2022, the Group did not undertake any significant investments, material acquisitions, or disposals of subsidiaries, associates, or joint ventures[76][80] Capital Commitments and Capital Expenditure As of March 31, 2022, the Group had no capital commitments for property and equipment acquisitions; capital expenditure for the period significantly decreased by 87.1% to HK$0.4 million, primarily for vehicle purchases - As of March 31, 2022, the Group had no capital commitments for the acquisition of property and equipment[82][87] Capital Expenditure Changes | Metric | FY2022 (HK$ million) | FY2021 (HK$ million) | Change (HK$ million) | Change Rate | | :--- | :--- | :--- | :--- | :--- | | Capital expenditure | 0.4 | 3.1 | ↓2.7 | ↓87.1% | - Capital expenditure was primarily related to vehicle purchases[83][88] Dividends The Board does not recommend the payment of any dividends for the years ended March 31, 2021 and 2022 - The Board does not recommend the payment of any dividends for the years ended March 31, 2021 and 2022[85][90] Events After the Reporting Period No significant events occurred after the financial year ended March 31, 2022, up to the date of this report - No significant events occurred after the financial year ended March 31, 2022, up to the date of this report[86][91] Comparison of Business Strategy Implementation Plans with Actual Progress The Group has proceeded with planned diesel tanker fleet expansion by ordering and deploying new vehicles, while IT system upgrades are still in discussion with potential vendors regarding requirements and specifications; human resources recruitment for drivers, logistics assistants, and senior accounting staff has progressed as planned Comparison of Business Strategy Implementation Plans with Actual Progress | Business Strategy | Plan (as at March 31, 2022) | Actual Progress (as at March 31, 2022) | Original Chunk Ref | | :--- | :--- | :--- | :--- | | Expand and Improve Diesel Tanker Fleet | Order two new diesel tankers; replace two existing diesel tankers; order one new diesel tanker | Two new diesel tankers ordered and put into use in Oct 2019; two new diesel tankers ordered and put into use in Apr 2020; one new diesel tanker ordered in May 2020 and put into use in Jun 2021 | [95, 96, 98] | | Enhance IT and Systems | Purchase Enterprise Resource Planning System | Discussing requirements and specifications for new office administrative IT system upgrade with potential vendors | [99] | | Strengthen Manpower | Recruit four drivers and two logistics assistants; recruit two accounting staff; recruit one administrative staff | As of March 31, 2020, four drivers and two logistics assistants employed; one senior accountant employed; one administrative staff employed in May 2019 | [99] | Use of Proceeds The company listed on January 8, 2019, with net proceeds from the share offer of approximately HK$34.8 million; as of March 31, 2022, HK$27.2 million has been used, with HK$7.6 million remaining, and the utilisation of funds for diesel tanker purchases and IT system upgrades is delayed, expected to be fully deployed by March 31, 2023 - Net proceeds from the share offer were approximately HK$34.8 million[102][103] Actual Use of Net Proceeds (as at March 31, 2022) | Purpose | Allocation as per Prospectus (HK$ million) | Revised Allocation (HK$ million) | Actual Use (HK$ million) | Total Unused Amount (HK$ million) | Expected Full Utilisation Timeline | | :--- | :--- | :--- | :--- | :--- | :--- | | Purchase Diesel Tankers | 15.0 | 15.0 | 12.4 | 2.6 | Before March 31, 2023 | | Manpower Expansion | 12.5 | 1.7 | 1.7 | – | N/A | | Upgrade IT Systems | 5.0 | 5.0 | – | 5.0 | Before March 31, 2023 | | Working Capital | 2.3 | 13.1 | 13.1 | – | N/A | | Total | 34.8 | 34.8 | 27.2 | 7.6 | | - The utilisation of funds for diesel tanker purchases and IT system upgrades is delayed, expected to be fully deployed by March 31, 2023[106] Employees and Remuneration Policies As of March 31, 2022, the Group had 23 employees with total staff costs of HK$7.6 million; remuneration policy is based on market levels, employee performance, qualifications, experience, and position, and is regularly reviewed Employee Headcount and Costs | Metric | March 31, 2022 | March 31, 2021 | | :--- | :--- | :--- | | Total Employees | 23 | 27 | | Total Staff Costs (HK$ million) | 7.6 | 7.3 | - Remuneration (including employee benefits) is maintained at market levels and regularly reviewed[108][111] - Employee remuneration and related benefits are determined based on performance, qualifications, experience, position, and the Group's business performance[108][111] Environmental Policies and Performance The Group's primary business is regulated by Hong Kong environmental laws and regulations, such as the Air Pollution Control Ordinance and Water Pollution Control Ordinance; the Group prioritises environmental protection, implementing measures to minimise operational impact on the environment and natural resources, with detailed policies and performance outlined in the Environmental, Social and Governance Report - The Group's primary business is regulated by Hong Kong environmental laws and regulations, including the Air Pollution Control Ordinance and Water Pollution Control Ordinance[109][112] - The Group recognises the importance of environmental protection and has implemented various measures to minimise the operational impact on the environment and natural resources[109][112] Corporate Governance Report Board of Directors The Board is committed to establishing high corporate governance standards, adhering to all applicable codes, and is responsible for overall strategy, management objectives, and performance oversight, delegating daily management while ensuring independence and diversity through its professionally qualified and experienced members - The Board is committed to establishing and ensuring high standards of corporate governance within the Group, complying with all applicable code provisions in the Corporate Governance Code[114][115][118][119] - The Board's primary responsibilities include formulating the Group's overall strategy, setting management objectives, and monitoring management performance[116][120] - The Board comprises two executive directors and three independent non-executive directors, meeting GEM Listing Rules requirements and possessing sufficient independence[122][123][124][125] Board Meetings and Training The Board holds at least four regular meetings annually, supported by Audit, Remuneration, and Nomination Committees; meeting notices and materials are distributed in advance for informed decision-making, and all directors engage in continuous professional development to update knowledge and skills, complying with corporate governance code requirements - The Board holds at least four regular meetings annually and has established Audit, Remuneration, and Nomination Committees[132][133][134][135] - Notices and agendas for regular Board meetings are provided to all directors at least 14 days before the meeting[133][135] - All directors have undertaken continuous professional development by attending training courses or reviewing materials on corporate governance and regulatory topics, complying with Code Provision C.1.4[149][153] Board and Committee Meeting Attendance (for the year ended March 31, 2022) | Director Name | Board | Audit Committee | Remuneration Committee | Nomination Committee | AGM | | :--- | :--- | :--- | :--- | :--- | :--- | | Mr. Law Ming Yik (Chairman) | 4/4 | – | 1/1 | 1/1 | 1/1 | | Mr. Li Yi Hao | 4/4 | – | – | – | 1/1 | | Mr. Fan Tak Wai | 4/4 | 4/4 | 1/1 | 1/1 | 1/1 | | Mr. Wong Ka Chun | 4/4 | 4/4 | – | 1/1 | 1/1 | | Mr. Ho Cheung Kong | 4/4 | 4/4 | 1/1 | – | 1/1 | Chairman and Chief Executive Officer Mr. Law Ming Yik serves as Chairman, leading the Board and overall corporate management strategy, while Mr. Li Yi Hao, as Chief Executive Officer, implements business strategies and oversees overall Group operations; this clear division of responsibilities aligns with corporate governance codes, ensuring effective management oversight - Mr. Law Ming Yik serves as Chairman, responsible for leading the Board and the overall corporate management of the Group's business development strategy[158][160] - Mr. Li Yi Hao serves as Chief Executive Officer, responsible for implementing business strategies, policies, and objectives set by the Board, and is accountable to the Board for the Group's overall operations[158][160] - The segregation of duties between the Chairman and Chief Executive Officer complies with Code Provision C.2.1 of the Corporate Governance Code, ensuring effective oversight of management[158][160] Board Committees The company has Audit, Remuneration, and Nomination Committees, each with clear written terms of reference; the Audit Committee oversees internal controls and financial statements, the Remuneration Committee sets compensation policies for directors and senior management, and the Nomination Committee handles board member nominations and diversity policy - The Audit Committee comprises three independent non-executive directors, with Mr. Ho Cheung Kong as Chairman; its primary responsibilities include providing independent opinions, overseeing internal control and risk management systems, and reviewing financial statements[162][163][164][167] - The Remuneration Committee comprises two independent non-executive directors and one executive director, with Mr. Fan Tak Wai as Chairman; its primary responsibility is to provide recommendations to the Board on the remuneration policy and structure for directors and senior management[170][171][175] - The Nomination Committee comprises two independent non-executive directors and one executive director, with Mr. Law Ming Yik as Chairman; its primary responsibilities include regularly reviewing the Board's diversity policy, structure, size, and composition, and identifying suitable candidates[183][186][187][191] Senior Management Remuneration Range (for the year ended March 31, 2022) | Remuneration Range (HK$) | Number of Individuals | | :--- | :--- | | 0 to 1,000,000 | 2 | | 1,000,000 to 2,000,000 | 1 | Accountability and Audit The Board is responsible for ensuring true and fair financial statements, maintaining proper accounting records, and safeguarding assets; the auditor is responsible for the financial statements and has reviewed audit and non-audit service fees; the company has no corporate governance committee, with its functions performed by the Board - The Board is responsible for ensuring that the Group's consolidated financial statements for each financial year present a true and fair view, and for maintaining proper accounting records and safeguarding assets[195][198][199] - The auditor's reporting responsibilities are set out in the Independent Auditor's Report[197][200] Auditor's Remuneration (for the year ended March 31, 2022) | Service Type | Amount (HK$) | | :--- | :--- | | Annual Audit Services | 480,000 | | Certain Agreed-Upon Procedures Services | 140,000 | | Total | 620,000 | - The company has not established a corporate governance committee, with its functions performed by the Board[204][205] Board Diversity Policy The company has adopted a Board Diversity Policy considering factors like gender, age, culture, education, professional experience, skills, and knowledge; the Nomination Committee is satisfied with current board diversity and plans to prioritise enhancing gender diversity by December 31, 2024 - The Board Diversity Policy considers factors such as gender, age, cultural and educational background, professional experience, skills, and knowledge[207][211] - The Nomination Committee is satisfied with the Board's diversity in terms of independence, skills, industry and professional experience, cultural and educational background, and tenure of board members[208][211] - The Nomination Committee agreed to proactively identify suitable candidates to enhance gender diversity as a primary consideration by December 31, 2024[208][211] Securities Transactions by Directors The company has adopted the GEM Listing Rules' code of conduct for directors' securities transactions and confirmed all directors complied with it during the reporting period - The company has adopted Rules 5.48 to 5.67 of the GEM Listing Rules as its own code of conduct for directors' securities transactions[210][212] - The company has confirmed that all directors complied with the code of conduct for the entire year ended March 31, 2022, and up to the date of this report[210][212] Communication with Shareholders The company is committed to continuous communication with shareholders through AGMs and other meetings, encouraging participation; all resolutions will be voted on by poll, with results promptly published, and an open, effective investor communication policy will be maintained, providing timely business updates - The company is committed to continuous communication with shareholders, particularly through Annual General Meetings or other general meetings, and encourages shareholder participation[213][219] - All resolutions proposed at general meetings will be voted on by poll, and the voting results will be published on the company's and Stock Exchange's websites in a timely manner after each general meeting[214][219] - The company will continue to maintain an open and effective investor communication policy, providing investors with timely updates on the Group's business in compliance with relevant regulatory requirements[215][219] Dividend Policy The Board has adopted a dividend policy requiring sufficient cash reserves for working capital and future growth when proposing or declaring dividends; dividend distribution depends on financial performance, cash flow, business strategy, capital needs, and other factors, payable in cash or scrip, and the policy will be reviewed periodically - The Board has adopted a dividend policy, requiring the company to maintain sufficient cash reserves to meet its working capital needs and future business growth when proposing or declaring dividends[218][222] - Dividend distribution will consider factors such as financial performance, cash flow position, business conditions and strategies, future operations and profitability, capital requirements and expenditure plans, and shareholders' interests[224][228] - The company may declare and pay dividends in cash, by way of scrip dividends, or in other forms deemed appropriate by the Board[225][227] - The Board reviews the dividend policy from time to time as needed[230][234] Shareholders' Rights Shareholders holding at least one-tenth of the company's paid-up capital have the right to requisition an extraordinary general meeting, and may direct enquiries to the Board, with the Company Secretary facilitating such communications - Shareholders holding not less than one-tenth of the company's paid-up capital have the right to requisition an extraordinary general meeting by written request to the Board or Company Secretary[231][235] - Shareholders may direct enquiries to the Board, with the Company Secretary responsible for forwarding such communications[238][241] Investor Relations and Inside Information Disclosure The company updates business development and financial performance through annual, interim, and quarterly reports, using its website as a communication platform; an inside information disclosure policy is in place, with the Board responsible for timely, accurate, and complete disclosure, and directors, management, and employees required to maintain confidentiality of unpublished information - The company updates its shareholders on its latest business developments and financial performance through annual, interim, and quarterly reports[239][242] - The company has established an inside information disclosure policy, with the Board responsible for timely dissemination of accurate and complete inside information regarding the Group to the market[240][243] - The policy strictly requires directors, management, and employees to keep unpublished inside information confidential and prohibits them from trading in the company's securities if they possess such information[240][243] Company Secretary Mr. Leung Cheuk Wai, the Company Secretary, advises the Board on corporate governance matters, ensures compliance with board procedures and applicable laws, and facilitates communication between directors and management; Mr. Leung has completed the professional training required by the GEM Listing Rules - Mr. Leung Cheuk Wai, the Company Secretary, advises the Board on corporate governance matters and ensures compliance with Board policies and procedures, applicable laws, rules, and regulations[245][249] - The Company Secretary facilitates communication among directors and between directors and management[245][249] - For the year ended March 31, 2022, the Company Secretary participated in over 15 hours of relevant professional training in compliance with Rule 5.15 of the GEM Listing Rules[246][249] Risk Management and Internal Control The Board is fully responsible for establishing and maintaining effective risk management and internal control systems to achieve business objectives, safeguard assets, ensure reliable financial information, and comply with regulations; the Group has established organisational structures and policies, identifying strategic, operational, financial, and compliance risks, with the Board, through the Audit Committee, annually reviewing system effectiveness and planning to continue engaging external professionals for internal audit functions - The Board is fully responsible for establishing and maintaining appropriate and effective risk management and internal control systems for the Group[247][250] - The systems aim to help achieve business objectives, safeguard assets, ensure proper accounting records for reliable financial information, and ensure compliance with relevant laws and regulations[247][250] Key Risks | Risk Area | Key Risks | | :--- | :--- | | Strategic Risks | Sensitivity to government policies; keeping up with new developments and customer expectations; market competition risk; reputational risk | | Operational Risks | Insufficient labour supply; work injuries; IT system disruptions | | Financial Risks | Liquidity risk; credit risk; interest rate risk; foreign exchange risk; inflation risk | | Compliance Risks | Risks related to occupational safety and health; risks of non-compliance with employment-related ordinances; changes in Listing Rules and relevant company regulations and ordinances | - The Board, through the Audit Committee, reviews the design and implementation effectiveness of the Group's risk management and internal control systems[257][258] - The Group currently has no internal audit function, but the Board believes engaging external independent professionals to perform internal audit functions would be more cost-effective[260][262] Environmental, Social and Governance Report - The Group firmly believes in the benefits of sustainable development, and that business growth should not come at the expense of the environment[319][322] - During the reporting period, the Group found no material non-compliance with environmental laws and regulations[320][323] Approach and Report Overview The Group integrates sustainability into its business strategy, focusing on environmental, social, and governance (ESG) factors to foster business growth and long-term sustainability; this report, prepared in accordance with Appendix 20 of the GEM Listing Rules, covers key operational performance in Hong Kong from April 1, 2021, to March 31, 2022 - The Group primarily engages in the sale of diesel and related products in Hong Kong, integrating sustainability into its business strategy[265][268] - This report is prepared in accordance with Appendix 20 of the GEM Listing Rules, 'Environmental, Social and Governance Reporting Guide,' covering key operational performance in Hong Kong from April 1, 2021, to March 31, 2022[272][275] - The Board has overall responsibility for the Group's ESG strategy and reporting, and for assessing and determining ESG-related risks[273][275] About the Company The Group listed on GEM of the Stock Exchange in 2019, primarily engaged in selling and transporting diesel and related products in Hong Kong; its competitive advantages lie in delivery capability and flexible delivery schedules, aiming to be a leading diesel supplier in Hong Kong's logistics industry - The Group listed on GEM of the Stock Exchange in 2019 (Stock Code: 8631), with its principal business being the sale and transportation of diesel and related products in Hong Kong[286][288] - The Group's delivery capability and flexibility in offering diverse delivery schedules to customers are its competitive advantages in the industry[286][288] - The goal is to become a leading diesel provider focused on the Hong Kong logistics industry[287][289] Board Statement The Board understands the importance of ESG governance for corporate sustainability and has established an ESG management framework; it primarily oversees ESG governance, including appointing key personnel, approving strategies and targets, monitoring progress, and reviewing annual ESG reports, while management and functional departments handle specific implementation and reporting - The Board is primarily responsible for overseeing the Group's environmental, social, and governance matters, such as determining the Group's ESG approach, managing ESG-related risks, and supervising management and relevant departments in formulating policies and appropriate measures[293][295] - The Board is responsible for appointing key personnel, approving ESG strategies, action plans and targets, approving resources, monitoring progress and performance, and reviewing and approving the annual ESG report[296][297] - Management is responsible for identifying and assessing ESG risks and opportunities, formulating strategies and plans, ensuring risk management systems are in place, and reporting to the Board[301][305] - Functional departments are responsible for coordinating and implementing specific policies, reporting regularly to management, collecting data, and preparing the annual ESG report[302][305] Stakeholder Engagement The Group actively engages with stakeholders, including the HKEX, government, suppliers, shareholders/investors, media and public, customers, employees, communities, and industry associations, to understand their concerns and ensure continuous business success and improvement - The Group actively strives to better understand and engage with stakeholders to ensure continuous improvement[307] - Stakeholders include the Hong Kong Stock Exchange, government, suppliers, shareholders/investors, media and public, customers, employees, communities, and industry associations[308][309] - Communication methods include meetings, training, site visits, financial reports, website updates, and community activities[308][309] Materiality Assessment The Group identified its most material ESG issues through surveys of internal and external stakeholders, with compliance with environmental laws, COVID-19 response, service quality, operational compliance, and anti-corruption being the top five, highlighting the Group's focus on environmental, social responsibility, and operational standards - The Group has conducted a materiality assessment involving surveys of internal and external stakeholders, including management, employees, customers, suppliers, industry associations, community organisations, and investors[311][312] - The five most material ESG issues are: compliance with environmental laws and regulations, combating the COVID-19 pandemic, service quality, operational compliance, and anti-corruption[315][317] - The Group will continue to communicate with stakeholders, collecting opinions more broadly through various channels for materiality analysis[316][317] Section A: Environmental The Group is committed to environmental sustainability, integrating eco-friendly practices into operations; no significant environmental non-compliance was found during the reporting period; measures like optimising fleet routes, procuring energy-efficient products, and promoting 3R principles aim to reduce atmospheric and greenhouse gas emissions, water, and paper consumption; the Group acknowledges climate change's physical and transition risks, planning new business strategies to address them A1 Emissions The Group is committed to reducing atmospheric pollutants and greenhouse gas emissions; during the reporting period, total atmospheric and greenhouse gas emissions significantly decreased, primarily due to COVID-19's impact on diesel demand in logistics and construction; the Group controls emissions through route optimisation, energy-efficient product procurement, and 3R principles - Diesel consumption by vehicles is the Group's primary source of atmospheric pollutant emissions, including nitrogen oxides (NOx), sulphur oxides (SOx), and particulate matter (PM)[325][327] Atmospheric Emissions Overview | Metric | FY2022 | FY2021 | Change Rate | Original Chunk Ref | | :--- | :--- | :--- | :--- | :--- | | Total Atmospheric Emissions | 1,288 kg | 1,604 kg | ↓20% | [329, 331] | | Atmospheric Emissions Intensity (per vehicle) | 90 kg | 100 kg | ↓10% | [329, 331] | | Nitrogen Oxides (NOx) | 1,199.81 kg | 1,484.16 kg | ↓19.16% | [85, 487] | | Sulphur Oxides (SOx) | 1.26 kg | 2.01 kg | ↓37.26% | [85, 487] | | Particulate Matter (PM) | 86.83 kg | 117.74 kg | ↓26.26% | [85, 487] | Greenhouse Gas Emissions Overview | Metric | FY2022 (tonnes) | FY2021 (tonnes) | Change Rate | Original Chunk Ref | | :--- | :--- | :--- | :--- | | Total GHG Emissions | 213 | 338 | ↓37% | [336, 338] | | GHG Emissions Intensity (per vehicle) | 15 | 21 | ↓29% | [336, 338] | | Scope 1 (Direct Emissions) | 207.97 | 333.50 | ↓38% | [345] | | Scope 2 (Indirect Emissions from Electricity Consumption) | 4.18 | 3.735 | ↑12% | [345] | | Scope 3 (Other Indirect Emissions) | 0.63 | 0.44 | ↑43% | [345] | - Scope 1 greenhouse gas emissions decreased by 38%, mainly due to the COVID-19 pandemic's impact on diesel demand in the logistics industry and for construction site machinery[347][351] - Scope 2 and Scope 3 emissions increased, primarily because employees resumed normal working hours as the pandemic eased, leading to increased paper and electricity consumption[348][351] - The Group's non-hazardous waste primarily consists of waste paper; during the reporting period, both waste paper generation and density increased, mainly due to employees resuming normal working hours after the pandemic subsided[360][361][363][365] A2 Use of Resources The Group is committed to being an environmentally friendly and sustainable enterprise, reducing energy, water, and paper consumption through energy-efficient equipment and 3R principles; during the reporting period, energy and water consumption increased, mainly due to employees returning to normal working hours as the pandemic eased; the Group will continue to monitor and strive to reduce resource consumption - The Group is committed to being an environmentally friendly and sustainable enterprise, having implemented a series of measures in its daily operations to reduce carbon emissions[368][370] Energy Consumption Overview | Metric | FY2022 | FY2021 | Change Rate | Original Chunk Ref | | :--- | :--- | :--- | :--- | :--- | | Total Energy Consumption (kWh) | 10,719 | 10,092 | ↑6% | [369, 371] | | Energy Consumption Intensity (kWh/employee) | 491 | 381 | ↑29% | [369, 371] | - Increased energy consumption was mainly due to the slowing spread of COVID-19 in Hong Kong, with employees resuming normal working hours at headquarters[369][371] Water Consumption Overview | Metric | FY2022 | FY2021 | Change Rate | Original Chunk Ref | | :--- | :--- | :--- | :--- | :--- | | Total Water Consumption (m³) | 46 | 35 | ↑31% | [375, 378, 381] | | Water Consumption Intensity (m³/employee) | 2 | 1 | ↑100% | [375, 378] | - Increased water consumption was mainly due to the slowing spread of COVID-19 in Hong Kong, with employees resuming normal working hours at headquarters[381][384] - The Group's core business involves selling diesel, and no significant use of packaging materials was identified during the reporting period[387][390] A3 The Environment and Natural Resources The Group believes business development should not compromise the environment, implementing various environmental protection measures; no significant environmental non-compliance was found during the reporting period, and future plans include investing more resources to upgrade equipment, reduce carbon footprint, and continuously monitor resource usage - The Group believes that business development should not come at the expense of the environment and has implemented various environmental protection measures[388][391] - During the reporting period, no material non-compliance with relevant laws and regulations was identified[389][391] - Future plans include investing more resources to upgrade equipment and existing vehicles to meet Hong Kong environmental standards and reduce carbon footprint[388][391] A4 Climate Change The Group recognises climate change threats, integrating them into decision-making and strategic planning; physical risks include extreme weather impacting employee safety and logistics, while transition risks, such as government green transport policies phasing out diesel commercial vehicles, could increase operating costs and reduce diesel demand, threatening long-term financial performance; the Group will optimise its business model and promote green business to address these challenges - The Group deeply understands the current threat of climate change and integrates it into its decision-making process and strategic business planning[394][396] - Physical risks include more frequent and intense adverse weather events (e.g., extreme precipitation and tropical cyclones), which could endanger employee safety and disrupt logistics[395][396] - Long-term temperature changes could lead to water scarcity and flooding, affecting upstream diesel supply and consequently increasing procurement costs[398][400] - The government's 'Hong Kong Climate Action Plan 2050' and 'Hong Kong Roadmap on Popularisation of Electric Vehicles' will gradually phase out diesel commercial vehicles, which is expected to increase the Group's vehicle replacement costs and reduce diesel demand, posing a significant threat to the Group's long-term financial performance[399][401] - The Group will formulate new long-term and short-term business strategies and review its existing ones to mitigate physical and transition risks as much as possible[403][405] Section B: Social – Employment and Labour Practices - Employees are the foundation of the Group's success, and the Group equally values the contributions and dedication of all its employees[404][406] - The Group strives to create a harmonious and inclusive work environment, protecting employees from any harassment and discrimination[413][417] - The Group highly values human rights and strictly complies with all labour laws and regulations prohibiting child and forced labour[451][454] B1 Employment As of March 31, 2022, the Group had 23 employees, all from Hong Kong, committed to equal opportunity and diversity regardless of age, gender, or marital status; comprehensive benefits include year-end bonuses, MPF contributions, and additional medical insurance; annual employee assessments drive performance, and a 1.26% average monthly turnover rate indicates good talent retention Employee Composition (as at March 31, 2022) | Metric | Quantity/Ratio | | :--- | :--- | | Total Employees | 23 | | Gender Composition | Male 78%, Female 22% | | Age Group | Age 18-25 0%, 26-35 30%, 36-45 22%, 46-55 22%, 56-66 26% | | Employment Type | Full-time 100% | | Length of Service | Less than 1 year 11%, 1-3 years 39%, 3-5 years 22%, 5-10 years 22%, More than 10 years 17% | - The Group highly values providing equal opportunities and diversity for all employees, recruiting regardless of age, gender, marital status, etc[413][414][417] - Comprehensive compensation and benefits are provided, including year-end bonuses, MPF contributions, and additional medical insurance[420][422] - Annual employee assessments, considering factors like teamwork, job responsibilities, attitude, punctuality, capability, work quality, and efficiency, are used for promotion, salary adjustments, and bonuses[421][422] Employee Turnover Rate (for the year ended March 31, 2022) | Metric | Average Monthly Turnover Rate | | :--- | :--- | | Overall | 1.26% | | Male | 1.19% | | Female | 1.19% | | 26-35 Age Group | 0.39% | | 36-45 Age Group | 3.16% | | 18-25, 46-55, 56-65 Age Group | 0% | B2 Health and Safety The Group is committed to safeguarding all employees' safety, health, and welfare, exceeding minimum legal occupational health and safety standards; all oil tankers and tractors are registered, equipped with fire safety gear, and drivers receive safety training; employee compensation and additional medical insurance are provided; no work-related injuries or fatalities were reported; in response to COVID-19, the Group implemented various preventive measures, including temperature checks, disinfection, and rapid antigen test kit provision - The Group is committed to safeguarding the safety, health, and welfare of all employees, striving for occupational health and safety standards higher than the minimum legal requirements[433][435] - All oil tankers and tractors are registered with relevant authorities, equipped with fire-fighting equipment and flammable material labels, and undergo regular inspection and maintenance[434][435] - All drivers are required to attend safety training courses organised by Sinopec, and are provided with safety manuals and industrial safety policies[437][440] - The Group provides employee compensation insurance to all its employees, covering work-related injuries and other medical needs, and offers additional medical insurance[438][440] - During the reporting period, the Group reported no work-related injuries or fatalities[439][440] - In response to the COVID-19 pandemic, the Group implemented various preventive measures, including social distancing, personal hygiene, temperature checks, disinfection, and procuring rapid antigen test kits for employees[442][44