Financial Performance - The company's revenue for the reporting period decreased by 4.0% to $208.5 million, while net profit increased by 7.6% to $15.6 million, marking a record high[7]. - In 2023, the company recorded revenue of approximately $208.5 million, a decrease of about 4.0% from approximately $217.2 million in 2022[19]. - Cost of sales decreased by approximately 4.5% to about $148.6 million in 2023 from approximately $155.6 million in 2022, with the cost of sales as a percentage of total revenue slightly decreasing from about 71.7% to about 71.3%[20]. - Gross profit fell from approximately $61.6 million in 2022 to about $59.9 million in 2023, a decline of about 2.7%, while gross margin slightly increased from approximately 28.3% to about 28.7%[21]. - The company achieved a net profit of approximately $15.6 million for the year ended December 31, 2023, compared to approximately $14.5 million for the year ended December 31, 2022, marking a significant milestone[22]. - The increase in net profit of approximately $1.1 million from 2022 was primarily due to a reduction in selling and distribution expenses from about $22.3 million to approximately $21.9 million[23]. - As of December 31, 2023, the company had cash and cash equivalents of approximately $18.1 million, down from $23.5 million in 2022, with a net cash position of approximately $18.1 million, a historical high[27]. - The current ratio improved to approximately 2.4 times in 2023 from about 2.0 times in 2022, indicating a relatively strong liquidity position[27]. - The company's total equity increased to approximately $53.6 million as of December 31, 2023, compared to $47.8 million in 2022, with a debt-to-equity ratio of approximately 0%[28]. Acquisitions and Growth Strategy - The company completed its first acquisition in nearly two years, purchasing assets from Tianli Development for $4.8 million, which is approximately 12.7% below the net asset value of the transaction[10]. - The acquisition is expected to contribute less than 10% to the company's revenue in 2024, but aligns with its strategy to expand in the outdoor/sports sector[10]. - The company aims to achieve greater growth through mergers and acquisitions in 2024 and 2025, exceeding the growth rates of 2022 and 2023[11]. - The company plans to focus on acquisitions, platformization, and digitalization as growth engines for 2024 and 2025[17]. Digitalization and Technology - The company has completed the construction of a data warehouse, which serves as the foundation for its digitalization efforts[12]. - Digitalization and platformization efforts are expected to slightly impact profitability in 2024 due to necessary investments in technology and personnel[15]. - The company is developing a centralized product development model to enhance production portability across factories and countries[12]. - The company anticipates that the benefits of cost and flexibility from digitalization will materialize in 2025, contributing positively to long-term growth and profitability[15]. Corporate Governance - The company has adhered to all provisions of the corporate governance code as of December 31, 2023[44]. - The board consists of three executive directors and four independent non-executive directors, ensuring a balanced skill set[46]. - The company aims to appoint two female directors to enhance gender diversity on the board[55]. - The audit committee is responsible for reviewing financial reporting, risk management, and internal control systems[58]. - The board regularly reviews its corporate governance practices to ensure compliance with the governance code[43]. - The company has established a diversity policy to ensure a balanced mix of skills, experience, and perspectives among board members[54]. - The board has retained specific functions, including approving significant capital expenditures and major acquisitions[49]. - The independent non-executive directors have confirmed their independence in accordance with the listing rules[51]. - The company is committed to high standards of corporate governance and business ethics to protect shareholder interests[44]. - The board's structure allows for effective teamwork and decision-making without concentration of power in any individual[45]. - The audit committee held four meetings during the year ending December 31, 2023, to review the financial performance and internal controls of the group[60]. - The remuneration committee conducted three meetings to review the company's remuneration policies and structures for directors and senior management[61]. - The board of directors held a minimum of four meetings within the 12-month period to discuss the group's financial performance and strategic development[66]. - The nomination committee also held three meetings to review the composition of the board and establish relevant policies for the nomination and appointment of directors[65]. - All directors participated in continuous professional development training related to their responsibilities under the listing rules, ensuring they are well-informed[74]. - The company has arranged appropriate insurance coverage for its directors and senior officers against potential legal actions[76]. - The remuneration committee's main functions include determining the remuneration of individual directors and senior management, ensuring transparency in the remuneration process[61]. - The nomination committee is responsible for assessing the independence of independent non-executive directors and ensuring board diversity[64]. - The company adopted a nomination policy to ensure a formal and transparent process for the appointment and removal of directors[69]. - The audit committee monitored the group's financial controls and risk management systems throughout the year[62]. - The external auditor, Ernst & Young, received a total fee of $408,000 for audit and non-audit services, with $246,000 for audit services and $162,000 for non-audit services[79]. - The board of directors confirmed compliance with the standard code of conduct for securities trading as of December 31, 2023[78]. - The company secretary, Mr. Li Yao Ming, completed no less than 15 hours of relevant professional training during the fiscal year ending December 31, 2023[80]. - The board believes that the risk management and internal control systems are effective and sufficient as of December 31, 2023[88]. - The company has established a risk management framework involving the board, audit committee, and senior management to oversee risk management and internal controls[85]. - The internal audit reports and enterprise risk assessment reports are submitted to the audit committee and board at least annually[88]. - The company has adopted appropriate accounting policies and has consistently applied them in preparing financial statements[84]. - The board is responsible for ensuring that the financial statements fairly reflect the group's business condition and performance as of the fiscal year-end[83]. - The company is committed to timely disclosure of inside information as per the Securities and Futures Ordinance and listing rules[89]. - The company holds annual general meetings at a location determined by the board, with special general meetings called as needed[90]. Environmental, Social, and Governance (ESG) Initiatives - The board has established a dedicated ESG committee to oversee the company's ESG strategies and performance, enhancing governance and stakeholder engagement[112]. - The ESG report covers the company's environmental and social performance for the year ending December 31, 2023, focusing on key performance indicators relevant to its operations in Shenzhen, China[106]. - The company emphasizes the importance of stakeholder communication in achieving success in environmental and social development, utilizing various channels for engagement[115]. - The board reviews the company's ESG performance annually during board meetings to ensure alignment with strategic goals[113]. - The company has implemented effective communication channels to ensure shareholders receive timely information and can actively participate in its development[96]. - The board has confirmed that the communication channels established are effective and adequately implemented as of December 31, 2023[97]. - The company has received assurances from its controlling shareholders regarding compliance with non-competition commitments, with no violations reported during the review period[103]. - The company is committed to maintaining high transparency and communication with shareholders and investors through various means, including press conferences and analyst briefings[96]. - The company will continue to review and potentially revise its dividend policy as deemed appropriate by the board[100]. - The company received the prestigious B-Corp certification, highlighting its commitment to social and environmental responsibility[130]. - The company maintained stable greenhouse gas emissions compared to 2022, with ongoing efforts to explore methods to offset carbon emissions[134]. - The company has implemented various policies for waste management, water conservation, and energy savings as part of its long-term commitment to environmental protection[133]. - The company aims for long-term carbon neutrality and has signed the Fashion Industry Climate Action Charter to demonstrate its commitment to a low-carbon future[134]. - The company has been recognized for its sustainable development performance by multiple organizations and associations[130]. - The company identified nine key ESG issues through a comprehensive materiality assessment, prioritizing actions for sustainable development[128]. - The company strictly adheres to environmental laws and regulations, with no significant violations reported during the year[130]. - The company focuses on managing supply chain environmental and social risks as part of its operational compliance[129]. - The company emphasizes employee engagement in environmental protection initiatives to enhance awareness and participation[130]. - The company is committed to improving community environments and participating in charitable activities[130]. Environmental Impact and Resource Management - Total greenhouse gas emissions increased to 477.1 tons CO2 equivalent in 2023 from 404.9 tons in 2022, representing an increase of 17.8%[135]. - Scope 2 indirect emissions rose to 332.4 tons CO2 equivalent in 2023 from 313.3 tons in 2022, an increase of 6.0%[135]. - Scope 3 other indirect emissions surged to 144.7 tons CO2 equivalent in 2023 from 91.6 tons in 2022, marking a significant increase of 57.9%[135]. - Total energy consumption reached 630.5 MWh in 2023, up from 594.4 MWh in 2022, reflecting an increase of 6.1%[142]. - The density of energy consumption per employee was 1.84 MWh in 2023, slightly up from 1.80 MWh in 2022[142]. - Non-hazardous waste generated increased to 114.2 tons in 2023 from 63.2 tons in 2022, a rise of 80.0%[149]. - The density of non-hazardous waste per employee was 0.33 tons in 2023, compared to 0.19 tons in 2022[149]. - Hazardous waste generated was 21.0 kg in 2023, up from 13.3 kg in 2022, an increase of 57.1%[149]. - The company has committed to reducing its carbon footprint and has received recognition from the Science Based Targets initiative (SBTi) for its targets aligned with the Paris Agreement[138]. - The company is actively implementing measures to transition energy sources from fossil fuels to renewable energy as part of its short-term goals[142]. - Total water consumption in Shenzhen office decreased to 3,372 cubic meters in 2023 from 3,530 cubic meters in 2022, representing a reduction of approximately 4.5%[151]. - Water consumption density per employee improved to 9.83 cubic meters in 2023 from 10.70 cubic meters in 2022, indicating a 8.1% increase in efficiency[151]. Employee Engagement and Welfare - The average training hours per employee in 2023 were 0.5 hours for senior staff, 7.7 hours for mid-level staff, and 7.4 hours for junior staff, with training participation rates of 18%, 53%, and 44% respectively[160]. - The company recorded zero workplace injuries and lost workdays due to injuries in 2023, maintaining a consistent safety record over the past three years[154]. - Employee benefits include public holidays, annual leave, maternity leave, and discretionary bonuses, with a focus on competitive compensation structures[157]. - The company employed a total of 343 employees as of December 31, 2023, with a gender distribution of 67% male and 32% female[164]. - The company conducted various training programs for employees, including hardware skills training and case studies on customer service and corporate liquidity[160]. - The company emphasizes a healthy and safe working environment, adhering to relevant occupational safety laws and regulations[154]. - Employee engagement initiatives include monthly birthday parties, gatherings, and annual dinners to enhance relationships and provide interaction opportunities[157]. - The company is committed to diversity and inclusion, ensuring fair recruitment processes and adherence to anti-discrimination laws[161]. - Female employees increased to 29% in 2023 from 23% in 2022, while male employees rose to 33% from 31%[167]. - Employee turnover rate as of December 31, 2023, was segmented by age, with 55% under 30 years, 28% between 30 to 50 years, and 42% over 50 years[167]. Supply Chain Management - Supplier procurement by region showed that China (excluding Hong Kong and Taiwan) accounted for 28%, while Hong Kong contributed 3%[177]. - The company has established a strict supplier selection process, evaluating product quality, delivery, capacity, compliance, and other factors[179]. - The company implemented a supplier scorecard system to identify potential environmental and social risks within the supply chain[179]. - The company emphasizes responsible sourcing and has prioritized suppliers that meet responsible raw material procurement standards[182]. - No products were recalled during the year due to safety and health reasons, indicating a strong quality control process[185]. - The company received one complaint regarding product quality during the year, which was resolved and investigated to prevent recurrence[186]. - The company adheres to a five-day work week to ensure adequate rest for employees and prevent forced labor[168]. - The company collaborates closely with suppliers to improve their environmental performance, particularly in water usage during garment production[182]. Compliance and Legal Matters - The company conducted nine training sessions on anti-corruption for current and new employees to enhance awareness[190]. - No legal cases related to bribery, corruption, extortion, or money laundering significantly impacted the company this year[190]. - The company donated RMB 12,000 to support impoverished high school students in Guizhou Province[194]. - The company has been supporting the HERhealth project since 2019, aimed at improving health awareness among female workers in Vietnam[194]. - Employees are required to sign confidentiality agreements before employment to protect sensitive information[192]. - The company emphasizes strict adherence to intellectual property laws and requires prior permission for the use of its trademarks[191]. - The company has implemented measures to ensure information security and protect customer privacy[192]. - The company has not directly emitted any pollutants or harmful waste this year[197]. - The company has set energy efficiency goals and is actively working towards achieving them[199]. - The company collaborates with local charities to support community development and welfare initiatives[194].
利华控股集团(01346) - 2023 - 年度财报