Financial Performance - Total revenue from E&M engineering services for the fiscal year 2023 was HK$53,239,808 (US$6,825,879), representing a 63.2% increase from HK$32,649,726 (US$4,169,931) in 2022[223]. - Contract revenue for the year ended December 31, 2023, was US$6,825,879, representing an increase of 63.8% from US$4,169,931 in 2022[347]. - Gross profit for 2023 was US$2,440,600, compared to US$785,704 in 2022, indicating a significant improvement in profitability[347]. - Operating loss for 2023 was US$771,090, compared to an operating loss of US$641,452 in 2022, reflecting ongoing challenges in managing administrative expenses[347]. - General and administrative expenses increased to US$3,211,690 in 2023 from US$1,427,156 in 2022, highlighting rising operational costs[347]. - Adjusted EBITDA for 2023 was US$(554,877), slightly improved from US$(558,901) in 2022, with an Adjusted EBITDA Margin of (8.13)%[345]. - Contract costs rose to US$4,385,279 in 2023, an increase of US$1,001,052 or 30% from US$3,384,227 in 2022[354]. - Interest expenses increased by US$26,187 or 74% to US$61,564 in 2023 from US$35,377 in 2022[358]. - Net cash used in operating activities was US$3,814,384 for the year ended December 31, 2023, an increase of US$3,461,620 compared to US$352,764 in 2022[375]. - Net cash provided by financing activities was approximately US$8,413,951 for the year ended December 31, 2023, an increase of US$7,991,420 or 1,891% compared to US$422,531 in 2022[378]. Market and Project Overview - The company’s projects primarily consist of private sector work, accounting for 100% of revenues in fiscal year 2023, with small to medium projects under HK$1 million (US$128,210) making up 10% of projects[227]. - The five largest customers contributed approximately 98% of total revenue in fiscal year 2023, with two customers accounting for 58% and 30% of annual revenue[234]. - The company has a success rate of approximately 36% in tender submissions for fiscal year 2023, with 151 submissions made[233]. - The E&M market in HK SAR is expected to grow, driven by population and economic expansion, positioning the company favorably for future projects[327]. - Revenue from large projects in 2023 was US$6,164,974, a 66% increase from US$3,705,423 in 2022[352]. - The number of small projects under HK$1 million increased by 42% in 2023, contributing to the revenue growth strategy[350]. Compliance and Regulatory Matters - The company is required to obtain a Certificate of Fire Service Installations and Equipment (FS251) before commencing fire service installation works[279]. - The company must comply with the Code of Practice for Energy Efficiency of Building Services Installation to enhance energy efficiency and promote decarbonization[274]. - The company is subject to fines of up to HK$10,000,000 for serious violations of labor and safety regulations under the Factories and Industrial Undertakings Ordinance[287]. - Employers face fines of up to HK$10,000,000 for failing to ensure workplace safety under the Occupational Safety and Health Ordinance[289]. - The company is required to follow the Code of Practice for Minimum Fire Service Installations and Equipment to ensure compliance with safety standards[278]. - The company is subject to the Air Pollution Control Ordinance, requiring it to minimize dust impacts and obtain necessary approvals before commencing building works[296][298]. - Compliance with the Noise Control Ordinance mandates that the company obtains construction noise permits for noisy work during restricted hours[299][301]. - The Waste Disposal Ordinance requires the company to engage qualified waste recyclers for the disposal of construction waste and to establish a billing account for disposal charges if the contract value exceeds HK$1 million[303][304]. - The Construction Industry Council Ordinance imposes a construction industry levy of 0.5% on the total value of construction operations exceeding HK$3 million[306]. - The Pneumoconiosis and Mesothelioma (Compensation) Ordinance imposes a compensation fund levy of 0.15% on the value of construction operations, not chargeable if the total value does not exceed HK$3 million[312]. - The company has confirmed compliance with all necessary levies and has submitted required notices under the CICO and PMCO[314]. Executive Compensation and Governance - The total compensation for Chief Executive Officer Pui Lung Ho in 2023 was $60,131, which includes a base compensation and bonus of $8,590[412]. - Chief Financial Officer Yuk Ming, Gary Ma earned $46,156 in 2023, reflecting a significant increase from $3,860 in 2021[412]. - The company has not paid any non-employee directors for the fiscal years ended December 31, 2023, 2022, and 2021, as there were no non-employee directors until February 2022[414]. - Independent directors will receive an annual cash retainer of $4,645, subject to the terms of definitive agreements[414]. - The company has entered into employment agreements with named executive officers, which include various benefits such as pension insurance and medical insurance[403]. - Each executive officer has agreed to non-competition restrictions during their employment and for two years following termination[404]. - The company has established confidentiality agreements with each named executive officer to protect trade secrets[406]. - The compensation committee determines executive officers' compensation based on financial performance and contributions to the company's success[409]. - The board of directors has not adopted a formal policy for determining executive compensation, relying instead on independent evaluations[410]. - The company has a structured approach to measuring executive performance based on objective parameters such as management skills and overall corporate performance[409]. Construction Industry Trends - The gross value of construction works performed by main contractors in Hong Kong was recorded at US$22.9 billion in 2023, an increase from US$20.4 billion in 2022[240]. - The gross value of construction works in the city increased by 9.6% in Q1 2023, reaching US$5.3 billion[241]. - The unemployment rate in the construction industry decreased to 4.5% in Q2 2023, down from 8.7% in the same quarter last year[241]. - The HK SAR Government plans to invest US$127.6 billion in infrastructure by 2028-2029 to stimulate public and private sector investment in construction projects[241]. - An estimated 172,000 public housing units will be produced in the next five years, representing a 9% increase compared to the previous five-year period[242]. - The HK SAR Government aims to repair or rectify 1,000 dilapidated or hazardous buildings by 2024, with 80% expected to be inspected and repaired by their owners[245]. - The increasing environmental awareness is driving demand for E&M engineering refurbishment, leading to more business opportunities in the sector[243]. - The HK SAR Government has implemented measures to support building rehabilitation projects, including stricter regulations and increased subsidies[243].
WANG & LEE GROUP(WLGS) - 2023 Q4 - Annual Report