On behalf of the board of directors (the “Board”) of Winfair Investment Company Limited (the “Company”, together with its subsidiaries, the “Group”), I am delighted to report the Group’s financial results and activities for the year ended 31 March 2024.

RESULTS AND DIVIDENDS

For the year under review, the revenue of the Group increased by approximately HK$813,000 (or 4.2%), to approximately HK$20,053,000, as compared to the preceding year. The Group recorded a loss of approximately HK$49,748,000, representing an increase in loss of approximately HK$13,521,000 (or 37.3%), as compared to the preceding year.

In January 2024, an interim dividend of HK$0.02 per share was paid. The Board now recommends a final dividend of HK$0.12 per share, totaling HK$4,800,000. Subject to approval by the shareholders of the Company at the forthcoming annual general meeting, such dividend will be payable on or about 30 September 2024.

BUSINESS REVIEW

^# Return on Capital Employed (ROCE) = Profit before tax and interest divided by average capital employed

During the year, the Group recorded a loss of approximately HK$49,748,000, representing an increase in loss of approximately HK$13,521,000 (or 37.3%), as compared to the preceding year. The increase was mainly due to an increase in fair value loss on investment properties and equity instruments at FVTPL incurred during the year.

The rental income of the Group for the year ended 31 March 2024 was approximately HK$14,643,000, representing an increase of approximately HK$1,905,000 (or 15%), as compared to the preceding year. The increase was mainly due to an increase in occupancy rate and a decrease in rental concession during the year following the relaxation of precautionary measures of COVID-19.

Excluding a recurring valuation gain or loss of investment properties, the leasing segment recorded a profit of approximately HK$10,456,000 for the year ended 31 March 2024, representing an increase of approximately HK$1,121,000 (or 12%), as compared to the preceding year.

Regarding the redevelopment project on No. 31 Fuk Tsun Street (“FTS Project”), the site investigation was completed, and the foundation (large diameter bored pile) plan was approved during the year. Due to interest rate hikes, a weaker-than-expected economic recovery, and continued downward pressure on Hong Kong property values, financial institutions have continuously tightened the lending policy and are particularly conservative and prudent in their lending attitudes towards the real estate business. With such an unfavourable business environment, the Group has slowed down the progress of the redevelopment in order to minimize the negative impact on shareholders’ interests. The Group will continue to take due care to assess the cost and benefit of the project and review the market changes from time to time. The Group will speed up or further slow down the redevelopment plan if and when the directors consider it appropriate, subject to prevailing market conditions.

The Group recorded a fair value loss on investment properties of approximately HK$48,900,000 (2023: HK$41,600,000) during the year under review. As at 31 March 2024, the Group’s investment properties portfolio amounted to HK$856,700,000 (2023: HK$902,600,000).

For the year ended 31 March 2024, the Group recorded a fair value loss of HK$130,000 (2023: Nil) on property held for future development.

As at the date of this report, there was no significant progress on the development.

Dividend income for the year ended 31 March 2024 decreased by approximately HK$1,092,000 (equivalent to approximately 16.8%) to HK$5,410,000, as compared to the preceding year. The decrease was mainly due to a decrease in the distribution of dividends by listed shares.

During the year under review, the Group disposed of certain equity instruments at fair value through other comprehensive income (“equity instruments at FVTOCI”) at an aggregate consideration of approximately HK$2,148,000 and realised a gain of approximately HK$235,000 (2023: HK$852,000) which was directly transferred from fair value reserve to retained profits.

During the year under review, the Group recorded a fair value loss on equity instruments at FVTPL of approximately HK$15,085,000 (2023: HK$6,782,000) and a fair value loss on equity instruments at FVTOCI of HK$10,241,000 (2023: HK$6,611,000) which were recorded in the consolidated statement of profit or loss and other comprehensive income respectively. As at 31 March 2024, the Group’s listed share investment portfolios had an aggregate fair value of approximately HK$95,328,000 (2023: HK$121,633,000).

Details of the top five of the Group’s share investment portfolios as at 31 March 2024 for long-term investment and trading purposes are set out in Table 1 and Table 2 below, respectively:

Table 1: Details of the top five in the Group’s Share Investment Portfolio for Long-Term Investment Purpose

Note (1): Other securities included ten stocks listed on the Hong Kong Stock Exchange, six of which were current constituents of the Hang Seng Index and their principal businesses mainly included property and construction, conglomerates, financials, and information technology.

Note (2): The Group held less than 1% interest in the issued share capital for each underlying company.

Table 2: Details of the top five in the Group’s Share Investment Portfolio for Trading Purpose

Note (1): Other securities included 21 stocks listed on the Hong Kong Stock Exchange, seven of which were current constituents of the Hang Seng Index and their principal businesses were properties and construction, financials, energy, consumer staples, automobile, utilities and real estate REIT.

Note (2): The Group held less than 1% interest in the issued share capital for each underlying company.

As at 31 March 2024, the Group’s total bank borrowings amounted to approximately HK$16,295,000, all of which were denominated in Hong Kong dollars wholly repayable within one year (2023: within two years HK$17,106,000). All of the Group’s bank borrowings are at floating interest rates. The Group’s gearing ratio, which was taken as bank borrowings to total shareholders’ equity, remained at 1.5%. The Group’s banking facilities are subject to review at any time, and also subject to the Bank’s overriding right of repayment on demand.

Cash held by the Group as at 31 March 2024 amounted to approximately HK$140,604,000 (2023: HK$134,256,000). The Group’s outstanding capital commitments for property redevelopment projects, which were contracted but not provided for, were HK$12,050,000. The capital expenditures for redevelopment projects are expected to be partly funded by internal resources and partly funded by construction loans. The management of the Group continues to operate under a prudent financial policy and will implement all necessary measures to ensure that the Group maintains adequate cash and appropriate credit facilities to meet its future operating, project development expenditure and loan repayment obligations. The Group will continue to closely monitor the market changes especially interest rate hikes, policies implemented by the Hong Kong Monetary Authority and the Government of HKSAR, and the banker’s lending attitude towards the real estate business. The Group will arrange new credit facilities for the Group’s property development when the Group considers it is in the best of the shareholders as a whole. In the long run, the Group will continue to adopt an optimal financial structure for the best interests of its shareholders in light of changes in economic conditions.

The Group did not use any financial instruments for hedging purposes during the years ended 31 March 2024 and 2023.

ASSETS PLEDGED

As at 31 March 2024, the Group’s investment properties with an aggregate carrying value of HK$61,300,000 (2023: HK$63,000,000) were pledged to a bank to secure general banking facilities granted to the Group.

CONTINGENT LIABILITIES

The Group did not have any contingent liabilities as at 31 March 2024 and 2023.

RISK AND UNCERTAINTY

The Group operates in an ever-changing business and economic environment. The Group’s business, financial condition and results of operation are subject to various business risks and uncertainties.

ECONOMIC RISK

The volatility in US and worldwide credit and financial markets, rising energy costs, inflationary pressure, a continuation of high interest rate environment, political turbulence, and geopolitical risk have increased the uncertainty of global economic prospect, economic growth and financial markets. The Group’s results of property leasing, property development and securities investment would be adversely affected. This also increases the cost of property development and finance costs on bank borrowings.

REGULATORY AND COMPLIANCE RISK

The Group is exposed to and subject to extensive government policies and regulations in Hong Kong.

The value of properties may fluctuate according to property market trends and policies implemented by the Hong Kong Government, which may change from time to time. All demand-side management measures for residential properties in Hong Kong have been cancelled since late February 2024, which may potentially stimulate the number of transactions. In addition, “Interim Housing”, the new policy in Hong Kong and “Lantau Tomorrow Vision” would have an impact on the local business environment. Those regulatory measures and new policies/vision will affect the Group’s decision on the acquisition of property for redevelopment and investment purposes. The Group would consider all risk factors as included in this section of “Risk and Uncertainty” when considering potential investment opportunities. The Group expects that the property market will be exposed to these risks.

For each potential material investment, a feasibility study will be carried out before the proposed acquisition, and focus will be placed on long-term prospects instead of short-term prospects. The Group would invest in capital expenditure and raise long-term borrowings based on periodic feasibility studies in line with the market. The strategic risk regarding capital expenditure and financial arrangement is of significance nowadays and the Group will remain cautious and prudent in its investment and borrowing to minimize such risk.

POST-COVID-19 RISK

The mainland China and Hong Kong Governments have relaxed the epidemic prevention restriction for COVID-19 for one year and the markets gradually showed signs of recovery. Generally speaking, dividend income from securities investment could improve. The value of the securities investment might also rebound depending on the nature of its business. For the leasing business, the vacancy of commercial shops in Hong Kong has improved. However, as the lifting of such social distancing measure increases outbound travel, cross-border consumption and shopping, whether rentals are back to the pre-pandemic level is questionable. Most landlords prefer to wait and see under the current economic environment and impose no or little rental increment.

As the Hong Kong Government implemented the tightening precautionary measures to combat COVID-19 few years ago, property development has been indirectly affected to a certain extent. This led to shortage of construction materials and unpredictable delays in the local real estate development market. As a result, the cost of building materials has increased significantly. Presently, there is still no sign of a decrease in cost of building materials and it is expected to remain at a high level. As development costs are one of the main factors in the Group’s decision to continue or put a halt to the development projects, the Group is exposed to risks from this aspect, which may affect the Group’s future performance.

RISK ARISING FROM CHANGE IN CONSUMPTION PATTERNS/CHANGE IN POPULATION

The net population movement will affect the local economic recovery, the rental yield and property market in Hong Kong.

The change in consumption patterns such as an increase in digital/online consumption and “Go North for consumption” will also affect the business environment and consequently indirectly affect the performance of the Group. The value of properties and rental yield will be adversely affected.

PROJECT RISK

The value of the Property is generally subject to prevailing market conditions, expected and recent interest rate trend, expected construction costs and income and the bankers’ lending policy or attitudes. The continued tightening of lending policies by the banks in Hong Kong has created obstacles to commence the redevelopment project. High interest rate increases construction costs. If the project is carried out under a high interest rate environment and economic downturn, the Group expects that the project risk, liquidity risk and risk of delay are very high. The Group will conduct feasibility reports regularly based on market conditions and review the market trend from time to time. The Group must be cautious and prudent in carrying out projects and borrowing in order to reduce these risks.

PRICE RISK

The actual and expected global and mainland China economic growth and global/local political factors affect the value and performance of listed shares in Hong Kong. Due to the unpredictable ever-changing economic and geopolitical environment, the securities market is expected to be more volatile. Volatility in the securities market may affect the value and composition of shares in the Group’s investment portfolio, resulting in timely buy/sell decisions in response to rapidly changing market conditions. The commercial risk in the equity market is safeguarded to a certain extent by the long-established expertise and experience of the Group in securities investment. Details of the Group’s price risk management are set out in note 35(d) to the Group’s consolidated financial statements.

FINANCIAL RISK

The Group is also subject to credit risk, liquidity risk, and interest rate risk in the normal course of the Group’s business. Particulars of financial risk management of the Group are set out in note 35 to the Group’s consolidated financial statements.

The Group has no significant exposure to foreign currency risk or fluctuations in exchange rates as the Group’s business activities are solely operated in Hong Kong and mainly dominated in Hong Kong Dollars.

CLIMATE CHANGE RISK

The Group may face risks associated with climate change in the long run. Possible rise in sea level resulting from ice melting, severe and frequent typhoon or extreme weather such as flooding or drought, and tsunami resulting from earthquake may arise due to climate change. These possible outcomes may not only be detrimental to physical properties or buildings but also affect the living standards of the global population. Particulars of climate change risk management are set out in the section headed “Climate Change” of the Environmental, Social and Governance Report (“ESG Report”) on page 31 of this annual report.

BUSINESS MODEL AND STRATEGY

The core business of the Group focuses on property investment and development in Hong Kong. The Group’s strategy for generating and preserving shareholder value is to invest in properties that offer attractive returns. The Group continues to pursue growth opportunities and make appropriate adjustments to its property investment portfolio.

The Group also focuses on securities investment. The Group’s strategy for generating and preserving shareholder value is to adopt a prudent investment policy on securities which have long-term potential growth. The Group continues to exercise prudent and disciplined financial management to ensure sustainable growth.

EMPLOYEE AND EMOLUMENT POLICY

As at 31 March 2024, the Group had four (2023: four) employees (excluding two executive directors). The Company’s emolument policy is to ensure that the remuneration offered to employees, including executive directors and senior management, is commensurate with their skills, knowledge, responsibilities and involvement in the Company’s affairs. The remuneration packages of the Group’s employees are periodically reviewed objectively and determined based on each individual’s performance. During the year ended 31 March 2024, the total staff costs (including directors’ emoluments) were approximately HK$4,453,000 (2023: HK$4,302,000).

ENVIRONMENTAL POLICY

The principal activities of the Group are property and shares investment, property development and securities dealings. As the Group has not directly engaged in the construction of property during the year, it considers that it has not operated in any environmentally sensitive business during the year. The “Environmental Policy” was formulated by the Group as a guide for the environmental protection practices in the Group’s operations during the year.

For its daily operations, the Group continues to implement feasible measures to reduce paper and electricity consumption in the office. Also, the Group is inclined to let out its properties to eligible tenants with tendencies to carry out environmentally sustainable business practices. The Group believes that the existing laws and regulations do not have any significant adverse effect on the Group’s principal activities during the year ended 31 March 2024. Disclosure relating to the Group’s environment policy and performance is set out in the section headed “Environmental” of the ESG Report on pages 29 to 33 of this annual report.

COMPLIANCE WITH THE RELEVANT LAWS AND REGULATIONS

The Group continues to commit to compliance with relevant laws and regulations in Hong Kong, such as the Companies Ordinance, the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”), and other local laws and regulations implemented by the Hong Kong Government. The Group believes the existing laws and regulations do not have any significant effect on the Group’s activities. There was no confirmed non-compliance incident resulting in fines or prosecution during the year ended 31 March 2024.

STAKEHOLDERS OTHER THAN MEMBERS

The success of the Group hinges on the knowledge, skill, drive, passion, and enthusiasm of its employees. To enhance the value for shareholders of the Company, the Group engages its employees in its recruitment plan to ensure that the right individuals are in place, combining the right mix of skill and experience.

The Group recognises the importance of health and safety, and is committed to providing a safe and healthy environment for its employees and tenants. Also, the Group recognises the importance of maintaining a good long-term relationship with its core business stakeholders such as employees, tenants, agents, repairs sub-contractors, other professional bodies, who are all important to the development of the Group’s business. The Group has established at least 10 years of good relationship with its largest tenant, with good creditability. Also, half the number of employees has worked with the Group for at least 10 years.

PROSPECTS

Looking ahead, the Company’s business will be continuously challenging. After the relaxation of epidemic prevention measures in Hong Kong since January 2024, the consumption patterns have further changed. “Go North for Consumption” becomes a trend that adversely affects amusement, retail and catering businesses in Hong Kong. The local economic recovery is weaker than expected.

Although the Hong Kong Government has cancelled all demand-side management measures for residential properties resulting in an increase in the number of transactions since late February 2024, the Hong Kong property market is still weak. The property developers are now more conservative and prudent due to the high interest rates, tightening lending policies implemented by the bankers, geopolitical concerns, Sino-US trade war, and other factors. In the short to medium term, we expect the property and securities market will be under pressure. We will keep monitoring the market sentiment and interest rate trend, and make appropriate decisions in each business segment and property development plans which would be in the best interest of the shareholders of the Company. When appropriate, the Group will negotiate loan arrangements with a bank to get the redevelopment projects back on track.

APPRECIATION

I appreciate the support and co-operation of my fellow directors and staff of the Group and thank them for their dedicated services and contribution.

Ng Tai Wai
Chairman

Hong Kong, 25 June 2024