工程施工分包外包

For FY2020, FY2021, FY2022 and the nine months ended 30 September 2023, we incurred subcontracting fees of approximately HK$71.0 million, HK$48.9 million, HK$91.6 million and HK$57.2 million for our construction site works, representing approximately 29.3%, 32.9%, 39.8% and 34.9% of our total purchases, respectively.

According to the Industry Report, it is common for structural steelwork contractors in Hong Kong to engage subcontractors to perform construction site works. Our executive Directors confirm that our subcontracting arrangement is in line with normal market practice.

In general, works performed by our subcontractors are inspected and monitored by our project management team based on our quality management system, environmental management system and occupational health and safety management system which are in conformity with the requirements of ISO 9001, ISO 14001 and ISO 45001 standards, respectively.

For the years ended December 31, 2020, 2021 and 2022 and the six months ended June 30, 2023, the total subcontracting fees we paid to our appointed subcontractors were RMB24.6 million, RMB85.3 million, RMB101.1 million and RMB38.8 million, respectively, representing 37.2%, 42.0%, 46.9% and 49.0% of our total cost of sales, respectively.

We categorize our subcontractors by the services type they can provide, and maintain more than 15 subcontractors in each category.

As we are ultimately accountable to our customers for the performance of our subcontractors under the contract or under applicable laws, we strictly manage and supervise the quality, schedule, health, safety and environmental records of our subcontractors.

During the Track Record Period, our subcontracting charges amounted to approximately RMB69.2 million, RMB86.6 million, RMB121.6 million and RMB63.2 million, respectively, representing approximately 42.6%, 51.5%, 64.1% and 69.2% of our total operating expenses (being the aggregate of our employee benefit expenses, subcontracting charges, material, supplies and other project costs, depreciation and amortisation, net impairment losses of contract assets and trade receivables and other operating expenses) in the corresponding years/period, respectively.

Subcontracting charges paid to our five largest subcontractors in each year/period during the Track Record Period in aggregate accounted for approximately 57.2%, 54.5%, 56.5% and 61.2%, respectively, of our total subcontracting charges, while subcontracting charges paid to our largest subcontractor in each year/period during the Track Record Period accounted for approximately 21.5%, 21.9%, 19.9% and 22.6%, respectively, of our total subcontracting charges.

Although we had relied on subcontracting arrangement during the Track Record Period, our Directors consider that there is no undue reliance on our part considering that (i) we had not relied on any single subcontractor for the provision of subcontracted services during the Track Record Period; (ii) we had not experienced any material disruption in obtaining subcontracted services which may materially and adversely affect or delay our delivery of services or products to our customers during the Track Record Period; and (iii) there are plenty of subcontractors providing similar services in the market and thus the risk of shortage or delay in the provision of necessary services is low and we are unlikely to encounter any material difficulty in engaging a substitute subcontractor on similar terms if needs arise.

Save for the personnel from our project management team, which include, among others, project manager, technical supervisor, construction officer, mechanical officer, procurement officer, labour officer, standardisation officer, safety officer, quality officer and information officer, all of our construction labour force and specialised construction workers were provided by third party subcontractors.

We believe that by engaging subcontractors, our Group can (i) deploy our valuable resources and focus on our core business needs which consist of project bidding, project management, cost control, quality control, occupational health and safety management and construction schedule; (ii) circumvent the tedious administrative processes of hiring full-time employees such as recruitment, training and payroll management; (iii) minimise legal risks and obligations; (iv) minimise the risks of labour shortage;

We select subcontractors with higher level of compliance records, ethical standards, and quality of works, among other important commercial terms considerations, we have maintained a list of approved suppliers for all significant and strategic suppliers, including labour subcontractors and specialised construction subcontractors.

As it is customary in China's construction industry, aside from personnel in our project management department, we generally do not employ our own construction labor force.

According to our subcontracting contracts, we usually make progress payments to our subcontractors and retain approximately 3% to 5% of the settlement amount of the subcontracted portion until the expiry of the defect liability period.

As we have limited control over our third-party labor service providers, we cannot assure that such service providers will always perform up to our required standard.

For the years ended 31 December 2020, 2021 and 2022, we engaged 37, 26 and 18 contractors in the PRC who were engaged in engineering and construction business for the construction of heat service facilities such as primary distribution pipelines and heat exchange stations, respectively.

We would engage qualified external contractors for carrying out the construction. The qualified external contractors engaged by us would be responsible for constructing the facilities as well as installing and testing the relevant equipment, instruments and systems.

It is our Group's policy to select our contractors for the construction of pipelines and heat service facilities through competitive tender process or competitive negotiation.

In order to maintain a flexible workforce, and considering our diversified services portfolio and the needs to expand our engineering and technical services segment, we will need to rely on subcontractors to provide an external labor force to provide engineering and technical services to our customers.

Starting from the year ended December 31, 2019, we made adjustments to our engineering and technical services portfolio so that we would offer more services for labor-intensive on-site construction work, on which we will require the procurement of a subcontracted labor force.

Whilst we are also in the process of gradually building up in-house engineering and technical services team, our Directors estimate that we will continue to rely on subcontractors to provide a certain level of workforce for this business segment in the future.

We engage subcontractors to perform more labour intensive works such as the installation and application of the passive fire protection materials and components to enable us to control our staff costs and focus on the most crucial aspects of a passive fire protection works project

Despite such delegation, we maintain control over our subcontractors and monitor the quality of the services provided.

For the years ended 30 June 2020, 2021 and 2022 and the four months ended 31 October 2022, we incurred subcontracting fees of approximately HK$55.5 million, HK$59.7 million, HK$95.5 million and HK$52.3 million, respectively.

For each of FY2019, FY2020, FY2021 and 3Q2022, the total labour and construction subcontracting fees paid by us to the subcontractors engaged by us amounted to approximately RMB569.0 million, RMB569.6 million, RMB644.4 million and RMB502.1 million, respectively, accounting for approximately 34.7%, 36.0%, 39.6% and 41.2% of our total cost of sales, respectively.

We follow strict criteria in selecting subcontractors and maintain a list of qualified subcontractors which we would usually choose from.

In the event of any material failure by our subcontractors to meet our safety or quality standards, we may cease to work with and/or claim damages from them.