Operations Review
Extracted from Annual Report 2023
Income Statement
During FY2023, as the People's Republic of China (PRC) moved towards a state of normalcy, there was a gradual recovery from the impact of the COVID-19 pandemic. However, several factors influenced the financial performance for the year. Firstly, considering the high base results achieved in FY2022 and the recent COVID-19 outbreak in the PRC, the revenue for FY2023 declined compared to the previous year. The reimposition of restrictions in various cities to curb the spread of the outbreak led to a slowdown in business activities. Additionally, the lacklustre property market further contributed to the decrease in revenue generated in mainland PRC for FY2023, which dropped from RMB559.7 million in FY2022 to RMB402.2 million, representing a decline of 28.1%. Despite the decline, the PRC remained the largest contributor to the Group's total revenue, accounting for 43.9%.
As a result of the downturn in revenue from the PRC, the Group experienced an overall decrease in its total revenue by 17.6%, from RMB1,111.3 million in FY2022 to RMB915.7 million in FY2023.
The performance of the Group's markets outside the People's Republic of China (PRC) exhibited mixed results. The Asia segment, primarily driven by Singapore and Hong Kong, maintained its position as the second-largest contributor to the Group's revenue, following the mainland PRC, accounting for 43.7% in FY2023. This increase in the Asia segment's percentage contribution compared to 34.2% in FY2022 can be attributed to the rise in rental and service income of RMB21.8 million, as well as the favourable exchange translation rate resulting from the significant appreciation of the Hong Kong Dollar (HKD) and Singapore Dollar (SGD) against the Chinese Renminbi (RMB).
Similarly, the Middle East segment experienced a revenue increase from RMB81.7 million in FY2022 to RMB110.6 million in FY2023, primarily driven by a sales growth of RMB28.9 million. In contrast, the USA & Europe segment reported a substantial decline in revenue from RMB90.0 million in FY2022 to RMB3.0 million in FY2023, mainly due to the one-time sales of two units of mega-size tower cranes in FY2022. In tandem with the decline in revenue, the Group experienced a 17.4% decrease in gross profit, dropping from RMB307.5 million in FY2022 to RMB254.0 million in FY2023. However, the gross profit margin for FY2023 remained stable at 27.2% compared to FY2022. This stability can be attributed to the relatively consistent margins observed in the geographical segments compared to FY2022. Although the mainland PRC segment witnessed a decline in margins due to a higher proportion of sales of small and medium tower cranes in FY2023, which typically yield lower margins compared to the large and medium-sized tower cranes sold in FY2022, this was counterbalanced by a higher proportion of export sales. Export sales generally generate higher margins, mitigating the impact on the overall gross profit margin.
The Group witnessed a 17.5% reduction in total operating expenses, declining from RMB244.6 million in FY2022 to RMB201.9 million in FY2023. This decrease was primarily driven by a 22.0% drop in distribution costs, which decreased from RMB125.4 million in FY2022 to RMB97.9 million in FY2023. The decrease in distribution costs can be attributed to lower expenses related to freight, transportation, and sales services. The reduction in freight and transportation expenses was primarily a result of the decreased freight rates in FY2023 compared to FY2022, which stemmed from the supply shortage situation during that period.
Concluding the financial year, the Group reported a net profit attributable to equity holders amounting to RMB51.3 million for FY2023, a decline from RMB55.3 million reported in FY2022.
"With an unwavering focus on quality and excellence, Yongmao is dedicated to maintaining consistent quality standards and fostering innovation to deliver increasing value over time."
Maintaining Our Edge in Innovation
With an unwavering focus on quality and excellence, Yongmao is dedicated to maintaining consistent quality standards and fostering innovation to deliver increasing value over time. We are committed to investing in research and development initiatives to uphold our competitive advantage and enhance our existing product range. Building upon the success of the STF2080 luffing tower crane, which was specifically designed for the wind power construction market, we have further advanced our technology and innovation. This resulted in the development of the STF3080 wind turbine tower crane, surpassing its predecessor in lifting capacity by 200 tonnes and height. The STF2080 tower crane has been recognised with two innovation awards, solidifying our position as an industry leader.
In addition to our ongoing efforts to enhance our tower crane products, we are actively exploring avenues to enhance operating efficiency to achieve optimal outcomes. In FY2023, we introduced our digital tower crane platform, which incorporate a dynamic simulation model. This platform is designed to enhance the overall management and process control capabilities of our hoisting machinery. Through our digital platform, we can conduct machine tests to further elevate the safety standards of our tower cranes.
By combining our safety and innovation principles, we enhance the effectiveness of Yongmao, thereby reinforcing our position in the pursuit of long-term objectives. We persistently invest in research and development to elevate our innovation standards, resulting in improved safety for our workers and enhanced operational efficiency. This continuous drive for innovation ultimately strengthens our core competitiveness.
Upholding Health and Safety Standards
Health and safety remain essential for maintaining the high quality of our work and operations. For FY2023, Yongmao organised several activities as part of our "Safety Production Month" to improve the quality of our employees' safety awareness. The activities were centred around the concept of people-oriented safety production and aimed at improving the level of safety management within the company.
With the objective of enhancing production safety and minimizing accidents, the Group has also made significant investments in production safety measures. An expanded safety system has been established, accompanied by mandatory monthly safety production meetings. These initiatives contribute to the improvement of safety capabilities and awareness, ensuring the integration of a safety mindset throughout our production workflow. By prioritising the well-being of our personnel, we can effectively achieve and sustain production efficiency and quality standards.
As countries around the world adapt to living with the ongoing COVID-19 pandemic, there remains the need to integrate health and safety measures into business operations, allowing for flexibility and containing the impact of another potential outbreak on businesses and their staff.
Looking Ahead
In the upcoming financial year, we will continue to extend our focus and seek to further proliferate the use of our large and mega-sized tower cranes for mega scale projects such as the energy plants, skyscrapers, bridges, airports and trains terminals. Our tower crane has proven to be a valuable asset in recent mega construction projects, showcasing a strong track record and earning recognition within the industry. We are optimistic that there will be further opportunities to demonstrate our capabilities and to expand our repertoire of wide-scale projects.
In closing, I like to thank our staff for their efforts in seeing Yongmao through another challenging year. I also like to thank our shareholders for their unwavering support throughout these times of uncertainty. Take care, and I wish you all good health.
Tian Ruo Nan
Chief Executive Officer