Yau Lee Holdings (SEHK: 00406) has issued a profit alert, forecasting a net loss for the financial year ending March 31, 2026, in the range of approximately HK$180 million to HK$230 million. This represents a significant increase compared to the net loss of HK$101 million recorded for the previous financial year ended March 31, 2025.

Reasons Behind the Widened Loss Forecast

The company attributes the expected increase in losses to several key factors. Firstly, the financial year ending March 2026 did not include a one-off in-kind compensation related to the relocation of its Shenzhen Longhua factory in mainland China, which was recognized in the prior year.

Secondly, a number of construction projects incurred losses. Several projects undertaken during the pandemic period experienced increased steel usage due to client-initiated design changes. Although these projects were completed in the latter half of the financial year and the additional steel quantities are eligible for remeasurement payments, these payments were calculated based on lower post-pandemic price fluctuation indices, which were insufficient to cover the actual costs incurred.

Furthermore, certain pilot projects utilizing the Modular Integrated Construction (MiC) method faced delays due to lengthier-than-expected approval times and complex site coordination procedures. Substantial unplanned costs were incurred to accelerate progress and recover from these delays.

Additional pressures on profitability came from costs and delays associated with replacing underperforming subcontractors. Moreover, the persistently weak price fluctuation indices led to downward revenue adjustments on a number of projects.