Company: MAGH
Filing Date: 2025-09-15
Form Type: 20-F
Source: 0001493152-25-013424
Chunk: 12

Company: Magnitude International Ltd
Filing Date: 2025-09-15
Form: 20-F
Item: Item 3
Chunk 12
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 be materially affected. If the delay is caused by our customers, we will also be unable to terminate
our contracts with them or seek compensation from them as such clauses are typically not included in our contracts.

Moreover,
other than liquidated damages, we may also have to bear additional costs as our customers have the discretion, after giving us notice
and regardless of our objections, hire or employ additional subcontractor, labor, machinery and equipment as they deem fit, to avoid
or minimize further delay. We will have to bear the aforementioned costs, with administrative charges calculated as a percentage of the
incurred costs. In addition, to minimize further delay, we are also obliged to incur overtime man hours and the related labor costs at
our own expense. In such circumstances, our financial performance and operations will be adversely affected.

Our
operating margin may decline as a result of increasing subcontracting, material, labor and other indirect costs.

Our
cost of sales is mainly comprised of subcontracting costs, material costs and project-related employee benefit expenses. Other indirect
costs include management costs, staff costs, administrative costs, finance costs and sales and distribution expenses. Indirect costs
are affected by, among other things, requirements imposed on contractors or subcontractors to implement more safety, environmental and
health enhancements to keep accident rates low, to improve welfare requirements to ensure the well-being of workers, to obtain more certifications
to fit customers’ tender requirements and to increase overhead costs for administrative purposes. If material costs, labor costs
and/or the other indirect costs increase, our subcontractors may pass the increase in their costs on to us by increasing their subcontracting
fees.

Subcontracting,
material, labor and other indirect costs mentioned above are subject to increase by other factors that are generally unpredictable and
beyond the control of contractors or subcontractors. If these costs continue to rise, and we fail to pass the increases on to our customers,
our business may be materially and adversely affected.

   7  

Our
customers may omit certain contract works by variation orders which can cause the total contract sum of that project to be reduced.

Our
project contracts generally have provisions empowering our customers to give instructions to vary the contract works by the issuance
of variation orders, which we are obliged to follow. Such variation orders could relate to the addition, modification or omission of
the contract works. For any cancellation of contract works, the total contract sum of that project will be reduced according to the schedule
of rates included in the project contracts. If