(Incorporated in the Cayman Islands with limited liability) ( 於開曼群島註冊成立的有限公司 ) Stock code : 3616 股份代號 : 3616 ANNUAL REPORT 年度報告 2024 Ever Reach Group (Holdings) Company Limited 恒 達 集 團（控 股）有 限 公 司 ANNUAL REPORT 2024 年 度 報 告 CONTENTS 目錄 Corporate Information 公司資料 As of the date of this Report DIRECTORS Executive Directors Mr. LI Xiaobing (Chairman) Mr. WANG Zhenfeng (Chief Executive Officer) Ms. QI Chunfeng Mr. WANG Quan Independent Non-Executive Directors | Corporate Information | 2 | | --- | --- | | 公司資料 | ...

[Corporate Information](index=3&type=section&id=Corporate%20Information) [Board of Directors and Committee Composition](index=3&type=section&id=Directors%20and%20Committees) As of the report date, the company's Board of Directors comprises four executive directors and three independent non-executive directors, with established Audit, Remuneration, Nomination, and Legal Compliance Committees. - The Board of Directors includes executive directors Li Xiaobing (Chairman), Wang Zhenfeng (CEO), Qi Chunfeng, and Wang Quan, as well as independent non-executive directors Fang Zheng, Li Guolin, and Wei Jian[4](index=4&type=chunk)[5](index=5&type=chunk) - The Audit Committee Chairman is Li Guolin, the Remuneration Committee Chairman is Fang Zheng, and the Nomination Committee Chairman is Li Xiaobing (to be succeeded by Li Guolin on June 30, 2025)[4](index=4&type=chunk)[5](index=5&type=chunk) [Company Details](index=4&type=section&id=Company%20Details) The company has appointed authorized representatives, a company secretary, and an auditor, disclosing its registered office, principal place of business in Hong Kong, and China headquarters, along with key information such as principal legal advisors and bankers. - Authorized representatives are Wang Quan and Liang Jinhui, the company secretary is Liang Jinhui, and the auditor is Evergreen (Hong Kong) CPA Limited[7](index=7&type=chunk)[8](index=8&type=chunk) - The company is registered in the Cayman Islands, with its principal place of business in Hong Kong at Leighton Centre, Causeway Bay, and its China headquarters in Xuchang City, Henan Province[7](index=7&type=chunk)[8](index=8&type=chunk) - Principal bankers include Bank of China (Hong Kong), China Construction Bank, China Minsheng Bank, and Industrial and Commercial Bank of China[9](index=9&type=chunk)[10](index=10&type=chunk) [Management Discussion and Analysis](index=6&type=section&id=Management%20Discussion%20and%20Analysis) [Industry Review](index=6&type=section&id=Industry%20Review) In the first half of 2024, China's real estate market experienced a significant downturn, with substantial declines in investment, completed area, and sales value, despite government policies aimed at stabilization and destocking. Key Indicators of China's Real Estate Market, H1 2024, Year-on-Year Change | Indicator | YoY Change (%) | | :--- | :--- | | Real Estate Development Investment | -10.1 | | Completed Housing Area | -21.8 | | Completed Residential Area | -21.7 | | New Commercial Housing Sales Area | -19.0 | | Residential Sales Area | -21.9 | | New Commercial Housing Sales Value | -25.0 | | Residential Sales Value | -26.9 | - Henan Province's real estate market also faced pressure, with development investment decreasing by **9.1% year-on-year** and new commercial housing sales value declining by **22.6%**[14](index=14&type=chunk)[15](index=15&type=chunk) - Government policy directions include "coordinated research on policies to digest existing housing stock and optimize incremental housing supply" and the central bank's "package" of new policies, aimed at stabilizing the market and destocking[16](index=16&type=chunk)[17](index=17&type=chunk) [Business Overview](index=8&type=section&id=Business%20Overview) In the first half of 2024, the Group focused on "ensuring project delivery" and "destocking" amidst market pressures, successfully delivering 259,000 square meters of gross floor area and earning recognition for high-quality development. - The Group successfully delivered approximately **259,000 square meters** of gross floor area in the first half, including projects in Xuchang urban area, Changge region, and Linying region of Luohe City[19](index=19&type=chunk)[22](index=22&type=chunk) - The Group aims to achieve its "destocking" goal by accelerating the supply of unsold housing and enhancing housing quality[19](index=19&type=chunk)[22](index=22&type=chunk) - The Group was recognized by China Index Academy as one of the "**2024 Henan Province High-Quality Real Estate Development Excellent Enterprises**"[21](index=21&type=chunk)[23](index=23&type=chunk) [Land Reserves](index=9&type=section&id=Land%20reserves) As of June 30, 2024, the Group's land reserves had a gross floor area of approximately 3.2 million square meters. - As of June 30, 2024, the Group's land reserves had a gross floor area of approximately **3.2 million square meters**[24](index=24&type=chunk)[25](index=25&type=chunk) [Contracted Sales](index=9&type=section&id=Contracted%20sales) For the six months ended June 30, 2024, the Group's total contracted sales decreased by 46.8% to RMB 839.4 million, primarily due to a significant drop in residential unit sales and declining average selling prices in Henan Province. Contracted Sales and Average Selling Price (For the six months ended June 30) | Indicator | 2024 (RMB Million/sqm/unit) | 2023 (RMB Million/sqm/unit) | Change (%) | | :--- | :--- | :--- | :--- | | **Contracted Sales** | | | | | Residential Units | 673.4 | 1,313.2 | -48.7 | | Commercial Units | 138.4 | 214.4 | -35.4 | | Parking Spaces | 21.1 | 40.9 | -48.4 | | Others | 6.5 | 9.9 | -34.3 | | **Total** | **839.4** | **1,578.4** | **-46.8** | | **Contracted Saleable GFA/Number of Units** | | | | | Saleable GFA (sqm) | 144,293 | 257,655 | -44.0 | | Parking Spaces (units) | 553 | 852 | -35.1 | | **Contracted Average Selling Price** | | | | | Saleable GFA (RMB/sqm) | 5,671 | 5,968 | -5.0 | | Parking Spaces (RMB/unit) | 38,114 | 47,442 | -19.7 | - The contracted average selling price per square meter for saleable gross floor area decreased by **5.0%** to approximately **RMB 5,671**, primarily due to property market price declines in Henan Province[27](index=27&type=chunk)[29](index=29&type=chunk) [Financial Review](index=10&type=section&id=Financial%20Review) In the first half of 2024, the Group's revenue slightly decreased, but gross profit and net profit significantly declined, turning from profit to loss, with narrowing gross profit margins and increased gearing. [Results](index=10&type=section&id=Results) Key Financial Results (For the six months ended June 30) | Indicator | 2024 (RMB Million) | 2023 (RMB Million) | Change (%) | | :--- | :--- | :--- | :--- | | Revenue | 1,467.6 | 1,488.2 | -1.4 | | Gross Profit | 139.1 | 259.2 | -46.3 | | Gross Profit Margin | 9.5% | 17.4% | -7.9 percentage points | | Net Profit/(Loss) for the Period | (36.1) | 69.2 | -105.3 million (from profit to loss) | [Revenue](index=10&type=section&id=Revenue) Revenue Composition (For the six months ended June 30) | Revenue Source | 2024 (RMB Thousand) | 2024 (%) | 2023 (RMB Thousand) | 2023 (%) | Change (%) | | :--- | :--- | :--- | :--- | :--- | :--- | | Property Sales | 1,457,879 | 99.4 | 1,481,189 | 99.5 | -1.6 | | Rental Income | 4,769 | 0.3 | 5,597 | 0.4 | -14.8 | | Service Income | 4,951 | 0.3 | 1,365 | 0.1 | +262.7 | | **Total** | **1,467,599** | **100.0** | **1,488,151** | **100.0** | **-1.4** | Property Sales Revenue Details (For the six months ended June 30) | Property Type | 2024 Revenue (RMB Thousand) | 2024 GFA Recognized (sqm) | 2024 Average Selling Price per sqm (RMB) | 2023 Revenue (RMB Thousand) | 2023 GFA Recognized (sqm) | 2023 Average Selling Price per sqm (RMB) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Residential | 1,269,581 | 244,648 | 5,189 | 1,282,830 | 223,965 | 5,728 | | Commercial | 144,798 | 18,749 | 7,723 | 159,592 | 21,956 | 7,269 | | Storerooms | 5,521 | 2,972 | 1,858 | 7,731 | 3,401 | 2,273 | | **Subtotal** | **1,419,900** | **266,369** | **5,331** | **1,450,153** | **249,322** | **5,816** | | Parking Spaces | 37,979 | 592 (number of units) | 64,154 (per unit) | 31,036 | 601 (number of units) | 51,641 (per unit) | [Gross Profit and Gross Profit Margin](index=12&type=section&id=Gross%20profit%20and%20gross%20profit%20margin) Gross Profit and Gross Profit Margin by Category (For the six months ended June 30) | Category | 2024 Revenue (RMB Thousand) | 2024 Cost of Sales (RMB Thousand) | 2024 Gross Profit/(Loss) (RMB Thousand) | 2024 Gross Profit Margin (%) | 2023 Revenue (RMB Thousand) | 2023 Cost of Sales (RMB Thousand) | 2023 Gross Profit/(Loss) (RMB Thousand) | 2023 Gross Profit Margin (%) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | **Property Sales** | | | | | | | | | | — Residential | 1,269,581 | 1,162,061 | 107,520 | 8.5 | 1,282,830 | 1,046,361 | 236,469 | 18.4 | | — Commercial | 144,798 | 133,953 | 10,845 | 7.5 | 159,592 | 133,917 | 25,675 | 16.1 | | — Parking Spaces and Storerooms | 43,500 | 28,801 | 14,699 | 33.8 | 38,767 | 45,691 | (6,924) | (17.9) | | **Subtotal** | **1,457,879** | **1,324,815** | **133,064** | **9.1** | **1,481,189** | **1,225,969** | **255,220** | **17.2** | | Rental Income | 4,769 | 34 | 4,735 | 99.3 | 5,597 | — | 5,597 | 100.0 | | Service Income | 4,951 | 3,699 | 1,252 | 25.3 | 1,365 | 2,955 | (1,590) | (116.5) | | **Total** | **1,467,599** | **1,328,548** | **139,051** | **9.5** | **1,488,151** | **1,228,924** | **259,227** | **17.4** | - Gross profit margins for residential and commercial property sales decreased from **18.4% and 16.1% to 8.5% and 7.5%**, respectively, primarily due to lower average selling prices for residential properties and increased costs for commercial properties[47](index=47&type=chunk)[51](index=51&type=chunk) - Loss for the period was approximately **RMB 36.1 million**, a decrease of approximately **RMB 105.3 million** compared to a profit of RMB 69.2 million in the same period last year, mainly due to a decline in gross profit margin and increased impairment provisions for properties held for sale or under development[48](index=48&type=chunk)[51](index=51&type=chunk) [Fair Value Losses on Investment Properties](index=13&type=section&id=Fair%20value%20losses%20on%20investment%20properties) Investment properties were valued by independent valuers as of June 30, 2024. - Investment properties were valued by independent valuers as of **June 30, 2024**[49](index=49&type=chunk)[52](index=52&type=chunk) [Selling and Marketing Expenses](index=13&type=section&id=Selling%20and%20marketing%20expenses) Selling and marketing expenses decreased by 17.8% to RMB 58.1 million, primarily due to reduced advertising and sales agent commissions. - Selling and marketing expenses were approximately **RMB 58.1 million**, a year-on-year decrease of approximately **17.8%**, primarily due to reduced advertising and promotional costs and sales agent commissions[50](index=50&type=chunk)[53](index=53&type=chunk) [Administrative Expenses](index=14&type=section&id=Administrative%20expenses) Administrative expenses slightly increased by 0.7% to RMB 56.6 million. - Administrative expenses were approximately **RMB 56.6 million**, a slight year-on-year increase of approximately **0.7%**[55](index=55&type=chunk)[59](index=59&type=chunk) [Other Losses — Net](index=14&type=section&id=Other%20losses%20%E2%80%94%20net) Other losses, net, amounted to approximately RMB 0.5 million. - Other losses, net, were approximately **RMB 0.5 million**[56](index=56&type=chunk)[60](index=60&type=chunk) [Finance (Costs)/Income — Net](index=14&type=section&id=Finance%20(costs)%2Fincome%20%E2%80%94%20net) Net finance costs primarily include interest expenses on borrowings and lease liabilities, offset by capitalized interest expenses and minor bank deposit interest income. - Finance (costs)/income, net, primarily includes interest income from bank deposits, interest expenses on borrowings, and interest and finance charges payable on lease liabilities, net of capitalized interest expenses[57](index=57&type=chunk)[61](index=61&type=chunk) [Income Tax Expenses](index=14&type=section&id=Income%20tax%20expenses) Income tax expenses decreased by 21.5% to RMB 49.2 million, mainly due to lower gross profit. - Income tax expenses were approximately **RMB 49.2 million**, a year-on-year decrease of approximately **21.5%**, primarily due to lower gross profit[58](index=58&type=chunk)[62](index=62&type=chunk) [Liquidity, Financial Resources and Capital Resources](index=15&type=section&id=Liquidity%2C%20financial%20resources%20and%20capital%20resources) Liquidity Position (As of June 30) | Indicator | 2024 (RMB Million) | December 31, 2023 (RMB Million) | | :--- | :--- | :--- | | Cash and Cash Equivalents | 238.5 | 274.8 | | Restricted Bank Deposits | 161.2 | 165.6 | | Total Borrowings | 1,092.0 | 948.6 | | Borrowings in Current Liabilities | 748.5 | 678.6 | | Fixed-Rate Borrowings Ratio | 63.3% | 68.9% | Borrowing Repayment Schedule (As of June 30) | Repayment Period | 2024 (RMB Thousand) | December 31, 2023 (RMB Thousand) | | :--- | :--- | :--- | | Within 1 year | 748,506 | 678,592 | | 1 to 2 years | 227,500 | 230,000 | | 2 to 5 years | 115,957 | 40,037 | | **Total** | **1,092,000** | **948,629** | [Current, Total and Net Assets](index=16&type=section&id=Current%2C%20total%20and%20net%20assets) Asset and Liability Position (As of June 30) | Indicator | 2024 (RMB Million) | December 31, 2023 (RMB Million) | | :--- | :--- | :--- | | **Assets** | | | | Total Non-Current Assets | 385.5 | 381.6 | | Total Current Assets | 7,948.2 | 8,703.6 | | **Total Assets** | **8,333.6** | **9,085.2** | | **Capital and Reserves** | | | | Equity Attributable to Owners of the Company | 1,761.7 | 1,812.4 | | Non-Controlling Interests | 60.3 | 45.7 | | **Total Equity** | **1,821.9** | **1,858.0** | | **Liabilities** | | | | Total Non-Current Liabilities | 378.4 | 296.1 | | Total Current Liabilities | 6,133.3 | 6,931.1 | | **Total Liabilities** | **6,511.7** | **7,227.2** | | Net Current Assets | 1,814.8 | 1,772.5 | | Total Assets Less Current Liabilities | 2,200.3 | 2,154.1 | [Charge on Assets](index=16&type=section&id=Charge%20on%20assets) Part of the Group's borrowings are secured by properties, plant and equipment, investment properties, shares of subsidiaries, and properties held for sale or under development. - Part of the Group's borrowings are secured by properties, plant and equipment, investment properties, shares of subsidiaries, and properties held for sale or under development[72](index=72&type=chunk)[74](index=74&type=chunk) [Contingent Liabilities](index=17&type=section&id=Contingent%20liabilities) The Group provides guarantees for homebuyers' bank financing and an associate's shareholder loan, with directors assessing the likelihood of default and funding risk as minimal or low. - The Group provides guarantees for homebuyers' bank financing, with directors considering the likelihood of default to be minimal and the financial guarantees not material[75](index=75&type=chunk)[76](index=76&type=chunk) - A Group subsidiary has funding repayment obligations for an associate's shareholder loan, amounting to approximately **RMB 229,495,000** as of June 30, 2024[75](index=75&type=chunk)[76](index=76&type=chunk) - Properties held for sale or under development pledged for certain third-party borrowings amounted to **RMB 119.3 million**[78](index=78&type=chunk)[79](index=79&type=chunk) [Key Financial Ratios](index=18&type=section&id=Key%20financial%20ratios) Key Financial Ratios (As of June 30) | Indicator | 2024 | December 31, 2023 | | :--- | :--- | :--- | | Current Ratio | 1.3 | 1.3 | | Gearing Ratio | 59.9 | 51.1 | | Debt-to-Equity Ratio | 46.8 | 36.3 | [KEY RISK FACTORS](index=19&type=section&id=KEY%20RISK%20FACTORS) The Group's business is highly dependent on the Henan Province real estate market, facing intense competition, susceptibility to force majeure events, and interest rate fluctuation risks. - All projects are located in Henan Province, China, with business highly dependent on local property market performance, influenced by economic, financial, supply-demand, government policies, and interest rates[83](index=83&type=chunk)[86](index=86&type=chunk) - The real estate market is highly competitive, with the Group competing against large national, regional, and local developers in land acquisition, location, product quality, and pricing[84](index=84&type=chunk)[86](index=86&type=chunk) - Business is affected by operating regions and the overall social conditions in China, with force majeure events (e.g., epidemics) potentially causing damage[85](index=85&type=chunk)[87](index=87&type=chunk) - The Group primarily faces interest rate fluctuation risks from borrowings but does not hedge cash flow or fair value interest rate risks[89](index=89&type=chunk)[93](index=93&type=chunk) [GEARING RATIO](index=20&type=section&id=GEARING%20RATIO) As of June 30, 2024, the Group's gearing ratio increased by 8.8 percentage points to 59.9%, primarily due to new borrowings obtained during the period. - As of June 30, 2024, the gearing ratio was **59.9%**, an increase of **8.8 percentage points** from **51.1%** on December 31, 2023[91](index=91&type=chunk)[94](index=94&type=chunk) - The increase in gearing ratio was primarily due to **new borrowings obtained** during the period[91](index=91&type=chunk)[94](index=94&type=chunk) [INTERIM DIVIDEND](index=20&type=section&id=INTERIM%20DIVIDEND) The Board does not recommend paying an interim dividend for the six months ended June 30, 2024, considering the Group's operating results, financial position, and capital requirements. - The Board does not recommend paying an interim dividend for the six months ended **June 30, 2024**[92](index=92&type=chunk)[95](index=95&type=chunk) [TREASURY POLICIES AND CAPITAL STRUCTURE](index=21&type=section&id=TREASURY%20POLICIES%20AND%20CAPITAL%20STRUCTURE) The Group's capital management aims to ensure continued operation, generate shareholder returns, and maintain an optimal capital structure to minimize funding costs, monitored by the gearing ratio. - The Group's capital management objectives are to ensure **continued operation**, generate **returns for shareholders**, and maintain an **optimal capital structure** to minimize funding costs[96](index=96&type=chunk)[100](index=100&type=chunk) - The Group adjusts its capital structure by modifying dividends, issuing new shares, or selling assets, and monitors capital using the **gearing ratio**[96](index=96&type=chunk)[101](index=101&type=chunk) [HUMAN RESOURCES AND EMPLOYEES' REMUNERATION](index=21&type=section&id=HUMAN%20RESOURCES%20AND%20EMPLOYEES'%20REMUNERATION) As of June 30, 2024, the Group had 548 employees, providing competitive remuneration, benefits, and training, and utilizing a share option scheme to attract and retain talent. - As of June 30, 2024, the Group had **548 employees**, a decrease from **658** on June 30, 2023[98](index=98&type=chunk)[102](index=102&type=chunk) - The Group provides medical insurance, social insurance contribution schemes or other pension schemes, and other in-kind benefits[98](index=98&type=chunk)[102](index=102&type=chunk) - The Group offers a range of employee training programs and adopted a **share option scheme** in **November 2018** as an incentive to attract and retain talent[99](index=99&type=chunk)[102](index=102&type=chunk) [FORWARD LOOKING](index=22&type=section&id=FORWARD%20LOOKING) For the second half of 2024, new home sales decline is expected to narrow, but real estate investment may remain weak, requiring time for market confidence to recover, with policies focusing on stimulating demand and optimizing restrictions. - The year-on-year decline in national new home sales is expected to **gradually narrow** in the second half, but real estate investment may remain weak, and market confidence recovery will still take time[104](index=104&type=chunk)[106](index=106&type=chunk) - Key policy directions include **lowering mortgage rates**, **transaction taxes and fees**, **optimizing purchase restrictions**, and stimulating demand for upgraded housing[104](index=104&type=chunk)[106](index=106&type=chunk) - In the second half, the Group will **strengthen internal control management**, maintain **product quality**, deepen core operational strategies, and enhance carbon neutrality requirements[105](index=105&type=chunk)[107](index=107&type=chunk) - The Group will closely monitor fund allocation, ensure efficient use of funds and stable cash flow through precise data analysis and forward-looking planning, and intensify innovation and application of marketing strategies[105](index=105&type=chunk)[107](index=107&type=chunk) [Other Information](index=23&type=section&id=Other%20Information) [EVENTS AFTER THE REPORTING PERIOD](index=23&type=section&id=EVENTS%20AFTER%20THE%20REPORTING%20PERIOD) Except as disclosed in this interim report, the Group has not undertaken any significant events after June 30, 2024. - The Group has not undertaken any **significant events** after **June 30, 2024**[108](index=108&type=chunk)[112](index=112&type=chunk) [DIRECTORS' SERVICE CONTRACTS](index=23&type=section&id=DIRECTORS'%20SERVICE%20CONTRACTS) Both executive and independent non-executive directors have signed three-year service agreements or appointment letters with the company, terminable according to agreement terms. - Service agreements or appointment letters for executive and independent non-executive directors are for a term of **three years**, terminable according to agreement terms[109](index=109&type=chunk)[113](index=113&type=chunk) [CORPORATE GOVERNANCE](index=23&type=section&id=CORPORATE%20GOVERNANCE) The company is committed to high standards of corporate governance and has complied with all applicable code provisions in Appendix C1 of the Listing Rules for the six months ended June 30, 2024, except for code provision B.2.2 (rotation of directors). - The company has complied with all applicable code provisions in Appendix C1 of the Listing Rules, except for code provision **B.2.2 (rotation of directors)**[110](index=110&type=chunk)[114](index=114&type=chunk) - Ms. Qi Chunfeng was due to retire at the 2024 Annual General Meeting and is required to retire by rotation at the next Annual General Meeting[111](index=111&type=chunk)[114](index=114&type=chunk) [COMPLIANCE WITH THE MODEL CODE FOR SECURITIES TRANSACTIONS](index=24&type=section&id=COMPLIANCE%20WITH%20THE%20MODEL%20CODE%20FOR%20SECURITIES%20TRANSACTIONS) The company has adopted the Model Code as the code of conduct for directors' securities transactions, and all directors have confirmed compliance with it. - All directors have confirmed compliance with the **Model Code for Securities Transactions** adopted by the company[116](index=116&type=chunk)[120](index=120&type=chunk) [PURCHASE, SALE OR REDEMPTION OF SECURITIES](index=24&type=section&id=PURCHASE%2C%20SALE%20OR%20REDEMPTION%20OF%20SECURITIES) For the six months ended June 30, 2024, neither the company nor any of its subsidiaries purchased, sold, or redeemed any of the company's listed securities. - For the six months ended **June 30, 2024**, neither the company nor any of its subsidiaries purchased, sold, or redeemed any **listed securities**[117](index=117&type=chunk)[121](index=121&type=chunk) [DIRECTORS' RIGHTS TO ACQUIRE SHARES OR DEBENTURES](index=24&type=section&id=DIRECTORS'%20RIGHTS%20TO%20ACQUIRE%20SHARES%20OR%20DEBENTURES) For the six months ended June 30, 2024, no rights to subscribe for shares or debentures of the company were granted to or exercised by any director, their spouse, or children under 18. - For the six months ended **June 30, 2024**, no rights to subscribe for company shares or debentures were granted to or exercised by any director, their spouse, or children under 18[118](index=118&type=chunk)[122](index=122&type=chunk) [SHARE OPTIONS](index=24&type=section&id=SHARE%20OPTIONS) The company adopted a ten-year share option scheme on October 22, 2018, to incentivize eligible participants, with a maximum of 120,000,000 shares available for issue, and no options granted, exercised, cancelled, or lapsed during the period ended June 30, 2024. - The company adopted a **share option scheme** on **October 22, 2018**, valid for **ten years**, to provide incentives to eligible participants[119](index=119&type=chunk)[123](index=123&type=chunk) - The maximum total number of shares available for issue under the share option scheme shall not exceed **10%** of the issued shares upon completion of the initial public offering (i.e., **120,000,000 shares**)[124](index=124&type=chunk)[127](index=127&type=chunk) - As of **June 30, 2024**, no share options were granted, exercised, cancelled, or lapsed during the period[130](index=130&type=chunk)[132](index=132&type=chunk) [DIRECTORS' AND CHIEF EXECUTIVES' INTERESTS IN THE SHARES, UNDERLYING SHARES AND DEBENTURES OF THE COMPANY](index=26&type=section&id=DIRECTORS'%20AND%20CHIEF%20EXECUTIVES'%20INTERESTS%20IN%20THE%20SHARES%2C%20UNDERLYING%20SHARES%20AND%20DEBENTURES%20OF%20THE%20COMPANY) As of June 30, 2024, Executive Director Mr. Li Xiaobing was deemed to have a 75.00% equity interest in the company through a discretionary trust and controlled corporations, with no other directors holding disclosable interests. Directors' Interests in the Company's Shares (As of June 30) | Name of Director | Capacity/Nature of Interest | Number and Class of Securities | Approximate Percentage of Shareholding (%) | | :--- | :--- | :--- | :--- | | Mr. Li Xiaobing | Trustee of a discretionary trust | 855,000,000 Ordinary Shares (L) | 71.25 | | Mr. Li Xiaobing | Interest in controlled corporation | 45,000,000 Ordinary Shares (L) | 3.75 | | **Total** | | **900,000,000 Ordinary Shares (L)** | **75.00** | - Mr. Li Xiaobing is deemed to have an interest in the company's shares through his capacity as the sole trustee of a family trust and a wholly-owned company[139](index=139&type=chunk) [SUBSTANTIAL SHAREHOLDERS' INTERESTS IN SHARES AND UNDERLYING SHARES OF THE COMPANY](index=28&type=section&id=SUBSTANTIAL%20SHAREHOLDERS'%20INTERESTS%20IN%20SHARES%20AND%20UNDERLYING%20SHARES%20OF%20THE%20COMPANY) As of June 30, 2024, substantial shareholders Heng Sheng Enterprise Limited, Heng Nuo Private Trust Limited, and Ms. Lin Wei (spouse of Mr. Li Xiaobing) were disclosed to have interests in the company's shares, with Ms. Lin Wei deemed to hold 75.00% due to spousal interest. Substantial Shareholders' Interests in the Company's Shares (As of June 30) | Name of Shareholder | Capacity/Nature of Interest | Number and Class of Securities | Approximate Percentage of Shareholding (%) | | :--- | :--- | :--- | :--- | | Heng Sheng Enterprise Limited | Beneficial owner | 855,000,000 Ordinary Shares (L) | 71.25 | | Heng Nuo Private Trust Limited | Interest in controlled corporation | 855,000,000 Ordinary Shares (L) | 71.25 | | Ms. Lin Wei | Interest of spouse | 900,000,000 Ordinary Shares (L) | 75.00 | - Heng Nuo Private Trust Limited, as the trustee of a family trust established by Mr. Li Xiaobing, is therefore deemed to have an interest in the shares of Heng Sheng Enterprise Limited[148](index=148&type=chunk) - Ms. Lin Wei, as the spouse of Mr. Li Xiaobing, is deemed to have an interest in all shares held by Mr. Li Xiaobing due to spousal interest[148](index=148&type=chunk) [EMPLOYEE AND REMUNERATION POLICIES](index=29&type=section&id=EMPLOYEE%20AND%20REMUNERATION%20POLICIES) The Group provides employees with remuneration and benefits in line with industry practice, awarding discretionary bonuses based on performance, and granting share options to eligible employees. - The Group provides employees with remuneration and benefits in line with industry practice, and discretionary bonuses are awarded based on Group and individual performance[145](index=145&type=chunk)[147](index=147&type=chunk) - Eligible employees may be granted share options in accordance with the terms of the company's share option scheme[145](index=145&type=chunk)[147](index=147&type=chunk) [RETIREMENT SCHEMES](index=30&type=section&id=RETIREMENT%20SCHEMES) The Group participates in defined contribution retirement schemes for its employees in China and provides a Mandatory Provident Fund Scheme for its Hong Kong employees, with contributions from both employer and employee. - The Group participates in defined contribution retirement schemes organized by Chinese municipal and provincial government authorities for its employees in China[150](index=150&type=chunk)[151](index=151&type=chunk) - The Group operates a Mandatory Provident Fund Scheme for its Hong Kong employees, with both employer and employee contributing **5%** of the employee's relevant income, subject to a monthly cap of **HK$30,000**[152](index=152&type=chunk)[155](index=155&type=chunk) [REVIEW BY AUDIT COMMITTEE](index=30&type=section&id=REVIEW%20BY%20AUDIT%20COMMITTEE) The unaudited condensed consolidated interim financial statements for the six months ended June 30, 2024, have been reviewed by the Board's Audit Committee, which comprises three independent non-executive directors. - The unaudited condensed consolidated interim financial statements for the six months ended **June 30, 2024**, have been reviewed by the Board's Audit Committee[153](index=153&type=chunk)[156](index=156&type=chunk) [AUDIT OR REVIEW OF THE FINANCIAL RESULTS](index=30&type=section&id=AUDIT%20OR%20REVIEW%20OF%20THE%20FINANCIAL%20RESULTS) The unaudited condensed consolidated interim financial statements for the six months ended June 30, 2024, have not been audited or reviewed by the company's auditor. - The unaudited condensed consolidated interim financial statements for the six months ended **June 30, 2024**, have not been audited or reviewed by the company's auditor[154](index=154&type=chunk)[157](index=157&type=chunk) [Unaudited Condensed Consolidated Statement of Profit or Loss](index=31&type=section&id=Unaudited%20Condensed%20Consolidated%20Statement%20of%20Profit%20or%20Loss) [Profit or Loss Summary](index=31&type=section&id=Profit%20or%20Loss%20Summary) For the six months ended June 30, 2024, the Group recorded revenue of RMB 1,467,599 thousand and gross profit of RMB 139,051 thousand, but ultimately incurred a loss for the period of RMB 36,099 thousand, with loss attributable to owners of the company at RMB 50,718 thousand. Unaudited Condensed Consolidated Statement of Profit or Loss (For the six months ended June 30) | Indicator | 2024 (RMB Thousand) | 2023 (RMB Thousand) | | :--- | :--- | :--- | | Revenue | 1,467,599 | 1,488,151 | | Cost of sales | (1,328,548) | (1,228,924) | | Gross profit | 139,051 | 259,227 | | Fair value losses on investment properties | (9,648) | (1,480) | | Selling and marketing expenses | (58,135) | (70,706) | | Administrative expenses | (56,643) | (56,193) | | Operating profit | 13,216 | 131,773 | | Finance (costs)/income, net | (43) | 101 | | Profit before income tax | 13,119 | 131,874 | | Income tax expenses | (49,218) | (62,698) | | **(Loss)/Profit for the period** | **(36,099)** | **69,176** | | (Loss)/Profit for the period attributable to owners of the Company | (50,718) | 60,763 | | Non-controlling interests | 14,619 | 8,413 | | Basic and diluted (loss)/earnings per share (RMB cents) | (4.23) | 5.06 | [Unaudited Condensed Consolidated Statement of Comprehensive Income](index=33&type=section&id=Unaudited%20Condensed%20Consolidated%20Statement%20of%20Comprehensive%20Income) [Comprehensive Income Summary](index=33&type=section&id=Comprehensive%20Income%20Summary) For the six months ended June 30, 2024, the Group recorded total comprehensive expense for the period of RMB (36,099) thousand, with RMB (50,718) thousand attributable to owners of the company. Unaudited Condensed Consolidated Statement of Comprehensive Income (For the six months ended June 30) | Indicator | 2024 (RMB Thousand) | 2023 (RMB Thousand) | | :--- | :--- | :--- | | (Loss)/Profit for the period and total comprehensive (expense)/income | (36,099) | 69,176 | | Total comprehensive (expense)/income attributable to owners of the Company | (50,718) | 60,763 | | Non-controlling interests | 14,619 | 8,413 | [Unaudited Condensed Consolidated Statement of Financial Position](index=34&type=section&id=Unaudited%20Condensed%20Consolidated%20Statement%20of%20Financial%20Position) [Financial Position Summary](index=34&type=section&id=Financial%20Position%20Summary) As of June 30, 2024, the Group's total assets were RMB 8,333,641 thousand, total liabilities were RMB 6,511,699 thousand, and total equity was RMB 1,821,942 thousand, with increased net current assets and non-current liabilities. Unaudited Condensed Consolidated Statement of Financial Position (As of June 30) | Indicator | 2024 (RMB Thousand) | December 31, 2023 (RMB Thousand) | | :--- | :--- | :--- | | **Assets** | | | | Total non-current assets | 385,456 | 381,579 | | Total current assets | 7,948,185 | 8,703,626 | | **Total assets** | **8,333,641** | **9,085,205** | | **Capital and reserves** | | | | Equity attributable to owners of the Company | 1,761,659 | 1,812,377 | | Non-controlling interests | 60,283 | 45,664 | | **Total equity** | **1,821,942** | **1,858,041** | | **Liabilities** | | | | Total non-current liabilities | 378,352 | 296,072 | | Total current liabilities | 6,133,347 | 6,931,092 | | **Total liabilities** | **6,511,699** | **7,227,164** | | Net current assets | 1,814,838 | 1,772,534 | | Total assets less current liabilities | 2,200,294 | 2,154,113 | [Unaudited Condensed Consolidated Statement of Changes in Equity](index=36&type=section&id=Unaudited%20Condensed%20Consolidated%20Statement%20of%20Changes%20in%20Equity) [Equity Changes Summary](index=36&type=section&id=Equity%20Changes%20Summary) For the six months ended June 30, 2024, the Group's total equity decreased from RMB 1,858,041 thousand to RMB 1,821,942 thousand, primarily due to a loss of RMB 36,099 thousand recorded during the period. Unaudited Condensed Consolidated Statement of Changes in Equity (For the six months ended June 30) | Indicator | Share Capital (RMB Thousand) | Share Premium (RMB Thousand) | Retained Profits (RMB Thousand) | Other Reserves (RMB Thousand) | Subtotal (RMB Thousand) | Non-controlling Interests (RMB Thousand) | Total Equity (RMB Thousand) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | At January 1, 2024 | 10,645 | 299,188 | 1,296,860 | 205,684 | 1,812,377 | 45,664 | 1,858,041 | | (Loss)/Profit for the period and total comprehensive (expense)/income | — | — | (50,718) | — | (50,718) | 14,619 | (36,099) | | At June 30, 2024 | 10,645 | 299,188 | 1,246,142 | 205,684 | 1,761,659 | 60,283 | 1,821,942 | [Unaudited Condensed Consolidated Statement of Cash Flows](index=37&type=section&id=Unaudited%20Condensed%20Consolidated%20Statement%20of%20Cash%20Flows) [Cash Flows Summary](index=37&type=section&id=Cash%20Flows%20Summary) For the six months ended June 30, 2024, the Group used net cash of RMB (99,864) thousand in operating activities and RMB (9,834) thousand in investing activities, while generating RMB 73,357 thousand from financing activities, resulting in a decrease in cash and cash equivalents. Unaudited Condensed Consolidated Statement of Cash Flows (For the six months ended June 30) | Indicator | 2024 (RMB Thousand) | 2023 (RMB Thousand) | | :--- | :--- | :--- | | Net cash used in operating activities | (99,864) | (134,267) | | Net cash used in investing activities | (9,834) | (179,297) | | Net cash generated from financing activities | 73,357 | 253,235 | | Net decrease in cash and cash equivalents | (36,341) | (60,329) | | Cash and cash equivalents at end of period | 238,467 | 160,730 | [Notes to the Unaudited Condensed Consolidated Interim Financial Information](index=39&type=section&id=Notes%20to%20the%20Unaudited%20Condensed%20Consolidated%20Interim%20Financial%20Information) [GENERAL INFORMATION](index=39&type=section&id=GENERAL%20INFORMATION) Hengda Group (Holdings) Company Limited, incorporated in the Cayman Islands and listed on the Hong Kong Stock Exchange, primarily engages in property development in China, with its interim financial information unaudited. - The company was incorporated in the **Cayman Islands** on **July 22, 2016**, and listed on the **Hong Kong Stock Exchange** on **November 12, 2018**[172](index=172&type=chunk)[175](index=175&type=chunk) - The company and its subsidiaries are primarily engaged in **property development** in **China**[173](index=173&type=chunk)[175](index=175&type=chunk) - The Group's condensed consolidated interim financial information has **not been audited or reviewed** by the company's auditor[174](index=174&type=chunk)[175](index=175&type=chunk) [BASIS OF PREPARATION](index=40&type=section&id=BASIS%20OF%20PREPARATION) This interim financial information is prepared under HKAS 34, consistent with 2023 annual policies, with the Board confident in the Group's going concern despite a period loss and significant liabilities, through proactive management and financial support. - This interim financial information has been prepared in accordance with **Hong Kong Accounting Standard 34** and is consistent with the accounting policies adopted in the **2023 annual consolidated financial statements**[176](index=176&type=chunk)[181](index=181&type=chunk) - The Group incurred a loss of approximately **RMB 36,099,000** for the six months ended June 30, 2024, and faces a low cash balance, significant short-term liabilities, and potential cash outflows from financial guarantees[182](index=182&type=chunk)[184](index=184&type=chunk) - The Board believes the Group will have sufficient working capital to continue as a going concern through proactive sales adjustments, communication with major contractors and suppliers, securing bank financing, and obtaining financial support from related parties[183](index=183&type=chunk)[190](index=190&type=chunk) [Going Concern Consideration](index=41&type=section&id=Going%20Concern%20consideration) Despite a loss of RMB 36,099,000 and significant current liabilities and potential cash outflows from financial guarantees, the Board plans proactive measures to ensure the Group's continued operation. - The Group recorded a loss of **RMB 36,099,000** in the first half of 2024, with total current liabilities of approximately **RMB 6,133,347,000**, of which approximately **RMB 748,506,000** represents bank and other long-term borrowings due within the next twelve months[182](index=182&type=chunk)[184](index=184&type=chunk) - The Group faces potential cash outflows of approximately **RMB 6,741,908,000** arising from financial guarantees provided to third parties and related parties[182](index=182&type=chunk)[184](index=184&type=chunk) - The Board has reviewed cash flow forecasts and plans to ensure **going concern** through measures such as sales adjustments, negotiating payments with major contractors and suppliers, securing project development loans, and obtaining financial support from related parties[183](index=183&type=chunk)[190](index=190&type=chunk) [ADOPTION OF AMENDMENTS TO HKFRS ACCOUNTING STANDARDS](index=43&type=section&id=ADOPTION%20OF%20AMENDMENTS%20TO%20HKFRS%20ACCOUNTING%20STANDARDS) During this interim period, the Group first applied several amendments to HKFRS Accounting Standards, which had no material impact on its consolidated financial position or performance, nor did they alter borrowing classifications. - The Group first applied amendments to **HKAS 1 "Classification of Liabilities as Current or Non-current"** and **"Non-current Liabilities with Covenants"**[191](index=191&type=chunk)[195](index=195&type=chunk) - These amendments had **no material impact** on the Group's consolidated financial position and performance, and did not result in changes to the classification of borrowings[191](index=191&type=chunk)[195](index=195&type=chunk) [SEGMENT INFORMATION](index=45&type=section&id=SEGMENT%20INFORMATION) The Group primarily engages in property development in China, with its chief operating decision-maker reviewing the business as a single segment, thus no segment information is presented, and all revenue and non-current assets originate from China. - The Group is primarily engaged in **property development in China**, and its chief operating decision-maker reviews the business as a single segment, thus no segment information is presented[196](index=196&type=chunk)[197](index=197&type=chunk) - For the six months ended June 30, 2024 and 2023, all of the Group's revenue originated from **China**, and all non-current assets are located in **China**[198](index=198&type=chunk)[199](index=199&type=chunk) [REVENUE](index=46&type=section&id=REVENUE) The Group's revenue primarily derives from property sales, rental income, and service income, with property sales accounting for 99.4% of total revenue and service income significantly increasing by 262.7% year-on-year, all generated from China. Revenue Source Analysis (For the six months ended June 30) | Revenue Source | 2024 (RMB Thousand) | 2023 (RMB Thousand) | | :--- | :--- | :--- | | Property Sales | 1,457,879 | 1,481,189 | | Service Income | 4,951 | 1,365 | | Rental Income | 4,769 | 5,597 | | **Total** | **1,467,599** | **1,488,151** | - Service income increased by **262.7% year-on-year**, while rental income decreased by **14.8% year-on-year**[201](index=201&type=chunk) - All revenue is generated from **China** and primarily recognized at a point in time[204](index=204&type=chunk)[205](index=205&type=chunk) [OTHER LOSSES, NET](index=48&type=section&id=OTHER%20LOSSES%2C%20NET) For the six months ended June 30, 2024, the Group's other losses, net, amounted to RMB 539 thousand, primarily comprising penalties, fines, compensation, and donations. Other Losses, Net Details (For the six months ended June 30) | Item | 2024 (RMB Thousand) | 2023 (RMB Thousand) | | :--- | :--- | :--- | | Penalties, fines and compensation | (537) | (179) | | Donations | (186) | (100) | | Loss on disposal of property, plant and equipment | (3) | (29) | | Others | 187 | 12 | | **Total** | **(539)** | **(296)** | [FINANCE INCOME/(COSTS)](index=49&type=section&id=FINANCE%20INCOME%2F(COSTS)) For the six months ended June 30, 2024, the Group's net finance costs were RMB 43 thousand, primarily comprising interest expenses on bank and other borrowings and lease liabilities interest, net of capitalized interest expenses. Finance Income/(Costs) Details (For the six months ended June 30) | Item | 2024 (RMB Thousand) | 2023 (RMB Thousand) | | :--- | :--- | :--- | | Interest income from bank deposits | 427 | 591 | | Interest on bank and other borrowings | (27,911) | (32,556) | | Interest on lease liabilities | (470) | (490) | | Less: Amount capitalised | 27,911 | 32,556 | | **Finance (costs)/income, net** | **(43)** | **101** | [PROFIT BEFORE INCOME TAX](index=50&type=section&id=PROFIT%20BEFORE%20INCOME%20TAX) For the six months ended June 30, 2024, the Group's profit before income tax was RMB 13,119 thousand, with key expenses including staff costs, depreciation, amortization, property costs, and a significant increase in provisions for properties held for sale or under development. Deductions from Profit Before Income Tax (For the six months ended June 30) | Item | 2024 (RMB Thousand) | 2023 (RMB Thousand) | | :--- | :--- | :--- | | Staff costs | 36,037 | 47,268 | | Depreciation expenses of property, plant and equipment | 3,692 | 4,031 | | Depreciation expenses of right-of-use assets | 2,295 | 2,070 | | Amortisation expenses of intangible assets | 364 | 363 | | Property costs recognised as expenses | 1,265,154 | 1,201,654 | | Provision for properties held for sale or under development | 57,671 | 12,583 | - Provision for properties held for sale or under development significantly increased from **RMB 12,583 thousand** in 2023 to **RMB 57,671 thousand** in 2024[212](index=212&type=chunk) [INCOME TAX EXPENSES](index=51&type=section&id=INCOME%20TAX%20EXPENSES) For the six months ended June 30, 2024, the Group's income tax expenses were RMB 49,218 thousand, primarily comprising PRC corporate income tax and land appreciation tax, with varying tax rates and exemptions for different entities. Income Tax Expenses Details (For the six months ended June 30) | Item | 2024 (RMB Thousand) | 2023 (RMB Thousand) | | :--- | :--- | :--- | | Current income tax — PRC Land Appreciation Tax | 915 | 23,858 | | Current income tax — PRC Corporate Income Tax | 31,460 | 50,703 | | Deferred income tax | 16,843 | (11,863) | | **Total** | **49,218** | **62,698** | - PRC corporate income tax rate is **25%**, with a **10% withholding tax** on dividends distributed to offshore holding companies (**5% for Hong Kong companies**)[215](index=215&type=chunk)[217](index=217&type=chunk) - PRC Land Appreciation Tax is levied at progressive rates from **30% to 60%**, while Hong Kong and overseas companies are exempt from profits tax[218](index=218&type=chunk)[223](index=223&type=chunk) [PRC Corporate Income Tax](index=51&type=section&id=PRC%20corporate%20income%20tax) - The PRC corporate income tax rate is **25%**[215](index=215&type=chunk) - Dividends distributed by PRC entities to offshore holding companies are subject to a **10% withholding tax**, with a **5% rate** applicable to Hong Kong holding companies[216](index=216&type=chunk)[217](index=217&type=chunk) [Land Appreciation Tax](index=52&type=section&id=LAT) - PRC Land Appreciation Tax is levied at progressive rates ranging from **30% to 60%**[218](index=218&type=chunk)[221](index=221&type=chunk) [Hong Kong Profits Tax](index=52&type=section&id=Hong%20Kong%20Profits%20Tax) - Hong Kong subsidiaries had **no taxable profits**, thus no provision for Hong Kong profits tax was made[219](index=219&type=chunk)[222](index=222&type=chunk) [Overseas Corporate Income Tax](index=52&type=section&id=Overseas%20corporate%20income%20tax) - Companies registered in the **Cayman Islands** and **British Virgin Islands** are not subject to any taxation[220](index=220&type=chunk)[223](index=223&type=chunk) [(LOSS)/EARNINGS PER SHARE](index=53&type=section&id=(LOSS)%2FEARNINGS%20PER%20SHARE) For the six months ended June 30, 2024, the Group reported a basic and diluted loss per share of RMB 4.23 cents, a decline from earnings per share of RMB 5.06 cents in the prior year, with no dilutive shares. (Loss)/Earnings Per Share (For the six months ended June 30) | Indicator | 2024 (RMB Thousand/cents) | 2023 (RMB Thousand/cents) | | :--- | :--- | :--- | | (Loss)/Profit for the period attributable to owners of the Company | (50,718) | 60,763 | | Weighted average number of ordinary shares in issue (thousands) | 1,200,000 | 1,200,000 | | Basic and diluted (loss)/earnings per share (RMB cents) | (4.23) | 5.06 | - As there were no dilutive shares in issue during the period, diluted (loss)/earnings per share is the same as basic (loss)/earnings per share[226](index=226&type=chunk)[227](index=227&type=chunk) [DIVIDENDS](index=54&type=section&id=DIVIDENDS) For the six months ended June 30, 2024, no dividends were paid or proposed, nor have any dividends been proposed since the end of the reporting period. - For the six months ended **June 30, 2024**, no dividends were paid or proposed[228](index=228&type=chunk)[232](index=232&type=chunk) [PROPERTY, PLANT AND EQUIPMENT](index=54&type=section&id=PROPERTY%2C%20PLANT%20AND%20EQUIPMENT) For the six months ended June 30, 2024, the Group acquired RMB 275 thousand in property, plant and equipment, disposed of RMB 3 thousand, and pledged certain buildings as collateral for bank borrowings. - Acquisitions of property, plant and equipment during the period amounted to approximately **RMB 275 thousand** (2023: RMB 2,828 thousand)[229](index=229&type=chunk)[233](index=233&type=chunk) - Disposals of property, plant and equipment with a carrying amount of approximately **RMB 3 thousand** were made during the period, with a loss of approximately **RMB 3 thousand** recognized[230](index=230&type=chunk)[233](index=233&type=chunk) - Certain buildings have been pledged as collateral for the Group's bank borrowings[231](index=231&type=chunk)[233](index=233&type=chunk) [INVESTMENT PROPERTIES](index=55&type=section&id=INVESTMENT%20PROPERTIES) As of June 30, 2024, the Group's investment properties had a carrying amount of RMB 135,440 thousand, including transfers from properties held for sale and a fair value loss, with some properties pledged as collateral for bank borrowings. Movement in Investment Properties (For the six months ended June 30) | Item | 2024 (RMB Thousand) | 2023 (RMB Thousand) | | :--- | :--- | :--- | | At January 1 | 119,600 | 122,520 | | Transfer from properties held or under development for sale | 25,488 | — | | Fair value losses | (9,648) | (1,480) | | **At June 30** | **135,440** | **121,040** | - Certain investment properties have been pledged as collateral for the Group's bank borrowings[235](index=235&type=chunk)[236](index=236&type=chunk) [PROPERTIES HELD OR UNDER DEVELOPMENT FOR SALE](index=56&type=section&id=PROPERTIES%20HELD%20OR%20UNDER%20DEVELOPMENT%20FOR%20SALE) As of June 30, 2024, the Group's net properties held or under development for sale amounted to RMB 6,956,459 thousand, with significant provisions made and certain properties pledged as collateral for borrowings. Balances of Properties Held or Under Development for Sale (As of June 30) | Item | 2024 (RMB Thousand) | December 31, 2023 (RMB Thousand) | | :--- | :--- | :--- | | Properties under development for sale | 4,796,537 | 5,295,466 | | Properties held for sale | 2,430,856 | 2,439,482 | | Less: Provision | (270,934) | (213,263) | | **Net carrying amount** | **6,956,459** | **7,521,685** | - Certain properties held or under development for sale have been pledged as collateral for the Group's bank and other long-term borrowings, and some are pledged for third-party and related-party borrowings[239](index=239&type=chunk)[241](index=241&type=chunk) [OTHER RECEIVABLES AND PREPAYMENTS](index=57&type=section&id=OTHER%20RECEIVABLES%20AND%20PREPAYMENTS) As of June 30, 2024, the Group's total other receivables and prepayments decreased to RMB 378,791 thousand, primarily comprising prepayments for construction costs, tender deposits, amounts due from government, and temporary funding from third parties. Other Receivables and Prepayments Details (As of June 30) | Item | 2024 (RMB Thousand) | December 31, 2023 (RMB Thousand) | | :--- | :--- | :--- | | Prepayments for construction costs | 20,269 | 120,245 | | Prepaid taxes and surcharges | 15,477 | 13,609 | | Recoverable VAT | 16,453 | 6,557 | | Tender and other deposits | 112,044 | 111,188 | | Amount due from a related party | 41,506 | 40,503 | | Amounts due from government in relation to costs of demolition and resettlement activities | 84,845 | 102,864 | | Temporary funding due from third parties | 63,506 | 55,730 | | Amount due from a contractor and a supplier | 13,750 | 114,610 | | Less: Impairment provision | (55,955) | (54,279) | | **Total** | **378,791** | **582,461** | [SHARE CAPITAL AND SHARE PREMIUM](index=58&type=section&id=SHARE%20CAPITAL%20AND%20SHARE%20PREMIUM) As of June 30, 2024, the company's authorized share capital was 2,400,000,000 ordinary shares of HK$0.01 each, with 1,200,000,000 shares issued and fully paid, totaling RMB 10,645 thousand in share capital and RMB 299,188 thousand in share premium. Share Capital and Share Premium (As of June 30) | Item | Number | Amount (HKD/RMB Thousand) | | :--- | :--- | :--- | | Authorised share capital (ordinary shares of HK$0.01 each) | 2,400,000,000 | 24,000,000 (HKD) | | Issued and fully paid ordinary shares (of HK$0.01 each) | 1,200,000,000 | 10,645 (RMB Thousand) (Share capital) | | | | 299,188 (RMB Thousand) (Share premium) | [BANK BORROWINGS](index=59&type=section&id=BANK%20BORROWINGS) As of June 30, 2024, the Group's total bank borrowings amounted to RMB 670,910 thousand, with RMB 364,990 thousand being current, and secured by various assets and guaranteed by related parties. Bank Borrowings Details (As of June 30) | Item | 2024 (RMB Thousand) | December 31, 2023 (RMB Thousand) | | :--- | :--- | :--- | | Long-term borrowings — secured bank borrowings | 622,910 | 367,400 | | Less: Current portion | (316,990) | (134,900) | | **Total non-current portion** | **305,920** | **232,500** | | Current borrowings — secured bank borrowings | 48,000 | 48,000 | | Add: Current portion of long-term secured bank borrowings | 316,990 | 134,900 | | **Total current portion** | **364,990** | **182,900** | | **Total** | **670,910** | **415,400** | - Part of the bank borrowings are secured by **properties held for sale or under development**, **investment properties**, and **property, plant and equipment**[248](index=248&type=chunk)[251](index=251&type=chunk) - Part of the bank borrowings are secured by **equity interests in subsidiaries**, **third-party properties**, and **related-party properties**, and guaranteed by **related parties**[249](index=249&type=chunk)[250](index=250&type=chunk) Bank Borrowings Repayment Schedule (As of June 30) | Repayment Period | 2024 (RMB Thousand) | December 31, 2023 (RMB Thousand) | | :--- | :--- | :--- | | Within one year | 364,990 | 182,900 | | After one year but within two years | 202,500 | 205,000 | | After two years but within five years | 103,420 | 27,500 | | **Total** | **670,910** | **415,400** | [OTHER LONG-TERM BORROWINGS](index=61&type=section&id=OTHER%20LONG-TERM%20BORROWINGS) As of June 30, 2024, the Group's total other long-term borrowings amounted to RMB 421,053 thousand, with RMB 383,516 thousand being current, primarily from non-financial institutions and non-controlling shareholders, secured by various assets and guaranteed by related parties. Other Long-Term Borrowings Details (As of June 30) | Item | 2024 (RMB Thousand) | December 31, 2023 (RMB Thousand) | | :--- | :--- | :--- | | Non-financial institutions, secured | 22,537 | 22,537 | | Non-financial institutions, unsecured | 266,260 | 294,260 | | Financial institutions, secured | — | 90,000 | | Loans from non-controlling shareholders, unsecured | 132,256 | 126,432 | | **Total** | **421,053** | **533,229** | | Less: Current portion | (383,516) | (495,692) | | **Amounts presented under non-current liabilities** | **37,537** | **37,537** | - The Group's other long-term borrowings are secured by **properties held for sale or under development** and **equity interests in subsidiaries**, and guaranteed by **related parties**[257](index=257&type=chunk)[259](index=259&type=chunk) - Borrowings from non-controlling shareholders are **unsecured and interest-bearing**, planned for repayment before **December 2024**[258](index=258&type=chunk)[260](index=260&type=chunk) Other Long-Term Borrowings Repayment Schedule (As of June 30) | Repayment Period | 2024 (RMB Thousand) | December 31, 2023 (RMB Thousand) | | :--- | :--- | :--- | | Within one year | 383,516 | 441,692 | | After one year but within two years | 25,000 | 61,000 | | After two years but within five years | 12,537 | 30,537 | | **Total** | **421,053** | **533,229** | [TRADE AND OTHER PAYABLES](index=64&type=section&id=TRADE%20AND%20OTHER%20PAYABLES) As of June 30, 2024, the Group's total trade and other payables decreased to RMB 1,693,145 thousand, with trade payables accounting for RMB 1,320,784 thousand, primarily including amounts due to related parties. Trade and Other Payables Details (As of June 30) | Item | 2024 (RMB Thousand) | December 31, 2023 (RMB Thousand) | | :--- | :--- | :--- | | Trade payables | 1,320,784 | 1,490,485 | | Deposits received from customers | 54,041 | 81,591 | | VAT and other taxes payable | 136,182 | 205,803 | | Amounts due to non-controlling shareholders | 41,733 | 83,533 | | Temporary funding payable | 25,389 | 18,939 | | Interest payable | 50,360 | 57,172 | | Salaries payable | 18,056 | 21,325 | | Amounts due to related parties | 17,382 | 15,304 | | Other amounts due to related parties | 2,303 | 958 | | Others | 26,915 | 32,375 | | **Total** | **1,693,145** | **2,007,485** | Ageing Analysis of Trade Payables (As of June 30) | Ageing | 2024 (RMB Thousand) | December 31, 2023 (RMB Thousand) | | :--- | :--- | :--- | | Within 1 year | 924,984 | 1,037,502 | | 1 to 2 years | 191,287 | 222,064 | | 2 to 3 years | 102,832 | 131,792 | | Over 3 years | 101,681 | 99,127 | | **Total** | **1,320,784** | **1,490,485** | - Trade payables include trade payables to related parties of approximately **RMB 5,330 thousand**[270](index=270&type=chunk) [CONTRACT LIABILITIES](index=66&type=section&id=CONTRACT%20LIABILITIES) Contract liabilities primarily represent amounts received in advance from customers for property sales, classified as current liabilities, and recognized as revenue upon property control transfer. - Contract liabilities primarily represent amounts received in advance from customers for property sales, which will be recognized as revenue upon transfer of property control[272](index=272&type=chunk) - Contract liabilities are classified as **current liabilities** and are expected to be recognized as revenue within the normal operating cycle[273](index=273&type=chunk) [COMMITMENTS](index=66&type=section&id=COMMITMENTS) As of June 30, 2024, the Group's capital expenditure committed but not yet incurred amounted to RMB 948,170 thousand, primarily for properties under development for sale. Capital Expenditure Committed But Not Yet Incurred (As of June 30) | Item | 2024 (RMB Thousand) | December 31, 2023 (RMB Thousand) | | :--- | :--- | :--- | | Properties under development for sale | 948,170 | 1,334,357 | | Land use rights | — | 40,810 | | **Total** | **948,170** | **1,375,167** | [FINANCIAL GUARANTEES AND CONTINGENT LIABILITIES](index=67&type=section&id=FINANCIAL%20GUARANTEES%20AND%20CONTINGENT%20LIABILITIES) As of June 30, 2024, the Group provided significant financial guarantees for homebuyers' mortgage financing and an associate's shareholder loan, along with pledges for third-party borrowings, with directors assessing low default and funding risks. Financial Guarantees and Contingent Liabilities (As of June 30) | Item | 2024 (RMB Thousand) | December 31, 2023 (RMB Thousand) | | :--- | :--- | :--- | | Guarantees given for homebuyers' mortgage financing | 6,512,413 | 6,958,416 | | Guarantees given for an associate's shareholder loan | 229,495 | 229,495 | | Pledges provided for certain third-party borrowings | 119,300 | 120,900 | | **Total** | **6,861,208** | **7,308,811** | - The Group provides guarantees for homebuyers' mortgage financing, with directors considering the likelihood of homebuyers defaulting on payments to be minimal[279](index=279&type=chunk)[280](index=280&type=chunk) - A Group subsidiary is obligated to fund the repayment of an associate's shareholder loan, with directors considering the risk of providing such funding to be low[282](index=282&type=chunk)[283](index=283&type=chunk) [RELATED-PARTY TRANSACTIONS](index=69&type=section&id=RELATED-PARTY%20TRANSACTIONS) The Group engaged in various related-party transactions, including temporary funding, civil engineering, and property management services, with related parties also providing guarantees for the Group's borrowings, resulting in outstanding balances as of June 30, 2024. - Related parties include company directors, their family members, controlling shareholders, non-controlling shareholders of subsidiaries, and companies controlled by Mr. Li[284](index=284&type=chunk)[287](index=287&type=chunk) Summary of Related-Party Transactions (For the six months ended June 30) | Transaction Type | Related Party | 2024 (RMB Thousand) | 2023 (RMB Thousand) | | :--- | :--- | :--- | :--- | | Provision of temporary funding | Xuchang Hengzhu | 1,003 | 3,782 | | Repayment of temporary funding | Xuchang Hengzhu | — | 3,360 | | Receipt of temporary funding | Heng Sheng | 2,078 | 2,556 | | Repayment of temporary funding | Heng Sheng | — | 283 | | Services provided | Luohe Huatai Construction | 9,268 | — | | Services provided | Hengda Property Management | 5,590 | 12,289 | | Related party guarantees | Mr. Li and Ms. Lin Wei | 488,630 | 414,420 | Related-Party Balances (As of June 30) | Balance Type | Related Party | 2024 (RMB Thousand) | December 31, 2023 (RMB Thousand) | | :--- | :--- | :--- | :--- | | Amounts due from related parties | Xuchang Hengzhu | 41,506 | 40,503 | | Other amounts due to related parties | Hengda Property Management | 1,799 | 958 | | Trade payables to related parties | Luohe Huatai Construction | 3,913 | 220 | | Amounts due to related parties | Heng Sheng | 11,224 | 9,146 | [Name and relationship with related parties](index=69&type=section&id=Name%20and%20relationship%20with%20related%20parties) - Related parties include company director Li Xiaobing and his family members, controlling shareholder Heng Sheng, property management companies controlled by Mr. Li, and associate Xuchang Hengzhu, among others[286](index=286&type=chunk)[287](index=287&type=chunk) [Transactions with related parties](index=71&type=section&id=Transactions%20with%20related%20parties) - The Group provided temporary funding of **RMB 1,003 thousand** to associate Xuchang Hengzhu and received temporary funding of **RMB 2,078 thousand** from holding company Heng Sheng[288](index=288&type=chunk)[290](index=290&type=chunk) - Related parties Luohe Huatai Construction provided civil engineering and construction services, and Hengda Property Management provided property management services[291](index=291&type=chunk)[292](index=292&type=chunk) - Mr. Li and Ms. Lin Wei provided guarantees for the Group's bank and other long-term borrowings, totaling **RMB 488,630 thousand**[293](index=293&type=chunk)[297](index=297&type=chunk) [Related-party balances](index=75&type=section&id=Related-party%20balances) - Amounts due from associate Xuchang Hengzhu were **RMB 41,506 thousand**[299](index=299&type=chunk)[300](index=300&type=chunk) - Among trade payables to related parties, **RMB 3,913 thousand** was due to Luohe Huatai Construction and **RMB 1,417 thousand** to Xuchang Erjian[304](index=304&type=chunk) - Amounts due to controlling shareholder Heng Sheng were **RMB 11,224 thousand**, and amounts due to Mr. Li were **RMB 1,814 thousand**[305](index=305&type=chunk)[306](index=306&type=chunk) [Glossary](index=77&type=section&id=Glossary) [Definitions](index=77&type=section&id=Definitions) This section provides definitions for key terms used in the report, including Board, Directors, the Group, HK$, IPO, Listing Rules, Model Code, PRC, RMB, SFO, Stock Exchange, and the Company. - The glossary provides definitions for key terms used in the report, such as "**the Group**" referring to Hengda Holdings and its subsidiaries, and "**PRC**" referring to the People's Republic of China (excluding Taiwan, Hong Kong, and Macau SAR)[307](index=307&type=chunk)

Financial Performance - For the year ended December 31, 2023, the Group's total revenue was approximately RMB3,565.6 million, an increase of approximately 24.6% from RMB2,861.8 million in 2022[24]. - The net profit for the same period was approximately RMB36.8 million, representing a decrease of approximately 52.7% from RMB77.8 million in 2022[24]. - The gross profit for the year was approximately RMB434.2 million, an increase of approximately RMB12.8 million or 3.0% from RMB421.4 million in 2022[64]. - The gross profit margin decreased to approximately 12.2% in 2023 from 14.7% in 2022, a decline of approximately 2.5 percentage points[64]. - Profit for the year decreased by approximately RMB41.0 million, or 52.7%, from approximately RMB77.8 million in 2022 to approximately RMB36.8 million in 2023[65]. - The overall revenue from property sales accounted for approximately 99.7% of total revenue for the year, consistent with 99.6% in 2022[72]. - Rental income increased by 27.6% to RMB8.72 million from RMB6.83 million in 2022[69]. - Service income decreased by 45.6% to RMB2.67 million from RMB4.90 million in 2022[69]. - Selling and marketing expenses increased by approximately 35.6% to RMB168.5 million in 2023, attributed to enhanced promotional activities for brand building[85][89]. - Administrative expenses decreased by approximately 3.4% from RMB135.7 million in 2022 to RMB131.1 million in 2023, mainly due to reduced staff costs[86][90]. Market Conditions - The real estate market showed stable and positive development, with local governments implementing financial policies to improve financing conditions for enterprises[15]. - The financing environment for real estate enterprises improved, although cash flow remained tight for many companies[15]. - The real estate market in Henan continued to decline in 2023, with limited effects from policy optimizations on stimulating sales[45]. - The overall real estate development investment in the PRC was approximately RMB 11,091,300 million in 2023, a decrease of about 9.6% from the previous year[42]. - The total construction area of new property projects in the PRC was approximately 953.76 million sq.m., a decrease of about 20.4% compared to 2022[41]. - The total sales area of commercial properties in 2023 was approximately 1,117.35 million sq.m., representing a decline of approximately 8.5% year-on-year[43]. Corporate Governance and Social Responsibility - The Group optimized its corporate governance structure and standardized business procedures to enhance construction management and product quality[16]. - The Group donated approximately RMB 2.2 million to charity during the year, fulfilling its corporate social responsibilities[16]. - The Group was recognized as one of the "Top 10 Local Real Estate Enterprises in Henan Province" and received multiple awards for its projects at various industry seminars[19]. - The Group's commitment to innovation and effective operation aims to achieve a win-win situation for customers, society, employees, and investors[20]. - The Group has gained wide recognition from various levels of government and sectors of society as it expands its property development business and enhances corporate governance[139]. Strategic Focus and Future Outlook - The Group plans to focus on improving product quality and competitiveness through continued investment in R&D[31]. - The Group aims to enhance its risk management and control systems to ensure stable and healthy business development[31]. - Looking ahead to 2024, the Group anticipates challenges in economic recovery but aims to consolidate and uplift the economy through strategic adjustments[30]. - The group will continue to prioritize quality as the lifeline of its business and strengthen management over product quality while adjusting marketing strategies in response to policy changes[140]. - The real estate market in 2024 is expected to develop in a relatively stable manner, focusing on stability and sustainability due to policy regulation and market adjustments[138]. Operational Efficiency and Workforce - The Group's operational efficiency was enhanced through optimized management and control, leading to improved risk prevention measures[47]. - The Group's total workforce decreased to 616 employees as of December 31, 2023, down from 755 in 2022[132]. - The company has implemented an employee stock option plan since November 2018 to attract and retain suitable business development candidates[136]. Financial Position and Capital Management - As of December 31, 2023, cash and cash equivalents amounted to approximately RMB 274.8 million, an increase of 24.3% from RMB 221.1 million as of December 31, 2022[93]. - Total borrowings increased to approximately RMB 948.6 million as of December 31, 2023, up 41.0% from RMB 672.8 million in the previous year[95]. - The Group's borrowings at variable rates expose it to cash flow interest rate risk, while fixed-rate borrowings expose it to fair value interest rate risk[120]. - The Group aims to maintain a solid capital structure to reduce funding costs and may adjust dividend payments, issue new shares, or sell assets to manage capital[134]. Leadership and Management - The company has a strong leadership team with diverse backgrounds in finance, management, and corporate governance[158]. - Ms. Qi Chunfeng has been appointed as a director since May 19, 2017, and has extensive experience in financial supervision and operational management in property development in China[149]. - Mr. Wang Quan has served as a deputy chief executive officer since April 2005 and has significant experience in operational management and corporate administration[154]. - Mr. Lee Kwok Lun has over 15 years of experience in accounting, audit, corporate finance, and financial management, and is currently the chairman of the Audit Committee[158]. - Mr. Wei Jian has over 13 years of experience in asset management, business development, and financial market operations, currently serving as Managing Director of Sincerity Investment Holding Limited[162].

[Consolidated Financial Statements](index=2&type=section&id=Consolidated%20Financial%20Statements) [Consolidated Statement of Profit or Loss](index=2&type=section&id=Consolidated%20Statement%20of%20Profit%20or%20Loss) In FY2024, the company turned from profit to loss with revenue decreasing by 22.5% to RMB 2.76 billion and a net loss of RMB 264 million Key Profit or Loss Items for FY2024 | Indicator | 2024 (RMB thousands) | 2023 (RMB thousands) | YoY Change | | :--- | :--- | :--- | :--- | | Revenue | 2,762,136 | 3,565,598 | -22.5% | | Gross Profit | 123,111 | 434,203 | -71.6% | | Operating (Loss) / Profit | (160,663) | 133,728 | From profit to loss | | (Loss) / Profit for the Year | (263,971) | 36,817 | From profit to loss | | (Loss) / Profit Attributable to Owners of the Company | (270,424) | 40,944 | From profit to loss | | (Loss) / Earnings Per Share (RMB fen) | (22.54) | 3.41 | From profit to loss | [Consolidated Statement of Comprehensive Income](index=3&type=section&id=Consolidated%20Statement%20of%20Comprehensive%20Income) Total comprehensive expense for the year was RMB 264 million, consistent with the net loss, indicating no other significant comprehensive items - Total comprehensive expense for the year was **RMB 264 million**, matching the net loss, indicating no other significant gains or losses not recognized in the profit or loss statement[5](index=5&type=chunk) [Consolidated Statement of Financial Position](index=4&type=section&id=Consolidated%20Statement%20of%20Financial%20Position) As of end-2024, total assets decreased by 13.1% to RMB 7.90 billion, and total equity by 14.2% to RMB 1.59 billion, with persistent short-term borrowing pressure Key Balance Sheet Items as of End-2024 | Indicator | 2024 (RMB thousands) | 2023 (RMB thousands) | YoY Change | | :--- | :--- | :--- | :--- | | Total Assets | 7,896,525 | 9,085,205 | -13.1% | | Total Liabilities | 6,302,455 | 7,227,164 | -12.8% | | Total Equity | 1,594,070 | 1,858,041 | -14.2% | | Net Current Assets | 1,674,036 | 1,772,534 | -5.6% | | Cash and Cash Equivalents | 253,342 | 274,808 | -7.8% | - The company's core asset, 'Properties held for sale or under development', decreased from **RMB 7.52 billion** to **RMB 6.60 billion**, reflecting the impact of property sales and value impairment[6](index=6&type=chunk) - Of total borrowings, current liabilities due within one year amounted to **RMB 647 million**, accounting for **60.8%** of total borrowings, indicating short-term repayment pressure[7](index=7&type=chunk)[64](index=64&type=chunk) [Notes to the Financial Statements](index=6&type=section&id=Notes%20to%20the%20Financial%20Statements) [Basis of Preparation and Going Concern](index=6&type=section&id=2%20Basis%20of%20Preparation) Auditors highlighted material uncertainty regarding going concern due to annual loss, low cash, high short-term liabilities, and potential financial guarantee outflows - The auditor's report highlighted significant doubts about the company's going concern ability, primarily due to: an annual loss of approximately **RMB 264 million**, cash and equivalents of only **RMB 253 million**, short-term borrowings of **RMB 647 million** due within the next 12 months, and potential cash outflows of approximately **RMB 6.84 billion** from financial guarantees[11](index=11&type=chunk)[89](index=89&type=chunk) - Management plans to implement four measures to address liquidity risks: 1. Actively adjust sales and pre-sale activities to accelerate cash collection 2. Negotiate payment arrangements with major contractors and suppliers 3. Actively communicate with banks to obtain project loans or discuss better repayment plans 4. Obtain written funding commitments from related parties and non-controlling shareholders, who will not demand repayment of approximately **RMB 47.12 million** in payables[13](index=13&type=chunk) [Revenue and Segment Information](index=10&type=section&id=4%20Revenue) 2024 total revenue was RMB 2.76 billion, dominated by property sales, with all revenue and non-current assets originating from China 2024 Revenue Breakdown | Revenue Source | 2024 (RMB thousands) | 2023 (RMB thousands) | | :--- | :--- | :--- | | Property Sales | 2,746,959 | 3,554,210 | | Service Income | 5,371 | 2,668 | | Rental Income | 9,806 | 8,720 | | **Total** | **2,762,136** | **3,565,598** | - The Group's business is highly concentrated, primarily engaged in property development in China, thus no operating segments are identified. All revenue and non-current assets are located in China[20](index=20&type=chunk) [Earnings per Share and Dividends](index=13&type=section&id=11%20Earnings%20per%20Share) Basic and diluted loss per share for 2024 was RMB 22.54 fen, a turn from prior year's profit, with no dividend recommended - Basic and diluted loss per share was **RMB 22.54 fen**, compared to a profit of **RMB 3.41 fen** in the prior year[24](index=24&type=chunk) - The Board did not recommend any dividend for the year 2024[25](index=25&type=chunk) [Capital Commitments and Contingent Liabilities](index=15&type=section&id=17%20Commitments) As of end-2024, the Group had RMB 840 million in capital commitments and significant contingent liabilities including mortgage and shareholder loan guarantees - Total capital expenditures committed but not yet incurred by the Group amounted to **RMB 842 million**, primarily for properties under development for sale[32](index=32&type=chunk) - The Group has several contingent liabilities, including: - Mortgage loan guarantees provided to homebuyers - Guarantees for the repayment of a shareholder loan of approximately **RMB 229 million** for an associate - Pledges of investment properties and properties under development for third-party borrowings of approximately **RMB 101 million**[68](index=68&type=chunk)[69](index=69&type=chunk) [Management Discussion and Analysis](index=16&type=section&id=Management%20Discussion%20and%20Analysis) [Chairman's Statement](index=16&type=section&id=Chairman's%20Statement) The Chairman's Statement highlights 2024 as a challenging year, with focus on 'ensuring timely delivery' and utilizing financing mechanisms, expecting market stabilization in 2025 - Facing industry difficulties, the company prioritized 'ensuring timely delivery of properties' as its primary social responsibility[34](index=34&type=chunk) - The company actively utilized the real estate financing coordination mechanism, ensuring all 'white list' projects were approved to alleviate funding pressure[34](index=34&type=chunk) - Looking ahead to 2025, the company believes policy support is expected to stabilize the market, and it will focus on project delivery, quality services, and integration of the entire industry chain resources[40](index=40&type=chunk) [Industry Review](index=19&type=section&id=Industry%20Review) The report reviews the severe downturn in China's and Henan's real estate markets in 2024, with significant declines across key indicators despite policy support Key National Real Estate Market Data Changes in 2024 | Indicator | YoY Change | | :--- | :--- | | Real Estate Development Investment | -10.6% | | New Construction Starts Area | -23.0% | | Completed Construction Area | -27.7% | Key Henan Province Real Estate Market Data Changes in 2024 | Indicator | YoY Change | | :--- | :--- | | Real Estate Development Investment | -7.5% | | Completed Construction Area | -44.5% | | New Commercial Property Sales Area | -11.0% | | New Commercial Property Sales Value | -13.8% | [Business Overview](index=20&type=section&id=Business%20Overview) In 2024, the Group achieved RMB 1.87 billion in contracted sales, a 29.1% decrease, with a land bank of 3.03 million sqm primarily in Xuchang - In 2024, the Group's cumulative contracted sales amounted to approximately **RMB 1.87 billion**, with a contracted sales area of approximately **324 thousand square meters**[48](index=48&type=chunk) - As of end-2024, the Group's total land bank was approximately **3.03 million square meters**, primarily concentrated in various districts and counties under Xuchang City, Henan Province[49](index=49&type=chunk) 2024 Contracted Sales Performance | Indicator | 2024 | 2023 | YoY Change | | :--- | :--- | :--- | :--- | | Contracted Sales Value (RMB millions) | 1,867.9 | 2,634.2 | -29.1% | | Contracted Sales Area (square meters) | 323,710 | 437,621 | -26.0% | | Average Selling Price (RMB per square meter) | 5,608 | 5,822 | -3.7% | [Financial Review](index=24&type=section&id=Financial%20Review) FY2024 saw significant financial deterioration with revenue down 22.5%, gross margin plummeting, and gearing ratio rising to 66.8%, intensifying financial risks Financial Performance Summary | Indicator | 2024 | 2023 | Change | | :--- | :--- | :--- | :--- | | Revenue (RMB millions) | 2,762.1 | 3,565.6 | -22.5% | | Gross Profit (RMB millions) | 123.1 | 434.2 | -71.6% | | Gross Profit Margin | 4.5% | 12.2% | -7.7 percentage points | | (Loss) / Profit for the Year (RMB millions) | (264.0) | 36.8 | -817.4% | - Property sales gross profit margin decreased from **12.0%** in 2023 to **4.2%** in 2024, primarily due to the residential property sales gross profit margin falling from **12.8%** to **4.7%**[56](index=56&type=chunk)[57](index=57&type=chunk) Key Financial Ratios | Ratio | 2024 | 2023 | | :--- | :--- | :--- | | Return on Assets | -3.1% | 0.4% | | Return on Equity | -15.3% | 2.0% | | Gearing Ratio | 66.8% | 51.1% | | Debt-to-Equity Ratio | 50.9% | 36.3% | [Key Risk Factors](index=31&type=section&id=Key%20Risk%20Factors) Main risks include high reliance on Henan's property market, intense competition, macroeconomic impacts, and interest/exchange rate fluctuations - Business is highly dependent on the property market performance in Xuchang City and Henan Province, making it susceptible to local economic, policy, and market supply-demand changes[72](index=72&type=chunk) - The real estate market is highly competitive, and the company faces challenges in land acquisition, brand recognition, pricing, and design quality[72](index=72&type=chunk) - The Group faces interest rate risk (primarily from borrowings) and foreign exchange risk (primarily from HKD bank deposits), but currently has no hedging policy in place[73](index=73&type=chunk) [Future Outlook](index=33&type=section&id=Future%20Outlook) For 2025, the Group anticipates market stabilization, focusing on flexible sales, efficient fund management, strategic land acquisition, and high-quality project development - Sales Strategy: Focus on accelerating sales of commercial properties and parking spaces, and expanding customer reach through online and offline integration[81](index=81&type=chunk) - Fund Management: Fully utilize government stimulus policies to shorten subscription, signing, and cash collection cycles, reducing capital tie-up[81](index=81&type=chunk) - Development Strategy: Adhere to the strategy of 'deepening presence in Henan, intensive cultivation in Xuchang', steadily acquiring new land reserves guided by market demand and profit[82](index=82&type=chunk) [Other Important Matters](index=34&type=section&id=Other%20Important%20Matters) [Suspension of Trading and Resumption Guidance](index=36&type=section&id=Suspension%20of%20Trading%20and%20Resumption%20Guidance) Shares suspended since April 2, 2024, with Stock Exchange requiring independent investigation, management integrity proof, internal control review, and outstanding financial results for resumption - The company's shares have been suspended from trading since **April 2, 2024**, pending fulfillment of the Stock Exchange's resumption guidance[92](index=92&type=chunk) - The core requirements of the Stock Exchange's resumption guidance include: an independent investigation into prepayment issues, demonstration of management integrity, an independent internal control review, publication of all outstanding financial results, and demonstration of compliance with Listing Rule 13.24 (sufficient business operations or assets)[94](index=94&type=chunk)[99](index=99&type=chunk) - The company's former auditor, PricewaterhouseCoopers, has resigned, and the new auditor is Evergreen (Hong Kong) CPA Limited[93](index=93&type=chunk)[97](index=97&type=chunk)

[Financial Statements](index=2&type=section&id=Financial%20Statements) [Unaudited Condensed Consolidated Statement of Profit or Loss](index=2&type=section&id=Unaudited%20Condensed%20Consolidated%20Statement%20of%20Profit%20or%20Loss) For the six months ended June 30, 2024, the company's revenue slightly decreased, gross profit significantly declined, and it reported a net loss of RMB 36.1 million, reversing from a profit in the prior year | Indicator | H1 2024 (RMB thousands) | H1 2023 (RMB thousands) | YoY Change | | :--- | :--- | :--- | :--- | | Revenue | 1,467,599 | 1,488,151 | -1.4% | | Gross Profit | 139,051 | 259,227 | -46.3% | | Operating Profit | 13,216 | 131,773 | -89.9% | | (Loss)/Profit for the Period | (36,099) | 69,176 | Reversed to Loss | | (Loss)/Profit Attributable to Owners of the Company | (50,718) | 60,763 | Reversed to Loss | | (Loss)/Earnings Per Share (RMB cents) | (4.23) | 5.06 | Reversed to Loss | [Unaudited Condensed Consolidated Statement of Comprehensive Income](index=3&type=section&id=Unaudited%20Condensed%20Consolidated%20Statement%20of%20Comprehensive%20Income) For the six months ended June 30, 2024, the company reported total comprehensive expenses of RMB 36.1 million, aligning with the period's net loss, a reversal from comprehensive income in the prior year | Item | H1 2024 (RMB thousands) | H1 2023 (RMB thousands) | | :--- | :--- | :--- | | (Loss)/Profit and Total Comprehensive (Expense)/Income for the Period | (36,099) | 69,176 | | Total Comprehensive (Expense)/Income Attributable to Owners of the Company | (50,718) | 60,763 | [Unaudited Condensed Consolidated Statement of Financial Position](index=4&type=section&id=Unaudited%20Condensed%20Consolidated%20Statement%20of%20Financial%20Position) As of June 30, 2024, total assets and liabilities decreased, total equity slightly declined, and cash and cash equivalents reduced while bank borrowings increased | Balance Sheet Item | June 30, 2024 (RMB thousands) | Dec 31, 2023 (RMB thousands) | Change | | :--- | :--- | :--- | :--- | | **Assets** | | | | | Total Assets | 8,333,641 | 9,085,205 | -8.3% | | Of which: Cash and Cash Equivalents | 238,467 | 274,808 | -13.2% | | Of which: Properties Held for Sale or Under Development | 6,956,459 | 7,521,685 | -7.5% | | **Liabilities** | | | | | Total Liabilities | 6,511,699 | 7,227,164 | -9.9% | | Of which: Bank Borrowings (Current + Non-current) | 670,910 | 415,400 | +61.5% | | Of which: Contract Liabilities | 3,382,407 | 3,956,814 | -14.5% | | **Equity** | | | | | Total Equity | 1,821,942 | 1,858,041 | -1.9% | [Notes to the Financial Statements](index=6&type=section&id=Notes%20to%20the%20Financial%20Statements) [Basis of Preparation and Going Concern](index=6&type=section&id=2%20Basis%20of%20Preparation) The financial statements' basis of preparation has significant uncertainty due to the company's reported loss, low cash, substantial short-term debt, and potential guarantee-related outflows, raising material doubts about its going concern ability - The Group incurred a loss of approximately **RMB 36.1 million** during the reporting period, with cash and cash equivalents of only approximately **RMB 238.5 million**[14](index=14&type=chunk) - The Group faces approximately **RMB 6.13 billion** in current liabilities, including **RMB 749 million** in bank and other borrowings due within one year, approximately **RMB 948 million** in capital commitments, and potential cash outflows of approximately **RMB 6.74 billion** from financial guarantees[14](index=14&type=chunk) - Management's mitigating actions include actively adjusting sales, negotiating payment terms with suppliers, communicating with banks for financing, and securing funding support commitments from related parties and non-controlling shareholders[14](index=14&type=chunk) [Revenue Analysis](index=9&type=section&id=4%20Revenue) Total revenue for H1 2024 slightly decreased to RMB 1.468 billion, primarily driven by property sales which declined, while service income saw substantial growth from a small base, with all revenue sourced from China | Revenue Source | H1 2024 (RMB thousands) | H1 2023 (RMB thousands) | YoY Change | | :--- | :--- | :--- | :--- | | Sales of Properties | 1,457,879 | 1,481,189 | -1.6% | | Service Income | 4,951 | 1,365 | +262.7% | | Rental Income | 4,769 | 5,597 | -14.8% | | **Total** | **1,467,599** | **1,488,151** | **-1.4%** | - The vast majority of revenue (**RMB 1.458 billion**) is recognized at a point in time, primarily corresponding to the delivery and recognition of property sales[20](index=20&type=chunk) [Key Asset and Liability Items](index=13&type=section&id=12%20Properties%20Held%20for%20Sale%20or%20Under%20Development) As of June 30, 2024, the net book value of properties held for sale or under development decreased, alongside reductions in trade payables and contract liabilities, reflecting slower market activity and project delivery | Item | June 30, 2024 (RMB thousands) | Dec 31, 2023 (RMB thousands) | | :--- | :--- | :--- | | Properties Under Development for Sale | 4,796,537 | 5,295,466 | | Properties Held for Sale | 2,430,856 | 2,439,482 | | Less: Provision | (270,934) | (213,263) | | **Net Book Value** | **6,956,459** | **7,521,685** | - Total trade payables amounted to **RMB 1.32 billion**, with approximately **70% (RMB 925 million)** due within one year[31](index=31&type=chunk) - Contract liabilities (primarily pre-received property payments) decreased from **RMB 3.96 billion** at the beginning of the year to **RMB 3.38 billion**, to be recognized as revenue upon future transfer of property control[34](index=34&type=chunk) - Capital commitments for properties under development for sale amounted to **RMB 948 million**, a significant reduction from **RMB 1.334 billion** at the beginning of the year[35](index=35&type=chunk) [Management Discussion and Analysis](index=17&type=section&id=Management%20Discussion%20and%20Analysis) [Industry Review and Business Overview](index=17&type=section&id=Industry%20Review) In H1 2024, China's and Henan's real estate markets faced continued pressure with declining indicators, prompting the Group to focus on property delivery and inventory reduction, successfully completing 259,000 square meters of deliveries - In H1 2024, national real estate development investment decreased by **10.1%** year-on-year, and sales of new commercial properties declined by **25.0%**; Henan Province's real estate development investment decreased by **9.1%** year-on-year, with new commercial property sales down **22.6%**[36](index=36&type=chunk) - The Group's core tasks are "ensuring property delivery" and "reducing inventory," having completed planned deliveries of approximately **259,000 square meters** in the first half[38](index=38&type=chunk) - As of June 30, 2024, the Group's land reserve had a gross floor area of approximately **3.2 million square meters**[40](index=40&type=chunk) [Contracted Sales Performance](index=20&type=section&id=Contracted%20Sales) In H1 2024, the Group's total contracted sales significantly decreased by 46.8% to RMB 839.4 million, with residential sales dropping sharply and average selling prices declining due to market conditions | Contracted Sales | H1 2024 | H1 2023 | YoY Change | | :--- | :--- | :--- | :--- | | **Sales Value (RMB millions)** | | | | | Residential Units | 673.4 | 1,313.2 | -48.7% | | Commercial Units | 138.4 | 214.4 | -35.4% | | **Total** | **839.4** | **1,578.4** | **-46.8%** | | **Average Selling Price** | | | | | Saleable GFA (RMB/sqm) | 5,671 | 5,968 | -5.0% | | Parking Spaces (RMB/unit) | 38,114 | 47,442 | -19.7% | [Financial Performance Review](index=21&type=section&id=Financial%20Review) In H1 2024, the company faced severe financial challenges, reporting a net loss of RMB 36.1 million due to a significant 46.3% decline in gross profit and a reduced gross profit margin, despite a slight revenue decrease [Overall Performance](index=21&type=section&id=Overall%20Performance) In H1 2024, the Group's revenue slightly decreased, gross profit sharply declined by 46.3% with a reduced margin, resulting in a net loss of RMB 36.1 million | Financial Indicator | H1 2024 | H1 2023 | YoY Change | | :--- | :--- | :--- | :--- | | Revenue (RMB millions) | 1,467.6 | 1,488.2 | -1.4% | | Gross Profit (RMB millions) | 139.1 | 259.2 | -46.3% | | Gross Profit Margin | 9.5% | 17.4% | -7.9 percentage points | | Net (Loss)/Profit (RMB millions) | (36.1) | 69.2 | Reversed to Loss | [Revenue and Gross Profit Analysis](index=21&type=section&id=Gross%20Profit%20and%20Gross%20Profit%20Margin) Property sales, the core revenue source, declined, and gross profit margins for both residential and commercial properties significantly deteriorated due to lower average selling prices and increased costs | Property Type | H1 2024 Gross Profit Margin | H1 2023 Gross Profit Margin | | :--- | :--- | :--- | | Residential | 8.5% | 18.4% | | Commercial | 7.5% | 16.1% | | **Total Property Sales** | **9.1%** | **17.2%** | - The primary reasons for the decline in gross profit margin were the decrease in average selling prices of delivered residential properties and increased costs for commercial properties[48](index=48&type=chunk) [Expenses and Taxation](index=24&type=section&id=Selling%20and%20Marketing%20Expenses) Selling and marketing expenses decreased by 17.8% to RMB 58.1 million, administrative expenses remained stable, and income tax expense declined by 21.5% due to reduced gross profit - Selling and marketing expenses decreased by **17.8%** year-on-year, primarily due to reduced advertising and promotional costs and sales agent commissions[51](index=51&type=chunk) - Administrative expenses slightly increased by **0.7%** year-on-year to **RMB 56.6 million**[52](index=52&type=chunk) - Income tax expense decreased by **21.5%** year-on-year to **RMB 49.2 million**, primarily due to reduced gross profit[55](index=55&type=chunk) [Liquidity and Capital Resources](index=25&type=section&id=Liquidity%2C%20Financial%20Resources%20and%20Capital%20Resources) As of June 30, 2024, the Group's liquidity was tight, with reduced cash, increased borrowings, and significantly higher gearing and debt-to-equity ratios, leading the Board to conserve cash by not declaring an interim dividend | Indicator | June 30, 2024 (RMB millions) | Dec 31, 2023 (RMB millions) | | :--- | :--- | :--- | | Cash and Cash Equivalents | 238.5 | 274.8 | | Total Borrowings | 1,092.0 | 948.6 | | - Due within one year | 748.5 | 678.6 | | Key Financial Ratios | June 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Current Ratio | 1.3 | 1.3 | | Gearing Ratio | 59.9% | 51.1% | | Debt-to-Equity Ratio | 46.8% | 36.3% | - The increase in the gearing ratio was primarily due to new borrowings obtained during the period[65](index=65&type=chunk) - The Board does not recommend the payment of an interim dividend[66](index=66&type=chunk) [Principal Risk Factors](index=28&type=section&id=Principal%20Risk%20Factors) The Group faces multiple risks, including high geographical concentration in Henan, intense market competition, interest rate fluctuations, macroeconomic and policy uncertainties, and potential impacts from force majeure events - Business is highly dependent on the property market performance in Henan Province (especially Xuchang City), making it susceptible to local economic conditions, policies, and market supply-demand dynamics[63](index=63&type=chunk) - The real estate market is highly competitive, with competition from large national and local developers in land acquisition, funding, branding, and other aspects[63](index=63&type=chunk) - The Group faces interest rate fluctuation risk, as floating-rate borrowings expose it to cash flow interest rate risk, with no hedging activities undertaken[64](index=64&type=chunk) [Outlook](index=30&type=section&id=Outlook) Management anticipates continued real estate market pressure in H2, but expects gradual stabilization with policy support, focusing on strict fund management, marketing innovation, and integrating environmental considerations to ensure sustainable operations - New home sales are expected to see a narrower year-on-year decline in the second half, but the market remains in a downturn, requiring time for confidence to recover[71](index=71&type=chunk) - The Group's top priority for the second half is strict monitoring of fund allocation management to ensure efficient fund utilization and stable cash flow[71](index=71&type=chunk) - The Group will intensify marketing strategy innovation and integrate environmental protection and carbon neutrality concepts into design and construction to enhance competitiveness and fulfill social responsibility[71](index=71&type=chunk)[72](index=72&type=chunk) [Other Information](index=31&type=section&id=Other%20Information) [Events After the Reporting Period](index=31&type=section&id=Events%20After%20the%20Reporting%20Period) Post-reporting period, the company's shares were suspended from trading on April 2, 2024, pending fulfillment of resumption guidance including an independent investigation, and a new auditor was appointed following the resignation of the previous one - The company's shares have been suspended from trading on the Stock Exchange since **April 2, 2024**, and will remain suspended[73](index=73&type=chunk) - The Stock Exchange has issued resumption guidance, requiring the company to conduct an independent investigation into advance payment issues, demonstrate management integrity, conduct an internal control review, and publish all outstanding financial results, among other requirements[75](index=75&type=chunk)[80](index=80&type=chunk) - Former auditor PricewaterhouseCoopers resigned on **August 9, 2024**, and Evergreen (Hong Kong) CPA Limited was appointed as the new auditor on **September 25, 2024**[74](index=74&type=chunk)[78](index=78&type=chunk) [Corporate Governance](index=33&type=section&id=Corporate%20Governance) The company emphasizes corporate transparency and accountability, with the Board confirming compliance with corporate governance codes and the interim financial report reviewed by the Audit Committee but not audited by the company's auditor - The Board believes the company has complied with all applicable code provisions contained in Appendix C1 of the Listing Rules on Corporate Governance Code[81](index=81&type=chunk) - The interim financial statements have been reviewed by the Audit Committee but have not been audited or reviewed by the company's auditor[84](index=84&type=chunk)[85](index=85&type=chunk)

[Financial Statements Summary](index=2&type=section&id=Financial%20Statements) In 2023, revenue grew 24.6% to RMB 3.57 billion, but net profit sharply declined 52.7% to RMB 36.82 million, with significant short-term debt raising going concern uncertainties [Consolidated Statement of Profit or Loss](index=2&type=section&id=Consolidated%20Statement%20of%20Profit%20or%20Loss) In 2023, revenue increased 24.6% to RMB 3.57 billion, but gross profit only grew 3.0%, while profit for the year plummeted 52.7% to RMB 36.82 million due to increased expenses and taxes 2023 Consolidated Statement of Profit or Loss Key Data | Indicator | 2023 (RMB Thousands) | 2022 (RMB Thousands) | YoY Change | | :--- | :--- | :--- | :--- | | Revenue | 3,565,598 | 2,861,771 | +24.6% | | Gross Profit | 434,203 | 421,376 | +3.0% | | Operating Profit | 133,728 | 154,409 | -13.4% | | Profit for the Year | 36,817 | 77,769 | -52.7% | | Profit Attributable to Owners of the Company | 40,944 | 84,812 | -51.7% | | Basic and Diluted Earnings Per Share (RMB Cents) | 3.41 | 7.07 | -51.8% | [Consolidated Statement of Financial Position](index=4&type=section&id=Consolidated%20Statement%20of%20Financial%20Position) As of 2023 year-end, total assets decreased 9.4% to RMB 9.09 billion, and total liabilities decreased 11.4% to RMB 7.23 billion, with significant liquidity pressure due to high current liabilities and low cash balances 2023 Year-End Consolidated Statement of Financial Position Key Data | Indicator | 2023 (RMB Thousands) | 2022 (RMB Thousands) | YoY Change | | :--- | :--- | :--- | :--- | | Total Assets | 9,085,205 | 10,029,496 | -9.4% | | Total Liabilities | 7,227,164 | 8,156,029 | -11.4% | | Total Equity | 1,858,041 | 1,873,467 | -0.8% | | Net Current Assets | 1,772,534 | 1,814,111 | -2.3% | | Cash and Cash Equivalents | 274,808 | 221,059 | +24.3% | [Summary of Notes to Financial Statements](index=6&type=section&id=Notes%20to%20Financial%20Statements) Notes reveal significant going concern uncertainties due to low cash, substantial short-term debt, and high financial guarantees, alongside details on revenue, dividends, EPS, and post-reporting period events [Going Concern Ability](index=7&type=section&id=Going%20Concern%20Ability) The report highlights significant going concern uncertainties due to low cash, high short-term debt, and substantial financial guarantees, despite management's mitigating actions and assessment of appropriate financial statement preparation - Significant uncertainties exist that may cast substantial doubt on the Group's ability to continue as a going concern, primarily due to[11](index=11&type=chunk) - Cash and cash equivalents of approximately **RMB 275 million**, while bank and other borrowings due within the next twelve months amount to **RMB 679 million**[11](index=11&type=chunk) - Potential cash outflows of approximately **RMB 7.19 billion** from financial guarantees provided[11](index=11&type=chunk) - Capital commitments for properties under development and land use rights of approximately **RMB 1.33 billion**[11](index=11&type=chunk) - Management's mitigating measures include[13](index=13&type=chunk) - Actively adjusting sales and pre-sale activities to monitor cash collection[13](index=13&type=chunk) - Negotiating payment arrangements with major contractors and suppliers[13](index=13&type=chunk) - Proactively communicating with financial institutions to secure project development loans or better repayment schedules[13](index=13&type=chunk) - Obtaining written commitments for financial support from related parties and non-controlling shareholders, who will not demand repayment of approximately **RMB 98.84 million**[13](index=13&type=chunk) [Revenue and Segment Information](index=10&type=section&id=Revenue%20and%20Segment%20Information) In 2023, total revenue was RMB 3.57 billion, predominantly from property sales (99.7%), with all revenue and non-current assets originating from China, leading to a single reporting segment 2023 Revenue Composition | Revenue Source | 2023 (RMB Thousands) | 2022 (RMB Thousands) | Proportion (2023) | | :--- | :--- | :--- | :--- | | Property Sales | 3,554,210 | 2,850,035 | 99.7% | | Rental Income | 8,720 | 6,832 | 0.2% | | Service Income | 2,668 | 4,904 | 0.1% | | **Total** | **3,565,598** | **2,861,771** | **100.0%** | - The Group primarily engages in a single business in China, property development, thus management reviews operations as one reporting segment, and no segment information is presented[21](index=21&type=chunk) - All of the Group's revenue is derived from China, and all non-current assets are located in China[22](index=22&type=chunk) [Dividends and Earnings Per Share](index=13&type=section&id=Dividends%20and%20Earnings%20Per%20Share) The Board recommends no dividend for 2023, with basic and diluted EPS significantly declining from RMB 7.07 cents to RMB 3.41 cents due to lower profit, and diluted EPS equaling basic EPS - The Board does not recommend the payment of any dividend for the year ended December 31, 2023[30](index=30&type=chunk)[44](index=44&type=chunk) Earnings Per Share | Indicator | 2023 | 2022 | | :--- | :--- | :--- | | Profit Attributable to Owners of the Company (RMB Thousands) | 40,944 | 84,812 | | Weighted Average Number of Ordinary Shares in Issue (Thousands of Shares) | 1,200,000 | 1,200,000 | | Basic and Diluted Earnings Per Share (RMB Cents) | 3.41 | 7.07 | [Post-Reporting Period Events (Notes)](index=16&type=section&id=Post-Reporting%20Period%20Events%20(Notes)) Post-reporting period, the Group sold its 41% equity in Xuchang Hengzhu for zero consideration in April 2024, incurring no gain or loss, and also early repaid RMB 90 million in other long-term borrowings to reduce interest expenses - On April 17, 2024, the Group disposed of its **41%** equity interest in associate Xuchang Hengzhu to the controlling shareholder for zero consideration, ceasing to be an associate of the Group[38](index=38&type=chunk) - In April 2024, the Group early repaid other long-term borrowings of **RMB 90 million** to reduce interest expenses[39](index=39&type=chunk) [Management Discussion and Analysis](index=17&type=section&id=Management%20Discussion%20and%20Analysis) Management reports 2023 revenue growth of 24.6% despite a weak property market, but profit sharply declined 52.7% due to price drops and cost increases, with heightened financial risk from a significantly increased leverage ratio [Chairman's Report](index=17&type=section&id=Chairman%27s%20Report) The Chairman's report highlights the Group's focus on sales in a challenging 2023 property market, achieving 24.6% revenue growth but a 52.7% net profit decline, with plans for market refinement and financial efficiency in 2024 - In 2023, the Group prioritized sales, increasing marketing incentives and assessments, achieving relatively good results among local property developers[41](index=41&type=chunk) 2023 Annual Performance Summary | Indicator | 2023 | 2022 | YoY Change | | :--- | :--- | :--- | :--- | | Total Revenue | Approx. **RMB 3,565.6 million** | Approx. **RMB 2,861.8 million** | +24.6% | | Net Profit | Approx. **RMB 36.8 million** | Approx. **RMB 77.8 million** | -52.7% | - Looking ahead to 2024, the Group will address challenges by coordinating fund allocation, deepening product R&D, adjusting marketing strategies, and improving risk management systems[46](index=46&type=chunk) [Industry Review and Business Overview](index=21&type=section&id=Industry%20Review%20and%20Business%20Overview) The 2023 property market saw declines in investment and sales, yet the Group achieved 23.5% growth in contracted sales to RMB 2.63 billion, holding 3.5 million sqm of land reserves primarily in Xuchang, despite a drop in average selling price - In 2023, national real estate development investment decreased by **9.6%**, new housing starts by **20.4%**, and commercial housing sales by **8.5%**, indicating a deep market adjustment period[49](index=49&type=chunk)[50](index=50&type=chunk) 2023 Contract Sales Performance | Indicator | 2023 | 2022 | YoY Change | | :--- | :--- | :--- | :--- | | Contract Sales Value (RMB Millions) | 2,634.2 | 2,132.3 | +23.5% | | Contracted Saleable GFA (Square Meters) | 437,621 | 337,623 | +29.6% | | Average Selling Price per Saleable GFA (RMB/Square Meter) | 5,822 | 6,152 | -5.4% | - As of December 31, 2023, the Group's total land bank amounted to approximately **3.5 million square meters** of GFA, primarily located in Xuchang City (**98.19%**)[54](index=54&type=chunk) [Financial Review](index=25&type=section&id=Financial%20Review) Revenue grew 24.6% due to increased confirmed GFA, but gross margin fell from 14.7% to 12.2% due to lower property ASP and negative margins on parking/storage, while sales expenses and income tax rose, and the leverage ratio significantly increased to 51.1% - Revenue increased by **24.6%** to **RMB 3.57 billion**, primarily due to an increase in recognized GFA of residential properties from **439,000 square meters** to **605,000 square meters**[60](index=60&type=chunk) - Gross profit margin decreased from **14.7%** to **12.2%**, mainly due to lower gross profit margin for residential properties and a negative gross profit margin of **-66.8%** on sales of parking spaces and storage rooms[57](index=57&type=chunk)[62](index=62&type=chunk)[63](index=63&type=chunk) - As of 2023 year-end, total borrowings increased to **RMB 949 million** (2022: RMB 673 million), with **RMB 679 million** classified as current liabilities due within one year[69](index=69&type=chunk)[70](index=70&type=chunk) Key Financial Ratios | Ratio | 2023 | 2022 | | :--- | :--- | :--- | | Return on Assets (ROA) | 0.4% | 0.8% | | Return on Equity (ROE) | 2.0% | 4.2% | | Leverage Ratio | 51.1% | 35.9% | | Debt-to-Equity Ratio | 36.3% | 24.1% | [Key Risk Factors](index=32&type=section&id=Key%20Risk%20Factors) The company faces significant risks including high geographical concentration in Henan Province, intense market competition from other developers, and interest rate risk from floating-rate borrowings without hedging policies - Geographical concentration risk: All projects are located in China's Henan Province, making business performance highly dependent on the property market in Xuchang City and Henan Province[78](index=78&type=chunk) - Market competition risk: Facing intense competition from large national and local developers in land acquisition, financial resources, brand recognition, and pricing[79](index=79&type=chunk) - Interest rate risk: Borrowings bearing floating interest rates expose the Group to cash flow interest rate risk, and the company has no hedging policy[79](index=79&type=chunk) [Human Resources](index=34&type=section&id=Human%20Resources) As of 2023 year-end, the Group had 616 employees, a decrease from 755 in 2022, with compensation policies reviewed by the Remuneration Committee, and benefits including medical and social insurance, alongside a share option scheme - As of December 31, 2023, the Group had a total of **616** employees, a decrease from **755** in the previous year[86](index=86&type=chunk) - The company has a Remuneration Committee to determine directors' remuneration and provides employees with medical insurance, social insurance, and other benefits, along with a share option scheme for incentives[86](index=86&type=chunk)[87](index=87&type=chunk) [Corporate Governance and Other Information](index=36&type=section&id=Corporate%20Governance%20and%20Other%20Information) This section reveals severe governance and operational challenges, including a qualified auditor's opinion on going concern, share trading suspension since April 2024, auditor resignation, and stringent HKEX resumption guidance indicating internal control and management integrity issues [Auditor's Opinion on Material Uncertainty Related to Going Concern](index=37&type=section&id=Auditor%27s%20Opinion%20on%20Material%20Uncertainty%20Related%20to%20Going%20Concern) The auditor's report highlights a material uncertainty regarding the Group's going concern ability due to low cash, significant short-term debt, and potential financial guarantee outflows, though their opinion remains unmodified - The auditor's report draws attention to a material uncertainty that may cast significant doubt on the Group's ability to continue as a going concern, but the auditor's opinion is not modified in respect of this matter[95](index=95&type=chunk) - Specific factors causing uncertainty include: low cash balance (approx. **RMB 275 million**), substantial short-term liabilities (borrowings due within 12 months approx. **RMB 679 million** and capital commitments approx. **RMB 1.33 billion**), and potential cash outflows from financial guarantees (approx. **RMB 7.19 billion**)[95](index=95&type=chunk) [Material Post-Reporting Period Events](index=38&type=section&id=Material%20Post-Reporting%20Period%20Events) Significant post-reporting events include share trading suspension since April 2024, the resignation of former auditor PwC and appointment of a new one, and HKEX resumption guidance requiring independent investigations and internal control reviews - The Company's shares have been suspended from trading on the Stock Exchange since **9:00 a.m. on April 2, 2024**, and will remain suspended[99](index=99&type=chunk) - Former auditor PricewaterhouseCoopers has resigned, and Evergreen (Hong Kong) CPA Limited has been appointed as the new auditor[100](index=100&type=chunk)[104](index=104&type=chunk) - The Stock Exchange has issued resumption guidance requiring the Company to[101](index=101&type=chunk)[107](index=107&type=chunk) - Conduct an independent investigation into prepayment issues[101](index=101&type=chunk)[107](index=107&type=chunk) - Demonstrate management's integrity[101](index=101&type=chunk)[107](index=107&type=chunk) - Conduct an independent internal control review[101](index=101&type=chunk)[107](index=107&type=chunk) - Publish all outstanding financial results[101](index=101&type=chunk)[107](index=107&type=chunk) - Demonstrate compliance with Listing Rule **13.24**[101](index=101&type=chunk)[107](index=107&type=chunk) - Inform the market of all material information[101](index=101&type=chunk)[107](index=107&type=chunk) [Continued Suspension of Trading](index=40&type=section&id=Continued%20Suspension%20of%20Trading) The company's shares remain suspended from trading on the Hong Kong Stock Exchange since April 2, 2024, and will continue until further notice, with a caution to shareholders and potential investors - The Company's shares have been suspended from trading since **April 2, 2024**, and will remain suspended until further notice[109](index=109&type=chunk)

Sales Performance - In the first half of 2023, the Group's contracted sales amounted to approximately RMB1,578.4 million, with residential properties accounting for approximately RMB1,313.2 million and commercial properties for approximately RMB214.4 million[17]. - For the six months ended 30 June 2023, the Group's contracted sales amounted to approximately RMB1,578.4 million, representing a 77.2% increase compared to RMB890.7 million in the same period of 2022[27]. - Residential units contributed RMB1,313.2 million to contracted sales, a 67.8% increase from RMB782.6 million in the previous year, while commercial units saw a significant increase of 162.7% to RMB214.4 million from RMB81.6 million[27]. - The sales of commodity housing in China amounted to approximately RMB6,309,200 million, showing an increase of approximately 1.1% year-on-year, with residential property sales increasing by approximately 3.7%[12]. - Approximately 595.15 million sq.m. of commodity housing was sold in the first half of 2023, reflecting a decrease of approximately 5.3% year-on-year[12]. - The pace of recovery in the real estate industry slowed significantly in the second quarter of 2023, leading to a decline in the Group's sales[16]. Financial Performance - The Group's revenue for the six months ended 30 June 2023 was approximately RMB1,488.2 million, a substantial increase of 214.4% from RMB473.3 million in the same period of 2022[30]. - Gross profit for the same period was approximately RMB259.2 million, reflecting a 137.8% increase from RMB109.0 million in the previous year, with a gross profit margin of 17.4%[31]. - The net profit for the period was approximately RMB69.2 million, a turnaround from a net loss of RMB22.4 million in the same period of 2022, marking an increase of approximately RMB91.6 million[32]. - For the six months ended June 30, 2023, total revenue increased by approximately RMB1,014.9 million or 214.4% to approximately RMB1,488.2 million, primarily driven by a RMB938.7 million increase in residential property sales[41]. - Profit for the six months ended June 30, 2023, was approximately RMB69.2 million, an increase of approximately RMB91.6 million compared to a loss of RMB22.4 million for the same period in 2022[47]. Market Conditions - The real estate investment in China for the first half of 2023 was RMB5,855,000 million, representing a decrease of approximately 7.9% compared to the same period last year[12]. - The new construction area in China decreased by approximately 24.3% year-on-year, totaling approximately 498.80 million sq.m.[12]. - Government policies have been implemented to stimulate consumer confidence in property ownership, including the reduction of Loan Prime Rates (LPR) by 10 basis points[13]. - The Group's real estate business experienced a short rebound due to the relaxation of regulatory and monetary policies, but overall market recovery remains slow[16]. - The real estate market in China experienced a lack of consumer confidence in the second quarter of 2023, following increased activity in the first quarter[105]. Operational Strategies - The sales strategy was adjusted with increased sales bonuses and performance assessments to encourage teams to meet sales targets[17]. - The Group plans to enhance its market presence amid intense competition from both national and local property developers in the cities where it operates[84]. - The Group will adjust marketing strategies with higher sales bonuses and performance assessments to ensure annual sales targets are met[106]. - The Group aims to enhance cash flow and capital allocation to support robust development in the second half of 2023[106]. - Continuous communication with major constructors and suppliers is being maintained to ensure timely payments and construction progress[199]. Financial Position - As of 30 June 2023, cash and cash equivalents amounted to approximately RMB160.7 million, a decrease from RMB221.1 million as of 31 December 2022[63]. - Total borrowings increased to approximately RMB999.1 million as of 30 June 2023 from RMB672.8 million as of 31 December 2022[65]. - The debt to equity ratio as of June 30, 2023, was 42.6%, compared to 24.1% as of December 31, 2022, indicating a significant increase in leverage[80]. - The gearing ratio increased to approximately 50.8%, up by 14.9 percentage points from 35.9% as of December 31, 2022, primarily due to new borrowings during the period[90]. - The Group's current ratio improved to 1.3 from 1.2 as of December 31, 2022, indicating better short-term liquidity[80]. Employee and Governance - As of June 30, 2023, the Group had a total workforce of 658 employees, down from 775 employees as of June 30, 2022, indicating a reduction of approximately 15.2%[99]. - The Group's remuneration policy for directors is reviewed periodically, considering performance and market conditions[99]. - The Group emphasizes the importance of corporate governance and has complied with all applicable code provisions as of June 30, 2023[114]. Shareholder Information - Mr. Li Xiaobing holds 855,000,000 ordinary shares, representing 71.25% of the Company's shareholding[138]. - The total number of shares available for issue under the Share Option Scheme was 120,000,000 shares, representing approximately 10% of the issued share capital of the Company[134]. - The Company has not disclosed any new product or technology developments during the reporting period[134]. - The Company has not reported any market expansion or acquisition strategies in the interim report[134]. Cash Flow and Investments - Net cash used in operating activities for the six months ended June 30, 2023, was RMB 159,016, significantly higher than RMB 81,577 for the same period in 2022, indicating a deterioration in cash flow from operations[179]. - Cash flow from financing activities generated a net cash inflow of RMB 249,704 for the six months ended June 30, 2023, compared to RMB 43,878 for the same period in 2022, showing an increase of approximately 468%[181]. - The net cash used in investing activities for the six months ended June 30, 2023, was RMB 151,017, compared to RMB 14,155 for the same period in 2022, highlighting a significant increase in cash outflow for investments[179].

香港交易及結算所有限公司及香港聯合交易所有限公司對本公告的內容概不負責，對其準確 性或完整性亦不發表任何聲明，並明確表示，概不對因本公告全部或任何部分內容而產生或 因倚賴該等內容而引致的任何損失承擔任何責任。 Ever Reach Group (Holdings) Company Limited 恒 達 集 團（ 控 股 ）有 限 公 司 （於開曼群島註冊成立的有限公司） （股份代號：3616） 截至2023年6月30日止六個月中期業績 業績 恒達集團（控股）有限公司（「本公司」）董事會（「董事會」）欣然宣佈本公司及其 附屬公司（統稱「本集團」）截至2023年6月30日止六個月的未經審核簡明綜合業 績，連同2022年同期的未經審核比較數字如下： – 1 – 未經審核簡明綜合損益表 截至2023年6月30日止六個月 | --- | --- | |-------|--------------| | | 2022年 | | | （未經審核） | | 附註 | 人民幣千元 | 收入 4 1,488,151 473,261 銷售成本 5 (1,228,924) (364,293) | --- | --- | --- | ...

Financial Performance - For the year ended December 31, 2022, the Group's total revenue was approximately RMB 2,861.8 million, representing an increase of approximately 3.4% from RMB 2,767.7 million in 2021[23]. - The net profit for the year ended December 31, 2022, was approximately RMB 77.8 million, a decrease of approximately 74.3% from RMB 303.2 million in 2021[23]. - The Board did not recommend the payment of a final dividend for the year ended December 31, 2022[24]. - Gross profit decreased by approximately RMB430.1 million, or about 50.5%, to approximately RMB421.4 million in 2022, with a gross profit margin of approximately 14.7% compared to 30.8% in 2021[70][73]. - Profit for the year decreased by approximately RMB225.4 million, or 74.3%, from approximately RMB303.2 million in 2021 to approximately RMB77.8 million in 2022[71][73]. - The total contracted sales for the Group was RMB2,132.3 million, down 50.6% from RMB4,312.1 million in 2021[66]. - Property sales amounted to approximately RMB2,850.0 million, representing a 3.5% increase from RMB2,753.4 million in 2021[75]. - Rental income increased by 28.8% to RMB6.8 million from RMB5.3 million in 2021[75]. - Service income decreased by 45.4% to RMB4.9 million from RMB9.0 million in 2021[75]. - The average selling price (ASP) for saleable GFA decreased by 8.3% to approximately RMB6,152 per square meter in 2022, primarily due to a decline in market prices in Henan Province[67]. - The average selling price (ASP) for residential properties decreased from RMB6,018 per sq.m. in 2021 to RMB5,716 per sq.m. in 2022[81]. - The ASP for commercial properties increased from RMB7,884 per sq.m. in 2021 to RMB8,840 per sq.m. in 2022, despite a 29.1% decrease in GFA recognized[82]. - The Group's return on assets decreased to 0.8% in 2022 from 3.2% in 2021, and return on equity fell to 4.2% from 18.0%[124]. - The net profit margin declined to 2.7% in 2022 compared to 11.0% in 2021[124]. Market Conditions - In 2022, the Group faced significant challenges in the real estate industry, with sales plunging due to low consumer confidence and the impact of COVID-19[12]. - The real estate industry faced significant challenges in 2022, with all aspects recording substantial declines due to market confidence issues[25]. - The real estate industry in China faced significant pressure due to the COVID-19 pandemic and a lack of confidence among homebuyers[44]. - The property market in Henan Province remains competitive, with significant competition from both national and local developers[126]. - Looking towards 2023, the economic recovery is expected to improve gradually, supported by adjustments in pandemic prevention policies and economic stabilization measures[26]. - The real estate market is expected to see positive changes in 2023 due to supportive policies, despite currently being in an adjustment stage[151][153]. Corporate Strategy and Operations - The Group's development strategy focuses on integrity management and fulfilling promises to achieve a win-win situation for customers, society, employees, and investors[19]. - The Group plans to upgrade its marketing strategy and enhance product competitiveness to clear excess inventory and improve sales[31]. - A comprehensive cost management system will be established to enhance cost control capabilities throughout the project development cycle[31]. - The Group aims to strengthen employee training programs to improve overall skills and productivity[31]. - The Group will actively explore new methods of real estate development to capture opportunities during the recovery period[32]. - The Group adjusted its marketing strategies, increasing online promotion and reducing selling costs to maximize sales potential[55]. - The Group focused on improving product quality and customer satisfaction by updating product compatibility standards and standardizing floor plans[55]. - The Group aims to stabilize its business operations and improve capital investment for different projects in collaboration with government platform companies[155][156]. - The Group will focus on ensuring quality assurance as a foundation for future development while managing project construction and market delivery progress[155][157]. - The Group's management is confident in returning to a path of stable development with the implementation of favorable policies in the real estate sector[156][157]. Corporate Social Responsibility - The Group donated approximately RMB 5.6 million to charity in 2022, fulfilling its corporate social responsibilities[13]. - The Group was recognized as one of the "200 Top Real Estate Companies in China" and received the "2022 Contribution Award for Urban Operation" at various industry summits[17]. Acquisitions and Investments - The Group established and acquired equity interests in Xuchang Hengrun Real Estate Company Limited and Xuchang Jian'an District Hengyu Industrial Company Limited in 2022[18]. - The Group increased its shareholding in Xuchang City Jian'an District Hengmu Property Company Limited from 51% to 100%[18]. - The Group acquired equity interests in several companies and increased its share ratio in one company from 51% to 100%[56]. - The Group acquired commercial and residential land in Xuchang with a gross floor area of approximately 160,000 square meters[56]. - The Group has not engaged in any material acquisitions or disposals during the year ended December 31, 2022[135]. - The Group has no current plans to acquire any material investments or capital assets outside of its ordinary property development business[136][140]. Management and Governance - Mr. LI Xiaobing has extensive experience in strategic planning and operational management in the property development business in China since joining the Group in October 2004[159]. - Mr. WANG Zhenfeng has been the chief executive officer of Xuchang Hengda since February 2013, with a strong background in financial management and corporate administration[161]. - Ms. QI Chunfeng has been a director and deputy chief executive officer of Xuchang Hengda since 2010, bringing extensive experience in financial supervision and operational management[166]. - Mr. WANG Quan has served as deputy chief executive officer since April 2005, focusing on operational management and corporate administration[171]. - Mr. LEE Kwok Lun, appointed as an independent non-executive Director in October 2018, has over 15 years of experience in accounting and financial management[175]. - The Group's management team has extensive experience in finance and investment, contributing to its strategic decision-making[188]. - The Group's independent non-executive directors bring over 17 years of experience in investment banking and corporate financing activities[183]. Compliance and Risk Management - The Group aims to maintain high integrity standards and has implemented various internal control measures and training across all business units[196]. - There was an unintentional non-compliance incident with Rule 14A.35 of the Listing Rules during the year, but no significant violations of laws and regulations occurred[196]. - The Group has been committed to ensuring compliance with applicable laws and regulatory requirements throughout its operations[200]. - The Group's exposure to interest rate changes is primarily due to its borrowings, with no hedging in place for cash flow or fair value interest rate risk[133]. - The majority of the Group's transactions and assets are denominated in Renminbi, limiting foreign currency risk[134].

香港交易及結算所有限公司及香港聯合交易所有限公司對本公告的內容概不負責，對其準確 性或完整性亦不發表任何聲明，並明確表示，概不對因本公告全部或任何部分內容而產生或 因倚賴該等內容而引致的任何損失承擔任何責任。 Ever Reach Group (Holdings) Company Limited 恒 達 集 團（ 控 股 ）有 限 公 司 （於開曼群島註冊成立的有限公司） （股份代號：3616） 截至2022年12月31日止年度全年業績 業績 恒達集團（控股）有限公司（「本公司」）董事（「董事」）會（「董事會」）宣佈本公司 截至2022年12月31日止年度的綜合業績，連同去年的比較數字如下： – 1 – 綜合損益表 截至2022年12月31日止年度 | --- | --- | |-------|------------| | | 日止年度 | | | 2021年 | | 附註 | 人民幣千元 | 收入 3 2,861,771 2,767,678 銷售成本 4 (2,440,395) (1,916,191) | --- | --- | --- | --- | |------------------------- ...