CORPORATE INFORMATION This section details the company's corporate governance and administrative structure, including board members, committee composition, principal bankers, auditors, share registrars, and registered office - This section details the company's corporate governance and administrative structure, including board members, committee composition, principal bankers, auditors, share registrars, and registered office4716 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME For the six months ended June 30, 2020, the Group's total revenue was HK$967 million, a 6.8% year-on-year decrease, with profit for the period at HK$32.91 million, down 19.9%, primarily due to slower EPC business progress and increased finance costs, resulting in basic earnings per share of 2.16 HK cents compared to 2.94 HK cents last year Key Profit or Loss Data for H1 2020 | Metric | H1 2020 (HK$ Thousand) | H1 2019 (HK$ Thousand) | Y-o-Y Change | | :--- | :--- | :--- | :--- | | Revenue | 966,788 | 1,037,388 | -6.8% | | Profit before income tax expense | 41,012 | 49,335 | -16.9% | | Profit for the period | 32,914 | 41,081 | -19.9% | | Profit attributable to owners of the Company | 28,337 | 38,609 | -26.6% | | Total comprehensive income for the period | 6,811 | 34,436 | -80.2% | | Basic and diluted earnings per share (HK cents) | 2.16 | 2.94 | -26.5% | CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION As of June 30, 2020, the Group's total assets increased by 8.9% to HK$6.191 billion, mainly due to property, plant, and equipment additions from photovoltaic power station acquisitions, while total liabilities rose 10.5% to HK$5.247 billion due to increased bank and other borrowings, with net assets slightly up 0.7% to HK$944 million Financial Position Summary | Metric | June 30, 2020 (HK$ Thousand) | December 31, 2019 (HK$ Thousand) | Period Change | | :--- | :--- | :--- | :--- | | Non-current assets | 1,883,478 | 1,480,259 | +27.2% | | Current assets | 4,307,495 | 4,206,117 | +2.4% | | Total assets | 6,190,973 | 5,686,376 | +8.9% | | Current liabilities | 4,080,846 | 3,962,554 | +3.0% | | Non-current liabilities | 1,166,438 | 786,944 | +48.2% | | Total liabilities | 5,247,284 | 4,749,498 | +10.5% | | Net assets | 943,689 | 936,878 | +0.7% | | Equity attributable to owners of the Company | 931,177 | 928,762 | +0.3% | CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the six months ended June 30, 2020, equity attributable to owners of the Company slightly increased from HK$929 million to HK$931 million, with a HK$28.34 million profit for the period partially offset by a HK$25.92 million exchange difference loss from translating overseas operations, resulting in total comprehensive income of only HK$2.415 million Changes in Equity Attributable to Owners of the Company (H1 2020) | Item | Amount (HK$ Thousand) | | :--- | :--- | | As at January 1, 2020 | 928,762 | | Profit for the period | 28,337 | | Other comprehensive income for the period | (25,922) | | Total comprehensive income for the period | 2,415 | | As at June 30, 2020 | 931,177 | CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS In H1 2020, the Group reported a net cash outflow from operating activities of HK$256 million and from investing activities of HK$340 million, while financing activities generated a net cash inflow of HK$721 million, primarily from new borrowings, resulting in cash and cash equivalents of HK$583 million at period-end, an increase of HK$125 million from the beginning of the period Cash Flow Statement Summary | Item | H1 2020 (HK$ Thousand) | H1 2019 (HK$ Thousand) | | :--- | :--- | :--- | | Net cash outflow from operating activities | (256,494) | (102,546) | | Net cash outflow from investing activities | (340,061) | (22,913) | | Net cash inflow from financing activities | 721,234 | 109,918 | | Net increase in cash and cash equivalents | 124,679 | (15,541) | | Cash and cash equivalents at end of period | 583,026 | 397,291 | NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS CORPORATE INFORMATION AND PRINCIPAL ACTIVITIES This note outlines the company's registration details and primary business activities, which are categorized into five segments: Engineering, Procurement and Construction (EPC) and consultancy and general construction; Power Generation; Financing; Manufacturing and Trading of solar-related products; and Other corporate management, investment, and treasury services - The Group's core business revolves around renewable energy, particularly the construction (EPC), operation (power generation) of photovoltaic power stations, and related financing and product manufacturing414345 SEGMENT REPORTING In H1 2020, the EPC and consultancy and general construction segment remained the largest revenue source, contributing HK$762 million or 78.9% of total revenue, while the power generation segment generated HK$89.29 million and manufacturing and trading HK$107 million, with financing segment revenue significantly declining, and EPC and power generation being the main profit contributors H1 2020 Revenue and Results by Business Segment | Business Segment | External Sales Revenue (HK$ Thousand) | Segment Results (HK$ Thousand) | | :--- | :--- | :--- | | EPC and Consultancy and General Construction | 762,408 | 56,574 | | Power Generation | 89,293 | 38,338 | | Financing | 7,956 | (15,058) | | Manufacturing and Trading | 107,131 | (6,714) | | All Other Segments | - | (14,381) | BANK AND OTHER BORROWINGS As of June 30, 2020, the Group's total bank and other borrowings significantly increased by 34.8% to HK$3.35 billion from HK$2.485 billion at the end of 2019, comprising HK$2.188 billion in current borrowings and HK$1.162 billion in non-current borrowings, primarily to support business expansion and project investments Composition of Bank and Other Borrowings | Item | June 30, 2020 (HK$ Thousand) | December 31, 2019 (HK$ Thousand) | | :--- | :--- | :--- | | Current borrowings | 2,188,405 | 1,699,801 | | Non-current borrowings | 1,162,088 | 784,719 | | Total | 3,350,493 | 2,484,520 | - Borrowings are secured by guarantees from the company's subsidiaries, finance lease receivables, trade receivables, pledged bank deposits, and shares in subsidiaries172176 - All borrowings bear floating interest rates, with effective annual interest rates ranging from 3.3% to 6.7%176 ACQUISITION OF SUBSIDIARIES To expand its power generation business, the Group acquired three photovoltaic power generation companies in H1 2020: Danyang Jinyangguang Photovoltaic Power, Fuyang Hengming Solar Power, and Zhenjiang GCL New Energy, aiming to acquire quality assets and expand its power generation business scale, with the acquisitions of Fuyang and Zhenjiang companies yielding a total bargain purchase gain of approximately HK$3.53 million - The Group acquired three photovoltaic power station operating companies in H1 2020 for a total consideration of approximately HK$97.07 million, expanding its power generation asset portfolio200201 - The acquisitions of Fuyang Solar Power and Zhenjiang GCL resulted in bargain purchase gains, primarily because the sellers intended to exit their investments due to their own business reasons223234 MANAGEMENT DISCUSSION AND ANALYSIS Business Review and Segment Performance In H1 2020, the Group's overall revenue decreased by 6.8% to HK$967 million, and profit declined by 19.9% to HK$32.91 million, primarily due to slower EPC project progress caused by the COVID-19 pandemic and increased finance costs, though power generation and general construction engineering businesses still achieved growth - The two main reasons for the profit decline were: (i) slower EPC business progress due to the pandemic and compressed project costs and profit margins from grid parity policies; and (ii) a significant increase in finance costs due to higher average borrowings241243 EPC AND CONSULTANCY AND GENERAL CONSTRUCTION As a core business, this segment's revenue decreased by 9.6% year-on-year to HK$762 million, and segment results declined by 8.0% to HK$56.57 million, primarily due to pandemic-induced delays in photovoltaic EPC projects, though strong performance in general construction engineering, with revenue up 65.4% to HK$310 million, partially offset the weakness in photovoltaic business EPC and Consultancy and General Construction Segment Performance | Metric | H1 2020 (HK$ Thousand) | H1 2019 (HK$ Thousand) | Y-o-Y Change | | :--- | :--- | :--- | :--- | | External Sales Revenue | 762,408 | 843,339 | -9.6% | | Segment Results | 56,574 | 61,494 | -8.0% | - General construction engineering business, including government affordable housing and municipal projects, became a significant growth driver for this segment, with revenue increasing by 65.4% year-on-year248249 MANUFACTURING AND TRADING The component factory in Peixian, Xuzhou, recorded external sales revenue of HK$107 million, a 14.8% year-on-year increase, but despite revenue growth, the segment still reported a loss of HK$6.71 million due to intense market competition leading to fewer orders, though the loss narrowed from HK$7.96 million in the prior year Manufacturing and Trading Segment Performance | Metric | H1 2020 (HK$ Thousand) | H1 2019 (HK$ Thousand) | | :--- | :--- | :--- | | External Sales Revenue | 107,131 | 94,177 | | Segment Loss | (6,714) | (7,964) | POWER GENERATION The power generation business continued stable growth, with external sales revenue reaching HK$89.29 million, a 3.0% year-on-year increase, and segment results growing 4.0% to HK$38.34 million, primarily benefiting from contributions from acquired and operated photovoltaic power stations during the period, bringing the Group's total installed capacity owned and operated to 210.39 MW at period-end - The Group completed the acquisitions of Fuyang Hengming and Zhenjiang GCL, two photovoltaic power generation companies, during the period, further expanding its power generation asset scale and contributing new revenue to this segment253 - The Group is actively developing in the energy storage sector, having completed technical solution research for the Suining wind farm's supporting energy storage and exploring new business models for energy storage participation in power plant black starts, peak shaving, and frequency regulation254255 FINANCING The finance lease business performed poorly, with external sales revenue decreasing by 39.5% year-on-year to HK$7.96 million, and segment loss widening by 47.4% to HK$15.06 million, primarily due to reduced interest and handling fee income and increased finance costs during the period Financing Segment Performance | Metric | H1 2020 (HK$ Thousand) | H1 2019 (HK$ Thousand) | Y-o-Y Change | | :--- | :--- | :--- | :--- | | External Sales Revenue | 7,956 | 13,157 | -39.5% | | Segment Loss | (15,058) | (10,218) | +47.4% | BUSINESS PROSPECT Looking ahead, the Group will continue to strengthen its EPC capabilities in wind, photovoltaic, and concentrated solar power projects, expand its construction engineering market with Jiangsu Province as a hub, actively participate in bidding for new energy projects, seek suitable projects in North and Northwest China, and leverage capital advantages to explore emerging industries around the Guangdong-Hong Kong-Macao Greater Bay Area and Hainan Free Trade Port, promoting supply chain finance and other synergistic businesses to create new profit growth points - Strategic priorities include: consolidating and expanding EPC business, especially general construction engineering; accelerating investment and development of new energy projects, including wind power; exploring emerging industry opportunities in the Guangdong-Hong Kong-Macao Greater Bay Area and Hainan Free Trade Port; and developing synergistic businesses such as supply chain finance266267270 FINANCIAL REVIEW This section details the Group's financial performance, position, and resources, noting a decline in H1 2020 revenue and profit primarily due to EPC business impacts, while total assets and liabilities increased in line with business expansion and project acquisitions, leading to a higher gearing ratio reflecting increased debt financing for development Financial Results The Group's H1 revenue decreased by 6.8% year-on-year, and profit attributable to owners of the Company declined by 26.6%, with a 9.6% decrease in EPC business revenue being the main driver of overall revenue decline, while power generation and manufacturing revenues grew by 3.0% and 13.8% respectively, and finance costs significantly increased by 30.7% to HK$38.71 million, putting considerable pressure on profit - Construction costs significantly increased by 64.8% year-on-year, while cost of inventories used decreased by 31.9%, reflecting a shift in business structure with an increase in general construction engineering projects and a decrease in new energy EPC projects285 - Finance costs significantly increased by 30.7%, primarily due to increased bank and other borrowings to support power station investments and EPC project advance payments287 Financial Position As of June 30, 2020, total assets increased to HK$6.191 billion, driven primarily by non-current assets (up 27.2% year-on-year), reflecting acquisitions of photovoltaic power stations, while total liabilities rose to HK$5.247 billion, with non-current liabilities increasing by 48.2%, mainly due to higher long-term bank borrowings - The growth in total assets and total liabilities aligns with the Group's strategy to expand its power generation business scale through acquisitions and increased borrowings289 Liquidity, Financial Resources and Gearing As of June 30, 2020, the Group held cash and cash equivalents of HK$583 million and net current assets of HK$227 million, with the gearing ratio (total liabilities/total equity) increasing from 2.77 at the end of 2019 to 3.67, reflecting higher debt levels, and the Group's borrowings are primarily at floating rates, secured by assets such as receivables and bank deposits Liquidity and Gearing Ratios | Metric | June 30, 2020 | December 31, 2019 | | :--- | :--- | :--- | | Cash and cash equivalents (HK$ Thousand) | 583,026 | 448,553 | | Net current assets (HK$ Thousand) | 226,649 | 243,563 | | Total bank and other borrowings (HK$ Thousand) | 3,350,493 | 2,484,520 | | Gearing ratio | 3.67 | 2.77 | CORPORATE GOVERNANCE AND OTHER INFORMATION Directors' and Substantial Shareholders' Interests This section discloses the shareholdings of directors and substantial shareholders, noting that as of June 30, 2020, controlling shareholder China National Nuclear Corporation (CNNC) indirectly held 30.46% of the company's shares through its subsidiary, and certain loan agreements require CNNC to maintain its status as the single largest shareholder with a stake of no less than 30% - Controlling shareholder China National Nuclear Corporation (CNNC), through CNNC Investment (Hong Kong) Company Limited, holds 400 million shares in the company, representing 30.46% of the issued shares348352 - The Group has HK$871 million in outstanding loans subject to specific performance obligations by the controlling shareholder, requiring CNNC to maintain its status as the single largest shareholder and a shareholding of no less than 30%322323
中国核能科技(00611) - 2020 - 中期财报