中国建筑兴业(00830) - 2019 - 中期财报

Company Business Structure The company's business is primarily divided into two major segments: engineering business and operations management business - The company's business is primarily divided into two major segments: engineering business and operations management business[4] Board of Directors and Committees This section details the composition of the Board of Directors and its various committees, including audit, remuneration, and nomination committees Board Members and Committee Composition | Board Position | Name | Committee Position | Name | | :--- | :--- | :--- | :--- | | Chairman and Non-executive Director | Zhang Haipeng | Audit Committee Chairman | Zhou Jinsong, CPA | | Executive Director | Wu Mingqing (Vice Chairman and CEO) | Audit Committee Member | HONG Winn, Kuang Xinyi | | Executive Director | Wang Hai | Remuneration Committee Chairman | Zhou Jinsong | | Executive Director | Chen Shanhong | Remuneration Committee Member | Zhang Haipeng, Wu Mingqing, HONG Winn, Kuang Xinyi | | Non-executive Director | Huang Jiang | Nomination Committee Chairman | Zhang Haipeng | | Independent Non-executive Director | Zhou Jinsong | Nomination Committee Member | Wu Mingqing, Zhou Jinsong, HONG Winn, Kuang Xinyi | | Independent Non-executive Director | HONG Winn | | | | Independent Non-executive Director | Kuang Xinyi | | | Company Information Key corporate details including authorized representatives, company secretary, share registrars, auditor, legal counsel, stock code, and important dates Key Company Information | Metric | Details | | :--- | :--- | | Authorized Representatives | Zhang Haipeng, Wu Mingqing | | Company Secretary | Liu Shuxian | | Principal Share Registrar | MaplesFS Limited | | Hong Kong Branch Share Registrar | Tricor Investor Services Limited | | Auditor | PricewaterhouseCoopers | | Legal Counsel | Mayer Brown | | Stock Code | 00830 | | Company Website | www.cscd.com.hk | | Interim Results Announcement | August 20, 2019 | | Closure of Register of Members | September 5 to 6, 2019 | | Interim Dividend Payment | October 4, 2019 | Chairman's Report The Chairman's Report provides an overview of the group's performance, business review, corporate governance, risk management, and future outlook Performance In the first half of 2019, the Group's main business revenue increased by 15.2% to HKD 2.031 billion, and profit attributable to shareholders increased by 20.4% to HKD 109.4 million H1 2019 Performance Overview | Metric | H1 2019 (HKD) | Y-o-Y Growth | | :--- | :--- | :--- | | Main Business Revenue | 2.031 billion | 15.2% | | Profit Attributable to Shareholders | 109.4 million | 20.4% | | Earnings Per Share | 0.0508 cents | 20.4% | Dividend Distribution The Board declared an interim dividend of HKD 0.012 cents per share, representing a 20.0% increase compared to the same period last year Interim Dividend Distribution | Metric | H1 2019 (HKD) | H1 2018 (HKD) | Y-o-Y Growth | | :--- | :--- | :--- | :--- | | Interim Dividend Per Share | 0.012 cents | 0.010 cents | 20.0% | Business Review Despite a complex global economic environment, the Group achieved record new curtain wall contracts, steady general contracting, stable mainland supervision, and significant progress in asset operation transformation Market Conditions Global economic growth slowed, with increased trade protectionism and financial market volatility, while China's economy maintained stable and progressive development - Global economic growth is slowing, with US trade protectionism and financial market volatility exacerbating downward pressure on emerging economies[9] - China's economy is transitioning to high-quality development, maintaining stable and progressive operations[9] - The Group adheres to its "rooted in Hong Kong and Macau, relying on the mainland, radiating overseas, and internal-external linkage" strategy, prudently bidding and actively expanding quality projects[10] Construction Engineering Business The construction engineering business saw continued growth in Hong Kong and Macau curtain wall projects, strategic focus on high-margin projects in North America, and steady progress in general contracting Curtain Wall Engineering Curtain wall business sustained growth in Hong Kong and Macau, focused on profitable projects in North America, secured major contracts in mainland China, and advanced overseas projects - Curtain wall business in Hong Kong and Macau continues to grow, consolidating its leading position in Hong Kong and stabilizing in Macau[11] - North American market focuses on high-margin, controllable-risk quality projects, winning the 700 St Jacques Victoria Sur Le Parc project in Montreal, Canada[11] - Mainland China curtain wall market prudently selects large projects with good client credit, including the Huawei Production Center G1 building curtain wall renovation project[11] - Zhuhai new factory actively increases intelligent and automated applications, effectively improving production capacity utilization and laying the foundation for scale advantages[11] - Projects such as the Melbourne Police Headquarters in Australia, Melbourne West Side Place Stage 1, and The Stage in London, UK, are progressing smoothly[12] General Contracting Business The general contracting business maintained stable development, actively participating in bids for small and medium-sized residential building projects in Hong Kong, with ongoing projects progressing smoothly - Construction contracting business developed steadily, actively participating in bids for Hong Kong's small and medium-sized residential building projects[13] - Ongoing projects, including the Chuang's Tuen Mun Town Lot 514 residential development and Henderson Ma Tau Wai project in Hong Kong, are progressing smoothly[13] Operations Management Business The Group completed the acquisition of Nanchang Bridge and Nanchang China Overseas New Bayi Bridge operations, marking a strategic shift towards asset operation, and is exploring elderly care industry investments - Completed the acquisition of Nanchang Bridge and Nanchang China Overseas New Bayi Bridge operations management business, officially launching a strategic transformation towards operations management specialization[14] - China Overseas Supervision adheres to the "large market, large client, large project" strategy, consolidating its business advantages[14] - Actively exploring investment in the elderly care industry, with the Toronto, Canada elderly care apartment project having completed preliminary planning and design, now entering the construction phase[14] New Contracts Awarded In the first half of 2019, the Group secured new contracts totaling HKD 2.453 billion, with curtain wall engineering and operations services being the primary contributors H1 2019 New Contracts Awarded Overview | Metric | Amount (HKD) | | :--- | :--- | | Total New Contracts Awarded | 2.453 billion | | Glass Curtain Wall Projects | 2.183 billion | | Operations Services | 256 million | Projects Under Construction As of the first half of 2019, the total contract value for projects under construction was HKD 12.677 billion, with outstanding contracts amounting to HKD 7.229 billion H1 2019 Projects Under Construction Overview | Metric | Amount (HKD) | | :--- | :--- | | Total Contract Value for Projects Under Construction | 12.677 billion | | Outstanding Contract Value | 7.229 billion | Corporate Governance The Group upholds integrity, transparency, and efficiency, strictly adhering to laws and listing rules, continuously improving its governance structure and internal controls to ensure sound corporate governance - The Group adheres to corporate governance principles of integrity, honesty, transparency, and efficiency, strictly complying with laws, regulations, and listing rules[17] - Continuously improving corporate governance structure and measures, establishing and refining policy systems, internal control systems, and management mechanisms and processes[17] Risk Management The Group continuously enhances its internal control system to improve risk assessment and management, strengthens supervision of key areas, and mitigates operational, political, and foreign exchange risks in overseas markets - Continuously improving the internal control management system to enhance risk prediction capabilities and control effectiveness, integrating internal control management with business processes[18] - Strengthening supervision over key areas and critical matters to prevent operational risks and plug management loopholes[18] - Continuously monitoring overseas market policies and exchange rate trends, concentrating resources on core cities in Europe and America to mitigate political and foreign exchange risks[18] Financial Management The Group strengthened financial management, improved capital efficiency, expanded financing channels, and accelerated project collections, maintaining a sound financial position with sufficient credit facilities - Strengthened financial management, improved capital utilization efficiency, actively explored financing channels, and accelerated project collection[19] H1 2019 Financial Status Summary | Metric | June 30, 2019 (HKD) | | :--- | :--- | | Total Bank Deposits | 443 million | | Total Borrowings | 724 million | | Net Gearing Ratio | 25.0% | | Committed and Undrawn Credit and Project Guarantee Facilities | 1.456 billion | Human Resources Management The Group prioritizes talent acquisition, retention, and development through comprehensive recruitment, training, appraisal, and remuneration systems, enhancing employee satisfaction and efficiency - Adheres to a people-oriented approach, emphasizing talent acquisition, retention, and development through improved recruitment, training, appraisal, and remuneration incentive systems[20] - Implemented a lecturer system, refined KPI appraisal, and continuously promoted various incentive systems like the "Site Target Management Responsibility System" to boost employee motivation[20] Total Number of Employees | Date | Total Employees (persons) | | :--- | :--- | | June 30, 2019 | 2,496 | | December 31, 2018 | 2,735 | Social Responsibility The Group actively fulfills its corporate social responsibility by participating in various charitable activities and achieving multiple environmental and social certifications - Participated in public welfare activities such as "Walk for Millions" and "Children's Dreams" for many consecutive years[21] - Received honorary certifications including "Green Office," "Global Caring Company," "Healthy Workplace," and "Low Carbon Care," and has been awarded the "Caring Company" logo by the Hong Kong Council of Social Service for five consecutive years[21] Future Outlook The second half of 2019 anticipates global economic slowdown, trade tensions, and Brexit uncertainties, while North American construction remains robust, Hong Kong stable, Macau recovering, and the Greater Bay Area offers opportunities Business and Development Strategies The Group will focus on curtain wall business in key markets, prudently expand overseas, develop small to medium-sized building projects in Hong Kong, and deepen operations management with asset acquisition opportunities - Curtain wall business, as the core principal business, adheres to the "large market, large client, large project" strategy, deepening its layout in the three major markets of Hong Kong and Macau, North America, and mainland China[23] - Prudently expanding overseas markets such as Australia, the UK, and the Asia-Pacific region, strengthening project management, brand promotion, and design team building[23] - General contracting business will actively develop high-quality small and medium-sized building construction projects in Hong Kong[24] - Operations management business will deepen its operating model, explore innovative business directions in mainland China, actively seek high-quality asset acquisition opportunities, and promote industry-finance integration to achieve the "dual-core driven" strategic goal[24] Acknowledgements The Board expresses gratitude to shareholders, clients, suppliers, and employees for their support, committed to fostering a healthy ecosystem that promotes mutual benefits and sustained growth in profitability - The Board expresses sincere gratitude to shareholders, clients, suppliers, and all employees for their strong support and hard work[24] - Committed to establishing and maintaining a healthy ecosystem where multiple stakeholders, including shareholders, the Board, management, employees, clients, and suppliers, mutually benefit, driving continuous growth in the Group's profitability and capabilities[24] Management Discussion and Analysis This section provides an in-depth analysis of the Group's overall financial performance, segmental results, administrative and finance costs, new contracts, liquidity, treasury policy, and human resources Overall Performance In H1 2019, total revenue increased by 15.2% to HKD 2.031 billion, profit attributable to shareholders rose by 20.4% to HKD 109.4 million, and net cash inflow from operations was HKD 75 million H1 2019 Overall Financial Performance | Metric | H1 2019 (HKD) | H1 2018 (HKD) | Y-o-Y Change | | :--- | :--- | :--- | :--- | | Total Revenue | 2.031 billion | 1.763 billion | +15.2% | | Profit Attributable to Shareholders | 109.4 million | 90.9 million | +20.4% | | Net Cash Inflow/(Outflow) from Operating Activities | 75 million (inflow) | 30 million (outflow) | Significant improvement | | Basic Earnings Per Share | 0.0508 cents | 0.0422 cents | +20.4% | - Acquired 100% equity and shareholder loans of Futian Enterprise Limited and Value Idea Investments Limited for HKD 295 million, gaining operation management rights for Nanchang Bridge and Nanchang China Overseas New Bayi Bridge[26] Segmental Analysis Curtain wall engineering saw significant growth, general contracting declined due to project cycles, and operations management surged following the acquisition of Nanchang Bridge operations Curtain Wall Engineering Business Revenue and operating profit for the curtain wall engineering business significantly increased, driven by expansion in the Greater China market and stringent cost controls Curtain Wall Engineering Business Performance | Metric | H1 2019 (HKD) | H1 2018 (HKD) | | :--- | :--- | :--- | | Segment Revenue | 1.430 billion | 1.055 billion | | Operating Profit | 89 million | 61 million | - Revenue increase primarily attributed to continuous expansion in the Greater China market, while operating profit growth resulted from the completion of certain Hong Kong projects and strict cost control[27] General Contracting Business Revenue and operating profit for the general contracting business decreased, mainly due to reduced contributions from projects nearing completion in 2018 and new projects being in early construction phases General Contracting Business Performance | Metric | H1 2019 (HKD) | H1 2018 (HKD) | | :--- | :--- | :--- | | Segment Revenue | 459 million | 589 million | | Operating Profit | 26 million | 51 million | - The decrease in revenue and operating profit was primarily due to reduced contributions from projects nearing completion in 2018 and new projects awarded in 2018 being in their initial construction phases[28] Operations Management Business Revenue and operating profit for the operations management business significantly increased, primarily driven by the acquisition of Nanchang China Overseas New Bayi Bridge and Nanchang Bridge operations Operations Management Business Performance | Metric | H1 2019 (HKD) | H1 2018 (HKD) | | :--- | :--- | :--- | | Segment Revenue | 142 million | 118 million | | Operating Profit | 55 million | 36 million | - The increase in revenue and operating profit was mainly due to the acquisition of Nanchang China Overseas New Bayi Bridge and Nanchang Bridge operations, as well as contributions from engineering consulting services[30] Administrative Expenses Administrative expenses decreased by 14.5% to HKD 94 million, reflecting strict cost control measures across the three core business segments Administrative Expenses Change | Metric | H1 2019 (HKD) | H1 2018 (HKD) | Y-o-Y Change | | :--- | :--- | :--- | :--- | | Administrative Expenses | 94 million | 110 million | -14.5% | - The reduction in administrative expenses was primarily due to strict cost control measures implemented across the three core business segments[31] Finance Costs Finance costs increased by 36.4% to HKD 15 million for the six months ended June 30, 2019, primarily due to rising interest rates Finance Costs Change | Metric | H1 2019 (HKD) | H1 2018 (HKD) | Y-o-Y Change | | :--- | :--- | :--- | :--- | | Finance Costs | 15 million | 11 million | +36.4% | - The increase in finance costs was primarily due to rising interest rates[31] New Contracts Awarded and Projects Under Construction In H1 2019, new contracts totaled HKD 2.453 billion, achieving 49.1% of the annual target, with total outstanding contracts amounting to HKD 7.229 billion New Contracts Awarded and Projects Under Construction Overview | Segment Business | New Contracts Awarded (HKD billion) | Total Contract Value (HKD billion) | Outstanding Contract Value (HKD billion) | | :--- | :--- | :--- | :--- | | Glass Curtain Wall | 2.183 | 9.853 | 6.029 | | Building Construction Projects | 0.014 | 2.361 | 0.915 | | Operations Management | 0.256 | 0.463 | 0.285 | | Total | 2.453 | 12.677 | 7.229 | - New contracts awarded in H1 2019 amounted to HKD 2.453 billion, achieving 49.1% of the annual target (not less than HKD 5 billion)[32] Liquidity and Financial Resources The Group maintains a sound financial position with HKD 443 million in cash, HKD 724 million in total borrowings, a net gearing ratio of 25.0%, and HKD 1.456 billion in undrawn credit facilities Liquidity and Financial Resources Overview | Metric | June 30, 2019 (HKD) | December 31, 2018 (HKD) | | :--- | :--- | :--- | | Bank and Cash Balances | 443 million | 387 million | | Total Borrowings | 724 million | 717 million | | Net Gearing Ratio | 25.0% | 32.1% | | Undrawn Bank Credit Facilities | 1.456 billion | Not applicable | Total Borrowings Maturity Profile (HKD thousand) | Maturity Period | June 30, 2019 | December 31, 2018 | | :--- | :--- | :--- | | Repayable on demand or within one year | 511,771 | 505,178 | | More than one year but not exceeding two years | 482 | 455 | | More than two years but not exceeding five years | 201,575 | 201,485 | | More than five years | 9,907 | 9,806 | | Total Borrowings | 723,735 | 716,924 | Bank Deposits Currency Mix (%) | Currency | June 30, 2019 | December 31, 2018 | | :--- | :--- | :--- | | HKD | 50 | 20 | | RMB | 29 | 35 | | USD | 1 | 3 | | MOP | 6 | 6 | | Others | 14 | 36 | Treasury Policy The Group adopts a prudent treasury policy, centralizing treasury matters to manage risks and reduce funding costs, with most cash held in short-term HKD or USD deposits - Adopts a prudent treasury policy, centralizing treasury matters to effectively manage risks and reduce funding costs[38] - Most cash is held in short-term HKD or USD deposits, with liquidity and financial requirements regularly reviewed[38] Employees and Remuneration Policy As of June 30, 2019, the Group had 2,496 employees, maintaining an effective management incentive policy and competitive remuneration system to align interests of management, employees, and shareholders Number of Employees | Date | Total Employees (persons) | | :--- | :--- | | June 30, 2019 | 2,496 | | December 31, 2018 | 2,735 | - Maintains an effective management incentive policy and competitive remuneration to align the interests of management, employees, and shareholders[39] Foreign Exchange Risk The Group's foreign currency risk primarily arises from sales or purchases denominated in USD, RMB, CAD, GBP, and MOP, with no current hedging policy but ongoing monitoring - Foreign currency risk primarily arises from sales or purchases denominated in USD, RMB, CAD, GBP, and MOP[40] - Currently, there is no foreign currency hedging policy, but management will continue to monitor foreign exchange risk and consider hedging when necessary[40] Unaudited Condensed Consolidated Statement of Profit or Loss This statement presents the Group's revenue, costs, gross profit, other income, expenses, finance costs, profit before tax, income tax, and profit for the period Condensed Consolidated Statement of Profit or Loss (For the six months ended June 30) | Metric (HKD thousand) | 2019 | 2018 | | :--- | :--- | :--- | | Revenue | 2,031,435 | 1,763,034 | | Cost of sales | (1,793,813) | (1,532,368) | | Gross profit | 237,622 | 230,666 | | Other income and other gains, net | 7,536 | 2,242 | | Administrative, selling and other operating expenses | (94,122) | (110,128) | | Finance costs | (14,909) | (11,115) | | Profit before tax | 136,127 | 111,665 | | Income tax expense | (31,947) | (23,615) | | Profit for the period | 104,180 | 88,050 | | Profit attributable to owners of the Company | 109,445 | 90,888 | | Non-controlling interests | (5,265) | (2,838) | | Earnings per share (HK cents) | 5.08 | 4.22 | Unaudited Condensed Consolidated Statement of Comprehensive Income This statement details the profit for the period and other comprehensive income items, including exchange differences on translation of foreign operations, leading to total comprehensive income Condensed Consolidated Statement of Comprehensive Income (For the six months ended June 30) | Metric (HKD thousand) | 2019 | 2018 | | :--- | :--- | :--- | | Profit for the period | 104,180 | 88,050 | | Other comprehensive income (items that may be reclassified subsequently to profit or loss) | | | | Exchange differences arising on translation of foreign operations | 7,874 | 2,087 | | Other comprehensive income for the period, net of tax | 7,874 | 2,087 | | Total comprehensive income for the period, net of tax | 112,054 | 90,137 | | Total comprehensive income for the period attributable to: | | | | Owners of the Company | 116,831 | 93,349 | | Non-controlling interests | (4,777) | (3,212) | Unaudited Condensed Consolidated Statement of Financial Position This statement presents the Group's assets, liabilities, and equity as of June 30, 2019, and December 31, 2018, detailing non-current and current components Condensed Consolidated Statement of Financial Position (As at June 30) | Metric (HKD thousand) | June 30, 2019 | December 31, 2018 | | :--- | :--- | :--- | | Non-current assets | | | | Property, plant and equipment | 530,796 | 476,959 | | Prepaid lease payments | — | 32,491 | | Interests in infrastructure project investments | 220,839 | — | | Goodwill | 138,149 | 138,149 | | Deferred tax assets | 93,068 | 92,647 | | Total non-current assets | 982,852 | 740,246 | | Current assets | | | | Contract assets | 1,182,883 | 967,471 | | Trade and other receivables | 1,341,460 | 1,173,875 | | Deposits and prepayments | 61,480 | 53,842 | | Interests in infrastructure project investments | 60,235 | — | | Inventories | 9,468 | 7,014 | | Tax recoverable | 1,783 | 707 | | Amounts due from group entities | 41,574 | 37,026 | | Amounts due from related companies | 3,951 | — | | Bank and cash balances | 443,024 | 386,630 | | Total current assets | 3,145,858 | 2,626,565 | | Total assets | 4,128,710 | 3,366,811 | | Current liabilities | | | | Bank borrowings | 511,771 | 505,178 | | Trade and other payables and accrued expenses | 1,210,354 | 1,049,699 | | Contract liabilities | 245,131 | 299,857 | | Lease liabilities | 7,360 | — | | Amounts due under finance leases | — | 793 | | Tax payable | 102,395 | 88,880 | | Dividends payable | 25,867 | — | | Amounts due to group entities | 644,188 | 170,240 | | Amounts due to related companies | 1,494 | — | | Total current liabilities | 2,748,560 | 2,114,647 | | Total assets less current liabilities | 1,380,150 | 1,252,164 | | Capital and reserves | | | | Share capital | 21,555 | 21,555 | | Share premium and reserves | 1,167,010 | 1,075,736 | | Equity attributable to owners of the Company | 1,188,565 | 1,097,291 | | Non-controlling interests | (63,785) | (59,008) | | Total equity | 1,124,780 | 1,038,283 | | Non-current liabilities | | | | Bank borrowings | 211,964 | 211,746 | | Lease liabilities | 18,906 | — | | Amounts due under finance leases | — | 1,842 | | Deferred tax liabilities | 24,500 | 293 | | Total non-current liabilities | 255,370 | 213,881 | Unaudited Condensed Consolidated Statement of Changes in Equity This statement outlines the changes in equity attributable to owners of the Company and non-controlling interests, including profit for the period, other comprehensive income, and dividend distributions - The condensed consolidated statement of changes in equity illustrates the movements in equity attributable to owners of the Company and non-controlling interests during the reporting period, encompassing profit for the period, other comprehensive income, and dividend distributions[46] - The special reserve arose from the difference between the fair value consideration for the acquisition of Haiyue Construction Engineering Co., Ltd. under common control and the net assets at the acquisition date, as well as the transfer of net liabilities from the capitalization of increased equity interest in a subsidiary[46] - Another portion of the special reserve originated from the common control merger with China Overseas Supervision Co., Ltd., representing the difference between the acquisition price and the acquired company's capital[47] Unaudited Condensed Consolidated Statement of Cash Flows This statement presents the Group's cash flows from operating, investing, and financing activities, showing the net increase or decrease in cash and cash equivalents for the period Condensed Consolidated Statement of Cash Flows (For the six months ended June 30) | Metric (HKD thousand) | 2019 | 2018 | | :--- | :--- | :--- | | Net cash generated from/(used in) operating activities | 75,590 | (30,159) | | Cash flows from investing activities | | | | Purchase of property, plant and equipment | (11,298) | (77,136) | | Proceeds from disposal of property, plant and equipment | 4 | 75 | | Interest received | 415 | 851 | | Net cash used in investing activities | (10,879) | (76,210) | | Cash flows from financing activities | | | | Finance costs | (14,332) | (11,016) | | Net proceeds from/(repayment of) bank loans | 6,308 | 2,752 | | Payment of lease liabilities | (4,075) | — | | Repayment of amounts due under finance leases | — | (472) | | Net cash used in financing activities | (12,099) | (8,736) | | Increase/(decrease) in cash and cash equivalents | 52,612 | (115,105) | | Effect of foreign exchange rate changes | 3,782 | 2,144 | | Cash and cash equivalents at beginning of period | 386,630 | 478,137 | | Cash and cash equivalents at end of period | 443,024 | 365,176 | Notes to the Unaudited Condensed Consolidated Financial Statements This section provides detailed notes explaining the basis of preparation, adoption of new accounting standards, estimates, segment information, and other financial disclosures Basis of Preparation The condensed consolidated financial statements are prepared in accordance with HKFRS 34 and HKEX Listing Rules, based on historical cost and presented in HKD - The condensed consolidated financial statements are prepared in accordance with Appendix 16 of the Hong Kong Stock Exchange Listing Rules and Hong Kong Accounting Standard 34 "Interim Financial Reporting" issued by the HKICPA[50] - The statements are prepared on a historical cost basis and presented in HKD[50] Adoption of New and Revised Standards, Amendments and Interpretations The Group adopted HKFRS 16 "Leases" and other new standards in the current interim period, with no significant impact on accounting policies except for HKFRS 16 - The Group first applied new and revised standards, including Hong Kong Financial Reporting Standard 16 "Leases," during the current interim period[51][52] - Except for HKFRS 16, other standard amendments and new interpretations had no significant impact on the Group's accounting policies[52] - The Group has not early adopted new standards issued but not yet effective, and anticipates no significant impact on the consolidated financial statements in the future[54] Adoption of HKFRS 16 Effective January 1, 2019, HKFRS 16 eliminated the distinction between operating and finance leases, requiring recognition of right-of-use assets and lease liabilities, increasing assets and financial liabilities on the statement of financial position - Effective January 1, 2019, HKFRS 16 was adopted, eliminating the distinction between operating and finance leases, requiring recognition of right-of-use assets and lease liabilities for all leases[55] - The modified retrospective approach was applied, without restating comparative information for prior periods, and recognizing the cumulative effect of initial application guidance[56] - The new standard will result in an increase in assets and financial liabilities on the consolidated statement of financial position[57] Impact of Adopting HKFRS 16 on Statement of Financial Position (January 1, 2019, HKD thousand) | Item | Impact Amount | | :--- | :--- | | Decrease in prepaid lease payments | 32,491 | | Decrease in property, plant and equipment — land, buildings and motor vehicles | 33,491 | | Increase in property, plant and equipment — right-of-use assets | 93,111 | | Decrease in current amounts due under finance leases | 793 | | Decrease in non-current amounts due under finance leases | 1,842 | | Increase in current lease liabilities | 7,339 | | Increase in non-current lease liabilities | 22,425 | Impact of Adopting HKFRS 16 on Statement of Profit or Loss (For the six months ended June 30, 2019, HKD thousand) | Item | Impact Amount | | :--- | :--- | | Decrease in administrative, selling and other operating expenses | 3,738 | | Increase in depreciation — administrative, selling and other operating expenses | 3,560 | | Increase in amortization — projects under construction | 340 | Estimates The preparation of interim financial statements requires management judgments, estimates, and assumptions that affect reported amounts, and actual results may differ from these estimates - The preparation of interim financial statements requires management to make judgments, estimates, and assumptions, and actual results may differ from these estimates[66] - The significant judgments made by management in applying the accounting policies and the key sources of estimation uncertainty are the same as those applied to the consolidated financial statements for the year ended December 31, 2019[66] Revenue and Segment Information The Group's total revenue for H1 2019 was HKD 2.031 billion, primarily from curtain wall engineering, general contracting, and operations management, with significant growth in operations management due to infrastructure investment interests - The Group primarily engages in curtain wall engineering, general contracting, and operations management businesses, with revenue representing income from construction and management contracts[67] Segment Performance Overview (For the six months ended June 30, HKD thousand) | Segment | 2019 Revenue | 2018 Revenue | 2019 Gross Profit | 2018 Gross Profit | 2019 Segment Results | 2018 Segment Results | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Curtain Wall Engineering | 1,430,001 | 1,055,469 | 137,251 | 127,109 | 88,642 | 60,998 | | General Contracting | 459,078 | 589,250 | 30,886 | 53,035 | 26,359 | 51,023 | | Operations Management | 142,356 | 118,315 | 69,485 | 50,522 | 55,239 | 35,946 | | Total | 2,031,435 | 1,763,034 | 237,622 | 230,666 | 170,240 | 147,967 | - In H1 2019, revenue from interests in infrastructure project investments for the operations management business was HKD 16,402,000 (H1 2018: zero)[67] Other Income and Other Gains, Net In H1 2019, other income and other gains, net, significantly increased to HKD 7,536,000, primarily driven by higher exchange gains Other Income and Other Gains, Net (For the six months ended June 30, HKD thousand) | Item | 2019 | 2018 | | :--- | :--- | :--- | | Bank interest income | 416 | 851 | | Exchange gains | 5,119 | — | | Miscellaneous income | 2,001 | 1,391 | | Total | 7,536 | 2,242 | - Exchange gains amounted to HKD 5,119,000 in H1 2019, compared to zero in H1 2018[69] Finance Costs In H1 2019, the Group's finance costs increased to HKD 14,909,000, mainly comprising interest on bank borrowings and overdrafts, and lease liabilities Finance Costs (For the six months ended June 30, HKD thousand) | Item | 2019 | 2018 | | :--- | :--- | :--- | | Interest on bank borrowings and overdrafts | 14,332 | 11,016 | | Finance lease charges | — | 99 | | Interest on lease liabilities | 577 | — | | Total | 14,909 | 11,115 | - Interest on lease liabilities amounted to HKD 577,000 in H1 2019, resulting from the adoption of Hong Kong Financial Reporting Standard 16[70] Profit Before Tax In H1 2019, the Group's profit before tax was stated after deducting depreciation and amortization totaling HKD 22,086,000, a significant increase from the prior year Items Deducted from Profit Before Tax (For the six months ended June 30, HKD thousand) | Item | 2019 | 2018 | | :--- | :--- | :--- | | Amortization of prepaid lease payments | — | 309 | | Depreciation and amortization — amounts included in projects under construction | 15,603 | 5,827 | | Depreciation — amounts included in administrative, selling and other operating expenses | 6,483 | 3,643 | | Total | 22,086 | 9,470 | - Total depreciation and amortization increased from HKD 9,470,000 in H1 2018 to HKD 22,086,000 in H1 2019[72] Income Tax Expense In H1 2019, the Group's income tax expense increased to HKD 31,947,000, primarily comprising Hong Kong profits tax, overseas tax, and deferred tax, with Hong Kong tax calculated at 16.5% Income Tax Expense (For the six months ended June 30, HKD thousand) | Item | 2019 | 2018 | | :--- | :--- | :--- | | Current tax — Hong Kong profits tax (provision for the period) | 17,814 | 17,300 | | Current tax — Overseas (provision for the period) | 9,168 | 7,005 | | Deferred tax | 4,958 | — | | Current income tax expense | 31,947 | 23,615 | - Hong Kong profits tax is calculated at a rate of 16.5% on the estimated assessable profit for the period[74] Dividends The Board declared an interim dividend of HKD 0.012 cents per share, totaling approximately HKD 25,867,000, an increase from the prior year Dividends Recognized (For the six months ended June 30, HKD thousand) | Item | 2019 | 2018 | | :--- | :--- | :--- | | 2018 final dividend of HKD 0.012 cents per share (paid on July 5, 2019) | 25,867 | — | | 2017 final dividend of HKD 0.010 cents per share (paid in H1 2018) | — | 21,555 | - The Board declared an interim dividend of HKD 0.012 cents per share (2018: HKD 0.010 cents per share), totaling approximately HKD 25,867,000, which was not recognized as a liability during the period[75] Earnings Per Share In H1 2019, basic and diluted earnings per share attributable to owners of the Company were HKD 0.0508 cents, a 20.4% increase, with no potentially dilutive ordinary shares during the period Earnings Per Share Calculation (For the six months ended June 30) | Metric | 2019 | 2018 | | :--- | :--- | :--- | | Profit attributable to owners of the Company for basic and diluted earnings per share calculation (HKD thousand) | 109,445 | 90,888 | | Weighted average number of ordinary shares (thousand shares) | 2,155,545 | 2,155,545 | | Basic and diluted earnings per share (HK cents) | 5.08 | 4.22 | - During the period, no diluted earnings per share were presented as the Company had no potentially dilutive ordinary shares[77] Interests in Infrastructure Project Investments The Group acquired interests in infrastructure project investments on January 7, 2019, representing RMB-denominated funds for PPP projects in mainland China, with effective interest rates ranging from 10.2% to 10.7% annually - Acquired interests in infrastructure project investments on January 7, 2019, through the acquisition of Value Idea Investment Limited and Futian Enterprise Limited[78] - These investments represent RMB-denominated funds for PPP infrastructure project joint ventures in mainland China, expected to be completed by 2025[78] - The effective interest rate for infrastructure project investments ranges from 10.2% to 10.7% per annum[78] Property, Plant and Equipment In H1 2019, the Group added approximately HKD 11,298,000 in property, plant, and equipment, a significant decrease compared to the same period last year Additions to Property, Plant and Equipment (HKD thousand) | Item | H1 2019 | H1 2018 | | :--- | :--- | :--- | | Additions to property, plant and equipment | 11,298 | 77,137 | Goodwill The carrying amount of goodwill is allocated to cash-generating units related to Gamma North America, Inc. and its North American subsidiaries, with recoverable amounts based on value-in-use calculations Goodwill Carrying Amount (HKD thousand) | Item | June 30, 2019 and December 31, 2018 | | :--- | :--- | | Cost | 159,707 | | Accumulated impairment | (21,558) | | Carrying amount | 138,149 | - The carrying amount of goodwill has been allocated to cash-generating units related to Gamma North America, Inc. and its North American segment subsidiaries[81] - The recoverable amount is calculated based on value-in-use, with key assumptions including discount rates, revenue growth rates, and projected gross profit margins[81] Trade and Other Receivables As of June 30, 2019, total trade and other receivables increased to HKD 1.341 billion, with trade receivables and retention money both rising, and an average credit period of no more than 90 days Aging Analysis of Trade and Other Receivables (HKD thousand) | Item | June 30, 2019 | December 31, 2018 | | :--- | :--- | :--- | | Trade receivables | | | | 0 – 30 days | 419,983 | 450,025 | | 31–60 days | 90,884 | 25,859 | | 61–90 days | 7,964 | 2,944 | | Over 90 days | 92,601 | 85,685 | | Subtotal | 611,432 | 564,513 | | Retention money receivable | 613,424 | 549,706 | | Other receivables | 116,604 | 59,656 | | Total trade and other receivables | 1,341,460 | 1,173,875 | - The Group generally grants customers an average credit period of no more than 90 days, with retention money receivable repayable approximately one year after the expiry of the project warranty period[83] Bank Borrowings As of June 30, 2019, total bank borrowings were HKD 724 million, mostly repayable within one year, with the average interest rate increasing to 3.98% Bank Borrowings Repayment Period (HKD thousand) | Repayment Period | June 30, 2019 | December 31, 2018 | | :--- | :--- | :--- | | Repayable on demand or within one year | 511,771 | 505,178 | | Repayable in the second year | 482 | 455 | | Repayable in the third to fifth years | 201,575 | 201,485 | | Repayable over five years | 9,907 | 9,806 | | Total borrowings | 723,735 | 716,924 | Bank Borrowings by Currency (HKD thousand) | Currency | June 30, 2019 | December 31, 2018 | | :--- | :--- | :--- | | HKD | 280,000 | 280,000 | | CAD | 23,063 | 13,071 | | USD | 420,672 | 423,853 | | Total | 723,735 | 716,924 | - The average interest rate for bank loans was 3.98% as of June 30, 2019 (December 31, 2018: 3.82%)[85] Trade and Other Payables and Accrued Expenses As of June 30, 2019, total trade and other payables and accrued expenses increased to HKD 1.210 billion, with both trade payables and retention money payable showing growth Aging Analysis of Trade and Other Payables and Accrued Expenses (HKD thousand) | Item | June 30, 2019 | December 31, 2018 | | :--- | :--- | :--- | | Trade payables | | | | 0 – 30 days | 753,812 | 510,174 | | 31–60 days | 26,840 | 27,294 | | Over 60 days | 64,898 | 175,444 | | Subtotal | 845,550 | 712,912 | | Retention money payable | 229,717 | 189,179 | | Other payables and accrued expenses | 135,087 | 147,608 | | Total | 1,210,354 | 1,049,699 | - As of June 30, 2019, retention money payable expected to be due after twelve months amounted to approximately HKD 95,905,000[87] Share Capital As of June 30, 2019, the Company's total issued and fully paid share capital comprised 2,155,545,000 ordinary shares of HKD 0.01 each, amounting to HKD 21,555,000 Share Capital Information | Item | June 30, 2019 | December 31, 2018 | | :--- | :--- | :--- | | Number of issued and fully paid shares (thousand shares) | 2,155,545 | 2,155,545 | | Amount (HKD thousand) | 21,555 | 21,555 | Commitments As of June 30, 2019, the Group's capital commitments for property, plant, and equipment under construction, contracted but not provided for, amounted to HKD 1,880,000 Contracted but Not Provided For Commitments (HKD thousand) | Item | June 30, 2019 | December 31, 2018 | | :--- | :--- | :--- | | Construction in progress for property, plant and equipment | 1,880 | 18,265 | Related Party Transactions In H1 2019, related party transactions included receiving engineering fees of HKD 731 million and service income of HKD 18.59 million from group entities, and paying service fees of HKD 13.80 million to group entities Related Party Transactions (For the six months ended June 30, HKD thousand) | Item | 2019 | 2018 | | :--- | :--- | :--- | | Engineering fees received from group entities | 730,796 | 358,183 | | Service income received from group entities | 18,592 | 18,615 | | Service fees paid to group entities | 13,800 | 18,849 | Other Information This section covers interim dividend details, share register closure, share capital, share options, directors' and major shareholders' interests, and corporate governance compliance Interim Dividend The Board declared an interim dividend of HKD 0.012 cents per share, payable on October 4, 2019, to shareholders registered on September 6, 2019 Interim Dividend Distribution Details | Metric | 2019 | 2018 | | :--- | :--- | :--- | | Interim Dividend Per Share | 0.012 cents | 0.010 cents | | Payment Date | October 4, 2019 | Not applicable | | Record Date | September 6, 2019 | Not applicable | Closure of Register of Members To determine eligibility for the interim dividend, the Company's register of members will be closed from September 5 to September 6, 2019 - The register of members will be closed from September 5 to September 6, 2019 (both dates inclusive)[92] - Shareholders wishing to qualify for the interim dividend must lodge all transfer documents for registration by 4:30 p.m. on September 4, 2019[92] Share Capital As of June 30, 2019, the Company's total issued share capital consisted of 2,155,545,000 ordinary shares with a par value of HKD 0.01 each Total Issued Share Capital | Date | Total Ordinary Shares (shares) | Par Value Per Share | | :--- | :--- | :--- | | June 30, 2019 | 2,155,545,000 | HKD 0.01 | Share Options The Company adopted a share option scheme on March 10, 2010, valid for ten years, with no options granted, exercised, cancelled, or lapsed during H1 2019, and no outstanding options at period-end - The Company adopted a share option scheme on March 10, 2010, with a validity period of ten years[93] - During the six months ended June 30, 2019, no share options were granted to or exercised by any directors, chief executives, or employees, nor were any share options cancelled or lapsed[93] - As of January 1, 2019, and June 30, 2019, there were no outstanding share options under the scheme[93] Directors' and Chief Executive's Interests and Short Positions in Shares, Underlying Shares and Debentures As of June 30, 2019, certain directors held long positions in the Company's shares and shares of its associated corporations, including China State Construction Engineering Corporation Limited Long Positions in Shares of the Company As of June 30, 2019, Directors Zhang Haipeng, Wu Mingqing, Chen Shanhong, and Huang Jiang held beneficial ownership in the Company's shares Directors' Long Positions in Shares of the Company (June 30, 2019) | Director's Name | Capacity | Nature of Interest | Number of Shares | Percentage of Issued Shares | | :--- | :--- | :--- | :--- | :--- | | Zhang Haipeng | Beneficial Owner | Personal Interest | 3,078,000 | 0.143% | | Wu Mingqing | Beneficial Owner | Personal Interest | 5,000,000 | 0.232% | | Chen Shanhong | Beneficial Owner | Personal Interest | 50,000 | 0.002% | | Huang Jiang | Beneficial Owner | Personal Interest | 3,000,000 | 0.139% | Interests and Short Positions in Shares, Underlying Shares and Debentures of Associated Corporations Directors Zhang Haipeng, Wu Mingqing, Wang Hai, Huang Jiang, and Chen Shanhong held long positions in shares of associated corporations, primarily China State Construction Engineering Corporation Limited and China State Construction International Holdings Limited - Zhang Haipeng, Wu Mingqing, Wang Hai, and Huang Jiang held A shares of China State Construction Engineering Corporation Limited, while Chen Shanhong held ordinary shares of China State Construction International Holdings Limited[96] - All interests in China State Construction Engineering Corporation Limited A shares were granted by China State Construction Engineering Corporation Limited under its share incentive scheme[96] Substantial Shareholders' Interests and Short Positions in Shares and Underlying Shares of the Company As of June 30, 2019, Gabo Holdings Limited and its parent companies, including China State Construction International Holdings Limited, held a 74.06% long position in the Company's shares Substantial Shareholders' Long Positions in Shares of the Company (June 30, 2019) | Shareholder Name | Capacity | Number of Ordinary Shares Held | Total | Percentage of Issued Shares (1) | | :--- | :--- | :--- | :--- | :--- | | Gabo Holdings Limited ("Gabo") | Beneficial Owner | 1,596,403,279 | 1,596,403,279 | 74.06 | | China State Construction International Holdings Limited ("CSCI") (2) | Interest in controlled corporation | 1,596,403,279 | 1,596,403,279 | 74.06 | | China Overseas Holdings Limited ("COHL") (2) | Interest in controlled corporation | 1,596,403,279 | 1,596,403,279 | 74.06 | | China State Construction Engineering Corporation Limited ("CSCEC") (2) | Interest in controlled corporation | 1,596,403,279 | 1,596,403,279 | 74.06 | | China State Construction Group Co., Ltd. ("CSCG") (2) | Interest in controlled corporation | 1,596,403,279 | 1,596,403,279 | 74.06 | - Gabo Holdings Limited is a wholly-owned subsidiary of China State Construction International Holdings Limited, which is approximately 64.66% owned by China Overseas Holdings Limited, a wholly-owned subsidiary of China State Construction Engineering Corporation Limited, which in turn is a subsidiary of China State Construction Group Co., Ltd.[99] Purchase, Sale or Redemption of the Company's Listed Securities During the six months ended June 30, 2019, neither the Company nor its subsidiaries purchased, sold, or redeemed any of the Company's listed securities - During the six months ended June 30, 2019, neither the Company nor any of its subsidiaries purchased, sold, or redeemed any of the Company's listed securities[101] Corporate Governance The Group complied with the Corporate Governance Code throughout the reporting period, with the Vice Chairman and CEO presiding over the AGM due to the Chairman's other commitments - The Group has complied with all code provisions of the Corporate Governance Code as set out in Appendix 14 of the Listing Rules throughout the reporting period[101] - Mr. Zhang Haipeng, Chairman and Non-executive Director, was unable to attend the Annual General Meeting held on May 29, 2019, due to other business commitments, and Mr. Wu Mingqing, Vice Chairman and Chief Executive Officer, chaired the meeting[101] Directors' Securities Transactions The Company adopted the Model Code for Securities Transactions by Directors of Listed Issuers, and all directors confirmed compliance with the code during the reporting period - The Company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers as its code of conduct for directors' securities transactions[102] - All directors have confirmed that all their securities transactions during the reporting period complied with the Model Code[102] Review of Accounts The Audit Committee, comprising three independent non-executive directors, has reviewed the Company's and its subsidiaries' unaudited condensed consolidated financial statements for the six months ended June 30, 2019 - The Audit Committee, comprising three independent non-executive directors, has reviewed the unaudited condensed consolidated financial statements of the Company and its subsidiaries for the six months ended June 30, 2019[103]