中国建筑兴业(00830) - 2019 - 年度财报

Company Overview Company Profile and Strategy China State Construction Development Holdings Limited upholds core values of integrity, innovation, pragmatism, and excellence, providing high-end curtain wall and building facade solutions as a global leader in specialized engineering - The company's core values are "integrity, innovation, pragmatism, and excellence," with a business philosophy of "quality assurance, value creation"[4] - The company is committed to sustainable development, aiming to become a "modern international group driven by traditional and new businesses"[4] - The company provides one-stop curtain wall and building facade solutions for high-end property development projects, operating globally across North America, Greater China, Australia, and the UK[20] 2019 Annual Milestones In 2019, China State Construction Development Holdings Limited underwent a name change, completed several infrastructure and thermal power operations acquisitions, secured significant construction projects, deepened internal synergy, and actively fulfilled social responsibilities - On January 7, the company announced a proposed acquisition of all issued shares and related shareholder loans of VALUE IDEA INVESTMENTS LIMITED and Futian Enterprise Limited (Nanchang Two Bridges Infrastructure), and a proposed change of company name[33] - On April 11, the company's English name changed from "FAR EAST GLOBAL GROUP LIMITED" to "CHINA STATE CONSTRUCTION DEVELOPMENT HOLDINGS LIMITED," and its Chinese name changed from "远东环球集团有限公司" to "中国建筑兴业集团有限公司"[33] - On October 14, the company announced a proposed acquisition of all issued shares and remaining domestic interests of China Overseas Public Utilities Investment Co., Ltd. for a total consideration of HKD 673.58 million[41] - On December 30, the acquisition of all registered capital of Shenyang Huanggu Thermal Power Co., Ltd. was completed[42] Overview of Major Ongoing Projects The company has numerous significant ongoing engineering projects globally, including mainland China, Hong Kong, Macau and other regions, the UK, and North America, covering residential, commercial, hospital, and public buildings, with contract values ranging from tens to hundreds of millions of HKD, and estimated completion years primarily between 2020 and 2023 Major Ongoing Facade Engineering Projects (Partial) | Project Name | Project Type | Estimated Total Contract Value (HKD millions) | Estimated Completion Year | | :------- | :------- | :------------------------ | :----------- | | Shenzhen Huawei Production Center G1 Building Renovation Project | Commercial | 108.8 | 2021 | | 2 Murray Road, Central, Hong Kong | Commercial | 636.0 | 2023 | | City Road, London, UK | Residential | 486.2 | 2021 | | The One, Toronto, Canada | Residential | 533.2 | 2021 | Financial Performance Financial Summary In fiscal year 2019, the company achieved steady growth in turnover, but profit attributable to owners of the company slightly decreased due to a one-off factory relocation expense, with basic earnings per share also declining and total annual dividends at HKD 1.2 cents per share, while total assets and equity attributable to owners of the company both increased Key Financial Data for Fiscal Years 2015-2019 (HKD thousands) | Indicator | 2015 | 2016 | 2017 | 2018 (Restated) | 2019 | | :--- | :----- | :----- | :----- | :------------ | :----- | | Turnover | 3,151,779 | 3,451,152 | 3,755,581 | 4,243,167 | 4,619,412 | | Profit attributable to owners of the company | 265,483 | 118,900 | 161,714 | 182,780 | 175,560 | | Total assets | 5,492,964 | 5,810,264 | 6,437,557 | 6,739,198 | 7,053,994 | | Equity attributable to owners of the company | 2,341,823 | 1,511,538 | 1,605,457 | 968,556 | 1,058,513 | | Basic earnings per share (HK cents) | 12.32 | 5.52 | 7.50 | 8.48 | 8.14 | | Dividends (HK cents) | 1.2 | 1.6 | 2.0 | 2.2 | 1.2 | - In 2019, construction engineering business accounted for 81% of segment revenue, while operation management business accounted for 19%[30] Overall Performance In fiscal year 2019, the Group's total revenue increased by 8.9% to HKD 4.619 billion, but profit attributable to shareholders decreased by 4.0% to HKD 176 million due to a one-off factory relocation expense; excluding this expense, core business profit grew by 46.6%, and the company further expanded its operation management business through acquisitions of Nanchang Two Bridges Infrastructure and Shenyang Huanggu Thermal Power businesses - The Group's total revenue reached HKD 4.619 billion, an 8.9% increase compared to the previous year (restated)[79] - Profit attributable to shareholders was HKD 176 million, a 4.0% decrease compared to the previous year (restated)[79] - Excluding the one-off factory relocation expense of HKD 42 million, core business profit was HKD 218 million, a 46.6% increase compared to the previous year's un-restated profit attributable to owners of the Group[79] - Basic earnings per share were HKD 8.14 cents, a 4.0% decrease compared to the previous year's basic earnings per share[79] - During the year, the acquisition of Nanchang Bridge, Nanchang China Overseas New Bayi Bridge operation management businesses, and Shenyang Huanggu Thermal Power operation business was completed, with total considerations of HKD 295 million and HKD 674 million, respectively[79] Segment Analysis In fiscal year 2019, facade engineering business revenue grew steadily, but operating profit decreased due to a one-off factory relocation expense; general contracting business revenue also saw robust growth, yet increased construction costs led to reduced profit, while operation management business significantly increased both revenue and operating profit, benefiting from newly acquired projects Segment Revenue and Operating Profit for Fiscal Years 2018-2019 (HKD thousands) | Segment Business | 2019 Revenue | 2018 Revenue (Restated) | 2019 Operating Profit | 2018 Operating Profit (Restated) | | :------- | :--------- | :---------------- | :------------- | :-------------------- | | Facade Engineering | 2,786,000 | 2,518,000 | 123,000 | 144,000 | | General Contracting Business | 941,000 | 851,000 | 47,000 | 64,000 | | Operation Management Business | 893,000 | 874,000 | 199,000 | 123,000 | - Operating profit for facade engineering business decreased primarily due to a one-off factory relocation expense of HKD 42 million from the closure of factories in Shenzhen, China, and Miami, USA, and new projects awarded in 2019 being in early construction stages[80] - Profit for general contracting business declined mainly due to increased construction costs for certain projects[81] - Operation management business revenue and operating profit grew, benefiting from contributions from newly acquired Shenyang Huanggu, Nanchang China Overseas New Bayi Bridge, and Nanchang Bridge[82] - Administrative expenses increased by 15.9% to HKD 248 million, mainly due to the acquisition of Shenyang Huanggu and the restructuring of North American business units[82] - Finance costs rose to HKD 39 million (2018 restated: HKD 29 million) due to increased bank borrowings[83] New Contracts and Projects in Progress In 2019, the Group secured 31 new contracts with a total contract value of HKD 5.054 billion, with Asia Pacific and Greater China regions accounting for 90%; as of year-end, the total contract value of projects in progress was HKD 15.279 billion, with outstanding contract value of HKD 8.196 billion - In 2019, a total of 31 projects were secured, with a total contract value of HKD 5.054 billion, achieving the annual target[65][84] - As of December 31, 2019, the total contract value of projects in progress was HKD 15.279 billion, with outstanding contract value of HKD 8.196 billion[66][84] New and Outstanding Contract Values in 2019 (HKD billions) | Segment Business | New Contract Value | Outstanding Contract Value (Total Contract Value) | Outstanding Contract Value (Uncompleted Contract Value) | | :------- | :--------- | :-------------------- | :-------------------- | | Glass Curtain Wall | 4.538 | 12.051 | 6.956 | | Building Construction Engineering | 0.016 | 2.362 | 0.724 | | Operation Management | 0.500 | 0.866 | 0.516 | | Total | 5.054 | 15.279 | 8.196 | Liquidity and Financial Resources As of December 31, 2019, the Group's cash and cash equivalents totaled HKD 827 million, with total borrowings of HKD 868 million, resulting in a net gearing ratio of approximately 3.9%, indicating a sound financial position, further supported by sufficient unutilized bank credit facilities of HKD 2.051 billion for future business development - As of December 31, 2019, cash and cash equivalents totaled HKD 827 million (2018 restated: HKD 697 million)[69][86] - Total borrowings were HKD 868 million (2018 restated: HKD 750 million), with approximately 44% denominated in HKD, 6% in CAD, and 50% in USD[69][86] - The net gearing ratio decreased from 5.5% in 2018 (restated) to 3.9% in 2019, indicating a sound financial position[69][86][326] - The Group had committed but unutilized credit facilities and performance bonds totaling HKD 2.051 billion[69][86] Total Borrowings Maturity Profile in 2019 (HKD thousands) | Maturity | December 31, 2019 | | :------- | :------------- | | Repayable on demand or within one year | 655,780 | | More than one year but not exceeding two years | 200,494 | | More than two years but not exceeding five years | 11,264 | | Over five years | — | | Total Borrowings | 867,538 | Dividend Policy Considering the future development needs of the operation management business, the Board of Directors recommended not to declare a final dividend, with the total annual dividend amounting to HKD 1.2 cents per share, in line with the company's policy to distribute approximately 30% of distributable profit annually, paid semi-annually - The Board of Directors recommended not to declare a final dividend, with the total annual dividend amounting to HKD 1.2 cents per share[59] - The company's dividend policy is to distribute approximately 30% of distributable profit semi-annually[125] Corporate Governance and Risk Management Board of Directors and Committees The company's Board of Directors, led by Chairman and Non-executive Director Mr. Zhang Haipeng, has established an Audit Committee, Remuneration Committee, and Nomination Committee to ensure a robust corporate governance structure, with reasonable committee compositions and independent non-executive directors playing a crucial role Board of Directors Members | Position | Name | | :--- | :--- | | Chairman and Non-executive Director | Zhang Haipeng | | Executive Directors | Wu Mingqing (Vice Chairman and CEO), Wang Hai, Chen Shanhong (resigned on March 18, 2020) | | Non-executive Director | Huang Jiang | | Independent Non-executive Directors | Zhou Jinsong, HONG Winn, Kwong Sum Yee | Committee Composition | Committee | Chairman | Members | | :--- | :--- | :--- | | Audit Committee | Zhou Jinsong | HONG Winn, Kwong Sum Yee | | Remuneration Committee | Zhou Jinsong | Zhang Haipeng, Wu Mingqing, HONG Winn, Kwong Sum Yee | | Nomination Committee | Zhang Haipeng | Wu Mingqing, Zhou Jinsong, HONG Winn, Kwong Sum Yee | Company Information The company is incorporated in the Cayman Islands with its principal place of business in Hong Kong, audited by PricewaterhouseCoopers, with legal counsel provided by Mayer Brown, and its shares are listed under stock code 00830 with an official website - The company's registered office is in the Cayman Islands, and its head office and principal place of business in Hong Kong are located at 16/F, Eight Commercial Tower, 8 Sun Yip Street, Chai Wan, Hong Kong[46] - The auditor is PricewaterhouseCoopers, and the legal counsel is Mayer Brown[46] - The company's stock code is 00830, and its website is www.cscd.com.hk[46](index=46&type=chunk) Corporate Governance Framework The Group adheres to corporate governance principles of integrity, honesty, transparency, and efficiency, strictly complying with laws, regulations, and listing rules, continuously improving its governance structure, policy system, internal control mechanisms, and management systems to ensure good corporate governance, with the Board committed to maintaining high standards of business ethics and a healthy corporate culture while proactively adjusting business strategies to respond to market changes - The Group adheres to corporate governance principles of "integrity, honesty, transparency, and efficiency," strictly complying with laws, regulations, and listing rules[66] - The Board of Directors is committed to maintaining high standards of business ethics, a healthy corporate culture, and good corporate governance practices, while proactively adjusting business strategies to respond to market changes[67] Internal Control and Risk Management The Group continuously improves its internal control management system to enhance risk prediction and control effectiveness, strengthening supervision over key areas and critical matters to prevent operational risks, while also monitoring overseas market policies and exchange rate trends, concentrating resources on core cities to mitigate political and exchange rate risks - The Group continuously improves its internal control management system to enhance risk prediction capabilities and control effectiveness, strengthening supervision over key areas and critical matters[68] - The Group monitors overseas market policies and exchange rate trends, concentrating resources on core cities in Europe and America to mitigate political and exchange rate risks[68] Financial Management In 2019, the Group strengthened financial management, improved capital utilization efficiency, actively explored financing channels, and accelerated project receivables collection to enhance capital turnover, with cash and cash equivalents of HKD 827 million, total borrowings of HKD 868 million, and a net gearing ratio of 3.9% at year-end, indicating a sound financial position - In 2019, financial management was strengthened to improve capital utilization efficiency, actively explore financing channels, and accelerate project receivables collection to enhance capital turnover[69] - As of December 31, 2019, cash and cash equivalents totaled HKD 827 million, total borrowings were HKD 868 million, and the net gearing ratio was 3.9%[69] - The Group had committed but unutilized credit facilities and performance bonds totaling HKD 2.051 billion, indicating a sound financial position[69] Human Resources Management The Group adheres to a people-oriented management philosophy, prioritizing talent acquisition, retention, and development through comprehensive systems for recruitment, training, performance appraisal, and compensation incentives to enhance employee satisfaction and work efficiency, implementing a lecturer system, refining KPI assessments, and continuously promoting various incentive programs, with a total workforce of 3,197 employees at year-end - The Group adheres to a people-oriented approach, prioritizing talent acquisition, retention, and development through comprehensive systems for recruitment, training, performance appraisal, and compensation incentives to enhance employee satisfaction and work efficiency[70] - During the year, a lecturer system was implemented to enrich training and communication methods, and the KPI assessment system continued to be refined[70] - In Hong Kong, Macau, and mainland China, initiatives such as the "Site Target Management Responsibility System" and "Design-Build Incentive System" were continuously promoted to enhance employee motivation and work efficiency[70] - As of December 31, 2019, the Group had a total of 3,197 employees[70] Environmental, Social and Governance (ESG) Report About This Report This report is prepared in accordance with Appendix 27 "Environmental, Social and Governance Reporting Guide" of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited, covering the Group's curtain wall, general contracting, and supervision businesses from January 1 to December 31, 2019, with operations in Hong Kong, the Pearl River Delta, Shanghai, the United States, and Canada, and the Group values stakeholder communication, establishing multiple channels to listen to needs and opinions - The report covers the Group's curtain wall, general contracting, and supervision businesses from January 1 to December 31, 2019[131] - Operations are located in Hong Kong, the Pearl River Delta, Shanghai, the United States, and Canada, among other regions[131] - The Group values stakeholder communication, establishing multiple channels including company newsletters, employee training, customer satisfaction surveys, and shareholder meetings to listen to needs and opinions[133] Sustainable Development Governance The Group established a Sustainable Development Management Committee in 2017 and formulated the "Sustainable Development Management Measures," actively introducing sustainable operating models, identifying material issues, and coordinating stakeholder communication, while complying with environmental laws and regulations, reducing office waste and carbon emissions through "Green Office Initiative" and "Green Office Guidelines," and implementing low-carbon energy-saving designs, centralized procurement, and factory prefabrication in production to minimize environmental impact - The Group established a Sustainable Development Management Committee in 2017 and formulated the "Sustainable Development Management Measures," committed to implementing sustainable development concepts[135] - The Group has "China State Construction Development Green Office Initiative" and "Green Office Guidelines," which are reviewed and updated annually to reduce office waste and carbon emissions[138] - Sustainable development measures are implemented in production, including curtain wall product design incorporating low-carbon energy-saving features (high light transmittance, low heat reflection glass), primarily sourced from recyclable materials[140] - Centralized procurement is practiced to reduce transportation carbon emissions, unitized curtain wall products are factory-processed to reduce on-site waste, and leftover engineering materials are reused[140] - Office waste is reduced through waste sorting and paper recycling, and production plant waste is entrusted to recycling organizations for reuse[143] Employment and Labor Practices The Group regards employees as a vital asset, strictly adhering to employment laws and regulations, prohibiting child or forced labor, and maintaining standard recruitment processes and regular review mechanisms, emphasizing equal employment opportunities with an employee handbook safeguarding rights related to remuneration, working hours, holidays, and anti-discrimination; to ensure employee safety and health, the Group provides medical coverage, regular health check-ups, safety training, and safety inspections, and has established a Safety Committee, while also focusing on employee development through internal and external training subsidies and organizing employee activities to foster team spirit - Strict compliance with employment-related laws and regulations, absolute prohibition of child or forced labor, and established standard recruitment processes and regular review practices[145] - Emphasis on equal employment opportunities, with the employee handbook covering policies on remuneration, dismissal, recruitment, promotion, working hours, holidays, equal opportunities, diversity, and anti-discrimination[147] - To ensure employee safety and health, the company provides corporate medical insurance, organizes regular employee health check-ups, safety training, and safety inspections, and has established a Safety Committee[148] - Internal training, subsidies for external training courses, and examination leave are provided, along with subsidies for professional society membership fees and special bonuses for obtaining professional qualifications[149] - Regular employee recreation days, "Company Day" events, and participation in "Community Chest Walk for Millions" are organized to strengthen team spirit and alleviate work pressure[150] Operational Practices and Product Responsibility The Group adheres to a business philosophy of "quality assurance, value creation," strictly complying with regulations and customer requirements, with its production facilities certified under ISO 9001:2015 Quality Management System, prioritizing customer satisfaction through annual surveys and a complaint handling mechanism, while in supply chain management, the Group regularly reviews supplier expenditure data and updates its supplier roster annually, using environmental, safety, quality, and reputation as selection criteria, and is committed to integrity, strictly prohibiting corruption and bribery, and providing anti-corruption training - Production facilities have obtained ISO 9001:2015 quality management system certification, with design managers designing curtain walls in accordance with technical requirements from the Hong Kong Buildings Department and architects[154] - Emphasis on and protection of intellectual property rights, with the company's ventilated waterproof louvers having passed tests meeting US specifications and possessing independent intellectual property rights[154] - An annual customer satisfaction survey is conducted at year-end, and a customer complaint handling mechanism is in place; no significant product or service complaints were received during the reporting period[155] - The Procurement Department updates the supplier roster annually, using environmental protection, safety, supply quality, past service performance, and reputation as selection criteria[156] - The Group is committed to integrity, absolutely not tolerating any corruption or bribery, and provides anti-corruption training[158] Community Investment and Social Inclusion The Group actively participates in community welfare activities, promoting the concept of equality and inclusion through corporate efforts, encouraging employees to engage in diverse community charity, cultural, and environmental promotion activities, collaborating annually with the registered charity "Sense" to organize inclusive events, and participating in social mutual aid activities such as the "Community Chest Walk for Millions," while receiving multiple awards and recognitions for its environmental protection and social responsibility efforts - Active participation in community welfare activities, promoting the concept of equality and inclusion through corporate efforts, and encouraging employees to engage in diverse community charity, cultural, and environmental promotion activities[158] - Annual collaboration with the registered charity "Sense" to organize inclusive activities, such as the "Inclusive Artists" charity workshop held at Tung Wah Group of Hospitals S.C. Gaw Memorial College on October 26, 2019[159] - Participation in the volunteer rice dumpling distribution event organized by China Overseas Group and annual participation in the "Community Chest Walk for Millions" event[160] Major Awards and Recognitions in 2019 | Category | Award or Recognition | Awarding Body | | :--- | :------- | :------- | | Environmental Protection | "Green Office 3+" and "Healthy Workplace" Labels | World Green Organisation | | Social Responsibility | "Caring Company 5+" Label | The Hong Kong Council of Social Service | | Social Responsibility | "Hong Kong Corporate Citizenship Program — Corporate Citizen Recognition 2020" Label | Hong Kong Productivity Council | ESG Performance Indicators In 2019, the Group's environmental performance included a total of 0.005 tons of hazardous waste and 5,095 tons of non-hazardous waste, with nitrogen oxides emissions of 790 tons; total greenhouse gas emissions were 3,368 tons of CO2 equivalent, a 36.2% year-on-year decrease, total energy consumption was 6,449 thousand kWh, and total water consumption was 62,585 tons, while in social performance, the total number of employees was 3,197, with a turnover rate of 24.9%, and 952 lost workdays due to occupational injuries Waste Disposal Volume in 2019 | Waste Category | Total Volume (tons) | Density (tons/employee) | | :------- | :------- | :------------------ | | Hazardous Waste | 0.005 | 0.000002 | | Non-hazardous Waste | 5,095 | 1.59 | Exhaust Gas Emissions in 2019 (tons) | Type of Exhaust Gas Emission | Emission Volume | | :------- | :----- | | Sulfur Oxides | 4 | | Nitrogen Oxides | 790 | | Particulate Matter | 0.06 | Greenhouse Gas Emissions and Energy Consumption in 2019 | Indicator | Value | | :--- | :--- | | Total Greenhouse Gas Emissions (CO2 equivalent) | 3,368 tons | | Greenhouse Gas Density (CO2 equivalent/employee) | 1.05 | | Total Energy Consumption | 6,449 thousand kWh | | Energy Consumption Density (thousand kWh/employee) | 2.02 | | Total Water Consumption | 62,585 tons | | Water Consumption Density (tons/employee) | 19.6 | - Total greenhouse gas emissions in 2019 decreased from 5,279 tons in the previous year to 3,368 tons, a 36.2% reduction, primarily due to the Group's various green policies to reduce energy consumption[168] Employee Count and Turnover Rate in 2019 | Category | Total Employees | Employees Turnover | Employee Turnover Rate | | :--- | :------- | :--------- | :----------- | | Total | 3,197 | 797 | 24.9% | - In 2019, there were 0 work-related fatalities, and 952 lost workdays due to occupational injuries[171] Directors' Report Principal Activities and Performance Allocation The company's principal activities are investment holding and providing corporate management services, with its major subsidiaries engaged in general contracting, facade engineering, and operation management services; in 2019, the Group achieved a profit of HKD 176 million, and the Board of Directors recommended no final dividend, with a total annual dividend of HKD 1.2 cents per share - The company's principal activities are investment holding and providing corporate management services, with major subsidiaries engaged in general contracting, facade engineering, and operation management services[173] - Profit attributable to owners of the company for 2019 was HKD 176 million[174] - The Board of Directors did not recommend a final dividend for 2019, with a total annual dividend of HKD 1.2 cents per share, amounting to HKD 25.867 million[174] Principal Risks and Uncertainties The Group faces various risks including foreign exchange, interest rate, market, bidding, project implementation, supply chain, talent, business conduct, and legal risks, which are managed and mitigated through measures such as natural hedging, prudent bidding strategies, improved project management, establishing long-term partnerships, talent development, and a robust risk assessment system Principal Risks and Management Measures | Risk Category | Risk Description | Management Measures | | :------- | :------- | :------- | | Foreign Exchange | Operating units conduct sales or purchases in non-functional currencies, primarily involving USD, RMB, AUD, CAD, and GBP. | Closely monitor exchange rate movements and adopt natural hedging strategies, currently without a formal hedging policy. | | Interest Rate | Interest rate risk is primarily associated with borrowings bearing floating interest rates. | Develop policies and procedures to assess, record, and monitor interest rate risk, considering hedging when necessary. | | Market | Macroeconomic, political changes, or new infrastructure spending developments may affect projects. | Strategy focuses on more flexible and stable markets, broad global market involvement, and continuous business model improvement. | | Bidding | Ability to identify, price, and implement profitable orders. | Follow strict estimation and bidding procedures, with defined authorization levels, and conduct post-bid reviews. | | Project Implementation | Complex design, engineering, and construction risks of construction projects. | Clearly defined operating procedures, identification, quantification, and mitigation measures, and enforcement of minimum project standards. | | Supply Chain | High reliance on supply chain partners, facing financial, technical, quality, safety, and ethical compliance risks. | Establish long-term partnerships, develop contingency plans, select preferred suppliers, and avoid over-reliance. | | Talent | Failure to recruit and retain excellent management personnel and employees. | Recruit based on competence and leadership, regularly review succession plans, and provide appropriate remuneration and incentives. | | Business Conduct | Risks of fraud, bribery, or corruption, especially in the construction industry. | A series of risk assessments, due diligence, and procurement controls to detect and minimize risks. | | Legal | Compliance with complex, stringent, and evolving legal, tax, and regulatory requirements. | Supervision by qualified internal personnel and external legal advisors, development of comprehensive policies, guidelines, and manuals, and provision of training. | Compliance with Relevant Laws and Regulations The Group is committed to complying with all applicable laws and regulations, including industry-specific construction regulations, general environmental, employment, anti-competition, and anti-corruption laws, as well as the Listing Rules for public companies, ensuring compliance through internal controls, approval procedures, and training - The Group is committed to complying with all applicable laws and regulations, including industry-specific construction regulations, general environmental, employment, anti-competition, and anti-corruption laws[180] - As a listed company, it must comply with the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited, the Codes on Takeovers and Mergers and Share Buy-backs, and the Securities and Futures Ordinance[180] - Compliance with all applicable laws and regulations is ensured through internal controls and approval procedures, training, and supervision by designated personnel[180] Directors and Senior Management Information The report lists the directors for the current year and up to the report date, confirming the independence of all independent non-executive directors; the Board is independent of the controlling company, and directors' interests in competing businesses are disclosed, with directors holding interests in company shares and related shares, and a share option scheme in place to incentivize employees - The list of directors includes Mr. Zhang Haipeng (Chairman and Non-executive Director), Mr. Wu Mingqing (Vice Chairman and Chief Executive Officer), Mr. Wang Hai, Mr. Chen Shanhong (resigned), Mr. Huang Jiang (Non-executive Director), and independent non-executive directors Mr. Zhou Jinsong, Mr. Hong Winn, and Ms. Kwong Sum Yee[183][184] - The company has received annual confirmations of independence from all independent non-executive directors and considers each of them to be independent[184] - Mr. Zhang Haipeng, Mr. Wu Mingqing, Mr. Chen Shanhong, and Mr. Huang Jiang hold directorships and/or senior management positions in the controlling company and/or its subsidiaries, which are engaged in construction, infrastructure investment, and related businesses[186] Directors' Long Positions in the Company's Shares (December 31, 2019) | Director Name | Capacity | Nature of Interest | Number of Ordinary Shares Held | 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 | - The company has adopted a share option scheme aimed at rewarding or compensating eligible participants and recruiting and retaining outstanding talent; no directors or chief executives were granted or exercised share options during the year ended December 31, 2019[191][192] Major Shareholders and Connected Transactions As of December 31, 2019, Gabo Holdings Limited and its upstream holding companies (China State Construction International, China Overseas Group, China State Construction Engineering Corporation Limited, China State Construction Engineering Corporation) were the company's major shareholders, holding 74.06% of the shares; the report disclosed multiple transactions with related parties, including acquisitions and continuing connected transactions, confirming compliance with listing rule disclosure requirements Major Shareholders' Long Positions in the Company's Shares (December 31, 2019) | Shareholder Name | Capacity | Number of Ordinary Shares Held | Percentage of Issued Shares | | :------- | :--- | :------------- | :----------------- | | Gabo Holdings Limited | Beneficial Owner | 1,596,403,279 | 74.06 | | China State Construction International Holdings Limited | Interest in Controlled Corporation | 1,596,403,279 | 74.06 | | China Overseas Group Limited | Interest in Controlled Corporation | 1,596,403,279 | 74.06 | | China State Construction Engineering Corporation Limited | Interest in Controlled Corporation | 1,596,403,279 | 74.06 | | China State Construction Engineering Corporation | Interest in Controlled Corporation | 1,596,403,279 | 74.06 | - In 2019, the Group engaged in multiple connected transactions, including the acquisition of Value Idea Investments Limited and Futian Enterprise Limited, and the acquisition of Shenyang Huanggu Thermal Power Co., Ltd.[204][206] - Continuing connected transactions included subcontracting agreements and operation service agreements with China State Construction Engineering Corporation Limited and China State Construction International Holdings Limited, as well as engineering framework agreements with China Overseas Land & Investment Limited and China Overseas Property Holdings Limited, among others[209][211][213][219][222][223][225] - The independent non-executive directors have conducted an annual review of all continuing connected transactions and confirmed that they were entered into in the ordinary course of business, on normal commercial terms or better, and were fair and reasonable and in the overall interests of the company's shareholders[226] Major Customers and Suppliers In 2019, the Group's top five customers accounted for approximately 44.7% of turnover, with the largest customer, a subsidiary of the controlling shareholder, contributing approximately 16.9% of turnover, while the top five suppliers accounted for less than 30% of total purchases - In 2019, the Group's top five customers accounted for approximately 44.7% of the Group's turnover, with the largest customer, a subsidiary of the company's controlling shareholder, accounting for approximately 16.9% of the Group's turnover[202] - The Group's top five suppliers accounted for less than 30% of the Group's total purchases for the year[202] Auditor The consolidated financial statements for the year ended December 31, 2019, were audited by PricewaterhouseCoopers, and a resolution concerning the appointment of Ernst & Young as the company's auditor will be proposed at the 2020 Annual General Meeting - The consolidated financial statements for the year ended December 31, 2019, were audited by PricewaterhouseCoopers[203] - A resolution concerning the appointment of Ernst & Young as the company's auditor will be proposed at the 2020 Annual General Meeting[203] Independent Auditor's Report Audit Opinion and Basis PricewaterhouseCoopers issued an unmodified opinion on the consolidated financial statements of China State Construction Development Holdings Limited for the year ended December 31, 2019, deeming them to present a true and fair view of the Group's financial position, performance, and cash flows in accordance with Hong Kong Financial Reporting Standards, and to be properly prepared in compliance with the Companies Ordinance disclosure requirements, with the audit conducted in accordance with Hong Kong Standards on Auditing and confirming independence - The auditor believes that the consolidated financial statements present a true and fair view of the Group's consolidated financial position as of December 31, 2019, and its consolidated financial performance and consolidated cash flows for the year then ended, in accordance with Hong Kong Financial Reporting Standards[228] - The audit was conducted in accordance with Hong Kong Standards on Auditing issued by the Hong Kong Institute of Certified Public Accountants[229] - The auditor is independent of the Group in accordance with the Code of Ethics for Professional Accountants[230] Key Audit Matters The auditor identified three key audit matters: revenue recognition for construction contracts, due to management's significant subjective judgments on estimated revenue, costs, and project progress; recoverability of trade receivables and contract assets, given their material amounts and reliance on management's judgment regarding customer creditworthiness, financial condition, and future events; and the carrying amount of deferred tax assets for Gamma USA, Inc. and impairment assessment of goodwill for Gamma North America, Inc., as these involve significant assumptions such as future profit forecasts and discount rates - Key audit matters include revenue recognition for construction contracts, due to management's significant subjective judgments on estimated project revenue, costs, and progress[231][232] - Key audit matters also include the recoverability of trade receivables and contract assets, as they are the Group's most significant assets, and their recoverability assessment relies on management's significant subjective judgments regarding customer creditworthiness, financial difficulties, historical bad debt records, and future economic conditions[231][233][234] - The third key audit matter is the carrying amount of deferred tax assets for Gamma USA, Inc. and the impairment assessment of goodwill for Gamma North America, Inc., due to their material carrying amounts and reliance on significant assumptions such as future taxable profits, revenue growth rates, gross profit margins, and discount rates[231][235][237] Responsibilities of Directors and Governance for Consolidated Financial Statements Directors are responsible for preparing consolidated financial statements that give a true and fair view in accordance with Hong Kong Financial Reporting Standards and the disclosure requirements of the Companies Ordinance, and for internal controls, while also assessing the Group's ability to continue as a going concern; the auditor's objective is to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, exercising professional judgment and maintaining professional skepticism throughout the audit - The company's directors are responsible for preparing consolidated financial statements that give a true and fair view in accordance with Hong Kong Financial Reporting Standards and the disclosure requirements of the Companies Ordinance, and for internal controls[239] - Directors are responsible for assessing the Group's ability to continue as a going concern and using the going concern basis of accounting[239] - The auditor's objective is to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error[240] - The auditor exercises professional judgment and maintains professional skepticism throughout the audit, identifying and assessing the risks of material misstatement[240] Consolidated Financial Statements Consolidated Statement of Profit or Loss In fiscal year 2019, the Group's turnover was HKD 4.619 billion, with a gross profit of HKD 544 million; profit before tax was HKD 277 million, income tax expense was HKD 109 million, and profit for the year was HKD 168 million, with profit attributable to owners of the company at HKD 176 million and basic earnings per share of 8.14 HK cents Major Data from 2019 Consolidated Statement of Profit or Loss (HKD thousands) | Indicator | 2019 | 2018 (Restated) | | :--- | :----- | :------------ | | Turnover | 4,619,412 | 4,243,167 | | Gross profit | 544,064 | 486,073 | | Profit before tax | 276,913 | 252,208 | | Income tax expense | (109,173) | (73,519) | | Profit for the year | 167,740 | 178,689 | | Profit attributable to owners of the company | 175,560 | 182,780 | | Basic earnings per share (HK cents) | 8.14 | 8.48 | Consolidated Statement of Comprehensive Income In fiscal year 2019, the Group's profit for the year was HKD 168 million, with other comprehensive loss primarily from exchange differences on translation of foreign operations amounting to HKD 26.664 million; total comprehensive income for the year was HKD 141 million, of which total comprehensive income attributable to owners of the company was HKD 149 million Major Data from 2019 Consolidated Statement of Comprehensive Income (HKD thousands) | Indicator | 2019 | 2018 (Restated) | | :--- | :----- | :------------ | | Profit for the year | 167,740 | 178,689 | | Exchange differences on translation of foreign operations | (26,664) | (99,652) | | Total comprehensive income for the year, net of tax | 141,076 | 79,037 | | Total comprehensive income attributable to owners of the company | 148,880 | 83,844 | Consolidated Statement of Financial Position As of December 31, 2019, the Group's total non-current assets were HKD 2.461 billion, and total current assets were HKD 4.593 billion; total current liabilities were HKD 4.749 billion, and total non-current liabilities were HKD 1.247 billion, with equity attributable to owners of the company at HKD 1.125 billion, and total assets less current liabilities at HKD 2.305 billion Major Data from 2019 Consolidated Statement of Financial Position (HKD thousands) | Indicator | December 31, 2019 | December 31, 2018 (Restated) | | :--- | :------------- | :-------------------- | | Non-current assets | 2,461,154 | 2,315,494 | | Current assets | 4,592,840 | 4,423,704 | | Current liabilities | 4,748,706 | 4,069,372 | | Non-current liabilities | 1,246,775 | 1,701,270 | | Equity attributable to owners of the company | 1,125,325 | 1,027,564 | | Total assets less current liabilities | 2,305,288 | 2,669,826 | Consolidated Statement of Changes in Equity As of December 31, 2019, equity attributable to owners of the company was HKD 1.125 billion, an increase from HKD 1.028 billion at the beginning of the year, with changes in equity primarily influenced by profit for the year, foreign currency exchange differences, and dividend payments, and common control combination having a restatement impact on opening equity Major Data from 2019 Consolidated Statement of Changes in Equity (HKD thousands) | Indicator | January 1, 2019 (Restated) | December 31, 2019 | | :--- | :------------------ | :------------- | | Equity attributable to owners of the company | 1,027,564 | 1,125,325 | | Non-controlling interests | (59,008) | (66,812) | | Total Equity | 968,556 | 1,058,513 | | Profit/(Loss) for the year | — | 175,560 | | Exchange differences on translation of foreign operations | — | (26,680) | | Dividends paid | — | (51,734) | Consolidated Statement of Cash Flows In fiscal year 2019, the Group's net cash generated from operating activities was HKD 404 million, net cash used in investing activities was HKD 277 million, and net cash generated from financing activities was HKD 14.374 million; cash and cash equivalents at the end of the period amounted to HKD 827 million, an increase of HKD 142 million from the beginning of the period Major Data from 2019 Consolidated Statement of Cash Flows (HKD thousands) | Indicator | 2019 | 2018 (Restated) | | :--- | :----- | :------------ | | Net cash generated from operating activities | 404,395 | 379,385 | | Net cash used in investing activities | (276,825) | (285,958) | | Net cash generated from/(used in) financing activities | 14,374 | (50,401) | | Increase in cash and cash equivalents | 141,944 | 43,026 | | Cash and cash equivalents at end of period | 826,576 | 696,736 | - Major non-cash transactions included the acquisition of 100% equity and shareholder loans of Futian Enterprise Limited and Value Idea Investments Limited, with a total consideration of HKD 295 million, of which HKD 117 million was settled through amounts payable to group companies[255] Notes to the Consolidated Financial Statements General Information and Basis of Preparation The Group primarily engages in general contracting, facade engineering, and operation management services, with the company incorporated in the Cayman Islands and listed on the Hong Kong Stock Exchange; in 2019, the company's name changed from "Far East Global Group Limited" to "China State Construction Development Holdings Limited," and the consolidated financial statements are prepared on a historical cost basis and going concern assumption, with comparative figures restated due to the acquisition of 100% equity in Shenyang Huanggu Thermal Power Co., Ltd. through a common control combination on December 30, 2019 - The company's name was officially changed from Far East Global Group Limited to China State Construction Development Holdings Limited in 2019[256] - The company's immediate holding company is Gabo Holdings Limited, and its ultimate holding company is China State Construction Engineering Corporation[256] - The consolidated financial statements are prepared on a historical cost basis and a going concern basis[257] - On December 30, 2019, the Group acquired 100% equity in Shenyang Huanggu Thermal Power Co., Ltd. through a common control combination, and the comparative figures in the consolidated financial statements have been restated[258] Summary of Significant Accounting Policies This section details the Group's accounting policies for consolidated accounts, foreign currency translation, property, plant and equipment, interests in infrastructure projects, intangible assets, impairment of non-financial assets, financial assets, inventories, trade and other receivables, cash and cash equivalents, trade payables, borrowings, borrowing costs, deferred income, share capital, income tax, provisions, leases, employee benefits, share-based payments, revenue recognition, contingent liabilities and contingent assets, insurance contracts, dividend distribution, and contract-related assets and liabilities, with significant changes in lease accounting due to the adoption of Hong Kong Financial Reporting Standard 16 "Leases" effective January 1, 2019 - Hong Kong Financial Reporting Standard 16 "Leases" was adopted effective January 1, 2019, requiring lessees to recognize right-of-use assets and lease liabilities for all leases[262] - Revenue recognition principle is to recognize revenue when control of goods or services is transferred to the customer, based on the progress of satisfying performance obligations or when the customer obtains control of the asset[310][312] - Revenue from construction contracts is recognized based on project progress, measured by direct measurement of the value of units delivered or survey measurement of work completed[312] - Revenue from thermal power business includes heating, steam, and electricity supply, as well as connection services, recognized over time at rates specified in contract terms[312] Financial Risk Management The Group faces market risks (foreign exchange risk, interest rate risk), credit risk, and liquidity risk, which are managed through natural hedging, regular monitoring, risk diversification, and assessing counterparty creditworthiness; the Group's capital management policy aims to safeguard continuous operation, monitoring capital structure through the net gearing ratio, which decreased to 3.9% in 2019 - The Group faces foreign exchange risk (primarily involving USD and AUD), interest rate risk (from floating rate borrowings), credit risk (from financial assets), and liquidity risk[318][319][321][322][323] - Foreign exchange risk is primarily managed through borrowings denominated in relevant foreign currencies, with no formal foreign currency hedging policy currently in place[320] - Credit risk is managed by establishing policies to ensure sales to customers with appropriate credit records and regularly reviewing the recoverability of trade debts[322] - The Group's capital management policy aims to safeguard continuous operation, monitoring capital structure through the net gearing ratio, which decreased from 5.5% to 3.9% in 2019[325][326] Critical Accounting Estimates and Judgments The Group's financial statements involve critical accounting estimates and judgments in areas such as the percentage of completion for construction contracts, estimates of foreseeable losses, asset impairment (goodwill, property, plant and equipment), income tax and deferred tax, and impairment of receivables and warranty provisions, all of which significantly impact the financial statements and require management's assessment based on experience and future forecasts - The percentage of completion for construction contracts and estimates of foreseeable losses rely on management's estimates and regular reviews of costs, revenue, and progress[329][330] - Goodwill impairment assessment involves significant judgments and assumptions regarding financial budgets, turnover growth rates, gross profit margins, and discount rates[331] - The recognition of income tax and deferred tax depends on judgments regarding future taxable profits and the availability of tax loss offsets[333] - Impairment assessments for receivables, contract assets, and amounts due from related parties are conducted on a forward-looking basis and require significant estimates and judgments regarding probability of default and future economic conditions[334] - Warranty provisions are estimated based on past experience of repair and return levels and are regularly reviewed for adequacy[335] Revenue and Segment Information The Group primarily operates three segments: facade engineering, general contracting, and operation management businesses; in 2019, total turnover was HKD 4.619 billion, with a gross profit of HKD 544 million, facade engineering revenue was HKD 2.786 billion, general contracting revenue was HKD 941 million, and operation management revenue was HKD 893 million, with facade engineering revenue mainly from Greater China, Asia, and other regions, and operation management business revenue primarily from Greater China, and one facade engineering customer accounted for over 10% of the Group's turnover - The Group primarily operates three operating segments: facade engineering business, general contracting business, and operation management business[336] 2019 Segment Turnover, Gross Profit, and Segment Results (HKD thousands) | Segment Business | Turnover | Gross Profit | Segment Results | | :------- | :----- | :--- | :------- | | Facade Engineering | 2,785,753 | 233,623 | 123,001 | | General Contracting Engineering | 940,564 | 56,594 | 47,410 | | Operation Management | 893,095 | 253,847 | 199,284 | | Total | 4,619,412 | 544,064 | 369,695 | - Segment turnover for facade engineering primarily originated from Greater China, Asia, and other regions (HKD 2.314 billion) and North America (HKD 471 million)[338] - One facade engineering customer generated approximately HKD 779 million in turnover, accounting for over 10% of the Group's total turnover[341] Other Income and Other Gains, Net In 2019, the Group's other income and other gains, net, amounted to HKD 19.64 million, primarily comprising bank interest income, exchange gains, insurance compensation, rental income, and service income; cost of sales was HKD 4.075 billion, administrative, selling, and other operating expenses were HKD 248 million, and finance costs were HKD 38.687 million 2019 Other Income and Other Gains, Net (HKD thousands) | Item | 2019 | 2018 (Restated) | | :--- | :----- | :------------ | | Bank interest income | 2,737 | 3,318 | | Exchange gains, net | 7,355 | — | | Insurance compensation | 653 | — | | Rental income | 3,001 | 842 | | Service income | 2,191 | 1,531 | | Miscellaneous income | 4,126 | 2,582 | | (Loss)/gain on disposal of property, plant and equipment | (423) | 509 | | Total | 19,640 | 8,782 | 2019 Expenses by Nature (HKD thousands) | Item | 2019 | 2018 (Restated) | | :--- | :----- | :------------ | | Cost of sales | 4,075,348 | 3,757,094 | | Administrative, selling and other operating expenses | 248,104 | 213,603 | | Finance costs | 38,687 | 29,044 | - Factory relocation expenses amounted to approximately HKD 42 million, including salaries, bonuses, and allowances of HKD 31.05 million, and operating lease expenses of HKD 11.121 million[343] Directors' and Chief Executive's Emoluments In 2019, the total remuneration for directors and the chief executive was HKD 12.365 million, comprising HKD 5.409 million in salaries and allowances and HKD 6.44 million in discretionary bonuses; among the five highest-paid individuals, two were directors, and the remaining three non-director individuals received total remuneration of HKD 7.705 million, while senior management (excluding directors and the chief executive) received total remuneration of HKD 16.043 million 2019 Directors' and Chief Executive's Emoluments (HKD thousands) | Name | Fees | Salaries and Allowances | Discretionary Bonuses | Employer's Contributions to Retirement Benefit Schemes | Total | | :--- | :--- | :------- | :------- | :------------------- | :--- | | Zhang Haipeng | — | — | — | — | — | | Wu Mingqing | — | 2,395 | 3,759 | 18 | 6,172 | | Wang Hai | — | 1,721 | 2,268 | — | 3,989 | | Chen Shanhong | — | 1,293 | 413 | 18 | 1,724 | | Huang Jiang | — | — | — | — | — | | Zhou Jinsong | 180 | — | — | — | 180 | | Hong Winn | 150 | — | — | — | 150 | | Kwong Sum Yee | 150 | — | — | — | 150 | | Total | 480 | 5,409 | 6,440 | 36 | 12,365 | 2019 Remuneration of Five Highest-Paid Individuals (Non-Directors) (HKD thousands) | Item | 2019 | | :--- | :----- | | Basic salaries and allowances | 3,552 | | Discretionary bonuses | 4,021 | | Contributions to retirement benefit schemes | 132 | | Total | 7,705 | 2019 Remuneration of Senior Management (Excluding Directors and Chief Executive) (HKD thousands) | Item | 2019 | | :--- | :----- | | Salaries and other benefits | 15,743 | | Contributions to pension schemes | 300 | | Total | 16,043 | Earnings Per Share and Dividends In fiscal year 2019, basic earnings per share attributable to owners of the company were 8.14 HK cents, a decrease compared to 8.48 HK cents in 2018 (restated); the Board of Directors did not recommend a final dividend for 2019, with an interim dividend of HKD 1.2 cents per share already paid, totaling HKD 25.867 million 2019 Earnings Per Share (HK cents) | Indicator | 2019 | 2018 (Restated) | | :--- | :----- | :------------ | | Basic earnings per share (HK cents) | 8.14 | 8.48 | | Diluted earnings per share (HK cents) | 8.14 | 8.48 | 2019 Dividend Distribution (HKD thousands) | Item | 2019 | 2018 | | :--- | :----- | :----- | | Interim dividend paid, HKD 1.2 cents per share | 25,867 | 21,555 | | No final dividend proposed | — | 25,867 | | Total | 25,867 | 47,422 | Notes to Statement of Financial Position Items This section provides detailed information, changes, and accounting treatments for the Group's property, plant and equipment, leases, interests in infrastructure projects, goodwill, subsidiaries, inventories, contract assets and contract liabilities, trade and other receivables, cash and cash equivalents, bank borrowings, trade payables, other payables and accrued expenses, and deferred tax; specifically, in 2019, the net book value of property, plant and equipment was HKD 1.728 billion, goodwill carrying amount was HKD 138 million, net trade receivables were HKD 930 million, and contract assets were HKD 1.018 billion - In 2019, the net book value of property, plant and equipment was HKD 1.728 billion (2018 restated: HKD 1.838 billion)[359] - In 2019, right-of-use assets increased by HKD 17.045 million, with current lease liabilities of HKD 7.641 million and non-current lease liabilities of HKD 29.99 million[362] - Interests in infrastructure projects amounted to HKD 248 million, of which HKD 54.01 million was due within one year; the effective interest rate ranged from 10.2% to 10.7% per annum[365][366] - The carrying amount of goodwill was HKD 138 million, primarily related to Gamma North America, Inc. and its North American segment subsidiaries, with impairment tests conducted annually[368] - In 2019, net trade receivables were HKD 930 million, and contract assets were HKD 1.018 billion; the average credit period for trade receivables did not exceed 90 days[378][381][382] - In 2019, cash and cash equivalents amounted to HKD 827 million, of which HKD 678 million was denominated in RMB; total bank borrowings were HKD 868 million, with an average interest rate of 4.19%[387][388][390] - In 2019, deferred tax liabilities were HKD 4.535 million, and deferred tax assets were HKD 172 million; the Group had unrecognized tax losses of HKD 1.32 billion available to offset future taxable income[395][397] Share Capital and Reserves As of December 31, 2019, the company's issued and fully paid share capital was HKD 21.555 million, with total share premium and reserves amounting to HKD 1.103 billion; distributable reserves were approximately HKD 993 million, and reserves included share premium, foreign currency translation rese