中国碳中和(01372) - 2020 - 中期财报

Financial Statements Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income The company achieved a net profit of HKD 499 million in H1 2020, a turnaround from a HKD 264 million loss, primarily due to one-off debt restructuring gains, with revenue down 12.3% and gross profit turning positive 2020 H1 Key Profit or Loss Indicators (HKD Thousand) | Indicator | 2020 H1 (Unaudited) | 2019 H1 (Unaudited) | Y-o-Y Change | | :--- | :--- | :--- | :--- | | Revenue | 215,823 | 246,196 | -12.3% | | Gross profit/(loss) | 5,998 | (24,680) | Turnaround to profit | | Net gain on derecognition of convertible bonds | 293,712 | — | Not applicable | | Gain on modification of promissory notes | 294,577 | — | Not applicable | | Profit/(loss) for the period | 499,053 | (264,268) | Turnaround to profit | | Profit/(loss) attributable to owners of the parent | 499,053 | (263,446) | Turnaround to profit | | Basic earnings/(loss) per share (HK Cents) | 249.5 | (131.7) | Turnaround to profit | | Diluted earnings/(loss) per share (HK Cents) | 129.9 | (131.7) | Turnaround to profit | - The key driver for the turnaround was one-off gains from debt restructuring, including approximately HKD 294 million from the derecognition of convertible bonds and approximately HKD 295 million from the modification of promissory notes, totaling approximately HKD 588 million[5][219] Condensed Consolidated Statement of Financial Position As of June 30, 2020, the company's net debt improved to HKD 466 million from HKD 975 million, with total liabilities decreasing to HKD 830 million, mainly due to debt restructuring reclassifying current to non-current liabilities Key Balance Sheet Indicators as of June 30, 2020 (HKD Thousand) | Indicator | June 30, 2020 (Unaudited) | Dec 31, 2019 (Audited) | Change | | :--- | :--- | :--- | :--- | | Total non-current assets | 4,119 | 51,929 | -92.1% | | Total current assets | 364,425 | 387,166 | -5.9% | | Total current liabilities | 403,489 | 1,367,928 | -70.5% | | Total non-current liabilities | 429,076 | 45,922 | +834.4% | | Net current liabilities | (41,064) | (980,762) | Significant improvement | | Net debt | (466,021) | (974,755) | Significant improvement | - The significant decrease in current liabilities was primarily due to the reclassification of convertible bonds (originally HKD 386 million) and promissory notes (originally HKD 554 million) to non-current liabilities after terms were revised, greatly improving the company's short-term solvency[12][15] Condensed Consolidated Statement of Changes in Equity As of June 30, 2020, the company's total equity deficit narrowed from HKD 975 million to HKD 466 million, primarily due to the HKD 499 million profit recorded, partially offsetting accumulated losses - The HKD 499 million profit recorded during the period was the main reason for the improvement in the equity deficit, reducing accumulated losses from HKD 1.37 billion to HKD 870 million[38] Condensed Consolidated Statement of Cash Flows In H1 2020, operating cash flow turned negative with a net outflow of HKD 8.8 million, indicating weakened core business cash generation, and period-end cash decreased to HKD 55.9 million 2020 H1 Cash Flow Statement Summary (HKD Thousand) | Item | 2020 H1 | 2019 H1 | | :--- | :--- | :--- | | Net cash flow from operating activities | (8,802) | 31,459 | | Net cash flow used in investing activities | (106) | (16,184) | | Net cash flow from financing activities | (1,844) | 13,058 | | Net decrease in cash and cash equivalents | (10,751) | 28,333 | | Cash and cash equivalents at period-end | 55,876 | 51,689 | Notes to the Condensed Consolidated Interim Financial Information 1. Corporate Information & 2. Basis of Preparation The company operates in civil engineering and automotive engines, facing 'going concern' uncertainty due to HKD 466 million net debt and HKD 41.06 million net current liabilities, though management expects sufficient working capital via debt revisions, shareholder support, and cost control - The Group primarily operates in two main businesses: civil engineering and construction, and automotive engines[45] - Despite recording a profit during the reporting period, the company still had net current liabilities of HKD 41.06 million and net debt of HKD 466 million as of June 30, 2020, raising significant doubts about its ability to continue as a going concern[51] - Management's confidence in the company's going concern is primarily based on: (i) alleviated repayment pressure from convertible bonds and promissory notes through revised terms; (ii) a commitment from the major shareholder to provide additional financial support of no less than HKD 58.6 million; and (iii) the implementation of strict cost control measures[51][53] 4. Segment Information The civil engineering segment is the Group's pillar, with revenue up 21.1% and contributing 98.9% of total revenue, while the automotive engine business saw a 96.5% revenue decline and HKD 52.96 million segment loss, severely impacting overall performance Segment Performance by Business Segment (HKD Thousand) | Business Segment | 2020 H1 Revenue | 2019 H1 Revenue | 2020 H1 Segment Result | 2019 H1 Segment Result | | :--- | :--- | :--- | :--- | :--- | | Civil Engineering and Construction | 213,397 | 176,244 | 401 | (7,480) | | Automotive Engines | 2,426 | 69,952 | (52,955) | (194,436) | | Total | 215,823 | 246,196 | (52,554) | (201,916) | 12. Goodwill Significant impairment losses of HKD 16.34 million on goodwill and HKD 28.9 million on property, plant, and equipment were recognized for the automotive engine business due to stalled customer restructuring, dim production prospects, and COVID-19 impacts - The primary reasons for impairment are the ongoing and uncertain restructuring of automotive engine business customers (especially BAIC Yinxiang) and unsatisfactory progress in resuming production, coupled with the impact of the pandemic, resulting in minimal operations for this business[111][112] - Based on pessimistic forecasts for future cash flows, the company conducted an impairment assessment for the automotive engine cash-generating unit (CGU), recognizing impairment losses on related assets[113][115] 14. Accounts Receivables Impairment provisions for accounts receivable reached HKD 485 million, mostly from the automotive engine business, due to high collection risk from customer restructuring delays and financial distress, prompting aggressive debt recovery efforts Accounts Receivable and Impairment by Business Segment (HKD Thousand) | Business Segment | Gross | Impairment | Net | | :--- | :--- | :--- | :--- | | Civil Engineering and Construction | 37,465 | (63) | 37,402 | | Automotive Engines | 655,056 | (484,879) | 170,177 | | Total | 692,521 | (484,942) | 207,579 | - The default rate for automotive engine business customers was assessed at 100%, with the company accruing impairment based on estimated recovery rates ranging from 12.5% to 38.1% for different customers[162][163] 17. Convertible Bonds & 18. Promissory Notes Major term revisions to convertible bonds and promissory notes were central to H1 performance, extending bond maturity to 2025 and making notes perpetual, significantly enhancing liquidity and generating HKD 588 million in one-off accounting gains, directly leading to the turnaround - The maturity date of convertible bonds was extended by five years to February 4, 2025, with this revision leading to the derecognition of a portion of the liability and generating a gain of HKD 294 million[187][184] - The promissory notes' term was modified to perpetual, with a fixed interest rate of 5%, generating a gain of HKD 295 million[198] - The convertible bonds and promissory notes originally held by Power Expert were transferred to LE Group Holdings Pte. Ltd. on February 3, 2020[191][201] Management Discussion and Analysis Business and Financial Review In H1 2020, Group performance turned profitable due to one-off debt restructuring gains, with civil engineering growing 21.1% despite challenges, while automotive engine revenue collapsed 96.5% and operations halted due to stalled customer restructuring and pandemic impacts Civil Engineering and Construction Business Despite COVID-19 and economic downturns, this business showed robust performance, with revenue growing to HKD 213.4 million, accounting for 98.9% of Group revenue, securing four new contracts, and holding HKD 609 million in total contract value for ongoing projects Civil Engineering and Construction Business Financial Performance (HKD Million) | Indicator | 2020 H1 | 2019 H1 | Change | | :--- | :--- | :--- | :--- | | Revenue | 213.4 | 176.2 | +21.1% | | Gross profit | 6.1 | 1.6 | +281.3% | | Gross profit margin | 2.8% | 0.9% | +1.9 ppt | - As of June 30, 2020, the Group secured four new contracts, including two from HKT[228][230] Automotive Engines Business This business segment saw revenue plummet 96.5% to HKD 2.4 million due to uncertain major customer restructuring and severe pandemic impacts, leading to minimal operations and significant impairment losses Automotive Engines Business Financial Performance (HKD Million) | Indicator | 2020 H1 | 2019 H1 | Change | | :--- | :--- | :--- | :--- | | Revenue | 2.4 | 70.0 | -96.5% | | Gross loss | 0.1 | 0.5 | -80.0% | - The core reason for the business's distress is the slow and uncertain restructuring progress of major customers (such as BAIC Yinxiang), with unknown plans for resuming production, directly leading to a depletion of orders[232] Prospects Management is cautious for H2 2020, expecting civil engineering to seek stable development, while the automotive engine business faces a bleak outlook with focus on debt recovery and potential divestment, alongside continued cost control and pursuit of new opportunities - Civil Engineering Business: Despite a challenging operating environment in Hong Kong, the company is confident in securing business opportunities through its extensive experience and will continue to adopt a prudent bidding strategy[235] - Automotive Engine Business: Customer restructuring delays are expected to continue adversely impacting the business, with dim prospects for recovery, leading the company's strategy to shift towards maximizing debt recovery and considering divestment of the business[236][238][241] - Overall Group Strategy: The Group will continue to strictly control costs and seek new business opportunities to improve performance and shareholder value[239][240] Principal Risks and Uncertainties The Group faces multiple risks: market demand and raw material price volatility, intense competition, evolving regulatory compliance, significant credit risk from automotive engine receivables, liquidity risk from net debt, and external shocks from events like COVID-19 - Credit Risk: Primarily arises from accounts receivable in the automotive engine business, where customers' financial conditions lead to significant delays and uncertainties in collection[247][250] - Liquidity Risk: As of June 30, 2020, the Group was in a net debt position, and despite mitigation measures, there remains a risk of inability to meet financial obligations as they fall due[248][251] - Event Risk: The COVID-19 pandemic has severely impacted the local economy, increasing operating costs and safety regulation pressures, with its long-term effects remaining uncertain[249][252] Capital Structure, Financial Resources, Liquidity and Gearing As of June 30, 2020, the Group held HKD 55.9 million in cash, and debt restructuring reclassified most debt to non-current, significantly reducing net current liabilities to HKD 46.3 million and improving the current ratio to 0.9, greatly alleviating short-term liquidity pressure - Debt restructuring was key to improving liquidity: the convertible bond maturity was extended to 2025, and promissory notes became perpetual, significantly easing the company's repayment pressure[255][260] Liquidity Indicator Changes | Indicator | June 30, 2020 | Dec 31, 2019 | | :--- | :--- | :--- | | Cash and cash equivalents (HKD Million) | 55.9 | 64.8 | | Net current liabilities (HKD Million) | 46.3 | 980.8 | | Current ratio | 0.9 | 0.3 | Other Information Corporate Governance During the reporting period, the company had several deviations from the Corporate Governance Code, including a vacant Chairman position, non-executive directors without specific terms, and an executive director failing to retire by rotation as required - The company's Chairman position remained vacant, violating Code Provision A.2.1 which requires separation of Chairman and Chief Executive roles[284] - Non-executive directors were not appointed for specific terms, violating Code Provision A.4.1[285] - Mr. Xing Bin, an executive director, inadvertently failed to retire by rotation at the 2019 Annual General Meeting as required, violating Code Provision A.4.2, with the company subsequently taking steps to rectify this issue[290] Directors' and Substantial Shareholders' Interests As of June 30, 2020, directors held no interests, while substantial shareholders included Mr. Jiang Jianhui (holding 150 million shares, 75.0%) and Mr. Arrab Chalid (holding convertible bonds for 195 million shares, potential 97.5%) Substantial Shareholders' Shareholding | Shareholder Name | Nature of Interest | Number of Shares/Underlying Shares Held | Approximate Percentage of Issued Share Capital | | :--- | :--- | :--- | :--- | | Mr. Jiang Jianhui | Controlled corporation interest | 150,000,000 | 75.0% | | Youth Force Asia Ltd | Beneficial owner | 150,000,000 | 75.0% | | Mr. Arrab Chalid | Controlled corporation interest | 195,000,000 (Underlying Shares) | 97.5% | | LE Group Holdings Pte Ltd | Beneficial owner | 195,000,000 (Underlying Shares) | 97.5% | Corporate Information - The report lists the company's registered office, principal place of business, board members, committee members, company secretary, share registrar, auditor (Cheng Feng CPA Limited), and share listing information (stock code: 1372)[323][326]