中国通商集团(01719) - 2018 - 年度财报

Company Information The report details core corporate governance and operational information, including board members, committee members, compliance officer, company secretary, auditor, legal counsel, principal bankers, and registered office - Mr. Yan Zhi serves as the Chairman and Non-executive Director, and the auditor is Grant Thornton Hong Kong Limited[7] Financial Highlights The company achieved steady performance growth in 2018 despite intense competition, with revenue increasing by 12.0% and profit attributable to owners by 6.7% 2018 Annual Financial Performance Summary (HKD Thousands) | Indicator | 2018 (HKD Thousands) | 2017 (HKD Thousands) | Year-on-Year Change | | :--- | :--- | :--- | :--- | | Revenue | 262,505 | 234,446 | +12.0% | | Gross Profit | 130,877 | 108,778 | +20.3% | | Operating Profit | 116,381 | 129,734 | -10.3% | | Profit Before Income Tax | 106,120 | 95,812 | +10.8% | | Profit Attributable to Owners of the Company | 71,259 | 66,795 | +6.7% | - Despite intense competition, the company achieved steady performance growth in 2018, with revenue increasing by 12.0% year-on-year and profit attributable to owners increasing by 6.7% year-on-year[10][18] - From a five-year trend, the company's container throughput, revenue, and profit attributable to owners all showed continuous growth, but market share slightly decreased to 40.7% in 2018[13][44] Chairman's Statement The Chairman highlights the successful transfer from GEM to the Main Board as a significant milestone, enhancing the Group's image and share liquidity, laying a foundation for future growth - The Chairman emphasized that the successful transfer from GEM to the Main Board was a significant milestone, enhancing the Group's image and share liquidity, laying a foundation for future growth[18] - In 2018, the net profit attributable to owners of the company reached HKD 71.26 million, primarily contributed by property leasing at Hannan Port, terminal operations at Wuhan Yangluo Port and General Port, integrated logistics services, and fair value gains on investment properties[18] - Looking ahead, the Group is optimistic about the prospects of China's inland port business but anticipates continued intense competition from adjacent ports in the Yangluo Port area before forming a joint venture with them; the Group will continue to adopt consistent pricing strategies with competitors and enhance service quality[21] Management Discussion and Analysis This section provides an in-depth review of the Group's operations, financial performance, future strategies, and key risks Business Review This section details the Group's core business of investing, developing, and operating multiple ports along the Yangtze River in Hubei Province, China, and providing related logistics services, focusing on the strategic positioning, business progress, and synergistic effects of Wuhan Yangluo Port, General Port, Hannan Port, Shayang Port, and Shipai Port, while also diversifying into municipal engineering contracting and supply chain management - The Group's core asset is Wuhan Yangluo Port, located in the middle reaches of the Yangtze River, serving as a crucial transshipment hub for surrounding provinces and cities[25] - Hannan Port Phase I is completed, and Phase II General Port is in the preliminary construction stage, aiming to create synergy with Yangluo Port to meet Wuhan's logistics demands[29][30] - Shayang Port and Shipai Port commenced commercial operations in 2018, with supporting logistics centers and storage yards under construction, expected to be completed sequentially in 2019, aiding the Group in expanding its bulk and general cargo business[31][34] - The Group diversified its business and extended its industrial chain by establishing Zhongji Tongshang Engineering and Tongshang Supply Chain, entering municipal engineering contracting and supply chain management and trading respectively[35][36] Operating Results In 2018, the Group's total revenue increased by 12.0% year-on-year to HKD 263 million, driven by growth in terminal services, integrated logistics, and supply chain trading businesses; total container throughput grew by 16.3%, but market share slightly decreased to 40.7% due to intense competition, leading to a reduction in average rates; gross profit margin improved from 46.4% to 49.9% primarily due to increased government subsidies; profit attributable to owners increased by 6.7% to HKD 71.26 million 2018 Revenue Segment Breakdown (HKD Thousands) | Segment | 2018 | 2017 | Growth Rate | | :--- | :--- | :--- | :--- | | Terminal Services | 99,008 | 86,660 | 14.2% | | Integrated Logistics Services | 83,665 | 76,453 | 9.4% | | Property Business | 34,538 | 33,426 | 3.3% | | Supply Chain Management and Trading Business | 24,002 | 18,765 | 27.9% | | Total | 262,505 | 234,446 | 12.0% | 2018 Container Throughput (TEUs) | Cargo Type | 2018 (TEUs) | 2017 (TEUs) | Growth Rate | | :--- | :--- | :--- | :--- | | Local Cargo | 323,477 | 289,341 | 11.8% | | Transshipment Cargo | 269,532 | 220,737 | 22.1% | | Total | 593,009 | 510,078 | 16.3% | - Despite increased throughput, Wuhan Yangluo Port's market share decreased from 42.8% to approximately 40.7% due to intense competition from adjacent ports; to counter competition, average rates for local and transshipment cargo decreased by approximately 2.2% and 6.1% respectively[44][45] - Gross profit margin increased from 46.4% to 49.9%, primarily due to increased government grants associated with higher throughput, offsetting some service costs[51] - Profit attributable to owners of the company increased by 6.7% to HKD 71.26 million, with earnings per share of 4.13 HK cents; profit growth was mainly driven by increased fair value gains on investment properties, partially offset by a higher tax rate[55] Future Outlook The Group is optimistic about China's port business prospects, especially the development of inland ports along the Yangtze River Economic Belt; to address competition, the Group is negotiating a joint venture with competitors in the Yangluo Port area to unify operational management, while continuing to expand business coverage through Hannan Port, Shayang Port, and Shipai Port, and collaborating with the government to promote green port construction for long-term growth - To eliminate vicious competition, the Group has entered into a joint venture agreement with neighboring port operators in the Yangluo Port area, aiming to establish a joint venture company to unify market development, pricing, scheduling, and settlement, with terms still under negotiation[59] - The company name changed from "China Infrastructure Port" to "China Merchants Group" to reflect its expanded business scope to include integrated services such as port construction and operation, logistics, port-side processing trade, and infrastructure investment[56] - The Group has entered into a strategic cooperation framework agreement with the Hubei Provincial Port and Waterway Administration to jointly construct green ports, LNG-powered vessels, and refueling stations along the Han River, promoting a green ecological industrial chain[60] Financial Resources and Liquidity The Group primarily relies on internal resources, shareholder loans, and bank borrowings for funding operations; as of the end of 2018, the Group's net gearing ratio improved to 0.7 times from the previous year, however, net current liabilities significantly increased to HKD 390 million, and the current ratio decreased to 0.3 times, indicating increased short-term repayment pressure Key Financial Position Indicators as of End of 2018 (HKD Thousands) | Indicator | 2018 | 2017 | | :--- | :--- | :--- | | Total Outstanding Interest-Bearing Borrowings | 428,620 | 542,780 | | Cash and Cash Equivalents | 15,170 | 37,940 | | Net Current Liabilities | 389,600 | 96,590 | | Current Ratio | 0.3 times | 0.7 times | | Net Gearing Ratio | 0.7 times | 0.8 times | - The significant increase in net current liabilities was primarily due to a decrease in trade receivables and an increase in trade payables and short-term bank borrowings[64] Principal Risks and Uncertainties This section outlines the Group's main risks, including operational risks (e.g., equipment failure, adverse weather), business risks (e.g., intense price competition), industry risks (cyclicality, alternative transportation modes), human resources risks, project delay risks, financial risks (high capital expenditure), and credit and inventory risks associated with the newly expanded supply chain business - Business Risk: Intense price competition exists in the Yangluo Port area, and the Group's reduction in rates to maintain competitiveness may affect gross profit margin; negotiations to form a joint venture to eliminate competition are ongoing[79] - Development Risk: Port construction projects like Hannan Port Phase II require substantial capital expenditure and may face completion delays and cost overruns due to various unforeseen factors[85] - Supply Chain Business Risk: The newly launched supply chain management and trading business faces customer credit risk (untimely collection of payments) and inventory risk (customer order cancellations)[91][92] Staff Information As of the end of 2018, the Group had 482 full-time employees, a slight decrease from 485 in 2017; the vast majority (479) are located at the main operating sites in Hubei Province, with 3 employees in the Hong Kong office handling financial matters 2018 Employee Distribution as of End of Year | Region | 2018 Headcount | 2017 Headcount | | :--- | :--- | :--- | | Hong Kong | 3 | 3 | | Hubei Province | 479 | 482 | | Total | 482 | 485 | Directors and Senior Management The report provides detailed biographies of the board members and senior management team - Chairman Mr. Yan Zhi possesses extensive investment and management experience in the logistics industry and various other sectors, also holding key positions in several listed companies including Zall Smart Commerce (2098.HK)[99] - Executive Director and Chief Executive Officer Mr. Xie Bingmu has over 30 years of experience in China's port and container terminal business[101] Corporate Governance Report The company successfully transferred from GEM to the Main Board on January 29, 2018, and adopted the Corporate Governance Code under the Main Board Listing Rules - The company successfully transferred from the Stock Exchange's GEM to the Main Board on January 29, 2018, and adopted the Corporate Governance Code under the Main Board Listing Rules[112] - The company clearly delineates the roles of the Chairman (Mr. Yan Zhi) and Chief Executive Officer (Mr. Xie Bingmu) to ensure a balance of power; the Chairman focuses on the Group's overall strategy, while the Chief Executive Officer is responsible for daily management[115] - The Board has established an Audit Committee, Remuneration Committee, and Nomination Committee, primarily composed of independent non-executive directors, responsible for overseeing financial reporting, risk management, remuneration policies, and director nominations[117][121][122] - The Board conducted an annual review of the Group's risk management and internal control systems and engaged external consultant Grant Thornton Advisory Services Limited for evaluation, deeming the systems sound and adequate[142] Environmental, Social and Governance Report During the reporting period, the Group had no significant environmental violations and achieved its target of reducing greenhouse gas emissions by 2%; it prioritized employee health and safety with no fatalities, and significantly increased training investment; the Group also established supplier screening mechanisms and anti-corruption policies, with no related complaints or concluded corruption lawsuits 2018 Key Environmental Performance Indicators | Indicator | 2018 Fiscal Year | | :--- | :--- | | Greenhouse Gas Emissions (kg CO2e) | 3,048,392 | | Electricity Consumption (kWh) | 3,184,597 | | Total Water Consumption (cubic meters) | 34,911 | | Domestic Waste (kg) | 122,044 | - During the reporting period, the Group had no significant environmental violations and achieved its target of reducing greenhouse gas emissions by 2%[156][178] - Regarding employees, the Group prioritizes health and safety, with no fatalities during the reporting period; investment in employee training significantly increased, with an average of 5 hours of training per employee, a 100% year-on-year increase[156][217] - In terms of operations, the Group established a supplier screening mechanism and formulated an anti-corruption policy, with no related complaints or concluded corruption lawsuits during the reporting period[220][229] Directors' Report The Board does not recommend a dividend for the year ended December 31, 2018; as of year-end, Chairman Mr. Yan Zhi held approximately 74.81% of the company's issued shares through his controlled corporations; the report also discloses related party transactions with the controlling shareholder and his controlled companies - The Board does not recommend the payment of a dividend for the year ended December 31, 2018[253] - As of the end of 2018, Chairman Mr. Yan Zhi held approximately 74.81% of the company's issued shares through corporations controlled by him[269] - During the reporting period, the Group's top five customers accounted for 41.8% of total revenue, with the largest customer accounting for 15.8%; the top five suppliers accounted for 41.6% of total purchases, with the largest supplier accounting for 11.6%[277] - Related party transactions with controlling shareholder Mr. Yan Zhi and his controlled companies were disclosed, including interest-free loans from Mr. Yan and ongoing related party transactions for subleasing office premises to Zall Hong Kong, which were exempted under the Listing Rules[289][290] Independent Auditor's Report Grant Thornton Hong Kong Limited issued an unmodified opinion on the Group's consolidated financial statements, affirming that they present a true and fair view of the Group's financial position and performance; key audit matters included the valuation of investment properties and going concern, with the auditor finding management's assessments and assumptions reasonable - The auditor, Grant Thornton Hong Kong Limited, issued an unmodified opinion on the Group's consolidated financial statements, deeming them to truly and fairly reflect the Group's financial position and performance[318] - Key audit matters were "Valuation of Investment Properties" and "Going Concern"; the auditor reviewed management's assessments and assumptions in these areas and found them to have a reasonable basis[322][323][327] - Regarding the going concern issue, the report noted that the Group had net current liabilities of HKD 390 million at the end of 2018, but management assessed that, based on expected positive operating cash flows, financial support commitments from the major shareholder, and good banking relationships, the Group has sufficient resources to continue as a going concern[328][378] Consolidated Financial Statements This section presents the Group's comprehensive financial performance, position, and cash flows for the reporting period Consolidated Statement of Profit or Loss and Other Comprehensive Income This statement presents the Group's revenue, costs, expenses, and profit for the 2018 fiscal year; total revenue was HKD 263 million, a 12.0% year-on-year increase; profit attributable to owners of the company was HKD 71.26 million, a 6.7% year-on-year increase 2018 Consolidated Statement of Profit or Loss Key Data (HKD Thousands) | Item | 2018 | 2017 | | :--- | :--- | :--- | | Revenue | 262,505 | 234,446 | | Gross Profit | 130,877 | 108,778 | | Fair Value Change of Investment Properties | 41,718 | 14,278 | | Profit Before Income Tax | 106,120 | 95,812 | | Profit for the Year | 79,217 | 76,176 | | Profit Attributable to Owners of the Company | 71,259 | 66,795 | Consolidated Statement of Financial Position This statement lists the Group's assets, liabilities, and equity as of the end of 2018; total assets were HKD 1.56 billion, and total equity was HKD 773 million; notably, current liabilities (HKD 580 million) significantly exceeded current assets (HKD 190 million), resulting in net current liabilities of HKD 390 million Consolidated Statement of Financial Position Summary as of End of 2018 (HKD Thousands) | Item | 2018 | 2017 | | :--- | :--- | :--- | | Assets | | | | Non-current Assets | 1,369,568 | 1,219,401 | | Current Assets | 190,338 | 268,893 | | Total Assets | 1,559,906 | 1,488,294 | | Liabilities and Equity | | | | Current Liabilities | 579,937 | 365,478 | | Non-current Liabilities | 207,083 | 388,642 | | Total Liabilities | 787,020 | 754,120 | | Total Equity | 772,886 | 734,174 | Consolidated Statement of Cash Flows This statement reflects the Group's cash inflows and outflows for the 2018 fiscal year; operating activities generated net cash inflow of HKD 131 million, while investing and financing activities recorded net cash outflows of HKD 56.64 million and HKD 96.57 million respectively, leading to a net decrease in cash and cash equivalents of HKD 22.28 million for the year 2018 Consolidated Statement of Cash Flows Summary (HKD Thousands) | Item | 2018 | 2017 | | :--- | :--- | :--- | | Net Cash Generated from Operating Activities | 130,929 | 22,333 | | Net Cash Used in Investing Activities | (56,636) | (176,569) | | Net Cash (Used in)/Generated from Financing Activities | (96,572) | 139,183 | | Net Decrease in Cash and Cash Equivalents | (22,279) | (15,053) | | Cash and Cash Equivalents at End of Year | 15,167 | 37,943 | Particulars of Major Properties The report lists the Group's major properties held for investment purposes, including the completed Hannan Port Phase I Ro-Ro berth and Zall Ecological Industrial City, and the Hanjiang Port Logistics Center under construction, expected to be completed by December 2019 - The report lists the Group's major properties held for investment purposes, including the completed Hannan Port Phase I Ro-Ro berth and Zall Ecological Industrial City, as well as the Hanjiang Port Logistics Center under construction, which is expected to be completed by December 2019[764] Financial Summary This section provides a five-year financial overview of the Group's key performance indicators, including revenue, profit attributable to owners, total assets, and total equity, demonstrating overall growth trends Five-Year Financial Summary (HKD Thousands) | Indicator | 2014 | 2015 | 2016 | 2017 | 2018 | | :--- | :--- | :--- | :--- | :--- | :--- | | Revenue | 186,482 | 190,110 | 207,032 | 234,446 | 262,505 | | Profit Attributable to Owners of the Company | 44,451 | 52,628 | 68,913 | 66,795 | 71,259 | | Total Assets | 1,176,141 | 990,417 | 1,231,818 | 1,488,294 | 1,559,906 | | Total Equity | 415,396 | 431,698 | 603,792 | 734,174 | 772,886 |