河北建设(01727) - 2019 - 年度财报

Chairman's Statement The Chairman's Statement reviews Hebei Construction Group's 2019 performance, highlighting achievements in market expansion, technological innovation, and talent development despite increased competition and economic downturn, while outlining 2020 strategic priorities including A-share listing and strengthening financial and technological capabilities - In 2019, the company's shares were officially included in the MSCI China All Shares Small Cap Index, enhancing its domestic and international influence[7] 2019 Key Financial and Operational Data | Indicator | Amount (RMB) | Year-on-Year Change | | :--- | :--- | :--- | | New Contracts Signed | 72.084 billion | 2.81% Increase | | Operating Revenue | 41.077 billion | 14.17% Decrease | | Net Profit | 763 million | 34.74% Decrease | - In 2019, the Inner Mongolia Natural History Museum project undertaken by the Group won the Luban Prize, along with multiple national and provincial engineering awards and scientific achievements[9] - In 2020, the company will steadily advance its A-share listing and continue to strengthen its financial and technological "two wings" to support the growth of its core business[13] Company Information This section provides fundamental company details for Hebei Construction Group Corporation Limited, including its legal name, board and supervisory committee members, senior management, committee structures, registered offices, stock information, and auditors - The company's legal name is Hebei Construction Group Corporation Limited[15] - The company's stock short name is Hebei Construction, with stock code 1727[19] - The Board of Directors has an Audit Committee, a Remuneration and Appraisal Committee, a Nomination Committee, and a Strategy Committee[15][19] - Effective June 20, 2019, the company did not renew its engagement with Ernst & Young as its overseas auditor for the 2019 fiscal year[20] Financial Highlights Summary of Consolidated Statement of Profit or Loss and Other Comprehensive Income This section summarizes the company's consolidated profit or loss and comprehensive income from 2015 to 2019, noting a decline in both operating revenue and net profit in 2019, with net profit decreasing by 34.74% year-on-year Summary of Consolidated Statement of Profit or Loss and Other Comprehensive Income (RMB Thousand) | Indicator | 2019 | 2018 (Restated) | 2017 (Restated) | 2016 | 2015 | | :--- | :--- | :--- | :--- | :--- | :--- | | Operating Revenue | 41,077,029 | 47,858,714 | 42,139,150 | 41,354,974 | 29,143,330 | | Operating Cost | 39,023,724 | 45,108,878 | 39,733,951 | 38,961,371 | 27,176,997 | | Operating Profit | 1,211,661 | 1,628,942 | 1,607,423 | 1,176,897 | 574,641 | | Net Profit | 763,123 | 1,169,421 | 1,129,979 | 813,603 | 410,233 | | Net Profit Attributable to Parent Company Shareholders | 770,415 | 1,154,039 | 1,089,086 | 768,178 | 406,277 | | Total Comprehensive Income | 821,780 | 1,230,321 | 1,129,979 | 813,603 | 410,233 | - Net profit in 2019 was RMB 763 million, a 34.74% decrease from RMB 1.169 billion in 2018[23] Assets, Liabilities and Non-controlling Interests This section provides a summary of the company's assets, liabilities, and non-controlling interests from 2015 to 2019, indicating a decrease in total assets and liabilities, but an increase in equity attributable to parent company shareholders in 2019 Summary of Assets, Liabilities and Non-controlling Interests (RMB Thousand) | Indicator | 2019 | 2018 (Restated) | 2017 (Restated) | 2016 | 2015 | | :--- | :--- | :--- | :--- | :--- | :--- | | Total Assets | 60,926,571 | 62,440,389 | 51,792,886 | 61,406,992 | 52,142,699 | | Total Liabilities | (55,022,999) | (56,508,044) | (47,273,992) | (58,317,314) | (49,970,930) | | Total Equity Attributable to Parent Company Shareholders | 5,720,610 | 5,406,491 | 4,089,872 | 2,834,235 | 2,080,907 | | Non-controlling Interests | 182,962 | 525,854 | 429,022 | 255,443 | 90,862 | - Total assets in 2019 were RMB 60.927 billion, a 2.42% decrease from RMB 62.440 billion in 2018[30] - Total equity attributable to parent company shareholders in 2019 was RMB 5.721 billion, a 5.82% increase from RMB 5.406 billion in 2018[30] Business Overview Part One: Business Review This section reviews Hebei Construction Group's 2019 business performance, highlighting its position as a leading non-state-owned construction group in China, with a 2.81% increase in new contracts signed and a 16.25% increase in uncompleted contracts year-on-year - The company's main businesses include construction engineering contracting (building construction, infrastructure construction, specialized and other construction engineering) and other services such as service concession arrangements[32][33] 2019 New Contracts Signed and Uncompleted Contracts | Indicator | 2019 (RMB Billion) | 2018 (RMB Billion) | Year-on-Year Growth | | :--- | :--- | :--- | :--- | | New Contracts Signed | 72.084 | 70.117 | 2.81% | | Uncompleted Contracts | 98.157 | 84.434 | 16.25% | New Contracts Signed (by Region) In 2019, new contracts signed by region showed the Beijing-Tianjin-Hebei region accounted for 53.76%, with a decrease in contract value, while other regions saw significant growth, reaching 46.24% 2019 New Contracts Signed (by Region) | Region | 2019 Amount (RMB Billion) | 2019 Share | 2018 Amount (RMB Billion) | 2018 Share | | :--- | :--- | :--- | :--- | :--- | | Total | 72.084 | 100% | 70.117 | 100% | | Beijing-Tianjin-Hebei | 38.752 | 53.76% | 40.725 | 58.08% | | Other Regions | 33.332 | 46.24% | 29.392 | 41.92% | - New contracts signed in the Beijing-Tianjin-Hebei region decreased from RMB 40.725 billion in 2018 to RMB 38.752 billion in 2019, with its share falling from 58.08% to 53.76%[35] - New contracts signed in other regions increased from RMB 29.392 billion in 2018 to RMB 33.332 billion in 2019, with its share rising from 41.92% to 46.24%[35] New Contracts Signed (by Segment) In 2019, new contracts signed by business segment showed building construction projects accounted for the largest share at 68.07% with year-on-year growth, while infrastructure construction and specialized and other construction projects saw declines 2019 New Contracts Signed (by Segment) | Segment | 2019 Amount (RMB Billion) | 2019 Share | 2018 Amount (RMB Billion) | 2018 Share | | :--- | :--- | :--- | :--- | :--- | | Total | 72.084 | 100% | 70.117 | 100% | | Building Construction Projects | 49.064 | 68.07% | 42.313 | 60.35% | | Infrastructure Construction Projects | 18.159 | 25.19% | 20.141 | 28.73% | | Specialized and Other Construction Projects | 4.861 | 6.74% | 7.663 | 10.92% | - New contracts signed for building construction projects increased from RMB 42.313 billion in 2018 to RMB 49.064 billion in 2019, with its share rising from 60.35% to 68.07%[38] - New contracts signed for infrastructure construction projects decreased from RMB 20.141 billion in 2018 to RMB 18.159 billion in 2019, with its share falling from 28.73% to 25.19%[38] Building Construction Business Building construction is the company's core business, with new contracts signed totaling RMB 49.064 billion in 2019, showing year-on-year growth, primarily driven by residential building projects - In 2019, new contracts signed for building construction business were RMB 49.064 billion, an increase from RMB 42.313 billion in 2018[39] New Contracts Signed for Building Construction Business (by Segment) | Segment | 2019 Amount (RMB Billion) | 2019 Share | 2018 Amount (RMB Billion) | 2018 Share | | :--- | :--- | :--- | :--- | :--- | | Total | 49.064 | 100% | 42.313 | 100% | | Residential Building Projects | 30.393 | 61.94% | 27.256 | 64.42% | | Public Building Projects | 12.598 | 25.68% | 10.328 | 24.41% | | Industrial Building Projects | 4.865 | 9.92% | 3.815 | 9.02% | | Commercial Building Projects | 1.208 | 2.46% | 0.914 | 2.15% | - The company undertook representative building construction projects such as the Fancheng District Shanty Town Renovation Resettlement Housing Project, Cangzhou Evergrande Health Valley, and Beijing New Airport Administrative Comprehensive Office Building[43][45][48][50][54][56][59] Infrastructure Construction Business The infrastructure construction business provides services for municipal and transportation projects, primarily to local governments, with new contracts signed totaling RMB 18.159 billion in 2019, a 9.84% year-on-year decrease, and municipal infrastructure accounting for 56.88% - In 2019, new contracts signed for infrastructure construction business were RMB 18.159 billion, a 9.84% decrease from RMB 20.141 billion in 2018[61] New Contracts Signed for Infrastructure Construction Business (by Segment) | Segment | 2019 Amount (RMB Billion) | 2019 Share | 2018 Amount (RMB Billion) | 2018 Share | | :--- | :--- | :--- | :--- | :--- | | Total | 18.159 | 100% | 20.141 | 100% | | Municipal Infrastructure Construction Projects | 10.329 | 56.88% | 11.201 | 55.61% | | Transportation Infrastructure Construction Projects | 7.830 | 43.12% | 8.940 | 44.39% | - The company undertook representative infrastructure construction projects such as the China Western (Guangyuan) Green Home Furnishing Industrial City, Ethiopia Kunt-Gasna Road Project, and Aid Mozambique Xai-Xai Airport Project[65][67][70] Specialized and Other Construction Engineering Contracting Business This segment covers mechanical and electrical installation, steel structures, and decoration, with new contracts signed totaling RMB 4.861 billion in 2019, a 36.57% year-on-year decrease, and decoration and renovation accounting for the largest share - In 2019, new contracts signed for specialized and other construction engineering contracting business were RMB 4.861 billion, a 36.57% decrease from RMB 7.663 billion in 2018[72] New Contracts Signed for Specialized and Other Construction Engineering Contracting Business (by Segment) | Segment | 2019 Amount (RMB Billion) | 2019 Share | 2018 Amount (RMB Billion) | 2018 Share | | :--- | :--- | :--- | :--- | :--- | | Total | 4.861 | 100% | 7.663 | 100% | | Mechanical and Electrical Installation | 1.070 | 22.01% | 0.810 | 10.57% | | Steel Structure | 0.936 | 19.25% | 1.435 | 18.73% | | Decoration and Renovation | 1.732 | 35.63% | 1.876 | 24.49% | | Other Construction Businesses | 1.123 | 23.11% | 3.542 | 46.21% | - The company undertook representative specialized and other construction engineering projects such as the Tumote Right Banner Yingneng Photovoltaic Power Development Project and Fengxian Economic Development Zone High-tech Industrial Park Dual Innovation Incubation Standard Factory Building Construction Project[76] Part Two: Scientific Research Achievements and Awards In 2019, the company significantly increased R&D investment, achieving numerous scientific research milestones, including the compilation of standards, the development of leading provincial construction methods, 180 new national patent applications, and the approval of a provincial prefabricated building technology innovation center - In 2019, 10 norms, standards, and procedures were completed as lead or co-editor, with 40 currently under compilation[79] - In 2019, 25 provincial construction methods' key technologies were evaluated, with 9 reaching domestic leading levels[80] - In 2019, 180 new national patent applications were accepted (including 32 invention patents), and 112 patents were granted (including 3 invention patents)[81] - In 2019, the company was approved to establish the "Hebei Provincial Prefabricated Building Technology Innovation Center (preparatory)," enhancing its technological innovation capabilities[81] - The company has cumulatively created 23 Luban Prize projects as lead contractor, participated in 14, and received over 600 provincial-level quality engineering awards, including the National Quality Award and National Excellent Engineering Award[78] Part Three: Future Outlook The company's 2020 strategy focuses on "Strong Foundation, Elevated Level, Innovation, Sustainable Development," prioritizing efficiency, informatization, talent, and innovation to achieve its goals, including developing financial and technological "two wings," becoming a leading integrated construction and municipal service provider, expanding market capabilities, and achieving high-quality growth - The company will continuously enrich and extend its financial and technological "two wings," leveraging financial capital to drive market expansion and strengthening technological innovation to master core and key technologies, thereby enhancing overall industry technical levels[85][86][87] - The company will continue to build "two providers": a leading integrated construction engineering service provider and a leading municipal service provider, covering multiple engineering fields and offering professional solutions[89] - The company will enhance its market capabilities, targeting high-end, large-scale, sophisticated, cutting-edge, and specialized projects, expanding its market share in national airport runway construction, striving for breakthroughs in the Xiong'an market, and exploring cooperation with central state-owned enterprises[90][91][94][95] - The company will achieve quality improvement and efficiency gains, and high-quality development by increasing project profitability, strengthening accounts receivable collection, revitalizing funds, and preventing risks[96] Management Discussion and Analysis Financial Review In 2019, operating revenue decreased by 14.2% to RMB 41.077 billion, primarily due to reduced construction engineering and real estate development, while net profit declined by RMB 406 million, influenced by lower revenue, increased management and R&D expenses, despite improved credit impairment and investment income 2019 Operating Revenue and Gross Margin by Business Segment | Business Segment | 2019 Revenue (RMB Billion) | 2019 Cost (RMB Billion) | 2019 Gross Margin (%) | 2018 Revenue (RMB Billion) | 2018 Cost (RMB Billion) | 2018 Gross Margin (%) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Building Construction Business | 28.699 | 27.364 | 4.7% | 29.783 | 28.573 | 4.1% | | Infrastructure Construction Business | 6.688 | 6.442 | 3.7% | 11.466 | 10.594 | 7.6% | | Specialized and Other Construction Business | 4.809 | 4.505 | 6.3% | 4.628 | 4.497 | 2.8% | | Total | 40.196 | 38.311 | 4.7% | 45.877 | 43.664 | 4.8% | - In 2019, operating revenue was RMB 41.077 billion, a 14.2% decrease from RMB 47.859 billion in 2018, primarily due to a RMB 5.681 billion reduction in construction engineering contracting business and a RMB 1.308 billion reduction in real estate development business[100] - The overall gross margin for construction engineering contracting business decreased by 0.1%, with a more significant decline in infrastructure construction business gross margin, mainly due to cooling in the infrastructure industry and intensified market competition[107] - In 2019, net profit was RMB 763 million, a decrease of RMB 406 million from 2018, primarily due to lower revenue, although credit impairment income and investment income improved[116] - Management expenses increased by RMB 94 million, mainly due to higher employee compensation and a significant increase in scientific and technological activity expenses; R&D expenses increased by RMB 58 million due to an increase in the number of R&D projects[110][112] - Credit impairment income was RMB 40 million, a decrease of RMB 294 million compared to credit impairment losses in 2018, primarily due to strengthened management of accounts receivable collection[113] Liquidity, Financial Resources and Capital Structure The company primarily funds operations through cash generated from operating activities and interest-bearing borrowings, with an increase in cash and cash equivalents in 2019 due to net cash inflow from financing activities, while capital expenditures significantly decreased, but there is a capital commitment for office building purchase 2019 Year-End Major Asset and Liability Changes | Indicator | 2019 Year-End (RMB Billion) | 2018 Year-End (RMB Billion) | Change (RMB Billion) | Reason for Change | | :--- | :--- | :--- | :--- | :--- | | Cash and Cash Equivalents | 7.045 | 6.688 | +0.357 | Net cash inflow from financing activities | | Receivables Financing | 1.258 | 0.725 | +0.533 | Increase in bill payments | | Long-term Equity Investments | 0.530 | 0.873 | -0.343 | Impact of investment and divestment of real estate subsidiaries | | Other Receivables | 2.469 | 4.091 | -1.622 | Cleanup of non-trading fund lending activities | | Net Contract Assets | 40.519 | 37.796 | +2.723 | Unsettled engineering work performed in Q4 | | Accounts Payable | 35.946 | 38.956 | -3.010 | Decrease in new project undertakings and impact of work stoppages | | Interest-bearing Borrowings | 5.029 | 3.635 | +1.394 | Increase in borrowings | | Capital Expenditures | 0.082 | 0.246 | -0.164 | Decrease in construction in progress and purchase of office buildings | - As of year-end 2019, the company's interest-bearing borrowings were approximately RMB 5.029 billion, with annual interest rates ranging from 4.4% to 12.0%[132] - The company signed an office building purchase agreement in 2019, committing to RMB 433 million in capital expenditures, of which the office building purchase price was RMB 350 million[136] Financial Ratios At the end of 2019, the company's current and quick ratios remained stable, but the gearing ratio significantly increased, and both return on assets and return on equity declined, reflecting changes in profitability and financial leverage 2019 Year-End Major Financial Ratios | Indicator | December 31, 2019 | December 31, 2018 | | :--- | :--- | :--- | | Current Ratio (times) | 1.1 | 1.1 | | Quick Ratio (times) | 1.1 | 1.0 | | Gearing Ratio | 85.2% | 61.3% | | Return on Assets | 1.2% | 2.1% | | Return on Equity | 12.6% | 22.4% | - The gearing ratio increased from 61.3% in 2018 to 85.2% at year-end 2019, indicating increased financial leverage[138] - Return on assets decreased from 2.1% in 2018 to 1.2%, and return on equity decreased from 22.4% to 12.6%, indicating a weakening of profitability[138] Contingent Liabilities As of December 31, 2019, the company provided credit financing guarantees to banks totaling approximately RMB 160 million - As of year-end 2019, the company provided third-party bank credit financing guarantees of approximately RMB 160 million[143] RMB Exchange Rate Fluctuations and Exchange Rate Risk The company conducts most of its business and bank loans in RMB, thus not facing significant foreign exchange fluctuation risks, and currently has no hedging policies in place - The company's vast majority of business and bank loans are transacted in RMB, posing no significant foreign exchange fluctuation risk[144] - The company currently has no foreign exchange risk hedging policy[144] Material Acquisitions or Disposals During the reporting period, the company made new investments in associates and joint ventures, divested its real estate segment through equity swap and transfer agreements, and acquired control of Hebei Construction Group Landscape Engineering Co., Ltd - The company made new investments of RMB 57 million in associate Jianwei County Yizong Liangheng Project Management Co., Ltd., and RMB 406 million in joint venture Qinhuangdao Yuanyi Road Construction Management Co., Ltd[147] - The company swapped its 90% equity in Zhongcheng Real Estate, 66% equity in Baoding Swan Real Estate, and 55% equity in Jinshibang Real Estate for Zhongming Real Estate's 100% equity in Hebei Construction Group Landscape Engineering, with a cash top-up of RMB 9.9 million for the difference[148] Employees and Remuneration Policy As of the end of 2019, the company had 8,062 full-time employees, an increase of 13.68% year-on-year, and maintains a performance and capability-oriented remuneration system benchmarked against industry standards to attract, retain, and incentivize talent - As of December 31, 2019, the company had 8,062 full-time employees, an increase of 13.68% from 2018[149] - The company has established a performance and capability-oriented remuneration system, benchmarked against compensation levels in the same region and industry, to attract and retain talent[149] Report of the Directors Company Information and Initial Public Offering The company was incorporated in China on April 7, 2017, and its H-shares were listed on the Main Board of the Hong Kong Stock Exchange on December 15, 2017 - The company was incorporated in China on April 7, 2017, and its H-shares were listed on the Main Board of the Hong Kong Stock Exchange on December 15, 2017[154] Business Review The company is a leading non-state-owned construction group in China, providing integrated engineering contracting solutions for building and infrastructure projects, benefiting from the Beijing-Tianjin-Hebei coordinated development strategy, with core businesses in construction engineering contracting and other services - The company's main business is engineering contracting for building construction and infrastructure projects, benefiting from the Beijing-Tianjin-Hebei coordinated development strategy[156] - The company primarily provides general contracting services for construction engineering, and also engages in service concession arrangements and other businesses[157][158] Environmental Policies and Performance The company has established and implemented environmental compliance systems to meet international standards and Chinese laws, covering noise control, air pollution, and solid waste and wastewater treatment - The company has established environmental compliance systems to ensure adherence to international standards and relevant Chinese laws and regulations[163] - Environmental measures include noise control, air pollution control, and solid waste and wastewater treatment[163] Compliance with Laws and Regulations As a China-registered H-share company listed on the Hong Kong Stock Exchange, the company strictly adheres to Chinese laws and regulations and listing rules, with the Board affirming material compliance - The company is regulated by the Company Law, Listing Rules, and Securities and Futures Ordinance, and complies with regulations from the Ministry of Housing and Urban-Rural Development, National Development and Reform Commission, and other departments in China[165] - The Board believes that the company has complied with relevant laws and regulations in all material aspects[168] Use of Proceeds from Initial Public Offering and Change in Use The company's IPO net proceeds were approximately HKD 1,972.25 million; in February 2019, shareholders approved changes to the use of proceeds, reallocating funds for PPP project equity investments to existing and future equity investments, and assigning approximately RMB 160.81 million for general corporate purposes - The company's IPO net proceeds were approximately HKD 1,972.25 million[169] - In February 2019, the company changed the use of part of its IPO proceeds, including reallocating funds from PPP project equity investments to existing and future equity investments, and assigning approximately RMB 160.81 million for general corporate purposes[172] Use of IPO Net Proceeds as of December 31, 2019 | Purpose | Net Proceeds Used (RMB Million) | Percentage (%) | | :--- | :--- | :--- | | Payments for uncompleted construction engineering contracts | 642.73 | 39.97 | | Funding for the Group's existing and future equity investments | 482.44 | 30.00 | | Repayment of the Group's loan principal and interest on or before maturity | 160.81 | 10.00 | | General corporate purposes | 315.29 | 19.61 | | Total | 1,601.27 | 99.58 | - As of year-end 2019, the company had cumulatively used approximately RMB 1,601.27 million of the raised funds, with the remaining funds expected to be fully utilized by December 31, 2020[177] Results and Distribution The company's 2019 net profit was RMB 763 million, and the Board proposed a cash dividend of RMB 0.14 per share, totaling RMB 246,593,690, with a dividend policy adopted in March 2019 outlining distribution and tax arrangements for overseas shareholders - The company's net profit for 2019 was RMB 763 million[178] - The Board proposed a cash dividend of RMB 0.14 per share (tax inclusive) based on the total share capital of 1,761,383,500 shares at year-end 2019, totaling RMB 246,593,690[182] - The company adopted a dividend policy on March 25, 2019, clarifying that dividend distribution plans are formulated by the Board and approved by the general meeting of shareholders, considering operating performance, cash flow, and financial position[186] - Overseas H-share non-resident enterprise shareholders will be subject to a 10% corporate income tax withholding; overseas H-share individual shareholders will be subject to individual income tax withholding at rates ranging from 10% to 20% based on tax treaties between their country of residence and China[187][190][192] Issued Share Capital As of December 31, 2019, the company's total registered share capital was RMB 1,761,383,500, comprising 1,300,000,000 domestic shares and 461,383,500 H-shares, with no changes during the reporting period - As of December 31, 2019, the company's total registered share capital was RMB 1,761,383,500, divided into 1,761,383,500 shares with a par value of RMB 1.00 each[193] - The share capital includes 1,300,000,000 domestic shares and 461,383,500 H-shares, with no changes during the reporting period[326] Repurchase, Sale or Redemption of the Company's Listed Securities During the reporting period, neither the company nor the Group repurchased, sold, or redeemed any listed securities - During the reporting period, neither the company nor the Group repurchased, sold, or redeemed any listed securities[194] Property, Plant and Equipment Details of the Group's property, plant, and equipment for the year 2019 are provided in Notes 6 and 14 to the financial statements - Details of the Group's property, plant, and equipment for the year 2019 are provided in Notes 6 and 14 to the financial statements[195] Major Customers and Suppliers In 2019, sales to the top five customers accounted for approximately 8.66% of total revenue, with the largest customer contributing 3.63%, while purchases from the top five suppliers represented about 13.91% of sales cost, indicating long-term stable relationships primarily secured through bidding processes - In 2019, sales to the top five customers accounted for approximately 8.66% of total revenue, with the largest customer contributing 3.63%[196] - In 2019, purchases from the top five suppliers accounted for approximately 13.91% of sales cost, with the largest supplier contributing 8.30%[199] - The company's customers primarily include universities, hospitals, civil aviation departments, government agencies, state-owned enterprises, and large real estate companies, with most customers having cooperated for over 30 years[200] - The company primarily procures raw materials and leases equipment through bidding processes or qualified supplier lists, with the vast majority of bids conducted through the company's cloud procurement platform since April 2016[201] Employees Employees are crucial for the company's sustainable development, with detailed information available in the "Directors, Supervisors, Senior Management and Employees - Employee Information" section on pages 181 to 182 of the report - Employees are key to the company's sustainable development, with detailed information available on pages 181 to 182 of the report[203] Bank and Other Borrowings Details regarding the company's bank and other borrowings as of December 31, 2019, are provided in Notes 6, 20, and 6, 26 to the financial statements - As of December 31, 2019, details of the company's bank and other borrowings are provided in Notes 6, 20, and 6, 26 to the financial statements[204] External Donations In 2019, the company made total donations of RMB 295,000 to local charitable organizations and governments of poverty-stricken counties - In 2019, the company's total external donations amounted to RMB 295,000[205] Directors, Supervisors and Senior Management This section lists the positions, appointment dates, and changes for the company's directors, supervisors, and senior management, including the resignation of Ms. Liu Shuzhen, the election of Mr. Zhao Wensheng as Executive Director, and Mr. Zhang Wenzhong as Chief Economist, and discloses their share interests in the company and its associated corporations Current Directors, Supervisors and Senior Management | Name | Position | Date of Appointment | | :--- | :--- | :--- | | Mr. Li Baozhong | Chairman and Executive Director | October 25, 2010 | | Mr. Shang Jinfeng | Executive Director and President | March 31, 2017 | | Mr. Liu Yongjian | Executive Director and Vice President | December 20, 2013 | | Mr. Zhao Wensheng | Executive Director, Chief Accountant and Financial Controller | February 25, 2019 | | Mr. Li Baoyuan | Honorary Chairman and Non-executive Director | October 26, 1997 | | Mr. Cao Qingshe | Vice Chairman and Non-executive Director | October 25, 2010 | | Mr. Xiao Xuwen | Independent Non-executive Director | December 15, 2017 | | Ms. Shen Lifeng | Independent Non-executive Director | December 15, 2017 | | Ms. Chen Xin | Independent Non-executive Director | December 15, 2017 | | Mr. Chen Yisheng | Independent Non-executive Director | December 15, 2017 | | Mr. Yu Xuefeng | Chairman of Supervisory Committee and Shareholder Supervisor | June 25, 2018 | | Mr. Liu Jingqiao | Employee Supervisor | March 31, 2017 | | Ms. Feng Xiujian | Shareholder Supervisor | January 23, 2013 | | Mr. Yue Jianming | Employee Supervisor | March 31, 2017 | | Mr. Wang Feng | Shareholder Supervisor | March 31, 2017 | | Mr. Gao Qiuli | Vice President and Chief Engineer | July 22, 2001 | | Mr. Zhang Wenzhong | Vice President and Chief Economist | March 26, 2018 | | Mr. Li Wutie | Board Secretary and Assistant to President | March 31, 2017 | - During the reporting period, Ms. Liu Shuzhen resigned as an executive director, Mr. Zhao Wensheng was elected as an executive director, and Mr. Zhang Wenzhong was elected as chief economist[211] Interests and Short Positions of Directors, Supervisors and Chief Executive in the Company's Shares (as of December 31, 2019) | Name | Capacity | Number of Shares Interested | Class of Shares | Nature of Interest | Approximate Percentage of Holding in Relevant Class of Shares | Approximate Percentage of Holding in Total Issued Share Capital of the Company | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Mr. Li Baoyuan | Interest in controlled corporation | 1,300,000,000 | Domestic Shares | Long Position | 100% | 73.8% | - Each director and supervisor has entered into a service contract with the company for a term from the date of appointment until the expiry of the current term of the Board/Supervisory Committee[214] - Remuneration for directors and supervisors is paid in the form of fees, salaries, pension scheme contributions, discretionary bonuses, housing and other allowances, and benefits in kind[217] - During the reporting period, none of the company's directors, supervisors, senior management, or their respective associates had any interests in businesses that directly or indirectly compete or may compete with the Group's business[221] Management Contracts For the year ended December 31, 2019, the company had no management and administration contracts concerning all or any substantial part of its business - For the year ended December 31, 2019, the company had no management and administration contracts concerning all or any substantial part of its business[226] Equity-linked Agreements For the year ended December 31, 2019, the Group had no equity-linked agreements - For the year ended December 31, 2019, the Group had no equity-linked agreements[227] Interests and Short Positions of Substantial Shareholders in Shares and Underlying Shares Information regarding the substantial shareholders' holdings in the company is detailed on pages 70 to 76 of the "Changes in Share Capital and Shareholder Information - Interests and Short Positions of Substantial Shareholders in Shares and Underlying Shares" section - Information on substantial shareholders' holdings in the company can be found on pages 70-76[230] Pre-emptive Rights, Share Option Schemes As of December 31, 2019, the company had no pre-emptive rights or share option schemes, and Chinese law or the company's articles of association do not explicitly provide for pre-emptive rights - As of December 31, 2019, the company had no pre-emptive rights or share option schemes[231] Permitted Indemnity Provisions The company maintains appropriate liability insurance for its directors, supervisors, and senior management, which includes permitted indemnity provisions, and as of December 31, 2019, no director benefited from any effective permitted indemnity provision - The company maintains appropriate liability insurance for its directors, supervisors, and senior management, which includes permitted indemnity provisions[232] Compliance with Non-Competition Undertaking by Controlling Shareholders The company received confirmations from controlling shareholders Mr. Li Baoyuan, Zhongru Investment, and Qianbao Investment, affirming full compliance with the non-competition undertaking for 2019 - Controlling shareholders Mr. Li Baoyuan, Zhongru Investment, and Qianbao Investment confirmed full compliance with the non-competition undertaking for 2019[233] Public Float As of the latest practicable date, the public held no less than 26.2% of the company's issued shares, meeting the public float requirements under Rules 8.08(1)(a) and (b) of the Hong Kong Listing Rules - As of the latest practicable date, the public float was no less than 26.2%, complying with Hong Kong Listing Rules requirements[234] Connected Transactions This section discloses the company's non-exempt one-off and continuing connected transactions for 2019, including an equity swap and transfer agreement (divesting real estate and acquiring landscape engineering) and an office building purchase agreement, with independent non-executive directors and auditors confirming compliance for continuing connected transactions - On May 17, 2019, the company signed an equity swap and transfer agreement with a related party to divest its real estate business and acquire 100% equity in Landscape Engineering, with a cash top-up of RMB 9.9 million for the difference[236][237] - On December 31, 2019, the company signed an office building purchase agreement with related party Baoding Zhucheng to purchase an office building for RMB 350 million, payable in installments[242][244] - The company signed a labor subcontracting framework agreement with Baoding Tianli, with total transaction amount in 2019 of RMB 3,239 million, which did not exceed the exemption cap[252][260] - The company signed an engineering construction service framework agreement with Zhongming Real Estate, with total transaction amount in 2019 of RMB 534 million, which did not exceed the annual cap[263][272] - Independent non-executive directors and auditors confirmed that the continuing connected transactions complied with ordinary course of business, general commercial terms, and were in the overall interest of shareholders[273][274][277] Related Party Transactions During the reporting period, the company entered into several transactions with related parties in accordance with applicable accounting standards, details of which are provided in Note 10 to the financial statements, and the company has complied with Chapter 14A of the Listing Rules - During the reporting period, the company entered into several transactions with related parties, details of which are provided in Note 10 to the financial statements[279] - The company has complied with the relevant provisions of Chapter 14A of the Listing Rules[279] Audit Committee The Board's Audit Committee has reviewed the company's 2019 annual results and annual report, as well as the audited consolidated financial statements prepared under China Accounting Standards for Business Enterprises - The Audit Committee has reviewed the company's 2019 annual results and annual report, as well as the audited consolidated financial statements[280] Change in Accounting Standards To streamline processes, improve efficiency, and reduce costs, the company adopted only China Accounting Standards for Business Enterprises for financial statement preparation starting from the accounting year commencing January 1, 2019, as approved by the general meeting of shareholders - The company adopted only China Accounting Standards for Business Enterprises for financial statement preparation starting from January 1, 2019, as approved by the general meeting of shareholders[283] Auditor In March 2019, the company proposed not to re-engage Ernst & Young as its overseas auditor and to re-engage Ernst & Young Hua Ming LLP as its domestic auditor for the 2019 financial statements audit under China Accounting Standards, a proposal approved by the general meeting of shareholders - In March 2019, the company proposed not to re-engage Ernst & Young as its overseas auditor and to re-engage Ernst & Young Hua Ming LLP as its domestic auditor[287] - This proposal was approved by the general meeting of shareholders, and Ernst & Young Hua Ming LLP will serve as the auditor for the 2019 financial statements under China Accounting Standards[287] Report of the Supervisory Committee Meeting Convening Status In 2019, the Supervisory Committee held three meetings, reviewing and approving important matters such as the annual report, financial report, profit distribution plan, accounting standard adoption, A-share issuance proposals, and interim performance report - In 2019, the Supervisory Committee held three meetings, reviewing and approving the annual report, financial report, profit distribution plan, accounting standard changes, A-share issuance proposals, and interim performance report[292][296] Attendance/Presence at Important Meetings In 2019, supervisors attended three general meetings of shareholders and were present at seventeen Board meetings, effectively overseeing the company's operations and management - In 2019, supervisors attended 3 general meetings of shareholders and were present at 17 Board meetings, effectively overseeing the company's operations and management[297] Daily Inspection and Research Status In 2019, the Supervisory Committee continuously monitored the company's operational compliance, ensuring internal operations adhered to regulations and listing requirements - In 2019, the Supervisory Committee continuously monitored the company's operational compliance, ensuring internal operations adhered to regulations and listing requirements[299] Independent Opinions and Special Explanations The Supervisory Committee affirmed that the Board's decisions were lawful, internal management systems were sound, information disclosure was standardized, financial reports fairly reflected the company's status, fundraising was managed compliantly, related party transactions were fair, and the internal control system was continuously improving - The Supervisory Committee believes that the Board's decisions were lawful, internal management systems were sound, information disclosure was standardized, and directors and senior management were diligent, with no actions found to harm the company's or shareholders' interests[300] - The Supervisory Committee believes that the company's 2019 financial systems were sound and well-managed, and the financial report fairly reflected its financial position and operating results[301] - The Supervisory Committee believes that the company's management and use of raised funds complied with national laws and regulations and prospectus commitments, and the change in use was in the best interests of the company and shareholders[304] - The Supervisory Committee believes that the company's related party transactions were fairly priced, with no actions found to harm the interests of the company or minority shareholders[304] - The Supervisory Committee believes that the company's internal control system continued to improve in 2019, with its overall level continuously rising, reasonably ensuring the achievement of internal control objectives[305] Major Events Convening of 2019 Annual General Meeting The company will convene its 2019 Annual General Meeting on June 23, 2020, with relevant notices and circulars to be dispatched in due course - The company will convene its 2019 Annual General Meeting on June 23, 2020[309] Suspension of Shareholder Registration To determine the list of shareholders entitled to attend the 2019 Annual General Meeting, the company will suspend shareholder registration from June 18 to June 23, 2020 - To determine the list of shareholders entitled to attend the 2019 Annual General Meeting, the company will suspend shareholder registration from June 18 to June 23, 2020[310] Final Dividend To determine the list of shareholders entitled to receive the proposed final dividend, the company will suspend shareholder registration from July 6 to July 8, 2020 - To determine the list of shareholders entitled to receive the proposed final dividend, the company will suspend shareholder registration from July 6 to July 8, 2020[311] Material Legal Proceedings, Arbitrations and Matters of Widespread Media Questioning In November 2019, the company clarified inaccurate media reports, and during the reporting period, the Group was not involved in any material legal proceedings, arbitrations, or matters of widespread media questioning - In November 2019, the company clarified inaccurate media reports[313] - During the reporting period, the Group was not involved in any material legal proceedings, arbitrations, or matters of widespread media questioning[317] Material Asset Transactions, Corporate Mergers Except as disclosed in this report, the company was not involved in any material asset transactions or corporate mergers during the reporting period - Except as disclosed in this report, the company was not involved in any material asset transactions or corporate mergers during the reporting period[318] Company Equity Incentive Schemes and Their Impact During the reporting period, the company was not involved in any matters concerning company equity incentive schemes - During the reporting period, the company was not involved in any matters concerning company equity incentive schemes[319] Material Contracts Except as disclosed in this report, neither the company nor any of its subsidiaries entered into any material contracts with the controlling shareholder or any of its subsidiaries (other than the Group) during the reporting period - Except as disclosed in this report, neither the company nor any of its subsidiaries entered into any material contracts with the controlling shareholder or any of its subsidiaries (other than the Group) during the reporting period[320] Circumstances Facing Suspension and Termination of Listing Risks During the reporting period, the company was not involved in any circumstances that could lead to the suspension or termination of its listing - During the reporting period, the company was not involved in any circumstances that could lead to the suspension or termination of its listing[321] Material Post-Balance Sheet Events The COVID-19 pandemic in early 2020 had a temporary impact on the company's operations from 2020 onwards, and the company continues to monitor its developments, with no other material post-balance sheet events occurring from January 1, 2020, to the latest practicable date - The COVID-19 pandemic in early 2020 had a certain temporary impact on the company's operations from 2020 onwards[322] - The company will continue to closely monitor the progress of the pandemic and assess its impact on financial position, cash flows, and operating results[322] Changes in Share Capital and Shareholder Information Share Capital and Changes in Share Capital The company's H-shares were listed on the HKEX Main Board on December 15, 2017, with additional H-shares issued on January 5, 2018, due to partial exercise of the over-allotment option; as of December 31, 2019, total registered share capital was RMB 1,761,383,500, comprising domestic and H-shares, with no changes during the reporting period - The company's H-shares were listed on the Main Board of the Stock Exchange on December 15, 2017, and additional H-shares were issued on January 5, 2018, due to the partial exercise of the over-allotment option[326] - As of December 31, 2019, the company's total registered share capital was RMB 1,761,383,500, including 1,300,000,000 domestic shares and 461,383,500 H-shares[326] - There were no changes in the company's share capital during the reporting period[326] Proposed A-share Issuance Plan The Board approved a proposed A-share issuance plan to list on the Shanghai Stock Exchange, offering up to 25% of the total shares after issuance, with proceeds of approximately RMB 3,955 million primarily for PPP and BOT projects, subject to market conditions and regulatory approvals - The company's Board of Directors resolved to approve the proposed A-share issuance plan, intending to issue A-shares not exceeding 25% of the total share capital after issuance, which is no more than 587,127,833 shares[327][328] - The A-shares will be listed on the Main Board of the Shanghai Stock Exchange, with an issue price not lower than RMB 1.00 per share[334][337] Use of A-share Issuance Proceeds | Purpose | Proposed Use of Proceeds (RMB Ten Thousand) | | :--- | :--- | | PPP Projects | 55,000 | | BOT Projects | 13,000 | | Other Fundraising Projects | 327,500 | | Total | 395,500 | - The plan has been approved by shareholders, with the resolution valid for 12 months from September 16, 2019[343] Interests and Short Positions of Directors, Supervisors and Chief Executive in Shares, Underlying Shares or Debentures of the Company and its Associated Corporations As of December 31, 2019, the company's directors, supervisors, and chief executive held interests in the company's shares, with Mr. Li Baoyuan holding 73.8% of the domestic shares through controlled corporations Interests and Short Positions of Directors, Supervisors and Chief Executive in the Company's Shares (as of December 31, 2019) | Name | Capacity | Number of Shares Interested | Class of Shares | Nature of Interest | Approximate Percentage of Holding in Relevant Class of Shares | Approximate Percentage of Holding in Total Issued Share Capital of the Company | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Mr. Li Baoyuan | Interest in controlled corporation | 1,300,000,000 | Domestic Shares | Long Position | 100% | 73.8% | Interests and Short Positions of Directors, Supervisors and Chief Executive in Shares of the Company's Associated Corporations (as of December 31, 2019) | Name | Name of Associated Corporation | Capacity | Number of Ordinary Shares Interested in Associated Corporation | Nature of Interest | Approximate Percentage of Holding in Issued Share Capital of Associated Corporation | | :--- | :--- | :--- | :--- | :--- | :--- | | Mr. Li Baoyuan | Qianbao Investment | Beneficial owner | 45,000,000 shares | Long Position | 90.00% | | Mr. Li Baoyuan | Zhongru Investment | Interest in controlled corporation | 231,500,000 shares | Long Position | 100.00% | | Mr. Li Baozhong | Qianbao Investment | Beneficial owner | 5,000,000 shares | Long Position | 10.00% | | Mr. Cao Qingshe | Zhongru Investment | Beneficial owner | 5,000,000 shares | Long Position | 2.16% | | Mr. Shang Jinfeng | Zhongru Investment | Beneficial owner | 1,000,000 shares | Long Position | 0.43% | | Mr. Zhao Wensheng | Zhongru Investment | Beneficial owner | 1,000,000 shares | Long Position | 0.43% | | Mr. Liu Yongjian | Zhongru Investment | Beneficial owner | 2,000,000 shares | Long Position | 0.86% | | Mr. Yu Xuefeng | Zhongru Investment | Beneficial owner | 1,000,000 shares | Long Position | 0.43% | | Mr. Liu Jingqiao | Zhongru Investment | Beneficial owner | 500,000 shares | Long Position | 0.22% | | Mr. Yue Jianming | Zhongru Investment | Beneficial owner | 500,000 shares | Long Position | 0.22% | Rights of Directors and Supervisors to Purchase Shares or Debentures As of December 31, 2019, no rights were granted to any director, supervisor, or their respective spouses or children under 18 to benefit from purchasing company shares or debentures - As of December 31, 2019, no rights were granted to any director, supervisor, or their respective spouses or children under 18 to benefit from purchasing company shares or debentures[354] Interests and Short Positions of Substantial Shareholders in Shares and Underlying Shares of the Company As of December 31, 2019, substantial shareholders Zhongru Investment and Qianbao Investment collectively held approximately 73.81% of the company's equity, while Hwabao Trust Co., Ltd. held 4.77% of the H-shares Interests and Short Positions of Substantial Shareholders in the Company's Shares and Underlying Shares (as of December 31, 2019) | Shareholder Name | Capacity | Number of Shares Interested | Class of Shares | Nature of Interest | Approximate Percentage of Holding in Relevant Class of Shares | Approximate Percentage of Holding in Total Issued Share Capital of the Company | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Zhongru Investment | Beneficial owner | 1,202,500,000 | Domestic Shares | Long Position | 92.50% | 68.27% | | Qianbao Investment | Interest in controlled corporation | 1,202,500,000 | Domestic Shares | Long Position | 92.50% | 68.27% | | Qianbao Investment | Beneficial owner | 97,500,000 | Domestic Shares | Long Position | 7.50% | 5.54% | | Hwabao Trust Co., Ltd | Trustee | 83,970,500 | H Shares | Long Position | 18.20% | 4.77% | Corporate Governance Report Corporate Governance Practices The company is committed to maintaining high corporate governance standards, having complied with all code provisions of Appendix 14 to the Listing Rules' Corporate Governance Code in 2019, and continuously strives to improve its internal controls and governance mechanisms - The company complied with all code provisions of Appendix 14 to the Listing Rules' Corporate Governance Code throughout 2019[362][364] - The company has established an effective corporate governance structure and is committed to continuously improving its internal controls and corporate governance mechanisms[364] Board of Directors The Board is responsible for the company's overall management, strategy, and policy approval, supported by four committees (Audit, Remuneration and Appraisal, Nomination, and Strategy), and as of the latest practicable date, comprises 10 directors, meeting Listing Rules requirements for independent non-executive directors - The Board of Directors is responsible for the overall management and control of the company, providing leadership and approving strategic policies and plans[367] - The Board has established an Audit Committee, a Remuneration and Appraisal Committee, a Nomination Committee, and a Strategy Committee to oversee specific areas[368] Board Composition (as of the Latest Practicable Date) | Category | Number of Members | | :--- | :--- | | Executive Directors | 4 | | Non-executive Directors | 2 | | Independent Non-executive Directors | 4 | | Total | 10 | - The company complies with Listing Rules 3.10(1), 3.10(2), and 3.10A regarding the number and professional qualifications of independent non-executive directors[373] - The company encourages directors to participate in continuous professional development programs and has provided training records[376][377] Chairman and President The roles of Chairman and President are held by different individuals with clearly defined responsibilities, with Chairman Mr. Li Baozhong presiding over shareholder and Board meetings, and President Mr. Shang Jinfeng managing the company's production and operations - The roles of Chairman and President are held by different individuals, with clearly defined responsibilities[380][381] - Chairman Mr. Li Baozhong is responsible for convening and presiding over general meetings of shareholders and Board meetings, while President Mr. Shang Jinfeng is responsible for the company's production and operation management[381] Appointment and Re-election of Directors Directors are elected by the general meeting of shareholders for a three-year term and are eligible for re-election, with the Nomination Committee responsible for considering selection criteria, procedures, and terms for new appointments - Directors are elected by the general meeting of shareholders for a three-year term and are eligible for re-election[382] - The Nomination Committee is responsible for considering the selection criteria, procedures, and terms for directors, and all newly nominated directors must be approved by the general meeting of shareholders[382] Board Committees The Board has established Audit, Nomination, Remuneration and Appraisal, and Strategy Committees, each with clear terms of reference and responsibilities, playing crucial roles in financial oversight, director nomination, remuneration evaluation, and strategic planning to ensure effective corporate governance - The Audit Committee's main responsibilities include reviewing financial policies, overseeing risk management and internal controls, and proposing the appointment or dismissal of external auditors[384] - The Nomination Committee's main responsibilities include formulating procedures and standards for the selection of directors and senior management, and making recommendations to the Board regarding candidates[389] - The Remuneration and Appraisal Committee's main responsibilities include formulating remuneration policies and plans for directors and senior management, and proposing remuneration distribution plans based on performance appraisals[401] - The Strategy Committee's main responsibilities include researching the company's medium-to-long-term development strategies, industrial structure adjustments, and major asset and business restructuring plans[405] - The company adopted a Board Diversity Policy on June 5, 2017, where candidates are selected based on a range of diversity factors, including gender, race, language, cultural background, educational background, industry experience, and professional experience[393][394] - The company adopted a Director Nomination Policy on March 25, 2019, clarifying the nomination committee's selection procedures and criteria for recommending director candidates[397][398][399][400] Corporate Governance Functions The Board collectively undertakes corporate governance responsibilities, including formulating and reviewing governance systems, overseeing director and se