河北建设(01727) - 2021 - 中期财报

Company Information This chapter provides fundamental information about Hebei Construction Group Corporation Limited, including its legal name, board and supervisory committee composition, registered offices, stock details, and professional advisors - The company's legal name is Hebei Construction Group Corporation Limited[4] - The Board of Directors comprises executive, non-executive, and independent non-executive directors, while the Supervisory Committee includes shareholder and employee supervisors[4] - The company has established Audit, Remuneration and Appraisal, Nomination, and Strategy Committees[4][7] - The company's stock short name and code are Hebei Construction (01727), with Tricor Investor Services Limited serving as the H-share registrar in Hong Kong[7] Financial Highlights For the six months ended June 30, 2021, revenue increased by 39.0% to RMB 19.97 billion, while net profit decreased by 7.1% to RMB 229 million, with EPS falling to RMB 0.13 Key Financial Indicators for H1 2021 (YoY Change) | Indicator | H1 2021 (RMB Billion) | H1 2020 (RMB Billion) | YoY Change (%) | | :------------------ | :-------------------- | :-------------------- | :------------- | | Revenue | 19.97 | 14.37 | +39.0 | | Net Profit | 2.29 | 2.47 | -7.1 | | Earnings Per Share (RMB) | 0.13 | 0.14 | -7.1 (decreased by 0.01) | Business Overview Hebei Construction Group, a leading non-state-owned construction group in China, saw new contract value grow by 5.28% to RMB 21.908 billion in H1 2021, while focusing on strategic opportunities, core regions, and emerging business expansion Company Business Overview The company's core business is construction engineering, with new contract value growing by 5.28% in H1 2021, primarily in building construction and the Beijing-Tianjin-Hebei region - The company's main business is construction engineering contracting, encompassing building construction, infrastructure construction, and specialized and other construction projects[12][13] H1 2021 New Contract Value Overview | Indicator | H1 2021 (RMB Billion) | H1 2020 (RMB Billion) | YoY Growth (%) | | :------------------ | :-------------------- | :-------------------- | :------------- | | New Contract Value | 219.08 | 208.09 | +5.28 | | Uncompleted Contracts | 794.35 | 817.05 (End of 2020) | -2.79 | New Contract Value Distribution by Region and Segment (H1 2021) | Category | Proportion (%) | | :----------- | :------------- | | By Region | | | Beijing-Tianjin-Hebei | 64.87 | | Others | 35.13 | | By Segment | | | Building Construction | 67.81 | | Infrastructure | 23.85 | | Specialized & Other | 8.34 | - New contract value for building construction business was RMB 14.855 billion, with residential building projects accounting for 49.25%[18][19] - New contract value for infrastructure construction business was RMB 5.225 billion, with municipal infrastructure projects accounting for 66.97%[22][24] - New contract value for specialized and other construction engineering contracting business was RMB 1.828 billion, with decoration and renovation accounting for 53.15%[25][27] Scientific Research Achievements and Awards In H1 2021, the company achieved multiple technological innovations, including provincial and ministerial-level project approvals, R&D expense collection, provincial awards, and numerous patent grants and quality accolades - One 2021 science and technology plan project from the Ministry of Housing and Urban-Rural Development and 31 new technology demonstration projects from the Hebei Provincial Department of Housing and Urban-Rural Development were approved[47] - RMB 46.0095 million in R&D expenses for 2020 enterprise-level science and technology projects were collected, and 200 enterprise-level R&D projects were approved in H1 2021[47] - As of the end of June 2021, 91 new patents were granted (including 5 invention patents), and 72 new patent applications were filed (including 11 invention patents)[48] - The company received 150 provincial-level excellent quality management group activity awards, one Beijing Municipal Infrastructure Public and Highway Engineering Great Wall Cup Gold Award, and other quality awards[50] Future Outlook The company plans to capitalize on national strategic opportunities, focusing on core regional market expansion, participating in national policy projects, and developing new business areas like rail transit and water conservancy, while enhancing risk management and strategic partnerships - The company will seize policy opportunities such as national domestic demand expansion, Beijing-Tianjin-Hebei coordinated development, Xiongan New Area construction, and airport economic zone development[51] - Market development will focus on core regions, particularly urban construction projects in Baoding's main urban area, and seek entry points in national policies like rural revitalization, new urbanization, and urban old residential community renovation[51][54] - The company aims to expand market share in landscaping, highway, and municipal sectors, and achieve gains in emerging business areas such as rail transit, ports, waterways, railways, water conservancy, and water body treatment[54] - The company will focus on building strategic alliances with large state-owned enterprises and central enterprises, leveraging technological innovation, project site management, and quality management capabilities to enhance market development[54] Management Discussion and Analysis This chapter analyzes the company's H1 2021 financial performance, detailing changes in revenue, costs, profits, and expenses, alongside discussions on liquidity, funding, capital structure, financial ratios, contingent liabilities, and human resources Financial Review In H1 2021, operating revenue grew 39.0% to RMB 19.97 billion due to construction recovery, but net profit declined 7.1% to RMB 229 million, impacted by increased management expenses and impairment losses - Operating revenue increased by RMB 5.599 billion year-on-year to RMB 19.97 billion, primarily due to a RMB 5.466 billion increase in construction engineering contracting business revenue, with no significant impact from the COVID-19 pandemic[57][58] Construction Engineering Contracting Segment Operating Performance (H1 2021 vs H1 2020) | Segment | H1 2021 Revenue (RMB Billion) | H1 2020 Revenue (RMB Billion) | Revenue Change (RMB Billion) | | :------------------------- | :---------------------------- | :---------------------------- | :--------------------------- | | Building Construction Business | 13.269 | 9.451 | +3.818 | | Infrastructure Construction Business | 4.763 | 3.096 | +1.667 | | Specialized & Other Construction Business | 1.559 | 1.578 | -0.019 | | Total | 19.591 | 14.125 | +5.466 | - Management expenses increased by RMB 82 million year-on-year to RMB 271 million, mainly due to higher social insurance expenses and increased staff compensation, benefits, and social security costs resulting from a larger workforce[64] - Credit impairment losses increased by RMB 77 million year-on-year to RMB 94 million, primarily due to increased individual bad debt provisions for certain long-aged receivables[67] - Asset impairment losses increased by RMB 201 million year-on-year to RMB 232 million, mainly due to increased individual bad debt provisions for contract assets on certain slow-settling projects[68] - Investment income increased by RMB 33 million year-on-year to RMB 29 million, primarily due to increased dividends declared by investees from strategic investments in other equity instruments[69] - Net profit was RMB 229 million, a decrease of RMB 18 million compared to the same period last year[71] Liquidity, Financial Resources, and Capital Structure The company funds operations primarily through operating cash and interest-bearing borrowings; as of June 30, 2021, cash decreased by RMB 2.237 billion due to increased net cash outflows from operating and financing activities, while receivables increased and contract assets decreased, reflecting faster project settlements - As of June 30, 2021, cash and cash equivalents were approximately RMB 5.771 billion, a decrease from RMB 8.001 billion at the end of 2020[72] - Cash and bank balances decreased by RMB 2.237 billion from the end of 2020 to RMB 6.216 billion, primarily due to increased net cash outflows from operating and financing activities[75] - Net accounts receivable increased by RMB 712 million from the end of 2020 to RMB 6.139 billion, mainly due to the Group's accelerated project settlements[78] - Net contract assets decreased by RMB 1.642 billion from the end of 2020 to RMB 38.881 billion, primarily due to timely settlement of completed projects during the reporting period[81] - Accounts payable decreased by RMB 1.535 billion (4%) from the end of 2020 to RMB 33.491 billion, mainly due to tightened liquidity among bulk raw material suppliers, leading to shorter payment terms with some suppliers[84] - Capital expenditure in H1 2021 was approximately RMB 132 million, a decrease of RMB 371 million compared to the same period in 2020, primarily due to no significant capital expenditure on office building construction during the reporting period[85] Financial Ratios As of June 30, 2021, the company's current and quick ratios remained at 1.1x, with a gearing ratio of 80.1%, slightly lower than year-end 2020, while return on assets and equity both decreased, indicating profitability pressure Key Financial Ratios (June 30, 2021 vs December 31, 2020) | Indicator | June 30, 2021 | December 31, 2020 | | :------------------------- | :------------ | :---------------- | | Current Ratio (x) | 1.1 | 1.1 | | Quick Ratio (x) | 1.1 | 1.1 | | Gearing Ratio (%) | 80.1 | 80.5 | | Return on Assets (Non-annualized) (%) | 0.4 | 1.2 | | Return on Equity (Non-annualized) (%) | 3.6 | 12.2 | Other Financial and Operating Information During the reporting period, there were no significant acquisitions or disposals, with contingent liabilities primarily from third-party bank credit guarantees and pending litigation; the company's operations are mainly in RMB, posing no significant foreign exchange risk, and it employs 8,823 full-time staff with performance-based compensation and training programs - There were no significant acquisitions or disposals during the reporting period[96] - Contingent liabilities include guarantees for third-party bank credit facilities totaling approximately RMB 145 million and contingent liabilities from pending litigation or arbitration amounting to RMB 6.68 million[97] - The vast majority of the company's business and bank loans are transacted in RMB, posing no significant foreign exchange fluctuation risk[98] - As of June 30, 2021, the company had 8,823 full-time employees, with a compensation system guided by employee performance and capabilities, and a three-level, four-tier, five-segment employee education and training system in place[99] Other Matters This chapter covers the company's total share capital, corporate governance compliance, code of conduct adherence, articles of association amendments, listed securities transactions, dividend distribution, and significant post-balance sheet events; total share capital remained unchanged at RMB 1,761,383,500, and no interim dividend was recommended for 2021 - As of June 30, 2021, the company's total share capital was RMB 1,761,383,500, with no changes during the reporting period[102] - The company has complied with all code provisions of the Corporate Governance Code and adopted most of the recommended best practices[103] - The company's directors and supervisors have confirmed compliance with the Model Code for Securities Transactions by Directors of Listed Issuers[104] - The Board does not recommend the payment of an interim dividend for the six months ended June 30, 2021[109] - The Audit Committee has reviewed and confirmed the Group's interim results announcement and financial statements for the six months ended June 30, 2021[111] Changes in Share Capital and Shareholder Information This chapter details the company's share capital structure, including domestic and H-shares, and discloses share interests of directors, supervisors, senior management, and major shareholders; as of June 30, 2021, total issued share capital was RMB 1,761,383,500, comprising 1.3 billion domestic shares and 461,383,500 H-shares, with no changes during the period - As of June 30, 2021, the company's total issued share capital was RMB 1,761,383,500, comprising 1.3 billion domestic shares and 461,383,500 H-shares, with no changes during the reporting period[114] - Mr. Li Baoyuan holds 1.3 billion domestic shares through controlled corporate interests, representing 73.80% of the company's total issued share capital[117] - Major shareholder Zhongru Investment beneficially owns 1.2025 billion domestic shares, representing 68.27% of the company's total issued share capital[131] - Ganbao Investment holds 1.2025 billion domestic shares through controlled corporate interests and beneficially owns 97.5 million domestic shares, totaling 73.81% of the company's total issued share capital[131][132] Directors, Supervisors, and Senior Management This chapter outlines the composition of the Board of Directors (9 members), Supervisory Committee (5 members), and senior management (8 members) as of the latest practicable date, with no changes in appointments during the reporting period - The company's Board of Directors consists of 9 directors, including 4 executive directors, 2 non-executive directors, and 3 independent non-executive directors[135] - The company's Supervisory Committee consists of 5 supervisors, including 3 shareholder supervisors and 2 employee supervisors[135] - The company has 8 senior management personnel, including Mr. Shang Jinfeng, Executive Director and President, and Mr. Liu Yongjian, Executive Director and Vice President[135] - There were no changes in the appointments of directors, supervisors, and senior management during the reporting period[137] Interim Consolidated Balance Sheet (Unaudited) As of June 30, 2021, the interim consolidated balance sheet shows total assets of RMB 60.572 billion, a decrease from year-end 2020, with total liabilities at RMB 54.133 billion and total equity at RMB 6.440 billion Interim Consolidated Balance Sheet Summary (June 30, 2021 vs December 31, 2020) | Indicator | June 30, 2021 (RMB Thousand) | December 31, 2020 (RMB Thousand) | | :------------------- | :--------------------------- | :------------------------------- | | Total Assets | 60,572,391 | 62,793,882 | | Total Current Assets | 55,292,300 | 57,896,727 | | Total Non-current Assets | 5,280,091 | 4,897,155 | | Total Liabilities | 54,132,733 | 56,353,803 | | Total Current Liabilities | 51,474,060 | 54,372,092 | | Total Non-current Liabilities | 2,658,673 | 1,981,711 | | Total Owners' Equity | 6,439,658 | 6,440,079 | Interim Consolidated Income Statement (Unaudited) For the six months ended June 30, 2021, the interim consolidated income statement reports operating revenue of RMB 19.970 billion and net profit of RMB 229 million, with net profit attributable to parent company shareholders at RMB 236.8 million and basic and diluted EPS at RMB 0.13 Interim Consolidated Income Statement Summary (H1 2021 vs H1 2020) | Indicator | H1 2021 (RMB Thousand) | H1 2020 (RMB Thousand) | | :------------------------------- | :--------------------- | :--------------------- | | Operating Revenue | 19,970,407 | 14,371,556 | | Operating Cost | 18,890,792 | 13,604,235 | | Operating Profit | 291,947 | 317,565 | | Total Profit | 282,080 | 316,645 | | Income Tax Expense | 52,999 | 69,978 | | Net Profit | 229,081 | 246,667 | | Net Profit Attributable to Owners of the Parent | 236,829 | 249,129 | | Basic and Diluted Earnings Per Share (RMB/share) | 0.13 | 0.14 | Interim Consolidated Statement of Changes in Equity (Unaudited) For the six months ended June 30, 2021, the interim consolidated statement of changes in equity shows total equity slightly decreased to RMB 6.440 billion, influenced by total comprehensive income of RMB 241.173 million and cash dividend payments of RMB 246.594 million Interim Consolidated Statement of Changes in Equity Summary (H1 2021) | Indicator | Beginning Balance (RMB Thousand) | Change for the Period (RMB Thousand) | Ending Balance (RMB Thousand) | | :-------------------------------------- | :------------------------------- | :----------------------------------- | :---------------------------- | | Share Capital | 1,761,384 | - | 1,761,384 | | Capital Reserve | 1,661,232 | - | 1,661,232 | | Other Comprehensive Income | 141,182 | 12,092 | 153,274 | | Surplus Reserve | 500,912 | - | 500,912 | | Retained Earnings | 2,181,233 | (9,765) | 2,171,468 | | Total Equity Attributable to Owners of the Parent | 6,245,943 | 2,327 | 6,248,270 | | Non-controlling Interests | 194,136 | (2,748) | 191,388 | | Total Equity | 6,440,079 | (421) | 6,439,658 | - Total comprehensive income for the period was RMB 241.173 million, of which RMB 248.921 million was attributable to owners of the parent company[156] - Cash dividends of RMB 246.594 million were paid during the period[156] Interim Consolidated Cash Flow Statement (Unaudited) For the six months ended June 30, 2021, the interim consolidated cash flow statement shows net cash outflows from operating, investing, and financing activities of RMB 1.871 billion, RMB 113.422 million, and RMB 245.846 million, respectively, resulting in a RMB 2.230 billion decrease in cash and cash equivalents to RMB 5.771 billion Interim Consolidated Cash Flow Statement Summary (H1 2021 vs H1 2020) | Indicator | H1 2021 (RMB Thousand) | H1 2020 (RMB Thousand) | | :------------------------------- | :--------------------- | :--------------------- | | Net Cash Flow from Operating Activities | (1,870,967) | (1,130,214) | | Net Cash Flow from Investing Activities | (113,422) | (477,112) | | Net Cash Flow from Financing Activities | (245,846) | 56,214 | | Net Decrease in Cash and Cash Equivalents | (2,229,578) | (1,547,697) | | Cash and Cash Equivalents at End of Period | 5,770,987 | 5,127,729 | - Net cash outflow from operating activities increased, primarily due to higher cash payments for goods purchased and services received[164] - Net cash outflow from investing activities decreased, primarily due to a significant reduction in cash paid for the acquisition of property, plant and equipment, intangible assets, and other long-term assets[164] - Net cash flow from financing activities shifted from a net inflow in the prior period to a net outflow, mainly due to increased cash payments for debt repayment[167] Company Balance Sheet (Unaudited) As of June 30, 2021, the company balance sheet shows total assets of RMB 48.755 billion, a decrease from year-end 2020, with total liabilities at RMB 42.847 billion and total equity at RMB 5.907 billion Company Balance Sheet Summary (June 30, 2021 vs December 31, 2020) | Indicator | June 30, 2021 (RMB Thousand) | December 31, 2020 (RMB Thousand) | | :------------------- | :--------------------------- | :------------------------------- | | Total Assets | 48,754,746 | 50,873,284 | | Total Current Assets | 43,956,148 | 46,253,325 | | Total Non-current Assets | 4,798,598 | 4,619,959 | | Total Liabilities | 42,847,452 | 44,940,013 | | Total Current Liabilities | 42,138,457 | 44,452,385 | | Total Non-current Liabilities | 708,995 | 487,628 | | Total Owners' Equity | 5,907,294 | 5,933,271 | Company Income Statement (Unaudited) For the six months ended June 30, 2021, the company income statement reports operating revenue of RMB 15.992 billion and net profit of RMB 210.138 million, with net other comprehensive income after tax at RMB 10.479 million and total comprehensive income at RMB 220.617 million Company Income Statement Summary (H1 2021 vs H1 2020) | Indicator | H1 2021 (RMB Thousand) | H1 2020 (RMB Thousand) | | :------------------- | :--------------------- | :--------------------- | | Operating Revenue | 15,992,319 | 12,138,555 | | Operating Cost | 15,185,235 | 11,531,687 | | Operating Profit | 254,640 | 283,793 | | Total Profit | 254,090 | 282,967 | | Income Tax Expense | 43,952 | 59,908 | | Net Profit | 210,138 | 223,059 | | Total Comprehensive Income | 220,617 | 190,409 | Company Statement of Changes in Equity (Unaudited) For the six months ended June 30, 2021, the company statement of changes in equity shows total shareholder equity slightly decreased to RMB 5.907 billion, influenced by total comprehensive income of RMB 220.617 million and cash dividend payments of RMB 246.594 million Company Statement of Changes in Equity Summary (H1 2021) | Indicator | Beginning Balance (RMB Thousand) | Change for the Period (RMB Thousand) | Ending Balance (RMB Thousand) | | :------------------- | :------------------------------- | :----------------------------------- | :---------------------------- | | Share Capital | 1,761,384 | - | 1,761,384 | | Capital Reserve | 1,447,379 | - | 1,447,379 | | Other Comprehensive Income | 146,817 | 10,479 | 157,296 | | Surplus Reserve | 292,919 | - | 292,919 | | Retained Earnings | 2,284,772 | (36,456) | 2,248,316 | | Total Shareholder Equity | 5,933,271 | (25,977) | 5,907,294 | - Total comprehensive income for the period was RMB 220.617 million[182] - Distributions to shareholders (cash dividends) for the period amounted to RMB 246.594 million[182] Company Cash Flow Statement (Unaudited) For the six months ended June 30, 2021, the company cash flow statement shows net cash outflows from operating, investing, and financing activities of RMB 1.509 billion, RMB 96.179 million, and RMB 222.261 million, respectively, resulting in a RMB 1.827 billion decrease in cash and cash equivalents to RMB 4.573 billion Company Cash Flow Statement Summary (H1 2021 vs H1 2020) | Indicator | H1 2021 (RMB Thousand) | H1 2020 (RMB Thousand) | | :------------------------------- | :--------------------- | :--------------------- | | Net Cash Flow from Operating Activities | (1,509,239) | (488,463) | | Net Cash Flow from Investing Activities | (96,179) | (477,072) | | Net Cash Flow from Financing Activities | (222,261) | (277,150) | | Net Decrease in Cash and Cash Equivalents | (1,827,022) | (1,239,270) | | Cash and Cash Equivalents at End of Period | 4,572,971 | 4,122,191 | - Net cash outflow from operating activities significantly increased year-on-year, primarily because the increase in cash received from sales of goods and services was less than the increase in cash paid for purchases of goods and services[189] - Net cash outflow from investing activities significantly decreased year-on-year, primarily due to a substantial reduction in cash paid for the acquisition of property, plant and equipment, intangible assets, and other long-term assets[189] - Net cash outflow from financing activities decreased year-on-year, primarily due to an increase in cash received from borrowings[192] Notes to Financial Statements This chapter provides detailed notes to the consolidated and company financial statements, covering company background, basis of preparation, significant accounting policies, taxes, scope of consolidation, key financial items, segment reporting, financial instruments and risks, fair value, related party transactions, contingent liabilities, leases, and commitments, offering crucial context and data General Information Hebei Construction Group Corporation Limited, formerly Hebei Construction Group Co., Ltd., completed its shareholding reform and listed on the Stock Exchange main board in 2017, primarily engaging in general contracting of construction projects and real estate development with top-tier qualifications; Zhongru Investment Co., Ltd. is the parent company, and Ganbao Investment Co., Ltd. is the ultimate parent company - The company completed its shareholding reform on April 7, 2017, and was listed on the main board of the Stock Exchange on December 15, 2017[195][196] - The company's registered capital is RMB 1,761,383,500, primarily engaged in general contracting of construction projects and real estate development[196][198] - The company holds a national special-grade qualification for general contracting of building construction projects, along with multiple first-grade qualifications for highway engineering, municipal public utility engineering, and mechanical and electrical installation engineering[198] - The Group's parent company is Zhongru Investment Co., Ltd., and the ultimate parent company is Ganbao Investment Co., Ltd[199] Basis of Preparation of Financial Statements These financial statements are prepared in accordance with the Accounting Standards for Business Enterprises issued by the Ministry of Finance, on a going concern basis, primarily at historical cost, and accurately reflect the financial position, operating results, and cash flows of the company and the Group - These financial statements are prepared in accordance with the Accounting Standards for Business Enterprises issued by the Ministry of Finance[201] - The statements are presented on a going concern basis, and except for certain financial instruments and investment properties, are measured at historical cost[202] - These financial statements truly and completely reflect the financial position of the company and the Group as of June 30, 2021, and their operating results and cash flows for the six months ended June 30, 2021[203] Significant Accounting Policies and Estimates This chapter details the company's significant accounting policies and estimates for financial statement preparation, covering accounting period, functional currency, business combinations, consolidation, financial instruments, revenue recognition, impairment, and fair value measurement, with no significant changes during the reporting period - The accounting year follows the calendar year, and the functional currency is RMB[207][208] - Business combinations are classified as under common control or not under common control, and the scope of consolidated financial statements is determined based on control[209][217] - Financial assets are classified based on business model and contractual cash flow characteristics as measured at fair value through profit or loss, amortized cost, or fair value through other comprehensive income[232] - Revenue is recognized upon satisfaction of performance obligations when the customer obtains control of goods or services, and construction contracts recognize revenue based on the stage of completion[292][295] - Significant accounting judgments and estimates include the method for determining the stage of completion of construction contracts, impairment of financial instruments and contract assets, fair value of unlisted equity investments, deferred income tax assets, and fair value estimation of investment properties[351][353][365][366][369][372] - For the six months ended June 30, 2021, there were no significant changes in the Group's accounting policies and estimates[378] Taxation This chapter lists the Group's main taxes and their rates, including Value-Added Tax, Urban Maintenance and Construction Tax, Education Surcharge, Local Education Surcharge, and Enterprise Income Tax - Value-Added Tax: General taxpayers calculate output tax at 6%, 9%, or 13%, while small-scale taxpayers pay at 3%[380][382] - Urban Maintenance and Construction Tax: Calculated at 7%, 5%, or 1% of the actual turnover tax paid[382] - Education Surcharge: Calculated at 3% of the actual turnover tax paid[383] - Local Education Surcharge: Calculated at 2% of the actual turnover tax paid[384] - Enterprise Income Tax: Calculated at 25% of taxable income[385] Scope of Consolidation of Consolidated Financial Statements This chapter lists the company's subsidiaries, detailing their principal places of business, nature of operations, registered capital, and equity and voting interests; as of June 30, 2021, the company held numerous subsidiaries primarily engaged in infrastructure, landscaping, investment management, and concrete manufacturing, with new investments in Baoding Yungong Trading Co., Ltd. and Dacheng Zhongyu Water Supply Co., Ltd. during the period - The company owns dozens of subsidiaries with a broad business scope, covering infrastructure construction, landscaping, investment management, automotive technology R&D and sales, aviation industry, water production and supply, agricultural sales, hospital management, window and door manufacturing, concrete manufacturing and sales, internet development and sales, water treatment, new energy technology development, investment consulting and management, environmental engineering, power sales services, electrical equipment installation and sales, machinery and equipment leasing, urban greening, consulting services, construction software development and sales, construction project quality inspection, and general retail[387][390][394][396] - During the reporting period, the company acquired a 13% equity interest in Hebei Construction Group Tianchen Construction Engineering Co., Ltd., directly holding 100% of its equity[397] - During the reporting period, the company invested in and established Baoding Yungong Trading Co., Ltd., directly holding 100% of its equity[397] - During the reporting period, the company, together with Dacheng Zhongzhou Water Supply Co., Ltd., invested in and established Dacheng Zhongyu Water Supply Co., Ltd., directly holding 20% of its equity and indirectly holding 80% of its equity[397] Notes to Major Items in Consolidated Financial Statements This chapter provides detailed notes on major items in the consolidated financial statements, including cash, receivables, contract assets, long-term equity investments, revenue, expenses, impairment losses, and cash flows, offering insights into their composition, changes, aging analysis, and impairment provisions Composition of Cash and Bank Balances (June 30, 2021 vs December 31, 2020) | Item | June 30, 2021 (RMB Thousand) | December 31, 2020 (RMB Thousand) | | :----------------- | :--------------------------- | :------------------------------- | | Cash on Hand | 5,385 | 9,540 | | Bank Deposits | 4,752,405 | 6,984,518 | | Other Cash and Bank Balances | 1,458,582 | 1,459,213 | | Total | 6,216,372 | 8,453,271 | - Net accounts receivable amounted to RMB 6.139 billion, an increase of RMB 712 million from the end of 2020, primarily due to the Group's accelerated project settlements[78][403] - Net contract assets amounted to RMB 38.881 billion, a decrease of RMB 1.642 billion from the end of 2020, primarily due to timely settlement of completed projects during the reporting period[81][445] - Long-term equity investments amounted to RMB 551.280 million, an increase of RMB 10.479 million from the end of 2020, primarily due to investments in associates and changes in investment income/loss under the equity method[77][458] - Operating revenue was RMB 19.970 billion, with RMB 19.591 billion from principal operations, and the construction engineering contracting segment contributing RMB 19.349 billion[505][507] - Investment income was RMB 28.824 million, a significant improvement from (RMB 4.075 million) in the prior period, mainly due to increased dividend income from other equity instrument investments[518] - Credit impairment losses were RMB 94.369 million, and asset impairment losses were RMB 231.694 million, both significantly higher than the prior period[520][521] - Net cash outflow from operating activities was RMB (1.871 billion), an increase in net outflow compared to the prior period[531] Segment Reporting This chapter divides the Group's operations into construction engineering contracting and other segments, providing their operating results, assets, and liabilities; the construction engineering segment is the primary revenue source with external revenue of RMB 19.349 billion, with all revenue and non-current assets primarily from mainland China, and no single customer accounting for over 10% of consolidated revenue - The Group has 2 reportable segments: construction engineering contracting and other segments[538] Segment Information Summary (H1 2021) | Indicator | Construction Engineering (RMB Thousand) | Other (RMB Thousand) | Adjustments and Eliminations (RMB Thousand) | Consolidated (RMB Thousand) | | :------------------- | :------------------------------------ | :------------------- | :------------------------------------------ | :-------------------------- | | External Revenue | 19,348,565 | 621,842 | – | 19,970,407 | | Total Profit | 305,749 | (15,218) | (8,451) | 282,080 | | Total Assets | 57,987,197 | 5,547,711 | (2,962,517) | 60,572,391 | | Total Liabilities | 51,885,823 | 3,819,806 | (1,572,896) | 54,132,733 | - The Group's revenue primarily originates from customers within mainland China, and all non-current assets are located in mainland China[546][547] - The Group has no single customer whose operating revenue exceeds 10% of the consolidated revenue[548] Financial Instruments and Risks This chapter details the Group's financial instrument classification, asset transfers, and key financial risks, including credit, liquidity, and market risks (interest rate and equity price risks), outlining capital management objectives and strategies; the Group assesses credit risk using an expected credit loss model, manages liquidity with sufficient funds, and addresses interest rate and equity price risks, with a gearing ratio of 80% - Financial assets are classified as measured at fair value through profit or loss, amortized cost, or fair value through other comprehensive income[551] - Transferred financial assets not derecognized include bills endorsed to suppliers and accounts receivable factoring arrangements, where the Group retains substantially all risks and rewards[559][562] - Transferred financial assets derecognized but with continuing involvement primarily consist of bank acceptance bills endorsed to suppliers for settling accounts payable, where the Group has transferred substantially all risks and rewards[563] - Key financial risks include credit risk, liquidity risk, and market risk (interest rate risk, equity instrument investment price risk)[566] - The Group uses an expected credit loss model to assess impairment of financial instruments and contract assets, incorporating forward-looking information[568][573] - As of June 30, 2021, if borrowing interest rates were to increase/decrease by 100 basis points, net profit or loss would decrease/increase by RMB 8.753 million[584] - As of June 30, 2021, the gearing ratio was 80%[590] Fair Value This chapter describes the fair value measurement methods and hierarchy for financial instruments and investment properties; long-term borrowings use discounted future cash flows, unlisted equity investments use comparable listed companies, and investment properties use the income approach, with no transfers between fair value hierarchy levels during the period - Cash and bank balances, accounts receivable, other receivables, short-term borrowings, bills payable, accounts payable, and other payables have fair values approximating their carrying amounts due to their short remaining maturities[591] - The fair value of long-term borrowings is determined using the discounted future cash flow method, with market yields of other financial instruments with similar contractual terms, credit risks, and remaining maturities as discount rates[593] - The fair value of unlisted equity instrument investments is estimated using the comparable listed company method, considering liquidity discounts[594] - Investment properties (Dafeng Supermarket) are valued using the income approach, with key unobservable inputs including capitalization rates and annual market rents[598] Fair Value Hierarchy of Assets (June 30, 2021) | Item | Level 1 (RMB Thousand) | Level 2 (RMB Thousand) | Level 3 (RMB Thousand) | Total (RMB Thousand) | | :----------------------- | :--------------------- | :--------------------- | :--------------------- | :------------------- | | Financial Assets at FVTPL | 817 | – | – | 817 | | Receivables Financing | – | 2,327,260 | – | 2,327,260 | | Other Equity Instrument Investments | 82,305 | – | 700,156 | 782,461 | | Investment Properties | – | – | 137,900 | 137,900 | | Total | 83,122 | 2,327,260 | 838,056 | 3,248,438 | Related Party Relationships and Transactions This chapter defines related party criteria, lists parent, subsidiaries, and other related parties, and discloses major transactions including goods and services, leases, guarantees, and key management compensation; transaction prices are typically market-based, with RMB 405.203 million in construction services provided and RMB 1.873 billion in labor services purchased from related parties as of June 30, 2021, along with detailed related party receivables and payables - Related party identification criteria include parties that control, are jointly controlled by, or exercise significant influence over the Group[609] - The company's parent company is Zhongru Investment Co., Ltd. (holding 69.4%), and the ultimate controlling party is Ganbao Investment Co., Ltd. (holding 5.6%)[613] Services Provided to Related Parties (H1 2021 vs H1 2020) | Related Party Name | H1 2021 (RMB Thousand) | H1 2020 (RMB Thousand) | | :------------------------------------- | :--------------------- | :--------------------- | | Xi'an Zhongyuan Real Estate Development Co., Ltd. | 77,789 | 25,270 | | Qinhuangdao Yuanyi Road Construction Management Co., Ltd. | 61,980 | 126,388 | | Hebei Zitan Real Estate Development Co., Ltd. | 45,839 | 32,029 | | Total | 405,203 | 299,234 | Services Purchased from Related Parties (H1 2021 vs H1 2020) | Related Party Name | H1 2021 (RMB Thousand) | H1 2020 (RMB Thousand) | | :--------------------------------- | :--------------------- | :--------------------- | | Baoding Tianli Labor Service Co., Ltd. | 1,871,620 | 1,037,800 | | Hebei Tianbo Construction Technology Co., Ltd. | 992 | 698 | | Total | 1,872,612 | 1,038,498 | - The Group provided a guarantee of RMB 600 million for Qinhuangdao Yuanyi Road Construction Management Co., Ltd., with actual guarantee liability undertaken amounting to RMB 127.5 million as of June 30, 2021[627][632] - As of June 30, 2021, related party balances in accounts receivable were RMB 109.460 million, in contract assets were RMB 917.879 million, and in accounts payable were RMB 1.007 billion[659][662][666] - Total compensation for key management personnel was RMB 5.191 million, an increase from the prior period[657] Contingent Matters As of June 30, 2021, the Group's total contingent liabilities were RMB 151.552 million, primarily from external guarantees (RMB 144.872 million) and pending litigation (RMB 6.680 million), with management assessing no significant increase in credit risk or material adverse impact on financial performance from these matters Summary of Contingent Matters (June 30, 2021 vs December 31, 2020) | Item | June 30, 2021 (RMB Thousand) | December 31, 2020 (RMB Thousand) | | :--------------------------------- | :--------------------------- | :------------------------------- | | Contingent Liabilities from External Guarantees | 144,872 | 153,294 | | Contingent Liabilities from Pending Litigation or Arbitration | 6,680 | 4,060 | | Total | 151,552 | 157,354 | - Contingent liabilities from external guarantees primarily relate to principal and interest on third-party bank credit facilities guaranteed by the Group, with no significant increase in associated credit risk[673] - Contingent liabilities from pending litigation or arbitration, as prudently estimated by management, do not include disputes, lawsuits, or claims highly likely to result in losses, and are not expected to have a material adverse effect on operating results or financial position[674] Leases This chapter discloses the Group's leasing activities as both lessor and lessee; as lessor, the Group generated RMB 14.996 million in rental income from operating leases of properties and idle machinery in H1 2021, while as lessee, it incurred RMB 1.022 million in lease liability interest expense and RMB 11.783 million in total cash outflows for properties and equipment - As a lessor, the Group leases out certain properties and idle machinery and equipment under operating leases[675] - In H1 2021, rental income from properties was RMB 1.276 million, and from machinery and equipment was RMB 13.720 million, totaling RMB 14.996 million[675][676] - As a lessee, the Group leases properties and machinery and equipment, with lease terms typically ranging from 3 months to 18 years[680] - In H1 2021, lease liability interest expense was RMB 1.022 million, short-term lease expenses recognized in profit or loss were RMB 5.614 million, and total cash outflow related to leases was RMB 11.783 million[680] Commitments As of June 30, 2021, the Group had no significant capital commitments - As of June 30, 2021, the Group had no significant capital commitments (December 31, 2020: RMB 1.297 million)[683] Approval of Financial Statements These financial statements were approved by the company's Board of Directors on August 31, 2021 - These financial statements were approved by the company's Board of Directors on August 31, 2021[684] Definitions This chapter provides definitions for key terms and abbreviations used in the report to ensure clear understanding of its content