伟工控股(01793) - 2020 - 中期财报

Corporate Information This section details Wecon Holdings Limited's corporate information, including board, advisors, and stock code 01793 - Board members include Executive Directors Mr. Tsang Ka Yip (Chairman), Mr. Tsang Tsz Him, Mr. Tsang Tsz Kit, and Independent Non-executive Directors Dr. Lau Chi Keung, Mr. Chan Tim Yiu, Mr. Sze Kwok Wing[3] - The company's auditor is Ernst & Young, with HSBC, Bank of China (Hong Kong), and Standard Chartered Bank (Hong Kong) as principal bankers[6] - The company's stock code is 01793, and its official website is **http://www.wecon.com.hk**[6](index=6&type=chunk) Management Discussion and Analysis This section details Wecon Holdings Limited's business performance, financial position, outlook, key risks, and capital utilization Business Review Wecon Holdings Limited, a long-established Hong Kong general contractor, primarily provides building construction and RMAA engineering services - The Group primarily engages in providing building construction services and renovation, maintenance, alteration, and addition (RMAA) engineering services[9] - As of September 30, 2019, the Group had 11 major projects with awarded contract sums of HKD 10.0 million or more, including 2 newly awarded projects[9] - During the same period, the Group had no major projects with awarded contract sums of HKD 10.0 million or more actually completed[9] Prospects The company's successful listing in February 2019 enhanced its image and provided capital for larger projects, despite market competition - The company's successful listing on the Main Board of the Stock Exchange on February 27, 2019, significantly enhanced its corporate image and provided a capital platform for bidding on larger contracts[9] - The Group faces intense competition in the Hong Kong building construction and RMAA markets, cautious client evaluation, and rising direct labor and material costs, increasing overall operational risks[12] - Despite challenging local economic conditions, the Board remains cautiously optimistic about the industry outlook, benefiting from government infrastructure development and housing supply policies[14][16] Principal Risks and Uncertainties The Group's business faces multiple risks, including reliance on non-recurring contracts, customer concentration, and subcontractor dependency - The Group's revenue relies on contracts obtained through non-recurring tender or quotation processes, with no guarantee of continuous success[19] - The Group faces significant concentration risk due to its heavy reliance on its largest and key customers[19] - The Group relies on subcontractors for most of its work, and fluctuations in subcontracting costs, poor performance, or inability to find subcontractors could significantly impact operations and profitability[21] - Cash flow may be insufficient due to timing mismatches between receiving progress payments from customers and paying suppliers and subcontractors[21] - Changes in raw material prices and supply could significantly and adversely affect operating results[22] - The Group provides performance bonds, which may affect its liquidity position[22] Segment Information The Group's reportable and operating segments are building construction services and renovation and maintenance engineering services - The Group's reportable and operating segments are (i) building construction services and (ii) renovation and maintenance engineering services[25] - Detailed segment information is disclosed in Note 3 to the interim condensed consolidated financial information within this interim report[25] Financial Review For the six months ended September 30, 2019, total revenue grew 10.7% to HKD 627.7 million, with net profit up 58.5% to HKD 21.4 million Key Financial Indicators Overview | Indicator | Six Months Ended Sep 30, 2019 (thousand HKD) | Six Months Ended Sep 30, 2018 (thousand HKD) | Change (thousand HKD) | Change (%) | | :--- | :----------------------------------- | :----------------------------------- | :------------ | :------- | | Total Revenue | 627,711 | 566,946 | 60,765 | 10.7% | | Gross Profit | 44,324 | 36,636 | 7,688 | 21.0% | | Net Profit | 21,385 | 13,501 | 7,884 | 58.5% | | Adjusted Net Profit (excluding listing expenses) | 21,400 | 19,200 | 2,200 | 11.5% | - The Group's gross profit margin increased by 0.6 percentage points from 6.5% in the same period of 2018 to 7.1% in the same period of 2019[31] - The adjusted net profit margin (excluding listing expenses) remained approximately 3.4% in both periods[51] Revenue Total Group revenue increased by 10.7% to HKD 627.7 million, driven by growth in both building construction and RMAA services Revenue Composition and Change | Service Category | Six Months Ended Sep 30, 2019 (thousand HKD) | Six Months Ended Sep 30, 2018 (thousand HKD) | Change (thousand HKD) | Change (%) | | :------- | :----------------------------------- | :----------------------------------- | :------------ | :------- | | Building Construction Services | 516,239 | 473,197 | 43,042 | 9.1% | | Renovation and Maintenance Engineering Services | 111,472 | 93,749 | 17,723 | 19.0% | | Total Revenue | 627,711 | 566,946 | 60,765 | 10.7% | - The increase in building construction services revenue was primarily due to the commencement of a large project during the six months ended September 30, 2019[28] - The increase in renovation and maintenance engineering services revenue was primarily due to significant progress on ongoing projects during the six months ended September 30, 2019[29] Cost of Sales The Group's cost of sales increased by 10.0% to HKD 583.4 million, mainly due to higher subcontracting and staff costs Cost of Sales Change | Indicator | Six Months Ended Sep 30, 2019 (thousand HKD) | Six Months Ended Sep 30, 2018 (thousand HKD) | Change (thousand HKD) | Change (%) | | :--- | :----------------------------------- | :----------------------------------- | :------------ | :------- | | Cost of Sales | 583,387 | 530,310 | 53,077 | 10.0% | - The increase in cost of sales was primarily attributable to higher subcontracting costs, direct staff costs, and site overheads[30] - The increase in cost of sales was partially offset by a decrease in material costs[30] Gross Profit and Gross Profit Margin Total gross profit increased to HKD 44.3 million, with the gross profit margin rising 0.6 percentage points to 7.1% Gross Profit and Gross Profit Margin Change | Indicator | Six Months Ended Sep 30, 2019 (thousand HKD) | Six Months Ended Sep 30, 2018 (thousand HKD) | Change (thousand HKD) | Change (percentage points) | | :--- | :----------------------------------- | :----------------------------------- | :------------ | :------------ | | Group Gross Profit | 44,324 | 36,636 | 7,688 | N/A | | Group Gross Profit Margin | 7.1% | 6.5% | N/A | 0.6 | | Building Construction Services Gross Profit | 34,300 | 25,700 | 8,600 | N/A | | Building Construction Services Gross Profit Margin | 6.6% | 5.4% | N/A | 1.2 | | Renovation and Maintenance Engineering Services Gross Profit | 10,000 | 10,900 | (900) | N/A | | Renovation and Maintenance Engineering Services Gross Profit Margin | 9.0% | 11.6% | N/A | (2.6) | - The increase in building construction services gross profit margin was primarily attributable to the contribution from a higher-margin industrial building development project[37] - The decrease in renovation and maintenance engineering services gross profit margin was primarily due to the contribution from a large project with a relatively lower gross profit margin caused by increased gas and electricity installation subcontracting costs[39] Other Income and Gains Other income and gains increased by HKD 1.9 million to HKD 3.5 million, mainly due to higher bank interest and insurance compensation Other Income and Gains Change | Indicator | Six Months Ended Sep 30, 2019 (thousand HKD) | Six Months Ended Sep 30, 2018 (thousand HKD) | Change (thousand HKD) | Change (%) | | :--- | :----------------------------------- | :----------------------------------- | :------------ | :------- | | Other Income and Gains | 3,517 | 1,553 | 1,964 | 126.5% | - The increase was primarily due to (i) increased interest income from bank deposits and (ii) increased compensation from insurance companies for employees[40] Administrative Expenses Administrative expenses increased by 4.7% to HKD 22.4 million, driven by post-listing professional fees and staff costs Administrative Expenses Change | Indicator | Six Months Ended Sep 30, 2019 (thousand HKD) | Six Months Ended Sep 30, 2018 (thousand HKD) | Change (thousand HKD) | Change (%) | | :--- | :----------------------------------- | :----------------------------------- | :------------ | :------- | | Administrative Expenses | 22,396 | 21,375 | 1,021 | 4.7% | - The increase was primarily due to (i) professional fees and other operating expenses post-listing; (ii) staff costs; and (iii) depreciation costs[45] - The increase was partially offset by one-off non-recurring listing expenses[45] Finance Costs Finance costs significantly decreased by 66.4% to HKD 0.144 million, primarily due to reduced interest expenses on bank borrowings Finance Costs Change | Indicator | Six Months Ended Sep 30, 2019 (thousand HKD) | Six Months Ended Sep 30, 2018 (thousand HKD) | Change (thousand HKD) | Change (%) | | :--- | :----------------------------------- | :----------------------------------- | :------------ | :------- | | Finance Costs | 144 | 429 | (285) | (66.4%) | - The decrease was primarily due to reduced interest expenses on bank borrowings[49] Income Tax Expenses Income tax expenses increased by 34.5% to HKD 3.9 million, mainly due to higher profits from building construction services Income Tax Expenses Change | Indicator | Six Months Ended Sep 30, 2019 (thousand HKD) | Six Months Ended Sep 30, 2018 (thousand HKD) | Change (thousand HKD) | Change (%) | | :--- | :----------------------------------- | :----------------------------------- | :------------ | :------- | | Income Tax Expenses | 3,916 | 2,884 | 1,032 | 34.5% | - The increase was primarily attributable to higher profits generated from building construction services, partially offset by a decrease in profits from renovation and maintenance engineering services and non-deductible listing expenses[49] Net Profit and Adjusted Net Profit Group net profit increased by 58.5% to HKD 21.4 million, with adjusted net profit (excluding listing expenses) up 11.5% Net Profit and Adjusted Net Profit Change | Indicator | Six Months Ended Sep 30, 2019 (thousand HKD) | Six Months Ended Sep 30, 2018 (thousand HKD) | Change (thousand HKD) | Change (%) | | :--- | :----------------------------------- | :----------------------------------- | :------------ | :------- | | Net Profit | 21,385 | 13,501 | 7,884 | 58.5% | | Adjusted Net Profit (excluding listing expenses) | 21,400 | 19,200 | 2,200 | 11.5% | | Adjusted Net Profit Margin (excluding listing expenses) | 3.4% | 3.4% | N/A | 0.0 | | Listing Expenses | Nil | 5,700 | (5,700) | -100.0% | Employees and Remuneration Policies As of September 30, 2019, the Group had 207 employees, with remuneration based on performance and market conditions, and total staff costs increasing - As of September 30, 2019, the Group had 205 full-time employees and 2 part-time employees (compared to 165 full-time and 1 part-time in the same period of 2018)[52] - Remuneration packages are determined by reference to individual performance, qualifications, merit, responsibilities, and market conditions, and are reviewed periodically[52] - Employee benefits include provident fund contributions, medical insurance, annual leave, and a share option scheme adopted on January 21, 2019[52] Total Staff Costs (excluding Directors' Emoluments) | Indicator | Six Months Ended Sep 30, 2019 (thousand HKD) | Six Months Ended Sep 30, 2018 (thousand HKD) | | :--- | :----------------------------------- | :----------------------------------- | | Total Staff Costs | 42,500 | 32,300 | Significant Investments, Material Acquisitions and Disposal of Subsidiaries and Associated Companies For the six months ended September 30, 2019, the Group held no significant investments, acquisitions, or disposals of subsidiaries - For the six months ended September 30, 2019, there were no significant investments, material acquisitions, or disposals of subsidiaries and associated companies[52] Commitments As of September 30, 2019, the Group had no material capital or operating lease commitments, except as disclosed in Note 14 - As of September 30, 2019, the Group had no material capital commitments or operating lease commitments, except as disclosed in Note 14 to the interim condensed consolidated financial information[56] Contingent Liabilities As of September 30, 2019, the Group had no material contingent liabilities, except as disclosed in Note 13 - As of September 30, 2019, the Group had no material contingent liabilities, except as disclosed in Note 13 to the interim condensed consolidated financial information[56] Foreign Exchange Exposure The Group faces minimal foreign exchange risk as most transactions and balances are denominated in HKD, with no hedging policy - As most business transactions and assets and liabilities are primarily denominated in Hong Kong Dollars, the Group faces minimal foreign exchange risk[56] - The Directors believe the Group's foreign exchange risk is negligible, thus no foreign currency hedging policy is currently deemed necessary[56] Gearing Ratio As of September 30, 2019, the Group's gearing ratio was approximately 4.3%, a slight decrease from 4.6% on March 31, 2019 Gearing Ratio | Indicator | Sep 30, 2019 | Mar 31, 2019 | Change (percentage points) | | :--- | :------------ | :------------ | :------------ | | Gearing Ratio | 4.3% | 4.6% | (0.3) | Liquidity and Financial Resources and Capital Structure The Group funds its liquidity and capital needs through shareholder contributions, bank borrowings, and operating cash flows, maintaining sufficient working capital - The Group primarily funds its liquidity and capital requirements through shareholder contributions, bank borrowings, and net cash generated from operating activities[58] Liquidity Indicators | Indicator | Sep 30, 2019 (thousand HKD) | Mar 31, 2019 (thousand HKD) | | :--- | :--------------------- | :--------------------- | | Pledged bank deposits, time deposits, and cash and bank balances | 203,800 | 194,800 | | Current Ratio | 1.7 times | 1.9 times | - The Directors believe the Group has sufficient working capital to meet its future requirements[60] - The company's shares were successfully listed on the Stock Exchange on February 27, 2019, and the Group's capital structure has remained unchanged since then[60] Debts and Charge on Assets As of September 30, 2019, the Group's interest-bearing bank borrowings totaled approximately HKD 10.8 million, secured by pledged deposits and corporate guarantees Total Interest-Bearing Bank Borrowings | Indicator | Sep 30, 2019 (thousand HKD) | Mar 31, 2019 (thousand HKD) | | :--- | :--------------------- | :--------------------- | | Total Interest-Bearing Bank Borrowings | 10,800 | 11,100 | - Bank facilities are secured by (i) the Group's pledged bank deposits and (ii) corporate guarantees executed by the Group[62] - Borrowings are denominated in Hong Kong Dollars and primarily bear interest at floating rates, with no interest rate hedging policy currently in place[62] Use of Proceeds Net proceeds from the February 2019 listing were approximately HKD 93.5 million, with HKD 39.5 million utilized as of September 30, 2019 - The net proceeds from the share listing amounted to approximately HKD 93.5 million[66] Use of Net Proceeds | Purpose | Planned Total Use of Proceeds (million HKD) | Actual Use of Proceeds from Listing Date to Sep 30, 2019 (million HKD) | Remaining Net Proceeds Balance (million HKD) | | :--- | :------------------------------ | :----------------------------------------------------- | :---------------------------- | | Enhance capacity to undertake more building construction and RMAA projects | 66.7 | 30.8 | 35.9 | | Strengthen human resources | 14.4 | 1.3 | 13.1 | | Office upgrade and renovation | 3.6 | 1.3 | 2.3 | | Research and development of innovative engineering and technologies | 2.9 | 2.2 | 0.7 | | General working capital | 5.9 | 3.9 | 2.0 | | Total | 93.5 | 39.5 | 54.0 | - The utilization of proceeds for strengthening human resources and R&D of innovative engineering and technologies was delayed due to difficulties in recruiting suitable personnel and delays in technological innovation development[70] Other Matter Comparative information for the six months ended September 30, 2018, was not reviewed in accordance with Hong Kong Standard on Review Engagements 2410 - The comparative information for the interim condensed consolidated statement of profit or loss and other comprehensive income, interim condensed consolidated statement of changes in equity, and interim condensed consolidated statement of cash flows for the six months ended September 30, 2018, and related explanatory notes, were not reviewed in accordance with Hong Kong Standard on Review Engagements 2410[72] Corporate Governance and Other Information This section outlines Wecon Holdings Limited's corporate governance framework, board composition, and compliance with regulations Corporate Governance Practices The company is committed to maintaining high standards of corporate governance, emphasizing transparency, accountability, and independence - The company is committed to achieving and maintaining the highest standards of corporate governance, based on principles of transparency, accountability, and independence[75] - The company has complied with all applicable code provisions of the Corporate Governance Code in Appendix 14 of the Listing Rules, except for code provision A.2.1 (separation of Chairman and Chief Executive roles)[76] Chairman and Chief Executive Mr. Tsang Ka Yip serves as both Chairman and Chief Executive, a deviation from code provision A.2.1, deemed beneficial by the Board - Mr. Tsang Ka Yip has served as both the Chairman and Chief Executive of the Board since the listing date, deviating from code provision A.2.1[77] - The Board believes Mr. Tsang's dual role is in the best interest of the Group and its shareholders due to his deep industry knowledge and familiarity with the Group's operations[77] Model Code for Securities Transactions by Directors The company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers, with all directors confirming full compliance - The company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers as set out in Appendix 10 of the Listing Rules[81] - All Directors confirmed their full compliance with the required standards set out in the Model Code for the six months ended September 30, 2019[81] Board of Directors The Board is responsible for setting overall strategy, management objectives, and overseeing management performance, comprising six directors - The Board's primary responsibilities include formulating the Group's overall strategy, setting management objectives, and overseeing management performance[82] - The Board comprises six Directors, including three executive directors and three independent non-executive directors[86] - Half of the Board consists of independent non-executive directors, with one possessing appropriate professional qualifications or expertise in accounting or financial management[86] Compliance with Laws and Regulations The Group has complied with all material laws and regulations impacting its business and operations, with no serious breaches reported - The Group has complied in all material respects with relevant laws and regulations that have a significant impact on its business and operations[90] - As of September 30, 2019, and up to the date of this interim report, the Group had no serious breaches or non-compliance with applicable laws and regulations[90] Results and Dividends The Group's profit and financial position for the six months ended September 30, 2019, are presented, with no interim dividend proposed - The Board resolved not to recommend the payment of an interim dividend to shareholders for the six months ended September 30, 2019[92] Share Options Scheme The company adopted a share option scheme on January 21, 2019, with no options granted, exercised, or lapsed since its adoption - The company adopted a share option scheme on January 21, 2019[92] - Since the adoption date and up to the date of this interim report, no share options have been granted, exercised, expired, cancelled, or lapsed under the scheme[92] Purchase, Sale or Redemption of Listed Securities For the six months ended September 30, 2019, neither the company nor its subsidiaries purchased, sold, or redeemed any listed securities - For the six months ended September 30, 2019, neither the company nor any of its subsidiaries purchased, sold, or redeemed any listed securities[94] Disclosure of Interests This section discloses the interests of directors, chief executives, and substantial shareholders in the company's shares Directors' and Chief Executive's Long Positions in the Company's Ordinary Shares | Director's Name | Capacity/Nature | Number of Shares Held | Approximate Percentage of Shareholding | | :------- | :--------- | :----------- | :------------- | | Mr. Tsang Ka Yip | Interest in controlled corporation | 600,000,000 | 75% | Interests of Substantial Shareholders (other than Directors) in the Company's Shares | Name | Nature of Interest | Number of Shares Held | Approximate Percentage of Interest in the Company | | :--- | :------- | :----------- | :--------------------- | | Triple Arch Limited | Beneficial owner | 600,000,000 | 75% | | Ms. Lai Yuk Lin (spouse of Mr. Tsang Ka Yip) | Interest in controlled corporation and spouse's interest | 600,000,000 | 75% | Directors' Interests in Competing Business As of September 30, 2019, no directors or their close associates held interests in businesses competing with the Group - As of September 30, 2019, and up to the date of this interim report, no Directors or their close associates had any interests in any business that directly or indirectly competes or may compete with the Group's business[110] Directors' Interests in Contracts of Significance No directors or their related entities held significant interests in material contracts with the Group as of September 30, 2019 - Except as disclosed in this interim report, as of September 30, 2019, or at any time during the six months ended September 30, 2019, no Director of the company or their related entities had a material interest, directly or indirectly, in any contract of significance to the Group's business entered into by the company, its holding company, or its subsidiaries[110] Connected Transactions The Group did not enter into any connected transactions during the six months ended September 30, 2019 - For the six months ended September 30, 2019, the Group did not enter into any connected transactions[110] Related Party Transactions Material related party transactions entered into by the Group for the six months ended September 30, 2019, are detailed in Note 15 - Material related party transactions entered into by the Group for the six months ended September 30, 2019, are set out in Note 15 to the interim condensed consolidated financial information[110] Interests of the Compliance Adviser The company appointed Optima Capital Limited as its compliance adviser, with no other interests in the company's securities - The company has appointed Optima Capital Limited as its compliance adviser[113] - Except for the compliance adviser agreement, neither Optima Capital Limited nor any of its directors, employees, or associates had any interests or potential interests in the securities of the company or any member of the Group as of September 30, 2019[113] Events After the Reporting Period No other significant events or material changes in the Group's condition or business occurred after September 30, 2019 - No other significant events occurred after September 30, 2019, and up to the date of this interim report[114] - There have been no material changes in the Group's condition and business since the publication of the previous annual report[114] Audit Committee Review The Audit Committee, established on January 21, 2019, reviewed the interim condensed consolidated financial information for the period - The Audit Committee was established on January 21, 2019, comprising three independent non-executive directors, in compliance with Listing Rule 3.21[115][117] - Its main responsibilities include collaborating with auditors, reviewing financial information, overseeing financial reporting, risk management, internal control systems, and continuous connected transactions[116] - The Committee has reviewed the Group's interim condensed consolidated financial information for the six months ended September 30, 2019[120] Appreciation The Board expresses sincere gratitude to shareholders, clients, subcontractors, suppliers, management, and staff for their continued support - The Board, on behalf of the company, thanks shareholders, clients, subcontractors, and suppliers for their continued confidence and support[123] - The Board also sincerely thanks management and staff for their hard work and loyalty to the Group[123] Report on Review of Interim Financial Information Ernst & Young reviewed Wecon Holdings Limited's interim financial information for the six months ended September 30, 2019 - Ernst & Young reviewed the interim financial information in accordance with Hong Kong Standard on Review Engagements 2410[132] - Based on the review, nothing has come to the reviewer's attention that causes them to believe the interim financial information is not prepared, in all material respects, in accordance with Hong Kong Accounting Standard 34[134] - The scope of a review is substantially less than an audit, and therefore no audit opinion is expressed[132] Interim Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income For the six months ended September 30, 2019, revenue grew 10.7% to HKD 627.7 million, and profit for the period increased 58.4% to HKD 21.4 million Summary of Interim Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income | Indicator | Six Months Ended Sep 30, 2019 (thousand HKD) | Six Months Ended Sep 30, 2018 (thousand HKD) | Change (thousand HKD) | Change (%) | | :--- | :----------------------------------- | :----------------------------------- | :------------ | :------- | | Revenue | 627,711 | 566,946 | 60,765 | 10.7% | | Cost of Sales | (583,387) | (530,310) | (53,077) | 10.0% | | Gross Profit | 44,324 | 36,636 | 7,688 | 21.0% | | Other Income and Gains | 3,517 | 1,553 | 1,964 | 126.5% | | Administrative Expenses | (22,396) | (21,375) | (1,021) | 4.8% | | Finance Costs | (144) | (429) | 285 | (66.4%) | | Profit Before Tax | 25,301 | 16,385 | 8,916 | 54.4% | | Income Tax | (3,916) | (2,884) | (1,032) | 35.8% | | Profit and Total Comprehensive Income for the Period Attributable to Equity Holders of the Company | 21,385 | 13,501 | 7,884 | 58.4% | | Earnings Per Share - Basic and Diluted | HK2.7 cents | HK2.3 cents | HK0.4 cents | 17.4% | Interim Condensed Consolidated Statement of Financial Position As of September 30, 2019, total assets less current liabilities increased to HKD 251.9 million, with net assets rising to HKD 248.9 million Summary of Interim Condensed Consolidated Statement of Financial Position | Indicator | Sep 30, 2019 (thousand HKD) | Mar 31, 2019 (thousand HKD) | Change (thousand HKD) | Change (%) | | :--- | :--------------------- | :--------------------- | :------------ | :------- | | Total Non-current Assets | 18,616 | 10,323 | 8,293 | 80.3% | | Total Current Assets | 548,844 | 490,755 | 58,089 | 11.8% | | Total Current Liabilities | 315,522 | 261,172 | 54,350 | 20.8% | | Net Current Assets | 233,322 | 229,583 | 3,739 | 1.6% | | Total Assets Less Current Liabilities | 251,938 | 239,906 | 12,032 | 5.0% | | Total Non-current Liabilities | 3,080 | 1,230 | 1,850 | 150.4% | | Net Assets | 248,858 | 238,676 | 10,182 | 4.3% | | Total Equity | 248,858 | 238,676 | 10,182 | 4.3% | - Total non-current assets significantly increased, primarily due to the recognition of right-of-use assets upon adoption of HKFRS 16[140] - Contract assets and trade receivables increased to HKD 293.7 million (March 31, 2019: HKD 246.0 million)[140] - Trade payables and retention payables increased to HKD 166.5 million (March 31, 2019: HKD 118.9 million)[140] Interim Condensed Consolidated Statement of Changes in Equity As of September 30, 2019, total equity attributable to equity holders increased to HKD 248.9 million, driven by profit for the period Summary of Interim Condensed Consolidated Statement of Changes in Equity | Indicator | Sep 30, 2019 (thousand HKD) | Apr 1, 2019 (restated/unaudited) (thousand HKD) | Change (thousand HKD) | | :--- | :--------------------- | :--------------------------------------- | :------------ | | Issued Share Capital | 8,000 | 8,000 | 0 | | Share Premium | 91,967 | 103,167 | (11,200) | | Merger Reserve | 18,900 | 18,900 | 0 | | Retained Profits | 129,991 | 108,606 | 21,385 | | Total Equity | 248,858 | 238,673 | 10,185 | - Profit and total comprehensive income for the period amounted to HKD 21.385 million[154] - Dividends paid to shareholders of the company totaled HKD 11.2 million[154] - The adoption of HKFRS 16 resulted in a decrease in retained profits of HKD 3 thousand[154] Interim Condensed Consolidated Statement of Cash Flows For the six months ended September 30, 2019, net cash from operating activities increased, while investing and financing activities resulted in net outflows Summary of Interim Condensed Consolidated Statement of Cash Flows | Indicator | Six Months Ended Sep 30, 2019 (thousand HKD) | Six Months Ended Sep 30, 2018 (thousand HKD) | Change (thousand HKD) | | :--- | :----------------------------------- | :----------------------------------- | :------------ | | Net Cash From Operating Activities | 27,866 | 22,073 | 5,793 | | Net Cash (Used in)/Generated from Investing Activities | (12,327) | 659 | (12,986) | | Net Cash Used in Financing Activities | (17,880) | (39,114) | 21,234 | | Net Decrease in Cash and Cash Equivalents | (2,341) | (16,382) | 14,041 | | Cash and Cash Equivalents at End of Period | 171,970 | 44,015 | 127,955 | - Net cash outflow from investing activities was primarily due to an increase in pledged deposits of HKD 11.36 million and the purchase of property, plant, and equipment of HKD 3.368 million[170] - Net cash outflow from financing activities primarily included repayment of bank loans of HKD 30.0 million and dividends paid to shareholders of the company of HKD 11.2 million[170] Notes to Interim Condensed Consolidated Financial Information This section provides detailed notes to the interim condensed consolidated financial information, covering company details, accounting policies, and financial disclosures Corporate and Group Information Wecon Holdings Limited is incorporated in the Cayman Islands, with Triple Arch Limited as its ultimate holding company - Wecon Holdings Limited is incorporated in the Cayman Islands[175] - The company's ultimate holding company is Triple Arch Limited, incorporated in the British Virgin Islands[175] Basis of Preparation The interim condensed consolidated financial information is prepared in HKD, rounded to the nearest thousand, following HKAS 34 and Listing Rules - The interim condensed consolidated financial information is prepared in accordance with Hong Kong Accounting Standard 34 "Interim Financial Reporting" and the applicable disclosure requirements of Appendix 16 of the Listing Rules[176] - The financial information is presented in Hong Kong Dollars, and all values have been rounded to the nearest thousand[178] - Acquisitions of subsidiaries under common control are accounted for using merger accounting principles, while acquisitions of subsidiaries not under common control are accounted for using the acquisition method[180][182] Changes in Accounting Policies and Disclosures The Group adopted new and revised HKFRSs from April 1, 2019, notably HKFRS 16 Leases, using a modified retrospective approach - The Group adopted new and revised Hong Kong Financial Reporting Standards (HKFRSs) from April 1, 2019, including HKFRS 16 "Leases"[193] - HKFRS 16 was adopted using the modified retrospective approach, and comparative information for 2018 was not restated[198] Impact of Adopting HKFRS 16 (as at April 1, 2019) | Indicator | thousand HKD | | :--- | :----- | | Increase in right-of-use assets | 2,579 | | Decrease in property, plant and equipment | (1,684) | | Increase in total assets | 895 | | Increase in lease liabilities | 1,957 | | Decrease in finance lease payables | (1,059) | | Increase in total liabilities | 898 | | Decrease in retained profits | (3) | - For the six months ended September 30, 2019, the Group recognized rental expenses for short-term leases of HKD 1.2 million[237] Operating Segment Information The Group's operating segments, building contracts and renovation and maintenance engineering, both achieved revenue growth for the period Overview of Operating Segment Performance | Indicator | Building Contracts (thousand HKD) | Renovation and Maintenance Engineering (thousand HKD) | Total (thousand HKD) | | :--- | :---------------- | :-------------------- | :------------ | | Six Months Ended Sep 30, 2019 | | | | | Revenue from External Customers | 516,239 | 111,472 | 627,711 | | Segment Results | 34,323 | 10,001 | 44,324 | | Six Months Ended Sep 30, 2018 | | | | | Revenue from External Customers | 473,197 | 93,749 | 566,946 | | Segment Results | 25,726 | 10,910 | 36,636 | Overview of Operating Segment Assets and Liabilities | Indicator | Building Contracts (thousand HKD) | Renovation and Maintenance Engineering (thousand HKD) | Total (thousand HKD) | | :--- | :---------------- | :-------------------- | :------------ | | Sep 30, 2019 | | | | | Segment Assets | 276,271 | 69,377 | 345,648 | | Segment Liabilities | 251,018 | 43,397 | 294,415 | | Mar 31, 2019 | | | | | Segment Assets | 232,924 | 64,960 | 297,884 | | Segment Liabilities | 212,580 | 27,253 | 239,833 | - Unallocated head office and corporate expenses amounted to HKD 20.317 million (2018: HKD 19.252 million)[242] Revenue For the six months ended September 30, 2019, total revenue from customer contracts was HKD 627.7 million, primarily from building construction services Analysis of Revenue from Customer Contracts | Service Category | Six Months Ended Sep 30, 2019 (thousand HKD) | Six Months Ended Sep 30, 2018 (thousand HKD) | | :------- | :----------------------------------- | :----------------------------------- | | Building Contracts | 516,239 | 473,197 | | Renovation and Maintenance Engineering | 111,472 | 93,749 | | Total Revenue | 627,711 | 566,946 | Timing of Revenue Recognition (Six Months Ended Sep 30, 2019) | Timing of Revenue Recognition | Building Contracts (thousand HKD) | Renovation and Maintenance Engineering (thousand HKD) | Total (thousand HKD) | | :----------- | :---------------- | :-------------------- | :------------ | | Over time | 516,239 | 24,724 | 540,963 | | At a point in time | – | 86,748 | 86,748 | | Total Revenue | 516,239 | 111,472 | 627,711 | Finance Costs Total finance costs decreased to HKD 0.144 million, mainly due to lower bank borrowing interest, partially offset by new lease liabilities interest Analysis of Finance Costs | Indicator | Six Months Ended Sep 30, 2019 (thousand HKD) | Six Months Ended Sep 30, 2018 (thousand HKD) | | :--- | :----------------------------------- | :----------------------------------- | | Interest on bank borrowings | 35 | 429 | | Interest on lease liabilities | 109 | – | | Total Finance Costs | 144 | 429 | Profit Before Tax Profit before tax increased to HKD 25.301 million, after deducting depreciation and employee benefit expenses, with no listing expenses this period Composition of Profit Before Tax | Indicator | Six Months Ended Sep 30, 2019 (thousand HKD) | Six Months Ended Sep 30, 2018 (thousand HKD) | | :--- | :----------------------------------- | :----------------------------------- | | Profit Before Tax | 25,301 | 16,385 | | Depreciation of property, plant and equipment | 774 | 552 | | Depreciation of right-of-use assets | 1,539 | – | | Employee benefit expenses (excluding directors' emoluments) | 42,500 | 32,310 | | Listing expenses | – | 5,737 | | Minimum lease payments under operating leases | 1,256 | 1,867 | Income Tax Hong Kong profits tax is provided at 16.5%, with a two-tiered rate for one subsidiary, leading to a total tax expense of HKD 3.916 million - Hong Kong profits tax is provided at a rate of 16.5%, with one subsidiary subject to a two-tiered tax rate (8.25% for the first HKD 2 million of estimated assessable profits, and 16.5% thereafter) for 2019 (2018: standard rate of 16.5%)[266] Analysis of Income Tax Expenses | Indicator | Six Months Ended Sep 30, 2019 (thousand HKD) | Six Months Ended Sep 30, 2018 (thousand HKD) | | :--- | :----------------------------------- | :----------------------------------- | | Current - Hong Kong tax for the period | 3,679 | 3,009 | | Deferred tax | 237 | 99 | | Total Tax Expense for the Period | 3,916 | 2,884 | Earnings Per Share Attributable to Equity Holders of the Company Basic earnings per share were HK2.7 cents, calculated based on profit attributable to equity holders and weighted average shares outstanding Earnings Per Share | Indicator | Six Months Ended Sep 30, 2019 | Six Months Ended Sep 30, 2018 | | :--- | :------------------------- | :------------------------- | | Basic and Diluted Earnings Per Share | HK2.7 cents | HK2.3 cents | | Profit for the Period Attributable to Equity Holders of the Company | HK$21,385,000 | HK$13,501,000 | | Weighted Average Number of Ordinary Shares in Issue | 800,000,000 | 600,000,000 | - For the six months ended September 30, 2018 and 2019, no adjustments for dilutive events were made as there were no potentially dilutive ordinary shares in issue during these periods[270] Dividends A final dividend of HK1.4 cents per share for FY2019, totaling HKD 11.2 million, was declared and paid, with no interim dividend proposed - A final dividend of HK1.4 cents per share for the financial year ended March 31, 2019, totaling HKD 11.2 million, was declared and paid during the six months ended September 30, 2019[274] - The Board resolved not to declare an interim dividend for the six months ended September 30, 2019[274] - For the six months ended September 30, 2018, and prior to the completion of the Reorganisation, certain subsidiaries of the Group declared an interim dividend of HKD 50.0 million to their then shareholders[273] Contract Assets and Trade Receivables As of September 30, 2019, total contract assets and trade receivables increased to HKD 293.7 million, with most trade receivables not yet overdue Analysis of Contract Assets and Trade Receivables | Indicator | Sep 30, 2019 (thousand HKD) | Mar 31, 2019 (thousand HKD) | | :--- | :--------------------- | :--------------------- | | Other contract assets | 33,858 | 10,900 | | Retention receivables | 80,357 | 63,583 | | Trade receivables | 179,510 | 171,536 | | Total | 293,725 | 246,019 | - The increase in other contract assets was due to increased provisions for ongoing construction services at the end of the period[281] - The increase in retention receivables was due to more completed contracts[281] Aging Analysis of Trade Receivables (based on invoice date) | Aging | Sep 30, 2019 (thousand HKD) | Mar 31, 2019 (thousand HKD) | | :--- | :--------------------- | :--------------------- | | Within 90 days | 173,059 | 169,278 | | 91 to 180 days | 5,278 | 1,493 | | 181 to 360 days | 611 | 172 | | Over 360 days | 562 | 593 | | Total | 179,510 | 171,536 | - The Group applies the simplified approach for expected credit losses under HKFRS 9, considering overdue but not impaired trade receivables to be fully recoverable[289] Trade and Retention Payables As of September 30, 2019, total trade and retention payables increased to HKD 166.5 million, with trade payables typically due within 30 days Analysis of Trade and Retention Payables | Indicator | Sep 30, 2019 (thousand HKD) | Mar 31, 2019 (thousand HKD) | | :--- | :--------------------- | :--------------------- | | Trade payables | 104,894 | 64,443 | | Retention payables | 61,582 | 54,452 | | Total | 166,476 | 118,895 | - Payment terms for trade payables are stipulated in relevant contracts, with a credit period generally of 30 days[293] - Retention payables are generally settled within one to two years[293] Share Capital The company's authorized share capital is HKD 50.0 million, with 800 million issued and fully paid shares totaling HKD 8.0 million Share Capital Structure | Indicator | Sep 30, 2019 | Mar 31, 2019 | | :--- | :------------ | :------------ | | Authorized Share Capital (shares) | 5,000,000,000 | 5,000,000,000 | | Authorized Share Capital (thousand HKD) | 50,000 | 50,000 | | Issued and Fully Paid Share Capital (shares) | 800,000,000 | 800,000,000 | | Issued and Fully Paid Share Capital (thousand HKD) | 8,000 | 8,000 | - Changes in share capital include the issue of new shares under the Reorganisation, a capitalization issue of 599,999,895 shares, and the issue of 200,000,000 new shares under the Share Offer[299] Contingent Liabilities As of September 30, 2019, the Group's contingent liabilities primarily comprised performance bonds, significantly increasing to HKD 85.185 million Contingent Liabilities: Performance Bonds | Indicator | Sep 30, 2019 (thousand HKD) | Mar 31, 2019 (thousand HKD) | Change (thousand HKD) | Change (%) | | :--- | :--------------------- | :--------------------- | :------------ | :------- | | Performance Bonds | 85,185 | 24,881 | 60,304 | 242.4% | - Certain performance bonds are secured by time deposits of HKD 16.373 million (March 31, 2019: HKD 5.0 million)[304] Commitments As of September 30, 2019, the Group's capital commitments included HKD 0.648 million for leasehold improvements, with future minimum lease payments for short-term operating leases Capital Commitments | Indicator | Sep 30, 2019 (thousand HKD) | Mar 31, 2019 (thousand HKD) | | :--- | :--------------------- | :--------------------- | | Contracted but not provided for: furniture, fixtures and office equipment | – | 1,250 | | Contracted but not provided for: leasehold improvements | 648 | – | | Total | 648 | 1,250 | Total Future Minimum Lease Payments under Irrevocable Short-Term Operating Leases | Indicator | Sep 30, 2019 (thousand HKD) | Mar 31, 2019 (thousand HKD) | | :--- | :--------------------- | :--------------------- | | Within one year | 1,531 | 2,497 | - The Group has elected not to recognize right-of-use assets and lease liabilities for short-term leases with a lease term of 12 months or less[309] Related Party Transactions As of September 30, 2019, the Group had no outstanding balances with related companies, and key management personnel remuneration decreased - As of September 30, 2019, and March 31, 2019, the Group had no outstanding balances with related companies[313] Total Remuneration Paid to Key Management Personnel | Indicator | Six Months Ended Sep 30, 2019 (thousand HKD) | Six Months Ended Sep 30, 2018 (thousand HKD) | | :--- | :----------------------------------- | :----------------------------------- | | Short-term employee benefits | 1,900 | 3,214 | | Post-employment benefits | 131 | 147 | | Total Remuneration | 2,031 | 3,361 | - Remuneration includes salaries, allowances, and benefits in kind paid to Ms. Lai Yuk Lin, spouse of a Director, including a housing allowance for a director's residence[316] Fair Value Measurement Management assesses that the fair values of most financial instruments approximate their carrying amounts due to short-term maturities - Management has assessed that the fair values of financial instruments such as cash and cash equivalents, contract assets and trade receivables, and trade and retention payables approximate their carrying amounts, primarily due to their short-term maturities[319] - The fair values of the non-current portions of retention payables, lease liabilities, and finance lease payables are calculated by discounting expected future cash flows using prevailing interest rates applicable to instruments with similar terms, credit risk, and remaining maturities[319] - During the period, there were no transfers between Level 1 and Level 2 of fair value measurements, and no financial assets or financial liabilities were transferred into or out of Level 3[319] Approval of the Unaudited Interim Financial Information The unaudited interim financial information was approved and authorized for issue by the Board of Directors on November 28, 2019 - The unaudited interim financial information was approved and authorized for issue by the Board of Directors on November 28, 2019[320]