惠生工程(02236) - 2019 - 年度财报

Corporate Information Board of Directors The company's Board of Directors comprises executive, non-executive, and independent non-executive directors, with Ms Rong Wei serving as the Chief Executive Officer - The Board of Directors includes Ms Rong Wei (Chief Executive Officer), Mr Zhou Hongliang, Mr Li Zhiyong, Mr Dong Hua (Executive Directors), Mr Liu Hongjun (Non-executive Director), and Mr Li Lei, Mr Tang Shisheng, Mr Feng Guohua (Independent Non-executive Directors)[9] Audit Committee The Audit Committee is chaired by Mr Feng Guohua, with Mr Tang Shisheng as a member - The Audit Committee is chaired by Mr Feng Guohua, with Mr Tang Shisheng as a member[9] Nomination Committee The Nomination Committee members include Mr Tang Shisheng, Mr Feng Guohua, and Mr Li Lei - The Nomination Committee members include Mr Tang Shisheng, Mr Feng Guohua, and Mr Li Lei[9] Remuneration Committee The Remuneration Committee is chaired by Mr Feng Guohua, with Mr Li Lei and Mr Tang Shisheng as members - The Remuneration Committee is chaired by Mr Feng Guohua, with Mr Li Lei and Mr Tang Shisheng as members[10] Global Headquarters, Principal Place of Business in China and Head Office The company's global headquarters and principal place of business in China are located in Pudong New Area, Shanghai, while its principal place of business in Hong Kong is at Central Plaza, Wan Chai - The global headquarters, principal place of business in China, and head office are located at 633 Zhongke Road, Zhangjiang Hi-Tech Park, Pudong New Area, Shanghai, China[10] - The principal place of business in Hong Kong is located at Room 5408, 54/F, Central Plaza, 18 Harbour Road, Wan Chai, Hong Kong[14] Auditor The company's auditor is Ernst & Young - The company's auditor is Ernst & Young[14] Principal Bankers The company's principal bankers include China CITIC Bank, Bank of China, East West Bank, China Merchants Bank, Industrial and Commercial Bank of China, and Shanghai Pudong Development Bank - The principal bankers include China CITIC Bank Corporation Limited, Bank of China Limited, East West Bank, China Merchants Bank Co, Ltd, Industrial and Commercial Bank of China Limited, and Shanghai Pudong Development Bank Co, Ltd[14] Financial Highlights Performance In 2019, the company's revenue significantly increased by 34.1% to RMB 4,367.3 million, but gross profit and profit for the year declined, mainly due to market competition and rising costs Key Performance Comparison 2019 vs 2018 | Indicator | 2019 (RMB in thousands) | 2018 (RMB in thousands) | | :--- | :--- | :--- | | Revenue | 4,367,271 | 3,256,478 | | Gross Profit | 408,227 | 498,872 | | Profit Before Tax | 89,775 | 72,739 | | Profit for the Year | 50,558 | 59,953 | | Profit Attributable to Owners of the Parent | 50,609 | 56,301 | | Basic and Diluted Earnings Per Share | RMB 0.01 | RMB 0.01 | - Revenue in 2019 saw a substantial year-on-year increase of 34.1%, primarily driven by overseas petrochemical projects in the Americas and the Middle East entering their peak construction phase[32] - In 2019, gross profit decreased by 18.2% year-on-year, and profit attributable to owners of the parent decreased by 10.1%, mainly due to intense market competition in petrochemical EPC projects, rising raw material costs, and increased overseas income tax expenses[32] Assets and Liabilities At the end of 2019, the company's non-current assets and net current assets grew, while current liabilities decreased, resulting in stable overall growth in net assets Key Assets and Liabilities Comparison 2019 vs 2018 | Indicator | 2019 (RMB in thousands) | 2018 (RMB in thousands) | | :--- | :--- | :--- | | Non-current Assets | 1,432,965 | 1,131,114 | | Current Assets | 4,287,999 | 4,618,231 | | Current Liabilities | 3,456,486 | 3,988,387 | | Net Current Assets | 831,513 | 629,844 | | Net Assets | 1,803,627 | 1,749,819 | - At the end of 2019, non-current assets increased by 26.7% year-on-year, net current assets grew by 31.9%, and net assets rose by 3.1%[20] Business Overview Business Review and Outlook for 2019 In 2019, amid a complex global economy and energy chemical market, Wison Engineering achieved a significant 78.3% year-on-year increase in total new contract value through its "Re-gathering for a New Journey, Re-entrepreneurship" strategy, which focused on enhancing refined project management, digitalization, modularization, R&D, and industrial chain extension - The Group adhered to its "Re-gathering for a New Journey, Re-entrepreneurship" strategy, actively responding to market challenges and continuously strengthening its core competitive advantages[25] - In 2019, the total value of new contracts was approximately RMB 12,776.6 million, a substantial year-on-year increase of 78.3%[25] - As of December 31, 2019, the total value of uncompleted contracts was approximately RMB 21,868.0 million, a year-on-year increase of 65.7%[25] Market Environment In 2019, global economic growth slowed and international oil prices fell, but the Asian market, especially China, remained the primary growth driver for the global chemical market, while the US and Middle East regions benefited from low-cost energy resources - In 2019, global economic growth slowed to its lowest level since the 2008 financial crisis, and the growth in world oil demand was the lowest since 2011[26] - The average price of Brent crude oil futures was US$64.2 per barrel, a year-on-year decrease of 10.5%[26] - The Asian market, represented by China and India, remained the main growth engine for the global chemical market, with China having the world's largest end-consumer market for energy and chemicals[26] Domestic Market Accelerates Reform and Further Opens Up Industries China increased its domestic oil and gas exploration and development, accelerated private refining and chemical integration projects, and relaxed policies for foreign and private capital, but tightened approvals after safety incidents, positively impacting high-quality industry development - 2019 marked the first year of the "Seven-Year Action Plan" for oil and gas exploration and development, leading to a significant increase in domestic upstream capital expenditure[30] - The "Special Administrative Measures for Foreign Investment Access (Negative List) (2019 Edition)" significantly eased restrictions on foreign investment in oil and gas exploration, development, and urban gas[30] - Safety incidents, such as the one in Xiangshui, Yancheng, led to tightened safety production inspections and approvals for new investment projects, promoting high-quality development in the industry[32] Performance Summary In 2019, revenue grew by 34.1% year-on-year, driven by overseas petrochemical projects, while gross profit and profit attributable to owners of the parent decreased by 18.2% and 10.1% respectively, due to market competition, rising costs, and increased overseas taxes Key Financial Indicators for 2019 | Indicator | 2019 (RMB in millions) | 2018 (RMB in millions) | YoY Change (%) | | :--- | :--- | :--- | :--- | | Revenue | 4,367.3 | 3,256.5 | +34.1% | | Gross Profit | 408.2 | 498.9 | -18.2% | | Profit Attributable to Owners of the Parent | 50.6 | 56.3 | -10.1% | - The total value of new contracts was approximately RMB 12,776.6 million, a year-on-year increase of 78.3%; the total value of uncompleted contracts was approximately RMB 21,868.0 million, a year-on-year increase of 65.7%[37] - Among new contracts, EPC accounted for 97.6%, with petrochemicals at 27.0%, refining at 49.3%, and coal chemicals at 10.1%[37] Business and Operational Review The company actively expanded in international markets, particularly in the Middle East and North America with modular EPC services, while maintaining advantages in traditional domestic sectors and making progress in emerging areas, supported by investments in R&D, digitalization, and talent development - 10 new projects were signed in international markets, primarily from the US and the Middle East, with active expansion into emerging markets like Russia, the CIS, Southeast Asia, and Africa[38] - 65 new projects were signed in the domestic market with a total contract value of approximately RMB 12.09 billion, concentrated in refining integration, ethylene, coal chemicals, PTA, and PDH[48] - Continued strategic investments in refined project management, digital and modular value creation, technology R&D, and industrial chain extension[25] International Market The company established a strong brand in the Middle East over nearly a decade, securing an EPC contract with KBR for a Saudi Aramco Total refinery project, and promoted modular EPC services in North America to reduce costs and shorten construction cycles - Successfully established a premium brand and reputation in the Middle East, executing EPC projects for Saudi Aramco and ADNOC, and secured an EPC contract for the SATORP refinery debottlenecking project in collaboration with KBR[41] - Promoted modular delivery EPC services in North America, reducing construction costs, significantly shortening construction cycles, and enhancing competitiveness[42] - Completed approximately 80% of the construction work for a petrochemical EPC project in Texas, USA, and for the first time, used self-propelled deck carriers for transoceanic module transportation[44] Domestic Market The company seized opportunities in the domestic market, maintaining its advantages in traditional fields like ethylene and coal chemicals while achieving breakthroughs in emerging areas such as PDH, PTA, and refining, with several projects receiving accolades for construction and safety standards - Signed 65 domestic projects with a total contract value of approximately RMB 12.09 billion, primarily in Shandong, Zhejiang, Fujian, and Guangdong provinces[48] - The Zhejiang Petrochemical 2 Ethylene Plant project was awarded the title of "2019 Zhejiang Petrochemical Phase II Civilized Construction Model Site"[49] - The MTO unit of the Nanjing Chengzhi Yongqing MTO project achieved a successful one-time startup, marking the first implementation of a combined MTO and butadiene technology route[51][53] Technology R&D The company continued to implement its "Technology-led Development" philosophy, filing 26 new patent applications, obtaining 18 patents, and registering 6 software copyrights in 2019, while also advancing national R&D projects and achieving significant results in MTO and butene oxidative dehydrogenation catalyst technologies - In 2019, the company filed 26 new patent applications, was granted 18 new patents, and registered 6 new software copyrights[57] - Established a postdoctoral research station in collaboration with East China University of Science and Technology, successfully recruiting postdoctoral talent[57] - MTO technology and butene oxidative dehydrogenation catalyst technology were successfully applied in multiple projects, demonstrating comprehensive strength[60] Digital Production The company actively promoted digital transformation to deliver "intelligent factories" through "intelligent engineering," enhancing digitalization in design, procurement, and project management, and established a joint smart factory lab with Honeywell to explore full lifecycle digitalization - Actively implemented the "Building Digital Wison to Support the One Body, Two Wings Strategy" to drive digital transformation[62] - Enhanced digitalization in design, procurement, construction management, and project management processes to achieve refined, real-time, and digital management[64] - Established a joint smart factory laboratory with Honeywell to explore full lifecycle digitalization and intelligence from process technology R&D to plant decommissioning[64] Modular Production Modular production is a core strategy, enabling the company to overcome site constraints, shorten project timelines, and improve efficiency through off-site prefabrication and assembly, with integrated "design + build + deliver" capabilities successfully demonstrated in multiple US projects - Modular prefabrication, assembly, and integrated delivery is a core strategy that helps expand overseas markets, shorten project timelines, and improve efficiency[65] - The company possesses capabilities for feasibility studies, basic design, detailed design, and construction of medium to large-scale onshore plant modules, as well as sea and land transportation and lifting design[67] - In 2019, modular delivery was implemented for three projects located in the United States[67] Awards and New Qualifications In 2019, the company received numerous national and provincial awards for its high-quality services, including the National Quality Engineering Gold Award, and gained recognition from the capital market with the "2019 Listed Company Excellence Award" and "Best Small-Mid Cap Company Award" - In 2019, the company received a total of 4 national awards and 12 provincial awards, a record high[68][69] - The "Weibei Coal Chemical Industrial Park 1.8 Million Tons Methanol, 700,000 Tons Polyolefin Project" was selected for the 2018–2019 National Quality Engineering Gold Award[69] - Received the "2019 Listed Company Excellence Award" from the Hong Kong Economic Journal and the "Best Small-Mid Cap Company Award" and "Best Investor Relations Award" at the "2019 Golden Hong Kong Stocks Awards" by Zhitong Caijing[71] Talent Program The company attracted new talent through a "market-oriented, customer-centric" philosophy, established a postdoctoral workstation, and completed an organizational restructuring in 2019 to enhance synergy and efficiency across five major systems, while also improving its incentive mechanisms - Successfully established the Wison Engineering corporate postdoctoral workstation and recruited 368 new employees, with over 80% holding master's or doctoral degrees[72] - Completed an organizational restructuring and optimization in 2019, reorganizing into five major systems: Technology, Marketing, Execution, Control, and Resources, to optimize talent and resource allocation[72] - Improved the incentive mechanism, prioritizing orders and projects while balancing material and spiritual, as well as long-term and short-term incentives[75] Company Outlook Looking ahead to 2020, the company anticipates a slowing global economy and volatile oil prices, but sees growth potential in the Chinese market and will continue its dual domestic and international strategy, accelerating digital and modular transformation to achieve diversified development - In 2020, the global economy is expected to slow significantly, with the petrochemical industry facing demand and profitability pressures, and international oil prices are projected to remain volatile[76] - China remains the world's largest and fastest-growing petrochemical market, with fine chemicals being a key future direction for the EPC engineering market[77] - The company will continue to promote and optimize its talent and organizational restructuring plans, increase R&D in digital and intelligent technologies, and build a business ecosystem to achieve diversified industrial extension[78][87][89] Seizing New Opportunities in the Domestic Market While Adhering to an Internationalization Strategy The company will deepen its presence in the Chinese market by capitalizing on policy liberalization and establishing a "Strategic Growth Center," while competing in mature international markets like North America and the Middle East through cost and schedule advantages and leveraging differentiated strengths in emerging markets - The Chinese market holds immense potential, and the company will continue to prioritize and actively develop it, establishing a "Strategic Growth Center" to cultivate long-term strategic clients[78] - International market strategies will be tailored by region: emphasizing cost and schedule advantages in mature markets (North America, Middle East); leveraging core technology and project management experience in emerging markets (Russia, Southeast Asia); and long-term planning for potential markets (Africa)[80] - Established an "Emerging Markets Department" and a "Key Account Department" to focus on new opportunities in Africa and South America and deepen collaboration with oil, gas, and petrochemical industry giants, respectively[81] Accelerating Digitalization and Modularization to Build a Technology-driven Engineering Services Enterprise The company is committed to developing digital and intelligent technologies, using big data and deep computing to improve EPC efficiency, and leveraging digital twin concepts to enhance smart factory operations, while applying modular production to more complex and large-scale projects - Digitalization and intelligence will transform the operating and working models of the energy and chemical engineering industry, using tools like big data and deep computing to enhance EPC engineering and management efficiency[84][86] - Smart factory operations will be centered on the digital twin concept to enhance market, process, and production efficiency, delivering optimal operational cycles for owners[84] - Modular production will be applied to more complex, larger-scale, and more remote engineering projects, further improving work efficiency and reducing costs through optimized design and refined layout[85] Building a Business Ecosystem to Achieve Diversified Industrial Extension The company will implement a strategy of "promoting development with science and strengthening business with technology," focusing on cutting-edge energy and chemical technologies, building a technology cooperation ecosystem, and advancing the industrialization of green and clean production technologies while seizing opportunities in new materials - Firmly implement the "promoting development with science and strengthening business with technology" strategy, focusing on cutting-edge technologies in basic chemicals, intermediate chemicals, new material raw material chemicals, green processes, and low-carbon energy conservation[87] - Build a technology cooperation ecosystem, seeking broad collaboration in "industry-academia-research" to promote the development and industrialization of green and clean production technologies[87][88] - Increase R&D in functional new materials and bottleneck raw materials that are highly import-dependent, forming a full-cycle strategic extension of new business covering development, construction, and operation to become a diversified and specialized energy services and operations enterprise[88][89] Management Discussion and Analysis Financial Review In 2019, revenue grew 34.1% due to overseas projects, but gross margin fell to 9.3%; other income increased significantly and administrative expenses decreased, while selling, R&D, and tax expenses rose, leading to a 15.7% drop in annual profit and a 19.8% decrease in trade receivables Key Items from the Consolidated Statement of Profit or Loss for 2019 vs 2018 | Indicator | 2019 (RMB in thousands) | 2018 (RMB in thousands) | YoY Change (%) | | :--- | :--- | :--- | :--- | | Revenue | 4,367,271 | 3,256,478 | +34.1% | | Gross Profit | 408,227 | 498,872 | -18.2% | | Other Income and Gains | 293,850 | 202,614 | +45.1% | | Selling and Marketing Expenses | (132,916) | (107,521) | +23.6% | | Administrative Expenses | (288,774) | (377,737) | -23.5% | | Other Expenses | (176,024) | (118,537) | +48.5% | | Finance Costs | (22,719) | (33,790) | -32.8% | | Income Tax | (39,217) | (12,786) | +206.3% | | Profit for the Year | 50,558 | 59,953 | -15.7% | - In 2019, revenue increased by 34.1% to RMB 4,367.3 million, while the gross profit margin decreased from 15.3% to 9.3%[97] - Total trade and bills receivables amounted to RMB 1,218.2 million, a year-on-year decrease of 19.8%[128] Consolidated Operating Results In 2019, the company's revenue was RMB 4,367,271 thousand, gross profit was RMB 408,227 thousand, profit for the year was RMB 50,558 thousand, and profit attributable to owners of the parent was RMB 50,609 thousand Key Data from the 2019 Consolidated Statement of Profit or Loss | Indicator | 2019 (RMB in thousands) | | :--- | :--- | | Revenue | 4,367,271 | | Gross Profit | 408,227 | | Profit Before Tax | 89,775 | | Profit for the Year | 50,558 | | Profit Attributable to Owners of the Parent | 50,609 | Revenue and Gross Profit In 2019, consolidated revenue grew 34.1% to RMB 4,367.3 million, while gross profit fell 18.2% to RMB 408.2 million, with the gross margin declining to 9.3%; EPC revenue rose 36.8%, but its margin dropped to 8.9% to enhance competitiveness, while petrochemical revenue surged 165.1% as coal chemical and refining revenues declined Segment Revenue and Gross Profit for 2019 vs 2018 | Segment | 2019 Revenue (RMB in millions) | 2018 Revenue (RMB in millions) | 2019 Gross Profit (RMB in millions) | 2018 Gross Profit (RMB in millions) | 2019 Gross Margin (%) | 2018 Gross Margin (%) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | EPC | 4,201.7 | 3,072.3 | 373.8 | 432.5 | 8.9% | 14.1% | | Design, Consulting & Technical Services | 165.6 | 184.2 | 34.4 | 66.4 | 20.8% | 36.0% | | Total | 4,367.3 | 3,256.5 | 408.2 | 498.9 | 9.3% | 15.3% | Consolidated Revenue by Customer Industry for 2019 vs 2018 | Customer Industry | 2019 (RMB in millions) | 2018 (RMB in millions) | Change (RMB in millions) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Petrochemical | 3,711.3 | 1,399.7 | 2,311.6 | 165.1% | | Coal Chemical | 321.7 | 1,587.5 | -1,265.8 | -79.7% | | Refining | 151.6 | 237.8 | -86.2 | -36.2% | | Other Products and Services | 182.7 | 31.5 | 151.2 | 480.0% | | Total | 4,367.3 | 3,256.5 | 1,110.8 | 34.1% | - The EPC gross profit margin decreased to 8.9%, mainly due to strategic adjustments in the gross margins of major ongoing projects to enhance market competitiveness in newly entered regions[103] Other Income and Gains In 2019, other income and gains increased by 45.1% to RMB 293.9 million, primarily driven by higher government grants and insurance compensation - Other income and gains increased by 45.1% from RMB 202.6 million in 2018 to RMB 293.9 million in 2019[119] - Government grants increased by RMB 79.8 million, and insurance compensation increased by RMB 37.5 million[119] Selling and Marketing Expenses In 2019, selling and marketing expenses rose by 23.6% to RMB 132.9 million, mainly due to increased upfront costs associated with domestic and international market expansion - Selling and marketing expenses increased by 23.6% from RMB 107.5 million in 2018 to RMB 132.9 million in 2019[120] - The increase was primarily due to higher upfront expenses incurred by the Group for its deployment in domestic and international markets[120] Administrative Expenses In 2019, administrative expenses decreased by 23.5% to RMB 288.8 million, mainly due to a reduction in administrative-related staff costs - Administrative expenses decreased by 23.5% from RMB 377.7 million in 2018 to RMB 288.8 million in 2019[121] - The decrease was mainly attributable to a reduction in administrative-related staff costs during the year[121] Other Expenses In 2019, other expenses increased by 48.5% to RMB 176.0 million, primarily due to higher research and development expenditures - Other expenses increased by 48.5% from RMB 118.5 million in 2018 to RMB 176.0 million in 2019[122] - The increase was mainly due to higher research and development expenditures during the year[122] Finance Costs In 2019, finance costs decreased by 32.8% to RMB 22.7 million, mainly due to lower interest on discounted bills, despite an increase in bank loan interest - Finance costs decreased by 32.8% from RMB 33.8 million in 2018 to RMB 22.7 million in 2019[123] - Interest on discounted bills decreased by RMB 18.1 million, while interest on bank loans increased by RMB 6.4 million[123] Income Tax Expense In 2019, income tax expense surged by 206.3% to RMB 39.2 million, primarily due to an increased contribution from regions with higher taxable income and tax rates - Income tax expense increased by 206.3% from RMB 12.8 million in 2018 to RMB 39.2 million in 2019[124] - The increase was mainly due to a higher proportion of taxable income from certain regions with higher income tax rates[124] Profit for the Year In 2019, profit for the year decreased by 15.7% to RMB 50.6 million, with the net profit margin falling to 1.2%, primarily due to lower gross margins on ongoing projects, market competition, and rising raw material costs - Profit for the year decreased by 15.7% from RMB 60.0 million in 2018 to RMB 50.6 million in 2019[127] - The net profit margin decreased from 1.8% in 2018 to 1.2% in 2019[127] - The decrease was mainly due to lower gross profit margins on major ongoing projects, affected by market competition and rising raw material costs[127] Trade and Bills Receivables At the end of 2019, total trade and bills receivables were RMB 1,218.2 million, a 19.8% decrease year-on-year, with the company primarily trading on credit and strictly monitoring credit risk - As of December 31, 2019, total trade and bills receivables amounted to RMB 1,218.2 million, a year-on-year decrease of 19.8%[128] - The company primarily engages in transactions with customers on credit terms, usually requiring advance payments, with a credit period of 30 days or the contract retention period[128] Financial Resources, Liquidity and Capital Structure At year-end 2019, cash and bank balances were RMB 814.3 million, representing 19.0% of current assets; net cash flow was negative from operating and investing activities but positive from financing activities, while the gearing ratio declined and short-term bank borrowings constituted 40.5% of total bank borrowings Key Items from the Consolidated Statement of Cash Flows for 2019 vs 2018 | Key Cash Flow Items | 2019 (RMB in millions) | 2018 (RMB in millions) | | :--- | :--- | :--- | | Net Cash Flow from Operating Activities | (271.1) | 666.7 | | Net Cash Flow from Investing Activities | (338.0) | 71.9 | | Net Cash Flow from Financing Activities | 483.5 | (744.1) | - As of December 31, 2019, cash and bank balances amounted to RMB 814.3 million, representing approximately 19.0% of current assets[129] - The gearing ratio showed a downward trend, standing at 70.5% in 2019 (2018: 74.8%), mainly due to enhanced debt control[134] - At the end of 2019, short-term bank borrowings accounted for 40.5% of total bank borrowings (2018: 100%)[137] Material Acquisitions and Disposals In 2019, the company, as a cornerstone investor, subscribed for approximately HKD 234.0 million in shares of CSSC (Hong Kong) Shipping and invested RMB 30.0 million in Shanxi Lu'an Chemical, and also acquired convertible bonds of CIMC-TianDa for HKD 100.0 million - As a cornerstone investor, subscribed for approximately HKD 234.0 million in shares of CSSC (Hong Kong) Shipping Company Limited, representing about 2.85% of its equity[141] - Injected RMB 30.0 million into Shanxi Lu'an Chemical Co, Ltd, accounting for a 0.2246% equity stake[142] - Acquired convertible bonds of CIMC-TianDa Holdings Company Limited with a principal amount of RMB 130.7 million for a cash consideration of HKD 100.0 million[143] Capital Expenditure Capital expenditure in 2019 was RMB 32.8 million, a decrease from RMB 39.2 million in 2018 Capital Expenditure | Year | Amount (RMB in millions) | | :--- | :--- | | 2019 | 32.8 | | 2018 | 39.2 | Foreign Exchange Risk Management The company's business transactions are mainly conducted in RMB and USD, and it has established and strictly adheres to a foreign currency hedging policy to manage currency risks - Business transactions are primarily conducted in RMB and USD, exposing the company to currency risks[145] - A foreign currency hedging policy has been established and is strictly followed to manage foreign currency risks[145] Contingent Liabilities The company is involved in several subcontractor claims totaling approximately RMB 425.0 million; the Board believes some claims lack merit but has made provisions for others - Involved in several subcontractor claims totaling approximately RMB 425.0 million, including engineering costs, interest, joint liabilities, and bill liabilities[147] - The Board believes that claims (1), (2), and (3) are without merit and the possibility of making additional payments is extremely low, so no provision has been made[147] - Provisions have been made for claims (4) and (5) due to the likelihood of bearing settlement responsibilities[147] Pledge of Assets As of December 31, 2019, buildings and rights to future rental income valued at approximately RMB 818.8 million were pledged as security for bank credit facilities - As of December 31, 2019, certain buildings and the rights to receive rental income from certain properties for the next few years, with a value of RMB 818.8 million, were pledged as collateral for the Group's bank credit facilities[147] Human Resources As of the end of 2019, the company employed 1,694 staff with total employee costs of RMB 619.3 million, and it regularly reviews compensation and benefits, providing various social insurances and a share option scheme - As of December 31, 2019, the Group employed a total of 1,694 employees (2018: 1,439)[147] - Total employee costs for 2019 amounted to RMB 619.3 million (2018: RMB 593.0 million)[147] - The company regularly reviews employee salaries and benefits, contributes to social insurance and mandatory provident funds for eligible employees, and offers a share option scheme as an incentive[147] Biographies of Directors and Senior Management Executive Directors The company's executive directors, including Ms Rong Wei (CEO), Mr Zhou Hongliang (Senior Vice President), Mr Li Zhiyong (CFO), and Mr Dong Hua (Senior Vice President), possess extensive industry experience and management backgrounds in their respective fields - Ms Rong Wei, Chief Executive Officer, has over 20 years of management and operational experience in state-owned, foreign-invested, and private enterprises[152] - Mr Zhou Hongliang, Senior Vice President, is responsible for the company's quality and safety brand and system construction, with 27 years of experience in the petrochemical industry[154] - Mr Li Zhiyong, Chief Financial Officer, oversees financial operations and investor relations management and holds the CFA designation[155] - Mr Dong Hua, Senior Vice President, is responsible for overseeing overseas marketing and international business, with over 31 years of experience in the petrochemical industry[158] Non-executive Director Mr Liu Hongjun, appointed as a Non-executive Director on February 19, 2020, has over 20 years of experience in the chemical engineering industry and serves as the President of Wison Group Holding Limited - Mr Liu Hongjun was appointed as a Non-executive Director on February 19, 2020, and has over 20 years of experience in the chemical engineering industry[159] - Mr Liu has been the President of Wison Group Holding Limited, the controlling shareholder of the Company, since December 2019[160] Independent Non-executive Directors The independent non-executive directors, including Mr Li Lei, Mr Tang Shisheng, and Mr Feng Guohua, have extensive professional backgrounds and experience in finance, economics, and IT and management consulting services - Mr Li Lei has over 25 years of experience in senior financial positions and is a fellow member of the Association of Chartered Certified Accountants in the UK[162] - Mr Tang Shisheng, a Doctor of Economics and a senior economist, has extensive experience in banking, securities, and investment[163] - Mr Feng Guohua has over 24 years of experience in IT and management consulting services and previously served as the General Manager of the Enterprise Services Department for Greater China at Microsoft (China) Co, Ltd[164] Senior Management The company's senior management team possesses deep professional knowledge and extensive experience in the petrochemical industry, technology R&D, project execution, and market strategy - Ms Chen Huimei, Senior Vice President, is responsible for enhancing professional talent resource efficiency, technical capabilities, and the company's productization capabilities, with 29 years of experience in the petrochemical industry[167] - Mr Li Yansheng, Chief Engineer and Chief Scientist, is responsible for guiding and leading technological development and has received numerous science and technology progress awards[171] - Mr Pang Xiongying, Chief Technology Officer, is responsible for global technology cooperation, market strategy research, and expansion, with 30 years of management experience in the energy and chemical industries[172] - Mr Cui Hongxing, Senior Vice President and Chief Scientist, is responsible for global international business development, especially in emerging markets like Africa, with approximately 32 years of experience in the petrochemical industry[174] Report of the Directors Principal Business The company is an investment holding company, and the Group's principal business is providing EPC (Engineering, Procurement, and Construction Management) services to chemical producers, offering integrated solutions across the entire project lifecycle - The Company is an investment holding company, and the Group's principal business is chemical EPC (i.e, engineering, procurement, and construction management) services[181] - It provides integrated services from feasibility studies, consulting, proprietary technology, design, engineering, procurement of raw materials and equipment, and construction management to maintenance and after-sales technical support[181] Business Overview The Business Overview and Management Discussion and Analysis sections of this report review the Group's business, disclose major risks, and confirm the implementation of an environmental management system in compliance with regulations and a "Green Engineering" strategy - A fair review of the Group's business, a discussion and analysis using financial key performance indicators, and a description of relationships with key stakeholders are contained in the Business Overview and Management Discussion and Analysis sections of this report[182] - The Group has established and implemented an environmental management system in accordance with GB/T 24001–2004/ISO14001:2004 standards, which has been certified by a third party[182] - It strictly complies with environmental laws and regulations and actively promotes a "Green Engineering" development strategy to achieve energy saving, emission reduction, and environmental protection goals through control at various stages of engineering design and construction[182] Events After the Reporting Period After the reporting period, the global outbreak of COVID-19 impacted business operations, causing project delays, while a sudden drop in international crude oil prices shocked energy and financial markets, which the company is closely monitoring - The global outbreak of the COVID-19 pandemic in 2020 has had certain impacts on the Group's business operations, particularly project delays[184] - The company headquarters adjusted its post-Spring Festival work arrangements, delaying the return to office and adopting a flexible combination of remote and in-office work[184] - Since March 2020, a sudden drop in international crude oil prices has caused a huge shock to the world's energy and financial markets, and the company is closely monitoring and studying its impact on the industry[186] Major Customers and Suppliers In 2019, the Group's top five suppliers accounted for approximately 22.1% of total purchases, with the largest supplier at 6.1%, while the top five customers contributed about 78.8% of total revenue, with the largest customer at 40.0% - For the year ended December 31, 2019, purchases from the Group's five largest suppliers accounted for approximately 22.1% of the Group's total purchases[187] - During the same period, purchases from the Group's single largest supplier accounted for approximately 6.1% of the Group's total purchases[187] - For the year ended December 31, 2019, our five largest customers accounted for approximately 78.8% of our total revenue, with the single largest customer accounting for about 40.0% of total revenue[187] Final Dividend The Board has proposed a final dividend for 2019 of RMB 0.0037 per ordinary share (equivalent to HKD 0.0040), to be paid on or around July 15, 2020 - The Board has recommended a final dividend of RMB 0.0037 per ordinary share (equivalent to HKD 0.0040)[191] - The final dividend will be paid on or around July 15, 2020, to shareholders whose names appear on the company's register of members on June 26, 2020[191] Share Capital and Share Option Schemes Details of the company's share capital and option schemes are in the financial statements notes; the dividend policy is discretionary, considering factors like earnings and cash flow, with distributable reserves of approximately RMB 863,095,000 at year-end 2019 - Dividend distribution is at the discretion of the Board, considering the Company's earnings, cash flow, financial performance, and future financing needs[195] - As of December 31, 2019, the Company's distributable reserves amounted to approximately RMB 863,095,000[198] Directors' Interests in the Company's Shares at Year-End 2019 | Director's Name | Number of Shares (L) | Approximate Percentage of Shareholding | | :--- | :--- | :--- | | Mr Zhou Hongliang | 6,290,000 | 0.15% | | Mr Dong Hua | 5,100,000 | 0.13% | | Mr Li Lei | 1,000,000 | 0.02% | | Mr Tang Shisheng | 1,000,000 | 0.02% | | Mr Feng Guohua | 1,000,000 | 0.02% | The Company's Share Option Scheme The company's share option scheme aims to attract and retain outstanding personnel by granting options to subscribe for shares, with 134,200,000 options granted on November 14, 2017, at an exercise price of HKD 1.744 per share - The Share Option Scheme is designed to attract and retain outstanding personnel and provide additional incentives to the Group's employees, directors, consultants, and advisors[220] - On November 14, 2017, 134,200,000 share options were granted at an exercise price of HKD 1.744 per share[223] - 25% of the options vest on the trading day following the 12th, 24th, 36th, and 48th month anniversaries of the grant date, and vested options can be exercised before the expiration of a five-year period from the grant date[223] The Company's Pre-IPO Share Option Scheme The Pre-IPO Share Option Scheme, adopted on November 30, 2012, was designed to reward eligible participants for their contributions to the Group; as of December 31, 2019, 130,527,000 options were outstanding at an exercise price of HKD 0.837 per share - The Pre-IPO Share Option Scheme was adopted on November 30, 2012, to recognize and thank eligible participants for their contributions to the Group[229] - As of December 31, 2019, 130,527,000 share options were outstanding at an exercise price of HKD 0.837 per share[233] - The options can be exercised in tranches within the option period, which expires on the last business day of the 96th month after the Listing Date[233] Interests and Short Positions of Substantial Shareholders and Other Persons in Shares and Underlying Shares As of December 31, 2019, Wison Engineering Investment Limited held approximately 75.82% of the company's shares, making it the substantial shareholder, with Mr Hua Bangsong and his spouse Ms Huang Xing indirectly holding the same interest through Wison Holding Interests of Substantial Shareholders and Other Persons in Shares at Year-End 2019 | Name | Capacity/Nature of Interest | Number of Shares Held (L) | Approximate Percentage of Shareholding | | :--- | :--- | :--- | :--- | | Wison Engineering Investment Limited | Beneficial Owner | 3,088,782,146 | 75.82% | | Wison Holding | Interest of controlled corporation | 3,088,782,146 | 75.82% | | Mr Hua Bangsong | Interest of controlled corporation | 3,088,782,146 | 75.82% | | Ms Huang Xing | Spouse interest | 3,088,782,146 | 75.82% | - Wison Engineering Investment Limited is the direct holding company of the Company, Wison Holding is the ultimate holding company, and Mr Hua Bangsong is the sole shareholder of Wison Holding[237][238] Connected Transactions In 2019, the company conducted a one-off connected transaction, an EPC contract with Wison Taizhou for RMB 440,250,000, and continuing connected transactions including leasing, property management, and technical services with fellow subsidiaries, all on normal commercial terms - On March 12, 2019, Wison Engineering entered into an EPC general contract with Wison Taizhou for a contract price of RMB 440,250,000, which was approved by independent shareholders[245] - Continuing connected transactions included leasing and property management services with Wison (China) Investment and Wison Offshore & Marine, totaling RMB 27,494,000 in 2019[257] - A technical consulting services framework agreement was signed with Wison (China) Investment, with recognized revenue of RMB 472,000 in 2019[260] - An engineering construction services framework agreement was signed with Wison Offshore & Marine, with a total contract value of approximately RMB 450,982,000 signed in 2019, and amounts payable to Wison Offshore & Marine Group of RMB 337,238,000[263] Remuneration Policy The company values employee reward and retention, offering competitive salaries, bonuses, and social benefits, along with long-term incentives through a share option scheme - The Group offers its employees competitive salaries and bonuses and contributes to various social welfare benefits for them[273] - The company also provides a long-term incentive plan for eligible employees in the form of a share option scheme[273] Public Float The company has obtained a waiver from the Stock Exchange to accept a lower public float percentage of 21.87% and has maintained this minimum level - The Company has obtained a waiver from the Stock Exchange to accept a lower public float percentage of 21.87% of our total issued share capital under Rule 8.08(1)(d) of the Listing Rules[280] - As of the date of this report, the Company has maintained the minimum public float agreed upon by the Stock Exchange[281] Corporate Governance Report Board of Directors The Board, comprising eight directors—four executive, one non-executive, and three independent non-executive—is responsible for guiding and supervising company affairs and held 13 meetings in 2019 to review various proposals and ensure compliance with corporate governance codes - The Board consists of eight directors, including executive directors Ms Rong Wei, Mr Zhou Hongliang, Mr Li Zhiyong, and Mr Dong Hua; non-executive director Mr Liu Hongjun; and independent non-executive directors Mr Li Lei, Mr Tang Shisheng, and Mr Feng Guohua[286] - In 2019, the Board held 13 meetings and reviewed 65 proposals, including the annual report, interim report, cornerstone investments, capital injections, and connected transactions[288] - There are no financial, business, family, or other material relationships among the Board members, who possess a diverse range of appropriate skills, experience, and perspectives[286] Board Committees The company has an Audit Committee, a Nomination Committee, and a Remuneration Committee, each operating under its terms of reference to oversee financial reporting, director appointments, and director remuneration, respectively - The company has three main board committees: the Audit Committee, the Nomination Committee, and the Remuneration Committee[292] - The Audit Committee is primarily responsible for reviewing and supervising the Group's financial reporting process and risk management and internal control systems[295] - The Nomination Committee is mainly responsible for making recommendations to the Board on the appointment of directors and senior management, and for reviewing and assessing the composition of the Board and the independence of independent non-executive directors[296] - The Remuneration Committee considers and recommends to the Board the remuneration and other benefits payable to the Company's directors and regularly monitors the remuneration of all directors[304] Audit Committee The Audit Committee, comprising three independent non-executive directors and chaired by Mr Li Lei, held three meetings in 2019 to review the annual and interim reports, the appointment of auditors, and to assess risk management and internal control measures - The Audit Committee has three members: Mr Li Lei as chairman, and Mr Feng Guohua and Mr Tang Shisheng as members, all of whom are independent non-executive directors[293] - In 2019, it held 3 meetings to review proposals including the Company's 2018 annual report, 2019 interim report, and the appointment of auditors for 2019[296] Nomination Committee The Nomination Committee, chaired by Mr Tang Shisheng and comprising three independent non-executive directors, has established nomination and board diversity policies to ensure a balanced mix of skills, experience, and perspectives on the Board - The Nomination Committee has three members: Mr Tang Shisheng as chairman, and Mr Feng Guohua and Mr Li Lei as members, all of whom are independent non-executive directors[296] - The company has established and adopted a board diversity policy that considers factors such as gender, age, cultural and educational background, professional experience, skills, and knowledge[299] - In 2019, it held 1 meeting and reviewed 4 proposals, including the re-election of directors[301] Remuneration Committee The Remuneration Committee, chaired by Mr Feng Guohua and comprising three independent non-executive directors, is responsible for recommending and monitoring director remuneration and benefits, holding two meetings in 2019 to review executive director compensation - The Remuneration Committee has three members: Mr Feng Guohua as chairman, and Mr Li Lei and Mr Tang Shisheng as members, all of whom are independent non-executive directors[304] - In 2019, it held 2 meetings and reviewed 3 proposals, including the remuneration of the Company's executive directors[304] - In 2019, there were 5 senior management members (excluding directors) with remuneration in the range of HKD 1,500,001 to HKD 3,000,000[307] Corporate Governance Functions The Board is responsible for establishing good corporate governance practices and maintaining a sound risk management and internal control system based on the COSO framework, with an internal audit function to ensure its effectiveness, which the Board deems adequate - The Board is responsible for ensuring the establishment of good corporate governance practices and procedures and maintaining a sound and effective risk management and internal control system[308] - The company has established and maintains a risk management system and internal control system based on the Enterprise Risk Management framework issued by COSO[308] - The company has an internal audit function that inspects and evaluates the review process and results, reporting to the Board and the Audit Committee[309] Risk Management and Internal Control The company has established a risk management system based on the COSO framework, covering all business processes with end-to-end controls, and its effectiveness is ensured through regular risk identification and assessment by management, with the Board deeming the system effective and adequate - The main features of the company's risk management and internal control system are comprehensive risk management, coverage of all business processes, and end-to-end control and monitoring[309] - The effectiveness of the system is confirmed through regular and ad-hoc risk identification, assessment, response, and follow-up conducted annually by management, business departments, and each project[309] - The Board, through the Audit Committee, reviews the adequacy and effectiveness of the company's risk management and internal control systems and internal audit function, and considers the existing systems to be effective and adequate[311] External Auditor Ernst & Young serves as the company's external auditor, with audit service fees amounting to RMB 4,610 thousand in 2019; Ernst & Young Advisory also provided non-audit services related to ESG - Ernst & Young has been appointed as the Company's external auditor[313] External Auditor's Remuneration for 2019 | Service Type | Amount (RMB in thousands) | | :--- | :--- | | Audit services provided by Ernst & Young | 4,610 | | Audit services provided by other local auditors | 864 | | Non-audit services provided by Ernst & Young Advisory for ESG | 290 | Shareholders Shareholders may request to convene a special general meeting and propose the election of directors in accordance with the company's articles of association, and can direct inquiries to the Board via email or at general meetings - One or more shareholders holding not less than one-tenth of the paid-up capital of the Company may request to convene a special general meeting[317] - Shareholders intending to propose the election of a director should submit a written notice to the company's share registrar or head office within the specified period[317] - Shareholders may contact the company's investor relations department via email at ir@wison.com or ask questions directly at the annual general meeting or special general meetings[318] Independent Auditor's Report Opinion The auditor opines that the consolidated financial statements give a true and fair view of the Group's financial position as of December 31, 2019, and of its financial performance and cash flows for the year then ended in accordance with IFRS and have been properly prepared in compliance with the Hong Kong Companies Ordinance - The consolidated financial statements give a true and fair view of the consolidated financial position of the Group as at 31 December 2019, and of its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards[321] - The consolidated financial statements have also been properly prepared in compliance with the disclosure requirements of the Hong Kong Companies Ordinance[321] Basis for Opinion The audit was conducted in accordance with International Standards on Auditing, and the auditor, being independent of the company and having fulfilled professional ethics responsibilities, believes the audit evidence obtained is sufficient and appropriate - The auditor conducted the audit in accordance with International Standards on Auditing, is independent of the Company, and has fulfilled professional ethics responsibilities[322] - The auditor believes that the audit evidence obtained is sufficient and appropriate to provide a basis for the audit opinion[322] Key Audit Matters Key audit matters included revenue recognition and measurement, and the recoverability of trade receivables and contract assets; the auditor tested controls over contract costs and revenue, assessed management estimates, and evaluated monitoring processes and impairment provisions for receivables - Key audit matters included revenue recognition and measurement, and the recoverability of trade receivables and contract assets[330] - For revenue recognition, the auditor tested controls over contract costs and revenue and assessed management's estimates of total budgeted contract costs and costs to completion[330] - For the recoverability of trade receivables and contract assets, the auditor assessed and tested monitoring processes, credit terms, and impairment provisions, and evaluated management's use of historical observable default rates and forward-looking information[332] Directors' Responsibilities for the Consolidated Financial Statements The directors are responsible for preparing true and fair consolidated financial statements in accordance with IFRS and the Hong Kong Companies Ordinance, and for implementing internal controls to ensure the statements are free from material misstatement, as well as assessing the Group's ability to continue as a going concern - The directors of the Company are responsible for the preparation of consolidated financial statements that give a true and fair view in accordance with IFRS and the disclosure requirements of the Hong Kong Companies Ordinance[337] - The directors are responsible for such internal control as they determine is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error[337] - The directors are responsible for assessing the Group's ability to continue as a going concern and, where applicable, disclosing matters related to going concern[337] Auditor's Responsibilities for the Audit of the Consolidated Financial Statements The auditor's objective is to ob