华滋国际海洋(02258) - 2021 - 中期财报

Company Information Board of Directors The company's Board of Directors comprises executive, non-executive, and independent non-executive directors, ensuring a sound corporate governance structure - Executive Directors include Mr. Wang Xiuchun (Chairman), Ms. Wan Yun (CEO), Mr. Wang Lijiang, and Mr. Wang Likai[5] - Mr. Wang Shizhong serves as a Non-executive Director, while Mr. Wang Hongwei, Mr. Sun Dajian, and Mr. Hou Siming are Independent Non-executive Directors[5][6] Key Company Information This section lists the company's registered address, principal place of business, auditor, principal share registrar, Hong Kong share registrar, principal bankers, company website, and stock code - The company is incorporated in the Cayman Islands, with its principal place of business and headquarters in Baoshan District, Shanghai, China[5] - The auditor is PricewaterhouseCoopers[6] - The company's stock code is 02258, and its website is **www.shbt-china.com**[1](index=1&type=chunk)[8] Management Discussion and Analysis Business Overview The company is a leading provider of port, waterway, marine, and municipal engineering services in China, covering port infrastructure, waterway engineering, urban public infrastructure construction, urban greening, and building construction services - The company's core businesses are port, waterway, marine, and municipal engineering services[10] - Key service areas include port infrastructure, waterway engineering, urban public infrastructure construction, urban greening, and building construction[10] Business Review In the first half of 2021, the Group steadily developed its core businesses while actively exploring new areas, with revenue primarily from marine construction and municipal engineering construction segments - In the first half of 2021, the Group steadily developed its core businesses and actively explored new areas[11] 2021 H1 Revenue Breakdown by Segment | Segment | Revenue (RMB million) | | :--------------------------------- | :------------------- | | Marine Construction | 476.0 | | Municipal Engineering Construction | 484.5 | | Total | 960.5 | Future Plans and Prospects The Group will seize opportunities from China's "14th Five-Year Plan" for new and traditional infrastructure, expand environmental engineering, and closely monitor international market changes to strengthen overseas risk management - For the domestic market, the Group will actively participate in marine infrastructure upgrades, new urbanization construction, and environmental engineering (e.g., water environment management)[14] - For the international market, the Group will closely monitor the impact of the pandemic and economic growth, review its overseas development strategy, and re-evaluate, refine, and upgrade its risk management system[16] Financial Overview In the first half of 2021, the Group's revenue significantly increased by 59.3% year-on-year, driven by strong performance in marine and municipal engineering construction, while maintaining healthy liquidity and an improved gearing ratio Revenue In the first half of 2021, the Group's consolidated revenue reached RMB 960.5 million, a significant 59.3% year-on-year increase, driven by growth in municipal engineering construction and marine construction segments - Consolidated revenue for 2021 H1 was RMB 960.5 million, a 59.3% increase from RMB 602.8 million in 2020 H1[17] - Revenue from the marine construction segment was RMB 476.0 million, and from the municipal engineering construction segment was RMB 484.5 million[17] - Domestic revenue was RMB 849.2 million, and Southeast Asia revenue was RMB 111.3 million[17] Cost of Sales and Gross Profit Cost of sales increased by 64.9% with revenue, mainly due to higher raw material and subcontracting costs, yet gross profit still grew by 19.5% year-on-year - Consolidated cost of sales for 2021 H1 was RMB 872.1 million, a 64.9% increase from 2020 H1[18] - Raw material and consumables costs increased by 45.8%, and subcontracting costs increased by 99.0%, primarily due to significant revenue growth in the marine construction segment[18] - Consolidated gross profit for 2021 H1 was RMB 88.4 million, a 19.5% increase from 2020 H1[18] Operating Profit Operating profit for the first half of 2021 increased by 22.0% year-on-year to RMB 37.5 million, primarily due to business expansion and revenue growth - Operating profit for 2021 H1 was RMB 37.5 million, a 22.0% increase from RMB 30.7 million in 2020 H1[19] Administrative Expenses Administrative expenses increased by 17.3% year-on-year, mainly due to higher staff costs, office expenses, and operating expenses from new business expansion - Administrative expenses for 2021 H1 were RMB 47.7 million, a 17.3% increase from 2020 H1[22] Income Tax Expense Income tax expense increased by 83.8% year-on-year, primarily due to higher revenue and profit before tax - Income tax expense for 2021 H1 was RMB 5.6 million, an 83.8% increase from 2020 H1[23] Trade and Other Receivables As of June 30, 2021, net trade and other receivables decreased due to project completion and collection of overdue payments, while net contract assets increased - Net trade and other receivables decreased to RMB 1,416.4 million as of June 30, 2021 (December 31, 2020: RMB 1,525.8 million)[24] - Net contract assets increased from RMB 1,161.8 million as of December 31, 2020, to RMB 1,214.4 million as of June 30, 2021[24] Trade and Other Payables As of June 30, 2021, trade and other payables decreased, mainly due to payments made and certain project procurement payments not yet due - Trade and other payables decreased to RMB 2,421.6 million as of June 30, 2021 (December 31, 2020: RMB 2,577.7 million)[25] Liquidity, Capital Structure, and Gearing Ratio The Group maintained a healthy liquidity position, with an improved gearing ratio, despite an increase in bank borrowings - Net current assets were approximately RMB 200.8 million as of June 30, 2021 (December 31, 2020: RMB 216.1 million)[26] - Cash and cash equivalents were approximately RMB 346.0 million as of June 30, 2021 (December 31, 2020: RMB 423.7 million)[26] - The gearing ratio was 79.4% as of June 30, 2021 (December 31, 2020: 80.7%)[26] Pledged Assets As of June 30, 2021, the Group had no pledged assets - As of June 30, 2021, the Group had no pledged assets[27] Foreign Exchange The Group's business is primarily conducted in RMB, HKD, BND, USD, and IDR, with no hedging policy adopted, managing foreign exchange risk through settlement in major currencies - The Group's business is primarily conducted in RMB, HKD, BND, USD, and IDR[29] - The Group has not adopted any hedging policy, mitigating foreign exchange risk by using major currencies for contracts and settlements[29] Capital Expenditure and Commitments The Group's capital expenditure is primarily funded by operating cash flow, with IPO proceeds providing additional funds, and no significant capital commitments during the reporting period - Capital expenditure is primarily funded by cash flow from operations, with net proceeds from the IPO providing additional funding[30] - As of June 30, 2021, the Group had no significant capital commitments[31] Contingent Liabilities As of June 30, 2021, the Group had no contingent liabilities - As of June 30, 2021, the Group had no contingent liabilities[32] Significant Acquisitions and Disposals of Subsidiaries, Associates, and Joint Ventures In the first half of 2021, the Group did not undertake any significant acquisitions or disposals of subsidiaries, associates, or joint ventures - During the six months ended June 30, 2021, the Group had no significant acquisitions or disposals of subsidiaries, associates, or joint ventures[33] Significant Investments Held As of June 30, 2021, the Group held no significant investments - As of June 30, 2021, the Group had no significant investments[34] Use of Proceeds The Group's net IPO proceeds were approximately HKD 202.9 million, with HKD 123.4 million utilized as of June 30, 2021, mainly for project funding, equipment purchases, and general working capital, while strategic equity investments remain largely unutilized - Net IPO proceeds were approximately HKD 202.9 million, with HKD 123.4 million utilized as of June 30, 2021[37] - HKD 68.8 million allocated for strategic equity investments remained unutilized as of June 30, 2021, expected to be used by December 2022 or earlier[37] - Some uses of proceeds were revised on December 17, 2020, including reallocating funds for existing projects to port, waterway, and marine engineering projects, and expanding the use for new fleet and construction equipment purchases to include repair and maintenance[38] Interim Dividend The Board resolved not to declare any dividend for the six months ended June 30, 2021, to maintain sufficient cash flow for daily operations and expansion needs - The Board resolved not to declare any dividend for the six months ended June 30, 2021[41] - This decision aims to maintain sufficient cash flow for daily operations and expansion needs[41] Employees and Remuneration Policy As of June 30, 2021, the Group had 597 employees, with staff costs increasing by 40.5% year-on-year, and the Remuneration Committee overseeing director and senior management compensation without significant labor disputes - As of June 30, 2021, the Group had 597 employees[42] - Staff costs (including directors' emoluments) for the reporting period were approximately RMB 31.5 million, a 40.5% increase from RMB 22.4 million in the same period of 2020[42] - The company's Remuneration Committee provides recommendations on the remuneration policy for directors and senior management, ensuring no director determines their own remuneration[42] Disclosure of Interests and Other Information Directors' and Chief Executive's Interests and Short Positions in Shares, Underlying Shares, and Debentures of the Company and its Associated Corporations As of June 30, 2021, Mr. Wang Xiuchun, Mr. Wang Likai, and Mr. Wang Shizhong each held 50.86% of the company's shares due to joint holdings and interests in controlled corporations Directors' and Chief Executive's Shareholdings (as of June 30, 2021) | Name of Director/Chief Executive | Capacity/Nature of Interest | Number of Shares Held | Percentage of Shareholding in Shares | | :----------------------- | :------------- | :----------- | :----------------- | | Mr. Wang Xiuchun | Interest held jointly with others | 419,792,836 | 50.86% | | Mr. Wang Likai | Interest held jointly with others | 419,792,836 | 50.86% | | Mr. Wang Shizhong | Interest in controlled corporations and interest held jointly with others | 419,792,836 | 50.86% | - Mr. Wang Shizhong, Mr. Ye Kangshun, Mr. Wang Xiuchun, Ms. Zhou Meng, Mr. Wang Shiqin, and Mr. Wang Likai are deemed to be parties acting in concert[46][50] Substantial Shareholders' Interests and Short Positions in Shares and Underlying Shares of the Company As of June 30, 2021, HuaZi Holding Limited and Ye Wang Zhou Holding Limited were substantial shareholders, with several individual shareholders holding shares directly or indirectly and deemed to be parties acting in concert Substantial Shareholders' Shareholdings (as of June 30, 2021) | Name of Shareholder | Nature of Interest | Number of Shares | Percentage of Shareholding in Shares | | :------------------------- | :------------- | :----------- | :----------------- | | HuaZi Holding Limited | Beneficial owner | 315,467,967 | 38.22% | | Ye Wang Zhou Holding Limited | Beneficial owner | 104,324,869 | 12.64% | | Mr. Ye Kangshun | Interest in controlled corporations and interest held jointly with others | 419,792,836 | 50.86% | | Ms. Zhou Meng | Interest held jointly with others | 419,792,836 | 50.86% | | Mr. Wang Shiqin | Interest held jointly with others | 419,792,836 | 50.86% | | HZ&BT Development Holding Limited | Beneficial owner | 143,542,720 | 17.39% | | Shilian Resources Limited | Beneficial owner | 55,714,444 | 6.75% | | Ms. Olive Chen | Interest in controlled corporations | 55,714,444 | 6.75% | - Mr. Wang Shizhong, Mr. Ye Kangshun, Mr. Wang Xiuchun, Ms. Zhou Meng, Mr. Wang Shiqin, and Mr. Wang Likai are deemed to be parties acting in concert[50] Purchase, Sale or Redemption of the Company's Listed Securities During the reporting period, neither the company nor any of its subsidiaries purchased, sold, or redeemed any of the company's listed securities - During the reporting period, neither the Company nor any of its subsidiaries purchased, sold, or redeemed any of the Company's listed securities[55] Share Option Scheme The company adopted a share option scheme in 2018 to incentivize employees, but as of June 30, 2021, no share options had been granted, exercised, lapsed, or cancelled - The Share Option Scheme was adopted on October 19, 2018, to incentivize and reward eligible persons[56] - From the listing date up to June 30, 2021, no share options were granted, exercised, lapsed, or cancelled[56] Share Award Scheme The company adopted a share award scheme in 2020 to recognize contributions and incentivize future development, but as of June 30, 2021, no share awards had been granted, exercised, lapsed, or cancelled - The Share Award Scheme was adopted on March 24, 2020, to recognize contributions and incentivize future development[57] - From the adoption date up to June 30, 2021, no share awards were granted, exercised, lapsed, or cancelled[57] Corporate Governance Code The Group is committed to maintaining high standards of corporate governance and has complied with all applicable provisions of the Corporate Governance Code set out in Appendix 14 to the Listing Rules - The Group is committed to maintaining high standards of corporate governance to safeguard shareholders' interests and enhance corporate value and accountability[58] - The company has adopted and complied with all applicable code provisions of the Corporate Governance Code set out in Appendix 14 to the Listing Rules[58] Changes in Directors' Information Independent Non-executive Director Mr. Wang Hongwei was appointed as an independent director of Shanghai Shimao Co., Ltd. on May 13, 2021 - Independent Non-executive Director Mr. Wang Hongwei was appointed as an independent director of Shanghai Shimao Co., Ltd. (stock code: 600823.SH) on May 13, 2021[60] Standard Code for Securities Transactions by Directors The Group has adopted the Model Code set out in Appendix 10 to the Listing Rules, and all directors confirmed full compliance with relevant provisions during the reporting period - The Group has adopted the Model Code set out in Appendix 10 to the Listing Rules as the code of conduct for directors' securities transactions[61] - All directors confirmed full compliance with the relevant provisions of the company's own code of conduct and the Model Code during the reporting period[61] Review of Interim Report by Audit Committee The Audit Committee has reviewed this interim report and raised no objections regarding the accounting policies adopted by the company - The Audit Committee has reviewed this interim report and raised no objections regarding the accounting policies adopted by the company[62] Condensed Consolidated Interim Statement of Comprehensive Income Financial Performance for H1 2021 In the first half of 2021, the company achieved significant growth in both revenue and operating profit, with corresponding increases in net profit and earnings per share Key Financial Data for H1 2021 (Unaudited) | Metric | Six Months Ended June 30, 2021 (RMB thousand) | Six Months Ended June 30, 2020 (RMB thousand) | Year-on-Year Change (%) | | :--------------------------------- | :--------------------------------------- | :--------------------------------------- | :----------- | | Revenue | 960,533 | 602,832 | 59.3% | | Cost of sales | (872,089) | (528,793) | 64.9% | | Gross profit | 88,444 | 74,039 | 19.5% | | Operating profit | 37,481 | 30,728 | 22.0% | | Profit for the period | 24,166 | 23,235 | 4.0% | | Basic earnings per share (RMB cents) | 2.95 | 2.82 | 4.6% | | Diluted earnings per share (RMB cents) | 2.95 | 2.82 | 4.6% | - In other comprehensive income, currency translation differences were negative, while fair value changes of equity instruments measured at fair value through other comprehensive income were positive[66] Condensed Consolidated Interim Statement of Financial Position Asset and Liability Structure As of June 30, 2021, the company's total assets slightly decreased, but total liabilities decreased more significantly, leading to an increase in total equity and maintaining a robust capital structure Key Financial Position Data as of June 30, 2021 (Unaudited) | Metric | June 30, 2021 (RMB thousand) | December 31, 2020 (RMB thousand) | Change (%) | | :--------------------------------- | :--------------------------- | :--------------------------- | :----------- | | Total assets | 3,300,428 | 3,432,028 | -3.8% | | Total liabilities | 2,619,463 | 2,768,304 | -5.4% | | Total equity | 680,965 | 663,724 | 2.6% | | Property, plant and equipment | 89,828 | 107,116 | -16.2% | | Contract assets | 1,214,355 | 1,161,768 | 4.5% | | Trade and other receivables | 1,416,407 | 1,525,762 | -7.2% | | Cash and cash equivalents | 346,019 | 423,696 | -18.3% | | Trade and other payables | 2,421,626 | 2,577,677 | -6.0% | | Borrowings | 81,750 | 54,000 | 51.4% | - Total non-current assets were RMB 794,041 thousand, and total current assets were RMB 2,506,387 thousand[68] - Total non-current liabilities were RMB 313,830 thousand, and total current liabilities were RMB 2,305,633 thousand[72] Condensed Consolidated Interim Statement of Changes in Equity Overview of Equity Changes In the first half of 2021, the company's total equity increased due to profit for the period, though partially offset by currency translation differences and dividend distribution - Total equity was RMB 663,724 thousand as of January 1, 2021, increasing to RMB 680,965 thousand as of June 30, 2021[75] - Profit for the period was RMB 24,166 thousand, and currency translation differences were RMB (1,837) thousand[75] - Dividends distributed to shareholders amounted to RMB 5,469 thousand[75] Condensed Consolidated Interim Statement of Cash Flows Overview of Cash Flows In the first half of 2021, cash flow from operating activities turned negative, net cash inflow from investing activities increased, and net cash inflow from financing activities significantly improved, yet cash and cash equivalents at period-end still decreased Key Cash Flow Data for H1 2021 (Unaudited) | Metric | Six Months Ended June 30, 2021 (RMB thousand) | Six Months Ended June 30, 2020 (RMB thousand) | | :--------------------------------- | :--------------------------------------- | :--------------------------------------- | | Net cash from operating activities | (106,784) | 47,201 | | Net cash from investing activities | 7,137 | 177 | | Net cash from financing activities | 23,946 | (7,068) | | Net (decrease)/increase in cash and cash equivalents | (75,701) | 40,310 | | Cash and cash equivalents at end of period | 346,019 | 514,625 | - Net cash from operating activities shifted from an inflow in 2020 H1 to an outflow of RMB 106,784 thousand in 2021 H1, primarily due to increased cash used in operations[79] - Net cash from financing activities shifted from an outflow in 2020 H1 to an inflow of RMB 23,946 thousand in 2021 H1, mainly attributable to new borrowings[79] Notes to the Condensed Consolidated Interim Financial Statements 1 General Information This section outlines the company's registration details, business scope, listing status, and the presentation currency and review status of the financial statements - Huazi International Marine Engineering Company Limited was incorporated in the Cayman Islands on December 20, 2017[81] - The Group primarily provides marine construction and municipal engineering construction services in Mainland China and Southeast Asia[81] - The company's shares were listed on the Main Board of The Stock Exchange of Hong Kong Limited on November 19, 2018[81] - The condensed consolidated interim financial statements are presented in RMB and are unaudited[81][82] 2 Basis of Preparation The condensed consolidated interim financial statements are prepared in accordance with HKAS 34 and should be read in conjunction with the annual financial statements, with no significant accounting policy changes from new or amended standards adopted this period - The condensed consolidated interim financial statements are prepared in accordance with Hong Kong Accounting Standard 34 "Interim Financial Reporting"[83] - The Group was not required to change its accounting policies or make retrospective adjustments due to the adoption of new and amended standards during the reporting period[88] - Several new standards and amendments have been issued but are not yet effective, and the Group is assessing their full impact[91] 3 Financial Risk Management The Group faces market risks (foreign exchange, interest rates), credit risk, and liquidity risk, managed by depositing cash with reputable banks, applying expected credit loss models, and maintaining sufficient liquidity, with fair value estimates of financial instruments using a three-level hierarchy 3.1 Financial Risk Factors The Group primarily faces foreign exchange risk (USD, BND, HKD) and credit risk (receivables and contract assets), managing the former without a hedging policy and the latter through an expected credit loss model - Foreign exchange risk primarily arises from USD, BND, and HKD denominated receipts and payments, and the Group has not adopted a foreign exchange hedging policy[95] - If RMB appreciates/depreciates by 5% against USD, BND, and HKD, total profit for 2021 H1 would decrease/increase by RMB 5,743 thousand[96] - Credit risk arises from restricted cash, cash and cash equivalents, trade receivables, retention receivables, long-term trade receivables, and contract assets, with expected credit losses measured using the simplified approach under HKFRS 9[100][105] - Net impairment losses on financial assets and contract assets for 2021 H1 were RMB (2,975) thousand[143] 3.2 Liquidity Risk The Group manages liquidity risk by maintaining sufficient cash and credit facilities, with total contractual undiscounted cash flows for non-derivative financial liabilities amounting to RMB 2,395,128 thousand as of June 30, 2021 - The Group aims to maintain sufficient committed credit facilities to ensure adequate and flexible funding[146] Contractual Undiscounted Cash Flows of Non-Derivative Financial Liabilities (as of June 30, 2021) | Type of Liability | Not later than 1 year (RMB thousand) | 1 to 2 years (RMB thousand) | 2 to 5 years (RMB thousand) | Over 5 years (RMB thousand) | Total (RMB thousand) | | :------------------------- | :----------------------- | :------------------- | :------------------- | :------------------- | :--------------- | | Bank borrowings | 61,812 | 6,078 | 16,428 | 2,309 | 86,627 | | Lease liabilities | 1,564 | 722 | 1,118 | 2,583 | 5,987 | | Trade and other payables | 1,984,897 | 155,339 | 142,047 | 20,231 | 2,302,514 | | Total | 2,048,273 | 162,139 | 159,593 | 25,123 | 2,395,128 | 3.3 Fair Value Estimation Fair value estimation of financial instruments uses a three-level hierarchy, with financial assets measured at fair value through other comprehensive income primarily in Level 1, and financial assets measured at fair value through profit or loss in Level 3 - Financial instruments are categorized into three levels based on the reliability of input data: Level 1 for active market quotes, Level 2 for observable market data, and Level 3 for unobservable market data[149][153] Recurring Fair Value Measurements (as of June 30, 2021) | Metric | Level 1 (RMB thousand) | Level 2 (RMB thousand) | Level 3 (RMB thousand) | Total (RMB thousand) | | :----------------------------------------------------------------- | :----------------- | :----------------- | :----------------- | :--------------- | | Financial assets at fair value through profit or loss | — | — | 50 | 50 | | Financial assets at fair value through other comprehensive income | 4,173 | — | — | 4,173 | | Total | 4,173 | — | 50 | 4,223 | - Valuation methods include using market quotes or dealer quotes for similar instruments, and discounted cash flow analysis[153] 4 Critical Accounting Estimates and Judgments The significant judgments and sources of estimation uncertainty made by management in preparing the condensed consolidated interim financial statements are consistent with those applied in the consolidated financial statements for the year ended December 31, 2020 - The significant judgments and sources of estimation uncertainty made by management are consistent with those applied in the consolidated financial statements for the year ended December 31, 2020[156] 5 Segment Information The Group's business is divided into two reportable segments, marine construction and municipal engineering construction, both achieving revenue and gross profit growth in 2021 H1, with Mainland China as the primary revenue source 5.1 Description of Segments and Principal Activities The Group's two reportable segments are marine construction (including port infrastructure construction, waterway engineering, and other services) and municipal engineering construction (including urban public infrastructure construction, urban greening, and building construction) - Reportable segments are marine construction (including port infrastructure construction, waterway engineering, and other services) and municipal engineering construction (including urban public infrastructure construction, urban greening, and building construction)[157] - Segment results are measured by gross profit[158] 5.2 Segment Results and Other Information In the first half of 2021, both marine construction and municipal engineering construction segments contributed significant revenue and gross profit, totaling RMB 88.4 million in gross profit H1 2021 Segment Results (Unaudited) | Segment | Revenue (RMB thousand) | Cost of Sales (RMB thousand) | Gross Profit (RMB thousand) | | :--------------------------------- | :---------------- | :-------------------- | :---------------- | | Marine Construction | 475,996 | (435,551) | 40,445 | | Municipal Engineering Construction | 484,537 | (436,538) | 47,999 | | Total | 960,533 | (872,089) | 88,444 | Segment Assets and Liabilities as of June 30, 2021 (Unaudited) | Segment | Total Assets (RMB thousand) | Total Liabilities (RMB thousand) | | :--------------------------------- | :-------------------- | :------------------ | | Marine Construction | 1,828,509 | 1,361,309 | | Municipal Engineering Construction | 1,577,553 | 1,363,788 | | Inter-segment elimination | (105,634) | (105,634) | | Total | 3,300,428 | 2,619,463 | 5.3 Revenue from Contracts with Customers and Cost of Sales In the first half of 2021, Mainland China was the Group's primary revenue source, contributing the majority of revenue and gross profit, with Southeast Asia also making contributions H1 2021 Revenue and Gross Profit by Geographical Area (Unaudited) | Area | Revenue (RMB thousand) | Cost of Sales (RMB thousand) | Gross Profit (RMB thousand) | | :----------------- | :---------------- | :-------------------- | :---------------- | | Mainland China | 849,222 | (768,340) | 80,882 | | Southeast Asia | 111,311 | (103,749) | 7,562 | | Total | 960,533 | (872,089) | 88,444 | - As of June 30, 2021, non-current assets in Mainland China were RMB 91,350 thousand, and in Southeast Asia were RMB 13,854 thousand[167] 5.4 Contract Assets and Liabilities As of June 30, 2021, the Group's total contract assets increased, while total contract liabilities decreased, with project completion leading to significant transfers of contract assets to trade and retention receivables Contract Assets and Liabilities (as of June 30, 2021) | Metric | June 30, 2021 (RMB thousand) | December 31, 2020 (RMB thousand) | | :--------------------------------- | :--------------------------- | :--------------------------- | | Total contract assets | 1,214,355 | 1,161,768 | | Total contract liabilities | 94,717 | 111,454 | - In 2021 H1, approximately RMB 150,663 thousand of contract assets were transferred to trade receivables, and approximately RMB 39,783 thousand were transferred to retention receivables, primarily due to project completion[172] 6 Operating Profit This section details the major expenses deducted from operating profit in the first half of 2021, including raw materials and consumables, subcontracting costs, staff costs, and depreciation and amortization H1 2021 Major Operating Expenses (Unaudited) | Expense Item | Six Months Ended June 30, 2021 (RMB thousand) | Six Months Ended June 30, 2020 (RMB thousand) | | :--------------------------------- | :--------------------------------------- | :--------------------------------------- | | Raw materials and consumables used | 433,747 | 297,567 | | Subcontracting costs | 356,916 | 179,386 | | Wages and salaries, social welfare and benefits (including directors' emoluments) | 31,500 | 22,412 | | Depreciation of property, plant and equipment | 8,605 | 7,951 | - Raw materials and consumables and subcontracting costs were the largest operating expense items, both showing significant increases in 2021 H1[175] 7 Income Tax Expense Net income tax expense for the first half of 2021 was RMB 5,640 thousand, comprising current and deferred income tax, with the Group subject to varying income tax rates across different jurisdictions and some subsidiaries enjoying preferential rates H1 2021 Income Tax Expense (Unaudited) | Metric | Six Months Ended June 30, 2021 (RMB thousand) | Six Months Ended June 30, 2020 (RMB thousand) | | :----------------- | :--------------------------------------- | :--------------------------------------- | | Current income tax | 7,636 | 3,871 | | Deferred income tax | (1,996) | (802) | | Income tax expense — Net | 5,640 | 3,069 | - The corporate income tax rate in China is 25%, but high-tech enterprise Sanhang Benteng Marine enjoys a preferential tax rate of 15%[181] - Hong Kong profits tax rate is 16.5%, Brunei income tax rate is 18.5%, and Indonesian income tax is 3% on construction revenue and 20% on bank deposit interest income[180][184][185] 8 Basic and Diluted Earnings Per Share In the first half of 2021, both basic and diluted earnings per share were RMB 2.95 cents, an increase from 2020 H1, with no dilutive potential ordinary shares outstanding during the reporting period H1 2021 Earnings Per Share (Unaudited) | Metric | Six Months Ended June 30, 2021 (Unaudited) | Six Months Ended June 30, 2020 (Unaudited) | | :--------------------------------- | :--------------------------------------- | :--------------------------------------- | | Profit attributable to owners of the Company (RMB thousand) | 24,166 | 23,235 | | Weighted average number of ordinary shares in issue (thousand shares) | 819,008 | 825,263 | | Basic earnings per share (RMB cents) | 2.95 | 2.82 | | Diluted earnings per share (RMB cents) | 2.95 | 2.82 | - Diluted earnings per share are the same as basic earnings per share because there were no dilutive potential ordinary shares outstanding as of June 30, 2021, and 2020[189] 9 Property, Plant and Equipment As of June 30, 2021, the net book value of property, plant and equipment decreased, despite new additions during the period, with some fixed assets transferred to construction in progress for upgrades to enhance operational efficiency - As of June 30, 2021, the net book value of property, plant and equipment was RMB 89,828 thousand (December 31, 2020: RMB 107,116 thousand)[197] - Additions in 2021 H1 amounted to RMB 4,075 thousand, and depreciation expense was RMB 8,605 thousand[197] - Some fixed assets were transferred to construction in progress for upgrades to extend their useful lives and enhance operational efficiency[194] 10 Trade and Other Receivables As of June 30, 2021, net trade and other receivables decreased, primarily due to the collection of project payments, with long-term trade receivables pledged as collateral for bank borrowings Net Trade and Other Receivables (as of June 30, 2021) | Metric | June 30, 2021 (RMB thousand) | December 31, 2020 (RMB thousand) | | :--------------------------------- | :--------------------------- | :--------------------------- | | Trade receivables — Net | 949,820 | 1,050,117 | | Retention receivables — Net | 222,523 | 241,690 | | Long-term trade receivables — Net | 50,850 | 52,518 | | Total trade and other receivables | 1,416,407 | 1,525,762 | - As of June 30, 2021, approximately RMB 50,850 thousand of long-term trade receivables were pledged as collateral for bank borrowings of RMB 26,750 thousand[206] Ageing Analysis of Trade Receivables and Bills Receivable (as of June 30, 2021) | Ageing | Amount (RMB thousand) | | :----------------- | :---------------- | | Within 3 months | 316,105 | | 4 to 6 months | 54,027 | | 7 to 12 months | 241,498 | | 1 to 2 years | 152,541 | | 2 to 3 years | 160,203 | | Over 3 years | 128,304 | | Total | 1,052,678 | 11 Cash and Cash Equivalents As of June 30, 2021, cash and cash equivalents decreased, with restricted cash primarily designated for migrant worker wages and project expenses Cash and Cash Equivalents (as of June 30, 2021) | Metric | June 30, 2021 (RMB thousand) | December 31, 2020 (RMB thousand) | | :--------------------------------- | :--------------------------- | :--------------------------- | | Cash in hand | 247 | 296 | | Cash at bank | 412,905 | 537,631 | | Less: Restricted cash | (67,133) | (114,231) | | Cash and cash equivalents | 346,019 | 423,696 | - Restricted cash primarily includes dedicated cash for migrant worker wages (RMB 43,504 thousand) and dedicated cash for project expenses (RMB 15,830 thousand)[209] 12 Share Capital and Share Premium As of June 30, 2021, the company's total issued share capital comprised 825,400,000 ordinary shares, with share premium decreasing due to dividend distribution - As of June 30, 2021, the company's total issued share capital comprised 825,400,000 ordinary shares with a par value of HKD 0.01 each, equivalent to RMB 7,303 thousand[211] - Share premium decreased from RMB 296,997 thousand as of January 1, 2021, to RMB 291,528 thousand as of June 30, 2021, primarily due to a dividend distribution of RMB 5,469 thousand[211] 13 Trade and Other Payables As of June 30, 2021, total trade and other payables decreased, primarily consisting of trade payables, retention payables, and long-term payables Trade and Other Payables (as of June 30, 2021) | Metric | June 30, 2021 (RMB thousand) | December 31, 2020 (RMB thousand) | | :--------------------------------- | :--------------------------- | :--------------------------- | | Trade payables | 1,530,473 | 1,674,743 | | Retention payables | 187,991 | 180,382 | | Long-term payables | 450,349 | 438,401 | | Total trade and other payables | 2,421,626 | 2,577,677 | - Trade payables and bills payable are primarily denominated in RMB[214] Ageing Analysis of Trade Payables and Bills Payable (as of June 30, 2021) | Ageing | Amount (RMB thousand) | | :----------------- | :---------------- | | Within 3 months | 598,204 | | 4 to 6 months | 211,368 | | 7 to 12 months | 142,315 | | 1 to 2 years | 260,130 | | 2 to 3 years | 141,409 | | Over 3 years | 177,497 | | Total | 1,530,923 | 14 Borrowings As of June 30, 2021, the Group's total borrowings increased to RMB 81,750 thousand, primarily comprising long-term and short-term bank borrowings, all secured by third-party or related-party guarantees Total Borrowings (as of June 30, 2021) | Metric | June 30, 2021 (RMB thousand) | December 31, 2020 (RMB thousand) | | :--------------------------------- | :--------------------------- | :--------------------------- | | Non-current portion of long-term bank borrowings — Secured | 22,000 | 24,500 | | Current portion of long-term bank borrowings — Secured | 4,750 | 4,500 | | Short-term bank borrowings — Secured | 55,000 | 25,000 | | Total borrowings | 81,750 | 54,000 | - Long-term bank borrowings are guaranteed by Zhejiang Kexin Engineering Materials Co., Ltd. (a third party) and pledged by long-term trade receivables[219] - Short-term bank borrowings are guaranteed by Huazi Benteng[221] 15 Dividends The Board recommended a final dividend of HKD 0.80 cents per share for the year ended December 31, 2020, totaling approximately RMB 5,469 thousand, which was paid in August - The Board recommended a final dividend of HKD 0.80 cents per share (equivalent to RMB 0.66 cents) for the year ended December 31, 2020[223] - The total proposed dividend of approximately RMB 5,469 thousand was paid in August 2021[223] 16 Commitments As of June 30, 2021, the Group had no significant capital commitments, but had minimum lease payments under irrevocable operating leases as a lessee and future minimum lease receivables as a lessor - As of June 30, 2021, the Group and the Company had no significant capital commitments[224] - As a lessee, minimum lease payments under irrevocable operating leases within 1 year amounted to RMB 300 thousand[228] - As a lessor, future minimum lease receivables under irrevocable operating leases within 1 year amounted to RMB 1,932 thousand[229] 17 Related Party Transactions The Group engaged in various ordinary course business transactions with related parties, including construction services, buying and selling goods and services, and rent, with corresponding receivables, payables, and guarantees 17.1 Transactions with Related Parties In the first half of 2021, the Group significantly increased construction services provided to related parties and engaged in raw material trading and rental transactions with them - Construction services provided to related parties totaled RMB 40,562 thousand in 2021 H1 (2020 H1: RMB 17,286 thousand)[235] - Raw materials bought from and sold to related parties totaled RMB 10,504 thousand in 2021 H1 (2020 H1: RMB 1,320 thousand)[238] - Rental income from related parties was RMB 201 thousand in 2021 H1 (2020 H1: RMB 192 thousand)[239] 17.2 Balances with Related Parties As of June 30, 2021, the Group had significant trade and retention receivables and contract assets from related parties, as well as trade and retention payables and long-term payables to related parties, with Huazi Benteng providing substantial guarantees to the Group Amounts Due from Related Parties (as of June 30, 2021) | Type | Amount (RMB thousand) | | :----------------- | :---------------- | | Trade and retention receivables | 174,059 | | Contract assets | 59,566 | | Other receivables | 4,866 | Amounts Due to Related Parties (as of June 30, 2021) | Type | Amount (RMB thousand) | | :----------------- | :---------------- | | Trade and retention payables | 15,539 | | Long-term payables | 50,510 | - As of June 30, 2021, Huazi Benteng provided guarantees of RMB 220,000 thousand to the Group[255] 18 Events After the Reporting Period As of June 30, 2021, neither the Company nor the Group had undertaken any other significant events after the reporting period - Neither the Company nor the Group had undertaken any other significant events after June 30, 2021[256] Definitions Key Term Definitions This section provides definitions for key terms and abbreviations used in the interim report to ensure accurate understanding of its content by readers - Definitions are provided for terms such as "Concert Party Confirmation", "Audit Committee", "BND", "Board", "Company", "Directors", "Group", "HKD", "IDR", "Listing", "Listing Date", "Listing Rules", "Major Currencies", "Model Code", "PRC", "Prospectus", "RMB", "Reporting Period", "SFO", "Shares", "Shareholders", "Share Award Scheme", "Share Option Scheme", "Stock Exchange", "Sanhang Benteng Marine", and "USD"[258][261][262][263][264][265][266][267][268][269][270][271][272][273][274](index=274&type=chunk]