巨涛海洋石油服务(03303) - 2021 - 中期财报

Financial Highlights The company reported significant growth in turnover and profit attributable to owners for the first half of 2021, with no interim dividend declared Financial Highlights for H1 2021 | Indicator | H1 2021 (RMB '000) | Prior Period (RMB '000) | YoY Change (%) | | :--- | :--- | :--- | :--- | | Turnover | 2,042,142 | 1,296,344 | 57.53% | | Gross Profit | 263,505 | 177,496 | 48.46% | | Profit attributable to owners of the Company | 98,301 | 25,363 | 288% | | Basic earnings per share | 5.966 cents | 1.552 cents | - | | Diluted earnings per share | 5.901 cents | 1.552 cents | - | - The Board announced no interim dividend would be paid for the six months ended June 30, 2021[4] Independent Review Report RSM Hong Kong conducted a review of the condensed consolidated interim financial information, finding no material non-compliance with HKAS 34 - RSM Hong Kong, the auditor, reviewed the condensed consolidated interim financial information in accordance with Hong Kong Standard on Review Engagements 2410[4][5] - The auditor found no matters suggesting the interim financial information was not prepared in all material respects in accordance with HongAS 34[8] Condensed Consolidated Statement of Profit or Loss The company's profit for the period significantly increased in 2021, driven by higher revenue and improved operating efficiency Condensed Consolidated Statement of Profit or Loss (For the six months ended June 30) | Indicator | 2021 (RMB '000) | 2020 (RMB '000) | | :--- | :--- | :--- | | Revenue | 2,042,142 | 1,296,344 | | Cost of sales and services | (1,778,637) | (1,118,848) | | Gross Profit | 263,505 | 177,496 | | Other income | 25,862 | 16,281 | | Administrative expenses | (173,325) | (96,708) | | Operating profit | 139,282 | 56,715 | | Finance costs | (14,633) | (19,432) | | Profit before tax | 124,649 | 37,283 | | Income tax expense | (26,348) | (11,920) | | Profit for the period attributable to owners of the Company | 98,301 | 25,363 | | Basic earnings per share | 5.966 cents | 1.552 cents | | Diluted earnings per share | 5.901 cents | 1.552 cents | Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income Total comprehensive income attributable to owners of the company increased significantly in 2021, despite a negative foreign currency translation difference Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income (For the six months ended June 30) | Indicator | 2021 (RMB '000) | 2020 (RMB '000) | | :--- | :--- | :--- | | Profit for the period | 98,301 | 25,363 | | Other comprehensive income: Exchange differences on translation of foreign operations | (7,919) | 18,096 | | Other comprehensive income for the period, net of tax | (7,919) | 18,096 | | Total comprehensive income for the period attributable to owners of the Company | 90,382 | 43,459 | Condensed Consolidated Statement of Financial Position The company's net assets decreased as of June 30, 2021, primarily due to a reduction in current assets and an increase in current liabilities Condensed Consolidated Statement of Financial Position (As at June 30, 2021) | Indicator | June 30, 2021 (RMB '000) | December 31, 2020 (RMB '000) | | :--- | :--- | :--- | | Non-current assets | | | | Property, plant and equipment | 1,215,304 | 1,246,905 | | Right-of-use assets | 433,168 | 444,561 | | Goodwill | 52,444 | 52,444 | | Intangible assets | 10,785 | 12,226 | | Trade receivables, non-current | 6,002 | 1,592 | | Deferred tax assets | 30,240 | 29,452 | | Total non-current assets | 1,747,943 | 1,787,180 | | Current assets | | | | Inventories | 195,061 | 127,343 | | Trade and bills receivables | 573,259 | 721,246 | | Contract cost assets | 6,047 | 6,150 | | Contract assets | 230,958 | 455,282 | | Prepayments, deposits and other receivables | 253,265 | 181,474 | | Derivative financial instruments | 8,591 | 2,182 | | Tax recoverable | 18 | - | | Pledged deposits | 112,291 | 136,073 | | Bank balances and cash | 1,342,360 | 1,188,255 | | Total current assets | 2,721,850 | 2,818,005 | | Current liabilities | | | | Trade and bills payables | 1,035,035 | 1,056,120 | | Contract liabilities | 171,481 | 430,267 | | Other accruals and payables | 211,957 | 133,667 | | Dividends payable | 307,783 | - | | Provisions | 208,195 | 68,541 | | Bank borrowings | 54,500 | 37,500 | | Deferred income | 10,873 | 8,398 | | Lease liabilities | 7,027 | 9,118 | | Tax payable | 34,788 | 17,174 | | Total current liabilities | 2,041,639 | 1,760,785 | | Net current assets | 680,211 | 1,057,220 | | Total assets less current liabilities | 2,428,154 | 2,844,400 | | Non-current liabilities | | | | Deferred income | 20,651 | 28,563 | | Lease liabilities | 42,727 | 45,868 | | Bank borrowings | 446,450 | 482,200 | | Deferred tax liabilities | 22,071 | 38,424 | | Total non-current liabilities | 531,899 | 595,055 | | Net assets | 1,896,255 | 2,249,345 | | Capital and reserves | | | | Share capital | 15,150 | 14,755 | | Reserves | 1,881,105 | 2,234,590 | | Total equity | 1,896,255 | 2,249,345 | Condensed Consolidated Statement of Changes in Equity Total equity decreased in the first half of 2021, mainly due to dividend payments, despite profit for the period and share-based expenses Condensed Consolidated Statement of Changes in Equity (For the six months ended June 30) | Item | Share Capital (RMB '000) | Share Premium (RMB '000) | Special Reserve (RMB '000) | Convertible Bond Equity Reserve (RMB '000) | Exchange Reserve (RMB '000) | Share-based Payment Reserve (RMB '000) | Statutory Reserve (RMB '000) | Retained Profits (RMB '000) | Total Equity (RMB '000) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | As at January 1, 2020 | 14,755 | 1,733,618 | (52,040) | 2,951 | (19,038) | 60,992 | 40,275 | 369,480 | 2,150,993 | | Total comprehensive income for the period | – | – | – | – | 18,096 | – | – | 25,363 | 43,459 | | Share-based payment expense | – | – | – | – | – | 1,935 | – | – | 1,935 | | Total changes in equity for the period | – | – | – | – | 18,096 | 1,935 | – | 25,363 | 45,394 | | As at June 30, 2020 | 14,755 | 1,733,618 | (52,040) | 2,951 | (942) | 62,927 | 40,275 | 394,843 | 2,196,387 | | As at January 1, 2021 | 14,755 | 1,733,618 | (52,040) | 2,951 | (72,422) | 46,813 | 40,275 | 535,395 | 2,249,345 | | Total comprehensive income for the period | – | – | – | – | (7,919) | – | – | 98,301 | 90,382 | | Share-based payment expense | – | – | – | – | – | 43,500 | – | – | 43,500 | | Forfeiture of share options | – | – | – | – | – | (655) | – | 655 | – | | Issue of shares upon exercise of share options | 395 | 39,034 | – | – | – | (13,688) | – | – | 25,741 | | Special dividend paid | – | (204,930) | – | – | – | – | – | – | (204,930) | | Final dividend for 2020 approved | – | (307,783) | – | – | – | – | – | – | (307,783) | | Total changes in equity for the period | 395 | (473,679) | – | – | (7,919) | 29,157 | – | 98,956 | (353,090) | | As at June 30, 2021 | 15,150 | 1,259,939 | (52,040) | 2,951 | (80,341) | 75,970 | 40,275 | 634,351 | 1,896,255 | Condensed Consolidated Statement of Cash Flows Net cash generated from operating activities decreased in 2021, while net cash from investing activities turned positive, and financing activities resulted in a net outflow Condensed Consolidated Statement of Cash Flows (For the six months ended June 30) | Indicator | 2021 (RMB '000) | 2020 (RMB '000) | | :--- | :--- | :--- | | Net cash generated from operating activities | 363,012 | 511,025 | | Net cash generated from/(used in) investing activities | 2,887 | (130,930) | | Net cash used in financing activities | (204,210) | (199,402) | | Net increase in cash and cash equivalents | 161,689 | 180,693 | | Cash and cash equivalents at beginning of period | 1,191,173 | 808,766 | | Effect of exchange rate changes | (7,929) | 18,106 | | Cash and cash equivalents at end of period | 1,344,933 | 1,007,565 | Notes to the Condensed Consolidated Financial Statements This section provides detailed explanations and disclosures for the condensed consolidated financial statements, covering accounting policies, fair value measurements, segment information, and other financial items 1. Basis of Preparation The condensed consolidated financial statements are prepared in accordance with HKAS 34 and HKEX Listing Rules, consistent with the 2020 annual financial statements - The condensed consolidated financial statements are prepared in accordance with Hong Kong Accounting Standard 34 'Interim Financial Reporting' issued by the HKICPA and the applicable disclosure requirements of the HKEX Listing Rules[20] - The condensed consolidated financial statements should be read in conjunction with the 2020 annual financial statements, with consistent accounting policies and methods of computation applied[20] 2. Adoption of New and Revised Hong Kong Financial Reporting Standards The Group adopted all new and revised HKFRSs effective January 1, 2021, with no significant impact on the consolidated financial statements, and no early adoption of upcoming standards - The Group adopted all new and revised HKFRSs relevant to its operations and effective for the accounting year beginning January 1, 2021, which had no significant impact on the Group's consolidated financial statements[21] - The Group did not early adopt any new or revised standards in preparing these condensed consolidated interim financial statements[21] 3. Fair Value Measurement The carrying amounts of the Group's financial assets and liabilities approximate their fair values, with fair value measurements categorized into three levels; derivative financial instruments significantly increased - The carrying amounts of the Group's financial assets and liabilities in the condensed consolidated statement of financial position approximate their respective fair values[23] - Fair value measurements are categorized into three levels based on valuation input data: Level 1 (quoted prices in active markets), Level 2 (observable input data), and Level 3 (unobservable input data)[23][24] Fair Value of Derivative Instruments (Forward Exchange Contracts) | Item | June 30, 2021 (RMB '000) | December 31, 2020 (RMB '000) | | :--- | :--- | :--- | | Derivative instruments - Forward exchange contracts (assets) | 8,591 | 2,182 | 4. Segment Information The Group operates in two main segments: oil and gas, and new energy and petrochemicals; the oil and gas segment contributed most of the revenue and profit, while the new energy segment saw significant revenue growth but incurred a loss - The Group comprises two main business segments: equipment engineering and integrated services for the oil and gas industry, and equipment engineering and integrated services for the new energy and petrochemical industry[28] Segment Revenue and Profit (For the six months ended June 30) | Segment | 2021 External Revenue (RMB '000) | 2021 Segment Profit/(Loss) (RMB '000) | 2020 External Revenue (RMB '000) | 2020 Segment Profit/(Loss) (RMB '000) | | :--- | :--- | :--- | :--- | :--- | | Oil and gas segment | 1,484,698 | 309,570 | 1,287,834 | 179,091 | | New energy and petrochemical segment | 546,147 | (46,185) | 516 | (216) | | Others | 11,297 | 120 | 7,994 | (1,379) | | Consolidated Total | 2,042,142 | 263,505 | 1,296,344 | 177,496 | Segment Profit Reconciliation (For the six months ended June 30) | Item | 2021 (RMB '000) | 2020 (RMB '000) | | :--- | :--- | :--- | | Total profit from reportable segments | 263,505 | 177,496 | | Unallocated amounts: Other income | 25,862 | 16,281 | | Unallocated amounts: Finance costs | (14,633) | (19,432) | | Unallocated amounts: Other operating expenses | (150,085) | (137,062) | | Consolidated profit before tax for the period | 124,649 | 37,283 | 5. Revenue The Group's revenue primarily derives from contracts with customers, categorized by business segment and timing of recognition; a significant portion of opening contract liabilities was recognized as revenue - The Group's revenue is generated from contracts with customers, primarily from equipment engineering and integrated services for the oil and gas industry and the new energy and petrochemical industry[33][35] Revenue by Business Segment and Timing of Recognition (For the six months ended June 30) | Timing of Revenue Recognition | Oil and Gas (2021 RMB '000) | New Energy and Petrochemical (2021 RMB '000) | Others (2021 RMB '000) | Total (2021 RMB '000) | | :--- | :--- | :--- | :--- | :--- | | Goods and services transferred at a point in time | 14,121 | 2,528 | – | 16,649 | | Goods and services transferred over time | 1,470,577 | 543,619 | 11,297 | 2,025,493 | | Total | 1,484,698 | 546,147 | 11,297 | 2,042,142 | - An amount of approximately RMB424,193,000 recognized in contract liabilities at the beginning of the period was recognized as revenue for the six months ended June 30, 2021[37] 6. Other Income Total other income for the first half of 2021 was RMB25,862 thousand, mainly from interest income, government grants, fair value gains on derivative financial instruments, and compensation income Composition of Other Income (For the six months ended June 30) | Item | 2021 (RMB '000) | 2020 (RMB '000) | | :--- | :--- | :--- | | Gain on disposal of property, plant and equipment | 324 | – | | Interest income | 4,567 | 5,388 | | Government grants recognized | 9,914 | 10,621 | | Fair value gain on derivative financial instruments | 1,526 | – | | Compensation income | 9,086 | – | | Miscellaneous income | 445 | 272 | | Total | 25,862 | 16,281 | - Of the recognized government grants, approximately RMB4,477,000 was compensation for expenses or losses incurred, and approximately RMB5,437,000 related to certain research and development activities[39] 7. Other Operating Expenses Total other operating expenses for the first half of 2021 amounted to RMB11,739 thousand, primarily comprising net exchange losses, inventory provisions, and impairment losses on property, plant, and equipment Composition of Other Operating Expenses (For the six months ended June 30) | Item | 2021 (RMB '000) | 2020 (RMB '000) | | :--- | :--- | :--- | | Net exchange losses | 4,585 | 6,557 | | Fair value loss on derivative financial instruments | – | 3,368 | | Provision for inventories | 1,381 | 2,226 | | Impairment loss on property, plant and equipment | 5,522 | – | | Others | 251 | 1,366 | | Total | 11,739 | 13,517 | 8. Finance Costs Total finance costs for the first half of 2021 were RMB14,633 thousand, mainly consisting of interest expense on bank loans and other charges, showing a decrease from the prior period Composition of Finance Costs (For the six months ended June 30) | Item | 2021 (RMB '000) | 2020 (RMB '000) | | :--- | :--- | :--- | | Interest expense on bank borrowings | 11,437 | 16,119 | | Others | 3,196 | 3,313 | | Total | 14,633 | 19,432 | 9. Dividends The Group paid a 2020 interim special dividend of RMB204,930 thousand in the first half of 2021, and no interim dividends were proposed for the periods ended June 30, 2021, and 2020 Dividends Paid (For the six months ended June 30) | Item | 2021 (RMB '000) | 2020 (RMB '000) | | :--- | :--- | :--- | | 2020 interim special dividend — HKD0.15 per share | 204,930 | – | - No interim dividends were proposed for the six months ended June 30, 2021, and June 30, 2020[44] - The final dividend for the year ended December 31, 2020, of HKD0.22 per share, was approved by shareholders and paid on July 23, 2021[43] 10. Income Tax Expense Income tax expense for the first half of 2021 was RMB26,348 thousand, primarily for China corporate income tax provision, showing an increase from the prior period, with no Hong Kong profits tax provision Income Tax Expense (For the six months ended June 30) | Item | 2021 (RMB '000) | 2020 (RMB '000) | | :--- | :--- | :--- | | Current tax — Provision for China corporate income tax for the period | 44,317 | 22,262 | | Current tax — Over-provision in prior periods | (827) | (5) | | Deferred tax | (17,142) | (10,337) | | Total | 26,348 | 11,920 | - The Group generated no assessable profits in Hong Kong, thus no provision for Hong Kong profits tax was made for the six months ended June 30, 2020, and 2021[48] 11. Profit for the Period The Group's profit for the period is accounted for after deducting or including various items, such as inventory provisions, impairment reversals on trade receivables, impairment losses on property, plant, and equipment, and directors' and management's emoluments Profit for the Period Adjustment Items (For the six months ended June 30) | Item | 2021 (RMB '000) | 2020 (RMB '000) | | :--- | :--- | :--- | | Provision for inventories | 1,381 | 2,226 | | Impairment (reversal)/loss on trade and other receivables | (34,475) | 26,673 | | Gain on disposal of property, plant and equipment | (324) | – | | Impairment (reversal)/loss on contract assets | (504) | 164 | | Impairment loss on property, plant and equipment | 5,522 | – | | Directors' emoluments — Directors | 180 | 180 | | Directors' emoluments — Management | 6,237 | 3,215 | | Directors' emoluments — Share-based payment expense | 1,008 | 570 | 12. Earnings Per Share Basic earnings per share for the first half of 2021 were RMB5.966 cents, and diluted earnings per share were RMB5.901 cents, both showing significant growth from the prior period, with diluted earnings considering the potential impact of share options Earnings Per Share Calculation Data (For the six months ended June 30) | Indicator | 2021 (RMB '000/share) | 2020 (RMB '000/share) | | :--- | :--- | :--- | | Profit for the period attributable to owners of the Company for basic and diluted EPS calculation | 98,301 | 25,363 | | Weighted average number of ordinary shares for basic EPS calculation | 1,647,650,864 | 1,634,016,389 | | Effect of potential dilutive ordinary shares arising from share options | 18,224,805 | – | | Weighted average number of ordinary shares for diluted EPS calculation | 1,665,875,669 | 1,634,016,389 | - As at June 30, 2020, the Company's outstanding share options had no dilutive effect as their exercise price was higher than the average market price per share[52] 13. Property, Plant and Equipment The Group acquired property, plant, and equipment amounting to approximately RMB42,046 thousand for the six months ended June 30, 2021, a decrease from the prior period Additions to Property, Plant and Equipment (For the six months ended June 30) | Item | 2021 (RMB '000) | 2020 (RMB '000) | | :--- | :--- | :--- | | Additions to property, plant and equipment | 42,046 | 58,897 | 14. Right-of-use Assets In the first half of 2021, the Group renewed a 16-month lease for property and warehouse use, recognizing RMB1,048 thousand in right-of-use assets and lease liabilities - For the six months ended June 30, 2021, the Group renewed an existing lease for property and warehouse use for a period of 16 months[54] - Upon commencement of the renewed lease, the Group recognized RMB1,048,000 in right-of-use assets and lease liabilities[54] 15. Trade and Bills Receivables As of June 30, 2021, total trade and bills receivables were RMB579,261 thousand, a decrease from the end of 2020, with credit terms typically ranging from 30 to 90 days and quality retention periods of 12 to 24 months Trade and Bills Receivables (As at June 30, 2021) | Item | June 30, 2021 (RMB '000) | December 31, 2020 (RMB '000) | | :--- | :--- | :--- | | Trade receivables | 697,748 | 857,630 | | Provision for doubtful debts | (119,381) | (153,854) | | Bills receivables | 894 | 19,062 | | Total | 579,261 | 722,838 | - The Group's credit terms with customers generally range from 30 to 90 days, with quality retention periods typically 12 to 24 months after completion of engineering and other services[58] - As at June 30, 2021, the Group obtained guarantees from a shareholder for individual trade receivables balances of approximately RMB102,794,000[58] Ageing Analysis of Trade Receivables (As at June 30, 2021) | Ageing | June 30, 2021 (RMB '000) | December 31, 2020 (RMB '000) | | :--- | :--- | :--- | | Invoiced: 0 to 30 days | 310,464 | 399,622 | | Invoiced: 31 to 90 days | 27,808 | 23,548 | | Invoiced: 91 to 365 days | 33,683 | 59,730 | | Invoiced: Over 365 days | 132,897 | 184,123 | | Unbilled | 192,896 | 190,607 | | Total | 697,748 | 857,630 | 16. Trade and Bills Payables As of June 30, 2021, total trade and bills payables were RMB1,035,035 thousand, a slight decrease from the end of 2020, with the largest portion in the 0-30 day ageing category Trade and Bills Payables (As at June 30, 2021) | Item | June 30, 2021 (RMB '000) | December 31, 2020 (RMB '000) | | :--- | :--- | :--- | | Trade payables | 1,026,859 | 980,751 | | Bills payables | 8,176 | 75,369 | | Total | 1,035,035 | 1,056,120 | Ageing Analysis of Trade Payables (As at June 30, 2021) | Ageing | June 30, 2021 (RMB '000) | December 31, 2020 (RMB '000) | | :--- | :--- | :--- | | 0 to 30 days | 612,436 | 816,354 | | 31 to 90 days | 92,791 | 54,711 | | 91 to 365 days | 255,615 | 15,376 | | Over 365 days | 66,017 | 94,310 | | Total | 1,026,859 | 980,751 | 17. Share Capital As of June 30, 2021, the Company's issued share capital comprised 1,681,306,389 ordinary shares, an increase from the end of 2020, primarily due to the issuance of 47,290,000 new shares from the exercise of share options Summary of Changes in Issued Share Capital (As at June 30, 2021) | Item | Number of Shares | Amount (HKD '000) | Equivalent to (RMB '000) | | :--- | :--- | :--- | :--- | | As at January 1, 2020 and December 31, 2020 | 1,634,016,389 | 16,341 | 14,755 | | Exercise of share options | 47,290,000 | 472 | 395 | | As at June 30, 2021 | 1,681,306,389 | 16,813 | 15,150 | - Share option holders exercised options to subscribe for a total of 47,290,000 ordinary shares of the Company for a total consideration of approximately HKD30,819,000 (approximately RMB25,741,000)[65] 18. Related Party Transactions The Group engaged in several related party transactions during the period, including receiving income from a shareholder's subsidiary and a shareholder, and paying lease liabilities and short-term lease-related fees to associated companies Related Party Transactions (For the six months ended June 30) | Item | 2021 (RMB '000) | 2020 (RMB '000) | | :--- | :--- | :--- | | Income received from/receivable from a subsidiary of a shareholder | 2,372 | 1,654 | | Income received from/receivable from a shareholder | 2,457 | 73,862 | | Lease liabilities paid to associated companies | 941 | – | | Short-term lease related fees with a shareholder | 18 | – | - Lease liabilities paid to associated companies involved a subsidiary of a wholly-owned company of Mr. Wang Lishan, a director of the Group[66] 19. Seasonality The Group's revenue from the oil and gas and new energy and petrochemical industries is subject to seasonal factors, as well as the number, scale, and progress of projects, making it difficult to predict seasonal trends and their impact on financial performance - The Group's revenue from the oil and gas industry and the new energy and petrochemical industry is affected by seasonal factors[67] - The Group's financial performance is influenced by the number and scale of projects secured through bidding and the progress of their completion[67] - The Group cannot predict the trend of seasonal effects and their impact on its financial performance[67] 20. Capital Commitments As of June 30, 2021, the Group's contracted but unprovided capital commitments for property, plant, and equipment amounted to RMB9,674 thousand, a decrease from the end of 2020 Capital Commitments (As at June 30, 2021) | Item | June 30, 2021 (RMB '000) | December 31, 2020 (RMB '000) | | :--- | :--- | :--- | | Contracted but not provided for property, plant and equipment | 9,674 | 19,636 | 21. Contingent Liabilities As of June 30, 2021, the Group had no significant contingent liabilities - As at June 30, 2021, the Group had no significant contingent liabilities[70] 22. Approval of Financial Statements The Board of Directors approved and authorized the condensed financial statements for issue on August 25, 2021 - The Board of Directors approved and authorized these condensed financial statements for issue on August 25, 2021[71] Management Discussion and Analysis This section provides an overview of the Group's operational and financial performance for the period, including a review of key financial metrics and an outlook on future strategies and market conditions 1. Review In the first half of 2021, the Group's Penglai and Zhuhai facilities experienced high workloads, successfully delivering major projects, with total outstanding contract value of approximately RMB3 billion, and plans for further facility upgrades - In the first half of 2021, the Group's Penglai and Zhuhai facilities experienced full workloads, showing significant overall growth compared to the same period last year[72] - The core module construction project for the North American GCGV natural gas chemical plant undertaken by the Penglai facility was successfully completed in March this year, receiving high recognition from the client[72] - The Zhuhai facility successfully delivered the first vessel of 50 offshore wind power equipment sets for a European offshore wind farm in mid-June 2021[73] - As at June 30, 2021, the Group's total outstanding contract value was approximately RMB3 billion[76] - The Group initiated the Zhuhai facility's Phase II wharf project in the first half, completing a preliminary feasibility report to enhance future business acquisition and product delivery capabilities[75] Revenue Revenue reached RMB2,042,142 thousand in the first half of 2021, a 57.53% year-on-year increase, with oil and gas business revenue growing by 15.29% and new energy and petrochemicals revenue significantly increasing by 105,742% due to offshore wind power projects Revenue by Business Segment Analysis (For the six months ended June 30) | Product/Service | 2021 (RMB '000) | % of Total Revenue | 2020 (RMB '000) | % of Total Revenue | | :--- | :--- | :--- | :--- | :--- | | Equipment engineering and integrated services for the oil and gas industry | 1,484,698 | 73 | 1,287,834 | 99 | | Equipment engineering and integrated services for the new energy and petrochemical industry | 546,147 | 26 | 516 | 0 | | Others | 11,297 | 1 | 7,994 | 1 | | Total | 2,042,142 | 100 | 1,296,344 | 100 | - Revenue from new energy and petrochemical equipment engineering and integrated services increased by approximately 105,742% or approximately RMB545,631,000 year-on-year, primarily due to contributions from offshore wind power equipment projects at the Zhuhai facility[77] Cost of Sales and Services Cost of sales and services was approximately RMB1,778,637 thousand, a 58.97% year-on-year increase, mainly due to a significant increase in workload, with direct costs accounting for 91.93% and growing by 67.10% - During the reporting period, the Group's cost of sales and services was approximately RMB1,778,637,000, an increase of approximately RMB659,789,000 or 58.97% compared to the same period last year[80] - Direct costs amounted to approximately RMB1,635,045,000, accounting for 91.93% of total cost of sales and services, an increase of approximately RMB656,570,000 or 67.10% from approximately RMB978,475,000 in the prior period[80] Gross Profit Total gross profit for the reporting period was approximately RMB263,505 thousand, a 48.46% year-on-year increase, but the overall gross profit margin decreased to 12.90% due to lower margins on some projects - During the reporting period, the Group's total gross profit was approximately RMB263,505,000, an increase of approximately RMB86,009,000 or 48.46% compared to approximately RMB177,496,000 in the prior period[81] - The overall gross profit margin decreased from 13.69% in the prior period to 12.90%, primarily due to lower gross margins recorded on some projects undertaken in the first half of this year[81] Gross Profit by Business Segment Analysis (For the six months ended June 30) | Product/Service | 2021 Gross Profit (RMB '000) | 2021 Gross Profit Margin (%) | 2020 Gross Profit (RMB '000) | 2020 Gross Profit Margin (%) | | :--- | :--- | :--- | :--- | :--- | | Equipment engineering and integrated services for the oil and gas industry | 309,570 | 21 | 179,091 | 14 | | Equipment engineering and integrated services for the new energy and petrochemical industry | (46,185) | (8) | (216) | (42) | | Others | 120 | 1 | (1,379) | (17) | | Total | 263,505 | 100 | 177,496 | 100 | Other Income Other income for the first half of 2021 was approximately RMB25,862 thousand, mainly comprising interest income, fair value gains on forward exchange contracts, and government grants - The Group's other income for the first half of 2021 was approximately RMB25,862,000[84] - It primarily comprised interest income, fair value gains on forward exchange contracts, and government grants[84] Administrative and Other Operating Expenses Total administrative and other operating expenses increased by approximately 68% to RMB185,064 thousand, mainly due to higher share option expenses and staff remuneration - Total administrative and other operating expenses increased by approximately 68% or approximately RMB74,839,000 year-on-year to approximately RMB185,064,000[85] - Compared to last year, expenses such as share option costs and staff remuneration increased this year[85] Finance Costs Finance costs for the reporting period were approximately RMB14,633 thousand, primarily consisting of bank interest expense of RMB11,437 thousand and other charges of RMB3,196 thousand - During this reporting period, the Group's finance costs were approximately RMB14,633,000[86] - It primarily comprised bank interest expense of approximately RMB11,437,000 and other charges such as bank handling fees of approximately RMB3,196,000[86] Profit for the Period Attributable to Owners of the Company Profit attributable to owners of the Company for the first half of 2021 was approximately RMB98,301 thousand, a significant increase of approximately 288% year-on-year, with basic earnings per share of approximately RMB5.966 cents - In the first half of 2021, profit attributable to owners of the Company was approximately RMB98,301,000, a significant increase of approximately 288% or approximately RMB72,938,000 year-on-year[87] - Basic earnings per share attributable to owners of the Company was approximately RMB5.966 cents[87] Liquidity and Financial Resources As of June 30, 2021, the Group had cash and bank deposits of approximately RMB1,344,933 thousand, net cash inflow from operating activities of RMB363,012 thousand, available bank credit facilities of RMB702,470 thousand, and bank guarantees under engineering contracts of RMB730,909 thousand Liquidity and Cash Flows (As at June 30) | Item | June 30, 2021 (RMB '000) | December 31, 2020 (RMB '000) | | :--- | :--- | :--- | | Cash plus bank deposits | 1,344,933 | 1,191,173 | | Net cash inflow from operating activities | 363,012 | - | | Net cash inflow from investing activities | 2,887 | - | | Net cash outflow from financing activities | 204,210 | - | - As at June 30, 2021, the Group had available bank credit facilities of approximately RMB702,470,000 (December 31, 2020: RMB570,620,000)[88] - As at June 30, 2021, the Group obtained bank guarantees under performance bonds for engineering contracts of approximately RMB730,909,000 (December 31, 2020: RMB1,048,565,000)[88] Capital Structure As of June 30, 2021, the Company's share capital consisted of 1,681,306,389 ordinary shares, and net assets were approximately RMB1,896,255 thousand, a decrease from the end of 2020 - As at June 30, 2021, the Company's share capital comprised 1,681,306,389 ordinary shares (December 31, 2020: 1,634,016,389 ordinary shares)[90] - As at June 30, 2021, the Group's net assets were approximately RMB1,896,255,000 (December 31, 2020: RMB2,249,345,000)[90] Significant Investments The Group further improved equipment and facilities at its Penglai and Zhuhai sites in the first half of the year and will continue to focus investments on the Zhuhai site to meet current and potential project demands - In the first half of this year, the Group further improved equipment and facilities at its Penglai and Zhuhai sites[91] - The Group will continue to focus investments on the Zhuhai site to improve equipment and facilities, meeting the demands of existing and potential projects[91] Foreign Exchange Risk Operating primarily in China with RMB as the functional currency, the Group faces foreign exchange rate fluctuation risks between RMB and other currencies like USD and EUR in its international business, which it manages by reducing foreign currency assets and considering exchange rate risks in contracts - The Group's primary operating locations are in China, and the functional currency of its main operating subsidiaries is RMB[92] - Fluctuations in the exchange rates of RMB against other currencies such as USD and EUR pose foreign exchange risks to the Group[92] - The Group will endeavor to reduce the amount of assets denominated in USD, EUR, and other currencies, conduct rolling forecasts of exchange rates, and consider potential exchange rate risks in business contracts[92] Pledge of the Group's Assets As of June 30, 2021, the Group had approximately RMB112,291 thousand in bank deposits pledged as collateral for bank loans, guarantees, letters of credit, and bank acceptance bills - As at June 30, 2021, the Group had bank deposits of approximately RMB112,291,000 (December 31, 2020: RMB136,073,000) pledged as collateral for bank loans, issued guarantees, letters of credit, and bank acceptance bills[93] Contingent Liabilities As of June 30, 2021, the Group had no significant contingent liabilities - As at June 30, 2021, the Group had no significant contingent liabilities[94] Capital Management The Group aims to maintain operational capability and maximize shareholder returns by optimizing its gearing ratio, which increased to 26.42% as of June 30, 2021, primarily due to a decrease in total equity from dividend payments - The Group's primary capital management objective is to maintain its ability to operate as a going concern and maximize shareholder returns by optimizing its gearing ratio[95] Gearing Ratio (As at June 30, 2021) | Item | June 30, 2021 (RMB '000) | December 31, 2020 (RMB '000) | | :--- | :--- | :--- | | Total bank borrowings | 500,950 | 519,700 | | Total equity | 1,896,255 | 2,249,345 | | Gearing ratio | 26.42% | 23.10% | - The increase in the gearing ratio during the period was primarily due to a decrease in total equity resulting from the payment of an interim special dividend and the declaration of a final dividend for 2020[98] Employees Information and Remuneration Policy As of June 30, 2021, the Group had 3,547 employees, with remuneration based on position, responsibilities, and performance, including social insurance and housing provident fund/MPF contributions, and a focus on employee development through on-the-job training Number of Employees (As at June 30, 2021) | Category | June 30, 2021 (persons) | December 31, 2020 (persons) | | :--- | :--- | :--- | | Total employees | 3,547 | 3,568 | | Management and technical staff | 1,555 | 1,625 | | Skilled workers | 1,992 | 1,943 | - The Group determines employee remuneration and incentives based on industry standards, job position, responsibilities, and performance[99] - The Group contributes to social insurance (pension, medical, unemployment, work injury) and housing provident funds for employees in mainland China, and MPF for Hong Kong employees as required[99] 2. Outlook Looking ahead, rising international oil prices are driving a recovery in oil and gas market demand, alongside strong demand in the offshore wind power equipment market; the Group will pursue large-scale construction projects, improve management, optimize operations, control costs, upgrade the Zhuhai facility, and seek new business opportunities - Steady increases in international oil prices are driving a recovery in oil and gas market demand, stimulating the marine engineering market, such as FPSO construction, with a significant increase expected in FPSO topside module construction opportunities[101] - The natural gas facilities and offshore wind power equipment markets are also expected to maintain strong demand[101] - The Group will further improve its management structure, optimize operations, control costs, and vigorously advance the implementation of existing projects[101] - The Group will promote the upgrade and construction of the Zhuhai facility to enhance its capability to undertake larger projects, while also seeking and researching new business opportunities, including acquisitions, to expand its business scale[101] Directors' Report and Corporate Governance This section details the Board's activities, including dividend policy, use of proceeds, share option schemes, directors' and major shareholders' interests, and compliance with corporate governance standards Interim Dividend The Board of Directors does not recommend the payment of an interim dividend for the six months ended June 30, 2021 - The Board of Directors does not recommend the payment of an interim dividend for the six months ended June 30, 2021[103] Use of Proceeds The Company raised approximately HKD962 million net proceeds from a subscription in 2017; as of June 30, 2021, most funds were used as planned for oil and gas equipment project working capital and general working capital, with a portion for Zhuhai business enhancement and facility expansion, and the remaining balance to be used in 2021-2022 based on business needs - The net proceeds from the subscription amounted to approximately HKD962,000,000[107] Use of Proceeds (As at June 30, 2021) | Planned Use | Use of Proceeds | Plan for Remaining Proceeds | | :--- | :--- | :--- | | Approximately HKD500 million for working capital related to design, procurement, installation, and construction projects of oil and gas equipment and facilities, and build-transfer projects | Fully utilized as planned | — | | Approximately HKD250 million for capital expenditures to enhance the Group's Zhuhai business and expand production equipment and office facilities | Approximately HKD166 million used for the Group's Zhuhai facility production and office facilities expenditures | The remaining approximately HKD84 million will be used for the Group's Zhuhai business production equipment and office facilities expenditures as business needs arise, with the unutilized balance expected to be used in 2021-2022 | | Approximately HKD212 million for the Group's general working capital | Fully utilized as planned | — | - Due to unfavorable market conditions in 2018 and 2019, the utilization of proceeds from the subscription was slower than originally planned, and the Group proactively slowed down some investments in the Zhuhai facility's construction[109] Share Options The Company has a share option scheme to reward contributors, with a regularly updated authorized limit and approval requirements for options granted to directors, major shareholders, or their associates; 100 million options were granted on June 10, 2021, with an estimated fair value of approximately HKD49,291 thousand - The Company's share option scheme aims to grant options to selected individuals as a reward or return for their contributions to the Group[110] - Unless approved by shareholders, the total number of shares to be issued upon exercise of all options granted under the 2016 Share Option Scheme and any other share option schemes of the Company shall not exceed 163,401,638 shares in aggregate[112] - As at the grant date of the options in 2021 (June 10, 2021), the estimated fair value of the options was approximately HKD49,291,000 (equivalent to RMB41,074,000), calculated using the binomial option pricing model[157] Details of Options Granted on June 10, 2021 | Item | Value | | :--- | :--- | | Number of options granted | 100,000,000 | | Share price on grant date | 1.43 HKD | | Expected volatility | 64.03% | | Expected term | 3 years | | Risk-free rate | 0.25% | | Expected dividend yield | 1.39% | Directors' and Chief Executive's Interests and/or Short Positions in the Shares, Underlying Shares and Debentures of the Company or any of its Associated Corporations As of June 30, 2021, several directors and key executives held interests in the Company's shares, controlled corporate interests, or share options, with Mr. Wang Lishan holding 23.61% controlled corporate interest and 1.05% beneficial ownership, and Mr. Cao Yunsheng holding 0.48% controlled corporate interest and 1.21% beneficial ownership Directors' and Chief Executive's Shareholdings (As at June 30, 2021) | Director Name | Capacity | Number of Shares (L) | Approximate Percentage of Shareholding | | :--- | :--- | :--- | :--- | | Wang Lishan | Controlled corporation interest | 396,911,278 | 23.61% | | | Beneficial owner | 17,628,000 | 1.05% | | | Share options | 2,300,000 | 0.14% | | Cao Yunsheng | Controlled corporation interest | 8,000,000 | 0.48% | | | Beneficial owner | 20,360,000 | 1.21% | | | Share options | 8,840,000 | 0.53% | | Gao Zhiqiang | Share options | 4,000,000 | 0.24% | | Wang Ningsheng | Share options | 5,000,000 | 0.30% | | Liu Yunian | Beneficial owner | 2,900,000 | 0.17% | | | Share options | 3,600,000 | 0.21% | | Qi Daqing | Beneficial owner | 2,710,000 | 0.16% | | | Share options | 2,340,000 | 0.14% | | Su Yang | Beneficial owner | 1,160,000 | 0.07% | | | Share options | 2,340,000 | 0.14% | | Zheng Yimin | Beneficial owner | 1,060,000 | 0.06% | | | Share options | 2,340,000 | 0.14% | Substantial Shareholders' Interests and/or Short Positions in the Shares and Underlying Shares of the Company As of June 30, 2021, substantial shareholders included Sanju Environmental (Hong Kong) Co., Limited and its parent Beijing Sanju Environmental New Materials Co., Ltd. (both 38.16%), Xiangxing Investment Co., Ltd. and its controller Mr. Wang Lishan (both 23.61%), and Capital Pilot Limited and its controller Mr. Xiao Shuming (both 9.64%) Substantial Shareholders' Shareholdings (As at June 30, 2021) | Shareholder Name/Name | Capacity | Number of Shares (L) | Percentage of Shareholding | | :--- | :--- | :--- | :--- | | Sanju Environmental (Hong Kong) Co., Limited | Beneficial owner | 641,566,556 | 38.16% | | Beijing Sanju Environmental New Materials Co., Ltd. | Controlled corporation interest | 641,566,556 | 38.16% | | Xiangxing Investment Co., Limited | Beneficial owner | 396,911,278 | 23.61% | | Wang Lishan | Controlled corporation interest | 396,911,278 | 23.61% | | | Beneficial owner | 17,628,000 | 1.05% | | | Share options | 2,300,000 | 0.14% | | Capital Pilot Limited | Person with security interest in shares | 161,995,555 | 9.64% | | Xiao Shuming | Controlled corporation interest | 161,995,555 | 9.64% | | Kang Minzhu | Spouse's interest | 161,995,555 | 9.64% | | Lu Chunyan | Controlled corporation interest | 161,995,555 | 9.64% | | Jinhua Xin (Hong Kong) Technology Co., Limited | Beneficial owner | 161,995,555 | 9.64% | Directors' Right to Acquire Shares or Debentures Except for options granted to directors under the Company's share option scheme in previous years, no directors or chief executives held, were granted, or exercised any other rights to subscribe for shares, warrants, or debentures of the Company or its associated corporations during the period - Except for options granted to directors under the Company's share option scheme in previous years, no directors or chief executives (including their spouses and children under 18) held, were granted, or exercised any other rights to subscribe for shares (or warrants or debentures, if applicable) of the Company, any of its specific businesses, or its associated corporations during the period[172] Purchase, Sale or Redemption of the Company's Listed Securities 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 during the reporting period[173] Corporate Governance The Company adopted the HKEX Corporate Governance Code, striving for high standards of corporate governance, and complied with the code during the reporting period, except for submitting internal monthly financial reports to certain executive directors rather than all Board members - The Company adopted the Corporate Governance Code set out in Appendix 14 of the HKEX Listing Rules, committed to maintaining high standards of corporate governance to enhance corporate transparency and protect shareholders' interests[174] - During this reporting period, the Company complied with the Corporate Governance Code, except for submitting internal monthly financial reports to executive directors Mr. Cao Yunsheng, Mr. Wang Ningsheng, and Mr. Liu Yunian (who are responsible for monitoring the Company's financial position) instead of all Board members[174] Directors' Securities Transactions The Company's Board adopted the Model Code for Securities Transactions by Directors of Listed Issuers; Independent Non-executive Director Mr. Zheng Yimin sold 550,000 shares during the period without prior written notification and confirmation from the Chairman, for which the Company provided explanation and notification - The Company's Board of Directors adopted the Model Code for Securities Transactions by Directors of Listed Issuers set out in Appendix 10 of the HKEX Listing Rules[175] - Independent Non-executive Director Mr. Zheng Yimin sold a total of 550,000 shares of the Company on June 29, 2021, and July 6, 2021, without prior written notification to and confirmation from the Chairman[175] Audit Committee The Audit Committee, composed of four independent non-executive directors, reviewed the Group's unaudited interim financial information for the six months ended June 30, 2021, confirming its compliance with applicable accounting standards, Listing Rules, and legal requirements, with appropriate disclosures - The Audit Committee, comprising four independent non-executive directors, is primarily responsible for reviewing the Company's financial information and overseeing the Group's financial reporting system, risk management, and internal control systems[176] - The Audit Committee reviewed the Group's unaudited interim financial information for the six months ended June 30, 2021, deeming it compliant with applicable accounting standards, Listing Rules, and legal requirements, with appropriate disclosures made[176] Others The Company complied with Listing Rules regarding the appointment of independent non-executive directors, including four such directors, one of whom is a financial management expert - The Company complied with Listing Rules 3.10(1), 3.10(2), and 3.10A, appointing four independent non-executive directors, including one financial management expert[177] Company Information The Company's shares are listed on the Main Board of the HKEX under stock code 03303 since September 21, 2006, with 1,681,306,389 ordinary shares issued and a diverse Board of Directors - The Company's shares are listed on the Main Board of The Stock Exchange of Hong Kong Limited under stock code 03303, with a listing date of September 21, 2006[179] - The number of issued ordinary shares is 1,681,306,389[179] - Board members include Executive Directors Wang Lishan (Chairman), Liu Lei (Vice Chairman), Cao Yunsheng (CEO), Gao Zhiqiang (President), Wang Ningsheng, Liu Yunian, and Independent Non-executive Directors Su Yang, Qi Daqing, Zheng Yimin, Tam Kin Yip, and Leung Fung Yee[179]