建业建荣(01556) - 2024 - 中期业绩

Condensed Consolidated Financial Statements This section presents the unaudited condensed consolidated financial statements for the six months ended June 30, 2024, comparing them with 2023 data Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income For the six months ended June 30, 2024, revenue grew 7.9% to HK$1,102,053 thousand, gross profit rose 17.6%, and profit for the period increased 26.2% to HK$55,197 thousand Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income | Indicator | 2024 (HK$ thousand) | 2023 (HK$ thousand) | Change (%) | | :--- | :--- | :--- | :--- | | Revenue | 1,102,053 | 1,021,491 | 7.9% | | Cost of construction | (927,571) | (873,179) | 6.2% | | Gross profit | 174,482 | 148,312 | 17.6% | | Other income and gains | 10,695 | 6,543 | 63.5% | | Administrative expenses | (119,809) | (102,071) | 17.4% | | Finance costs | (56) | (492) | -88.6% | | Profit before tax | 65,312 | 52,292 | 24.9% | | Income tax expense | (10,115) | (8,562) | 18.1% | | Profit and total comprehensive income for the period | 55,197 | 43,730 | 26.2% | | Basic and diluted earnings per share | 3.68 HK cents | 2.92 HK cents | 26.0% | Condensed Consolidated Statement of Financial Position As of June 30, 2024, total non-current assets were HK$489,940 thousand, total current assets HK$1,432,210 thousand, and net assets HK$725,403 thousand, with cash and cash equivalents up 29.9% Condensed Consolidated Statement of Financial Position | Indicator | June 30, 2024 (HK$ thousand) | December 31, 2023 (HK$ thousand) | Change (%) | | :--- | :--- | :--- | :--- | | Total non-current assets | 489,940 | 480,063 | 2.1% | | Total current assets | 1,432,210 | 1,276,689 | 12.2% | | Total current liabilities | 1,164,433 | 993,140 | 17.2% | | Net current assets | 267,777 | 283,549 | -5.6% | | Net assets | 725,403 | 730,206 | -0.7% | | Cash and cash equivalents | 736,443 | 566,535 | 29.9% | Notes to the Condensed Consolidated Interim Financial Statements This section details notes to the condensed consolidated interim financial statements for the six months ended June 30, 2024, covering company information, accounting policies, segment data, revenue, profit before tax, finance costs, income tax, EPS, dividends, PPE, trade receivables, and payables 1. Company Information The Company is a Bermuda-incorporated investment holding company, with subsidiaries primarily engaged in foundation construction, drilling, and site investigation in Hong Kong and overseas - The Company is an investment holding company, with its shares listed on the Main Board of the Hong Kong Stock Exchange[5] - Its principal activities include foundation construction and ancillary services, and drilling and site investigation works, serving public and private sector organizations in Hong Kong and overseas[5] 2. Basis of Preparation and Changes in Accounting Policies and Disclosures The unaudited condensed consolidated interim financial statements adhere to HKAS 34 and Listing Rules, with consistent accounting policies and no significant impact from new standards - The financial statements are prepared in accordance with Hong Kong Accounting Standard 34 Interim Financial Reporting and the applicable disclosure requirements of Appendix D2 to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited[6] - The accounting policies used in preparing the unaudited condensed consolidated interim financial statements are consistent with those followed in the preparation of the Group’s annual financial statements for the year ended December 31, 2023[6] - The newly adopted revised accounting standards have no significant impact on the Group's performance and financial position[6] 3. Segment Information The Group operates in Foundation and Drilling Divisions; H1 2024 external sales were HK$805,846 thousand for Foundation and HK$296,207 thousand for Drilling, with a combined segment result of HK$66,930 thousand - The Group's business is divided into two reportable operating segments: foundation construction and ancillary services (Foundation Division) and drilling and site investigation (Drilling Division)[7] Segment Information | Segment | Sales to external customers (HK$ thousand) | Inter-segment sales (HK$ thousand) | Segment result (HK$ thousand) | | :--- | :--- | :--- | :--- | | Foundation construction and ancillary services | 805,846 | – | 42,027 | | Drilling and site investigation | 296,207 | 99,000 | 24,903 | | Total | 1,102,053 | 99,000 | 66,930 | - As of June 30, 2024, the Foundation Division's segment assets were HK$1,536,459 thousand, and the Drilling Division's were HK$384,073 thousand[8] 4. Revenue, Other Income and Gains H1 2024 revenue from customer contracts was HK$1,102,053 thousand, mainly from construction services, while other income and gains rose to HK$10,695 thousand, driven by bank interest and government grants Revenue by Service Type | Service Type | Foundation Construction and Ancillary Services (HK$ thousand) | Drilling and Site Investigation (HK$ thousand) | Total (HK$ thousand) | | :--- | :--- | :--- | :--- | | Construction services | 805,846 | 296,207 | 1,102,053 | Other Income and Gains | Other Income and Gains Item | 2024 (HK$ thousand) | 2023 (HK$ thousand) | | :--- | :--- | :--- | | Bank interest income | 9,467 | 5,929 | | Government grants | 1,218 | – | | Exchange gains | – | 411 | | Others | 10 | 203 | | Total | 10,695 | 6,543 | - Government grants primarily refer to subsidies from the Construction Innovation and Technology Fund of the Hong Kong Government, with no unfulfilled conditions or contingencies attached[11] 5. Profit Before Tax Group profit before tax was HK$65,312 thousand, after deducting depreciation of property, plant and equipment (HK$32,963 thousand), right-of-use assets (HK$4,956 thousand), and staff welfare expenses (HK$266,509 thousand) Profit Before Tax Adjustments | Item | 2024 (HK$ thousand) | 2023 (HK$ thousand) | | :--- | :--- | :--- | | Depreciation of property, plant and equipment | 32,963 | 33,732 | | Depreciation of right-of-use assets | 4,956 | 4,406 | | Staff welfare expenses (including directors' emoluments) | 266,509 | 235,341 | | Lease payments not included in the measurement of lease liabilities | 3,011 | 2,431 | | Net foreign exchange differences | 386 | (411) | 6. Finance Costs H1 2024 finance costs were HK$56 thousand, mainly lease liability interest, a significant 88.6% decrease year-on-year Finance Costs Breakdown | Item | 2024 (HK$ thousand) | 2023 (HK$ thousand) | | :--- | :--- | :--- | | Interest on lease liabilities | 56 | – | | Imputed interest on other payables | – | 492 | | Total | 56 | 492 | 7. Income Tax H1 2024 income tax expense was HK$10,115 thousand, with the Hong Kong profits tax rate maintained at 16.5% Income Tax Expense | Item | 2024 (HK$ thousand) | 2023 (HK$ thousand) | | :--- | :--- | :--- | | Current – Hong Kong profits tax for the period | 11,670 | 11,183 | | Deferred | (1,555) | (2,621) | | Total tax expense for the period | 10,115 | 8,562 | - Hong Kong profits tax is provided at a rate of 16.5%, consistent with 2023[14] 8. Earnings Per Share Attributable to Owners of the Company H1 2024 basic earnings per share rose to 3.68 HK cents from 2.92 HK cents, with 1,500,000,000 ordinary shares issued - Basic earnings per share were 3.68 HK cents (2023: 2.92 HK cents), calculated based on profit attributable to owners of the Company of HK$55,197,000 for the period[15] - The number of ordinary shares issued during the period was 1,500,000,000, consistent with 2023[15] - The Group had no ordinary shares with potential dilutive effects issued during the two periods ended June 30, 2024 and 2023[15] 9. Dividends The Board recommended no interim dividend for H1 2024; the 2023 final and special dividends of 2.0 HK cents each were paid on July 11, 2024 - The Board recommended no interim dividend for the six months ended June 30, 2024 (2023: Nil)[16] - The final dividend of 2.0 HK cents per ordinary share and a special dividend of 2.0 HK cents per ordinary share for the year ended December 31, 2023, were paid on July 11, 2024[16] 10. Property, Plant and Equipment H1 2024 property, plant and equipment acquisitions totaled HK$39,143 thousand, a decrease from HK$72,870 thousand in the prior year - For the six months ended June 30, 2024, the Group acquired property, plant and equipment at a cost of HK$39,143 thousand (2023: HK$72,870 thousand)[17] 11. Trade Receivables Net trade receivables decreased to HK$233,556 thousand as of June 30, 2024, with significant concentration risk from the largest and top five customers Trade Receivables | Indicator | June 30, 2024 (HK$ thousand) | December 31, 2023 (HK$ thousand) | | :--- | :--- | :--- | | Trade receivables | 243,014 | 307,033 | | Less: Impairment | (9,458) | (9,458) | | Net amount | 233,556 | 297,575 | - As of June 30, 2024, 31% and 61% of the Group's total trade receivables were from its largest and top five customers, respectively, indicating concentration risk[18] Trade Receivables Ageing Analysis | Ageing | June 30, 2024 (HK$ thousand) | December 31, 2023 (HK$ thousand) | | :--- | :--- | :--- | | Current to 30 days | 165,527 | 234,871 | | 31 to 60 days | 32,188 | 15,953 | | 61 to 90 days | 5,922 | 12,637 | | Over 90 days | 29,919 | 34,114 | | Total | 233,556 | 297,575 | Trade Payables and Retention Payables Total trade and retention payables decreased to HK$209,378 thousand as of June 30, 2024; trade payables are settled within 30 days, retention payables within one to two years Trade Payables and Retention Payables | Indicator | June 30, 2024 (HK$ thousand) | December 31, 2023 (HK$ thousand) | | :--- | :--- | :--- | | Trade payables | 164,145 | 200,067 | | Retention payables | 45,233 | 42,026 | | Total | 209,378 | 242,093 | - Trade payables are normally settled within 30 days, while retention payables have repayment periods ranging from one to two years[20] Management Discussion and Analysis This section analyzes the Group's H1 2024 operating results and financial position, covering key indicator changes, business operations, liquidity, employee policies, connected transactions, and future outlook Results Group turnover for H1 2024 increased by 7.9% to HK$1,102.1 million, with profit rising 26.2% to HK$55.2 million - The Group recorded a turnover of HK$1,102.1 million for the six months ended June 30, 2024 (2023: HK$1,021.5 million), representing a 7.9% increase[21] - Profit for the period amounted to HK$55.2 million (2023: HK$43.7 million), an increase of 26.2%[21] Interim Dividend The Board recommended no interim dividend for the six months ended June 30, 2024 - The Board recommended no interim dividend for the six months ended June 30, 2024 (2023: Nil)[22] Business and Operations Review The Group operates Foundation and Drilling Divisions; as of June 30, 2024, Foundation had 20 projects (HK$4,145 million contract value), and Drilling had 41 projects (HK$877 million contract value) - The Group engages in foundation construction and ancillary services (Foundation Division) and drilling and site investigation works (Drilling Division) for public and private sector organizations in Hong Kong and overseas[22] - As of June 30, 2024, the Foundation Division had 20 ongoing projects with a contract value of approximately HK$4,145 million[22] - As of June 30, 2024, the Drilling Division had 41 ongoing projects with a contract value of approximately HK$877 million[22] Revenue Group revenue grew 7.9% to HK$1,102.1 million, mainly due to a 121.9% surge in Drilling Division revenue, despite a 9.3% decline in Foundation Division revenue - The Group's revenue increased by 7.9% to HK$1,102.1 million for the reporting period, from HK$1,021.5 million in the same period last year[23] - Revenue from the Drilling Division increased by 121.9% from HK$133.5 million in the previous period to HK$296.2 million in the review period, primarily due to satisfactory progress on several site investigation main contractor contracts and sub-contractor contracts for percussion drilling undertaken by Driltech[23] - Revenue from the Foundation Division decreased by 9.3% from HK$888.0 million in the previous period to HK$805.8 million in the reporting period, mainly due to delays in certain private engineering projects caused by unsatisfactory ground conditions[23] Gross Profit and Gross Margin Group gross profit rose 17.6% to HK$174.5 million, with gross margin improving from 14.5% to 15.8%, attributed to revenue growth, project management, and cost control - The Group's total gross profit for the reporting period was HK$174.5 million, an increase of 17.6% compared to HK$148.3 million in the prior period[24] - The Group's gross margin also increased from 14.5% in the previous period to 15.8% in the reporting period[24] - The increase in gross profit was due to increased Group revenue and improved gross margin, attributed to satisfactory progress of construction projects, a professional project management team anticipating and resolving technical issues to save costs, and strict project cost control implementation[24] Other Income and Gains Other income and gains surged 63.5% to HK$10.7 million, driven by increased bank interest income (HK$5.9 million to HK$9.5 million) and a HK$1.2 million government subsidy - The Group recorded other income and gains of HK$10.7 million during the reporting period, an increase of 63.5% compared to HK$6.5 million in the same period last year[25] - The increase in other income and gains was mainly due to an increase in interest income earned by the Group from cash deposits placed with licensed banks, from HK$5.9 million in the previous period to HK$9.5 million in the reporting period[25] - Driltech received a subsidy of HK$1.2 million from the Construction Innovation and Technology Fund of the Hong Kong Government during the reporting period[25] Administrative Expenses Administrative expenses rose 17.4% to HK$119.8 million, mainly due to a HK$6.7 million increase in staff costs for talent and a HK$5.9 million rise in repair and maintenance costs - The Group's administrative expenses for the reporting period were HK$119.8 million, an increase of 17.4% compared to HK$102.1 million in the prior period[26] - The increase in administrative expenses was mainly due to an increase in staff costs of HK$6.7 million during the reporting period for recruiting and retaining competitive talent[26] - Repair and maintenance costs increased by HK$5.9 million during the review period to maintain the Group's machinery fleet and accessories[26] Profit for the Period Group profit for the period rose 26.2% to HK$55.2 million, driven by increased gross profit (HK$26.2 million) and other income (HK$4.2 million), partially offset by higher administrative expenses (HK$17.7 million) - The Group's profit for the reporting period was HK$55.2 million, an increase of 26.2% compared to HK$43.7 million in the prior period[27] - The increase in profit for the period was mainly due to an increase in gross profit from construction projects of HK$26.2 million and an increase in other income and gains of HK$4.2 million[27] - The increase in administrative expenses of HK$17.7 million during the review period partially offset the profit contribution[27] Financial Review This section reviews the Group's liquidity, financial policies, and contingent liabilities, noting increased cash to HK$736.4 million, a robust debt-free financial position, prudent policies, and HK$289.9 million in guarantees for performance bonds Liquidity and Financial Resources Unsecured cash and bank balances rose to HK$736.4 million as of June 30, 2024, driven by net cash inflows from large contracts, maintaining a robust, debt-free financial position - As of June 30, 2024, the Group's unsecured cash and bank balances were HK$736.4 million, compared to HK$566.5 million as of December 31, 2023[28] - The increase in cash and bank balances was mainly due to net cash inflows from several large foundation and site investigation contracts, after paying capital expenditure of HK$39.1 million for the acquisition of plant and machinery[28] - The Group maintained a robust financial position and remained debt-free during the review period[28] Funding and Financial Policies The Group maintains prudent funding and financial policies, depositing surplus funds with licensed banks and closely monitoring liquidity to meet financial needs - The Group has consistently adopted prudent funding and financial policies, placing surplus funds as cash deposits with licensed banks[29] - Management closely monitors the Group's liquidity position to ensure that the liquidity structure of its assets, liabilities, and other commitments is sufficient to meet its funding requirements from time to time[29] Contingent Liabilities As of June 30, 2024, the Group's corporate guarantees and counter-indemnities for performance bonds totaled HK$289.9 million, an increase from HK$230.6 million in 2023 - As of June 30, 2024, the Group provided corporate guarantees and counter-indemnities totaling HK$289.9 million to certain banks and an insurance company for performance bonds (December 31, 2023: HK$230.6 million)[30] Employees and Remuneration Policy As of June 30, 2024, the Group employed 728 staff in Hong Kong, with annual remuneration reviews based on market and performance, offering medical insurance, provident funds, and education subsidies - As of June 30, 2024, the Group employed 728 staff in Hong Kong and has established a professional team for foundation and drilling engineering[31] - Employee remuneration packages are reviewed annually and determined with reference to market compensation and individual employee performance[31] - In addition to basic salaries and discretionary bonuses, the Group also provides other employee benefits to eligible employees, including medical insurance, provident funds, and education subsidies[31] Connected Transactions The Group disclosed two connected transactions: a HK$250 million loan to Build King Industrial Limited and a service framework agreement with K. Wah Group, both requiring independent shareholder approval - The Company entered into a loan agreement with Build King Industrial Limited to provide a loan of up to HK$250 million at an annual interest rate of 6.0%, with a loan period of 12 months from the drawdown date, extendable for another 12 months with Company approval[32] - The Company entered into a framework agreement with K. Wah Group, allowing K. Wah Group members to engage Group members for certain services through a tender process for three years, from October 1, 2024, to September 30, 2027[33] - Both transactions constitute major and connected transactions under the Listing Rules and are subject to approval by the Company's independent shareholders at an extraordinary general meeting to be convened[32][33] Prospects and Future Plans Hong Kong's housing policy and Northern Metropolis offer foundation industry opportunities, despite private market weakness, competition, and rising labor costs; the Group plans strategic investments in talent, technology, service expansion, and ESG for sustainable growth - The Hong Kong Government aims to provide 308,000 public housing units by 2033-2034, with public housing supply projected to increase slightly by 5,000 units to approximately 146,800 units over the next five years[34] - Construction tender prices are expected to rise by 2% in 2024, lower than the 4% increase in 2023, reflecting reduced private sector activity and decreased public project spending[34] - The private construction market is almost at a standstill, posing significant challenges for the Group, which has focused on public tenders but still faces intense competition and rising labor costs[34] - The Group will strengthen its competitive advantage through strategic investments in talent development, machinery, and facilities, actively seeking development opportunities in both public and private sectors[35] - The Group invests in innovative technologies, particularly focusing on Artificial Intelligence (AI) applications and enhancing Information Technology (IT) capabilities to streamline operations, reduce manual work, and improve overall productivity and project efficiency[35] - Subsidiary Driltech achieved a new milestone by securing an offshore exploration contract and will continue to expand its scope of laboratory testing accreditation; another subsidiary, Wing Fung Engineering Limited, is exploring development opportunities in site formation, civil engineering, road, and drainage works[35] - The Group has established an Environmental, Social and Governance (ESG) Committee responsible for overseeing carbon emission monitoring, ensuring employee welfare and well-being, and promoting community engagement through community activities[35] - The Group will continue to seek new warehouses and office buildings, and consistently expand its foundation business in both public and private sectors, maintaining cautious optimism regarding the prospects of Hong Kong's foundation industry[36] Other Information This section details the Group's corporate governance, including directors' securities trading compliance, corporate governance code adherence, audit committee functions, listed share transactions, and board composition Acknowledgements The Board thanks the Executive Committee, management, staff, partners, and shareholders, reaffirming its goal of consolidating core foundations and driving long-term sustainable growth - The Board extends its sincere gratitude to the Executive Committee, management team, and staff for their tireless efforts and significant contributions[37] - Sincere appreciation is extended to business partners and shareholders for their crucial support[37] - Looking ahead, the primary goal is to consolidate core foundations and drive long-term sustainable growth[37] Corporate Governance The Company adopted and complied with the standard code for directors' securities transactions (Listing Rules Appendix C3) and the Corporate Governance Code (Appendix C1); the Audit Committee reviewed H1 2024 interim results - The Company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers as set out in Appendix C3 to the Listing Rules, and all Directors confirmed compliance with the Model Code throughout the six months ended June 30, 2024[38] - The Directors believe that the Company has complied with all relevant code provisions of the Corporate Governance Code as set out in Appendix C1 to the Listing Rules for the six months ended June 30, 2024[39] - The Audit Committee, comprising three independent non-executive Directors, has held regular meetings since its establishment and has reviewed the Company's interim results for the six months ended June 30, 2024[40] Purchase, Sale or Redemption of the Company's Listed Securities Neither the Company nor its subsidiaries purchased, sold, or redeemed any of the Company's listed shares during the six months ended June 30, 2024 - During the six months ended June 30, 2024, neither the Company nor any of its subsidiaries purchased, sold, or redeemed any of the Company's listed shares[41] Board Composition As of the announcement date, the Board comprises nine directors: six executive and three independent non-executive directors - As of the announcement date, the Board of Directors comprises nine directors[42] - Including six executive directors: Mr. Chan Yuen Hong (Chairman), Mr. Wong Shing Wai, Mr. Yu Wing Sang, Mr. Lam Ping Lun, Mr. Wai Hon Man, and Mr. Lam Hoi Fan[42] - And three independent non-executive directors: Mr. Kong Siu Chee, Mr. Pong Tit Fan, and Mr. Tsui Chi Keung[42]