华营建筑(01582) - 2024 - 中期财报

Corporate Information Corporate Structure and Key Personnel This section details CR Construction Group Holdings Limited's corporate structure, including board and committee compositions, key advisors, and notes the resignation of two non-executive directors during the period - The company's Board of Directors comprises executive, non-executive, and independent non-executive directors, with independent non-executive directors chairing the Audit, Remuneration, and Nomination Committees, aligning with corporate governance standards[3][4] - Non-executive directors Ms. Ding Shaojian and Mr. Fan Jingbo resigned on June 11, 2024[3] Chairman's Statement Chairman's Statement The Chairman's Statement outlines the Group's H1 2024 performance, business review, and future outlook, emphasizing resilient results despite market challenges, new project acquisitions, and significant investment in technological innovation H1 2024 Performance Overview | Indicator | Amount/Quantity | | :--- | :--- | | Total Revenue | Approx. 2,773.2 Million HKD | | Profit Attributable to Owners of the Company | Approx. 35.8 Million HKD | | New Construction Project Wins | 9 projects, total contract value approx. 4.1 Billion HKD | | Environmental Business Projects | 3 contracts (approx. 6.9 Million HKD), 19 service concession arrangements | - The Group actively implemented measures such as innovation, resource optimization, cost reduction, and efficiency improvement to sustain healthy business growth amidst industry challenges[8][11] - The company prioritizes technological innovation, successfully developing the "4S Smart Site Safety System" with ISO 27001 certification and modular bio-disk equipment for rural wastewater treatment, enhancing engineering efficiency and safety[13][14][15] - The Group's future strategy focuses on four key areas: increasing talent development investment, pursuing diversified growth and technological innovation, expanding domestic and international market presence, and aligning with government development policies to explore public and environmental projects[20] Financial and Operational Data Highlights Financial and Operational Data Highlights This section summarizes the Group's key financial data for the six months ended June 30, 2024, noting a slight revenue decrease, significant gross profit increase, reduced profit attributable to owners, and the declaration of an interim dividend H1 2024 Financial Summary (Year-on-Year) | Indicator | H1 2024 (Million HKD) | H1 2023 (Million HKD) | Change | | :--- | :--- | :--- | :--- | | Total Revenue | 2,773.2 | 2,832.1 | -2.1% | | Total Gross Profit | 188.1 | 150.5 | +25.0% | | Profit Attributable to Owners of the Company | 35.8 | 45.5 | -21.3% | | Interim Dividend (Per Share) | 1.5 HK cents | 1.5 HK cents | Unchanged | Management Discussion and Analysis Business Review The Group operates in two segments: construction, a leading contractor in Hong Kong, Malaysia, and the UK with 47 ongoing projects totaling HKD 28.5 billion; and environmental, focused on wastewater treatment in mainland China, which secured its first project outside Zhejiang and achieved "Specialized, Refined, and New" SME recognition Construction Business Project Overview (As of June 30, 2024) | Indicator | Quantity/Amount | | :--- | :--- | | Projects on Hand | 47 projects | | Original Contract Value of Projects on Hand | Approx. 28.5 Billion HKD | | New Projects Awarded During the Period | 9 projects | | Original Contract Value of New Projects Awarded | Approx. 4.1 Billion HKD | | Projects Completed During the Period | 6 projects | | Original Contract Value of Completed Projects | Approx. 3.1 Billion HKD | - Zhejiang Construction Environmental Protection, an environmental business subsidiary, secured a rural wastewater treatment project in Kunshan, Jiangsu Province, marking its first expansion outside Zhejiang Province[26][27] - Zhejiang Construction Environmental Protection was recognized as a 2024 Zhejiang Provincial "Specialized, Refined, and New" SME, demonstrating its leading position in technology, market, quality, and efficiency[26][27] The Prospects For H2 2024, the Group anticipates stable Hong Kong economic growth and positive impacts from relaxed compulsory sale thresholds, with imported labor potentially easing cost pressures; it will continue R&D investment (HKD 11.6 million in H1) and seek new construction and environmental opportunities globally - Subsequent to the reporting period, the Group was awarded one new construction project with an original contract value of approximately HKD 2.1 billion[28] - The Group's total R&D expenditure during the reporting period was approximately HKD 11.6 million, primarily invested in its proprietary "4S Smart Site Safety System" and integrated rural domestic wastewater treatment equipment[28][32] - The government's "Land (Compulsory Sale for Redevelopment) (Amendment) Bill" is expected to lower compulsory sale thresholds, facilitating large-scale redevelopment projects and positively impacting the Group's business[33][35] Principal Risks and Uncertainties The Group faces principal business risks from project non-recurrence, intense bidding, license dependency, cost overruns, and safety failures, alongside industry and market risks from high competition and macroeconomic fluctuations in its core markets including Hong Kong, Malaysia, the UK, and mainland China - Business risks include the Group's revenue primarily deriving from non-recurring projects obtained through competitive bidding with no guaranteed success rate, reliance on various licenses for operations, and potential discrepancies between estimated and actual costs in tender pricing[36][38] - Industry and market risks stem from intense competition within the construction sector and the Group's susceptibility to economic conditions in its key markets, including Hong Kong, Malaysia, the UK, and mainland China[37][39] Financial Review In H1 2024, the Group's total revenue decreased by 2.1% to HKD 2.773 billion, primarily due to a 40.5% drop in environmental business revenue; however, overall gross profit increased by 25% to HKD 188 million, with margin improving to 6.8%, though net profit declined by 21.3% to HKD 36.2 million due to higher administrative expenses, finance costs, and a HKD 17.7 million expected credit loss provision Revenue Performance by Business Segment (H1 2024 vs H1 2023) | Business Segment | H1 2024 Revenue (Million HKD) | H1 2023 Revenue (Million HKD) | Year-on-Year Change | | :--- | :--- | :--- | :--- | | Building Construction Works | 2,414.3 | 2,455.9 | -1.7% | | RMAA Works | 290.6 | 261.4 | +11.2% | | Environmental Business | 68.3 | 114.8 | -40.5% | | Total | 2,773.2 | 2,832.1 | -2.1% | Gross Profit and Gross Margin Performance by Business Segment (H1 2024 vs H1 2023) | Business Segment | H1 2024 Gross Profit (Million HKD) | H1 2024 Gross Margin | H1 2023 Gross Profit (Million HKD) | H1 2023 Gross Margin | | :--- | :--- | :--- | :--- | :--- | | Building Construction Works | 126.7 | 5.2% | 130.6 | 5.3% | | RMAA Works | 43.2 | 14.9% | -1.4 | -0.5% | | Environmental Business | 18.2 | 26.6% | 21.3 | 18.5% | | Total | 188.1 | 6.8% | 150.5 | 5.3% | - Net other operating expenses shifted from an income of HKD 2.1 million in the prior period to an expense of HKD 16.9 million this period, primarily due to a HKD 17.7 million provision for expected credit losses on receivables under HKFRS 9[54][58] - Finance costs increased by HKD 10.6 million year-on-year to HKD 29.7 million, mainly driven by rising HIBOR (Hong Kong Interbank Offered Rate)[59] - The Group's net profit decreased by 21.3% year-on-year, from HKD 46.0 million to HKD 36.2 million[59] Liquidity, Financial Resources and Capital Structure The Group maintained robust liquidity during the reporting period, with its gearing ratio significantly decreasing to 29.2% as of June 30, 2024, cash and cash equivalents substantially increasing to HKD 428 million, and net current assets rising to HKD 411 million, while its capital structure remained largely unchanged since listing Key Financial Position Indicators (As of June 30, 2024) | Indicator | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Gearing Ratio | 29.2% | 42.3% | | Cash and Cash Equivalents | 427.6 Million HKD | 236.0 Million HKD | | Net Current Assets | 411.4 Million HKD | 374.5 Million HKD | | Interest-bearing Bank Borrowings | 493.5 Million HKD | 415.6 Million HKD | - The gearing ratio is calculated as net debt divided by (equity attributable to owners of the company + net debt), with its decrease indicating an improvement in the Group's financial leverage[64] Corporate Governance/Other Information Corporate Governance and Compliance The Group maintains high corporate governance standards, complying with all applicable Code provisions during the period, with the temporary exception of board gender diversity due to a non-executive director's resignation, which the company plans to rectify by August 31, 2024, and all directors adhered to securities dealing standards - Due to the resignation of Ms. Ding Shaojian as a non-executive director on June 11, 2024, the company's Board of Directors temporarily does not meet the gender diversity requirements under Listing Rule 13.92[67][70] - The company plans to appoint Ms. Tang Yuk Lai as an independent non-executive director by August 31, 2024, to regain compliance with the Listing Rules[67][70] - The company's Audit Committee has reviewed the unaudited interim condensed consolidated financial information for the six months ended June 30, 2024[73][75] Directors' and Substantial Shareholders' Interests This section discloses the interests of the company's directors, chief executive, and substantial shareholders in the company's shares as of June 30, 2024, noting Chairman Mr. Guan Manyu holds 0.50%, and the controlling shareholder, CR Construction Investment Limited, holds 72.23%, ultimately controlled by Zhejiang Provincial State-owned Capital Operation Co., Ltd Directors' Shareholdings (As of June 30, 2024) | Director Name | Capacity | Number of Shares Held | Approximate Percentage of Shareholding (%) | | :--- | :--- | :--- | :--- | | Mr. Guan Manyu | Beneficial Owner | 2,500,000 | 0.50 | | Mr. Li Ka Yin | Beneficial Owner | 1,000,000 | 0.20 | | Mr. Chan Tak Yiu | Beneficial Owner | 100,000 | 0.02 | | Mr. Yang Haojiang | Beneficial Owner | 500,000 | 0.10 | - Substantial shareholder Zhejiang Provincial State-owned Capital Operation Co., Ltd. indirectly holds 361,150,000 shares, representing 72.23% of the total share capital, through a series of controlled entities[82][84] Share Option Scheme The company adopted a Share Option Scheme on September 17, 2019, valid until 2029, with a maximum of 50,000,000 shares available for options, aiming to incentivize contributors, and no options have been granted, exercised, expired, or lapsed since its adoption to date - The Share Option Scheme aims to attract and retain talent, with eligible participants including employees, directors, consultants, and business partners[86] - No share options have been granted or exercised since the scheme's adoption to the reporting date, and as of June 30, 2024, the company had no outstanding share options[89][91] Independent Review Report Independent Review Report This section presents the independent review report by Ernst & Young, Certified Public Accountants, on the Group's interim financial information for the six months ended June 30, 2024, concluding that nothing came to their attention suggesting the information was not prepared in all material respects in accordance with HKAS 34 - The scope of a review is substantially less than an audit, thus the auditor does not express an audit opinion[94][95] - Based on the review, the auditor found no material matters indicating that the interim financial information was not prepared as required[96][97] Interim Condensed Consolidated Financial Statements Interim Condensed Consolidated Statement of Profit or Loss For the six months ended June 30, 2024, the Group reported revenue of HKD 2.773 billion, gross profit of HKD 188 million, profit for the period of HKD 36.22 million, with HKD 35.85 million attributable to owners of the company, and basic earnings per share of 7.17 HK cents H1 2024 Statement of Profit or Loss Summary | Item | Amount (Thousand HKD) | | :--- | :--- | | Revenue | 2,773,188 | | Gross profit | 188,062 | | Profit Before Tax | 49,869 | | Profit for the Period | 36,220 | | Profit Attributable to Owners of the Company | 35,845 | | Basic Earnings Per Share | 7.17 HK cents | Interim Condensed Consolidated Statement of Financial Position As of June 30, 2024, the Group's total assets were HKD 4.239 billion, total liabilities HKD 3.587 billion, and net assets HKD 652 million, with net current assets of HKD 411 million indicating robust short-term solvency Financial Position Summary (As of June 30, 2024) | Item | Amount (Thousand HKD) | | :--- | :--- | | Total Non-current Assets | 350,952 | | Total Current Assets | 3,887,915 | | Total Assets | 4,238,867 | | Total Current Liabilities | 3,476,514 | | Total Non-current Liabilities | 110,702 | | Total Liabilities | 3,587,216 | | Net Assets | 651,651 | Interim Condensed Consolidated Statement of Cash Flows In H1 2024, the Group generated HKD 224 million net cash from operating activities, a significant improvement from a HKD 425 million net outflow in the prior year, with net cash outflows of HKD 2.06 million from investing and HKD 29.31 million from financing activities, resulting in a HKD 193 million net increase in cash and cash equivalents, ending the period at HKD 428 million Cash Flow Statement Summary (H1 2024) | Item | Amount (Thousand HKD) | | :--- | :--- | | Net Cash Flows from Operating Activities | 223,999 | | Net Cash Flows (Used in) Investing Activities | (2,058) | | Net Cash Flows (Used in) Financing Activities | (29,313) | | Net Increase in Cash and Cash Equivalents | 192,628 | | Cash and Cash Equivalents at End of Period | 427,626 | Notes to Interim Condensed Consolidated Financial Information The financial statement notes detail accounting policies, segment information, revenue composition, and related party transactions, highlighting the Group's two operating segments—construction and environmental—with construction as the primary revenue source, and providing breakdowns of revenue by type, geography, and recognition timing, alongside disclosures of various transactions and balances with the holding company and fellow subsidiaries - The Group has two reportable operating segments: (i) Construction Business (in Hong Kong, Malaysia, and the UK) and (ii) Environmental Business (in China), with management separately monitoring their performance for decision-making purposes[118] Segment Revenue and Results (H1 2024) | Segment | Revenue (Thousand HKD) | Segment Results (Thousand HKD) | | :--- | :--- | :--- | | Construction Business | 2,704,868 | 65,794 | | Environmental Business | 68,320 | 8,056 | | Total | 2,773,188 | 73,850 | - The Group engages in various related party transactions with its intermediate holding company and fellow subsidiaries, including consulting service fees, interest expenses, material purchases, and subcontracting service fees[172] - As of June 30, 2024, the Group had loans from its intermediate holding company and fellow subsidiaries totaling approximately HKD 196 million, with some being interest-bearing[174][175]