安乐工程(01977) - 2024 - 中期财报

Company Profile ATAL Engineering Group, established in 1977, is a leading MEP engineering and technology services provider with diverse operations across Hong Kong, Macau, mainland China, the US, and the UK - The company, established in 1977, is a leading MEP engineering and technology services provider[1] - Business covers Building Services, Environmental, ICBT, and Lifts & Escalators segments[1] - Operations span Hong Kong, Macau, mainland China, the US, and the UK[1] Financial Highlights Group revenue increased by 14.9% to HKD 3.2654 billion, but profit attributable to owners significantly decreased to HKD 82.4 million due to one-off gains in the prior period Financial Highlights for the Six Months Ended June 30 | Metric | 2024 (HKD Million) | 2023 (HKD Million) | | :------------------- | :----------------- | :----------------- | | Revenue | 3,265.4 | 2,841.1 | | Gross Profit | 477.7 | 453.8 | | Profit Attributable to Owners | 82.4 | 237.5 | | Basic Earnings Per Share | HKD 0.06 | HKD 0.17 | - Board resolved to pay an interim dividend of HKD 2.38 cents per share, totaling approximately HKD 33 million for the six months ended June 30, 2024[3] Chairman's Statement The Chairman's Statement highlights the Group's leadership in MEP engineering, innovation in AI-driven digital twin technology, green business, and new market expansion - Group achieved significant market share in Building Services and Environmental Engineering, with advantages in data centers and infrastructure[4] - Continuous R&D investment focuses on AI-driven digital twin technology for energy efficiency, building operations, ESG performance, water treatment automation, and critical facility O&M[5] - New headquarters, ATAL Engineering Tower, commenced operations in July 2024, enhancing service capabilities and employee productivity[7] - Will continue to identify projects supporting new market development and expand overseas business[5] Management Discussion and Analysis This section details the Group's H1 2024 business performance, financial position, segment progress, strategic priorities, and future outlook, showing robust revenue growth despite profit fluctuations from one-off factors Interim Business Review H1 2024 revenue grew 14.9% to HKD 3.2654 billion, driven by data center and infrastructure projects, with adjusted profit attributable to owners at HKD 67.2 million and total contracts on hand of HKD 11.7043 billion Key Financial Indicators for H1 2024 | Metric | Amount (HKD) | | :------------------- | :---------- | | Revenue | 3.2654 billion | | Profit Attributable to Owners | 82.4 million | | Gross Profit Margin | 14.6% | | Total Contract Value on Hand | 11.7043 billion | - Revenue increased by 14.9% year-on-year, driven by data center, medical, building, and infrastructure projects, and contributions from a UK lifts company acquisition[7] - Adjusted profit attributable to owners was HKD 67.2 million, comparable to HKD 74.7 million in the prior period, mainly due to project phasing differences[7] - Group focuses R&D investment and business development on innovative construction technologies (MiMEP, DfMA, BIM), smart solutions (AI-driven digital twin, energy management, renewable energy, ESG management, robotics), and new environmental technologies[9] Segment Performance All business segments showed significant progress in H1 2024, with strong revenue growth in Building Services, new projects in Environmental, key roles for ICBT in smart city transformation, and overseas expansion benefiting Lifts and Escalators Building Services Engineering Building Services Engineering revenue grew 20.8% to HKD 2.111 billion, with a contract value on hand of HKD 5.585 billion, driven by new projects and continued investment in MiMEP and BIM technologies Building Services Engineering Performance | Metric | H1 2024 (HKD Million) | H1 2023 (HKD Million) | Change Rate | | :--------------- | :------------------ | :------------------ | :---------- | | Revenue | 2,111 | 1,748 | +20.8% | | Contract Value on Hand | 5,585 | 6,150 | -9.19% | | New Contracts Awarded | 1,881 | 2,461 | -23.5% | | Recurring M&E Revenue | 205 | 184 | +11.3% | - Recently secured new MEP engineering service projects, including a Grade A office building in Causeway Bay utilizing MiMEP and a large-scale project in Macau[12] - Continued investment in BIM and MiMEP technologies, with a new MiMEP facility in mainland China to enhance productivity, safety, and quality[12] Environmental Engineering Environmental Engineering revenue remained stable at HKD 621 million, with HKD 4.514 billion in contracts on hand, securing new projects in flood prevention and wastewater treatment while expanding into overseas markets Environmental Engineering Performance | Metric | H1 2024 (HKD Million) | H1 2023 (HKD Million) | | :----------------- | :------------------ | :------------------ | | Revenue | 621 | 623 | | Contract Value on Hand | 4,514 | 4,599 | - Awarded significant engineering contracts for Yuen Long flood barriers and a new leachate wastewater treatment plant at Tuen Mun Nim Wan Landfill[13] - Implementing climate solutions, clean water, waste, and wastewater treatment technologies, including AI-driven digital twin technology to extend facility lifecycles[13] - Participating in engineering tender activities in overseas regions such as the Philippines and Dubai[13] Information, Communications and Building Technology (ICBT) ICBT revenue was HKD 295 million, with HKD 938 million in contracts on hand, playing a key role in smart city transformation by providing AI-driven green and smart building solutions ICBT Segment Performance | Metric | H1 2024 (HKD Million) | H1 2023 (HKD Million) | | :----------------- | :------------------ | :------------------ | | Revenue | 295 | 311 | | Contract Value on Hand | 938 | 941 | - Provides AI-driven digital twin technology, energy management, renewable energy, robotics solutions, and smart lampposts for green and smart building solutions[14] - Secured contracts for an AI video analytics CCTV system for a shopping mall in Southern Hong Kong Island and ELV equipment and building management systems for a residential project in Tseung Kwan O[14] Lifts and Escalators Lifts and Escalators revenue surged 49.4% to HKD 239 million, driven by overseas projects and acquisitions, with US associate business turning profitable despite brand impairment losses Lifts and Escalators Segment Performance | Metric | H1 2024 (HKD Million) | H1 2023 (HKD Million) | Change Rate | | :----------------- | :------------------ | :------------------ | :---------- | | Revenue | 239 | 160 | +49.4% | | Contracts on Hand | 667 | 586 | +13.8% | - US associate business turned profitable due to higher gross margins and a one-off net insurance claim income, partially offset by post-tax brand impairment losses[16][28] - Anlev brand received "Star of Safety" for 46 consecutive quarters and five "Stars of Quality" from the Hong Kong Electrical and Mechanical Services Department[16] Innovation, Resource Management and Other Operating Projects The Group fosters an innovation culture, developing AI and robotics solutions, and successfully applying BIM, DfMA, and MiMEP in over 50% of Building Services projects - Established Smart Data Automation (SDA) business development unit to service O&M for critical facilities like water treatment plants, sewage treatment plants, and data centers[17] - Over 50% of Building Services Engineering projects successfully applied BIM, DfMA, and MiMEP technologies, enhancing efficiency, quality, and safety[17] - Developed wastewater treatment system "AMSFS III" won the "Hong Kong Green Innovation Award," demonstrating commitment to green innovation[17] Impact of COVID-19 Pandemic The Group capitalizes on economic recovery and border reopening between Hong Kong and mainland China, leveraging talent from the Greater Bay Area to support business expansion - Global economic recovery and full border reopening between Hong Kong and mainland China present development opportunities for the Group[18][19] - Leveraging Greater Bay Area talent to address Hong Kong's human resource market challenges and support core business expansion[19] Financial Review H1 2024 revenue grew 14.9% to HKD 3.2654 billion, but profit attributable to owners decreased significantly to HKD 82.4 million due to one-off gains in the prior period, while administrative expenses increased and cash levels remained strong H1 2024 Financial Performance | Metric | H1 2024 (HKD Million) | H1 2023 (HKD Million) | Change Rate | | :------------------- | :------------------ | :------------------ | :---------- | | Revenue | 3,265.4 | 2,841.1 | +14.9% | | Gross Profit | 477.7 | 453.8 | +5.3% | | Gross Profit Margin | 14.6% | 16.0% | -1.4% | | Profit Attributable to Owners | 82.4 | 237.5 | -65.3% | | Adjusted Profit Attributable to Owners | 67.2 | 74.7 | -10.0% | | Administrative Expenses | 360.9 | 318.3 | +13.4% | | Cash and Bank Balances | 1,147.3 | 906.4 (End of 2023) | +26.6% | - Profit attributable to owners was impacted by a one-off net insurance claim income of HKD 15.2 million from a US associate and one-off dilution gain of HKD 124.1 million and gain on disposal of an associate's interest of HKD 38.7 million in the prior period[20][26][28] - Share of results of associates increased by HKD 7.8 million, mainly due to the US associate turning profitable, partially offset by brand impairment losses[28] Liquidity and Financial Resources The Group maintains a robust liquidity position with HKD 1.1473 billion in cash and bank balances, and total bank borrowings of HKD 519.5 million, supported by ample committed bank facilities Liquidity Position | Metric | June 30, 2024 (HKD Million) | Dec 31, 2023 (HKD Million) | Change Rate | | :----------------- | :------------------------ | :----------------------- | :---------- | | Cash and Bank Balances | 1,147.3 | 906.4 | +26.6% | | Total Bank Borrowings | 519.5 | 320.0 | +62.3% | | Committed Bank Facilities | 2,704.7 | 2,673.4 | +1.2% | | Utilized Bank Facilities | 1,251.4 | 949.8 | +31.7% | - Bank borrowings are primarily denominated in HKD and RMB, bear floating interest rates, and are mostly due within five years[29] Exchange Rate Risk The Group's exchange rate risk is not significant, as it primarily operates in Hong Kong, Macau, mainland China, and the UK, with currency risk closely monitored and hedged - Group's primary business regions are Hong Kong, Macau, mainland China, and the UK, resulting in non-significant exchange rate risk[30] - Currency risk is closely monitored through exchange rate fluctuation reviews, and foreign currency transactions are hedged with forward exchange contracts[30] Use of Proceeds from Share Listing Of the HKD 335.7 million net proceeds from the 2019 global offering, HKD 59.8 million remains unutilized for acquisitions or investments, with full utilization expected by December 31, 2025 Use of Proceeds from Share Listing and Balance | Category of Use | Original Net Proceeds Allocated (HKD Million) | Unutilized Net Proceeds as of Dec 31, 2023 (HKD Million) | Unutilized Net Proceeds as of June 30, 2024 (HKD Million) | | :----------------------- | :---------------------------- | :---------------------------------------------- | :---------------------------------------------- | | Support Building Services Engineering | 67.1 | – | – | | Enhance Environmental Engineering | 100.7 | – | – | | Enhance ICBT Business | 67.1 | – | – | | Expand Lifts and Escalators Business | 67.1 | – | – | | Acquisitions or Investments | – | 59.8 | 59.8 | | General Working Capital | 33.7 | – | – | | Total | 335.7 | 59.8 | 59.8 | - Unutilized net proceeds are delayed due to macroeconomic and geopolitical uncertainties, leading management to prudently seek business acquisition and investment opportunities[31] - Full utilization of net proceeds is expected by December 31, 2025, with no change in the proposed use[31] Future Plans for Material Investments or Capital Assets As of the report date, the Group has no specific future plans for material investments or capital assets but will continue to actively seek suitable business and investment opportunities - No specific future plans for material investments or capital assets as of the report date[33] - Group will continue to seek suitable new business and investment opportunities[33] Material Acquisitions or Disposals of Subsidiaries, Associates and Joint Ventures No material acquisitions or disposals of subsidiaries, associates, or joint ventures occurred during the reporting period - No material acquisition or disposal activities during the reporting period[34] Gearing Ratio and Debt The Group's gearing ratio increased to 23.9% as of June 30, 2024, from 15.1% at year-end 2023, primarily due to the drawdown of revitalization and short-term green loans Gearing Ratio | Metric | June 30, 2024 | Dec 31, 2023 | | :----------- | :------------ | :----------- | | Gearing Ratio | 23.9% | 15.1% | - Gearing ratio increased mainly due to the drawdown of revitalization loans and short-term green loans[35] Pledge of the Group's Assets As of June 30, 2024, the Group pledged assets totaling HKD 938.9 million as security for bank financing, mortgage loans, and revitalization loans for ATAL Engineering Tower Total Pledged Assets | Metric | June 30, 2024 (HKD Million) | Dec 31, 2023 (HKD Million) | | :--------------- | :------------------------ | :----------------------- | | Total Pledged Assets | 938.9 | 854.0 | - Pledged assets primarily secure general short-term bank financing, mortgage loans, and revitalization loans for ATAL Engineering Tower[36] Capital Commitments As of June 30, 2024, the Group's contracted but unprovided capital commitments totaled HKD 26.9 million, mainly for the revitalization of ATAL Engineering Tower and expansion of Nanjing production facilities Capital Commitments | Purpose | June 30, 2024 (HKD Million) | | :------------------------------------ | :------------------------ | | Revitalization of ATAL Engineering Tower and related plant and equipment | 24.6 | | Expansion of Nanjing Production Facilities | 2.3 | | Total | 26.9 | Contingent Liabilities As of June 30, 2024, the Group had outstanding performance guarantees of approximately HKD 596.6 million and has made adequate provisions for potential losses from ongoing litigation Contingent Liabilities | Metric | June 30, 2024 (HKD Million) | Dec 31, 2023 (HKD Million) | | :--------------------- | :------------------------ | :----------------------- | | Outstanding Performance Guarantees | 596.6 | 586.6 | - Group has made adequate provisions for potential losses from pending litigation[38] Events After Reporting Period No material events occurred after the reporting period up to the date of this report - No material events occurred after the reporting period[39] Human Resources As of June 30, 2024, the Group employed 2,725 staff, providing extensive training and fostering talent development, while also enhancing workplace safety through smart systems Human Resources Overview | Metric | June 30, 2024 | June 30, 2023 | | :----------------- | :------------ | :------------ | | Number of Employees | 2,725 | 2,701 | | Internal Training Courses | 252 | - | | Total Training Hours | 21,000+ hours | - | - Cultivated over 1,100 young engineers and technicians and successfully applied to establish new professional training categories in control, automation, instrumentation, and electronics[40] - Developed "Smart Site Safety System Working Group" applying AI and IoT technologies to enhance site safety and efficiency, including smart safety harness systems and welding robots[40] - Received multiple accolades at the "HR Excellence Awards 2023/24," including "Management Trainee Programme Award – Silver," "Learning & Development Award – Bronze," and "Talent Acquisition Award – Bronze"[41] Outlook The Group is optimistic about its business prospects, driven by a substantial contract backlog, leadership in growth sectors, and strategic investments in advanced technologies and market expansion - Hong Kong's overall construction volume is projected to reach approximately HKD 300 billion annually by 2031-2032, with government capital expenditure of about HKD 90.2 billion in 2024-2025, presenting significant opportunities[42] - Investments in advanced technologies like BIM, MiC, MiMEP, robotics solutions, AI, IoT, and big data analytics will enhance productivity, efficiency, safety, and project quality[42] - Will continue to explore suitable and synergistic business opportunities, including expanding into East Asia, Southeast Asia, the Middle East, and other regions when appropriate[43] - Strong liquidity, low gearing, and robust recurring cash flow ensure financial flexibility for new projects and long-term strategic planning[43] Review Report on Condensed Consolidated Financial Statements Deloitte Touche Tohmatsu reviewed the Group's condensed consolidated financial statements for H1 2024, concluding no material non-compliance with HKAS 34 - External auditor Deloitte Touche Tohmatsu reviewed the condensed consolidated financial statements[44] - Auditor concluded no matters suggesting the condensed consolidated financial statements were not prepared in all material respects in accordance with HKAS 34[45] Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income This statement presents the Group's H1 2024 financial performance, with profit for the period significantly decreasing to HKD 82.28 million from HKD 237.5 million in the prior year Summary of Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income | Metric | H1 2024 (HKD Thousand) | H1 2023 (HKD Thousand) | | :------------------- | :--------------------- | :--------------------- | | Revenue | 3,265,383 | 2,841,055 | | Cost of Sales and Services | (2,787,685) | (2,387,255) | | Gross Profit | 477,698 | 453,800 | | Other Income | 12,260 | 11,929 | | Other Gains and Losses | (16,385) | 144,546 | | Administrative Expenses | (360,896) | (318,304) | | Share of Results of Associates | 53 | (7,797) | | Finance Costs | (8,366) | (5,318) | | Profit Before Tax | 105,468 | 267,462 | | Income Tax Expense | (23,188) | (29,942) | | Profit for the Period | 82,280 | 237,520 | - Profit for the period significantly decreased, mainly due to other gains and losses turning from a net gain of HKD 144.5 million in the prior period to a net loss of HKD 16.4 million in the current period[45][67] Condensed Consolidated Statement of Financial Position This statement outlines the Group's financial position as of June 30, 2024, with total assets less current liabilities at HKD 2.5655 billion and total equity at HKD 2.1804 billion, reflecting increases in property, plant, and equipment Summary of Condensed Consolidated Statement of Financial Position | Metric | June 30, 2024 (HKD Thousand) | Dec 31, 2023 (HKD Thousand) | | :----------------------- | :--------------------- | :---------------------- | | Non-current Assets | 1,462,913 | 1,417,963 | | Current Assets | 3,882,484 | 3,721,387 | | Current Liabilities | 2,779,927 | 2,730,119 | | Net Current Assets | 1,102,557 | 991,268 | | Total Assets Less Current Liabilities | 2,565,470 | 2,409,231 | | Total Equity | 2,180,400 | 2,129,162 | | Non-current Liabilities | 385,070 | 280,069 | - Property, plant and equipment increased from HKD 851.1 million to HKD 925.5 million, mainly related to the revitalization of ATAL Engineering Tower[46][85] - Bank borrowings (non-current liabilities) increased from HKD 248.8 million to HKD 347.9 million, reflecting the drawdown of revitalization loans[47][21] Condensed Consolidated Statement of Changes in Equity This statement details changes in equity components for H1 2024, with total comprehensive income for the period at HKD 62.581 million and profit attributable to owners at HKD 82.409 million Summary of Condensed Consolidated Statement of Changes in Equity | Metric | H1 2024 (HKD Thousand) | H1 2023 (HKD Thousand) | | :----------------------- | :--------------------- | :--------------------- | | Profit for the Period | 82,280 | 237,520 | | Other Comprehensive Expense for the Period (net of tax) | (19,699) | (22,857) | | Total Comprehensive Income for the Period | 62,581 | 214,663 | | Profit Attributable to Owners of the Company for the Period | 82,409 | 237,520 | | Total Comprehensive Income Attributable to Owners of the Company | 62,734 | 214,663 | - Total comprehensive income for the period was HKD 62.581 million, a significant decrease from HKD 214.7 million in the prior period[48] - Other comprehensive expenses primarily included a property revaluation loss of HKD 2.217 million and exchange differences on translation of overseas operations of HKD 17.749 million[45][48] Condensed Consolidated Statement of Cash Flows This statement presents the Group's H1 2024 cash flows, with net cash from operating activities significantly improving to HKD 206.1 million, while investment activities resulted in a net outflow of HKD 112.2 million Summary of Condensed Consolidated Statement of Cash Flows | Metric | H1 2024 (HKD Thousand) | H1 2023 (HKD Thousand) | | :----------------------- | :--------------------- | :--------------------- | | Net Cash From/(Used In) Operating Activities | 206,130 | (76,308) | | Net Cash (Used In)/From Investing Activities | (112,200) | 38,398 | | Net Cash From/(Used In) Financing Activities | 155,900 | (97,044) | | Net Increase/(Decrease) in Cash and Cash Equivalents | 249,830 | (134,954) | | Cash and Cash Equivalents at End of Period | 1,147,345 | 835,139 | - Operating cash flow improved from a net outflow to a net inflow, reflecting enhanced operational efficiency[50] - Net cash outflow from investing activities increased, primarily due to additions to property, plant and equipment of HKD 105.1 million, largely related to ATAL Engineering Tower revitalization[50][85] - Net cash inflow from financing activities was HKD 155.9 million, mainly from new bank borrowings of HKD 238.7 million[51] Notes to the Condensed Consolidated Financial Statements This section provides detailed notes to the condensed consolidated financial statements, offering in-depth information on accounting policies, revenue, expenses, balance sheet items, equity, financial instruments, and related party transactions Basis of Preparation The condensed consolidated financial statements are prepared in accordance with HKAS 34 and the Listing Rules, measured on a historical cost basis with certain exceptions - Financial statements are prepared in accordance with HKAS 34 and the Listing Rules[55] - Historical cost basis is applied, with certain properties and financial instruments measured at revalued amounts or fair value[55] Principal Accounting Policies Accounting policies and calculation methods for this interim period are consistent with the annual consolidated financial statements for the year ended December 31, 2023 - Accounting policies applied in this interim period are consistent with the 2023 annual consolidated financial statements[55] - Initial application of revised HKFRSs had no material impact on the financial position and performance for the current and prior periods[55] Revenue and Segment Information Group revenue primarily derives from contract works, maintenance, and goods sales, totaling HKD 3.2654 billion in H1 2024, with Hong Kong as the main source and Building Services Engineering as the largest segment Revenue Sources and Geographical Distribution | Revenue Category | H1 2024 (HKD Thousand) | H1 2023 (HKD Thousand) | | :--------------- | :--------------------- | :--------------------- | | Contract Works | 2,585,340 | 2,219,660 | | Maintenance Works | 614,741 | 565,122 | | Sales of Goods | 65,302 | 56,273 | | Total Revenue | 3,265,383 | 2,841,055 | | Geographical Distribution | | | | Hong Kong | 2,795,938 | 2,459,875 | | Macau | 291,946 | 221,971 | | Mainland China | 110,284 | 152,024 | | United Kingdom | 63,657 | 5,303 | | United States | 37 | 18 | | Others | 3,521 | 1,864 | Revenue by Business Segment | Business Segment | H1 2024 (HKD Thousand) | H1 2023 (HKD Thousand) | | :----------------------- | :--------------------- | :--------------------- | | Building Services Engineering | 2,111,348 | 1,747,968 | | Environmental Engineering | 620,588 | 622,524 | | ICBT | 294,570 | 310,918 | | Lifts and Escalators | 238,877 | 159,645 | - Total transaction price allocated to remaining performance obligations amounted to HKD 11.7043 billion as of June 30, 2024[60] Other Income and Gains/(Losses) In H1 2024, the Group recorded a net loss of HKD 16.4 million from other income and gains/(losses), a significant shift from a net gain of HKD 144.5 million in the prior period due to one-off gains in 2023 Composition of Other Income and Gains/(Losses) | Item | H1 2024 (HKD Thousand) | H1 2023 (HKD Thousand) | | :--------------------------------- | :--------------------- | :--------------------- | | Gain on disposal of interest in an associate | – | 38,725 | | Impairment loss on interest in an associate | (12,645) | (19,000) | | Deemed gain on dilution of interest in an associate | – | 124,125 | | Net exchange losses | (3,457) | (2,177) | | Fair value change loss on investment properties | (220) | – | | Total | (16,385) | 144,546 | - No one-off gains from private placement by an associate and disposal of interest in the prior period were recognized in the current period[26][67] Finance Costs Finance costs increased by 57.3% to HKD 8.366 million in H1 2024, primarily driven by higher interest expenses on bank borrowings Composition of Finance Costs | Item | H1 2024 (HKD Thousand) | H1 2023 (HKD Thousand) | | :--------------- | :--------------------- | :--------------------- | | Interest expense on bank borrowings | 5,998 | 2,251 | | Interest on lease liabilities | 1,063 | 1,712 | | Ancillary costs for bank financing | 1,305 | 1,355 | | Total | 8,366 | 5,318 | - Interest expense on bank borrowings increased from HKD 2.251 million to HKD 5.998 million, being the primary driver of finance cost growth[69] Income Tax Expense Income tax expense decreased to HKD 23.188 million in H1 2024, with Hong Kong profits tax calculated under a two-tiered system and varying rates for Macau and mainland China Composition of Income Tax Expense | Item | H1 2024 (HKD Thousand) | H1 2023 (HKD Thousand) | | :--------------- | :--------------------- | :--------------------- | | Current tax | 23,601 | 32,023 | | Underprovision in prior years | (100) | 46 | | Deferred tax | (313) | (2,127) | | Total | 23,188 | 29,942 | - Hong Kong profits tax applies a two-tiered system, with the first HKD 2 million of assessable profits taxed at 8.25% and the remainder at 16.5%[70] - Mainland China subsidiaries are subject to a 25% corporate income tax rate, with high-tech enterprises enjoying a 15% preferential tax rate until 2024[71] Profit for the Period Profit for the period is derived after deducting various expenses, with staff costs totaling HKD 738.3 million in H1 2024, representing a 12.4% increase year-on-year Deductions from Profit for the Period | Item | H1 2024 (HKD Thousand) | H1 2023 (HKD Thousand) | | :----------------------- | :--------------------- | :--------------------- | | Staff costs | 738,321 | 656,723 | | Cost of inventories recognized as expense | 140,083 | 129,517 | | Amortization of intangible assets | 301 | – | | Depreciation of property, plant and equipment | 10,760 | 12,042 | | Depreciation of right-of-use assets | 22,776 | 19,611 | | Write-down of inventories, net | 3,378 | 3,774 | | Fair value change loss on derivative financial instruments | 2,547 | (1,155) | | Auditor's remuneration | 3,043 | 2,755 | - Staff costs (including directors' emoluments) increased by 12.4% from HKD 656.7 million to HKD 738.3 million[76] Dividends The Board declared an interim dividend of HKD 2.38 cents per share, totaling approximately HKD 32.993 million, payable around September 27, 2024 - Board declared an interim dividend of HKD 2.38 cents per share, totaling approximately HKD 32.993 million[80] - Interim dividend will be paid on or about September 27, 2024, with shares trading ex-dividend from September 11, 2024[80][121] Earnings Per Share Basic and diluted earnings per share for H1 2024 were both HKD 6 cents, lower than HKD 17 cents in the prior period, with weighted average ordinary shares adjusted for the share award scheme Earnings Per Share | Metric | H1 2024 (HK Cents) | H1 2023 (HK Cents) | | :----------- | :----------------- | :----------------- | | Basic EPS | 6 | 17 | | Diluted EPS | 6 | 17 | Weighted Average Number of Ordinary Shares | Metric | H1 2024 | H1 2023 | | :----------------------- | :------------ | :------------ | | Weighted average number of ordinary shares for basic EPS | 1,386,528,000 | 1,395,438,000 | | Weighted average number of ordinary shares for diluted EPS | 1,399,148,220 | 1,395,438,000 | - For diluted EPS calculation, the effect of certain company award shares was assumed, with no other dilutive potential ordinary shares[81] Investment Properties As of June 30, 2024, investment properties had a fair value of HKD 4.26 million, a decrease from HKD 4.48 million due to fair value change losses, and are pledged as security for bank financing Fair Value of Investment Properties | Metric | June 30, 2024 (HKD Thousand) | Dec 31, 2023 (HKD Thousand) | | :--------------- | :--------------------- | :---------------------- | | Fair Value | 4,260 | 4,480 | | Fair Value Change | (220) | (240) | - Fair value of investment properties was assessed by independent professional valuer JLL Limited using the direct comparison method[82] - Investment properties are pledged as security for general bank financing of certain subsidiaries of the Company[83] Property, Plant and Equipment and Right-of-Use Assets In H1 2024, the Group invested HKD 87.997 million in property, plant, and equipment, primarily for the revitalization of ATAL Engineering Tower, and recognized HKD 13.826 million in new right-of-use assets - Additions to property, plant and equipment amounted to HKD 87.997 million, with HKD 78.849 million related to the revitalization of ATAL Engineering Tower[85] - Bank interest expenses of HKD 1.431 million for ATAL Engineering Tower were capitalized as construction in progress[85] - New lease agreements resulted in the recognition of right-of-use assets of approximately HKD 13.826 million[85] Interests in Associates / Amounts Due from an Associate As of June 30, 2024, interests in associates totaled HKD 457.9 million, with impairment losses recognized for TEI due to unfavorable US market conditions, and HKD 118.4 million due from OBJV Interests in Associates | Metric | June 30, 2024 (HKD Thousand) | Dec 31, 2023 (HKD Thousand) | | :------------------- | :--------------------- | :---------------------- | | Cost of Investment | 332,657 | 332,657 | | Impairment Losses Recognized | (137,245) | (124,600) | | Share of Post-Acquisition Profit and Other Comprehensive Income | 262,473 | 275,999 | | Interests in Associates | 457,885 | 484,056 | - Impairment assessment of TEI's interest resulted in a goodwill impairment loss of HKD 12.645 million and a post-tax brand impairment loss of HKD 18.921 million, primarily due to lower-than-expected financial performance from unfavorable US market conditions[88] - Amount due from OBJV was HKD 118.4 million, which is interest-free, non-trade in nature, unsecured, and repayable on demand[88] Contract Assets As of June 30, 2024, net contract assets were HKD 1.2944 billion, a decrease from HKD 1.3467 billion, including HKD 511.7 million in retention receivables, with expected credit loss provisions made Contract Assets | Metric | June 30, 2024 (HKD Thousand) | Dec 31, 2023 (HKD Thousand) | | :----------------- | :--------------------- | :---------------------- | | Contract Assets | 1,316,657 | 1,368,359 | | Less: Provision for Credit Losses | (22,221) | (21,646) | | Net | 1,294,436 | 1,346,713 | - Contract assets include approximately HKD 511.7 million in retention receivables, typically settled after the warranty period expires[91] - Provisions for expected credit losses have been made in accordance with HKFRS 9[91] Trade Receivables As of June 30, 2024, net trade receivables were HKD 1.1753 billion, stable compared to year-end 2023, including HKD 161.9 million in unbilled revenue, with credit periods of 14 to 90 days Trade Receivables | Metric | June 30, 2024 (HKD Thousand) | Dec 31, 2023 (HKD Thousand) | | :------------------- | :--------------------- | :---------------------- | | Trade Receivables | 1,074,481 | 1,068,590 | | Less: Provision for Credit Losses | (62,405) | (65,504) | | Unbilled Revenue | 161,930 | 173,732 | | Bills Receivable | 1,264 | 1,400 | | Total | 1,175,270 | 1,178,218 | Ageing Analysis of Trade Receivables (Net of Credit Loss Provision) | Ageing | June 30, 2024 (HKD Thousand) | Dec 31, 2023 (HKD Thousand) | | :------------- | :--------------------- | :---------------------- | | 0 to 30 days | 610,367 | 533,985 | | 31 to 90 days | 236,227 | 355,195 | | 91 to 360 days | 163,909 | 113,249 | | Over 1 year | 1,573 | 657 | | Total | 1,012,076 | 1,003,086 | - Provisions for expected credit losses have been made in accordance with HKFRS 9, with impairment provisions of HKD 17.273 million recognized and HKD 12.16 million reversed in the current period[95] Trade Payables and Retention Payables As of June 30, 2024, total trade payables and retention payables decreased to HKD 644.2 million from HKD 775.6 million at year-end 2023, with trade payables having credit periods of 0 to 90 days Trade Payables and Retention Payables | Item | June 30, 2024 (HKD Thousand) | Dec 31, 2023 (HKD Thousand) | | :--------------- | :--------------------- | :---------------------- | | Trade Payables | 415,923 | 537,801 | | Trade Payables (Unbilled) | 41,124 | 52,099 | | Retention Payables | 187,190 | 185,741 | | Total | 644,237 | 775,641 | Ageing Analysis of Trade Payables | Ageing | June 30, 2024 (HKD Thousand) | Dec 31, 2023 (HKD Thousand) | | :------------- | :--------------------- | :---------------------- | | 0 to 30 days | 206,480 | 273,155 | | 31 to 90 days | 142,290 | 202,301 | | 91 to 360 days | 41,137 | 39,037 | | Over 1 year | 26,016 | 23,308 | | Total | 415,923 | 537,801 | Other Payables and Accruals As of June 30, 2024, other payables and accruals increased to HKD 1.826 billion, primarily comprising accrued contract costs of HKD 1.4693 billion and accrued staff costs of HKD 143 million, with litigation provision maintained Other Payables and Accruals | Item | June 30, 2024 (HKD Thousand) | Dec 31, 2023 (HKD Thousand) | | :--------------- | :--------------------- | :---------------------- | | Accrued Contract Costs | 1,469,251 | 1,379,053 | | Accrued Staff Costs | 143,029 | 129,708 | | Provision for Litigation Liabilities | 150,000 | 150,000 | | Liabilities for Additional Interest in an Associate | 3,204 | – | | Others | 60,514 | 84,813 | | Total | 1,825,998 | 1,743,574 | - Provision for litigation liabilities remained at HKD 150 million, related to a cooperation agreement with the Hong Kong Competition Commission in November 2022[98] Bank Borrowings As of June 30, 2024, total bank borrowings significantly increased to HKD 519.5 million, with HKD 171.6 million due within one year and HKD 347.9 million due after one year, secured by various assets Composition of Bank Borrowings | Item | June 30, 2024 (HKD Thousand) | Dec 31, 2023 (HKD Thousand) | | :--------------- | :--------------------- | :---------------------- | | Secured floating-rate bank loans | 266,638 | 274,271 | | Secured fixed-rate bank loans | 100,000 | – | | Unsecured floating-rate bank loans | 152,761 | 45,535 | | Unsecured fixed-rate bank loans | 105 | 240 | | Total | 519,504 | 320,046 | | Due within one year | (171,638) | (71,280) | | Due after one year | 347,866 | 248,766 | - Bank borrowings bear effective interest rates ranging from 2.50% to 6.58%[101] - Secured bank borrowings are pledged against ATAL Engineering Tower, Nanjing properties, rental income, and assets of certain wholly-owned subsidiaries and trade receivables[101] Share Capital As of June 30, 2024, the Company's authorized share capital was 100 billion ordinary shares of HKD 0.01 each, with 1.4 billion issued and fully paid shares, totaling HKD 14 million Share Capital Overview | Metric | Number of Shares | Par Value | Share Capital (HKD Thousand) | | :------------- | :-------------------- | :-------- | :--------------------------- | | Authorized Share Capital | 100,000,000,000 | HKD 0.01 | 1,000,000 | | Issued and Fully Paid Share Capital | 1,400,000,000 | HKD 0.01 | 14,000 | - In April 2024, the Company repurchased 430,000 of its own ordinary shares for a total consideration of HKD 451,000[102] - As of June 30, 2024, the trustee held 13.72 million of the Company's own ordinary shares[104] Share-based Payments The Group's share award scheme aims to reward participants, with 12.56 million unvested award shares whose vesting date has been postponed to December 23, 2024, and no options granted under the share option scheme Unvested Award Shares under Share Award Scheme | Grantee/Category | Unvested Awards as of Jan 1, 2024 | Forfeited/Lapsed during the Period | Unvested Awards as of June 30, 2024 | | :--------------- | :-------------------------------- | :--------------------------------- | :---------------------------------- | | Directors | 5,920,000 | – | 5,920,000 | | Employees | 7,240,000 | (600,000) | 6,640,000 | | Total | 13,160,000 | (600,000) | 12,560,000 | - 12.56 million award shares remain unvested, with their vesting date postponed from June 30, 2024, to December 23, 2024[107][137] - No share options have been granted under the share option scheme since its effective date of July 12, 2019, with no outstanding options at period-end[109][137] Pledge of Assets As of the reporting period end, the Group had pledged assets totaling HKD 943.558 million as security for bank borrowings and general bank financing, including properties, investment properties, and bank deposits Pledged Assets | Item | June 30, 2024 (HKD Thousand) | Dec 31, 2023 (HKD Thousand) | | :--------------- | :--------------------- | :---------------------- | | Properties | 872,414 | 791,345 | | Investment Properties | 4,260 | 4,480 | | Bank Deposits | 26,260 | 22,698 | | Others | 40,624 | 35,476 | | Total | 943,558 | 853,999 | - Other pledged assets include certain trade receivables and fixed and floating charges over all assets of certain wholly-owned subsidiaries[110] Fair Value Measurement of Financial Instruments The Group's derivative financial instruments are measured at fair value on a recurring basis, classified as Level 2, with fair values estimated using discounted cash flow models Fair Value of Derivative Financial Instruments | Metric | June 30, 2024 (HKD Thousand) | Dec 31, 2023 (HKD Thousand) | | :----------------------- | :--------------------- | :---------------------- | | Derivative Financial (Liabilities)/Assets | (1,079) | 1,468 | - Fair value measurement of derivative financial instruments uses discounted cash flow valuation techniques and is classified as Level 2[111] - Carrying amounts of other financial assets and liabilities recorded at amortized cost approximate their fair values[113] Performance Guarantees As of June 30, 2024, the Group had outstanding performance guarantees of approximately HKD 596.6 million, issued by banks to customers as security for contract obligations Outstanding Performance Guarantees | Metric | June 30, 2024 (HKD Thousand) | Dec 31, 2023 (HKD Thousand) | | :----------------------- | :--------------------- | :-------------------- | | Outstanding Performance Guarantees | 596,639 | 586,620 | - Performance guarantees are issued by banks to customers as security for the Group's due performance of contractual obligations[114] Related Party Transactions The Group engaged in various related party transactions, including sales with associates OBJV and TEI, and lease liability repayments and expense recharges with Perfect Motive Summary of Related Party Transactions | Related Company Name | Relationship | Nature of Transaction | H1 2024 (HKD Thousand) | H1 2023 (HKD Thousand) | | :------------------- | :----------- | :-------------------- | :--------------------- | :--------------------- | | OBJV | Associate | Sales | 3,409 | 1,604 | | Perfect Motive | Related Party | Repayment of Lease Liabilities | 7,956 | 7,956 | | Perfect Motive | Related Party | Recharge of Direct Expenses | 273 | 280 | | TEI | Associate | Sales | 37 | 40 | - Lease liabilities related to Perfect Motive amounted to HKD 5.222 million as of June 30, 2024[117] - Emoluments of key management personnel (directors) are disclosed in Note 7 (Profit for the Period)[118] Capital Commitments As of the reporting period end, the Group's contracted but unprovided capital commitments totaled HKD 26.896 million, primarily for the revitalization of ATAL Engineering Tower and expansion of Nanjing production facilities Composition of Capital Commitments | Purpose | June 30, 2024 (HKD Thousand) | Dec 31, 2023 (HKD Thousand) | | :------------------------------------ | :--------------------- | :---------------------- | | Expansion of Existing Production Facilities | 2,334 | 4,470 | | Revitalization of ATAL Engineering Tower | 17,807 | 92,044 | | Plant and Equipment for ATAL Engineering Tower | 6,755 | – | | Total | 26,896 | 96,514 | Interim Dividend The Board declared an interim dividend of HKD 2.38 cents per share, totaling approximately HKD 32.993 million, with shares trading ex-dividend from September 11, 2024 - Board declared an interim dividend of HKD 2.38 cents per share, totaling approximately HKD 32.993 million[120] - Share register will be closed from September 13 to September 16, 2024, to determine dividend entitlement, with shares trading ex-dividend from September 11, 2024[121] Other Information This section covers the Group's international sanctions compliance, interim results review, corporate governance, directors' securities transactions, director updates, and share interests International Sanctions The Group conducted no transactions with sanctioned individuals or entities during the reporting period and maintains measures to ensure compliance and monitor sanction risks - No transactions with individuals or entities subject to international sanctions during the reporting period[123] - Risk Management Committee (Sanctions Risk) meets at least twice annually to monitor sanction risks and establish written procedures[123] Review of Interim Results The Company's Audit Committee reviewed the unaudited condensed consolidated interim financial statements for H1 2024 with management and external auditor Deloitte Touche Tohmatsu - Audit Committee reviewed the interim financial statements and discussed financial matters with management and external auditor[124] - External auditor Deloitte Touche Tohmatsu reviewed the financial statements in accordance with Hong Kong Standard on Review Engagements 2410[124] Compliance with Corporate Governance Code The Company is committed to high corporate governance standards and complied with all code provisions of the Corporate Governance Code during the reporting period - Company adopted the principles and code provisions of the Corporate Governance Code set out in Appendix C1 to the Listing Rules[125] - Company complied with all code provisions of the Corporate Governance Code during the reporting period[125] Directors' Securities Transactions All directors confirmed compliance with the Securities Dealing Code, except for Dr. Poon Lok To, who inadvertently sold 2,332,000 shares without prior dealing confirmation - Company's Securities Dealing Code is no less exacting than the Model Code[126] - Dr. Poon Lok To, Founder and Executive Director, inadvertently sold 2,332,000 shares without prior dealing confirmation, constituting a breach of the Securities Dealing Code[126] - Dr. Poon has provided a written undertaking to comply with all requirements in the future[126] Update on Directors' Information Mr. Lam Kin Fung was appointed as an independent non-executive director of Goldin Financial Holdings Limited, and the monthly salaries of Mr. Chan Hoi Ming, Mr. Cheng Wai Lun, and Mr. Cheng Wai Keung increased from April 1, 2024 - Mr. Lam Kin Fung was appointed as an independent non-executive director of Goldin Financial Holdings Limited[127] Directors' Remuneration Adjustment | Director Name | New Monthly Remuneration (HKD) | Effective Date | | :----------------- | :----------------------------- | :---------------- | | Mr. Chan Hoi Ming | 215,250 | April 1, 2024 | | Mr. Cheng Wai Lun | 174,900 | April 1, 2024 | | Mr. Cheng Wai Keung | 195,000 | April 1, 2024 | Directors' Interests in Securities As of June 30, 2024, Dr. Poon Lok To held approximately 65.77% of the Company's shares through a discretionary trust and beneficial ownership, with other directors also holding shares and related interests Directors' Interests in the Company's Shares | Director Name | Capacity/Nature of Interest | Number of Shares Held | Number of Related Shares Held | Approximate Percentage of Shareholding | | :----------------- | :------------------------ | :-------------------- | :---------------------------- | :------------------------------------- | | Dr. Poon | Founder of Discretionary Trust | 888,650,000 | – | 63.48% | | Dr. Poon | Beneficial Owner | 32,198,000 | – | 2.29% | | Mr. Chan Hoi Ming | Beneficial Owner | 4,200,000 | 5,600,000 | 0.30% / 0.40% | | Mr. Cheng Wai Lun | Beneficial Owner | 244,500 | 320,000 | 0.02% / 0.02% | - Dr. Poon holds 63.48% of the Company's shares through Arling Investment Limited and 2.29% as a beneficial owner[130] - Related shares held by Mr. Chan Hoi Ming and Mr. Cheng Wai Lun are unvested award shares granted under the Share Award Scheme[130] Substantial Shareholders / Other Persons' Interests in Securities As of June 30, 2024, substantial shareholders include HSBC International Trustee Limited, Ardik Investment Limited, and Arling Investment Limited, each holding approximately 63.48% of the Company's shares, with Ms. Teresa Cheng and Mr. David Michael Webb also holding significant interests Substantial Shareholders' Interests in Shares | Name/Company | Capacity/Nature of Interest | Number of Shares Held | Approximate Percentage of Shareholding | | :------------------------- | :------------------------ | :-------------------- | :------------------------------------- | | HSBC International Trustee Limited | Founder of Discretionary Trust | 888,650,000 | 63.48% | | Ardik Investment Limited | Interest of Controlled Corporation | 888,650,000 | 63.48% | | Arling Investment Limited | Beneficial Owner | 888,650,000 | 63.48% | | Ms. Teresa Cheng | Spouse's Interest | 920,848,000 | 65.77% | Other Persons' Interests in Shares | Name | Capacity/Nature of Interest | Number of Shares Held | Approximate Percentage of Shareholding | | :----------------------- | :------------------------ | :-------------------- | :------------------------------------- | | Mr. Webb David Michael | Interest of Controlled Corporation | 112,084,000 | 8.00% | - Ms. Teresa Cheng is deemed to be interested in the Company's shares under the SFO due to her spouse, Dr. Poon's, interests[135] Share Option Scheme and Share Award Scheme The share option scheme has not granted any options since its inception, while the share award scheme saw 600,000 awards lapse and the vesting date for 12.56 million awards postponed to December