恒达集团控股(03616) - 2025 - 中期财报

Corporate Information Board of Directors and Committee Composition As of the report date, the company's Board of Directors comprises four executive directors and three independent non-executive directors, with established Audit, Remuneration, Nomination, and Legal Compliance Committees. - The Board of Directors includes executive directors Li Xiaobing (Chairman), Wang Zhenfeng (CEO), Qi Chunfeng, and Wang Quan, as well as independent non-executive directors Fang Zheng, Li Guolin, and Wei Jian[4][5] - The Audit Committee Chairman is Li Guolin, the Remuneration Committee Chairman is Fang Zheng, and the Nomination Committee Chairman is Li Xiaobing (to be succeeded by Li Guolin on June 30, 2025)[4][5] Company Details The company has appointed authorized representatives, a company secretary, and an auditor, disclosing its registered office, principal place of business in Hong Kong, and China headquarters, along with key information such as principal legal advisors and bankers. - Authorized representatives are Wang Quan and Liang Jinhui, the company secretary is Liang Jinhui, and the auditor is Evergreen (Hong Kong) CPA Limited[7][8] - The company is registered in the Cayman Islands, with its principal place of business in Hong Kong at Leighton Centre, Causeway Bay, and its China headquarters in Xuchang City, Henan Province[7][8] - Principal bankers include Bank of China (Hong Kong), China Construction Bank, China Minsheng Bank, and Industrial and Commercial Bank of China[9][10] Management Discussion and Analysis Industry Review In the first half of 2024, China's real estate market experienced a significant downturn, with substantial declines in investment, completed area, and sales value, despite government policies aimed at stabilization and destocking. Key Indicators of China's Real Estate Market, H1 2024, Year-on-Year Change | Indicator | YoY Change (%) | | :--- | :--- | | Real Estate Development Investment | -10.1 | | Completed Housing Area | -21.8 | | Completed Residential Area | -21.7 | | New Commercial Housing Sales Area | -19.0 | | Residential Sales Area | -21.9 | | New Commercial Housing Sales Value | -25.0 | | Residential Sales Value | -26.9 | - Henan Province's real estate market also faced pressure, with development investment decreasing by 9.1% year-on-year and new commercial housing sales value declining by 22.6%[14][15] - Government policy directions include "coordinated research on policies to digest existing housing stock and optimize incremental housing supply" and the central bank's "package" of new policies, aimed at stabilizing the market and destocking[16][17] Business Overview In the first half of 2024, the Group focused on "ensuring project delivery" and "destocking" amidst market pressures, successfully delivering 259,000 square meters of gross floor area and earning recognition for high-quality development. - The Group successfully delivered approximately 259,000 square meters of gross floor area in the first half, including projects in Xuchang urban area, Changge region, and Linying region of Luohe City[19][22] - The Group aims to achieve its "destocking" goal by accelerating the supply of unsold housing and enhancing housing quality[19][22] - The Group was recognized by China Index Academy as one of the "2024 Henan Province High-Quality Real Estate Development Excellent Enterprises"[21][23] Land Reserves As of June 30, 2024, the Group's land reserves had a gross floor area of approximately 3.2 million square meters. - As of June 30, 2024, the Group's land reserves had a gross floor area of approximately 3.2 million square meters[24][25] Contracted Sales For the six months ended June 30, 2024, the Group's total contracted sales decreased by 46.8% to RMB 839.4 million, primarily due to a significant drop in residential unit sales and declining average selling prices in Henan Province. Contracted Sales and Average Selling Price (For the six months ended June 30) | Indicator | 2024 (RMB Million/sqm/unit) | 2023 (RMB Million/sqm/unit) | Change (%) | | :--- | :--- | :--- | :--- | | Contracted Sales | | | | | Residential Units | 673.4 | 1,313.2 | -48.7 | | Commercial Units | 138.4 | 214.4 | -35.4 | | Parking Spaces | 21.1 | 40.9 | -48.4 | | Others | 6.5 | 9.9 | -34.3 | | Total | 839.4 | 1,578.4 | -46.8 | | Contracted Saleable GFA/Number of Units | | | | | Saleable GFA (sqm) | 144,293 | 257,655 | -44.0 | | Parking Spaces (units) | 553 | 852 | -35.1 | | Contracted Average Selling Price | | | | | Saleable GFA (RMB/sqm) | 5,671 | 5,968 | -5.0 | | Parking Spaces (RMB/unit) | 38,114 | 47,442 | -19.7 | - The contracted average selling price per square meter for saleable gross floor area decreased by 5.0% to approximately RMB 5,671, primarily due to property market price declines in Henan Province[27][29] Financial Review In the first half of 2024, the Group's revenue slightly decreased, but gross profit and net profit significantly declined, turning from profit to loss, with narrowing gross profit margins and increased gearing. Results Key Financial Results (For the six months ended June 30) | Indicator | 2024 (RMB Million) | 2023 (RMB Million) | Change (%) | | :--- | :--- | :--- | :--- | | Revenue | 1,467.6 | 1,488.2 | -1.4 | | Gross Profit | 139.1 | 259.2 | -46.3 | | Gross Profit Margin | 9.5% | 17.4% | -7.9 percentage points | | Net Profit/(Loss) for the Period | (36.1) | 69.2 | -105.3 million (from profit to loss) | Revenue Revenue Composition (For the six months ended June 30) | Revenue Source | 2024 (RMB Thousand) | 2024 (%) | 2023 (RMB Thousand) | 2023 (%) | Change (%) | | :--- | :--- | :--- | :--- | :--- | :--- | | Property Sales | 1,457,879 | 99.4 | 1,481,189 | 99.5 | -1.6 | | Rental Income | 4,769 | 0.3 | 5,597 | 0.4 | -14.8 | | Service Income | 4,951 | 0.3 | 1,365 | 0.1 | +262.7 | | Total | 1,467,599 | 100.0 | 1,488,151 | 100.0 | -1.4 | Property Sales Revenue Details (For the six months ended June 30) | Property Type | 2024 Revenue (RMB Thousand) | 2024 GFA Recognized (sqm) | 2024 Average Selling Price per sqm (RMB) | 2023 Revenue (RMB Thousand) | 2023 GFA Recognized (sqm) | 2023 Average Selling Price per sqm (RMB) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Residential | 1,269,581 | 244,648 | 5,189 | 1,282,830 | 223,965 | 5,728 | | Commercial | 144,798 | 18,749 | 7,723 | 159,592 | 21,956 | 7,269 | | Storerooms | 5,521 | 2,972 | 1,858 | 7,731 | 3,401 | 2,273 | | Subtotal | 1,419,900 | 266,369 | 5,331 | 1,450,153 | 249,322 | 5,816 | | Parking Spaces | 37,979 | 592 (number of units) | 64,154 (per unit) | 31,036 | 601 (number of units) | 51,641 (per unit) | Gross Profit and Gross Profit Margin Gross Profit and Gross Profit Margin by Category (For the six months ended June 30) | Category | 2024 Revenue (RMB Thousand) | 2024 Cost of Sales (RMB Thousand) | 2024 Gross Profit/(Loss) (RMB Thousand) | 2024 Gross Profit Margin (%) | 2023 Revenue (RMB Thousand) | 2023 Cost of Sales (RMB Thousand) | 2023 Gross Profit/(Loss) (RMB Thousand) | 2023 Gross Profit Margin (%) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Property Sales | | | | | | | | | | — Residential | 1,269,581 | 1,162,061 | 107,520 | 8.5 | 1,282,830 | 1,046,361 | 236,469 | 18.4 | | — Commercial | 144,798 | 133,953 | 10,845 | 7.5 | 159,592 | 133,917 | 25,675 | 16.1 | | — Parking Spaces and Storerooms | 43,500 | 28,801 | 14,699 | 33.8 | 38,767 | 45,691 | (6,924) | (17.9) | | Subtotal | 1,457,879 | 1,324,815 | 133,064 | 9.1 | 1,481,189 | 1,225,969 | 255,220 | 17.2 | | Rental Income | 4,769 | 34 | 4,735 | 99.3 | 5,597 | — | 5,597 | 100.0 | | Service Income | 4,951 | 3,699 | 1,252 | 25.3 | 1,365 | 2,955 | (1,590) | (116.5) | | Total | 1,467,599 | 1,328,548 | 139,051 | 9.5 | 1,488,151 | 1,228,924 | 259,227 | 17.4 | - Gross profit margins for residential and commercial property sales decreased from 18.4% and 16.1% to 8.5% and 7.5%, respectively, primarily due to lower average selling prices for residential properties and increased costs for commercial properties[47][51] - Loss for the period was approximately RMB 36.1 million, a decrease of approximately RMB 105.3 million compared to a profit of RMB 69.2 million in the same period last year, mainly due to a decline in gross profit margin and increased impairment provisions for properties held for sale or under development[48][51] Fair Value Losses on Investment Properties Investment properties were valued by independent valuers as of June 30, 2024. - Investment properties were valued by independent valuers as of June 30, 2024[49][52] Selling and Marketing Expenses Selling and marketing expenses decreased by 17.8% to RMB 58.1 million, primarily due to reduced advertising and sales agent commissions. - Selling and marketing expenses were approximately RMB 58.1 million, a year-on-year decrease of approximately 17.8%, primarily due to reduced advertising and promotional costs and sales agent commissions[50][53] Administrative Expenses Administrative expenses slightly increased by 0.7% to RMB 56.6 million. - Administrative expenses were approximately RMB 56.6 million, a slight year-on-year increase of approximately 0.7%[55][59] Other Losses — Net Other losses, net, amounted to approximately RMB 0.5 million. - Other losses, net, were approximately RMB 0.5 million[56][60] Finance (Costs)/Income — Net Net finance costs primarily include interest expenses on borrowings and lease liabilities, offset by capitalized interest expenses and minor bank deposit interest income. - Finance (costs)/income, net, primarily includes interest income from bank deposits, interest expenses on borrowings, and interest and finance charges payable on lease liabilities, net of capitalized interest expenses[57][61] Income Tax Expenses Income tax expenses decreased by 21.5% to RMB 49.2 million, mainly due to lower gross profit. - Income tax expenses were approximately RMB 49.2 million, a year-on-year decrease of approximately 21.5%, primarily due to lower gross profit[58][62] Liquidity, Financial Resources and Capital Resources Liquidity Position (As of June 30) | Indicator | 2024 (RMB Million) | December 31, 2023 (RMB Million) | | :--- | :--- | :--- | | Cash and Cash Equivalents | 238.5 | 274.8 | | Restricted Bank Deposits | 161.2 | 165.6 | | Total Borrowings | 1,092.0 | 948.6 | | Borrowings in Current Liabilities | 748.5 | 678.6 | | Fixed-Rate Borrowings Ratio | 63.3% | 68.9% | Borrowing Repayment Schedule (As of June 30) | Repayment Period | 2024 (RMB Thousand) | December 31, 2023 (RMB Thousand) | | :--- | :--- | :--- | | Within 1 year | 748,506 | 678,592 | | 1 to 2 years | 227,500 | 230,000 | | 2 to 5 years | 115,957 | 40,037 | | Total | 1,092,000 | 948,629 | Current, Total and Net Assets Asset and Liability Position (As of June 30) | Indicator | 2024 (RMB Million) | December 31, 2023 (RMB Million) | | :--- | :--- | :--- | | Assets | | | | Total Non-Current Assets | 385.5 | 381.6 | | Total Current Assets | 7,948.2 | 8,703.6 | | Total Assets | 8,333.6 | 9,085.2 | | Capital and Reserves | | | | Equity Attributable to Owners of the Company | 1,761.7 | 1,812.4 | | Non-Controlling Interests | 60.3 | 45.7 | | Total Equity | 1,821.9 | 1,858.0 | | Liabilities | | | | Total Non-Current Liabilities | 378.4 | 296.1 | | Total Current Liabilities | 6,133.3 | 6,931.1 | | Total Liabilities | 6,511.7 | 7,227.2 | | Net Current Assets | 1,814.8 | 1,772.5 | | Total Assets Less Current Liabilities | 2,200.3 | 2,154.1 | Charge on Assets Part of the Group's borrowings are secured by properties, plant and equipment, investment properties, shares of subsidiaries, and properties held for sale or under development. - Part of the Group's borrowings are secured by properties, plant and equipment, investment properties, shares of subsidiaries, and properties held for sale or under development[72][74] Contingent Liabilities The Group provides guarantees for homebuyers' bank financing and an associate's shareholder loan, with directors assessing the likelihood of default and funding risk as minimal or low. - The Group provides guarantees for homebuyers' bank financing, with directors considering the likelihood of default to be minimal and the financial guarantees not material[75][76] - A Group subsidiary has funding repayment obligations for an associate's shareholder loan, amounting to approximately RMB 229,495,000 as of June 30, 2024[75][76] - Properties held for sale or under development pledged for certain third-party borrowings amounted to RMB 119.3 million[78][79] Key Financial Ratios Key Financial Ratios (As of June 30) | Indicator | 2024 | December 31, 2023 | | :--- | :--- | :--- | | Current Ratio | 1.3 | 1.3 | | Gearing Ratio | 59.9 | 51.1 | | Debt-to-Equity Ratio | 46.8 | 36.3 | KEY RISK FACTORS The Group's business is highly dependent on the Henan Province real estate market, facing intense competition, susceptibility to force majeure events, and interest rate fluctuation risks. - All projects are located in Henan Province, China, with business highly dependent on local property market performance, influenced by economic, financial, supply-demand, government policies, and interest rates[83][86] - The real estate market is highly competitive, with the Group competing against large national, regional, and local developers in land acquisition, location, product quality, and pricing[84][86] - Business is affected by operating regions and the overall social conditions in China, with force majeure events (e.g., epidemics) potentially causing damage[85][87] - The Group primarily faces interest rate fluctuation risks from borrowings but does not hedge cash flow or fair value interest rate risks[89][93] GEARING RATIO As of June 30, 2024, the Group's gearing ratio increased by 8.8 percentage points to 59.9%, primarily due to new borrowings obtained during the period. - As of June 30, 2024, the gearing ratio was 59.9%, an increase of 8.8 percentage points from 51.1% on December 31, 2023[91][94] - The increase in gearing ratio was primarily due to new borrowings obtained during the period[91][94] INTERIM DIVIDEND The Board does not recommend paying an interim dividend for the six months ended June 30, 2024, considering the Group's operating results, financial position, and capital requirements. - The Board does not recommend paying an interim dividend for the six months ended June 30, 2024[92][95] TREASURY POLICIES AND CAPITAL STRUCTURE The Group's capital management aims to ensure continued operation, generate shareholder returns, and maintain an optimal capital structure to minimize funding costs, monitored by the gearing ratio. - The Group's capital management objectives are to ensure continued operation, generate returns for shareholders, and maintain an optimal capital structure to minimize funding costs[96][100] - The Group adjusts its capital structure by modifying dividends, issuing new shares, or selling assets, and monitors capital using the gearing ratio[96][101] HUMAN RESOURCES AND EMPLOYEES' REMUNERATION As of June 30, 2024, the Group had 548 employees, providing competitive remuneration, benefits, and training, and utilizing a share option scheme to attract and retain talent. - As of June 30, 2024, the Group had 548 employees, a decrease from 658 on June 30, 2023[98][102] - The Group provides medical insurance, social insurance contribution schemes or other pension schemes, and other in-kind benefits[98][102] - The Group offers a range of employee training programs and adopted a share option scheme in November 2018 as an incentive to attract and retain talent[99][102] FORWARD LOOKING For the second half of 2024, new home sales decline is expected to narrow, but real estate investment may remain weak, requiring time for market confidence to recover, with policies focusing on stimulating demand and optimizing restrictions. - The year-on-year decline in national new home sales is expected to gradually narrow in the second half, but real estate investment may remain weak, and market confidence recovery will still take time[104][106] - Key policy directions include lowering mortgage rates, transaction taxes and fees, optimizing purchase restrictions, and stimulating demand for upgraded housing[104][106] - In the second half, the Group will strengthen internal control management, maintain product quality, deepen core operational strategies, and enhance carbon neutrality requirements[105][107] - The Group will closely monitor fund allocation, ensure efficient use of funds and stable cash flow through precise data analysis and forward-looking planning, and intensify innovation and application of marketing strategies[105][107] Other Information EVENTS AFTER THE REPORTING PERIOD Except as disclosed in this interim report, the Group has not undertaken any significant events after June 30, 2024. - The Group has not undertaken any significant events after June 30, 2024[108][112] DIRECTORS' SERVICE CONTRACTS Both executive and independent non-executive directors have signed three-year service agreements or appointment letters with the company, terminable according to agreement terms. - Service agreements or appointment letters for executive and independent non-executive directors are for a term of three years, terminable according to agreement terms[109][113] CORPORATE GOVERNANCE The company is committed to high standards of corporate governance and has complied with all applicable code provisions in Appendix C1 of the Listing Rules for the six months ended June 30, 2024, except for code provision B.2.2 (rotation of directors). - The company has complied with all applicable code provisions in Appendix C1 of the Listing Rules, except for code provision B.2.2 (rotation of directors)[110][114] - Ms. Qi Chunfeng was due to retire at the 2024 Annual General Meeting and is required to retire by rotation at the next Annual General Meeting[111][114] COMPLIANCE WITH THE MODEL CODE FOR SECURITIES TRANSACTIONS The company has adopted the Model Code as the code of conduct for directors' securities transactions, and all directors have confirmed compliance with it. - All directors have confirmed compliance with the Model Code for Securities Transactions adopted by the company[116][120] PURCHASE, SALE OR REDEMPTION OF SECURITIES For 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 securities. - For the six months ended June 30, 2024, neither the company nor any of its subsidiaries purchased, sold, or redeemed any listed securities[117][121] DIRECTORS' RIGHTS TO ACQUIRE SHARES OR DEBENTURES For the six months ended June 30, 2024, no rights to subscribe for shares or debentures of the company were granted to or exercised by any director, their spouse, or children under 18. - For the six months ended June 30, 2024, no rights to subscribe for company shares or debentures were granted to or exercised by any director, their spouse, or children under 18[118][122] SHARE OPTIONS The company adopted a ten-year share option scheme on October 22, 2018, to incentivize eligible participants, with a maximum of 120,000,000 shares available for issue, and no options granted, exercised, cancelled, or lapsed during the period ended June 30, 2024. - The company adopted a share option scheme on October 22, 2018, valid for ten years, to provide incentives to eligible participants[119][123] - The maximum total number of shares available for issue under the share option scheme shall not exceed 10% of the issued shares upon completion of the initial public offering (i.e., 120,000,000 shares)[124][127] - As of June 30, 2024, no share options were granted, exercised, cancelled, or lapsed during the period[130][132] DIRECTORS' AND CHIEF EXECUTIVES' INTERESTS IN THE SHARES, UNDERLYING SHARES AND DEBENTURES OF THE COMPANY As of June 30, 2024, Executive Director Mr. Li Xiaobing was deemed to have a 75.00% equity interest in the company through a discretionary trust and controlled corporations, with no other directors holding disclosable interests. Directors' Interests in the Company's Shares (As of June 30) | Name of Director | Capacity/Nature of Interest | Number and Class of Securities | Approximate Percentage of Shareholding (%) | | :--- | :--- | :--- | :--- | | Mr. Li Xiaobing | Trustee of a discretionary trust | 855,000,000 Ordinary Shares (L) | 71.25 | | Mr. Li Xiaobing | Interest in controlled corporation | 45,000,000 Ordinary Shares (L) | 3.75 | | Total | | 900,000,000 Ordinary Shares (L) | 75.00 | - Mr. Li Xiaobing is deemed to have an interest in the company's shares through his capacity as the sole trustee of a family trust and a wholly-owned company[139] SUBSTANTIAL SHAREHOLDERS' INTERESTS IN SHARES AND UNDERLYING SHARES OF THE COMPANY As of June 30, 2024, substantial shareholders Heng Sheng Enterprise Limited, Heng Nuo Private Trust Limited, and Ms. Lin Wei (spouse of Mr. Li Xiaobing) were disclosed to have interests in the company's shares, with Ms. Lin Wei deemed to hold 75.00% due to spousal interest. Substantial Shareholders' Interests in the Company's Shares (As of June 30) | Name of Shareholder | Capacity/Nature of Interest | Number and Class of Securities | Approximate Percentage of Shareholding (%) | | :--- | :--- | :--- | :--- | | Heng Sheng Enterprise Limited | Beneficial owner | 855,000,000 Ordinary Shares (L) | 71.25 | | Heng Nuo Private Trust Limited | Interest in controlled corporation | 855,000,000 Ordinary Shares (L) | 71.25 | | Ms. Lin Wei | Interest of spouse | 900,000,000 Ordinary Shares (L) | 75.00 | - Heng Nuo Private Trust Limited, as the trustee of a family trust established by Mr. Li Xiaobing, is therefore deemed to have an interest in the shares of Heng Sheng Enterprise Limited[148] - Ms. Lin Wei, as the spouse of Mr. Li Xiaobing, is deemed to have an interest in all shares held by Mr. Li Xiaobing due to spousal interest[148] EMPLOYEE AND REMUNERATION POLICIES The Group provides employees with remuneration and benefits in line with industry practice, awarding discretionary bonuses based on performance, and granting share options to eligible employees. - The Group provides employees with remuneration and benefits in line with industry practice, and discretionary bonuses are awarded based on Group and individual performance[145][147] - Eligible employees may be granted share options in accordance with the terms of the company's share option scheme[145][147] RETIREMENT SCHEMES The Group participates in defined contribution retirement schemes for its employees in China and provides a Mandatory Provident Fund Scheme for its Hong Kong employees, with contributions from both employer and employee. - The Group participates in defined contribution retirement schemes organized by Chinese municipal and provincial government authorities for its employees in China[150][151] - The Group operates a Mandatory Provident Fund Scheme for its Hong Kong employees, with both employer and employee contributing 5% of the employee's relevant income, subject to a monthly cap of HK$30,000[152][155] REVIEW BY AUDIT COMMITTEE The unaudited condensed consolidated interim financial statements for the six months ended June 30, 2024, have been reviewed by the Board's Audit Committee, which comprises three independent non-executive directors. - The unaudited condensed consolidated interim financial statements for the six months ended June 30, 2024, have been reviewed by the Board's Audit Committee[153][156] AUDIT OR REVIEW OF THE FINANCIAL RESULTS The unaudited condensed consolidated interim financial statements for the six months ended June 30, 2024, have not been audited or reviewed by the company's auditor. - The unaudited condensed consolidated interim financial statements for the six months ended June 30, 2024, have not been audited or reviewed by the company's auditor[154][157] Unaudited Condensed Consolidated Statement of Profit or Loss Profit or Loss Summary For the six months ended June 30, 2024, the Group recorded revenue of RMB 1,467,599 thousand and gross profit of RMB 139,051 thousand, but ultimately incurred a loss for the period of RMB 36,099 thousand, with loss attributable to owners of the company at RMB 50,718 thousand. Unaudited Condensed Consolidated Statement of Profit or Loss (For the six months ended June 30) | Indicator | 2024 (RMB Thousand) | 2023 (RMB Thousand) | | :--- | :--- | :--- | | Revenue | 1,467,599 | 1,488,151 | | Cost of sales | (1,328,548) | (1,228,924) | | Gross profit | 139,051 | 259,227 | | Fair value losses on investment properties | (9,648) | (1,480) | | Selling and marketing expenses | (58,135) | (70,706) | | Administrative expenses | (56,643) | (56,193) | | Operating profit | 13,216 | 131,773 | | Finance (costs)/income, net | (43) | 101 | | Profit before income tax | 13,119 | 131,874 | | Income tax expenses | (49,218) | (62,698) | | (Loss)/Profit for the period | (36,099) | 69,176 | | (Loss)/Profit for the period attributable to owners of the Company | (50,718) | 60,763 | | Non-controlling interests | 14,619 | 8,413 | | Basic and diluted (loss)/earnings per share (RMB cents) | (4.23) | 5.06 | Unaudited Condensed Consolidated Statement of Comprehensive Income Comprehensive Income Summary For the six months ended June 30, 2024, the Group recorded total comprehensive expense for the period of RMB (36,099) thousand, with RMB (50,718) thousand attributable to owners of the company. Unaudited Condensed Consolidated Statement of Comprehensive Income (For the six months ended June 30) | Indicator | 2024 (RMB Thousand) | 2023 (RMB Thousand) | | :--- | :--- | :--- | | (Loss)/Profit for the period and total comprehensive (expense)/income | (36,099) | 69,176 | | Total comprehensive (expense)/income attributable to owners of the Company | (50,718) | 60,763 | | Non-controlling interests | 14,619 | 8,413 | Unaudited Condensed Consolidated Statement of Financial Position Financial Position Summary As of June 30, 2024, the Group's total assets were RMB 8,333,641 thousand, total liabilities were RMB 6,511,699 thousand, and total equity was RMB 1,821,942 thousand, with increased net current assets and non-current liabilities. Unaudited Condensed Consolidated Statement of Financial Position (As of June 30) | Indicator | 2024 (RMB Thousand) | December 31, 2023 (RMB Thousand) | | :--- | :--- | :--- | | Assets | | | | Total non-current assets | 385,456 | 381,579 | | Total current assets | 7,948,185 | 8,703,626 | | Total assets | 8,333,641 | 9,085,205 | | Capital and reserves | | | | Equity attributable to owners of the Company | 1,761,659 | 1,812,377 | | Non-controlling interests | 60,283 | 45,664 | | Total equity | 1,821,942 | 1,858,041 | | Liabilities | | | | Total non-current liabilities | 378,352 | 296,072 | | Total current liabilities | 6,133,347 | 6,931,092 | | Total liabilities | 6,511,699 | 7,227,164 | | Net current assets | 1,814,838 | 1,772,534 | | Total assets less current liabilities | 2,200,294 | 2,154,113 | Unaudited Condensed Consolidated Statement of Changes in Equity Equity Changes Summary For the six months ended June 30, 2024, the Group's total equity decreased from RMB 1,858,041 thousand to RMB 1,821,942 thousand, primarily due to a loss of RMB 36,099 thousand recorded during the period. Unaudited Condensed Consolidated Statement of Changes in Equity (For the six months ended June 30) | Indicator | Share Capital (RMB Thousand) | Share Premium (RMB Thousand) | Retained Profits (RMB Thousand) | Other Reserves (RMB Thousand) | Subtotal (RMB Thousand) | Non-controlling Interests (RMB Thousand) | Total Equity (RMB Thousand) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | At January 1, 2024 | 10,645 | 299,188 | 1,296,860 | 205,684 | 1,812,377 | 45,664 | 1,858,041 | | (Loss)/Profit for the period and total comprehensive (expense)/income | — | — | (50,718) | — | (50,718) | 14,619 | (36,099) | | At June 30, 2024 | 10,645 | 299,188 | 1,246,142 | 205,684 | 1,761,659 | 60,283 | 1,821,942 | Unaudited Condensed Consolidated Statement of Cash Flows Cash Flows Summary For the six months ended June 30, 2024, the Group used net cash of RMB (99,864) thousand in operating activities and RMB (9,834) thousand in investing activities, while generating RMB 73,357 thousand from financing activities, resulting in a decrease in cash and cash equivalents. Unaudited Condensed Consolidated Statement of Cash Flows (For the six months ended June 30) | Indicator | 2024 (RMB Thousand) | 2023 (RMB Thousand) | | :--- | :--- | :--- | | Net cash used in operating activities | (99,864) | (134,267) | | Net cash used in investing activities | (9,834) | (179,297) | | Net cash generated from financing activities | 73,357 | 253,235 | | Net decrease in cash and cash equivalents | (36,341) | (60,329) | | Cash and cash equivalents at end of period | 238,467 | 160,730 | Notes to the Unaudited Condensed Consolidated Interim Financial Information GENERAL INFORMATION Hengda Group (Holdings) Company Limited, incorporated in the Cayman Islands and listed on the Hong Kong Stock Exchange, primarily engages in property development in China, with its interim financial information unaudited. - The company was incorporated in the Cayman Islands on July 22, 2016, and listed on the Hong Kong Stock Exchange on November 12, 2018[172][175] - The company and its subsidiaries are primarily engaged in property development in China[173][175] - The Group's condensed consolidated interim financial information has not been audited or reviewed by the company's auditor[174][175] BASIS OF PREPARATION This interim financial information is prepared under HKAS 34, consistent with 2023 annual policies, with the Board confident in the Group's going concern despite a period loss and significant liabilities, through proactive management and financial support. - This interim financial information has been prepared in accordance with Hong Kong Accounting Standard 34 and is consistent with the accounting policies adopted in the 2023 annual consolidated financial statements[176][181] - The Group incurred a loss of approximately RMB 36,099,000 for the six months ended June 30, 2024, and faces a low cash balance, significant short-term liabilities, and potential cash outflows from financial guarantees[182][184] - The Board believes the Group will have sufficient working capital to continue as a going concern through proactive sales adjustments, communication with major contractors and suppliers, securing bank financing, and obtaining financial support from related parties[183][190] Going Concern Consideration Despite a loss of RMB 36,099,000 and significant current liabilities and potential cash outflows from financial guarantees, the Board plans proactive measures to ensure the Group's continued operation. - The Group recorded a loss of RMB 36,099,000 in the first half of 2024, with total current liabilities of approximately RMB 6,133,347,000, of which approximately RMB 748,506,000 represents bank and other long-term borrowings due within the next twelve months[182][184] - The Group faces potential cash outflows of approximately RMB 6,741,908,000 arising from financial guarantees provided to third parties and related parties[182][184] - The Board has reviewed cash flow forecasts and plans to ensure going concern through measures such as sales adjustments, negotiating payments with major contractors and suppliers, securing project development loans, and obtaining financial support from related parties[183][190] ADOPTION OF AMENDMENTS TO HKFRS ACCOUNTING STANDARDS During this interim period, the Group first applied several amendments to HKFRS Accounting Standards, which had no material impact on its consolidated financial position or performance, nor did they alter borrowing classifications. - The Group first applied amendments to HKAS 1 "Classification of Liabilities as Current or Non-current" and "Non-current Liabilities with Covenants"[191][195] - These amendments had no material impact on the Group's consolidated financial position and performance, and did not result in changes to the classification of borrowings[191][195] SEGMENT INFORMATION The Group primarily engages in property development in China, with its chief operating decision-maker reviewing the business as a single segment, thus no segment information is presented, and all revenue and non-current assets originate from China. - The Group is primarily engaged in property development in China, and its chief operating decision-maker reviews the business as a single segment, thus no segment information is presented[196][197] - For the six months ended June 30, 2024 and 2023, all of the Group's revenue originated from China, and all non-current assets are located in China[198][199] REVENUE The Group's revenue primarily derives from property sales, rental income, and service income, with property sales accounting for 99.4% of total revenue and service income significantly increasing by 262.7% year-on-year, all generated from China. Revenue Source Analysis (For the six months ended June 30) | Revenue Source | 2024 (RMB Thousand) | 2023 (RMB Thousand) | | :--- | :--- | :--- | | Property Sales | 1,457,879 | 1,481,189 | | Service Income | 4,951 | 1,365 | | Rental Income | 4,769 | 5,597 | | Total | 1,467,599 | 1,488,151 | - Service income increased by 262.7% year-on-year, while rental income decreased by 14.8% year-on-year[201] - All revenue is generated from China and primarily recognized at a point in time[204][205] OTHER LOSSES, NET For the six months ended June 30, 2024, the Group's other losses, net, amounted to RMB 539 thousand, primarily comprising penalties, fines, compensation, and donations. Other Losses, Net Details (For the six months ended June 30) | Item | 2024 (RMB Thousand) | 2023 (RMB Thousand) | | :--- | :--- | :--- | | Penalties, fines and compensation | (537) | (179) | | Donations | (186) | (100) | | Loss on disposal of property, plant and equipment | (3) | (29) | | Others | 187 | 12 | | Total | (539) | (296) | FINANCE INCOME/(COSTS) For the six months ended June 30, 2024, the Group's net finance costs were RMB 43 thousand, primarily comprising interest expenses on bank and other borrowings and lease liabilities interest, net of capitalized interest expenses. Finance Income/(Costs) Details (For the six months ended June 30) | Item | 2024 (RMB Thousand) | 2023 (RMB Thousand) | | :--- | :--- | :--- | | Interest income from bank deposits | 427 | 591 | | Interest on bank and other borrowings | (27,911) | (32,556) | | Interest on lease liabilities | (470) | (490) | | Less: Amount capitalised | 27,911 | 32,556 | | Finance (costs)/income, net | (43) | 101 | PROFIT BEFORE INCOME TAX For the six months ended June 30, 2024, the Group's profit before income tax was RMB 13,119 thousand, with key expenses including staff costs, depreciation, amortization, property costs, and a significant increase in provisions for properties held for sale or under development. Deductions from Profit Before Income Tax (For the six months ended June 30) | Item | 2024 (RMB Thousand) | 2023 (RMB Thousand) | | :--- | :--- | :--- | | Staff costs | 36,037 | 47,268 | | Depreciation expenses of property, plant and equipment | 3,692 | 4,031 | | Depreciation expenses of right-of-use assets | 2,295 | 2,070 | | Amortisation expenses of intangible assets | 364 | 363 | | Property costs recognised as expenses | 1,265,154 | 1,201,654 | | Provision for properties held for sale or under development | 57,671 | 12,583 | - Provision for properties held for sale or under development significantly increased from RMB 12,583 thousand in 2023 to RMB 57,671 thousand in 2024[212] INCOME TAX EXPENSES For the six months ended June 30, 2024, the Group's income tax expenses were RMB 49,218 thousand, primarily comprising PRC corporate income tax and land appreciation tax, with varying tax rates and exemptions for different entities. Income Tax Expenses Details (For the six months ended June 30) | Item | 2024 (RMB Thousand) | 2023 (RMB Thousand) | | :--- | :--- | :--- | | Current income tax — PRC Land Appreciation Tax | 915 | 23,858 | | Current income tax — PRC Corporate Income Tax | 31,460 | 50,703 | | Deferred income tax | 16,843 | (11,863) | | Total | 49,218 | 62,698 | - PRC corporate income tax rate is 25%, with a 10% withholding tax on dividends distributed to offshore holding companies (5% for Hong Kong companies)[215][217] - PRC Land Appreciation Tax is levied at progressive rates from 30% to 60%, while Hong Kong and overseas companies are exempt from profits tax[218][223] PRC Corporate Income Tax - The PRC corporate income tax rate is 25%[215] - Dividends distributed by PRC entities to offshore holding companies are subject to a 10% withholding tax, with a 5% rate applicable to Hong Kong holding companies[216][217] Land Appreciation Tax - PRC Land Appreciation Tax is levied at progressive rates ranging from 30% to 60%[218][221] Hong Kong Profits Tax - Hong Kong subsidiaries had no taxable profits, thus no provision for Hong Kong profits tax was made[219][222] Overseas Corporate Income Tax - Companies registered in the Cayman Islands and British Virgin Islands are not subject to any taxation[220][223] (LOSS)/EARNINGS PER SHARE For the six months ended June 30, 2024, the Group reported a basic and diluted loss per share of RMB 4.23 cents, a decline from earnings per share of RMB 5.06 cents in the prior year, with no dilutive shares. (Loss)/Earnings Per Share (For the six months ended June 30) | Indicator | 2024 (RMB Thousand/cents) | 2023 (RMB Thousand/cents) | | :--- | :--- | :--- | | (Loss)/Profit for the period attributable to owners of the Company | (50,718) | 60,763 | | Weighted average number of ordinary shares in issue (thousands) | 1,200,000 | 1,200,000 | | Basic and diluted (loss)/earnings per share (RMB cents) | (4.23) | 5.06 | - As there were no dilutive shares in issue during the period, diluted (loss)/earnings per share is the same as basic (loss)/earnings per share[226][227] DIVIDENDS For the six months ended June 30, 2024, no dividends were paid or proposed, nor have any dividends been proposed since the end of the reporting period. - For the six months ended June 30, 2024, no dividends were paid or proposed[228][232] PROPERTY, PLANT AND EQUIPMENT For the six months ended June 30, 2024, the Group acquired RMB 275 thousand in property, plant and equipment, disposed of RMB 3 thousand, and pledged certain buildings as collateral for bank borrowings. - Acquisitions of property, plant and equipment during the period amounted to approximately RMB 275 thousand (2023: RMB 2,828 thousand)[229][233] - Disposals of property, plant and equipment with a carrying amount of approximately RMB 3 thousand were made during the period, with a loss of approximately RMB 3 thousand recognized[230][233] - Certain buildings have been pledged as collateral for the Group's bank borrowings[231][233] INVESTMENT PROPERTIES As of June 30, 2024, the Group's investment properties had a carrying amount of RMB 135,440 thousand, including transfers from properties held for sale and a fair value loss, with some properties pledged as collateral for bank borrowings. Movement in Investment Properties (For the six months ended June 30) | Item | 2024 (RMB Thousand) | 2023 (RMB Thousand) | | :--- | :--- | :--- | | At January 1 | 119,600 | 122,520 | | Transfer from properties held or under development for sale | 25,488 | — | | Fair value losses | (9,648) | (1,480) | | At June 30 | 135,440 | 121,040 | - Certain investment properties have been pledged as collateral for the Group's bank borrowings[235][236] PROPERTIES HELD OR UNDER DEVELOPMENT FOR SALE As of June 30, 2024, the Group's net properties held or under development for sale amounted to RMB 6,956,459 thousand, with significant provisions made and certain properties pledged as collateral for borrowings. Balances of Properties Held or Under Development for Sale (As of June 30) | Item | 2024 (RMB Thousand) | December 31, 2023 (RMB Thousand) | | :--- | :--- | :--- | | Properties under development for sale | 4,796,537 | 5,295,466 | | Properties held for sale | 2,430,856 | 2,439,482 | | Less: Provision | (270,934) | (213,263) | | Net carrying amount | 6,956,459 | 7,521,685 | - Certain properties held or under development for sale have been pledged as collateral for the Group's bank and other long-term borrowings, and some are pledged for third-party and related-party borrowings[239][241] OTHER RECEIVABLES AND PREPAYMENTS As of June 30, 2024, the Group's total other receivables and prepayments decreased to RMB 378,791 thousand, primarily comprising prepayments for construction costs, tender deposits, amounts due from government, and temporary funding from third parties. Other Receivables and Prepayments Details (As of June 30) | Item | 2024 (RMB Thousand) | December 31, 2023 (RMB Thousand) | | :--- | :--- | :--- | | Prepayments for construction costs | 20,269 | 120,245 | | Prepaid taxes and surcharges | 15,477 | 13,609 | | Recoverable VAT | 16,453 | 6,557 | | Tender and other deposits | 112,044 | 111,188 | | Amount due from a related party | 41,506 | 40,503 | | Amounts due from government in relation to costs of demolition and resettlement activities | 84,845 | 102,864 | | Temporary funding due from third parties | 63,506 | 55,730 | | Amount due from a contractor and a supplier | 13,750 | 114,610 | | Less: Impairment provision | (55,955) | (54,279) | | Total | 378,791 | 582,461 | SHARE CAPITAL AND SHARE PREMIUM As of June 30, 2024, the company's authorized share capital was 2,400,000,000 ordinary shares of HK$0.01 each, with 1,200,000,000 shares issued and fully paid, totaling RMB 10,645 thousand in share capital and RMB 299,188 thousand in share premium. Share Capital and Share Premium (As of June 30) | Item | Number | Amount (HKD/RMB Thousand) | | :--- | :--- | :--- | | Authorised share capital (ordinary shares of HK$0.01 each) | 2,400,000,000 | 24,000,000 (HKD) | | Issued and fully paid ordinary shares (of HK$0.01 each) | 1,200,000,000 | 10,645 (RMB Thousand) (Share capital) | | | | 299,188 (RMB Thousand) (Share premium) | BANK BORROWINGS As of June 30, 2024, the Group's total bank borrowings amounted to RMB 670,910 thousand, with RMB 364,990 thousand being current, and secured by various assets and guaranteed by related parties. Bank Borrowings Details (As of June 30) | Item | 2024 (RMB Thousand) | December 31, 2023 (RMB Thousand) | | :--- | :--- | :--- | | Long-term borrowings — secured bank borrowings | 622,910 | 367,400 | | Less: Current portion | (316,990) | (134,900) | | Total non-current portion | 305,920 | 232,500 | | Current borrowings — secured bank borrowings | 48,000 | 48,000 | | Add: Current portion of long-term secured bank borrowings | 316,990 | 134,900 | | Total current portion | 364,990 | 182,900 | | Total | 670,910 | 415,400 | - Part of the bank borrowings are secured by properties held for sale or under development, investment properties, and property, plant and equipment[248][251] - Part of the bank borrowings are secured by equity interests in subsidiaries, third-party properties, and related-party properties, and guaranteed by related parties[249][250] Bank Borrowings Repayment Schedule (As of June 30) | Repayment Period | 2024 (RMB Thousand) | December 31, 2023 (RMB Thousand) | | :--- | :--- | :--- | | Within one year | 364,990 | 182,900 | | After one year but within two years | 202,500 | 205,000 | | After two years but within five years | 103,420 | 27,500 | | Total | 670,910 | 415,400 | OTHER LONG-TERM BORROWINGS As of June 30, 2024, the Group's total other long-term borrowings amounted to RMB 421,053 thousand, with RMB 383,516 thousand being current, primarily from non-financial institutions and non-controlling shareholders, secured by various assets and guaranteed by related parties. Other Long-Term Borrowings Details (As of June 30) | Item | 2024 (RMB Thousand) | December 31, 2023 (RMB Thousand) | | :--- | :--- | :--- | | Non-financial institutions, secured | 22,537 | 22,537 | | Non-financial institutions, unsecured | 266,260 | 294,260 | | Financial institutions, secured | — | 90,000 | | Loans from non-controlling shareholders, unsecured | 132,256 | 126,432 | | Total | 421,053 | 533,229 | | Less: Current portion | (383,516) | (495,692) | | Amounts presented under non-current liabilities | 37,537 | 37,537 | - The Group's other long-term borrowings are secured by properties held for sale or under development and equity interests in subsidiaries, and guaranteed by related parties[257][259] - Borrowings from non-controlling shareholders are unsecured and interest-bearing, planned for repayment before December 2024[258][260] Other Long-Term Borrowings Repayment Schedule (As of June 30) | Repayment Period | 2024 (RMB Thousand) | December 31, 2023 (RMB Thousand) | | :--- | :--- | :--- | | Within one year | 383,516 | 441,692 | | After one year but within two years | 25,000 | 61,000 | | After two years but within five years | 12,537 | 30,537 | | Total | 421,053 | 533,229 | TRADE AND OTHER PAYABLES As of June 30, 2024, the Group's total trade and other payables decreased to RMB 1,693,145 thousand, with trade payables accounting for RMB 1,320,784 thousand, primarily including amounts due to related parties. Trade and Other Payables Details (As of June 30) | Item | 2024 (RMB Thousand) | December 31, 2023 (RMB Thousand) | | :--- | :--- | :--- | | Trade payables | 1,320,784 | 1,490,485 | | Deposits received from customers | 54,041 | 81,591 | | VAT and other taxes payable | 136,182 | 205,803 | | Amounts due to non-controlling shareholders | 41,733 | 83,533 | | Temporary funding payable | 25,389 | 18,939 | | Interest payable | 50,360 | 57,172 | | Salaries payable | 18,056 | 21,325 | | Amounts due to related parties | 17,382 | 15,304 | | Other amounts due to related parties | 2,303 | 958 | | Others | 26,915 | 32,375 | | Total | 1,693,145 | 2,007,485 | Ageing Analysis of Trade Payables (As of June 30) | Ageing | 2024 (RMB Thousand) | December 31, 2023 (RMB Thousand) | | :--- | :--- | :--- | | Within 1 year | 924,984 | 1,037,502 | | 1 to 2 years | 191,287 | 222,064 | | 2 to 3 years | 102,832 | 131,792 | | Over 3 years | 101,681 | 99,127 | | Total | 1,320,784 | 1,490,485 | - Trade payables include trade payables to related parties of approximately RMB 5,330 thousand[270] CONTRACT LIABILITIES Contract liabilities primarily represent amounts received in advance from customers for property sales, classified as current liabilities, and recognized as revenue upon property control transfer. - Contract liabilities primarily represent amounts received in advance from customers for property sales, which will be recognized as revenue upon transfer of property control[272] - Contract liabilities are classified as current liabilities and are expected to be recognized as revenue within the normal operating cycle[273] COMMITMENTS As of June 30, 2024, the Group's capital expenditure committed but not yet incurred amounted to RMB 948,170 thousand, primarily for properties under development for sale. Capital Expenditure Committed But Not Yet Incurred (As of June 30) | Item | 2024 (RMB Thousand) | December 31, 2023 (RMB Thousand) | | :--- | :--- | :--- | | Properties under development for sale | 948,170 | 1,334,357 | | Land use rights | — | 40,810 | | Total | 948,170 | 1,375,167 | FINANCIAL GUARANTEES AND CONTINGENT LIABILITIES As of June 30, 2024, the Group provided significant financial guarantees for homebuyers' mortgage financing and an associate's shareholder loan, along with pledges for third-party borrowings, with directors assessing low default and funding risks. Financial Guarantees and Contingent Liabilities (As of June 30) | Item | 2024 (RMB Thousand) | December 31, 2023 (RMB Thousand) | | :--- | :--- | :--- | | Guarantees given for homebuyers' mortgage financing | 6,512,413 | 6,958,416 | | Guarantees given for an associate's shareholder loan | 229,495 | 229,495 | | Pledges provided for certain third-party borrowings | 119,300 | 120,900 | | Total | 6,861,208 | 7,308,811 | - The Group provides guarantees for homebuyers' mortgage financing, with directors considering the likelihood of homebuyers defaulting on payments to be minimal[279][280] - A Group subsidiary is obligated to fund the repayment of an associate's shareholder loan, with directors considering the risk of providing such funding to be low[282][283] RELATED-PARTY TRANSACTIONS The Group engaged in various related-party transactions, including temporary funding, civil engineering, and property management services, with related parties also providing guarantees for the Group's borrowings, resulting in outstanding balances as of June 30, 2024. - Related parties include company directors, their family members, controlling shareholders, non-controlling shareholders of subsidiaries, and companies controlled by Mr. Li[284][287] Summary of Related-Party Transactions (For the six months ended June 30) | Transaction Type | Related Party | 2024 (RMB Thousand) | 2023 (RMB Thousand) | | :--- | :--- | :--- | :--- | | Provision of temporary funding | Xuchang Hengzhu | 1,003 | 3,782 | | Repayment of temporary funding | Xuchang Hengzhu | — | 3,360 | | Receipt of temporary funding | Heng Sheng | 2,078 | 2,556 | | Repayment of temporary funding | Heng Sheng | — | 283 | | Services provided | Luohe Huatai Construction | 9,268 | — | | Services provided | Hengda Property Management | 5,590 | 12,289 | | Related party guarantees | Mr. Li and Ms. Lin Wei | 488,630 | 414,420 | Related-Party Balances (As of June 30) | Balance Type | Related Party | 2024 (RMB Thousand) | December 31, 2023 (RMB Thousand) | | :--- | :--- | :--- | :--- | | Amounts due from related parties | Xuchang Hengzhu | 41,506 | 40,503 | | Other amounts due to related parties | Hengda Property Management | 1,799 | 958 | | Trade payables to related parties | Luohe Huatai Construction | 3,913 | 220 | | Amounts due to related parties | Heng Sheng | 11,224 | 9,146 | Name and relationship with related parties - Related parties include company director Li Xiaobing and his family members, controlling shareholder Heng Sheng, property management companies controlled by Mr. Li, and associate Xuchang Hengzhu, among others[286][287] Transactions with related parties - The Group provided temporary funding of RMB 1,003 thousand to associate Xuchang Hengzhu and received temporary funding of RMB 2,078 thousand from holding company Heng Sheng[288][290] - Related parties Luohe Huatai Construction provided civil engineering and construction services, and Hengda Property Management provided property management services[291][292] - Mr. Li and Ms. Lin Wei provided guarantees for the Group's bank and other long-term borrowings, totaling RMB 488,630 thousand[293][297] Related-party balances - Amounts due from associate Xuchang Hengzhu were RMB 41,506 thousand[299][300] - Among trade payables to related parties, RMB 3,913 thousand was due to Luohe Huatai Construction and RMB 1,417 thousand to Xuchang Erjian[304] - Amounts due to controlling shareholder Heng Sheng were RMB 11,224 thousand, and amounts due to Mr. Li were RMB 1,814 thousand[305][306] Glossary Definitions This section provides definitions for key terms used in the report, including Board, Directors, the Group, HK$, IPO, Listing Rules, Model Code, PRC, RMB, SFO, Stock Exchange, and the Company. - The glossary provides definitions for key terms used in the report, such as "the Group" referring to Hengda Holdings and its subsidiaries, and "PRC" referring to the People's Republic of China (excluding Taiwan, Hong Kong, and Macau SAR)[307]