中国通信服务(00552) - 2023 - 中期业绩

Key Highlights The Group steadily implemented its strategy in H1 2023, achieving positive business development, continuous improvement in operating efficiency metrics (e.g., gross margin, net profit margin, and ROE), and improved free cash flow, driven by domestic telecom operators and strategic emerging industries | Indicator | H1 2023 (RMB million) | YoY Growth (%) | H1 2023 (Ratio) | YoY Increase (percentage points) | | :-------- | :-------------------- | :------------- | :-------------- | :------------------------------- | | Operating Revenue | 73,170 | 5.7 | - | - | | Net Profit | 2,034 | 7.3 | - | - | | Gross Margin | - | - | 10.7% | 0.2 | | Net Profit Margin | - | - | 2.8% | 0.1 | | Annualized ROE | - | - | 10.0% | 0.2 | - Revenue from the domestic telecommunications operator market grew by 7.5%, and revenue from the domestic non-operator enterprise and government market grew by 3.6%[2] - Focusing on strategic emerging industries like digital infrastructure, smart cities, and green low-carbon solutions, new contract value increased by over 30%, accounting for over 27% of total new contract value, becoming a major contributor to business growth[2] Chairman's Statement The Chairman's Statement outlines the company's H1 2023 operating strategy, financial performance, market expansion, core capability building, social responsibility, and future outlook, positioning itself as a 'new-generation integrated smart service provider' to achieve steady growth and improved efficiency by seizing digital economy opportunities - The Group is positioned as a 'new-generation integrated smart service provider,' aiming to build a 'first-class smart service innovative enterprise'[3] - Focusing on future-oriented strategic emerging businesses, the Group aims to become a 'main force in digital infrastructure construction, a leader in smart city services, a top enterprise in industrial digital services, and a trusted expert in smart operations'[3] I. Operating Performance Stabilizes and Improves, Quality and Efficiency Continuously Enhance The Group seized digital China construction opportunities in H1 2023, achieving steady operating revenue growth, continuous improvement in gross and net profit margins, and positive trends in cash flow and shareholder returns | Indicator | H1 2023 (RMB million) | YoY Growth (%) | H1 2023 (Ratio) | YoY Increase (percentage points) | | :-------- | :-------------------- | :------------- | :-------------- | :------------------------------- | | Operating Revenue | 73,170 | 5.7 | - | - | | Service Revenue | 70,713 | 6.3 | - | - | | Operating Gross Profit | 7,834 | 7.4 | - | - | | Gross Margin | - | - | 10.7% | 0.2 | | Net Profit | 2,034 | 7.3 | - | - | | Net Profit Margin | - | - | 2.8% | 0.1 | | Annualized ROE | - | - | 10.0% | 0.2 | | Basic Earnings Per Share (RMB) | 0.294 | 7.3 | - | - | - Free cash flow improved year-on-year, and Return on Equity (ROE) further increased[4] 1. Adhering to Transformation and Upgrading, Three Major Business Segments Achieve Steady Growth The Group's three major business segments achieved steady growth through transformation and upgrading, with telecommunications infrastructure services growing fastest, applications, content, and other services maintaining good growth, and business process outsourcing services showing stable improvement | Business Segment | H1 2023 Revenue (RMB million) | YoY Growth (%) | % of Operating Revenue | | :--------------- | :---------------------------- | :------------- | :--------------------- | | Telecommunications Infrastructure Services | 37,688 | 7.5 | 51.5 | | Business Process Outsourcing Services | 21,729 | 0.9 | 29.7 | | Applications, Content, and Other Services | 13,753 | 8.6 | 18.8 | - Growth in telecommunications infrastructure services revenue was primarily led by high-value consulting and design services, continuously improving business quality[5] - Within applications, content, and other services, software development and system support businesses grew rapidly by 31.5%, demonstrating market recognition for enterprise software and digital service capabilities[6] 2. Integrating into Customer Ecosystems, Stabilizing Three Major Customer Markets The Group achieved stable development in domestic non-operator enterprise and government, domestic telecommunications operator, and overseas markets by focusing on new businesses, responding to changing customer demands, and optimizing its layout, thereby consolidating its market position | Customer Market | H1 2023 Revenue (RMB million) | YoY Growth (%) | % of Operating Revenue | | :-------------- | :---------------------------- | :------------- | :--------------------- | | Domestic Telecommunications Operators Market | 39,977 | 7.5 | 54.7 | | Domestic Non-Operator Enterprise and Government Market | 31,623 | 3.6 | - | | Overseas Market | 1,570 | 1.2 | - | - The domestic non-operator enterprise and government market focused on strategic emerging industries such as digital government, enterprise digital transformation, intelligent computing centers, power infrastructure and support, and photovoltaic construction, solidifying development quality[7] - The domestic telecommunications operators market actively responded to demands for data centers, computing networks, and industrial digitalization, contributing the most to revenue growth among all customer groups[7][8] - The overseas market expanded high-quality projects in key 'Belt and Road' regions, providing digital infrastructure, photovoltaic, and new energy storage construction services, with a continuous increase in the proportion of high-value businesses[8] II. Focusing on New Drivers, Strategic Emerging Businesses Develop Strongly The Group actively responded to digital China construction by focusing on strategic emerging industries like digital infrastructure, smart cities, green low-carbon, and emergency safety, cultivating new growth drivers, with new contract value increasing by over 30% year-on-year, becoming the main contributor to contract growth - New contract value in strategic emerging industries grew by over 30% year-on-year, accounting for over 27% of total new contract value[9] - In digital infrastructure, seizing opportunities from the 'East-Data-West-Computing' project and AIGC-driven data center, intelligent computing center, and supercomputing center construction, the Group established a Digital Infrastructure Industry Research Institute and successfully undertook multiple hundred-million-RMB general contracting projects[9] - In smart cities, guided by top-level design, the Group focused on digital government, enterprise digital transformation, and smart transportation, being shortlisted in the '2023 Digital Government Industry Map' and enhancing brand influence[10] - In the green low-carbon industry, serving the national 'dual carbon' strategy, the Group deeply cultivated power infrastructure, photovoltaic construction, energy services, and carbon management, engaging in strategic and industry-university-research cooperation with Beijing Green Exchange and 25 research institutions[10] - In emergency safety, addressing the needs of regulatory authorities and key industry clients, the Group developed core products such as asset mapping, situational awareness, safety production supervision, risk monitoring and early warning, and emergency rescue command, being selected for industry panoramas and potential rankings[10] III. Continuously Building Core Capabilities, Constructing a First-Class Smart Service Innovative Enterprise The Group is committed to comprehensively enhancing its core competitiveness by strengthening technological innovation, building integrated service capabilities, accelerating digital transformation, and steadily advancing key reforms, aiming to become a 'first-class smart service innovative enterprise' 1. Strengthening Technology-Driven Innovation, Enhancing Product Competitiveness The Group continuously increases R&D investment, optimizes its technology innovation system, focuses on industrial digital applications and core professional technologies, creates benchmark solutions and core products, and introduces high-end expert teams and tech talents to drive high-quality development through technological innovation - Continuously increasing R&D investment, focusing on core professional technology areas such as industrial digital applications, IoT, blockchain, dual-carbon energy-saving technologies, and cybersecurity[11] - Strengthening collaboration among R&D, marketing, and delivery teams to accelerate product market promotion efficiency[11] - Vigorously introducing high-end expert teams and tech talents to build strong core enterprise competitiveness[11] 2. Building Strong Integrated Capabilities, Providing High-Level Services to Customers The Group integrates 4T capabilities, focusing on customers, leveraging its integrated service advantages in digital general integration, digital infrastructure general contracting, and consulting design leadership, and continuously optimizing its marketing and operation service system to enhance end-to-end delivery capabilities - Integrating CT, IT, DT, and OT (4T) capabilities to build a high-quality service-oriented enterprise[12] - Leveraging integrated service advantages such as digital general integration, digital infrastructure general contracting, and consulting design leadership[12] - Continuously optimizing marketing and operation service systems adapted to new businesses and models, enhancing end-to-end, comprehensive delivery capabilities[12] 3. Accelerating Digital Transformation, Achieving High-Efficiency Operations The Group prioritizes digitalization to enhance value creation, deeply integrating digital technology with production, operation, management, and product services to drive model innovation, and continuously advancing internal production and operation digital transformation to improve efficiency and reduce costs - Guided by overall planning, promoting deep integration of digital technology with enterprise production, operation, management, and product services to drive innovation in production models and business products[13] - Strengthening digital transformation mindset, awareness, and talent cultivation to enhance the source power of innovation[14] - Continuously advancing internal production and operation digital transformation, promoting tools such as production efficiency platforms and project site management systems to improve operational efficiency and data sharing capabilities[14] 4. Steadily Advancing Reforms in Key Areas, Building Leading Industry Enterprises The Group deepens reforms to continuously optimize enterprise operation and management mechanisms, steadily advances professional integration, completes shareholding reforms and integration of subsidiaries, and accelerates the cultivation of leading enterprises in consulting design and application software to enhance corporate governance and operational efficiency - Deepening reforms to optimize enterprise operation and management mechanisms, stimulating vitality, strengthening momentum, and enhancing capabilities[15] - Completed the shareholding reform of China Comservice Supply Chain Co., Ltd. and the first-phase integration of China Comservice Smart Property Development Co., Ltd[15] - Accelerating the cultivation of leading professional enterprises in consulting design and application software to build new competitive advantages in the industrial chain[15] IV. Actively Fulfilling Environmental and Social Responsibilities, Maintaining Good Corporate Governance The Group actively fulfills its corporate mission and social responsibilities, adheres to standardized operations and green practices, achieving good results in environmental protection, social services, and corporate governance, gaining wide recognition from capital markets and the industry - Upholding green development concepts, established the 'Zero-Carbon Information and Communication Network Joint Laboratory,' participated in national 'dual carbon' research projects, and provided clean, low-carbon, and efficient services to customers[16][17] - Actively undertaking social responsibilities, successfully completing communication guarantees for major events such as the 'China-Central Asia Summit' and the '31st World University Summer Games,' and actively participating in disaster relief during natural disasters[17] - Corporate governance level recognized by the capital market, ranking 98th in 'Fortune' China Top 500 Listed Companies and 1,499th in 'Forbes' Global 2000, and winning multiple 'Best Management Team' and 'Corporate Governance' awards in Asia[17] V. Outlook Looking ahead, the Group will continue to strengthen its leadership in strategic emerging industries, cultivate new growth curves, enhance consulting design and infrastructure general contracting capabilities, boost brand influence, and leverage capital operations to improve industrial leadership, accelerating its transformation into a 'first-class smart service innovative enterprise' - Digital China construction and new technologies drive industrial development innovation, with broad market prospects for strategic emerging industries[18] - In the future, the Group will strengthen integrated consulting and design capabilities, accelerate business upgrades, increase R&D investment, introduce high-end expert talents, and advance digital transformation and strategic emerging business layouts[18] - Building strong infrastructure general contracting capabilities, actively expanding high-value general contracting projects in the industry, cultivating high-efficiency general contracting project manager teams, creating cost advantages, and comprehensively enhancing general contracting project management capabilities[18] - Strengthening brand-driven capabilities, solidifying its leading position in telecommunications infrastructure, focusing on smart cities, industrial digital services, and smart operations, and building a brand as the main force in digital infrastructure construction[18][19] - Enhancing industrial leadership through capital operations, leveraging the role of capital as a link, actively seeking opportunities for large projects, strengthening the industrial ecosystem through investment, and promoting new business expansion and improved development quality[19] Group Performance This section presents the unaudited consolidated performance of China Communications Services Corporation Limited and its subsidiaries, including the condensed consolidated income statement, statement of comprehensive income, and statement of financial position, reflecting financial performance for the six months ended June 30, 2023, and financial position at period-end Condensed Consolidated Income Statement For the six months ended June 30, 2023, the Group's operating revenue reached RMB 73,170 million, net profit was RMB 2,034 million, and basic earnings per share were RMB 0.294, all showing year-on-year growth Condensed Consolidated Income Statement (For the six months ended June 30) | Indicator | 2023 (RMB thousand) | 2022 (RMB thousand) | | :-------- | :------------------ | :------------------ | | Operating Revenue | 73,169,553 | 69,253,532 | | Operating Costs | (65,335,907) | (61,959,855) | | Gross Profit | 7,833,646 | 7,293,677 | | Other Income | 935,824 | 940,297 | | Selling, General and Administrative Expenses | (6,353,365) | (5,920,470) | | Other Expenses | (76,420) | (76,213) | | Finance Costs | (55,394) | (42,401) | | Share of Profits of Associates and Joint Ventures | 54,320 | 39,125 | | Profit Before Tax | 2,338,611 | 2,234,015 | | Income Tax | (226,337) | (277,051) | | Profit for the Period | 2,112,274 | 1,956,964 | | Profit Attributable to Equity Holders of the Company | 2,034,456 | 1,895,456 | | Profit Attributable to Non-controlling Interests | 77,818 | 61,508 | | Basic/Diluted Earnings Per Share (RMB) | 0.294 | 0.274 | Condensed Consolidated Statement of Comprehensive Income For the six months ended June 30, 2023, the Group's profit for the period was RMB 2,112 million, with total other comprehensive income of RMB 383 million, resulting in a total comprehensive income of RMB 2,495 million Condensed Consolidated Statement of Comprehensive Income (For the six months ended June 30) | Indicator | 2023 (RMB thousand) | 2022 (RMB thousand) | | :-------- | :------------------ | :------------------ | | Profit for the Period | 2,112,274 | 1,956,964 | | Other Comprehensive Income for the Period (after tax) | 382,931 | 139,371 | | Total Comprehensive Income for the Period | 2,495,205 | 2,096,335 | | Total Comprehensive Income Attributable to Equity Holders of the Company | 2,417,251 | 2,034,624 | | Total Comprehensive Income Attributable to Non-controlling Interests | 77,954 | 61,711 | Condensed Consolidated Statement of Financial Position As of June 30, 2023, the Group's total assets were RMB 119,040 million, total liabilities were RMB 76,330 million, and total equity was RMB 42,710 million, maintaining a stable financial position Condensed Consolidated Statement of Financial Position (As of June 30, 2023) | Indicator | June 30, 2023 (RMB thousand) | December 31, 2022 (RMB thousand) | | :-------- | :--------------------------- | :------------------------------- | | Total Non-current Assets | 26,718,340 | 26,065,369 | | Total Current Assets | 92,321,679 | 84,203,229 | | Total Assets | 119,040,019 | 110,268,598 | | Total Current Liabilities | 74,205,950 | 66,596,457 | | Total Non-current Liabilities | 2,123,582 | 2,048,216 | | Total Liabilities | 76,329,532 | 68,644,673 | | Equity Attributable to Equity Holders of the Company | 41,416,480 | 40,360,637 | | Non-controlling Interests | 1,294,007 | 1,263,288 | | Total Equity | 42,710,487 | 41,623,925 | Notes This section provides detailed notes to the condensed consolidated interim financial information, covering the basis of preparation, significant accounting policies, segment reporting, composition of various revenues and costs, taxation, dividends, and specific information on key balance sheet items, offering essential context and details for understanding the financial statements 1. Basis of Preparation This condensed consolidated interim financial information is prepared in accordance with International Accounting Standard 34 'Interim Financial Reporting' and complies with the disclosure requirements of Appendix 16 to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited, also disclosing the impact of business combinations under common control - The condensed consolidated interim financial information is prepared in accordance with International Accounting Standard 34 'Interim Financial Reporting' and complies with the disclosure requirements of Appendix 16 to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited[25] Impact of Business Combinations Under Common Control On February 28, 2023, the Group acquired 100% equity of China Post and Telecommunications Translation Service Co., Ltd. for RMB 18.45 million; as both are under the common control of China Telecom Group Co., Ltd., this acquisition is reflected using the pooling of interests method in the consolidated financial statements, and relevant historical data has been restated - China Comservice acquired 100% equity of China Post and Telecommunications Translation Service Co., Ltd. for RMB 18.45 million on February 28, 2023[26] - This acquisition is considered a business combination under common control, reflected using the pooling of interests method, with the target company's assets and liabilities measured at historical cost, and the consolidated financial statements have been restated[26] 2. Significant Accounting Policies This condensed consolidated interim financial information is prepared on a historical cost basis and applies newly revised International Financial Reporting Standards, which have no significant impact on the Group's financial information - This condensed consolidated interim financial information is prepared on a historical cost basis, with certain financial instruments measured at fair value[27] - The Group first applied IFRS 17 'Insurance Contracts' and amendments to IAS 1, IAS 8, and IAS 12, but these had no significant impact on the condensed consolidated interim financial information[28] 3. Segment Reporting The Group's primary business segment is providing integrated smart solutions in the information and digitalization fields, thus no other segment information is disclosed - The Group primarily has one business segment, which is providing integrated smart solutions in the information and digitalization fields[29] 4. Operating Revenue For the six months ended June 30, 2023, the Group's total operating revenue from providing integrated smart solutions was RMB 73,170 million, primarily from telecommunications infrastructure services, business process outsourcing services, and applications, content, and other services, with detailed breakdowns by major customers and geographical contributions Operating Revenue by Business Nature (For the six months ended June 30) | Business Nature | 2023 (RMB thousand) | 2022 (RMB thousand) | | :-------------- | :------------------ | :------------------ | | Telecommunications Infrastructure Services Revenue | 37,687,865 | 35,049,501 | | Business Process Outsourcing Services Revenue | 21,728,657 | 21,536,968 | | Applications, Content, and Other Services Revenue | 13,753,031 | 12,667,063 | | Total | 73,169,553 | 69,253,532 | Operating Revenue by Major Customers (For the six months ended June 30) | Customer | 2023 (RMB million) | % of Total Operating Revenue | 2022 (RMB million) | % of Total Operating Revenue | | :------- | :----------------- | :--------------------------- | :----------------- | :--------------------------- | | China Telecom Group | 25,823 | 35.3 | 22,725 | 32.8 | | China Mobile Group | 8,301 | 11.3 | 8,978 | 13.0 | | Regions outside Mainland China | 1,570 | - | 1,551 | - | - Effective January 1, 2023, the Group reclassified China Broadcasting Network Group Co., Ltd. and its subsidiaries from non-telecommunications operators to telecommunications operators, and comparative data has been reclassified[31] 5. Operating Costs For the six months ended June 30, 2023, the Group's operating costs were RMB 65,336 million, primarily comprising subcontracting costs, material costs, and direct staff costs Composition of Operating Costs (For the six months ended June 30) | Cost Item | 2023 (RMB thousand) | 2022 (RMB thousand) | | :-------- | :------------------ | :------------------ | | Subcontracting Costs | 40,303,014 | 38,063,019 | | Material Costs | 11,885,948 | 10,896,460 | | Direct Staff Costs | 3,871,293 | 4,029,976 | | Direct Costs of Goods for Distribution | 1,682,870 | 2,032,762 | | Short-term Lease and Low-value Asset Lease Expenses | 581,799 | 580,360 | | Depreciation and Amortization | 482,139 | 469,638 | | Others | 6,528,844 | 5,887,640 | | Total | 65,335,907 | 61,959,855 | 6. Other Income For the six months ended June 30, 2023, the Group's other income totaled RMB 936 million, primarily from interest income, dividend income, management fee income, government grants, and additional input VAT deductions Composition of Other Income (For the six months ended June 30) | Income Item | 2023 (RMB thousand) | 2022 (RMB thousand) | | :---------- | :------------------ | :------------------ | | Interest Income | 317,534 | 247,019 | | Dividend Income from Equity Instruments | 176,610 | 176,683 | | Management Fee Income | 149,716 | 151,853 | | Government Grants | 111,838 | 124,169 | | Additional Input VAT Deductions | 94,655 | 129,156 | | Gains on Disposal of Property, Plant and Equipment, Intangible Assets and Right-of-use Assets | 3,391 | 7,067 | | Penalty Income | 1,698 | 4,852 | | Investment Income and Fair Value Changes from Wealth Management Products and Structured Deposits | — | 44,185 | | Others | 80,382 | 55,313 | | Total | 935,824 | 940,297 | 7. Finance Costs For the six months ended June 30, 2023, the Group's finance costs were RMB 55 million, mainly comprising interest on bank and other borrowings and lease liabilities, with no borrowing costs capitalized into construction in progress during the period Composition of Finance Costs (For the six months ended June 30) | Expense Item | 2023 (RMB thousand) | 2022 (RMB thousand) | | :----------- | :------------------ | :------------------ | | Interest on Bank and Other Borrowings | 28,402 | 13,126 | | Interest on Lease Liabilities | 26,992 | 29,275 | | Total | 55,394 | 42,401 | - No borrowing costs were capitalized into construction in progress for the six months ended June 30, 2023[35] 8. Profit Before Tax For the six months ended June 30, 2023, the Group's profit before tax was RMB 2,339 million, after deducting employee costs, amortization, depreciation, material costs, direct distribution costs of goods, impairment losses, and selling, general and administrative expenses Deductions from Profit Before Tax (For the six months ended June 30) | Item | 2023 (RMB thousand) | 2022 (RMB thousand) | | :--- | :------------------ | :------------------ | | Employee Costs | 8,239,454 | 8,128,702 | | Amortization | 98,229 | 82,822 | | Depreciation | 714,914 | 704,556 | | Auditor's Remuneration | 7,009 | 6,623 | | Material Costs | 11,885,948 | 10,896,460 | | Direct Costs of Goods for Distribution | 1,682,870 | 2,032,762 | | Impairment Losses and Reversals of Inventories, Net | 19,296 | 21,575 | | Impairment Losses Recognized and Reversals for Accounts Receivable, Other Receivables, Contract Assets and Others, Net | 165,852 | 118,247 | | Short-term Lease and Low-value Asset Lease Expenses | 665,716 | 663,808 | Major Expense Categories (For the six months ended June 30) | Expense Item | 2023 (RMB million) | 2022 (RMB million) | | :----------- | :----------------- | :----------------- | | Selling and Marketing Expenses | 1,180 | 1,119 | | Administrative Expenses | 2,748 | 2,576 | | Research and Development Costs | 2,082 | 1,924 | | Other Expenses | 343 | 301 | 9. Income Tax For the six months ended June 30, 2023, the Group's total income tax was RMB 226 million, with differences between actual tax expense and estimated income tax at statutory rates primarily due to subsidiary tax incentives, non-deductible expenses, non-taxable income, and additional R&D expense deductions Composition of Income Tax (For the six months ended June 30) | Item | 2023 (RMB thousand) | 2022 (RMB thousand) | | :--- | :------------------ | :------------------ | | Current Tax | 252,167 | 439,393 | | Deferred Tax | (25,830) | (162,342) | | Total Income Tax | 226,337 | 277,051 | - The Group's PRC subsidiaries calculate income tax at a statutory rate of 25%, with eligible high-tech enterprises, Western Development, and small-profit enterprises enjoying preferential tax rates of 15% or 20%[38][39] - Certain R&D costs are eligible for an additional 100% deduction (compared to 75% in 2022)[39] 10. Earnings Per Share For the six months ended June 30, 2023, the Group's basic earnings per share were RMB 0.294, which was the same as diluted earnings per share due to the absence of outstanding potentially dilutive ordinary shares Earnings Per Share (For the six months ended June 30) | Indicator | 2023 (RMB) | 2022 (RMB) | | :-------- | :--------- | :--------- | | Basic/Diluted Earnings Per Share | 0.294 | 0.274 | - Basic earnings per share are calculated by dividing profit attributable to equity holders of the Company of RMB 2,034 million by 6,926,018 thousand shares[40] 11. Other Comprehensive Income For the six months ended June 30, 2023, the Group's total other comprehensive income was RMB 383 million, primarily from fair value changes of equity instruments measured at fair value through other comprehensive income, and exchange differences on translation of financial statements Composition of Other Comprehensive Income (For the six months ended June 30) | Item | 2023 (RMB thousand) | 2022 (RMB thousand) | | :--- | :------------------ | :------------------ | | Fair Value Changes of Equity Instruments Measured at Fair Value Through Other Comprehensive Income Recognized During the Period | 498,426 | 162,028 | | Net Deferred Tax Credited to Other Comprehensive Income | (126,265) | (39,932) | | Exchange Differences on Translation of Financial Statements | 10,770 | 17,275 | | Other Comprehensive Income for the Period | 382,931 | 139,371 | 12. Dividends The Board of Directors resolved not to declare an interim dividend for the six months ended June 30, 2023, while also disclosing the final dividend pertaining to the previous financial year approved during this period - The Board of Directors resolved not to declare an interim dividend for the six months ended June 30, 2023[42] Final Dividend Pertaining to the Previous Financial Year Approved During the Period | Item | 2023 (RMB thousand) | 2022 (RMB thousand) | | :--- | :------------------ | :------------------ | | Final Dividend (RMB per share) | 0.1939 | 0.1732 | | Total | 1,342,955 | 1,199,587 | 13. Accounts Receivable and Bills Receivable, Net As of June 30, 2023, the Group's net accounts receivable and bills receivable totaled RMB 26,014 million, after deducting credit loss provisions, with a detailed aging analysis provided Accounts Receivable and Bills Receivable, Net (As of June 30, 2023) | Item | June 30, 2023 (RMB thousand) | December 31, 2022 (RMB thousand) | | :--- | :--------------------------- | :------------------------------- | | Bills Receivable | 441,536 | 508,294 | | Accounts Receivable | 27,647,258 | 21,748,457 | | Provision for Credit Losses | (2,075,072) | (1,946,486) | | Total | 26,013,722 | 20,310,265 | Aging Analysis of Accounts Receivable and Bills Receivable (As of June 30, 2023) | Aging | June 30, 2023 (RMB thousand) | December 31, 2022 (RMB thousand) | | :---- | :--------------------------- | :------------------------------- | | Current | 1,619,305 | 1,897,638 | | Within One Year | 20,960,356 | 15,651,051 | | Over One Year but Less Than Two Years | 2,569,742 | 2,026,546 | | Over Two Years but Less Than Three Years | 627,570 | 513,913 | | Over Three Years but Less Than Four Years | 144,017 | 139,131 | | Over Four Years but Less Than Five Years | 44,258 | 33,512 | | Over Five Years | 48,474 | 48,474 | | Total | 26,013,722 | 20,310,265 | 14. Contract Assets, Net As of June 30, 2023, the Group's net contract assets totaled RMB 29,456 million, primarily from telecommunications infrastructure services, after deducting credit loss provisions; these are unbilled amounts due for services provided, expected to be transferred to accounts receivable within one year Contract Assets, Net (As of June 30, 2023) | Item | June 30, 2023 (RMB thousand) | December 31, 2022 (RMB thousand) | | :--- | :--------------------------- | :------------------------------- | | Telecommunications Infrastructure Services | 24,486,094 | 21,099,704 | | Business Process Outsourcing Services | 1,596,019 | 1,114,789 | | Applications, Content, and Other Services | 3,678,669 | 3,337,797 | | Provision for Credit Losses | (304,349) | (283,469) | | Total | 29,456,433 | 25,268,821 | - Contract assets are unbilled amounts due to the Group for construction, design, and other services provided, where the right to consideration is conditional[47] - The Group typically transfers contract assets that reach specific milestones to accounts receivable no later than one year after the reporting period[47] 15. Accounts Payable and Bills Payable As of June 30, 2023, the Group's total accounts payable and bills payable amounted to RMB 52,915 million, with most due within one year, and a detailed aging analysis is provided Accounts Payable and Bills Payable (As of June 30, 2023) | Item | June 30, 2023 (RMB thousand) | December 31, 2022 (RMB thousand) | | :--- | :--------------------------- | :------------------------------- | | Accounts Payable | 49,130,212 | 40,985,965 | | Bills Payable | 3,784,630 | 3,625,330 | | Total | 52,914,842 | 44,611,295 | Aging Analysis of Accounts Payable and Bills Payable (As of June 30, 2023) | Aging | June 30, 2023 (RMB thousand) | December 31, 2022 (RMB thousand) | | :---- | :--------------------------- | :------------------------------- | | Within One Year | 50,368,332 | 42,062,776 | | Over One Year but Less Than Two Years | 1,514,246 | 1,414,963 | | Over Two Years but Less Than Three Years | 454,736 | 450,309 | | Over Three Years | 577,528 | 683,247 | | Total | 52,914,842 | 44,611,295 | - Amounts due to China Telecom Group, the Group's associates, and associates of China Telecom Group are unsecured, interest-free, and expected to be settled within one year[48] 16. Contract Liabilities As of June 30, 2023, the Group's contract liabilities totaled RMB 8,193 million, primarily from telecommunications infrastructure services and other services; these represent customer prepayments received before fulfilling performance obligations Contract Liabilities (As of June 30, 2023) | Item | June 30, 2023 (RMB thousand) | December 31, 2022 (RMB thousand) | | :--- | :--------------------------- | :------------------------------- | | Telecommunications Infrastructure Services | 5,870,883 | 8,526,663 | | Other Services | 2,321,773 | 2,341,312 | | Total | 8,192,656 | 10,867,975 | - Contract liabilities are customer prepayments received by the Group before fulfilling performance obligations, recognized as contract liabilities until the related contract performance obligations are completed[49] Financial Review This section provides a detailed review of the Group's financial performance for H1 2023, including operating revenue, operating costs, gross profit, selling, general and administrative expenses, profit attributable to equity holders, cash flow, and asset and liability status, highlighting the company's steady growth and improved efficiency amidst digital economy opportunities Operating Revenue The Group's operating revenue for H1 2023 reached RMB 73,170 million, a 5.7% year-on-year increase, driven by its strategy of 'value leadership, steady progress, and high-quality development,' and seizing opportunities in the digital economy and new infrastructure construction Operating Revenue (For the six months ended June 30) | Indicator | H1 2023 (RMB million) | H1 2022 (RMB million) | YoY Growth (%) | | :-------- | :-------------------- | :-------------------- | :------------- | | Operating Revenue | 73,170 | 69,254 | 5.7 | - The Group is positioned as a 'new-generation integrated smart service provider,' aiming to become a 'main force in digital infrastructure construction, a leader in smart city services, a top enterprise in industrial digital services, and a trusted expert in smart operations'[50] Revenue by Business Segment All three of the Group's business segments achieved revenue growth, with telecommunications infrastructure services being the primary driver, and design services, software development, and system support services performing particularly well, demonstrating the company's enhanced capabilities in digital transformation Revenue by Business Segment (For the six months ended June 30) | Business Segment | H1 2023 Revenue (RMB million) | YoY Growth (%) | | :--------------- | :---------------------------- | :------------- | | Telecommunications Infrastructure Services | 37,688 | 7.5 | | Business Process Outsourcing Services | 21,729 | 0.9 | | Applications, Content, and Other Services | 13,753 | 8.6 | - Telecommunications infrastructure services were the primary driver of business growth, with design services revenue reaching RMB 5,200 million, a 15.3% year-on-year increase[51] - Within applications, content, and other services, software development and system support services revenue reached RMB 2,613 million, growing by 31.5% year-on-year, maintaining over 20% growth for several consecutive years[51] Revenue by Market Segment The Group achieved revenue growth in domestic telecommunications operator, domestic non-operator enterprise and government, and overseas markets, with the domestic telecommunications operator market making significant contributions, and the non-operator enterprise and government market maintaining stable growth through optimized business structure and expansion of high-value businesses Revenue by Market Segment (For the six months ended June 30) | Customer Market | H1 2023 Revenue (RMB million) | YoY Growth (%) | | :-------------- | :---------------------------- | :------------- | | Domestic Telecommunications Operators Market | 39,977 | 7.5 | | Domestic Non-Operator Enterprise and Government Market | 31,623 | 3.6 | | Overseas Market | 1,570 | 1.2 | - The domestic telecommunications operator market adhered to the 'CAPEX + OPEX + Smart Applications' development strategy, actively responding to demands for data center and computing network construction and industrial digitalization, making significant contributions to performance growth[53] - The domestic non-operator enterprise and government market focused on strategic opportunities in the digital economy and industrial digitalization, deeply exploring business demands such as data centers, digital government, and enterprise digital transformation, and expanding high-value businesses[53] Operating Costs The Group's operating costs increased by 5.4% year-on-year in H1 2023, with a decrease in direct staff costs, effective control over the increase in subcontracting costs, and a significant slowdown in the increase in material costs, demonstrating the company's efforts in cost management Operating Cost Changes (For the six months ended June 30) | Cost Item | H1 2023 (RMB million) | H1 2022 (RMB million) | YoY Change (%) | | :-------- | :-------------------- | :-------------------- | :------------- | | Total Operating Costs | 65,336 | 61,960 | 5.4 (Increase) | | Direct Staff Costs | 3,871 | 4,030 | (3.9) (Decrease) | | Subcontracting Costs | 40,303 | 38,063 | 5.9 (Increase) | | Material Costs | 11,886 | 10,896 | 9.1 (Increase) | - The Group reasonably controlled total headcount and optimized employment structure, leading to a continuous decrease in direct staff costs[54] - Strengthened subcontracting management and enhanced self-delivery capabilities, effectively controlling the increase in subcontracting costs[54] - Strengthened general contracting project management, enhancing material cost control through optimized internal procurement systems and centralized procurement, significantly slowing down the increase in material costs[54] Gross Profit The Group's gross profit increased by 7.4% year-on-year in H1 2023, with gross margin rising by 0.2 percentage points to 10.7%, continuing to stabilize and recover, primarily due to the company's focus on quality and efficiency, strengthened project and cost management, and a steady increase in the proportion of high-value businesses Gross Profit and Gross Margin (For the six months ended June 30) | Indicator | H1 2023 (RMB million) | H1 2022 (RMB million) | YoY Growth (%) | Gross Margin (%) | | :-------- | :-------------------- | :-------------------- | :------------- | :--------------- | | Gross Profit | 7,834 | 7,294 | 7.4 | - | | Gross Margin | - | - | - | 10.7 | - Gross margin increased by 0.2 percentage points year-on-year to 10.7%, continuing to stabilize and recover[55] - Through performance-based incentives, subsidiaries selected and expanded high-margin projects, strengthened project management and cost control, and enhanced business value creation capabilities[55] - With deeper penetration into the digital economy, new infrastructure construction, and industrial digitalization, the proportion of high-value businesses will steadily increase, driving a positive trend in overall gross margin[55] Selling, General and Administrative Expenses The Group's selling, general and administrative expenses for H1 2023 were RMB 6,353 million, a 7.3% year-on-year increase, with its proportion of operating revenue slightly rising to 8.7%, mainly due to the normalization of economic activities Selling, General and Administrative Expenses (For the six months ended June 30) | Indicator | H1 2023 (RMB million) | H1 2022 (RMB million) | YoY Growth (%) | % of Operating Revenue | | :-------- | :-------------------- | :-------------------- | :------------- | :--------------------- | | Selling, General and Administrative Expenses | 6,353 | 5,920 | 7.3 | 8.7 | - Selling, general and administrative expenses as a percentage of operating revenue increased by 0.2 percentage points year-on-year, primarily due to the normalization of economic activities[56] Profit Attributable to Equity Holders of the Company The Group's profit attributable to equity holders of the Company for H1 2023 was RMB 2,034 million, a 7.3% year-on-year increase Profit Attributable to Equity Holders of the Company (For the six months ended June 30) | Indicator | H1 2023 (RMB million) | H1 2022 (RMB million) | YoY Growth (%) | | :-------- | :-------------------- | :-------------------- | :------------- | | Profit Attributable to Equity Holders of the Company | 2,034 | 1,895 | 7.3 | Cash Flow The Group's net cash outflow for H1 2023 was RMB 2,323 million, an improvement from RMB 3,170 million in the prior year, primarily due to strengthened working capital management Net Cash Flow (For the six months ended June 30) | Indicator | H1 2023 (RMB million) | H1 2022 (RMB million) | | :-------- | :-------------------- | :-------------------- | | Net Cash Flow | (2,323) | (3,170) | - Net cash outflow improved year-on-year, primarily because the Group adhered to value leadership, strengthened working capital management, and improved net operating cash flow[57] Assets and Liabilities As of June 30, 2023, the Group's total assets and total liabilities both increased, with the asset-liability ratio slightly rising, yet maintaining a stable financial position Assets and Liabilities Status (As of June 30, 2023) | Indicator | June 30, 2023 (RMB million) | December 31, 2022 (RMB million) | Change (RMB million) | | :-------- | :-------------------------- | :------------------------------ | :------------------- | | Total Assets | 119,040 | 110,269 | 8,771 (Increase) | | Total Liabilities | 76,330 | 68,645 | 7,685 (Increase) | | Asset-Liability Ratio | 64.1% | - | Slightly Increased | Other Information This section covers other important information regarding the company's corporate governance, compliance, securities trading, interim report publication, and forward-looking statements, and lists Board members, ensuring transparency and adherence to regulatory requirements Audit Committee The Audit Committee has reviewed the Group's accounting principles, risk management, internal controls, and financial reporting matters, including the interim results for the six months ended June 30, 2023, with management and international auditors - The Audit Committee has reviewed the accounting principles and practices adopted by the Group and discussed risk management, internal controls, and financial reporting matters, including the interim results[59] Compliance with Corporate Governance Code The Company has complied with the code provisions set out in the Corporate Governance Code in Appendix 14 to the Listing Rules, using the 'Company Law of the People's Republic of China' and applicable laws and regulations in both regions as fundamental guidelines for corporate governance - The Company has complied with the code provisions set out in the Corporate Governance Code in Appendix 14 to the Listing Rules[60] - The 'Company Law of the People's Republic of China' and applicable laws, regulations, and regulatory requirements in both regions serve as fundamental guidelines for the Company's corporate governance[60] Compliance with the Model Code for Securities Transactions by Directors of Listed Issuers The Company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers set out in Appendix 10 to the Listing Rules, and after specific inquiry, all Directors and Supervisors confirmed compliance with the Code - The Company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers set out in Appendix 10 to the Listing Rules[61] - All Directors and Supervisors confirmed compliance with the Model Code for securities transactions of the Company for the six months ended June 30, 2023[61] Compliance with Appendix 16 to the Listing Rules The Company confirms that, apart from matters already disclosed, there have been no material changes to the existing company information listed in paragraph 32 of Appendix 16 to the Listing Rules compared to the information disclosed in the 2022 Annual Report - The Company confirms that there have been no material changes to the existing company information listed in paragraph 32 of Appendix 16 to the Listing Rules compared to the information disclosed in the 2022 Annual Report[62] Purchase, Sale or Redemption of the Company's Listed Securities For the six months ended June 30, 2023, 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, 2023, neither the Company nor any of its subsidiaries purchased, sold, or redeemed any of the Company's listed securities[63] Interim Report The interim report for the six months ended June 30, 2023, will be dispatched to shareholders at a later date and published on the HKEXnews website and the Company's website - The interim report for the six months ended June 30, 2023, will be dispatched to shareholders at a later date and published on the HKEXnews website (www.hkexnews.hk) and the Company's website (www.chinaccs.com.hk)[63](index=63&type=chunk) Forward-Looking Statements The Company reminds readers that certain statements in the report are forward-looking, subject to risks, uncertainties, and assumptions such as changes in macroeconomic environment, natural disasters, industry growth, regulatory environment, and business strategy execution, where actual results may differ materially, and the Company undertakes no obligation to update these statements - Forward-looking statements are subject to risks, uncertainties, and assumptions such as changes in the macroeconomic environment, natural disasters, relevant industry growth, changes in the regulatory environment, and execution of business strategies[64] - The Company's actual results may differ materially from those described in forward-looking statements, and the Company will not update these forward-looking statements[64] Board of Directors The Company's Board of Directors includes Executive Directors Mr. Liu Guiqing, Mr. Yan Dong, and Ms. Zhang Xu; Non-executive Directors Mr. Gao Tongqing, Mr. Tang Yongbo, and Mr. Huang Zhen; and Independent Non-executive Directors Mr. Xiao Weiqiang, Mr. Lu Tingjie, Mr. Wang Qi, and Mr. Wang Chungge - Executive Directors: Mr. Liu Guiqing, Mr. Yan Dong, and Ms. Zhang Xu[64] - Non-executive Directors: Mr. Gao Tongqing, Mr. Tang Yongbo, and Mr. Huang Zhen[64] - Independent Non-executive Directors: Mr. Xiao Weiqiang, Mr. Lu Tingjie, Mr. Wang Qi, and Mr. Wang Chungge[64]