智欣集团控股(02187) - 2023 - 中期业绩

Company Information Board of Directors and Company Secretary The Board of Directors of Zhixin Group Holding Limited comprises six executive directors and three independent non-executive directors, with audit, nomination, remuneration, and strategy committees, and Mr. Yuan Zhiwei and Mr. Zhong Dezhu as joint company secretaries - The Board members include Executive Directors Mr. Ye Zhijie, Mr. Huang Wengui, Mr. Lai Quanshui, Mr. Qiu Limiao, Mr. Ye Dan, and Mr. Huang Kaining; and Independent Non-executive Directors Ms. Wang Duanxiu, Ms. Cai Huinong, and Mr. Jiang Qinjian[2] - The company has an audit committee, a nomination committee, a remuneration committee, and a strategy committee[29] - The joint company secretaries are Mr. Yuan Zhiwei and Mr. Zhong Dezhu[29] Registration and Principal Place of Business The company is incorporated in the Cayman Islands, with its headquarters and principal place of business in Xiamen, Fujian Province, China, and its principal place of business in Hong Kong located in Causeway Bay, with stock code 2187 - The Company was incorporated in the Cayman Islands as an exempted company on 14 November 2018[78] - The Group's headquarters are located in Xiamen, Fujian Province, China[91] - The Company's stock code is 2187[11] Financial Highlights Key Financial Data For the six months ended 30 June 2023, the company's revenue was approximately RMB 231.0 million, a year-on-year decrease of 24.7%, gross profit decreased by 9.2% to RMB 32.8 million, and profit for the period significantly increased by 1,909.2% to RMB 10.6 million Key Financial Data for the Six Months Ended June 30 | Indicator | 2023 (RMB thousand) | 2022 (RMB thousand) | Change % | | :----- | :------------------ | :------------------ | :------- | | Revenue | 231,018 | 306,675 | (24.7%) | | Gross Profit | 32,777 | 36,080 | (9.2%) | | Profit for the Period | 10,649 | 530 | 1,909.2% | - The decrease in revenue was primarily due to additional price concessions offered by the Group to some customers as a result of market price competition in the ready-mixed concrete and precast concrete components markets[14] - The decrease was partially offset by increased revenue from the sale of eco-friendly bricks and new revenue streams from the sale of products such as iron ore and aggregates produced from iron ore tailings recycling during the period[14] Chairman's Statement Business Overview and Outlook The Group is a concrete building materials manufacturer and supplier in Xiamen, Fujian Province, China, also engaged in comprehensive utilization of iron ore tailings and production of eco-friendly bricks in Changjiang, Hainan Province, with business segments including ready-mixed concrete, precast concrete components, and iron ore tailings recycling and eco-friendly bricks, maintaining optimism for strong revenue from the latter despite market pressures on traditional segments - The Group is a manufacturer and supplier of concrete building materials in Xiamen, Fujian Province, China, and is engaged in the comprehensive utilization of iron ore tailings and the production of eco-friendly bricks in Changjiang, Hainan Province, China[23] - Business segments can be broadly divided into three categories: ready-mixed concrete, precast concrete components, and iron ore tailings recycling and eco-friendly bricks[23] - The Group is confident that the iron ore tailings recycling and eco-friendly bricks business will continue to generate strong revenue this year, and is very optimistic about the business prospects of comprehensive utilization of iron ore tailings[15] New Business Investments and Performance Since the acquisition of Ruitu Mingsheng in December 2021, the Group has made significant investments in a fully automated iron ore tailings recycling production line with an annual processing capacity of 3 million tons, receiving government subsidies of approximately RMB 10.2 million, with eco-friendly bricks and iron ore tailings recycling businesses achieving profits and gross margins of 49.4% and 54.8% respectively during the period - The Group has made significant investments in advanced automated assembly lines, including fully automated and integrated production equipment for iron ore tailings recycling, with an annual processing capacity of 3 million tons[24] - During the period, the Group received government subsidies and incentives of approximately RMB 10.2 million for investing in the tailings production line[24] - The eco-friendly bricks and iron ore tailings recycling businesses achieved profits during the period, with gross margins reaching 49.4% and 54.8% respectively[24] Management Discussion and Analysis Business Review During the period, the Group's total revenue was approximately RMB 231.0 million, a year-on-year decrease of 24.7%, with ready-mixed concrete and precast concrete components revenues decreasing by 48.5% and 46.1% respectively due to market price competition, while iron ore tailings recycling and eco-friendly bricks revenue significantly increased by 907.5% to RMB 74.8 million, becoming a new growth driver - The Group's revenue was approximately RMB 231.0 million, a decrease of approximately 24.7% compared to approximately RMB 306.7 million for the six months ended 30 June 2022[32] Revenue Changes by Business Segment | Business Segment | 2023 Revenue (RMB million) | 2022 Revenue (RMB million) | Change % | | :----------------- | :------------------------ | :------------------------ | :------- | | Ready-mixed Concrete | 112.0 | 217.3 | (48.5%) | | Precast Concrete Components | 44.2 | 82.0 | (46.1%) | | Iron Ore Tailings Recycling and Eco-friendly Bricks | 74.8 | 7.4 | 907.5% | - The increase in revenue from iron ore tailings recycling and eco-friendly bricks was mainly due to increased sales volume of eco-friendly bricks and new revenue streams from the sale of products produced from iron ore tailings recycling during the period[26] Cost of Sales, Gross Profit, and Gross Margin Cost of sales decreased by 26.7% year-on-year to RMB 198.2 million, primarily due to lower sales of ready-mixed concrete and precast concrete components, while overall gross profit decreased by 9.2% to RMB 32.8 million, but the overall gross margin increased from 11.8% to 14.2%, mainly driven by increased sales of high-margin iron ore tailings recycling and eco-friendly bricks - Cost of sales decreased by approximately RMB 72.4 million or approximately 26.7% from approximately RMB 270.6 million for the six months ended 30 June 2022 to approximately RMB 198.2 million for the current period[27] - The Group's overall gross profit decreased by approximately RMB 3.3 million or approximately 9.2% from approximately RMB 36.1 million for the six months ended 30 June 2022 to approximately RMB 32.8 million for the current period[27] - The Group's overall gross margin increased from approximately 11.8% for the six months ended 30 June 2022 to approximately 14.2% for the current period, mainly due to increased sales of higher-margin products from iron ore tailings recycling and eco-friendly bricks[27] Other Income and Expenses Other income increased by 178.3% to RMB 19.6 million during the period, mainly from government subsidies and incentives, while net other losses decreased by 86.3% to RMB 0.4 million, sales expenses decreased by 48.5% to RMB 7.2 million, administrative expenses decreased by 9.5% to RMB 21.1 million, and net finance costs decreased by 4.8% to RMB 7.0 million - Other income increased by approximately 178.3% to approximately RMB 19.6 million, mainly due to an increase in non-recurring government subsidies and incentives to approximately RMB 11.2 million[40] - Net other losses decreased by approximately 86.3% to approximately RMB 0.4 million, mainly due to a one-off compensation expense arising from the early termination of the lease for the precast concrete components production plant in the same period last year[41] Key Expense Changes | Expense Category | 2023 (RMB million) | 2022 (RMB million) | Change % | | :------- | :-------------------- | :-------------------- | :------- | | Sales Expenses | 7.2 | 13.9 | (48.5%) | | Administrative Expenses | 21.1 | 23.3 | (9.5%) | | Net Finance Costs | 7.0 | 7.3 | (4.8%) | Profit for the Period and Liquidity Profit for the period was approximately RMB 10.6 million, a significant increase from the prior year, with net current liabilities of approximately RMB 4.1 million compared to net current assets at the end of last year, cash and cash equivalents of approximately RMB 13.3 million, and a gearing ratio of approximately 50.4%, slightly lower than 51.5% at the end of last year - Profit for the period was approximately RMB 10.6 million (six months ended 30 June 2022: RMB 530,000)[38] - As at 30 June 2023, the Group's net current liabilities were approximately RMB 4.1 million (31 December 2022: net current assets of approximately RMB 39.8 million)[38] Liquidity and Borrowings | Indicator | 30 June 2023 (RMB million) | 31 December 2022 (RMB million) | | :--------------- | :--------------------------- | :---------------------------- | | Cash and Cash Equivalents | 13.3 | 17.5 | | Current Borrowings | 305.7 | 257.4 | | Non-current Borrowings | 146.0 | 186.2 | | Gearing Ratio | 50.4% | 51.5% | Capital Commitments and Significant Investments As of 30 June 2023, the Group's capital commitments were approximately RMB 133.0 million, with no significant acquisitions or disposals during the period, and the company has signed an investment contract to build a quartz mine deep processing and lightweight eco-friendly building materials production project in Yongding District, Longyan City, Fujian Province, with a total investment of RMB 1,100 million - As at 30 June 2023, the Group's capital commitments were approximately RMB 133.0 million (31 December 2022: RMB 148.3 million)[49] - During the period, the Group did not undertake any significant acquisitions or disposals related to subsidiaries, associates, and joint ventures[56] - On 16 May 2023, the Company entered into an investment agreement with Longyan Yongding Natural Resources Bureau, conditionally agreeing to invest in the construction of a quartz mine deep processing and lightweight eco-friendly building materials production project in Yongding District, Longyan City, Fujian Province, China, with a total investment of RMB 1,100 million[50] Employees and Use of Proceeds As of 30 June 2023, the Group had 497 employees, a decrease from the prior year, with employee remuneration determined by qualifications, responsibilities, contributions, and experience, and net proceeds from the share offer of approximately HKD 238.7 million were mainly used for expanding precast concrete component production capacity, enhancing IT and environmental systems, purchasing vehicles, and general working capital, most of which have been utilized - As at 30 June 2023, the Group had 497 employees (30 June 2022: 553 employees)[65] - Employee remuneration is determined with reference to factors such as qualifications, responsibilities, contributions, and experience[65] Use of Proceeds from Share Offer | Use | Disclosed Updated Net Proceeds to be Used (HKD million) | Net Proceeds Used as at 30 June 2023 (HKD million) | Net Proceeds Unused as at 30 June 2023 (HKD million) | Expected Timeline for Using Unused Net Proceeds | | :--------------------------------- | :-------------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :----------------------------------- | | Expanding precast concrete component production capacity | 24.5 | 0.2 | 7.1 | Before December 2024 | | Enhancing IT systems | 1.2 | — | — | Not applicable | | Improving environmental protection systems | 1.2 | — | — | Not applicable | | Purchasing mixer trucks and concrete pump trucks | 2.0 | — | — | Not applicable | | General working capital | 105.3 | — | — | Not applicable | | Repaying borrowings | 104.5 | — | — | Not applicable | | Total | 238.7 | 0.2 | 7.1 | | Prospects The Board is optimistic about the Group's business maintaining an upward trend in the second half of 2023, with the iron ore tailings comprehensive utilization business in Changjiang County, Hainan Province, expected to become a major revenue source due to abundant tailings supply and strong demand in neighboring areas - The Board is optimistic that the Group's business will maintain an upward trend in the second half of 2023 compared to the first half of the year[68] - The comprehensive utilization of iron ore tailings in Hainan is poised to become one of the Group's main revenue sources, owing to the abundant supply of iron ore tailings available for processing in Changjiang County, Hainan Province, coupled with anticipated strong demand for tailings output resources in neighboring areas[68] Condensed Consolidated Interim Statement of Comprehensive Income Statement of Comprehensive Income For the six months ended 30 June 2023, Zhixin Group recorded revenue of RMB 231,018 thousand and gross profit of RMB 32,777 thousand, with profit for the period at RMB 10,649 thousand and basic and diluted earnings per share of RMB 0.014 Condensed Consolidated Interim Statement of Comprehensive Income (For the Six Months Ended June 30) | Indicator | 2023 (RMB thousand) | 2022 (RMB thousand) | | :------------------------- | :------------------ | :------------------ | | Revenue | 231,018 | 306,675 | | Cost of sales | (198,241) | (270,595) | | Gross profit | 32,777 | 36,080 | | Other income | 19,562 | 7,028 | | Net other losses | (358) | (2,606) | | Sales expenses | (7,180) | (13,932) | | Administrative expenses | (21,107) | (23,318) | | Impairment loss on financial assets (increase) / reversal | (1,238) | 4,534 | | Operating profit | 22,456 | 7,786 | | Net finance costs | (6,954) | (7,301) | | Profit before income tax | 15,502 | 485 | | Income tax expense / (credit) | (4,853) | 45 | | Profit and total comprehensive income for the period attributable to owners of the Company | 10,649 | 530 | | Basic and diluted earnings per share (RMB) | 0.014 | 0.00071 | Condensed Consolidated Interim Statement of Financial Position Statement of Financial Position As of 30 June 2023, Zhixin Group's total assets were RMB 1,416,780 thousand, total equity was RMB 453,719 thousand, total liabilities were RMB 963,061 thousand, and net current liabilities were approximately RMB 4.1 million Condensed Consolidated Interim Statement of Financial Position (As at June 30) | Indicator | 30 June 2023 (RMB thousand) | 31 December 2022 (RMB thousand) | | :--------------- | :------------------------- | :-------------------------- | | Assets | | | | Non-current assets | 619,171 | 600,625 | | Current assets | 797,609 | 784,474 | | Total Assets | 1,416,780 | 1,385,099 | | Equity | | | | Total equity | 453,719 | 443,070 | | Liabilities | | | | Non-current liabilities | 161,400 | 197,363 | | Current liabilities | 801,661 | 744,666 | | Total Liabilities | 963,061 | 942,029 | | Total Equity and Liabilities | 1,416,780 | 1,385,099 | - As at 30 June 2023, the Group's net current liabilities were approximately RMB 4.1 million (31 December 2022: net current assets of approximately RMB 39.8 million)[38] Condensed Consolidated Interim Statement of Changes in Equity Statement of Changes in Equity For the six months ended 30 June 2023, total equity attributable to owners of the Company increased from RMB 443,070 thousand at the beginning of the period to RMB 453,719 thousand at the end of the period, primarily due to profit for the period of RMB 10,649 thousand Condensed Consolidated Interim Statement of Changes in Equity (For the Six Months Ended June 30) | Indicator | Share Capital (RMB thousand) | Reserves (RMB thousand) | Retained Earnings (RMB thousand) | Total (RMB thousand) | | :------------------- | :---------------- | :---------------- | :-------------------- | :---------------- | | As at 1 January 2023 | 6,358 | 364,659 | 72,053 | 443,070 | | Profit for the period | — | — | 10,649 | 10,649 | | As at 30 June 2023 | 6,358 | 364,659 | 82,702 | 453,719 | | As at 1 January 2022 | 6,358 | 364,659 | 70,800 | 441,817 | | Profit for the period | — | — | 530 | 530 | | As at 30 June 2022 | 6,358 | 364,659 | 71,330 | 442,347 | Condensed Consolidated Interim Statement of Cash Flows Statement of Cash Flows For the six months ended 30 June 2023, net cash generated from operating activities was RMB 40,175 thousand, net cash used in investing activities was RMB 37,758 thousand, and net cash used in financing activities was RMB 6,579 thousand, with cash and cash equivalents at the end of the period totaling RMB 13,327 thousand Condensed Consolidated Interim Statement of Cash Flows (For the Six Months Ended June 30) | Cash Flow Category | 2023 (RMB thousand) | 2022 (RMB thousand) | | :------------------- | :------------------ | :------------------ | | Net cash generated from operating activities | 40,175 | 1,927 | | Net cash used in investing activities | (37,758) | (75,580) | | Net cash used in financing activities | (6,579) | (3,158) | | Net decrease in cash and cash equivalents | (4,162) | (76,811) | | Cash and cash equivalents at beginning of period | 17,483 | 107,199 | | Cash and cash equivalents at end of period | 13,327 | 30,388 | Notes to the Condensed Consolidated Interim Financial Statements 1 General Information of the Group Zhixin Group primarily engages in the manufacturing and sale of ready-mixed concrete and precast concrete components in Xiamen, Fujian Province, China, and since the acquisition of Ruitu Mingsheng in December 2021, its business has expanded to include eco-friendly brick manufacturing and comprehensive utilization of iron ore tailings in Changjiang City, Hainan Province, China - The Company is an investment holding company and its subsidiaries (collectively, the "Group") are principally engaged in the manufacturing and sale of ready-mixed concrete and precast concrete components in Xiamen, Fujian Province, the People's Republic of China ("China")[91] - The Group commenced the manufacturing and sale of eco-friendly bricks and comprehensive utilization of iron ore tailings in Changjiang City, Hainan Province, China in 2022, following the completion of the acquisition of Ruitu Mingsheng Environmental Building Materials (Changjiang) Co., Ltd. ("Ruitu Mingsheng") in December 2021[91] 2 Basis of Preparation The condensed consolidated interim financial statements are prepared in accordance with Hong Kong Accounting Standard 34 "Interim Financial Reporting" and should be read in conjunction with the annual consolidated financial statements for the year ended 31 December 2022 - These condensed consolidated interim financial statements for the six months ended 30 June 2023 have been prepared in accordance with Hong Kong Accounting Standard ("HKAS") 34 "Interim Financial Reporting"[82] - The condensed consolidated interim financial statements do not include all the information and disclosures normally required in the annual consolidated financial statements, and should therefore be read in conjunction with the annual consolidated financial statements for the year ended 31 December 2022[82] 3 Significant Accounting Policies The principal accounting policies applied in preparing the condensed consolidated interim financial statements are consistent with those applied in the annual consolidated financial statements, with the adoption of new and revised standards including HKFRS 17 and amendments to HKAS 1, 8, and 12 - The principal accounting policies applied in preparing these condensed consolidated interim financial statements are consistent with those applied in the annual consolidated financial statements for the year ended 31 December 2022 and the relevant interim financial period, except for the adoption of new and revised standards as set out below[85] New and Revised Standards Adopted by the Group | Standard | Effective for annual periods beginning on or after | | :-------------------------------------------------------------- | :----------------------------------- | | HKFRS 17 (Insurance Contracts) | 1 January 2023 | | Amendments to HKAS 1, HKFRS Practice Statement 2 (Disclosure of Accounting Policies) | 1 January 2023 | | Amendments to HKAS 8 (Definition of Accounting Estimates) | 1 January 2023 | | Amendments to HKAS 12 (Deferred Tax related to Assets and Liabilities arising from a Single Transaction) | 1 January 2023 | 4 Estimates The preparation of interim financial statements requires management to make judgments, estimates, and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income, and expenses, and actual results may differ from these estimates - The preparation of interim financial statements requires management to make judgments, estimates, and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income, and expenses[219] - Actual results may differ from these estimates[219] 5 Financial Risk Management The Group is exposed to various financial risks including market risk (foreign exchange and interest rate risk), credit risk, and liquidity risk, with risk management plans aimed at minimizing adverse impacts on financial performance, and no derivative financial instruments were used for hedging during the period, with risk management policies remaining unchanged since the end of the last financial year - The Group's activities expose it to a variety of financial risks: market risk (including foreign exchange risk and interest rate risk), credit risk, and liquidity risk[227] - The Group's overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group's financial performance[227] - There have been no changes in the Group's risk management policies since the end of the last financial year[228] 5.1 Financial Risk Factors The Group's financial risk factors primarily include credit risk and liquidity risk, with credit risk arising mainly from cash and bank balances, restricted bank balances, and trade receivables, and liquidity risk managed by controlling the maturity dates of financial assets and liabilities - The Group is exposed to credit risk in relation to its cash and bank balances, restricted bank balances, trade receivables, and other receivables[229] - To manage credit risk arising from cash and bank balances and restricted bank balances, these amounts are mainly deposited with banks with high credit ratings[230] 5.2 Fair Value Estimation of Financial Assets and Liabilities Measured at Amortized Cost This report does not provide detailed information on the fair value estimation of financial assets and liabilities measured at amortized cost 6 Segment Information The Group's business is divided into three operating segments: ready-mixed concrete, precast concrete components, and iron ore tailings recycling and eco-friendly bricks, with the latter segment achieving significant profit during the period, while the ready-mixed concrete and precast concrete components segments recorded losses - The Group's business has identified the following three operating segments: (i) ready-mixed concrete; (ii) precast concrete components; and (iii) iron ore tailings recycling and eco-friendly bricks[103] Segment Results (For the Six Months Ended 30 June 2023) | Segment | Revenue (RMB thousand) | Gross Profit (RMB thousand) | Segment Results (RMB thousand) | | :------------------- | :---------------- | :---------------- | :-------------------- | | Ready-mixed Concrete | 111,972 | (10,093) | (22,647) | | Precast Concrete Components | 44,209 | 3,355 | (5,065) | | Iron Ore Tailings Recycling and Eco-friendly Bricks | 74,837 | 39,515 | 33,948 | | Total | 231,018 | 32,777 | 6,236 | 6.1 Segment Information of the Group The Group's segment information shows that the iron ore tailings recycling and eco-friendly bricks business achieved significant revenue and segment results growth in the first half of 2023, while traditional ready-mixed concrete and precast concrete components businesses faced challenges with declining revenue and segment results Reconciliation of Segment Results to Profit for the Period (For the Six Months Ended 30 June 2023) | Item | Amount (RMB thousand) | | :------------------------- | :---------------- | | Reportable segment results | 6,236 | | Unallocated costs and expenses | (1,746) | | Other income | 19,562 | | Net other losses | (358) | | Reversal of impairment loss on financial assets | (1,238) | | Net finance costs | (6,954) | | Profit before income tax | 15,502 | | Income tax expense | (4,853) | | Profit and total comprehensive income for the period | 10,649 | Segment Assets and Liabilities (As at 30 June 2023) | Segment | Segment Assets (RMB thousand) | Segment Liabilities (RMB thousand) | | :------------------- | :-------------------- | :-------------------- | | Ready-mixed Concrete | 532,663 | 303,522 | | Precast Concrete Components | 393,957 | 106,689 | | Iron Ore Tailings Recycling and Eco-friendly Bricks | 404,031 | 78,725 | | Total | 1,330,651 | 488,936 | 6.2 Contract Liabilities As of 30 June 2023, the Group's total contract liabilities were RMB 9,077 thousand, primarily from the iron ore tailings recycling and eco-friendly bricks business, related to customer advances and recognized before goods delivery Contract Liabilities (RMB thousand) | Business Segment | 30 June 2023 | 31 December 2022 | | :----------------- | :------------ | :------------- | | Iron Ore Tailings Recycling and Eco-friendly Bricks | 7,097 | 131 | | Precast Concrete Components | 1,223 | 560 | | Ready-mixed Concrete | 757 | 1,587 | | Total | 9,077 | 2,278 | - Contract liabilities represent the Group's obligation to provide services to customers for consideration received from customers; if a customer pays consideration before the Group delivers goods to them, the Group recognizes a contract liability[106] - For the six months ended 30 June 2023, revenue recognized from contract liabilities was RMB 1,748 thousand, an increase from RMB 1,503 thousand in the same period last year[108] 7 Expenses by Nature For the six months ended 30 June 2023, the Group's total expenses were RMB 226,528 thousand, a decrease from RMB 307,845 thousand in the prior year, mainly due to reductions in raw materials and consumables used, employee benefit expenses, and transportation expenses Expenses by Nature (For the Six Months Ended June 30) | Expense Category | 2023 (RMB thousand) | 2022 (RMB thousand) | | :------------------- | :------------------ | :------------------ | | Raw materials and consumables used | 142,924 | 203,708 | | Employee benefit expenses | 29,083 | 38,986 | | Outsourcing service fees | 12,879 | 12,214 | | Depreciation of property, plant and equipment | 9,315 | 9,252 | | Depreciation of right-of-use assets | 2,224 | 2,404 | | Transportation expenses | 8,984 | 17,474 | | Utilities | 6,819 | 3,390 | | Impairment provision for inventories | 973 | 1,727 | | Total | 226,528 | 307,845 | 8 Income Tax Expense / (Credit) For the six months ended 30 June 2023, income tax expense was approximately RMB 4,853 thousand, compared to an income tax credit of RMB 45 thousand in the prior year, primarily due to increased taxable profit from the iron ore tailings recycling and eco-friendly bricks business in China, with Chinese subsidiaries subject to a 25% corporate income tax rate, and some enjoying a preferential rate of 15% Income Tax Expense / (Credit) (For the Six Months Ended June 30) | Item | 2023 (RMB thousand) | 2022 (RMB thousand) | | :----------------- | :------------------ | :------------------ | | Current income tax | 6,599 | 1,564 | | Deferred income tax | (1,746) | (1,609) | | Income Tax Expense / (Credit) | 4,853 | (45) | - Income tax expense was approximately RMB 4.9 million, due to increased taxable profit from the Group's iron ore tailings recycling and eco-friendly bricks business in China[37] - The Company's subsidiaries incorporated in China are subject to corporate income tax at a rate of 25%, except for Xiamen Zhixin Construction Engineering Technology Co., Ltd., which is subject to a preferential tax rate of 15%[125] 9 Basic and Diluted Earnings Per Share For the six months ended 30 June 2023, basic earnings per share significantly increased to RMB 0.014 from RMB 0.00071 in the prior year, and diluted earnings per share were the same as basic earnings per share due to no potential dilutive ordinary shares outstanding during the period Basic Earnings Per Share (For the Six Months Ended June 30) | Indicator | 2023 (Unaudited) | 2022 (Unaudited) | | :------------------------- | :---------------- | :---------------- | | Profit attributable to owners of the Company (RMB thousand) | 10,649 | 530 | | Weighted average number of ordinary shares issued | 748,000,000 | 748,000,000 | | Basic earnings per share (RMB) | 0.014 | 0.00071 | - As there were no potential dilutive ordinary shares outstanding as at 30 June 2023, the diluted earnings per share presented are the same as the basic earnings per share[127] 10 Dividends No dividends were paid, declared, or proposed for the six months ended 30 June 2023 - No dividends were paid, declared, or proposed for the six months ended 30 June 2023 (2022: Nil)[123] 11 Property, Plant and Equipment, Right-of-Use Assets, Investment Properties and Intangible Assets As of 30 June 2023, the Group's total property, plant and equipment, right-of-use assets, investment properties, and intangible assets amounted to RMB 583,566 thousand, with additions to property, plant and equipment of RMB 24,388 thousand during the period Changes in Non-current Assets (RMB thousand) | Asset Category | As at 1 January 2023 | Additions | Depreciation / Amortization | Disposals | As at 30 June 2023 | | :----------- | :------------- | :----- | :--------- | :----- | :-------------- | | Property, Plant and Equipment | 390,405 | 24,388 | (9,428) | (377) | 404,988 | | Right-of-Use Assets | 104,547 | 1,031 | (2,224) | — | 103,354 | | Investment Properties | 36,347 | — | (595) | — | 35,752 | | Intangible Assets | 39,513 | — | (41) | — | 39,472 | - Assets pledged to secure the Group's borrowings are set out in note 20(a)[132] 12 Inventories As of 30 June 2023, the Group's total inventories were RMB 87,685 thousand, a significant increase from RMB 22,571 thousand as of 31 December 2022, primarily due to a substantial increase in raw material inventories, with an impairment provision for inventories of RMB 2,010 thousand Inventory Composition (RMB thousand) | Inventory Category | 30 June 2023 | 31 December 2022 | | :--------------- | :------------ | :------------- | | Raw materials | 71,963 | 8,771 | | Work in progress | 3,884 | 623 | | Finished goods | 13,848 | 14,214 | | Less: Impairment provision for inventories | (2,010) | (1,037) | | Total | 87,685 | 22,571 | - The impairment provision for inventories was RMB 1,037 thousand at the beginning of the period, increased by RMB 2,010 thousand during the period, and was RMB 2,010 thousand at the end of the period[139] 13 Trade Receivables As of 30 June 2023, total trade receivables were RMB 640,973 thousand, a decrease from RMB 692,387 thousand as of 31 December 2022, with the largest proportion of trade receivables due within one year, and the Group having transferred some receivables to factoring agents while retaining overdue payment and credit risk Trade Receivables (RMB thousand) | Item | 30 June 2023 | 31 December 2022 | | :--------------- | :------------ | :------------- | | Current trade receivables | 654,242 | 704,195 | | Less: Impairment provision | (13,269) | (11,808) | | Current Net | 640,973 | 692,387 | | Non-current retention receivables | 26,192 | 26,947 | | Less: Impairment provision | (1,330) | (1,553) | | Non-current Net | 24,862 | 25,394 | | Total | 665,835 | 717,781 | Ageing Analysis of Trade Receivables (RMB thousand) | Ageing | 30 June 2023 | 31 December 2022 | | :------- | :------------ | :------------- | | Within 1 year | 385,850 | 465,067 | | 1 to 2 years | 195,291 | 205,149 | | 2 to 3 years | 81,848 | 52,185 | | Over 3 years | 17,445 | 8,741 | | Total | 680,434 | 731,142 | - As at 30 June 2023, the carrying amount of trade receivables included receivables subject to factoring arrangements of RMB 17,261,000. The Group has transferred the related receivables to factoring agents but retained overdue payment and credit risk[141] 14 Prepayments, Deposits and Other Receivables As of 30 June 2023, total prepayments, deposits, and other receivables amounted to RMB 55,624 thousand, an increase from RMB 52,032 thousand as of 31 December 2022, primarily comprising prepayments for raw materials and operating expenses, and recoverable deductible VAT Prepayments, Deposits and Other Receivables (RMB thousand) | Item | 30 June 2023 | 31 December 2022 | | :------------------- | :------------ | :------------- | | Prepayments for raw materials and operating expenses | 29,056 | 25,527 | | Recoverable deductible VAT | 8,771 | 12,925 | | Rental receivables | 6,176 | 5,530 | | Refundable deposits | 5,294 | 4,682 | | Other receivables | 6,327 | 3,368 | | Total | 55,624 | 52,032 | 15 Cash and Bank Balances As of 30 June 2023, the Group's total cash and bank balances were RMB 13,327 thousand, a decrease from RMB 17,483 thousand as of 31 December 2022, with restricted bank balances reduced to zero Cash and Bank Balances (RMB thousand) | Item | 30 June 2023 | 31 December 2022 | | :----------------- | :------------ | :------------- | | Cash on hand and at bank | 13,327 | 17,483 | | Restricted bank balances | — | 1 | | Total | 13,327 | 17,484 | - Restricted bank balances are bank deposits held and pledged for the issuance of bills payable[151] 16 Share Capital As of 30 June 2023, the Company's authorized share capital was 3,000,000,000 ordinary shares with a par value of HKD 0.01 each, totaling RMB 25,500 thousand, and issued share capital was 748,000,000 ordinary shares, totaling RMB 6,358 thousand, remaining unchanged from the beginning of the period Share Capital (RMB thousand) | Share Capital Category | Number of Ordinary Shares | Share Capital (HKD thousand) | Share Capital (RMB thousand) | | :------- | :------------ | :------------ | :---------------- | | Authorized | 3,000,000,000 | 30,000 | 25,500 | | Issued | 748,000,000 | 7,480 | 6,358 | 17 Reserves As of 30 June 2023, the Group's total reserves amounted to RMB 364,659 thousand, including share premium, capital reserve, and statutory reserve, remaining unchanged from the beginning of the period Reserves (RMB thousand) | Reserve Category | Share Premium | Capital Reserve | Statutory Reserve | Total | | :------- | :------- | :------- | :------- | :------ | | As at 1 January 2023 to 30 June 2023 | 220,966 | 127,135 | 16,558 | 364,659 | | As at 1 January 2022 to 30 June 2022 | 220,966 | 127,135 | 16,558 | 364,659 | 18 Trade Payables As of 30 June 2023, total trade payables were RMB 385,537 thousand, an increase from RMB 348,408 thousand as of 31 December 2022, with most trade payables due within one year Trade Payables (RMB thousand) | Item | 30 June 2023 | 31 December 2022 | | :----------- | :------------ | :------------- | | Trade payables | 385,537 | 348,408 | Ageing Analysis of Trade Payables (RMB thousand) | Ageing | 30 June 2023 | 31 December 2022 | | :------- | :------------ | :------------- | | Within one year | 328,619 | 325,543 | | One to two years | 48,408 | 19,158 | | Over two years | 8,510 | 3,707 | | Total | 385,537 | 348,408 | 19 Other Payables and Accrued Expenses As of 30 June 2023, total other payables and accrued expenses amounted to RMB 93,208 thousand, a decrease from RMB 134,873 thousand as of 31 December 2022, primarily due to a reduction in amounts due to related parties Other Payables and Accrued Expenses (RMB thousand) | Item | 30 June 2023 | 31 December 2022 | | :------------------- | :------------ | :------------- | | Payables for purchase of property, plant and equipment | 37,811 | 52,091 | | Amounts due to related parties | 21,688 | 44,502 | | Employee benefit payables | 4,022 | 4,223 | | Payables for acquisition of subsidiaries | 3,000 | 4,500 | | Other taxes payable | 2,822 | 10,289 | | Others | 7,090 | 5,681 | | Total | 93,208 | 134,873 | 20 Borrowings As of 30 June 2023, the Group's total borrowings were RMB 451,635 thousand, comprising current borrowings of RMB 305,675 thousand and non-current borrowings of RMB 145,960 thousand, with most bank borrowings secured and guaranteed by subsidiaries, directors and their spouses, and an independent third-party credit guarantee company Total Borrowings (RMB thousand) | Borrowing Category | 30 June 2023 Current | 30 June 2023 Non-current | 30 June 2023 Total | 31 December 2022 Current | 31 December 2022 Non-current | 31 December 2022 Total | | :----------- | :---------------- | :------------------ | :---------------- | :----------------- | :------------------- | :----------------- | | Bank borrowings | 288,414 | 145,960 | 434,374 | 237,801 | 186,208 | 424,009 | | Factoring borrowings | 17,261 | — | 17,261 | 19,586 | — | 19,586 | | Total Borrowings | 305,675 | 145,960 | 451,635 | 257,387 | 186,208 | 443,595 | - The Group's secured bank borrowings as at 30 June 2023 were pledged by the Group's assets as set out in note 20(a), and guaranteed by three subsidiaries of the Group, Mr. Huang Wengui, Mr. Ye Zhijie and their spouses, and an independent third-party credit guarantee company[155] Borrowing Repayment Schedule (RMB thousand) | Repayment Period | 30 June 2023 | | :--------- | :------------ | | Within 1 year | 305,675 | | 1 to 2 years | 18,277 | | 2 to 3 years | 9,987 | | Over 3 years | 117,696 | | Total | 451,635 | 21 Lease Liabilities As of 30 June 2023, the Group's current lease liabilities were RMB 1,227 thousand, primarily for land and building leases used as warehouses and factories Lease Liabilities (RMB thousand) | Lease Category | 30 June 2023 Current | 30 June 2023 Non-current | 30 June 2023 Total | | :----------------- | :---------------- | :------------------ | :---------------- | | Land and buildings used as warehouses and factories | 1,227 | — | 1,227 | - The Group leases land for its operations, and these liabilities are measured at the net present value of the lease payments outstanding over the lease term[177] 22 Commitments As of 30 June 2023, the Group's capital commitments were RMB 133,009 thousand, mainly for property, plant and equipment, and irrevocable short-term operating lease commitments were RMB 396 thousand Capital Commitments (RMB thousand) | Commitment Category | 30 June 2023 | 31 December 2022 | | :----------------- | :------------ | :------------- | | Contracted but not provided for: Property, plant and equipment | 133,009 | 148,338 | Irrevocable Short-term Operating Leases (RMB thousand) | Lease Category | 30 June 2023 | 31 December 2022 | | :------- | :------------ | :------------- | | Warehouses | 396 | 2,060 | 23 Related Party Transactions The Group engaged in related party transactions, including the repayment of shareholder advances from Mr. Ye Zhijie of RMB 22,814 thousand, with amounts due to Mr. Ye Zhijie totaling RMB 21,688 thousand as of 30 June 2023, and key management personnel compensation amounting to RMB 2,379 thousand Transactions with Related Parties (For the Six Months Ended June 30) | Transaction Item | 2023 (RMB thousand) | 2022 (RMB thousand) | | :------------------- | :------------------ | :------------------ | | Amounts from a shareholder — Mr. Ye Zhijie | — | 16,963 | | Repayment of amounts from a shareholder — Mr. Ye Zhijie | (22,814) | — | Balances with Related Parties (RMB thousand) | Balance Item | 30 June 2023 | 31 December 2022 | | :------------------- | :------------ | :------------- | | Amounts due to a related party — Mr. Ye Zhijie | 21,688 | 44,502 | - Key management personnel compensation for the six months ended 30 June 2023 was approximately RMB 2,379,000 (2022: RMB 1,630,000)[180] Corporate Governance and Other Information Compliance with Corporate Governance Code The Board is committed to establishing sound corporate governance principles and confirms that for the six months ended 30 June 2023, the Company has applied the principles and complied with the code provisions of the Corporate Governance Code - The Board is committed to establishing sound corporate governance principles and practices and achieving high standards of corporate governance[182] - The Board has reviewed the Company's corporate governance practices and is satisfied that for the six months ended 30 June 2023, the Company has applied the principles and complied with the code provisions set out in the Corporate Governance Code[183] Compliance with Model Code for Securities Transactions by Directors The Company has adopted a code of conduct for directors' securities transactions, with terms no less exacting than the Model Code, and directors have confirmed compliance with the required standards of the Model Code and the relevant code of conduct after specific enquiry - The Company has adopted a code of conduct regarding securities transactions by directors (the terms of which are no less exacting than the required standards set out in the Model Code) as the code of conduct for directors' dealings in the Company's securities[183] - Following specific enquiry by the Company to all Directors, the Directors confirmed that they had complied with the required standards set out in the Model Code and the code of conduct for directors' dealings for the six months ended 30 June 2023[183] Directors' and Chief Executive's Interests and/or Short Positions in Shares, Underlying Shares and Debentures of the Company and its Associated Corporations As of 30 June 2023, several directors held interests in the company's shares, with Mr. Ye Zhijie holding 36.73% through a controlled corporation, Mr. Huang Wengui holding 16.25%, and other directors also holding beneficial interests Directors' Interests in the Company's Shares | Director | Nature of Interest | Number of Shares Held | Approximate Percentage of Interest in the Company's Issued Share Capital | | :--------- | :----------- | :----------------- | :--------------------------------- | | Mr. Ye Zhijie | Controlled corporation interest | 274,706,100 (L) | 36.73% | | Mr. Huang Wengui | Controlled corporation interest | 121,568,700 (L) | 16.25% | | Mr. Lai Quanshui | Beneficial interest | 30,000,000 (L) | 4.01% | | Mr. Huang Kaining | Beneficial interest | 6,000,000 (L) | 0.80% | | Mr. Qiu Limiao | Beneficial interest | 56,000 (L) | 0.01% | | Mr. Ye Dan | Beneficial interest | 50,000 (L) | 0.01% | - Mr. Ye Zhijie is the sole shareholder of Zhixin Investment Holdings Limited, which holds 274,706,100 shares[196] - Mr. Huang Wengui is the sole shareholder of Yaohe Holdings Limited, which holds 121,568,700 shares[185] Substantial Shareholders' Interests and/or Short Positions in Shares and Underlying Shares of the Company As of 30 June 2023, Zhixin Investment Holdings Limited and Ms. Hong Wei (spouse of Mr. Ye Zhijie) held 36.73% of the shares, Yaohe Holdings Limited and Ms. Lin Lingling (spouse of Mr. Huang Wengui) held 16.25%, Mr. Lai Yiyang held 7.82%, and Ms. Yang Min held 6.68% Substantial Shareholders' Long Positions in the Company's Shares | Name / Company Name | Nature of Interest | Number of Shares Held | Approximate Percentage of Interest in the Company's Issued Share Capital | | :----------------- | :------- | :----------------- | :--------------------------------- | | Zhixin Investment Holdings Limited | Beneficial interest | 274,706,100 | 36.73% | | Ms. Hong Wei | Spouse's interest | 274,706,100 | 36.73% | | Yaohe Holdings Limited | Beneficial interest | 121,568,700 | 16.25% | | Ms. Lin Lingling | Spouse's interest | 121,568,700 | 16.25% | | Mr. Lai Yiyang | Beneficial interest | 58,480,000 | 7.82% | | Ms. Yang Min | Beneficial interest | 49,980,000 | 6.68% | - Ms. Hong Wei is the spouse of Mr. Ye Zhijie; under the SFO, Ms. Hong Wei is deemed to be interested in all shares in which Mr. Ye Zhijie is deemed to be interested[192] - Ms. Lin Lingling is the spouse of Mr. Huang Wengui; under the SFO, Ms. Lin Lingling is deemed to be interested in all shares in which Mr. Huang Wengui is deemed to be interested[201] Changes in Directors Mr. Lai Quanshui has been appointed as an executive director and, together with Mr. Huang Wengui, Mr. Qiu Limiao, and Mr. Ye Dan, forms the Strategy Committee, with Mr. Lai serving as Chairman, effective 6 April 2023 - Mr. Lai Quanshui has been appointed as an executive director[203] - The Strategy Committee has been established, comprising four executive directors: Mr. Lai Quanshui, Mr. Huang Wengui, Mr. Qiu Limiao, and Mr. Ye Dan, with Mr. Lai serving as the Chairman of the Strategy Committee, effective 6 April 2023[203] Directors' Interests in Competing Business For the six months ended 30 June 2023, no director had any interest in any business that competes or is likely to compete, directly or indirectly, with the Group's business, nor any conflict of interest with the Group - For the six months ended 30 June 2023, no director had any interest in any business that competes or is likely to compete, directly or indirectly, with the Group's business, nor any conflict of interest with the Group[204] Interim Dividend The Board does not recommend the payment of an interim dividend for the six months ended 30 June 2023 - The Board does not recommend the payment of an interim dividend for the six months ended 30 June 2023[210] Review of Interim Financial Statements The unaudited condensed consolidated interim financial statements of the Company and its subsidiaries for the six months ended 30 June 2023 and this interim report have been reviewed by the Audit Committee - The unaudited condensed consolidated interim financial statements of the Company and its subsidiaries for the six months ended 30 June 2023 and this interim report have been reviewed by the Audit Committee[209] Purchase, Sale or Redemption of the Company's Listed Securities For the six months ended 30 June 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 30 June 2023, neither the Company nor any of its subsidiaries purchased, sold, or redeemed any of the Company's listed securities[195] Glossary Glossary This section provides definitions for key terms used in the interim report to ensure readers have a clear understanding of the report's content - In this interim report, unless the context otherwise requires, the following terms shall have the following meanings[212]