2020
Interim Report
(Incorporated in Bermuda with limited liability) Stock Code : 1556
CONTENTS
Corporate Information | 2 |
Chairman's Statement | 4 |
Management Discussion and Analysis | 6 |
Condensed Consolidated Statement of Profit or Loss and | 8 |
Other Comprehensive Income | |
Condensed Consolidated Statement of Financial Position | 9 |
Condensed Consolidated Statement of Changes in Equity | 10 |
Condensed Consolidated Statement of Cash Flows | 11 |
Notes to the Condensed Consolidated Interim Financial Statements | 13 |
Other Information | 27 |
CORPORATE INFORMATION
BOARD OF DIRECTORS
Executive Directors
Yuen-Keung CHAN (Chairman)
James Sing-Wai WONG
Wing-SangYU (Managing Director)
Philip Bing-Lun LAM
Hin-Kwong SO
Independent Non-Executive Directors
Siu-Chee KONG
Ivan Ti-Fan PONG
Robert Che-Kwong TSUI
AUDIT COMMITTEE
Siu-Chee KONG (Chairman)
Ivan Ti-Fan PONG
Robert Che-Kwong TSUI
REMUNERATION COMMITTEE
Robert Che-Kwong TSUI (Chairman)
Ivan Ti-Fan PONG
Yuen-Keung CHAN
NOMINATION COMMITTEE
Ivan Ti-Fan PONG (Chairman)
Robert Che-Kwong TSUI
Yuen-Keung CHAN
COMPANY SECRETARY
Eric Wing-Hung YUEN
PRINCIPAL BANKERS
The Hongkong and Shanghai Banking
Corporation Limited
The Bank of East Asia, Limited
Hang Seng Bank Limited
Shanghai Commercial Bank Limited
Bank of China (Hong Kong) Limited
China Construction Bank (Asia) Corporation Limited
Chong Hing Bank Limited
AUDITOR
Ernst & Young
PRINCIPAL SHARE REGISTRAR AND
TRANSFER OFFICE
Conyers Corporate Services (Bermuda) Limited
Clarendon House
2 Church Street
Hamilton HM 11
Bermuda
HONG KONG BRANCH SHARE REGISTRAR AND TRANSFER OFFICE
Tricor Investor Services Limited
Level 54, Hopewell Centre
183 Queen's Road East
Hong Kong
REGISTERED OFFICE
Clarendon House
2 Church Street
Hamilton HM 11
Bermuda
HEAD OFFICE AND PRINCIPAL PLACE OF BUSINESS
Room 2308, 23/F
Wing On Centre
111 Connaught Road Central
Hong Kong
STOCK CODE
SEHK 01556
2 Chinney Kin Wing Holdings Limited · Interim Report 2020
CORPORATE INFORMATION
BUSINESS ADDRESSES AND CONTACTS
Chinney Kin Wing Holdings Limited | DrilTech Ground Engineering Limited | ||||
DrilTech Geotechnical Engineering Limited | |||||
Room 2308, 23/F | Block A&B, 8th Floor | ||||
Wing On Centre | Hong Kong Spinners Industrial Building, Phase VI | ||||
111 Connaught Road Central | 481-483 Castle Peak Road | ||||
Hong Kong | Kowloon | ||||
Hong Kong | |||||
Tel | : | (852) 2877-3307 | Tel | : | (852) 2371-0008 |
Fax | : | (852) 2877-2035 | Fax | : | (852) 2744-1037 |
Website | : | http://www.chinneykinwing.com.hk | Website | : | http://www.driltech.com.hk |
: | enquiry@chinneykinwing.com.hk | : | driltech@driltech.com.hk | ||
Kin Wing Engineering Company Limited | DrilTech Ground Engineering (Macau) Limited | ||||
Kin Wing Foundations Limited | |||||
Kin Wing Machinery & Transportation Limited | |||||
Block A&B, 9th Floor | Alameda Dr. Carlos D'Assumpção | ||||
Hong Kong Spinners Industrial Building, Phase VI | nºs 411-417, Praça Wong Chio | ||||
481-483 Castle Peak Road | 5º andar D-G | ||||
Kowloon | em Macau | ||||
Hong Kong | |||||
Tel | : | (852) 2415-6509 | Tel | : | (853) 2871-5564 |
Fax | : | (852) 2490-0173 | (853) 2871-5718 | ||
Website | : | http://www.kinwing.com.hk | Fax | : | (853) 2871-3948 |
: | kwecoltd@kinwing.com.hk | ||||
Kinwing Engineering (Macau) Company Limited | DrilTech Ground Engineering (Singapore) Pte. Ltd. | ||||
Alameda Dr. Carlos D'Assumpção | 80 Robinson Road | ||||
nºs 411-417, Praça Wong Chio | #25-00 | ||||
5º andar D-G | Singapore 068898 | ||||
em Macau | |||||
Tel | : | (65) 6534-5755 | |||
Tel | : | (853) 2871-5564 | Fax | : | (65) 6534-5766 |
(853) 2871-5718 | |||||
Fax | : | (853) 2871-3948 |
Chinney Kin Wing Holdings Limited · Interim Report 2020 | 3 |
CHAIRMAN'S STATEMENT
TO OUR SHAREHOLDERS
On behalf of the board (the "Board") of directors (the "Directors"), I am pleased to present to our shareholders the interim report of Chinney Kin Wing Holdings Limited (the "Company") together with its subsidiaries (the "Group") for the six months ended 30 June 2020. The Group's revenue in the reporting period increased 32.6% to HK$686.8 million from the previous corresponding period of HK$518.1 million. The profit and total comprehensive income for the period under review was HK$32.8 million, represented an increase of 19.8% as compared with the previous corresponding period of HK$27.3 million.
INTERIM DIVIDEND
The Board does not propose the payment of an interim dividend for the six months ended 30 June 2020 (2019: Nil).
BUSINESS AND OPERATION REVIEW
The Group is engaged in foundation construction and ancillary services (the "Foundation Division"), and drilling and site investigation works (the "Drilling Division") for both public and private sectors in Hong Kong and overseas.
During the six months ended 30 June 2020, the Group had completed 3 and 10 projects in the Foundation Division and the Drilling Division with contract sums of approximately HK$402 million and HK$65 million respectively.
As at 30 June 2020, the Group had 11 and 48 projects in progress with contract sums of approximately HK$3,107 million and HK$356 million in the Foundation and Drilling Divisions respectively.
CONNECTED TRANSACTION
On 20 September 2016, Gold Famous Development Limited ("Gold Famous"), an indirect wholly-owned subsidiary of Hon Kwok Land Investment Company, Limited ("Hon Kwok") and an indirect non wholly-owned subsidiary of Chinney Investments, Limited ("Chinney Investments"), as the employer entered into a framework agreement (the "Framework Agreement") with Kin Wing Foundations Limited ("KWF"), an indirect wholly-owned subsidiary of the Company and an indirect non wholly-owned subsidiary of Chinney Alliance Group Limited ("CAG"), as a contractor for the construction of piling foundation, pipe piling, bored pile wall works at K.C.T.L. 495, Kin Chuen Street, Kwai Chung, New Territories, Hong Kong at a contract sum of HK$210 million (the "Foundation Construction Works"). The entering into the Framework Agreement constituted a connected transaction of each of Chinney Investments, Hon Kwok, CAG and the Company under the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the "Listing Rules"). On 7 November 2016, at the respective extraordinary general meetings held by each of Chinney Investments and Hon Kwok and at the respective special general meetings held by each of CAG and the Company, the transaction was approved by the independent shareholders of each of Chinney Investments, Hon Kwok, CAG and the Company.
Details of the transaction were set out in the joint announcement of Chinney Investments, Hon Kwok, CAG and the Company dated 20 September 2016 and the Company's circular dated 21 October 2016. During the six months ended 30 June 2020, no revenue was recognised by KWF as the Foundation Construction Works were substantially completed and pending for agreement of variation orders and final account of the project.
4 Chinney Kin Wing Holdings Limited · Interim Report 2020
CHAIRMAN'S STATEMENT
OUTLOOK AND FUTURE PLANS
Since the outbreak of the COVID-19 novel coronavirus pandemic in early 2020, our Group remains alert to the latest news by implementing a series of precautionary and control measures to ensure the health and safety of our staff at all levels, so that they may enjoy working in a safe and hassle-free workplace.
On 20 July 2020, the Company announced a possible acquisition of the 50% equity interest in a company which holds land that can be used by the Group as a storage depot. If the acquisition materialises, this depot will serve as an ideal hub for our production team and general workforce to better streamline, centralise and enhance the Group's plant maintenance and engineering works as well as optimise our machinery and equipment storage system.
DrilTech, the Group's Drilling Division, is well-equipped with advanced technology and machinery specialising in a broad spectrum of drilling services. To sustain the robust development of the Group in the future, DrilTech will diversify its business by allocating more resources to expanding the scope of services in marine ground investigation, instrumentation, and field testing. Combining our Group's established reputation in the market together with a sizeable pool of exceptionally skillful talent from our project management teams, we foresee that DrilTech will continue to expand our client base and contribute to a stable and sustainable development of the Group throughout 2020.
To sustain our business growth and achieve a stable financial status amid fierce competitions in the foundation market, the Group continues to improve upon a series of practical and effective measures, including but not limited to stringent cost control, reduction of administrative expenses, optimisation of the workforce and resource allocation, enhancing production efficiency, empowering project management teams as well as strengthening the core and extended business fundamentals through a significant investment in staff recruitment and various resources in a timely manner. In addition, we will focus on bidding for large-scale and complex foundation contracts offered by public and private sectors as well as diversifying our scope of business activities.
With reference to the Long-Term Housing Strategy Annual Progress Report 2019 as announced by the Hong Kong Government in December 2019, the total housing supply targets for the 10-year period from fiscal year 2020/21 to 2029/30 are 430,000 units. The outlook of the foundation market looks promising as there will be large scale infrastructure projects to be launched by the local Government in the near future. Such brand-new construction initiatives entail bulk quantities of foundation works, offering abundant commercial opportunities for the foundations industry. In light of the housing buildup, we are prudently optimistic about our future development in spite of the keen competition.
APPRECIATION
On behalf of the Board, I would like to take this opportunity to extend my appreciation to our staff and workforce for their continued dedication and professionalism. Our many stakeholders and business partners are important to our business and we give our thanks for their tremendous support and loyalty. In addition, I would like to extend my thanks to our shareholders for your unwavering support. With our unique blend of operational excellence and expertise in the field, we are poised to create significant shareholder value in the future.
Yuen-Keung Chan
Chairman
Hong Kong, 26 August 2020
Chinney Kin Wing Holdings Limited · Interim Report 2020 | 5 |
MANAGEMENT DISCUSSION AND ANALYSIS
BUSINESS AND OPERATION REVIEW
REVENUE
During the reporting period, the Group recorded a total revenue of HK$686.8 million, represented an increase of 32.6% when comparing with last year's corresponding period of HK$518.1 million. The increase of revenue was primarily attributable to the contribution from certain sizeable foundation contracts in the Foundation Division, which were actively progressed in accordance with the scheduled construction program in the reporting period.
GROSS PROFIT AND GROSS PROFIT MARGIN
The Group's total gross profit in the reporting period was HK$128.4 million as compared with the previous corresponding period of HK$124.2 million, represented an increase of 3.4%. The gross profit margin of the Group, however, decreased from previous corresponding period of 24.0% to current reporting period of 18.7%. Continuing weakness in the construction sector combined with intense competition amongst the market players in the foundation market in the past years had led the contractors to adopt more aggressive pricing policies, resulting in reduced contract profits. In addition, stringent contract requirements and high index of labour costs have further deteriorated the contract profitability.
ADMINISTRATIVE EXPENSES
The Group's administrative expenses was HK$93.9 million in the reporting period, represented an increase of 3.2% as compared with the previous corresponding of HK$91.0 million. The increase of administrative expenses in the current period was mainly due to the increase of staff costs by HK$6.6 million for rewarding and retaining talented staff for their servicing in the Group. The magnitude of the increased staff costs was partly set-off by our stringent and persistent control of other administrative overheads over the reporting period.
NET PROFIT
The Group's net profit for the reporting period was HK$32.8 million, represented an increase of 19.8% when comparing with the previous corresponding period of HK$27.3 million. The increase of net profit was due in part to proportionate receipt of a subsidy of HK$5.6 million from the Hong Kong Government under the Employment Support Scheme in the reporting period.
6 Chinney Kin Wing Holdings Limited · Interim Report 2020
MANAGEMENT DISCUSSION AND ANALYSIS
FINANCIAL REVIEW
LIQUIDITY AND FINANCIAL RESOURCES
As at 30 June 2020, the Group had cash and bank balances of HK$60.8 million as compared to HK$54.6 million as at 31 December 2019. The increase of cash and bank balances was primarily due to the net cash inflow from operating activities after the capital payment of HK$15.2 million for the acquisition of plant and machineries during the reporting period. The Group had maintained a sound financial position during the period under review.
FUNDING AND TREASURY POLICY
The Group maintains a prudent funding and treasury policy. Surplus funds are maintained in the form of cash deposits with licensed banks. To manage liquidity risk, the Board closely monitors the Group's liquidity position to ensure that the liquidity structure of the Group's assets, liabilities and other commitments can meet its funding requirements from time to time.
CONTINGENT LIABILITIES
As at 30 June 2020, the Group provided corporate guarantees and indemnities to certain banks and an insurance company for an aggregate amount of HK$273.7 million (31 December 2019: HK$200.5 million) for the issue of performance bonds in its ordinary course of business.
EMPLOYEES AND REMUNERATION POLICIES
As at 30 June 2020, the Group employed 540 staff in Hong Kong. The Group is proud of the professional foundation and drilling contracting team formed by these colleagues. Remuneration packages are reviewed annually and determined by reference to market pay and individual performance. In addition to salary payments and discretionary bonuses, the Group also provides other employment benefits including medical insurance cover, provident fund and educational subsidies to eligible staff.
Chinney Kin Wing Holdings Limited · Interim Report 2020 | 7 |
CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
Six months ended 30 June | ||||
2020 | 2019 | |||
(Unaudited) | (Unaudited) | |||
Notes | HK$'000 | HK$'000 | ||
REVENUE | 4 | 686,820 | 518,096 | |
Cost of construction | (558,456) | (393,939) | ||
Gross profit | 128,364 | 124,157 | ||
Other income and gains | 4 | 5,621 | 1,933 | |
Administrative expenses | (93,918) | (90,978) | ||
Finance costs | (172) | (301) | ||
PROFIT BEFORE TAX | 5 | 39,895 | 34,811 | |
Income tax expense | 6 | (7,144) | (7,463) | |
PROFIT AND TOTAL COMPREHENSIVE | ||||
INCOME FOR THE PERIOD | 32,751 | 27,348 | ||
Profit and total comprehensive income attributable to: | ||||
Equity holders of the Company | 32,751 | 27,348 | ||
EARNINGS PER SHARE ATTRIBUTABLE TO ORDINARY | ||||
EQUITY HOLDERS OF THE COMPANY | 7 | |||
Basic and diluted | HK 2.18 cents | HK 1.82 cents | ||
8 Chinney Kin Wing Holdings Limited · Interim Report 2020
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
30 June | 31 December | ||
2020 | 2019 | ||
(Unaudited) | (Audited) | ||
Notes | HK$'000 | HK$'000 | |
NON-CURRENT ASSETS | |||
Property, plant and equipment | 9 | 241,274 | 256,002 |
Right-of-use assets | 5,294 | 9,752 | |
Total non-current assets | 246,568 | 265,754 | |
CURRENT ASSETS | |||
Trade receivables | 10 | 198,622 | 257,327 |
Contract assets | 326,834 | 279,223 | |
Prepayments, deposits and other receivables | 32,597 | 25,139 | |
Due from a fellow subsidiary | 1,790 | 1,790 | |
Due from a related company | 11 | - | 5,250 |
Tax recoverable | 3,524 | 8,024 | |
Cash and cash equivalents | 60,819 | 54,607 | |
Total current assets | 624,186 | 631,360 | |
CURRENT LIABILITIES | |||
Trade and retention monies payables | 12 | 187,224 | 174,288 |
Other payables and accruals | 141,005 | 203,798 | |
Dividend payable | 22,500 | - | |
Due to fellow subsidiaries | 31 | - | |
Tax payable | 10,345 | 14,673 | |
Lease liabilities | 5,420 | 9,060 | |
Total current liabilities | 366,525 | 401,819 | |
NET CURRENT ASSETS | 257,661 | 229,541 | |
TOTAL ASSETS LESS CURRENT LIABILITIES | 504,229 | 495,295 | |
NON-CURRENT LIABILITIES | |||
Lease liabilities | 16 | 866 | |
Deferred tax liabilities | 41,299 | 41,766 | |
Total non-current liabilities | 41,315 | 42,632 | |
Net assets | 462,914 | 452,663 | |
EQUITY | |||
Equity attributable to equity holders of the Company | |||
Issued capital | 13 | 150,000 | 150,000 |
Reserves | 312,914 | 302,663 | |
Total equity | 462,914 | 452,663 | |
Chinney Kin Wing Holdings Limited · Interim Report 2020 | 9 |
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Issued | Share | Capital | Merger | Retained | Total | ||
capital | premium* | reserve* | reserve* | profits* | equity | ||
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | ||
HK$'000 | HK$'000 | HK$'000 | HK$'000 | HK$'000 | HK$'000 | ||
At 1 January 2020 | 150,000 | 63,628 | (1) | 20,002 | 219,034 | 452,663 | |
Profit and total comprehensive | |||||||
income for the period | - | - | - | - | 32,751 | 32,751 | |
Final 2019 dividend declared | - | - | - | - | (22,500) | (22,500) | |
At 30 June 2020 | 150,000 | 63,628 | (1) | 20,002 | 229,285 | 462,914 | |
At 1 January 2019 | 150,000 | 63,628 | (1) | 20,002 | 191,461 | 425,090 | |
Profit and total comprehensive | |||||||
income for the period | - | - | - | - | 27,348 | 27,348 | |
Final 2018 dividend declared | - | - | - | - | (30,000) | (30,000) | |
At 30 June 2019 | 150,000 | 63,628 | (1) | 20,002 | 188,809 | 422,438 | |
The merger reserve of the Group represents the capital contribution from the equity holders of a subsidiary now comprising the Group before the completion of the Reorganisation.
- These reserve accounts comprise the consolidated reserves of HK$312,914,000 in the condensed consolidated statement of financial position.
10 Chinney Kin Wing Holdings Limited · Interim Report 2020
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Six months ended 30 June | ||||
2020 | 2019 | |||
(Unaudited) | (Unaudited) | |||
Notes | HK$'000 | HK$'000 | ||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||
Profit before tax | 39,895 | 34,811 | ||
Adjustments for: | ||||
Financial costs | 172 | 301 | ||
Interest income | 4 | (42) | (379) | |
Depreciation of property, plant and equipment | 5 | 29,933 | 31,241 | |
Depreciation of right-of-use assets | 5 | 4,458 | 4,458 | |
Loss on disposal of items of property, plant and equipment | 5 | - | 15 | |
74,416 | 70,447 | |||
Decrease in trade receivables | 58,705 | 42,126 | ||
Increase in contract assets | (47,611) | (71,128) | ||
Increase in prepayments, deposits and other receivables | (7,458) | (9,697) | ||
Decrease in amount due from a related company | 5,250 | 5,250 | ||
Increase in amount due to the ultimate holding company | - | 1,795 | ||
Increase in amounts due to fellow subsidiaries | 31 | 708 | ||
Increase/(decrease) in trade and retention monies payables | 12,936 | (32,497) | ||
Decrease in other payables and accruals | (62,793) | (100,765) | ||
Cash generated from/(used in) operations | 33,476 | (93,761) | ||
Tax paid | (7,439) | (339) | ||
Net cash flows generated from/(used in) operating activities | 26,037 | (94,100) | ||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||
Interest received | 42 | 379 | ||
Purchase of items of property, plant and equipment | (15,205) | (17,660) | ||
Net cash used in investing activities | (15,163) | (17,281) | ||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||
Interest paid | (28) | - | ||
Principal portion of lease payments | (4,634) | (4,634) | ||
Net cash flows used in financing activities | (4,662) | (4,634) | ||
Chinney Kin Wing Holdings Limited · Interim Report 2020 | 11 |
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Six months ended 30 June | |||
2020 | 2019 | ||
(Unaudited) | (Unaudited) | ||
HK$'000 | HK$'000 | ||
NET INCREASE/(DECREASE) IN CASH AND CASH | |||
EQUIVALENTS | 6,212 | (116,015) | |
Cash and cash equivalents at beginning of period | 54,607 | 193,661 | |
CASH AND CASH EQUIVALENTS AT END OF PERIOD | 60,819 | 77,646 | |
ANALYSIS OF BALANCES OF CASH AND CASH EQUIVALENTS | |||
Cash and bank balances | 60,819 | 77,646 | |
Cash and cash equivalents as stated in the condensed | |||
consolidated statement of cash flows | 60,819 | 77,646 | |
12 Chinney Kin Wing Holdings Limited · Interim Report 2020
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
-
CORPORATE INFORMATION
The Company is a limited liability company incorporated in Bermuda with its shares listed on the Main Board of The Stock Exchange of Hong Kong Limited (the "Stock Exchange"). The registered office of the Company is located at Clarendon House, 2 Church Street, Hamilton HM 11, Bermuda, and the Company's head office and principal place of business is located at Room 2308, 23/F, Wing On Centre, 111 Connaught Road Central, Hong Kong.
The Company is an investment holding company. During the period under review, the Company's subsidiaries were principally involved in foundation construction, and drilling and site investigation works for both public and private sectors in Hong Kong and overseas. - BASIS OF PREPARATION AND CHANGES IN ACCOUNTING POLICIES AND DISCLOSURES
The unaudited condensed consolidated interim financial statements have been prepared in accordance with Hong Kong Accounting Standard ("HKAS") 34 Interim Financial Reporting issued by the Hong Kong Institute of Certified Public Accountants ("HKICPA") and with the applicable disclosure requirements of Appendix 16 to the Listing Rules.
The unaudited condensed consolidated interim financial statements do not include all the information and disclosures required in the financial statements, and should be read in conjunction with the Group's annual financial statements for the year ended 31 December 2019.
The unaudited condensed consolidated interim financial statements have been prepared under the historical cost convention. The accounting policies adopted in the preparation of the condensed consolidated interim financial statements are consistent with those followed in the preparation of the Group's annual financial statements for the year ended 31 December 2019, except as described below. The Group has applied, for the first time, the following revised Hong Kong Financial Reporting Standards ("HKFRS", which include all HKFRSs, HKASs and Interpretations) issued by the HKICPA for the current period's financial information.
Amendments to HKFRS 3 | Definition of a Business |
Amendments to HKFRS 9, HKAS 39 | Interest Rate Benchmark Reform |
and HKFRS 7 | |
Amendments to HKFRS 16 | Covid-19-Related Rent Concessions (early adopted) |
Amendments to HKAS 1 and HKAS 8 | Definition of Material |
The adoption of these revised accounting standards does not have material impact on the Group's unaudited condensed consolidated interim financial statements.
Chinney Kin Wing Holdings Limited · Interim Report 2020 | 13 |
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
3. OPERATING SEGMENT INFORMATION
For management purposes, the Group is organised into business units based on their services and has two reportable operating segments as follows:
- Foundation construction and ancillary services; and
- Drilling and site investigation.
Management monitors the results of the Group's operating segments separately for the purpose of making decisions about resources allocation and performance assessment. Segment performance is evaluated based on reportable segment profit, which is a measure of adjusted operating profit before tax. The adjusted profit before tax is measured consistently with the Group's profit before tax except that interest income, finance costs as well as unallocated corporate gains and expenses are excluded from such measurement.
Segment assets exclude other unallocated head office and corporate assets as these assets are managed on a group basis.
Segment liabilities exclude other unallocated head office and corporate liabilities as these liabilities are managed on a group basis.
Intersegment sales and transfers are transacted with reference to the selling prices used for sales made to third parties at the then prevailing market prices.
14 Chinney Kin Wing Holdings Limited · Interim Report 2020
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
3. OPERATING SEGMENT INFORMATION (continued)
Six months ended 30 June 2020
Foundation | |||||
construction | Drilling | ||||
and ancillary | and site | ||||
services | investigation | Total | |||
(Unaudited) | (Unaudited) | (Unaudited) | |||
HK$'000 | HK$'000 | HK$'000 | |||
Segment revenue: | |||||
Sales to external customers | 598,951 | 87,869 | 686,820 | ||
Intersegment sales | - | 34,836 | 34,836 | ||
Other revenue | 4,414 | 1,207 | 5,621 | ||
603,365 | 123,912 | 727,277 | |||
Reconciliation: | |||||
Elimination of intersegment sales | (34,836) | ||||
Other revenue | (5,621) | ||||
Revenue | 686,820 | ||||
Segment results | 32,748 | 16,006 | 48,754 | ||
Reconciliation: | |||||
Corporate and other unallocated expenses | (8,729) | ||||
Interest income | 42 | ||||
Financial costs | (172) | ||||
Profit before tax | 39,895 | ||||
Chinney Kin Wing Holdings Limited · Interim Report 2020 | 15 |
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
3. OPERATING SEGMENT INFORMATION (continued)
As at 30 June 2020
Foundation | ||||
construction | Drilling | |||
and ancillary | and site | |||
services | investigation | Total | ||
(Unaudited) | (Unaudited) | (Unaudited) | ||
HK$'000 | HK$'000 | HK$'000 | ||
Segment assets | 700,521 | 169,151 | 869,672 | |
Reconciliation: | ||||
Corporate and other unallocated assets | 1,082 | |||
Total assets | 870,754 | |||
Segment liabilities | 235,955 | 144,877 | 380,832 | |
Reconciliation: | ||||
Corporate and other unallocated liabilities | 27,008 | |||
Total liabilities | 407,840 | |||
16 Chinney Kin Wing Holdings Limited · Interim Report 2020
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
3. OPERATING SEGMENT INFORMATION (continued)
Six months ended 30 June 2019
Foundation | ||||
construction | Drilling | |||
and ancillary | and site | |||
services | investigation | Total | ||
(Unaudited) | (Unaudited) | (Unaudited) | ||
HK$'000 | HK$'000 | HK$'000 | ||
Segment revenue: | ||||
Sales to external customers | 426,377 | 91,719 | 518,096 | |
Intersegment sales | - | 42,918 | 42,918 | |
Other revenue | ||||
Rental income from leasing of machinery | 1,500 | - | 1,500 | |
Others | 76 | 357 | 433 | |
427,953 | 134,994 | 562,947 | ||
Reconciliation: | ||||
Elimination of intersegment sales | (42,918) | |||
Other revenue | (1,933) | |||
Revenue | 518,096 | |||
Segment results | ||||
24,559 | 14,542 | 39,101 | ||
Reconciliation: | ||||
Corporate and other unallocated expenses | (4,368) | |||
Interest income | 379 | |||
Financial costs | (301) | |||
Profit before tax | 34,811 | |||
Chinney Kin Wing Holdings Limited · Interim Report 2020 | 17 |
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
3. OPERATING SEGMENT INFORMATION (continued)
As at 31 December 2019
Foundation | |||
construction | Drilling | ||
and ancillary | and site | ||
services | investigation | Total | |
(Audited) | (Audited) | (Audited) | |
HK$'000 | HK$'000 | HK$'000 | |
Segment assets | 722,918 | 172,470 | 895,388 |
Reconciliation: | |||
Corporate and other unallocated assets | 1,726 | ||
Total assets | 897,114 | ||
Segment liabilities | |||
286,679 | 154,168 | 440,847 | |
Reconciliation: | |||
Corporate and other unallocated liabilities | 3,604 | ||
Total liabilities | 444,451 | ||
4. REVENUE, OTHER INCOME AND GAINS
An analysis of the Group's revenue is as follows:
Six months ended 30 June | ||
2020 | 2019 | |
(Unaudited) | (Unaudited) | |
HK$'000 | HK$'000 | |
Revenue from contracts with customers | ||
Construction services | 686,820 | 518,096 |
18 Chinney Kin Wing Holdings Limited · Interim Report 2020
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
4. REVENUE, OTHER INCOME AND GAINS (continued)
Revenue from contracts with customers Disaggregated revenue information
Six months ended 30 June 2020 Segments
Foundation | ||||
construction | Drilling | |||
and ancillary | and site | |||
services | investigation | Total | ||
(Unaudited) | (Unaudited) | (Unaudited) | ||
HK$'000 | HK$'000 | HK$'000 | ||
Type of services | ||||
Construction services | 598,951 | 87,869 | 686,820 | |
Geographical markets | ||||
Hong Kong | 598,951 | 87,869 | 686,820 | |
Timing of revenue recognition | ||||
Services transferred over time | 598,951 | 87,869 | 686,820 | |
Revenue from contracts with customers | ||||
External customers | 598,951 | 87,869 | 686,820 | |
Intersegment sales | - | 34,836 | 34,836 | |
598,951 | 122,705 | 721,656 | ||
Elimination of intersegment sales | - | (34,836) | (34,836) | |
Total revenue from contracts with customers | 598,951 | 87,869 | 686,820 | |
Chinney Kin Wing Holdings Limited · Interim Report 2020 | 19 |
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
4. REVENUE, OTHER INCOME AND GAINS (continued)
Revenue from contracts with customers (continued) Disaggregated revenue information (continued)
Six months ended 30 June 2019
Segments
Foundation | |||||
construction | Drilling | ||||
and ancillary | and site | ||||
services | investigation | Total | |||
(Unaudited) | (Unaudited) | (Unaudited) | |||
HK$'000 | HK$'000 | HK$'000 | |||
Type of services | |||||
Construction services | 426,377 | 91,719 | 518,096 | ||
Geographical markets | |||||
Hong Kong | 426,377 | 90,159 | 516,536 | ||
Singapore | - | 1,560 | 1,560 | ||
426,377 | 91,719 | 518,096 | |||
Timing of revenue recognition | |||||
Services transferred over time | 426,377 | 91,719 | 518,096 | ||
Revenue from contracts with customers | |||||
External customers | 426,377 | 91,719 | 518,096 | ||
Intersegment sales | - | 42,918 | 42,918 | ||
426,377 | 134,637 | 561,014 | |||
Elimination of intersegment sales | - | (42,918) | (42,918) | ||
Total revenue from contracts with customers | 426,377 | 91,719 | 518,096 | ||
OTHER INCOME AND GAINS | |||||
Six months ended 30 June | |||||
2020 | 2019 | ||||
(Unaudited) | (Unaudited) | ||||
HK$'000 | HK$'000 | ||||
Bank interest income | 42 | 379 | |||
Rental income from leasing of machinery | - | 1,500 | |||
Foreign exchange differences, net | - | 54 | |||
Government subsidies* | 5,579 | - | |||
5,621 | 1,933 | ||||
- The government subsidies represented mainly grants from the Employment Support Scheme of the Hong Kong Government, which aims to retain employment and combat COVID-19. There are no unfulfilled conditions or contingencies relating to these subsidies.
20 Chinney Kin Wing Holdings Limited · Interim Report 2020
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
5. PROFIT BEFORE TAX
The Group's profit before tax is arrived at after charging/(crediting):
Six months ended 30 June | |||
2020 | 2019 | ||
(Unaudited) | (Unaudited) | ||
HK$'000 | HK$'000 | ||
Depreciation of property, plant and equipment | 29,933 | 31,241 | |
Less: Amount included in cost of construction | (5,060) | (4,360) | |
24,873 | 26,881 | ||
Depreciation of right-of-use assets | 4,458 | 4,458 | |
Employee benefit expense (including directors' remuneration) | 167,211 | 148,607 | |
Less: Amount included in cost of construction | (124,128) | (112,158) | |
43,083 | 36,449 | ||
Lease payments not included in the measurement of lease liabilities Loss on disposal of items of property, plant and equipment Foreign exchange differences, net
6. INCOME TAX
Current - Hong Kong Charge for the period Under provision in prior years
Deferred
Total tax charge for the period
1,280 | 772 | |
- | 15 | |
29 | (54) | |
Six months ended 30 June
20202019
(Unaudited) (Unaudited)
HK$'000HK$'000
7,304 | 9,655 |
307 | - |
- (2,192)
7,1447,463
Hong Kong profits tax has been provided at the rate of 16.5% (2019: 16.5%) on the estimated assessable profits arising in Hong Kong during the period. Taxes on profits assessable elsewhere have been calculated at the rates of tax prevailing in the jurisdictions in which the Group operates.
Chinney Kin Wing Holdings Limited · Interim Report 2020 | 21 |
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
-
EARNINGS PER SHARE ATTRIBUTABLE TO ORDINARY EQUITY HOLDERS OF THE COMPANY
The calculation of the basic earnings per share is based on the profit for the period attributable to ordinary equity holders of the Company of HK$32,751,000 (2019: HK$27,348,000) and the number of ordinary shares of 1,500,000,000 (2019: 1,500,000,000) in issue during the period.
The Group had no potentially dilutive ordinary shares in issue during the periods ended 30 June 2020 and 2019. - DIVIDEND
The Board does not propose the payment of an interim dividend for the six months ended 30 June 2020 (2019: Nil).
The final dividend of HK1.5 cents per ordinary share for the year ended 31 December 2019 was approved by the Company's shareholders at the annual general meeting of the Company held on 9 June 2020 and paid on 7 July 2020. - PROPERTY, PLANT AND EQUIPMENT
During the six months ended 30 June 2020, the Group acquired property, plant and equipment with a cost of HK$15,205,000 (2019: HK$17,660,000). - TRADE RECEIVABLES
30 June | 31 December | |
2020 | 2019 | |
(Unaudited) | (Audited) | |
HK$'000 | HK$'000 | |
Trade receivables | 198,622 | 257,327 |
The Group's trading terms with its customers are mainly on credit. The credit period is generally one month. Each customer has a maximum credit limit. The Group seeks to maintain strict control over its outstanding receivables. Overdue balances are reviewed regularly by senior management. The Group does not hold any collateral or other credit enhancements over its trade receivable balances. Trade receivables are non-interest-bearing. At 30 June 2020, the Group had certain concentration risk that may arise from the exposure to the largest customer and five largest customers, which accounted for 39% and 71% (31 December 2019: 36% and 79%) of the Group's total trade receivables balance, respectively.
22 Chinney Kin Wing Holdings Limited · Interim Report 2020
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
10. TRADE RECEIVABLES (continued)
The ageing analysis of the trade receivables as at the end of the reporting period, based on the invoice date and net of provisions, is as follows:
30 June | 31 December | |
2020 | 2019 | |
(Unaudited) | (Audited) | |
HK$'000 | HK$'000 | |
Current to 30 days | 125,514 | 166,549 |
31 to 60 days | 40,241 | 82,750 |
61 to 90 days | 22,479 | 160 |
Over 90 days | 10,388 | 7,868 |
198,622 | 257,327 | |
- DUE FROM A RELATED COMPANY
At 31 December 2019, the amount due from a related company represents construction contracting income certified from Gold Famous. Gold Famous is an indirect wholly-owned subsidiary of Hon Kwok of which Dr. James Sai-Wing Wong, a controlling shareholder of the Company, is also a director of and has a beneficial interest in. Mr. James Sing-Wai Wong and Mr. Philip Bing-Lun Lam are common directors of the Company and Hon Kwok. - TRADE AND RETENTION MONIES PAYABLES
30 June | 31 December | |
2020 | 2019 | |
(Unaudited) | (Audited) | |
HK$'000 | HK$'000 | |
Trade payables | 152,673 | 133,802 |
Retention monies payable | 34,551 | 40,486 |
187,224 | 174,288 | |
Chinney Kin Wing Holdings Limited · Interim Report 2020 | 23 |
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
12. TRADE AND RETENTION MONIES PAYABLES (continued)
The ageing analysis of the trade and retention monies payables as at the end of the reporting period, based on the invoice date, is as follows:
30 June | 31 December | |
2020 | 2019 | |
(Unaudited) | (Audited) | |
HK$'000 | HK$'000 | |
Current to 30 days | 124,711 | 106,820 |
31 to 60 days | 15,912 | 19,579 |
61 to 90 days | 3,392 | 5,927 |
Over 90 days | 8,658 | 1,476 |
152,673 | 133,802 | |
Retention monies payable | 34,551 | 40,486 |
187,224 | 174,288 | |
The trade and retention monies payables are non-interest-bearing. Trade payables are normally settled on 30-day terms. Retention monies payable had repayment terms ranging from one to two years.
13. SHARE CAPITAL
30 June | 31 December | |
2020 | 2019 | |
(Unaudited) | (Audited) | |
HK$'000 | HK$'000 | |
Authorised: | ||
3,000,000,000 (31 December 2019: 3,000,000,000) | ||
ordinary shares of HK$0.10 each | 300,000 | 300,000 |
Issued and fully paid: | ||
1,500,000,000 (31 December 2019: 1,500,000,000) | ||
ordinary shares of HK$0.10 each | 150,000 | 150,000 |
14. CONTINGENT LIABILITIES
As at 30 June 2020, the Group provided corporate guarantees and indemnities to certain banks and an insurance company for an aggregate amount of HK$273,700,000 (31 December 2019: HK$200,509,000) for the issue of performance bonds in its ordinary course of business.
24 Chinney Kin Wing Holdings Limited · Interim Report 2020
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
15. RELATED PARTY TRANSACTIONS
- The Group had the following material transactions with related parties during the period:
Six months ended 30 June | ||||
2020 | 2019 | |||
(Unaudited) | (Unaudited) | |||
Notes | HK$'000 | HK$'000 | ||
Rent paid to fellow subsidiaries | (i) | 1,052 | 772 | |
Rent paid to a related company | (i) | 97 | 97 | |
Purchases from fellow subsidiaries | (ii) | 404 | 233 | |
Contracting income from a related company | (iii) | - | (6,708) | |
Notes:
- Rents paid to fellow subsidiaries and a related company are based on the market price.
- In the opinion of the directors, the above transactions were made according to the published prices and conditions similar to those offered to other major customers and suppliers.
- The contracting income received from a related company was negotiated between the concerned parties by reference to prevailing market rates. The transaction constitutes a connected transaction of the Group and was approved by the independent shareholders of the Company at a special general meeting held on 7 November 2016.
- Compensation of key management personnel of the Group:
Six months ended 30 June | ||
2020 | 2019 | |
(Unaudited) | (Unaudited) | |
HK$'000 | HK$'000 | |
Short-term employee benefits | 16,177 | 11,215 |
Post-employment benefits | 311 | 276 |
Total compensation paid to key management personnel | 16,488 | 11,491 |
16. CAPITAL COMMITMENTS
As at 30 June 2020, the Group had contracted, but not provided for acquisition of plant and machineries in the amount of approximately HK$17,143,000 (31 December 2019: Nil).
Chinney Kin Wing Holdings Limited · Interim Report 2020 | 25 |
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
-
FAIR VALUE AND FAIR VALUE HIERARCHY OF FINANCIAL INSTRUMENTS
The management has assessed the following instruments at their approximate carrying values because of the short term nature of their maturity dates, these instruments include cash and cash equivalents, trade receivables, financial assets included in prepayments, deposits and other receivables, trade and retention monies payables, lease liabilities, financial liabilities included in other payables and accruals and balances with group companies.
The fair value of the non-current portion of lease liabilities has been calculated by discounting the expected future cash flows using rate currently available for instruments with similar terms, credit risk and remaining maturities.
Fair value hierarchy
At 30 June 2020 and 31 December 2019, the Group did not have any financial assets and liabilities measured at fair value.
During the period, there were no transfers of fair value measurements between Level 1 and Level 2 and no transfers into or out of Level 3 for both financial assets and financial liabilities (2019: Nil). - EVENT AFTER THE REPORTING PERIOD
On 20 July 2020, Kin Wing Chinney (BVI) Limited (a direct wholly-owned subsidiary of the Company, as purchaser), the Company and Profit Gainer Holdings Limited (an independent third party, as vendor) entered into a memorandum of understanding in relation to the possible acquisition of 50% of the issued share capital of Senior Rich Development Limited (the "Possible Acquisition"). The Possible Acquisition, which is still under negotiation, if materialises, may constitute a major transaction for the Company and CAG and will be subject to the announcement, reporting and shareholders' approval requirements under the Listing Rules. Details of the transaction were set out in the joint announcement of the Company and CAG issued on 20 July 2020.
Further announcement will be made by the Company and CAG in accordance with the applicable requirements of the Listing Rules as and when appropriate.
26 Chinney Kin Wing Holdings Limited · Interim Report 2020
OTHER INFORMATION
CORPORATE GOVERNANCE
Model Code for Securities Transactions by Directors
The Company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers (the "Model Code") set out in Appendix 10 of the Listing Rules. On specific enquiries made, all Directors have confirmed that they have complied with the required standard set out in the Model Code throughout the six months ended 30 June 2020.
Compliance with the Corporate Governance Code
In the opinion of the Directors, the Company has complied with all relevant code provisions of the Corporate Governance Code as set out in Appendix 14 to the Listing Rules during the six months ended 30 June 2020.
Audit Committee
The audit committee of the Company (the "Audit Committee") comprises all the three independent non-executive Directors, namely Mr. Siu-Chee Kong (Chairman of the Audit Committee), Mr. Ivan Ti-Fan Pong and Mr. Robert Che-Kwong Tsui. Regular meetings have been held by the Audit Committee since its establishment and it meets at least twice each year to review and oversee the Group's financial reporting process and internal control. The Company's interim results for the six months ended 30 June 2020 have not been audited, but have been reviewed by the Audit Committee.
DIRECTORS' INTERESTS AND SHORT POSITIONS IN SHARES, UNDERLYING SHARES AND DEBENTURES
As at 30 June 2020, none of the Directors had registered an interest or short position in the shares, underlying shares or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the Securities and Futures Ordinance (the "SFO")) that was required to be recorded pursuant to Section 352 of the SFO, or as otherwise notified to the Company and the Stock Exchange pursuant to the Model Code.
DIRECTORS' RIGHTS TO ACQUIRE SHARES OR DEBENTURES
At no time during the six-month period ended 30 June 2020 were rights to acquire benefits by means of the acquisition of shares in or debentures of the Company granted to any of the Directors or their respective spouse or minor children, or were any such rights exercised by them; or was the Company or any of its subsidiaries a party to any arrangement to enable the Directors to acquire such rights in any other body corporate.
Chinney Kin Wing Holdings Limited · Interim Report 2020 | 27 |
OTHER INFORMATION
SUBSTANTIAL SHAREHOLDERS' AND OTHER PERSONS' INTERESTS AND SHORT POSITIONS IN SHARES AND UNDERLYING SHARES
As at 30 June 2020, the following interests and short positions of 5% or more of the share capital of the Company were recorded in the register of interests required to be kept by the Company pursuant to Section 336 of the SFO:
Long positions in ordinary shares of the Company
Percentage of | ||||
Number of | the Company's | |||
Capacity and | ordinary | issued share | ||
Name | Notes | nature of interest | shares held | capital |
James Sai-Wing Wong | 1 | Interest through controlled | 1,117,500,000 | 74.50% |
corporations | ||||
Chinney Alliance Group Limited | Beneficial owner | 1,117,500,000 | 74.50% | |
Enhancement Investments Limited | 1, 2 | Interest through a controlled | 1,117,500,000 | 74.50% |
corporation |
Notes:
- Dr. James Sai-Wing Wong and Enhancement Investments Limited are deemed to be interested in the same parcel of the 1,117,500,000 shares by virtue of Section 316 of the SFO; and
- Enhancement Investments Limited is beneficially wholly-owned by Dr. James Sai-Wing Wong.
Save as disclosed above, as at 30 June 2020, no person had registered an interest or short positions in the shares or underlying shares of the Company that was required to be recorded pursuant to Section 336 of the SFO.
PURCHASE, SALE OR REDEMPTION OF THE COMPANY'S LISTED SHARES
Neither the Company, nor any of its subsidiaries had purchased, sold or redeemed any of the Company's listed shares during the six months ended 30 June 2020.
28 Chinney Kin Wing Holdings Limited · Interim Report 2020
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