Chengdu Expressway Co., Ltd. - Annual Report 2020

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Chengdu Expressway Co., Ltd. 成都高速公路股份有限公司

(a joint stock company incorporated in the People’s Republic of China with limited liability)

(Stock Code: 01785)

2020 ANNUAL RESULTS ANNOUNCEMENT

HIGHLIGHTS

In 2020, the Group achieved revenue of RMB2,014,344,000, representing a year-on-year decrease of 12.5% from 2019 (as restated).
In 2020, the Group recorded total comprehensive income for the year attributable to owners of the Company of RMB344,509,000, representing a year-on-year decrease of 29.0%.
In 2020, basic and diluted earnings per Share were RMB0.208, representing a year-on-year decrease of RMB0.088 per Share.
The Board recommended a final cash dividend for 2020 of RMB200,388,342 in total, and based on the Company’s current total number of Shares of 1,656,102,000, RMB0.121 per Share (tax inclusive).

– 1 –

The Board hereby announces the audited consolidated results of the Group for the year ended 31 December 2020, prepared under the International Financial Reporting Standards, together with the comparative figures for the previous year as follows:

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

Year ended 31 December 2020

Notes REVENUE 4 Cost of sales Gross profit Other income and gains 4 Selling expenses Administrative expenses Other expenses Finance costs 5 Share of profits and losses of: A joint venture Associates PROFIT BEFORE TAX 6 Income tax expense 7 PROFIT FOR THE YEAR Other comprehensive income TOTAL COMPREHENSIVE INCOME FOR THE YEAR Attributable to: Owners of the Company Non-controlling interests EARNINGS PER SHARE ATTRIBUTABLE TO ORDINARY EQUITY HOLDERS OF THE COMPANY – Basic and diluted 9	2020 RMB’000 2,014,344 (1,350,097) 664,247 68,552 (50,268) (90,955) (57,381) (136,439) 2,073 30,961 430,790 (49,110) 381,680 – 381,680 344,509 37,171 381,680 RMB0.208	2019 RMB’000 (Restated) 2,301,384 (1,428,873) 872,511 90,428 (51,347) (101,647) (14,875) (136,156) 2,229 20,385 681,528 (125,961) 555,567 – 555,567 485,198 70,369 555,567 RMB0.296

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CONSOLIDATED STATEMENT OF FINANCIAL POSITION

31 December 2020

Notes NON-CURRENT ASSETS Property, plant and equipment Right-of-use assets Goodwill 10 Service concession arrangements 11 Software Investment in a joint venture Investments in associates Payments in advance 12 Financial assets at fair value through profit or loss Pledged deposits Long-term receivable 15 Deferred tax assets Total non-current assets CURRENT ASSETS Inventories 13 Trade receivables 14 Prepayments, other receivables and other assets 15 Cash and cash equivalents Total current assets CURRENT LIABILITIES Trade payables 16 Other payables and accruals 17 Interest-bearing bank and other borrowings 18 Lease liabilities Tax payable Total current liabilities NET CURRENT ASSETS TOTAL ASSETS LESS CURRENT LIABILITIES NON-CURRENT LIABILITIES Interest-bearing bank and other borrowings 18 Deferred income 17 Lease liabilities Deferred tax liabilities Total non-current liabilities Net assets	2020 RMB’000 396,977 542,242 34,026 5,772,189 1,809 13,350 286,925 46,688 500 15,269 1,720 32,562 7,144,257 54,558 68,617 40,288 1,759,686 1,923,149 927,659 318,832 214,500 6,520 39,691 1,507,202 415,947 7,560,204 3,049,768 112,997 40,958 184,571 3,388,294 4,171,910	2019 RMB’000 (Restated) 468,468 498,974 34,026 5,925,770 1,172 11,277 209,682 63,166 500 – 860 12,434
		7,226,329
		32,308 51,606 349,026 1,674,850
		2,107,790
		956,974 181,982 257,157 3,848 51,140
		1,451,101
		656,689
		7,883,018
		2,757,560 120,224 35,659 235,020
		3,148,463
		4,734,555

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Notes EQUITY Equity attributable to owners of the Company Issued capital 19 Reserves 20 Non-controlling interests Total equity	2020 RMB’000 1,656,102 1,624,044 3,280,146 891,764 4,171,910	2019 RMB’000 (Restated) 1,656,102 2,205,837
		3,861,939 872,616
		4,734,555

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NOTES TO FINANCIAL STATEMENTS

1. CORPORATE AND GROUP INFORMATION

Chengdu Expressway Co., Ltd. (the “ Company ”) is a joint stock company with limited liability established in the People’s Republic of China (the “ PRC ”). The Company’s H shares were listed on the Main Board of The Stock Exchange of Hong Kong Limited (“ Stock Exchange ”) on 15 January 2019.

The registered office of the Company is located at 9th Floor, Youyi Data Building, No. 28 Jingyuan East Road, Deyuan town (Jingrong town), Pidu District, Chengdu, Sichuan, the PRC. The principal place of business of the Company in Hong Kong is located at 40th Floor, Dah Sing Financial Centre, No. 248 Queen’s Road East, Wanchai, Hong Kong.

During the year, the Company and its subsidiaries (“ Group ”) were involved in the following principal activities:

management and operation of expressways in Mainland China
management and operation of petrol stations and gas stations in Mainland China

In the opinion of the directors of the Company (“ Directors ”), the parent company of the Company is Chengdu Expressway Construction and Development Co., Ltd. (“ Chengdu Expressway Construction ”), a company established in Chengdu, Sichuan Province, the PRC. The ultimate controlling shareholder of the Company is Chengdu Communications Investment Group Co., Ltd. (“ Chengdu Communications Investment ”), which is wholly owned by the State-owned Assets Supervision and Administration Commission of Chengdu Municipal Government.

2.1 BASIS OF PRESENTATION

As disclosed in note 21(a) to the financial statements, a business combination under common control was effected during the current year, where the business acquired in the business combination and the Company are both controlled by Chengdu Communications Investment, the ultimate controlling shareholder of the Company.

To consistently apply the Group’s accounting policy for common control business combinations, the acquisition has been accounted for based on the principles of merger accounting in accordance with Accounting Guideline 5 Merger Accounting for Common Control Combinations issued by the HKICPA as if the acquisition had occurred when the combining entities first came under the control of Chengdu Communications Investment or since their respective dates of establishment whichever is shorter. Accordingly, the assets and liabilities acquired in the common control business combination have been stated at their carrying amounts as if they had been held or incurred by the Group from the later of the date on which the combining entity first came under the control of Chengdu Communications Investment or the relevant transactions giving rise to the assets or liabilities arose. No adjustments are made to reflect fair values, or recognise any new assets or liabilities as a result of the acquisition by the Group.

Accordingly, the comparative figures of the consolidated financial statements have been restated.

2.2 BASIS OF PREPARATION

These financial statements have been prepared in accordance with International Financial Reporting Standards (“ IFRSs ”), which comprise standards and interpretations approved by the International Accounting Standards Board (“ IASB ”), and International Accounting Standards (“ IASs ”) and Standing Interpretations Committee interpretations approved by the International Accounting Standards Committee that remain in effect and the disclosure requirements of the Hong Kong Companies Ordinance. They have been prepared under the historical cost convention, except for financial assets at fair value through profit or loss which have been measured at fair value. These financial statements are presented in Renminbi (“ RMB ”) and all values are rounded to nearest thousand except when otherwise indicated.

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2.3 ISSUED BUT NOT YET EFFECTIVE INTERNATIONAL FINANCIAL REPORTING STANDARDS

The Group has not applied the following new and revised IFRSs, that have been issued but are not yet effective, in these financial statements.

Amendments to IFRS 3	Reference to the Conceptual Framework 2
Amendments to IFRS 9, IAS 39,	Interest Rate Benchmark Reform – Phase 2 1
IFRS 7, IFRS 4 and IFRS 16
Amendments to IFRS 10 and IAS 28	Sale or Contribution of Assets between an Investor and its Associate or
	Joint Venture 4
IFRS 17	Insurance Contracts 3
Amendments to IFRS 17	Insurance Contracts 3,5
Amendments to IAS 1	Classification of Liabilities as Current or Non-current 3
Amendments to IAS 1	Disclosure of Accounting Policies 3
Amendments to IAS 8	Definition of Accounting Estimates 3
Amendments to IAS 16	Property, Plant and Equipment: Proceeds before Intended Use 2
Amendments to IAS 37	Onerous Contracts – Cost of Fulfilling a Contract 2
Annual Improvements to IFRS	Amendments to IFRS 1, IFRS 9, Illustrative Examples accompanying IFRS 16,
Standards 2018-2020	and IAS 41 2
Amendment to IFRS 16	Covid-19-Related Rent Concessions 6

1 Effective for annual periods beginning on or after 1 January 2021 2 Effective for annual periods beginning on or after 1 January 2022 3 Effective for annual periods beginning on or after 1 January 2023
4 No mandatory effective date yet determined but available for adoption
5 As a consequence of the amendments to IFRS 17 issued in June 2020, IFRS 4 was amended to extend the temporary exemption that permits insurers to apply IAS 39 rather than IFRS 9 for annual periods beginning before 1 January 2023
6 Effective for annual periods beginning on or after 1 June 2020.

3. OPERATING SEGMENT INFORMATION

For management purposes, the Group is organised into business units based on their products and services and has two reportable operating segments as follows:

(a) the toll roads segment comprises the construction, operation and maintenance of toll expressways located in Sichuan province;
(b) the energy investment segment comprises the operation of petrol stations and a gas station and sales of refined oil and compressed natural gas.

In previous years, the Board of Directors considered that there were no reportable operating segments other than the toll operation segment. In 2020, the Group acquired a 94.49% equity interest in Chengdu Energy Development Co., Ltd (“ Energy Development Company ”). Energy Development Company is involved in the management and operation of petrol stations and a gas station. Management monitors the results of the Group’s operating segments separately for the purpose of making decisions about resource allocation and performance assessment. Due to the changes in the composition of segment this year, the operating segment information in 2019 was also restated.

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker, The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board of Directors that makes strategic decisions. Segment performance is evaluated based on reportable segment profit, which is a measure of adjusted profit before tax. The adjusted profit before tax is measured consistently with the Group’s profit before tax except that dividend income, as well as head office and corporate expenses are excluded from such measurement.

Segment assets exclude deferred tax assets, as these assets are managed on a group basis.

Segment liabilities exclude dividend payables and deferred tax liabilities, as these liabilities are managed on a group basis.

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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.

Operating segments information is listed as follows:

Toll roads Energy investment Year ended 31 December 2020 RMB’000 RMB’000 Segment revenue 1,115,822 898,522 Segment cost 629,106 720,991 Segment results 356,222 41,534 Reconciliation: Dividend income Profit before tax Segment assets 7,954,881 1,079,963 Reconciliation: Deferred tax assets Total assets Segment liabilities 4,591,921 102,342 Reconciliation Dividend payable Deferred tax liabilities Total liabilities Other segment information Share of profits of a joint venture – 2,073 Share of profits and losses of associates 12,154 18,807 Interest expenses 136,067 372 Depreciation and amortisation 301,543 27,531 Investments in associates 118,218 168,707 Investment in a joint venture – 13,350 Capital expenditure 124,515 17,161*	Total RMB’000 2,014,344 1,350,097 397,756 33,034
	430,790
	9,034,844 32,562
	9,067,406
	4,694,263 16,662 184,571
	4,895,496
	2,073 30,961 136,439 329,074 286,925 13,350 141,676

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Toll roads Energy investment Year ended 31 December 2019 RMB’000 RMB’000 (Restated) (Restated) Segment revenue 1,255,926 1,045,458 Segment cost 553,964 874,909 Segment results 572,361 86,553 Reconciliation: Dividend income Profit before tax Segment assets 8,325,591 996,094 Reconciliation: Deferred tax assets Total assets Segment liabilities 4,324,974 39,570 Reconciliation: Deferred tax liabilities Total liabilities Other segment information Share of profits of a joint venture – 2,229 Share of profits and losses of associates (352) 20,737 Interest expenses 134,866 1,290 Depreciation and amortisation 281,891 28,401 Investments in associates 106,064 103,618 Investment in a joint venture – 11,277 Capital expenditure* 88,416 22,022	Total RMB’000 (Restated) 2,301,384 1,428,873 658,914 22,614
	681,528
	9,321,685 12,434
	9,334,119
	4,364,544 235,020
	4,599,564
	2,229 20,385 136,156 310,292 209,682 11,277 110,438

Capital expenditure consists of additions to property, plant and equipment, service concession arrangements and software.

Entity-wide disclosures

Geographical information

All of the Group’s external revenue is derived from customers based in Mainland China, and all of the non-current assets of the Group are located in Mainland China. Accordingly, no segment information by geographical segment is presented.

Information about major customers

No revenue derived from a single customer contributed to 10% or more of the total revenue of the Group during the year.

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4. REVENUE, OTHER INCOME AND GAINS

An analysis of revenue is as follows:

Revenue from contracts with customers Toll income – Chengguan Expressway – Chengpeng Expressway – Chengwenqiong Expressway – Chengdu Airport Expressway – Qiongming Expressway Sub-total Sales of refined oil Construction revenue in respect of service concession arrangements Total revenue from contracts with customers Revenue from contracts with customers (i) Disaggregated revenue information For the year ended 31 December 2020	2020 RMB’ 000 225,402 217,360 333,490 111,749 122,205 1,010,206 898,522 105,616 2,014,344	2019 RMB’ 000 (Restated) 307,940 238,312 433,933 142,570 133,171
		1,255,926
		1,045,458 –
		2,301,384

		Energy
	Toll roads	investment	Total
	RMB’000	RMB’000	RMB’000
Types of goods or services
Toll income	1,010,206	–	1,010,206
Sales of refined oil	–	898,522	898,522
Construction revenue in respect of service
concession arrangements	105,616	–	105,616
Total revenue from contracts with customers	1,115,822	898,522	2,014,344
Timing of revenue recognition
At a point in time	1,010,206	898,522	1,908,728
Overtime	105,616	–	105,616
Total revenue from contracts with customers	1,115,822	898,522	2,014,344

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For the year ended 31 December 2019 (Restated)

		Energy
	Toll roads	investment	Total
	RMB’000	RMB’000	RMB’000
Types of goods or services
Toll income	1,255,926	–	1,255,926
Sales of refined oil	–	1,045,458	1,045,458
Construction revenue in respect of service
concession arrangements	–	–	–
Total revenue from contracts with customers	1,255,926	1,045,458	2,301,384
Timing of revenue recognition
At a point in time	1,255,926	1,045,458	2,301,384
Overtime	–	–	–
Total revenue from contracts with customers	1,255,926	1,045,458	2,301,384

(ii) Performance obligations

Information about the Group’s performance obligations is summarised below:

Toll income

Toll income is recognised at the point in time when the relevant services have been provided and the Group received the payment or the right to receive payment has been established. As permitted under IFRS 15, the transaction price allocated to these unsatisfied contracts is not disclosed.

Sales of refined oil

Sale of refined oil is recognised at a point in time when the refined oil has been delivered and the Group has received the payment or the right to receive payment has been established. As permitted under IFRS 15, the transaction price allocated to these unsatisfied contracts is not disclosed.

Construction revenue in respect of service concession arrangements

The performance obligation is satisfied over time as construction services are rendered when the Group’s performance creates and enhances an asset that the customer controls as the construction and upgrade services are performed.

There were no unsatisfied or partially unsatisfied performance obligations as at 31 December 2020 and 2019.

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An analysis of other income and gains is as follows:

Other income and gains Interest income from a long-term receivable Bank interest income Compensation income for road damage and temporary road occupation Rental income Deferred income released to profit or loss Gain on disposal of items of property, plant and equipment Overprovision of tax and surcharge payables in prior years Miscellaneous Other income and gains Total revenue, other income and gains	2020 RMB’000 6,042 20,896 5,893 13,793 5,241 1,676 13,639 1,372 68,552 2,082,896	2019 RMB’000 (Restated) 11,619 39,147 17,223 12,061 4,240 313 – 5,825
		90,428
		2,391,812

5. FINANCE COSTS

An analysis of finance costs is as follows:

Interest expenses on bank and other borrowings Interest on lease liabilities	2020 RMB’000 134,441 1,998 136,439	2019 RMB’000 (Restated) 134,054 2,102
		136,156

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6. PROFIT BEFORE TAX

The Group’s profit before tax is arrived at after charging/(crediting):

		2020	2019
	Notes	RMB’000	RMB’000
			(Restated)
Cost of operating service		523,490	553,964
Cost of purchasing refined oil		720,991	874,909
Construction costs in respect of service concession arrangements		105,616	–
Cost of sales		1,350,097	1,428,873
Employee benefit expense:
Wages, salaries and allowances, social security and benefits		167,936	189,628
Pension scheme contributions (defined contribution fund)		7,881	26,199
Other staff benefits		47,819	41,681
		223,636	257,508
Depreciation in respect of:
– property, plant and equipment		57,776	51,269
– right-of-use assets		21,892	21,019
Amortisation in respect of:
– service concession arrangements	11	249,071	237,679
– software		335	325
Impairment loss/(reversal of impairment loss) on trade
receivables	14	435	(21)
Impairment loss on other receivable	15(c)	45,960	407
(Gain)/loss on disposal and write-off of items of
property, plant and equipment, net		(1,466)	1,985
Lease payments not included in the measurement of
lease liabilities		2,196	637
Foreign exchange losses		194	8,968
Bank interest income		(20,896)	(39,147)

7. INCOME TAX

No Hong Kong profits tax has been provided as no assessable profits were earned in or derived from Hong Kong during the year.

Except for certain subsidiaries and associates which are entitled to a preferential tax rate of 15% (2019: 15%) as described below, the Group’s other entities are subject to PRC corporate income tax at the standard rate of 25% (2019: 25%) on their respective assessable profits for the year.

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The Company, Chengdu Chengwenqiong Expressway Co., Ltd., Chengdu Airport Expressway Co., Ltd., Sichuan Chengming Expressway Co., Ltd. (“ Chengming Expressway Company ”) and associates of the Company, i.e., Chengdu Chengbei Exit Expressway Co., Ltd. (“ Chengbei Exit Expressway Company ”), Chengdu Tongneng Compressed Natural Gas Co., Ltd., Chengdu Jiaoyun Compressed Natural Gas Development Co., Ltd. and Zhongyou Jieneng (Chengdu) Environmental Protection Technology Co., Ltd. (“ Zhongyou Jieneng ”) were entitled to a preferential tax rate of 15% under the Circular on Issues Concerning Tax Policies for In-depth Implementation of Western Development Strategies of the State Administration of Taxation, the Ministry of Finance and General Administration of Customs (Cai Shui [2011] No. 58) (the “ Circular ”). Pursuant to the Circular, the tax preferential treatments for the western region development are valid until 31 December 2020. Pursuant to the Circular of Extending the Period of Western Development Strategies Preferential Tax Rate (Cai Shui Fa [2020] No. 23) (the “ New Circular ”), the tax preferential treatments were extended to 31 December 2030.

The major components of income tax expense for the year are as follows:

Current – Mainland China Charge for the year Underprovision in prior years Deferred Total tax charge for the year	2020 RMB’000 118,965 722 (70,577) 49,110	2019 RMB’000 (Restated) 127,433 8,706 (10,178) 125,961

A reconciliation of the tax expense applicable to profit before tax using the statutory tax rate in Mainland China for companies within the Group to the tax expense at the effective tax rate is as follows:

Profit before tax Income tax charge at the statutory tax rate of 25% Effect of the preferential income tax rate of 15% Expenses not deductible for tax Adjustments in respect of current tax of previous years Income not subject to tax Profit attributable to a joint venture and associates Effect of change in tax rate on the opening balance of deferred tax* Tax losses not recognised Tax charge at the Group’s effective tax rate	2020 RMB’000 430,790 107,698 (26,480) 387 722 (1,513) (7,043) (26,622) 1,961 49,110	2019 RMB’000 (Restated) 681,528 170,382 (48,043) 64 8,706 (2,859) (5,689) – 3,400 125,961

The effect of change in tax rate on the opening balance of deferred tax for the year ended 31 December 2020 is due to the extension of the preferential tax rate for certain subsidiaries pursuant to the New Circular.

The share of tax attributable to a joint venture and associates amounting to RMB691,000 (2019 (Restated: RMB743,000)) and RMB5,487,000 (2019 (Restated): RMB3,776,000), respectively, is included in “Share of profits and losses of a joint venture and associates” in profit or loss.

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8. DIVIDENDS

		2020	2019
		RMB’000	RMB’000
Proposed final – RMB0.121	(2019: RMB0.120) per ordinary share	200,388	198,732

The proposed final dividend for the year is subject to the approval of the Company’s shareholders at the forthcoming annual general meeting.

9. EARNINGS PER SHARE ATTRIBUTABLE TO ORDINARY EQUITY HOLDERS OF THE COMPANY

The calculation of basic earnings per share is based on the profit for the year attributable to ordinary equity holders of the Company of RMB344,509,000 (2019 (Restated): RMB485,198,000), and the number of ordinary shares of 1,656,102,000 (the weighted average number of ordinary shares for year ended 31 December 2019: 1,638,607,677) in issue during the year.

No adjustment has been made to the basic earnings per share amounts presented for the years ended 31 December 2020 and 2019 in respect of a dilution as the Group had no potentially dilutive ordinary shares in issue during the years ended 31 December 2020 and 2019.

10. GOODWILL

Cost and net carrying amount at 1 January Effect of a business combination under common control (note 21(b)) Cost and net carrying amount at 31 December	2020 RMB’000 34,026 – 34,026	2019 RMB’000 – 34,026
		34,026

Impairment testing of goodwill

Goodwill acquired through a business combination is allocated to the Chengming Expressway Company cash-generating unit (“ Chengming CGU ”) for impairment testing.

The recoverable amounts of the Chengming CGU had been determined based on a value in use calculation using cash flow projections based on financial budgets covering a five-year period approved by the directors. The discount rate applied to the cash flow projections was 7.96% and cash flows beyond the five-year period were extrapolated using a growth rate of 3.89%.

Assumptions were used in the value in use calculation of the Chengming CGU for 31 December 2020. The following describes each key assumption on which management has based its cash flow projections to undertake impairment testing of goodwill:

Toll rate – The estimated toll rate of each type of vehicles was approved by the Department of Transportation of Sichuan Province, Sichuan Provincial Development and Reform Commission.

Traffic volume – The estimated traffic volume forecast was issued by an independent traffic consultant.

Discount rate – The discount rate used is pre-tax and reflects specific risks relating to the Chengming CGU.

The values assigned to the key assumptions on the market development of the cash-generating unit and discount rate are consistent with external information sources.

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In the opinion of the Company’s directors, a decrease in revenue, caused by the decrease of the toll rate or the decrease of traffic volume, by 5% to 7% would cause the carrying amount of the Chengming CGU to exceed its recoverable amount by approximately RMB11,286,000 to RMB69,264,000, and any reasonably possible change in the other key assumptions on which the recoverable amount is based would not cause the cash-generating unit’s carrying amount to exceed its recoverable amount.

11. SERVICE CONCESSION ARRANGEMENTS

Cost: At beginning of the year Additions Effect of a business combination under common control (note 21(b)) Disposal At end of the year Accumulated amortisation: At beginning of the year Charged for the year At end of the year Net carrying amount: At beginning of the year At end of the year	2020 RMB’000 7,371,103 105,616 – (10,126) 7,466,593 1,445,333 249,071 1,694,404 5,925,770 5,772,189	2019 RMB’000 4,542,384 – 2,828,719 –
		7,371,103
		1,207,654 237,679
		1,445,333
		3,334,730
		5,925,770

(a) The concession rights pertaining to certain expressways of the Group with net carrying amounts listed below were pledged to obtain interest-bearing secured bank loans and other borrowings granted to the Group:

	2020	2019
	RMB’000	RMB’000
Chengpeng Expressway	1,267,784	1,337,828
Chengwenqiong Expressway	1,070,956	1,140,153
Qiongming Expressway	2,383,471	2,369,666
	4,722,211	4,847,647

(b) During the year, the Group was in the construction of the upgrading projects of Chengguan Expressway and Qiongming Expressway. Total construction costs of RMB105,616,000 (2019: Nil) were incurred, among which RMB105,616,000 (2019: Nil) was sub-contracted to third party subcontractors.

In addition, construction revenue of RMB105,616,000 (2019: Nil) was mainly recognised in respect of the construction service provided by the Group for the upgrading projects of Chengguan Expressway and Qiongming Expressway using the input method during the year.

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12. PAYMENTS IN ADVANCE

Purchase of land use rights 13. INVENTORIES Refined oil products 14. TRADE RECEIVABLES Trade receivables are analysed by category as follows: Batch payment arrangement Inter-network toll collection and Electronic Toll Collection (“ETC”) receivables Refined oil Impairment allowance	2020 RMB’000 46,688 2020 RMB’000 54,558 2020 RMB’000 27,999 40,468 589 69,056 (439) 68,617	2019 RMB’000 (Restated) 63,166 2019 RMB’000 (Restated) 32,308 2019 RMB’000 (Restated) 44,130 6,929 551 51,610 (4) 51,606

The Group’s trade receivables mainly arose from toll income receivables under the batch payment arrangement (the “ Arrangement ”) on Chengwenqiong Expressway. In accordance with the Arrangement entered into between the Group and certain local government agencies in Chengdu, the relevant government agencies agreed to pay the Group an amount of a batch payment fee for a certain period in consideration for certain qualified passenger vehicles passing through the expressway without toll payment. Under the Arrangement, the batch payment fee is determined by reference to the actual traffic information and the current toll fee standards of the relevant toll roads, factors affecting future traffic volumes, such as economic growth and consumption level forecast, changes of road network conditions and the potential upside impact on traffic volume. Toll income receivables under the Arrangement are settled in accordance with the credit period of 1 month to 3 months as specified in the relevant contracts governing the Arrangement.

The Group seeks to maintain strict control over the outstanding receivables to minimise credit risk. Overdue balances are reviewed regularly by senior management. Trade receivables are non-interest-bearing.

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An ageing analysis of the Group’s trade receivables as at the end of the reporting period, based on the transaction date and net of loss allowance for impairment of trade receivables, is as follows:

Within 3 months (neither past due nor impaired) Over 3 months (past due)	2020 RMB’000 68,617 – 68,617	2019 RMB’000 (Restated) 51,324 282
		51,606

The movements in the loss allowance for impairment of trade receivables are as follows:

At beginning of year Impairment loss/(reversal of impairment loss) on trade receivables At end of year	2020 RMB’000 4 435 439	2019 RMB’000 (Restated) 25 (21)
		4

An impairment analysis is performed at each reporting date using a provision matrix to measure expected credit losses. As prescribed by IFRS 9, which permits the use of the lifetime expected loss model for all trade receivables, the provision rates are based on days past due. Generally, trade receivables are written off if past due for more than one year and are not subject to enforcement activity.

Set out below is the information about the credit risk exposure on the Group’s trade receivables using a provision except for trade receivables:

As at 31 December 2020

			Past due
		Less than	1 to	3	Over
	Current	1 month	months		3 months	Total
Expected credit loss rate	0.00%	0.00%	0.00%		100.00%	0.64%
Gross carrying amount (RMB’000)	68,617	–		–	439	69,056
Expected credit loss (RMB’000)	–	–		–	439	439

As at 31 December 2019 (Restated)

Current Expected credit loss rate 0.00% Gross carrying amount (RMB’000) 51,324 Expected credit loss (RMB’000) –	Past due Less than 1 month 1 to 3 months Over 3 months Total 0.00% 0.00% 1.40% 0.00% – – 286 51,610 – – 4 4

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15. PREPAYMENTS, OTHER RECEIVABLES AND OTHER ASSETS

		2020	2019
	Notes	RMB’000	RMB’000
			(Restated)
Current portion
Prepayment to suppliers		1,437	2,918
Due from related parties	(b)	68,201	78,542
Government grant receivable	(a)	–	241,687
Rental income receivable		–	8,077
Interest receivable		3,291	9,218
Deposit		6,601	2,269
Deductible input value added tax		4,032	524
Others		4,322	9,041
		87,884	352,276
Impairment allowance	(c)	(47,596)	(3,250)
		40,288	349,026
Non-current portion
Due from a related party	(b)	1,720	860
		42,008	349,886

Notes:

(a) The government grant receivable related to the expansion project of Chengpeng Expressway was fully collected in the year.
(b) In December 2018, Energy Development Company granted interest-bearing loans to Zhongyou Jieneng and Chengdu Jiuhe Oil Management Co., Ltd. (“ Chengdu Jiuhe ”) amounting to RMB1,900,000 and RMB2,150,000, respectively. The interest-bearing loan to Zhongyou Jieneng which bore interest at a rate of 4.35% per annum has been fully repaid by Zhongyou Jieneng in December 2019. The interest-bearing loan to Chengdu Jiuhe bore interest at a rate of 4.75% per annum. In 2020, Chengdu Jiuhe and Energy Development Company entered into an agreement to extend the repayment period and the interest-bearing loan will be repaid in three separate instalments with the first, second and last instalments amounting to RMB430,000, RMB860,000 and RMB860,000, respectively, to be due in December 2021, December 2022 and December 2023, respectively.

Other than the above, other amounts due from related parties are interest-free and have no fixed term of repayments.

At beginning of year Amount written off as uncollectible Impairment loss At end of year	2020 RMB’000 3,250 (1,614) 45,960 47,596	2019 RMB’000 (Restated) 2,843 – 407
		3,250

– 18 –

At the end of the reporting period, none of the above prepayments is either past due or impaired.

An impairment analysis is performed at each reporting date by considering expected credit losses, which are estimated by applying a loss rate approach with reference to the historical loss record of the Group. The loss rate is adjusted to reflect the current conditions and forecasts of future economic conditions, as appropriate.

In determining the ECLs for other receivables, the directors of the Company have taken into account the historical default experience and the future prospects of the industries and/or various external sources of actual and forecast economic information, as appropriate, in estimating the probability of default of each of the other receivables and other current assets occurring within their respective loss assessment time horizons, as well as the loss upon default in each case. Except for the other receivables due from Chengdu Petroleum Corporation (“ Petroleum Corporation ”) amounted to RMB45,751,000 which had been fully impaired during the year, the Group has assessed and concluded that the risk of default rate for the other instruments was minimal at the end of the reporting periods since the counterparties to these instruments have a high credit rating.

16. TRADE PAYABLES

An ageing analysis of trade payables as of the end of the reporting period based on the invoice date is as follows:

Within 3 months 3 to 6 months 6 to 12 months Over 1 year Retention monies, included in trade payables	2020 RMB’000 68,083 78,002 4,152 777,422 927,659 5,099	2019 RMB’000 (Restated) 133,190 1,439 22,708 799,637
		956,974
		28,047

Trade payables are non-interest-bearing. Except for the retention money payables arising from construction and upgrade services which are normally settled between six months and one year, credit periods granted by each individual supplier or contractor are on a case-by-case basis and set out in the respective contracts.

– 19 –

17. OTHER PAYABLES AND ACCRUALS

Notes Current portion Payroll and welfare payables Taxes and surcharge payables Due to related parties Payables for property, plant and equipment Inter-network toll collection payable (a) Construction payables related to a project where the Group acts as an intermediary agent (b) Deposits Interest payable Deferred income (c) Consultancy and professional fees Dividend payables (d) Contract liabilities (e) Others Non-current portion Deferred income (c)	2020 RMB’000 32,238 12,550 260 17,749 3,244 123,369 27,544 4,108 8,873 1,937 16,662 35,232 35,066 318,832 112,997 431,829	2019 RMB’000 (Restated) 43,511 26,482 26,006 10,624 3,974 – 25,736 3,271 8,700 2,792 – 9,092 21,794
		181,982
		120,224
		302,206

Notes:

(a) The balance represented the expressway tolls pending for allocation to other expressway operators.
(b) The balance represented unused project funds related to the “expressway to expressway” inter-network construction project between Chengguan Expressway and Chengdu Ring Expressway, which is funded by the Chengdu Municipal Government and unpaid to the construction companies. The Group merely acts as an intermediary agency for the management of funds from the Chengdu Municipal Government and settlement of construction costs to the related contractors. The Group did not charge any agency or management fee from the management of funds arising from this project.
(c) The balance represented leasing income received in advance for occupying the Group’s land along the expressways. Deferred income of the Group to be released to profit or loss after twelve months from the end of the year has been recorded as a non-current liability.
(d) The balance represented dividend payables to the non-controlling shareholders of Chengpeng Expressway Company and Communications Investment Energy amounting to RMB916,000 and RMB15,746,000, respectively.
(e) Contract liabilities consisted of short-term advances received from customers in relation to the sale of refined oil and short-term advances received from government agencies in relation to the batch payment of Chengwenqiong Expressway. Contract liabilities will be recognised as revenue within one year. The increase in contract liabilities in the reporting periods was mainly due to the increase in short-term advances received from a government agency.

– 20 –

18. INTEREST-BEARING BANK AND OTHER BORROWINGS

2020	2019
Effective interest rate (%) Maturity 4.31-4.41 2021 3.66-4.31 2021 4.90 2021 4.31-4.41 2022-2038 3.66-4.31 2022-2025 4.90 2024	Effective interest rate (%) Maturity 4.41-4.90 2020 4.41-4.90 2020 4.90 2020 4.41-4.90 2021-2030 4.41-4.90 2021-2030 4.90 2024 2020 RMB’000 214,500 236,000 838,000 1,894,000 3,182,500 – – 81,768 81,768 3,264,268	RMB’000 (Restated) 104,657 32,500 120,000
		257,157
		1,793,500 192,000 772,060
		2,757,560
		3,014,717
		2019 RMB’000 (Restated) 137,157 209,000 882,000 894,500
		2,122,657
		120,000 – 772,060
		892,060
		3,014,717

– 21 –

Notes:

(a) The bank loans were secured by the service concession rights disclosed in note 11 to the financial statements. In addition, the bank loan of approximately RMB1,767,500,000 as at 31 December 2020 (2019: RMB1,114,157,000) was also guaranteed by Chengdu Communications Investment at nil consideration.
(b) The bank loans of approximately RMB192,000,000 as at 31 December 2020 (2019: RMB224,500,000) were guaranteed by the Company and Chengwenqiong Expressway Company at nil consideration.
(c) The other loans of approximately nil as at 31 December 2020 (2019: RMB120,000,000) were secured by the service concession arrangement of Chengwenqiong Expressway (note 11).
(d) The unsecured other loan represented an interest-bearing loan received from Chengdu Expressway Construction.

At the end of the reporting period, all interest-bearing bank and other borrowings were denominated in RMB.

19. ISSUED CAPITAL

Issued and fully paid: Domestic shares of 1,200,000,000 of RMB1.00 each H shares of 456,102,000 of RMB1.00 each	2020 RMB’000 1,200,000 456,102 1,656,102	2019 RMB’000 1,200,000 456,102
		1,656,102

All domestic shares and H shares rank pari passu with each other in terms of dividend and voting rights.

20. RESERVES

The amounts of the Group’s reserves and the movements therin for the current and prior years are presented in the consolidated statement of changes.

(a) Share premium

The application of the share premium account is governed by the Company Law of the PRC. Under the constitutional documents and the Company Law of the PRC, the share premium is distributable as a dividend on the condition that the Company is able to pay its debts when they fall due in the ordinary course of business at the time the proposed dividend is to be paid.

(b) Statutory reserve

In accordance with the Company Law of the PRC and the respective articles of association of subsidiaries domiciled in Mainland China, each of the PRC subsidiaries is required to allocate 10% of its profit after tax, as determined in accordance with PRC Generally Accepted Accounting Principles (“ GAAP ”), to the statutory surplus reserve (the “ SSR ”) until such reserve reaches 50% of its registered capital.

According to the articles of association of the subsidiaries located in Mainland China, the Company and the subsidiaries are required to allocate 10% of their profit after tax in accordance with PRC GAAP to the SSR.

The SSR is non-distributable except in the event of liquidation and subject to certain restrictions set out in the relevant PRC regulations. They can be used to offset accumulated losses or capitalised as paid-up capital.

– 22 –

(c) Other reserve

It represents the fair value of 40% of the share of identifiable net assets of Chengbei Exit Expressway Company‘s attributable share as at the acquisition date of RMB121,818,000.

(d) Merger differences

Merger differences consisted of: (i) the difference between the consideration of RMB429,777,000 paid by Chengdu Expressway Construction to acquire 51% equity interests in Chengming Expressway Company, after netting off the consideration of RMB485,143,000 paid to Chengdu Expressway Construction by the Group on the acquisition of 51% equity interests in Chengming Expressway Company, and (ii) the difference between the consideration of RMB727,570,000 by the Group to acquire 94.49% equity interests in Energy Development Company offset by the aggregate amount of the paid-up issued capital, capital reserve and merger reserve attributable to the then owners immediately before the acquisition of RMB402,857,000.

(e) Safety fund reserve

Pursuant to the relevant PRC regulation, Chengdu Zhongyou Energy Co.,Ltd. and Chengdu Communications Investment Energy Development Co.,Ltd. (“ Communications Investment Energy ”) are required to transfer a certain percentage based on a progressive rate on revenue generated from transportation of petrol or other dangerous chemical into a designated fund. The safety fund can only be transferred to retained profits to offset safety related expenses as and when they are incurred, including expenses related to safety protection facilities and equipment improvement and maintenance as well as safety production inspection, appraisal, consultation and training.

21. BUSINESS COMBINATIONS UNDER COMMON CONTROL

(a) Acquisition of Energy Development Company

On 12 August 2020, the Group acquired 94.49% equity interests in Energy Development Company from Chengdu Communications Investment for a consideration of RMB727,570,000. Energy Development Company is engaged in the management and operation of petrol stations in Mainland China. The acquisition was made as part of the Company’s diversified investment strategy, which could improve the Group’s ability to continue as a going concern and to resist risks.

As the Group and Energy Development Company are under the common control of Chengdu Communications Investment before and after the acquisition, the business combination has been accounted for in the consolidated financial statements of the Group as a business combination under common control based on the principles of merger accounting as if the acquisition had occurred when Energy Development Company established by Chengdu Communications Investment. Energy Development Company has been under the control of Chengdu Communications Investment since established. Upon the business combination under common control effected on 12 August 2020, Energy Development Company has also become a subsidiary of the Group since its establishment date on 2 June 2011.

Under the principles of merger accounting, the assets and liabilities of Energy Development Company are consolidated in the Group’s financial statements using the existing book values as stated in the consolidated financial statements of Chengdu Communications Investment immediately prior to the combination.

– 23 –

The carrying amounts of the assets and liabilities of Energy Development Company as at the transaction date on 12 August 2020 were as follows:

Property, plant and equipment Right-of-use assets Software Trade receivables Inventories Prepayments, other receivables and other assets Cash and bank balances Long-term receivable Deferred tax assets Payments in advance Investment in a joint venture Investments in associates Trade payables Tax payables Other payables and accruals Lease liabilities Deferred tax liabilities Total net assets at book value Non-controlling interests Difference recognised in equity Total purchase consideration	Book values at 12 August 2020 a RMB’000 106,617 430,792 633 24 14,845 34,442 165,113 1,720 14,908 63,283 12,252 160,176 (3,153) (4,719) (33,409) (10,127) (38,174) 915,223 (342,668) 572,555 155,015 727,570	Book values t 31 December 2019 RMB’000 108,501 428,272 657 547 32,308 78,551 168,337 860 3,366 63,166 11,277 103,618 (4,312) (5,367) (25,834) (4,413) (40,985) 918,549

The Group has elected to measure the non-controlling interests in Energy Development Company at the proportionate share of the non-controlling interests of Energy Development Company’s identifiable net assets.

The Group incurred transaction costs of RMB2,059,000 for this acquisition. These transaction costs have been expensed and are included in administrative expenses in profit or loss.

(b) Acquisition of Chengming Expressway Company

On 16 December 2019, the Group acquired 51% equity interests in Chengming Expressway Company from Chengdu Expressway Construction for a consideration of RMB485,143,000. Chengming Expressway Company is engaged in the management and operation of Qiongming Expressway. The acquisition was made as part of the Company’s development strategy to acquire high-quality expressways and will benefit the competition against the expressway nearby.

– 24 –

As the Group and Chengming Expressway Company are under the common control of Chengdu Expressway Construction before and after the acquisition, the business combination has been accounted for in the consolidated financial statements of the Group as a business combination under common control based on the principles of merger accounting as if the acquisition had occurred when Chengming Expressway Company first came under the control of Chengdu Expressway Construction on 7 May 2019. On 7 May 2019, Chengdu Expressway Construction acquired the 100% equity interests in Chengming Expressway Company from independent third parties at a cash consideration of RMB842,700,000. Upon this acquisition and the business combination under common control effected on 16 December 2019, Chengming Expressway Company has also become a subsidiary of the Group since 7 May 2019.

Under the principles of merger accounting, the assets and liabilities of Chengming Expressway Company are consolidated in the Group’s financial statements using the existing book values as stated in the consolidated financial statements of Chengdu Expressway Construction immediately prior to the combination. The difference between the consideration paid by Chengdu Expressway Construction to acquire 51% equity interests in Chengming Expressway Company of RMB429,777,000 and the distribution to Chengdu Expressway Construction on the acquisition of 51% equity interests in Chengming Expressway Company of RMB485,143,000 amounted to RMB55,366,000. Such difference was recognised in the merger deficit account.

The following table shows the amount of goodwill recognised and fair values of the net identifiable assets and liabilities of Chengming Expressway Company as at the date when Chengming Expressway Company first came under the control of Chengdu Expressway Construction on 7 May 2019:

Notes
Property, plant and equipment
Right-of-use assets
Service concession arrangements
11
Trade receivables
Prepayments, other receivables and other assets
Cash and bank balances
Trade payables
Other payables and accruals
Interest-bearing bank and other borrowings
Deferred income
Deferred tax liabilities
Total identifiable net assets at fair value
Non-controlling interests
Goodwill on acquisition
10
The proportionate share of the consideration paid by Chengdu Expressway
Construction for the acquisition of the 51% equity interests in Chengming
Expressway Company

Fair values
at 7 May 2019
RMB’000
57,377
35,012
2,828,719
2,269
8,401
111,831
(9,495)
(9,776)
(1,995,374)
(63,734)
(189,247)
775,983
(380,232)
34,026
429,777

– 25 –

The Group has elected to measure the non-controlling interests in Chengming Expressway Company at the proportionate share of the non-controlling interests of Chengming Expressway Company’s identifiable net assets.

Had the combination taken place at the beginning of the year, the revenue from continuing operations of the Group and the profit of the Group for the year would have been RMB1,312,708,000 and RMB471,055,000, respectively.

The Group incurred transaction costs of RMB2,654,000 for this acquisition. These transaction costs have been expensed and are included in administrative expenses in profit or loss.

An analysis of the cash flows in respect of the acquisition of Chengming Expressway Company is as follows:

Cash consideration Cash and bank balances acquired Net outflow of cash and cash equivalents included in cash flows from investing activities	RMB’000 (485,143) 111,831 (373,312)

Since 7 May 2019, Chengming Expressway Company contributed RMB133,171,000 to the Group’s revenue and caused a loss of RMB7,062,000 to the consolidated profit for the year ended 31 December 2019.

22. CONTINGENT LIABILITIES

On 4 June 2018, Communications Investment Energy was involved in a contract dispute arising from a forged trade receivable document composed by Petroleum Corporation for an amount of approximately RMB73,989,000. Petroleum Corporation is a subsidiary of Chengdu Huaguan Industrial Co., Ltd. As at the reporting date, the litigation is still unsettled. The Directors, based on the advice from the Group’s legal counsel, believe that Communications Investment Energy has a valid defence against the lawsuit. In addition, Chengdu Communications Investment has irrevocably undertaken in writing to the Company, if, following the completion of the acquisition of Energy Development Company, the court ruled that Communications Investment Energy shall assume legal responsibilities, Chengdu Communications Investment shall fully compensate the actual losses thus incurred to the Group. Accordingly, the Directors have not provided for any loss arising from litigation, other than the related legal costs.

– 26 –

CHAIRMAN’S STATEMENT

The year of 2020 was significantly unusual, when the sudden outbreak and spread of COVID-19 pandemic wreaked havoc to global and domestic economies. During the Reporting Period, the Group focused on the macro situation, meticulously carried out industry policies, proactively implemented various pandemic prevention measures, rolled out smooth operations under each business segment and did not record any case of virus infection. During the Reporting Period, the Group continued to optimise internal control, materialised cost reduction and efficiency enhancement, captured market opportunities, accelerated diversified business expansion and strengthened core competitiveness to earnestly cope with the impact of the pandemic. Despite a decline in annual operating results as compared with the corresponding period of last year, our overall growth resonated with the macro-economic condition and trended towards a positive outlook.

During the Reporting Period, the Group achieved revenue of RMB2,014,344,000 (2019 (restated): RMB2,301,384,000), representing a decrease of RMB287,040,000, or 12.5% from 2019. Toll income of the expressway segment reached RMB1,010,206,000 (2019 (restated): RMB1,255,926,000), accounting for 50.2% of the total revenue for the year and representing a year-on-year decrease of 19.6%; and revenue from the energy segment reached RMB898,522,000 (2019 (restated): RMB1,045,458,000), accounting for 44.6% of the total revenue for the year and representing a year-on-year decrease of 14.1%.

During the Reporting Period, the Group achieved profit for the year of RMB381,680,000 (2019 (restated): RMB555,567,000), representing a decrease of RMB173,887,000, or 31.3% from 2019; total comprehensive income for the year attributable to owners of the Company of RMB344,509,000 (2019 (restated): RMB485,198,000), representing a year-on-year decrease of 29.0%; and basic earnings per Share of approximately RMB0.208 (2019 (restated): RMB0.296), representing a year-on-year decrease of 29.7%.

The Company is committed to creating steady returns for the Shareholders. The Board recommended the payment of a final cash dividend for 2020 of RMB0.121 per Share (tax inclusive), totaling RMB200,388,342. The dividend payout plan will be implemented upon approval at the AGM for 2020 to be held on Thursday, 10 June 2021.

– 27 –

Results Review

COVID-19 Pandemic Leading to A Decline in Annual Results

Expressway Segment

During the Reporting Period, primarily due to the COVID-19 pandemic and the policy of the MOT to waive tolls for toll expressways nationwide during the period from 00:00 on 17 February 2020 to 00:00 on 6 May 2020 (the “ Toll Waiver Policy of the MOT ”), the operating results of the expressway segment of the Group recorded certain decline from the same period of the previous year. In particular, toll income during the first half of the year suffered a significant year-on-year drop. In the second half of the year, with the COVID-19 pandemic gradually under control and toll collection returned to normal, toll income quickly returned to and slightly exceeded the amount recorded in the corresponding period of last year.

During the Reporting Period, the expressway segment achieved toll income of RMB1,010,206,000, representing a year-on-year decrease of 19.6% (2019 (restated): RMB1,255,926,000). In particular, Chengguan Expressway, Chengpeng Expressway, Chengwenqiong Expressway, Qiongming Expressway and Chengdu Airport Expressway recorded daily weighted average traffic volume[Note 1] of 40,051, 61,085, 57,048, 12,591 and 43,510, representing a decrease of 1.7%, an increase of 14.2%, a decrease of 3.1%, a decrease of 19.3% and a decrease of 3.2% from 2019, respectively; and toll income of RMB225,402,000, RMB217,360,000, RMB333,490,000, RMB122,205,000 and RMB111,749,000, representing a decrease of 26.8%, a decrease of 8.8%, a decrease of 23.1%, a decrease of 8.2%[Note 2] and a decrease of 21.6% from 2019, respectively.

During the Reporting Period, due to the COVID-19 pandemic and the Toll Waiver Policy of the MOT, the primary key factors that affected the toll income and traffic volume of the expressways of the Group, as well as the construction projects, five expressways of the Group recorded varied performances. Chengpeng Expressway maintained a significant increase in traffic volume attributable to traffic redirection following the renovation and expansion project of the old Chengpeng Expressway. Qiongming Expressway recorded a drastic year-on-year decline in traffic volume attributable to a decrease in traffic lanes for road surface renovation during the Reporting Period. Chengwenqiong Expressway recorded a decline in traffic volume as it is connected to Qiongming Expressway, therefore indirectly subject to the road surface renovation project on Qiongming Expressway. Chengdu Airport Expressway recorded a slight decrease in traffic volume attributable to reduced flight in Chengdu Shuangliu International Airport. Chengguan Expressway recorded a slight decrease in traffic volume attributable to the renovation project on Yangxi line, Expressway-to-Expressway inter-network project and road surface renovation during the Reporting Period.

Notes:

1 In the context, traffic volume for 2020 was collected based on the period from 6 May 2020 to 31 December 2020; and that for 2019 was collected based on the period from 1 May 2019 to 31 December 2019. For details of the traffic volume, please refer to “Expressway Segment” under “Management Discussion and Analysis” in this announcement.

2 As Qiongming Expressway was acquired by the Group from Chengdu Expressway Construction in 2019 and Chengdu Expressway Construction completed acquisition of equity interests in Chengming Expressway Company on 7 May 2019, the Group consolidated the results of Qiongming Expressway recorded from May to December 2019 into its financial statements for 2019. Qiongming Expressway registered toll income of RMB133,171,000 from May to December 2019, and RMB122,205,000 from January to December 2020, a decrease of 8.2% compared with RMB133,171,000.

– 28 –

Energy Segment

The Company completed acquisition of 94.49% equity interests in Energy Development Company on 12 August 2020, upon which, the energy segment was consolidated into the Group. During the Reporting Period, demand for refined oil shrank due to the COVID-19 pandemic and domestic refined oil traded at low prices. Under the combined impact of the COVID-19 pandemic and price fluctuations, the operating results of the energy segment recorded a drop from the previous year and suffered a “V”-shaped curve for the whole year as is the case of the expressway segment.

During the Reporting Period, the energy segment achieved operating revenue of RMB898,522,000 (2019 (restated): RMB1,045,458,000), representing a year-on-year decrease of 14.1%.

Diversified Business Expansion and Intensifying Core Competitiveness

The Company accelerated business expansion to cope with the shock caused by COVID-19 pandemic to the business of the Group. During the Reporting Period, the Group focused on expanding the principal business and proactively explored new and reliable growth drivers to mitigate risks from single operation in the strategy of nurturing “expressway +” industries. On 4 March 2020, the Company entered into the Project Investment Agreement with the Pidu District Government, pursuant to which, Pidu District Government undertakes to provide project supporting infrastructure, and to offer preferential policies including the industrial talent programs and other incentives, and the Company undertakes to invest in the construction of a Class B expressway service area in proximity to Ande Toll Station (near K22 of Chengguan Expressway) within Pidu District. To such end, the Company established Zhenxing Company as the project company to be responsible for investment and construction of Ande service area. In February 2021, phase I construction of the project had been initiated. On 12 August 2020, the Company successfully acquired 94.49% equity interests of Energy Development Company to newly establish the energy segment and conduct retail business of refined oil through Energy Development Company and retail business of CNG through the joint venture and associates of Energy Development Company. On 8 December 2020, the Company won the tenders for the operation and management business of Chengdu Tianfu International Airport Expressway (“ Tianfu Airport Expressway ”) and Pujiang-Dujiangyan Section of Chengdu Economic Zone Ring Expressway (“ Pudu Expressway ”) and secured operation and management contracts of a total amount of approximately RMB76,347,000 per annum and for a term of two years.

Through the above efforts, the Company further expanded asset scale and revenue sources, and increased backlog for future development, which intensified its core competitiveness.

– 29 –

On-going Optimisation of Operation and Management to Materialise Cost Reduction and Efficiency Enhancement

During the Reporting Period, the Group upheld the intensive, flat and professional expressway operation management approach. On 29 April 2020, the Company established a 100%-owned subsidiary, Operation Company, which took over, among other things, toll collection, maintenance and asset operation and development of Chengguan Expressway, Chengpeng Expressway, Chengwenqiong Expressway, Qiongming Expressway and Chengdu Airport Expressway operated by the Group. The establishment and operation of Operation Company enhanced efficiency for the expressway operation and management and reduced management cost. In addition, the Group also raised the internal control concept of “practicing austerity” to cope with shock of the pandemic through strict control over costs and ensure sound financial position during the Reporting Period.

During the Reporting Period, the Group continued to consolidate expressway management and service capacity and won industry recognition and honours. All of the expressways operated by the Group successfully passed the “13th five-year” national expressway maintenance and management assessment inspection organised by the MOT and received notice of commendation from the Expressway Administration Bureau of Department of Transportation of Sichuan Province. Qiongming Expressway was accepted by the Expressway Administration Bureau of Department of Transportation of Sichuan Province as an “Expressway with Good Service, Environment, Security, Maintenance and Operation”. The “Ingenuity Blue” Innovation Service Team comprising 20 key expressway operation and management staff was recognised as the 7th “Most Beautiful Chinese Road Collector Team” by China Highway & Transportation Society.

Outlook in 2021

Leveraging the endeavours made in 2020, the COVID-19 pandemic has been effectively controlled in China and macro-economy registered a rapid recovery. In 2020, GDP of the whole nation, Sichuan Province and Chengdu recorded a year-on-year increase of 2.3%, 3.8% and 4.0%, respectively and it is expected that steady and progressive growth will be maintained in 2021. Meanwhile, the 14th five-year plan of the national economy and social development (the “ 14th Five-Year Plan ”) will roll out commencing from 2021, and the dual-city economic circle strategy for Chengdu and Chongqing, the transportation integration strategy for Chengdu and Chongqing, and the development strategy of “one trunk with multiple branches and coordinated development among five districts” for Sichuan Province and other regional material development strategies are advancing smoothly. Chengdu of Sichuan Province, where the Group domiciles, is located at the heart of such development strategies and the industry in which the Group operates is also closely related to such strategies. The Group expects that, in-depth implementation of the development strategies will facilitate the Group to expand operations and consolidate operating results.

– 30 –

With respect to expressway segment, the Group will leverage the management platform of Operation Company, continue to promote intensive, flat and professional operation and management over expressways operated by it, achieve cost reduction and efficiency enhancement and enhance its principal business. Meanwhile, tapping into the operation business of Tianfu Airport Expressway and Pudu Expressway, the Group will accumulate market-oriented management experience and industry reputation, so as to earnestly forge the “Chengdu Expressway” management brand. In addition, we will attach great importance to the policies of the state, Sichuan Province and Chengdu under the 14th Five-Year Plan and quality road assets and extension business available on the market arising from such polices, in a bid to capture policy dividend and maintain sustainable development of the Group.

With respect to energy segment, the Group will steadily bring into play backlog resources, proactively secure our foothold in the “eastward exploration” regions in Chengdu and establish new oil and gas stations while improving existing refined oil retail service capabilities. Meanwhile, the Group will follow the national energy structure adjustment policies and focus on hydrogen energy and other new energy businesses, striving to create new revenue and profit growth drivers.

The Group will remain dedicated to the commitments made at listing, build itself into a quality listed enterprise with remarkable results and create greater value for the Shareholders.

– 31 –

MANAGEMENT DISCUSSION AND ANALYSIS

Summary of the Group’s Operating Results

	2020	2019
	RMB’000	RMB’000
		(Restated)
Revenue	2,014,344	2,301,384
Including:
Toll income	1,010,206	1,255,926
Sales of refined oil	898,522	1,045,458
Construction revenue in respect of service concession
arrangements	105,616	–
Profit before tax	430,790	681,528
Total comprehensive income for the year attributable to owners
of the Company	344,509	485,198
Earnings per Share attributable to ordinary equity holders of the
Company
– Basic and diluted	RMB0.208	RMB0.296
Summary of the Group’s Financial Position
	As at	As at
	31 December	31 December
	2020	2019
	RMB’000	RMB’000
		(Restated)
Total assets	9,067,406	9,334,119
Total liabilities	4,895,496	4,599,564
Non-controlling interests	891,764	872,616
Equity attributable to owners of the Company	3,280,146	3,861,939

Note: Data for 2019 under “Management Discussion and Analysis” in this announcement were restated.

– 32 –

Revenue

The Group is primarily engaged in toll collection, maintenance and repair of the expressways operated by it, as well as management and operation of petrol stations and gas stations in its daily operations.

During the Reporting Period, the Group operated a total of five expressways, including Chengguan Expressway, Chengpeng Expressway, Chengwenqiong Expressway, Chengdu Airport Expressway and Qiongming Expressway under the expressway segment and 22 petrol stations and one gas station (one petrol station and one gas station did not commence operation during the Reporting Period) under the energy segment.

As a result of the COVID-19 pandemic, the Group achieved revenue of RMB2,014,344,000 during the Reporting Period, representing a year-on-year decrease of RMB287,040,000 from 2019, including revenue from the expressway segment of RMB1,010,206,000, accounting for 50.2% of the total revenue for 2020, and revenue from the energy segment of RMB898,522,000, accounting for 44.6% of the total revenue for 2020. The table below sets forth an analysis of revenue generated by the Group during the Reporting Period:

Revenue from expressway segment Chengguan Expressway Chengpeng Expressway Chengwenqiong Expressway Chengdu Airport Expressway Qiongming Expressway Toll income Construction revenue in respect of service concession arrangements Revenue from energy segment Sales of refined oil Total revenue	2020 RMB’000 225,402 217,360 333,490 111,749 122,205 1,010,206 105,616 898,522 2,014,344	2019 RMB’000 (Restated) 307,940 238,312 433,933 142,570 133,171Note 1,255,926 – 1,045,458 2,301,384

Note: RMB133,171,000 represented toll income of Qiongming Expressway recorded from May to December 2019, while toll income of Qiongming Expressway recorded throughout 2019 amounted to RMB189,953,000.

– 33 –

Expressway Segment

Pursuant to the Notice on Resumption of Toll Collection on Toll Roads of the Ministry of Transport (《交通運輸部關於恢復收費公路收費的公告》) published at the night of 28 April 2020 by the MOT, with approval from the State Council, toll charge of toll roads has been resumed from 00:00 on 6 May 2020. Set out below is the traffic volume of each expressway of the Group recorded during the period from 6 May 2020 to 31 December 2020 (the “ Toll Resumption Period ”):

	Daily weighted	Daily weighted
	average traffic volume (vehicle)			Year-on-year
	6 May 2020 to	1 May 2019 to		increase/
Toll expressway	31 December 2020	31 December 2019		(decrease)
Chengguan Expressway	40,051		40,749	(1.7%)
Chengpeng Expressway	61,085		53,503	14.2%
Chengwenqiong Expressway	57,048		58,845	(3.1%)
Chengdu Airport Expressway	43,510		44,934	(3.2%)
Qiongming Expressway	12,591		15,608	(19.3%)
Total	214,285		213,639	0.3%

Details of toll income and traffic volume of expressways operated by the Group are set out below:

During the Reporting Period, toll income of the expressways operated by the Group recorded a decline from 2019, primarily attributable to the COVID-19 pandemic and Toll Waiver Policy of the MOT. In particular, (i) Chengguan Expressway, Chengwenqiong Expressway and Chengdu Airport Expressway suffered significant headwinds with a decrease in toll income of RMB82,538,000, RMB100,443,000 and RMB30,821,000, or 26.8%, 23.1% and 21.6%, respectively, from 2019; (ii) Chengpeng Expressway recorded a decrease in toll income of RMB20,952,000, or 8.8%, from 2019, (iii) Chengdu Expressway Construction acquired the 100% equity interests of Chengming Expressway Company in May 2019 and the Company acquired 51% equity interests in Chengming Expressway Company from Chengdu Expressway Construction in December 2019. Due to business combination under common control, operating results of Chengming Expressway Company from May to December 2019 were consolidated into the financial statements of the Group for 2019. Qiongming Expressway recorded toll income of RMB122,205,000 throughout 2020 and RMB133,171,000 for May to December 2019, a decrease of RMB10,966,000, or 8.2%.

– 34 –

During the Toll Resumption Period, overall traffic volume of the expressways operated by the Group recorded a slight year-on-year increase. In particular, (i) Chengpeng Expressway recorded an increase in traffic volume benefited from redirection of certain freight vehicles following renovation and expansion of old Chengpeng Expressway; (ii) Chengguan Expressway recorded a decline in traffic volume due to the renovation project on Yangxi line, the Expressway-to-Expressway inter-network project and road surface renovation; (iii) Qiongming Expressway recorded a decline in traffic volume due to a decrease in traffic lanes for whole line renovation project; (iv) Chengwenqiong Expressway recorded a decline in traffic volume as it is connected to Qiongming Expressway and indirectly subject to the renovation project on Qiongming Expressway; and (v) Chengdu Airport Expressway recorded a slight decrease in traffic volume due to reduced flights at Chengdu Shuangliu International Airport.

Construction revenue in respect of service concession arrangements reached RMB105,616,000, a year-on-year increase of RMB105,616,000, primarily attributable to the renovation projects of Chengguan Expressway and Qiongming Expressway during the Reporting Period. Such construction revenue was non-recurring in nature and relates solely to the upgrading or expansion projects undertaken by the Group rather than provision of construction services to third parties and the construction revenue in respect of service concession arrangements recognised equals the construction cost incurred for the same period.

Energy Segment

During the Reporting Period, revenue of the energy segment reached RMB898,522,000, a decrease of RMB146,936,000, or 14.1%, from 2019, primarily attributable to a continuous drop in domestic oil price and therefore a decrease in overall operating revenue.

Cost of Sales

During the Reporting Period, cost of sales of the Group primarily included cost of sales of refined oil, depreciation and amortisation, staff remuneration, construction cost in respect of service concession arrangements and expressway maintenance and repair. During the Reporting Period, the Group’s cost of sales was RMB1,350,097,000, representing a year-on-year decrease of 5.5% as compared with RMB1,428,873,000 for the same period in 2019, which was primarily attributable to (i) an increase in construction cost in respect of service concession arrangements of RMB105,616,000 from 2019 due to renovation projects of Chengguan Expressway and Qiongming Expressway in 2020; (ii) a decrease in cost of sales of refined oil of Energy Development Company by RMB153,918,000 in 2020 from 2019 given the drop in domestic refined oil prices; and (iii) a decrease in staff cost resulting from waiver of social insurance contributions from February to December 2020 following the Measures for Temporary Reduction and Exemption of Enterprise Social Insurance Contributions in Sichuan Province (《四川省階段性減免企業社會保險費實施辦法》) (Chuan Ren She Fa [2020] No. 1) issued by the Department of Human Resources and Social Security of Sichuan Province and other four departments on 4 March 2020.

– 35 –

Gross Profit and Gross Profit Margin

During the Reporting Period, gross profit of the Group’s operations amounted to RMB664,247,000 (2019: RMB872,511,000) and gross profit margin was 33.0% (2019: 37.9%), representing a year-on-year decrease of 4.9%.

During the Reporting Period, gross profit of toll income was RMB486,716,000, and gross profit margin of toll income was 48.2% (2019: 55.9%), a year-on-year decrease of 7.7 percentage points, primarily attributable to a decrease in toll income as affected by the COVID-19 pandemic and Toll Waiver Policy of the MOT. Gross profit of retail of refined oil under the energy segment was RMB177,531,000, and gross profit margin of retail of refined oil was 19.8% (2019: 16.3%), a year-on-year increase of 3.5 percentage points, primarily attributable to slower decrease in selling price than that in purchase price of refined oil.

Administrative Expenses

During the Reporting Period, the Group incurred administrative expenses of RMB90,955,000 (2019: RMB101,647,000), representing a year-on-year decrease of 10.5%, which was mainly attributable to reward of RMB8,000,000 received from government authorities, which was used to offset administrative expenses on a net basis and a decrease in staff cost resulting from waiver of social insurance contributions from February to December 2020 following the Measures for Temporary Reduction and Exemption of Enterprise Social Insurance Contributions in Sichuan Province (《四川省階段性減免企業社會保險費實施辦法》) (Chuan Ren She Fa [2020] No. 1) issued by the Department of Human Resources and Social Security of Sichuan Province and other four departments on 4 March 2020.

During the Reporting Period, the employee benefit expenses (including salary and social security expenses) and depreciation and amortisation amount of the Group were RMB65,222,000 (2019: RMB68,272,000) and RMB7,806,000 (2019: RMB8,080,000), respectively.

Other Expenses

During the Reporting Period, the Group incurred other expenses of RMB57,381,000 (2019: RMB14,875,000), representing a year-on-year increase of RMB42,506,000, which was primarily attributable to impairment loss fully provided on other receivables due from Chengdu Petroleum Corporation (“ Petroleum Corporation ”) of RMB45,751,000 in 2020 as disclosed in the circular of the Company dated 10 July 2020, leading to an increase in other expenses.

Share of Profit of Associates

During the Reporting Period, the Company recognised share of profit of associates of RMB30,961,000 (2019: RMB20,385,000) arising from its 40%, 25%, 43%, 30% and 47.49% equity interests in Chengbei Exit Expressway Company, Chengdu Jiaoyun Compressed Natural Gas Development Co., Ltd., Chengdu Jiuhe Oil Management Co., Ltd., Chengdu Tongneng Compressed Natural Gas Co., Ltd. and Zhongyou Jieneng (Chengdu) Environmental Protection Technology Co., Ltd., respectively, a year-on-year increase of 51.9%, primarily attributable to turnaround from loss in 2019 to profit in 2020 recorded by Chengbei Exit Expressway Company following resumption of toll collection from 6 May 2020, leading to an increase in share of profit of Chengbei Exit Expressway Company of RMB12,154,000 arising from the Company’s equity interests therein recognised in 2020.

– 36 –

Total Comprehensive Income for the year Attributable to Owners of the Company

During the Reporting Period, the total comprehensive income for the year attributable to owners of the Company was RMB344,509,000 (2019: RMB485,198,000), representing a year-on-year decrease of 29.0%, primarily due to impact of the COVID-19 pandemic and Toll Waiver Policy of the MOT. Basic and diluted earnings per Share were RMB0.208 (2019: RMB0.296) during the Reporting Period, representing a year-on-year decrease of RMB0.088.

Assets and Liabilities Overall Conditions

As at the end of the Reporting Period, total assets of the Group amounted to RMB9,067,406,000 (2019: RMB9,334,119,000), representing a decrease of 2.9% from the end of 2019. The Group’s total assets mainly consist of service concession rights in respect of Chengguan Expressway, Chengpeng Expressway, Chengwenqiong Expressway, Qiongming Expressway and Chengdu Airport Expressway. The above assets accounted for 63.7% of the Group’s total assets. Cash and cash equivalents and other assets accounted for 19.4% and 16.9% of total assets, respectively.

As at the end of the Reporting Period, total liabilities of the Group amounted to RMB4,895,496,000 (2019: RMB4,599,564,000), representing an increase of 6.4% from the end of 2019.

Borrowings and Repayment Capacity

As at the end of the Reporting Period, total liabilities of the Group amounted to RMB4,895,496,000 (2019: RMB4,599,564,000), of which 66.7% (2019: 65.5%) represented bank and other borrowings while 25.5% (2019: 24.8%) represented amounts payable to suppliers.

As at the end of the Reporting Period, total interest-bearing borrowings of the Group amounted to RMB3,264,268,000 (2019: RMB3,014,717,000), of which RMB3,182,500,000 represented bank borrowings and RMB81,768,000 represented other borrowings, 93.4% of the interest-bearing borrowings are not repayable within one year.

As at the end of the Reporting Period, bank borrowings of the Group carried an annual interest rate ranging from 3.66% to 4.41%. Other borrowings carried a fixed annual interest rate of 4.90%.

During the Reporting Period, total finance cost of the Group amounted to RMB136,439,000 (2019: RMB136,156,000). Earnings before interest and tax amounted to RMB567,229,000 (2019: RMB817,684,000) and therefore interest coverage ratio (earnings before interest and tax divided by interest expenses) was 4.2 (2019: 6.0).

As at the end of the Reporting Period, gearing ratio of the Group (being total liabilities divided by total assets) was 54.0% (2019: 49.3%).

– 37 –

Borrowing Ratio

Being a measurement of financial leverage, borrowing ratio is calculated as net debt divided by “total equity and net debt”. Net debt refers to interest-bearing bank and other loans minus cash and cash equivalents, not including liabilities for working capital. Equity includes equity attributable to owners of the Group and non-controlling interests. As at the end of the Reporting Period, the borrowing ratio of the Group was 26.5% (2019: 22.1%).

Capital Expenditure Commitments and Utilisation

During the Reporting Period, capital expenditure of the Group amounted to RMB141,676,000 (2019 (restated): RMB110,438,000). Out of the total capital expenditure of the Group, RMB105,616,000 was used for renovation projects of Chengguan Expressway and Qiongming Expressway, RMB35,088,000 was used for equipment purchase and reformation and RMB972,000 for other intangible assets.

As at the end of the Reporting Period, total capital expenditure commitments of the Group amounted to RMB40,437,000, of which RMB7,025,000 was incurred from the purchase and reformation of equipment and facilities for Chengwenqiong Expressway, RMB28,306,000 was land-related capital expense committed by Zhenxing Company, and RMB5,106,000 was fixed assets-related capital expenses committed by Zhenxing Company for establishment of service area and by Energy Development Company and Chengdu Zhongyou Energy Co., Ltd. for establishment of petrol stations and gas stations. The Group will prioritise internal resources to fund the above capital expenditure commitments.

Liquidity and Capital Resources

The Group focuses on maintaining a reasonable capital structure and continuously improving its profitability in order to maintain good credit standing and sound financial position.

As at the end of the Reporting Period, total current assets of the Group amounted to RMB1,923,149,000 (2019: RMB2,107,790,000), of which: (i) cash and cash equivalents were RMB1,759,686,000 (2019: RMB1,674,850,000), accounting for 91.5% (2019: 79.5%) of current assets; (ii) trade receivables were RMB68,617,000 (2019: RMB51,606,000), accounting for 3.6% (2019: 2.4%) of current assets; (iii) prepayments, other receivables and other assets were RMB40,288,000 (2019: RMB349,026,000), accounting for 2.1% (2019: 16.6%) of current assets; and (iv) inventories were RMB54,558,000 (2019: RMB32,308,000), accounting for 2.8% (2019: 1.5%) of current assets.

As at the end of the Reporting Period, current ratio (current assets divided by current liabilities) of the Group was 127.6% (2019: 145.3%). The decrease of the current ratio was primarily due to (i) an increase in current liabilities as a result of the recorded but unsettled construction payment for the completed road surface renovation projects of Chengguan Expressway and Qiongming Expressway; and (ii) a decrease in current assets due to acquisition of long-term assets with cash.

– 38 –

The table below sets out certain information about the Group’s consolidated statements of cash flows for the years ended 31 December 2020 and 2019:

Cash and cash equivalents presented
in the consolidated statements of
cash flows at the beginning of the year
Net cash flows from operating activities
Net cash flows from/(used in) investing
activities
Net cash flows used in financing activities
Net increase in cash and
cash equivalents
Cash and cash equivalents presented
in the consolidated statements of
cash flows at the end of the year
Analysis of balances of cash and
cash equivalents
Cash and cash equivalents as stated
in the consolidated statement of
financial position
Time deposits with original maturity of
over three months
Cash and cash equivalents as stated
in the consolidated statements of
cash flows

Year ended 31 December
2020
2019
RMB’000
RMB’000
RMB’000
RMB’000
1,287,293
1,085,814
996,883
1,154,480
191,155
(808,610)
(843,681)
(144,391)
344,357
201,479
1,631,650
1,287,293
1,759,686
1,674,850
(128,036)
(387,557)
1,631,650
1,287,293

– 39 –

Net cash flows from operating activities: During the Reporting Period, net cash flows from operating activities of the Group amounted to approximately RMB996,883,000, compared to approximately RMB1,154,480,000 in 2019, representing a year-on-year decrease of RMB157,597,000, or 13.7%, primarily attributable to (i) a decrease in revenue from toll income and refined oil recorded in 2020 from 2019 of RMB392,656,000 due to the impact of the COVID-19 pandemic, the Toll Waiver Policy of the MOT and drop in domestic oil prices; (ii) an increase in government grants of RMB47,729,000 in 2020 from 2019; (iii) construction fees payable of RMB350,000,000 received for projects where the Group acted as agency, RMB226,631,000 of which had been paid and RMB123,369,000 remained to be paid, leading to an increase in cash inflows of RMB123,369,000 in 2020 from 2019; and (iv) a decrease in cash outflow of RMB23,643,000 due to increase in payables.

Net cash flows from/(used in) investing activities: During the Reporting Period, net cash flows from investing activities of the Group were approximately RMB191,155,000, as compared to net cash flow used in investing activities of approximately RMB808,610,000 in 2019, which was mainly due to (i) an increase in cash outflow due to acquisition of Chengming Expressway Company in 2019 and cash outflow decreased by RMB373,312,000 in 2020 from 2019; and (ii) an increase in cash inflow of RMB567,078,000 due to a decrease in time deposits with original maturity of over three months.

Net cash flows used in financing activities: During the Reporting Period, net cash flows used in the Group’s financing activities were approximately RMB843,681,000, compared to approximately RMB144,391,000 in 2019, representing a year-on-year increase of RMB699,290,000, or 484.3%, primarily attributable to (i) a decline in cash inflow of RMB864,403,000 as a result of no more fund-raising activity through share issuance following the Global Offering in 2019; (ii) increase in repayment of bank and other borrowings of RMB725,874,000 during the Year from last year; (iii) capital injection of non-controlling shareholders of subsidiaries of RMB44,852,000; (iv) increase in proceeds from bank borrowings of RMB1,533,000,000 from last year; (v) a decrease in cash outflow of RMB18,341,000 due to nil dividends paid to the then shareholders of a subsidiary acquired through business combination under common control in 2020; and (vi) an increase in cash outflow of RMB727,570,000 due to acquisition of Energy Development Company in 2020.

– 40 –

Net Proceeds From Global Offering and Utilisation

The Company issued 400,000,000 H Shares in Global Offering which were listed on the Main Board of the Stock Exchange on 15 January 2019, and issued 56,102,000 H Shares upon partial exercise of the over-allotment option which were listed on the Main Board of the Stock Exchange on 12 February 2019. The net proceeds from the initial public offering of new Shares and the issue of over-allotment Shares amounted to HK$931.5 million (equivalent to approximately RMB802.5 million), which have been fully utilised in accordance with the purposes set out in the Prospectus as of the date of this announcement (plans regarding acquiring or investing in one high-quality expressway and establishing new business segments or acquiring other complementary business have been accomplished within two years after listing as scheduled). Details of the use of proceeds are set out below:

		Net proceeds	from the Global Offering and	from the Global Offering and	utilisation
		Amount
	Percentage of	available for
	the net	utilisation as at	Amount
	proceeds	the beginning	utilised	Amount
	from the	of	during the	utilised as of		Expected
	Global	the Reporting	Reporting	the date of this	Remaining	timetable
	Offering	Period	Period	announcement	amount	for utilisation
		RMB’000	RMB’000	RMB’000	RMB’000
Acquiring or investing in one high-quality expressway	70%	76,573	76,573	561,716	–	N/A
Establishing new business segments or acquiring
other complementary business	10%	80,245	80,245	80,245	–	N/A
Improving the operational efficiency of expressways	10%	69,472	26,645	80,245	–	N/A
General corporate and working capital purposes	10%	40,557	40,557	80,245	–	N/A
Total	100%	266,847	224,020	802,451	–

Note 1: Net proceeds as set out in the Prospectus are on an expected basis while net proceeds as set out in this announcement represent the sum of the issued capital and share premium finally included in the Group’s account upon completion of the over-allotment offering.

Note 2: As of 31 December 2020, balance of unutilised proceeds allocated for “improving the operational efficiency of expressways” was RMB42,827,000, which had been fully utilised according to the intended purpose as at the date of this announcement. The remaining net proceeds from the Global Offering had been fully utilised according to respective intended purposes during the Reporting Period.

– 41 –

Significant Investment, Material Acquisition and Disposal

The Company entered into the Share Transfer Agreement with Chengdu Communications Investment on 25 May 2020, pursuant to which, the Company agreed to acquire and Chengdu Communications Investment agreed to dispose of 94.49% equity interests of Energy Development Company held by it at a cash consideration of RMB727,570,000, of which RMB367,570,000 was financed with self-owned funds and RMB360,000,000 was financed with a bank loan. The acquisition was considered and approved by the independent shareholders of the Company on 7 August 2020 and was completed on 12 August 2020. Energy Development Company became a direct non-wholly-owned subsidiary of the Company. For details of the acquisition, please refer to the announcements of the Company dated 25 May 2020, 7 August 2020 and 12 August 2020 as well as the circular of the Company dated 10 July 2020.

Save as disclosed in this announcement, during the Reporting Period, the Company did not make any material acquisitions and disposals of subsidiaries, associates or joint ventures, nor did it hold any significant investments.

Pledge of Assets

As at the end of the Reporting Period, the service concession arrangements of Chengwenqiong Expressway with a net carrying amount of RMB1,070,956,000 (2019: RMB1,140,153,000) were pledged to secure bank loans and other loans of RMB580,000,000 (2019: RMB601,000,000), the service concession arrangements of Chengpeng Expressway with a net carrying amount of RMB1,267,784,000 (2019: RMB1,337,828,000) were pledged to secure bank loans of RMB283,000,000 (2019: RMB303,000,000), and the service concession arrangements of Qiongming Expressway with a net carrying amount of RMB2,383,471,000 (2019: RMB2,369,666,000) were pledged to secure bank loans of RMB1,767,500,000 (2019: RMB1,114,157,000).

As at the end of the Reporting Period, pledged deposits with a net carrying amount of RMB15,269,000 (2019: nil) were used as deposits for the operating business of Tianfu Airport Expressway and Pudu Expressway, including deposits of RMB8,211,000 for Tianfu Airport Expressway and RMB7,058,000 for Pudu Expressway.

Exchange Rate Fluctuation Risk

The Group currently does not engage in hedging activities that are designed or intended to manage foreign exchange rate risk. The Group will continue to monitor foreign exchange movements to maximise the Group’s cash value.

– 42 –

Contingent Liabilities

On 4 June 2018, Communications Investment Energy was involved in a contract dispute arising from a forged trade receivable document composed by Petroleum Corporation for an amount of approximately RMB73,989,000. Petroleum Corporation is a subsidiary of Chengdu Huaguan Industrial Co., Ltd. As at the date of this announcement, the litigation is still unsettled. The Directors, based on the advice from the Group’s legal counsel, believe that Communications Investment Energy has a valid defence against the lawsuit. In addition, Chengdu Communications Investment has irrevocably undertaken in writing to the Company, if, following the completion of the acquisition of Energy Development Company, the court ruled that Communications Investment Energy shall assume legal responsibilities, Chengdu Communications Investment shall fully compensate the actual losses thus incurred to the Group. Accordingly, the Directors have not provided for any loss arising from litigation, other than the related legal costs. Save as disclosed above, the Group did not have any significant contingent liabilities, nor did it provide any guarantees for related parties.

Purchase, Sale or Redemption of Listed Securities

During the Reporting Period, neither the Company nor any of its subsidiaries purchased, sold or redeemed any of the listed securities of the Company.

SUBSEQUENT EVENTS

To improve auditing efficiency, save auditing fees and reduce discrepancies in information disclosure, the Board resolved on 25 March 2021 to propose alignment in preparation of financial statements in accordance with China Accounting Standards for Business Enterprises commencing from 2021. In this regard, the Board also resolved on the same date to propose to cease re-appointment of Ernst & Young as the international auditor of the Company and appoint Ernst & Young Hua Ming LLP as the auditor of the Company for 2021. The above proposals are subject to approval by the Shareholders at the 2020 AGM by way of ordinary resolutions. For details of the proposals, please refer to the announcement of the Company dated 25 March 2021.

CORPORATE GOVERNANCE

Compliance with the Corporate Governance Code

The Company has adopted the principles and code provisions as set out in the Corporate Governance Code as its own corporate governance code. The Company has been in compliance with the applicable code provisions throughout the Reporting Period, except the deviation from code provision A.4.2.

– 43 –

As stated in code provision A.4.2, all Directors (including the Director whose tenure is designated) shall retire by turns once every three years at least. As disclosed in the announcement of the Company dated 20 November 2019, the terms of the Directors of the first session of the Board and Supervisors of the first session of the Supervisory Committee expired on 21 November 2019. As the nomination of candidates for Directors and Supervisors for the new session had not been finished at that time, to ensure the continuity of the Board and the Supervisory Committee, re-election of the members of the Board and the Supervisory Committee was postponed, and the terms of the special committees under the first session of the Board were extended correspondingly. Prior to completion of the re-election, all the members of the first session of the Board and the Supervisory Committee continued to discharge their respective responsibilities in accordance with the requirements of laws, regulations and the Articles of Association. The Company convened an annual general meeting on 11 June 2020, at which the appointments of Directors of the second session of the Board and shareholder representative Supervisors of the second session of the Supervisory Committee were approved. Appointments of the employee representative Supervisors of the second session of the Supervisory Committee also took effect on 11 June 2020. On 11 June 2020, the Board also elected chairman of the second session of the Board and appointed the chairman and members of each special committee under the second session of the Board, and the Supervisory Committee elected chairman of the second session of the Supervisory Committee.

Compliance with the Model Code

The Company has adopted the Model Code as the code of conduct for all Directors and Supervisors in conducting securities transactions of the Company. The Company has made specific enquiries to all Directors and Supervisors, and they confirmed that they complied with the requirements of the Model Code throughout the Reporting Period.

DIVIDENDS

The Board recommended a final cash dividend for 2020 of RMB200,388,342 in total, and based on the Company’s current total number of Shares of 1,656,102,000, RMB0.121 per Share (tax inclusive). The dividend distribution proposal is subject to the approval by the Shareholders at the AGM to be held on 10 June 2021. If approved, the final dividends are expected to be paid on 9 August 2021 to Shareholders whose names appear on the register of members of the Company on 23 June 2021. Dividends payable to the holders of Domestic Shares will be paid in RMB, and dividends payable to the holders of H Shares will be paid in Hong Kong dollars. The amount of Hong Kong dollars payable will be calculated based on the average central parity rate of Renminbi to Hong Kong dollars as announced by the People’s Bank of China during the calendar week prior to the announcement of declaration of the final dividend at the AGM (if approved).

– 44 –

CLOSURE OF REGISTER OF MEMBERS

The 2020 AGM will be convened on Thursday, 10 June 2021. In order to ascertain Shareholders’ entitlement to attend and vote at the AGM, the register of members of the Company will be closed from Tuesday, 11 May 2021 to Thursday, 10 June 2021 (both days inclusive), during which period no transfer of Shares will be registered. In order to qualify for attending and voting at the AGM, all duly completed transfer forms accompanied by the relevant Share certificates shall be lodged with the Company’s H Share Registrar, Computershare Hong Kong Investor Services Limited, at Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong for registration before 4:30 p.m. on Monday, 10 May 2021. Shareholders whose names appear on the register of members of the Company on Tuesday, 11 May 2021 shall be eligible to attend the AGM.

The register of members of the Company will be closed from Friday, 18 June 2021 to Wednesday, 23 June 2021 (both days inclusive), during which period no transfer of Shares will be registered. In order to qualify for receiving the final dividends, holders of H Shares shall lodge transfer documents with the Company’s H Share Registrar, Computershare Hong Kong Investor Services Limited, at Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong for registration before 4:30 p.m. on Thursday, 17 June 2021. Shareholders whose names appear on the register of members of the Company on Wednesday, 23 June 2021 shall be eligible to receive final dividends.

ANNUAL REPORT

The annual report for the year ended 31 December 2020 containing all the information required under Appendix 16 to the Listing Rules will be despatched to the Shareholders in due course and available on the websites of the Stock Exchange (www.hkexnews.hk) and the Company (www.chengdugs.com).

SCOPE OF WORK FOR ANNUAL RESULTS ANNOUNCEMENT BY AUDITORS

The financial information set out in this announcement does not constitute the Group’s audited accounts for the year ended 31 December 2020, but represents an extract from the consolidated financial statements for the year ended 31 December 2020 which have been audited by the auditor of the Company, Ernst & Young in accordance with Hong Kong Standards on Auditing issued by the Hong Kong Institute of Certified Public Accountants.

AUDIT AND RISK MANAGEMENT COMMITTEE

The audit and risk management committee under the Board has reviewed the annual results of the Company for 2020.

– 45 –

DEFINITIONS

In this announcement, unless the context otherwise requires, the following terms shall have the meanings set out below:

“AGM” the annual general meeting of the Company to be held on 10 June 2021 “Articles of Association” the articles of association of the Company “Board” the board of Directors of the Company “Chengbei Exit Expressway Chengdu Chengbei Exit Expressway Co., Ltd. ( 成都城北出口高速 Company” 公路有限公司 ), a company incorporated in the PRC with limited liability on 6 September 1996, which is an associate of the Company with 40% of its equity interests held by the Company
“Chengdu Airport Chengdu Airport Expressway Co., Ltd. ( 成都機場高速公路有限 Expressway Company” 責任公司 ), a company incorporated in the PRC with limited liability on 24 December 1997, which is a non-wholly-owned subsidiary of the Company with 55% of its equity interests held by the Company
“Chengdu Communications Chengdu Communications Investment Group Co., Ltd. ( 成都交通投資 Investment” 集團有限公司 ), a company incorporated in the PRC with limited liability on 16 March 2007, which is one of the controlling shareholders of the Company
“Chengdu Expressway Chengdu Expressway Construction and Development Co., Ltd. ( 成都 Construction” 高速公路建設開發有限公司 ), a company incorporated in the PRC with limited liability on 25 June 1996, which is one of the controlling shareholders of the Company
“Chengming Expressway Sichuan Chengming Expressway Co., Ltd. ( 四川成名高速公路有限 Company” 公司 ), a company incorporated in the PRC with limited liability on 15 November 2007, which is a non-wholly-owned subsidiary of the Company with 51% of its equity interests held by the Company
“Chengpeng Expressway Chengdu Chengpeng Expressway Co., Ltd. ( 成都成彭高速公路有限 Company” 責任公司 ), a company incorporated in the PRC with limited liability on 11 September 2002, which is a non-wholly-owned subsidiary of the Company with 99.74% of its equity interests held by the Company
“Chengwenqiong Expressway Chengdu Chengwenqiong Expressway Co., Ltd. ( 成都成溫邛高速公路 Company” 有限公司 ), a company incorporated in the PRC with limited liability on 26 October 1998, which is a wholly-owned subsidiary of the Company

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“Communications Investment Chengdu Communications Investment Energy Development Co., Ltd. Energy” ( 成都交投能源發展有限公司 ), a company incorporated in the PRC with limited liability, which is a subsidiary of Energy Development Company with 55% of its equity interests held by Energy Development Company “Company” Chengdu Expressway Co., Ltd. ( 成都高速公路股份有限公司 ), a joint stock company with limited liability incorporated in the PRC, the H Shares of which are listed and traded on the Stock Exchange “Director(s)” the director(s) of the Company “Domestic Share(s)” ordinary Share(s) of the Company with a nominal value of RMB1.00 each, which are subscribed for and paid up in Renminbi “Energy Development Chengdu Energy Development Co., Ltd. ( 成都能源發展股份有限 Company” 公司 ), a joint stock company incorporated in the PRC with limited liability, which is held by the Company as to 94.49% (its remaining 5.51% equity interests are held by Chengdu Communications Investment Property Company Limited, an indirect wholly-owned subsidiary of Chengdu Communications Investment) and became a non-wholly-owned subsidiary of the Company on 12 August 2020 “GDP” gross domestic product “Global Offering” has the meeting ascribed thereto in the Prospectus “Group” the Company and its subsidiaries from time to time “Hong Kong dollars” or Hong Kong dollars, the lawful currency of Hong Kong “HK$” “H Share(s)” overseas listed foreign Share(s) in the ordinary Share capital of the Company with a nominal value of RMB1.00 each, which are subscribed for and traded in Hong Kong dollars and are approved to be listed and traded on the Stock Exchange “Listing Rules” the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited “Model Code” Model Code for Securities Transactions by Directors of Listed Issuers as set out in Appendix 10 to the Listing Rules “MOT” Ministry of Transport of the People’s Republic of China

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“Operation Company” Chengdu Expressway Operation Management Co., Ltd. ( 成都高速運營管理有限公司 ), a company incorporated in the PRC with limited liability and a subsidiary of the Company with 100% of its equity interests held by the Company “Prospectus” the prospectus of the Company dated 28 December 2018 “Reporting Period” or the annual period ended 31 December 2020 the “Year” “RMB” Renminbi, the lawful currency of the PRC

“Share(s)” the share(s) of the Company, including Domestic Shares and H Shares
“Shareholder(s)” holder(s) of the Share(s) of the Company

“Sinopec Chengdu Energy” Sinopec Chengdu Energy Co., Ltd. ( 中石化成都能源有限公司 ), a company incorporated in the PRC with limited liability and a joint venture of Energy Development Company with 50% of its equity interest held by Energy Development Company “Stock Exchange” The Stock Exchange of Hong Kong Limited

“Supervisor(s)” the supervisor(s) of the Company

“Zhenxing Company” Chengdu Expressway Zhenxing Development Co., Ltd. ( 成都高速振興發展有限責任公司 ), a company incorporated in the PRC with limited liability and a subsidiary of the Company with 80% of its equity interests held by the Company

On behalf of the Board Chengdu Expressway Co., Ltd. Xiao Jun Chairman

Chengdu, the PRC, 25 March 2021

As at the date of this announcement, the Board comprises Mr. Yang Tan, Ms. Wang Xiao, Mr. Zhang Dongmin and Mr. Luo Dan as executive Directors, Mr. Xiao Jun and Mr. Yang Bin as non-executive Directors, and Mr. Shu Wa Tung, Laurence, Mr. Ye Yong and Mr. Li Yuanfu as independent non-executive Directors.

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AI assistant

Chengdu Expressway Co., Ltd. — Annual Report 2020

50166_rns_2021-03-25_01dbaf89-d2fd-4003-848a-b70a2e0c62e0.pdf

Chengdu Expressway Co., Ltd. 成都高速公路股份有限公司

2020 ANNUAL RESULTS ANNOUNCEMENT

HIGHLIGHTS

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

NOTES TO FINANCIAL STATEMENTS

1. CORPORATE AND GROUP INFORMATION

2.1

BASIS OF PRESENTATION

2.2 BASIS OF PREPARATION

2.3 ISSUED BUT NOT YET EFFECTIVE INTERNATIONAL FINANCIAL REPORTING STANDARDS

3.

OPERATING SEGMENT INFORMATION

Entity-wide disclosures

Geographical information

Information about major customers

4. REVENUE, OTHER INCOME AND GAINS

(ii) Performance obligations

Toll income

Sales of refined oil

5. FINANCE COSTS

6. PROFIT BEFORE TAX

7. INCOME TAX

8. DIVIDENDS

9. EARNINGS PER SHARE ATTRIBUTABLE TO ORDINARY EQUITY HOLDERS OF THE COMPANY

10. GOODWILL

Impairment testing of goodwill

11. SERVICE CONCESSION ARRANGEMENTS

12. PAYMENTS IN ADVANCE

As at 31 December 2020

As at 31 December 2019 (Restated)

15. PREPAYMENTS, OTHER RECEIVABLES AND OTHER ASSETS

16. TRADE PAYABLES

17. OTHER PAYABLES AND ACCRUALS

18. INTEREST-BEARING BANK AND OTHER BORROWINGS

19. ISSUED CAPITAL

20. RESERVES

(a) Share premium

(b) Statutory reserve

(c) Other reserve

(d) Merger differences

(e) Safety fund reserve

21. BUSINESS COMBINATIONS UNDER COMMON CONTROL

(a) Acquisition of Energy Development Company

(b) Acquisition of Chengming Expressway Company

22. CONTINGENT LIABILITIES

CHAIRMAN’S STATEMENT

Results Review

COVID-19 Pandemic Leading to A Decline in Annual Results

Expressway Segment

Energy Segment

Diversified Business Expansion and Intensifying Core Competitiveness

On-going Optimisation of Operation and Management to Materialise Cost Reduction and Efficiency Enhancement

Outlook in 2021

MANAGEMENT DISCUSSION AND ANALYSIS

Summary of the Group’s Operating Results

Revenue

Expressway Segment

Energy Segment

Cost of Sales

Gross Profit and Gross Profit Margin

Administrative Expenses

Other Expenses

Share of Profit of Associates

Total Comprehensive Income for the year Attributable to Owners of the Company

Assets and Liabilities Overall Conditions

Borrowings and Repayment Capacity

Borrowing Ratio

Capital Expenditure Commitments and Utilisation

Liquidity and Capital Resources

Net Proceeds From Global Offering and Utilisation

Significant Investment, Material Acquisition and Disposal

Pledge of Assets

Exchange Rate Fluctuation Risk

Contingent Liabilities

Purchase, Sale or Redemption of Listed Securities

SUBSEQUENT EVENTS

Chengdu Expressway Co., Ltd. Annual Report 2020