Jujiang Construction Group Co., Ltd. — Interim / Quarterly Report 2017

Aug 25, 2017

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

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Jujiang Construction Group Co., Ltd. 巨匠建設集團股份有限公司

( A joint stock limited liability company established in the People’s Republic of China ) (Stock Code: 1459)

ANNOUNCEMENT OF INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2017

FINANCIAL HIGHLIGHTS
	For the six months ended 30 June
	2017	2016	Change
	RMB’000	RMB’000	%
Revenue	2,080,395	1,999,078	4.07
Gross profit	114,435	118,180	(3.17)
Gross profit margin	5.50%	5.91%	(0.41)
Profit for the period	51,936	47,958	8.29
Net profit margin	2.50%	2.40%	0.10
Basic and diluted earnings per share(RMB)	0.10	0.09

INTERIM RESULTS

The board (the “Board”) of directors (the “Directors”) of Jujiang Construction Group Co., Ltd. (the “Company”) is pleased to announce the unaudited condensed consolidated interim results of the Company and its subsidiaries (collectively the “Group”) for the six months ended 30 June 2017, together with the comparative figures for the six months ended 30 June 2016. The interim results have been reviewed by the audit committee of the Company (the "Audit Committee").

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INTERIM CONDENSED CONSOLIDATED STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

For the six months ended 30 June

Notes Revenue 4 Cost of sales Gross profit Other income and gains 4 Administrative expenses Other expenses Finance costs PROFIT BEFORE TAX 5 Income tax expense 6 PROFIT FOR THE PERIOD OTHER COMPREHENSIVE INCOME TOTAL COMPREHENSIVE INCOME FOR THE PERIOD, NET OF TAX Profit attributable to: Owners of the parent Non-controlling interests Total comprehensive income attributable to: Owners of the parent Non-controlling interests Earnings per share attributable to ordinary equity holders of the parent: Basic and diluted (expressed in RMB per share) 7	2017 RMB’000 (Unaudited) 2,080,395 (1,965,960) 114,435 8,638 (32,875) (4,414) (17,354) 68,430 (16,494) 51,936 – 51,936 51,558 378 51,936 51,558 378 51,936 0.10	2016 RMB’000 (Unaudited) 1,999,078 (1,880,898)
		118,180 16,364 (37,242) (7,944) (22,434)
		66,924 (18,966)
		47,958 –
		47,958
		47,975 (17)
		47,958
		47,975 (17)
		47,958
		0.09

The Board does not recommend the payment of an interim dividend for the six months ended 30 June 2017 (30 June 2016: Nil).

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INTERIM CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

Notes NON-CURRENT ASSETS Property, plant and equipment Prepaid land lease payments Intangible assets Available-for-sale investment Deferred tax assets Trade receivables 8 Prepayments, deposits and other receivables Other non-current assets Total non-current assets CURRENT ASSETS Prepaid land lease payments Inventories Trade and bills receivables 8 Prepayments, deposits and other receivables Amounts due from contract customers 9 Pledged deposits Cash and cash equivalents Total current assets CURRENT LIABILITIES Trade and bills payables 10 Other payables, advances from customers and accruals Amounts due to contract customers 9 Interest-bearing bank borrowings 11 Tax payable Total current liabilities NET CURRENT ASSETS TOTAL ASSETS LESS CURRENT LIABILITIES	As at 30 June 2017 RMB’000 (Unaudited) 133,431 9,142 2,441 - 15,478 16,670 62,906 19 240,087 291 9,251 650,929 477,264 2,794,916 18,379 57,541 4,008,571 2,035,008 219,234 226,309 570,858 132,634 3,184,043 824,528 1,064,615	As at 31 December 2016 RMB’000 (Audited) 135,336 9,288 2,102 3,600 15,891 26,648 47,707 116 240,688 291 7,612 647,359 488,918 2,998,346 18,110 65,013 4,225,649 2,330,523 216,549 113,970 644,491 130,544 3,436,077 789,572 1,030,260

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Notes NON-CURRENT LIABILITIES Other payables and accruals Total non-current liabilities Net assets EQUITY Equity attributable to owners of the parent Share capital Reserves Non-controlling interests Total equity	As at 30 June 2017 RMB’000 (Unaudited) 7,223 7,223 1,057,392 533,360 518,240 1,051,600 5,792 1,057,392	As at 31 December 2016 RMB’000 (Audited) 24,804 24,804 1,005,456 533,360 466,682 1,000,042 5,414 1,005,456

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NOTES TO INTERIM CONDENSED CONSOLIDATED STATEMENTS

FINANCIAL

1. CORPORATE AND GROUP INFORMATION

The Company, formerly known as Qitang Commune Construction Agency, was established in the People’s Republic of China (the “PRC”) on 25 October 1965 as a collective economy agency (集體經濟社). In July 1996, the Company was converted into a company with limited liability. The Company became a joint stock company with limited liability on 29 December 2014 and changed its name to Jujiang Construction Group Co., Ltd. in preparation for the listing. The registered office address of the Company is Gaoqiao Town, Jiaxing City, Zhejiang Province, the PRC. The Company’s H share were listed (the “Listing”) on the Main Board of The Stock Exchange of Hong Kong Limited (the “Stock Exchange”) on 12 January 2016 (the “Listing Date”).

During the six months ended 30 June 2017, the Group’s principal activities were as follows:

• ˙ Construction contracting

• ˙ Others – design, survey, consultancy and other businesses

In the opinion of the directors, the holding company and the ultimate holding company of the Company is Zhejiang Jujiang Holdings Group Co., Ltd.

2. BASIS OF PREPARATION

The unaudited interim condensed consolidated financial statements for the six months ended 30 June 2017 have been prepared in accordance with International Accounting Standard (“IAS”) 34 Interim Financial Reporting and the disclosure requirements of Appendix 16 to the Rules Governing the Listing of Securities on the Stock Exchange (the “Listing Rules”). It was approved and authorised for issue by the Board on 25 August 2017.

The unaudited interim condensed consolidated financial statements do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the Group’s annual financial statements for the year ended 31 December 2016.

The unaudited interim condensed consolidated financial statements are presented in Renminbi (“RMB”) and all values are rounded to the nearest thousands, except when otherwise indicated.

New standards, interpretations and amendments adopted by the Group

The accounting policies adopted in the preparation of the interim condensed consolidated financial statements are consistent with those followed in the preparation of the Group’s annual consolidated financial statements for the year ended 31 December 2016, except for the adoption of the new standards and interpretations effective as of 1 January 2017. The Group has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective.

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Amendments to IFRS 2 Classification and Measurement of Share-based Payment Transactions[ 1] Amendments to IFRS 4 Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts[ 1] IFRS 9 Financial Instruments[ 1] Amendments to IFRS 10 Sales or Contribution of Assets between an Investor and its Associate or Joint and IAS 28 Venture[3] IFRS 15 Revenue from Contracts with Customers[ 1] Amendments to IFRS 15 Clarifications to IFRS 15 Revenue from Contracts with Customers[1 ] IFRS 16 Lease[2 ] Amendments to IAS 40 Transfers of Investment Property[ 1] IFRIC Interpretation 22 Foreign Currency Transactions and Advance Consideration[ 1] IFRIC Interpretation 23 Uncertainty Over Income Tax Treatments[2] Annual Improvements Amendments to a number of IFRSs 2014-2016 cycle

1 Effective for annual periods beginning on or after 1 January 2018. 2 Effective for annual periods beginning on or after 1 January 2019.

3 No mandatory effective date yet determined but available for adoption.

The directors are in the process of assessing the possible impact on the future adoption of the new and revised IFRSs, but are not yet in a position to reasonably estimate their impact on the Group’s interim condensed consolidated financial statements.

3. OPERATING SEGMENT INFORMATION

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

• (a) Construction contracting – this segment engages in the provision of services relating to construction contracting in architecture;

• (b) Others – provision of services on designing, surveying and mapping, monitoring and consulting services in the engineering of municipal management and construction, installation of lifting equipment, sale of construction materials and civil defense products and provision of services relating to construction contracting in architecture.

Management monitors the results of the Group’s operating segments separately for the purpose of making decisions about resources allocation and performance assessment. Segment performance is evaluated based on reportable segment profit or loss, which is a measure of adjusted profit or loss before tax. The adjusted profit or loss before tax is measured consistently with the Group’s profit before tax.

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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.

For the six months ended 30 June 2017 Segment revenue: Sales to external customers Intersegment sales Total revenue Segment results Income tax expense Profit for the period Other segment information: Interest income Finance costs Depreciation Amortisation Provision for impairment of trade receivables, deposits and other receivables Capital expenditure As at 30 June 2017 Segment assets Segment liabilities For the six months ended 30 June 2016 Segment revenue: Sales to external customers Intersegment sales Total revenue Segment results Income tax expense Profit for the period*	Construction contracting RMB’000 (Unaudited) 2,058,721 -	Others RMB’000 (Unaudited) 21,674 2,551	Elimination RMB’000 (Unaudited) - (2,551)	Total RMB’000 (Unaudited) 2,080,395 -
	2,058,721	24,225	(2,551)	2,080,395
	63,487 (14,675)	4,943 (1,819)	- -	68,430 (16,494)
	48,812	3,124	-	51,936
	66 15,493 3,433 330 1,726 2,304	29 1,861 355 18 90 166	- - - - - -	95 17,354 3,788 348 1,816 2,470
	Construction contracting RMB’000 (Unaudited) 4,327,404	Others RMB’000 (Unaudited) 111,306	Elimination RMB’000 (Unaudited) (190,052)	Total RMB’000 (Unaudited) 4,248,658
	3,219,634	65,834	(94,202)	3,191,266
	Construction contracting RMB’000 (Unaudited) 1,989,598 -	Others RMB’000 (Unaudited) 9,480 27	Elimination RMB’000 (Unaudited) - (27)	Total RMB’000 (Unaudited) 1,999,078 -
	1,989,598	9,507	(27)	1,999,078
	74,285 (19,039)	(7,361) 73	- -	66,924 (18,966)
	55,246	(7,288)	-	47,958

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Other segment information: Interest income Finance costs Depreciation Amortisation Provision for impairment of trade receivables, deposits and other receivables Capital expenditure* As at 30 June 2016 Segment assets Segment liabilities	76 20,369 3,294 274 4,712 13,529	32 2,065 465 9 3 75	- 108 - 22,434 - 3,759 - 283 - 4,715 - 13,604
	Construction contracting RMB’000 (Audited) 4,183,799	Others RMB’000 (Audited) 104,833	Elimination Total RMB’000 RMB’000 (Audited) (Audited) (170,544) 4,118,088
	3,164,315	65,285	(74,694) 3,154,906

Note:

• Capital expenditure mainly consists of additions of property, plant and equipment and intangible assets.

4. REVENUE, OTHER INCOME AND GAINS

Revenue, which is also the Group’s turnover, represents: (1) the values of services rendered; (2) appropriate proportion of contract revenue of construction contracting; and (3) the net invoiced value of goods sold, after allowances for returns and trade discounts.

An analysis of the Group’s revenue, other income and gains is as follows:

Revenue Construction contracting Others Other income and gains Interest income Government grant Dividend from available-for-sale investment Gain on disposal of available-for-sale investment Others	For the six months ended 30 June 2017 2016 RMB’000 RMB’000 (Unaudited) (Unaudited) 2,058,721 1,989,598 21,674 9,480 2,080,395 1,999,078 95 108 262 11,505 4,680 3,600 164 - 3,437 1,151 8,638 16,364	For the six months ended 30 June 2017 2016 RMB’000 RMB’000 (Unaudited) (Unaudited) 2,058,721 1,989,598 21,674 9,480 2,080,395 1,999,078 95 108 262 11,505 4,680 3,600 164 - 3,437 1,151 8,638 16,364
		1,999,078
		108 11,505 3,600 - 1,151
		16,364

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5. PROFIT BEFORE TAX

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

Cost of construction contracting (including depreciation) Cost of others Total cost of sales Depreciation of items of property, plant and equipment Amortisation of prepaid land lease payments Amortisation of intangible assets Total depreciation and amortisation Impairment of trade receivables (Reversal of)/provision for impairment of deposits and other receivables Total impairment losses, net Minimum lease payments under operating leases of land and buildings Auditors’ remuneration Employee benefit expenses (including Directors’ and Supervisors’ remuneration) : Wages, salaries and allowances Social insurance Welfare and other expenses Interest income 6. INCOME TAX EXPENSE Current income tax – Mainland China - Charge for the period - (Over)/under provision in prior years Deferred income tax Tax charge for the period		For the six months ended 30 June 2017 2016 RMB’000 RMB’000 (Unaudited) (Unaudited) 1,951,301 1,871,632 14,659 9,266 1,965,960 1,880,898 3,788 3,759 146 145 202 138 4,136 4,042 5,456 3,922 (3,640) 793 1,816 4,715 351 206 1,047 1,119 19,743 17,415 15,643 13,122 3,373 3,370 727 923 (95) (108) For the six months ended 30 June 2017 2016 RMB’000 RMB’000 (Unaudited) (Unaudited) 16,981 17,733 (900) 168 413 1,065 16,494 18,966	For the six months ended 30 June 2017 2016 RMB’000 RMB’000 (Unaudited) (Unaudited) 1,951,301 1,871,632 14,659 9,266 1,965,960 1,880,898 3,788 3,759 146 145 202 138 4,136 4,042 5,456 3,922 (3,640) 793 1,816 4,715 351 206 1,047 1,119 19,743 17,415 15,643 13,122 3,373 3,370 727 923 (95) (108) For the six months ended 30 June 2017 2016 RMB’000 RMB’000 (Unaudited) (Unaudited) 16,981 17,733 (900) 168 413 1,065 16,494 18,966
			18,966

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A reconciliation of the income tax expense applicable to profit before tax at the statutory income tax rate to the income tax expense at the Group’s effective income tax rate for the six months ended 30 June 2017 and 2016 is as follows:

Profit before tax Income tax charge at the statutory income tax rate (25%) Income not subject to tax Expenses not deductible for tax purposes Adjustments in respect of current tax of prior year Tax losses not recognised Tax charge for the period at the effective rate	For the six months ended 30 June 2017 2016 RMB’000 RMB’000 (Unaudited) (Unaudited) 68,430 66,924 17,107 16,731 (1,170) - 716 695 (900) 168 741 1,372 16,494 18,966	For the six months ended 30 June 2017 2016 RMB’000 RMB’000 (Unaudited) (Unaudited) 68,430 66,924 17,107 16,731 (1,170) - 716 695 (900) 168 741 1,372 16,494 18,966
		18,966

7. EARNINGS PER SHARE ATTRIBUTABLE TO ORDINARY EQUITY HOLDERS OF THE PARENT

The calculation of the basic earnings per share amounts is based on the profit for the period attributable to ordinary equity holders of the parent and the weighted average number of ordinary shares in issue during the six months ended 30 June 2017.

No adjustment has been made to the basic earnings per share amounts presented for the six months ended 30 June 2017 and 2016 in respect of a dilution as the Group had no potentially dilutive ordinary shares in issue during the those periods.

The following reflects the income and share data used in the basic earnings per share computation:

Earnings: Profit for the period attributable to ordinary equity holders of the parent, used in the basic earnings per share calculation Number of shares: Weighted average number of ordinary shares in issue during the period, used in the basic earnings per share calculation	For the six months ended 30 June 2017 2016 RMB’000 RMB’000 (Unaudited) (Unaudited) 51,558 47,975 For the six months ended 30 June 2017 2016 ’000 ’000 (Unaudited) (Unaudited) 533,360 524,567

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8. TRADE AND BILLS RECEIVABLES

Trade receivables represented receivables for contract works. The payment terms of contract work receivables are stipulated in relevant contracts. The Group’s trading terms with its customers are mainly on credit, except for new customers, where payment in advance is normally required. The credit period offered by the Group is one to three months. The Group seeks to maintain strict control over its outstanding receivables and has a credit control department to minimise credit risk. Overdue balances are reviewed regularly by senior management. The Group does not hold any collateral or other credit enhancements over its trade receivable balances. Trade and bills receivables are non-interest-bearing.

Trade receivables Provision for impairment Trade receivables, net Bills receivable Portion classified as non-current assets(1) Current portion	As at 30 June 2017 RMB’000 (Unaudited) 590,889 (24,701) 566,188 101,411 667,599 (16,670) 650,929	As at 31 December 2016 RMB’000 (Audited) 662,703 (19,245) 643,458 30,549 674,007 (26,648) 647,359

(1) The non-current portion of trade receivables mainly represents the amounts of retentions held by customers at the end of each of the reporting period, which will be paid at the end of the retention period.

At the end of the reporting period, the amounts of retentions held by customers for contract works included in trade receivables for the Group are approximately as follows:

Retentions in trade receivables Provision for impairment Retentions in trade receivables, net Portion classified as non-current assets Current portion	As at 30 June 2017 RMB’000 (Unaudited) 39,724 (124) 39,600 (16,670) 22,930	As at 31 December 2016 RMB’000 (Audited) 28,293 (74) 28,219 (26,648) 1,571

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An aged analysis of the Group’s trade receivables, based on the billing date and net of provision for impairment of trade receivables, as at the end of each of the reporting period is as follows:

Within 3 months 3 months to 6 months 6 months to 1 year 1 to 2 years 2 to 3 years 3 to 4 years 4 to 5 years Over 5 years	As at 30 June 2017 RMB’000 (Unaudited) 222,995 22,332 64,894 208,681 30,315 7,538 7,835 1,598 566,188	As at 31 December 2016 RMB’000 (Audited) 237,915 28,571 283,482 49,524 21,101 18,410 3,817 638 643,458

The movements in provision for impairment of trade receivables are as follows:

At beginning of the period Impairment losses recognised Impairment losses reversed At end of the period	As at 30 June 2017 RMB’000 (Unaudited) 19,245 5,667 (211) 24,701	As at 31 December 2016 RMB’000 (Audited) 19,316 830 (901) 19,245

Included in the above provision for impairment of trade receivables are provisions for individually impaired trade receivables of approximately RMB10,090,000 (unaudited) and approximately RMB10,090,000 with aggregate carrying amounts before provision of approximately RMB10,090,000 (unaudited) and approximately RMB10,090,000 as at 30 June 2017 and 31 December 2016, respectively.

The individually impaired trade receivables relate to customers that were in default in principal payments or were in financial difficulties and only a portion of the receivables is expected to be recovered.

An aged analysis of the trade receivables, that are neither individually nor collectively considered to be impaired, is as follows:

Neither past due nor impaired Past due within 1 year but not impaired	As at 30 June As at 31 December 2017 2016 RMB’000 RMB’000 (Unaudited) (Audited) 257,205 265,433 86,123 310,444 343,328 575,877

Receivables that were neither past due nor impaired relate to a large number of diversified customers for whom that was no recent history of default.

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Transferred financial assets that are not derecognised in their entirety

The Group endorsed and discounted certain bills receivable accepted by banks in Mainland China (the “Endorsed Bills”) with a carrying amount of approximately RMB91,854,000 (unaudited) and approximately RMB27,852,000 as at 30 June 2017 and 31 December 2016, respectively, to certain of its suppliers in order to settle the trade payables due to such suppliers (the “Endorsement”). In the opinion of the Directors, the Group has retained the substantial risks and rewards, which include default risks relating to such Endorsed Bills, and accordingly, it continued to recognise the full carrying amounts of the Endorsed Bills and the associated trade payables settled. Subsequent to the Endorsement, the Group did not retain any rights on the use of the Endorsed Bills, including the sale, transfer or pledge of the Endorsed Bills to any other third parties. The aggregate carrying amounts of the trade payables settled by the Endorsed Bills during the period to which the suppliers have recourse approximately RMB91,854,000 (unaudited) and approximately RMB27,852,000 as at 30 June 2017 and 31 December 2016, respectively.

Transferred financial assets that are derecognised in their entirety

The Group endorsed and discounted certain bills receivable accepted by banks in the PRC (the “Derecognised Bills”), to certain of its suppliers in order to settle the trade payables due to such suppliers with a carrying amount in aggregate of, approximately RMB192,549,000 (unaudited) and approximately RMB121,066,000 as at 30 June 2017 and 31 December 2016, respectively. The Derecognised Bills have a maturity from one to six months at the end of the each of reporting period. In accordance with the Law of Negotiable Instruments in the PRC, the holders of the Derecognised Bills have a right of recourse against the Group if the PRC banks default (the “Continuing Involvement”). In the opinion of the Directors, the Group has transferred substantially all risks and rewards relating to the derecognised bills. Accordingly, it has derecognised the full carrying amounts of the Derecognised Bills and the associated trade payables. The maximum exposure to loss from the Group’s Continuing Involvement in the Derecognised Bills and the undiscounted cash flows to repurchase these Derecognised Bills is equal to their carrying amounts. In the opinion of the Directors, the fair values of the Group’s Continuing Involvement in the Derecognised Bills are not significant.

During the reporting period, the Group has not recognised any gain or loss on the date of transfer of the Derecognised Bills. No gains or losses were recognised from the Continuing Involvement, both during the period or cumulatively.

9. AMOUNTS DUE FROM/(TO) CONTRACT CUSTOMERS

Construction contracts

Amount due from contract customers Amount due to contract customers	As at 30 June 2017 RMB’000 (Unaudited) 2,794,916 (226,309) 2,568,607	As at 31 December 2016 RMB’000 (Audited) 2,998,346 (113,970) 2,884,376

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Accumulated contract costs incurred plus recognised profits less recognised losses to date Less: Accumulated progress billing received and receivable	As at 30 June 2017 RMB’000 (Unaudited) 27,381,531 24,812,924 2,568,607	As at 31 December 2016 RMB’000 (Audited) 27,429,443 24,545,067 2,884,376

10. TRADE AND BILLS PAYABLES

An aged analysis of the trade payables, as at the reporting period, based on the invoice date, is as follows:

Within 6 months 6 months to 1 year 1 to 2 years 2 to 3 years Over 3 years	As at 30 June 2017 RMB’000 (Unaudited) 1,063,951 199,494 634,460 119,355 17,748 2,035,008	As at 31 December 2016 RMB’000 (Audited) 267,491 1,472,885 531,766 41,773 16,608 2,330,523

The trade payables are non-interest-bearing and are normally settled within terms from three to six months.

11. INTEREST-BEARING BANK BORROWINGS

	As	at 30 June	2017		As at 31 December	As at 31 December	2016
	Effective				Effective
	interest				interest
	rate (%)	Maturity	RMB’000		rate (%)	Maturity	RMB’000
Current
Bank loans – secured	4.4-20.4	2017-2018	555,360		4.35-21.6	2017	644,491
Bank loans – unsecured	6.5	2017-2018		4,372	-	-	-
Other borrowings –
secured	4.7-9.2	2017-2018		5,984	-	-	-
Other borrowings –
unsecured	8.0	2017-2018		5,142	-	-	-
			570,858				644,491

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Notes:

• (a) Certain of the Group’s buildings with a net carrying amount of approximately RMB97,422,000 (unaudited) and approximately RMB98,215,000 as at 30 June 2017 and 31 December 2016, respectively, were pledged to secure general banking facilities granted to the Group.

• (b) As at 30 June 2017 and 31 December 2016, the Group’s interest-bearing bank borrowings of approximately RMB541,736,000 (unaudited) and approximately RMB621,941,000, respectively, are jointly guaranteed by the controlling shareholder and other related parties of the Group, free of charge.

12. COMMITMENTS

As at 30 June 2017, the Group did not have any significant commitments.

13. DIVIDEND

The Board does not recommend the payment of an interim dividend for the six months ended 30 June 2017(30 June 2016: Nil).

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MANAGEMENT DISCUSSION AND ANALYSIS

MARKET REVIEW

China’s rapid economic growth over the years has spurred the development of its construction industry. Given China’s continuous urbanization in relation to improving community functions and facilities in urban areas, the demand for construction industry is expected to maintain its momentum. Expected in 2017, the urbanization rate of China will be 59.2%. Urbanization rate represents the rate of change in the size of the urban population over a certain period. By 2020, it is projected that approximately 100 million of the rural population will settle in urban areas, which will bring significant demand for new urban residential construction. In line with the historical trend of increases in the average fee for construction projects, the total output value of China’s construction industry in China increased from approximately RMB8,587.1 billion for the six months ended 30 June 2017, increased by 10.9% as compared with the same period in 2016.

BUSINESS REVIEW

In the first half of 2017, the Company made significant achievements in business expansion. While maintaining and furthering cooperation relationships with major customers, including Country Garden Holdings Company Limited (“Country Garden”), China Vanke Co., Ltd. (“Vanke”), Greentown China Holdings Limited (“Greentown”), Jiayuan Chuangsheng Holding Group Co., Ltd. (“Jiayuan”), Sunac China Holdings Limited (“Sunac”), Zhenshi Holding Group Co., Ltd. (“Zhenshi”) and Tongkun Group Co., Ltd. (“Tongkun”), the Company successfully expanded its business footprint to surrounding cities and other provinces, including undertaking two projects with a total cost of RMB408 million in Zhengzhou City, the provincial capital of Henan Province. Meanwhile, the Company also actively pushed forward the development of quality business by striving to undertake quality business with economy of scale and market influence to boost brand awareness. In the first half of the year, and among the contracted business projects newly undertaken, ten were worth over RMB50 million, and six over RMB100 million.

In addition, the Company has been placing a great deal of emphasis on innovation in production technologies. In the first half of 2017, the Company leveraged on the “Academician Workstations” and “Industry-Academic Research” platforms to expand the scale of technological cooperation with external parties, aiming to offer technical support to its ongoing projects, and in the first half of the year, one application for national patents filed by the Company was accepted, two patents were approved, and four excellent QC accomplishment awards at the municipal-level were granted.

In the first half of 2017, the Company won many important awards at the provincial, municipal and county levels, including 16 for overall performance, 11 for quality works, and dozens for construction safety and attainment of standards. In particular, the Zhenshi Headquarters Building （振石總部大樓）project, a pioneer project in applying BIM Technology with achievements in adopting a standard construction process, was among the 17th batch of New Construction Technology Application Demonstration Projects, which enhanced our status as an influential brand.

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For the six months ended 30 June 2017, approximately 99.0% of the revenue was contributed by the construction contracting business. The Group recorded a revenue of approximately RMB2,080.4 million for the six months ended 30 June 2017, increased by 4.07% as compared with the same period in 2016. Profit for the period rose by 8.3% to approximately RMB51.9 million. The Group’s performance maintained a steady growth.

Construction contracting business Residential Commercial Industrial Public works Other business Total revenue	For the six months ended 30 June 2017 2016 RMB'million % RMB'million % 999.6 48.1 728.0 36.4 821.1 39.5 940.9 47.1 118.7 5.7 140.9 7.0 119.3 5.7 179.8 9.0 2,058.7 99.0 1,989.6 99.5 21.7 1.0 9.5 0.5 2,080.4 100.0 1,999.1 100.0	For the six months ended 30 June 2017 2016 RMB'million % RMB'million % 999.6 48.1 728.0 36.4 821.1 39.5 940.9 47.1 118.7 5.7 140.9 7.0 119.3 5.7 179.8 9.0 2,058.7 99.0 1,989.6 99.5 21.7 1.0 9.5 0.5 2,080.4 100.0 1,999.1 100.0
		99.5 0.5
		100.0

During the first half of the year, the Group pushed forward high-end projects and cooperated with high-value customers, including securing quality new customers such as Country Garden, Vanke and Greentown. Compared with the value of backlog of about RMB4,902.1 million as at 30 June 2016, the value of backlog increased by 6.46% to approximately RMB5,219.0 million as at 30 June 2017.

Opening value of backlog Net value of new projects(1) Revenue recognized(2) Closing value of backlog(3)	For the six months ended 30 June 2017 2016 RMB'million RMB'million 5,422.6 4,999.4 1,860.1 1,921.0 (2,063.7) (2,018.3) 5,219.0 4,902.1

Notes:

• (1) Net value of new contracts means the total contract value of new construction contracting contracts which were awarded to us during the relevant period indicated.

• (2) Revenue recognized means the revenue that has been recognized during the relevant period indicated, such amounts are before deducting business tax/value added tax.

• (3) Closing value of backlog means the total contract value for the remaining work of construction projects before the percentage of completion of such projects reached 100% as of the end of the relevant period indicated.

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FINANCIAL REVIEW

Revenue and gross profit margin

Revenue increased by 4.07% from approximately RMB1,999.1 million for the six months ended 30 June 2016 to approximately RMB2,080.4 million for the six months ended 30 June 2017 primarily because of increase of construction constructing business amounting to approximately RMB69.1 million and increase of other amounting to approximately RMB12.2 million for the six months ended 30 June 2017. Increase in construction constructing business was a result of increase in revenue from residential construction projects amounting to approximately RMB271.6 million, which was offsetting by decrease in revenue from other construction projects amounting to RMB202.5 million. Since 2016, the Group focused to develop a good relationship with high value customers, the strategies have been well achieved. During the period, revenue contributed by 2 new high value customers in residential properties business were RMB97.1 million as there was nil for the six months ended 30 June 2016. Decrease in other construction constructing business is a result of some of major projects were nearly completed in 2016 and the Group focused on high value customers and high value projects in order to have a healthy development.

Gross profit decreased by 3.17% from approximately RMB118.2 million for the six months ended 30 June 2016 to approximately RMB114.4 million for the six months ended 30 June 2017, and gross profit margin decreased from 5.91% to 5.50% during the same period. The decrease in gross profit was a result of decrease in gross profit margin. The decrease in gross profit margin was primarily due to decrease in overall profit margin of each of business sector, especially for public projects. During the six months ended 30 June 2017, decrease in profits margin of public projects was a results of overrun of a project and finalized revenue of another project was lower than the budgeted revenue. The Group devoted much attention to selecting prestigious and high-margin projects to tender for.

Other income and gains

Other income and gains decreased significantly by approximately RMB7.8 million from approximately RMB16.4 million for the six months ended 30 June 2016 to approximately RMB8.6 million for the six months ended 30 June 2017 primarily because we received one-off government grants of approximately RMB11.0 million for the six months ended 30 June 2016 in relation to the Listing as no such government grant was incurred for the six months ended 30 June 2017.

Administrative expenses

Administrative expenses decreased by 11.7% from approximately RMB37.2 million for the six months ended 30 June 2016 to approximately RMB32.9 million for the six months ended 30 June 2017. Such decrease was primarily due to decrease in professional fee in relation to the Listing amounting to approximately RMB3.3 million.

Other expenses

Other expenses decreased significantly by 44.4% from approximately RMB7.9 million for the six months ended 30 June 2016 to approximately RMB4.4 million for the six months ended 30 June 2017. Such decreased represented a reversal of impairment of other receivables amounting to approximately RMB3.6 million for the six months ended 30 June 2017 as there was an impairment loss of other receivables amounting to RMB0.8 million for the six months ended 30 June 2016.

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Finance costs

Finance costs decreased by 22.6% from approximately RMB22.4 million for the six months ended 30 June 2016 to approximately RMB17.4 million for the six months ended 30 June 2017 due to decrease in average of the loan balance during the period as compared with that average balance in last period.

Income tax expense

Income tax expenses decreased by 13.0% from approximately RMB19.0 million for the six months ended 30 June 2016 to approximately RMB16.5 million for the six months ended 30 June 2017. Such decrease was primarily due to over-provision for income tax in prior year and an income not subject to tax in relation to dividend income contributed from available -for-sales investment for the six months ended 30 June 2017. Our effective tax rate decreased from approximately 28.3% for the six months ended 30 June 2016 to approximately 24.1% for the six months ended 30 June 2017, the reason was mentioned as above.

Profit for the period

Profit for the period increased by 8.3% from approximately RMB48.0 million for the six months ended 30 June 2016 to approximately RMB51.9 million for the six months ended 30 June 2017. Net profit margin increased from approximately 2.40% for the six months ended 30 June 2016 to approximately 2.50% for the six months ended 30 June 2017, primarily due to the decrease in finance costs and administrative expenses

LIQUIDITY, FINANCIAL RESOURCES AND CAPITAL STRUCTURE

The Group’s operations are primarily funded through cash generated from operating activities and interest-bearing borrowings. As of 30 June 2017 and 31 December 2016, the Group had cash and cash equivalents of approximately RMB57.5 million and approximately RMB65.0 million, respectively.

Treasury Policies

The Group monitors the cash flows and cash balance on a regular basis and seeks to maintain an optimal level of liquidity that can meet the working capital needs while supporting a healthy level of business and its various growth strategies throughout the period under review. In the future, the Group intends to finance its operations through cash generated from operating activities, interestbearing bank borrowings. Other than normal bank borrowings that the Group obtained from commercial banks and potential debt financing plans, the Group does not expect to have any material external debt financing plan in the near future.

Amounts due from contract customers

The amounts due from contract customers decreased from approximately RMB2,998.3 million as of 31 December 2016 to approximately RMB2,794.9 million as of 30 June 2017, representing 71.0% and 69.7% of the total current assets as of the same dates. The decrease in the proportion of the amounts due from contract customers to the total current assets was primarily because of the Group actively to issue billings to the customers.

Trade and bill payables

Trade and bills payables decreased from approximately RMB2,330.5 million as of 31 December 2016 to approximately RMB2,035.0 million as of 30 June 2017. Such decrease was a result of improvement of operating cash flow.

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Borrowings and charge on assets

As of 30 June 2017, the Group relied on interest-bearing borrowings in the amount of approximately RMB570.9 million (31 December 2016: approximately RMB644.5 million) which are repayable within 1 year and carried effective interest rate with a range from 4.4% to 20.4% per annum (31 December 2016: 4.4% to 21.6% per annum).

As at 30 June 2017, certain general banking facilities of the Group were secured by the Group’s land use rights and buildings of approximately RMB97.4 million (31 December 2016: approximately RMB98.2 million).

Gearing ratio

The gearing ratio decreased from approximately 55.8% as at 31 December 2016 to approximately 46.8% as at 30 June 2017, such decrease was mainly attributing to repayments of interest-bearing bank and other borrowings during the period.

Gearing ratio represents net debt divided by total equity as of the end of a year /period. Net debt is defined as all borrowings deducted by cash and bank balances and pledged deposits.

Capital Expenditure

Capital expenditures decreased from approximately RMB13.6 million for the year ended 31 December 2016 to approximately RMB2.5 million for the six months ended 30 June 2017 primarily because the Group has made sufficient investments in the previous years to satisfy the needs of the business operations during the period.

Capital Commitments

As at 30 June 2017, the Group did not have any significant commitments.

Contingent liabilities

As at 30 June 2017, the Group had no material contingent liabilities.

Fluctuation of RMB Exchange Rate and Foreign Exchange Risks

The majority of the Group’s business and all bank borrowings are denominated and accounted for in RMB. Therefore, the Group does not have significant exposure to foreign exchange fluctuation. The Board does not expect the fluctuation of RMB exchange rate and other foreign exchange fluctuations will have material impact on the business operations or financial results of the Group. The Group currently has no hedging policy with respect to the foreign exchange risks, therefore, the Group has not entered into any hedging transactions to manage the potential fluctuation in foreign currencies.

SIGNIFICANT INVESTMENTS HELD, MATERIAL ACQUISITIONS AND DISPOSALS

The Group had no significant investments held or material acquisitions and disposals during the six months ended 30 June 2017.

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FUTURE PLANS FOR MATERIAL INVESTMENTS AND CAPITAL ASSETS

The Group did not have other plans for material investments and capital assets as at 30 June 2017.

EMPLOYEE AND REMUNERATION POLICIES

As of 30 June 2017, the Group had total of 704 employees, of which 583 were based in Jiaxing City, and 121 were based in other areas in Zhejiang Province and in other provinces and regions in China. For the six months ended 30 June 2017, the Group incurred total staff costs of approximately RMB19.7 million, representing an increase of approximately 13.4% as compared with the same period in 2016, mainly attributable to increase in headcount and salary incremental.

The Group believes that the long-term growth depends on the expertise, experience and development of the employees. The salaries and benefits of the employees depend primarily on their type of work, position, length of service with us and local market conditions. In order to improve the employees’ skills and technical expertise, the Group provide regular training to the employees.

FUTURE PROSPECTS

The Group’s goal is to continue to capture greater market share in Zhejiang Province and in other provinces and regions in China to become a leading construction contracting and design company in selected regions. To achieve this goal, the Group intend to pursue the following strategies:

Leverage the Premium Class Certificate and Engineering Design Certificate for larger-scale and more complex initiatives

The Group plans to leverage the Premium Class Certificate and Engineering Design Certificate to provide fully-integrated construction solutions, which consist of general construction contracting and design, survey and consultancy services for building construction projects of all types and scales nationwide. As of 30 June 2017, the Group was one of the few holders of both the Premium Class Certificate and Engineering Design Certificate in Zhejiang Province. Leveraging the favorable position in the industry, the Group intends to undertake larger -scale and more complex construction projects. As profitability generally increases with the size and complexity of construction projects, undertaking such construction projects will enable us to enhance the profitability. Moreover, undertaking projects where the Group provides construction general contracting and design, survey and consultancy services allows us to vertically integrate the business. The Group will be able to take into account the costs and have better control over quality at the earlier design stage of the construction project. To facilitate the undertaking of larger-scale and more complex construction projects, the Group plans to apply a portion of the proceeds from the Listing to procure new equipment and machinery used in the construction projects, including jacks and lifting equipment.

The Group intends to leverage the Premium Class Certificate and Engineering Design Certificate to establish business relationships with new and well-recognized customers build the track record of prominent construction projects and enhance the brand exposure. With increased exposure and more prominent construction projects in the portfolio, the Group intends to augment the reputation in Zhejiang Province and in other provinces and regions in China. The Group expects that the augmented reputation will allow us to undertake increasingly more prominent construction projects where the Group will be able to charge a premium price for the services. The Group plans to leverage the position in Zhejiang Province holding both certificates to gain more bargaining power for favorable prices for raw materials and equipment and machinery, which will lower the costs and enhance the profitability.

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Develop business opportunities to undertake EPC and PPP projects

The Group plans to seize the opportunities emerging from the promotion of pilot projects for general contracting of construction works in Zhejiang Province, with an aim to strengthening resources integration for developing general contracting business and committing itself to nurturing integrated capabilities in design, procurement and construction. The Group will also proactively deploy more resources for EPC projects and focus on following up quality projects.

Moreover, according to Ipsos, an increasing number of infrastructure projects in China are expected to be completed on a PPP basis in the coming years. As such, the Group intends to develop business opportunities to undertake more projects on a PPP basis in the future. Under the PPP model, the Group would generally be responsible for financing, investment, management and construction of the project. The Group believes that PPP projects will enhance the profitability and brand recognition, and the Group intends to selectively undertake such projects in the future. PPP projects are awarded to qualified construction companies through a public bidding process held by relevant government authorities. The Group intends to leverage the strong relations with the local Jiaxing government and the track record of high-quality public works construction projects to win such projects. By gaining expertise and developing the reputation as a premium PPP service provider, the Group plans to develop PPP operations in other regions of Zhejiang Province and other provinces and regions in China. Given the significant upfront investment required to undertake such projects, the Group also plans to finance future projects through a combination of the working capital and bank borrowings.

Push forward the strategy of major customers in full swing and expand market footprint

The Group plans to leverage the opportunity of cooperating with large real estate enterprises to push forward the strategy of major customers in full swing. By providing quality services and enhancing the quality of works projects, the Group will further enhance its partnership with major customers, including Country Garden, Vanke, Greentown, Sunac, Zhenshi and Tongkun. Meanwhile, the Group will proactively identify major potential customers in the future and fully leverage various communication and exchange channels for seeking opportunities for business cooperation, with a view to nurturing new major customers which can offer sustainable development and stable business.

In addition, the Groups plans to expand its market footprint on an ongoing basis, including (i) continually tapping into existing markets and boosting the operational results of regional branch companies in Jiangsu, Anhui and Jiangxi, which are outside Zhejiang Province; (ii) expediting its deployment in emerging markets, pushing forward initial development in provincial capitals outside Zhejiang Province and surrounding areas of Jiaxing and proactively expandi ng into regions without business presence to seek emerging cooperation opportunities; and (iii) proactively competing for high-end markets outside Zhejiang Province by keeping track of significant investment projects of major customers and Zhejiang merchants on the back of certificate resources and brand advantage to achieve market expansion.

Actively developed the Building Information Modeling Technology (“BIM” Technology)

The Group believes that with the development of science and technology, advanced technology plays a major role in promoting the development of the industry. Currently, the construction industry is advocating application of the information technology BIM Technology throughout the whole process of project design, construction, operation and maintenance to enhance overall benefits. As important technological measures of promoting innovative development of the building and construction industry, application and promotion of the BIM Technology will have an immense impact on the scientific and technological advancement as well as the transformation and upgrade of the building and construction industry. The Group has aligned itself with industry trends to fully leverage the advantages of the BIM Technology, fully pushing forward the progress of applying the BIM Technology to the Zhenshi Headquarters Building ( 振石總部大樓) project. The Group will leverage the advantages of the platform offered by the BIM Technology Research Institute to strengthen the nurturing of technological teams and further enhance application capabilities, as well as to achieve data sharing on a real-time basis. Through conclusion of findings from applying BIM technology in pilot projects, the promotion of BIM technology applications can be expedited.

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OTHER INFORMATION

INTERIM DIVIDEND

The Board does not recommend the payment of an interim dividend for the six months ended 30 June 2017(30 June 2016: Nil).

PURCHASE, SALE OR REDEMPTION OF LISTED SECURITIES

For the six months ended 30 June 2017, there was no purchase, sale or redemption by the Company or any of its subsidiaries of any listed securities of the Company.

DIRECTORS’ COMPETING INTERESTS

None of the controlling shareholders, Directors and their respective close associates (as defined under the Listing Rules) has any interests in any business which directly or indirectly competes or is likely to compete with the principal business and other businesses, which would require disclosure under Rule 8.10 of the Listing Rules, as at 30 June 2017.

COMPLIANCE WITH THE CORPORATE GOVERNANCE CODE

The Board comprises six executive Directors and three independent non-executive Directors. The Board has adopted the code provisions (the “Code Provisions”) of the Corporate Governance Code (“CG Code”) set out in Appendix 14 to the Listing Rules. Throughout the six months ended 30 June 2017, the Company has fully complied with the Code Provisions, except for the following deviations.

Pursuant to Code Provision A.2.1 of the CG Code, the responsibilities between the chairman and the chief executive officer should be segregated and should not be performed by the same individual. However, the Group does not have a separate chairman and general manager (which is equivalent to chief executive officer) and Mr. Lv Yaoneng currently performs these two roles. Our Board believes that vesting the roles of both chairman and general manager in the same person has the benefit of ensuring consistent leadership within our Group and enables more effective and efficient overall strategic planning for our Group. Our Board considers that the balance of power and authority for the present arrangement will not be impaired and this structure will enable our Company to make and implement decisions promptly and effectively. Our Board will continue to review and consider splitting the roles of chairman of our Board and general manager of our Company at a time when it is appropriate and suitable by taking into account the circumstances of our Group as a whole.

According to Code Provision A.1.8 of the CG Code, the Company should arrange appropriate insurance cover in respect of legal action against its directors. The Company is negotiating with the relevant insurance agents about the liability insurance for the Directors and will arrange such insurance cover in due course.

Save as disclosed above, our Company is expected to comply with the CG Code set out in Appendix 14 to the Listing Rules. Our Directors will review our corporate governance policies and compliance with the CG Code each financial year.

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MODEL CODE FOR SECURITIES TRANSACTIONS

The Company has adopted the model code for Securities Transactions by Directors of Listed Issuers (the “Model Code”) as the Company’s code of conduct regarding Directors’ and Supervisors’ securities transactions on terms or less exacting than the requested standard set out in the Model Code. Upon specific enquiries, all Directors and Supervisors confirmed that they have complied with the relevant provisions of the Model Code throughout the six months ended 30 June 2017. The Company continues and will continue to ensure compliance with the corresponding provisions set out in the Model Code.

Senior management who, because of their office in the Company, are likely to be in possession of inside information, have also been requested to comply with the provisions of the Model Code.

EVENTS AFTER THE REPORTING PERIOD

As of the date of this announcement, the Group has no significant events after the reporting period required to be disclosed.

PUBLICATION OF THE CONDENSED CONSOLIDATED INTERIM RESULTS AND 2017 INTERIM REPORT ON THE WEBSITES OF THE STOCK EXCHANGE AND THE COMPANY

This interim results announcement is published on the websites of the Stock Exchange (http://www.hkexnews.hk) and the Company (http://www.jujiang.cn) and the 2017 Interim Report containing all the information required by the Listing Rules will be dispatched to the shareholders of the Company and published on the respective websites of the Stock Exchange and the Company in due course.

AUDIT COMMITTEE

The Audit Committee was established with written terms of reference in compliance with Rule 3.21 of the Listing Rules and the CG Code as set out in Appendix 14 to the Listing Rules on 23 December 2015. The Audit Committee consists of three members, namely Mr. Wong Ka Wai, Mr. Lin Tao and Mr. Yu Jingxuan, all being our independent non-executive Directors. Mr. Yu Jingxuan has been appointed as the chairman of the Audit Committee, and is our independent non - executive director possessing the appropriate professional qualifications. The primary duties of the Audit Committee are to review and supervise the financial reporting process and internal control system of the Group, oversee the audit process and perform other duties and responsibilities as assigned by our Board.

The Audit Committee has discussed with the management and external auditor the accounting principles and policies adopted by the Group, and reviewed the Group’s unaudited interim condensed consolidated financial statements for the six months ended 30 June 2017. The Audit Committee is of the opinion that the financial statements comply with the applicable accounting standards.

On behalf of the Board Jujiang Construction Group Co., Ltd. Mr. Lv Yaoneng Chairman

Zhejiang Province, the PRC, 25 August 2017

As of the date of this announcement, the Board comprises Mr. Lv Yaoneng, Mr. Lv Dazhong, Mr. Li Jinyan, Mr. Lu Zhicheng, Mr. Shen Haiquan and Mr. Zheng Gang, as executive Directors; and Mr. Yu Jingxuan, Mr. Lin Tao, and Mr. Wong Kai Wai, as independent non-executive Directors.

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