Jujiang Construction Group Co., Ltd. — Interim / Quarterly Report 2018

Sep 24, 2018

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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 company established in the People’s Republic of China) (Stock Code: 1459)

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2018 INTERIM REPORT

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CONTENTS

	Page
Corporate Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	2
Financial Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
Management Discussion and Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	14
Report on Review of Interim Condensed Consolidated Financial Statements . . . . . . . . . . . . .	19
Interim Condensed Consolidated Statement of Profit or Loss and
Other Comprehensive Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	21
Interim Condensed Consolidated Statement of Financial Position . . . . . . . . . . . . . . . . . . . . . . . .	22
Interim Condensed Consolidated Statement of Changes in Equity . . . . . . . . . . . . . . . . . . . . . . .	24
Interim Condensed Consolidated Statement of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	25
Notes to Interim Condensed Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . .	27

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Interim Report 2018 1

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CORPORATE INFORMATION

DIRECTORS

Executive Directors

Mr. Lyu Yaoneng (Chairman) Mr. Lyu Dazhong Mr. Li Jinyan Mr. Lu Zhicheng Mr. Shen Haiquan Mr. Zheng Gang

Independent Non-Executive Directors

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Mr. Yu Jingxuan Mr. Lin Tao Mr. Wong Ka Wai

SUPERVISORS

Mr. Zou Jiangtao Mr. Chen Xiangjiang Mr. Lyu Xingliang Mr. Zhu Jialian

JOINT COMPANY SECRETARIES

Mr. Hong Kam Le Mr. Jin Shuigan

AUTHORISED REPRESENTATIVES

Mr. Lyu Yaoneng Mr. Jin Shuigan

LEGAL ADVISER

As to Hong Kong Law Li & Partners

As to PRC Law AILBright Law Office

AUDITOR

Ernst & Young

H SHARE REGISTRAR

AUDIT COMMITTEE

Mr. Yu Jiagxuan (Chairman) Mr. Wong Ka Wai Mr. Lin Tao

NOMINATION COMMITTEE

Mr. Lin Tao (Chairman) Mr. Lyu Yaoneng Mr. Yu Jingxuan

REMUNERATION AND APPRAISAL COMMITTEE

Mr. Wong Ka Wai (Chairman) Mr. Lyu Yaoneng Mr. Lin Tao

Tricor Investor Services Limited Level 22, Hopewell Centre 183 Queen’s Road East Hong Kong

PRINCIPAL BANKERS

• China Construction Bank Corporation Tongxiang Branch

• Industrial and Commercial Bank of China Limited Tongxiang Branch

• Industrial Bank Co., Ltd Jiaxing Branch

• Bank of Communications Co., Ltd Tongxiang Branch

• China Merchants Bank Co., Ltd Jiaxing Tongxiang Branch

STRATEGIC COMMITTEE

Mr. Lyu Yaoneng (Chairman) Mr. Lin Tao Mr. Zheng Gang

2 Jujiang Construction Group Co., Ltd.

CORPORATE INFORMATION

REGISTERED ADDRESS

Gaoqiao Town Jiaxing City Zhejiang Province PRC

HEAD OFFICE AND PRINCIPAL PLACE OF BUSINESS IN PRC

No. 669 Qingfeng South Road (South) Tongxiang City Zhejiang Province PRC

PRINCIPAL PLACE OF BUSINESS IN HONG KONG

22/F, World-Wide House 19 Des Voeux Road Central Hong Kong

STOCK CODE

1459

WEBSITE

www.jujiang.cn

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Interim Report 2018 3

	FINANCIAL SUMMARY
		For the six		months ended		30 June
		2018		2017
		Unaudited		Unaudited		Change
		RMB’000		RMB’000		%
	Revenue	3,214,760		2,080,395		54.5
	Gross profit Gross profit margin Profit for the period Net profit margin Basic and diluted earnings per share (RMB)	178,038 5.54% 77,423 2.41% 0.14		114,435 5.50% 51,936 2.50% 0.10		55.6 0.04 49.1 (0.09)

4 Jujiang Construction Group Co., Ltd.

MANAGEMENT DISCUSSION AND ANALYSIS

OVERVIEW

The Jujiang Construction Group Co., Ltd. (the “Company”) and its subsidiaries (collectively the “Group”) was established in 1965 as one of the earliest construction companies in Jiaxing, a city currently with a population of more than 4.5 million and strong commercial and light industrial activities. With 50 years’ experience in the construction industry, the Group has built a successful track record in the industry in which the Group operates.

The Group successfully obtained the Premium Class Certificate for General Building Construction Contracting Work (“Premium Class Certificate”) and the Grade A Engineering Design (Construction Industry) Certificate (“Engineering Design Certificate”) on 28 January 2015 after undergoing a stringent review process. As of 30 June 2018, the Group was one of few numbers construction company in Zhejiang Province holding both certificates. The Premium Class Certificate is the highest qualification awarded to building construction general contractors satisfying the high standards in relation to project management experience, technological innovation and scale of operations. The Engineering Design Certificate is awarded to those that meet high standards in relation to personnel qualifications, management capabilities and internal control. Holding these two key certificates as well as other certificates, the Group is able to provide fully integrated construction solutions, which consist of construction contracting and design, survey and consultancy services for building construction projects of all types and scales nationwide. The Group believes holding these certificates will also allow us to charge a premium rate for our services, resulting in higher profit margins in our construction projects.

MARKET REVIEW

In the first half of 2018, China’s real estate policy control entered into a new stage. On one hand, China continued to actively suppress irrational demands; on the other hand, it focused on adjusting the medium to long-term supply structure. The Chinese government clearly stated that the regulatory controls would not be relaxed. Some cities implemented the local responsibility while intensively introducing policies. In the first half of the year, the regulatory control efforts were not weakened. As at 30 June 2018, more than 50 cities above the prefecture level and more than 10 county cities have introduced regulatory control policies. Despite this, according to the national data of National Bureau of Statistics of China, during the six months ended 30 June 2018: i) the total building construction area in China was approximately 10,466.13 million square meters (30 June 2017: approximately 9,697.40 million square meters), representing an increase of 7.9% as compared to corresponding period in 2017; ii) the total new construction area in China was approximately 2,518.54 million square meters (30 June 2017: approximately 2,297.75 million square meters), representing an increase of 9.6% as compared to corresponding period in 2017; and iii) the total contract value of construction companies in China was approximately RMB33,537.8 billion (30 June 2017: approximately RMB 28,866.1 billion), representing an increase of 16.2% as compared to corresponding period in 2017. In addition, during the six months ended 30 June 2018, the total output value of construction industry in China grew by 10.4% to approximately RMB9,479.0 billion (30 June 2017: approximately RMB 8,587.1 billion) as compared with the same period of last year. The rising figures reflected that in spite of new challenges to real estate industry brought by the real estate policy control, the development momentum of construction industry was still strong and the demand for construction industry is expected to maintain a growing trend.

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Interim Report 2018 5

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MANAGEMENT DISCUSSION AND ANALYSIS

BUSINESS REVIEW

In the first half of the year, the Group made full use of the Group’s own brand superiority to strengthen the allocation of business resources by actively delivering the three main strategies of ‘major customers’, ‘going out’, and ‘quality business’. During the interim reporting period, the Group achieved major breakthroughs in revenue and net profit, which increased by approximately 54.5% and 49.1% to RMB 3,214.8 million and RMB 77.4 million, respectively, compared with the same period last year. Compared with the value of backlog of about RMB5,219.0 million as at 30 June 2017, the value of backlog increased by 69.1% to approximately RMB8,822.8 million as at 30 June 2018. The table below shows the breakdown of value of backlog changes:

	BUSINESS REVIEW In the first half of the year, the Group made full use of the Group’s own brand superiority to strengthen the allocation of business resources by actively delivering the three main strategies of ‘major customers’, ‘going out’, and ‘quality business’. During the interim reporting period, the	BUSINESS REVIEW In the first half of the year, the Group made full use of the Group’s own brand superiority to strengthen the allocation of business resources by actively delivering the three main strategies of ‘major customers’, ‘going out’, and ‘quality business’. During the interim reporting period, the	BUSINESS REVIEW In the first half of the year, the Group made full use of the Group’s own brand superiority to strengthen the allocation of business resources by actively delivering the three main strategies of ‘major customers’, ‘going out’, and ‘quality business’. During the interim reporting period, the	BUSINESS REVIEW In the first half of the year, the Group made full use of the Group’s own brand superiority to strengthen the allocation of business resources by actively delivering the three main strategies of ‘major customers’, ‘going out’, and ‘quality business’. During the interim reporting period, the	BUSINESS REVIEW In the first half of the year, the Group made full use of the Group’s own brand superiority to strengthen the allocation of business resources by actively delivering the three main strategies of ‘major customers’, ‘going out’, and ‘quality business’. During the interim reporting period, the	BUSINESS REVIEW In the first half of the year, the Group made full use of the Group’s own brand superiority to strengthen the allocation of business resources by actively delivering the three main strategies of ‘major customers’, ‘going out’, and ‘quality business’. During the interim reporting period, the
	Group achieved major breakthroughs in revenue and net profit, which increased by approximately
	54.5% and 49.1% to RMB 3,214.8 million and RMB 77.4			million, respectively,	compared with the
	same period last year. Compared with the value of backlog of about RMB5,219.0 million as at 30
	June 2017, the value of backlog increased by 69.1%	to approximately RMB8,822.8 million as at 30
	June 2018. The table below shows the breakdown of	value of backlog changes:
				For the six months ended 30 June
				2018		2017
				RMB’million		RMB’million
				(unaudited)		(unaudited)
	Opening value of backlog			7,976.8		5,422.6
	Net value of new projects(1)			4,038.9		1,860.1
	Revenue recognized(2)			(3,192.9)		(2,063.7)
	Closing value of backlog(3)			8,822.8		5,219.0

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 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.

Actively delivering the three main strategies of ‘Major Customers’, ‘Going Out’, and ‘Quality Business’

‘Major Customers’

With the Company’s development strategy of “Major Customers”, we promoted rapid development of business with the major customers with our excellent services and quality. We gained recognition and trust from the existing large real estate companies and local leading enterprises and maintained a good relationship with them, which includes: Zhenshi Holding Group Co., Ltd., Jushi Group Co., Ltd., Tongkun Group Co., Ltd.（桐昆集團股份有限公司） Country Garden Holdings Company Limited, Sunac China Holdings Limited and Greentown China Holdings Limited. In the first half of the year, the total value of new major projects was approximately RMB2.13 billion, representing 52.6% of the total contract value. Some of the largescale projects that we undertook include the Jiaxing Jingkai Land No. 2017-10 Construction Project, the Jushi Group Co., Ltd. Smart Manufacturing 230 Project, the Ruzhou Sweet-Scented Osmanthus Garden (汝州建業桂園) Phase I Project and Zhengzhou Rongchuangcheng Project Development Zone* (鄭州融創城項目開發區) Phase I Project.

6 Jujiang Construction Group Co., Ltd.

MANAGEMENT DISCUSSION AND ANALYSIS

‘Going Out’

The Group achieved remarkable results in the implementation of the “going out” strategy. In the first half of the year, the total amount of new businesses outside the Zhejiang province exceeded RMB1.26 billion, accounting for approximately 31.1% of the total new contract value. We undertook projects outside Zhejiang Province such as the Lingyuan City Yongli Shopping Mall* (凌源市永利廣場) Phase III Project,. The following table sets forth a breakdown of new contract amounts by region for the years indicated:

	For the six months ended 30 June 2018 2017 Change RMB’million % RMB’million % % (unaudited) (unaudited)
Jiaxing City Zhejiang Province (except Jiaxing City) Other areas (except Zhejiang Province) Total	2,507.1 62.1 1,084.6 58.3 131.2 275.7 6.8 234.9 12.6 17.4 1,256.1 31.1 540.6 29.1 132.4 4,038.9 100.0 1,860.1 100.0

‘Quality business’

In the first half of the year, the production management of the Group’s projects under construction was carried out in an orderly manner and recognized by our customers and local authorities. In the first half of the year, the Group had 6 standardized sites above the city level, including 5 provincial-level sites. Among them, the CCTV New Film Space-Central New Film Tongxiang Park (CCTV新影時空-中央新影桐鄉園) Phase I Project won the title of advanced construction site in the “Civilized and Harmonious Construction Sites” competition for construction companies in Zhejiang Province, whereas the Haiyan Smart Manufacturing Innovation Center (海鹽智慧製造創新中心) Phase I Project was awarded the title of the 18th Batch of Demonstration Projects with New Construction Technology Applications in Zhejiang Province.

We actively participated in public project bidding and tendering, with a focus on the major and quality projects, and undertook large-scale projects such as the Tongxiang•Zhejiang Media Huace Film Industrial Park (桐鄉 • 浙江傳媒華策電影產業園) Phase I Project, the Jiashan No.2 People’s Hospital (嘉善縣第二人民醫院) Relocation Project, and the Tongxiang Shanty Town Redevelopment Project.

Interim Report 2018 7

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MANAGEMENT DISCUSSION AND ANALYSIS

In the development of new areas, we proactively undertook and constructed the Engineering Procurement Construction (“EPC”) projects. We participated in the construction of the “Buttonwood+” EPC project and completed the topping off on schedule currently, which provided us with an opportunity to accumulate experience for construction of the subsequent EPC projects. On 24 May 2018, we won the bid and undertook the EPC project of Tongxiang Kangming Road Primary School* (桐鄉康明路小學). We negotiated and followed up certain public-private partnership (“PPP”) projects with thorough explorations and constant investigations, trying to look for collaboration. We also pushed for the research on the prefabricated structure for precast concrete (“PC”) by taking the construction of the existing PC structure as an opportunity to sum up experience and reserve technology; closely followed the related developments of construction industrialization in Tongxiang City, completed project proposal drafts and accelerated implementation of industrialization base construction; as well as aggressively explored overseas project construction and steadily planned related works.

For the six months ended 30 June 2018, approximately 99.1% (30 June 2017: approximately 99.0%) of the revenue was contributed by the construction contracting business. The following table sets forth a breakdown of our revenue by business and project type for the periods indicated:

	For the six months ended 30 June 2018 2017 RMB’million % RMB’million % (unaudited) (unaudited)
Construction contracting business Residential Commercial Public works Industrial Other business Total revenue	1,472.9 45.8 999.6 48.1 553.8 17.2 821.1 39.5 249.1 7.7 118.7 5.7 911.6 28.4 119.3 5.7
	3,187.4 99.1 2,058.7 99.0 27.4 0.9 21.7 1.0
	3,214.8 100.0 2,080.4 100.0

FINANCIAL REVIEW

Revenue and gross profit margin

Revenue increased by approximately 54.5% or approximately RMB1,134.4 million from approximately RMB2,080.4 million for the six months ended 30 June 2017 to approximately RMB3,214.8 million for the six months ended 30 June 2018 primarily because of increase of construction contracting business amounting to approximately RMB1,128.7 million and increase of other business amounting to approximately RMB5.7 million for the six months ended 30 June 2018. Increase in construction contracting business was a result of increase in revenue from residential construction contracting business and industrial construction contracting business amounting to approximately RMB473.3 million and RMB792.3 million, respectively, which was offset by decrease in revenue from commercial construction contracting business amounting to RMB267.3 million. Increase in residential and industrial construction contracting business are in

8 Jujiang Construction Group Co., Ltd.

MANAGEMENT DISCUSSION AND ANALYSIS

line with the strategies of the Group, the backlog value on hands as at 31 December 2017 and the new backlog value from the new contracts signed by the Group for the six months ended 30 June 2018 increased significantly, especially for residential construction contracting business and industrial construction contracting business. Decrease in commercial construction contracting business is a result of the fact that some of major projects were nearly completed in 2017, and new commercial projects of backlog values of approximately RMB236.0 million will commence construction during the six months ending 30 June 2018.

Gross profit increased by approximately 55.6% or approximately RMB63.6 million from approximately RMB114.4 million for the six months ended 30 June 2017 to approximately RMB178.0 million for the six months ended 30 June 2018, and gross profit margin remained stable at 5.50% and 5.54% for the six months ended 30 June 2017 and 2018, respectively. The increase in gross profit was a result of increase in revenue. The gross profit margin of construction contracting business increased from approximately 5.22% for the six months ended 30 June 2017 to approximately 5.39% for the six months ended 30 June 2018, such increase was offset by decrease in gross profits margin of other business from approximately 32.4% for the six months ended 30 June 2017 to approximately 22.3% for the six months ended 30 June 2018.

Other income and gains

Other income and gains decreased significantly by approximately RMB7.5 million from approximately RMB8.6 million for the six months ended 30 June 2017 to approximately RMB1.1 million for the six months ended 30 June 2018 primarily because the Group received one-off government grants of approximately RMB2.7 million and a dividend income of approximately RMB4.8 million for the six months ended 30 June 2017 while no such income were incurred for the six months ended 30 June 2018.

Administrative expenses

Administrative expenses increased by 10.9% from approximately RMB32.9 million for the six months ended 30 June 2017 to approximately RMB36.5 million for the six months ended 30 June 2018. Such increase was primarily due to increase in bank charge in relation to financing arrangements.

Other expenses

Other expenses increased significantly by 36.2% from approximately RMB4.4 million for the six months ended 30 June 2017 to approximately RMB6.0 million for the six months ended 30 June 2018. Such increase was primarily due to a reversal of impairment of other receivables amounting to approximately RMB3.6 million for the six months ended 30 June 2017 and there was an impairment loss of other receivables amounting to RMB0.8 million for the six months ended 30 June 2018, such increase was offset by decrease in impairment of trade receivables from approximately RMB5.5 million for the six months ended 30 June 2017 to approximately RMB3.5 million for the six months ended 30 June 2018.

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Finance costs

Finance costs increased by approximately 84.3% from approximately RMB17.4 million for the six months ended 30 June 2017 to approximately RMB32.0 million for the six months ended 30 June 2018. Such increase was primarily due to the use of receivable factoring and discounting bills by the Group to obtain financing, as a result the Group incurred an aggregated interest of approximately RMB15.8 million for the six months ended 30 June 2018, while no such transaction was incurred for the six months ended 30 June 2017.

Interim Report 2018 9

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MANAGEMENT DISCUSSION AND ANALYSIS

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Income tax expense

Income tax expenses increased by 65.1% from approximately RMB16.5 million for the six months ended 30 June 2017 to approximately RMB27.2 million for the six months ended 30 June 2018, and such increase is primarily attributing to increase in assessable income due to increase in revenue for the six months ended 30 June 2018. The effective tax rate increased from approximately 24.1% for the six months ended 30 June 2017 to approximately 26.0% for the six months ended 30 June 2018, such increase was primarily attributing to a non-taxable dividend income of approximately RMB4.7 million for the six months ended 30 June 2017 while there is no such income for the six months ended 30 June 2018.

Profit for the period

As a result of the foregoing, the profit for the period increased by approximately 49.1% from approximately RMB51.9 million for the six months ended 30 June 2017 to approximately RMB77.4 million for the six months ended 30 June 2018. Net profit margin was stable at approximately 2.4% and 2.5% for the six months ended 30 June 2017 and 2018, respectively.

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 2018 and 31 December 2017, the Group had cash and cash equivalents of approximately RMB84.5 million and approximately RMB83.9 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, interest-bearing borrowings from the banks and/or issuance of the bonds

On 20 March 2018, the resolution in relation to the issuance of corporate bonds with an aggregate principal of not exceeding USD200 million were considered and approved at the extraordinary general meeting (“EGM”) of the Company. For details of the terms of the said corporate bonds, please refer to the circular of the Company dated 2 February 2018. The relevant resolutions for the issuance of the said corporate bonds shall be effective for 24 months from the date of approval at the EGM.

On 12 June 2018, the resolution in relation to the issuance of corporate bonds with an aggregate principal of not exceeding RMB500 million were considered and approved at the annual general meeting (“AGM”) of the Company. For details of the terms of the said corporate bonds, please refer to the circular of the Company dated 27 April 2018. The relevant resolutions for the issuance of the said corporate bonds shall be effective for 24 months from the date of approval at the AGM.

Amounts due from contract customers and contract assets

The amounts of contract assets decreased by approximately 3.8% from approximately RMB3,084.5 million as of 31 December 2017 to approximately RMB2,966.8 million as of 30 June 2018, representing approximately 67.6% and approximately 62.8% 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 the Group actively issued bills to the customers.

10 Jujiang Construction Group Co., Ltd.

MANAGEMENT DISCUSSION AND ANALYSIS

Trade and bill receivables

Trade and bills receivables increased by approximately 26.7% from approximately RMB926.5 million as of 31 December 2017 to approximately RMB1,174.2 million as of 30 June 2018. Such increase was in line with the expansion of the business. The trader and bills receivables turnover days decreased from approximately 53 days as at 31 December 2017 to approximately 48 days as at 30 June 2018, and such decrease was a result of the use of receivables factoring.

Trade and bill payables

Trade and bills payables increased from approximately RMB2,586.0 million as of 31 December 2017 to approximately RMB2,752.7 million as of 30 June 2018. Such increase was in line with the expansion of the business. The trader and bills payable turnover days decreased from approximately 184 days as at 31 December 2017 to approximately 158 days as at 30 June 2018, and such decrease was a result of improvement of the operating cash flow.

Borrowings and charge on assets

As of 30 June 2018, the Group relied on interest-bearing borrowings in the amount of approximately RMB466.7 million (31 December 2017: approximately RMB549.6 million) which are repayable within 1 year and carried effective interest rate with a range from 4.35% to 20.40% per annum (31 December 2017: 4.35% to 20.40% per annum).

As at 30 June 2018, certain general banking facilities of the Group were secured by the Group’s land use rights and buildings of approximately RMB94.4 million (31 December 2017: approximately RMB95.5 million).

Gearing ratio

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.

The gearing ratio of the Group decreased from approximately 39.6% as at 31 December 2017 to approximately 29.4% as at 30 June 2018, and such decrease was mainly attributing to repayments of interest-bearing bank borrowings during the period.

Capital expenditure

As at 30 June 2018, the capital expenditures were approximately RMB2.2 million (31 December 2017: approximately RMB6.6 million). The capital expenditure incurred for the six months ended 30 June 2018 primarily related to the construction machinery for the business expansion.

Capital commitments

As at 30 June 2018, the Group did not have any significant commitments.

Contingent liabilities

As at 30 June 2018, the Group had no material contingent liabilities.

Interim Report 2018 11

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MANAGEMENT DISCUSSION AND ANALYSIS

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 OF SUBSIDIARIES, ASSOCIATES AND JOINT VENTURES

The Group had no significant investments held or material acquisitions and disposals of subsidiaries, associates and joint ventures during the six months ended 30 June 2018.

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 2018.

EMPLOYEE AND REMUNERATION POLICIES

As of 30 June 2018, the Group had total of 782 employees, of which 594 were based in Jiaxing City, and 188 were based in other areas in Zhejiang Province and in other provinces and regions in China. For the six months ended 30 June 2018, the Group incurred total staff costs of approximately RMB20.1 million, representing an increase of approximately 2.0% as compared with the same period in 2017, 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 provides regular training to the employees.

FUTURE PROSPECTS

In the second half of the year, the Group will continue to actively implement the three main strategies of “Major Customers”, “Going Out” and “Quality Business”. In the meantime, the Group will strengthen project management and risk prevention and control by adhering to the principle of “taking preventive measures before problems happen” and the purpose of “pursuing steady and long-term progress”, as well as acting cautiously to strengthen risk prevention and control with a “risk isolation zone”. We will put efforts in pre-prevention and control, supervision during events and post-handling to improve the risk prevention and control system. Establishing a comprehensive customer evaluation system and project manager evaluation system, we can prevent risks from the source and enhance project risk assessment. We will also strengthen the centralized management of funds, and control total amount of funds used and implement an accountability system. By strengthening project cost control and establishing “two-dimensional” prevention and control measures in terms of laws and internal audits, the Company’s rapid and quality development will be positively facilitated.

12 Jujiang Construction Group Co., Ltd.

MANAGEMENT DISCUSSION AND ANALYSIS

SHARE CAPITAL

The share capital structure of the Company as at 30 June 2018 is as follows:

Class of Shares	Number of shares Approximate percentage of the total issued share capital
Domestic shares in issue H shares in issue Total	400,000,000 75.0% 133,360,000 25.0%
	533,360,000 100.0%

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Interim Report 2018 13

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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 2018 (30 June 2017: Nil).

PURCHASE, SALE OR REDEMPTION OF LISTED SECURITIES

For the six months ended 30 June 2018, there was no purchase, sale or redemption by the Company or any of its subsidiaries of any listed securities of the Company.

INTERESTS AND SHORT POSITIONS OF DIRECTORS, SUPERVISORS AND THE CHIEF EXECUTIVE IN THE SHARES, UNDERLYING SHARES AND DEBENTURES OF THE COMPANY AND ITS ASSOCIATED CORPORATIONS

As at 30 June 2018, the interests or short positions of the Directors, Supervisors and the chief executive in the Shares, underlying Shares and debentures of the Company and its associated corporations (within the meaning of Part XV of the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) (“SFO”)) which will be required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they were taken or deemed to have under such provisions of the SFO) or which will be required, pursuant to section 352 of the SFO, to be entered in the register referred to therein, or which will be required, pursuant to the Model Code for Securities Transactions by Directors of the Listed Issuers as set out in Appendix 10 (the “Model Code”) to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”) to be notified to the Company and the Stock Exchange are as follows:

The Company

The Company
						Approximate		Approximate
			Number of shares			percentage of		percentage of
			of the relevant			shareholdings in		shareholdings in
			corporation (including			the total share		the relevant class
			associated corporation)			capital of the		of Shares of the
Director/Supervisor	Nature of interest		held(1)			Company		Company
Mr. Lyu Yaoneng(2)	Interest of controlled		204,000,000 Domestic
		corporation		Shares (L)		38.25%		51%

Notes:

• (1) The letter “L” denotes a person’s long position (as defined under Part XV of the SFO) in the Domestic Shares.

• (2) Zhejiang Jujiang Holdings Group Co., Ltd (浙江巨匠控股集團有限公司) (“Jujiang Holdings”) is held as to approximately 51.33% by Mr. Lyu Yaoneng. Mr. Lyu Yaoneng controls more than one-third of the voting rights of Jujiang Holdings and are deemed to be interested in its interest in the Company by virtue of the SFO.

14 Jujiang Construction Group Co., Ltd.

OTHER INFORMATION

Associated Corporation

						Approximate
						shareholding
						percentage in the
						relevant class of shares
Director/						in the Associated
Supervisor	Associated Corporation		Nature of interest			Corporation
Mr. Lyu Yaoneng	Jujiang Holdings		Beneficial owner(1)			51.33%
	Jujiang Industrial		Beneficial owner(3)			10.00%
Mr. Lyu Dazhong	Jujiang Holdings		Beneficial owner(1)			11.42%
Mr. Li Jinyan	Jujiang Holdings		Beneficial owner(1)			5.33%
Mr. Lu Zhicheng	Jujiang Holdings		Beneficial owner(1)			4.39%
Mr. Zheng Gang	Jujiang Equity Investment		Beneficial owner(2)			2.66%
Mr. Shen Haiquan	Jujiang Equity Investment		Beneficial owner(2)			1.69%
Mr. Zou Jiangtao	Jujiang Equity Investment		Beneficial owner(2)			0.30%

Notes:

• (1) The disclosed interest represents the interests in Jujiang Holdings, the associated corporation which is owned as to approximately 51.33% by Mr. Lyu Yaoneng, 11.42% by Mr. Lyu Dazhong, 7.01% by Mr. Lyn Yuntao, 4.39% by Mr. Lu Zhicheng, 4.97% by Mr. Shen Bingkun, 1.54% by Mr. Fan Zhiming, 8.52% by Mr. Wang Shaolin, 1.31% by Mr. Ma Shengliang, 5.33% by Mr. Li Jinyan and 4.17% by Mr. Gao Xingwu, respectively.

• (2) The disclosed interest represents the interests in Zhejiang Jujiang Equity Investment Management Co., Ltd (浙 江巨匠股權投資管理股份有限公司) (“Jujiang Equity Investment”), the associated corporation which is owned by 188 individual shareholders together as to 100%, of which two are Directors (Mr. Shen Haiquan and Mr. Zheng Gang who owned 1.6940% and 2.6612% of Jujiang Equity Investment respectively), one is a Supervisor (Mr. Zou Jiangtao who owned 0.2995% of Jujiang Equity Investment), 121 are current employees other than Directors and Supervisors, 26 are former employees, one is Mr. Lyu Yuntao, who is Mr. Lyu Yaoneng’s son (who owned 29.0536% of Jujiang Equity Investment) and 37 are Independent Third Parties.

• (3) The disclosed interest represents the interests in Tongxiang City Jujiang Industrial Investment Co., Ltd. (桐鄉 市巨匠實業投資有限公司) (“Jujiang Industrial”), the associated corporation which is owned as to 10% by Mr. Lyu Yaoneng and 90% by Zhejiang Jujiang Technology Services Co., Ltd. (浙江巨匠科技服務有限公司), respectively.

Interim Report 2018 15

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OTHER INFORMATION

INTERESTS AND SHORT POSITIONS OF THE SUBSTANTIAL SHAREHOLDERS AND OTHER PERSONS IN THE SHARES AND UNDERLYING SHARES OF THE COMPANY

As at to 30 June 2018, so far as the Directors, Supervisors and the chief executive of the Company are aware of, as indicated on the register of interests and/or short positions required to be maintained pursuant to Section 336 of Part XV of the SFO, the substantial Shareholders and other persons (other than Directors, Supervisors and the chief executive of the Company) had the following interests and/or short positions in the Shares or underlying Shares of the Company:

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----- Start of picture text -----

|||||||||
|---|---|---|---|---|---|---|---|
|are aware of, as indicated on the register of interests and/or short positions required to be|
|maintained pursuant to Section 336 of Part XV of the SFO, the substantial Shareholders and other|
|persons (other than Directors, Supervisors and the chief executive of the Company) had the|
|following interests and/or short positions in the Shares or underlying Shares of the Company:|
|Approximate|
|Approximate|percentage of|
|percentage of|shareholdings in|
|shareholdings in|the total share|
|Number of Shares|the relevant class|capital of the|
|Shareholders|Nature of interest|held|[(1)]|of Shares|[(2)]|Company|[(3)]|
|Jujiang Holdings|[(4)]|Beneficial owner|204,000,000 Domestic|
|Shares (L)|51%|38.25%|
|Ms. Shen Hongfen|[(5)]|Interest of spouse|204,000,000 Domestic|
|Shares (L)|51%|38.25%|
|Jujiang Equity|Beneficial owner|196,000,000 Domestic|
|Investment|[(6)]|Shares (L)|49%|36.75%|
|Chan Ka Wo|Beneficial owner|9,480,000 H Shares (L)|7.11%|1.78%|

----- End of picture text -----

Notes:

• (1) The letter “L” denotes a person’s long position (as defined under Part XV of the SFO) in the Domestic Shares.

• (2) The calculation is based on the percentage of shareholding in the Domestic Shares/H Shares.

• (3) The calculation is based on the total number of 533,360,000 Shares in issue after the Global Offering.

• (4) Jujiang Holdings will be directly interested in approximately 38.25% in the Company.

• (5) Ms. Shen Hongfen (沈洪芬), the spouse of Mr. Lyu Yaoneng, is deemed to be interested in Mr. Lyu Yaoneng’s interest in the Company by virtue of the SFO.

• (6) Jujiang Equity Investment will be directly interested in approximately 36.75% in the Company.

16 Jujiang Construction Group Co., Ltd.

OTHER INFORMATION

Save as disclosed above, as at 30 June 2018, so far as the Directors, Supervisors and the chief executive of the Company are aware of, no other persons have interests and/or short positions in the Shares or underlying Shares which were required, pursuant to Section 336 of Part XV of the SFO, to be recorded in the register kept under such provisions.

DIRECTORS’ COMPETING INTERESTS

As at 30 June 2018, 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.

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 2018, 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. Lyu 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.

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 as the Company’s code of conduct regarding Directors’ and Supervisors’ securities transactions on terms no less exacting than the required 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 2018. 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.

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Interim Report 2018 17

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OTHER INFORMATION

SIGNIFICANT EVENTS AFTER THE REPORTING PERIOD

On 24 August 2018, the Company and the China Hong Kong Capital Asset Management Co., Ltd. (“Placing Agent”) entered into the placing agreement pursuant to which the Placing Agent has agreed to act as the placing agent, on a best effort basis, for the purposes of arranging placees to subscribe for bonds up to an aggregate principal amount of HK$200,000,000 at interest rate 7% per annum within the three months. For more details, please refer to the announcement of the Company dated 24 August 2018.

Save as disclosed above, as of the date of this report, the Group has no significant events after the reporting period required to be disclosed.

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 nonexecutive 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 2018. 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. Lyu Yaoneng Chairman

Zhejiang Province, the PRC, 24 August 2018

18 Jujiang Construction Group Co., Ltd.

REPORT ON REVIEW OF INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Ernst & Young

22/F CITIC Tower 1 Tim Mei Avenue Central, Hong Kong Tel: +852 2846 9888 Fax: +852 2868 4432 www.ey.com

To the board of directors of Jujiang Construction Group Co., Ltd.

(Established in the People’s Republic of China with limited liability)

INTRODUCTION

We have reviewed the accompanying interim condensed consolidated statements set out on pages 21 to 52, which comprise the interim condensed consolidated statement of financial position of Jujiang Construction Group Co., Ltd. (the “Company”) and its subsidiaries (together, the “Group”) as at 30 June 2018 and the interim condensed consolidated statements of profit or loss and other comprehensive income, changes in equity and cash flows for the six months period then ended and explanatory notes. The Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited require the preparation of a report on interim condensed consolidated financial statements to be in compliance with the relevant provisions thereof and International Accounting Standard 34 “Interim Financial Reporting” (“IAS 34”) issued by the International Accounting Standards Board.

The directors are responsible for the preparation and presentation of these interim condensed consolidated financial statements in accordance with IAS 34. Our responsibility is to express a conclusion on these interim condensed consolidated financial statements based on our review. Our report is made solely to you, as a body, in accordance with our agreed terms of engagement, and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report.

SCOPE OF REVIEW

We conducted our review in accordance with Hong Kong Standard on Review Engagements 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity, issued by the Hong Kong Institute of Certified Public Accountants. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

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Interim Report 2018 19

REPORT ON REVIEW OF INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CONCLUSION

Based on our review, nothing has come to our attention that causes us to believe that the accompanying interim condensed consolidated financial statements are not prepared, in all material respects, in accordance with IAS 34.

Ernst & Young

Certified Public Accountants Hong Kong 24 August 2018

20 Jujiang Construction Group Co., Ltd.

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

For the six months ended 30 June

For the six months ended 30 June
		Notes	2018	2017
			RMB’000	RMB’000
			(Unaudited)	(Unaudited)
REVENUE		3	3,214,760	2,080,395
Cost of sales			(3,036,722)	(1,965,960)
Gross profit			178,038	114,435
Other income and gains		5	1,095	8,638
Administrative expenses			(36,477)	(32,875)
Other expenses			(6,010)	(4,414)
Finance costs		6	(31,990)	(17,354)
PROFIT BEFORE TAX		7	104,656	68,430
Income tax expense		8	(27,233)	(16,494)
PROFIT FOR THE PERIOD			77,423	51,936
OTHER COMPREHENSIVE INCOME			–	–
TOTAL COMPREHENSIVE INCOME FOR THE
PERIOD, NET OF TAX			77,423	51,936
Profit attributable to:
Owners of the parent			77,316	51,558
Non-controlling interests			107	378
			77,423	51,936
Total comprehensive income attributable to:
Owners of the parent			77,316	51,558
Non-controlling interests			107	378
			77,423	51,936
Earnings per share attributable to ordinary
equity holders of the parent:
Basic and diluted (expressed in RMB per share)		10	0.14	0.10

The Board did not recommend an interim dividend for the six months ended 30 June 2018 (six months ended 30 June 2017: Nil)

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Interim Report 2018 21

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INTERIM CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at As at
30 June 31 December
Notes 2018 2017
RMB’000 RMB’000
(Unaudited) (Audited)
NON-CURRENT ASSETS
Property, plant and equipment 11 130,647 132,559
Prepaid land lease payments 8,851 8,997
Intangible assets 2,223 2,407
Deferred tax assets 17,401 17,113
Trade receivables 13 37,555 25,173
Prepayments, deposits and other receivables 14 55,255 40,412
Other non-current assets – 15
Total non-current assets 251,932 226,676
CURRENT ASSETS
Prepaid land lease payments 291 291
Inventories 14,176 12,028
Trade and bills receivables 13 1,174,207 926,544
Prepayments, deposits and other receivables 14 457,085 437,571
Contract assets 12 2,966,785 –
Amounts due from contract customers 12 – 3,084,495
Pledged deposits 15 27,418 18,752
Cash and cash equivalents 15 84,457 83,859
Total current assets 4,724,419 4,563,540
CURRENT LIABILITIES
Trade and bills payables 16 2,752,686 2,586,026
Other payables, advances from customers and
accruals 17 229,165 232,574
Contract liabilities 12 153,453 –
Amounts due to contract customers 12 – 132,125
Interest-bearing bank and other borrowings 18 466,727 549,561
Tax payable 167,050 159,044
Total current liabilities 3,769,081 3,659,330
NET CURRENT ASSETS 955,338 904,210
TOTAL ASSETS LESS CURRENT LIABILITIES 1,207,270 1,130,886
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22 Jujiang Construction Group Co., Ltd.

INTERIM CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

Notes	As at 30 June 2018 As at 31 December 2017 RMB’000 RMB’000 (Unaudited) (Audited)
NON-CURRENT LIABILITIES Other payables and accruals 17 Total non-current liabilities Net assets EQUITY Equity attributable to owners of the parent Share capital 19 Reserves 20 Non-controlling interests Total equity	388 827
	388 827
	1,206,882 1,130,059
	533,360 533,360 667,790 590,474
	1,201,150 1,123,834 5,732 6,225
	1,206,882 1,130,059

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Interim Report 2018 23

	INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN	INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN	INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN	INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN	INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN	INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN	INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN	INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN	INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN	INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN	INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN	INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN	EQUITY	EQUITY	EQUITY
							For the six months ended 30 June 2018
							Attributable	to owners of		the parent
									Statutory				Non-
					Share	Capital	Special		surplus	Retained			controlling		Total
					capital	reserve	reserve		reserve	profits	Total		interests		equity
			Note		RMB’000	RMB’000	RMB’000		RMB’000	RMB’000	RMB’000		RMB’000		RMB’000
	At 1 January 2018 Profit for the period				533,360 –	188,480 –	– –		42,971 –	359,023 77,316	1,123,834 77,316		6,225 107		1,130,059 77,423
	Total comprehensive income for the period Transfer to special reserve Utilisation of special reserve Distribution paid to non- controlling shareholders		(i) (i)		– – – –	– – – –	– 66,613 (66,613) –		– – – –	77,316 (66,613) 66,613 –	77,316 – – –		107 – – (600)		77,423 – – (600)
	At 30 June 2018 (Unaudited)				533,360	188,480	–		42,971	436,339	1,201,150		5,732		1,206,882
							For the six months ended 30 June 2017
							Attributable		to owners of the parent
									Statutory				Non-
						Capital	Special		surplus	Retained			controlling		Total
				Share capital		reserve	reserve		reserve	profits	Total		interests		equity
			Note		RMB’000	RMB’000	RMB’000		RMB’000	RMB’000	RMB’000		RMB’000		RMB’000
	At 1 January 2017				533,360	188,480	–		29,927	248,275	1,000,042		5,414		1,005,456
	Profit for the period				–	–	–		–	51,558	51,558		378		51,936
	Total comprehensive income
	for the period				–	–	–		–	51,558	51,558		378		51,936
	Transfer to special reserve		(i)		–	–	48,117		–	(48,117)	–		–		–
	Utilisation of special reserve		(i)		–	–	(48,117)		–	48,117	–		–		–
	At 30 June 2017 (Unaudited)				533,360	188,480	–		29,927	299,833	1,051,600		5,792		1,057,392

Note:

(i) In preparation of the financial statements, the Group has appropriated a certain amount of retained profits to a special reserve fund for each of the six months ended 30 June 2018 and 2017, for safety production expense purposes as required by directives issued by relevant PRC government authorities. The Group charged the safety production expense to profit or loss when such expense was incurred, and at the same time an equal amount of such special reserve fund was utilised and transferred back to retained profits until such special reserve was fully utilised.

24 Jujiang Construction Group Co., Ltd.

INTERIM CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

For the six months ended 30 June

For the six months ended 30 June
			2018	2017
			RMB’000	RMB’000
		Notes	(Unaudited)	(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Profit before tax			104,656	68,430
Adjustments for:
Finance costs Dividend income from		6	31,990	17,354
available-for-sale investments		5	–	(4,680)
Interest income		5	(90)	(95)
Exchange difference, net			–	4
Gain on disposal of available-for-sale
investments		5	–	(164)
Loss on disposal of intangible assets			1	–
Depreciation of items of property, plant and
equipment			3,991	3,788
Amortisation of intangible assets			251	202
Amortisation of prepaid land lease payments			146	146
Impairment of trade receivables		13	3,514	5,456
Impairment/(reversal of impairment) of
deposits and other receivables		14	811	(3,640)
Gain on disposal of items of property, plant
and equipment, net			(19)	(2,691)
			145,251	84,110
Increase in inventories			(2,148)	(1,639)
Increase in contract assets/contract liabilities			（2,813,332)	–
Decrease in amounts due from/(to) contract
customers (Increase)/decrease in trade and bills			2,964,760	315,769
receivables			(263,559)	5,632
(Increase)/decrease in prepayments, deposits
and other receivables			(35,152)	192
Increase in pledged deposits			(8,666)	(269)
Increase/(decrease) in trade and bills payables Decrease in other payables, advances from customers and accruals			166,660 (16,238)	(295,515) (14,896)
Cash flows from operations			137,576	93,384
Interest received			90	95
Income tax paid			(19,515)	(13,991)
Net cash flows from operating activities			118,151	79,488

Interim Report 2018 25

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INTERIM CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
For the six months ended 30 June
2018 2017
RMB’000 RMB’000
Notes (Unaudited) (Unaudited)
CASH FLOWS FROM/USED IN INVESTING
ACTIVITIES
Payments for acquisition of items of property,
plant and equipment (2,120) (1,930)
Payments for acquisition of intangible assets (68) (540)
Proceeds from disposal of items of property,
plant and equipment 59 2,737
Proceeds from disposal of available-for-sale
investments – 3,764
Net cash flows (used in)/from investing activities (2,129) 4,031
CASH FLOWS USED IN FINANCING
ACTIVITIES
Interest paid (31,990) (17,354)
Proceeds from borrowings 253,250 364,392
Repayment of borrowings (336,084) (438,025)
Borrowings and repayments of loans to related
parties – (6,621)
Borrowings and repayments of loans from
related parties – 6,621
Dividends paid to non-controlling shareholders (600) –
Net cash flows used in financing activities (115,424) (90,987)
NET INCREASE/(DECREASE) IN CASH AND
CASH EQUIVALENTS 598 (7,468)
Effect of foreign exchange rate changes – (4)
Cash and cash equivalents at beginning of
period 83,859 65,013
CASH AND CASH EQUIVALENTS AT END OF
PERIOD 84,457 57,541
ANALYSIS OF BALANCES OF CASH AND
CASH EQUIVALENTS
Cash and bank balances 15 111,875 75,920
Less: Pledged deposits 27,418 18,379
Cash and cash equivalents as stated in the
statement of financial position and statement
of cash flows 84,457 57,541
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26 Jujiang Construction Group Co., Ltd.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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. The registered office address of the Company is Gaoqiao Town, Jiaxing City, Zhejiang Province, the PRC. The Company’s H shares 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 2018, the Group’s principal activities were as follows:

• Construction contracting

• Others – Design, survey and consultancy, etc.

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 AND CHANGES TO THE GROUP’S ACCOUNTING POLICIES

2.1 Basis of preparation

The unaudited interim condensed consolidated financial statements for the six months ended 30 June 2018 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 of Hong Kong Limited (the “Listing Rules”). It was approved and authorised for issue by the board of directors on 24 August 2018.

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 2017.

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.

These interim condensed consolidated financial statements have not been audited.

Interim Report 2018 27

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
2. BASIS OF PREPARATION AND CHANGES TO THE GROUP’
ACCOUNTING POLICIES(Continued)
2.2 New standards, interpretations and amendments adopted by the Group
The accounting policies adopted in the preparation of the interim condense
consolidated financial statements are consistent with those followed in th
preparation of the Group’s annual consolidated financial statements for the yea
ended 31 December 2017, except for the adoption of the new standards an
interpretations effective as of 1 January 2018.
Amendments to IFRS 2 Classification and Measurement of Share-based
Payment Transactions
Amendments to IFRS 4 Applying IFRS 9 Financial Instruments with IFRS 4
Insurance Contracts
IFRS 9 Financial Instruments
IFRS 15 Revenue from Contracts with Customers
Amendments to IFRS 15 Clarifications to IFRS 15 Revenue from Contracts
with Customers
Amendments to IAS 40 Transfers of Investment Property
IFRIC Interpretation 22 Foreign Currency Transactions and Advance
Consideration
Annual Improvements Amendments to IFRS 1 and IAS 28
2014-2016 cycle

2. BASIS OF PREPARATION AND CHANGES TO THE GROUP’S ACCOUNTING POLICIES (Continued)

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 2017, except for the adoption of the new standards and interpretations effective as of 1 January 2018.

The Group applies, for the first time, IFRS 15 Revenue from Contracts with Customers and IFRS 9 Financial Instruments. As required by IAS 34, the nature and effect of these changes are disclosed below.

IFRS 15 Revenue from Contracts with Customers

IFRS 15 supersedes IAS 11 Construction Contracts, IAS 18 Revenue and related Interpretations and it applies to all revenue arising from contracts with customers, unless those contracts are in the scope of other standards. The new standard establishes a five-step model to account for revenue arising from contracts with customers. Under IFRS 15, revenue is recognised at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer.

The standard requires entities to exercise judgement, taking into consideration all of the relevant facts and circumstances when applying each step of the model to contracts with their customers. The standard also specifies the accounting for the incremental costs of obtaining a contract and the costs directly related to fulfilling a contract.

28 Jujiang Construction Group Co., Ltd.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

2. BASIS OF PREPARATION AND CHANGES TO THE GROUP’S ACCOUNTING POLICIES (Continued)

• 2.2 New standards, interpretations and amendments adopted by the Group (Continued)

IFRS 15 Revenue from Contracts with Customers (Continued)

The Group adopted IFRS 15 using the modified retrospective method of adoption. The effect of adopting IFRS 15 is, as follows:

• The comparative information for each of the primary financial statements would be presented based on the requirements of IAS 11, IAS 18 and related Interpretations;

• The cumulative catch-up adjustment to the opening balance of retained profits (or other components of equity) as at 1 January 2018, only for contracts that are not completed at the date of initial application, would be recognised in the consolidated statement of changes in equity for the six months ended 30 June 2018;

• As required for the interim condensed consolidated financial statements, the Group disaggregated revenue recognised from contracts with customers into categories that depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors. The Group also disclosed information about the relationship between the disclosure of disaggregated revenue and revenue information disclosed for each reportable segment. Refer to note 3 for the disclosure on disaggregated revenue. Disclosures for the comparative period in the notes to the financial statements would also follow the requirements of IAS 11, IAS 18 and related Interpretations. As a result, the disclosure of disaggregated revenue in note 3 would not include comparative information under IFRS 15.

• Except the reclassification of amount due from customers for contract works to contract assets and amount due to customers for contract works to contract liabilities and further disclosure set as related note in the interim financial statements, the Directors believe that the application of IFRS 15 has no impact on the amounts reported set out in the interim financial statements.

• The outstanding balance of amounts due from customers of RMB3,084,495,000 as of 1 January 2018 arising from contracts with customers in the scope of IFRS 15 were reclassified to contract assets.

• The outstanding balance of amounts due to customers and advances from customers of RMB144,515,000 as of 1 January 2018 arising from contracts with customers in the scope of IFRS 15 were reclassified to contract liabilities.

Interim Report 2018 29

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NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
2. BASIS OF PREPARATION AND CHANGES TO THE GROUP’S
ACCOUNTING POLICIES (Continued)
2.2 New standards, interpretations and amendments adopted by the Group
(Continued)
IFRS 15 Revenue from Contracts with Customers (Continued)
The following adjustments were made to the amounts recognised in the statement
of financial position on 1 January 2018:
At
31 December At
2017 Effects of 1 January
(as previously adoption of 2018
presented) IFRS 15 (as restated)
RMB’000 RMB’000 RMB’000
Condensed consolidated
statement of financial
position (extract):
Amount due from contract
customers 3,084,495 (3,084,495) –
Contract assets – 3,084,495 3,084,495
Amount due to contract
customers (132,125) 132,125 –
Other payables, advances from
customers and accruals (232,574) 12,390 (220,184)
Contract liabilities – (144,515) (144,515)
----- End of picture text -----

The adoption of IFRS 15 has no material impact to the condensed consolidated income statement and has no impact to the net cash flow from operating, investing and financing activities on the condensed consolidated statement of cash flows.

There is no cumulative catch-up adjustment to the opening balance of retained profits (or other components of equity) as at 1 January 2018 with the modified retrospective method of adoption for the Group. Consequently, the new disclosure requirements on disaggregated revenue and reconciliation from disaggregated revenue to revenue information of each reportable segment for the current period are the only substantial change upon adoption of IFRS 15.

30 Jujiang Construction Group Co., Ltd.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

2. BASIS OF PREPARATION AND CHANGES TO THE GROUP’S ACCOUNTING POLICIES (Continued)

• 2.2 New standards, interpretations and amendments adopted by the Group (Continued)

IFRS 9 Financial Instruments

IFRS 9 replaces IAS 39 Financial Instruments: Recognition and Measurement for annual periods beginning on or after 1 January 2018, bringing together all three aspects of the accounting for financial instruments: classification and measurement; impairment; and hedge accounting.

The Group has not restated comparative information for 2017 for financial instruments in the scope of IFRS 9. Therefore, the comparative information for 2017 is reported under IAS 39 and is not comparable to the information presented for the six months ended 30 June 2018.

Changes to classification and measurement

To determine their classification and measurement category, IFRS 9 requires all financial assets, except equity instruments and derivatives, to be assessed based on a combination of the entity’s business model for managing the assets and the instruments’ contractual cash flow characteristics.

The IAS 39 measurement categories of financial assets, including financial assets at fair value through profit or loss, loans and receivables, available-for-sale financial investments and held-to-maturity investments have been replaced by:

• Debt instruments at amortised cost;

• Debt instruments at fair value through other comprehensive income, with gains or losses recycled to profit or loss on derecognition;

• Equity instruments at fair value through other comprehensive income, with no recycling of gains or losses to profit or loss on derecognition; and

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• Financial assets at fair value through profit or loss.

The accounting for financial liabilities remains largely the same as it was under IAS 39.

Under IFRS 9, embedded derivatives are no longer separated from a host financial asset. Instead, financial assets are classified based on the business model and their contractual terms. The accounting for derivatives embedded in financial liabilities and in non-financial host contracts has not changed.

As of 1 January 2018, the category of loans and receivables under IAS 39, including cash and cash equivalents, pledged deposits, trade and bills receivables, financial assets included in prepayments, deposits and other receivables, were transferred to debt instruments at amortised cost under IFRS 9.

Interim Report 2018 31

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

2. BASIS OF PREPARATION AND CHANGES TO THE GROUP’S ACCOUNTING POLICIES (Continued)

• 2.2 New standards, interpretations and amendments adopted by the Group (Continued)

IFRS 9 Financial Instruments (Continued)

Changes to the impairment calculation

IFRS 9 requires the Group to record an allowance for ECLs for all the debt financial assets not held at fair value through profit or loss. ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Group expects to receive. The shortfall is then discounted at an approximation to the asset’s original effective interest rate.

The Group applies the simplified approach and record lifetime expected losses that are estimated based on the present values of all cash shortfalls over the remaining life of all of its trade receivables and other receivables. As of 1 January 2018, the impairment remained unchanged with the adoption of IFRS 9.

Several other amendments and interpretations apply for the first time in 2018, but do not have an impact on the interim condensed consolidated financial statements of the Group.

The Group has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective.

3. REVENUE FROM CONTRACTS WITH CUSTOMERS

Set out below is the disaggregation of the Group’s revenue from contracts with customers:

Segments	For the six months ended 30 June 2018 Construction contracting Others Total RMB’000 RMB’000 RMB’000 (Unaudited) (Unaudited) (Unaudited)
Timing of revenue recognition Services transferred over time Goods transferred at a point in time Total revenue from contracts with customers Type of goods or service Construction contracting Designing services Sale of construction materials and civil defense products Total revenue from contracts with customers Geographical markets Mainland China Total revenue from contracts with customers
	3,187,333 10,347 3,197,680
	– 17,080 17,080
	3,187,333 27,427 3,214,760
	3,187,333 – 3,187,333
	– 10,347 10,347
	– 17,080 17,080
	3,187,333 27,427 3,214,760
	3,187,333 27,427 3,214,760
	3,187,333 27,427 3,214,760

Jujiang Construction Group Co., Ltd.

32

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

3. REVENUE FROM CONTRACTS WITH CUSTOMERS (Continued)

Set out below is the reconciliation of the revenue from contracts with customers with the amounts disclosed in the segment information:

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|||||
|---|---|---|---|
|Construction|
|contracting|Others|Total|
|RMB’000|RMB’000|RMB’000|
|(Unaudited)|(Unaudited)|(Unaudited)|
|Revenue|
|Sales to external customers|3,187,333|27,427|3,214,760|
|Intersegment sales|–|3,240|3,240|
|3,187,333|30,667|3,218,000|
|Adjustments and eliminations|–|(3,240)|(3,240)|
|Total revenue from contracts with|
|customers|3,187,333|27,427|3,214,760|
|For the six months ended 30 June 2017|
|Construction|
|Segments|contracting|Others|Total|
|RMB’000|RMB’000|RMB’000|
|(Unaudited)|(Unaudited)|(Unaudited)|
|Timing of revenue recognition|
|Services transferred over time|2,058,721|7,158|2,065,879|
|–|
|Goods transferred at a point in time|14,516|14,516|
|Total revenue from contracts with|
|customers|2,058,721|21,674|2,080,395|
|Type of goods or service|
|–|
|Construction contracting|2,058,721|2,058,721|
|–|
|Designing services|7,158|7,158|
|Sale of construction materials and|
|–|
|civil defense products|14,516|14,516|
|Total revenue from contracts with|
|customers|2,058,721|21,674|2,080,395|
|Geographical markets|
|Mainland China|2,058,721|21,674|2,080,395|
|Total revenue from contracts with|
|customers|2,058,721|21,674|2,080,395|

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Interim Report 2018 33

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|||||
|---|---|---|---|
|NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS|
|3.|REVENUE FROM CONTRACTS WITH CUSTOMERS|(Continued)|
|Set out below is the reconciliation of the revenue from contracts with customers with the|
|amounts disclosed in the segment information:|
|Construction|
|contracting|Others|Total|
|RMB’000|RMB’000|RMB’000|
|(Unaudited)|(Unaudited)|(Unaudited)|
|Revenue|
|Sales to external customers|2,058,721|21,674|2,080,395|
|–|
|Intersegment sales|2,551|2,551|
|2,058,721|24,225|2,082,946|
|–|
|Adjustments and eliminations|(2,551)|(2,551)|
|Total revenue from contracts with|
|customers|2,058,721|21,674|2,080,395|

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4. 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.

The Group’s revenue from external customers from each operating segment is set out in note 3 to the interim condensed consolidated financial statement.

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.

34 Jujiang Construction Group Co., Ltd.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

4. OPERATING SEGMENT INFORMATION (Continued)

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.

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||||||
|---|---|---|---|---|
|For the six months ended 30 June 2018|
|Construction|
|contracting|Others|Eliminations|Total|
|RMB’000|RMB’000|RMB’000|RMB’000|
|(Unaudited)|(Unaudited)|(Unaudited)|(Unaudited)|
|Segment revenue:|
|Sales to external customers|3,187,333|27,427|–|3,214,760|
|Intersegment sales|–|3,240|(3,240)|–|
|Total revenue|3,187,333|30,667|(3,240)|3,214,760|
|Segment results|104,661|1,395|(1,400)|104,656|
|Income tax expense|(26,343)|(890)|–|(27,233)|
|Profit for the period|78,318|505|(1,400)|77,423|
|Other segment information:|
|Interest income|80|10|–|90|
|Finance costs|30,190|1,800|–|31,990|
|Depreciation|3,782|209|–|3,991|
|Amortisation|356|41|–|397|
|Provision for impairment of|
|trade receivables, deposits|
|and other receivables|4,243|82|–|4,325|
|Capital expenditure*|1,926|262|–|2,188|
|As at 30 June 2018|
|Construction|
|contracting|Others|Eliminations|Total|
|RMB’000|RMB’000|RMB’000|RMB’000|
|(Unaudited)|(Unaudited)|(Unaudited)|(Unaudited)|
|Segment assets|5,057,915|113,987|(195,551)|4,976,351|
|Segment liabilities|3,801,037|68,133|(99,701)|3,769,469|

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Interim Report 2018 35

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS	NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS	NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS	NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS	NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS	NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS	NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS	NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS	NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS	NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS	NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
4.	OPERATING SEGMENT INFORMATION(Continued)
			For	the six months ended 30 June				2017
			Construction
			contracting		Others		Eliminations			Total
			RMB’000		RMB’000		RMB’000			RMB’000
			(Unaudited)		(Unaudited)		(Unaudited)			(Unaudited)
	Segment revenue:
	Sales to external customers		2,058,721		21,674			–		2,080,395
	Intersegment sales		–		2,551		(2,551)			–
	Total revenue		2,058,721		24,225		(2,551)			2,080,395
	Segment results		63,487		4,943			–		68,430
	Income tax expense		(14,675)		(1,819)			–		(16,494)
	Profit for the period		48,812		3,124			–		51,936
	Other segment information:
	Interest income		66		29			–		95
	Finance costs		15,493		1,861			–		17,354
	Depreciation		3,433		355			–		3,788
	Amortisation		330		18			–		348
	Provision for impairment of
	trade receivables, deposits
	and other receivables		1,726		90			–		1,816
	Capital expenditure*		2,304		166			–		2,470
					As at 30 June 2017
			Construction
			contracting		Others		Eliminations			Total
			RMB’000		RMB’000		RMB’000			RMB’000
			(Unaudited)		(Unaudited)		(Unaudited)			(Unaudited)
	Segment assets		4,327,404		111,306		(190,052)			4,248,658
	Segment liabilities		3,219,634		65,834		(94,202)			3,191,266
	Note:

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

36 Jujiang Construction Group Co., Ltd.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

5. OTHER INCOME AND GAINS

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

	For the six months ended 30 June 2018 2017 RMB’000 RMB’000 (Unaudited) (Unaudited)
Interest income Government grant Dividend from available- for-sale investment Gain on disposal of available-for-sale investment Others	90 95 673 262 – 4,680 – 164 332 3,437
	1,095 8,638

6.

FINANCE COSTS

FINANCE COSTS
	For the six months ended 30 June 2018 2017 RMB’000 RMB’000 (Unaudited) (Unaudited)
Interest on bank loans wholly repayable within one year Interest on discounted bills receivable Letter of Guarantee		17,354 – –
	26,871
	3,384
	1,735
		17,354
	31,990

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Interim Report 2018 37

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NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
7. PROFIT BEFORE TAX
The Group’s profit before tax is arrived at after charging/(crediting):
For the six months ended 30 June
2018 2017
RMB’000 RMB’000
(Unaudited) (Unaudited)
Cost of construction contracting (including
depreciation) 3,015,404 1,951,301
Cost of others 21,318 14,659
Total cost of sales 3,036,722 1,965,960
Depreciation of items of property, plant and
equipment (note (a)) 3,991 3,788
Amortisation of prepaid land lease payments 146 146
Amortisation of intangible assets 251 202
Total depreciation and amortisation 4,388 4,136
Impairment of trade receivables 3,514 5,456
Impairment/(reversal of impairment) of
deposits and other receivables 811 (3,640)
Total impairment losses, net 4,325 1,816
Minimum lease payments under operating
leases of land and buildings (note (b)) 328 351
Auditors’ remuneration 700 1,047
Employee benefit expenses (including
Directors’ and Supervisors’ remuneration)
(note (c)): 20,136 19,743
– Wages, salaries and allowances 15,291 15,643
– Social insurance 4,081 3,373
– Welfare and other expenses 764 727
Interest income (90) (95)
----- End of picture text -----

Notes:

(a) Depreciation of approximately RMB1,846,000 (unaudited) and approximately RMB1,780,000 (unaudited) is included in administrative expenses in the consolidated statement of profit or loss and other comprehensive income for the six months ended 30 June 2018 and 2017, respectively.

(b) Minimum lease payments of approximately RMB328,000 (unaudited) and approximately RMB351,000 (unaudited) are included in administrative expenses in the consolidated statement of profit or loss and other comprehensive income for the six months ended 30 June 2018 and 2017, respectively.

(c) Employee benefit expenses of approximately RMB20,136,000 (unaudited) and approximately RMB19,743,000 (unaudited) are included in administrative expenses in the consolidated statement of profit or loss and other comprehensive income for the six months ended 30 June 2018 and 2017, respectively.

Jujiang Construction Group Co., Ltd.

38

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

8. INCOME TAX EXPENSE

All of the Group’s subsidiaries registered in the PRC and operating only in Mainland China are subject to PRC enterprise income tax on the taxable income as reported in their PRC statutory accounts adjusted in accordance with relevant PRC income tax laws. Except for those further explained below, PRC enterprise income tax has been provided at the rate of 25% (2017: 25%) on the taxable income.

The breakdown of income tax expense are as follow:

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||||
|---|---|---|
|For the six months ended 30 June|
|2018|2017|
|RMB’000|RMB’000|
|(Unaudited)|(Unaudited)|
|Current income tax – Mainland China|
|Charge for the period|27,521|16,981|
|Over provision in prior year|–|(900)|
|Deferred income tax|(288)|413|
|Tax charge for the period|27,233|16,494|

----- End of picture text -----

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 reporting period is as follows:

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----- Start of picture text -----

||||
|---|---|---|
|For the six months ended 30 June|
|2018|2017|
|RMB’000|RMB’000|
|(Unaudited)|(Unaudited)|
|Profit before tax|104,656|68,430|
|Income tax charge at the statutory income tax|
|rate (25%)|26,164|17,107|
|Income not subject to tax|–|(1,170)|
|Expenses not deductible for tax purposes|614|716|
|Adjustments in respect of current tax of prior|
|year|–|(900)|
|Tax losses not recognised|455|741|
|Tax charge for the year at the effective rate|27,233|16,494|

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9. DIVIDENDS

The Board does not recommend the payment of an interim dividend for the six months ended 30 June 2018 (30 June 2017: Nil).

Interim Report 2018 39

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NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

The calculation of the basic earnings per share amount 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 period.

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ordinary shares in issue during the period.
No adjustment has been made to the basic earnings per share amounts presented for
six months ended 30 June 2018 and 2017 in respect of a dilution as the Group had no
potentially dilutive ordinary shares in issue during those periods.
The following reflects the income and share data used in the basic earnings per share
computation:
For the six months ended 30 June
2018 2017
RMB’000 RMB’000
(Unaudited) (Unaudited)
Earnings:
Profit for the year attributable to ordinary
equity holders of the parent, used in the
basic earnings per share calculation 77,316 51,558
For the six months ended 30 June
2018 2017
‘000 ‘000
(Unaudited) (Unaudited)
Number of shares:
Weighted average number of ordinary shares
in issue during the period, used in the
basic earnings per share calculation 533,360 533,360
----- End of picture text -----

40 Jujiang Construction Group Co., Ltd.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

11. PROPERTY, PLANT AND EQUIPMENT

During the six months ended 30 June 2018, the Group acquired property, plant and equipment with an aggregate cost amounting to approximately RMB2,120,000 (Unaudited) (six months ended 30 June 2017: RMB1,930,000 (Unaudited)).

In addition, during the same period, property, plant and equipment with an aggregate net carrying value of approximately RMB40,000 (Unaudited) (six months ended 30 June 2017: RMB46,000 (Unaudited)) were disposed of, which resulted in a net gain on disposal of approximately RMB19,000 (Unaudited) (six months ended 30 June 2017: RMB2,691,000 (Unaudited)).

12. CONTRACT ASSETS/CONTRACT LIABILITIES

Amounts due from contract customers Contract assets Amounts due to contract customers Contract liabilities
Accumulated contract costs incurred plus recognised profits less recognised losses to date Less: Accumulated progress billing received and receivable

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Interim Report 2018 41

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NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
12. CONTRACT ASSETS/CONTRACT LIABILITIES (Continued)
As at
30 June 2018
RMB’000
(Unaudited)
Contract liabilities from construction contract 133,621
Short-term advances for civil defense products 17,163
Contract liabilities from design contract 2,669
Total contract liabilities 153,453
Contract assets are initially recognised for revenue earned from construction services as
rights to receive consideration are conditional on successful completion of construction.
----- End of picture text -----

Contract assets are initially recognised for revenue earned from construction services as rights to receive consideration are conditional on successful completion of construction. Upon completion of service and acceptance by the customer, the amounts recognised as contract assets are reclassified to trade receivables.

Contract liabilities include short-term advances received to construction services, design contracting and deliver construction materials and civil defense products if the measure of the remaining performance obligations exceeds the measure of the remaining rights.

Set out below is the amount of revenue recognised from:

		Six months ended
		30 June 2018
		RMB’000
		(Unaudited)
	Amounts included in contract liabilities at the beginning of the
	period(1)	98,168

(1) Contract liabilities at 1 January 2018 have been reclassified from amounts due to contract customers and advances from customers as set out in note 2.2.

42 Jujiang Construction Group Co., Ltd.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

13. TRADE AND BILLS RECEIVABLES

Trade receivables represented receivables for contract works. The payment terms of contract work receivables are stipulated in relevant contracts. 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. Trade and bills receivables are non-interest-bearing.

	As at As at 30 June 2018 31 December 2017 RMB’000 RMB’000 (Unaudited) (Audited)
Trade receivables Provision for impairment Trade receivables, net Bills receivable Portion classified as non-current assets(1) Current portion	981,118 799,772 (34,172) (30,658)
	946,946 769,114 264,816 182,603
	1,211,762 951,717 (37,555) (25,173)
	1,174,207 926,544

(1) The non-current portion of trade receivables mainly represents the amounts of retentions held by customers at the end 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:

	As at	As at
	30 June 2018	31 December 2017
	RMB’000	RMB’000
	(Unaudited)	(Audited)
Retentions in trade receivables	76,196	69,894
Provision for impairment	(331)	(146)
Retentions in trade receivables, net	75,865	69,748
Portion classified as non-current assets	(37,555)	(25,173)
Current portion	38,310	44,575

Interim Report 2018 43

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NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
13. TRADE AND BILLS RECEIVABLES (Continued)
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 the reporting period is as
follows:
As at As at
30 June 2018 31 December 2017
RMB’000 RMB’000
(Unaudited) (Audited)
Within 3 months 516,278 338,663
3 months to 6 months 198,572 63,112
6 months to 1 year 40,177 141,979
Over 1 year 191,919 225,360
946,946 769,114
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The movements in provision for impairment of trade receivables are as follows:

	As at As at 30 June 2018 31 December 2017 RMB’000 RMB’000 (Unaudited) (Audited)
At beginning of the period Impairment losses recognised Impairment losses reversed At end of the period	30,658 19,245 3,766 11,413 (252) –
	34,172 30,658

44 Jujiang Construction Group Co., Ltd.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

13. TRADE AND BILLS RECEIVABLES (Continued)

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

	As at As at 30 June 2018 31 December 2017 RMB’000 RMB’000 (Unaudited) (Audited)
Neither past due nor impaired Past due within 1 year but not impaired	583,291 403,257 236,932 201,454
	820,223 604,711

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

Transferred financial assets that are not derecognised in their entirety

The Group endorsed certain bills receivable accepted by banks in Mainland China (the “Endorsed Bills”) with carrying amounts of approximately RMB208,143,000 (unaudited) and approximately RMB141,751,000 as at 30 June 2018 and 31 December 2017, 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 were approximately RMB208,143,000 (unaudited) and approximately RMB141,751,000 as at 30 June 2018 and 31 December 2017, 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 RMB638,675,000 (unaudited) and approximately RMB422,068,000 as at 30 June 2018 and 31 December 2017, respectively. The Derecognised Bills have a maturity from one to six months at the end of the 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.

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Interim Report 2018 45

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NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
14. PREPAYMENTS, DEPOSITS AND OTHER RECEIVABLES
As at As at
30 June 2018 31 December 2017
RMB’000 RMB’000
(Unaudited) (Audited)
Deposits and other receivables 233,689 218,793
Provision for impairment of deposits and other
receivables (30,161) (29,350)
203,528 189,443
Prepayment to suppliers 308,812 288,540
512,340 477,983
Portion classified as non-current assets (1) (55,255) (40,412)
Current portion 457,085 437,571
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(1) The non-current portion of deposits and other receivables mainly represents performance guarantee amounts held by customers at the end of the reporting period.

The movements in provision for impairment of deposits and other receivables are as follows:

	As at As at 30 June 2018 31 December 2017 RMB’000 RMB’000 (Unaudited) (Audited)
At beginning of the period Impairment losses recognised Impairment losses reversed At the end of the period	29,350 33,439 914 17,149 (103) (21,238)
	30,161 29,350

46 Jujiang Construction Group Co., Ltd.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

14. PREPAYMENTS, DEPOSITS AND OTHER RECEIVABLES (Continued)

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

	As at As at 30 June 2018 31 December 2017 RMB’000 RMB’000 (Unaudited) (Audited)
Neither past due nor impaired Past due within 1 year but not impaired	138,345 117,700 46,529 56,473
	184,874 174,173

None of the balances except for the deposits and other receivables disclosed above is either past due or impaired, as they relate to balances for which there was no recent history of default.

15. CASH AND CASH EQUIVALENTS AND PLEDGED DEPOSITS

	As at	As at
	30 June 2018	31 December 2017
	RMB’000	RMB’000
	(Unaudited)	(Audited)
Cash and bank balances	84,457	83,859
Time deposits	27,418	18,752
Less: Pledged time deposits:	111,875	102,611
Pledged bank balances for bank notes and
letters of credit	(27,418)	(18,752)
Cash and cash equivalents	84,457	83,859

The RMB is not freely convertible into other currencies. However, under Mainland China’s prevailing rules and regulations over foreign exchange, the Group is permitted to exchange RMB for other currencies through banks authorised to conduct foreign exchange business.

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Cash at banks earns interest at floating rates based on daily bank deposit rates. Short term time deposits are made for varying periods of between one day and three months depending on the immediate cash requirements of the Group, and earn interest at the respective short term time deposit rates. The bank balances and pledged deposits are deposited with creditworthy banks with no recent history of default.

Interim Report 2018 47

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NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
16. TRADE AND BILLS PAYABLES
An aged analysis of the trade payables, as at the end of the reporting period, based on the
invoice date, is as follows:
As at As at
30 June 2018 31 December 2017
RMB’000 RMB’000
(Unaudited) (Audited)
Within 6 months 1,832,660 1,272,495
6 months to 1 year 331,995 725,478
Over 1 year 588,031 588,053
2,752,686 2,586,026
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The trade payables are non-interest-bearing and are normally settled within terms from three to six months.

17. OTHER PAYABLES, ADVANCES FROM CUSTOMERS AND ACCRUALS

	As at As at 30 June 2018 31 December 2017 RMB’000 RMB’000 (Unaudited) (Audited)
Advances from customers Accrued salaries, wages and benefits Other taxes payable Other payables Portion classified as non-current liabilities (1) Current portion	– 12,390 5,254 8,428 204,411 184,539 19,888 28,044
	229,553 233,401 (388) (827)
	229,165 232,574

The above amounts are unsecured, non-interest-bearing and have no fixed terms of settlement.

(1) The non-current portion mainly represents the performance guaranteed amounts from subcontractors and suppliers of the Group at the end of the reporting period.

48 Jujiang Construction Group Co., Ltd.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

18. INTEREST-BEARING BANK AND OTHER BORROWINGS

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||||||||
|---|---|---|---|---|---|---|
|As at 30 June 2018|As at 31 December 2017|
|Effective|Effective|
|interest|interest|
|rate (%)|Maturity|RMB’000|rate (%)|Maturity|RMB’000|
|Current|
|Bank loans – mortgaged|4.35 – 6.48|2018-2019|420,777|4.35-7.22|2018|399,677|
|Bank loans – guaranteed|4.79 – 20.4|2018-2019|44,950|4.79-20.4|2018|140,589|
|Bank loans – other|7.50|2018-2019|1,000|7.18|2018|9,295|
|466,727|549,561|

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Notes:

• (a) Certain of the Group’s buildings with net carrying amounts of approximately RMB94,383,000 (unaudited) and approximately RMB95,518,000 as at 30 June 2018 and 31 December 2017, respectively, were pledged to secure general banking facilities granted to the Group.

• (b) As set out in note 23(c), as at 30 June 2018 and 31 December 2017, the Group’s interest-bearing bank and other borrowings of approximately RMB431,177,000 (unaudited) and approximately RMB511,516,000, respectively, were jointly guaranteed by the controlling shareholder and other related parties of the Group free of charge.

19. SHARE CAPITAL

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||||
|---|---|---|
|As at|As at|
|30 June 2018|31 December 2017|
|RMB’000|RMB’000|
|(Unaudited)|(Audited)|
|Share capital|533,360|533,360|
|The movements in share capital are as follows:|
|Share capital|
|As at|As at|
|30 June 2018|31 December 2017|
|RMB’000|RMB’000|
|At beginning and end of the period|533,360|533,360|

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20. RESERVES

The amounts of the Group’s reserves and the movements therein for the reporting period are presented in the consolidated statement of changes in equity.

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Interim Report 2018 49

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NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
21. OPERATING LEASE ARRANGEMENTS
As lessee
At the end of the reporting period, the Group had the following total future minimum
lease payments under non-cancellable operating leases falling due as follows:
As at As at
30 June 2018 31 December 2017
RMB’000 RMB’000
(Unaudited) (Audited)
Within one year 981 1,064
In the second to fifth years, inclusive 455 740
– –
After five years
1,436 1,804
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22. COMMITMENTS

At the end of the reporting period, the Group did not have any significant commitments.

23. RELATED PARTY TRANSACTIONS

(a) The Group had the following material transactions with related parties during the reporting period:

		For the six months	For the six months	ended 30 June
		2018		2017
		RMB’000		RMB’000
		(Unaudited)		(Unaudited)
	Construction contracting services
	provided to:
	Fellow subsidiaries	1,788		101,895
	Associate of fellow subsidiaries	500		5,715
	Purchase of raw materials:
	A company of which the controlling
	shareholder of the Company is a
	director	–		503
	The borrowings and repayments of
	loans provided to:
	Fellow subsidiaries	–		6,621
	The borrowings and repayments of
	loans received from:
	Fellow subsidiaries	–		6,621

The above related party transactions were conducted in accordance with the terms mutually agreed between the parties.

50 Jujiang Construction Group Co., Ltd.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

23. RELATED PARTY TRANSACTIONS (Continued)

• (b) The aggregate amounts of remuneration of the Directors and Supervisors of the Company during the Relevant Periods, disclosed pursuant to the Hong Kong Listing Rules, are as follows:

	For the six months ended 30 June 2018 2017 RMB’000 RMB’000 (Unaudited) (Unaudited)
Fees Other emoluments: – Salaries, allowances and benefits in kind – Pension schemes	– – 960 728 26 25
	986 753

• (c) Other transactions with related parties:

The Group’s interest-bearing bank and other borrowings of RMB431,177,000 (unaudited) and RMB511,516,000 as at 30 June 2018 and 31 December 2017, respectively, were jointly guaranteed by the controlling shareholder and other related parties of the Group, as set out in note 18(b).

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Interim Report 2018 51

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NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
23. RELATED PARTY TRANSACTIONS (Continued)
(d) Outstanding balances with related parties:
As at As at
30 June 2018 31 December 2017
RMB’000 RMB’000
(Unaudited) (Audited)
Accounts receivable:
Fellow subsidiaries 43,230 46,671
Other receivables:
Fellow subsidiaries 352 352
Key management person of the holding
company 950 950
Other payables:
Fellow subsidiaries 50 50
Contract assets:
Fellow subsidiaries 50,936 –
Associate of fellow subsidiaries 52,050 –
Amounts due from contract
customers:
Fellow subsidiaries – 68,765
Associate of fellow subsidiaries – 51,535
Amounts due to contract customers:
Fellow subsidiaries – 63
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24. EVENTS AFTER THE REPORTING PERIOD

On 24 August 2018, the Company and the China Hong Kong Capital Asset Management Co., Ltd. (“Placing Agent”) entered into the placing agreement pursuant to which the Placing Agent has agreed to act as the placing agent, on a best effort basis, for the purposes of arranging placees to subscribe for bonds up to an aggregate principal amount of HK$200,000,000 at interest rate 7% per annum within the three months.

Save as disclosed above, as of the date of this Report, the Group has no significant events after the reporting period required to be disclosed.

25. APPROVAL OF THE FINANCIAL STATEMENTS

The financial statements were approved and authorised for issue by the board of directors on 24 August 2018.

52 Jujiang Construction Group Co., Ltd.