Contents Corporate Information 2 Management Discussion and Analysis 4 Corporate Governance and Other Information 15 Report on Review of Condensed 19 C

Transcription

1 (Incorporated in the Cayman Islands with limited liability) ( 於開曼群島註冊成立的有限公司 ) STOCK CODE 股份代號 : 1637

2 Contents Corporate Information 2 Management Discussion and Analysis 4 Corporate Governance and Other Information 15 Report on Review of Condensed 19 Consolidated Financial Statements Condensed Consolidated Statement of Profit or Loss and 21 Other Comprehensive Income Condensed Consolidated Statement of Financial Position 22 Condensed Consolidated Statement of Changes in Equity 24 Condensed Consolidated Statement of Cash Flows 25 Notes to the Condensed Consolidated Financial Statements 26

3 Corporate Information BOARD OF DIRECTORS Executive Directors Mr. Yu Cheung Choy (Chairman) Mr. Lau Man Ching (Chief Executive Officer) Non-executive Director Mr. Yu Ho Chi Independent Non-executive Directors Mr. Lam Yim Nam Mr. Lee Wing Kee Mr. To Yan Ming Edmond AUDIT COMMITTEE Mr. To Yan Ming Edmond (Chairman) Mr. Lam Yim Nam Mr. Lee Wing Kee Mr. Yu Ho Chi REMUNERATION COMMITTEE Mr. Lam Yim Nam (Chairman) Mr. Lee Wing Kee Mr. To Yan Ming Edmond NOMINATION COMMITTEE Mr. Lee Wing Kee (Chairman) Mr. Lam Yim Nam Mr. To Yan Ming Edmond COMPANY SECRETARY Mr. Tse Kam Fai FCIS, FCS FCIS, FCS AUTHORISED REPRESENTATIVES Mr. Yu Cheung Choy Mr. Lau Man Ching 2 SH GROUP (HOLDINGS) LIMITED Interim Report

4 Corporate Information REGISTERED OFFICE Cricket Square, Hutchins Drive P.O. Box 2681 Grand Cayman KY Cayman Islands Cricket Square, Hutchins Drive P.O. Box 2681 Grand Cayman KY Cayman Islands HEAD OFFICE AND PRINCIPAL PLACE OF BUSINESS IN HONG KONG Units , 6/F., Tower I Cheung Sha Wan Plaza 833 Cheung Sha Wan Road Kowloon Hong Kong PRINCIPAL SHARE REGISTRAR AND TRANSFER OFFICE IN THE CAYMAN ISLANDS Conyers Trust Company (Cayman) Limited Cricket Square, Hutchins Drive P.O. Box 2681 Grand Cayman KY Cayman Islands Conyers Trust Company (Cayman) Limited Cricket Square, Hutchins Drive P.O. Box 2681 Grand Cayman KY Cayman Islands BRANCH SHARE REGISTRAR AND TRANSFER OFFICE IN HONG KONG Tricor Investor Services Limited Level 22, Hopewell Centre 183 Queen s Road East Hong Kong INDEPENDENT AUDITOR Deloitte Touche Tohmatsu Certified Public Accountants PRINCIPAL BANKS Bank of China (Hong Kong) Limited Hang Seng Bank Shanghai Commercial Bank STOCK CODE COMPANY S WEBSITE

5 Management Discussion and Analysis SH Group (Holdings) Limited (the Company, together with its subsidiaries, the Group ) is principally engaged in providing electrical and mechanical engineering ( E&M engineering ) services in Hong Kong. We provide services in relation to the supply, installation and maintenance of mechanical ventilation and air-conditioning system ( MVAC system ) system, and also provide services in relation to low voltage electrical system and other E&M system, including fire services system, plumbing and drainage system. BUSINESS REVIEW Our revenue decreased by approximately HK$27.4 million, or 15.0%, from approximately HK$182.9 million for the six months ended 30 September 2017 (the Last Period ) to approximately HK$155.5 million for the six months ended 30 September 2018 (the Current Period ), since the majority of the projects undertaken during the Last Period were substantially completed in the year ended 31 March 2018 while some of the awarded projects currently on hand are at the early stage of project implementation, hence the revenue being recognised by the Group during the Current Period was minimal. Major projects awarded and major projects undertaken in the Current Period are outlined below % SH GROUP (HOLDINGS) LIMITED Interim Report

6 Management Discussion and Analysis Projects awarded in the Current Period During the Current Period, we were awarded 13 projects with an aggregate contract sum of approximately HK$350.3 million (out of which 1 project with contract sum of approximately HK$72.0 million was related to electrical system installation). The following table sets forth the particulars of the five largest projects awarded in the Current Period in terms of contract sum: Type (Residential/ Non-residential) (Note) Key scope of work Date of award Contract sum HK$ million MVAC system installation for a property development at Yuen Long Non-residential 11 September Electrical system installation for a proposed residential development at Wong Chuk Hang Residential 17 May MVAC system installation for a property development at Pak Shek Kok, Tai Po Residential 10 August MVAC system installation for a residential development at Tuen Mun Residential 21 June MVAC system installation for a property development at Sai Kung Residential 17 July Note: Residential projects refer to projects that involve residential flats while Non-residential projects refer to projects that do not involve residential flats

7 Management Discussion and Analysis Major projects undertaken in the Current Period During the Current Period, the Group continued to focus our efforts on the supply, installation and maintenance of MVAC system and low voltage electrical system. Revenue contributed by projects relating to MVAC system and low voltage electrical system accounted for approximately 82.0% and 18.0% respectively for the Current Period (2017: 97.8% and 2.2%). The following table sets forth the particulars of the five largest projects undertaken in the Current Period in terms of revenue contribution: 82.0% 18.0% 97.8% 2.2% Revenue Type recognised (Residential/ during the Non-residential) Current Period Key scope of work Date of award Contract sum HK$ million HK$ million MVAC system installation for a property development at Tseung Kwan O Residential 25 February MVAC system installation for a property development at Yuen Long Residential 20 June Electrical system installation for a proposed composite building at North Point Residential 9 May MVAC system installation for a remodeling project at Tsim Sha Tsui Non-residential 4 July MVAC system installation for a proposed residential development Residential 7 December at Pak Shek Kok, Tai Po 6 SH GROUP (HOLDINGS) LIMITED Interim Report

8 Management Discussion and Analysis Recent development and Future prospects Subsequent to the Current Period and up to the date of this report, we were awarded 2 projects with an aggregate contract sum of approximately HK$60.8 million in relation to MVAC system installation. Looking forward to the second half of the financial year ending 31 March 2019, despite the opportunities arising from the continuous growth in construction industry in both private and public sector, the Group is faced with certain industry-wide challenges, such as labour shortage problem and the increasing equipment, labour and material costs, and intensified competition in the industry, which will exert pressure on the Group s business and profitability. The Group continues to leverage our reputation and qualification in the industry to undertake the existing projects in progress and the newly awarded projects. For the purpose of maintaining a stable revenue growth, the Group will continue to bid for targeted projects with reasonable profit margin and diversify our projects in different E&M engineering services FINANCIAL REVIEW Revenue Our revenue decreased by approximately HK$27.4 million, or 15.0%, from approximately HK$182.9 million for the Last Period to approximately HK$155.5 million for the Current Period, since the majority of the projects undertaken during the Last Period were substantially completed in the year ended 31 March 2018 while some of the awarded projects currently on hand are at the early stage of project implementation, hence the revenue being recognised by the Group during the Current Period was minimal %

9 Management Discussion and Analysis Gross profit and gross profit margin Our gross profit decreased by approximately HK$17.6 million, or 53.0% from approximately HK$33.2 million for the Last Period to approximately HK$15.6 million for the Current Period. Our gross profit margin decreased by approximately 8.1 percentage points, from approximately 18.2% for the Last Period to approximately 10.1% for the Current Period. The decrease in gross profit and gross profit margin was mainly due to (i) intensified competition in the industry faced by the Group that the Group adopted a more competitive pricing strategy in securing new projects; and (ii) increase in direct staff costs as a result of more employees were hired to handle the awarded projects currently on hand % % % (i) (ii) Other income Other income for the Current Period increased by approximately HK$0.2 million, from approximately HK$0.3 million for the Last Period to approximately HK$0.5 million for the Current Period. The increase was mainly attributable to the effect of the increase in bank interest income Other gain We recorded an increase in other gain of approximately HK$0.2 million for the Current Period, which was attributable to the fair value gain on financial assets at fair value through profit or loss. Administrative expenses Our administrative expenses increased by approximately HK$0.6 million, or approximately 6.8%, from approximately HK$8.8 million for the Last Period to approximately HK$9.4 million for the Current Period. The increase was mainly attributable to the increase in rental expenses and building management fee of approximately HK$0.4 million for the additional office units rented during the Current Period % Finance costs Our finance costs solely represented interest expenses on bank borrowings. The amount remained relatively stable, with an amount of approximately HK$0.2 million for both periods SH GROUP (HOLDINGS) LIMITED Interim Report

10 Management Discussion and Analysis Income tax expenses Our income tax expenses decreased by approximately HK$3.2 million, from approximately HK$4.3 million for the Last Period to approximately HK$1.1 million for the Current Period due to the combined effect of the above factors. The effective tax rate for the Current Period was approximately 16.6% (2017: 17.5%) % 17.5% Profit attributable to owners of the Company Based on the above factors, profit attributable to owners of the Company decreased by approximately HK$14.6 million or approximately 72.3%, from approximately HK$20.2 million for the Last Period to approximately HK$5.6 million for the Current Period % 5.6 LIQUIDITY, FINANCIAL RESOURCES AND CAPITAL STRUCTURE Capital Structure As at 30 September 2018, the capital structure of the Group consisted of equity of approximately HK$219.9 million (31 March 2018: HK$228.0 million) and bank borrowings of approximately HK$10.6 million (31 March 2018: HK$12.1 million). For details, please refer to the paragraph headed Bank borrowings below Cash position and fund available During the Current Period, the Group maintained a healthy liquidity position, with working capital being financed by our operating cash flows, bank borrowings and the retained profits. As at 30 September 2018, our cash and cash equivalents were approximately HK$179.5 million (31 March 2018: HK$158.9 million). The bank deposits of approximately HK$31.1 million pledged with a bank as at 31 March 2018 to secure the bank borrowings and banking facilities including performance guarantees issued by the bank was released during the Current Period. As at 30 September 2018, the current ratio of the Group was approximately 2.6 times (31 March 2018: 3.0 times)

11 Management Discussion and Analysis Bank borrowings As at 30 September 2018, the Group had total bank borrowings of approximately HK$10.6 million (31 March 2018: HK$12.1 million). As at 31 March 2018, the Group had a facility agreement entered into with a bank with a facility limit of approximately HK$59.4 million. Our Company had made undertakings relating to certain performance obligation of the controlling shareholders, namely Mr. Yu and Mr. Lau, pursuant to the facility agreement including the following: (i) Mr. Yu and Mr. Lau undertake to maintain majority shareholding of our Company; and (ii) Mr. Yu shall remain the Chairman of our Company or we shall notify the bank 14 days in advance in case he ceases to be the Chairman. During the Current Period, such facility agreement was renewed with a facility limit of approximately HK$54.0 million. The above-mentioned undertakings relating to certain performance obligation of the controlling shareholders were replaced by the following obligation undertaken by the Group: (i) In case of Mr. Yu and Mr. Lau are not the major shareholders of the Company, the Group should notify the bank 14 days in advance; and (ii) In case of Mr. Yu is not entitled to be Chairman of the Company, the Group should notify the bank 14 days in advance. This facility agreement remained effective as at 30 September As at 31 March 2018 and 30 September 2018, other than disclosed above, the Group had made undertakings relating to certain performance obligation of the controlling shareholders pursuant to another facility agreement entered with a bank with a facility limit of HK$30.0 million including the following: (i) Mr.Yu and Mr. Lau undertake to maintain as the largest shareholders of the Company directly or indirectly; and (ii) Mr. Yu and Mr. Lau shall remain as the Chairman or director of the Company (i) (ii) (i) 14 (ii) (i) (ii) GEARING RATIO As at 30 September 2018, the Group s gearing ratio was approximately 4.8% (31 March 2018: 5.3%), calculated as the bank borrowings divided by the total equity as at the end of the respective periods and multiplied by 100%. 4.8% 5.3% 100% 10 SH GROUP (HOLDINGS) LIMITED Interim Report

12 Management Discussion and Analysis NET CURRENT ASSETS As at 30 September 2018, the Group had net current assets of approximately HK$188.0 million (31 March 2018: HK$173.0 million). The increase in net current assets position was mainly attributable to the release of pledged bank deposits, offset by the purchase of financial assets at fair value through profit or loss and declaration of final dividend in respect of the year ended 31 March 2018 payable to the shareholders of the Company during the Current Period. The Group s policy is to regularly monitor its liquidity requirements and its compliance with covenants in relation to banking facility agreements, to ensure that it maintains sufficient reserves of cash and adequate committed lines of funding from the banks to meet its liquidity requirements. The board (the Board ) of directors of the Company (the Directors ) is not aware of any liquidity issue that may cast significant doubt on the Group s ability to continue as a going concern CAPITAL EXPENDITURES The Group s capital expenditures for the Current Period amounted to approximately HK$0.7 million (2017: HK$0.4 million), which was incurred for the purchase of property and equipment FOREIGN EXCHANGE EXPOSURE The Group s revenue-generating activities and bank borrowings were transacted in Hong Kong Dollar, which is the functional and presentation currency of the Group. The Board considers that the Group was not exposed to significant foreign exchange risk, and had not employed any financial instrument for hedging. The Board will review the Group s foreign exchange risk and exposure from time to time and will apply hedging where necessary. USE OF NET PROCEEDS FROM LISTING The shares of the Company were listed on the Main Board of The Stock Exchange of Hong Kong Limited (the Stock Exchange ) on 3 January 2017 through global offering (the Global Offering ) as described in the section Structure and Condition of the Global Offering in the prospectus of the Company dated 19 December 2016 (the Prospectus )

13 Management Discussion and Analysis Based on the offer price of HK$1.20 per share, the net proceeds of the 80,000,000 issued shares received by the Company was approximately HK$69.0 million, after deducting the listing expenses borne by the Company. The proposed application of net proceeds as stated in the Prospectus has been adjusted according to the principles and proposed percentage of utilisation as specified in the section headed Future Plans and Use of Proceeds in the Prospectus. Up to 30 September 2018, the net proceeds were used as follows: ,000, Net proceeds from Global Offering Utilisation up to 30 September 2018 Unutilised amount HK$ million HK$ million HK$ million Development and expansion of E&M engineering services business Provision of performance guarantees for projects on hand Installation of Enterprise Resource Planning system General working capital The Group held the unutilised net proceeds mainly in short-term deposits with licensed banks in Hong Kong. 12 SH GROUP (HOLDINGS) LIMITED Interim Report

14 Management Discussion and Analysis FINANCIAL GUARANTEES AND CONTINGENT LIABILITIES Save as disclosed below, the Group had no other contingent liabilities as at 30 September 2018: As at 30 September 2018, performance guarantees of approximately HK$36.2 million (31 March 2018: HK$31.5 million) were given by banks in favour of the Group s customers as security for the due performance and observance of the Group s obligations under the contracts entered into between the Group and its customers. If the Group fails to provide satisfactory performance to its customers to whom performance guarantees have been given, such customers may demand the banks to pay to them the sum or sum stipulated in such demand. The Group will become liable to compensate such banks accordingly. The performance guarantees will be released upon completion of the contracts work PLEDGE OF ASSETS As at 30 September 2018, the Group s leasehold land and buildings amounted to approximately HK$20.3 million (31 March 2018: HK$20.6 million) were pledged with banks to secure the bank borrowings and banking facilities including performance guarantees issued by the banks. The bank deposits of approximately HK$31.1 million pledged with a bank as at 31 March 2018 to secure the bank borrowings and banking facilities including performance guarantees issued by that bank was released during the Current Period CAPITAL COMMITMENTS As at 30 September 2018, the Group did not have any capital commitments contracted but not provided for

15 Management Discussion and Analysis EMPLOYEES, TRAINING AND REMUNERATION POLICY As at 30 September 2018, the Group had a total of 113 employees (31 March 2018: 93). The remuneration offered to employees generally includes salaries, medical benefits and bonus. In general, the Group determines salaries of its employees based on each employee s qualification, position and seniority. The Group provides training to its employees according to the work requirements MATERIAL ACQUISITIONS AND DISPOSALS The Group did not have any material acquisitions and disposals of subsidiaries, associates and joint ventures during the Current Period. SIGNIFICANT INVESTMENTS HELD The Group did not have any significant investments held as at 30 September FUTURE PLANS FOR MATERIAL INVESTMENTS OR CAPITAL ASSETS The Group did not have other plans for material investments or capital assets as at 30 September SH GROUP (HOLDINGS) LIMITED Interim Report

16 Corporate Governance and Other Information CORPORATE GOVERNANCE PRACTICES The Company is committed to maintain good corporate governance standard and procedures to ensure the integrity, transparency and quality of disclosure in order to enhance the shareholders value. The Company has adopted the code provisions set out in the Corporate Governance Code ( CG Code ) as set out in Appendix 14 to the Rules Governing the Listing of Securities on the Stock Exchange (the Listing Rules ), as its own code of corporate governance. In the opinion of the Directors, the Company was in compliance with all relevant code provisions set out in the CG Code during the six months ended 30 September MODEL CODE FOR SECURITIES TRANSACTIONS BY DIRECTORS The Company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers ( Model Code ) as set out in Appendix 10 to the Listing Rules as the code of conduct regarding securities transactions by the Directors. Having made specific enquiry of all Directors, all Directors have confirmed that they have complied with the required standards as set out in the Model Code during the six months ended 30 September DIRECTORS AND CHIEF EXECUTIVES INTERESTS AND SHORT POSITIONS IN SHARES AND UNDERLYING SHARES As at 30 September 2018, the interests or short positions of the Directors and chief executives of the Company in the shares, underlying shares and debentures of the Company or any associated corporation (within the meaning of Part XV of the Securities and Futures Ordinance (Chapter 571, Laws of Hong Kong) ( SFO )), which were 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 are taken or deemed to have under such provisions of the SFO), or which were required, pursuant to section 352 of the SFO, to be entered in the register referred to therein, or which were required, pursuant to the Model Code, are set out below: 571 XV XV

17 Corporate Governance and Other Information Approximate percentage of the Number of issued share capital shares/underlying of the Company Long position/ shares held Name of Directors Capacity Short position Notes Yu Cheung Choy Interests held jointly with another Long position 246,000, , 3 person/interest of controlled corporations Lau Man Ching Interests held jointly with another Long position 54,000, , 3 person/interest of controlled corporations Notes: These 246,000,000 shares are held through Prosperously Legend Limited ( Prosperously Legend ), which is wholly-owned by Mr. Yu Cheung Choy. 2. These 54,000,000 shares are held through Simply Grace Limited ( Simply Grace ), which is whollyowned by Mr. Lau Man Ching. 3. On 7 July 2016, Mr. Yu and Mr. Lau entered into the acting-in-concert confirmation, whereby they confirmed that, among other things, since 21 July 2004, they have been actively cooperating with one another and acting in concert, with an aim to achieving consensus and concerted action on all operating and financing decisions and major affairs relating to each member company within the Group. Save as disclosed above, none of the Directors, chief executives of the Company or their associates had any interests or short positions in any shares, underlying shares and debentures of the Company or any of its associated corporations as defined in Part XV of the SFO as recorded in the register to be kept under section 352 of the SFO or as otherwise notified to the Company and the Stock Exchange pursuant to the Model Code as at 30 September SH GROUP (HOLDINGS) LIMITED Interim Report ,000,000 Prosperously Legend LimitedProsperously Legend Prosperously Legend 2. 54,000,000 Simply Grace LimitedSimply Grace Simply Grace 3. XV 352

18 Corporate Governance and Other Information SUBSTANTIAL SHAREHOLDERS INTERESTS AND SHORT POSITIONS IN SHARES AND UNDERLYING SHARES As at 30 September 2018, the register of substantial shareholders maintained by the Company pursuant to section 336 of the SFO shows that other than the interests of the Directors and the chief executives, the following shareholders had notified the Company of relevant interests or short position in shares and underlying shares of Company as follows: 336 Approximate percentage of the Number of issued share capital shares/underlying of the Company Long position/ shares held Name Capacity short position Notes Prosperously Legend Beneficial owner Long position 246,000, Simply Grace Beneficial owner Long position 54,000, Notes: 1. Prosperously Legend is wholly-owned by Mr. Yu Cheung Choy. 1. Prosperously Legend 2. Simply Grace is wholly-owned by Mr. Lau Man Ching. 2. Simply Grace Save as disclosed above, no other parties were recorded in the register of the Company required to be kept under section 336 of the SFO as having interests or short positions in the shares or underlying shares of the Company as at 30 September SHARE OPTION SCHEME The Company adopted a share option scheme (the Share Option Scheme ) pursuant to the written resolutions of the shareholders passed on 6 December The purpose of the Share Option Scheme is to enable the Group to grant options to full time or part time employee, Directors (including executive, non-executive or independent non-executive Directors), any supplier, any customer, any service provider, any shareholder, any adviser or consultant of the Group as incentives or rewards for their contribution to the Group

19 Corporate Governance and Other Information No share option has been granted by the Company under the Share Option Scheme since its adoption and up to the date of this report. PURCHASE, SALE OR REDEMPTION OF LISTED SECURITIES OF THE COMPANY Neither the Company nor any of its subsidiaries purchased, sold or redeemed any of the Company s listed securities during the six months ended 30 September AUDIT COMMITTEE The Company established the Audit Committee on 6 December 2016 with written terms of reference in compliance with the CG Code. The primary duties and roles of the Audit Committee include, but are not limited to, (a) making recommendations to the Board on the appointment, re-appointment and removal of the external auditor, and approving the remuneration and terms of engagement of the external auditor, and any questions of its resignation or dismissal; (b) monitoring integrity of financial statements and annual report and accounts, half-year report and, if prepared for publication, quarterly reports, and reviewing significant financial reporting judgments contained in them; and (c) reviewing the financial controls, risk management and internal control systems. The Audit Committee currently consists of three independent non-executive Directors, namely Mr. To Yan Ming Edmond (as chairman), Mr. Lam Yim Nam and Mr. Lee Wing Kee and one non-executive Director, namely Mr. Yu Ho Chi. The Audit Committee has reviewed the unaudited condensed consolidated financial statements of the Group for the six months ended 30 September (a) (b) (c) By order of the Board SH Group (Holdings) Limited Yu Cheung Choy Chairman Hong Kong, 22 November SH GROUP (HOLDINGS) LIMITED Interim Report

20 Report on Review of Condensed Consolidated Financial Statements To the Board of Directors of SH Group (Holdings) Limited (incorporated in the Cayman Islands with limited liability) INTRODUCTION We have reviewed the condensed consolidated financial statements of SH Group (Holdings) Limited (the Company ) and its subsidiaries (collectively referred to as the Group ) set out on pages 21 to 60, which comprises the condensed consolidated statement of financial position as of 30 September 2018 and the related condensed consolidated statement of profit or loss and other comprehensive income, statement of changes in equity and statement of cash flows for the six-month period then ended, and certain 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 financial information to be in compliance with the relevant provisions thereof and Hong Kong Accounting Standard 34 Interim Financial Reporting ( HKAS 34 ) issued by the Hong Kong Institute of Certified Public Accountants. The directors of the Company are responsible for the preparation and presentation of these condensed consolidated financial statements in accordance with HKAS 34. Our responsibility is to express a conclusion on these condensed consolidated financial statements based on our review, and to report our conclusion 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

21 Report on Review of Condensed Consolidated Financial Statements 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 these condensed consolidated financial statements 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 CONCLUSION Based on our review, nothing has come to our attention that causes us to believe that the condensed consolidated financial statements are not prepared, in all material respects, in accordance with HKAS Deloitte Touche Tohmatsu Certified Public Accountants Hong Kong 22 November SH GROUP (HOLDINGS) LIMITED Interim Report

22 Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income For the six months ended 30 September HK$ 000 HK$ 000 Notes (Unaudited) (Unaudited) Revenue 4 155, ,900 Direct costs (139,819) (149,678) Gross profit 15,640 33,222 Other income Other gain 202 Administrative expenses (9,444) (8,841) Finance costs (212) (206) Profit before taxation 5 6,725 24,498 Income tax expense 6 (1,114) (4,276) Profit and total comprehensive income for the period 5,611 20,222 Earnings per share Basic (HK cents)

23 Condensed Consolidated Statement of Financial Position As at 30 September 2018 As at As at 30 September 31 March HK$ 000 HK$ 000 Notes (Unaudited) (Audited) Non-current assets Property and equipment 9 22,096 22,121 Deposits 2,345 2,036 Pledged bank deposits 31,112 Financial assets at fair value through profit or loss 7,715 Deferred tax assets 13 32,156 55,282 Current assets Trade receivables 10 24,380 23,172 Other receivables, deposits and prepayments 4,637 38,954 Contract assets 11 99,272 Amounts due from customers for contract work 39,217 Bank balances and cash 179, , , ,254 Current liabilities Trade and bills payables 12 19,474 17,825 Other payables and accrued charges 53,004 38,992 Contract Liabilities 11 34,629 Amounts due to customers for contract work 16,406 Tax payable 2,043 1,934 Bank borrowings 13 10,614 12, ,764 87,214 Net current assets 188, ,040 Total assets less current liabilities 220, , SH GROUP (HOLDINGS) LIMITED Interim Report

24 Condensed Consolidated Statement of Financial Position As at 30 September 2018 As at As at 30 September 31 March HK$ 000 HK$ 000 Notes (Unaudited) (Audited) Non-current liabilities Provisions Deferred tax liabilities Net assets 219, ,042 Capital and reserves Share capital 14 4,000 4,000 Reserves 215, ,042 Equity attributable to owners of the Company 219, ,

25 Condensed Consolidated Statement of Changes in Equity Issued share capital Share premium Other reserve Retained profits Total HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 (Unaudited) At 31 March 2018 (Audited) 4,000 83,223 5, , ,042 Adjustments (Note 3) 3 (4,997) (4,997) At 1 April 2018 (restated) Profit and total comprehensive income for the period Dividends recognised as distribution (Note 8) At 30 September 2018 (Unaudited) 4,000 82,223 5, , ,045 5,611 5,611 8 (8,800) (8,800) 4,000 83,223 5, , ,856 For the six months ended 30 September 2017 (Unaudited) At 1 April 2017 (Audited) Profit and total comprehensive income for the period At 30 September 2017 (Unaudited) 4,000 83,223 5, , ,456 20,222 20,222 4,000 83,223 5, , , SH GROUP (HOLDINGS) LIMITED Interim Report

26 Condensed Consolidated Statement of Cash Flows OPERATING ACTIVITIES For the six months ended 30 September HK$ 000 HK$ 000 (Unaudited) (Unaudited) Operating cash flows before movements in working capital 6,984 25,262 Changes in amounts due from/to customers for contract work, net 15,483 Increase in contract assets (18,989) Increase in contract liabilities 8,011 Increase in trade receivables (3,675) (22,463) Increase in other payables and accrued charges 7,808 5,021 Other movements in working capital (1,048) 2,147 Cash (used in) generated from operations (909) 25,450 Income tax paid (12) Net cash (used in) from operating activities (909) 25,438 INVESTING ACTIVITIES Bank interest received Dividends received 108 Withdrawal of pledged bank deposits 31, Purchases of financial assets at fair value through profit or loss (7,513) Purchase of property and equipment (731) (439) Net cash from (used in) investing activities 23,144 (137) FINANCING ACTIVITIES Interest paid (212) (206) Repayment of bank borrowings (1,443) (1,454) Cash used in financing activities (1,655) (1,660) Net increase in cash and cash equivalents 20,580 23,641 Cash and cash equivalents at beginning of the period 158, ,259 Cash and cash equivalents at end of the period represented by bank balances and cash 179, ,

27 1. GENERAL INFORMATION SH Group (Holdings) Limited (the Company ) was incorporated and registered as an exempted company with limited liability in the Cayman Islands under the Cayman Companies Law on 9 May The address of the Company s registered office and the principal place of business are Cricket Square, Hutchins Drive, P.O. Box 2681, Grand Cayman KY1-1111, Cayman Islands and Units , 6/F., Tower I, Cheung Sha Wan Plaza, 833 Cheung Sha Wan Road, Kowloon, Hong Kong, respectively. Its immediate and ultimate holding company is Prosperously Legend Limited, which was incorporated in the British Virgin Islands and whollyowned by Mr. Yu Cheung Choy ( Mr. Yu ), who is also the Chairman and executive Director of the Company. The condensed consolidated financial statements are presented in Hong Kong dollar ( HK$ ), which is also the functional currency of companies comprising the Group. 1. Cricket Square, Hutchins Drive, P.O. Box 2681, Grand Cayman KY1-1111, Cayman Islands Prosperously Legend Limited 2. BASIS OF PREPARATION The condensed consolidated financial statements of the Group for the six months ended 30 September 2018 have been prepared in accordance with the applicable disclosure requirements of Appendix 16 to the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited (the Stock Exchange ) and with Hong Kong Accounting Standard ( HKAS ) 34 Interim Financial Reporting issued by the Hong Kong Institute of Certified Public Accountants (the HKICPA ). The condensed consolidated financial statements should be read in conjunction with the Group s consolidated financial statements for the year ended 31 March 2018, which have been prepared in accordance with Hong Kong Financial Reporting Standards ( HKFRSs ) SH GROUP (HOLDINGS) LIMITED Interim Report

28 3. PRINCIPAL ACCOUNTING POLICIES The condensed consolidated financial statements have been prepared on the historical cost basis, except for certain financial instruments which are measured at fair values. Other than changes in accounting policies resulting from application of new and amendments to HKFRSs, the accounting policies and methods of computation used in the condensed consolidated financial statements for the six months ended 30 September 2018 are the same as those followed in the preparation of the Group s consolidated financial statements for the year ended 31 March Application of new and amendments to HKFRSs and an interpretation In the current interim period, the Group has applied, for the first time, the following new and amendments to HKFRSs and an interpretation issued by the HKICPA which are mandatory effective for the annual period beginning on or after 1 April 2018 for the preparation of the Group s condensed consolidated financial statements: HKFRS 9 9 HKFRS HK(IFRIC)-Int Amendments to HKFRS 2 2 Amendments to HKFRS 4 4 Amendments to HKAS Amendments to HKAS Financial Instruments Revenue from Contracts with Customers and the related Amendments Foreign Currency Transactions and Advance Consideration Classification and Measurement of Share-based Payment Transactions Applying HKFRS 9 Financial Instruments with HKFRS 4 Insurance Contracts 4 9 As part of the Annual Improvements to HKFRSs Cycle Transfers of Investment Property The new and amendments to HKFRSs and an interpretation have been applied in accordance with the relevant transition provisions in the respective standards and amendments and an interpretation which results in changes in accounting policies, amounts reported and/or disclosures as described below

29 3. PRINCIPAL ACCOUNTING POLICIES (Cont d) 3.1 Impacts and changes in accounting policies of application on HKFRS 15 Revenue from Contracts with Customers The Group has applied HKFRS 15 Revenue from Contracts with Customers and the related amendments for the first time in the current interim period. HKFRS 15 superseded HKAS 18 Revenue, HKAS 11 Construction Contracts and the related interpretations. The Group recognises revenue from provision of electrical and mechanical engineering services. The Group has applied HKFRS 15 retrospectively with the cumulative effect of initially applying this standard recognised at the date of initial application, 1 April Any difference at the date of initial application is recognised in the opening retained profits (or other components of equity, as appropriate) and comparative information has not been restated. Furthermore, in accordance with the transition provisions in HKFRS 15, the Group has elected to apply the standard retrospectively only to contracts that are not completed at 1 April 2018 and has used the practical expedient for all contract modifications that occurred before the date of initial application, the aggregate effect of all of the modifications was reflected at the date of initial application. Accordingly, certain comparative information may not be comparable as comparative information was prepared under HKAS 18 Revenue and HKAS 11 Construction Contracts and the related interpretations SH GROUP (HOLDINGS) LIMITED Interim Report

30 3. PRINCIPAL ACCOUNTING POLICIES (Cont d) 3.1 Impacts and changes in accounting policies of application on HKFRS 15 Revenue from Contracts with Customers (Cont d) Key changes in accounting policies resulting from application of HKFRS 15 HKFRS 15 introduces a 5-step approach when recognising revenue: Step 1: Identify the contract(s) with a customer 1 Step 2: Identify the performance obligations in the contract 2 Step 3: Determine the transaction price 3 Step 4: Allocate the transaction price to the performance 4 obligations in the contract Step 5: Recognise revenue when (or as) the Group satisfies a 5 performance obligation

31 3. PRINCIPAL ACCOUNTING POLICIES (Cont d) 3.1 Impacts and changes in accounting policies of application on HKFRS 15 Revenue from Contracts with Customers (Cont d) Key changes in accounting policies resulting from application of HKFRS 15 (Cont d) Under HKFRS 15, the Group recognises revenue when (or as) a performance obligation is satisfied, i.e. when control of the goods or services underlying the particular performance obligation is transferred to the customer. A performance obligation represents a good and service (or a bundle of goods or services) that is distinct or a series of distinct goods or services that are substantially the same. Control is transferred over time and revenue is recognised over time by reference to the progress towards complete satisfaction of the relevant performance obligation if one of the following criteria is met: the customer simultaneously receives and consumes the benefits provided by the Group s performance as the Group performs; the Group s performance creates and enhances an asset that the customer controls as the Group performs; or the Group s performance does not create an asset with an alternative use to the Group and the Group has an enforceable right to payment for performance completed to date. 30 SH GROUP (HOLDINGS) LIMITED Interim Report

32 3. PRINCIPAL ACCOUNTING POLICIES (Cont d) 3.1 Impacts and changes in accounting policies of application on HKFRS 15 Revenue from Contracts with Customers (Cont d) Key changes in accounting policies resulting from application of HKFRS 15 (Cont d) Otherwise, revenue is recognised at a point in time when the customer obtains control of the distinct good or service. The Group s revenue from engineering service contracts is recognised over time as the Group s performance creates or enhances an asset or work in progress that the customer controls as the asset is created or enhanced. With the performance obligation satisfied over time, the revenue recognised is measured at the progress towards complete satisfaction of the performance obligation. The progress towards complete satisfaction of a performance obligation is measured based on input method, which is to recognise revenue on the basis of the Group s efforts or inputs to the satisfaction of a performance obligation relative to the total expected inputs to the satisfaction of that performance obligation, that best depict the Group s performance in transferring control of goods or services. Previously, under HKAS 18, the Group s revenue from engineering service contracts is recognised based on the stage of completion at the end of each reporting period determined with reference to surveys of work performed to date relative to the total contract revenue as the directors of the Company considered such method measured reliably the engineering services performed

33 3. PRINCIPAL ACCOUNTING POLICIES (Cont d) 3.1 Impacts and changes in accounting policies of application on HKFRS 15 Revenue from Contracts with Customers (Cont d) Key changes in accounting policies resulting from application of HKFRS 15 (Cont d) A contract asset represents the Group s right to consideration in exchange for goods or services that the Group has transferred to a customer that is not yet unconditional. It is assessed for impairment in accordance with HKFRS 9. In contrast, a receivable represents the Group s unconditional right to consideration, i.e. only the passage of time is required before payment of that consideration is due. A contract liability represents the Group s obligation to transfer goods or services to a customer for which the Group has received consideration (or an amount of consideration is due) from the customer Summary of effects arising from initial application of HKFRS 15 The following table summarises the impact of transition to HKFRS 15 on retained profits at 1 April Impact of adopting HKFRS 15 at 1 April HK$ 000 Retained profits Engineering services contracts recognised over time (5,985) Tax effects 988 Impact at 1 April 2018 (4,997) 32 SH GROUP (HOLDINGS) LIMITED Interim Report

34 3. PRINCIPAL ACCOUNTING POLICIES (Cont d) 3.1 Impacts and changes in accounting policies of application on HKFRS 15 Revenue from Contracts with Customers (Cont d) Summary of effects arising from initial application of HKFRS 15 (Cont d) The following adjustments were made to the amounts recognised in the condensed consolidated statement of financial position at 1 April Line items that were not affected by the changes have not been included Carrying amounts previously reported at 31 March 2018 Reclassification Remeasurement Carrying amounts under HKFRS 15 at 1 April 2018* 15 * HK$ 000 HK$ 000 HK$ 000 HK$ 000 (Note) Current assets Trade receivables 23,172 (2,467) 20,705 Other receivables, deposits and prepayments 38,954 (36,968) 1,986 Contract assets 76,185 4,098 80,283 Amounts due from customers for contract work 39,217 (39,217) Current liabilities Other payables and accrued charges 38,992 (2,596) 36,396 Contract liabilities 16,535 10,083 26,618 Amounts due to customers for contract work 16,406 (16,406) Tax payable 1,934 (988) 946 Capital and reserves Reserves 224,042 (4,997) 219,

35 3. PRINCIPAL ACCOUNTING POLICIES (Cont d) 3.1 Impacts and changes in accounting policies of application on HKFRS 15 Revenue from Contracts with Customers (Cont d) Summary of effects arising from initial application of HKFRS 15 (Cont d) * The amounts in this column are before the adjustments from the application of HKFRS 9. Note: In relation to engineering services contracts previously accounted under HKAS 18, the Group applied input method in estimating the performance obligations satisfied upon the date of initial application of HKFRS 15. HK$39,217,000 and HK$13,939,000 of amounts due from/to customers for contract work under HKAS 18 were reclassified to contract assets and contract liabilities under HKFRS 15 respectively. HK$36,968,000 of retention receivables was reclassified from other receivables, deposits and prepayments to contract assets under HKFRS 15. HK$2,596,000 of other payables and accrued charges was reclassified to contract liabilities under HKFRS 15. HK$2,467,000 of trade receivables was eliminated against amounts due to customers for contract work under HKFRS 15. The following tables summarise the impacts of applying HKFRS 15 on the Group s condensed consolidated statement of financial position as at 30 September 2018 and its condensed consolidated statement of profit or loss and other comprehensive income for the current interim period for each of the line items affected. Line items that were not affected by the changes have not been included * ,217,000 13,939, ,968, ,596, ,467, SH GROUP (HOLDINGS) LIMITED Interim Report

36 3. PRINCIPAL ACCOUNTING POLICIES (Cont d) 3.1 Impacts and changes in accounting policies of application on HKFRS 15 Revenue from Contracts with Customers (Cont d) Summary of effects arising from initial application of HKFRS 15 (Cont d) Impact on the condensed consolidated statement of financial position Amounts without application of HKFRS 15 Note As reported Adjustments 15 HK$ 000 HK$ 000 HK$ 000 Current assets Trade receivables (b) 24, ,137 Other receivables, deposits and prepayments (b) 4,637 38,614 43,251 Contract assets (a), (b) 99,272 (99,272) Amounts due from customers for contract work (a), (b) 54,473 54,473 Current liabilities Other payables and accrued charges (b) 53,004 2,713 55,717 Contract liabilities (a), (b) 34,629 (34,629) Amounts due to customers for contract work (a), (b) 22,006 22,006 Tax payable 2, ,767 Capital and reserves Reserves 215,856 3, ,

37 3. PRINCIPAL ACCOUNTING POLICIES (Cont d) 3.1 Impacts and changes in accounting policies of application on HKFRS 15 Revenue from Contracts with Customers (Cont d) Summary of effects arising from initial application of HKFRS 15 (Cont d) Impact on the condensed consolidated statement of profit or loss and other comprehensive income Amounts without application of HKFRS 15 Note As reported Adjustments 15 HK$ 000 HK$ 000 HK$ 000 Revenue (a) 155,459 (4,546) 150,913 Direct costs (a) (139,819) 3,043 (136,776) Profit before taxation 6,725 (1,503) 5,222 Income tax expense (1,114) 264 (850) Profit for the period 5,611 (1,239) 4, SH GROUP (HOLDINGS) LIMITED Interim Report

38 3. PRINCIPAL ACCOUNTING POLICIES (Cont d) 3.1 Impacts and changes in accounting policies of application on HKFRS 15 Revenue from Contracts with Customers (Cont d) Summary of effects arising from initial application of HKFRS 15 (Cont d) Note: (a) The adjustments are arising from the different bases of measuring the stage (a) of completion at the end of each reporting period under HKAS 18 and 18 HKFRS (b) Without application of HKFRS 15, the contract assets under HKFRS 15 will (b) be reclassified as amounts due from customers for contract work and other 15 receivables, deposits and prepayments (for retention receivables) under 15 HKAS 18, and the contract liabilities under HKFRS 15 will be reclassified as amounts due to customers for contract work and other payables and accrued charges under HKAS 18. The trade receivables will be reinstated 18 with amounts due to customers for contract work for HKAS

39 3. PRINCIPAL ACCOUNTING POLICIES (Cont d) 3.2 Impacts and changes in accounting policies of application on HKFRS 9 Financial Instruments In the current period, the Group has applied HKFRS 9 Financial Instruments and the related consequential amendments to other HKFRSs. HKFRS 9 introduces new requirements for (1) the classification and measurement of financial assets and financial liabilities, (2) expected credit losses ( ECL ) for financial assets and other items (for example, contract assets) and (3) general hedge accounting. The Group has applied HKFRS 9 in accordance with the transition provisions set out in HKFRS 9. i.e. applied the classification and measurement requirements (including impairment) retrospectively to instruments that have not been derecognised as at 1 April 2018 (date of initial application) and has not applied the requirements to instruments that have already been derecognised as at 1 April The difference between carrying amounts as at 31 March 2018 and the carrying amounts as at 1 April 2018 are recognised in the opening retained profits and other components of equity, without restating comparative information. Accordingly, certain comparative information may not be comparable as comparative information was prepared under HKAS 39 Financial Instruments: Recognition and Measurement (1) (2) SH GROUP (HOLDINGS) LIMITED Interim Report

40 3. PRINCIPAL ACCOUNTING POLICIES (Cont d) 3.2 Impacts and changes in accounting policies of application on HKFRS 9 Financial Instruments (Cont d) Classification and measurement of financial assets and financial liabilities Trade receivables arising from contracts with customers are initially measured in accordance with HKFRS 15. All recognised financial assets that are within the scope of HKFRS 9 are subsequently measured at amortised cost or fair value, including unquoted equity investments measured at cost less impairment under HKAS 39. Financial assets that meet the following conditions are subsequently measured at amortised cost: the financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows; and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding

41 3. PRINCIPAL ACCOUNTING POLICIES (Cont d) 3.2 Impacts and changes in accounting policies of application on HKFRS 9 Financial Instruments (Cont d) Classification and measurement of financial assets and financial liabilities (Cont d) Financial assets that meet the following conditions are subsequently measured at fair value through other comprehensive income ( FVTOCI ): the financial asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling the financial assets; and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. All other financial assets are subsequently measured at fair value through profit or loss ( FVTPL ), except that at the date of initial application/initial recognition of a financial asset the Group may irrevocably elect to present subsequent changes in fair value of an equity investment in other comprehensive income ( OCI ) if that equity investment is neither held for trading nor contingent consideration recognised by an acquirer in a business combination to which HKFRS 3 Business Combinations applies SH GROUP (HOLDINGS) LIMITED Interim Report

42 3. PRINCIPAL ACCOUNTING POLICIES (Cont d) 3.2 Impacts and changes in accounting policies of application on HKFRS 9 Financial Instruments (Cont d) Classification and measurement of financial assets and financial liabilities (Cont d) Financial assets at FVTPL Financial assets that do not meet the criteria for being measured at amortised cost or FVTOCI or designated as FVTOCI are measured at FVTPL. Financial assets at FVTPL are measured at fair value at the end of each reporting period, with any fair value gains or losses recognised in profit or loss. The net gain or loss recognised in profit or loss excludes any dividend or interest earned on the financial asset and is included in the other gain line item. The directors of the Company reviewed and assessed the Group s financial assets as at 1 April 2018 based on the facts and circumstances that existed at that date. Trade receivables arising from contracts with customers are initially measured in accordance with HKFRS 15. The measurement categories for all financial assets and financial liabilities of the Group as at 1 April 2018 remain the same upon the application of HKFRS

43 3. PRINCIPAL ACCOUNTING POLICIES (Cont d) 3.2 Impacts and changes in accounting policies of application on HKFRS 9 Financial Instruments (Cont d) Impairment under ECL model The Group recognises a loss allowance for ECL on financial assets which are subject to impairment under HKFRS 9 (including trade receivables, other receivables and deposits, pledged bank deposits, bank balances and cash and contract assets). The amount of ECL is updated at each reporting date to reflect changes in credit risk since initial recognition. Lifetime ECL represents the ECL that will result from all possible default events over the expected life of the relevant instrument. In contrast, 12-month ECL ( 12m ECL ) represents the portion of lifetime ECL that is expected to result from default events that are possible within 12 months after the reporting date. Assessment are done based on the Group s historical credit loss experience, adjusted for factors that are specific to the debtors, general economic conditions and an assessment of both the current conditions at the reporting date as well as the forecast of future conditions SH GROUP (HOLDINGS) LIMITED Interim Report

44 3. PRINCIPAL ACCOUNTING POLICIES (Cont d) 3.2 Impacts and changes in accounting policies of application on HKFRS 9 Financial Instruments (Cont d) Impairment under ECL model (Cont d) The Group always recognises lifetime ECL for trade receivables and contract assets. The ECL on these assets are assessed individually for debtors with significant balances and/or collectively using a provision matrix with appropriate groupings. For all other instruments, the Group measures the loss allowance equal to 12m ECL, unless when there has been a significant increase in credit risk since initial recognition, the Group recognises lifetime ECL. The assessment of whether lifetime ECL should be recognised is based on significant increases in the likelihood or risk of a default occurring since initial recognition. Significant increase in credit risk In assessing whether the credit risk has increased significantly since initial recognition, the Group compares the risk of a default occurring on the financial instruments as at the reporting date with the risk of a default occurring on the financial instruments as at the date of initial recognition. In making this assessment, the Group considers both quantitative and qualitative information that is reasonable and supportable, including historical experience and forward-looking information that is available without undue cost or effort

45 3. PRINCIPAL ACCOUNTING POLICIES (Cont d) 3.2 Impacts and changes in accounting policies of application on HKFRS 9 Financial Instruments (Cont d) Impairment under ECL model (Cont d) Significant increase in credit risk (Cont d) In particular, the following information is taken into account when assessing whether credit risk has increased significantly: an actual or expected significant deterioration in the financial instruments external (if available) or internal credit rating; significant deterioration in external market indicators of credit risk, e.g. a significant increase in the credit spread, the credit default swap prices for the debtor; existing or forecast adverse changes in business, financial or economic conditions that are expected to cause a significant decrease in the debtor s ability to meet its debt obligations; an actual or expected significant deterioration in the operating results of the debtor; an actual or expected significant adverse change in the regulatory, economic, or technological environment of the debtor that results in a significant decrease in the debtor s ability to meet its debt obligations. 44 SH GROUP (HOLDINGS) LIMITED Interim Report

46 3. PRINCIPAL ACCOUNTING POLICIES (Cont d) 3.2 Impacts and changes in accounting policies of application on HKFRS 9 Financial Instruments (Cont d) Impairment under ECL model (Cont d) Significant increase in credit risk (Cont d) Irrespective of the outcome of the above assessment, the Group presumes that the credit risk has increased significantly since initial recognition when contractual payments are more than 30 days past due, unless the Group has reasonable and supportable information that demonstrates otherwise. The Group considers that default has occurred when the instruments are more than 90 days past due unless the Group has reasonable and supportable information to demonstrate that a more lagging default criterion is more appropriate. Measurement and recognition of ECL The measurement of ECL is a function of the probability of default, loss given default (i.e. the magnitude of the loss if there is a default) and the exposure at default. The assessment of the probability of default and loss given default is based on historical data adjusted by forward-looking information. Generally, the ECL is estimated as the difference between all contractual cash flows that are due to the Group in accordance with the contract and all the cash flows that the Group expects to receive, discounted at the effective interest rate determined at initial recognition

47 3. PRINCIPAL ACCOUNTING POLICIES (Cont d) 3.2 Impacts and changes in accounting policies of application on HKFRS 9 Financial Instruments (Cont d) Impairment under ECL model (Cont d) Measurement and recognition of ECL (Cont d) Interest income is calculated based on the gross carrying amount of the financial assets unless the financial assets are credit impaired, in which case interest income is calculated based on amortised cost of the financial assets. The Group recognises an impairment gain or loss in profit or loss for all financial instruments by adjusting their carrying amount, with the exception of trade receivables and contract assets where the corresponding adjustment is recognised through a loss allowance account. As at 1 April 2018 and 30 September 2018, the directors of the Company reviewed and assessed the Group s existing financial assets and contract assets for impairment using reasonable and supportable information that is available without undue cost or effort in accordance with the requirements of HKFRS 9 and considered the application of ECL model has no material impact to the financial position of the Group as at 1 April 2018 and 30 September 2018 and results of the Group for the six months ended 30 September SH GROUP (HOLDINGS) LIMITED Interim Report

48 3. PRINCIPAL ACCOUNTING POLICIES (Cont d) The application of the other amendments to HKFRSs and an interpretation in the current interim period has had no material effect on the amounts reported and/or disclosures set out in these condensed consolidated financial statements REVENUE AND SEGMENT INFORMATION 4. Revenue Revenue represents the fair value of amounts received or receivable from the engineering service contracts by the Group to external customers. The Group s revenue is solely derived from electrical and mechanical engineering ( E&M engineering ) services with the focus on the supply, installation and maintenance of mechanical ventilation and air-conditioning system ( MVAC system ) and low voltage electrical system in Hong Kong during the six months ended 30 September 2018 and Disaggregation of revenue For the six months ended 30 September 2018 HK$ 000 (Unaudited) Type of services (revenue recognised over time) Supply, installation and maintenance of MVAC system Supply, installation and maintenance of low voltage electrical system 127,513 27, ,459 The revenue recognised for the current period is mainly from private sector projects

49 4. REVENUE AND SEGMENT INFORMATION (Cont d) Segment information For the purpose of resources allocation and performance assessment, the chief operating decision maker (that is, Mr. Yu and Mr. Lau Man Ching ( Mr. Lau ), who is the Chief Executive Officer and executive Director of the Company) reviews the overall results and financial position of the Group as a whole. Accordingly, the Group has only one single operating segment and no further discrete financial information nor analysis of this single segment is presented. Geographical information No geographical segment information is presented as the Group s revenue are all derived from Hong Kong based on the location of services delivered and the Group s property and equipment amounting to HK$22,096,000 (Unaudited) as at 30 September 2018 (31 March 2018: HK$22,121,000 (Audited)) are all located in Hong Kong by physical location of assets. Information about major customers Revenue attributed from customers that accounted for 10% or more of the Group s total revenue during the period is as follows: 4. 22,096,000 22,121,000 10% For the six months ended 30 September HK$ 000 HK$ 000 (Unaudited) (Unaudited) Customer A A 65,761 N/A * Customer B B 21,746 N/A # Customer C C 15,871 N/A * Customer D D N/A * 59,983 Customer E E N/A * 41,777 Customer F F N/A * 38,316 * Revenue from the relevant customer was less than 10% of the Group s total revenue for the respective period. * 10% # No revenue was attributed from the relevant customers for the respective period. # 48 SH GROUP (HOLDINGS) LIMITED Interim Report

50 5. PROFIT BEFORE TAXATION 5. For the six months ended 30 September HK$ 000 HK$ 000 (Unaudited) (Unaudited) Profit before taxation has been arrived at after charging: Depreciation of property and equipment Fair value gain on financial assets at fair value through profit or loss 202 Directors emoluments 2,514 2,340 Other staff costs: Salaries and other benefits 20,980 18,013 Retirement benefit scheme contributions Total staff costs 24,248 20,946 Minimum lease payments under operating leases in respect of office premises 1,

51 6. INCOME TAX EXPENSE 6. For the six months ended 30 September HK$ 000 HK$ 000 (Unaudited) (Unaudited) Current tax - Hong Kong Profits Tax 1,097 4,271 Deferred taxation ,114 4,276 Hong Kong Profits Tax is calculated at 16.5% of the estimated assessable profit for both periods. 7. EARNINGS PER SHARE The calculation of basic earnings per share is based on the following data: 16.5% 7. For the six months ended 30 September (Unaudited) (Unaudited) Earnings: Earnings for the purpose of calculating basic earnings per share (profit for the period attributable to owners of the Company) (HK$ 000) Number of shares: Weighted average number of ordinary shares for the purpose of calculating basic earnings per share 5,611 20, ,000, ,000,000 There was no dilutive potential ordinary share for both periods. 50 SH GROUP (HOLDINGS) LIMITED Interim Report

52 8. DIVIDENDS During the six months ended 30 September 2018, a final dividend in respect of the year ended 31 March 2018 of HK2.2 cents per ordinary share (approximately HK$8.8 million in aggregate) was declared and payable to the shareholders of the Company. No dividend was paid or declared by the Company during the six months ended 30 September The Board did not declare any interim dividend for the six months ended 30 September 2018 (2017: Nil) PROPERTY AND EQUIPMENT During the six months ended 30 September 2018, the Group acquired property and equipment amounting to HK$731,000 (Unaudited) (2017: HK$439,000 (Unaudited)) , , TRADE RECEIVABLES The Group grants credit terms of 30 days to its customers from the date of invoices on progress billings of contract works. An aged analysis of the trade receivables presented based on the invoice date at the end of each reporting period is as follows: As at 30 September 2018 As at 31 March 2018 HK$ 000 HK$ 000 (Unaudited) (Audited) 0-30 days ,985 16, days ,321 4, days Over 90 days 90 5,488 2,080 24,380 23,

53 11. CONTRACT ASSETS AND CONTRACT LIABILITIES 11. As at 30 September 2018 HK$ 000 (Unaudited) Contract assets Unbilled revenue from engineering services contracts 60,658 Retention receivables 38,614 99,272 Contract liabilities Engineering services contracts 34,629 The Group has rights to considerations from customers for the provision of E&M engineering services. Contract assets arise when the Group has right to consideration for completion of E&M engineering services and not yet billed under the relevant contracts, and their right is conditioned on factors other than passage of time. Any amount previously recognised as a contract asset is reclassified to trade receivables when such right becomes unconditional other than the passage of time. Remaining rights and performance obligations in a particular contract is accounted for and presented on a net basis, as either a contract asset or a contract liability. If the progress payment exceeds the revenue recognised to date under the input method, the Group recognises a contract liability for the difference. Retention money is unsecured and interest-free and represented the monies withheld by customers of contract works recoverable after the completion of defect liability period of the relevant contracts or in accordance with the terms specified in the relevant contracts, usually being 1 to 2 years from the date of completion of respective E&M engineering services projects. 52 SH GROUP (HOLDINGS) LIMITED Interim Report

54 12. TRADE AND BILLS PAYABLES The credit period on purchases and subcontracting of contract work services ranges from 30 to 60 days generally. The following is an aged analysis of trade payables presented based on the invoice date and bills payables presented based on the date of issuance of the bills at the end of each reporting period: As at 30 September 2018 As at 31 March 2018 HK$ 000 HK$ 000 (Unaudited) (Audited) Trade payables: 0-30 days ,305 7, days ,169 8,284 19,474 15,431 Bills payables: 0-30 days , days ,298 2,394 19,474 17,

55 13. BANK BORROWINGS 13. As at As at 30 September 31 March HK$ 000 HK$ 000 (Unaudited) (Audited) Secured bank borrowings 10,614 12,057 Carrying amounts repayable (note): Within one year 2,906 2,910 More than one year, but not exceeding two years 1,278 2,379 More than two years, but not more than five years 2,330 2,312 Over five years 4,100 4,456 10,614 12,057 Note: The amounts due are based on scheduled repayment dates set out in the loan agreements. All the bank borrowings as at 30 September 2018 and 31 March 2018 contain a repayable on demand clause and are shown under current liabilities. 54 SH GROUP (HOLDINGS) LIMITED Interim Report

56 13. BANK BORROWINGS (Cont d) All bank borrowings were guaranteed by corporate guarantee of the Company. Certain banking facilities of the Group were secured by: 13. (i) leasehold land and buildings owned by the Group as at 30 September 2018 and 31 March 2018; and (i) (ii) deposits of HK$31,112,000 as at 31 March (ii) 31,112,000 As at 31 March 2018, the Group had made undertakings relating to certain performance obligation of the controlling shareholders, namely Mr. Yu and Mr. Lau, pursuant to a facility agreement including the following: (i) Mr. Yu and Mr. Lau undertake to maintain majority shareholding of the Company; and (ii) Mr. Yu shall remain the Chairman of the Company or the Company shall notify the bank 14 days in advance in case he ceases to be the Chairman. During the current period, such facility agreement was renewed and the above-mentioned undertakings were replaced by the following obligation undertaken by the Group: (i) In case of Mr. Yu and Mr. Lau are not the major shareholders of the Company, the Group should notify the bank 14 days in advance; and (ii) In case of Mr. Yu is not entitled to be Chairman of the Company, the Group should notify the bank 14 days in advance. This facility agreement remained effective as at 30 September As at 31 March 2018 and 30 September 2018, other than disclosed above, the Group had made undertakings relating to certain performance obligation of the controlling shareholders pursuant to another facility agreement entered with a bank including the following: (i) Mr.Yu and Mr. Lau undertake to maintain as the largest shareholders of the Company directly or indirectly; and (ii) Mr. Yu and Mr. Lau shall remain as the Chairman or director of the Company. (i) (ii) 14 (i) 14 (ii) 14 (i) (ii)

57 14. SHARE CAPITAL Details of the share capital of the Company are disclosed as follows: 14. Amount Number of shares HK$ HK$ 000 Ordinary shares of HK$0.01 each Authorised: At 1 April 2017 (Audited), 30 September 2017 (Unaudited), 1 April 2018 (Audited) and 30 September 2018 (Unaudited) Issued and fully paid: At 1 April 2017 (Audited), 30 September 2017 (Unaudited), 1 April 2018 (Audited) and 30 September 2018 (Unaudited) ,000,000, ,000, , ,000,000 4,000,000 4, PLEDGE OF ASSETS At the end of each reporting period, the Group pledged the following assets to secure the bank borrowings and banking facilities including performance guarantees issued by the banks. The carrying amounts of the assets pledged are as follows: 15. As at 30 September 2018 As at 31 March 2018 HK$ 000 HK$ 000 (Unaudited) (Audited) Bank deposits 31,112 Leasehold land and buildings 20,269 20,622 20,269 51, SH GROUP (HOLDINGS) LIMITED Interim Report

58 16. RELATED PARTY TRANSACTIONS Other than disclosed elsewhere in the condensed consolidated financial statements, the Group had the following related party transactions during the period: Compensation to key management personnel of the Group which represent the directors of the Company are as follows: 16. For the six months ended 30 September HK$ 000 HK$ 000 (Unaudited) (Unaudited) Directors fees Salaries 2,184 2,082 Discretionary bonus Retirement benefit scheme contributions CONTINGENT LIABILITIES As at 30 September 2018, performance guarantees of HK$36,220,000 (31 March 2018: HK$31,466,000) were given by banks in favour of the Group s customers as security for the due performance and observance of the Group s obligations under the contracts entered into between the Group and its customers. If the Group fails to provide satisfactory performance to its customers to whom performance guarantees have been given, such customers may demand the banks to pay to them the sum or sum stipulated in such demand. The Group will become liable to compensate such banks accordingly. The performance guarantees will be released upon completion of the contract works. The performance guarantees were granted under the banking facilities with details as set out in note 13. At the end of each reporting period, as represented by the directors of the Company, they do not consider it is probable that a claim will be made against the Group ,220,000 31,466,

59 18. OPERATING LEASE COMMITMENTS The Group as lessee At the end of each reporting period, the Group had commitments for future minimum lease payments in respect of office premises rented under non-cancellable operating lease which fall due as follows: 18. As at 30 September 2018 As at 31 March 2018 HK$ 000 HK$ 000 (Unaudited) (Audited) Within one year 2, In the second to fifth year inclusive 3, , The above operating lease payments represent rental payable by the Group for office premises. Lease agreements for office premises are negotiated and fixed for a term of two to three years (2017: two years) and one of these lease agreements included a renewal option at the discretion of the Group for further two years. 58 SH GROUP (HOLDINGS) LIMITED Interim Report

60 19. FAIR VALUE MEASUREMENT Fair value of the Group s financial assets that are measured at fair value on a recurring basis Some of the Group s financial assets are measured at fair value at the end of each reporting period. The following table gives information about how the fair values of these financial assets are determined (in particular, the valuation technique(s) and inputs used), as well as the level of the fair value hierarchy into which the fair value measurements are categorised (Levels 1 to 3) based on the degree to which the inputs to the fair value measurements is observable. 19. Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active market for identical assets or liabilities; Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs)

61 19. FAIR VALUE MEASUREMENT (Cont d) Financial instruments 19. Fair value as at Valuation technique(s) 30 September March 2018 Fair value and key input(s) hierarchy Financial assets at fair value Equity securities listed Nil Level 1 Quoted bid prices in through profit or loss in Hong Kong: an active market HK$7,715,000 7,715,000 There is no transfers among Level 1 and Level 2 during both periods. Fair value of the Group s financial assets and financial liabilities that are not measured at fair value on a recurring basis The directors of the Company consider that the carrying amounts of financial assets and financial liabilities recorded at amortised cost in the condensed consolidated financial statements approximate their fair values. 60 SH GROUP (HOLDINGS) LIMITED Interim Report