CHINESE PEOPLE HOLDINGS COMPANY LIMITED 中 民 控 股 有 限 公 司 (Incorporated in Bermuda with limited liability) 於百慕達註冊成立之有限責任公司 (Stock Code 股份代號 681) 2017 INTERIM REPORT 中 期 報 告
Contents Pages 2 Corporate Information 3 Management Discussion and Analysis 19 Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income 21 Consolidated Statement of Financial Position 23 Condensed Consolidated Statement of Changes in Equity 25 Condensed Consolidated Statement of Cash Flows 26 Notes to the Condensed Consolidated Financial Statements 51 Disclosure of Interests 55 Other Information 1
Corporate Information Board of Directors Dr. Mo Shikang (Chairman) Mr. Zhang Hesheng (Deputy Chairman) Mr. Chu Kin Wang Peleus (Deputy Chairman) Mr. Fan Fangyi (Managing Director) Miss Mo Yunbi Dr. Liu Junmin* Prof. Zhao Yanyun* Mr. Sin Ka Man* (* Independent Non-executive Directors) Audit Committee Mr. Sin Ka Man (Chairman) Dr. Liu Junmin Prof. Zhao Yanyun Nomination Dr. Mo Shikang (Chairman) Committee Dr. Liu Junmin Prof. Zhao Yanyun Mr. Sin Ka Man Remuneration Mr. Sin Ka Man (Chairman) Committee Dr. Mo Shikang Mr. Zhang Hesheng Dr. Liu Junmin Prof. Zhao Yanyun Company Secretary Ms. Li Fun Replen Principal Bankers Bank of China (Hong Kong) Limited The Hongkong and Shanghai Banking Corporation Limited China Construction Bank China Minsheng Bank Shanghai Pudong Development Bank Agricultural Bank of China Auditor Deloitte Touche Tohmatsu Principal Share MUFG Fund Services Registrar and (Bermuda) Limited Transfer Office The Belvedere Building 69 Pitts Bay Road Pembroke, HM08, Bermuda Hong Kong Branch Tricor Tengis Limited Share Registrar Level 22 and Transfer Office Hopewell Centre 183 Queen s Road East Hong Kong Registered Office Canon s Court 22 Victoria Street Hamilton HM 12 Bermuda Head Office No. 36 BDA International Business Park No. 2 Jingyuan North Street Economic Technological Development Area Beijing, 100176, China Principal Place Unit 1101, 11th Floor of Business Tung Ning Building in Hong Kong 2 Hillier Street Central, Hong Kong Email info@681hk.com Website www.681hk.com Stock Code 00681 * * * * MUFG Fund Services (Bermuda) Limited The Belvedere Building 69 Pitts Bay Road Pembroke, HM08, Bermuda 183 22 Canon s Court 22 Victoria Street Hamilton HM 12 Bermuda 2 BDA36 100176 2 11 1101 info@681hk.com www.681hk.com 00681 2 Chinese People Holdings Company Limited 2017 Interim Report
Management Discussion and Analysis The board (the Board ) of directors (the Director(s) ) of Chinese People Holdings Company Limited (the Company ) is pleased to announce the unaudited consolidated interim result of the Company and its controlled entities (its subsidiaries) (collectively the Group ) for the six months ended 30 September 2017 (the Period ). 2017 9 30 MD & A FINANCIAL HIGHLIGHTS Items For the six months ended 30 September 9 30 2017 2016 Variance RMB 000 RMB 000 RMB 000 Revenue from continuing operations: Piped gas business 216,233 186,337 29,896 Transportation, distribution & retail of LPG business 268,069 158,579 109,490 Barreled drinking water business 253 1,883 (1,630) Total 484,555 346,799 137,756 Segment results of continuing operations: Piped gas business 21,088 (508) 21,596 Transportation, distribution & retail of LPG business 9,538 14,416 (4,878) Barreled drinking water business (155) 1,529 (1,684) Total 30,471 15,437 15,034 Share of results of associates 18,508 8,609 9,899 Share of results of joint ventures 87,407 75,293 12,114 Finance costs (5,097) (6,364) 1,267 Other income and expenses (net) (16,181) (7,769) (8,412) Income tax expense (11,480) (9,201) (2,279) Profit for the period from continuing operations 103,628 76,005 27,623 Discontinued operation: Profit for the period from discontinued operation 53,435 (53,435) Profit for the period 103,628 129,440 (25,812) 3
Management Discussion and Analysis Items For the six months ended 30 September 9 30 2017 2016 Variance RMB 000 RMB 000 RMB 000 Attributable to owners of the Company: Profit from continuing operations 90,674 67,037 23,637 Profit from discontinued operation 53,435 (53,435) 90,674 120,472 (29,798) RMB RMB RMB Earnings per share From continuing and discontinued operations Basic and diluted (RMB cents per share) 1.31 cents 1.73 cents (0.42) cents From continuing operations Basic and diluted (RMB cents per share) 1.31 cents 0.97 cents 0.34 cents Analysis of results For the six months ended 30 September 9 30 2017 2016 Variance RMB 000 RMB 000 RMB 000 Profit for the period from continuing operations 103,628 76,005 27,623 Adjustments for: Finance costs 5,097 6,364 (1,267) Depreciation and amortisation 19,902 17,825 2,077 Income tax expense 11,480 9,201 2,279 Share-based payments 13,223 13,223 Core profit from continuing operations 153,330 109,395 43,935 Breakdown as follows: The Group 47,415 25,493 21,922 Share of results of associates 18,508 8,609 9,899 Share of results of joint ventures 87,407 75,293 12,114 153,330 109,395 43,935 4 Chinese People Holdings Company Limited 2017 Interim Report
Management Discussion and Analysis OPERATIONAL HIGHLIGHTS Items For the six months ended 30 September 9 30 2017 2016 Controlling Non-controlling Total Controlling Non-controlling Total MD & A No. of projects (unit) Piped gas projects 12 40 52 12 40 52 LPG projects 29 26 55 25 27 52 Barreled drinking water project 1 1 1 1 Total 42 66 108 38 67 105 New connected customers (unit) Household 17,619 87,686 105,305 8,085 72,609 80,694 C/I 561 1,994 2,555 369 1,128 1,497 Total 18,180 89,680 107,860 8,454 73,737 82,191 Accumulated connected customers (unit) Household 331,570 1,020,046 1,351,616 313,951 932,360 1,246,311 C/I 6,010 7,378 13,388 5,449 5,384 10,833 Total 337,580 1,027,424 1,365,004 319,400 937,744 1,257,144 Sales volume of piped gas (10,000 m 3 ) Household 2,813 2,046 4,859 2,560 1,691 4,251 C/I 6,620 23,667 30,287 5,933 15,162 21,095 Total sales 9,433 25,713 35,146 8,493 16,853 25,346 Sales volume of LPG (tons) 52,821 174,811 227,632 34,110 160,031 194,141 Sales of barreled drinking water (bottle) 104,429 104,429 497,550 497,550 5
Management Discussion and Analysis BUSINESS REVIEW During the first half of 2017, with the further promotion of supply-side structural reforms, the economic structure of China was further optimised, and the overall economy continued its steady growth. While focusing on economic development, the Chinese government vigorously promoted the construction of a green ecological society and air pollution management. During the first half of the year, the apparent consumption of natural gas in China reached 114.6 billion cubic metres ( m 3 ), which represented an increase of approximately 15% over the corresponding period of 2016. The apparent consumption of LPG reached 23,025,900 tons, representing an increase of aaproximately 20% over the corresponding period of 2016. 2017 1,146 201615% 2,302.592016 20% During the Period, total revenue from continuing operations of the Group amounted to approximately RMB485 million, representing a year-on-year increase of 39.72% over the corresponding period last year, while profit for the Period from continuing operations was approximately RMB104 million (2016: RMB76 million). Basic and diluted earnings per share from continuing operations were RMB1.31 cents (2016: RMB0.97 cents). The overall gross profit margin of the Group was 24.98% (2016: 28.13%), representing a decrease of 3.15% as compared with the corresponding period last year. The decrease in gross profit margin was mainly attributable to revenue mix change caused by faster growth in the revenue of LPG business. 4.8539.72% 1.04 2016 0.76 1.3120160.97 24.98% (2016: 28.13%)3.15 Piped gas business During the reporting period, the Group benefited from the gradual use of natural gas by newly-connected household customers and the continued implementation of the Coal to Gas project by local governments. The sales of natural gas of the Group recorded satisfactory results. The real estate markets in various cities, in which the gas projects of the Group located, maintained steady growth during the Period, and the piped gas business developed smoothly. 6 Chinese People Holdings Company Limited 2017 Interim Report
Management Discussion and Analysis BUSINESS REVIEW (Continued) Piped gas business (Continued) Piped gas business is our main business and our main source of income. During the Period, revenue of approximately RMB216,233,000 was recorded from our piped gas business, representing an increase of RMB29,896,000 or 16.04% over the corresponding period last year, which accounted for approximately 44.63% (2016: 53.73%) of our revenue from continuing operations during the Period. The overall gross profit margin of piped gas business was 25.15% (2016: 24.90%). 216,233,000 29,896,00016.04% 44.63% 2016 53.73% 25.15% 2016 24.90% MD & A Gas connection During the reporting period, revenue from gas connection construction contracts was approximately RMB49,112,000, representing an increase of RMB14,726,000 or 42.83% over the corresponding period last year. Revenue from gas connection construction contracts represented approximately 22.71% (2016: 18.45%) of the total revenue of the piped gas business. During the reporting period, there was an addition of 17,619 units of household customers and an addition of 561 units of commercial and industrial ( C/I ) customers. As at 30 September 2017, the accumulated number of connected household customers was 331,570 units; and the accumulated number of connected C/I customers was 6,010 units, representing a growth of 5.61% and 10.30% respectively over the corresponding period last year. A comparison of the accumulated number of connected customers of the Group among the years of 2015 to 2017 is shown in Graph 1. 49,112,000 14,726,00042.83% 22.71% 2016 18.45% 17,619 561 2017 9 30 331,570 6,010 5.61% 10.30% 2015-2017 7
Management Discussion and Analysis BUSINESS REVIEW (Continued) Piped gas business (Continued) Gas connection (Continued) Graph 1: Comparison of the accumulated number of connected units among the past three years unit ( 000) 350 300 Household customers 279,510 313,951 331,570 unit 7,000 6,000 4,706 C/I customers 5,449 6,010 250 5,000 200 4,000 150 3,000 100 2,000 50 1,000 0 2015 2016 at 30 September 2017 Year 0 2015 2016 at 30 September 2017 Year 8 Chinese People Holdings Company Limited 2017 Interim Report
Management Discussion and Analysis BUSINESS REVIEW (Continued) Piped gas business (Continued) Gas sales MD & A During the reporting period, revenue from gas sales was approximately RMB167,121,000, representing an increase of RMB15,170,000 or 9.98% over the corresponding period last year. The increase was mainly due to the steady increase of gas sales volume and the increase of gas selling prices. Revenue from gas sales accounted for approximately 77.29% (2016: 81.55%) of the total revenue from the piped gas business. Our total piped gas sales achieved approximately 94.33 million m 3, representing a year-on-year increase of 11.07%. Among the total sales, 28.13 million m 3 were sold to household customers, which represented a year-on-year increase of 9.88%; 66.20 million m 3 were sold to C/I customers, which represented a year-on-year increase of 11.58%. A comparison of the sales volume of piped gas of the Group among the years of 2015 to 2017 (for the six months ended 30 September) is shown in Graph 2. 167,121,000 15,170,0009.98% 77.29% 2016 81.55% 9,433 11.07% 2,813 9.88% 6,620 11.58% 2015 20179 30 Graph 2: Comparison of the total sales volume of piped gas among the past three years (for the six months ended 30 September) 9 30 ( 0,000 m 3 ) 10000 9,336 8,493 9,433 8000 6,817 6,620 5,933 6000 Total sales volume 4000 2000 2,519 2,560 2,813 C/I customers Household customers 0 2015 2016 2017 Year Six months ended 30 September 9
Management Discussion and Analysis BUSINESS REVIEW (Continued) Transportation, distribution and retail of LPG business During the reporting period, on the basis of the further development of existing market, we continued to develop new markets and new businesses. We have commenced the business of gas tank wholesale and two-way transportation business in certain regions. We increased our profit sources in our original bottled LPG market and also expanded the market influence of the Group. During the reporting period, sales of LPG was 52,821 tons in total, representing an increase of 54.85% over the corresponding period last year. Total revenue from LPG sales was approximately RMB268,069,000, representing an increase of RMB109,490,000 or 69.04% over the corresponding period last year. During the Period, revenue from transportation, distribution and retail of LPG accounted for approximately 55.32% (2016: 45.73%) of our total revenue from continuing operations. The gross profit marign of LPG business was 24.92% (2016: 31.23%). A comparison of the sales volume of LPG of the Group among the years of 2015 to 2017 (for the six months ended 30 September) is shown in Graph 3. 52,821 54.85% 268,069,000 109,490,00069.04% 55.32% (2016:45.73% 24.92% (2016:31.23%2015 20179 30 Graph 3: Comparison of the sales volume of LPG among the past three years (for the six months ended 30 September) 9 30 (Tons) 60000 52,821 50000 40000 34,707 34,110 30000 20000 10000 0 2015 2016 2017 Six months ended 30 September Year 10 Chinese People Holdings Company Limited 2017 Interim Report
Management Discussion and Analysis BUSINESS REVIEW (Continued) Barreled drinking water business With the improvement of public life quality, the development of barreled drinking water is accelerating. We carried out barreled drinking water business with Tianjin region as the centre and expanded to the peripheral areas, developed new customers, made full use of the existing transportation and customer resources of LPG business, combined with the existing logistics and distribution network, and achieved efficient utilisation. As an additional business, barreled drinking water business continues to create a new profit stream to the Group. MD & A Graph 4: Revenue structure for continuing operations of the Group (for the six months ended 30 September) 9 30 9.91% Gas Connection 53.73% Piped gas 43.82% Gas Sales 0.54% Barreled drinking water 10.14% Gas Connection 44.63% Piped gas 34.49% Gas Sales 0.05% Barreled drinking water 45.73% LPG 55.32% LPG 2016 2017 11
Management Discussion and Analysis BUSINESS REVIEW (Continued) New projects during the reporting period During the reporting period, we set up 2 new LPG projects. As at 30 September 2017, the Group managed 108 projects in China, which are mainly located in Chongqing, Tianjin, Sichuan, Yunnan, Hunan, Hubei, Jiangxi, Shaanxi, Guizhou, Guangxi and Fujian provinces. In the future, the Group will focus on the business opportunities besides the existing projects. With its well-organised management system, sound operating records and gas source security capability, the Group will continue to expand its businesses and sales volume through various methods. FINANCIAL REVIEW Liquidity and capital resources At 30 September 2017, the consolidated financial position of the Group is as follows: 2 2017 9 30 108 2017 9 30 At 30 September 2017 2017 9 30 At 31 March 2017 Change 2017 3 31 RMB 000 RMB 000 RMB 000 Non-current assets 1,923,108 1,805,364 117,744 Current assets 563,912 551,794 12,118 Current liabilities (497,491) (480,157) (17,334) Non-current liabilities (48,814) (50,888) 2,074 Net assets 1,940,715 1,826,113 114,602 Equity attributable to owners of the Company 1,761,094 1,657,176 103,918 Non-controlling interests 179,621 168,937 10,684 Total equity 1,940,715 1,826,113 114,602 12 Chinese People Holdings Company Limited 2017 Interim Report
Management Discussion and Analysis FINANCIAL REVIEW (Continued) Liquidity and capital resources (Continued) At 30 September 2017, the bank balances and cash of the Group amounted to approximately RMB402,653,000 (31 March 2017: approximately RMB392,287,000), and the total borrowings amounted to approximately RMB259,039,000 (31 March 2017: approximately RMB260,268,000). The consolidated debt-to-capitalisation ratio, representing the ratio of total borrowings to total borrowings and equity attributable to owners of the Company, was 12.82% (31 March 2017: 13.57%). Currently, the sources of the operating and capital expenditure of the Group are operating cash flow, current assets, and bank borrowings. The Group has sufficient funds to meet future capital expenditures and operational needs. 2017 9 30 402,653,0002017 3 31 392,287,000 259,039,000 2017 3 31 260,268,000 12.82% 2017 3 3113.57% MD & A Borrowing structure At 30 September 2017, the total borrowings of the Group were approximately RMB259,039,000 (31 March 2017: approximately RMB260,268,000), which mainly comprised domestic bank borrowings denominated in Renminbi of the project companies in China and consideration payable. Bank borrowings, in which interest is calculated by reference to the interest rate announced by the People's Bank of China plus certain basis points, are mainly applied to gas pipelines construction, as general working capital and for operating expenses; the consideration payable represented the balance for the acquisition of LPG and barreled drinking water projects in Tianjin and the accrued interest (calculated by reference to the best lending rate for Hong Kong Dollars quoted by the Hong Kong Bank from time to time) thereon. Further details of the acquisition are set out in the Company s circular dated 25 November 2014. Due to the capital intensive nature of the Group s business, the Group needs to ensure that it maintains sufficient cash and credit lines to meet its liquidity requirements. During the Period, the Group yet to settle the consideration payable to the vendor. The consideration payable was due on 10 July 2017, being the sixth business day after the issue of the profit certificate, the overdue interest accrued up to 30 September 2017 was approximately RMB1,771,000. Apart from the borrowings of approximately RMB88,500,000 (31 March 2017: approximately RMB91,500,000) which were secured by certain assets with carrying amount of approximately RMB101,616,000 (31 March 2017: approximately RMB103,074,000), others were unsecured. Short-term borrowings amounted to approximately RMB218,539,000 (31 March 2017: approximately RMB217,768,000), while others were long-term borrowings due after one year. Details of the pledge of assets and capital commitments are set out in notes 16 and 21 to the condensed consolidated financial statements respectively. 2017 9 30 259,039,0002017 3 31 260,268,000 2014 11 25 2017 7 10 2017 9 30 1,771,00088,500,000 (2017 3 3191,500,000 101,616,000 (2017 3 31103,074,000 218,539,000 (2017 3 31 217,768,000 16 21 13
Management Discussion and Analysis FINANCIAL REVIEW (Continued) Capital structure The long-term capital of the Group comprised equity attributable to owners of the Company and borrowings, which was confirmed by the sound debt-to-capitalisation ratio stated in the section headed Liquidity and capital resources above. Foreign exchange risk As all of our operations are in China and substantially all of its revenue and expenses are denominated in Renminbi, there was no significant foreign exchange risk in its operation. We currently do not have foreign currency hedging policy but monitor the market trends of exchange rates closely, and adopt appropriate measures when necessary. 14 Chinese People Holdings Company Limited 2017 Interim Report
Management Discussion and Analysis FINANCIAL REVIEW (Continued) Capital commitment At 30 September 2017, the capital commitment of the Group amounted to approximately RMB50,532,000 (31 March 2017: RMB22,194,000), mainly attributable to running district gas pipelines construction and prepaid lease payments. Please refer to note 21 to the condensed consolidated financial statements for details. 2017 9 30 50,532,000 2017 3 31 22,194,000 21 MD & A Contingent liabilities At 31 August 2015, Beijing Civigas Co., Ltd. ( Beijing Civigas ) (a wholly-owned subsidiary of the Company) together with the joint venture partner entered into a guarantee agreement with a bank, whereby Beijing Civigas and the joint venture partner have agreed to provide a joint and several corporate guarantees in favour of the bank for the loan of RMB100,000,000 granted to Fujian Province An Ran Gas Investments Co., Ltd. ( Fujian An Ran ) (as borrower), a joint venture of the Group. Details of this transaction are set out in the Company's announcement dated 31 August 2015. Up to 30 September 2017, Fujian An Ran has drawn the whole facility line. Save as disclosed above, at 30 September 2017, we had no material contingent liabilities. 2015 8 31 100,000,000 2015 8 31 2017 9 30 2017 9 30 Employees and remuneration policy As at 30 September 2017, we had approximately 1,700 employees, most of them were stationed in China. The employees' salaries are determined from time to time with reference to their duties and responsibilities with the Group, business performance of the Group, profitability and market conditions. In addition to pension funds, individual employees may be granted discretionary bonus, share options, and award shares as rewards for their outstanding performance. 2017 9 30 1,700 Purchase, sale and repurchase of the Company's listed securities During the reporting period, neither the Company nor any of its subsidiaries have purchased, sold or repurchased any of the Company's listed securities. 15
Management Discussion and Analysis PROSPECTS The macro-economy of China has achieved steady progress, and economic restructuring has been the main engine. The economic structure is continuously optimised, the resource utilisation rate is constantly improved, and the circular industry is under development. Green traffic and green construction have grown rapidly, and energy-saving and emission reduction are initially taking effect. The tremendous achievements made in energy development of China have created a new situation in the reform of energy development with Chinese characteristics and has provided the Group with a good environment for growth. Piped gas business During the reporting period, China successively promulgated some important policies, such as Opinions on Deepening the Reform of the Oil and Gas System, Guiding Opinions on Strengthening Gas Distribution Price Regulation, and Opinions on Acceleration of the Utilisation of Natural Gas. China stressed that it would continue to support the development of the natural gas industry, deepen the reform of the natural gas industry, further promote the marketisation of the natural gas industry, and gradually nurture natural gas to be one of the main energy sources in the modern, clean energy system of China. By 2020, the proportion of natural gas in the primary energy consumption structure will strive to reach approximately 10%, and the underground gas storage will have an effective working volume of 14.8 billion m 3. By 2030, the proportion of natural gas in the primary energy consumption structure will strive to reach approximately 15%, and the underground gas storage will have an effective working volume of more than 35.0 billion m 3. 2020 10%148 2030 15% 350 In the future, the Group will continue to actively utilise the customer resources and service brands of the gas access network to cultivate and focus on customers based on the consolidation of existing market and full development of customer potential, while also raising the number of rights of operation of piped gas. Moreover, the Group will closely monitor the market-oriented reform trends of the domestic natural gas market, and will promptly make corresponding arrangements to meet the new business development opportunities brought about by the reform. 16 Chinese People Holdings Company Limited 2017 Interim Report
Management Discussion and Analysis PROSPECTS (Continued) Transportation, distribution and retail of LPG business LPG is widely used in the field of biotechnology cryogenic extraction, furnace roasting, automobile fuel and residential life due to its low pollution, high heat output, easy transport, stable pressure, simple storage and flexible supply. In recent years, China has vigorously promoted energy revolution and transformation and is establishing a green and diversified energy supply system, while LPG is one of the green clean energy sources. LPG plays an indispensable role for the management of air pollution and urbanisation, and China actively supports the use of LPG. For instance, the State Administration of Taxation released the Notice on the Policy of Streamlining and Combination of Value-Added Tax Levy Rates in June 2017, and resolved to adjust the value-added tax rate commencing on 1 July 2017. The value-added tax rates on LPG products were reduced from 13% to 11%, making their prices more competitive. With the continuous transformation of reform achievements into favourable measures, it will effectively reduce the burden on enterprises and help them gain new impetus for development. 2017 6 2017 7 1 13% 11% MD & A The retail network; bottle distribution system and its customer base are the core values of the bottled LPG business and the key factors determining the competitiveness and profitability of the bottled LPG market. We will accelerate and optimise the establishment of retail and distribution network with the support of information technology, explore new business models and actively conduct research on the application of emerging technologies in the field of bottled LPG. We also actively explore business opportunities and operation models in community public service and selectively carry out community public service. 17
Management Discussion and Analysis PROSPECTS (Continued) Barreled drinking water business With the enhancement of people's health and safety awareness, packaged drinking water, including barreled water, has become the main source of drinking water for households. Such market has a huge room for growth. The newly revised Food Safety Law is strictly implemented while consumer safety awareness of food is further enhanced. The food regulatory authorities are accelerating the establishment of food safety regulatory system and full traceability system. The Group will expedite the establishment of a quality and safety guarantee system to adapt the characteristics of the drinking water industry and establish a healthy brand image. Development plan With the stable growth of the national economy and the steady progress of the market-oriented reform of natural gas and LPG, the Group will continue to develop its existing users and vigorously cooperate with the government to commence Coal to Gas business. At the same time, the Group will make use of its competitive edges in operation management, safety management, and brand services to conduct centralised procurement of resources in order to reduce the cost of gas source. The Group is actively expanding its existing businesses and looking for opportunities for development of other new businesses, including but not limited to expand the scale of investment in existing subsidiaries; acquire other businesses; expand its gas stations and to utilise the advantages of distribution system to develop gas fuel, living products, kitchen and cold chain products, it is expected to require relatively large amount of cash. Respective plans have yet to been implemented and the Group will make further announcement(s) as and when appropriate and comply with all applicable requirements under the Listing Rules. 18 Chinese People Holdings Company Limited 2017 Interim Report
Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income For the six months ended 30 September 2017 (Unaudited) Six months ended 30 September 9 30 2017 2016 Notes RMB 000 RMB 000 Continuing operations Revenue 3 484,555 346,799 Cost of sales and services (363,506) (249,253) Financials Gross profit 121,049 97,546 Other gains and losses 4 (11,383) (9,605) Other income 5 8,314 10,684 Finance costs 6 (5,097) (6,364) Selling and distribution expenses (48,090) (39,591) Administrative expenses (55,600) (51,366) Share of results of associates 18,508 8,609 Share of results of joint ventures 87,407 75,293 Profit before tax 115,108 85,206 Income tax expense 7 (11,480) (9,201) Profit for the period from continuing operations 8 103,628 76,005 Discontinued operation Profit for the period from discontinued operation 9-53,435 Profit for the period 103,628 129,440 Other comprehensive income for the period Item that may be reclassified subsequently to profit or loss: change in fair value of available-for-sale investments 21 1 Total comprehensive income for the period 103,649 129,441 19
Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income For the six months ended 30 September 2017 (Unaudited) Six months ended 30 September 9 30 2017 2016 Note RMB 000 RMB 000 Attributable to: Owners of the Company Profit from continuing operations 90,674 67,037 Profit from discontinued operation - 53,435 90,674 120,472 Non-controlling interests Profit from continuing operations 12,954 8,968 103,628 129,440 Total comprehensive income attributable to: Owners of the Company 90,695 120,473 Non-controlling interests 12,954 8,968 103,649 129,441 Earnings per share 11 RMB RMB From continuing and discontinued operations basic and diluted 1.31 cents 1.73 cents From continuing operations basic and diluted 1.31 cents 0.97 cents 20 Chinese People Holdings Company Limited 2017 Interim Report
Consolidated Statement of Financial Position At 30 September 2017 At 30 September At 31 March 2017 2017 (Unaudited) (Audited) 2017 2017 9 30 3 31 Notes RMB 000 RMB 000 Non-current assets Property, plant and equipment 12 646,790 619,984 Investment properties 12 13,200 13,200 Prepaid lease payments 12 58,559 59,306 Goodwill 14,051 14,051 Intangible assets 13 26,210 26,825 Interests in associates 126,074 107,566 Interests in joint ventures 1,004,962 917,556 Available-for-sale investments 16,721 15,032 Long-term deposits and other receivables 16,541 31,844 Financials 1,923,108 1,805,364 Current assets Inventories 22,250 21,401 Trade, bills and other receivables and prepayments 14 117,557 112,056 Amount due from a joint venture 20,189 24,556 Prepaid lease payments 1,263 1,494 Bank balances and cash 402,653 392,287 563,912 551,794 Current liabilities Trade and other payables 15 241,350 216,352 Tax liabilities 37,587 41,635 Amount due to an associate 15 299 Amount due to a joint venture 4,103 Consideration payable 157,539 155,768 Bank borrowings 16 61,000 62,000 497,491 480,157 Net current assets 66,421 71,637 Total assets less current liabilities 1,989,529 1,877,001 21
Consolidated Statement of Financial Position At 30 September 2017 At 30 September At 31 March 2017 2017 (Unaudited) (Audited) 2017 2017 9 30 3 31 Note RMB 000 RMB 000 Capital and reserves Share capital 17 465,730 453,328 Reserves 1,295,364 1,203,848 Equity attributable to owners of the Company 1,761,094 1,657,176 Non-controlling interests 179,621 168,937 Total equity 1,940,715 1,826,113 Non-current liabilities Bank borrowings 40,500 42,500 Deferred tax liabilities 8,314 8,388 48,814 50,888 1,989,529 1,877,001 22 Chinese People Holdings Company Limited 2017 Interim Report
Condensed Consolidated Statement of Changes in Equity For the six months ended 30 September 2017 Attributable to owners of the Company Contributed Surplus reserve Deemed Capital Investment revaluation Other Share capital Share premium Capital reserve surplus fund contribution contribution reserve reserve Share-based compensation reserve Retained earnings (accumulated losses) Total Non controlling interests Total RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 Note (a) Note (b) Note (c) Note (d) (a) (b) (c) (d) At 1 April 2016 (audited) 2016 4 1 453,328 944,616 2,086 92,665 77,270 26,628 7,721 (7) 7,175 (172,060) 1,439,422 164,988 1,604,410 Financials Total comprehensive income for the period Profit for the period 120,472 120,472 8,968 129,440 Total other comprehensive income 1 1 1 Total comprehensive income for the period 1 120,472 120,473 8,968 129,441 Appropriations 2,963 (2,963) Dividends paid to non-controlling interest of subsidiaries (20,860) (20,860) At 30 September 2016 (unaudited) 2016 9 30 453,328 944,616 2,086 92,665 80,233 26,628 7,721 (6) 7,175 (54,551) 1,559,895 153,096 1,712,991 At 1 April 2017 (audited) 2017 4 1 453,328 944,616 2,086 92,665 95,168 26,628 7,721 (7) 6,822 12,212 15,937 1,657,176 168,937 1,826,113 Total comprehensive income for the period Profit for the period 90,674 90,674 12,954 103,628 Total other comprehensive income 21 21 21 Total comprehensive income for the period 21 90,674 90,695 12,954 103,649 Recognition of share-based payments 13,223 13,223 13,223 Issue of Award Shares (note 18) 18 12,402 13,033 (25,435) Capital injection from non-controlling interests of subsidiaries 8,450 8,450 Dividends paid to non-controlling interest of subsidiaries (10,720) (10,720) At 30 September 2017 (unaudited) 2017 9 30 465,730 957,649 2,086 92,665 95,168 26,628 7,721 14 6,822 106,611 1,761,094 179,621 1,940,715 23
Condensed Consolidated Statement of Changes in Equity For the six months ended 30 September 2017 Notes: (a) Capital reserve was recognised as a result of acquisition of additional interest in an associate which became a subsidiary. (a) (b) Contributed surplus represents the difference between the nominal value of the Company s share capital issued as consideration in exchange for the nominal value of the issued share capital of the subsidiaries acquired at the time of the Company s listing in 1997. (b) 1997 (c) The articles of association of the Company s subsidiaries incorporated in the People s Republic of China (the PRC or China ) state that they should make an appropriation of 10% of their profit for the year (prepared under generally accepted accounting principles in the PRC) each year to the surplus reserve fund until the balance reaches 50% of the paid-in capital. The surplus reserve fund shall only be used for making good losses, capitalisation into paid-in capital and expansion of their production and operation. (c) 10% 50% (d) The other reserve of the Group represents the effect arising from the change in the Group s equity interest on existing subsidiary without losing control. (d) 24 Chinese People Holdings Company Limited 2016 Interim Report
Condensed consolidated statement of cash flows For the six months ended 30 September 2017 (Unaudited) Six months ended 30 September 9 30 2017 2016 RMB 000 RMB 000 Net cash from operating activities 66,576 31,942 Financials Net cash used in investing activities (47,330) (2,106) Net cash used in financing activities (8,880) (32,058) Net increase (decrease) in cash and cash equivalents 10,366 (2,222) Cash and cash equivalents at beginning of the period 392,287 305,147 Cash and cash equivalents at end of the period 402,653 302,925 Analysis of balances of cash and cash equivalents Bank balances and cash 402,653 302,925 25
Notes to the Condensed Consolidated Financial Statements For the six months ended 30 September 2017 1. GENERAL INFORMATION Chinese People Holdings Company Limited (the Company ) is incorporated and domiciled in Bermuda as an exempted company with limited liability on 13 November 1996. On 24 April 1997, the Company s shares were listed on the Main Board of The Stock Exchange of Hong Kong Limited (the Stock Exchange ). The address of the registered office and principal place of business of the Company are disclosed in the section headed Corporate Information of the Company s interim report. 1. 1996 11 13 1997 4 24 The Company acts as an investment holding company. The Group is principally engaged in the sales and distribution of natural gas and Liquefied Petroleum Gas ( LPG ) in the PRC, including the provision of piped gas, transportation, distribution and retail of LPG and production and sale of barreled drinking water. The condensed consolidated financial statements are presented in Renminbi ( RMB ), which is also the functional currency of the Company and its subsidiaries (collectively referred to as the Group ). 2. BASIS OF PREPARATION AND PRINCIPAL ACCOUNTING POLICIES The condensed consolidated financial statements have been prepared in accordance with Hong Kong Accounting Standard ( HKAS ) 34 Interim Financial Reporting issued by the Hong Kong Institute of Certified Public Accountants ( HKICPA ) as well as with the applicable disclosure requirements of Appendix 16 to the Rules Governing the Listing of Securities (the Listing Rules ) on the Stock Exchange. 2. 34 The condensed consolidated financial statements have been prepared on the historical cost basis except for certain properties and financial instruments, which are measured at fair values, as appropriate. Except as described below, the accounting policies and methods of computation used in the condensed consolidated financial statements are the same as those followed in the preparation of the Group s financial statements for the year ended 31 March 2017. 2017 3 31 26 Chinese People Holdings Company Limited 2017 Interim Report
Notes to the Condensed Consolidated Financial Statements 2. BASIS OF PREPARATION AND PRINCIPAL ACCOUNTING POLICIES 2. (Continued) In the current interim period, the Group has applied, for the first time, the following amendments to Hong Kong Financial Reporting Standards ( HKFRSs ) issued by the HKICPA: Amendments to HKAS 7 Amendments to HKAS 12 Amendments to HKFRS 12 Disclosure Initiative Recognition of Deferred Tax Assets for Unrealised Losses As Part of the Annual Improvement to HKFRSs 2014-2016 Cycle 7 12 12 20142016 The above amendments to HKFRSs have been applied retrospectively or prospectively as required by the respective amendments. Except as described below, the application of the above amendments to HKFRSs in the current interim period has had no material impact on the Group s financial performance and positions and/or on the disclosures set out in these condensed consolidated financial statements. Additional disclosures about changes in liabilities arising from financing activities, including both changes from cash flows and non-cash changes on application of amendments to HKAS 7 will be provided in the consolidated financial statements for the year ending 31 March 2018. 7 2018 3 31 Notes to Financials 27
Notes to the Condensed Consolidated Financial Statements For the six months ended 30 September 2017 3. SEGMENT INFORMATION Information reported to the Group s chief operating decision maker ( CODM ), being the managing Director of the Company, for the purposes of resource allocation and assessment of segment performance focuses on types of goods sold or services rendered which is also consistent with the basis of organisation of the Group. 3. The Group ceased the lottery agency business ( Discontinued Operation ) upon the completion of disposal of a group of subsidiaries on 30 June 2016 as described in note 9. Accordingly, the results of lottery agency business for the six months ended 30 September 2016 have been separately presented as Discontinued Operation in the condensed consolidated statement of profit or loss and other comprehensive income. 2016 6 30 9 2016 9 30 The Group s reportable and operating segments under HKFRS 8 are as follows: (1) Provision of piped gas construction of gas pipeline networks and provision of piped gas; (2) Transportation, distribution and retail of LPG the sale of LPG in bulk to wholesale customers and the retail of LPG to end user households, industrial and commercial customers; and 8 (1) (2) (3) Production and sale of barreled drinking water. (3) 28 Chinese People Holdings Company Limited 2017 Interim Report
Notes to the Condensed Consolidated Financial Statements 3. SEGMENT INFORMATION (Continued) The following is an analysis of the Group s revenue and results by reportable and operating segment. For the six months ended 30 September 2017 3. 2017 9 30 Provision of piped gas Continuing operations Transportation, distribution and retail of LPG Production and sale of barreled drinking water Total RMB 000 RMB 000 RMB 000 RMB 000 Revenue from external customers 216,233 268,069 253 484,555 Segment profit (loss) 21,088 9,538 (155) 30,471 Unallocated income 4,767 Central administration costs (20,948) Share of results of associates 18,508 Share of results of joint ventures 87,407 Finance costs (5,097) Notes to Financials Profit before tax from continuing operations 115,108 Other segment information Amounts included in the measure of segment results: Depreciation 12,069 5,327 25 17,421 Amortisation 1,198 395 1,593 19,014 Unallocated depreciation and amortisation 888 Total 19,902 (Gain) loss on disposal of property, plant and equipment 711 (3,608) (2,897) Amounts regularly provided to the CODM but not included in the measure of segment results: Interests in associates 126,074 Interests in joint ventures 1,004,962 Share of results of associates 18,508 Share of results of joint ventures 87,407 29
Notes to the Condensed Consolidated Financial Statements For the six months ended 30 September 2017 3. SEGMENT INFORMATION (Continued) For the six months ended 30 September 2016 3. 2016 9 30 Provision of piped gas Continuing operations Transportation, distribution and retail of LPG Production and sale of barreled drinking water Total RMB 000 RMB 000 RMB 000 RMB 000 Revenue from external customers 186,337 158,579 1,883 346,799 Segment profit (loss) (508) 14,416 1,529 15,437 Unallocated income 1,995 Central administration costs (9,764) Share of results of associates 8,609 Share of results of joint ventures 75,293 Finance costs (6,364) Profit before tax from continuing operations 85,206 Other segment information Amounts included in the measure of segment results: Depreciation 10,778 4,749 25 15,552 Amortisation 942 351 1,293 16,845 Unallocated depreciation and amortisation 980 Total 17,825 Loss on disposal of property, plant and equipment 248 159 407 Amounts regularly provided to the CODM but not included in the measure of segment results: Interests in associates 96,917 Interests in joint ventures 863,076 Share of results of associates 8,609 Share of results of joint ventures 75,293 30 Chinese People Holdings Company Limited 2017 Interim Report
Notes to the Condensed Consolidated Financial Statements 3. SEGMENT INFORMATION (Continued) Segment revenue reported above represents revenue generated from external customers. There were no inter-segment sales in the current period (2016: nil). 3. 2016 The accounting policies of the reportable and operating segments are the same as the Group s accounting policies described in the annual report for the year ended 31 March 2017. Segment profit (loss) represents the profit earned (loss incurred) by each segment without allocation of share of results of associates, share of results of joint ventures, central administration costs, finance costs and certain other income and other gains and losses. This is the measure reported to the CODM for the purpose of resource allocation and performance assessment. 2017 3 31 The following is an analysis of the Group s assets and liabilities by reportable and operating segments. Segment assets At 30 September 2017 2017 9 30 RMB 000 At 31 March 2017 2017 3 31 RMB 000 Notes to Financials Provision of piped gas 620,491 601,048 Transportation, distribution and retail of LPG 280,784 282,527 Production and sale of barreled drinking water 519 4,641 Total segment assets 901,794 888,216 Investment properties 13,200 13,200 Interests in associates 126,074 107,566 Interests in joint ventures 1,004,962 917,556 Available-for-sale investments 16,721 15,032 Bank balances and cash 402,653 392,287 Unallocated assets 21,616 23,301 Consolidated assets 2,487,020 2,357,158 31
Notes to the Condensed Consolidated Financial Statements For the six months ended 30 September 2017 3. SEGMENT INFORMATION (Continued) Segment liabilities 3. At 30 September 2017 2017 9 30 RMB 000 At 31 March 2017 2017 3 31 RMB 000 Provision of piped gas 172,416 156,330 Transportation, distribution and retail of LPG 142,988 136,562 Production and sale of barreled drinking water 80,961 80,115 Total segment liabilities 396,365 373,007 Bank borrowings 101,500 104,500 Tax liabilities 37,587 41,635 Deferred tax liabilities 8,314 8,388 Unallocated liabilities 2,539 3,515 Consolidated liabilities 546,305 531,045 For the purposes of monitoring segment performance and allocating resources between segments: all assets are allocated to operating segments other than investment properties, interests in associates, interests in joint ventures, available-for-sale investments, bank balances and cash, certain property, plant and equipment and other receivables; and all liabilities are allocated to operating segments other than bank borrowings, tax liabilities, deferred tax liabilities and certain other payables. Geographical information The Group s business is principally carried out in the PRC. All the revenue of the Group for both periods are derived from the PRC based on the locations of goods delivered and services provided and the Group s non-current assets are physically located in the PRC. Accordingly, no geographical information is presented. 32 Chinese People Holdings Company Limited 2017 Interim Report
Notes to the Condensed Consolidated Financial Statements 4. OTHER GAINS AND LOSSES 4. (Unaudited) Six months ended 30 September 9 30 2017 2016 RMB 000 RMB 000 Gain (loss) on disposal of property, plant and equipment 2,897 (407) Net allowances charged in respect of other receivables (13,896) (9,494) Net foreign exchange (loss) gain (384) 296 (11,383) (9,605) 5. OTHER INCOME 5. (Unaudited) Six months ended 30 September 9 30 2017 2016 RMB 000 RMB 000 Notes to Financials Bank interest income 4,131 1,026 Dividend income from available-for-sale investments 1 Gain on disposal of available-for sale investments 129 Interest income from loan to a non-controlling interests of subsidiary 241 Interest income from loan to a joint venture 506 735 Rental income 323 656 Repair and maintenance services income 456 1,333 Government grant 46 4 Others 2,722 6,689 8,314 10,684 33
Notes to the Condensed Consolidated Financial Statements For the six months ended 30 September 2017 6. FINANCE COSTS 6. (Unaudited) Six months ended 30 September 9 30 2017 2016 RMB 000 RMB 000 Imputed interest on consideration payable 5,966 Interest on consideration payable 1,771 Interest on bank borrowings wholly repayable within five years 3,326 398 5,097 6,364 7. INCOME TAX EXPENSE 7. (Unaudited) Six months ended 30 September 9 30 2017 2016 RMB 000 RMB 000 PRC Enterprise Income Tax current tax 12,214 9,181 (over) under provision in previous periods (660) 24 Deferred taxation (74) (4) 11,480 9,201 No provision for Hong Kong Profits Tax has been made in the condensed consolidated financial statements as the Group had no assessable profits derived in Hong Kong for both periods. Under the Law of the PRC on Enterprise Income Tax (the EIT Law ) and Implementation Regulation of the EIT Law, the tax rate of the PRC subsidiaries is 25%. Certain PRC group entities are entitled to the preferential tax rate pursuant to the relevant regulations applicable to enterprises situated in the western regions of the PRC. The applicable tax rate of those PRC group entities is 15% for the six months ended 30 September 2017 and 2016. 25% 20172016 9 30 15% 34 Chinese People Holdings Company Limited 2017 Interim Report
Notes to the Condensed Consolidated Financial Statements 8. PROFIT FOR THE PERIOD FROM CONTINUING OPERATIONS Profit for the period from continuing operations has been arrived at after charging the following: 8. (Unaudited) Six months ended 30 September 9 30 2017 2016 RMB 000 RMB 000 Staff costs including Directors emoluments: Directors emoluments 10,191 3,636 Salaries, allowance and benefits in kind 48,293 46,958 Share-based payments 5,529 Retirement benefits scheme contribution 7,004 6,547 71,017 57,141 Cost of inventories recognised as expenses 316,530 210,854 Depreciation of property, plant and equipment 18,309 16,532 Amortisation of prepaid lease payments 978 691 Amortisation of intangible assets (included in administrative expenses) 615 602 Operating lease payments in respect of rented premises 4,093 3,072 Contract cost recognised as expense in respect of gas connection construction contracts 23,952 14,556 Notes to Financials 35
Notes to the Condensed Consolidated Financial Statements For the six months ended 30 September 2017 9. DISCONTINUED OPERATION On 28 June 2016, Beijing Zhongmin Yongheng Investment Consultant Co., Ltd. ( Zhongmin Yongheng ), a whollyowned subsidiary of the Company, and the Company (collectively as the Vendors ) and Yongheng Development Corporation Limited and Yongheng Development Group (Shenzhen) Co., Ltd (collectively as the Purchasers ), which were held by a director of Shenzhen Le Cai (as defined below) who regard as connected persons at the subsidiary level of the Company, entered into equity transfer agreements, pursuant to which the Vendors agreed to sell and the Purchasers agreed to purchase the entire equity interest in Shenzhen Yongheng Le Cai Technology Development Limited ( Shenzhen Le Cai ); Shenzhen Yongheng Jin Cai Technology Development Limited and Shenzhen Cai Cai Le Electronic Entertainment Technology Development Limited, wholly-owned subsidiaries of the Company (collectively as Lottery Companies ) for the total consideration of RMB73,000,000, which be satisfied by the Purchasers as to (i) RMB20,000,000 in cash and in instalment to the Vendors and (ii) RMB53,000,000 settled through assumption of all the shareholder s loan and other debts owing by Zhongmin Yongheng to Shenzhen Le Cai. The disposal of the Lottery Companies was effected in order to minimise the Company s exposure on the short term difficulties to the PRC lottery market which resulted from the current regulatory development of the PRC lottery industry. Upon the disposal of Lottery Companies completed on 30 June 2016, the Group discontinued its lottery agency business. The profit for the six months ended 30 September 2016 from the Discontinued Operation was presented below. 9. 2016 6 28 73,000,000(i) 20,000,000 (ii) 53,000,000 2016 6 30 2016 9 30 36 Chinese People Holdings Company Limited 2017 Interim Report