Chinney Alliance : Interim Report 2020

Interim Report

2020

* For identification purpose only

CONTENTS

Corporate Information	2
Review of Operations	4
Condensed Consolidated Statement of Profit or Loss	10
Condensed Consolidated Statement of Comprehensive Income	11
Condensed Consolidated Statement of Financial Position	12
Condensed Consolidated Statement of Changes in Equity	14
Condensed Consolidated Statement of Cash Flows	15
Notes to the Condensed Consolidated Interim Financial Statements	17
Other Information	38

Interim Report 2020

Chinney Alliance Group Limited

1

CORPORATE INFORMATION

BOARD OF DIRECTORS

Executive Directors

James Sai-Wing WONG (Chairman)

Yuen-KeungCHAN (Vice Chairman and Managing Director)

James Sing-Wai WONG

Philip Bing-Lun LAM

Non-Executive Director

Wendy Kim-See GAN

Independent Non-Executive Directors

Yuen-Tin NG

Chi-Chiu WU

Ronald James BLAKE

AUDIT COMMITTEE

Yuen-Tin NG (Chairman)

Chi-Chiu WU

Wendy Kim-See GAN

REMUNERATION COMMITTEE

Chi-Chiu WU (Chairman)

Yuen-Tin NG

Wendy Kim-See GAN

COMPANY SECRETARY

Yun-Sang LO

PRINCIPAL BANKERS

The Hongkong and Shanghai Banking

Corporation Limited

The Bank of East Asia, Limited

Shanghai Commercial Bank Limited

Hang Seng Bank Limited

Bank of China (Hong Kong) Limited

AUDITOR

Ernst & Young

PRINCIPAL SHARE REGISTRAR

AND TRANSFER OFFICE

Ocorian Management (Bermuda) Limited Victoria Place, 5th Floor

31 Victoria Street

Hamilton HM 10 Bermuda

HONG KONG BRANCH SHARE REGISTRAR AND TRANSFER OFFICE

Tricor Tengis Limited

Level 54, Hopewell Centre

183 Queen's Road East

Hong Kong

REGISTERED OFFICE

Clarendon House

2 Church Street

Hamilton HM 11

Bermuda

HEAD OFFICE AND PRINCIPAL PLACE OF BUSINESS

23rd Floor

Wing On Centre

111 Connaught Road Central

Hong Kong

STOCK CODE

SEHK 00385

2

Chinney Alliance Group Limited

Interim Report 2020

CORPORATE INFORMATION

BUSINESS ADDRESSES AND CONTACTS

Chinney Alliance Group Limited	Chinney Construction Company, Limited
23rd Floor	Block A&B, 9th Floor
Wing On Centre	Hong Kong Spinners Industrial Building, Phase VI
111 Connaught Road Central	481-483 Castle Peak Road
Hong Kong	Kowloon
		Hong Kong
Tel	: (852) 2877-3307
Fax	: (852) 2877-2035	Tel	: (852) 2371-0100
Website	: http://chinneyalliancegroup.etnet.com.hk	Fax	: (852) 2411-1402
E-mail	: [e-mail]	E-mail	: [e-mail]

Kin Wing Engineering Company Limited	DrilTech Ground Engineering Limited
Kin Wing Foundations Limited	DrilTech Geotechnical Engineering Limited
Block A&B, 9th Floor	Block A&B, 8th Floor
Hong Kong Spinners Industrial Building, Phase VI	Hong Kong Spinners Industrial Building, Phase VI
481-483 Castle Peak Road	481-483 Castle Peak Road
Kowloon		Kowloon
Hong Kong	Hong Kong
Tel	: (852) 2415-6509	Tel	: (852) 2371-0008
Fax	: (852) 2490-0173	Fax	: (852) 2744-1037
Website	: http://www.kinwing.com.hk	Website	: http://www.driltech.com.hk
E-mail	: [e-mail]	E-mail	: [e-mail]
Shun Cheong Electrical Engineering Company Limited	Jacobson van den Berg (Hong Kong) Limited
Westco Airconditioning Limited
Block C, 9th Floor	Flat A, 7th Floor
Hong Kong Spinners Industrial Building, Phase VI	Cheung Lung Industrial Building
481-483 Castle Peak Road	10 Cheung Yee Street
Kowloon		Kowloon
Hong Kong	Hong Kong
Tel	: (852) 2426-3123	Tel	: (852) 2828-9328
Fax	: (852) 2481-3463	Fax	: (852) 2828-9408
E-mail	: [e-mail]	Website	: http://www.jvdb.com
		E-mail	: [e-mail]
Westco Chinney Limited	Chinney Alliance Engineering Limited
Block C, 9th Floor	Unit 901-903, 9th Floor
Hong Kong Spinners Industrial Building, Phase VI	Laford Centre
481-483 Castle Peak Road	838 Lai Chi Kok Road
Kowloon		Kowloon
Hong Kong	Hong Kong
Tel	: (852) 2362-4301	Tel	: (852) 3798-3800
Fax	: (852) 2412-1706	Fax	: (852) 2960-1013
Website	: http://www.westcochinney.com	Website	: http://www.chinney-eng.com
E-mail	: [e-mail]	E-mail	: [e-mail]

Interim Report 2020

Chinney Alliance Group Limited

3

REVIEW OF OPERATIONS

RESULTS

The board of directors (the "Board") of Chinney Alliance Group Limited (the "Company", collectively with its subsidiaries, the "Group") is pleased to announced that the Group recorded a revenue of HK$2,177 million (2019: HK$2,453 million), with net profit of HK$60.6 million (2019: HK$91.7 million) for the six months ended 30 June 2020. The profit attributable to the equity holders of the Company was HK$52.3 million (2019: HK$84.8 million).

INTERIM DIVIDEND

The Board does not recommend the payment of an interim dividend for the six months ended 30 June 2020 (2019: Nil).

BUSINESS REVIEW AND PROSPECTS

The results and prospects of our major business segments are set out below:

Trading of plastics and chemical products

Jacobson van den Berg (Hong Kong) Limited and its fellow subsidiaries generated revenue of HK$182 million (2019: HK$235 million) from sales to external customers and an operating loss of HK$1.4 million (2019: loss of HK$2.0 million). The trading environment for our plastics business has been an uphill battle for the past two years. While the US and Mainland China reached an agreement to ease trade tensions at the beginning of the year, manufacturers were hit with shut downs due to the COVID-19 pandemic. The demand for our traditional plastic and chemical products decreased even more. The provision for slow moving plastic and chemical goods and net exchange losses from the weak Renminbi further lowered its margins. Fortunately, an increase in the sale and profit contribution from "JcoNAT" disinfectant products partly compensated for the loss from plastics operations. Our managers are diligently exploring ways to broaden the scope of its trading business to strengthen its market position and maintain quality customers. It is also developing new distribution channels for "JcoNAT" products in Hong Kong and Mainland China to expand its market presence.

Building related contracting services

Shun Cheong Investments Limited and its subsidiaries ("Shun Cheong") has core businesses in heat, ventilation and air-conditioning, water, electrical, and fire services contributing revenue of HK$905 million (2019: HK$1,160 million) with operating profits of HK$41.1 million (2019: HK$52.5 million). The current major projects were still in early stages of construction, thus profit contribution were lower than that of the corresponding period last year. There were also increases in staff costs and overhead to support the increase in the number of active projects. As at the end of the reporting period, the segment had outstanding contract sums of approximately HK$4,167 million, with additional HK$357 million worth projects were awarded subsequently.

Building construction

Chinney Construction Company, Limited ("Chinney Construction") and Chinney Builders Company Limited, which operate in Hong Kong, and Chinney Timwill Construction (Macau) Company Limited earned a combined revenue of HK$305 million (2019: HK$522 million) and achieved an operating profit of HK$14.9 million (2019: HK$46.2 million). This business was affected by previous active projects being completed yet the award of new projects had been delayed due to the social and COVID-19 pandemic situations. Consequently, revenue and profit were both reduced for the current period. However, the award of major projects in the second and the third quarters of this year has improved business prospects for the remainder of the year. An outstanding contract sum of approximately HK$896 million as at 30 June 2020 and additional HK$391 million worth projects were awarded subsequent to the end of the reporting period.

4

Chinney Alliance Group Limited

Interim Report 2020

REVIEW OF OPERATIONS

BUSINESS REVIEW AND PROSPECTS (continued)

Foundation piling and ground investigation

Chinney Kin Wing Holdings Limited ("Chinney Kin Wing", together with its subsidiaries, the "Chinney Kin Wing Group") contributed revenue of HK$687 million (2019: HK$518 million) and operating profit of HK$39.9 million (2019: HK$34.8 million) to the Group. The increase in revenue in the current period was attributable to the contribution from certain sizeable contracts from our foundation division. The gross profit recognised also increased, but not in proportion to the increase in revenue. This was due to lower profit margins resulting from the continuing weak market combined with intense competition. The Chinney Kin Wing Group and market players had to adopt more aggressive pricing policies to win business. Moreover, more stringent contractual requirements as well as higher labour costs due to operational constraints brought on by COVID-19 pandemic further eroded profit margins. At the same time, Chinney Kin Wing Group increased staff costs to reward and retain talented staff so as to maintain workforce performance and productivity.

As at 30 June 2020, Chinney Kin Wing Group had 11 and 48 projects in progress with contract sums of approximately HK$3,107 million and HK$356 million in the foundation and drilling divisions, respectively.

Since the outbreak of the COVID-19, the management of Chinney Kin Wing Group implemented a series of precautionary and control measures to ensure the safety of our staff and members, with the purpose of providing a safe and hassle-free workplace. To sustain business growth and achieve financial stability amid fierce competitions in the foundation market, Chinney Kin Wing Group will continue to implement a series of practical and effective measures, including but not limited to stringent cost controls, reduction of administrative expenses, optimisation of the workforce and resource allocation, enhancing production efficiency, empowering project management teams as well as strengthening the core and extended business fundamentals through a significant investment in staff recruitment and various resources in a timely manner. The management of Chinney Kin Wing will focus on bidding for large-scale and complex foundation contracts offered by public and private sectors as well as diversifying their scope of business activities. At the same time, the drilling division, DrilTech, will endeavour to diversify its business by allocating resources to expand the scope of services in marine ground investigation, instrumentation and field testing. Given their sizeable pool of exceptionally talented team members, the management of Chinney Kin Wing foresees that DrilTech will continue to expand its client base and contribute to the stable and sustainable development of the Chinney Kin Wing Group through 2020, and in turn enhance the revenue and profit contribution in the coming years.

On 20 July 2020, the Company and Chinney Kin Wing announced a possible acquisition of the 50% equity interest in a company which holds land that can be used by the Chinney Kin Wing Group as a storage depot. If the acquisition materialises, this depot will serve as an ideal hub for our production team and general workforce to better streamline, centralise and enhance the Chinney Kin Wing Group's plant maintenance and engineering works as well as optimise the machinery and equipment storage system.

Other businesses

Other businesses recorded a profit of HK$2.2 million (2019: loss of HK$2.3 million), due mainly to profit contributions from Chinney Alliance Engineering Limited (the Group's aviation business) of HK$3.3 million. The aviation business is running some significant projects for the Hong Kong International Airport and is expected to contribute profit to the Group in the coming years.

Interim Report 2020

Chinney Alliance Group Limited

5

REVIEW OF OPERATIONS

FINANCIAL REVIEW

Liquidity and financial resources

Total interest-bearing debts of the Group, which included trust receipt loans, bank loans and lease liabilities, amounted to HK$290.7 million as at 30 June 2020 (31 December 2019: HK$315.0 million), with no bank overdrafts (31 December 2019: bank overdrafts HK$7.2 million excluded from total interest-bearing debts). The Group's lease liabilities amounted to HK$66.0 million as at 30 June 2020

(31 December 2019: HK$71.1 million). There were HK$234.3 million or 81% (31 December 2019: HK$256.2 million or 81%) of interest-bearing debts classified as current liabilities. The current portion of interest-bearing debts included bank borrowings with repayment-on-demand conditions imposed by the lenders. If that portion of the bank borrowings repayable after one year was classified as non-current liabilities, the current portion of the total interest-bearing debts would be reduced by HK$16.8 million to HK$217.5 million, or 75% of the total interest-bearing debts. Included in the current portion of interest-bearing debts were trust receipt loans of HK$121.4 million (31 December 2019: HK$144.8 million) for financing the purchases of goods by the Plastic Trading segment and the purchases of materials and equipment for installation in the projects of the Building Services segment. Current ratio of the Group as at 30 June 2020, measured by total current assets over total current liabilities, was 1.8 (31 December 2019: 1.7). Total unpledged cash and bank balances less bank overdrafts as at 30 June 2020 were HK$561.9 million (31 December 2019: HK$640.6 million). The decrease in unpledged cash and bank balances less bank overdrafts was mainly due to net cash outflow from operations of HK$30.5 million and net cash outflow for the purchase of property, plant and equipment of HK$22.9 million, net repayment of trust receipt loans of HK$23.4 million and repayment of lease liabilities of HK$6.3 million, net of net inflow from bank loans drawn less repayments of HK$4.2 million.

The Group had a total of HK$2,080 million undrawn banking facilities at period-end available for its working capital, trade finance and issue of performance/surety bonds. The gearing ratio of the Group, measured by total interest-bearing borrowings of HK$290.7 million over the equity attributable to the owners of the Company of HK$1,954.5 million, was 14.9% as at 30 June 2020 (31 December 2019: 16.3%).

Funding and treasury policy

The Group maintains a prudent funding and treasury policy. Surplus funds are maintained in the form of cash deposits with leading banks. Borrowings are mainly denominated in Hong Kong dollars and bear interest at floating rates. Forward contracts of a non-speculative nature are entered to hedge the foreign currency trade purchase commitments of the Group when desirable.

Pledge of assets

As of 30 June 2020, certain properties having an aggregate book value of HK$185.1 million were pledged to banks to secure bank loans and general banking facilities extended to the Group. In addition, time deposits of HK$0.5 million were pledged to banks to secure the performance/surety bonds issued in favour of the Group's clients on contracting works.

6

Chinney Alliance Group Limited

Interim Report 2020

REVIEW OF OPERATIONS

FINANCIAL REVIEW (continued)

Contingent liability

Details of the contingent liabilities of the Group are set out in note 15 to the condensed consolidated interim financial statements.

Employees and remuneration policies

The Group employed approximately 1,840 staff in Hong Kong and other parts of the People's Republic of China (the "PRC") as of 30 June 2020. Remuneration packages are reviewed annually and determined by reference to market pay and individual performance. In addition to salary payments and year-end discretionary bonuses, the Group also provides other employment benefits including medical insurance cover, provident fund and educational subsidies to eligible staff.

CONNECTED TRANSACTIONS

1. On 20 September 2016, Gold Famous Development Limited ("Gold Famous"), an indirect wholly-owned subsidiary of Hon Kwok Land Investment Company, Limited ("Hon Kwok") and an indirect non wholly-owned subsidiary of Chinney Investments, Limited ("Chinney Investments"), as the employer entered into a framework agreement (the "Foundation Framework Agreement") with Kin Wing Foundations Limited ("KWF"), an indirect wholly-owned subsidiary of Chinney Kin Wing and an indirect non wholly-owned subsidiary of the Company, as a contractor for the construction of piling foundation, pipe piling, bored pile wall works at K.C.T.L. 495, Kin Chuen Street, Kwai Chung, New Territories, Hong Kong (the "Land") at a contract sum of HK$210 million (the "Foundation Construction Works"). The entering into the Foundation Framework Agreement constituted a connected transaction of each of Chinney Investments, Hon Kwok, the Company and Chinney Kin Wing under the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the "Listing Rules"). On 7 November 2016, at the respective extraordinary general meetings held by each of Chinney Investments and Hon Kwok and at the respective special general meetings held by each of the Company and Chinney Kin Wing, the transaction was approved by the independent shareholders of each of Chinney Investments, Hon Kwok, the Company and Chinney Kin Wing.
   Details of the transaction were set out in the joint announcement of Chinney Investments, Hon Kwok, the Company and Chinney Kin Wing dated 20 September 2016 and the Company's circular dated 21 October 2016. During the six months ended 30 June 2020, no revenue was recognised by KWF as the Foundation Construction Works were substantially completed and pending for agreement of variation orders and final account of the project.

Interim Report 2020

Chinney Alliance Group Limited

7

REVIEW OF OPERATIONS

CONNECTED TRANSACTIONS (continued)

1. On 12 June 2018, Shun Cheong Data Centre Solutions Company Limited ("Shun Cheong Data Centre Solutions"), an indirect wholly-owned subsidiary of the Company, as a consultant entered into a consultancy agreement with Gold Famous (as the employer) for the provision of consultancy services by Shun Cheong Data Centre Solutions to Gold Famous in relation to the construction and development of a data centre in the Land (the "Data Centre Project") at a consultancy fee of HK$16,200,000 (the "Consultancy Agreement"). The entering into the Consultancy Agreement constituted a connected transaction for each of Chinney Investments, Hon Kwok and the Company. As the applicable percentage ratios for each of Chinney Investments, Hon Kwok and the Company were more than 0.1% but less than 5%, the transactions contemplated under the Consultancy Agreement were subject to the reporting and announcement requirements but exempt from the circular and independent shareholders' approval requirement for each of the companies under Chapter 14A of the Listing Rules.
   Details of the Consultancy Agreement and transactions contemplated thereunder were set out in a joint announcement of the Chinney Investments, Hon Kwok and the Company dated 12 June 2018. The revenue recognised by Shun Cheong Data Centre Solutions in respect of the transaction amounted to HK$4,050,000 during the six months ended 30 June 2020. The Consultancy Agreement was completed and the consultancy fee of HK$16,200,000 was received in full.
2. On 12 July 2018, Chinney Construction, an indirect wholly-owned subsidiary of the Company, entered into a framework agreement with Gold Famous as the employer for the construction works to be carried out by Chinney Construction as the main contractor for the Data Centre Project at a total contract sum of HK$757,838,691.70 (the "Construction Framework Agreement"). The entering into of the Construction Framework Agreement constituted a connected transaction of each of Chinney Investments, Hon Kwok and the Company. Pursuant to Rules 14A.81 and 14A.82 of the Listing Rules, the Consultancy Agreement and the Construction Framework Agreement should be aggregated as a series of transactions as they were entered into within a 12-month period and involved parties which were connected with one another among Chinney Investments, Hon Kwok and the Company. On 24 August 2018, at the respective extraordinary general meetings held by each of Chinney Investments and Hon Kwok and on the special general meeting held by the Company, the transaction was approved by the independent shareholders of each of Chinney Investments, Hon Kwok and the Company.
   Details of the transaction were set out in the joint announcement of Chinney Investments, Hon Kwok and the Company dated 12 July 2018 and the Company's circular dated 8 August 2018. During the six months ended 30 June 2020, revenue of HK$155,018,000 was recognised by Chinney Construction in respect of the transaction.

8

Chinney Alliance Group Limited

Interim Report 2020

REVIEW OF OPERATIONS

OUTLOOK

Hong Kong's economic outlook continues to be severely restricted by the COVID-19 pandemic. At the same time, the relationship between the US and China continues to deteriorate and their conflict is widening beyond trade.

In Hong Kong, GDP fell by 9% year-on-year in the second quarter of 2020. The unemployment rate once reached 6.2%: the highest in more than 15 years, and then reduced to 6.1% in May to July 2020. The local economy has been alternatively tightening and loosening based upon the number of local COVID-19 cases, with the most recent tightening measures implement to combat the third wave of the pandemic in July. The services industry has been the worst affected and there is speculation of a new wave of bankruptcies and layoffs before the end of the year. The Cash Pay-off Scheme, the Employment Support Scheme and other funding schemes have eased some of the difficulties faced by of businesses entities and households. The Group's businesses have also been affected as well as have received benefits in this economic environment. The Plastic Trading segment continues the development of products and distribution channels to grow its health related business segment. The Foundation, Building Construction and Building Services segments are facing keen competition on price and skilled workers, but have maintained their reputations for reliability and excellence. While the Group has satisfactory level of contracts secured, we are facing the most difficult business environment since the last SARS epidemic. However, we remain optimistic about prospects. As announced by the Government in the Long-term Housing Strategy Annual Progress Report 2019, the total housing supply targets for the 10-year period from fiscal year 2020/21 to 2029/30 will be 430,000 units. We believe this signals an increase in demand for the construction industry related businesses in Hong Kong for both public and private sectors for the next ten years.

APPRECIATION

I would like to thank my fellow directors for their advice and continued support, and more importantly to our staff at all levels for their dedication, hard work and contribution during these difficult times. I would also like to thank you, our shareholders, for your loyalty and support. And also thank you to our business partners and other stakeholders with whom we share our business development and success.

By Order of the Board

James Sai-Wing Wong

Chairman

Hong Kong, 26 August 2020

Interim Report 2020

Chinney Alliance Group Limited

9

CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS

		Six months ended 30 June
		2020		2019
		(Unaudited)	(Unaudited)
	Notes	HK$'000	HK$'000
REVENUE	3	2,177,135		2,453,426
Cost of sales/services provided		(1,847,472)	(2,098,110)
Gross profit		329,663		355,316
Other income	3	3,004		3,276
Selling and distribution costs		(6,480)	(6,882)
Administrative expenses		(258,075)	(229,261)
Other operating income/(expenses), net		16,988		(258)
Finance costs	4	(7,334)	(5,953)
PROFIT BEFORE TAX	5	77,766		116,238
Income tax expense	6	(17,176)	(24,524)
PROFIT FOR THE PERIOD		60,590		91,714
Attributable to:
Owners of the Company		52,256		84,766
Non-controlling interests		8,334		6,948
		60,590		91,714
EARNINGS PER SHARE ATTRIBUTABLE TO
ORDINARY EQUITY HOLDERS OF THE COMPANY	7
Basic and diluted		HK8.8 cents	HK14.3 cents

10

Chinney Alliance Group Limited

Interim Report 2020

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

	Six months ended 30 June
	2020		2019
	(Unaudited)	(Unaudited)
	HK$'000	HK$'000
PROFIT FOR THE PERIOD	60,590		91,714
OTHER COMPREHENSIVE INCOME/(LOSS)
Other comprehensive income/(loss) that may be reclassified to
profit or loss in subsequent periods:
Exchange differences on translation of foreign operations and
net other comprehensive income/(loss) that may be reclassified
to profit or loss in subsequent periods	(2,221)	247
Other comprehensive loss that will not be reclassified to
profit or loss in subsequent periods:
Change in fair value of equity investment at fair value through
other comprehensive income	(207)	(82)
OTHER COMPREHENSIVE INCOME/(LOSS) FOR THE PERIOD,
NET OF TAX	(2,428)	165
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD	58,162		91,879
Attributable to:
Owners of the Company	49,828		84,931
Non-controlling interests	8,334		6,948
	58,162		91,879

Interim Report 2020

Chinney Alliance Group Limited

11

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

		30 June	31 December
		2020		2019
		(Unaudited)	(Audited)
	Notes	HK$'000	HK$'000
NON-CURRENT ASSETS
Property, plant and equipment	9	964,503		881,258
Investment properties		39,191		39,191
Investment in a joint venture		-	-
Equity investment at fair value through
other comprehensive income		2,623		2,830
Goodwill		14,369		14,369
Financial assets at fair value through profit or loss		6,781		6,053
Prepayment, deposits and other receivables		2,077		2,516
Deferred tax assets		50		50
Total non-current assets		1,029,594		946,267
CURRENT ASSETS
Inventories		79,462		74,150
Contract assets		1,345,201		1,169,182
Trade receivables	10	548,389		730,073
Amount due from a related company	11	37,583		106,642
Amount due from a joint venture		967		967
Prepayments, deposits and other receivables		102,619		271,077
Derivative financial instruments		1,854		-
Tax recoverable		3,993		8,024
Pledged time deposits		529		452
Cash and cash equivalents		561,912		647,827
Total current assets		2,682,509		3,008,394
CURRENT LIABILITIES
Trade, bills and retention monies payables	12	591,649		714,509
Trust receipt loans		121,376		144,804
Other payables and accruals		620,178		717,519
Tax payable		32,944		51,939
Interest-bearing bank borrowings		103,317		106,332
Lease liabilities		9,653		12,356
Total current liabilities		1,479,117		1,747,459
NET CURRENT ASSETS		1,203,392		1,260,935
TOTAL ASSETS LESS CURRENT LIABILITIES		2,232,986		2,207,202

12

Chinney Alliance Group Limited

Interim Report 2020

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

		30 June	31 December
		2020		2019
		(Unaudited)	(Audited)
	Notes	HK$'000	HK$'000
NON-CURRENT LIABILITIES
Lease liabilities		56,379		58,756
Deferred tax liabilities		96,233		96,700
Total non-current liabilities		152,612		155,456
Net assets		2,080,374		2,051,746
EQUITY
Equity attributable to owners of the Company
Issued capital	13	59,490		59,490
Reserves		1,895,029		1,868,997
		1,954,519		1,928,487
Non-controlling interests		125,855		123,259
Total equity		2,080,374		2,051,746

Interim Report 2020

Chinney Alliance Group Limited

13

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

													Attributable to owners of the Company
															Fair value
			Share									Asset	reserve				Exchange								Non-
	Issued	premium	Contributed	revaluation	(non-	Legal	fluctuation	Retained			controlling	Total
	capital	account				surplus				reserve	recycling)	reserve		reserve	profits	Total				interests	equity
	(Unaudited)	(Unaudited)				(Unaudited)				(Unaudited)	(Unaudited)	(Unaudited)		(Unaudited)	(Unaudited)	(Unaudited)				(Unaudited)	(Unaudited)
	HK$'000	HK$'000				HK$'000				HK$'000	HK$'000	HK$'000		HK$'000	HK$'000	HK$'000				HK$'000	HK$'000
At 1 January 2020	59,490		60,978		120,946	303,068	(213)	1,505		(2,406)	1,385,119	1,928,487	123,259	2,051,746
Profit for the period	-	-				-				-	-	-		-	52,256	52,256	8,334	60,590
Other comprehensive loss
for the period:
Exchange differences related to
foreign operations	-	-				-				-	-	-	(2,221)	-	(2,221)				-	(2,221)
Change in fair value of equity
investment at fair value through
other comprehensive income	-	-				-				-	(207)	-		-	-	(207)				-	(207)
Total comprehensive income
for the period	-	-				-				-	(207)	-	(2,221)	52,256	49,828	8,334	58,162
Release of revaluation reserve on
leasehold land and owned
buildings to retained profits	-	-				-	(6,425)	-	-		-	6,425	-				-	-
Dividends paid to non-controlling
shareholders	-	-				-				-	-	-		-	-	-	(5,738)	(5,738)
Final 2019 dividend declared	-	-				-				-	-	-		-	(23,796)	(23,796)				-	(23,796)
At 30 June 2020	59,490		60,978*	120,946*	296,643*	(420)*	1,505*	(4,627)*	1,420,004*	1,954,519	125,855	2,080,374
At 1 January 2019	59,490		60,978		120,946	314,177	111		1,505	(1,026)	1,277,084	1,833,265	118,113	1,951,378
Profit for the period	-	-				-				-	-	-		-	84,766	84,766	6,948	91,714
Other comprehensive income/(loss)
for the period:
Exchange differences on translation
of foreign operations	-	-				-				-	-	-	247		-	247					-	247
Loss on change in fair value of
equity investment designated at
fair value through other
comprehensive income	-	-				-				-	(82)	-		-	-	(82)				-	(82)
Total comprehensive income
for the period	-	-				-				-	(82)	-	247		84,766	84,931	6,948	91,879
Release of revaluation reserve on
land and buildings to retained
profits	-	-				-	(6,373)	-	-		-	6,373	-				-	-
Dividends declared to non-controlling
shareholders	-	-				-				-	-	-		-	-	-	(7,650)	(7,650)
Final 2018 dividend declared	-	-				-				-	-	-		-	(35,694)	(35,694)				-	(35,694)
At 30 June 2019	59,490		60,978		120,946	307,804	29		1,505	(779)	1,332,529	1,882,502	117,411	1,999,913

• These reserve accounts comprise the consolidated reserves of HK$1,895,029,000 in the condensed consolidated statement of financial position.

14

Chinney Alliance Group Limited

Interim Report 2020

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

		Six months ended 30 June
		2020			2019
		(Unaudited)	(Unaudited)
	Notes	HK$'000	HK$'000
CASH FLOWS FROM OPERATING ACTIVITIES
Profit before tax		77,766			116,238
Adjustments for:
Finance costs	4	7,334			5,953
Depreciation of property, plant and equipment	5	38,146			43,783
Depreciation of right-of-use assets	5	16,246			6,993
Provision for inventories included in cost of
inventories sold		893			266
Loss/(gain) on disposal of items of property,
plant and equipment, net	5	(4)	263
Fair value loss/(gain) on derivative financial instruments	5	(1,854)	3
Fair value changes in financial assets at fair value
through profit or loss	5	286			-
Interest income	3	(1,799)	(1,525)
		137,014		171,974
Decrease/(increase) in inventories		(6,205)	27,509
Increase in contract assets		(176,019)	(112,648)
Decrease in trade receivables		181,684		28,069
Decrease/(increase) in amount due from a
related company		69,059			(32,665)
Decrease/(increase) in prepayments, deposits and
other receivables		52,104			(50,729)
Decrease in trade, bills and retention monies payables		(122,860)	(76,845)
Decrease in other payables and accruals		(127,119)	(88,256)
Cash generated from/(used in) operations		7,658			(133,591)
Interest received		1,799			1,525
Interest paid		(7,334)	(5,953)
Hong Kong profits tax paid, net		(25,950)	-
Overseas tax paid, net		(6,653)	(378)
Net cash flows used in operating activities		(30,480)	(138,397)

Interim Report 2020

Chinney Alliance Group Limited

15

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

	Six months ended 30 June
	2020		2019
	(Unaudited)	(Unaudited)
Notes	HK$'000	HK$'000
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of items of property, plant and equipment	(22,885)	(49,550)
Purchase of equity investment at fair value through
other comprehensive income	-	(235)
Purchase of financial assets at fair value through
profit or loss	(1,014)	-
Proceeds from disposals of items of property,
plant and equipment	6		18
Proceeds from disposal of derivative financial instruments	-	493
Net cash flows used in investing activities	(23,893)	(49,274)
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in trust receipt loans	(23,428)	(35,363)
New bank loans	75,000		40,000
Repayment of bank loans	(70,789)	(10,470)
Decrease/(increase) in pledged time deposits	(77)	1,611
Principal portion of lease payments	(6,250)	(5,332)
Net cash flows used in financing activities	(25,544)	(9,554)
NET DECREASE IN CASH AND CASH EQUIVALENTS	(79,917)	(197,225)
Cash and cash equivalents at beginning of period	640,601		778,936
Effect of foreign exchange rate changes, net	1,228		206
CASH AND CASH EQUIVALENTS AT END OF PERIOD	561,912		581,917
ANALYSIS OF BALANCES OF CASH AND CASH
EQUIVALENTS
Cash and bank balances	410,239		486,765
Non-pledged time deposits with original maturity of less
than three months when acquired	151,673		100,772
Cash and cash equivalents as stated in the condensed
consolidated statement of financial position	561,912		587,537
Bank overdrafts	-	(5,620)
Cash and cash equivalents as stated in the condensed
consolidated statement of cash flows	561,912		581,917

16

Chinney Alliance Group Limited

Interim Report 2020

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

1. BASIS OF PREPARATION AND CHANGES IN ACCOUNTING POLICIES AND DISCLOSURES

The unaudited condensed consolidated interim 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") and with the applicable disclosure requirements of Appendix 16 to the Listing Rules.

The unaudited condensed consolidated interim financial statements do not include all the information and disclosures required in the financial statements, and should be read in conjunction with the Group's annual financial statements for the year ended 31 December 2019.

The unaudited condensed consolidated interim financial statements have been prepared under the historical cost convention, except for investment properties, leasehold land and buildings included in property, plant and equipment, equity investment at fair value through other comprehensive income, financial assets at fair value through profit or loss as well as derivative financial instruments, which have been measured at fair value. The accounting policies adopted in the preparation of the unaudited condensed consolidated interim financial statements are consistent with those followed in the preparation of the Group's annual financial statements for the year ended 31 December 2019, except as described below. The Group has applied, for the first time, the following revised Hong Kong Financial Reporting Standards ("HKFRS", which include all HKFRSs, HKASs and Interpretations) issued by the HKICPA for the current period's financial information.

Amendments to HKFRS 3	Definition of a Business
Amendments to HKFRS 9, HKAS 39	Interest Rate Benchmark Reform
and HKFRS 7
Amendments to HKFRS 16	Covid-19-Related Rent Concessions (early adopted)
Amendments to HKAS 1 and HKAS 8	Definition of Material

The adoption of these revised accounting standards does not have material impact on the Group's unaudited condensed consolidated interim financial statements.

Interim Report 2020

Chinney Alliance Group Limited

17

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

2. OPERATING SEGMENT INFORMATION

The Group is principally engaged in the trading of plastics and chemical products, provision of building related contracting services, provision of foundation piling works and sub-structure works, building construction works for both public and private sectors and others, which include distribution of aviation system and other hi-tech products and property and investment holding.

Six months ended 30 June 2020

			Building			Foundation
	Plastic and	related			piling and
	chemical	contracting	Building	ground
	products	services	construction	investigation	Others	Total
	(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)
	HK$'000	HK$'000	HK$'000	HK$'000	HK$'000	HK$'000
Segment revenue:
Sales to external customers	181,547		904,601	305,291	686,820	98,876	2,177,135
Intersegment sales	122		33,747	-	-	-	33,869
Other revenue	243		322	607	42	30	1,244
	181,912		938,670	305,898	686,862	98,906	2,212,248
Reconciliation:
Elimination of
intersegment sales											(33,869)
Revenue											2,178,379
Segment results	(1,421)	41,077	14,949	39,863	2,226	96,694
Reconciliation:
Interest income and
unallocated gains											1,760
Unallocated expenses											(20,688)
Profit before tax											77,766

18

Chinney Alliance Group Limited

Interim Report 2020

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

2. OPERATING SEGMENT INFORMATION (continued)

As at 30 June 2020

		Building		Foundation
	Plastic and	related		piling and
	chemical	contracting	Building	ground
	products	services	construction	investigation	Others	Total
	(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)
	HK$'000	HK$'000	HK$'000	HK$'000	HK$'000	HK$'000
Segment assets	338,427	1,402,038	667,493	871,049	379,214	3,658,221
Reconciliation:
Elimination of intersegment
receivables						(58,288)
Equity investment at fair
value through other
comprehensive income						2,623
Financial assets at fair value
through profit or loss						2,500
Corporate and other
unallocated assets						107,047
Total assets						3,712,103
Segment liabilities	87,448	840,229	172,726	339,341	95,359	1,535,103
Reconciliation:
Elimination of intersegment
payables						(58,288)
Corporate and other
unallocated liabilities						154,914
Total liabilities						1,631,729

Interim Report 2020

Chinney Alliance Group Limited

19

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

2. OPERATING SEGMENT INFORMATION (continued)

Six months ended 30 June 2019

			Building			Foundation
	Plastic and	related			piling and
	chemical	contracting	Building	ground
	products	services	construction	investigation	Others	Total
	(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)
	HK$'000	HK$'000	HK$'000	HK$'000	HK$'000	HK$'000
Segment revenue:
Sales to external customers	234,947		1,159,620	521,664	518,096	19,099	2,453,426
Intersegment sales	101		11,004	-	-	-	11,105
Other revenue	497		63		23		1,879	2	2,464
	235,545		1,170,687	521,687	519,975	19,101	2,466,995
Reconciliation:
Elimination of
intersegment sales											(11,105)
Revenue											2,455,890
Segment results
(2,043)	52,510	46,192	34,763	(2,266)	129,156
Reconciliation:
Interest income and
unallocated gains											812
Unallocated expenses											(13,730)
Profit before tax											116,238

20

Chinney Alliance Group Limited

Interim Report 2020

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

2. OPERATING SEGMENT INFORMATION (continued)

As at 31 December 2019

		Building		Foundation
	Plastic and	related		piling and
	chemical	contracting	Building	ground
	products	services	construction	investigation	Others	Total
	(Audited)	(Audited)	(Audited)	(Audited)	(Audited)	(Audited)
	HK$'000	HK$'000	HK$'000	HK$'000	HK$'000	HK$'000
Segment assets	361,494	1,518,685	734,277	892,941	268,509	3,775,906
Reconciliation:
Elimination of intersegment
receivables						(59,695)
Equity investment at fair
value through other
comprehensive income						2,830
Financial assets at fair value
through profit or loss						1,647
Corporate and other
unallocated assets						233,973
Total assets						3,954,661
Segment liabilities
95,449	961,412	246,117	387,919	99,063	1,789,960
Reconciliation:
Elimination of intersegment
payables						(59,695)
Corporate and other
unallocated liabilities						172,650
Total liabilities						1,902,915

Interim Report 2020

Chinney Alliance Group Limited

21

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

3. REVENUE AND OTHER INCOME

An analysis of revenue and other income is as follows:

REVENUE FROM CONTRACTS WITH CUSTOMERS

	Six months ended 30 June
	2020	2019
	(Unaudited)		(Unaudited)
	HK$'000		HK$'000
Type of goods and services
Sales of goods	233,427	346,760
Construction services	1,943,708	2,106,666
Total revenue from contracts with customers	2,177,135	2,453,426
Timing of revenue recognition
Goods transferred at a point in time	233,427	346,760
Services transferred over time	1,943,708	2,106,666
Total revenue from contracts with customers	2,177,135	2,453,426

22

Chinney Alliance Group Limited

Interim Report 2020

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

3. REVENUE AND OTHER INCOME (continued)

REVENUE FROM CONTRACTS WITH CUSTOMERS (continued)

1. Disaggregated revenue information
   For the six months ended 30 June 2020

				Building			Foundation
		Plastic and	related			piling and
		chemical	contracting	Building	ground
Segments	products	services	construction	investigation	Others	Total
		(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)
		HK$'000	HK$'000	HK$'000	HK$'000	HK$'000	HK$'000
Type of goods or services
Sales of goods	181,547		51,880	-	-	-	233,427
Construction services	-	852,721	305,291	686,820	98,876	1,943,708
Total revenue from
contracts with customers	181,547		904,601	305,291	686,820	98,876	2,177,135
Geographical markets
Hong Kong	128,678		843,447	212,694	686,820	95,025	1,966,664
Mainland China and Macau	52,869		61,154	92,597	-	3,851	210,471
Total revenue from
contracts with customers	181,547		904,601	305,291	686,820	98,876	2,177,135
Timing of revenue
recognition
Goods transferred at a
point in time	181,547		51,880	-	-	-	233,427
Services transferred over
time	-	852,721	305,291	686,820	98,876	1,943,708
Total revenue from
contracts with customers	181,547		904,601	305,291	686,820	98,876	2,177,135

Interim Report 2020

Chinney Alliance Group Limited

23

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

3. REVENUE AND OTHER INCOME (continued)

REVENUE FROM CONTRACTS WITH CUSTOMERS (continued)

1. Disaggregated revenue information (continued) For the six months ended 30 June 2019

				Building			Foundation
		Plastic and	related			piling and
		chemical	contracting	Building	ground
Segments	products	services	construction	investigation	Others	Total
		(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)
		HK$'000	HK$'000	HK$'000	HK$'000	HK$'000	HK$'000
Type of goods or
services
Sales of goods	234,947		111,813	-	-	-	346,760
Construction services	-	1,047,807	521,664	518,096	19,099	2,106,666
Total revenue from
contracts with customers	234,947		1,159,620	521,664	518,096	19,099	2,453,426
Geographical markets
Hong Kong	168,946		1,036,480	454,455	516,536	14,269	2,192,246
Mainland China,
Macau and Singapore	66,001		123,140	67,209	1,560	4,830	261,180
Total revenue from
contracts with customers	234,947		1,159,620	521,664	518,096	19,099	2,453,426
Timing of revenue
recognition
Goods transferred at a
point in time	234,947		111,813	-	-	-	346,760
Services transferred over
time	-	1,047,807	521,664	518,096	19,099	2,106,666
Total revenue from
contracts with customers	234,947		1,159,620	521,664	518,096	19,099	2,453,426

24

Chinney Alliance Group Limited

Interim Report 2020

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

3. REVENUE AND OTHER INCOME (continued)

REVENUE FROM CONTRACTS WITH CUSTOMERS (continued)

1. Disaggregated revenue information (continued)
   Set out below is the reconciliation of the revenue from contracts with customers with the amounts disclosed in the segment information:
   For the six months ended 30 June 2020

			Building			Foundation
	Plastic and	related			piling and
	chemical	contracting	Building	ground
Segments	products	services	construction	investigation	Others	Total
	(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)
	HK$'000	HK$'000	HK$'000	HK$'000	HK$'000	HK$'000
Revenue from contracts
with customers
Sales to external customers	181,547		904,601	305,291	686,820	98,876	2,177,135
Intersegment sales	122		33,747	-	-	-	33,869
	181,669		938,348	305,291	686,820	98,876	2,211,004
Intersegment adjustments
and eliminations	(122)	(33,747)	-	-	-	(33,869)
	181,547		904,601	305,291	686,820	98,876	2,177,135
For the six months ended 30 June 2019
			Building			Foundation
	Plastic and	related			piling and
	chemical	contracting	Building	ground
Segments	products	services	construction	investigation	Others	Total
	(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)
	HK$'000	HK$'000	HK$'000	HK$'000	HK$'000	HK$'000
Revenue from contracts
with customers
Sales to external customers	234,947		1,159,620	521,664	518,096	19,099	2,453,426
Intersegment sales	101		11,004	-	-	-	11,105
	235,048		1,170,624	521,664	518,096	19,099	2,464,531
Intersegment adjustments
and eliminations	(101)	(11,004)	-	-	-	(11,105)
	234,947		1,159,620	521,664	518,096	19,099	2,453,426

Interim Report 2020

Chinney Alliance Group Limited

25

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

3. REVENUE AND OTHER INCOME (continued)

REVENUE FROM CONTRACTS WITH CUSTOMERS (continued)

1. Disaggregated revenue information (continued)
   The following table shows the amounts of revenue recognised in the current reporting period that were included in the contract liabilities at the beginning of the reporting:

	Six months ended 30 June
	2020	2019
	(Unaudited)		(Unaudited)
	HK$'000		HK$'000
Revenue recognised that was included in contract
liabilities at the beginning of the reporting period:
Construction services	351,609	196,518
	Six months ended 30 June
	2020	2019
	(Unaudited)		(Unaudited)
	HK$'000		HK$'000
Revenue recognised from performance obligations
satisfied in previous periods:
Construction services not previously recognised due to
constraints on variable consideration	10,696	16,837

1. Performance obligations
   Information about the Group's performance obligations is summarised below:
   Sale of products
   The performance obligation is satisfied upon delivery of the products and payment is generally due within 60 days from delivery, except for new customers, where payment in advance is normally required.
   Construction services
   The performance obligation is satisfied over time as services are rendered and payment is generally due within 30 to 60 days from the date of billing. A certain percentage of payment is retained by customers until the end of the retention period as the Group's entitlement to the final payment is conditional on the satisfaction of the service quality by the customers over a certain period as stipulated in the contracts.

26

Chinney Alliance Group Limited

Interim Report 2020

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

3. REVENUE AND OTHER INCOME (continued)

REVENUE FROM CONTRACTS WITH CUSTOMERS (continued)

1. Performance obligations (continued)
   The amounts of transaction prices allocated to the remaining performance obligations (unsatisfied or partially unsatisfied) as at end of the reporting period are as follows:

	30 June		31 December
	2020	2019
	(Unaudited)		(Audited)
	HK$'000		HK$'000
Amounts expected to be recognised as revenue:
Within one year	6,071,231	5,315,623
After one year	2,642,928	3,134,125
	8,714,159	8,449,748

The amounts of transaction prices allocated to the remaining performance obligations which are expected to be recognised as revenue after one year relate to construction services, of which the performance obligations are to be satisfied within five years. All the other amounts of transaction prices allocated to the remaining performance obligations are expected to be recognised as revenue within one year. The amounts disclosed above do not include variable consideration which is constrained.

OTHER INCOME
	Six months ended 30 June
	2020		2019
	(Unaudited)	(Unaudited)
	HK$'000	HK$'000
Interest income	1,799		1,525
Gross rental income	258		1,500
Others	947		251
	3,004		3,276

Interim Report 2020

Chinney Alliance Group Limited

27

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

4. FINANCE COSTS

An analysis of finance costs is as follows:

	Six months ended 30 June
	2020		2019
	(Unaudited)	(Unaudited)
	HK$'000	HK$'000
Interest on bank loans and overdrafts	5,221		3,587
Interest on lease liabilities	2,113		2,366
	7,334		5,953

5. PROFIT BEFORE TAX

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

	Six months ended 30 June
	2020		2019
	(Unaudited)	(Unaudited)
	HK$'000	HK$'000
Depreciation of property, plant and equipment
(excluding right-of-use assets)	38,146		43,783
Less: Amount included in cost of services provided	(5,255)	(4,576)
	32,891		39,207
Depreciation of right-of-use assets	16,246		6,993
Employee benefit expense (including directors' remuneration)	435,472		405,306
Less: Amount included in cost of services provided	(284,184)	(275,636)
	151,288		129,670
Loss/(gain) on disposal of items of property, plant and
equipment, net*	(4)	263
Government subsidies* (note)	(15,136)	-
Fair value changes in financial assets at fair value through
profit or loss*	286		-
Fair value loss/(gain) on derivative financial instruments
- transaction not qualifying as hedge*	(1,854)	3
Foreign exchange differences, net*	157		(8)

• These expenses/(income) are included in "Other operating income/(expenses), net" in the condensed consolidated statement of profit or loss.

Note: The government subsidies represented mainly grants from the Employment Support Scheme of the Hong Kong Government, which aims to retain employment and combat COVID-19. There are no unfulfilled conditions or contingencies relating to these subsidies.

28

Chinney Alliance Group Limited

Interim Report 2020

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

6.	INCOME TAX
		Six months ended 30 June
		2020		2019
		(Unaudited)	(Unaudited)
		HK$'000	HK$'000
	Current - Hong Kong
	Charge for the period	16,394		24,172
	Under provision in prior years	307		-
	Current - Elsewhere
	Charge for the period	690		2,543
	Under provision in prior years	252		-
	Deferred	(467)	(2,191)
	Total tax charge for the period	17,176		24,524

Hong Kong profits tax has been provided at the rate of 16.5% (2019: 16.5%) on the estimated assessable profits arising in Hong Kong during the period. Taxes on profits assessable elsewhere have been calculated at the rates of tax prevailing in the jurisdictions in which the Group operates.

1. EARNINGS PER SHARE ATTRIBUTABLE TO ORDINARY EQUITY HOLDERS OF THE COMPANY
   The calculation of basic earnings per share amounts is based on the profit for the period attributable to ordinary equity holders of the Company of HK$52,256,000 (2019: HK$84,766,000) and the number of 594,899,245 ordinary shares in issue during both periods.
   The Group had no potential dilutive ordinary shares in issue during the periods ended 30 June 2020 and 2019.
2. DIVIDEND
   The Board does not recommend the payment of an interim dividend for the six months ended 30 June 2020 (2019: Nil).
   The final dividend of HK4.0 cents per ordinary share for the year ended 31 December 2019 was approved by the Company's shareholders at the annual general meeting of the Company held on 9 June 2020 and paid on 7 July 2020.
3. PROPERTY, PLANT AND EQUIPMENT
   During the six months ended 30 June 2020, the Group has acquired property, plant and equipment at cost of HK$117,037,000 through an acquisition of a wholly foreign owned enterprise established in the PRC. This acquisition was accounted for as an acquisition of assets and liabilities through the acquisition of a subsidiary.

Interim Report 2020

Chinney Alliance Group Limited

29

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

10. TRADE RECEIVABLES

	30 June		31 December
	2020	2019
	(Unaudited)		(Audited)
	HK$'000		HK$'000
Trade receivables	548,389	730,073

The Group's trading terms with its customers are mainly on credit. The credit periods range from cash on delivery to 60 days. A longer credit period may be allowed to customers with good business relationships with the Group. Each customer has a maximum credit limit. The Group seeks to maintain strict control over its outstanding receivables. Overdue balances are reviewed regularly by senior management. In view of the aforementioned and the fact that the Group's trade receivables relate to a large number of diversified customers, there is no significant concentration of credit risk. The Group does not hold any collateral or other credit enhancements over its trade receivable balances. Trade receivables are non-interest-bearing.

An ageing analysis of the trade receivables as at the end of the reporting period, based on the invoice date and net of loss allowance, is as follows:

	30 June	31 December
	2020		2019
	(Unaudited)	(Audited)
	HK$'000	HK$'000
Current to 30 days	289,488		400,129
31 to 60 days	113,429		183,634
61 to 90 days	56,844		66,267
Over 90 days	88,628		80,043
	548,389		730,073

11. AMOUNT DUE FROM A RELATED COMPANY

The amount due from a related company represents construction contracting income certified from Gold Famous. Gold Famous is an indirect wholly-owned subsidiary of Hon Kwok of which Dr. James Sai-Wing Wong, a director and a controlling shareholder of the Company, is also a director of and has a beneficial interest in. Mr. James Sing-Wai Wong and Mr. Philip Bing-Lun Lam are common directors of the Company and Hon Kwok.

30

Chinney Alliance Group Limited

Interim Report 2020

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

12. TRADE, BILLS AND RETENTION MONIES PAYABLES

	30 June		31 December
	2020	2019
	(Unaudited)		(Audited)
	HK$'000		HK$'000
Trade payables	310,311	416,371
Bills payable	12,347	15,432
Retention monies payable	268,991	282,706
	591,649	714,509

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

	30 June	31 December
	2020		2019
	(Unaudited)	(Audited)
	HK$'000	HK$'000
Current to 30 days	207,403		328,461
31 to 60 days	66,441		56,234
61 to 90 days	11,876		22,465
Over 90 days	24,591		9,211
	310,311		416,371

The trade payables are non-interest-bearing and are normally settled within terms of 60 to 120 days.

13. SHARE CAPITAL

	30 June	31 December
	2020		2019
	(Unaudited)	(Audited)
	HK$'000	HK$'000
Authorised:
2,500,000,000 (31 December 2019: 2,500,000,000) ordinary
shares of HK$0.10 (31 December 2019: HK$0.10) each	250,000	250,000
Issued and fully paid:
594,899,245 (31 December 2019: 594,899,245) ordinary
shares of HK$0.10 (31 December 2019: HK$0.10) each	59,490		59,490

Interim Report 2020

Chinney Alliance Group Limited

31

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

14. RELATED PARTY TRANSACTIONS

1. The Group had the following material transactions with related parties during the period:

		Six months ended 30 June
		2020		2019
		(Unaudited)	(Unaudited)
	Notes	HK$'000	HK$'000
Share of rental and office expenses with a
related company	(i)	488		1,379
Construction contract income on foundation
pilings and construction works from a
related company	(ii)	155,018	202,287
Consultancy income from a related company	(iii)	4,050		2,430
Income on maintenance works from related
companies	(iv)	46		2,722

Notes:

1. 1. The rental and office expenses were charged by Hon Kwok, a subsidiary of Chinney Investments, on an actual basis. Dr. James Sai-Wing Wong is a director of and has a beneficial interest in Hon Kwok. Mr. James Sing-Wai Wong and Mr. Philip Bing-Lun Lam are common directors of the Company and Hon Kwok.
   2. The construction contracting income on foundation piling and construction works received from a related company was negotiated between the concerned parties by reference to prevailing market rates. The transactions constituted connected transactions of the Group and were approved by the independent shareholders of the Company at the special general meetings held on 7 November 2016 and 24 August 2018, respectively.
   3. The consultancy income received from a related company was negotiated between the concerned parties by reference to prevailing market rates. The transaction constitutes a connected transaction of the Company but exempted for circular and independent shareholders' approval requirements of the Listing Rules.
   4. The income on maintenance works received from Hon Kwok and its subsidiaries was negotiated between the concerned parties by reference to prevailing market rates.
2. Compensation of key management personnel of the Group:

	Six months ended 30 June
	2020		2019
	(Unaudited)	(Unaudited)
	HK$'000	HK$'000
Short-term employee benefits	65,083		50,582
Post-employment benefits	1,622		1,664
Total compensation paid to key management personnel	66,705		52,246

32

Chinney Alliance Group Limited

Interim Report 2020

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

1. CONTINGENT LIABILITY
   As at 30 June 2020, the Group provided corporate guarantees and indemnities to certain banks and financial institutions of an aggregate amount of HK$911.6 million to secure the surety/performance bonds issued in favour of the Group's clients on contracting works. This amount included surety/performance bonds issued in favour of the clients of Chinney Kin Wing Group of which corporate guarantees and indemnities of HK$273.7 million were provided by Chinney Kin Wing Group.
   Save as disclosed above, the Group had no other material contingent liabilities as at 30 June 2020.
2. COMMITMENTS
   The Group had the following capital commitments at the end of the reporting period:

	30 June	31 December
	2020		2019
	(Unaudited)	(Audited)
	HK$'000	HK$'000
Contracted, but not provided for:
Purchase of property, plant and equipment	17,143		-
Capital contribution to financial assets at fair value	2,379		3,393
	19,522		3,393

17. Acquisition of assets and liabilities through acquisition of a subsidiary

The Group entered into an acquisition agreement on 26 November 2019 for the acquisition of the entire equity interest in 東莞東寶龍燈光設備有限公司 (Dongguan Dongbaolong Light Equipment Co., Ltd., for identification only), a wholly foreign owned enterprise established in the PRC, from an independent third party for a cash consideration of RMB104,000,000 (equivalent to HK$116,896,000), which was paid upon signing of the acquisition agreement as deposit and stakeholder monies. The transaction was completed on 20 January 2020. This acquisition was accounted for as an acquisition of assets and liabilities through the acquisition of a subsidiary.

The net inflow of cash and cash equivalents from this acquisition reflected in the consolidated statement of cash flows as part of the cash flow movement in individual assets and liabilities acquired.

Interim Report 2020

Chinney Alliance Group Limited

33

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

17. Acquisition of assets and liabilities through acquisition of a subsidiary (continued)

The net assets acquired in the acquisition are as follows:

	HK$'000
Net assets acquired:
Property, plant and equipment	117,037
Prepayments, deposits and other receivables	68
Cash and cash equivalents	35
Other payables and accruals	(244)
	116,896
Satisfied by:
Deposit and stakeholder monies paid in last year	116,896
Cash and cash equivalents acquired	35

18. FAIR VALUE AND FAIR VALUE HIERARCHY OF FINANCIAL INSTRUMENTS

The carrying amounts and fair values of the Group's financial instruments, other than those with carrying amounts that reasonably approximate to fair values, are as follows:

		Carrying amounts		Fair Values
		30 June	31 December		30 June	31 December
	2020		2019	2020	2019
	(Unaudited)		(Audited)	(Unaudited)		(Audited)
		HK$'000		HK$'000		HK$'000		HK$'000
Financial assets
Equity investment at fair value through
other comprehensive income	2,623		2,830	2,623	2,830
Financial assets at fair value through
profit or loss	6,781		6,053	6,781	6,053
Derivative financial instruments	1,854			-	1,854		-
	11,258		8,883	11,258	8,883

34

Chinney Alliance Group Limited

Interim Report 2020

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

18. FAIR VALUE AND FAIR VALUE HIERARCHY OF FINANCIAL INSTRUMENTS (continued)

Management has assessed that the fair values of cash and cash equivalents, pledged time deposits, trade receivables, trade, bills and retention monies payables, trust receipt loans, financial assets included in prepayments, deposits and other receivables, financial liabilities included in other payables and accruals, lease liabilities, interest-bearing bank borrowings, an amount due from a related company and an amount due from a joint venture approximate to their carrying amounts largely due to the short-term maturities of these instruments.

The fair values of the financial assets and liabilities are included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The following methods and assumptions were used to estimate the fair values:

The fair values of the non-current portion of financial assets included in prepayments, deposits and other receivables and lease liabilities have been calculated by discounting the expected future cash flows using rates currently available for instruments with similar terms, credit risk and remaining maturities.

The fair values of certain financial assets at fair value through profit or loss and derivative financial instruments was based on market observable transactions. The fair values of the unlisted equity investment designated at fair value through other comprehensive income and certain financial assets at fair value through profit or loss were derived from the latest transaction price.

Fair value hierarchy

Assets measured at fair value:

		Fair value measurement as at 30 June 2020 using
	Quoted prices	Significant	Significant
		in active	observable	unobservable
		markets	inputs	inputs
		(Level 1)	(Level 2)	(Level 3)	Total
		(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)
		HK$'000	HK$'000	HK$'000	HK$'000
Equity investment at fair
value through other
comprehensive income		-	-	2,623	2,623
Financial assets at fair value
through profit or loss		-	4,564	2,217	6,781
Derivative financial instruments		-	1,854	-	1,854
		-	6,418	4,840	11,258

Interim Report 2020

Chinney Alliance Group Limited

35

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

18. FAIR VALUE AND FAIR VALUE HIERARCHY OF FINANCIAL INSTRUMENTS (continued)

Fair value hierarchy (continued) Assets measured at fair value:

	Fair value measurement as at 31 December 2019 using
	Quoted prices	Significant	Significant
	in active	observable	unobservable
	markets	inputs	inputs
	(Level 1)	(Level 2)	(Level 3)	Total
	(Audited)	(Audited)	(Audited)	(Audited)
	HK$'000	HK$'000	HK$'000	HK$'000
Equity investment at fair
value through other
comprehensive income	-	-	2,830	2,830
Financial assets at fair value
through profit or loss	-	4,689	1,364	6,053
	-	4,689	4,194	8,883

The Group did not have any financial liabilities measured at fair value as at 30 June 2020 and 31 December 2019.

During the six months ended 30 June 2020, there were no transfers of fair value measurements between Level 1 and Level 2 and no transfers into or out of Level 3 for both financial assets and financial liabilities (2019: Nil).

36

Chinney Alliance Group Limited

Interim Report 2020

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

19. EVENTS AFTER THE REPORTING PERIOD

1. On 20 July 2020, Kin Wing Chinney (BVI) Limited (an indirect non wholly-owned subsidiary of the Company and a direct wholly-owned subsidiary of Chinney Kin Wing, as purchaser), Chinney Kin Wing and Profit Gainer Holdings Limited (an independent third party, as vendor) entered into a memorandum of understanding in relation to the possible acquisition of 50% of the issued share capital of Senior Rich Development Limited (the "Possible Acquisition"). The Possible Acquisition, which is still under negotiation, if materialises, may constitute a major transaction for the Company and Chinney Kin Wing and will be subject to the announcement, reporting and shareholders' approval requirements under the Listing Rules. Details of the transaction were set out in the joint announcement of the Company and Chinney Kin Wing issued on 20 July 2020.
   Further announcement will be made by the Company and Chinney Kin Wing in accordance with the applicable requirements of the Listing Rules as and when appropriate.
2. On 18 August 2020, the Company and FRO Management Holdings Limited ("FRO Management", an independent third party within the meaning of the Listing Rules) entered into a settlement deed (the "Settlement Deed"), pursuant to which (i) the Company agreed to buy back and FRO Management agreed to sell to the Company 25% of the issued shares in Chinney Shun Cheong Holdings Limited ("Chinney Shun Cheong", a direct 75% subsidiary of the Company immediate before the execution of the Settlement Deed) at a cash consideration of HK$40,000,000 together with the payment of interest of HK$6,630,137; and (ii) FRO Management waived all rights and claims it may have under or arising from the subscription agreement dated 9 February 2017 and supplemental agreement dated 27 April 2017 entered into between Chinney Shun Cheong and FRO Management in relation to the subscription of the 5% interest bearing convertible bond in the principal amount of HK$40,000,000 issued by Chinney Shun Cheong to FRO Management on 27 April 2017 (the "Convertible Bond"), the exercise of the conversion right under the Convertible Bond or otherwise in connection with FRO Management's potential investment in the building services segment engaged by the Group under Shun Cheong Investments Limited and its subsidiaries. The transaction contemplated under the Settlement Deed was completed on 18 August 2020 and Chinney Shun Cheong has become a direct wholly-owned subsidiary of the Company since then. Details of the transaction were set out in the Company's announcement published on 18 August 2020.

Interim Report 2020

Chinney Alliance Group Limited

37

OTHER INFORMATION

CORPORATE GOVERNANCE

Model Code for Securities Transactions by Directors

The Company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers (the "Model Code") set out in Appendix 10 of the Listing Rules. On specific enquiries made, all directors of the Company have confirmed that they have complied with the required standard set out in the Model Code throughout the six months ended 30 June 2020.

Compliance with the Corporate Governance Code

In the opinion of the directors, the Company has complied with all relevant code provisions of the Corporate Governance Code (the "CG Code") as set out in Appendix 14 to the Listing Rules during the six months ended 30 June 2020, except A.4.1, A.4.2, A.5.1 to A.5.4, A.6.7 and E.1.2, which are explained below.

1. Code provision A.4.1 of the CG Code stipulates that non-executive directors should be appointed for a specific term, subject to re-election and that code provision A.4.2 of the CG Code stipulates that every director, including those appointed for a specific term, should be subject to retirement by rotation at least once every three years.
   The existing non-executive directors of the Company do not have a specific term of appointment but are subject to retirement by rotation and re-election at the Company's annual general meeting under the Bye-laws of the Company. As such, the Board considers that sufficient measures have been taken to ensure that the Company's corporate governance practices are no less exacting than those in the CG Code.
   According to the provisions of the Company's Bye-laws, at each annual general meeting one-third of the directors for the time being (or, if their number is not a multiple of three, the number nearest to but not greater than one-third) shall retire from office by rotation save that the Chairman and/or the Managing Director of the Company shall not be subject to retirement by rotation or be taken into account in determining the number of directors to retire in each year.
   Dr. James Sai-Wing Wong, the beneficial owner of Chinney Investments, Enhancement Investments Limited and Chinney Capital Limited, which collectively hold approximately 73.68% interest in the Company, is the Chairman of the Board to safeguard their investments in the Company. In addition, the Board considers that the continuity of the office of the Chairman and Managing Director provide the Group with a strong and consistent leadership for the smooth operation of the businesses of the Group. As a result, the Board concurred that the Chairman and the Managing Director need not be subject to retirement by rotation.
2. Code provisions A.5.1 to A.5.4 of the CG Code in respect of the establishment, terms of reference and resources of a nomination committee. The Company has not established a nomination committee. The Board is responsible for considering the suitability of a candidate to act as a director, and collectively approving and terminating the appointment of a director as this allows a more informed and balanced decision to be made. The Chairman is mainly responsible for identifying suitable candidates for members of the Board when there is a vacancy or an additional director is considered necessary. The Chairman will propose the appointment of such candidates to the Board for consideration and the Board will determine the suitability of the relevant candidates having due regard to the Nomination Policy and the Board Diversity Policy adopted by the Company and assess the independence of the proposed independent non-executive director(s) as appropriate.

38

Chinney Alliance Group Limited

Interim Report 2020

OTHER INFORMATION

CORPORATE GOVERNANCE (continued)

Compliance with the Corporate Governance Code (continued)

1. Code provision A.6.7 of the CG Code requires that independent non-executive directors and other non-executive directors shall attend general meetings to gain and develop a balanced understanding of the views of shareholders. Mr. Yuen-Tin Ng, being independent non-executive director of the Company, did not attend the annual general meeting of the Company held on 9 June 2020 due to engagement in his own business.
2. Code provision E.1.2 of the CG Code requires that the chairman of the board should attend the annual general meeting. Dr. James Sai-Wing Wong, the Chairman of the Board, did not attend the annual general meeting of the Company held on 9 June 2020 due to engagement in his own business.

Audit Committee

Regular meetings have been held by the audit committee of the Company (the "Audit Committee") since establishment and it meets at least twice each year to review and supervise the Group's financial reporting process and internal control. The Company's interim results for the six months ended 30 June 2020 has not been audited, but has been reviewed by the Audit Committee.

DIRECTORS' INTERESTS AND SHORT POSITIONS IN SHARES, UNDERLYING SHARES AND DEBENTURES

As at 30 June 2020, the interests and short positions of the directors in the shares, underlying shares and debentures of the Company and its associated corporations (within the meaning of Part XV of the Securities and Futures Ordinance (the "SFO")), as recorded in the register required to be kept by the Company pursuant to Section 352 of the SFO, or as otherwise notified to the Company and The Stock Exchange of Hong Kong Limited pursuant to the Model Code in the Listing Rules, were as follows:

Long positions in ordinary shares of the Company
	Number of shares held, capacity and nature of interest
						Percentage of the
	Personal	Family	Corporate			Company's issued
Name of Director	interests	interests	interests	Total	share capital
James Sai-Wing Wong	-	-	438,334,216	438,334,216	73.68%
			(Note)

Note: Amongst these shares, 21,996,000 shares are held by Chinney Capital Limited, 173,093,695 shares are held by Multi-Investment Group Limited and 243,244,521 shares are held by Enhancement Investments Limited, all of which Dr. James Sai-Wing Wong is a director and a controlling shareholder and has beneficial interests.

Save as disclosed above, as at 30 June 2020, none of the directors had registered an interest or short position in the shares, underlying shares and debentures of the Company or any of its associated corporations that was required to be recorded pursuant to Section 352 of the SFO, or as otherwise notified to the Company and The Stock Exchange of Hong Kong Limited pursuant to the Model Code.

Interim Report 2020

Chinney Alliance Group Limited

39

OTHER INFORMATION

DIRECTORS' RIGHTS TO ACQUIRE SHARES OR DEBENTURES

At no time during the six-month period ended 30 June 2020 were rights to acquire benefits by means of the acquisition of shares in or debentures of the Company granted to any director or their respective spouse or minor children, or were any such rights exercised by them; or was the Company or any of its subsidiaries a party to any arrangement to enable the directors to acquire such rights in any other body corporate.

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

As at 30 June 2020, the interests and short positions of those persons in the shares and underlying shares of the Company as recorded in the register of interests required to be kept by the Company under Section 336 of the SFO were as follows:

Long positions in ordinary shares of the Company
				Percentage of
			Number of	the Company's
		Capacity and	ordinary	issued share
Name	Notes	nature of interest	shares held	capital
James Sai-Wing Wong	1, 2, 3	Interest through controlled	438,334,216	73.68%
		corporations
Lucky Year Finance Limited	1	Interest through a controlled	173,093,695	29.10%
		corporation
Chinney Holdings Limited	1	Interest through a controlled	173,093,695	29.10%
		corporation
Chinney Investments	1	Interest through a controlled	173,093,695	29.10%
		corporation
Newsworthy Resources Limited	1	Interest through a controlled	173,093,695	29.10%
		corporation
Multi-Investment Group Limited	1	Beneficial owner	173,093,695	29.10%
Enhancement Investments Limited	2	Beneficial owner	243,244,521	40.89%

Notes:

1. Dr. James Sai-Wing Wong, Lucky Year Finance Limited, Chinney Holdings Limited, Chinney Investments, Newsworthy Resources Limited and Multi-Investment Group Limited are deemed to be interested in the same parcel of 173,093,695 shares by virtue of Section 316 of the SFO;
2. Enhancement Investments Limited is beneficially wholly-owned by Dr. James Sai-Wing Wong; and
3. 21,996,000 shares are held by Chinney Capital Limited, which is beneficially wholly-owned by Dr. James Sai-Wing Wong.

Save as disclosed above, as at 30 June 2020, no person, other than the directors of the Company, whose interests are set out in the section "Directors' interests and short positions in shares, underlying shares and debentures" above, had registered an interest or short position in the shares or underlying shares of the Company that was required to be recorded pursuant to Section 336 of the SFO.

PURCHASE, SALE OR REDEMPTION OF THE COMPANY'S LISTED SHARES

Neither the Company, nor any of its subsidiaries had purchased, sold or redeemed any of the Company's listed shares during the six months ended 30 June 2020.

40

Chinney Alliance Group Limited

Interim Report 2020