ANNUAL REPORT 2016 Shaping Our Future
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(Stock Code : 363) ECO D n r tio e a va m home no n I mony Har Growth S Visions u st er a i at nable Clea n w ment ron vi n E th al He ANNUAL REPORT 2016 Shaping our future Annual Report 2016 ANNUAL Report 2016 SHANGHAI INDUSTRIAL HOLDINGS LIMITED 1 CONTENTS 2 Corporate Information 3 Information for Shareholders 4 Chairman’s Statement 8 SIHL at a Glance 9 Group Business Structure 10 Business Review, Discussion and Analysis 37 Financial Review 44 Corporate Governance Report 56 Directors’ and Senior Management Profiles 61 Directors’ Report 69 Independent Auditor’s Report 74 Consolidated Statement of Profit or Loss 75 Consolidated Statement of Profit or Loss and Other Comprehensive Income 76 Consolidated Statement of Financial Position 78 Consolidated Statement of Changes in Equity 80 Consolidated Statement of Cash Flows 83 Notes to the Consolidated Financial Statements 188 Financial Summary 189 Particulars of Major Properties Held for Investment Purposes 191 Glossary of Terms 2 SHANGHAI INDUSTRIAL HOLDINGS LIMITED ANNUAL Report 2016 CORPORATE INFORMATION DIRECTORS COMPANY SECRETARY Executive Directors Mr. Yee Foo Hei Mr. Wang Wei (Chairman) Mr. Zhou Jun (Vice Chairman & Chief Executive Officer) QUALIFIED ACCOUNTANT Mr. Xu Bo (Deputy CEO) Mr. Lee Kim Fung, Edward Mr. Xu Zhan AUTHORISED REPRESENTATIVES Independent Non-Executive Directors Mr. Zhou Jun Prof. Woo Chia-Wei Mr. Yee Foo Hei Mr. Leung Pak To, Francis Mr. Cheng Hoi Chuen, Vincent REGISTERED OFFICE Mr. Yuen Tin Fan, Francis 26th Floor, Harcourt House, 39 Gloucester Road, Wanchai, Hong Kong BOARD COMMITTEES Executive Committee COMPANY STOCK CODE Mr. Wang Wei (Committee Chairman) Stock Exchange : 363 Mr. Zhou Jun Bloomberg : 363 HK Mr. Xu Bo Reuters : 0363.HK ADR : SGHIY Audit Committee Mr. Cheng Hoi Chuen, Vincent (Committee Chairman) COMPANY WEBSITE Prof. Woo Chia-Wei www.sihl.com.hk Mr. Leung Pak To, Francis Mr. Yuen Tin Fan, Francis AUDITOR Deloitte Touche Tohmatsu Remuneration Committee Prof. Woo Chia-Wei (Committee Chairman) ADR DEPOSITORY BANK Mr. Leung Pak To, Francis The Bank of New York Mellon Mr. Cheng Hoi Chuen, Vincent BNY Mellon Shareowner Services Mr. Yuen Tin Fan, Francis P.O. Box 358516, Mr. Li Han Sheng Pittsburgh, PA 15252-8516, USA Mr. Tang Ming Telephone : (1) 201 680 6825 Toll free (USA) : (1) 888 BNY ADRS Nomination Committee Website : www.bnymellon.com/shareowner Prof. Woo Chia-Wei (Committee Chairman) Email : [email protected] Mr. Leung Pak To, Francis Mr. Cheng Hoi Chuen, Vincent Mr. Yuen Tin Fan, Francis Mr. Li Han Sheng Mr. Tang Ming ANNUAL Report 2016 SHANGHAI INDUSTRIAL HOLDINGS LIMITED 3 INFORMATION FOR SHAREHOLDERS SHAREHOLDER ENQUIRIES DIVIDEND Company Contact Details Proposed 2016 final dividend of HK46 cents (2015: HK45 cents) per share will be paid to shareholders on Address : 26th Floor, Harcourt House or about Friday, 9 June 2017 subject to shareholders’ 39 Gloucester Road approval. Wanchai, Hong Kong Telephone : (852) 2529 5652 Subject to approval by shareholders of the final Facsimile : (852) 2529 5067 dividend and together with the 2016 interim dividend Email : [email protected] of HK36 cents (2015: HK36 cents) per share and the special dividend HK10 cents paid during the year, total Company Secretarial dividends for the year amounts to HK92 cents (2015: Telephone : (852) 2876 2317 HK81 cents) per share. Facsimile : (852) 2863 0408 Investor Relations CLOSURE OF REGISTER OF MEMBERS Telephone: (852) 2821 3936 For the purpose of determining shareholders’ eligibility Facsimile: (852) 2866 2989 to attend and vote at the annual general meeting, the register of members of the Company will be closed Share Registrar from Wednesday, 17 May 2017 to Monday, 22 May 2017, both days inclusive, during which period no Tricor Secretaries Limited transfer of shares will be effected. As such, all transfers Address : 22nd Floor, Hopewell Centre accompanied by the relevant share certificates must be 183 Queen’s Road East lodged with the Company’s share registrar by 4:30 p.m. Hong Kong on Tuesday, 16 May 2017. Telephone : (852) 2980 1333 Facsimile : (852) 2861 1465 For the purpose of determining shareholders’ entitlement to the final dividend, the register of members Our Website of the Company will be closed on Monday, 29 May 2017, Press releases and other information of the Group can be no transfer of shares will be effected on that day. As found at our website: www.sihl.com.hk. such, all transfers accompanied by the relevant share certificates must be lodged with the Company’s share registrar by 4:30 p.m. on Friday, 26 May 2017. FINANCIAL CALENDAR 2016 interim results announced 31 August 2016 2016 final results announced 29 March 2017 Despatch of 2016 annual report on or about 18 April 2017 2017 annual general meeting 22 May 2017 Ex-dividend date for 2016 final dividend 25 May 2017 Record date for 2016 final dividend 29 May 2017 Despatch of notice of 2016 final dividend on or about 9 June 2017 4 SHANGHAI INDUSTRIAL HOLDINGS LIMITED ANNUAL Report 2016 CHAIrman’S STATEMENT Wang Wei Chairman I am pleased to report to our shareholders the results of the Group for 2016. During the year, the market was extremely volatile domestically and overseas with rapid changes in the global political and economic environment. Against this scenario, the Board and the management of the Group have made considerable efforts to integrate its financing activities and business operations and continued to focus on its principal businesses – infrastructure facilities, real estate and consumer products. These core businesses have also been further strengthened to improve operational efficiency. In addition, the Group has achieved stable growth for its business segments through developing new business arenas and enhancing its internal control. Capitalizing on activities in the capital market, the Group has also increased mergers and acquisitions activities and completed a number of material projects, building an excellent asset structure and laying a solid foundation for its long-term development. For the year ended 31 December 2016, the Group’s net profit amounted to HK$2,903 million, representing a year- on-year increase of 2.7% as compared to last year. The increase was mainly attributable to stable profitability growth for the year of our infrastructure facilities and consumer products businesses. The Group’s total revenue amounted to HK$22,132 million, representing a year-on-year increase of 12.4%. The Board of Directors has recommended a final dividend of HK46 cents (2015: HK45 cents) per share for 2016. Together with an interim dividend of HK36 cents (2015: HK36 cents) per share and a special dividend of HK10 cents per share paid during the year, total dividends for the year amounted to HK92 cents (2015: HK81 cents) per share. During the year, the Group continued to build up a good momentum for the development of its three core businesses and achieve satisfactory growth. Of these, the toll roads business maintained a strong cash flow, water services business expanded rapidly, and the infrastructure facilities business recorded a profit of HK$1,397 million, representing a year-on-year increase of 22.9%. Furthermore, the toll roads and water services businesses acquired a number of high-quality assets through capital injections from the parent company as well as mergers and acquisitions in the market, further strengthening profitability for its core businesses. ANNUAL Report 2016 SHANGHAI INDUSTRIAL HOLDINGS LIMITED 5 Chairman’s STATEMENT The real estate business recorded a profit of HK$752 million for the year on the back of rapid developments in the domestic real estate market. It however represented a decrease of 15.4% over the previous year which was mainly attributable to extra profits recorded for the disposal of a 10% interest in the Four Season Hotel Shanghai during the last financial year. Excluding the impact from the extra gains, profits actually increased by 2.5% over last year. The consumer products business maintained steady growth against a difficult external environment, recording a net profit of HK$1,075 million, representing a year-on-year increase of 2.5%. INFRASTRUCTURE Business – CONTINUING TO GROW AND EXPAND ITS ASSET SIZE In September 2016, the Group acquired 23.0584% interests of Bridge Company from its parent company at a consideration of HK$1,803 million. This connected transaction was approved unanimously by the independent shareholders of the Company at an extraordinary general meeting. The acquisition has resulted in the injection of high-quality assets into the Group’s toll road business, helping to enhance its future profitability. During the year, the Group’s three existing high-quality toll roads continued to generate stable cash flow and recorded sustained growth. Traffic flow and revenue also increased overall, benefiting from a rising number of cars and tourist traffic. Considerable efforts were made to improve operational efficiency such as enhancing management standards for its roads, improving road maintenance and monitoring and to effectively prevent traffic jams. For the water services business, the Group continued to expand its asset size as planned and to improve the quality of its assets, further consolidating its market share in the industry. In October 2016, the Company and SI Environment acquired 20.2344% and 32.6562% shareholding interests – totaling 52.8906% in Longjiang Environmental for a cash consideration of RMB518 million and RMB836 million, respectively. Together with the 42.1094% shareholding interests already held by the Group, the acquisition brought the Group’s shareholding interests in Longjiang Environmental to 95%. In February 2017, a further acquisition of a 3.75% interest in Longjiang Environmental from an independent third party for a cash consideration of RMB96 million was made, bringing the Group’s shareholding interests to 98.75%. Longjiang Environmental is a leading company in the water services industry in Heilongjiang, and such acquisition represents an important strategic move in respect of the Group’s investments in the water services industry in the northeast China region.