SHENZHEN INVESTMENT HOLDINGS BAY AREA DEVELOPMENT COMPANY LIMITED (incorporated in the Cayman Islands with limited liability) Stock Codes: 737 (HKD counter) & 80737 (RMB counter) Hong Kong Shenzhen Dongguan Guangzhou Foshan Zhongshan Zhuhai Macao Huizhou Jiangmen Zhaoqing 2019 ANNUAL R E P O R T About Us Shenzhen Investment Holdings Bay Area Development Company Limited (the “Company”, formerly known as Hopewell Highway Infrastructure Limited) was incorporated in the Cayman Islands and listed on The Stock Exchange of Hong Kong Limited since 6 August 2003 with stock codes 737 (HKD counter) and 80737 (RMB counter). The ultimate parent company of the Company is Shenzhen Investment Holdings Company Limited. The Company is principally engaged in expressway business and adopts development strategies focusing on the infrastructure and correlated business as well as land development and utilisation along the GS Superhighway within the Guangdong-Hong Kong-Macao Greater Bay Area. Contents 2 Financial Highlights (Presented under Proportionate Consolidation Method) 3 5-Year Financial Summary 6 Chairman’s Statement 9 Dividend and Closure of Register 11 Profile of Directors 16 Management Discussion and Analysis 16 Business Review 34 Financial Review 45 Others 46 Corporate Governance Report 66 Report of the Directors 77 Independent Auditor’s Report 85 Consolidated Statement of Profit or Loss and Other Comprehensive Income 86 Consolidated Statement of Financial Position 87 Consolidated Statement of Changes in Equity 88 Consolidated Statement of Cash Flows 89 Notes to the Consolidated Financial Statements 143 Appendix – Consolidated Financial Information 146 Glossary 151 Corporate Information 152 Financial Calendar Financial Highlights (Presented under Proportionate Consolidation Method) Net toll Revenue by Net Toll Revenue Expressway (RMB million) Owners of the Company (RMB million) 2,400 800 2,162 2,144 656 2,000 612 600 1,600 1,200 1,120 400 304 800 200 400 66% GS Superhighway 0 0 34% 2017/18 second 2019 2017/18 second 2019 GZ West half of 2018 half of 2018 Superhighway (Note 1) Gearing Ratio Interest Coverage Total Debt to (Note 1) (EBITDA/Interest) (Net Debt to Equity Attributable to Total Assets Owners of the Company) 8 7.7x 7.8x 60 110 107% 7.5x 104% 100 48% 48% 92% 50 47% 90 6 80 40 70 60 4 30 50 40 20 2 30 10 20 10 0 0 0 2017/18 second 2019 30 June 31 December 31 December 30 June 31 December 31 December half of 2018 2018 2018 2019 2018 2018 2019 Note 1: The Group’s share of JV’s debt is defined as bank and other loans together with balance with JV partner and shareholder’s loan. Net debt is defined as total debt (including share of JV’s) less total bank balances and cash (including share of JVs). 2 Shenzhen Investment Holdings Bay Area Development Company Limited 5-Year Financial Summary The financial summary of the Group for the year ended 30 June 2016 to the year ended 31 December 2019. Consolidated Results Prepared under the Equity Method (RMB million) Six months ended Year ended Year ended 30 June 31 December 31 December 2016 2017 2018 2018 2019 Share of results of joint ventures 556 680 724 340 701 Corporate results (35) (48) (58) (32) (80) Profit for the year/period 521 632 666 308 621 Profit for the year/period attributable to: Owners of the Company 511 623 656 304 612 Non-controlling interests 10 9 10 4 9 Profit for the year/period 521 632 666 308 621 Segment Revenue and Results (RMB million) Six months ended Year ended Year ended 30 June 31 December 31 December 2016 2017 2018 2018 2019 Revenue 2,002 2,159 2,162 1,120 2,144 GS Superhighway 1,480 1,560 1,499 743 1,409 GZ West Superhighway 522 599 663 377 735 Xintang Residential Project – – – – – EBITDA 1,705 1,859 1,889 983 1,875 GS Superhighway(1) 1,262 1,343 1,309 663 1,248 GZ West Superhighway 443 516 580 320 627 Xintang Residential Project – – – – 0 Depreciation and amortisation (595) (671) (692) (358) (690) GS Superhighway (414) (460) (463) (232) (445) GZ West Superhighway (181) (211) (229) (126) (245) Xintang Residential Project – – – – – Interest and tax (499) (522) (538) (270) (511) GS Superhighway (277) (324) (325) (164) (316) GZ West Superhighway (222) (198) (213) (106) (193) Xintang Residential Project – – – – (2) Segment results(2) 611 666 659 355 674 GS Superhighway 571 559 521 267 487 GZ West Superhighway 40 107 138 88 189 Xintang Residential Project – – – – (2) Segment corporate results(3) (8) (17) (15) (10) (31) Net exchange (loss)/gain (82) (17) 22 (37) (22) Profit for the year/period 521 632 666 308 621 Profit for the year/period attributable to: Owners of the Company 511 623 656 304 612 Non-controlling interests 10 9 10 4 9 Profit for the year/period 521 632 666 308 621 ANNUAL REPORT 2019 3 5-Year Financial Summary Consolidated Statement of Financial Position Prepared under the Equity Method (RMB million) As at 30 June As at 31 December 2016 2017 2018 2018 2019 Interests in joint ventures 6,176 5,172 4,852 4,798 4,858 Loans to a joint venture – – – – – Bank balances and cash 652 469 691 140 50 Dividend receivable from a joint venture 19 0 74 – – Amount due from a joint venture – – – – 311 Equity instrument at fair value through other comprehensive income – – – 11 23 Investment 5 5 5 – – Property and equipment 0 0 0 1 2 Other current assets 2 3 4 0 1 Total assets 6,854 5,649 5,626 4,950 5,245 Bank loans – – – – 281 PRC withholding tax liabilities 127 80 70 70 81 Other current liabilities 8 12 10 11 13 Interim dividend payable – – 371 – – Total liabilities 135 92 451 81 375 Non-controlling interests 46 31 27 30 24 Equity attributable to owners of the Company 6,673 5,526 5,148 4,839 4,846 Consolidated Statement of Cash Flows Prepared under the Equity Method (RMB million) Six months ended Year ended Year ended 30 June 31 December 31 December 2016 2017 2018 2018 2019 Net cash used in operating activities (42) (37) (36) (14) (39) Net cash from (used in) investing activities – Advance to a joint venture – – – – (309) – Registered capital contribution to a joint venture (212) – – – (4) – Repayment of loans from a joint venture 788 – – – – – Net dividends received 823 1,620 911 449 613 – Others 57 22 19 8 2 Net cash from (used in) financing activities – New bank loans raised 369 – – 266 546 – Repayment of bank loans (619) – – (266) (265) – Dividends paid (1,084) (1,824) (674) (1,001) (639) – Others (2) – – (1) (1) Net increase (decrease) in cash and cash equivalents 78 (219) 220 (559) (96) Cash and cash equivalents at the beginning of year/period 574 652 469 691 140 Effect of foreign exchange rate changes 0 36 2 8 6 Cash and cash equivalents at the end of year/period 652 469 691 140 50 Total bank balances and cash 652 469 691 140 50 4 Shenzhen Investment Holdings Bay Area Development Company Limited 5-Year Financial Summary Per Share Basis Six months ended Year ended Year ended 30 June 31 December 31 December 2016 2017 2018 2018 2019 Basic earnings per share (RMB cents) 16.6 20.2 21.3 9.9 19.9 Dividend per share (RMB cents) – Interim 8.4 8.6 11.6 – 9.8 – Final 8.2 11.6 9.7 9.9 10.1 – Special final 40.0 10.0 10.0 – – Net asset value per share (RMB) 2.2 1.8 1.7 1.6 1.6 (4) Dividend payout ratio 100% 100% 100% 100% 100% Financial Ratios As at 30 June As at 31 December 2016 2017 2018 2018 2019 Return on equity attributable to (7) owners of the Company 8% 11% 13% 12% 13% Prepared under Equity Method Total debt(5) to total assets – – – – 5% Gearing ratio (Net debt(5) to equity attributable to owners of the Company) – – – – 5% Prepared under Proportionate Consolidation Method Total debt(6) to total assets 43% 50% 47% 48% 48% Gearing ratio (Net debt(6) to equity attributable to owners of the Company) 73% 99% 92% 104% 107% Notes: (1) Excluding exchange differences and related income tax. (2) The segment results represent the Group’s share of results of joint ventures before exchange difference (net of related income tax) and net of withholding tax attributed to the dividend received from and the undistributed earnings of a joint venture. (3) The segment corporate results represent the corporate results before corporate exchange difference and withholding tax attributed to the dividend received from and the undistributed earnings of a joint venture. (4) Excluding special final dividend. (5) Under equity method, total debt include bank loans of the Group. Net debt is defined as total debt less the bank balances and cash of the Group as at the reporting date. (6) Under proportionate consolidation method, total debt include bank loans of the Group, bank and other loans of joint ventures, balance with a joint venture partner. Net debt is defined as total debt less the bank balances and cash of the Group and joint ventures together with pledged bank balances and deposits of the joint ventures as at the reporting date. (7) Annualised figure. ANNUAL REPORT 2019 5 Chairman’s Statement Financial Results and Dividend Proposal It is my honour to report on behalf of the Board to Shareholders the Group’s final results for the financial year ended 31 December 2019. The Group’s net profit of the toll expressway projects was RMB676 million, profit attributable to owners of the Company was RMB612 million, and basic earnings per share stood at RMB19.86 cents.