CHANGSHA BROAD HOMES INDUSTRIAL GROUP CO., LTD. Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.
Changsha Broad Homes Industrial Group Co., Ltd.
ڗӍჃɽИσʈุණྠٰ΅Ϟࠢʮ̡
(A joint stock company incorporated in the People's Republic of China with limited liability)
(Stock Code: 2163)
ANNUAL RESULTS ANNOUNCEMENT FOR THE YEAR ENDED DECEMBER 31, 2020
The board of directors (the "Board") of Changsha Broad Homes Industrial Group Co., Ltd. (the "Company") is pleased to announce the audited consolidated results of the Company and its subsidiaries (the "Group") for the year ended December 31, 2020. These results have been audited by the auditors of the Company and reviewed by the Audit Committee of the Company.
This announcement, containing the full text of the 2020 annual report of the Company, complies with the relevant requirements of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the "Hong Kong Stock Exchange") in relation to information to accompany preliminary announcement of annual results. This announcement is published on the websites of the Hong Kong Stock Exchange (www.hkexnews.hk) and the Company (www.bhome.com.cn). The full text of the 2020 annual report of the Company will be despatched to the shareholders of the Company and published on the websites of the Hong Kong Stock Exchange and the Company in due course.
By order of the Board
Changsha Broad Homes Industrial Group Co., Ltd.
Zhang Jian
Chairman
Changsha, China, February 26, 2021
As at the date of this announcement, the Board comprises Mr. Zhang Jian, Ms. Tang Fen, Ms. Shi Donghong, Mr. Zhang Kexiang and Mr. Tan Xinming as executive directors of the Company; Mr. Zhang Quanxun and Ms. Hu Keman as non-executive directors of the Company; and Mr. Chen Gongrong, Mr. Li Zhengnong, Mr. Wong Kai Yan Thomas and Mr. Zhao Zhengting as independent non-executive directors of the Company.
Contents
2 Company Profile
3 Corporate Information
5 Definitions
11 Financial Summary and Operating Highlights
14 Chairman's Statement
16 Management Discussion and Analysis
37 Directors, Supervisors and Senior Management
45 Report of the Board
59 Report of the Supervisory Committee
62 Corporate Governance Report
83 Environmental, Social and Governance Report
131 Independent Auditor's Report
139 Consolidated Statement of Comprehensive Income
141 Consolidated Statement of Financial Position
143 Consolidated Statement of Changes in Equity
144 Consolidated Cash Flow Statement
146 Notes to the Consolidated Financial Statements
236 Appendix IParticulars of Properties held by the Group
Company Profile
Changsha Broad Homes Industrial Group Co., Ltd. and its subsidiaries are the pioneer and leader in the industrialization of construction industry in the PRC, which provide comprehensive solutions to facilitate the modernization of construction industry in China, and offer professionalized, intelligent and scalable manufacturing of prefabricated buildings and services leveraging the profound technology accumulation and continuous innovation, research and development capacity.
Through years of industrialized exploration, the Company has accumulated industry-leading software and hardware technologies. In particular, the Company is the first to develop and utilize the PC-CPS (Cyber Physical System), a full-process digital system, in the prefabricated construction industry in China, seeking to achieve massive and continuous production of customized products. The Company is committed to establishing a digital supporting system covering the entire industry chain of construction, in which various elements of the industry chain can be defined and the entire construction process, from design and manufacturing to construction, operation and maintenance, can be simulated on the internet through information technology, thereby determining the variables in the construction process and guiding the actual operation and implementation based on a data-driven approach through IoT of construction industry. Meanwhile, the Company cooperates with relevant enterprises along the industry chain to formulate standards of construction industrialization, thereby transforming the traditional labor - intensive and scattered construction industry into a centralized, efficient and modern manufacturing industry.
Early in 1996, the founder and management team of the Company entered the field of construction industrialization. The Company is among the first batch of enterprises having been named as National Housing Industrialization Bases ( Иσପุʷਿή ) and has established cooperative relations with nine out of China's top ten property developers and China's top ten construction enterprises. In addition, it provides PC units and technical services for several landmark projects in China, such as Qingtang Bay Public Rental Housing Project ( ڡಆᝄʮॡגධͦ ), the largest prefabricated public rental housing pilot project in Beijing as of the end of 2019 and the first green residential demonstration project in Beijing, and Hefei Binhu Qin Garden Project ( Υ٭Ᏽಳӎධͦ ), the largest industrialized residential project under construction in China as of the end of 2019.
On November 6, 2019, the H Shares of the Company were officially listed on the Main Board of the Hong Kong Stock Exchange (Stock Code: 2163).
BOARD
Executive Directors
Mr. Zhang Jian (Chairman) Ms. Tang Fen (President)
Ms. Shi Donghong (Vice President,
Ms. Shi Donghong
Ms. Leung Suet Wing
JOINT COMPANY SECRETARIES
Chief Financial Officer, Secretary to the Board and Joint Company Secretary)
Mr. Zhang Kexiang (Vice President) Mr. Tan Xinming (Vice President)
Non-executive Directors
Mr. Zhang Quanxun
Ms. Hu Keman (appointed on May 15, 2020)
Independent Non-executive Directors
Mr. Chen Gongrong
Mr. Li Zhengnong
Mr. Wong Kai Yan Thomas
Mr. Zhao Zhengting (appointed on May 15, 2020)
Supervisors
Ms. Zhang Mingxin Mr. Li Gen
Ms. Liu Jing
AUDIT COMMITTEE
Mr. Chen Gongrong (Chairman) Mr. Li Zhengnong
Mr. Wong Kai Yan Thomas
REMUNERATION AND APPRAISAL COMMITTEE
Mr. Li Zhengnong (Chairman) Mr. Chen Gongrong
Mr. Zhang Jian
NOMINATION COMMITTEE
Mr. Li Zhengnong (Chairman)
Mr. Chen Gongrong
Mr. Zhang Jian
STRATEGY COMMITTEE
Mr. Zhang Jian (Chairman)
Ms. Tang Fen
Ms. Shi Donghong
Ms. Shi Donghong
Ms. Leung Suet Wing (ACIS, ACS)
LEGAL ADVISERS
as to Hong Kong law: Baker & McKenzie
as to PRC law:
Jia Yuan Law Offices
AUDITOR
KPMG
Certified Public Accountants
Public Interest Entity Auditor registered in accordance cwith the Financial Reporting Council Ordinance
COMPLIANCE ADVISER
Anglo Chinese Corporate Finance, Limited
Corporate Information
REGISTERED OFFICE
Intersection of Lusong Road and Dongfanghong Road Changsha High-tech Development Zone, Changsha Hunan, PRC
HEADQUARTERS AND PRINCIPAL PLACE OF BUSINESS IN THE PRC
No. 248 Yinshuang Road
Yuelu District, Changsha Hunan, PRC
PRINCIPAL PLACE OF BUSINESS IN HONG KONG
31/F, Tower Two, Times Square 1 Matheson Street
Causeway Bay, Hong Kong
H SHARE REGISTRAR
Computershare Hong Kong Investor Services Limited Shops 1712-1716, 17th Floor
Hopewell Centre
183 Queen's Road East Wanchai, Hong Kong
PRINCIPAL BANKERS
Bank of Changsha, Main Branch
China Construction Bank Corporation, Hunan Branch Bank of China Limited, Hunan Branch
Bank of Communications Co., Ltd., Hunan Branch Shanghai Pudong Development Bank, Changsha Branch
November 6, 2019
INVESTOR RELATIONS
ir@bhome.com.cn
COMPANY WEBSITE
www.bhome.com.cn
STOCK CODE
Listed on the Main Board of the Hong Kong
Stock Exchange
H Share Stock Code: 2163
H Share Abbreviation: BROAD HOMES
LISTING DATE
In this annual report, unless the context otherwise requires, the following terms and expressions have the meanings set forth below:
the 2020 annual general meeting of the Company to be held at 10:00 a.m. on March 26, 2021 and any adjournment thereof (if any)
"Articles of Association"
the current prevailing articles of association of the Company
"Audit Committee"
the audit committee of the Company, one of the special committees of the Board
"B-house"
prefabricated villa products of Broad House
"B2B"
a business model in which enterprises exchange and transmit data and information and carry out trading activities through private networks or the Internet
"B2C"
enterprises providing consumers with a new shopping environment through the Internet
"Board"
the board of Directors of the Company
"Broad Homes United Program"
the program initiated by our Company, where our Company cooperates with local business partners to set up Joint Factories to manufacture PC units
"cement"
gray powder, made by calcining lime and clay, which hardens when mixed with water and is generally used in producing mortar and concrete
"China" or "PRC"
the People's Republic of China, but for the purpose of this annual report only, excluding Hong Kong, Macau Special Administrative Region of the PRC and Taiwan region
"China Real Estate News"
a Chinese real estate newspaper (and its news website) governed by the MOHURD
"cloud"
a global network of servers, each with a unique function
"Company" or "Broad Homes"
Changsha Broad Homes Industrial Group Co., Ltd. ( ڗӍჃɽИσʈ ุණྠٰ΅Ϟࠢʮ̡ ), which was established in the PRC on April 30, 2006 as a limited liability company and was converted into a joint stock company with limited liability in the PRC on December 10, 2015
the Companies Ordinance (Chapter 622 of the Laws of Hong Kong), as amended, supplemented or otherwise modified from time to time
an artificial, stonelike material used for various structural purposes, made by mixing cement and various aggregates, such as sand, pebbles, gravel or shale, with water and allowing the mixture to harden
has the meaning ascribed to it under the Hong Kong Listing Rulesthe Corporate Governance Code as set out in Appendix 14 of the Hong Kong Listing Rules
"curing"
the process where the concrete surfaces are kept wet for a certain period after placing of concrete so as to promote the hardening of cement
"Director(s)"
the director(s) of the Company
"Domestic Share(s)"
domestic unlisted ordinary share(s) in the share capital of the Company, with a nominal value of RMB1.00 each, which are subscribed for and paid up in Renminbi
"Global Offering"
the Hong Kong Public Offering and the International Offering
"gravel"
impure sandstone containing lime and clay
"Group" or "we/us"
the Company and its subsidiaries (or the Company and any one or more of its subsidiaries, as the context may require)
"H Share(s)"
"Hong Kong"
the Rules Governing the Listing of Securities on the Hong Kong Stock Exchange, as amended, supplemented or otherwise modified from time to time
overseas listed foreign investment share(s) in the ordinary share capital of the Company with a par value of RMB1.00 each, which are listed on the Hong Kong Stock Exchange and traded in Hong Kong Dollars
the Hong Kong Special Administrative Region of the PRC
Hong Kong dollars, the lawful currency of Hong Kong
The Stock Exchange of Hong Kong Limitedindividual International Financial Reporting Standards, International Accounting Standards and Interpretations issued by the International Accounting Standards Board
"Independent Third Party(ies)"
party(ies) not connected with us within the meaning of the Hong Kong Listing Rules as far as our Directors are aware after having made all reasonable enquiries
"Internet +"
"Internet + various traditional industries", leveraging information and communication technologies and Internet platforms to make the Internet and traditional industries deeply integrated to create a new development ecology
"IoT"
internet of things, a network of physical objects embedded with electronics, software, sensors, and network connectivity that enables these objects to collect and exchange data thus to realize intelligent identification, positioning, tracking, monitoring and management
"ISO9001"
a standard for quality management systems maintained by the International Organization for Standardization (ISO) and is administered by accreditation and certification bodies
"Joint Factory(ies)"
the entities established under the Broad Homes United Program to manage and operate the PC manufacturing factory. The Joint Factory also refers to the factory it operates and manages as context requires
"Listing"
the listing of the H Shares on the Main Board of the Hong Kong Stock Exchange
"Listing Date"
November 6, 2019, the date on which the H Shares were listed and traded on the Main Board of the Hong Kong Stock Exchange
"m"
meter(s)
"m2"
square meter(s)
"Main Board"
the stock market (excluding the option market) operated by the Hong Kong Stock Exchange which is independent from and operated in parallel with the GEM of the Hong Kong Stock Exchange
"MIIT"
the Ministry of Industry and Information Technology of the PRC ( ʕശɛ ͏ձʈุձڦࢹʷ)
"MOC"
the Ministry of Construction of the PRC ( ʕശɛ͏ձܔண)
"Model Code"
the Model Code for Securities Transactions by Directors of Listed Issuers as set out in Appendix 10 to the Hong Kong Listing Rules
the nomination committee of the Company, one of the special committees of the Board
original equipment manufacturer, a company that makes a part or subsystem that is used in another company's end product
the option granted by the Company in the Global Offering to the International Underwriters, exercisable by the Joint Global Coordinators on behalf of the International Underwriters at any time from the date of the International Underwriting Agreement until the 30th day after the last day for lodging applications under the Hong Kong Public Offering. The Company issued 167,400 H Shares from partial exercise of the over-allotment option on November 28, 2019
"PC" or "prefabricated concrete"
a construction product produced by casting concrete in a reusable mould which is then cured in a controlled environment, transported to the construction site and lifted into place; in contrast, standard concrete is poured into site-specific forms and cured on site
"PC Maker"
the series of software for designing PC units and realizing other functions along the industry chain of prefabricated construction industry, of which PC Maker I is its first generation
"PC Maker I"
a BIM software developed by the Company for designing PC units
"PC-CPS"
"PRC GAAP"
a type of building that consists of several factory-built components or units that are assembled on-site to complete the unit
a province or, where the context requires, a provincial level autonomous region or municipality, under the direct supervision of the central government of the PRC
cyber-physical-system, an intelligent system to manage the operation and production
Accounting Standards for Business Enterprises issued by the Ministry of Finance of the PRC
"rebar" or "bar"
a steel bar or mesh of steel wires used as a tension device in reinforced concrete and reinforced masonry structures to strengthen and aid the concrete under tension
"reinforced concrete"
concrete in which wire mesh or steel bars are embedded to increase its tensile strength
"Reporting Period"
the financial year ended December 31, 2020
"Remuneration and Appraisal Committee"
the remuneration and appraisal committee of the Company, one of the special committees of the Board
"RMB" or "Renminbi"
the lawful currency of the PRC
"SFO"
the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong), as amended, supplemented or otherwise modified from time to time
"Shanghai Stock Exchange"
the Shanghai Stock Exchange ( ɪऎᗇՎʹה)
"Share(s)"
the ordinary share(s) in the share capital of the Company with a nominal value of RMB1.00 each, comprising H Share(s) and Domestic Share(s)
"Shareholder(s)"
holder(s) of Share(s)
"Shenzhen SASAC"
the State-owned Assets Supervision and Administration Commission of the People's Government of Shenzhen ( ଉέ̹ɛ͏ִ݁Ϟ༟ପ္ ຖ၍ଣ։ࡰึ)
"State Council"
the State Council of the PRC ( ʕശɛ͏ձਕ৫)
"Strategy Committee"
the strategy committee of the Company, one of the special committees of the Board
"Supervisor(s)"
the supervisor(s) of the Company
"Supervisory Committee"
the supervisory committee of the Company
"ton(s)"
metric tons
"two-level management strategy"
management model of the Joint Factories with one level being Joint Factories with significant influence and the other being Joint Factories without significant influence
Definitions
In this annual report, the terms "associate(s)," "close associate(s)," "connected person(s)," "core connected person(s)," "connected transaction(s)," "controlling shareholder(s)," "subsidiary(ies)" and "substantial shareholder(s)" shall have the meanings given to such terms in the Hong Kong Listing Rules, unless the context otherwise requires.
Certain amounts and percentage figures included in this annual report have been subject to rounding. Accordingly, figures shown as totals in certain tables may not be an arithmetic aggregation of the figures preceding them. Any discrepancies in any table or chart between the total shown and the sum of the amounts listed are due to rounding.
Words importing the masculine gender include, where applicable, the feminine and neuter genders.
For ease of reference, the names of the PRC established companies or entities, laws or regulations have been included in this annual report in both the Chinese and English languages and in the event of any inconsistency, the Chinese versions shall prevail.
Note: Gearing ratio is calculated based on the total liabilities divided by total assets as at the end of the respective reporting period.
CONDENSED STATEMENTS OF FINANCIAL POSITION
As at December 31,
2020 | 2019 | 2018 | 2017 | 2016 | |
RMB'000 | RMB'000 | RMB'000 | RMB'000 | RMB'000 | |
Assets | |||||
Total non-current assets | 5,207,489 | 4,853,065 | 3,473,386 | 2,724,729 | 1,969,352 |
Total current assets | 3,983,679 | 4,714,361 | 3,852,499 | 4,246,662 | 3,827,779 |
Total assets | 9,191,168 | 9,567,426 | 7,325,885 | 6,971,391 | 5,797,131 |
Equity | |||||
Total equity attributable | |||||
to equity shareholders | |||||
of the Company | 4,138,642 | 4,166,041 | 2,882,723 | 2,706,974 | 1,863,215 |
Total equity | 4,138,642 | 4,166,041 | 2,882,723 | 2,706,974 | 1,863,215 |
Liabilities | |||||
Total non-current | |||||
liabilities | 1,146,458 | 370,664 | 454,883 | 441,478 | 400,977 |
Total current liabilities | 3,906,068 | 5,030,721 | 3,988,279 | 3,822,939 | 3,532,939 |
Total liabilities | 5,052,526 | 5,401,385 | 4,443,162 | 4,264,417 | 3,933,916 |
Total equity and liabilities | 9,191,168 | 9,567,426 | 7,325,885 | 6,971,391 | 5,797,131 |
Note: The construction contracting business has been classified as discontinued operation of the Group for the year ended
December 31, 2020. In accordance with IFRS 5, Non-current Assets Held for Sale and Discontinued Operations, the Group has restated the comparative information in 2019 in this regard.
FINANCIAL PERFORMANCE HIGHLIGHTS
Our financial performance highlights for the year ended December 31, 2020 are set out below:
Total revenue decreased by 22.4% from RMB3,369.4 million for the year ended December 31, 2019 to RMB2,613.9 million for the year ended December 31, 2020.
Revenue of PC unit manufacturing business increased by 5.0% from RMB2,303.7 million for the year ended December 31, 2019 to RMB2,419.2 million for the year ended December 31, 2020, and revenue of PC unit manufacturing business as a percentage of total revenue increased from 68.4% for the year ended December 31, 2019 to 92.6% for the year ended December 31, 2020.
Gross profit decreased by 19.0% from RMB1,144.0 million for the year ended December 31, 2019 to RMB926.8 million for the year ended December 31, 2020; and gross profit margin increased from 34.0% for the year ended December 31, 2019 to 35.5% for the year ended December 31, 2020.
Gross profit margin of PC unit manufacturing business increased from 34.6% for the year ended December 31, 2019 to 36.6% for the year ended December 31, 2020, primarily attributable to the fact that we achieved cost reduction and efficiency enhancement through continuous improvement of our operating capacity.
Profit from operations decreased by 44.1% from RMB600.6 million for the year ended December 31, 2019 to RMB336.0 million for the year ended December 31, 2020.
Loss from discontinued operation was RMB2.9 million for the year ended December 31, 2020 and our construction contracting business was terminated.
Net profit decreased by 68.0% from net gains of RMB676.9 million for the year ended December 31, 2019 to net gains of RMB216.4 million for the year ended December 31, 2020.
Net cash generated from operating activities decreased by 81.2% from RMB967.1 million for the year ended December 31, 2019 to RMB181.8 million for the year ended December 31, 2020.
Financial Summary and Operating Highlights
OPERATING HIGHLIGHTS
Our operating highlights for the year ended December 31, 2020 are set out below:
New contracts and backlog
Year ended December 31,
As at December 31,
Total new contract amount of our PC unit manufacturing business increased by 31.7% from RMB3,106.2 million for the year ended December 31, 2019 to RMB4,090.7 million for the year ended December 31, 2020.
Total backlog amount of our PC unit manufacturing business increased by 38.6% from RMB3,748.9 million for the year ended December 31, 2019 to RMB5,195.9 million for the year ended December 31, 2020.
Production and sales volume and production line utilization rate of the PC unit manufacturing business
The production volume of our PC units increased by 3.4% from 771,000 cubic metres for the year ended December 31, 2019 to 797,000 cubic metres for the year ended December 31, 2020. The sales volume of our PC units increased by 7.0% from 815,000 cubic metres for the year ended December 31, 2019 to 872,000 cubic metres for the year ended December 31, 2020.
Our production line utilization rate decreased from 45.8% in 2019 to 37.8% in 2020, primarily attributable to (i) an increase in capacity of 428,000 cubic metres in 2020, the utilization rate of which are on the rise; and (ii) short-term production suspension as a result of the COVID-19 pandemic.
Chairman's Statement
Dear investors of Broad Homes and friends who care about us:
Best greetings! The COVID-19 pandemic still remains challenging globally and China has adopted hardcore prevention measures to contain virus spread. Profound changes have taken place so far. No news is more encouraging than your health and safety. Taking this opportunity, I would like to wish you, your family and friends good health and prosperity.
At this critical moment, we just released our operating performance for 2020. Rather than elaborating on the specific data, I would like to explain to you, how Broad Homes rebranded itself to seek opportunities, seize opportunities, create opportunities and change the crises to opportunities amid the challenges confronted with global economy and even in face of a "Black Swan".
In 2020, Broad Homes forged ahead through the adversities, demonstrating strong tenacity and vigor.
During the year, the COVID-19 pandemic inflicted the globe, significantly affecting society and the economy, and striking a heavy blow to our production and operation activities. However, leveraging unremitting efforts, orders of the PC unit manufacturing business, our principal business, achieved potent growth. In particular, newly secured contract amount reached RMB4.091 billion in 2020, representing a year-on-year increase of 31.7%; and the amount of the orders secured but yet to be completed reached RMB5.196 billion in late 2020, representing a year-on-year increase of 38.6%. Sufficient new orders and backlog orders will pave the way for us in 2021.
During the year, we were committed to the "To B + To C" two-wheel drive strategy and further promoted digital construction. We were successfully included in the recommended catalogue of digital empowerment for small and medium-sized enterprises of MIIT, and was honoured as "2020 China's Environmental and Social Responsibility Enterprise of the Year (2020 ϋܓʕϋܓᐑྤٟึபΆุ )" by China Environment News, a press agency directly under Ministry of Ecology and Environment of the PRC. We continued to implement the cooperation strategy with brand property developers with "focus" and "service" being the keynotes throughout the year. We were again named No.1 preferred cooperator among "Prefabricated Structure - PC Structure" brands of the "2020 China Real Estate Industry Chain Strategic and Integrity Supplier Research Report (2020 ϋܓʕגήପପุᗡଫ༐ڦ ԶᏐਠӺజѓ )". We newly launched the fully prefabricated industrial residential high-end product "B-house", the premium travelling and residential space product "BOX MODUL", and the "NewLife Module Talent Apartment" integrating residential and community functions, which realize the productization of housing in a true sense and promote the coordinated development of urban and rural construction.
The year of 2020 witnessed our aggressive pursuits. Despite the pandemic and mounting uncertainties, we strived to identify the course forward, kept pace with times and adapted ourselves to the evolving trends, in a bid to embrace healthier and sustainable development.
The pandemic revealed to us the market demand for trillion-level quality residential buildings in rural areas, and completed the strategic transformation of "To B + To C" mode. In the post-pandemic era, the value of healthy housing has become increasingly prominent, and low-density villages once again returned to public view. According to the "Standard of Livable Rural Housing with Modern Function, Local Style, Cost-effective, Structural Safety and Green Environmental Protection" proposed by the MOHURD, there is a long way to go to upgrade the quality of rural housing in China. Pursuant to relevant statistics, in the next 15 years, at least 31.6 billion Ĕ rural housing are required to be reconstructed or newly built in rural areas of China. Based on the reflection of the pandemic and market research, we launched the rural industrialized residential product series "B-house", constructed and opened housing parks in six major cities, and simultaneously offered a variety of standardized products via online and offline channels. Real-sense housing productization is an important measure for us to focus on creating value for customers, and is also a practical effort to promote the high-quality development of urban and rural construction. Practice and development during the past year fully demonstrated the feasibility, correctness and the necessity of strategic investment of "To B + To C" strategy.
Chairman's Statement
The pandemic also proved the necessity of comprehensive implementation of digital construction, and strengthened our determination to promote the layout of innovative business capabilities. We have arranged for forward-looking business mix in the digital field, independently developed the PC-CPS intelligent manufacturing management system with leading position in the domestic prefabricated building industry, and have launched market-oriented application, which realized key data sharing and collaboration along all stages of the whole lifecycle of prefabricated buildings, and completed the transformation from the original planned instruction-based production on the supply side to the data-driven production on the demand side. In the future, we will continue to improve the PC-CPS platform, deepen digital construction, continuously upgrade products, technologies and services, and change data into production factors, so as to achieve better quality and efficiency improvement, and create greater value for customers and society.
In 2021, amid the lingering pandemic, we, through ups and downs, have learnt that we should stay committed to our mission, pool efforts from all sides and vigorously press ahead.
In 2021, the implementation of the "Dual Circulation" strategy and the "14th Five-Year Plan", a series of explicit guidelines, implies new opportunities. The Central Economic Work Conference put it clear to solve the major housing problems in big cities, and the China Housing and Urban-Rural Construction Work Conference deployed eight key tasks, including urban renovation and rural construction. Thanks to such clear and definite message for promoting the high-quality development of urban and rural construction, Board Homes will enjoy new opportunities.
Those with perseverance may harvest success in 2021. China's urbanization process is accelerating, aging and redundant old urban areas are embracing renovation opportunities, a new generation of tenants pops up, diversified rental housing has turned to new growth drivers, and a blueprint for rural revitalization is gradually unfolding. Such changes reflect people's desire for a better life, and call upon Broad Homes not only to be participants in urban and rural construction, but also to be creators of a better life. Only by unswervingly carrying out innovation and paralleling quality with service can we stand the test of market and time. We will continue to adhere to the "strugglers-oriented" talent strategy, focus on the innovation of new technologies, new forms and new models, and continue to promote the high-quality development of urban and rural construction.
Foresight, confidence, tenacity and great execution remains crucial for our continuous growth. I would like to extend sincere appreciation for your trust, support and spur, and also your involvement in our development!
Each seed surviving the adversity of winter nourishes a vivid dream for spring. With stronger belief, we will charge forward against all odds to a more glorious future!
Changsha Broad Homes Industrial Group Co., Ltd.
Zhang Jian
Chairman
Changsha • Hunan February 26, 2021
1. BUSINESS REVIEW AND PROSPECT
Business highlights of the Company
In 2020, amidst the inevitable impact caused by the COVID-19 pandemic, the management team and all employees of the Company were committed to making up for the time lost in the pandemic while attaching great importance to pandemic control and prevention, so as to improve operating efficiency.
In 2020, we reinforced our principal business. Externally, we timely adjusted market strategy and consolidated sales of PC units to secure contract amount of RMB4,090.7 million, an increase of 31.7% from the previous year, and backlog orders of RMB5,195.9 million, an increase of 38.6% from the previous year. Internally, leveraging the comprehensive application of the PC-CPS system, we achieved quality improvement and productivity enhancement, optimized organizational efficiency and conducted strict control over production costs, leading to a further increase in the profitability of our PC unit manufacturing business with gross profit margin reaching 36.6%, an increase of 2 percentage points from the previous year. We continued to strengthen cooperation with brand property strategic customers, whose repeated purchases with us registered a significant increase. Our subsidiaries entered into annual strategic procurement agreements with brand property developers and large-scale construction enterprises, in a bid to identify the target market, expand scale, realize standard co-construction and achieve mutual promotion with business partners.
In 2020, we strived for explorations and innovations. We launched the B-house upgrading products, which realized the shift from To B to "To B + To C", and demonstrated through sample rooms within over half a year to conduct deep interaction with the market and end customers. Leveraging innovative integration of social resources, we conducted proactive exploration in the following three aspects: optimization and finalization of product design, practice of different promotion and sales models, system and platform construction of product execution. Bold innovation, careful verification, product execution and system improvement laid a solid foundation for the follow-up development of B-house and other "To C" businesses.
Continuing operations
PC unit manufacturing
During the Reporting Period, our PC unit manufacturing business strived to overcome the impact from different adverse factors of the pandemic and maintained a growing momentum. The revenue from PC unit manufacturing business increased by 5.0% from RMB2,303.7 million for the year ended December 31, 2019 to RMB2,419.2 million for the year ended December 31, 2020; and the revenue from this segment as a percentage of total revenue increased from 68.4% for the year ended December 31, 2019 to 92.6% for the year ended December 31, 2020. The gross profit of PC unit manufacturing business increased by 11.0% from RMB797.9 million for the year ended December 31, 2019 to RMB885.4 million for the year ended December 31, 2020, and the gross profit margin increased from 34.6% for the year ended December 31, 2019 to 36.6% for the year ended December 31, 2020.
PC equipment manufacturing
During the Reporting Period, our PC equipment manufacturing business recorded revenue of RMB91.8 million, representing a year-on-year decrease of 89.8%, which was primarily due to the improvement in layout of Joint Factories nationwide with the progress of the "Broad Homes United Program" and a delay in establishment of certain Joint Factories as a result of the COVID-19 pandemic.
The "Broad Homes United Program"
As of December 31, 2020, we had contributed to 62 Joint Factories, 58 of which were capable of commercial production and 21 achieved profitability as of December 31, 2020.
Discontinued operation
Construction contracting
During the Reporting Period, our construction contracting business recorded revenue of RMB102.9 million, representing a year-on-year decrease of 39.1%. Starting from 2016, the Group determined to focus on PC units and PC equipment manufacturing business and developing PC unit design and production management system. Accordingly, it ceased to secure new contracts for construction contracting business and relevant projects were successively winding up. To optimize asset structure and concentrate our efforts to reinforce the principal business, we disposed of the construction contracting business to Independent Third Parties in September 2020. For details, please refer to the section headed "Major acquisitions and disposals of subsidiaries and associates".
Prospect and strategies
Schedule investment in production centres in major potential regions of China and steadily promote the Broad Homes United Program
We will continue to implement our strategy of "Scale plus Profits". We intend to continue to lead the market through establishing regional production centres in major cities to improve our nationwide layout. Regional production centre is a combination of wholly-owned PC factory and technology centre, where our PC unit manufacturing capability is fully enhanced with support from our strong research and development capability of technology centres while the research results of the technology centres can be quickly applied in real time manufacturing in our PC factories and in turn enhances the production capacity and efficiency while enabling the application and development of our technology. The regional production centres will serve as regional benchmark for our PC units manufacturing and provide technical support to the PC factories in the region. As of December 31, 2020, we had established seven regional production centres in Hunan, Zhejiang, Anhui, Jiangsu, Guangdong, Tianjin and Shanghai. Meanwhile, we will build new regional production centres in cities which we believe to have promising market potentials but where we have not established factories, and further enhance our leadership in the prefabricated construction industry in China by enlarging our production scale and profitability.
As of December 31, 2020, we had accumulatively invested in 62 Joint Factories, 58 of which were capable of commercial production. We plan to further increase the number of the Joint Factories to realize a full coverage of major prefabricated construction markets in China with funds generated from our business operation and other financial resources available.
Upgrade our digital intelligent platform (AI-CPS) to strengthen our capability
We plan to further upgrade the PC-CPS intelligent manufacturing management system to AI-CPS on the existing basis, so as to break through the traditional management mode, create a digital organization, procure digitalization as the long-term strategy for enterprise development, comprehensively promote digitalization of market, factory, supply chain, manpower and finance, base business decision-making on more accurate and objective data, change management from organization and process-driven to data-driven, complete data-based operation, change uncertainties into certainties and turn managers into operators. With the enhancement of digital capability, the unique problems of non-standard products and prolonged and uncertain delivery in the prefabricated construction industry will be better solved, and JIT (Just In Time)-like efficiency and precision are pursued in this industry where supply and demand remains uncertain, with the ultimate goal being improving operational efficiency and profitability.
Comprehensively popularize technical marketing to maximum value created for strategic customers
We will further focus on clients who are among the top 50 real estate developers in China, adhere to our strategic philosophy of "Creating Value with Our Client", comprehensively popularize technical marketing, position ourselves as customer engineer capable of business and technology services, and provide technology, business and on-site full-process upgrade services, to directly demonstrate and create value with technology.
We plan to continue to promote cooperation with brand property developers and large-scale construction enterprises, allocate various resources to provide all-round technical services and product support for strategic customers, and facilitate customers to better improve construction quality, quantify and control construction costs, and accelerate progress and turnover. We strive to build a comprehensive connection with strategic customers in terms of technical exchange, product demand and information interaction, thus cultivating multi-dimensional and in-depth customer reliance and achieving maximum scale.
Expand in overseas markets
Affected by the global outbreak of COVID-19 since the beginning of 2020, we will postpone our plan of expansion in overseas markets. After the material adverse effects from the pandemic subside, we plan to promote and export fully prefabricated villa products or export fully prefabricated building products and relevant construction management, technologies, equipment and services to overseas markets when appropriate. Fully prefabricated building products can substantially reduce construction effort on-site and can be constructed in a more efficient, environmental-friendly and energy-saving manner as compared with traditional buildings. Such products are more competitive in the market as they are in line with the value orientation of the people in the developed countries and popular islands for tourists.
Develop module integration services
We divide our PC prefabricated construction business into two major sectors, being B2B and B2C. Our prefabricated business division is responsible for the B2B unit, which is primarily engaged in PC unit and PC equipment manufacturing business. Our module integration technology division is responsible for the B2C unit, mainly including the B-house product business.
Such product primarily targets at C-end consumers by adopting the online and offline "Internet +" mode for providing one-stop industrial fully prefabricated rural high-end housing service for production, sales, installation and after-sales service leveraging the establishment of an information platform system and our PC factories across the nation.
The forty-year period since reform and opening up in China witnessed the four decades of urbanization, when vast rural population continuously poured into cities, resulting in an ever-intensifying contradiction in housing among the urban population. With the implementation of such policies as the integration of urban and rural areas and the construction of beautiful countryside as advocated by the government, a growing number of urban elites expect to own an ideal house in proximity to cities. The MOHURD issued the Notice on Carrying out the Pilot Work of Rural Housing Construction ( ᗫක༵࢝ӀИגܔண༊ᓃʈЪٙஷٝ ) on February 2, 2019, pursuant to which, provinces and cities across the country successively rolled out relevant documents on rural housing construction management to guide the rural housing construction management in a unified and standardized manner. The official implementation of the new Land Administration Law of the PRC (ʕ ശɛ͏ձɺή၍ଣج ) on January 1, 2020 and policies such as the confirmation of rural land rights significantly promoted the development of the rural self-built housing market, and at the same time laid a legal basis for standardizing rural self-built housing systems.
The upgraded B-house products were launched after the pandemic, which attracted instant and great market attention and response. The B-house products have led the construction industry into the product-based era from the project-based era. We have established an internet platform for residential property trading and pioneered in adopting the marketing model of "housing 4S shops + business agents" in rural areas to utilize external resources in different regions, thereby facilitating rapid business expansion to cover major regions in China. Through active exploration and implementation in 2020, we expect that there will be certain breakthrough in our B2C business, thereby laying solid foundation for large-scale development in next year.
2. RESULTS OF OPERATIONS
The table below sets out a summary of our consolidated results of operations for 2020:
Net valuation gains on investment properties Other income
Sales and distribution expenses General and administrative expenses Research and development expenses Profit from operations
Finance costs
Fair value changes on financial assets at fair value through profit or loss
Share of profits less losses of associates
Gains on loss of significant influence in associates Gains on disposal of partial interest in associates
Loss on disposal of financial assets at fair value through profit or loss
Gains on disposal of associates Profit before taxation
Income tax
Profit from continuing operations
Discontinued operation
(Loss)/profit from discontinued operation
Profit for the year
Basic and diluted earnings per share (RMB) Continuing operations
Discontinued operation
Year ended December 31, 2020
2019
RMB'000 (restated)Note
3,200,428 (2,098,043) 1,102,385
17,186 20,284
52,760 63,734
(241,924) (208,006)
(267,742) (240,337)
(125,735) (167,104)
570,956
(99,411)
12,600 (35,062)
60,158 248,188
- 7,580
-
- 2,162
267,313 707,013
219,347 658,750
(2,927) 18,169
216,420 676,919
0.44 1.76
0.45 1.71
€0.01) 0.05
Note: The construction contracting business has been classified as discontinued operation of the Group for the year ended December 31, 2020. In accordance with IFRS 5, Non-current Assets Held for Sale and Discontinued Operations, the Group has restated the comparative information in 2019 in this regard.
(48,263)
Revenue
Our revenue decreased by 22.4% from RMB3,369.4 million for the year ended December 31, 2019 to RMB2,613.9 million for the year ended December 31, 2020.
The table below sets out a breakdown of revenue by business segment for the periods indicated (in absolute terms and as a percentage of our total revenue):
Year ended December 31,
Revenue | Amount | total revenue | Amount | total revenue |
RMB'000 | RMB'000 | |||
Continuing operations | ||||
PC unit manufacturing | 2,419,235 | 92.6% | 2,303,660 | 68.4% |
PC equipment manufacturing | 91,753 | 3.5% | 896,768 | 26.6% |
2,510,988 | 96.1% | 3,200,428 | 95.0% | |
Discontinued operation | ||||
Construction contracting | 102,862 | 3.9% | 168,988 | 5.0% |
Total | 2,613,850 | 100.0% | 3,369,416 | 100.0% |
Continuing operations |
Revenue from PC unit manufacturing business increased by 5% from RMB2,303.7 million for the year ended December 31, 2019 to RMB2,419.2 million for the year ended December 31, 2020; and revenue from PC unit manufacturing business as a percentage of total revenue rose from 68.4% for the year ended December 31, 2019 to 92.6% for the year ended December 31, 2020, primarily due to our continuous focus on and expansion of the scale of PC unit manufacturing business.
Revenue from PC equipment manufacturing business decreased by 89.8% from RMB896.8 million for the year ended December 31, 2019 to RMB91.8 million for the year ended December 31, 2020; and revenue from PC equipment manufacturing business as a percentage of total revenue dropped from 26.6% for the year ended December 31, 2019 to 3.5% for the year ended December 31, 2020, primarily due to the improving layout of Joint Factories nationwide with the implementation of the "Broad Homes United Program" and a delay in establishment of certain Joint Factories as a result of the COVID-19 pandemic, leading to a decline in revenue from equipment.
Discontinued operation
Revenue from construction contracting business decreased by 39.1% from RMB169.0 million for the year ended December 31, 2019 to RMB102.9 million for the year ended December 31, 2020; and revenue from construction contracting business as a percentage of total revenue dropped from 5.0% for the year ended December 31, 2019 to 3.9% for the year ended December 31, 2020, primarily due to the fact that starting from 2016, we determined to concentrate our efforts on PC units and PC equipment manufacturing business, therefore ceased to secure new contracts for construction contracting business and relevant projects were successively winding up. To optimize asset structure and concentrate our efforts to reinforce the principal business, we disposed of construction contracting business to Independent Third Parties in September 2020.
Cost of sales
Our cost of sales decreased by 24.2% from RMB2,225.4 million for the year ended December 31, 2019 to RMB1,687.0 million for the year ended December 31, 2020, primarily attributable to a drop in cost in line with the decline in our total revenue during the Reporting Period.
The table below sets out a breakdown of the cost of sales by business segment for the periods indicated (in absolute terms and as a percentage of our total cost of sales):
Year ended December 31,
Continuing operations
The cost of sales of PC unit manufacturing business increased by 1.9% from RMB1,505.8 million for the year ended December 31, 2019 to RMB1,533.8 million for the year ended December 31, 2020, primarily attributable to an increase in cost corresponding to the scale expansion of PC unit manufacturing business, but at a slower rate than the growth in revenue leveraging our on-going efforts to enhance operating capacity.
The cost of sales of PC equipment manufacturing business decreased by 89.0% from RMB592.3 million for the year ended December 31, 2019 to RMB64.9 million for the year ended December 31, 2020, primarily attributable to a parallel decline in revenue.
Discontinued operation
The cost of sales of construction contracting business (discontinued operation) decreased by 30.7% from RMB127.4 million for the year ended December 31, 2019 to RMB88.3 million for the year ended December 31, 2020, primarily attributable to a corresponding decline in revenue with the successive winding-up of projects of the construction contracting business. To optimize business structure and concentrate our efforts to reinforce the principal business, we disposed of such business to Independent Third Parties in September 2020.
Gross profit and gross profit margin
Our overall gross profit decreased by 19.0% from RMB1,144.0 million for the year ended December 31, 2019 to RMB926.8 million for the year ended December 31, 2020. Our gross profit margin rose from 34.0% for the year ended December 31, 2019 to 35.5% for the year ended December 31, 2020.
The table below sets out a breakdown of gross profit by business segment for the periods indicated, and as a percentage of revenue (i.e. gross profit margin) of each business segment:
Year ended December 31,
Continuing operations
The gross profit of PC unit manufacturing business increased by 11.0% from RMB797.9 million for the year ended December 31, 2019 to RMB885.4 million for the year ended December 31, 2020; and the gross profit margin rose from 34.6% for the year ended December 31, 2019 to 36.6% for the year ended December 31, 2020, primarily due to the fact that we achieved cost reduction and efficiency enhancement through continuous enhancement of our operating capacity.
The gross profit of PC equipment manufacturing business decreased by 91.2% from RMB304.5 million for the year ended December 31, 2019 to RMB26.8 million for the year ended December 31, 2020; and the gross profit margin dropped from 34.0% for the year ended December 31, 2019 to 29.2% for the year ended December 31, 2020, primarily due to a slow-down in construction progress of Joint Factories as a result of the improving layout of Joint Factories nationwide with the implementation of the "Broad Homes United Program" and the COVID-19 pandemic and therefore a decline in revenue.
Discontinued operation
The gross profit of construction contracting business decreased by 65.1% from RMB41.6 million for the year ended December 31, 2019 to RMB14.5 million for the year ended December 31, 2020; and the gross profit margin dropped from 24.6% for the year ended December 31, 2019 to 14.1% for the year ended December 31, 2020, primarily due to a decline in revenue with the winding-up of various projects of construction contracting business. To optimize business structure and concentrate our efforts to reinforce the principal business, we disposed of such business to Independent Third Parties in September 2020.
Net valuation gains on investment properties
Valuation gains on investment properties reached RMB17.2 million for the year ended December 31, 2020, as compared to RMB20.3 million for the year ended December 31, 2019.
Other income
Our other income consists primarily of government grants and losses on disposal of assets.
The table below sets out a breakdown of the main components of our other income for the periods indicated:
Year ended December 31,
2020 2019
RMB'000 RMB'000
Government grants | 48,059 | 68,433 |
Losses on disposal of property, plant and equipment | (1,082) | (1,963) |
Losses on disposal of investment properties | (3,603) | (5,715) |
Others | 9,386 | 2,979 |
Total | 52,760 | 63,734 |
Our other income decreased by 17.2% from RMB63.7 million for the year ended December 31, 2019 to RMB52.8 million for the year ended December 31, 2020, primarily attributable to a decline in government grants during the Reporting Period.
Sales and distribution expenses
Our sales and distribution expenses mainly include freight, staff remuneration, operation cost, promotion fee, after-sale service fee and depreciation and amortization, etc. Such expenses increased by 16.3% from RMB208.0 million for the year ended December 31, 2019 to RMB241.9 million for the year ended December 31, 2020, and such expenses as a percentage of our total revenue of the corresponding period increased from 6.5% to 9.6%. The increase in sales and distribution expenses was primarily attributable to increased expenses in market personnel remunerations and market development as a result of promotion of new B-house products.
The table below sets out a breakdown of our sales and distribution expenses for the periods indicated:
Year ended December 31,
2020 2019
RMB'000 RMB'000
Freight | 102,326 | 121,614 |
Staff remuneration | 73,297 | 42,442 |
After-sale service fee | 5,455 | 7,565 |
Operation cost, promotion fee, etc. | 42,598 | 17,000 |
Depreciation and amortization | 4,424 | 3,347 |
Vehicle utilization fee | 6,030 | 5,109 |
Others | 7,794 | 10,929 |
Total | 241,924 | 208,006 |
General and administrative expenses |
Our general and administrative expenses consist primarily of remuneration for administrative staff, bad debt provision and depreciation and amortization. Such expenses increased by 11.4% from RMB240.3 million for the year ended December 31, 2019 to RMB267.7 million for the year ended December 31, 2020, and such expenses as a percentage of our total revenue of the corresponding period increased from 7.5% to 10.7%, primarily attributable to (i) an increase in depreciation and amortization and related expenses arising from commencement of operation of office buildings following construction, renovation and expansion of factories; and (ii) professional consulting fee newly incurred to boost service and management level of the Company.
The table below sets out a breakdown of our general and administrative expenses for the periods indicated:
Year ended December 31,
2020 2019
RMB'000 RMB'000
Staff remuneration | 71,180 | 86,538 |
Includes: share-based payment | Ñ | 16,368 |
Business taxes and surcharges | 30,097 | 28,211 |
Depreciation and amortization | 50,502 | 35,242 |
Bad debt provision | 38,742 | 37,099 |
Office expenses, travel expenses | 19,032 | 15,916 |
Consulting fee | 28,386 | 18,118 |
Others | 29,803 | 19,213 |
Total | 267,742 | 240,337 |
Research and development expenses |
Our research and development expenses primarily consist of staff remuneration, experiment and material costs and depreciation and amortization. The total research and development expenses decreased by 33.4% from RMB271.6 million for the year ended December 31, 2019 to RMB180.9 million for the year ended December 31, 2020. For the years ended December 31, 2020 and 2019, RMB125.7 million and RMB167.1 million of our research and development expenses were incurred, respectively, and RMB55.1 million and RMB104.5 million of our research and development expenses were capitalized, accounting for 30.5% and 38.5% of our research and development expenses for the same year, respectively. The decrease in total research and development expenses was mainly because the progress of certain research and development projects was delayed as affected by the COVID-19 pandemic.
The table below sets out a breakdown of our research and development expenses for the periods indicated:
Year ended December 31,
RMB'000 RMB'000
2020 2019
Staff remuneration | 85,310 | 111,062 |
Experiment and material costs | 70,997 | 127,319 |
Depreciation and amortization | 9,799 | 17,811 |
Others | 14,755 | 15,431 |
Total research and development expenses | 180,861 | 271,623 |
Capitalization of research and development expenses | (55,126) | (104,520) |
Total | 125,735 | 167,104 |
Finance costs
Our finance costs consist primarily of interest on bank loans and other borrowings, interest expenses and interest on lease liabilities. Such costs increased by 23.7% from RMB99.4 million for the year ended December 31, 2019 to RMB122.9 million for the year ended December 31, 2020, which was mainly due to the fact that payment from certain customers was delayed as affected by the COVID-19 pandemic, and as a result, we incurred more interests from external financing activities, which was partially offset by interest income and net foreign exchange gains.
The table below sets out a breakdown of our finance costs for the periods indicated:
Year ended December 31,
2020 2019
RMB'000 RMB'000
Interest on bank loans and other borrowings | 137,808 | 103,898 |
Interest expense on lease liabilities | 4,725 | 2,562 |
Interest income | (14,387) | (4,920) |
Net foreign exchange gain | (5,212) | (2,129) |
Total | 122,934 | 99,411 |
Fair value changes of financial assets at fair value through profit or loss |
Our fair value changes of financial assets reached RMB4.5 million for the year ended December 31, 2020, as compared to RMB12.6 million for the year ended December 31, 2019.
Share of profits less losses of associates
Our share of profits less losses of associates was calculated by the profit less loss attributable to us from our associates pursuant to our equity interests in such associates. As some of the Joint Factories were under construction or at the trial or during start-up stage and had not yet recorded any profit in their operations, we recorded a loss on our investment in the associates as a whole during the Reporting Period. Share of profits less losses of associates decreased by 41.3% from RMB35.1 million for the year ended December 31, 2019 to RMB20.6 million for the year ended December 31, 2020, primarily attributable to the improving profitability resulting from the increase in business volume of associates.
Gains on loss of significant influence in associates
Based on our "two-level management strategy" and "two-level management research", for the years ended December 31, 2020 and 2019, 2 and 17 Joint Factories that we had made capital contribution to were re-measured as financial assets at fair value through profit or loss, respectively. As such, we recorded gains on loss of significant influence in associates of RMB60.2 million and RMB248.2 million, respectively. Since 2018, to better cope with the management resources pressure as a result of the implementation of the "Broad Homes United Program", and activate cooperative partners, taking into comprehensive account of management cost, decision-making efficiency and intention of partners, the Company adjusted the management and control mode of certain Joint Factories and the majority of Joint Factories completed such shift in management mode in 2018 and 2019. Therefore, gains on loss of significant influence in associates recorded in 2020 decreased from the corresponding period of previous year. The Company confirmed that, the re-measurement and re-classification criteria of the above Joint Factories complied with the reclassification criteria as disclosed in the section headed "Development of the 'Two-level Management Strategy' on Our Portfolio of Joint Factories" in the financial section of the Prospectus.
The fair value of Joint Factories as financial assets at fair value through profit or loss was determined by valuation. The Company determined the value primarily based on independent valuation reports prepared by the valuer. The Company determined the fair value of the relevant financial assets using the comparable transactions method and the comparable company method under the market approach according to the different development stages of the Joint Factories. Among the Joint Factories re-measured as financial assets at fair value through profit or loss, 36 were in the initial operation period while 13 were in the rapid development period and 10 of these 13 Joint Factories were profitable. Under the market approach, accumulated losses incurred by a company in the initial operation period cannot be considered as an impairment of the initial investment. On the other hand, the prefabricated construction industry is supported by government policies and has a good prospect. According to the valuation results obtained by the professional body using the above valuation approach, such gains were recorded because the fair value of the financial assets exceeded the amount of interests held in the associates before the loss of significant influence over the target companies.
Gains on disposal of partial interest in associates
Gains on disposal of partial interest in associates reached RMB7.6 million for the year ended December 31, 2019, and no such gains were recorded for the year ended December 31, 2020.
Loss on disposal of financial assets at fair value through profit or loss
Loss on disposal of financial assets at fair value through profit or loss reached RMB0.7 million for the year ended December 31, 2020. For the year ended December 31, 2019, we did not dispose of any such financial assets and therefore did not record relevant loss.
Gains on disposal of associates
For the year ended December 31, 2019, we recorded gains on disposal of associates of RMB2.2 million, as compared to no relevant gains for the year ended December 31, 2020 as we did not dispose of any associate.
Income tax
Our income tax expense consists primarily of corporate income tax and movements in deferred tax assets. Our income tax decreased by 0.6% from RMB48.3 million for the year ended December 31, 2019 to RMB48.0 million for the year ended December 31, 2020.
(Loss)/profit from discontinued operation
We disposed of the 100% equity interests in Hunan Broad Construction & Industrial Co., Ltd. ( ಳیჃɽܔʈ ٰ΅Ϟࠢʮ̡ ) ("Broad Construction Industrial") on September 30, 2020 and the construction contracting business was presented as discontinued operation. Loss from discontinued operation reached RMB2.9 million for the year ended December 31, 2020, including gains on disposal of the discontinued operation of RMB9.2 million.
Profit for the year
In view of the above, our profit for the year decreased by 68.0% from profit of RMB676.9 million for the year ended December 31, 2019 to profit of RMB216.4 million for the year ended December 31, 2020.
3. WORKING CAPITAL AND CAPITAL RESOURCES
We have met our capital needs through cash flows from operations and financing. As at December 31, 2020, our balance of cash and cash equivalents amounted to RMB828.3 million while as at December 31, 2019, our cash and cash equivalents were RMB1,084.8 million.
The table below sets out our cash flows for the periods indicated:
Year ended December 31,
Net cash generated from operating activities Net cash used in investing activities
Net cash (used in)/generated from financing activities
Net (decrease)/increase in cash and cash equivalents
Effect of foreign exchange rate changes
Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the end of the year
RMB'000 RMB'000
2020 2019
967,056 (1,307,209) 1,129,410
789,257
Net cash generated from operating activities
Net cash generated from operating activities mainly includes our profits and non-cash items (such as depreciation and amortization) during the Reporting Period and is adjusted according to changes in working capital.
For the year ended December 31, 2020, net cash generated from operating activities was RMB181.8 million, mainly due to profit before income tax of RMB265.5 million, which was adjusted according to the following aspects: (i) non-cash items, mainly including RMB229.7 million of depreciation and amortization, loss on disposal of equipment of RMB1.3 million, bad debt provision and inventory provision of RMB43.7 million, government grant amortization benefit of RMB4.8 million, finance expenses of RMB123.1 million, gain on disposal of a subsidiary of RMB9.2 million, share of profits less losses of associates of RMB20.6 million, loss on disposal of partial interest in associates of RMB0.7 million, gains on loss of significant influence in associates of RMB60.2 million, gains on fair value change of financial assets at fair value through profit or loss of RMB4.5 million, dividend income of RMB4.0 million, net valuation gains on investment properties of RMB17.2 million, and loss on disposal of investment properties of RMB3.6 million; and (ii) changes in working capital, mainly including an increase in inventory of RMB26 thousand, an increase in trade and other receivables of RMB299.5 million, a decrease in trade and other payables of RMB364.1 million, a decrease in contract assets of RMB197.7 million, an increase in contract liabilities of RMB57.3 million, an increase in deferred income of RMB45.8 million and income tax paid of RMB43.6 million.
Net cash used in investing activities
For the year ended December 31, 2020, net cash used in investing activities was RMB367.1 million, mainly attributable to (i) payment for purchase of property, plant and equipment, right-of-use assets and intangible assets of RMB501.6 million, (ii) capital injection in Joint Factories of RMB116.8 million and purchase of wealth management products of RMB580.0 million, (iii) payment for interests in associates of RMB32.1 million, (iv) proceeds from disposal of financial assets at fair value through profit or loss of RMB598.8 million, (v) proceeds from disposal of property, plant and equipment of RMB1.9 million; (vi) proceeds from disposal of interests in subsidiaries of RMB186.9 million; (vii) proceeds from disposal of investment properties of RMB28.6 million; and (viii) proceeds from other investing activities of RMB47.3 million.
Net cash (used in)/generated from financing activities
For the year ended December 31, 2020, net cash used in financing activities was RMB76.4 million, mainly due to (i) proceeds from loans and borrowings of RMB2,950.6 million; (ii) payment of borrowings and interest of RMB2,739.6 million; (iii) payment of dividends of RMB243.8 million; and (iv) principal and interest of lease liabilities paid of RMB43.6 million.
Borrowings
Our total borrowings increased by RMB364.6 million from RMB2,618.7 million as at December 31, 2019 to RMB2,983.3 million as at December 31, 2020, primarily due to a delay in payments from certain customers and increase of external financing incurred by the Group. As at December 31, 2020, we had bank facilities of approximately RMB5,430 million (credit facilities), of which approximately RMB2,173 million remains unutilized.
Capital expenditures
Our previous capital expenditures were mainly due to the purchase of property, plant and equipment, right-of-use assets and intangible assets, the purchase of wealth management products, and the capital injection in associates. Our capital expenditures decreased from RMB1,455.8 million for the year ended December 31, 2019 to RMB1,230.6 million for the year ended December 31, 2020.
Net current assets/liabilities
Our net current assets/liabilities turned positive from RMB-316.4 million for the year ended December 31, 2019 to RMB77.6 million for the year ended December 31, 2020. We will continue to improve our net current asset/liability position through the measures set forth below: (i) improving our capital management primarily through the use of equity financing, while reducing the use of short-term borrowings to meet financing needs, so to support business expansion; (ii) expanding financing channels and reducing the use of our own funds for long-term asset investments; and (iii) coordinating with customers on the settlement of trade debtors and bills receivable and expedite the implementation of customers' projects so as to timely recognize received advances as revenues.
Pledge of assets
For the year ended December 31, 2020, our restricted and pledged bank deposits were RMB206.8 million, as compared to restricted and pledged bank deposits of RMB277.8 million for the year ended December 31, 2019.
Off-balance sheet commitments and arrangements
For the year ended December 31, 2020, we had no off-balance sheet arrangements.
Future plan for significant investments and capital assets
For the year ended December 31, 2020, save as those disclosed in this report, the Group did not have any significant investment or capital asset acquisition approved by the Board.
Major acquisitions and disposals of subsidiaries and associates
For the year ended December 31, 2020, we disposed of a subsidiary, being Hunan Broad Construction & Industrial Co., Ltd. ( ಳیჃɽܔʈٰ΅Ϟࠢʮ̡ ) ("Broad Construction Industrial") , to Independent Third Parties. On September 29, 2020, the Company and Ningxiang Broad Homes Industrial Co., Ltd. ( ྐྵඊჃ ɽИσʈุϞࠢʮ̡ ), a wholly-owned subsidiary of the Company (collectively as the sellers), Independent Third Parties (collectively as purchasers), and Mr. Zhang Jian (as the guarantor) entered into the equity transfer agreement. Pursuant to the agreement, the sellers agreed to sell and the purchasers agreed to acquire 100% equity interest in Broad Construction Industrial at a total cash consideration of RMB292,000,000. Shengxin Property (Anshan) Co., Ltd. purchased 98% equity interests in Broad Construction Industrial from the Company at a consideration of RMB286,160,000, and Shenzhen Minghai Construction Engineering Co., Ltd. purchased 2% equity interests in Broad Construction Industrial from Ningxiang Broad Homes Industrial Co., Ltd. at a consideration of RMB5,840,000. Mr. Zhang Jian voluntarily provided an irrevocable guarantee with joint liabilities for the performance of the sellers and Broad Construction Industrial of their respective obligations under the equity transfer agreement with a term of three years commencing from the expiry of the period of performance of obligations by the sellers and Broad Construction Industrial. Such guarantee is not secured by the assets of the Group. For details, please refer to the announcement of the Company dated September 29, 2020. As of December 31, 2020, change of industrial and commercial registration of Broad Construction Industrial has been completed.
Save as disclosed above, during the year ended December 31, 2020, the Group did not make any major acquisitions of subsidiaries and associates or disposals of associates.
Employees and remuneration policy
For the year ended December 31, 2020, we had 3,402 full-time employees (annual average for 2020). We expect to continue to employ more people in mainland China. According to our human resources strategy, we offer competitive remuneration to employees. Our total remuneration expenses (including share-based remuneration expenses) decreased by 23.0% from RMB564.8 million for the year ended December 31, 2019 to RMB434.7 million for the year ended December 31, 2020, primarily attributable to (i) no share-based remuneration expenses incurred during the Reporting Period; (ii) a decrease in the remuneration expense of the Group as affected by the COVID-19 pandemic; and (iii) on-going enhancement of our operating capacity.
4. COMMITMENTS
Capital Commitments
Our capital commitments outstanding as of the dates indicated are set forth below:
Year ended December 31,
RMB'000 RMB'000
2020 2019
5. FINANCIAL RATIOS
Year ended December 31, 2020
The following table sets forth the summary of our key financial ratios as of the dates indicated:
2019
Current ratio(1)
1.0 0.9
Quick ratio(2)
1.0 0.9
Loan-to-equity ratio(3)
72.1% 62.9%
Return on total assets(4)
2.3% 8.0%
Return on equity(5)
5.2% 19.2%
Interest coverage ratio(6)
3.2 8.2
Notes:
(1) Current ratio equals to current assets divided by current liabilities as of the end of the year.
(2) Quick ratio equals to current assets (excluding inventories) divided by current liabilities as of the end of the year.
(3) Loan-to-equity ratio equals to total interest-bearing bank and other borrowings divided by total equity as of the end of the year.
(4) Return on total assets equals to profits as at the end of the year/for the year divided by average of total assets at the beginning and end of the year.
(5) Return on equity equals to profits as at the end of the year/for the year divided by average of total equity at the beginning and end of the year.
(6) Interest coverage ratio equals to profit before interest and taxation divided by finance costs.
Current Ratio
Our current ratio increased from 0.9 as at December 31, 2019 to 1.0 as at December 31, 2020. For further details regarding the movements of our current assets and current liabilities, please refer to the section headed "Management Discussion and Analysis - Working capital and capital resources - Net Current Assets/ Liabilities".
Quick Ratio
Our quick ratio increased from 0.9 as at December 31, 2019 to 1.0 as at December 31, 2020. For further details regarding the movements of our current assets and current liabilities, please refer to the section headed "Management Discussion and Analysis - Working capital and capital resources - Net Current Assets/ Liabilities".
Loan-to-equity Ratio
Our loan-to-equity ratio increased from 62.9% as at December 31, 2019 to 72.1% as at December 31, 2020.
Return on Total Assets
Our return on total assets decreased from 8.0% for the year ended December 31, 2019 to 2.3% for the year ended December 31, 2020.
Return on Equity
Our return on equity decreased from 19.2% for the year ended December 31, 2019 to 5.2% for the year ended December 31, 2020.
Interest Coverage Ratio
Our interest coverage ratio decreased from 8.2 times for the year ended December 31, 2019 to 3.2 times for the year ended December 31, 2020.
6. CREDIT RISK
Our credit risk is primarily attributable to trade debtors and bills receivable. We have limited exposure to credit risks from our cash and cash equivalents and restricted and pledged deposits since the counterparties are banks which we assess with low credit risk. Furthermore, we believe that we are exposed to limited bad debt risks. Our major customers are investment entities and large-scale real estate developers controlled by the government, the credit risk of which is assessed to be insignificant.
We have established credit policies to continuously monitor our credit risks. Our credit risk is mainly affected by the individual characteristics of each customer rather than the industries or country in which the customers operate, and therefore concentration of credit risk primarily arises when we have significant exposure to individual customers. In this regard, we conduct individual credit assessment on customers requiring credit over a certain amount to manage the risks. Those assessments focus on the payment history and the current payment ability of customers, and take into account information specific to the customer as well as in relation to economic environment in which the customer operates. Trade debtors are due within 30 days from the date of billing. Normally, we do not obtain collateral from customers. We continuously monitor the condition of our receivables balance.
Turnover days of trade debtors and bills receivable
Our overall turnover days of trade debtors and bills receivable increased from 230 days for the year ended December 31, 2019 to 346 days for the year ended December 31, 2020, of which the turnover days of trade debtors and bills receivable of the PC unit manufacturing business increased from 204 days for the year ended December 31, 2019 to 290 days for the year ended December 31, 2020, primarily attributable to a delay in payment from certain customers as affected by the COVID-19 pandemic.
7. CONTINGENT LIABILITIES
During the Reporting Period, we did not have any significant contingent liabilities.
8. LIQUIDITY RISK
Our objective is to ensure continuity of sufficient funding and funding flexibility by utilizing a variety of bank and other borrowings with debt maturities spreading over a range of periods, thereby ensuring that our outstanding borrowing obligation is not exposed to excessive repayment risk in any one year. Our subsidiaries may arrange their liquidity, including short-term investment of cash surplus and obtaining loans to satisfy their cash requirement, at their discretion according to their operating conditions and business needs, subject to the approval from the Board in the event beyond their entitlement. We constantly monitor current and expected liquidity requirements to ensure that we maintain sufficient cash reserve and adequate committed lines of funding from major financial institutions to meet our liquidity requirements in the short and longer terms.
Moreover, we actively and regularly review and manage our capital structure and adjust our capital structure in light of changes in economic condition. In 2020, we did not make any changes in the objectives, policies or process of capital management.
9. INTEREST RATE RISK
Our risk from interest rate movements primarily arises from long-term borrowings. We are exposed to cash flow interest rate risk and fair value interest rate risk relating to our borrowings with floating rates and fixed rate, respectively. Our management controls our interest rate risk by reviewing the borrowings with fixed rates and floating rates. During the Reporting Period, we did not consider it necessary to use interest rate swaps to hedge our exposure to interest rate risk.
As at December 31, 2020, balance of fixed-rate borrowings amounted to RMB2,034.7 million, with the fixed interest rate ranging from 0% to 6.00% per annum and balance of floating-rate borrowings amounted to RMB881.2 million, with floating interest rate ranging from 4.18% to 5.75% per annum.
10. CURRENCY RISK
In respect of cash at bank and on hand denominated in foreign currencies other than the functional currency, the Group ensures that its net exposure is kept to an acceptable level by buying or selling foreign currencies at spot rates when necessary to address short-term imbalances. No material foreign exchange exposure and foreign currency risk are recognized as at December 31, 2020.
11. SIGNIFICANT EVENTS AFTER THE REPORTING PERIOD
From the end of the Reporting Period to the date of this annual report, there were no adjusted or non-adjustingsignificant events with a significant financial impact on the Group.
DIRECTORS
Executive Directors
Mr. Zhang Jian ( ੵᄏ͛ ), aged 57, is the founder of the Company, and has been the chairman of the Board and an executive Director since the date of the incorporation of the Company in April 2006. Mr. Zhang takes charge of the overall affairs of the Board, participates in the formulation and implementation of the business and operation strategies of the Company and makes significant business and operational decisions of the Company through the Board.
Since March 1996, Mr. Zhang has served as an executive director of Hunan Broad Lingmu House Equipment Co., Ltd. ("Broad Lingmu"), responsible for formulation of strategies, business operation and investment decision-making. Since April 2008, he has served as the chairman of board of Hunan Dazheng Investment Co., Ltd. ("Dazheng Investment"), responsible for investment and management affairs. Since April 2013, he has served as a general partner of Changsha High-tech Development Zone Daxin Investment Management Partnership (Limited Partnership) ("Daxin Investment"), responsible for investment and management affairs.
Before joining the Group, Mr. Zhang taught thermal engineering at Harbin University of Science and Technology ( ۞ဧ Ᏽଣʈɽኪ ) from July 1985 to September 1988. He served as the head of Chenzhou Hot Spring Heating Equipment Factory* ( ₉ψݰમาண௪ᅀ ) from June 1988 to September 1992 and was mainly responsible for research, development and management. He served as an executive director and the president of Broad Air-Conditioner Co., Ltd.* ( Ⴣɽ٤ሜϞࠢʮ̡ ) (a company mainly engaged in the research, development, production and sales of air-conditioners) from September 1992 to July 2002 and was mainly responsible for formulation of strategies and the overall management and operation.
Mr. Zhang served as a representative of the Eighth National People's Congress of the PRC from March 1993 to February 1998 and a representative of the Ninth National People's Congress of the PRC from March 1998 to February 2003. Mr. Zhang was awarded the China Invention Gold Award* ( ʕ೯ږᆤ ) by the Organizing Committee of International Exhibition of Patent, New Technology and New Products* ( ყਖ਼лʿอҦஔอପ ۜ࢝ᚎึଡ଼ᔌ։ࡰึ ) in November 1990, the Invention Silver Award of the Foire Internationale de Paris by Foire Internationale de Paris in 1991, the Invention Gold Award of the 22nd International Exhibition of Geneva by the International Advisory Committee for Inventions in April 1994, the National Technology Advancement Award by National Science and Technology Commission in December 1996, the Grand Prize of the 110th Concours Lépine International Paris by Association des Inventeurs et Fabricants Francais in 2011, and the Real Estate Representative for the 40th Anniversary of China's Reform and Opening-up by Leju Finance ( ᆀ֢ৌ ) in December 2018.
Mr. Zhang obtained a bachelor's degree in thermal engineering from Harbin Institute of Technology ( ۞ဧᏵʈุɽኪ) in July 1985.
Ms. Tang Fen ( ࡥځɾɻ ), aged 44, is an executive Director and the president of the Company. She takes charge of the overall management and operation of the Company. Ms. Tang joined the Group in August 2006, and previously served as the general manager of the investment and cooperation affairs department and vice president of the Company successively.
Since September 2015, Ms. Tang has been the vice president of the seventh session of the council for China Real Estate Association, responsible for exercising the functions and powers as the vice president.
Before joining the Group, Ms. Tang served as an assistant to director of event planning of China Golden Eagle TV Art Festival Organizing Committee* (ʕږཥൖᖵஔືଡ଼։ึ) from July 2000 to March 2003 and was mainly responsible for the planning and implementation work of the China Golden Eagle TV Art Festival. She served as a vice president of Hunan Yunda Real Estate Development Co., Ltd.* (ಳی༶༺גήପක೯Ϟࠢʮ̡) (a company mainly engaged in real estate development) from March 2003 to July 2006 and was mainly responsible for sales and investment solicitation.
Ms. Tang was awarded the title of Outstanding Entrepreneur of Changsha High-tech Zone from 2014 to 2018 by the CPC Changsha High-tech Zone Work Committee and Changsha High-tech Zone Management Committee.
Ms. Tang graduated from Changsha Electric Power College* (ڗӍཥɢኪ৫) majoring in computer and application in June 2001 and Changsha University of Science and Technology (ڗӍଣʈɽኪ) majoring in accounting (correspondence) in June 2004.
Ms. Shi Donghong (ͩ؇ߎɾɻ), aged 44, is an executive Director, a vice president, the chief financial officer, the secretary of the Board and the joint company secretary of the Company. She is responsible for the overall financial management, corporate development and board secretarial work of the Company. Ms. Shi joined the Group in December 2007, and previously served as the finance manager, deputy manager of strategy office and manager of capital operation department of the Company successively.
Before joining the Group, Ms. Shi served as the store ledger accountant, cashier, financial team leader as well as financial executive of Broad Lingmu successively and was mainly responsible for financial work from February 1997 to November 2007.
Ms. Shi was awarded the title of Outstanding Entrepreneur of Changsha High-tech Zone from 2014 to 2016 by the CPC Changsha High-tech Zone Work Committee and Changsha High-tech Zone Management Committee and the title of Five-star Management Talent in May 2018 by China Association of Chief Financial Officers.
Ms. Shi graduated from China Central Radio and TV University* (ʕ̯ᄿᅧཥൖɽኪ) majoring in accounting in November 2005. She obtained a master's degree in business administration from Asia International Open University (Macau) in September 2010. Ms. Shi was granted the qualification of Senior International Finance Manager by the International Financial Management Association in April 2010 and the qualification of Chief Financial Officer (ᐼึࠇࢪ) by China Association of Chief Financial Officers in December 2010.
Mr. Zhang Kexiang (ੵдୂ͛), aged 57, is an executive Director and a vice president of the Company. He is responsible for the data operation centre of the Company. Mr. Zhang joined the Group at the time of the incorporation of the Company in April 2006, and previously served as the manager of manufacture department of the Company, responsible for management affairs.
Before joining the Group, Mr. Zhang served as an engineer in the technical division of Changsha Shipyard* (ڗӍ୵୴ᅀ) (a company mainly engaged in shipbuilding business) from July 1984 to October 1996 and was mainly responsible for technical research and development. He served as the head of the Pressure Vessel Branch of Changsha Shipyard* (ڗӍ୵୴ᅀᏀɢ࢙ኜʱᅀ) from October 1996 to December 1998 and was mainly responsible for management. He served as the head of the management division of Broad Lingmu from December 1998 to December 2004 and was mainly responsible for production management. He served as the on-board general manager of Changsha Noah Cruise Co., Ltd.* (ڗӍ࣑ԭದቃϞࠢʮ̡) (a company mainly engaged in cruise operation) from December 2004 to April 2006 and was mainly responsible for management.
Mr. Zhang obtained a bachelor's degree in ship and marine engineering from Huazhong University of Science and Technology (ശʕ߅Ҧɽኪ) in July 1984. Mr. Zhang was also granted the title of engineer by Hunan Provincial Department of Personnel in July 1992.
Mr. Tan Xinming (ᗈอ͛), aged 45, is an executive Director and a vice president of the Company. He is responsible for business operation and management of the Company. Mr. Tan joined the Group at the time of the incorporation of the Company in April 2006, and previously served as the secretary of the chairman's office, procurement manager and construction general manager of the Company successively.
Before joining the Group, Mr. Tan successively served as a financial manager and the secretary of the chairman's office of Broad Lingmu, responsible for financial management affairs and the administration of the chairman's office from July 2003 to March 2006.
Mr. Tan served as a strategic consultant for procurement alliance of China Real Estate Chamber of Commerce from October 2015 to October 2018.
Mr. Tan graduated from Hunan College of Finance and Economics* (ಳیৌኪ৫) majoring in accounting in December 1998. Mr. Tan was also granted the qualification of certified public accountant by the Chinese Institute of Certified Public Accountants in September 2004.
Non-executive Directors
Mr. Zhang Quanxun (ੵᛆኔ͛), aged 47, is a non-executive Director of the Company. He is mainly responsible for participating in major decision-making of the Company and offering professional advice and judgment to the Board.
Since June 2013, Mr. Zhang has served as a vice president of Shenzhen Yuanzhi Fuhai Investment Management Limited, responsible for facilitating the development of various businesses, participating in the establishment, assessment, investment decision-making and fund-raising of all projects, as well as the external liaison and maintenance of relationships with limited partners and shareholders. Since May 2015, Mr. Zhang has served as a director of Shenzhen Tellus Holding Co., Ltd.* (ଉέ̹तɢ€ණྠٰ΅Ϟࠢʮ̡) (a company listed on the Shenzhen Stock Exchange (stock code: 000025)). Since November 2017, he has served as a supervisor of Shenzhen High-tech Investment Group Co., Ltd.* (ଉέ̹৷อҳණྠϞࠢʮ̡).
Before joining the Group, Mr. Zhang served as a deputy director of Xiamen Productivity Promotion Centre* (ขژ ̹͛ପɢڮආʕː) (an institute mainly engaged in investment and project management in science and technology industry) from August to November 2008. From December 2008 to January 2011, Mr. Zhang successively served as the vice director of business department of plastic packaging, and the director of business department of plastic packaging as well as the strategic development department of Shenzhen Tongchan Packaging Group Co., Ltd.* (ଉέ̹ஷପ̍ༀණྠϞࠢʮ̡) (a company mainly engaged in the production and sales of packaging products and investment in packaging industry). From January 2011 to February 2013, Mr. Zhang served as the head of the strategic research and merges and acquisitions department of Shenzhen Yuanzhi Investment Limited*(ଉέ̹ Ⴣߧҳ༟Ϟࠢʮ̡) (a company mainly engaged in industrial investment and the development and management of investment and assets).
Mr. Zhang obtained a bachelor's degree in economics and a master's degree in business administration from Xiamen University (ขژɽኪ) in July 1994 and December 2005, respectively.
Ms. Hu Keman (ߡд♒ɾɻ), whose previous name was Hu Keman (ߡдਟ), aged 54, is a non-executive Director of the Company and has successively served as assistant to the chairman and deputy director of the Strategic Management Committee of Zoomlion Heavy Industry Science and Technology Co., Ltd. (listed on the Shenzhen Stock Exchange (stock code: 000157) (A shares) and the Hong Kong Stock Exchange (stock code: 01157) (H shares), respectively) since January 2013, the vice chairman of Zoomlion Group Finance Co., Ltd. (ʕᑌࠠ߅ණྠৌਕ Ϟࠢʮ̡) since May 2015; a director of Zoomlion Capital Co., Ltd. (ʕᑌࠠ߅༟͉Ϟࠢபʮ̡) since October 2015; and the chairman of Beijing Junlai Capital Management Co., Ltd. (̏ԯёԸ༟͉၍ଣϞࠢʮ̡) since June 2018.
Prior to that, Ms. Hu worked in Changsha Construction Machinery Research Institute of the MOC from October 1988 to February 1993, responsible for standards management. From February 1993 to June 2007, Ms. Hu served as a director of the office and manager of the real estate department of Zoomlion Heavy Industry Science and Technology Co., Ltd., which is mainly engaged in research and development, manufacturing, production and sales of high-tech equipment such as construction machinery and agricultural machinery. From June 2007 to May 2009, Ms. Hu served as the general manager of Changsha Zhongliang Real Estate Investment Co., Ltd. (ڗӍʕᔋήପҳ༟Ϟࠢʮ̡). From May 2009 to December 2012, Ms. Hu worked as an investment consultant in Hongyi Investment (Beijing) Co., Ltd. (̾ ᆇҳ༟ (̏ԯ)Ϟࠢʮ̡).
Ms. Hu obtained a bachelor's degree in electrical engineering from Hunan University in June 1988 and a master's degree in management science and engineering from Hunan University in June 2005.
Independent Non-executive Directors
Mr. Chen Gongrong (͛), aged 58, is an independent non-executive Director of the Company. He is mainly responsible for supervising and offering independent advice and judgment to the Board.
Mr. Chen successively served as a teaching assistant, lecturer and associate professor at Hunan College of Finance and Economics* (ಳیৌኪ৫) from July 1985 to December 1999, and has successively served as an associate professor and professor in Hunan University since January 2000, responsible for teaching accounting. Mr. Chen served as an independent director of several listed companies, responsible for participating in the board decision-making, namely Vatti Co., Ltd.* (ശٰ΅Ϟࠢʮ̡) (a company listed on the Shenzhen Stock Exchange (stock code: 002035) and mainly engaged in the research, manufacturing and sales of gas cookers, water heaters, range hoods, etc.) from October 2007 to May 2013, Hunan Corun New Energy Co., Ltd.* (ಳی߅ɢჃอঐ๕ٰ΅Ϟࠢ ʮ̡) (a company listed on the Shanghai Stock Exchange (stock code: 600478) and mainly engaged in the research, manufacturing, development, production and sales of continuous strip of nickel foam and relevant product series) from July 2008 to June 2014, Hunan Zhenghong Science and Technology Development Co., Ltd.* (ಳی͍ࠀ߅Ҧ೯ ٰ࢝΅Ϟࠢʮ̡) (a company listed on the Shenzhen Stock Exchange (stock code: 000702) and mainly engaged in the research, manufacturing, production and sales of various types of feeds) from March 2009 to March 2015, Hunan Mendale Hometextile Co., Ltd.* (ಳیྫྷᆎ५ٰ΅Ϟࠢʮ̡) (a company listed on the Shenzhen Stock Exchange (stock code: 002397) and mainly engaged in the research, development, design, production and sales of home textiles) from August 2012 to August 2018 and China South Publishing & Media Group Co., Ltd.* (ʕی̈وෂదණྠ ٰ΅Ϟࠢʮ̡) (a company listed on the Shanghai Stock Exchange (stock code: 601098)) from September 2013 to September 2019.
Mr. Chen also currently serves as an independent director responsible for participating in the board decision-making of several listed companies, namely Hunan Friendship & Apollo Commercial Co., Ltd. (ಳیʾሒڛتᖯਠٰุ΅Ϟ ࠢʮ̡) (a company listed on the Shenzhen Stock Exchange (stock code: 002277)) since May 2015, Hunan Gold Corporation Limited* (ಳیරږٰ΅Ϟࠢʮ̡) (a company listed on the Shenzhen Stock Exchange (stock code: 002155)) since May 2015, Changlan Electric Technology Co., Ltd. (ڗཥʈ߅Ҧٰ΅Ϟࠢʮ̡) (a company listed on the Shenzhen Stock Exchange (stock code: 002879) and mainly engaged in the research, development, production and sales of power accessories, cable fittings and other auxiliary materials) since April 2019 and Hunan Chendian International Development Co., Ltd. (ಳی₉ཥყ೯ٰ࢝΅Ϟࠢʮ̡) (a company listed on the Shanghai Stock Exchange (stock code: 600969) and mainly engaged in power supply and water supply and investment in industrial gas, residual-heat power generation and hydropower) since November 2019.
Mr. Chen obtained a bachelor's degree in financial accounting from Hunan College of Finance and Economics* (ಳی ৌኪ৫) in June 1985 and a doctorate degree in accounting from Hunan University (ಳیɽኪ) in March 2010. Mr. Chen was also granted the title of professor by Hunan Provincial Department of Personnel in May 2006.
Mr. Li Zhengnong (ҽ͍༵͛), aged 58, is an independent non-executive Director of the Company. He is mainly responsible for supervising and offering independent advice and judgment to the Board. Since February 2005, Mr. Li has served as a professor at the School of Civil Engineering of Hunan University, mainly responsible for teaching and research as the director of the key laboratory for building safety and energy efficiency education division.
Mr. Li obtained a doctorate degree of science in structural engineering from Wuhan University of Industry* (؛ဏʈุ ɽኪ) in July 1995. Mr. Li was also granted the title of professor by Zhejiang Provincial Department of Personnel in October 2003.
Mr. Wong Kai Yan Thomas (ˮԳؚ͛), aged 50, is an independent non-executive Director of the Company. He is mainly responsible for supervising and offering independent advice and judgment to the Board.
Since March 2018, Mr. Wong has served as the managing director of the asset management department of VPower Group International Holdings Limited (a company listed on the Hong Kong Stock Exchange (stock code: 01608)), responsible for managing the fund investment, determining the investment goals and developing and implementing the asset management plans and strategies and an independent non-executive director of YCIH Green High-Performance Concrete Company Limited (a company listed on the Hong Kong Stock Exchange (stock code: 01847)).
Before joining the Group, from June 1995 to May 1997, Mr. Wong served as an auditor of BDO; from July 1997 to January 2004, Mr. Wong served as the financial officer of Kong Sun Holdings Limited (a company listed on the Hong Kong Stock Exchange (stock code: 00295) and mainly engaged in investment business); from March 2004 to April 2008, Mr. Wong served as a consultant of Pioneer International Enterprise Limited; from July 2008 to December 2017, Mr. Wong served as a joint authorized representative and joint company secretary of CRRC Corporation Limited (a company listed on the Hong Kong Stock Exchange (stock code: 01766) and mainly engaged in railway equipping business); from November 2015 to December 2017, Mr. Wong served as a director, a vice president and the chief financial officer of CRRC (Hong Kong) Co., Limited (a company mainly engaged in trade and investment business).
Mr. Wong obtained a bachelor's degree of business in accounting from the University of Wollongong in Australia in May 1995 and a master's degree of science in investment analysis from the Hong Kong University of Science and Technology in May 2011. Mr. Wong became a member of CPA Australia in March 1999 and a member of Hong Kong Institute of Certified Public Accountants in July 1999.
Mr. Zhao Zhengting (Ⴛ͍࣎͛), aged 49, is an independent non-executive Director of the Company and is mainly responsible for supervising and offering independent advice and judgment to the Board.
Mr. Zhao was engaged in information management of construction industry in the Science and Technology Development Promotion Centre of the MOC from September 1994 to May 2005, served as a director of the China Real Estate Chamber of Commerce (Όʈਠᑌגήପਠึ) (the "CRECC") from May 2005 to August 2009, where he was engaged in the promotion of green demonstration projects, served as secretary general of ELITE Science and Technology Foundation (̏ԯၚ߅Ҧਿږึ, now renamed as Beijing ELITE Habitat Development Foundation) from August 2009 to October 2011, where he was engaged in the promotion of science and technology public welfare projects and has been the secretary-general of the CRECC since October 2011, where he served members, industry and the government.
Changsha Broad Homes Industrial Group Co., Ltd.
Mr. Zhao currently also serves as independent directors of several companies, where he is responsible for participating in the decision-making process of the board of directors. In particular, Mr. Zhao has been an independent director of Xiamen Dinek Intelligent Technology Co., Ltd. (ขژӭߗд౽ঐ߅Ҧٰ΅Ϟࠢʮ̡) (listed on the Shenzhen Stock Exchange, stock code: 300884) since January 2018 and has been an independent director of Guangdong Jianlang Hardware Products Co., Ltd. (ᄿ؇ࣦʞږႡٰۜ΅Ϟࠢʮ̡) (listed on the Shenzhen Stock Exchange, stock code: 002791).
Mr. Zhao obtained a bachelor's degree in computer science and technology from Beijing University of Technology in July 1994 and obtained a master's degree in industrial economics from Capital University of Economics and Business in January 2008. In 1998, Mr. Zhao won the construction advanced individual award from the MOC and participated in the drafting of Intelligent Buildings and Urban Information (౽ঐܔጘၾ̹۬ڦࢹ) and China's Green and Low Carbon Residential Technology Assessment Manual (ʕၠЍЭ၁ИਜҦஔ൙П˓̅).
SUPERVISORS
Ms. Zhang Mingxin (ੵ㒥ɾɻ), whose former name was Zhang Mingxing (ੵ), aged 42, is the chairman of the Supervisory Committee of the Company, responsible for directing the work of the Supervisory Committee, coordinating Supervisors to jointly supervise the operating and financial activities of the Company. Ms. Zhang is also the administrative director of the Company, responsible for administration services of the Company. Ms. Zhang joined the Group at the time of the incorporation of the Company in April 2006 and previously served as the secretary of the president's office, the head of personnel department of the supply chain division, a procurement engineer and the director of the administrative services division of the Company successively.
Before joining the Group, Ms. Zhang successively served as an office director and cashier of Changsha Wangcheng District Film Distribution and Screening Company* (ڗӍ̹ૐ۬ਜཥᅂ೯Б׳݈ʮ̡) (a company mainly engaged in film distribution and screening business) from August 1996 to September 2001 and was mainly responsible for capital management. She served as a data management officer of Broad Lingmu from October 2001 to April 2006 and was mainly responsible for data management.
Ms. Zhang graduated from China Central Radio and TV University* (ʕ̯ᄿᅧཥൖɽኪ) in April 2005, majoring in administration management.
Mr. Li Gen (ҽ࣬͛), aged 36, is a non-employee representative Supervisor, responsible for the joint supervision of the Company's operational and financial activities. Mr. Li is also the capital operation director of the board secretary office of the Company, responsible for the capital-operational work of the Company. Mr. Li joined the Group in October 2010 and previously served as a financing manager of the strategy research office and a manager of the capital operation department successively.
Before joining the Group, Mr. Li served as an investment manager in Changsha Wanjiali Road Branch of Zhongtai Securities Company Limited* (ʕइᗇՎٰ΅Ϟࠢʮ̡) (a company mainly engaged in securities business) from March to September 2010, and was mainly responsible for security investment.
Mr. Li obtained a bachelor's degree in measuring and control technology and instruments from Central South University (ʕیɽኪ) in June 2007 and a master's degree in business administration from Central South University (ʕ یɽኪ) in December 2009.
Ms. Liu Jing (ᄎ౻ɾɻ), aged 39, is an employee representative Supervisor, responsible for the joint supervision of the Company's operational and financial activities. Ms. Liu Jing is also the branding director of the Company, responsible for the coordination of brand development and implementation of promotion projects of the Group. Ms. Liu Jing joined the Group in October 2012, and she has been serving as the branding director of the Company since then.
Before joining the Group, Ms. Liu Jing served as the assistant to the chairman of Hunan Future Investment Group Co., Ltd.* (ಳی͊Ըҳ༟ණྠϞࠢʮ̡) (a company mainly engaged in real estate development and investment) from November 2007 to September 2012 and was mainly responsible for assisting the chairman on day-to-day operational work.
Ms. Liu Jing obtained a bachelor's degree of arts from Xiangtan University (ಱᆐɽኪ) in June 2003, majoring in English.
SENIOR MANAGEMENT
The senior management of the Company consists of Mr. Zhang Jian, Ms. Tang Fen, Ms. Shi Donghong, Mr. Zhang Kexiang and Mr. Tan Xinming. For their biographical details, please see "Directors" above.
JOINT COMPANY SECRETARIES
Ms. Shi Donghong (ͩ؇ߎɾɻ) is the joint company secretary of the Company. Please refer to the section headed "Directors" above for her biographical details.
Ms. Leung Suet Wing (ɾɻ) is the joint company secretary of the Company. Ms. Leung is the manager of TMF Hong Kong Limited, which is a corporate secretarial services provider. From June 2011 to June 2013, Ms. Leung had successively served as an associate and the officer of corporate services department of Tricor Services Limited. Ms. Leung has extensive knowledge and experience in the fields of corporate governance, regulation and compliance of listed companies, and has accumulated and possesses more than eight years of experience in professional company secretarial industry. Ms. Leung is currently serving as a joint company secretary of several companies listed on the Hong Kong Stock Exchange. Ms. Leung obtained a master's degree in accounting and corporate governance from City University of Hong Kong in July 2016, and became a member, a Chartered Secretary and a Chartered Governance Professional of The Hong Kong Institute of Chartered Secretaries and the Chartered Governance Institute (formerly known as The Institute of Chartered Secretaries and Administrators) in the United Kingdom respectively in December 2016.
The Board is pleased to present the report of the Board and the audited consolidated financial statements of the Group for the year ended December 31, 2020.
GLOBAL OFFERING AND USE OF PROCEEDS FROM LISTING
The H Shares of the Company were listed on the Main Board of the Hong Kong Stock Exchange on November 6, 2019, and the Company issued a total of 122,035,400 H Shares in Global Offering (including 167,400 H Shares issued upon partial exercise of the Over-allotment Option) at an offer price of HK$9.68 per Share with a nominal value of RMB1.00 each. For details, please refer to the announcements of the Company dated November 5, 2019 and November 28, 2019. Net proceeds from the Global Offering (including the partial exercise of the Over-allotment Option) aggregated to approximately HK$1,111.7 million (net of underwriting commission and related Listing expenses). As at December 31, 2020, balance of the unutilized net proceeds was approximately HK$706.70 million(1).
Net proceeds from the Listing (adjusted on a pro rata basis based on the actual net proceeds) have been and will be utilized in the same manner as set out in the Prospectus. The table below sets out the planned use of net proceeds and the actual use as at December 31, 2020:
Amount UtilizedAmount UnutilizedUse of ProceedsAllocation of Net ProceedsAllocation of Net Proceeds
(as at
(as at
December 31, 2020)
December 31, 2020)Expected Time for Utilization of Unutilized Amount
(%)
(HK$ million)
(HK$ million)
(HK$ million)
(I) Expanding PC Unit Manufacturing Business
45
500.2
283.85
216.44 Before December 31, 2022
(1) Establishing Wholly-owned Regional Production Centres in Key Strategic Regions
36
400.2
194.53
205.70 Before December 31, 2021
(2) Expanding Factories and Upgrading Equipment in Existing Regional Production Centres
9
100.0
89.32
10.74 Before December 31, 2022
(II) Expansion in Overseas Market
20
222.3
6.05
216.25 Before December 31,
2021
(III) Developing and Expanding Intelligent Equipment Business
15
166.8
14.25
152.46 Before December 31,
2022
(IV) Developing and Establishing an Intelligent Service Platform in the Prefabricated Construction Industry
10
111.2
38.21
72.99 Before December 31,
2021
(V) Working Capital and Other General Corporate Purposes
10
111.2
111.20
0.00 Before February 28, 2021
Total
100
1,111.7
453.56
658.14
Note:
(1) Net proceeds from offering were approximately HK$1,111.7 million, of which approximately HK$453.56 million had been utilized as at December 31, 2020, approximately HK$48.56 million were obtained through foreign exchange settlement and deposits and approximately HK$706.70 million were unutilized as at December 31, 2020.
PRINCIPAL BUSINESS
The Group is primarily engaged in the industrialization of construction industry in the PRC, including prefabricated concrete unit manufacturing ("PC Unit Manufacturing") and prefabricated concrete equipment manufacturing ("PC Equipment Manufacturing"). The Group is also engaged in construction contracting business, which has been discontinued since September 2020. An analysis of the principal business of the Company for the year ended December 31, 2020 is set out in the section headed "Management Discussion and Analysis" and note 4 to the consolidated financial statements in this annual report.
SUBSIDIARIES
Details of the subsidiaries of the Company are set out in note 16 to the consolidated financial statements of this annual report.
RESULTS
The results of the Group for the year ended December 31, 2020 are set out in the consolidated statement of comprehensive income as set out on pages 139 to 140 of this annual report.
DIVIDEND POLICY
The Articles of Association provide that dividends may be paid in cash, stock or a combination of cash and stock. Any proposed dividend distribution shall be formulated by the Board and subject to Shareholders' approval. The Company does not currently have a fixed dividend payout ratio. The amount of dividends to be declared and distributed will depend on the following factors: the Company's overall business condition, results of operation, financial results, working capital, capital requirements, future prospect, cash flow and any other factors which the Board may deem relevant. The Company may declare interim dividend after taking into account the relevant factors that our Board deems relevant. The profit after tax of the Company used for dividend distribution will be the lesser of (i) the net profit determined in accordance with PRC GAAP or (ii) the net profit determined in accordance with IFRSs. The Articles of Association further provide that after the general meeting has passed a resolution on the profit distribution plan, the Board must complete the dividend (or share) distribution within two months after the general meeting.
FINAL DIVIDEND
The Board has proposed not to distribute a final dividend for the year ended December 31, 2020.
To the best knowledge of the Directors, there was no arrangement under which the Shareholders waived or agreed to waive any dividend.
TAX REDUCTION OR EXEMPTION
In general, H shareholders shall be taxed for the dividends distributed by the Company in accordance with the Enterprise Income Tax Law of the PRC, the Individual Income Tax Law of the PRC and other relevant laws, regulations and rules. However, H shareholders may enjoy tax relief in accordance with the provisions of applicable tax treaties entered into by the countries/regions where they belong to by virtue of residential identification and the PRC. Pursuant to the Enterprise Income Tax Law of the PRC and its implementing regulations, the Company shall withhold and pay enterprise income tax at a tax rate of 10% for the income of a non-resident enterprise deriving from PRC. Any H shares registered under the name of non-individual enterprise, including the H shares registered under the name of HKSCC Nominees Limited, other nominees or trustees, or other organisations or entities, shall be deemed as shares held by non-resident enterprise shareholders and therefore, the dividends entitled to shall be subject to withholding enterprise income tax. Pursuant to the Notice on Issues Concerning Individual Income Tax Collection and Management after the Repeal of Guo Shui Fa [1993] No. 45 (Guo Shui Han [2011] No. 348) issued by the State Administration of Taxation on June 28, 2011, where the non-resident individual shareholders obtain dividend and bonuses from the shares issued in Hong Kong by non-foreign-invested enterprise, individual income tax shall be withheld and remitted by the withholding agent according to the domain of "interest, dividends and bonuses". Accordingly, for individual H shareholders who are Hong Kong or Macau residents or whose country of domicile is a country which has entered into a tax treaty with the PRC stipulating a tax rate of 10%, the Company will withhold and pay individual income tax at the rate of 10% when paying the final dividend to H shareholders whose names appear on the H Share register of members of the Company at the corresponding record date. Where the dividend tax rate is not 10%, it will be handled according to the following requirements:
(1) for residents of countries which have entered into a treaty with China in respect of a tax rate lower than 10%, such H shareholder individuals may by themselves or entrust the Company to file tax returns with the competent tax authorities to be entitled to the agreed tax rate, and shall keep relevant information for inspection. To the extent that the information is duly provided, the Company will withhold and pay individual income tax according to the provisions of PRC tax laws and such tax treaties upon approval by the competent tax authorities;
(2) for residents of countries which have entered into a treaty with China in respect of a tax rate of 10% or more but less than 20%, the Company will withhold and pay the individual income tax according to the agreed effective tax rate;
(3) for residents of countries which have not entered into any tax treaties with the PRC and in any other circumstances, the Company will withhold and pay individual income tax at the rate of 20%.
The Company will have no liability in respect of any claims arising from any delay in, or inaccurate determination of the status of the Shareholders or any disputes over the mechanism of withholding.
BUSINESS REVIEW
The business review of the Group during the year is set out in the sections headed "Chairman's Statement", "Management Discussion and Analysis" and "Environmental, Social and Governance Report" of this annual report, which include an analysis of the Group on major risks and uncertainties it is exposed to, the performance of the Group and the expected development trends of the business of the Group with key financial indicators as well as the Group's environmental policies and performance. Such review and discussion constitutes an integral part of this Report of the Board. Significant events taking place subsequent to the current financial year which have a material impact on the Company are set out in the section headed "Significant Events after the Reporting Period" of this annual report.
The Group is not aware of any significant relationships with its employees, customers and suppliers, which have a significant impact on the Group and are the basis of its success.
FINANCIAL SUMMARY
A summary of the Group's results and assets and liabilities for the past five financial years is set out on page 11 of this annual report, which does not constitute part of the audited consolidated financial statements.
MAJOR CUSTOMERS AND SUPPLIERS
Major Customers
For the year ended December 31, 2020, the turnover of the Group's top five customers accounted for 12.29% of the Group's total revenue, while the turnover of the Group's single largest customer accounted for 2.76% of the Group's total revenue.
Major Suppliers
For the year ended December 31, 2020, the turnover of the Group's top five suppliers accounted for 18.73% of the Group's total purchase for the year ended December 31, 2020, while the turnover of the Group's single largest supplier accounted for 7.69% of the Group's total purchase.
During the Reporting Period, none of the Directors, any of their respective close associates or any Shareholders who, to the best knowledge of the Directors, own more than 5% of the Company's issued shares, had interests in the Group's five largest customers or suppliers.
PROPERTY, PLANT AND EQUIPMENT
Details of the changes in property, plant and equipment of the Company and the Group for the year ended December 31, 2020 are set out in note 13 to the consolidated financial statements.
SHARE CAPITAL
Details of the changes in the Company's share capital during the Reporting Period are set out in notes 30(a) and 30(b) to the consolidated financial statements.
RESERVES
Details of the changes in the reserves of the Company and the Group for the year ended December 31, 2020 are set out in the consolidated statement of changes in equity on page 143.
DISTRIBUTABLE RESERVE
As of December 31, 2020, the Company's distributable reserve was approximately RMB3,651.0 million (as of December 31, 2019: RMB3,678.4 million).
BANK BORROWINGS AND OTHER BORROWINGS
Details of bank borrowings and other borrowings of the Company and the Group as at December 31, 2020 are set out in notes 24 and 31(b) to the consolidated financial statements.
LIST OF DIRECTORS AND SUPERVISORS
During the Reporting Period and up to the date of this annual report, the list of the Directors and the Supervisors is set out below:
Executive Directors:
Mr. Zhang Jian (Chairman) Ms. Tang Fen (President)
Ms. Shi Donghong (Vice President, Chief Financial Officer, Secretary of the Board and Joint Company Secretary) Mr. Zhang Kexiang (Vice President)
Mr. Tan Xinming (Vice President)
Non-executive Directors:
Mr. Zhang Quanxun
Ms. Hu Keman (appointed on May 15, 2020)
Independent Non-executive Directors:
Mr. Chen Gongrong
Mr. Li Zhengnong
Mr. Wong Kai Yan Thomas
Mr. Zhao Zhengting (appointed on May 15, 2020)
Supervisors:
Ms. Zhang Mingxin Mr. Li Gen
Ms. Liu Jing
During the year ended December 31, 2020, none of the Directors or Supervisors resigned from their relevant positions.
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
Biographical details of the Directors, Supervisors and senior management of the Company are set out on pages 37 to 44 of this annual report. During the Reporting Period and up to the date of this annual report, there was no change in information of Directors, Supervisors or president of the Company subject to disclosure in accordance with Rule 13.51B(1) of the Hong Kong Listing Rules.
CONFIRMATION OF INDEPENDENCE OF INDEPENDENT NON-EXECUTIVE DIRECTORS
The Company has received confirmation of their independence from each independent non-executive Director in accordance with Rule 3.13 of the Hong Kong Listing Rules, and the Company believes that all independent non-executive Directors are independent parties for the year ended December 31, 2020.
SERVICE CONTRACTS AND ENGAGEMENT LETTERS OF DIRECTORS AND SUPERVISORS
The Company has entered into a service contract with each of Ms. Hu Keman and Mr. Zhao Zhengting on May 15, 2020 and with each of the other Directors on October 11, 2019 with the term of office commencing from the date when they are elected as Directors of the second session of the Board at the general meeting of the Company till the expiry of the term of office of the second session of the Board, and are subject to re-election upon expiry of their terms of office. The Company has also entered into a service contract with each Supervisor on October 11, 2019 with the term of office commencing from the date when they are elected as Supervisors at the general meeting or the employee congress (as the case may be) of the Company till the expiry of the term of office of the second session of the Supervisory Committee, and are subject to re-election upon expiry of their terms of office.
The Company confirmed that no Director or Supervisor has entered into a service contract with the Group which is not determinable by the Company within one year without payment of compensation (other than statutory compensation).
DIRECTORS' AND SUPERVISORS' INTERESTS IN MATERIAL TRANSACTIONS, ARRANGEMENTS OR CONTRACTS
During the year ended December 31, 2020 and up to the date of this annual report, none of the Directors or Supervisors had a material interest, directly or indirectly, in any transactions, arrangements or contracts to which the Company, any of its subsidiaries or fellow subsidiaries is a party and are material to the business of the Group.
MANAGEMENT CONTRACTS
During the Reporting Period and up to the date of this annual report, the Company has not entered into or executed any contracts regarding the management and administration of all or any material part of its business.
MATERIAL CONTRACTS
Save as those disclosed in this annual report, during the Reporting Period, the Company or any of its subsidiaries did not have any material contracts with controlling shareholders or their subsidiaries under Appendix 16 to the Hong Kong Listing Rules, nor did the controlling shareholders or their subsidiaries have any significant contracts to provide services to the Company or its subsidiaries.
REMUNERATION POLICY
The Company has established a Remuneration and Appraisal Committee in accordance with the Corporate Governance Code in Appendix 14 to the Hong Kong Listing Rules to review the remuneration policy of the Group and the remuneration structure of the Directors and senior management of the Group. The Board determines the remuneration of the Directors, Supervisors and senior management of the Group with reference to the recommendations of the Remuneration and Appraisal Committee after taking into account the Group's operating results, personal performance and comparable market practices.
Details of the remuneration of the Directors, Supervisors and the five highest paid individuals during the Reporting Period are set out in notes 9 and 10 to the consolidated financial statements.
The Company confirms that none of the Directors have waived or agreed to waive any remuneration, nor has the Group paid any remuneration to any Director as an inducement to join or upon joining the Group or as compensation for loss of office.
EQUITY-LINKED AGREEMENTS
The Group did not enter into and did not have any equity-linked agreements.
RETIREMENT AND EMPLOYEE BENEFIT SCHEME
Details of the Company's retirement and employee benefit scheme are set out in note 6(b) to the consolidated financial statements.
DIRECTORS', SUPERVISORS' AND CHIEF EXECUTIVE'S INTERESTS AND/OR SHORT POSITIONS IN SHARES, UNDERLYING SHARES AND DEBENTURES
As of December 31, 2020, the Directors, Supervisors and the chief executives of the Company had the following interests and/or short positions in the Shares, underlying shares or debentures of the Company or any of its associated corporations (as defined under Part XV of the SFO) which will be required to be notified to the Company and the Hong Kong Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interest and/or short positions which they were taken or deemed to have under such provisions of the SFO) or which will be required, pursuant to section 352 of the SFO, to be entered in the register referred to therein; or which will be required to be notified to the Company and the Hong Kong Stock Exchange according to the Model Code:
Approximate
Name of the Directors, Supervisors and the chief executiveClass of SharesNature of interestNumber of Shares held
Approximate percentage of the total issued Shares of thepercentage of the total issued
Domestic Shares of theApproximate percentage of the total issued H Shares of the
Company %
Company %
Company %
Long position/ Short position/ Lending pool
Mr. Zhang Jian
Domestic Shares Beneficial owner
Interest held by controlled corporations
171,507,840 101,912,160
35.17 20.90
46.91 27.88
- Long position - Long position
(Note 2)H SharesInterest held by spouse
122,700 (Note 3)
0.03
-
0.10
Long positionMs. Tang Fen
DomesticSharesBeneficial owner
1,800,000
0.37
0.49
- Long position
(Note 4)
Notes:
(1) The above disclosure is primarily based on the information published on the website of the Hong Kong Stock Exchange (www.hkexnews.hk).
(2) Hunan Broad Lingmu House Equipment Co., Ltd.* (ಳیჃɽཕ˝Иגண௪Ϟࠢʮ̡ ) ("Broad Lingmu") directly holds 66,176,160 Domestic Shares, Changsha High-tech Development Zone Daxin Investment Management Partnership (Limited Partnership)* ( ڗӍ৷อක೯ਜɽ㒥ҳ༟၍ଣΥྫΆุ ( ϞࠢΥྫ )) ("Daxin Investment") directly holds 18,600,000 Domestic Shares, Hunan Dazheng Investment Co., Ltd.* ( ಳیɽ͍ҳ༟ٰ΅Ϟࠢʮ̡ ) ("Dazheng Investment") directly holds 12,000,000 Domestic Shares, and Hangzhou Fuyang Shangjiu Jingyuan Equity Investment Partnership Enterprise (Limited Partnership)* ( ψబජɪɘ᎑Ⴣٰᛆҳ༟ΥྫΆุ ( ϞࠢΥྫ )) ("Fuyang Shangjiu") directly holds 5,136,000 Domestic Shares. Broad Lingmu is wholly owned by Mr. Zhang Jian. Mr. Zhang Jian is the general partner of Daxin Investment and holds 66% partnership interest in Daxin Investment. Mr. Zhang Jian directly holds 0.3% interest and indirectly holds 70.9% interest (through Broad Lingmu) in Dazheng Investment. Mr. Zhang Jian indirectly holds approximately 99.33% partnership interest (through Broad Lingmu) in Fuyang Shangjiu. Therefore, Mr. Zhang Jian is deemed to be interested in the Domestic Shares held by Broad Lingmu, Daxin Investment, Dazheng Investment and Fuyang Shangjiu, for the purpose of Part XV of the SFO.
(3) Ms. Liu Hui ( ݣᅆɾɻ ), the spouse of Mr. Zhang Jian, directly holds 122,700 H Shares. Therefore, Mr. Zhang Jian is deemed to be interested in 122,700 H Shares for the purpose of Part XV of the SFO.
(4) Each of Ms. Tang Fen, Ms. Shi Donghong, Mr. Zhang Kexiang and Mr. Tan Xinming has been granted certain Shares through Daxin Investment and Dazheng Investment, being employee stock ownership platforms of the Company.
(5) Mr. Zhou Bin (մⅳ͛), the spouse of Ms. Shi Donghong, directly holds 3,876,000 Domestic Shares, and Fuyang Shangjiu directly holds 5,136,000 Domestic Shares. Mr. Zhou Bin is the general partner of Fuyang Shangjiu. Therefore, Ms. Shi Donghong is deemed to be interested in 9,012,000 Domestic Shares for the purpose of Part XV of the SFO.
(6) Shenzhen Yuanzhi Fuhai Investment Partnership (Limited Partnership)* ( ଉέჃߧబऎٰᛆҳ༟Άุ ( ϞࠢΥྫ )) ("Yuanzhi Fuhai") directly holds 25,404,000 Domestic Shares. The general partner of Yuanzhi Fuhai is Shenzhen Yuanzhi Fuhai Investment Management Limited* ( ଉέ̹Ⴣߧబऎҳ༟၍ଣϞࠢʮ̡ ) which is ultimately controlled by the Shenzhen SASAC and Shenzhen Jiahe Investment Management Partnership (Limited Partnership)* ( ଉέԳΥҳ༟၍ଣΆุ€ϞࠢΥྫ )) which is ultimately controlled by Mr. Zhang Quanxun and Mr. Cheng Houbo ( ێ௹͛ ). Therefore, Mr. Zhang Quanxun is deemed to be interested in such Domestic Shares held by Yuanzhi Fuhai for the purpose of Part XV of the SFO.
Save as those disclosed above, as of December 31, 2020, none of the Directors, Supervisors or the chief executive of the Company had any interests and/or short positions in the Shares, underlying shares or debentures of the Company or any of its associated corporations (as defined under Part XV of the SFO) which will be required to be notified to the Company and the Hong Kong Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interest and/or short positions which they were taken or deemed to have under such provisions of the SFO) or which will be required, pursuant to section 352 of the SFO, to be entered in the register referred to therein; or which will be required to be notified to the Company and the Hong Kong Stock Exchange according to the Model Code.
DIRECTORS' RIGHTS TO ACQUIRE SHARES OR DEBENTURES
Save as otherwise disclosed in this annual report, at no time during the Reporting Period was the Company or its subsidiaries a party to any arrangement that would enable the Directors to acquire benefits by means of acquisition of shares in, or debentures of, the Company or any other body corporate, and none of the Directors or any of their spouses or children under the age of 18 were granted any right to subscribe for the equity or debt securities of the Company or any other body corporate or had exercised any such right.
SUBSTANTIAL SHAREHOLDERS' INTERESTS AND SHORT POSITIONS IN SHARES AND UNDERLYING SHARES
As at December 31, 2020, as far as the Directors are aware, the following persons (other than the Directors, the Supervisors and chief executive of the Company) had interests and/or short positions in the shares or underlying shares of the Company which were required to be disclosed to the Company and the Hong Kong Stock Exchange pursuant to the provisions of Divisions 2 and 3 of Part XV of the SFO, or which were required to be entered in the register maintained by the Company pursuant to Section 336 of the SFO:
Approximate
Approximate percentage of the total issued
percentage of the total issuedName of substantial Shareholder
Class of SharesNature of interestNumber of Shares held
Shares of the
Domestic Shares of theApproximate percentage of the total issued H Shares of the
Company %
Company %
Company %
Long position/ Short position/ Lending pool
Broad Lingmu
Domestic SharesBeneficial owner Interest held by controlled corporations
66,176,160 17,136,000
13.57 18.10
- Long position
3.51 4.69
(Note 3)Daxin Investment
Domestic SharesTrustee
18,600,000
3.81 5.09
- Long position
(Note 4)Yuanzhi Fuhai
Domestic SharesTrustee
25,404,000
5.21 6.95
- Long position
(Note 5)
OceanLink Management Ltd. H SharesInterest held by controlled corporations
16,527,000
3.39
-
13.54 Long position
(Note 7)OceanLink Partners Fund, LPH SharesBeneficial owner
10,440,391
2.14
-
8.56 Long position
(Note 7)UBS Group AG
H SharesInterest held by controlled corporations
8,529,600 (Note 8)
1.75
-
6.99 Long position
Notes:
(1) The above disclosure is primarily based on the information published on the website of the Hong Kong Stock Exchange (www.hkexnews.hk).
(2) According to section 336 of the SFO, the Shareholders of the Company are required to file disclosure of interests forms when certain criteria are fulfilled. If the Shareholder's shareholding in the Company changes, unless certain criteria are fulfilled, the Shareholder need not notify the Company and the Hong Kong Stock Exchange. Therefore, the latest shareholder's shareholding in the Company may be different from that filed with the Hong Kong Stock Exchange.
(3) Broad Lingmu directly holds 66,176,160 Domestic Shares, Daxin Investment directly holds 18,600,000 Domestic Shares, Dazheng Investment directly holds 12,000,000 Domestic Shares, and Fuyang Shangjiu directly holds 5,136,000 Domestic Shares. Broad Lingmu is wholly owned by Mr. Zhang Jian. Mr. Zhang Jian is the general partner of Daxin Investment and holds 66% partnership interest in Daxin Investment. Mr. Zhang Jian directly holds 0.3% interest and indirectly holds 70.9% interest (through Broad Lingmu) in Dazheng Investment. Mr. Zhang Jian indirectly holds approximately 99.33% partnership interest (through Broad Lingmu) in Fuyang Shangjiu. Therefore, Mr. Zhang Jian is deemed to be interested in the Domestic Shares held by Broad Lingmu, Daxin Investment, Dazheng Investment and Fuyang Shangjiu, and Broad Lingmu is deemed to be interested in the Domestic Shares held by Dazheng Investment and Fuyang Shangjiu, for the purpose of Part XV of the SFO.
(4) Daxin Investment is an employee stock ownership platform of the Company.
(5) The general partners of Yuanzhi Fuhai are Shenzhen Yuanzhi Fuhai Investment Management Limited* ( ଉέ̹Ⴣߧబऎҳ ༟၍ଣϞࠢʮ̡ ) and Shenzhen Jiahe Investment Management Partnership (Limited Partnership)* ( ଉέԳΥҳ༟၍ଣ Άุ€ϞࠢΥྫ )). Shenzhen Yuanzhi Fuhai Investment Management Limited* ( ଉέ̹Ⴣߧబऎҳ༟၍ଣϞࠢʮ̡ ) is ultimately controlled by Shenzhen SASAC through Shenzhen Yuanzhi Investment Limited* ( ଉέ̹Ⴣߧҳ༟Ϟࠢʮ̡ ); and Shenzhen Jiahe Investment Management Partnership (Limited Partnership)* ( ଉέԳΥҳ༟၍ଣΆุ€ϞࠢΥྫ )) is ultimately controlled by Mr. Zhang Quanxun and Mr. Cheng Houbo ( ێ௹͛ ). The limited partner of Yuanzhi Fuhai holding over one third of partnership interest in Yuanzhi Fuhai is Shenzhen Yuanzhi Fuhai Merger Acquisition Investment Fund Partnership (Limited Partnership)* ( ଉέჃߧబऎԻᒅҳ༟ਿږΥྫΆุ€ϞࠢΥྫ )), which is also ultimately controlled by Shenzhen SASAC through Shenzhen Yuanzhi Investment Limited* ( ଉέ̹Ⴣߧҳ༟Ϟࠢʮ̡ ).
(6) According to the interest disclosure forms filed by Cassini Partners, L.P and Massachusetts Institute of Technology on
December 31, 2020, Cassini Partners, L.P directly holds 6,245,509 H Shares and Massachusetts Institute of Technology holds 96.80% equity interests of Cassini Partners, L.P Therefore, Massachusetts Institute of Technology is deemed to be interested in the 6,245,509 H Shares held by Cassini Partners, L.P, for the purpose of the SFO.
(7) According to the interest disclosure form filed by OceanLink Management Ltd. on December 30, 2020, OceanLink Partners Fund, LP directly holds 10,440,391 H Shares and Cassini Partners, L.P directly holds 6,086,609 H Shares. OceanLink Management Ltd. is the general partner of OceanLink Partners Fund, LP and the investment advisor and contingent interest partner of Cassini Partners, L.P. Cassini Partners, L.P is accustomed or obliged to act in accordance with the directions of OceanLink Management Ltd. Therefore, OceanLink Management Ltd. is deemed to be interested in the 10,440,391 H Shares held by OceanLink Partners Fund, LP and 6,086,609 H Shares held by Cassini Partners, L.P, for the purpose of the SFO.
(8) UBS AG directly holds 8,487,600 H Shares and UBS Switzerland AG directly holds 42,000 H Shares. UBS Group AG holds 100% equity interests in UBS AG and UBS Switzerland AG. Therefore, UBS Group AG is deemed to be interested in the 8,487,600 H Shares held by UBS AG and 42,000 H Shares held by UBS Switzerland AG, for the purpose of the SFO.
Save as those disclosed above, as at December 31, 2020, as far as the Directors are aware, no other persons (other than the Directors, the Supervisors and chief executive of the Company) had interests and/or short positions in the shares or underlying shares of the Company which were required to be disclosed pursuant to Divisions 2 and 3 of Part XV of the SFO, or which were required to be entered in the register maintained by the Company pursuant to Section 336 of the SFO.
PURCHASE, REDEMPTION OR SALE OF THE LISTED SECURITIES
During the Reporting Period, neither the Company nor any of its subsidiaries purchased, sold or redeemed any of the Company's H Shares.
PRE-EMPTIVE RIGHTS
There is no provision for the pre-emptive rights under the Articles of Association and the laws of the PRC, which would oblige the Company to offer new shares on a pro-rata basis to existing Shareholders.
NON-COMPETITION AGREEMENT AND UNDERTAKINGS
For details on non-competition agreement and undertakings, please refer to the section headed "Non-competition Agreement and Undertakings" as set out under the section headed "Relationship with the Controlling Shareholders" in the Prospectus.
Mr. Zhang Jian (the controlling shareholder of the Company) and his spouse Ms. Liu Hui confirmed that they had complied with the Non-competition Agreement and Undertakings during the Reporting Period. The independent non-executive Directors have reviewed their relevant undertakings and believed that they fully complied with the Non-competition Agreement and Undertakings.
DIRECTORS' INTEREST IN COMPETING BUSINESS
Save as disclosed in this annual report, none of the Directors or their associates had any interest in any business which directly or indirectly competes or may compete with the businesses of our Group during the Reporting Period.
CONNECTED TRANSACTIONS AND CONTINUING CONNECTED TRANSACTIONS
During the Reporting Period, the Company did not have any non-exempt connected transactions or continuing connected transactions under Chapter 14A of the Hong Kong Listing Rules. The related-party transactions described in note 33 to the consolidated financial statements do not constitute connected transactions or continuing connected transactions as defined in Chapter 14A of the Hong Kong Listing Rules and have complied with the disclosure requirements under Chapter 14A of the Hong Kong Listing Rules.
CHARITABLE DONATIONS
During the Reporting Period, the Group made charitable donations and other donations of RMB1,171,860 (2019:
RMB1,151,730).
COMPLIANCE WITH LAWS AND REGULATIONS
As the Group's primary business operations are conducted in China, the Group is subject to relevant laws and regulations in the PRC, including but not limited to general laws and regulations relating to quality, safety in production, environmental protection, intellectual property rights and labor and personnel. At the same time, as a joint stock company incorporated in China with limited liability and listed on the Hong Kong Stock Exchange, the Company is governed by relevant domestic laws and regulations such as the Company Law, as well as Hong Kong laws and regulations such as the Hong Kong Listing Rules, the SFO, etc.
The Group has implemented internal control and risk management to ensure compliance with such laws and regulations. For the year ended December 31, 2020, to the best knowledge of the Board, the Group did not violate any relevant laws and regulations which had a significant impact on the Group's development, performance and business.
MATERIAL LEGAL PROCEEDINGS
For the year ended December 31, 2020, the Group were not involved in any material legal proceedings or arbitrations. To the best knowledge of the Directors, there was no material legal proceeding or claim which is pending or threatening against the Group.
PERMITTED INDEMNITY PROVISIONS
The Group has arranged for appropriate insurance for potential legal proceedings against the Directors, Supervisors and senior management due to their positions.
SIGNIFICANT EVENTS AFTER THE REPORTING PERIOD
From the end of the Reporting Period to the date of this annual report, there were no adjusted or non-adjusting significant events with a significant financial impact on the Group.
AUDIT COMMITTEE
The Company has established an Audit Committee in accordance with Rule 3.21 and the Corporate Governance Code as set out in Appendix 14 of the Hong Kong Listing Rules. The Audit Committee of the Company has reviewed the accounting principles and practices adopted by the Group and the audited consolidated financial statements for the year ended December 31, 2020 together with the management and the Company's external auditors.
CORPORATE GOVERNANCE
The Group is committed to maintaining high standards of corporate governance practices. Details of the corporate governance practices adopted by the Group are set out in the Corporate Governance Report on pages 62 to 82 of this annual report.
PUBLIC FLOAT
According to information publicly available to the Company and to the knowledge of the Directors, at least 25% of the total issued shares of the Company (i.e. the minimum public float required by the Hong Kong Listing Rules) are held by the public at any time during the Reporting Period and up to the date of this annual report.
AUDITOR
KPMG was appointed as the auditor of the Company for the year ended December 31, 2020. KPMG has audited the financial statements prepared in accordance with IFRSs as of December 31, 2020 and issued an unqualified audit report thereon.
A resolution on proposed re-appointment of KPMG as auditor of the Company will be submitted at the AGM.
The Company did not change auditor in the past three years.
By order of the Board
Changsha Broad Homes Industrial Group Co., Ltd. Zhang Jian
Chairman
Changsha • Hunan February 26, 2021
Dear Shareholders:
During the Reporting Period, the Supervisory Committee, in strict accordance with the requirements of the Company Law and other relevant laws and regulations, the Articles of Association and the Rules of Procedure of the Supervisory Committee, and following the principle of integrity and accountability towards the Company and all of its Shareholders, earnestly fulfilled its supervisory duties and proactively carried out various tasks to perform supervision and inspection upon the compliance operation of the Company, the Company's finance, the implementation of the resolutions passed by the general meetings of the Company, the Board's processes of making material decisions and the compliance of the Company's operation and management as well as the performance of their duties by the Directors and the management personnel of the Company. Members of the Supervisory Committee discharged their duties in diligence with good faith and dedication, thereby bringing a significant contribution to the constant improvement of corporate governance and continuous optimization and upgrading of the Group, and realizing the purpose of securing stable and sustainable high-quality development of the Group.
I. WORK CARRIED OUT BY THE SUPERVISORY COMMITTEE
1. Meetings Convened
During the Reporting Period, the Supervisory Committee convened four meetings in total:
(1) On March 26, 2020, the fourth meeting of the second session of the Supervisory Committee was convened by means of on-site voting, at which the Proposal in Relation to the 2019 Annual Report and Results Announcement of the Company ( ᗫʮ̡ 2019 ϋܓజѓʿุᐶʮѓ ٙᙄࣩ' ), the Proposal in Relation to the Work Report of the Supervisory Committee of the Company for 2019 ( ᗫʮ̡ 2019 ϋܓ္ԫึʈЪజѓٙᙄࣩ' ), the Proposal in Relation to the Financial Report of the Company for 2019 ( ᗫʮ̡ 2019 ϋ ܓ ৌ ਕ Ӕ ၑ జ ѓ ٙ ᙄ ࣩ') and the Proposal in Relation to the Profit Distribution Plan of the Company for 2019 ( ᗫʮ̡ 2019 ϋܓлᆗʱৣཫࣩٙᙄࣩ' ) were considered and approved and filed into resolutions.
(2) On June 18, 2020, the fifth meeting of the second session of the Supervisory Committee was convened by means of on-site voting, at which the Proposal in Relation to Plan for Distribution of Accumulated Profits Prior to the Initial Public Offering of A Shares and Listing of the Company ( ᗫʮ̡ϣʮක೯Б A ٰٰୃԨɪ̹ۃဆπлᆗʱৣ˙ࣩٙᙄࣩ' ), the Proposal in Relation to Dividend Distribution Plan for Shareholders for Three Years After the Initial Public Offering of A Shares and Listing of the Company ( ᗫʮ̡ϣʮක೯Б A ٰٰୃԨɪ̹ܝ ɧϋٰ؇ʱߎΫజྌٙᙄࣩ' ), the Proposal in Relation to Engagement of Auditors for the Initial Public Offering of A Shares and Listing of the Company ( ᗫ໌ሗʮ̡ϣʮක೯Б A ٰٰୃԨɪ̹ᄲࠇዚٙᙄࣩ' ), the Proposal in Relation to Confirming the Related Party Transactions of the Company During the Reporting Period ( ᗫᆽႩʮ̡జѓಂʫᗫᑌʹ ٙᙄࣩ' ) and the Proposal in Relation to Formulation of the Rules of Procedure of Supervisory Committee of Changsha Broad Homes Industrial Group Co., Ltd. (Draft) Applicable after the Initial Public Offering of A Shares and Listing of the Company ( ᗫՓ֛ʮ̡ϣʮක೯БA ٰ ٰ ୃ Ԩ ɪ ̹ ܝ ቇ ͜ ٙ"ڗ Ӎ Ⴣ ɽ И σ ʈ ุ ණ ྠ ٰ ΅ Ϟ ࠢ ʮ ̡ ္ ԫ ึ ᙄ ԫ ۆ ( ণࣩ )•ٙ ᙄ ࣩ' ) were considered and approved and filed into resolutions.
2.
(3) On August 28, 2020, the sixth meeting of the second session of the Supervisory Committee was convened by means of on-site voting, at which the Proposal in Relation to the 2020 Interim Report and the Interim Results Announcement of the Company ( ᗫʮ̡ 2020 ϋʕಂజѓʿ ʕಂุᐶʮѓٙᙄࣩ' ) was considered and approved.
(4) On December 15, 2020, the seventh meeting of the second session of the Supervisory
Committee was convened by means of on-site voting, at which the Proposal in Relation to Confirming the Related Party Transactions of the Company During the Reporting Period ( ᗫ ᆽႩʮ̡జѓಂʫᗫᑌʹٙᙄࣩ' ) was considered and approved and filed into resolution.
Discharging of Responsibilities
During the Reporting Period, the members of the Supervisory Committee attended all the general meetings and Board meetings of the Company and supervised over the procedures and substances of relevant meetings and raised suggestions and advice thereon. Besides, they also performed supervision on the Company's decision-making process during its operation, compliance operation, financial position and the discharging of responsibilities of the Directors and management personnel of the Company during the daily operation of the Company. Reasonable suggestions and advice put forward by the Supervisory Committee were adopted by the Company, which satisfyingly safeguarded the legitimate interests of the Company and its Shareholders.
II. INDEPENDENT OPINIONS OF THE SUPERVISORY COMMITTEE
1. Opinions with Respect to the Compliance Operation of the Company
In 2020, in line with the requirements of the Company Law and other laws and regulations, and the Articles of Association and other relevant regulatory provisions, the Supervisory Committee exercised supervision over the convening procedures of the general meetings and the Board meetings, the resolutions passed thereon, the Board's implementation of the resolutions passed by the general meetings and the performance of duties by the senior management.
The Supervisory Committee is of the opinion that, the Company carried out operations and decision-making process in strict accordance with the Company Law and other laws and regulations, and the Articles of Association and other relevant regulatory provisions. The Board operated in a normative manner with procedures in compliance with laws and decisions made in a rational means, and maintained an objective and prudent examining perspective towards the Company's operation, to reach legal and rational decisions and implement various resolutions passed by the general meetings with due care. The Directors and senior management faithfully performed their duties in diligence and did not breach any laws, regulations or the Articles of Association or committed any acts detrimental to the interests of the Company. All resolutions passed by the general meetings were properly implemented.
2. Opinions with Respect to the Finance of the Company
The Supervisory Committee carefully considered the financial report of the Company for 2020 and accompanying information prepared in accordance with the IFRSs and audited by the independent auditors of the Company with unqualified opinions. The Supervisory Committee is of the opinion that, the financial report of the Company for 2020 gave an objective and true view of the Company's financial position and operating results.
In the new year, the Supervisory Committee will continue to comply with the requirements of relevant laws, regulations and the Articles of Association, discharge its supervisory duties and give full play to its supervision and counterbalance functions based closely on the development of the Company, so as to consistently enhance the corporate governance ability of the Company and effectively safeguard and protect the legitimate rights and interests of the Shareholders and the Company.
Changsha Broad Homes Industrial Group Co., Ltd.
Zhang Mingxin
Chairman of the Supervisory Committee
Changsha • Hunan
February 26, 2021
The Board is pleased to present the Corporate Governance Report as set out in the annual report of the Company for the year ended December 31, 2020.
CORPORATE GOVERNANCE PRACTICES
The Group is committed to maintaining a high level of corporate governance to safeguard the rights and interests of Shareholders and enhance corporate value as well as the accountability assumed by the Board towards the Shareholders. The H Shares of the Company were listed on the Main Board of the Hong Kong Stock Exchange on November 6, 2019. As a company incorporated in the PRC and listed on the Hong Kong Stock Exchange, the Company complies with the relevant requirements of the Hong Kong Listing Rules and meanwhile takes the Company Law and applicable laws, regulations and regulatory requirements in both mainland and Hong Kong as its basic guidelines of corporate governance.
The Company has adopted the Corporate Governance Code contained in Appendix 14 to the Hong Kong Listing Rules as its own corporate governance standards. The Directors are of the opinion that, during the Reporting Period, the Company has complied with all the applicable code provisions under the Corporate Governance Code. The Company will continue to review and supervise over its corporate governance practice to ensure compliance with the Corporate Governance Code.
BOARD
Overview
The Board is responsible for the overall leadership of the Group, and it oversees the Group's strategic decisions and monitors the Group's business and performance. The Board has delegated the authority and responsibility for day-to-day management and operation of the Group to the senior management of the Group. To oversee particular aspects of the Company's affairs, the Board has established four special committees under the Board, including the Strategy Committee, the Audit Committee, the Nomination Committee and the Remuneration and Appraisal Committee. The Board has assigned responsibilities as stipulated in their terms of reference to each special Board committee.
All the Directors shall ensure that they perform their duties in the principle of integrity, in compliance with applicable laws and regulations and in any event for the interests of the Company and its Shareholders as a whole.
The Company has arranged appropriate insurances in respect of legal actions against its Directors, and it will review the coverage of such liability insurances on an annual basis.
Board composition
The Board currently comprises 11 Directors, including five executive Directors, two non-executive Directors and four independent non-executive Directors. Details are as follows:
Executive Directors:
Mr. Zhang Jian (Chairman) Ms. Tang Fen (President)
Ms. Shi Donghong (Vice President, Chief Financial Officer, Secretary of the Board and Joint Company Secretary) Mr. Zhang Kexiang (Vice President)
Mr. Tan Xinming (Vice President)
Non-Executive Directors:
Mr. Zhang Quanxun
Ms. Hu Keman (appointed on May 15, 2020)
Independent Non-Executive Directors:
Mr. Chen Gongrong
Mr. Li Zhengnong
Mr. Wong Kai Yan Thomas
Mr. Zhao Zhengting (appointed on May 15, 2020)
The biographical details of the Directors are set out in the section headed "Directors, Supervisors and Senior Management" in this annual report. Save as disclosed in the biographies of the Directors as set out under the section headed "Directors, Supervisors and Senior Management" of this annual report, none of the Directors has any personal relationship (including financial, business, family or other material/relevant relationship) with any other Director, Supervisor or chief executive.
The Board comprises renowned experts in the fields of, among other things, industry, finance, management and asset management. The Nomination Committee will review the structure of the Board at least once each year. The Board consists of four independent non-executive Directors, of whom Mr. Chen Gongrong is qualified as an accountant and also serves as the chairman of the Audit Committee. The Company believes that, during the Reporting Period, the composition of the Board had been in compliance with Rules 3.10(1) and 3.10(2) of the Hong Kong Listing Rules, which require that the board of directors should include at least three independent non-executive directors and at least one of them shall own appropriate professional qualifications or accounting or related financial management expertise, and Rule 3.10A of Hong Kong Listing Rules, which requires that independent non-executive directors shall account for at least one third of the board of directors, as well as Rule 3.21 of Hong Kong Listing Rules with respect to the qualifications of members of the audit committee. In addition, the name list of independent non-executive Directors is disclosed in all of the corporate communications published in accordance with the Hong Kong Listing Rules.
The Company has received the annual confirmation letter issued by each of the independent non-executive Directors in respect of their independence in accordance with Rule 3.13 of the Hong Kong Listing Rules to confirm their independence. Therefore, the Company considers the independent non-executive Directors to be independent.
All of the Directors (including non-executive Directors and independent non-executive Directors) have brought a wide spectrum of valuable business experience, knowledge and specialized skills to the Board for its efficient and effective functioning. Through active participation in Board meetings, the non-executive Directors have played a positive role in customary issues that involve potential conflict of interests. The independent non-executive Directors are invited to serve on the Audit Committee, the Remuneration and Appraisal Committee and the Nomination Committee.
As regards the Corporate Governance Code provision requiring directors to disclose the number and nature of offices held in public companies or organizations and other significant undertakings as well as their capacity and the commencing time and duration of their offices in the issuer, Directors have agreed to disclose their aforesaid information to the Company in due course. Details of the biographies of the Directors are set out in the section headed "Directors, Supervisors and Senior Management" in this annual report .
CONTINUOUS PROFESSIONAL DEVELOPMENT OF DIRECTORS
The Company provides necessary induction to all Directors to ensure that they have a proper understanding of the Company's operations and businesses as well as their responsibilities under relevant positions, laws, rules and regulations. The Company also arranges regular seminars to provide Directors with updates on latest development and changes in the Hong Kong Listing Rules and other relevant legal and regulatory requirements from time to time. The Company also provides the Directors with regular updates on the Company's performance, position and prospects to enable the Board as a whole and each Director to discharge their duties.
The Company encourages all Directors to participate in continuous professional development, to develop and update their knowledge and skills. The joint company secretaries of the Company update and provide written training materials on roles, functions and duties of directors from time to time.
According to materials provided by the Directors, during the year ended December 31, 2020, the Directors received the following trainings:
Nature of continuous professional
Name of Director
development courses
Executive Directors
Mr. Zhang Jian
A, B
Ms. Tang Fen
A, B
Ms. Shi Donghong Mr. Zhang Kexiang Mr. Tan Xinming
A, B
A, B
A, B
A, B A, B
Non-Executive Directors
Mr. Zhang Quanxun
Ms. Hu Keman
Independent Non-Executive Directors
Mr. Chen Gongrong
Mr. Li Zhengnong
Mr. Wong Kai Yan Thomas Mr. Zhao Zhengting
Reading materials provided by external parties or the Company include but not limited to the latest materials on the business of the Company, latest updates on duties of Directors, corporate governance and regulation and other applicable regulatory requirements.
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
As required by code provision A.2.1 of the Corporate Governance Code, the roles of chairman of the board of directors and chief executive officer should be separate and performed by different individuals.
The chairman of the Board and the president of the Company are currently served by Mr. Zhang Jian and Ms. Tang Fen respectively, being two different positions with expressly stipulated duties. The chairman of the Board is responsible for providing strategic advice and guidance for the development of the Group, leading the Board and guaranteeing effective operation of the Board in accordance with sound corporate governance practice and procedures, as well as advocating an open and active discussing culture to promote the Directors (especially the non-executive Directors) to effectively contribute to the Board and ensure the constructive relationship between the executive Directors and non-executive Directors. The president is responsible for the daily operation of the Group and implementing the objectives, policies and strategies assigned by the Board.
APPOINTMENT AND RE-ELECTION OF DIRECTORS
According to the Articles of Association, Directors shall be elected at general meetings with a term of office of three years. Upon the expiry of the term of office, a Director shall be eligible to offer himself/herself for re-election and re-appointment.
The Company entered into a service contract with each of Ms. Hu Keman and Mr. Zhao Zhengting on May 15, 2020 and with each of the other Directors on October 11, 2019, with a term of office starting from the date on which they were appointed as Directors to the second session of the Board by the general meeting and terminating upon expiry of the term of the second session of the Board. They shall be eligible for re-election and re-appointment upon expiry of their terms.
The Company confirmed that no Director has entered into a service contract with the Group which is not determinable by the Company within one year without payment of compensation (other than statutory compensation).
The procedures underlying the appointment, re-election, re-appointment and removal of the Directors are set out in the Articles of Association. The Nomination Committee is responsible for reviewing the Board composition, and making recommendations to the Board on appointment, re-election, re-appointment and succession planning of Directors.
BOARD MEETINGS
The Company adopts the practice of holding Board meetings regularly and convenes at least four Board meetings per annum, approximately one meeting for every quarter. Notice of a regular Board meeting shall be served on all Directors at least 14 days before the date of the meeting to provide all Directors with an opportunity to attend the regular meeting and discuss matters in the agenda for such regular meeting.
According to the Articles of Association and the terms of reference of each special committee under the Board, the Company will issue appropriate notice for extraordinary board meetings and meetings of the special committees under the Board. The meeting notice shall include the agenda and accompanying board and special committee papers and shall be served at least five days prior to an extraordinary Board meeting and three days prior to a meeting of the special committee under the Board to ensure that Directors have sufficient time to review the papers and to prepare adequately for the meetings. When Directors or committee members are unable to attend a meeting, they will be advised of the matters to be discussed on the meeting and given an opportunity to express their views to the Board or the special committees under the Board prior to the meeting. The joint company secretaries or the Board office shall keep meeting minutes and provide copies of minutes of such meetings to all Directors for reference and record.
Minutes of the Board meetings and special committee meetings will be recorded in details for the matters considered by the Board and the special committees and the decisions reached thereby, including any concerns raised by the Directors. Draft minutes of each Board meeting and special committee meeting will be sent to each Director for consideration within a reasonable time after the date on which the meeting is held. Minutes of Board meetings are available for inspection by all the Directors.
During the Reporting Period, the Board convened seven Board meetings and two general meetings. The table below sets out the attendance of each Director at the Board meetings and general meetings:
Number of actual attendance at Board meetings/Number of required attendance at
Director
Board meetingsNumber of actual attendance at general meetings/Number of required attendance at general meetings
Note: Pursuant to the resolution passed at the 2019 annual general meeting of the Company on May 15, 2020, Ms. Hu Keman and Mr. Zhao Zhengting have been serving as Directors since approval thereat.
Mr. Zhang Jian Ms. Tang Fen
7/7 2/2
7/7 2/2
Ms. Shi Donghong Mr. Zhang Kexiang Mr. Tan Xinming Mr. Zhang Quanxun Ms. Hu Keman
7/7 2/2
7/7 2/2
7/7 2/2
7/7 2/2
6/6 1/1
Mr. Chen Gongrong Mr. Li Zhengnong
7/7 2/2
7/7 2/2
Mr. Wong Kai Yan Thomas
7/7 2/2
Mr. Zhao Zhengting
6/6 1/1
Save for the above Board meetings, the chairman and the independent non-executive Directors convened a meeting without attendance of other Directors.
MODEL CODE FOR SECURITIES TRANSACTIONS
The Company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers as contained in Appendix 10 to the Hong Kong Listing Rules as its own code of conduct regarding securities transactions by Directors. Upon specific enquiry to all Directors and Supervisors, they confirmed that they have complied with the code of conduct as set out in the Model Code during the year ended December 31, 2020.
Since the Listing Date, the Company has also adopted its own code of conduct regarding employees' securities transactions on terms no less exacting than the standard set out in the Model Code for the compliance by its relevant employees who are likely to be in possession of unpublished inside information of the Company when dealing with the Company's securities.
DELEGATION BY THE BOARD
The Board is responsible to the general meeting of the Company and reserves the decision-making rights for all material matters, including: deciding on the Company's business plans and investment plans; within the scope authorized by the general meeting, deciding, among others, the Company's external investment, purchase and sale of assets, assets mortgage, wealth management entrustment, bank credit and connected transactions; deciding on the provision of security for the third parties; deciding on the establishment of the Company's internal management bodies and on the establishment or closing of the Company's branches or representative offices; and engaging or dismiss the Company's president, secretary to the board of directors; vice president, chief financial officer and other senior management members. Directors have recourse to seek independent professional advice in performing their duties at the Company's expense. They are also encouraged to consult with the Company's senior management independently.
The senior management of the Company is responsible for the Group's daily management, administration and operation. The delegated functions and responsibilities are periodically reviewed by the Board to ensure the rationality of the delegation arrangement. Approval has to be obtained from the Board prior to any significant transactions entered into by the management.
CORPORATE GOVERNANCE FUNCTION
The Board recognizes that corporate governance should be the collective responsibility of Directors and their corporate governance duties include:
(a) To review and monitor the Company's policies and practices on compliance with legal and regulatory requirements;
(b) To review and monitor the training and continuous professional development of Directors and senior management;
(c) To develop, review and monitor the codes of conduct and compliance manual for employees and Directors;
(d) To develop and review the corporate governance policy and practice of the Company and to make recommendations and report the same to the Board;
(e) To review the Company's compliance with the Corporate Governance Code and disclosure in the Corporate Governance Report; and
(f) To review and monitor the Company's compliance with its whistleblowing policies.
During the Reporting Period, the Board has performed the above duties.
SPECIAL COMMITTEES UNDER THE BOARD
The Board has established four special committees under the Board, including the Strategy Committee, the Audit Committee, the Nomination Committee and the Remuneration and Appraisal Committee. All the special committees under the Board have written terms of reference with a clear division of rights and responsibilities. The terms of reference of the Audit Committee, the Nomination Committee and the Remuneration and Appraisal Committee are available for inspection on the websites of the Hong Kong Stock Exchange and of the Company.
AUDIT COMMITTEE
The Audit Committee comprises three members, namely Mr. Chen Gongrong (chairman), an independent non-executive Director, Mr. Li Zhengnong, an independent non-executive Director and Mr. Wong Kai Yan Thomas, an independent non-executive Director. Mr. Chen Gongrong possesses appropriate accounting or finance management-related expertise.
Set forth below are the principal duties of the Audit Committee:
1. To make recommendations to the Board regarding the appointment, re-appointment and removal of the external auditor, and to approve the remuneration and terms of engagement of the external auditor, and handle any question of its resignation or dismissal;
2. To review and monitor the external auditor's independence, objectivity and the effectiveness of the audit process in accordance with applicable standards. The Committee should discuss with the auditor the nature, scope and method of the audit and the relevant reporting obligations before the audit commences; to develop and implement policy on engaging an external auditor to provide non-audit services; and to be responsible for the communication between the internal audit department and external auditor;
3. To monitor the truthfulness, completeness and accuracy of the financial statements, annual reports and accounts, interim reports and quarterly reports (if any) of the Company, and to review significant financial reporting opinions contained therein;
4. To examine the Company's financial control, internal control and risk management systems;
5. To discuss the risk management and internal control system with the management to ensure that the management has performed its duty to have an effective risk management and internal control system;
6. To review the financial and accounting policies and practices of the Company;
7. To review the Company's risk management strategies and solutions for key risk management issues;
8. To confirm the list of the Company's connected parties, and conduct an overall review of connected transactions and regular inquiries of the overall state of connected transactions.
During the Reporting Period, the Audit Committee convened five meetings for the purpose of discussing and considering the followings:
1. The proposal in relation to the 2019 annual report and results announcement of the Company; the proposal in relation to the 2019 financial report of the Company; the proposal in relation to the profit distribution plan for
2019 of the Company and the proposal in relation to the engagement of auditors for 2020.
2. The proposal in relation to plan for distribution of accumulated profits prior to the initial public offering of A shares and listing of the Company; the proposal in relation to dividend distribution plan for shareholders for three years after the initial public offering of A shares and listing of the Company; the proposal in relation to engagement of auditors for the initial public offering of A shares and listing of the Company and the proposal in relation to confirming the related party transactions of the Company during the Reporting Period.
3. The proposal in relation to the 2020 interim report and interim results announcement of the Company.
4. The proposal in relation to consideration of the audit report of the Company, the proposal in relation to the self-assessment report on internal control of the Company and the proposal in relation to consideration of internal control audit report and related documents.
5. The proposal in relation to the 2020 interim audit report of the Company, the proposal in relation to the self-assessment report on internal control of the Company, the proposal in relation to consideration of internal control audit report and related documents and the proposal in relation to confirming the related party transactions of the Company during the reporting period.
The Audit Committee has reviewed the annual results of the Company for the year ended December 31, 2020.
The table below sets forth the attendance of each member of the Audit Committee at the meetings:
Name of Director
Actual attendance/Required attendance
Mr. Chen Gongrong 5/5
Mr. Li Zhengnong 5/5
Mr. Wong Kai Yan Thomas 5/5
NOMINATION COMMITTEE
The Nomination Committee comprises three members, namely Mr. Li Zhengnong (chairman), an independent non-executive Director, Mr. Zhang Jian, an executive Director and Mr. Chen Gongrong, an independent non-executive Director.
Set forth below are the principal duties of the Nomination Committee:
1. To formulate the standards, procedures and methods for selection of directors and senior management of the Company and submit the same to the Board for consideration;
2. To review the structure, size, composition and member qualifications (including skills, expertise and experience) of the Board at least once each year, and to make recommendations for any change to the Board for complying with the strategy of the Company. The Committee shall maintain a Board membership diversity policy;
3. To identify individuals suitably qualified to become directors, and to examine the candidates for directors, president and secretary to the Board and make recommendations;
4. To screen the candidates for other management members and provide advice to the Board;
5. To evaluate the overall skill, expertise and experience of directors and senior management and assess the independence of the independent non-executive directors;
6. To make recommendations to the Board on the appointment or re-appointment of directors and succession plan for directors, in particular the chairman of the Board and the vice president;
7. To review the board diversity policy and any measurable objective for implementing such board diversity policy as may be adopted by the Board from time to time and to review the progress on achieving the objectives, and to make disclosure of such diversity policy or its summary and its review results in the corporate governance report of the Company annually.
The table below sets forth the attendance of each member of the Nomination Committee at the meeting:
The Nomination Committee will assess the candidate or incumbent on criteria such as integrity, experience, skill and ability to commit time and effort to carry out the duties. The recommendations of the Nomination Committee will then be put to the Board for decision.
During the Reporting Period, the Nomination Committee convened one meeting for the purpose of discussing and considering the followings: proposals in relation to the nomination of Directors.
NOMINATION POLICY OF THE DIRECTORS
The Company has formulated the procedure for nomination of candidates of Directors by the Shareholders. In accordance with the relevant requirements in Article 104 of the Articles of Association, a shareholder independently or shareholders collectively holding at least 3 percent of the total outstanding voting shares of the Company may propose to the general meeting candidates for the position of the Director who is not an employee representative in the form of a written proposal, provided that the number of persons nominated complies with the Articles of Association and does not exceed the number of persons to be elected. The Shareholder(s) shall submit the aforesaid proposal to the Company at least 14 days before the date the general meeting is to be held.
A candidate of the director must comply with the relevant qualification requirements set out in the Company Law, the Articles of Association and other applicable laws and regulations. The Nomination Committee has the right to review director candidates and make recommendations according to the Articles of Association, the Terms of Reference for the Nomination Committee of the Board of Directors and other relevant rules and regulations of the Company.
BOARD DIVERSITY POLICY
To achieve sustainable and balanced development, the Company recognizes and believes that the board diversity policy is beneficial for enhancing the performance of the Company. The Company deems that boosting diversity at the Board level is a must for realizing its strategic goals and pursuing sustainable development. The Company has formulated the board diversity policy, which outlines the principles for the Board to fulfill diversity. The Company is committed to selecting the best candidate for each position based on the diversity principle, including but not limited to gender, age, cultural and educational background, ethnicity, professional experience, skills, knowledge and length of service. All the appointment(s) of the Board members will be based on meritocracy and all candidates will be evaluated in line with appropriate conditions with due consideration given to the benefit of board diversity. The Nomination Committee will review the board diversity policy and measurable objectives to ensure its effectiveness.
The Nomination Committee is mainly responsible for identifying persons with appropriate qualifications to serve as directors taking full consideration of the board diversity policy in the selection process. The appointment of all members of the Board will give due regard to the benefits of the board diversity policy and will be based on the merits of each candidate and objective criteria.
The Nomination Committee considers that the board is sufficiently diverse and therefore, it did not establish any measurable objectives for the board diversity policy.
REMUNERATION AND APPRAISAL COMMITTEE
The Remuneration and Appraisal Committee comprises three members, namely Mr. Li Zhengnong (chairman), an independent non-executive Director, Mr. Chen Gongrong, an independent non-executive Director and Mr. Zhang Jian, an executive Director.
Set forth below are the principal duties of the Remuneration and Appraisal Committee:
1. To make recommendations to the Board on the Company's remuneration policies and structure for all
Directors and senior management and on the establishment of a formal and transparent procedure for formulating such remuneration policies;
2. To review and approve the management's remuneration proposals with reference to the Board's corporate goals and objectives;
3. To determine the remuneration packages (including benefits in kind, pension rights and compensation payments, including any compensation payable for loss or termination of their office or appointment) for all executive Directors and senior management and to make recommendations to the Board on the remuneration for non-executive Directors;
4. To formulate administrative measures for the performance appraisal of the senior management of the Company, prepare appraisal plans and determine appraisal purposes;
5. To review and approve performance-based remuneration by making reference to the corporate objectives approved from time to time by the Board;
6. To examine and approve compensation payable to the executive Directors and senior management for any loss or termination of office or appointment to ensure that the compensation conforms to relevant contractual terms or, in case the compensation does not conform to relevant contractual terms, is fair and reasonable and no undue burden is placed on the Company;
7. To examine and approve compensation arrangements relating to dismissal or removal of Directors for misconduct to ensure that the arrangements conform to relevant contractual terms or, in case the arrangements do not conform to relevant contractual terms, are otherwise reasonable and appropriate;
8. To ensure that no director or any of his/her associates (as defined under the Hong Kong Listing Rules) is involved in deciding his/her own remuneration.
During the Reporting Period, the Remuneration and Appraisal Committee convened one meeting for the purpose of discussing and considering the followings: the proposal in relation to the remuneration of the Directors and Supervisors for 2019.
Name of Director
The table below sets forth the attendance of each member of the Remuneration and Appraisal Committee at the meeting:
Actual attendance/Required attendance
STRATEGY COMMITTEE
The Strategy Committee comprises three members, namely Mr. Zhang Jian (chairman), an executive Director, Ms. Tang Fen, an executive Director and Ms. Shi Donghong, an executive Director.
Set forth below are the principal duties of the Strategy Committee:
1. To conduct research into the strategic development plan of the Company and make recommendations thereof;
2. To conduct research into the material investment and finance plans which are subject to the approval of the Board under the Articles of Association and make recommendations thereof;
3. To conduct research into the material capital operations and assets operating projects which are subject to the approval of the Board under the Articles of Association and make recommendations thereof;
4. To conduct research into other material businesses which may influence the development of the Company and make recommendations thereof;
5. To supervise the implementation of the above matters.
During the Reporting Period, the Strategy Committee convened four meetings for the purpose of discussing and considering the followings:
1. The proposal in relation to proposing the general meeting to grant general mandate to the Board to issue Domestic Shares and H Shares and the proposal in relation to proposing the general meeting to grant general mandate to the Board to repurchase Shares.
2. The proposal in relation to the application for initial public offering of A shares and listing on the ChiNext and the proposal in relation to investment projects to be financed by the proceeds from the initial public offering of A shares and the feasibility analysis.
3. The proposal in relation to adjustment of total investment amount of investment projects to be financed by the proceeds and the amount of proceeds proposed to be utilized.
4. The proposal in relation to transfer of entire equity interests of Hunan Broad Construction & Industrial Co., Ltd. ( ಳیჃɽܔʈٰ΅Ϟࠢʮ̡ ).
The table below sets forth the attendance of each member of the Strategy Committee at the meetings:
Name of Director
Actual attendance/Required attendance
Mr. Zhang Jian 4/4
Ms. Tang Fen 4/4
Ms. Shi Donghong 4/4
REMUNERATION OF THE DIRECTORS, SUPERVISORS AND THE SENIOR MANAGEMENT
For the year ended December 31, 2020, the remuneration of the Directors, Supervisors and the senior management of the Company falls within the following bands:
0-100,000 3
100,001-500,000 5
500,001-1,000,000 3
1,000,001-1,500,000 1
1,500,001-2,000,000 0
2,000,001-2,500,000 0
2,500,001-3,000,000 0
3,000,001-3,500,000 0
3,500,001-4,000,000 0
4,000,001-4,500,000 0
For details of remuneration of the Directors and five highest paid individuals for the year ended December 31, 2020, please refer to notes 9 and 10 to the consolidated financial statements contained in this annual report.
DIRECTORS' FINANCIAL REPORTING RESPONSIBILITY IN RESPECT OF FINANCIAL STATEMENTS
The Directors acknowledge their responsibilities for preparing the financial statements of the Company for the year ended December 31, 2020, which give a true and fair view of the affairs of the Company and the Group and of the Group's results and cash flows.
The management has provided to the Board such explanation and information as necessary to enable the Board to carry out an informed assessment of the Company's financial statements, which are submitted to the Board for approval. The Company has provided all members of the Board with monthly updates on the Company's performance, positions and prospects.
The Directors are not aware of any material uncertainties relating to events or conditions which may cast significant doubt upon the Group's ability to continue the operation.
The statement by the auditors of the Company regarding their reporting responsibilities on the consolidated financial statements of the Company is set out in the Independent Auditor's Report from page 137 to page 138 of this annual report.
INTERNAL CONTROL AND RISK MANAGEMENT
Overview
The Company completed the initial public offering of its H Shares on November 6, 2019 which were listed on the Main Board of the Hong Kong Stock Exchange. Through a series of strict standardized governance, the Company has constructed an internal control system in compliance with the listing regulatory requirements and relevant regulatory stipulations and implemented various risk management measures to effectively control and manage the risks in the Company's operating activities.
The internal rules and policies that the Company has formed to regulate and guide our operation include marketing management measures, factory accounting manual, intellectual property management measures, capital budgeting management measures, credit business management measures, recruitment management rules, information disclosure measures, management system of connected transactions, confidentiality system, document management measures, etc. In particular, for quality control, we have established supplier management measures, purchase and biding management procedures, rules for security risk valuation and management and other internal rules.
The Board acknowledges that it is the responsibility of the Board for maintaining adequate internal control system and risk management system and reviewing the effectiveness of such systems on an annual basis. Such internal control system and risk management system are designed to properly and effectively manage various risks confronted by the Company instead of totally eliminating risks involved in business operation and the Company can only exert due efforts and guarantee to this end.
Procedures and major characteristics of internal control and risk management
The Board assumes overall responsibilities for evaluating and determining the nature and extent of the risks that the Company is willing to bear in achieving its strategic goals, and establishing and maintaining an appropriate and effective risk management and internal control system.
The internal audit team is responsible for independently reviewing the adequacy and effectiveness of the risk management and internal control system. The internal audit team inspects key issues related to accounting practices and all major internal control issues, and provides findings and improvement suggestions to the Audit Committee.
The Board reviewed the report prepared by the management and internal audit results with the support of the Audit Committee and the management. The Board considered that the Company's risk management and internal control system during the Reporting Period were effective and adequate.
The Group's risk control centre plays an important role in monitoring the internal governance of the Company. The primary responsibilities of the risk control centre are to regulate and review the financial condition and internal control of the Company, and to conduct regular and comprehensive audit on all branches and subsidiaries of the Company.
Relevant departments of the Company are responsible for implementing risk management policies and routine risk management. In order to standardize the Group's risk management and to set transparency and risk management performance standards, relevant departments are responsible for (i) collecting risk data on their operations and work; (ii) conducting risk assessment, including identification, ranking, measurement and classification of all major risks that may potentially affect the achievement of the objectives; (iii) preparing risk management reports for the president's review; (iv) continuously monitoring major risks related to the Company's operations; (v) implementing appropriate measures in response to the risks when necessary; and (vi) formulating and implementing appropriate mechanisms to promote the application of our risk management framework.
At the subsidiary level, the Company and its major operating subsidiaries have established an array of agreement procedures for internal control and reported the actual investigation results on the physical monitoring and internal control of different procedures of the Group, including, among others, environmental control, risk assessment, internal supervision, information and communication, anti-fraud, reporting and disclosure, related party and connected transactions, taxation, sales and collection management, procurement and payment management, inventory management, fixed asset management, personnel and compensation management, capital management, contract management, research and development and intangible asset management, information system management and insurance.
RISKS IN OPERATION
1. Risks in relation to macro-economic fluctuation
The business and future growth prospect of the Company depend on China's overall economic condition, and any slowdown of future economic development may adversely affect the Company's performance. Meanwhile, under the joint influence of the transformation from investment-driven to consumption-driven mode in national economy, deleveraging, strengthening environmental protection control and eliminating redundant capacity of heavy industry, the domestic investment environment of fixed assets may cool down, and relevant control measures may have certain impact on the Company's operations. For example, the government's control over capital investment may reduce investment in affordable housing projects and public facilities construction projects; and the overall deleveraging efforts in the national economy may reduce the scale of real estate development and construction nationwide, the number of government affordable housing projects and urban construction projects, and may also affect the investment and construction progress of Joint Factories.
2. Risks in relation to the development and policies of construction industry
The business and future growth prospect of the Company depend on the development of China's construction industry. In 2020, the total output of China's construction industry reached RMB24.84 trillion, an increase of 5.7% year-on-year, which still maintained a relatively high growth rate. In addition, with the continuous improvement of China's urbanization in the future, the growth of urban resident population will continuously boost demand for purchasing residential buildings and urban construction. During the Reporting Period, the Company primarily derived its operating income from the prefabricated construction industry, which is expected to continue in the future. However, the prefabricated construction industry only accounts for a portion of the construction industry. Besides the overall growth rate of the construction industry, the growth of the prefabricated construction industry is also affected by structural changes in the industry, market preferences, consumption habits and other factors.
In addition, the Company is also subject to relevant policies of the construction industry. In 2016, the State Council and local governments issued certain opinions to enhance policy support for prefabricated buildings. It is expected that the proportion of prefabricated buildings in new buildings will reach 30% in about 10 years, but it will take a long time for relevant supporting policies to be fully implemented in various localities. Therefore, the Company may still face competition from traditional buildings in the future. If the prefabricated building industry fails to grow as expected, or there is any change in the relevant policies of the government to encourage the development of the prefabricated constriction industry, it may adversely affect the Company's business development, financial condition and operating performance.
3. Risks in relation to intensified market competition
The Company is confronting fierce competition from national large-scale construction companies and regional peers. National large-scale construction companies generally boast stable project supply or extensive technical resources, while regional peers generally enjoy the advantages of rich long-term customer resources and low transportation cost within the region. With the increase of competitors, the Company will face the risk of intensified market competition. In addition, if local policies and regulations do not explicitly require the construction of prefabricated buildings, customers may tend to adopt traditional construction methods, but the Company has no obvious competitive advantage in traditional construction business.
The Company generally obtains PC unit manufacturing business contracts through bidding, and there may be risks that the Company fails to be invited to participate in bidding or cannot win the bid after participating in bidding. Meanwhile, due to the entrance of other competitors in the market, the Company may not be able to obtain new projects on an on-going basis as a result of market competition, or the winning price of new projects will be further reduced, and the Company's operating performance, financial condition and business prospects will thus be affected to some extent.
4. Risks in relation to a decline in demand for PC equipment after an upsurge
Since 2016, with the strong support of national and local policies, the prefabricated construction industry has experienced explosive growth. In order to quickly occupy market at the early stage of industry development, national market players vigorously distributed production capacity, leading to a rapid increase in the market demand for PC equipment. During the Reporting Period, a majority of the Company's PC equipment was sold to the Joint Factories, and the growth of market demand for the Company's PC equipment is primarily attributable to the commercial production and expansion of the Joint Factories, namely, the successful implementation of the "Broad Homes United Program". However, as PC equipment is not consumables, with the gradual improvement of the strategic layout of the Company's Joint Factories across the country, save for the demand for production expansion and upgrading, the demand for new PC equipment by Joint Factories may decrease. Thus, there may be risks that the demand for PC equipment will decline after a skyrocketing upsurge.
Risks in relation to seasonal fluctuations in the industry
The Company's operating performance is subject to seasonal fluctuations. The market demand for PC units of the Company is affected by seasonal fluctuations. For example, due to the Spring Festival holiday and the cold weather, the Company usually records lower sales and revenue in the first quarter. Therefore, the quarterly results of the Company may not reflect the overall annual business and financial performance of the Company. In addition, severe weather factors such as snow, storm and rainstorm will affect the production activities of the construction industry, thus having an adverse impact on the sales and revenue of PC units of the Company.
Risks in relation to business activities affected by the COVID-19 pandemic
Due to the COVID-19 epidemic, the Company, its major customers and suppliers postponed work resumption during the 2020 Spring Festival holiday, and the commencement and construction of projects were thus delayed or suspended. The production and operation were affected to varying degrees, and the market sales, raw material procurement, production and delivery of products lagged behind schedule, which had a significant impact on the Company's performance in the first quarter of 2020.
As the Company's PC units, PC equipment and construction contracting business involves transportation and delivery, provision of installation and training services, construction and other business activities that need to be carried out on site, and personnel gathering and flow is limited amid the COVID-19 epidemic, project installation, commissioning and personnel training are difficult to advance smoothly, which would compromise the completion of field work, and may further affect the project schedule. In the future, if the pandemic rebounds or the government strengthens the management and control over business activities to control the pandemic, the Company's production and operation may be adversely affected to certain extent.
MAJOR MEASURES OF INTERNAL CONTROL AND RISK MANAGEMENT
The Company has adopted a number of internal control policies, measures and procedures to reasonably ensure the achievement of certain objectives, including effective and efficient operation, reliable financial reporting and compliance with relevant laws and regulations. The following is a summary of internal control policies, measures and procedures that the Company has implemented or plans to implement:
h The Company has established a Risk Control Administration Centre to be responsible for the overall internal control, corporate governance and legal compliance of the Group.
h The Risk Control Administration Centre is responsible for promulgating and revising internal control policies, measures and procedures to ensure that the Company maintains sound and effective internal control and complies with applicable laws and regulations. It also oversees the implementation of internal control policies, measures and procedures and conducts regular compliance reviews of the business process at different stages.
h The Risk Control Administration Centre organizes monthly/annual internal control self-examination of each business department of the Company, and provides the internal control self-assessment report containing its risks and improvement suggestions to the heads of relevant business departments.
h The person-in-charge of each business department is responsible for implementing relevant internal control policies, measures and procedures and regularly checking the implementation of relevant policies, measures and procedures.
h The Company has implemented relevant internal control policies, measures and procedures at the product development or production stage in each business department, provided trainings for relevant employees on such policies, measures and procedures and solved their problems, submitted suggestions and proposed amendments to relevant policies, measures and procedures to the Risk Control Administration Centre, and conducted regular inspections on the implementation of relevant policies, measures and procedures.
h The Company has adopted a number of measures and procedures in various areas of our business operations (such as project management, quality assurance, intellectual property protection, environmental protection and occupational health and safety). We provide employees with regular trainings on such measures and procedures.
h The Risk Control Administration Centre has established a complaint reporting mechanism for our Directors, senior management, employees, customers and other business partners, and has conducted independent and fair investigations on reported complaints for the purpose of appropriate follow-up. Leveraging such mechanism, our employees can report their complaints and problems. The Risk Control Administration Centre evaluates the effectiveness and potential vulnerabilities of the Company's internal control system based on the complaints received, so as to improve our internal control policies, measures and procedures accordingly.
The Company has formulated an information disclosure policy to provide comprehensive guidelines for the Directors, senior management and relevant employees of the Company in handling confidential data, supervising data disclosure and responding to inquiries.
The Company has implemented control procedures to ensure that unauthorized access to and use of inside information are strictly prohibited.
The Board has reviewed the effectiveness of the Group's internal audit system and risk management and internal control system through the Audit Committee, including the adequacy of the aforementioned system and the resources, employee qualifications and experience of the Company's accounting and financial reporting functions, as well as the adequacy of training courses and budgets for the aforementioned employees.
For the year ended December 31, 2020, upon review, the Board considered that the Group's risk management and internal control systems (including financial, operational and compliance controls) were effective and adequate. The review also covered financial reports and employee qualifications, experience and related resources.
AUDITOR'S REMUNERATION
The approximate remuneration of the auditor for the audit services (relating to listing and annual audit) and non-audit services (relating to preparation of the environmental, social and governance report) provided to the Company during the year ended December 31, 2020 is set out below:
Type of service | Amount |
(RMB) | |
Continuing operations | |
- Audit services | 8,490,000 |
- Non-audit services | 150,000 |
Discontinued operation | |
- Audit services | 75,000 |
Total | 8,715,000 |
JOINT COMPANY SECRETARIES |
Ms. Shi Donghong ("Ms. Shi") is the joint company secretary of the Company and is responsible for advising the Board on corporate governance matters and ensuring that the policies and procedures of the Board, and the applicable laws, rules and regulations are followed.
In order to maintain good corporate governance and ensure compliance with the Hong Kong Listing Rules and applicable Hong Kong laws, the Company also engaged Ms. Leung Suet Wing ("Ms. Leung") from TMF Hong Kong Limited as another joint company secretary of the Company to assist Ms. Shi to discharge her duties as company secretary of the Company. Ms. Leung's primary contact person in the Company is Mr. Huang Fengchun.
The Company confirmed that Ms. Shi and Ms. Leung had undertaken not less than 15 hours of relevant professionaltraining in compliance with Rule 3.29 of the Hong Kong Listing Rules for the year ended December 31, 2020.
RELATION WITH SHAREHOLDERS AND INVESTOR RELATIONS
The Company considers that effective communication with Shareholders is essential for enhancing investor relations and understanding of the Group's business, performance and strategies. The Company also recognizes the importance of timely and non-selective disclosure of its information, which will enable Shareholders and investors to make the informed investment decisions.
The Company's annual general meeting provides an opportunity for direct communication between the Shareholders and the Directors. The chairman of the Board and the chairmen of the special committees under the Board will attend the annual general meeting to answer shareholders' questions. The auditors will also attend the annual general meeting and answer questions on the conduct of the audit, the preparation and content of the auditor's report, accounting policies and independence of the auditors.
In order to promote effective communication, the Company adopts the Shareholders communication policy with an aim to establish the mutual relationship and communication between the Company and the Shareholders, and maintains a website (www.bhome.com.cn) on which the Company will publish the latest data, financial information, corporate governance practices and other information on its business operations and development for public inspection.
The Company will strengthen communication with Shareholders and investors through roadshows, reverse roadshows, analyst conferences, results presentations, media press conferences, telephone conferences, etc.
SHAREHOLDERS' RIGHTS
To safeguard shareholders' interests and rights, a separate resolution is proposed for each issue at general meetings.
All resolutions put forward at general meetings will be voted by poll pursuant to the Hong Kong Listing Rules and poll results will be posted on the websites of the Company and the Hong Kong Stock Exchange in a timely manner after each general meeting.
1. Convening extraordinary general meetings and Shareholders' class meetings
According to the Articles of Association, the Company shall convene an extraordinary general meeting within two months from the date when a Shareholder individually or Shareholders jointly holding at least 10 percent of the Company's Shares (the number of Shares held by the Shareholders shall be counted based on the date of the written request) request convening extraordinary general meetings in writing;
Shareholders requesting the convening of a Shareholders' class meeting shall do so by the procedures set forth below:
(I) two or more Shareholders holding in aggregate at least 10 percent of the Shares carrying the voting rights at the meeting to be held may sign one or more written requests of identical form and content requesting that the Board convenes a class Shareholders' meeting and stating the topics to be discussed at the meeting. The Board shall convene the class Shareholders' meeting as soon as possible after having received the aforementioned written request. The shareholding referred to above shall be calculated as of the day on which the written request is made.
(II) if the Board fails to issue a notice to convene such meeting within 30 days after having received the aforementioned written request, the Shareholders who made such request may themselves convene the meeting within four months after the Board received the request. The procedures for the Shareholders to convene such meeting shall, to the extent possible, be identical to the procedures for the Board to convene the Shareholders' meetings.
2. Enquiries to the Board
Shareholders who intend to put forward their enquiries about the Company to the Board could email their enquiries to the Board secretary office at the headquarters of the Company atir@bhome.com.cn.
3. Procedures for submitting proposals at general meetings
A Shareholder alone or Shareholders together holding at least 3 percent of the Shares of the Company may submit extempore motions in writing to the convener 10 days prior to the date of such meeting. The convener shall issue a supplementary notice of the general meeting and make an announcement of the contents of such extempore motion within two days after receipt of the motion, and submit such extempore motion to the general meeting for consideration. The contents of such an extempore motion shall fall within the authority of the general meeting, and contain a clear topic and a specific resolution.
DIVIDEND POLICY
For details of the dividend policy of the Company, please refer to the section headed "Dividend Policy" in the "Report of the Board" of this annual report.
AMENDMENTS TO THE ARTICLES OF ASSOCIATION
The Company made amendments and restatement to the Articles of Association in accordance with the Hong Kong Listing Rules on the Listing Date, which was effective and published on the websites of the Hong Kong Stock Exchange and the Company on November 6, 2019. The Company exercised partial Over-allotment Option of 167,400 H shares on November 28, 2019, which were allotted and issued on December 3, 2019 and updated the relevant articles of the Articles of Association accordingly. The amended Articles of Association have been published on the websites of the Hong Kong Stock Exchange and the Company on December 3, 2019. The Company convened an annual general meeting on May 15, 2020 to make amendments to the Articles of Association and the amended Articles of Association were published on the websites of the Hong Kong Stock Exchange and the Company on the same date.
BOARD STATEMENT
The Board of Directors and all directors of the Company guarantee that the information contained in this report does not contain any false statements, misleading representations or material omissions, and all of them jointly and severally take responsibility as to the truthfulness, accuracy and completeness of the contents of this report.
BASIS OF PREPARATION
This report was prepared in accordance with the Environmental, Social and Governance Reporting Guide as set out in Appendix 27 to the Hong Kong Listing Rules.
RELEASE CYCLE
This report is prepared annually and covers the period from January 1, 2020 to December 31, 2020. This is the second Environmental, Social and Governance Report (the "ESG Report") of the Group and the one for the next reporting period (2021) is expected to be released in 2022. Certain information contained herein is a brief review of past activities.
REPORTING SCOPE
The reporting entities are Changsha Broad Homes Industrial Group Co., Ltd. and its subsidiaries. The information in respect of their policies, social responsibilities and environmental protection efforts cover all the businesses of the Group.
REPORTING PRINCIPLE
Quantitative: In accordance with the "key performance indicators" of the Environmental, Social and Governance Reporting Guide as set out in Appendix 27 to the Rules Governing the Listing of Securities on the Stock Exchange, the Group disclosed quantitative indicators in the "environment" category. Quantitative indicators of the "society" category were disclosed to the greatest extent, and will be fully disclosed in the future after the statistical process is gradually optimized.
Balance: This report strives to achieve objective, fair and truthful disclosure and reflection of the Group's achievements and practices in the environment and social fields in 2020, and also the problems encountered and improvement measures with a sense of responsibility.
Consistency: This report follows a consistent range of statistics and the statistics scope of 2020 corresponds with that in 2019.
SOURCE
The information in this report is derived from the internal documents and related statistics of Changsha Broad Homes Industrial Group Co., Ltd. and its subsidiaries.
AVAILABILITY
The Chinese and English version of this report is available on the website of the Stock Exchange (http://www.hkexnews.hk) and the official website of the Group. This report is prepared in both Chinese and English and in case of inconsistencies, the Chinese version shall prevail.
REPRESENTATIONS
For ease of presentation, "Changsha Broad Homes Industrial Group Co., Ltd." is hereinafter referred to as "Broad Homes", the "Group" or "we/us" in this report.
1 EXECUTIVE'S ADDRESS
The year of 2020 was unusually significant. The sudden outbreak of COVID-19 pandemic has changed people's working mode and life radius, and also affected their demand for housing, which is not only an indispensable habitat to accommodate in peace and contentment, but also a warm shelter to spend quality time with families.
Responding to the needs of society has always been our important social responsibility as a responsible and large-scale enterprise. Back in 1996, we stepped into China's construction industrialization field with the founding mission of enhancing productivity, improving quality and reducing waste. In the past twenty-five years, which also marked one quarter of a century, we stayed committed to sustainable development through adhering to technological innovation, consolidating manufacturing foundation and embracing cooperation. From Changsha in Hunan province, which is surrounded by mountains and rivers, to major economic regions in China such as the Beijing-Tianjin-Hebei region, Yangtze River Delta region, Pearl River Delta region and other core metropolitan areas in central and western China, our production network covers approximately 100 cities. In 2020, we released the first annual report and ESG Report after listing on the Hong Kong Stock Exchange, and the "Return to A-share market" plan on the ChiNext of the Shenzhen Stock Exchange is rolling out in full swing and order. The continuous expansion of scale and the progress in the capital market have brought us more stakeholders, and we will continue to pay attention to the demands of all stakeholders and stride forward on the path of sustainable development with a higher conviction.
Amid the uncertainties and ups and downs brought about by the shocks of the pandemic, we believed in persistence, seized opportunities, actively integrated into the new development pattern, resonated with the times and national strategies, and promoted the high-quality development of urban and rural construction. At present, the urbanization process is accelerating, the old urban areas are ushering in the opportunities of renovation, a new generation of tenants pops up, and diversified rental is driving new demands. In 2020, we gained insight into the escalation of consumer demand in the pandemic, actively distributed in the low-density rural housing market, created a new business normal in a better life, and empowered beautiful urban and rural settlements. We actively responded to people's desire for a better life, and integrated the principles of "people-oriented, quality improvement, innovation-driven and sustainable development" into all aspects of our development.
Humanistic care is an important foundation for sustainable development of an enterprise. In face of the sudden and severe COVID-19 pandemic, we paid close attention to pandemic prevention and control tasks in our community. In the early stage when resources were in shortage, we donated medical materials worth RMB1 million to Xiangya Hospital of Central South University, which was fighting the pandemic in the front line, and provided much-needed material support for medical staff. In view of the work and production resumption needs after the pandemic, we arranged for orderly work resumption in our factories on the premise that the pandemic prevention measures of premises and personnel were in place. We extend sincere appreciation to every partner for their efforts in the pandemic and wish mankind an early victory over the pandemic.
In our daily work, we attach importance to employees' welfare and development demands, promote the construction and development of the Group's training system, provide exclusive development paths for employees, and facilitate employees to grow in an all-round way. We understand that it is "urgent to cultivate talents" and emphasize the training of talents in the whole industry. In 2016, we opened Broad Academy, which adopts an "open strategy" to share the knowledge system of the industry, making every effort to train talents for the industry and promote the continuous in-depth reform of the industry.
In order to better cope with climate change, China plans to achieve "carbon neutrality" by 2060. Given the huge demand for construction brought about by population growth and the heightening consensus of all walks of life on the risks of climate change, the construction industry plays a vital role in the process of achieving China's "carbon neutral" goal. Since its establishment, Broad Homes has been committed to the original mission of providing comprehensive solutions for China's construction industrialization, reducing material waste and resource consumption, and promoting energy conservation and emission reduction. We remain true to our original aspiration and keep our mission firmly in mind. We always implement the concept of green development, promote the transformation of construction methods by continuously improving the comprehensive solutions of green prefabricated buildings, assist customers to reduce the intensity of field operations and environmental impact, realize added value and efficiency improvement, and fulfil corporate environmental and social responsibilities.
February 26, 2021
We will be committed to drawing upon our advantages for further success. As the pioneer and forerunner of China's green construction, we will always uphold the corporate values of "no speculation, professionalism and concentration" and the corporate development strategy of paralleling economic benefits with social benefits. Ready to bear the weight of responsibility, we will move forward fearlessly.
By order of the Board
Zhang Jian
Chairman
Changsha • Hunan
2 ABOUT US
The Company is the pioneer and leader in the industrialization of construction industry in the PRC, which provides comprehensive solutions to facilitate the modernization of construction industry in China, and offers professionalized, intelligent and scalable manufacturing of prefabricated buildings and services leveraging the profound technology accumulation and continuous innovation, research and development capacity.
Early in 1996, the founder and management team of the Company entered the field of construction industrialization. The Company is among the first batch of enterprises having been named as National Housing Industrialization Bases ( Иσପุʷਿή ) and has established cooperative relations with nine out of China's top ten property developers and China's top ten construction enterprises. In addition, it provides PC units and technical services for several landmark projects in China, such as Qingtang Bay Public Rental Housing Project ( ڡಆᝄʮॡגධͦ ), the largest prefabricated public rental housing pilot project in Beijing as of the end of 2019 and the first green residential demonstration project in Beijing, and Hefei Binhu Qin Garden Project ( Υ٭Ᏽಳӎධͦ ), the largest industrialized residential project under construction in China as of the end of 2019.
Through years of industrialized exploration, the Company has accumulated industry-leading software and hardware technologies. In particular, the Company is the first to develop and utilize the PC-CPS, a full-process digital system, in the prefabricated construction industry in China, seeking to achieve massive and continuous production of customized products. The Company is committed to establishing a digital supporting system covering the entire industry chain of construction, in which various elements of the industry chain can be defined and the entire construction process, from design and manufacturing to construction, operation and maintenance, can be simulated on the internet through information technology, thereby determining the variables in the construction process and guiding the actual operation and implementation based on a data-driven approach through IoT of construction industry. Meanwhile, the Company cooperates with relevant enterprises along the industry chain to formulate standards of construction industrialization, thereby transforming the traditional laborÑintensive and scattered construction industry into a centralized, efficient and modern manufacturing industry.
3 ENVIRONMENTAL, SOCIAL AND GOVERNANCE ("ESG") OVERVIEW
ESG Strategy of the Group
The Group has been adhering to the original aspiration of green development. Under the leadership of the founder and chairman Mr. Zhang Jian, the Group is committed to promoting the modernization of construction industry in the PRC, guiding the transformation of production methods in the industry, and reducing the large amount of waste water, waste residue and mold use generated by the traditional construction industry. The Group consistently keeps corporate social responsibility in mind and infiltrates the concept of sustainable development into every aspect of corporate governance and operations with commitment to the common achievement of economic, social and environmental benefits.
ESG Governance Structure of the Group
The Group has established a top-down ESG governance structure, where the Board is responsible for supervising the environmental and social aspects of the Group, including risk assessment, risk prioritizing and management, overseeing and reviewing the Group's performance with respect to environmental and social fields, so as to guide the sustainable development direction and path of the Group. The Group also established an ESG working team, which is led by high-ranking managerial personnel and includes intermediate level managers. The working team consists of core representatives from all regular management divisions of the Group, including the Board Office, Human Resources Institute, Administration Centre, Design and Craft Department, Operations Management Department, Brand Strategy Department, Product Department, Market and Service and Human Finance Department, covering all relevant departments in daily management process of the Group. The working team reports to the Board on a regular basis for recommendations and advice and is responsible for communicating and implementing the strategies, measures and feedback of the Group on issues related to ESG, which is an indispensable execution party for the sustainable development of the Group.
Stakeholder Engagement
The Group's ESG stakeholders mainly include the employees, suppliers, customers, shareholders, investors, government, and the communities where the Group operates. The Group believes that listening to and understanding the opinions of stakeholders will provide a solid foundation for the long-term development of the Group. In this regard, the Group actively explores various channels to maintain good communication with stakeholders, to enhance the stakeholders' understanding of the development and operational policies, and to provide more opportunities for them to put forward suggestions so that the Group can provide them with timely and effective feedback regarding their concerns. In this way, the Group ensures that it is cooperating and working alongside stakeholders to achieve mutual benefits.
• Participate in discussion for formulation of relevant policies and industry standards
• Contribute corporate experience
• Guide and influence public policies actively
• Engage in dialogue with the local government
• Board meeting, shareholders' meeting and investors' meeting
• Direct communication among shareholders
• Enhance information disclosures
• Implement state policies, abide by state laws and regulations
• Accept supervision and check-ups
• Create more posts to boost the employment rate
• Participate in affordable housing construction projects
• Declare taxes in a timely manner
• Convene shareholder meetings regularly
• Convene meetings of the board of directors regularly
• Convene meetings with investors
• Disclose statutory issues in a timely manner
• Employee representative in the supervisory committee
• Labor union
• Employee representative conference
• Employee survey and provision of timely feedback
• Enhance information disclosure
• Enhance training for employees in respect of culture and technical skills
• Improve employees living and working environment
• Guarantee employees' rights and benefits, upgrade their welfare level
• Health and safety guarantees for employees
• Establish a labor union
during the service offering process
• Customer survey and feedback
• Complaint hotline
• Enhance information disclosures
• Standardize production
• Improve return and exchange and quality control system
• Conduct regular customer satisfaction surveys
• Respond to customer complaints and provide them with feedback in a timely manner
• Earnestly protect customer privacythe supplier management rules
• Contract negotiation
• Daily business exchange
• Enhance information disclosures
• Exchange ideas with local government and organization
• Actively participate in public welfare activities
• Enhance information disclosure
Materiality Assessment
During the reporting year, we obtained an update of the materiality assessment on each aspect of ESG from internal stakeholders, including directors, senior management and middle management through questionnaires from the perspectives of long-term development strategies, management enhancement, urgency of investment and competitiveness advantages of the Company. We will also continually pay attention to all stakeholders, constantly review and update the materiality assessment, and include external stakeholders when the conditions are appropriate, so as to achieve a more accurate and thorough understanding of the demands of various parties, and to provide guidance and direction to the enterprise's business operations and controls over environmental and social governance.
Based on the analysis and summary of the results of the materiality assessment from all stakeholders, we have formed the following materiality assessment matrix, which covers business operations, the business environment, society, governance and the Environmental, Social and Governance Reporting Guide of the Hong Kong Stock Exchange. The Group puts its focus on social aspects such as employment and labor practices, supply chain management, anti-corruption, and environmental aspects such as water resources and indirect energy.
We have fully considered the importance of each key performance indicator to the operation and the stakeholders. After comprehensive evaluation, we have selected the following indicators as the major influential aspects of the Group's sustainable development. While taking all environmental and social responsibilities into consideration, the Group has paid more attention to the following areas.
Assessment of Materiality to Broad Homes
EnvironmentalSocial
Impact on stakeholders
5
6
4
7
8
9 2
3
1
Impact on operations
Employment and labor practice 4
Anti-corruption 5
Supply chain management 6
Product health and safety 7
Occupational health and safety 8
Development and trainings 9
4 ENVIRONMENTAL PROTECTION
Since its establishment, environmental protection has been considered as one of the cores of the Group's development strategy. The Group strives to promote the development of industrial buildings. Through the innovation of production methods and construction craft, it realizes a green industrial building system featuring low-energy, low-pollution and low-waste that is different from traditional construction modes. Although it is not a highly polluting industry in which the Group operates and our production craft and process do not involve heavy pollution, we continue to emphasize the importance of environmental protection in our daily operations and development, actively implement the green and low-carbon development strategy, and effectively reduce the negative impact on the environment during production and construction to continuously improve the benefits from environmental protection of the Group.
The Group strictly abides by laws and regulations that have material impacts on the development of the Group, such as the Environmental Protection Law of the People's Republic of China, the Law of the People's Republic of China on Environmental Impact Assessment, the Law of the People's Republic of China on Prevention and Control of Water Pollution, the Law of the People's Republic of China on Prevention and Control of Atmospheric Pollution, and the Law of the People's Republic of China on Prevention and Control of Environmental Pollution by Solid Waste. With green development as the mission and local companies as the management unit, the general manager of the local company is responsible for organizing, formulating and implementing a number of internal management systems on environmental compliance and pollution control, such as the Regulations on Energy Saving and Consumption Reduction, Hazardous Waste Management System, Waste Management Measures and Regulations on Control of Waste Water, Waste Gas and Noise. The detailed rules specify the process of treatment, reuse and discharge of production wastewater and waste, and the responsible person of the local company then reports directly to the Chairman of the Company and the Group to ensure that the goal of 100% up-to-standard discharge of production pollutants and 100% pollution-free disposal of solid waste is achieved. Starting from the details of the use of electrical appliances, water conservation, paperless office and official cars management, we have made specific regulations on daily actions of our employees to effectively reduce the use of water, electricity, paper and gasoline, and reduce energy consumption; and also strengthen the awareness of energy conservation and consumption reduction for all employees, which helps to guide all employees to form good habits of conservation and environmental protection, thus laying a solid foundation for the sustainable development of the Company.
As at the end of the reporting year, the Group's company and five subsidiaries have obtained the environmental management system certification, which affirms our daily work and achievements in environmental management, and also represents an incentive to continuously optimize and develop our environmental management system to achieve higher standards and goals.
4.1 Emissions
Low carbon, environmental protection, energy saving and emission reduction
In the construction process, wood, as a traditional sample material, is consumed in a significant amount. The wooden samples are light in weight and convenient to disassemble and install with good construction performance. Its application has played a positive role in improving the quality of building structural engineering. However, in the traditional operation methods, building contractors generally use on-site moulding. The turnover rate of wooden samples is generally low, and the wood consumption is huge. Generally, a set of wood sample can only be reused 3 to 5 times in the construction process. Huge wood consumption puts tremendous pressure on the environment. The Group applies a new construction production method. The completion of the production of prefabricated PC units in the factory enables the use of samples to be concentrated at the factory stage, which greatly promotes the reuse of wooden samples in loops and lessens wood consumption by 75% as compared to traditional methods, making strong contributions to reducing carbon emissions and the greenhouse effect.
Greenhouse gas emissions of the Group are set out below:
2019
Unit
Remark
989.25
tons of CO2 equivalent
11,745.59
tons of CO2 equivalentDiesel consumption, methane and nitrous oxide of production equipment has been converted Consumption of purchased power and natural gas
12,734.84
tons of CO2 equivalent
165.18
tons of CO2 Output includes self-equivalent/10,000 production for self-use cubic metres of output
The Group is not responsible for the transportation during the sales process, but certain office vehicles consume gasoline. During the Reporting Period, gasoline consumption reached 583,100 litres (2019: 527,500 litres). However, considering that it is difficult to meet the requirements of accurate disclosure and the principle of time efficiency, the mileage of office vehicles has not been disclosed, and the data of greenhouse gas emissions caused by gasoline consumption has not been disclosed yet. We will gradually establish and improve the collection system of relevant information to facilitate disclosure in future reports.
The Group will gradually establish and improve the management system to control the emission reduction targets.
Monitoring wastewater for standard discharge
The Group's wastewater discharge mainly comes from washing ground wastewater, motor vehicle washing wastewater, other production wastewater and domestic sewage. For wastewater discharge, under the guidance of the Group, local companies have formulated strict prevention and monitoring systems based on the premise that production wastewater/domestic sewage is separated from surface runoff, mainly including:
• Production wastewater must be recycled. Fixed triple-deck sedimentation tanks and triple-deck cleaning tanks are set up in the main sewage source area of the PC factory workshop. The sewage from cleaning the equipment is reused as cleaning water after passing through the triple-deck sedimentation to reduce waste water discharge;
• Instead of being poured into sewage pipes or drainage ditches or sedimentation tanks, chemical waste liquids (paints, etc.) and oil during the production process can be collected in containers and temporarily stored in warehouses and shall be processed by the Administration Department after reaching a certain amount;
• Oil and chemicals that have dropped on the ground should be wiped clean with a rag and are forbidden to wash into the sewer with water;
• It is forbidden to pour the residual oil and leftovers from the canteen into sewage pipes and sedimentation tanks; it is forbidden to use phosphorus-containing detergents to wash dishes;
• Oil drains or filters should be set up in the sewage outlet of the canteen and cleaned up in time. The filtered domestic garbage is implemented according to the Waste Management Procedures;
• The drainage pipes of the canteens, washrooms and shower cubicles should be equipped with a filter screen and connected to the municipal sewage pipelines to ensure smooth drainage;
• The septic tank of the toilet should be conducted anti-permeability treatment;
• Special rainwater pipelines should be set up, and it is forbidden to discharge sewage into rainwater pipelines;
• Production and domestic garbage are not allowed to be stacked in the open air to ensure that rainwater is not polluted.
To ensure that the wastewater control system is fully implemented, the Group also requires local companies to implement a wastewater monitoring system, including:
• Each local company should set up several wastewater discharge outlets in its office building and workshop and mark them;
• The Manufacturing Department should entrust an environmental monitoring station to monitor the wastewater discharge of the Company once a year in accordance with the Integrated Wastewater Discharge Standard. For those failing to meet the standards, we shall analyze the reasons and take measures to make improvement;
• Wastewater discharge shall comply with the Class II standard of the Integrated Wastewater Discharge Standard and the Wastewater Quality Standards for Discharge to Sewers.
Thanks to the joint efforts of the Group and its subsidiaries, there was no failure to meet the wastewater discharge monitoring standards, and the goal of 100% up-to-standard discharge of production and domestic wastewater was achieved during the reporting year.
Waste management
The hazardous waste of the Group is mainly discarded diesel barrels, which are recovered by diesel suppliers. Non-hazardous waste mainly includes concrete slag generated from the production of PC units and domestic garbage generated by employees during their daily work. Among them, concrete is one of the most consumed raw materials in production. The compliance disposal and discharge of concrete slag is also one of the topics of concern to the Group.
Changsha Broad Homes Industrial Group Co., Ltd.
In order to further standardize and comply with the management of waste discharge, we have implemented classified waste management, including hazardous waste, general waste and recyclable waste. Among them, hazardous waste refers to the solid, semi-solid, liquid and gaseous wastes that are identified as to some extent having toxicity, decay, flammability, explosiveness, chemical reactivity or pollution to the environment according to the uniform regulations of the state, such as waste chemical reagent thinner, paints, waste paint buckets, asphalt residues, etc. After collecting, sorting, labeling and registering such waste, local companies will hand over them to professionally qualified agency for treatment. We strictly prohibit the hazardous waste from being mixed into the non-hazardous waste for storage, and have set up the Emergency Preparedness and Response Control Procedures to respond to emergencies during the storage of hazardous waste. Since the Group does not contract for construction business in actual construction projects, there did not exist relevant hazardous waste generated during the year. General waste refers to solid, semi-solid (muddy) waste that is not classified as hazardous waste generated in the production process, daily life, business activities and other activities, such as domestic waste, construction waste. For this sort of waste, since there is no possibility to cause pollution and recycle, local companies will request garbage classification according to the requirements of local governments, and the separated domestic garbage will be transported by the cleaning company or the sanitation department to the municipal waste disposal stations for uniform processing. The concrete slag is transported and processed by a professionally qualified cleaning company. The recyclable waste refers to waste with recycling value generated in the production process and daily life. The recycling of such waste is part of our practice of green development. Each local company clarifies the types of waste that can be recycled in its production and office activities, and guides employees to carry out classified distribution by setting up classification collection boxes and system specifications. The supplier's recycling and internal waste utilization are considered in turn. The remaining recyclable waste will be recovered by the recycling department in a unified way, so as to maximize the turnover rate and recycling rate of internal materials of the Group.
The non-hazardous waste such as waste concrete and domestic waste generated by the Group are all disposed of by qualified third parties, and domestic waste is transported by the third parties to government designated locations for disposal. Although the Group has collected statistics on the number of freight, with respect to actual weight, retrospective statistics cannot meet the principles of accurate disclosure and time efficiency. Therefore, relevant data have not been disclosed in the reporting year and we will gradually improve the collection mechanism of relevant information to facilitate disclosure in future reports.
The Group will gradually establish and improve the management system to control waste reduction targets.
4.2 Use of Resources
Energy saving, consumption reduction, cost cutting and efficiency boosting
The major energy used in the production and office processes of the Group is electricity. Electrical energy saving is an important way for us to respond to the basic national policy of energy conservation and emission reduction. Details are set out below:
First, formulate rules and regulations. In the Regulations on Energy Saving and Consumption Reduction, we made specific regulations on air conditioning temperature in winter and summer and turning off lights while leaving office. We also stipulated clear provisions in the Employee Handbook to strictly check and punish those failing to turn off the lamps, fans, air conditioners, computers and other electrical appliances and equipment in the office or factory workshop when off duty.
Second, the major equipment used in the production process, such as transverse moving car, curing kiln, material distributor, hopper and other motors, are controlled by frequency converter to reduce energy consumption, thus improving production efficiency and energy utilization rate through continuous technical improvement and breakthroughs.
Third, the Administration Department of the Group regularly organizes trainings on energy conservation and consumption reduction to continuously strengthen employees' awareness of resources, energy and materials conservation. The Finance Department of the Group is responsible for collecting the production power consumption and other power consumption of each factory, and cooperating with the Production Department and the Administration Department to analyze the causes of power consumption fluctuation. During the Reporting Period, the Group consumed 14,715,500 kWh of electricity (2019: 14,763,100 kWh).
2020 | 2019 | Unit | |
Total power | |||
consumption | 1,471.55 | 1,476.31 | 10,000 kWh |
Power consumption | |||
density | 18.45 | 19.15 | 10,000 kWh/PC units of 10,000 m3 |
In addition, due to working processes, Broad Homes (Tianjin) Co., Ltd. also consumes natural gas. During the Reporting Period, a total of 197,300 cubic metres of natural gas were consumed (2019: 136,600 cubic metres).
Conserving water through process innovation
Water used by the Group in production and other activities comes from fresh water provided by the Urban Water Supply Bureau, and the Group did not encounter any problem in obtaining water sources.
The improvement of water use efficiency is mainly attributable to the application of the dry implementation process in the rough surface moulding process of prefabricated units and recycled water.
Currently, there are three main moulding processes for the rough surface of prefabricated units: retarder plus garment wash process, machined pattern and one-off moulding of PE film. Their characteristics and principal effects are as follows:
Name of process Materials used Working principle Environmental effect
Machined pattern
One-off moulding of PE filmSand blasting machine, bush hammer, etc.
Polyethylene mouldApply retarder on freshly poured concrete surface or the mould surface and then rinse the surface of the unit with water to achieve a rough surface after the concrete is solidifiedTreat the surface of the unit with mechanical equipment, and chip the concrete on the surface of the unit to expose the aggregate to achieve a rough surface
Polyethylene plastic is used to make concave-convex mould, which are fixed on the side wall of precast units mould to achieve a rough surface after demoulding
As the retarder is a chemical agent, the wastewater after flushing can be discharged after special treatment;tremendous waste of water resources is caused during the flushing process
A large amount of dust will be generated, which will pollute the factory environment and affect the health of operatorsIt will cause no adverse effects on the factory environment and the external environment, and there is possibility to recycle polyethylene mould, which has certain positive environmental benefits
Since 2017, the Group has applied the one-off moulding of PE film manufacturing process in surface roughening for PC units. This has delivered significant benefits in terms of water savings. Take a 3,550*2,800*200mm PC shear wall as an example. This prefabricated unit uses about 2 m3 of concrete, and needs surface roughening on four sides. The surface area treated is 2.54 m2, and the amount of water needed for flushing is about 0.5 tons, that is, on average, 0.25 tons of water is needed to flush 1 m3 of concrete. Based on the rough calculation and take the Tianjin plant, one of Group's local companies, for example. It produced a daily average of about 1,000 m3 of wall panels, of which about 65% required surface roughening. If the retarder plus water washing method is used, according to the above data, 162.5 tons of water would be required for flushing, which is a great waste of water resources. At the same time, the use of large amounts of retarders will pollute the working environment of the plant and have a great adverse impact on the external ecological environment. During the Reporting Period, all the directly operated factories of the Group strictly abided by the environmental protection requirements, neither washing nor pickling was adopted in the process of making the rough surface of PC units, which saved significant amount of water resources compared with other processes.
The cleaning water for concrete mixing station and hopper can be recycled after sand and stone separation and three-stage sedimentation tank treatment, and can then be used in mixing station or for cleaning of mixing station and hopper. Such concept has been gradually implemented in various directly operated factories such as Lugu Factory for water recycling.
The Finance Department of the Group is responsible for collecting the water consumption data of each factory, and cooperating with the Production Department and the Administration Department to analyze the causes of water consumption fluctuation. During the Reporting Period, water consumed by the Group was as follows:
2020 | 2019 | Unit | |
Total water consumption | 532,894 | 432,094 | m3 |
Water consumption density | 0.67 | 0.56 | m3/PC units per m3 |
Explanations: |
1. The increase in total water consumption and density was mainly due to (1) the increase of business and personnel in Hangzhou factory; (2) short-term leakage of equipment and pipelines in Yueyang Factory and Jiangsu Factory; and (3) the increase in output of Huizhou factory.
2. The increase in water consumption density was mainly due to (1) the improvement of the maintenance standard of finished products in Tianjin factory, and water spraying and moisture preservation for PC units in summer; (2) the increase in basic consumption of Lu'an factory as a result of operation of new plants; (3) the shift in product structure of Shanghai factory from ordinary wallboard to sandwich wallboard, which consumes more water in production due to complex structure.
The Group will gradually establish and improve the management system to control the water consumption target. In terms of production water consumption, the Group primarily saves water through process innovation. In other water consumption activities, we control the water output by adjusting the water output equipment, so as to reduce the water consumption of daily flowing water. In addition, the Group posts slogans reminding staff to save water at water sites to deepen their awareness of water conservation.
Packaging materials
As the Group's finished products, such as PC units, do not use outer packaging, the Group's business process does not involve the use and consumption of packaging materials. PC equipment is generally paved with sleepers, covered with tarpaulins, and fixed with ropes for packaging, all of which are provided by the transportation company and will be recycled after transportation.
Annual Report 2020
97
4.3 Environment and Natural Resources
Reducing noise and strictly controlling dust
The major environmental impacts of the Group's operating process include noise pollution and dust pollution. In particular, noise comes mainly from the operation of production equipment, equipment maintenance and noise from loading and transportation of outsourced transport vehicles into and out of the factories. In order to reduce the impact of noise from various plants on the lives of people in adjacent communities and residential areas, the Group strictly keeps the noise levels at the boundaries of production sites below 60 decibels during the day and below 50 decibels at night. Meanwhile, we have formulated the following provisions for noise control and prevention:
• The requirements of the Standards for Noise at the Boundaries of Industrial Enterprises shall be complied with in respect of noise at the boundaries of production sites; the requirements of the Limits of Noise Emitted By Stationary Road Vehicles and the Allowable Noise Limits for Motor Vehicles shall be complied with in respect of the noise of motor vehicles;
• For the noise pollution prevention and control facilities of construction projects, the "three simultaneities" system for environmental protection must be adhered to;
• When a new project is built or new equipment is introduced, the equipment department shall make an environmental impact assessment in time, and select equipment with high efficiency and low noise pollution as far as possible, so as to reduce environmental noise;
• Where construction noise is emitted to the surrounding living environment within the city limits, the standards for emission of environmental noise from production sites as stipulated by the State shall be complied with;
• Where machinery and equipment which may produce significant environmental noise pollution are used in the production process within the city limits, the production unit must file a report on the project name for the product, the production site and duration, the value of the environmental noise that may be produced, and measures taken to prevent and control environmental noise pollution with the competent administrative department for environmental protection of the people's government at or above the county level in the place where the product is produced 15 days in advance;
• In urban areas where noise-sensitive buildings are concentrated, it is forbidden to conduct production operations at night that cause environmental noise pollution. If it is really necessary to conduct production at night in excess of noise standards due to production process requirements or other special needs, an application shall be submitted to the relevant departments before production, and nighttime production can only be conducted after approval;
• Where a production site that emits strong noise is located close to a residential area, it must be enclosed with a fence not less than 1.8m in height;
• Equipment that emits strong noise on the production site should be located on the side far away from the residential area, and measures should be taken to reduce noise;
• Production machinery which is likely to produce noise and vibration shall be operated in strict accordance with the equipment operating procedures. In order to reduce noise, it is strictly prohibited to operate against rules.
We entrust environmental monitoring stations in places where our subsidiaries are located to carry out noise monitoring on our subsidiaries' production sites near residential areas and fill in the Noise Pollution Monitoring Record. Where the requirements of the standards are not met, the causes will be analyzed and measures will be taken for improvement.
For the Group, dust pollution comes mainly from concrete batching plants during the production of PC units in local plants. Due to the extensive impact of industrial dust on the environment, employee health and plant equipment, the Group has made the following requirements for the batching plant facilities of local plants: First, during the procurement process for batching plant facilities, we must ensure that equipment provided by suppliers meet the national environmental standards, and explicitly prohibit the procurement of substandard products; second, we require the provision of pulse jet bag filters in the silos and main structure of the batching plant to remove dust; third, the batching plant must be in a closed indoor environment to prevent dust from being blown around by the wind. Each factory engages a third-party testing agency to carry out on-site testing on dust emission every year, and no excessive emission was recorded in 2020.
In order to reduce the dust caused by the loading and unloading of vehicles, we have set up spray dust reduction facilities in places prone to generate dust during the intensive period of transportation, and have installed spray devices in various direct factories such as Lugu No.2 Factory, Hefei Factory and Lu'an Factory.
Picture 1: Spray dust reduction facilities in
Lugu No. 2 Factory in Changsha
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Changsha Broad Homes Industrial Group Co. Ltd. published this content on 26 February 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 26 February 2021 08:48:03 UTC.
