RESULTS

The board of directors (the “Board”) of Chinney Alliance Group Limited (the “Company” and, collectively with its subsidiaries, the “Group”) is pleased to announce that the Group recorded a revenue of HK$4,552 million for the year ended 31 December 2015 (2014: HK$3,813 million). The net profit attributable to shareholders of the Company for the year was HK$169.1 million (2014: HK$142.3 million), which included a gain on reclassification of exchange fluctuation reserve upon realisation of the Group’s investment in an associate of HK$2.1 million. Should this one-off gain be excluded, the profit would be HK$167.0 million. The Group’s land and buildings held for own use recorded a surplus arising from revaluation of HK$7.7 million (net of deferred tax) which was credited to reserve as other comprehensive income (2014: HK$48.6 million).

   PROPOSED FINAL DIVIDEND

The Board recommend the payment of a final dividend of HK5.0 cents per share for the year ended 31 December 2015 (2014: HK4.0 cents) to the shareholders of the Company whose names appear on the Company’s register of members on 10 June 2016. It is expected that the final dividend cheques will be despatched to the shareholders on or before 27 June 2016.

   CLOSURE OF REGISTER OF MEMBERS FOR ANNUAL GENERAL MEETING

The annual general meeting of the Company is scheduled to be held on 1 June 2016. For determining the entitlement to attend and vote at the annual general meeting, the register of members of the Company will be closed from 30 May 2016 to 1 June 2016 (both days inclusive), during which period no share transfers will be registered. In order to be eligible to attend and vote at the annual general meeting, all transfer forms accompanied by relevant share certificates must be lodged with Tricor Tengis Limited at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong by no later than 4:30 p.m. on 27 May 2016.

   CLOSURE OF REGISTER OF MEMBERS FOR DIVIDEND

The proposed final dividend for the year ended 31 December 2015 is subject to the approval by the shareholders at the annual general meeting. For determining the entitlement to the proposed final dividend, the register of members of the Company will be closed from 8 June 2016 to 10 June 2016 (both days inclusive), during which period no share transfers will be registered. The last day for dealing in the Company’s share cum entitlements to the proposed final dividend will be 3 June 2016. In order to qualify for the proposed final dividend, all transfer forms accompanied by relevant share certificates must be lodged with Tricor Tengis Limited at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong by no later than 4:30 p.m. on 7 June 2016.

   BUSINESS REVIEW AND PROSPECTS

Trading of plastics and chemical products

The Plastic Trading division, consists of Jacobson van den Berg (Hong Kong) Limited (“Jacobson HK”) and its fellow subsidiaries, contributed a revenue of HK$567 million (2014: HK$550 million) and an operating profit of HK$7.3 million (2014: HK$9.8 million). With the strong business relationship with suppliers and effort of the management and front line staff, the division provided more competitive products and packages to customers which attributed to the increase in sales. However, the sharp decrease in oil prices over the year reduced the selling prices of the division’s products. Manufacturers in South China, which were major customers of the division, were hit by the devaluation of Renminbi and were keen on bargain to strive for profitability. As a result, the profit margin of the division was reduced. Nevertheless, the division continues to develop closer relationship with suppliers to broaden the product line to enhance the quality of earnings.

 

Building related contracting services

Shun Cheong Investments Limited and its subsidiaries (“Shun Cheong”) contributed a revenue of HK$1,325 million (2014: HK$845 million) and an operating profit of HK$30.9 million (2014: HK$29.2 million). During the year, the division was awarded more contracts which attributed to the increase in revenue. With more sizeable contracts are running, the management is cautious to monitor the progress and reserve prudent level of buffer for the expecting increase in costs, especially labour costs. Besides, the division employed more staff at all levels to cater for the newly awarded contracts and increase in business volume. So the increase operating profit was not in proportion to the increase in revenue of the year under review. Shun Cheong has diversified portfolio in both public and private sectors for residential development, commercial buildings, hotels and resorts, and maintenance contracts. The division had outstanding contract sum of approximately HK$3,039 million as at 31 December 2015 and was awarded approximately HK$401 million worth contracts subsequent to the year end date.

 

Building construction

The division consists of Chinney Construction Company, Limited (“CCCL”) and Chinney Builders Company Limited which operate in Hong Kong and Chinney Timwill Construction (Macau) Company Limited which operates in Macau. During the year, the division contributed a revenue of HK$1,120 million (2014: HK$1,027 million) and an operating profit of HK$35.1 million (2014: HK$38.7 million). While revenue and profit margin maintained at similar level of last year, staff costs and other overhead increased to match business development and so the operating profit decreased slightly. With the site works of contracts awarded in 2015 commenced in second half of 2015 and 2016, the division is working at full capacity. The current contracts included staff quarters, hostel, residential and commercial development in both public and private sectors. The outstanding contract sum was approximately HK$1,597 million as at year end and approximately HK$825 million worth contracts were awarded after year end.

Foundation piling and ground investigation

As mentioned in the 2015 interim report and subsequent announcements and circular to shareholders of the Company, the Group spun-off its foundation division for separate listing. The trading of the shares of Chinney Kin Wing Holdings Limited (“Chinney Kin Wing”), the holding company of the foundation division, on the Main Board of the Stock Exchange commenced on 11 November 2015 and Chinney Kin Wing has become a 74.5% subsidiary of the Company since then.

The principal subsidiaries of Chinney Kin Wing are Kin Wing Engineering Company Limited (“KWE”) and Kin Wing Foundations Limited engaged in foundation business and DrilTech Ground Engineering Limited engaged in drilling business. During the year under review, the division contributed revenue of HK$1,515 million (2014: HK$1,382 million) and operating profit of HK$168.9 million (2014: HK$110.7 million) to the Group. The increase in revenue was mainly due to the efforts in pursuing projects of relatively larger scale in terms of contract sum. Profit margin was also improved for more technically complex and sizeable projects and the stringent project costs control. Despite the increase in staff costs and depreciation for plant and machinery acquired during the year, and the one-off expenses incurred for listing, the division’s operating profit recorded significant increase. As at 31 December 2015, the division had 14 and 39 projects in progress with contract sum of approximately HK$2,003 million and HK$226 million in foundation business and drilling business respectively. Subsequent to the year-end, the division was awarded 4 foundation contracts and 12 drilling contracts with total contract sum of approximately HK$219 million.

 

Other businesses

Other businesses include the holding of properties for the Group’s own use and the distribution of aviation system and other hi-tech products engaged by Chinney Alliance Engineering Limited (“CAE”). CAE recorded a revenue of HK$25 million (2014: HK$8 million) and an operating loss of HK$6.5 million (2014: loss of HK$5.3 million). The new air traffic management system of the Hong Kong airport was under the testing stage and CAE invoiced for the works done according to the progress and the revenue increase. Such increase in revenue and profit was set-off by impairment of trade debts although the management is still pursing for recovery. The new air traffic management system is intended to be in operation in 2016 and CAE will recognise the revenue in accordance with the progress. The proposed Three-Runway System will be the major development of the Hong Kong International Airport to meet the expected air traffic growth. Subject to necessary statutory procedures and government approval, this proposed project would bring significant business opportunity to CAE in future years.

The properties holding recorded a loss of HK$1.1 million which was mainly due to depreciation charges.

The Group’s investment in Jiangxi Kaitong New Materials Company Limited (“Jiangxi Kaitong”), which was engaged in the manufacturing of stainless steel and plastic compound pipes in the People’s Republic of China (the “PRC”), was de-recognised as an associate after the expiry of the operation period approved by local government and is currently under the process of dissolution. The investment was reclassified to current asset as loans and receivables and the attributable exchange reserve of HK$2.1 million was reclassified as profit. The process of dissolution is expected to complete in 2016.

The Group’s share of the profits and losses of associates reported net losses of HK$0.4 million (2014: losses of HK$2.2 million). These represented the share of the results of the Group’s investment in Fineshade Investments Limited (“Fineshade”) which holds interests in a real estate property in Hangzhou, the PRC as investment properties. With the improving occupancy of the investment properties in the year under review, Fineshade managed to reduce its loss.

   OUTLOOK

The long waiting rise of interest rates of the US Federal Reserve started in December 2015. But the Federal Open Market Committee’s meeting in March 2016 decided, based on the potential impact from weaker global growth and financial market turmoil on the US economy, that no increase in borrowing costs and scaled back forecasts for the 2016 to 0.5%, down from 1% forecast in December 2015. Other advance economies are still weak. The Eurozone and Japan continue quantitative easing policies and adopt negative interest rate to stimulate consumption. So the growth momentum of the global economy in 2016 would be slow and unsteady. The China Government tunes down the forecast of target GDP growth to 6.5% to 7.0% from previous 7.0%. China’s economy has slowed steadily as the government tries to replace the reliance on trade and investment model with self-sustaining growth driven by domestic consumption.

The Hong Kong economy recorded a 2.4% growth in 2015, which was below the average annual growth of 3.4% in the past ten years. Given the decline in domestic demand and the weak global economic outlook, the local government estimated only 1% to 2% growth in the local economy in 2016. Nevertheless, the building construction sector would continue to grow under the intensive public construction works and ongoing private sector building activity. The Group’s Plastic Trading division would face another tough year given the weak global economy and the transformation of the China economy. Although there are still sufficient tenders for building construction works for the public and private sectors, the competition is very keen as reflected in the tender prices. The Group’s three construction related divisions continue to seek new tender opportunities and monitor costs to maintain profitability and liquidity. The Foundation division as a separate listed company continues to improve its competitive strength and given its strong financial resources, will be able to have a sustainable development in the future. The Directors are cautiously optimistic with the Group’s profitability in the coming year.

   APPRECIATION

I would like to thank my fellow directors for their advice and continued support and staff of all levels for their hard working and contribution for the success during the past year.

James Sai-Wing WongChairmanHong Kong, 30 March 2016