Overall business environment

The principal activities of the Group are investment in and the development, operation and management of container and other ports, and the provision of port related logistics and other services including integrated logistics, port and warehouse leasing and the supply chain management and trading services, mainly conducted through its various ports, including the WIT Port ( 武漢陽邏港), the Multi-Purpose Port ( 通用港口), the Hannan Port ( 漢南港) and the Shipai Port ( 石牌港), all located in the Yangtze River Basin in Hubei Province, the PRC.

The WIT Port and the Multi-Purpose Port

The WIT Port is located along the Yangtze River in the Yangluo Economic Development Zone, Wuhan, Hubei Province, the PRC.

Wuhan has a solid and developed industrial base, and is where various major industrial operators have commenced operations in, including operators of automobile and parts, chemical products, steel, grain, wood, textile, machinery and equipment as well as construction material businesses. They have been and will continue to be the major suppliers of gateway cargo containers in the WIT Port.

Due to the inherent water-depth limitations along the upstream regions of the Yangtze River, large ships are precluded from navigating directly between those areas and Shanghai. The trans-shipment service provided by the WIT Port offers a more economical alternative for customers in these areas, namely the trans-shipment of container cargoes to Shanghai or direct shipping overseas upon amalgamation at Yangluo Port. Surrounding areas which are serviced by the WIT Port include Hunan, Guizhou, Chongqing, Sichuan, Shanxi, Henan, Hubei and Shaanxi Provinces. Strategic initiatives by the government for shipping companies and the WIT Port promoted water-to-water trans-shipment to Yangshan Port in Shanghai and direct shipment to Japan, Korea and Russia ( 江海直航) and have further strengthened the position of the WIT Port as a transshipment port at the mid-stream of the Yangtze River. Phase I terminal of Yangluo Port opened the first direct international shipping route from Wuhan to Japan in the fourth quarter of 2019, which is a milestone of landmark significance as this is the first international shipping route in the middle and upper reaches of Yangtze River. In the third quarter of 2021, the Group opened up two new sea channels. The first one is directly from Zhoushan to Wuhan Yangluo Port, then from Yangluo Port to Chengdu-Chongqing region, indicating that Wuhan has successfully opened up the new channel from sea to river for foreign trade. The new channel plays an important role in promoting the development of direct shipment, in enhancing the functions of the golden waterway of Yangtze River, and in building a modern comprehensive transportation system. Another new channel for foreign trade is a direct container shipping route from Yangluo Port to Busan Port in South Korea, which is the second international shipping route opened in Wuhan and the first direct shipping route to South Korea opened in the middle and upper reaches of Yangtze River and in the central region. On 22 July and 23 July 2022, Yangluo Port successfully opened two containerized direct routes for domestic trades, which are the routes from Yangluo Port to Wuhu Port of Anhui Province and from Yangluo Port to Yueyang Port of Hunan Province, respectively. On 30 September 2022, Wuhan opened a new channel for foreign trade which is the direct shipping route from Yangluo Port to Eastern Port in Russia. It is the third international shipping route opened by Wuhan, and also the first direct shipping route to Russia opened in the middle and upper reaches of Yangtze River and even in the central region.

The Group has also developed port related services, including agency and integrated logistics services to expand its revenue sources. Such agency and integrated logistics services include bonded warehousing, customs clearance, break bulk and distribution at the WIT Port.

Since Hubei Port became the immediate holding company of the Company in January 2022, the integration of phase I, II and III terminals of Yangluo Port has been completed so as to further optimize port logistics resources, all of which were conducive to the synergy and development of the Group’s port business.

The Hannan Port

The Hannan Port is located along the Yangtze River in Wuhan, adjacent to the Shanghai-Chengdu, Beijing Zhuhai Expressway and within 80 kilometers of the Beijing-Guangzhou Beijing-Kowloon rail link.

Wuhan, the provincial capital of Hubei, is an important transport hub in the PRC. In terms of riverway traffic, Wuhan is linked through the Yangtze River with six provinces (namely Jiangsu, Anhui, Hubei, Sichuan, Jiangxi and Hunan) and Shanghai. Given the important role of Wuhan in the development of the “Yangtze River Economic Belt ( 長江經濟帶)”, the Directors consider that it is in the interests of the Group to make further investments in its port businesses in the Wuhan area.

To capture the future economic growth in Wuhan and to better position itself against the competition from neighbouring ports, the Hannan Port provides an opportunity for the Group to expand its geographical coverage beyond the Yangluo Port area to where the WIT Port and the Multi-Purpose Port in Wuhan are located. The Hannan Port creates synergies between the WIT Port and the Hannan Port, particularly because the management team of the WIT Port has extensive experience in the construction, development and management of ports in the PRC. Being the feeder port of the WIT Port, the Hannan Port can increase the throughput capacity of the WIT Port to satisfy the demand for logistics services in Wuhan. The WIT Port, together with the Hannan Port, can provide more cost effective solutions to the Group’s customers. The Hannan Port will be developed into a multi-purpose service platform in several phases, providing terminal, warehousing and logistics services including RORO (Roll on Roll off), bulk cargo transportation and storage, automobile spare parts processing and logistics services.

Since Hubei Port became the immediate holding company of the Company in January 2022, the Group has proactively explored all favorable business opportunities, seized the favorable opportunity of the upcoming construction of the Hannan Bridge and the Sixth Ring Road, and strived for bridge construction-related enterprises to settle in Hannan Port Industrial Park, while vigorously developing its logistics and transportation service business in Hannan. The Group will keep a close eye on the development opportunities brought by the construction of the Hannan Bridge which promotes the explosive expansion in the demand of logistics and transportation services due to the need to transport bridge construction materials and equipment, actively integrate various superior resources, organize relevant supporting services, and make every effort to smooth the supply channels of materials, so as to build the industrial park into a distribution center for imported goods. We endeavour to engage with new customers for new projects to create more economic benefits for the Group.

Phase I of the Hannan Port has been completed. Phase II, which will be developed into a multi-purpose port, is now at the stage of doing pre-construction work.

The Shipai Port

The Shipai Port is located in Shipai Town, Zhongxiang City, Hubei Province, the PRC and is intended to be developed into a port, logistics and industrial mixed-use port district with an area of approximately 25 square kilometers. The port portion of the Shipai Port will occupy an area of approximately 2.5 square kilometers with four 1000-tonne class berths, and a logistics park covering approximately 2.5 square kilometers will be constructed next to the port area. The investment in the Shipai Port provides an opportunity for the Group to expand its geographical coverage and create synergy among its ports.

The Shipai Port commenced commercial operations in 2018. The inspection and acceptance of the construction of the temporary stacking yard and berths were completed in 2019 and 2021 respectively.

Zhongji Tongshang Construction

Zhongji Tongshang Municipal Construction Engineering (Wuhun) Co., Ltd (“Zhongji Tongshang Construction”) has been negotiating for the role of the main contractor in municipal construction projects in Hubei Province. As a main contractor in construction project, Zhongji Tongshang Construction will be expected to act as the entity in charge of the entire project, and will be responsible for completion or outsourcing of the construction works and supervision of the project to ensure that it will be completed on time and within budget, and ensuring that the construction work will meet all relevant regulations and quality standards.

The Group commenced its construction business through Zhongji Tongshang Construction since December 2019, as a main contractor for the provision of construction services for various construction works, including residential structures, commercial structures and performance stages. Prior to the disposal of Zhongji Tongshang Construction, Zhongji Tongshang Construction acted as the platform for the Group to diversify its business and explore new business opportunities in the construction industry.

On 21 May 2021, the Group entered into an agreement to dispose of its 100% equity interests in Zhongji Tongshang Construction. The disposal of Zhongji Tongshang Construction was completed in June 2021. The Group discontinued its operation in the provision of construction services. Further details are set out in the announcement of the Company dated 21 May 2021.

The Hanjiang Logistics Centre

The Hanjiang logistics centre is adjacent to the Shayang Port and is owned by the Group. It comprises 7 blocks of warehouses and an ancillary office building and it is intended to be held as investment property for generating rental income.

Tongshang Supply Chain

Leveraging the Group’s extensive experience in the operation and management of various ports and terminals located within the Yangtze River Basin in Hubei Province, coupled with its solid customer and supplier network cultivated during its many years of business operation, Tongshang Supply Chain Management (Wuhan) Co., Ltd.* ( 通商供應鏈管理（武漢）有限公司) (“Tongshang Supply Chain”) serves as the principal supply chain service provider and trader for up-stream suppliers and down-stream customers through the supply chain management and trading business of the Group. The development of supply chain management and trading business will enable the Group to establish deeper connections with both supply and demand sides of the supply chain, engage in various businesses such as trading, logistics, storage and delivery services, and enhance efficiency of integrated services. At the same time, it will enable the Group to consolidate and optimise the flow of commodities, capital and information for the supply chain, which will facilitate trading among enterprises, reduce costs and strengthen competitiveness of the Group.

Operating results

Revenue

Continuing operations

For the year ended 31 December 2022, the Group’s revenue amounted to HK$319.54 million (2021: HK$247.67 million), representing an increase of approximately 29.0% as compared to 2021. The increase was mainly due to the offsetting effect of (i) the increase in revenue of HK$20.61 million from the terminal service business due to the increase in container throughout handled by the WIT Port ( 陽邏港) and the increase in the standard tariff of both gateway cargo containers and trans-shipment containers after the completion of acquisition of the controlling interests of the Group by Hubei Port since January 2022 and the successful integration of Phase I, Phase II and Phase III of Yangluo Port area, the price cutting competition ceased to exist; (ii) the increase in integrated logistics service income of HK18.89 million due to the increase in business volume from the WIT Port; (iii) the decrease in revenue of HK$13.51 million from general and bulk cargoes handling service conduced through the Hannan Port ( 漢南港) and the Shipai Port ( 石牌港); (iv) the decrease in stacking yard and warehouse leasing income of HK6.06 million in the property business of the WIT Port and the Hannan Port; and (v) the significant increase in revenue of HK$49.18 million from the supply chain management and trading business due to the commencement of the rice and broken rice trading business since September 2022.

Terminal service

Container throughput

Total throughput achieved by WIT for the year ended 31 December 2022 was 801,537 TEUs, representing an increase of 81,516 TEUs or approximately 11.3% as compared to that of 720,021 TEUs for the year ended 31 December 2021. For the 801,537 (2021: 720,021 TEUs) TEUs handled in 2022, 337,042 TEUs (2021: 285,048 TEUs) or approximately 42.0% (2021: 39.6%) and 464,495 TEUs (2021: 434,973 TEUs) or approximately 58.0% (2021: 60.4%) were attributed to gateway cargoes and trans-shipment cargoes respectively. The gateway cargoes throughput increased by approximately 18.2% to 337,042 TEUs (2021: 285,048 TEUs) and the trans-shipment cargoes throughput increased by approximately 6.8% to 464,495 TEUs (2021: 434,973 TEUs).

The increase in overall container throughput for the year ended 31 December 2022 was attributable to an approximately 18.2% increase in gateway cargoes and an approximately 6.8% increase in trans-shipment cargoes. The increase in gateway cargoes and trans-shipment cargoes was mainly due to the cessation of price cutting competition after the completion of acquisition of the controlling interests of the Group by Hubei Port since January 2022 and the successful integration of Phase I, Phase II and Phase III of Yangluo Port area. As a result, the Group captured certain market shares.

Market share

The Group’s market share of container throughput in Wuhan for the year ended 31 December 2022 was 29.0% which remained at a similar level compared with that for the year ended 31 December 2021 of 29.7% based on a total of 2.70 million TEUs (2021: 2.48 million) handled for the whole of Wuhan Ports in 2022.

Average tariff

Tariff, which is denominated in Renminbi (“RMB”), is converted into Hong Kong dollars (“HK$”), the reporting currency of the Group. The average tariff for gateway cargo containers at the WIT Port for the year ended 31 December 2022 was RMB232 (equivalent to approximately HK$269) per TEU (2021: RMB205 (equivalent to approximately HK$246) per TEU), representing an increase of approximately 13.2% compared to that of 2021. The average tariff for trans-shipment containers at the WIT Port was RMB19 (equivalent to approximately HK$22) per TEU (2021: RMB11 (equivalent to approximately HK$13) per TEU), increased by approximately 72.7% as compared to that of 2021. The increase in the tariff of both gateway cargo containers and trans-shipment containers was due to the cessation of price cutting competition after the integration. Besides, the increase in the tariff for the transshipment containers was due to the decrease in volume of transportation of transshipment cargoes with relatively low tariffs.

Integrated logistics service

The integrated logistics service business of the Group provides agency and logistics services, including provision of freight forwarding, customs clearance, transportation of containers and logistics management services. Revenue generated from the integrated logistics service business for the year ended 31 December 2022 increased by HK$18.89 million to HK$61.07 million (2021: HK$42.18 million), which accounted for approximately 19.1% of the Group’s total revenue for the year ended 31 December 2022 (2021: 17.1%).

The increase was mainly attributable to the increase in business volume from the WIT Port during the year ended 31 December 2022.

Property business

Revenue for the Group’s property business is mainly generated from the port and warehouse leasing business of the Hannan Port, Wuhan which owns investment properties of leasehold lands, berth, commercial buildings and pontoon, as well as the leasing of a stacking yard and certain warehouses at the WIT Port during the year ended 31 December 2022. The port and warehouse leasing income for property business decreased to HK$8.90 million (2021: HK$14.96 million) which accounted for approximately 2.8% of the Group’s total revenue for the year ended 31 December 2022 (2021: 6.0%).

The decrease was mainly due to the decrease in revenue from the leases for the stacking yard and warehouses at the WIT Port and the Hannan Port.

Supply chain management and trading business

The revenue of the Group’s supply chain management and trading business increased to HK$117.32 million (2021: HK$68.14 million) which accounted for approximately 36.7% of the Group’s total revenue for the year ended 31 December 2022 (2021: 27.5%).

Due to the robust market demand of the agriculture and food product, the Group have commenced the rice and broken rice trading business since September 2022 and the revenue from supply chain management and trading business increased significantly during the year ended 31 December 2022.

Gross profit and gross profit margin

For the year ended 31 December 2022, gross profit increased by 57.2% to HK$85.37 million (2021: HK$54.32 million) and gross profit margin was 26.7% (2021: 21.9%). The increase was mainly due to the increase in the revenue from terminal services with relatively higher gross profit margins due to the increase in standard tariff of both gateway cargo containers and trans-shipment containers of the WIT Port and the TEUs of gateway cargoes with relatively higher gross profit margins increased and accounted for 42.0% of the total TEUs handled (2021: 39.6%).

Other income

Other income for the year ended 31 December 2022 decreased by HK$23.83 million or approximately 79.4% to HK$6.20 million (2021: HK$30.03 million). The decrease is mainly due to the decrease in government subsidies of HK$22.26 million granted to certain subsidiaries of the Group.

Decrease in fair value of investment properties

The Group holds certain investment properties, including (i) the port and warehouse in the Hannan Port; (ii) the logistics centre adjacent to the Shayang Port; and (iii) a stacking yard and certain warehouses at the WIT Port. The Group’s investment properties are revalued at the end of the reporting period on an open market value basis by an independent property valuer. Changes in fair value arising from such revaluations are accounted for as “change in fair value of investment properties” through the consolidated statement of profit or loss and other comprehensive income. For the year ended 31 December 2022, the Group recorded positive fair value gain in the value of investment properties of HK$25.79 million (2021: HK$72.80 million).

The decrease in fair value gain of investment properties is mainly due to the decrease in the magnitude of rental growth of the warehouse properties in Wuhan for the year ended 31 December 2022.

Loss on disposal of subsidiaries

The loss on disposal of subsidiaries was HK$5.99 million for the year ended 31 December 2021, representing the net effect of (i) loss on disposal of Shayang County Guoli Transportation Investment Co., Limited of HK$6.58 million; and (ii) gain on disposal of Zhongji Tongshang Yuanlin (Wuhan) Co. Ltd. of HK$99,000 and Zhongji Tongshang Construction (Wuhan) Co. Ltd. of HK$497,000.

Share of (loss)/profit of associates

Share of loss was HK$0.80 million for the year ended 31 December 2022 (2021: share of profit of HK$0.14 million) of the associates, namely Wuhan Chang Sheng Gang Tong Automobile Logistics Company Limited* （武漢長盛港通汽車物流有限公司） (“Wuhan Chang Sheng Gang Tong”), which reflected the Group’s share of the results of its 20.4% equity interests of the entity and Tongshang Port (Jiangling) Company Limited* ( 通商港口( 江陵) 有限公司) (“Tongshang Port (Jiangling)”), which reflected the Group’s share of the results of its 40.0% equity interests of the entity. The principal activities of Wuhan Chang Sheng Gang Tong are the sale of motor vehicles and provision of car parking services. The principal activities of Tongshang Port (Jiangling) are provision of customs clearance and logistics services.

Profit from continuing operations attributable to owners of the Company for the year

Profit from continuing operations attributable to owners of the Company decreased by HK$0.87 million or approximately 4.0% to HK$20.78 million (2021: HK$21.65 million). The decrease in profit was mainly attributable to the offsetting effects of (i) the increase in EBITDA of HK$46.18 million; (ii) the decrease in finance costs of HK$4.04 million due to the repayment of other borrowings with higher interest rates for the year ended 31 December 2022; (iii) the decrease in depreciation and amortisation of HK$2.39 million; (iv) the decrease in fair value gain of investment properties of HK$47.01 million due to the decrease in the magnitude of rental growth of the warehouse properties in Wuhan for the year ended 31 December 2022; (v) there being loss on disposal of subsidiaries of HK$5.99 million incurred during the year ended 31 December 2021 whilst there being no such loss incurred during the year ended 31 December 2022; and (vi) the increase in income tax expenses of HK$8.53 million due to the increase in taxable profit of certain subsidiaries.

Earnings per share (basic and diluted) attributable to owners of the Company for the year ended 31 December 2022 was HK1.20 cents (2021: HK1.26 cents), representing an decrease of 4.8% as compared with that for the year ended 31 December 2021.

Discontinued operation

Construction business

The Group commenced its construction business through Zhongji Tongshang Construction in December 2019, acting as main contractor for the provision of construction services for the projects of (i) the residential structures and commercial structures and a performance stage at Northwest of Bayuanhe Bridge, Provincial Highway S309, Shengli Town, Luotian County, Huanggang City, Hubei Province, the PRC ( 中國湖北省黃岡市羅田縣勝利鎮S309 省道巴源河大橋西北); and (ii) the major and secondary structural construction, earthworks, drainage installation works and other ancillary works for residential and commercial buildings (both 3-storey or below) at Yangdian Town, Xiaogan City, Hubei Province, the PRC ( 中國湖北省孝感市楊店鎮). In June 2021, Zhongji Tongshang Construction was disposed of and ceased to be an indirect wholly-owned subsidiary of the Company. Accordingly, the Group discontinued its operations in the provision of construction services and hence, revenue decreased during the year ended 31 December 2022.

The gain on disposal of discontinued operation was HK$7.32 million for the year ended 31 December 2021, representing the gain on disposal of Zhongji Tongshang Construction.