China Water Affairs Announces FY2024/25 Interim Results

OperatingMargin Remarkably ImprovedOn Greater Revenue Contribution

From OperationServices Along With Stable Interim Dividend Payouts

(29 November 2024, HongKong) China Water Affairs Group Limited (“China Water Affairs” or the“Company”, stock code: 0855.HK), a leading integrated wateroperator in China, today announced the interim results of the Company and itssubsidiaries (collectively known as the “Group”) for the six months ended 30September 2024 (the “Reporting Period”).

During the Reporting Period, China'smacro-economy faced complex and uncertain situation. The Group proactively responded to market challengesby optimizing its development strategy to enhance the investment returnmanagement of core businesses and bolster the operating efficiency of existingprojects. However, the total revenue declined mainlydue to a reduction in large construction projects from the peak, leading to asubstantial reduction in construction services of each core business segment. The uptrend incapital expenditures started to reverse accordingly. Despite a 35.7% decline in the revenue from construction services, therevenue from operation services substantiallygrew and their contribution to total revenueaugmented remarkably, resulting in impressive improvement of the operating marginand paving a solidfoundation for the Group’s sustainable andhealthy growth.

The Group realized revenue of approximately HK$5.953 billion for theReporting Period, down 13.0% year-on-year. Although the gross profit reduced by9.4% year-on-year to approximately HK$2.286 billion, the gross profit marginand the operating margin advanced by 1.5 and 2.8 percentage points respectivelyfrom a year ago. Net profit for the period amounted to approximately HK$1.238billion, down 10.2% year-on-year; profit attributable to shareholders droppedby 8.5% year-on-year to approximately HK$756 million. In order to rewardshareholders for their support, the Board of Directors declared the payment ofinterim dividends of HK 13 cents per share, which was the same with last fiscalyear.

In alignment with the optimization of development strategy,the capital expenditures on water supply operation started to decline. Whilethe revenue from construction services reduced by 22.3% year-on-year, watersupply segment retreated accordingly. The revenue from city water supplybusiness decreased by 10.6% year-on-year to approximately HK$3.765 billion.Although the profit of city water supply segment reduced by 5.4% year-on-yearto approximately HK$1.14 billion, the revenue from recurring water supplyoperation maintained steady growth and its segment margin grew by 1.9percentage points year-on-year to 30.2%. Meanwhile, the Group refined thedevelopment strategy for direct drinking water services and prioritized theresource allocation on projects with best returns with a view to enhancing thepotential returns of existing projects. The revenue from direct drinking watersegment for the period dropped by 64.2% year-on-year to approximately HK$369million and the segment profit reduced by 50.3% year-on-year to approximatelyHK$167 million. On the other hand, the recurring operation revenue of thissegment soared by 57.1% year-on-year. The segment margin significantly improvedand climbed by 12.6 percentage points year-on-year to 45.1%. The revenuefrom city water supply and direct drinking water operations made up 69.5% ofthe Group’s total revenue and remained its major revenue source.

Underpinned by the commencement of operation of the wastewater treatmentproject for ExxonMobil in Huizhou Daya Bay in the first half of this year, therecurring operation revenue of environmental protection segment surged by 76.8%year-on-year to approximately HK$315 million and the segment profit grew by12.7% year-on-year, reflecting the sustainable and high-quality development ofenvironmental protection segment.

The Group retained a sound financial position in the period. As of 30September, its net assets amounted to approximately HK$22.569 billion,representing an increase of 5.2% from the end of March. The gearing ratioremained at a healthy level of 66.0% and stayed flat when compared with the endof March. It further deepened existing cooperation with banks to expanddomestic financing channels. A major breakthrough was made with successful issuanceof its first 3-year RMB 500 million green panda bond at a 3% coupon rate. TheGroup was approved to issue green panda bonds up to a total amount of RMB 3billion. By refinancing the short-term borrowings with long-term borrowings,the Group further enhanced its debt structure with the ratio of long-termborrowings to total borrowings further improved.

Looking ahead, the overall operating environment is poised to graduallypick up after the central government launched a bundle of supportive policies tostabilize the economic development and augment domestic demand. The Groupinsists on high-quality development and aims to offer ever-improving directdrinking water services to the public, thereby upgrading its tap water qualityfrom safe water to healthy water. It strives to meet the society’s need to livequality life and drive reasonable business growth in tandem with better qualitydevelopment.

China has recently promulgated policies to facilitate the formation of amarket-based water pricing mechanism. In view of current low-inflationmacro-environment, the lag between water tariff adjustments and cost recoverystipulated by the government and the likely rate cuts both in China andoverseas, imminent water tariff hikes have become a market consensus. All thesefactors will help water supply enterprises to return to profitability andsustain healthy development. The Group will grasp these invaluableopportunities to bolster its operating efficiency and synergies, endeavor tosatisfy people’s aspirations for a better life and create promising returns forshareholders.

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About China Water Affairs Group Limited

China WaterAffairs Group Limited is a leading professional, international,market-oriented and cross-regional water services operator in China and theonly Hong Kong listed company focusing on tap water business. Headquartered inHong Kong, it has operations management centers in Beijing and Shenzhen. TheGroup (including associate companies) mainly engages in urban water supply,pipeline direct drinking water, sewage treatment and drainage and other relatedvalue-added services in Mainland China. Its services cover more than 30 millionpeople spreading across 24 provinces, direct-administered municipalities andautonomous regions. The Group has established a leading position as afull-service operator in China’s water affairs market. Its management comprisesof veteran experts in the water industry with an insight into governmentpolicies and services management. The Company’s shares were included in thefirst batch of securities eligible for trading through Shenzhen-Hong Kong StockConnect in 2016 and have been the constituent stock in the FTSE EnvironmentalOpportunities Asia Pacific Index since 2009.

This pressrelease is issued by PRChina Limited on behalf of China Water Affairs GroupLimited.

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