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China Water Affairs Achieves Steady Growth in FY2018/19 Annual Results As It Focuses on the Core Cit

Results Highlights:
(HK$ million)
For the 12 months ended 31 March
Gross Profit
Operating Profit from Continuing Businesses
EBITDA from Continuing Businesses
Profit Attributable to Owners of the Company
Basic Earnings per Share (HK cents)
Dividend per Share
(HK cents)
(* Excluding the impact of RMB fluctuations during the same period)
(27 June 2019, Hong Kong) China Water Affairs Group Limited (“China Water Affairs” or the “Company”, stock code: 0855.HK), a leading integrated water services operator in China, announced today the annual results of the Company and its subsidiaries (the “Group”) for the twelve months ended 31 March 2019 (the “Period”).
Underpinned by steady development of core city supply water business and robust growth of environmental operation, the Group’s total revenue for the Period grew by 9.5% year-on-year to approximately HK$8.30 billion. The profit attributable to its shareholders climbed by 20.1% year-on-year to approximately HK$1.37 billion, while the EBITDA from continuing operations increased by 13.2% year-on-year to approximately HK$3.51 billion. In order to give back to shareholders for their long-term support, the board of directors recommended the payment of final dividend of 16 HK cents per share. Together with the interim dividend of 12 HK cents per share, the total dividend per share for the Period amounts to 28 HK cents, up 21.7% from the previous year and hitting the Company’s guidance of not less than 30% dividend payout ratio.

The Group’s dedication to core businesses has borne reach fruits, with its two core operations producing satisfactory results in the Period and generating revenue of approximately HK$7.90 billion, up 12.6% year-on-year and accounting for 95.1% of its total revenue. Of which, the revenue from environmental protection business surged by 87.1% year-on-year to approximately HK$1.52 billion, mainly due to higher operating standards resulting from facilities upgrade and the procurement of more water environmental renovation construction services. The segment profit of environmental protection business soared by 63.8% year-on-year to approximately HK$4.40 billion.
Meanwhile, water supply business continued to generate stable revenue in the Period. Of which, water supply operation services produced revenue of approximately HK$2.21 billion, up 12.6% year-on-year; while the revenue from water supply connection services was approximately HK$1.44 billion, up 9.7% year-on-year. The segment profit of water supply business amounted to approximately HK$2.62 billion, up 9.0% from a year ago. The stable growth of water supply business was mainly attributable to an increase in the volume of water sold, the procurement of more construction and connection work driven by the persistent efforts to promote urban-rural integration and the public-private partnership model in the water sector, as well as the additional contribution from new water projects during the Period.
In order to concentrate resources on the expansion of core operations, the Group got rid of a number of its non-core assets in the Period, including the reduction of its equity investment in Jiangxi Xiannuhu Tourism and the disposal of its interests in some property assets located in different cities such as Hangzhou, Chongqing and Jingzhou. Cash of approximately HK$980 million was recouped from these disposals and it is contemplated to be invested in the Group’s core water supply and environmental protection businesses.
In February this year, the Group announced the formation of a joint venture known as Jiangxi Yinli Direct Drinking Water Equipment Co., Ltd. with Orix Corporation and Toray Industries Inc. to vigorously expand direct drinking water business. Given the ever-increasing demand for direct drinking water in China, there is ample room for this market to grow. This cooperation will enable the Group to firmly grasp the tremendous opportunities arising in direct drinking water market.
Besides, the Group announced in April this year that it had spent approximately HK$1.2 billion to acquire approximately 29.52% interest in Kangda International (stock code: 6136.HK) to boost its water supply and sewage treatment capacity and geographical coverage, thereby enabling to capture the considerable opportunities brought about by the integration of water supply and drainage and the integration of urban-rural water supply.
The Group maintained a sound financial position in the Period. As at 31 March 2019, its cash on hand and pledged deposits and total assets were approximately HK$4.62 billion and HK$35.82 billion respectively, up 49.9% and 25.3% from the end of March 2018. The total gearing ratio and the current ratio at the end of the Period were 64.0% and 1.13 times respectively and stayed at a healthy and controllable level. In the first half of this year, Moody’s Investors Service, a global leading credit rating agency, reaffirmed the Company’s Ba1 rating and positive and stable rating outlook, which was the highest rating among privately-owned infrastructure services providers in China.
Looking ahead, Mr. Duan Chuan Liang, Chairman of China Water Affairs, said, “Although the Chinese economy shows further signs of slowing down amid intensifying trade frictions between the United States and China, the income and cash flow of water affair business as a public utility has high visibility. In particular, there is pressing need for China to upgrade and expand its water supply facilities so as to promote the healthy and rapid development of urbanization in the country. Moreover, domestic environmentally-friendly reclaimed water market is set to thrive and the related market demand will be enormous. The Ministry of Finance released the ‘Opinions on Implementing Regulated Development of Cooperation between the Government and Social Capital’ in March, which will lend strong policy support to privately-owned enterprises for their participation in public services projects and create invaluable opportunities for the Group to drive our business growth.”
Mr. Duan Chuan Liang said, “We will deepen cooperation with local governments and join our efforts to enhance the overall standards of city water supply services and water services value chain as well as the efficiency and quality of all-round services. Focusing on two pillars of growth –the integration of urban-rural water supply and the integration of water supply and drainage, we will expand the scale of our core businesses and optimize our asset mix and resources allocation. While accelerating our development and acquisitions in water market and reinforcing our business layout, we will also speed up the development of secondary water supply and direct drinking water businesses, hence creating greater return to shareholders.”
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About China Water Affairs Group Limited
China Water Affairs Group Limited is principally engaged in city water supply, sewage treatment and drainage and related value-added businesses in the PRC. Currently, the Group’s businesses cover about 60 cities in 3 municipalities of Beijing, Tianjin and Chongqing, and in 13 provinces including Guangdong, Jiangxi, Henan, Jiangsu, Hubei, etc. With a well-established cooperative relationship with various local government authorities, the Group has positioned itself in a leading position in China’s water industry.
This press release is issued by PRChina Limited on behalf of China Water Affairs Group Limited.
For investor and media enquiries
PRChina Limited
David Shiu / Nicole Lau / Ray Sun 
Tel: (852) 2522 1838 / (852) 2522 1368

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