*Excluding the impact from the fluctuation of RMB exchange rates
(27 November 2019, Hong Kong) China Water Affairs Group Limited (“China Water Affairs” or the “Company”, stock code: 00855.HK), a leading integrated water services operator in China, announced today the interim results of the Company and its subsidiaries (the “Group”) for the six months ended 30 September 2019 (the “Reporting Period”).
The Group’s revenue for the Reporting Period increased by 5.1% year-on-year to approximately HK$4.35 billion, as its core city water supply operation maintained steady growth. Meanwhile, its operating profit and EBITDA were approximately HK$1.61 billion and HK$2.21 billion respectively, representing 6.3% and 24.0% year-on-year growth. Profit attributable to the Company’s owners expanded by 36.4% year-on-year to approximately HK$880 million.
In order to reward shareholders for their long-term support to the Group, the board of directors recommended paying an interim dividend of 14 HK cents per share, representing a 16.7% growth when compared with the interim dividend of 12 HK cents paid out for the same period last year.
Due to an increase in water volume sold, the water tariff hikes up to expectation, further promotion of the integration of urban and rural water supply as well as the supporting of the government’s preferential policy, more water supply construction and connection works acquired, and the water supply segment maintained steady growth in the Reporting Period. It generated revenue of approximately HK$3.59 billion, up 13.4% from a year ago. If the impact from exchange rate fluctuation were excluded, the growth rate would have been 17%. The water supply segment contributed 82% of the Group’s total revenue, representing an increase of 6 percentage points from the same period last year.
The revenues from water supply construction services and water supply connection services amounted to approximately HK$1.54 billion and HK$760 million respectively, up 18% and 10% from a year ago. During the period, a total of 650,000 new water supply users (including 210,000 new customers in urban and rural water supply business) were added; The revenue from water fees brought about HK$1.25 billion, up 11% year-on-year. Meanwhile, the revenue from water supply services reached approximately HK$1.45 billion, up 17% year-on-year. If the impact from the fluctuation of RMB exchange rates were excluded, the revenue from water supply services would have grown by 21% year-on-year. The profit margin of water supply segment for the period increased by 1 percentage point year-on-year.
Facing the lack of new BOT opportunities in the sewage environmental protection sector, and the large-scale of upgrading projects is coming to an end, China Water adjusted its business strategy to increasing the scale of sewage treatment through M&A, supplying water in new cities and reducing environmental protection business. Therefore, the Company acquired a 29.52% stake in Kangda International in April this year at a total consideration of HK$1.2 billion for the expansion of urban sewage treatment business with a sewage treatment capacity of 4.24 million tons per day. The total scale of sewage treatment capacity of China Water is 5.08 million tons per day. The sewage treatment services increased by 19% year-on-year. In addition to the investment income from Kangda International, the overall profit of the sewage treatment sector grew briskly.
In terms of value-added services, the Group's direct drinking water business has achieved rapid growth. During the period, the Group added more than 140 direct drinking water projects, with a revenue of HK$27.27 million in this sector, including HK$6.25 million in water sales, HK$17.05 million in water supply connection services and HK$4.55 million in equipment sales. As of September 2019, the Group's direct drinking water service has covered a population of nearly 500,000. In the future, the direct drinking water market will enjoy enormous potential for development, thereby spurring the growth of direct drinking water business of China Water Affairs.
In order to retain resources for the development of its core water supply business, the Group disposed of various non-core assets in the period. A total of HK$240 million was recouped and non-core assets worth more than HK$500 million would be handled recently. The disposal of aforementioned non-core assets provided adequate resources for the Group to expand its core operation.
Underpinned by stable cashflow from core water supply business, the Group maintained a sound financial position in the Reporting Period. As at 30 September 2019, its cash and cash equivalents reached approximately HK$4.75 billion and its total assets amounted to approximately HK$38.42 billion, representing an increase of 3.0% and 7.2% respectively from the end of March in 2019. The total gearing ratio and the current ratio at the end of the period were 65.7% and 1.04 times respectively and stayed within a healthy and manageable level.
Looking ahead, China Water Affairs will adhere to the development strategy with water supply as the core, strengthen mergers and acquisitions, accelerate the process of urban and rural water supply integration and supply and drainage integration, firmly grasp the huge business opportunity in the domestic drinking water market, and promote the smart water services and artificial intelligence applications in the water industry. China Water will provide better services to the society and the general public and create greater investment value for 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(including affiliated company)’s businesses spread across over 110 cities, including 3 municipalities of Beijing, Tianjin and Chongqing, and those in 20 provinces such as Guangdong, Jiangxi, Henan, Jiangsu and Hubei. 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.
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