Corporate Governance and Compliance - The company has established a system for managing inside information and disclosure, ensuring compliance with the "Guidelines on Disclosure of Inside Information" issued by the Securities and Futures Commission[6] - The company amended its Memorandum and Articles of Association to permit hybrid and electronic general meetings, aligning with relevant legal and Listing Rules requirements[24] - The company's Audit Committee confirmed that non-audit services, including tax advisory and environmental, social, and governance advisory services, did not affect the independence of the external auditor[8][9] - The company has implemented anti-corruption and anti-bribery policies, providing training to employees and Directors to enhance integrity and awareness of malpractice[37] - The company's Internal Audit and Inspection Department accepts reports of suspected misconduct and violations from employees and stakeholders, with no serious fraud or misconduct incidents reported during the year[37] - The Board is responsible for determining the overall objective, risk appetites, and risk tolerance for corporate risk management, and approves risk management strategies and major risk mitigation solutions[40] - The company has complied with all applicable provisions of the Corporate Governance Code as set out in Appendix C1 to the Listing Rules of the Stock Exchange of Hong Kong Limited[194] - The company has adopted the Model Code for Securities Transactions by Directors as set out in Appendix C3 of the Listing Rules, and all Directors confirmed compliance with the required standards during the year ended 31 December 2023[196] - The Board is responsible for leadership and control of the company, overseeing the Group's businesses, strategic decisions, and performance, with day-to-day management delegated to the CEO and senior management[196] - The Board composition as of 31 December 2023 includes Executive Directors Zhao Juanxian, Li Zhong, Liu Yujie, and Duan Jerry Linnan, and Independent Non-Executive Directors Chau Kam Wing, Chang Qing, and Peng Yongzhen[196] - The Board complied with the Listing Rules requirement to appoint at least three independent non-executive Directors, with at least one possessing appropriate professional qualifications or accounting expertise[196] - Directors are required to disclose their commitments to the company, including the number and nature of offices held in public companies or organizations[198] - The roles and duties of the Chairman and the Chief Executive Officer are clearly defined and carried out by different individuals to preserve independence and balance of views[198] Risk Management - The company has established a comprehensive risk management process, ensuring timely, accurate, and complete information sharing across departments and business units, laying the foundation for supervision and enhancement of risk management[35] - The senior management focuses on major risks, events, and decisions, supervising the collection of firsthand information, risk assessment, management strategies, and implementation of risk management solutions[35] - The internal audit department conducts annual reviews of risk management implementation across departments and business units, evaluating strategies and proposing adjustments or improvements[35] - Key risks identified in 2023 include government breach of agreement, delayed collection, accounts receivable management, litigation disputes, and liability for breach of agreement[35] - Measures to address government breach risks include establishing a feedback mechanism and actively communicating with local governments to formulate solutions[35] - Delayed collection risks are mitigated by maintaining good communication with the government and making collection efforts[35] - The company's leading risk management and supporting organization is responsible for establishing and amending risk management policies and mechanisms, and formulating annual risk management work plans[42] - The company's risk management organization regularly collects first-hand information regarding risk management, carries out risk assessments, and discusses major risks faced by the company[42] - The company's risk management organization assesses the soundness, reasonability, and effectiveness of the risk management system and reviews the annual comprehensive risk management report[42] - The company's risk management organization accepts reports from employees and cooperating organizations, organizes investigations, and provides handling advice for violations of company and legal regulations[42] - The company's risk management organization assists in carrying out risk management work and formulates internal auditing plans based on risk assessment results[42] - The company has established a comprehensive risk management program led by the Internal Audit and Inspection Department, which includes collecting first-hand information, analyzing and assessing risks, proposing risk management strategies, and supervising the implementation of risk management works[44] Financial Performance and Reporting - The company paid RMB thousands in remuneration to its independent auditor, Ernst & Young, for the year ended 31 December 2023[7][10] - Construction services revenue decreased by RMB 719.5 million (approximately 81%) to RMB 173.6 million, with its share of total revenue dropping from 31% to less than 8%[75] - Total revenue for the year decreased by 23.5% year-on-year to RMB 2,216.4 million[75] - Actual wastewater treatment volume reached 1,265.7 million tonnes, representing a 3.2% increase compared to the previous year[75] - Utilization rate of wastewater treatment plants and reclaimed water plants increased from 82% to 85%[75] - Overall gross profit margin increased by 4.7 percentage points to 48.5% due to a decrease in lower-margin construction services revenue[75] - Gross profit and profit attributable to owners of the parent decreased by 15.2% and 47.1% to RMB 1,076.0 million and RMB 124.8 million, respectively[75] - Capital expenditure for the year was RMB 127.1 million, a 75% decrease year-on-year[75] - Net operating cash inflow was RMB 292.9 million, marking the fifth consecutive year of positive cash flow since 2019[75] - The gearing ratio and current ratio as of December 31, 2023, were 69.6% and 1.15, respectively[75] - The average borrowing interest rate for the year was 5.95%, down 0.01 percentage points from the previous year[75] - The Group had 103 service concession arrangement projects in operation with a treatment capacity of over 4 million tons per day as of 31 December 2023[82] - The Group entered into a total of 112 service concession arrangements, including 106 wastewater treatment plants, 1 water distribution plant, 3 sludge treatment plants, and 2 reclaimed water treatment plants as of 31 December 2023[86] - The Group's operational treatment capacity was 4,024,500 tons per day, with an additional 240,500 tons per day not yet in operation or transferred[88] - Construction revenue for the year ended 31 December 2023 was RMB121.0 million, representing an 84% year-on-year decrease compared to RMB753.0 million in 2022, primarily due to a decrease in the number of projects during the main construction period[93] - Total daily treatment capacity of service concession arrangement plants under construction as of 31 December 2023 was 100,500 tonnes, including 70,500 tonnes for wastewater treatment plants and 30,000 tonnes for water distribution plants[93] - Revenue from Water Environment Comprehensive Remediation projects for the year ended 31 December 2023 was RMB43.4 million, a 62% decrease compared to RMB114.4 million in 2022, mainly due to the completion of most existing EPC projects[95] - Revenue from Rural Water Improvement projects for the year ended 31 December 2023 was RMB49.9 million, a 16% year-on-year decrease compared to RMB59.1 million in 2022, primarily due to a net impact of decreased construction revenue and increased operation revenue from project commencement[95] - Total revenue for the year ended 31 December 2023 was RMB2,216.4 million, a decrease of RMB680.2 million compared to RMB2,896.6 million in 2022, mainly due to a RMB719.6 million decrease in construction revenue[97] - Operation revenue increased by RMB28.5 million in 2023, primarily due to the commencement of new BOT and upgrade projects in Urban Water Treatment[97] - Financial income from service concession arrangements increased by RMB10.9 million in 2023, mainly due to an increase in financial assets[97] - Cost of sales for the year ended 31 December 2023 was RMB1,140.4 million, a 30% decrease compared to RMB1,627.9 million in 2022, driven by a RMB551.5 million decrease in construction costs[98] - Operation costs increased by RMB64.0 million in 2023, mainly due to increased operation numbers of upgrade projects and higher costs of wastewater treatment chemicals[98] - The Group recorded other income and gains of RMB59.8 million for the year ended 31 December 2023, an increase of approximately 11% compared to RMB53.9 million in the previous corresponding period[100] - Administrative expenses for the year ended 31 December 2023 were RMB283.1 million, an increase of approximately 3% compared to RMB274.1 million in the previous corresponding period, mainly due to higher professional fees[100] - Other expenses for the year ended 31 December 2023 were RMB43.4 million, a decrease of approximately 59% compared to RMB105.9 million in the previous corresponding period, primarily due to reduced foreign exchange losses, non-operating expenses, and impairment losses[100] - Receivables for service concession arrangements as of 31 December 2023 were RMB11,592,250 thousand, with a current portion of RMB2,079,291 thousand and a non-current portion of RMB9,512,959 thousand[102] - Contract assets as of 31 December 2023 were RMB1,255.0 million, a decrease of RMB451.9 million compared to RMB1,706.9 million as of 31 December 2022, mainly due to reclassification to financial receivables and increased construction from BOT, PPP, and EPC projects[104] - The Group's wastewater treatment capacity as of 31 December 2023 was 4,265,000 tonnes/day, with an actual treatment volume of 1,261.1 million tonnes for the year[109] - The Group's total water distribution and treatment capacity as of 31 December 2023 was 4,360,000 tonnes/day, with an actual treatment volume of 1,265.7 million tonnes for the year[109] - The Group's sludge treatment capacity as of 31 December 2023 was 550 tonnes/day, contributing to a total capacity of 4,360,550 tonnes/day[109] - The Group had 98 wastewater treatment projects, 2 reclaimed water treatment projects, and 3 sludge treatment projects in operation in Mainland China as of 31 December 2023, with total daily treatment capacities of 4,024,500 tonnes, 65,000 tonnes, and 550 tonnes, respectively[110] - The annualized utilization rate for wastewater and reclaimed water treatment plants was approximately 85% for the year ended 31 December 2023, up from 82% in 2022[110] - The actual average water treatment tariff for the year ended 31 December 2023 was approximately RMB1.59 per tonne, compared to RMB1.56 per tonne in 2022[110] - The actual aggregate processing volume for the year ended 31 December 2023 was 1,265.7 million tonnes, a 3% increase compared to 1,226.6 million tonnes in 2022[110] - Total operation revenue from Urban Water Treatment services for the year ended 31 December 2023 was RMB1,265.3 million, a 2% increase compared to RMB1,243.3 million in 2022[110] - The Group's revenue for the year ended 31 December 2023 was RMB2,216.4 million, a decrease of RMB680.2 million compared to RMB2,896.6 million in 2022, primarily due to a decrease in construction revenue[115] - The Group's gross profit margin for the year ended 31 December 2023 was approximately 49%, an increase of 5 percentage points from 44% in the previous year[117] - The Group's financing costs for the year ended 31 December 2023 were RMB578.7 million, a 2% increase compared to RMB566.2 million in 2022, mainly due to an increase in average interest-bearing bank and other borrowings[118] - The Group's financial receivables as of 31 December 2023 were RMB11,592.3 million, an increase of RMB385.8 million compared to RMB11,206.5 million in 2022, primarily due to reclassification from contract assets after the completion of water treatment project construction and upgrade cycles[120] - Trade receivables increased to RMB2,808.5 million, up by RMB372.1 million, primarily due to a rise in Urban Water Treatment projects receivables by RMB573.4 million and a net decrease in Environment Comprehensive Remediation projects receivables by RMB177.8 million[123] - Prepayments, other receivables, and other assets increased to RMB929.0 million, up by RMB180.9 million, mainly due to receivables from the disposal of an associate increasing by RMB144.9 million and deductible input VAT increasing by RMB29.9 million[123] - Cash and cash equivalents increased to RMB248.4 million, up by RMB51.5 million, primarily due to reduced cash outflows from financing activities[125] - Net cash flows from operating activities in 2023 were RMB292.9 million, compared to RMB368.4 million in 2022[126] - Net cash flows used in financing activities in 2023 were RMB257.1 million, compared to RMB563.0 million in 2022[126] - Interest-bearing debts increased to RMB9,917.0 million, with 64.7% being long-term, and over 71% of bank and other borrowings bearing interest at floating rates[128] - The Group's gearing ratio slightly decreased to 69.6% as of 31 December 2023, compared to 69.7% in the previous year[128] - Capital expenditure for 2023 was RMB127.1 million, significantly lower than the RMB512.7 million in 2022, primarily due to reduced construction and acquisition costs for BOT, TOT, BOO, and PPP projects[128] - Gross profit margin for the year ended 31 December 2023 was approximately 49%, an increase of 5 percentage points compared to 44% in the previous year, primarily due to a decrease in the proportion of construction revenue[141] - Finance costs for the year ended 31 December 2023 amounted to RMB578.7 million, representing a 2% increase from RMB566.2 million in the previous corresponding period, mainly due to an increase in the average balance of interest-bearing bank and other borrowings[142] - The average balance of interest-bearing bank and other borrowings increased by RMB223.6 million, with an average interest rate of 5.95%, slightly lower than the previous corresponding period's rate of 5.96%[142] - The Group did not have any significant contingent liabilities as of 31 December 2023, consistent with the previous year[129] - No significant events took place subsequent to 31 December 2023, as disclosed[130] - The Group's contributions to the defined contribution pension plan are recognized as expenses when incurred, and forfeited contributions cannot be used to reduce existing contribution levels[129][131] - The Group's operations are primarily conducted in China, with transactions mostly denominated and settled in RMB, and as of 31 December 2023, there was no significant foreign currency risk exposure[132] - The Group's share of profits of associates for the year ended December 2023 was RMB4.7 million, a significant increase from RMB2.6 million in the previous year[143] - Share of losses of joint ventures for the year ended 31 December 2023 was RMB0.3 million, a major decrease from RMB3.6 million in the previous year[143] - Income tax expense for the year ended 31 December 2023 was RMB44.7 million for current PRC income tax and RMB59.0 million for deferred expenses, with an effective tax rate of 44%, up 8 percentage points from the previous year[143] - The Group's financial receivables as at 31 December 2023 were RMB11,592.3 million, an increase of RMB385.8 million from the previous year, mainly due to reclassification from contract assets[145] - Contract assets as at 31 December 2023 were RMB1,255.0 million, a decrease of RMB451.9 million from the previous year, mainly due to reclassification to financial receivables and increased construction under BOT, PPP, and EPC contracts[147] - Cash and cash equivalents as at 31 December 2023 were RMB248.4 million, an increase of RMB51.5 million from the previous year, due to decreased cash outflows in financing activities[150] - The Group invested RMB258.4 million in BOT/TOT and PPP projects for the year ended 31 December 2023, compared to RMB311.0 million in the previous year[151] - Trade and bills payables as at 31 December 2023 were RMB2,013.5 million, a decrease of RMB246.7 million from the previous year, in line with construction work progress and settlements[152] - Other payables and accruals as at 31 December 2023 were RMB207.9 million, a decrease of RMB80.2 million from the previous year, mainly due to reduced amounts to an associate and salary payables[152] - The Group had 2,296 employees as at 31 December 2023, with remuneration packages determined by market conditions and individual performance[154] - No significant contingent liabilities as of December 31, 2023 (December 31, 2022: None)[157] - No significant events occurred after December 31, 2023, except as disclosed[158] Environmental and Social Responsibility - The company operates in the environmental sector, focusing on wastewater treatment and water resources, with policies such as the "Implementation Plan for the Construction and Management of Domestic Sewage and Waste Treatment Facilities in Towns" and the "National Water Network Construction Plan Outline" supporting its industry[59] - The company's annual report for the year ended December 31, 2023, highlights its commitment to improving environmental infrastructure and supporting private enterprise development, with policies aimed at enhancing the business environment and reducing transaction costs[59] - The company's male to female ratio in the workforce, including senior management, is approximately 2:1, maintaining a healthy and reasonable gender diversity[37] - The company has been certified as a Class A General Construction Contractor of Municipal and Public Works by the Ministry of Housing and Urban-Rural Development, and holds CAEPI level-1 certifications for industrial wastewater and domestic sewage operation and service capabilities[167] - The company has implemented ISO9001 Quality Management System, ISO14001 Environmental Management System, and ISO45001 Occupational Health and Safety Management System[167] - The company has won the National Important Environmental Protection Practical Technology Demonstration Project Award for several environmental protection projects[167] - The company is the deputy chairman unit of the National Industrial Commercial and Environmental Protection Association and a member of the China Environment Protection
康达环保(06136) - 2023 - 年度财报