首创环境(03989) - 2024 - 中期业绩

Interim Condensed Consolidated Financial Statements Interim Condensed Consolidated Statement of Profit or Loss For the six months ended June 30, 2024, revenue decreased by 6.38% to RMB 1.787 billion, while gross profit margin improved to 36.41%, and profit attributable to owners of the parent increased by 13.48% to RMB 171 million Key Data from Interim Condensed Consolidated Statement of Profit or Loss | Metric | 2024 (RMB thousands) | 2023 (RMB thousands) | Change (%) | | :-------------------------------------- | :------------------- | :------------------- | :--------- | | Revenue | 1,786,721 | 1,908,540 | -6.38 | | Cost of sales | (1,136,244) | (1,256,574) | -9.60 | | Gross profit | 650,477 | 651,966 | -0.23 | | Gross profit margin | 36.41% | 34.16% | +2.25pp | | Profit before tax | 236,125 | 131,854 | +79.09 | | Profit for the period | 194,820 | 135,498 | +43.78 | | Profit attributable to owners of the parent | 170,656 | 150,386 | +13.48 | | Profit attributable to non-controlling interests | 24,164 | (14,888) | N/A | | Basic earnings per share | RMB 1.19 cents | RMB 1.05 cents | +13.33 | - Revenue decrease was primarily due to reduced construction revenue from projects transitioning to commercial operation and a sharp decline in revenue from discontinued dismantling projects[41] - Gross profit margin increased mainly due to higher waste processing volume and improved power generation efficiency in some project companies, leading to increased operating income and reduced fixed cost allocation[41] - Net profit attributable to owners of the company increased primarily due to a reduction in impairment provisions for long-term assets during the period[41] Interim Condensed Consolidated Statement of Comprehensive Income For the six months ended June 30, 2024, total comprehensive income was RMB 192 million, a 56.08% increase from RMB 123 million in the prior year, driven by profit growth and foreign exchange differences Key Data from Interim Condensed Consolidated Statement of Comprehensive Income | Metric | 2024 (RMB thousands) | 2023 (RMB thousands) | Change (%) | | :----------------------------------- | :------------------- | :------------------- | :--------- | | Profit for the period | 194,820 | 135,498 | +43.78 | | Other comprehensive income | (2,451) | (12,070) | -79.60 | | Total comprehensive income for the period | 192,369 | 123,428 | +56.08 | | Attributable to owners of the parent | 169,307 | 143,251 | +18.19 | | Attributable to non-controlling interests | 23,062 | (19,823) | N/A | - Net exchange differences from translating overseas operations were negative RMB 2,251 thousands, a narrower loss compared to negative RMB 10,069 thousands in the prior period[4] - Fair value changes of equity investments designated at fair value through other comprehensive income were negative RMB 200 thousands, compared to negative RMB 2,001 thousands in the prior period[4] Interim Condensed Consolidated Statement of Financial Position As of June 30, 2024, total assets reached RMB 20.591 billion, with net current assets significantly increasing by 24.84% to RMB 3.498 billion, and the current ratio improving to 2.02, indicating enhanced liquidity Key Data from Interim Condensed Consolidated Statement of Financial Position | Metric | June 30, 2024 (RMB thousands) | Dec 31, 2023 (RMB thousands) | Change (%) | | :-------------------------------- | :---------------------------- | :--------------------------- | :--------- | | Total non-current assets | 13,666,986 | 13,956,791 | -2.08 | | Total current assets | 6,923,887 | 6,330,375 | +9.38 | | Total current liabilities | 3,425,403 | 3,528,069 | -2.91 | | Net current assets | 3,498,484 | 2,802,306 | +24.84 | | Total assets less current liabilities | 17,165,470 | 16,759,097 | +2.42 | | Total non-current liabilities | 10,240,514 | 10,063,232 | +1.76 | | Net assets | 6,924,956 | 6,695,865 | +3.42 | | Total equity | 6,924,956 | 6,695,865 | +3.42 | | Debt-to-asset ratio | 66.37% | 66.99% | -0.62pp | | Current ratio | 2.02 | 1.79 | +0.23 | - The current ratio increased mainly due to most projects entering commercial operation, leading to a continuous increase in trade receivables, while the payment of project final construction costs resulted in a decrease in trade payables[42] - Franchise financial assets totaled RMB 9.516 billion, with RMB 7.844 billion classified as non-current and RMB 1.673 billion as current[5][23] Notes to the Interim Condensed Consolidated Financial Information 1. Company and Group Information The company, incorporated in the Cayman Islands and listed on the HKEX, primarily engages in waste treatment and waste-to-energy businesses, with Beijing Capital Group Co., Ltd. as its ultimate controlling entity - The Company was incorporated in the Cayman Islands on May 27, 2004, and listed on the Main Board of the Hong Kong Stock Exchange on July 13, 2006[7] - Its principal activities are waste treatment and waste-to-energy businesses[7] - The ultimate controlling company is Beijing Capital Group Co., Ltd., a state-owned enterprise in China[7] 2. Basis of Preparation The interim condensed consolidated financial information is prepared in accordance with HKAS 34 and should be read in conjunction with the annual consolidated financial statements for the year ended December 31, 2023 - The interim condensed consolidated financial information has been prepared in accordance with Hong Kong Accounting Standard 34 ('HKAS 34') Interim Financial Reporting[8] - It does not include all the information and disclosures required in the annual financial statements and should be read in conjunction with the Group’s annual consolidated financial statements for the year ended December 31, 2023[8] 3. Changes in Accounting Policies and Disclosures Newly adopted HKFRS amendments, including those on lease liabilities in sale and leaseback, classification of liabilities, and supplier financing arrangements, have no material impact on the Group's financial position or performance - Newly adopted amendments include HKFRS 16 (Amendment) on lease liabilities in sale and leaseback, HKAS 1 (Amendment) on classification of liabilities as current or non-current, and HKAS 7 and HKFRS 7 (Amendments) on supplier financing arrangements[9][10] - As the Group has no sale and leaseback transactions with variable lease payments not dependent on any index or rate, and no supplier financing arrangements, the related amendments have no impact on its financial position or performance[10] - The Group has reassessed the terms and conditions of its liabilities and concluded that the classification of liabilities as current or non-current remains unchanged after the initial application of the amendments[10] 4. Operating Segment Information The Group operates a single reportable segment: waste treatment and waste-to-energy businesses in China - The Group has only one reportable segment, which is waste treatment and waste-to-energy businesses in China[11] 5. Revenue, Other Income and Gains For the six months ended June 30, 2024, total revenue was RMB 1.787 billion, a 6.38% decrease year-on-year, while other income and gains significantly increased by 62.79% to RMB 60.671 million due to higher government grants and interest income Revenue Composition | Revenue Type | 2024 (RMB thousands) | 2023 (RMB thousands) | Change (%) | | :------------------------------------------ | :------------------- | :------------------- | :--------- | | Revenue from contracts with customers | 1,523,209 | 1,639,245 | -7.08 | | Effective interest income from franchise financial assets | 263,512 | 269,295 | -2.00 | | Total Revenue | 1,786,721 | 1,908,540 | -6.38 | Other Income and Gains Composition | Other Income and Gains Type | 2024 (RMB thousands) | 2023 (RMB thousands) | Change (%) | | :------------------------ | :------------------- | :------------------- | :--------- | | Bank interest income | 1,734 | 6,019 | -71.19 | | Other interest income | 24,602 | 3,011 | +717.01 | | Government grants | 33,955 | 17,042 | +99.24 | | Exchange gains | – | 8,172 | N/A | | Total Other Income and Gains | 60,671 | 37,274 | +62.79 | - Within revenue from contracts with customers, construction service revenue under service concession arrangements decreased by 59.29% year-on-year, while operation service revenue increased by 12.43%[12] 6. Profit Before Tax For the six months ended June 30, 2024, profit before tax significantly increased by 79.09% to RMB 236 million, primarily due to a substantial reduction in net impairment losses on financial and contract assets Key Deductions/(Additions) to Profit Before Tax | Item | 2024 (RMB thousands) | 2023 (RMB thousands) | Change (%) | | :---------------------------------------- | :------------------- | :------------------- | :--------- | | Cost of services provided under service concession arrangements | 750,677 | 867,048 | -13.42 | | Cost of other services provided | 347,589 | 259,941 | +33.72 | | Cost of inventories sold | 37,978 | 129,585 | -70.61 | | Depreciation (property, plant and equipment) | 30,900 | 27,952 | +10.55 | | Amortisation of other intangible assets | 105,885 | 104,186 | +1.63 | | Research and development costs | 22,188 | 20,879 | +6.27 | | Employee benefit expenses | 110,464 | 101,860 | +8.45 | | Net impairment losses on financial and contract assets | 40,576 | 129,405 | -68.65 | - Net impairment losses on financial and contract assets significantly decreased, with impairment of other intangible assets falling from RMB 87,800 thousands in 2023 to zero in 2024[15] 7. Finance Costs For the six months ended June 30, 2024, total finance costs decreased by 4.59% to RMB 213 million, mainly due to reduced interest expenses from corporate bonds and partial interest capitalization Finance Costs Analysis | Item | 2024 (RMB thousands) | 2023 (RMB thousands) | Change (%) | | :------------------------- | :------------------- | :------------------- | :--------- | | Interest on bank and other borrowings | 213,012 | 206,371 | +3.22 | | Interest on corporate bonds | – | 15,119 | -100.00 | | Interest on lease liabilities | 240 | 743 | -67.70 | | Less: Interest capitalised | (1,203) | (4,576) | -73.70 | | Total | 212,903 | 223,134 | -4.59 | - The decrease in finance costs was mainly due to the repayment of RMB 1 billion bonds in May 2023, leading to reduced interest expenses in the current period[44] 8. Income Tax For the six months ended June 30, 2024, income tax expense was RMB 41.305 million, compared to an income tax credit in the prior year, primarily due to a shift from deferred tax credit to expense Income Tax Composition | Item | 2024 (RMB thousands) | 2023 (RMB thousands) | Change (%) | | :------------------ | :------------------- | :------------------- | :--------- | | Current income tax | 19,887 | 9,184 | +116.54 | | Deferred income tax | 21,418 | (12,828) | N/A | | Total | 41,305 | (3,644) | N/A | - Tax on taxable profits in other regions is calculated at the applicable tax rates in the jurisdictions where the Group operates[16] 9. Earnings Per Share Attributable to Ordinary Equity Holders of the Parent For the six months ended June 30, 2024, basic earnings per share increased by 13.33% to RMB 1.19 cents, consistent with the growth in profit attributable to ordinary equity holders of the parent Basic Earnings Per Share Calculation | Metric | 2024 (RMB thousands) | 2023 (RMB thousands) | | :------------------------------------------------------------------- | :------------------- | :------------------- | | Profit attributable to ordinary equity holders of the parent (RMB thousands) | 170,656 | 150,386 | | Weighted average number of shares issued during the period (shares) | 14,294,733,167 | 14,294,733,167 | | Basic earnings per share | RMB 1.19 cents | RMB 1.05 cents | - As of June 30, 2024, and 2023, the Group had no outstanding potentially dilutive ordinary shares[18] 10. Dividends For the six months ended June 30, 2024, no interim dividends were declared, whereas a special dividend of RMB 132 million for the year ended December 31, 2022, was declared in the prior period Final Dividends Declared | Item | 2024 (RMB thousands) | 2023 (RMB thousands) | | :---------------------------------- | :------------------- | :------------------- | | Final dividend declared - HK 1 cent | – | 131,590 | - No dividends were proposed by the Company for the six months ended June 30, 2024[19] 11. Property, Plant and Equipment For the six months ended June 30, 2024, the Group increased asset purchases, incurred a net loss on asset disposals, and recognized an impairment of RMB 18.65 million on machinery, equipment, and vehicles at Zibo Shoutuo Environmental Technology Co., Ltd Property, Plant and Equipment Related Data | Item | 2024 (RMB thousands) | 2023 (RMB thousands) | | :---------------------------------- | :------------------- | :------------------- | | Cost of assets purchased | 10,874 | 8,157 | | Net book value of assets disposed of | 970 | 12 | | Net loss on disposal | 970 | (26) (gain) | | Impairment | 18,650 | – | - The impairment of RMB 18.65 million relates to machinery, equipment, and vehicles of Zibo Shoutuo Environmental Technology Co., Ltd., which is engaged in hazardous waste treatment[20] - The recoverable amount is determined based on value-in-use calculations, derived from cash flow forecasts over the asset's useful life, using a pre-tax discount rate of 10.1%[20] 12. Other Intangible Assets For the six months ended June 30, 2024, other intangible assets from service concession arrangements increased by RMB 120 million, primarily due to the completion of the BOT project by Pu'er Shou Chuang Environmental Energy Co., Ltd - Other intangible assets arising from service concession arrangements increased by RMB 119,955 thousands[21] - Primarily due to the completion of the Build-Operate-Transfer ('BOT') project operated by Pu'er Shou Chuang Environmental Energy Co., Ltd., which is engaged in waste-to-energy incineration[21] - Intangible assets arising from service concession arrangements are amortized on a straight-line basis from the date they are available for use until the end of the concession period[21] 13. Franchise Financial Assets As of June 30, 2024, franchise financial assets totaled RMB 9.516 billion, with an impairment of RMB 832,000 recognized during the period for construction and operation services provided to government agencies under service concession arrangements Franchise Financial Assets | Item | June 30, 2024 (RMB thousands) | Dec 31, 2023 (RMB thousands) | | :------------------------ | :---------------------------- | :--------------------------- | | Franchise financial assets | 9,629,232 | 9,541,196 | | Impairment | (113,116) | (112,284) | | Total | 9,516,116 | 9,428,912 | | Current assets | 1,672,563 | 1,631,688 | | Non-current assets | 7,843,553 | 7,797,224 | - The Group provides construction and operation services to certain PRC government authorities under service concession arrangements, where consideration may be the right to a financial asset or an intangible asset[24] - Impairment of RMB 832,000 was recognized during the period, with default probabilities ranging from 0.08% to 1.98% and estimated loss given default rates of 45% or 75%[24] 14. Prepayments, Other Receivables and Other Assets As of June 30, 2024, prepayments, other receivables, and other assets totaled RMB 1.146 billion, with a notable increase in receivables from disposals related to the termination of three service concession arrangements Composition of Prepayments, Other Receivables and Other Assets | Item | June 30, 2024 (RMB thousands) | Dec 31, 2023 (RMB thousands) | | :------------------------ | :---------------------------- | :--------------------------- | | Advances to suppliers | 49,012 | 47,073 | | VAT recoverable | 551,383 | 583,475 | | Interest receivable | 5,024 | 5,024 | | Tender deposits | 225,443 | 223,757 | | Receivables from disposals | 188,217 | 142,580 | | Others | 127,339 | 120,453 | | Total | 1,146,418 | 1,122,362 | | Current assets | 1,047,921 | 1,015,087 | | Non-current assets | 98,497 | 107,275 | - The increase in receivables from disposals is related to the termination of three service concession arrangements involving Beijing Yanqing District Urban and Rural Environmental Management Center, Huludao Municipal Government, and Wengan County Government[26] 15. Trade Receivables As of June 30, 2024, trade receivables totaled RMB 2.531 billion, a 21.73% increase from year-end 2023, with a significant rise in receivables over 180 days, indicating increased collection pressure Trade Receivables and Aging Analysis | Item | June 30, 2024 (RMB thousands) | Dec 31, 2023 (RMB thousands) | | :--------------- | :---------------------------- | :--------------------------- | | Trade receivables | 2,653,284 | 2,169,090 | | Impairment | (122,303) | (89,977) | | Total | 2,530,981 | 2,079,113 | | 0 to 90 days | 696,567 | 605,163 | | 91 to 180 days | 410,952 | 484,900 | | Over 180 days | 1,423,462 | 989,050 | - Trade receivables aged over 180 days increased by 43.92% from RMB 989 million at year-end 2023 to RMB 1.423 billion as of June 30, 2024[27] - Trade receivables balance includes RMB 44.317 million due from fellow subsidiary Sichuan Qingshi Construction Co., Ltd[27] 16. Trade Payables As of June 30, 2024, trade payables totaled RMB 1.537 billion, a 6.91% decrease from year-end 2023, with a reduction in payables aged 0-90 days and stable payables over 180 days Trade Payables Aging Analysis | Item | June 30, 2024 (RMB thousands) | Dec 31, 2023 (RMB thousands) | | :------------ | :---------------------------- | :--------------------------- | | 0 to 90 days | 775,675 | 853,442 | | 91 to 180 days | 52,307 | 57,749 | | Over 180 days | 708,743 | 739,619 | | Total | 1,536,725 | 1,650,810 | - Trade payables balance includes RMB 3.496 million due to fellow subsidiary Beijing Capital Atmospheric Environmental Technology Co., Ltd[28] 17. Interest-Bearing Bank and Other Borrowings As of June 30, 2024, total interest-bearing bank and other borrowings amounted to RMB 10.592 billion, with secured borrowings accounting for 62.04% and a high proportion of non-current liabilities Composition of Interest-Bearing Bank and Other Borrowings | Item | June 30, 2024 (RMB thousands) | Dec 31, 2023 (RMB thousands) | | :---------------------------------- | :---------------------------- | :--------------------------- | | Secured borrowings | 6,571,965 | 6,524,840 | | Unsecured borrowings | 4,020,100 | 3,947,204 | | Total | 10,592,065 | 10,472,044 | | Repayable within one year | 1,329,913 | 1,364,343 | | Repayable after one year but within two years | 2,072,113 | 2,040,066 | | Repayable after two years but within five years | 3,491,163 | 3,356,741 | | Repayable after five years | 3,698,876 | 3,710,894 | | Non-current liabilities | 9,262,152 | 9,107,701 | - Secured bank and other borrowings are primarily guaranteed by the Company, pledged under service concession arrangements (including waste-to-energy incineration and food waste treatment projects), and secured by leased land[30] - Unsecured borrowings include other loans of RMB 3.27 billion from Beijing Capital Eco-Environmental Protection Group Co., Ltd., an indirect controlling company of the Company[30] Management Discussion and Analysis Macroeconomic and Industry Overview In H1 2024, China's GDP grew by 5%, with the environmental protection industry showing positive development despite market segmentation and a decline in new waste incineration and long-term sanitation projects - In H1 2024, China's GDP grew by 5% year-on-year, with 5.3% growth in Q1 and a slowdown to 4.7% in Q2[31] - New waste incineration capacity decreased to 5,800 tonnes/day, a 75% year-on-year decline; new investment fell to RMB 4.2 billion, a 71% year-on-year decrease, both hitting a three-year low[31] - Contract value for sanitation projects over RMB 10 million reached RMB 93.9 billion, a 14% year-on-year increase; long-cycle projects accounted for 28%, short-cycle projects for 69%; site remediation business turnover reached RMB 46.6 billion, a 15% year-on-year increase[31] Group Strategy and Business Development The Group aligns with national policies and its controlling shareholder's strategies, focusing on waste-to-energy, urban and rural sanitation, site remediation, and carbon management to build a diversified 'investment + operation + service' value model - Fully implementing the '14th Five-Year Plan' strategy and the 'Eco+2025' strategy iteration deployment of the controlling shareholder, Beijing Capital Eco-Environmental Protection Group Co., Ltd[32] - Focusing on the core environmental protection business, continuously strengthening the core position of waste-to-energy incineration, and actively promoting the development of light-asset businesses such as urban and rural sanitation, site remediation, and energy-saving carbon reduction[32] - Established three light-asset business platforms: Site Remediation Department, Sanitation Industry Department, and Carbon Asset Management Department, building a diversified 'investment + operation + service' value-driven model[32] Operating Performance Overview In H1 2024, the Group achieved operating revenue of RMB 1.787 billion, with waste-to-energy, urban and rural sanitation, site remediation, and organic solid waste treatment contributing 95.04%, and net profit attributable to the parent company reaching RMB 171 million H1 2024 Operating Performance | Metric | Amount (RMB) | Y-o-Y Change (%) | | :-------------------------- | :------------------ | :--------------- | | Operating revenue | 1.787 billion RMB | -6.38 | | Profit for the period | 195 million RMB | +43.78 | | Net profit attributable to owners of the parent | 171 million RMB | +13.48 | - Waste-to-energy incineration, urban and rural sanitation, site remediation, and organic solid waste treatment contributed RMB 1.698 billion in operating revenue, accounting for 95.04% of total revenue[32] - Seven city companies in Zhumadian, Nanchang, Nanyang, Huizhou, Xinxiang, Pingdingshan, and Duyun collectively achieved revenue of RMB 678 million, with Nanyang and Duyun city companies experiencing growth exceeding 35%[32] Project Reserves and Operations The Group has 67 projects reserved in China with a total investment of approximately RMB 19.783 billion, operating 57 projects that processed 5.0416 million tonnes of domestic waste and generated 1.287 billion kWh of grid power in H1 - A total of 67 projects are reserved domestically, including 29 waste-to-energy projects, 5 landfill projects, and 6 organic waste treatment projects, with a total investment of approximately RMB 19.783 billion[33] - The total designed capacity is approximately 14.9808 million tonnes of waste processed annually and approximately 1.2 million pieces of electrical and electronic equipment dismantled annually[33] - In H1, 5.0416 million tonnes of domestic waste were processed, 23,100 tonnes of hazardous waste were treated, 23,400 units were dismantled, and a total of 1.287 billion kWh of grid power was supplied[33] Significant Achievements in Comprehensive Quality Improvement The Group achieved significant results in quality improvement, including successful commercialization of 3 projects, price adjustments for 2 projects, increased plant utilization from 77% to 87%, and cost reductions through centralized procurement and loan interest rate adjustments - Three projects, Qianjiang Incineration, Fuzhou Food Waste, and Gao'an Collection & Transportation, successfully transitioned to commercial operation; Pu'er Incineration and Gao'an Collection & Transportation projects achieved price adjustments[34] - Project capacity utilization increased from 77% to 87%, and the average on-grid power generation per tonne of waste received at waste-to-energy incineration projects increased by 5.7% compared to last year[34] - By expanding centralized procurement categories and coverage, RMB 14 million in procurement costs was saved; loan interest rates for projects such as Yutian Incineration and Xinxiang Incineration were reduced, with a maximum decrease of 80 basis points[35] Fruitful Results in Innovation and Growth The Group made steady progress in technology innovation projects, expanded its market with 47 waste incineration derivative contracts worth RMB 24 million and 6 urban and rural sanitation projects with annual contracts of RMB 69 million, and received a Shanghai Science and Technology Progress Second Prize - Six 'leaderboard' technology innovation projects are steadily progressing, with the flue gas desulfurization process modification project entering the trial and commissioning phase[36] - Waste incineration derivative businesses expanded to 10 projects, signing 47 contracts with a contract value of approximately RMB 24 million; urban and rural sanitation landed 6 projects with annual contract values of RMB 69 million[36] - The project 'Key Technologies and Applications for Fine Separation, Reconstruction, and Stepwise Targeted Conversion of Food Waste Resources,' jointly submitted with Donghua University, won the Shanghai Science and Technology Progress Second Prize[36] Notable Effects of System Upgrades The Group actively advanced its operational excellence and sanitation management systems, improving power generation, reducing plant power consumption, and enhancing unit efficiency, while exploring new ventures in waste plastic chemical recycling and new energy heating - Actively promoting the construction of an excellent operation system, improving power generation, reducing plant power consumption rates, and enhancing unit efficiency through production technology exchange meetings and the implementation of three major procedures in water treatment[37] - Improving the sanitation business management system, with a focus on advancing safety management, operational planning management, human resource management, and organizational capacity building[37] - Conducting in-depth research and argumentation on three directions: chemical recycling of waste plastics, new energy heating, and the application of heat pumps in large-scale heating projects[37] Enhanced Safety System The Group achieved 100% signing of all-staff safety responsibility statements, conducted 10 safety inspections, rectified 265 hazards with a 100% rectification rate, and revised safety management regulations - All-staff safety target responsibility statements have been signed at all levels with departments, subordinate units, and employees, achieving a 100% signing rate[38] - A total of 10 safety inspections were conducted, identifying and rectifying 265 hazards, with 100% coverage for high and medium-risk safety inspections and 100% rectification rate for safety hazards[38] - Revised and issued the 'Management Measures for Reporting and Investigating Production Safety Accidents' and the 'Management Measures for Related Parties'[38] Diversified Financing Methods The Group maintains strong relationships with major financial institutions and actively reduces financing costs, with total bank credit lines of RMB 10.143 billion in H1 2024, including RMB 500 million at headquarters and RMB 9.643 billion at project companies - Maintaining good cooperative relationships with several mainstream financial institutions, including Bank of China, Industrial and Commercial Bank of China, China Construction Bank, and Postal Savings Bank of China[39] - Continuously engaging in in-depth exchanges and effective communication with partner banks, persistently working to reduce financing costs for existing medium and long-term borrowings[39] - In H1 2024, the Group's total outstanding bank credit lines amounted to RMB 10.143 billion, with RMB 500 million at headquarters and RMB 9.643 billion at project companies[39] Business Outlook The Group will continue to pursue annual operating targets, focus on project implementation, reduce losses, and decrease accounts receivable, aiming for enhanced return on equity and high-quality development through comprehensive management improvements - Continuing to anchor annual operating targets, prioritizing project implementation, and concentrating resources to secure high-quality projects[40] - Implementing thoroughly and meticulously, continuously advancing loss reduction and accounts receivable compression[40] - Driven by enhanced return on equity, comprehensively promoting Group management improvements, focusing on 'five major objectives,' adopting 'four major initiatives,' and addressing ten key management improvement areas[40] Financial Review Financial Performance During the review period, the Group's revenue decreased by 6.38% to RMB 1.787 billion, primarily due to projects transitioning to commercial operation and the cessation of dismantling projects, while gross profit margin increased to 36.41%, and net profit attributable to owners of the company rose by 13.48% to RMB 171 million Financial Performance Overview | Metric | 2024 (RMB thousands) | 2023 (RMB thousands) | Change (%) | | :-------------------------------------- | :------------------- | :------------------- | :--------- | | Revenue | 1,786,721 | 1,908,540 | -6.38 | | Gross profit margin | 36.41% | 34.16% | +2.25pp | | Sales and administrative expenses | 198,473 | 202,671 | -2.07 | | Net profit attributable to owners of the company | 170,656 | 150,386 | +13.48 | - Revenue decrease was primarily due to reduced construction revenue from projects transitioning to commercial operation; simultaneously, revenue from discontinued dismantling projects sharply declined[41] - Gross profit margin increased mainly due to higher waste processing volume and continuously improved power generation efficiency in some project companies, leading to increased operating income and reduced fixed cost allocation[41] Financial Position As of June 30, 2024, the Group's total assets were RMB 20.591 billion, with net assets attributable to owners of the company at RMB 6.599 billion; the debt-to-asset ratio slightly decreased to 66.37%, and the current ratio improved to 2.02, indicating enhanced liquidity Financial Position Overview | Metric | June 30, 2024 (RMB thousands) | Dec 31, 2023 (RMB thousands) | | :-------------------------------------- | :---------------------------- | :--------------------------- | | Total assets | 20,590,873 | 20,287,166 | | Net assets attributable to owners of the company | 6,598,697 | 6,429,390 | | Debt-to-asset ratio | 66.37% | 66.99% | | Current ratio | 2.02 | 1.79 | - The current ratio increased mainly due to most projects entering commercial operation, leading to a continuous increase in trade receivables, while the gradual payment of project final construction costs resulted in a decrease in trade payables[42] Financial Resources The Group primarily funds its operations through internal cash flows, debt financing, and bank loans; as of June 30, 2024, cash and bank balances, along with pledged bank deposits, totaled RMB 546 million, a decrease of RMB 157 million from year-end 2023, mainly due to slower government payments and project final payments - The Group primarily funds its operations through internally generated cash flows, debt financing, and bank loans[43] Cash and Bank Balances | Metric | June 30, 2024 (RMB thousands) | Dec 31, 2023 (RMB thousands) | | :-------------------------------------- | :---------------------------- | :--------------------------- | | Cash and bank balances and pledged bank deposits | 545,752 | 702,288 | - The decrease in cash was mainly due to slower collection of government receivables, influenced by fiscal approval processes and economic downturns, as well as the gradual payment of project final construction costs during the period[43] Borrowings As of June 30, 2024, the Group's total outstanding borrowings were RMB 10.592 billion, an increase of RMB 120 million from year-end 2023, with 32% secured and 68% floating-rate; finance costs decreased by 4.59% to RMB 213 million due to corporate bond repayment Borrowings Overview | Metric | June 30, 2024 (RMB thousands) | Dec 31, 2023 (RMB thousands) | | :--------------------- | :---------------------------- | :--------------------------- | | Total outstanding borrowings | 10,592,065 | 10,472,044 | | Secured borrowings | 6,571,965 | 6,524,840 | | Unsecured borrowings | 4,020,100 | 3,947,204 | - Fixed-rate and floating-rate borrowings accounted for approximately 32% and 68% of total borrowings, respectively[44] - Finance costs decreased by 4.59% to approximately RMB 212,903 thousands from RMB 223,134 thousands in the prior period of 2023, mainly due to reduced interest expenses from the repayment of RMB 1 billion bonds in May 2023[44] Foreign Exchange Risk The Group's sales, purchases, and operating expenses are primarily denominated in USD, HKD, and RMB; the Board anticipates no significant impact from future exchange rate fluctuations and will monitor and prepare for hedging activities - The Group's sales, purchases, and operating expenses are mostly denominated in USD, HKD, and RMB[45] - The Board expects future exchange rate fluctuations will not have a significant impact on the Group's operations[45] - Management will continue to flexibly monitor foreign exchange risks and be prepared to promptly undertake appropriate hedging activities when necessary[45] Pledge of Assets As of June 30, 2024, certain bank financings are secured by revenues from service concession arrangements, RMB 3.045 million in bank balances, and RMB 35.544 million in leased land and buildings; an additional RMB 35.964 million in bank deposits is pledged for service concession arrangements - Guarantees for certain bank financings include certain revenues under service concession arrangements, bank balances of RMB 3.045 million, and leased land and buildings of RMB 35.544 million[46] - Bank deposits of RMB 35.964 million (primarily bank balances) are pledged as guarantees for service concession arrangements as required by local governments[46] Capital Commitments As of June 30, 2024, the Group had capital commitments of approximately RMB 103 million for construction works under service concession arrangements, which are contracted but not yet provided for in the financial statements - As of June 30, 2024, the Group had capital commitments of approximately RMB 102,542 thousands for construction works under service concession arrangements[47] - These capital commitments are contracted but not yet provided for in the unaudited consolidated financial statements[47] Contingent Liabilities As of June 30, 2024, the Group provided performance guarantees of approximately RMB 218 million to Chinese government agencies for domestic project construction and operation, and is involved in a RMB 73.477 million construction contract dispute with Fujian Huifeng Construction Engineering Co., Ltd - The Group provided performance guarantees of approximately RMB 217,993 thousands to Chinese government agencies for the construction progress and continuous operation of domestic projects[48] - A dispute of RMB 73.477 million exists with Fujian Huifeng Construction Engineering Co., Ltd. regarding a construction contract, with litigation ongoing[48] Other Information Employee Information As of June 30, 2024, the Group employed approximately 3,647 staff, predominantly in China, with a total employee cost of RMB 249 million, and compensation policies linked to performance and ongoing training - As of June 30, 2024, the Group employed approximately 3,647 staff, with a male-to-female ratio of 3.44:1, primarily based in China[49] - Total employee costs were RMB 249 million, including basic pension insurance, basic medical insurance, unemployment insurance, work injury insurance, maternity insurance, and housing provident fund[49] - Compensation policies are linked to individual employee performance, benchmarked against prevailing salary trends in the aforementioned regions, and supplemented by continuous training and development programs[49] Purchase, Sale or Redemption of the Company's Listed Securities For the six months ended June 30, 2024, neither the Company nor its subsidiaries purchased, sold, or redeemed any of the Company's listed securities, and the Company held no treasury shares - As of June 30, 2024, the Company held no treasury shares[50] - For the six months ended June 30, 2024, neither the Company nor any of its subsidiaries purchased, sold, or redeemed any of the Company's listed securities[50] Interim Dividends The Board has resolved not to declare an interim dividend for the six months ended June 30, 2024 - The Board has resolved not to declare an interim dividend for the six months ended June 30, 2024 (six months ended June 30, 2023: nil)[51] Significant Acquisitions and Disposals of Subsidiaries, Associates and Joint Ventures Shenzhen Qianhai entered into a capital increase agreement with Shou Chuang Environmental Group and Shou Chuang Sanitation, where Shou Chuang Environmental Group subscribed for approximately 49% of Shou Chuang Sanitation's increased registered capital, with Shou Chuang Sanitation remaining a subsidiary and no gain or loss expected for the Group - Shenzhen Qianhai entered into a capital increase agreement with Beijing Capital Eco-Environmental Protection Group Co., Ltd. and Beijing Capital Sanitation Co., Ltd[51] - Shou Chuang Environmental Group will subscribe for RMB 33.64 million of the increased registered capital in Shou Chuang Sanitation, representing approximately 49% of its enlarged registered capital[51] - Upon completion of the capital increase, Shenzhen Qianhai's equity interest in Shou Chuang Sanitation will be diluted to 51%, with Shou Chuang Sanitation remaining a subsidiary of the Company, and the Group is not expected to record any gain or loss from the capital increase[51][52] Significant Investments Held by the Group For the six months ended June 30, 2024, the Group held no significant investments - For the six months ended June 30, 2024, the Group held no significant investments[52] Future Plans for Material Investments or Capital Assets Other than as disclosed in this announcement, the Group had no future plans for material investments or capital asset acquisitions for the six months ended June 30, 2024 - Other than as disclosed in this announcement, for the six months ended June 30, 2024, the Group had no future plans for material investments or acquisitions of capital assets[52] Events After the Reporting Period Other than as disclosed in this announcement, no significant events affecting the Company occurred from June 30, 2024, to the date of this announcement - Other than as disclosed in this announcement, no significant events affecting the Company occurred from June 30, 2024, to the date of this announcement[53] Corporate Governance Practices The Company has adopted and complied with all applicable code provisions of the Corporate Governance Code set out in Appendix C1 of the HKEX Listing Rules for the six months ended June 30, 2024 - The Company has adopted the principles and code provisions of the Corporate Governance Code set out in Appendix C1 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited[54] - For the six months ended June 30, 2024, the Company has complied with all applicable code provisions of the Corporate Governance Code[54] Standard Code for Securities Transactions by Directors The Company has adopted and its directors have confirmed compliance with the Standard Code for Securities Transactions by Directors of Listed Issuers, as set out in Appendix C3 of the Listing Rules, for the review period - The Company has adopted the Standard Code for Securities Transactions by Directors of Listed Issuers, as set out in Appendix C3 of the Listing Rules, as the code for its directors' dealings in the Company's securities, and it also applies to the Company's senior management[55] - All Directors have confirmed their compliance with the required standards set out in the Standard Code for the six months ended June 30, 2024[55] Audit Committee Review of Interim Results The Audit Committee reviewed the unaudited interim results and report for the six months ended June 30, 2024, confirming compliance with relevant accounting standards, laws, and regulations, with no material discrepancies found by external auditors - The Audit Committee has reviewed the accounting principles and practices adopted by the Group for the six months ended June 30, 2024, and discussed audit, internal control, and financial reporting matters with management[56] - The Audit Committee is of the opinion that the Group's unaudited interim results for the six months ended June 30, 2024, comply with relevant accounting standards, laws, and regulations[56] - The external auditor conducted an independent review in accordance with Hong Kong Standard on Review Engagements 2410 and found no matters that caused them to believe the interim financial information was not prepared, in all material respects, in accordance with HKAS 34[56] Publication of Interim Results and Interim Report This interim results announcement will be published on the Company's and HKEX websites, and the interim report for the six months ended June 30, 2024, will be dispatched to shareholders and published on the websites in due course - This interim results announcement will be published on the Company's website (www.cehl.com.hk) and the HKEX website (www.hkexnews.hk)[57](index=57&type=chunk) - The Company's interim report for the six months ended June 30, 2024, will be dispatched to shareholders and published on the aforementioned websites in due course[57]