新宇环保(00436) - 2024 - 中期业绩

Financial Highlights Overview of Financial Highlights For H1 2024, New Universe Environmental Group's revenue from continuing operations decreased by 17.2%, while net loss and loss attributable to owners of the Company significantly narrowed | Indicator | H1 2024 (HKD thousands) | H1 2023 (HKD thousands) | Change (%) | | :--- | :--- | :--- | :--- | | Revenue from continuing operations | 166,070 | 200,638 | -17.2% | | Net loss | (23,706) | (37,247) | -36.4% | | Loss attributable to owners of the Company | (20,248) | (33,165) | -38.9% | | Basic loss per share (HK cents) | (0.67) | (1.09) | -38.5% | | Indicator | June 30, 2024 (HKD thousands) | December 31, 2023 (HKD thousands) | Change (%) | | :--- | :--- | :--- | :--- | | Equity attributable to owners of the Company | 888,574 | 908,251 | -2.2% | | Cash and cash equivalents | 212,302 | 186,365 | +13.9% | | Bank borrowings | 53,700 | 44,000 | +22.0% | - The Board resolved not to declare a dividend for the six months ended June 30, 2024[1] Condensed Consolidated Financial Statements Condensed Consolidated Statement of Profit or Loss For H1 2024, the Group's continuing operations generated HKD 166,070 thousand revenue, with a net loss of HKD 23,706 thousand, significantly narrowed by the absence of discontinued operations losses | Indicator | H1 2024 (HKD thousands) | H1 2023 (HKD thousands) | | :--- | :--- | :--- | | Revenue (continuing operations) | 166,070 | 200,638 | | Cost of sales | (146,139) | (175,372) | | Gross profit | 19,931 | 25,266 | | Operating loss | (8,725) | (14,529) | | Loss before tax | (18,847) | (23,577) | | Loss from continuing operations | (23,706) | (29,978) | | Loss from discontinued operations | – | (7,269) | | Loss for the period | (23,706) | (37,247) | | Loss attributable to owners of the Company | (20,248) | (33,165) | - Basic and diluted loss per share improved from 0.85 HK cents (continuing operations) and 1.09 HK cents (continuing and discontinued operations) in H1 2023 to 0.67 HK cents in H1 2024[3] Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income For H1 2024, the Group's total comprehensive loss significantly narrowed to HKD 20,895 thousand, driven by a positive fair value change in equity investments and reduced negative exchange differences | Indicator | H1 2024 (HKD thousands) | H1 2023 (HKD thousands) | | :--- | :--- | :--- | | Loss for the period | (23,706) | (37,247) | | Exchange differences (translation of overseas subsidiaries) | (15,892) | (29,219) | | Fair value change of equity investments at fair value through other comprehensive income | 24,200 | (500) | | Other comprehensive income for the period, net of tax | 2,811 | (38,259) | | Total comprehensive loss for the period | (20,895) | (75,506) | | Total comprehensive loss attributable to owners of the Company | (15,019) | (66,498) | - Fair value change of equity investments turned from a loss of HKD 500 thousand in H1 2023 to a gain of HKD 24,200 thousand in H1 2024, positively impacting comprehensive income[4] Condensed Consolidated Statement of Financial Position As of June 30, 2024, the Group's total assets slightly decreased to HKD 1,279,187 thousand, but net current assets increased, driven by significant growth in equity investment fair value and reduced accounts payable | Indicator | June 30, 2024 (HKD thousands) | December 31, 2023 (HKD thousands) | | :--- | :--- | :--- | | Non-current assets | 939,650 | 969,911 | | Current assets | 339,537 | 331,513 | | Current liabilities | 252,771 | 249,980 | | Net current assets | 86,766 | 81,533 | | Total assets | 1,279,187 | 1,301,424 | | Total liabilities | 291,381 | 288,065 | | Net assets | 987,806 | 1,013,359 | | Equity attributable to owners of the Company | 888,574 | 908,251 | - Equity investments at fair value through other comprehensive income increased from HKD 81,500 thousand as of December 31, 2023, to HKD 105,700 thousand as of June 30, 2024[5] - Accounts and notes receivable decreased from HKD 92,617 thousand as of December 31, 2023, to HKD 67,799 thousand as of June 30, 2024, and accounts payable decreased from HKD 59,392 thousand to HKD 39,409 thousand[5] Notes to the Unaudited Interim Financial Statements 1. Basis of Preparation These condensed consolidated interim financial statements are prepared in accordance with the HKEX Listing Rules and HKAS 34 "Interim Financial Reporting" and were approved by the Board on August 21, 2024 - Financial statements prepared in accordance with Appendix D2 of the HKEX Listing Rules and HKAS 34 "Interim Financial Reporting"[7] 2. Changes in Accounting Policies The Group has applied revised HKFRSs issued by the HKICPA, but these changes have no significant impact on the results and financial position of the current or prior periods - Several revised HKFRSs applied, including liability classification, leases, and supplier finance arrangement disclosures[8] - Accounting policy changes have no significant impact on the Group's results and financial position for the current or prior periods[8] 3. Revenue and Segment Information The Group's H1 2024 revenue of HKD 166,070 thousand primarily came from hazardous waste, industrial wastewater treatment, and factory leasing, with the waste treatment segment showing a revenue decrease - Revenue from continuing operations refers to revenue generated from hazardous waste incineration and landfill services, industrial wastewater treatment services, provision of related supporting and management services, and provision of factory facilities[11] | Service Type | H1 2024 (HKD thousands) | H1 2023 (HKD thousands) | | :--- | :--- | :--- | | Hazardous waste incineration and landfill services | 105,297 | 138,808 | | Industrial wastewater treatment and related services | 46,282 | 45,533 | | Rental income from factory facilities | 14,491 | 16,297 | | Total Revenue | 166,070 | 200,638 | - The Group has three reportable segments: industrial and medical waste environmental treatment and disposal services; environmental electroplating wastewater treatment and related services in environmental electroplating zones; and investment in plastic dyeing business[13] 3(c) Segment Results, Assets and Liabilities The waste environmental treatment and disposal segment recorded a pre-tax loss of HKD 27,403 thousand in H1 2024, while the wastewater environmental treatment segment recorded a profit of HKD 12,677 thousand, and the plastic dyeing investment segment contributed a profit of HKD 3,425 thousand | Segment | H1 2024 Revenue (HKD thousands) | H1 2024 Result (HKD thousands) | | :--- | :--- | :--- | | Waste environmental treatment and disposal | 105,297 | (27,403) | | Wastewater environmental treatment, management services, utilities and facilities | 60,773 | 12,677 | | Plastic dyeing investment | 3,745 | 3,425 | | Segment Subtotal | 169,815 | (11,301) | - As of the end of the reporting period, assets for the waste environmental treatment and disposal segment were HKD 848,644 thousand, for the wastewater environmental treatment segment were HKD 305,495 thousand, and for the plastic dyeing investment segment were HKD 109,417 thousand[14] 3(d) Reconciliation of Reportable Segment Revenue, Profit or Loss, Assets and Liabilities This section provides a reconciliation between the segments and the consolidated financial statements, showing the sources of consolidated revenue from continuing operations, loss before tax, total assets, and total liabilities | Indicator | H1 2024 (HKD thousands) | H1 2023 (HKD thousands) | | :--- | :--- | :--- | | Consolidated revenue | 166,070 | 200,638 | | Reportable segment loss | (11,301) | (14,852) | | Unallocated head office and corporate expenses, net | (7,546) | (8,725) | | Consolidated loss before tax | (18,847) | (23,577) | | Indicator | June 30, 2024 (HKD thousands) | December 31, 2023 (HKD thousands) | | :--- | :--- | :--- | | Reportable segment assets | 1,263,556 | 1,278,479 | | Unallocated head office and corporate assets | 15,631 | 22,945 | | Consolidated total assets | 1,279,187 | 1,301,424 | | Consolidated total liabilities | 291,381 | 288,065 | 3(e) Geographical Information All the Group's revenue and non-current assets are generated from and located in China, thus no geographical analysis is presented - All the Group's revenue and non-current assets are generated from and located in China[17] 3(f) Major Customers For the six months ended June 30, 2024, the Group had no major customers whose transactions exceeded 10% or more of total revenue - For the six months ended June 30, 2024, there were no major customers whose transactions exceeded 10% or more of the Group's total revenue[18] 4. Other Income For H1 2024, other income primarily comprised dividend income from equity investments at fair value through other comprehensive income, totaling HKD 3,745 thousand, a slight decrease from the prior year | Source | H1 2024 (HKD thousands) | H1 2023 (HKD thousands) | | :--- | :--- | :--- | | Dividend income from equity investments at fair value through other comprehensive income | 3,745 | 3,945 | 5. Other Revenue For H1 2024, total other revenue was HKD 3,564 thousand, a significant increase from the prior year, mainly due to waivers and discounts received from service providers | Source | H1 2024 (HKD thousands) | H1 2023 (HKD thousands) | | :--- | :--- | :--- | | Waivers and discounts received from service providers | 2,515 | – | | VAT refunds | 62 | 1,031 | | Government grants | – | 41 | | Release of deferred government grants | 816 | 1,054 | | Miscellaneous income | 171 | 392 | | Total | 3,564 | 2,518 | - The net increase in other revenue for the period was mainly due to waivers and discounts received from various service providers[19] 6. Finance Income and Costs For H1 2024, net finance income was HKD 913 thousand, a decrease from the prior year, mainly due to lower interest income from short-term bank deposits and foreign exchange losses, while total finance costs also decreased | Indicator | H1 2024 (HKD thousands) | H1 2023 (HKD thousands) | | :--- | :--- | :--- | | Interest income from short-term bank deposits | 2,052 | 2,655 | | Net foreign exchange (loss)/gain | (225) | 882 | | Total finance income | 1,827 | 3,537 | | Interest expense on bank borrowings | 908 | 2,037 | | Interest expense on lease liabilities | 6 | 14 | | Total finance costs | 914 | 2,051 | | Net finance income | 913 | 1,486 | - The net decrease in finance income was mainly due to a decrease in interest income from free cash flow funds during the period[21] - The net decrease in finance costs was mainly due to the Group's reduction of higher-interest borrowings during the period[21] 7. Loss Before Tax For H1 2024, loss before tax from continuing operations was net of various expenses, with decreases in depreciation of property, plant and equipment and total staff costs, and a significant reduction in other operating expenses due to the absence of site clearance costs | Expense Item | H1 2024 (HKD thousands) | H1 2023 (HKD thousands) | | :--- | :--- | :--- | | Depreciation of property, plant and equipment | 34,500 | 36,154 | | Depreciation of right-of-use assets | 1,619 | 1,632 | | Other operating expenses | 5,738 | 13,291 | | Total staff costs | 38,398 | 43,436 | | Cost of sales | 146,139 | 175,372 | - The net decrease in other operating expenses was mainly due to the absence of site clearance costs for development land in the current period[22] - Incident expenses significantly increased from HKD 20 thousand in H1 2023 to HKD 710 thousand in H1 2024[22] 8. Income Tax For H1 2024, total income tax was HKD 4,859 thousand, a decrease from the prior year, mainly due to lower taxable profits from China operations and changes in China dividend withholding tax | Tax Type | H1 2024 (HKD thousands) | H1 2023 (HKD thousands) | | :--- | :--- | :--- | | China corporate income tax | 4,359 | 4,556 | | Under-provision in prior periods | 267 | 210 | | China dividend withholding tax | – | 1,884 | | Deferred tax (China dividend withholding tax) | – | (1,884) | | Origination and reversal of other temporary differences | 233 | 1,635 | | Total income tax | 4,859 | 6,401 | - The net decrease in income tax was mainly due to lower taxable profits from China operations during the period[24] - China subsidiaries are subject to a corporate income tax rate of 25%, with high-tech enterprises enjoying a preferential rate of 15%[24] 9. Discontinued Operations The Group completed the disposal of its entire interest in subsidiary Jiangsu Yuxin Environmental Engineering Management Co., Ltd. on August 3, 2023, resulting in no losses from discontinued operations in H1 2024, compared to a loss of HKD 7,269 thousand in H1 2023 - The Group completed the disposal of its entire interest in Jiangsu Yuxin Environmental Engineering Management Co., Ltd. on August 3, 2023[25] | Indicator | H1 2024 (HKD thousands) | H1 2023 (HKD thousands) | | :--- | :--- | :--- | | Loss for the period from discontinued operations | – | (7,269) | | Basic and diluted loss per share | – | (0.24) HK cents | 10. Loss Per Share For H1 2024, both basic and diluted loss per share were 0.67 HK cents, an improvement from 1.09 HK cents in the prior year, mainly due to a reduction in loss attributable to owners of the Company | Indicator | H1 2024 | H1 2023 | | :--- | :--- | :--- | | Loss attributable to owners of the Company | HKD 20,248,000 | HKD 33,165,000 | | Weighted average number of ordinary shares in issue | 3,035,697,018 shares | 3,035,697,018 shares | | Basic and diluted loss per share | (0.67) HK cents | (1.09) HK cents | 11. Dividends The Board does not recommend the payment of any interim dividend for the six months ended June 30, 2024 - The Board does not recommend the payment of any interim dividend for the six months ended June 30, 2024[28] 12. Accounts and Notes Receivable As of June 30, 2024, total accounts and notes receivable (net of provision for credit losses) were HKD 67,799 thousand, a significant decrease from December 31, 2023, with a corresponding reduction in credit loss provision | Indicator | June 30, 2024 (HKD thousands) | December 31, 2023 (HKD thousands) | | :--- | :--- | :--- | | Accounts receivable | 63,213 | 73,337 | | Lease receivables | 21,376 | 15,853 | | Notes receivable | 4,149 | 26,823 | | Provision for credit losses | (20,939) | (23,396) | | Total (net) | 67,799 | 92,617 | | Aging | June 30, 2024 (HKD thousands) | December 31, 2023 (HKD thousands) | | :--- | :--- | :--- | | 0 to 30 days | 29,785 | 57,669 | | 31 to 60 days | 14,291 | 9,236 | | 61 to 90 days | 7,831 | 10,694 | | 91 to 180 days | 6,578 | 6,305 | | 181 to 360 days | 6,026 | 3,738 | | Over one year | 3,288 | 4,975 | | Total (net) | 67,799 | 92,617 | - The average credit period for customers of industrial waste, wastewater, and sludge treatment services is generally 60 days, while for customers of regulated medical waste disposal services, it is extended to 180 days[31] 13. Prepayments, Deposits and Other Receivables As of June 30, 2024, total prepayments, deposits, and other receivables were HKD 38,930 thousand, an increase from December 31, 2023, mainly due to an increase in amounts due from a joint venture | Item | June 30, 2024 (HKD thousands) | December 31, 2023 (HKD thousands) | | :--- | :--- | :--- | | Other receivables | 295 | 402 | | Prepayments | 7,930 | 7,990 | | Dividend receivable from equity investments | 3,464 | – | | Amounts due from a joint venture | 16,823 | 13,435 | | Consideration receivable from disposal of a subsidiary | 10,418 | 10,670 | | Total | 38,930 | 32,497 | - Amounts due from a joint venture are unsecured, bear interest at 3.55% to 4.05% per annum, and are subject to agreements with repayment on demand clauses[32] - The outstanding consideration receivable from the disposal of the entire equity interest in Jiangsu Yuxin is due by December 29, 2024, and the Group has urged the buyer to settle the overdue portion[33] 14. Accounts Payable As of June 30, 2024, total accounts payable were HKD 39,409 thousand, a significant decrease from December 31, 2023, and are generally settled within 90 to 180 days | Aging | June 30, 2024 (HKD thousands) | December 31, 2023 (HKD thousands) | | :--- | :--- | :--- | | 0 to 30 days | 9,631 | 12,740 | | 31 to 60 days | 4,278 | 5,422 | | 61 to 90 days | 3,342 | 3,022 | | Over 90 days | 22,158 | 38,208 | | Total | 39,409 | 59,392 | - Accounts payable are interest-free and generally settled within 90 to 180 days[34] 15. Accruals and Other Payables As of June 30, 2024, total accruals and other payables were HKD 153,052 thousand, an increase from December 31, 2023, mainly due to increased payables for property, plant and equipment acquisitions and the recognition of dividends payable to the Company's shareholders | Item | June 30, 2024 (HKD thousands) | December 31, 2023 (HKD thousands) | | :--- | :--- | :--- | | Wages and bonuses payable | 4,834 | 6,627 | | Accounts payable for acquisition of property, plant and equipment | 14,928 | 9,521 | | Accrued costs for land restoration and soil remediation of abandoned plants | 25,753 | 26,377 | | Dividends payable to shareholders of the Company | 4,857 | – | | Dividends payable to non-controlling interests of a subsidiary | 57,336 | 57,466 | | Other payables | 45,344 | 37,383 | | Total | 153,052 | 137,374 | - Dividends payable to non-controlling interests of a subsidiary mainly include amounts attributable to Mr. Xi Yongxiang, Mr. Sun Jiaqing, and Mr. Liu Laigen[35] - Other payables mainly include deposits received, accrued sales expenses, wastewater treatment costs, and maintenance costs[36] Management Discussion and Analysis Business Review The Group's business review covers industrial and medical waste environmental treatment and disposal services, wastewater treatment services in environmental electroplating zones, and strategic investment in plastic dyeing business, with waste treatment service revenue decreasing but profit margins in environmental electroplating zones and plastic dyeing business generally improving Industrial and Medical Waste Environmental Treatment and Disposal Services For H1 2024, revenue from industrial and medical waste environmental treatment and disposal services decreased by 24.1% to HKD 105,297 thousand, leading to an expanded pre-tax loss due to reduced revenue and increased costs | Waste Type | H1 2024 Collected & Disposed Waste (tonnes) | H1 2024 Segment Revenue (HKD thousands) | H1 2023 Collected & Disposed Waste (tonnes) | H1 2023 Segment Revenue (HKD thousands) | | :--- | :--- | :--- | :--- | :--- | | Hazardous industrial waste | 41,946 | 83,318 | 40,623 | 115,910 | | Regulated medical waste | 3,645 | 17,521 | 4,237 | 21,678 | | General industrial waste and others | – | 4,458 | 932 | 1,220 | | Total | 45,591 | 105,297 | 45,792 | 138,808 | - The Group's share of net profit from associate Zhenjiang Xinqu increased, but its share of net losses from Nanjing Tianyu and joint venture Xinyu Rongkai persisted[38][39] - Xinyu Rongkai's hazardous industrial waste operating license expired in October 2023, pending renewal approval, and facilities are temporarily suspended[40] Environmental Electroplating Wastewater Treatment Services in Environmental Electroplating Zones For H1 2024, revenue from environmental electroplating wastewater treatment services slightly decreased to HKD 60,773 thousand, but the pre-tax segment profit margin significantly improved to 20.9%, with increased wastewater treatment volume and average utilization | Service Type | H1 2024 Segment Revenue (HKD thousands) | H1 2023 Segment Revenue (HKD thousands) | | :--- | :--- | :--- | | Industrial wastewater treatment and provision of utility support and management services | 46,282 | 45,533 | | Rental of plants and facilities | 14,491 | 16,297 | | Total | 60,773 | 61,830 | | Indicator | H1 2024 | H1 2023 | | :--- | :--- | :--- | | Pre-tax segment profit margin | 20.9% | 13.0% | | Average utilization rate of plant buildings and facilities | 86.2% | 91.8% | | Electroplating wastewater treated by centralized wastewater treatment plant (tonnes) | 182,526 | 141,559 | | Average utilization rate of wastewater treatment volume | 20.3% | 15.7% | - The environmental electroplating zone currently has 22 factory buildings leased by 33 manufacturing customers, a slight decrease from 35 at the end of last year[44] Strategic Investment in Plastic Dyeing Business The Group's equity investments in three plastic dyeing entities saw improved pre-tax profit margins for Suzhou Xinhua Mei, Danyang Xinhua Mei, and Qingdao Huamei in H1 2024, with HKD 3,745 thousand in dividends declared | Company | H1 2024 Pre-tax Profit Margin | H1 2023 Pre-tax Profit Margin | | :--- | :--- | :--- | | Suzhou Xinhua Mei | 2.6% | 0.3% | | Danyang Xinhua Mei | 2.7% | 1.8% | | Qingdao Huamei | 5.9% | 4.2% | - For H1 2024, Suzhou Xinhua Mei, Danyang Xinhua Mei, and Qingdao Huamei declared total dividends of approximately HKD 3,745 thousand for their 2023 performance, expected to be distributed in Q4 of this year[45] Outlook The Group continues to face revenue challenges from declining market prices for hazardous waste incineration treatment services in Jiangsu Province, China, and will focus on environmental businesses, explore restructuring, and consider restarting loss-making units to improve profitability - The Group continues to face revenue reduction due to declining market prices for hazardous waste incineration treatment services in Jiangsu Province, China[46] - The Group will continue to focus on environmental-related businesses, prudently explore business restructuring and industrial upgrading opportunities to enhance the sustainable performance of its environmental businesses[46] - The Group will also consider restarting certain temporarily suspended loss-making units once market conditions regain vitality[46] Financial Review The Group's H1 2024 total revenue decreased by 17.2%, with a slight gross margin decline, but significant other revenue growth and improved impairment loss reversal led to a substantial reduction in period loss and loss attributable to owners | Indicator | H1 2024 (HKD thousands) | H1 2023 (HKD thousands) | Change (%) | | :--- | :--- | :--- | :--- | | Total revenue | 166,070 | 200,638 | -17.2 | | Average gross profit margin | 12.0% | 12.6% | -4.8 | | Other income | 3,745 | 3,945 | -5.1 | | Other revenue | 3,564 | 2,518 | +41.5 | | Impairment loss reversal/(impairment loss) on accounts receivable, net | 1,927 | (13) | – | | Loss for the period | (23,706) | (37,247) | -36.4 | | Loss attributable to owners of the Company | (20,248) | (33,165) | -38.9 | | Adjusted EBITDA | 29,221 | 26,794 | +9.1 | - The net decrease in total revenue was mainly due to the continuous decline in average unit treatment prices for industrial and medical waste environmental treatment and disposal services in Jiangsu Province, China[48] - The reduction in the Group's loss, net loss attributable to owners of the Company, and loss per share was mainly attributable to improved performance of industrial wastewater environmental treatment services in the environmental electroplating zone, and the absence of losses from discontinued operations in the current period[49] Operating Seasonality The demand for environmental hazardous waste treatment and disposal services in Jiangsu Province generally increases in the first half of the year, with the business generating approximately HKD 239,160 thousand in revenue and a pre-tax loss of HKD 21,228 thousand for the twelve months ended June 30, 2024 - Demand for environmental hazardous waste treatment and disposal services in Jiangsu Province generally increases in the first half of the year[50] | Indicator | 12 months ended June 30, 2024 | 12 months ended June 30, 2023 | | :--- | :--- | :--- | | Revenue from integrated hazardous waste treatment and disposal services | HKD 239,160 thousand | HKD 325,479 thousand | | Waste collected and disposed | 96,485 tonnes | 96,274 tonnes | | Loss before tax | HKD 21,228 thousand | HKD 23,130 thousand | Capital Expenditure For H1 2024, the Group's capital expenditure for the environmental hazardous waste treatment and disposal services operating segment was approximately HKD 1,220 thousand, while for industrial wastewater and sludge treatment services in the environmental electroplating zone, it was approximately HKD 10,515 thousand | Item | H1 2024 (HKD thousands) | H1 2023 (HKD thousands) | | :--- | :--- | :--- | | Property, plant and equipment for environmental hazardous waste treatment and disposal services operating segment | 1,220 | 7,041 | | Property, plant and equipment for industrial wastewater and sludge treatment services and provision of facilities and support in environmental electroplating zone operating segment | 10,515 | 9,078 | Capital Commitments As of the reporting period end, the Group's total contracted but unprovided capital commitments amounted to HKD 31,455 thousand, primarily for capital expenditure on property, plant and equipment, and contributions to an equity investment | Item | June 30, 2024 (HKD thousands) | December 31, 2023 (HKD thousands) | | :--- | :--- | :--- | | Capital expenditure on property, plant and equipment | 31,455 | 44,084 | | Contribution to an equity investment | 15,976 | 15,976 | - Zhenjiang Xinyu will further invest USD 15,000,000 for expansion plans, including new incinerators, technological upgrades, and optimization of other facilities, with an additional capital injection of USD 5,000,000 pending approval from relevant Chinese government authorities[53] Liquidity and Financial Resources The Group maintains a moderately sound financial position, with cash and cash equivalents increasing to HKD 212,302 thousand as of June 30, 2024, and a current ratio of 1.34 times and gearing ratio of 5.5%, indicating good liquidity and a stable capital structure - The Group utilizes its internally generated cash flows and bank financing to fund its operations, settle its debts and liabilities as they fall due, and will fund its contracted capital commitments[54] | Indicator | June 30, 2024 (HKD thousands) | December 31, 2023 (HKD thousands) | | :--- | :--- | :--- | | Cash and cash equivalents | 212,302 | 186,365 | | Available unutilized unsecured bank facilities | 139,778 | 153,300 | | Current ratio | 1.34 times | 1.33 times | | Gearing ratio | 5.5% | 4.4% | | Borrowing Type | June 30, 2024 (HKD thousands) | December 31, 2023 (HKD thousands) | | :--- | :--- | :--- | | Secured RMB bank borrowings | 21,480 | 22,000 | | Unsecured RMB bank borrowings | 32,220 | 22,000 | | Total bank borrowings | 53,700 | 44,000 | | Lease liabilities | 164 | 332 | | Total interest-bearing borrowings | 53,864 | 44,332 | Capital Structure There were no significant changes in the Company's capital structure as of June 30, 2024, compared to December 31, 2023 - There were no significant changes in the Company's capital structure as of June 30, 2024, compared to December 31, 2023[62] Significant Acquisitions and Disposals of Subsidiaries, Associates and Joint Ventures The Company had no other significant investments or significant acquisitions and disposals of subsidiaries, associates, and joint ventures during the six months ended June 30, 2024 - The Company had no other significant investments or significant acquisitions and disposals of subsidiaries, associates, and joint ventures during the six months ended June 30, 2024[63] Significant Investments Held and Their Performance As of June 30, 2024, the Group's total fair value of equity investments in Suzhou Xinhua Mei, Danyang Xinhua Mei, and Qingdao Huamei was HKD 105,700 thousand, an increase from December 31, 2023, with improved operating profit before tax for each company | Company | Group's Interest | H1 2024 Operating Profit Before Tax (HKD thousands) | H1 2023 Operating Profit Before Tax (HKD thousands) | Group's Share of Fair Value as of June 30, 2024 (HKD thousands) | Group's Share of Fair Value as of December 31, 2023 (HKD thousands) | | :--- | :--- | :--- | :--- | :--- | :--- | | Suzhou Xinhua Mei | 18.62% | 3,347 | 2,561 | 12,200 | 7,000 | | Danyang Xinhua Mei | 24.50% | 4,286 | 3,644 | 11,100 | 7,600 | | Qingdao Huamei | 28.67% | 18,538 | 10,812 | 82,400 | 66,900 | | Total | | 26,171 | 17,017 | 105,700 | 81,500 | - As of June 30, 2024, the fair values of unlisted equity investments in Suzhou Xinhua Mei, Danyang Xinhua Mei, and Qingdao Huamei accounted for 1.0%, 0.9%, and 6.4% of the Group's total assets, respectively (December 31, 2023: 0.5%, 0.6%, and 5.1%)[65] Impairment Test on Goodwill For H1 2024, the Group conducted an impairment test on goodwill and determined that no impairment loss was necessary, based on cash flow forecasts for Zhenjiang Xinyu and Yancheng Yuxin Solid Waste Disposal Co., Ltd., using a pre-tax discount rate of 15.75% - Goodwill impairment test based on cash flow forecasts for cash-generating units (Zhenjiang Xinyu and Yancheng Yuxin) operating at licensed incineration and disposal capacity with a 2% growth rate[66] - The assessment used a pre-tax discount rate of 15.75% (December 31, 2023: 16.12%)[66] - For the six months ended June 30, 2024, no impairment loss on goodwill was deemed necessary[66] Impairment Test on Interest in an Associate (Nanjing Tianyu) As of June 30, 2024, the Group conducted an impairment test on its interest in Nanjing Tianyu and determined that no impairment loss was necessary, based on cash flow forecasts using a pre-tax discount rate of 13.46% - The recoverable amount of the interest in Nanjing Tianyu was assessed based on its cash flow forecasts operating at licensed incineration and disposal capacity (38,000 tonnes of hazardous industrial waste per annum) with a 2% growth rate[67] - The assessment used a pre-tax discount rate of 13.46% (December 31, 2023: 15.57%)[67] - For the six months ended June 30, 2024, the Group determined that no impairment loss on its interest in Nanjing Tianyu was necessary[67] Pledged Assets As of June 30, 2024, the Group pledged certain property, plant and equipment and land use rights as collateral for bank credit, with a total carrying value of HKD 59,403 thousand and secured bank borrowings of HKD 21,480 thousand | Collateral Type | June 30, 2024 Carrying Value (HKD thousands) | December 31, 2023 Carrying Value (HKD thousands) | | :--- | :--- | :--- | | Property, plant and equipment | 51,981 | 57,483 | | Land use rights | 7,422 | 7,692 | | Total | 59,403 | 65,175 | | Secured bank borrowings | 21,480 | 22,000 | Contingent Liabilities The Group faces legal proceedings against subsidiary NUET(JS) involving unpaid dividends and related interest, with a property preservation order granted for 38.54% equity interest in Zhenjiang Xinyu, though directors believe it will not adversely affect normal operations - NUET(JS) faces legal proceedings from two shareholders demanding payment of declared and unpaid dividends of HKD 26,579,113.60 and related interest[70] - The court granted a property preservation order for each plaintiff's application, preserving 38.54% of Zhenjiang Xinyu's equity interest, valid until March 17, 2025[70] - The first-instance judgment dismissed the plaintiff's claims, but the plaintiff has appealed, and the case has been heard, awaiting further judgment[71] Employee Information As of June 30, 2024, the Group's continuing operations employed 425 full-time employees, a decrease from 2023, with staff costs amounting to HKD 38,398 thousand, and a remuneration policy emphasizing motivation and performance with various benefits | Indicator | June 30, 2024 | June 30, 2023 | | :--- | :--- | :--- | | Total full-time employees | 425 | 584 | | Hong Kong employees | 16 | 17 | | China employees | 409 | 567 | | Staff costs (including directors' emoluments) | HKD 38,398 thousand | HKD 43,436 thousand | - The Group's remuneration policy emphasizes employee motivation and performance, offering share option schemes, bonuses, medical insurance, MPF contributions (Hong Kong), and China statutory social insurance benefits[72] Foreign Currency Risk The Group primarily operates in China, facing foreign currency risk from RMB exchange rate fluctuations against HKD, which resulted in a negative exchange difference of approximately HKD 19,839 thousand recognized in other comprehensive income for H1 2024 - The Group primarily operates in China, with most transactions, assets, and liabilities denominated in RMB, facing exchange rate fluctuation risk between RMB and HKD[73] - For the six months ended June 30, 2024, the average depreciation of RMB against HKD resulted in an overall negative exchange difference of approximately HKD 19,839 thousand (2023: HKD 37,329 thousand), recognized in other comprehensive income[73] Interest Rate Risk As of June 30, 2024, the Group's bank borrowings are managed with a mix of fixed and floating interest rates, with RMB-denominated bank borrowings bearing fixed interest rates ranging from 3.20% to 3.50% per annum - The Group's bank borrowings are managed using a mix of fixed and floating interest rates to minimize risk[74] - RMB-denominated bank borrowings bear different fixed interest rates ranging from 3.20% to 3.50% per annum (December 31, 2023: 3.20% to 4.00%)[74] Credit Risk The Group's credit risk primarily arises from accounts receivable, lease receivables, and other receivables, with a provision for credit losses of approximately HKD 20,939 thousand as of June 30, 2024, representing 23.6% of the gross carrying amount - The Group's credit risk primarily arises from accounts receivable, lease receivables, and other receivables, with limited credit risk from cash and cash equivalents and notes receivable from banks and financial institutions[75] - As of June 30, 2024, 4.6% and 10.7% of the gross amounts of accounts receivable and lease receivables were due from the Group's largest customer and top five customers, respectively[75] | Indicator | June 30, 2024 (HKD thousands) | December 31, 2023 (HKD thousands) | | :--- | :--- | :--- | | Amount of provision for credit losses | 20,939 | 23,396 | | Gross carrying amount of accounts receivable, lease receivables and notes receivable | 88,738 | 116,013 | | Provision ratio | 23.6% | 20.17% | Key Risks and Uncertainties Related to the Company's Business Operations The Group faces continuous revenue decline and losses in its industrial hazardous waste integrated treatment and disposal services business segment in China due to market price drops and manufacturing uncertainties, and will mitigate this through market penetration, business restructuring, and industrial upgrading - The Group's business segment providing integrated industrial hazardous waste treatment and disposal services in China faces continuous revenue decline and losses[76] - Uncertainties and challenges faced by local manufacturing and chemical industries may exert pressure on hazardous waste disposal pricing for the Group's specific customer base[76] - The Group will continue to engage in environmental-related businesses, strengthen business strategies for market penetration in different geographical areas, prudently explore business restructuring and industrial upgrading to reduce reliance on specific markets and further investments[76] Dividends The Board does not recommend the payment of an interim dividend for the six months ended June 30, 2024, while the final dividend for the fiscal year ended 2023 was paid on July 31, 2024 - The Board does not recommend the payment of an interim dividend for the six months ended June 30, 2024[77] - The final dividend for the fiscal year ended December 31, 2023, was HKD 0.0016 per ordinary share, totaling approximately HKD 4,857 thousand, paid on July 31, 2024[77] Other Information Changes in Directors' Information There were no significant changes in directors' information during the six months ended June 30, 2024 - There were no significant changes in directors' information during the six months ended June 30, 2024[78] Management Information There were no significant changes in the Company's management team members' information during the six months ended June 30, 2024 - There were no significant changes in the Company's management team members' information during the six months ended June 30, 2024[80] Purchase, Sale or Redemption of the Company's Listed Securities Neither the Company nor any of its subsidiaries purchased, sold, or redeemed any of the Company's listed securities during 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 during the six months ended June 30, 2024[81] Changes to Constitutional Documents Amendments to the Company's articles of association were approved by shareholders at the Annual General Meeting on May 24, 2024, primarily to comply with Listing Rules requirements for electronic dissemination of corporate communications - Amendments to the Company's articles of association were approved by shareholders at the Company's Annual General Meeting held on May 24, 2024[82] - The relevant amendments primarily updated the Company's articles to comply with the Listing Rules' amendments regarding electronic dissemination of corporate communications to shareholders[82] Events After Reporting Period There were no significant events after the six months ended June 30, 2024, and up to the date of this announcement, for the Company or the Group - There were no significant events after the six months ended June 30, 2024, and up to the date of this announcement, for the Company or the Group[83] Corporate Governance Practices The Company is committed to establishing good corporate governance practices and complied with all code provisions of the Corporate Governance Code for the six months ended June 30, 2024, except for code provision C.2.1 regarding the separation of Chairman and CEO roles - The Company complied with all code provisions of the Corporate Governance Code set out in Part 2 of Appendix C1 of the Listing Rules, except for code provision C.2.1[85] - Mr. Xi Yu serves concurrently as Chairman of the Board and Chief Executive Officer of the Company, constituting a deviation from code provision C.2.1 of the Corporate Governance Code[86] - The Board believes that the combined roles of Chairman and Chief Executive Officer facilitate the execution of the Group's business strategies and maximize operational efficiency, but will continue to review and consider separating the roles when appropriate[86] Standard Code for Securities Transactions by Directors The Company has adopted the Standard Code as set out in Appendix C3 of the Listing Rules as the code of conduct for directors' securities transactions, and directors confirmed full compliance during the six months ended June 30, 2024 - 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[87] - Directors confirmed their full compliance with the required dealing standards set out in the Standard Code during the six months ended June 30, 2024[87] Connected Transactions The Group had no discloseable connected transactions during the reporting period or at any time during the six months ended June 30, 2024 - The Group had no discloseable connected transactions during the reporting period or at any time during the six months ended June 30, 2024[88] Financial Assistance and Guarantees to an Affiliate The Company provided bank loan guarantees for joint venture Xinyu Rongkai, totaling RMB 120,000,000 and RMB 9,000,000, and also provided unsecured loans and advances for its construction and general operating purposes - The Company and its joint venture partner jointly guaranteed bank loan facilities for Xinyu Rongkai totaling RMB 120,000,000 (approximately HKD 128,880,000), effective until December 31, 2027[89] - The Company provided a guarantee for Xinyu Rongkai's short-term bank facility totaling RMB 9,000,000 (approximately HKD 9,666,000), with a guaranteed amount of RMB 5,850,000 (approximately HKD 6,283,000), effective until December 4, 2027[90] - The Group provided an unsecured loan of RMB 10,075,000 (approximately HKD 10,821,000) to Xinyu Rongkai under a JV loan agreement, bearing interest at 4.05% per annum, and provided unsecured advances of approximately HKD 16,823,000[91] Directors' Service Contracts No director has entered into a service contract with the Company that is not terminable within one year without payment of compensation (other than statutory compensation) - No director has entered into a service contract with the Company that is not terminable within one year without payment of compensation (other than statutory compensation)[93] Directors' Interests in Material Contracts Executive Directors Mr. Xi Yu and Ms. Zhang Xiaoling have interests in a transaction involving the Group's lease of office property, conducted on terms no less favorable than those available from independent third parties and falling within the Listing Rules' exemption level - Executive Directors Mr. Xi Yu and Ms. Zhang Xiaoling are also directors of the landlord, New Art International Investment Limited[94] - The Company's indirect wholly-owned subsidiary, Huike Resources Limited, entered into a lease agreement with New Art International Investment Limited for office property in Hong Kong, with a monthly rent of HKD 80,000[94][95] - The above transaction was conducted in the ordinary course of the Group's business on terms no less favorable than those available from independent third parties and falls within the de minimis exemption under Rule 14A.76(1)(a) of the Listing Rules[95] Directors' Interests in Competing Interests Executive Director Ms. Liu Yujie holds investments in companies operating hazardous waste projects in four cities in China, but due to the exclusivity of operating licenses and the Group's lack of relevant operations, her investments do not constitute competition with the Group - Executive Director Ms. Liu Yujie holds investments in four companies operating hazardous waste projects in four cities in China, with a controlling interest in one of them[96] - Due to the exclusivity of operating licenses for hazardous waste operations in each of the aforementioned four cities, and the Group having no relevant operations in those cities, the Board believes Ms. Liu Yujie's investments do not compete with the Group's interests[96] Public Float Based on publicly available information and to the best of the directors' knowledge, the Company maintained a sufficient public float of not less than 25% of its issued shares as required by the Listing Rules during the six months ended June 30, 2024 - For the six months ended June 30, 2024, the Company maintained a sufficient public float of not less than 25% of its issued shares as required by the Listing Rules[97] Compliance with Relevant Laws and Regulations The Group prioritizes legal and regulatory compliance and has engaged financial and legal advisors, and for the six months ended June 30, 2024, was not aware of any material non-compliance with relevant laws and regulations - The Group prioritizes legal and regulatory requirements in formulating its policies and practices and has engaged financial and legal advisors[98] - For the six months ended June 30, 2024, the Group was not aware of any material non-compliance with relevant laws and regulations that would significantly impact the Group's business and operations[99] Audit Committee Review The Company's Audit Committee has reviewed the Company's unaudited consolidated financial results and financial information for the six months ended June 30, 2024, with management - The Audit Committee, comprising three independent non-executive directors, has reviewed the Company's unaudited consolidated financial results and financial information for the six months ended June 30, 2024, with management[100] Independent Review of Interim Financial Results The Company's condensed consolidated financial statements for the six months ended June 30, 2024, have been reviewed by independent auditor Crowe (HK) CPA Limited, with no material discrepancies found - The Company's condensed consolidated financial statements for the six months ended June 30, 2024, have been reviewed by independent auditor Crowe (HK) CPA Limited in accordance with Hong Kong Standard on Review Engagements 2410[101] - The auditor did not identify any matters that caused them to believe that the interim financial report was not prepared in all material respects in accordance with Hong Kong Accounting Standard 34 "Interim Financial Reporting"[101] Publication of Interim Results on HKEX and Company Website This interim results announcement has been published on the Company's website and the HKEX website, and the interim results report will be published for review in due course - This interim results announcement is published on the Company's website (www.nuigl.com) and the HKEX website (www.hkexnews.hk)[102](index=102&type=chunk)