维港环保科技(01845) - 2019 - 年度财报

Company Profile Company Profile Veikong Environmental Technology, listed on HKEX in 2019, is a leading Chinese hazardous waste incineration solution provider expanding into new solid waste treatment technologies - By the end of 2019, the company had completed 20 hazardous waste incineration projects with a cumulative designed annual disposal capacity of 435,000 tons; it also held 18 projects under construction with a designed annual disposal capacity of 458,000 tons, indicating continuous business expansion[5] - The company's business has successfully expanded from hazardous waste incineration to new solid waste treatment areas including oil sludge thermal desorption, solid waste anaerobic pyrolysis, and cement kiln co-processing[5] Corporate Information Corporate Information This section details the company's core organizational structure and key partners, including board members, executives, and advisors - Mr. Cai Zhuhua serves as the Chairman of the Board, while Mr. Feng Tao and Mr. Cai Zhuhua chair the Audit, Remuneration, and Nomination Committees respectively[8] - The company's auditor and reporting accountant is Tianzhi Hong Kong Certified Public Accountants Limited[10] - The company's shares were listed on the Hong Kong Stock Exchange on January 3, 2019, with stock code 1845[14] FINANCIAL SUMMARY FINANCIAL SUMMARY The Group achieved strong financial performance in FY2019, with revenue growing 12.0% to RMB 537.5 million and net profit surging 35.9% to RMB 78 million 2019 Financial Year Key Financial Indicators | Indicator | 2019 (RMB thousands) | 2018 (RMB thousands) | YoY Change | | :--- | :--- | :--- | :--- | | Revenue | 537,509 | 480,091 | +12.0% | | Gross Profit | 144,236 | 124,663 | +15.6% | | Gross Margin | 26.8% | 26.0% | +0.8pp | | Profit for the Year | 78,031 | 57,411 | +35.9% | | Net Margin | 14.5% | 12.0% | +2.5pp | | Profit Attributable to Owners of the Company | 66,984 | 49,799 | +34.5% | | Basic Earnings Per Share (RMB) | 0.050 | 0.049 | +2.0% | Balance Sheet Summary (Year-End) | Indicator | 2019 (RMB thousands) | 2018 (RMB thousands) | YoY Change | | :--- | :--- | :--- | :--- | | Total Assets | 802,027 | 469,735 | +70.7% | | Total Liabilities | 227,886 | 310,445 | -26.6% | | Equity Attributable to Owners of the Company | 516,815 | 132,070 | +291.3% | CHAIRMAN'S STATEMENT CHAIRMAN'S STATEMENT Chairman Cai Zhuhua highlights 2019 as a milestone year with the HKEX listing, emphasizing the Group's strategic focus on technology commercialization and business expansion - Successful listing on the Main Board of the Hong Kong Stock Exchange on January 3, 2019, marked a significant breakthrough and new starting point for the Group[22][25] - Looking ahead, the Group will continue to focus on technological innovation, commercializing advanced solid waste treatment technologies to seize more market opportunities and maintain its leading market position[23][26] MANAGEMENT DISCUSSION AND ANALYSIS I. BUSINESS REVIEW In 2019, the core hazardous waste incineration business expanded, adding 220,000 tons of annual capacity, while new ventures like oil sludge thermal desorption generated RMB 45.4 million in revenue 2019 Hazardous Waste Incineration Projects Overview | Project Status | Quantity | Cumulative Designed Annual Disposal Capacity | | :--- | :--- | :--- | | Completed in 2019 | 8 projects | Approximately 220,000 tons | | Under Construction as of Year-End | 18 projects | Approximately 458,000 tons | - Oil sludge thermal desorption solutions business generated RMB 45.4 million in revenue in 2019, demonstrating strong growth momentum for this new business line[63] - The company signed contracts with renowned cement producers for cement kiln co-processing of hazardous waste projects, expected to commence operations in 2020, marking the official launch of its business in this sector[63] II. FINANCIAL POSITION AND OPERATING RESULTS The Group's FY2019 operating results showed significant growth, with total revenue up 12.0% to RMB 537.5 million and net profit surging 35.9% to RMB 78 million, while the gearing ratio improved to 28.4% 2019 Revenue Composition and Year-on-Year Change | Business Segment | 2019 Revenue (RMB millions) | 2018 Revenue (RMB millions) | YoY Change | | :--- | :--- | :--- | :--- | | Hazardous Waste Incineration Solutions | 453.0 | 444.8 | +1.8% | | Oil Sludge Thermal Desorption Solutions | 45.4 | 10.7 | +324.3% | | Anaerobic Pyrolysis Solid Waste Disposal | 22.8 | 4.1 | +456.1% | | Other Services | 16.3 | 20.5 | -20.5% | | Total | 537.5 | 480.1 | +12.0% | Gross Profit and Gross Margin by Business Segment | Business Segment | 2019 Gross Profit (RMB millions) | 2019 Gross Margin | 2018 Gross Margin | | :--- | :--- | :--- | :--- | | Hazardous Waste Incineration Solutions | 99.4 | 21.9% | 25.5% | | Oil Sludge Thermal Desorption Services | 30.6 | 67.4% | 73.8% | | Anaerobic Pyrolysis Solid Waste Disposal | 10.3 | 45.2% | 29.3% | | Total | 144.2 | 26.8% | 26.0% | - Gross margin for the core hazardous waste incineration solutions business decreased from 25.5% to 21.9%, primarily due to intense market competition leading to project price adjustments and the procurement of higher-cost equipment materials to enhance system quality[85][86] - Net profit margin increased from 12.0% to 14.5%, mainly attributable to higher gross margin and the absence of listing expenses in 2019 (RMB 12.3 million in 2018)[92][99] - The gearing ratio (total liabilities/total assets) significantly decreased from 66.1% in 2018 to 28.4% in 2019, indicating a substantial optimization of the company's financial structure post-listing[105] III. PROSPECTS The Group's future strategy focuses on consolidating hazardous waste market leadership, industrializing anaerobic pyrolysis, exploring new project models, and leveraging capital markets for expansion - Future strategy will focus on four key directions: consolidating leadership in hazardous waste incineration, industrializing anaerobic pyrolysis technology, exploring new project models (e.g., O&M services), and leveraging the capital market platform for expansion[111][115] IPO Proceeds Usage and Status (As of December 31, 2019) | Purpose | Net Proceeds (RMB millions) | Amount Utilized (RMB millions) | Unutilized Amount (RMB millions) | | :--- | :--- | :--- | :--- | | Utilization of Anaerobic Pyrolysis Technology | 90.9 | 63.1 | 27.8 | | Establishment of Research and Engineering Center | 45.4 | — | 45.4 | | Commercialization of Oil Sludge Thermal Desorption Technology | 34.1 | 8.6 | 25.5 | | Investment in Cement Kiln Co-processing | 34.1 | 13.1 | 21.0 | | Working Capital and General Corporate Purposes | 22.7 | 22.7 | — | | Total | 227.2 | 107.5 | 119.7 | - The company adopted a dividend policy on March 26, 2019, but without a predetermined payout ratio; dividend distribution will be at the Board's discretion based on the Group's business conditions, capital needs, and profitability[122] DIRECTORS AND SENIOR MANAGEMENT DIRECTORS AND SENIOR MANAGEMENT This section outlines the backgrounds and responsibilities of the company's board members and senior management, highlighting their extensive industry experience - The executive director team consists of Mr. Cai Zhuhua (Chairman), Mr. Dong Honghui, and Mr. Deng Zhaoshan, all possessing over 12 years of extensive experience in solid waste treatment[124][127][131] - Senior management includes Chief Scientist Dr. Wang Zhicheng, who has over 18 years of experience in the environmental industry and is an inventor or designer of multiple anaerobic pyrolysis technology patents[148][152] CORPORATE GOVERNANCE REPORT CORPORATE GOVERNANCE REPORT The company maintained high corporate governance standards, complying with HKEX code provisions, with the Board overseeing risk management and internal controls through its independent committees - The company complied with the Corporate Governance Code, with the sole deviation being the combined roles of Chairman and Chief Executive held by Mr. Cai Zhuhua, which the Board believes allows for more effective long-term strategic planning and execution[161][195] - The Board has three committees: Audit, Remuneration, and Nomination, with Mr. Feng Tao, an independent non-executive director, chairing both the Audit and Remuneration Committees, ensuring their independence[219][227][235] - The Board is responsible for maintaining adequate risk management and internal control systems, with annual effectiveness reviews conducted by the Audit Committee. The risk management system is implemented at departmental, internal audit, and Board levels[257] Environmental, Social and Governance REPORT Environmental, Social and Governance REPORT This report details the Group's 2019 ESG performance, focusing on health and safety, product responsibility, and resource usage, alongside social and environmental impact data - The company identified health and safety, product responsibility, and resource usage as the three material aspects for this year's ESG report[281][283] 2019 Key Environmental Performance Indicators | Indicator Type | Indicator | 2019 Data | | :--- | :--- | :--- | | Greenhouse Gas Emissions | Total Scope 1 + Scope 2 Emissions | Approximately 6,001.25 tons CO2e | | Exhaust Gas Emissions | Nitrogen Oxides (NOx) | Approximately 1,784.26 kg | | | Sulfur Oxides (SOx) | Approximately 144.97 kg | | Solid Waste | Reduced Soil (from oil sludge treatment) | 129,373 tons | | | Domestic Solid Waste | Approximately 30 tons | | Resource Consumption | Total Electricity Consumption | Approximately 1,949,592 kWh | | | Total Water Consumption | Approximately 102,266.3 tons | - Regarding social responsibility, the company's total workforce increased to approximately 228 employees, a 15.7% year-on-year growth. The company provided employees with various professional development training, including waste battery disposal technology, project risk analysis, and safety training[297][312] DIRECTORS' REPORT DIRECTORS' REPORT This report provides statutory information for FY2019, including the Board's decision not to declare a dividend, customer concentration, and details on shareholdings and the pre-IPO share option scheme - The Board has resolved not to declare a final dividend for the year ended December 31, 2019[375] - The company has high customer concentration, with the largest customer accounting for 24.1% of revenue, and the top five customers collectively accounting for 61.5%[381] - As of the end of 2019, there were 44,453,389 unexercised share options under the pre-IPO share option scheme, representing approximately 3.3% of the issued share capital[414][417] - The independent non-executive directors have reviewed the controlling shareholder's non-compete undertaking and confirmed no breaches occurred during the reporting period[427] INDEPENDENT AUDITOR'S REPORT INDEPENDENT AUDITOR'S REPORT The auditor issued an unqualified opinion on the 2019 consolidated financial statements, highlighting revenue recognition and impairment of receivables as key audit matters - The auditor issued an unqualified opinion on the 2019 consolidated financial statements[441][443] - Key Audit Matter One: Revenue recognition for hazardous waste incineration solutions. This is considered a key audit matter due to the use of the input method (percentage of completion) for revenue recognition, which involves significant estimates of total contract costs[451] - Key Audit Matter Two: Estimated impairment of trade receivables and contract assets. This is listed as a key audit matter due to its materiality to the statement of financial position and the significant management judgment involved in assessing Expected Credit Losses (ECL)[458] FINANCIAL STATEMENTS AND NOTES TO THE FINANCIAL STATEMENTS Consolidated statement of profit or loss and other comprehensive income In FY2019, the Group's revenue grew 12.0% to RMB 537.5 million, with gross profit up 15.6% and profit for the year increasing 35.9% to RMB 78.03 million Consolidated Statement of Profit or Loss Summary | Item (RMB thousands) | 2019 | 2018 | | :--- | :--- | :--- | | Revenue | 537,509 | 480,091 | | Gross Profit | 144,236 | 124,663 | | Profit Before Tax | 91,122 | 67,970 | | Profit for the Year | 78,031 | 57,411 | | Profit Attributable to Owners of the Company | 66,984 | 49,799 | | Basic Earnings Per Share (RMB) | 0.050 | 0.049 | Consolidated statement of financial position As of 2019 year-end, total assets surged to RMB 802 million, total liabilities decreased to RMB 228 million, and shareholder equity significantly improved to RMB 574 million Consolidated Statement of Financial Position Summary | Item (RMB thousands) | 2019 December 31 | 2018 December 31 | | :--- | :--- | :--- | | Assets | | | | Non-current Assets | 150,885 | 68,916 | | Current Assets | 651,142 | 400,819 | | Total Assets | 802,027 | 469,735 | | Liabilities and Equity | | | | Current Liabilities | 223,927 | 210,544 | | Non-current Liabilities | 3,959 | 99,901 | | Total Liabilities | 227,886 | 310,445 | | Total Equity | 574,141 | 159,290 | Consolidated statement of cash flows In 2019, operating activities resulted in a net cash outflow of RMB 52.8 million, while financing activities generated a net inflow of RMB 247.6 million, leading to a year-end cash balance of RMB 142.2 million Consolidated Statement of Cash Flows Summary | Item (RMB thousands) | 2019 | 2018 | | :--- | :--- | :--- | | Net Cash Used in Operating Activities | (52,796) | (69,422) | | Net Cash Used in Investing Activities | (76,020) | (40,759) | | Net Cash From Financing Activities | 247,585 | 64,672 | | Net Increase/(Decrease) in Cash and Cash Equivalents | 118,769 | (45,509) | | Cash and Cash Equivalents at Beginning of Year | 23,437 | 68,946 | | Cash and Cash Equivalents at End of Year | 142,206 | 23,437 |