北京控股环境集团(00154) - 2020 - 中期财报

Company Information This section provides an overview of the company's fundamental information, including its board of directors, key committees, and registration details Company Information Overview This section provides basic company information for Beijing Enterprises Environment Group Limited, including board members, committee compositions, registered office, share registrar, auditor, and principal bankers - The company's Board of Directors comprises Executive Directors Mr. Ke Jian (Chairman and CEO), Ms. Sha Ning (Vice President), Mr. Wu Guangfa, and Independent Non-executive Directors Dr. Jin Lizuo, Dr. Huan Guocang, Dr. Wang Jianping, Professor Nie Yongfeng, and Mr. Zhang Ming[18] - Dr. Huan Guocang chairs the Audit Committee, Dr. Jin Lizuo chairs the Remuneration Committee, and Mr. Ke Jian chairs the Nomination Committee[18] - The company's registered office is located at 66th Floor, Central Plaza, 18 Harbour Road, Wanchai, Hong Kong, with stock code 154[18] Corporate Structure This section outlines the company's equity structure and its primary solid waste treatment projects as of August 31, 2020 Corporate Structure Overview This section illustrates Beijing Enterprises Environment Group Limited's equity structure and key solid waste treatment projects, including waste-to-energy and hazardous waste treatment, as of August 31, 2020 - Beijing Enterprises Environment Group Limited is indirectly controlled by Beijing Enterprises Holdings Limited and holds a 49.23% equity interest in Idata Finance Trading Limited[23] - The Group operates multiple solid waste treatment projects in mainland China, including the Haidian District Circular Economy Industrial Park Renewable Energy Power Plant, Beijing Gaoantun Waste Incineration Project, and Harbin Shuangqi Waste-to-Energy BOT Project[23] - Key projects include waste-to-energy facilities and the Hengyang Hazardous Waste Disposal Center Project in Hunan Province[23] Management Discussion and Analysis This section provides a comprehensive review of the Group's business operations, financial performance, and future outlook for the period Business Review The Group's core business is solid waste treatment, operating nine projects in the environmental protection sector; operating performance declined due to the pandemic and waste sorting, with total domestic waste treated down 14.6% and total power generation down 4.0%, while solid waste treatment revenue and net profit decreased, and ecological construction revenue slightly increased with net profit growing by 16.0% - The Group's core business is solid waste treatment, operating nine projects in mainland China, including eight waste-to-energy projects with a total daily capacity of 10,225 tons and one hazardous and medical waste treatment project with an annual capacity of 35,000 tons[25] - The Group's operating performance declined due to the COVID-19 pandemic and the implementation of waste sorting policies[26] Comparison of Business Volume for H1 2020 vs H1 2019 | Metric | H1 2020 (10k tons/million kWh) | H1 2019 (10k tons/million kWh) | Change Rate | | :------------------------- | :----------------------------- | :----------------------------- | :---------- | | Total Domestic Waste Treated | 153.48 | 179.79 | -14.6% | | Total Power Generation | 577.24 | 601.27 | -4.0% | | On-grid Power Generation | 462.62 | 486.38 | -4.9% | Financial Performance of Solid Waste Treatment and Ecological Construction Segments for H1 2020 | Segment | Revenue (HKD Million) | YoY Change | EBITDA (HKD Million) | YoY Change | Net Profit (HKD Million) | YoY Change | | :----------------------- | :-------------------- | :--------- | :------------------- | :--------- | :----------------------- | :--------- | | Solid Waste Treatment | 482 | -12.5% | 242 | -8.9% | 118 | -23.4% | | Ecological Construction | 117 | +1.8% | Not Applicable | Not Applicable | 7.84 | +16.0% | Business Outlook The Group will closely monitor the pandemic, prioritize epidemic prevention and safe production, vigorously promote 'quality and efficiency improvement,' accelerate solid waste and ecological project construction, reduce costs, and enhance operating efficiency, while also exploring new solid waste projects like sludge, kitchen waste, and biomass, formulating long-term strategic development plans, increasing external investment, broadening financing channels, and actively innovating technology development - The Group will vigorously pursue 'quality and efficiency improvement,' accelerate solid waste and ecological project construction, strive to reduce costs, and enhance overall operating efficiency[31] - Expand business scope by developing new solid waste projects such as sludge, kitchen waste, and biomass, building upon existing projects[31] - Expedite the formulation of strategic development plans, actively plan the Group's medium-to-long-term development, thoroughly research new investment areas and models, increase external investment, and integrate new project investments with financial markets to broaden financing channels[31] Financial Review For the six months ended June 30, 2020, the Group's revenue decreased by 10% year-on-year to HKD 599 million, gross profit decreased by 19% to HKD 178 million, and overall gross margin fell to 29.7%; other income increased, but administrative expenses, other operating expenses, and finance costs all rose, leading to a 29% decline in both profit for the period and profit attributable to shareholders Revenue and Gross Profit Overview for H1 2020 | Metric | H1 2020 (HKD Million) | H1 2019 (HKD Million) | YoY Change | | :-------------------------------------- | :-------------------- | :-------------------- | :--------- | | Total Revenue | 599.09 | 666.24 | -10% | | Solid Waste Treatment and Electricity & Steam Sales Revenue | 455.82 | 521.44 | -13% | | Construction and Related Services Revenue | 26.45 | 30.01 | -12% | | Ecological Construction Services Revenue | 116.82 | 114.79 | +2% | | Total Gross Profit | 177.70 | 220.40 | -19% | | Overall Gross Margin | 29.7% | 33.1% | -3.4pp | Other Financial Indicators for H1 2020 | Metric | H1 2020 (HKD Million) | H1 2019 (HKD Million) | YoY Change | | :----------------------------- | :-------------------- | :-------------------- | :--------- | | Other Income | 48.32 | 36.97 | +30.7% | | Selling and Distribution Expenses | 1.12 | 1.22 | -8% | | Administrative Expenses | 72.23 | 66.81 | +8% | | Other Operating Expenses, Net | 4.75 | 2.72 | +74.6% | | Finance Costs | 39.02 | 35.81 | +9% | | Income Tax Expense | 12.08 | 14.19 | -15% | | EBITDA | 248.92 | 273.15 | -9% | | Profit for the Period | 96.82 | 136.63 | -29% | | Profit Attributable to Shareholders | 92.45 | 130.56 | -29% | Financial Position As of June 30, 2020, the Group's total assets and total liabilities were HKD 8.788 billion and HKD 5.653 billion, respectively, a slight decrease from the end of 2019; key investments during the period included the Jining Yanzhou District Waste-to-Energy PPP project, while net property, plant and equipment decreased, concession rights and receivables under service concession arrangements were amortized or reduced, trade and bills receivables increased, and trade and other payables decreased - In January 2020, the Group established a joint venture to invest in and construct the Jining Yanzhou District Waste-to-Energy PPP project, with a total investment of approximately HKD 900 million, a daily processing capacity of 1,500 tons, and an expected operational start in 2022[46] Comparison of Financial Position as of June 30, 2020, and December 31, 2019 | Metric | June 30, 2020 (HKD Million) | Dec 31, 2019 (HKD Million) | Change (HKD Million) | | :-------------------------------------- | :-------------------------- | :------------------------- | :------------------- | | Total Assets | 8,788 | 8,939 | -151 | | Total Liabilities | 5,653 | 5,829 | -176 | | Net Property, Plant and Equipment | 1,082 | 1,125 | -43 | | Goodwill | 1,123 | 1,123 | 0 | | Amortization of Concession Rights | 52 | 52 | 0 | | Receivables under Service Concession Arrangements | 1,925 | 1,973 | -48 | | Trade and Bills Receivables | 477 | 390 | +87 | | Bank and Other Borrowings | 843 (RMB) | 843 (RMB) | 0 | | Convertible Bonds (Liability Component) | 2,162 | 2,147 | +15 | | Trade Payables | 465 | 528 | -63 | | Other Payables and Accruals | 1,642 | 1,692 | -50 | Liquidity and Financial Resources As of June 30, 2020, the Group's cash and cash equivalents totaled HKD 1.303 billion, with current liabilities exceeding current assets; however, the Board believes the Group has the ability to continue as a going concern, supported by stable cash flows from solid waste treatment and financial backing from its controlling shareholder - As of June 30, 2020, the Group's cash and cash equivalents amounted to HKD 1.303 billion, with approximately 60% denominated in RMB and 40% in HKD and USD[63] - The Group's current liabilities were HKD 2.306 billion, exceeding current assets of HKD 2.263 billion[63] - Controlling shareholder Beijing Enterprises Holdings Limited has pledged not to demand repayment from the Group for amounts owed to Idata and its subsidiaries until the Group can repay without impairing its liquidity and financial position[63] Key Performance Indicators | Metric | H1 2020 | H1 2019 | | :------------------------ | :------ | :------ | | Gross Margin | 29.7% | 33.1% | | Operating Profit Margin | 24.7% | 28.0% | | Net Profit Margin | 16.2% | 20.5% | | Average Return on Equity | 3.3% | 4.8% | | Current Ratio (times) | 0.98 | 0.93 | | Gearing Ratio | 64.3% | 65.2% | | Debt-to-Asset Ratio | 56.9% | 55.2% | Capital Expenditure and Commitments For the six months ended June 30, 2020, the Group's total capital expenditure was HKD 139 million, primarily for the construction and renovation of waste treatment plants; capital commitments for service concession arrangements at period-end amounted to HKD 124 million Capital Expenditure and Commitments for H1 2020 | Item | Amount (HKD Million) | | :------------------------------------ | :------------------- | | Total Capital Expenditure | 139 | | Capital Commitments for Service Concession Arrangements | 124 | Pledge of the Group's Assets As of June 30, 2020, certain of the Group's land and buildings, right-of-use assets, and trade receivables were pledged as collateral for bank loans, with additional financial institution deposits pledged as security deposits - The Group's land and buildings with a net book value of HKD 43.06 million, right-of-use assets of HKD 19.94 million, and trade receivables from solid waste treatment services with a net book value of HKD 46.73 million were pledged as collateral for bank loans[68] - The Group's financial institution deposits of HKD 8.45 million were pledged to government authorities and a customer as security deposits for the construction and related services of solid waste treatment plants[68] Foreign Exchange Risk The Group's operations are primarily conducted in RMB in mainland China, but financial statements are presented in HKD, leading to exchange rate fluctuations impacting net assets; a net exchange loss of HKD 4.05 million was recognized in the income statement, and a comprehensive loss of HKD 84.13 million from translating overseas operations was recognized in the exchange fluctuation reserve Foreign Exchange Losses for H1 2020 | Item | H1 2020 (HKD Million) | H1 2019 (HKD Million) | | :---------------------------------------- | :-------------------- | :-------------------- | | Net Exchange Loss Recognized in Profit or Loss | 4.05 | 1.08 | | Comprehensive Loss from Translating Overseas Operations | 84.13 | 18.22 | - The Group currently does not use derivative financial instruments to hedge its foreign currency risk[69] Contingent Liabilities The Group has contingent liabilities related to unobtained construction acceptance and operating permits for certain waste treatment plants, but the company believes these non-compliance issues will not materially adversely affect operations or financial position - The Group has not yet obtained acceptance for the construction of certain waste treatment plants from relevant government authorities and is still applying for certain permits[70] - The company believes that the non-compliance matters, individually and in aggregate, will not have a material adverse effect on the Group's operations and financial position[70] Employees and Remuneration Policy As of June 30, 2020, the Group had 1,192 employees, with total staff costs of HKD 106 million, an 8% year-on-year decrease; remuneration policy references market terms and individual performance, with discretionary bonuses awarded, and no share options were granted, exercised, or forfeited during the period, with 37.62 million share options remaining unexercised Employee and Remuneration Overview | Metric | June 30, 2020 | Dec 31, 2019 | | :-------------------------------- | :------------ | :----------- | | Number of Employees | 1,192 | 1,246 | | Total Staff Costs (H1 2020) | HKD 106.03 million | HKD 115.36 million (H1 2019) | - The Group's remuneration policy is regularly reviewed, with compensation based on market terms and individual performance, and discretionary bonuses awarded based on individual performance assessments[72] - As of June 30, 2020, the company had 37,620,000 unexercised share options with an exercise price of HKD 1.25 per share, granted on June 21, 2011, and expiring on June 20, 2021[72] Interim Condensed Consolidated Financial Information This section presents the Group's interim condensed consolidated financial statements, including the profit or loss, comprehensive income, financial position, equity changes, and cash flows Interim Condensed Consolidated Statement of Profit or Loss For the six months ended June 30, 2020, the Group's revenue was HKD 599 million, a 10% decrease year-on-year; gross profit was HKD 178 million, and operating profit was HKD 148 million; profit for the period was HKD 96.82 million, and profit attributable to shareholders was HKD 92.45 million, both significantly down 29% year-on-year, with basic earnings per share at 6.16 HK cents and diluted earnings per share at 3.11 HK cents Summary of Interim Condensed Consolidated Statement of Profit or Loss for H1 2020 | Metric | H1 2020 (HKD Thousand) | H1 2019 (HKD Thousand) | YoY Change | | :------------------------------------------ | :--------------------- | :--------------------- | :--------- | | Revenue | 599,092 | 666,239 | -10.1% | | Cost of Sales | (421,387) | (445,834) | -5.5% | | Gross Profit | 177,705 | 220,405 | -19.4% | | Other Income | 48,316 | 36,967 | +30.7% | | Operating Profit | 147,924 | 186,618 | -20.8% | | Finance Costs | (39,024) | (35,805) | +9.0% | | Profit Before Tax | 108,900 | 150,813 | -27.8% | | Income Tax | (12,078) | (14,188) | -14.8% | | Profit for the Period | 96,822 | 136,625 | -29.2% | | Profit Attributable to Shareholders | 92,453 | 130,555 | -29.2% | | Basic Earnings Per Share (HK cents) | 6.16 | 8.70 | -29.2% | | Diluted Earnings Per Share (HK cents) | 3.11 | 4.21 | -26.1% | Interim Condensed Consolidated Statement of Comprehensive Income For the six months ended June 30, 2020, the Group's profit for the period was HKD 96.82 million; other comprehensive loss primarily stemmed from exchange differences on translating overseas operations, resulting in a significant drop in total comprehensive income to HKD 5.883 million, with total comprehensive income attributable to shareholders at HKD 8.326 million Summary of Interim Condensed Consolidated Statement of Comprehensive Income for H1 2020 | Metric | H1 2020 (HKD Thousand) | H1 2019 (HKD Thousand) | YoY Change | | :------------------------------------------ | :--------------------- | :--------------------- | :--------- | | Profit for the Period | 96,822 | 136,625 | -29.2% | | Exchange Differences on Translating Overseas Operations | (90,939) | (19,290) | +371.4% | | Total Comprehensive Income for the Period | 5,883 | 117,335 | -95.0% | | Attributable to Shareholders | 8,326 | 112,338 | -92.6% | Interim Condensed Consolidated Statement of Financial Position As of June 30, 2020, the Group's total assets were HKD 8.788 billion, total liabilities were HKD 5.653 billion, and total equity was HKD 3.136 billion; non-current assets primarily included concession rights and receivables under service concession arrangements, while cash and cash equivalents in current assets amounted to HKD 1.303 billion; current liabilities exceeded current assets, but convertible bonds constituted a significant portion of non-current liabilities Summary of Interim Condensed Consolidated Statement of Financial Position as of June 30, 2020 | Metric | June 30, 2020 (HKD Thousand) | Dec 31, 2019 (HKD Thousand) | Change (HKD Thousand) | | :------------------------------------------ | :--------------------------- | :-------------------------- | :-------------------- | | Total Assets | 8,788,136 | 8,939,578 | -151,442 | | Total Liabilities | 5,652,621 | 5,828,613 | -175,992 | | Total Equity | 3,135,515 | 3,110,965 | +24,550 | | Property, Plant and Equipment | 1,082,340 | 1,125,398 | -43,058 | | Concession Rights | 2,133,007 | 2,132,275 | +732 | | Receivables under Service Concession Arrangements | 1,924,739 | 1,972,804 | -48,065 | | Trade and Bills Receivables | 476,666 | 389,695 | +86,971 | | Cash and Cash Equivalents | 1,303,418 | 1,416,990 | -113,572 | | Convertible Bonds (Non-current Liabilities) | 2,162,006 | 2,147,168 | +14,838 | | Trade Payables | 465,018 | 527,970 | -62,952 | | Other Payables and Accruals | 1,625,581 | 1,672,960 | -47,379 | Interim Condensed Consolidated Statement of Changes in Equity For the six months ended June 30, 2020, total equity attributable to shareholders increased from HKD 2.818 billion at the beginning of the year to HKD 2.826 billion; profit for the period was HKD 92.45 million, but an HKD 84.127 million comprehensive loss from exchange differences on translating overseas operations resulted in total comprehensive income of only HKD 8.326 million Summary of Changes in Equity for H1 2020 | Item | Jan 1, 2020 (HKD Thousand) | June 30, 2020 (HKD Thousand) | | :---------------------------------------- | :------------------------- | :--------------------------- | | Total Attributable to Shareholders | 2,817,710 | 2,826,036 | | Non-controlling Interests | 293,255 | 309,479 | | Total Equity | 3,110,965 | 3,135,515 | | Profit for the Period (Attributable to Shareholders) | 92,453 | 92,453 | | Exchange Fluctuation Reserve (Translating Overseas Operations) | (214,424) | (298,551) | | Total Comprehensive Income for the Period (Attributable to Shareholders) | Not Applicable | 8,326 | Interim Condensed Consolidated Statement of Cash Flows For the six months ended June 30, 2020, the Group generated HKD 89.164 million net cash from operating activities, had a net outflow of HKD 132.4 million from investing activities, and a net outflow of HKD 52.176 million from financing activities; cash and cash equivalents at period-end were HKD 1.193 billion, a decrease of HKD 95.416 million from the beginning of the period Summary of Interim Condensed Consolidated Statement of Cash Flows for H1 2020 | Item | H1 2020 (HKD Thousand) | H1 2019 (HKD Thousand) | | :---------------------------------------- | :--------------------- | :--------------------- | | Net Cash Flows from Operating Activities | 89,164 | 49,685 | | Net Cash Flows Used in Investing Activities | (132,404) | (38,532) | | Net Cash Flows Used in Financing Activities | (52,176) | (272,460) | | Net Decrease in Cash and Cash Equivalents | (95,416) | (261,307) | | Cash and Cash Equivalents at Beginning of Period | 1,306,276 | 1,610,717 | | Cash and Cash Equivalents at End of Period | 1,193,002 | 1,347,604 | - The increase in cash outflow from investing activities was primarily due to a significant increase in expenditure for the acquisition of concession rights[89] - The decrease in cash outflow from financing activities was primarily due to reduced repayment of amounts owed to the direct controlling company[89] Notes to the Interim Condensed Consolidated Financial Information This section provides detailed notes to the interim condensed consolidated financial information, covering basis of preparation, changes in accounting policies, operating segment information, revenue and other income, various expenses, financial position items, liquidity, commitments, and related party disclosures, offering deeper explanations and background for the financial statements Basis of Preparation The interim condensed consolidated financial information is prepared in accordance with HKAS 34 and Appendix 16 of the Listing Rules; despite current liabilities exceeding current assets, the Group prepares its financial information on a going concern basis, considering internal resources and controlling shareholder commitments - The interim condensed consolidated financial information has been prepared in accordance with Hong Kong Accounting Standard 34 Interim Financial Reporting and the applicable disclosure requirements of Appendix 16 to the Listing Rules of the Stock Exchange[95] - Despite the Group's current liabilities exceeding its current assets as at June 30, 2020, the interim condensed consolidated financial information has been prepared on a going concern basis, taking into account internal resources and the commitment from its indirect controlling shareholder, Beijing Enterprises Holdings Limited[95] Changes in Accounting Policies and Disclosures The revised Hong Kong Financial Reporting Standards adopted for the first time in this period had no significant financial impact on the unaudited interim condensed consolidated financial information, and there were no material changes in the accounting policies applied - The adoption of the revised Hong Kong Financial Reporting Standards had no significant financial impact on the unaudited interim condensed consolidated financial information[102] - There were no material changes in the accounting policies applied in this unaudited condensed consolidated financial information[102] Operating Segment Information The Group's operating segments include solid waste treatment, ecological construction services, and corporate and other segments; solid waste treatment segment revenue and profit both decreased, while ecological construction services segment revenue slightly increased with profit growth; geographical information is not presented as over 90% of revenue and non-current assets are located in mainland China - The Group's operating segments include solid waste treatment (construction and operation of waste-to-energy plants, waste treatment, and sale of electricity and steam), ecological construction services (landscape construction, design, project management), and corporate and other segments (property investment and corporate income/expenses)[104] Financial Performance by Operating Segment for H1 2020 | Segment | Revenue (HKD Thousand) | Operating Profit/(Loss) (HKD Thousand) | Profit/(Loss) for the Period (HKD Thousand) | Segment Assets (HKD Thousand) | Segment Liabilities (HKD Thousand) | | :------------------------- | :--------------------- | :------------------------------------- | :------------------------------------------ | :---------------------------- | :--------------------------------- | | Solid Waste Treatment | 482,268 | 151,976 | 118,076 | 8,139,356 | 2,730,329 | | Ecological Construction Services | 116,824 | 9,855 | 7,837 | 392,220 | 285,753 | | Corporate and Other | – | (13,907) | (29,091) | 256,560 | 2,636,539 | | Total | 599,092 | 147,924 | 96,822 | 8,788,136 | 5,652,621 | - Over 90% of the Group's revenue and non-current assets are located in mainland China, thus no geographical information is presented[111] Revenue and Other Income The Group's total revenue for H1 2020 was HKD 599 million, with solid waste treatment-related income, including domestic waste treatment, hazardous and medical waste treatment, and electricity sales, accounting for the largest share; other income totaled HKD 48.316 million, primarily from VAT refunds and interest income Breakdown of Revenue and Other Income for H1 2020 | Revenue Category | H1 2020 (HKD Thousand) | H1 2019 (HKD Thousand) | | :--------------------------------------- | :--------------------- | :--------------------- | | Domestic Waste Treatment | 118,732 | 151,039 | | Hazardous and Medical Waste Treatment | 21,660 | 32,660 | | Kitchen Waste, Leachate, Sludge, and Other Treatment | 31,594 | 16,611 | | Electricity Sales | 279,912 | 305,724 | | Steam Sales | 3,916 | 15,410 | | Construction and Related Services | 26,454 | 30,008 | | Landscape Construction Services | 87,828 | 93,889 | | Landscape Design Services | 28,996 | 20,898 | | Total Revenue | 599,092 | 666,239 | | Other Income (Total) | 48,316 | 36,967 | | VAT Refunds | 34,493 | 26,539 | | Interest Income | 6,460 | 6,311 | - Imputed interest income of HKD 44.626 million under service concession arrangements was included in domestic waste treatment services revenue for the period[114] Operating Profit The Group's operating profit is stated after deducting various expenses, including depreciation of property, plant and equipment of HKD 38.897 million, amortization of concession rights of HKD 51.576 million, and a net exchange difference of HKD 4.052 million Operating Profit Deductions for H1 2020 | Item | H1 2020 (HKD Thousand) | H1 2019 (HKD Thousand) | | :---------------------------------- | :--------------------- | :--------------------- | | Depreciation of Property, Plant and Equipment | 38,897 | 23,485 | | Depreciation of Right-of-Use Assets | 7,664 | 7,995 | | Amortization of Concession Rights | 51,576 | 52,096 | | Amortization of Other Intangible Assets | 2,861 | 2,956 | | Exchange Differences, Net | 4,052 | 1,079 | Finance Costs The Group's total finance costs for H1 2020 amounted to HKD 39.024 million, primarily comprising interest on bank and other borrowings of HKD 23.181 million and imputed interest on convertible bonds of HKD 14.838 million Breakdown of Finance Costs for H1 2020 | Item | H1 2020 (HKD Thousand) | H1 2019 (HKD Thousand) | | :---------------------------------- | :--------------------- | :--------------------- | | Interest on Bank and Other Borrowings | 23,181 | 22,225 | | Imputed Interest on Convertible Bonds | 14,838 | 14,554 | | Interest on Lease Liabilities | 783 | 1,149 | | Total Interest Expense | 38,802 | 37,928 | | Other Finance Costs | 222 | 183 | | Total Finance Costs | 39,024 | 35,805 | Income Tax The Group's income tax expense for H1 2020 was HKD 12.078 million, a 14.8% decrease year-on-year; certain mainland China subsidiaries engaged in solid waste treatment enjoy a preferential policy of three years corporate income tax exemption followed by a 50% tax reduction for the subsequent three years Breakdown of Income Tax Expense for H1 2020 | Item | H1 2020 (HKD Thousand) | H1 2019 (HKD Thousand) | | :---------------------------- | :--------------------- | :--------------------- | | Current – Hong Kong | 37 | 817 | | Current – Mainland China | 9,280 | 12,579 | | Deferred | 2,700 | 634 | | Total Tax Expense for the Period | 12,078 | 14,188 | - Certain of the Group's subsidiaries in mainland China enjoy a three-year corporate income tax exemption, followed by a 50% tax reduction for the subsequent three years[125] Interim Dividend The Board does not recommend the payment of an interim dividend for the six months ended June 30, 2020 - The Board does not recommend the payment of an interim dividend for the six months ended June 30, 2020[126] Earnings Per Share Attributable to Shareholders For the six months ended June 30, 2020, basic earnings per share attributable to shareholders was 6.16 HK cents, and diluted earnings per share was 3.11 HK cents; diluted earnings calculation considered the imputed interest on convertible bonds Earnings Per Share Calculation for H1 2020 | Metric | H1 2020 | H1 2019 | | :------------------------------------------ | :------------ | :------------ | | Basic Earnings Per Share (HK cents) | 6.16 | 8.70 | | Diluted Earnings Per Share (HK cents) | 3.11 | 4.21 | | Profit for the Period Attributable to Shareholders for Basic EPS Calculation (HKD Thousand) | 92,453 | 130,555 | | Imputed Interest on Convertible Bonds (HKD Thousand) | 14,838 | 14,554 | | Weighted Average Number of Ordinary Shares in Issue for Basic EPS Calculation | 1,500,360,150 | 1,500,360,150 | | Dilutive Effect – Weighted Average Number of Convertible Bonds | 1,948,938,053 | 1,948,938,053 | Receivables under Service Concession Arrangements As of June 30, 2020, the Group's total receivables under service concession arrangements amounted to HKD 1.985 billion, with the non-current portion being HKD 1.925 billion; these receivables primarily arise from BOT projects and will be collected as service fees during the operating period Aging Analysis of Receivables under Service Concession Arrangements | Item | June 30, 2020 (HKD Thousand) | Dec 31, 2019 (HKD Thousand) | | :------------------------ | :--------------------------- | :-------------------------- | | Unbilled: Current Portion | 60,714 | 63,183 | | Unbilled: Non-current Portion | 1,924,739 | 1,972,804 | | Total | 1,985,453 | 2,035,987 | - Receivables under service concession arrangements are primarily recognized from solid waste treatment plants operated under BOT arrangements and will be paid as service fees during the operating period of the service concession arrangements[132] Trade and Bills Receivables As of June 30, 2020, the Group's total trade and bills receivables amounted to HKD 477 million, an increase from the end of 2019; of this, HKD 370 million was outstanding within three months, and HKD 46.73 million was pledged as collateral for bank loans Aging Analysis of Trade and Bills Receivables | Aging | June 30, 2020 (HKD Thousand) | Dec 31, 2019 (HKD Thousand) | | :---------------- | :--------------------------- | :-------------------------- | | Within 3 months | 370,201 | 317,168 | | 4 to 6 months | 39,341 | 33,925 | | 7 to 12 months | 46,268 | 18,303 | | 1 to 2 years | 14,261 | 13,432 | | 2 to 3 years | 2,124 | 4,851 | | Over 3 years | 4,471 | 2,016 | | Total | 476,666 | 389,695 | - Trade receivables of HKD 46.73 million arising from solid waste treatment services were pledged as collateral for bank loans granted to the Group[135] Prepayments, Other Receivables and Other Assets As of June 30, 2020, the Group's total prepayments, other receivables, and other assets amounted to HKD 165 million, a decrease from the end of 2019; these primarily include prepayments, deposits and other receivables, and amounts due from fellow subsidiaries and non-controlling interest holders Breakdown of Prepayments, Other Receivables and Other Assets | Item | June 30, 2020 (HKD Thousand) | Dec 31, 2019 (HKD Thousand) | | :---------------------------------- | :--------------------------- | :-------------------------- | | Prepayments | 72,712 | 89,377 | | Deposits and Other Receivables | 65,842 | 91,975 | | Amounts Due from Fellow Subsidiaries | 5,396 | 4,077 | | Amounts Due from Non-controlling Interest Holders | 26,764 | 14,227 | | Impairment Allowance | (5,539) | (5,664) | | Current Portion | 135,057 | 163,097 | | Non-current Portion | 30,118 | 30,895 | - Balances with fellow subsidiaries and non-controlling interest holders are unsecured, interest-free, and repayable on demand[137] Share Capital As of June 30, 2020, the company's issued and fully paid ordinary shares totaled 1,500,360,150, with share capital amounting to HKD 2.228 billion, remaining unchanged from the end of 2019 Share Capital Overview | Item | June 30, 2020 (HKD Thousand) | Dec 31, 2019 (HKD Thousand) | | :---------------------------------- | :--------------------------- | :-------------------------- | | Issued and Fully Paid Ordinary Shares (Number) | 1,500,360,150 | 1,500,360,150 | | Share Capital Amount | 2,227,564 | 2,227,564 | Convertible Bonds In October 2016, the company issued convertible bonds with a principal amount of HKD 2.202 billion to Idata Finance Trading Limited, with a conversion price of HKD 1.13 per share, zero interest, and maturing in October 2021; as of June 30, 2020, outstanding convertible bonds were split into a liability component of HKD 2.162 billion and an equity component of HKD 147 million Summary of Convertible Bond Movements | Item | June 30, 2020 (HKD Thousand) | Dec 31, 2019 (HKD Thousand) | | :------------------------ | :--------------------------- | :-------------------------- | | Outstanding Principal Amount | 2,202,300 | 2,202,300 | | Liability Component | 2,162,006 | 2,147,168 | | Equity Component | 147,029 | 147,029 | - The convertible bonds were issued to Idata Finance Trading Limited on October 31, 2016, with a conversion price of HKD 1.13 per share, zero interest, and maturing on October 31, 2021[140] Bank and Other Borrowings As of June 30, 2020, the Group's total bank and other borrowings amounted to HKD 926 million, with a current portion of HKD 140 million and a non-current portion of HKD 786 million; borrowings are primarily denominated in RMB, including secured bank loans and unsecured loans from fellow subsidiaries and other entities, with a weighted average interest rate of approximately 4.7% per annum Breakdown of Bank and Other Borrowings | Item | June 30, 2020 (HKD Thousand) | Dec 31, 2019 (HKD Thousand) | | :---------------------------------- | :--------------------------- | :-------------------------- | | Bank Loans, Secured | 191,247 | 206,781 | | Other Loans, Unsecured (Fellow Subsidiaries) | 682,297 | 717,169 | | Other Loans, Unsecured (Others) | 52,473 | 62,977 | | Total Bank and Other Borrowings | 926,017 | 986,927 | | Current Portion of Liabilities | (140,385) | (203,427) | | Non-current Portion | 785,632 | 783,500 | - All of the Group's bank and other borrowings are denominated in RMB, with a weighted average interest rate of approximately 4.7% per annum[57][142] - Secured bank loans are collateralized by land and buildings, right-of-use assets, and trade receivables[143] Trade Payables As of June 30, 2020, the Group's total trade payables amounted to HKD 465 million, a decrease from the end of 2019; of this, HKD 137 million was unbilled, and trade payables are non-interest bearing and generally settled within one to six months Aging Analysis of Trade Payables | Aging | June 30, 2020 (HKD Thousand) | Dec 31, 2019 (HKD Thousand) | | :------------------------ | :--------------------------- | :-------------------------- | | Billed: Less than 3 months | 119,890 | 121,620 | | Billed: 4 to 6 months | 24,620 | 123,154 | | Billed: 7 to 12 months | 66,979 | 46,522 | | Billed: Over 1 year | 116,713 | 90,527 | | Unbilled | 136,816 | 146,147 | | Total | 465,018 | 527,970 | - Trade payables include an amount of HKD 58.193 million due to a non-controlling interest holder[148] Other Payables and Accruals As of June 30, 2020, the Group's total other payables and accruals amounted to HKD 1.642 billion, a decrease from the end of 2019; these primarily include HKD 491 million owed to the indirect controlling company and HKD 1.007 billion owed to fellow subsidiaries, which are unsecured, interest-free, and repayable on demand, backed by the controlling company's financial support commitment Breakdown of Other Payables and Accruals | Item | June 30, 2020 (HKD Thousand) | Dec 31, 2019 (HKD Thousand) | | :---------------------------------- | :--------------------------- | :-------------------------- | | Other Payables | 90,130 | 95,301 | | Contract Liabilities | 6,071 | 18,098 | | Lease Liabilities | 25,223 | 30,571 | | Accruals | 19,719 | 30,053 | | Amounts Due to Indirect Controlling Company | 491,000 | 491,000 | | Amounts Due to Fellow Subsidiaries | 1,007,025 | 1,023,946 | | Amounts Due to a Joint Venture | 2,587 | 3,188 | | Total | 1,641,755 | 1,692,157 | | Current Portion | (1,625,581) | (1,672,960) | | Non-current Portion | 16,174 | 19,197 | - Balances due to the indirect controlling company, fellow subsidiaries, and a joint venture are unsecured, interest-free, and repayable on demand[152] - Beijing Enterprises Holdings has committed not to demand repayment from the Group for HKD 491 million owed to Idata and RMB 800 million owed to a fellow subsidiary of the company until the Group can repay without impairing its liquidity and financial position[152] Contingent Liabilities The Group has contingent liabilities related to unobtained final acceptance for the construction of certain waste incineration plants from government authorities and ongoing applications for certain operating permits; nevertheless, the company believes these non-compliance events will not have a material adverse effect on the Group's operations and financial position - The Group has not yet obtained final acceptance for the construction of certain waste incineration plants from relevant government authorities and is still applying for certain operating permits[153] - The company believes that the non-compliance events, individually and in aggregate, will not have a material adverse effect on the Group's operations and financial position[153] Commitments As of June 30, 2020, the Group's total capital commitments amounted to HKD 124 million, primarily for service concession arrangements on a BOO and BOT basis Breakdown of Capital Commitments | Item | June 30, 2020 (HKD Thousand) | Dec 31, 2019 (HKD Thousand) | | :---------------------------------- | :--------------------------- | :-------------------------- | | Service Concession Arrangements on BOO Basis | 53,008 | 51,188 | | Service Concession Arrangements on BOT Basis | 71,143 | 55,281 | | Total | 124,151 | 106,469 | Related Party Disclosures The Group engaged in various related party transactions, including rental income from fellow subsidiary Hongchuang, and interest income and expenses with BE Group Finance; total compensation for key management personnel was HKD 6.587 million, and transactions with other state-owned enterprises were considered ordinary course of business and not materially affected Related Party Transactions for H1 2020 | Related Party Name | Nature of Transaction | H1 2020 (HKD Thousand) | H1 2019 (HKD Thousand) | | :--------------------------------- | :-------------------- | :--------------------- | :--------------------- | | Beijing BE Hongchuang Technology Co Ltd | Rental Income | 1,423 | 1,485 | | BE Group Finance | Interest Income | 141 | 187 | | BE Group Finance | Interest Expense | 17,042 | 16,629 | Key Management Personnel Compensation for H1 2020 | Item | H1 2020 (HKD Thousand) | H1 2019 (HKD Thousand) | | :------------------------ | :--------------------- | :--------------------- | | Short-term Employee Benefits | 6,427 | 6,768 | | Post-employment Benefits | 160 | 343 | | Total Compensation | 6,587 | 7,111 | - Transactions with other state-owned enterprises (e.g., electricity sales, waste treatment services, bank deposits) are considered in the ordinary course of business and were not materially or unduly affected by common control by the Chinese government[164] Other Financial Information As of June 30, 2020, the Group's net current liabilities amounted to HKD 43.723 million, and total assets less current liabilities were HKD 6.482 billion Other Financial Indicators | Metric | June 30, 2020 (HKD Thousand) | Dec 31, 2019 (HKD Thousand) | | :-------------------------------- | :--------------------------- | :-------------------------- | | Net Current Liabilities | 43,723 | 177,862 | | Total Assets Less Current Liabilities | 6,481,660 | 6,456,792 | Approval of Interim Condensed Consolidated Financial Information The interim condensed consolidated financial information was approved by the Board of Directors on August 31, 2020, and authorized for issue - The interim condensed consolidated financial information was approved by the Board of Directors on August 31, 2020, and authorized for issue[166] Disclosable Information This section details information required for disclosure, including directors' particulars, shareholdings, related party interests, and compliance with listing rules Directors This section lists the company's directors as of June 30, 2020, and the report date, confirming no material changes in director information since the 2019 annual report date - The company's directors include Executive Directors Mr. Ke Jian (Chairman and CEO), Ms. Sha Ning (Vice President), Mr. Wu Guangfa, and Independent Non-executive Directors Dr. Jin Lizuo, Dr. Huan Guocang, Dr. Wang Jianping, Professor Nie Yongfeng, and Mr. Zhang Ming[169] - Mr. E Meng resigned as Chairman on January 3, 2020[169] - No material changes in directors' information requiring disclosure have occurred since the date of the 2019 annual report[170] Directors' Service Contracts As of June 30, 2020, no director had entered into a service contract with the company that could not be terminated by the company within one year without compensation (other than statutory compensation) - As of June 30, 2020, no director had entered into a service contract with the company that could not be terminated by the company within one year without compensation (other than statutory compensation)[171] Directors' Interests in Transactions, Arrangements or Contracts For the six months ended June 30, 2020, other than transactions with fellow subsidiaries, no director or director's associated entity had a material direct or indirect interest in any transaction, arrangement, or contract significant to the Group's business - Other than transactions with fellow subsidiaries, for the six months ended June 30, 2020, no director or director's associated entity had a material direct or indirect interest in any transaction, arrangement, or contract significant to the Group's business[172] Directors' Interests in Competing Businesses Although both the company and its controlling shareholder, Beijing Enterprises Holdings, are engaged in solid waste treatment, the company believes no competition exists due to clear geographical project demarcation, no competition in solid waste supply and electricity sales, independent management teams, and a non-competition undertaking from Beijing Enterprises Holdings - Mr. E Meng, Mr. Ke Jian, and Ms. Sha Ning are all employed by Beijing Enterprises Holdings, which is also involved in solid waste treatment businesses[173] - No competition exists between the company and Beijing Enterprises Holdings due to clear geographical demarcation of solid waste treatment projects, no competition in solid waste supply and electricity sales, independent management teams, and a non-competition undertaking provided by Beijing Enterprises Holdings to the company[175] Directors' and Chief Executive's Interests and Short Positions in Shares and Underlying Shares As of June 30, 2020, Mr. Wu Guangfa held a long position of 10,392,755 ordinary shares in the company, representing 0.69% of the total issued shares; additionally, directors also held share options in the company Directors' Long Positions in the Company's Ordinary Shares | Director's Name | Directly Beneficially Owned (Number of Shares) | Through Controlled Corporations (Number of Shares) | Total (Number of Shares) | Percentage of Total Issued Shares of the Company | | :-------------- | :--------------------------------- | :--------------------------------- | :----------------------- | :----------------------------------------------- | | Mr. Wu Guangfa | 1,600,000 | 8,792,755 | 10,392,755 | 0.69% | - Directors hold interests in the company's share options, details of which are disclosed in the 'Share Option Scheme' section[177] Share Option Scheme The company has a share option scheme to reward eligible participants; as of June 30, 2020, 37,620,000 share options remained unexercised, representing approximately 2.5% of issued ordinary shares, with an exercise price of HKD 1.25 per share, expiring on June 20, 2021 Unexercised Share Options as of June 30, 2020 | Name or Category of Participant | Number of Share Options | | :------------------------------ | :---------------------- | | Mr. Wu Guangfa | 5,500,000 | | Dr. Jin Lizuo | 670,000 | | Dr. Huan Guocang | 670,000 | | Dr. Wang Jianping | 670,000 | | Other Non-Director Participants | 30,110,000 | | Total | 37,620,000 | - The unexercised share options were granted on June 21, 2011, with an exercise price of HKD 1.25 per share, exercisable at any time from the grant date, and will expire on June 20, 2021, if unexercised[180] - As of June 30, 2020, the unexercised share options represented approximately 2.5% of the company's issued ordinary shares[180] Material Contracts For the six months ended June 30, 2020, or as of that date, other than transactions with fellow subsidiaries, no material contract significant to the Group's business, in which a director had a material direct or indirect interest, remained in force, entered into by the company, its subsidiaries, fellow subsidiaries, or its parent company - Other than transactions with fellow subsidiaries, no material contract significant to the Group's business, in which a director had a material direct or indirect interest, remained in force for the six months ended June 30, 2020, or as of June 30, 2020, entered into by the company, its subsidiaries, fellow subsidiaries, or its parent company[181] Major Shareholders' Interests and Short Positions in Shares and Underlying Shares As of June 30, 2020, Idata Finance Trading Limited, Beijing Enterprises Holdings Limited, Beijing Enterprises Group (BVI) Company Limited, BE Group, and Khazanah Nasional Berhad were the company's major shareholders, holding 5% or more of the equity Major Shareholders' Long Positions in the Company's Ordinary Shares | Name | Total (Number of Shares) | Percentage of the Company's Share Capital | | :---------------------------------- | :----------------------- | :---------------------------------------- | | Idata Finance Trading Limited | 738,675,000 | 49.23% | | Beijing Enterprises Holdings Limited | 756,120,000 | 50.40% | | Beijing Enterprises Group (BVI) Company Limited | 756,120,000 | 50.40% | | BE Group | 756,120,000 | 50.40% | | Khazanah Nasional Berhad | 347,000,000 | 23.13% | - Beijing Enterprises Holdings Limited is deemed to have an interest in the ordinary shares held by Idata Finance Trading Limited[183] - BEBVI and BE Group are the direct and ultimate controlling companies of Beijing Enterprises Holdings, respectively, and each is deemed to have an interest in the ordinary shares held by Beijing Enterprises Holdings and Idata, respectively[184] Purchase, Redemption or Sale of the Company's Listed Securities Neither the company nor any of its subsidiaries purchased, redeemed, or sold any of the company's listed securities for the six months ended June 30, 2020 - Neither the company nor any of its subsidiaries purchased, redeemed, or sold any of the company's listed securities for the six months ended June 30, 2020[185] Sufficiency of Public Float As of the report date, no less than 25% of the company's total issued shares were held by the public, complying with Listing Rules requirements - As of the report date, no less than 25% of the company's total issued shares were held by the public[186] Corporate Governance This section outlines the company's corporate governance practices, including compliance with the Corporate Governance Code, board and committee structures, and risk management Corporate Governance Practices The company's directors believe that, with certain exceptions, the company has complied with the Corporate Governance Code in Appendix 14 of the Listing Rules for the six months ended June 30, 2020; key deviations include board meeting frequency, combined roles of Chairman and CEO, non-executive directors without fixed terms, and some directors' absence from the AGM - The company's directors believe that, save as disclosed below, the company has complied with all applicable code provisions of the Corporate Governance Code set out in Appendix 14 to the Listing Rules for the six months ended June 30, 2020[189] - Board meetings were not held at least four times annually on a regular basis but convened as appropriate[189] - Mr. Ke Jian holds both the Chairman and Chief Executive Officer positions, deviating from the code provision that the roles of Chairman and Chief Executive Officer should be separate and not held by the same individual[189] - Non-executive directors do not have a specific term of appointment but are subject to retirement by rotation at annual general meetings in accordance with the company's articles of association[190] - Some independent non-executive directors, the Chairman of the Board, and chairmen of Board committee