北控水务集团(00371) - 2022 - 年度业绩

Executive Summary Summary of Key Financial Results Profit attributable to equity holders decreased to HKD 1,374.2 million, mainly due to a deemed disposal loss and halted water environment projects, yet core water treatment profit grew 13% with stable cash flow | Indicator | 2022 (HKD Million) | Reason for Change | | :--- | :--- | :--- | | Profit attributable to equity holders of the Company | 1,374.2 | Decrease, mainly due to a deemed disposal loss of HKD 1,091 million from associate Shandong Hi-Speed New Energy Group Limited (one-off, non-cash) and cessation of investment in integrated water environment treatment projects | | Core water treatment business profit growth | 13% | Steady growth | | Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) | 8,297 | - | | Proposed final dividend per share | 8.7 HK Cents | - | | Full-year dividend per share | 15.7 HK Cents | - | - The Board firmly believes that with the rapid recovery of the Chinese economy, the Group's operational level will further improve and develop from the 2023 financial year onwards[2] Consolidated Financial Statements Consolidated Income Statement Operating revenue decreased by 10.4% to HKD 24,982 million, with profit for the year down 50.3% to HKD 2,715.7 million, primarily due to increased net other operating expenses and reduced share of joint venture profits | Indicator | 2022 (HKD Thousand) | 2021 (HKD Thousand) | Y-o-Y Change (%) | | :--- | :--- | :--- | :--- | | Operating revenue | 24,982,372 | 27,880,147 | -10.4% | | Gross profit | 9,838,002 | 10,449,670 | -5.8% | | Operating profit | 6,215,907 | 8,731,109 | -28.8% | | Finance costs | (3,192,649) | (2,718,745) | +17.4% | | Profit before tax | 3,797,043 | 6,932,145 | -45.2% | | Profit for the year | 2,715,710 | 5,467,921 | -50.3% | | Profit attributable to equity holders of the Company | 1,374,151 | 4,195,940 | -67.2% | | Basic earnings per share | 13.18 HK Cents | 41.42 HK Cents | -68.2% | | Diluted earnings per share | 13.16 HK Cents | 41.17 HK Cents | -68.0% | Consolidated Statement of Comprehensive Income The Group recorded a total comprehensive loss of HKD 4,159.8 million, a significant shift from prior year's income, mainly due to foreign exchange translation losses and fair value changes in equity investments | Indicator | 2022 (HKD Thousand) | 2021 (HKD Thousand) | Y-o-Y Change | | :--- | :--- | :--- | :--- | | Profit for the year | 2,715,710 | 5,467,921 | -50.3% | | Other comprehensive income/(loss) | (6,875,545) | 1,275,498 | Significant decrease | | - Translation of foreign operations | (6,447,064) | 1,386,186 | Shift from income to loss | | - Fair value changes of equity investments | (415,213) | (116,039) | Loss widened | | Total comprehensive income/(loss) for the year | (4,159,835) | 6,743,419 | Shift from income to loss | | Total comprehensive income/(loss) attributable to equity holders of the Company | (4,006,389) | 5,165,135 | Shift from income to loss | Consolidated Statement of Financial Position Total assets slightly increased to HKD 183,945.7 million, with non-current asset shifts, while total equity decreased by 6.4% and total liabilities rose by 3.7%, increasing the gearing ratio | Indicator | 2022 (HKD Thousand) | 2021 (HKD Thousand) | Y-o-Y Change (%) | | :--- | :--- | :--- | :--- | | Total assets | 183,945,711 | 183,623,186 | +0.2% | | Non-current assets | 137,359,876 | 144,021,885 | -4.6% | | - Amounts due from contract customers | 22,700,825 | 36,255,486 | -37.4% | | - Receivables from service concession arrangements | 58,470,512 | 53,218,131 | +9.9% | | Current assets | 46,585,835 | 39,601,301 | +17.6% | | Total equity | 59,463,501 | 63,548,754 | -6.4% | | Total liabilities | 124,482,210 | 120,074,432 | +3.7% | | - Non-current liabilities | 73,741,052 | 70,374,829 | +4.8% | | - Current liabilities | 50,741,158 | 49,699,603 | +2.1% | Notes to the Financial Statements Basis of Presentation and Preparation The Group's financial statements are prepared on a going concern basis, adhering to HKFRS and Hong Kong Companies Ordinance, with control assessed based on power over and exposure to variable returns from investees - As of December 31, 2022, the Group had net current liabilities of HKD 4.2 billion, but the Board believes the Group will have sufficient available funds to operate on a going concern basis, considering existing bank facilities, timing of capital commitments, and potential equity financing[9] - The financial statements are prepared in accordance with Hong Kong Financial Reporting Standards and disclosure requirements of the Hong Kong Companies Ordinance, presented in Hong Kong Dollars under the historical cost convention, except for certain financial assets[10] - Consolidated financial statements include the Company and its subsidiaries, with control obtained based on exposure or rights to variable returns from involvement with the investee and the ability to affect those returns through power over the investee[11] Changes in Accounting Policies and Disclosures Revised HKFRS, including HKFRS 3, HKAS 16, HKAS 37, and Annual Improvements 2018-2020, were adopted this year, with no significant impact on the Group's financial position or performance - HKFRS 3 amendments replaced conceptual framework references and added exceptions to recognition principles, with no impact on the Group's financial position and performance[12] - HKAS 16 amendments prohibit deducting proceeds from property, plant, and equipment sales from cost during the period to achieve intended operational status, with no impact on the Group's financial position or performance[12] - HKAS 37 amendments clarified the composition of costs to fulfill an onerous contract, with no impact on the Group's financial position or performance[13] - HKFRS 9 amendments clarified fees included when assessing whether terms of a financial liability are substantially different, with no impact on the Group's financial position or performance[13] Operating Segment Information The Group's operations include water treatment, construction, technology services, equipment sales, and urban resource services, with Mainland China as the primary market, though water treatment and construction revenue declined in 2022 - The Group's operating segments include wastewater and reclaimed water treatment and construction services, water supply services, technology and consulting services and equipment sales, and urban resource services[14] | Segment | 2022 Operating Revenue (HKD Thousand) | 2021 Operating Revenue (HKD Thousand) | 2022 Gross Profit (HKD Thousand) | 2021 Gross Profit (HKD Thousand) | | :--- | :--- | :--- | :--- | :--- | | Wastewater and reclaimed water treatment and construction services | 15,958,680 | 20,749,712 | 6,548,462 | 7,067,372 | | Water supply services | 3,089,815 | 3,069,094 | 1,399,709 | 1,404,760 | | Technology and consulting services and equipment sales | 3,393,251 | 4,061,341 | 1,372,851 | 1,977,538 | | Urban resource services | 2,540,626 | – | 516,980 | – | | Total | 24,982,372 | 27,880,147 | 9,838,002 | 10,449,670 | | Region | 2022 Operating Revenue (HKD Thousand) | 2021 Operating Revenue (HKD Thousand) | | :--- | :--- | :--- | | Mainland China | 23,436,091 | 26,265,120 | | Other regions | 1,546,281 | 1,615,027 | | Total | 24,982,372 | 27,880,147 | Operating Revenue Total operating revenue for 2022 was HKD 24,982.4 million, a 10.4% decrease, with significant declines in wastewater and reclaimed water treatment services, offset partly by new urban resource services | Operating Revenue Source | 2022 (HKD Thousand) | 2021 (HKD Thousand) | Y-o-Y Change (%) | | :--- | :--- | :--- | :--- | | Operating revenue from contracts with customers | 9,873,665 | 8,145,080 | +21.2% | | Wastewater and reclaimed water treatment services | 6,085,015 | 12,604,632 | -51.7% | | Water supply services | 3,089,815 | 3,069,094 | +0.7% | | Technology and consulting services and equipment sales | 3,393,251 | 4,061,341 | -16.5% | | Urban resource services | 2,540,626 | – | New | | Total | 24,982,372 | 27,880,147 | -10.4% | - Estimated interest income from service concession arrangements was HKD 3,531,519,000 (2021: HKD 3,390,411,000), included in operating revenue[18] Operating Profit Operating profit for 2022 decreased by 28.8% to HKD 6,215.9 million, primarily due to a substantial reduction in construction service costs and increased depreciation of property, plant, and equipment and right-of-use assets | Cost Item | 2022 (HKD Thousand) | 2021 (HKD Thousand) | Y-o-Y Change (%) | | :--- | :--- | :--- | :--- | | Cost of providing wastewater and reclaimed water treatment services | 4,084,868 | 3,265,409 | +25.1% | | Cost of construction services | 4,968,465 | 10,079,786 | -50.7% | | Cost of water supply services | 1,544,994 | 1,536,417 | +0.6% | | Cost of providing technology and consulting services and equipment sales | 2,020,400 | 2,083,803 | -3.1% | | Cost of providing urban resource services | 2,023,646 | – | New | | Depreciation of property, plant and equipment | 669,370 | 334,231 | +100.3% | | Depreciation of right-of-use assets | 77,528 | 44,990 | +72.3% | | Amortisation of concession rights | 501,997 | 465,062 | +7.9% | | Amortisation of other intangible assets | 58,446 | 50,805 | +15.0% | Finance Costs Total finance costs increased by 17.4% to HKD 3,192.6 million in 2022, driven by higher interest on bank and other borrowings, despite a slight decrease in corporate bond and bills payable interest | Finance Cost Item | 2022 (HKD Thousand) | 2021 (HKD Thousand) | Y-o-Y Change (%) | | :--- | :--- | :--- | :--- | | Interest on bank and other borrowings | 2,377,196 | 1,911,963 | +24.3% | | Interest on corporate bonds | 771,177 | 805,205 | -4.2% | | Interest on bills payable | 125,023 | 147,787 | -15.4% | | Interest on lease liabilities | 11,685 | 6,426 | +81.8% | | Total interest expenses | 3,285,081 | 2,871,381 | +14.4% | | Increase in discounted amount of major overhaul provision due to passage of time | 39,747 | 33,270 | +19.5% | | Total finance costs | 3,324,828 | 2,904,651 | +14.5% | | Less: Interest capitalised into construction service costs | (132,179) | (185,906) | -29.0% | | Total finance costs | 3,192,649 | 2,718,745 | +17.4% | Income Tax Expense Total income tax expense for 2022 decreased by 26.2% to HKD 1,081.3 million, with current income tax provision in Mainland China being the main component, benefiting from tax incentives for certain subsidiaries - Hong Kong profits tax provision is made at a rate of 16.5% on estimated assessable profits generated in Hong Kong[21] - Certain subsidiaries in Mainland China enjoy income tax exemptions and reductions, benefiting from a preferential corporate income tax rate of 15% due to their engagement in environmental protection, energy, and water conservancy businesses or location in western Mainland China[21] | Income Tax Item | 2022 (HKD Thousand) | 2021 (HKD Thousand) | Y-o-Y Change (%) | | :--- | :--- | :--- | :--- | | Current – Hong Kong | 8,656 | 8,636 | +0.2% | | Current – Mainland China | 739,822 | 776,500 | -4.7% | | Current – Other regions | 35,582 | 31,674 | +12.3% | | Deferred | 297,273 | 647,372 | -54.1% | | Total tax expense for the year | 1,081,333 | 1,464,224 | -26.2% | Dividends The Group proposed a final dividend of 8.7 HK cents per share for 2022, an increase from 6.7 HK cents in 2021, with the total annual dividend remaining largely stable at HKD 1,582.8 million | Dividend Type | 2022 (HKD Thousand) | 2021 (HKD Thousand) | Y-o-Y Change (%) | | :--- | :--- | :--- | :--- | | Interim dividend (HK Cents per share) | 7.0 | 9.0 | -22.2% | | Proposed final dividend (HK Cents per share) | 8.7 | 6.7 | +29.9% | | Total | 1,582,761 | 1,588,082 | -0.3% | - The proposed final dividend for the year is subject to approval by the Company's shareholders at the forthcoming annual general meeting[23] Earnings Per Share Basic earnings per share for 2022 significantly decreased to 13.18 HK cents from 41.42 HK cents, primarily due to reduced profit attributable to equity holders and adjustments for perpetual capital instruments | Indicator | 2022 (HKD Thousand) | 2021 (HKD Thousand) | Y-o-Y Change (%) | | :--- | :--- | :--- | :--- | | Profit for the year attributable to equity holders of the Company | 1,374,151 | 4,195,940 | -67.2% | | Distributions on perpetual capital instruments | (45,428) | (48,563) | -6.5% | | Profit used for calculating basic earnings per share | 1,328,723 | 4,147,377 | -68.0% | | Profit for the year attributable to equity holders of the Company used for calculating diluted earnings per share | 1,327,861 | 4,147,377 | -68.0% | | Number of Ordinary Shares | 2022 | 2021 | Y-o-Y Change (%) | | :--- | :--- | :--- | :--- | | Weighted average number of ordinary shares in issue during the year less weighted average number of shares held under share award scheme for calculating basic earnings per share | 10,082,181,556 | 10,012,507,269 | +0.7% | | Weighted average number of ordinary shares for calculating diluted earnings per share | 10,089,632,605 | 10,073,275,600 | +0.2% | Receivables Receivables from service concession arrangements and trade receivables increased in 2022, while prepayments, deposits, and other receivables decreased, with strict credit control maintained | Receivable Type | 2022 (HKD Thousand) | 2021 (HKD Thousand) | Y-o-Y Change (%) | | :--- | :--- | :--- | :--- | | Receivables from service concession arrangements (Total) | 65,373,265 | 58,740,854 | +11.3% | | - Non-current portion | 58,470,512 | 53,218,131 | +9.9% | | - Current portion | 6,902,753 | 5,522,723 | +25.0% | | Trade receivables (Total) | 24,749,386 | 20,846,959 | +18.7% | | - Non-current portion | 12,848,693 | 11,956,063 | +7.5% | | - Current portion | 11,900,693 | 8,890,896 | +33.8% | | Prepayments, deposits and other receivables (Total) | 10,848,331 | 12,066,168 | -10.1% | | - Non-current portion | 1,574,914 | 2,138,861 | -26.4% | | - Current portion | 9,273,417 | 9,927,307 | -6.6% | - The non-current portion of receivables from service concession arrangements is classified as contract assets due to conditions for receiving consideration not yet being met[28] - Trade receivables primarily arise from integrated treatment project construction services, water supply services, technology and consulting services, urban resource services, and equipment sales, with credit terms generally one to three months, and some integrated treatment project trade receivables bearing interest at 4.8% to 15.0% per annum[29] Payables Other payables and accrued liabilities increased by 8.9% to HKD 11,345.8 million, while trade payables decreased by 9.7% to HKD 22,638.1 million, mainly due to a reduction in short-term trade payables | Payable Type | 2022 (HKD Thousand) | 2021 (HKD Thousand) | Y-o-Y Change (%) | | :--- | :--- | :--- | :--- | | Other payables and accrued liabilities (Total) | 11,345,842 | 10,418,464 | +8.9% | | - Accrued liabilities | 1,352,584 | 1,277,134 | +5.9% | | - Other liabilities | 5,138,846 | 4,357,137 | +18.0% | | Trade payables (Total) | 22,638,089 | 25,071,178 | -9.7% | | - Within three months | 9,413,357 | 13,540,292 | -30.5% | | - One to two years | 5,412,642 | 3,933,816 | +37.6% | - Trade payables are non-interest bearing, except for certain trade payables related to construction services that are not yet due for payment, and are generally settled within 60 days[33] Other Financial Information As of December 31, 2022, net current liabilities significantly decreased by 58.8% to HKD 4,155.3 million, while total assets less current liabilities slightly declined | Indicator | 2022 (HKD Thousand) | 2021 (HKD Thousand) | Y-o-Y Change (%) | | :--- | :--- | :--- | :--- | | Net current liabilities | 4,155,323 | 10,098,302 | -58.8% | | Total assets less current liabilities | 133,204,553 | 133,923,583 | -0.5% | Management Discussion and Analysis Financial Summary In 2022, operating revenue decreased by 10% to HKD 24,982.4 million, mainly due to reduced water environment treatment construction services, with profit attributable to equity holders down 67% to HKD 1,374.2 million | Business Segment | 2022 Operating Revenue (HKD Million) | 2021 Operating Revenue (HKD Million) | Operating Revenue Change (%) | | :--- | :--- | :--- | :--- | | Wastewater and reclaimed water treatment services | 9,873.7 | 8,145.1 | +21% | | Water supply services | 3,089.8 | 3,069.1 | +1% | | Subtotal Water Treatment Services | 12,963.5 | 11,214.2 | +16% | | Integrated treatment project construction services | 1,458.9 | 3,071.4 | -53% | | Construction of BOT water projects | 4,626.1 | 9,533.2 | -51% | | Subtotal Water Environment Treatment Construction Services | 6,085.0 | 12,604.6 | -52% | | Water environment treatment technology services and equipment sales | 3,393.3 | 4,061.3 | -16% | | Urban resource services | 2,540.6 | – | New | | Total Business Performance | 24,982.4 | 27,880.1 | -10% | | Total Profit attributable to equity holders of the Company | 1,374.2 | 4,195.9 | -67% | - Other items, including headquarters expenses, deemed disposal loss from an associate, and finance costs, had a negative impact on profit attributable to equity holders of the Company, widening to HKD -6,017.9 million in 2022 from HKD -4,125.6 million in 2021[37][43][45] Business Review The Group's core businesses include water treatment, water environment construction, and technology services, with water treatment capacity increasing, while construction revenue declined and urban resource services became a new revenue contributor - The Group's water plants cover 20 provinces, 5 autonomous regions, and 4 municipalities in Mainland China[46] - In 2022, the Group's total design capacity for water treatment services increased by 2,836,078 tons/day, reaching 44,287,093 tons/day[46] Water Treatment Services The Group's water treatment services, including wastewater, reclaimed water, and water supply, saw increased design capacity and average contract prices in Mainland China, with stable overseas operations | Project Type | Operating Design Capacity (tons/day) | Design Capacity Not Yet Operational/Transferred (tons/day) | Total Design Capacity (tons/day) | | :--- | :--- | :--- | :--- | | Mainland China Wastewater Treatment | 18,517,545 | 5,852,450 | 24,369,995 | | Mainland China Reclaimed Water Treatment | 2,193,488 | 2,237,600 | 4,431,088 | | Mainland China Water Supply | 9,708,442 | 3,912,500 | 13,620,942 | | Overseas Wastewater Treatment | 230,518 | – | 230,518 | | Overseas Reclaimed Water Treatment | 267,350 | – | 267,350 | | Overseas Water Supply | 1,067,200 | – | 1,067,200 | | Overseas Seawater Desalination | 300,000 | – | 300,000 | | Total | 32,284,543 | 12,002,550 | 44,287,093 | - The total daily operating design capacity for Mainland China wastewater and reclaimed water treatment services was 18,517,545 tons (a 9.9% year-on-year increase), and for reclaimed water treatment plants was 2,193,488 tons (a 29.8% year-on-year increase), with an average daily treatment rate of 80% and an actual average water treatment contract price of approximately RMB 1.47 per ton (a 5.8% year-on-year increase)[49] - The total daily operating design capacity for Mainland China water supply services was 9,708,442 tons (a 3.6% year-on-year increase), with an actual average contract price of approximately RMB 2.13 per ton (a 1.4% year-on-year increase)[57] Water Environment Treatment Construction Services Operating revenue from integrated treatment project construction services significantly decreased by 53% to HKD 1,458.9 million, and profit attributable to equity holders decreased by 43% to HKD 685.9 million, due to halted investments and restricted project operations - Operating revenue from integrated treatment project construction services decreased by 53% from HKD 3,071.4 million in 2021 to HKD 1,458.9 million in 2022[59] - Interest income from water environment treatment projects attributable to the Company was HKD 478.3 million (2021: HKD 450.9 million), an increase of 6.1%[59] - Total operating revenue from construction of BOT water projects was HKD 4,626.1 million (2021: HKD 9,533.2 million), a 51.4% decrease; profit attributable to equity holders of the Company was HKD 617.3 million (2021: HKD 1,191.8 million), a 48.2% decrease[60] Water Environment Treatment Technology Services and Equipment Sales Operating revenue from water environment treatment technology services and equipment sales decreased by 16.5% to HKD 3,393.3 million, with profit attributable to equity holders down 43.2% to HKD 653.7 million, mainly due to China's travel restrictions - Operating revenue from providing technology services and equipment sales was HKD 3,393.3 million (2021: HKD 4,061.3 million), accounting for 14% of the Group's total operating revenue[62] - Profit attributable to equity holders of the Company was HKD 653.7 million (2021: HKD 1,151.4 million)[62] - The decrease in operating revenue and profit attributable to equity holders of the Company was mainly due to travel restrictions implemented in China during the year, hindering the development of new technology service projects[62] Urban Resource Services Effective June 30, 2022, the Group consolidated Beijing Enterprises Urban Resources Group Limited, which contributed HKD 2,540.6 million in operating revenue and HKD 48.1 million in net profit attributable to the Group - Effective June 30, 2022, the Group consolidated the results of Beijing Enterprises Urban Resources Group Limited ("BEUR")[63] - BEUR primarily engages in environmental sanitation services, hazardous waste treatment, and waste electrical and electronic product processing businesses[63] - From the consolidation date to December 31, 2022, BEUR contributed HKD 2,540.6 million in operating revenue, with the Group's share of net profit being HKD 48.1 million[63] Financial Analysis Operating revenue decreased by 10% to HKD 24,982.4 million, gross profit margin rose to 39%, while management expenses and net other operating expenses increased, and the gearing ratio also rose Revenue and Cost Analysis Operating revenue decreased by 10% to HKD 24,982.4 million, primarily due to reduced water environment treatment construction services, while cost of sales decreased by 13.1% and gross profit margin rose to 39% - Operating revenue for the year was HKD 24,982.4 million (2021: HKD 27,880.1 million), with the decrease mainly due to reduced operating revenue from water environment treatment construction services[64] - Cost of sales for the year was HKD 15,144.4 million (2021: HKD 17,430.5 million), with the decrease mainly due to a HKD 5,111.3 million reduction in construction service costs[65] - The gross profit margin for the year increased from 37% last year to 39%, due to a change in the operating revenue mix, with a higher proportion of operating revenue from water treatment services compared to water environment treatment construction services[66] Other Income and Expenses Net other income and gains increased to HKD 1,488.3 million, while administrative expenses rose to HKD 3,457.3 million, and net other operating expenses significantly increased to HKD 2,783.4 million, mainly due to a deemed disposal loss and remeasurement loss - Net other income and gains for the year was HKD 1,488.3 million (2021: HKD 1,248.5 million), mainly comprising sludge treatment revenue of HKD 145.7 million, pipeline installation revenue of HKD 307.2 million, bargain purchase gain from subsidiary acquisition of HKD 186.5 million, and government grants of HKD 244.3 million[68] - Administrative expenses for the year increased to HKD 3,457.3 million (2021: HKD 3,158.4 million), mainly due to increased staff-related expenses from business expansion and the consolidation of Beijing Enterprises Urban Resources during the year[69] - Net other operating expenses for the year increased from HKD 905.6 million in 2021 to HKD 2,783.4 million, mainly due to a deemed disposal loss of HKD 1,091 million from associate Shandong Hi-Speed New Energy Group Limited and a remeasurement loss of HKD 173 million from Beijing Enterprises Urban Resources[70] Share of Profits Share of profits from joint ventures decreased by 24.3% to HKD 652.0 million, while share of profits from associates increased by 109.6% to HKD 121.8 million, mainly due to increased share from Shandong Hi-Speed New Energy Group Limited - Share of profits from joint ventures decreased to HKD 652.0 million (2021: HKD 861.7 million), mainly due to reduced profits from several joint ventures engaged in water treatment services and water environment treatment technology services and equipment sales[72] - Share of profits from associates increased to HKD 121.8 million (2021: HKD 58.1 million), mainly due to increased share of profits from Shandong Hi-Speed New Energy Group Limited[73] Tax and Perpetual Capital Instruments Income tax expense included HKD 739.8 million in current Mainland China income tax, with an effective tax rate of approximately 18% due to tax incentives, and perpetual capital instrument distributions related to 2021 bond coupon payments - Income tax expense for the year included current Mainland China income tax of HKD 739.8 million Due to tax incentives for some subsidiaries, the effective tax rate for Mainland China operations was approximately 18%, lower than the standard Mainland China corporate income tax rate of 25%[74] - Profit attributable to holders of perpetual capital instruments refers to coupon payments on perpetual bonds with a total principal amount of RMB 2.5 billion issued in 2021[75] Asset Changes Property, plant, and equipment increased by HKD 3,754.9 million, and right-of-use assets by HKD 385.7 million, mainly due to the consolidation of Beijing Enterprises Urban Resources, while investments in joint ventures and associates decreased - Property, plant and equipment increased by HKD 3,754.9 million, mainly due to the consolidation of Beijing Enterprises Urban Resources during the year[75] - Right-of-use assets increased by HKD 385.7 million, mainly due to the consolidation of Beijing Enterprises Urban Resources during the year[76] - The balance of concession rights increased mainly due to the acquisition of a subsidiary and the consolidation of Beijing Enterprises Urban Resources[81] - Investments in joint ventures decreased by HKD 351.2 million, mainly due to RMB depreciation and dividends declared by certain joint ventures[82] - Investments in associates decreased by HKD 2,753.2 million, mainly due to RMB depreciation, the deemed disposal of Shandong Hi-Speed New Energy Group Limited, and the consolidation of Beijing Enterprises Urban Resources, which was previously classified as an associate[82] Receivables and Payables Total amounts due from contract customers, receivables from service concession arrangements, and trade receivables slightly decreased to HKD 117,214.7 million, with shifts in composition due to reclassifications and acquisitions | Total Receivables | 2022 (HKD Million) | 2021 (HKD Million) | Y-o-Y Change (%) | | :--- | :--- | :--- | :--- | | Amounts due from contract customers | 27,092.0 | 40,054.2 | -32.4% | | Receivables from service concession arrangements | 65,373.3 | 58,740.8 | +11.3% | | Trade receivables | 24,749.4 | 20,847.0 | +18.7% | | Total | 117,214.7 | 119,642.0 | -2.0% | - Amounts due from contract customers decreased by HKD 12,962.2 million, mainly due to reclassification to receivables from service concession arrangements and trade receivables upon commencement of operations for certain BOT projects and completion of BT projects, respectively[78] - Trade receivables increased by HKD 3,902.4 million, mainly due to the consolidation of Beijing Enterprises Urban Resources and reclassification from amounts due from contract customers upon completion of BT projects[79] - Other payables and accrued liabilities increased by HKD 927.4 million, mainly due to the consolidation of Beijing Enterprises Urban Resources[84] - Trade payables decreased by HKD 2,433.1 million, mainly due to reduced trade payables to subcontractors for water environment treatment project construction services during the year[89] Capital Structure and Liquidity Cash and cash equivalents increased to HKD 13,163.9 million, total borrowings rose to HKD 82,095.3 million, and the gearing ratio increased to 1.16, primarily due to increased borrowings and reduced equity - Cash and cash equivalents increased by HKD 2,421.2 million, mainly due to the consolidation of Beijing Enterprises Urban Resources and proceeds from corporate bond issuance during the year[84] - Bank and other borrowings increased by HKD 7,151.5 million, mainly due to the consolidation of Beijing Enterprises Urban Resources and new bank loans to fund the acquisition and construction of multiple water projects in Mainland China during the year[87] - Corporate bonds increased by HKD 1,269.0 million, mainly due to the net effect of new corporate bonds with a principal amount of RMB 2 billion issued during the year and RMB depreciation[88] - The gearing ratio (total bank and other borrowings, finance lease payables, bills payable, and corporate bonds less cash and cash equivalents divided by total equity) as of December 31, 2022, was 1.16 (2021: 1.03), with the increase mainly due to increased bank and other borrowings and reduced total equity during the year[90] - Total capital expenditure for the year was HKD 7,324.9 million (2021: HKD 10,709.6 million), primarily for acquiring property, plant and equipment, right-of-use assets, and intangible assets; constructing and acquiring water plants; and equity investments[91] Future Outlook The Group will prioritize sustainable development, integrate digital technology, enhance core competitiveness for asset-light transformation, advance smart water R&D, and lead carbon reduction in the water industry, aiming for high-quality, sustainable growth in 2023 - The Company integrates data elements and digital technology into its corporate development, building an enterprise data asset and management system, and establishing a comprehensive, continuous innovation mechanism to support its asset-light strategic transformation and sustainable development[92] - Guided by its digitalization strategy, the Group continuously advances the R&D and iterative upgrade of smart water products, and enhances its operational efficiency through systematic construction of business and management digitalization[92] - The Group actively responds to the national "3060" dual carbon strategy, adhering to the development philosophy of "green priority, carbon reduction and efficiency enhancement," continuously increasing R&D investment in low-carbon new technologies, optimizing low-carbon operational management methods, fully exploring its own emission reduction potential, and leading carbon reduction and low-carbon transformation in the water industry[93] - In 2023, the Group will continue to acquire and manage large-scale assets, create new business growth points through technological and model innovation, improve corporate operational efficiency, and focus on high-quality, sustainable development, striving towards its vision of "becoming a trusted, development-leading world-class water environment service provider"[94] Other Corporate Information Employees and Remuneration Policy As of December 31, 2022, the Group employed 71,974 staff, with total staff costs significantly increasing to HKD 5,428.7 million, and remuneration packages determined by market terms and individual performance - As of December 31, 2022, the Group employed 71,974 staff (including 51,367 employees from Beijing Enterprises Urban Resources)[95][96] - Total staff costs for the year ended December 31, 2022, were HKD 5,428,673,000 (2021: HKD 3,622,166,000), an increase of 49.9%[95] - The Group's remuneration packages are generally determined by market terms and individual performance, including discretionary bonuses, share options, and share awards As of December 31, 2022, the total number of outstanding share options represented approximately 1.42% of the Company's issued ordinary shares, and 21,664,326 award shares were unvested, representing approximately 0.22% of the issued ordinary shares[95] Significant Investments and Acquisitions For the year ended December 31, 2022, the Group made no significant investments in or acquisitions of subsidiaries and affiliated companies - For the year ended December 31, 2022, the Group had no significant investments in or acquisitions of subsidiaries and affiliated companies[95] Pledge of Group Assets As of December 31, 2022, the Group's secured bank and other borrowings and corporate bonds were collateralized by various assets, including concession rights, land use rights, investment properties, and equity interests in subsidiaries - The Group's secured bank and other borrowings and corporate bonds are collateralized by concession rights (including concession rights and receivables from service concession arrangements), land use rights and buildings, investment properties, guarantees provided by the Company and/or its subsidiaries, property, plant and equipment, right-of-use assets, equity interests in subsidiaries, bank balances, and receivables[96][97] Foreign Exchange Risk Most of the Company's subsidiaries operate in Mainland China, with transactions primarily in RMB, making the Group's consolidated accounts and net asset value susceptible to RMB to HKD exchange rate fluctuations, with no derivative hedging currently employed - Most of the Company's subsidiaries operate in Mainland China, and their transactions are mostly denominated and settled in RMB[98] - Exchange rate fluctuations will affect currency translation when the Group prepares its consolidated accounts, thereby impacting the Group's net asset value[98] - Currently, the Group does not use derivative financial instruments to hedge its foreign currency risk[98] Contingent Liabilities As of December 31, 2022, the Group provided HKD 2,281.6 million in bank guarantees for project bids and performance bonds, and HKD 2,593.9 million in corporate guarantees for associate and joint venture financing, with no material adverse financial impact from a recent arbitration | Guarantee Type | 2022 (HKD Thousand) | 2021 (HKD Thousand) | | :--- | :--- | :--- | | Bank guarantees (project bidding and performance bonds) | 2,281,620 | 1,223,872 | | Corporate guarantees (associate and joint venture financing) | 2,593,904 | 3,635,425 | - In September 2021, an arbitration proceeding was initiated against a direct wholly-owned subsidiary of the Company, and the final arbitration award has been issued, which did not have a material adverse financial impact on the Group[100] Final Dividend The Board recommends a final dividend of 8.7 HK cents per ordinary share for the financial year ended December 31, 2022, payable to shareholders on June 16, 2023, subject to AGM approval on June 7, 2023 - The Board recommends a final dividend of 8.7 HK cents per ordinary share for the financial year ended December 31, 2022[101] - The proposed final dividend will be paid to the Company's shareholders whose names appear on the Company's register of members on Friday, June 16, 2023, subject to approval by shareholders at the Annual General Meeting to be held on Wednesday, June 7, 2023[101] Closure of Register of Members The Company will suspend its register of members in two periods to determine eligibility for attending the AGM (June 2-7, 2023) and receiving the proposed final dividend (June 14-16, 2023) - The Company will suspend its register of members from Friday, June 2, 2023, to Wednesday, June 7, 2023, to determine eligibility for attending and voting at the Annual General Meeting[102] - The Company will suspend its register of members from Wednesday, June 14, 2023, to Friday, June 16, 2023, to determine eligibility for receiving the proposed final dividend[103] Corporate Governance For the year ended December 31, 2022, the Company complied with all Corporate Governance Code provisions, except for the Chairman's AGM absence and a temporary shortfall in independent non-executive directors, which was rectified - For the year ended December 31, 2022, the Company complied with all code provisions of the Corporate Governance Code set out in Appendix 14 of the Listing Rules, except for the absence of the Chairman of the Board at the Annual General Meeting[104] - Following the resignation of Mr Wang Kaijun, an independent non-executive Director of the Company, on August 31, 2022, the number of independent non-executive Directors of the Company fell below the requirement of Rule 3.10A of the Listing Rules, but was rectified within three months[104] Standard Code for Securities Transactions by Directors The Company adopted the Standard Code for Securities Transactions by Directors of Listed Issuers, and all directors confirmed compliance for the year ended December 31, 2022 - The Company has adopted the Standard Code for Securities Transactions by Directors of Listed Issuers set out in Appendix 10 of the Listing Rules as its code of conduct for directors' securities transactions[105] - For the year ended December 31, 2022, the Company confirmed that all Directors complied with the required standards set out in the Standard Code and its code of conduct for directors' securities transactions[105] Audit Committee The Audit Committee, comprising three independent non-executive directors, reviewed and approved the 2022 final results, confirming appropriate accounting policies and sufficient disclosures - The Company's Audit Committee, comprising three independent non-executive Directors, is primarily responsible for reviewing and overseeing the Company's financial reporting process, risk management, and internal controls[106] - The final results for the year ended December 31, 2022, have been reviewed and approved by the Audit Committee The Audit Committee is of the opinion that appropriate accounting policies have been adopted and sufficient disclosures have been made in the preparation of these results[106] Scope of Work of the Company's Auditor on Preliminary Announcement The Company's auditor confirmed the preliminary announcement's financial figures align with the draft consolidated financial statements but did not provide an opinion or assurance conclusion as their work is not an assurance engagement - The Company's auditor agreed that the figures in the consolidated statement of financial position, consolidated income statement, consolidated statement of comprehensive income, and related notes for the Group for the year ended December 31, 2022, as presented in the preliminary announcement, are consistent with the amounts in the Group's draft consolidated financial statements for the year[107] - The work performed by the Company's auditor in this regard does not constitute an assurance engagement, and accordingly, the Company's auditor does not express an opinion or an assurance conclusion on the preliminary announcement[107] Purchase, Sale and Redemption of the Company's Listed Securities For the year ended December 31, 2022, the Company repurchased 89,212,000 ordinary shares on the Stock Exchange for HKD 162,924,260, which were subsequently cancelled to enhance net asset value and shareholder value - For the year ended December 31, 2022, the Company repurchased a total of 89,212,000 ordinary shares of the Company on the Stock Exchange for a total consideration of HKD 162,924,260 (before expenses)[108] - The Company subsequently cancelled all repurchased shares The share repurchases are expected to have a positive effect on the net asset value per share and create greater value for shareholders[108] | Year/Month | Number of Ordinary Shares Repurchased | Highest Price Per Share (HKD) | Lowest Price Per Share (HKD) | Total Consideration Paid (HKD) | | :--- | :--- | :--- | :--- | :--- | | August 2022 | 722,000 | 2.02 | 2.00 | 1,450,000 | | September 2022 | 32,534,000 | 2.02 | 1.63 | 59,819,320 | | October 2022 | 50,098,000 | 1.93 | 1.66 | 91,130,280 | | November 2022 | 5,838,000 | 1.93 | 1.67 | 10,485,460 | | December 2022 | 20,000 | 1.96 | 1.96 | 39,200 | | Total | 89,212,000 | | | 162,924,260 | Proposed Amendments to the Articles of Association The Board proposes amendments to the Articles of Association to align with Listing Rules, enhance flexibility for hybrid and electronic general meetings, and reflect legal updates, subject to shareholder approval at the AGM - The Board proposes certain amendments to the Company's existing Articles of Association to align them with the core shareholder protection levels set out in Appendix 3 of the Listing Rules and to allow the Company flexibility to convene and hold hybrid and electronic general meetings[110] - The proposed amendments are subject to approval by the Company's shareholders by way of a special resolution at the Annual General Meeting and will become effective upon such approval by the Company's shareholders at the Annual General Meeting[110] Publication of Final Results and Annual Report This results announcement is published on the Company's and Stock Exchange's websites, with the 2022 Annual Report and AGM Notice to be dispatched to shareholders and published online in due course - This results announcement is published on the Company's website (www.bewg.net) and the Stock Exchange's website (www.hkexnews.hk)[111](index=111&type=chunk) - The 2022 Annual Report and the Notice of Annual General Meeting will be dispatched to the Company's shareholders and published on the Company's and the Stock Exchange's websites in due course[111] Acknowledgement Chairman Xiong Bin, on behalf of the Board, extends sincere gratitude to all Group employees for their continuous support, dedication, and loyal service - Chairman Xiong Bin, on behalf of the Board, extends sincere gratitude to all Group employees for their continuous support, dedication, and loyal service[112]