China Water Affairs : Announces FY2023/24 Annual Results

Revenue from Direct DrinkingWater Supply Operations Surged 72.5% YoY

Reinforcing Dual-EngineBusiness Model

(27 June 2024, Hong Kong)China WaterAffairs Group Limited("China Water Affairs" or the "Company", stock code:0855.HK), a leading integrated water operator in China,today announced the annual results of the Company and its subsidiaries(collectively known as the "Group") for the twelve months ended 31 March 2024(the "Reporting Period").

During the Reporting Period, the Grouprecorded revenue of approximately HK$12.86 billion, down 9.4% year-on-yearmainly due to the fluctuations of RMB exchange rate and lower revenue resultingfrom the decrease in installation, maintenance and construction works in citywater supply and environmental protections segments. If the impact of RMBexchange rate movement was excluded, its revenue decreased by 4.1% from a yearago. Net profit for the period was approximately HK$2.59 billion, down 16.1%year-on-year. Net profit excludingnon-recurring items decreased by 9.3% year-on-year if changes in the operating results ofthe associates in which the Company held non-controlling interests and the impactsfrom a 23-year high US interest rates wereexcluded. It would have dropped 4.0% year-on-year if the impacts of RMBexchange rate fluctuations were also excluded.

It is noteworthy that while the decline in the Group's revenue andprofit mainly derived from non-core businesses and construction service, itscore operations maintained healthy development which was in alignment with theGroup's strategy to focus on core business development.

In order to capture the ample opportunities from pipeline directdrinking water service driven by overriding trend of reducing carbon emissionsand plastic goods and promoting green development in China, as well as tocontinuously reward shareholders, the Board of Directors recommended thepayment of a final dividend of 15 HK cents per share to the equity holders ofthe Company. Together with an interim dividend of 13 HK cents already paid out,the total dividend for the year amounts to 28 HK cents per share, representinga dividend payout ratio of 30%.

Underpinned by the solid foundationestablished for years through the integration of urban-rural water supply andsupply-drainage services, the Group vigorously expanded pipeline directdrinking water business and created "water supply + direct drinking water" businesses as itstwin growth engines. Remarkable progress was achieved as pipeline directdrinking water supply segment saw remarkable growth in the period and itsrevenue climbed 31.4% year-on-year to approximately HK$1.72 billion. If theimpact of RMB exchange rate movement was excluded, the segment revenue surgedby 39.1% from a year ago mainly due to 72.5% year-on-year growth in pipelinedirect drinking water supply operations. Profit from this segment soared 17.3%year-on-year to approximately HK$509 million and increased by 24.2%year-on-year if the impact of RMB exchange rate movement was excluded.

During the Reporting Period, the citywater supply segment maintained steady development with the volume of watersold advanced by 2.6% year-on-year. Owing to the tariff hike delay caused bythe COVID pandemic, only two cities were approved to raise their water tariffsin the period, marking a historic low for the Company. Revenue from watersupply service reduced by 1.3% year-on-year to approximately HK$3.31 billion andgrew by 4.5% year-on-year if the impact of RMB exchange rate movement wasexcluded. Revenue from city water supply segment for the Reporting Perioddropped by 5.2% year-on-year to approximately HK$8.28 billion. If the impact ofRMB exchange rate movement was excluded, revenue from this segment edged up by0.3% year-on-year. Profit from this segment reduced by 12.2% year-on-year toapproximately HK$2.49 billion and dropped by 7.1% year-on-year to if the impactof RMB exchange rate movement was excluded.

As for the environmental protectionbusiness, revenue from sewage treatment and water environmental renovationconstruction services reduced by 44.9% year-on-year to HK$655 million owing tothe completion of a number of projects (including ExxonMobil's Daya Bay Projectin Huizhou). The related capital expenditures significantly droppedaccordingly. Nevertheless, revenue from environmental protection segment isexpected to see exponential growth as ExxonMobil's project is put intooperation, thereby driving the high-quality development of this segment.

The Group retained a sound financial position. As of 31 March 2024, itpossessed cash and pledged deposits of approximately HK$5.55 billion; while itsgearing ratio stayed at a healthy level of 66.1%. In order to further optimize itsfinancial structure, the Group refinanced its short-term borrowings withlong-term borrowings, leading to a decrease of 6 percentage points in the ratioof short-term borrowings to total borrowings to 28%. Its debt structure was henceremarkably optimized.

Looking ahead, the demand for high-quality and healthy drinking waterwill continue to grow amid the green and low-carbon socio-economictransformation. Pipeline direct drinking water will play a dominant role inChina's transition to the consumption of low-carbon drinking water. It not onlyaligns with current development pattern and market demand, but also drive theGroup's business growth towards second stage and provide it invaluableopportunity for rapid expansion.

The Group will adhere to its core operational principle with an emphasison the quality of water supply, continuing to pursue the development strategyof making water supply and pipeline direct drinking water as the twin pillars.While insisting on technological innovation and green and low-carbondevelopment strategy, it will grasp the opportunity brought by pipeline directdrinking water to drive the second stage of development. In addition tomaintaining a healthy cash-flow and financial position, the Group will attachgreat importance to promoting a sustainable development model which integrateslight and heavy assets. It will endeavor to satisfy people's aspirations for abetter life and to create promising returns for shareholders.

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About China Water Affairs Group Limited

China WaterAffairs Group Limited is a leading professional, international,market-oriented and cross-regional water services operator in China and theonly Hong Kong listed company focusing on tap water business. Headquartered inHong Kong, it has operations management centers in Beijing and Shenzhen. TheGroup (including associate companies) mainly engages in urban water supply,pipeline direct drinking water, sewage treatment and drainage and other relatedvalue-added services in Mainland China. Its services cover more than 30 millionpeople spread across 24 provinces, direct-administered municipalities andautonomous regions. The Group has established a leading position as afull-service operator in China's water affairs market. Its management comprisesof veteran experts in the water industry with an insight into governmentpolicies and services management. The Company's shares were included in thefirst batch of securities eligible for trading through Shenzhen-Hong Kong StockConnect in 2016 and have been the constituent stock in the FTSE EnvironmentalOpportunities Asia Pacific Index since 2009.

This pressrelease is issued by PRChina Limited on behalf of China Water Affairs GroupLimited.

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