Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong

Limited take no responsibility for the contents of this announcement, make no

representation as to its accuracy or completeness and expressly disclaim any liability
whatsoever for any loss howsoever arising from or in reliance upon the whole or any
part of the contents of this announcement.

(Incorporated in the Cayman Islands and continued in Bermuda with limited liability)
(Stock Code: 855)

ANNOUNCEMENT OF RESULTS
FOR THE YEAR ENDED 31 MARCH 2020

KEY HIGHLIGHTS
• The Group recorded a revenue of HK$8,694.3 million, representing a steady
increase of 4.7% from HK$8,302.2 million in last year.

• The average exchange rate of Renmibi to Hong Kong Dollar adopted by the
Group for financial reporting purpose depreciated by approximately 4.5% as
compared with the last corresponding year.

• Revenue composition of city water supply operation and construction segment

remained robust. Revenue contribution from water supply operation services and
water supply connection income amounted to HK$4,022.1 million (2019:
HK$3,655.0 million), representing a steady increase of 10.0% as compared with
the last corresponding year. Revenue contribution from water supply construction
services amounted to HK$3,081.2 million (2019: HK$2,630.5 million),
representing a steady increase of 17.1% as compared with the last corresponding
year. The revenue from city water supply operation and construction segment
amounted to HK$7,224.2 million (2019: HK$6,376.1 million), representing a
steady increase of 13.3% as compared with the last corresponding year. The
revenue from city water supply operation and construction segment represented
approximately 83.1% (2019: 76.8%) of the total revenue. The city water supply
segment profit (including city water supply, water related connection works and
construction services) amounted to HK$2,956.1 million (2019: HK$2,618.7
million), representing a steady increase of 12.9% as compared with the last
corresponding year.

1
• Revenue contribution from sewage treatment and drainage operation services
amounted to HK$334.2 million (2019: HK$319.5 million), representing a steady
increase of 4.6% as compared with the last corresponding year. Revenue
contribution from sewage treatment and water environmental renovation
construction services amounted to HK$613.7 million (2019: HK$1,086.1
million), representing a significant decrease of 43.5% as compared with the last
corresponding year. The revenue from environmental protection segment
amounted to HK$1,073.9 million (2019: HK$1,522.3 million), representing a
significant decrease of 29.5% as compared with the last corresponding year. The
revenue from environmental protection segment represented approximately
12.4% (2019: 18.3%) of the total revenue. The environmental protection segment
profit (including sewage treatment and drainage operating and construction, solid
waste and hazardous waste business, environmental sanitation and water
environment management) amounted to HK$276.3 million (2019: HK$443.9
million), representing a significant decrease of 37.8% as compared with the last
corresponding year.

• Earnings before interest, taxes, depreciation and amortisation which is calculated

as profit before finance costs, income tax, depreciation and amortisation
amounted to HK$4,213.5 million, representing a steady increase of 17.8% from
HK$3,575.8 million in last corresponding year.

• Profit for the year attributable to owners of the Company was HK$1,639.5
million, representing a steady increase of 19.7% from HK$1,369.2 million in last
corresponding year.

• Basic earnings per share for the year was HK102.12 cents, representing a steady
increase of 20.0% from HK85.10 cents in last corresponding year.

• In consideration of the satisfactory results, the board of directors has proposed to

pay the equity shareholders of the Company a final dividend of HK16 cents per
share. Together with the interim dividend of HK14 cents per share, the total
dividends for the year will be HK30 cents per share (2019: HK28 cents per
share), representing a steady increase of 7.1% as compared with the last
corresponding year.

2
RESULTS
The Board of Directors (the “Directors”) of China Water Affairs Group Limited (the
“Company”) announces the audited consolidated results of the Company and its
subsidiaries (the “Group”) for the year ended 31 March 2020 together with the
comparative figures for the previous year as follows:

CONSOLIDATED INCOME STATEMENT

For the year ended 31 March 2020

2020 2019
Notes HK$’000 HK$’000

Revenue 4 8,694,303 8,302,211

Cost of sales (4,935,818) (4,838,372)

Gross profit 3,758,485 3,463,839

Other income 4 370,563 300,258

Selling and distribution costs (199,135) (191,436)
Administrative expenses (735,335) (655,232)
Other operating expenses (13,121) (13,067)
(Loss)/gain on disposal of subsidiaries, net (348) 117,841

Operating profit 6 3,181,109 3,022,203

Finance costs 7 (429,215) (319,185)

Share of results of associates 412,615 69,041

Profit before income tax 3,164,509 2,772,059

Income tax expense 8 (657,220) (641,776)

Profit for the year 2,507,289 2,130,283

3
 2020 2019
Notes HK$’000 HK$’000

Profit for the year attributable to:

Owners of the Company 1,639,495 1,369,235
Non-controlling interests 867,794 761,048

2,507,289 2,130,283

Earnings per share for profit attributable to

owners of the Company during the year 10 HK cents HK cents

Basic 102.12 85.10

Diluted 102.12 85.10

4
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 March 2020

2020 2019
HK$’000 HK$’000

Profit for the year 2,507,289 2,130,283

Other comprehensive (loss)/income

Items that have been or may be reclassified subsequently
to profit or loss:
– Currency translation (832,644) (473,983)
– Recycling of currency translation differences
  upon disposal of subsidiaries (258) (3,865)

Items that will not be reclassified to profit or loss:

– Change in fair value of financial assets at fair value
  through other comprehensive income 2,964 60,000
– Share of other comprehensive loss of an associate (1,814) –

Other comprehensive loss for the year, net of tax (831,752) (417,848)

Total comprehensive income for the year 1,675,537 1,712,435

Total comprehensive income attributable to:

Owners of the Company 1,008,628 1,080,910
Non-controlling interests 666,909 631,525

1,675,537 1,712,435

5
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 March 2020

2020 2019
Notes HK$’000 HK$’000

ASSETS AND LIABILITIES

Non-current assets
Property, plant and equipment 2,224,200 2,019,900
Prepaid land lease payments – 901,423
Right-of-use assets 1,297,830 –
Investment properties 1,031,042 912,335
Interests in associates 2,227,812 676,035
Financial assets at fair value through other
comprehensive income 358,285 349,225
Goodwill 1,320,004 1,220,394
Other intangible assets 17,558,146 15,293,235
Prepayments, deposits and other receivables 894,863 1,500,105
Contract assets 670,545 540,779
Receivables under service concession
arrangements 1,031,570 1,079,365

28,614,297 24,492,796

Current assets
Properties under development 1,505,720 1,273,890
Properties held for sale 751,533 816,189
Inventories 630,394 530,990
Contract assets 295,993 233,484
Receivables under service concession
arrangements 62,361 61,967
Trade and bills receivables 11 1,324,787 1,242,864
Financial assets at fair value through profit or
loss 292,135 489,340
Due from non-controlling equity holders of
subsidiaries 211,072 288,194
Due from associates 13,411 227,416
Prepayments, deposits and other receivables 1,597,350 1,549,667
Pledged deposits 963,236 644,524
Cash and cash equivalents 5,640,664 3,973,315

13,288,656 11,331,840

6
 2020 2019
Notes HK$’000 HK$’000

Current liabilities
Lease liabilities 30,966 –
Contract liabilities 906,157 648,134
Trade and bills payables 12 3,106,708 2,410,098
Accrued liabilities, deposits received and other
payables 2,482,964 1,979,082
Due to associates 121,805 46,093
Borrowings 4,090,990 3,437,483
Due to non-controlling equity holders of
subsidiaries 163,642 219,048
Provision for tax 1,432,744 1,278,874

12,335,976 10,018,812

Net current assets 952,680 1,313,028

Total assets less current liabilities 29,566,977 25,805,824

Non-current liabilities
Borrowings 13,298,027 11,494,131
Lease liabilities 335,379 –
Contract liabilities 276,453 273,133
Due to non-controlling equity holders of
subsidiaries 412,979 27,784
Deferred government grants 202,213 225,583
Deferred tax liabilities 943,423 882,723

15,468,474 12,903,354

Net assets 14,098,503 12,902,470

EQUITY

Equity attributable to owners of

the Company
Share capital 16,040 16,089
Reserves 8,491,670 7,954,377

8,507,710 7,970,466

Non-controlling interests 5,590,793 4,932,004

Total equity 14,098,503 12,902,470

7
Notes:

1. BASIS OF PREPARATION
The consolidated financial statements of the Group have been prepared in accordance with all
applicable Hong Kong Financial Reporting Standards (“HKFRS”). The consolidated financial
statements have been prepared under the historical cost convention, as modified by the revaluation
of investment properties, financial assets at fair value through profit or loss and financial assets at
fair value through other comprehensive income, which are carried at fair value.

The preparation of financial statements in conformity with HKFRS requires the use of certain
critical accounting estimates. It also requires management to exercise its judgement in the process
of applying the Group’s accounting policies.

2. NEW STANDARD, AMENDMENTS TO STANDARDS AND INTERPRETATION

During the year, the Group adopted the following new standard, amendments to standards and
interpretation which are relevant to the Group’s operation and are mandatory for the year ended 31
March 2020.

Annual Improvements Project Annual Improvements to 2015-2017 Cycle

HKAS 19 (Amendments) Plan Amendment, Curtailment or Settlement
HKAS 28 (Amendments) Long-term Interests in Associates and Joint Ventures
HKFRS 9 (Amendments) Prepayment Features with Negative Compensation
HKFRS 16 Leases
HK (IFRIC) Interpretation 23 Uncertainty over Income Tax Treatments

The Group has changed its accounting policies as a result of adopting HKFRS 16. The Group
elected to adopt the new standard retrospectively but has not restated comparative information as of
1 April 2019. This is disclosed in note 3 below. The other amendments to standards and
interpretation adopted by the Group did not have any impact on the amounts recognised in prior
periods and are not expected to significantly affect the current or future periods.

3. CHANGES IN ACCOUNTING POLICIES

This note explains the impact of the adoption of HKFRS 16 Leases on the Group’s consolidated
financial statements.

As indicated in note 2 above, the Group has adopted HKFRS 16 Leases retrospectively from 1 April
2019, but has not restated comparatives information for the 2019 reporting period, as permitted
under the specific transition provisions under HKFRS 16. The reclassifications and the adjustments
arising from the new leasing rules are therefore recognised in the consolidated statement of
financial position on 1 April 2019.

On adoption of HKFRS 16, the Group recognised lease liabilities in relation to leases which had
previously been classified as ‘operating leases’ under the principles of HKAS 17 Leases. These
liabilities were measured at the present value of the remaining lease payments, discounted using the
lessee’s incremental borrowing rate as of 1 April 2019. The weighted average lessee’s incremental
borrowing rate applied to the lease liabilities on 1 April 2019 was 4.95%.

8
(i) Practical expedients applied
In applying HKFRS 16 for the first time, the Group has used the following practical
expedients permitted by the standard:

• the use of a single discount rate to a portfolio of leases with reasonably similar
characteristics;

• the reliance on previous assessments on whether leases are onerous as an alternative to

performing an impairment review;

• the use of recognition exemption to leases with a remaining lease term of 12 months
or less at 1 April 2019;

• the use of recognition exemption to leases for which the underlying asset is of low
value;

• the exclusion of initial direct costs for the measurement of the right-of-use asset at the
date of initial application; and

• the use of hindsight in determining lease term at the date of initial application.

The Group has also elected not to reassess whether a contract is, or contains a lease at the
date of initial application. Instead, for contracts entered into before the transition date, the
Group relied on its assessment made applying HKAS 17 and HK(IFRIC)-Interpretation 4
Determining whether an Arrangement contains a Lease.

(ii) Measurement of lease liabilities

The Group had operating lease commitments of HK$374,674,000 as disclosed as at 31 March
2019 a n d o n a d o p t i o n o f H K F R S 16, t h e G r o u p r e c o g n i s e d l e a s e l i a b i l i t i e s o f
HK$230,248,000 as at 1 April 2019. The key differences between the disclosed operating
lease commitments and the recognised lease liabilities have mainly arisen from the
discounting impact on operating lease commitments in using the lessee’s incremental
borrowing rate as of 1 April 2019, additional lease liabilities recognised under the scope of
HKFRS 16 and exclusion of short-term and low-value leases recognised on a straight-line
basis as expense.

(iii) Measurement of right-of-use assets

All the right-of-use assets were measured at the amount equal to the lease liability, adjusted
by the amount of any prepaid or accrued lease payments relating to that lease recognised in
the consolidated statement of financial position as at 31 March 2019. There were no onerous
lease contracts that would have required an adjustment to the right-of-use assets at the date
of initial application.

(iv) Adjustments recognised in the balance sheet on 1 April 2019

The change in accounting policy affected the right-of-use assets and lease liabilities, and
both increased by HK$230,248,000 on 1 April 2019. In addition, prepaid land lease payments
of HK$901,423,000 were reclassified to right-of-use assets on 1 April 2019. There was no
material impact on retained earnings on 1 April 2019.

9
 The following is a reconciliation of the opening effect on adoption of HKFRS 16 as at 1
April 2019:

Lease Lease
Prepaid liabilities liabilities
Consolidated statement Right-of-use land lease – current – non-current
of financial position (extract) assets payments portion portion
HK$’000 HK$’000 HK$’000 HK$’000

At 31 March 2019,
as originally reported – 901,423 – –
Reclassification to right-of-use
assets on adoption of HKFRS 16 901,423 (901,423) – –
Adjustment on adoption of
HKFRS 16 230,248 – 40,361 189,887

At 1 April 2019, as restated 1,131,671 – 40,361 189,887

The recognised right-of-use assets relate to the following types of assets:

31 March 1 April
2020 2019
HK$’000 HK$’000

Leasehold land and land use right 1,098,313 901,423

Buildings 199,517 230,248

Total right-of-use assets 1,297,830 1,131,671

(v) Lessor accounting

The Group did not need to make any adjustments to the accounting for assets held as lessor
under operating leases as a result of the adoption of HKFRS 16.

10
4. REVENUE AND OTHER INCOME
Revenue derived from the Group’s principal activities, which is also the Group’s turnover,
recognised during the year is as follows:

2020 2019
HK$’000 HK$’000

Revenue:

Water supply operation services 2,403,111 2,213,932

Water supply connection income 1,618,953 1,441,064
Water supply construction services 3,081,211 2,630,500
Sewage treatment and drainage operation services 334,231 319,506
Sewage treatment and water environmental renovation
construction services 613,719 1,086,107
Sales of properties 200,229 250,991
Sales of goods 33,682 14,282
Hotel and rental income 91,488 102,106
Finance income 45,972 37,770
Handling income 32,323 29,568
Others 239,384 176,385

Total 8,694,303 8,302,211

Other income:

Interest income 119,337 96,487

Government grants and subsidies# 181,617 143,234
Amortisation of deferred government grants 9,176 8,158
Gain on disposal of property, plant and equipment, net 7,532 4,874
Dividend income from financial assets 13,566 8,833
Miscellaneous income 39,335 38,672

Total 370,563 300,258

#
Government grants and subsidies mainly comprised unconditional subsidies for subsidising
the Group’s water supply and other businesses.

11
5. SEGMENT INFORMATION
The Group identifies operating segments and prepares segment information based on the regular
internal financial information reported to the executive directors, which are the Group’s chief
operating decision-maker for their decisions about resources allocation to the Group’s business
components and for their review of the performance of those components. The business components
in the internal financial information reported to the executive directors are determined following the
Group’s major product and service lines.

The Group has identified the following reportable segments:

(i) “City water supply operation and construction” involves the provision of water supply
operation and construction services;

(ii) “Environmental protection” involves the provision of sewage treatment and drainage
operation and construction services, solid waste and hazardous waste business, environmental
sanitation and water environment management; and

(iii) “Property development and investment” segment involves development of properties for sale
and investment in properties for long-term rental yields or for capital appreciation.

Information about other business activities and operating segments that are not reportable are
combined and disclosed in “All other segments”.

Each of these operating segments is managed separately as each of the product and service lines
requires different resources as well as marketing approaches. All inter-segment transfers are carried
out at arm’s length prices.

The measurement policies the Group uses for reporting segment results under HKFRS 8 are the
same as those used in its consolidated financial statements prepared under HKFRSs, except that
finance costs, share of results of associates, corporate income, corporate expense, income tax
expense and (loss)/gain on disposal of subsidiaries, net are excluded from segment results.

Segment assets exclude corporate assets (mainly comprises cash and cash equivalents and pledged
deposits), financial assets at fair value through other comprehensive income, financial assets at fair
value through profit or loss and interests in associates. Segment liabilities exclude items such as
taxation and other corporate liabilities (mainly comprises corporate borrowings).

Unallocated corporate income mainly comprises interest income and dividend income from
financial assets.

Unallocated corporate expenses mainly comprise salaries and wages, operating leases and other
operating expenses of the Company and the investment holding companies.

No asymmetrical allocations have been applied to reportable segments.

12
For the year ended 31 March 2020

City water Property

supply development
operation and Environmental and All other Inter-segment
construction protection investment segments elimination Total
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Revenue
From external customers 7,224,212 1,073,940 237,181 158,970 – 8,694,303
From inter-segment – – – – – –

Segment revenue 7,224,212 1,073,940 237,181 158,970 – 8,694,303

Segment profit 2,956,077 276,277 42,091 8,604 – 3,283,049

Unallocated corporate income 133,903

Unallocated corporate expense (235,495)
Loss on disposal of subsidiaries, net (348)
Finance costs (429,215)
Share of results of associates 67,144 340,306 4,870 295 – 412,615

Profit before income tax 3,164,509

Income tax expense (657,220)

Profit for the year 2,507,289

Other segment information

Additions of investment properties – – 167,126 – – 167,126
Additions to other non-current
segment assets 3,410,755 62,491 2,309 152,604 – 3,628,159
Amortisation of deferred government
grants 6,699 2,477 – – – 9,176
Amortisation of other intangible assets (468,428) (6,103) – (4,614) – (479,145)
Depreciation of property, plant and
equipment and right-of-use assets (64,460) (20,578) (9,425) (46,167) – (140,630)
Property, plant and equipment
written off (394) (157) – – – (551)
Gain/(loss) on disposal of property,
plant and equipment 7,440 (121) 98 115 – 7,532

Bad debts written off (1,427) – – – – (1,427)

13
 City water Property
supply development
operation and Environmental and All other
construction protection investment segments Total
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Segment assets 22,445,828 3,199,268 3,636,747 2,491,867 31,773,710

Other financial assets 650,420
Interests in associates 474,475 1,659,401 – 93,936 2,227,812
Other corporate assets 7,251,011

41,902,953

Segment liabilities 5,517,013 902,721 1,126,945 161,160 7,707,839

Deferred tax liabilities 943,423
Provision for tax 1,432,744
Other corporate liabilities 17,720,444

27,804,450

14
For the year ended 31 March 2019

City water Property

supply development
operation and Environmental and All other Inter-segment
construction protection investment segments elimination Total
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Revenue
From external customers 6,376,124 1,522,337 291,043 112,707 – 8,302,211
From inter-segment – – – – – –

Segment revenue 6,376,124 1,522,337 291,043 112,707 – 8,302,211

Segment profit/(loss) 2,618,675 443,948 (78,692) 9,118 – 2,993,049

Unallocated corporate income 105,910

Unallocated corporate expense (194,597)
Gain on disposal of subsidiaries, net 117,841
Finance costs (319,185)
Share of results of associates 65,951 (77) (1,487) 4,654 – 69,041

Profit before income tax 2,772,059

Income tax expense (641,776)

Profit for the year 2,130,283

Other segment information

Additions of investment properties – – 35,119 – – 35,119
Additions to other non-current
segment assets 2,627,111 123,405 3,339 126,015 – 2,879,870
Amortisation of deferred government
grants 6,396 1,762 – – – 8,158
Amortisation of other intangible assets (397,594) (6,307) – – – (403,901)
Depreciation of property, plant and
equipment and amortisation of
prepaid land lease payments (38,434) (11,606) (1,599) (28,975) – (80,614)
Property, plant and equipment
written off (845) (173) (5) (56) – (1,079)
(Loss)/gain on disposal of property,
plant and equipment (243) (47) (60) 5,224 – 4,874

15
 City water
supply Property
operation and Environmental development All other
construction protection and investment segments Total
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Segment assets 19,240,003 3,968,766 3,299,609 2,462,175 28,970,553

Other financial assets 838,565
Interests in associates 468,785 33,042 62,453 111,755 676,035
Other corporate assets 5,339,483

35,824,636

Segment liabilities 4,144,851 815,200 483,379 120,253 5,563,683

Deferred tax liabilities 882,723
Provision for tax 1,278,874
Other corporate liabilities 15,196,886

22,922,166

For the years ended 31 March 2020 and 2019, the Group did not depend on any single customer
under each of the segments.

The Group’s revenue from external customers and its non-current assets located in geographical
areas other than the People’s Republic of China (“the PRC”) are less than 10% of the aggregate
amount of all segments.

16
6. OPERATING PROFIT
Profit from operation is arrived at after charging/(crediting) the following:

2020 2019
HK$’000 HK$’000

Cost of sales 4,935,818 4,838,372

Depreciation of property, plant and equipment 73,155 57,013
Depreciation of right-of-use assets 67,475 –
Amortisation of prepaid land lease payments – 23,601
Amortisation of other intangible assets 479,145 403,901
Operating leases in respect of
– leasehold land and buildings 3,581 23,072
– other property, plant and equipment 3,206 28,376

Staff costs (including directors’ emoluments):

Salaries and wages 801,213 727,941
Pension scheme contribution 129,682 133,334

930,895 861,275

Gain on disposal of property, plant and equipment, net (7,532) (4,874)

Property, plant and equipment written off 551 1,079
Bad debts written off 1,427 –
Net foreign exchange loss 19,308 5,397

7. FINANCE COSTS
2020 2019
HK$’000 HK$’000

Interest on bank loans 590,991 430,589

Interest on other loans 168,164 208,263
Interest on lease liabilities 19,058 –

Total borrowing costs 778,213 638,852

Less: interest capitalised included in property, plant and
equipment, other intangible assets and properties
under development (348,998) (319,667)

429,215 319,185

17
8. INCOME TAX EXPENSE
Income tax expense in the consolidated income statement represents:

2020 2019
HK$’000 HK$’000

Current income tax

– the PRC 569,223 638,021

Deferred tax 87,997 3,755

Total income tax expense 657,220 641,776

9. DIVIDENDS
(a) Dividends attributable to the year

2020 2019
HK$’000 HK$’000

Interim dividend of HK$0.14 (2019: HK$0.12)

per ordinary share 224,564 193,068
Proposed final dividend of HK$0.16 (2019: HK$0.16)
per ordinary share 256,645 257,424

481,209 450,492

The final dividends proposed after the reporting date for the year ended 31 March 2020 and
2019 were not recognised as a liability at the reporting date. In addition, the final dividend is
subject to the shareholders’ approval at the forthcoming annual general meeting.

(b) Dividends attributable to the previous financial year, approved and paid during the
year
2020 2019
HK$’000 HK$’000

Final dividend in respect of the previous financial year

of HK$0.16 (2019: HK$0.15) per ordinary share 257,424 241,335
Adjustment to the final dividend (Note) (779) –

256,645 241,335

Note: The adjustment was made due to shares repurchased prior to the record date of the
final dividends and, therefore, the related shares ranked for this dividend payment.

18
10. EARNINGS PER SHARE FOR PROFIT ATTRIBUTABLE TO OWNERS OF THE
COMPANY
The calculation of basic earnings per share is based on the profit for the year attributable to owners
of the Company of HK$1,639,495,000 (2019: HK$1,369,235,000) and the weighted average of
1,605,481,000 (2019: 1,608,901,000) ordinary shares in issue during the year.

Diluted earnings per share is the same as basic earnings per share as there were no potential diluted
ordinary shares outstanding during the year ended 31 March 2020 and 2019.

11. TRADE AND BILLS RECEIVABLES

The Group has a policy of allowing trade customers with credit terms of normally within 90 days
except for construction projects for which settlement is made in accordance with the terms specified
in the contracts governing the relevant transaction. The ageing analysis of trade and bills
receivables based on invoice dates is as follows:

2020 2019
HK$’000 HK$’000

0 to 90 days 773,703 612,672

91 to 180 days 120,514 167,899
Over 180 days 430,570 462,293

1,324,787 1,242,864

12. TRADE AND BILLS PAYABLES

The credit terms of trade and bills payables vary according to the terms agreed with different
suppliers. Based on the invoice dates, the ageing analysis of the Group’s trade and bills payables as
at the reporting date is as follows:

2020 2019
HK$’000 HK$’000

0 to 90 days 2,148,969 1,678,905

91 to 180 days 459,900 308,239
Over 180 days 497,839 422,954

3,106,708 2,410,098

19
13. EVENT AFTER THE REPORTING PERIOD
On 1 April 2020, the Company entered into a subscription agreement (the “Subscription
Agreement”) with Baring Private Equity Asia V Holding (5) Limited (“BPEA”) (the “Proposed
Subscription”) pursuant to which the Company conditionally agreed to subscribe for, and BPEA
conditionally agreed to issue, the exchangeable bonds for a consideration of approximately
HK$361.3 million (the “Exchangeable Bonds”). The consideration shall be satisfied by the
Company issuing the convertible bonds to BPEA to convert into up to 44,886,521 ordinary shares
of the Company (“Conversion Share”) at the initial conversion price (subject to adjustment) of
HK$8.05 per Conversion Share (the “Convertible Bonds”). BPEA conditionally agreed to subscribe
for the Convertible Bonds of the Company in an aggregate principal amount of approximately
HK$361.3 million.

The Exchangable Bonds will initially entitle the holder thereof to exchange for 344,129,996
ordinary shares of Kangda International Environmental Company Limited (“Kangda International”)
(subject to adjustment), representing approximately 16.93% of the entire issued share capital of
Kangda International, owned by BPEA as at the date of the Subscription Agreement. The ordinary
shares of Kangda International are listed on the Mainboard of The Stock Exchange of Hong Kong
Limited (stock code: 6136) (“Kangda Shares). The right of the holder of the Exchangeable Bonds to
exchange the principal amount of the Exchangeable Bonds into Kangda Shares is in accordance
with the terms and conditions of the Exchangeable Bonds (“Exchange Right”). The Company will
nominate Sharp Profit Investments Limited (“Sharp Profit”), a wholly-owned subsidiary of the
Company, to be the holder of the Exchangeable Bonds upon completion of the Proposed
Subscription.

As at the date of the Subscription Agreement, Sharp Profit legally and beneficially holds
approximately 29.52% of the entire issued share capital of Kangda International. Upon completion
of the Proposed Subscription and before the exercise of any Exchange Right, assuming no new
Kangda Shares will be issued, Sharp Profit’s shareholding in Kangda International will remain
unchanged and Kangda International will be accounted for as an associate of the Group. Assuming
that no new Kangda Shares will be issued to any person from the date of the Subscription
Agreement and up to the date of exercising the Exchange Right in full, Sharp Profit will own a total
of approximately 46.45% of the entire issued share capital of Kangda International upon full
exercise of the Exchange Right.

Further details of which are disclosed in the Company’s announcement dated 1 April 2020. The
Proposed Subscription was completed on 8 May 2020 and the Convertible Bonds and the
Exchangeable Bonds were issued on 8 May 2020 accordingly.

20
MANAGEMENT DISCUSSION AND ANALYSIS
FINANCIAL RESULTS
For the year ended 31 March 2020, the Group recorded a revenue of HK$8,694.3
million, representing a steady increase of 4.7% from HK$8,302.2 million in last year.
The Group recorded a gross profit of HK$3,758.5 million, representing a steady increase
of 8.5% from HK$3,463.8 million in last year. For the year under review, the Group
recorded a profit for the year attributable to owners of the Company of HK$1,639.5
million, representing a steady increase of 19.7% from HK$1,369.2 million in last year.
The basic earnings per share increased steadily by 20.0% to HK102.12 cents in current
year.

DIVIDENDS
The Directors recommended a final dividend of HK16 cents (2019: HK16 cents) per ordinary
share, which is subject to the approval by the shareholders at the forthcoming annual general
meeting of the Company to be held on Friday, 4 September 2020 and will be payable on or
about Friday, 16 October 2020 to the shareholders whose names appear on the register of
members on Friday, 11 September 2020.

CLOSURE OF REGISTER OF MEMBERS

For Annual General Meeting
The register of members will be closed from Tuesday, 1 September 2020 to Friday, 4
September 2020 (both days inclusive), during which period no transfer of shares will be
registered. In order to qualify for attending and voting at the forthcoming annual general
meeting of the Company to be held on Friday, 4 September 2020, all transfers of shares
accompanied by the relevant share certificates and appropriate transfer forms must be
lodged with the office of the Company’s Share Registrar in Hong Kong, Tricor Tengis
Limited, at Level 54, Hopewell Centre, 183 Queen’s Road East, Hong Kong, for
registration not later than 4:30 p.m. on Monday, 31 August 2020.

For Entitlement to Proposed Final Dividend

The register of members will be closed from Thursday, 10 September 2020 to Friday, 11
September 2020, during which period no transfer of shares will be registered. In order to
qualify for entitlement to the proposed final dividend, all transfers of shares
accompanied by the relevant share certificates and appropriate transfer forms must be
lodged with the office of the Company’s Share Registrar in Hong Kong, Tricor Tengis
Limited, at Level 54, Hopewell Centre, 183 Queen’s Road East, Hong Kong, for
registration not later than 4:30 p.m. on Wednesday, 9 September 2020. Subject to the
approval by shareholders of the Company at the forthcoming annual general meeting, the
proposed final dividend will be paid on or around Friday, 16 October 2020.

21
BUSINESS REVIEW
The Group’s total revenue continuously increased from HK$8,302.2 million for the year
ended 31 March 2019 to HK$8,694.3 million for the year ended 31 March 2020,
representing a steady increase of 4.7%. The Group continued its strategy to focus on
core business. For the year under review, the Group recorded a steady growth in its “City
water supply operation and construction” and “Environment protection” segments. The
total revenue attributable to the “City water supply operation and construction” and
“Environment protection” segments increased from HK$7,898.5 million to HK$8,298.2
million. This represented a steady and continuous growth of segments revenue by 5.1%,
which was mainly attributable to the successful strategy of the Group through
procurement of more construction and connection work, increase in operating efficiency
and tariff of the water supply and sewage treatment plants and various mergers and
acquisition.

(i) Water Supply Business Analysis

Water supply projects of the Group are well spread in various provincial cities and
regions across China, including Hunan, Hubei, Henan, Hebei, Hainan, Jiangsu,
Jiangxi, Shenzhen, Guangdong, Beijing, Chongqing, Shandong, Shanxi and
Heilongjiang.

For the year under review, the revenue from city water supply operation and
construction segment amounted to HK$7,224.2 million (2019: HK$6,376.1
million), representing a steady increase of 13.3% as compared with the last
corresponding year. The water supply segment profit (including city water supply,
water related connection works and construction services) amounted to HK$2,956.1
million (2019: HK$2,618.7 million), representing a steady increase of 12.9% as
compared with the last corresponding year. This was mainly because of increase in
volume of water sold, procurement of more construction and connection work
driven by the continuation of urban-rural water supply integration and the
promotion of the Public-Private Partnership model in the water sector and the
additional contribution from the direct drinking water business and new water
projects during the year.

22
(ii) Environmental Protection Business Analysis
Environmental protection projects of the Group are well spread in various
provincial cities and regions across China, including Beijing, Tianjin, Shenzhen,
Guangdong, Henan, Hebei, Hubei, Jiangxi, Shaanxi, Heilongjiang and Sichuan.

For the year under review, the revenue from environmental protection segment
amounted to HK$1,073.9 million (2019: HK$1,522.3 million), representing a
significant decrease of 29.5% as compared with the last corresponding year. The
environmental protection segment profit (including sewage treatment and drainage
operating and construction, solid waste and hazardous waste business,
environmental sanitation and water environment management) amounted to
HK$276.3 million (2019: HK$443.9 million), representing a significant decrease
of 37.8% as compared with the last corresponding year. This was mainly due to the
decrease in the work for upgrade of facilities for higher operating standard and
water environmental renovation construction services in current year.

(iii) Property Business Analysis

The Group held various property development and investment projects which are
mainly located in Beijing, Chongqing, Jiangxi, Hunan, Hubei and Henan provinces
of China.

For the year under review, the revenue from the property business segment
amounted to HK$237.2 million (2019: HK$291.0 million). The total property
business segment profit amounted to HK$42.1 million (2019: segment loss
amounted to HK$78.7 million). This was mainly due to the increase in profit
margin in sales of property projects in current year.

The Group acquired 600,000,000 ordinary shares of Kangda International Environmental

Company Limited (“Kangda International”) at the price of HK$2.00 per share,
representing its 29.52% equity interest, at a total consideration of HK$1.2 billion in
April 2019. The audited net asset value per ordinary share of Kangda International
attributable to the shareholders as at 31 December 2018 was approximately RMB2.02
(equivalent to approximately HK$2.35). The shares of Kangda International are listed on
the Mainboard of The Stock Exchange of Hong Kong Limited (the “Stock Exchange”)
(stock code: 6136) and it was accounted for as an associate of the Group during the year
under review. During the year under review, the total contribution to the Group by
Kangda International amounting to HK$323.2 million, which comprised the excess of
the investor’s share of the net fair value of associate’s identifiable assets and liabilities
over the cost of the investment of HK$214.8 million and share of post-acquisition results
of Kangda International of HK$108.4 million, was included in the share of results of
associates.

23
For the corresponding year under review, the Group recorded a gain on disposal of
subsidiaries amounting to HK$117.8 million, which was mainly because of the disposal
of the non-core investments including the entire interests in 新余市仙女湖游船有限責
任公司 and 新余市仙女湖聖祥發展有限責任公司, and 55% equity interest in 江西仙女
湖旅游股份有限公司. The Group considered that realisation of the above non-core
investments at a gain can provide resources to the Group in developing its core
businesses in China.

PROSPECTS
The outbreak of the COVID-19 pandemic across different regions has brought
unprecedented impacts and challenges to the global economy. Uncertainties and
volatility surrounding global economic outlook has surged. There are and will be
significant changes in the mode of production and lifestyle in the society. Under such
market conditions, the nature of the Group’s utility business characterised by stable
revenue and cash flow has become a prominent advantage. China has actively deployed
to resume production and reboot economic activities after an effective control of the first
wave of the pandemic in the nation. The rapid recovery of China’s economy will lay
down beneficial foundation for future development and enhancement of the water
industry.

Looking forward, benefited from the Group’s two core development strategies, namely
urban-rural water supply integration and supply-drainage integration, and the adherence
to its strategy to actively expand value-added services, it is expected that the Group’s
business will continue to grow steadily. The Group shall continue to expand its business
in the area of infrastructure and public services through the long-term public-private
partnership which has been actively promoted by the government. It shall continue to
dedicate its efforts in capacity building and risk prevention and control, so as to enhance
its overall services capability, and the efficiency and quality of its all-round services of
its relevant business in the water industry chain, with its urban water supply services as
the focus. As to the direction of future business development, the Group shall focus on
the development of its core water supply business, accelerate the development of its
value-added businesses including direct drinking water, and improve the smart pipeline
network system in order to boost its core competitiveness and provide better services to
the society and people, so as to create higher returns for its shareholders.

ISSUE OF CONVERTIBLE BONDS

On 1 April 2020, the Company entered into a subscription agreement with Baring Private
Equity Asia V Holding (5) Limited (“BPEA”) (the “Proposed Subscription”) pursuant to
which the Company conditionally agreed to subscribe for, and BPEA conditionally
agreed to issue, the exchangeable bonds for a consideration of approximately HK$361.3
million (the “Exchangeable Bonds”). The consideration shall be satisfied by the
Company issuing the convertible bonds to BPEA to convert into up to 44,886,521
ordinary shares of the Company (“Conversion Share”) at the initial conversion price
(subject to adjustment) of HK$8.05 per Conversion Share (the “Convertible Bonds”).
BPEA conditionally agreed to subscribe for the Convertible Bonds of the Company in an
aggregate principal amount of approximately HK$361.3 million.

24
Further details of which are disclosed in the Company’s announcement dated 1 April
2020. The Proposed Subscription was completed on 8 May 2020 and the Convertible
Bonds and the Exchangeable Bonds were issued on 8 May 2020 accordingly.

LIQUIDITY AND FINANCIAL RESOURCES

As at 31 March 2020, the Group has total cash and cash equivalents and pledged deposits
of approximately HK$6,603.9 million (2019: HK$4,617.8 million). The gearing ratio,
calculated as a percentage of total liabilities to total assets, is 66.4% (2019: 64.0%) as at
31 March 2020. The current ratio is 1.08 times (2019: 1.13 times) as at 31 March 2020.
The decrease in current ratio is mainly due to classification of long-term loan with
repayment option amounting to USD64 million (approximately HK$499 million) from
non-current liability into current liability. In the opinion of the directors, the Group will
have sufficient working capital to meet its financial obligations in full as they fall due in
the foreseeable future.

PURCHASE, REDEMPTION OR SALE OF LISTED SECURITIES OF THE

COMPANY
During the year ended 31 March 2020, the Company repurchased its own shares on the
Stock Exchange as follows:

Aggregate
Number of consideration
shares Highest price Lowest price (excluding
Month/Year repurchased per share per share expenses)
HK$ HK$ HK$

July 2019 3,758,000 7.46 6.99 27,008,000

August 2019 1,114,000 6.98 6.08 7,209,000

During the year ended 31 March 2020, the Company repurchased and cancelled a total of
4,872,000 ordinary shares of HK$0.01 each in the capital of the Company. Accordingly,
the issued share capital of the Company was reduced by the nominal value thereof. The
premium payable on repurchase was charged against the contributed surplus of the
Company.

The purchase of the Company’s shares during the year was effected by the directors,
pursuant to the mandate from shareholders received at the last annual general meeting,
with a view to benefiting shareholders as a whole by enhancing the net asset value per
share and earnings per share of the Group.

Save as disclosed above, neither the Company nor any of its subsidiaries purchased, sold
or redeemed any of the Company’s listed securities during the year.

25
CORPORATE GOVERNANCE
During the year ended 31 March 2020, the Company has complied with all the applicable
provisions of the Corporate Governance Code as set out in Appendix 14 to the Rules
Governing the Listing of Securities on the Stock Exchange (the “Listing Rules”), save
and except for the deviations from code provisions A.2.1, A.4.2 and A.6.7.

Under code provision A.2.1, the roles of chairman and chief executive should be separate
and should not be performed by the same individual. Mr. Duan Chuan Liang serves as
the Chairman of the Company. The function of chief executive officer is collectively
performed by the executive directors. The Board considers that this structure will not
impair the balance of power and authority between the Board and the management of the
Company. The Board continues to believe that this structure is conducive to strong and
consistent leadership, enabling the Company to make and implement decisions promptly
and efficiently. The Board has strong confidence in the executive directors and believes
that this structure is beneficial to the business prospects of the Company.

Under code provision A.4.2, every director should be subject to retirement by rotation at
least once every three years. According to the Company’s bye-laws, at each annual
general meeting, one third of the directors shall retire from office by rotation provided
that notwithstanding anything therein, the Chairman of the Board of the Company shall
not be subject to retirement by rotation or taken into account in determining the number
of directors to retire. As continuation is a key factor to the successful long term
implementation of business plans, the Board believes that the roles of the chairman
provide the Group with strong and consistent leadership and allow more effective
planning and execution of long-term business strategy. As such, the Board is of the view
that the chairman of Board should not be subject to retirement by rotation.

U n d e r c o d e provision A .6.7, inde pe nde nt non- e xe c utive dir e c tor s a nd oth e r

non-executive directors should attend general meetings and develop a balanced
understanding of the views of shareholders. Certain independent non-executive directors
and non-executive directors were unable to attend the Company’s annual general
meeting held on 6 September 2019 due to their other business commitments.

HUMAN RESOURCES
As at 31 March 2020, the Group has employed approximately 9,400 staff. Most of them
stationed in the PRC and the remaining in Hong Kong. The remuneration package of the
employees is determined by various factors including their experience and performance,
the market condition, industry practice and applicable employment law.

26
MODEL CODE FOR SECURITIES TRANSACTIONS
The Company has adopted the Model Code for Securities Transactions by Directors of
Listed Issuers (“Model Code”) as set out in Appendix 10 to the Listing Rules as its code
of conduct regarding securities transactions of directors. The Company has made specific
enquiry to all directors regarding any non-compliance with the Model Code throughout
the year ended 31 March 2020 and they all confirmed that they have fully complied with
the required standard set out in the Model Code.

AUDIT COMMITTEE AND REVIEW OF ANNUAL RESULTS

The audit committee of the Company currently comprises five independent
non-executive directors, namely Mr. Chau Kam Wing (chairman of audit committee),
Mr. Siu Chi Ming, Ms. Ho Ping, Ms. Zhou Nan and Mr. Chan Wai Cheung Admiral. The
annual results of the Group for the year ended 31 March 2020 have been reviewed by the
audit committee.

The financial figures in respect of the announcement of the Group’s consolidated results
for the year ended 31 March 2020 have been agreed by the Company’s auditor,
PricewaterhouseCoopers (“PwC”), to the amount set out in the Group’s audited
consolidated financial statements for the year. The work performed by PwC in this
respect did not constitute an assurance engagement in accordance with Hong Kong
Standards on Auditing, Hong Kong Standards on Review Engagements or Hong Kong
Standards on Assurance Engagements issued by the Hong Kong Institute of Certified
Public Accountants, and consequently no assurance has been expressed by PwC on this
announcement.

PUBLICATION OF ANNUAL RESULTS AND ANNUAL REPORT

This results announcement is published on the Stock Exchange’s website
(http://www.hkex.com.hk) and the Company’s website (http://www.chinawatergroup.com).
The annual report will be dispatched to the shareholders and will be available on
websites of the Stock Exchange and the Company in due course.

On Behalf of the Board

China Water Affairs Group Limited
Duan Chuan Liang
Chairman

Hong Kong, 29 June 2020

As at the date of this announcement, the Board comprises five executive Directors, being
Mr. Duan Chuan Liang, Ms. Ding Bin, Ms. Liu Yu Jie, Mr. Li Zhong and Mr. Duan Jerry
Linnan, four non-executive Directors, being Mr. Zhao Hai Hu, Mr. Zhou Wen Zhi,
Mr. Makoto Inoue and Ms. Wang Xiaoqin, and five independent non-executive Directors,
being Mr. Chau Kam Wing, Mr. Siu Chi Ming, Ms. Ho Ping, Ms. Zhou Nan and
Mr. Chan Wai Cheung Admiral.

*  For identification purposes only

27