Beijing Enterprises Environment : ANNOUNCEMENT OF SUMMARISED INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2020

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 Hong Kong with limited liability)

(Stock Code: 154)

ANNOUNCEMENT OF SUMMARISED INTERIM RESULTS

FOR THE SIX MONTHS ENDED 30 JUNE 2020

HIGHLIGHTS

• The Group's revenue for the six months ended 30 June 2020 amounted to HK$599 million, decreased by 10% as compared with HK$666 million in the corresponding period of last year.
• EBITDA for the period amounted to HK$249 million, decreased by 9% as compared with HK$273 million in the corresponding period of last year.
• Profit for the period attributable to members of the Company amounted to HK$92 million, decreased by 29% as compared with HK$131 million in the corresponding period of last year.
• Basic earnings per share amounted to HK6.16 cents.
• Net assets per share attributable to members of the Company as at 30 June 2020 amounted to HK$1.88.
• The Board does not recommend the payment of an interim dividend for the period.

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The board (the "Board") of directors (the "Directors") of Beijing Enterprises Environment Group Limited (the "Company") is pleased to announce the unaudited consolidated results of the Company and its subsidiaries (collectively, the "Group") for the six months ended 30 June 2020, together with comparative figures for the corresponding period in last year, as follows:

INTERIM CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS

For the six months ended 30 June 2020

		For the six months
		ended 30 June
		2020		2019
		(Unaudited)	(Unaudited)
	Notes	HK$'000	HK$'000
REVENUE	4	599,092		666,239
Cost of sales		(421,387)	(445,834)
Gross profit		177,705		220,405
Other income	4	48,316		36,967
Selling and distribution expenses		(1,120)	(1,223)
Administrative expenses		(72,226)	(66,808)
Other operating expenses, net		(4,751)	(2,723)
PROFIT FROM OPERATING ACTIVITIES	5	147,924		186,618
Finance costs	6	(39,024)	(35,805)
PROFIT BEFORE TAX		108,900		150,813
Income tax	7	(12,078)	(14,188)
PROFIT FOR THE PERIOD		96,822		136,625
ATTRIBUTABLE TO:
Members of the Company		92,453		130,555
Non-controlling interests		4,369		6,070
		96,822		136,625
EARNINGS PER SHARE ATTRIBUTABLE TO
MEMBERS OF THE COMPANY	8
- Basic (HK cents)		6.16		8.70
- Diluted (HK cents)		3.11		4.21

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INTERIM CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the six months ended 30 June 2020

		For the six months
		ended 30 June
		2020		2019
		(Unaudited)	(Unaudited)
		HK$'000	HK$'000
PROFIT FOR THE PERIOD	96,822		136,625
OTHER COMPREHENSIVE LOSS FOR THE PERIOD,
NET OF INCOME TAX
Items that may be reclassified to profit or loss in
subsequent periods:
Exchange differences on translation of foreign operations	(90,939)	(19,290)
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD	5,883		117,335
ATTRIBUTABLE TO:
Members of the Company	8,326		112,338
Non-controlling interests	(2,443)	4,997
		5,883		117,335

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INTERIM CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

30 June 2020

		30 June		31 December
		2020	2019
		(Unaudited)		(Audited)
	Notes	HK$'000		HK$'000
ASSETS
Non-current assets:
Property, plant and equipment		1,082,340	1,125,398
Investment property		46,154	47,191
Right-of-use assets		67,069	76,327
Goodwill		1,122,551	1,122,551
Operating concessions		2,133,007	2,132,275
Other intangible assets		107,564	112,877
Investment in a joint venture		6,652	6,652
Receivables under service concession
arrangements	9	1,924,739	1,972,804
Prepayments, other receivables and other assets		30,118	30,895
Deferred tax assets		5,189	7,684
Total non-current assets		6,525,383	6,634,654
Current assets:
Inventories		37,416	39,668
Receivables under service concession
arrangements	9	60,714	63,183
Trade and bills receivables	10	476,666	389,695
Contract assets		241,030	223,649
Prepayments, other receivables and other assets		135,057	163,097
Pledged deposits		8,452	8,642
Cash and cash equivalents		1,303,418	1,416,990
Total current assets		2,262,753	2,304,924
TOTAL ASSETS		8,788,136	8,939,578

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INTERIM CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION (CONTINUED)

30 June 2020

		30 June		31 December
		2020	2019
		(Unaudited)		(Audited)
	Note	HK$'000		HK$'000
EQUITY AND LIABILITIES
Equity attributable to members of the Company
Share capital		2,227,564	2,227,564
Equity component of convertible bonds		147,029	147,029
Other reserves		451,443	443,117
		2,826,036	2,817,710
Non-controlling interests		309,479	293,255
TOTAL EQUITY		3,135,515	3,110,965
Non-current liabilities:
Bank and other borrowings		785,632	783,500
Convertible bonds		2,162,006	2,147,168
Provision for major overhauls		7,957	7,298
Other payables		16,174	19,197
Deferred income		140,639	150,026
Deferred tax liabilities		233,737		238,638
Total non-current liabilities		3,346,145	3,345,827
Current liabilities:
Trade payables	11	465,018	527,970
Other payables and accruals		1,625,581	1,672,960
Bank and other borrowings		140,385	203,427
Tax payables		75,492		78,429
Total current liabilities		2,306,476		2,482,786
TOTAL LIABILITIES		5,652,621	5,828,613
TOTAL EQUITY AND LIABILITIES		8,788,136	8,939,578

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NOTES:

1. BASIS OF PREPARATION

The interim condensed consolidated financial information for the six months ended 30 June 2020 set out in this announcement has been prepared in accordance with the applicable disclosure requirements of Appendix 16 to The Rules Governing the Listing of Securities (the "Listing Rules") on the Stock Exchange of Hong Kong Limited (the "Stock Exchange"). The interim condensed consolidated financial information does not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the Group's annual financial statements for the year ended 31 December 2019.

In preparing the interim condensed consolidated financial information, the directors of the Company have given careful consideration to the future liquidity of the Group in light of the fact that its current liabilities exceeded its current assets as at 30 June 2020. Taking into account the Group's internal resources and undertaking from Beijing Enterprises Holdings Limited ("BEHL"), the intermediate holding company, not to demand repayment of the amounts due by the Group to its subsidiaries until such time when the Group is in a position to repay without impairing its liquidity and financial position, the directors of the Company considered that the Group will be able to operate on a going concern basis. Accordingly, the interim condensed consolidated financial information has been prepared on a going concern basis.

The financial information relating to the year ended 31 December 2019 that is included in the interim condensed consolidated statement of financial position as comparative information does not constitute the Company's statutory annual consolidated financial statements for that year but is derived from those consolidated financial statements. Further information relating to those statutory consolidated financial statements required to be disclosed in accordance with section 436 of the Hong Kong Companies Ordinance is as follows:

The Company has delivered the consolidated financial statements for the year ended 31 December 2019 to the Registrar of Companies as required by section 662(3) of, and Part 3 of Schedule 6 to, the Hong Kong Companies Ordinance. The Company's auditor has reported on the consolidated financial statements of the Company for the year ended 31 December 2019. The auditor's report was unqualified; and did not contain a statement under sections 406(2), 407(2) or 407(3) of the Hong Kong Companies Ordinance.

The interim condensed consolidated financial information has not been audited, but has been reviewed by the Company's audit committee.

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2. CHANGES IN ACCOUNTING POLICIES AND DISCLOSURES

The accounting policies adopted in the preparation of the interim condensed consolidated financial information are consistent with those applied in the preparation of the Group's annual consolidated financial statements for the year ended 31 December 2019, except for the adoption of the following revised Hong Kong Financial Reporting Standards ("HKFRSs") for the first time for the current period's financial information.

Amendments to HKFRS 3	Definition of a Business
Amendments to HKFRS 9, HKAS 39	Interest Rate Benchmark Reform
and HKFRS 7
Amendment to HKFRS 16	Covid-19-Related Rent Concessions (early adopted)
Amendments to HKAS 1 and HKAS 8	Definition of Material

The adoption of the above revised HKFRSs has had no significant financial effect on this unaudited interim condensed consolidated financial information and there has been no significant changes to the accounting policies applied in this unaudited condensed consolidated financial information.

3. OPERATING SEGMENT INFORMATION

For management purposes, the Group's operating businesses are structured and managed separately according to the nature of their operations and the products and services they provide. Each of the Group's operating segments represents a strategic business unit that offers products and services which are subject to risks and returns that are different from those of the other operating segments.

Particulars of the Group's reportable operating segments are summarised as follows:

1. the solid waste treatment segment comprises the construction and operation of waste incineration plants, waste treatment and the sale of electricity and steam generated from waste incineration;
2. the ecological construction services segment comprises the landscaping construction, design, project survey and design and construction project management; and
3. the corporate and others segment comprises property investment and corporate income and expense items.

Management monitors the results of the Group's operating segments separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on reportable segment profit/loss, which is measured consistently with the Group's profit for the period.

Segment assets and liabilities of each of the reportable operating segments are separately managed by each of the individual operating segments.

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The following table presents the revenue and profit/(loss) regarding the Group's operating segments for the six months ended 30 June 2020 and 2019 and the total assets and total liabilities regarding the Group's operating segments as at 30 June 2020 and 31 December 2019, respectively.

		Solid	Ecological
		waste	construction	Corporate
		treatment	services	and others	Total
		(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)
		HK$'000	HK$'000	HK$'000	HK$'000
For the six months ended 30 June 2020
Segment revenue (note 4)	482,268		116,824		-	599,092
Cost of sales	(335,591)	(85,796)	-	(421,387)
Gross profit	146,677		31,028		-	177,705
Profit/(loss) from operating activities	151,976		9,855		(13,907)	147,924
Finance costs	(22,780)	(1,328)	(14,916)	(39,024)
Profit/(loss) before tax	129,196		8,527		(28,823)	108,900
Income tax	(11,120)	(690)	(268)	(12,078)
Profit/(loss) for the period	118,076		7,837		(29,091)	96,822
Segment profit/(loss) attributable to
members of the Company	117,449		4,094		(29,090)	92,453
At 30 June 2020
Segment assets	8,139,356		392,220		256,560	8,788,136
Segment liabilities	2,730,329		285,753		2,636,539	5,652,621

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		Solid	Ecological
		waste	construction	Corporate
		treatment	services	and others	Total
		(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)
		HK$'000	HK$'000	HK$'000	HK$'000
For the six months ended 30 June 2019
Segment revenue (note 4)	551,452		114,787		-	666,239
Cost of sales	(353,369)	(92,465)	-	(445,834)
Gross profit	198,083		22,322		-	220,405
Profit/(loss) from operating activities	186,823		8,861		(9,066)	186,618
Finance costs	(20,276)	(747)	(14,782)	(35,805)
Profit/(loss) before tax	166,547		8,114		(23,848)	150,813
Income tax	(12,465)	(1,357)	(366)	(14,188)
Profit/(loss) for the period	154,082		6,757		(24,214)	136,625
Segment profit/(loss) attributable to
members of the Company	151,285		3,441		(24,171)	130,555
At 31 December 2019
Segment assets	8,117,033		417,778		404,767	8,939,578
Segment liabilities	2,888,400		316,339		2,623,874	5,828,613

During the six months ended 30 June 2020, the Group acquired property, plant and equipment and operating concessions with a total cost of HK$138,864,000 (six months ended 30 June 2019: HK$48,981,000).

Geographical information

Geographical information is not presented since over 90% of the Group's revenue from external customers is generated in Mainland China and over 90% of the non-current assets (other than financial assets) of the Group are located in Mainland China. Accordingly, in the opinion of the directors of the Company, the presentation of geographical information would provide no additional useful information to the users of the interim financial statements.

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Information about a major customer

During the six months ended 30 June 2020, the Group had transactions with an external customer (six months ended 30 June 2019: one) which accounted for over 10% of the Group's total revenue. The revenue generated from sales to this customer for the six months ended 30 June 2020 is amounted to HK$114,103,000 (six months ended 30 June 2019: HK$140,735,000).

4. REVENUE AND OTHER INCOME

An analysis of the Group's revenue and other income is as follows:

	For the six months
	ended 30 June
	2020	2019
	(Unaudited)		(Unaudited)
	HK$'000		HK$'000
Revenue
Household waste treatment*	118,732	151,039
Hazardous and medical waste treatment	21,660	32,660
Food waste, leachate, sludge and other treatments	31,594	16,611
Sale of electricity	279,912	305,724
Sale of steam	3,916	15,410
Construction and related services	26,454	30,008
Landscaping construction services	87,828	93,889
Landscaping design services	28,996	20,898
	599,092	666,239
Other income
Value added tax refund	34,493	26,539
Interest income	6,460	6,311
Rental income	1,442	1,504
Government grant#	2,844	1,544
Others	3,077	1,069
	48,316	36,967

• Imputed interest income under service concession arrangements during the period amounting to HK$44,626,000 (six months ended 30 June 2019: HK$47,174,000) was included in the revenue derived from household waste treatment services.

• The government grant recognised by the Group during the period represented subsidies received from certain government authorities as incentives to promote and accelerate development in the local provinces.

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5. PROFIT FROM OPERATING ACTIVITIES

The Group's profit from operating activities is arrived at after charging:

	For the six months
	ended 30 June
	2020	2019
	(Unaudited)		(Unaudited)
	HK$'000		HK$'000
Depreciation of property, plant and equipment	38,897	23,485
Depreciation of right-of-use assets	7,664	7,995
Amortisation of operating concessions*	51,576	52,096
Amortisation of other intangible assets*	2,861	2,956
Foreign exchange difference, net	4,052	1,079

• The amortisation of operating concessions and other intangible assets (excluding computer software amounting to HK$300,000 (six months ended 30 June 2019: HK$276,000)) are included in "Cost of sales" in the interim condensed consolidated statement of profit or loss.

6. FINANCE COSTS

An analysis of finance costs is as follows:

	For the six months
	ended 30 June
	2020	2019
	(Unaudited)		(Unaudited)
	HK$'000		HK$'000
Interest on bank and other borrowings	23,181	22,225
Imputed interest on convertible bonds	14,838	14,554
Interest on lease liabilities	783	1,149
Total interest expenses	38,802	37,928
Less: Interest capitalised	-	(2,306)
	38,802	35,622
Other finance costs:
Increase in discounted amounts of provision for major
overhauls arising from the passage of time	222	183
	39,024	35,805

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7. INCOME TAX

Hong Kong profits tax has been provided at the rate of 16.5% (six months ended 30 June 2019: 16.5%) on the estimated assessable profit arising in Hong Kong during the period. Taxes on profits assessable elsewhere have been calculated at the rates of tax prevailing in the countries or jurisdictions in which the Group operates, based on existing legislation, interpretations and practices in respect thereof.

	For the six months
	ended 30 June
	2020	2019
	(Unaudited)		(Unaudited)
	HK$'000		HK$'000
Current - Hong Kong
Charge for the period	37	817
Current - Mainland China
Charge for the period	9,280	12,579
Under provision in prior periods	61	158
	9,378	13,554
Deferred	2,700	634
Total tax charge for the period	12,078	14,188

In accordance with the relevant tax laws of the People's Republic of China (the "PRC"), certain subsidiaries of the Group which are engaged in the solid waste treatment business are exempted from corporate income tax for three years starting from the first year they generated revenue and are granted by a 50% tax reduction for the ensuing three years.

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8. EARNINGS PER SHARE ATTRIBUTABLE TO MEMBERS OF THE COMPANY

The calculation of the basic earnings per share amount is based on the profit for the period attributable to members of the Company, and the weighted average number of ordinary shares in issue during the period.

The calculation of the diluted earnings per share amount is based on the profit for the period attributable to members of the Company, adjusted to reflect the imputed interest on convertible bonds. The weighted average number of ordinary shares used in the calculation is the number of ordinary shares in issue during the period, as used in the basic earnings per share calculation, and the weighted average number of ordinary shares assumed to have been issued at no consideration on the deemed exercise or conversion of all dilutive potential ordinary shares into ordinary shares.

The calculations of the basic and diluted earnings per share amounts are based on:

		For the six months
		ended 30 June
		2020	2019
		(Unaudited)			(Unaudited)
		HK$'000			HK$'000
Earnings
Profit for the period attributable to members of the Company
used in the basic earnings per share calculation	92,453	130,555
Imputed interest on convertible bonds (note 6)	14,838	14,554
Profit for the period attributable to members of the Company
before imputed interest on convertible bonds	107,291	145,109
		30 June			30 June
		2020	2019
		(Unaudited)			(Unaudited)
Shares
Weighted average number of ordinary shares in issue during the
period used in the basic earnings per share calculation	1,500,360,150	1,500,360,150
Effect of dilution - weighted average number of ordinary shares:
Convertible bonds	1,948,938,053	1,948,938,053
		3,449,298,203	3,449,298,203

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9. RECEIVABLES UNDER SERVICE CONCESSION ARRANGEMENTS

An ageing analysis of the Group's receivables under service concession arrangements as at the end of the reporting period, based on the invoice date and net of impairment, is as follows:

	30 June		31 December
	2020	2019
	(Unaudited)		(Audited)
	HK$'000		HK$'000
Unbilled:
Current portion	60,714	63,183
Non-current portion	1,924,739	1,972,804
	1,985,453	2,035,987

10. TRADE AND BILLS RECEIVABLES

An ageing analysis of the Group's trade and bills receivables as at the end of the reporting period, based on the invoice date and net of loss allowance, is as follows:

	30 June		31 December
	2020	2019
	(Unaudited)		(Audited)
	HK$'000		HK$'000
Within 3 months	370,201	317,168
4 to 6 months	39,341	33,925
7 to 12 months	46,268	18,303
1 to 2 years	14,261	13,432
2 to 3 years	2,124	4,851
Over 3 years	4,471	2,016
	476,666	389,695

Various companies of the Group have different credit policies, depending on the requirements of their markets in which they operate and the businesses they engage in. The credit period granted to customers is generally one to three months. An ageing analysis of the trade and bills receivables is regularly prepared and closely monitored in order to minimise any related credit risk. Trade and bills receivables are non- interest-bearing and the Group does not hold any collateral or other credit enhancements over its trade receivable balances.

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11. TRADE PAYABLES

An ageing analysis of the Group's trade payables as at the end of the reporting period, based on the invoice date, is as follows:

	30 June		31 December
	2020	2019
	(Unaudited)		(Audited)
	HK$'000		HK$'000
Billed:
Less than 3 months	119,890	121,620
4 to 6 months	24,620	123,154
7 to 12 months	66,979	46,522
Over 1 year	116,713	90,527
	328,202	381,823
Unbilled	136,816	146,147
	465,018	527,970

The trade payables are non-interest-bearing and normally settled within one to six months.

12. OTHER FINANCIAL INFORMATION

The net current liabilities and total assets less current liabilities of the Group as at 30 June 2020 amounted to HK$43,723,000 (31 December 2019: HK$177,862,000) and HK$6,481,660,000 (31 December 2019: HK$6,456,792,000), respectively.

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INTERIM DIVIDEND

The Board does not recommend the payment of an interim dividend for the six months ended 30 June 2020 (six months ended 30 June 2019: Nil).

MANAGEMENT DISCUSSION AND ANALYSIS

BUSINESS REVIEW

The Group is engaged in the environmental protection business with solid waste treatment as its core business. Currently, the Group is operating nine solid waste treatment projects in China, including eight household waste incineration power generation projects with total waste treatment capacity of 10,225 tonnes/day and one hazardous and medical waste treatment project with waste treatment capacity of 35,000 tonnes/year.

			Waste
		Business	treatment
Project Name	Region	Model	capacity
Household waste incineration power generation projects:
Haidian Project（北京市海澱區循環經濟產業園再生能源發電廠項目） Beijing	BOT	2,100 tonnes/day
Gaoantun Project（北京高安屯垃圾焚燒項目）	Beijing	BOT	1,600 tonnes/day
Ha'erbin Project（哈爾濱雙琦垃圾焚燒發電項目）	Heilongjiang	BOT	1,600 tonnes/day
Changde Project（常德市生活垃圾焚燒發電項目）	Hunan	BOT	1,400 tonnes/day
Taian Project（泰安生活垃圾焚燒發電項目）	Shandong	BOO	1,200 tonnes/day
Shuyang Project（江蘇省沭陽縣垃圾焚燒發電項目）	Jiangsu	BOT	1,200 tonnes/day
Zhangjiagang Project（張家港市生活垃圾焚燒發電廠項目）	Jiangsu	BOO	900 tonnes/day
Wenchang Project（文昌市生活垃圾焚燒發電廠項目）	Hainan	BOT	225 tonnes/day
Hazardous and medical waste treatment project:
Hengxing Project（湖南省衡陽危險廢物處置中心項目）	Hunan	BOT	35,000 tonnes/year

During the period under business review, the Group's operating results declined due to the COVID-19 epidemic and the implementation of garbage classification. During the period, total household waste treatment volume of the Group was 1,534,800 tonnes, decreased by 14.6% as compared with 1,797,900 tonnes in the corresponding period of last year. Other waste treatment volume included medical and hazardous waste of 4,900 tonnes, food waste of 37,500 tonnes, sludge of 63,000 tonnes and leachate of 112,700 tonnes. Total electricity generating volume was 577.24 million kWh, decreased by 4.0% as compared with 601.27 million kWh in the corresponding period of last year. The on-grid electricity volume was

462.62 million kWh, decreased by 4.9% as compared with 486.38 million kWh in the corresponding period of last year. Steam supply was 16,300 tonnes.

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The Group established a joint venture in January 2020 to invest and construct the Jining Yanzhou Household Waste Incineration Power Generation PPP Project in Shandong Province, with a daily waste treatment capacity of 1,500 tonnes and the total investment was approximately HK$900 million. As affected by the epidemic, the current actual project construction works are behind schedule. The project company is actively coordinating with the main contractor to carry out full construction works. We will strive to complete the trail operation at or before the end of 2021, after taking measures such as optimising the construction organisation plan and putting more construction work force.

The Phase III expansion work of Hunan Changde Project is conducting the preparation works for construction. The expansion work of Jiangsu Zhangjiagang Project is also undergoing preliminary design works. Both projects are expected to further enhance the Group's household waste treatment capacity in 2021 and 2022 respectively.

During the six months ended 30 June 2020, revenue from the solid waste treatment segment was HK$482 million, down by 12.5% year-on-year. EBITDA was HK$242 million, down by 8.9% year-on-year. Net profit was HK$118 million, down by 23.4% year-on-year.

During the period under business review, the ecological construction segment of the Group successfully bid and signed contracts of 26 municipal landscape construction projects in total, including 5 municipal landscape construction projects and 21 landscape planning and design projects. During the period, a total of 26 projects were under construction and maintenance. Due to the tremendous impact of the COVID-19 epidemic on municipal landscape construction enterprises, the construction of these projects was delayed accordingly, and the operating results for the period were fallen behind the budget. During the six months ended 30 June 2020, revenue from the ecological construction segment of the Group was HK$117 million, representing an increase of 1.8%, and net profit was HK$7.84 million, representing an increase of 16.0%.

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BUSINESS PROSPECT

The Group will pay close attention to the development of COVID-19 epidemic and vigorously implement the "quality and efficiency improvement" under the premise of epidemic prevention and safety production. We will accelerate the construction progress of solid waste and ecological construction projects, strive to reduce costs and expenses, and also improve overall operational efficiency. On the other hand, leveraging its existing projects, the Group will explore new solid waste projects such as sludge, food waste and biomass to expand its business scope.

The Group will formulate a strategic development plan as soon as possible to actively contrive the Group's medium and long-term development. We will conduct in-depth study on new investment areas and new models, and fortify external investments. We will expand financing channels further by integrating new project investments with the financial market organically. The Group will operate and manage our businesses prudently to ensure that the Group's various operating performance indicators are further improved. We will actively make innovative move in technology development and practice new development concepts, with a view to promote high-quality development of the Group.

FINANCIAL REVIEW

Revenue and gross profit

During the six months ended 30 June 2020, the Group recorded revenue of HK$599.09 million, decreased by 10% as compared with the corresponding period in last year of HK$666.24 million. The revenue derived from the solid waste treatment and the sale of electricity and steam amounted to HK$455.82 million, decreased by 13% as compared with last corresponding period of HK$521.44 million. The revenue derived from the construction and related services amounted to HK$26.45 million, decreased by 12% as compared with last corresponding period of HK$30.01 million. The revenue derived from the ecological construction services amounted to HK$116.82 million, increased by 2% as compared with last corresponding period of HK$114.79 million.

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The Group's gross profit amounted to HK$177.70 million, decreased by 19% or HK$42.70 million as compared with last corresponding period of HK$220.40 million. The overall gross profit margin declined from 33.1% to 29.7%.

		Revenue		Gross profit	Gross profit margin
		For the six months		For the six months	For the six months
		ended 30 June		ended 30 June	ended 30 June
	2020	2019	2020	2019	2020		2019
	HK$ million		HK$ million	HK$ million		HK$ million	%			%
Household waste treatment	118.73	151.04
Other solid waste treatment	53.26	49.27
Sale of electricity and steam	283.83	321.13
	455.82	521.44	140.65	197.32	30.9		37.8
Construction and related services	26.45	30.01	6.02	0.76	22.8		2.5
Ecological construction services	116.82	114.79	31.03	22.32	26.6		19.4
	599.09	666.24	177.70	220.40	29.7		33.1

Other income

The Group recorded other income of HK$48.32 million during the six months ended 30 June 2020, increased by HK$11.35 million as compared with last corresponding period of HK$36.97 million. The other income for the period mainly comprised value added tax refund of HK$34.49 million (first half of 2019: HK$26.54 million) and interest income of HK$6.46 million (first half of 2019: HK$6.31 million).

Selling and distribution expenses

The Group's selling and distribution expenses for the six months ended 30 June 2020 decreased by 8% or HK$0.10 million to HK$1.12 million.

Administrative expenses

The Group's administrative expenses for the six months ended 30 June 2020 increased by 8% or HK$5.42 million to HK$72.23 million, which was mainly caused by the additional administrative expenses of HK$7.26 million incurred by the ecological construction services segment.

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Other operating expenses, net

The Group incurred other operating expenses, net of HK$4.75 million during the six months ended 30 June 2020, increased by HK$2.03 million as compared with last corresponding period of HK$2.72 million. The other operating expenses for the period mainly comprised net foreign exchange loss of HK$4.05 million (first half of 2019: HK$1.08 million).

Finance costs

The Group's finance costs for the six months ended 30 June 2020 increased by 9% or HK$3.22 million to HK$39.02 million, which mainly comprised interest on a bank loan of HK$5.42 million (first half of 2019 HK$5.60 million), interest on borrowings from 北京控 股集團財務有限公司 ("BG Finance"), a fellow subsidiary of the Company, of HK$17.04 million (first half of 2019: HK$16.63 million), interest on other borrowings of HK$0.71 million (first half of 2019: Nil) and imputed interest on convertible bonds issued to Idata Finance Trading Limited ("Idata"), the immediate holding company of the Company, of HK$14.84 million (first half of 2019: HK$14.55 million). Interest on other borrowings of HK$2.31 million incurred for the expansion construction of solid waste treatment projects had been capitalised during the six months ended 30 June 2019.

Income tax

The Group's income tax expense for the six months ended 30 June 2020 amounted to HK$12.08 million, decreased by 15% or HK$2.11 million as compared with last corresponding period of HK$14.19 million. Certain subsidiaries of the Group in Mainland China are (i) exempted from corporate income tax for three years starting from the first year they generate revenue and are granted by a 50% tax reduction for the ensuring three years; and

1. qualified for the high-tech enterprises corporate income tax rate reduction. The Group's effective tax rate for the period was 11.1% (first half of 2019: 9.4%).

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EBITDA and profit for the period

EBITDA for the six months ended 30 June 2020 was HK$248.92 million, decreased by 9% or HK$24.23 million as compared with last corresponding period of HK$273.15 million. Profit for the period amounted to HK$96.82 million, decreased by 29% or HK$39.81 million as compared with last corresponding period of HK$136.63 million. Profit for the period attributable to members of the Company amounted to HK$92.45 million, decreased by 29% or HK$38.11 million as compared with last corresponding period of HK$130.56 million.

										Profit for the period
										attributable to members
		EBITDA	Profit for the period	of the Company
		For the six months	For the six months	For the six months
		ended 30 June	ended 30 June	ended 30 June
	2020		2019		2020		2019	2020	2019
	HK$ million	HK$ million	HK$ million	HK$ million	HK$ million	HK$ million
Solid waste treatment segment	242.19		265.94		118.07		154.08	117.44	151.29
Ecological construction segment	18.01		13.56		7.84		6.76	4.10	3.44
Corporate and others segment	(11.28)	(6.35)	(29.09)	(24.21)	(29.09)	(24.17)
	248.92		273.15		96.82		136.63	92.45	130.56

FINANCIAL POSITION

In January 2020, the Group established a joint venture to invest and construct the Jining Yanzhou Household Waste Incineration Power Generation PPP Project in Shandong Province, China, with a daily waste treatment capacity of 1,500 tonnes and a total investment of approximately HK$900 million, which is scheduled to be put into operation in 2022. Except for the expansion construction and technical modifications on certain existing household waste treatment plants, the Group had made no material investment, acquisition and disposal of subsidiaries and associated companies during the six months ended 30 June 2020.

Total assets and liabilities

As at 30 June 2020, the Group had total assets and total liabilities amounted to HK$8,788 million and HK$5,653 million, respectively, decreased by HK$151 million and HK$176 million as compared with those as at 31 December 2019, respectively.

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Property, plant and equipment

The decrease in net carrying amount of the Group's property, plant and equipment by HK$43 million during the period was mainly attributable to the expansion construction work of the Shandong Taian Project of HK$17 million and the depreciation provided during the period of HK$39 million (first half of 2019: HK$23 million).

Goodwill

The Group acquired certain companies relating to solid waste treatment projects in April 2014 and October 2016 and an aggregate goodwill of HK$1,123 million arose from these acquisitions. During the period, there has no significant consequence that giving rise to the material deterioration to the value-in-use value of the relevant companies and the Company will appoint an independent professional valuer to assess the goodwill impairment testing as at the financial year end.

Operating concessions

The Group's operating concessions are recognised from the solid waste treatment plants operated under Build-Operate-Transfer ("BOT") arrangements. During the period, construction expenditure of HK$118 million has been incurred and HK$52 million (first half of 2019: HK$52 million) has been amortised in the statement of profit or loss.

Other intangible assets

The Group's other intangible assets mainly comprised the operating rights of the two household waste treatment plants operated under Build-Own-Operate ("BOO") arrangements. During the period, HK$3 million (first half of 2019: HK$3 million) has been amortised in the statement of profit or loss.

Receivables under service concession arrangements

The Group's receivables under service concession arrangements are recognised from the five household waste treatment plants operated under BOT arrangements with guaranteed waste treatment revenue, decreased by HK$51 million during the period.

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Inventories

The Group's inventories of HK$37 million mainly represented coal and consumables for the solid waste treatment plants, decreased by HK$2 million during the period.

Trade and bills receivables

The Group's trade and bills receivables increased by HK$87 million to HK$477 million during the period. Based on the invoice date, trade and bills receivables of HK$370 million (included the national subsidy of on-grid electricity of HK$150 million from the Beijing Haidian Project for the period from trial operation in early 2017 to June 2020 which has not yet arranged for settlement) are outstanding within three months, and only HK$21 million are outstanding for over one year.

Prepayments, other receivables and other assets

The Group's total prepayments, other receivables and other assets decreased by HK$29 million to HK$165 million during the period, which mainly comprised prepayments of HK$73 million, value added tax refund and other taxes recoverable of HK$31 million, balances due from non-controlling equity holders of HK$25 million, deposits and other receivables of HK$36 million.

Bank and other borrowings

The Group's bank and other borrowings were all denominated in Renminbi. During the period, the Group repaid RMB41 million and further advanced for RMB5 million. As at the end of the reporting period, the Group has bank and other borrowings amounted to RMB843 million, of which RMB174 million from a commercial bank, RMB621 million from BG Finance and RMB48 million from other parties relating to the business of ecological construction services. The weighted average interest rate of the Group's bank and other borrowings was approximately 4.7% per annum.

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Convertible bonds

The Group's convertible bonds were issued to Idata with the principal amount of HK$2,202 million in October 2016 and has the share conversion price of HK$1.13, which are non- interest-bearing and will mature in October 2021. For accounting purpose, the outstanding convertible bonds were bifurcated into liability component of HK$2,162 million and equity component of HK$147 million as at the end of the reporting period.

Deferred income

The Group's deferred income of HK$141 million represented PRC government grants and subsidies on solid waste treatment business, decreased by HK$9 million during the period.

Trade payables

The Group's trade payables decreased by HK$63 million to HK$465 million during the period, of which HK$137 million has not yet billed.

Other payables and accruals

The Group's other payables and accruals decreased by HK$50 million to HK$1,642 million during the period, which mainly comprised (i) an amount due to Idata of HK$491 million (31 December 2019: HK$491 million) and (ii) amounts due to fellow subsidiaries in aggregate of RMB916 million (31 December 2019: RMB911 million), which are unsecured and non- interest-bearing.

Liquidity and financial resources

The Group adopts conservative treasury policies in cash management. As at 30 June 2020, the Group had cash and cash equivalents amounted to HK$1,303 million (approximately 60% of which were denominated in Renminbi and 40% of which were denominated in Hong Kong dollars and United States dollars); bank and other borrowings amounted to RMB843 million; non-interest-bearing amounts due to Idata and certain fellow subsidiaries of the Company amounted to HK$491 million and RMB916 million, respectively; and non-interest-bearing convertible bonds issued to Idata in the principal amount of HK$2,202 million (which will mature in October 2021).

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As at 31 December 2019, Beijing Enterprises Holdings Limited ("BEHL"), the intermediate holding company of the Company, has undertaken not to demand of the amounts due by the Group to Idata of HK$491 million and its subsidiary of RMB800 million, until such time when the Group is in a position to repay without impairing its liquidity and financial position.

As at 30 June 2020, the Group's current liabilities of HK$2,306 million exceeded its current assets of HK$2,263 million. In consideration of the stable cash recurring nature of solid waste treatment operations and the financial support of the holding company, the directors of the Company considered that the Group will be able to operate on a going concern basis and the Group has sufficient cash resources to finance its operations in the foreseeable future.

Key performance indicators
	For the six months
	ended 30 June
	2020	2019
Gross profit margin	29.7%	33.1%
Operating profit margin	24.7%	28.0%
Net profit margin	16.2%	20.5%
Return on average equity	3.3%	4.8%
	30 June		31 December
	2020	2019
Current ratio (times)	0.98	0.93
Debt ratio (total liabilities/total assets)	64.3%	65.2%
Gearing ratio (net debt/total equity)	56.9%	55.2%

Capital expenditure and commitment

During the six months ended 30 June 2020, the Group's total capital expenditures amounted to HK$139 million, of which HK$138 million was spent on construction and modification of waste treatment plants and HK$1 million was spent on purchase of other assets. As at 30 June 2020, the Group has capital commitment for service concession arrangements amounted to HK$124 million.

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Charges on the Group's assets

As at 30 June 2020, save as (i) the Group's land and buildings with a net carrying amount of HK$43.06 million, the Group's right-of-use assets of HK$19.94 million and the Group's trade receivables arising from the provision of solid waste treatment service with a net carrying amount of HK$46.73 million are pledged for the Group's bank loans, and (ii) the Group's deposits from financial institutions of HK$8.45 million are pledged as security deposits to the government authorities and a customer for the provision of construction and related services of solid waste treatment plants; the Group did not have any charges on the Group's assets.

Foreign exchange exposure

The Group's businesses are principally located in Mainland China and the majority of its transactions are conducted in Renminbi. As the financial statements of the Group are presented in Hong Kong dollars, which is the Company's functional and presentation currency, any fluctuation of exchanges rates would impact the Group's net asset value. During the six months ended 30 June 2020, the losses arising on settlement or translation of monetary items of HK$4.05 million (first half of 2019: HK$1.08 million) are taken to the statement of profit or loss and the comprehensive loss arising on translation of foreign operations of HK$84.13 million (first half of 2019: HK$18.22 million) are recognised in the exchange fluctuation reserve. Currently, the Group has not used derivative financial instruments to hedge against its foreign currency risk.

Contingent liabilities

The final acceptance of the construction of certain waste treatment plants have not been obtained from the relevant government authorities and the Group is still in the process of applying for certain permits in relation to their operations. According to the relevant PRC Law, the Group may be liable to administrative sanctions to be charged by the relevant government authorities due to the above matters. Nevertheless, the Company is of the view that the non-compliance incidents, individually and in aggregate, would have no material adverse impact on the operations and financial position of the Group.

Save as disclosed above, as at 30 June 2020, the Group did not have any significant contingent liabilities.

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EMPLOYEES AND REMUNERATION POLICIES

As at 30 June 2020, the Group had 1,192 employees (31 December 2019: 1,246). Total staff cost for the six months ended 30 June 2020 was HK$106.03 million, decreased by 8% as compared with HK$115.36 million in the corresponding period in last year. The Group's remuneration policy and package are periodically reviewed and generally structured by reference to market terms and individual performance. Discretionary bonuses are awarded to certain employees according to the assessment of individual performance.

No share option was granted, exercised or forfeited during the period under review. The Company has 37,620,000 share options outstanding as at 30 June 2020, which were granted on 21 June 2011 at an exercise price of HK$1.25 per share and represented approximately 2.5% of the Company's ordinary shares in issue as at 30 June 2020.

COMPLIANCE WITH THE CORPORATE GOVERNANCE CODE

In the opinion of the directors of the Company, save as disclosed below, the Company has complied with all the applicable code provisions (the "Code Provisions") of the Corporate Governance Code as set out in Appendix 14 to the Listing Rules for the six months ended 30 June 2020.

1. Under Code Provision A.1.1, the board should meet regularly and board meetings should be held at least four times a year at approximately quarterly intervals. It is expected regular board meetings will normally involve the active participation of a majority of directors entitled to present. However, the Company considers it is more efficient to hold board meetings to address emerging issues as appropriate. Sufficient measures have been taken to ensure that there is efficient communication among the directors.
2. 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. Following the retirement of Mr. E Meng as Chairman on 3 January 2020, Mr. Ke Jian assumes the positions of chairman of the Board and Chief Executive Officer. The Company considers that such arrangement can bring benefits to the Company's business development and management at present, and will not impair the balance of power and authority between the Board and the management of the Company.

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1. Under Code Provision A.2.7, the chairman should at least annually hold meetings with the non-executive directors (including independent non-executive directors) without the executive directors present. However, the Company considers it is more effective for non-executive directors to voice their views by individual communication with the chairman of the board.
2. Under Code Provision A.4.1, non-executive directors should be appointed for a specific term, subject to re-election. However, all existing non-executive directors of the Company are not appointed for a specific term but subject to retirement by rotation at the annual general meeting in accordance with the Company's articles of association.
3. Under Code Provision A.6.7, independent non-executive directors and other non- executive directors should also attend general meetings and develop a balanced understanding of the views of shareholders. However, the independent non-executive directors of the Company were unable to attend the 2020 annual general meeting of the Company due to other business engagements.
4. Under Code Provision E.1.2, the chairman of the board should attend the annual general meeting. He should also invite the chairman of the audit, remuneration and nomination committees to attend. However, the chairman of the board and the chairmen of the board committees were unable to attend the 2020 annual general meeting of the Company due to other business engagements.

DIRECTORS' SECURITIES TRANSACTIONS

The Company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers (the "Model Code") as set out in Appendix 10 of the Listing Rules for securities transactions by the directors of the Company. All the directors of the Company have confirmed that, following specific enquiry by the Company, they have complied with the required standard as set out in the Model Code throughout the six months ended 30 June 2020.

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AUDIT COMMITTEE

The Audit Committee was established with written terms of reference in accordance with Rule 3.21 of the Listing Rules and Code Provision C.3. The current members of the Audit Committee comprise three independent non-executive directors, namely Dr. Huan Guocang (committee chairman), Dr. Jin Lizuo and Dr. Wang Jianping.

The Audit Committee has reviewed the interim results, financial positions, risk management, internal control, impacts of the new accounting standards and management issues of the Group during the six months ended 30 June 2020.

PURCHASE, REDEMPTION, OR SALE OF LISTED SECURITIES OF THE COMPANY

Neither the Company, nor any of its subsidiaries purchased, redeemed or sold any of the Company's listed securities during the six months ended 30 June 2020.

PUBLICATION OF FINANCIAL INFORMATION

The Company's 2020 interim report containing all the relevant information required by the Listing Rules will be published on the websites of the Stock Exchange (www.hkexnews.hk) and the Company (www.beegl.com.hk) in due course.

APPRECIATION

The Board would like to express our gratitude to all employees, shareholders and parties from different sectors for their support to the Group.

By order of the Board

Ke Jian

Chairman & Chief Executive Officer

Hong Kong, 31 August 2020

As at the date of this announcement, the board of directors of the Company comprises three executive directors, namely Mr. Ke Jian, Ms. Sha Ning and Mr. Ng Kong Fat, Brian, and five independent non-executive directors, namely Dr. Jin Lizuo, Dr. Huan Guocang, Dr. Wang Jianping, Prof. Nie Yongfeng and Mr. Cheung Ming.

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