2016 Annual Results Presentation March 2017 Strictly Private and Confidential
Disclaimer This presentation incorporates information contained in the annual results announcement (the “Results Announcement”) for the year ended 31 December 2016 of CT Environmental Group (the “Company”). This presentation should be read in conjunction with the Results Announcement and is qualified in its entirety by the more detailed information and financial information contained in the Results Announcement. Other than the information contained in the Results Announcement, you shall not reproduce or distribute this presentation, in whole or in part, and you shall not disclose any of the contents of this presentation or use any information herein for any purpose without the Company’s prior written consent. You hereby agree to the foregoing by accepting delivery of this presentation. The contents of this presentation have not been reviewed or approved by any regulatory authority in Hong Kong or elsewhere. The contents of this presentation are not investment, legal or tax advice. You are advised to exercise caution in perusing the contents of this presentation. If you are in any doubt about any of the contents of this presentation, you should obtain independent professional advice. 1
Agenda • Strategic Overview and 2016 FY Highlights Mr. Lu Yili, CEO • 2016 FY Financial Overview Mr. Edwin Ma, CFO • 2017 Strategic Focus Mr. Lu Yili, CEO • Q&A 2
Strategy Overview and 2016 FY Highlights Mr. Lu Yili, CEO
Leading environmental protection solution provider CT Environmental Group is at the heart of an environmental and resource revolution There are increasingly favourable government policies to facilitate economic growth in a more environmentally-friendly way along with enhanced regulation of the protection treatment service We are well positioned to take advantage of the growing market demand for high-quality integrated industrial waste management solutions 4
CTEG continues to deliver on long-term strategy A leading player in industrial waste treatment area with strong entrepreneurship and project track record poised to capture growth in a juncture when China advocates environmental consciousness Market Position & Strength Growth Strategy 2016 Progress Early mover in the industrial wastewater Ongoing diversification of our customer treatment segment with well-recognized Establishment of greenfield projects in base franchise and effective BOO model Guangdong Longmen as an integrated solid waste environmental protection base Vertical expansion into sludge treatment Significant progress on the first flagship Sector & effective diversification into Penetrate into new provinces project in Guangxi market, an energy- hazardous waste treatment sector saving environmental protection industrial park project Successful integration of acquisitions Strong R&D capability & significant Continue to broaden our expertise and project development experience service offerings 5
2016 FY performance highlights CTEG delivered strong growth and further strengthened its core businesses • Strong revenue growth of approx. 30% to RMB1.87bn on sustained growth of three core businesses • Maintained steady gross profit margin at 46% • Net profit impacted by one-off items, decreased by 13% Recurring net profit increased approx. 17% – • Major corporate actions Expansion beyond homebase into Guangxi Zhuang Autonomous Region with first comprehensive flagship project – • Final dividend of HK0.67 cents per share for the year ended 31 December 2016 • Special dividend of HK0.86 cents per share in connection to the profit from disposal of land in 2017 6
Achieved growth across all three business segments Industrial wastewater treatment: • Processed volume of six existing industrial wastewater treatment facilities recognised organic growth of 8% YoY – Sludge treatment: • Increased overall capacity driven by strong demand from customers – Hazardous waste treatment: • Overall increase in operating capacity primarily due to commencement of Nansha Marine Conservation Centre with profitability at 31% – utilisation rate Industrial Wastewater Hazardous Waste Core Business Segment Sludge Treatment Treatment Treatment Fiscal Period 2016 2015 2016 2015 2016 2015 7 6 3 3 6 5 No. of Projects 579,500 575,000 3,442 3,142 830,000 330,000 Operating Capacity m 3 /day m 3 /day tonnes/day tonnes/day tonnes/year tonnes/year 62% 58% >100% 93% 48% 65% Average Utilisation Rate 7
Strong pipeline offering high visibility for 2017-8 Business Status/Estimated Projects Segment Capacity Model Time of Operation Guangxi Yulin (Water) Water Treatment BOO IWWT: 50,000 m3/day; IWS: 50,000 m3/day 2017 Q2 Guangxi Yulin (Sludge) Solid Waste BOO Sludge: 200 tonnes/day 2017 Q2 Sludge: Phase I: 500 tonnes/day Longmen Industry Base Solid Waste BOO 2017 Q3 Industrial Solid Waste: 300,000 tonnes/year Longmen Industry Base Solid Waste BOT Waste-to-energy: 600 tonnes/day 2017 Q3 Yinghong Park (Phase I) Water Treatment BOO IWWT: 20,000 m3/day; IWS: 50,000 m3/day 2017 Q4 Sichuan Guangyuan (Phase I) Water Treatment BOO IWWT: 50,000 m3/day; IWS: 50,000 m3/day 2017 Q4 Yulin Chinese Medicine (Phase I) Water Treatment BOO IWWT: 5,000 m3/day 2018 Q1 Xinfeng Lvzhi Solid Waste BOO Industrial Solid Waste: 350,000 tonnes/year 2018 Q1 Yonghe Haitao (Phase IV) Water Treatment BOO IWWT: 50,000 m3/day Under planning 8
2016 FY Financial Overview Mr. Edwin Ma, CFO
2016 FY financial highlights • Delivered strong topline growth and maintained steady gross profit margin • Net profit was impacted by one-off items, impairment on non-current assets and foreign exchange loss 2016 FY 2015 FY % Change (RMB mm) Turnover 1,865.9 1,435.0 +30.0% Gross Profit 852.3 715.5 +19.1% Profit Attributable to Equity Holders 519.1 598.9 -13.3% Recurring Net Profit 589.6 503.7 +17.0% Basic EPS 0.08 0.10 -20% 10
Strong sector penetration leading to revenue diversification Revenue Breakdown by Sector Revenue Breakdown by Customer RMB 1,866 mm 7% 6% 3% 5% 16% 30% 5% 37% 10% 2016 22% 26% 33% Water Treatment BOT Project Construction Textile Automobile Manufacture Others Service Sludge and Solid Waste Treatment Municipalities Electronic Hazardous Waste Treatment Heating Service Chemical Papermaking RMB 1,435 5% 7% 2015 3% mm 6% 20% 34% 3% 6% 50% 16% 25% 25% 11
Margins remain stable Recurring* EBITDA Margin, Gross Margin EBITDA Margin, Gross Margin and Net Margin and Net Margin 59% 59% 58% 58% 57% 56% 55% 50% 55% 54% 54% 53% 54% 50% 46% 42% 42% 38% 30% 29% 29% 28% 28% 28% 1H2015 FY2015 1H2016 FY2016 1H2015 FY2015 1H2016 FY2016 Recurring EBITDA Margin Recurring Gross Margin EBITDA Margin Gross Margin Net Margin Recurring Net Margin *Add back VAT refund to turnover, exclude income from BOT construction services, entrusted operation and one-off gain/loss 12
Expense analysis • While costs and expenses increased, the ratio of cost as a percentage of turnover remained steady (RMB mm) Administrative Expense Finance Cost 13.7 % 9.7% 12.9% 4.6% 4.5% 256.2 14.9 88.2 70.2 139.3 2015 2016 2015 2016 % of Turnover Effective interest rate 13
Other financial indicators As at 31/12/2016 As at 31/12/2015 31/12/2016 vs 31/12/2015 A/R Balance 554.9 411.4 +34.9% (RMB million) A/R Turnover 97.5 94.7 +2.8 days (days) 14
Maintained healthy gearing ratio (Total Bank Borrowing – Cash) / Total Equity 56.3% 55.8% 31/12/2015 31/12/2016 15
Capital expenditure RMB 669 mm RMB 1,197 mm 100% 8% 90% 38% 80% 70% 60% 65% 12% 50% 40% 30% 50% 20% 27% 10% 0% 2016 2015 Water Treatment Sludge and Solid Waste Treatment Hazardous Waste Treatment 16
2017 Strategic Focus Mr. Lu Yili, CEO
Well-positioned to capture growth • Government’s commitment to environmental protection and associated policies increases • Proven track record of delivering • Focus on geographical expansion 18
Q&A
APPENDIX
CTEG business model • CTEG Established business with strong track record in industrial wastewater, sludge and solid waste, and hazardous waste – treatment solutions Best positioned to capitalise on opportunities brought about by fighting global climate change and national policy – Solid management team with operational excellence to deliver – Business Model Solid waste treatment facilities Untreated solid waste CTEG’s major customers Landfill, incineration and resource utilisation Hazardous waste treatment facilities Untreated Waste generating enterprises hazardous waste Landfill, incineration, resource utilisation and concentrated sewage treatment Wastewater treatment facilities Untreated Industrial water supply wastewater Treated wastewater being discharged Sludge treatment facilities Sludge produced in the Industrial water supply facilities wastewater treatment Nutrition soil, green brick Reclaimed water (water process and light ceramsite recycling) Committed to becoming China’s leading one-stop industrial waste management solution provider 21
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