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FY2018/19ANNUAL RESULTS
(2018.4.1 – 2019.3.31)
2019.06.21
2
Operational Performance• Natural Gas• LPG• Value-added Services
Financial Performance
Future Strategy & Outlook
CONTENTS
3
NATURAL GAS
MANAGEMENTDISCUSSION &
ANALYSIS
New Investments
Acquired 15 additional city concessions in 6 provinces and autonomous regions, as at 31 March 2019, the Group
cumulatively secured a total of 542 piped gas projects with concession rights (including 365 city piped gas projects, 177
township “replacement of coal with gas” projects at county or district levels)
4
Provinces/Autonomous
Regions/Municipalities
Cities/Districts
Acquired 15
additional
city
concessions
Heilongjiang Province Acheng District of Harbin City, Jiguan New District of Jixi City, Wuchang City, Anda City,
Tailai County, Bin County, Zhaoyuan County, Fangzheng County, Jiansanjiang
Inner Mongolia Autonomous
RegionGanqimaodu Industrial Park of Urad Zhong Qi, Dengkou County
Hunan Province Huaihua National Agriculture and Technology Zone
Jiangxi Province Nancheng County
Jilin Province Fuyu City
Hubei Province Chongyang County
Further
increased
shareholdings
in existing
projects
Inner Mongolia Autonomous
RegionIncreased shareholdings in Hohhot city gas project to 63%, turning the project from a JV to
a subsidiary
Liaoning Province Increased shareholdings in Shenyang city gas project to 46.4%; signed strategic cooperation
agreement with the government of Shenyang City to comprehensively promote the use of
natural gas in Shenyang city and its surrounding areas
Natural Gas – Volume Growth
PeriodVolume Growth:
City and Township Projects
2018/19 25.1%
2017/18 39.1%
2016/17 16.2%
PeriodVolume Growth:
Pipelines & Trade
2018/19 44.2%
2017/18 83.2%
2016/17 46.2%
5
12,224.3
18,659.3
24,656.4
8,473.3
11,786.5
14,744.4
3,751.0
6,872.8
9,912.0
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
11,000
12,000
13,000
14,000
15,000
16,000
17,000
18,000
19,000
20,000
21,000
22,000
23,000
24,000
25,000
2016/17 2017/18 2018/19
City & Township Projects Pipelines & Trade
Nat
ura
l Gas
Sal
es V
olu
me
(mill
ion
m3
)
Natural Gas – Volume Growth
PeriodVolume Growth:
City and Township Projects
2018/19 25.1%
2017/18 39.1%
2016/17 16.2%
PeriodVolume Growth:
Pipelines & Trade
2018/19 44.2%
2017/18 83.2%
2016/17 46.2%
6
12,224.3
18,659.3
24,656.4
8,473.3
11,786.5
14,744.4
3,751.0
6,872.8
9,912.0
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
11,000
12,000
13,000
14,000
15,000
16,000
17,000
18,000
19,000
20,000
21,000
22,000
23,000
24,000
25,000
2016/17 2017/18 2018/19
City & Township Projects Pipelines & Trade
Nat
ura
l Gas
Sal
es V
olu
me
(mill
ion
m3
)
Natural Gas – Customer Breakdown
Customer
% of total
city &
township
gas volume
Volume growth
2018/19 2017/18
Residential 27.0% 29.0% 60.1%
Industrial 47.8% 30.1% 47.3%
Commercial 17.1% 22.5% 23.7%
CNG/LNG
Stations8.1% -2.5% 1.7%
City &townshipgasvolume
Volume Growth
Customer 2018/19 2017/18 2016/17
Pipelines or
Trading44.2% 83.2% 46.2%
Pipeline & trading volume
7
3,751.0
6,872.8
9,912.0 1,203.5
1,223.9
1,193.5
1,661.0
2,054.1
2,516.2
3,679.3
5,419.6
7,050.0
1,929.5
3,088.9
3,984.7
0
2,500
5,000
7,500
10,000
12,500
15,000
17,500
20,000
22,500
25,000
2016/17 2017/18 2018/19
Pipelines & Trade CNG/LNG
Commercial Industrial
Residential
Nat
ura
l gas
sal
es v
olu
me
(mill
ion
m3)
Natural Gas – Effective Connections
Proactively optimising its connection strategy to promote new connections of existing residential buildings, CGH continues to deliver stable new
connections in city gas projects, at the same time, continue to boost its robust growth of new connections in township gas projects. In FY2018/19, the
proportion of existing residential connections over total new connections in city gas projects reached 36%.
8
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
4,000,000
4,500,000
5,000,000
New Residential Connections
3,926,762
Ho
use
ho
lds
0%
5%
10%
15%
20%
25%
30%
35%
40%
Existing Building Connections/Total
Connections in City Projects35%5,107,836 36%
Natural Gas – Customer Breakdown
9
Customer
New Connections (Organic Growth)
Change
from
FY2017/18
FY2017/18
Portfolio
Total
FY2018/19Change from
FY2017/18FY2017/18
FY2018/19
Portfolio
Total
Residential 5,107,836 30.1% 3,926,762 29,678,157
26,137,411
3,540,746
20.8%
11.6%
208.1%
24,570,321
23,421,188
1,149,133
City Projects 2,716,223 -2.2% 2,777,629
RCG* 2,391,613 108.1% 1,149,133
Industrial 2,686 15.9% 2,318 12,407 27.6% 9,721
Commercial 30,673 14.3% 26,829 199,637 18.2% 168,964
CNG/LNG
Stations- - - 575 -0.9% 580
RCG *: “Replacement of coal with gas projects in towns and villages in North China”
10
City Gas Projects
Customer Tariffs (ex-tax) (RMB / m3)FY2018/19 FY2017/18 Change
Residential 2.52 2.40 5.0%
Industrial 2.65 2.50 6.0%
Commercial 2.79 2.60 7.3%
CNG/LNG Stations 2.93 2.63 11.4%
Dollar Margins (ex-tax) (RMB / m3) FY2018/19 1HFY2018/19 FY2017/18
Overall Dollar Margin (city gas projects) 0.61 0.625 0.623
Residential 0.44 0.47 0.51
Industrial 0.59 0.59 0.60
Commercial 0.75 0.82 0.78
CNG/LNG Stations 0.91 0.88 0.75
Natural Gas – Tariff & Dollar Margin
Natural Gas – Other Operational Data
11
FY2018/19 FY2017/18 FY2016/17
Residential
Connection Fee
(RMB per customer)
City Projects 2,508 2,523 2,540
Township Projects 3,010 3,089 -
Urban Population Covered (million) 132.0 123.9 117.1
Household Penetration Rate (City Gas
Projects)60.7% 57.2% 53.1%
12
LIQUEFIEDPETROLEUM
GAS
MANAGEMENTDISCUSSION &
ANALYSIS
LPG – Vertical Integration of the Value Chain
13
CGH Core Business Areas
Upstream
LP
G
Midstream Downstream End Users
LPG Import LPG
receiving
terminals
Storage
facilities
Class II
Stations
Bottling
Stations /
Retail
Points
Industrial
CommercialDomestic
Oil Refinery
CGH Facilities / Customers
Residential
China Gas owns:
8 LPG receiving terminals
300,000 m3 of LPG storage capacity
100 LPG distribution projects and 1,100 retail stores
LPG distribution coverage in 19 provinces in China
Over 300,000 m3 Storage Capacity
8 LPG Terminals (Class 1 & 2)
LPG Fleet Capacity: 12,600 tonnes
100 LPG Distribution Projects
1,100 LPG Retail Stores
2,534,300
2,944,4932,785,350
1,164,700
1,085,9011,208,027
3,699,000
4,030,394 3,993,377
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
4,000,000
FY2016/17 FY2017/18 FY2018/19
wholesale retail
LPG Sales Volume Breakdown (Tons)
LPG – Vertical Integration of the Value Chain
Retail:• A more popular clean energy in townships and villages
where natural gas is not available;• Consolidating retail market through better service,
safety standard and quality of goods;• Owning a national call no. “95007”;
Wholesale: • Demand driven, such as rapid growth of the
petrochemical synthesis and processing sector where LPG is used as a raw material;
• Contractual sales accounts for about 60% of the total wholesale volume, so as to effectively avoid LPG price fluctuation risk;
Further market penetration Economies of scale Fully liberalized market LPG price-setter
FY2018/19Change from
FY2017/18FY2017/18 FY2016/17
Sales Volume (tonnes) 3,993,377 -0.9% 4,030,394 3,699,000
Wholesale 2,785,350 -5.4% 2,944,493 2,534,300
Retail 1,208,027 11.3% 1,085,901 1,164,700
Sales Revenue (HK$’000) 15,917,100 -0.3% 15,969,830 11,654,633
Core net profit attributable to
owners of the Company
(HK$’000)
101,766 -81.5% 550,836 440,388
Core NP Margin (%) 0.6% - 2.8pts 3.4% 3.8%
15
LPG – Vertical Integration of the Value Chain
1. LPG wholesale business recorded a slight year-on-year decrease in sales volume. It was mainly attributable to the control of the
Group appropriately exercised over its LPG imports to prevent the effect of the substantial volatility of international LPG purchase
price on purchase costs and profit.
2. As the crude oil and LPG prices fell sharply in 2018 Q4, causing sales loss for those LPG purchased before the oil price drop,
which was the main reason behind the 81.5% decline in core net profit attributable to the owners of the Company during the
period.
16
17
VALUE-ADDEDSERVICES
MANAGEMENTDISCUSSION &
ANALYSIS
Value-added Services – Asset-light Business
18
Sale and/or delivery of products/services via existing network with 35M+ customers
Gas heaters & kitchen appliances under the brand of Gasbo (中燃宝), such
as gas stoves, disinfection cabinet, range hood, etc.
Smart Home
Comprehensive gas insurance
Sale of water purifier
Sale of air purifier
Gas alarm system
Bottled water
Gas corrugated pipes
Maintenance and equipment conversion services
and more…
Online +
offline
19
Value-added Services – Asset-light Business
Huge PRC market, High margin, Strong growth
Performance (HK$ millions)
Revenue & profit continue to grow at high double-digit in years
Value-added Services
Blue
Ocean
Value-added services FY18/19Change from
FY17/18FY17/18
Revenue 3,903.1 32.5% 2,946.7
Gross profit 1,421.0 42.0% 1,000.6
GP margin 36.4% 34.0%
Operating profit 1,144.5 47.8% 774.5
OP margin 29.3% 26.3%
20
FINANCIAL PERFORMANCE
Income Statement
HK$ (millions) FY2018/19 % change FY2017/18
Revenue 59,386.1 +12.4% 52,832.0
Gas sales 27,105.7 +19.9% 22,612.9
Connection fees 11,179.3 +25.3% 8,923.7
LPG sales 15,917.1 -0.3% 15,969.8
Value-added services 3,903.1 +32.5% 2,946.7
Construction design and services 1,280.9 -46.2% 2,378.9
Gross profit 14,059.2 +20.5% 11,671.0
EBIT 11,634.1 +20.3% 9,674.4
One-off or non-operational items 73.1 - 266.9
Profit attributable to owners of the Company 8,224.4 +34.9% 6,095.2
EPS - Basic (HK dollars) 1.63 +32.5% 1.23
Core net profit attributable to owners of the Company * 8,151.3* +28.1%* 6,362.0
Dividend per share (HK cents) (full year) 44.0 +25.7% 35.0
Dividend payout ratio (core) 28.0% + 0.7pts 27.3%
21
* The growth of Core profit attributable to owners of the Company would have increased by more than 28.1% if RMB vs. USD/HK$
didn’t drop by more than 6.3% during this FY2018/19.
22
ItemsHK$
millionsRemarks
1Exchange gain/loss (150.3)
Foreign debt proportion remained at low level of 14.7% as at
31 March 2019
2 Gain or loss on disposal of
associate/JV/PPE/others445.7
For instance: increased shares in a JV (Hohhot city gas project)
from 51% to 63%, which becomes a subsidiary
3 Share of ex loss & option expense
attributable to ZY Gas (associate,
41.81% of shares)
(159.2)
4 Share based payments (options) (63.1) Fully booked
Total amount 73.1
One-off / non-operational items
Change of Currencies
23
1.247
1.168
1.12
1.14
1.16
1.18
1.2
1.22
1.24
1.26
29/3/2018 29/03/2019
Historical exchange rate
RMB :HKD
source: http://www.hkexchangerate.com
HK$(millions) FY18/19 FY17/18 FY16/17
Total Assets 109,879.7 82,058.0 60,221.8
Total Equity 40,782.4 32,730.1 23,946.6
Shareholder's Equity 35,321.1 28,456.0 20,550.2
Cash 13,482.3 8,537.0 5,242.3
Short-term Bank and Other Borrowings 16,407.5 11,079.3 10,873.3
of which LPG trade finance related facilities 2,240.6 3,614.1 -
Long-term Bank and Other Borrowings 21,491.4 21,293.1 12,745.2
Net Gearing Ratio * 54% 62% 77%
24
Balance Sheet
* Excluding the LPG import letter of credit related trade finance
25
FY2018/19 FY2017/18
Operating profit margin 16.9% 15.5%
Sales of gas 11.0% 10.9%
Gas connection 30.8% 32.7%
Construction design and services 16.5% 17.2%
LPG sales 0.8% 3.2%
Value-added services 29.3% 26.3%
Operating Profit Margins
26
Financial Highlights
* Net of one-off or non-operational items
0.160.22
0.39
0.5
0.66
0.75
0.91
1.28
1.61
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.8
HK
$
Core EPS*
2.23.92
8.48
12.06
16.15
19.46
25
35
44
0
5
10
15
20
25
30
35
40
45
HK
Cen
ts
DPS
27
FUTURE STRATEGY & OUTLOOK
Future Strategy
28
Continue to add 10-20 new city concessions in each year
Speed up connections to old/existing residential buildings to increase penetration rate
Strong volume driver: “coal to gas” conversion for industrial and commercial users
Huge new market for winter heating application: replacement of coal with gas for residential
users in towns and villages in 15 provinces in northern China
Develop the enormous value-added services’ market for more than 35 million existing
customers, increasing by 5 million annually
Vertically integrate LPG value chain and boost LPG assets’ utilization rate
Explore new businesses, such as, Distributed Energy, Gas Co-generation, Electric Charging
Posts and Electricity Distribution etc.
Township “coal-to-gas” for heating
29
Established strategic partnerships with Tianjin city, Hebei, Shandong, Shanxi, Henan, Shaanxi, Anhui, Yunnan,
Hainan, Heilongjiang, Hubei, Jilin, Guizhou, Sichuan and Hunan provinces respectively, and implemented projects,
in more than 177 counties or districts, such as “replacement of coal with gas” in towns and villages, conversion of
coal-fired boilers to natural-gas-fed in urban areas, natural gas for vehicles, distributed energy resources, natural gas
storage facilities and the construction of natural gas pipeline networks and “beautiful countryside”.
As at 31st March 2019, China Gas has signed contracts to replace coal with natural gas for more than 7 million
households in towns/villages, including the 3.54 million households for which the connection works have been
completed by March 2019.
Replacement of coal with natural gas projects in towns and villages will contribute to the Group:
1. A substantial increase in new residential connections, on top of the annual residential connections in 365
existing city gas projects.
2. Continuously grow value-added business by selling wall-hanging gas heaters and kitchen appliances.
3. Replacement of coal with natural gas projects in towns and villages is mainly for winter heating purpose, the
average gas consumption per household for heating in winter is about 10 times of the usage by urban
household, thus, it will bring substantial growth in natural gas sales in the future.
Outlook
30
Segment
FY2018/1
9
(Actual)
FY2019/20 FY2020/21
Gas volume in city & township projects 25.1% 25+% p.a.
Annual residential connections (households) 5,107,836 5,500,000 6,300,000
Sale tonnage of LPG (tons) 3,993,377 4,300,000 5,000,000
Gross profit of value-added service 42.0% 40+% p.a.
The Board proposes to seek the approval of the Shareholders on the refreshment of the Scheme Mandate Limit, in
order to enable the Company to provide more rewards and motivation to its employees and other eligible persons
under the Share Option Scheme for their contribution and continuing efforts to promote the interest of the
Company and enhance the value of the Shares.
Conditions intended to be attached to the New Options to be granted under the Scheme Mandate Limit, if
refreshed:
i. the Group’s audited net profit after tax (before share-based payment expenses) and
deduction of net profit after tax attributable to non-controlling interests for any of the
financial years ending on or before 31 March 2022 based on the audited consolidated
financial statements of the Company amounts to HK$ 14 billion or above; or
ii. if the above condition is not fulfilled, the New Options can still be exercised if the
Group’s audited profit after tax (before share-based payment expenses) and deduction
of net profit after tax attributable to non-controlling interests for the financial year
ending 31 March 2023 based on the audited consolidated financial statements of the
Company amounts to HK$15 billion or above; and
the New Options will lapse if none of the above conditions is satisfied.
31
Conditions intended to be attached to the New Options to be granted
REFERENCE DOCUMENTS
32
•issued by the Ministry of Environmental Protection in collaboration with the People's Governments of Beijing, Tianjin and Hebei in June 2016
•promotion of "gas for coal replacement" campaign, designation of coal-free areas
•dedicated funding from central government
"Reinforced Measures on Air Pollution Prevention and Control in Beijing-Tianjin-Hebei (2016-2017)"
•issued by the Ministry of Finance and Ministry of Environmental Protection in July 2016
•strengthen the use of special funds for “air pollution prevention and control”
"Measures for the Administration of Special Funds for Air Pollution Prevention andControl"
•issued by the People's Government of Hebei in August 2016
"Implementation Plan for the Reinforced Measures on Air Pollution Prevention andControl in Hebei (2016-2017)"
•issued by 4 ministries in collaboration with People's Governments of six provinces and municipalities in NorthernChina in February 2017
•number of "pollution diffusion belt cities" raised to 28
•shut down of heavily polluting factories in winter
"2017 Work Plan on Air Pollution Prevention and Control in Beijing-Tianjin-Hebeiand the Surrounding Areas"
33
Environmental Protection Policies
34
•issued by 4 ministries in collaboration in May 2017
•support for pilot projects on clean winter heating with central finance
•3 years demonstration period. Financial subsidy by the central government according to the scale of the city: 1billion each year for municipalities, 700 million each year for provincial capital cities, and 500 million each year forprefecture-level cities.
"Circular of the Central Government on Piloting Winter Cleaning and Heating inNorthern China"
•issued by 10 ministries in collaboration with People's Governments of six provinces and municipalities in NorthernChina in August 2017
•supervision of “air pollution comprehensive management” work done by the 28 “pollution diffusion belt cities”
"Priority Working Plan for Comprehensive Management of Air Pollution duringFall and Winter of 2017-2018 in Beijing-Tianjin-Hebei and its Surrounding Areas"
•Issued by 10 ministries in collaboration in December 2017
•Includes all 15 provinces in north China
•by 2021: 70% clean heating coverage in north China, replacing 150 MTs of coal; comprehensive clean heatingcoverage in “2+26” cities and abolition of all boilers under 35 tons; 80% clean heating coverage in counties andcity suburbs and abolition of all boilers under 20 tons; 60% clean heating coverage in rural area
“Clean Winter Heating Plan for North China (2017-2021)"
•issued by the State Council, highest profile document for air pollution control
•Extending air pollution control from “2+26” to the Yangtze River Delta and Fenhe-Weihe Plain
•Incremental gas will prioritize residential use and winter heating in areas with severe air pollution; prioritizingBeijing-Tianjin-Hebei and its surrounding area and Fenhe-Weihe Plain in order to realize “the replacement of coalwith gas”
“Three Year Action Plan for Winning the Battle for Blue Sky"
Environmental Protection Policies
Subsidies for "coal to gas replacement", in Hebei Province:
Residential users:
Installation subsidy, RMB 4,000/household. Provincial government bears RMB 1,000, city and county
governments bear the rest RMB 3,000
Equipment purchase subsidy
70% reimbursement of purchase of wall-mounted heaters, up to RMB 2,700
Gas subsidy in winter
RMB 0.8/cubic meter subsidy for winter heating purpose, up to RMB 960 per year, for 3 years
Industrial users:
Subsidy of RMB 100,000 per steam ton for retrofitting coal-fired boilers to gas-fired boilers
35
Subsidy Policies for Township
Disclaimer & Contact
Disclaimer:
Statements in this presentation and handout that are not strictly historical are “forward-looking” statements. Forward-lookingstatements involve risks and uncertainties, including, but not limited to, continued acceptance of the Company’s product andservices in the marketplace, competitive factors, new products and technology changes, the Company’s dependence upon thirdparty suppliers and other risks detailed from time to time in the presentation, handout and other related documents. All thedirectors of China Gas jointly and severally accept full responsibility for the accuracy of the information contained in thesematerials and confirm, having made all reasonable inquiries, that to the best of their knowledge, opinions expressed in thesematerials have been arrived at after due and careful consideration and there are no other facts not contained in these materials,the omission of which would make any statement in these materials misleading. The materials and information in thepresentations and other documents are for informational purposes only, and are not an offer or solicitation for the purchase orsale of any securities or financial instruments or to provide any investment service or investment advice.
For investor enquires:
Mr. Frank Li
Tel: +852 2238 0315 l Fax: +852 2287 0633
Email: [email protected]
Website: www.chinagasholdings.com.hk
36