DEAR SHAREHOLDER，
The Group continues to adopt the strategy of focusing on building the core businesses of water treatment and supply and property development. The Group sold the Tianjin Jixian Project in FY2016 and a 5% interest in the Yichang Project in FY2017, thus transferring the management of the Yichang Project to the Hongkun Group, our new partner in this project. This strategy has paid off as we improved cash flows and reduced overall debt of the Group over the last four years, as shown by our stronger balance sheets in recent years.

REVIEW OF 2019
In FY2019, against the backdrop of China’s slowing economy and weakening market conditions due to various property cooling measures implemented, Group revenue dipped by 29.6% to RMB63.13 million to RMB89.68 million in FY2018.

With lower cost of water operations during the year, FY2019’s cost of sales and services provided was lower by 7.8% to RMB35.65 million, a decrease of RMB3.01 million from RMB38.66 million in FY2018. The Group recorded a lower gross profit of RMB27.48 million in FY2019, a decrease of 46.13% as compared to RMB51.02 million in FY2018.

On the positive side, other income in FY2019 was RMB35.63 million, representing an increase of RMB27.72 million from RMB7.91 million in FY2018.

As a result, the Group recorded a profit after tax of RMB25.93 million in FY2019 as compared to RMB18.52 million in FY2018.

From the year ended 31 December 2019, our cash and cash equivalents rose by RMB103.52 million, mainly from net cash provided by operating activities and financing activities partially offset by investing activities. During the year, we continued to focus on generating cash from water treatment services and property development project, and we will continue to drive cash flows in FY2020.

In 2019, our subsidiary Tianjin Water has completed the construction of Xinhe Water Treatment Plant (新河污水处理及再生水厂项目). The project, with a capacity of treating discharged water of 70 thousand tonnes per day, receives treatment fees from the local government for upgrading the intake water from a sewage treatment plant ( 污水处理厂) to a standard sufficient for discharge and further treatment, and sells further treated water to customers through our existing network of pipelines.

UPDATE ON GOLD MINING & OIL EXPLORATION PROJECTS
The Group holds a 20.1% interest in Liuhe County Yukun Mining Co Ltd (“Liuhe”), a gold exploration and mining company in the Jilin Province, China. We have made a full impairment on the Liuhe project in Q4 FY2015 and do not expect this project to be viable in future.

The Group still holds an effective stake of 34.54% in an oil exploration company licensed to explore and drill oil & gas fields at early stages in Papua New Guinea through an investment vehicle known as Future Trillion Holdings Limited (“Future Trillion”). The Group has made full impairment for the related investment in this project in Q4 FY2015 and intends to support the partners in the project to apply for or renew the exploration rights in 2020. It will also consider bringing in new partners in this project when there is an opportunity.

LOOKING AHEAD
The Group’s water pipeline construction business in Tianjin is very dependent on the local economic environment and the general state of property development. The property development project in Yichang City, Hubei Province requires undertaking construction and related activities. The outbreak of the novel coronavirus pneumonia, also known as COVID-19, has caused significant disruptions to the movement of people, goods and services throughout China. It has also brought disruptions to labour supply to the Group’s water and property development projects.

In FY2018, the KYWJ Group (50% owned associated companies of the Group) had commenced the development in “new” Phases 3-1, 3-2 and 3-3. To-date, the property development projects are still ongoing. Due to the delay in the permitting process in Q4 2019 and the outbreak of COVID-19 in Q1 2020, the KYWJ Group expects the completion of Phase 3-1 to be further delayed. However, the KYWJ Group still expects to generate cash inflow through sales of available units from the earlier completed Phases 1 and 2 and pre-sales of Phases 3-1 and Phase 3-2, albeit at a slower pace. The KYWJ Group is in the process of seeking approvals for some planning adjustments for Phase 3-3.

SUSTAINABILITY STATEMENT
To comply with SGX-ST Listing Rule 711A, the Group issued the FY2019 Sustainability Report on 27 May 2020 and will continue to issue Sustainability Reports on an annual basis.

A NOTE OF APPRECIATION
On behalf of the Board, I would like to express our heartfelt gratitude to all our shareholders, management, customers, business partners and our employees for your unyielding faith, support and contributions to the Group during these very challenging times. We look forward to your continued support as we strive to enhance the Group’s financial performance. I would also like to thank my fellow Directors for their invaluable contributions.

The Group has no other investment at present, and we will continue to focus on the water treatment and property development businesses in China. Though the economic outlook remains uncertain, we will stay focused and positive, as we continue to create greater value for our shareholders in time to come.

Shan Chang
Non-Executive Chairman