BEIJING ENTERPRISES HOLDINGS LIMITED BEIJING ENTERPRISES HOLDINGS LIMITED Stock Code : 392 ANNUAL REPORT 2015 ANNUAL REPORT 2015 CONTENT 2 Corporate Information 4 Corporate Structure 5 Financial Highlights 6 Chairman’s Statement 8 Management Discussion and Analysis 21 Directors and Senior Management 26 Report of The Directors 41 Corporate Governance Report 53 Independent Auditors’ Report 55 Consolidated Statement of Profit or Loss 56 Consolidated Statement of Comprehensive Income 57 Consolidated Statement of Financial Position 60 Consolidated Statement of Changes in Equity 62 Consolidated Statement of Cash Flows 65 Notes to Financial Statements 191 Five Year Financial Summary Beijing Enterprises Holdings Limited 01 Annual Report 2015 Corporate Information CORPORATE INFORMATION DIRECTORS CORPORATE GOVERNANCE & RISK Executive Directors MANAGEMENT COMMITTEE Mr. Wang Dong (Chairman) Mr. Zhou Si (Committee Chairman) Mr. Hou Zibo (Vice Chairman) Mr. Jiang Xinhao Mr. Zhou Si (Vice Chairman & Chief Executive Officer) Mr. Lam Hoi Ham Mr. Li Fucheng (Vice Chairman) Mr. Fu Tingmei Mr. Li Yongcheng (Vice Chairman) Dr. Yu Sun Say Mr. E Meng (Executive Vice President) Mr. Jiang Xinhao (Vice President) COMPANY SECRETARY Mr. Tam Chun Fai Mr. Tam Chun Fai CPA CFA (Chief Financial Officer & Company Secretary) STOCK CODE Independent Non-Executive Directors 392 Mr. Wu Jiesi Mr. Lam Hoi Ham WEBSITE Mr. Fu Tingmei www.behl.com.hk Mr. Sze Chi Ching Mr. Shi Hanmin SHARE REGISTRAR Dr. Yu Sun Say Tricor Tengis Limited Level 22, Hopewell Centre, AUDIT COMMITTEE 183 Queen’s Road East, Mr. Wu Jiesi Hong Kong Mr. Lam Hoi Ham (Committee Chairman) Mr. Fu Tingmei REGISTERED OFFICE 66/F., Central Plaza, REMUNERATION COMMITTEE 18 Harbour Road, Mr. Zhou Si Wanchai, Hong Kong Mr. Wu Jiesi (Committee Chairman) Tel: (852) 2915 2898 Mr. Lam Hoi Ham Fax: (852) 2857 5084 NOMINATION COMMITTEE AUDITORS Mr. Wang Dong (Committee Chairman) Ernst & Young Mr. Lam Hoi Ham Mr. Fu Tingmei 02 Beijing Enterprises Holdings Limited Annual Report 2015 CORPORATE INFORMATION LEGAL ADVISERS Hong Kong Law DLA Piper Mayer Brown JSM PRC Law Haiwen & Partners US Law Mayer Brown JSM PRINCIPAL BANKERS In Hong Kong Bank of China, Hong Kong Branch Bank of Communications, Hong Kong Branch China Construction Bank, Hong Kong Branch DBS Bank Ltd., Hong Kong Branch Mizuho Corporate Bank Ltd., Hong Kong Branch In Mainland China Agricultural Bank of China Bank of China China Construction Bank Guangdong Development Bank The Industrial and Commercial Bank of China ADR Depository Bank The Bank of New York Beijing Enterprises Holdings Limited 03 Annual Report 2015 Corporate Structure CORPORATE STRUCTURE As at 31 December 2015 Other entities, most of which are under the Beijing Enterprises Group Company Limited control of the Beijing Municipal Government 72.72% 27.28% Beijing Enterprises Investment Limited Public Investors 40.24% 20.56% 39.20% # Beijing Enterprises Holdings Limited Stock Code: 392 79.77% Yanjing Beer 100% Beijing Gas 57.39% Yanjing Brewery T 40% PetroChina Beijing Stock Code: 000729 Pipeline Co 50.03% Yanjing Huiquan* Stock Code: 600573 22.70% China Gas # Stock Code: 384 50.43% Beijing Development # Stock Code: 154 43.84% BE Water # Stock Code: 371 20.76% Biosino Bio-Tech Stock Code: 8247 * Listed on The Shanghai Stock Exchange T Listed on The Shenzhen Stock Exchange # Listed on The Main Board of The Hong Kong Stock Exchange π Listed on The Growth Enterprise Market of The Hong Kong Stock Exchange 04 Beijing Enterprises Holdings Limited Annual Report 2015 FINANCIAL HIGHLIGHTS FINANCIAL HIGHLIGHTS Financial Highlights 2015 2014 Change for the year ended 31 December HK$’000 HK$’000 Turnover 60,149,945 47,935,795 +25.5% Gross profit 9,051,048 8,576,031 +5.5% Profit for the year 5,955,913 5,405,647 +10.2% Profit attributable to shareholders of the Company 5,667,378 4,831,678 +17.3% Basic EPS (in HK dollars) 4.41 3.78 +16.7% Total dividend per share (in HK dollars) 0.95 0.90 +5.6% EBIT 7,939,737 7,142,972 +11.2% EBITDA 10,701,227 9,565,663 +11.9% Total assets 124,766,040 124,173,816 +0.5% Bank balance and cash 13,766,807 11,266,441 +22.2% Shareholders’ equity 58,187,267 57,176,356 +1.8% Key financial indicators for the year ended 31 December 2015 2014 Average finance costs 3.6% 3.7% Current ratio (times) 1.28 0.94 Gross profit margin 15.0% 17.9% Net gearing ratio 30.6% 38.1% Net profit margin 9.9% 11.3% Payout ratio (%) 21.5% 23.8% Return on average equity 9.8% 8.7% Definitions: • Average finance costs • Net profit margin Total interest expenses/Average borrowing for the year Net profit for the year/Turnover • Current ratio • Payout ratio Current assets/Current liabilities Dividend per share/Earnings per share • Gross profit margin • Return on average equity Gross profit/Turnover Profit attributable to shareholders of the Company/Average equity attributable to equity holders of the Company • Net gearing ratio Net borrowing/Total equity Beijing Enterprises Holdings Limited 05 Annual Report 2015 CHAIRMAN’S STATEMENT CHAIRMAN’S STATEMENT In 2015, the global economic development was getting more complicated with initial signs of recovery in developed economies such as USA and Europe, while the emerging economies represented by China were accumulating momentum for innovation and development despite global economic downward pressure. Beijing Enterprises Holdings Limited (the “Company” or the “Group”) fully intensified its enterprise reform and innovation and continued to maintain a sustained, steady and healthy development. According to the financial statements prepared under the Hong Kong Financial Reporting Standards, the Company achieved operating revenue of HK$60.15 billion in 2015, representing a year-on-year increase of 25.5%. Profit attributable to shareholders of the Company amounted to HK$5.67 billion, representing a year-on- year increase of 17.3%. The board of directors proposed a final dividend of HK65 cents per share. 2015 was the final year of our second Five-year Plan. Since 2011, we adhered to the principle of focusing on our principal businesses in accordance with the established strategic plan, pooled resources together to develop the three major core businesses in gas, water and solid waste treatment and also the beer segment as our value investment business, and withdrawn from other non-principal businesses gradually. Over the past year, sales volume of our natural gas business continued to maintain a high-speed growth, water and solid waste treatment businesses achieved a leap-forward development, with our strategic layout basically completed. At the same time, through investment, financing and a series of successful capital market operations, the Company’s foundation became more stable which gave a clearer sector layout and more solid capital market position. Looking forward into 2016, the Company will continue to unswervingly facilitate the clean energy business and environmental protection business. We will seize the opportunities brought by energy industry reform and at the same time, intensify our efforts to develop new businesses such as cooling-heating-power supply projects to further increase our leading superiority in gas business. By leveraging on the opportunity of integrating Beijing, Tianjin and Hebei together, the Group will focus on developing the Beijing, Tianjin and Hebei markets and further elevate the synergetic cooperation with China Gas Holdings Limited (Stock Code: 384) to reinforce and expand the national gas market. In environmental protection business, we will continue to optimize the strategic planning of water business, maintain the capital advantage of Beijing Enterprises Water Group Limited (Stock Code: 371), forcefully promote our technical competitiveness and make a success in the two drivers of capital and technology advantage. The solid waste treatment operations are the growing business that we will develop in full swing. The Company will fully support the solid waste treatment segment to secure high-quality projects, enlarge its scale rapidly, escalate industry influence, establish environmental protection brand image and strive for becoming the industry standard. 06 Beijing Enterprises Holdings Limited Annual Report 2015 CHAIRMAN’S STATEMENT In the beginning of 2016, the Company completed the acquisition of the 100% interest equity of EEW Energy from Waste GmbH (“EEW”), an energy-from-waste company in Munich, Germany. The acquisition of EEW is the largest merger and acquisition project by a Chinese enterprises in Germany, which for sure will enhance our operation scale and industry standing in the solid waste treatment and environmental protection sector in China. This acquisition is also an important measure to actively carry out green development concept, boost up the development of environmental protection industry and explore the overseas markets pro-actively by the Company; and at the same time also conform with the “One Belt One Road” development strategy advocated by our government, which plays an active demonstration role for PRC enterprises to implement the “Going Global” strategy. In the future, we will keep on grasping economic development opportunities both domestically and abroad and go with the times of green low-carbon development. Furthermore, we will move forward the implementation of strategic agreements within the framework of enhancing original international co-operations. We will strive to promote the overall standard of domestic environmental protection industry through learning and introducing the advanced environmental protection ideas, skills and management experience in Europe, and contribute to the green sustainable development in China. We will forge ahead, be hardworking and be dedicated to become a leading services provider of clean energies and utilities in China, making tremendous contributions to the nation’s economic and social development. Wang Dong Chairman Hong Kong 31 March 2016 Beijing Enterprises Holdings Limited 07 Annual Report 2015 Management Discussion and Analysis MANAGEMENT DISCUSSION AND ANALYSIS I. BUSINESS REVIEW Natural Gas Distribution Business Beijing Gas Group Company Limited (“Beijing Gas”) recorded a revenue of HK$43.95 billion in 2015, representing a year-on-year growth of 35.5%.