China Geothermal Industry Development : FIRST QUARTERLY REPORT 2021

(Incorporated in the Cayman Islands with limited liability)

Stock Code: 8128

TECHNOLOGY

AND RESOURCES LINKS

First Quarterly Report 2021

CHARACTERISTICS OF THE GEM OF THE STOCK EXCHANGE OF HONG KONG LIMITED (THE "STOCK EXCHANGE")

GEM has been positioned as a market designed to accommodate small and mid-sized companies to which a higher investment risk may be attached than other companies listed on the Stock Exchange. Prospective investors should be aware of the potential risks of investing in such companies and should make the decision to invest only after due and careful consideration.

Given that the companies listed on GEM are generally small and mid-sized companies, there is a risk that securities traded on GEM may be more susceptible to high market volatility than securities traded on the main board of the Stock Exchange and no assurance is given that there will be a liquid market in the securities traded on GEM.

Hong Kong Exchanges and Clearing Limited and the Stock Exchange take no responsibility for the contents of this report, 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 report.

This report, for which the directors of China Geothermal Industry Development Group Limited (the "Company") collectively and individually accept full responsibility, includes particulars given in compliance with the Rules Governing the Listing of Securities on the GEM (the "GEM Listing Rules") of the Stock Exchange for the purpose of giving information with regard to the Company. The directors, having made all reasonable enquiries, confirm that to the best of their knowledge and belief the information contained in this report is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement herein or this report misleading.

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China Geothermal Industry Development Group Limited

First Quarterly Report 2021

HIGHLIGHTS

Revenue for the three months ended 31 March 2021 (the "Review Period") amounted to approximately HK$25,695,000.

Net loss after tax of the Group for the Review Period amounted to approximately HK$23,359,000.

No dividend was declared for the Review Period.

FINANCIAL REVIEW

The following table provides a brief summary of the financial results of China Geothermal Industry Development Group Limited (the "Company") and its subsidiaries (collectively the "Group"). For more detailed information, please refer to the unaudited consolidated financial statements for the Review Period and for the three months ended 31 March 2020.

			Three months ended
			31 March
		2021		2020
			HK$'000	HK$'000
		(Unaudited)	(Unaudited)
Revenue
	- Shallow geothermal energy utilisation system	24,613		41,272
	- Air conditioning/shallow geothermal heat pump	1,082		-
	- Properties investment and development		-		3,668
			25,695		44,940
Loss for the period		(23,359)		(18,797)
Loss attributable to owners of the parent		(22,273)		(18,152)

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During the Review Period, the Group's revenue amounted to approximately HK$25,695,000 which was mainly contributed by shallow geothermal energy utilisation business as compared with that of approximately HK$44,940,000 for the corresponding period last year. The revenue decreased by approximately HK$19,245,000 as compared with that of corresponding period last year. During the Review Period, the revenue decreased by approximately 42.8% mainly because, on the one hand, the slow progress of projects during the Lunar New Year period that were brought forward from last year, which were slower than expected. On the other hand, due to the decrease of approximately HK$15,830,000 of accumulated contracts signed compared with first quarter of the last year. The decrease was approximately 52.3% compared with the last year. The Group's gross profit margin increased from 18.4% in last corresponding period to 19.0% in the current period.

Other income and gains decreased from approximately HK$6,065,000 in the corresponding period last year to approximately HK$2,121,000 for the three months ended 31 March 2021.

Selling and distribution expenses amounted to approximately HK$5,076,000 and HK$7,888,000 for the three months ended 31 March 2021 and 2020 respectively. Besides, administrative expenses amounted to approximately HK$19,758,000 and HK$24,999,000 for the three months ended 31 March 2021 and 2020 respectively.

During the Review Period, the Group adjusted the operation structures to strengthen control over costs of projects and relevant expenditures. Both the selling and distribution expenses and administrative expenses of the Group have relatively significant decrease compared with the same period last year.

Finance costs amounted to approximately HK$796,000 for the three months ended 31 March 2021 as compared with approximately HK$5,855,000 for the last corresponding period. The main reason for the drop of finance costs was the reduction of bank loans.

For the three months ended 31 March 2021, the loss for the period was approximately HK$23,359,000, versus approximately HK$18,797,000 for the corresponding period in last year.

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China Geothermal Industry Development Group Limited

First Quarterly Report 2021

BUSINESS REVIEW AND OUTLOOK

During the Review Period, the Company recorded revenue of approximately HK$25,695,000, of which revenue from engineering construction accounted for approximately 62.6% of total revenue, energy contract management accounted for approximately 33.2% of total revenue, equipment sales accounted for 4.2% of total revenue.

During the Review Period, the Company's overall revenue decreased by approximately 42.8% as compared with that of the same period last year which was mainly due to the construction progress for the projects carried over from the previous year were slower than expected due to the Lunar New Year. At the same time, the number of contracts secured in the first quarter has decreased significantly as compared with the same period last year, and many coal-to-electricity projects are under planning.

The projects under construction during the Review Period were mainly projects carried over from the previous year, such as the Beijing Haidian Foreign Language Experimental School Yuanxiang Campus phase II, the newly built Zhangqiu Community Service Hall, and Yungu Tianyuan Ground Source Heat Pump Environmental System Project (Kaili) etc. The newly signed projects mainly included Handan Fengfeng Civic Center, Changsha Rongcheng Hospital, Xingtai Library, and the heating transformation project for the ground workshop of Songyuan Xinmu Oil Production Plant.

In order to adapt to the market competition and to leverage on the advantages of shallow geothermal energy as an alternative energy source for heating, new business models have been added and supplemented on the basis of the traditional business model to gradually expand the application market. For example, the Changsha Rongcheng Hospital project adopted investment- construction-operation model which can effectively warrant the continuous inflow of cash flows.

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