Leader Environmental Technologies Limited FY2025 Results: A Transformational Year

Leader Environmental Technologies Limited (LET) has released its condensed financial statements for the full year ended 31 December 2025. FY2025 was a pivotal year for the company, marked by the strategic divestment of its AIWater business and a significant capital return to shareholders. This analysis reviews LET’s key financial metrics, performance drivers, exceptional items, and prospects for investors.

Key Financial Metrics and Comparative Performance

Performance Highlights and Drivers

• Revenue: Total group revenue was stable at RMB 29.93 million, with a strong surge in continuing operations revenue (+63.6% YoY), driven by new sludge treatment projects in China. Discontinued operations (AIWater) saw revenue fall by RMB 5.0 million due to lower equipment and O&M sales.
• Net Profit: The group reported an exceptional net profit of RMB 206.1 million, driven by a RMB 318.6 million gain on the disposal of the AIWater Group. Excluding this, the underlying business remains marginally profitable.
• Gross Margin: Gross profit margin for continuing operations improved from 25.1% to 30.2% YoY, reflecting higher-margin engineering revenue.
• EPS: Earnings per share turned positive (13.65 RMB cents vs. -3.76 RMB cents), mainly due to the one-off disposal gain.
• Balance Sheet: Net asset value per share fell to negative (1.07 RMB cents), mainly due to a large capital distribution and derecognition of non-controlling interest. The current ratio dropped from 0.89 to 0.68 (after reclassification of convertible bonds as current liabilities), which signals some liquidity pressure if not for the CB maturity extension.
• Cash Flow: Net cash used in operating activities was RMB 42.7 million (vs. RMB 30.5 million last year), but this was offset by RMB 240.5 million in net cash from investing activities (mainly from the AIWater disposal).

Exceptional Items and Notable Corporate Actions

• AIWater Group Divestment: The disposal of the AIWater business was completed for a consideration of RMB 370 million, resulting in a gain of RMB 318.6 million. This was a transformational transaction for the group, providing substantial liquidity and enabling a capital return to shareholders.
• Capital Reduction and Distribution: The company returned S\$27.3 million (RMB 154.2 million) to shareholders, reducing share capital accordingly.
• Convertible Bonds: The group exercised an extension option, moving the final maturity of its US\$15m convertible bonds to 2028, alleviating near-term refinancing risk.
• Special Payment to Bondholder: RMB 34.7 million was paid to the CB holder as part of the AIWater disposal cash distribution entitlement.
• Impairments: The group recognized RMB 14.9 million in impairment losses, mainly on contract assets and receivables, reflecting risk in collections and project execution.

Related Party Transactions and Remuneration

• Directors’ Remuneration: Directors’ fees totaled RMB 1.44 million, with salaries and short-term benefits of RMB 1.92 million. Key management (excluding directors) received RMB 4.46 million in salaries and RMB 0.29 million in contributions to defined plans.
• Related Party Transactions: Sales and services to related parties, and purchases from associates, were disclosed but not deemed material or unusual in nature.

Chairman’s Statement and Strategic Outlook

“Following a year of strategic realignment and portfolio optimisation, the Group enters 2026 with a clearer focus on its core sludge treatment and membrane technology businesses. A key strategic milestone was the successful divestment of our AIWater business segment, which delivered an exceptional return on investment of more than 13 times over its four-year development period… The value realised from the divestment has strengthened the Group’s financial position and supported the Board’s decision to make a cash distribution of approximately S\$44.05 million in FY2025, back to the shareholders and bondholder.

The broader operating environment, particularly in China, remained subdued amid a sluggish economic recovery. Despite these headwinds, the Group made meaningful progress in securing new projects and strengthening our market position. We undertook a decisive realignment of our business priorities to reinforce our focus on the Group’s core sludge and membrane businesses. While the projects secured in 2025 have yet to contribute positively to the financial results, we expect their financial impact to materialise progressively over the coming periods.

Our sludge treatment demonstration plant in Changi Water Reclamation Plant, Singapore, showcasing our proprietary Continuous Thermal Hydrolysis (“CTH”) and Pyrolysis technology, was successfully completed in July 2025… The CTH–Pyrolysis system offers clear advantages over conventional treatment methods. Notably, the system converts the sludge into biochar, creating potential pathways for value-added use…

With a clear value proposition, we are now well placed to pursue greater business opportunities in China, Singapore, and our surrounding regions. Our membrane business continued to draw on the capabilities of our joint venture company, NTi Technology Pte. Ltd. (“NTi Tech”), to support the production of high-performance membranes… Building on the Group’s strong technical expertise and synergy… we have developed an innovative membrane condenser system…

With the joint venture company being formally established with Econ [subsidiary of Shandong Hi-Speed Co. Ltd.], this partnership underscores our commitment to an asset-light business model… Looking ahead, the Group remains focused on leveraging innovative technologies to support sustainable growth. We will continue to deepen our presence in the environmental solutions sector through the ongoing identification, development and application of advanced technologies aimed at addressing practical environmental challenges across our core business segments.”

Tone: The Chairman’s statement is positive, emphasizing successful portfolio transformation, financial strength post-divestment, new partnerships, and technology leadership, while acknowledging macroeconomic headwinds in China.

Significant Events and Corporate Actions

• Divestment of the AIWater business and subsequent capital reduction/cash return were the most significant events. These actions have reshaped the balance sheet and business focus.
• The group entered a joint venture with a state-owned enterprise in China for new sludge treatment contracts (RMB 143.3 million awarded, with RMB 70 million apportioned to LET).
• Additional investment in organic waste and sludge treatment business, and a new demonstration membrane project in Singapore, signal ongoing R&D and business development.
• No dividends proposed for FY2025, as the group preserves cash for working capital and growth opportunities.
• Current ratio is below 1.0 due to CB reclassification, but management expects no liquidity issues in the next 12 months due to the maturity extension.

Conclusion and Investment Recommendation

Overall Assessment: LET’s FY2025 results reflect a transformative year, with a one-off gain from the AIWater divestment masking underlying challenges. The core business is stable, with improving margins and new project wins, but the group now faces the test of delivering sustainable earnings growth from its remaining sludge and membrane operations. Liquidity is adequate in the near term, but the negative net asset value and lack of recurring profits warrant caution.

Investor Recommendations

• If you currently hold LET stock: Consider reducing your exposure or taking profits if you benefited from the recent capital return and price appreciation. The exceptional gain from the AIWater divestment is non-recurring, and the company’s core business, while promising, has yet to demonstrate consistent profitability. Monitor upcoming project contributions and liquidity closely.
• If you do not currently hold LET stock: Consider a wait-and-see approach. While the group is well positioned in its niche and has a strengthened cash position, visibility on sustainable earnings and return to positive net asset value is limited. Re-assess after a few quarters of stable operating profit and clearer execution on new projects.

Disclaimer: This analysis is based solely on the company’s FY2025 financial report as provided. It does not constitute investment advice. Investors should conduct their own due diligence and consider their own risk tolerance before making investment decisions.

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