Summary of China Oriental Education Conference Call Company Overview - **Company**: China Oriental Education - **Industry**: Vocational Education Key Points Overall Performance - The overall performance for 2024 met expectations, with profits significantly exceeding forecasts, indicating a return to normalcy and an upward trajectory [3] - Spring 2025 enrollment data showed record highs in student numbers, revenue, and fees, with growth exceeding 10% compared to previous years [3][4] Enrollment and Growth - Spring 2025 enrollment reached historical highs across all sectors, including cooking, automotive, IT, and beauty, with short-term courses seeing over 30% growth [3] - The company is targeting the market of students not pursuing further education, particularly focusing on the "four school" demographic and unemployed university graduates, leading to over 100% growth in a newly developed 15-month course [3][6] Cost Management and Efficiency - The company has implemented cost reduction strategies, including a 2% decrease in customer acquisition costs and renegotiated rental contracts resulting in savings of several million yuan [3][5] - Enhanced marketing effectiveness through improved ad targeting and efficiency, utilizing advanced data platforms for real-time monitoring [5] Future Projections - Anticipated continued growth in fall 2025 enrollment, driven by favorable market conditions and strategic adjustments made since 2023 [3][10] - Expected revenue growth of approximately 7% in 2025, with student numbers increasing by 5% and tuition fees rising by 2-3% [19] Competitive Landscape - The company remains confident in its competitive position against public institutions, citing superior market alignment and rapid curriculum updates [8] - The company has over 50 academic licenses, contributing to high employment rates for graduates, with a notable 98% college admission rate for certain programs [8] Impact of COVID-19 - The pandemic accelerated the elimination of weaker competitors, allowing the company to strengthen its market position and achieve profitability starting in 2024 [9] Capital Expenditure and Dividends - Projected capital expenditures will decrease from over 900 million yuan in 2024 to 200-300 million yuan by 2027, with operating cash flow exceeding 1 billion yuan annually [18] - Dividends are expected to increase, with a minimum of 0.2 yuan per share in 2024 [18] School Utilization and Expansion - Current school utilization rates have improved to over 70%, with specific centers achieving up to 90% [16] - Plans for new schools in regions like Hangzhou and Jinan, with a focus on maintaining quality and efficiency [21] Employment Trends - Employment rates vary by sector, with automotive and IT fields showing strong demand, while the culinary sector remains stable despite emerging trends [13] Tuition Trends - Tuition fees are expected to rise modestly, with an average increase of about 1% in 2025, driven by the introduction of new programs [15] Long-term Growth Potential - The company aims to maintain a revenue growth rate of over 5%, with potential to approach 10% by 2026 through strategic expansions and program enhancements [22][23]

Investment Rating - The report upgrades the investment rating of China Oriental Education to "Buy" [1][5][10]. Core Views - The company is expected to achieve high-quality growth in revenue and profit margins over the next three years, driven by refined operational strategies and market-oriented training systems [3][5][10]. - The average training participants are projected to grow at a compound annual growth rate (CAGR) of approximately 4% from 2024 to 2026, reaching 165,000 participants by 2026 [5][10][11]. - Revenue is anticipated to increase to 4.08 billion, 4.38 billion, and 4.69 billion yuan in 2024, 2025, and 2026, respectively, with a CAGR of 5.6% during the same period [5][10][11]. Summary by Sections 1. Refined Operational Strategy - The company has reduced the number of its teaching centers to 234, optimizing capacity utilization from 72.2% in 2023 to 75.9% in 2024, and further to 79.8% by 2026 [4][19][29]. - Marketing efficiency is expected to improve, with the marketing expense ratio decreasing from approximately 26.1% in 2023 to 23.8% in 2024, and further to 22.9% by 2026 [4][11][46]. 2. Expanding Market for High School and College Graduates - The company is developing mid-cycle courses of 15 months to 1.5 years to cater to the training needs of high school and college graduates, which is expected to enhance enrollment [51][52]. - The introduction of the Oumandi brand in the beauty and wellness training sector is projected to achieve 11,500 training participants by 2026, contributing 470 million yuan to total revenue, accounting for 10% [5][59]. 3. Financial Data and Profit Forecast - Revenue for 2024 is estimated at 4.08 billion yuan, with adjusted net profits expected to reach 488 million yuan, reflecting a significant increase from previous years [6][10]. - The net profit margin is projected to improve from 12% in 2024 to 14.8% by 2026, driven by scale effects and cost control measures [5][10][11].

Investment Rating - The investment rating for the company is "Buy" with a target price set at HKD 3.92, reflecting a potential upside from the latest closing price of HKD 2.85 [2][4]. Core Insights - The establishment of the first technician college by the company, recognized by the Anhui provincial government, signifies the company's commitment to enhancing vocational education and aligns with national policy initiatives [3]. - The college currently has over 8,100 students and 463 full-time teachers, offering 18 specialized programs, which is expected to attract more high school students and potentially extend the duration of study programs [3]. - The company aims to build a multi-tiered educational framework that includes vocational training, technical schools, and technician colleges, enhancing its ability to produce skilled talent in high-demand sectors such as new energy vehicles and intelligent manufacturing [3]. - The company is expected to see continued revenue growth driven by effective cost control and normalization of student enrollment, with projected revenues of HKD 41.5 billion, HKD 44.1 billion, and HKD 48.4 billion for the years 2024, 2025, and 2026 respectively [4][5]. Financial Summary - The company's revenue for 2023 is projected at HKD 3,978.65 million, with a year-on-year growth of 4.18%. The revenue is expected to grow to HKD 4,149.49 million in 2024, HKD 4,405.82 million in 2025, and HKD 4,841.54 million in 2026 [5][8]. - The net profit attributable to the parent company is forecasted to be HKD 272.62 million in 2023, increasing to HKD 496.06 million in 2024, HKD 596.04 million in 2025, and HKD 725.32 million in 2026, reflecting significant growth rates [6][8]. - The earnings per share (EPS) are projected to be HKD 0.23, HKD 0.27, and HKD 0.33 for the years 2024, 2025, and 2026 respectively, with a corresponding price-to-earnings (PE) ratio of 11, 9, and 8 [4][6].

School Operations and Enrollment - As of June 30, 2024, China East Education operated 234 schools and centers with an average of 144,793 students enrolled and customers registered for the six months ended[3] - The culinary arts segment, under the New East and Cuisine Academy brands, had 93 schools with an average of 57,013 students enrolled[7] - The auto services segment, branded as Wontone, operated 41 schools and had an average of 40,143 students enrolled[7] - The information technology segment, under Xinhua Internet and Wisezone brands, included 57 schools with an average of 39,590 students enrolled[7] - The fashion and beauty segment, branded as On-mind, had 7 schools with an average of 3,409 students enrolled[7] - The western cuisine and pastry segment, branded as Omick, operated 36 schools with an average of 4,638 students enrolled[7] - The number of schools in operation reached 245 as of December 31, 2023, including 76 schools under New East Culinary Education and 46 schools under Omick Education of Western Cuisine and Pastry[8] - As of June 30, 2024, the company operated 234 schools and centers across almost all provinces in mainland China and Hong Kong[15] - The company operates under seven school brands, including New East Culinary Education and Xinhua Internet Technology Education[15] Financial Performance - Revenue for the six months ended June 30, 2024, was RMB 1,983 million, compared to RMB 1,953 million for the same period in 2023, representing a growth of approximately 1.5%[10] - Net profit for the period increased to RMB 272 million for the six months ended June 30, 2024, up from RMB 204 million in the same period of 2023, reflecting a growth of approximately 33.3%[10] - Adjusted net profit for the six months ended June 30, 2024, was RMB 278 million, compared to RMB 176 million in the same period of 2023, indicating a growth of approximately 57.9%[10] - Adjusted EBITDA for the six months ended June 30, 2024, was RMB 715 million, an increase from RMB 633 million in the same period of 2023, representing a growth of approximately 13%[10] - Total assets amounted to 9,259 million as of the reporting period[11] - The net assets as of June 30, 2024, were RMB 5,496 million, a slight decrease from RMB 5,608 million as of December 31, 2023[9] Enrollment Trends - For the six months ended June 30, 2024, the total new student enrollments in the Culinary Arts segment decreased by 11.2% to 34,682 from 39,068 in the same period of 2023[20] - In the Western Cuisine and Pastry segment, new student enrollments fell by 12.9% to 7,549 compared to 8,666 in the prior year[20] - The Information Technology and Internet Technology segment experienced a decrease of 11.1% in total new student enrollments, dropping from 14,835 to 13,192[22] - The total number of new students enrollment for the group decreased by 7.7% to 78,009 in the six months ended June 30, 2024, compared to 84,552 in 2023[24] - The average number of long-term students enrolled as of June 30, 2024, increased by 3.8% to 37,006 from 35,653 in 2023[28] - The average number of long-term students enrolled in the "On-mind" segment surged by 189.9% to 2,574 from 888 in 2023[28] Cost and Profitability - Gross profit for the six months ended 30 June 2024 was RMB 1,051 million, compared to RMB 997 million for the corresponding period in 2023, with a gross profit margin of 53.0% compared to 51.1% in 2023[47] - Teaching staff salaries and benefits accounted for RMB 377.9 million, representing 40.5% of total costs for the six months ended 30 June 2024, up from 37.9% in 2023[46] - Selling expenses decreased from RMB 513 million for the six months ended 30 June 2023 to RMB 464 million for the six months ended 30 June 2024, primarily due to tighter control on advertising costs[53] - The cost of revenue decreased from approximately RMB 956 million for the six months ended 30 June 2023 to approximately RMB 932 million for the six months ended 30 June 2024, representing a decrease of approximately 2.5%[43] Strategic Initiatives - The company established Anhui Xinhua Education to consolidate all schools under a single entity, increasing operational efficiency[8] - The company expanded its business to Hong Kong, increasing its market presence[8] - The Group plans to establish Vocational Education Industrial Parks in major student recruitment provinces to enhance teaching and training facilities[65] - The Group intends to expand its school network to cover all provincial capital cities in China, targeting cities with high demand for skilled workers[67] - The Group is exploring new markets for vocational training in emerging fields such as artificial intelligence and healthcare[70] Shareholding and Corporate Governance - As of June 30, 2024, Mr. Wu Junbao holds 721,792,602 shares, representing 33.13% of the company's issued share capital[83] - Mr. Wu Wei owns 490,361,609 shares, accounting for 22.51% of the total issued share capital[83] - The interests of directors and chief executives in associated corporations are significant, indicating strong ownership ties[84] - The company has complied with all code provisions set out in the Corporate Governance Code during the six months ended June 30, 2024[106] - The company is committed to enhancing its corporate governance practices to safeguard the interests of shareholders and potential investors[106] Compliance and Regulatory Environment - The Group is subject to annual reviews of connected transactions by relevant governmental authorities[108] - The newly revised "Vocational Education Law of the People's Republic of China" was implemented in May 2022, improving the recognition of vocational education[115] - The Group's vocational education business aligns with the requirements of modern vocational education systems as outlined in recent policies, which is expected to benefit future development[116] Cash Flow and Investments - Net cash from operating activities for the six months ended June 30, 2024, was RMB 639,213, an increase of 31% compared to RMB 487,865 for the same period in 2023[148] - Net cash used in investing activities amounted to RMB (245,028) for the six months ended June 30, 2024, compared to RMB (145,166) in the same period of 2023, indicating a significant increase in investment outflows[148] - The company received asset-related government grants amounting to RMB 39,169, a significant increase from RMB 368 in the same period last year[148] - The company reported a net cash used in financing activities of RMB (566,056), a decrease from RMB (595,240) in the same period of 2023, reflecting improved financing efficiency[148]

Investment Rating - The report assigns an "Outperform" rating for the company, indicating a positive outlook compared to the market [4]. Core Insights - The company achieved revenue of 1.983 billion RMB in H1 2024, a year-on-year increase of 1.6%, and a net profit attributable to shareholders of 272 million RMB, up 33.2% year-on-year [4]. - The company has optimized its school structure, closing down long-term loss-making institutions, resulting in a total of 234 schools as of H1 2024, a decrease of 11 from the end of 2023 [4]. - The focus on high-value-added programs has improved profitability, with a gross margin of 53% in H1 2024, an increase of 1.9 percentage points year-on-year [4]. - The report forecasts revenues for 2024-2026 to be 4.174 billion RMB, 4.606 billion RMB, and 5.050 billion RMB respectively, with adjusted net profits of 427 million RMB, 525 million RMB, and 625 million RMB, corresponding to PE ratios of 11X, 9X, and 8X [4][5]. Summary by Sections Financial Performance - In H1 2024, the company reported a revenue of 1.983 billion RMB, with a year-on-year growth of 1.6% and an adjusted net profit of 278 million RMB, reflecting a significant increase of 57.9% [4]. - The company’s gross margin improved to 53% in H1 2024, up from the previous year [4]. School Structure and Cost Management - The company has reduced the number of schools to 234, optimizing its brand structure and significantly improving cost efficiency, with sales and management expense ratios decreasing to 23.4% and 12.9% respectively [4]. - The focus on high-value programs has led to a shift in enrollment, with a notable increase in long-term course registrations [4]. Market Segments - The culinary segment remains the most significant, contributing approximately 54% of total revenue, while the beauty industry is showing strong growth [4]. - The internet training segment is under pressure due to increased competition, with a decline in both revenue and new enrollments [4]. Profitability Forecast - The report projects a steady increase in revenue and adjusted net profit over the next three years, with a significant improvement in profitability metrics [5][6].

港股公司报告 | 公司点评 业绩兑现分红延续，关注股息属性 公司发布 2024H1 业绩报告 24H1 年实现营收 19.83 亿人民币，同比+1.6%；净利 2.72 亿，同比+33.2%； 调后净利 2.78 亿，同比+57.9%。 分品牌看：新东方及美味学院 9.19 亿（占比 46.3%，同比-2.4pct），同比-3.3%； 欧米奇 1.59 亿（占比 8.0%，同比-0.2pct），同比-0.8%； 新华电脑及华信智原 3.78 亿（占比 19.1%，同比-1.2pct），同比-4.3%； 万通 4.49 亿（占比 22.6%，同比+1.9pct），同比+11.1%； 欧曼谛 0.40 亿（占比 2.0%，同比+1.2pct），同比+142.1%。 截止至 24H1，公司定期存款 13.01 亿，现金及等价物 13.44 亿，合计 26.45 亿；净资产 54.96 亿，PB 为 0.9。本次派息（2023 年股息）4 亿人民币； 公司 2019-2023 年派息分别为 4.2/4.9/4.5/3.9/4 亿，合计约 22 亿。 公司学校 234 所，24H1 新培训人次及新客户注册人数 7.8 ...

Investment Rating - The report maintains a "Recommended" rating for the company [2][3]. Core Views - The company reported a revenue of 1.983 billion yuan for the first half of 2024, representing a year-over-year increase of 1.6%. The net profit attributable to the parent company was 272 million yuan, up 33.2% year-over-year, while the adjusted net profit reached 278 million yuan, reflecting a 57.9% increase year-over-year [2]. - The optimization of the school structure has shown significant effects, leading to a notable improvement in cost and expense ratios. The number of schools decreased to 234, down by 11 compared to the previous year, indicating ongoing structural optimization efforts [2]. - The company has effectively controlled sales expenses, resulting in a significant optimization of expense ratios. The operating cost for the first half of 2024 was 932 million yuan, a decrease of 2.45% year-over-year [2]. - The culinary business has seen an improvement in gross margin, while the automotive repair segment has shown steady growth. The beauty industry has achieved high growth with enhanced profitability [2]. - The company anticipates continued profit release driven by school structure optimization over the next two years, alongside accelerated regional center construction to enhance management scale and achieve economies of scale [2]. Financial Forecasts - The company expects net profits attributable to the parent company for 2024, 2025, and 2026 to be 409 million yuan, 627 million yuan, and 822 million yuan, respectively, with corresponding P/E ratios of 12x, 8x, and 6x [3][9]. - The projected revenue growth rates for the next few years are 4.2%, 5.7%, 12.2%, and 11.4% for 2023, 2024, 2025, and 2026, respectively [3][9]. - The gross margin is expected to improve from 47.96% in 2023 to 53.25% by 2026, indicating a positive trend in profitability [9].

社会服务 2024 年 08 月 22 日 中国东方教育 (00667) ——招生策略适时调整，严控费用利润喜人 报告原因：强调原有的投资评级 | --- | --- | |------------------------|---------------------| | 市场数据： | 2024 年 08 月 21 日 | | 收盘价（港币） | 2.58 | | 恒生中国企业指数 | 6141.78 | | 52 周最高/最低（港币） | 3.85/2.01 | | H 股市值（亿港币） | 56.21 | | 流通 H 股（百万股） | 2,178.85 | | 汇率（人民币/港币） | 1.0923 | 一年内股价与基准指数对比走势： -30% -20% -10% 0% 10% 20% 30% 40% 2023-082023-112024-022024-052024-08 恒生中国企业指数 00667.HK 资料来源：Bloomberg 证券分析师 黄哲 A0230513030001 huangzhe@swsresearch.com 联系人 黄哲 (8621)23297818× huangzhe@sw ...

Investment Rating - The investment rating for the company is "Buy" with a target price set based on a total market capitalization of HKD 56.21 billion [2]. Core Views - The company's performance in H1 2024 exceeded market expectations, with revenue, net profit attributable to shareholders, and adjusted net profit showing year-on-year growth of 1.6%, 33.2%, and 57.9% respectively [2]. - The increase in net profit was primarily driven by improved gross margins and a reduction in expense ratios, particularly in sales and costs [2][3]. - The company is expected to continue outperforming in the short term due to effective cost control, with a gradual recovery in long-term student enrollment anticipated as strategies normalize [5]. Summary by Sections Financial Performance - In H1 2024, the company reported revenues of HKD 1.983 billion, net profit of HKD 272 million, and adjusted net profit of HKD 278 million, reflecting significant growth compared to the previous year [2]. - The gross margin improved to 53.0%, an increase of 1.9 percentage points year-on-year, attributed to cost reductions in teaching-related consumables and rental expenses [4]. - The net profit margin rose to 13.7%, up 3.3 percentage points year-on-year, with a notable decrease in sales expenses due to better control over advertising costs [4]. Business Segments - Revenue growth varied across business segments, with notable increases in automotive services and beauty sectors, while culinary and IT segments faced challenges [3]. - The average training participants in various segments showed mixed results, with a decline in long-term students primarily due to the lingering effects of the pandemic [3]. - The average transaction price for automotive services increased significantly, indicating a shift towards higher-value enrollments [3]. Future Outlook - The company anticipates continued growth in the automotive and beauty sectors, while the culinary segment is expected to recover gradually [5]. - Adjustments to revenue forecasts for 2024, 2025, and 2026 reflect a more conservative outlook, with expected revenues of HKD 41.5 billion, HKD 44.1 billion, and HKD 48.4 billion respectively [5]. - The earnings per share (EPS) estimates have been revised upwards, projecting HKD 0.23, HKD 0.27, and HKD 0.33 for the next three years [5].

Summary This summary outlines China East Education Holdings Limited's key financial and operating data for the six months ended June 30, 2024, showing growth in revenue and profit, but a decrease in new student enrollments and school count Key Financial and Operating Data for the Six Months Ended June 30, 2024 | Indicator | 2024 | 2023 | Change (Increase/(Decrease)) | | :--- | :--- | :--- | :--- | | New Student Enrollments and New Customer Registrations | 78,009 | 84,552 | (7.7%) | | Average Student Enrollments and Average Customer Registrations | 144,793 | 147,276 | (1.7%) | | Revenue (RMB million) | 1,983 | 1,953 | 1.6% | | Gross Profit (RMB million) | 1,051 | 997 | 5.4% | | Net Profit (RMB million) | 272 | 204 | 33.2% | | Adjusted Net Profit (RMB million) | 278 | 176 | 57.9% | | Adjusted EBITDA (RMB million) | 715 | 633 | 13.0% | | Number of Schools and Centers (at period end) | 234 | 245 | (11) | | Net Assets (RMB million) (at period end) | 5,496 | 5,608 | (2.0%) | | Total Assets (RMB million) (at period end) | 9,259 | 9,291 | (0.3%) | [Condensed Consolidated Financial Statements](index=2&type=section&id=Condensed%20Consolidated%20Financial%20Statements) This section presents China East Education Holdings Limited's unaudited condensed consolidated financial statements for the six months ended June 30, 2024, including the statement of profit or loss and other comprehensive income and the statement of financial position, providing an overview of the company's operating results and financial position during the reporting period [Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income](index=2&type=section&id=Condensed%20Consolidated%20Statement%20of%20Profit%20or%20Loss%20and%20Other%20Comprehensive%20Income) For the six months ended June 30, 2024, the company's revenue and gross profit both increased, profit for the period significantly improved, and basic earnings per share also rose accordingly Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income (For the six months ended June 30) | Indicator | 2024 (RMB thousand) | 2023 (RMB thousand) | | :--- | :--- | :--- | | Revenue | 1,983,324 | 1,953,023 | | Cost of revenue | (932,200) | (955,629) | | Gross profit | 1,051,124 | 997,394 | | Other income and expenses | 57,501 | 68,485 | | Other gains and losses | 24,472 | 57,469 | | Selling expenses | (464,212) | (513,019) | | Administrative expenses | (255,812) | (255,894) | | Research and development expenses | (5,425) | (7,902) | | Finance costs | (61,578) | (71,570) | | Profit before tax | 346,070 | 274,963 | | Income tax expense | (74,557) | (71,128) | | Profit and total comprehensive income for the period | 271,513 | 203,835 | | Basic earnings per share (RMB cents) | 12.46 | 9.36 | | Diluted earnings per share (RMB cents) | 12.45 | 9.19 | [Condensed Consolidated Statement of Financial Position](index=3&type=section&id=Condensed%20Consolidated%20Statement%20of%20Financial%20Position) As of June 30, 2024, the company's non-current assets increased, net current assets decreased, and total assets and net assets slightly reduced, but the overall financial structure remained stable Condensed Consolidated Statement of Financial Position (at period end) | Indicator | June 30, 2024 (RMB thousand) | December 31, 2023 (RMB thousand) | | :--- | :--- | :--- | | **Non-current assets** | | | | Property and equipment | 3,163,417 | 3,080,278 | | Right-of-use assets | 2,225,739 | 2,225,672 | | Total other non-current assets | 94,514 | 77,269 | | **Total non-current assets** | **5,533,670** | **5,383,219** | | **Current assets** | | | | Inventories | 68,415 | 67,893 | | Trade and other receivables | 385,167 | 323,558 | | Other financial assets | 625,094 | 364,196 | | Time deposits | 1,301,481 | 1,551,441 | | Cash and cash equivalents | 1,343,895 | 1,515,313 | | Total other current assets | 1,647 | 5,513 | | **Total current assets** | **3,725,699** | **3,907,914** | | **Current liabilities** | | | | Trade and other payables | 611,739 | 681,433 | | Tax liabilities | 77,275 | 62,634 | | Lease liabilities | 344,227 | 265,397 | | Contract liabilities | 1,464,236 | 1,323,910 | | **Total current liabilities** | **2,497,477** | **2,333,374** | | **Net current assets** | **1,228,222** | **1,574,540** | | **Total assets less current liabilities** | **6,761,892** | **6,957,759** | | **Total equity** | **5,495,546** | **5,607,563** | | **Non-current liabilities** | | | | Lease liabilities | 1,206,180 | 1,307,764 | | Contract liabilities | 37,953 | 17,981 | | Government grants | 2,823 | 3,924 | | Deferred tax liabilities | 19,390 | 20,527 | | **Total non-current liabilities** | **1,266,346** | **1,350,196** | | **Net assets** | **5,495,546** | **5,607,563** | [Notes to the Condensed Consolidated Financial Statements](index=5&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed notes to the condensed consolidated financial statements, covering the company's general information, accounting policies, revenue and segment data, various income and expense breakdowns, dividends, earnings per share, and major balance sheet item changes [General Information](index=5&type=section&id=General%20Information) China East Education Holdings Limited was incorporated in the Cayman Islands in 2018, listed on the HKEX in 2019, primarily operates vocational education institutions, and presents its financial statements in RMB - The company was incorporated in the Cayman Islands on October 4, 2018, and listed on the Main Board of the Stock Exchange of Hong Kong on June 12, 2019[9](index=9&type=chunk) - The company's principal business is operating vocational education institutions, with Mr. Wu Junbao, Mr. Wu Wei, and Mr. Xiao Guoqing as the ultimate controlling parties[9](index=9&type=chunk) - The condensed consolidated financial statements are presented in RMB, which is the functional currency of the company and its subsidiaries[9](index=9&type=chunk) [Basis of Preparation](index=5&type=section&id=Basis%20of%20Preparation) The condensed consolidated financial statements are prepared in accordance with HKAS 34 and the Listing Rules, using the historical cost basis, consistent with the 2023 annual consolidated financial statements, except for the initial application of certain revised HKFRSs - The condensed consolidated financial statements are prepared in accordance with Hong Kong Accounting Standard 34 "Interim Financial Reporting" issued by the Hong Kong Institute of Certified Public Accountants and the applicable disclosure requirements of Appendix D2 to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited[10](index=10&type=chunk) - The statements are prepared on the historical cost basis, except for certain financial instruments measured at fair value[10](index=10&type=chunk) [Significant Accounting Policies](index=5&type=section&id=Significant%20Accounting%20Policies) Several revised HKFRSs were first applied during this interim period, but these revisions had no significant impact on the Group's financial position and performance for the current and prior periods - The Group first applied amendments to HKFRS 16 (Revised) Lease Liabilities in a Sale and Leaseback, HKAS 1 (Revised) Classification of Liabilities as Current or Non-current, and other amendments[11](index=11&type=chunk) - The application of the amendments to HKFRSs had no significant impact on the Group's financial position and performance for the current and prior periods[11](index=11&type=chunk) [Revenue and Segment Information](index=6&type=section&id=Revenue%20and%20Segment%20Information) The Group primarily provides vocational education services in China and reorganized its operating segments during the period, integrating Meishi College into Culinary Technology, reclassifying Omic Western Pastry and Culinary Education, integrating Huaxin Zhiyuan into Information Technology and Internet Technology, reclassifying Wantong Auto Education, and reporting the Fashion and Beauty segment independently, with revenue mainly derived from tuition and service fees - The Group is principally engaged in providing vocational education services in China, and revenue refers to service income from tuition and service fees net of sales-related taxes[12](index=12&type=chunk) - The internal reporting structure was reorganized during the period, integrating Meishi College into New East Culinary Education, reclassifying Omic Western Pastry and Culinary Education as Western Pastry and Culinary, integrating Huaxin Zhiyuan DT Talent Training Base into Xinhua Computer Education, reclassifying Wantong Auto Education as Auto Services, and reporting the Fashion and Beauty segment independently[12](index=12&type=chunk) Segment Revenue for the Six Months Ended June 30, 2024 (RMB thousand) | Segment | External Sales | Inter-segment Sales | Segment Revenue | | :--- | :--- | :--- | :--- | | Culinary Technology | 919,295 | 4,018 | 923,313 | | Western Pastry and Culinary | 159,280 | – | 159,280 | | Information Technology and Internet Technology | 378,229 | – | 378,229 | | Auto Services | 449,163 | – | 449,163 | | Fashion and Beauty | 40,481 | – | 40,481 | | Other Miscellaneous Businesses | 36,876 | 61,512 | 98,388 | | Eliminations | – | (65,530) | (65,530) | | **Total** | **1,983,324** | **–** | **1,983,324** | - Almost all of the Group's non-current assets are located in China, and no single customer contributed more than **10%** of total revenue[17](index=17&type=chunk) [Other Income and Expenses](index=9&type=section&id=Other%20Income%20and%20Expenses) For the six months ended June 30, 2024, total other income and expenses amounted to RMB 57,501 thousand, a decrease from RMB 68,485 thousand in the prior year, mainly due to reduced unconditional government grants and interest income from time deposits and bank balances Details of Other Income and Expenses (RMB thousand) | Item | 2024 | 2023 | | :--- | :--- | :--- | | Government grants related to assets | 1,704 | 708 | | Unconditional government grants | 10,056 | 16,478 | | Interest income – time deposits and bank balances | 43,937 | 48,029 | | Interest income – entrusted loan to an associate | 1,157 | 2,671 | | Others | 647 | 599 | | **Total** | **57,501** | **68,485** | [Other Gains and Losses](index=9&type=section&id=Other%20Gains%20and%20Losses) For the six months ended June 30, 2024, other gains and losses recorded a net gain of RMB 24,472 thousand, a significant decrease from RMB 57,469 thousand in the prior year, primarily impacted by a reduction in net exchange gains Details of Other Gains and Losses (RMB thousand) | Item | 2024 | 2023 | | :--- | :--- | :--- | | Net gain from fair value changes of other financial assets at fair value through profit or loss | 20,148 | 11,281 | | Net (loss) gain on disposal of property and equipment | (8,125) | 366 | | Gain on termination of lease agreements | 6,708 | 1,751 | | Net exchange gain | 5,741 | 44,071 | | **Total** | **24,472** | **57,469** | [Finance Costs](index=9&type=section&id=Finance%20Costs) For the six months ended June 30, 2024, finance costs amounted to RMB 61,578 thousand, primarily interest expense on lease liabilities, a decrease from RMB 71,570 thousand in the prior year Finance Costs (RMB thousand) | Item | 2024 | 2023 | | :--- | :--- | :--- | | Interest expense on lease liabilities | 61,578 | 71,570 | [Income Tax Expense](index=10&type=section&id=Income%20Tax%20Expense) For the six months ended June 30, 2024, income tax expense was RMB 74,557 thousand, a slight increase from RMB 71,128 thousand in the prior year, mainly comprising current tax for China corporate income tax Details of Income Tax Expense (RMB thousand) | Item | 2024 | 2023 | | :--- | :--- | :--- | | China corporate income tax – current tax | 77,732 | 75,305 | | China corporate income tax – over-provision in prior years | (1,529) | (1,186) | | Deferred tax | (1,646) | (2,991) | | **Total** | **74,557** | **71,128** | [Profit for the Period](index=10&type=section&id=Profit%20for%20the%20Period) For the six months ended June 30, 2024, profit for the period was RMB 271,513 thousand, a significant increase from RMB 203,835 thousand in the prior year, mainly due to stable staff costs and reduced depreciation Details of Profit for the Period Deductions (RMB thousand) | Item | 2024 | 2023 | | :--- | :--- | :--- | | Directors' remuneration | 1,889 | 1,657 | | Other staff costs – salaries and other allowances | 628,889 | 622,544 | | Other staff costs – contributions to retirement benefit schemes | 77,335 | 76,358 | | Other staff costs – equity-settled share-based payment expenses | 12,449 | 16,363 | | **Total staff costs** | **720,562** | **716,922** | | Depreciation of property and equipment | 157,218 | 159,820 | | Depreciation of right-of-use assets | 145,717 | 158,521 | | **Total depreciation** | **302,935** | **318,341** | | Less: capitalized in construction in progress | (2,753) | (4,746) | | **Net depreciation** | **300,182** | **313,595** | - For the six months ended June 30, 2024, total share option expenses recognized amounted to approximately **RMB 12.55 million**, a decrease from RMB 16.496 million in the prior year[22](index=22&type=chunk) [Dividends](index=11&type=section&id=Dividends) The Board decided not to declare an interim dividend for the six months ended June 30, 2024. The company paid a final dividend of HKD 0.2 per share for the year ended December 31, 2023, in June 2024 - Subsequent to the end of the interim period, the Board decided not to declare a dividend for the interim period ended June 30, 2024 (for the six months ended June 30, 2023: nil)[23](index=23&type=chunk) - On June 7, 2024, a final dividend of **HKD 0.2** per share (approximately RMB 0.182) for the year ended December 31, 2023, totaling approximately **RMB 396.08 million**, was declared to the company's owners[23](index=23&type=chunk) [Earnings Per Share](index=11&type=section&id=Earnings%20Per%20Share) For the six months ended June 30, 2024, basic earnings per share were RMB 12.46 cents, and diluted earnings per share were RMB 12.45 cents, both showing an increase from the prior year Earnings Per Share Calculation Data | Indicator | 2024 (RMB thousand) | 2023 (RMB thousand) | | :--- | :--- | :--- | | Profit for the purpose of calculating basic and diluted earnings per share (profit attributable to owners of the company for the period) | 271,513 | 203,835 | | Weighted average number of ordinary shares for basic earnings per share | 2,178,851,302 | 2,178,701,777 | | Effect of dilutive potential ordinary shares – share options | 2,690,955 | 38,469,672 | | Weighted average number of ordinary shares for diluted earnings per share | 2,181,542,257 | 2,217,171,449 | [Trade and Other Receivables](index=12&type=section&id=Trade%20and%20Other%20Receivables) As of June 30, 2024, total trade and other receivables amounted to RMB 385,167 thousand, an increase from RMB 323,558 thousand as of December 31, 2023, mainly due to growth in trade receivables and other receivables Details of Trade and Other Receivables (RMB thousand) | Item | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Trade receivables – government | 19,046 | 18,759 | | Trade receivables – others | 51,592 | 29,592 | | **Total trade receivables** | **70,638** | **48,351** | | Total other receivables | 314,529 | 275,207 | | **Total** | **385,167** | **323,558** | Aging Analysis of Trade Receivables (RMB thousand) | Aging | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Within 3 months | 45,914 | 31,428 | | Over 3 months but within 12 months | 23,311 | 15,956 | | Over 1 year | 1,413 | 967 | | **Total** | **70,638** | **48,351** | - The Group's management believes that all trade receivables balances overdue for more than **90 days** are not considered to be in default, as they are receivables from local governments in China with extremely low credit risk[27](index=27&type=chunk) [Other Financial Assets](index=14&type=section&id=Other%20Financial%20Assets) As of June 30, 2024, total other financial assets amounted to RMB 675,094 thousand, a significant increase from RMB 444,196 thousand as of December 31, 2023, mainly due to the growth in other financial assets at fair value through profit or loss, particularly structured deposits Details of Other Financial Assets (RMB thousand) | Item | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Other financial assets at fair value through profit or loss – unquoted fund investments | 369,653 | 352,446 | | Other financial assets at fair value through profit or loss – structured deposits | 255,441 | 11,750 | | **Total other financial assets at fair value through profit or loss** | **625,094** | **364,196** | | Other financial assets at amortized cost – entrusted loan to an associate | 50,000 | 80,000 | | **Total** | **675,094** | **444,196** | - The entrusted loan to an associate (Anhui Xinhua Holdings Group Investment Co., Ltd., controlled by Mr. Xiao Guoqing) is **RMB 50 million**, with a fixed annual interest rate of **7%**, maturing on December 31, 2025[29](index=29&type=chunk) [Trade and Other Payables](index=15&type=section&id=Trade%20and%20Other%20Payables) As of June 30, 2024, total trade and other payables amounted to RMB 611,739 thousand, a decrease from RMB 681,433 thousand as of December 31, 2023, mainly due to reductions in payables for property and equipment and salaries payable Details of Trade and Other Payables (RMB thousand) | Item | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Trade payables | 138,499 | 123,804 | | Payables for property and equipment | 171,590 | 202,182 | | VAT and other taxes payable | 15,250 | 6,810 | | Salaries payable | 140,609 | 202,549 | | Discretionary subsidies collected on behalf of students | 29,020 | 33,047 | | Miscellaneous deposits collected from students – within 12 months | 66,815 | 62,753 | | Other payables | 49,956 | 50,288 | | **Total** | **611,739** | **681,433** | - The credit period for trade creditors is generally **90 days**, and as of June 30, 2024, trade payables within 90 days amounted to **RMB 138,499 thousand**[31](index=31&type=chunk) [Share Capital](index=16&type=section&id=Share%20Capital) As of June 30, 2024, the company's authorized share capital was HKD 380,000, with 2,178,851,302 shares issued, and the share capital amount remained stable Changes in Share Capital (RMB thousand) | Item | Number of Shares | Share Capital HKD | Presented in Condensed Consolidated Financial Statements RMB thousand | | :--- | :--- | :--- | :--- | | Authorized: as of June 30, 2024 | 3,800,000,000 | 380,000 | - | | Issued: as of January 1, 2023 | 2,176,465,802 | 217,646 | 192 | | New shares issued upon exercise of share options (for the six months ended June 30, 2023) | 2,273,500 | 227 | – | | As of June 30, 2024 | 2,178,851,302 | 217,885 | 192 | - During the six months ended June 30, 2023, **2,273,500** share options were exercised at a subscription price of **HKD 2.25** per share, resulting in the issuance of **2,273,500** new ordinary shares[33](index=33&type=chunk) [Capital Commitments](index=16&type=section&id=Capital%20Commitments) As of June 30, 2024, the company's capital expenditures contracted but not yet provided for in the condensed consolidated financial statements amounted to RMB 472,581 thousand, primarily for the acquisition of property and equipment and leased land Capital Commitments (RMB thousand) | Item | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Capital expenditures contracted but not yet provided for in the condensed consolidated financial statements for the acquisition of property and equipment and leased land | 472,581 | 485,613 | [Management Discussion and Analysis](index=17&type=section&id=Management%20Discussion%20and%20Analysis) This section provides management's detailed discussion and analysis of the company's business and financial performance for the six months ended June 30, 2024, including business review, operating data, financial review, investment strategy, and future outlook, outlining the company's strategic direction and risk management measures [Business Review](index=17&type=section&id=Business%20Review) The company is a leading player in China's vocational skills education sector, particularly in culinary technology, information technology and internet technology, and auto services, operating 234 schools and centers in mainland China and Hong Kong as of June 30, 2024, and undergoing business segment reorganization during the period to streamline operations [Business Segments](index=17&type=section&id=Business%20Segments) The Group reorganized its business segments during the period, integrating Meishi College into Culinary Technology, Huaxin Zhiyuan into Information Technology and Internet Technology, reclassifying Omic Western Pastry and Culinary Education as Western Pastry and Culinary, and establishing Fashion and Beauty as an independent segment to optimize operations - The Group reorganized its business, integrating Meishi College into New East Culinary Education under the Culinary Technology segment, Huaxin Zhiyuan DT Talent Training Base into Xinhua Computer Education under the Information Technology and Internet Technology segment, and reclassifying Omic Western Pastry and Culinary Education as the Western Pastry and Culinary segment[36](index=36&type=chunk) Overview of Reorganized Segments and Brands | Segment and Brand | Number of Schools/Centers | Description | | :--- | :--- | :--- | | Culinary Technology (New East Culinary Education) | 75 | Offers comprehensive culinary training courses, teaching traditional Chinese dishes and classic Chinese and Western cooking skills | | Culinary Technology (Meishi College) | 18 | Provides personalized culinary experience services | | Western Pastry and Culinary (Omic Western Pastry and Culinary Education) | 36 | Offers courses in baking, desserts, Western cuisine, bartending, and barista training | | Information Technology and Internet Technology (Xinhua Computer Education) | 38 | Provides training courses related to information technology and internet technology | | Information Technology and Internet Technology (Huaxin Zhiyuan DT Talent Training Base) | 19 | Offers short-term information technology and internet technology courses for college and university students | | Auto Services (Wantong Auto Education) | 41 | Provides practical training in auto repair skills and auto business | | Fashion and Beauty (Omandi Fashion and Beauty Education) | 7 | Focuses on cultivating highly skilled fashion and beauty professionals | [Operating Data Summary](index=20&type=section&id=Operating%20Data%20Summary) This section summarizes operating data for the six months ended June 30, 2024, including new student enrollments, average student enrollments, tuition/service fee ranges, and graduate referral employment and entrepreneurship rates, showing an overall decrease in new enrollments but strong growth in Fashion and Beauty, and high employment rates for long-term course graduates [New Student Enrollments and New Customer Registrations](index=20&type=section&id=New%20Student%20Enrollments%20and%20New%20Customer%20Registrations) For the six months ended June 30, 2024, the Group's total new student enrollments and new customer registrations were 78,009, a year-on-year decrease of 7.7%, with the Fashion and Beauty segment achieving a significant growth of 154.6%, while Culinary Technology, Western Pastry and Culinary, and Information Technology and Internet Technology segments experienced declines New Student Enrollments and New Customer Registrations (For the six months ended June 30) | Segment and Brand | 2024 | 2023 | Change (Increase/(Decrease)) | | :--- | :--- | :--- | :--- | | Culinary Technology Subtotal | 34,682 | 39,068 | (11.2%) | | Western Pastry and Culinary Subtotal | 7,549 | 8,666 | (12.9%) | | Information Technology and Internet Technology Subtotal | 13,192 | 14,835 | (11.1%) | | Auto Services Subtotal | 19,716 | 20,457 | (3.6%) | | Fashion and Beauty Subtotal | 2,870 | 1,526 | 88.1% | | **Group Total** | **78,009** | **84,552** | **(7.7%)** | - New student enrollments for long-term courses in Fashion and Beauty increased by **154.6%**, with courses lasting one to two years growing by **208.7%**[40](index=40&type=chunk) [Average Student Enrollments and Average Customer Registrations](index=22&type=section&id=Average%20Student%20Enrollments%20and%20Average%20Customer%20Registrations) For the six months ended June 30, 2024, the Group's total average student enrollments and customer registrations were 144,793, a year-on-year decrease of 1.7%, with the Fashion and Beauty segment's average enrollments increasing by 144.2%, while Culinary Technology and Information Technology and Internet Technology segments experienced declines Average Student Enrollments and Customer Registrations (For the six months ended June 30) | Segment and Brand | 2024 | 2023 | Change (Increase/(Decrease)) | | :--- | :--- | :--- | :--- | | Culinary Technology Subtotal | 57,013 | 60,228 | (5.3%) | | Western Pastry and Culinary Subtotal | 4,638 | 4,594 | 1.0% | | Information Technology and Internet Technology Subtotal | 39,590 | 42,231 | (6.3%) | | Auto Services Subtotal | 40,143 | 38,827 | 3.4% | | Fashion and Beauty Subtotal | 3,409 | 1,396 | 144.2% | | **Group Total** | **144,793** | **147,276** | **(1.7%)** | - Average student enrollments for long-term courses in Fashion and Beauty increased by **189.9%**, with courses lasting one to two years growing by **457.2%**[43](index=43&type=chunk) [Tuition/Service Fees](index=24&type=section&id=Tuition%2FService%20Fees) For the six months ended June 30, 2024, long-term course tuition fees across segments ranged from RMB 10,800-180,000 per year, and short-term course fees ranged from RMB 500-68,000 per course, with some segments experiencing tuition fee adjustments Tuition/Service Fee Ranges (For the six months ended June 30) | Segment and Brand | Course | 2024 Tuition/Service Fee Range (RMB) | 2023 Tuition/Service Fee Range (RMB) | | :--- | :--- | :--- | :--- | | Culinary Technology (New East & Meishi College) | Long-term courses | 10,800-180,000/year | 10,800-115,000/year | | | Short-term courses | 500-68,000/course | 500-68,000/course | | Western Pastry and Culinary (Omic) | Long-term courses | 46,000-72,000/year | 46,000-72,000/year | | | Short-term courses | 800-39,000/course | 800-39,000/course | | Information Technology and Internet Technology (Xinhua Computer & Huaxin Zhiyuan) | Long-term courses | 12,600-53,800/year | 7,000-68,000/year | | | Short-term courses | 999-29,800/course | 999-53,800/course | | Auto Services (Wantong) | Long-term courses | 10,800-68,800/year | 6,800-38,800/year | | | Short-term courses | 800-37,400/course | 800-37,400/course | | Fashion and Beauty (Omandi) | Long-term courses | 13,900-52,800/year | 13,900-27,800/year | | | Short-term courses | 5,800-25,800/course | 5,800-28,800/course | [Referral Employment and Entrepreneurship Rate](index=25&type=section&id=Referral%20Employment%20and%20Entrepreneurship%20Rate) For the six months ended June 30, 2024, the average referral employment and entrepreneurship rate for long-term course graduates of New East, Omic, and Xinhua Computer exceeded 90%, while Wantong and Omandi exceeded 95%, demonstrating the company's strong performance in assisting students with employment Referral Employment and Entrepreneurship Rate for Long-term Course Graduates (For the six months ended June 30, 2024) | Brand | Referral Employment Rate | | :--- | :--- | | New East | 94.4% | | Omic | 93.0% | | Xinhua Computer | 92.0% | | Wantong | 96.1% | | Omandi | 95.3% | - Referral employment and entrepreneurship rate refers to the total number of long-term course students employed through the company's employment and entrepreneurship service programs or entrepreneurial services divided by the total number of long-term course graduates during that period[48](index=48&type=chunk) [Financial Review](index=26&type=section&id=Financial%20Review) This section provides a detailed review of financial performance for the six months ended June 30, 2024, including revenue, costs, gross profit, various expenses, adjusted profit metrics, and asset-liability structure, showing revenue and gross profit growth, effective cost control, but a decrease in current ratio and cash and cash equivalents [Revenue](index=26&type=section&id=Revenue) For the six months ended June 30, 2024, the Group's revenue was RMB 1,983 million, a year-on-year increase of 1.6%, attracting more high-value new students by adjusting enrollment strategies and optimizing curriculum structure despite a decrease in new student enrollments - For the six months ended June 30, 2024, revenue increased by approximately **1.6%** from RMB 1,953 million in the prior year to **RMB 1,983 million**[49](index=49&type=chunk) - New student enrollments and new customer registrations decreased by approximately **7.7%**, but the company adjusted its enrollment strategy and optimized its curriculum structure to attract more high-value new students[49](index=49&type=chunk) Revenue and Average Annual Tuition/Service Fees per Student/Customer by Segment (RMB thousand) | Segment and Brand | 2024 Revenue | 2024 Average Annual Tuition/Service Fees per Student/Customer | 2023 Revenue | 2023 Average Annual Tuition/Service Fees per Student/Customer | Revenue Change | Average Tuition/Service Fees Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Culinary Technology | 919,295 | 32.2 | 951,055 | 31.6 | (3.3%) | 2.1% | | Western Pastry and Culinary | 159,280 | 68.7 | 160,605 | 69.9 | (0.8%) | (1.8%) | | Information Technology and Internet Technology | 378,229 | 19.1 | 395,036 | 18.7 | (4.3%) | 2.1% | | Auto Services | 449,163 | 22.4 | 404,375 | 20.8 | 11.1% | 7.4% | | Fashion and Beauty | 40,481 | 23.7 | 16,722 | 24.6 | 142.1% | (3.5%) | | Other Miscellaneous Businesses | 36,876 | Not applicable | 25,230 | Not applicable | 46.2% | Not applicable | | **Total** | **1,983,324** | **26.9** | **1,953,023** | **26.2** | **1.6%** | **2.7%** | [Cost of Revenue](index=27&type=section&id=Cost%20of%20Revenue) For the six months ended June 30, 2024, cost of revenue was RMB 932 million, a year-on-year decrease of 2.5%, mainly due to reductions in teaching-related consumables and other costs, lease expenses and depreciation of right-of-use assets, and campus maintenance and depreciation - Cost of revenue decreased by approximately **2.5%** from approximately RMB 956 million in the prior year to approximately **RMB 932 million**[52](index=52&type=chunk) Details of Cost of Revenue (RMB thousand) | Item | 2024 Cost | 2024 % of Total | 2023 Cost | 2023 % of Total | | :--- | :--- | :--- | :--- | :--- | | Staff salaries and benefits | 377,920 | 40.5% | 362,269 | 37.9% | | Teaching-related consumables and other costs | 168,780 | 18.1% | 191,777 | 20.1% | | Lease expenses and depreciation of right-of-use assets | 144,142 | 15.5% | 157,092 | 16.5% | | Campus maintenance and depreciation | 163,730 | 17.6% | 168,478 | 17.6% | | Utilities | 45,703 | 4.9% | 45,107 | 4.7% | | Office expenses | 31,925 | 3.4% | 30,906 | 3.2% | | **Total** | **932,200** | **100%** | **955,629** | **100%** | [Gross Profit and Gross Margin](index=28&type=section&id=Gross%20Profit%20and%20Gross%20Margin) For the six months ended June 30, 2024, gross profit was RMB 1,051 million and gross margin was 53.0%, both higher than RMB 997 million and 51.1% in the prior year, mainly due to increased revenue and effective cost control - Gross profit increased from **RMB 997 million** in the prior year to **RMB 1,051 million**[54](index=54&type=chunk) - Gross margin improved from **51.1%** in the prior year to **53.0%**, primarily due to increased revenue and decreased cost of revenue[54](index=54&type=chunk) Gross Profit and Gross Margin by Major Segment | Segment and Brand | 2024 Gross Profit/(Loss) (RMB thousand) | 2024 Gross Profit/(Loss) Margin | 2023 Gross Profit/(Loss) (RMB thousand) | 2023 Gross Profit/(Loss) Margin | | :--- | :--- | :--- | :--- | :--- | | Culinary Technology | 508,154 | 55.3% | 501,178 | 52.7% | | Western Pastry and Culinary | 85,699 | 53.8% | 75,443 | 47.0% | | Information Technology and Internet Technology | 204,757 | 54.1% | 216,455 | 54.8% | | Auto Services | 243,109 | 54.1% | 209,413 | 51.8% | | Fashion and Beauty | 21,280 | 52.6% | 6,010 | 35.9% | | Other Miscellaneous Businesses | (11,875) | (32.2%) | (11,105) | (44.0%) | | **Total** | **1,051,124** | **53.0%** | **997,394** | **51.1%** | [Other Income and Expenses](index=29&type=section&id=Other%20Income%20and%20Expenses) For the six months ended June 30, 2024, other income and expenses amounted to approximately RMB 58 million, a decrease from RMB 68 million in the prior year, mainly due to reduced unconditional government grants and interest income from time deposits - Other income and expenses amounted to approximately **RMB 58 million** (prior year: RMB 68 million), primarily due to a decrease in unconditional government grants and interest income from time deposits and bank balances[57](index=57&type=chunk) [Other Gains and Losses](index=29&type=section&id=Other%20Gains%20and%20Losses) For the six months ended June 30, 2024, other gains and losses recorded a net gain of approximately RMB 24 million, a significant decrease from RMB 57 million in the prior year, primarily impacted by a reduction in net exchange gains - Other gains and losses recorded a net gain of approximately **RMB 24 million** (prior year: RMB 57 million)[58](index=58&type=chunk) - This was primarily attributable to a gain from fair value changes of other financial assets at fair value through profit or loss of approximately **RMB 20 million** (prior year: RMB 11 million) and a net exchange gain of approximately **RMB 6 million** (prior year: RMB 44 million)[58](index=58&type=chunk) [Selling Expenses](index=29&type=section&id=Selling%20Expenses) For the six months ended June 30, 2024, selling expenses were RMB 464 million, a decrease from RMB 513 million in the prior year, mainly due to the company's enhanced control over advertising costs - Selling expenses decreased from **RMB 513 million** in the prior year to **RMB 464 million**, mainly due to enhanced control over advertising costs[59](index=59&type=chunk) [Administrative Expenses](index=29&type=section&id=Administrative%20Expenses) For the six months ended June 30, 2024, administrative expenses remained stable at RMB 256 million, with its proportion to revenue slightly decreasing - Administrative expenses remained stable at **RMB 256 million** for the six months ended June 30, 2023, and June 30, 2024[60](index=60&type=chunk) - Administrative expenses accounted for approximately **12.9%** of revenue for the six months ended June 30, 2024, compared to **13.1%** for the six months ended June 30, 2023[60](index=60&type=chunk) [Finance Costs](index=29&type=section&id=Finance%20Costs) For the six months ended June 30, 2024, finance costs were RMB 62 million, primarily interest expense on lease liabilities, a decrease from RMB 72 million in the prior year - Finance costs amounted to **RMB 62 million** (prior year: RMB 72 million), representing interest expense recognized on lease liabilities[61](index=61&type=chunk) [Adjusted Net Profit and Adjusted EBITDA](index=30&type=section&id=Adjusted%20Net%20Profit%20and%20Adjusted%20EBITDA) For the six months ended June 30, 2024, adjusted net profit was RMB 278 million, a year-on-year increase of 57.9%; adjusted EBITDA was RMB 715 million, a year-on-year increase of 13.0%, indicating a significant improvement in the company's profitability Adjusted Net Profit and Adjusted EBITDA (RMB thousand) | Indicator | 2024 | 2023 | | :--- | :--- | :--- | | Net profit for the period | 271,513 | 203,835 | | Adjustment: Non-cash share-based payment expenses | 12,550 | 16,496 | | Adjustment: Net exchange gain | (5,741) | (44,071) | | **Adjusted Net Profit** | **278,322** | **176,260** | | Adjustment: Depreciation | 300,182 | 313,595 | | Finance costs | 61,578 | 71,570 | | Income tax | 74,557 | 71,128 | | **Adjusted EBITDA** | **714,639** | **632,553** | - Adjusted net profit excludes the impact of non-cash share-based payment expenses and net exchange gains[63](index=63&type=chunk) [Property and Equipment](index=31&type=section&id=Property%20and%20Equipment) As of June 30, 2024, property and equipment amounted to approximately RMB 3,163 million, a 2.7% increase from December 31, 2023, mainly due to additions to property and equipment for vocational education industrial parks and new schools in Sichuan, Shandong, Guizhou, and Henan - Property and equipment increased by **2.7%** from approximately RMB 3,080 million as of December 31, 2023, to approximately **RMB 3,163 million** as of June 30, 2024[65](index=65&type=chunk) - The increase was mainly due to additions to property and equipment for vocational education industrial parks in Sichuan, Shandong, Guizhou, and Henan, as well as new schools during the period[65](index=65&type=chunk) [Right-of-Use Assets](index=31&type=section&id=Right-of-Use%20Assets) As of June 30, 2024, right-of-use assets remained stable at approximately RMB 2,226 million, as the acquisition of right-of-use assets for vocational education industrial parks in Guizhou and Henan was offset by the closure of loss-making schools and termination of lease agreements - Right-of-use assets remained stable at approximately **RMB 2,226 million** as of June 30, 2024[66](index=66&type=chunk) - The stability was due to the acquisition of right-of-use assets for vocational education industrial parks in Guizhou and Henan being offset by the closure of certain loss-making schools and the termination of related lease agreements[66](index=66&type=chunk) [Capital Structure, Liquidity, Financial Resources, and Gearing Ratio](index=31&type=section&id=Capital%20Structure%2C%20Liquidity%2C%20Financial%20Resources%2C%20and%20Gearing%20Ratio) As of June 30, 2024, the Group's total equity was approximately RMB 5,496 million, with a current ratio of 1.5 times and a gearing ratio of 40.6%. Total time deposits, cash, and cash equivalents amounted to approximately RMB 2,645 million, accounting for 28.6% of total assets - As of June 30, 2024, the Group's total equity was approximately **RMB 5,496 million** (December 31, 2023: RMB 5,608 million)[66](index=66&type=chunk) Liquidity and Gearing Ratio | Indicator | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Current ratio | 1.5 times | 1.7 times | | Gearing ratio | 40.6% | 39.6% | | Total time deposits, cash and cash equivalents | RMB 2,645 million | RMB 3,067 million | | % of total assets | 28.6% | 33.0% | - For the six months ended June 30, 2024, capital expenditures amounted to approximately **RMB 471 million**, primarily related to the acquisition of property and equipment and right-of-use assets[66](index=66&type=chunk) [Other Financial Assets](index=32&type=section&id=Other%20Financial%20Assets) This section details the company's other financial assets held as of June 30, 2024, including unlisted fund investments and structured deposits, and explains its investment strategy and risk management measures aimed at generating higher returns from idle funds Details of Other Financial Assets (As of June 30, 2024) | Category | Name | Fair Value (RMB thousand) | Unrealized Gain (RMB thousand) | % of Total Assets | | :--- | :--- | :--- | :--- | :--- | | Unlisted Fund Investments | E Fund Hong Kong Selected Asia High Yield Fund | 164,059 | 8,575 | 1.8% | | | CICC Multi-Strategy Fixed Income Fund | 205,594 | 8,632 | 2.2% | | **Total Unlisted Fund Investments** | | **369,653** | **17,207** | **4.0%** | | Structured Deposits | China Construction Bank Money Market Fund | 50,061 | 61 | 0.5% | | | Guoxin Securities Fengli Xinan Series | 61,156 | 1,156 | 0.7% | | | Haitong Securities Co., Ltd. Haitong Asset Management Wealth Craftsmanship 100 Series | 61,128 | 1,128 | 0.7% | | | Bank of Hangzhou Structured Deposit | 1,000 | – | 0.0% | | | Huaxia Bank Huaxia Wealth Pure Bond | 50,346 | 346 | 0.5% | | | Industrial and Commercial Bank of China Limited "Quanxin Equity" Weekly Open-ended Wealth Management Product | 11,750 | – | 0.1% | | | Exchange Rate Linked Accumulative Corporate Structured Deposit | 20,000 | – | 0.2% | | **Total Structured Deposits** | | **255,441** | **2,691** | **2.7%** | | Other Financial Assets at Amortized Cost | Entrusted loan to an associate – Xinhua Holdings Group | 50,000 | – | 0.5% | | **Total** | | **675,094** | **19,898** | **7.2%** | - The investment strategy aims to utilize idle funds to obtain returns relatively higher than fixed bank deposits without affecting business operations or capital expenditures[69](index=69&type=chunk) - The company has implemented internal controls and risk management measures, including regular analysis of financial asset performance, requiring issuance by reputable banks or financial institutions, and assessing the financial condition of entrusted loans to associates with personal guarantees from controlling shareholders[69](index=69&type=chunk)[70](index=70&type=chunk) [Material Investments, Acquisitions, and Disposals](index=35&type=section&id=Material%20Investments%2C%20Acquisitions%2C%20and%20Disposals) For the six months ended June 30, 2024, the Group held no major investments, material acquisitions, or disposals of subsidiaries, associates, and joint ventures, other than those disclosed - For the six months ended June 30, 2024, the Group held no major investments, material acquisitions, or disposals of subsidiaries, associates, and joint ventures[71](index=71&type=chunk) [Foreign Exchange Risk Management](index=35&type=section&id=Foreign%20Exchange%20Risk%20Management) The Group's majority of income and expenses are denominated in RMB, but some expenses, time deposits, bank balances, and other payables are denominated in HKD and USD, exposing it to foreign exchange risk. Management monitors foreign exchange risk and will consider hedging when necessary - The majority of the Group's income and expenses are denominated in RMB, but some are denominated in HKD and USD, exposing it to foreign exchange risk[71](index=71&type=chunk) - For the six months ended June 30, 2024, the Group did not use any financial instruments for hedging purposes[71](index=71&type=chunk) - Management monitors foreign exchange risk and will consider hedging significant foreign currency exposures when necessary[71](index=71&type=chunk) [Pledges of the Group's Assets](index=35&type=section&id=Pledges%20of%20the%20Group%27s%20Assets) As of June 30, 2024, and December 31, 2023, the Group pledged lease deposits to secure unpaid contractual lease payments - As of June 30, 2024, and December 31, 2023, the Group pledged lease deposits to secure unpaid contractual lease payments[72](index=72&type=chunk) [Contingent Liabilities](index=35&type=section&id=Contingent%20Liabilities) As of June 30, 2024, and December 31, 2023, the Group had no material contingent liabilities, guarantees, or pending litigation - As of June 30, 2024, and December 31, 2023, the Group had no material contingent liabilities, guarantees, or any material litigation or claims pending or threatened against any member of the Group[72](index=72&type=chunk) [Events After Reporting Period](index=35&type=section&id=Events%20After%20Reporting%20Period) No significant events occurred after the reporting period and up to the date of this announcement - No significant events occurred after the reporting period and up to the date of this announcement[73](index=73&type=chunk) [Outlook](index=35&type=section&id=Outlook) The company is committed to continuously expanding its business, campus network, and strengthening its market position through strategies such as establishing vocational education industrial parks, expanding its campus network, curriculum expansion and diversification, and actively applying to become a third-party assessment institution for vocational skill level certification, to meet market demand and enhance educational quality [Establishment of Vocational Education Industrial Parks](index=36&type=section&id=Establishment%20of%20Vocational%20Education%20Industrial%20Parks) The company strategically acquires land and facilities in key enrollment provinces to establish vocational education industrial parks, equipping them with advanced teaching and practical training facilities to consolidate market leadership, avoid rental pressure, improve campus environments, and increase long-term student stability - The company's strategy is to acquire land and building facilities in major enrollment cities to establish vocational education industrial parks[74](index=74&type=chunk) - Vocational education industrial parks will be equipped with advanced teaching and practical training facilities for the seven major brand schools/centers, consolidating market leadership and brand position[74](index=74&type=chunk) - Phase I projects of vocational education industrial parks in Sichuan, Shandong, and Guizhou have commenced operations, Phase I of the Henan vocational education industrial park is nearing completion, and Phase I projects in Jiangsu and Jiangxi vocational education industrial parks are being planned and advanced[74](index=74&type=chunk) [Expansion of Campus Network](index=36&type=section&id=Expansion%20of%20Campus%20Network) The company plans to further expand its campus network to cover all provincial capital cities in China and establish operations in cities with significant potential but unmet demand for skilled workers in culinary technology, Western pastry and culinary, information technology and internet technology, auto services, and fashion and beauty - The company intends to further expand its campus network to cover all provincial capital cities in China[75](index=75&type=chunk) - Plans include establishing operations in cities with significant potential but unmet demand for skilled workers in culinary technology, Western pastry and culinary, information technology and internet technology, auto services, and fashion and beauty[75](index=75&type=chunk) [Curriculum Expansion and Diversification](index=36&type=section&id=Curriculum%20Expansion%20and%20Diversification) The company plans to expand the diversity of courses in its five existing industry sectors and explore potential new industry areas, such as vocational skills education for service industries and new economies like artificial intelligence and healthcare, to seize market development opportunities - The company plans to continue expanding its business and diversifying its curriculum to respond to industry trends and market demand[76](index=76&type=chunk) - It will continue to develop other markets for vocational skills education in service industries and new economies such as artificial intelligence and healthcare[76](index=76&type=chunk) [Actively Applying to Become a Third-Party Assessment Institution for Vocational Skill Level Certification](index=37&type=section&id=Actively%20Applying%20to%20Become%20a%20Third-Party%20Assessment%20Institution%20for%20Vocational%20Skill%20Level%20Certification) The Group has become one of China's first third-party assessment institutions for vocational skill level certification, which will significantly enhance its reputation, strengthen brand influence, enrich culinary segment courses, integrate employment resources, and improve educational quality - The Group became one of China's first third-party assessment institutions for vocational skill level certification in 2020[77](index=77&type=chunk) - This means the Group can conduct vocational skill level assessments and issue nationally recognized certificates to the public according to standards and regulations, which will significantly enhance the Group's reputation and strengthen its brand influence[77](index=77&type=chunk) - The Group can provide corresponding examination training for social personnel seeking vocational skill level certificates, thereby further enriching the culinary segment's curriculum and acquiring potential customers[77](index=77&type=chunk) [Other Information](index=38&type=section&id=Other%20Information) This section covers the company's employees and remuneration policy, dividend distribution, trading of listed securities, corporate governance practices, standard code for securities transactions, and the audit committee's review of financial statements, demonstrating the company's practices in human resource management, shareholder returns, and corporate governance [Employees and Remuneration Policy](index=38&type=section&id=Employees%20and%20Remuneration%20Policy) As of June 30, 2024, the company had 10,564 employees, with remuneration determined based on individual qualifications, experience, performance, and market levels. The company provides social security programs for employees in China and MPF schemes for employees in Hong Kong - As of June 30, 2024, the company had **10,564 employees**, with **10,550** in mainland China and **14** in Hong Kong[78](index=78&type=chunk) Number of Employees by Function (As of June 30, 2024) | Function | Number of Full-time Employees | % of Total | | :--- | :--- | :--- | | Executive Directors and Core Management | 312 | 3.0% | | Full-time Teachers and Instructors | 5,456 | 51.6% | | Student Accommodation Staff | 53 | 0.5% | | Logistics Staff | 386 | 3.7% | | Administrative Staff | 1,779 | 16.8% | | Accounting and Finance Staff | 356 | 3.4% | | Others | 2,222 | 21.0% | | **Total** | **10,564** | **100%** | - Remuneration is determined based on individual qualifications, experience, performance, contribution to the Group, and prevailing market remuneration levels, providing employees with basic salaries and performance bonuses[79](index=79&type=chunk) [Dividends](index=39&type=section&id=Dividends) The Board did not recommend an interim dividend for the six months ended June 30, 2024, at its meeting on August 21, 2024. The company paid a final dividend of HKD 0.2 per share for the year ended December 31, 2023, in June 2024 - The Board did not recommend the distribution of an interim dividend for the six months ended June 30, 2024 (prior year: nil)[80](index=80&type=chunk) - The company paid a final dividend of **HKD 0.2** per ordinary share (approximately RMB 0.18) for the year ended December 31, 2023, on June 27, 2024[80](index=80&type=chunk) [Purchase, Sale, and Redemption of the Company's Listed Securities](index=39&type=section&id=Purchase%2C%20Sale%2C%20and%20Redemption%20of%20the%20Company%27s%20Listed%20Securities) For the six months ended June 30, 2024, neither the company nor any of its subsidiaries purchased, sold, or redeemed any of the company's listed securities, and the company held no treasury shares - For the six months ended June 30, 2024, neither the company nor any of its subsidiaries purchased, sold, or redeemed any of the company's listed securities[81](index=81&type=chunk) - As of June 30, 2024, the company held no treasury shares[81](index=81&type=chunk) [Corporate Governance Practices](index=39&type=section&id=Corporate%20Governance%20Practices) The company has adopted and complied with all code provisions of the Corporate Governance Code set out in Appendix C1 of the Listing Rules, committed to enhancing corporate governance practices to safeguard shareholders' interests - The company has adopted the principles of the Corporate Governance Code set out in Appendix C1 of the Listing Rules[82](index=82&type=chunk) - For the six months ended June 30, 2024, the company has complied with all code provisions of the Corporate Governance Code[82](index=82&type=chunk) [Standard Code for Securities Transactions](index=39&type=section&id=Standard%20Code%20for%20Securities%20Transactions) The company has adopted the Standard Code as set out in Appendix C3 of the Listing Rules as the code of conduct for directors and relevant employees dealing in securities, and confirmed that all directors complied with the code during the reporting period - The company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers as set out in Appendix C3 of the Listing Rules[83](index=83&type=chunk) - Following specific enquiries with all directors, it is confirmed that they have complied with the required standards set out in the Model Code for the six months ended June 30, 2024[83](index=83&type=chunk) [Audit Committee and Review of Condensed Consolidated Financial Statements](index=40&type=section&id=Audit%20Committee%20and%20Review%20of%20Condensed%20Consolidated%20Financial%20Statements) The Audit Committee, comprising three independent non-executive directors, has reviewed the Group's unaudited condensed consolidated financial statements for the six months ended June 30, 2024, and deemed them to be in compliance with applicable accounting standards, Listing Rules, and statutory requirements - The Audit Committee, comprising three independent non-executive directors, is primarily responsible for assisting the Board in conducting an independent review of the integrity, accuracy, and fairness of the financial statements[84](index=84&type=chunk) - The Audit Committee has reviewed the Group's unaudited condensed consolidated financial statements for the six months ended June 30, 2024, and considers them to be prepared in accordance with applicable accounting standards, the Listing Rules, and statutory requirements[84](index=84&type=chunk) - The company's auditor, Deloitte Touche Tohmatsu, has reviewed the Group's unaudited interim results in accordance with Hong Kong Standard on Review Engagements 2410 issued by the Hong Kong Institute of Certified Public Accountants[84](index=84&type=chunk) [Publication of Interim Results Announcement and Interim Report](index=40&type=section&id=Publication%20of%20Interim%20Results%20Announcement%20and%20Interim%20Report) This interim results announcement has been published on the HKEX website and the company's website, and the interim report will be published and dispatched to shareholders who have opted for a printed version in due course - This interim results announcement has been published on the HKEX website (www.hkexnews.hk) and the company's website (www.chinaeastedu.com)[85](index=85&type=chunk) - The company's interim report for the six months ended June 30, 2024, will be published on the aforementioned websites in due course and dispatched to shareholders who have indicated their preference to receive a printed version[85](index=85&type=chunk)