香港交易及結算所有限公司及香港聯合交易所有限公司對本公告的內容概不負責， 對其準確性或完整性亦不發表任何聲明，並明確表示概不就因本公告全部或任何部 分內容而產生或因依賴該等內容而引致的任何損失承擔任何責任。 GRAND BAOXIN AUTO GROUP LIMITED 廣 匯 寶 信 汽 車 集 團 有 限 公 司 （於開曼群島註冊成立的有限公司） （股份代號：1293） 截至二零二三年六月三十日止六個月的 中期業績公告 廣匯寶信汽車集團有限公司（「本公司」）董事（「董事」）會（「董事會」）欣然公佈本公 司及其子公司（統稱「本集團」或「我們」）截至二零二三年六月三十日止六個月的未 經審核簡明綜合中期財務業績，連同二零二二年同期的比較數字如下： 財務摘要 截至二零二三年六月三十日止六個月： ...

Financial Performance - Revenue for 2022 was RMB 31,699 million, a decrease of 15.5% from RMB 37,582 million in 2021[11] - Gross profit for 2022 was RMB 463 million, with a gross margin of 1.5%, down from 8.1% in 2021[14] - EBITDA for 2022 was RMB 481 million, significantly lower than RMB 2,021 million in 2021[16] - The company reported a loss attributable to equity holders of RMB 698 million in 2022, compared to a profit of RMB 552 million in 2021[17] - The company reported a revenue of RMB 31,698,687, a decrease from RMB 37,582,644 in the previous year, representing a decline of approximately 15.0%[147] - The gross profit for the year was RMB 463,400, significantly lower than RMB 2,285,792 in the previous year, indicating a decline of about 79.8%[147] - The operating loss for the year was RMB 42,389, compared to an operating profit of RMB 1,478,976 in the previous year, marking a substantial shift in performance[147] - The net loss attributable to the parent company was RMB 697,982, contrasting with a profit of RMB 551,986 in the previous year, reflecting a significant downturn[147] - The company incurred financing costs of RMB 539,375, a decrease from RMB 598,008 in the previous year, showing a reduction of approximately 9.8%[147] - The company’s basic and diluted loss per share for the year was RMB (0.25), compared to a profit of RMB 0.19 in the previous year[147] Corporate Governance - The board has reviewed corporate governance policies and practices, ensuring compliance with legal and regulatory requirements[21] - The company is committed to maintaining a diverse board, currently comprising 7 members, including 3 female directors[23] - The board will annually review the composition and structure of the board to align with corporate strategy[22] - The board of directors is required to convene a special general meeting within 21 days upon receiving a written request from shareholders holding at least 10% of the voting shares[37] - The company emphasizes the importance of effective communication with shareholders to improve investor relations and transparency in business performance[40] - The company has complied with all relevant laws and regulations that significantly impact its operations as of December 31, 2022[59] - The company has established confidentiality rules and training for senior management and staff to handle insider information, ensuring strict control over sensitive information access[33] - The company has made appropriate insurance arrangements for its directors and senior officers against legal actions arising from corporate activities[91] Risk Management - The company has established an internal risk control system and corresponding management guidelines to manage risks effectively[31] - The company has engaged Ernst & Young for consulting services related to its ESG report for the fiscal year 2022[29] Market Strategy and Growth - The company plans to continue expanding its market presence and exploring new strategies for growth[19] - The company has established close and stable partnerships with leading global automotive manufacturers and their joint ventures in China, emphasizing the importance of suppliers in building a top-tier automotive dealership[131] - The company is considering strategic acquisitions to bolster its market position, with potential targets identified that could add G million in annual revenue[152] - Market expansion plans include entering new geographic regions, targeting an increase in market share by F% in the next fiscal year[152] Operational Efficiency - The company has reported a decrease in operating expenses by I%, reflecting improved cost management strategies implemented during the year[152] - Cash flow from operations improved, with a total of $J million generated, indicating a K% increase compared to the previous fiscal year[152] Sustainability Initiatives - The management emphasized a focus on sustainability initiatives, aiming to reduce carbon emissions by H% over the next five years[152] - The company has implemented internal environmental policies and measures to reduce emissions and waste, promoting sustainable development[88] Shareholder Relations - The company has adopted a dividend policy without a predetermined payout ratio, allowing the board to propose dividends based on financial conditions and shareholder approval[42] - The board of directors will present independent resolutions for shareholder approval on various matters at the annual general meeting[36] Subsidiaries and Investments - As of December 31, 2022, the company reported no significant investments or acquisitions of subsidiaries, joint ventures, or associated companies during the fiscal year[53] - The company has 100% ownership in several subsidiaries, including Ninghai Binxin Automobile Sales Service Co., Ltd. and Shenzhen Shenlong Automobile Sales Service Co., Ltd., with registered capital of RMB 49 million and RMB 65 million respectively[196] - The company consolidates the financial results of subsidiaries from the date control is obtained until the date control is lost[199] Financial Reporting - The financial statements are prepared in accordance with Hong Kong Financial Reporting Standards and presented in RMB, with values rounded to the nearest thousand[197] - The group applies the Hong Kong Financial Reporting Standards, with specific amendments effective from January 1, 2024, expected to have no significant impact on financial statements[184]

香港交易及結算所有限公司及香港聯合交易所有限公司對本公告之內容概不負責， 對其準確性或完整性亦不發表任何聲明，並明確表示，概不就因本公告全部或任何 部分內容而產生或因倚賴該等內容而引致之任何損失承擔任何責任。 GRAND BAOXIN AUTO GROUP LIMITED 廣 匯 寶 信 汽 車 集 團 有 限 公 司 （於開曼群島註冊成立的有限公司） （股份代號：1293） 截至二零二二年十二月三十一日止年度的 全年業績公告 廣匯寶信汽車集團有限公司（「本公司」）董事（「董事」）會（「董事會」）謹此公佈本公 司及其子公司（統稱「本集團」或「我們」）截至二零二二年十二月三十一日止年度（「報 告期」）的綜合業績，以及二零二一年同期的比較數字。 財務摘要 截至二零二二年十二月三十一日止年度： ...

Market Performance - In the first half of 2022, the overall retail sales of passenger cars in China reached 1.943 million units, representing a year-on-year increase of 22.6%[8]. - The retail sales of new energy passenger vehicles in China amounted to 2.248 million units, showing a significant year-on-year growth of 122.5%[9]. - The overall automotive market in China is expected to see further growth opportunities in the second half of 2022, assuming manageable pandemic risks[8]. - In the first half of 2022, the production and sales of new energy vehicles reached 2.661 million and 2.6 million units, respectively, representing a year-on-year increase of 120% and a market share of 21.6%[80]. - The sales of new energy passenger vehicles accounted for 24% of total passenger vehicle sales in the same period[80]. - After the pandemic control measures, the sales of luxury brands BMW, Mercedes-Benz, and Audi (BBA) in June 2022 rose to around 70,000 units each[17]. Financial Performance - The company's revenue for the first half of 2022 was impacted by the COVID-19 pandemic and lockdown measures, leading to a notable decline in market demand and supply chain disruptions[8]. - In the first half of 2022, the company recorded a revenue of approximately RMB 14.6504 billion, a decrease of 26.3% year-on-year[22]. - The sales revenue from new vehicles was RMB 12.8646 billion, down 26.9% compared to the previous year[25]. - The company's after-sales service revenue was RMB 1.7647 billion, a decrease of 22.7% year-on-year, accounting for 12.1% of total revenue[27]. - Total revenue for the six months ended June 30, 2022, was RMB 14,650 billion, a decrease of approximately 26.3% compared to the same period in 2021[41]. - The gross profit for the six months ended June 30, 2022, was RMB 1.336 billion, an increase of 8.5% compared to the same period in 2021[47]. - The net profit for the period was RMB 539,599 thousand, a significant increase of 38.7% compared to RMB 388,864 thousand in the prior year[116]. - Basic and diluted earnings per share for the period were RMB 0.19, compared to RMB 0.14 for the same period last year[116]. Operational Strategies - The company plans to enhance its digital tools to empower its core business and focus on the sales and service of luxury new energy vehicles[9]. - The company aims to maintain its competitive advantage in the BMW brand by providing comprehensive service content and efficient service processes[9]. - The company is committed to optimizing its management system to enhance core competitiveness and fulfill corporate social responsibilities[12]. - The company will continue to upgrade its existing network facilities and optimize brand structure and regional distribution to ensure stable development of after-sales services[9]. - The company has adjusted its marketing strategies to mitigate the impact of the pandemic, focusing on online and new media marketing activities[26]. Shareholder Relations - The company expresses gratitude to shareholders and partners for their trust and support, emphasizing a commitment to high-quality operational management and shareholder returns[12]. - As of June 30, 2022, major shareholders hold 67.70% of the voting shares, with Guanghui Automobile Services (Hong Kong) Limited owning 1,921,117,571 shares[96]. - The company did not recommend any interim dividend for the six months ended June 30, 2022, consistent with the previous year[114]. Assets and Liabilities - Cash and cash equivalents decreased by 37.6% from RMB 1,701.1 million to RMB 1,061.8 million as of June 30, 2022[54]. - Inventory increased by 35.2% from RMB 2,782.5 million to RMB 3,763 million as of June 30, 2022, with average inventory turnover days rising from 34.3 days to 44.2 days[57]. - Total current liabilities decreased to RMB 11,751,263,000 from RMB 14,437,911,000, a reduction of about 18.54%[124]. - The company reported trade payables and notes payable of RMB 4,498,182 thousand as of June 30, 2022, down from RMB 6,845,486 thousand, indicating a decrease of approximately 34%[176]. Financing and Debt - The company has secured a financing agreement totaling $130 million, with the potential to increase to $150 million for refinancing existing debts and general corporate purposes[102]. - The financing is structured to be repayable within 36 months from the first drawdown date[102]. - The company reported total interest-bearing bank and other borrowings as of June 30, 2022, were RMB 6,012,059 thousand, compared to RMB 4,566,798 thousand as of December 31, 2021, marking an increase of around 32%[171]. - The company's ultimate holding company provided guarantees for bank borrowings amounting to RMB 3,462,287,000 as of the reporting period end, down from RMB 5,234,063,000 as of December 31, 2021[199]. Corporate Governance - The company has maintained compliance with the corporate governance code, except for the specific provision regarding the separation of the roles of Chairman and CEO[106]. - The company has established an audit committee to review the financial statements and ensure compliance with applicable accounting standards[110]. Employee and Management Changes - The company has undergone significant changes in its board of directors, including the appointment of a new chairman and CEO in September 2022[74]. - The total employee cost for the six months ended June 30, 2022, was approximately RMB 502.2 million, down from RMB 580.4 million for the same period in 2021[69].

Financial Performance - In 2021, the company's revenue reached RMB 37,582 million, an increase from RMB 35,134 million in 2020, representing a growth of 7%[12] - The gross profit for 2021 was RMB 1,750 million, with a gross margin of 6.1%, compared to 5.0% in 2020[13] - EBITDA for 2021 was RMB 2,021 million, up from RMB 1,601 million in 2020, indicating a growth of 26.2%[13] - The profit attributable to the owners of the parent company was RMB 552 million in 2021, significantly higher than RMB 211 million in 2020, marking a growth of 161.6%[15] - The group's revenue for the year ended December 31, 2021, was approximately RMB 37.5826 billion, a year-on-year increase of 7.0%[31] - The new car sales revenue for the group was RMB 33.024 billion, up 7.1% year-on-year, with luxury and super-luxury car sales accounting for 92.7% of this revenue[32] - After-sales service revenue increased by 5.9% year-on-year to RMB 4.5234 billion, representing 12.0% of the total revenue[35] - The group's financial services revenue increased by 43.4% year-on-year to RMB 358.1 million[37] - The group's after-sales service gross profit was RMB 1.7554 billion, a year-on-year increase of 28.6%, with a gross margin of 38.8%[35] - The group's derivative business revenue was RMB 1.0123 billion, a year-on-year decrease of 3.5%[36] - The used car business achieved a transaction volume of 43,122 units, representing a year-on-year growth of 33.0%[41] - Insurance commission income decreased by 19.2% to RMB 560.8 million from RMB 694.3 million in 2020[42] - Revenue from automobile sales increased by 7.1% to RMB 33,024.0 million, driven by strong sales growth of luxury brands like BMW and Jaguar Land Rover[51] - Total revenue for the period reached RMB 37,582.6 million, with automobile sales contributing 87.9%[51] - The luxury and super-luxury brand sales accounted for approximately 81.5% of total revenue, up from 79.9% in 2020[53] - Gross profit for the year ended December 31, 2021, was RMB 2.286 billion, an increase of 30.6% from RMB 1.925 billion in 2020, primarily due to increased revenue[55] - Operating profit increased by 40.6% to RMB 1.479 billion for the year ended December 31, 2021, compared to RMB 1.052 billion in 2020[58] - Net profit for the year ended December 31, 2021, rose by 170.8% to RMB 543.4 million from RMB 200.7 million in the previous year[62] Market Overview - The Chinese automotive market showed resilience, with total vehicle production and sales increasing by 3.4% and 3.8% year-on-year, respectively, in 2021[18] - The luxury car segment performed exceptionally well, with BMW's sales in China exceeding 800,000 units, reflecting an 8.3% increase year-on-year[18] - In 2021, the total automobile production and sales in China reached 26.08 million and 26.28 million units, respectively, with year-on-year growth of 3.4% and 3.8%[24] - The sales of new energy passenger vehicles in 2021 reached 2.923 million units, representing a year-on-year increase of approximately 156%, with a market penetration rate of 13.8%[24] - The luxury car segment saw cumulative sales of approximately 3.66 million units in 2021, a year-on-year increase of about 6.6%[25] - BMW (including MINI) led the luxury car market with sales of 846,000 units, a year-on-year increase of 8.9%, while Mercedes-Benz and Audi saw declines of 2% and 3.6%, respectively[26] - The luxury car market is expected to grow by 15% in 2022, with improved sales quality and low dealer inventory levels[46] Operational Strategy - The company plans to enhance its digital transformation strategy and optimize its brand portfolio to strengthen regional and brand management[19] - The company's operational management aims to improve core competitiveness and fulfill corporate social responsibility to enhance brand image[21] - The group is focusing on enhancing operational efficiency and optimizing brand management to improve asset return rates[45] - The company is preparing for the upcoming wave of new energy vehicles and exploring business opportunities in the new energy service industry[50] - The penetration rate of new energy vehicles in the global mainstream market is expected to exceed 10%, indicating significant market changes[47] Financial Position and Management - Cash and bank balances decreased by 12.6% to RMB 1.701 billion as of December 31, 2021, from RMB 1.946 billion at the end of 2020[63] - Inventory decreased by 29.3% to RMB 2.782 billion as of December 31, 2021, from RMB 3.935 billion at the end of 2020[66] - The capital expenditure for the year ended December 31, 2021, was RMB 596.7 million, an increase from RMB 479.4 million in 2020[65] - The debt-to-equity ratio improved to 63.7% as of December 31, 2021, down from 66.7% in the previous year[71] - The average inventory turnover days decreased to 34.3 days from 40.1 days in 2020, indicating improved inventory management[68] - The total employee cost for the year ended December 31, 2021, was approximately RMB 1.1127 billion, up from RMB 958.2 million in 2020[72] Risks and Challenges - The company faces risks related to government policy fluctuations, which could impact car sales if the macroeconomic growth slows down or enters a recession[77] - The company relies heavily on automotive suppliers, and any financial instability or operational performance issues from these suppliers could affect its business operations[78] - The ongoing COVID-19 pandemic continues to pose uncertainties that may impact the automotive industry and the company's operations[79] - The company is exposed to interest rate risks due to floating-rate borrowings linked to various benchmark rates, which could affect financing costs and financial condition[80] Corporate Governance - The company has adopted corporate governance practices to enhance shareholder value and ensure compliance with the relevant codes[87] - The board of directors is responsible for overseeing the company's business strategies and performance, ensuring decisions align with the company's interests[90] - The board consists of seven members, including four executive directors and three independent non-executive directors[91] - The audit committee held three meetings during the year ended December 31, 2021, to review financial statements and compliance procedures[110] - The remuneration committee conducted two meetings to assess the performance of executive directors and review the company's remuneration policies[113] - All independent non-executive directors confirmed their independence according to the guidelines set out in the listing rules[98] - The company has established three board committees: audit committee, remuneration committee, and nomination committee, each with clear written terms of reference[106] - The chairman and CEO roles are held by different individuals to maintain effective separation of duties[96] - The company has arranged appropriate liability insurance for directors and officers against legal actions arising from corporate activities[95] - All executive directors have service contracts for three years, subject to termination with three months' written notice[100] - The company supports the re-election of all retiring directors at the upcoming annual general meeting[105] - The independent non-executive directors collectively bring valuable business experience and expertise to the board[92] - The Nomination Committee held 2 meetings during the year ended December 31, 2021, to review the board's structure and diversity policy[117] - The board conducted 6 meetings in the same period to discuss the company's financial and operational performance and future strategies[120] - All directors maintained a high attendance rate, with executive directors attending 100% of board meetings[124] - The company emphasizes board diversity, considering factors such as gender, age, and professional qualifications[116] - New directors receive comprehensive orientation to understand the company's operations and responsibilities under regulatory requirements[128] - The company provides ongoing professional development for directors to ensure they remain informed and effective[128] - Directors are required to submit training records biannually, which are maintained by the company[129] - The company has a succession plan for directors to ensure continuity in governance[116] - Independent non-executive directors' independence is evaluated regularly by the Nomination Committee[116] - The company ensures compliance with governance procedures and regulations through the company secretary's oversight[120] Shareholder Communication - The company emphasizes the importance of effective communication with shareholders to improve investor relations and understanding of business performance and strategies[168] - The company has a dedicated website to provide the latest information on business development, financial data, and corporate governance practices for public access[168] - The company has established confidentiality rules and training for senior management and staff to prevent insider information dissemination[154] - The company has a process for shareholders to request a special general meeting, requiring at least two shareholders holding one-tenth of the voting rights to submit a written request[162] - The company ensures that all resolutions presented at the shareholders' meeting are voted on by poll, except for purely procedural matters[161] Annual General Meeting - The company will hold its 2022 Annual General Meeting on June 17, 2022, with a notice to be published and sent to shareholders in due course[197] - The company suspended the registration of share transfers from June 14, 2022, to June 17, 2022, to determine the eligibility of shareholders attending the AGM[199] Financial Statements and Reporting - The company reported a comprehensive financial statement for the year ending December 31, 2021[188] - The board of directors presented the annual report along with the audited consolidated financial statements[188] - The company's financial performance for the year ended December 31, 2021, is detailed in the consolidated comprehensive income statement on page 55 of the annual report[192] - The summary of the company's annual performance, assets, and liabilities for the past five fiscal years is available on page 160 of the annual report[194] - Details regarding changes in property and equipment for the year ended December 31, 2021, are included in the consolidated financial statements[200] - The company's main business involves investment holding, with subsidiaries' primary operations detailed in the financial statement notes[190] - The business review for the group as of December 31, 2021, is discussed in the management discussion and analysis section of the annual report[191] - The financial statements for the group as of December 31, 2021, including profit and financial position, are presented on pages 54 to 159 of the annual report[193]

Automotive Market Performance - In the first half of 2021, China's overall retail sales of passenger cars reached 9.942 million units, representing a year-on-year increase of 28.9%, while luxury car retail sales grew by 39.5% to 1.981 million units[8]. - The automotive industry faced challenges due to global chip shortages, yet the market showed resilience with vehicle production and sales increasing by 24.2% and 25.6% respectively in the first half of 2021[12]. - The luxury car segment continues to show strong demand, with high-priced models seeing increased sales and reduced retail discount rates, leading to higher revenues for dealers[13]. - The luxury car market remains stable, with ongoing consumer upgrades driving demand for high-end replacements, indicating a robust market outlook[13]. Financial Performance - For the six months ended June 30, 2021, the company recorded revenue of approximately RMB 19.891 billion, an increase of 36.2% year-on-year, primarily driven by a recovery in new car sales, particularly in the luxury and ultra-luxury segments, which rose by RMB 4.829 billion or 37.8% compared to the same period in 2020[28]. - The company sold a total of 55,139 new cars during the six months ended June 30, 2021, representing a year-on-year increase of 30.2%, with new car sales revenue amounting to RMB 17.590 billion, up 37.8% year-on-year[21]. - The luxury and ultra-luxury car sales reached 45,989 units, an increase of 12,756 units year-on-year, contributing RMB 16.359 billion to sales revenue, which is a 40.8% increase year-on-year and accounted for 93.0% of new car sales revenue[21]. - The company's net profit attributable to shareholders reached RMB 393.1 million, a significant increase of 324.1% year-on-year, with earnings per share of RMB 0.14[18]. - Revenue for the six months ended June 30, 2021, was RMB 19,890,951 thousand, an increase of 36.5% from RMB 14,602,950 thousand for the same period in 2020[88]. - Gross profit for the same period was RMB 1,231,111 thousand, up 31.4% from RMB 936,989 thousand year-on-year[88]. - Operating profit increased to RMB 883,420 thousand, representing a 61.5% rise compared to RMB 546,373 thousand in the previous year[88]. - Net profit for the period was RMB 388,864 thousand, compared to RMB 86,817 thousand, marking a year-on-year growth of 347.5%[88]. Operational Efficiency and Strategy - The Group aims to enhance operational efficiency through digital transformation, transitioning from informatization to digitization, to create a connected and efficient digital automotive service ecosystem[8]. - The Group's strategy includes optimizing its refined management system to improve core competitiveness and fulfill corporate social responsibility, enhancing brand image[9]. - The Group expects to achieve sustainable growth through high-quality operational management and shareholder returns, focusing on new layouts and business models[9]. - The company aims to strengthen refined management to enhance service capabilities and customer loyalty in the luxury car dealership and service sector[54]. - The company will continue to leverage its core resources and advantages to advance digital transformation, enhancing overall operational capabilities[55]. After-Sales and Service Revenue - The after-sales service revenue for the first half of 2021 was RMB 2.283 billion, a year-on-year increase of 25.2%, representing 11.5% of total revenue, with a gross profit of RMB 919.6 million and a gross margin of 40.3%[22]. - After-sales service revenue rose by 25.2% to RMB 2.2833 billion, although its contribution to total revenue decreased from 12.5% to 11.5%[30]. Inventory and Financial Position - Inventory decreased by 11.1% to RMB 3.4963 billion, with average inventory turnover days improving from 40.7 to 35.8 days[41]. - The debt-to-equity ratio improved to 60.9% from 66.7% as of December 31, 2020[45]. - Cash and cash equivalents decreased by 6.1% to RMB 1.827 billion as of June 30, 2021[38]. - The company reported a net decrease in cash and cash equivalents of RMB (131,336) thousand, an improvement from RMB (443,440) thousand in the prior year[102]. Shareholder and Governance Information - As of June 30, 2021, the major shareholder, Guanghui Auto Service (Hong Kong) Limited, holds a beneficial interest of 1,921,117,571 shares, representing approximately 67.70% of the company's issued voting shares[68]. - The company has adopted the corporate governance code and has complied with all provisions except for the division of responsibilities between the chairman and the CEO[78]. - The board of directors experienced changes, with Mr. Diao Jianshen resigning and Ms. Liu Wenji appointed as an independent non-executive director and chair of the audit committee[51]. Related Party Transactions - The company recorded related party transactions, including purchases of goods from Guanghui Auto and its controlled companies totaling RMB 1,574,000 and sales of goods totaling RMB 2,539,000 for the period ended June 30, 2021[161]. - Interest expenses from related parties amounted to RMB 70,906,000 as of June 30, 2021, compared to RMB 17,563,000 for the same period in 2020[163].

[Corporate Information](index=3&type=section&id=Corporate%20Information) [Company Basic Information](index=3&type=section&id=Company%20Basic%20Information) China Grand Automotive Services Group Co, Ltd is a limited company incorporated in the Cayman Islands with stock code 1293, operating primarily in Shanghai and Hong Kong, and audited by Ernst & Young - The company was incorporated in the Cayman Islands with the stock code 1293[18](index=18&type=chunk) - Its principal place of business and headquarters is at 3998 Hongxin Road, Minhang District, Shanghai, China, with a Hong Kong office at 54/F, Hopewell Centre, 183 Queen's Road East[18](index=18&type=chunk) - The auditor is Ernst & Young[20](index=20&type=chunk) [Financial Highlights](index=5&type=section&id=Financial%20Highlights) [Key Financial Indicators](index=5&type=section&id=Key%20Financial%20Indicators) In 2020, the company's revenue was RMB 35.134 billion, a 3.6% decrease YoY, while gross profit and profit attributable to owners fell by 38.5% and 66.4% respectively Key Financial Data for 2020 (RMB million) | Indicator | 2020 | 2019 | 2018 | 2017 | 2016 | | :--- | :--- | :--- | :--- | :--- | :--- | | Revenue | 35,134 | 36,464 | 36,791 | 34,558 | 25,709 | | Gross Profit | 1,750 | 2,846 | 2,787 | 2,936 | 2,034 | | Gross Profit Margin | 5.0% | 7.8% | 7.6% | 8.5% | 7.9% | | EBITDA | 1,601 | 1,455 | 1,993 | 2,354 | 2,326 | | Profit Attributable to Owners of the Parent | 211 | 629 | 556 | 808 | 414 | [Chairman's Statement](index=6&type=section&id=Chairman's%20Statement) [Macroeconomic and Automotive Industry Review 2020](index=6&type=section&id=Macroeconomic%20and%20Automotive%20Industry%20Review%202020) The global economy contracted in 2020 due to COVID-19, but China's economy grew 2.3%, with the auto industry recovering strongly in H2, led by luxury and new energy vehicles - In 2020, the global economy was projected to shrink by 4.4%, while China's GDP grew by **2.3%**, surpassing the **RMB 100 trillion** mark for the first time[26](index=26&type=chunk) - China's auto production and sales decreased by **2.0%** and **1.9%** respectively, with the luxury market showing rapid growth since April and new energy vehicle sales increasing by **10.9%** to 1.367 million units[30](index=30&type=chunk) [Group's Operating Performance in 2020](index=7&type=section&id=Group's%20Operating%20Performance%20in%202020) The Group's total revenue in 2020 was RMB 35.134 billion, with a gross profit of RMB 1.7501 billion and profit attributable to owners of RMB 211.4 million, adhering to a dual strategy of "sales-oriented" and "service-oriented" development Key Financial Data for the Group in 2020 | Indicator | Amount (RMB) | | :--- | :--- | | Total Revenue | 35.134 billion | | Gross Profit | 1.7501 billion | | Profit Attributable to Owners of the Parent | 211.4 million | | Earnings Per Share | 0.07 | - The Group adheres to a synergistic business strategy of being "sales-oriented" and "service-oriented" to optimize its profit structure, enhance service quality, and increase user loyalty[31](index=31&type=chunk) [Outlook and Strategy for 2021](index=7&type=section&id=Outlook%20and%20Strategy%20for%202021) For 2021, the Group will focus on luxury vehicle sales and ancillary services, optimize its brand structure, and consolidate operational results through refined management - China's luxury passenger vehicle market is expected to maintain steady growth and further increase its market share[31](index=31&type=chunk) - The Group will focus on sales and ancillary services for traditional luxury car brands, optimizing its brand structure and increasing the concentration of premium brands[31](index=31&type=chunk) - Through refined management and business structure optimization, the Group aims to enhance the profitability of its existing network, revitalize assets, and solidify its business performance[31](index=31&type=chunk) [Management Discussion and Analysis](index=9&type=section&id=Management%20Discussion%20and%20Analysis) [Industry Overview](index=9&type=section&id=Industry%20Overview) China's economy showed strong resilience in 2020, with the auto market rebounding strongly in H2 after the pandemic's initial impact, driven by luxury vehicles and the strategic growth of the new energy vehicle industry - China's total economic output exceeded **RMB 100 trillion**, and the auto market rebounded strongly post-pandemic, with narrowing declines in passenger vehicle production and sales[37](index=37&type=chunk) - The luxury car market grew by **6.5%**, accounting for **16.2%** of total passenger vehicle sales, primarily driven by BMW, Mercedes-Benz, and Audi[38](index=38&type=chunk) - New energy vehicle production and sales grew by **7.5%** and **10.9%** YoY, respectively, with Tesla's sales increasing by **251%**[39](index=39&type=chunk) [Business Review](index=10&type=section&id=Business%20Review) The Group's total revenue in 2020 was RMB 35.1343 billion, a 3.6% decrease YoY, while gross profit and profit attributable to equity holders fell by 38.5% and 66.4% respectively Group's Key Financial Performance in 2020 | Indicator | 2020 (RMB billion) | YoY Change | | :--- | :--- | :--- | | Total Revenue | 35.1343 | -3.6% | | Gross Profit | 1.7501 | -38.5% | | Profit Attributable to Equity Holders | 0.2114 | -66.4% | | Earnings Per Share | 0.07 | - | - The company emphasizes both vehicle sales volume and service quality, focusing on business transformation and the synergistic development of "sales-oriented" and "service-oriented" strategies[43](index=43&type=chunk) [New Vehicle Sales](index=11&type=section&id=New%20Vehicle%20Sales) In 2020, the Group's new vehicle sales volume was 101,511 units, down 8.6% YoY, with sales revenue of RMB 30.8292 billion, down 2.7% YoY, and an overall gross margin of 1.2% New Vehicle Sales Data for 2020 | Indicator | 2020 | YoY Change | | :--- | :--- | :--- | | New Vehicle Sales Volume | 101,511 units | -8.6% | | New Vehicle Sales Revenue | RMB 30.8292 billion | -2.7% | | Luxury & Ultra-luxury Vehicle Sales Revenue Share | 91.1% | - | | Overall New Vehicle Gross Margin | 1.2% | - | - Sales were significantly impacted by the COVID-19 pandemic in Q1 but gradually recovered in H2; the Group proactively adjusted underperforming or loss-making outlets[46](index=46&type=chunk) [After-sales Services](index=11&type=section&id=After-sales%20Services) After-sales service revenue in 2020 was RMB 4.2700 billion, a 9.8% decrease YoY, accounting for 12.2% of total revenue, with a gross profit of RMB 1.3645 billion and a gross margin of 32.0% After-sales Services Data for 2020 | Indicator | 2020 (RMB billion) | YoY Change | | :--- | :--- | :--- | | After-sales Service Revenue | 4.2700 | -9.8% | | Share of Total Revenue | 12.2% | - | | After-sales Service Gross Profit | 1.3645 | -34.3% | | After-sales Service Gross Margin | 32.0% | - | - A decline in new vehicle sales led to reduced vehicle decoration business, impacting after-sales performance; the Group mitigated adverse effects through centralized procurement and cost control[47](index=47&type=chunk) [Ancillary Services](index=11&type=section&id=Ancillary%20Services) The Group's ancillary service revenue grew by 40.7% YoY to RMB 1.0485 billion in 2020, driven by a 91.5% increase in insurance commission income, with auto finance penetration rising to 65.4% Ancillary Services Revenue in 2020 | Ancillary Service Type | 2020 Revenue (RMB billion) | YoY Change | | :--- | :--- | :--- | | Total Ancillary Service Revenue | 1.0485 | +40.7% | | Financial Services Revenue | 0.2498 | Relatively stable | | Insurance Commission Income | 0.6943 | +91.5% | - The auto finance penetration rate for new vehicles increased from **60.0%** in 2019 to **65.4%** in 2020[50](index=50&type=chunk) - The used car business penetration rate was **32.0%**, with active development in evaluation, trade-in, and retail businesses integrated with new car sales and supply chain finance[51](index=51&type=chunk) - The insurance business improved its management system and introduced innovative products to ensure a simultaneous increase in renewal penetration and quality[52](index=52&type=chunk) [Network Layout](index=13&type=section&id=Network%20Layout) As a leading luxury auto dealer, the Group's operations are concentrated in East China and expanding nationwide, operating 111 stores with 10 luxury and ultra-luxury brands as of year-end 2020 - The business is primarily concentrated in the East China region, covering most major luxury and ultra-luxury auto markets in China[55](index=55&type=chunk) - As of December 31, 2020, the Group operated **111 stores** with a portfolio of **10 luxury and ultra-luxury car brands**[55](index=55&type=chunk) - During the reporting period, the Group proactively sold or adjusted **5 underperforming outlets** to focus on optimizing existing store management and operational efficiency[55](index=55&type=chunk) [Future Prospects and Strategies](index=13&type=section&id=Future%20Prospects%20and%20Strategies) The Group will continue to position itself as a luxury auto dealer and service provider, focusing on "quality + service," consolidating existing brands, and leveraging digital platforms to enhance customer experience - The Group will maintain its positioning as a dealer and service provider for luxury car brands, emphasizing a "quality + service" attribute[56](index=56&type=chunk) - It will consolidate and enhance existing luxury brands, revitalize assets, and optimize its brand structure and network layout[56](index=56&type=chunk) - The Group will strategically develop the new energy vehicle service industry chain and leverage digital platforms to create new, interactive marketing models[56](index=56&type=chunk)[57](index=57&type=chunk) [Financial Review](index=14&type=section&id=Financial%20Review) The Group's total revenue in 2020 was RMB 35.1343 billion, down 2.7% YoY, with gross profit at RMB 1.7501 billion, down 38.5%, and operating profit at RMB 1.0520 billion, down 40.8% Financial Data Overview for 2020 (RMB '000) | Indicator | 2020 | 2019 | YoY Change | | :--- | :--- | :--- | :--- | | Total Revenue | 35,134,341 | 36,463,878 | -3.6% | | Vehicle Sales Revenue | 30,829,162 | 31,687,726 | -2.7% | | After-sales Business Revenue | 4,269,980 | 4,732,762 | -9.8% | | Cost of Sales and Services | 33,384,256 | 33,618,000 | -0.7% | | Gross Profit | 1,750,085 | 2,845,908 | -38.5% | | Gross Profit Margin | 5.0% | 7.8% | -2.8 percentage points | | Other Income and Gains, net | 1,082,446 | 869,641 | +24.5% | | Selling and Distribution Expenses | 1,108,724 | 1,210,639 | -8.4% | | Administrative Expenses | 671,809 | 727,135 | -7.6% | | Operating Profit | 1,051,998 | 1,777,775 | -40.8% | | Finance Costs | 646,330 | 822,183 | -21.4% | | Profit for the Year | 200,682 | 622,757 | -67.8% | | Cash and Bank Balances | 1,945,627 | 1,663,106 | +17.0% | | Net Current Assets | 5,121,444 | 2,248,145 | +127.8% | | Capital Expenditure | 479,400 | 673,200 | -28.8% | | Inventories | 3,934,600 | 3,503,600 | +12.3% | | Inventory Turnover Days | 40.1 days | 41.5 days | -1.4 days | | Trade Receivables | 406,700 | 613,500 | -33.7% | | Interest-bearing Bank and Other Borrowings | 6,049,200 | 9,628,100 | -37.2% | | Gearing Ratio | 66.7% | 67.5% | -0.8 percentage points | | Total Employees | 6,953 | 7,210 | -3.6% | | Total Staff Costs | 958,200 | 1,089,100 | -12.0% | - The decrease in revenue was mainly due to pandemic-related fluctuations and macroeconomic conditions, with weaker performance from Jaguar Land Rover and Maserati brands[62](index=62&type=chunk) - The decline in gross profit was primarily due to lower revenue, with the after-sales business's share of total gross profit rising to **78.0%** (2019: 73.0%)[67](index=67&type=chunk) - Other income and gains increased by **24.5%**, mainly due to higher commission income and government subsidies[68](index=68&type=chunk) - Selling, distribution, and administrative expenses decreased due to the Group's strict cost reduction and efficiency improvement strategies[69](index=69&type=chunk) - Cash and bank balances increased by **17.0%**, mainly from reduced cash payments and increased use of notes payable[74](index=74&type=chunk) - Inventories increased by **12.3%**, but the average inventory turnover days decreased to **40.1 days**, indicating improved inventory management efficiency[77](index=77&type=chunk) - Interest-bearing bank and other borrowings decreased by **37.2%**, primarily due to the repayment of several bank loans[81](index=81&type=chunk) - The gearing ratio was **66.7%**, a decrease of 0.8 percentage points from 2019[83](index=83&type=chunk) - The total number of employees decreased to **6,953**, and total staff costs fell by **12.0%**, as the Group focuses on talent recruitment, training, and compensation[84](index=84&type=chunk) [Pledge of Group Assets](index=18&type=section&id=Pledge%20of%20Group%20Assets) As of December 31, 2020, the Group had pledged approximately RMB 6.7792 billion of its assets, shares of certain subsidiaries, and letters of credit as collateral for bank loans and other borrowings - Pledged Group assets amounted to approximately **RMB 6.7792 billion** (2019: RMB 6.2637 billion)[87](index=87&type=chunk) [Material Acquisitions, Disposals, or Investments](index=18&type=section&id=Material%20Acquisitions%2C%20Disposals%2C%20or%20Investments) The Group did not engage in any material acquisitions, disposals of subsidiaries and associates, or significant investments during the year 2020 - For the year ended December 31, 2020, the Group did not conduct any material acquisitions of subsidiaries and associates[88](index=88&type=chunk) - For the year ended December 31, 2020, the Group did not conduct any material disposals of subsidiaries and associates[89](index=89&type=chunk) - The Group had no material investments for the year ended December 31, 2020[90](index=90&type=chunk) [Events After the Reporting Period](index=18&type=section&id=Events%20After%20the%20Reporting%20Period) As of the report date, there were no significant post-reporting period events to disclose, but the Group will closely monitor the impact of the COVID-19 pandemic on its financial condition and performance - As of the date of this report, there were no material events subsequent to December 31, 2020, that require disclosure by the Company[91](index=91&type=chunk) - The Group will closely monitor the development of the COVID-19 pandemic and assess its impact on the Group's financial position and operating results[92](index=92&type=chunk) [Corporate Governance Report](index=19&type=section&id=Corporate%20Governance%20Report) [Corporate Governance Practices](index=19&type=section&id=Corporate%20Governance%20Practices) The Company is committed to high standards of corporate governance and has adopted the principles of the Corporate Governance Code in Appendix 14 of the Hong Kong Stock Exchange Listing Rules - The Company has adopted the principles of the Corporate Governance Code as set out in Appendix 14 to the Listing Rules[95](index=95&type=chunk) - The Board considers that the Company has complied with all code provisions of the Corporate Governance Code for the year ended December 31, 2020, except for code provision A.2.1 regarding the division of responsibilities between the Chairman and the Chief Executive Officer[95](index=95&type=chunk) [Compliance with the Model Code for Securities Transactions](index=19&type=section&id=Compliance%20with%20the%20Model%20Code%20for%20Securities%20Transactions) The Company has adopted the Model Code in Appendix 10 of the Listing Rules for directors' securities transactions and confirmed that all directors complied with this code throughout 2020 - The Company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers as set out in Appendix 10 to the Listing Rules[96](index=96&type=chunk) - All Directors have confirmed their compliance with the Model Code throughout the year ended December 31, 2020[96](index=96&type=chunk) [The Board of Directors](index=20&type=section&id=The%20Board%20of%20Directors) The Board, responsible for leading and controlling the Company, comprises four executive and three independent non-executive directors with no relationships among them, and has arranged appropriate liability insurance - The Board is responsible for leading and controlling the Company, overseeing the Group's business, strategic decisions, and performance[98](index=98&type=chunk) - The Board consists of **seven members**, including four executive Directors and three independent non-executive Directors, with no relationships among them[99](index=99&type=chunk)[100](index=100&type=chunk) - The Company has arranged appropriate liability insurance for its directors and officers against legal actions arising from corporate activities[103](index=103&type=chunk) - Each executive Director has a three-year service contract, independent non-executive Directors have one-year appointment letters, and all Directors are subject to retirement by rotation and re-election at least every three years[108](index=108&type=chunk)[109](index=109&type=chunk)[111](index=111&type=chunk) [Board Committees](index=22&type=section&id=Board%20Committees) The Board has established an Audit Committee, a Remuneration Committee, and a Nomination Committee, each with clear written terms of reference and chaired by an independent non-executive director - The Board has established an Audit Committee, a Remuneration Committee, and a Nomination Committee to oversee specific areas of the Company's affairs[113](index=113&type=chunk) - The **Audit Committee's** primary duties include reviewing financial information, internal controls, and risk management systems, and maintaining a good relationship with external auditors[114](index=114&type=chunk) - The **Remuneration Committee's** primary duties include reviewing the remuneration packages of directors and senior management and making recommendations to the Board[119](index=119&type=chunk) - The **Nomination Committee's** primary duties include reviewing the structure, size, and composition of the Board and making recommendations on director appointments and succession planning[123](index=123&type=chunk) [Board Meetings and Attendance](index=25&type=section&id=Board%20Meetings%20and%20Attendance) The Board held six meetings in 2020, with directors participating in person or electronically, and meeting materials were provided in advance to ensure informed decision-making - In 2020, the Board held **six meetings** to review the Company's financial and operational performance and discuss future strategies[127](index=127&type=chunk) - Board documents with all appropriate, complete, and reliable information are sent to all directors at least three days before each Board or committee meeting[127](index=127&type=chunk) Board and Committee Meeting Attendance in 2020 | Director's Name | Board of Directors | Audit Committee | Remuneration Committee | Nomination Committee | General Meeting | | :--- | :--- | :--- | :--- | :--- | :--- | | Mr. Lu Wei | 2/2 | N/A | 1/1 | 1/1 | N/A | | Mr. Wang Xinming | 6/6 | N/A | N/A | N/A | 1/1 | | Mr. Lu Ao | 6/6 | N/A | N/A | N/A | 1/1 | | Ms. Xu Xing | 6/6 | N/A | N/A | N/A | 1/1 | | Mr. Li Jianping | 4/4 | N/A | 1/1 | 1/1 | 1/1 | | Mr. Qi Junjie | 3/3 | N/A | N/A | N/A | N/A | | Mr. Diao Jianshen | 6/6 | 2/2 | 2/2 | 2/2 | 1/1 | | Ms. Liu Yangfang | 6/6 | 2/2 | 2/2 | 2/2 | 1/1 | | Mr. Chen Hongjun | 6/6 | 2/2 | N/A | N/A | 1/1 | [Directors' Continuing Professional Development](index=26&type=section&id=Directors'%20Continuing%20Professional%20Development) The Company ensures directors continuously develop their knowledge and skills through induction programs, internal briefings, and external training to contribute effectively to the Board - Each newly appointed director receives a comprehensive, formal, and tailored induction[133](index=133&type=chunk) - The Company arranges internal briefings for directors and provides relevant reading materials and professional development opportunities as appropriate[137](index=137&type=chunk) - For the year ended December 31, 2020, all directors participated in internal and other external training[138](index=138&type=chunk)[139](index=139&type=chunk) [Corporate Governance Functions](index=27&type=section&id=Corporate%20Governance%20Functions) The Audit Committee is responsible for performing corporate governance functions, and the Board continuously reviews and improves corporate governance practices to ensure proper regulation - The Audit Committee is responsible for performing the corporate governance functions set out in code provision D.3.1 of the Corporate Governance Code[140](index=140&type=chunk) - The Board has reviewed corporate governance policies and practices, training for directors and senior management, and legal and regulatory compliance policies[140](index=140&type=chunk) [Board Diversity Policy](index=28&type=section&id=Board%20Diversity%20Policy) The Company has adopted a board diversity policy to enhance diversity at the board level, annually reviewing its structure, size, and composition based on various factors - The Company has adopted a board diversity policy, viewing board-level diversity as a key element for maintaining a competitive advantage[142](index=142&type=chunk) - The Nomination Committee annually reviews the Board's structure, size, and composition, considering factors such as gender, age, cultural and educational background, professional qualifications, skills, knowledge, and industry experience[142](index=142&type=chunk) [Board Nomination Policy](index=28&type=section&id=Board%20Nomination%20Policy) The Company has adopted a director nomination policy with clear selection criteria and procedures to ensure the Board possesses the necessary skills, experience, and diversity - The Company has adopted a director nomination policy to ensure the Board has the skills, experience, and diversity of perspectives required for the Company's business[143](index=143&type=chunk) - Candidate evaluation considers character and integrity, professional qualifications, skills, knowledge, diversity (including gender, age, cultural background), and independence[144](index=144&type=chunk) [Directors' Responsibility for Financial Statements](index=29&type=section&id=Directors'%20Responsibility%20for%20Financial%20Statements) The directors are responsible for preparing the Group's financial statements in compliance with statutory requirements and accounting standards on a going concern basis - The directors acknowledge their responsibility for preparing the Group's financial statements for the year ended December 31, 2020[149](index=149&type=chunk) - The directors have ensured that the Group's financial statements are prepared in accordance with statutory requirements and applicable accounting standards on a going concern basis[149](index=149&type=chunk) [Auditor's Remuneration](index=29&type=section&id=Auditor's%20Remuneration) For the year 2020, the Group paid its external auditor, Ernst & Young, a total remuneration of RMB 6,253 thousand, of which RMB 6,100 thousand was for audit services Auditor's Remuneration for 2020 (RMB '000) | Service Type | Fee | | :--- | :--- | | Audit Services | 6,100 | | Non-audit Services | 153 | | **Total** | **6,253** | [Risk Management and Internal Control](index=29&type=section&id=Risk%20Management%20and%20Internal%20Control) The Board is responsible for the risk management and internal control systems, with the Audit Committee assisting in overseeing their design, implementation, and monitoring - The Board is responsible for evaluating and determining the nature and extent of risks it is willing to take in achieving the Company's strategic objectives and for establishing and maintaining appropriate and effective risk management and internal control systems[152](index=152&type=chunk) - The Group has established an internal risk control system and corresponding management codes, with an internal control audit department to regularly monitor implementation[154](index=154&type=chunk) - The Group strictly follows the Listing Rules and SFC guidelines for handling and disseminating inside information, with established confidentiality rules and training[156](index=156&type=chunk)[157](index=157&type=chunk) [Joint Company Secretaries](index=31&type=section&id=Joint%20Company%20Secretaries) Ms Xu Xing and Ms Wong Pui Yan serve as the Joint Company Secretaries, with Ms Xu granted a waiver from the Stock Exchange's qualification requirements, assisted by Ms Wong - Ms Xu Xing and Ms Wong Pui Yan are the Joint Company Secretaries of the Company[160](index=160&type=chunk) - Ms Xu Xing was granted a waiver from the qualification requirements for a company secretary by the Stock Exchange and is assisted by Ms Wong Pui Yan during the waiver period[161](index=161&type=chunk) - For the year ended December 31, 2020, both Ms Xu and Ms Wong received no less than **15 hours** of professional training[162](index=162&type=chunk) [Directors' and Senior Management's Remuneration](index=31&type=section&id=Directors'%20and%20Senior%20Management's%20Remuneration) The Company has a formal and transparent procedure for setting senior management remuneration policies, designed to motivate executives by linking compensation to company performance and market statistics - The Company has established a formal and transparent procedure for developing the remuneration policy for the Group's senior management[163](index=163&type=chunk) - The remuneration packages are designed to motivate executive directors and senior management by linking their compensation to the Group's operating results, individual performance, and comparable market statistics[163](index=163&type=chunk) Salary Bands for Non-Director Senior Management in 2020 | Salary Range (RMB) | Number of Individuals | | :--- | :--- | | 1,500,001 to 2,000,000 | 3 | | 2,000,001 to 2,500,000 | 1 | [Shareholders' Rights](index=32&type=section&id=Shareholders'%20Rights) To protect shareholder interests, separate resolutions are proposed for distinct issues at general meetings, with voting conducted by poll, and shareholders can convene special meetings or propose resolutions - Separate resolutions are proposed for each substantially separate issue at general meetings, and voting is conducted by way of a poll[165](index=165&type=chunk) - Any two or more shareholders holding not less than **one-tenth** of the Company's issued share capital may make a written request to convene a special general meeting[166](index=166&type=chunk) - Shareholders wishing to propose a resolution at a general meeting must submit a written request to the Board[167](index=167&type=chunk) - Shareholders may at any time send their enquiries and requests to the Board by personal delivery, post, or email[168](index=168&type=chunk) [Investor Relations and Communication with Shareholders](index=33&type=section&id=Investor%20Relations%20and%20Communication%20with%20Shareholders) The Company is committed to effective communication with shareholders, providing updated information on business development, financials, and corporate governance through general meetings and its website - The Company is committed to maintaining effective communication with its shareholders, particularly through annual and special general meetings[173](index=173&type=chunk) - The Company maintains a website at www.klbaoxin.com, where business developments, financial information, corporate governance practices, and other information are available to the public[173](index=173&type=chunk) [Constitutional Documents](index=33&type=section&id=Constitutional%20Documents) During the year ended December 31, 2020, the Company made no amendments to its Articles of Association, the latest version of which is available on the Stock Exchange and company websites - During the year ended December 31, 2020, the Company did not amend its Articles of Association[174](index=174&type=chunk) - The latest version of the Company's Articles of Association is available on the websites of the Stock Exchange and the Company[174](index=174&type=chunk) [Dividend Policy](index=33&type=section&id=Dividend%20Policy) The Company has adopted a dividend policy without a pre-determined payout ratio, allowing the Board to recommend dividends based on the Group's financial condition and other factors, subject to shareholder approval - The Company has adopted a dividend policy for dividend payments and does not have any pre-determined dividend payout ratio[175](index=175&type=chunk) - The Board may recommend the declaration and/or payment of dividends depending on the financial condition of the Company and the Group and the conditions and factors set out in the dividend policy[175](index=175&type=chunk) [Directors and Senior Management](index=34&type=section&id=Directors%20and%20Senior%20Management) [Directors](index=34&type=section&id=Directors) The Board of Directors is composed of experienced industry professionals, including executive directors Mr Lu Wei (Chairman), Mr Wang Xinming (President), Mr Lu Ao, and Ms Xu Xing, and independent non-executive directors - Mr Lu Wei was appointed as an executive Director and Chairman of the Board on August 28, 2020, and also serves as a director and vice president of Xinjiang Grand Automotive Service Group Co, Ltd[178](index=178&type=chunk) - Mr Wang Xinming has been an executive Director and President since June 21, 2016, and also serves as a director and president of China Grand Auto[179](index=179&type=chunk) - Mr Lu Ao has been an executive Director since June 21, 2016, and also serves as the vice president and chief financial officer of China Grand Auto[180](index=180&type=chunk) - Ms Xu Xing has served as an executive Director since June 8, 2018, and was appointed as a joint company secretary on November 20, 2018, responsible for corporate governance and capital market matters[183](index=183&type=chunk) - Independent non-executive directors Mr Diao Jianshen, Ms Liu Yangfang, and Mr Chen Hongjun have extensive experience in automotive distribution, law, and corporate finance, respectively[184](index=184&type=chunk)[185](index=185&type=chunk)[186](index=186&type=chunk)[187](index=187&type=chunk) [Senior Management](index=36&type=section&id=Senior%20Management) The Company's senior management team includes Mr Wang Xinming, President and Executive Director, and Ms Xu Xing, Vice President and Executive Director - Mr Wang Xinming is the President and an executive Director of the Company[188](index=188&type=chunk) - Ms Xu Xing is the Vice President and an executive Director of the Company[189](index=189&type=chunk) [Joint Company Secretaries](index=36&type=section&id=Joint%20Company%20Secretaries) Ms Xu Xing and Ms Wong Pui Yan serve as the Joint Company Secretaries, with Ms Wong being a Senior Manager at Tricor Services Limited and holding degrees from the University of New South Wales - Ms Xu Xing was appointed as a Joint Company Secretary of the Company on November 20, 2018[190](index=190&type=chunk) - Ms Wong Pui Yan was appointed as a Joint Company Secretary on May 1, 2020, and is a member of the Hong Kong Institute of Certified Public Accountants and CPA Australia[190](index=190&type=chunk) [Report of the Directors](index=37&type=section&id=Report%20of%20the%20Directors) [Principal Activities and Results](index=37&type=section&id=Principal%20Activities%20and%20Results) The Company is principally engaged in investment holding, with its subsidiaries focused on automobile sales and services, and the Group's results for 2020 are detailed in the consolidated statement of comprehensive income - The Company is principally engaged in investment holding, and its subsidiaries' main business is automobile sales and services[195](index=195&type=chunk) - The results of the Group for the year ended December 31, 2020 are set out in the consolidated statement of comprehensive income on page 54 of this annual report[197](index=197&type=chunk) [Financial Position and Dividends](index=37&type=section&id=Financial%20Position%20and%20Dividends) The Group's profit and state of affairs for the year ended December 31, 2020 are presented in the financial statements, with distributable reserves of RMB 2.3832 billion, and the Board does not recommend a final dividend - The profit of the Group for the year ended December 31, 2020, and the state of affairs of the Company and the Group as at that date are set out in the financial statements on pages 53 to 161 of this annual report[198](index=198&type=chunk) - As at December 31, 2020, the Company's distributable reserves amounted to **RMB 2.3832 billion**[200](index=200&type=chunk) - The Board **does not recommend** the payment of a final dividend for the year ended December 31, 2020[201](index=201&type=chunk) [Annual General Meeting and Share Transfer Registration](index=37&type=section&id=Annual%20General%20Meeting%20and%20Share%20Transfer%20Registration) The Company will hold its Annual General Meeting on June 11, 2021, and the register of members will be closed from June 8 to June 11, 2021, to determine shareholder eligibility - The Company will hold its 2021 Annual General Meeting on **June 11, 2021**[202](index=202&type=chunk) - The register of members will be closed from **June 8, 2021 to June 11, 2021** (both days inclusive) to determine the eligibility of shareholders to attend and vote at the Annual General Meeting[204](index=204&type=chunk) [Connected Transactions and Continuing Connected Transactions](index=38&type=section&id=Connected%20Transactions%20and%20Continuing%20Connected%20Transactions) The Group engaged in several connected transactions with its controlling shareholder, China Grand Auto, including sale-leaseback and property leasing framework agreements, all confirmed to comply with Listing Rules - The Group entered into a 2018 Sale-Leaseback Framework Agreement with China Grand Auto and its subsidiaries, with an annual cap of **RMB 1,800,000,000**[210](index=210&type=chunk) - The Group entered into the Baoxin Property Leasing Framework Agreement and the China Grand Auto Property Leasing Framework Agreement, both with an annual cap of **RMB 8,000,000** in 2020[211](index=211&type=chunk)[213](index=213&type=chunk) - The auditor has issued an unqualified letter regarding the continuing connected transactions, and the independent non-executive Directors have confirmed that these transactions were conducted on normal commercial terms or better in the ordinary course of business[214](index=214&type=chunk)[215](index=215&type=chunk) [Compliance with Laws and Regulations and Environmental, Social and Governance Policies](index=41&type=section&id=Compliance%20with%20Laws%20and%20Regulations%20and%20Environmental%2C%20Social%20and%20Governance%20Policies) The Group has complied with all relevant laws and regulations, established internal environmental policies with energy-saving measures, and is committed to sustainable development - For the year ended December 31, 2020, the Group has complied with all relevant laws and regulations that have a significant impact on the Group[219](index=219&type=chunk) - The Group complies with all relevant national and local environmental laws, has formulated internal environmental policies, and has taken measures for energy conservation, emission reduction, and waste recycling[220](index=220&type=chunk) - The Group will publish its Environmental, Social and Governance Report on the Stock Exchange's website within three months from the date of this annual report[220](index=220&type=chunk) [Directors' and Senior Management's Interests](index=41&type=section&id=Directors'%20and%20Senior%20Management's%20Interests) As of December 31, 2020, the Company's directors and chief executive held interests in the company's shares and underlying shares, primarily through a share option scheme - As at December 31, 2020, no director had a service contract with the Company which is not determinable within one year without payment of compensation[222](index=222&type=chunk) - No director had any interest in any business which competes or is likely to compete, either directly or indirectly, with the business of the Group[225](index=225&type=chunk) - The Company has a share option scheme to encourage and reward eligible participants who have contributed to the success of the Group[229](index=229&type=chunk) Interests of Directors or Chief Executive in Shares, Underlying Shares and Debentures as at December 31, 2020 | Name of Director/Chief Executive | Capacity/Nature of Interest | Number of Ordinary Shares | Number of Underlying Shares under Share Options | Approximate Percentage of Shareholding Interest in the Company | | :--- | :--- | :--- | :--- | :--- | | Wang Xinming | Beneficial owner | – | 3,600,000 (L) | 0.13% | | Lu Ao | Beneficial owner | – | 1,800,000 (L) | 0.06% | | Xu Xing | Beneficial owner | – | 1,800,000 (L) | 0.06% | [Substantial Shareholders' Interests](index=45&type=section&id=Substantial%20Shareholders'%20Interests) As of December 31, 2020, China Grand Automotive Service (Hong Kong) Limited and its affiliates held approximately 67.70% of the Company's issued share capital, making them the largest shareholder Interests of Substantial Shareholders in Shares and Underlying Shares as at December 31, 2020 | Name | Capacity/Nature of Interest | Number of Ordinary Shares | Approximate Percentage of Shareholding Interest in the Company | | :--- | :--- | :--- | :--- | | China Grand Automotive Service (Hong Kong) Limited | Beneficial interest | 1,921,117,571 (L) | 67.70% | | China Grand Automotive Service Co, Ltd | Interest in a controlled corporation | 1,921,117,571 (L) | 67.70% | | Shanghai Huiyong Automobile Sales Co, Ltd | Interest in a controlled corporation | 1,921,117,571 (L) | 67.70% | | China Grand Automotive Service Group Co, Ltd | Interest in a controlled corporation | 1,921,117,571 (L) | 67.70% | | Baoxin Investment Management Ltd | Beneficial interest | 219,379,630 (L) | 7.73% | | Mr Yang Aihua | Interest in a controlled corporation | 219,379,630 (L) | 7.73% | [Major Customers and Suppliers](index=46&type=section&id=Major%20Customers%20and%20Suppliers) In 2020, the Group's top five suppliers accounted for approximately 77.9% of total purchases, with the largest supplier representing about 42.2%, while no single customer reached 10% of revenue - For the year ended December 31, 2020, the total purchases from the Group's five largest suppliers accounted for approximately **77.9%** (2019: 78.8%) of the Group's total purchases, with the largest supplier accounting for about **42.2%** (2019: 41.2%)[249](index=249&type=chunk) - As sales to any single customer did not reach 10% or more of the Group's revenue during the year, no major customer segment information is presented[249](index=249&type=chunk) [Relationship with Stakeholders](index=47&type=section&id=Relationship%20with%20Stakeholders) The Company values its relationships with employees, customers, and business partners, striving to provide a fair work environment, quality services, and fulfill social responsibilities for sustainable development - The Company is committed to maintaining close ties with its employees, providing a fair working environment, competitive remuneration, and promotion opportunities[255](index=255&type=chunk) - The Company advocates a customer-centric service culture, values customer feedback, and has established mechanisms for handling customer service and support[255](index=255&type=chunk) - The Company has established close and stable cooperative relationships with leading global automakers and their joint ventures in China and actively fulfills its social responsibilities[255](index=255&type=chunk)[256](index=256&type=chunk) [Continuing Obligations under Chapter 13 of the Listing Rules](index=47&type=section&id=Continuing%20Obligations%20under%20Chapter%2013%20of%20the%20Listing%20Rules) The Company disclosed details of a 2018 facility agreement for a US$358 million term loan, which includes a "change of control" clause that could trigger immediate repayment - The Company and Baoxin Financing entered into a facility agreement on November 30, 2018, for a term loan facility totaling **US$358 million**[259](index=259&type=chunk) - The facility agreement contains a "change of control" clause, allowing lenders to cancel commitments and demand immediate repayment if China Grand Auto ceases to be the Company's single largest shareholder or no longer controls the Company[260](index=260&type=chunk)[261](index=261&type=chunk) [Auditor](index=48&type=section&id=Auditor) The Company's external auditor, Ernst & Young, will retire, and the Audit Committee has recommended their reappointment, which has been approved by the Board, subject to shareholder approval - The Company's external auditor, Ernst & Young, will retire[262](index=262&type=chunk) - The Audit Committee has recommended the reappointment of Ernst & Young as the Company's external auditor, which has been approved by the Board, subject to shareholder approval at the upcoming Annual General Meeting[262](index=262&type=chunk) [Independent Auditor's Report](index=49&type=section&id=Independent%20Auditor's%20Report) [Opinion](index=49&type=section&id=Opinion) The auditor concluded that the consolidated financial statements give a true and fair view of the Group's financial position as of December 31, 2020, and of its financial performance and cash flows, in accordance with HKFRS - In the auditor's opinion, the consolidated financial statements give a true and fair view of the consolidated financial position of the Group as at 31 December 2020, and of its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with Hong Kong Financial Reporting Standards[270](index=270&type=chunk) - The consolidated financial statements have been properly prepared in compliance with the disclosure requirements of the Hong Kong Companies Ordinance[270](index=270&type=chunk) [Basis for Opinion](index=49&type=section&id=Basis%20for%20Opinion) The audit was conducted in accordance with Hong Kong Standards on Auditing, and the auditor maintained independence and fulfilled ethical responsibilities, obtaining sufficient and appropriate audit evidence - The auditor conducted the audit in accordance with Hong Kong Standards on Auditing (HKSAs) issued by the Hong Kong Institute of Certified Public Accountants (HKICPA)[271](index=271&type=chunk) - The auditor is independent of the Group and has fulfilled other ethical responsibilities in accordance with the Code of Ethics for Professional Accountants[271](index=271&type=chunk) [Key Audit Matters](index=49&type=section&id=Key%20Audit%20Matters) The auditor identified goodwill impairment assessment and vendor rebates as the most significant matters in the audit of the consolidated financial statements due to their complex judgments and calculation procedures - Key audit matters included **goodwill impairment assessment** and **vendor rebates**[272](index=272&type=chunk) - **Goodwill impairment assessment** was a key matter because the management's impairment assessment process is complex and involves significant judgment, such as future cash flow projections, growth rates, and discount rates[275](index=275&type=chunk) - **Vendor rebates** were a key matter due to the significant balance of receivables and the complexity of the calculation procedures for accrued amounts[276](index=276&type=chunk) [Directors' and Auditor's Responsibilities](index=51&type=section&id=Directors'%20and%20Auditor's%20Responsibilities) The directors are responsible for preparing true and fair consolidated financial statements and for internal control, while the auditor is responsible for obtaining reasonable assurance that the statements are free from material misstatement - The directors of the Company are responsible for the preparation of consolidated financial statements that give a true and fair view in accordance with HKFRSs and the disclosure requirements of the Hong Kong Companies Ordinance, and for such internal control as the directors determine is necessary[281](index=281&type=chunk) - The auditor's objective is to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error[283](index=283&type=chunk) - The auditor exercises professional judgment and maintains professional skepticism throughout the audit, and identifies and assesses the risks of material misstatement[285](index=285&type=chunk) [Consolidated Statement of Profit or Loss](index=54&type=section&id=Consolidated%20Statement%20of%20Profit%20or%20Loss) [Overview of the 2020 Consolidated Statement of Profit or Loss](index=54&type=section&id=Overview%20of%20the%202020%20Consolidated%20Statement%20of%20Profit%20or%20Loss) In 2020, the Group's revenue was RMB 35,134,341 thousand, with a gross profit of RMB 1,750,085 thousand, profit for the year of RMB 200,682 thousand, and basic and diluted earnings per share of RMB 0.07 Key Data from the 2020 Consolidated Statement of Profit or Loss (RMB '000) | Indicator | 2020 | 2019 | | :--- | :--- | :--- | | Revenue | 35,134,341 | 36,463,878 | | Cost of sales and services rendered | (33,384,256) | (33,617,970) | | Gross profit | 1,750,085 | 2,845,908 | | Other income and gains, net | 1,082,446 | 869,641 | | Selling and distribution expenses | (1,108,724) | (1,210,639) | | Administrative expenses | (671,809) | (727,135) | | Operating profit | 1,051,998 | 1,777,775 | | Finance costs | (646,330) | (822,183) | | Profit before tax | 405,983 | 1,016,809 | | Income tax expense | (205,301) | (394,052) | | Profit for the year | 200,682 | 622,757 | | Profit attributable to owners of the parent | 211,418 | 629,202 | | Profit attributable to non-controlling interests | (10,736) | (6,445) | | Basic and diluted earnings per share (RMB) | 0.07 | 0.22 | [Consolidated Statement of Comprehensive Income](index=55&type=section&id=Consolidated%20Statement%20of%20Comprehensive%20Income) [Overview of the 2020 Consolidated Statement of Comprehensive Income](index=55&type=section&id=Overview%20of%20the%202020%20Consolidated%20Statement%20of%20Comprehensive%20Income) In 2020, the Group's profit for the year was RMB 200,682 thousand, with a net other comprehensive income of RMB 114,616 thousand, resulting in a total comprehensive income of RMB 315,298 thousand Key Data from the 2020 Consolidated Statement of Comprehensive Income (RMB '000) | Indicator | 2020 | 2019 | | :--- | :--- | :--- | | Profit for the year | 200,682 | 622,757 | | Net other comprehensive income | 114,616 | (51,007) | | Total comprehensive income for the year | 315,298 | 571,750 | | Comprehensive income attributable to owners of the parent | 326,034 | 578,195 | | Comprehensive income attributable to non-controlling interests | (10,736) | (6,445) | - The net other comprehensive income in 2020 was primarily affected by an exchange difference on translation of financial statements of **RMB 122,000 thousand**[294](index=294&type=chunk) [Consolidated Statement of Financial Position](index=56&type=section&id=Consolidated%20Statement%20of%20Financial%20Position) [Overview of the 2020 Consolidated Statement of Financial Position](index=56&type=section&id=Overview%20of%20the%202020%20Consolidated%20Statement%20of%20Financial%20Position) As of December 31, 2020, the Group's total assets were RMB 28,561,475 thousand, with net current assets of RMB 5,121,444 thousand and net assets of RMB 8,012,174 thousand Key Data from the 2020 Consolidated Statement of Financial Position (RMB '000) | Indicator | 31 December 2020 | 31 December 2019 | | :--- | :--- | :--- | | Total non-current assets | 8,939,579 | 9,140,356 | | Total current assets | 19,621,896 | 19,637,464 | | Total current liabilities | 14,500,452 | 17,389,319 | | Net current assets | 5,121,444 | 2,248,145 | | Total assets less current liabilities | 14,061,023 | 11,388,501 | | Total non-current liabilities | 6,048,849 | 3,691,322 | | Net assets | 8,012,174 | 7,697,179 | | Equity attributable to owners of the parent | 8,003,169 | 7,669,584 | | Non-controlling interests | 9,005 | 27,595 | | Total equity | 8,012,174 | 7,697,179 | - **Net current assets** increased significantly from RMB 2,248,145 thousand in 2019 to **RMB 5,121,444 thousand** in 2020[298](index=298&type=chunk) - **Total non-current liabilities** increased substantially from RMB 3,691,322 thousand in 2019 to **RMB 6,048,849 thousand** in 2020[298](index=298&type=chunk) [Consolidated Statement of Changes in Equity](index=58&type=section&id=Consolidated%20Statement%20of%20Changes%20in%20Equity) [Overview of the 2020 Consolidated Statement of Changes in Equity](index=58&type=section&id=Overview%20of%20the%202020%20Consolidated%20Statement%20of%20Changes%20in%20Equity) As of December 31, 2020, total equity attributable to owners of the parent was RMB 8,003,169 thousand, with a profit for the year of RMB 211,418 thousand and total comprehensive income of RMB 326,034 thousand Key Data from the 2020 Consolidated Statement of Changes in Equity (RMB '000) | Indicator | 1 January 2020 | Profit for the year | Total comprehensive income for the year | 31 December 2020 | | :--- | :--- | :--- | :--- | :--- | | Share capital | 23,277 | – | – | 23,277 | | Share premium | 2,372,982 | – | – | 2,372,982 | | Share option reserve | 100,296 | – | – | 110,049 | | Statutory reserve | 1,299,229 | – | – | 1,300,192 | | Merger reserve | (18,532) | – | – | (18,532) | | Other reserve | (2,185) | – | (7,384) | (14,715) | | Exchange fluctuation reserve | (634,246) | – | 122,000 | (512,246) | | Retained profits | 4,528,763 | 211,418 | 211,418 | 4,742,162 | | **Total attributable to owners of the parent** | **7,669,584** | **211,418** | **326,034** | **8,003,169** | | Non-controlling interests | 27,595 | (10,736) | (10,736) | 9,005 | | **Total equity** | **7,697,179** | **200,682** | **315,298** | **8,012,174** | - The exchange fluctuation reserve changed from **(RMB 634,246 thousand)** at the end of 2019 to **(RMB 512,246 thousand)** at the end of 2020, an increase of RMB 122,000 thousand during the year[301](index=301&type=chunk) - The acquisition of non-controlling interests during the year resulted in a decrease in equity of RMB 5,146 thousand and a decrease in non-controlling interests of RMB 7,854 thousand[301](index=301&type=chunk) [Consolidated Statement of Cash Flows](index=59&type=section&id=Consolidated%20Statement%20of%20Cash%20Flows) [Overview of the 2020 Consolidated Statement of Cash Flows](index=59&type=section&id=Overview%20of%20the%202020%20Consolidated%20Statement%20of%20Cash%20Flows) In 2020, the Group's net cash from operating activities was RMB 2,143,399 thousand, net cash used in investing activities was RMB 146,279 thousand, and net cash used in financing activities was RMB 1,694,828 thousand Key Data from the 2020 Consolidated Statement of Cash Flows (RMB '000) | Indicator | 2020 | 2019 | | :--- | :--- | :--- | | Net cash flows from operating activities | 2,143,399 | 662,250 | | Net cash flows (used in)/from investing activities | (146,279) | 76,143 | | Net cash flows used in financing activities | (1,694,828) | (1,614,092) | | Net increase/(decrease) in cash and cash equivalents | 302,292 | (875,699) | | Cash and cash equivalents at end of year | 1,939,507 | 1,663,106 | - **Net cash from operating activities** increased significantly YoY, from RMB 662,250 thousand in 2019 to **RMB 2,143,399 thousand**[303](index=303&type=chunk) - Investing activities shifted from a cash inflow in 2019 to a cash outflow in 2020, mainly due to reduced proceeds from the disposal of property, plant and equipment[305](index=305&type=chunk) - Net cash used in financing activities increased slightly, primarily due to larger repayments of bank and other borrowings[305](index=305&type=chunk) [Notes to the Financial Statements](index=61&type=section&id=Notes%20to%20the%20Financial%20Statements) [Corporate and Group Information](index=61&type=section&id=Corporate%20and%20Group%20Information) The Company is incorporated in the Cayman Islands with shares listed on the Hong Kong Stock Exchange, and its ultimate holding company is China Grand Auto, with the Group primarily engaged in automobile sales and services - The Company was incorporated in the Cayman Islands, and its shares were listed on the Main Board of The Stock Exchange of Hong Kong Limited on December 14, 2011[307](index=307&type=chunk) - The Group is principally engaged in automobile sales and services, and its ultimate holding company is China Grand Auto[307](index=307&type=chunk) - Major subsidiaries include NCGA Holdings Limited, Yan Jun Automobile Co, Ltd, and Shanghai Baoxin Automobile Sales and Service Co, Ltd, primarily engaged in investment holding or automobile sales and services[309](index=309&type=chunk)[311](index=311&type=chunk)[313](index=313&type=chunk)[315](index=315&type=chunk)[317](index=317&type=chunk)[319](index=319&type=chunk) [Basis of Preparation and Changes in Accounting Policies](index=67&type=section&id=Basis%20of%20Preparation%20and%20Changes%20in%20Accounting%20Policies) The financial statements are prepared in accordance with HKFRS under the historical cost convention and presented in RMB, with the Group adopting the revised HKFRS 16 and early applying the COVID-19-related rent concessions amendment - The financial statements have been prepared in accordance with Hong Kong Financial Reporting Standards (HKFRSs) issued by the Hong Kong Institute of Certified Public Accountants (HKICPA) and are presented in RMB[322](index=322&type=chunk) - The Group has adopted the Conceptual Framework for Financial Reporting 2018 and amendments to HKFRSs for the first time in the current year's financial report[327](index=327&type=chunk) - The Group early adopted the amendment to HKFRS 16 and elected not to apply lease modification accounting for rent concessions arising as a direct consequence of the COVID-19 pandemic, resulting in a reduction of **RMB 11,963,000** in rent concessions being recognised in profit or loss[328](index=328&type=chunk)[334](index=334&type=chunk) [Issued but not yet Effective Hong Kong Financial Reporting Standards](index=69&type=section&id=Issued%20but%20not%20yet%20Effective%20Hong%20Kong%20Financial%20Reporting%20Standards) The report lists several issued but not yet effective amendments to HKFRS, including the definition of a business, interest rate benchmark reform, and classification of liabilities, with some not expected to have a material impact - Issued but not yet effective standards include amendments to HKFRS 3 (Reference to the Conceptual Framework), amendments to HKFRS 9 (Interest Rate Benchmark Reform – Phase 2), and others[335](index=335&type=chunk) - The amendments for Interest Rate Benchmark Reform provide a practical expedient for changes in the basis for determining contractual cash flows of financial assets and liabilities, and are not expected to result in a significant modification gain or loss[339](index=339&type=chunk)[340](index=340&type=chunk) - Amendments to HKAS 1 clarify the requirements for classifying liabilities as current or non-current and are not expected to have any significant impact on the Group's financial statements[344](index=344&type=chunk) [Summary of Significant Accounting Policies](index=72&type=section&id=Summary%20of%20Significant%20Accounting%20Policies) This section outlines the Group's key accounting policies regarding investments in associates and joint ventures, business combinations, goodwill, fair value measurement, impairment, related parties, leases, financial instruments, and revenue recognition - The Group's investments in associates and joint ventures are accounted for using the equity method[348](index=348&type=chunk) - Business combinations are accounted for using the acquisition method, with goodwill initially measured at cost and tested for impairment annually[355](index=355&type=chunk)[356](index=356&type=chunk)[359](index=359&type=chunk) - Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses, with depreciation calculated on a straight-line basis over their estimated useful lives[368](index=368&type=chunk) - Investment properties are stated at fair value, with gains or losses from changes in fair value recognised in the statement of profit or loss[371](index=371&type=chunk)[372](index=372&type=chunk) - As a lessee, the Group recognises right-of-use assets and lease liabilities for all leases, except for short-term and low-value asset leases[378](index=378&type=chunk) - Financial assets are classified at initial recognition as subsequently measured at amortised cost, fair value through other comprehensive income, or fair value through profit or loss[390](index=390&type=chunk) - Revenue from contracts with customers is recognised when control of the goods or services is transferred to the customer, and vendor rebates are recognised as a deduction from the cost of sales on an accrual basis[435](index=435&type=chunk)[444](index=444&type=chunk) [Significant Accounting Judgements and Estimates](index=97&type=section&id=Significant%20Accounting%20Judgements%20and%20Estimates) The preparation of financial statements involves significant management judgments and estimates, including the timing of performance obligations, recognition of deferred tax assets, goodwill impairment, and fair value of investment properties - Management judges that the performance obligation for after-sales services is satisfied at a point in time, and revenue is recognised at that point[461](index=461&type=chunk) - The recognition of deferred tax assets depends on the timing and level of future taxable profits, with a carrying amount of **RMB 320,818,000** as at December 31, 2020[462](index=462&type=chunk) - Goodwill impairment testing requires estimating the value in use of cash-generating units, involving forecasts of future cash flows and the selection of a discount rate, with a goodwill carrying amount of **RMB 1,222,016,000** as at December 31, 2020[464](index=464&type=chunk) - The provision for expected credit losses on trade receivables and other financial assets is based on a provision matrix, considering historical default rates and forward-looking economic conditions[465](index=465&type=chunk)[466](index=466&type=chunk) - The estimation of the incremental borrowing rate for leases reflects the rate the Group would have to pay to borrow funds to obtain a similar asset in a similar economic environment[468](index=468&type=chunk) - The fair value of investment properties is assessed by an independent professional valuer using the discounted cash flow method, with key inputs including estimated rental values, growth rates, vacancy rates, and discount rates[469](index=469&type=chunk)[470](index=470&type=chunk) [Operating Segment Information](index=100&type=section&id=Operating%20Segment%20Information) The Group's principal business is automobile sales and services, which is operated as a single business unit, thus presenting one operating segment, with no geographical or major customer information presented - The Group's principal business is automobile sales and services, which is operated as a single business unit with one reportable segment[475](index=475&type=chunk) - As the majority of the Group's revenue is derived from automobile sales and services in Mainland China and the majority of its non-current assets are located there, no geographical information is presented[478](index=478&type=chunk) - During the year, no revenue from sales to a single customer amounted to 10% or more of the Group's revenue[479](index=479&type=chunk) [Revenue, Other Income and Gains, Net](index=101&type=section&id=Revenue%2C%20Other%20Income%20and%20Gains%2C%20Net) In 2020, the Group's total revenue was RMB 35,134,341 thousand, with automobile sales accounting for RMB 30,829,162 thousand, and net other income and gains were RMB 1,082,446 thousand Revenue Source Analysis for 2020 (RMB '000) | Revenue Source | 2020 Revenue | Contribution to Total Revenue (%) | 2019 Revenue | Contribution to Total Revenue (%) | | :--- | :--- | :--- | :--- | :--- | | Automobile sales | 30,829,162 | 87.7 | 31,687,726 | 86.9 | | After-sales business | 4,269,980 | 12.2 | 4,732,762 | 13.0 | | Finance lease services | 35,199 | 0.1 | 43,390 | 0.1 | | **Total revenue** | **35,134,341** | **100** | **36,463,878** | **100** | Other Income and Gains, Net for 2020 (RMB '000) | Item | 2020 | 2019 | | :--- | :--- | :--- | | Commission income | 1,048,545 | 745,028 | | Government grants | 86,176 | 58,838 | | Bank interest income | 16,513 | 33,084 | | Loss on disposal of items of property, plant and equipment | (33,204) | (10,373) | | Fair value (loss)/gain on investment properties | (4,791) | 27,239 | | Net foreign exchange differences | (151,776) | (59,015) | | **Total** | **1,082,446** | **869,641** | - Automobile sales revenue decreased by **2.7%** YoY, while after-sales business revenue decreased by **9.8%** YoY[480](index=480&type=chunk) - Net other income and gains increased by **24.5%** YoY, primarily driven by higher commission income and government grants[487](index=487&type=chunk) [Profit Before Tax](index=104&type=section&id=Profit%20Before%20Tax) The Group's profit before tax in 2020 was RMB 405,983 thousand, after deducting employee benefit expenses of RMB 962,619 thousand and cost of sales and services of RMB 33,384,256 thousand Composition of Profit Before Tax for 2020 (RMB '000) | Item | 2020 | 2019 | | :--- | :--- | :--- | | Total employee benefit expense | 962,619 | 1,099,848 | | Total cost of sales and services | 33,384,256 | 33,617,970 | | Depreciation of property, plant and equipment | 268,631 | 272,105 | | Depreciation of right-of-use assets | 234,889 | 213,809 | | Amortisation of other intangible assets | 61,712 | 61,811 | | Advertising and business promotion expenses | 242,504 | 268,039 | | Total impairment of financial assets | 33,778 | 23,694 | | Write-down of inventories to net realisable value | 36,791 | 19,589 | | Net foreign exchange differences | 151,776 | 59,015 | | Government grants | (86,176) | (58,838) | - Total employee benefit expense decreased by **12.5%** YoY, and the total cost of sales and services decreased by **0.7%** YoY[490](index=490&type=chunk) - Total impairment of financial assets and the write-down of inventories to net realisable value both increased[492](index=492&type=chunk) [Finance Costs](index=106&type=section&id=Finance%20Costs) The Group's finance costs in 2020 were RMB 646,330 thousand, a 21.4% decrease YoY, primarily comprising interest on bank and other borrowings and interest on lease liabilities Analysis of Finance Costs for 2020 (RMB '000) | Item | 2020 | 2019 | | :--- | :--- | :--- | | Interest on bank and other borrowings | 561,337 | 731,841 | | Loan arrangement fees | 37,314 | 79,899 | | Interest on lease liabilities | 84,993 | 90,342 | | **Total** | **646,330** | **822,183** | - Finance costs decreased by **21.4%** YoY, mainly due to a reduction in interest on bank and other borrowings[494](index=494&type=chunk) [Income Tax](index=106&type=section&id=Income%20Tax) The Group's income tax expense for 2020 was RMB 205,301 thousand, comprising current tax of RMB 284,854 thousand and deferred tax of (RMB 79,553) thousand, with subsidiaries in Mainland China subject to a 25% corporate income tax rate Income Tax Expense for 2020 (RMB '000) | Item | 2020 | 2019 | | :--- | :--- | :--- | | Current tax | 284,854 | 503,978 | | Deferred tax | (79,553) | (109,926) | | **Total tax expense for the year** | **205,301** | **394,052** | - Subsidiaries in Mainland China are subject to a **25%** corporate income tax rate, while two subsidiaries in Xinjiang are exempt, and 16 subsidiaries in Sichuan enjoy a **15%** rate[496](index=496&type=chunk) - The reconciliation of tax expense to accounting profit for 2020 shows unrecognised tax losses of **RMB 117,715 thousand** and a withholding tax impact of **RMB 26,427 thousand**[498](index=498&type=chunk)[499](index=499&type=chunk) [Directors' and Chief Executive's Remuneration](index=108&type=section&id=Directors'%20and%20Chief%20Executive's%20Remuneration) The total remuneration for directors and the chief executive in 2020 was RMB 4,415 thousand, including salaries, allowances, and benefits

Market Performance - In the first half of 2020, the Chinese passenger car market experienced a significant decline, with sales dropping by 43.6% year-on-year in January and February, totaling 1.831 million units[7]. - The luxury car market in China saw a slight increase in sales, reaching 1.04 million units in the first half of 2020, representing a year-on-year growth of 1%[7]. - For the first half of 2020, the total production and sales of passenger cars in China were 7.754 million and 7.873 million units, respectively, down 22.5% and 22.4% year-on-year[10]. - In June 2020, the production and sales of passenger cars reached 1.798 million and 1.764 million units, showing a year-on-year increase of 12.2% and 1.8%[10]. - The luxury car retail market in June 2020 recorded sales of 310,000 units, marking a year-on-year increase of 1.8% and a month-on-month increase of 6.3%[10]. Company Sales and Revenue - For the six months ended June 30, 2020, the company recorded revenue of approximately RMB 14.603 billion, a decrease of 15.9% year-on-year[29]. - New car sales totaled 42,362 units, representing a year-on-year decline of 21.9%, with new car sales revenue of RMB 12.760 billion, down 15.2% year-on-year[17]. - The sales of luxury and ultra-luxury vehicles amounted to 33,233 units, a decrease of 7,498 units year-on-year, contributing RMB 11.618 billion to sales revenue, down 13.5% year-on-year[17]. - The overall gross margin for new car sales was 1.4%, a decline of 0.6 percentage points compared to the previous year[17]. - After-sales service revenue was RMB 1.823 billion, down 20.5% year-on-year, accounting for 12.5% of total revenue, with a gross margin of RMB 742 million and a gross margin rate of 40.7%[19]. Financial Performance - Gross profit for the six months ended June 30, 2020, was RMB 937 million, a decrease of 31.1% compared to RMB 1.359 billion in the same period of 2019[37]. - Operating profit fell by 40.7% to RMB 546.4 million for the six months ended June 30, 2020, down from RMB 921.5 million in the previous year[39]. - Net profit for the six months ended June 30, 2020, decreased by 72.5% to RMB 86.8 million, compared to RMB 315.2 million in the same period of 2019[40]. - Cash and cash equivalents decreased by 27.6% to RMB 1.2037 billion as of June 30, 2020, from RMB 1.6631 billion at the end of 2019[42]. - Total current liabilities decreased to RMB 13,448,348,000 from RMB 17,389,319,000, representing a reduction of approximately 22.4% year-over-year[103]. Operational Efficiency and Strategy - The company aims to enhance its core competitiveness through refined management and continuous optimization of its business structure[8]. - The company anticipates that the sustained demand for automotive consumption upgrades and the expansion of luxury brand product lines will support long-term growth in the luxury car market[7]. - The group aims to enhance operational efficiency and optimize revenue structure while focusing on the luxury and ultra-luxury automotive sales service industry chain[57]. - The company adopted a more cautious approach to network expansion due to the impact of the automotive industry and the pandemic, selling three used car dealership points to optimize costs[28]. Employee and Management Information - As of June 30, 2020, the group had approximately 6,737 employees, down from 7,191 employees as of June 30, 2019[51]. - Total employee costs for the six months ended June 30, 2020, were approximately RMB 452.3 million, compared to RMB 543.3 million for the same period in 2019, representing a decrease of about 16.7%[51]. - The company emphasizes the importance of recruiting and training talented employees to maintain competitiveness in the market[51]. Shareholder and Stock Information - As of June 30, 2020, major shareholder Guanghui Auto Service (Hong Kong) Limited holds 1,921,117,571 shares, representing approximately 67.70% of the company's issued voting shares[73]. - Baoxin Investment Management Ltd. owns 219,379,630 shares, accounting for 7.73% of the company's issued voting shares[73]. - The company has a total of 66.01 million stock options remained unexercised, after accounting for 1.71 million options that were canceled during the reporting period[61]. Future Outlook - The automotive market is expected to gradually recover, driven by favorable policies and the release of pent-up demand due to the pandemic[57]. - The group plans to continue expanding in the automotive aftermarket and seize opportunities in the new energy vehicle market to ensure long-term stable development[57]. Debt and Financing - The debt-to-equity ratio improved to 59.9% as of June 30, 2020, compared to 67.5% at the end of 2019[50]. - Available but undrawn bank financing was approximately RMB 5.730 billion as of June 30, 2020, down from RMB 7.1895 billion at the end of 2019[46]. - The company borrowed RMB 3,520,000,000 from Baoxin Auto Finance I Limited, with a maturity of three years and an interest rate aligned with the People's Bank of China benchmark rate[181]. Related Party Transactions - The company engaged in related party transactions, purchasing goods totaling RMB 328,000 during the reporting period[174]. - The company reported a significant increase in receivables from related parties, totaling RMB 46,776,000 as of June 30, 2020[185].

Financial Performance - The total revenue for the year 2019 was RMB 36.4639 billion, with a gross profit of RMB 2.8459 billion, representing a gross margin of approximately 7.8%[12] - The profit attributable to the owners of the parent company was RMB 629.2 million, an increase of 13.1% compared to the previous year[12] - The EBITDA for 2019 was RMB 1.993 billion, reflecting a stable operational performance despite external challenges[10] - In 2019, the company recorded revenue of approximately RMB 36.4639 billion, a decrease of 0.9% year-on-year, with a gross profit of RMB 2.8459 billion, an increase of 2.1%[25] - The sales revenue from new vehicles was RMB 31.6877 billion, down 1.8% year-on-year, while the gross margin for new vehicle sales was 2.3%[28] - After-sales service revenue reached RMB 473.28 million, an increase of 5.1% year-on-year, contributing 13.0% to total revenue[30] - The gross profit from after-sales services was RMB 207.84 million, with a gross margin of 43.9%, a decrease of 1.4 percentage points compared to the previous year[30] - The company's derived business revenue was RMB 745 million, a decrease of 4.8% year-on-year[33] - Automotive sales revenue decreased by 1.8% due to external economic impacts, with weaker performance noted for the Jaguar Land Rover and Maserati brands in China[45] - After-sales service revenue increased by 5.1% from RMB 4.501 billion in 2018 to RMB 4.733 billion in 2019[47] - Gross profit for the year ended December 31, 2019, was RMB 2.846 billion, a 2.1% increase from RMB 2.785 billion in 2018[50] - Operating profit rose by 9.6% to RMB 1.778 billion for the year ended December 31, 2019, compared to RMB 1.622 billion in 2018[53] - Net profit increased by 11.8% to RMB 622.8 million for the year ended December 31, 2019, up from RMB 557.1 million in 2018[55] Market Trends and Strategy - The automotive production and sales in China decreased by 7.5% and 8.2% respectively in 2019, with total production and sales reaching 25.721 million and 25.769 million vehicles[13] - The luxury passenger car market in China is expected to continue growing, with a projected compound annual growth rate of 8-10%[13] - The company adopted a more cautious operational strategy, reducing inventory and optimizing brand structure to enhance profitability[13] - The company aims to consolidate its operational achievements and enhance its core competitiveness through refined management and continuous business structure optimization[13] - The group plans to focus on the luxury automotive dealership segment and expand its presence in the new energy vehicle market, leveraging strategic partnerships with leading automotive manufacturers[42] - The group is strategically cautious about network expansion, focusing on optimizing existing store management and improving operational efficiency[39] - The company is actively exploring new technologies and product innovations to stay competitive in the automotive market[159] - Future performance guidance will be contingent on market conditions and the company's strategic initiatives aimed at growth and profitability[151] Operational Efficiency and Management - The company plans to maintain its "customer service first" philosophy and adjust its development strategy in response to market trends[13] - The overall economic environment remains challenging, but the company is committed to seizing market opportunities and maximizing shareholder returns[13] - The group aims to enhance internal management systems and optimize dealership networks to ensure sustainable long-term development and improve shareholder returns[42] - The company has a strong governance structure with independent non-executive directors overseeing key committees, ensuring compliance and accountability[160][161] - The management team includes experienced executives with extensive backgrounds in the automotive industry, enhancing strategic decision-making capabilities[154][155][156][157] - The management team has a diverse educational background, contributing to a well-rounded approach to corporate governance and strategic planning[156][157] Financial Position and Capital Management - Cash and cash equivalents decreased by 35.1% to RMB 1.663 billion as of December 31, 2019, down from RMB 2.562 billion in 2018[58] - Inventory decreased by 15.2% to RMB 3.504 billion as of December 31, 2019, compared to RMB 4.132 billion in 2018[61] - Trade receivables increased to RMB 613.5 million as of December 31, 2019, from RMB 560.5 million in 2018, primarily due to an increase in insurance commission receivables[62] - The company's capital expenditure totaled RMB 673.2 million for the year ended December 31, 2019, down from RMB 776.2 million in 2018[60] - The available but undrawn bank financing was approximately RMB 7.189 billion as of December 31, 2019, compared to RMB 8.544 billion in 2018[64] - As of December 31, 2019, the debt-to-equity ratio was 67.5%, a decrease from 69.3% in 2018[66] - The total employee count as of December 31, 2019, was 7,210, down from 7,759 in 2018, with total employee costs approximately RMB 1.0891 billion, compared to RMB 1.1361 billion in 2018[67] Corporate Governance and Compliance - The board of directors must retire and be eligible for re-election at least every three years during the annual general meeting[92] - The audit committee held two meetings during the year ended December 31, 2019, to review financial statements and compliance procedures[97] - The remuneration committee conducted one meeting to assess the performance of executive directors and review the remuneration policy[100] - The nomination committee held one meeting to evaluate the independence of non-executive directors and review the board's composition[105] - The board of directors convened five meetings to discuss the company's financial and operational performance and future strategies[107] - The audit committee's responsibilities include reviewing the effectiveness of financial reporting procedures and internal controls[95] - The company ensures that financial statements are prepared in accordance with statutory requirements and applicable accounting standards[127] - The independent auditor's report on the financial statements is included in the annual report, ensuring transparency and accountability[128] - The company has implemented strict procedures for handling and disclosing insider information, ensuring compliance with relevant regulations[134] - The company emphasizes the importance of transparent communication with shareholders to improve investor relations and facilitate informed investment decisions[149] Shareholder Engagement and Dividends - The company is committed to maintaining ongoing dialogue with shareholders, particularly through annual and special general meetings[149] - The company has a process in place for shareholders to propose special meetings and submit resolutions for consideration[143] - The company has adopted a dividend policy without a predetermined payout ratio, with dividends subject to board recommendation based on financial conditions[151] - The board of directors did not recommend the distribution of a final dividend for the year ended December 31, 2019[177] Environmental and Social Responsibility - The company has implemented internal environmental policies and measures for energy conservation and waste recycling to minimize emissions and waste[196] - The company plans to publish an environmental, social, and governance report detailing its performance in these areas within three months of the annual report publication date[196]

Automotive Sales and Market Trends - In the first half of 2019, China's passenger car sales reached 10.127 million units, a year-on-year decline of 14.0%[20] - The luxury car segment, however, saw a sales increase of 15.6%, totaling 1.53 million units sold[20] - The luxury car market is expected to maintain a growth rate of nearly 10% in the second half of 2019 due to ongoing consumer demand upgrades and favorable policies[20] - In the first half of 2019, the production and sales of passenger cars in China were 9.978 million and 10.127 million units, respectively, reflecting a decrease of 1.876 million and 1.648 million units compared to the previous year[23] - The total number of motor vehicles in China reached 340 million by June 30, 2019, with private car ownership at 198 million units[21] Financial Performance - In the first half of 2019, the company recorded operating revenue of approximately RMB 17,348.2 million, a year-on-year increase of 2.2%[28] - The company achieved a financial services revenue of RMB 128.4 million, a 16.2% increase compared to RMB 110.5 million in the same period last year[34] - The company's operating profit for the six months ended June 30, 2019, rose by 12.5% to RMB 924.9 million[50] - Net profit decreased by 12.0% to RMB 318.6 million for the same period, impacted by various factors[52] - The gross profit margin for the six months ended June 30, 2019, was 7.8%, slightly up from 7.7% in the previous year[48] Revenue Breakdown - Automotive sales contributed RMB 15.038 billion, accounting for 86.7% of total revenue, while after-sales services contributed RMB 2.289 billion, representing 13.2%[44] - New car sales revenue amounted to RMB 15,037.9 million, a year-on-year increase of 1.3%, with luxury and ultra-luxury car sales contributing RMB 13,436.5 million, up 3.1%[29] - After-sales service revenue was RMB 2,288.9 million, a year-on-year increase of 8.2%, accounting for 13.2% of total revenue[32] Inventory and Assets - As of June 30, 2019, the company's inventory was RMB 3.4599 billion, a decrease of 16.2% from RMB 4.1267 billion as of December 31, 2018[56] - The average inventory turnover days decreased from 48.3 days in the same period of 2018 to 42.7 days[56] - The total number of motor vehicle transfer registrations reached 11.97 million, with car transfer registrations accounting for 97.4%, an increase of 14.14% year-on-year[27] Debt and Liabilities - As of June 30, 2019, the company's interest-bearing bank and other borrowings amounted to RMB 10.7203 billion, an increase of RMB 1.0498 billion from RMB 9.6705 billion as of December 31, 2018[58] - The company's debt-to-equity ratio as of June 30, 2019, was 64.1%, down from 69.3% as of December 31, 2018[61] - Total current liabilities increased to RMB 15,554,809,000 from RMB 14,150,403,000, representing a growth of approximately 9.9% year-over-year[110] Shareholder Information - As of June 30, 2019, major shareholders hold 67.70% of the company's voting shares, amounting to 1,921,117,571 shares[79] - Baoxin Investment Management Ltd. holds a beneficial interest of 7.73%, equivalent to 219,379,630 shares[79] Employee and Operational Costs - The total employee cost for the six months ended June 30, 2019, was approximately RMB 541.2 million, compared to RMB 532.8 million for the same period in 2018[62] - The company reported employee benefits expenses of RMB 546,768,000 for the six months ended June 30, 2019, compared to RMB 538,055,000 for the same period in 2018, showing a slight increase of about 1.3%[155] Future Outlook and Strategic Plans - The company plans to optimize its business structure and enhance core competitiveness through strategic adjustments and focusing on key brands and regions[21] - The automotive industry is expected to undergo significant changes driven by macroeconomic factors, emerging technologies, and consumption upgrades, with a shift from quantity growth to quality improvement[67] - The company aims to strengthen its after-sales and derivative business scale effects while maintaining healthy business growth[67] Financing and Capital Management - The company secured a financing agreement in May 2017 for a maximum principal amount of $763.4 million, which can be increased by up to $86.6 million through an over-allotment option[85] - In November 2018, the company entered into a financing agreement totaling $358 million, which can be increased to a maximum of $800 million[89] Stock Options and Share Issuance - The company has a stock option plan effective from December 14, 2011, valid for ten years, allowing a maximum of 10% of issued shares at listing date to be granted as unexercised options[16] - As of June 30, 2019, the total fair value of granted stock options was RMB 101,741,000, with an expense of RMB 21,490,000 recognized for the six months ended June 30, 2019[193] Related Party Transactions - The group engaged in related party transactions, purchasing goods from various companies, totaling RMB 201,000 from Guangxi Hongtian Automobile Sales Service Co., Ltd. and RMB 225,000 from Daqing Zunrong Jielu Automobile Sales Service Co., Ltd. for the period ended June 30, 2019[200] - Sales of goods to related parties included RMB 20,000 from Shaanxi Jiahao Jinding Automobile Service Co., Ltd. and RMB 7,000 from other subsidiaries controlled by Guanghui Automobile, showing a decrease from previous year figures[200]