HATH CHINA LEON INSPECTION HOLDING LIMITED 中国力鸿检验控股有限公司 (Incorporated in the Cayman Islands with limited liability) (於開曼群島註冊成立的有限公司) Stock Code 股份代號：1586 202 Annual Report 年 | --- | --- | --- | |------------------------------------------------------------|------------------------|----------| | | | Contents | | | | 目錄 | | | | | | Corporate Information | 公司資料 | 2 | | Profile of Directors and Senior Management | 董事及高級管理人員簡介 | 5 | | Corporate Profile | 公司概況 | 13 | | Chairman's Statement | 主席報告 | 14 | | Manageme ...

H域H CHINA LEON INSPECTION HOLDING LIMITED 中国 力 鸿 检 验 控 股 有 限 公 司 (Incorporated in the Cayman Islands with limited liability) (於開曼群島註冊成立的有限公司) Stock Code 股份代號：1586 02 Interim Report 中期報告 Contents 目錄 2 Definitions 釋義 4 Corporate Information 公司資料 7 Management Discussion and Analysis 管理層討論與分析 13 Additional Information 補充資料 24 Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income 簡明綜合損益及其他全面收益表 25 Condensed Consolidated Statement of Financial Position 簡明綜合財務狀況表 27 Condensed Consolidat ...

HAQAH CHINA LEON INSPECTION HOLDING LIMITED 中国力鸿检验控股有限公司 (Incorporated in the Cayman Islands with limited liability) (於開曼群島註冊成立的有限公司) Stock Code 股份代號：1586 2019 Annual Report 年報 Contents 目錄 | --- | --- | |------------------------------------------------------------|------------------------| | | | | Definitions | 釋義 | | Corporate Profile | 公司概況 | | Corporate Information | 公司資料 | | Financial Highlights | 財務摘要 | | Financial Summary | 財務概要 | | Chairman's Statement | 主席報告 | | Profile of Directors and Senior Manag ...

Financial Performance - The interim report covers the six months ended June 30, 2019, providing a comprehensive financial overview [5] - For the six months ended June 30, 2019, the Group's revenue increased by 68.7% to approximately RMB 171.8 million, up from RMB 101.9 million in the same period of 2018 [42] - The gross profit for the same period increased by 49.9% to approximately RMB 81.3 million, while the gross profit margin decreased from 53.2% to 47.3% [47] - The Group's profit for the Period increased by 73.4% from approximately RMB 7.4 million for the six months ended 30 June 2018 to approximately RMB 12.7 million in the Period, driven by a significant rise in overall business volume [50] - Revenue for the six months ended June 30, 2019, was RMB 171,847,000, an increase of 68.5% compared to RMB 101,895,000 for the same period in 2018 [162] - Gross profit for the same period was RMB 81,269,000, representing a gross margin of 47.3% [162] - Profit for the period was RMB 12,746,000, up 73.5% from RMB 7,352,000 in the prior year [162] - Total comprehensive income for the period was RMB 13,789,000, compared to RMB 7,809,000 in the previous year, reflecting a growth of 76.5% [162] - Basic earnings per share for the period was RMB 3.34 cents, an increase from RMB 2.86 cents in the same period last year [162] Market Expansion and Strategic Initiatives - The company reported a significant expansion into the South Asia market as part of its strategic plan under the "Belt & Road Initiative" [27] - The company aims to leverage its existing infrastructure to support future growth and market expansion initiatives [26] - In May 2019, China Leon acquired Saybolt (Singapore) Pte Ltd., expanding its laboratory testing and inspection services in Singapore, Malaysia, and Indonesia [30] - In June 2019, China Leon won the bid for the overseas supervision business of Datang Hong Kong, enhancing its overseas business operations [31] - The company plans to enhance service capabilities and expand coverage through investments, joint ventures, and acquisitions, with a focus on globalization and diversification [97] - The company aims to provide comprehensive quality management services covering the entire supply chain, aligning with China's national strategy for high-quality development [37] Financial Position and Assets - As of June 30, 2019, the Group had cash and cash equivalents of RMB 84.6 million, indicating a strong financial position to support operations [60] - Trade and bills receivables increased significantly from approximately RMB 42.3 million to RMB 82.2 million, reflecting a substantial growth in business scale [58] - Total assets less current liabilities amounted to RMB 238,429,000, compared to RMB 211,193,000 at the end of 2018 [166] - Non-current assets increased to RMB 209,449,000 from RMB 166,819,000, reflecting a growth of 25.5% [164] - The company’s retained profits increased to RMB 95,911,000 as of June 30, 2019, from RMB 86,549,000 in the previous year, which is an increase of about 10.0% [169] Corporate Governance and Compliance - The report emphasizes the importance of maintaining compliance with the Listing Rules of the Hong Kong Stock Exchange [5] - The company has complied with the corporate governance code provisions, except for the deviation regarding the roles of chairman and CEO being held by the same individual [107] - The audit committee has reviewed the unaudited interim condensed consolidated statements for the period [112] - The Company has established an audit committee in accordance with the Listing Rules to ensure high standards of corporate governance [117] - The Board confirmed compliance with the "Standard Code" during the reporting period [115] Employee and Operational Growth - The Group had a total of 1,260 employees as of June 30, 2019, compared to 841 employees as of June 30, 2018, reflecting a growth of approximately 50% [82] - Selling, distribution and administrative expenses increased from approximately RMB 41.2 million to approximately RMB 57.3 million, primarily due to higher costs from overseas acquisitions and increased R&D expenditure [53] Financial Instruments and Risks - The Group's credit risk is primarily managed through credit verification procedures for all customers, ensuring no significant bad debt risk is faced [76] - The Group is exposed to foreign currency risk primarily from transactions denominated in Hong Kong dollars and United States dollars [78] - The maximum credit risk associated with the Group's financial assets is equivalent to their carrying amount [76] Accounting Policies and Standards - The Group has applied IFRS 16 for the first time in the interim period, which supersedes IAS 17 "Leases" and related interpretations [182] - The application of new and amended IFRSs has had no material impact on the Group's financial performance and positions for the current and prior periods [184] - The accounting policies used in the interim financial statements are consistent with those presented in the annual financial statements for the year ended December 31, 2018 [182] - Lease liabilities include fixed payments, variable payments based on indices, residual value guarantees, and penalties for terminating leases [198] Share Capital and Ownership - The stock code for China Leon Inspection Holding Limited is 1586, indicating its listing on the Hong Kong Stock Exchange [25] - As of June 30, 2019, the issued share capital of the Company was 400,000,000 shares [131] - The interests of Directors and Chief Executive in shares included 225,810,000 shares held jointly by Mr. LI Xiangli, Ms. ZHANG Aiying, and Mr. LIU Yi, representing approximately 56.45% of the issued share capital of the Company [122][126] - The Company had granted a total of 11,000,000 Share Options under the Share Option Scheme, with 850,000 lapsing [153] - The Share Option Scheme aims to reward contributions and retain valuable human resources for the Group [155]

Company Overview - China Leon Inspection Holding Limited is the first PRC third-party inspection and testing service provider listed on the Hong Kong Stock Exchange, with stock code 1586[10]. - The company holds the largest market share in China's coal testing and inspection industry, maintaining long-term relationships with reputable customers[12]. - The company offers a comprehensive range of services, including inspection and testing for coal quality assurance, surveying for contract fulfillment, and ancillary services to prevent dishonest activities[11]. - China Leon is committed to providing world-class services through strict standards and industry-leading technical equipment[10]. - The company has a vast service center network located at major coal-trade ports in China, enhancing its service capabilities[12]. - The company aims to become the world's leading international third-party independent inspection and testing service provider[13]. Strategic Plans and Development - The strategic plans include consolidating the leading position in the coal testing industry, upgrading service center networks, strengthening research and development, and pursuing strategic acquisitions[13]. - The company plans to strengthen its service center network and enhance R&D efforts as part of its strategic direction[15]. - The company is focused on expanding its service coverage through strategic investments and acquisitions[13]. - The Group plans to further expand into upstream and downstream related markets for commodities and innovate in supply chain quality management in 2019[37]. - The establishment of service centers in upstream coal production areas and inland downstream areas reflects the Group's strategy to explore new business models[30]. - The Group's expansion into import and export inspection services now includes minerals, petrochemicals, and agricultural products, marking the beginning of diversified business development[30]. Financial Performance - Revenue for 2018 amounted to approximately RMB233.8 million, representing an increase of 16.4% from approximately RMB200.9 million recorded in 2017[17]. - Gross profit for 2018 amounted to approximately RMB122.9 million, representing an increase of 11.0% from approximately RMB110.7 million recorded in 2017[17]. - Profit attributable to owners of the parent for 2018 amounted to approximately RMB14.0 million, representing a decrease of 60.7% from approximately RMB35.6 million recorded in 2017[17]. - Net profit for 2018 was RMB4.9 million, representing a decrease of 85.9% compared to 2017[26]. - Total assets as of 31 December 2018 were RMB328.9 million, an increase from RMB254.4 million in 2017[21]. - Total liabilities as of 31 December 2018 were RMB131.9 million, an increase from RMB56.1 million in 2017[21]. - The gross profit margin decreased from 55.1% in 2017 to 52.6% in 2018[90]. - The Group's profit for the year decreased by 85.9%, from approximately RMB34.7 million in 2017 to approximately RMB4.9 million in 2018, primarily due to the expansion of its testing and inspection business through overseas acquisitions[126]. Research and Development - Significant investment in research and development led to the automation of coal testing processes, including the development of an automated coal testing laboratory and a mobile standardized coal laboratory[31]. - The new information system "LEON LIMS 1.0" has improved operational efficiency by enabling informatization management throughout the entire coal inspection process[31]. - The company emphasizes the importance of technological improvements and R&D collaboration to achieve competitive advantages in the market[111]. - Continued investment in research and development led to the upgrade of traditional coal testing to fully automated testing systems, enhancing service capabilities[96]. Leadership and Governance - The Board consists of eight Directors, including four executive Directors, one non-executive Director, and three independent non-executive Directors[50]. - Mr. Li Xiangli, aged 56, is the Chairman, CEO, and an executive Director, responsible for strategic planning and overall management since his appointment on January 13, 2016[52]. - The Company has a strong leadership team with extensive industry experience, enhancing its strategic capabilities[52][56]. - The Board's composition includes a balance of executive and independent directors, ensuring effective governance[50]. - The roles of chairman and CEO are held by the same individual, Mr. LI Xiangli, which deviates from the CG Code provision A.2.1[178]. - The Chairman and CEO, Mr. Li Xiangli, holds both positions, which the board believes enhances decision-making efficiency and opportunity capture[181]. Market Environment - The coal testing and inspection industry is expected to develop steadily due to tightened regulations and a favorable market environment[24]. - The demand for power generation is expected to grow more rapidly in 2019, while coal consumption and trading volume may see slight growth[87]. - The industry and market environment in 2019 is projected to be favorable for the future business development of the company[87]. Operational Efficiency - The company plans to enhance service capabilities through strategic acquisitions and joint ventures, focusing on opportunities that can improve service coverage[115]. - Future strategies include leveraging technology and automation to improve service capabilities and customer experience, aiming to increase market share[101]. - The Group's finance costs increased by 281.4% from approximately RMB0.7 million in 2017 to RMB2.6 million in 2018 due to costs incurred from an interest-bearing Secured Guaranteed Note issued in 2018[126]. Financial Position - The Group's financial position remains strong, with sufficient resources to support operations and meet foreseeable capital expenditures[146][150]. - Total debt increased significantly from RMB 17,742,000 in 2017 to RMB 76,085,000 in 2018, representing a growth of 328.5%[161]. - The gearing ratio rose sharply from 8.9% in 2017 to 38.6% in 2018, indicating a higher level of financial leverage[161].