Financial Performance - Profit for the year increased to RMB 91.0 million in 2023, up from RMB 26.3 million in 2022, representing a growth of 245%[1] - EBITDA for the year reached RMB 308.6 million, compared to RMB 233.8 million in 2022, reflecting a year-over-year increase of 32%[1] - The Group's consolidated profit for the Reporting Period amounted to RMB 91.0 million, representing a year-on-year increase of 246.0% from RMB 26.3 million in 2022[139] - Adjusted EBITDA recorded a year-on-year increase of 35.0% to RMB 291.3 million, up from RMB 215.8 million in 2022[151] - The overall operating margin increased from 14.2% in 2022 to 17.8% for the Reporting Period due to stringent cost control policies[133] Revenue Growth - In 2023, Guangdong Kanghua Healthcare Co., Ltd. reported a revenue of RMB 2,041,858,000, representing a year-on-year increase of 10.6%[102] - The hospital services segment recorded revenue of RMB 1,887.9 million, a year-on-year increase of 9.7%, achieving the highest revenue since 2019[121] - Revenue from cardiovascular related disciplines increased to RMB 271,010,000 in 2023, up from RMB 206,477,000 in 2022, representing a year-on-year growth of 31.2%[90] - Revenue from other clinical disciplines reached RMB 478,540,000 in 2023, compared to RMB 422,933,000 in 2022, marking a growth of 13.2%[90] - Revenue from rehabilitation and other related healthcare services reached RMB 141.2 million, marking a year-on-year increase of 26.4% from RMB 111.7 million in 2022[194] Asset Management - The Group's net assets position was RMB 1,497.5 million as of December 31, 2023, slightly down from RMB 1,514.5 million in 2022[14] - The Group recorded net current assets of RMB 328.8 million in 2023, an increase from RMB 289.6 million in 2022[12] - The Group's finance costs decreased to RMB 12.1 million in 2023 from RMB 15.0 million in 2022, showing improved cost management[1] - The Group's cash management policy includes purchasing investment products to achieve higher interest income without interfering with business operations[28] Investment and Expansion Plans - The group plans to allocate RMB 70.4 million for the expansion of current operations and upgrading hospital facilities by the end of December 31, 2024[22] - An investment of RMB 281.7 million is intended for expanding operating capacity and capabilities in multi-disciplinary specialized treatment and diagnosis by the end of December 31, 2024[22] - The group aims to expand healthcare operations in China through selective mergers and acquisitions, with an allocation of RMB 273.9 million for this purpose by the end of December 31, 2024[22] - The Group's investment strategy includes exploring new potential investment projects and capital market investments to diversify business risk and maximize shareholder value[44] Operational Efficiency - The net cash generated from operating activities was RMB 204.2 million in 2023, a year-on-year decrease of 7.8% compared to RMB 221.4 million in 2022, primarily due to changes in working capital[32] - The Group's total income tax paid during the Reporting Period was RMB 52.1 million, slightly up from RMB 51.6 million in 2022[51] - The net cash flows used in financing activities amounted to RMB 55.6 million, a decrease from RMB 110.9 million in 2022, primarily due to new bank loans raised of RMB 68.2 million[54] Patient Services and Experience - Patient visits increased significantly, with outpatient visits reaching 1,530,200 in 2023, compared to 1,456,100 in 2022[104] - The Group's hospitals have committed increased efforts in marketing and promotion, leading to an increase in inpatient visits following the relaxation of pandemic-related measures[116] - Renkang Hospital is focused on optimizing medical services and enhancing patient experience, with plans to continue improving its medical capabilities and quality standards in 2024[169] Market Trends and Government Support - The healthcare market in China is expected to grow steadily, driven by rising incomes and an aging population, as outlined in the "Healthy China 2030" initiative[108] - The government continues to support private healthcare participation, creating opportunities for innovative service providers to address public healthcare gaps[111] - Regulatory bodies have introduced policies to increase supply and strengthen the public healthcare system to meet basic medical needs[128]

Financial Performance - Revenue for the reporting period increased by 10.6% to RMB 2,041.9 million (2022: RMB 1,845.6 million) [5] - Profit for the reporting period increased by 246.0% to RMB 91.0 million (2022: RMB 26.3 million) [5] - Profit attributable to owners of the company increased by 102.8% to RMB 121.1 million (2022: RMB 59.7 million) [5] - Adjusted EBITDA increased by 35.0% to RMB 291.3 million (2022: RMB 215.8 million) [5] - The company's revenue for 2023 reached RMB 2,041,858 thousand, a 10.6% increase from RMB 1,845,633 thousand in 2022 [21] - Gross profit for the year was RMB 364,370 thousand, up from RMB 261,350 thousand, reflecting a significant improvement in profitability [21] - The net profit for the year amounted to RMB 91,023 thousand, compared to RMB 26,284 thousand in the previous year, indicating a substantial growth of 246.5% [21] - Basic and diluted earnings per share were both RMB 36.2, an increase from RMB 17.9 in 2022 [21] - The group reported a consolidated profit for the period of RMB 91.0 million, a significant increase of 246.0% compared to RMB 26.3 million in 2022 [92] - Adjusted EBITDA increased by 35.0% to RMB 291.3 million, up from RMB 215.8 million in 2022, indicating strong core business performance [93] Assets and Liabilities - Non-current assets totalled RMB 1,529.5 million, a decrease from RMB 1,594.8 million in the previous year [7] - Current assets totalled RMB 1,095.5 million, down from RMB 1,124.5 million in the previous year [7] - Current liabilities decreased to RMB 766.7 million from RMB 834.9 million in the previous year [7] - Net current assets increased to RMB 328.8 million from RMB 289.6 million in the previous year [7] - Non-current liabilities totaled RMB 360,760 thousand, slightly down from RMB 369,821 thousand in the previous year [22] - The company's net asset value was RMB 1,497,527 thousand, a decrease from RMB 1,514,528 thousand in 2022 [22] Dividends - The board does not recommend the payment of a final dividend for the reporting period [5] - The company has not declared or proposed any dividends for the year, consistent with the previous year [38] Operational Efficiency - The company continues to focus on expanding its healthcare services and enhancing operational efficiency [6] - The group has engaged Silver Mountain Capital for a 20-year management arrangement to enhance operational efficiency at Kangxin Hospital [199] Employee and Costs - Total employee costs increased to RMB 635,071,000 in 2023, up from RMB 624,332,000 in 2022, reflecting a growth of approximately 1.2% [61] - The company reported a decrease in administrative expenses to RMB 242,391 thousand from RMB 228,323 thousand [21] - Financing costs decreased to RMB 12,055 thousand from RMB 15,043 thousand, indicating improved cost management [21] - Administrative expenses increased by approximately 6.2% year-on-year to RMB 242.4 million, primarily due to a 47.2% rise in management and consulting fees to RMB 23.5 million [157] Service Segments - The group primarily operates in China, providing hospital services, rehabilitation, and elderly care services [23] - The group’s total revenue and performance analysis is segmented by the types of services provided, focusing on hospital services, rehabilitation, and elderly care [53] - The company operates three main business segments: hospital services, rehabilitation and other medical services, and elderly medical services, focusing on providing quality healthcare [85] - The elderly medical services segment includes a comprehensive elderly care center with 108 beds, aimed at addressing the growing demand for elderly care services in Dongguan, China [87] - The rehabilitation and related medical services segment recorded annual revenue of RMB 141.2 million, a year-on-year increase of 26.4% from RMB 111.7 million in 2022 [91] - Revenue from inpatient medical services reached RMB 1,079.6 million, a year-on-year increase of 16.5%, accounting for 52.9% of total revenue [179] - The hospital services segment recorded revenue of RMB 1,887.9 million, a 9.7% increase from RMB 1,721.5 million in 2022, marking the highest revenue since 2019 [117] Patient Statistics - Total inpatient visits increased to 74,337, a year-on-year growth of 17.9% from 63,053 in 2022 [94] - The overall bed occupancy rate rose to 71.9%, up from 62.2% in 2022, due to the increase in inpatient numbers [94] - The total number of outpatient visits increased to 1,530,169, reflecting a year-on-year increase of 5.1% from 1,456,072 in 2022 [94] - The total number of surgical procedures performed increased to 48,105, representing a year-on-year growth of 13.6% from 42,346 in 2022 [94] Strategic Developments - The company is focused on developing its large-scale healthcare concept business in response to the aging population in China, which presents significant growth potential in the healthcare and elderly care sectors [87] - The company is exploring reforms in medical insurance payment methods to improve efficiency and address low reimbursement rates [127] - The group is positioned to benefit from the increasing demand for high-quality medical services due to an aging population and expanding middle class in China [138] - The group is developing a new elderly healthcare complex in Dongguan, which began construction in 2021 to meet the growing medical service needs in Guangdong Province [141] Acquisitions - The group acquired 70% of Dongguan Kanghua Hemodialysis Medical Investment Management Co., Ltd. for RMB 7.7 million, with the acquisition completed on January 9, 2024 [111] - The acquisition of 40% equity in Kangxin Hospital for RMB 108.0 million, completed in November 2023, making it a wholly-owned subsidiary [145] - The acquisition of the Kanghua Hemodialysis Group is expected to create synergies and enhance profitability and efficiency for both entities [144] Future Outlook - The company aims to optimize medical services and enhance patient safety and quality management in 2024 [125] - The company plans to focus on high-quality, high-tech VIP medical services as a growth driver in 2024 [170] - The group plans to enhance service quality and aims for a five-star elderly care institution certification in 2024 [135] - The company plans to complete the first phase of the Kanghua Qingxi Hospital project by April 2024, with operations expected to commence by March 2025 [172]

Financial Performance - The Group's consolidated revenue for the reporting period was RMB987.5 million, a year-on-year increase of 14.5% from RMB862.7 million for the six months ended June 30, 2022[10]. - The Group recorded a consolidated profit of RMB29.4 million for the reporting period, compared to a loss of RMB22.3 million in the same period last year[10]. - Adjusted EBITDA increased by 98.1% to RMB129.2 million, up from RMB65.2 million for the six months ended June 30, 2022, indicating solid core operations[13]. - The overall operating profit margin improved from 10.3% to 17.3% during the reporting period[37]. - Total gross profit increased to RMB171.0 million, representing a 93.2% increase from RMB88.5 million in the previous period, with a gross profit margin rising to 17.3%[114]. Revenue Breakdown - Revenue from rehabilitation and other healthcare services increased by 22.9% to RMB60.7 million, driven by higher patient intake and expansion of rehabilitation centers[11]. - Kanghua Hospital's revenue reached RMB765.0 million, representing a 17.1% increase from RMB653.2 million in the same period last year, primarily due to increased patient visits[15]. - Revenue from VIP healthcare services grew by 21.3% to RMB61.0 million, compared to RMB50.3 million for the six months ended June 30, 2022, reflecting recovery in demand[24]. - Revenue from special services, targeting high-income patients, reached RMB916 million, reflecting a 6.8% increase from RMB857 million in the previous year[45]. - Inpatient healthcare services generated revenue of RMB547.4 million, a 23.2% increase compared to RMB444.3 million for the same period in 2022, accounting for 55.4% of total revenue[84]. Patient Statistics - The number of surgeries performed increased to 19,714, up from 17,826 in the same period last year, with complex surgeries rising by 10.6% and 78.9% respectively[21]. - Inpatient visits increased by 17.6% to 35,012, while outpatient visits rose by 3.8% to 718,641 during the first half of 2023[39]. - The total number of outpatient visits increased to 718,641, marking a 3.8% rise from 692,141[194]. - The total number of surgical operations increased to 19,714, representing a 10.6% increase from 17,826[194]. Cost and Expenses - The Group's overall cost of revenue for hospital services rose to RMB761.2 million, a 4.9% increase from RMB725.6 million in the same period of 2022[62]. - The cost of revenue for the rehabilitation and other healthcare services segment increased to RMB51.2 million, a 15.6% rise from RMB44.3 million in the previous year[61]. - Administrative expenses amounted to RMB125.6 million, representing a period-on-period increase of approximately 8.9% from RMB115.3 million in the same period of 2022[65]. - Finance costs for the Reporting Period decreased by 25.6% to RMB6.4 million, down from RMB8.6 million in the previous year[66]. Debt and Financing - As of June 30, 2023, the Group had bank loan facilities totaling RMB620.0 million for the Phase II medical facility and RMB330.0 million for the Kanghua Qingxi Healthcare Complex, with RMB376.1 million drawn down[1]. - As of June 30, 2023, the Group's debt-to-equity ratio was 19.2%, up from 18.5% on December 31, 2022[54]. - A financial leasing agreement of RMB200.0 million was established, with RMB66.0 million drawn down as of 30 June 2023, at an effective interest rate of 6.74%[79]. Operational Efficiency - The Group is focusing on optimizing medical services and improving operational efficiency for the remainder of 2023[50]. - The establishment of a new elderly healthcare complex in Dongguan is aimed at enhancing high-end comprehensive medical care services to meet growing demand in Guangdong Province[52]. - The Group's management emphasizes stringent cost control, maintaining stable administrative expenses despite increases in certain areas[65]. Staff and Training - As of June 30, 2023, the Group had a total of 3,956 full-time staff, an increase from 3,848 as of December 31, 2022[100]. - The Group provides structured training and education programs to enhance staff competencies and ensure high-quality service delivery[101]. - Regular internal and external mandatory training is organized for medical staff to keep them updated on the latest healthcare developments[101]. Corporate Governance - The Company does not have any other disclosure obligations under Rules 13.20, 13.21, and 13.22 of the Hong Kong Listing Rules[107]. - The Company has adopted the Model Code for Directors' and Supervisors' securities transactions, and all have complied with the required standards during the six months ended June 30, 2023[107]. - The Board expresses appreciation to the management team and staff for their contributions and to shareholders and business partners for their support[107]. Cash Flow and Investments - Net cash flow from operating activities increased by 24.1% to RMB62.6 million for the six months ended June 30, 2023, compared to RMB50.4 million for the same period in 2022[180]. - The net cash flow from investing activities was RMB18.4 million during the reporting period, a significant improvement from a net cash outflow of RMB149.4 million for the six months ended June 30, 2022[182]. - The Group's investments classified as financial assets at FVTPL totaled RMB386.0 million as of June 30, 2023, down from RMB572.4 million as of December 31, 2022[177]. Future Outlook - The Group's management is optimistic about future performance, supported by stable cash flows and strategic investments in healthcare infrastructure[151]. - The Group plans to utilize RMB273.9 million for expansion through selective mergers and acquisitions, with RMB175.0 million already utilized by June 30, 2023[193].

[Financial Summary](index=1&type=section&id=Financial%20Summary) The company achieved significant financial improvement for the six months ended June 30, 2023, with revenue growing 14.5% to RMB 987.5 million and a profit of RMB 29.4 million, reversing the loss from the prior year, while adjusted EBITDA surged 98.1% to RMB 129.2 million, indicating strong core business performance, with no interim dividend recommended [Financial Summary for the Six Months Ended June 30, 2023](index=1&type=section&id=Financial%20Summary%20for%20the%20Six%20Months%20Ended%20June%2030%2C%202023) | Indicator | H1 2023 (RMB million) | H1 2022 (RMB million) | YoY Change | | :--- | :-------------------- | :-------------------- | :------- | | Revenue | 987.5 | 862.7 | +14.5% | | Profit/(Loss) for the Period | 29.4 | (22.3) | Turned to profit | | Profit/(Loss) for the Period Attributable to Owners of the Company | 50.7 | (4.8) | Turned to profit | | Earnings/(Loss) Per Share (RMB cents) | 15.1 | (1.4) | Turned to profit | | Adjusted EBITDA | 129.2 | 65.2 | +98.1% | | Interim Dividend | Not recommended | None | - | [Condensed Consolidated Financial Information](index=2&type=section&id=Condensed%20Consolidated%20Financial%20Information) This section presents the company's unaudited condensed consolidated financial statements, including the statement of profit or loss and other comprehensive income, statement of financial position, and explanations of key accounting policies and the impact of new IFRS, showing a transition from loss to profit and improved financial position [Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income](index=2&type=section&id=Condensed%20Consolidated%20Statement%20of%20Profit%20or%20Loss%20and%20Other%20Comprehensive%20Income) The company achieved a significant turnaround from loss to profit for the six months ended June 30, 2023, with total revenue growing 14.5% and gross profit surging 93.2%, primarily due to business recovery and cost control, leading to a substantial increase in income tax expense [Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income (For the Six Months Ended June 30)](index=2&type=section&id=Condensed%20Consolidated%20Statement%20of%20Profit%20or%20Loss%20and%20Other%20Comprehensive%20Income%20%28For%20the%20Six%20Months%20Ended%20June%2030%29) | Indicator | 2023 (RMB thousand) | 2022 (RMB thousand) | YoY Change | | :--- | :------------------ | :------------------ | :------- | | Revenue | 987,498 | 862,722 | +14.5% | | Cost of Revenue | (816,504) | (774,199) | +5.5% | | Gross Profit | 170,994 | 88,523 | +93.2% | | Other Income | 21,179 | 28,795 | -26.4% | | Net Other Expenses, Gains and Losses | 1,122 | 691 | +62.4% | | Net Impairment Loss Provision under Expected Credit Loss Model | (2,236) | (2,991) | -25.3% | | Administrative Expenses | (125,617) | (115,340) | +8.9% | | Finance Costs | (6,361) | (8,550) | -25.6% | | Profit/(Loss) Before Tax | 59,081 | (8,872) | Turned to profit | | Income Tax Expense | (29,715) | (13,399) | +121.8% | | Profit/(Loss) and Total Comprehensive Income/(Loss) for the Period | 29,366 | (22,271) | Turned to profit | | Profit/(Loss) for the Period Attributable to Owners of the Company | 50,655 | (4,771) | Turned to profit | | Profit/(Loss) for the Period Attributable to Non-controlling Interests | (21,289) | (17,500) | +21.7% | [Condensed Consolidated Statement of Financial Position](index=3&type=section&id=Condensed%20Consolidated%20Statement%20of%20Financial%20Position) As of June 30, 2023, the company's financial position is robust, with increases in net current assets and total equity, while non-current assets slightly decreased and total current liabilities reduced, indicating improved liquidity [Condensed Consolidated Statement of Financial Position (As of June 30, 2023)](index=3&type=section&id=Condensed%20Consolidated%20Statement%20of%20Financial%20Position%20%28As%20of%20June%2030%2C%202023%29) | Indicator | June 30, 2023 (RMB thousand) | December 31, 2022 (RMB thousand) | Change | | :--- | :--------------------------- | :--------------------------- | :--- | | Total Non-current Assets | 1,512,601 | 1,594,789 | -5.2% | | Total Current Assets | 1,145,824 | 1,124,545 | +1.9% | | Total Current Liabilities | 753,240 | 834,985 | -9.8% | | Net Current Assets | 392,584 | 289,560 | +35.6% | | Total Assets Less Current Liabilities | 1,905,185 | 1,884,349 | +1.1% | | Total Non-current Liabilities | 361,348 | 369,821 | -2.3% | | Net Assets | 1,543,837 | 1,514,528 | +1.9% | | Equity Attributable to Owners of the Company | 1,549,662 | 1,499,007 | +3.4% | | Non-controlling Interests | (5,825) | 15,521 | -137.5% | [Significant Accounting Policies and Application](index=5&type=section&id=Significant%20Accounting%20Policies%20and%20Application) This section outlines the basis of preparation and key accounting policies for the interim condensed consolidated financial information, highlighting the adoption of new IFRS and amendments, particularly IAS 12's retrospective application for deferred tax on lease transactions, which adjusted opening retained profits and equity - The interim condensed consolidated financial information is prepared on a historical cost convention, except for certain financial assets measured at fair value[127](index=127&type=chunk) - The Group has adopted IAS 8 (Amendments) clarifying the distinction between changes in accounting estimates and changes in accounting policies, and IAS 12 (Amendments) narrowing the scope of initial recognition exemption, requiring recognition of deferred tax assets and liabilities for temporary differences arising from leases and decommissioning obligations[127](index=127&type=chunk)[128](index=128&type=chunk)[139](index=139&type=chunk)[142](index=142&type=chunk) - The retrospective application of IAS 12 amendments resulted in a decrease in profit/(loss) and total comprehensive income/(loss) for the period by **RMB 1,257 thousand** (2022: RMB 669 thousand), and a total net impact on equity as of December 31, 2022, of **RMB 12,021 thousand**[146](index=146&type=chunk)[149](index=149&type=chunk)[153](index=153&type=chunk) [Management Discussion and Analysis](index=19&type=section&id=Management%20Discussion%20and%20Analysis) This section provides a detailed discussion of the company's business performance, financial condition, liquidity, and capital resources for the six months ended June 30, 2023, showing strong post-pandemic recovery, significant revenue growth across segments, improved profitability, and active strategic investments and capital expenditure plans [Business Review and Outlook](index=19&type=section&id=Business%20Review%20and%20Outlook) The company experienced a significant business recovery in the first half of 2023, with consolidated revenue growing 14.5% year-on-year and a return to profitability, primarily driven by the release of medical service demand post-pandemic, leading to a substantial increase in patient visits, while continuing to optimize its service portfolio, enhance management efficiency, and actively respond to industry changes [Business Overview for the Six Months Ended June 30, 2023](index=19&type=section&id=Business%20Overview%20for%20the%20Six%20Months%20Ended%20June%2030%2C%202023) The company achieved a strong business recovery in the first half of 2023, with total inpatient visits increasing by 17.6%, overall bed utilization rising to 69.8%, and total surgical procedures growing by 10.6%, primarily due to the release of medical service demand after the lifting of pandemic restrictions - The Chinese economy showed signs of moderate recovery in the first half of 2023, with the healthcare industry undergoing a critical transformation phase[26](index=26&type=chunk) - Since March 2023, with the lifting of all pandemic restrictions, demand for medical services has been released, leading to a significant increase in patient visits[27](index=27&type=chunk) [Key Operating Data for Hospital Services (For the Six Months Ended June 30)](index=19&type=section&id=Key%20Operating%20Data%20for%20Hospital%20Services%20%28For%20the%20Six%20Months%20Ended%20June%2030%29) | Indicator | H1 2023 | H1 2022 | YoY Change | | :--- | :----------- | :----------- | :------- | | Total Inpatient Visits | 35,012 | 29,761 | +17.6% | | Overall Average Expense Per Inpatient (RMB) | 15,635.9 | 14,930.3 | +4.7% | | Overall Bed Utilization Rate | 69.8% | 61.2% | +8.6 percentage points | | Average Length of Stay (Days) | 6.6 | 6.7 | -0.1 days | | Total Outpatient Visits | 718,641 | 692,141 | +3.8% | | Overall Average Expense Per Outpatient (RMB) | 434.7 | 456.0 | -4.7% | | Total Surgical Procedures | 19,714 | 17,826 | +10.6% | [Hospital Services](index=22&type=section&id=Hospital%20Services) The hospital services segment recorded a 14.1% revenue growth in the first half of 2023, with Kanghua Hospital and Kangxin Hospital revenues increasing by 17.1% and 77.2% respectively, while Renkang Hospital's revenue decreased by 11.5% due to fewer outpatient visits post-pandemic, and cardiology became the largest medical specialty with 51.2% revenue growth [Kanghua Hospital](index=22&type=section&id=Kanghua%20Hospital) Kanghua Hospital recorded revenue of **RMB 765.0 million** in the first half of 2023, a 17.1% year-on-year increase, primarily driven by increased patient visits, while actively enhancing management efficiency and medical technology application, and being recognized among China's top county-level hospitals - Kanghua Hospital's revenue was **RMB 765.0 million**, a **17.1% year-on-year increase**, mainly due to increased patient visits[5](index=5&type=chunk) - The hospital is committed to strengthening its management mechanisms, improving management efficiency, and striving to pass the Grade III Class A re-evaluation by the end of 2023[5](index=5&type=chunk) - Kanghua Hospital was awarded "Top 300 County-level Hospitals in China's Hospital Competitiveness 2022"[5](index=5&type=chunk) [Renkang Hospital](index=22&type=section&id=Renkang%20Hospital) Renkang Hospital successfully passed its Grade II Class A qualification assessment in the first half of 2023, but its revenue decreased by 11.5% to **RMB 115.9 million**, primarily due to fewer outpatient visits and fever/vaccination services post-pandemic, while the hospital is advancing its trauma center construction - Renkang Hospital successfully passed its Grade II Class A qualification assessment[6](index=6&type=chunk) - Renkang Hospital's revenue was **RMB 115.9 million**, a **11.5% year-on-year decrease**, mainly due to fewer outpatient visits and patients for fever and vaccination services after the pandemic subsided[6](index=6&type=chunk) - The hospital is advancing the construction of its trauma center and received positive feedback from the Municipal Health Commission for the pre-assessment of a "Provincial Grade IV Trauma Center"[6](index=6&type=chunk) [Kangxin Hospital](index=23&type=section&id=Kangxin%20Hospital) Kangxin Hospital recorded revenue of **RMB 40.0 million** in the first half of 2023, a significant 77.2% year-on-year increase, by strengthening medical management, optimizing processes, and hosting international cardiovascular disease forums to enhance medical standards and brand recognition, while exploring DRGS medical insurance payment reform - Kangxin Hospital's revenue was **RMB 40.0 million**, a significant **77.2% year-on-year increase**[210](index=210&type=chunk) - The hospital continuously strengthens medical management, optimizes medical processes, and hosted an international cardiovascular disease forum, enhancing brand awareness[7](index=7&type=chunk)[210](index=210&type=chunk) - Kangxin Hospital is exploring Diagnosis-Related Grouping (DRGS) medical insurance payment reform to improve efficiency[7](index=7&type=chunk) [Medical Specialty Revenue Contribution](index=24&type=section&id=Medical%20Specialty%20Revenue%20Contribution) In the first half of 2023, cardiology replaced obstetrics and gynecology as the Group's largest medical specialty, with revenue growing 51.2% year-on-year, while obstetrics and gynecology revenue declined 6.6% due to lower birth rates, and pediatric medicine, physical examination, internal medicine, emergency, and oncology departments all recorded significant revenue growth [Medical Specialty Revenue Contribution (For the Six Months Ended June 30)](index=24&type=section&id=Medical%20Specialty%20Revenue%20Contribution%20%28For%20the%20Six%20Months%20Ended%20June%2030%29) | Medical Specialty | YoY Change | 2023 (RMB thousand) | % of Hospital Revenue (2023) | 2022 (RMB thousand) | % of Hospital Revenue (2022) | | :--- | :--- | :--- | :--- | :--- | :--- | | Cardiovascular-related Departments | +51.2% | 144,010 | 15.6% | 95,242 | 11.8% | | Internal Medicine-related Departments | +17.9% | 112,435 | 12.2% | 95,339 | 11.8% | | Obstetrics and Gynecology-related Departments | -6.6% | 106,499 | 11.6% | 114,054 | 14.1% | | Neurology-related Departments | +10.4% | 63,175 | 6.9% | 57,215 | 7.1% | | General Surgery-related Departments | +10.9% | 61,728 | 6.7% | 55,662 | 6.9% | | Emergency-related Departments | +14.7% | 50,083 | 5.4% | 43,681 | 5.4% | | Orthopedics-related Departments | -5.3% | 41,884 | 4.5% | 44,210 | 5.5% | | Oncology-related Departments | +12.5% | 35,381 | 3.8% | 31,446 | 3.9% | | Nephrology-related Departments | +8.8% | 34,529 | 3.7% | 31,729 | 3.9% | | Medical Aesthetics-related Departments | +10.8% | 23,813 | 2.6% | 21,488 | 2.7% | | Pediatric Medicine-related Departments | +46.0% | 22,975 | 2.5% | 15,739 | 2.0% | | Physical Examination Department | +30.5% | 61,024 | 6.6% | 46,766 | 5.8% | | Other Clinical Departments | +6.0% | 163,347 | 17.7% | 154,172 | 19.1% | | **Total** | | **920,883** | **100.0%** | **806,743** | **100.0%** | - Cardiovascular department has replaced obstetrics and gynecology as the Group's largest medical specialty, with revenue increasing by **51.2% year-on-year**, primarily due to a significant increase in Kangxin Hospital's revenue[9](index=9&type=chunk) - Obstetrics and gynecology revenue decreased by **6.6%**, mainly due to a decline in birth rates during the pandemic[9](index=9&type=chunk) [VIP Special Services](index=25&type=section&id=VIP%20Special%20Services) The Group's VIP special services generated total revenue of **RMB 91.6 million** in the first half of 2023, a 6.8% year-on-year increase, with VIP medical services revenue growing 21.3% due to increased inpatient and outpatient visits post-pandemic, while reproductive medicine revenue declined 21.1% due to worsening fertility sentiment - Total special services revenue was **RMB 91.6 million**, a **6.8% year-on-year increase**[213](index=213&type=chunk) [Special Services Revenue Contribution (For the Six Months Ended June 30)](index=25&type=section&id=Special%20Services%20Revenue%20Contribution%20%28For%20the%20Six%20Months%20Ended%20June%2030%29) | Special Service | YoY Change | 2023 (RMB thousand) | 2022 (RMB thousand) | | :--- | :--- | :--- | :--- | | VIP Medical Services | +21.3% | 61,027 | 50,328 | | Reproductive Medicine | -21.1% | 18,039 | 22,853 | | Plastic and Aesthetic Surgery | -14.6% | 2,206 | 2,582 | | Laser Treatment | +3.4% | 10,293 | 9,952 | | **Total Special Services Revenue** | **+6.8%** | **91,565** | **85,715** | - VIP medical services revenue increased by **21.3%**, mainly due to increased VIP inpatient and outpatient visits after the pandemic recovery[230](index=230&type=chunk) - Reproductive medicine revenue decreased by **21.1%**, primarily due to a general worsening of fertility sentiment and the lingering effects of the pandemic[12](index=12&type=chunk) [Rehabilitation and Other Medical Services](index=20&type=section&id=Rehabilitation%20and%20Other%20Medical%20Services) The rehabilitation and other medical services segment recorded revenue of **RMB 60.7 million** in the first half of 2023, a 22.9% year-on-year increase, primarily due to increased admissions at rehabilitation hospitals, an expanded network of rehabilitation centers, and recovery from pandemic impacts, with Anhui Hualin Group actively expanding its market and attracting significant growth in work-related injury and burn patients - Revenue from the rehabilitation and other medical services segment was **RMB 60.7 million**, a **22.9% year-on-year increase**[2](index=2&type=chunk)[215](index=215&type=chunk) - The increase in revenue was mainly due to increased admissions at rehabilitation hospitals, the continuous expansion of the rehabilitation center network, and recovery from the impact of the pandemic[2](index=2&type=chunk) - Anhui Hualin Group saw a **140% increase in surgeries**, **35% growth in work-related injury patients**, and **27% growth in burn patients** in the first half of 2023[216](index=216&type=chunk) - Anhui Hualin Group actively promotes internal organizational innovation, introduces young medical professionals, and explores the construction of medical-related commercial platforms to promote the application of traditional Chinese medicine[232](index=232&type=chunk) [Elderly Care Services](index=20&type=section&id=Elderly%20Care%20Services) The elderly care services segment's revenue in the first half of 2023 was **RMB 5.9 million**, a 10.5% year-on-year decrease, primarily due to a decline in the number of elderly patients admitted caused by pandemic-related restrictions, while Renkang Nursing Home achieved an average bed utilization rate of 82.6% and is committed to improving service quality for five-star accreditation - Revenue from the elderly care services segment was **RMB 5.9 million**, a **10.5% year-on-year decrease**[208](index=208&type=chunk)[239](index=239&type=chunk)[247](index=247&type=chunk) - The decrease in revenue was mainly due to a decline in the number of elderly patients admitted during the reporting period and the continued negative impact of the pandemic[208](index=208&type=chunk)[239](index=239&type=chunk) - Renkang Nursing Home had an average of **92 elderly patients admitted**, with an average bed utilization rate of **82.6%**[247](index=247&type=chunk) - Renkang Nursing Home will continue to focus on improving service quality and cooperate with Guangdong Province's assessment of elderly care institutions, striving to achieve five-star elderly care institution accreditation[247](index=247&type=chunk) [Industry Outlook and Strategy](index=28&type=section&id=Industry%20Outlook%20and%20Strategy) China's healthcare industry has entered the post-pandemic era with increased public health awareness and ongoing government medical reforms, and the company will align with government policies, strengthen talent development and medical technology, and establish specialized departments to enhance competitiveness and achieve sustainable healthy development - China has entered the post-pandemic era, with increased public health management awareness and a rebound recovery in the medical industry[248](index=248&type=chunk) - The government is strengthening the universal healthcare security system, deepening medical reforms, and resolutely cracking down on corruption in the medical industry as part of the "14th Five-Year Plan"[248](index=248&type=chunk)[233](index=233&type=chunk) - The Group will closely follow government policies, strengthen talent development and medical technology, and establish specialized departments based on social needs to enhance competitiveness[31](index=31&type=chunk) - The Group will continue to optimize medical services, enhance medical operational efficiency, fully leverage the advantages of its subsidiary hospitals, and ensure the overall business recovers as quickly as possible[249](index=249&type=chunk) [Future Plans for Major Investments and Capital Assets](index=29&type=section&id=Future%20Plans%20for%20Major%20Investments%20and%20Capital%20Assets) The company is actively advancing the construction of Kanghua • Qingxi Branch, a project aimed at enhancing high-end comprehensive medical and nursing care services, while also acquiring additional equity in Kangxin Hospital to achieve full control and optimize its operational management [Kanghua • Qingxi Branch](index=29&type=section&id=Kanghua%20%E2%80%A2%20Qingxi%20Branch) Kanghua • Qingxi Branch is a new elderly healthcare complex being developed by the Group in Qingxi Town, Dongguan City, with a total construction area of over 130,000 square meters, planning for 500 inpatient beds and approximately 800 nursing and rehabilitation beds, with Phase I expected to be operational by March 2025 and a total investment of approximately **RMB 156.4 million** for the six months ended June 30, 2023 - Kanghua • Qingxi Branch is a new elderly healthcare complex development project by the Group located in Qingxi Town, Dongguan City, with major facility construction commencing in 2021[16](index=16&type=chunk) - The planned construction includes several medical technology buildings, inpatient buildings, and nursing buildings, expected to have **500 inpatient beds** and approximately **800 nursing and rehabilitation beds**[32](index=32&type=chunk) - Phase I construction is expected to complete the main structural work and acceptance by April 2024, and relevant interior decoration by February 2025, aiming for Phase I to be operational by March 2025[32](index=32&type=chunk) - As of June 30, 2023, the total investment for Kanghua • Qingxi Branch was approximately **RMB 156.4 million**[32](index=32&type=chunk) [Acquisition of Additional Equity in Kangxin Hospital](index=30&type=section&id=Acquisition%20of%20Additional%20Equity%20in%20Kangxin%20Hospital) The company is acquiring an additional 40% equity in Kangxin Hospital for a consideration of **RMB 108.0 million**, which upon completion will make Kangxin Hospital a wholly-owned subsidiary, aiming to gain full equity control and facilitate management arrangements with Yinshan Capital, with a deposit of **RMB 16.2 million** paid as of the reporting period end, and the acquisition pending completion - The Company has agreed to acquire a **40% equity interest** in Kangxin Hospital from Dongguan Jiade Medical Investment Co., Ltd. for a consideration of **RMB 108.0 million**[204](index=204&type=chunk)[250](index=250&type=chunk) - The acquisition will enable the Group to obtain full equity control over Kangxin Hospital and facilitate its management arrangements with Yinshan Capital Co., Ltd[251](index=251&type=chunk) - As of June 30, 2023, the Group has paid a deposit of **RMB 16.2 million** to the seller for this acquisition[235](index=235&type=chunk) - The acquisition agreement has not yet been completed, mainly due to administrative procedures related to the release of equity pledges as collateral for certain bank loans[235](index=235&type=chunk) [Financial Review](index=30&type=section&id=Financial%20Review) This financial review details the company's revenue, costs, gross profit, and gross margin across business segments, as well as other income and expenses, showing a 14.5% increase in total revenue and a 93.2% surge in gross profit, primarily driven by the strong recovery and efficiency improvements in hospital services, leading to a turnaround to profit for the period and a corresponding increase in income tax expense [Segment Revenue](index=30&type=section&id=Segment%20Revenue) The company's total revenue increased by 14.5% year-on-year to **RMB 987.5 million**, with the hospital services segment contributing 93.3% of total revenue, growing 14.1% driven by increased patient visits and higher average expenses post-pandemic, while rehabilitation and other medical services revenue grew 22.9%, and elderly care services revenue decreased by 10.5% [Segment Revenue (For the Six Months Ended June 30)](index=30&type=section&id=Segment%20Revenue%20%28For%20the%20Six%20Months%20Ended%20June%2030%29) | Segment | 2023 (RMB thousand) | % of Total Revenue (2023) | 2022 (RMB thousand) | % of Total Revenue (2022) | YoY Change | | :--- | :------------------ | :-------------------- | :------------------ | :-------------------- | :------- | | Hospital Services | 920,883 | 93.3% | 806,743 | 93.5% | +14.1% | | Rehabilitation and Other Medical Services | 60,741 | 6.2% | 49,416 | 5.7% | +22.9% | | Elderly Care Services | 5,874 | 0.6% | 6,563 | 0.8% | -10.5% | | **Total** | **987,498** | **100.0%** | **862,722** | **100.0%** | **+14.5%** | - The increase in hospital services revenue was mainly due to business recovery after the lifting of pandemic-related controls and measures, increased inpatient and outpatient visits, and higher average expenses for inpatient medical services and physical examination services[21](index=21&type=chunk)[37](index=37&type=chunk) - The increase in rehabilitation and other medical services revenue was mainly due to the continuous recovery of patient visits after the lifting of pandemic-related controls and measures, and the maturation and improvement of rehabilitation hospital operations[254](index=254&type=chunk) - The decrease in elderly care services revenue was mainly due to a reduction in patient admissions during the reporting period and the continued negative impact of the pandemic[239](index=239&type=chunk) [Cost of Revenue](index=32&type=section&id=Cost%20of%20Revenue) The Group's total cost of revenue increased by 5.5% year-on-year to **RMB 816.5 million**, with the hospital services segment's cost of revenue increasing by 4.9% primarily due to higher consumption of pharmaceuticals and medical consumables, while rehabilitation and other medical services' cost of revenue grew 15.6%, and elderly care services' cost of revenue decreased by 4.3%, with pharmaceuticals, medical consumables, and staff costs accounting for 26.7%, 26.4%, and 33.2% of total cost of revenue, respectively - The Group's total cost of revenue was **RMB 816.5 million**, a **5.5% year-on-year increase**[18](index=18&type=chunk)[123](index=123&type=chunk) - The cost of revenue for the hospital services segment increased by **4.9%** to **RMB 761.2 million**, mainly due to increased consumption of pharmaceuticals and medical consumables[255](index=255&type=chunk) - The cost of revenue for the rehabilitation and other medical services segment increased by **15.6%** to **RMB 51.2 million**, mainly due to increased business volume[240](index=240&type=chunk) - Pharmaceuticals, medical consumables, and staff costs accounted for approximately **26.7%**, **26.4%**, and **33.2%** of the Group's total cost of revenue, respectively[241](index=241&type=chunk) [Gross Profit and Gross Margin](index=33&type=section&id=Gross%20Profit%20and%20Gross%20Margin) The Group's total gross profit significantly increased by 93.2% year-on-year to **RMB 171.0 million**, with the overall gross margin improving to 17.3% (from 10.3% in the prior year), primarily driven by a strong rebound in hospital services operations, increased average patient expenses, a higher number of surgeries, and improved financial performance of Kangxin Hospital - The Group's total gross profit was **RMB 171.0 million**, a **93.2% year-on-year increase**[24](index=24&type=chunk)[123](index=123&type=chunk) - The overall gross margin increased to **17.3%** (from 10.3% in the prior year)[24](index=24&type=chunk)[18](index=18&type=chunk) - The increase in gross margin was mainly due to a strong rebound in hospital services operations, increased average expenses for inpatient medical services and physical examination services, a higher number of surgeries performed, and improved financial performance of Kangxin Hospital[24](index=24&type=chunk) [Other Income](index=33&type=section&id=Other%20Income) The Group's other income decreased by 26.4% year-on-year to **RMB 21.2 million**, primarily due to reduced investment income from financial assets at fair value through profit or loss, lower fixed operating lease income, and no vaccine-related income during the reporting period, although clinical trial and related income increased - Other income was **RMB 21.2 million**, a **26.4% year-on-year decrease**[189](index=189&type=chunk)[243](index=243&type=chunk) - The decrease was mainly due to reduced investment income from financial assets at fair value through profit or loss (**RMB 6.4 million**, a **19.3% year-on-year decrease**), lower fixed operating lease income, and no vaccine-related income obtained during the reporting period[189](index=189&type=chunk)[243](index=243&type=chunk) - Clinical trial and related income increased to **RMB 5.3 million**, a **35.3% year-on-year increase**[189](index=189&type=chunk)[243](index=243&type=chunk) [Other Expenses, Gains and Losses](index=34&type=section&id=Other%20Expenses%2C%20Gains%20and%20Losses) The Group recorded a net gain of **RMB 1.1 million** in other expenses, gains, and losses, primarily attributable to a fair value gain of **RMB 1.7 million** from financial assets at fair value through profit or loss, partially offset by a net exchange loss of **RMB 0.5 million**, mainly from Hong Kong dollar-denominated financial assets - Other expenses, gains, and losses resulted in a net gain of **RMB 1.1 million** (prior year: RMB 0.7 million)[178](index=178&type=chunk)[258](index=258&type=chunk) - This was primarily attributable to a fair value gain of **RMB 1.7 million** from financial assets at fair value through profit or loss (prior year: fair value loss of RMB 2.4 million)[178](index=178&type=chunk)[258](index=258&type=chunk) - A net exchange loss of **RMB 0.5 million** was recorded (prior year: net exchange gain of RMB 3.1 million), mainly from Hong Kong dollar-denominated financial assets[178](index=178&type=chunk)[258](index=258&type=chunk) [Net Impairment Loss Provision under Expected Credit Loss Model](index=34&type=section&id=Net%20Impairment%20Loss%20Provision%20under%20Expected%20Credit%20Loss%20Model) During the reporting period, the net impairment loss provision under the expected credit loss model was **RMB 2.2 million** (prior year: RMB 3.0 million), primarily affected by an increase in the overall balance of trade and other receivables, an increase in aging, and a decline in credit ratings for some corporate clients, though the company has strengthened overdue debt recovery and credit review - The net impairment loss provision under the expected credit loss model was **RMB 2.2 million** (prior year: RMB 3.0 million)[259](index=259&type=chunk) - The net provision was mainly due to an increase in the overall balance of trade and other receivables at the end of the reporting period, an increase in the aging of the Group's trade receivables, a decline in credit ratings for some corporate clients, and the impact of outstanding patient debts[259](index=259&type=chunk) - The Group has intensified efforts to recover overdue debts, including through legal action for patient receivables, and tightened credit review for corporate clients[259](index=259&type=chunk) [Administrative Expenses](index=35&type=section&id=Administrative%20Expenses) Administrative expenses increased by 8.9% year-on-year to **RMB 125.6 million**, primarily due to a significant increase in management and consulting fees related to the outsourced management arrangement for Kangxin Hospital, with lease expenses and property management expenses also rising, while other major administrative expenses remained relatively stable due to strict cost control - Administrative expenses were **RMB 125.6 million**, an **8.9% year-on-year increase**[261](index=261&type=chunk) - This was mainly due to a significant increase in management and consulting fees by **RMB 15.7 million** (prior year: RMB 5.3 million), primarily attributable to management fees paid since June 2022 related to the outsourced management arrangement for Kangxin Hospital[261](index=261&type=chunk) - Lease expenses and property management expenses increased, while administrative staff costs and other major administrative expenses remained relatively stable[261](index=261&type=chunk) [Finance Costs](index=35&type=section&id=Finance%20Costs) Finance costs for the reporting period decreased by 25.6% year-on-year to **RMB 6.4 million**, primarily attributable to reduced interest on bank loans raised and a decrease in the interest component related to lease liabilities, partially offset by capitalized interest amounts - Finance costs were **RMB 6.4 million**, a **25.6% year-on-year decrease**[262](index=262&type=chunk) - Finance costs include interest on bank loans raised of **RMB 8.4 million** (prior year: RMB 9.6 million), interest components related to lease liabilities of **RMB 4.1 million** (prior year: RMB 5.1 million), less interest capitalized in the cost of qualifying assets of **RMB 6.1 million** (prior year: RMB 6.2 million)[262](index=262&type=chunk) [Income Tax Expense](index=35&type=section&id=Income%20Tax%20Expense) Income tax expense for the first half of 2023 significantly increased by 121.8% year-on-year to **RMB 29.7 million**, primarily due to increased profit generated by Kanghua Hospital, with the Group's subsidiaries in China generally subject to a 25% income tax rate, while some small and micro enterprises enjoy preferential rates - Income tax expense was **RMB 29.7 million**, a **121.8% year-on-year increase**[42](index=42&type=chunk)[191](index=191&type=chunk) - The increase in income tax expense was mainly due to the increased profit generated by Kanghua Hospital during the reporting period[42](index=42&type=chunk) - The Group's subsidiaries in China are generally subject to an income tax rate of **25%** on their taxable income, with certain subsidiaries classified as "small and micro enterprises" enjoying preferential income tax rates ranging from **2.5% to 10%**[42](index=42&type=chunk)[192](index=192&type=chunk) [Profit for the Period](index=35&type=section&id=Profit%20for%20the%20Period) The Group recorded a profit of **RMB 29.4 million** for the reporting period, successfully reversing the loss of **RMB 22.3 million** from the prior year, with profit attributable to shareholders at **RMB 50.7 million**, reflecting a significant improvement in overall business performance - The Group recorded a profit of **RMB 29.4 million** for the reporting period (prior year: loss of RMB 22.3 million)[264](index=264&type=chunk) - Profit attributable to shareholders was **RMB 50.7 million** (prior year: loss of RMB 4.8 million)[264](index=264&type=chunk) [Adjusted EBITDA](index=36&type=section&id=Adjusted%20EBITDA) The Group's adjusted EBITDA significantly increased by 98.1% year-on-year to **RMB 129.2 million**, indicating robust core business operations after excluding financing, investment-related income, fair value changes, exchange rate impacts, capital expenditures, and significant non-cash losses - The Group's adjusted EBITDA increased by **98.1%** year-on-year to **RMB 129.2 million**[119](index=119&type=chunk)[203](index=203&type=chunk) [Adjusted EBITDA Reconciliation (For the Six Months Ended June 30)](index=36&type=section&id=Adjusted%20EBITDA%20Reconciliation%20%28For%20the%20Six%20Months%20Ended%20June%2030%29) | Indicator | 2023 (RMB thousand) | 2022 (RMB thousand) | | :--- | :------------------ | :------------------ | | Profit/(Loss) Before Tax | 59,081 | (8,872) | | Add: Income Tax Expense | 29,715 | 13,399 | | Add: Finance Costs | 6,361 | 8,550 | | Add: Depreciation of Right-of-use Assets | 18,117 | 18,127 | | Add: Depreciation of Property, Plant and Equipment | 54,853 | 57,008 | | **EBITDA** | **138,412** | **74,813** | | Less: Fair Value Gain/(Loss) on Financial Assets at Fair Value Through Profit or Loss | (1,718) | 2,361 | | Less: Investment Income from Financial Assets at Fair Value Through Profit or Loss | (6,384) | (7,907) | | Add: Exchange Loss/(Gain) | 493 | (3,076) | | Less: Bank and Other Interest Income | (1,576) | (946) | | **Adjusted EBITDA** | **129,227** | **65,245** | - Adjusted EBITDA is a non-IFRS measure designed to exclude non-core operating impacts such as taxes, debt costs, depreciation, and amortization, to reflect the Group's underlying profitability[59](index=59&type=chunk) [Financial Position](index=37&type=section&id=Financial%20Position) This section analyzes the company's financial position as of June 30, 2023, including property, plant and equipment, right-of-use assets, trade and other receivables, other assets, and trade and other payables, showing increases in net current assets and net assets, growth in trade receivables, and a reduction in trade payables due to accelerated payments [Property, Plant and Equipment, Right-of-Use Assets, and Deposits Paid for Acquisition of Property, Plant and Equipment](index=37&type=section&id=Property%2C%20Plant%20and%20Equipment%2C%20Right-of-Use%20Assets%2C%20and%20Deposits%20Paid%20for%20Acquisition%20of%20Property%2C%20Plant%20and%20Equipment) As of June 30, 2023, the Group's property, plant and equipment increased, while right-of-use assets slightly decreased, with capital expenditures primarily for upgrading hospital service capabilities, constructing Phase II medical facilities at Kangxin Hospital, and developing Kanghua • Qingxi Branch, and deposits paid for property, plant and equipment acquisitions decreased - Property, plant and equipment amounted to **RMB 1,113.4 million** (December 31, 2022: RMB 1,085.8 million), and right-of-use assets amounted to **RMB 302.3 million** (December 31, 2022: RMB 319.9 million)[124](index=124&type=chunk) - The Group incurred expenditures for the acquisition of property, plant and equipment and construction in progress of **RMB 19.0 million** and **RMB 63.5 million** respectively, mainly for upgrading and expanding hospital operational service capabilities, construction costs for Kangxin Hospital Phase II medical facilities, and the development of Kanghua • Qingxi Branch[47](index=47&type=chunk)[196](index=196&type=chunk) - Deposits paid for the acquisition of property, plant and equipment were **RMB 12.9 million** (December 31, 2022: RMB 58.1 million), mainly referring to deposits paid for Kangxin Hospital Phase II medical facility construction costs and payments for new medical equipment and other new facilities[48](index=48&type=chunk)[124](index=124&type=chunk) [Trade and Other Receivables](index=38&type=section&id=Trade%20and%20Other%20Receivables) As of June 30, 2023, total trade and other receivables increased to **RMB 337.3 million**, with trade receivables rising to **RMB 279.7 million**, of which 62.6% were aged within 90 days, and the average turnover days were 46.7 days, while other receivables increased to **RMB 57.6 million**, mainly due to the deposit paid for the acquisition of additional equity in Kangxin Hospital - Total trade and other receivables increased to **RMB 337.3 million** (December 31, 2022: RMB 281.2 million)[124](index=124&type=chunk)[199](index=199&type=chunk) - Trade receivables increased to **RMB 279.7 million**, with **62.6%** aged within 90 days, and the average trade receivables turnover days were **46.7 days**[49](index=49&type=chunk)[199](index=199&type=chunk) - The increase in trade receivables and turnover days was mainly due to increased balances from social security funds and other government departments, as well as some corporate clients[49](index=49&type=chunk) - Other receivables increased to **RMB 57.6 million**, mainly due to a deposit of **RMB 16.2 million** paid for the acquisition of additional equity in Kangxin Hospital[73](index=73&type=chunk)[199](index=199&type=chunk) [Other Assets](index=38&type=section&id=Other%20Assets) The Group's other assets include a brand introduction fee of **RMB 20.0 million** paid for the Kangxin Hospital management arrangement, amortized over the service period, and as Kangxin Hospital achieved its revenue growth target during the performance period, the Group is not entitled to a refund of this fee - The Group has paid a brand introduction fee of **RMB 20.0 million** to Yinshan Capital to facilitate the introduction of the "Artemed" brand, classified as other assets in the consolidated statement of financial position[65](index=65&type=chunk) - The brand introduction fee is amortized over the service period, with **RMB 0.5 million** amortized and deducted from profit or loss during the reporting period[51](index=51&type=chunk) - Kangxin Hospital achieved its revenue growth target during the performance period, thus the Group is not entitled to a refund of the brand introduction fee from Yinshan Capital[65](index=65&type=chunk) [Trade and Other Payables and Provisions](index=39&type=section&id=Trade%20and%20Other%20Payables%20and%20Provisions) As of June 30, 2023, trade and other payables and provisions decreased to **RMB 651.7 million**, primarily due to reduced trade payables from accelerated payments to suppliers, as well as decreases in accrued expenses and advances received, while provisions for medical malpractice claims increased - Trade and other payables and provisions decreased to **RMB 651.7 million** (December 31, 2022: RMB 717.8 million)[75](index=75&type=chunk)[207](index=207&type=chunk) - The decrease was mainly due to accelerated payments to suppliers during the reporting period, leading to a reduction in trade payables to **RMB 314.0 million**, accrued expenses to **RMB 85.3 million**, and advances received to **RMB 185.9 million**[75](index=75&type=chunk)[207](index=207&type=chunk) - Provisions for medical malpractice claims increased to **RMB 2.4 million** (December 31, 2022: RMB 1.2 million)[75](index=75&type=chunk)[207](index=207&type=chunk) [Aging Analysis of Trade Payables (As of June 30)](index=39&type=section&id=Aging%20Analysis%20of%20Trade%20Payables%20%28As%20of%20June%2030%29) | Aging | June 30, 2023 (RMB thousand) | December 31, 2022 (RMB thousand) | | :--- | :--------------------------- | :--------------------------- | | Within 30 days | 92,160 | 94,494 | | 31 to 90 days | 139,064 | 124,444 | | 91 to 180 days | 41,948 | 77,870 | | 181 to 365 days | 18,893 | 26,086 | | Over 365 days | 21,925 | 25,916 | | **Total** | **313,990** | **348,810** | [Net Current Assets and Net Assets](index=40&type=section&id=Net%20Current%20Assets%20and%20Net%20Assets) As of June 30, 2023, the Group recorded net current assets of **RMB 392.6 million** (December 31, 2022: RMB 289.6 million) and net assets of **RMB 1,543.8 million** (December 31, 2022: RMB 1,514.5 million), demonstrating continuous improvement in its financial position - Net current assets were **RMB 392.6 million** (December 31, 2022: RMB 289.6 million)[77](index=77&type=chunk) - Net assets were **RMB 1,543.8 million** (December 31, 2022: RMB 1,514.5 million)[77](index=77&type=chunk) [Liquidity and Capital Resources](index=40&type=section&id=Liquidity%20and%20Capital%20Resources) This section outlines the company's liquidity and capital resources, including strong financial resources, active cash management activities, cash flow analysis, significant investments, capital expenditures, use of IPO proceeds, debt, asset pledges, financial instruments, gearing ratio, and exchange rate fluctuation risks, confirming the company possesses sufficient liquidity and financial resources to support its operations and future development [Financial Resources](index=40&type=section&id=Financial%20Resources) As of June 30, 2023, the Group maintained a strong financial position with cash and cash equivalents of **RMB 285.0 million**, time bank deposits of **RMB 61.6 million**, and restricted bank balances of **RMB 35.5 million**, with the directors believing the Group has sufficient liquidity and financial resources to meet working capital needs for at least the next twelve months - Cash and cash equivalents amounted to **RMB 285.0 million** (December 31, 2022: RMB 264.3 million)[66](index=66&type=chunk) - Time bank deposits amounted to **RMB 61.6 million** (December 31, 2022: nil)[66](index=66&type=chunk) - Restricted bank balances amounted to **RMB 35.5 million** (December 31, 2022: RMB 2.3 million)[66](index=66&type=chunk) - The Group will have adequate and sufficient liquidity and financial resources to meet its working capital requirements for at least the next twelve months after the end of the reporting period[66](index=66&type=chunk) [Cash Management Activities](index=40&type=section&id=Cash%20Management%20Activities) The Group manages excess cash by purchasing investment products, including structured short-term bank deposits and fund investments, to generate higher interest income and capital returns without impacting business operations or capital expenditures, focusing on low-risk, short-term products and actively exploring equity investments in the healthcare sector - The Group's investments (classified as financial assets at fair value through profit or loss) totaled **RMB 386.0 million** (December 31, 2022: RMB 572.4 million)[67](index=67&type=chunk)[188](index=188&type=chunk) - Investments include structured short-term bank deposits of **RMB 350.0 million** (December 31, 2022: RMB 490.0 million) and fund investments of **RMB 36.0 million** (December 31, 2022: RMB 18.0 million)[67](index=67&type=chunk)[188](index=188&type=chunk) - The Group purchases investment products from financial institutions to obtain higher interest income, carefully balancing the risks and returns of investment products, without affecting business operations or capital expenditures[80](index=80&type=chunk)[86](index=86&type=chunk) - The Group also invests in investment funds and equity investment funds to earn long-term investment returns and explore new potential investment projects and capital market investments to diversify operational risks and broaden income sources[86](index=86&type=chunk) [Cash Flow Analysis](index=41&type=section&id=Cash%20Flow%20Analysis) The Group's net cash flow from operating activities increased by 24.1% year-on-year to **RMB 62.6 million**, primarily due to improved adjusted EBITDA performance and recorded profit, while net cash flow from investing activities turned to a net inflow of **RMB 18.4 million**, mainly from net proceeds from the disposal of financial assets at fair value through profit or loss, and net cash flow used in financing activities increased to **RMB 60.4 million**, primarily due to acquisition deposits and new bank loans [Cash Flow Analysis (For the Six Months Ended June 30)](index=41&type=section&id=Cash%20Flow%20Analysis%20%28For%20the%20Six%20Months%20Ended%20June%2030%29) | Cash Flow Type | YoY Change | 2023 (RMB thousand) | 2022 (RMB thousand) | | :--- | :--- | :--- | :--- | | Net Cash Flow from Operating Activities | +24.1% | 62,571 | 50,421 | | Net Cash Flow from/(used in) Investing Activities | N/A | 18,351 | (149,356) | | Net Cash Flow used in Financing Activities | +266.3% | (60,406) | (16,490) | | Net Increase/(Decrease) in Cash and Cash Equivalents | N/A | 20,516 | (115,425) | - The increase in net cash flow from operating activities was mainly due to improved adjusted EBITDA performance and recorded profit[82](index=82&type=chunk) - Net cash flow from investing activities was mainly due to net proceeds of **RMB 187.5 million** from the disposal of financial assets at fair value through profit or loss[94](index=94&type=chunk) - The increase in net cash flow used in financing activities was mainly attributable to a deposit of **RMB 16.2 million** paid for the acquisition of additional equity in Kangxin Hospital and new bank loans raised of **RMB 30.7 million**[84](index=84&type=chunk) [Significant Investments, Acquisitions and Disposals](index=42&type=section&id=Significant%20Investments%2C%20Acquisitions%20and%20Disposals) During the reporting period, the Group acquired an additional 32.9% equity interest in Hefei Aikanghui Health Management Co., Ltd. for a cash consideration of **RMB 49,000**, a company primarily providing home-based elderly rehabilitation and nursing services in Hefei City, with no other significant investments, acquisitions, or disposals - The Group acquired an additional **32.9% equity interest** in Hefei Aikanghui Health Management Co., Ltd. for a cash consideration of **RMB 49,000**, a company primarily engaged in providing home-based elderly rehabilitation and nursing services in Hefei City[70](index=70&type=chunk) - Save as disclosed in this announcement, the Group had no other significant investments, acquisitions, or disposals during the reporting period[85](index=85&type=chunk) [Capital Expenditures](index=43&type=section&id=Capital%20Expenditures) The Group's capital expenditures for the reporting period amounted to **RMB 82.6 million**, primarily for expanding operations, maintaining medical facilities, and improving operational efficiency, funded mainly by cash flow from operating activities and bank loans, with capital commitments for property, plant and equipment contracted but not provided for totaling **RMB 219.5 million** as of June 30, 2023 - The Group's capital expenditures for the reporting period amounted to **RMB 82.6 million** (prior year: RMB 78.7 million)[87](index=87&type=chunk) - Capital expenditures primarily include the purchase of property, plant and equipment (including capital expenditures for construction in progress) to expand operations, maintain medical facilities, and improve operational efficiency[87](index=87&type=chunk) - The Group primarily funds capital expenditures through cash flow from operating activities and bank loans[87](index=87&type=chunk) - As of June 30, 2023, the Group's capital commitments for property, plant and equipment contracted but not provided for in the interim condensed consolidated financial information amounted to **RMB 219.5 million**[68](index=68&type=chunk)[114](index=114&type=chunk) [Use of Proceeds from Initial Public Offering](index=43&type=section&id=Use%20of%20Proceeds%20from%20Initial%20Public%20Offering) The net proceeds from the company's initial public offering were approximately **RMB 782.6 million**, with portions utilized for general working capital (10%), expanding existing businesses and upgrading hospital facilities (17.2%), and business acquisitions and potential acquisitions (22.4%) as of June 30, 2023, leaving an unutilized balance of **RMB 394.6 million**, partly used for purchasing financial products and time bank deposits - The net proceeds from the initial public offering were approximately **RMB 782.6 million**[88](index=88&type=chunk) [Use of Proceeds from Initial Public Offering (For the Six Months Ended June 30, 2023)](index=43&type=section&id=Use%20of%20Proceeds%20from%20Initial%20Public%20Offering%20%28For%20the%20Six%20Months%20Ended%20June%2030%2C%202023%29) | Use | Amount Utilized (RMB million) | % of Net Proceeds | | :--- | :-------------------------- | :---------------- | | General Working Capital | 78.3 | 10% | | Expanding Existing Businesses and Upgrading Hospital Facilities | 134.7 | 17.2% | | Business Acquisitions and Potential Acquisitions | 175.0 | 22.4% | | **Total Utilized** | **388.0** | **49.6%** | | **Unutilized Balance** | **394.6** | **50.4%** | - The unutilized balance of net proceeds was **RMB 394.6 million**, part of which has been used to purchase certain financial products and placed in time bank deposits to obtain higher interest income and capital returns[90](index=90&type=chunk) - The Company does not anticipate any significant changes to the planned use of proceeds as stated in the prospectus[90](index=90&type=chunk) [Debt](index=44&type=section&id=Debt) As of June 30, 2023, the Group had secured bank loans with a carrying value of **RMB 296.7 million**, primarily for the development of Kangxin Hospital Phase II medical facilities and Kanghua • Qingxi Branch construction, including floating and fixed interest rates, and secured by equity pledges, leasehold land mortgages, and director guarantees, while also facing contingent liabilities of approximately **RMB 12.1 million** for medical malpractice claims, with a provision of **RMB 2.4 million** made - The Group's bank loan financing includes **RMB 620.0 million** for the development of Kangxin Hospital Phase II medical facilities and Kangxin Hospital operations, and **RMB 330.0 million** for the construction and development of Kanghua • Qingxi Branch[97](index=97&type=chunk) - As of June 30, 2023, the Group had secured bank loans with a carrying value of **RMB 296.7 million** (December 31, 2022: RMB 280.9 million)[97](index=97&type=chunk)[117](index=117&type=chunk) - Bank loans are secured by equity pledges, leasehold land mortgages, and guarantees from Mr. Wang Junyang, the Chairman of the Group[97](index=97&type=chunk)[99](index=99&type=chunk) - The Group's ongoing medical malpractice claims total approximately **RMB 12.1 million** (December 31, 2022: RMB 14.0 million), with a provision of approximately **RMB 2.4 million** made[101](index=101&type=chunk)[110](index=110&type=chunk) [Pledge of Assets](index=46&type=section&id=Pledge%20of%20Assets) As of June 30, 2023, certain property, plant and equipment with a net carrying value of **RMB 17.1 million** and leasehold land (including right-of-use assets) with a net carrying value of **RMB 80.1 million** were pledged to secure bank facilities granted to the Group - Certain property, plant and equipment of the Group with a net carrying value of **RMB 17.1 million** (December 31, 2022: RMB 21.0 million) have been pledged[92](index=92&type=chunk) - Leasehold land (including right-of-use assets) with a net carrying value of **RMB 80.1 million** (December 31, 2022: nil) has been pledged to secure bank facilities granted to the Group[92](index=92&type=chunk) [Financial Instruments](index=46&type=section&id=Financial%20Instruments) The Group's financial instruments primarily include trade receivables, financial assets at fair value through profit or loss, bank deposits, trade payables, bank loans, and lease liabilities, with management closely monitoring these risks to ensure timely and effective appropriate measures are taken - The Group's financial instruments primarily include trade and other receivables, financial assets at fair value through profit or loss, time bank deposits, bank balances and cash, restricted bank balances, trade and other payables, amounts due to non-controlling shareholders of subsidiaries, bank loans, and lease liabilities[105](index=105&type=chunk) - The Company's management manages and monitors these risks to ensure that appropriate measures are taken in a timely and effective manner[105](index=105&type=chunk) [Gearing Ratio](index=46&type=section&id=Gearing%20Ratio) As of June 30, 2023, the Group's gearing ratio (total interest-bearing bank loans divided by total equity and multiplied by 100%) was 19.2%, a slight increase from 18.5% as of December 31, 2022 - The Group's gearing ratio was **19.2%** (December 31, 2022: 18.5%)[106](index=106&type=chunk) [Exchange Rate Fluctuation Risk](index=46&type=section&id=Exchange%20Rate%20Fluctuation%20Risk) The Group faces foreign exchange risk primarily from Hong Kong dollar-denominated financial assets, with management mitigating currency risk by closely monitoring foreign currency exchange rate movements and considering hedging significant foreign currency exposures when necessary - The Group holds certain financial assets denominated in Hong Kong dollars and is therefore exposed to foreign exchange risk, primarily from fluctuations in the exchange rate between the Hong Kong dollar and the Renminbi[115](index=115&type=chunk) - The Group has not applied any derivative financial instruments to hedge its currency risk exposures[115](index=115&type=chunk) - Management manages currency risk by closely monitoring movements in foreign currency exchange rates and will consider hedging significant foreign currency exposures when necessary[115](index=115&type=chunk) [Other Information](index=47&type=section&id=Other%20Information) This section covers other important information for the reporting period, including the company's employee situation, remuneration policies, training programs, interim dividend decision, securities transactions, post-reporting period events, interim results review, corporate governance compliance, and changes in board members [Employees, Remuneration Policies and Training Programs](index=47&type=section&id=Employees%2C%20Remuneration%20Policies%20and%20Training%20Programs) As of June 30, 2023, the Group had a total of 3,956 full-time employees, implementing comprehensive remuneration policies including basic salary, performance bonuses, and other benefits, adjusted regularly to maintain competitiveness, and providing systematic training and education programs to enhance professional skills, foster high standards of practice, and promote a proactive risk reporting culture - As of June 30, 2023, the Group had a total of **3,956 full-time employees** (December 31, 2022: 3,848 employees)[116](index=116&type=chunk) - Employee-related costs for the reporting period were approximately **RMB 311.6 million** (prior year: RMB 308.9 million)[116](index=116&type=chunk) - The Group's comprehensive employee remuneration policy includes basic salary calculated with reference to individual position, qualifications, and years of service, performance bonuses based on specific indicators of individual job functions, and other benefits, with the remuneration structure regularly adjusted based on current market data[116](index=116&type=chunk) - The Group provides systematic training and education programs aimed at equipping employees with solid medical principles and knowledge, practice skills, and fostering high standards of practice, organizational capabilities, and a proactive risk reporting culture[288](index=288&type=chunk) [Interim Dividend](index=47&type=section&id=Interim%20Dividend) The Board does not recommend the payment of an interim dividend for the six months ended June 30, 2023 - The Board does not recommend the payment of an interim dividend for the six months ended June 30, 2023 (prior year: nil)[119](index=119&type=chunk)[184](index=184&type=chunk)[268](index=268&type=chunk) [Repurchase, Sale or Redemption of the Company's Securities](index=47&type=section&id=Repurchase%2C%20Sale%20or%20Redemption%20of%20the%20Company%27s%20Securities) During the reporting period, neither the Company nor any of its subsidiaries repurchased, sold, or redeemed any of the Company's listed securities - During the reporting period, neither the Company nor any of its subsidiaries purchased, sold, or redeemed any of the Company's listed securities[269](index=269&type=chunk) [Events After the Reporting Period](index=48&type=section&id=Events%20After%20the%20Reporting%20Period) Subsequent to the reporting period, the Company entered into a supplemental agreement with Yinshan Capital to extend the term of the Kangxin Hospital management arrangement, and is finalizing details and implementing a spin-off plan to separate the land and buildings of Kangxin Hospital, while also negotiating with Yinshan Capital for the sale of a controlling interest in Kangxin Hospital - On July 14, 2023, the Company entered into a supplemental agreement with Yinshan Capital to extend the term of the Kangxin Hospital management arrangement[271](index=271&type=chunk) - The Company is finalizing details and implementing a spin-off plan to separate the land and buildings from Kangxin Hospital[271](index=271&type=chunk) - The Company is also negotiating with Yinshan Capital regarding the sale of a controlling interest in Kangxin Hospital (after the completion of the spin-off)[271](index=271&type=chunk) [Review of Interim Results](index=48&type=section&id=Review%20of%20Interim%20Results) The Company's Audit Committee has reviewed the Group's interim results for the six months ended June 30, 2023, confirming compliance with applicable accounting standards and requirements and adequate disclosure, with the Company's auditor also conducting a review in accordance with Hong Kong Review Engagements Standards - The Company's Audit Committee has reviewed the Group's interim results for the six months ended June 30, 2023, and considers that the Company has complied with applicable accounting standards and requirements and made adequate disclosures[273](index=273&type=chunk) - The Company's auditor has also reviewed the Group's interim results for the six months ended June 30, 2023, in accordance with Hong Kong Standard on Review Engagements 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Hong Kong Institute of Certified Public Accountants[283](index=283&type=chunk) - The Company's Audit Committee comprises three independent non-executive directors, of whom Mr. Chan Sing Nang possesses appropriate professional qualifications[275](index=275&type=chunk) [Compliance with Corporate Governance Code](index=48&type=section&id=Compliance%20with%20Corporate%20Governance%20Code) The Company confirms compliance with all code provisions set out in Part 2 of the Corporate Governance Code contained in Appendix 14 to the Hong Kong Listing Rules for the six months ended June 30, 2023, committed to maintaining high standards of corporate governance to protect shareholder interests and establish highly accountable and transparent practices - The Company has complied with all code provisions set out in Part 2 of the Corporate Governance Code contained in Appendix 14 to the Hong Kong Listing Rules for the six months ended June 30, 2023[276](index=276&type=chunk) - The Board is committed to promoting good corporate governance to protect the interests of the Company's shareholders and believes that maintaining a high level of corporate governance is a key success factor for the Company[278](index=278&type=chunk) [Changes in Information of Directors, Supervisors and Chief Executive](index=49&type=section&id=Changes%20in%20Information%20of%20Directors%2C%20Supervisors%20and%20Chief%20Executive) No changes in information requiring disclosure have occurred since the date of the Company's 2022 Annual Report - No changes in information requiring disclosure have occurred since the date of the Company's 2022 Annual Report, in accordance with Rule 13.51B(1) of the Hong Kong Listing Rules[279](index=279&type=chunk) [Publication of 2023 Condensed Consolidated Interim Results and Interim Report](index=49&type=section&id=Publication%20of%202023%20Condensed%20Consolidated%20Interim%20Results%20and%20Interim%20Report) This interim results announcement has been published on the HKEX website and the Company's website, with the Company's 2023 interim report, containing all information required by the Hong Kong Listing Rules, to be dispatched to shareholders and published on the aforementioned websites in due course - This interim results announcement has been published on the HKEX website (www.hkexnews.hk) and the Company's website (www.kanghuagp.com)[282](index=282&type=chunk) - The Company's 2023 interim report, containing all information required by the Hong Kong Listing Rules, will be dispatched to the Company's shareholders and published on the aforementioned websites in due course[282](index=282&type=chunk) [Acknowledgements](index=49&type=section&id=Acknowledgements) The Board takes this opportunity to express its gratitude for the contributions made by the Group's management team and employees, and extends its sincere thanks for the continued support from all shareholders and business partners - The Board, on behalf of the Board, takes this opportunity to express its gratitude for the contributions made by the Group's management team and employees, and extends its sincere thanks for the continued support from all shareholders and business partners[281](index=281&type=chunk)

Financial Performance - In 2022, the Group's consolidated revenue was RMB1,845.6 million, a year-on-year decrease of 5.5% from RMB1,953.9 million in 2021, primarily due to a 6.4% drop in revenue from hospital services[9]. - The Group's consolidated profit for the Reporting Period was RMB27.7 million, a year-on-year decrease of 58.6% from RMB66.9 million in 2021, primarily due to lower revenue and profit from Kanghua Hospital and Renkang Hospital[12]. - The overall operating margin decreased from 18.1% to 14.2% during the Reporting Period[12]. - Adjusted EBITDA decreased by 30.0% to RMB215.8 million, down from RMB308.1 million in 2021, indicating that the Group's core operations remained profitable[19]. - The Group's total revenue for the year was RMB 1,845.6 million, a decrease of 6.4% compared to RMB 1,953.9 million in the previous year, accounting for 93.3% of total revenue[85]. - Revenue from inpatient healthcare services decreased by 14.1% to RMB 927.1 million, representing 50.2% of total revenue, down from 55.3% in the previous year[86]. - Revenue from outpatient healthcare services increased by 3.9% to RMB 640.7 million, accounting for 34.7% of total revenue, up from 31.6% in the previous year[86]. - Revenue from physical examination services rose by 7.4% to RMB 153.7 million, representing 8.3% of total revenue, compared to 7.3% in the previous year[86]. - The cost of revenue for rehabilitation and other healthcare services increased by 9.1% to RMB 93.0 million, in line with the revenue growth for the year[91]. - The overall average patient spending from inpatient healthcare services decreased, contributing to the decline in gross profit[4]. Revenue Segmentation - Revenue from rehabilitation and other related healthcare services increased by 10.1% to RMB111.7 million, up from RMB101.5 million in 2021[11]. - Revenue from rehabilitation hospital operations rose by 30.0%, driven by higher patient intake and expansion of the rehabilitation centre network[11]. - The hospital services segment recorded revenue of RMB1,721.5 million, a year-on-year decrease of 6.4%, with Kanghua Hospital and Renkang Hospital experiencing revenue declines of 8.0% and 4.2%, respectively[16]. - Kangxin Hospital, however, saw a significant revenue increase of 41.8% compared to 2021[16]. - The elderly healthcare services segment achieved revenue of RMB12.5 million, a year-on-year growth of 1.8% from RMB12.2 million in 2021, attributed to the maturation of operations since its opening in 2019[13]. - Revenue from VIP healthcare services decreased by 13.5% to RMB86.9 million compared to RMB100.5 million in 2021 due to the impact of the pandemic[41]. - Revenue from rehabilitation hospital and other healthcare services increased by 30.0% to RMB53.1 million in 2022, up from RMB40.8 million in 2021, driven by growth in rehabilitation patient visits[43]. - Revenue from rehabilitation centers and other services slightly decreased by 3.4% to RMB58.6 million in 2022, down from RMB60.7 million in 2021[43]. Strategic Developments - The Group is developing the Kanghua Qingxi Healthcare Complex, with a total construction area of over 130,000 square meters, featuring 500 inpatient beds and around 800 nursing and rehabilitation beds[9]. - The first phase of the Kanghua Qingxi Healthcare Complex is expected to commence operations by March 2025[9]. - The Group's strategic partnership with Yingshan Capital aims to introduce international management experience and expertise to improve hospital operations[7]. - The Group plans to enhance smart hospital construction and expand internet healthcare services to improve patient consultation and treatment convenience[14]. - The Group aims to optimize healthcare services and improve operational efficiency in 2023, focusing on core business and stakeholder relationships[14]. - The Group's rehabilitation and other healthcare services segments recorded a revenue increase of 10.1%[16]. - Kanghua Hospital aims to pass the Class III Grade A re-evaluation by the end of 2023, focusing on seven aspects including hospital management and medical safety[22]. - Renkang Hospital is working towards obtaining a secondary qualification by the end of 2023, enhancing medical quality control and service levels[28]. Market Trends and Future Outlook - The overall growth of the healthcare industry for the elderly is anticipated to be a major trend in the future, with the Group actively preparing for relevant evaluations and qualifications[9]. - The surge in COVID-19 cases at the end of 2022 presented both threats and opportunities, with the government increasing medical clinics and promoting online medical services[16]. - The Chinese healthcare market is transitioning to a "post-pandemic" era in 2023, presenting opportunities for restructuring and upgrading in the pharmaceutical and medical sectors[53]. - By the end of 2024, all regions in China are expected to implement DRG/DIP payment method reform, which aims to alleviate pressure on the healthcare security fund[56]. - The demand for consumption health is driven by an aging population and increased health awareness post-COVID-19, with sub-sectors like ophthalmology and medical aesthetics showing significant growth potential[60]. - The healthcare industry is undergoing reforms aimed at improving resource allocation and efficiency, including medical insurance reforms and the promotion of private healthcare services[74]. Operational Efficiency and Cost Management - The Group plans to enhance smart hospital construction and expand internet healthcare services to improve patient consultation and treatment convenience[14]. - The average bed occupancy rate at Renkang Elderly Care Centre was 86.1% in 2022, with revenue from elderly medical services increasing by 1.8% to RMB12.5 million[50]. - Staff-related costs increased by 9.8% compared to 2021, reflecting rising salary levels and competition for medical professionals[3]. - Administrative expenses increased to RMB 228.3 million, a 1.4% rise from RMB 225.2 million in 2021, mainly due to increased staff costs[102]. - The overall repair and maintenance expenditure significantly decreased to RMB 16.2 million from RMB 27.7 million in 2021[102]. - The Group's management closely monitors the credit quality of accounts receivable, with no overdue or impaired debts reported[139]. Investment and Financial Position - The Group's investments classified as financial assets at FVTPL totaled RMB572.4 million as of December 31, 2022, down from RMB603.3 million in 2021[132]. - The Group's fund investment increased to RMB18.0 million in 2022 from RMB10.0 million in 2021, indicating growth in equity investments in unlisted companies[132]. - The Group expects to maintain adequate liquidity and financial resources to meet working capital requirements for at least the next twelve months[132]. - The Group's capital expenditure during the reporting period was RMB 168.0 million, slightly down from RMB 169.3 million in 2021[180]. - The total unutilized net proceeds from the IPO as of December 31, 2022, amounted to RMB 410.8 million, with part used for purchasing financial products to achieve higher interest income[175]. - The Group's investment strategy includes low-risk structured deposit products and portfolio investment funds to maximize returns on idle cash without affecting operations[136]. - The Group's capital expenditures are primarily financed through cash flows generated from operating activities and bank loans[180]. - The company secured a total of RMB620.0 million in new bank loans for the development of Kangxin Hospital's Phase II medical facilities, with RMB345.4 million drawn down by December 31, 2022[188]. Compliance and Sustainability - The company is committed to environmental protection and sustainable development, adhering to national and local environmental laws and regulations in the PRC[200]. - The company has engaged qualified third parties for the proper disposal of medical wastes in compliance with applicable laws and regulations[200].

[Company Overview and Financial Summary](index=1&type=section&id=%E5%85%AC%E5%8F%B8%E6%A6%82%E8%A7%88%E5%8F%8A%E8%B2%A1%E5%8B%99%E6%91%98%E8%A6%81) This section provides an overview of the company's operations in China, presenting key financial highlights, consolidated statements, and equity structure for the fiscal year 2022 [Company and Group Information](index=5&type=section&id=%E5%85%AC%E5%8F%B8%E5%8F%8A%E9%9B%86%E5%9C%98%E8%B3%87%E6%96%99) Guangdong Kanghua Healthcare Co., Ltd., established in China with H-shares listed in Hong Kong, primarily provides hospital, rehabilitation, elderly care, and pharmaceutical sales services, with financial statements presented in RMB - The company, established in China with H-shares listed on the Hong Kong Stock Exchange, primarily operates in hospital services, rehabilitation and other medical services, elderly care services, and pharmaceutical sales[85](index=85&type=chunk) - Consolidated financial statements are presented in RMB[86](index=86&type=chunk) [Financial Highlights](index=1&type=section&id=%E8%B2%A1%E5%8B%99%E6%91%98%E8%A6%81) In FY2022, the Group's revenue decreased by 5.5% to RMB 1,845.6 million, profit by 58.6% to RMB 27.7 million, and adjusted EBITDA by 30.0%, with no final dividend recommended 2022 Financial Highlights | Indicator | 2022 (RMB million) | 2021 (RMB million) | Change (%) | | :--- | :--- | :--- | :--- | | Revenue | 1,845.6 | 1,953.9 | -5.5% | | Profit | 27.7 | 66.9 | -58.6% | | Profit attributable to owners of the Company | 61.0 | 94.3 | -35.3% | | Earnings per share (RMB cents) | 18.3 | 28.2 | -35.3% | | Adjusted EBITDA | 215.8 | 308.1 | -30.0% | - The Board does not recommend the payment of a final dividend for the year[92](index=92&type=chunk) [Consolidated Statement of Profit or Loss and Other Comprehensive Income](index=2&type=section&id=%E7%B6%9C%E5%90%88%E6%90%8D%E7%9B%8A%E5%8F%8A%E5%85%B6%E4%BB%96%E5%85%A8%E9%9D%A2%E6%94%B6%E7%9B%8A%E8%A1%A8) For FY2022, the Group reported revenue of RMB 1,845,633 thousand and gross profit of RMB 261,350 thousand, with profit for the year at RMB 27,736 thousand, of which RMB 61,032 thousand was attributable to owners of the Company 2022 Consolidated Statement of Profit or Loss and Other Comprehensive Income Key Data | Indicator | 2022 (RMB thousand) | 2021 (RMB thousand) | | :--- | :--- | :--- | | Revenue | 1,845,633 | 1,953,944 | | Cost of revenue | (1,584,283) | (1,601,196) | | Gross profit | 261,350 | 352,748 | | Other income | 54,858 | 45,149 | | Administrative expenses | (228,323) | (225,223) | | Profit before tax | 69,309 | 129,209 | | Income tax expense | (41,573) | (62,284) | | Profit and total comprehensive income for the year | 27,736 | 66,925 | | Profit attributable to owners of the Company | 61,032 | 94,307 | | Profit attributable to non-controlling interests | (33,296) | (27,382) | [Consolidated Statement of Financial Position](index=3&type=section&id=%E7%B6%9C%E5%90%88%E8%B2%A1%E5%8B%99%E7%8B%80%E6%B3%81%E8%A1%A8) As of December 31, 2022, the Group's total non-current assets were RMB 1,594,789 thousand, total current assets were RMB 1,124,545 thousand, total current liabilities were RMB 834,985 thousand, and net current assets were RMB 289,560 thousand 2022 Consolidated Statement of Financial Position Key Data | Indicator | 2022 (RMB thousand) | 2021 (RMB thousand) | | :--- | :--- | :--- | | Total non-current assets | 1,594,789 | 1,579,520 | | Total current assets | 1,124,545 | 1,125,082 | | Total current liabilities | 834,985 | 777,648 | | Net current assets | 289,560 | 347,434 | | Total assets less current liabilities | 1,884,349 | 1,926,954 | | Total non-current liabilities | 381,842 | 452,527 | | Net assets | 1,502,507 | 1,474,427 | [Equity](index=4&type=section&id=%E8%82%A1%E6%AC%8A) As of December 31, 2022, equity attributable to owners of the Company was RMB 1,487,869 thousand, non-controlling interests were RMB 14,638 thousand, and total equity was RMB 1,502,507 thousand 2022 Equity Structure | Indicator | 2022 (RMB thousand) | 2021 (RMB thousand) | | :--- | :--- | :--- | | Share capital | 334,394 | 334,394 | | Reserves | 1,153,475 | 1,092,443 | | Equity attributable to owners of the Company | 1,487,869 | 1,426,837 | | Non-controlling interests | 14,638 | 47,590 | | Total equity | 1,502,507 | 1,474,427 | [Accounting Policies](index=5&type=section&id=%E6%9C%83%E8%A8%88%E6%94%BF%E7%AD%96) This section details the Group's adoption of new and revised International Financial Reporting Standards and outlines those issued but not yet effective [Application of New and Revised International Financial Reporting Standards](index=5&type=section&id=%E6%87%89%E7%94%A8%E6%96%B0%E8%A8%82%E5%8F%8A%E7%B6%93%E4%BF%AE%E8%A8%82%E5%9C%8B%E9%9A%9B%E8%B2%A1%E5%8B%99%E5%A0%B1%E5%91%8A%E6%BA%96%E5%89%87) The Group has adopted several amendments to International Financial Reporting Standards for the first time, which had no material impact on the financial position or performance for the current and prior years - The Group has adopted several amendments to International Financial Reporting Standards for the first time, which had no material impact on the financial position or performance[87](index=87&type=chunk)[99](index=99&type=chunk) [New and Revised International Financial Reporting Standards Issued But Not Yet Effective](index=6&type=section&id=%E5%B7%B2%E9%A0%92%E5%B8%83%E4%BD%86%E5%B0%9A%E6%9C%AA%E7%94%9F%E6%95%88%E7%9A%84%E6%96%B0%E8%A8%82%E5%8F%8A%E7%B6%93%E4%BF%AE%E8%A8%82%E5%9C%8B%E9%9A%9B%E8%B2%A1%E5%8B%99%E5%A0%B1%E5%91%8A%E6%BA%96%E5%89%87) The Directors anticipate that the application of all new and revised International Financial Reporting Standards will not have a significant impact on the consolidated financial statements in the foreseeable future - The Directors anticipate that the future application of new and revised International Financial Reporting Standards will not have a significant impact on the consolidated financial statements[2](index=2&type=chunk) New and Revised International Financial Reporting Standards Not Yet Effective | International Financial Reporting Standard | Description | Effective Date | | :--- | :--- | :--- | | Amendments to IFRS 10 and IAS 28 | Sale or Contribution of Assets between an Investor and its Associate or Joint Venture | To be determined | | IFRS 17 | Insurance Contracts | January 1, 2023 | | Amendments to IAS 1 | Classification of Liabilities as Current or Non-current | January 1, 2023 | | Amendments to IAS 8 | Definition of Accounting Estimates | January 1, 2023 | [Revenue and Segment Information](index=7&type=section&id=%E6%94%B6%E7%9B%8A%E5%8F%8A%E5%88%86%E9%83%A8%E8%B3%87%E6%96%99) This section provides a detailed analysis of the Group's revenue by service type and operating segment, along with geographical information, major customers, and other income and expenses for FY2022 [Revenue Analysis](index=7&type=section&id=%E6%94%B6%E7%9B%8A%E5%88%86%E6%9E%90) In FY2022, the Group's total revenue was RMB 1,845,633 thousand, primarily derived from hospital services (inpatient, outpatient, physical examination), rehabilitation and other medical services, and elderly care services, with pharmaceutical sales revenue significantly reduced 2022 Revenue Analysis (by Service Type) | Service Type | 2022 (RMB thousand) | 2021 (RMB thousand) | | :--- | :--- | :--- | | Hospital services | 1,721,462 | 1,839,475 | | - Inpatient medical services | 927,086 | 1,079,632 | | - Outpatient medical services | 640,699 | 616,776 | | - Physical examination services | 153,677 | 143,067 | | Rehabilitation and other medical services | 111,714 | 101,507 | | - Rehabilitation hospital and other medical services | 53,093 | 40,841 | | - Rehabilitation center services and other services | 58,621 | 60,666 | | Elderly care services | 12,457 | 12,236 | | Pharmaceutical sales | – | 726 | | **Total Revenue** | **1,845,633** | **1,953,944** | - Pharmaceutical sales business has been significantly scaled down and gradually integrated with the hospital services segment, with no related revenue in 2022[101](index=101&type=chunk)[150](index=150&type=chunk)[261](index=261&type=chunk) [Segment Information](index=8&type=section&id=%E5%88%86%E9%83%A8%E8%B3%87%E6%96%99) The Group's operations are categorized into four reportable operating segments: hospital services, rehabilitation and other medical services, elderly care services, and pharmaceutical sales, with hospital services generating RMB 1,721,462 thousand in 2022 - The Group's operating segments include hospital services, rehabilitation and other medical services, elderly care services, and pharmaceutical sales[102](index=102&type=chunk)[110](index=110&type=chunk)[111](index=111&type=chunk) 2022 Segment Revenue and Profit | Segment | 2022 Revenue (RMB thousand) | 2021 Revenue (RMB thousand) | 2022 Segment Profit (RMB thousand) | 2021 Segment Profit (RMB thousand) | | :--- | :--- | :--- | :--- | :--- | | Hospital services | 1,721,462 | 1,839,475 | 238,533 | 316,669 | | Rehabilitation and other medical services | 111,714 | 101,507 | 18,762 | 16,273 | | Elderly care services | 12,457 | 12,236 | 4,055 | 4,178 | | Pharmaceutical sales | – | 726 | – | 116 | | **Total** | **1,845,633** | **1,953,944** | **261,350** | **337,236** | - Segment profit refers to the profit earned by each segment, before allocation of other income, other expenses, impairment loss allowances, administrative expenses, and finance costs[115](index=115&type=chunk) [Geographical Information and Major Customers](index=10&type=section&id=%E5%9C%B0%E7%90%86%E8%B3%87%E6%96%99%E5%8F%8A%E4%B8%BB%E8%A6%81%E5%AE%A2%E6%88%B6) All of the Group's revenue and nearly all non-current assets are derived from China, with a highly diversified patient base where no single patient category contributes over 10% of total revenue - All revenue and almost all non-current assets are derived from China[13](index=13&type=chunk) - The patient portfolio is highly diversified, with no single patient category contributing more than **10% of total revenue**[13](index=13&type=chunk) [Other Income](index=10&type=section&id=%E5%85%B6%E4%BB%96%E6%94%B6%E5%85%A5) Other income for FY2022 was RMB 54,858 thousand, a 21.5% year-on-year increase, primarily driven by investment income from financial assets at fair value through profit or loss, clinical trial revenue, and COVID-19 related rent concessions, partially offset by reduced government subsidies 2022 Other Income Composition | Income Source | 2022 (RMB thousand) | 2021 (RMB thousand) | Change (%) | | :--- | :--- | :--- | :--- | | Investment income from financial assets at fair value through profit or loss | 13,285 | 8,612 | +54.3% | | Clinical trial and related income | 10,853 | 4,842 | +124.1% | | COVID-19 related rent concessions | 7,396 | – | N/A | | Government subsidies | 5,730 | 11,186 | -48.8% | | Bank and other interest income | 3,226 | 1,869 | +72.6% | | Others | 10,517 | 8,247 | +27.5% | | **Total** | **54,858** | **45,149** | **+21.5%** | - Government subsidies decreased primarily due to reduced subsidies for vaccination and COVID-19 related activities[287](index=287&type=chunk) - Investment income increased mainly due to an increase in average structured deposits[287](index=287&type=chunk) [Net Other Expenses, Gains and Losses](index=11&type=section&id=%E5%85%B6%E4%BB%96%E9%96%8B%E6%94%AF%E3%80%81%E6%94%B6%E7%9B%8A%E5%8F%8A%E8%99%A7%E6%90%8D%E6%B7%A8%E9%A1%8D) In FY2022, the Group recorded net other expenses, gains and losses of RMB 677 thousand, an improvement from a net loss of RMB 5,210 thousand in 2021, primarily due to net exchange gains from HKD-denominated financial assets, despite increased fair value losses on financial assets at fair value through profit or loss 2022 Net Other Expenses, Gains and Losses | Item | 2022 (RMB thousand) | 2021 (RMB thousand) | | :--- | :--- | :--- | | Net exchange gains/(losses) | 5,907 | (2,290) | | Fair value losses on financial assets at fair value through profit or loss | (4,436) | (2,328) | | Loss on disposal of property, plant and equipment | (579) | (451) | | Donations | (215) | (141) | | **Net** | **677** | **(5,210)** | - Net exchange gains were **RMB 5,907 thousand**, compared to a loss of **RMB 2,290 thousand** in 2021, representing a significant improvement[118](index=118&type=chunk)[164](index=164&type=chunk) [Profit Before Tax](index=11&type=section&id=%E9%99%A4%E7%A8%85%E5%89%8D%E6%BA%A2%E5%88%A9) Profit before tax for FY2022 was RMB 69,309 thousand, a significant decrease from RMB 129,209 thousand in 2021, with key expense items such as total staff costs, cost of inventories, and depreciation disclosed 2022 Profit Before Tax Related Expenses | Item | 2022 (RMB thousand) | 2021 (RMB thousand) | | :--- | :--- | :--- | | Total staff costs | 624,332 | 568,633 | | Cost of inventories recognized as expense | 814,510 | 875,486 | | Depreciation of property, plant and equipment | 113,007 | 113,603 | | Depreciation of right-of-use assets | 36,434 | 35,840 | | Research and development expenses | 1,096 | 835 | | Auditor's remuneration | 1,650 | 1,696 | [Income Tax Expense](index=12&type=section&id=%E6%89%80%E5%BE%97%E7%A8%85%E9%96%8B%E6%94%AF) Income tax expense for FY2022 was RMB 41,573 thousand, a 33.3% year-on-year decrease, with a 25% corporate income tax rate for mainland Chinese subsidiaries and preferential rates for "small and micro enterprises," while the effective tax rate increased to 60.0% due to unrecognised tax effects of Kangxin Hospital's losses 2022 Income Tax Expense | Tax Type | 2022 (RMB thousand) | 2021 (RMB thousand) | | :--- | :--- | :--- | | China corporate income tax | 42,346 | 61,103 | | Hong Kong profits tax | 78 | 72 | | Deferred tax (credit)/expense | (851) | 1,262 | | **Total** | **41,573** | **62,284** | - Mainland Chinese subsidiaries are subject to a **25% corporate income tax rate**, with some "small and micro enterprises" enjoying preferential rates of **2.5% to 10%**[120](index=120&type=chunk)[173](index=173&type=chunk) - The effective tax rate increased from **48.2% in 2021 to 60.0% in 2022**, primarily due to the unrecognised tax impact of losses incurred by Kangxin Hospital[173](index=173&type=chunk) [Dividends](index=12&type=section&id=%E8%82%A1%E6%81%AF) No dividends were paid or proposed by the Company for the year ended December 31, 2022 - No dividends were paid or proposed for the year 2022[130](index=130&type=chunk) [Earnings Per Share](index=13&type=section&id=%E6%AF%8F%E8%82%A1%E7%9B%88%E5%88%A9) Basic earnings per share for FY2022 decreased to RMB 18.3 cents from RMB 28.2 cents in 2021, with diluted earnings per share being the same due to the absence of potentially dilutive ordinary shares 2022 Earnings Per Share | Indicator | 2022 (RMB cents) | 2021 (RMB cents) | | :--- | :--- | :--- | | Basic earnings per share | 18.3 | 28.2 | | Diluted earnings per share | 18.3 | 28.2 | - Basic earnings per share are calculated based on profit attributable to owners of the Company and the weighted average of **334,394,000 ordinary shares** in issue[9](index=9&type=chunk)[10](index=10&type=chunk) - Diluted earnings per share are the same as basic earnings per share due to the absence of potentially dilutive ordinary shares[19](index=19&type=chunk)[131](index=131&type=chunk)[132](index=132&type=chunk) [Financial Assets at Fair Value Through Profit or Loss](index=13&type=section&id=%E6%8C%89%E5%85%AC%E5%B9%B3%E5%80%BC%E8%A8%88%E5%85%A5%E6%90%8D%E7%9B%8A%E7%9A%84%E9%87%91%E8%9E%8D%E8%B3%87%E7%94%A2) As of December 31, 2022, the Group's total financial assets at fair value through profit or loss amounted to RMB 572,449 thousand, primarily comprising structured bank deposits, portfolio funds, and fund investments, with structured bank deposits classified as current assets and the others as non-current assets 2022 Financial Assets at Fair Value Through Profit or Loss | Item | 2022 (RMB thousand) | 2021 (RMB thousand) | | :--- | :--- | :--- | | Portfolio funds | 64,449 | 63,326 | | Fund investments | 18,000 | 10,000 | | Structured bank deposits | 490,000 | 530,000 | | **Total** | **572,449** | **603,326** | | **Classification:** | | | | Current assets | 490,000 | 530,000 | | Non-current assets | 82,449 | 73,326 | - Portfolio funds primarily invest in Hong Kong-listed shares, managed by discretionary fund managers, and are intended for long-term investment[20](index=20&type=chunk)[293](index=293&type=chunk) - Fund investments primarily target unlisted companies in medical services, biotechnology, medical devices, and medical informatics[21](index=21&type=chunk)[293](index=293&type=chunk) - Structured bank deposits have maturities of less than six months, with principal generally renewed upon maturity[12](index=12&type=chunk)[293](index=293&type=chunk) [Management Discussion and Analysis](index=18&type=section&id=%E7%AE%A1%E7%90%86%E5%B1%A4%E8%A8%8E%E8%AB%96%E5%8F%8A%E5%88%86%E6%9E%90) This section reviews the Group's business performance in 2022, discusses the impact of COVID-19, outlines the outlook and strategies for 2023, and details performance across hospital, rehabilitation, and elderly care services [Business Review and Outlook](index=18&type=section&id=%E6%A5%AD%E5%8B%99%E5%9B%9E%E9%A1%A7%E5%92%8C%E5%B1%95%E6%9C%9B) 2022 was a challenging year with recurring COVID-19 outbreaks and strict lockdown measures disrupting operations, leading to a decline in overall revenue and profit, but with policy relaxation at year-end, 2023 is expected to see an economic rebound, focusing on post-pandemic recovery and facility upgrades - In 2022, business development and operations faced challenges due to the COVID-19 pandemic and lockdown measures, resulting in a **6.4% reduction** in revenue for the hospital services department[34](index=34&type=chunk)[36](index=36&type=chunk) - With the easing of COVID-19 control measures at the end of 2022, the economy is expected to rebound in 2023, and the Group will focus on implementing post-pandemic recovery plans and increasing investment in hospital and elderly care facility upgrades[35](index=35&type=chunk)[42](index=42&type=chunk)[55](index=55&type=chunk) 2022 Group Overall Financial Performance | Indicator | 2022 (RMB million) | 2021 (RMB million) | Change (%) | | :--- | :--- | :--- | :--- | | Consolidated Revenue | 1,845.6 | 1,953.9 | -5.5% | | Adjusted EBITDA | 215.8 | 308.1 | -30.0% | | Consolidated Profit | 27.7 | 66.9 | -58.6% | [2022 Business Overview and COVID-19 Impact](index=18&type=section&id=2022%E5%B9%B4%E6%A5%AD%E5%8B%99%E6%A6%82%E8%A7%88%E5%8F%8ACovid-19%E5%BD%B1%E9%9F%BF) The persistent COVID-19 pandemic and stringent control measures in 2022 led to hospital operational disruptions, reduced patient willingness to seek medical attention, and significantly impacted demand for medical services, with year-end policy relaxation potentially still affecting supply chains and business operations in the short term - The COVID-19 pandemic and strict lockdown measures in 2022 led to hospital operational disruptions, patients avoiding medical institutions, and an adverse impact on demand for medical services[34](index=34&type=chunk) - China eased COVID-19 control measures at the end of 2022, but short-term impacts on supply chains and business operations may persist[35](index=35&type=chunk)[42](index=42&type=chunk) - The government required all first and second-tier hospitals to establish fever clinics and promote online medical services to reduce hospital crowding[74](index=74&type=chunk) [2023 Outlook and Strategies](index=20&type=section&id=2023%E5%B9%B4%E5%B1%95%E6%9C%9B%E5%8F%8A%E7%AD%96%E7%95%A5) With the easing of COVID-19 control measures at the end of 2022, the domestic economy is expected to rebound in 2023, driving business operations, and the Group will prioritize the operation and execution of its post-pandemic recovery plan, increasing investment in upgrading hospital and elderly care facilities - China's economy is expected to rebound in 2023 due to the lifting of pandemic restrictions, driving the Group's business operations[55](index=55&type=chunk) - The Group's 2023 strategic focus is on the operation and execution of its post-pandemic recovery plan, along with increasing investment in upgrading hospital and elderly care facilities[55](index=55&type=chunk) [Hospital Services](index=21&type=section&id=%E9%86%AB%E9%99%A2%E6%9C%8D%E5%8B%99) In 2022, most key performance indicators for the Group's hospital services department, including inpatient visits, average expenditure per inpatient, bed utilization rate, and total surgical procedures, recorded declines, while average expenditure per outpatient and physical examination visits saw slight increases - In 2022, key performance indicators for the hospital services department generally declined, including inpatient visits, bed utilization rate, and total surgical procedures[46](index=46&type=chunk) 2022 Hospital Services Key Operating Data | Indicator | 2022 | 2021 | Change | | :--- | :--- | :--- | :--- | | Inpatient visits | 63,053 | 67,546 | -6.7% | | Average length of stay (days) | 6.6 | 7.1 | -0.5 | | Average expenditure per visit (RMB) (inpatient) | 14,703.3 | 15,983.7 | -8.0% | | Outpatient visits | 1,456,072 | 1,487,674 | -2.1% | | Average expenditure per visit (RMB) (outpatient) | 440.0 | 414.6 | +6.1% | | Physical examination visits | 174,143 | 170,702 | +2.0% | | Average expenditure per visit (RMB) (physical examination) | 882.5 | 838.1 | +5.3% | | Total surgical procedures | 42,346 | 46,647 | -9.2% | [Revenue Contribution by Medical Specialties](index=28&type=section&id=%E9%86%AB%E5%AD%B8%E5%B0%88%E7%A7%91%E6%94%B6%E7%9B%8A%E8%B2%A2%E7%8D%BB) In 2022, Obstetrics and Gynecology, Cardiology, Internal Medicine, General Surgery, and Neurology remained the top five specialties contributing to hospital service revenue, accounting for approximately 50.4% of total revenue, with significant declines in Obstetrics and Gynecology, Orthopedics, Emergency, Medical Aesthetics, and Pediatrics, while Cardiology and Nephrology saw slight growth 2022 Hospital Services Revenue Contribution by Medical Specialties | Medical Specialty | 2022 (RMB thousand) | 2021 (RMB thousand) | 2022 % of Hospital Revenue | | :--- | :--- | :--- | :--- | | Obstetrics and Gynecology related departments | 230,402 | 264,436 | 13.4% | | Cardiology related departments | 206,477 | 204,550 | 12.0% | | Internal Medicine related departments | 193,127 | 209,894 | 11.2% | | General Surgery related departments | 120,944 | 133,923 | 7.0% | | Neurology related departments | 117,593 | 124,301 | 6.8% | | Orthopedics related departments | 87,888 | 106,851 | 5.1% | | Emergency related departments | 87,094 | 111,153 | 5.1% | | Nephrology related departments | 65,335 | 62,574 | 3.8% | | Medical Aesthetics related departments | 42,725 | 53,283 | 2.5% | | Pediatrics related departments | 35,128 | 42,581 | 2.0% | | Physical Examination Department | 153,678 | 143,068 | 8.9% | | **Total** | **1,721,462** | **1,839,475** | **100.0%** | - Obstetrics and Gynecology, Cardiology, Internal Medicine, General Surgery, and Neurology are the top five specialties, accounting for approximately **50.4% of total hospital service revenue**[241](index=241&type=chunk) - Revenue from Obstetrics and Gynecology, Orthopedics, Emergency, Medical Aesthetics, and Pediatrics significantly decreased, primarily due to reduced patient visits during the temporary closure of Kanghua Hospital[134](index=134&type=chunk) [Kanghua Hospital](index=22&type=section&id=%E5%BA%B7%E8%8F%AF%E9%86%AB%E9%99%A2) In 2022, Kanghua Hospital's revenue decreased by 8.0% year-on-year to RMB 1,403.9 million, with declines in both outpatient/emergency visits and discharge numbers, while the hospital continued to enhance management efficiency, update KPI assessment systems, and initiate its Grade III Class A re-evaluation, planning to deepen its "Three-Precision Management" strategy and advance smart hospital construction and internet medical services in 2023 2022 Kanghua Hospital Operating Data | Indicator | 2022 (RMB million) | 2021 (RMB million) | Change (%) | | :--- | :--- | :--- | :--- | | Revenue | 1,403.9 | 1,526.0 | -8.0% | | Outpatient and emergency visits | 1,031,835 | 1,091,737 | -5.5% | | Discharges | 50,575 | 53,115 | -4.8% | - Kanghua Hospital continues to enhance management efficiency, update its KPI assessment system, and has initiated its Grade III Class A re-evaluation, aiming to successfully pass by the end of 2023[49](index=49&type=chunk) - In 2023, Kanghua Hospital will focus on refined management, precise treatment, and sincere service, advancing smart hospital construction and internet medical services[51](index=51&type=chunk)[59](index=59&type=chunk) - The hospital strengthened standardized management of medical technology applications, completed filing for restricted technologies, and revised the admission system for new technologies and projects[60](index=60&type=chunk) [Renkang Hospital](index=24&type=section&id=%E4%BB%81%E5%BA%B7%E9%86%AB%E9%99%A2) In 2022, Renkang Hospital's revenue decreased by 4.2% year-on-year to RMB 263.9 million, with outpatient and emergency visits increasing by 5.6% but discharges declining by 18.1%, while the hospital actively pursued Grade II accreditation, strengthened medical quality control, and increased investment in informatization and facilities, planning to reinforce its long-term development vision and build "renowned hospitals, departments, and doctors" in 2023 2022 Renkang Hospital Operating Data | Indicator | 2022 (RMB million) | 2021 (RMB million) | Change (%) | | :--- | :--- | :--- | :--- | | Revenue | 263.9 | 275.6 | -4.2% | | Outpatient and emergency visits | 394,190 | 373,384 | +5.6% | | Discharges | 10,442 | 12,746 | -18.1% | - Renkang Hospital is actively pursuing Grade II accreditation, aiming to pass the evaluation by the end of 2023[68](index=68&type=chunk) - The hospital increased investment in informatization and facility construction, with a **60% increase** in informatization system investment in 2022 compared to 2021[71](index=71&type=chunk) [Kangxin Hospital](index=25&type=section&id=%E5%BA%B7%E5%BF%83%E9%86%AB%E9%99%A2) In 2022, Kangxin Hospital significantly improved its operating performance, with revenue increasing by 41.8% year-on-year to RMB 53.6 million, growth in both outpatient/emergency visits and discharges, and a substantial increase in interventional surgeries, while the hospital entered a management arrangement with Yinshan Capital to introduce German medical group Artemed's expertise and strengthened medical quality and collaborations 2022 Kangxin Hospital Operating Data | Indicator | 2022 (RMB million) | 2021 (RMB million) | Change (%) | | :--- | :--- | :--- | :--- | | Revenue | 53.6 | 37.8 | +41.8% | | Outpatient and emergency visits | 30,047 | 22,553 | +33.2% | | Discharges | 2,036 | 1,685 | +20.8% | | Interventional surgeries | 694 | N/A | +56.3% | - Kangxin Hospital entered a management arrangement with Yinshan Capital to introduce the management experience and international medical expert team in cardiology from German medical group Artemed, aiming to improve and optimize operations[64](index=64&type=chunk) - The hospital strengthened medical quality and safety management, established a hospital-level medical quality control committee, and actively engaged in cooperation and exchanges, organizing academic forums[65](index=65&type=chunk)[66](index=66&type=chunk) - Kangxin Hospital continuously develops new technologies and projects, applying for three new technologies in 2022 and pioneering transesophageal echocardiography combined with right heart acoustic angiography in Chongqing[75](index=75&type=chunk) [VIP Special Services](index=29&type=section&id=VIP%E7%89%B9%E6%AE%8A%E6%9C%8D%E5%8B%99) In 2022, the Group's total revenue from special services decreased by 10.1% year-on-year to RMB 156.1 million, accounting for approximately 8.5% of total revenue, with VIP medical services, reproductive medicine, laser treatment, and plastic surgery being the main offerings, and VIP medical services being most affected by the pandemic, experiencing a 13.5% revenue decline - Special services are high-end medical services beyond basic healthcare, primarily targeting high-income patients[141](index=141&type=chunk) 2022 Special Services Revenue Contribution | Service Type | 2022 (RMB million) | 2021 (RMB million) | Change (%) | | :--- | :--- | :--- | :--- | | VIP medical services | 86.9 | 100.5 | -13.5% | | Reproductive medicine | 45.1 | 46.9 | -3.8% | | Laser treatment | 19.8 | 21.7 | -8.4% | | Plastic and cosmetic surgery | 4.2 | 4.6 | -9.4% | | **Total Revenue** | **156.1** | **173.6** | **-10.1%** | - VIP medical services were adversely affected by the pandemic, with reduced VIP inpatient and outpatient visits leading to a **13.5% decline** in revenue[243](index=243&type=chunk) [Rehabilitation and Other Medical Services](index=30&type=section&id=%E5%BA%B7%E5%BE%A9%E5%8F%8A%E5%85%B6%E4%BB%96%E9%86%AB%E7%99%82%E6%9C%8D%E5%8B%99) In 2022, the Group's rehabilitation and other related medical services segment revenue increased by 10.1% year-on-year to RMB 111.7 million, with rehabilitation hospital and other medical services revenue growing by 30.0% due to the maturing business and increased patient visits at Hefei Kanghua Rehabilitation Hospital, while rehabilitation center services saw a slight 3.4% decrease due to pandemic impacts, and Anhui Hualin Group continued to expand its rehabilitation development and received multiple certifications and awards 2022 Rehabilitation and Other Medical Services Revenue | Service Type | 2022 (RMB million) | 2021 (RMB million) | Change (%) | | :--- | :--- | :--- | :--- | | Rehabilitation hospital and other medical services | 53.1 | 40.8 | +30.0% | | Rehabilitation center services and other services | 58.6 | 60.7 | -3.4% | | **Total Revenue** | **111.7** | **101.5** | **+10.1%** | - Revenue growth in rehabilitation hospital and other medical services is primarily attributed to the maturing business and significant increase in patient visits at Hefei Kanghua Rehabilitation Hospital[245](index=245&type=chunk)[271](index=271&type=chunk) - The decrease in rehabilitation center service revenue is mainly due to business interruptions and suspensions at children's rehabilitation centers caused by pandemic control measures[246](index=246&type=chunk)[271](index=271&type=chunk) - Anhui Hualin Group continues to strengthen standard construction, improve its management system, refine its smart rehabilitation system, and plans to develop new projects to maintain technological leadership[250](index=250&type=chunk) [Elderly Care Services](index=32&type=section&id=%E8%80%81%E5%B9%B4%E9%86%AB%E7%99%82%E6%9C%8D%E5%8B%99) In 2022, Renkang Nursing Home's elderly care services revenue increased by 1.8% year-on-year to RMB 12.5 million, with an average annual bed utilization rate of 86.1%, as the nursing home's operations matured, management capabilities strengthened, and social security regulations were strictly enforced, with future plans to actively prepare for service quality evaluations and apply for Guangdong Province Elderly-Friendly Medical Institution accreditation 2022 Elderly Care Services Operating Data | Indicator | 2022 (RMB million) | 2021 (RMB million) | Change (%) | | :--- | :--- | :--- | :--- | | Revenue | 12.5 | 12.2 | +1.8% | | Number of beds | 108 | 108 | 0% | | Average daily elderly patients | 93 | 93 | 0% | | Average annual bed utilization rate | 86.1% | 86.2% | -0.1% | - Renkang Nursing Home's business operations are maturing, having reached maximum operating capacity, with relatively stable revenue levels[161](index=161&type=chunk) - The nursing home strengthened its management capabilities, strictly implemented Dongguan City's social insurance system regulations, and provided comprehensive functional medical assessments and professional nursing for elderly residents[136](index=136&type=chunk)[144](index=144&type=chunk) - Renkang Nursing Home will actively prepare for and undergo service quality evaluations, and apply for the Guangdong Province Elderly-Friendly Medical Institution accreditation[260](index=260&type=chunk) [Pharmaceutical Sales](index=33&type=section&id=%E9%8A%B7%E5%94%AE%E8%97%A5%E5%93%81) In FY2022, the Group's pharmaceutical sales segment recorded no revenue, as this business was scaled down in 2021 and gradually integrated with the hospital services segment - In 2022, the pharmaceutical sales segment recorded no revenue, as this business was scaled down in 2021 and gradually integrated with the hospital services segment[138](index=138&type=chunk)[150](index=150&type=chunk)[261](index=261&type=chunk) [Industry Outlook and Strategies](index=33&type=section&id=%E8%A1%8C%E6%A5%AD%E5%89%8D%E6%99%AF%E5%8F%8A%E7%AD%96%E7%95%A5) 2023 marks a pivotal year for China's healthcare market transition to a "post-pandemic" era, with industry reshaping and upgrading driven by an aging population, increased health awareness, digitalization of medical services, rapid infrastructure development, payment reforms, and the growth of traditional Chinese medicine, while the Group aims to enhance smart hospital construction, promote internet medical services, and optimize operational efficiency - 2023 is a critical year for the transformation of China's medical market into a "post-pandemic" era, with the pharmaceutical and medical industries undergoing reshaping, transformation, and upgrading[254](index=254&type=chunk) - An aging population and increased health management awareness will drive medical demand growth, with the elderly population proportion expected to reach approximately **25% by 2030**[263](index=263&type=chunk) - The trend of medical service digitalization is evident, with over **70% of Chinese patients** accepting digital medical services provided by tech giants and approximately **50% willing to pay extra** for the convenience[145](index=145&type=chunk)[264](index=264&type=chunk) - Medical infrastructure is rapidly developing, with policy support leading to a significant increase in tertiary hospital expansion and primary hospital quality improvement projects[273](index=273&type=chunk) - Medical payment reform continues to deepen, with DRG/DIP payment reforms set to cover all medical insurance統籌 regions and disease types to alleviate pressure on medical insurance funds[265](index=265&type=chunk) - The Traditional Chinese Medicine industry is experiencing rapid growth, with policy support driving its sustained and rapid development[266](index=266&type=chunk) [Aging Population and Health Management Awareness](index=34&type=section&id=%E4%BA%BA%E5%8F%A3%E8%80%81%E9%BD%A1%E5%8C%96%E8%88%87%E5%81%A5%E5%BA%B7%E7%AE%A1%E7%90%86%E6%84%8F%E8%AD%98) China's population is rapidly aging, with a steady increase in the number of elderly aged 60 and above, projected to reach approximately 25% by 2030, driving immense medical demand among this high-incidence disease group, where diagnosis and treatment rates still need improvement - The number of elderly people aged 60 and above in China is steadily increasing, with the proportion of the elderly population expected to reach approximately **25% by 2030**[263](index=263&type=chunk) - Middle-aged and elderly individuals are a high-incidence group for diseases, driving immense medical demand, and the diagnosis and treatment rates for various diseases need improvement[263](index=263&type=chunk) [Digitalization of Medical Services](index=34&type=section&id=%E9%86%AB%E7%99%82%E6%9C%8D%E5%8B%99%E6%95%B8%E5%AD%97%E5%8C%96) The COVID-19 pandemic accelerated the shift from offline to online medical services, with digital touchpoints constantly available for appointments, consultations, and medication dispensing, leading over 70% of Chinese patients to accept digital medical services and approximately 50% willing to pay extra for them - The pandemic has driven the digitalization of medical services, enabling appointment booking, consultations, and medication dispensing through digital means[145](index=145&type=chunk) - Over **70% of Chinese patients** accept digital medical services, and approximately **50% are willing to pay extra** for the convenience brought by digitalization[145](index=145&type=chunk) [Rapid Development of Medical Infrastructure](index=35&type=section&id=%E9%86%AB%E7%99%82%E5%9F%BA%E7%A4%8E%E8%A8%AD%E6%96%BD%E5%BF%AB%E9%80%9F%E7%99%BC%E5%B1%95) Since the outbreak of COVID-19, China's new medical infrastructure has entered a rapid development phase to address structural deficiencies in medical resources, with policy support significantly increasing tertiary hospital expansion and primary hospital quality improvement projects, and fiscal interest-subsidized loans expected to provide RMB 200 billion in financial support, accelerating new medical infrastructure development - Since the pandemic, China's new medical infrastructure has entered a rapid development phase to address structural deficiencies in medical resources[273](index=273&type=chunk) - With policy support, tertiary hospital expansion and primary hospital quality improvement projects have significantly increased, with fiscal interest-subsidized loans expected to provide **RMB 200 billion** in financial support[273](index=273&type=chunk) [Medical Payment Reform](index=35&type=section&id=%E9%86%AB%E7%99%82%E6%94%AF%E4%BB%98%E6%94%B9%E9%9D%A9) Medical payments face pressure, with the DRG/DIP payment reform three-year action plan aiming to cover all national medical insurance pooling regions by the end of 2024 and achieve full coverage of medical insurance funds and disease types by the end of 2025 to effectively alleviate pressure on medical insurance funds, while the commercial health insurance market, though lagging, holds significant potential - The DRG/DIP payment reform plan aims to cover all national medical insurance pooling regions by the end of 2024 and achieve full coverage of medical insurance funds and disease types by the end of 2025, to alleviate pressure on medical insurance funds[265](index=265&type=chunk) - China's commercial medical insurance development lags, but the market has immense growth potential[153](index=153&type=chunk)[265](index=265&type=chunk) [Rapid Development of Traditional Chinese Medicine Industry](index=36&type=section&id=%E4%B8%AD%E9%86%AB%E8%97%A5%E7%94%A2%E6%A5%AD%E5%BF%AB%E9%80%9F%E7%99%BC%E5%B1%95) The consumer health market has a solid demand base, and the Traditional Chinese Medicine industry is experiencing rapid growth with policy support, including the expansion of sales channels for Traditional Chinese Medicine granule preparations and their inclusion in the standard Class B medical insurance catalog - The consumer health market has solid demand, and the Traditional Chinese Medicine industry is experiencing rapid growth with policy support[266](index=266&type=chunk) - The sales scope of Traditional Chinese Medicine granule preparations has expanded to all medical institutions with Traditional Chinese Medicine practice qualifications and is included in the standard Class B medical insurance catalog[266](index=266&type=chunk) [Our Strategies](index=36&type=section&id=%E6%88%91%E5%80%91%E7%9A%84%E7%AD%96%E7%95%A5) The Group will enhance smart hospital construction, promote the improvement and expansion of internet medical services to enhance patient satisfaction, and in 2023, will continue to optimize medical services, improve operational efficiency, focus on core businesses, and strengthen management standards and stakeholder relationships - The Group will improve smart hospital construction, promote the enhancement and expansion of internet medical services, and increase patient satisfaction[267](index=267&type=chunk) - In 2023, the Group will optimize medical services and operational efficiency, focus on core businesses, raise management standards, and strengthen relationships with stakeholders[267](index=267&type=chunk) [Major Investments and Future Plans for Capital Assets](index=37&type=section&id=%E9%87%8D%E5%A4%A7%E6%8A%95%E8%B3%87%E5%8F%8A%E8%B3%87%E6%9C%AC%E8%B3%87%E7%94%A2%E4%B9%8B%E6%9C%AA%E4%BE%86%E8%A8%88%E5%8A%83) The Group is developing Kanghua • Qingxi Branch, a new elderly healthcare complex in Qingxi Town, Dongguan City, with Phase I construction of the main structure and acceptance expected by April 2024, and operation by March 2025 - Kanghua • Qingxi Branch is a new elderly healthcare complex development project, planned with **500 inpatient beds** and approximately **800 nursing and rehabilitation beds**[147](index=147&type=chunk)[269](index=269&type=chunk) - Phase I construction of the main structure and acceptance is expected by **April 2024**, with operation commencing by **March 2025**[147](index=147&type=chunk) [Financial Review](index=37&type=section&id=%E8%B2%A1%E5%8B%99%E5%9B%9E%E9%A1%A7) This section provides a detailed financial review of the Group's segment revenue, cost of revenue, gross profit, other income and expenses, tax, and overall financial position and liquidity for FY2022 [Segment Revenue](index=37&type=section&id=%E5%88%86%E9%83%A8%E6%94%B6%E7%9B%8A) In FY2022, the Group's total revenue decreased by 5.5% to RMB 1,845.6 million, with hospital services revenue declining by 6.4% due to reduced inpatient visits and lower revenue from certain departments, while rehabilitation and other medical services revenue grew by 10.1%, elderly care services revenue by 1.8%, and pharmaceutical sales recorded no revenue 2022 Segment Revenue Overview | Segment | 2022 (RMB million) | 2021 (RMB million) | Change (%) | % of Total Revenue | | :--- | :--- | :--- | :--- | :--- | | Hospital services | 1,721.5 | 1,839.5 | -6.4% | 93.3% | | Rehabilitation and other medical services | 111.7 | 101.5 | +10.1% | 6.1% | | Elderly care services | 12.5 | 12.2 | +1.8% | 0.7% | | Pharmaceutical sales | – | 0.7 | -100% | 0% | | **Total** | **1,845.6** | **1,953.9** | **-5.5%** | **100%** | - The decrease in hospital services revenue is primarily due to reduced inpatient visits, lower average expenditure, and declining revenue from certain departments at Kanghua Hospital and Renkang Hospital, partially offset by increased outpatient and physical examination revenue[270](index=270&type=chunk)[277](index=277&type=chunk) - The growth in rehabilitation and other medical services revenue is mainly attributed to a significant increase in rehabilitation patient visits at Hefei Kanghua Rehabilitation Hospital[271](index=271&type=chunk) - Elderly care services revenue showed stable growth, primarily because Renkang Nursing Home's operations are maturing and have reached maximum operating capacity[161](index=161&type=chunk) [Cost of Revenue](index=40&type=section&id=%E6%94%B6%E7%9B%8A%E6%88%90%E6%9C%AC) Total cost of revenue for FY2022 was RMB 1,584.3 million, a 1.6% year-on-year decrease, with hospital services cost of revenue decreasing by 1.6% due to lower variable costs and reduced inpatient visits, while rehabilitation and other medical services cost of revenue increased by 9.1% in line with revenue growth, and elderly care services cost of revenue increased by 4.3%, with pharmaceuticals, medical consumables, and staff costs being major components 2022 Segment Cost of Revenue | Segment | 2022 (RMB thousand) | 2021 (RMB thousand) | Change (%) | | :--- | :--- | :--- | :--- | | Hospital services | (1,482,929) | (1,507,294) | -1.6% | | Rehabilitation and other medical services | (92,952) | (85,234) | +9.1% | | Elderly care services | (8,402) | (8,058) | +4.3% | | Pharmaceutical sales | – | (610) | -100% | | **Total** | **(1,584,283)** | **(1,601,196)** | **-1.1%** | - The decrease in hospital services cost of revenue is primarily due to reduced operations at Kanghua Hospital and Renkang Hospital, corresponding to lower pharmaceutical and medical consumable costs and fewer inpatient visits[272](index=272&type=chunk) - Kangxin Hospital's cost of revenue increased, but its gross margin remained negative, as it is still in the expansion phase of its operations[272](index=272&type=chunk) - Pharmaceutical costs, medical consumable costs, and staff costs accounted for approximately **25.7%**, **25.7%**, and **34.2%** of total cost of revenue, respectively[279](index=279&type=chunk) - Total staff-related costs increased by **9.8%**, reflecting higher salary levels, overtime compensation, and increased competition for medical professionals[279](index=279&type=chunk) [Gross Profit and Gross Margin](index=41&type=section&id=%E6%AF%9B%E5%88%A9%E5%8F%8A%E6%AF%9B%E5%88%A9%E7%8E%87) Total gross profit for FY2022 was RMB 261.4 million, a 25.9% year-on-year decrease, with the overall gross margin falling to 14.2%, primarily due to lower average expenditure for inpatient medical services, fewer complex surgeries, temporary closure of Kanghua Hospital's outpatient department, and ongoing losses at Kangxin Hospital 2022 Segment Gross Profit and Gross Margin | Segment | 2022 Gross Profit (RMB thousand) | 2022 Gross Margin (%) | 2021 Gross Profit (RMB thousand) | 2021 Gross Margin (%) | | :--- | :--- | :--- | :--- | :--- | | Hospital services | 238,533 | 13.9% | 332,181 | 18.1% | | Rehabilitation and other medical services | 18,762 | 16.8% | 16,273 | 16.0% | | Elderly care services | 4,055 | 32.6% | 4,178 | 34.1% | | Pharmaceutical sales | – | 0% | 116 | 16.0% | | **Total** | **261,350** | **14.2%** | **352,748** | **18.1%** | - The overall gross margin decreased to **14.2%**, primarily due to lower average expenditure for inpatient medical services, fewer complex surgeries, the temporary closure of Kanghua Hospital's outpatient department, and ongoing losses at Kangxin Hospital[286](index=286&type=chunk) [Other Income (Financial Review)](index=41&type=section&id=%E5%85%B6%E4%BB%96%E6%94%B6%E5%85%A5_%E8%B2%A1%E5%8B%99%E5%9B%9E%E9%A1%A7) Other income for FY2022 was RMB 54.9 million, a 21.5% year-on-year increase, mainly driven by investment income from financial assets at fair value through profit or loss, clinical trial and related income, and COVID-19 related rent concessions, while government subsidies decreased 2022 Other Income Composition | Income Source | 2022 (RMB million) | 2021 (RMB million) | Change (%) | | :--- | :--- | :--- | :--- | | Investment income from financial assets at fair value through profit or loss | 13.3 | 8.6 | +54.3% | | Clinical trial and related income | 10.9 | 4.8 | +127.1% | | COVID-19 related rent concessions | 7.4 | – | N/A | | Government subsidies | 5.7 | 11.2 | -49.1% | | Bank and other interest income | 3.2 | 1.9 | +68.4% | | **Total** | **54.9** | **45.1** | **+21.5%** | - Government subsidies decreased primarily due to reduced subsidies for vaccination and COVID-19 related activities[287](index=287&type=chunk) - Investment income increased mainly due to an increase in average structured deposits, consistent with the Group's cash management policy[287](index=287&type=chunk)[288](index=288&type=chunk) [Net Other Expenses, Gains and Losses (Financial Review)](index=42&type=section&id=%E5%85%B6%E4%BB%96%E9%96%8B%E6%94%AF%E3%80%81%E6%94%B6%E7%9B%8A%E5%8F%8A%E8%99%A7%E6%90%8D%E6%B7%A8%E9%A1%8D_%E8%B2%A1%E5%8B%99%E5%9B%9E%E9%A1%A7) In FY2022, the Group recorded net other expenses, gains and losses of RMB 0.7 million, an improvement from a net loss of RMB 5.2 million in 2021, primarily due to net exchange gains from HKD-denominated financial assets, offsetting fair value losses on financial assets at fair value through profit or loss 2022 Net Other Expenses, Gains and Losses | Item | 2022 (RMB million) | 2021 (RMB million) | | :--- | :--- | :--- | | Net exchange gains/(losses) | 5.9 | (2.3) | | Fair value losses on financial assets at fair value through profit or loss | (4.4) | (2.3) | | Loss on disposal of property, plant and equipment | (0.6) | (0.5) | | Donations | (0.2) | (0.1) | | **Net** | **0.7** | **(5.2)** | - Net exchange gains were **RMB 5.9 million**, compared to a loss of **RMB 2.3 million** in 2021, representing a significant improvement[164](index=164&type=chunk) [Net Impairment Loss Allowance Under Expected Credit Loss Model](index=42&type=section&id=%E9%A0%90%E6%9C%9F%E4%BF%A1%E8%B2%B8%E8%99%A7%E6%90%8D%E6%A8%A1%E5%BC%8F%E9%A0%85%E4%B8%8B%E4%B9%8B%E6%B8%9B%E5%80%BC%E8%99%A7%E6%90%8D%E6%92%A5%E5%82%99%E6%B7%A8%E9%A1%8D) In FY2022, net impairment loss allowance under the expected credit loss model increased to RMB 4.2 million from RMB 2.9 million in 2021, primarily due to increased balances and aging of trade and other receivables, and a decline in credit ratings for some corporate customers 2022 Net Impairment Loss Allowance Under Expected Credit Loss Model | Item | 2022 (RMB million) | 2021 (RMB million) | | :--- | :--- | :--- | | Net impairment loss allowance | 4.2 | 2.9 | - The increase in net allowance is primarily due to increased balances and aging of trade and other receivables, and a decline in credit ratings for some corporate customers[165](index=165&type=chunk) - The Group strengthened efforts to recover overdue debts, including legal actions and tightening credit reviews for corporate customers[165](index=165&type=chunk) [Administrative Expenses](index=43&type=section&id=%E8%A1%8C%E6%94%BF%E9%96%8B%E6%94%AF) Administrative expenses for FY2022 were RMB 228.3 million, an increase of approximately 1.4% year-on-year, primarily due to higher administrative staff-related costs, partially offset by a significant reduction in repair and maintenance expenses 2022 Administrative Expenses | Item | 2022 (RMB million) | 2021 (RMB million) | Change (%) | | :--- | :--- | :--- | :--- | | Administrative expenses | 228.3 | 225.2 | +1.4% | | Administrative staff-related costs | 83.7 | 74.4 | +12.5% | | Repair and maintenance expenses | 16.2 | 27.7 | -41.5% | - Administrative staff-related costs increased primarily due to higher staff salaries, bonus payments, and related employee welfare expenses[157](index=157&type=chunk) [Finance Costs](index=43&type=section&id=%E8%9E%8D%E8%B3%87%E6%88%90%E6%9C%AC) Finance costs for FY2022 were RMB 15.0 million, a 24.1% year-on-year decrease, primarily comprising interest on bank loans and lease liabilities, net of capitalized interest amounts 2022 Finance Costs | Item | 2022 (RMB million) | 2021 (RMB million) | Change (%) | | :--- | :--- | :--- | :--- | | Finance costs | 15.0 | 19.8 | -24.1% | | Interest on bank loans | 18.6 | 18.0 | +3.3% | | Interest on lease liabilities | 9.7 | 11.5 | -15.6% | | Less: capitalized amount | (13.3) | (9.7) | +37.1% | [Income Tax Expense (Financial Review)](index=43&type=section&id=%E6%89%80%E5%BE%97%E7%A8%85%E9%96%8B%E6%94%AF_%E8%B2%A1%E5%8B%99%E5%9B%9E%E9%A1%A7) Income tax expense for FY2022 was RMB 41.6 million, a 33.3% year-on-year decrease, with the effective tax rate increasing from 48.2% in 2021 to 60.0% in 2022, primarily due to the unrecognised tax impact of Kangxin Hospital's losses 2022 Income Tax Expense | Item | 2022 (RMB million) | 2021 (RMB million) | | :--- | :--- | :--- | | Income tax expense | 41.6 | 62.3 | -33.3% | | Effective tax rate | 60.0% | 48.2% | +11.8% | - The increase in the effective tax rate is primarily due to the tax impact of unrecognised tax losses generated by Kangxin Hospital[173](index=173&type=chunk) [Profit for the Year](index=43&type=section&id=%E5%B9%B4%E5%85%A7%E6%BA%A2%E5%88%A9) In FY2022, the Group recorded a profit of RMB 27.7 million, with profit attributable to shareholders of the Company at RMB 61.0 million 2022 Profit for the Year | Item | 2022 (RMB million) | 2021 (RMB million) | | :--- | :--- | :--- | | Group profit | 27.7 | 66.9 | | Profit attributable to shareholders of the Company | 61.0 | 94.3 | [Financial Position](index=44&type=section&id=%E8%B2%A1%E5%8B%99%E7%8B%80%E6%B3%81) As of December 31, 2022, the Group maintained a sound financial position, with changes in property, plant and equipment, right-of-use assets, and trade and other receivables, alongside increases in trade and other payables and provisions - As of December 31, 2022, the Group recorded net current assets of **RMB 289.6 million** and a net asset position of **RMB 1,502.5 million**[140](index=140&type=chunk) [Property, Plant and Equipment, Right-of-Use Assets and Deposits Paid for Acquisition of Property, Plant and Equipment](index=44&type=section&id=%E7%89%A9%E6%A5%AD%E3%80%81%E5%BB%A0%E6%88%BF%E5%8F%8A%E8%A8%AD%E5%82%99%E3%80%81%E4%BD%BF%E7%94%A8%E6%AC%8A%E8%B3%87%E7%94%A2%E4%BB%A5%E5%8F%8A%E5%B0%B1%E6%94%B6%E8%B3%BC%E7%89%A9%E6%A5%AD%E3%80%81%E5%BB%A0%E6%88%BF%E5%8F%8A%E8%A8%AD%E5%82%99%E6%94%AF%E4%BB%98%E7%9A%84%E6%8C%89%E9%87%91) As of December 31, 2022, the Group paid deposits of RMB 58.1 million for the purchase of property, plant and equipment, primarily for Phase II medical equipment at Kangxin Hospital and construction costs for Kanghua • Qingxi Branch, with right-of-use assets amounting to RMB 319.9 million 2022 Property, Plant and Equipment Related Data | Item | 2022 (RMB million) | 2021 (RMB million) | | :--- | :--- | :--- | | Deposits paid for purchase of property, plant and equipment | 58.1 | 91.6 | | Right-of-use assets | 319.9 | 354.1 | - Deposits are primarily used for Phase II medical equipment at Kangxin Hospital and construction costs for Kanghua • Qingxi Branch, as well as purchasing new medical equipment and other new facilities[187](index=187&type=chunk) [Other Assets](index=44&type=section&id=%E5%85%B6%E4%BB%96%E8%B3%87%E7%94%A2) In May 2022, the Company entered into a management arrangement with Yinshan Capital to introduce German medical group Artemed to participate in the daily management and operation of Kangxin Hospital, having paid RMB 20.0 million in brand introduction fees, classified as other assets and amortized over the service period - The Group entered into a management arrangement with Yinshan Capital to introduce German medical group Artemed to participate in the daily management and operation of Kangxin Hospital for a period of **20 years**[176](index=176&type=chunk) - The Group paid a **RMB 20.0 million** brand introduction fee, classified as other assets and amortized over the service period[168](index=168&type=chunk)[178](index=178&type=chunk) [Financial Assets at Fair Value Through Profit or Loss (Financial Review)](index=47&type=section&id=%E6%8C%89%E5%85%AC%E5%B9%B3%E5%80%BC%E8%A8%88%E5%85%A5%E6%90%8D%E7%9B%8A%E7%9A%84%E9%87%91%E8%9E%8D%E8%B3%87%E7%94%A2_%E8%B2%A1%E5%8B%99%E5%9B%9E%E9%A1%A7) As of December 31, 2022, the Group's total financial assets at fair value through profit or loss amounted to RMB 572.4 million, primarily comprising portfolio funds, fund investments, and structured short-term bank deposits, which are part of the Group's cash management activities aimed at achieving higher interest income and capital returns 2022 Financial Assets at Fair Value Through Profit or Loss | Item | 2022 (RMB million) | 2021 (RMB million) | | :--- | :--- | :--- | | Portfolio funds | 64.4 | 63.3 | | Fund investments | 18.0 | 10.0 | | Structured short-term bank deposits | 490.0 | 530.0 | | **Total** | **572.4** | **603.3** | - These investments are part of the Group's cash management activities, aiming to achieve higher interest income and capital returns without affecting normal business operations or capital expenditures[180](index=180&type=chunk)[293](index=293&type=chunk) [Trade and Other Receivables](index=45&type=section&id=%E6%87%89%E6%94%B6%E8%B3%A6%E6%AC%BE%E5%8F%8A%E5%85%B6%E4%BB%96%E6%87%89%E6%94%B6%E6%AC%BE%E9%A0%85) As of December 31, 2022, trade receivables decreased to RMB 229.6 million, with 73.2% aged within 90 days, and the average trade receivables turnover days were 45.1 days, while other receivables increased to RMB 54.0 million, mainly due to higher prepayments to suppliers and other receivables 2022 Trade and Other Receivables | Item | 2022 (RMB million) | 2021 (RMB million) | | :--- | :--- | :--- | | Trade receivables | 229.6 | 226.5 | | - % aged within 90 days | 73.2% | 86.0% | | Average trade receivables turnover days | 45.1 days | 40.3 days | | Other receivables | 54.0 | 44.0 | | - Prepayments to suppliers | 19.3 | 13.3 | - The increase in trade receivables and turnover days is primarily due to higher balances from social security funds, other government agencies, and certain corporate customers[169](index=169&type=chunk) - The Group conducts credit assessments for trade receivables and has deducted a net impairment loss allowance of **RMB 4.2 million**[169](index=169&type=chunk) [Trade and Other Payables and Provisions](index=46&type=section&id=%E6%87%89%E4%BB%98%E8%B3%A6%E6%AC%BE%E5%8F%8A%E5%85%B6%E4%BB%96%E6%87%89%E4%BB%98%E6%AC%BE%E9%A0%85%E4%BB%A5%E5%8F%8A%E6%92%A5%E5%82%99) As of December 31, 2022, trade and other payables and provisions increased to RMB 717.8 million, primarily due to higher trade payables, accrued expenses, advances from customers, and payables for property, plant and equipment acquisitions, while provisions for medical malpractice claims decreased 2022 Trade and Other Payables and Provisions | Item | 2022 (RMB million) | 2021 (RMB million) | | :--- | :--- | :--- | | Total trade and other payables and provisions | 717.8 | 633.4 | | Trade payables | 348.8 | 321.6 | | Accrued expenses | 106.2 | 98.2 | | Advances from customers | 197.1 | 147.2 | | Payables for acquisition of property, plant and equipment | 36.6 | 30.6 | | Provisions for medical malpractice claims | 1.2 | 1.9 | - The increase in trade payables is mainly due to increased procurement of materials, especially COVID-19 related materials, during the reporting period[172](index=172&type=chunk) - The increase in advances from customers is primarily due to increased temporary funds received from social security funds[172](index=172&type=chunk) - Provisions for medical malpractice claims decreased, with **RMB 2.4 million** provided during the year, **RMB 1.5 million** reversed, and **RMB 1.6 million** utilized[172](index=172&type=chunk)[26](index=26&type=chunk) [Net Current Assets](index=46&type=section&id=%E6%B5%81%E5%8B%95%E8%B3%87%E7%94%A2%E6%B7%A8%E5%80%BC) As of December 31, 2022, the Group recorded net current assets of RMB 289.6 million, a decrease from RMB 347.4 million in 2021 2022 Net Current Assets | Item | 2022 (RMB million) | 2021 (RMB million) | | :--- | :--- | :--- | | Net current assets | 289.6 | 347.4 | [Liquidity and Capital Resources](index=46&type=section&id=%E6%B5%81%E5%8B%95%E8%B3%87%E9%87%91%E5%8F%8A%E8%B3%87%E6%9C%AC%E8%B3%87%E6%BA%90) The Group maintains a strong financial position with sufficient cash and cash equivalents and stable cash flow from operating activities, managing cash through investment products and having clear capital expenditure plans, with bank loans primarily for Kangxin Hospital's Phase II medical facility development, facing exchange rate fluctuation risks but maintaining a reasonable gearing ratio - The Group maintains a strong financial position with sufficient cash and cash equivalents and stable cash flow from operating activities, adequate to meet working capital needs for the next 12 months[291](index=291&type=chunk) - The Group manages cash by investing excess cash in low-risk structured bank deposit products and investment funds to achieve higher interest income and capital returns[196](index=196&type=chunk)[293](index=293&type=chunk) [Financial Resources](index=46&type=section&id=%E8%B2%A1%E5%8B%99%E8%B3%87%E6%BA%90) As of December 31, 2022, the Group's cash and cash equivalents amounted to RMB 264.3 million, with no time deposits, and the Directors believe the Group has sufficient liquidity and financial resources to meet its working capital requirements for the next 12 months 2022 Financial Resources | Item | 2022 (RMB million) | 2021 (RMB million) | | :--- | :--- | :--- | | Cash and cash equivalents | 264.3 | 237.3 | | Time deposits | 0 | 3.0 | - The Group generates stable cash inflows from operating activities, and the Directors believe it has sufficient liquidity to meet working capital requirements for the next 12 months[291](index=291&type=chunk) [Cash Management Activities](index=47&type=section&id=%E7%8F%BE%E9%87%91%E7%AE%A1%E7%90%86%E6%B4%BB%E5%8B%95) The Group invests excess cash in low-risk structured bank deposit products and investment funds to achieve higher interest income, adhering to standards that ensure investment products have a maturity generally not exceeding one year, do not affect normal business operations or capital expenditures, are issued by reputable banks, and have low underlying investment portfolio risk, also investing in investment funds and equity investment funds for long-term returns - The Group invests excess cash in low-risk structured bank deposit products and investment funds to achieve higher interest income and capital returns[180](index=180&type=chunk)[196](index=196&type=chunk) - Investment products must meet standards including a maturity generally not exceeding one year, no impact on normal business operations or capital expenditures, issuance by reputable banks, and low underlying investment portfolio risk[180](index=180&type=chunk) - The Group's strategy is to explore new potential investment projects and capital market investments to diversify operational risks, broaden income sources, and maximize shareholder value[191](index=191&type=chunk)[196](index=196&type=chunk) [Cash Flow Analysis](index=48&type=section&id=%E7%8F%BE%E9%87%91%E6%B5%81%E9%87%8F%E5%88%86%E6%9E%90) Net cash generated from operating activities for FY2022 was RMB 221.4 million, a 33.6% year-on-year decrease, primarily due to underperformance in adjusted EBITDA, while net cash used in investing activities was RMB 83.2 million, a 72.2% decrease, and net cash used in financing activities was RMB 110.9 million, compared to net cash generated of RMB 23.3 million in 2021 2022 Cash Flow Analysis | Item | 2022 (RMB million) | 2021 (RMB million) | Change (%) | | :--- | :--- | :--- | :--- | | Net cash generated from operating activities | 221.4 | 333.4 | -33.6% | | Net cash used in investing activities | (83.2) | (299.3) | -72.2% | | Net cash (used in)/generated from financing activities | (110.9) | 23.3 | N/A | | Net increase in cash and cash equivalents | 27.4 | 57.3 | -52.1% | - The decrease in net cash from operating activities is primarily attributed to the underperformance of adjusted EBITDA[188](index=188&type=chunk) - The decrease in net cash used in investing activities is mainly due to reduced purchases of property, plant and equipment, and a net decrease in financial assets at fair value through profit or loss[183](index=183&type=chunk) - Net cash from financing activities shifted from generated to used, primarily due to no new bank loans raised and increased repayment of bank loans[184](index=184&type=chunk) [Major Investments, Acquisitions and Disposals](index=49&type=section&id=%E9%87%8D%E5%A4%A7%E6%8A%95%E8%B3%87%E3%80%81%E6%94%B6%E8%B3%BC%E5%8F%8A%E5%87%BA%E5%94%AE) In January 2022, the Group acquired a 57.7% equity interest in Hefei Aikanghui Health Management Co., Ltd. for RMB 577,000, a company primarily providing home-based elderly rehabilitation and nursing services, with no goodwill arising from the acquisition - In January 2022, the Group acquired a **57.7% equity interest** in Hefei Aikanghui Health Management Co., Ltd. for **RMB 577,000**, a company primarily providing home-based elderly rehabilitation and nursing services[185](index=185&type=chunk) - No goodwill arose from this acquisition, resulting in a net cash outflow of **RMB 570,000**[185](index=185&type=chunk) [Use of Proceeds from Initial Public Offering](index=50&type=section&id=%E9%A6%96%E6%AC%A1%E5%85%AC%E9%96%8B%E7%99%BC%E5%94%AE%E6%89%80%E5%BE%97%E6%AC%BE%E9%A0%85%E7%94%A8%E9%80%94) The net proceeds from the Company's H-share initial public offering amounted to approximately RMB 782.6 million, with portions utilized for general working capital, expanding existing businesses, upgrading hospital facilities, and business acquisitions by December 31, 2022, leaving RMB 410.8 million unutilized, part of which was used to purchase financial products - The net proceeds from the H-share initial public offering amounted to approximately **RMB 782.6 million**[198](index=198&type=chunk) 2022 IPO Proceeds Utilization | Use | Amount Utilized (RMB million) | % of Net Proceeds | | :--- | :--- | :--- | | General working capital | 78.3 | 10.0% | | Expanding existing businesses and upgrading hospital facilities | 134.7 | 17.2% | | Business acquisitions and potential acquisitions | 158.8 | 20.3% | | **Unutilized

Financial Performance - Revenue for the six months ended June 30, 2022, was RMB 862,722,000, a decrease of 1.0% compared to RMB 871,485,000 in 2021[38]. - Gross profit decreased by 31.8% to RMB 88,523,000, resulting in a gross profit margin of 10.3%, down from 14.9% in the previous year[38]. - The company reported a loss before tax of RMB (8,872,000), compared to a profit of RMB 35,843,000 in the same period last year[38]. - The loss attributable to owners of the company for the period was RMB (21,602,000), a significant decline from a profit of RMB 14,799,000 in 2021[38]. - Adjusted EBITDA for the period was RMB 65,245,000, reflecting a decrease of 41.3% from RMB 111,097,000 in the prior year[38]. - Basic loss per share was RMB (1.2) cents, compared to earnings of RMB 9.2 cents per share in the previous year[38]. - The Group's consolidated loss for the Reporting Period amounted to RMB 21.6 million, compared to a profit of RMB 14.8 million in the same period last year, primarily due to decreased revenue and profit at Kanghua Hospital[58]. - The Group's total gross profit was RMB 88.5 million, a decrease of 31.8% compared to RMB 129.8 million for the six months ended June 30, 2021, with a gross profit margin dropping to 10.3% from 14.9%[165]. - The loss attributable to shareholders was RMB 4.2 million, compared to a profit of RMB 30.9 million in the same period of 2021, indicating a challenging financial environment[182]. Revenue Breakdown - Revenue from the hospital services segment decreased by 1.8%, while revenue from rehabilitation and other healthcare services increased by 11.7% and elderly healthcare services increased by 27.0%[46]. - Revenue from the rehabilitation and other related healthcare services segment was RMB 49.4 million, up from RMB 44.2 million in the same period last year, marking an increase of 11.7%[52]. - Revenue from the elderly healthcare services segment increased by 27.0%, attributed to the gradual maturity of the elderly care center operation since its opening in 2019[53]. - Revenue from inpatient healthcare services decreased to RMB 444.3 million, down 8.8% year-on-year, accounting for 51.5% of total revenue[158]. - Revenue from outpatient healthcare services increased to RMB 315.6 million, up 12.1% year-on-year, accounting for 36.6% of total revenue[158]. - Revenue from rehabilitation and other healthcare services rose to RMB 49.4 million, an increase of 11.7% year-on-year, representing 5.7% of total revenue[158]. - Revenue from elderly healthcare services increased to RMB 6.6 million, up 27.0% year-on-year, accounting for 0.8% of total revenue[158]. Operational Challenges - Patient visits to medical institutions decreased due to COVID-19, impacting demand for non-critical healthcare services[45]. - The overall business operations experienced interruptions due to government controls on healthcare services during the pandemic[45]. - The overall decrease in surgeries and patient visits was primarily attributed to the temporary closure of medical facilities at Kanghua Hospital during the reporting period[109]. - Kanghua Hospital faced a temporary closure of its outpatient department due to a COVID-19 case, adversely impacting revenue during the reporting period[67]. Strategic Focus - The company is focusing on expanding its service offerings in various medical disciplines, including orthopaedics and nephrology[15]. - Future strategies may include market expansion and potential mergers or acquisitions to enhance service capabilities[15]. - The company is investing in new technologies and product development to improve operational efficiency and patient care[15]. - Management remains cautious about market conditions and is adjusting its performance guidance accordingly for the upcoming periods[15]. Cost Management - Direct staff costs increased by 16.3% compared to the prior period, reflecting rising salary levels and competition for medical professionals[160]. - Administrative expenses increased by approximately 11.5% to RMB 115.3 million from RMB 103.4 million, primarily due to higher administrative staff costs and general expenditures[172]. - Finance costs decreased by 16.3% to RMB 8.6 million from RMB 10.2 million, with bank loan interest rising to RMB 9.6 million from RMB 8.7 million[173]. Investment and Assets - The Group's capital expenditure on property, plant, and equipment was RMB 48.9 million, an increase from RMB 32.7 million in the same period of 2021, aimed at upgrading hospital service capacity[180]. - The Group's investments classified as financial assets at fair value through profit or loss totaled RMB 701.8 million as of June 30, 2022, up from RMB 603.3 million as of December 31, 2021[195]. - The group established a partnership for a fund focused on medical services, biotechnology, medical devices, and medical informatics, with an initial term of seven years[197]. Digital Transformation - The COVID-19 pandemic has accelerated the digital transformation of the healthcare industry, increasing patient acceptance of digital healthcare services[140]. - The Chinese government is promoting digital development in the healthcare industry, including internet hospital standards and online payment for social medical insurance[139].

Financial Performance - Revenue for the year ended December 31, 2021, was RMB 1,953,944,000, representing a year-on-year increase of 12.0% from RMB 1,745,023,000 in 2020[7] - Gross profit for 2021 was RMB 352,748,000, with a gross profit margin of 18.1%, up from 15.1% in 2020, reflecting a 34.0% increase in gross profit[7] - Profit for the year attributable to owners of the Company was RMB 66,925,000, compared to a loss of RMB 50,056,000 in 2020, marking a significant turnaround[7] - Adjusted EBITDA for 2021 was RMB 308,113,000, a 56.8% increase from RMB 196,493,000 in 2020[7] - Total revenue for the Group in 2021 was RMB 1,953.9 million, representing a year-on-year increase of 12.0%[53] - The Group's consolidated profit for the year ended 31 December 2021 amounted to RMB 66.9 million, a turnaround from a loss of RMB 50.1 million in 2020[52] - Adjusted EBITDA increased by 56.8% to RMB 308.1 million, indicating solid profitability in core operations[56] - The overall operating margin improved from 15.1% in 2020 to 18.1% in the reporting period[54] Patient Visits and Services - The number of inpatient visits in 2021 was 1,487,700, an increase from 1,358,500 in 2020[12] - Outpatient visits for 2021 totaled 67,500, compared to 56,600 in 2020[12] - Total inpatient visits increased to 67,546, a year-on-year increase of 19.4%, while outpatient visits rose to 1,487,674, up 9.5% year-on-year[49] - Revenue from hospital services amounted to RMB1,839.5 million, reflecting a year-on-year increase of 13.5% due to an increase in patient visits[49] - Revenue from elderly healthcare services at Renkang Elderly Care Centre amounted to RMB12.2 million, representing a year-on-year increase of 84.8%[51] - The increase in elderly healthcare revenue was driven by maturing operations and rising demand for services, leading to higher patient intake[51] Asset and Liability Management - Total assets increased by 10.2% to RMB 2,704,602,000, while total liabilities rose by 17.6% to RMB 1,230,175,000[7] - The Company reported a net gearing ratio of 21.1%, up from 18.3% in 2020, indicating a slight increase in leverage[7] Strategic Initiatives and Future Plans - The Company plans to continue expanding its market presence and investing in new technologies to enhance service delivery and patient care[7] - Future plans include implementing a high degree of information-based integration in various management areas, enhancing decision-making capabilities[36] - The strategic theme for the Group is "Being Open to New Opportunities and Creating a New Pathway," aimed at improving medical care quality and competitiveness[21] - The Group plans to optimize medical services and improve operational efficiency in 2022[64] - The Group will continue to explore merger and acquisition opportunities in the domestic market[64] COVID-19 Response and Impact - The Group administered over 850,000 doses of COVID-19 vaccine, receiving high praise from the government and society for its efforts[29] - The impact of the COVID-19 pandemic is expected to persist, with ongoing operational challenges for healthcare service providers[58] - The Group aims to accelerate the online transformation of the healthcare industry and promote breakthroughs in the consumer medical segment[64] - The COVID-19 pandemic has led to an upsurge in online medical treatments, providing patients with more options[174] Hospital Recognition and Achievements - Kanghua Hospital was awarded as a key clinical specialty in Dongguan in 2021 and recognized as one of the top 100 private hospitals in China[30] - The hospital's teaching ability and academic research level significantly improved, with 19 projects approved by the Dongguan social science and technology development program in 2021[30] - Kanghua Hospital was awarded multiple recognitions, including being listed among the top 100 private hospitals and the top 300 prefecture-level city hospitals in China[94] Rehabilitation and Specialized Services - Revenue from rehabilitation and other healthcare services was RMB101.5 million, a year-on-year increase of 1.1%, with rehabilitation hospital services declining by 36.4% to RMB40.8 million[50] - Revenue from rehabilitation centres and other healthcare services, particularly children rehabilitation operations, increased by 67.7% to RMB60.7 million[50] - The hospital aims to enhance the functions of its rehabilitation and hypertension centers to manage chronic diseases effectively[122] Digital Transformation and Healthcare Innovation - The hospital's digitalization efforts included integrating online appointment registration, consultations, and payment systems to create a seamless medical service experience[99] - The Group has focused on upgrading hospitals and elderly healthcare facilities as part of its strategy moving forward[76] - The Group is focusing on developing internal medical businesses such as atrial fibrillation and supraventricular tachycardia to enhance technical capabilities[122] Market Trends and Industry Outlook - The healthcare industry is expected to experience transitional pains but continues to present development opportunities due to aging population and policy support[165] - The consumer healthcare market is valued at RMB 13 trillion, providing numerous opportunities for business development[184] - The demand for consumer healthcare is expected to grow as proactive health awareness increases, transitioning from a hospital-centered to a patient-centered approach in 2022[184]

Financial Performance - Revenue for the six months ended June 30, 2021, increased by 14.5% to RMB 871,485,000 compared to RMB 760,987,000 in 2020[7] - Gross profit rose by 77.4% to RMB 129,845,000, with a gross profit margin of 14.9%, up from 9.6% in 2020[7] - Profit before taxation improved by 128.8% to RMB 35,843,000, compared to a loss of RMB 124,446,000 in the previous year[7] - The company reported a profit for the period of RMB 14,799,000, a significant turnaround from a loss of RMB 126,219,000 in 2020, representing a 111.7% increase[7] - Adjusted EBITDA surged by 283.9% to RMB 111,097,000, compared to RMB 28,936,000 in the same period last year[7] - Basic earnings per share increased by 128.9% to 9.2 RMB cents, recovering from a loss of 31.8 RMB cents in 2020[7] Market Recovery - The healthcare market in the PRC, particularly in Guangdong Province, showed signs of stabilization and recovery due to effective pandemic control measures and government support[17] - The number of outpatient visits increased to 698,500 in 2021 from 566,600 in 2020, reflecting a recovery trend[12] - The company is focusing on expanding its healthcare services and enhancing operational efficiency in response to market recovery[17] - Future strategies include continued investment in healthcare infrastructure and potential new service offerings to meet growing demand[17] Hospital Operations - Revenue from Kanghua Hospital and Renkang Hospital increased by 9.7% and 45.8%, respectively, while Kangxin Hospital experienced a mild decline of 1.7%[20] - Total inpatient visits increased to 31,308, representing a 20.3% increase from 26,030 in the first half of 2020[27] - Total outpatient visits rose to 698,486, a 23.3% increase from 566,568 in the first half of 2020[27] - The total number of surgical operations increased to 19,416, representing an 8.0% increase from 17,991 in the same period of 2020[27] - Revenue from the rehabilitation and related healthcare services segment increased by 40.7% to RMB 44.2 million, compared to RMB 31.5 million in the first half of 2020[23] Revenue Breakdown - Revenue from hospital services increased to RMB 821.3 million for the six months ended June 30, 2021, representing a year-on-year increase of 13.8% and accounting for 94.2% of total revenue[102] - Revenue from inpatient healthcare services was RMB 487.4 million, a 4.2% increase from RMB 468.0 million, representing 55.9% of total revenue[105] - Revenue from outpatient healthcare services rose to RMB 281.6 million, a 24.4% increase from RMB 226.5 million, accounting for 32.3% of total revenue[105] - Revenue from physical examination services surged to RMB 52.3 million, a 92.6% increase from RMB 27.2 million, making up 6.0% of total revenue[105] Cost and Expenses - The Group's cost of revenue for the reporting period was RMB 741.6 million, leading to a gross profit of RMB 129.8 million[100] - Total staff-related costs increased by 3.7% compared to the previous year, reflecting higher salary levels and competitive compensation packages for healthcare professionals[120] - Administrative expenses for the first half of 2021 amounted to RMB 103.4 million, a decrease of approximately 16.1% compared to RMB 123.2 million for the same period in 2020[143] - Finance costs for the reporting period decreased by 9.6% to RMB 10.2 million, down from RMB 11.3 million in the first half of 2020[145] Cash Flow and Investments - The Group generated net cash from operating activities of RMB 155.8 million for the six months ended June 30, 2021, representing a 492.2% increase from RMB 26.3 million in the same period of 2020[174] - Net cash used in investing activities was RMB(163.6) million for the six months ended June 30, 2021, compared to RMB(129.2) million in the same period of 2020, reflecting a 26.7% increase[173] - The Group's investments classified as financial assets at FVTPL totaled RMB 570.5 million as of June 30, 2021, up from RMB 467.7 million as of December 31, 2020[167] Future Outlook - The Group anticipates significant business growth following the effective control of the COVID-19 pandemic[78] - The Group aims to expand healthcare operations in the PRC through selective mergers and acquisitions, with a budget of RMB 273.9 million, of which RMB 158.8 million has been utilized[188] - The Group plans to expand its current operations and upgrade hospital facilities, with an allocated budget of RMB 70.4 million, expected to be fully utilized by December 31, 2021[188] Challenges and Risks - The hospital faced challenges including high overhead costs and competition for healthcare professionals, impacting patient visits[43] - The Group's management estimates that the timeline for utilizing unutilized funds is subject to change based on operating and market conditions[189] - The Group closely monitors the credit quality of accounts receivables, considering debts that are neither past due nor impaired as having good credit quality[136]

Financial Performance - Revenue for the year ended December 31, 2020, was RMB 1,745,023,000, a decrease of 10.8% compared to RMB 1,955,525,000 in 2019[9] - Gross profit for 2020 was RMB 263,155,000, down 32.4% from RMB 389,419,000 in 2019, resulting in a gross profit margin of 15.1%, a decline of 4.83 percentage points[9] - The company reported a loss attributable to owners of RMB 25,372,000 for 2020, a significant decrease from a profit of RMB 74,264,000 in 2019, marking a 134.2% year-over-year change[9] - Adjusted EBITDA for 2020 was RMB 196,493,000, down 32.1% from RMB 289,180,000 in 2019[9] - The Group incurred a consolidated loss of RMB 50.1 million in 2020, compared to a profit of RMB 48.7 million in 2019[50] - Loss attributable to owners of the Company was RMB 25.4 million, down from a profit of RMB 74.3 million in 2019[50] - Adjusted EBITDA decreased by 32.1% to RMB 196.5 million, indicating that core operations remained profitable after adjustments[50] - The Group recognized an impairment loss on goodwill totaling RMB 77.4 million related to Kangxin Hospital and Anhui Hualin[50] Patient Visits and Services - The number of outpatient visits in 2020 was 1,358,500, a decrease from 1,753,300 in 2019[12] - The company experienced a decline in inpatient visits, with 2020 figures showing a drop compared to previous years[12] - Total inpatient visits decreased to 56,589, a year-on-year decline of 25.1%, while outpatient visits fell to 1,358,516, down 22.5%[48] - Total outpatient visits decreased to 1,358,516, representing a year-on-year decrease of 22.5%, with average spending per outpatient visit rising by 11.9% to RMB 389.3[71] - Total number of surgical operations decreased to 39,082, a year-on-year decrease of 15.1%[71] - The total number of surgeries performed in 2020 was 39,170, a decrease of 15.0% from 46,094 in 2019, with complex surgeries (level 3 or 4) decreasing by 12.1%[119] Impact of COVID-19 - The Group's operations were significantly impacted by the COVID-19 pandemic, leading to a decline in outpatient visits, inpatient visits, and surgical operations during the first half of 2020[27] - Starting from the second half of 2020, patient visit volumes quickly rebounded to pre-pandemic levels, with a notable increase in rehabilitation services[27] - The Group's operations rebounded in the second half of 2020, with patient visits gradually returning to pre-pandemic levels[61] - The pandemic caused a significant slowdown in business operations across all segments, but staff headcount remained unchanged during this period[191] Strategic Initiatives and Future Plans - The company plans to focus on expanding its healthcare services and enhancing operational efficiency in the coming years[9] - The Group plans to leverage opportunities in the Greater Bay Area to expand its healthcare network and business operations[21] - The establishment of internet hospitals is being expedited in response to the increasing demand for online medical consultations[32] - The Group aims to strengthen its healthcare services network in the Greater Bay Area and capitalize on opportunities from the "Healthy China 2030" vision[58] - The strategy includes enhancing operational efficiency and consolidating the leading position in China's private healthcare industry[58] - The Group plans to improve specialties based on existing advantages and develop both offline and online service capabilities[58] Revenue by Segment - Revenue from hospital services amounted to RMB1,620.5 million, reflecting a year-on-year decrease of 12.3% due to a decline in patient visits during the pandemic[48] - Revenue from rehabilitation and related healthcare services segment recorded revenue of RMB100.4 million, representing a year-on-year increase of 15.3%[48] - Revenue from elderly healthcare services surged to RMB 6.62 million in 2020, representing a significant year-on-year increase of 296.4% from RMB 1.67 million in 2019, driven by an increase in patient intake[156] - Revenue from pharmaceutical products and medical consumables decreased to RMB 17.54 million, down 5.6% year-on-year, accounting for 1.0% of total revenue[182] Operational Efficiency and Management - The Group is focusing on enhancing healthcare service competencies and restructuring management capabilities to improve operational efficiency[21] - The Group's management is optimistic that new internet services will mitigate the operational impacts of future pandemics[37] - The Group's strategic shift is towards delivering high-quality services while maintaining fast-paced expansion in the healthcare sector[167] - The Group has implemented numerous precautionary measures to ensure the health and safety of employees and stable operations during the pandemic[164] Recognition and Certifications - Kanghua Hospital achieved several recognitions, including a 5-star expertise rating and a 3A creditworthiness rating from the Chinese Non-governmental Medical Institute Association[38] - Kanghua Hospital's Department of Respiratory and Critical Medicine received PCCM certification as a class III hospital, aimed at improving national standards for respiratory disease treatment[79] - Renkang Hospital was recognized as a Class 2 hospital with excellent performance in the national PCCM standardization construction project[43] - Kangxin Hospital was recognized as a training project base for electrophysiology specialty by the National Health Commission, indicating its advanced capabilities in this area[108] Challenges and Risks - The company faced a significant revenue decline in the first half of 2020 due to pandemic-related restrictions, leading to an impairment loss on goodwill of RMB 27.5 million[141] - The management anticipates that rising operating costs will suppress revenue growth potential in the short to medium term[141] - The government has implemented centralized procurement policies aimed at lowering pharmaceutical purchase prices, which may influence the Group's procurement strategies[159] Other Income and Financial Metrics - Other income for the Group increased by approximately 39.2% year-on-year to RMB 41.2 million in 2020, up from RMB 29.6 million in 2019[198] - Investment income from financial assets at FVTPL rose by 13.3% to RMB 16.4 million in 2020, compared to RMB 14.5 million in 2019[198] - Government subsidies increased significantly to RMB 6.3 million in 2020, up from RMB 0.7 million in 2019, primarily due to pandemic-related support[198]