Market Expansion and Strategy - Overseas markets such as Southeast Asia, Japan, North America, and the Middle East will be explored further, with new casual social games expected to launch soon[8] - The company plans to deepen regional market penetration and increase marketing efforts in underdeveloped areas in China[10] - New marketing channels, including collaborations with MCNs and influencers, will be explored to reduce customer acquisition costs[11] - Increased R&D investment will focus on preparing and launching new products for both domestic and overseas markets[12] - The company aims to identify potential business opportunities through partnerships, acquisitions, and investments in promising R&D teams[13] Financial Performance - Revenue decreased by 12.4% to RMB 835.7 million in the first half of 2024 compared to RMB 953.5 million in the same period of 2023, primarily due to a decrease in ARPPU despite a 70.0% increase in paying users[14] - Revenue breakdown for the first half of 2024: 91.2% from virtual token sales, 6.4% from third-party mobile game distribution, and 2.4% from advertising, compared to 85.9%, 9.9%, and 4.2% respectively in the same period of 2023[14] - Cost of sales increased by 35.2% to RMB 422.7 million in the first half of 2024, driven by higher commissions to third-party distribution channels, increased new media costs, and higher employee benefits[15] - Gross profit decreased by 35.6% to RMB 413.0 million, with gross margin dropping from 67.2% in the first half of 2023 to 49.4% in the first half of 2024[16] - Selling and marketing expenses surged by 101.4% to RMB 261.1 million in the first half of 2024, mainly due to increased advertising and marketing expenditures to maintain market share[20] - Profit before tax plummeted by 91.0% to RMB 40.3 million in the first half of 2024, with the profit margin declining from 47.1% to 4.8%[22] - Net profit attributable to owners of the company dropped by 92.9% to RMB 28.0 million in the first half of 2024[24] - The company's adjusted net profit attributable to owners for the six months ended June 30, 2024, was approximately RMB 42.0 million, a significant decrease of 90.6% compared to RMB 445.6 million for the same period in 2023[26] - Revenue for the six months ended June 30, 2024, decreased to RMB 835.659 million from RMB 953.477 million in the same period in 2023, representing a decline of approximately 12.4%[37] - Gross profit for the six months ended June 30, 2024, was RMB 412.968 million, down from RMB 640.840 million in 2023, a decrease of approximately 35.5%[37] - Net profit attributable to the company's owners for the six months ended June 30, 2024, was RMB 28.009 million, a significant drop from RMB 395.293 million in 2023, representing a decline of approximately 92.9%[38] - Basic earnings per share for the six months ended June 30, 2024, were RMB 0.0223, compared to RMB 0.3098 in 2023, a decrease of approximately 92.8%[38] - The company's profit attributable to owners for the six months ended June 30, 2024, was RMB 28,009 thousand, a significant decrease from RMB 395,293 thousand in the same period in 2023[63] Cash Flow and Capital Expenditures - Cash and cash equivalents as of June 30, 2024, were approximately RMB 1,028.7 million, down from RMB 1,340.9 million as of December 31, 2023[28] - Capital expenditures for the six months ended June 30, 2024, were approximately RMB 261.3 million, a significant increase from RMB 71.2 million in the same period in 2023[31] - Net cash generated from operating activities was RMB 12,162, compared to RMB 182,951 in the same period last year[47] - Net cash used in investing activities was RMB 309,147, primarily due to purchases of financial assets and investments in associates and joint ventures[47] - Net cash used in financing activities was RMB 16,926, including RMB 10,894 for share repurchases[47] - Cash and cash equivalents decreased by RMB 313,911, ending the period at RMB 1,028,691[47] Shareholder and Equity Information - The company had no short-term or long-term bank borrowings as of June 30, 2024, except for lease liabilities totaling RMB 20.5 million[29] - The company's debt-to-asset ratio was zero as of June 30, 2024, indicating no debt[30] - Total assets as of June 30, 2024, were RMB 2.010 billion, slightly up from RMB 1.887 billion as of December 31, 2023[39] - Current liabilities as of June 30, 2024, increased to RMB 304.944 million from RMB 190.164 million as of December 31, 2023, representing an increase of approximately 60.3%[39] - Net current assets as of June 30, 2024, were RMB 1.705 billion, slightly up from RMB 1.697 billion as of December 31, 2023[39] - Total equity as of June 30, 2024, was RMB 2.003 billion, down from RMB 2.084 billion as of December 31, 2023, representing a decrease of approximately 3.9%[40] - Non-current liabilities as of June 30, 2024, were RMB 12.863 million, slightly up from RMB 12.602 million as of December 31, 2023[40] - The company's net asset value as of June 30, 2024, was RMB 2.003 billion, down from RMB 2.084 billion as of December 31, 2023, representing a decrease of approximately 3.9%[40] - Dividends distributed during the period amounted to RMB 117.226 million[44] - Share-based payment expenses under the 2024 share incentive plan were RMB 13.808 million[44] - Share repurchases during the period totaled RMB 10.894 million[44] - Total equity as of January 1, 2024, was RMB 2,084.150 million, with a net profit of RMB 28.009 million for the period[44] - Share-based payment expenses under the 2021 share incentive plan were RMB 142,000[44] - Total equity as of June 30, 2023, was RMB 2,050.575 million, with a net profit of RMB 402.557 million for the period[43] - Share-based payment expenses under the 2023 share incentive plan were RMB 27.152 million[43] - Dividends distributed during the period amounted to RMB 162.823 million[43] - Total equity increased to 5,164,000 from 11,982 during the six months ended June 30, 2024[45] - The company received a donation of 32,085,086 shares from two shareholders, with a fair value of RMB 64,790,000[45] - The company repurchased 5,164,000 shares at prices ranging from HKD 1.915 to HKD 2.684, with a total cost of RMB 10,893,569 (HKD 11,982,260)[45] - The company declared a final dividend of HKD 0.10 per share, totaling HKD 128.3 million, compared to HKD 0.14 per share in the previous period[57] Share Incentive Plans and Awards - The company's share-based payment plan allows for the issuance of up to 10% of the total issued shares as of the listing date, which is 125,600,000 shares[86] - On November 14, 2019, the company granted options to 58 eligible employees to subscribe for a total of 62,360,000 ordinary shares with a fair value of HKD 47,452,000 (RMB 42,508,000)[87] - The exercise price for the granted options is HKD 2.09 per share, with vesting periods of 30% on November 14, 2020, 40% on November 14, 2021, and 30% on November 14, 2022[87] - As of September 30, 2021, 1,600,000 options were forfeited due to the termination of employment of two grantees, and 60,760,000 options remained unexercised[87] - The company compensated the remaining option holders with share awards, with compensation ratios of 0.35, 0.5, and 0.8333 shares per unexercised option[88] - 26 remaining option holders received 9,278,500 compensation shares for 26,510,000 unexercised options at a ratio of 0.35 shares per option[88] - 29 remaining option holders received 16,525,000 compensation shares for 33,050,000 unexercised options at a ratio of 0.5 shares per option[88] - 1 remaining option holder received 1,000,000 compensation shares for 1,200,000 unexercised options at a ratio of approximately 0.8333 shares per option[88] - A total of 26,803,500 compensation share awards were granted as compensation for the cancellation of unexercised existing share options[89] - 40% of the total share awards will vest on April 30, 2022, 30% on April 30, 2023, and 30% on April 30, 2024[89] - For the vesting on April 30, 2024, the company's consolidated revenue for the year ending December 31, 2023, should increase by at least 20% compared to the year ending December 31, 2020[89] - 5,343,000 shares vested during the period ending June 30, 2024, with 195,000 shares forfeited[91] - The fair value increase of HKD 7,710,000 will be amortized over the vesting periods ending April 30, 2022, April 30, 2023, and April 30, 2024, at 40%, 30%, and 30% respectively[92] - The company recognized share-based payment expenses of RMB 142,000 for the period ending June 30, 2024[92] - 600,000 share awards were granted under the 2021 Share Award Plan to two grantees on September 30, 2021[93] - For the 2021 Share Award Plan, 40% of the total share awards will vest on April 30, 2022, 30% on April 30, 2023, and 30% on April 30, 2024[93] - The company's operating profit should account for at least 75% of the total profit for the year ending December 31, 2023, for the vesting on April 30, 2024[93] - The company recognized share-based payment expenses of RMB 43,000 related to the 2021 Share Award Plan for the period ending June 30, 2024, compared to RMB 102,000 for the same period in 2023[95] - The 2023 Share Award Plan granted 19,311,675 shares to 21 grantees, with share-based payment expenses of RMB 27,152,000 recognized for the period ending June 30, 2023[96] - The 2024 Share Award Plan granted a total of 7,006,454 shares to 23 grantees, with share-based payment expenses of RMB 13,808,000 recognized for the period ending June 30, 2024[97] - The fair value of the company's 5% equity in Spirejoy Pte. Ltd. increased to RMB 2,999,000 as of June 30, 2024, from RMB 1,499,000 as of December 31, 2023[99] - The fair value of the company's equity securities listed on the Shanghai Stock Exchange decreased to RMB 19,144,000 as of June 30, 2024, from RMB 34,819,000 as of December 31, 2023[99] - The fair value of the company's private equity funds increased to RMB 130,824,000 as of June 30, 2024, from RMB 62,599,000 as of December 31, 2023[99] - The company's 10% equity in a partnership investing in consumer, enterprise services, and entertainment sectors was valued at RMB 31,243,000 as of June 30, 2024, slightly down from RMB 31,532,000 as of December 31, 2023[99] - No gains or losses were recognized in other comprehensive income for unlisted equity instruments classified as fair value through other comprehensive income during the period ending June 30, 2024, compared to a loss of RMB 3,333,000 for the same period in 2023[101] - Total revenue for the six months ended June 30, 2024, reached RMB 127,215 thousand, compared to RMB 38,615 thousand in the same period in 2023, representing a significant increase[103] - Advertising and promotion services revenue from Guangzhou Keyang amounted to RMB 56,145 thousand, a new addition compared to the previous year[103] - Game operation costs for Guangzhou Keyang were RMB 19,288 thousand, a new expense item for the period[103] - The company recorded a gain of RMB 9,032 thousand from the sale of assets, including mobile game R&D results and property, plant, and equipment, to Shenzhen Keyang[105] - Loans to associates increased to RMB 111,102 thousand as of June 30, 2024, up from RMB 80,000 thousand at the end of 2023[106] - Total compensation for key management personnel, including salaries, bonuses, and stock-based payments, was RMB 8,327 thousand for the six months ended June 30, 2024, down from RMB 30,786 thousand in the same period in 2023[108] - Mr. Wu Chengze holds a 33.80% equity interest in the company through his controlled entity, Wu Chengze Network Limited[110] - Wu Chengze Network Limited holds a beneficial interest of 33.80% in the company's shares, amounting to 433,842,000 shares[116] - Xiamen Challenger Venture Capital Partnership holds a controlled corporate interest of 5.52% in the company's shares, amounting to 70,840,000 shares[116] - Jiang Ming Kuan Network Limited holds a beneficial interest of 6.61% in the company's shares, amounting to 84,885,000 shares[116] - Zhang Na holds a beneficial interest of 5.25% in the company's shares, amounting to 67,414,500 shares, and a spousal interest of 5.31%, amounting to 68,112,838 shares[116] - The company's share incentive plan allows for the issuance of up to 10% of the total issued shares, which is 125,600,000 shares, or a higher limit as permitted by the stock exchange[119] - The total number of shares that can be issued upon the exercise of all options under the share incentive plan and other plans shall not exceed 30% of the total issued shares at any time[119] - The company's subsidiary, Hometown Interactive (Xiamen) Network Technology Co., Ltd., has a registered capital of RMB 10,000,000, with Wu Chengze holding a 100% interest through Jilin Yutai Network Technology Co., Ltd.[112][114] - Su Bo holds an 18.4% interest in Hometown Interactive (Xiamen) Network Technology Co., Ltd. through Jilin Yutai Network Technology Co., Ltd.[112] - The company's share incentive plan requires a payment of HKD 1.00 for the acceptance of granted options, which is non-refundable and not considered as part of the exercise price[119] - The company's share incentive plan stipulates that no further options can be granted to a qualified person if the total number of shares issued or to be issued exceeds 1% of the total issued shares, unless approved by shareholders at a general meeting[119] - No share options were granted/exercised/cancelled/expired under the share option plan as of June 30, 2024[120] - The share option plan has a remaining validity period of approximately 5 years as of June 30, 2024[120] - The company can grant up to 63,240,000 share options under the share option plan as of both January 1, 2024 and June 30, 2024[120] - The share incentive plan has a remaining validity period of approximately 4 years and 10 months as of June 30, 2024[122] - The maximum number of new shares that can be issued under the share incentive plan in any fiscal year is 3% of the total issued shares[122] - The maximum number of new shares that can be issued to selected participants under the share incentive plan in any 12-month period is 1% of the total issued shares[122] - The company did not grant any share options or share incentives that required the issuance of new shares in the six months ended June 30, 2024[123] - As of December 31, 2022, the total number of unvested share incentives under the share incentive plan was 13,038,000[124] - In 2022, the company granted a total of 49,345,449 share incentives under the share incentive plan[124] - The share incentives granted in 2022 had a vesting period from April

Financial Performance - Revenue for the six months ended June 30, 2024, was RMB 835,659,000, a decrease of 12.4% compared to RMB 953,477,000 in the same period last year[2] - Gross profit for the same period was RMB 412,968,000, down 35.6% from RMB 640,840,000 year-on-year[2] - Adjusted net profit attributable to the company was RMB 42,002,000, a significant decline of 90.6% from RMB 445,611,000 in the previous year[2] - Revenue from self-developed mobile games was RMB 761,849,000, a decrease of 6.9% compared to RMB 818,662,000 last year[3] - Revenue from third-party mobile games was RMB 53,549,000, showing a substantial decline of 43.4% from RMB 94,635,000 year-on-year[3] - Advertising revenue for the period was RMB 20,261,000, a significant increase of 49.6% compared to RMB 40,180,000 last year[3] - The company's revenue for the six months ended June 30, 2024, was approximately RMB 835.7 million, a decrease of 12.4% compared to RMB 953.5 million for the same period in 2023[11] - The number of paying users increased by 70.0% year-on-year, but the overall revenue decline was attributed to a reduction in ARPPU due to adjustments in commercialization strategies[11] - Profit before tax decreased by approximately 91.0% from RMB 449.5 million for the six months ended June 30, 2023, to RMB 40.3 million for the six months ended June 30, 2024, with the profit margin dropping from 47.1% to 4.8%[20] - Profit attributable to owners of the company decreased by approximately 92.9% from RMB 395.3 million for the six months ended June 30, 2023, to RMB 28.0 million for the same period in 2024[22] User Engagement - The number of paying users reached 15,691,516, representing a 70.0% increase year-on-year[5] - The company has introduced new game features and upgraded graphics, enhancing user experience and engagement[5] Market Strategy - The company plans to explore overseas gaming markets in Southeast Asia, Japan, North America, and the Middle East in the second half of 2024[6] - The company plans to enhance its game portfolio and increase market penetration in underdeveloped regions, particularly in central, northwest, and southeast provinces of China[8] - The company will continue to explore new marketing channels and collaborate with MCNs and streamers to reduce customer acquisition costs[8] - Increased R&D investment is planned to prepare for the testing and launch of new products in both domestic and overseas markets[9] - The company aims to identify potential business opportunities through strategic partnerships and may consider incubation, investment, and acquisitions[10] Expenses and Costs - Sales cost increased by approximately 35.2% to RMB 422.7 million for the six months ended June 30, 2024, primarily due to increased commissions paid to third-party distribution channels and payment providers[12][13] - Sales and marketing expenses rose by approximately 101.4% to RMB 261.1 million, driven by increased advertising and marketing expenditures[18] - Administrative and other expenses decreased by approximately 15.4% from RMB 146.4 million for the six months ended June 30, 2023, to RMB 123.9 million for the six months ended June 30, 2024, primarily due to a reduction in employee costs of RMB 22.4 million and a decrease in share-based payment expenses of RMB 13.9 million[19] Cash Flow and Assets - As of June 30, 2024, the company had cash and cash equivalents of approximately RMB 1,028.7 million, down from RMB 1,340.9 million as of December 31, 2023[27] - The company had no short-term or long-term bank borrowings as of June 30, 2024, and the total liabilities to assets ratio was zero[28][29] - Capital expenditures for the six months ended June 30, 2024, were approximately RMB 261.3 million, significantly higher than RMB 71.2 million for the same period in 2023, primarily due to increased investments in financial assets and joint ventures[30] - The total cash and cash equivalents at the end of June 30, 2024, were RMB 1,028,691,000, down from RMB 1,155,952,000 at the end of June 30, 2023[46] Shareholder Information - The company confirmed dividend distributions amounting to RMB 117,226,000 during the period[41] - The company repurchased a total of 5,164,000 shares at a total cost of RMB 10,893,569 (approximately HKD 11,982,260) during the six months ended June 30, 2024[43] - No interim dividend was declared for the six months ending June 30, 2024, consistent with the previous period[73] Compliance and Governance - The company has complied with the corporate governance code throughout the reporting period[74] - The audit committee has reviewed the unaudited interim results and confirmed compliance with applicable accounting principles[76] - There was a change in the board of directors, with Mr. Su Bo appointed as an executive director on April 5, 2024[77] Financial Reporting - The financial statements are prepared in accordance with International Financial Reporting Standards and reflect the company's financial position and performance accurately[48] - The company has adopted new and revised International Financial Reporting Standards effective from January 1, 2024, with no significant impact on the financial statements[51]

Financial Performance - Revenue reached RMB 1,779.7 million, a year-on-year increase of 13.9%[7] - Gross profit was RMB 1,157.5 million, a year-on-year increase of 13.4%[7] - Adjusted net profit was RMB 499.4 million, a year-on-year decrease of 5.5%[7] - Revenue from continuing operations increased by 13.9% to RMB 1,779.7 million, with gross profit rising by 13.4% to RMB 1,157.5 million[16] - Net profit attributable to owners decreased by 6.1% to RMB 436.9 million, while non-IFRS adjusted net profit dropped by 5.5% to RMB 499.4 million[16] - Gross profit increased by 13.4% from RMB 1,020.6 million in 2022 to RMB 1,157.5 million in 2023, while gross margin decreased slightly from 65.3% to 65.0%[25] - Profit before tax grew by 33.3% from RMB 376.0 million in 2022 to RMB 501.1 million in 2023, with the profit margin increasing from 24.1% to 28.2%[31] - Net profit attributable to owners of the company decreased by 6.1% from RMB 465.3 million in 2022 to RMB 436.9 million in 2023[32] - Adjusted net profit attributable to owners of the company declined by 5.5% from RMB 528.6 million in 2022 to RMB 499.4 million in 2023, after adjusting for non-cash items and withholding tax[34] - Revenue breakdown: 88.2% from virtual token sales, 8.0% from third-party game distribution, and 3.8% from advertising[23] - Sales costs increased by 14.7% to RMB 622.2 million, driven by higher commissions to third-party distribution channels and suppliers[24] - Other income rose by 6.0% from RMB 59.7 million in 2022 to RMB 63.3 million in 2023, primarily due to an increase in interest income of RMB 4.5 million[26] - Sales and marketing expenses decreased by 37.4% from RMB 543.7 million in 2022 to RMB 340.6 million in 2023, driven by reduced advertising spending on platforms like ByteDance and Tencent[29] - Administrative and other expenses increased by 76.3% from RMB 220.1 million in 2022 to RMB 387.9 million in 2023, mainly due to higher employee costs, subcontracting fees for new game development, and share-based payment expenses[30] - Cash and cash equivalents increased to RMB 1,340.9 million as of December 31, 2023, up from RMB 1,163.3 million in 2022, with the majority held in RMB-denominated accounts[36] - The company had no short-term or long-term bank borrowings as of December 31, 2023, except for lease liabilities of RMB 20.8 million[37] - The leverage ratio remained at zero as of December 31, 2023, due to the absence of borrowings[38] - Capital expenditures for the year ended December 31, 2023, amounted to approximately RMB 69.6 million, a decrease from RMB 104.0 million in the previous year, primarily due to reduced investments in financial assets and joint ventures[39] - The company incurred a loss of RMB 16.8 million from the sale of Jilin Xinyue and Jilin Anrui, with total consideration of RMB 135.0 million for the 40% equity stakes in both entities[41] - The company's distributable reserves as of December 31, 2023, amounted to approximately RMB 14.7 million, compared to zero in the previous year[134] - The company proposed a final dividend of HK$0.1 per share for the year ended December 31, 2023, totaling HK$128,340,350 (equivalent to RMB 118,073,122), subject to shareholder approval at the Annual General Meeting on June 6, 2024[132] User Metrics and Engagement - DAUs (Daily Active Users) were 14,389,388, a year-on-year increase of 3.1%[10] - MAUs (Monthly Active Users) were 68,289,393, a year-on-year increase of 9.4%[10] - Paying users reached 13,104,865, a year-on-year decrease of 21.3% but a 42.0% increase compared to June 30, 2023[10] - Daily active users (DAUs) grew by 3.1% to 14,389,388, and monthly active users (MAUs) increased by 9.4% to 68,289,393[16] - Paid users decreased by 21.3% to 13,104,865, while third-party game co-operation revenue reached RMB 145.2 million[16] - The company's classic board game portfolio showed strong vitality with stable active user scale and increased user willingness to recharge[10] - The company launched new 3D upgraded versions of "Weile Dou Dizhu" and "Weile Sichuan Mahjong," introducing new appearance systems and enhancing user experience[11] - The company's overseas games, "Weile Fishing International Edition" and "Weile Fishing Vietnam Edition," have shown stable operational data and are expected to contribute more to overseas user growth and revenue in 2024[11] - The company has developed a localized game portfolio for different countries, with several customized chess and card games in the optimization phase, set to be released soon[11] - The company has invested in new media operations, including live streaming and e-sports, with over 10,000 signed streamers, enhancing its marketing and distribution capabilities[12][13] - The company has established a "triple-driven" distribution model combining联运,赛事, and直播, improving user conversion and game dissemination[12] - The company has developed a self-service platform for game distribution, integrating data analysis and targeted distribution, significantly improving operational efficiency[14] - The company is actively applying AI technology in game development, focusing on AIGC talent cultivation and building a systematic AI service platform[14] - The company plans to open its digital tool platform to third parties to explore commercialization opportunities[14] - The company plans to expand its game portfolio and increase market penetration in 2024, targeting prefecture-level cities in China[18][20] - The company aims to leverage new media technologies and innovative channels to enhance customer acquisition and reduce costs[19] - The company's revenue heavily relies on two major game types: mahjong and poker variants, with performance in these areas being critical to business and operational results[56] - Only a small portion of registered players are paying players, and the company must improve player monetization to sustain growth[57] - The company depends on proprietary channels for mobile game distribution, and any disruption could significantly impact business and financial performance[56] - The company utilizes third-party payment providers like WeChat Pay and Alipay, relying on their stability for in-game purchases[57] - The company primarily generates user traffic organically but also leverages third-party distribution channels, including mobile manufacturers and app stores[57] - The company faces regulatory risks due to evolving domestic and international laws governing the mobile gaming industry[57] - The company aims to consolidate its leading position in the localized mobile chess and card game industry in China in 2024[59] - The company has successfully launched multiple casual games targeting both domestic and international players, expanding beyond its core localized mobile card and board game business[79] Corporate Governance and Compliance - The company has complied with relevant Chinese laws and regulations, including those related to value-added telecommunications services, online game testing and distribution, virtual currency, real-name registration, anti-addiction systems, data security, and privacy protection[54] - The company has obtained all necessary licenses, approvals, and permits for its operations in China and reported no significant violations or non-compliance with applicable laws and regulations during the year ended December 31, 2023[54] - The company’s board of directors has submitted the annual report and audited consolidated financial statements for the year ended December 31, 2023[50] - The company’s business review, future development discussions, and key financial and operational performance indicators are detailed in the "Management Discussion and Analysis" section on pages 13 to 18 of the annual report[52] - The company is committed to fulfilling social responsibilities, improving employee welfare, promoting development, protecting the environment, and achieving sustainable growth, with no significant health, safety, or environmental risks reported[53] - The company has obtained exemptions from the Hong Kong Stock Exchange for certain compliance requirements under the new contractual arrangements[96] - The company's independent non-executive directors confirmed that the related party transactions during the year were conducted under fair and reasonable terms, in the ordinary course of business, and in the best interests of shareholders[115] - The company's auditor, Deloitte Touche Tohmatsu, issued an unqualified opinion on the related party transactions for the year ended December 31, 2023, with no need to establish or disclose an annual cap[116] - The company has obtained exemptions from the Hong Kong Stock Exchange regarding certain disclosure and approval requirements for related party transactions under the original contractual arrangements[114] - Risks associated with the original contractual arrangements include potential non-compliance with Chinese laws, changes in regulations, and conflicts of interest with Chinese operating entities[112] - The company's Chinese operating entities may face higher income tax liabilities due to differing tax rates, which could adversely affect the group's financial performance[112] - The company's independent non-executive directors confirmed that no new transactions, contracts, or agreements were entered into with related parties during the year[115] - The company's auditor confirmed that no other related party transactions requiring disclosure under the Hong Kong Listing Rules were identified beyond those disclosed in the annual report[116] - The company's Chairman and CEO roles were separated on September 5, 2023, with Ms. Cui Wei appointed as the new CEO, ensuring compliance with the Corporate Governance Code[142] - The company has three executive directors and three independent non-executive directors as of December 31, 2023[145] - The company complies with the requirement of appointing at least three independent non-executive directors, with one having appropriate professional qualifications or accounting/financial management expertise[146] - The roles of Chairman and CEO were separated on September 5, 2023, with Ms. Cui Wei appointed as the new CEO[147] - The Board of Directors is responsible for leading and monitoring the company, including strategy formulation, operational and financial performance oversight, and ensuring robust internal control and risk management systems[149] - Independent non-executive directors ensure high standards of regulatory reporting and provide effective independent judgment on corporate actions and operations[150] - The company has established mechanisms to ensure independent opinions are introduced to the Board, including annual reviews of Board composition and independence by the Nomination Committee[151] - Directors are encouraged to engage in continuous professional development to update their knowledge and skills, with training costs borne by the company[152] - The company held a total of 9 board meetings during the reporting period, with all directors attending the 2023 Annual General Meeting[156] - The Audit Committee, composed of 3 independent non-executive directors, held 2 meetings to review financial reports, risk management, and internal control systems[158][159] - The Remuneration Committee, consisting of 3 independent non-executive directors, is responsible for reviewing and approving directors' and senior management's remuneration policies and schemes[160] - Newly appointed directors received onboarding training on relevant listing rules and legal responsibilities from external legal advisors[154] - All directors attended training sessions on their roles, responsibilities, and relevant laws and regulations during their tenure[154] - The company's board committees (Audit, Remuneration, and Nomination) are primarily composed of independent non-executive directors[157] - The Audit Committee confirmed that the company's audited consolidated results complied with applicable accounting principles and standards[159] - The Remuneration Committee is responsible for overseeing the training and continuous professional development of directors and senior management[160] - The company's corporate governance policies and practices were reviewed and monitored by the Audit Committee[159] - The Audit Committee met twice with external auditors without the presence of executive directors and management[159] - The company's internal control systems, including financial, operational, and compliance controls, were effective and adequate for the year ended December 31, 2023[166] - The company's risk management and internal control systems are reviewed annually to assess and improve their effectiveness[166] - The company's investor relations website, www.jiaxianghudong.com, serves as a communication platform for shareholders and investors, providing access to financial and other relevant information[176] - The company's shareholder communication policy was effectively implemented as of December 31, 2023, with timely and accurate disclosure of information[176] - The company's external auditors were paid RMB 0.8 million for interim review services and RMB 0.1 million for other services in 2023[170] - The company's board of directors is responsible for the preparation of the financial statements for the year ended December 31, 2023[167] - The company's dividend policy ensures that dividends are not declared in excess of the amount recommended by the board of directors and are only paid from legally distributable profits and reserves[168] - The company's Hong Kong principal place of business was changed to Room 2451, Lee Garden One, 33 Hysan Avenue, Causeway Bay, Hong Kong on April 13, 2023, and the email address was updated to ir@weile.com[179] - The company's Hong Kong principal place of business was further changed to Room LM8, 5/F, Lippo Centre, 169 Electric Road, North Point, Hong Kong on January 31, 2024[179] - The company released its fifth Environmental, Social, and Governance (ESG) report, detailing policies, measures, and key performance indicators (KPIs) for 2023[181] - The ESG report covers the period from January 1, 2023, to December 31, 2023, and focuses on the company's operations in China[182] - The company adheres to the ESG reporting guidelines of the Hong Kong Stock Exchange, ensuring consistency, quantification, and balance in its disclosures[183][184] - The company's ESG report is available in both Chinese and English on the Hong Kong Stock Exchange website and the company's official website[185] - The company is committed to sustainable development, with policies covering environmental protection, employment practices, supply chain management, product responsibility, and business ethics[188] - The board is responsible for the company's ESG strategy and oversees its implementation, with senior management appointed to handle ESG matters and report annually to the board[189] - The company has identified and assessed significant ESG risks, including climate change and product quality, and has developed response measures and contingency plans to minimize these risks[191] - The company maintains close communication with stakeholders through formal and informal channels to gather feedback and improve operational performance and sustainability[192] - Key stakeholders include shareholders, regulators, customers, employees, business partners, suppliers, distributors, communities, and media, each with specific expectations and communication channels[193][194] - The company conducted a materiality assessment with the help of independent consultants, identifying 24 significant ESG issues across environmental, employee, product, and social domains[195] - The materiality assessment results are presented in a matrix, ranking issues such as waste management, employee welfare, product quality, and social contribution[196] - The company operates as an electronic entertainment platform and adheres to environmental laws and regulations, with no significant violations reported during the period[197] - The company conducted an ESG risk assessment to identify potential climate risks that could threaten its business operations[198] - The company has implemented measures to address identified climate risks and regularly reviews the effectiveness of these measures[198] - The company focuses on monitoring weather forecasts and requires employees to take shelter during natural disasters or extreme weather events[199] - The company has developed a business continuity plan to guide disaster recovery procedures[200] Employee and Compensation - As of December 31, 2023, the company had 652 full-time employees, with total employee costs of RMB 278.9 million, an increase from RMB 224.8 million in 2022, driven by higher salaries and stock-based compensation[42] - The company provides competitive salaries and benefits based on market standards in the regions where it operates[64] - The company has adopted a share option plan and a share award plan to align the interests of employees and senior management with those of the company[64] - The company offers performance-based bonuses and has an annual appraisal system to determine salary increases, bonuses, and promotions[64] - The company's share incentive plan allows for the issuance of up to 125,600,000 shares, representing approximately 9.79% of the issued share capital as of the annual report date[66] - The maximum number of shares that can be issued under the share option plan and any other plan shall not exceed 30% of the total issued shares at any time[66] - The share option plan has a remaining validity period of approximately 5.5 years as of December 31, 2023[66] - As of December 31, 2023, no share options were granted under the share option plan[67] - The number of share options available for grant under the share option plan was 63,240,000 as of both January 1, 2023, and December 31, 2023[67] - The share award plan allows for the issuance of up to 38,502,105 shares, representing 3% of the issued shares as of the report date[68] - The share award plan is valid for ten years from the adoption date[68] - The maximum number of new shares that can be issued under the Share Award Plan in any fiscal year is 3% of the total issued shares at that time, and the maximum number of new shares that can be issued to selected participants in any 12-month period is 1% of the total issued shares at that time[69] - The Share Award Plan will be effective for a period of 10 years from June 6, 2019, and as of December 31, 2023, the remaining term of the plan is approximately 5.5 years[69] - In 2021, the company appointed Futu Trust Limited as another trustee for the Share Award Plan, in addition to Convergent Trust Limited[70] - No new shares were issued under the Share Award Plan in 2023, as no awards requiring the issuance of new shares were granted during the year[70] - As of December 31, 2022, the total number of shares granted under the Share Award Plan was 49,345,449, with 27,403,500 shares unvested at the beginning of the year and 13,038,

Financial Performance - Revenue for the year ended December 31, 2023, reached RMB 1,779.7 million, representing a year-on-year increase of 13.9%[2] - Gross profit for the same period was RMB 1,157.5 million, with a year-on-year growth of 13.4%[2] - Adjusted net profit attributable to the company's owners was RMB 499.4 million, reflecting a decrease of 5.5% compared to the previous year[2] - The net profit attributable to shareholders for the period was RMB 436.9 million, a decrease of 6.1% year-on-year, while the adjusted net profit was RMB 499.4 million, down 5.5% year-on-year[14] - The company's revenue for the year ended December 31, 2023, was approximately RMB 1,779.7 million, an increase of 13.9% compared to RMB 1,562.9 million in 2022[21] - The group's profit before tax increased by approximately 33.3% from RMB 376.0 million for the year ended December 31, 2022, to approximately RMB 501.1 million for the year ended December 31, 2023[29] - The profit before tax margin improved from 24.1% to 28.2%, primarily due to a reduction in sales and marketing expenses by approximately 37.4%[29] - The profit attributable to the company's owners decreased by approximately 6.1% from RMB 465.3 million in 2022 to RMB 436.9 million in 2023[31] - Adjusted net profit attributable to the company's owners was approximately RMB 499.4 million for the year ended December 31, 2023, down 5.5% from RMB 528.6 million in 2022[33] User Metrics - Daily Active Users (DAUs) as of December 31, 2023, were 14,389,388, showing a year-on-year increase of 3.1%[5] - Monthly Active Users (MAUs) averaged 68,289,393, representing a year-on-year growth of 9.4%[5] - The number of paying users decreased by 21.3% to 13,104,865, indicating a need for strategic adjustments in user monetization[7] - Daily active users (DAUs) increased to 14,389,388, a year-on-year growth of 3.1%, and monthly active users (MAUs) rose to 68,289,393, up 9.4% year-on-year[14] - The number of paying players decreased to 13,104,865, reflecting a decline of 21.3% year-on-year[14] Revenue Sources - Revenue from self-developed mobile games was RMB 1,566.5 million, up 23.9% from RMB 1,264.3 million in the previous year[3] - Revenue from third-party mobile games decreased by 21.0% to RMB 145.2 million from RMB 183.9 million[3] - The company generated RMB 145.2 million in revenue from third-party game collaborations during the reporting period[14] - Advertising revenue reached RMB 1,711,667,000, compared to RMB 1,448,199,000 in the previous year, marking an increase of about 18.2%[51] Expenses and Costs - Sales cost increased by approximately 14.7% to RMB 622.2 million from RMB 542.3 million in 2022, primarily due to increased commissions and fees paid to third-party distribution channels and suppliers[22] - Sales and marketing expenses decreased by approximately 37.4% to RMB 340.6 million from RMB 543.7 million in 2022, due to adjustments in advertising spending[27] - The total employee cost for the year ended December 31, 2023, was approximately RMB 278.9 million, an increase from RMB 224.8 million in 2022, primarily due to an increase in the number of game developers and share-based compensation[40] - The total employee costs for 2023 amounted to RMB 278,860,000, representing a 24.0% increase from RMB 224,800,000 in 2022[58] Strategic Initiatives - The company launched new 3D upgraded versions of popular games, enhancing user experience and engagement[8] - The company is expanding its global presence with localized versions of games, including the international and Vietnamese versions of "Micro Fishing" launched in 2023[8] - The company has established a new media marketing strategy, focusing on game distribution through live streaming and partnerships with over 10,000 streamers, enhancing user acquisition and engagement[10] - The company has developed a digital tool platform that integrates third-party media services, significantly improving operational efficiency and data analysis capabilities[11] - The company is actively applying AI technology in product development and has plans to open its digital tool platform to third parties for commercialization[12] - The company aims to evolve from a leading local game operator in China to a global casual competitive gaming platform through diversified strategies[14] - The company plans to expand its game portfolio and increase market penetration, particularly targeting potential users in lower-tier cities[16] - The company aims to enhance customer acquisition through new media marketing strategies and innovative channels to reduce customer acquisition costs[17] - The company intends to increase its geographical coverage in China, focusing on cities in provinces such as Henan, Yunnan, Shandong, and Guangdong[18] Financial Position - Cash and cash equivalents increased to approximately RMB 1,340.9 million as of December 31, 2023, compared to RMB 1,163.3 million as of December 31, 2022[35] - The group had no short-term or long-term bank borrowings as of December 31, 2023, resulting in a leverage ratio of zero[36] - Non-current assets increased to RMB 399.5 million as of December 31, 2023, from RMB 495.5 million in 2022, primarily due to changes in investments[44] - Current assets totaled RMB 1,887.4 million as of December 31, 2023, compared to RMB 1,609.8 million in 2022, indicating a growth in liquidity[44] - The company's net asset value increased to RMB 2,084.2 million as of December 31, 2023, from RMB 1,794.0 million in 2022, reflecting a strong financial position[45] Corporate Governance - The company complied with the corporate governance code, except for the separation of the roles of Chairman and CEO until September 5, 2023[76] - The company appointed a new CEO, replacing the previous CEO on September 5, 2023, ensuring compliance with corporate governance standards[77] - All directors confirmed adherence to the standard code of conduct for securities trading during the reporting period[78] - The group's annual performance has been audited by Deloitte, confirming compliance with applicable accounting principles and full disclosure[81] - The audit committee consists of three independent non-executive directors, with Mr. Hu Yangyang serving as the chairman[80] Taxation - Income tax expenses rose by approximately 130.3% from RMB 26.3 million in 2022 to RMB 60.6 million in 2023, with an effective tax rate increase from 7.0% to 12.1%[30] - The effective corporate income tax rate for the company was reduced to 15% due to its recognition as a "High-tech Enterprise" and "Double Software Enterprise" in China[54] - The company reported a total income tax expense of RMB 69,163,000 for the year, up from RMB 45,635,000 in 2022[53] - The company recognized a tax impact of RMB 12,381,000 from the excess deduction for R&D expenses in 2023, compared to RMB 21,708,000 in 2022[57]

Share Incentive Plan - The share incentive plan allows for the issuance of 38,502,105 shares, representing 3% of the total shares issued as of the 2022 annual report date[1] - No new shares were issued for the share incentive plan during the 2022 fiscal year[1] - The company did not have any acceptance conditions for the share rewards under the incentive plan, including payment amounts and deadlines[1]

Financial Performance - The company reported a 22.0% increase in revenue, a 16.1% increase in gross profit, and a 12.7% increase in adjusted net profit for the six months ending June 30, 2023, compared to the previous year[17]. - The company's revenue for the reporting period reached RMB 953.5 million, representing a year-on-year increase of 22.0%[21]. - Gross profit for the same period was RMB 640.8 million, reflecting a growth of 16.1% compared to the previous year[21]. - Profit before tax increased by approximately 54.2% from RMB 291.6 million to RMB 449.5 million, with the profit margin rising from 37.3% to 47.1%[33]. - Adjusted net profit attributable to the company's owners increased by approximately 12.7% from RMB 395.5 million to RMB 445.6 million for the six months ended June 30, 2023[37]. - The company reported a profit of RMB 395,293,000 for the six months ended June 30, 2023, compared to RMB 380,299,000 for the same period in 2022, indicating a year-on-year increase[90]. User Engagement and Growth - Daily Active Users (DAUs), Monthly Active Users (MAUs), and paying players grew by 41.5%, 21.9%, and 2.8% year-over-year, respectively[17]. - Daily Active Users (DAUs) increased to 14,247,326, a year-on-year growth of 41.5%[21]. - Monthly Active Users (MAUs) rose to 67,949,141, marking a 21.9% increase year-on-year[21]. - The number of paying users reached 9,230,631, up 2.8% year-on-year[21]. - Over 2.5 million players registered to become Mahjong players through the company's platform by June 30, 2023, following the launch of a certification platform[18]. - The company organized over ten national and regional Mahjong tournaments with more than 6,000 participants during the reporting period[18]. Cost and Expenses - Sales costs increased by 36.1%, with payment channel costs and platform share rising to RMB 267.4 million, a 42.0% increase year-on-year[22]. - Marketing expenses decreased by approximately 40.1% to RMB 129.7 million due to better-than-expected player recharge conditions[22]. - Administrative and other expenses rose by approximately 61.7% from RMB 90.5 million to RMB 146.4 million, driven by increases in employee costs and subcontracted technical fees related to new game development[32]. - Selling and marketing expenses decreased by approximately 40.1% from RMB 216.6 million to RMB 129.7 million due to better-than-expected player recharge conditions[31]. Strategic Initiatives - The company signed a popular streamer, Feng Timo, on July 6, 2023, and conducted her first Douyin live stream on August 12, 2023, enhancing user engagement[17]. - The introduction and application of AIGC technology are aimed at improving game development efficiency and enhancing operational management[19]. - The company continues to explore innovative development opportunities to create long-term value for shareholders[19]. - The company plans to expand its game portfolio and enhance market penetration in over 30 cities in provinces like Zhejiang and Fujian in the second half of 2023[23]. - The company aims to explore potential business opportunities through strategic partnerships and acquisitions to enhance its game offerings[24]. Cash Flow and Financial Position - As of June 30, 2023, the company had cash and cash equivalents of approximately RMB 1,156.0 million, a slight decrease from RMB 1,163.3 million as of December 31, 2022[39]. - The company reported capital expenditures of approximately RMB 71.2 million for the six months ended June 30, 2023, compared to RMB 17.6 million for the same period in 2022, primarily due to increased spending on office furniture and equipment[42]. - The company had no short-term or long-term bank borrowings as of June 30, 2023, and total lease liabilities amounted to RMB 9.3 million[40]. - The company's debt-to-asset ratio was zero as there were no liabilities reported as of June 30, 2023[41]. - The company reported a significant increase in cash flow from operating activities, reflecting improved operational efficiency and revenue generation[58]. Investments and Acquisitions - The company plans to sell a 40% stake in Jilin Xinyue for RMB 99.90 million and a 40% stake in Jilin Anrui for RMB 35.10 million as part of its future investment strategy[43]. - The company is actively exploring potential mergers and acquisitions to enhance its market position and drive growth[56]. - The company has invested in several joint ventures, including Chengdu Cangmo Information Technology Co., Ltd. and Shenzhen Jinyunshan Technology Co., Ltd., both with a 40% ownership stake[96]. Shareholder and Equity Information - The company’s major shareholder, Mr. Wu Chengze, holds a 33.80% equity interest, amounting to 433,842,000 shares[140]. - The company has a significant concentration of ownership, with major shareholders holding substantial percentages of equity[146][147]. - The company has established a series of contractual arrangements to exercise actual control over its subsidiaries, ensuring significant economic benefits from their operations[161]. Corporate Governance - The company has complied with the corporate governance code, except for the separation of the roles of Chairman and CEO, which are held by the same individual, Wu Chengze[162]. - The audit committee, composed of three independent non-executive directors, has reviewed the unaudited interim results and confirmed compliance with applicable accounting principles[164]. - There were significant changes in the board of directors, including the resignation of Wu Chengze as CEO on September 5, 2023, and the appointment of Ding Chunlong and Tang Yinghao as executive directors on March 30, 2023[165].

[Performance Summary](index=1&type=section&id=Performance%20Summary) [Financial Highlights](index=1&type=section&id=Financial%20Highlights) In H1 2023, revenue from continuing operations grew 22.0% to RMB 953 million, with adjusted net profit increasing 12.7% to RMB 446 million, demonstrating robust core business growth H1 2023 Key Financial Indicators (Continuing Operations) | Indicator | For the Six Months Ended June 30 (RMB '000) | YoY Change (%) | | :--- | :--- | :--- | | **Revenue from Continuing Operations** | 953,477 | 22.0% | | **Gross Profit from Continuing Operations** | 640,840 | 16.1% | | **Profit Attributable to Owners (from Continuing Operations)** | 395,293 | 49.6% | | **Non-IFRS Adjusted Net Profit** | 445,611 | 12.7% | | **Basic Earnings Per Share (RMB)** | 0.3098 | 1.4% | - The company sold and ceased its private game room card business in 2022, and related financial data has been excluded and restated from continuing operations to better reflect core business performance[2](index=2&type=chunk) Revenue by Virtual Product Type (RMB '000) | Revenue Source | H1 2023 | H1 2022 | YoY Change (%) | | :--- | :--- | :--- | :--- | | Self-developed Mobile Games | 818,662 | 639,418 | 28.0% | | Third-party Mobile Games | 94,635 | 82,623 | 14.5% | | Advertising Revenue | 40,180 | 59,722 | (32.7)% | | **Total** | **953,477** | **781,763** | **22.0%** | [Operational Highlights](index=3&type=section&id=Operational%20Highlights) As of June 30, 2023, core operational metrics showed strong growth, with DAUs increasing 41.5% to 14.25 million and MAUs up 21.9% to 67.95 million, indicating significant user base and activity enhancement Core Operational Data | Indicator | As of June 30, 2023 | As of June 30, 2022 | YoY Change | | :--- | :--- | :--- | :--- | | Daily Active Users (DAUs) | 14,247,326 | 10,068,889 | +41.5% | | Average Monthly Active Users (MAUs) | 67,949,141 | 55,757,653 | +21.9% | | Paying Users | 9,230,631 | 8,975,481 | +2.8% | [Business Overview and Outlook](index=4&type=section&id=Business%20Overview%20and%20Outlook) [Business Review](index=4&type=section&id=Business%20Review) The company, a developer and operator of localized mahjong, poker, and casual games, stabilized its player base and boosted paying intent through new gameplay and payment models, while optimizing marketing strategies to reduce selling and marketing expenses by 40.1%, and enhancing brand influence with Weile Mahjong becoming the sole official online mahjong grading platform - The company is positioned as a leading local chess and card game operator in China, committed to growing into a global casual competitive game platform[5](index=5&type=chunk) - By introducing new gameplay and new payment models such as top-up monthly cards, the company stabilized its player base while increasing user willingness to pay[5](index=5&type=chunk) - Marketing strategy shifted from large-scale campaigns to precise marketing, with **16** event accounts deployed on platforms like Douyin, enhancing brand exposure and user acquisition, leading to a significant decrease in marketing expenses[6](index=6&type=chunk) - Weile Mahjong was designated as the sole online mahjong athlete grading cooperation platform, with over **2.5 million** players registered as mahjong athletes by the end of the reporting period[6](index=6&type=chunk) - Launched the tower defense casual game 'Meet Meowkes' in May 2023, and plans to launch products like 'Weile 3D Dou Dizhu' to upgrade the gaming experience[6](index=6&type=chunk) [Business Outlook](index=6&type=section&id=Business%20Outlook) In H2 2023, the company plans to consolidate its competitive advantage through five strategies: enriching game portfolio with localized innovations, increasing new media marketing to lower acquisition costs, expanding coverage to over 30 prefecture-level cities in China, boosting R&D for hardcore and competitive games and overseas markets, and seeking external cooperation through incubation, investment, and M&A - Plans to expand its game portfolio, launching localized chess and card game variants to attract users in prefecture-level cities[7](index=7&type=chunk) - Aims to increase market share in over **30** prefecture-level cities across multiple provinces including Zhejiang, Fujian, Anhui, and Jiangsu[7](index=7&type=chunk) - Will continue to invest R&D resources to launch new game types such as hardcore and competitive games, and expand into overseas markets to generate international revenue[8](index=8&type=chunk) - Will explore cooperation opportunities with promising R&D teams through various forms including incubation, investment, and acquisitions[9](index=9&type=chunk) [Management Discussion and Analysis](index=7&type=section&id=Management%20Discussion%20and%20Analysis) [Financial Review — Continuing Operations](index=7&type=section&id=Financial%20Review%20%E2%80%94%20Continuing%20Operations) During the reporting period, the company demonstrated robust financial performance with revenue growing 22.0% driven by game innovation and new media partnerships, while cost of sales increased 36.1% leading to a gross margin decline from 70.6% to 67.2%, selling and marketing expenses significantly decreased by 40.1%, administrative expenses rose 61.7% due to R&D and staff costs, and profit before tax ultimately increased by 54.2% [Revenue](index=7&type=section&id=Revenue) H1 2023 revenue increased 22.0% to RMB 953.5 million, primarily driven by continuous innovation in mahjong and poker games and deep collaboration with new media channels, which effectively boosted DAU and player stickiness, with virtual token sales increasing their revenue contribution from 81.8% to 85.9% - Revenue increased by **22.0%** year-on-year to **RMB 953.5 million**, primarily benefiting from game innovation and cooperation with new media channels[10](index=10&type=chunk) Revenue Structure Proportion Change | Revenue Source | H1 2023 Proportion | H1 2022 Proportion | | :--- | :--- | :--- | | Sales of Virtual Tokens | 85.9% | 81.8% | | Distribution of Third-party Mobile Games | 9.9% | 10.6% | | Advertising | 4.2% | 7.6% | [Cost of Sales](index=7&type=section&id=Cost%20of%20Sales) Cost of sales increased 36.1% year-on-year to RMB 312.6 million, primarily due to a RMB 79.1 million increase in commissions and fees paid to third-party distribution channels and payment providers, in line with revenue growth - Cost of sales increased by **36.1%** year-on-year, primarily driven by an increase of **RMB 79.1 million** in commissions and fees paid to third-party distribution channels and payment providers[11](index=11&type=chunk) [Gross Profit and Gross Margin](index=8&type=section&id=Gross%20Profit%20and%20Gross%20Margin) Gross profit increased 16.1% year-on-year to RMB 640.8 million, but gross margin decreased from 70.6% to 67.2% due to a higher growth rate in cost of sales compared to revenue - Gross profit increased by **16.1%** year-on-year, but gross margin decreased from **70.6%** to **67.2%**[12](index=12&type=chunk) [Other Income, Gains and Losses](index=8&type=section&id=Other%20Income%2C%20Gains%20and%20Losses) Other income increased 40.6% year-on-year to RMB 30.4 million, primarily from higher interest income, while other gains and losses recorded a gain of RMB 27.0 million, compared to a loss of RMB 1.6 million in the prior period, mainly due to a RMB 30.6 million gain from the disposal of investments in associates - Other income increased by **40.6%** year-on-year, primarily due to a **RMB 6.6 million** increase in interest income[13](index=13&type=chunk) - Other gains and losses recorded a net gain of **RMB 27.0 million**, primarily from a **RMB 30.6 million** gain on disposal of investments in associates[14](index=14&type=chunk) [Selling and Marketing Expenses](index=8&type=section&id=Selling%20and%20Marketing%20Expenses) Selling and marketing expenses significantly decreased by 40.1% year-on-year to RMB 129.7 million, primarily because player top-up performance exceeded expectations in H1, leading the company to reduce marketing and advertising spending by RMB 90.7 million - Selling and marketing expenses significantly decreased by **40.1%** year-on-year, mainly due to a **RMB 90.7 million** reduction in advertising and marketing expenses[16](index=16&type=chunk) [Administrative and Other Expenses](index=9&type=section&id=Administrative%20and%20Other%20Expenses) Administrative and other expenses increased 61.7% year-on-year to RMB 146.4 million, primarily due to a RMB 11.6 million increase in staff costs, a RMB 10.9 million increase in share-based payments, and a RMB 27.1 million increase in subcontracted technical fees related to new game R&D - Administrative and other expenses increased by **61.7%** year-on-year, primarily due to increased staff costs, share-based payments, and R&D subcontracting fees[17](index=17&type=chunk) [Profit Before Income Tax](index=9&type=section&id=Profit%20Before%20Income%20Tax) Profit before tax increased 54.2% year-on-year to RMB 449.5 million, with the pre-tax profit margin rising from 37.3% to 47.1%, driven by higher other gains and significantly reduced selling expenses, while income tax expense increased 69.7% due to higher withholding tax provisions, raising the effective tax rate from 9.5% to 10.4% - Profit before tax increased by **54.2%** year-on-year to **RMB 449.5 million**, with the pre-tax profit margin improving from **37.3%** to **47.1%**[18](index=18&type=chunk) - Income tax expense increased by **69.7%** year-on-year, with the effective tax rate rising from **9.5%** to **10.4%**, primarily due to provisions for withholding tax on undistributed profits[19](index=19&type=chunk) [Profit Attributable to Owners of the Company](index=9&type=section&id=Profit%20Attributable%20to%20Owners%20of%20the%20Company) During the reporting period, profit attributable to owners of the company (including continuing and discontinued operations) was RMB 395.3 million, an increase of 3.9% from RMB 380.3 million in the prior year - Profit attributable to owners of the company increased by **3.9%** year-on-year to **RMB 395.3 million**[20](index=20&type=chunk) [Non-IFRS Measures — Adjusted Net Profit](index=10&type=section&id=Non-IFRS%20Measures%20%E2%80%94%20Adjusted%20Net%20Profit) To better assess core business performance, the company disclosed adjusted net profit, which, after excluding share-based payment expenses (RMB 27.8 million) and withholding tax on undistributed profits (RMB 22.5 million), amounted to RMB 445.6 million in H1 2023, representing a 12.7% year-on-year increase Adjusted Net Profit Reconciliation (RMB '000) | Item | H1 2023 | H1 2022 | | :--- | :--- | :--- | | Profit Attributable to Owners of the Company for the Period | 395,293 | 380,299 | | Add: Share-based Payment Expenses | 27,818 | 15,180 | | Add: Withholding Tax on Undistributed Profits | 22,500 | — | | **Adjusted Net Profit Attributable to Owners of the Company** | **445,611** | **395,479** | [Liquidity and Capital Resources](index=11&type=section&id=Liquidity%20and%20Capital%20Resources) The Group primarily funds its operations with cash generated from operating activities and adopts a prudent financial management approach, holding approximately RMB 1.156 billion in cash and cash equivalents, predominantly in RMB, with no bank borrowings and a zero gearing ratio, indicating a healthy financial position [Cash and Cash Equivalents](index=11&type=section&id=Cash%20and%20Cash%20Equivalents) As of June 30, 2023, the Group held approximately RMB 1.156 billion in cash and cash equivalents, a slight decrease from RMB 1.163 billion at the end of 2022, with approximately RMB 1.028 billion denominated in RMB, and no foreign currency risk hedging currently in place - As of June 30, 2023, cash and cash equivalents amounted to approximately **RMB 1.156 billion**, with about **89%** (**RMB 1.028 billion**) denominated in RMB[24](index=24&type=chunk) [Debt](index=11&type=section&id=Debt) As of June 30, 2023, the Group had no short-term or long-term bank borrowings or other debts, apart from RMB 9.3 million in lease liabilities, maintaining a zero gearing ratio and no pledged assets - The Group has no bank borrowings and a **zero** gearing ratio[25](index=25&type=chunk)[26](index=26&type=chunk) [Capital Expenditure](index=12&type=section&id=Capital%20Expenditure) During the reporting period, capital expenditure significantly increased to approximately RMB 71.2 million from RMB 17.6 million in the prior period, primarily for the purchase of office furniture and equipment - Capital expenditure significantly increased year-on-year from **RMB 17.6 million** to **RMB 71.2 million**, primarily for the purchase of office furniture and equipment[26](index=26&type=chunk) [Significant Acquisitions, Disposals and Future Plans for Major Investments](index=12&type=section&id=Significant%20Acquisitions%2C%20Disposals%20and%20Future%20Plans%20for%20Major%20Investments) During the reporting period, the Group undertook a significant asset disposal, agreeing in May 2023 to sell its 40% equity interests in associates Jilin Xinyue and Jilin Anrui for a total consideration of RMB 135 million, with no other major acquisitions or disposals during the period - In May 2023, the Group agreed to dispose of its **40%** equity interest in Jilin Xinyue (for **RMB 99.9 million**) and **40%** equity interest in Jilin Anrui (for **RMB 35.1 million**) to third parties[27](index=27&type=chunk) [Employees and Staff Costs](index=13&type=section&id=Employees%20and%20Staff%20Costs) As of June 30, 2023, the Group had 601 full-time employees, with over half (324) engaged in game development, and total staff costs for H1 amounted to approximately RMB 101.2 million, a 16.6% year-on-year increase, primarily due to higher salaries, benefits, and share-based compensation - As of the end of the reporting period, the Group had **601** full-time employees, with game developers constituting the largest proportion (**324** employees)[29](index=29&type=chunk) - Total staff costs for H1 amounted to **RMB 101.2 million**, a **16.6%** year-on-year increase, primarily due to increased salaries and share-based incentives[29](index=29&type=chunk) [Condensed Consolidated Financial Statements](index=14&type=section&id=Condensed%20Consolidated%20Financial%20Statements) [Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income](index=14&type=section&id=Condensed%20Consolidated%20Statement%20of%20Profit%20or%20Loss%20and%20Other%20Comprehensive%20Income) The financial report shows H1 2023 revenue from continuing operations at RMB 953 million and gross profit at RMB 641 million, with profit for the period from continuing operations at RMB 403 million after accounting for other gains and controlled selling expenses, resulting in a total profit for the period of RMB 403 million, compared to RMB 380 million in the prior year, including discontinued operations Consolidated Statement of Profit or Loss Summary (RMB '000) | Item | H1 2023 | H1 2022 | | :--- | :--- | :--- | | **Revenue (Continuing Operations)** | 953,477 | 781,763 | | **Gross Profit (Continuing Operations)** | 640,840 | 552,090 | | **Profit Before Income Tax (Continuing Operations)** | 449,484 | 291,581 | | **Profit for the Period from Continuing Operations** | 402,557 | 263,923 | | **Profit for the Period from Discontinued Operations** | — | 116,032 | | **Total Profit for the Period** | 402,557 | 379,955 | | **Profit Attributable to Owners of the Company for the Period** | 395,293 | 380,299 | [Condensed Consolidated Statement of Financial Position](index=16&type=section&id=Condensed%20Consolidated%20Statement%20of%20Financial%20Position) As of June 30, 2023, the company's total assets were RMB 2.237 billion, total liabilities RMB 187 million, and net assets reached RMB 2.051 billion, a 14.3% increase from RMB 1.794 billion at the end of 2022, with net current assets of RMB 1.601 billion, indicating strong liquidity and solvency Consolidated Statement of Financial Position Summary (RMB '000) | Item | As of June 30, 2023 | As of December 31, 2022 | | :--- | :--- | :--- | | **Non-current Assets** | 475,054 | 495,509 | | **Current Assets** | 1,762,104 | 1,609,796 | | **Total Assets** | 2,237,158 | 2,105,305 | | **Current Liabilities** | 161,181 | 274,678 | | **Non-current Liabilities** | 25,402 | 36,614 | | **Total Liabilities** | 186,583 | 311,292 | | **Net Assets** | 2,050,575 | 1,794,013 | | **Equity Attributable to Owners of the Company** | 2,043,717 | 1,794,419 | [Condensed Consolidated Statement of Changes in Equity](index=18&type=section&id=Condensed%20Consolidated%20Statement%20of%20Changes%20in%20Equity) As of June 30, 2023, equity attributable to owners of the company increased from RMB 1.794 billion at the beginning of the year to RMB 2.044 billion, primarily driven by profit for the period of RMB 395 million, partially offset by dividends paid of RMB 163 million and share repurchases of RMB 7.66 million - Equity attributable to owners of the company increased from **RMB 1.794 billion** at the beginning of the year to **RMB 2.044 billion**[40](index=40&type=chunk) - The primary contribution to the increase in equity was profit for the period of **RMB 395 million**, with the main reduction being dividends paid of **RMB 163 million**[40](index=40&type=chunk) [Condensed Consolidated Cash Flow Statement](index=21&type=section&id=Condensed%20Consolidated%20Cash%20Flow%20Statement) In H1 2023, net cash inflow from operating activities significantly increased to RMB 183 million, while net cash outflow from investing activities was RMB 21.58 million, mainly for financial assets and property equipment, and net cash outflow from financing activities was RMB 176 million, primarily for dividend payments and share repurchases, with cash and cash equivalents at period-end totaling RMB 1.156 billion Consolidated Cash Flow Statement Summary (RMB '000) | Item | H1 2023 | H1 2022 | | :--- | :--- | :--- | | Net Cash Generated from Operating Activities | 182,951 | 79,652 | | Net Cash (Used in)/Generated from Investing Activities | (21,580) | 6,858 | | Net Cash Used in Financing Activities | (176,128) | (20,068) | | **Net (Decrease)/Increase in Cash and Cash Equivalents** | **(14,757)** | **66,442** | | **Cash and Cash Equivalents at End of Period** | **1,155,952** | **1,193,791** | [Notes to the Condensed Consolidated Financial Information](index=23&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Information) [1. General Information](index=23&type=section&id=1.%20General%20Information) The Group primarily engages in mobile game development, publishing, and operation in China, with financial statements prepared under International Accounting Standards, and a significant event during the reporting period was the disposal of 40% equity interests in associates Jilin Xinyue and Jilin Anrui - Significant event during the reporting period: Disposal of **40%** equity interest in Jilin Xinyue (for **RMB 99 million**) and **40%** equity interest in Jilin Anrui (for **RMB 35.1 million**) to third parties[47](index=47&type=chunk) [3. Revenue and Segment Information](index=25&type=section&id=3.%20Revenue%20and%20Segment%20Information) The Group's revenue primarily derives from sales of virtual tokens for self-developed mobile games, distribution of third-party mobile games, and advertising, with all operating activities managed and reported as a single segment (mobile game development and operation in China), and all revenue generated within China - All of the Group's revenue is generated from China and managed and reported as a single operating segment[50](index=50&type=chunk)[52](index=52&type=chunk) [7. Disposal of Subsidiaries / Discontinued Operations](index=29&type=section&id=7.%20Disposal%20of%20Subsidiaries%20%E2%88%95%20Discontinued%20Operations) To streamline operations, the Group disposed of its 100% equity interest in Jilin Yuker, which engaged in the private game room card business, and ceased related operations in H1 2022; this business generated RMB 116 million in profit (including disposal gain) in H1 2022 and is now classified as discontinued operations, with no such business in H1 2023 - The Group disposed of and ceased its private game room card business in H1 2022, with Jilin Yuker being the entity for this business[59](index=59&type=chunk) - Discontinued operations contributed **RMB 116 million** in profit in H1 2022, which included a gain of **RMB 97.8 million** from the disposal of Jilin Yuker[60](index=60&type=chunk) [8. Dividends](index=32&type=section&id=8.%20Dividends) During the reporting period, the company paid a final dividend of HKD 0.14 per share for 2022, totaling approximately RMB 163 million, with basic earnings per share from continuing operations at RMB 0.3098 and diluted earnings per share at RMB 0.3073 - Paid a final dividend of **HKD 0.14** per share for 2022, totaling **RMB 163 million**[66](index=66&type=chunk) Earnings Per Share (RMB) | Item | H1 2023 | H1 2022 | | :--- | :--- | :--- | | **From Continuing Operations - Basic** | 0.3098 | 0.2123 | | **From Continuing Operations - Diluted** | 0.3073 | 0.2097 | | **From Continuing and Discontinued Operations - Basic** | 0.3098 | 0.3056 | [10. Investments in Associates](index=35&type=section&id=10.%20Investments%20in%20Associates) During the reporting period, the Group disposed of its entire equity interests in Jilin Xinyue and Jilin Anrui, recognizing a gain of RMB 27.88 million, while also making new investments in Shenzhen Jinyunshan and Xiamen Chuyao; as of period-end, trade receivables stood at RMB 196 million with a healthy aging profile, and prepayments and other receivables significantly increased due to higher advertising prepayments - Disposed of entire equity interests in Jilin Xinyue and Jilin Anrui for a total fair value consideration of **RMB 116 million**, recognizing a gain of **RMB 27.88 million**[77](index=77&type=chunk)[78](index=78&type=chunk) - Made new investments in Shenzhen Jinyunshan (**49%** equity interest) and Xiamen Chuyao (**40%** equity interest) for a total consideration of **RMB 10 million**[79](index=79&type=chunk) - Trade receivables amounted to **RMB 196 million**, with credit terms typically **0** to **60** days, and overdue but not impaired amounts over **90** days totaling **RMB 3.14 million**[80](index=80&type=chunk)[81](index=81&type=chunk) [Other Information](index=43&type=section&id=Other%20Information) [Interim Dividend](index=43&type=section&id=Interim%20Dividend) The Board does not recommend paying any interim dividend for H1 2023, and during the reporting period, the company repurchased 4,798,000 shares on the open market through a trustee for a total consideration of approximately RMB 7.66 million for its share award scheme - The Board does not recommend declaring an interim dividend for 2023[87](index=87&type=chunk) - During the period, **4,798,000** shares were repurchased for the share award scheme, at a total consideration of **RMB 7.66 million**[87](index=87&type=chunk) [Compliance with Corporate Governance Code](index=43&type=section&id=Compliance%20with%20Corporate%20Governance%20Code) During the reporting period, the company largely complied with the Corporate Governance Code, with one deviation where the roles of Chairman and CEO are held by the same individual, Mr. Wu Chengze; the Board believes this arrangement benefits Group management and maintains appropriate independence, and the Audit Committee has reviewed the interim results - The company has one corporate governance deviation: the roles of Chairman and Chief Executive Officer are combined and held by Mr. Wu Chengze[88](index=88&type=chunk)[89](index=89&type=chunk) - The Audit Committee, comprising three independent non-executive directors, has reviewed these interim results[91](index=91&type=chunk) [Changes in Directors' Biographical Details under Rule 13.51B(1) of the Listing Rules](index=45&type=section&id=Changes%20in%20Directors%27%20Biographical%20Details%20under%20Rule%2013.51B(1)%20of%20the%20Listing%20Rules) During and after the reporting period, the company's Board of Directors underwent several changes, including Mr. Guo Shunshun's resignation as executive director, the election of Mr. Ding Chunlong and Mr. Tang Yinghao as executive directors, and the retirement of Mr. Jiang Mingkuan and Mr. Su Bo as executive directors Director Change Details | Name | Change Details | | :--- | :--- | | Mr. Guo Shunshun | Resigned as Executive Director on June 1, 2023 | | Mr. Ding Chunlong | Elected as Executive Director on March 30, 2023 | | Mr. Tang Yinghao | Elected as Executive Director on March 30, 2023 | | Mr. Jiang Mingkuan | Retired as Executive Director on May 22, 2023 | | Mr. Su Bo | Retired as Executive Director on May 22, 2023 |

Financial Performance - In 2022, the company achieved revenue of RMB 1,562,940 thousand, a 21.3% increase from RMB 1,287,722 thousand in 2021[7] - Gross profit for 2022 was RMB 1,020,619 thousand, up 6.4% from RMB 958,828 thousand in 2021[7] - Net profit attributable to owners for the year was RMB 465,274 thousand, a decrease of 7.5% compared to RMB 500,713 thousand in 2021[7] - The company reported revenue and gross profit of RMB 1,562.9 million and RMB 1,020.6 million for the year ended December 31, 2022, representing an increase of approximately 37.0% and 21.9% year-on-year, respectively[11] - The net profit attributable to shareholders for the year was RMB 465.3 million, a decrease of 7.1% year-on-year, while the adjusted net profit was RMB 528.6 million[11] - The gross profit increased by 21.9% to approximately RMB 1,020.6 million, while the gross profit margin decreased from 73.4% in 2021 to 65.3% in 2022[18] User Engagement - Daily active users (DAU) grew by 60% year-on-year, while monthly active users (MAU) and paying users increased by 23.6% and 8.2% respectively[9] - Daily active users increased to 13,956,188, a year-on-year growth of 60.0%, and monthly active users reached 62,437,541, up 23.7%[11] - The number of paying players grew to 16,644,819, reflecting an 8.2% year-on-year increase[11] - The company reported a significant increase in user engagement, with a year-over-year growth of 25% in active users[19] Research and Development - R&D expenses rose by 82% to RMB 175 million, focusing on enhancing game play and developing diverse game categories[9] - Research and development investment totaled RMB 175.3 million during the reporting period, focusing on new game features and aesthetics[12] - The company plans to invest in R&D to introduce new game types, including hardcore and competitive games, in 2023[16] - The company is investing $10 million in research and development for new gaming technologies[19] Marketing and Expansion - Sales and marketing expenses rose to RMB 543.7 million, an increase of approximately 80.6% compared to the previous year[12] - The company aims to enhance its product competitiveness to capture market share in a challenging environment[9] - The company plans to launch new localized casual games targeting Southeast Asia and South America, which are expected to generate overseas revenue soon[12] - The company aims to expand its market share in 50 prefecture-level cities across provinces such as Zhejiang, Fujian, Anhui, and Jiangsu in 2023[16] - Future guidance indicates an expected revenue growth of 20% for the next fiscal year, driven by new product launches and market expansion[19] Financial Position - Total non-current assets increased to RMB 465,509 thousand in 2022 from RMB 275,768 thousand in 2021[8] - Current assets reached RMB 1,609,796 thousand, compared to RMB 1,453,169 thousand in the previous year[8] - Total equity rose to RMB 1,794,013 thousand in 2022, up from RMB 1,440,304 thousand in 2021[8] - As of December 31, 2022, the company had cash and cash equivalents of approximately RMB 1,163.3 million, compared to RMB 1,125.2 million as of December 31, 2021[30] - The company's capital expenditures for the year ended December 31, 2022, were approximately RMB 104.0 million, significantly up from RMB 29.6 million for the year ended December 31, 2021[33] Dividend Policy - The board proposed a dividend of approximately HKD 179.7 million for the year 2022, bringing total dividends since IPO to approximately HKD 434.7 million[13] - The company is committed to maintaining a sustainable dividend policy while balancing shareholder interests and long-term development[13] - The company proposed a final dividend of HKD 0.14 per share for the year ended December 31, 2022, totaling approximately HKD 179.68 million (equivalent to RMB 157.18 million)[104] Employee and Management - Employee costs increased to approximately RMB 224.8 million for the year ended December 31, 2022, compared to RMB 139.1 million in 2021, primarily due to salary increases and a rise in share-based compensation[38] - The company has a total of 686 full-time employees as of December 31, 2022, with significant roles in R&D, game development, and marketing[38] - The company has established a comprehensive human resources management system covering recruitment, compensation, performance, and employee welfare[176] - The company has implemented measures to enhance water efficiency, including the installation of automatic sensor faucets[170] Compliance and Governance - The company has complied with all relevant laws and regulations in China, obtaining all necessary licenses and approvals for operations as of December 31, 2022[50] - The board consists of nine directors, including six executive directors and three independent non-executive directors as of December 31, 2022[117] - The company has established mechanisms to ensure independent opinions are brought to the board, including annual reviews of board composition[123] - The company has confirmed compliance with the relevant regulations regarding related party transactions during the reporting period[88] Environmental, Social, and Governance (ESG) - The company has identified and assessed significant ESG risks, including climate change and product quality, to manage potential impacts on operations[157] - The company is committed to reducing greenhouse gas emissions through energy efficiency improvements and the introduction of energy-saving measures, with progress ongoing[167] - The company has established environmental goals to address climate change, with good progress recorded during the reporting period[167] - The company has implemented measures to optimize energy efficiency, including promoting carpooling and encouraging the use of public transport, aiming to reduce its carbon footprint[168] Risk Management - The company faces several risks related to contractual arrangements, including potential non-compliance with Chinese laws, which could lead to severe consequences such as the annulment of agreements[84] - The company has implemented measures to mitigate risks associated with contractual arrangements, including quarterly reviews by the board and monthly compliance reports from operational units[85] - The risk management and internal control team is responsible for identifying and monitoring risks, reporting findings directly to the board[135] Customer Service and Player Protection - The company has a dedicated customer service management system to handle player inquiries and complaints, ensuring high service quality through adequate training[192] - The company implements strict measures to protect players, especially minors, including real-name registration and game time limits[193] - Players are notified if they exceed 3 hours of gameplay, with earnings halved if they continue, and accounts are suspended after 10 hours of play in a day[193] - The company has established a comprehensive anti-gambling management system, prohibiting any gambling features in its games[194]

Financial Performance - For the year ended December 31, 2022, the company reported revenue from continuing operations of RMB 1,562.9 million, a 37.0% increase compared to RMB 1,140.6 million in 2021[2]. - The gross profit from continuing operations was RMB 1,020.6 million, reflecting a 21.9% increase from RMB 837.0 million in the previous year[2]. - The net profit attributable to the company's owners from continuing operations was RMB 465.3 million, a decrease of 7.1% compared to RMB 500.7 million in 2021[2]. - Sales revenue increased to RMB 1,562.9 million, up 37.0% from RMB 1,140.6 million in the previous year[12]. - Gross profit increased by 21.9% to RMB 1,020.6 million, with a gross margin decrease to 65.3% from 73.4%[14]. - Profit before tax decreased by approximately 21.2% from RMB 477.4 million for the year ended December 31, 2021, to RMB 376.0 million for the year ended December 31, 2022, with the profit margin dropping from 41.9% to 24.1%[19]. - Profit attributable to owners of the company decreased by approximately 7.1% from RMB 500.7 million for the year ended December 31, 2021, to RMB 465.3 million for the year ended December 31, 2022[22]. - Total comprehensive income for 2022 was RMB 456,812 thousand, down 8% from RMB 496,702 thousand in 2021[37]. - Basic earnings per share from continuing operations for 2022 was RMB 27.94, compared to RMB 32.74 in 2021, reflecting a decline of 14%[43]. User Metrics - Daily active users (DAUs) increased to 13,956,188, representing a 60.0% year-over-year growth from 8,720,755[4]. - Monthly active users (MAUs) rose to 62,437,541, marking a 23.7% increase from 50,492,103 in the previous year[4]. - The total number of active users reached 16,644,819, representing a year-on-year increase of 8.2%[6]. Revenue Sources - Revenue from self-developed mobile games was RMB 1,264.3 million, up 29.8% from RMB 974.2 million in 2021[3]. - Revenue from third-party mobile games surged by 363.0% to RMB 183.9 million from RMB 39.7 million[3]. - Third-party game distribution revenue amounted to RMB 183.9 million, a significant year-on-year growth of 363.0%[6]. - Advertising revenue for 2022 was RMB 1,448,199,000, an increase from RMB 1,013,910,000 in 2021, leading to total revenue of RMB 1,562,940,000 for 2022 compared to RMB 1,140,563,000 in 2021[51]. Expenses and Costs - Sales costs rose to RMB 542.3 million, reflecting a year-on-year increase of 78.7%[13]. - Sales and marketing expenses increased by approximately 80.6% from RMB 301.0 million for the year ended December 31, 2021, to RMB 543.7 million for the year ended December 31, 2022, mainly due to targeted advertising in key expansion areas such as Sichuan, Jiangsu, and Guangzhou[17]. - Administrative and other expenses rose by approximately 140.3% from RMB 91.6 million for the year ended December 31, 2021, to RMB 220.1 million for the year ended December 31, 2022, primarily due to increased employee costs related to R&D and subcontracting fees for new game development[18]. - The total employee cost for the group for the year ended December 31, 2022, was approximately RMB 224.8 million, an increase from RMB 139.1 million in 2021[35]. - The increase in employee costs was primarily due to a rise in salaries and other benefits by approximately RMB 60.2 million and an increase in share-based compensation by approximately RMB 21 million[35]. Taxation and Profitability - Income tax expenses decreased by approximately 60.0% from RMB 65.7 million for the year ended December 31, 2021, to RMB 26.3 million for the year ended December 31, 2022, with the effective tax rate dropping from 13.8% to 7.0%[21]. - The company's income tax expense for 2022 was RMB 26,326,000, significantly lower than RMB 65,672,000 in 2021[56]. - The effective corporate income tax rate for the company is 25%, but it benefits from a reduced rate of 15% due to its recognition as a "High-tech Enterprise" since 2021[55]. Strategic Initiatives - The company aims to expand from a leading local card game operator in China to a global casual competitive gaming platform[5]. - The company plans to expand its game portfolio and introduce localized board and card game variants to attract users in lower-tier cities[8]. - Increased investment in new media marketing is expected to enhance customer acquisition channels and reduce costs[9]. - Ongoing R&D investment will focus on launching new game types, including hardcore and competitive games, to enrich the game lineup[10]. - The company plans to continue expanding its mobile game development and operations in China, focusing on new product launches and market penetration strategies[46]. Investments and Assets - Non-current assets increased to RMB 495,509 thousand in 2022 from RMB 275,768 thousand in 2021, representing an increase of 80%[44]. - The company reported a significant increase in investments in associates, rising to RMB 186,545 thousand in 2022 from RMB 153,498 thousand in 2021, an increase of 21%[44]. - The company’s net asset value increased to RMB 1,794,013 thousand in 2022, up from RMB 1,440,304 thousand in 2021, reflecting a growth of 25%[45]. Corporate Governance - The company has complied with the corporate governance code, except for the separation of roles between the Chairman and CEO[82]. - The audit committee has confirmed that the financial statements comply with applicable accounting principles and have been adequately disclosed[85]. - No significant events affecting the group have occurred since the end of the reporting period[82].

Financial Performance - For the six months ended June 30, 2022, the company's revenue and gross profit were RMB 781.8 million and RMB 552.1 million, representing an increase of approximately 63.8% and 57.1% compared to the same period last year[11]. - The adjusted net profit for the same period was approximately RMB 391.6 million, an increase of about 24.1% from approximately RMB 315.6 million for the six months ended June 30, 2021[11]. - The company's revenue for the six months ended June 30, 2022, was approximately RMB 781.8 million, an increase of 63.8% compared to RMB 477.4 million for the same period in 2021[15]. - Daily active users (DAUs) increased to 10,369,762, representing a growth of 30.4% year-over-year, while monthly active users reached 60,544,023, up 18.6%[12]. - The number of paying players rose to 9,039,561, marking a 44.0% increase compared to the previous year[12]. - The total comprehensive income for the period was RMB 372.3 million, compared to RMB 306.3 million in the same period of 2021, indicating an increase of approximately 21.5%[39]. - The company reported a profit attributable to owners of RMB 380,299,000 for the six months ended June 30, 2022, compared to RMB 310,699,000 for the same period in 2021, representing a year-over-year increase of 22.4%[40]. - Basic earnings per share from continuing and discontinued operations increased to RMB 30.56, up from RMB 24.92 in the previous year, reflecting a growth of 22.5%[40]. Research and Development - The company significantly increased its R&D investment to approximately RMB 72.5 million, a year-on-year increase of 149.1%[11]. - The company is focusing on R&D investments to enrich its game pipeline and expand into overseas markets[14]. - Employee costs for the first half of 2022 totaled approximately RMB 86.8 million, up from RMB 44.5 million in the same period of 2021, reflecting an increase of about 94.9%[35]. Marketing and User Engagement - The company confirmed advertising revenue of RMB 59.7 million during the reporting period, with user engagement through ads incentivized by virtual rewards in games[11]. - Daily Active Users (DAUs) and player engagement significantly improved due to strategic partnerships with new media channels such as Douyin and Kuaishou[11]. - Marketing expenses surged by approximately 221.2% to RMB 216.6 million in 2022 from RMB 67.4 million in 2021, aimed at enhancing brand exposure in key regions[12]. - The company aims to increase market share in 50 cities across Zhejiang, Fujian, Anhui, and Jiangsu provinces in the second half of 2022[14]. Game Development and Portfolio Expansion - The company successfully launched new casual games, including "Encountering Meowks," which has received official game approval and is expected to be released within 2022[11]. - The company continues to innovate and introduce new elements in its existing Mahjong and Poker games to enhance player experience[11]. - The company is focused on diversifying its game portfolio through ongoing development of various game projects[11]. - The company plans to expand its game portfolio by introducing localized board and card games to attract users in lower-tier cities[14]. Financial Position and Cash Flow - Cash and cash equivalents amounted to approximately RMB 1,193.8 million as of June 30, 2022, up from RMB 1,125.2 million as of December 31, 2021[29]. - The company had no short-term or long-term bank borrowings as of June 30, 2022, except for lease liabilities totaling RMB 22.8 million[30]. - The net cash generated from operating activities was RMB 79,652,000, a decrease of 64.7% compared to RMB 225,605,000 in the same period last year[45]. - The company reported a net cash outflow from financing activities of RMB 20,068,000, compared to a net cash outflow of RMB 1,380,000 in the previous year[45]. Shareholder and Equity Information - The company repurchased a total of 9,478,000 shares at a total cost of RMB 13,902,000 (HKD 16,960,000) during the six months ended June 30, 2022[43]. - The company has a stock option plan that allows for the issuance of up to 10% of the total shares outstanding at the time of listing, which is 125,600,000 shares[94]. - The total number of stock options granted and yet to be exercised cannot exceed 30% of the total issued shares at any time[127]. - The share reward plan allows for a maximum of 3% of the total issued shares to be allocated in any financial year, with a limit of 1% in any 12-month period[130]. Corporate Governance and Compliance - The company has complied with the corporate governance code during the reporting period, with a slight deviation regarding the roles of the chairman and CEO[134]. - The audit committee has reviewed the unaudited interim results and confirmed compliance with applicable accounting principles[137]. Future Outlook - The company aims to evolve from a leading local card game operator in China to a global casual competitive gaming platform[11]. - The company plans to continue expanding its market presence and investing in new technologies to drive future growth[40].