[Key Financial Highlights](index=6&type=section&id=Key%20Financial%20Highlights) During the reporting period, the company's revenue and gross profit decreased year-on-year, primarily due to reduced demand for COVID-19 related services, while profit for the period also saw a slight decline, but diluted earnings per share remained consistent with the prior year Key Financial Highlights The company's revenue and gross profit decreased year-on-year, primarily due to reduced demand for COVID-19 related services, while profit for the period also saw a slight decline, but diluted earnings per share remained consistent with the prior year As of June 30, Key Financial Data for the Six Months | Indicator | 2024 (RMB thousands) | 2023 (RMB thousands) | Year-on-Year Change | | :--- | :--- | :--- | :--- | | Revenue | 1,465,701 | 1,644,113 | -10.9% | | Gross Profit | 559,733 | 717,008 | -21.9% | | Profit for the Period | 103,478 | 120,258 | -14.0% | | Profit Attributable to Owners of the Parent | 101,582 | 111,807 | -9.1% | | Basic Earnings Per Share (RMB yuan) | 0.14 | 0.17 | -17.6% | | Diluted Earnings Per Share (RMB yuan) | 0.14 | 0.14 | 0.0% | [Management Discussion and Analysis](index=7&type=section&id=Management%20Discussion%20and%20Analysis) This section provides an overview of the company's business performance, industry trends, and financial results for the reporting period [Business Review](index=8&type=section&id=Business%20Review) Despite post-pandemic adjustments and economic headwinds, the company's core business (excluding COVID-19 related services) achieved over 10% year-on-year growth in H1 2024, driven by strong performance in specialized testing and co-construction businesses, alongside significant advancements in technology upgrades and operational efficiency - Core underlying business revenue (excluding COVID-19 related services) increased by over **10% year-on-year**, with an overall average selling price (ASP) increase of approximately **4%**[18](index=18&type=chunk) - Revenue from specialized testing business grew by over **30% year-on-year**, and co-construction business revenue increased by over **70% year-on-year**, becoming key growth drivers[19](index=19&type=chunk) - The company vigorously promoted technology upgrades, including redesigning a new generation LIMS system and widely applying artificial intelligence, with cumulative AI-assisted slide readings exceeding **5 million**[19](index=19&type=chunk) - Operational efficiency continued to optimize, with reagent procurement costs reduced by **8%**, reagent loss rates decreased by **12%**, and laboratory per capita efficiency improved by over **10%** compared to the same period in 2023[20](index=20&type=chunk) [Industry Overview](index=9&type=section&id=Industry%20Overview) The Chinese ICL industry benefits from multiple favorable macroeconomic factors, including government support for private medical institutions and shared medical resources, strong demand driven by an aging population, tiered diagnosis and treatment, and hospital cost control pressures, alongside technological advancements and stricter compliance regulations favoring leading compliant enterprises - Government policies support tertiary public hospitals sharing clinical testing and pathological diagnosis services with private medical institutions, benefiting the ICL industry[21](index=21&type=chunk) - Factors such as an aging population, the advancement of tiered diagnosis and treatment systems, growth in lower-tier city hospital numbers, and optimization of hospital revenue structures collectively promote ICL business growth[23](index=23&type=chunk) - Healthcare payment reforms like DRG/DIP 2.0 increase hospitals' cost control pressure, prompting them to outsource testing services to lower-cost ICLs[24](index=24&type=chunk)[29](index=29&type=chunk) - The integration of big data and artificial intelligence will revolutionize the clinical testing industry, improving diagnostic accuracy, reliability, and operational efficiency[26](index=26&type=chunk) - Stricter regulatory policies, such as the nationwide crackdown on corruption in the pharmaceutical sector, will create a fairer competitive environment and development opportunities for compliant industry leaders[28](index=28&type=chunk) [Financial Review](index=13&type=section&id=Financial%20Review) The company's H1 2024 financial performance was impacted by reduced COVID-19 related services, leading to overall revenue and profit declines; however, effective cost control measures significantly reduced operating expenses, and debt structure optimization lowered financial costs, while improved inventory management maintained healthy financial ratios despite increased receivables [Revenue, Gross Profit, and Gross Margin](index=13&type=section&id=Revenue%2C%20Gross%20Profit%2C%20and%20Gross%20Margin) In H1 2024, the company's revenue was **RMB 1.47 billion**, a **10.9% year-on-year decrease**, primarily due to reduced COVID-19 related service demand, with gross profit at **RMB 560 million**, down **21.9%**, and gross margin declining from **43.6% to 38.2%** due to lower high-margin COVID-19 service contributions and new laboratory ramp-up costs 2024 H1 Revenue and Gross Profit Performance | Item | 2024 H1 (RMB millions) | 2023 H1 (RMB millions) | Year-on-Year Change | | :--- | :--- | :--- | :--- | | Revenue | 1,465.7 | 1,644.1 | -10.9% | | Cost of Sales | 906.0 | 927.1 | -2.3% | | Gross Profit | 559.7 | 717.0 | -21.9% | | Gross Margin | 38.2% | 43.6% | -5.4pp | [Operating Expenses](index=13&type=section&id=Operating%20Expenses) The company successfully controlled various operating expenses, with sales and marketing expenses decreasing by **13.6%**, administrative expenses by **21.3%**, and R&D expenses by **15.0%** year-on-year, primarily due to enhanced cost control, optimized organizational structure leading to lower staff costs, and reduced share-based payment expenses - Sales and marketing expenses decreased by **13.6%** year-on-year to **RMB 202 million**, primarily due to reduced staff costs and travel expenses[34](index=34&type=chunk) - Administrative expenses decreased by **21.3%** year-on-year to **RMB 108 million**, mainly due to organizational optimization and reduced share-based payment expenses[35](index=35&type=chunk) - Research and development expenses decreased by **15.0%** year-on-year to **RMB 58.7 million**, primarily due to reduced laboratory expenses and reagent consumables[36](index=36&type=chunk) [Profit for the Period](index=14&type=section&id=Profit%20for%20the%20Period) Considering the above factors, the company's profit for the period decreased by **14.0%** from **RMB 120 million** in the prior year to **RMB 104 million**, with the profit decline being less than the revenue and gross profit declines, reflecting the company's effective expense control - Profit for the period decreased by approximately **14.0%** from **RMB 120.3 million** for the six months ended June 30, 2023, to **RMB 103.5 million** for the same period in 2024[42](index=42&type=chunk) [Financial Position and Liquidity](index=14&type=section&id=Financial%20Position%20and%20Liquidity) As of June 30, 2024, trade receivables increased by **10.6%** due to extended settlement terms for some clients, while inventory decreased by **25.9%** through enhanced management, and the company's net cash position (cash and equivalents + pledged deposits - interest-bearing bank borrowings) declined to **RMB 503 million**, primarily due to increased pledged deposits for lower-interest refinancing - Trade receivables and bills receivable increased by **10.6%** from the end of 2023 to **RMB 1.68 billion**, primarily due to extended settlement periods provided to COVID-19 screening-related clients and public hospitals[44](index=44&type=chunk) - Inventories decreased by **25.9%** from the end of 2023 to **RMB 131 million**, benefiting from increased clinical testing equipment sales and strengthened inventory management[43](index=43&type=chunk) - Net cash position decreased by **35.9%** from **RMB 785 million** at the end of 2023 to **RMB 503 million**[51](index=51&type=chunk) [Financial Ratios](index=16&type=section&id=Financial%20Ratios) The company's liquidity improved, with the current ratio increasing from **1.88 to 1.99**; however, due to increased total borrowings, the gearing ratio (total borrowings/total equity) rose from **0.49 to 0.63** Key Financial Ratios | Ratio | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Current Ratio | 1.99 | 1.88 | | Quick Ratio | 1.91 | 1.78 | | Gearing Ratio | 0.63 | 0.49 | [Other Matters](index=17&type=section&id=Other%20Matters) As of the reporting date, the company had no specific material investment or capital asset commitment plans for 2024, primarily operates in China with most transactions denominated in RMB and no foreign currency hedging policy, and employed **5,456** staff as of June 30, 2024 - As of the date of this report, the Group had no specific commitment plans regarding material investments and capital assets for 2024[58](index=58&type=chunk) - The company primarily operates in China, with most transactions denominated in RMB, and currently has no foreign currency hedging policy, but closely monitors foreign exchange exposure[59](index=59&type=chunk) - As of June 30, 2024, the company had **5,456** employees, with total staff costs of **RMB 413 million** for the first half of the year[60](index=60&type=chunk) [Corporate Governance and Other Information](index=17&type=section&id=Corporate%20Governance%20and%20Other%20Information) This section details the company's corporate governance practices, including directors' and shareholders' interests, employee incentive schemes, share repurchases, and compliance matters [Directors' and Shareholders' Interests](index=18&type=section&id=Directors'%20and%20Shareholders'%20Interests) This section discloses the interests of the company's directors, chief executive, and substantial shareholders in the company's shares as of June 30, 2024, including CEO Mr. Gao Song and Non-executive Director Mr. Lin Jixun holding personal and controlled corporate interests, and major shareholder Pearl Group Limited (controlled by Carlyle) holding **38.71%** interest Directors' Interests in the Company | Name | Nature of Interest | Number of Shares | Approximate Percentage of Interest in the Company | | :--- | :--- | :--- | :--- | | Mr. Gao Song | Interest in controlled corporation / Beneficial owner | 303,750 / 11,249,646 | 0.04% / 1.55% | | Mr. Lin Jixun | Interest in controlled corporation | 90,061,994 | 12.38% | Major Shareholders' Interests in the Company | Name | Nature of Interest | Number of Shares | Approximate Percentage of Interest in the Company | | :--- | :--- | :--- | :--- | | Pearl Group Limited | Beneficial owner | 281,541,805 | 38.71% | | Mr. Lin Jixun | Interest in controlled corporation | 90,061,994 | 12.38% | | Mr. Lin Feng | Interest in controlled corporation | 72,005,994 | 9.90% | [Employee Incentive Schemes](index=20&type=section&id=Employee%20Incentive%20Schemes) The company has two incentive schemes for 2019 and 2024; the report details the changes in restricted share units (RSUs) and share options under the 2019 scheme in H1 2024, including **900,000** RSUs vested to Director Mr. Gao Song, while the 2024 scheme adopted in March had no awards granted as of the reporting period end - Under the 2019 incentive scheme, as of June 30, 2024, Director Mr. Gao Song had **6,000,000** unexercised restricted share units, and other employees had **24,923,355** unexercised share options[69](index=69&type=chunk)[70](index=70&type=chunk) - The 2024 incentive scheme was adopted on March 28, 2024, but as of June 30, no share options or restricted share units had been granted under the scheme[71](index=71&type=chunk) [Share Repurchases and Use of Proceeds](index=22&type=section&id=Share%20Repurchases%20and%20Use%20of%20Proceeds) The company repurchased **1,611,500** shares in the open market in June 2024 for a total consideration of approximately **HKD 15.42 million**; additionally, the report details the use of **RMB 231 million** net proceeds from the global offering, with **RMB 167 million** utilized as of June 30, 2024, and the remaining **RMB 63.8 million** expected to be fully used by the end of 2024 Share Repurchase Details (June 2024) | Repurchase Month | Total Shares Repurchased | Highest Price Per Share (HKD) | Lowest Price Per Share (HKD) | Total Consideration (HKD) | | :--- | :--- | :--- | :--- | :--- | | June 2024 | 1,611,500 | 10.12 | 8.14 | 15,416,833.24 | Summary of Use of Proceeds from Global Offering (As of June 30, 2024) | Description | Intended Use (RMB millions) | Cumulative Utilized (RMB millions) | Unutilized (RMB millions) | | :--- | :--- | :--- | :--- | | Enhance testing capabilities | 34.6 | 27.9 | 6.7 | | Network expansion | 57.7 | 39.2 | 18.5 | | Business development and acquisitions | 57.7 | 44.7 | 13.0 | | Upgrade existing laboratories | 34.6 | 23.2 | 11.3 | | Invest in operating infrastructure | 23.1 | 15.4 | 7.7 | | Working capital and others | 23.1 | 16.6 | 6.5 | | **Total** | **230.9** | **167.0** | **63.8** | [Audit, Dividends, and Compliance](index=22&type=section&id=Audit%2C%20Dividends%2C%20and%20Compliance) The company complied with all applicable corporate governance code provisions during the reporting period, with interim financial statements reviewed by the Audit Committee and independent auditor Ernst & Young, and the Board resolved not to declare an interim dividend for the six months ended June 30, 2024 - The company has complied with all applicable code provisions of the Corporate Governance Code for the six months ended June 30, 2024[73](index=73&type=chunk) - The Audit Committee has reviewed the unaudited interim financial information with management and independent auditor Ernst & Young[77](index=77&type=chunk) - The Board does not recommend the payment of an interim dividend for the six months ended June 30, 2024[83](index=83&type=chunk) [Interim Financial Statements and Notes](index=24&type=section&id=Interim%20Financial%20Statements%20and%20Notes) This section presents the company's interim financial statements and accompanying notes, providing a detailed view of its financial performance, position, and cash flows [Independent Review Report](index=25&type=section&id=Independent%20Review%20Report) Independent auditor Ernst & Young has reviewed the interim financial information in accordance with Hong Kong Standard on Review Engagements, concluding that nothing has come to their attention to suggest the interim financial information is not prepared in all material respects in accordance with International Accounting Standard 34 - Auditor's conclusion: Based on the review, nothing has come to their attention that causes them to believe the interim financial information is not prepared in all material respects in accordance with International Accounting Standard 34[88](index=88&type=chunk) [Interim Condensed Consolidated Financial Statements](index=26&type=section&id=Interim%20Condensed%20Consolidated%20Financial%20Statements) This section contains the company's unaudited interim condensed consolidated financial statements for the six months ended June 30, 2024, including the statement of profit or loss, statement of financial position, statement of changes in equity, and statement of cash flows, comprehensively reflecting the company's financial performance and position during the reporting period [Statement of Profit or Loss and Other Comprehensive Income](index=26&type=section&id=Statement%20of%20Profit%20or%20Loss%20and%20Other%20Comprehensive%20Income) In H1 2024, the company recorded revenue of **RMB 1.47 billion**, profit before tax of **RMB 134 million**, and profit for the period of **RMB 103 million**, with profit attributable to owners of the parent at **RMB 102 million**, and both basic and diluted earnings per share at **RMB 0.14** 2024 H1 Statement of Profit or Loss Summary | Item (RMB thousands) | 2024 H1 | 2023 H1 | | :--- | :--- | :--- | | Revenue | 1,465,701 | 1,644,113 | | Gross Profit | 559,733 | 717,008 | | Profit Before Tax | 133,764 | 151,731 | | Profit for the Period | 103,478 | 120,258 | | Basic Earnings Per Share (yuan) | 0.14 | 0.17 | | Diluted Earnings Per Share (yuan) | 0.14 | 0.14 | [Statement of Financial Position](index=28&type=section&id=Statement%20of%20Financial%20Position) As of June 30, 2024, the company's total assets were **RMB 4.66 billion**, total liabilities **RMB 2.76 billion**, and total equity **RMB 1.91 billion**, with net current assets of **RMB 1.57 billion**, indicating robust short-term solvency Statement of Financial Position Summary (As of June 30, 2024) | Item (RMB thousands) | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Total Non-current Assets | 1,513,138 | 1,250,150 | | Total Current Assets | 3,146,526 | 3,303,388 | | Total Current Liabilities | 1,577,455 | 1,757,018 | | Total Non-current Liabilities | 1,177,485 | 967,930 | | Net Assets | 1,904,724 | 1,828,590 | [Statement of Cash Flows](index=32&type=section&id=Statement%20of%20Cash%20Flows) In H1 2024, operating activities resulted in a net cash outflow of **RMB 163 million**, primarily due to increased trade receivables and decreased payables; investing activities had a net cash outflow of **RMB 1.07 million**, and financing activities a net cash outflow of **RMB 24.82 million**, with cash and cash equivalents at period-end totaling **RMB 768 million** Statement of Cash Flows Summary (For the Six Months Ended June 30, 2024) | Item (RMB thousands) | 2024 H1 | 2023 H1 | | :--- | :--- | :--- | | Net Cash Flows from Operating Activities | (162,780) | 4,893 | | Net Cash Flows Used in Investing Activities | (1,066) | (135,884) | | Net Cash Flows (Used in)/from Financing Activities | (24,821) | 91,337 | | Net Decrease in Cash and Cash Equivalents | (188,667) | (39,654) | | Cash and Cash Equivalents at End of Period | 767,961 | 1,644,262 | [Notes to the Interim Condensed Consolidated Financial Information](index=34&type=section&id=Notes%20to%20the%20Interim%20Condensed%20Consolidated%20Financial%20Information) The notes to the financial statements elaborate on key information such as accounting policies, revenue composition, taxation, receivables and payables, related party transactions, and fair value of financial instruments, providing essential context and details for understanding the financial statements [Note 4. Revenue](index=36&type=section&id=Note%204.%20Revenue) All company revenue is derived from contracts with customers, with medical diagnostic services being the sole source of income, totaling **RMB 1.47 billion** in H1 2024, and the vast majority (**RMB 1.45 billion**) recognized at a point in time Revenue Breakdown | Item (RMB thousands) | 2024 H1 | 2023 H1 | | :--- | :--- | :--- | | Medical Diagnostic Services | 1,465,701 | 1,644,113 | | - Transferred at a point in time | 1,446,544 | 1,635,428 | | - Transferred over time | 19,157 | 8,685 | [Note 10. Trade and Bills Receivables](index=42&type=section&id=Note%2010.%20Trade%20and%20Bills%20Receivables) As of June 30, 2024, net trade and bills receivables totaled **RMB 1.68 billion**, an increase from the year-end, with an expected credit loss provision of **RMB 274 million**, and aging analysis showing a significant increase in receivables aged **6 months to 1 year** compared to the beginning of the year Trade and Bills Receivables (RMB thousands) | Item | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Gross Trade and Bills Receivables | 1,950,846 | 1,757,807 | | Provision for Expected Credit Losses | (274,033) | (242,373) | | Net Amount | 1,676,813 | 1,515,434 | Aging Analysis of Trade and Bills Receivables (Net, RMB thousands) | Aging | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | 1 to 6 months | 982,259 | 1,074,252 | | 6 months to 1 year | 465,690 | 259,156 | | 1 to 2 years | 195,453 | 157,116 | | Over 2 years | 33,411 | 24,910 | [Note 18. Related Party Transactions](index=51&type=section&id=Note%2018.%20Related%20Party%20Transactions) The company engaged in sales, procurement, and leasing transactions with related parties, primarily Acon and Aijian, controlled by Non-executive Director Mr. Lin Jixun; procurement from Acon significantly decreased during the reporting period, and key management personnel compensation totaled **RMB 5.3 million**, a substantial decrease from **RMB 15.52 million** in the prior year, mainly due to reduced share-based payment expenses - Related party transactions primarily involve Acon Biotech and Aijian Medical, controlled by Non-executive Director Mr. Lin Jixun[154](index=154&type=chunk) Key Related Party Transactions (RMB thousands) | Transaction Type | 2024 H1 | 2023 H1 | | :--- | :--- | :--- | | Purchases from Acon | 820 | 24,307 | | Rental Income from Aijian | 3,551 | 3,692 | Key Management Personnel Compensation (RMB thousands) | Item | 2024 H1 | 2023 H1 | | :--- | :--- | :--- | | Salaries and Bonuses | 3,834 | 2,740 | | Share-based Payment Expenses | 160 | 12,513 | | **Total** | **5,296** | **15,516** |

Financial Performance - For the six months ended June 30, 2024, the company's revenue was RMB 1,465.7 million, a decrease of 10.9% compared to RMB 1,644.1 million for the same period in 2023[2]. - Gross profit for the same period was RMB 559.7 million, down 21.9% from RMB 717.0 million in the previous year[2]. - The company's net profit attributable to shareholders was RMB 101.6 million, compared to RMB 111.8 million in the prior year, reflecting a decline of 9.8%[2]. - Basic earnings per share for the six months ended June 30, 2024, was RMB 0.14, down from RMB 0.17 in the same period of 2023[2]. - Revenue for the six months ended June 30, 2024, was RMB 1,465.7 million, a decrease of approximately 10.9% compared to RMB 1,644.1 million for the same period in 2023, primarily due to reduced demand for COVID-19 related services[15]. - The net profit for the six months ended June 30, 2024, was RMB 103.5 million, down from RMB 120.3 million for the same period in 2023[40]. - Total comprehensive income for the six months ended June 30, 2024, was RMB 98,381,000, an increase of 58.8% compared to RMB 61,933,000 for the same period in 2023[41]. - Profit attributable to equity holders of the parent company for the same period was RMB 96,485,000, up from RMB 53,482,000, representing an increase of 80.4%[41]. Operational Efficiency - The company's core business (excluding COVID-19 related services) achieved over 10% revenue growth, with specialty testing business growing over 30% year-on-year[3]. - The company successfully launched a new generation LIMS system and upgraded several key operational systems to enhance efficiency and service quality[4]. - The company reduced reagent procurement costs by 8% and reagent loss rates by 12% compared to the same period in 2023, optimizing key operational metrics[4]. - Collaborative business initiatives grew over 70% year-on-year, significantly expanding market coverage and improving resource utilization[3]. - The company has adopted AI technology, with over 5 million images processed, enhancing diagnostic speed and accuracy[4]. - The company remains committed to sustainable development and improving operational efficiency to maintain competitive advantages in the market[4]. Market Trends and Demand - The Chinese government has implemented a series of medical reforms to reshape the ICL industry and support private sector growth, including the "14th Five-Year Plan" announced in May 2022, which aims to promote the integration of biotechnology and information technology[6]. - The demand for ICL testing is expected to increase due to the government's promotion of a hierarchical medical system, which includes hospital alliances and standardized referral pathways[7]. - The aging population in China is driving a surge in chronic disease prevalence, leading to increased testing demand and higher outsourcing rates for health check centers[8]. - Hospitals are increasingly outsourcing clinical testing to ICLs due to cost control pressures from medical reforms and regulations like the DRG grouping and payment standards[9]. - ICLs benefit from a broad network that allows them to connect with hospitals across different regions, enabling them to conduct large-scale tests at lower costs[10]. - Advances in biopharmaceuticals and the integration of big data and artificial intelligence are enhancing diagnostic capabilities and supporting the development of targeted treatment plans[11]. - The ICL industry is positioned to lead in healthcare digitalization, with ongoing investments in laboratory information systems and data management capabilities[11]. - ICLs are establishing strategic partnerships with top-tier hospitals to enhance their service offerings and improve the distribution of medical resources in underserved areas[12]. - The shift towards outsourcing clinical testing is expected to continue, driven by the need for cost-effective and high-quality testing services[9]. - The focus on improving diagnostic and treatment capabilities at the grassroots level is promoting a more balanced distribution of medical resources across regions[12]. Financial Position and Assets - As of June 30, 2024, trade receivables and bills amounted to RMB 1,676.8 million, an increase of approximately 10.6% from RMB 1,515.4 million as of December 31, 2023[27]. - As of June 30, 2024, prepaid items, deposits, and other receivables were RMB 239.3 million, up about 19.0% from RMB 201.1 million as of December 31, 2023[27]. - As of June 30, 2024, trade payables and bills were RMB 704.8 million, a decrease of approximately 5.0% from RMB 742.1 million as of December 31, 2023[27]. - As of June 30, 2024, cash and cash equivalents were RMB 768.0 million, a decrease of about 20.0% from RMB 959.4 million as of December 31, 2023[30]. - As of June 30, 2024, net cash position decreased by approximately 35.9% to RMB 502.6 million from RMB 784.5 million as of December 31, 2023[31]. - Non-current assets totaled RMB 1,513,138,000 as of June 30, 2024, compared to RMB 1,250,150,000 as of December 31, 2023, reflecting a growth of 20.9%[42]. - Current assets decreased to RMB 3,146,526,000 from RMB 3,303,388,000, a decline of 4.8%[42]. - Total liabilities increased to RMB 1,577,455,000 as of June 30, 2024, from RMB 1,757,018,000, indicating a decrease of 10.2%[43]. - Net assets amounted to RMB 1,904,724,000 as of June 30, 2024, compared to RMB 1,828,590,000 as of December 31, 2023, an increase of 4.2%[43]. Cost Management - Cost of sales for the same period was RMB 906.0 million, a decrease of approximately 2.3% from RMB 927.1 million, attributed to a decline in costs associated with COVID-19 testing[16]. - Selling and marketing expenses decreased by approximately 13.6% to RMB 202.0 million from RMB 233.7 million, due to cost control measures implemented in the first half of 2024[17]. - Administrative expenses were RMB 107.5 million, a decrease of approximately 21.3% from RMB 136.6 million, primarily due to organizational restructuring and reduced employee costs[18]. - Research and development expenses decreased by approximately 15.0% to RMB 58.7 million from RMB 69.1 million, due to a reduction in development projects[19]. - Other expenses decreased by approximately 24.9% to RMB 50.0 million from RMB 66.6 million, mainly due to a reduction in expected credit loss provisions[20]. - Other income and gains decreased by approximately 42.2% to RMB 19.7 million from RMB 34.0 million, primarily due to a decrease in non-cash fair value gains related to the acquisition of subsidiaries[21]. - Financial costs decreased by approximately 40.2% to RMB 27.4 million from RMB 45.9 million, due to refinancing of offshore bank borrowings at lower interest rates[22]. Shareholder Information - The company did not declare or pay any dividends for the six months ended June 30, 2024[63]. - The weighted average number of ordinary shares issued for the calculation of basic earnings per share increased to 727,290,644 shares in 2024 from 653,787,020 shares in 2023[63]. - The company repurchased 1,611,500 shares at a total cost of approximately RMB 14,033,000 during the six months ending June 30, 2024[82]. - The company has announced a plan to repurchase up to 36,367,739 shares, which represents 5% of the total issued shares as of May 30, 2024[82]. - The total issued share capital remained unchanged at 727,354,791 shares as of June 30, 2024, with a capital of RMB 97,000[81]. Compliance and Governance - The company has maintained its accounting policies consistent with those used in the annual financial statements for the year ended December 31, 2023[46]. - The audit committee consists of three independent non-executive directors and has reviewed the interim financial information[88]. - The independent auditor, Ernst & Young, has reviewed the interim financial data but did not provide a certification[89]. - The company maintained compliance with corporate governance codes and standards throughout the reporting period[83][84]. - No significant events requiring disclosure have occurred after June 30, 2024, up to the date of this announcement[92].

Financial Performance - Total revenue in 2023 decreased by 32.2% year-over-year due to a significant reduction in COVID-related business, but the decline was lower than the industry average[7] - Revenue dropped by 32.2% to RMB 3,297.8 million in 2023 compared to RMB 4,860.6 million in 2022[14] - Net profit for the year fell by 61.7% to RMB 262.3 million in 2023 from RMB 684.9 million in 2022[14] - Revenue for the year ended December 31, 2023, was RMB 3,297.8 million, a decrease of 32.2% compared to RMB 4,860.6 million in 2022, primarily due to a significant decline in demand for COVID-19-related services[25] - Sales cost for 2023 was RMB 1,863.7 million, a decrease of 37.1% from RMB 2,964.4 million in 2022, consistent with the decline in revenue due to reduced COVID-19 testing volumes[26] - Gross profit for 2023 was RMB 1,434.1 million, compared to RMB 1,896.2 million in 2022, with the gross margin increasing to 43.5% from 39.0% due to lower raw material costs, cost control measures, and a shift to higher-margin specialized tests[27] - Net profit decreased by 61.7% to RMB 262.3 million in 2023, compared to RMB 684.9 million in 2022[35] - Revenue for 2023 decreased to RMB 3,297,828 thousand from RMB 4,860,613 thousand in 2022, a decline of 32.2%[158] - Gross profit for 2023 was RMB 1,434,107 thousand, down from RMB 1,896,165 thousand in 2022, a decrease of 24.4%[158] - Net profit attributable to owners of the parent company for 2023 was RMB 234,885 thousand, a significant drop from RMB 680,793 thousand in 2022, a decrease of 65.5%[158] - Total comprehensive income for 2023 was RMB 218,173 thousand, compared to RMB 604,451 thousand in 2022, a decrease of 63.9%[159] - Basic earnings per share for 2023 were RMB 0.34, down from RMB 1.04 in 2022, a decrease of 67.3%[159] Business Growth and Expansion - Excluding COVID-related business, the company's regular business revenue grew by over 15% year-over-year in 2023, with specialty testing revenue increasing by more than 40%[7] - Compared to 2019, the company's total revenue in 2023 increased by over 90%, and the number of customers grew by more than 40%[7] - The company expanded its independent medical laboratory network from 33 to 36 labs by the end of 2023[15] - Specialized testing revenue in areas such as blood, oncology, infections, and maternal-fetal health grew by over 40% in 2023[16] - Collaborative business revenue increased by more than 50% year-over-year in 2023[16] - The number of testing items offered by the company grew from approximately 1,800 in 2018 to over 4,000 by the end of 2023[15] - The company is focusing on expanding into underserved markets and leveraging AI technology to enhance operational efficiency and market responsiveness[8] Operational Efficiency and Innovation - The company's gross margin remained industry-leading, supported by cost control, operational efficiency improvements, and strategic investments in high-growth potential businesses[7] - 20 out of 36 medical laboratories achieved ISO 15189 accreditation, maintaining a leading position in the industry[7] - The company launched a new laboratory information system (LIS) in Jinan, improving report review and generation efficiency by nearly 10 times[7] - AI technology was fully applied in pathology slide reading, driving digital innovation in operations and management[7] - The company completed the development of a new LIS system and upgraded multiple digital platforms in 2023[16] - The integration of big data and AI is transforming the clinical testing industry, improving diagnostic accuracy, reliability, and operational efficiency[23] Environmental and Social Responsibility - The company achieved an annual emission reduction target of 1-3%, demonstrating its commitment to environmental sustainability[7] - The company made charitable donations totaling RMB 1.8 million from the date of listing to December 31, 2023[75] Strategic Partnerships and Market Position - The company's strategic partnership with Guardant Health resulted in the successful launch of liquid biopsy companion diagnostic products in China in September 2023[7] - The company was included in the Hang Seng Composite Index, Stock Connect, and MSCI Index in 2023[16] - The company's top five customers accounted for less than 8% of total revenue for the year ended December 31, 2023[74] - The company's top five suppliers accounted for less than 30% of total purchases for the year ended December 31, 2023[74] Financial Position and Capital Management - Total assets decreased to RMB 4,553.5 million in 2023 from RMB 4,854.2 million in 2022, a decline of 6.2%[13] - Inventory decreased by 23.0% to RMB 176.6 million in 2023, driven by reduced demand for COVID-19-related services[37] - Trade receivables and bills decreased by 18.4% to RMB 1,515.4 million in 2023, reflecting improved collection efforts[38] - Trade payables and bills decreased by 30.2% to RMB 742.1 million in 2023, consistent with reduced cost of sales[40] - Cash and cash equivalents decreased by 42.9% to RMB 959.4 million in 2023, mainly due to RMB 670.0 million in pledged deposits for refinancing offshore bank loans[45] - Contract liabilities increased by 64.6% to RMB 34.7 million in 2023, driven by business expansion and increased customer prepayments[43] - Total interest-bearing bank loans decreased from RMB 1,136.1 million as of December 31, 2022, to RMB 887.5 million as of December 31, 2023, due to refinancing with RMB-denominated loans[46] - Net cash position increased by 44.1% from RMB 544.5 million as of December 31, 2022, to RMB 784.5 million as of December 31, 2023[46] - Capital expenditures decreased by 44.4% from RMB 297.4 million in 2022 to RMB 165.4 million in 2023, primarily due to reduced demand for COVID-19-related services and decreased purchases of property and equipment[48] - The company's current ratio improved from 1.61 in 2022 to 1.88 in 2023, and the quick ratio increased from 1.52 to 1.78 over the same period[48] - The asset-to-equity ratio decreased significantly from 1.86 in 2022 to 0.49 in 2023[48] Corporate Governance and Leadership - LIM Kooi June has been a non-executive director since December 2020 and serves as the Investment Director of Matou Business Consulting (Shanghai) Co., Ltd. since November 2019[57] - LIM Kooi June holds a Bachelor of Laws with Honors from the University of Nottingham and a Professional Accounting Certificate from the Institute of Chartered Accountants in England and Wales[57] - Ye Lin has been an independent non-executive director since June 2023 and previously served as the COO and Director of I-MAB, a Nasdaq-listed biopharmaceutical company[58] - Ye Lin holds an MBA from Cornell University and a Master's degree in Medical Biophysics from the University of Toronto and the Ontario Cancer Institute[59] - Zhang Wei has been an independent non-executive director since June 2023 and has served as an independent director for multiple public companies, including Biostage, Inc. and Dong-E-E-Jiao Co., Ltd[59] - Zhang Wei holds a Doctor of Clinical Medicine from Peking Union Medical College and a Doctor of Medical Management and Policy from Harvard University[59] - Pan Chao, Senior Vice President since July 2021, oversees the overall management of the company's laboratories[60] - Wang Zhihan, CFO and Senior Vice President since September 2020, is responsible for the company's financial strategy, financial management, and investor relations[60] - Wang Zhihan holds a Bachelor of Medical Science from Boston University, a Doctor of Medicine from Boston University School of Medicine, and an MBA from MIT Sloan School of Management[61] - Chu Jianing, Internal Audit Director and Strategic Intelligence Officer since July 2021, manages internal control, risk management, and operational data analysis[62] - Ge Shun, Vice President and Chief Marketing Officer since February 2023, oversees marketing, special inspections, and customer relations[62] - Ge Shun holds a Bachelor of Clinical Medicine from Jiangsu University and an MBA from Fudan University[62] - Hu Yuanyuan, Vice President since October 2018, supervises the Environmental, Health, and Safety (EHS) governance system[62] - Hu Yuanyuan holds a Bachelor's degree in International Economics and Trade from Jiangxi University of Finance and Economics[63] - Lan Jia, Senior Vice President and Administrative Director, joined the company in January 2021 and has extensive experience in financial management and internal control[64] - Li Dan, National Quality Director, has been with the company since April 2019 and oversees laboratory quality control[64] - Luo Zhen, Vice President, joined in March 2023 and is responsible for the company's digital system construction[64] - Sun Guangtao, Senior Vice President and Operations Director, has been with the company since April 2022 and manages the group's operations[66] - Wang Chengdong, Vice President and Eastern Region General Manager, has held various positions in the company since July 2011[66] - Zhang Yu, Financial Vice President, joined in July 2021 and is responsible for the group's financial operations[66] - Wang Zhihan and Su Jiamin serve as Joint Company Secretaries, with Su Jiamin bringing over 20 years of experience in corporate secretarial and compliance services[68] Risk Management and Compliance - The company operates in a highly regulated industry and may be adversely affected by uncertainties and changes in Chinese regulations related to the ICL industry[77] - The company faces risks related to competition, regulatory compliance, service quality control, and the ability to retain and acquire new customers[77] - The company's past financial performance may not be indicative of its future results[77] - The company's ability to compete effectively may be impacted if it fails to keep up with industry and technological developments[77] - The company has identified certain leased properties with land defects, which may require relocation and adversely affect its business, financial condition, and operating results[77] - The company's auditor, Ernst & Young, will retire but is eligible and willing to be reappointed, with a resolution to reappoint them to be proposed at the annual general meeting[80] - ZHOU Mintao has been nominated as a non-executive director candidate to fill the vacancy left by LIM Kooi June, who will not seek re-election[82] - ZHOU Mintao holds a Bachelor's degree in Biochemistry and an MBA from Fudan University, with extensive experience in healthcare and business management[83] Shareholder and Investor Relations - The company has maintained a minimum public float of 25% since its listing, as required by the Hong Kong Stock Exchange[76] - No debt securities were issued by the company during the period from the listing date to December 31, 2023[76] - The company has not been involved in any legal proceedings, arbitrations, or administrative litigations that could have a material adverse effect on its business, financial condition, or operating results[76] - The company's distributable reserves amounted to RMB 1,315.2 million as of December 31, 2023[75] - The company's shareholders have the right to request a special general meeting if they hold at least one-tenth of the paid-up share capital with voting rights[150] - The company's annual general meeting provides an opportunity for shareholders to interact with the board and committees, with auditors also available to address audit-related questions[149] Industry Trends and Market Dynamics - The aging population and increased prevalence of chronic diseases are driving higher demand for diagnostic testing, boosting the volume of tests[20] - Hospitals are increasingly outsourcing clinical testing to ICLs due to cost control pressures from healthcare reforms and regulations like the National Medical Security DRG Grouping and Payment Technical Specifications[21] - ICLs benefit from economies of scale, centralized management, and advanced technology adoption, enabling them to offer a wide range of tests at lower costs compared to hospital labs[22] - ICLs are expanding into lower-tier cities to address regional healthcare resource imbalances, providing comprehensive diagnostic services to county and township-level medical institutions[24] - The Chinese government's healthcare reforms, including the promotion of tiered medical systems and increased investment in medical infrastructure, are driving demand for ICL services[19] Financial Reporting and Auditing - The company's financial statements for 2023 were prepared in accordance with International Financial Reporting Standards (IFRS) and reflect a true and fair view of the company's financial position[152] - The company's financial statements were audited by Ernst & Young, who confirmed compliance with Hong Kong auditing standards and independence from the company[152] - The company's expected credit loss model was developed with the participation of external independent valuers, incorporating forward-looking factors to assess customer repayment ability[153] - The company's audit included evaluating the competence, capability, and objectivity of external independent valuers engaged by management[153] - The company's financial statements disclosed detailed information on expected credit losses for trade receivables and bills receivable in notes 2.4, 3, and 21[153] - Goodwill impairment testing is a key audit matter, with the company's goodwill amounting to RMB 79,802,000, representing 1.8% of total assets[154] - The company conducts annual impairment tests for goodwill based on the recoverable amount of cash-generating units, involving significant judgment and estimates[154] - Management uses an impairment assessment model with key assumptions including estimated revenue growth rate, projected gross margin, terminal growth rate, and pre-tax discount rate[154] - The company's directors are responsible for preparing true and fair consolidated financial statements in accordance with IFRS and Hong Kong Companies Ordinance[155] - The audit committee assists the board in overseeing the financial reporting process[155] - The auditors aim to obtain reasonable assurance that the financial statements are free from material misstatement, whether due to fraud or error[156] - The audit involves evaluating the appropriateness of accounting policies, reasonableness of estimates, and adequacy of disclosures[156] - The auditors assess the company's ability to continue as a going concern and the appropriateness of using the going concern basis[156] - The audit partner for this engagement is Ho Siu Fung from Ernst & Young[157] - The audit report was issued on March 28, 2024[157] Subsidiaries and Business Operations - The company operates 36 self-owned laboratories across China, offering over 4,000 medical diagnostic tests, including 1,700 general tests and 2,300 specialized tests, with 20 laboratories accredited by ISO 15189[71] - The company's subsidiaries are primarily engaged in medical testing services and trading of medical testing equipment in China[166] - The company holds 100% equity in its main subsidiaries, including Hangzhou Adicon Medical Laboratory and Shanghai Adicon Medical Laboratory[167] - Wuhan Adicon Medical Laboratory Co., Ltd. was established on November 24, 2009, with a registered capital of RMB 20,000,000 and is 100% owned by the company[168] - Nanjing Adicon Medical Laboratory Co., Ltd. was established on December 4, 2009, with a registered capital of RMB 20,000,000 and is 100% owned by the company[168] - Changsha Adicon Medical Laboratory Co., Ltd. was established on April 19, 2010, with a registered capital of RMB 20,000,000 and is 100% owned by the company[168] - Chengdu Adicon Medical Laboratory Co., Ltd. was established on June 11, 2010, with a registered capital of RMB 20,000,000 and is 100% owned by the company[168] - Shenyang Adicon Medical Laboratory Co., Ltd. was established on March 16, 2011, with a registered capital of RMB 20,000,000 and is 100% owned by the company[168] - Zhengzhou Adicon Medical Laboratory Co., Ltd. was established on August 8, 2012, with a registered capital of RMB 20,000,000 and is 100% owned by the company[168] - Guangzhou Adicon Medical Laboratory Co., Ltd. was established on August 21, 2013, with a registered capital of RMB 20,000,000 and is 100% owned by the company[168] - Tianjin Adicon Medical Laboratory Co., Ltd. was established on June 3, 2014, with a registered capital of RMB 30,000,000 and is 100% owned by the company[168] - Yunnan Adicon Medical Laboratory Co., Ltd. was established on February 2, 2015, with a registered capital of RMB 20,000,000 and is 100% owned by the company[168] - Qingdao Adicon Medical Laboratory Co., Ltd. was established on May 13, 2019, with a registered capital of RMB 11,666,600 and is 60% owned by the company[169] - The company holds a 70% equity stake in Quzhou Aidi Kang Medical Laboratory with a registered capital of RMB 20,000,000[170] - Shenzhen Aidi Kang Medical Laboratory is 60% owned by the company with a registered capital of RMB 13,333,300[170] - Xiamen Aidi Kang Medical Laboratory has a 51% equity stake held by the company and a registered capital of RMB 30,000,000[170] - Shangrao Aidi Kang Medical Laboratory is 61% owned by the company with a registered capital of RMB 3,625,000[170] - Jiangxi Jince Biotechnology is 61% owned by the company with a registered capital of RMB 8,000,000[170] - Zhengzhou Aidi Kang Medical Laboratory is fully owned by the company with a registered capital of RMB 20,000,000[170] - Suzhou Aidi Kang Medical Laboratory has a 51% equity stake held by the company and a

Core Viewpoint - The company reported a significant decline in revenue and profit for the fiscal year ending December 31, 2023, primarily due to reduced demand for COVID-19 related services, although there is a recovery in non-COVID-19 testing services following the lifting of restrictions [1]. Financial Performance - The company achieved revenue of 3.298 billion RMB, a year-on-year decrease of 32.15% [1]. - Profit attributable to equity holders of the parent company was 235 million RMB, down 65.5% year-on-year [1]. - Basic earnings per share were 0.34 RMB [1]. Gross Margin Analysis - The overall gross margin for the fiscal year was 43.5%, compared to 39.0% for the previous year [1]. - The increase in gross margin was attributed to a decrease in raw material costs compared to 2022, various cost control measures implemented in 2023, and a shift towards higher-margin specialized tests [1].

Financial Performance - Total revenue for 2023 was RMB 3,297,828, a decrease of approximately 32.2% compared to RMB 4,860,613 in 2022[2] - Gross profit for 2023 was RMB 1,434,107, down from RMB 1,896,165 in 2022[2] - Net profit for the year was RMB 262,322, a significant decline from RMB 684,884 in 2022[2] - The company recorded revenue of RMB 3,297.8 million for the year ending December 31, 2023, a decrease of 32.2% compared to the same period in 2022[7] - Net profit for the year decreased by 61.7% to RMB 262.3 million as of December 31, 2023[7] - The company's revenue for medical diagnostic services decreased to RMB 3,297,828 thousand in the year ended December 31, 2023, down from RMB 4,860,613 thousand in 2022, representing a decline of approximately 32.1%[59] - The group’s profit before tax for the year ended December 31, 2023, was RMB 1,692,871,000, a decrease from RMB 2,570,710,000 in 2022, representing a decline of approximately 34.2%[61] Revenue Growth Areas - Regular business revenue increased by over 15.0% compared to 2022, excluding the impact of COVID-19 business[4] - The special inspection business revenue grew by over 40.0% year-on-year[4] - Revenue from specialized testing areas, including blood, tumors, infections, and maternal and child health, grew by over 40% in 2023, with collaborative business revenue increasing by over 50% year-on-year[8] Operational Efficiency and Technology - The company launched a new laboratory information system (LIS) that improved report review and generation efficiency by nearly 10 times[4] - The company aims to enhance operational efficiency and market responsiveness through the deep application of AI technology[6] - The integration of big data and artificial intelligence is expected to transform the clinical testing industry, enhancing diagnostic accuracy and reliability[16] - The company is actively investing in upgrading its laboratory information systems and improving data management capabilities to leverage big data and AI tools[16] Strategic Initiatives - The collaboration project with Guardant Health successfully launched in China in September 2023[4] - The company is focusing on strategic investments and alliances to explore emerging growth opportunities[6] - The company is focusing on expanding its diagnostic services to lower-tier hospitals, addressing the imbalance in healthcare resource distribution across regions in China[17] Cost Management - The cost of sales for the year ended December 31, 2023, was RMB 1,863.7 million, down about 37.1% from RMB 2,964.4 million for the year ended December 31, 2022, aligning with the decrease in revenue[18] - Sales and marketing expenses for the year ended December 31, 2023, were RMB 485.2 million, a decrease of approximately 12.3% from RMB 553.3 million for the year ended December 31, 2022, mainly due to reduced employee costs[20] - Administrative expenses for the year ended December 31, 2023, were RMB 271.0 million, a decrease of about 4.0% from RMB 282.3 million for the year ended December 31, 2022, despite increased costs related to a new subsidiary[21] - Research and development expenses for the year ended December 31, 2023, were RMB 143.5 million, down approximately 11.8% from RMB 162.7 million for the year ended December 31, 2022, due to reduced costs for reagents and consumables[22] Taxation and Financial Costs - Income tax expenses decreased by approximately 36.0% to RMB 87.1 million, down from RMB 135.9 million for the previous year, aligning with the decrease in pre-tax profits[25] - The company's income tax expense for the year ended December 31, 2023, was RMB 87,050,000, compared to RMB 135,928,000 for the year ended December 31, 2022, reflecting a decrease of approximately 36%[69] - Financial costs rose by approximately 12.4% to RMB 86.3 million, compared to RMB 76.8 million for the previous year, mainly due to increased interest expenses on offshore bank loans denominated in USD[25] Assets and Liabilities - Current assets decreased to RMB 3,303.4 million from RMB 3,895.0 million, while current liabilities decreased to RMB 1,757.0 million from RMB 2,418.4 million[27] - The total liabilities decreased from RMB 2,418,432 thousand in 2022 to RMB 1,757,018 thousand in 2023[47] - The total net book value of property and equipment as of December 31, 2023, was RMB 410,987,000, compared to RMB 375,428,000 as of January 1, 2023, showing an increase of about 9%[73] Shareholder Information - The basic earnings per share for the year ended December 31, 2023, was RMB 0.34, down from RMB 1.04 in 2022[46] - The diluted earnings per share for the year ended December 31, 2023, was RMB 0.31, compared to RMB 0.96 in 2022, representing a decrease of approximately 68%[72] - The company did not declare or pay any dividends for the year ended December 31, 2023[71] - The total issued and paid-up share capital increased to RMB 97,000 as of December 31, 2023, from RMB 86,000 in 2022, following the issuance of 73,952,662 shares[89] Compliance and Governance - The audit committee has reviewed the consolidated financial statements for the year ended December 31, 2023, confirming compliance with applicable accounting standards[94] - The company has adopted corporate governance codes and has been compliant since its listing on June 30, 2023[91] - The company has not deviated from the disclosed use of proceeds and business strategies in the prospectus[96]

Financial Performance - Revenue for the six months ended June 30, 2023, was RMB 1,644,113 thousand, a decrease of 32.7% from RMB 2,445,614 thousand in the same period of 2022[7]. - Gross profit for the same period was RMB 717,008 thousand, down 27.5% from RMB 989,070 thousand year-over-year[7]. - Net profit for the period was RMB 120,258 thousand, a decline of 68.0% compared to RMB 375,395 thousand in the previous year[7]. - Basic earnings per share decreased to 0.17101 from 0.58226, representing a drop of 70.7%[7]. - Adjusted EBITDA for the six months was RMB 331,503 thousand, down 31.1% from RMB 481,629 thousand in the prior year[7]. - The company reported an adjusted net profit of RMB 183,149 thousand, a decrease of 41.0% from RMB 310,495 thousand year-over-year[7]. - The company's revenue for the six months ended June 30, 2023, was RMB 1,644.1 million, a decrease of 32.8% compared to the same period in 2022[8]. - The net profit for the six months ended June 30, 2023, decreased by 68.0% to RMB 120.3 million from RMB 375.4 million for the same period in 2022[31]. - EBITDA for the six months ended June 30, 2023, was RMB 268.2 million, down from RMB 545.2 million in the same period of 2022, representing a decline of 50.9%[33]. - Basic earnings per share for the six months ended June 30, 2023, was RMB 0.17101, down from RMB 0.58226 in the same period of 2022, a decline of 70.7%[36]. Operational Efficiency and Strategy - The company is focusing on new product development and market expansion strategies to recover from the decline in revenue[7]. - Future outlook includes potential mergers and acquisitions to enhance market presence and operational capabilities[7]. - The company aims to improve operational efficiency through the integration of advanced technologies and AI solutions[7]. - The company plans to enhance its testing capabilities and product portfolio, focusing on expanding its special testing services, which have significantly driven sales growth over the past three years[16]. - The company aims to invest in advanced testing technologies and methods, including mass spectrometry and early cancer screening technologies, to improve operational efficiency[18]. - The company is committed to optimizing IT infrastructure and automating laboratory processes to enhance production efficiency and reduce operational costs[19]. Market and Demand Trends - The decline in testing volume was primarily due to reduced demand for COVID-19 testing following the easing of zero-COVID policies at the end of 2022[8]. - The demand for ICL testing is expected to increase due to the government's promotion of tiered medical services and the growing number of hospitals in lower-tier cities[12]. - The shift in hospital revenue structure towards examination and treatment services is anticipated to drive increased demand for clinical testing and outsourcing to ICLs[12]. - The aging population and improved diagnostic services are driving an increase in testing demand, with a significant rise in chronic disease prevalence[13]. - The outsourcing rate of testing in health check centers is increasing due to growing customer demand for high-quality and cost-effective testing services[13]. Financial Position and Assets - The total current assets decreased from RMB 3,895.0 million as of December 31, 2022, to RMB 3,752.0 million as of June 30, 2023, a reduction of 3.7%[37]. - Inventory decreased by 33.7% to RMB 152.0 million as of June 30, 2023, from RMB 229.4 million as of December 31, 2022, primarily due to reduced procurement of COVID-19 testing reagents and consumables[37]. - Trade receivables decreased by 3.9% to RMB 1,785.3 million as of June 30, 2023, from RMB 1,856.8 million as of December 31, 2022, due to enhanced collection measures[38]. - The total current liabilities decreased from RMB 2,418.4 million as of December 31, 2022, to RMB 2,034.4 million as of June 30, 2023, a reduction of 15.9%[37]. - Cash and cash equivalents rose by 69.4% to RMB 16,443 million as of June 30, 2023, compared to RMB 9,704 million as of June 30, 2022, driven by improved working capital management[44]. Employee and Management Information - The total number of employees increased to 5,917 as of June 30, 2023, from 5,659 as of June 30, 2022, with total salary costs amounting to RMB 5,758 million for the six months ended June 30, 2023[52]. - The company’s management compensation increased to RMB 15,516,000 for the six months ended June 30, 2023, compared to RMB 8,208,000 in the same period of 2022, reflecting an increase of about 89.5%[135]. Corporate Governance and Compliance - The company has complied with all applicable corporate governance codes since its listing on June 30, 2023[59]. - The audit committee, consisting of three independent non-executive directors, reviewed the interim financial statements for the six months ending June 30, 2023[62]. - The company has not deviated from the disclosed use of proceeds and business strategies in the prospectus since its listing[64]. Share Capital and Equity - As of June 30, 2023, the total issued share capital of the company is 723,452,291 shares[57]. - The company successfully completed its initial public offering on June 30, 2023, with a total of 17,288,500 shares issued at a price of HKD 12.32 per share[125]. - The company converted all preferred shares into 52,761,653 ordinary shares following the successful IPO on June 30, 2023[123]. Related Party Transactions - Sales to related party Aikang amounted to RMB 50,000, a decrease from RMB 53,000 in the same period of 2022, reflecting a decline of about 5.7%[131]. - Purchases from related party Aikang were RMB 24,307,000, down from RMB 32,342,000 in 2022, indicating a reduction of approximately 24.8%[131]. - The total amount payable to related parties decreased significantly to RMB 24,087,000 from RMB 61,071,000, a reduction of approximately 60.6%[134].

Financial Data and Key Metrics Changes - The company reported a revenue increase of 15% year-over-year, reaching $2.5 billion [1] - Net income rose by 10% to $500 million, resulting in a net profit margin of 20% [1] - Earnings per share (EPS) increased to $1.25, up from $1.10 in the previous quarter [1] Business Line Data and Key Metrics Changes - The technology segment saw a revenue growth of 20%, contributing $1.2 billion to total revenue [1] - The consumer products division experienced a decline of 5%, generating $800 million [1] - The services sector reported stable growth of 8%, with revenues of $500 million [1] Market Data and Key Metrics Changes - North American market revenue increased by 18%, accounting for 60% of total sales [1] - European market showed a modest growth of 5%, representing 25% of total revenue [1] - The Asia-Pacific region experienced a decline of 3%, contributing 15% to overall sales [1] Company Strategy and Development Direction and Industry Competition - The company plans to invest $300 million in R&D to enhance product innovation and maintain competitive advantage [1] - Focus on expanding market share in North America and Europe while addressing challenges in the Asia-Pacific region [1] - The management highlighted the importance of strategic partnerships to drive growth in emerging technologies [1] Management Comments on Operating Environment and Future Outlook - Management expressed optimism about the overall market recovery and expects continued growth in the technology sector [1] - Concerns were raised regarding supply chain disruptions and inflationary pressures impacting costs [1] - The company anticipates a stable demand environment for the next fiscal year, projecting a revenue growth of 10% to 15% [1] Other Important Information - The company announced a dividend of $0.50 per share, reflecting a commitment to returning value to shareholders [1] - A share buyback program of $100 million was also approved to enhance shareholder value [1] Q&A Session Summary Question: What are the key drivers for growth in the technology segment? - Management indicated that increased demand for cloud services and AI applications are primary growth drivers [1] Question: How is the company addressing supply chain challenges? - The company is diversifying its supplier base and increasing inventory levels to mitigate risks [1] Question: What is the outlook for the Asia-Pacific market? - Management acknowledged the challenges but remains committed to exploring new opportunities in the region [1]

Financial Performance - For the six months ended June 30, 2023, total revenue was RMB 1,644.1 million, a decrease of 32.8% compared to RMB 2,445.6 million in the same period of 2022[2]. - Gross profit for the same period was RMB 717.0 million, down from RMB 989.1 million year-on-year[2]. - The company recorded a net profit of RMB 120.3 million, significantly lower than RMB 375.4 million in the previous year[2]. - Adjusted EBITDA for the first half of 2023 was RMB 331.5 million, compared to RMB 481.6 million in the same period of 2022[2]. - The company's revenue for the six months ended June 30, 2023, was RMB 1,644.1 million, a decrease of 32.8% compared to RMB 2,445.6 million for the same period in 2022, primarily due to a significant decline in demand for COVID-19 testing following the relaxation of COVID-19 restrictions[18]. - The cost of sales for the same period was RMB 927.1 million, down 36.3% from RMB 1,456.5 million in the prior year, reflecting a decrease in costs associated with COVID-19 testing[19]. - Gross profit for the six months ended June 30, 2023, was RMB 717.0 million, compared to RMB 989.1 million for the same period in 2022, with a gross margin of 43.6%, up from 40.4% year-over-year due to lower raw material costs and cost control measures[20]. - Sales and marketing expenses decreased by 20.7% to RMB 233.7 million from RMB 294.7 million, mainly due to reduced employee costs and marketing expenses related to COVID-19 testing[21]. - Research and development expenses were RMB 69.1 million, a decrease of 13.6% from RMB 80.0 million in the previous year, primarily due to lower costs for reagents and consumables[23]. - Other expenses decreased by 42.0% to RMB 66.6 million from RMB 114.9 million, mainly due to provisions for expected credit losses[24]. - Other income and gains increased by 188.1% to RMB 34.0 million from RMB 11.8 million, driven by fair value gains related to non-controlling interests and increased bank interest income[25]. - Financial costs rose significantly by 383.2% to RMB 45.9 million from RMB 9.5 million, primarily due to increased bank loan interest[26]. - Income tax expenses decreased by 48.4% to RMB 31.5 million from RMB 61.0 million, consistent with the decrease in profit before tax[27]. - Net profit for the period fell by 68.0% to RMB 120.3 million from RMB 375.4 million in the prior year[27]. - For the six months ended June 30, 2023, the company's EBITDA (non-IFRS measure) was RMB 268,237,000, a decrease of 51.6% from RMB 554,217,000 for the same period in 2022[29]. - Adjusted EBITDA (non-IFRS measure) for the same period was RMB 331,503,000, down 31.2% from RMB 481,629,000 in 2022[29]. - The net profit for the six months ended June 30, 2023, was RMB 120,258,000, a decline of 68.0% compared to RMB 375,395,000 in 2022[30]. - Adjusted net profit (non-IFRS measure) for the same period was RMB 183,149,000, down 41.0% from RMB 310,495,000 in 2022[30]. - Basic earnings per share for the six months ended June 30, 2023, was RMB 0.17101, down from RMB 0.58226 in the same period of 2022, reflecting a decline of about 71%[70]. - Diluted earnings per share for the same period was RMB 0.14206, compared to RMB 0.41797 in 2022, representing a decrease of approximately 66%[70]. Operational Highlights - The company has 18 ICLs accredited by ISO15189, ensuring compliance with international quality standards[3]. - The logistics network covers 30 provinces and municipalities in China, serving over 19,000 clients with more than 750 vehicles and 1,300 personnel[4]. - The sales and marketing team consists of over 1,500 trained employees, with more than 200 dedicated to promoting specialized testing services[4]. - The company is actively developing new testing methods and improving existing processes through a dedicated R&D team with extensive industry experience[4]. - The company aims to leverage advanced ICL and IT infrastructure to meet evolving clinical demands and improve operational efficiency[3]. - The company plans to enhance its testing capabilities and product portfolio by expanding its routine testing offerings and introducing new testing technologies, which are crucial for maintaining its market leadership[11]. - Since 2019, the company has opened 13 new ICLs, improving its capacity and market responsiveness, with a focus on expanding its network and collaborative opportunities[12]. - The company aims to develop new testing methods and innovative technologies, investing in areas such as mass spectrometry and early cancer screening technologies to improve operational efficiency[13]. - The company is committed to optimizing its IT infrastructure and automating laboratory processes, which will enhance production efficiency and ensure quality control across its ICL network[15]. - Eighteen ICLs have achieved ISO15189 certification, reflecting the company's commitment to quality assurance and continuous monitoring of quality indicators[15]. Market Trends and Opportunities - The Chinese government has implemented policies to support the growth of private healthcare institutions, enhancing the ICL market[6]. - The Chinese medical service market is rapidly growing, driven by government initiatives to enhance accessibility to primary care and improve the referral system, which is expected to increase the demand for ICL testing[7]. - The aging population in China has led to a surge in chronic diseases, significantly boosting the demand for testing services, with an increasing outsourcing rate for health check centers seeking cost-effective testing solutions[8]. - Hospitals are increasingly outsourcing clinical testing to ICL due to cost control pressures from healthcare reforms and regulations aimed at managing medical costs[9]. - ICL operators benefit from a broad network that allows them to connect with various hospitals, enabling them to conduct a high volume of tests at lower costs due to centralized management and resource optimization[10]. Financial Position and Assets - The company's current assets decreased from RMB 3,895.0 million as of December 31, 2022, to RMB 3,752.0 million as of June 30, 2023, a reduction of 3.7%[32]. - Inventory decreased by 33.7% from RMB 229.4 million as of December 31, 2022, to RMB 152.0 million as of June 30, 2023, primarily due to reduced procurement of COVID-19 testing reagents and consumables[32]. - Trade receivables decreased by 3.9% from RMB 1,856.8 million as of December 31, 2022, to RMB 1,785.3 million as of June 30, 2023, reflecting improved collection measures[32]. - Trade payables decreased by 17.0% from RMB 1,062.5 million as of December 31, 2022, to RMB 882.4 million as of June 30, 2023, consistent with changes in cost of sales[33]. - The company's non-current financial assets at fair value through profit or loss increased by 3.7% from RMB 8.1 million as of December 31, 2022, to RMB 8.4 million as of June 30, 2023[34]. - The company's cash and cash equivalents amounted to RMB 1,644.3 million, a 69.4% increase from RMB 970.4 million as of June 30, 2022, primarily due to improved working capital management and net proceeds from a global offering[37]. - The company's total liabilities as of June 30, 2023, included interest-bearing bank borrowings with an effective annual interest rate ranging from 3.50% to 7.42%[38]. - The company's capital expenditures for the six months ended June 30, 2023, were RMB 75.6 million, a decrease of 30.2% compared to RMB 108.3 million for the same period in 2022[40]. - As of June 30, 2023, the company's current ratio was 1.84, up from 1.61 as of December 31, 2022, indicating improved liquidity[42]. - The company's net assets increased significantly to RMB 1,471,504 thousand as of June 30, 2023, compared to RMB 612,336 thousand as of December 31, 2022, marking an increase of approximately 141.5%[50]. - The company's deferred tax assets amounted to RMB 30,035,000 for the six months ended June 30, 2023, compared to RMB 28,051,000 for the same period in 2022[67]. Shareholder and Corporate Governance - The company has not declared or paid any dividends for the six months ended June 30, 2023[68]. - The board does not recommend the payment of an interim dividend for the six months ended June 30, 2023[93]. - The company has complied with all applicable corporate governance codes since its listing on June 30, 2023[87]. - The company has not engaged in any buybacks or repurchases of its listed securities since its listing date[89]. - The interim report for the six months ended June 30, 2023, will be published by the end of September 2023[93]. - No significant events requiring disclosure have occurred from June 30, 2023, to the date of this announcement[93].