味千(中国)(00538) - 2023 - 中期财报

Company Overview Ajisen (China) is a leading quick-service restaurant chain operating 569 restaurants in China, 22 in Hong Kong, and 2 in Europe as of June 30, 2023 Company Profile Ajisen (China) is a leading quick-service restaurant chain operating 569 restaurants in China, 22 in Hong Kong, and 2 in Europe as of June 30, 2023, listed on HKEX in 2007 - As of June 30, 2023, the Group operated 569 restaurants across 134 cities in China, with 100 in Shanghai being the highest concentration[4] - The Group operates 22 restaurants in Hong Kong and 2 in Europe, supported by five production bases in major Chinese cities[4] - The company was listed on the Main Board of the Hong Kong Stock Exchange on March 30, 2007, as the first Chinese restaurant chain listed overseas[4] Corporate Information This section provides details on the company's governance structure, including the Board of Directors and key committee members Board of Directors and Committee Members The report details the Board and key committee members, with Ms. Pan Wei serving as Chairperson and CEO, and independent non-executive directors chairing various committees to ensure governance independence - The Chairperson and Chief Executive Officer is Ms. Pan Wei[14] - The Audit Committee is chaired by Mr. Ren Xiwen, the Remuneration Committee by Mr. Lu Jiaxing, and the Nomination Committee by Mr. Wang Jincheng, all independent non-executive directors[7][14] Financial Highlights This section presents a concise overview of the Group's key financial performance indicators for the reporting period Key Financial Indicators for H1 2023 In H1 2023, the company's performance significantly improved, with turnover increasing by 30.6% to RMB 885 million and a turnaround to pre-tax profit of RMB 181 million and profit attributable to shareholders of RMB 133 million H1 2023 Financial Summary (Year-on-Year Comparison) | Metric | H1 2023 (RMB million) | H1 2022 (RMB million) | Change Rate | | :--- | :--- | :--- | :--- | | Turnover | 884.8 | 677.5 | +30.6% | | Gross Profit | 665.0 | 496.3 | +34.0% | | Profit (Loss) Before Tax | 181.3 | (136.1) | Not Applicable | | Profit (Loss) Attributable to Company Shareholders | 133.1 | (106.5) | Not Applicable | | Basic Earnings (Loss) Per Share (RMB) | 0.12 | (0.10) | Not Applicable | Management Discussion and Analysis This section provides an in-depth review of the Group's operational and financial performance, along with industry trends and future outlook Industry Review and Outlook In H1 2023, China's catering market saw a 21.4% revenue increase due to economic recovery, with digitalization becoming a key strategy, while the Group plans continued refined management and digital upgrades despite global uncertainties - In H1 2023, national catering revenue reached RMB 2,432.9 billion, a 21.4% year-on-year increase, indicating significant consumer spending release in the catering market[29] - Digital transformation is a crucial trend in the catering industry, enhancing supply, fostering innovation, and improving operational efficiency and standardization[20] - For H2, the Group will continue refined management, stringent food safety control, and accelerated digital upgrades to enhance operational efficiency and turnover[300] Business Review During the period, retail chain restaurants remained the core business, contributing 95.2% of total revenue, with the Group implementing strategies like supply chain optimization and cost control, leading to a reduction in restaurant count from 669 to 569 by June 30, 2023 - Revenue from retail chain restaurant operations was approximately RMB 843 million, accounting for 95.2% of total Group revenue, a 34.1% year-on-year increase[47] - The Group implemented various cost control measures, including optimizing global supply chains, leveraging five production bases for stable supply, and streamlining operations to reduce labor requirements[31] Restaurant Count Changes (by Region) | Region | June 30, 2023 | June 30, 2022 | Change | | :--- | :--- | :--- | :--- | | North China | 105 | 136 | -31 | | East China | 242 | 286 | -44 | | South China | 141 | 151 | -10 | | Central China | 79 | 94 | -15 | | Europe | 2 | 2 | 0 | | Total | 569 | 669 | -100 | Financial Review In H1 2023, the Group's financial performance rebounded strongly with turnover up 30.6% to RMB 885 million, gross margin improving to 75.1%, and a successful turnaround to a profit attributable to shareholders of RMB 133 million due to revenue growth, cost control, and fair value gains Turnover For the six months ended June 30, 2023, Group turnover was approximately RMB 885 million, a 30.6% increase year-on-year, primarily due to unrestricted full-capacity restaurant operations post-pandemic Turnover Performance | Item | H1 2023 | H1 2022 | Change | | :--- | :--- | :--- | :--- | | Turnover (RMB thousand) | 884,847 | 677,469 | +30.6% | Gross Profit & Gross Margin During the period, Group gross profit increased by 34.0% to approximately RMB 665 million, with gross margin rising from 73.3% to 75.1%, driven by lower raw material costs and reduced waste due to increased revenue Gross Profit and Gross Margin Performance | Metric | H1 2023 | H1 2022 | Change | | :--- | :--- | :--- | :--- | | Gross Profit (RMB thousand) | 664,952 | 496,329 | +34.0% | | Gross Margin | 75.1% | 73.3% | +1.8pp | - The ratio of inventory consumption cost to turnover decreased from 26.7% to 24.9%, primarily due to lower pork prices and reduced waste from increased revenue[49] Operating Expenses During the period, staff costs and depreciation were well-controlled, with staff costs as a percentage of turnover decreasing from 31.1% to 25.7%, while other operating expenses generally increased by 7.4% due to revenue recovery, notably delivery platform fees - Staff costs were approximately RMB 228 million, a 7.9% year-on-year increase, but their proportion of turnover decreased from 31.1% to 25.7%[52] - Depreciation expenses were approximately RMB 160 million, a 14.7% year-on-year decrease, mainly due to a reduction in restaurant count[53] - Other operating expenses were approximately RMB 212 million, a 7.4% year-on-year increase, with delivery platform service fees growing by 20.2% and variable lease payments by 56.0%[36][37] Other Income, Gains and Losses During the period, other income and other gains/losses significantly boosted profitability, with other income up 54.6% due to increased interest and waived franchise fees, and other gains/losses turning to a net gain of RMB 70.08 million from a net loss, driven by fair value increases in financial investments and investment properties - Other income was approximately RMB 54.92 million, a 54.6% year-on-year increase, mainly due to higher deposit interest rates and waived franchise commissions[55] - Other gains and losses recorded a net gain of approximately RMB 70.08 million (compared to a net loss of RMB 56.30 million in the prior period), primarily due to fair value gains of RMB 26.47 million from financial investments and RMB 37.07 million from investment properties[56] Finance Costs For the six months ended June 30, 2023, Group finance costs decreased by approximately 24.7% to RMB 9.57 million, primarily due to reduced bank loans and lower interest on lease liabilities from fewer stores Finance Costs Breakdown | Item | H1 2023 (RMB thousand) | H1 2022 (RMB thousand) | Change | | :--- | :--- | :--- | :--- | | Interest on bank loans | 523 | 634 | -17.5% | | Interest on lease liabilities | 9,047 | 12,081 | -25.1% | | Total | 9,570 | 12,715 | -24.7% | Profit/Loss Combining these factors, the Group achieved a significant performance turnaround in H1 2023, reporting a pre-tax profit of approximately RMB 181 million (compared to a loss of RMB 136 million last year) and a profit attributable to shareholders of RMB 133 million (compared to a loss of RMB 107 million) Profit/Loss Performance | Metric | H1 2023 (RMB thousand) | H1 2022 (RMB thousand) | | :--- | :--- | :--- | | Profit (Loss) Before Tax | 181,256 | (136,066) | | Profit (Loss) Attributable to Company Shareholders | 133,095 | (106,513) | Liquidity and Financial Resources As of June 30, 2023, the Group maintained a robust liquidity and financial position with cash and cash equivalents of approximately RMB 1.578 billion, a current ratio of 3.3, and a low debt-to-asset ratio of 1.0%, indicating a healthy financial structure - Cash and cash equivalents increased to approximately RMB 1.578 billion from RMB 1.465 billion at the end of 2022[60] - The current ratio improved to 3.3 from 3.2 at the end of 2022[60] - The debt-to-asset ratio (total loans/total assets) remained at a low level of 1.0%[73] Risk Management The Group faces low financial risk, with minimal currency risk due to RMB-denominated transactions, limited interest rate risk from no significant interest-bearing assets, and low credit risk concentration as most sales are cash/credit card based and bank deposits are with reputable institutions - Currency Risk: Most operations are denominated in RMB, resulting in minimal currency risk, with no currency hedging policy in place[42] - Interest Rate Risk: The Group has no significant interest-bearing assets, so income and operating cash flows are largely unaffected by market interest rate changes[43] - Credit Risk: The Group has no highly concentrated credit risk, as retail customers primarily settle with cash or credit cards, and bank balances are held with reputable institutions[62] Other Matters During the period, Group capital expenditure remained low at approximately RMB 28.03 million, with no significant contingent liabilities, major investments, or disposals, and new Articles of Association were approved at the AGM on June 7, 2023 - Capital expenditure was approximately RMB 28.03 million, maintained at a low level due to uncertain economic prospects[64] - As of June 30, 2023, the Group had no significant contingent liabilities[63] - There were no significant investments, acquisitions, or disposals during or after the reporting period[65][79] Condensed Consolidated Financial Statements This section presents the Group's condensed consolidated financial statements, including the statement of profit or loss, financial position, changes in equity, and cash flows Review Report Deloitte Touche Tohmatsu, the auditor, reviewed the interim financial statements in accordance with HKSRS 2410, concluding that nothing came to their attention suggesting the statements were not prepared in all material respects according to HKAS 34 - Deloitte Touche Tohmatsu, the auditor, issued a review conclusion on the interim financial statements[67][81] - The review concluded that nothing came to their attention suggesting the condensed consolidated financial statements were not prepared in all material respects in accordance with HKAS 34[82] Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income This statement details the Group's profit composition, showing H1 2023 turnover of RMB 885 million, operating profit of RMB 65.25 million, pre-tax profit of RMB 181 million, and profit for the period of RMB 140 million, a significant turnaround from a loss of RMB 120 million in the prior period H1 2023 Statement of Profit or Loss Summary | Item (RMB thousand) | H1 2023 | H1 2022 | | :--- | :--- | :--- | | Revenue | 884,847 | 677,469 | | Operating Profit (Loss) | 65,251 | (99,587) | | Profit (Loss) Before Tax | 181,256 | (136,066) | | Profit (Loss) for the Period | 139,596 | (120,361) | | Profit (Loss) Attributable to Company Shareholders | 133,095 | (106,513) | Condensed Consolidated Statement of Financial Position As of June 30, 2023, the Group's total assets were approximately RMB 3.97 billion, total liabilities RMB 949 million, and net assets RMB 3.022 billion, with investment properties (RMB 1.049 billion) and cash and cash equivalents (RMB 1.578 billion) being the largest components of non-current and current assets respectively Statement of Financial Position Summary (as of June 30, 2023) | Item (RMB thousand) | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Total Assets | 3,970,878 | 3,868,584 | | Non-current Assets | 2,148,656 | 2,146,242 | | Current Assets | 1,822,222 | 1,722,342 | | Total Liabilities | 948,548 | 947,272 | | Non-current Liabilities | 400,544 | 411,051 | | Current Liabilities | 548,004 | 536,221 | | Net Assets | 3,022,330 | 2,921,312 | | Total Equity | 3,022,330 | 2,921,312 | Condensed Consolidated Statement of Changes in Equity The statement shows that as of June 30, 2023, total equity attributable to company shareholders increased to RMB 2.966 billion, primarily driven by RMB 133 million profit for the period and RMB 23.06 million in other comprehensive income, partially offset by RMB 65.49 million in declared dividends - Equity attributable to company shareholders increased from RMB 2.875 billion at the beginning of the period to RMB 2.966 billion at the end[88][86] - Key changes in equity include a RMB 133 million increase from profit for the period, a RMB 23.06 million increase from other comprehensive income, and a RMB 65.49 million decrease from dividends paid[88] Condensed Consolidated Statement of Cash Flows In H1 2023, the Group generated a net cash inflow of RMB 277 million from operating activities, a significant improvement from RMB 100 million in the prior period, with net cash outflows of RMB 33.03 million from investing and RMB 145 million from financing activities, leading to a period-end cash and cash equivalents total of RMB 1.578 billion Cash Flow Statement Summary | Item (RMB thousand) | H1 2023 | H1 2022 | | :--- | :--- | :--- | | Net cash generated from operating activities | 276,892 | 99,978 | | Net cash used in investing activities | (33,029) | (23,196) | | Net cash used in financing activities | (145,100) | (88,619) | | Net increase (decrease) in cash and cash equivalents | 98,763 | (11,837) | | Total cash and cash equivalents at end of period | 1,578,250 | 1,528,194 | Notes to the Condensed Consolidated Financial Statements This section provides detailed explanations and breakdowns of the figures presented in the condensed consolidated financial statements Basis of Preparation and Principal Accounting Policies These condensed consolidated financial statements are prepared under HKAS 34 "Interim Financial Reporting," with the Group adopting several newly revised HKFRS standards for the first time during the period, though accounting policies remain consistent with the prior annual report except for these new applications - The financial statements are prepared in accordance with HKAS 34 "Interim Financial Reporting" and the HKEX Listing Rules[106] - The Group adopted several newly revised Hong Kong Financial Reporting Standards for the first time during this period, with no significant impact on financial position or performance[92][93] - Following the application of HKAS 12 (Amendments), the Group recognized related deferred tax assets and liabilities on a gross basis, with no impact on retained earnings[96] Revenue from Contracts with Customers and Segment Information The Group's revenue primarily derives from restaurant operations, accounting for 95.2% of total revenue and contributing most external sales and operating profit, with Mainland China being the main geographical revenue source at 88.3% Revenue Breakdown (by Business Segment) | Business Segment | H1 2023 (RMB thousand) | H1 2022 (RMB thousand) | | :--- | :--- | :--- | | Restaurant operations | 842,594 | 628,250 | | Production and sale of ramen and related products | 42,253 | 49,219 | | Total | 884,847 | 677,469 | Segment Results Summary (H1 2023) | Segment | External Sales (RMB thousand) | Segment Profit (RMB thousand) | | :--- | :--- | :--- | | Restaurant operations | 842,594 | 97,032 | | Production and sale of ramen and related products | 42,253 | 419 | | Investment holding | - | 86,950 | | Total Segments | 884,847 | 184,401 | Revenue and Non-current Assets (by Geographical Location) | Region | Revenue from External Customers (RMB thousand) | Non-current Assets (RMB thousand) | | :--- | :--- | :--- | | Mainland China | 781,701 | 1,445,320 | | Hong Kong | 103,146 | 501,184 | | Total | 884,847 | 1,946,504 | Analysis of Operating Items This section analyzes key income statement items, showing other income significantly increased to RMB 54.92 million from property rentals, bank interest, and waived franchise fees, while other gains and losses recorded a net gain of RMB 70.08 million due to fair value gains on investment properties and financial assets, with current income tax expense at RMB 41.66 million due to improved profitability Other Income Breakdown | Item (RMB thousand) | H1 2023 | H1 2022 | | :--- | :--- | :--- | | Property rental income | 15,743 | 12,307 | | Bank interest income | 15,019 | 6,807 | | Franchise commission payable to related parties waived | 12,049 | - | | Government grants | 4,466 | 11,216 | | Total | 54,915 | 35,522 | Other Gains and Losses Breakdown | Item (RMB thousand) | H1 2023 | H1 2022 | | :--- | :--- | :--- | | Fair value gain on investment properties | 37,070 | 5,630 | | Fair value gain (loss) on financial assets at fair value through profit or loss | 26,471 | (33,587) | | Fair value gain on financial liabilities at fair value through profit or loss | 6,567 | 11,874 | | Impairment losses recognized | (1,174) | (36,873) | | Total | 70,077 | (56,301) | - Current income tax expense was RMB 41.66 million, compared to an income tax credit of RMB 15.71 million in the prior period, with Hong Kong profits tax at an estimated 16.5% and Mainland China corporate income tax at 25%[127][158] Dividends and Earnings Per Share The Board resolved not to declare an interim dividend for H1 2023, with basic earnings per share at RMB 0.12 (compared to a loss of RMB 0.10 last year), and no dilutive effect due to option exercise prices exceeding average market prices - The Board resolved not to declare an interim dividend for the six months ended June 30, 2023[268] Earnings (Loss) Per Share Calculation | Metric | H1 2023 | H1 2022 | | :--- | :--- | :--- | | Profit (Loss) Attributable to Company Shareholders (RMB thousand) | 133,095 | (106,513) | | Number of ordinary shares | 1,091,538,820 | 1,091,538,820 | | Basic earnings (loss) per share (RMB) | 0.12 | (0.10) | Key Assets Analysis At period-end, key Group assets included investment properties, property, plant and equipment, right-of-use assets, and financial assets, with investment properties recording a fair value gain of RMB 37.07 million, only minor asset impairment recognized for one Hong Kong restaurant due to improved performance, and financial assets at fair value through profit or loss increasing to RMB 172 million - Fair value gain on investment properties was approximately RMB 37.07 million[165] - Due to significant performance improvement, no material impairment was recognized for property, plant and equipment or right-of-use assets this period, with only RMB 0.187 million impairment recognized for one loss-making restaurant in Hong Kong[148] - Financial assets at fair value through profit or loss (unlisted equity investments and fund investments) increased from RMB 125 million to RMB 172 million[188] - Trade receivables increased from RMB 18.47 million to RMB 23.81 million, with most balances aged within 30 days[172][154] Key Liabilities and Equity Analysis The Group's liability structure remained stable, with trade payables of approximately RMB 95.52 million (average credit period 60 days), total bank loans of RMB 39.93 million (weighted average effective interest rate 1.46%), unchanged share capital of 1.092 billion ordinary shares, and share option scheme expenses of RMB 0.95 million recognized during the period - Total trade payables were RMB 95.52 million, with most balances aged within 60 days[194][195] - Total bank loans were RMB 39.93 million, all denominated in HKD, with a weighted average effective interest rate of 1.46%[196][181] - Share capital remained unchanged, with 1,091,538,820 issued and fully paid ordinary shares[182] - As of June 30, 2023, the Group recognized expenses of approximately RMB 0.95 million for the share option scheme[216] Financial Instruments and Fair Value This note details financial instrument fair value measurement, categorizing assets and liabilities into three levels, with most unlisted investments valued using Level 2 (discounted cash flow) and Level 3 (market and income approaches), and total fair value changes for Level 3 financial instruments amounting to a gain of RMB 32.21 million during the period - The Group uses a three-level fair value hierarchy for financial instruments, with Level 1 for quoted prices, Level 2 for observable inputs, and Level 3 for unobservable inputs[204][218] - Unlisted equity investments and fund investments are primarily valued using Level 2 (discounted cash flow) and Level 3 (market approach, income approach) valuation techniques[205] - Total fair value changes for Level 3 financial assets and liabilities held at the end of the reporting period amounted to a gain of RMB 32.21 million, recognized under "Other gains and losses"[221][207] Related Party Transactions During the period, the Group engaged in related party transactions, primarily involving procurement of food supplies, payment of franchise commissions and technical fees, and receipt of renovation services, all conducted in the ordinary course of business, with significant transactions involving Shigamitsu Sangyo Co., Ltd. for procurement, sales, and franchise fees Summary of Major Related Party Transactions (H1 2023) | Related Party | Nature of Transaction | Amount (RMB thousand) | | :--- | :--- | :--- | | Shigamitsu Sangyo Co., Ltd. | Purchase of food, raw materials and supplies | (14,418) | | Shigamitsu Sangyo Co., Ltd. | Franchise commission (Mainland China and Hong Kong) | (9,825) | | Guangzhou Yunyi Information Technology Co., Ltd. | Purchase of services | - (Prior period: 5,530) | | Hubei Jupeng Kitchen Equipment Co., Ltd. | Purchase of property, plant and equipment | (319) | - Remuneration for directors and key management personnel is determined by the Remuneration Committee based on individual performance and market trends[242] Other Information This section covers additional disclosures, including corporate governance practices, directors' and shareholders' interests, share option schemes, and employee and dividend information Corporate Governance The Group complied with all applicable Corporate Governance Code provisions during the period, with the only deviation being Ms. Pan Wei holding both Chairperson and CEO roles, which the Board believes provides strong, consistent leadership, and the Audit Committee has reviewed the interim results - The Group complied with the Corporate Governance Code, with one deviation: Ms. Pan Wei holds both Chairperson and Chief Executive Officer roles, which the Board believes provides strong and consistent leadership at this stage[211] - The Audit Committee, comprising three independent non-executive directors, has reviewed the company's unaudited interim results[213] - During the reporting period, neither the company nor any of its subsidiaries purchased, sold, or redeemed any of the company's listed securities[228] Directors' and Shareholders' Interests This section discloses directors' and major shareholders' interests in company shares, with Chairperson Ms. Pan Wei holding approximately 47.55% through a discretionary trust and beneficial ownership, and Invesco Asset Management Ltd. among other institutional investors - Chairperson Ms. Pan Wei holds approximately 47.55% of the company's shares through a discretionary trust and personal beneficial ownership[230] - Non-executive Director Mr. Katsuaki Shigamitsu holds approximately 2.97% of the company's shares through beneficial ownership and controlled corporate interests[230] - Major shareholder Favor Choice (controlled by Ms. Pan's trust) holds 43.99% of shares, and Invesco Asset Management Ltd. holds 7.90%[252] Share Option Scheme The company has share option schemes to incentivize contributors, detailing the 2007 (expired) and 2017 plans' objectives, eligibility, total shares issuable, and exercise price determination, with 32.171 million outstanding options as of June 30, 2023, representing approximately 2.94% of issued shares - The company has a 2017 Share Option Scheme to grant options to eligible directors, employees, and consultants who contribute to the Group[237][270] - The total number of shares available for issue under the 2017 Share Option Scheme is 79,982,882 shares, representing 7.33% of issued shares as of the reporting date[272] - As of June 30, 2023, a total of 32,171,000 share options granted and outstanding under both schemes represented approximately 2.94% of the issued shares[263][265] Employees and Dividends As of June 30, 2023, the Group had 7,746 employees with total remuneration of approximately RMB 228 million, regularly reviewing compensation policies and providing discretionary bonuses or share options based on performance, while the Board resolved not to declare an interim dividend for 2023 - As of June 30, 2023, the Group had 7,746 employees, a decrease from 7,982 in the prior period[267] - Total remuneration for the six months ended June 30, 2023, was approximately RMB 228 million[281] - The Board resolved not to declare an interim dividend for the six months ended June 30, 2023[268][288]