思考乐教育(01769) - 2023 - 中期财报

Company Information This section outlines the company's board, legal and auditing advisors, registered office, and key listing and banking details Board of Directors and Legal Advisors The company's Board of Directors comprises executive, non-executive, and independent non-executive directors, with audit, remuneration, nomination, and strategy development committees; legal advisors include Allen & Overy and Conyers Dill & Pearman - Board members include Chairman Mr. Chen Qiyuan (Executive Director) and CEO Mr. Qi Mingzhi (Executive Director)[5] - The Audit Committee is chaired by Mr. Wong Wai Tak, the Remuneration Committee by Ms. Yan Jiamin, and both the Nomination and Strategy Development Committees by Mr. Chen Qiyuan[5] Auditor and Registered Office The company's auditor is PricewaterhouseCoopers, with its registered office in the Cayman Islands, headquarters in Shenzhen, China, and principal Hong Kong business location in Kowloon - The auditor is PricewaterhouseCoopers[5] - The registered office is located at Cricket Square, Hutchins Drive, P.O. Box 2681, Grand Cayman, KY1-1111, Cayman Islands[5] - The headquarters and principal place of business in China are located at Room 401–410, 4/F, Yunfeng Garden, No. 29 Youyi Road, Jianan Community, Nanhu Street, Luohu District, Shenzhen, China[5] Shares and Banking Information The company's shares were listed on June 21, 2019, with stock code 1769, and its principal bankers include China Merchants Bank, Industrial Bank, and Agricultural Bank of China - The listing date was June 21, 2019, with stock code 1769[7] - Principal bankers include China Merchants Bank Co., Ltd. Shenzhen Cuizhu Branch, Industrial Bank Co., Ltd. Shenzhen Meilin Branch, and Agricultural Bank of China Co., Ltd. Shenzhen Jinfu Branch[7] Company Profile This section provides an overview of the company's core educational services, philosophy, and its strategic diversification into new business areas like live e-commerce Educational Services and Philosophy Thinkol Education Group is a leading private education service provider in South China, offering quality tutoring and after-school care with a philosophy of 'Extensive Learning, Dedicated Teaching, Achieving Students' - The company is a leading private education service provider in South China[21] - The educational philosophy is 'Extensive Learning, Dedicated Teaching, Achieving Students', with all courses taught in small classes of no more than 20 students[9] - After-school care services are provided to offer a safe and comfortable environment for students, fostering positive values and lifelong learning abilities[10] Diversified Business Development The Group actively pursues diversification, expanding beyond 'Lexue' general education courses into live e-commerce, leveraging brand, technology, and resources to offer diverse, high-quality products - The 'Lexue' curriculum covers general education in art, sports, painting, performing arts, calligraphy, scientific literacy, traditional Chinese studies, logical training, and international literacy[22] - Exploring new opportunities, the Group has entered the live e-commerce business, offering food, beverages, daily necessities, and other products, aiming to build a high-quality, cost-effective e-commerce platform[23] Financial Highlights This section presents a concise overview of the Group's key financial performance indicators for the period, highlighting revenue growth and a return to profitability Key Financial Indicators For the six months ended June 30, 2023, revenue increased by 31.3% to RMB251.3 million, operating profit turned positive to RMB49.7 million, and profit attributable to equity holders surged by 234.1% to RMB42.9 million Financial Highlights for the Six Months Ended June 30 | Item | 2023 (RMB thousands) | 2022 (RMB thousands) | Change (RMB thousands) | Percentage Change | | :--- | :--- | :--- | :--- | :--- | | Revenue | 251,323 | 191,428 | 59,895 | 31.3% | | Operating Profit/(Loss) | 49,656 | (54,703) | 104,359 | 190.8% | | Profit/(Loss) for the Period Attributable to Equity Holders | 42,938 | (32,027) | 74,965 | 234.1% | | Adjusted Profit/(Loss) for the Period Attributable to Equity Holders | 46,511 | (32,027) | 78,538 | 245.2% | Earnings/(Loss) Per Share | Item | 2023 (RMB cents) | 2022 (RMB cents) | Change (RMB cents) | Percentage Change | | :--- | :--- | :--- | :--- | :--- | | Basic | 7.73 | (5.76) | 13.49 | 234.2% | | Diluted | 7.66 | (5.76) | 13.42 | 233.0% | | Adjusted Basic Earnings/(Loss) Per Share | 8.37 | (5.76) | 14.13 | 245.3% | | Adjusted Diluted Earnings/(Loss) Per Share | 8.29 | (5.76) | 14.05 | 244.0% | Chairman's Report This report summarizes the Group's financial performance, outlines future development strategies, and expresses gratitude to stakeholders for their continued support Performance Summary The Group's core business remained profitable, achieving an operating profit of RMB49.7 million, with significant growth in quality-oriented courses and a return to net profit - The Group's principal business remained profitable, recording an operating profit of RMB49.7 million[28] - Revenue from quality-oriented courses increased from RMB179.0 million in the prior period to RMB232.2 million, with tutoring hours growing by 29.3%[28] - Total revenue increased by 31.3% year-on-year to RMB251.3 million, with net profit attributable to equity holders of RMB42.9 million, driven by increased tutoring hours, improved operating efficiency, and fair value gains on financial assets[28] Future Outlook and Development Strategies The Group is actively pursuing new opportunities in live e-commerce and strengthening its 'Lexue' quality education brand to achieve diversified growth, expand revenue, and enhance shareholder returns - Actively seeking new business opportunities, entering the live e-commerce sector, and leveraging brand, technology, resources, and talent to create a high-quality, cost-effective e-commerce platform[29] - Further strengthening the 'Lexue' brand in quality-oriented education, including courses in art, sports, painting, performing arts, calligraphy, scientific literacy, traditional Chinese studies, logical thinking training, and international literacy[29] - The Group will strive to promote comprehensive diversified development, utilizing brand influence and management experience to expand its revenue base, while rigorously implementing cost control measures and maintaining stable cash flow[29] Acknowledgements The Chairman, on behalf of the Board, extends gratitude to students, parents, management, employees, shareholders, government, and business partners for their support and dedication - The Chairman, on behalf of the Board, expresses gratitude for the loyalty and dedication of students, parents, management, and all employees[31] - Appreciation is extended to shareholders, various government authorities, and business partners for their support and trust[31] Interim Financial Information Review Report This section presents the independent review report on the interim financial information, confirming its preparation in accordance with International Accounting Standard 34 Review Conclusion PricewaterhouseCoopers reviewed the interim financial information in accordance with ISRE 2410 and found no material matters indicating non-compliance with IAS 34 - The scope of review is less than that of an audit, thus no audit opinion is expressed[62] - The auditor, PricewaterhouseCoopers, concluded that nothing has come to their attention to suggest that the interim financial information is not prepared, in all material respects, in accordance with International Accounting Standard 34 'Interim Financial Reporting'[63][64] Interim Condensed Consolidated Statement of Comprehensive Income This statement details the Group's revenue, costs, and profit or loss for the interim period, showing a significant turnaround from a prior-year loss to a current-period profit Revenue and Profit Performance For the six months ended June 30, 2023, the Group reported revenue of RMB251,323 thousand, gross profit of RMB104,058 thousand, operating profit of RMB49,656 thousand, and profit for the period of RMB42,474 thousand, reversing the prior year's loss Interim Condensed Consolidated Statement of Comprehensive Income (For the six months ended June 30) | Item | 2023 (RMB thousands) | 2022 (RMB thousands) | | :--- | :--- | :--- | | Revenue | 251,323 | 191,428 | | Cost of Sales | (147,265) | (126,848) | | Gross Profit | 104,058 | 64,580 | | Selling Expenses | (5,133) | (1,566) | | Administrative Expenses | (50,420) | (34,963) | | Research and Development Expenses | (8,701) | (6,792) | | Other Income — Net | 4,134 | 2,975 | | Other Gains/(Losses) — Net | 5,718 | (78,937) | | Operating Profit/(Loss) | 49,656 | (54,703) | | Finance Costs | (2,774) | (3,826) | | Profit/(Loss) Before Income Tax | 46,882 | (58,529) | | Income Tax (Expense)/Credit | (4,408) | 25,689 | | Profit/(Loss) for the Period | 42,474 | (32,840) | | Profit/(Loss) Attributable to Equity Holders | 42,938 | (32,027) | | Profit/(Loss) Attributable to Non-controlling Interests | (464) | (813) | | Basic Earnings/(Loss) Per Share (RMB cents) | 7.73 | (5.76) | | Diluted Earnings/(Loss) Per Share (RMB cents) | 7.66 | (5.76) | Interim Condensed Consolidated Statement of Financial Position This statement provides a snapshot of the Group's financial position, detailing its assets, liabilities, and equity as of the reporting date Asset Structure As of June 30, 2023, the Group's total assets amounted to RMB734,864 thousand, comprising RMB434,053 thousand in non-current assets and RMB300,811 thousand in current assets Interim Condensed Consolidated Statement of Financial Position (Assets) | Item | June 30, 2023 (RMB thousands) | December 31, 2022 (RMB thousands) | | :--- | :--- | :--- | | Non-current Assets | | | | Property, Plant and Equipment | 35,486 | 37,678 | | Right-of-Use Assets | 141,000 | 135,895 | | Investment Properties | 82,155 | 82,375 | | Intangible Assets | 2,768 | 2,454 | | Prepayments and Other Receivables | 22,993 | 10,931 | | Deferred Tax Assets | 19,686 | 20,264 | | Financial Assets at Fair Value Through Profit or Loss | 33,965 | 32,695 | | Financial Assets Measured at Amortised Cost | 96,000 | — | | Total Non-current Assets | 434,053 | 322,292 | | Current Assets | | | | Inventories | 301 | — | | Prepayments and Other Receivables | 24,689 | 16,566 | | Financial Assets at Fair Value Through Profit or Loss | 92,267 | 117,295 | | Fixed Deposits with Original Maturity Over Three Months | 9,047 | — | | Cash and Cash Equivalents | 174,507 | 298,737 | | Restricted Cash | — | 35 | | Total Current Assets | 300,811 | 432,633 | | Total Assets | 734,864 | 754,925 | Liabilities and Equity Structure As of June 30, 2023, the Group's total equity was RMB416,150 thousand, and total liabilities were RMB318,714 thousand, with current liabilities amounting to RMB229,223 thousand Interim Condensed Consolidated Statement of Financial Position (Equity and Liabilities) | Item | June 30, 2023 (RMB thousands) | December 31, 2022 (RMB thousands) | | :--- | :--- | :--- | | Equity | | | | Share Capital | 3,775 | 3,775 | | Share Premium | 82,698 | 82,698 | | Shares Held for Employee Share Scheme | (2,203) | — | | Other Reserves | 36,815 | 32,338 | | Retained Earnings | 295,529 | 252,591 | | Capital and Reserves Attributable to Equity Holders of the Company | 416,614 | 371,402 | | Non-controlling Interests | (464) | — | | Total Equity | 416,150 | 371,402 | | Liabilities | | | | Non-current Liabilities | | | | Lease Liabilities | 89,491 | 82,764 | | Total Non-current Liabilities | 89,491 | 82,764 | | Current Liabilities | | | | Contract Liabilities | 128,851 | 181,524 | | Lease Liabilities | 35,417 | 34,169 | | Trade and Other Payables | 61,662 | 83,431 | | Current Income Tax Liabilities | 3,293 | 1,635 | | Total Current Liabilities | 229,223 | 300,759 | | Total Liabilities | 318,714 | 383,523 | | Total Equity and Liabilities | 734,864 | 754,925 | Interim Condensed Consolidated Statement of Changes in Equity This statement illustrates the changes in the Group's equity components over the interim period, reflecting profits, share-based payments, and share acquisitions Overview of Equity Changes For the six months ended June 30, 2023, total equity increased from RMB371,402 thousand to RMB416,150 thousand, driven by profit for the period and share-based payments, partially offset by share acquisitions for the employee share scheme Interim Condensed Consolidated Statement of Changes in Equity (For the six months ended June 30) | Item | Share Capital (RMB thousands) | Share Premium (RMB thousands) | Shares Held for Employee Share Scheme (RMB thousands) | Other Reserves (RMB thousands) | Retained Earnings (RMB thousands) | Total (RMB thousands) | Non-controlling Interests (RMB thousands) | Total Equity (RMB thousands) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Balance at January 1, 2023 | 3,775 | 82,698 | — | 32,338 | 252,591 | 371,402 | — | 371,402 | | Profit for the period | — | — | — | — | 42,938 | 42,938 | (464) | 42,474 | | Total comprehensive income for the period | — | — | — | — | 42,938 | 42,938 | (464) | 42,474 | | Acquisition of shares for employee share scheme | — | — | (2,203) | — | — | (2,203) | — | (2,203) | | Share-based payments | — | — | — | 4,477 | — | 4,477 | — | 4,477 | | Balance at June 30, 2023 | 3,775 | 82,698 | (2,203) | 36,815 | 295,529 | 416,614 | (464) | 416,150 | Interim Condensed Consolidated Statement of Changes in Equity (For the six months ended June 30) | Item | Share Capital (RMB thousands) | Share Premium (RMB thousands) | Other Reserves (RMB thousands) | Retained Earnings (RMB thousands) | Total (RMB thousands) | Non-controlling Interests (RMB thousands) | Total Equity (RMB thousands) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Balance at January 1, 2022 | 3,775 | 82,698 | 33,293 | 198,180 | 317,946 | (401) | 317,545 | | Loss for the period | — | — | — | (32,027) | (32,027) | (813) | (32,840) | | Total comprehensive income for the period | — | — | — | (32,027) | (32,027) | (813) | (32,840) | | Balance at June 30, 2022 | 3,775 | 82,698 | 33,293 | 166,153 | 285,919 | (1,214) | 284,705 | Interim Condensed Consolidated Statement of Cash Flows This statement summarizes the Group's cash inflows and outflows from operating, investing, and financing activities, resulting in a net decrease in cash and cash equivalents Cash Flow Overview For the six months ended June 30, 2023, net cash outflow from operating activities was RMB7,561 thousand, from investing activities RMB93,942 thousand, and from financing activities RMB23,707 thousand, leading to a net decrease in cash and cash equivalents of RMB125,210 thousand Interim Condensed Consolidated Statement of Cash Flows (For the six months ended June 30) | Item | 2023 (RMB thousands) | 2022 (RMB thousands) | | :--- | :--- | :--- | | Net Cash (Used in)/Generated from Operating Activities | (7,561) | 4,558 | | Net Cash (Used in)/Generated from Investing Activities | (93,942) | 21,719 | | Net Cash Used in Financing Activities | (23,707) | (62,186) | | Net Decrease in Cash and Cash Equivalents | (125,210) | (35,909) | | Cash and Cash Equivalents at Beginning of Period | 298,737 | 236,041 | | Effect of Exchange Rate Changes on Cash and Cash Equivalents | 980 | 173 | | Cash and Cash Equivalents at End of Period | 174,507 | 200,305 | Notes to the Interim Financial Information This section provides detailed explanatory notes to the interim financial statements, covering general information, accounting policies, risk management, and specific financial line items General Information and Basis of Preparation The company, incorporated in the Cayman Islands, primarily provides private education services in China, with shares listed on the HKEX since June 21, 2019, and interim financial information prepared under IAS 34 on a going concern basis - The Company is an investment holding company primarily engaged in providing private education services in China[85] - The Company's shares were listed on The Stock Exchange of Hong Kong Limited on June 21, 2019[87] - The condensed consolidated interim financial information has been prepared in accordance with International Accounting Standard 34 'Interim Financial Reporting' and on a going concern basis[89][90] Accounting Policies and Estimates Accounting policies applied in this period are consistent with the 2022 financial statements, incorporating new and revised standards not expected to have a significant impact, with management judgments and estimates made during preparation - The accounting policies applied in this financial information are consistent with those of the 2022 financial statements, except for the adoption of new and revised standards[93] - New or revised standards include insurance contracts, disclosure of accounting policies, definition of accounting estimates, and deferred tax related to assets and liabilities arising from a single transaction[95] - Management is required to make judgments, estimates, and assumptions that affect the application of accounting policies and the reported amounts in preparing the interim financial information[96] Financial Risk Management The Group manages market (foreign exchange, interest rate), credit, and liquidity risks by maintaining sufficient cash and bank balances and investing in low-risk wealth management products, with fair value estimates primarily using discounted cash flow methods - The Group's activities are exposed to market risks (including foreign exchange risk and cash flow and fair value interest rate risk), credit risk, and liquidity risk[98] - Liquidity risk is managed by holding sufficient cash and bank balances and investing surplus cash reserves in low-risk wealth management products[15][99] Financial Liabilities Maturity Analysis (As of June 30) | Item | Within One Year (RMB thousands) | One to Two Years (RMB thousands) | Two to Five Years (RMB thousands) | Over Five Years (RMB thousands) | Total (RMB thousands) | | :--- | :--- | :--- | :--- | :--- | :--- | | 2023 | | | | | | | Trade Payables | 1,896 | — | — | — | 1,896 | | Other Payables | 6,752 | — | — | — | 6,752 | | Lease Liabilities | 40,407 | 31,306 | 43,964 | 112,986 | 228,663 | | Total | 49,055 | 31,306 | 43,964 | 112,986 | 237,311 | | 2022 | | | | | | | Trade Payables | 1,281 | — | — | — | 1,281 | | Other Payables | 11,042 | — | — | — | 11,042 | | Lease Liabilities | 37,138 | 29,928 | 35,393 | 100,219 | 202,678 | | Total | 49,461 | 29,928 | 35,393 | 100,219 | 215,001 | Financial Instruments Measured at Fair Value (As of June 30) | Item | Level 1 (RMB thousands) | Level 2 (RMB thousands) | Level 3 (RMB thousands) | Total (RMB thousands) | | :--- | :--- | :--- | :--- | :--- | | 2023 | | | | | | Wealth Management Products | — | — | 92,267 | 92,267 | | Listed Equity Investments in Mainland China | 3,335 | — | — | 3,335 | | Unlisted Equity Investments in Mainland China | — | — | 30,630 | 30,630 | | Total | 3,335 | — | 122,897 | 126,232 | | 2022 | | | | | | Wealth Management Products | — | — | 117,295 | 117,295 | | Listed Equity Investments in Mainland China | 2,065 | — | — | 2,065 | | Unlisted Equity Investments in Mainland China | — | — | 30,630 | 30,630 | | Total | 2,065 | — | 147,925 | 149,990 | Revenue and Segment Information The Group's primary operating decision-maker views the Group as a single operating segment of private education services, with its main market in Guangdong Province, China, generating RMB251,323 thousand in revenue from private education services and others for the six months ended June 30, 2023 - The Group's chief operating decision-maker (the Board) considers the Group as a single operating segment of private education services[118] - The Group's principal market is located in Guangdong Province, China, from which most of its revenue and operating profit are derived[115] Revenue by Timing of Recognition (For the six months ended June 30) | Revenue Source | 2023 (RMB thousands) | 2022 (RMB thousands) | | :--- | :--- | :--- | | Private Education Services and Others | 251,323 | 191,428 | Other Income and Gains For the six months ended June 30, 2023, net other income was RMB4,134 thousand, primarily from sub-leasing, operating lease rentals, finance income, and government grants, while net other gains were RMB5,718 thousand, mainly due to reduced fair value losses on financial assets Other Income—Net (For the six months ended June 30) | Income Source | 2023 (RMB thousands) | 2022 (RMB thousands) | | :--- | :--- | :--- | | Sub-lease — Net | 354 | 112 | | Rental income from operating leases | 1,467 | 1,456 | | Finance income | 792 | 194 | | Government grants | 1,521 | 1,213 | | Total | 4,134 | 2,975 | Other Gains/(Losses)—Net (For the six months ended June 30) | Item | 2023 (RMB thousands) | 2022 (RMB thousands) | | :--- | :--- | :--- | | Fair value gains/(losses) on financial assets at fair value through profit or loss | 3,669 | (80,491) | | Interest on financial assets measured at amortised cost | 630 | — | | Lease modification | 279 | 4,356 | | Net loss on disposal of property, plant and equipment | (20) | (1,508) | | Deposit loss | (226) | (510) | | Compensation expenses | (115) | (483) | | Fair value loss on investment properties | (400) | (360) | | Net foreign exchange gains | 980 | 173 | | Others | 921 | (114) | | Total | 5,718 | (78,937) | Expenses by Nature For the six months ended June 30, 2023, total Group expenses were RMB211,519 thousand, with employee benefit expenses being the largest component, and increases in depreciation, amortization, advertising, and exhibition expenses Expenses by Nature (For the six months ended June 30) | Expense Item | 2023 (RMB thousands) | 2022 (RMB thousands) | | :--- | :--- | :--- | | Employee benefit expenses | 147,712 | 109,545 | | Depreciation and amortisation | 28,441 | 39,679 | | Advertising and exhibition expenses | 4,247 | 1,327 | | Teaching materials | 3,689 | 2,922 | | Property management expenses | 3,081 | 3,117 | | Professional service fees | 3,336 | 2,514 | | Office expenses | 2,827 | 1,584 | | Maintenance costs | 1,569 | 1,540 | | Operating expenses | 1,376 | — | | Utilities | 1,370 | 986 | | Other taxes | 1,192 | 765 | | Auditor's remuneration | 650 | 650 | | COVID-19 related rental concessions | — | (1,310) | | Impairment provision | 3,794 | (12) | | Others | 8,235 | 6,862 | | Total | 211,519 | 170,169 | Finance Costs and Income Tax For the six months ended June 30, 2023, finance costs decreased by 27.5% to RMB2,774 thousand due to lower interest on lease liabilities and borrowings, while income tax shifted from a credit to an expense of RMB4,408 thousand due to increased taxable profit Finance Costs (For the six months ended June 30) | Item | 2023 (RMB thousands) | 2022 (RMB thousands) | | :--- | :--- | :--- | | Interest expense on borrowings | — | 356 | | Interest expense on lease liabilities | 2,774 | 3,470 | | Total | 2,774 | 3,826 | Income Tax Expense/(Credit) (For the six months ended June 30) | Item | 2023 (RMB thousands) | 2022 (RMB thousands) | | :--- | :--- | :--- | | Current tax — Current tax on profit/(loss) for the period | 3,830 | (1,459) | | Deferred income tax — Increase/(decrease) in deferred income tax | 578 | (24,230) | | Income Tax Expense/(Credit) | 4,408 | (25,689) | - The PRC corporate income tax rate is 25%, but Shenzhen Thinkol enjoyed a 15% preferential tax rate as a high-tech enterprise from 2020-2022, increasing to 25% from January 1, 2023[133] - Under PRC tax regulations, enterprises can claim a 200% super deduction for research and development expenses[136] Earnings/(Loss) Per Share For the six months ended June 30, 2023, basic earnings per share were RMB7.73 cents and diluted earnings per share were RMB7.66 cents, both reversing from a loss in the prior year Basic Earnings/(Loss) Per Share (For the six months ended June 30) | Item | 2023 | 2022 | | :--- | :--- | :--- | | Profit/(Loss) attributable to equity holders of the Company (RMB thousands) | 42,938 | (32,027) | | Weighted average number of ordinary shares in issue (thousands of shares) | 555,515 | 555,700 | | Basic earnings/(loss) per share (RMB cents) | 7.73 | (5.76) | Diluted Earnings/(Loss) Per Share (For the six months ended June 30) | Item | 2023 | 2022 | | :--- | :--- | :--- | | Diluted earnings/(loss) per share (RMB cents) | 7.66 | (5.76) | | Weighted average number of ordinary shares in issue used as the denominator in calculating basic earnings/(loss) per share | 555,515,000 | 555,700,000 | | Adjustments for the calculation of diluted earnings/(loss) per share: share options | 5,349,000 | — | | Weighted average number of ordinary shares and potential ordinary shares used as the denominator in calculating diluted earnings/(loss) per share | 560,864,000 | 555,700,000 | Property, Plant and Equipment As of June 30, 2023, the carrying value of property, plant and equipment was RMB35,486 thousand, with additions of RMB3,842 thousand and depreciation expense of RMB6,014 thousand during the period Movements in Property, Plant and Equipment (For the six months ended June 30) | Item | 2023 (RMB thousands) | 2022 (RMB thousands) | | :--- | :--- | :--- | | At beginning of period | 37,678 | 54,369 | | Additions | 3,842 | 901 | | Transferred to investment properties | — | (4,798) | | Disposals | (20) | (1,910) | | Depreciation expense | (6,014) | (4,453) | | At end of period | 35,486 | 44,109 | Right-of-Use Assets and Leases As of June 30, 2023, total right-of-use assets amounted to RMB141,000 thousand, including RMB44,351 thousand for land use rights and RMB96,649 thousand for properties, with total lease liabilities of RMB124,908 thousand Right-of-Use Assets and Lease Liabilities (As of June 30) | Item | June 30, 2023 (RMB thousands) | December 31, 2022 (RMB thousands) | | :--- | :--- | :--- | | Right-of-Use Assets | | | | Land use rights | 44,351 | 45,300 | | Properties | 96,649 | 90,595 | | Total | 141,000 | 135,895 | | Lease Liabilities | | | | Current | 35,417 | 34,169 | | Non-current | 89,491 | 82,764 | | Total | 124,908 | 116,933 | Depreciation Expense on Right-of-Use Assets (For the six months ended June 30) | Item | 2023 (RMB thousands) | 2022 (RMB thousands) | | :--- | :--- | :--- | | Properties | 21,292 | 34,006 | | Land use rights | 949 | 1,044 | | Total | 22,241 | 35,050 | - For the six months ended June 30, 2023, cash outflow for lease financing activities was RMB21,504 thousand, and for short-term lease operating activities was RMB2,793 thousand[147] Investment Properties As of June 30, 2023, investment properties had a fair value of RMB82,155 thousand, with additions of RMB180 thousand and a revaluation loss of RMB400 thousand during the period, primarily leased out under operating leases Movements in Investment Properties (For the six months ended June 30) | Item | 2023 (RMB thousands) | 2022 (RMB thousands) | | :--- | :--- | :--- | | At beginning of period | 82,375 | 65,100 | | Additions | 180 | — | | Transferred from property, plant and equipment | — | 4,798 | | Transferred from land use rights | — | 12,482 | | Revaluation loss recognised in other gains/(losses)—net | (400) | (360) | | At end of period | 82,155 | 82,020 | - Investment properties were valued by Jones Lang LaSalle Corporate Appraisal and Advisory Limited using the comparison approach with reference to recent market transaction prices[152] - Investment properties are leased to tenants under operating leases, with rent paid monthly, and tenants may be required to provide deposits to mitigate credit risk[153] Intangible Assets As of June 30, 2023, intangible assets had a carrying value of RMB2,768 thousand, with additions of RMB500 thousand and amortization of RMB186 thousand during the period Movements in Intangible Assets (For the six months ended June 30) | Item | 2023 (RMB thousands) | 2022 (RMB thousands) | | :--- | :--- | :--- | | At beginning of period | 2,454 | 2,801 | | Additions | 500 | 56 | | Disposals | — | (53) | | Amortisation | (186) | (176) | | At end of period | 2,768 | 2,628 | Prepayments and Other Receivables As of June 30, 2023, non-current prepayments and other receivables totaled RMB22,993 thousand, and current portions were RMB24,689 thousand, primarily comprising lease deposits, prepayments, loans to employees, and other receivables Prepayments and Other Receivables (As of June 30) | Item | June 30, 2023 (RMB thousands) | December 31, 2022 (RMB thousands) | | :--- | :--- | :--- | | Included in non-current assets | | | | Lease deposits | 9,458 | 13,636 | | Prepaid fund management fees | 676 | 273 | | Prepayments for renovation of leased properties | 12,127 | 327 | | Interest receivable | 801 | — | | Impairment provision | (69) | (3,305) | | Subtotal | 22,993 | 10,931 | | Included in current assets | | | | Lease deposits | 2,941 | 479 | | Prepayments | 11,727 | 2,414 | | Loans to employees | 4,083 | 3,450 | | Cash advances to employees | 2,872 | 2,724 | | Lease receivables | 4,158 | 3,821 | | Other receivables | 1,829 | 6,093 | | Impairment provision | (2,921) | (2,415) | | Subtotal | 24,689 | 16,566 | - Loans to employees primarily refer to unsecured and interest-free loans granted to certain employees for personal housing purchases[158] - The Group applies the simplified approach under IFRS 9 to measure expected credit losses, making provisions for lifetime expected losses for all other receivables[159] Financial Assets at Fair Value Through Profit or Loss As of June 30, 2023, total financial assets at fair value through profit or loss were RMB126,232 thousand, mainly comprising wealth management products and listed/unlisted equity investments in Mainland China, with additions of RMB1,208,110 thousand and disposals of RMB1,235,537 thousand during the period Financial Assets at Fair Value Through Profit or Loss (As of June 30) | Item | June 30, 2023 (RMB thousands) | December 31, 2022 (RMB thousands) | | :--- | :--- | :--- | | Non-current assets | | | | Listed equity investments in Mainland China | 3,335 | 2,065 | | Unlisted equity investments in Mainland China | 30,630 | 30,630 | | Subtotal | 33,965 | 32,695 | | Current assets | | | | Wealth management products | 92,267 | 117,295 | | Total | 126,232 | 149,990 | Movements in Financial Assets at Fair Value Through Profit or Loss (For the six months ended June 30) | Item | 2023 (RMB thousands) | 2022 (RMB thousands) | | :--- | :--- | :--- | | At beginning of period | 149,990 | 179,854 | | Additions | 1,208,110 | 644,422 | | Fair value gains/(losses) | 3,669 | (80,491) | | Disposals | (1,235,537) | (671,200) | | At end of period | 126,232 | 72,585 | - Short-term investments primarily consist of wealth management products denominated in RMB, with expected annual returns ranging from 7.0% to 8.7%, measured at fair value through profit or loss as their contractual cash flows do not solely comprise principal and interest payments[165] Bank Balances and Cash As of June 30, 2023, total cash and bank balances were RMB183,554 thousand, with RMB167,307 thousand denominated in RMB and RMB16,244 thousand in HKD, and cash and cash equivalents at period-end were RMB174,507 thousand Bank Balances and Cash (As of June 30) | Item | June 30, 2023 (RMB thousands) | December 31, 2022 (RMB thousands) | | :--- | :--- | :--- | | Cash and bank deposits | 183,554 | 298,737 | | Less: Fixed deposits with original maturity over three months | (9,047) | — | | Total | 174,507 | 298,737 | Cash and Bank Deposits by Currency (As of June 30) | Currency | June 30, 2023 (RMB thousands) | December 31, 2022 (RMB thousands) | | :--- | :--- | :--- | | RMB | 167,307 | 296,924 | | USD | 3 | 3 | | HKD | 16,244 | 1,810 | | Total | 183,554 | 298,737 | - As of June 30, 2023, there were no restricted deposits held by banks[168] Share Capital and Share Schemes As of June 30, 2023, the company had 555,700,000 ordinary shares in issue with a par value of RMB3,774,897 thousand; the trustee acquired 1,508,000 shares for the employee share scheme at a total cost of RMB2,203 thousand, and 27,785,000 share options were granted on February 6, 2023, resulting in a share option expense of RMB4,477 thousand Share Capital Information (As of June 30) | Item | Number of Authorised Ordinary Shares | Par Value of Authorised Ordinary Shares (USD) | Par Value of Authorised Ordinary Shares (RMB) | Number of Issued Ordinary Shares | Par Value of Issued Ordinary Shares (USD) | Par Value of Issued Ordinary Shares (RMB) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | January 1, 2023 and June 30, 2023 | 1,000,000,000 | 1,000,000 | 6,860,633 | 555,700,000 | 555,700 | 3,774,897 | Shares Held for Employee Share Scheme (As of June 30) | Item | Number of Shares | RMB thousands | | :--- | :--- | :--- | | Balance at January 1, 2023 | — | — | | Acquisition of shares by trustee | 1,508,000 | 2,203 | | Balance at June 30, 2023 | 1,508,000 | 2,203 | - On February 6, 2023, the Company granted 27,785,000 share options with an exercise price of HKD1.62, aiming to provide long-term incentives to employees[178][179] - For the six months ended June 30, 2023, the total share option expense recognised was approximately RMB4,477 thousand[185] Share Premium and Other Reserves As of June 30, 2023, share premium was RMB82,698 thousand and other reserves totaled RMB36,815 thousand, primarily due to an increase of RMB4,477 thousand from share-based payments Movements in Share Premium and Other Reserves (As of June 30) | Item | Share Premium (RMB thousands) | Merger Reserve (RMB thousands) | Capital Reserve (RMB thousands) | Share-based Payment Reserve (RMB thousands) | Revaluation Surplus (RMB thousands) | Total (RMB thousands) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Balance at January 1, 2023 | 82,698 | (46,347) | 78,056 | 251 | 378 | 32,338 | | Share-based payments | — | — | — | 4,477 | — | 4,477 | | Balance at June 30, 2023 | 82,698 | (46,347) | 78,056 | 4,728 | 378 | 36,815 | Dividends The Board does not recommend the payment of an interim dividend for the six months ended June 30, 2023 - The Board does not recommend the payment of an interim dividend for the six months ended June 30, 2023[187] Contract Liabilities and Trade and Other Payables As of June 30, 2023, contract liabilities were RMB128,851 thousand, primarily representing prepaid consideration for education services, while trade and other payables totaled RMB61,662 thousand, mainly comprising employee benefits payable and trade payables Contract Liabilities (As of June 30) | Item | June 30, 2023 (RMB thousands) | December 31, 2022 (RMB thousands) | | :--- | :--- | :--- | | Deferred revenue — Education services | 128,851 | 181,524 | Trade and Other Payables (As of June 30) | Item | June 30, 2023 (RMB thousands) | December 31, 2022 (RMB thousands) | | :--- | :--- | :--- | | Trade payables | 1,896 | 1,281 | | Employee benefits payable | 41,511 | 57,141 | | Other taxes payable | 11,433 | 13,927 | | Advance lease payments | 70 | 40 | | Other payables | 6,752 | 11,042 | | Total | 61,662 | 83,431 | - Trade payables are primarily related to the purchase of educational books and other teaching aids, with a typical credit period of three months[192] Events After Reporting Period and Comparative Figures Between July 1 and July 21, 2023, the trustee of the company's share award scheme acquired 2,692,000 ordinary shares for RMB3,106 thousand, and comparative figures have been reclassified without affecting total equity or profit/loss - Between July 1 and July 21, 2023, the trustee of the Company's share award scheme acquired 2,692,000 ordinary shares for a total consideration of RMB3,106 thousand[35] - Comparative figures have been reclassified to conform with the current period's presentation, with no impact on total equity or profit/(loss)[36] Management Discussion and Analysis This section provides management's perspective on the Group's financial performance, liquidity, capital structure, risk management, and future outlook for the interim period Financial Review For the six months ended June 30, 2023, the Group's revenue grew by 31.3% to RMB251.3 million, gross profit increased by 61.1% to RMB104.1 million with a gross margin of 41.4%, operating profit turned positive to RMB49.7 million, and profit for the period was RMB42.9 million - Revenue increased by 31.3% from RMB191.4 million to RMB251.3 million, primarily due to an increase in total student enrollments and tutoring hours[38] Revenue by Education Service Category (For the six months ended June 30) | Category | 2023 (RMB thousands) | 2022 (RMB thousands) | Change (%) | | :--- | :--- | :--- | :--- | | Non-academic quality-oriented courses and others | 232,216 | 178,966 | 29.8% | | Tutoring courses | 19,107 | 12,462 | 53.3% | | Total | 251,323 | 191,428 | 31.3% | Student Enrollments and Tutoring Hours (For the six months ended June 30) | Category | 2023 Student Enrollments | 2023 Tutoring Hours | 2022 Student Enrollments | 2022 Tutoring Hours | Student Enrollments Change (%) | Tutoring Hours Change (%) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Non-academic quality-oriented courses | 107,908 | 2,675,300 | 83,646 | 2,068,795 | 29.0% | 29.3% | | Tutoring courses | 8,622 | 212,300 | 5,671 | 138,704 | 52.0% | 53.1% | | Total | 116,530 | 2,887,600 | 89,317 | 2,207,499 | 30.5% | 30.8% | - Cost of sales increased by 16.1% to RMB147.3 million, mainly due to increased teacher remuneration[40] - Gross profit increased by 61.1% to RMB104.1 million, with gross margin improving from 33.7% to 41.4%[41] - Selling expenses increased by 227.8% to RMB5.1 million, primarily due to increased advertising and exhibition expenses and customer service personnel expenses for the live e-commerce business[44] - Administrative expenses increased by 44.2% to RMB50.4 million, mainly due to increased administrative staff expenses and office expenses[1] - Research and development expenses increased by 28.1% to RMB8.7 million, primarily due to increased R&D personnel expenses[45] - Net other income increased by 39.0% to RMB4.1 million, mainly due to increased finance income and government subsidies[46] - Net other gains were RMB5.7 million, compared to a loss of RMB78.9 million in the prior period, primarily due to a RMB84.2 million reduction in fair value losses on financial assets[47] - Finance costs decreased by 27.5% to RMB2.8 million, mainly due to reduced interest expenses on lease liabilities and borrowings[48] - Profit before income tax was RMB46.9 million, reversing a loss of RMB58.5 million in the prior period[49] - Income tax expense was RMB4.4 million, compared to a credit of RMB25.7 million in the prior period, primarily due to increased taxable profit[50] - Profit for the period attributable to equity holders was RMB42.9 million, reversing a loss of RMB32.0 million in the prior period[52] Adjusted Profit/(Loss) for the Period Attributable to Equity Holders (For the six months ended June 30) | Item | 2023 (RMB thousands) | 2022 (RMB thousands) | Percentage Change | | :--- | :--- | :--- | :--- | | Profit/(Loss) for the period attributable to equity holders | 42,938 | (32,027) | 234.1% | | Add: Share option benefit expenses | 3,573 | — | Not applicable | | Adjusted Profit/(Loss) for the period attributable to equity holders | 46,511 | (32,027) | 245.2% | Liquidity, Financial Resources and Capital Structure As of June 30, 2023, the Group's total equity was RMB416.2 million, cash and cash equivalents decreased by 41.6% to RMB174.5 million, and the Group had no bank borrowings, resulting in a zero debt-to-asset ratio - As of June 30, 2023, the Group's total equity was RMB416.2 million (December 31, 2022: RMB371.4 million)[56] - Cash and cash equivalents decreased by 41.6% from RMB298.7 million to RMB174.5 million[56] - The Group had no bank borrowings as of June 30, 2023, and December 31, 2022, resulting in a debt-to-asset ratio of 0%[56] Treasury Management Policy The Group's treasury management policy involves investing surplus cash reserves in low-risk, short-term wealth management products to generate income, with investment decisions authorized by the Chairman and executed by the Treasury Department - The treasury management policy is to utilize surplus cash reserves to invest in low-risk wealth management products without affecting business operations or capital expenditures[15] - Investments are generally made in medium-to-low risk and short-term (typically not exceeding one year) wealth management products, including low-risk products issued by trust companies and commercial banks, money market instruments, debt instruments, and listed/unlisted securities[15] - Investment decisions are authorized by the Chairman of the Board, with the Treasury Department responsible for overall execution, tracking investment performance, and risk management[15] Foreign Exchange Risk and Material Investments The Group's revenue and expenses are primarily RMB-denominated, with cash in RMB and HKD, and currently no foreign currency hedging policy; no material investments, acquisitions, or disposals occurred during the period, but the Group will actively seek future investment opportunities - Most of the Group's revenue and expenses are denominated in RMB, and most cash and bank deposits are denominated in RMB and HKD, with no foreign currency hedging policy currently in place[17] - For the six months ended June 30, 2023, the Company did not undertake any material investments, acquisitions, or disposals of subsidiaries, associates, or joint ventures[18] - The Group will strive to adapt to rapidly changing market conditions and actively seek investment opportunities to broaden its revenue base and enhance future financial performance[18] Dividends, Contingent Liabilities and Pledged Assets The Board does not recommend an interim dividend for the six months ended June 30, 2023, and as of that date, the Group had no material contingent liabilities, guarantees, pending litigations, or pledged assets - The Board does not recommend the payment of an interim dividend for the six months ended June 30, 2023[57] - As of June 30, 2023, the Group had no material contingent liabilities, guarantees, or pending litigations[58] - As of June 30, 2023, and December 31, 2022, the Group had no pledged assets[59] Employees and Remuneration Policy As of June 30, 2023, the Group employed 1,757 staff, an increase from December 31, 2022, with remuneration policies aligned with market practices and reviewed to ensure competitiveness based on individual performance and experience - As of June 30, 2023, the Group employed a total of 1,757 employees (December 31, 2022: 1,350 employees)[60] - Remuneration policies are consistent with prevailing market practices, determined based on individual employee performance and experience, and continuously reviewed to ensure market competitiveness[60] Events After Reporting Period No significant events impacting the Group have occurred after June 30, 2023, other than those disclosed in this interim report - Other than those disclosed in this interim report, no significant events affecting the Group have occurred after June 30, 2023[195] Corporate Governance and Other Information This section details the Group's adherence to corporate governance standards, including compliance with codes, audit committee functions, and information on directors', major shareholders', and share scheme interests Corporate Governance Code and Model Code for Securities Transactions The company is committed to high corporate governance standards, complying with all applicable code provisions of the Listing Rules Appendix 14 and the Model Code for Securities Transactions by Directors and Relevant Employees for the six months ended June 30, 2023 - The Company has complied with all applicable code provisions of the Corporate Governance Code and Corporate Governance Report set out in Appendix 14 of the Listing Rules[198] - Directors and relevant employees have complied with the Model Code for Securities Transactions by Directors and Relevant Employees for the six months ended June 30, 2023[199] Audit Committee The Audit Committee, comprising three independent non-executive directors and chaired by Mr. Wong Wai Tak, is responsible for reviewing and overseeing the Group's financial reporting, risk management, and internal control systems, and has reviewed this interim report - The Audit Committee comprises three independent non-executive directors: Mr. Wong Wai Tak (Chairman), Mr. Yang Xuezhi, and Ms. Yan Jiamin[199] - The Audit Committee has reviewed the Group's unaudited consolidated financial statements for the six months ended June 30, 2023, and this interim report, and met with the independent auditor, PricewaterhouseCoopers[206] Purchase, Sale or Redemption of the Company's Listed Securities For the six months ended June 30, 2023, neither the Company nor its subsidiaries or consolidated affiliated entities purchased, sold, or redeemed any of the Company's listed securities - For the six months ended June 30, 2023, neither the Company nor any of its subsidiaries or consolidated affiliated entities purchased, sold, or redeemed any of the Company's listed securities[200] Directors' and Chief Executive's Interests in Shares As of June 30, 2023, directors and chief executives held interests in the company's shares, with Mr. Chen Qiyuan holding 39.42% through controlled corporations and Mr. Qi Mingzhi beneficially owning 2.31% Directors' and Chief Executive's Long Positions in the Company (As of June 30) | Name | Capacity/Nature of Interest | Number of Shares | Approximate Percentage of the Company's Shareholding | | :--- | :--- | :--- | :--- | | Mr. Chen Qiyuan | Interest in controlled corporation | 219,130,000 | 39.42% | | Mr. Qi Mingzhi | Beneficial owner | 12,818,000 | 2.31% | Directors' and Chief Executive's Long Positions in Shenzhen Thinkol Culture Education Technology Development Co., Ltd. (As of June 30) | Name | Capacity/Nature of Interest | Amount of Registered Capital Held (RMB) | Approximate Percentage of Equity | | :--- | :--- | :--- | :--- | | Mr. Chen Qiyuan | Beneficial owner | 7,800,000 | 39% | Substantial Shareholders' Interests in Shares As of June 30, 2023, substantial shareholders Tiansheng and Yuxiq International each held 39.42% of the company's equity, with Yuxiq International wholly owned by Executive Director and controlling shareholder Mr. Chen Qiyuan Substantial Shareholders' Interests in Shares and Underlying Shares (As of June 30) | Name | Capacity/Nature of Interest | Number of Shares | Approximate Percentage of the Company's Shareholding | | :--- | :--- | :--- | :--- | | Tiansheng | Beneficial owner | 219,130,000 | 39.42% | | Yuxiq International | Interest in controlled corporation | 219,130,000 | 39.42% | - Tiansheng is owned by Yuxiq International with 100 voting shares, and Yuxiq International is wholly owned by Mr. Chen Qiyuan, an Executive Director and controlling shareholder of the Company[213] Share Option Scheme and Share Award Scheme The Share Option Scheme, approved by shareholders on June 3, 2019, aims to incentivize employees and has a ten-year validity, while the Share Award Scheme, adopted on December 28, 2020, has seen the trustee purchase shares for future awards - The Share Option Scheme was approved and adopted by shareholders on June 3, 2019, and became effective upon the listing of shares, aiming to provide long-term incentives to selected participants[215] - The Share Option Scheme has a validity period of ten years, with approximately five years and ten months remaining as of the date of this interim report[218] Details of Movements in Share Option Scheme (For the six months ended June 30) | Name/Category of Grantee | Date of Grant | Exercise Price Per Share (HKD) | January 1, 2023 | Granted during the period | Exercised during the period | Lapsed/Cancelled during the period | Outstanding at June 30, 2023 | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Employees of the Group | February 6, 2023 | 1.62 | — | 27,785,000 | — | — | 27,785,000 | - The Share Award Scheme was approved and adopted by the Board on December 28, 2020; the trustee has purchased a total of 11,481,000 shares, of which 7,281,000 shares have been awarded to selected participants and 4,200,000 shares are held by the trustee[224][225] Structured Contracts Due to PRC legal restrictions on equity structures in education, the Group controls its PRC operating entities through structured contracts, has taken steps to meet qualification requirements, and monitors the potential impact of the Foreign Investment Law on these arrangements - Given PRC legal restrictions on the equity structure of businesses engaged by the Group, it controls its PRC operating entities and derives economic benefits through structured contracts[226][228] - The Group has taken specific steps to demonstrate compliance with qualification requirements, including preparing to launch tutoring centers in Hong Kong and obtaining school registration certificates[235] - The Foreign Investment Law does not explicitly define contractual arrangements as foreign investment, but it may be considered a form of foreign investment in the future, creating uncertainty for structured contracts[232][237] - For the six months ended June 30, 2023, and up to the date of this report, the structured contracts are legally enforceable and do not violate existing PRC laws and regulations[233] Definitions This section provides a comprehensive glossary of key terms used throughout the report to ensure clarity and consistent understanding Definitions of Terms This chapter defines key terms used in the report, such as Stock Exchange, Board, Corporate Governance Code, Company, COVID-19, Directors, Group, IFRS, Listing Rules, Model Code, PRC, Prospectus, Share Award Scheme, Scheme Rules, SFO, Shareholders, Shares, Share Option Scheme, Tiansheng, Trustee, Trust Deed, and Yuxiq International - This chapter provides definitions for key terms used in the report, such as 'Stock Exchange' referring to The Stock Exchange of Hong Kong Limited, and 'the Group' referring to the Company and its subsidiaries and consolidated affiliated entities[240][241]