雍禾医疗(02279) - 2024 - 中期业绩

Financial Summary This section provides a high-level overview of the company's financial performance for the six months ended June 30, 2024 Financial Summary for the Six Months Ended June 30, 2024 | Indicator | H1 2024 (RMB million) | H1 2023 (RMB million) | Change | | :--- | :--- | :--- | :--- | | Revenue | 900.2 | 827.8 | Increase | | Gross Profit | 529.4 | 467.6 | Increase | | Gross Margin | 58.8% | 56.5% | Increase | | Net Loss | 138.6 | 226.2 | Narrowed by 38.7% | | Basic Loss Per Share | 0.28 | 0.44 | Narrowed | - The Board has resolved not to declare any interim dividend for the six months ended June 30, 2024[1] Interim Condensed Consolidated Financial Statements This section presents the interim condensed consolidated financial statements, including the statement of comprehensive income and statement of financial position Interim Condensed Consolidated Statement of Comprehensive Income For the six months ended June 30, 2024, the Group's revenue grew to RMB 900.2 million, gross profit to RMB 529.4 million, with net loss narrowing to RMB 138.6 million Key Data from Interim Condensed Consolidated Statement of Comprehensive Income | Indicator | H1 2024 (RMB thousand) | H1 2023 (RMB thousand) | | :--- | :--- | :--- | | Revenue from contracts with customers | 900,203 | 827,807 | | Cost of sales and services | (370,766) | (360,209) | | Gross profit | 529,437 | 467,598 | | Selling and marketing expenses | (462,573) | (498,402) | | General and administrative expenses | (140,970) | (174,861) | | Operating loss | (130,649) | (225,132) | | Loss for the period | (138,648) | (226,191) | | Basic loss per share (RMB) | (0.28) | (0.44) | Interim Condensed Consolidated Statement of Financial Position As of June 30, 2024, total assets were RMB 2,086.8 million, a decrease from RMB 2,444.6 million at the end of 2023, with corresponding reductions in equity and liabilities Key Data from Interim Condensed Consolidated Statement of Financial Position | Indicator | June 30, 2024 (RMB thousand) | December 31, 2023 (RMB thousand) | | :--- | :--- | :--- | | Total non-current assets | 1,367,729 | 1,635,235 | | Total current assets | 719,068 | 809,326 | | Total assets | 2,086,797 | 2,444,561 | | Total equity | 801,818 | 942,251 | | Total non-current liabilities | 628,259 | 779,409 | | Total current liabilities | 656,720 | 722,901 | | Total liabilities | 1,284,979 | 1,502,310 | Notes to the Interim Condensed Consolidated Financial Information This section provides detailed notes explaining the basis of preparation, accounting policies, and specific financial line items in the interim financial statements 1. General Information Yonghe Medical Group Co., Ltd. was incorporated in the Cayman Islands, listed in Hong Kong in 2021, and primarily provides hair transplant and medical hair care services in mainland China - The Company was incorporated as an exempted company in the Cayman Islands on September 17, 2020[4] - The Group is principally engaged in providing hair transplant medical services and medical hair care services in mainland China[4] - The Company was listed on the Main Board of The Stock Exchange of Hong Kong Limited on December 13, 2021[4] 2. Basis of Preparation The interim condensed consolidated financial information is prepared in accordance with HKAS 34 "Interim Financial Reporting" and should be read with the annual financial statements - The interim condensed consolidated financial information has been prepared in accordance with Hong Kong Accounting Standard 34 "Interim Financial Reporting"[5] 3. Accounting Policies The Group's accounting policies are consistent with 2023, with new standards adopted from January 1, 2024, expected to have no significant impact on operations or financial statements 3.1 New and Revised Standards Adopted by the Group - The Group has first applied a number of amendments from January 1, 2024, including amendments to HKAS 1, HK(IFRIC)-Int 5, HKAS 7 and HKFRS 7, and HKFRS 16[7] - The adoption of the amendments to HKAS 1 did not result in a change in the classification of the Group's borrowings, and no retrospective adjustments were made[7] 3.2 Impact of Standards Not Yet Adopted by the Group - Amendments to HKAS 21 by the Hong Kong Institute of Certified Public Accountants will be applicable to annual reporting periods beginning on or after January 1, 2025, and the Group expects these amendments will not have a significant impact on its operations or financial statements[9] 4. Revenue from Contracts with Customers For the six months ended June 30, 2024, total revenue from customer contracts was RMB 900.2 million, primarily from hair transplant and medical hair care services Customer Revenue by Service Category | Service Category | H1 2024 (RMB thousand) | H1 2023 (RMB thousand) | | :--- | :--- | :--- | | Hair transplant medical services | 672,885 | 640,798 | | Medical hair care services | 215,176 | 171,684 | | Others | 12,142 | 15,325 | | Total | 900,203 | 827,807 | Customer Revenue by Timing of Recognition | Timing of Recognition | H1 2024 (RMB thousand) | H1 2023 (RMB thousand) | | :--- | :--- | :--- | | Revenue recognized at a point in time | 708,029 | 679,603 | | Revenue recognized over time | 192,174 | 148,204 | | Total | 900,203 | 827,807 | Customer Revenue by Geographical Region | Region | H1 2024 (RMB thousand) | H1 2023 (RMB thousand) | | :--- | :--- | :--- | | Mainland China | 898,745 | 825,034 | | Hong Kong | 1,458 | 2,773 | | Total | 900,203 | 827,807 | 5. Other Losses, Net For the six months ended June 30, 2024, net other losses significantly increased to RMB 44.8 million, mainly due to losses on disposal and impairment of property, plant, and equipment Details of Other Losses, Net | Item | H1 2024 (RMB thousand) | H1 2023 (RMB thousand) | | :--- | :--- | :--- | | Loss on disposal of property, plant and equipment | (34,016) | (3,981) | | Impairment loss on property, plant and equipment | (14,064) | – | | Gain on early termination of property leases | 2,682 | 2,337 | | Net fair value loss on financial liabilities at fair value through profit or loss | – | (4,132) | | Others | 582 | (1,612) | | Total | (44,816) | (7,388) | 6. Expenses by Nature For the six months ended June 30, 2024, total expenses decreased to RMB 986.7 million, primarily due to reduced employee benefits and promotion and marketing expenses Details of Expenses by Nature | Expense Category | H1 2024 (RMB thousand) | H1 2023 (RMB thousand) | | :--- | :--- | :--- | | Employee benefit expenses | 371,270 | 399,747 | | Promotion and marketing related expenses | 322,749 | 345,161 | | Depreciation of property, plant and equipment | 85,862 | 73,143 | | Depreciation of right-of-use assets | 81,302 | 77,652 | | Cost of inventories and consumables | 50,549 | 58,081 | | Total | 986,734 | 1,046,497 | 7. Finance Costs – Net For the six months ended June 30, 2024, net finance costs significantly decreased to RMB 16.1 million, mainly due to lower interest expenses on lease liabilities and foreign exchange losses Details of Finance Income | Item | H1 2024 (RMB thousand) | H1 2023 (RMB thousand) | | :--- | :--- | :--- | | Interest income from bank deposits | 5,476 | 7,587 | | Foreign exchange gain | 48 | – | | Total | 5,524 | 7,587 | Details of Finance Costs | Item | H1 2024 (RMB thousand) | H1 2023 (RMB thousand) | | :--- | :--- | :--- | | Interest expense on lease liabilities | (18,924) | (27,598) | | Foreign exchange loss | – | (11,285) | | Interest expense on bank borrowings | (2,650) | – | | Total | (21,574) | (38,883) | Finance Costs – Net | Indicator | H1 2024 (RMB thousand) | H1 2023 (RMB thousand) | | :--- | :--- | :--- | | Finance costs – net | (16,050) | (31,296) | 8. Income Tax Credit For the six months ended June 30, 2024, income tax credit decreased significantly to RMB 8.1 million, mainly due to reduced deferred tax recognized on temporary losses Details of Income Tax Credit | Item | H1 2024 (RMB thousand) | H1 2023 (RMB thousand) | | :--- | :--- | :--- | | Current income tax | (5,726) | (3,884) | | Deferred income tax | 13,777 | 34,121 | | Income tax credit | 8,051 | 30,237 | - Subsidiaries incorporated in the Cayman Islands and British Virgin Islands are exempt from income tax[15][16] - Subsidiaries incorporated in Hong Kong are subject to Hong Kong profits tax at a rate of 16.5%[17] - Certain subsidiaries in mainland China, such as Yonghe Investment, qualify as high-tech enterprises and enjoy a preferential income tax rate of 15%, while some qualify as small and micro enterprises, and other entities are taxed at the standard rate of 25%[18] 9. Loss Per Share For the six months ended June 30, 2024, basic loss per share narrowed to RMB 0.28, and diluted loss per share was the same due to the Group incurring losses Calculation of Basic Loss Per Share | Indicator | H1 2024 | H1 2023 | | :--- | :--- | :--- | | Loss for the period attributable to equity holders of the Company (RMB thousand) | (138,572) | (226,191) | | Less: Loss attributable to unvested restricted shares during the vesting period (RMB thousand) | 2,170 | 5,088 | | Loss attributable to ordinary equity holders of the Company for basic loss per share calculation (RMB thousand) | (136,402) | (221,103) | | Weighted average number of ordinary shares in issue (thousand shares) | 492,937 | 501,887 | | Basic loss per share (RMB) | (0.28) | (0.44) | - As the Group incurred losses during the reporting period, potential ordinary shares were not included in the calculation of diluted loss per share, thus diluted loss per share is the same as basic loss per share[21] 10. Dividends For the six months ended June 30, 2024, the company neither paid nor declared any interim dividends, consistent with the prior year - For the six months ended June 30, 2024, the Company neither paid nor declared any dividends[23] 11. Trade Receivables As of June 30, 2024, net trade receivables slightly increased to RMB 10.4 million, primarily from financial institutions or third-party payment platforms with short credit terms Details of Trade Receivables | Item | June 30, 2024 (RMB thousand) | December 31, 2023 (RMB thousand) | | :--- | :--- | :--- | | Trade receivables from contracts with customers – third parties | 10,428 | 10,283 | | Less: Impairment allowance | (29) | (16) | | Net amount | 10,399 | 10,267 | Ageing Analysis of Trade Receivables | Ageing | June 30, 2024 (RMB thousand) | December 31, 2023 (RMB thousand) | | :--- | :--- | :--- | | Within 3 months | 10,244 | 9,326 | | 3 to 6 months | 175 | 941 | | 6 months to 1 year | 4 | 10 | | 1 to 2 years | 5 | 6 | | Total | 10,428 | 10,283 | - The Group generally collects payments from customers in advance, and trade receivables primarily refer to amounts due from financial institutions or third-party payment platforms, with a general credit period of within 15 days, and 6 months for corporate customers[24] 12. Prepayments, Deposits and Other Receivables As of June 30, 2024, total prepayments, deposits, and other receivables decreased to RMB 113.9 million, mainly due to lower current prepayments and deductible input VAT Details of Prepayments, Deposits and Other Receivables | Item | June 30, 2024 (RMB thousand) | December 31, 2023 (RMB thousand) | | :--- | :--- | :--- | | Current prepayments | 29,618 | 33,360 | | Deductible input VAT | 5,882 | 8,771 | | Other receivables (net) | 75,640 | 77,708 | | Subtotal included in current assets | 111,140 | 119,839 | | Included in non-current assets | 2,745 | 2,106 | | Total | 113,885 | 121,945 | 13. Inventories As of June 30, 2024, total inventories decreased to RMB 62.6 million, primarily comprising medical hair care consumables, medicines, and washing and hair care products Details of Inventories | Item | June 30, 2024 (RMB thousand) | December 31, 2023 (RMB thousand) | | :--- | :--- | :--- | | Medical hair care consumables | 33,446 | 38,284 | | Medicines and medical consumables | 15,227 | 18,184 | | Washing and hair care products | 11,098 | 16,041 | | Others | 2,845 | 3,496 | | Total | 62,616 | 76,005 | Trade and Other Payables As of June 30, 2024, total trade and other payables decreased to RMB 168.2 million, mainly due to reductions in trade payables and accrued employee benefits Details of Trade and Other Payables | Item | June 30, 2024 (RMB thousand) | December 31, 2023 (RMB thousand) | | :--- | :--- | :--- | | Trade payables | 61,509 | 76,166 | | Accrued employee benefits | 56,872 | 68,556 | | Taxes payable | 15,775 | 17,201 | | Refund liabilities | 10,415 | 12,009 | | Accrued expenses | 9,403 | 15,037 | | Deposits | 7,686 | 12,666 | | Bills payable | – | 3,250 | | Others | 6,544 | 5,988 | | Total | 168,204 | 210,873 | Ageing Analysis of Trade Payables | Ageing | June 30, 2024 (RMB thousand) | December 31, 2023 (RMB thousand) | | :--- | :--- | :--- | | Within 3 months | 50,741 | 54,618 | | 3 to 6 months | 5,237 | 15,872 | | 6 months to 1 year | 2,582 | 2,727 | | 1 to 2 years | 1,274 | 1,051 | | Over 2 years | 1,675 | 1,898 | | Total | 61,509 | 76,166 | 15. Contract Liabilities As of June 30, 2024, total contract liabilities increased to RMB 199.1 million, primarily from medical hair care services, with RMB 123 million expected to be recognized as revenue within one year Details of Contract Liabilities | Item | June 30, 2024 (RMB thousand) | December 31, 2023 (RMB thousand) | | :--- | :--- | :--- | | Medical hair care | 168,400 | 153,494 | | Hair transplant medical services | 22,150 | 18,354 | | Others | 8,578 | 10,507 | | Total | 199,128 | 182,355 | Revenue Recognized from Contract Liabilities | Service Category | H1 2024 (RMB thousand) | H1 2023 (RMB thousand) | | :--- | :--- | :--- | | Medical hair care | 77,154 | 59,542 | | Hair transplant medical services | 6,560 | 2,958 | | Others | 4,288 | 5,252 | | Total | 88,002 | 67,752 | - Management expects that approximately RMB 123 million (December 31, 2023: approximately RMB 99 million) of the unfulfilled contract amount as of June 30, 2024, will be recognized as revenue within the next year[33] Management Discussion and Analysis This section provides a comprehensive review of the Group's business operations, strategic initiatives, and financial performance for the reporting period Business Review Yonghe Medical, a leading hair medical service group in China, achieved 8.7% revenue growth to RMB 900.2 million and improved gross margin to 58.8% for the first half of 2024 Hair Transplant Business Hair transplant business revenue increased by 5.0% to RMB 672.9 million, driven by a 3.4% increase in patient numbers and enhanced service quality - For the six months ended June 30, 2024, hair transplant business revenue was RMB 672.9 million, an increase of 5.0% year-on-year, accounting for 74.8% of total revenue[39] - The Group deepened its "one-price-for-all" pricing strategy and launched the "Good Doctors Around You" national tour to enhance service quality and resource allocation[39] Key Operating Data for Hair Transplant Medical Services | Indicator | H1 2024 | H1 2023 | | :--- | :--- | :--- | | Number of patients receiving hair transplant medical services | 29,272 | 28,304 | | Average spending per hair transplant patient (RMB) | 22,987 | 22,640 | | Number of patients receiving "Yongxiang" services | 1,700 | 1,297 | - The number of patients undergoing hair transplant surgery increased by 3.4% to 29,272, with a significant 31.1% increase in patients receiving "Yongxiang" services[39] Medical Hair Care Business Medical hair care business revenue grew by 25.3% to RMB 215.2 million, with patient numbers increasing by 21.9% and repurchase rate improving to 29.0% - For the six months ended June 30, 2024, medical hair care business revenue was RMB 215.2 million, an increase of 25.3% year-on-year, accounting for 23.9% of total revenue[41] - The Group established "Svenson Medical Hair Care Centers" within each hair transplant medical institution and independent stores to provide professional medical-grade hair health management services[41] Key Operating Data for Medical Hair Care Services | Indicator | H1 2024 | H1 2023 | | :--- | :--- | :--- | | Number of patients receiving medical hair care services | 49,683 | 40,758 | | Average spending per medical hair care patient (RMB) | 4,331 | 4,212 | | Repurchase rate | 29.0% | 26.4% | - The number of patients receiving medical hair care services increased by 21.9% to 49,683, and the repurchase rate improved to 29.0%[41][42] Business Progress The Group implemented strategic adjustments, strengthened cost control, optimized operations, and enhanced medical service quality, while cautiously expanding and leveraging digital technologies Effective Cost Control Significantly Enhances Operational Efficiency The Group implemented strategic adjustments to strengthen cost control, optimize operational efficiency, and enhance profitability, including integrating clinics and optimizing resource allocation - The Group implemented strategic adjustments to strengthen cost control mechanisms, optimize operational efficiency, and enhance profitability[42] - The Group prudently executed its strategy of integrating new and existing clinics, appropriately extended the market observation period for new clinics, and launched the "Top Doctors National Tour in Beijing, Shanghai, and Guangzhou" project and promoted "cross-clinic, cross-city surgical support" services[42][43] - During the reporting period, two new Yonghe Hair Transplant medical institutions and two Svenson clinics were established, while five Yonghe Hair Transplant medical institutions and six Svenson clinics were closed to optimize medical resource allocation[43] Number of Hair Transplant Medical Institutions by Development Stage | Development Stage | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Mature clinics | 52 | 47 | | Developing clinics | 12 | 12 | | New clinics | 8 | 16 | | Total | 72 | 75 | Deepening Medical Service Quality to Lead Industry Development The Group upgraded its "Good Doctor + Good System" brand strategy, leading the industry into the Hair Transplant 3.0 era by emphasizing professional training and comprehensive service enhancements - The Group upgraded its "Good Doctor + Good System" brand strategy, leading the industry into the Hair Transplant 3.0 era, emphasizing professional training and evaluation of doctors, and system upgrades across five dimensions: diagnosis, transplantation, aesthetics, hair care, and comfort[45] Professional Medical Team Composition | Team Category | Number of People as of June 30, 2024 | | :--- | :--- | | Total professional team | 1,503 | | - Doctors | 282 | | - Nurses | 1,125 | | - Other medical professionals | 96 | - The Group signed strategic cooperation agreements with several excellent pharmaceutical companies to explore a "R&D-production-sales-application" integrated innovation model and continuously strengthened cooperation with renowned medical schools and top-tier hospitals[46] Advancing Refined Marketing Strategies to Enhance Brand Value The Group is implementing brand renewal and refined marketing strategies to establish its "Hair Transplant 3.0 era" positioning, enhance brand awareness, and optimize marketing costs - The Group is advancing brand renewal and refined marketing strategies, clearly defining its new positioning for the "Hair Transplant 3.0 era" to enhance brand awareness and market influence[47] - The Group adopted a multi-channel, multi-touchpoint integrated marketing approach, utilizing data analytics and precise targeting to control marketing costs, and improved its private domain user operation management system to form a closed-loop private domain marketing strategy[47] Adhering to Technological Innovation and Continuously Advancing Intelligent Development The Group is committed to technological innovation, implementing self-developed operational management systems, integrating AI tools for online consultations, and automating scalp health assessments - The self-developed operational management system "Hefan" has been piloted in various clinics, covering the entire process and achieving "full lifecycle electronic archives"[48] - AI robot tools have been integrated into online consultation services, increasing the speed of initial interaction feedback by 85%[48] - Automated scalp health assessment is achieved through image model algorithms, instantly generating reports on patients' scalp environment and hair health status[48] Future Outlook The Group anticipates continued high growth in the hair medical services market, focusing on cost reduction, efficiency improvement, refined operations, and technology-driven services to enhance competitiveness Cost Reduction and Efficiency Enhancement for Refined Operation of Medical Institutions The Group will continue to advance its refined operational system through data-driven optimization, efficient resource utilization, and enhanced talent management to build "smart clinics" - The Group will continue to advance its refined operational system, ensuring efficient resource utilization and effective cost control through data-driven approaches and process optimization[50] - The Group will deepen its lean management strategy, introduce advanced data analysis tools, optimize the distribution network of hair transplant and hair care institutions, and strengthen cross-clinic cooperation[50] - The Group will focus on talent development and management, enhance the digitalization and automation of human resources, establish a comprehensive performance appraisal system, and promote innovative management and "smart clinic" construction across all clinics[50] Continuously Enhancing Operational and Medical Service Capabilities The Group aims to enhance operational and medical service capabilities by implementing differentiated services, advanced technologies like 3D simulated hair transplant design, and patient-centric service systems - The Group will promote differentiated services based on regional market characteristics, establish a rigorous assessment mechanism, and upgrade process re-engineering and standardized operations for key clinics[51] - The Group will deepen its "Good Doctor + Good System" strategy, introduce advanced technological equipment, and plans to pilot 3D simulated hair transplant design and intelligent hair transplant surgery in more clinics[51] - The Group will promote the construction of a patient-centric multi-channel medical service system, improve the full lifecycle service experience for customers, and strengthen compliance management and risk control[51] Adhering to Technology-Oriented Operations to Promote Digital and Intelligent Services The Group is committed to technology-driven operations, leveraging AI models for business empowerment, implementing smart quality inspection systems, and achieving paperless operations across clinics - The Group will empower its business through intelligent AI models, introducing AI models in lead follow-up, deal closing, and post-operative service stages, and completing the pilot work for Yonghe's "3D simulated hair transplant design solution"[52] - The Group will complete the launch of the "Intelligent Quality Inspection System" to enhance quality inspection coverage and efficiency, and provide valuable business insights[52] - The Group will fully launch the "Paperless Clinic" project to digitize customer documents and reports, and strengthen information security and data privacy protection[52] Financial Review This section reviews the Group's financial performance for the six months ended June 30, 2024, covering revenue, costs, gross profit, expenses, tax, net loss, cash flow, capital expenditure, and debt Revenue For the six months ended June 30, 2024, the Group's revenue increased by 8.7% to RMB 900.2 million, driven by growth in both hair transplant and medical hair care services - For the six months ended June 30, 2024, the Group's revenue was RMB 900.2 million, an increase of 8.7% compared to the same period in 2023[54] Revenue Breakdown by Business Line | Business Line | H1 2024 (RMB thousand) | Share (%) | H1 2023 (RMB thousand) | Share (%) | | :--- | :--- | :--- | :--- | :--- | | Hair transplant medical services | 672,885 | 74.8 | 640,798 | 77.4 | | Medical hair care services | 215,176 | 23.9 | 171,684 | 20.7 | | Others | 12,142 | 1.3 | 15,325 | 1.9 | | Total | 900,203 | 100 | 827,807 | 100 | - Revenue from hair transplant medical services increased by 5.0% to RMB 672.9 million, primarily due to a 3.4% increase in patient numbers[54] - Revenue from medical hair care services increased by 25.3% to RMB 215.2 million, primarily due to a 21.9% increase in patient numbers[55] - Revenue from other services decreased by 20.8% to RMB 12.1 million[56] Costs For the six months ended June 30, 2024, sales and service costs increased to RMB 370.8 million, primarily due to higher employee costs and amortization and depreciation expenses - For the six months ended June 30, 2024, cost of sales and services was RMB 370.8 million, an increase from RMB 360.2 million in the same period of 2023[57] Details of Cost of Sales and Services | Cost Category | H1 2024 (RMB thousand) | Share (%) | H1 2023 (RMB thousand) | Share (%) | | :--- | :--- | :--- | :--- | :--- | | Staff costs | 142,032 | 38.3 | 140,983 | 39.1 | | Amortization and depreciation expenses | 152,677 | 41.2 | 135,846 | 37.7 | | Cost of inventories and consumables | 50,549 | 13.6 | 58,081 | 16.1 | | Operating related expenses | 19,596 | 5.3 | 17,518 | 4.9 | | Other expenses | 5,912 | 1.6 | 7,781 | 2.2 | | Total | 370,766 | 100 | 360,209 | 100 | - The increase in staff costs was mainly due to increased revenue, while the increase in amortization and depreciation expenses was primarily due to the increased number of operating medical institutions[57] Gross Profit and Gross Margin For the six months ended June 30, 2024, gross profit increased by 13.2% to RMB 529.4 million, with gross margin improving to 58.8% - For the six months ended June 30, 2024, gross profit was RMB 529.4 million, an increase of 13.2% compared to the same period last year[58] - Gross margin was 58.8%, an increase from 56.5% in the same period of 2023[58] Other Income For the six months ended June 30, 2024, other income decreased to RMB 0.8 million, mainly comprising government grants and VAT super deduction - For the six months ended June 30, 2024, other income was RMB 0.8 million, a decrease from RMB 1.2 million in the same period of 2023, mainly comprising government grants and VAT super deduction[59] General and Administrative Expenses For the six months ended June 30, 2024, general and administrative expenses decreased to RMB 141.0 million, primarily due to reduced employee costs from personnel optimization - For the six months ended June 30, 2024, general and administrative expenses were RMB 141.0 million, a decrease from RMB 174.9 million in the same period of 2023[60] Details of General and Administrative Expenses | Expense Category | H1 2024 (RMB thousand) | Share (%) | H1 2023 (RMB thousand) | Share (%) | | :--- | :--- | :--- | :--- | :--- | | Staff costs | 97,483 | 69.1 | 119,976 | 68.6 | | Operating related expenses | 9,096 | 6.5 | 14,086 | 8.1 | | Amortization and depreciation expenses | 9,441 | 6.7 | 8,967 | 5.1 | | Professional and consulting service fees | 6,757 | 4.8 | 7,734 | 4.4 | | Travel and entertainment expenses | 4,952 | 3.5 | 6,350 | 3.6 | | Others | 13,241 | 9.4 | 17,748 | 10.2 | | Total | 140,970 | 100 | 174,861 | 100 | - The decrease in staff costs was mainly due to personnel optimization and organizational structure adjustments[60] Selling and Marketing Expenses For the six months ended June 30, 2024, selling and marketing expenses decreased to RMB 462.6 million, mainly due to the implementation of refined marketing strategies - For the six months ended June 30, 2024, selling and marketing expenses were RMB 462.6 million, a decrease from RMB 498.4 million in the same period of 2023[61] Details of Selling and Marketing Expenses | Expense Category | H1 2024 (RMB thousand) | Share (%) | H1 2023 (RMB thousand) | Share (%) | | :--- | :--- | :--- | :--- | :--- | | Marketing and promotion expenses | 322,749 | 69.7 | 345,161 | 69.2 | | Staff costs | 119,716 | 25.9 | 127,148 | 25.5 | | Travel expenses | 5,892 | 1.3 | 8,970 | 1.8 | | Operating related expenses | 3,101 | 0.7 | 5,748 | 1.2 | | Amortization and depreciation expenses | 6,457 | 1.4 | 7,307 | 1.5 | | Others | 4,658 | 1.0 | 4,068 | 0.8 | | Total | 462,573 | 100 | 498,402 | 100 | - The decrease in marketing and promotion expenses was mainly due to the Group's implementation of refined marketing strategies[61] Income Tax Credit For the six months ended June 30, 2024, income tax credit decreased by 73.4% to RMB 8.1 million, primarily due to reduced deferred tax recognized on temporary losses - For the six months ended June 30, 2024, income tax credit decreased by 73.4% from RMB 30.2 million to RMB 8.1 million, mainly due to a decrease in deferred income tax recognized on temporary losses during the period[62] Net Loss and Net Loss Margin For the six months ended June 30, 2024, net loss narrowed to RMB 138.6 million, and net loss margin decreased to 15.4%, driven by improved operational efficiency and cost savings - For the six months ended June 30, 2024, net loss decreased from RMB 226.2 million to RMB 138.6 million, and the net loss margin decreased from 27.3% to 15.4%[63] - The decrease in net loss was primarily attributable to revenue growth driven by improved operational efficiency, and cost savings from optimized marketing and human resources[63] Cash and Cash Equivalents As of June 30, 2024, cash and cash equivalents decreased to RMB 533.8 million from RMB 603.2 million at December 31, 2023 - As of June 30, 2024, cash and cash equivalents were RMB 533.8 million, a decrease from RMB 603.2 million as of December 31, 2023[64] Cash Flows Net cash from operating activities turned positive for the first half of 2024, indicating improved operational health, despite a decrease in overall cash and cash equivalents Selected Data from Consolidated Cash Flow Statement | Item | H1 2024 (RMB thousand) | H1 2023 (RMB thousand) | | :--- | :--- | :--- | | Net cash from/(used in) operating activities | 73,974 | (24,978) | | Net cash (used in)/from investing activities | (18,282) | 163,055 | | Net cash used in financing activities | (125,169) | (210,537) | | Cash and cash equivalents at end of period | 533,780 | 486,842 | - Net cash from operating activities turned from a net outflow in the first half of 2023 to a net inflow in the first half of 2024, indicating improved operating conditions[65] Liquidity and Capital Resources The Group maintains a healthy cash flow and robust liquidity, with RMB 533.8 million in cash and cash equivalents, sufficient to meet operational needs and future expansion plans - As of June 30, 2024, cash and cash equivalents were RMB 533.8 million, and bank borrowings were RMB 132.6 million[66] - The Group possesses robust cash flow, which is sufficient to meet its daily working capital requirements and future medical institution expansion plans[64] Capital Expenditure For the six months ended June 30, 2024, capital expenditure significantly decreased to RMB 18.4 million, primarily due to reduced payments for property, plant, and equipment - For the six months ended June 30, 2024, capital expenditure was RMB 18.4 million, a significant decrease from RMB 107.6 million in the same period of 2023[67] Details of Capital Expenditure | Item | H1 2024 (RMB thousand) | H1 2023 (RMB thousand) | | :--- | :--- | :--- | | Payments for property, plant and equipment | 13,966 | 107,083 | | Payments for intangible assets | 4,398 | 540 | | Total | 18,364 | 107,623 | Indebtedness As of June 30, 2024, total indebtedness decreased to RMB 904.1 million, primarily due to reductions in bank borrowings and lease liabilities - As of June 30, 2024, the Group's total indebtedness was RMB 904.1 million, a decrease from RMB 1,095.5 million as of December 31, 2023[68] Details of Indebtedness | Debt Category | June 30, 2024 (RMB thousand) | December 31, 2023 (RMB thousand) | | :--- | :--- | :--- | | Current bank borrowings | 132,628 | 152,816 | | Current lease liabilities | 147,608 | 170,044 | | Non-current lease liabilities | 623,825 | 772,693 | | Total | 904,061 | 1,095,553 | Bank Borrowings As of June 30, 2024, outstanding interest-bearing bank borrowings were RMB 132.6 million, with interest rates ranging from 2.9% to 3.4% - As of June 30, 2024, outstanding interest-bearing bank borrowings were RMB 132.6 million, bearing interest at annual rates ranging from 2.9% to 3.4%[69] Lease Liabilities As of June 30, 2024, total outstanding lease liabilities decreased to RMB 771.4 million from RMB 942.7 million at December 31, 2023 - As of June 30, 2024, total outstanding lease liabilities were RMB 771.4 million, a decrease from RMB 942.7 million as of December 31, 2023[70] Plans for Material Investments or Capital Asset Purchases in the Future As of June 30, 2024, the Group had no plans for material investments or capital asset purchases beyond those disclosed in the prospectus - As of June 30, 2024, the Group had no plans for any material investments or capital asset purchases in the future, other than those disclosed in the prospectus[70] Pledge of Assets As of June 30, 2024, the Group had no pledged assets - As of June 30, 2024, the Group had no pledged assets[70] Gearing Ratio As of June 30, 2024, the Group's gearing ratio slightly increased to 16.5% from 16.2% at December 31, 2023 - As of June 30, 2024, the Group's gearing ratio was 16.5%, a slight increase from 16.2% as of December 31, 2023[70] Exchange Rates and Any Related Hedges The Group has no significant foreign currency risk as its operations, assets, and liabilities are primarily denominated in RMB, with a small amount of foreign currency cash - The Group does not have significant foreign currency risk as its operations, assets, and liabilities are primarily denominated in RMB[71] - As of June 30, 2024, cash and cash equivalents denominated in foreign currencies amounted to RMB 7.5 million[71] Contingent Liabilities As of June 30, 2024, the Group had no significant contingent liabilities - As of June 30, 2024, the Group had no significant contingent liabilities[72] Employees and Remuneration Policies As of June 30, 2024, the Group had 3,826 employees, with total employee costs decreasing, and offers competitive remuneration, development, and social security benefits - As of June 30, 2024, the Group had a total of 3,826 employees, of whom 1,503 were professional medical team members[72] - Employee costs for the six months ended June 30, 2024, were RMB 371.3 million, a decrease from RMB 399.7 million in the same period of 2023[72] - The Group offers competitive remuneration packages, promotion opportunities, diverse training programs, and a professional working environment, and participates in social security schemes for its employees[72] Other Information This section covers additional corporate governance, compliance, and financial information, including interim dividends, share repurchases, and the audit committee's review Interim Dividends The Board has resolved not to declare any interim dividend for the six months ended June 30, 2024 - The Board has resolved not to declare any interim dividend for the six months ended June 30, 2024[73] Compliance with the Corporate Governance Code The company complied with the Corporate Governance Code, except for the chairman and CEO roles being held by the same individual, which the Board believes benefits management - The Company has complied with all applicable principles and code provisions of the Corporate Governance Code, except for the deviation from code provision C.2.1 (the roles of chairman and chief executive officer are performed by the same individual, Mr. Zhang Yu)[73] - The Board believes that combining the roles of chairman and chief executive officer is beneficial to the Group's management[73] Compliance with the Model Code for Securities Transactions The company adopted the Model Code for securities transactions by directors and employees, confirming compliance during the reporting period - The Company has adopted the Model Code for Securities Transactions by Directors and Employees who may possess unpublished inside information of the Company[73] - The Directors have confirmed their compliance with the Model Code throughout the reporting period, and the Company has not identified any instances of non-compliance by relevant employees[73] Events After the Reporting Period No significant events occurred after the reporting period that could impact the Group, other than those disclosed in this announcement - Save as disclosed in this announcement, there have been no significant events after the reporting period that could affect the Group[74] Use of Proceeds from Global Offering and Change in Use of Proceeds The company received net proceeds of approximately HKD 1,526.2 million from the global offering and resolved to reallocate HKD 251.0 million to working capital to optimize financial resource deployment - The Company received net proceeds of approximately HKD 1,526.2 million from the global offering[76] - On August 22, 2024, the Board resolved to change the use of the unutilized net proceeds again, reallocating a total of HKD 251.0 million from "product and service innovation projects," "R&D and enhancement of service system," and "integration of industry resources to enhance brand awareness" categories to "working capital and general corporate purposes"[76][77] Use of Proceeds from Global Offering and Changes | Use of Proceeds | Planned Amount (HKD million) | Unutilized Amount as of June 30, 2024 (HKD million) | Revised Amount as of August 22, 2024 (HKD million) | Expected Timeline for Full Utilization | | :--- | :--- | :--- | :--- | :--- | | For expansion and upgrade of existing hair transplant medical institutions in China | 64.7 | 0 | 0 | Not applicable | | For product and service innovation projects | 222.3 | 131.2 | 88.6 | Before December 2025 | | For investment in R&D and enhancement of our service system with cutting-edge technology | 136.1 | 93.5 | 38.2 | Before December 2025 | | For integration of industry resources in China to enhance our brand awareness | 378.3 | 282.3 | 122.3 | Before December 2025 | | For settlement of outstanding balance of acquisition consideration for acquisition of Prominent Hair | 0 | 0 | 0 | Not applicable | | For working capital and general corporate purposes | 24.2 | 0 | 251.0 | Before December 2025 | | Total | 825.6 | 507.0 | 500.1 | | - Reasons for changing the use of proceeds include reduced R&D costs due to cooperation with pharmaceutical companies, lower data analytics team building costs, completion of smart hospital construction, and a slowdown in clinic expansion due to economic conditions[77] Repurchase, Sale or Redemption of the Company's Listed Securities For the six months ended June 30, 2024, the company repurchased 1,608,000 shares for approximately HKD 1,998,120, demonstrating confidence in its business development - For the six months ended June 30, 2024, the Company repurchased a total of 1,608,000 shares on the Stock Exchange, representing 0.31% of the total share capital, for a total consideration of approximately HKD 1,998,120[78] Monthly Share Repurchase Report | Repurchase Month | Number of Shares Repurchased | Highest Price Per Share (HKD) | Lowest Price Per Share (HKD) | Total Consideration (HKD) | | :--- | :--- | :--- | :--- | :--- | | January 2024 | 216,000 | 2.05 | 1.90 | 426,425 | | April 2024 | 702,500 | 1.21 | 0.92 | 772,760 | | May 2024 | 642,500 | 1.27 | 1.05 | 747,145 | | June 2024 | 47,000 | 1.15 | 1.01 | 51,790 | - On June 14, 2024, the Company cancelled 1,561,000 repurchased shares, reducing the number of issued shares to 525,519,416[79] Audit Committee The Audit Committee, chaired by Mr. Chen Bingjun, oversees external auditors, internal audit systems, and reviews financial reports and disclosures - The Audit Committee is chaired by Mr. Chen Bingjun, an independent non-executive Director, and comprises Mr. Geng Jiaqi, a non-executive Director, and Mr. Li Xiaopei, an independent non-executive Director[80] - The primary responsibilities of the Audit Committee include overseeing and evaluating the work of external auditors, supervising the implementation of internal audit systems, and reviewing financial reports and related disclosures[80] Review of Interim Results The Audit Committee, management, and independent auditors reviewed the unaudited condensed consolidated interim financial information for the six months ended June 30, 2024 - The Audit Committee, together with the Company's management and independent auditors, has reviewed the accounting principles and policies adopted by the Company and the unaudited condensed consolidated interim financial information for the six months ended June 30, 2024[81] - The unaudited condensed consolidated interim financial information has been reviewed by the Company's independent auditors in accordance with Hong Kong Standard on Review Engagements 2410[81] Publication of Interim Results Announcement and Interim Report The interim results announcement is available on the HKEX and company websites, with the full 2024 interim report to be published later - This interim results announcement is available on the website of the Stock Exchange and the Company's website[82] - The 2024 Interim Report, containing all information required by the Listing Rules, will be published on the respective websites of the Stock Exchange and the Company in due course[82] Definitions This section provides definitions for key terms and abbreviations used in this announcement to ensure a clear understanding of the report content - This section provides definitions for terms such as "Audit Committee," "Board," "CAGR," "Corporate Governance Code," "Chairman," "Domestic," "Company," "Directors," "Group," "HKD," "Hong Kong," "Listing," "Listing Rules," "Main Board," "Model Code," "Prospectus," "RMB," "Reporting Period," "Shareholder," "Shares," "Stock Exchange," "US$," and "%"[83][84]