友联国际教育租赁(01563) - 2020 - 中期财报

Management Discussion and Analysis Business Review COVID-19 severely impacted key clients, causing delayed repayments and the industry's first negative growth since 2006, prompting legal actions - COVID-19 severely impacted the company's key healthcare and aviation clients, leading to delayed repayments[5] - China's finance lease contract balance was approximately RMB 6.5 trillion at the end of Q1 2020, a 2.8% decrease from end-2019, marking the first negative growth since 2006[5] - Management initiated various measures, including legal actions, to protect the company's rights under finance lease agreements due to delayed repayments[5] Financial Review Total revenue decreased by 10.1%, and loss for the period surged 975.8% to RMB 35.5 million, primarily due to increased impairment provisions Revenue Total revenue decreased by 10.1% due to unrecognised finance lease income from lessees with prolonged repayment delays Revenue Overview | Item | Six Months Ended June 30, 2020 (RMB million) | Six Months Ended June 30, 2019 (RMB million) | YoY Change | | :--- | :--- | :--- | :--- | | Revenue | Approx. 128.0 | Approx. 142.4 | -10.1% | Other Income, Gains or Losses Other income, gains or losses significantly increased YoY, driven by higher bank interest income and new compensation from aircraft sales Details of Other Income, Gains or Losses | Item | Six Months Ended June 30, 2020 (RMB million) | Six Months Ended June 30, 2019 (RMB million) | Change (RMB million) | | :--- | :--- | :--- | :--- | | Bank interest income | Approx. 1.4 | Approx. 0.8 | +0.6 | | Compensation from aircraft sales | Approx. 0.9 | 0 | +0.9 | | Total | Approx. 2.3 | Approx. 0.9 | +1.4 | Staff Costs Staff costs decreased by 35.8% YoY due to a reduction in the number of employees - Staff costs decreased by approximately 35.8% from approximately RMB 6.7 million in the prior period to approximately RMB 4.3 million in the reporting period, primarily due to a reduction in employee headcount[9] Other Operating Expenses Other operating expenses slightly decreased YoY from approximately RMB 10.0 million to RMB 8.9 million, maintaining a stable proportion of total revenue - Other operating expenses decreased to approximately RMB 8.9 million from RMB 10.0 million in the prior period[10] Finance Costs Finance costs significantly decreased by 34.4% YoY to RMB 71.2 million, driven by reduced borrowing balances and bond maturity Composition of Finance Costs | Item | Six Months Ended June 30, 2020 (RMB million) | Six Months Ended June 30, 2019 (RMB million) | YoY Change | | :--- | :--- | :--- | :--- | | Borrowing costs | Approx. 54.5 | Approx. 77.6 | -29.7% | | Bonds payable costs | Approx. 9.7 | Approx. 23.1 | -57.9% | | Total Finance Costs | Approx. 71.2 | Approx. 108.4 | -34.4% | Loss for the Period Loss for the period sharply expanded by 975.8%, and net profit margin deteriorated from -2.3% to -27.3%, due to decreased finance lease income and increased impairment provisions Loss for the Period and Net Profit Margin | Metric | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | YoY Change | | :--- | :--- | :--- | :--- | | Loss for the period (RMB million) | Approx. 35.5 | Approx. 3.3 | +975.8% | | Net profit margin | -27.3% | -2.3% | Significant decline | Liquidity, Financial Resources and Capital Structure Cash and cash equivalents decreased to RMB 337 million YoY, while the gearing ratio remained stable at 64.1%, with RMB 586 million in new borrowings supporting operations Key Financial Position Indicators (As at Period-End) | Metric | June 30, 2020 (RMB million) | June 30, 2019 (RMB million) | | :--- | :--- | :--- | | Cash and cash equivalents | Approx. 336.9 | Approx. 639.2 | | Working capital | Approx. 762.0 | Approx. 1,016.0 | | Total equity | Approx. 1,146.8 | Approx. 1,262.0 | | Gearing ratio | Approx. 64.1% | Approx. 64.9% | - For the six months ended June 30, 2020, the Group obtained new borrowings of RMB 586 million with interest rates ranging from 3.85% to 8%[15] Finance Lease Receivables Total finance lease receivables slightly decreased by 1.5% YoY, but impairment loss provisions surged by 298.8% to RMB 303 million, reflecting heightened concerns over asset quality Finance Lease Receivables and Impairment Provisions | Item | Six Months Ended June 30, 2020 (RMB million) | Six Months Ended June 30, 2019 (RMB million) | YoY Change | | :--- | :--- | :--- | :--- | | Finance lease receivables | Approx. 2,940.2 | Approx. 2,985.1 | -1.5% | | Impairment loss provisions | Approx. 303.1 | Approx. 76.0 | +298.8% | Employees and Remuneration Policy As of June 30, 2020, full-time employees decreased from 40 to 22, with employee benefit expenses falling from RMB 6.7 million to RMB 4.3 million - As of June 30, 2020, the Group employed 22 full-time employees, a significant reduction from 40 in the prior period[18] - For the six months ended June 30, 2020, employee benefit expenses were approximately RMB 4.3 million, lower than RMB 6.7 million in the prior period[18] Risk Management The Group manages credit risk with a comprehensive system, adopting a five-tier asset classification for finance lease receivables and an expected credit loss model for impairment assessment - The Group identifies credit risk as its primary exposure and has developed a comprehensive risk management system covering pre-transaction, in-transaction, and post-transaction controls[20] - The company voluntarily adopts a five-tier asset quality classification system (normal, special mention, substandard, doubtful, loss) to monitor finance lease receivables, categorized by days past due[20][21] - The Group also uses an expected credit loss model for impairment assessment, considering client characteristics, credit history, and economic conditions[22] Use of Proceeds from Global Offering Net proceeds of RMB 323.5 million were primarily for business expansion, with RMB 57.7 million remaining unutilized due to economic slowdown, expected to be fully deployed by end-2021 Use and Utilization of Net Proceeds (As of June 30, 2020) | Use of Net Proceeds | Planned Utilization (RMB million) | Utilized Amount (RMB million) | Unutilized Amount (RMB million) | Expected Timeline for Utilization | | :--- | :--- | :--- | :--- | :--- | | Healthcare industry expansion | 161.8 | 128.0 | 33.8 | Expected to be fully utilized by end-2021 or earlier | | Aviation and public infrastructure industry expansion | 129.4 | 124.5 | 4.9 | Expected to be fully utilized by end-2021 or earlier | | General working capital | 32.3 | 13.3 | 19.0 | Expected to be fully utilized by end-2021 or earlier | | Total | 323.5 | 265.8 | 57.7 | | - The primary reason for unutilized proceeds is the slower pace of business development due to global economic slowdown and market changes[26] Events After Reporting Period Post-reporting period, the company experienced board and management changes, including a new Non-Executive Director, an Executive Director's resignation, and a new CFO appointment - Mr. Jiao Jianbin was appointed as a Non-Executive Director on September 16, 2020[27] - Ms. Xu Juan resigned as an Executive Director on September 18, 2020, and Mr. Yuan Jianshan was appointed as Chief Financial Officer on the same day[27] Outlook and Plans For H2 2020, the Group plans to strengthen risk management and overdue asset recovery, focus on counter-cyclical projects, and explore FinTech applications for long-term development - Strengthen risk management and overdue asset recovery to ensure asset security[28] - Prioritize projects in counter-cyclical or weakly cyclical industries for business deployment[28] - Explore FinTech applications, especially blockchain technology in automotive, shipping, and construction machinery leasing, to build a digital service platform[28] Other Information Corporate Governance and Board Committees The company maintains high corporate governance standards, complying with all code provisions and ensuring its Audit, Remuneration, and Nomination Committees fulfilled their duties - The company complied with all code provisions of the Corporate Governance Code during the reporting period[30] - The Audit Committee reviewed the unaudited condensed financial statements for the six months ended June 30, 2020[32] Securities Transactions and Share Option Scheme The company complied with its directors' securities transaction code, with no listed securities purchased, sold, or redeemed, and no share options granted or exercised during the period - All directors confirmed compliance with the securities dealing code during the reporting period[36] - Neither the company nor any of its subsidiaries purchased, sold, or redeemed any of the company's listed securities during the reporting period[37] - No outstanding share options existed under the share option scheme, nor were any granted, exercised, cancelled, or lapsed during the reporting period[39] Directors' and Shareholders' Interests As of June 30, 2020, CEO Mr. Li Luqiang held 0.55% interest, while Union Capital Pte. Ltd. was the controlling shareholder with 51.23%, and PA Investment Funds SPC held 9.87% - Executive Director and CEO Mr. Li Luqiang held approximately 0.55% of the company's interests through controlled corporations and beneficial ownership[40] Major Shareholder Holdings (As of June 30, 2020) | Major Shareholder | Interest Percentage | | :--- | :--- | | Union Capital Pte. Ltd. (and parties acting in concert) | 51.23% | | PA Investment Funds SPC (and parties acting in concert) | 9.87% | Condensed Consolidated Financial Statements Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income Revenue decreased by 10.1% to RMB 128 million, and loss for the period expanded to RMB 35.5 million due to increased financial asset impairment losses, with a loss per share of RMB 0.0237 Key Profit or Loss Statement Data | Item (RMB thousand) | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :--- | :--- | :--- | | Revenue | 127,967 | 142,395 | | Finance costs | (71,185) | (108,445) | | Impairment loss on financial assets | (94,135) | (14,686) | | Loss for the period | (35,528) | (3,250) | | Loss per share (RMB) | (0.0237) | (0.0025) | Condensed Consolidated Statement of Financial Position As of June 30, 2020, total assets were RMB 3.457 billion, total liabilities RMB 2.310 billion, and total equity RMB 1.147 billion, with finance lease receivables and borrowings as core components Key Financial Position Data (As of June 30, 2020) | Item (RMB thousand) | Amount | | :--- | :--- | | Assets | | | Finance lease receivables | 2,940,197 | | Bank balances and cash | 356,741 | | Total Assets | 3,457,056 | | Liabilities and Equity | | | Borrowings | 1,813,929 | | Bonds issued | 236,580 | | Total Liabilities | 2,310,286 | | Total Equity | 1,146,770 | Condensed Consolidated Cash Flow Statement Net cash outflow from operating activities was RMB 238 million, a significant reversal YoY, while net cash inflow from financing activities was RMB 308 million, with period-end cash at RMB 337 million Key Cash Flow Statement Data | Item (RMB thousand) | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :--- | :--- | :--- | | Net cash from operating activities | (237,733) | 753,604 | | Net cash from investing activities | 10,844 | (488) | | Net cash from financing activities | 307,814 | (506,838) | | Cash and cash equivalents at period-end | 336,913 | 639,201 | Notes to the Condensed Consolidated Interim Financial Information Notes detail key accounting items, showing impairment provisions for finance lease receivables increased from RMB 209 million to RMB 303 million, with related party finance lease income of RMB 30.506 million - During the reporting period, impairment provisions for finance lease receivables increased from approximately RMB 209 million at the beginning of the year to approximately RMB 303 million at period-end, with credit-impaired (over 90 days past due) provisions accounting for the majority[74][79] - For the six months ended June 30, 2020, the Group obtained new borrowings of RMB 586 million with interest rates ranging from 3.85% to 8%[83] - During the reporting period, finance lease income from related parties Nanshan Group and its subsidiaries was RMB 30.506 million[90]