康宁医院(02120) - 2021 - 中期财报

Company Information Company Basic Information and Organizational Structure This section outlines Wenzhou Kangning Hospital Co., Ltd.'s registration, board, committees, secretaries, representatives, auditors, legal counsel, offices, H-share registrar, stock code, website, and investor relations, noting recent changes in non-executive directors and supervisors - The Board of Directors includes executive, non-executive, and independent non-executive directors, and has established an Audit Committee, Nomination Committee, Remuneration Committee, and Strategy and Risk Management Committee[5] - On April 30, 2021, Mr. Lin Lijun resigned as a non-executive director and a member of the Strategy and Risk Management Committee; on September 9, 2021, Mr. Yang Yang resigned as a non-executive director and a member of the Audit Committee, and Ms. Huang Jingou resigned as a shareholder representative supervisor[6] - The Company's H-share stock code is 2120, and its website is www.knhosp.cn[7](index=7&type=chunk) Financial Highlights Key Financial Data and Indicators For the six months ended June 30, 2021, the company achieved significant growth in operating revenue and net profit, with increases in total assets and equity, reflecting robust financial performance Key Financial Data for the Six Months Ended June 30 (RMB in thousands) | Indicator | 2021 (Unaudited) | 2020 (Unaudited) | Change Rate (%) | | :------------------------- | :--------------- | :--------------- | :-------------- | | Operating Revenue | 622,811 | 465,150 | 33.9% | | Profit Before Income Tax | 57,665 | 39,404 | 46.3% | | Income Tax Expense | (16,522) | (10,503) | 57.3% | | Net Profit | 41,143 | 28,901 | 42.3% | | Net Profit Attributable to Shareholders of the Company | 42,913 | 36,410 | 17.9% | | Loss Attributable to Minority Shareholders | (1,770) | (7,509) | -76.4% | Key Balance Sheet Data (RMB in thousands) | Indicator | June 30, 2021 (Unaudited) | December 31, 2020 (Audited) | Change Rate (%) | | :------------------------- | :------------------------ | :-------------------------- | :-------------- | | Total Assets | 2,410,867 | 2,274,908 | 6.0% | | Total Liabilities | 1,038,771 | 960,485 | 8.1% | | Total Equity | 1,372,096 | 1,314,423 | 4.4% | | Equity Attributable to Shareholders of the Company | 1,287,559 | 1,186,459 | 8.5% | | Minority Interests | 84,537 | 127,964 | -33.9% | Management Discussion and Analysis Business Review and Outlook In H1 2021, the Group's self-owned hospital business grew steadily despite the pandemic, expanding hospital count and operating beds through various models, while actively pursuing industry chain layout and business transformation in internet mental health, child/adolescent psychological services, and elderly rehabilitation - As of June 30, 2021, the Group's self-owned hospitals increased to 25 (including 1 independent internet hospital), with operating beds rising to 8,328, up from 24 hospitals and 7,483 beds at the end of 2020[10] - The Group enhanced its "Internet Mental Health Platform," accelerating online-offline service integration; innovated social psychological services, exploring child and adolescent mental health models; and strengthened elderly rehabilitation medical layout with multiple projects under construction[11] - Looking ahead, the Group will focus on public health needs, respond to national policies, cultivate Zhejiang's grassroots medical service market, and strengthen talent development in mental health and elderly rehabilitation for sustainable growth[12] Financial Review During the reporting period, the Group achieved substantial growth in revenue and gross profit, improved gross margin for self-owned hospitals, and increased net profit attributable to shareholders, demonstrating strong profitability - The Group's revenue reached RMB 622.8 million, a 33.9% year-on-year increase[13] - Self-owned hospital operating revenue was RMB 576.4 million, a 31.3% year-on-year increase[13] - Self-owned hospital gross margin increased to 27.5% (2020: 26.3%), driving overall gross profit growth of 31.5% to RMB 168.7 million[13] - Net profit attributable to the Company's shareholders was RMB 42.9 million, a 17.9% year-on-year increase[13] Revenue and Cost of Revenue The Group's revenue primarily stems from self-owned hospital operations, other medical-related businesses, and real estate, with all segments showing growth, notably real estate due to investment property disposal Total Revenue Breakdown (RMB in thousands) | Revenue Source | 2021 (Unaudited) | 2020 (Unaudited) | Change Rate (%) | | :----------------------------- | :--------------- | :--------------- | :-------------- | | Self-Owned Hospital Operating Revenue | 576,419 | 438,886 | 31.3% | | Other Medical-Related Business Revenue | 27,023 | 19,116 | 41.4% | | Real Estate Business Revenue | 19,369 | 7,148 | 171.0% | | Total Revenue | 622,811 | 465,150 | 33.9% | Self-Owned Hospital Operating Revenue and Cost of Revenue Self-owned hospital operating revenue, primarily from treatment, general medical services, and drug sales, grew due to increased inpatient and outpatient services, with cost of revenue rising due to higher drug/consumable and employee benefit expenses Self-Owned Hospital Operating Revenue, Cost, and Gross Profit Breakdown (RMB in thousands) | Indicator | 2021 (Unaudited) | 2020 (Unaudited) | Change Rate (%) | | :------------------------------- | :--------------- | :--------------- | :-------------- | | Treatment and General Medical Services | | | | | Revenue | 448,139 | 337,751 | 32.7% | | Cost of Revenue | 295,524 | 237,419 | 24.5% | | Gross Profit | 152,615 | 100,332 | 52.1% | | Drug Sales | | | | | Revenue | 128,280 | 101,135 | 26.8% | | Cost of Revenue | 122,123 | 86,044 | 41.9% | | Gross Profit | 6,157 | 15,091 | -59.2% | | Total Self-Owned Hospitals | | | | | Revenue | 576,419 | 438,886 | 31.3% | | Cost of Revenue | 417,647 | 323,463 | 29.1% | | Gross Profit | 158,772 | 115,423 | 37.6% | Self-Owned Hospital Inpatient and Outpatient Operating Data | Indicator | 2021 (Unaudited) | 2020 (Unaudited) | Change Rate (%) | | :------------------------------- | :--------------- | :--------------- | :-------------- | | Inpatient | | | | | Number of Inpatient Beds at Period End | 8,328 | 6,853 | 21.5% | | Inpatient Days | 1,315,493 | 1,030,392 | 27.7% | | Total Inpatient Revenue (RMB in thousands) | 498,407 | 378,831 | 31.6% | | Outpatient | | | | | Outpatient Visits | 177,881 | 125,852 | 41.3% | | Total Outpatient Revenue (RMB in thousands) | 78,012 | 60,055 | 29.9% | - Inpatient revenue slightly increased to 86.5% of self-owned hospital operating revenue, while outpatient revenue slightly decreased to 13.5%[23] - Self-owned hospital cost of revenue increased by 29.1%, mainly driven by higher expenses for drugs and consumables (+33.1%), employee benefits and expenses (+33.2%), and depreciation of right-of-use assets (+23.5%)[27] Other Medical-Related Business Revenue Other medical-related business revenue, including medical equipment sales, non-hospital drug sales, social psychological services, and IT, increased to RMB 27.0 million, with significant contributions from non-hospital drug and medical equipment sales - Other medical-related business revenue was RMB 27.0 million, with non-hospital drug and medical equipment sales revenue at RMB 16.3 million, a significant increase from RMB 5.8 million in the same period of 2020[28] Real Estate Business Revenue Real estate business revenue, comprising property leasing and sales, significantly increased to RMB 19.4 million, primarily due to sales revenue from the disposal of investment properties - Real estate business revenue increased to RMB 19.4 million (2020: RMB 7.1 million), mainly due to RMB 16.0 million in sales revenue from the disposal of Wenzhou Guoda investment properties[29] Gross Profit and Gross Margin During the reporting period, the Group's total gross profit and self-owned hospital business gross profit both increased, while the overall gross margin slightly decreased due to a decline in drug sales gross margin, despite an improvement in treatment and general medical services gross margin - The Group's total gross profit reached RMB 168.7 million, a 31.5% year-on-year increase; self-owned hospital business gross profit reached RMB 158.8 million, a 37.6% year-on-year increase[30] Gross Margin Breakdown by Business | Business | 2021 (Unaudited) | 2020 (Unaudited) | Change (Percentage Points) | | :------------------------------- | :--------------- | :--------------- | :------------------------- | | Treatment and General Medical Services | 34.1% | 29.7% | +4.4 | | Drug Sales | 4.8% | 14.9% | -10.1 | | Self-Owned Hospital Business | 27.5% | 26.3% | +1.2 | | Real Estate and Other Businesses | 21.3% | 47.1% | -25.8 | | Overall Gross Margin | 27.1% | 27.6% | -0.5 | Taxes and Surcharges During the reporting period, the Group's taxes and surcharges amounted to RMB 2.2 million, remaining largely consistent with the prior year - Taxes and surcharges were RMB 2.2 million (2020: RMB 2.0 million)[31] Selling Expenses During the reporting period, the Group's selling expenses were RMB 4.9 million, with the proportion to self-owned hospital operating revenue remaining stable - Selling expenses were RMB 4.9 million (2020: RMB 3.7 million), representing 0.8% of self-owned hospital operating revenue, consistent with the prior year[32] Administrative Expenses During the reporting period, the Group's administrative expenses increased by 33.5%, primarily due to higher employee benefits, depreciation, and amortization, leading to a slight rise in the ratio of administrative expenses to self-owned hospital operating revenue Administrative Expenses Breakdown (RMB in thousands) | Item | 2021 (Unaudited) | 2020 (Unaudited) | Change Rate (%) | | :------------------------- | :--------------- | :--------------- | :-------------- | | Employee Benefits and Expenses | 42,156 | 35,136 | 19.9% | | Depreciation and Amortization | 8,632 | 5,970 | 44.6% | | Professional Service Fees | 2,845 | 2,406 | 18.2% | | Travel Expenses | 1,226 | 1,468 | -16.5% | | Others | 18,076 | 9,659 | 87.1% | | Total Administrative Expenses | 72,935 | 54,639 | 33.5% | - Administrative expenses accounted for 12.7% of self-owned hospital operating revenue (2020: 12.4%)[34] Research and Development Expenses During the reporting period, R&D expenses surged by 347.6%, primarily due to increased investment in IT software, social psychological service platforms, and internet hospital application development, alongside clinical research incentive policies - R&D expenses were RMB 11.8 million (2020: RMB 2.6 million), a 347.6% year-on-year increase[35] - R&D expenses as a percentage of self-owned hospital operating revenue increased to 2.0% (2020: 0.6%)[35] - The increase was mainly driven by increased investment in IT software, social psychological service platforms, and internet hospital application development, as well as the implementation of clinical research incentive policies at Wenzhou Kangning Hospital[35] Finance Costs - Net During the reporting period, net finance costs increased by RMB 5.3 million, primarily due to higher interest expenses from increased bank borrowings and lease liabilities Finance Income and Expenses Breakdown (RMB in thousands) | Item | 2021 (Unaudited) | 2020 (Unaudited) | Change (RMB in thousands) | | :------------------------- | :--------------- | :--------------- | :------------------------ | | Interest Income | 1,684 | 2,454 | -770 | | Exchange (Loss) / Gain | (23) | 125 | -148 | | Borrowing Interest Expense | (11,674) | (9,165) | -2,509 | | Lease Liability Interest Expense | (6,558) | (4,921) | -1,637 | | Others | (548) | (339) | -209 | | Net Finance Costs | (17,119) | (11,846) | -5,273 | - Net finance costs increased by RMB 5.3 million, primarily due to a RMB 2.5 million increase in borrowing interest expenses from higher bank loans and a RMB 1.6 million increase in lease liability interest expenses[36] Investment Income / (Loss) During the reporting period, the Group's investment income was RMB 5.4 million, primarily benefiting from gains generated by the disposal and restructuring of Wenzhou Guoda equity Investment Income / (Loss) Breakdown (RMB in thousands) | Item | 2021 (Unaudited) | 2020 (Unaudited) | Change (RMB in thousands) | | :--------------------------------- | :--------------- | :--------------- | :------------------------ | | Share of Loss of Associates Accounted for Using Equity Method | (755) | (1,020) | 265 | | Gain on Disposal of Long-Term Equity Investment | 6,119 | – | 6,119 | | Interest from Structured Deposits | – | 96 | -96 | | Total Investment Income | 5,364 | (924) | 6,288 | - Investment income primarily resulted from gains generated by the disposal and restructuring of Wenzhou Guoda equity[39] Credit Impairment Losses During the reporting period, credit impairment losses decreased to RMB 12.0 million, with its proportion to total revenue declining, while the allowance for doubtful accounts for trade receivables increased - Credit impairment losses decreased to RMB 12.0 million (2020: RMB 16.1 million), representing 1.9% of total revenue (2020: 3.5%)[40] - As of June 30, 2021, the allowance for doubtful accounts for trade receivables was RMB 44.2 million, accounting for 10.6% of total trade receivables (December 31, 2020: RMB 33.9 million, 9.5%)[40] Non-Operating Income (Expenses) During the reporting period, the Group's non-operating income remained largely stable, while non-operating expenses decreased, primarily due to reduced donation expenditures Non-Operating Income and Expenses Breakdown (RMB in thousands) | Item | 2021 (Unaudited) | 2020 (Unaudited) | Change (RMB in thousands) | | :------------------------- | :--------------- | :--------------- | :------------------------ | | Government Grants | 297 | 30 | 267 | | Other Non-Operating Income | 308 | 535 | -227 | | Non-Operating Income | 605 | 565 | 40 | | Donation Expenses | (973) | (2,627) | 1,654 | | Other Non-Operating Expenses | (1,739) | (408) | -1,331 | | Non-Operating Expenses | (2,712) | (3,035) | 323 | - Non-operating expenses decreased to RMB 2.7 million, primarily due to a RMB 1.7 million reduction in donation expenditures[41] Income Tax Expense During the reporting period, income tax expense increased by 57.3%, with the effective tax rate rising - Income tax expense increased to RMB 16.5 million (2020: RMB 10.5 million), a 57.3% year-on-year increase[42] - The effective tax rate increased from 26.7% in the same period of 2020 to 28.7%[42] Financial Position This section details changes in assets and liabilities at the end of the reporting period, including inventory, trade receivables, disposal of investment properties, increase in right-of-use assets, and changes in accounts payable and other payables Inventories As of June 30, 2021, inventory balance slightly increased, primarily comprising drugs in stock and revolving materials - Inventory balance was RMB 39.1 million (December 31, 2020: RMB 37.5 million)[43] Trade Receivables As of June 30, 2021, the trade receivables balance increased by 16.0%, primarily due to higher self-owned hospital operating revenue, with an improvement in turnover days - Trade receivables balance was RMB 372.9 million (December 31, 2020: RMB 321.4 million), a 16.0% increase[44] - Trade receivables turnover days improved to 101 days (2020: 129 days)[45] Other Receivables and Prepayments As of June 30, 2021, other receivables and prepayments slightly decreased - Other receivables and prepayments decreased to RMB 74.8 million (December 31, 2020: RMB 75.4 million)[46] Investment Properties As of June 30, 2021, the Group had no investment properties, primarily due to the sale of all equity in Wenzhou Guoda - As of June 30, 2021, the Group had no investment properties (December 31, 2020: RMB 107.8 million), as they were previously held by Wenzhou Guoda, whose entire equity has been sold[47] Other Non-Current Financial Assets As of June 30, 2021, the balance of other non-current financial assets slightly increased, mainly due to the fair value increase of the Jinpu Fund investment - The balance of other non-current financial assets was RMB 57.7 million (December 31, 2020: RMB 57.4 million), with a fair value increase of RMB 0.3 million, primarily from the Jinpu Fund[48] Right-of-Use Assets As of June 30, 2021, right-of-use assets increased, primarily due to newly signed lease contracts - Right-of-use assets increased to RMB 276.5 million (December 31, 2020: RMB 227.6 million), mainly due to an RMB 69.5 million increase from newly signed lease contracts[49] Trade Payables As of June 30, 2021, trade payables slightly decreased - Trade payables slightly decreased to RMB 69.0 million (December 31, 2020: RMB 69.6 million)[51] Contract Liabilities As of June 30, 2021, contract liabilities increased - Contract liabilities increased to RMB 14.4 million (December 31, 2020: RMB 13.0 million)[52] Other Payables As of June 30, 2021, other payables decreased, primarily due to a reduction in payables for equity repurchases - Other payables decreased to RMB 35.8 million (December 31, 2020: RMB 76.6 million), mainly due to a RMB 23.3 million reduction in payables for equity repurchases[53] Liquidity and Capital Resources During the reporting period, the Group's net cash from operating activities significantly increased, net cash used in investing activities decreased, net cash from financing activities slightly declined, and the net increase in cash and cash equivalents substantially improved Consolidated Cash Flow Statement Key Data (RMB in thousands) | Item | 2021 (Unaudited) | 2020 (Unaudited) | Change (RMB in thousands) | | :--------------------------------- | :--------------- | :--------------- | :------------------------ | | Net Cash Generated from Operating Activities | 37,316 | 17,799 | 19,517 | | Net Cash Used in Investing Activities | (60,918) | (76,436) | 15,518 | | Net Cash Generated from Financing Activities | 93,139 | 94,945 | -1,806 | | Net Increase in Cash and Cash Equivalents | 69,515 | 36,424 | 33,091 | Net Cash Generated from Operating Activities Net cash generated from operating activities was RMB 37.3 million, primarily driven by net profit, adjustments for credit impairment losses, and asset depreciation/amortization, though working capital changes led to cash outflows - Net cash generated from operating activities was RMB 37.3 million, primarily including RMB 41.1 million in net profit, RMB 12.0 million in credit impairment loss adjustments, and RMB 70.1 million in various asset depreciation and amortization adjustments, while working capital changes resulted in RMB 92.0 million in cash outflows[55] Net Cash Used in Investing Activities Net cash used in investing activities was RMB 60.9 million, primarily for the acquisition of property, plant, and equipment, including hospital relocation projects and land use rights purchases - Net cash used in investing activities was RMB 60.9 million, primarily for the purchase of RMB 83.5 million in property, plant, and equipment, including the Qingtian Kangning Hospital and Yongjia Kangning Hospital relocation projects, and land use rights for Linhai Cining Hospital[56] Net Cash Generated from Financing Activities During the reporting period, net cash generated from financing activities amounted to RMB 93.1 million - Net cash generated from financing activities was RMB 93.1 million[57] Significant Investments, Acquisitions and Disposals During the reporting period, the Group had no significant investments, acquisitions, or disposals - The Group had no significant investments, acquisitions, or disposals during the six months ended June 30, 2021[58] Indebtedness The Group's indebtedness primarily consists of bank borrowings and lease liabilities; during the reporting period, bank borrowing balances increased, with no significant contingent liabilities or asset pledges Bank Borrowings As of June 30, 2021, the Group's bank borrowing balance increased, primarily due to new borrowings exceeding repayments - Bank borrowing balance was RMB 564.6 million (December 31, 2020: RMB 426.5 million), mainly due to RMB 283.0 million in new borrowings and RMB 144.9 million in repayments[58] Contingent Liabilities As of June 30, 2021, the Group had no significant contingent liabilities or guarantees - As of June 30, 2021, the Group had no contingent liabilities or guarantees that would have a significant impact on its financial position or operations[59] Pledge of Assets During the reporting period, the Group had no pledge of assets - The Group had no pledge of assets during the reporting period[60] Lease Liabilities As of June 30, 2021, the present value of the Group's lease liabilities was RMB 227.2 million - As of June 30, 2021, the present value of outstanding lease payments under irrevocable lease agreements was RMB 227.2 million[61] Financial Instruments The Group's financial instruments include trade receivables, other non-current financial assets, other receivables, cash and cash equivalents, bank borrowings, trade payables, and other payables, with management monitoring risks to ensure timely and effective measures - The Group's financial instruments include trade receivables, other non-current financial assets, other receivables, cash and cash equivalents, bank borrowings, trade payables, and other payables[62] Exchange Rate Fluctuation Risk The Group faces exchange rate fluctuation risk between HKD and RMB, managed by closely monitoring rate changes, but no derivative financial instruments were used for hedging during the reporting period - The Group primarily faces exchange rate fluctuation risk between HKD and RMB[63] - During the six months ended June 30, 2021, the Group did not use any derivative financial instruments to hedge exchange rate risk[63] Gearing Ratio As of June 30, 2021, the Group's gearing ratio slightly increased, primarily due to an increase in bank borrowings - The gearing ratio slightly increased to 43.1% (December 31, 2020: 41.6%), primarily due to an increase in bank borrowings[64] Employees and Remuneration Policy As of June 30, 2021, the Group's employee count and total staff remuneration both increased, with the remuneration policy referencing industry benchmarks and employee performance - As of June 30, 2021, the Group had 3,763 employees (December 31, 2020: 3,338 employees)[65] - During the reporting period, total staff remuneration was approximately RMB 198.1 million (2020: RMB 149.5 million), with average annual staff remuneration of RMB 108.2 thousand[65] Share Incentive Scheme The Company revised its 2018 share incentive scheme, removing performance assessment requirements and the company's obligation to repurchase unvested incentive shares; as of the reporting date, all 2,460,000 incentive shares have been granted - The Company revised the "Wenzhou Kangning Hospital Co., Ltd. 2018 Share Incentive Scheme," removing performance assessment requirements and the Company's obligation to repurchase unvested incentive shares[68] - As of the reporting date, the share incentive scheme had 193 actual grantees, with all 2,460,000 proposed incentive shares granted, representing 3.2976% of the total issued share capital, at a grant price of RMB 10.47 per share[69] Corporate Governance and Other Information Corporate Governance During the reporting period, the Company complied with the Corporate Governance Code; subsequently, a non-executive director resigned, causing the Audit Committee to fall short of Listing Rules requirements, which the Company will address promptly - The Company complied with all code provisions under the Corporate Governance Code during the reporting period[70] - On September 9, 2021, Mr. Yang Yang resigned as a non-executive director and a member of the Audit Committee, causing the Audit Committee to no longer comply with Rule 3.21 of the Hong Kong Listing Rules; the Company will appoint a suitable replacement as soon as practicable[70] Compliance with Model Code The Company's directors and supervisors complied with the Model Code during the reporting period, maintaining strict control and registration of insiders with access to inside information - Directors and supervisors complied with the requirements of the Model Code during the period from January 1, 2021, to June 30, 2021[71] - The Company restricted access to inside information to the minimum necessary before public disclosure and registered employees with inside information, prohibiting share dealings during blackout periods[71] Accounting Standards The Company has adopted China Accounting Standards for Business Enterprises since the 2017 financial year and complies with the disclosure requirements of the Hong Kong Companies Ordinance - The Company has adopted China Accounting Standards for Business Enterprises since the 2017 financial year, while also complying with the disclosure requirements of the Companies Ordinance (Chapter 622 of the Laws of Hong Kong)[72] Accounting Policies These financial statements are prepared in accordance with the Accounting Standards for Business Enterprises and Accounting Standard No. 32 – Interim Financial Reporting issued by the Ministry of Finance of China, with accounting policies consistent with the 2020 annual financial statements - These financial statements are prepared in accordance with the Accounting Standards for Business Enterprises – Basic Standards and specific accounting standards and related regulations issued by the Ministry of Finance[75] - The accounting policies adopted in these financial statements are consistent with those used by the Group in preparing its 2020 annual financial statements[75] Significant Changes in Accounting Policies The Group has adopted the "Accounting Treatment Provisions for Rent Concessions Related to COVID-19 Pandemic" and "Implementation Guidance for Accounting Standards for Business Enterprises" issued by the Ministry of Finance, with no significant impact on the financial statements - The Group has adopted the "Accounting Treatment Provisions for Rent Concessions Related to COVID-19 Pandemic" and "Implementation Guidance for Accounting Standards for Business Enterprises" issued by the Ministry of Finance in preparing its financial statements, with no significant impact on the financial statements of the Group and the Company[77] Audit Committee and Review of Interim Report and Interim Results The Audit Committee has reviewed this interim report and financial information, confirming compliance with applicable accounting standards and disclosure requirements - The Audit Committee has reviewed this interim report and the Group's financial information for the six months ended June 30, 2021, confirming compliance with applicable accounting standards, principles, and regulations, and appropriate disclosures[78] Interim Dividend The Board does not recommend the payment of an interim dividend for the six months ended June 30, 2021 - The Board does not recommend the payment of an interim dividend for the six months ended June 30, 2021 (2020: nil)[79] Purchase, Sale or Redemption of Listed Securities During the reporting period, neither the Company nor any of its subsidiaries purchased, sold, or redeemed any of the Company's listed securities - During the reporting period, neither the Company nor any of its subsidiaries purchased, sold, or redeemed any of the Company's listed securities[79] Changes in Directors, Supervisors and Senior Management During the reporting period, there were multiple changes in the Company's directors and supervisors, including changes in the appointments of Mr. Lin Lijun, Mr. Qin Hao, Mr. Yang Yang, and Ms. Huang Jingou - Mr. Lin Lijun resigned as a non-executive director on April 30, 2021; Mr. Qin Hao was appointed as a non-executive director on June 18, 2021[80] - Mr. Yang Yang resigned as a non-executive director and a member of the Audit Committee on September 9, 2021; Ms. Huang Jingou resigned as a shareholder representative supervisor on the same day[80] Events After the Reporting Period Subsequent to the reporting period, the Company proposed to apply for an A-share offering and signed an investment agreement to acquire 100% equity in Pingyang Changgeng Yining Hospital Co., Ltd - The Board proposed to apply for an A-share offering[82] - The Company entered into an investment agreement with relevant parties and individuals, conditionally agreeing to acquire 100% equity in Pingyang Changgeng Yining Hospital Co., Ltd. for a total consideration of RMB 154.7447 million[82] Changes in Resumes of Directors, Supervisors and Key Executives During the reporting period, there were changes in the resumes of directors, managers, and supervisors of some of the Group's subsidiaries, including Linhai Cining Hospital and Wenzhou Ouhai Yining Rehabilitation Hospital Changes in Key Executive Resumes | Name | Group Member | Position Held | Period in Position | | :--------------- | :--------------------------------- | :----------------------- | :----------------- | | Ms. Zhang Feixue | Linhai Cining Hospital Co., Ltd. | Executive Director and Manager | Since February 2021 | | Mr. Wang Jian | Wenzhou Ouhai Yining Rehabilitation Hospital Co., Ltd. | Chairman | Since March 2021 | | Mr. Jin Weiguang | Cangnan Yining Nursing Center Co., Ltd. | Executive Director and General Manager | Since March 2021 | | Ms. Wang Hongyue | Cangnan Yining Nursing Center Co., Ltd. | Supervisor | Since March 2021 | | Mr. Wang Jian | Hangzhou Yining Medical Equipment R&D Co., Ltd. | Executive Director and General Manager | Since April 2021 | | Mr. Zhou Chaoyi | Chun'an Qiandaohu Kangning Hospital Co., Ltd. | Executive Director and General Manager | Since May 2021 | Disclosure of Interests This section discloses the interests and short positions of directors, supervisors, chief executives, and substantial shareholders in the Company's shares as of June 30, 2021 Securities Interests of Directors, Supervisors and Chief Executives As of June 30, 2021, Mr. Guan Weili, Ms. Wang Lianyue, and Ms. Wang Hongyue held interests in the Company's domestic shares and H-shares, with Mr. Guan Weili and Ms. Wang Lianyue being spouses, and Ms. Wang Hongyue holding interests through controlled corporations Directors' Securities Interests (as of June 30, 2021) | Director Name | Share Type | Nature of Interest | Number of Shares (L) | Total Shares (L) | Approximate Percentage of Class of Shares | Approximate Percentage of Total Share Capital | | :--------------- | :--------- | :----------------- | :------------------- | :--------------- | :---------------------------------------- | :-------------------------------------------- | | Mr. Guan Weili | Domestic | Beneficial Owner | 18,350,250 | 22,144,750 | 40.07% | 29.68% | | | Domestic | Spouse's Interest | 3,794,500 | | | | | Ms. Wang Lianyue | Domestic | Beneficial Owner | 3,794,500 | 22,144,750 | 40.07% | 29.68% | | | Domestic | Spouse's Interest | 18,350,250 | | | | | Ms. Wang Hongyue | Domestic | Beneficial Owner | 3,984,350 | 5,984,350 | 10.83% | 8.02% | | | Domestic | Interest in Controlled Corporation | 2,000,000 | | | | | | H Shares | Beneficial Owner | 309,000 | 309,000 | 1.60% | 0.41% | - Mr. Guan Weili and Ms. Wang Lianyue are spouses and are deemed to have interests in each other's domestic shares under the Securities and Futures Ordinance[88] - Ms. Wang Hongyue holds interests in the Company's domestic shares through limited partnerships controlled by her as a general partner[88] Interests of Substantial Shareholders As of June 30, 2021, besides directors, supervisors, and chief executives, several institutions and individuals held 5% or more equity interests in the Company, including Defu Fund, GAC Capital, Central Enterprise Poverty Area Industrial Investment Fund, and UBS Group AG Substantial Shareholders' Interests (as of June 30, 2021) | Name | Share Type | Nature of Interest | Number of Shares (L) | Approximate Percentage of Class of Shares | Approximate Percentage of Total Share Capital | | :----------------------------------------- | :--------- | :----------------- | :------------------- | :---------------------------------------- | :-------------------------------------------- | | Guangzhou Defu Equity Investment Partnership (Limited Partnership) | Domestic | Beneficial Owner | 5,384,875 | 9.74% | 7.22% | | Guangzhou Defu Investment Consulting Partnership (Limited Partnership) | Domestic | Interest in Controlled Corporation | 5,384,875 | 9.74% | 7.22% | | GAC Capital Co., Ltd. | Domestic | Interest in Controlled Corporation | 5,384,875 | 9.74% | 7.22% | | Mr. Hou Ming | Domestic | Interest in Controlled Corporation | 5,384,875 | 9.74% | 7.22% | | Mr. Xu Yi | Domestic | Spouse's Interest | 5,984,350 | 10.83% | 8.02% | | Shanghai Tanying Investment Partnership (Limited Partnership) | Domestic | Beneficial Owner | 4,519,003 | 8.18% | 6.06% | | Shanghai Lejin Investment Partnership (Limited Partnership) | Domestic | Interest in Controlled Corporation | 4,519,003 | 8.18% | 6.06% | | Mr. Lin Lijun | Domestic | Interest in Controlled Corporation | 6,506,309 | 11.77% | 8.72% | | Shanghai Shengg Investment Management Co., Ltd. | Domestic | Interest in Controlled Corporation | 6,506,359 | 11.77% | 8.72% | | Qingdao Jinshi Haorui Investment Co., Ltd. | Domestic | Beneficial Owner | 2,780,000 | 5.03% | 3.73% | | Jinshi Investment Co., Ltd. | Domestic | Interest in Controlled Corporation | 2,780,000 | 5.03% | 3.73% | | Central Enterprise Poverty Area Industrial Investment Fund Co., Ltd. | Domestic | Beneficial Owner | 6,666,666 | 12.06% | 8.94% | | Wind Information Co., Ltd. | Domestic | Interest in Controlled Corporation | 3,333,000 | 6.03% | 4.47% | | Shanghai Hehuayuan Enterprise Management Center (Limited Partnership) | Domestic | Interest in Controlled Corporation | 3,333,000 | 6.03% | 4.47% | | Wind Impact Equity Investment (Jiaxing) Partnership (Limited Partnership) | Domestic | Beneficial Owner | 3,333,000 | 6.03% | 4.47% | | Citigroup Inc. | H Shares | Person with Security Interest | 1,345,792 | 6.96% | 1.80% | | OrbiMed Advisors LLC | H Shares | Investment Manager | 1,454,000 | 7.52% | 1.95% | | OrbiMed Capital LLC | H Shares | Investment Manager | 2,150,900 | 11.12% | 2.88% | | OrbiMed Partners Master Fund Limited | H Shares | Beneficial Owner | 1,279,900 | 6.62% | 1.72% | | Prime Capital Management Company Limited | H Shares | Investment Manager | 2,420,019 | 12.51% | 3.24% | | OrbiMed Partners II, L.P. | H Shares | Beneficial Owner | 1,052,000 | 5.44% | 1.41% | | UBS Group AG | H Shares | Interest in Controlled Corporation | 4,035,096 | 20.86% | 5.41% | | Ms. Zou Haili | H Shares | Beneficial Owner | 1,900,000 | 9.82% | 2.55% | Consolidated Balance Sheet Consolidated Balance Sheet Details As of June 30, 2021, the Group's total consolidated assets amounted to RMB 2,410,867,584, an increase of approximately 6.0% from the end of 2020, with both current and non-current assets, total liabilities, and total equity showing corresponding growth Consolidated Balance Sheet Key Data (RMB in Yuan) | Item | June 30, 2021 (Unaudited) | December 31, 2020 (Audited) | Change Rate (%) | | :------------------------- | :------------------------ | :-------------------------- | :-------------- | | Assets | | | | | Total Current Assets | 783,768,728 | 640,779,695 | 22.3% | | Total Non-Current Assets | 1,627,098,856 | 1,608,167,752 | 1.2% | | Total Assets | 2,410,867,584 | 2,248,947,447 | 7.2% | | Liabilities and Equity | | | | | Total Current Liabilities | 554,168,676 | 599,050,882 | -7.5% | | Total Non-Current Liabilities | 484,602,421 | 335,472,168 | 44.4% | | Total Liabilities | 1,038,771,097 | 934,523,050 | 11.2% | | Total Equity | 1,372,096,487 | 1,314,424,397 | 4.4% | Company Balance Sheet Company Balance Sheet Details As of June 30, 2021, the Company's total assets amounted to RMB 1,709,100,540, an increase of approximately 7.3% from the end of 2020, with both current and non-current assets, total liabilities, and total equity showing corresponding growth Company Balance Sheet Key Data (RMB in Yuan) | Item | June 30, 2021 (Unaudited) | December 31, 2020 (Audited) | Change Rate (%) | | :------------------------- | :------------------------ | :-------------------------- | :-------------- | | Assets | | | | | Total Current Assets | 758,962,045 | 730,660,802 | 3.9% | | Total Non-Current Assets | 950,138,495 | 861,368,783 | 10.3% | | Total Assets | 1,709,100,540 | 1,592,029,585 | 7.3% | | Liabilities and Equity | | | | | Total Current Liabilities | 360,788,520 | 395,279,629 | -8.7% | | Total Non-Current Liabilities | 156,193,579 | 49,253,124 | 217.1% | | Total Liabilities | 516,958,393 | 444,532,753 | 16.3% | | Total Equity | 1,192,118,441 | 1,147,496,832 | 3.9% | Consolidated Income Statement Consolidated Income Statement Details For the six months ended June 30, 2021, the Group achieved significant growth in operating revenue and net profit, with a substantial increase in total comprehensive income and a corresponding rise in earnings per share Consolidated Income Statement Key Data (RMB in Yuan) | Item | Six Months Ended June 30, 2021 (Unaudited) | Six Months Ended June 30, 2020 (Unaudited) | Change Rate (%) | | :--------------------------------- | :----------------------------------------- | :----------------------------------------- | :-------------- | | Operating Revenue | 622,811,396 | 465,150,452 | 33.9% | | Operating Profit | 59,771,797 | 41,874,086 | 42.7% | | Total Profit | 57,665,247 | 39,403,983 | 46.3% | | Net Profit | 41,143,150 | 28,901,235 | 42.3% | | Net Profit Attributable to Parent Company Shareholders | 42,913,178 | 36,409,947 | 17.9% | | Total Comprehensive Income | 41,143,150 | 28,901,235 | 42.3% | | Basic Earnings Per Share (RMB) | 0.59 | 0.50 | 18.0% | | Diluted Earnings Per Share (RMB) | 0.59 | 0.50 | 18.0% | Company Income Statement Company Income Statement Details For the six months ended June 30, 2021, the Company's operating revenue slightly decreased, with a corresponding reduction in net profit and total comprehensive income Company Income Statement Key Data (RMB in Yuan) | Item | Six Months Ended June 30, 2021 (Unaudited) | Six Months Ended June 30, 2020 (Unaudited) | Change Rate (%) | | :--------------------------------- | :----------------------------------------- | :----------------------------------------- | :-------------- | | Operating Revenue | 189,532,979 | 193,700,484 | -2.1% | | Operating Profit | 15,321,291 | 28,902,150 | -47.0% | | Total Profit | 15,212,971 | 28,434,255 | -46.5% | | Net Profit | 11,821,483 | 21,836,736 | -45.8% | | Total Comprehensive Income | 11,821,483 | 21,836,736 | -45.8% | Consolidated Cash Flow Statement Consolidated Cash Flow Statement Details For the six months ended June 30, 2021, the Group's net cash from operating activities significantly increased, net cash used in investing activities decreased, net cash from financing activities slightly declined, and the period-end cash and cash equivalents balance substantially rose Consolidated Cash Flow Statement Key Data (RMB in Yuan) | Item | Six Months Ended June 30, 2021 (Unaudited) | Six Months Ended June 30, 2020 (Unaudited) | Change Rate (%) | | :--------------------------------- | :----------------------------------------- | :----------------------------------------- | :-------------- | | Net Cash Generated from Operating Activities | 37,315,721 | 17,798,747 | 109.7% | | Net Cash Used in Investing Activities | (60,918,009) | (76,436,244) | 20.3% | | Net Cash Generated from Financing Activities | 93,138,579 | 94,945,096 | -1.9% | | Net Increase in Cash and Cash Equivalents | 69,515,256 | 36,424,342 | 90.8% | | Cash and Cash Equivalents at Period End | 269,607,921 | 201,376,292 | 33.9% | Company Cash Flow Statement Company Cash Flow Statement Details For the six months ended June 30, 2021, the Company's net cash from operating activities turned positive, net cash used in investing activities slightly increased, net cash from financing activities remained high, and the period-end cash and cash equivalents balance significantly rose Company Cash Flow Statement Key Data (RMB in Yuan) | Item | Six Months Ended June 30, 2021 (Unaudited) | Six Months Ended June 30, 2020 (Unaudited) | Change Rate (%) | | :--------------------------------- | :----------------------------------------- | :----------------------------------------- | :-------------- | | Net Cash Generated from Operating Activities | 47,238,761 | (6,595,066) | 816.2% | | Net Cash Used in Investing Activities | (83,891,370) | (82,527,771) | -1.6% | | Net Cash Generated from Financing Activities | 102,277,401 | 92,328,964 | 10.8% | | Net Increase in Cash and Cash Equivalents | 65,603,757 | 3,322,870 | 1873.9% | | Cash and Cash Equivalents at Period End | 183,740,562 | 93,535,076 | 96.4% | Consolidated Statement of Changes in Equity Consolidated Statement of Changes in Equity Details For the six months ended June 30, 2021, the Group's net profit attributable to parent company shareholders and total comprehensive income both increased, capital reserve rose due to share-based payments and reversal of repurchase obligations, while minority interests decreased due to subsidiary disposal Consolidated Statement of Changes in Equity Key Data (RMB in Yuan) | Item | June 30, 2021 (Unaudited) | January 1, 2020 (Audited) | Change (RMB in Yuan) | | :--------------------------------- | :------------------------ | :------------------------ | :------------------- | | Share Capital | 74,600,300 | 74,600,300 | 0 | | Capital Reserve | 814,055,511 | 804,566,529 | 9,488,982 | | Less: Treasury Shares | – | (23,311,144) | 23,311,144 | | Surplus Reserve | 37,300,150 | 36,593,229 | 706,921 | | Retained Earnings | 361,603,198 | 319,396,941 | 42,206,257 | | Total Equity Attributable to Parent Company Shareholders | 1,287,559,159 | 1,211,845,855 | 75,713,304 | | Minority Interests | 84,537,328 | 102,578,542 | -18,041,214 | | Total Equity | 1,372,096,487 | 1,314,424,397 | 57,672,090 | - Net profit was RMB 41,143,150, with net profit attributable to parent company shareholders at RMB 42,913,178[129] - The increase in capital reserve was primarily due to the amount of share-based payments recognized in equity and the reversal of treasury shares from the cancellation of repurchase obligations[129] Company Statement of Changes in Equity Company Statement of Changes in Equity Details For the six months ended June 30, 2021, the Company's net profit and total comprehensive income increased, and capital reserve rose due to share-based payments and the reversal of repurchase obligations Company Statement of Changes in Equity Key Data (RMB in Yuan) | Item | June 30, 2021 (Unaudited) | January 1, 2020 (Audited) | Change (RMB in Yuan) | | :------------------------- | :------------------------ | :------------------------ | :------------------- | | Share Capital | 74,600,300 | 74,600,300 | 0 | | Capital Reserve | 838,005,588 | 828,516,606 | 9,488,982 | | Less: Treasury Shares | – | (23,311,144) | 23,311,144 | | Surplus Reserve | 37,300,150 | 36,593,229 | 706,921 | | Retained Earnings | 242,212,403 | 231,097,841 | 11,114,562 | | Total Equity | 1,192,118,441 | 1,147,496,832 | 44,621,609 | - Net profit was RMB 11,821,483[134] - The increase in capital reserve was primarily due to the amount of share-based payments recognized in equity and the reversal of treasury shares from the cancellation of repurchase obligations[134] Notes to Financial Statements I. Company Overview This section outlines Wenzhou Kangning Hospital Co., Ltd.'s establishment history, business nature, listing status, and scope of consolidated financial statements - The Company was established on February 7, 1996, converted to a joint-stock limited company on October 15, 2014, and listed on the Hong Kong Stock Exchange on November 20, 2015[139][140][141] - The Group primarily operates psychiatric hospitals, providing comprehensive specialized medical services for patients with mental and psychological disorders[140] II. Significant Accounting Policies and Estimates This section explains the basis of preparation for the interim financial statements, adherence to accounting standards, and consistency with the 2020 annual financial statements' accounting policies - These interim financial statements are prepared in accordance with the Accounting Standards for Business Enterprises and Accounting Standard No. 32 – Interim Financial Reporting issued by the Ministry of Finance[144][145] - The accounting policies adopted in these financial statements are consistent with those used by the Group in preparing its 2020 annual financial statements and are prepared on a going concern basis[145][146] III. Taxation This section details the Group's applicable major tax types and rates, including corporate income tax, VAT, urban maintenance and construction tax, education surcharges, property tax, land use tax, and land appreciation tax, along with relevant tax incentives Major Tax Types and Rates | Tax Type | Tax Rate | Tax Base | | :------------------------- | :----------------- | :----------------------------- | | Corporate Income Tax | 15%, 20% or 25% | Taxable Income | | Value-Added Tax | 1%, 3%, 5%, 6% or 13% | Operating Revenue | | Urban Maintenance and Construction Tax | 7% | Based on VAT actually paid | | Education Surcharge | 3% | Based on VAT actually paid | | Local Education Surcharge | 2% | Based on VAT actually paid | | Property Tax | 1.2% or 12% | 70% of original property value or rental income | | Land Use Tax | RMB 5/square meter | Based on land area | | Land Appreciation Tax | 30%-60% | Appreciation Amount | - Some subsidiaries, such as Hangzhou Jeremiah, enjoy a 15% corporate income tax preferential rate, while some subsidiaries meeting small and micro-profit enterprise criteria enjoy a 20% preferential rate[151] - The Group's medical service income is exempt from VAT; some management consulting service income is subject to 6% or 3% VAT, and drug and equipment sales are subject to 13% VAT[153][154][155] - Some subsidiaries enjoy property tax and urban land use tax exemptions[158] IV. Notes to Consolidated Financial Statement Items This section provides detailed disclosures on the specific circumstances and changes of each major item in the consolidated financial statements, including assets, liabilities, revenue, costs, expenses, and cash flows Cash and Bank Balances As of June 30, 2021, total cash and bank balances increased, with changes in bank deposits and restricted funds Cash and Bank Balances Breakdown (RMB in Yuan) | Item | June 30, 2021 (Unaudited) | December 31, 2020 (Audited) | Change Rate (%) | | :----------------------- | :------------------------ | :-------------------------- | :-------------- | | Cash on Hand | 275,366 | 374,287 | -26.4% | | Bank Deposits | 269,332,555 | 199,718,378 | 34.8% | | Other Cash and Bank Balances | 27,362,636 | 6,406,899 | 327.1% | | Total | 296,970,557 | 206,499,564 | 43.8% | - As of June 30, 2021, RMB 14,000,000 of bank deposits were restricted funds, serving as project