艾迪康控股(09860) - 2024 - 中期财报

Key Financial Highlights During the reporting period, the company's revenue and gross profit decreased year-on-year, primarily due to reduced demand for COVID-19 related services, while profit for the period also saw a slight decline, but diluted earnings per share remained consistent with the prior year Key Financial Highlights The company's revenue and gross profit decreased year-on-year, primarily due to reduced demand for COVID-19 related services, while profit for the period also saw a slight decline, but diluted earnings per share remained consistent with the prior year As of June 30, Key Financial Data for the Six Months | Indicator | 2024 (RMB thousands) | 2023 (RMB thousands) | Year-on-Year Change | | :--- | :--- | :--- | :--- | | Revenue | 1,465,701 | 1,644,113 | -10.9% | | Gross Profit | 559,733 | 717,008 | -21.9% | | Profit for the Period | 103,478 | 120,258 | -14.0% | | Profit Attributable to Owners of the Parent | 101,582 | 111,807 | -9.1% | | Basic Earnings Per Share (RMB yuan) | 0.14 | 0.17 | -17.6% | | Diluted Earnings Per Share (RMB yuan) | 0.14 | 0.14 | 0.0% | Management Discussion and Analysis This section provides an overview of the company's business performance, industry trends, and financial results for the reporting period Business Review Despite post-pandemic adjustments and economic headwinds, the company's core business (excluding COVID-19 related services) achieved over 10% year-on-year growth in H1 2024, driven by strong performance in specialized testing and co-construction businesses, alongside significant advancements in technology upgrades and operational efficiency - Core underlying business revenue (excluding COVID-19 related services) increased by over 10% year-on-year, with an overall average selling price (ASP) increase of approximately 4%[18] - Revenue from specialized testing business grew by over 30% year-on-year, and co-construction business revenue increased by over 70% year-on-year, becoming key growth drivers[19] - The company vigorously promoted technology upgrades, including redesigning a new generation LIMS system and widely applying artificial intelligence, with cumulative AI-assisted slide readings exceeding 5 million[19] - Operational efficiency continued to optimize, with reagent procurement costs reduced by 8%, reagent loss rates decreased by 12%, and laboratory per capita efficiency improved by over 10% compared to the same period in 2023[20] Industry Overview The Chinese ICL industry benefits from multiple favorable macroeconomic factors, including government support for private medical institutions and shared medical resources, strong demand driven by an aging population, tiered diagnosis and treatment, and hospital cost control pressures, alongside technological advancements and stricter compliance regulations favoring leading compliant enterprises - Government policies support tertiary public hospitals sharing clinical testing and pathological diagnosis services with private medical institutions, benefiting the ICL industry[21] - Factors such as an aging population, the advancement of tiered diagnosis and treatment systems, growth in lower-tier city hospital numbers, and optimization of hospital revenue structures collectively promote ICL business growth[23] - Healthcare payment reforms like DRG/DIP 2.0 increase hospitals' cost control pressure, prompting them to outsource testing services to lower-cost ICLs[24][29] - The integration of big data and artificial intelligence will revolutionize the clinical testing industry, improving diagnostic accuracy, reliability, and operational efficiency[26] - Stricter regulatory policies, such as the nationwide crackdown on corruption in the pharmaceutical sector, will create a fairer competitive environment and development opportunities for compliant industry leaders[28] Financial Review The company's H1 2024 financial performance was impacted by reduced COVID-19 related services, leading to overall revenue and profit declines; however, effective cost control measures significantly reduced operating expenses, and debt structure optimization lowered financial costs, while improved inventory management maintained healthy financial ratios despite increased receivables Revenue, Gross Profit, and Gross Margin In H1 2024, the company's revenue was RMB 1.47 billion, a 10.9% year-on-year decrease, primarily due to reduced COVID-19 related service demand, with gross profit at RMB 560 million, down 21.9%, and gross margin declining from 43.6% to 38.2% due to lower high-margin COVID-19 service contributions and new laboratory ramp-up costs 2024 H1 Revenue and Gross Profit Performance | Item | 2024 H1 (RMB millions) | 2023 H1 (RMB millions) | Year-on-Year Change | | :--- | :--- | :--- | :--- | | Revenue | 1,465.7 | 1,644.1 | -10.9% | | Cost of Sales | 906.0 | 927.1 | -2.3% | | Gross Profit | 559.7 | 717.0 | -21.9% | | Gross Margin | 38.2% | 43.6% | -5.4pp | Operating Expenses The company successfully controlled various operating expenses, with sales and marketing expenses decreasing by 13.6%, administrative expenses by 21.3%, and R&D expenses by 15.0% year-on-year, primarily due to enhanced cost control, optimized organizational structure leading to lower staff costs, and reduced share-based payment expenses - Sales and marketing expenses decreased by 13.6% year-on-year to RMB 202 million, primarily due to reduced staff costs and travel expenses[34] - Administrative expenses decreased by 21.3% year-on-year to RMB 108 million, mainly due to organizational optimization and reduced share-based payment expenses[35] - Research and development expenses decreased by 15.0% year-on-year to RMB 58.7 million, primarily due to reduced laboratory expenses and reagent consumables[36] Profit for the Period Considering the above factors, the company's profit for the period decreased by 14.0% from RMB 120 million in the prior year to RMB 104 million, with the profit decline being less than the revenue and gross profit declines, reflecting the company's effective expense control - Profit for the period decreased by approximately 14.0% from RMB 120.3 million for the six months ended June 30, 2023, to RMB 103.5 million for the same period in 2024[42] Financial Position and Liquidity As of June 30, 2024, trade receivables increased by 10.6% due to extended settlement terms for some clients, while inventory decreased by 25.9% through enhanced management, and the company's net cash position (cash and equivalents + pledged deposits - interest-bearing bank borrowings) declined to RMB 503 million, primarily due to increased pledged deposits for lower-interest refinancing - Trade receivables and bills receivable increased by 10.6% from the end of 2023 to RMB 1.68 billion, primarily due to extended settlement periods provided to COVID-19 screening-related clients and public hospitals[44] - Inventories decreased by 25.9% from the end of 2023 to RMB 131 million, benefiting from increased clinical testing equipment sales and strengthened inventory management[43] - Net cash position decreased by 35.9% from RMB 785 million at the end of 2023 to RMB 503 million[51] Financial Ratios The company's liquidity improved, with the current ratio increasing from 1.88 to 1.99; however, due to increased total borrowings, the gearing ratio (total borrowings/total equity) rose from 0.49 to 0.63 Key Financial Ratios | Ratio | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Current Ratio | 1.99 | 1.88 | | Quick Ratio | 1.91 | 1.78 | | Gearing Ratio | 0.63 | 0.49 | Other Matters As of the reporting date, the company had no specific material investment or capital asset commitment plans for 2024, primarily operates in China with most transactions denominated in RMB and no foreign currency hedging policy, and employed 5,456 staff as of June 30, 2024 - As of the date of this report, the Group had no specific commitment plans regarding material investments and capital assets for 2024[58] - The company primarily operates in China, with most transactions denominated in RMB, and currently has no foreign currency hedging policy, but closely monitors foreign exchange exposure[59] - As of June 30, 2024, the company had 5,456 employees, with total staff costs of RMB 413 million for the first half of the year[60] Corporate Governance and Other Information This section details the company's corporate governance practices, including directors' and shareholders' interests, employee incentive schemes, share repurchases, and compliance matters Directors' and Shareholders' Interests This section discloses the interests of the company's directors, chief executive, and substantial shareholders in the company's shares as of June 30, 2024, including CEO Mr. Gao Song and Non-executive Director Mr. Lin Jixun holding personal and controlled corporate interests, and major shareholder Pearl Group Limited (controlled by Carlyle) holding 38.71% interest Directors' Interests in the Company | Name | Nature of Interest | Number of Shares | Approximate Percentage of Interest in the Company | | :--- | :--- | :--- | :--- | | Mr. Gao Song | Interest in controlled corporation / Beneficial owner | 303,750 / 11,249,646 | 0.04% / 1.55% | | Mr. Lin Jixun | Interest in controlled corporation | 90,061,994 | 12.38% | Major Shareholders' Interests in the Company | Name | Nature of Interest | Number of Shares | Approximate Percentage of Interest in the Company | | :--- | :--- | :--- | :--- | | Pearl Group Limited | Beneficial owner | 281,541,805 | 38.71% | | Mr. Lin Jixun | Interest in controlled corporation | 90,061,994 | 12.38% | | Mr. Lin Feng | Interest in controlled corporation | 72,005,994 | 9.90% | Employee Incentive Schemes The company has two incentive schemes for 2019 and 2024; the report details the changes in restricted share units (RSUs) and share options under the 2019 scheme in H1 2024, including 900,000 RSUs vested to Director Mr. Gao Song, while the 2024 scheme adopted in March had no awards granted as of the reporting period end - Under the 2019 incentive scheme, as of June 30, 2024, Director Mr. Gao Song had 6,000,000 unexercised restricted share units, and other employees had 24,923,355 unexercised share options[69][70] - The 2024 incentive scheme was adopted on March 28, 2024, but as of June 30, no share options or restricted share units had been granted under the scheme[71] Share Repurchases and Use of Proceeds The company repurchased 1,611,500 shares in the open market in June 2024 for a total consideration of approximately HKD 15.42 million; additionally, the report details the use of RMB 231 million net proceeds from the global offering, with RMB 167 million utilized as of June 30, 2024, and the remaining RMB 63.8 million expected to be fully used by the end of 2024 Share Repurchase Details (June 2024) | Repurchase Month | Total Shares Repurchased | Highest Price Per Share (HKD) | Lowest Price Per Share (HKD) | Total Consideration (HKD) | | :--- | :--- | :--- | :--- | :--- | | June 2024 | 1,611,500 | 10.12 | 8.14 | 15,416,833.24 | Summary of Use of Proceeds from Global Offering (As of June 30, 2024) | Description | Intended Use (RMB millions) | Cumulative Utilized (RMB millions) | Unutilized (RMB millions) | | :--- | :--- | :--- | :--- | | Enhance testing capabilities | 34.6 | 27.9 | 6.7 | | Network expansion | 57.7 | 39.2 | 18.5 | | Business development and acquisitions | 57.7 | 44.7 | 13.0 | | Upgrade existing laboratories | 34.6 | 23.2 | 11.3 | | Invest in operating infrastructure | 23.1 | 15.4 | 7.7 | | Working capital and others | 23.1 | 16.6 | 6.5 | | Total | 230.9 | 167.0 | 63.8 | Audit, Dividends, and Compliance The company complied with all applicable corporate governance code provisions during the reporting period, with interim financial statements reviewed by the Audit Committee and independent auditor Ernst & Young, and the Board resolved not to declare an interim dividend for the six months ended June 30, 2024 - The company has complied with all applicable code provisions of the Corporate Governance Code for the six months ended June 30, 2024[73] - The Audit Committee has reviewed the unaudited interim financial information with management and independent auditor Ernst & Young[77] - The Board does not recommend the payment of an interim dividend for the six months ended June 30, 2024[83] Interim Financial Statements and Notes This section presents the company's interim financial statements and accompanying notes, providing a detailed view of its financial performance, position, and cash flows Independent Review Report Independent auditor Ernst & Young has reviewed the interim financial information in accordance with Hong Kong Standard on Review Engagements, concluding that nothing has come to their attention to suggest the interim financial information is not prepared in all material respects in accordance with International Accounting Standard 34 - Auditor's conclusion: Based on the review, nothing has come to their attention that causes them to believe the interim financial information is not prepared in all material respects in accordance with International Accounting Standard 34[88] Interim Condensed Consolidated Financial Statements This section contains the company's unaudited interim condensed consolidated financial statements for the six months ended June 30, 2024, including the statement of profit or loss, statement of financial position, statement of changes in equity, and statement of cash flows, comprehensively reflecting the company's financial performance and position during the reporting period Statement of Profit or Loss and Other Comprehensive Income In H1 2024, the company recorded revenue of RMB 1.47 billion, profit before tax of RMB 134 million, and profit for the period of RMB 103 million, with profit attributable to owners of the parent at RMB 102 million, and both basic and diluted earnings per share at RMB 0.14 2024 H1 Statement of Profit or Loss Summary | Item (RMB thousands) | 2024 H1 | 2023 H1 | | :--- | :--- | :--- | | Revenue | 1,465,701 | 1,644,113 | | Gross Profit | 559,733 | 717,008 | | Profit Before Tax | 133,764 | 151,731 | | Profit for the Period | 103,478 | 120,258 | | Basic Earnings Per Share (yuan) | 0.14 | 0.17 | | Diluted Earnings Per Share (yuan) | 0.14 | 0.14 | Statement of Financial Position As of June 30, 2024, the company's total assets were RMB 4.66 billion, total liabilities RMB 2.76 billion, and total equity RMB 1.91 billion, with net current assets of RMB 1.57 billion, indicating robust short-term solvency Statement of Financial Position Summary (As of June 30, 2024) | Item (RMB thousands) | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Total Non-current Assets | 1,513,138 | 1,250,150 | | Total Current Assets | 3,146,526 | 3,303,388 | | Total Current Liabilities | 1,577,455 | 1,757,018 | | Total Non-current Liabilities | 1,177,485 | 967,930 | | Net Assets | 1,904,724 | 1,828,590 | Statement of Cash Flows In H1 2024, operating activities resulted in a net cash outflow of RMB 163 million, primarily due to increased trade receivables and decreased payables; investing activities had a net cash outflow of RMB 1.07 million, and financing activities a net cash outflow of RMB 24.82 million, with cash and cash equivalents at period-end totaling RMB 768 million Statement of Cash Flows Summary (For the Six Months Ended June 30, 2024) | Item (RMB thousands) | 2024 H1 | 2023 H1 | | :--- | :--- | :--- | | Net Cash Flows from Operating Activities | (162,780) | 4,893 | | Net Cash Flows Used in Investing Activities | (1,066) | (135,884) | | Net Cash Flows (Used in)/from Financing Activities | (24,821) | 91,337 | | Net Decrease in Cash and Cash Equivalents | (188,667) | (39,654) | | Cash and Cash Equivalents at End of Period | 767,961 | 1,644,262 | Notes to the Interim Condensed Consolidated Financial Information The notes to the financial statements elaborate on key information such as accounting policies, revenue composition, taxation, receivables and payables, related party transactions, and fair value of financial instruments, providing essential context and details for understanding the financial statements Note 4. Revenue All company revenue is derived from contracts with customers, with medical diagnostic services being the sole source of income, totaling RMB 1.47 billion in H1 2024, and the vast majority (RMB 1.45 billion) recognized at a point in time Revenue Breakdown | Item (RMB thousands) | 2024 H1 | 2023 H1 | | :--- | :--- | :--- | | Medical Diagnostic Services | 1,465,701 | 1,644,113 | | - Transferred at a point in time | 1,446,544 | 1,635,428 | | - Transferred over time | 19,157 | 8,685 | Note 10. Trade and Bills Receivables As of June 30, 2024, net trade and bills receivables totaled RMB 1.68 billion, an increase from the year-end, with an expected credit loss provision of RMB 274 million, and aging analysis showing a significant increase in receivables aged 6 months to 1 year compared to the beginning of the year Trade and Bills Receivables (RMB thousands) | Item | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Gross Trade and Bills Receivables | 1,950,846 | 1,757,807 | | Provision for Expected Credit Losses | (274,033) | (242,373) | | Net Amount | 1,676,813 | 1,515,434 | Aging Analysis of Trade and Bills Receivables (Net, RMB thousands) | Aging | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | 1 to 6 months | 982,259 | 1,074,252 | | 6 months to 1 year | 465,690 | 259,156 | | 1 to 2 years | 195,453 | 157,116 | | Over 2 years | 33,411 | 24,910 | Note 18. Related Party Transactions The company engaged in sales, procurement, and leasing transactions with related parties, primarily Acon and Aijian, controlled by Non-executive Director Mr. Lin Jixun; procurement from Acon significantly decreased during the reporting period, and key management personnel compensation totaled RMB 5.3 million, a substantial decrease from RMB 15.52 million in the prior year, mainly due to reduced share-based payment expenses - Related party transactions primarily involve Acon Biotech and Aijian Medical, controlled by Non-executive Director Mr. Lin Jixun[154] Key Related Party Transactions (RMB thousands) | Transaction Type | 2024 H1 | 2023 H1 | | :--- | :--- | :--- | | Purchases from Acon | 820 | 24,307 | | Rental Income from Aijian | 3,551 | 3,692 | Key Management Personnel Compensation (RMB thousands) | Item | 2024 H1 | 2023 H1 | | :--- | :--- | :--- | | Salaries and Bonuses | 3,834 | 2,740 | | Share-based Payment Expenses | 160 | 12,513 | | Total | 5,296 | 15,516 |