CGII HLDGS(01940) - 2023 - 中期业绩

Interim Results Announcement for the Six Months Ended June 30, 2023 Financial Highlights The Group achieved significant financial growth during the reporting period, with substantial year-on-year increases in revenue, gross profit, and net profit, and a doubling of earnings per share. The gearing ratio slightly increased, but the Board did not recommend an interim dividend | Indicator | Six Months Ended June 30, 2023 (RMB million) | Six Months Ended June 30, 2022 (RMB million) | Year-on-Year Growth Rate | | :--- | :--- | :--- | :--- | | Revenue | 708.08 | 636.43 | 11.26% | | Gross Profit | 164.10 | 143.45 | 14.40% | | Net Profit | 69.50 | 41.63 | 66.95% | | Basic and Diluted Earnings Per Share | RMB 0.06 | RMB 0.03 | 100.00% | | Gearing Ratio (Period-end) | 42.55% (June 30, 2023) | 42.27% (December 31, 2022) | 0.28 percentage points | | Interim Dividend | Not recommended | Nil | - | Unaudited Consolidated Interim Financial Statements This section presents the unaudited consolidated interim statement of comprehensive income and consolidated interim statement of financial position for the six months ended June 30, 2023, reflecting the Group's operating results and financial position during the reporting period | Indicator | Six Months Ended June 30, 2023 (RMB) | Six Months Ended June 30, 2022 (RMB) | | :--- | :--- | :--- | | Revenue | 708,078,203 | 636,434,507 | | Cost of Revenue | (543,975,093) | (492,988,332) | | Gross Profit | 164,103,110 | 143,446,175 | | Operating Profit | 98,546,648 | 74,653,780 | | Profit Before Income Tax | 85,907,095 | 61,627,476 | | Profit for the Period Attributable to Owners of the Company | 69,501,507 | 41,630,615 | | Indicator | As of June 30, 2023 (RMB) | As of December 31, 2022 (RMB) | | :--- | :--- | :--- | | Non-current Assets | 1,611,881,279 | 1,615,885,963 | | Current Assets | 1,016,534,224 | 990,790,481 | | Current Liabilities | 779,432,396 | 860,485,398 | | Non-current Liabilities | 394,759,884 | 360,357,987 | | Net Assets | 1,454,223,223 | 1,385,833,059 | | Total Equity | 1,454,223,223 | 1,385,833,059 | Notes to the Interim Condensed Consolidated Financial Statements This section provides detailed notes to the interim condensed consolidated financial statements, covering general information, basis of preparation, significant accounting policies, independent investigation findings, segment information, and specific explanations for various asset, liability, and profit and loss items General Information and Basis of Preparation The Company was incorporated in the Cayman Islands with investment holding as its principal business, while the Group primarily engages in industrial gas production and supply in China. Interim financial information is prepared in accordance with IAS 34 and the HKEX Listing Rules, consistent with 2022 annual financial statements' accounting policies, except for the adoption of new and revised IFRSs - The Company was incorporated as an exempted company in the Cayman Islands on August 4, 2006, with its principal place of business in the People's Republic of China[11] - The Group is principally engaged in the production and supply of industrial gases in China, with investment holding as its main business[171] - The interim financial information has been reviewed, is unaudited, and prepared in accordance with International Accounting Standard 34 and the applicable disclosure provisions of the HKEX Listing Rules[175][176] - The accounting policies and basis of preparation used for the interim financial information are consistent with those used for the annual financial statements for the year ended December 31, 2022, except for the adoption of new and revised International Financial Reporting Standards[33][235] Significant Accounting Policies The Group adopted new and revised International Financial Reporting Standards, including amendments to IAS 1, IAS 8, and IAS 12, with no significant impact expected on the interim condensed consolidated financial statements - The Group adopted new and revised International Financial Reporting Standards, including amendments to IAS 1 and IFRS Practice Statement 2 (Disclosure of Accounting Policies), amendments to IAS 8 (Definition of Accounting Estimates), amendments to IAS 12 (Deferred Tax Related to Assets and Liabilities Arising from a Single Transaction), and amendments to IAS 1 (Classification of Liabilities as Current or Non-current)[190] - The Directors anticipate that the future application of these amendments and modifications will not have any significant impact on the interim condensed consolidated financial statements[213] Independent Investigation and Findings The Board established an independent investigation committee to probe four transactions raised by the former auditor, finding that former Executive Director Mr. Chen and former CFO Mr. Bai unauthorizedly entered into RMB 118 million in loan transactions and HKD 80 million in note investments without Board approval, lacking commercial substance and due diligence. These amounts remain unpaid, with full impairment provisions made and legal actions pursued - The Board established an independent investigation committee on March 24, 2021, to conduct an independent factual investigation into four transactions raised by the former auditor to assess their commercial substance and rationale[177][199] - The investigation found that former Executive Director Mr. Chen and former Chief Financial Officer Mr. Bai unauthorizedly entered into three loan agreements totaling RMB 118 million and a note investment agreement of HKD 80 million (approximately RMB 66.4 million) without Board approval[181][180][20] - These transactions were not discussed or approved by the Board, violating the Company's financial control system policies, and lacked background checks or due diligence on the borrowers, with no collateral provided as security[18][20][41][134] - Mr. Chen claimed the loan funds were for dividends payable to the controlling shareholder, but the use was changed without the controlling shareholder's consent and not approved according to the Company's articles of association[39] - As of the reporting period, all loans and note investments remain unpaid, and the Group has made full impairment provisions of RMB 118 million and RMB 66.4 million, and has issued a writ of summons in the High Court of Hong Kong and obtained default judgments[211][232][188][212] Revenue and Segment Information The Group primarily engages in the production and supply of industrial gases (pipeline and liquefied) and liquefied natural gas and gas transmission services. During the reporting period, both industrial gas and LNG and gas transmission services segments saw growth in revenue and gross profit, with industrial gas contributing the majority - The Group is principally engaged in the production and supply of industrial gases, liquefied natural gas, and related gas transmission services in China[236] | Segment | Six Months Ended June 30, 2023 (RMB) | Six Months Ended June 30, 2022 (RMB) | | :--- | :--- | :--- | | Revenue from Supply of Industrial Gases (Pipeline and Liquefied) | 573,840,720 | 529,775,497 | | Gross Profit from Supply of Industrial Gases (Pipeline and Liquefied) | 159,969,044 | 140,401,612 | | Revenue from Liquefied Natural Gas and Gas Transmission Services | 143,190,867 | 113,701,296 | | Gross Profit from Liquefied Natural Gas and Gas Transmission Services | 4,134,066 | 3,044,563 | | Total Group Revenue | 708,078,203 | 636,434,507 | | Total Group Gross Profit | 164,103,110 | 143,446,175 | | Revenue Category | Six Months Ended June 30, 2023 (RMB) | Six Months Ended June 30, 2022 (RMB) | | :--- | :--- | :--- | | Supply of Pipeline Industrial Gases | 474,525,842 | 410,797,876 | | Supply of Liquefied Industrial Gases | 79,972,753 | 103,190,517 | | Supply of Liquefied Natural Gas and Gas Transmission Services | 143,190,867 | 113,701,296 | | Others | 10,388,741 | 8,744,818 | | Total | 708,078,203 | 636,434,507 | - All of the Group's revenue is derived from contracts with customers, and customer advances are presented as contract liabilities[240][241] Other Income and Gains During the reporting period, the Group's other income and net other gains both decreased, primarily due to the absence of government grants for other income and a decline in net foreign exchange gains for net other gains | Item | Six Months Ended June 30, 2023 (RMB) | Six Months Ended June 30, 2022 (RMB) | | :--- | :--- | :--- | | Government Grants | – | 458,925 | | Other Income | 46,728 | 10,484 | | Total Other Income | 46,728 | 469,409 | | Net Foreign Exchange Gain | 3,171,946 | 8,806,894 | | Other Gains | (327,057) | (150,000) | | Total Net Other Gains | 2,844,889 | 8,656,894 | - Other income decreased by approximately 90.05%, mainly due to the absence of government subsidies[125] - Net other gains decreased by approximately 67.14%, primarily due to a decrease in net foreign exchange gains[125] Finance Costs - Net During the reporting period, the Group's net finance costs slightly decreased, primarily due to increased interest income from bank deposits, despite a rise in interest expenses on bank borrowings | Item | Six Months Ended June 30, 2023 (RMB) | Six Months Ended June 30, 2022 (RMB) | | :--- | :--- | :--- | | Interest Income from Bank Deposits | 1,599,306 | 703,769 | | Interest Expense on Bank Borrowings | (14,817,918) | (14,793,157) | | Interest Expense on Discounted Bills Receivable | (526,923) | – | | Interest Expense on Lease Liabilities | (82,886) | (101,023) | | Add: Capitalized Amount | 1,188,868 | 1,164,107 | | Finance Costs Incurred | (14,238,859) | (13,730,073) | | Finance Costs - Net | (12,639,553) | (13,026,304) | - Net finance costs decreased by approximately 2.97%, primarily due to an increase in interest income[114] - Finance costs for qualifying assets have been capitalized at an average annual interest rate of 4.99%[63] Income Tax Expense The Group's income tax expense decreased during the reporting period, mainly due to the utilization of unrecognized accumulated tax losses. The Group's PRC subsidiaries benefit from preferential tax rates as high-tech enterprises and can enjoy super-deduction policies for R&D expenses | Item | Six Months Ended June 30, 2023 (RMB) | Six Months Ended June 30, 2022 (RMB) | | :--- | :--- | :--- | | Current Tax - PRC Enterprise Income Tax | 9,028,186 | 15,127,173 | | Deferred Tax - Charged to Profit or Loss for the Period | 7,377,402 | 4,869,688 | | Total Income Tax Expense | 16,405,588 | 19,996,861 | - Income tax expense decreased by approximately 17.96%, mainly due to the utilization of certain unrecognized accumulated tax losses[85] - The Company is incorporated in the Cayman Islands and is not subject to income tax. Its PRC subsidiaries, Tanggang Gas and Luancheng, are recognized as high-tech enterprises and enjoy a preferential income tax rate of 15%[65][92] - Enterprises engaged in R&D activities are entitled to deduct 200% of their R&D expenses as deductible expenses (super-deduction)[224] Dividends and Earnings Per Share The Board did not recommend an interim dividend for the year ending December 31, 2023. During the reporting period, basic and diluted earnings per share attributable to owners of the Company were RMB 0.06, an increase from the prior year - The Board did not recommend an interim dividend for the year ending December 31, 2023 (2022: Nil)[27][225][297] | Item | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Profit for the Period Attributable to Owners of the Company (RMB) | 69,501,507 | 41,630,615 | | Weighted Average Number of Ordinary Shares (Number) | 1,200,000,000 | 1,200,000,000 | | Basic and Diluted Earnings Per Share (RMB) | 0.06 | 0.03 | - Diluted earnings per share are the same as basic earnings per share as no dilutive events existed for the Group for the six months ended June 30, 2023 and 2022[226] Property, Plant and Equipment & Right-of-use Assets During the reporting period, the Group made additions to property, plant and equipment totaling approximately RMB 60.68 million, and recognized additions to right-of-use assets and lease liabilities of RMB 1.86 million - For the six months ended June 30, 2023, the Group acquired items of property, plant and equipment, including construction in progress, at a total cost of RMB 60,677,571[96] - For the six months ended June 30, 2023, the Group recognized additions to right-of-use assets and lease liabilities of RMB 1,861,270 respectively[270] Trade and Other Receivables The Group's total trade receivables increased, with impairment loss provisions recognized. Most receivables are from HBIS Group and its subsidiaries, with credit terms typically not exceeding 180 days | Item | As of June 30, 2023 (RMB) | As of December 31, 2022 (RMB) | | :--- | :--- | :--- | | Trade Receivables | 659,336,790 | 575,170,544 | | Less: Provision for Impairment Losses | (13,794,408) | (8,135,000) | | Net Trade Receivables | 645,542,382 | 567,035,544 | | Ageing Analysis (Based on Invoice Date) | As of June 30, 2023 (RMB) | As of December 31, 2022 (RMB) | | :--- | :--- | :--- | | Up to 6 Months | 578,129,894 | 529,420,167 | | 6 Months to 1 Year | 43,055,728 | 14,346,868 | | 1 to 2 Years | 5,010,701 | 22,230,873 | | Over 2 Years | 19,346,059 | 1,037,636 | | Total | 645,542,382 | 567,035,544 | - As of June 30, 2023, a provision for impairment losses of approximately RMB 13.79 million was made for trade receivables, mainly due to some trade receivables exceeding six months, which were considered to have certain credit risk[87] - Approximately 97% of the Group's trade receivables are due from HBIS Group and its subsidiaries, with credit terms typically not exceeding 180 days[87] Loans Receivable Three loan agreements totaling RMB 118 million entered into by the Group in 2020 remained unpaid as of the reporting period end. These loans were fully written off and fully impaired as of December 31, 2022 - The Group entered into three loan agreements with Company A, Company B, and Company C on November 30 and December 1, 2020, with a total principal amount of RMB 118,000,000, which were due for repayment on December 30, 2020, but remained unpaid as of June 30, 2023, and December 31, 2022[72][122][98][271] - The Group recorded an impairment loss of RMB 118,000,000 in the consolidated statement of comprehensive income for the year ended December 31, 2020, and fully wrote off these loans for the year ended December 31, 2022[271] Note Investments A HKD 80 million (approximately RMB 66.4 million) note investment entered into by the Group with Company D in January 2021 remained unpaid as of the reporting period end. The note was fully written off and fully impaired as of December 31, 2022 - The Group entered into an investment agreement with Company D on January 18, 2021, to subscribe for its secured loan notes totaling HKD 80 million (approximately RMB 66.4 million), with a fixed annual return rate of 4.5%, due for repayment on December 17, 2021[99] - As of June 30, 2023, and December 31, 2022, this note investment remained unpaid[250] - The Group recorded an impairment loss of RMB 66,400,000 in the consolidated statement of comprehensive income for the year ended December 31, 2021, and fully wrote off this note for the year ended December 31, 2022[74] Deposits, Prepayments and Other Receivables The Group's total deposits, prepayments, and other receivables decreased, primarily comprising recoverable VAT, amounts due from related parties, utility and other prepayments, deposits, and other items | Item | As of June 30, 2023 (RMB) | As of December 31, 2022 (RMB) | | :--- | :--- | :--- | | Recoverable VAT | 8,270,517 | 10,190,850 | | Amounts Due from Related Parties | 59,733 | 67,629 | | Utility and Other Prepayments | 7,238,435 | 9,267,645 | | Deposits | 2,075,620 | 2,338,587 | | Others | 761,454 | 703,299 | | Total | 18,405,759 | 22,568,010 | Cash and Cash Equivalents The Group's cash and cash equivalents decreased at the end of the reporting period | Item | As of June 30, 2023 (RMB) | As of December 31, 2022 (RMB) | | :--- | :--- | :--- | | Cash at Bank | 301,394,838 | 360,738,465 | Trade and Other Payables The Group's total trade and other payables decreased, with trade payables constituting the largest portion and a significant reduction in dividends payable | Item | As of June 30, 2023 (RMB) | As of December 31, 2022 (RMB) | | :--- | :--- | :--- | | Trade Payables | 354,635,468 | 381,680,822 | | Payables for Construction and Equipment | 53,499,837 | 49,457,365 | | Dividends Payable | 50,671,500 | 100,671,500 | | Payables for Operating Service Fees | 24,585,000 | 21,168,000 | | Tax Payables | 557,660 | 829,098 | | Salaries and Bonuses Payable | 4,272,209 | 6,649,128 | | Professional Service Fees Payable | 11,542,102 | 13,744,238 | | Deposits | 1,734,800 | 1,887,472 | | Interest Payable | 1,401,811 | 1,418,960 | | Others | 8,788,035 | 6,809,431 | | Total | 511,688,422 | 584,316,014 | | Ageing Analysis (Based on Invoice Date) | As of June 30, 2023 (RMB) | As of December 31, 2022 (RMB) | | :--- | :--- | :--- | | Less than 1 Year | 295,341,268 | 320,585,126 | | 1 to 2 Years | 50,767,520 | 55,841,805 | | 2 to 3 Years | 7,038,027 | 3,662,931 | | Over 3 Years | 1,488,653 | 1,590,960 | | Total | 354,635,468 | 381,680,822 | Management Discussion and Analysis This section details the Group's business performance, financial condition, risk management strategies, employee and remuneration policies, and use of global offering proceeds during the reporting period. The Group benefited from stable growth in China's steel industry and the development of industrial gas outsourcing, while actively expanding into rare and specialty gas markets Business Review The Group primarily engages in industrial gas production and supply in China, benefiting from stable growth in the Chinese steel industry. The total volume of the Group's pipeline and liquefied industrial gas business increased, and LNG product sales significantly rose, driving overall revenue growth. The Group actively expands into rare and specialty gas markets, leveraging opportunities from the developing outsourced gas supply model - The Group is principally engaged in the production and supply of industrial gases in China, with revenue primarily derived from steel production companies[275][123] - In the first half of 2023, China's crude steel output increased by 1.3% year-on-year, pig iron output by 2.7% year-on-year, and steel product output by 4.4% year-on-year, providing a stable environment for the Group's business[254] - The Group's total volume of pipeline and liquefied industrial gas business increased compared to the same period last year, and sales of Luancheng's liquefied natural gas products significantly rose in the market, leading to an 11.26% year-on-year increase in revenue for the first half of 2023[276] - The Group closely follows industry trends, actively develops rare and specialty gas products, and expands its market share in electronic specialty gas products to enhance future development prospects[79] - The outsourced gas supply model offers low operating costs, high supply stability, high resource utilization efficiency, and low one-time financial costs, with its market share steadily growing in recent years, presenting development opportunities for the Group[107][124] Financial Review During the reporting period, the Group's revenue and gross profit both grew, with a substantial increase in net profit. Pipeline industrial gas revenue rose, while liquefied industrial gas revenue decreased. LNG and gas transmission services revenue significantly increased. Administrative expenses declined due to reduced legal and professional fees, but credit loss provisions for trade receivables increased | Indicator | Six Months Ended June 30, 2023 (RMB million) | Six Months Ended June 30, 2022 (RMB million) | Year-on-Year Growth Rate | | :--- | :--- | :--- | :--- | | Revenue | 708.08 | 636.43 | 11.26% | | Gross Profit | 164.10 | 143.45 | 14.40% | | Profit Attributable to Owners of the Company | 69.50 | 41.63 | 66.95% | | Earnings Per Share | RMB 0.06 | RMB 0.03 | 100.00% | - Revenue from pipeline industrial gases increased by approximately 15.51%, mainly due to increased demand for pipeline gas resulting from higher steel production by HBIS Laoting Steel Co., Ltd. and Tangshan Medium and Heavy Plate Co., Ltd[82] - Revenue from liquefied industrial gases decreased by approximately 22.50%, primarily due to a decline in prices for crude krypton-xenon and liquid oxygen products[82][284] - Revenue from liquefied natural gas and gas transmission services increased by approximately 25.94%, mainly due to an increase in the supply of raw materials available for LNG production at the Luancheng plant[284] - Administrative expenses decreased by approximately 36.69%, primarily due to the absence of legal and professional fees incurred in the prior period related to the resumption of share trading[261] - Credit loss provisions for trade receivables increased by approximately 63.53%, mainly due to an increase in overall trade receivables and trade receivables with ageing exceeding six months[285] Risk Management The Group faces foreign currency, credit, liquidity, and interest rate risks. These risks are managed through regular monitoring, assessing customer credit quality, and maintaining appropriate liquid asset levels. Certain property, plant, and equipment are pledged for loan financing - The principal risks arising from the Group's financial instruments are foreign currency risk, credit risk, liquidity risk, and interest rate risk[263] - Approximately 97% of the Group's trade receivables are due from HBIS Group and its subsidiaries; the credit quality of these customers is assessed, and impairment provisions are made based on prudence principles[87] - The Group does not use derivative financial instruments to hedge its foreign exchange risk but regularly reviews and considers foreign exchange risk to be non-material[116] - The Group manages liquidity risk by regularly monitoring cash and bank balances, forecasting cash flows, and assessing the level of liquid assets[140] - As of June 30, 2023, certain property, plant and equipment of the Group, amounting to approximately RMB 16.42 million, were pledged to banks for loan facilities granted to the Group[117] - As of June 30, 2023, the Group had no significant contingent liabilities[291] Post-Reporting Period Events There were no significant events for the Group subsequent to the reporting period and up to the date of this announcement - There were no significant events for the Group subsequent to the reporting period and up to the date of this announcement[142] Employees and Remuneration Policy The Group highly values talent, employing 354 staff as of June 30, 2023, and offering competitive remuneration packages. The Group invests in continuous education and training programs to enhance employee skills and knowledge, and adopted a share option scheme in 2020 for long-term incentives - As of June 30, 2023, the Group employed a total of 354 staff, with total staff costs of approximately RMB 25.99 million[120] - The Group provides competitive remuneration packages to its employees and invests in continuous education and training programs to regularly update skills and knowledge[119][127] - The Group adopted a share option scheme on June 17, 2020, with a 10-year validity, aiming to grant options to eligible employees as long-term incentives, but no share options have been granted, cancelled, or lapsed as of the date of this announcement[143] Use of Proceeds from Global Offering The net proceeds from the global offering amounted to RMB 298.1 million. As of this announcement date, the Company utilized approximately 83.0% of the proceeds, primarily for the procurement and relocation of air separation units. The unutilized portion will be progressively used according to the proposed uses and updated timetable disclosed in the prospectus - The net proceeds from the global offering amounted to HKD 315.9 million (approximately RMB 298.1 million)[292] - As of the date of this announcement, the Company had utilized RMB 246,950,000 of the initial public offering proceeds, representing approximately 83.0%. The unutilized amount was RMB 50,553,000, representing approximately 17.0%[292] | Planned Use of IPO Proceeds | IPO Proceeds Utilized (RMB thousand) | IPO Proceeds Unutilized (RMB thousand) | | :--- | :--- | :--- | | Procurement and Relocation of Air Separation Units related to Tanggang Gas New Area Plant Development (Phase 1) | 246,950 | – | | Procurement and Relocation of Air Separation Units related to Tanggang Gas New Area Plant Development (Phase 2) | – | 50,553 | | Working Capital and Other General Corporate Purposes | 27,300 | – | | Total | 274,250 | 50,553 | - During the reporting period, the Company did not use the initial public offering proceeds. There were no changes to the proposed use or allocation[292] Corporate Governance and Other Information The Group is committed to maintaining high corporate governance standards and has complied with all applicable provisions of the HKEX Corporate Governance Code. The Audit Committee reviewed the interim results. Auditors issued qualified opinions and conclusions on past loan transactions and note investments, and management and the Audit Committee are working closely with auditors to remove these qualifications in future financial years Corporate Governance The Company adopted the principles and code provisions of the HKEX Corporate Governance Code and complied with all applicable code provisions during the reporting period to safeguard the overall interests of shareholders - The Company adopted the principles and code provisions of the Corporate Governance Code set out in Appendix 14 to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited as the basis for its corporate governance practices[44] - The Company complied with all applicable code provisions contained in the Corporate Governance Code during the reporting period[45] Securities Transactions The Company adopted a code of conduct for directors' securities transactions, confirming all directors complied with the standard code during the reporting period. Neither the Company nor its subsidiaries purchased, sold, or redeemed its listed securities during the period - The Company adopted a code of conduct regarding directors' securities transactions, and all Directors confirmed their compliance with the required standards set out in the Model Code throughout the reporting period[47] - During the reporting period, neither the Company nor any of its subsidiaries purchased, sold, or redeemed any of the Company's listed securities[46] Audit Committee Review The Company's Audit Committee reviewed the Group's unaudited interim condensed consolidated financial information and this announcement for the reporting period, discussing accounting policies, internal controls, and financial reporting matters. The independent auditor reviewed the interim financial information in accordance with HKSRS 2410 - The Company's Audit Committee reviewed the Group's unaudited interim condensed consolidated financial information and this announcement for the reporting period, and discussed matters related to the accounting policies and practices adopted by the Company, as well as internal controls and financial reporting matters[48] - The Company's independent auditor reviewed the Group's unaudited interim financial information for the reporting period in accordance with Hong Kong Standard on Review Engagements 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity," issued by the Hong Kong Institute of Certified Public Accountants[48] Additional Information on Qualified Conclusion Auditors issued a qualified opinion on the write-off of three overdue loans and interest-bearing note investments in the 2022 annual report, and a qualified conclusion on the H1 2023 interim financial statements, primarily due to comparability issues. Management and the Audit Committee acknowledge these limitations and are collaborating with auditors, expecting a full removal of the audit opinion when consolidated financial statements for FY2024 and subsequent years no longer include relevant balances or disclosures - The auditor's qualified opinion on the Company's 2022 consolidated financial statements related to the write-off of three overdue loans (RMB 118 million) and an interest-bearing note investment (HKD 80 million / approximately RMB 66.4 million)[50][128] - The auditor issued a qualified review conclusion on the Company's unaudited interim condensed consolidated financial statements for the six months ended June 30, 2023, due to the potential impact of the aforementioned matters on the comparability of the interim condensed consolidated statement of comprehensive income and statement of changes in equity[21][24] - Management and the Audit Committee acknowledge the auditor's scope limitations in determining the nature of the loan transactions and note investments, and the scope limitations on the comparability of the current period's figures with the 2022 period's figures in the relevant prior year's consolidated financial statements[26][60] - The auditor expects that, barring unforeseen circumstances, the audit opinion will be thoroughly removed for the financial year ending December 31, 2024, and subsequent years when the consolidated financial statements no longer contain any balances or disclosures related to the prior year's audit opinion[24][57] - The Company has a clear roadmap to remove the prior year's audit opinion and review opinion, and the Board and management will continue to work closely with the auditor[58] Independent Auditor's Review Report Summary The independent auditor reviewed the interim financial information under HKSRS 2410, but due to the nature of loan transactions and note investments, and their unauthorized nature, the scope of work was limited, preventing determination of whether related write-offs were free from material misstatement, thus issuing a qualified conclusion on the interim condensed consolidated financial statements Review Scope The auditor conducted a review in accordance with HKSRS 2410 issued by the HKICPA, with a scope significantly narrower than an audit, thus no audit opinion is expressed - The auditor conducted a review in accordance with Hong Kong Standard on Review Engagements 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity," issued by the Hong Kong Institute of Certified Public Accountants[132] - A review is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing, and consequently, the auditor does not express an audit opinion[132] Basis for Qualified Conclusion The basis for the qualified conclusion is that the former chairman unauthorizedly entered into loan transactions and note investments, totaling RMB 118 million and HKD 80 million (approx. RMB 66.4 million), outside the Group's ordinary course of business and without Board approval, lacking background checks and due diligence. These amounts remain unpaid, preventing the auditor from determining the appropriateness of related write-offs and impacting financial statement comparability - The basis for the qualified conclusion is that the former chairman of the Company unauthorizedly entered into three loan agreements (RMB 118 million) and a loan note agreement (HKD 80 million / approximately RMB 66.4 million) without Board approval[154][152][157] - These transactions were outside the Group's ordinary course of business, and no background checks or due diligence were performed on the borrowers and Company D before entering into them[161][134] - The former chairman instructed the transfer of funds, originally planned for dividend payments to shareholders, to the borrowers and Company D, without prior Board approval[161] - As of the reporting date, none of the borrowers had repaid any amounts, and the outstanding balance from Company D remained unpaid[130] - Due to limited scope, the auditor was unable to determine the nature of the loan transactions and note investments, could not ascertain whether the related write-offs were free from material misstatement, and did not receive satisfactory explanations from the Board regarding the commercial substance and business rationale of the transactions[135][158][162] Qualified Conclusion Given the potential impact of the aforementioned matters on the comparability of current figures with corresponding figures in the interim condensed consolidated statement of comprehensive income for the six months ended June 30, 2022, the auditor issued a qualified conclusion on the Company's interim condensed consolidated financial statements for the six months ended June 30, 2023 - Due to the potential impact of the aforementioned matters on the comparability of the current figures with the corresponding figures in the interim condensed consolidated statement of comprehensive income for the six months ended June 30, 2022, the auditor issued a qualified conclusion on the Company's interim condensed consolidated financial statements for the six months ended June 30, 2023[163] Other Information This section includes the interim dividend decision, publication information for the results announcement and interim report, and the updated composition of the Board of Directors Interim Dividend The Board did not recommend an interim dividend for the year ending December 31, 2023 - The Board did not recommend an interim dividend for the year ending December 31, 2023 (2022: Nil)[160][297] Publication of Announcement This results announcement has been published on the HKEX website and the Company's website. The Company's interim report for the six months ended June 30, 2023, will be dispatched to shareholders and published on the aforementioned websites in late September 2023 - This results announcement is published on the HKEX website (www.hkexnews.hk) and the Company's website (www.cgiihldgs.com)[165](index=165&type=chunk) - The Company's interim report for the six months ended June 30, 2023, will be dispatched to shareholders and published on the aforementioned websites in late September 2023[165] Board of Directors As of this announcement date, the Board of Directors comprises Executive Directors Mr. Yao Li (Chairman) and Ms. Gao Guimin; Non-executive Directors Mr. Li Rui, Ms. Wu Shuming, and Mr. Zhang Wenli; and Independent Non-executive Directors Mr. Xiao Zhixiong, Mr. Xiao Huanwei, and Ms. Li Jun - As of the date of this announcement, the Board of Directors comprises Executive Directors Mr. Yao Li (Chairman) and Ms. Gao Guimin; Non-executive Directors Mr. Li Rui, Ms. Wu Shuming, and Mr. Zhang Wenli; and Independent Non-executive Directors Mr. Xiao Zhixiong, Mr. Xiao Huanwei, and Ms. Li Jun[131]