中国新华教育(02779) - 2023 - 中期业绩

Executive Summary Interim Results Overview The Group reported unaudited interim consolidated financial results for H1 2023, with adjusted revenue up 7.3% to RMB 490,697 thousand and profit for the period up 5.2% Key Financial Data for the Six Months Ended June 30, 2023 | Metric | 2023 (RMB '000) | 2022 (RMB '000) | % Change | | :----------------- | :-------------- | :-------------- | :--------- | | Adjusted Revenue (1) | 490,697 | 457,295 | 7.3% | | Revenue | 351,075 | 333,473 | 5.3% | | Gross Profit | 234,822 | 221,856 | 5.8% | | Profit for the Period | 181,454 | 172,495 | 5.2% | | Adjusted Net Profit (2) | 218,904 | 219,417 | -0.2% | - Adjusted revenue includes the Group's revenue plus revenue from Clinical Medical College and Hongshan College, which is not an IFRS measure[101] Consolidated Financial Statements Consolidated Statement of Profit or Loss and Other Comprehensive Income For the six months ended June 30, 2023, the Group's revenue was RMB 351,075 thousand, gross profit was RMB 234,822 thousand, profit for the period was RMB 181,454 thousand, and basic and diluted earnings per share were RMB 11.3 cents Consolidated Statement of Profit or Loss and Other Comprehensive Income (Summary) | Metric | Six Months Ended June 30, 2023 (RMB '000) | Six Months Ended June 30, 2022 (RMB '000) | | :------------------------- | :---------------------------------------- | :---------------------------------------- | | Revenue | 351,075 | 333,473 | | Cost of Sales | (116,253) | (111,617) | | Gross Profit | 234,822 | 221,856 | | Other Income | 24,725 | 37,817 | | Selling and Distribution Costs | (3,092) | (1,822) | | Administrative Expenses | (66,249) | (76,615) | | Operating Profit | 190,206 | 181,236 | | Finance Costs | (6,514) | (7,989) | | Profit Before Tax | 183,692 | 173,247 | | Income Tax | (2,238) | (752) | | Profit for the Period | 181,454 | 172,495 | Earnings Per Share | Metric | Six Months Ended June 30, 2023 (RMB cents) | Six Months Ended June 30, 2022 (RMB cents) | | :----------------- | :----------------------------------------- | :----------------------------------------- | | Basic EPS | 11.3 | 10.7 | | Diluted EPS | 11.3 | 10.7 | Consolidated Statement of Financial Position As of June 30, 2023, the Group's total non-current assets were RMB 3,748,538 thousand, net current assets increased 77.4% to RMB 47,004 thousand, and net assets were RMB 3,345,354 thousand Consolidated Statement of Financial Position (Summary) | Metric | June 30, 2023 (RMB '000) | December 31, 2022 (RMB '000) | | :------------------------- | :----------------------- | :--------------------------- | | Total Non-Current Assets | 3,748,538 | 3,653,976 | | Total Current Assets | 315,688 | 537,936 | | Total Current Liabilities | 268,684 | 511,423 | | Net Current Assets | 47,004 | 26,513 | | Total Assets Less Current Liabilities | 3,795,542 | 3,680,489 | | Non-Current Liabilities | 450,188 | 446,096 | | Net Assets | 3,345,354 | 3,234,393 | | Total Equity | 3,345,354 | 3,234,393 | - Net current assets increased by 77.4% during the reporting period, primarily due to a decrease in contract liabilities exceeding the decrease in current assets[65] Notes to the Unaudited Interim Financial Report 1 Basis of Preparation This interim financial report, prepared under HKEX Listing Rules and IAS 34, was approved for publication on August 30, 2023, explaining changes in financial position and performance since the 2022 annual financial statements - This interim financial report is prepared in accordance with the applicable disclosure provisions of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited, including International Accounting Standard 34 Interim Financial Reporting issued by the International Accounting Standards Board[106] - The report was approved for publication on August 30, 2023, and contains condensed consolidated financial statements and selected explanatory notes to explain changes in financial position and performance since the 2022 annual financial statements[106][139] 2 Changes in Accounting Policies This interim financial report is prepared using the same accounting policies as the 2022 annual financial statements, with no significant impact from new IFRS amendments on the Group's results or financial position - This interim financial report is prepared in accordance with the same accounting policies adopted in the 2022 annual financial statements, except for changes in accounting policies expected to be reflected in the 2023 annual financial statements[2] - The IASB has issued several amendments to IFRSs, including amendments to IFRS 12 (Income Taxes: International Tax Reform – Pillar Two Model Rules and Deferred Tax related to Assets and Liabilities arising from a Single Transaction), IFRS 8 (Accounting Policies, Changes in Accounting Estimates and Errors: Definition of Accounting Estimates), and IFRS 17 (Insurance Contracts)[3][108][140] - These developments have not had a significant impact on the way the Group's results and financial position for the current or prior periods are prepared or presented in this interim financial report[95] 3 Revenue and Segment Reporting For the six months ended June 30, 2023, the Group's revenue, primarily from tuition and boarding fees, increased 5.3% to RMB 351,075 thousand, with all revenue and non-current assets originating from China, operating as a single education services segment Revenue Sources | Revenue Source | Six Months Ended June 30, 2023 (RMB '000) | Six Months Ended June 30, 2022 (RMB '000) | | :------------- | :---------------------------------------- | :---------------------------------------- | | Tuition Fees | 323,909 | 306,960 | | Boarding Fees | 27,166 | 26,513 | | Total | 351,075 | 333,473 | - All of the Group's revenue is derived from the People's Republic of China, and all its non-current assets are located in China[96] - The Group has determined that it has only one operating segment, which is the provision of education services[141] 4 Other Income Other income for the six months ended June 30, 2023, decreased 34.7% to RMB 24,725 thousand, primarily due to reduced operating surplus from Hongshan College, comprising rental, service, government grants, interest, and college operating surpluses Other Income Details | Item | Six Months Ended June 30, 2023 (RMB '000) | Six Months Ended June 30, 2022 (RMB '000) | | :------------------------------------- | :---------------------------------------- | :---------------------------------------- | | Rental and Property Management Income | 10,914 | 10,841 | | Service Income | 7,233 | 6,849 | | Government Grants | 798 | 1,097 | | Interest Income from Financial Assets Measured at Amortized Cost | 4,842 | 3,569 | | Operating Surplus from Clinical Medical College and Hongshan College (i) | 1,411 | 15,131 | | Others | (473) | 330 | | Total | 24,725 | 37,817 | - Other income decreased by 34.7% from RMB 37.8 million for the six months ended June 30, 2022, to RMB 24.7 million for the reporting period, primarily due to the combined effect of a decrease in operating surplus from Hongshan College[170] - Operating surplus from Clinical Medical College and Hongshan College refers to the surplus or deficit to be absorbed by the Group, which is the recognized revenue less operating costs of the two colleges during the reporting period[98] 5 Profit Before Tax For the six months ended June 30, 2023, the Group's profit before tax increased 6.1% to RMB 183,692 thousand, after deducting items such as depreciation, amortization, and auditor's remuneration Items Deducted from Profit Before Tax | Item | Six Months Ended June 30, 2023 (RMB '000) | Six Months Ended June 30, 2022 (RMB '000) | | :--------------------------------- | :---------------------------------------- | :---------------------------------------- | | Depreciation of Property, Plant and Equipment | 31,164 | 30,167 | | Amortization of Intangible Assets | 1,554 | 2,480 | | Depreciation of Right-of-Use Assets | 1,278 | 1,278 | | Auditor's Remuneration | 1,000 | 1,612 | | Total | 34,996 | 35,537 | - The Group recognized a profit before income tax of RMB 183.7 million for the reporting period, an increase of 6.1% compared to RMB 173.2 million for the six months ended June 30, 2022, primarily due to increased revenue[61] 6 Income Tax in the Consolidated Statement of Profit or Loss and Other Comprehensive Income Income tax provision for the six months ended June 30, 2023, surged 175.0% to RMB 2,238 thousand due to increased taxable income, with future tax treatment potentially affected by pending detailed policy instructions for non-profit private schools Current Tax Provision | Item | Six Months Ended June 30, 2023 (RMB '000) | Six Months Ended June 30, 2022 (RMB '000) | | :--------------------------------- | :---------------------------------------- | :---------------------------------------- | | PRC Income Tax Provision for the Period | 2,238 | 752 | - The Group's income tax increased by 175.0% from RMB 0.8 million for the six months ended June 30, 2022, to RMB 2.2 million for the reporting period, primarily due to an increase in taxable income[175] - According to relevant provisions of the Implementation Rules for the Law for Promoting Private Education, private schools that do not require reasonable returns may enjoy the same tax preferential treatment as public schools; however, as of the date of this announcement, the Group has not yet initiated the registration process due to the lack of detailed instructions, and future tax treatment may be adversely affected[10][116] 7 Earnings Per Share For the six months ended June 30, 2023, profit attributable to shareholders was RMB 181,454 thousand. Basic and diluted earnings per share were RMB 11.3 cents, based on weighted average ordinary shares Earnings Per Share | Metric | Six Months Ended June 30, 2023 (RMB cents) | Six Months Ended June 30, 2022 (RMB cents) | | :----------------- | :----------------------------------------- | :----------------------------------------- | | Basic EPS | 11.3 | 10.7 | | Diluted EPS | 11.3 | 10.7 | - Basic earnings per share are calculated based on the profit attributable to shareholders of the Company of RMB 181,454,000 for the six months ended June 30, 2023, and the weighted average number of ordinary shares in issue of 1,608,583,000 shares[117] - Diluted earnings per share are calculated based on the profit attributable to shareholders of the Company of RMB 181,454,000 for the six months ended June 30, 2023, and the weighted average number of ordinary shares of 1,609,579,000 shares[149] 8 Other Non-Current Assets As of June 30, 2023, total other non-current assets were RMB 2,826,094 thousand, mainly comprising investment prepayments for Hongshan College and campus construction payments to Clinical Medical College and Hongshan College Other Non-Current Assets Details | Item | June 30, 2023 (RMB '000) | December 31, 2022 (RMB '000) | | :------------------- | :----------------------- | :--------------------------- | | Prepayments for Investments | 660,000 | 660,000 | | Other Receivables | 2,166,094 | 2,040,291 | | Total | 2,826,094 | 2,700,291 | - Other receivables refer to campus construction payments to Clinical Medical College amounting to RMB 1,081,049,000 (December 31, 2022: RMB 1,001,872,000) and campus construction payments to Hongshan College amounting to RMB 1,085,045,000 (December 31, 2022: RMB 1,038,419,000), all of which are unsecured, interest-free, and repayable on demand[119] 9 Trade Receivables As of June 30, 2023, the Group's trade receivables decreased to RMB 574 thousand from RMB 2,639 thousand as of December 31, 2022, with no bad debt provisions made at the period-end Trade Receivables | Item | June 30, 2023 (RMB '000) | December 31, 2022 (RMB '000) | | :-------- | :----------------------- | :--------------------------- | | Within One Year | 574 | 2,639 | - As of the end of the reporting period, no provision for doubtful debts was made[120] 10 Prepayments, Deposits, and Other Receivables As of June 30, 2023, prepayments, deposits, and other receivables totaled RMB 211,681 thousand, primarily including a RMB 200,000 thousand balance due from Hongshan College Prepayments, Deposits, and Other Receivables | Item | June 30, 2023 (RMB '000) | December 31, 2022 (RMB '000) | | :------------------- | :----------------------- | :--------------------------- | | Prepayments and Deposits | 201,299 | 205,089 | | Other Receivables | 10,382 | 8,140 | | Total | 211,681 | 213,229 | - As of June 30, 2023, prepayments and deposits primarily included a balance due from Hongshan College amounting to RMB 200,000,000[15][120] 11 Long-Term Bank Deposits, Cash, and Bank Balances As of June 30, 2023, the Group's long-term bank deposits, cash, and bank balances totaled RMB 283,433 thousand, a decrease from RMB 502,068 thousand as of December 31, 2022, with bank deposits earning 3.10% to 3.70% annual interest Long-Term Bank Deposits, Cash, and Bank Balances | Item | June 30, 2023 (RMB '000) | December 31, 2022 (RMB '000) | | :----------------------- | :----------------------- | :--------------------------- | | Long-Term Bank Deposits | 180,000 | 180,000 | | Cash and Bank Balances | | | | - Bank Term Deposits | 60,000 | 130,000 | | - Cash and Cash Equivalents | 43,433 | 192,068 | | Total | 283,433 | 502,068 | - As of June 30, 2023, bank term deposits bore interest at annual rates ranging from 3.10% to 3.70% (December 31, 2022: 2.96% to 3.70%)[152] 12 Loans and Borrowings As of June 30, 2023, the Group's total loans and borrowings were RMB 500,208 thousand, including RMB 207,940 thousand in unsecured bank loans at 3.90% annual interest and RMB 292,268 thousand from related parties at 2.00% annual interest, with the latter extended to June 21, 2027 Loans and Borrowings Details | Item | June 30, 2023 (RMB '000) | December 31, 2022 (RMB '000) | | :------------------- | :----------------------- | :--------------------------- | | Unsecured Bank Loans | 207,940 | 212,940 | | Loans from Related Parties | 292,268 | 283,176 | | Total | 500,208 | 496,116 | - As of June 30, 2023, unsecured bank loans bore interest at an annual rate of 3.90%[17] - The Group entered into a loan agreement with its related party, Wu Junbao Co., Ltd., at an annual interest rate of 2.00%, and a loan extension agreement was signed during the reporting period, extending the maturity date from June 21, 2024, to June 21, 2027[153] 13 Contract Liabilities As of June 30, 2023, the Group's contract liabilities significantly decreased to RMB 14,784 thousand from RMB 329,549 thousand as of December 31, 2022, primarily comprising tuition and boarding fees Contract Liabilities Details | Item | June 30, 2023 (RMB '000) | December 31, 2022 (RMB '000) | | :------------ | :----------------------- | :--------------------------- | | Tuition Fees | 5,797 | 296,718 | | Boarding Fees | 8,987 | 32,831 | | Total | 14,784 | 329,549 | 14 Other Payables As of June 30, 2023, the Group's other payables increased to RMB 201,642 thousand, primarily including amounts due to suppliers, dividends payable, and accrued staff costs, all expected to be settled within one year Other Payables Details | Item | June 30, 2023 (RMB '000) | December 31, 2022 (RMB '000) | | :----------------------- | :----------------------- | :--------------------------- | | Amounts Due to Suppliers | 57,007 | 68,103 | | Miscellaneous Expenses Collected from Students | 8,988 | 16,491 | | Accrued Staff Costs | 19,687 | 27,421 | | Accrued Expenses | 7,198 | 8,175 | | Dividends Payable | 97,290 | – | | Interest Payable | 10,712 | 7,567 | | Others | 760 | 760 | | Total | 201,642 | 128,517 | - All other payables are expected to be settled within one year[155] 15 Share Capital, Reserves, and Dividends As of June 30, 2023, the Company's share capital was RMB 12,952 thousand and reserves were RMB 3,332,402 thousand, with no interim dividend recommended and 71,900,000 share options granted at HKD 0.764 per share Share Capital and Reserves | Item | June 30, 2023 (RMB '000) | December 31, 2022 (RMB '000) | | :-------- | :----------------------- | :--------------------------- | | Share Capital | 12,952 | 12,952 | | Reserves | 3,332,402 | 3,221,441 | | Total Equity | 3,345,354 | 3,234,393 | - The Company's directors do not recommend the payment of an interim dividend for the six months ended June 30, 2023[156] - On June 5, 2023, the Company granted 71,900,000 share options to certain employees (including three executive directors, Zhang Ming, Lu Zhen, and Wang Yongkai) under the Employee Share Option Scheme, with an exercise price of HKD 0.764 per share[129] Capital Management The Group monitors its capital structure using the asset-liability ratio to ensure going concern and shareholder returns, with the ratio decreasing to 18% as of June 30, 2023, from 23% as of December 31, 2022 - The Group's primary objective of capital management is to ensure its ability to continue as a going concern, so that it can continue to generate returns for shareholders and benefits for other stakeholders through pricing products and services commensurate with the level of risk and by obtaining financing at a reasonable cost[130] Asset-Liability Ratio | Metric | June 30, 2023 (RMB '000) | December 31, 2022 (RMB '000) | | :----------------- | :----------------------- | :--------------------------- | | Total Liabilities | 718,872 | 957,519 | | Total Assets | 4,064,226 | 4,191,912 | | Asset-Liability Ratio | 18% | 23% | - As of June 30, 2023, the ratio was 17.7%, a slight decrease during the reporting period compared to 22.8% as of December 31, 2022[45] Management Discussion and Analysis Business Review and Operational Updates The Group invests in and operates four educational institutions, all of which made significant progress in professional development, faculty, industry-academia collaboration, and digital campus construction to meet national demand for high-quality applied talents - The Group invests in and operates four educational institutions: Anhui Xinhua University, Clinical Medical College of Anhui Medical University, Hongshan College of Nanjing University of Finance and Economics, and Anhui Xinhua School[187] - The Group closely aligns with the needs of emerging industries and the transformation and upgrading of traditional industries, continuously strengthening professional development, with its colleges currently having a total of 4 national-level first-class undergraduate programs and 14 provincial-level first-class undergraduate programs[192] - The Group actively promotes industry-academia and local government cooperation, deepens international exchanges and cooperation, establishes an international exchange cloud platform, and introduces curriculum resources from renowned universities such as Harvard University and Oxford University[52] Our Schools Xinhua College offers 59 undergraduate programs and added a national-level first-class course, Clinical Medical College saw a 40.6% increase in enrollment to 5,991 students, Hongshan College's Gaocun campus is ready for use, and Xinhua School was recognized as a national key secondary vocational school - Xinhua College has 10 secondary colleges and 2 teaching departments, offering a total of 59 undergraduate programs, with 4 national-level first-class undergraduate programs in Communication Engineering, Financial Management, Economics and Finance, and Software Engineering, and 1 new national-level first-class undergraduate course ("Digital Circuits")[47] - In the 2022/2023 academic year, Clinical Medical College's enrollment reached 5,991 students, a year-on-year increase of 40.6%, and it added 1 provincial-level high-level public health college, with scientific research projects doubling compared to the same period last year[48] - Hongshan College's Gaocun campus is fully equipped, functionally complete, and offers excellent conditions, and is about to be put into use[137] Student Enrollment | School | June 30, 2023 | June 30, 2022 | | :--------------------- | :------------ | :------------ | | Xinhua College | | | | Full-time Students | 24,092 | 24,476 | | Continuing Education | 15,586 | 12,296 | | Subtotal | 39,678 | 36,772 | | Clinical Medical College (1) | | | | Full-time Students | 5,991 | 4,261 | | Hongshan College (1) | | | | Full-time Students | 9,820 | 10,213 | | Xinhua School | | | | Full-time Students | 4,374 | 6,288 | | Total Full-time Students | 44,277 | 45,238 | | Total Students | 59,863 | 57,534 | Operational Updates and Highlights The Group actively aligns with emerging industry demands, strengthens professional and curriculum development, recruits high-caliber faculty, deepens industry-academia cooperation, and invests in modern digital campus construction to cultivate high-quality applied talents - Significant achievements in professional and curriculum development, aligning with emerging industry demands, with affiliated colleges having a total of 4 national-level first-class undergraduate programs and 14 provincial-level first-class undergraduate programs[192] - Strengthened talent recruitment and cultivation to build a high-level faculty team, continuously attracting doctoral, associate senior professional title and above talents, and enriching the "dual-qualified" teacher team[166] - Deepened exchanges and cooperation, effectively leveraging collaborative education, actively promoting industry-academia and local government cooperation, enhancing international exchanges and cooperation, and introducing curriculum resources from renowned universities such as Harvard University and Oxford University[52] - Increased investment, with modern campus construction reaching new heights, including the construction or renovation of 32 experimental training centers, strengthening campus informatization, and promoting educational digitalization[137] Financial Review The Group achieved revenue and gross profit growth, but other income and adjusted net profit slightly decreased, while operating costs, selling and distribution costs, administrative expenses, and finance costs saw varied changes, leading to increased profit for the period and improved net current assets and asset-liability ratio Revenue The Group's revenue increased 5.3% to RMB 351.1 million for the period, primarily due to higher average tuition fees, with adjusted revenue (including Clinical Medical College and Hongshan College) growing 7.3% to RMB 490,697 thousand - The Group's revenue increased by 5.3% from RMB 333.5 million for the six months ended June 30, 2022, to RMB 351.1 million for the reporting period, primarily due to an increase in the average tuition fees charged to students[196] Revenue and Adjusted Revenue | Item | Six Months Ended June 30, 2023 (RMB '000) | Six Months Ended June 30, 2022 (RMB '000) | | :--------------------------------- | :---------------------------------------- | :---------------------------------------- | | Revenue | 351,075 | 333,473 | | Add: Revenue from Clinical Medical College and Hongshan College | 139,622 | 123,822 | | Adjusted Revenue | 490,697 | 457,295 | Other Income Other income decreased 34.7% to RMB 24.7 million for the period, primarily due to the reduced operating surplus from Hongshan College - Other income decreased by 34.7% from RMB 37.8 million for the six months ended June 30, 2022, to RMB 24.7 million for the reporting period, primarily due to the combined effect of a decrease in operating surplus from Hongshan College[170] Cost of Sales Cost of sales increased 4.2% to RMB 116.3 million for the period, mainly due to the expanded school scale and increased ongoing teaching investment - Cost of sales increased by 4.2% from RMB 111.6 million for the six months ended June 30, 2022, to RMB 116.3 million for the reporting period, primarily due to the expanded school scale and increased ongoing teaching investment[37] Gross Profit Gross profit increased 5.8% to RMB 234.8 million for the period, driven by continuous optimization of management and economies of scale from resource integration, aligning with business growth - Gross profit increased by 5.8% from RMB 221.9 million for the six months ended June 30, 2022, to RMB 234.8 million for the reporting period, primarily due to the continuous optimization of our management and economies of scale brought about by resource integration, consistent with our business growth[58] Selling and Distribution Costs Selling and distribution costs increased 72.2% to RMB 3.1 million for the period, primarily due to increased recruitment activities in H1 2023 to boost student enrollment - Selling and distribution costs increased by 72.2% from RMB 1.8 million for the six months ended June 30, 2022, to RMB 3.1 million for the reporting period, primarily due to increased recruitment activities in the first half of 2023 to improve student enrollment rates[59] Administrative Expenses Administrative expenses decreased 13.6% to RMB 66.2 million for the period, mainly due to a reduction in exchange losses - Administrative expenses decreased by 13.6% from RMB 76.6 million for the six months ended June 30, 2022, to RMB 66.2 million for the reporting period, primarily due to a decrease in exchange losses[173] Finance Costs Finance costs decreased to RMB 6.5 million for the period, primarily due to a reduction in total loan amounts and interest rates - Finance costs decreased from RMB 8 million for the six months ended June 30, 2022, to RMB 6.5 million for the reporting period, primarily due to a decrease in total loan amounts and interest rates[40] Profit Before Tax The Group's profit before tax increased 6.1% to RMB 183.7 million for the period, primarily driven by increased revenue - The Group recognized a profit before income tax of RMB 183.7 million for the reporting period, an increase of 6.1% compared to RMB 173.2 million for the six months ended June 30, 2022, primarily due to increased revenue[61] Income Tax The Group's income tax increased 175.0% to RMB 2.2 million for the period, primarily due to an increase in taxable income - The Group's income tax increased by 175.0% from RMB 0.8 million for the six months ended June 30, 2022, to RMB 2.2 million for the reporting period, primarily due to an increase in taxable income[175] Profit for the Period Due to the combined impact of revenue and cost changes, the Group recorded a profit of RMB 181.5 million for the period, an increase of 5.2% - Due to the combined impact of the aforementioned revenue and cost changes, the Group recorded a profit of RMB 181.5 million for the reporting period, an increase of 5.2% compared to RMB 172.5 million for the six months ended June 30, 2022[42] Adjusted Net Profit Adjusted net profit slightly decreased 0.2% to RMB 218,904 thousand, after adjusting for exchange gains or losses and share-based payment expenses unrelated to the Group's operating performance Adjusted Net Profit Calculation | Item | Six Months Ended June 30, 2023 (RMB '000) | Six Months Ended June 30, 2022 (RMB '000) | | :--------------------------------- | :---------------------------------------- | :---------------------------------------- | | Profit for the Period | 181,454 | 172,495 | | Add: Exchange Losses | 35,009 | 43,580 | | Add: Share-Based Payment Expenses | 2,441 | 3,342 | | Adjusted Net Profit | 218,904 | 219,417 | - Adjusted net profit is the profit for the period adjusted for exchange gains or losses and share-based payment expenses unrelated to the Group's operating performance, and it is not an IFRS measure[43] Working Capital and Capital Resources The Group primarily funds its operations through cash and cash equivalents from operations, with net current assets increasing 77.4% to RMB 47 million and total bank and related party loans amounting to RMB 500.2 million - The Group primarily funds its operations through cash and cash equivalents generated from operations[43] - As of June 30, 2023, the Group recorded net current assets of RMB 47 million, an increase of 77.4% compared to RMB 26.5 million as of December 31, 2022, primarily due to a decrease in contract liabilities exceeding the decrease in current assets[65] - As of June 30, 2023, the Group's bank loans and loans from related parties amounted to RMB 500.2 million[67] Capital Expenditure Capital expenditure for the period significantly increased to RMB 126.1 million, primarily related to the construction of buildings and school facilities, and the purchase of equipment and software, funded mainly by cash from operations - For the reporting period, the Group's capital expenditure was RMB 126.1 million (June 30, 2022: RMB 14.3 million), primarily related to the construction of buildings and school facilities and the purchase of equipment and software[179] - As Clinical Medical College and Hongshan College are not yet consolidated, capital expenditure does not include these two schools for now[179] Asset-Liability Ratio As of June 30, 2023, the Group's asset-liability ratio slightly decreased to 17.7%, indicating improved financial leverage - The Group's asset-liability ratio is calculated as total liabilities divided by total assets; as of June 30, 2023, the ratio was 17.7%, a slight decrease during the reporting period compared to 22.8% as of December 31, 2022[45] Asset-Liability Ratio | Metric | June 30, 2023 | December 31, 2022 | | :----------------- | :------------ | :---------------- | | Asset-Liability Ratio | 18% | 23% | Future Plans for Material Investments and Capital Assets The Group had no other plans for material investments and capital assets as of June 30, 2023, and up to the date of this announcement - The Group had no other plans for material investments and capital assets as of June 30, 2023, and up to the date of this announcement[68] - During the reporting period, the Group did not hold any material investments[181] Material Acquisitions and Disposals of Subsidiaries and Associates The Company had no material acquisitions or disposals of subsidiaries and associates during the reporting period - The Company had no material acquisitions or disposals of subsidiaries and associates during the reporting period[69] Foreign Exchange Risk Management The Group's functional currency is RMB, with most income and expenses denominated in RMB, and while some bank balances are in USD or HKD, no hedging instruments are currently in place, but management continuously monitors foreign exchange risk - The Group's functional currency is RMB, and most of its income and expenses are denominated in RMB; as of June 30, 2023, certain bank balances were denominated in USD or HKD[76] - The Group has not entered into any financial instruments for hedging purposes at present, and management continuously monitors foreign exchange risk and will consider using financial instruments to hedge significant foreign currency risks when necessary[76] Pledge of Assets As of June 30, 2023, the Group had no assets pledged - As of June 30, 2023, the Group had no assets pledged[70] Human Resources As of June 30, 2023, the Group had approximately 2,576 employees, an increase from the prior year, participating in local government social security plans, maintaining good employee relations with no significant labor disputes - As of June 30, 2023, the Group had approximately 2,576 employees (June 30, 2022: 2,057)[182] - In accordance with applicable laws and regulations, the Group participates in employee social security schemes managed by local governments, including housing, pension, medical insurance, maternity insurance, and unemployment insurance[182] - The Board believes that the Group maintains good working relationships with its employees, and we did not experience any significant labor disputes during the reporting period[182] Off-Balance Sheet Commitments and Arrangements As of June 30, 2023, the Group had no off-balance sheet transactions, unrecorded material contingent liabilities, guarantees, or lawsuits against it - As of June 30, 2023, the Group had not entered into any off-balance sheet transactions[183] - As of June 30, 2023, the Group had no unrecorded material contingent liabilities, guarantees, or any lawsuits against it[180] Events After Reporting Period No events with a material impact on the Group occurred after the reporting period and up to the date of this announcement - No events with a material impact on the Group occurred after the reporting period and up to the date of this announcement[78] Interim Dividend The Board does not recommend the payment of an interim dividend for the reporting period - The Board does not recommend the payment of an interim dividend for the reporting period[72] Review of Interim Results KPMG, the Company's independent auditor, reviewed the unaudited interim consolidated financial statements, and the Audit Committee discussed accounting standards, policies, internal controls, and financial reporting with management and the auditor - The Company's independent auditor, KPMG, has reviewed the unaudited interim consolidated financial statements 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[185] - The Audit Committee has reviewed the accounting standards and policies adopted by the Company with management and the Company's independent auditor, and has discussed matters relating to the Group's internal controls and financial reporting, including the review of the unaudited interim results for the reporting period[185] Purchase, Sale or Redemption of the Company's Listed Securities 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 during the reporting period[184] Corporate Governance Corporate Governance Code The Group is committed to high corporate governance standards, adhering to the HKEX Listing Rules' Corporate Governance Code throughout the reporting period to protect shareholder interests and enhance corporate value - The Group is committed to maintaining a high level of corporate governance to protect the interests of the Company's shareholders and enhance corporate value and accountability[74] - The Company has adopted 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 its own corporate governance code[74] - The Company has complied with all applicable code provisions under the Corporate Governance Code throughout the reporting period[74] Standard Code for Securities Transactions by Directors The Company adopted the Standard Code for Securities Transactions by Directors of Listed Issuers, and all directors confirmed compliance during the reporting period - The Company has adopted the Standard Code for Securities Transactions by Directors of Listed Issuers set out in Appendix 10 to the Listing Rules as its code of conduct for directors' securities transactions[80] - Following specific enquiries made to the Board, all directors confirmed that they had complied with the Standard Code during the reporting period[80] Publication of Interim Results and Interim Report This announcement is published on the HKEX and Company websites, and the interim report for the period will be dispatched to shareholders and published on these websites by the end of September 2023 - This announcement is published on the website of Hong Kong Exchanges and Clearing Limited (www.hkexnews.hk) and the Company's website (www.chinaxhedu.com)[81](index=81&type=chunk) - The Company's interim report for the reporting period will be dispatched to shareholders and published on the aforementioned websites by the end of September 2023[81]