和谐汽车(03836) - 2022 - 年度业绩

Annual Results Announcement The Group's FY2022 revenue, new car sales, gross profit, and net profit attributable to owners all significantly declined, resulting in a full-year loss, with basic and diluted loss per share at RMB 1.08 Performance Highlights The Group's FY2022 revenue, new car sales, gross profit, and net profit attributable to owners all significantly declined, resulting in a full-year loss, with basic and diluted loss per share at RMB 1.08 FY2022 Performance Highlights | Metric | 2022 (RMB million) | 2021 (RMB million) | Change (%) | | :--- | :--- | :--- | :--- | | Revenue | 16,321.7 | 17,981.1 | -9.2% | | New Car Sales (units) | 35,506 | - | -13.0% | | Gross Profit | 1,079.7 | 1,751.3 | -38.3% | | Loss for the Year | (1,622.8) | 691.3 | N/A | | Profit after Non-Recurring Losses | 164.8 | - | N/A | | Basic and Diluted Loss Per Share (RMB) | (1.08) | 0.44 | N/A | - Gross profit from car sales and other businesses decreased by 64.6% year-on-year, while gross profit from after-sales services decreased by 24.7% year-on-year[33] Annual Results The Group transitioned from profit to loss in FY2022, with significant declines in revenue and gross profit, alongside a negative shift in other income and net gains Consolidated Statement of Profit or Loss and Other Comprehensive Income The Group shifted from profit to a loss of RMB 1,622.8 million in FY2022, with significant declines in revenue and gross profit, and a negative turn in other income and net gains leading to an operating loss Key Data from Consolidated Statement of Profit or Loss and Other Comprehensive Income | Metric | 2022 (RMB thousand) | 2021 (RMB thousand) | Change (%) | | :--- | :--- | :--- | :--- | | Revenue | 16,321,659 | 17,981,051 | -9.2% | | Cost of Sales and Services | (15,241,990) | (16,229,787) | -6.1% | | Gross Profit | 1,079,669 | 1,751,264 | -38.3% | | Other Income and Net Gains | (1,232,990) | 442,989 | N/A | | Operating (Loss)/Profit | (1,382,308) | 1,057,569 | N/A | | (Loss)/Profit for the Year | (1,622,804) | 691,271 | N/A | | (Loss)/Profit for the Year Attributable to Owners of the Company | (1,627,762) | 673,155 | N/A | | Basic (Loss)/Earnings Per Share (RMB) | (1.08) | 0.44 | N/A | - Total comprehensive loss for the year was RMB 1,654.1 million, compared to a total comprehensive income of RMB 637.9 million in 2021[49] Consolidated Statement of Financial Position As of December 31, 2022, the Group's total assets and net assets decreased, with significant declines in non-current and current assets, particularly prepayments and other receivables, while trade payables and bills payable substantially increased Key Data from Consolidated Statement of Financial Position | Metric | 2022 (RMB thousand) | 2021 (RMB thousand) | Change (%) | | :--- | :--- | :--- | :--- | | Assets | | | | | Total Non-Current Assets | 4,860,204 | 6,152,024 | -21.0% | | Total Current Assets | 5,942,353 | 7,096,574 | -16.3% | | Inventories | 1,540,438 | 1,129,635 | +36.4% | | Trade Receivables | 197,882 | 148,149 | +33.6% | | Prepayments, Other Receivables and Other Assets | 2,534,426 | 3,760,416 | -32.6% | | Cash and Bank Balances | 1,161,992 | 1,629,199 | -28.7% | | Liabilities | | | | | Total Current Liabilities | 3,899,527 | 4,355,319 | -10.5% | | Bank Loans and Other Borrowings | 2,083,023 | 2,629,978 | -20.8% | | Trade Payables and Bills Payable | 635,135 | 217,265 | +192.3% | | Total Non-Current Liabilities | 876,323 | 850,717 | +3.0% | | Equity | | | | | Net Assets | 6,026,707 | 8,042,562 | -25.1% | | Total Equity | 6,026,707 | 8,042,562 | -25.1% | - Investments at fair value through profit or loss decreased from RMB 1,217,011 thousand (non-current) and RMB 81,504 thousand (current) in 2021 to zero in 2022, indicating disposal or impairment of related investments[41] Notes to Consolidated Financial Statements This section details the Group's general information, accounting policies, segment reporting, and specific financial statement items, including revenue, expenses, and balance sheet components General and Group Information China Harmony Auto Holding Limited was incorporated in the Cayman Islands in 2012 and listed on the HKEX in 2013, primarily engaging in car sales and after-sales services in mainland China, with Cititrust Private Trust (Cayman) Limited as the ultimate holding company and Mr. Feng Changge as the controlling shareholder - The Company was incorporated in the Cayman Islands on September 24, 2012, and listed on the Main Board of the HKEX on June 13, 2013[58] - The Group's principal activities are car sales and after-sales services in mainland China[58] - The Company's ultimate holding company is Cititrust Private Trust (Cayman) Limited, and Mr. Feng Changge is the Chairman, Executive Director, and controlling shareholder of the Company[59] Basis of Preparation The consolidated financial statements are prepared in accordance with Hong Kong Financial Reporting Standards issued by the HKICPA, applicable disclosure requirements of the HKEX Listing Rules, and the Hong Kong Companies Ordinance - The consolidated financial statements are prepared in accordance with Hong Kong Financial Reporting Standards (HKFRSs) issued by the HKICPA, and the applicable disclosure requirements of the HKEX Listing Rules and the Hong Kong Companies Ordinance[72] Adoption of New and Revised HKFRSs The Group adopted all new and revised HKFRSs effective from January 1, 2022, this year, with no significant changes to its accounting policies, consolidated financial statement presentation, or reported amounts - All new and revised HKFRSs effective from January 1, 2022, have been adopted this year, with no significant impact on accounting policies or financial statements[73] Operating Segment Information The Group's primary business is car sales and after-sales services, with all revenue and over 90% of non-current assets and liabilities located in mainland China, thus no geographical segment information is presented, operating as a single business unit - The Group's principal activities are car sales and after-sales services, operating as a single business unit with one reportable segment[74] - No geographical segment information is presented as all revenue and over 90% of non-current assets and liabilities are located in mainland China[64] - No sales to a single customer reached 10% or more of the Group's revenue during the year, thus no major customer information is presented[77] Revenue (Note 4) The Group's total revenue in 2022 was RMB 16,321.7 million, a 9.2% year-on-year decrease, with car sales and other revenue being the largest component but declining, after-sales service revenue also decreasing, while finance lease service revenue increased Revenue Classification | Revenue Source | 2022 (RMB thousand) | 2021 (RMB thousand) | Change (%) | | :--- | :--- | :--- | :--- | | Car Sales and Other | 14,324,782 | 15,609,705 | -8.2% | | After-Sales Services | 1,936,818 | 2,326,282 | -16.7% | | Finance Lease Services | 60,059 | 45,064 | +33.3% | | Total Revenue | 16,321,659 | 17,981,051 | -9.2% | - Total revenue from customer contracts decreased from RMB 17,935,987 thousand in 2021 to RMB 16,261,600 thousand in 2022[68] - Performance obligations for car sales and other businesses are satisfied upon customer receipt of goods, typically requiring upfront payments; after-sales service obligations are satisfied upon service provision, with payments usually collected at the time of service[78][84] Other Income and Net Gains (Note 5) The Group's other income and net gains were a negative RMB 1,233.0 million in 2022, compared to a positive RMB 443.0 million in 2021, primarily due to a significant increase in impairment losses on investments at fair value through profit or loss Other Income and Net Gains | Item | 2022 (RMB thousand) | 2021 (RMB thousand) | Change | | :--- | :--- | :--- | :--- | | Commission Income | 412,049 | 420,628 | -2.0% | | Bank Interest Income | 23,572 | 14,472 | +62.9% | | Government Grants | 9,920 | 7,383 | +34.4% | | Impairment Loss on Investments at Fair Value Through Profit or Loss | (1,298,515) | (58,763) | N/A | | Impairment Loss on Equity Investments Loan at Fair Value Through Other Comprehensive Income | (354,577) | — | N/A | | Impairment Loss on Loans to Third Parties | (40,296) | — | N/A | | Total | (1,232,990) | 442,989 | N/A | - Government grants include various subsidies received by the Company's subsidiaries from relevant government authorities, with no unfulfilled conditions or contingencies[86] Finance Costs (Note 6) The Group's finance costs in 2022 were RMB 121.3 million, a 7.3% year-on-year decrease, primarily due to a reduced average borrowing balance and improved loan management capabilities Composition of Finance Costs | Item | 2022 (RMB thousand) | 2021 (RMB thousand) | Change (%) | | :--- | :--- | :--- | :--- | | Interest on Bank Loans and Other Borrowings | 72,480 | 90,996 | -20.4% | | Interest on Leases | 51,871 | 48,785 | +6.3% | | Less: Capitalized Interest | (3,062) | (8,928) | -65.7% | | Total | 121,289 | 130,853 | -7.3% | Income Tax Expense (Note 7) The Group's income tax expense in 2022 was RMB 115.5 million, a significant decrease from RMB 235.7 million in 2021, with mainland China subsidiaries taxed at 25%, Hong Kong subsidiaries having no taxable profit, and Cayman Islands and BVI registered companies being tax-exempt Income Tax Expense | Item | 2022 (RMB thousand) | 2021 (RMB thousand) | Change (%) | | :--- | :--- | :--- | :--- | | Current Mainland China Corporate Income Tax Annual Provision | 123,733 | 246,397 | -49.8% | | Deferred Tax | (8,214) | (10,703) | -23.2% | | Total Income Tax Expense | 115,519 | 235,694 | -51.0% | - The income tax rate for mainland China subsidiaries is 25%[95] - Hong Kong registered subsidiaries had no taxable profit in 2022, thus no provision for Hong Kong profits tax was made[88] Loss/Profit for the Year (Note 8) The Group transitioned from profit to a loss of RMB 1,622.8 million in 2022, primarily impacted by impairment losses on investments at fair value through profit or loss and write-offs of property, plant, and equipment Major Deductions/(Additions) in Loss/Profit for the Year | Item | 2022 (RMB thousand) | 2021 (RMB thousand) | Change | | :--- | :--- | :--- | :--- | | Amortization of Intangible Assets | 6,455 | 5,818 | +10.9% | | Cost of Car Sales | 14,089,921 | 14,945,370 | -5.7% | | Cost of After-Sales Services | 1,152,069 | 1,284,417 | -10.3% | | Depreciation of Property, Plant and Equipment | 201,377 | 193,928 | +3.8% | | Impairment Loss on Investments at Fair Value Through Profit or Loss | 1,298,515 | 58,763 | N/A | | Total Employee Costs | 421,902 | 464,061 | -9.0% | - Impairment provision for inventories of RMB 4,223 thousand was made in 2022, compared to none in 2021[1] - After-sales service costs included employee benefit expenses of RMB 142,382 thousand, an increase from RMB 120,497 thousand in 2021[1] Earnings/Loss Per Share (Note 9) The Group's basic and diluted loss per share in 2022 was RMB 1.08, compared to basic and diluted earnings per share of RMB 0.44 in 2021, with diluted loss per share being the same as basic loss per share in 2022 due to the anti-dilutive effect of share options Loss/Earnings Per Share | Metric | 2022 (RMB) | 2021 (RMB) | | :--- | :--- | :--- | | Basic (Loss)/Earnings Per Share | (1.08) | 0.44 | | Diluted (Loss)/Earnings Per Share | (1.08) | 0.44 | - The loss/profit for the year attributable to owners of the Company used to calculate basic loss/earnings per share was RMB (1,627,762) thousand (2021: RMB 673,155 thousand)[104] - Due to the anti-dilutive effect of the Group's share options, diluted loss per share for the year ended December 31, 2022, was the same as basic loss per share[99] Inventories (Note 10) As of December 31, 2022, the Group's total inventories were RMB 1,540.4 million, a 36.4% year-on-year increase, with car inventories being the largest component, and some inventories pledged as collateral for bank loans and bills payable Composition of Inventories | Item | 2022 (RMB thousand) | 2021 (RMB thousand) | Change (%) | | :--- | :--- | :--- | :--- | | Cars | 1,363,572 | 948,003 | +43.8% | | Parts and Accessories | 176,866 | 181,632 | -2.6% | | Total | 1,540,438 | 1,129,635 | +36.4% | - As of December 31, 2022, the Group pledged certain inventories with a total carrying amount of approximately RMB 434,570 thousand as collateral for bank loans and other borrowings[4] - As of December 31, 2022, the Group pledged certain inventories with a total carrying amount of approximately RMB 206,671 thousand as collateral for bills payable[101] Trade Receivables (Note 11) As of December 31, 2022, the Group's total trade receivables were RMB 197.9 million, a 33.6% year-on-year increase, with receivables within three months accounting for the largest portion, and the Group strictly monitors receivables through its credit control department, using lifetime expected credit loss provisions Aging Analysis of Trade Receivables | Aging | 2022 (RMB thousand) | 2021 (RMB thousand) | Change (%) | | :--- | :--- | :--- | :--- | | Within 3 months | 191,481 | 128,297 | +49.2% | | 3 months to 1 year | 6,401 | 19,852 | -67.8% | | Total | 197,882 | 148,149 | +33.6% | - The Group is committed to strictly monitoring outstanding receivables and has a credit control department to minimize credit risk[106] - The Group applies the simplified approach under HKFRS 9, using lifetime expected credit loss provisions for all trade receivables[108] Trade Payables and Bills Payable (Note 12) As of December 31, 2022, the Group's total trade payables and bills payable were RMB 635.1 million, a substantial 192.3% year-on-year increase, with payables within three months accounting for the largest portion Aging Analysis of Trade Payables and Bills Payable | Aging | 2022 (RMB thousand) | 2021 (RMB thousand) | Change (%) | | :--- | :--- | :--- | :--- | | Within 3 months | 596,491 | 212,083 | +181.2% | | 3 to 6 months | 16,257 | 2,762 | +488.6% | | 6 to 12 months | 21,429 | 636 | +3272.5% | | Over 12 months | 958 | 1,784 | -46.3% | | Total | 635,135 | 217,265 | +192.3% | - As of December 31, 2022, certain of the Group's bills payable were secured by inventories with a total carrying amount of approximately RMB 206,671 thousand[113] Dividends (Note 13) The Board does not recommend declaring any dividend for the year ended December 31, 2022, whereas a dividend of HKD 0.21 per share was distributed in 2021 - The Board does not recommend declaring any dividend for the year ended December 31, 2022 (2021: HKD 0.21 per share, totaling RMB 281,012 thousand, paid on August 15, 2022)[114][145] Management Discussion and Analysis This section reviews the industry and company performance in 2022, outlines future business strategies, and provides a detailed financial overview, including revenue, costs, profitability, liquidity, and capital resources Industry Review In 2022, China's passenger car market grew 1.9% amidst the pandemic, with luxury car sales up 6% to 3.09 million units, driven by a 49% surge in new energy luxury vehicles, while top luxury brands like BBA saw sales decline but actively pursued electrification and increased China investments - In 2022, China's passenger car market recorded cumulative retail sales of 20.543 million units, a 1.9% year-on-year increase[30] - In 2022, luxury car market sales reached 3.09 million units, a 6% year-on-year increase, with the new energy luxury car market surging by 49% against the trend[9] - BBA sales in China collectively declined (BMW -6.4%, Mercedes-Benz -0.9%, Audi -8.4%), but all announced the launch or production of pure electric vehicle factories in China with significant investments[9][22] - In 2022, domestic new energy passenger vehicle retail sales reached 5.674 million units, a 90% year-on-year increase, with high-end electric vehicles increasingly becoming a mainstream family choice[115] Industry Outlook With fading pandemic impacts and stabilizing supply chains, the 2023 overall auto market is expected to improve, with new energy vehicles maintaining strong growth, potentially reaching a 36% penetration rate, and luxury brands launching more new energy models while advancing brand reshaping, business model and channel optimization, and digital management - New energy passenger vehicle sales are expected to reach 8.5 million units in 2023, with a projected penetration rate of 36%[23] - The BBA family plans to launch more new energy vehicle models in 2023, with electrification transformation extending beyond product line enrichment to brand reshaping, business model and channel optimization, and advanced digital management models[116] Company Review In 2022, the Company's total sales declined 13.0% to 35,506 units due to intermittent store closures and disrupted sales rhythms from pandemic lockdowns, with BMW (including MINI) and Lexus sales decreasing, but ultra-luxury brands like Ferrari, Bentley, and Rolls-Royce showing strong growth, while the Company continued to focus on used cars and EVs, strategically investing in Dangdang New Energy and securing authorizations for multiple mainstream EV brands - The Company's total sales in 2022 were 35,506 units, a 13.0% year-on-year decrease[112] 2022 Key Brand Sales Changes | Brand | 2022 Sales (units) | Year-on-Year Change (%) | | :--- | :--- | :--- | | BMW (incl. MINI) | 26,756 | -13.5% | | Lexus | 3,875 | -7.6% | | Ferrari | - | +250.0% | | Bentley | - | +14.1% | | Rolls-Royce | - | +7.3% | - The Company's operating network added a Bentley Beijing store and received awards such as '2022 Dealer of the Year' for Ferrari Greater China[16] - Average inventory turnover days increased by 7.0 days year-on-year to 32.0 days[16] - Strategic investment Dangdang New Energy has obtained authorizations from mainstream EV brands such as Li Auto, NIO Group, and XPeng, aiming to provide comprehensive sales and after-sales services[16] Business Outlook The Company anticipates continued strong vitality in the high-end car market, will maintain its advantageous brand portfolio (BMW, Lexus, Ferrari, Bentley, and Rolls-Royce), and will pursue M&A strategies to expand market share, while enhancing profitability through optimized expense ratios and operational efficiency, and actively embracing electric and intelligent transformation to explore new business models - The Company will maintain its current advantageous brand portfolio and, when appropriate, pursue M&A strategies to consolidate and expand market share and influence[18] - The Company will further enhance profitability by optimizing various expense ratios and improving operational efficiency[18] - The transition to electric vehicles has become one of the Company's important mid-to-long-term strategies, and it will continue to focus on exploring new business models for traditional dealers under new trends[18] - Significant growth potential remains in the luxury and ultra-luxury brand segments, and the Company will actively embrace the transformation towards electric and intelligent vehicles[117] Financial Overview The Group's 2022 financial performance faced challenges with declining revenue and gross profit, recording significant non-recurring losses, and while liquidity tightened, the Board believes existing resources are sufficient to meet funding needs, with the Company actively managing costs, debt, and employee remuneration and incentives - The Group's revenue in 2022 was RMB 16,321.7 million, a 9.2% decrease compared to 2021[27] Revenue In 2022, revenue from car sales and other businesses was RMB 14,324.8 million, an 8.2% year-on-year decrease, while after-sales service revenue was RMB 1,936.8 million, a 16.7% year-on-year decrease Revenue Composition | Revenue Source | 2022 (RMB million) | 2021 (RMB million) | Change (%) | | :--- | :--- | :--- | :--- | | Car Sales and Other | 14,324.8 | 15,609.7 | -8.2% | | After-Sales Services | 1,936.8 | 2,326.3 | -16.7% | - Revenue from car sales and other businesses accounted for 87.8% of total revenue in 2022, while after-sales service revenue accounted for 11.9%[19] Cost of Sales and Services In 2022, cost of sales and services was RMB 15,242.0 million, a 6.1% year-on-year decrease, consistent with the overall revenue decline, with both car sales and other costs and after-sales service costs decreasing Composition of Cost of Sales and Services | Cost Type | 2022 (RMB million) | 2021 (RMB million) | Change (%) | | :--- | :--- | :--- | :--- | | Cost of Car Sales and Other | 14,089.9 | 14,945.4 | -5.7% | | Cost of After-Sales Services | 1,152.1 | 1,284.4 | -10.3% | | Total | 15,242.0 | 16,229.8 | -6.1% | - The decrease in costs was primarily due to lower revenue from car sales and other businesses, as well as after-sales services[28] Gross Profit and Gross Margin In 2022, gross profit was RMB 1,079.7 million, a 38.3% year-on-year decrease, with gross margin at 6.6%, down 3.1 percentage points, primarily due to pandemic lockdowns and market oversupply affecting car sales and other gross margins, and reduced vehicle usage frequency impacting after-sales service gross margins Gross Profit and Gross Margin | Metric | 2022 | 2021 | Change | | :--- | :--- | :--- | :--- | | Gross Profit (RMB million) | 1,079.7 | 1,751.3 | -38.3% | | Gross Margin | 6.6% | 9.7% | -3.1 percentage points | | Gross Margin for Car Sales and Other | 1.6% | 4.2% | -2.6 percentage points | | Gross Margin for After-Sales Services | 40.5% | 44.8% | -4.3 percentage points | - Gross profit from car sales and other businesses was RMB 234.9 million, a 64.6% year-on-year decrease; gross profit from after-sales services was RMB 784.7 million, a 24.7% year-on-year decrease[29] - The decline in gross margin was primarily due to weakened market demand from pandemic lockdown measures, and oversupply leading to lower selling prices after manufacturers pre-stocked due to chip shortages[29] Other Income and Net Gains In 2022, other income and net gains were a negative RMB 1,233.0 million, primarily impacted by RMB 1,787.6 million in total non-recurring losses, including full impairment provisions for FMC equity investment, independent after-sales company loans, 4S store closures and relocations, William Financial Holdings M&A fund investment, and third-party loans Total Non-Recurring Losses | Loss Source | Amount (RMB million) | | :--- | :--- | | Full Impairment Provision for FMC Equity Investment | 1,217.0 | | Impairment Loss on Independent After-Sales Company Loans and Advances | 354.6 | | Impairment Loss on Property, Plant and Equipment (4S Store Closures/Relocations) | 94.2 | | Full Impairment Provision for William Financial Holdings M&A Fund Investment | 81.5 | | Full Impairment Provision for Third-Party Loans | 40.3 | | Total | 1,787.6 | - Commission income was RMB 412.0 million, and interest income was RMB 71.6 million[149] Sales and Administrative Expenses In 2022, sales and administrative expenses were RMB 1,229.0 million, an 8.1% year-on-year increase, primarily due to one-off repair costs from store renovations and increased depreciation and lease costs for operational store assets Sales and Administrative Expenses | Metric | 2022 (RMB million) | 2021 (RMB million) | Change (%) | | :--- | :--- | :--- | :--- | | Sales and Administrative Expenses | 1,229.0 | 1,136.7 | +8.1% | - The increase was primarily due to one-off repair costs from store renovations and increased depreciation and lease costs for operational store assets[152] Finance Costs In 2022, finance costs were RMB 121.3 million, a 7.3% year-on-year decrease, primarily due to a reduced average borrowing balance and improved loan management capabilities during the reporting period Finance Costs | Metric | 2022 (RMB million) | 2021 (RMB million) | Change (%) | | :--- | :--- | :--- | :--- | | Finance Costs | 121.3 | 130.9 | -7.3% | Loss/Profit for the Year Attributable to Owners of the Company In 2022, the loss for the year attributable to owners of the Company was RMB 1,627.8 million, which would have been a profit of RMB 159.8 million excluding the impact of non-recurring losses Loss/Profit for the Year Attributable to Owners of the Company | Metric | 2022 (RMB million) | | :--- | :--- | | Loss for the Year Attributable to Owners of the Company | (1,627.8) | | Profit after Non-Recurring Losses | 159.8 | Liquidity and Capital Resources The Group's cash and bank balances totaled RMB 1,162.0 million, a 28.7% year-on-year decrease, with liquidity needs primarily met through short-term bank loans and operating cash flows, and the Board believes existing resources are sufficient Cash and Bank Balances | Metric | 2022 (RMB million) | 2021 (RMB million) | Change (%) | | :--- | :--- | :--- | :--- | | Cash and Bank Balances | 1,162.0 | 1,629.2 | -28.7% | - The Group's liquidity needs are primarily met through a combination of short-term bank loans and cash flows from operating activities[163] - The Board believes that the Group's liquidity needs can be met[164] Capital Expenditure Capital expenditure in 2022 was RMB 386.4 million, a 26.1% year-on-year decrease, primarily for purchasing property, plant, and equipment related to sales outlets Capital Expenditure | Metric | 2022 (RMB million) | 2021 (RMB million) | Change (%) | | :--- | :--- | :--- | :--- | | Capital Expenditure | 386.4 | 522.7 | -26.1% | Cash Flow In 2022, net cash from operating activities was RMB 781.1 million, net cash from investing activities was RMB 4.7 million, and net cash used in financing activities was RMB 1,080.4 million Cash Flow | Activity Type | 2022 (RMB million) | | :--- | :--- | | Net Cash from Operating Activities | 781.1 | | Net Cash from Investing Activities | 4.7 | | Net Cash Used in Financing Activities | (1,080.4) | Net Current Assets As of December 31, 2022, the Group's net current assets were RMB 2,042.8 million, a 25.5% year-on-year decrease, primarily due to impairment of current assets Net Current Assets | Metric | 2022 (RMB million) | 2021 (RMB million) | Change (%) | | :--- | :--- | :--- | :--- | | Net Current Assets | 2,042.8 | 2,741.3 | -25.5% | - The decrease was primarily due to impairment of current assets, as detailed in the 'Other Income and Net Gains' section[165] Inventories As of December 31, 2022, inventories increased 36.4% from RMB 1,129.6 million to RMB 1,540.4 million, with average inventory turnover days increasing by 7 days to 32 days, primarily due to strict pandemic prevention policies in mainland China Inventories and Turnover Days | Metric | 2022 | 2021 | Change | | :--- | :--- | :--- | :--- | | Inventories (RMB million) | 1,540.4 | 1,129.6 | +36.4% | | Average Inventory Turnover Days (days) | 32 | 25 | +7 days | - The increase in inventories and inventory turnover days was primarily due to strict pandemic prevention policies in mainland China, such as lockdowns[166] Bank Loans and Other Borrowings As of December 31, 2022, total bank loans and other borrowings were RMB 2,083.0 million, a 20.8% year-on-year decrease, with some borrowings secured by assets like inventories, property, plant, and equipment, and land use rights, or guaranteed by directors, subsidiaries, or legal representatives, resulting in a 44.2% gearing ratio, an increase of 4.9 percentage points Bank Loans and Other Borrowings | Borrowing Type | 2022 (RMB thousand) | 2021 (RMB thousand) | Change (%) | | :--- | :--- | :--- | :--- | | Bank Loans (within one year) | 1,436,133 | 1,622,591 | -11.5% | | Other Borrowings (within one year) | 646,890 | 1,007,387 | -35.8% | | Total | 2,083,023 | 2,629,978 | -20.8% | | Gearing Ratio | 44.2% | 39.3% | +4.9 percentage points | - Pledged assets include inventories of RMB 434.6 million, property, plant, and equipment of RMB 13.1 million, and land use rights of RMB 4.4 million[168] - Some bank loans and other borrowings are guaranteed by certain directors of the Company, subsidiaries of the Group, or legal representatives of certain subsidiaries of the Company[168] Interest Rate Risk and Foreign Exchange Risk The Group faces interest rate fluctuation risk, where rising rates could increase borrowing costs, and currently does not use financial derivatives to hedge this risk; while its business is primarily RMB-denominated, some cash deposits and bank borrowings are in HKD or USD, potentially leading to exchange differences from currency fluctuations, but no significant direct foreign exchange risk is currently perceived - The Group is exposed to risks arising from fluctuations in loan interest rates, where rising rates could lead to increased borrowing costs[174] - The Group does not use any financial derivative instruments to hedge interest rate risk[174] - The Group's business is primarily denominated in RMB, and it does not currently perceive any significant direct foreign exchange risk, nor does it use financial derivative instruments to hedge foreign exchange risk[169] Employees and Remuneration Policy As of December 31, 2022, the Group employed 3,925 staff, a 13.7% year-on-year decrease, with employee costs in 2022 at RMB 421.9 million, a 9.0% year-on-year decrease, and the Company has share option and share award schemes to incentivize, reward, attract, and retain talent Employee Count and Costs | Metric | 2022 | 2021 | Change (%) | | :--- | :--- | :--- | :--- | | Employee Count (persons) | 3,925 | 4,551 | -13.7% | | Employee Costs (RMB million) | 421.9 | 464.1 | -9.0% | - Employee remuneration packages are determined based on work experience, responsibilities, and performance, and are subject to annual review[175] - The Company has a share option scheme (effective 2015, approximately two years and three months remaining) and a share award scheme (adopted 2019, approximately two years and three months remaining), aimed at incentivizing and rewarding employees, and attracting and retaining talent[176][183] Other Information This section covers share repurchases, post-reporting period events, off-balance sheet arrangements, dividend policy, corporate governance, and administrative details for the upcoming AGM Purchase, Sale or Redemption of Listed Securities For the year ended December 31, 2022, the Company repurchased 32,366,000 ordinary shares on the HKEX for approximately HKD 96,263,669.53, with 15,974,000 repurchased shares cancelled on June 10, 2022, as the Directors believe share repurchases are in the best interest of the Company and its shareholders, enhancing earnings per share 2022 Share Repurchase Details | Month of Repurchase | Number of Shares | Total Consideration (HKD) | | :--- | :--- | :--- | | January 2022 | 5,638,500 | 26,325,433.25 | | February 2022 | 3,847,000 | 15,469,714.30 | | ... | ... | ... | | December 2022 | 1,139,500 | 1,394,200.00 | | Total | 32,366,000 | 96,263,669.53 | - 15,974,000 repurchased shares were subsequently cancelled on June 10, 2022[126] - The Directors believe that the share repurchases are in the best interests of the Company and its shareholders, and that such repurchases can enhance the Company's earnings per share[118] Post-Reporting Period Events As of the date of this announcement, no significant events have occurred that would have a material impact on the Group - No significant events that would have a material impact on the Group have occurred from the end of the reporting period on December 31, 2022, up to the date of this announcement[143] Off-balance Sheet Commitments and Arrangements As of the date of this announcement, the Group has not entered into any off-balance sheet transactions - As of the date of this announcement, the Group has not entered into any off-balance sheet transactions[144] Final Dividend For the year ended December 31, 2022, the Company's Board of Directors recommends not declaring an annual dividend (2021: HKD 0.21 per ordinary share) - For the year ended December 31, 2022, the Company's Board of Directors recommends not declaring an annual dividend (2021: HKD 0.21 per ordinary share)[145] Compliance with Corporate Governance Code For the year ended December 31, 2022, the Company complied with the applicable principles and code provisions of the Corporate Governance Code as set out in Appendix 14 of the HKEX Listing Rules - For the year ended December 31, 2022, the Company complied with the applicable principles and code provisions of the Corporate Governance Code as set out in Appendix 14 of the HKEX Listing Rules[146] - The Board will continue to review and monitor the Company's corporate governance practices to comply with the Corporate Governance Code and maintain a high standard of corporate governance practices[121] Standard Code for Securities Transactions by Directors The Company adopted the Standard Code for Securities Transactions by Directors of Listed Issuers, as set out in Appendix 10 of the Listing Rules, as its code of conduct, and all Directors confirmed compliance for the year ended December 31, 2022 - The Company has adopted the Standard Code for Securities Transactions by Directors of Listed Issuers, as set out in Appendix 10 of the Listing Rules, as its code of conduct[128] - All Directors have confirmed compliance with the Standard Code for the year ended December 31, 2022[128] Significant Investments, Acquisitions and Disposals of Subsidiaries, Associates and Joint Ventures Except as disclosed in this announcement, the Group did not undertake any significant investments, acquisitions, or disposals of subsidiaries, associates, and joint ventures during the reporting period - Except as disclosed in this announcement, the Group did not undertake any significant investments, acquisitions, or disposals of subsidiaries, associates, and joint ventures during the reporting period[129] Sufficiency of Public Float Based on publicly available information and the Directors' knowledge, the Board confirms that the Company maintained sufficient public float as required under the Listing Rules during the reporting period - The Directors confirm that the Company maintained sufficient public float as required under the Listing Rules during the reporting period[130] 2023 Annual General Meeting The Company will hold its 2023 Annual General Meeting on Tuesday, June 13, 2023, with the notice of meeting to be published and dispatched to shareholders in due course in accordance with the Listing Rules - The Company will hold its 2023 Annual General Meeting on Tuesday, June 13, 2023[132] Closure of Register of Members for 2023 Annual General Meeting To determine eligibility for attending and voting at the 2023 Annual General Meeting, the Company will suspend its share transfer registration from Thursday, June 8, 2023, to Tuesday, June 13, 2023 - The Company will suspend its share transfer registration from Thursday, June 8, 2023, to Tuesday, June 13, 2023[123] - Investors should submit all share transfer documents to the Company's share registrar branch no later than 4:30 p.m. on Wednesday, June 7, 2023, for registration[123] Auditor's Scope of Work The consolidated financial statement figures for the Group for the year ended December 31, 2022, in the preliminary announcement have been agreed by the Group's auditor, ZHONGHUI ANDA CPA Limited, but their work does not constitute an assurance engagement under HKICPA standards, thus no assurance is given on the preliminary announcement - The consolidated financial statement figures for the Group for the year ended December 31, 2022, in the preliminary announcement have been agreed by the Group's auditor, ZHONGHUI ANDA CPA Limited[134] - The auditor's work does not constitute an assurance engagement issued by the HKICPA, thus no assurance is given on the preliminary announcement[134] Audit Committee The Company has established an Audit Committee in compliance with the Listing Rules and Corporate Governance Code, which has reviewed the annual results for the year ended December 31, 2022, and comprises three independent non-executive directors, with Mr. Wang Nengguang as Chairman - The Company has established an Audit Committee in accordance with the Listing Rules and Corporate Governance Code, and has formulated written terms of reference[135] - The Audit Committee comprises three independent non-executive directors: Mr. Wang Nengguang (Chairman), Mr. Liu Guoxun, and Mr. Chen Yinglong[135] - The Audit Committee has reviewed the annual results for the year ended December 31, 2022[136] Publication of Annual Results and Annual Report on HKEX and Company Website The annual results announcement is published on the HKEX website and the Company's website, and the annual report will be dispatched to shareholders and made available on both websites in due course - The annual results announcement is published on the HKEX website (http://www.hkexnews.hk) and the Company's website (http://www.hexieauto.com)[138](index=138&type=chunk) - The annual report will be dispatched to shareholders and made available on the HKEX website and the Company's website in due course[138] Acknowledgement The Board sincerely thanks all employees for their loyalty and contributions, and shareholders and business partners for their trust and support, enabling the Group's growth and progress amidst competition and challenges - The Board sincerely thanks all employees for their loyalty and contributions, and all shareholders and business partners for their trust and support[139]