(Incorporated in the Cayman Islands with limited liability) Stock Code : 1773
Interim Report
2020
Contents
Page | |
Corporate Information | 2 |
Financial Highlights | 3 |
Independent Review Report | 4 |
Interim Condensed Consolidated Statement of Profit or Loss | |
and Other Comprehensive Income | 5 |
Interim Condensed Consolidated Statement of Financial Position | 6 |
Interim Condensed Consolidated Statement of Changes in Equity | 8 |
Interim Condensed Consolidated Statement of Cash Flows | 9 |
Notes to Interim Condensed Financial Information | 11 |
Management Discussion and Analysis | 34 |
Other Information | 50 |
Corporate Information
BOARD OF DIRECTORS
Executive Directors
Mr. Luo Shi (Chairman)
Ms. Yang Zhaotao
Mr. Wang Rui
Non-executive Director
Mr. Tian Mu
Independent non-executive Directors
Mr. Liu Kai Yu Kenneth
Mr. Yang Dong
Mr. Cheng Yiqun
BOARD COMMITTEES
Audit Committee
Mr. Liu Kai Yu Kenneth (Chairman)
Mr. Cheng Yiqun
Mr. Yang Dong
Remuneration Committee
Mr. Cheng Yiqun (Chairman)
Mr. Wang Rui
Mr. Yang Dong
Nomination Committee
Mr. Cheng Yiqun (Chairman)
Mr. Luo Shi
Mr. Liu Kai Yu Kenneth
AUDITOR
Ernst & Young
Certified Public Accountants
22/F, CITIC Tower
1 Tim Mei Avenue
Central, Hong Kong
CAYMAN ISLANDS PRINCIPAL SHARE REGISTRAR AND TRANSFER AGENT
Maples Fund Services (Cayman) Limited
PO Box 1093, Boundary Hall
Cricket Square
Grand Cayman KY1-1102
Cayman Islands
HONG KONG SHARE REGISTRAR
Computershare Hong Kong Investor Services Limited
Shops 1712-1716
17/F, Hopewell Centre
183 Queen's Road East
Wanchai, Hong Kong
JOINT COMPANY SECRETARIES
Mr. Wang Rui
Ms. Zhang Xiao
AUTHORISED REPRESENTATIVES
Mr. Wang Rui
Ms. Zhang Xiao
LEGAL ADVISOR AS TO HONG KONG LAW
Jingtian & Gongcheng LLP
Suite 3203-3207, Edinburgh Tower
The Landmark
15 Queen's Road Central
Hong Kong
REGISTERED OFFICE IN CAYMAN ISLANDS
PO Box 309, Ugland House
Grand Cayman, KY1-1104
Cayman Islands
HEADQUARTER IN THE PRC
Tower T25
Qingyang Industrial Zone
Chengdu
Sichuan Province
PRC
PRINCIPAL PLACE OF BUSINESS IN HONG KONG
40th Floor, Sunlight Tower
No. 248 Queen's Road East
Wanchai
Hong Kong
PRINCIPAL BANKS
Industrial and Commercial Bank of China
Agricultural Bank of China
China Citic Bank
STOCK CODE
1773
COMPANY WEBSITE
http://www.tianlieducation.com
2 Tianli Education International Holdings Limited • Interim Report 2020
Financial Highlights
For the six months | ||||
ended 30 June | ||||
Percentage | ||||
2020 | 2019 | Change | Change | |
RMB'000 | RMB'000 | RMB'000 | ||
(Unaudited) | (Unaudited) | |||
Revenue | 570,654 | 438,093 | 132,561 | 30.3% |
Gross Profit | 275,262 | 190,302 | 84,960 | 44.6% |
Profit for the period | 210,242 | 146,375 | 63,867 | 43.6% |
EARNINGS PER SHARE | ||||
ATTRIBUTABLE TO ORDINARY | ||||
EQUITY HOLDERS OF | ||||
THE COMPANY | ||||
RMB | RMB | RMB | ||
Basic | 10.22 cents | 7.01 cents | 3.21 cents | 45.8% |
Diluted | 10.19 cents | 7.01 cents | 3.18 cents | 45.4% |
Interim Report 2020 • Tianli Education International Holdings Limited | 3 |
Independent Review Report
To the board of directors of Tianli Education International Holdings Limited (Incorporated in the Cayman Islands with limited liability)
Introduction
We have reviewed the interim condensed financial information set out on pages 5 to 33, which comprises the condensed consolidated statement of financial position of Tianli Education International Holdings Limited (the "Company") and its subsidiaries (the "Group") as at 30 June 2020 and the related consolidated statements of profit or loss and other comprehensive income, changes in equity and cash flows for the six-month period then ended, and explanatory notes. The Main Board Listing Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited require the preparation of a report on interim condensed financial information to be in compliance with the relevant provisions thereof and International Accounting Standard 34 Interim Financial Reporting ("IAS 34") issued by the International Accounting Standards Board. The directors of the Company are responsible for the preparation and presentation of this interim financial information in accordance with IAS 34. Our responsibility is to express a conclusion on this interim financial information based on our review. Our report is made solely to you, as a body, in accordance with our agreed terms of engagement, and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report.
Scope of Review
We conducted our 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. A review of interim condensed financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the interim condensed financial information is not prepared, in all material respects, in accordance with IAS 34.
Ernst & Young
Certified Public Accountants
Hong Kong
28 August 2020
4 Tianli Education International Holdings Limited • Interim Report 2020
Interim Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income
For the six months ended 30 June 2020
2020 | 2019 | ||||
Notes | RMB'000 | RMB'000 | |||
(Unaudited) | (Unaudited) | ||||
REVENUE | 3 | 570,654 | 438,093 | ||
Cost of sales | (295,392) | (247,791) | |||
Gross profit | 275,262 | 190,302 | |||
Other income and gains | 3 | 11,288 | 12,420 | ||
Selling and distribution expenses | (8,108) | (6,687) | |||
Administrative expenses | (58,575) | (42,711) | |||
Other expenses | (1,576) | (3,429) | |||
Interest expenses | 4 | (7,395) | (3,500) | ||
Share of profit/(loss) of an associate | (103) | 729 | |||
PROFIT BEFORE TAX | 5 | 210,793 | 147,124 | ||
Income tax expense | 6 | (551) | (749) | ||
PROFIT FOR THE PERIOD | 210,242 | 146,375 | |||
OTHER COMPREHENSIVE INCOME FOR THE PERIOD | |||||
Other comprehensive income that will be reclassified to profit or | |||||
loss in subsequent periods: | |||||
Exchange differences related to translation of foreign operation | 178 | 126 | |||
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD | 210,420 | 146,501 | |||
Profit attributable to: | |||||
Owners of the Company | 208,466 | 143,738 | |||
Non-controlling interests | 1,776 | 2,637 | |||
210,242 | 146,375 | ||||
Total comprehensive income attributable to: | |||||
Owners of the Company | 208,644 | 143,864 | |||
Non-controlling interests | 1,776 | 2,637 | |||
210,420 | 146,501 | ||||
EARNINGS PER SHARE ATTRIBUTABLE TO ORDINARY EQUITY | |||||
HOLDERS OF THE COMPANY | |||||
Basic | 7 | RMB10.22 cents | RMB7.01 cents | ||
Diluted | 7 | RMB10.19 cents | RMB7.01 cents | ||
Interim Report 2020 • | Tianli Education International Holdings Limited 5 |
Interim Condensed Consolidated Statement of Financial Position
30 June 2020
30 June | 31 December | ||
2020 | 2019 | ||
Notes | RMB'000 | RMB'000 | |
(Unaudited) | (audited) | ||
NON-CURRENT ASSETS | |||
Property, plant and equipment | 8 | 3,735,401 | 2,999,396 |
Right-of-use assets | 9 | 860,946 | 743,153 |
Goodwill | 10 | 7,572 | 7,572 |
Intangible assets | 3,765 | 2,645 | |
Investment in an associate | 6,518 | 6,621 | |
Prepayments, deposits and other receivables | 12 | 385,697 | 253,784 |
Total non-current assets | 4,999,899 | 4,013,171 | |
CURRENT ASSETS | |||
Inventories | 3,841 | 3,542 | |
Trade receivables | 11 | 3,027 | 1,106 |
Prepayments, deposits and other receivables | 12 | 91,372 | 69,363 |
Amounts due from related parties | 23(b) | 202 | 202 |
Financial assets at fair value through profit or loss | 6,300 | 4,200 | |
Cash and cash equivalents | 13 | 775,049 | 631,429 |
Total current assets | 879,791 | 709,842 | |
CURRENT LIABILITIES | |||
Trade payables | 14 | 22,760 | 22,318 |
Other payables and accruals | 15 | 304,740 | 254,476 |
Contract liabilities | 16 | 394,915 | 537,573 |
Interest-bearing bank loans | 18 | 220,500 | 184,000 |
Amount due to a related party | 23(b) | 406,717 | 217,596 |
Tax payable | 2,750 | 2,846 | |
Lease liabilities | 9 | 8,103 | 5,669 |
Deferred income | 17 | 219,872 | 152,737 |
Total current liabilities | 1,580,357 | 1,377,215 | |
Continued/... |
6 Tianli Education International Holdings Limited • Interim Report 2020
30 June | 31 December | ||||
2020 | 2019 | ||||
Notes | RMB'000 | RMB'000 | |||
(Unaudited) | (audited) | ||||
NET CURRENT LIABILITIES | 2.1 | (700,566) | (667,373) | ||
TOTAL ASSETS LESS CURRENT LIABILITIES | 4,299,333 | 3,345,798 | |||
NON-CURRENT LIABILITIES | |||||
Contract liabilities | 16 | 49,299 | 50,424 | ||
Lease liabilities | 9 | 87,587 | 88,325 | ||
Deferred income | 17 | 752,030 | 450,642 | ||
Interest-bearing bank loans | 18 | 793,500 | 275,000 | ||
Total non-current liabilities | 1,682,416 | 864,391 | |||
Net assets | 2,616,917 | 2,481,407 | |||
EQUITY | |||||
Equity attributable to owners of the Company | |||||
Issued capital | 19 | 176,375 | 176,375 | ||
Reserves | 2,396,342 | 2,262,608 | |||
2,572,717 | 2,438,983 | ||||
Non-controlling interests | 44,200 | 42,424 | |||
Total equity | 2,616,917 | 2,481,407 |
Luo Shi | Wang Rui |
Director | Director |
Interim Report 2020 • Tianli Education International Holdings Limited | 7 |
Interim Condensed Consolidated Statement of Changes in Equity
For the six months ended 30 June 2020
Attributable to owners of the Company | |||||||||||||
Difference | |||||||||||||
Share | arising from | ||||||||||||
repurchased | Share | acquisition | Statutory | Exchange | Non- | ||||||||
for the share | award | of non- | |||||||||||
Issued | Share | award | scheme | Capital | controlling | surplus | fluctuation | Retained | controlling | Total | |||
capital | premium | scheme | reserve | reserve | interests | reserves | reserve | profits | Total | interests | equity | ||
RMB'000 | RMB'000 | RMB'000 | RMB'000 | RMB'000 | RMB'000 | RMB'000 | RMB'000 | RMB'000 | RMB'000 | RMB'000 | RMB'000 | ||
(unaudited) | (unaudited) | (unaudited) | (unaudited) | (unaudited) | (unaudited) | (unaudited) | (unaudited) | (unaudited) | (unaudited) | (unaudited) | (unaudited) | ||
(note 19) | (note 20) | ||||||||||||
As at 1 January 2020 | 176,375 | 1,015,777* | (42,489)* | - | 563,558* | 16,326* | 101,025* | 151* | 608,260* | 2,438,983 | 42,424 | 2,481,407 | |
Profit for the period | - | - | - | - | - | - | - | - | 208,466 | 208,466 | 1,776 | 210,242 | |
Other comprehensive income | |||||||||||||
for the period: | |||||||||||||
Exchange differences on | - | - | - | - | - | - | - | 178 | - | 178 | - | 178 | |
translation of foreign operation | |||||||||||||
Total comprehensive income | - | - | - | - | - | - | - | 178 | 208,466 | 208,644 | 1,776 | 210,420 | |
for the period | |||||||||||||
Transfer from retained profits | - | - | - | - | - | - | 23,893 | - | (23,893) | - | - | - | |
Offset with a dividend | - | - | 1,270 | - | - | - | - | - | - | 1,270 | - | 1,270 | |
Final 2019 dividend declared | - | (77,668) | - | - | - | - | - | - | - | (77,668) | - | (77,668) | |
Equity-settled share award | - | - | - | 1,480 | - | - | - | - | - | 1,480 | - | 1,480 | |
scheme expenses | |||||||||||||
Proceeds from shares awarded | |||||||||||||
in the prior year under the | - | - | 8 | - | - | - | - | - | - | 8 | - | 8 | |
share award scheme | |||||||||||||
As at 30 June 2020 | 176,375 | 938,109* | (41,211)* | 1,480* | 563,558* | 16,326* | 124,918* | 329* | 792,833* | 2,572,717 | 44,200 | 2,616,917 | |
At 1 January 2019 | 176,375 | 1,075,090* | - | - | 563,558* | (824)* | 74,171* | - | 370,168* | 2,258,538 | 33,424 | 2,291,962 | |
Profit for the period | - | - | - | - | - | - | - | - | 143,738 | 143,738 | 2,637 | 146,375 | |
Other comprehensive income | |||||||||||||
for the period: | |||||||||||||
Exchange differences on | |||||||||||||
translation of foreign operation | - | - | - | - | - | - | - | 126 | - | 126 | - | 126 | |
Total comprehensive income | |||||||||||||
for the period | - | - | - | - | - | - | - | 126 | 143,738 | 143,864 | 2,637 | 146,501 | |
Transfer from retained profits | - | - | - | - | - | - | 13,051 | - | (13,051) | - | - | - | |
Dividends paid to non-controlling | |||||||||||||
shareholders of subsidiaries | - | - | - | - | - | - | - | - | - | - | (340) | (340) | |
Final 2018 dividend declared | - | (59,313) | - | - | - | - | - | - | - | (59,313) | - | (59,313) | |
Increase in capital reserve | |||||||||||||
of a subsidiary | - | - | - | - | 17,150 | - | - | - | - | 17,150 | - | 17,150 | |
Shares repurchased for the | |||||||||||||
share award scheme | - | - | (43,129) | - | - | - | - | - | - | (43,129) | - | (43,129) | |
Capital contribution from non-controlling | |||||||||||||
shareholders of subsidiaries | - | - | - | - | - | - | - | - | - | - | 3,888 | 3,888 | |
At 30 June 2019 | 176,375 | 1,015,777* | (43,129)* | - | 580,708* | (824)* | 87,222* | 126* | 500,855* | 2,317,110 | 39,609 | 2,356,719 | |
- These reserve accounts comprise the reserves of RMB2,396,342,000 (31 December 2019: RMB2,262,608,000) in the interim condensed consolidated statement of financial position
8 Tianli Education International Holdings Limited • Interim Report 2020
Interim Condensed Consolidated Statement of Cash Flows
For the six months ended 30 June 2020
2020 | 2019 | ||||
Notes | RMB'000 | RMB'000 | |||
(unaudited) | (unaudited) | ||||
CASH FLOWS FROM OPERATING ACTIVITIES | |||||
Profit before tax | 210,793 | 147,124 | |||
Adjustments for: | |||||
Depreciation of property, plant and equipment | 5 | 49,490 | 31,390 | ||
Depreciation of right-of-use assets | 5 | 11,848 | 8,585 | ||
Amortisation of intangible assets | 5 | 139 | 46 | ||
Share of loss/(profit) of an associate | 103 | (729) | |||
Gain on disposal of financial assets | |||||
at fair value through profit or loss | 5 | (110) | (1,605) | ||
Loss on disposal of items of | |||||
property, plant and equipment, net | 5 | 69 | - | ||
Loss on cancellation of operating leases as a lessee | 114 | - | |||
Equity settled share award scheme expenses | 5 | 1,480 | - | ||
Unrealised foreign exchange gains, net | (5,367) | (1,683) | |||
Bank interest income | 5 | (3,532) | (7,081) | ||
Deferred income released to profit or loss | 17 | (86,694) | (53,555) | ||
Interest expenses | 4 | 7,395 | 3,500 | ||
185,728 | 125,992 | ||||
Increase in inventories | (299) | (240) | |||
Increase in trade receivables | (1,921) | (3,151) | |||
Increase in prepayments, deposits and other receivables | (13,875) | (24,711) | |||
Decrease in amounts due from related parties | - | 2,365 | |||
Increase/(decrease) in trade payables | 442 | (217) | |||
Increase/(decrease) in contract liabilities | (129,679) | 272,708 | |||
Receipt of government grants | 446,305 | 236,925 | |||
Increase in other payables and accruals | 44,868 | 57,880 | |||
Cash generated from operations | 531,569 | 667,551 | |||
Income tax paid | (647) | (646) | |||
Net cash flows from operating activities | 530,922 | 666,905 | |||
Continued/... |
Interim Report 2020 • Tianli Education International Holdings Limited | 9 |
2020 | 2019 | ||||
RMB'000 | RMB'000 | ||||
(unaudited) | (unaudited) | ||||
CASH FLOWS FROM INVESTING ACTIVITIES | |||||
Purchases of items of property, plant and equipment | (558,859) | (599,559) | |||
Purchase of intangible assets | (3,613) | (2,513) | |||
Prepaid land lease payments | (290,916) | (144,899) | |||
Proceeds from disposal of items of property, plant and equipment | 50 | 205 | |||
Purchase of financial assets at fair value through profit or loss | (107,803) | (347,533) | |||
Proceeds from disposal of financial assets at fair | |||||
value through profit or loss | 105,813 | 306,255 | |||
Decrease in time deposits with original maturity of over three months | 180,434 | 418,290 | |||
Bank Interest received | 3,918 | 11,384 | |||
Net cash flows used in investing activities | (670,976) | (358,370) | |||
CASH FLOWS FROM FINANCING ACTIVITIES | |||||
Dividend received from shares awarded scheme | 1,270 | - | |||
Repurchase of shares held for the share award scheme | - | (43,129) | |||
Capital contribution from the non-controlling shareholders | - | 21,038 | |||
Proceeds from shares awarded under the share award scheme | 400 | - | |||
Proceeds from bank loans | 736,000 | - | |||
Repayment of bank loans | (181,000) | (14,567) | |||
Dividends paid | (77,668) | (59,313) | |||
Dividends paid to non-controlling shareholders of subsidiaries | - | (340) | |||
Principal portion of lease payments | (1,621) | (1,360) | |||
Interest portion of the lease liabilities | (1,044) | (649) | |||
Interest paid | (17,774) | (15,085) | |||
Net cash flows from/(used in) financing activities | 458,563 | (113,405) | |||
NET INCREASE IN CASH AND CASH EQUIVALENTS | 318,509 | 195,130 | |||
Effect of foreign exchange rate changes, net | 5,545 | 1,808 | |||
Cash and cash equivalents at beginning of period | 450,995 | 707,277 | |||
CASH AND CASH EQUIVALENTS AT END OF PERIOD | 775,049 | 904,215 | |||
ANALYSIS OF BALANCES OF CASH AND CASH EQUIVALENTS: | |||||
Cash and cash equivalents as stated in the | |||||
consolidated statement of financial position | 775,049 | 1,011,645 | |||
Time deposits with original maturity of over three months | - | (107,430) | |||
Cash and cash equivalents as stated in the | |||||
consolidated statement of cash flows | 775,049 | 904,215 | |||
10 Tianli Education International Holdings Limited • Interim Report 2020
Notes to Interim Condensed Financial Information
30 June 2020
1. CORPORATE INFORMATION
The Company is a limited liability company incorporated in the Cayman Islands on 24 January 2017 as an exempted company under the laws of the Cayman Islands. The registered office address of the Company is P.O. Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands. The principal place of business of the Company is located at 40th Floor, Sunlight Tower, No. 248 Queen's Road East, Wanchai, Hong Kong.
During the period ended 30 June 2020 (the "Period"), the Company and its subsidiaries (collectively referred to as the "Group"), the Group were principally engaged in the provision of education and related management services in the People's Republic of China (the "PRC"). There were no significant changes in the nature of the Group's principal activities during the Period.
In the opinion of the Directors, the parent company and the ultimate holding company of the Company are Sky Elite Limited, a company incorporated in the British Virgin Islands. The ultimate controlling shareholder of the Company is Mr. Luo Shi ("Mr. Luo").
2.1 BASIS OF PRESENTATION
The interim condensed consolidated financial information for the Period has been prepared in accordance with International Accounting Standard 34 Interim Financial Reporting. The interim condensed consolidated financial information does not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the Group's annual financial statements for the year ended 31 December 2019.
Going concern
The Group recorded net current liabilities of RMB700,566,000 as at 30 June 2020. Therein the Group recorded a current portion of contract liabilities and deferred income of RMB394,915,000 and RMB219,872,000, respectively, as at 30 June 2020.
In view of the net current liability position, the Directors have given careful consideration to the future liquidity and performance of the Group and its available sources of finance in assessing whether the Group will have sufficient financial resources to continue as a going concern. Having considered the cash flows from operations and the positive operating results, the Directors are of the opinion that the Group is able to meet in full its financial obligations as they fall due for the foreseeable future and it is appropriate to prepare the interim condensed consolidated financial information of the Group for the six months ended 30 June 2020 on a going concern basis.
Interim Report 2020 • Tianli Education International Holdings Limited 11
2.2 CHANGES IN ACCOUNTING POLICIES
The accounting policies adopted in the preparation of this interim condensed consolidated financial information are consistent with those followed in the preparation of the Group's annual consolidated financial statements for the year ended 31 December 2019, except for the adoption of the following revised International Financial Reporting Standards ("IFRSs") for the first time for the current period's financial information.
Amendments to IFRS 3 | Definition of a Business |
Amendments to IFRS 9, IAS 39 and IFRS 7 | Interest Rate Benchmark Reform |
Amendments to IAS 1 and IAS 8 | Definition of Material |
The adoption of these revised standards to IFRSs has had no significant financial effect on the preparation of the Group's interim condensed consolidated financial information.
3. REVENUE, OTHER INCOME AND GAINS
Revenue represents the values of services rendered after deducting scholarships and refunds during the Period and the six months ended 30 June 2019.
An analysis of revenue is as follows: | ||
For the six months ended 30 June | ||
2020 | 2019 | |
RMB'000 | RMB'000 | |
(unaudited) | (unaudited) | |
Revenue from contracts with customers | ||
Tuition fees | 411,589 | 306,959 |
Boarding fees | 49,423 | 38,930 |
School canteen operations | 107,815 | 89,162 |
Management and franchise fees | 1,827 | 3,042 |
Total revenue | 570,654 | 438,093 |
12 Tianli Education International Holdings Limited • Interim Report 2020
3. REVENUE, OTHER INCOME AND GAINS (CONTINUED)
Revenue from contracts with customers
(i) | Disaggregated revenue information | ||
For the six months ended 30 June | |||
2020 | 2019 | ||
RMB'000 | RMB'000 | ||
(unaudited) | (unaudited) | ||
Timing of revenue recognition | |||
Goods transferred at a point in time | 107,815 | 89,162 | |
Services transferred over time | 462,839 | 348,931 | |
Total revenue from contracts with customers | 570,654 | 438,093 |
- Performance obligations
Information about the Group's performance obligations is summarised below:
Goods transferred at a point in time
The performance obligation of the school canteen operations is satisfied at a point in time when the control of goods is transferred, being the time when the goods are accepted by the customers.
Services transferred over time
Other than the canteen operations, the performance obligations for services are satisfied over time because a customer simultaneously receives and consumes the benefits provided by the Group.
The transaction prices allocated to the remaining performance obligations (unsatisfied or partially unsatisfied) are as follows:
30 June | 31 December | |
2020 | 2019 | |
RMB'000 | RMB'000 | |
(unaudited) | (audited) | |
Within one year | 394,915 | 537,573 |
More than one year | 49,299 | 50,424 |
444,214 | 587,997 | |
The performance obligations expected to be recognised in more than one year relate to teaching services that are to be satisfied within 26.5 years from 30 June 2020. All the other remaining performance obligations are expected to be recognised within one year.
Interim Report 2020 • Tianli Education International Holdings Limited 13
3. REVENUE, OTHER INCOME AND GAINS (CONTINUED)
Revenue from contracts with customers (continued) | ||||||
(ii) | Performance obligations (continued) | |||||
Services transferred over time (continued) | ||||||
An analysis of other income and gains is as follows: | ||||||
For the six months ended 30 June | ||||||
2020 | 2019 | |||||
RMB'000 | RMB'000 | |||||
(unaudited) | (unaudited) | |||||
Other income and gains | ||||||
Bank interest income | 3,532 | 7,081 | ||||
Other service income | 1,177 | 3,044 | ||||
Foreign exchange gains, net | 5,863 | - | ||||
Gain on disposal of financial assets at fair value through profit or | ||||||
loss | 110 | 1,605 | ||||
Rental income | 320 | 507 | ||||
Others | 286 | 183 | ||||
Total other income and gains | 11,288 | 12,420 | ||||
4. | INTEREST EXPENSES | |||||
An analysis of the Group's interest expenses is as follows: | ||||||
For the six months ended 30 June | ||||||
2020 | 2019 | |||||
RMB'000 | RMB'000 | |||||
(unaudited) | (unaudited) | |||||
Interest on bank loans | 17,522 | 14,805 | ||||
Less: Interest capitalised (note 8(b)) | (13,192) | (14,323) | ||||
4,330 | 482 | |||||
Interest on lease liabilities | 3,065 | 3,018 | ||||
7,395 | 3,500 | |||||
Interest rate of borrowing costs capitalised (%) | 5.73-7.13 | 6.18-7.13 |
14 Tianli Education International Holdings Limited • Interim Report 2020
5. PROFIT BEFORE TAX
The Group's profit before tax is arrived at after charging/(crediting):
For the six months ended 30 June | ||||
2020 | 2019 | |||
Notes | RMB'000 | RMB'000 | ||
(unaudited) | (unaudited) | |||
Cost of inventories sold | 48,994 | 46,906 | ||
Cost of services provided | 246,398 | 200,885 | ||
295,392 | 247,791 | |||
Employee benefit expense (excluding directors' and chief | ||||
executive's remuneration): | ||||
Wages and salaries | 252,410 | 181,400 | ||
Pension scheme contributions (defined contribution scheme) | 17,950 | 20,788 | ||
Welfare | 25,100 | 21,617 | ||
Housing fund (defined contribution scheme) | 8,826 | 7,078 | ||
Less: Government grants released | 17 | (86,694) | (53,555) | |
Subsidies received | (9,160) | (3,043) | ||
208,432 | 174,285 | |||
Depreciation of items of property, plant and equipment* | 8 | 49,490 | 31,390 | |
Depreciation of right-of-use assets* | 9 | 11,848 | 8,585 | |
Amortisation of intangible assets | 139 | 46 | ||
Auditor's remuneration | 1,200 | 1,000 | ||
Bank interest income | (3,532) | (7,081) | ||
Loss on disposal of property, plant and equipment, net | 69 | - | ||
Loss on cancellation of operating leases as a lessee | 114 | - | ||
Gain on disposal of financial assets at fair value through | ||||
profit or loss | (110) | (1,605) | ||
Lease payments not included in the measurement of | ||||
lease liabilities | 941 | 539 | ||
Research expenses | 1,452 | - | ||
Equity-settled share award scheme expenses | 1,480 | - | ||
Foreign exchange losses/(gains), net | (5,863) | 1,884 | ||
Rental income | (320) | (507) | ||
- The depreciation of items of property, plant and equipment and depreciation of right-of-use assets of RMB44,143,000 and RMB11,124,000, respectively (Six months ended 30 June 2019: the depreciation of items of property, plant and equipment and depreciation of right-of-use assets of RMB29,259,000 and RMB7,918,000 respectively) are recorded in "Cost of sales" in profit or loss.
Interim Report 2020 • Tianli Education International Holdings Limited 15
6. INCOME TAX
Corporate income tax of the Group has been provided at the applicable tax rates on the estimated taxable profits arising in Mainland China during the Period:
For the six months ended 30 June
20202019
RMB'000RMB'000
(unaudited) (unaudited)
Current - Mainland China | ||
Charge for the period | 551 | 749 |
Notes:
- Pursuant to the rules and regulations of the Cayman Islands and British Virgin Islands, the Group is not subject to any income tax in the Cayman Islands and British Virgin Islands.
- The applicable corporate income tax ("CIT") rate for a Hong Kong-incorporated subsidiary was 16.5% during the year. No provision for Hong Kong profits tax has been made as the Group had no assessable profits derived from for earned in Hong Kong during the Period and the six months ended 30 June 2019.
- Pursuant to the PRC Income Tax Law and the respective regulations, except for Tibet Yongsi, all the Group's non-school subsidiaries established in the PRC were subject to the PRC CIT at a rate of 25% during the Period and the six months ended 30 June 2019.
- During the Period, Tibet Yongsi was entitled to a preferential PRC CIT rate of 15% as its business scope falls within the scope of the encouraging education industry under the "Western Development Policy".
- In accordance with the historical tax returns filed with the relevant tax authorities and the confirmations obtained therefrom of certain schools engaged in the provision of formal education services, except for the tutoring schools and certain kindergartens, there was no corporate income tax imposed on the Group's schools in respect of the education services provided. As a result, no income tax expense was recognised for the income from the provision of formal educational services during the Period and the six months ended 30 June 2019.
- Tutoring schools and certain kindergartens of the Group which provide non-academic and non-formal educational services are subject to corporate income tax at a rate of 25%. Kindergartens and tutoring schools are qualifying entities under the preferential income tax reduction policy for small-scaled minimal profit enterprises. Under the preferential tax policy, the first RMB1 million of taxable income of these schools is taxed at 5% and the taxable income within RMB1 million to RMB3 million is taxed at 10%.
16 Tianli Education International Holdings Limited • Interim Report 2020
7. EARNINGS PER SHARE ATTRIBUTABLE TO ORDINARY EQUITY HOLDERS OF THE COMPANY
The calculation of the basic earnings per share amounts is based on the profit attributable to ordinary equity holders of the Company for the six months ended 30 June 2020, and the weighted average number of ordinary shares in issue during the Period, as adjusted to reflect the shares repurchased under the share award scheme during the Period.
The calculation of the diluted earnings per share amounts is based on the profit for the Period attributable to ordinary equity holders of the Company. The weighted average number of ordinary shares used in the calculation is the weighted average number of ordinary shares in issue during the Period, as used in the basic earnings per share calculation and the number of unvested ordinary shares that would have been issued under the share award scheme when they become vested.
The calculation of the basic earnings per share is based on: | |||
For the six months ended 30 June | |||
2020 | 2019 | ||
RMB'000 | RMB'000 | ||
(unaudited) | (unaudited) | ||
Earnings | |||
Profit attributable to the ordinary equity holders | 208,466 | 143,738 | |
Number of shares | |||
For the six months ended 30 June | |||
2020 | 2019 | ||
(unaudited) | (unaudited) | ||
Shares | |||
Weighted average number of ordinary shares in issue | 2,075,000,000 | 2,075,000,000 | |
Effect of the weighted average number of ordinary shares | |||
repurchased under the share award scheme | (34,355,000) | (25,010,000) | |
Adjusted weighted average number of ordinary shares | |||
used in the basic earnings per share calculation | 2,040,645,000 | 2,049,990,000 | |
Effect of dilution: | |||
Number of unvested ordinary shares | |||
granted under the share award scheme | 7,724,000 | - | |
Adjusted weighted average number of ordinary shares | |||
used in the diluted earnings per share calculation | 2,048,369,000 | 2,049,990,000 | |
Interim Report 2020 • Tianli Education International Holdings Limited 17
8. PROPERTY, PLANT AND EQUIPMENT AND RIGHT-OF-USE ASSETS
Movements in property, plant and equipment during the Period are as follows:
Property, plant | ||
and equipment | ||
RMB'000 | ||
(Unaudited) | ||
Carrying amounts at 1 January 2020 | 2,999,396 | |
Additions | 785,614 | |
Disposals | (119) | |
Depreciation charged for the Period (note 5) | (49,490) | |
Carrying amounts at 30 June 2020 | 3,735,401 | |
Notes: |
- As at 30 June 2020, the Group was in the customary process of obtaining the relevant property ownership certificates for certain buildings with a net carrying amount of approximately RMB1,836,118,000 (31 December 2019: RMB1,719,422,000). The Group's buildings can only be sold, transferred or mortgaged when the relevant certificates have been obtained.
- Interest expenses capitalised as part of property, plant and equipment by the Group during the Period amounted to RMB13,192,000 (six months ended 30 June 2019: RMB14,323,000) (note 4).
9. LEASES
The carrying amounts of the Group's right-of-use assets and lease liabilities and the movements during the Period are as follows:
Right-of-use assets | Lease | ||||
Land | Buildings | Total | liabilities | ||
RMB'000 | RMB'000 | RMB'000 | RMB'000 | ||
(Unaudited) | (Unaudited) | (Unaudited) | |||
As at 1 January 2020 | 658,009 | 85,144 | 743,153 | 93,994 | |
Additions | 128,459 | 2,556 | 131,015 | 2,556 | |
Depreciation charged | (8,139) | (3,709) | (11,848) | - | |
Interest expense | - | - | - | 3,065 | |
Cancellation | - | (1,374) | (1,374) | (1,260) | |
Payments | - | - | - | (2,665) | |
As at 30 June 2020 | 778,329 | 82,617 | 860,946 | 95,690 |
The Group recognised rental expenses from short-term leases of RMB941,000 (note 5) for the Period (six months ended 30 June 2019: RMB539,000).
18 Tianli Education International Holdings Limited • Interim Report 2020
10. GOODWILL
IAS 36 requires an entity to perform impairment tests on goodwill on an annual basis. However, management did not identify any significant adverse changes in the operating results and macro environment in the six months' period ended 30 June 2020, and the Company's management has concluded there was no impairment indicator of goodwill as at 30 June 2020. Accordingly, the Company's management did not perform impairment testing on goodwill as at 30 June 2020.
11. TRADE RECEIVABLES
30 June | 31 December | |
2020 | 2019 | |
RMB'000 | RMB'000 | |
(unaudited) | (audited) | |
Within 3 months | 3,027 | 1,106 |
Trade receivables mainly represented amounts of management fees due from certain entrusted schools. There is no fixed credit term for payments. The Group does not hold any collateral or other credit enhancements over its trade receivable balances. Trade receivables are non-interest-bearing.
Trade receivables as at the end of the reporting period which are based on the transaction date were aged within 3 months and are not individually nor collectively considered to be impaired. None of the above trade receivables is either past due or impaired. The receivables have no recent history of default.
No expected credit losses were provided as it is assessed that the overall expected credit loss rate for the above financial assets measured at amortised cost is minimal.
Interim Report 2020 • Tianli Education International Holdings Limited 19
12. PREPAYMENTS, DEPOSITS AND OTHER RECEIVABLES
30 June | 31 December | |
2020 | 2019 | |
RMB'000 | RMB'000 | |
(unaudited) | (audited) | |
Current portion: | ||
Security deposits related to the construction of schools | 11,760 | 13,125 |
Other deposits | 1,436 | 5,596 |
Prepayments | 9,607 | 7,332 |
Interest receivable | - | 386 |
Advances to staff | 5,467 | 5,300 |
Advance to third parties | 1,833 | 1,833 |
Deductible input value-added tax | 47,451 | 33,317 |
Government grant receivable | 8,912 | - |
Other receivables | 4,906 | 2,474 |
91,372 | 69,363 | |
Non-current portion: | ||
Prepayments for property, plant and equipment* | 17,745 | 50,643 |
Prepayment for intangible assets | 4,829 | 2,475 |
Prepayment for the acquisition of land use rights | 363,123 | 200,666 |
385,697 | 253,784 | |
Total | 477,069 | 323,147 |
- Included in the prepayments for property, plant and equipment is a prepayment paid to a related party, Luzhou Nanyuan Construction Engineering Co., Ltd. ("Nanyuan Construction") amounting to RMB8,211,000 (31 December 2019: RMB43,092,000) (note 23(b)).
The financial assets included in the above balances relate to receivables for which there was no recent history of default and past due amounts, and the loss allowance was assessed to be minimal.
20 Tianli Education International Holdings Limited • Interim Report 2020
13. CASH AND CASH EQUIVALENTS
30 June | 31 December | |
2020 | 2019 | |
RMB'000 | RMB'000 | |
(unaudited) | (audited) | |
Cash and bank balances | 600,417 | 316,993 |
Time deposits with original maturity of: | ||
- less than three months | 174,632 | 134,002 |
- over three months | - | 180,434 |
Cash and cash equivalents | 775,049 | 631,429 |
The Group's cash and bank balances and time deposits are denominated in the following currencies:
30 June | 31 December | |
2020 | 2019 | |
RMB'000 | RMB'000 | |
(unaudited) | (audited) | |
RMB | 529,328 | 251,212 |
HK$ | 111,388 | 199,030 |
US$ | 134,333 | 181,187 |
775,049 | 631,429 | |
The RMB is not freely convertible into other currencies, however, under Mainland China's Foreign Exchange Control Regulations and Administration of Settlement, Sale and Payment of Foreign Exchange Regulations, the Group is permitted to exchange RMB for other currencies through banks authorised to conduct foreign exchange business.
Cash at banks earns interest at floating rates based on daily bank deposit rates. Time deposits are made for varying periods of between one day and three months depending on the immediate cash requirements of the Group and earn interest at the respective time deposit rates. The bank balances are deposited with creditworthy banks with no recent history of default.
Interim Report 2020 • Tianli Education International Holdings Limited 21
14. TRADE PAYABLES
An ageing analysis of trade payables as at the end of the Period, based on the invoice date, is as follows:
30 June | 31 December | |
2020 | 2019 | |
RMB'000 | RMB'000 | |
(unaudited) | (audited) | |
Within 3 months | 21,530 | 22,077 |
Over 3 months and within 6 months | 157 | 165 |
Over 6 months | 1,073 | 76 |
22,760 | 22,318 |
The trade payables are non-interest-bearing and are normally settled on 30-day terms.
15. OTHER PAYABLES AND ACCRUALS
30 June | 31 December | |
2020 | 2019 | |
RMB'000 | RMB'000 | |
(unaudited) | (audited) | |
Accrued bonuses and other employee benefits | 139,159 | 113,720 |
Miscellaneous advances from students* | 82,454 | 66,740 |
Payables for purchase of property, plant and equipment | 41,585 | 50,041 |
Deposits | 12,862 | 11,130 |
Interest payable | - | 252 |
Boarding fees and canteen operation fees | ||
refundable to students (note 16) | 14,104 | - |
Other payables and accrued expenses | 14,576 | 12,593 |
304,740 | 254,476 |
- The balances mainly represented miscellaneous advances received from students for the purchase of uniforms and textbooks on their behalf.
The above balances are unsecured and non-interest-bearing.
22 Tianli Education International Holdings Limited • Interim Report 2020
16. CONTRACT LIABILITIES
30 June | 31 December | |
2020 | 2019 | |
RMB'000 | RMB'000 | |
(unaudited) | (audited) | |
Tuition fees | 404,436 | 497,916 |
Boarding fees | 17,533 | 31,217 |
Canteen operation fees | 19,306 | 55,440 |
Others | 2,939 | 3,424 |
444,214 | 587,997 | |
Current portion | 394,915 | 537,573 |
Non-current portion (note) | 49,299 | 50,424 |
444,214 | 587,997 | |
Note: The amounts represent tuition fees received in advance from the Xichang City Government as consideration to enrol a certain number of students designated by the Xichang City Government for 30 years since the start of operation of Xichang Tianli International School ("Xichang Tianli School").
Changes in contract liabilities during the reporting period/year are as follows: | ||||
30 June | 31 December | |||
2020 | 2019 | |||
RMB'000 | RMB'000 | |||
(unaudited) | (audited) | |||
At the beginning of the reporting period/year | 587,997 | 393,324 | ||
Revenue recognised that was included in the contract liabilities | ||||
at the beginning of the reporting period/year | (538,698) | (342,900) | ||
Boarding fees and canteen operation fees | ||||
refundable to students (note 15) | 14,104 | - | ||
Increase due to cash received, excluding amounts recognised as revenue | ||||
during the reporting period/year | 380,811 | 537,573 | ||
At the end of the reporting period/year | 444,214 | 587,997 |
There were no contract assets at 30 June 2020 recognised in the consolidated statement of financial position.
Interim Report 2020 • Tianli Education International Holdings Limited 23
17. DEFERRED INCOME
30 June | 31 December | ||
2020 | 2019 | ||
RMB'000 | RMB'000 | ||
(unaudited) | (audited) | ||
Government grants related to expense items | |||
At the beginning of period/year | 603,379 | 169,794 | |
Government grants received | 455,217 | 465,349 | |
Government grant transferred in from prepaid land lease payments | - | 118,161 | |
Released to profit or loss (note 5) | (86,694) | (149,925) | |
At the end of period/year | 971,902 | 603,379 | |
Current | 219,872 | 152,737 | |
Non-current | 752,030 | 450,642 | |
Total | 971,902 | 603,379 | |
Various government grants have been received mainly for the purpose of compensation of mainly salaries and wages arising from the teaching activities at certain schools of the Group. Upon completion of the operating activities, the government grants related to the expense items would be released to profit or loss and deducted from the operating expenses to which they relate. Government grants received for which expenditure has not yet been undertaken are included in deferred income.
24 Tianli Education International Holdings Limited • Interim Report 2020
18. INTEREST-BEARING BANK LOANS
30 June 2020 (unaudited) | 31 December 2019 (audited) | ||||||
Effective | Effective | ||||||
interest | interest | ||||||
rate | Maturity | RMB'000 | rate | Maturity | RMB'000 | ||
Current | |||||||
Bank loans - secured | 4.785 | 2021 | 100,000 | 4.785 | 2020 | 100,000 | |
Bank loans - unsecured | 6 | 2021 | 50,000 | - | - | - | |
Current portion of long-term | |||||||
bank loans - secured | 5.73-7.125 | 2021 | 70,500 | 6.175-7.125 | 2020 | 84,000 | |
220,500 | - | - | 184,000 | ||||
Non-current | |||||||
Bank loans - secured | 5.292-7.125 | 2021-2030 | 793,500 | 6.175-7.125 | 2021-2023 | 275,000 | |
1,014,000 | 459,000 | ||||||
30 June | 31 December | ||||||
2020 | 2019 | ||||||
RMB'000 | RMB'000 | ||||||
(unaudited) | (audited) | ||||||
Bank loans repayable: | |||||||
Within one year | 220,500 | 184,000 | |||||
In the second year | 166,500 | 164,000 | |||||
In the third to fifth years, inclusive | 627,000 | 111,000 | |||||
1,014,000 | 459,000 | ||||||
All of the Group's bank loans are denominated in RMB.
Notes:
The Group's bank loans are secured by:
- Pledges of equity interests in the following subsidiaries of the Group:
- 100% equity interest in Yibin Shenzhou Tianli Education Development Limited has been pledged for a bank loan of RMB80,000,000 as at 31 December 2019;
- 100% equity interest in Xichang Shenzhou Tianli Education Development Limited has been pledged for bank loans of RMB99,000,000 and RMB108,000,000 as at 30 June 2020 and 31 December 2019, respectively;
- 100% equity interest in Neijiang Shenzhou Tianli Education Development Limited has been pledged for bank loans of RMB100,000,000 as at 30 June 2020 and 31 December 2019, respectively;
- 100% equity interest in Guangyuan Shenzhou Tianli Education Development Limited has been pledged for bank loans of RMB79,000,000 and RMB80,000,000 as at 30 June 2020 and 31 December 2019, respectively;
Interim Report 2020 • Tianli Education International Holdings Limited 25
18. INTEREST-BEARING BANK LOANS (CONTINUED)
Notes: (continued)
- Pledges of equity interests in the following subsidiaries of the Group: (continued)
- 100% equity interest in Deyang Shenzhou Tianli Education Consulting Limited has been pledged for a bank loan of RMB150,000,000 as at 30 June 2020 (31 December 2019: Nil);
- 100% equity interest in Dazhou Shenzhou Tianli Education Consulting Limited has been pledged for a bank loan of RMB150,000,000 as at 30 June 2020 (31 December 2019: Nil);
- 100% equity interest in Chengdu Tianli Aizhihui Education Consulting Limited has been pledged for a bank loan of RMB200,000,000 as at 30 June 2020 (31 December 2019: Nil); and
- 100% equity interest in Weifang Shenzhou Tianli Education Consulting Limited has been pledged for a bank loan of RMB66,000,000 as at 30 June 2020 (31 December 2019: Nil).
- Rights over tuition or boarding fees of the following schools:
- Rights over tuition fees of Luzhou Tianli School and Luzhou Longmatan Tianli Elementary School have been pledged for aggregate bank loans of RMB91,000,000 as at 31 December 2019;
- Rights over boarding fees of Yibin Tianli School have been pledged for a bank loan of RMB80,000,000 as at 31 December 2019;
- Rights over boarding fees of Guangyuan Tianli School have been pledged for bank loans of RMB79,000,000 and RMB80,000,000 as at 30 June 2020 and 31 December 2019, respectively;
- Rights over tuition, boarding and other fees of Xichang Tianli School have been pledged for bank loans of RMB99,000,000 and RMB108,000,000 as at 30 June 2020 and 31 December 2019, respectively;
- Rights over tuition and boarding fees of Weifang Tianli School have been pledged for a bank loan of RMB66,000,000 as at 30 June 2020 (31 December 2019: Nil);
- Rights over tuition, boarding and other fees of Deyang Tianli School have been pledged for a bank loan of RMB150,000,000 as at 30 June 2020 (31 December 2019: Nil);
- Rights over tuition, boarding and other fees of Neijiang Tianli School have been pledged for a bank loan of RMB100,000,000 as at 30 June 2020 (31 December 2019: Nil);
- Rights over tuition, boarding and other fees of DaZhou Tianli School have been pledged for a bank loan of RMB150,000,000 as at 30 June 2020 (31 December 2019: Nil);
- Rights over tuition and boarding fees of Chengdu Longquanyi District Tianli Elementary School and Chengdu Longquanyi District Tianli Kindergarten Company Limited have been pledged for a bank loan of RMB200,000,000 as at 30 June 2020 (31 December 2019: Nil);
- Rights over tuition, boarding and other fees of Luzhou Tianli School have been pledged for a bank loan of RMB90,000,000 as at 30 June 2020 (31 December 2019: Nil); and
- Rights over tuition, boarding and other fees of Luzhou Longmatan Tianli Elementary School have been pledged for a bank loan of RMB30,000,000 as at 30 June 2020 (31 December 2019: Nil).
26 Tianli Education International Holdings Limited • Interim Report 2020
18. INTEREST-BEARING BANK LOANS (CONTINUED)
Notes: (continued)
- Rights over rental income of the following schools:
- Rights over rental income of Dazhou Shenzhou Tianli Education Consulting Limited have been pledged for a bank loan of RMB150,000,000 as at 30 June 2020; and
- Rights over rental income of Chengdu Tianli Huixin Education Consulting Limited have been pledged for a bank loan of RMB200,000,000 as at 30 June 2020.
- In addition, Mr. Luo has guaranteed the Group's bank loans of RMB99,000,000 and RMB108,000,000 as at 30 June 2020 and 31 December 2019, respectively.
19. SHARE CAPITAL
Shares | ||
30 June | 31 December | |
2020 | 2019 | |
HK$'000 | HK$'000 | |
(unaudited) | (audited) | |
Authorised: | ||
10,000,000,000 ordinary shares of HK$0.1 each | 1,000,000 | 1,000,000 |
Issued and fully paid: | ||
2,075,000,000 ordinary shares of HK$0.1 each | 207,500 | 207,500 |
Equivalent to approximately (in RMB'000) | 176,375 | 176,375 |
20. SHARE AWARD SCHEME
The Company adopted a restricted share award scheme (the "Scheme"), effective from 17 December 2018. The purpose of the Scheme is (i) to recognise and motivate the contribution of the key management personnel and core employees of the Group; (ii) to help the Group retain and attract the selected participants in attaining the long-term business objectives of the Company; and (iii) to further align the interests of the selected participants directly to the shareholders of the Company through ownership of the Company's shares.
The Scheme shall be effective from 17 December 2018 and shall continue in full force and effect for 10 years or until such date of early termination as determined by the Company's board of directors (the "Board"), whichever is earlier. The maximum number of shares may be granted under the Scheme in aggregate shall be no more than 75,000,000 shares.
The Scheme shall be subject to the administration of the Board and a trustee (the "Trustee") in accordance with the rules governing the Scheme ("Scheme Rules") and the trust deed.
Interim Report 2020 • Tianli Education International Holdings Limited 27
20. SHARE AWARD SCHEME (CONTINUED)
A selected participant shall be entitled to receive the award shares held by the Trustee in accordance with the following vesting schedule and the selected participants shall be responsible for all the taxes, stamp duty, levies and charges applicable to the grant and vesting of the award shares:
- 10% of a selected participant's award shares shall become vested upon each of the first anniversary, the second anniversary, the third anniversary, the fourth anniversary and the fifth anniversary after the grant date; and
- 50% of a selected participant's award shares shall become vested upon the sixth anniversary after the grant date.
Vesting of the award shares will be conditional on the selected participant remaining as an employee of the Group until and on each of the relevant vesting date and his/her execution of the relevant documents to effect the transfer from the Trustee. In the event that the selected participant ceases to be an employee of the Group before all award shares are vested, the Trustee shall repurchase the unvested award shares at the repurchase price from the resources contributed by the Group. The repurchased shares shall be held under the trust and be granted to other selected participant(s) as instructed by the Board.
The Trustee shall not exercise the voting rights in respect of any shares held under the trust including but not limited to the award shares.
As at 30 June 2020, the Group has set up a trust specifically for the management of the share award scheme through the trust, and a total of 34,355,000 shares of the Company have been purchased by the Trustee.
Pursuant to share award notices issued on 15 December 2019 to those selected participants, an aggregate of 7,724,000 shares (the "2019 Awarded Shares") of the Company of HK$0.10 each were granted at RMB1.60 (equivalent to approximately HK$1.78) per 2019 Awarded Share and the earliest vesting date of the 2019 Awarded Shares is 1 September 2020. There is no other performance target required except that the eligible participant remains as an employee of the Group. The fair value of services received in return for shares granted is measured by reference to the fair value of the shares granted.
The fair value of the shares granted is based on the difference between the market price of the shares and the subscription price paid by the selected participants at the grant date, adjusted for the exclusion of expected dividends to be received in the vesting period.
During the Period, total share award scheme expenses of RMB1,480,000 were charged to profit or loss (six months ended
30 June 2019: Nil).
21. DIVIDEND
At the meeting of the Directors held on 28 August 2020, the Directors resolved not to pay an interim dividend for the Period (six months ended 30 June 2019: Nil).
28 Tianli Education International Holdings Limited • Interim Report 2020
22. COMMITMENTS
The Group had the following capital commitments as at 30 June 2020 and 31 December 2019:
30 June | 31 December | |
2020 | 2019 | |
RMB'000 | RMB'000 | |
(unaudited) | (audited) | |
Contracted but not provided for: | ||
Property, plant and equipment | 844,440 | 1,528,845 |
23. RELATED PARTY TRANSACTIONS AND BALANCES
The Directors are of the view that the following individuals/companies are related parties that had material transactions or balances with the Group during the Reporting Period.
(a) | Name and relationships of related parties | |
Name | Relationships | |
Mr. Luo | Ultimate controlling shareholder of the Company | |
Gulin Tianli Shengzhong Industry Co., Ltd | ||
("Gulin Shengzhong") | A company controlled by Mr. Luo | |
Nanyuan Construction | A company controlled by Mr. Luo | |
Sichuan Tianli Real Estate Development | ||
Co., Ltd. ("Tianli Real Estate") | A company controlled by Mr. Luo | |
Luzhou Tianli Property Management | ||
Co., Ltd. ("Luzhou Tianli Property") | A company controlled by Mr. Luo | |
Affiliated Kindergarten of Luzhou Jiangyang | ||
Tianli School ("Luzhou Tianli Kindergarten") | An associate of the Company |
In addition to the transactions detailed elsewhere in this interim condensed consolidated financial information, the Group had the following transactions with related parties:
Interim Report 2020 • Tianli Education International Holdings Limited 29
23. RELATED PARTY TRANSACTIONS AND BALANCES (CONTINUED)
(b) | Outstanding balances with related parties | |||
30 June | 31 December | |||
2020 | 2019 | |||
Notes | RMB'000 | RMB'000 | ||
(unaudited) | (audited) | |||
Amounts due from related parties | ||||
Trade in nature | ||||
Luzhou Tianli Kindergarten | (i) | 15 | 15 | |
Non-trade in nature | ||||
Luzhou Tianli Property | 20 | 20 | ||
Luzhou Tianli Kindergarten | (ii) | 167 | 167 | |
187 | 187 | |||
Total | 202 | 202 | ||
Prepayments, deposits and other receivables | ||||
Non-trade in nature | ||||
Nanyuan Construction | 12 | 8,211 | 43,092 | |
Amount due to a related party | ||||
Non-trade in nature | ||||
Nanyuan Construction | 406,717 | 217,956 |
Notes:
- Included in the amount due from Luzhou Tianli Kindergarten were management fees receivable for the provision of kindergarten management services provided by the Group amounting to RMB15,000 as at 30 June 2020 (31 December 2019: RMB15,000).
- The non-trade balances were interest-free advances granted to Luzhou Tianli Kindergarten. These balances were unsecured, interest-free and had no fixed terms of repayment.
- Except for the amounts due from related parties as disclosed in note (i) above and the prepayments made to Nanyuan Construction in relation to the construction services to be provided by Nanyuan Construction, the amounts due from related parties were unsecured, interest-free and had no fixed terms of repayment.
30 Tianli Education International Holdings Limited • Interim Report 2020
23. RELATED PARTY TRANSACTIONS AND BALANCES (CONTINUED)
- Transactions with related parties
- Construction of property, plant and equipment
For the six months ended 30 June
20202019
RMB'000RMB'000
(unaudited) (unaudited)
Nanyuan Construction | 739,891 | 613,528 |
The considerations for the construction of property, plant and equipment were determined at prices mutually agreed between the Group and its related parties with reference to the benchmarking studies for similar transactions.
- Rental of properties
For the six months ended 30 June | ||
2020 | 2019 | |
RMB'000 | RMB'000 | |
(unaudited) | (unaudited) | |
Gulin Shengzhong* | - | - |
Tianli Real Estate | - | 68 |
- | 68 | |
- The Group rented certain properties from Gulin Shengzhong. Rental was charged based on prices mutually agreed between the Group and the related parties. Upon the adoption of IFRS 16, the above lease contract with Gulin Shengzhong was recognised and measured as a right-of-use asset. During the Period, the rental fee payable by the Group to Gulin Shengzhong amounted to RMB141,000 (six months ended 30 June 2019: RMB193,000).
- Provision of management services and sale of goods
For the six months ended 30 June
20202019
RMB'000RMB'000
(unaudited) (unaudited)
Luzhou Tianli Kindergarten | 81 | 124 |
The amount represented fees charged for the provision of management services to Luzhou Tianli Kindergarten, at prices mutually agreed between the Group and Luzhou Tianli Kindergarten.
-
Others
During the Period, a bank loan of RMB99,000,000 (31 December 2019: RMB108,000,000) of the Group has been guaranteed by Mr. Luo. Details of this guarantee are disclosed in note 18 to the interim condensed consolidated financial information.
Interim Report 2020 • Tianli Education International Holdings Limited 31
23. RELATED PARTY TRANSACTIONS AND BALANCES (CONTINUED)
- Compensation of key management personnel of the Group
For the six months ended 30 June | ||
2020 | 2019 | |
RMB'000 | RMB'000 | |
(unaudited) | (unaudited) | |
Salaries, allowances and benefits in kind | 565 | 806 |
Equity-settled share award scheme expenses | 383 | - |
Pension scheme contributions | 4 | 53 |
952 | 859 | |
24. FAIR VALUE AND FAIR VALUE HIERARCHY OF FINANCIAL INSTRUMENTS
The carrying amounts and fair values of the Group's financial instruments with carrying amounts that require recurring fair value measurement are as follows:
Carrying amounts | |||
30 June | 31 December | ||
2020 | 2019 | ||
RMB'000 | RMB'000 | ||
(unaudited) | (audited) | ||
Financial assets at fair value through profit or loss | 6,300 | 4,200 | |
Long-terminterest-bearing bank loans | 793,500 | 275,000 | |
799,800 | 279,200 | ||
Fair values | |||
30 June | 31 December | ||
2020 | 2019 | ||
RMB'000 | RMB'000 | ||
(unaudited) | (audited) | ||
Financial assets at fair value through profit or loss | 6,300 | 4,200 | |
Long-terminterest-bearing bank loans | 793,500 | 275,000 | |
799,800 | 279,200 |
Management has assessed that the fair values of cash and cash equivalents, trade receivables, trade payables, financial assets included in prepayments, deposits and other receivables, financial liabilities included in other payables and accruals, and amounts due from/to related parties approximate to their carrying amounts largely due to the short term maturities of these instruments.
The fair values of the financial assets and liabilities are included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The following methods and assumptions were used to estimate the fair values:
32 Tianli Education International Holdings Limited • Interim Report 2020
24. FAIR VALUE AND FAIR VALUE HIERARCHY OF FINANCIAL INSTRUMENTS (CONTINUED)
The fair values of the non-currentinterest-bearing bank loans and lease liabilities have been calculated by discounting the expected future cash flows using rates currently available for instruments with similar terms, credit risk and remaining maturities. The Group's own non-performance risk for interest-bearing bank loans as at 30 June 2020 was assessed to be insignificant.
The fair values of financial assets at fair value through profit or loss included in other current financial assets are measured using the expectation return published by licensed banks.
Fair value hierarchy
The following tables illustrate the fair value measurement hierarchy of the Group's financial instruments:
Assets measured at fair value: | |||||
Fair value measurement using | |||||
Quoted prices | Significant | Significant | |||
in active | observable | unobservable | |||
markets | inputs | inputs | |||
Level 1 | Level 2 | Level 3 | Total | ||
RMB'000 | RMB'000 | RMB'000 | RMB'000 | ||
Financial assets at fair value through | |||||
profit or loss | - | 6,300 | - | 6,300 | |
30 June 2020 | |||||
31 December 2019 | - | 4,200 | - | 4,200 | |
Liabilities for which fair values are disclosed: | |||||
Fair value measurement using | |||||
Quoted prices | Significant | Significant | |||
in active | observable | unobservable | |||
markets | inputs | inputs | |||
Level 1 | Level 2 | Level 3 | Total | ||
RMB'000 | RMB'000 | RMB'000 | RMB'000 | ||
Interest-bearing bank loans, non-current | |||||
portion | - | - | 793,500 | 793,500 | |
30 June 2020 | |||||
31 December 2019 | - | - | 275,000 | 275,000 | |
During the Period, there were no transfers of fair value measurements between Level 1 and Level 2 and no transfers into or out of Level 3.
Except as disclosed above, the Group did not have any financial assets and liabilities measured at fair value as at 30 June 2020 (31 December 2019: Nil).
25. EVENTS AFTER THE REPORTING PERIOD
No significant events that require additional disclosure or adjustments occurred after the reporting period.
26. APPROVAL OF THE INTERIM CONDENSED FINANCIAL INFORMATION
The interim condensed financial information was approved and authorised for issue by the board of directors on 28 August 2020.
Interim Report 2020 • Tianli Education International Holdings Limited 33
Management Discussion and Analysis
BUSINESS REVIEW
Overview
Established in 2002, the Group is a leading private education service provider in Western region of the PRC. We primarily offer K-12 educational services, supplemented by tutoring services for K-12 students and prekindergarten children. We are one of the largest private K-12 school operators in Western region of the PRC. As at 30 June 2020, we have approximately 40,833 students enrolled in the K-12 schools in our school network, representing an increase of 35.5% comparing with approximately 30,145 students enrolled as at 30 June 2019.
Our Education Philosophy
Our fundamental educational philosophy is premised on the development of each child's strengths and potential and promotion of life-long learning and growth. The core of our educational philosophy is "Six Establishments and One Accomplishment (六立一達)", which represents the seven crucial objectives we encourage our students to achieve sound health, morality, wisdom, behavior, mind and creativity and a positive influence on society in addition to self-realization ("立身, 立德, 立學, 立行, 立心, 立異, 達人"). We design and develop our educational programs to reflect this concept, emphasizing the importance of solid academic performance in core subject areas such as Mathematics, Science, Language and History, at the same time encouraging our students to explore individual interests and enhance physical fitness, and nurturing students' creativity, communication skills, independent thinking and social responsibility. On 6 May 2020, the Company was awarded with "2019 Private Enterprise of the Year for Poverty Elimination in Liangshan (2019年度助力涼山脫貧攻堅行動先進民營企業)" by Sichuan Chambers of Commerce, Sichuan Poverty Alleviation and Development Bureau, Sichuan Glory Society and Sichuan Branch of Agriculture Bank of China.
Student Placement and Education Quality
Since our inception, our students have consistently achieved outstanding results in various academic examinations and contests, as well as in extra-curricular activities. For the six months ended 30 June 2020 (the "Reporting Period"), approximately 96.3% of the graduating high school students of our schools with high school programs which have graduating classes who participated in the National Higher Education Entrance Examination (known as "Gaokao") in the relevant cities where the schools are located were admitted to universities in the PRC, and approximately 75.5% were admitted to first-tier universities in the PRC.
Our Schools and Education Curriculum
We have established a school network consisting of (i) self-owned schools which are owned and operated by us, (ii) entrusted schools to which we provide management services, and (iii) franchised early childhood education centers to which we have licensed the right to use our brand. As at 30 June 2020, our school network consisted of 20 self-owned and 4 entrusted K-12 schools in operation in 16 cities in the provinces of Sichuan, Shandong, Guizhou, Yunnan, Henan and Inner Mongolia, which administered 13 high school programs, 17 middle school programs, 19 elementary school programs and 7 kindergarten programs. We also operate or license our brand to a total of 5 tutorial centers and 4 early childhood education centers.
34 Tianli Education International Holdings Limited • Interim Report 2020
PRC-certified teachers are crucial to our business, allowing us to maintain the quality of our educational services while undergoing expansion. The table below sets forth a breakdown of the number of full-time teachers employed by us as at the dates indicated:
Six months ended 30 June | ||
2020 | 2019 | |
Self-ownedK-12 schools | 2,538 | 2,127 |
Self-owned tutorial centers | 80 | 80 |
Total | 2,618 | 2,207 |
We recruit teachers through different channels and methods, including campus recruitment, general public recruitment, assessment of candidates who apply through our recruitment procedures and the use of online recruiting websites. We offer internships to undergraduate students who are major in education or related subjects and show promising potential during our recruiting process. We also actively recruit teachers with extensive experiences from public schools and other private schools to expand our talent pool.
As at 30 June 2020, we have approximately 40,833 students enrolled in the self-owned and entrusted K-12 schools in our school network, representing a year-on-year increase of 35.5%. This increase is driven by the increase in the number of students enrolled in existing K-12 schools, which utilization rates will continue to increase and the increase in the number of students enrolled in the newly opened self-ownedK-12 schools.
Financially, our revenue increased by 30.3% from RMB438.1 million for the six months ended 30 June 2019 to RMB570.7 million for the Reporting Period, primarily driven by the increase of revenue from our self-ownedK-12 schools. The following table sets forth the revenue generated from each school type in our school network for the six months ended 30 June 2019 and 30 June 2020:
Six months ended 30 June | ||
2020 | 2019 | |
RMB'000 | RMB'000 | |
Revenue | ||
Self-ownedK-12 schools | 554,718 | 420,090 |
Self-owned tutorial centers | 12,624 | 14,391 |
Self-owned early childhood education center | 1,485 | 570 |
Management and franchise fees received from | ||
entrusted and franchised schools | 1,827 | 3,042 |
Total | 570,654 | 438,093 |
Interim Report 2020 • Tianli Education International Holdings Limited 35
Self-ownedK-12 School
As at 30 June 2020, we owned and operated 20 self-ownedK-12 schools across Chengdu, Luzhou, Xichang, Guangyuan, Neijiang, Dazhou, Ya'an, Yibin, Deyang, and Ziyang in Sichuan as well as Ulanqab in Inner Mongolia, Weifang in Shangdong, Zhoukou in Henan, Zunyi in Guizhou, Baoshan and Zhaotong in Yunnan.
All of our K-12 schools except kindergartens are boarding schools. We charge students enrolled in our self-ownedK-12 schools tuition fees, and for boarding students, boarding fees. For all of our self-owned grades 1-12 schools, tuition fees and boarding fees are generally paid in advance prior to the beginning of each school year. For our self-owned kindergartens, tuition fees are generally paid in advance at the beginning of every semester. During the Reporting Period, the Group recorded RMB554.7 million of revenue from our self-ownedK-12 schools which represented 32.0% year-on-year increase and contributed to 97.2% of the Group's revenue for the Reporting Period, primarily driven by the increase in student enrollment and an increase in tuition fee rates for some of our self-ownedK-12 schools.
The following table sets forth information about the revenue of our self-ownedK-12 schools during the six months ended 30 June 2019 and 2020.
Six months ended 30 June | ||
2020 | 2019 | |
RMB'000 | RMB'000 | |
Revenue from self-ownedK-12 schools | ||
Tuition fees | 397,480 | 291,998 |
Boarding fees | 49,423 | 38,930 |
School canteen operations | 107,815 | 89,162 |
Revenue from self-ownedK-12 schools | 554,718 | 420,090 |
Tuition fee rates and boarding fee rates are adjusted according to different market factors including estimation of numbers of student applications and are subject to governments' approval or filing.
The following table illustrates the information on average tuition fees and boarding fees per student by school programs during the six months ended 30 June 2019 and 2020.
Six months ended 30 June | ||
2020 | 2019 | |
RMB'000 | RMB'000 | |
Average tuition and boarding fees per student of | ||
our self-ownedK-12 school1 | ||
High schools | 11.00 | 11.31 |
Middle schools | 12.33 | 12.13 |
Elementary schools | 13.51 | 11.90 |
Kindergartens | 9.24 | 13.79 |
1. The average revenue per student of our self-ownedK-12 schools is equal to the total revenue of our self-ownedK-12 schools during January to June of that year, divided by the number of students of the spring term of that year.
36 Tianli Education International Holdings Limited • Interim Report 2020
Information about our tutorial centers and early childhood education centers
Our self-owned and entrusted tutorial centers offer tutoring services to K-12 students and franchised early childhood education centers offer tutoring services to pre-kindergarten children. The following table sets forth information about our tutorial centers and early childhood education centers in operation as at 30 June 2020:
Tutorial Centers | |||
Number of | |||
Location | Types of tutoring services offered | Nature | Tutorial Centers |
Luzhou | After-school tutoring services; music, art and | Self-owned | 3 |
sports tutoring services | |||
Yibin | After-school tutoring services; music, art and | Self-owned | 2 |
sports tutoring services; English tutoring services | |||
Early Childhood Education Centers | |||
Number of | |||
Early Childhood | |||
Location | Types of tutoring services offered | Nature | Education Centers |
Chongqing | Pre-school tutoring services | Franchised | 1 |
Luzhou | Pre-school education | Self-owned | 1 |
Franchised | 2 |
We evaluate the market demand and offer a variety of courses with different class sizes in our tutorial centers and early childhood education centers from time to time to satisfy various needs of students, and the tuition fees we charge vary according to (i) different categories of courses, (ii) class size (we generally charge a higher tuition fee rate for a course with a specific term if the class size is smaller), and (iii) the length of courses (the tuition fee rate of a course with a certain class size is usually higher if the course consists of more sessions). As a result, a change in the mix of courses of different tuition fee rates and the proportion of student enrollment in courses of different tuition fee rates will lead to a change in the average tuition per enrollment.
Self-owned tutorial centers
During the Reporting Period, the Group recorded a revenue of RMB12.6 million (2019: RMB14.4 million) from our self-owned tutorial centers which represented 12.3% year-on-year decrease primarily due to the decrease in the numbers of self-owned tutorial centers. During the Reporting Period, 5 of our self-owned tutorial centers have been closed and entered the process of deregistration.
Self-owned early childhood education center
During the Reporting Period, we owned and operated an early childhood education center in Luzhou. Due to increase in the number of students, the revenue from self-owned early childhood center increased from RMB0.6 million for the six months ended 30 June 2019 to RMB1.5 million for the Reporting Period.
Interim Report 2020 • Tianli Education International Holdings Limited 37
Management and franchise fees received from entrusted and franchised schools
Apart from operating our self-ownedK-12 schools as well as self-owned tutorial centers, we also provide school management services for entrusted K-12 schools and tutorial centers. During the Reporting Period, we set to open two entrusted K-12 schools namely, Luxian Tianli Primary School in Luzhou and Xiangshan Tianli School in Ningbo for the forthcoming 2020/2021 school year.
In addition, we license the right to use our brand to franchised early childhood education centers. As at 30 June 2020, there were 1 and 2 franchised early childhood education centers in Chongqing and Luzhou respectively.
As affected by the COVID-19 epidemic, revenue from management and franchise fees decreased by 39.9% from approximately RMB3.04 million for the six months ended 30 June 2019 to approximately RMB1.83 million during the Reporting Period.
PROSPECTS
Outlook for Private Education in the PRC
Since the 1980s, the PRC government, both at the central and the local levels, has launched a series of policies to encourage the development of private education institutions as part of its strategies to bridge the shortage of private education. In some regions, local governments have implemented favorable policies, such as financial support for campus building, to attract renowned private school operators. In the PRC, children's education has always been highly valued by parents. Private education markets which include fundamental education and tutoring have been taking off along the continuous growth of disposable income of urban households. As the One-Child Policy has been relaxed and the Two-Child Policy implemented, the birth rate increased from 2010 to 2016 and is expected to remain stable going forward. The higher birth rate will lead to a larger number of students when these newborns reach school age and a higher demand for education.
These factors will likely drive the PRC's education market to grow further. We own a reputable private school network, and the Board is optimistic that we will achieve sustainable development in the growing private education market.
38 Tianli Education International Holdings Limited • Interim Report 2020
Impacts of COVID-19 epidemic
Since the epidemic, the PRC government has implemented various emergency measures to contain the spread of COVID-19. Among others, the resumption of the classroom teaching, offices and construction works in the PRC has been delayed after the Chinese New Year holidays. Gaokao and final exams in our K-12 schools have been generally postponed. Student recruitment, communication and tuition payment have also been slowed down as we canceled some of the open days.
In respect of class suspension, we have arranged online teaching, tutoring and class meetings for our students and sought for the plans of weekend and summer courses to catch up the set educational schemes.
There has not been any significant delay of the construction of the school campuses that are set to launch in September 2020 as the topping out works of the relevant campuses have already been completed before the Chinese New Year. In addition, our capital expenditure has reduced as the prices of building materials and labor costs generally decreased.
Thanks to the increased enrollment, our revenue from boarding fee and school canteen operations maintained on the increase during the Reporting Period. We refunded the boarding fee, after retaining all relevant direct costs, as required by the education departments of relevant local governments. The shortened semester has also led to reduce food and utility costs therefore the overall effect of the epidemic on our operating profit was not material. Please see the paragraph headed "Revenue" of the Financial Review in this interim report for details.
We will continue to assess the impact of the epidemic on the Group's business operations and financial performance and closely monitor the Group's exposure to the risks and uncertainties in connection with the epidemic.
School Network Development Plan
We have established a centralized and standardized management system which we believe is essential to the success of our business as it enables us to integrate our resources, to enhance our operating efficiency and to ensure the quality of our educational services. With our management system, we have been able to quickly expand our school network to new geographic locations and at the same time implement our quality standards across our school network. We believe our deep understanding of the K-12 education market, support for private K-12 education from the local governments, our position as a market leader and the potential of our target markets are highly favorable to our continued successful expansion nationwide. Looking forward, we will further deepen our penetration in second and third-tier cities nationwide with our thorough understanding of the PRC private education market, our reputation among parents and students, and the local government's support for K-12 schools. We also seek to establish new K-12 schools in different provinces by duplicating our centralized and standardized K-12 school operation model. We believe expanding our presence nationwide is crucial to enhance our brand influence and strengthen our position to become one of the leading K-12 school network operators in the PRC.
Interim Report 2020 • Tianli Education International Holdings Limited 39
We have entered into 4 agreements during the Reporting Period and another 2 agreements subsequent to the Reporting Period. Together with the agreements entered prior to the Reporting Period, we set out below details of the schools to be opened in the forthcoming years as at the date of this interim report.
Estimated | |||
maximum | |||
capacity | |||
(Student | Nature of | ||
School Name | Location | enrollment) | operation |
Dongying Tianli School | Dongying, Shandong Province | 4,000 | Self-owned |
(東營天立學校) | |||
Rizhao Tianli School | Rizhao, Shandong Province | 4,680 | Self-owned |
(日照天立學校) | |||
Jiange Tianli School | Guangyuan, Sichuan Province | 4,000 | Self-owned |
(劍閣天立學校) | |||
Yichun Tianli School | Yichuan, Jiangxi Province | 6,000 | Self-owned |
(宜春天立學校) | |||
Chengdu Pixian Tianli School | Chengdu, Sichuan Province | 2,800 | Self-owned |
(成都郫縣天立學校) | |||
Luzhou Tianli Flagship School | Luzhou, Sichuan Province | 5,000 | Self-owned |
(瀘州天立旗艦學校) | |||
Luxian Tianli School | Luzhou, Sichuan Province | 1,845 | Entrusted |
(瀘縣天立小學) | |||
Xiangshan Tianli School | Ningbo, Zhejiang Province | 2,400 | Entrusted |
(象山天立學校) | |||
Lanzhou Tianli School | Lanzhou, Gansu Province | 6,000 | Self-owned |
(蘭州天立學校) | |||
Tongren Wanshan Tianli School | Tongren, Guizhou Province | 3,000 | Self-owned |
(銅仁市萬山區天立學校) | |||
Chuzhou Lai'an Tianli School | Chuzhou, Anhui Province | 5,000 | Self-owned |
(滁州市來安縣天立學校) | |||
Chuxiong Tianli School | Chuxiong, Yunnan Province | 4,680 | Self-owned |
(楚雄天立學校) | |||
Jining Tianli School | Jining, Shandong Province | 6,000 | Self-owned |
(濟寧天立學校) | |||
Kaili Tianli School | Kaili, Guizhou Province | 5,000 | Self-owned |
(凱里天立學校) | |||
Guizhou Kaiyang Tianli School | Guiyang, Guizhou Province | 3,000 | Self-owned |
(貴州開陽天立學校) | |||
Ulanqab Tianli School | Ulanqab, Inner Mongolia | 4,620 | Self-owned |
(內蒙古烏蘭察布天立學校) | |||
40 Tianli Education International Holdings Limited • Interim Report 2020
Regulatory Update
Amendments on the Implementation Rules for the Law for Promoting Private Education (the "Draft")
The Ministry of Justice published the Draft Amendments on the Implementation Rules for the Law for Promoting Private Education (中華人民共和國民辦教育促進法實施條例(修訂草案)(送審稿)) on 10 August 2018. Paragraph 3 of Article 5 of the Draft stipulated that foreign invested enterprises established in the PRC and social organizations in which the foreigners are the actual controller may not operate, participate in the operation of or actually control private schools providing compulsory education; if such enterprises and organizations run other types of private schools, they shall meet the relevant PRC foreign investment regulations, which created uncertainty for the structure under the contractual arrangement of K-12 schools. Article 12 of the Draft provided that social organizations which run or are the actual controller of various private schools and run schools by means of collectivization shall be qualified as a legal person, and possess relevant funds, forces, organization institutions required for running schools, and assume management and supervision responsibilities for their private schools. For those who run schools by means of collectivization, they are not allowed to control nonprofit private schools by way of merger and acquisition, franchising and agreement control, which restricted private education groups from expanding through acquisition in the future. Article 45 of the Draft stipulated that administrative department of education and human resources and social security department shall tighten their supervision over the entering into of the agreements between non-profit private schools and stakeholders, and shall examine and review the necessity, legality and compliance of the agreements that involve material interests or have been repeatedly executed over a long period of time, but it did not specify the specific requirements and conditions of examination and review. So far, the Draft has not been considered, nor officially released.
Save as the principal risks and uncertainties summarized in the section headed "Report of Directors" of the interim report of the Group, we cannot assure you that the future Draft implemented by relevant government authorities will not diverge from our current understanding and interpretation of it. Given the changing regulatory environment, there are still certain uncertainties about how to implement the above Draft. We are not certain that future laws or relevant implementation rules for the law for promoting private education will have an impact on our business, financial conditions and operating results (if any). As at the date of this interim report, the Company has not been affected by the Draft. The Company will closely monitor the developments of the Draft.
Several Opinions of the CPC Central Committee and the State Council on Deepening the Reform and Standardization of Preschool Education (the "Several Opinions")
On 7 November 2018, the CPC Central Committee and the State Council issued Several Opinions on Deepening the Reform and Standardization of Preschool Education (《關於學前教育深化改革規範發展的若干意見》). The Several Opinions stipulated that private kindergartens are not allowed to be listed separately or packaged as part of assets. Listed companies are not allowed to invest in for-profit kindergartens by raising funds from stock market, nor acquire assets from for-profit kindergartens by issuing shares or paying cash. As at the date of this interim report, no laws and regulations corresponding to the Several Opinions have been promulgated.
In light of the immaterial revenue contribution from the kindergarten segment, implementing the Several Opinions will not have significant impact on the financial conditions and operating results of the Group. However, the Company will closely monitor the developments of the Several Opinions.
Interim Report 2020 • Tianli Education International Holdings Limited 41
Foreign Investment Law of the PRC
On 15 March 2019, the Standing Committee of the National People's Congress promulgated the Foreign Investment Law which became effective on 1 January 2020. The Implementation Rules of the Foreign Investment Law came into effect on the same date as well. The Foreign Investment Law and the Implementation Rules defines foreign investment as direct or indirect investment activities in the PRC by one or more foreign natural persons, enterprises or other organizations ("Foreign Investors"), and clearly stipulates four types of investment activities would fall within the definition of foreign investment, including (a) Foreign Investors alone or cooperate with other investors to establish foreign-invested enterprises in the PRC; (b) Foreign Investors acquire shares, equities, property shares or other similar rights of Chinese domestic enterprises; (c) Foreign Investors alone or cooperate with other investors invest new projects in the PRC; and (d) other means of investment prescribed by laws, administrative regulations and rules promulgated by the State Council. Furthermore, the law prescribes that the PRC applies the pre-establishment national treatment and negative list management system against foreign investment. The negative list of prohibited investment sectors prescribes areas which foreign investors are not allowed to invest upon; the negative list of restricted investment sectors prescribes areas which foreign investors are required to abide to the conditions as imposed under the regulations of the negative list; and all other areas excluded from the negative list would be handled according to the general principles applicable for both domestic and foreign enterprises. The Foreign Investment Law further stipulates that laws such as the Company Law of the PRC and the Partnership Enterprise law of the PRC shall apply to the organizational form, corporate governance and activities standards of foreign invested enterprises. For foreign invested enterprises established before the implementation of the Foreign Investment Law may maintain their original organizational form for five years from 1 January 2020. Specific measures for implementation shall be formulated by the State Council. The Foreign Investment Law does not explicitly include clauses involving "actual control" or "contractual arrangements."
Nevertheless, it is not excluded that there will be further laws and regulations governing the same. Therefore, it remains uncertain as to whether the structure under contractual arrangements will be included in the supervisory regime for foreign investment, and if so, the ways under which it is governed. As at the date of this interim report, the Company's operation remained unaffected by the Foreign Investment Law. The Company will closely monitor the development of the Foreign Investment Law and related legislations.
FINANCIAL REVIEW
Revenue
Our revenue includes tuition fees, boarding fees, canteen operation fees and management and franchise fees.
Our revenue increased by 30.3% from RMB438.1 million for the six months ended 30 June 2019 to RMB570.7 million for the Reporting Period, primarily driven by an increase in student enrolment and an increase in tuition fee rates for some of our self-ownedK-12 school.
Revenue from tuition fees increased by 34.1% from RMB307.0 million for the six months ended 30 June 2019 to RMB411.6 million for the Reporting Period, primarily as a result of the increase of student enrollment. We opened seven K-12 schools which classes commenced in 2019/2020 school year in 2019. Meanwhile, there was an increase in the number of students enrolled in our existing self-ownedK-12 schools.
Revenue from boarding fees increased by 27.0% from RMB38.9 million for the six months ended 30 June 2019 to RMB49.4 million for the Reporting Period, primarily driven by an increase in student enrolment.
Revenue from school canteen and convenience store operations increased by 20.9% from RMB89.2 million for the six months ended 30 June 2019 to RMB107.8 million for the Reporting Period, primarily as a result of increased student enrollment.
42 Tianli Education International Holdings Limited • Interim Report 2020
Revenue from management fees decreased by 39.9% from approximately RMB3.0 million for the six months ended 30 June 2019 to approximately RMB1.8 million for the Reporting Period, primarily because the income of our entrusted schools decreased for the COVID-19 epidemic during the Reporting Period.
Costs of Principal Activities
Our cost of sales consists of labor costs, teaching related costs, depreciation and amortization, material consumption, utilities and others. The following table sets forth the components of our cost of sales for the periods indicated.
Six months ended 30 June | ||
2020 | 2019 | |
RMB'000 | RMB'000 | |
Labor costs | 169,382 | 143,740 |
Teaching related costs | 10,067 | 9,359 |
Depreciation and amortization | 55,408 | 37,223 |
Material consumption | 48,994 | 46,906 |
Utilities | 8,873 | 9,263 |
Others | 2,668 | 1,300 |
Total | 295,392 | 247,791 |
Labor costs increased by 17.8% from RMB143.7 million for the six months ended 30 June 2019 to RMB169.4 million for the Reporting Period, primarily because we hired new teachers as a result of the increased student enrollment and the expansion of our school network while raising the salaries and wages of our teachers to attract and retain well-qualified teaching staff.
Teaching related costs increased by 7.6% from RMB9.4 million for the six months ended 30 June 2019 to RMB10.1 million for the Reporting Period, primarily because of an increase in our teachers' teaching activities resulting from the increased student enrollment.
Depreciation and amortization costs increased by 48.9% from RMB37.2 million for the six months ended 30 June 2019 to RMB55.4 million for the Reporting Period, primarily because we opened seven self-ownedK-12 schools which classes commenced in 2019/2020 school year in 2019.
Material consumption costs increased by 4.5% from RMB46.9 million for the six months ended 30 June 2019 to RMB49.0 million for the Reporting Period, primarily because of the increased student enrollment.
Utilities decreased slightly by 4.2% from RMB9.3 million for the six months ended 30 June 2019 to RMB8.9 million for the Reporting Period, primarily because the semester has been shortened for the COVID-19 epidemic.
Other costs increased by 105.2% from approximately RMB1.3 million for the six months ended 30 June 2019 to approximately RMB2.7 million for the Reporting Period, primarily due to the increased maintenance costs for the existing campuses.
Interim Report 2020 • Tianli Education International Holdings Limited 43
Gross Profit and Gross Profit Margin
The Group's gross profit for the Reporting Period were approximately RMB275.3 million, representing an increase of 44.6% from approximately RMB190.3 million for the six months ended 30 June 2019. The Group's gross profit margin for the Reporting Period was approximately 48.2%, representing a increase from approximately 43.4% for the six months ended 30 June 2019 due to increase in number of students and the waiver of social insurance fee during COVID-19 epidemic.
Other Income and Gains
Other income and gains primarily consist of interest income from bank deposits, other service income, net gain in foreign exchange, gain on disposal of financial assets at fair value through profit or loss and rental income.
Other income and gains decreased from RMB12.4 million for the six months ended 30 June 2019 to RMB11.3 million for the Reporting Period, primarily because of decrease in interest income from banks.
Administrative Expenses
Administrative expenses primarily consist of (i) administrative staff costs, and (ii) office administration expenses, which primarily consist of office supply and utilities and travelling, and meal and training expenses incurred in connection with administrative activities.
Administrative expenses increased by 37.1% from RMB42.7 million for the six months ended 30 June 2019 to RMB58.6 million for the Reporting Period, primarily as a result of an increase in administrative staff costs.
Administrative staff costs increased by 33.3% from RMB28.8 million for the six months ended 30 June 2019 to RMB38.4 million for the Reporting Period, primarily because we recruited additional administrative staff and management personnel for the K-12 schools opened in 2019 and 2020 and raised their salaries.
In order to reflect the core of our education philosophy "Six Establishments and One Accomplishment (六立一達)", we design and develop our education programs, namely the "Lida Program". Pursuant to the overall construction plan of Lida Program, the Group is conducting researches and will develop the products of Lida Program, including teaching materials, repositories, examination databases, courses and other resources, and the related expenses will be recognized as research expenditure or development expenditure, respectively, according to the research stage of the project. As such, the Group recorded research expenditure of approximately RMB1.5 million for the Reporting Period (six months ended 30 June 2019: Nil). Research expenditure amounted to approximately 0.25% of the total revenue of the Group. There was no capitalized development expenditure for the Reporting Period.
Interest Expenses
Interest expenses increased from RMB3.5 million for the six months ended 30 June 2019 to RMB7.4 million for the Reporting Period, primarily because of increase in bank loans for financing the working capital requirement.
44 Tianli Education International Holdings Limited • Interim Report 2020
CAPITAL STRUCTURE, LIQUIDITY AND FINANCIAL RESOURCES
The shares of the Company (the "share(s)") were successfully listed on Main Board of The Stock Exchange of Hong Kong Limited (the "Stock Exchange") on 12 July 2018 (the "Listing"). There has been no change in the capital structure of the Group since then. The capital of the Company only comprises of ordinary shares.
The Group finances its liquidity and capital requirements primarily through cash generated from operations, bank borrowings and equity contribution from shareholders.
As at 30 June 2020, we had net current liabilities of approximately RMB700.6 million (31 December 2019: RMB667.4 million). The increase in net current liabilities was mainly attributable to (i) purchase of property, plant and equipment for the newly opened schools; and (ii) payment of dividends declared in 2019.
In view of the net current liabilities position, the Directors have given careful consideration to the future liquidity and performance of the Group and its available sources of finance in assessing whether the Group will have sufficient financial resources to continue as a going concern. Having considered the cash flows from operations and the positive operating results, the Directors are of the opinion the Group is able to meet in full its financial obligations as they fall due for the foreseeable future and it is appropriate to prepare the Financial Information as a going concern basis.
As at 30 June 2020, the Group had cash and cash equivalents of approximately RMB775.0 million (31 December 2019: approximately RMB631.4 million).
The following table sets forth a summary of our cash flows for the periods indicated:
Six months ended 30 June | |||
2020 | 2019 | ||
RMB'000 | RMB'000 | ||
Net cash flow from operating activities | 530,922 | 666,905 | |
Net cash flow used in investing activities | (670,976) | (358,370) | |
Net cash flow from/(used in) financing activities | 458,563 | (113,405) | |
Net increase in cash and cash equivalents | 318,509 | 195,130 | |
Effect of foreign exchange rate changes, net | 5,545 | 1,808 | |
Cash and cash equivalents at beginning of period | 450,995 | 707,277 | |
Cash and cash equivalents at end of the period | 775,049 | 904,215 |
As at 30 June 2020, cash and cash equivalents amounted to RMB775.0 million. It also represented a increase of RMB324.1 million compared with RMB451.0 million as at 31 December 2019. The increase in cash and cash equivalents was primarily attributable to (i) net cash flow of RMB530.9 million from operating activities resulting from expansion in operation; (ii) net cash flow of RMB671.0 million used in investing activities for building eight new schools which will begin operation in the fall semester of 2020; and (iii) net cash flow of RMB458.6 million from financing activities resulting from borrowing from banks.
The Company has not adopted financial instruments for hedging purposes.
Interim Report 2020 • Tianli Education International Holdings Limited 45
BORROWINGS AND GEARING RATIO
As at 30 June 2020, the Group had borrowings of approximately RMB1,014.0 million which was denominated in RMB (31 December 2019: RMB459.0 million), among which RMB170.0 million was at fixed interest rate. The Group's bank borrowings were primarily used in financing the working capital requirement of its operations and school constructions.
As at 30 June 2020, the gearing ratio of the Group, calculated as the total interest-bearing borrowings divided by the total equity, was approximately 38.8% (31 December 2019: approximately 18.5%).
CHARGE OVER ASSETS AND RIGHTS
Save as disclosed in note 18 under the section of "Notes to interim condensed financial information", the Group did not have additional assets or rights pledged as at 30 June 2020 and 30 June 2019.
FOREIGN CURRENCY RISK
The functional currency of the Company is RMB, except that the functional currencies of certain overseas subsidiaries are currencies other than the RMB. As at 30 June 2020, certain cash and bank balances and time deposits are denominated in RMB, HKD and USD, which would expose the Group to foreign currency risk. The Group has not used any foreign currency swap contracts to reduce the exposure to USD and HKD arising from bank balances. The Company also currently does not have any foreign exchange hedging policy.
TREASURY POLICIES
The Directors will continue to follow a prudent policy in managing the Group's cash and cash equivalents and maintain a strong and healthy liquidity position to ensure that the Group is well placed to take advantage of future growth opportunities.
SIGNIFICANT INVESTMENTS HELD, MATERIAL ACQUISITIONS OR DISPOSALS OF SUBSIDIARIES, ASSOCIATES AND JOINT VENTURES, AND FUTURE PLANS FOR MATERIAL INVESTMENTS OR CAPITAL ASSETS
There was no significant investment held, material acquisition and disposal of subsidiaries and associates by the Company during the Reporting Period. The Group will make every endeavor to keep abreast of the changing market conditions, proactively identify investment opportunities in order to broaden the revenue base of the Group, enhance its future financial performance and profitability. Moreover, the Group is seeking for further operating efficiency across the business. We are confident in the future and committed to continuous growth of the Company.
CAPITAL EXPENDITURES
Our capital expenditures primarily related to the construction of new self-owned schools, the maintenance and upgrade of our existing self-owned schools, and the purchase of additional educational facilities and equipment for our self-owned schools. The Group's capital expenditures consisted of purchase or construction costs relating to property, equipment, prepaid land lease payments and other intangible assets. For the Reporting Period, our capital expenditures were RMB916.6 million (six months ended 30 June 2019: RMB962.0 million), which we funded primarily through cash generated from operations, bank facilities, and net proceeds received from the global offering in July 2018.
46 Tianli Education International Holdings Limited • Interim Report 2020
CONTINGENT LIABILITIES
As at 30 June 2020, the Group did not have any material contingent liabilities (31 December 2019: Nil).
CAPITAL COMMITMENTS
As at 30 June 2020, the Group had capital commitments contracted but not provided for property, plant and equipment amounting to RMB844.4 million (31 December 2019: RMB1,528.8 million).
SEGMENT INFORMATION
The Group has determined that it only has one operating segment which is the provision of education and related management services.
EMPLOYEES AND REMUNERATION POLICIES
As at 30 June 2020, the Group employed approximately 5,501 employees (30 June 2019: 4,150). The staff costs, including Directors' emoluments, net of government grant released and subsidies received, of the Group were approximately RMB208.4 million for the Reporting Period (30 June 2019: approximately RMB174.3 million).
The Group promotes individuals based on their performance and development potential in the positions held. In order to attract and retain high-calibre staff, competitive remuneration package is offered to employees (with reference to market norms and individual employees' performance, qualification and experience). On top of basic salaries, bonuses may be paid with reference to the Group's performance as well as individual's performance. Besides, share incentive schemes are also adopted to retain high-calibre staff of the Group.
Interim Report 2020 • Tianli Education International Holdings Limited 47
USE OF PROCEEDS FROM LISTING
The net proceeds from the listing (after deducting the underwriting fees and other listing expenses borne by the Company) amounted to approximately HKD1,478.63 million which was used for the intended purposes as set out in the section headed "Future Plans and Use of Proceeds" of the Prospectus. Unutilized net proceeds are deposited in bank accounts.
Net proceeds (HKD million) | Expected Time for the Use of | ||||
Items | Percentage | Available | Utilized | Unutilized | Unutilized proceeds (Note) |
Expansion of our school network | 60% | 887.18 | 671.69 | 215.49 | On or before December 2020 |
Repayment of bank loans | 30% | 443.59 | 403.56 | 40.03 | On or before December 2020 |
Working Capital and general | |||||
corporate purposes | 10% | 147.86 | 134.38 | 13.48 | On or before December 2020 |
Note: The expected timeline for utilising the remaining proceeds is based on the best estimation made by the Group. It will be subject to change based on the current and future development of the market condition.
The following table illustrates the net proceeds utilized for expansion of our school network as at 30 June 2020:
As at 30 June | ||
2020 | ||
(HKD million) | ||
Net proceeds utilized for expansion of our school network | ||
Ya'an Tianli School (雅安天立學校) | 27.71 | |
Deyang Tianli School (德陽天立學校) | 94.8 | |
Dazhou Tianli School (達州市天立學校) | 114.41 | |
Zunyi Xinpu Tianli School (遵義市新浦新區天立學校) | 94.28 | |
Yiliang Tianli School (彝良縣天立學校) | 113.79 | |
Chengdu Longquanyi Tianli Elementary School | ||
(成都市龍泉驛區天立小學校) | 46.67 | |
Chengdu Pixian Tianli School (成都郫縣天立學校) | 132.35 | |
Dongying Tianli School (東營天立學校) | 47.68 | |
Total | 671.69 |
48 Tianli Education International Holdings Limited • Interim Report 2020
PLAN TO COMPLY WITH THE QUALIFICATION REQUIREMENT
We have adopted a specific plan and have commenced taking concrete steps which we reasonably believe are meaningful endeavors to demonstrate compliance with the relevant qualification and high quality of education held by a foreign investor of Sino-foreign joint venture private school for PRC students under the Regulations on Sino-foreign Cooperation in Operating Schools of the PRC 《中華人民共和國中外合作辦學條例》 ("Qualification Requirement"). These include (i) entering into cooperation agreements with reputable international education institutions; and (ii) communicating or negotiating with certain experienced and reputable overseas education service providers exploring potential opportunities of further cooperation.
In anticipation of potential overseas expansion of our business, we are negotiating for cooperation opportunities with educational institutions in United Kingdom, Canada, and other overseas regions. The existing management team of the target educational institution will be retained to take the lead in the daily operation and management with the participation of our representatives so that we can gain the relevant overseas experience.
We expect to invest up to USD30 million for the acquisition of K-12 school(s) in United Kingdom, Canada and other overseas regions, which will be financed by our internal resources and/or external financing, depending on the cash flow position and the size of the acquisition(s). It is our acquisition strategy that the acquisition should not be of such size which may have any material adverse impact on our Group's normal business, financial condition, results of operations and specifically our cost structure, whether we are acquiring a controlling stake in the K-12 school or not.
The Company is of the view that the steps taken by our Group, that is, the overseas expansion plan is reasonable and appropriate to demonstrate compliance with the Qualification Requirement.
OVERALL PERFORMANCE AND COMPLIANCE WITH THE STRUCTURED CONTRACTS
Our Group has adopted certain measures to ensure the effective operation of our Group with the implementation of the Structured Contracts (defined in the prospectus of the Company dated 28 June 2018 issued by the Company in relation to its listing of its shares on the Main Board of the Stock Exchange) which we obtain control over and derive the economic benefits from our operating entities in PRC as the laws, regulations and regulatory practice generally prohibit or restrict foreign ownership in the private education. Each of our Directors has confirmed that he/ she, and his/her associates, do not have any interest in any business or interests that competes or may compete with the business of our Group and any other conflicts of interest which any such person has or may have with our Group. The Company is not aware of any non-performance of the Structured Contracts or non-compliance with such aforementioned measures as at the date of this interim report.
INTERIM DIVIDEND
The Board resolved not to declare any interim dividend for the six months ended 30 June 2020 (for the six months ended 30 June 2019: Nil).
EVENTS AFTER THE REPORTING PERIOD
No significant events that require additional disclosure or adjustments occurred after the Reporting Period.
Interim Report 2020 • Tianli Education International Holdings Limited 49
OTHER INFORMATION
DIRECTORS' AND CHIEF EXECUTIVE'S INTEREST AND SHORT POSITIONS IN SHARES, UNDERLYING SHARES AND DEBENTURES
As at 30 June 2020, the interest and short positions of the Directors and chief executive of the Company in the shares, underlying shares and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the Securities and Futures Ordinance ("SFO")) which will have to be notified to the Company and the Stock Exchange pursuant to Division 7 and 8 of Part XV of the SFO (including interests and short positions which he is taken or deemed to have taken under such provisions of the SFO) or which will be required, pursuant to Section 352 of the SFO, to be recorded in the register referred to therein or which will be required pursuant to the Model Code to be notified to the Company and the Stock Exchange are set out as follows:
Long position in shares of the Company
Number of | Approximate | |||
shares held/ | percentage of | |||
Name | Capacity/Nature of interest | interested | interest | |
Mr. Luo Shi (Note 1) | Interest of a controlled corporation | 862,641,316 | ||
Interest of spouse | 1,956,520 | |||
Beneficiary of a trust | 6,521,733 | |||
871,119,569 | 41.98% | |||
Ms. Yang Zhaotao (Note 2) | Beneficiary of a trust | 1,956,520 | 0.09% | |
Mr. Wang Rui (Note 3) | Beneficiary of a trust | 1,956,520 | 0.09% | |
Mr. Tian Mu (Note 4) | Interest of a controlled corporation | 5,744,737 | 0.28% | |
Notes: |
- Mr. Luo Shi is an executive Director, the chairman and the chief executive officer of the Company and holds 100% of the issued share capital of Sky Elite Limited. In addition, Ms. Tu Mengxuan has been granted 1,956,520 shares under the Pre- IPO Restricted Share Award Scheme, 391,304 shares of which have been vested as at 30 June 2020. Ms. Tu Mengxuan is the spouse of Mr. Luo Shi. By virtue of the SFO, Mr. Luo is deemed or taken to be interested in the shares in which Sky Elite Limited and Ms. Tu Mengxuan are interested. Furthermore, Mr. Luo has been granted 6,521,733 shares under the Pre-IPO Restricted Share Award Scheme, 3,913,038 shares of which have been vested as at 30 June 2020.
- Ms. Yang Zhaotao is an executive Director and has been granted 1,956,520 shares under the Pre-IPO Restricted Share Award Scheme, 1,173,912 shares of which have been vested as at 30 June 2020.
- Mr. Wang Rui is an executive Director and has been granted 1,956,520 shares under the Pre-IPO Restricted Share Award Scheme, 1,173,912 shares of which have been vested as at 30 June 2020.
- Mr. Tian Mu is a non-executive Director and wholly-owns 100% of the issued share capital of Healthy and Peaceful Limited, and therefore he is deemed or taken to be interested in the issued share capital of the Company in which Healthy and Peaceful Limited has shareholding interests.
Save as disclosed above, as at 30 June 2020, none of the Directors and chief executive of the Company has any interests or short positions in any shares, underlying shares and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which would have to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interest or short positions which they were taken or deemed to have under such provisions of the SFO), or which were recorded in the register required to be kept by the Company pursuant to Section 352 of the SFO, or which were required, pursuant to the Model Code to be notified to the Company and the Stock Exchange.
50 Tianli Education International Holdings Limited • Interim Report 2020
SUBSTANTIAL SHAREHOLDERS' INTERESTS AND SHORT POSITIONS IN THE SHARES, UNDERLYING SHARES AND DEBENTURES
As at 30 June 2020, to the best knowledge of the Directors, the following persons (other than being a Director or chief executive of the Company) had interests or short positions in the shares or underlying shares which fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO as recorded in the register required to be kept by the Company pursuant to Section 336 of the SFO:
Long positions in the shares
Number of | Approximate | |||
shares held/ | percentage of | |||
Name | Capacity/Nature of interest | interested | interest | |
Sky Elite Limited (Note 1) | Beneficial interest | 862,641,316 | 41.57% | |
Ms. Tu Mengxuan (Note 2) | Beneficiary of a trust | 1,956,520 | ||
Interest of spouse | 869,163,049 | |||
871,119,569 | 41.98% | |||
THE CORE TRUST COMPANY | Trustee | 108,495,158 | 5.22% | |
LIMITED (Note 3) | ||||
TCT (BVI) Limited (Note 3) | Other | 108,495,158 | 5.22% |
Notes:
- Mr. Luo holds 100% of the issued share capital of Sky Elite Limited and therefore Mr. Luo is deemed or taken to be interested in the Shares held by Sky Elite Limited under Part XV of the SFO.
- Ms. Tu Mengxuan has been granted 1,956,520 shares under the Pre-IPO Restricted Share Award Scheme, 391,304 shares of which have been vested as at 30 June 2020. Ms. Tu Mengxuan is the spouse of Mr. Luo. Under the SFO, Ms. Tu Mengxuan is deemed to be interested in the same number of shares in which Mr. Luo is interested.
- THE CORE TRUST COMPANY LIMITED controlled TCT (BVI) Limited as to 100% and hence was deemed to be interested in the shares or interests held by TCT (BVI) Limited in the Company. TCT (BVI) Limited controlled Sky Vista Limited and Sky Vista 2nd Limited as to 100% respectively, and hence was deemed to be interested in the shares or interests held by Sky Vista Limited and Sky Vista 2nd Limited in the Company. Sky Vista Limited and Sky Vista 2nd Limited were established by THE CORE TRUST COMPANY LIMITED as special purpose vehicles for holding shares of the Company granted under the Pre-IPO Restricted Share Award Scheme (see section named "Pre-IPO Restricted Share Award Scheme" below) and Restricted Share Award Scheme (see section named "Restricted Share Award Scheme" below) respectively on behalf of the eligible persons.
Save as disclosed above, as at 30 June 2020, none of the substantial or significant shareholders or other persons, other than the Directors and chief executives of the Company whose interest are set out in the section "Other information - Directors' and chief executives' interests and short positions in shares, underlying shares and debentures of the Company" above, had any interest or a short position in the shares or underlying shares of the Company as recorded in the register required to be kept by the Company under Section 336 of the SFO.
Interim Report 2020 • Tianli Education International Holdings Limited 51
CHANGE IN DIRECTORS' INFORMATION
Mr. Liu Kai Yu Kenneth, an independent non-executive Director, was appointed as an independent director/ independent non-executive director of Hangzhou Tigermed Consulting Co., Ltd. (stock code: 300347.SZ and 3347. HK) in April 2020.
Save as disclosed above, during the Reporting Period and up to the date of this interim report, there were no other changes in the information of the Directors which shall be disclosed under Rule 13.51B(1) of the Listing Rules.
COMPETITION AND CONFLICT OF INTEREST
None of the Directors or the controlling shareholders (as defined in the Rules Governing the Listing of Securities on the Stock Exchange (the "Listing Rules")) of the Company (the "Controlling Shareholders") or their respective close associates has engaged in any business that competes or may compete, either directly or indirectly, with the businesses of the Group or has or may have any other conflict of interests with the Group during the six months ended 30 June 2020.
PRE-IPO RESTRICTED SHARE AWARD SCHEME
The Company adopted a pre-IPO restricted share award scheme (the "Pre-IPORestricted Share Award Scheme") on 26 January 2018. The Pre-IPO Restricted Share Award Scheme is not a share option scheme and is not subject to the provisions of Chapter 17 of the Listing Rules.
The Company has adopted the said scheme to align the interests of eligible persons with those of the Group through ownership of shares, to support value creation oriented performance culture and, in part, to replace those certain interests of certain eligible persons in Shenzhou Tianli Education Investment Co, Ltd. transferred in connection with the reorganization transaction of the Group.
The basis of eligibility of any selected person for the grant of share awards was determined by the Board from time to time on the basis of the selected person's contribution to the development and growth of the Group or such other factors as the Board may deem appropriate and in particular the reorganization transaction of the Group.
The maximum number of share awards that may be granted under the Pre-IPO Restricted Share Award Scheme in aggregate (excluding share awards that have lapsed or been cancelled in accordance with the rules of the scheme) shall be such number of shares held or to be held by the trustee for the purpose of the scheme from time to time, and which shall in any event, be no more than 107,178,158 shares. The Company will not make further grants of share awards under the scheme.
As at 30 June 2020, a total of 106,121,634 shares, representing approximately 5.11% of the total issued shares of the Company, were granted to the selected persons.
SHARE OPTION SCHEME
The Company has also adopted a share option scheme on 24 June 2018 (the "Share Option Scheme"). The purpose of the Share Option Scheme is to give the eligible persons an opportunity to have a personal stake in our Company and help motivate them to optimize their future contributions to our Group and/or to reward them for their past contributions, to attract and retain or otherwise maintain on-going relationships with such eligible persons who are significant to and/or whose contributions are or will be beneficial to the performance, growth or success of our Group, and additionally in the case of executives, to enable our Group to attract and retain individuals with experience and ability and/or to reward them for their past contributions.
Eligible participants of the Share Option Scheme include, among others, any executive director of, manager of, or other employee holding an executive, managerial, supervisory or similar position in any member of our Group, any proposed employee, any full-time or part-time employee, or a person for the time being seconded to work full-time or part-time for any member of our Group, a direct or indirect shareholder of any member of our Group, a supplier of goods or services to any member of our Group, a customer, consultant, business or joint venture partner, franchisee, contractor, agent or representative of any member of our Group, a person or entity that provides design, research, development or other support or any advisory, consultancy, professional or other services to any member of our Group; and an associate of any of the persons referred to the above.
Subject to the terms of this Share Option Scheme, the scheme shall be valid and effective for a period of 10 years from the date on which it becomes unconditional, after which no further options will be granted or offered but the provisions of the Share Option Scheme shall remain in force and effect in all other respects. All options granted prior to such expiry and not then exercised shall continue to be valid and exercisable subject to and in accordance with the Share Option Scheme.
For the six months ended 30 June 2020, no share option was granted, exercised, expired or lapsed and there is no outstanding share option under the scheme. The remaining life of the scheme is eight years and four months.
52 Tianli Education International Holdings Limited • Interim Report 2020
RESTRICTED SHARE AWARD SCHEME
The Company adopted a restricted share award scheme (the "Restricted Share Award Scheme") on 17 December 2018. The Restricted Share Award Scheme is not a share option scheme and is not subject to the provisions of Chapter 17 of the Listing Rules.
The purpose and objective of the said scheme is (i) to recognize and motivate the contribution of the key management personnel and core employees of the Group; (ii) to help the Group retain and attract the selected participants in attaining the long term business objectives of the Company; and (iii) to further align the interests of the selected participants directly to the shareholders of the Company through ownership of shares.
The eligible participants of the scheme include Directors, senior management, managerial staff, school district principals (學區校長), school sector principals (學段校長) and school reserve senior executive (學校後備高管) of the Group.
The maximum number of award shares that may be granted under the scheme in aggregate shall be no more than 75,000,000 shares.
As at 30 June 2020, under the Restricted Share Award Scheme, the trustee purchased a total of 34,355,000 shares, representing approximately 1.66% of the total issued shares of the Company. A total of 7,724,000 shares, representing approximately 0.37% of the total issued shares of the Company, were granted to Selected Participants under the scheme.
CORPORATE GOVERNANCE
The Directors are committed to the maintenance of good corporate governance practices and procedures. The Company believes that good corporate governance provides a framework that is essential for effective management, a healthy corporate culture, successful business growth and enhancing shareholders' value. The corporate governance principles of the Company emphasize a quality Board, sound internal controls, and transparency and accountability to all shareholders. The Company has adopted the code provisions set out in the Corporate Governance Code and Corporate Governance Report (the "CG Code") contained in Appendix 14 of the Listing Rules. In the opinion of the Board, the Company has complied with the CG Code during the six months ended 30 June 2020, except for the deviation from provision A.2.1 of the CG Code which is explained below:
According to provision A.2.1 of the CG Code, the roles of chairman and chief executive officer should be separate and should not be performed by the same individual. Mr. Luo is the chairman of the Board and chief executive officer of the Company, responsible for strategic development, overall operational management and major decision making of the Group.
Mr. Luo is the founder of the Group and has been managing the Group's business and overall strategic planning since its establishment, the Directors thereby consider that the vesting of the roles of chairman and chief executive officer in Mr. Luo is beneficial to the business prospects and management of the Group by ensuring consistent leadership within the Group, aligning the directions and approaches on the board level and execution level and enabling more effective and efficient overall strategic planning for the Group. The Board considers that the balance of power and authority for the present arrangement will not be impaired and this structure will enable the Company to make and implement decisions promptly and effectively. Accordingly, the Company had not segregated the roles of its chairman and chief executive officer. The Board will continue to review and consider splitting the roles of chairman of the Board and the chief executive officer of the Company at an appropriate time if necessary, taking into account the circumstances of the Group as a whole.
Interim Report 2020 • Tianli Education International Holdings Limited 53
MODEL CODE FOR SECURITIES TRANSACTIONS BY DIRECTORS
The Company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers (the "Model Code") set out in Appendix 10 of the Listing Rules as the guidelines for the Directors' dealings in the securities of the Company. Upon specific enquiries being made with all Directors, each of them confirmed that they have complied with the required standards set out in the Model Code during the six months ended 30 June 2020.
PURCHASE, SALE OR REDEMPTION OF THE LISTED SECURITIES OF THE COMPANY
For the six months ended 30 June 2020, neither the Company nor any of its subsidiaries has purchased, sold or redeemed any of the Company's listed securities.
REVIEW OF INTERIM RESULTS
The independent auditors of the Company, namely, Ernst & Young, have carried out a review of the interim condensed financial information in accordance with the Hong Kong Standard on Review Engagement 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Hong Kong Institute of Certified Public Accountants.
The Audit Committee has jointly reviewed with the management and the independent auditors of the Company, the accounting principles and policies adopted by the Company and discussed internal control and financial reporting matters (including the review of the unaudited interim results for the six months ended 30 June 2020) of the Group. The Audit Committee considered that the interim results are in compliance with the applicable accounting standards, laws and regulations, and the Company has made appropriate disclosures thereof.
By order of the Board
Tianli Education International Holdings Limited
Luo Shi
Chairman, Executive Director and Chief Executive Officer
The PRC, 28 August 2020
54 Tianli Education International Holdings Limited • Interim Report 2020
This is an excerpt of the original content. To continue reading it, access the original document here.
Attachments
- Original document
- Permalink
Disclaimer
Tianli Education International Holdings Ltd. published this content on 21 September 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 21 September 2020 08:49:06 UTC