3978 ANNUAL REPORT 2019 CONTENTS Corporate Information 2 Company Profi le 4 Financial and Key Operating Data Highlights 6 Chairman’s Statement 7 Management Discussion and Analysis 11 Directors and Senior Management 22 Directors’ Report 27 Corporate Governance Report 56 Environmental, Social and Governance Report 76 Independent Auditor’s Report 119 Consolidated Statement of Profi t or Loss 124 Consolidated Statement of Comprehensive Income 125 Consolidated Statement of Financial Position 126 Consolidated Statement of Changes in Equity 128 Consolidated Statement of Cash Flows 130 Notes to the Consolidated Financial Statements 133 Five-Year Financial Summary 228 Corporate Information BOARD OF DIRECTORS LEGAL ADVISER Executive Directors Jingtian & Gongcheng LLP Mr. Junjing Tang (Chairman of the board of directors) Mr. Junying Tang COMPLIANCE ADVISER Mr. Gui Zhou Central China International Capital Limited Non-executive Director PRINCIPAL BANKS Mr. Wenhui Xu China Merchants Bank Guangzhou Liwan Branch Industrial and Commercial Bank of China Guangzhou Independent Non-executive Directors Nanfang Branch Mr. Yingmin Wu Ms. Yu Long REGISTERED OFFICE Mr. Peng Xue Harneys Fiduciary (Cayman) Limited 4th Floor, Harbour Place AUDIT COMMITTEE 103 South Church Street Mr. Peng Xue (Chairman) P.O.Box 10240 Ms. Yu Long Grand Cayman, KY1-1002 Mr. Wenhui Xu Cayman Islands REMUNERATION COMMITTEE HEADQUARTERS AND PRINCIPAL PLACE Ms. Yu Long (Chairlady) OF BUSINESS IN THE PRC Mr. Junjing Tang 35/F, Tower B Mr. Peng Xue China International Centre No. 33 Zhongshansan Road NOMINATION COMMITTEE Yuexiu District, Guangzhou Mr. Junjing Tang (Chairman) Guangdong, PRC Mr. Yingmin Wu Ms. Yu Long PRINCIPAL PLACE OF BUSINESS IN HONG KONG JOINT COMPANY SECRETARIES Room 1901, 19/F Mr. Changxu Zhu Lee Garden One Ms. Chau Hing Ling (LLM, FCIS, FCS) 33 Hysan Avenue Causeway Bay AUTHORIZED REPRESENTATIVES Hong Kong Mr. Junjing Tang Ms. Chau Hing Ling (LLM, FCIS, FCS) AUDITOR Ernst & Young Certified Public Accountant 2 China Beststudy Annual Report 2019 Corporate Information PRINCIPAL SHARE REGISTRAR AND TRANSFER OFFICE Harneys Fiduciary (Cayman) Limited 4th Floor, Harbour Place 103 South Church Street P.O.Box 10240 Grand Cayman, KY1-1002 Cayman Islands HONG KONG BRANCH SHARE REGISTRAR Computershare Hong Kong Investor Services Limited Shops 1712-1716, 17th Floor Hopewell Centre 183 Queen’s Road East Wanchai Hong Kong STOCK CODE 3978 COMPANY’S WEBSITE www.beststudy.com INVESTOR RELATIONS Address: 35/F, Tower B, China International Centre, No. 33 Zhongshansan Road, Yuexiu District, Guangzhou, Guangdong, PRC Tel: +86-20-38970078 Email: [email protected] LISTING DATE 27 December 2018 China Beststudy Annual Report 2019 3 Company Profi le As the largest K-12 after-school education service provider in southern China and the fifth largest nationwide1, China Beststudy Education Group (the “Company” or “Beststudy” and, together with its subsidiaries, collectively the “Group”) has been established for 22 years. We provide quality and diversified education products and services to students and parents. Our Group mainly offers after-school education-related courses, including Small Group Tutoring, Individualised Tutoring, Talent Education and Fulltime Test Preparation Program. As at 31 December 2019, the Group had a total of 265 education centres nationwide distributed in major cities in the Greater Bay Area such as Guangzhou, Shenzhen, Foshan, Dongguan, Zhongshan, Zhuhai, Huizhou and Beijing, Shanghai, and Nanning. The main education products and services provided by our Group are Small-Group Tutoring, Individualised Tutoring, Talent Education and Full-time Test Preparation Program. Our Small Group Tutoring and Individualised Tutoring, which are designed to improve students’ academic performance, cover all key academic subjects taught in primary schools, middle schools, and high schools in China. Our Talent Education is designed to nurture the all-round development of our students and make the learning process more engaging and enjoyable. Our Full-time Test Preparation Program aims to help middle school and high school graduates achieve admission to their preferred schools through Zhongkao (中考) and Gaokao (高考). The Group has been deeply plowing South China area and radiating across the country. Through 22 years of efforts and development, our “Zhuoyue Education” (卓越教育) brand and reputation have also been recognised and welcomed by students and parents and all social sectors. In 2019, we obtained the award of “2018 Education Leader” (2018年度教育 領航者) issued by “Yangcheng Evening News” (羊城晚報) and the “2019 Shenzhen Business Leading Brand in the New Consumption Era” (2019年新消費時代深圳商業領軍品牌) accredited by Shenzhen Special Zone Daily. The recognition of students, parents, and people from all walks of life will help us to enlarge our student pool and further strengthen our market position in the K-12 after-school education training industry in China. BESTSTUDY·EDUCATIONAL PHILOSOPHY AND VALUES John Dewey, an American educator, put forward the philosophy of “Education is Growth”. Beststudy is of the view that “growth” is to respect children’s own characteristics, relieve them of passive learning and forced training, identify their potentials and embrace the possibilities of life. With regard to this, Beststudy proposed the brand strategy of “growth for future” in 2017, and regarded “future growth” as the motivation behind students’ development in the future. 1 According to an industry report prepared by Frost & Sullivan based on 2017 statistics 4 China Beststudy Annual Report 2019 Company Profile Therefore, we present a “Future Growth Capability Model” covering learning, health, creativity and happiness. Developing a strong capability to learn and maintaining a good health status are preconditions for one to change the world with creativity. In an era with rapid changes in knowledge, technology and mindset, students are not able to strengthen their competitiveness without the capability to learn. Maintaining a good health status is essential for a child to overcome excessive learning stress, adapt to this rapidly changing world and become a person with healthy mind and body. Creativity is the most vital capability for children’s further development in the future. The continual efforts that we and our children have jointly made eventually contribute to the meaning of our life journey: to enable every individual to live happily and help others to pursue happiness. The “Four-in-One” model of learning, health, creativity and happiness is crucial for students to develop core competitiveness for future challenges. Creativity Curiosity, Imagination, Covergent Thinking Happiness Learning Health Learning Motivation, Physical Health, Learning Capability, Mental Health, Learning Habits Social Resilience “All for children” is not only the first principle of our core values, but also the beginning and end of our journey. We embark on our work with a special focus on this core value. We encourage employees to be self-motived, utilize resources and grow amid challenges. Therefore, we propose “growing through challenges” as one of the corporate core values. “Being open and innovative to achieve the extraordinary” is also one the most important components of our core values. We hope to pursue continual innovation with an open mind in an attempt to achieve better customer experience and product experience. In addition, our core values also include an “result-oriented” approach, which requires us to benchmark our performance against key indicators and provide high-performance professionals with a greater development platform. These four aspects serve as the core values of Beststudy. China Beststudy Annual Report 2019 5 Financial and Key Operating Data Highlights FINANCIAL AND KEY OPERATING DATA HIGHLIGHTS For the year ended 31 December 2019 2018 % Change RMB’000 RMB’000 Revenue 1,831,667 1,473,748 +24.3% Gross Profit 767,623 598,031 +28.4% Net Profit 134,881 73,971 +82.3% Adjusted Net Profit(Note 1) 165,021(Note 2) 121,265 +36.1% Proposed final dividend per ordinary share HK5.3 cents – N/A Proposed final special dividend per ordinary share HK2.0 cents – N/A Number of Enrollments 709,393 593,252 +19.6% Number of Tutoring Hours 15,488,368 13,562,869 +14.2% Number of Education Centres 265 242 Number of Newly Established Education Centres 53 60 Note 1: Adjusted Net Profit eliminates the effect of non-recurring items and certain items that were not incurred in relation to the Group’s principal business such as equity-settled compensation costs, discontinued operations and listing expenses. Note 2: The difference between adjusted net profit and net profit for 2019 was due to the equity-settled compensation costs amounted to RMB30.1 million. 6 China Beststudy Annual Report 2019 Chairman’s Statement Dear Shareholders, On behalf of the Board (the “Board”) of directors (the “Directors”) of China Beststudy Education Group (the Company) and its subsidiaries (the Group), I am pleased to present the annual report of the Group for the year ended 31 December 2019 (the “Reporting Period”). OVERVIEW As the largest K-12 after-school education service provider in southern China and the fifth largest nationwide1, our Group has been adhering to the “all for children” since our establishment 22 years ago. We provide quality and diversified education products and services to students and parents. Our Group mainly offers after-school education-related courses, including Small Group Tutoring, Individualised Tutoring, Talent Education and