Annual Report
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3978 ANNUAL REPORT2018 Corporate Information 2 CONTENTS Company Profile 4 Financial Highlights 5 Chairman’s Statement 6 Management Discussion and Analysis 11 Directors and Senior Management 17 Directors’ Report 23 Corporate Governance Report 52 ESG Report 71 Independent Auditor’s Report 97 Consolidated Statement of Profit or Loss 102 Consolidated Statement of Comprehensive Income 103 Consolidated Statement of Financial Position 104 Consolidated Statement of Changes in Equity 106 Consolidated Statement of Cash Flows 108 Notes to Consolidated Financial Statements 111 Four-Year Financial Summary 198 CORPORATE INFORMATION BOARD OF DIRECTORS AUDITOR Executive Directors Ernst & Young Mr. Junjing Tang (Chairman of the board of directors) Certified Public Accountant Mr. Junying Tang Mr. Gui Zhou LEGAL ADVISER Lu & Partners LLP Non-executive Directors Mr. Wenhui Xu COMPLIANCE ADVISER Ms. Wen Li Central China International Capital Limited Independent Non-executive Directors PRINCIPAL BANKS Mr. Yingmin Wu China Merchants Bank Guangzhou Liwan Branch Ms. Yu Long Industrial and Commercial Bank of Mr. Peng Xue China Guangzhou Nanfang Branch AUDIT COMMITTEE REGISTERED OFFICE Mr. Peng Xue (Chairman) 4th Floor, Harbour Place Ms. Yu Long 103 South Church Street Mr. Wenhui Xu P.O.Box 10240 Grand Cayman, KY1-1002 REMUNERATION COMMITTEE Cayman Islands Ms. Yu Long (Chairlady) Mr. Junjing Tang HEADQUARTERS AND PRINCIPAL PLACE Mr. Peng Xue OF BUSINESS IN THE PRC 35/F, Tower B NOMINATION COMMITTEE China International Centre Mr. Junjing Tang (Chairman) No. 33 Zhongshansan Road Mr. Yingmin Wu Yuexiu District, Guangzhou Ms. Yu Long Guangdong, PRC JOINT COMPANY SECRETARIES PRINCIPAL PLACE OF BUSINESS IN Mr. Changxu Zhu HONG KONG Ms. Chau Hing Ling (LLM, FCIS, FCS) Room 1901, 19/F Lee Garden One AUTHORIZED REPRESENTATIVES 33 Hysan Avenue Mr. Junjing Tang Causeway Bay Ms. Chau Hing Ling (LLM, FCIS, FCS) Hong Kong 2 China Beststudy Education Group Annual Report 2018 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 Education Group Annual Report 2018 3 COMPANY PROFILE In the 21 years since its establishment in 1997, China Beststudy Education Group (hereinafter referred to as the “Group”) has developed into a large-scale K-12 after-school education service provider with 3,242 full-time teachers and annual enrollments of nearly 600,000 students. On 27 December 2018, the Group was successfully listed on the main board of the Hong Kong Stock Exchange and became the first K-12 after-school education service provider listed in Hong Kong. As of 31 December 2018, the Group had a total of 242 education centres nationwide, which are mainly distributed in major cities in the Greater Bay Area such as Guangzhou, Foshan, Shenzhen, Dongguan, Zhongshan and Zhuhai. The main teaching products and services provided by our Group are the Premium Learning Program (for academic subjects), Elite Talent Program (for quality subjects) and Full-time Test Preparation Program. Our Premium Learning Program (for academic subjects) is designed to improve students’ academic performance, and covers all key academic subjects taught in primary schools, middle schools, and high schools in China. Our Elite Talent Program (for quality subjects) 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 deep plowing the South China area and radiating across the country. Through 21 years of efforts and development, our “Zhuoyue Education” (卓越教育) brand and reputation have also been recognized and welcomed by students and parents. In FY 2018, we obtained the award of “2018 Outstanding Private Education Institution of Guangzhou” (2018年度廣州民辦教育先進集體) issued by Private Education Association of Guangdong Province and the “Top 10 Education Institution in the 2018 Shenzhen 3-15 Net Promoter Score Ranking” (2018年3-15消費者NPS口碑指數排行榜深圳 市教育培訓行業前十名) accredited by Shenzhen Consumer Council. The recognition of students, parents and 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. 4 China Beststudy Education Group Annual Report 2018 FINANCIAL HIGHLIGHTS For the Year ended 31 December 2018 2017 % Change RMB’000 RMB’000 Revenue 1,473,748 1,141,701 +29.1% Gross Profit 598,031 482,750 +23.9% Net Profit 73,971 65,809 +12.4% Adjusted Net Profit(Note 1) 121,265 106,570 +13.8% Net Profit from Core Business(Note 2) 115,712 91,038 +27.1% Number of Enrollments 593,252 500,409 +18.6% Number of Tutoring Hours 13,562,869 11,179,556 +21.3% Number of Education Centres 242 180 Number of Newly Established Education Centres 60(Note 3) 22(Note 4) Notes: 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 share compensation costs, discontinued operations, listing expenses and other one-off expenses. 2. Net Profit from Core Business was used to evaluate the financial performance of the Company by eliminating the impact of items that the Company does not consider indicative of the performance of our core business, which represents the Adjusted Net Profit excluding the effect of share of profits or losses of associates and a joint venture and fair value changes on unlisted equity investments through profit or loss. 3. The 63 newly added education centres in 2018 include 60 newly established education centres and three education centres that were separated from existing education centres and were managed independently thereafter. 4. The 39 newly added education centres in 2017 include 22 newly established education centres and 17 education centres that were separated from the existing education centres and were managed independently thereafter. China Beststudy Education Group Annual Report 2018 5 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 2018 (the “Year”). OVERVIEW As the largest K-12 after-school education service provider in southern China and the fifth largest nationwide, we have been successfully listed on the Hong Kong Stock Exchange Limited (the “Exchange”) on 27 December 2018, thus becoming the first K-12 after school education service provider listed on the Exchange. In the 21 years since the establishment of the Group, the group has consistently adhered to the business objective of “All for children”. We offer a diverse spectrum of K-12 after-school education services and products, including the Premium Learning Program (for academic subjects) and the Elite Talent Program (for quality subjects), as well as other school subject-related courses including the Full-time Test Preparation Program. INDUSTRY OVERVIEW China’s K-12 education system comprises three years in kindergarten, nine years of compulsory education in primary and middle schools, followed by three years in high school. Students may then proceed to matriculate into colleges or universities. In order to be admitted to colleges or universities in China, high school graduates are required to take the national college entrance examinations, or “Gaokao.” The Gaokao is the most critical set of examinations in a student’s education as the results determine whether a student will be able to attend a highly-ranked college, or any at all, which in turn has a significant impact on the student’s future job prospects. In addition, there is a gap between the huge number of students and the limited number of quality colleges and universities. In 2017, the acceptance rates of four-year degree colleges and the top 50 universities in China were only 39.6% and 2.5%. Due to the fierce competition for quality undergraduate education in China, students prepare themselves fervently for the high school and middle school entrance examinations, and to improve their academic performance in primary schools. Therefore, in order to increase their chances of eventually being admitted to top universities, many students start working diligently at a very young age in the hope of excelling in every stage of their education, for a spot in the schools of their choice. 6 China Beststudy Education Group Annual Report 2018 CHAIRMAN’S STATEMENT BUSINESS REVIEW In 2018, various regulatory institutions of mainland China promulgated a series of laws, regulations and rules for implementation for the after-school education industry and the after-school education institutions. The industry underwent unprecedented and serious challenges. The tightened regulatory policies changed the consumers’ consumption pattern and after-school education services providers’ operating strategy. The Group has maintained a consistent operating guideline to abide by the laws, comply with the regulations and provide educational services conforming to the standards, and to actively adjust our operations to adapt to the new requirements imposed by the new policies. For example, on 22 August 2018, the General Office of the State Council has promulgated the No. 80 Opinion of the State Council (the “Opinion No. 80”), providing various guidelines for standardizing the market of after-school education services to primary to middle school students.