China Education Group Holdings Limited China Education Group （於開曼群島註冊成立並以「ChinaEdu中 教 常 春 藤 」名 稱 (incorporated in the Cayman Islands with limited liability and carrying on 在香港經營業務的有限公司） business in Hong Kong as “ChinaEdu 中教常春藤” ) 股份代號﹕839 Stock Code : 839 中國教育集團控股有限公司 ANNUAL REPORT 2017 ANNUAL REPORT 年度報告 To Pioneer Excellence and 引領教育 卓越與創新 Innovation in Education 2017年度報告 Annual Report 2017 OUR MISSION Preparing students for success through Excellence and Innovation in education CONTENTS Corporate Information 2 Co-Chairmen’s Statement 5 Management Discussion and Analysis 9 Environmental, Social and Governance Report 17 Corporate Governance Report 64 Directors and Senior Management 76 Report of Directors 84 Independent Auditor’s Report 113 Consolidated Statement of Profit or Loss Comprehensive Income 120 Consolidated Statement of Financial Position 122 Consolidated Statement of Changes In Equity 125 Consolidated Statement of Cash Flows 127 Notes to Consolidated Financial Statements 130 Financial Summary 217 Glossary 219 CORPORATE INFORMATION BOARD OF DIRECTORS AUTHORISED REPRESENTATIVES Executive Directors Dr. Yu Kai Mr. Mok Kwai Pui Bill Mr. Yu Guo (Co-chairman) Mr. Xie Ketao (Co-chairman) AUDITOR Dr. Yu Kai (Chief Executive Officer) Ms. Xie Shaohua Deloitte Touche Tohmatsu 35/F, One Pacific Place Independent Non-Executive Directors 88 Queensway Hong Kong Dr. Gerard A. Postiglione Dr. Rui Meng COMPLIANCE ADVISER Dr. Wu Kin Bing Somerley Capital Limited AUDIT COMMITTEE 20/F, China Building 29 Queen’s Road Central Dr. Rui Meng (Chairman) Hong Kong Dr. Gerard A. Postiglione Dr. Wu Kin Bing REGISTERED OFFICE IN REMUNERATION COMMITTEE CAYMAN ISLANDS The offices of Walkers Corporate Limited Dr. Gerard A. Postiglione (Chairman) Cayman Corporate Centre Dr. Yu Kai 27 Hospital Road Dr. Rui Meng George Town NOMINATION COMMITTEE Grand Cayman KY1-9008 Cayman Islands Mr. Yu Guo (Chairman) Dr. Gerard A. Postiglione PRINCIPAL OFFICE IN Dr. Wu Kin Bing HONG KONG COMPANY SECRETARY 17/F, Wheelock House 20 Pedder Street Mr. Mok Kwai Pui Bill Central Hong Kong 2 China Education Group Holdings Limited CORPORATE INFORMATION PRINCIPAL SHARE REGISTRAR AND TRANSFER OFFICE Walkers Corporate Limited Cayman Corporate Centre 27 Hospital Road George Town Grand Cayman KY1-9008 Cayman Islands HONG KONG SHARE REGISTRAR Computershare Hong Kong Investor Services Limited Shops 1712-1716, 17th Floor Hopewell Centre 183 Queen’s Road East Wanchai Hong Kong COMPANY WEBSITE www.chinaeducation.hk STOCK CODE 839 Annual Report 2017 3 CO-CHAIRMEN’S STATEMENT Our Group is a leading higher and vocational education provider in China, operating a list of top-ranked and time-honored private higher and vocational education institutions. Each of our operating schools has been recognized as one of the best private education institutions in China with leading rankings in terms of competitive strengths. Group’s primary business is to provide high quality higher and professional education services in the mainland of China. Our mission is to pioneer excellence and innovation in education and our fundamental educational philosophy is to prepare students for success through excellence and innovation in education. China Education Group As an educational service provider, we are Holdings Limited is a committed to provide industry-leading higher leading Hong Kong and vocational education to students in the PRC publicly-listed education through student-centered teaching strategies company (HKEx: 839). and methods. As a leading applied-education provider, we emphasize the teaching of practical Company was listed skills and knowledge and focus on workplace on the Main Board simulation training to improve the employability of Stock Exchange of our graduates. We integrate education, of Hong Kong on 15 research and application to produce practical December 2017. and workforce-ready graduates from a broad range of academic programmes prepared to excel in a technologically driven world. Operational Highlights Dear Shareholders, Company’s most prominent operational highlight in 2017 was the acquisition of On behalf of the Board of Directors of China Guangzhou Baiyun Senior Technical School of Education Group Holdings Limited (the Business and Technology (Guangzhou Baiyun “Company” or “China Education Group”, and Technician College of Business and Technology) its subsidiaries, collectively, the “Group”), we (“Baiyun Technician College”), a leading private are pleased to present to you the 2017 annual technician college in China, on 14 August 2017. report. As the result of the acquisition, not only our student enrollment has significantly increased by Overview of the Group more than 18%, but also we have expanded our The listing is a major milestone of company’s business coverage and leveraged our strength development. As of 13 March 2018, the date of from traditional higher education to high quality annual report, co-chairmen hold a majority of technician education. shares while institutional investors and retail investors hold the remaining. China Education Group has a powerful group of cornerstone investors; its four cornerstone investors (GIC Private Limited, Greenwoods Asset Management Limited, International Finance Corporation, and Value Partners Hong Kong Limited) are leading companies in the investment field. Annual Report 2017 5 Co-Chairmen’s Statement Another crucial milestones of the Company’s and governance code. Further, China Education 2017 operation was the commencement of Group is fully committed to safeguard the local construction and development of Guangdong environment and be socially responsible in its Baiyun University’s new campus which locates daily operation; we care our local community’s on the Zhongluotan land in Baiyun district, improvement just as much as we care our own Guangzhou. New campus construction officially company’s. began in September 2017, and the construction and commencement of operations of the new Future Strategy campus will take place in phases over the next three years. Once fully developed, the Looking forward, Group’s first and foremost planned new campus is expected to have a development strategy is to expend its school site area of 498,000 sq.m. and to accommodate network to extend our geographic coverage and approximately up to 26,000 students, further increase our market penetration in private higher realizing Group’s economics of scale and and vocational education industry, through synergistic effects. acquisitions, cooperation or other means. We have developed our own methodology in While China Education Group has significantly evaluating targets and our acquisition criteria is expanded its size in 2017, it has maintained selective as we weight target’s quality as much its highest level of operation standard and as target’s size; we only acquire targets with committed to excellent as always; the quality of development potentials that commensurate our operation is as cardinal as the quantity. A with our long-term financial and operational conspicuous example is, we internally pay more expectations. In addition, offering high quality attention to individual student’s employment post-investment management services both in quality than to the aggregated employment finance and operation to our acquired schools, rate, despite maintaining a high initial student will be another important job for us in the employment rate is an important external future. Leveraging on our industrial management evaluation factor; as usual, we achieved a and experience for nearly 30 years and the high initial employment rate of 93.1% in 2017, award of the ISO9001 certification for education compared to 92.4% in 2016. As co-chairmen, management, we have leading capabilities in we cannot stress more to maintain a stringent school management. and impartial corporate governance in our daily operation; since March 2017 when we kicked off the IPO the Company has held numerous legal and internal control trainings for its staff and has further improved its corporate internal control 6 China Education Group Holdings Limited Co-Chairmen’s Statement The level of tuition fees and boarding fees we We would also like to appreciate every single charge is a significant factor that affects our employee of ours; their everyday meticulous profitability. While we strive to offer students work and contribution are the source and reasonable and affordable services, it is guarantee of China Education Group’s important for us to optimize pricing strategies highest quality education services. In addition, without compromising our competitive edges. we thank investors for their continuous In addition, to improve the quality of ancillary support. Furthermore, we would like to thank services to students and diversify our source of governments’ support for our educational revenue is another pivotal future development business development. Finally, we would like to strategy of ours. express our sincerest gratitude to the extremely dedicated and knowledgeable professional The quality of our education and image of parties involved in China Education Group’s our brand are crucial to our business growth, global offering; we are truly impressed by their for both our existing schools and future professionalism throughout the listing process. acquired targets. We plan to further solidify our competitive advantages in the private Last but not least, we from time to time higher and vocational education market and encourage and welcome prospective students maintain our market leading position, by and