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TONGCHENG TRAVEL HOLDINGS LIMITED

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Tongcheng Elong : ANNOUNCEMENT OF THE RESULTS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2020

08/28/2020 | 05:02am EDT

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

Tongcheng-Elong Holdings Limited

同 程 藝 龍 控 股 有 限 公 司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 0780)

ANNOUNCEMENT OF THE RESULTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2020

The Board of the Company is pleased to announce the unaudited consolidated results of the Group for the three and six months ended June 30, 2020, together with comparative figures for the same periods of 2019.

KEY HIGHLIGHTS

The Company's operation and performance were inevitably disrupted by the COVID-19 outbreak since January 2020. Compared with the same periods in 2019, some key metrics for the three and six months ended June 30, 2020 declined due to the decreased demands in our travel business, resulting from the reduction of travel willingness as well as implementation of travel restrictions and lockdown policies imposed by governments around the world to combat the spread of COVID-19.

However, compared with the remarkable decrease in the previous quarter, we are glad to see a recovery trend in the second quarter of 2020 for some key metrics, which was attributable to the restoration of economic activities and living orders in mainland China since the outbreak of COVID-19 being contained.

FOR THE THREE MONTHS ENDED JUNE 30, 2020:

  • Revenue decreased by 24.6% year-to-year to RMB1,200.1 million from RMB1,590.9 million in the same period of 2019. Such decrease was narrowed down compared with 43.6% decline in the first quarter of 2020. Also, on a quarter-to-quarter basis, the revenue in the second quarter of 2020 increased by 19.4%.
  • Adjusted EBITDA dropped from RMB440.5 million in the second quarter of 2019 to RMB267.3 million in the same period of 2020. The year-to-year decrease of adjusted EBITDA was narrowed down to 39.3% in the second quarter of 2020 from 74.2% in the first quarter of 2020. In the second quarter of 2020, adjusted EBITDA margin decreased from 27.7% in the second quarter of 2019, or increased from 15.8% in the previous quarter, to 22.3%.

1

  • Adjusted net profit for the period dropped from RMB345.6 million in the second quarter of 2019 to RMB196.2 million in the same period of 2020. The year-to-year decrease of adjusted net profit was narrowed down to 43.2% in the second quarter of 2020 from 82.6% in the previous quarter. In the second quarter of 2020, adjusted net margin decreased from 21.7% in the second quarter of 2019, or increased from 7.8% in the previous quarter, to 16.3%.
  • Average MAUs decreased by 3.3% year-to-year from 181.6 million in the same period of 2019 but increased by 18.3% quarter-to-quarter from 148.4 million in the first quarter of 2020 to 175.6 million.
  • Average MPUs decreased by 32.9% year-to-year from 27.7 million in the same period of 2019 but increased by 25.7% quarter-to-quarter from 14.8 million in the first quarter of 2020 to 18.6 million.

FOR THE SIX MONTHS ENDED JUNE 30, 2020:

  • Revenue decreased by 34.6% year-to-year to RMB2,205.2 million from RMB3,374.3 million in the same period of 2019.
  • Adjusted EBITDA decreased by 59.6% year-to-year to RMB426.3 million from RMB1,056.1 million in the same period of 2019. Adjusted EBITDA margin decreased from 31.3% in the same period of 2019 to 19.3%.
  • Adjusted net profit for the period decreased by 65.5% year-to-year to RMB274.2 million from RMB794.0 million in the same period of 2019. Adjusted net margin decreased from 23.5% in the same period of 2019 to 12.4%.
  • Average MAUs decreased by 15.0% year-to-year from 190.5 million in the same period of 2019 to 162.0 million.
  • Average MPUs decreased by 34.3% year-to-year from 25.4 million in the same period of 2019 to 16.7 million.

1. Key financial summary for the three months ended June 30, 2020

Unaudited

Three months ended

June 30,

Year-to-year

2020

2019

change

RMB' 000

RMB' 000

Revenue

1,200,106

1,590,898

(24.6)%

Adjusted EBITDA

267,349

440,536

(39.3)%

Adjusted net profit for the period

196,162

345,561

(43.2)%

Revenue(decrease)/growth (year-to-year)

(24.6)%

21.0%

Adjusted EBITDA margin

22.3%

27.7%

Adjusted net margin

16.3%

21.7%

Note:

  1. Please refer to "Other Financial Information" below for the meaning of "adjusted EBITDA" and "adjusted net profit for the period".

2

2. Operating metrics for the three months ended June 30, 2020

Three months ended

June 30,

Year-to-year

2020

2019

change

GMV (in RMB billion)

22.4

41.3

(45.8)%

Number of average MAUs (in million)

175.6

181.6

(3.3)%

Number of average MPUs (in million)

18.6

27.7

(32.9)%

3. Key financial summary for the six months ended June 30, 2020

Unaudited

Six months ended

June 30,

Year-to-year

2020

2019

change

RMB' 000

RMB' 000

Revenue

2,205,222

3,374,309

(34.6)%

Adjusted EBITDA

426,251

1,056,106

(59.6)%

Adjusted net profit for the period

274,237

794,011

(65.5)%

Revenue (decrease)/growth (year-to-year)

(34.6)%

19.1%

Adjusted EBITDA margin

19.3%

31.3%

Adjusted net margin

12.4%

23.5%

Note:

  1. Please refer to "Other Financial Information" below for the meaning of "adjusted EBITDA" and "adjusted net profit for the period".

4. Operating metrics for the six months ended June 30, 2020

Six months ended

June 30,

Year-to-year

2020

2019

change

GMV (in RMB billion)

40.6

77.2

(47.4)%

Number of average MAUs (in million)

162.0

190.5

(15.0)%

Number of average MPUs (in million)

16.7

25.4

(34.3)%

3

Business Review and Outlook

Results Highlights

The Chinese economy, especially the travel industry, has suffered a major reduction due to the outbreak of COVID-19 since late January 2020, and the virus has spread across the world and became a pandemic since early March 2020. The global economy has been severely affected as cities were shut down and different kinds of restrictions were imposed to maintain social distance among people.

The Chinese government reacted to the pandemic promptly and implemented strict crowd control and public health measures so as to contain the spread of virus. The pandemic has been effectively controlled and restrictions on movement and travel in lower-tier cities in China were relaxed in April 2020. The overall situation has been further improved and travel industry has shown clear sign of recovery as people's life began to return to normal in China since the second quarter of 2020. Although the pandemic remained volatile in certain regions and market uncertainties persisted, we still endeavored to capture the recovery opportunities and streamline our operations, and achieved better financial results than the industry in the second quarter and the first half of 2020.

With the significant improvement in market confidence and demand in the second quarter of 2020, search volume on our platforms improved quarter by quarter. For the three months ended June 30, 2020, our average MAUs slightly declined by 3.3% year-to-year, but largely improved by 18.3% quarter-to-quarter to 175.6 million. For the six months ended June 30, 2020, our average MAUs declined by 15.0% year-to-year to 162.0 million. However, the supply of different kinds of travel products remained limited because travel restrictions in high-tier cities were in place in the second quarter of 2020. The volatility of the pandemic circumstances also delayed users' decision making. As such, our average MPUs declined by 32.9% and 34.3% year-to-year to 18.6 million and 16.7 million, respectively, for the three and six months ended June 30, 2020. Total GMV decreased by 45.8% and 47.4% year-to-year to RMB22.4 billion and RMB40.6 billion, respectively, for the three and six months ended June 30, 2020. However, our avergae MPUs and GMV for the three months ended June 30, 2020 have been significantly increased by 25.7% and 22.8% quarter-to-quarter seperately, when compared with the first quarter of 2020.

Riding on the recovery trend, we continued to optimize our brand, products and technology to capture the domestic demand. As a pioneer and veteran in the travel industry, we once again acutely captured the opportunities of industry change in traffic channel and accumulated extensive experience in mini-program operations. We did not only leverage on the stable traffic sources on Weixin, but also further promote other traffic channels such as our own APPs, quick APPs (輕應用), and live-streaming on different platforms. Moreover, our cooperation with handset vendors and offline channels have enabled us to acquire users in an effective way. Together with our advantages in lower-tier cities which recovered faster, low user acquisition cost and further enhancement in operating efficiency, we managed to outperform the industry average. Our total revenue declined by 24.6% year-to-year from RMB1,590.9 million in the second quarter of 2019

  • but increased by 19.4% quarter-to-quarter from RMB1,005.1 million in the first quarter of 2020 to RMB1,200.1 million in the second quarter of 2020. Thanks to our flexible operations strategy, stringent cost control and light operational model, we achieved an adjusted net profit for the period of RMB196.2 million and an adjusted net profit margin of 16.3% in the second quarter of 2020. Our total revenue and adjusted net profit for the six months ended June 30, 2020 were RMB2,205.2 million and RMB274.2 million, respectively.

4

Business Review

In the depths of the pandemic, we focused on protecting our users and supporting our suppliers by implementing various kinds of initiatives. We opened up a self-service online cancellation function on our platforms for users to fast-track refund and changes. We also launched a "Safe Room" initiative to ensure a safe environment for hotel guests. To help our suppliers, we established an Ark Alliance (方舟聯盟) to form allies and promote tourist spots via online marketing for free. To capture the revitalization of the travel industry, we also launched "Hit The Road" (啟程計劃) initiative to explore innovative marketing channels such as live streaming programs to enhance brand awareness and promote interactions with users. Our innovative live streaming programs with local governments, airports, airlines and travel destinations on Weixin mini program and other short video platforms have received positive feedback from our users and have successfully promoted tourist destinations and tourism for various cities and regions. In response to Chinese government's initiative to stimulate domestic consumption, we leveraged on our huge traffic and advanced technology and worked with local governments and suppliers to distribute consumer coupons through our platforms. All our efforts made during the challenging period have been well recognized by our users and will continue to help enhancing our user retention and monetization in the coming future.

During the period under review, we continued to leverage on our diversified and effective traffic channels. Amid the pandemic period, our traffic on Tencent-based platforms continued to be the most cost-effective and stable. Based on our in-depth knowledge and substantial experience in operating Weixin mini program, we deepened cooperation with Weixin and joined hands to develop a "Search + Travel" ecosystem. In the second quarter of 2020, about 81.4% of our average MAUs was contributed from Tencent-based platforms with majority of the traffic came from Weixin Payment portal and the drop-down list of users' favorite or most frequently used mini programs. Moreover, we diversified our traffic channels by fostering and further penetrating other online traffic sources such as quick APPs and live streaming activities on different platforms. We dedicated additional efforts in promoting and enhancing our operations in quick APPs. We launched a series of initiatives with China's major handset vendors as additional user acquisition channels. To seize the opportunities brought by the upsurge of live streaming, we cooperated with local governments and tourist attractions to introduce a new format of "Travel + Live Streaming" promotion which covered various cities and travel scenarios. We also developed the content together with our live-streaming platform partners to attract traffic. In the second quarter of 2020, our MAUs from other non-Weixin channels has already achieved a positive growth. In addition to online traffic sources, we strived to broaden our traffic channels through offline user acquisition. We collaborated with hotels, bus operators and tourist attractions to gain offline users and have yielded initial positive results.

5

We further consolidated our leading position in China's OTA market, especially in lower-tier cities. We extended our reach in lower-tier cities in China and captured the recovery and growth opportunities in these cities. As of June 30, 2020, the percentage of our registered users resided in non-first-tier cities in China maintained at approximately 85.9%. For the three months ended June 30, 2020, approximately 63.1% of our new paying users on Weixin platform were from tier-3 or below cities in China, which increased from 61.5% in the same period of 2019. The Chinese government has successfully contained the spread of COVID-19 and relaxed the corresponding measures and restrictions in lower-tier cities in April, but the pandemic control in high-tier cities remained volatile and experienced some challenges in the second quarter of 2020. With our extensive reach and experience in lower-tier cities in China, we offered tailored recommendations and targeted promotions to lower-tier cities users to ride on the recovery opportunities. Our dedicated efforts in developing the market allowed us to achieve business growth in lower-tier cities and further enhance our market position. In the second quarter of 2020, the room nights sold in lower-tier cities achieved a year-to-year growth of about 15%.

We maintained long-term and close relationships with various TSPs to offer users with one-stop shop products and services throughout their journeys. As of June 30, 2020, our online platforms offered over 7,500 domestic routes operated by about 750 domestic airlines and agencies, over 2 million hotels and alternative accommodation options, nearly 370,000 bus routes, 590 ferry routes and approximately 8,000 domestic tourist attractions ticketing services. During the period under review, we further enhanced our products and services to meet users' evolving travel needs. Due to the limited supply of transportation tickets during the pandemic, our intelligent travel solutions system "Huixing (慧行)" has received overwhelming positive response from users. We also launched other value-added products and services according to the latest circumstances to cater for users' needs. For accommodation business, we tapped into the niche demand and offered innovative products and services to our users. All of these ancillary products and services will further enhance our user stickiness and monetization.

We continued to develop and apply our advanced technology to transform from an OTA to ITA. We further upgraded Huixing by enhancing algorithm capability which helped to improve the cross-selling from train tickets to air tickets. We optimized our customer service procedures to enhance the efficiency of customer services and proactively provide information and reminders tailor-made for different kinds of users. To cater for the special needs of some users, we implemented a Real-Time Communication technology (RTC) and became the first OTA to adopt video customer services. As a leading OTA player, we always aim to contribute to the acceleration of online travel penetration in China. We worked with bus operators to promote the digitalization of bus ticketing industry by setting up vending machines at bus stations and transferred the transactions from offline to online. We also cooperated with tourist attractions and helped to enhance the digitalization and online penetration of the industry, especially when crowd control measures such as requirement for reservation and limitation for daily visitors were implemented during the pandemic. In addition, we enhanced the value proposition to our TSPs by developing mini programs for airports, developing revenue management systems for airlines and offering PMS systems for hotels. These will not only enhance the technology level of the whole travel industry, but also expand our revenue stream.

In the second quarter of 2020, we launched a new brand name "同程旅行" ("ly.com") and a new brand logo, as well as a new slogan "Together, let's go!". By upgrading our brand, we reinforced our young and modern brand image and further emphasized on our targeted customers. The new brand reflects our ambition to provide convenient, intelligent and reliable travel services with a younger mind, which has been well-recognized by our users.

6

Business Outlook and Strategies

With effective control measures implemented by the Chinese government and the dedication of medical staff, the pandemic has been effectively controlled in China. Recently, China shows strong signs of economic rebound after the outbreak of COVID-19. The Chinese government also introduced various policies to encourage domestic consumption. Although market uncertainties will remain in the rest of the year, we will continue to monitor market changes and adjust our strategies swiftly according to market dynamics. With our core competitive advantages including stable and cost-effective traffic channels, advanced technology innovations as well as flexible and efficient operating model, we are confident to capture the recovery opportunities and continue to outperform the industry. Having gone through the challenges in the first half of 2020, we believe that we will emerge as a better and stronger company in the future.

Based on the currently available information, for the third quarter of 2020, we expect revenue to decrease by approximately 5.0% to 10.0% year-to-year, and our adjusted net profit for the period to be in the range of RMB300.0 million to RMB400.0 million. The above are preliminary estimates which have not been reviewed by the Company's auditor and the Audit Committee, and remain subject to change.

In terms of long-term development, we believe the ongoing development and further investment in infrastructure in China will continue to provide immense growth potentials to the travel industry. The increasing online penetration rate of travel industry and expanding demand for high quality travel products and services will create enormous business opportunities for us. We will further penetrate into the travel market in China, especially in lower-tier cities, by leveraging on our diversified and cost-effective traffic sources. We will enhance our products and services with technology innovations and pursue our transformation from an OTA to ITA. We will continue to strengthen the long-term relationships with our suppliers to build a more efficient travel ecosystem. We will also look for merger and acquisition opportunities to boost future growth.

7

MANAGEMENT DISCUSSION AND ANALYSIS

Second Quarter of 2020 compared to Second Quarter of 2019

Unaudited

Three months ended

June 30,

2020

2019

RMB' 000

RMB' 000

Revenue

1,200,106

1,590,898

Cost of revenue

(332,453)

(561,160)

Gross profit

867,653

1,029,738

Service development expenses

(300,363)

(352,154)

Selling and marketing expenses

(369,489)

(407,187)

Administrative expenses

(106,328)

(99,495)

Net provision for impairment loss on financial assets

(98,245)

(310)

Fair value changes on investments measured at fair value

through profit or loss

18,155

26,104

Other income

41,784

13,667

Other (losses)/gains, net

(3,991)

7,811

Operating profit

49,176

218,174

Finance income

10,445

10,455

Finance costs

(2,592)

(3,829)

Share of results of associates

(36)

(3,003)

Profit before income tax

56,993

221,797

Income tax expense

(1,865)

(23,636)

Profit for the period

55,128

198,161

Attributable to:

Equity holders of the Company

54,730

199,280

Non-controlling interests

398

(1,119)

Adjusted net profit for the period(a)

196,162

345,561

Note:

  1. Please see "Other Financial Information - Non-IFRS Financial Measures" below for more information about adjusted net profit for the period.

8

Revenue

Our revenue was generated primarily from accommodation reservation business and transportation ticketing business. The following table sets forth a breakdown of our revenue in absolute amount and as a percentage of the total revenue for the periods indicated:

Unaudited

Three months ended June 30,

2020

2019

RMB' 000

RMB' 000

Accommodation reservation services

384,298

32.0%

553,360

34.8%

Transportation ticketing services

725,822

60.5%

937,092

58.9%

Others

89,986

7.5%

100,446

6.3%

Total revenue

1,200,106

100.0%

1,590,898

100.0%

Revenue decreased by 24.6% from RMB1,590.9 million for the three months ended June 30, 2019 to RMB1,200.1 million for the three months ended June 30, 2020. The decrease was narrowed down compared with 43.6% in the first quarter of 2020.

Accommodation reservation services

We present accommodation reservation revenue on a net basis in circumstances where we do not assume inventory risk, and on a gross basis in circumstances where we pre-purchase accommodation room nights for which we take inventory risk. Revenue recognized on a gross basis represents the amounts billed to the users for the room nights sold, while the prices at which we pre-purchase the room nights from the accommodation suppliers are recorded as cost of revenue. For the three months ended June 30, 2020 and 2019, inventory-risk-taking room nights accounted for approximately 0.7% and 0.4%, respectively, of the total of room nights booked through our online platforms, and its financial impact was immaterial.

Due to the continuous effect of COVID-19 with declined demand of accommodation, revenue from accommodation reservation services decreased by 30.6% from RMB553.4 million for the three months ended June 30, 2019 to RMB384.3 million for the three months ended June 30, 2020. However, such year-to-year decline was narrowed down compared with 53.2% decline in the first quarter of 2020, and there was a growth of 67.8% in the second quarter of 2020 compared with the previous quarter.

9

Transportation ticketing services

We generated transportation ticketing revenue primarily from commissions received from suppliers of transportation tickets, travel insurance and other ancillary value-added travel products and services. In these transactions, we acted primarily as an agent, assumed no inventory risk and no obligations for cancelled ticket reservations, and therefore recorded the majority of our revenue on a net basis. Starting from fiscal year 2019, we put a few resources on inventory-risk-taking transportation products in order to provide more secured quality products to end users with relatively higher gross margin. For the three months ended June 30, 2020 and 2019, inventory-risk-taking transportation tickets accounted for approximately 0.1% and 0.2%, respectively, of the total of transportation tickets sold through our online platforms, and its financial impact on transportation ticketing revenue was immaterial.

Although facing continuous effect of COVID-19 with declined demand of transportation ticketing services, domestic travelling is returning to normal quickly, the year-to-year drop of revenue from transportation ticketing services in the second quarter of 2020 slowed to 22.5% compared with the year-to-year decline of 45.4% in the first quarter of 2020.

Others

Revenue from others mainly includes: (i) revenue from advertising services; (ii) attraction ticketing revenue; and (iii) revenues generated from ancillary value-added user services.

Revenue from others decreased by 10.4% from RMB100.4 million for the three months ended June 30, 2019 to RMB90.0 million for the three months ended June 30, 2020, which was mainly due to (i)the decrease in revenue from attraction ticketing services; and (ii) partially offset by the increase in revenue generated from membership services and advertising services.

Cost of revenue

Our cost of revenue consists primarily of: (i) order processing cost, representing the fees we pay to banks and payment channels for processing user payments; (ii) cost of pre-purchasedinventory-risk-taking products, representing the prices we pay to TSPs to purchase travel products for which we take inventory risk; (iii) employee benefit expenses, representing the wages, salaries, and other benefits (including share-based compensation) for our user services and TSP services employees; (iv) depreciation of property, plant and equipment, and right-of-use assets; (v) procurement costs, which represents the costs for sourcing ancillary value-added travel products and services from service providers; and (vi) others, which primarily include telephone and communication costs, tax and surcharges, travel and entertainment cost, professional fees, user fulfilment fees (which represent compensation paid to users due to user and customers complaints), and rental and utility fees.

10

The following table sets forth a breakdown of our cost of revenue in absolute amount and as a percentage of total cost of revenue for the three months ended June 30, 2020 and 2019:

Unaudited

Three months ended June 30,

2020

2019

RMB' 000

RMB' 000

Order processing cost

134,089

40.3%

243,566

43.4%

Cost of pre-purchasedinventory-risk-taking

products

49,731

15.0%

101,801

18.1%

Employee benefit expenses

37,879

11.4%

61,647

11.0%

Depreciation of property, plant and

equipment, and right-of-use assets

30,233

9.1%

31,165

5.6%

Procurement costs

26,553

8.0%

64,713

11.5%

Others

53,968

16.2%

58,268

10.4%

Total cost of revenue

332,453

100.0%

561,160

100.0%

Cost of revenue decreased by 40.8% from RMB561.2 million for the three months ended June 30, 2019 to RMB332.5 million for the three months ended June 30, 2020. The decrease was mainly due to: (i) a decrease in order processing cost from RMB243.6 million for the three months ended June 30, 2019 to RMB134.1 million for the three months ended June 30, 2020, as a result of declined GMV; (ii) a decrease in cost of pre-purchasedinventory-risk-taking products from RMB101.8 million for the three months ended June 30, 2019 to RMB49.7 million for the three months ended June 30, 2020; and (iii) a decrease in procurement costs due to the decreased sales of ancillary value-added travel products and services. Excluding share-based compensation charges, cost of revenue accounted for 27.4% of revenue for the three months ended June 30, 2020, which decreased from 35.0% for the same period of 2019.

Service development expenses

Service development expenses decreased by 14.7% from RMB352.2 million for the three months ended June 30, 2019 to RMB300.4 million for the three months ended June 30, 2020. The decrease was mainly due to the decreased number of IT employees and relevant decreased employee benefits. Excluding share-based compensation charges, service development expenses accounted for 22.8% of revenue for the three months ended June 30, 2020, which increased from 20.5% for the same period of 2019.

Selling and marketing expenses

Selling and marketing expenses decreased by 9.3% from RMB407.2 million for the three months ended June 30, 2019 to RMB369.5 million for the three months ended June 30, 2020, which was mainly due to: (i) the decreased headcount of sales employees with less benefit expenses; and (ii) the decrease in agency commission expenses. Excluding share-based compensation charges, selling and marketing expenses accounted for 30.1% of revenue for the three months ended June 30, 2020 compared with 25.0% for the same period of 2019.

11

Administrative expenses

Administrative expenses increased from RMB99.5 million for the three months ended June 30, 2019 to RMB106.3 million for the three months ended June 30, 2020, which was mainly due to increased employee severance and other one-time termination benefits in the second quarter of 2020. Excluding share-based compensation charges, administrative expenses accounted for 6.1% of revenue for the three months ended June 30, 2020, which increased from 3.9% for the same period of 2019.

Net Provision for Impairment Losses on Financial Assets

During the period under review, we separately presented "net provision for impairment loss on financial assets" in the condensed consolidated interim income statement, and the comparative figures were reclassified to conform to current period's presentation. Net provision for impairment losses on financial assets increased to RMB98.2 million for the three months ended June 30, 2020 from RMB0.3 million for the same period of 2019, which was mainly due to the disrupted debtors' repayment capability since COVID-19 outbreak.

Fair value changes on investments measured at fair value through profit or loss

Along with the market condition, we recorded fair value gains on investments measured at fair value through profit or loss of RMB18.2 million for the three months ended June 30, 2020, compared with RMB26.1 million for the three months ended June 30, 2019.

Other income

Other income increased by 205.7% from RMB13.7 million for the three months ended June 30, 2019 to RMB41.8 million for the three months ended June 30, 2020. The increase primarily reflected the increase in government subsidies received.

Income tax expense

We recorded an income tax expense of RMB1.9 million and RMB23.6 million for the three months ended June 30, 2020 and 2019, respectively. The decreased income tax expense was due to the decreased taxable income for the three months ended June 30, 2020.

Profit attributable to equity holders of the Company

As a result of the foregoing, profit attributable to equity holders of the Company decreased from profit of RMB199.3 million for the three months ended June 30, 2019 to RMB54.7 million for the three months ended June 30, 2020.

12

OTHER FINANCIAL INFORMATION

Non-IFRS Financial Measures

To supplement our consolidated results, which are presented in accordance with IFRS, we also use certain non-IFRS measures, namely adjusted EBITDA and adjusted net profit for the period, as additional financial metrics. These non-IFRS financial measures are not required by or presented in accordance with IFRS.

We believe that non-IFRS measures facilitate comparisons of our operating performance by eliminating potential impacts of items that our management does not consider indicative of our operating performance. We believe that such non-IFRS measures present useful information in understanding and evaluating our consolidated results of operations in the same manner as they help our management. However, our presentation of such non-IFRS measures may not be comparable to similarly titled measures presented by other companies. The use of these non-IFRS measures has limitations as an analytical tool, and you should not consider it in isolation from, or as substitute for analysis of, our results of operations or financial condition as reported under IFRS.

  1. Reconciliation of adjusted EBITDA from operating profit/(loss)
    The following table reconciles adjusted EBITDA to operating profit/(loss), its most directly comparable financial measure calculated and presented in accordance with IFRS for the periods presented:

Unaudited

Unaudited

Three months ended

Six months ended

June 30,

June 30,

2020

2019

2020

2019

RMB' 000 RMB' 000 RMB' 000 RMB' 000

Operating profit/(loss)

49,176

218,174

(3,496)

405,626

Add:

Share-based compensation

71,749

76,106

137,693

361,856

Amortization of intangible assets

103,496

102,362

207,023

204,312

Depreciation of property, plant and

equipment, and right-of-use assets

42,928

43,348

85,031

83,766

Acquisition-related cost

-

546

-

546

Adjusted EBITDA

267,349

440,536

426,251

1,056,106

13

  1. Reconciliation of adjusted net profit for the period from profit/(loss) for the period
    The following table reconciles our adjusted net profit for the period to profit/(loss) for the period, its most directly comparable financial measure calculated and presented in accordance with IFRS, for the periods presented:

Unaudited

Unaudited

Three months ended

Six months ended

June 30,

June 30,

2020

2019

2020

2019

RMB' 000 RMB' 000 RMB' 000 RMB' 000

Profit/(loss) for the period

55,128

198,161

(2,061)

295,601

Add:

Share-based compensation

71,749

76,106

137,693

361,856

Amortization of intangible assets

from acquisition

69,285

70,748

138,605

136,008

Acquisition-related cost

-

546

-

546

Adjusted net profit for the period

196,162

345,561

274,237

794,011

Share-based compensation charges were included in cost of revenue and expense items as follows:

Unaudited

Unaudited

Three months ended

Six months ended

June 30,

June 30,

2020

2019

2020

2019

RMB' 000 RMB' 000

RMB' 000 RMB' 000

Cost of revenue

3,749

4,366

6,925

20,089

Service development expenses

26,438

25,561

44,512

122,133

Selling and marketing expenses

8,386

9,218

16,439

34,059

Administrative expenses

33,176

36,961

69,817

185,575

Total share-based compensation

71,749

76,106

137,693

361,856

14

Liquidity and Financial Resources

We fund our liquidity needs mainly from (i) the net proceeds received from the global offering; and (ii) net cash generated from our business growth.

We had cash and cash equivalents of RMB2,393.1 million and RMB2,376.8 million as of June 30, 2020 and 2019, respectively.

The following table sets forth our cash flows for the periods indicated:

Unaudited

Six months ended

June 30,

2020

2019

RMB' 000

RMB' 000

Net cash flows (used in)/generated from operating activities

(1,113,610)

618,007

Net cash flows generated from/(used in) investing activities

1,216,483

(1,389,739)

Net cash flows generated from financing activities

9,895

8,070

Net increase/(decrease) in cash and cash equivalents

112,768

(763,662)

Cash and cash equivalents at beginning of the period

2,271,268

3,143,883

Effect of exchange rate changes on cash and cash equivalents

9,099

(3,432)

Cash and cash equivalents at end of the period

2,393,135

2,376,789

Net cash flows used in operating activities

For the six months ended June 30, 2020, net cash used in operating activities was RMB1,113.6 million, which was primarily attributable to the profit before income tax of RMB7.7 million, adjusted by (i) amortization of intangible assets of RMB207.0 million, depreciation of property, plant and equipment, and right-of-use assets of RMB85.0 million, and share-based compensation of RMB137.7 million and (ii) changes in working capital, which primarily consisted of a decrease in trade receivables of RMB162.3 million, a decrease in trade payables of RMB1,398.0 million, a decrease in prepayment and other receivables of RMB285.2 million, and a decrease in accrued expenses and current liabilities of RMB667.7 million. We also paid income tax of RMB47.2 million and received interest income of RMB15.2 million.

Net cash flows generated from investing activities

For the six months ended June 30, 2020, net cash generated from investing activities was RMB1,216.5 million, which was primarily attributable to (i) net cash received from wealth management products of RMB1,070.4 million; (ii) cash received for net repayments of loans to related parties of RMB139.8 million; and (iii) payment for purchases of property, plant and equipment of RMB62.8 million.

15

Net cash flows generated from financing activities

For the six months ended June 30, 2020, net cash generated from financing activities was RMB9.9 million, which was primarily due to (i) proceeds from exercise of stock option of RMB92.7 million; (ii) partially offset by repayment of long-term borrowings and short-term borrowings of RMB14.0 million and RMB60.1 million, respectively; and (iii) payment of long-term leases of RMB10.2 million.

Gearing Ratio

As of June 30, 2020, our gearing ratio, calculated as total borrowings divided by total equity attributable to equity holders of the Company was approximately 1.3%.

As of June 30, 2020, our Group did not have any significant contingent liabilities and did not hold any financial instruments for hedging purposes.

Pledge of assets

In October 2017, we entered into a loan agreement with the lending bank to borrow RMB196.9 million to finance our purchase of office premises. The loan was secured by our property and will expire on October 23, 2027. As of June 30, 2020, the carrying amount of such secured property was RMB370.2 million.

Capital Expenditure

Unaudited

Six months ended June 30,

2020

2019

RMB' 000

RMB' 000

Purchase of property, plant and equipment

62,837

137,550

Purchase of intangible assets

185

503

Placement of long-term investments(a)

1,500

230,328

Total capital expenditure

64,522

368,381

Note:

  1. Placement of long-term investments represents investments accounted for using the equity method and investments measured at fair value through profit or loss.

Our capital expenditure primarily includes purchases of property, plant and equipment, intangible assets, investments accounted for using the equity method and investments measured at fair value through profit or loss. We fund our capital expenditure requirements mainly from cash generated from our operations as well as bank borrowings.

16

Long-term Investment Activities

Unaudited

Audited

As of

As of

June 30,

December 31,

2020

2019

RMB' 000

RMB' 000

Investments accounted for using the equity method

82,243

90,435

Investments measured at fair value through profit or loss

182,560

238,753

Investments measured at amortized cost

253,832

250,697

Total long-term investments

518,635

579,885

Our long-term investments as of June 30, 2020 were RMB518.6 million, as compared to RMB579.9 million as of December 31, 2019. The decrease in our long-term investments measured at fair value through profit or loss was mainly caused by our fair value loss in certain public and private companies that we hold less than 20% interests. We made long-term investments in accordance with our general strategy of investing or acquiring businesses that are supplement and benefit our business. Long-term investments measured at amortized cost are term deposits over one year with fixed interest rates, denominated in RMB. As of June 30, 2020, none of these individual investments was regarded as material. We plan to fund our long-term investments using cash flows generated from our operations and the net proceeds received from the global offering.

Material Acquisition and Disposals

There was no material acquisition or disposal of subsidiaries, associates and joint ventures during the six months ended June 30, 2020.

Foreign Exchange Risk

Foreign exchange risk arises when future commercial transactions or recognized assets and liabilities are denominated in a currency that is not our functional currency. We manage our foreign exchange risk by performing regular reviews of our net foreign exchange exposures. We did not hedge against any fluctuation in foreign currency during the six months ended June 30, 2020.

Our subsidiaries and Consolidated Affiliated Entities in the PRC operate mainly in the PRC with most of the transactions settled in RMB. We consider our business not exposed to any significant foreign exchange risk as there are no significant financial assets or liabilities of our Group denominated in currencies other than the respective functional currency of our Group's subsidiaries and Consolidated Affiliated Entities operating in the PRC.

17

Employee

As of June 30, 2020, we had a total of 4,545 full-time employees. As of the same date, approximately 54.9% and 19.2% of our full-time employees were based in Suzhou and Beijing, respectively, while the remaining 25.9% of them were based in the rest of the PRC and overseas.

We primarily recruit our employees through on-campus job fairs, recruitment agencies and online channels, including our corporate websites and social networking platforms. We have adopted robust internal training policies, pursuant to which management, technology and other training are regularly provided to our employees by in-house trainers or third-party consultants. We have adopted 2016 Share Incentive Plan, 2018 Share Incentive Plan, 2019 RSU Plan and 2019 Share Option Plan.

As required by the PRC laws, we participate in various statutory employee benefit plans, including social insurance funds, namely a pension contribution plan, a medical insurance plan, an unemployment insurance plan, a work-related injury insurance plan, a maternity insurance plan, and a hosing provident fund. We are required under PRC laws to contribute to employee benefit plans at specified percentages of salaries, bonuses and certain allowances of our employees up to a maximum amount specified by the local governments from time to time.

None of our employees is currently represented by labor unions. We believe that we maintain a good working relationship with our employees and we did not experience any significant labor disputes or any material difficulty in recruiting employees for our operations for the six months ended June 30, 2020.

18

CONDENSED CONSOLIDATED INTERIM INCOME STATEMENT

For the three and six months ended June 30, 2020

Unaudited

Unaudited

Three months ended

Six months ended

June 30,

June 30,

2020

2019

2020

2019

Note

RMB' 000

RMB' 000

RMB' 000

RMB' 000

Revenue

2

1,200,106

1,590,898

2,205,222

3,374,309

Cost of revenue

3

(332,453)

(561,160)

(683,720)

(1,059,430)

Gross profit

867,653

1,029,738

1,521,502

2,314,879

Service development expenses

3

(300,363)

(352,154)

(587,812)

(782,206)

Selling and marketing expenses

3

(369,489)

(407,187)

(660,683)

(876,910)

Administrative expenses

3

(106,328)

(99,495)

(208,584)

(323,666)

Net provision for impairment

loss on financial assets

(98,245)

(310)

(116,023)

(4,461)

Fair value changes on investments

measured at fair value through

profit or loss

9

18,155

26,104

(10,710)

49,511

Other income

41,784

13,667

53,143

17,798

Other (losses)/gains, net

4

(3,991)

7,811

5,671

10,681

Operating profit/(loss)

49,176

218,174

(3,496)

405,626

Finance income

10,445

10,455

22,667

24,442

Finance costs

(2,592)

(3,829)

(5,578)

(6,729)

Share of results of associates

(36)

(3,003)

(5,890)

(6,064)

Profit before income tax

56,993

221,797

7,703

417,275

Income tax expense

5

(1,865)

(23,636)

(9,764)

(121,674)

Profit/(loss) for the period

55,128

198,161

(2,061)

295,601

Profit/(loss) attributable to:

- Equity holders of the Company

54,730

199,280

(903)

296,602

- Non-controlling interests

398

(1,119)

(1,158)

(1,001)

55,128

198,161

(2,061)

295,601

Earnings/(loss) per share

(expressed in RMB per share):

6

- Basic

0.03

0.10

(0.00)

0.15

- Diluted

0.03

0.09

(0.00)

0.14

19

CONDENSED CONSOLIDATED INTERIM STATEMENT OF COMPREHENSIVE INCOME

For the three and six months ended June 30, 2020

Unaudited

Unaudited

Three months ended

Six months ended

June 30,

June 30,

2020

2019

2020

2019

RMB' 000 RMB' 000 RMB' 000 RMB' 000

Profit/(loss) for the period

55,128

198,161

(2,061)

295,601

Other comprehensive income

Items that may not be subsequently

reclassified to profit or loss:

- Currency translation differences

8,589

32,198

34,023

3,313

Other comprehensive income for the

period, net of tax

8,589

32,198

34,023

3,313

Total comprehensive income for

the period

63,717

230,359

31,962

298,914

Total comprehensive income

attributable to:

- Equity holders of the Company

63,319

231,478

33,120

299,915

- Non-controlling interests

398

(1,119)

(1,158)

(1,001)

63,717

230,359

31,962

298,914

20

CONDENSED CONSOLIDATED INTERIM STATEMENT OF FINANCIAL POSITION

As of June 30, 2020

Unaudited

Audited

As of

As of

June 30,

December 31,

2020

2019

Note

RMB' 000

RMB' 000

ASSETS

Non-current assets

Property, plant and equipment

1,089,094

1,102,031

Right-of-use assets

43,002

41,067

Investments accounted for using the equity method

8

82,243

90,435

Investments measured at fair value through profit or loss

9

182,560

238,753

Investments measured at amortized cost

9

253,832

250,697

Intangible assets

7,653,614

7,860,452

Deferred income tax assets

228,363

201,057

Prepayment and other receivables

11

8,149

7,425

9,540,857

9,791,917

Current assets

Trade receivables

10

870,087

1,096,313

Prepayment and other receivables

11

1,125,074

1,569,453

Short-term investments measured at amortized cost

9

157,561

156,760

Short-term investments measured at fair value

through profit or loss

9

3,379,094

4,384,168

Restricted cash

151,613

213,381

Cash and cash equivalents

2,393,135

2,271,268

8,076,564

9,691,343

Total assets

17,617,421

19,483,260

EQUITY

Capital and reserves attributable to

equity holders of the Company

Share capital

7,387

7,323

Share premium

18,544,957

18,189,973

Treasury stock

-

(7)

Other reserves

(2,760,550)

(2,668,946)

Accumulated losses

(2,372,880)

(2,371,977)

13,418,914

13,156,366

Non-controlling interests

(4,350)

(4,692)

Total equity

13,414,564

13,151,674

21

CONDENSED CONSOLIDATED INTERIM STATEMENT OF FINANCIAL POSITION

As of June 30, 2020

Unaudited

Audited

As of

As of

June 30,

December 31,

2020

2019

Note

RMB' 000

RMB' 000

LIABILITIES

Non-current liabilities

Borrowings

12

123,075

132,921

Long-term lease liabilities

16,130

17,830

Other payables and accruals

14

6,702

6,702

Deferred income tax liabilities

546,789

568,376

692,696

725,829

Current liabilities

Borrowings

12

47,952

106,895

Trade payables

13

2,033,080

3,428,531

Other payables and accruals

14

1,164,425

1,946,769

Short-term lease liabilities

9,907

6,059

Contract liabilities

214,392

88,554

Current income tax liabilities

40,405

28,949

3,510,161

5,605,757

Total liabilities

4,202,857

6,331,586

Total equity and liabilities

17,617,421

19,483,260

22

CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY

For the six months ended June 30, 2020

Unaudited

Attributable to equity holders of the Company

Non-

Share

Share

Treasury

Other

Accumulated

controlling

Total

capital

premium

stock

reserves

losses

Sub-total

interests

equity

RMB'000

RMB'000

RMB'000

RMB'000

RMB'000

RMB'000

RMB'000

RMB'000

As of January 1, 2020

7,323

18,189,973

(7)

(2,668,946)

(2,371,977)

13,156,366

(4,692)

13,151,674

Comprehensive income

Loss for the period

-

-

-

-

(903)

(903)

(1,158)

(2,061)

Other comprehensive income

Currency translation differences

-

-

-

34,023

-

34,023

-

34,023

Total comprehensive income/(loss)

-

-

-

34,023

(903)

33,120

(1,158)

31,962

Transactions with owners

Exercise of share options-proceed received

56

219,816

-

(127,219)

-

92,653

-

92,653

Vesting and settlement of RSUs

8

135,168

7

(135,183)

-

-

-

-

Share-based compensations

-

-

-

136,872

-

136,872

-

136,872

Others

-

-

-

(97)

-

(97)

1,500

1,403

Total transactions with owners recognized

directly in equity

64

354,984

7

(125,627)

-

229,428

1,500

230,928

As of June 30, 2020

7,387

18,544,957

-

(2,760,550)

(2,372,880)

13,418,914

(4,350)

13,414,564

23

CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY For the six months ended June 30, 2020

Unaudited

Attributable to equity holders of the Company

Non-

Share

Share

Treasury

Other

Accumulated

controlling

Total

capital

premium

stock

reserves

losses

Sub-total

interests

equity

RMB'000

RMB'000

RMB'000

RMB'000

RMB'000

RMB'000

RMB'000

RMB'000

As of January 1, 2019

7,156

17,311,220

(15)

(2,722,834)

(3,060,074)

11,535,453

(7,642)

11,527,811

Comprehensive income

Profit/(loss) for the period

-

-

-

-

296,602

296,602

(1,001)

295,601

Other comprehensive income

Currency translation differences

-

-

-

3,313

-

3,313

-

3,313

Total comprehensive income/(loss)

-

-

-

3,313

296,602

299,915

(1,001)

298,914

Transactions with owners

Exercise of share options-proceed received

28

126,358

-

(62,030)

-

64,356

-

64,356

Exercise of RSUs

(6)

-

6

-

-

-

-

-

Purchase of non-controlling interests in

connection with the business combination

-

-

-

-

-

-

1,199

1,199

Share-based compensations

-

-

-

360,872

-

360,872

-

360,872

Total transactions with owners recognized

directly in equity

22

126,358

6

298,842

-

425,228

1,199

426,427

As of June 30, 2019

7,178

17,437,578

(9)

(2,420,679)

(2,763,472)

12,260,596

(7,444)

12,253,152

24

CONDENSED CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS

For the six months ended June 30, 2020

Unaudited

Six months ended

June 30,

2020

2019

RMB' 000

RMB' 000

Net cash flows (used in)/generated from operating activities

(1,113,610)

618,007

Net cash flows generated from/(used in) investing activities

1,216,483

(1,389,739)

Net cash flows generated from financing activities

9,895

8,070

Net increase/(decrease) in cash and cash equivalents

112,768

(763,662)

Cash and cash equivalents at beginning of the period

2,271,268

3,143,883

Effect of exchange rate changes on cash and cash equivalents

9,099

(3,432)

Cash and cash equivalents at end of the period

2,393,135

2,376,789

25

Notes

1. Basis of preparation

Tongcheng-Elong Holdings Limited (the "Company", formerly known as China E-Dragon Holdings Limited) is an exempted company with limited liability incorporated under the laws of the Cayman Islands on January 14, 2016.

The Company's shares have been listed on the Main Board of The Stock Exchange of Hong Kong Limited since November 26, 2018 (the "Listing").

The Company is an investment holding company. The Company and its subsidiaries (together, the "Group") are principally engaged in the provision of travel related services, including accommodation reservation services, transportation ticketing services, and other travel-related products and services.

The condensed consolidated interim financial information comprises the condensed consolidated interim statement of financial position as of June 30, 2020, the condensed consolidated interim income statement and the condensed consolidated interim statement of comprehensive income for the three-month and six-month periods then ended, the condensed consolidated interim statement of changes in equity and the condensed consolidated interim statement of cash flows for the six-month period then ended, and a summary of significant accounting policies and other explanatory notes (the "Interim Financial Information"). The Interim Financial Information is presented in Renminbi ("RMB"), unless otherwise stated.

The Interim Financial Information has been prepared in accordance with International Accounting Standard 34 ("IAS 34"), "Interim financial reporting" issued by the International Accounting Standards Board and should be read in conjunction with the annual consolidated financial statements of the Company for the year ended December 31, 2019, which have been prepared in accordance with International Financial Reporting Standards ("IFRS"), as set out in the 2019 annual report of the Company dated March 25, 2020 (the "2019 Financial Statements").

The accounting policies adopted are consistent with those of the previous financial year and corresponding interim reporting period, except for the estimation of income tax and the adoption of new and amended standards as set out below.

Income tax expense is recognised based on management's estimate of the average effective annual income tax rate expected for the full financial year.

The following standards and amendments have been adopted by the Group for the first time for the financial year beginning on January 1, 2020:

Amendments to IAS 1 and IAS 8

Definition of material

Amendments to IFRS 3

Definition of a Business

Revised Conceptual Framework

Revised Conceptual Framework for Financial Reporting

Amendments to IFRS 9, IAS 39 and IFRS 7

Interest Rate Benchmark Reform

The adoption of these new and amended standards does not have any significant fanancial impact on the interim financial information of the Group.

During the period, the Group separately presented the "net provision for impairment loss on financial assets" in the condensed consolidated interim income statement. The comparative figures have been reclassified to conform to current period's presentation.

26

2. Revenue and segment information

The Chief Operating Decision-maker (the "CODM") assesses the performance of the operating segment mainly based on the measure of operating profit, excluding items which are not directly related to the segment performance (the "combined results"). These include non-operating income/(expenses) such as government subsidies, fair value changes on investments measured at fair value through profit or loss, and other non-operating items. The CODM reviews the combined results when making decisions about allocating resources and assessing performance of the Group as a whole. Therefore, the Group has only one reportable segment which mainly operates its businesses in the PRC and earns substantially all of the revenues from external customers attributed to the PRC. As of June 30, 2020 and 2019, substantially all of the non-current assets of the Group were located in the PRC. Therefore, no geographical segments are presented. No analysis of segment assets or segment liabilities is presented as it is not used by the CODM when making decisions about allocating resources and assessing performance of the Group.

Unaudited

Three months ended

Six months ended

June 30,

June 30,

2020

2019

2020

2019

RMB' 000

RMB' 000

RMB' 000

RMB' 000

Operating profit/(loss) per condensed

consolidated interim income statement

49,176

218,174

(3,496)

405,626

Less: Other income

(41,784)

(13,667)

(53,143)

(17,798)

Fair value changes on investments

measured at fair value through

profit or loss

(18,155)

(26,104)

10,710

(49,511)

Other losses/(gains), net

3,991

(7,811)

(5,671)

(10,681)

Operating (loss)/profit presented to the

CODM

(6,772)

170,592

(51,600)

327,636

Revenue by service types for the three and six months ended June 30, 2020 and 2019 are as follows:

Unaudited

Three months ended

Six months ended

June 30,

June 30,

2020

2019

2020

2019

RMB' 000

RMB' 000

RMB' 000

RMB' 000

Accommodation reservation services

384,298

553,360

613,312

1,042,524

Transportation ticketing services

725,822

937,092

1,412,590

2,196,040

Others

89,986

100,446

179,320

135,745

Total revenue

1,200,106

1,590,898

2,205,222

3,374,309

27

3.

Expenses by nature

Unaudited

Three months ended

Six months ended

June 30,

June 30,

2020

2019

2020

2019

RMB' 000

RMB' 000

RMB' 000

RMB' 000

Employee benefit expenses

399,600

468,105

790,607

1,207,114

Advertising and promotion expenses

238,797

240,423

421,458

547,364

Depreciation and amortization expense

146,424

145,709

292,054

288,078

Order processing cost

134,089

243,566

249,533

464,130

Cost of pre-purchased travel related products

49,731

101,801

90,358

154,845

Bandwidth and servers fee

34,034

32,088

63,263

82,980

Commission expenses

30,592

46,614

42,244

78,996

Procurement costs

26,553

64,713

63,345

69,526

Rental and utility fees

18,159

15,043

29,328

29,330

Telephone and communication

11,898

8,001

20,308

15,361

Professional service fees

668

15,420

19,442

35,785

Travelling and entertainment expenses

7,466

16,725

11,060

30,079

Audit fees

1,264

1,000

2,264

2,000

Tax and surcharges

4,433

4,956

7,388

12,272

Acquisition-related cost

-

546

-

546

Others

4,925

15,286

38,147

23,806

1,108,633

1,419,996

2,140,799

3,042,212

4.

Other (losses)/gains, net

Unaudited

Three months ended

Six months ended

June 30,

June 30,

2020

2019

2020

2019

RMB' 000

RMB' 000

RMB' 000

RMB' 000

Investment income from investments

measured at amortized cost

3,984

3,560

8,422

4,948

Foreign exchange (loss)/gain

(2,224)

517

3,685

1,872

Net (loss)/gain on disposal of property,

plant and equipment

(615)

319

(667)

336

Others

(5,136)

3,415

(5,769)

3,525

(3,991)

7,811

5,671

10,681

28

5. Income tax expense

The income tax expense of the Group for the three and six months ended June 30, 2020 and 2019 is analyzed as follows:

Unaudited

Three months ended

Six months ended

June 30,

June 30,

2020

2019

2020

2019

RMB' 000

RMB' 000

RMB' 000

RMB' 000

Current income tax

28,732

18,528

58,659

136,014

Deferred income tax

(26,867)

5,108

(48,895)

(14,340)

1,865

23,636

9,764

121,674

  1. Cayman Islands income tax
    Under the current laws of the Cayman Islands, the Company is not subject to tax on the Company's income or capital gains. In addition, no Cayman Islands withholding tax is imposed upon any payments of dividends.
  2. Hong Kong income tax
    Entities incorporated in Hong Kong are subject to Hong Kong profits tax at a rate of 8.25% on assessable profits up to HKD2 million and 16.5% on any part of assessable profits over HKD2 million for the periods presented.
  3. PRC corporate income tax ("CIT")
    CIT provision was made on the estimated assessable profits of entities within the Group incorporated in the PRC for the periods presented, calculated in accordance with the relevant regulations of the PRC after considering the available tax benefits from refunds and allowances. The general PRC CIT rate is 25% for the periods presented.
    Three and two of the Company's subsidiaries incorporated in the PRC are qualified as High and New Technology Enterprise, and accordingly, they are subject to a reduced preferential CIT rate of 15% for the three and six months ended June 30, 2020 and 2019, respectively, according to the applicable CIT law.
  4. PRC Withholding Tax ("WHT")
    According to the applicable PRC tax regulations, dividends distributed by a company established in the PRC to a foreign investor with respect to profits derived after January 1, 2008 are generally subject to a 10% WHT. If a foreign investor incorporated in Hong Kong meets the conditions and requirements under the double taxation treaty arrangement entered into between the PRC and Hong Kong, the relevant withholding tax rate will be reduced from 10% to 5%.
    For the periods presented, the Group does not have any plan to require its PRC subsidiaries to distribute their retained earnings and intends to retain them to operate and expand its business in the PRC. Accordingly, no deferred income tax liability related to WHT on undistributed earnings was accrued as of the end of each reporting period.

29

6. Earnings/(loss) per share

  1. Basic
    Basic earnings or loss per share for the three and six months ended June 30, 2020 and 2019 are calculated by dividing the profit or loss attribute to the Company's equity holders by the weighted average number of ordinary shares in issue during the respective period.

Unaudited

Three months ended

Six months ended

June 30,

June 30,

2020

2019

2020

2019

Net profit/(loss) attributable to the owners of

the Company (RMB' 000)

54,730

199,280

(903)

296,602

Weighted average number of ordinary shares

in issue (thousand shares)

2,115,962

2,052,751

2,112,939

2,050,298

Basic earnings/(loss) per share

(expressed in RMB per share)

0.03

0.10

(0.00)

0.15

  1. Diluted
    Diluted earnings/(losses) per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. The Company has two categories of dilutive potential ordinary shares - share options and RSUs. As the Company incurred losses for the six months ended June 30, 2020, the dilutive potential ordinary shares were not included in the calculation of diluted loss per share as their inclusion would be anti-dilution. Accordingly, diluted loss per share for the six months ended June 30, 2020 was the same as basic loss per share.

Unaudited

Three months ended

Six months ended

June 30,

June 30,

2020

2019

2020

2019

RMB' 000

RMB' 000

RMB' 000

RMB' 000

Net profit/(loss) attributable to the owners of

the Company (RMB' 000)

54,730

199,280

(903)

296,602

Net profit/(loss) for calculation of

diluted earnings/(loss) per share (RMB' 000)

54,730

199,280

(903)

296,602

Weighted average number of

ordinary shares in issue (thousand shares)

2,115,962

2,052,751

2,112,939

2,050,298

Adjustments for Options granted to

employees (thousand shares)

47,170

67,659

-

62,298

Adjustments for RSUs granted to

employees (thousand shares)

2,128

7,319

-

7,870

Weighted average number of ordinary shares for

calculation of diluted earnings/(loss) per

share (thousand shares)

2,165,260

2,127,729

2,112,939

2,120,466

Diluted earnings/(loss) per share

(expressed in RMB per share)

0.03

0.09

(0.00)

0.14

30

  1. Dividend
    No dividend was paid or declared by the Company during each of the six months ended June 30, 2020 and 2019.
  2. Investments accounted for using the equity method

Unaudited

Six months ended

June 30,

2020

2019

RMB' 000

RMB' 000

At the beginning of the period

90,435

48,731

Additions

-

71,850

Transfers

(2,775)

-

Share-based compensation to employee of the Group's associates (a)

300

-

Share of losses

(5,890)

(6,064)

Currency translation differences

173

-

At the end of the period

82,243

114,517

  1. On December 20, 2019, the Group granted 20,983,500 share options and 7,902,000 RSUs under the 2019 Share Incentive Plan to senior management, other employees, directors of the Group, including 459,000 share options and 25,000 RSUs to employees of the Group's associates.

9. Investments

Unaudited

Audited

As of

As of

June 30,

December 31,

2020

2019

RMB' 000

RMB' 000

Current assets

Short-term investments measured at

- Amortized cost (a)

157,561

156,760

- Fair value through profit or loss (b)

3,379,094

4,384,168

3,536,655

4,540,928

Non-current assets

Long-term investments measured at

- Amortized cost (c)

253,832

250,697

- Fair value through profit or loss (d)

182,560

238,753

436,392

489,450

  1. Short-terminvestments measured at amortized cost
    Short-term investments measured at amortized cost are term deposits within one year with fixed interest rates, denominated in RMB. The investments are held for collection of contractual cash flow and the contractual cash flows of these investments qualify for solely payments of principal and interest, hence they are measured at amortized cost. None of these investments was past due as of June 30, 2020 and December 31, 2019.

31

  1. Short-terminvestments measured at fair value through profit or loss
    The Short-term investments measured at fair value through profit or loss include wealth management products, denominated in RMB or USD, with expected rates of return ranging from 2.4% to 5.0%, per annum for the period ended June 30, 2020 (for the same period of 2019: 2.8% to 7.2%). The returns on all of these wealth management products are not guaranteed, hence their contractual cash flows do not qualify for solely payments of principal and interest. Therefore, they are measured at fair value through profit or loss. As of June 30, 2020 and December 31, 2019, none of these investments was past due. The fair values are based on cash flow discounted using the expected rate of return based on management judgment and are within level 3 of the fair value hierarchy.
    As of June 30, 2020 and December 31, 2019, the short-term investments measured at fair value through profit or loss also included a discretionary portfolio management agreement denominated in USD, which was entered by the Company in December 2019 with a commercial financial institution. This portfolio management agreement is made for the purpose of achieving investment yield and balancing the Company's liquidity level simultaneously. Pursuant to the agreement, the Company diversified its investment portfolio and authorized the commercial financial institution to act as the portfolio manager to manage its assets held or to be held in account on the Company's behalf. The investment portfolios were instructed to be deployed in highly liquid financial assets, for instance government bonds and corporate bonds, that are traded in active markets and quoted by market prices and therefore, being classified as level 2 within a fair value hierarchy. The initial cost of investments under this portfolio management agreement was USD25 million, out of which USD12.5 million was funded by the Company with remaining portion funded from the commercial financial institution. The Company recorded the total investment as short-term investment measured at fair value through profit or loss, and credited the fund from the commercial financial institution, bearing interest at LIBOR+90bp compound rate per week, as short-term borrowings. As of June 30, 2020, the Company has repaid USD8.5 million.
  2. Long-terminvestments measured at amortized cost
    As of June 30, 2020 and December 31, 2019, long-term investments measured at amortized cost included term deposits over one year with fixed interest rates, denominated in RMB. The investments are held for collection of contractual cash flow and the contractual cash flows of these investments qualify for solely payments of principal and interest, hence they are measured at amortized cost. None of these investments was past due as of June 30, 2020 and December 31, 2019.
  3. Long-terminvestments measured at fair value through profit or loss
    As of June 30, 2020 and December 31, 2019, long-term investments measured at fair value through profit or loss represented equity interests held by the Group in several private and listed companies.
    The equity interests held by the Group in the private and listed companies are (i) less than 20% of each entity and the Group does not have control or significant influence over each of these entities, or (ii) not considered to be substantively the same as ordinary share due to the investment having a substantive liquidation preference or redemption rights. Therefore, these investments are classified as long-term investments measured at fair value through profit or loss. The fair values of the long-term investments are measured using a valuation technique with unobservable inputs and hence classified as level 3 of the fair value hierarchy for equity interests in private companies, and are measured by quoted market prices in active markets and hence classified as level 1 of the fair value hierarchy for equity interests in listed companies.
  4. Amounts recognized in profit or loss

Unaudited

Three months ended

Six months ended

June 30,

June 30,

2020

2019

2020

2019

RMB' 000

RMB' 000

RMB' 000

RMB' 000

Fair value changes on long-term investments

measured at fair value through profit or loss

(15,089)

(2,672)

(59,714)

(2,672)

Fair value changes on short-term investments

measured at fair value through profit or loss

33,244

28,776

49,004

52,183

18,155

26,104

(10,710)

49,511

32

10. Trade receivables

The Group normally allows a credit period of 30 days to its customers. Ageing analysis of trade receivables based on invoice date is as follows:

Unaudited

Audited

As of

As of

June 30,

December 31,

2020

2019

RMB' 000

RMB' 000

Up to 6 months

760,359

1,045,582

Over 6 months

208,073

85,183

968,432

1,130,765

Less: allowance for impairment of trade receivables

(98,345)

(34,452)

870,087

1,096,313

11. Prepayment and other receivables

Unaudited

Audited

As of

As of

June 30,

December 31,

2020

2019

RMB' 000

RMB' 000

Included in non-current assets

Advances to suppliers

3,656

3,809

Total non-financial assets

3,656

3,809

Deposits

4,493

3,616

Total financial assets

4,493

3,616

Non-current, total

8,149

7,425

Included in current assets

Advances to accommodation suppliers

21,655

50,584

Prepaid taxation

34,609

30,784

Advances to tickets suppliers

301,391

462,301

Prepayment for advertising

29,401

25,964

Prepayment for office rental

1,228

449

Prepayment to related parties

29,282

24,706

Others

78,101

87,058

Total non-financial assets

495,667

681,846

Deposits

141,096

201,920

Receivable from related parties

426,436

626,800

Others

61,875

58,887

Total financial assets

629,407

887,607

Current, total

1,125,074

1,569,453

33

12. Borrowings

Unaudited

Audited

As of

As of

June 30,

December 31,

2020

2019

RMB' 000

RMB' 000

Included in non-current liabilities:

Secured bank borrowings (Note a)

123,075

132,921

Included in current liabilities:

Unsecured loan from financial institution (Note (b))

28,260

87,203

Current portion of secured bank borrowings

19,692

19,692

47,952

106,895

171,027

239,816

Note:

  1. The borrowings were secured by property, plant and equipment of the Group and bear interest at CHIBOR floating rate with 10% per annum.
  2. The Company borrowed USD12.5 million in 2019 to leverage short term investment measured at fair value through profit or loss (Note 9(b)). The loan bears interest at LIBOR+90bp compound rate per week, as short-term borrowings. As of June 30, 2020, the Company has repaid USD8.5 million.

At June 30, 2020 and December 31, 2019, the Group's borrowings were repayable as follows:

Unaudited

Audited

As of

As of

June 30,

December 31,

2020

2019

RMB' 000

RMB' 000

Within 1 year

47,952

106,895

1~2 years

19,692

19,692

2~5 years

59,076

59,076

Over 5 years

44,307

54,153

171,027

239,816

13. Trade payables

Trade payables and their ageing analysis based on inovice date are as follows:

Unaudited

Audited

As of

As of

June 30,

December 31,

2020

2019

RMB' 000

RMB' 000

Up to 6 months

1,798,765

3,253,169

Over 6 months

234,315

175,362

2,033,080

3,428,531

34

14.

Other payables and accruals

Unaudited

Audited

As of

As of

June 30,

December 31,

2020

2019

RMB' 000

RMB' 000

Accrual for users incentive program

30,188

78,195

Payable to travel service suppliers

29,346

14,041

Deposits from sales channel

76,717

104,647

Payables to related parties

9,624

16,055

Payable of reorganization cost

157,696

157,193

Payable to insurance companies

232,336

228,792

Payable of construction for property, plant and equipment

52,372

54,274

Payable of investment in associate

14,144

15,000

Others

43,735

77,649

Total financial liabilities

646,158

745,846

Advances from users

227,438

685,560

Accrued payroll and welfare

161,601

291,699

Accrued commissions

11,695

16,521

Business and other taxes

25,139

57,855

Accrued advertisement expenses

65,033

107,431

Accrued professional fees

12,541

27,379

Advances from related parties

4,909

312

Others

16,613

20,868

Total non-financial liabilities

524,969

1,207,625

Total

1,171,127

1,953,471

35

USE OF PROCEEDS

The Shares of the Company were listed on the Main Board of the Stock Exchange on November 26, 2018 by way of global offering, raising total net proceeds of approximately RMB1,319.3 million after deducting professional fees, underwriting commissions and other related listing expenses. For the six months ended June 30, 2020, the Group has used RMB5.6 million for working capital and general corporate purposes. For details of the breakdown of the use of proceeds, please refer to the 2020 interim report of to be published in due course.

CORPORATE GOVERNANCE AND OTHER INFORMATION

Interim dividend

The Board does not recommend the payment of interim dividend for the six months ended June 30, 2020 to the Shareholders.

Event after the six months ended June 30, 2020

There has been no material event after the end of the period for the six months ended June 30, 2020 which requires disclosure in this announcement.

Purchase, Sale or Redemption of the Company's Listed Securities

Neither the Company nor any of its subsidiaries purchased, sold or redeemed any of the Company's listed securities during the six months ended June 30, 2020.

Model Code for Securities Transactions

The Company has adopted the Model Code. Specific enquiries have been made to all the Directors and the Directors have confirmed that they have complied with the Model Code during the six months ended June 30, 2020.

The Company's employees, who are likely to be in possession of inside information of the Company, have also been subject to the Model Code for securities transactions. No incident of non-compliance of the Model Code by the employees was noted by the Company during the six months ended June 30, 2020.

Compliance with the Corporate Governance Code

The Company has adopted and applied the principles and code provisions as set out in the Corporate Governance Code. During the six months ended June 30, 2020, the Company has complied with the code provisions in the Corporate Governance Code.

36

Audit Committee

The Audit Committee has three members comprising two independent non-executive Directors, Mr. Wu Haibing (chairman of the Audit Committee) and Ms. Han Yuling and one non-executive Director, being Mr. Cheng Yun Ming Matthew, with terms of reference in compliance with the Listing Rules.

The Audit Committee has considered and reviewed the accounting principles and practices adopted by the Group and has discussed matters in relation to internal controls and financial reporting with the management, including the review of the unaudited condensed consolidated interim financial results of the Group for the three and six months ended June 30, 2020. The Audit Committee considers that the interim financial results for the three and six months ended June 30, 2020 are in compliance with the relevant accounting standards, rules and regulations and appropriate disclosures have been duly made.

Publication of Interim Results Announcement and Interim Report

This announcement is published on the websites of the Stock Exchange (www.hkexnews.hk) and the Company (www.tcelir.com).

The interim report for the three and six months ended June 30, 2020 containing all the information required by Appendix 16 to the Listing Rules will be dispatched to the Shareholders and published on the websites of the Stock Exchange and the Company in due course.

DEFINITION

In this announcement, unless the context otherwise require, the following expressions shall have the following meaning:

"2016 Share Incentive Plan"

"2018 Share Incentive Plan"

"2019 RSU Plan"

"2019 Share Option Plan"

the share incentive plan adopted and approved by the Company on August 26, 2016

the share incentive plan adopted and approved by the Company on March 9, 2018

the 2019 restricted share unit plan adopted and approved by the Company on July 2, 2019

the 2019 share option plan approved by an ordinary resolution passed by shareholders of the Company at the extraordinary general meeting of the Company on August 2, 2019

"Audit Committee"

"Board"

"China" or "PRC"

"Company"

the audit committee of the Board

the board of directors of the Company

People's Republic of China

Tongcheng-Elong Holdings Limited (同程藝龍控股有限公司), an exempted company with limited liability incorporated under the laws of the Cayman Islands on January 14, 2016

37

"Consolidated

the entities we control through certain contractual arrangements

Affiliated Entities"

"Corporate Governance Code" the Corporate Governance Code set out in Appendix 14 to the

Listing Rules

"Director(s)"

the director(s) of the Company

"GMV"

gross merchandise volume, the total value of merchandise sold

in the specified market or through a specified platform during a

given period

"Group", "we", "us", or "our"

"Hong Kong"

"Stock Exchange"

"IFRS"

"ITA"

"Listing Rules"

"MAUs"

"Model Code"

"MPUs"

"OTA"

"RMB"

"RSUs"

"Share(s)"

"Shareholder(s)"

the Company, its subsidiaries and Consolidated Affiliated Entities from time to time

the Hong Kong Special Administrative Region of the People's Republic of China

The Stock Exchange of Hong Kong Limited

International Financial Reporting Standards, amendments, and interpretations, as issued from time to time by the International Accounting Standards Board

intelligent travel assistant

the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited, as amended, supplemented or otherwise modified from time to time

monthly active users who access our platforms at least once during a calendar month

the Model Code for Securities Transactions by Directors of Listed Issuers set out in Appendix 10 to the Listing Rules

monthly paying users who make purchases on our platforms at least once during a calendar month

online travel agency

Renminbi, the lawful currency of China

restricted share unit(s)

ordinary share(s) in the share capital of the Company, currently of nominal value US$0.0005 each

holder(s) of the Share(s)

38

"Tencent"

"Tencent-based platforms"

"TSP(s)"

"USD" or "US$"

APPRECIATION

Tencent Holdings Limited, a company incorporated in the British Virgin Islands on November 23, 1999 and subsequently redomiciled to the Cayman Islands on February 27, 2004 as an exempted company under the laws of the Cayman Islands, whose shares are listed on the Main Board of the Stock Exchange (stock code: 700)

  1. our proprietary Weixin-based mini programs, which can be accessible by Weixin users through the "Rail & Flight" and "Hotel" portals in Weixin Wallet, the mobile payment interface of Tencent's Weixin or from the drop-down list of the favorite or most frequently used mini programs in Weixin; and (ii) the "Rail & Flight" and "Hotel" in QQ Wallet, the mobile payment interface of Tencent's Mobile QQ and certain other portals in Mobile QQ

travel service provider(s)

United States dollars, the lawful currency of the United States of America

The Board would like to express its sincere gratitude to the Shareholders, management team, employees, business partners and customers of the Company for their support and contribution to the Group.

By Order of the Board

Tongcheng-Elong Holdings Limited

Ma Heping

Executive Director and

Chief Executive Officer

Hong Kong, August 28, 2020

As at the date of this announcement, the Board comprises the following:

Executive Directors

Independent Non-executive Directors

Wu Zhixiang (Co-Chairman)

Wu Haibing

Ma Heping (Chief Executive Officer)

Dai Xiaojing

Han Yuling

Non-executive Directors

Liang Jianzhang (Co-Chairman)

Jiang Hao

Cheng Yun Ming Matthew

Brent Richard Irvin

39

Disclaimer

Tongcheng-Elong Holdings Ltd. published this content on 28 August 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 28 August 2020 09:02:07 UTC


© Publicnow 2020
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Zhi Xiang Wu Co-Chairman
Jian Zhang Liang Co-Chairman
Hai Bing Wu Independent Non-Executive Director
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