Kinetic Development Group Limited — Interim / Quarterly Report 2023

Aug 25, 2023

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.

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Kinetic Development Group Limited 力 量 發 展 集 團 有 限 公 司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 1277)

INTERIM RESULTS ANNOUNCEMENT FOR THE SIX MONTHS ENDED 30 JUNE 2023

FINANCIAL HIGHLIGHTS

	Six months ended 30 June	Six months ended 30 June
	2023	2022	Change
	RMB’ million	RMB’ million
Revenue	1,492.2	3,010.0	-50.4%
Gross profit	816.9	2,095.3	-61.0%
Gross profit margin	54.7%	69.6%	-14.9 p.p.
Profit attributable to equity
shareholders of the Company	570.2	1,365.3	-58.2%
Net profit margin	38.1%	45.3%	-7.2 p.p.
Earnings per share
— Basic and Diluted	6.76 RMB cents	16.20 RMB cents
Interim dividend per share	3.0 HK cents	6.0 HK cents

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The board of directors (the “ Board ”) of Kinetic Development Group Limited (the “ Company ”) announces the unaudited interim consolidated results of the Company and its subsidiaries (the “ Group ”) for the six months ended 30 June 2023, together with the comparative figures for the corresponding period ended 30 June 2022 as follows:

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

For the six months ended 30 June 2023 – unaudited

Notes REVENUE 4 Cost of sales Gross profit Other incomes and losses, net 5 Gains/(losses) on fair value changes of financial assets 15 Selling expenses Administrative expenses PROFIT FROM OPERATIONS Share of profits of associates Finance costs 7 PROFIT BEFORE TAXATION 6 Income tax expense 8 PROFIT FOR THE PERIOD Other comprehensive income for the period that may be reclassified subsequently to profit or loss: Exchange differences on translation of financial statements of operations outside Mainland China TOTAL COMPREHENSIVE INCOME FOR THE PERIOD

Six months ended 30 June 2023 2022 RMB’000 RMB’000 1,492,198 3,009,958 (675,293) (914,623) 816,905 2,095,335 (15,545) 9,212 15,296 (33,751) (7,239) (12,319) (140,310) (123,057) 669,107 1,935,420 1,769 10,401 (37,515) (10,945) 633,361 1,934,876 (64,286) (572,724) 569,075 1,362,152 1,758 (9,304) 570,833 1,352,848

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Notes Profit for the period attributable to: Equity shareholders of the Company Non-controlling interests Total comprehensive income for the period attributable to: Equity shareholders of the Company Non-controlling interests Basic and diluted earnings per share attributable to equity shareholders of the Company (RMB cents) 9	Six months ended 30 June 2023 2022 RMB’000 RMB’000 570,236 1,365,349 (1,161) (3,197) 569,075 1,362,152 571,994 1,356,045 (1,161) (3,197) 570,833 1,352,848 6.76 16.20

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CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 30 June 2023 – unaudited

Notes NON-CURRENT ASSETS Property, plant and equipment 10 Right-of-use assets 11 Intangible assets 12 Interest in associates Deferred tax assets Prepayments for proposed acquisitions 13 Other non-current assets 14 Total non-current assets CURRENT ASSETS Financial assets at fair value through profit or loss 15 Inventories 16 Trade and other receivables 17 Pledged and restricted deposits 18 Cash at bank 18 Current portion of other non-current assets 14 Total current assets CURRENT LIABILITIES Trade and other payables 19 Contract liabilities Bank loans 20 Lease liabilities 21 Income tax payable Total current liabilities NET CURRENT LIABILITIES TOTAL ASSETS LESS CURRENT LIABILITIES	30 June 2023 RMB’000 1,809,418 42,454 3,201,954 105,854 40,182 2,685,986 298,831 8,184,679 206,195 112,088 156,277 920,540 348,015 65,419 1,808,534 986,989 114,380 1,267,370 – 383,001 2,751,740 (943,206) 7,241,473	31 December 2022 RMB’000 1,716,365 116,873 3,210,599 104,085 42,581 2,546,892 143,037 7,880,432 190,899 110,213 220,718 475,903 551,866 62,610 1,612,209 518,906 196,283 300,000 15,898 784,328 1,815,415 (203,206) 7,677,226

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Notes NON-CURRENT LIABILITIES Bank loans 20 Lease liabilities 21 Long-term payables 22 Deferred tax liabilities Accrual for reclamation costs Total non-current liabilities Net assets EQUITY Share capital Reserves Total equity attributable to equity shareholders of the Company Non-controlling interests Total equity	30 June 2023 RMB’000 200,000 4,724 643,200 42,774 6,369 897,067 6,344,406 54,293 6,303,278 6,357,571 (13,165) 6,344,406	31 December 2022 RMB’000 583,000 79,542 638,992 52,865 6,037 1,360,436 6,316,790 54,293 6,274,501 6,328,794 (12,004) 6,316,790

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NOTES TO THE FINANCIAL INFORMATION EXTRACTED FROM UNAUDITED INTERIM FINANCIAL REPORT

For the six months ended 30 June 2023

1. CORPORATE AND GROUP INFORMATION

Kinetic Development Group Limited (the “ Company ”) was incorporated as an exempted company with limited liability in the Cayman Islands on 27 July 2010 under the Companies Law, Chapter 22 (Law 3 of 1961, as consolidated and revised). The Company’s registered office address is Windward 3, Regatta Office Park, P.O. Box 1350, Grand Cayman, KY1-1108, Cayman Islands. The Company and its subsidiaries (collectively referred to as the “ Group ”) are mainly engaged in the extraction and sale of coal products. There has been no significant change in the Group’s principal activities during the period.

In the opinion of the directors of the Company (the “ Directors ”), the holding company and the ultimate holding company of the Company is King Lok Holdings Limited, which was incorporated in the British Virgin Islands with limited liability.

2.1 BASIS OF PREPARATION

The interim financial report has been prepared in accordance with the applicable disclosure provisions of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (“ Listing Rules ”), including compliance with Hong Kong Accounting Standard (“ HKAS ”) 34, Interim financial reporting , issued by the Hong Kong Institute of Certified Public Accountants (“ HKICPA ”). It was authorised for issue on 25 August 2023.

The interim financial report has been prepared in accordance with the same accounting policies adopted in the 2022 annual financial statements, except for the accounting policy changes that are expected to be reflected in the 2023 annual financial statements. Details of any changes in accounting policies are set out in Note 2.2.

The preparation of interim financial report in conformity with HKAS 34 requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses on a year to date basis. Actual results may differ from these estimates.

The interim financial report contains condensed consolidated financial statements and selected explanatory notes. The notes include an explanation of events and transactions that are significant to an understanding of the changes in financial position and performance of the Group since the 2022 annual financial statements. The condensed consolidated interim financial statements and notes thereon do not include all of the information required for a full set of financial statements prepared in accordance with HKFRSs.

The financial information relating to the financial year ended 31 December 2022 that is included in the interim financial report as comparative information does not constitute the Group’s annual financial statements for that financial year but is derived from those financial statements. The auditor has reported on those financial statements on 30 March 2023. The auditor’s opinion was not modified but included a reference to a matter to which the auditor drew attention for material uncertainty related to going concern.

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As at 30 June 2023, the Group had net current liabilities of RMB943,206,000 and has undertaken several acquisitions as disclosed in Note 13 with estimated total consideration of over RMB3 billion, of which the remaining amounts for the acquisitions and other capital expenditure amounting to approximately RMB1.2 billion will be paid in the near future. In addition, the Group has also been contemplating to expand existing business through actively seeking potential mining project targets or diversifying its business by stepping into new business other than mining. The Group needs to seek financing from banks or other financial institutions in order to fund the acquisitions and future capital expenditure.

The Group’s ability to fund the above-mentioned acquisitions and capital expenditures heavily relies on its future operating cash inflows and its ability to finance through bank loans, which may be affected by the government macro-control policy and volatility in coal market price.

The Directors assessed the Group’s ability to continue as a going concern, taking into account (i) the Group’s current cash at bank balances; (ii) the expected operating cash flows of the Group for at least the next twelve months from the end of the current reporting period; and (iii) the Group’s capital expenditure forecast for at least the next twelve months from the end of the current reporting period, with the potential gap to be satisfied by external borrowings. The Directors are of the opinion that the Group will carefully monitor its liquidity position and assuming that the Group is able to generate sufficient cash inflows from future operations and obtain borrowings from bank or other financial institutions when needed, the Group will be able to meet its liabilities as and when they fall due for at least the next twelve months. Accordingly, it is appropriate to prepare the condensed consolidated interim financial statements on a going concern basis. The condensed consolidated interim financial statements do not include any adjustments relating to the carrying amounts and reclassification of assets and liabilities that might be necessary should the Group be unable to continue as a going concern.

2.2 CHANGES IN ACCOUNTING POLICIES

New and amended HKFRSs

The Group has applied the following new and amended HKFRSs issued by the HKICPA to this interim financial report for the current accounting period:

• HKFRS 17, Insurance contracts

HKFRS 17, which replaces HKFRS 4, sets out the recognition, measurement, presentation and disclosure requirements applicable to issuers of insurance contracts.

• Amendments to HKAS 8, Accounting policies, changes in accounting estimates and errors: Definition of accounting estimates

The amendments provide further guidance on the distinction between changes in accounting policies and changes in accounting estimates.

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• Amendments to HKAS 12, Income taxes: Deferred tax related to assets and liabilities arising from a single transaction

The amendments narrow the scope of the initial recognition exemption such that it does not apply to transactions that give rise to equal and offsetting temporary differences on initial recognition such as leases and decommissioning liabilities. For leases and decommissioning liabilities, the associated deferred tax assets and liabilities are required to be recognised from the beginning of the earliest comparative period presented, with any cumulative effect recognised as an adjustment to retained earnings or other components of equity at that date. For all other transactions, the amendments are applied to those transactions that occur after the beginning of the earliest period presented.

• Amendments to HKAS 12, Income taxes: International tax reform — Pillar Two model rules

The amendments introduce a temporary mandatory exception from deferred tax accounting for the income tax arising from tax laws enacted or substantively enacted to implement the Pillar Two model rules published by the Organisation for Economic Co-operation and Development (“ OECD ”) (income tax arising from such tax laws is hereafter referred to as “ Pillar Two income taxes ”), including tax laws that implement qualified domestic minimum top-up taxes described in those rules. The amendments also introduce disclosure requirements about such tax. The amendments are immediately effective upon issuance and require retrospective application.

None of the new and amended HKFRSs have had a material effect on how the Group’s results and financial position for the current or prior periods have been prepared or presented in this interim financial report. The Group has not applied any new standard or interpretation that is not yet effective for the current accounting period.

3. OPERATING SEGMENT INFORMATION

Management has determined operating segments with reference to the reports reviewed by the chief operating decision maker (“ CODM ”) of the Group that are used to assess the performance and allocate resources. The Group manages its businesses by business lines, in a manner consistent with the way in which the information is reported internally to the Group’s CODM. The reportable segments of the Group are coal mining segment and other segment (mainly including planting and properties operations) that are in line with the business plans and information provided to the CODM of the Group.

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The revenue generated from other segment is insignificant to the Group. As such, the results of other segment is not measured separately.

The information regarding the Group’s reportable segments as provided to the Group’s CODM for the purposes of resource allocation for the six months ended 30 June 2023 is the total amount of related assets and liabilities of reportable segments.

Information regarding the Group’s reportable segments for the six months ended 30 June 2023 and reconciliations of reportable segment assets and liabilities are set out below.

(i) Segment assets and liabilities

Reportable segment assets Reportable segment liabilities Reportable segment assets Reportable segment liabilities	At 30 June 2023 Coal mining segment Other segment Total RMB’000 RMB’000 RMB’000 7,483,456 1,964,570 9,448,026 3,037,416 50,002 3,087,418 At 31 December 2022 Coal mining segment Other segment Total RMB’000 RMB’000 RMB’000 7,405,766 1,694,987 9,100,753 1,937,232 138,649 2,075,881	Total RMB’000 9,448,026 3,087,418

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(ii) Reconciliations of reportable segment assets and liabilities

Notes Assets Reportable segment assets Loans granted to related parties 14 Financial assets at fair value through profit or loss 15 Deferred tax assets Consolidated total assets Note Liabilities Reportable segment liabilities Income tax payable Taxes payable other than income tax 19 Deferred tax liabilities Consolidated total liabilities	At 30 June 2023 RMB’000 9,448,026 298,810 206,195 40,182 9,993,213 At 30 June 2023 RMB’000 3,087,418 383,001 135,614 42,774 3,648,807	At 31 December 2022 RMB’000 9,100,753 158,408 190,899 42,581 9,492,641 At 31 December 2022 RMB’000 2,075,881 784,328 262,777 52,865 3,175,851

(iii) Geographic information

No geographic information is shown as the Group’s operating results are entirely derived from its business activities in the People’s Republic of China (the “ PRC ”).

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4. REVENUE

The principal activities of the Group are the extraction and sale of coal products. Revenue represents the sales value of goods supplied to customers, excluding value added taxes or any trade discounts.

Revenue from contracts with customers Sale of coal products Others	Six months ended 30 June 2023 2022 RMB’000 RMB’000 1,489,107 3,007,788 3,091 2,170 1,492,198 3,009,958	Six months ended 30 June 2023 2022 RMB’000 RMB’000 1,489,107 3,007,788 3,091 2,170 1,492,198 3,009,958
		3,009,958

5. OTHER INCOMES AND LOSSES, NET

Government grants Interest income Gains/(losses) on disposal of non-current assets Donation Write-down of inventories Others	Six months ended 30 June 2023 2022 RMB’000 RMB’000 28,672 19,319 7,830 6,699 8,043 (10,966) (63,008) – – (3,697) 2,918 (2,143) (15,545) 9,212	Six months ended 30 June 2023 2022 RMB’000 RMB’000 28,672 19,319 7,830 6,699 8,043 (10,966) (63,008) – – (3,697) 2,918 (2,143) (15,545) 9,212
		9,212

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6. PROFIT BEFORE TAXATION

The Group’s profit before taxation is arrived at after charging:

Cost of sales — Transportation and storage costs — Cost of inventories sold Staff costs: Salaries, wages, bonuses and benefits Contribution to defined contribution plans Depreciation Amortisation of intangible assets Amortisation of right-of-use assets Write-down of inventories	Six months ended 30 June 2023 2022 RMB’000 RMB’000 333,146 502,173 342,147 412,450 675,293 914,623 188,562 172,407 7,458 5,217 196,020 177,624 45,264 46,522 8,855 15,588 3,467 392 – 3,697	Six months ended 30 June 2023 2022 RMB’000 RMB’000 333,146 502,173 342,147 412,450 675,293 914,623 188,562 172,407 7,458 5,217 196,020 177,624 45,264 46,522 8,855 15,588 3,467 392 – 3,697
		914,623 172,407 5,217
		177,624
		46,522 15,588 392 3,697

Cost of inventories sold for the six months ended 30 June 2023 included RMB138,938,000 (six months ended 30 June 2022: RMB136,308,000) relating to staff costs, depreciation and amortisation, which amounts are also included in the respective amounts disclosed separately above for each of these types of expenses.

7. FINANCE COSTS

Interest expenses Unwinding of discount	Six months ended 30 June 2023 2022 RMB’000 RMB’000 31,084 6,658 6,431 4,287 37,515 10,945	Six months ended 30 June 2023 2022 RMB’000 RMB’000 31,084 6,658 6,431 4,287 37,515 10,945
		10,945

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8. INCOME TAX EXPENSE

The major components of income tax expense in the consolidated statement of profit or loss and other comprehensive income are:

Current tax — Mainland China Deferred income tax Reversal and origination of temporary differences Total tax expense for the period	Six months ended 30 June 2023 2022 RMB’000 RMB’000 71,978 596,715 (7,692) (23,991) 64,286 572,724

• (a) Pursuant to the rules and regulations of the Cayman Islands and the British Virgin Islands (“ BVI ”), the Company and its subsidiary, Blue Gems Worldwide Limited and Porus Power Limited, are not subject to any income tax in the Cayman Islands and BVI, respectively.

• (b) Except for Inner Mongolia Zhunge’er Kinetic Coal Limited (“ Kinetic Coal ”), PRC corporate income tax (“ CIT ”) was provided at a rate of 25% on the taxable income of the companies comprising the Group within Mainland China, as adjusted for income and expense items which are not assessable or deductible for income tax purposes. Kinetic Coal was qualified as a “High and New Technology Enterprise” on 14 December 2022, hence it enjoys a preferential income tax rate of 15% from 2022 to 2024.

• (c) Pursuant to the PRC Corporate Income Tax Law, a 10% withholding tax is levied on dividends declared to foreign investors from the foreign investment enterprises established in Mainland China. The requirement is effective from 1 January 2008 and applies to earnings after 31 December 2007. A lower withholding tax rate may be applied if certain criteria are met. The Group is therefore liable for withholding taxes on dividends distributed by those subsidiaries established in Mainland China in respect of earnings generated from 1 January 2008. In 2023, Kinetic Development Group Limited, Blue Gems Worldwide Limited and Kinetic (Asia) Limited obtained Hong Kong SAR certificate of resident status for the calendar year 2022 and the two succeeding calendar years, respectively. As a result, under the “Arrangement between the Mainland China and Hong Kong SAR for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income”, the Group is subject to a withholding tax rate of 5% from 2022 to 2024. The relevant tax authorities in Mainland China has refunded the Group with the difference of PRC withholding tax incurred for the year ended 31 December 2022 which was calculated at the rate of 10% and 5%, amounting to RMB74,558,000. The Group provided for and paid the withholding taxes subject to a tax rate of 5% for the six months ended 30 June 2023.

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9. BASIC AND DILUTED EARNINGS PER SHARE

The calculation of basic earnings per share for the six months ended 30 June 2023 is based on the profit for the period attributable to equity shareholders of the Company of RMB570,236,000 and the 8,430,000,000 shares in issue during the period.

The calculation of basic earnings per share for the six months ended 30 June 2022 is based on the profit for the period attributable to equity shareholders of the Company of RMB1,365,349,000 and the 8,430,000,000 shares in issue during the period.

There were no dilutive potential ordinary shares during the six months ended 30 June 2023 and 2022, and therefore, diluted earnings per share is the same as the basic earnings per share.

10. PROPERTY, PLANT AND EQUIPMENT

At 1 January 2023 Additions Disposals Depreciation At 30 June 2023	Carrying amount RMB’000 1,716,365 138,332 (15) (45,264) 1,809,418

The Group is in the process of applying for the title of certificates of certain properties with a carrying value of RMB279,260,000 (31 December 2022: RMB283,700,000) as at 30 June 2023. The Directors are of the opinion that the use of and the conduct of operating activities at the properties referred to above are not affected by the fact that the Group has not yet obtained the relevant property title certificates.

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11. RIGHT-OF-USE ASSETS

At 1 January 2023 Additions Disposals_(note)_ Amortisation At 30 June 2023	Carrying amount RMB’000 116,873 12,536 (83,488) (3,467) 42,454

note:

In 2022, the Group entered into land lease agreements (the “ Land Lease Agreements ”) with certain village committees of Togtoh County, Hohhot, Inner Mongolia Autonomous Region (“ Village Committees ”) for planting. The corresponding Land Leases Agreements were early terminated on 1 March 2023 and the Group was not liable for or required to pay any compensation due to the early termination of the Land Lease Agreements.

12. INTANGIBLE ASSETS

At 1 January 2023 Additions Amortisation At 30 June 2023	Carrying amount RMB’000 3,210,599 210 (8,855) 3,201,954

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13. PREPAYMENTS FOR PROPOSED ACQUISITIONS

Notes Related parties — Acquisition of Guizhou Liliang Energy Co., Ltd. (“Guizhou Liliang”) (a) — Acquisition of properties from Guangzhou Seedland Real Estate Development Co., Ltd. (“Seedland”) (b) — Acquisition of properties from Hainan Hangxiao Real Estate Development Co., Ltd. (“Hainan Hangxiao”) (c) — Acquisition of Star Idea Enterprises Limited (“Star Idea”) (d) Third parties	At 30 June 2023 RMB’000 1,080,256 803,000 564,625 232,105 2,679,986 6,000 2,685,986	At 31 December 2022 RMB’000 1,080,256 696,000 564,625 200,011 2,540,892 6,000 2,546,892

Notes:

• (a) On 24 December 2021, the Group entered into an acquisition agreement with Guizhou Liliang, an entity owned by Mr. Zhang Li, to acquire its 75% equity interests in Liupanshui Changlin Real Estate Development Co., Ltd. (“ Changlin ”) which is expected to own the mining rights of a coal mine in Guizhou upon completion of a restructuring, with a total consideration of RMB1,100,000,000. According to the acquisition agreement, the Group prepaid RMB550,000,000 in 2021 and RMB530,256,000 in 2022 to Guizhou Liliang, respectively. Prior to the completion of the acquisition, certain conditions shall be satisfied. If those conditions were not satisfied, the Group is entitled to require Guizhou Liliang to refund any payment (without interest) which the Group had actually made to it under the acquisition agreement. The recoverability of the prepayments are secured by 100% equity interests of Guizhou Liliang. This transaction, together with the completed acquisition of Wuhai Fuliang in 2022, is a connected and major transaction of the Group on an aggregate basis. The transaction with Guizhou Liliang is subject to the independent shareholders’ approval.

• (b) On 29 April and 12 July 2022, the Group entered into a property purchase agreement and revised supplementary agreement with subsidiaries of Seedland, including Qingdao Shilu Ocean Big Data Investment Development Co., Ltd., Zunyi Field Real Estate Development Co., Ltd., Jingmen Shiqiang Real Estate Co., Ltd., Wuxi Shidi Real Estate Co., Ltd., Zhongshan Shidi Real Estate Co., Ltd. and Wuhan Pingan Zhongxin Real Estate Co., Ltd., all of which are controlled by Mr. Zhang Liang, Johnson, to acquire certain properties with a total consideration of RMB809,480,000. According to the agreements, the Group prepaid RMB670,000,000 to Guangzhou Chaiju Architectural Design Consulting Co., Ltd. (“ Guangzhou Chaiju ”) and RMB133,000,000 to Zhuhai Hengqin Tianshi Enterprise Management Consulting Co., Ltd. (“ Zhuhai Hengqin ”). The transaction is a connected transaction of the Group which was duly approved by the independent shareholders of the Company on the extraordinary general meeting of the Company held on 25 October 2022.

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• (c) On 30 May 2022, the Group entered into a property purchase framework agreement with Hainan Hangxiao, an entity controlled by Guangzhou R&F Properties Co., Ltd. of which Mr. Zhang Li is one of major shareholders, to acquire certain properties with a total consideration of RMB1,000,939,000. According to the property purchase framework agreement, the Group prepaid RMB564,625,000 to Hainan Hangxiao. The recoverability of the prepayment is secured by rights to 50% of sales proceeds from other properties in the same development project owned by Hainan Hangxiao according to a supplemental agreement signed in March 2023.

• (d) On 30 December 2022, the Group entered into an acquisition and subscription agreement with Mr. Zhang Li and Star Idea to acquire 36,500 existing shares of Star Idea (the “ Acquisition in relation to Star Idea ”), representing approximately 73% of the equity interest in Star Idea with a consideration of USD62,757,010. The Group prepaid USD19,435,763 (equivalent to RMB135,362,000) to Mr. Zhang Li. The Group also agreed to subscribe for an additional 16,667 newly issued shares of Star Idea with a consideration of USD28,656,169, for which the Group partially prepaid the consideration as settled with a loan to Star Idea (the “ Loan Agreement ”) of USD9,098,333 pursuant to a loan agreement dated 4 November 2022.

On 29 March 2023, due to the changes in macro-economy and regulatory condition and based on the status of the proposed acquisition then, the Group entered into a supplemental agreement with Mr. Zhang Li and Star Idea to terminate the subscription of additional 16,667 newly issued shares of Star Idea. As a result, with effect from 29 March 2023, the “Loan Agreement” has been reinstated, and the prepayment made by the Group to Star Idea in relation to the subscription agreement has been classified as a loan pursuant to the Loan Agreement and was recognised as other non-current assets.

In 2023, the Group further prepaid USD13,743,000 (equivalent to RMB96,743,000). As of 30 June 2023, the total consideration was approximately USD62,757,010 and the consideration has been paid in cumulative amounts of USD33,178,763 (equivalent to RMB232,105,000). The acquisition is a connected transaction of the Group, which was duly approved by the independent shareholders of the Company on the extraordinary general meeting of the Company held on 28 July 2023 and is expected to be completed in the second half of 2023.

On 17 February 2023, Mr. Zhang Liang, Johnson and King Lok Holdings Limited, an entity owned by Mr. Zhang Liang, Johnson, agreed to pledge 5,307,450,000 shares held by them in the Company and the interests derived therefrom as security for the performance of contractual obligations of Guizhou Liliang, Mr. Zhang Li and subsidiaries of Seedland under the relevant acquisitions and loan agreements. The share pledge arrangement serves as a security of the prepayments made for the acquisition of Guizhou Liliang, acquisition of properties from Seedland and acquisition of Star Idea, as well as loans granted to Guizhou Liliang.

The Directors have assessed the progress of the transactions and the ability of the related parties to fulfil the obligations under the agreements described above and even if these transactions not completed as schedule the counterparties are financially capable to repay the outstanding amounts to the Company.

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14. OTHER NON-CURRENT ASSETS

At 30 June 2023 RMB’000 Loans granted to related parties 298,810 Others 65,440 Total 364,250 Less: Current portion of other non-current assets — Related parties 65,419 Other non-current assets 298,831 FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS 30 June 2023 RMB’000 Trust wealth management investments 206,195	At 31 December 2022 RMB’000 158,408 47,239 205,647 62,610 143,037 31 December 2022 RMB’000 190,899

15. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

On 25 December 2020, the Group entered into a subscription agreement with Northern International Trust Co., Ltd. (“ Northern Trust ”) to subscribe a trust wealth management investment amounting to RMB252,530,000 for a period of 1 year, which is redeemable on demand. As at 30 June 2023, the fair value of the investment was RMB125,353,000 (31 December 2022: RMB115,576,000), resulting in a gain of RMB9,777,000 on fair value changes, due to price movement in its investment in a corporate bond issued by Guangzhou R&F Properties Co., Ltd. (“ Guangzhou R&F ”) in 2018 with an annual interest rate of 6.58%. Subsequent to 30 June 2023, the fair value of the trust wealth management investment was in the range between RMB130,000,000 and RMB160,000,000.

On 28 December 2020, the Group entered into a subscription agreement with Beijing International Trust Co., Ltd. (“ Beijing Trust ”) to subscribe a trust wealth management investment amounting to RMB151,500,000 for a period of 10 years, which is redeemable on demand. As at 30 June 2023, the fair value of the investment was RMB80,842,000 (31 December 2022: RMB75,323,000), resulting in a gain of RMB5,519,000 on fair value changes, due to price movement in its investment in a corporate bond issued by Guangzhou R&F in 2020 with an annual interest rate of 6.30%. Subsequent to 30 June 2023, the fair value of the trust wealth management investment was in the range between RMB60,000,000 and RMB90,000,000.

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16. INVENTORIES

Coal products Raw materials, accessories and chemicals Others 17. TRADE AND OTHER RECEIVABLES Trade debtors Other receivables — Government subsidy receivables — Prepayments and deposits — Deductible input VAT — Others	30 June 2023 RMB’000 64,615 47,452 21 112,088 30 June 2023 RMB’000 848 – 87,337 43,162 24,930 156,277	31 December 2022 RMB’000 56,746 49,849 3,618 110,213 31 December 2022 RMB’000 5,227 65,220 102,781 38,264 9,226 220,718

As at the end of the reporting period, the aging analysis of trade debtors, based on the invoice date and net of provisions is as follows:

			30 June	31 December
			2023	2022
			RMB’000	RMB’000
Within	6	months	848	5,227

Trade debtors are generally due within 30 to 90 days from the date of billing.

The allowances for trade and other receivables are estimated based on the Group’s historical credit loss experience, adjusted for factors that are specific to the debtors and an assessment of both the current and forecast general economic conditions at the reporting date. As the Directors are of opinion that the amount of expected credit losses is minimal, no loss allowance for trade and other receivables recognised as at 30 June 2023 under HKFRS 9.

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18. CASH AT BANK AND PLEDGED AND RESTRICTED DEPOSITS

Cash and bank balances Pledged deposits Restricted deposits Less: Pledged for bank loans Restricted deposits Cash and cash equivalents	30 June 2023 RMB’000 348,015 800,000 120,540 1,268,555 800,000 120,540 348,015	31 December 2022 RMB’000 551,866 400,000 75,903 1,027,769 400,000 75,903 551,866

As at 30 June 2023, the cash and bank balances of the Group denominated in RMB amounted to RMB339,443,000 (31 December 2022: RMB502,779,000).

As at 30 June 2023, the Group’s bank balances of RMB800,000,000 (31 December 2022: RMB400,000,000) were deposited as guarantee fund for the Group to obtain bank loan of RMB1,100,000,000 (31 December 2022: RMB1,000,000,000).

As at 30 June 2023, the Group’s bank balances of approximately RMB120,540,000 (31 December 2022: RMB75,903,000) were deposited with banks as a mine environment restoration guarantee fund pursuant to the related government regulations.

– 20 –

19. TRADE AND OTHER PAYABLES

Notes Dividends payable Taxes payable other than income tax Payables for material and construction (a) Other payables and accruals (b) Amounts due to related parties	30 June 2023 RMB’000 543,217 135,614 160,943 142,824 4,391 986,989	31 December 2022 RMB’000 – 262,777 120,703 133,905 1,521 518,906

Notes:

• (a) Payables for material and construction are non-interest-bearing.

An aging analysis of the payables for material and construction as at the end of the reporting period, based on the invoice date, is as follows:

Within 1 year 1 to 2 years Over 2 years	30 June 2023 RMB’000 150,728 7,701 2,514 160,943	31 December 2022 RMB’000 82,628 9,688 28,387 120,703

• (b) Other payables and accruals are non-interest bearing, which are expected to be settled within one year or repayable on demand.

– 21 –

20. BANK LOANS

At 30 June 2023 Notes Effective interest rate (%) Maturity Current Bank loan — secured (a) 3.50% 2024 Bank loan — secured (b) 5.50% 2024 Current portion of long-term bank loans — secured (c) 6.65% 2024 Current portion of long-term bank loan — secured (d) 5.00% 2024 Non-current Long-term bank loans — secured (c) – – Long-term bank loan — secured (e) 5.00% 2025	At 31 December 2022 RMB’000 Effective interest rate (%) Maturity RMB’000 400,000 – – – 134,370 – – – 33,000 – – – 700,000 5.00% 2023 300,000 1,267,370 300,000 – 6.65% 2024 33,000 200,000 5.00% 2024 550,000 200,000 583,000 1,467,370 883,000	At 31 December 2022 RMB’000 Effective interest rate (%) Maturity RMB’000 400,000 – – – 134,370 – – – 33,000 – – – 700,000 5.00% 2023 300,000 1,267,370 300,000 – 6.65% 2024 33,000 200,000 5.00% 2024 550,000 200,000 583,000 1,467,370 883,000
		300,000
		33,000 550,000
		583,000
		883,000

Notes:

• (a) As at 30 June 2023, the Group’s bank loans amounting to RMB400,000,000 was secured by the Group’s pledged deposits amounting to RMB400,000,000, which will be due in March 2024.

• (b) As at 30 June 2023, the Group’s bank loans amounting to RMB134,370,000 was secured by the mining right of Dafanpu coal mine held by Kinetic Coal, which will be due in March 2024.

• (c) As at 30 June 2023, the Group’s bank loans amounting to RMB33,000,000 (31 December 2022: RMB33,000,000) was guaranteed by Kinetic Coal and Mr. Ju Wenzhong, a director of the Company, which will be due within one year.

• (d) As at 30 June 2023, the Group’s bank loan amounting to RMB700,000,000 (31 December 2022: RMB850,000,000) was jointly guaranteed by Mr. Zhang Li and Mr. Zhang Liang, Johnson and secured by the Group’s pledged deposits amounting to RMB400,000,000 and the mining right of Dafanpu coal mine held by Kinetic Coal, which will be due in May 2024 (31 December 2022: RMB300,000,000 will be due within one year).

• (e) As at 30 June 2023, the Group’s bank loans amounting to RMB200,000,000 was secured by the mining right of Dafanpu coal mine held by Kinetic Coal, which will be due in March 2025.

– 22 –

21. LEASE LIABILITIES

The lease liabilities were repayable as follows:

Within 1 year After 1 year but within 2 years After 2 years but within 5 years Over 5 years LONG-TERM PAYABLES Present value of payables in relation to mining rights Present value of compensation payable in relation to the demolition and relocation Less: current portion recorded in trade and other payables	30 June 2023 RMB’000 – – – 4,724 4,724 30 June 2023 RMB’000 669,953 28,635 698,588 55,388 643,200	31 December 2022 RMB’000 15,898 16,969 57,981 4,592 95,440 31 December 2022 RMB’000 665,196 27,859 693,055 54,063 638,992

22. LONG-TERM PAYABLES

23. DIVIDENDS

The Directors proposed an interim dividend of HKD3.0 cents per share (six months ended 30 June 2022: HKD6.0 cents per share), payable to shareholders of the Company on or before 3 November 2023. The dates for closure of register of members of the Company for ascertaining shareholders’ entitlement to receive the proposed interim dividend will be further announced. The total amount of the interim dividend to be distributed is estimated to be approximately RMB233,169,000 (six months ended 30 June 2022: RMB432,555,000).

24. EVENTS AFTER REPORTING PERIOD

• (a) After the end of the reporting period, the Directors proposed an interim dividend, further details are disclosed in Note 23.

• (b) On 28 July 2023, the Acquisition in relation to Star Idea was approved by the independent shareholders of the Company on the Company’s extraordinary general meeting, details are disclosed in Note 13(d).

Save as above, the Group had no significant non-adjusting events subsequent to 30 June 2023.

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MANAGEMENT DISCUSSION AND ANALYSIS

OVERVIEW

Market Review

In the first half of 2023, global inflationary pressure remained high, coupled with the continuous interest rate hike, resulting in the insufficient growth momentum of the global economy, and a slowdown in the growth of the global trade. In face of the complex and grim international environment, the PRC government paid effort on promoting high quality development, the market demand experienced a progressive recovery, while the demand and supply for the production continued to increase, and the overall stability was maintained in employment and prices, which paved the way for a generally stable and favourable economy. According to the data from the National Bureau of Statistics of China (“ NBSC ”), China’s GDP for the first half of 2023 amounted to approximately RMB59.3 trillion, representing an increase of 5.5% year-on-year; sizable nationwide industrial enterprises achieved a business revenue of approximately RMB62.6 trillion, representing a year-onyear decrease of 0.4%; sizable nationwide industrial enterprises achieved a total profit of approximately RMB3,388.46 billion, representing a year-on-year decrease of 16.8%.

During the first half of 2023, both supply and demand experienced significant growth, but overall, supply exceeded demand moderately. On the supply side, with the effects from numerous factors such as the continuous effects of policies for ensuring the supply of coal, and the zero-tariff policy for imported coal, there was a stable growth in the domestic production of coal in the first half of the year, while there was a high-level growth in the quantity of imported coal. According to the data from the NBSC, the raw coal output of China’s sizable nationwide industrial enterprises amounted to approximately 2.3 billion tonnes in the first half of 2023, with a year-on-year increase of 4.4%. China imported approximately 220 million tonnes of coal during the same period, with a year-on-year increase of 93.0%. During the same period, the demand side showed a buoyant and upward trend in general and the demand for power generated by the downstream coal fired power plant remains high. According to that data from the NBSC, the power generation maintains a growth in the first half of the year, the nationwide power generation amounted to approximately 4.2 trillion kWh, representing a year-on-year increase of 3.8%. Among which, the power generated by hydro-power recorded a year-on-year decrease of 22.9%, thus power generated by thermal power complements the shortfall from hydro-power, and recorded a year-on-year increase of 7.5%.

– 24 –

The average coal prices experienced a general decrease in the first half of 2023, but was still at a relatively high level. Affected by the decrease in coal price, the general operating results of the industry recorded a year-on-year decrease. According to the data from the NBSC, in the first half of 2023, the principal business income of large-scale enterprises from the coal mining and coal washing industries in China amounted to approximately RMB1,769.52 billion, representing a year-on-year decrease of 12.6%, while the total profit amounted to approximately RMB412.76 billion, representing a year-on-year decrease of 23.3%.

In conclusion, during the first half of 2023, under the influence of the slowdown in domestic and overseas economic growth, the further release of the coal production capacity, and the comprehensive opening for the imported coal, the demand and supply pattern for domestic coal was easing in a progressive manner. There was a frustration and adjustment in the coal price, exerting pressure to the general results of coal enterprises.

BUSINESS REVIEW

As a leading integrated coal enterprise in China, the Group’s business activities operate through the whole coal industry chain, covering coal production, washing, loading, transportation and trading.

During the first half of 2023, under the influence of several factors, the coal market selling price experienced a downward frustration. Meanwhile, the coal mining works of Dafanpu Coal Mine of the Group in the first half of the year faced faults, fracture zones, increase in pressure in roof plate and a slow progression of mining, which resulted in a significant decrease in the production volume of coal, and in turn resulted in a significant decrease in the sales volume of the coal of the Group. During the first half of the year, the average selling price per tonne of the Group’s 5,000 kcal low-sulfur environmentally friendly thermal coal amounted to approximately RMB866, representing a year-on-year decrease of approximately 6.3%; the sales volume of the 5,000 kcal coal of the Group recorded a year-on-year decrease of approximately 48.1% as compared to the corresponding period last year. For the six months ended 30 June 2023, the Group recorded a total revenue of approximately RMB1,492.2 million, representing a year-on-year decrease of 50.4% as compared to the corresponding period last year. In face of the numerous difficulties from the external markets and our own extraction conditions, on one hand the Group prudently considered and judged the market trend, and by complementing the market demand and the actual production of Dafanpu Coal Mine, the Group timely deployed different sales strategy for different stages, and grasped the opportunity to make delivery when the coal price was at a relatively high level, which realized a scenario that the selling price was slightly higher than the prevailing market price, and maximized sales profits. On the other hand, the Group adopted effective measures in a proactive manner in the mining aspect, which successfully overcame the barriers on mining process caused by the underground conditions of mines. The production, delivery and sales of coal recovered to its normal level progressively in May 2023. It is expected that growth momentum will return in the second half of the year.

– 25 –

During the reporting period, the Group continued to implement refined management, formulated and improved various systems in various operational aspects, and strived to control various management fees and costs, which effectively mitigated the effect of the decline of sales price on gross profit margin. For the six months ended 30 June 2023, the Group achieved a gross profit margin of approximately 54.7%, which was of an industryleading level.

Based on the above business strategies, the Group has maintained a steady development under the grim internal and external challenges during the first half of the year, bringing a relatively considerable profit returns to shareholders. For the six months ended 30 June 2023, the Group’s consolidated net profit amounted to approximately RMB569.1 million, representing a year-on-year decrease of 58.2%. The Group’s EBITDA amounted to approximately RMB728.5 million, representing a year-on-year decrease of 63.7%.

The Group has always put safe production in top priority. The Group’s Dafanpu Coal Mine in Inner Mongolia has maintained the honour of “Class A Coal Mine” for eight consecutive years, and has been rated as “Coal Industry Premium Safe and Efficient Mine” by the China National Coal Association since 2014. During the reporting period, Dafanpu Coal Mine successfully passed the acceptance of “National Class 1 Safe Production Standardized Mine” and “Intelligent Mining Process”.

The Group also attaches great importance to green and sustainable development. During the first half of 2023, the Dafanpu Coal Mine continued to maintain the national green mine honor, which fully reflected the comprehensive strengths of the Group on sustainable development of the coal industry. In recent years, the Group has successfully established an ecological industrial chain integrating agricultural product planting and livestock breeding in the mine reclamation area. On the basis of the steady operation of the principal business of coal, the Company will carry out the ancillary business of agriculture and animal husbandry to seek more profit returns for shareholders.

FUTURE OUTLOOK

Looking forward to the second half of 2023, with the effects of monetary tightening policy, it is anticipated that the global economic growth will experience a further slowdown. The World Economic Outlook Report released by the International Monetary Fund in April 2023 predicted that the global economic growth for 2023 will declined to 2.8%. It is anticipated that the PRC government will continue to stick to the steady macro policy, and will focus on expanding the domestic demand, maintaining its support on real economy. It is expected that China’s economy will continue to recover and with a favourable development.

– 26 –

In terms of the coal market, it is anticipated that the domestic supply will continue to be prosperous, however its growth rate will experience a slowdown. The demand continues to be at a high level, it is expected that demand and supply will return to an equilibrium state. It is expected that the average coal price will record a slight decrease trend, but the degree will be limited. As the summer peak season has passed, while there is an imminent need for coal storage for winter times, the coal price will remain resilient in the second half of the year, it is expected that the results for the coal enterprises may improve in the second half of the year.

Looking forward to the second half of 2023, the Group will continue to implement the mine development concept of both safety, efficiency and environmental protection, further implement the refined operation strategy, making full use of the advantages from its own low-sulphur, high-quality thermal coal brand products “Kinetic 2”, and conforming to the market situation, in order to flexibly adjust the sales pace and strategy, and to improve the Group’s operating efficiency effectively. In addition, Weiyi Coal Mine and Yongan Coal Mine, which are operated by the Group and located in Ningxia, are currently under construction and are expected to be put into operation successively in the first half of 2025 and reach full capacity by 2027. The Group is able to tap into coking coal business, and further increase the production capacity of coking coal by 2.1 million tons per year, thus break through the limitations from operating a single coal mine with a single coal type, and coal mine projects in Ningxia is expected to be one of the main driving forces of the growth in results in the future.

In terms of other businesses, the Guangtaichang Original Breeding Pig Farm of Inner Mongolia Liangyun Animal Husbandry Development Co., Ltd. (內蒙古量蘊牧業發展有限 公司) has been built in 2022, and 650 French original breeding pigs have been introduced from France. In the first phase, a breeding area is planned to be built, including a breeding farm and two fattening farms, of which the fattening farm in Lijiata (李家塔) and the breeding farm in Huajian (鏵尖) are expected to put into operation in the second half of the year. The fattening farm in Wulan Bulang (烏蘭不浪) is expected to be completed and put into operation at the start of 2025. The first phase of the project is expected to reach full capacity by the end of 2025, with 7,200 breeding pigs in stock and 170,000 pigs of various types marketed annually.

Looking forward, the Group will continue to uphold the principle of high-quality development. On the basis of the steady development of the principal coal business, the Company will expand a diversity of ancillary businesses, improve the overall operation efficiency, and to reward its shareholders with outstanding results.

– 27 –

FINANCIAL REVIEW

Revenue

Revenue of the Group decreased from approximately RMB3,010.0 million for the six months ended 30 June 2022 to approximately RMB1,492.2 million for the six months ended 30 June 2023, representing a decrease of approximately 50.4% as compared with the corresponding period last year.

The decrease in the Group’s revenue was mainly due to the influence of several factors. The coal market selling price experienced a downward frustration, the average selling price of the Group’s 5,000 kcal coal products decreased by approximately 6.3% for the six months ended 30 June 2023 as compared with the same period last year. Meanwhile, the coal mining works of Dafanpu Coal Mine of the Group in the first half of the year faced faults, fracture zones, increase in pressure in roof plate and a slow progression of mining, which resulted in a significant decrease in the sales volume of the coal of the Group. The sales volume of the Group’s 5,000 kcal coal products decreased by approximately 48.1% as compared to the corresponding period last year.

Cost of sales

For the six months ended 30 June 2023, the Group incurred cost of sales of approximately RMB675.3 million as compared to the Group’s cost of sales of approximately RMB914.6 million for the six months ended 30 June 2022. The cost of sales of the Group mainly comprised transportation costs, salaries of coal mine workers, costs of supplementary materials, fuel and electricity, depreciation, amortisation and surcharges of mining operations. The decrease in the Group’s cost of sales was mainly attributable to the decrease in the sales volume of the coal of the Group.

Gross profit and gross profit margin

For the six months ended 30 June 2023, the Group recorded a gross profit of approximately RMB816.9 million and a gross profit margin of approximately 54.7% as compared to the gross profit of approximately RMB2,095.3 million and the gross profit margin of approximately 69.6% for the six months ended 30 June 2022.

The decrease in Group’s gross profit margin for the six months ended 30 June 2023 was mainly attributable to the decrease in the average selling price of the Group’s coal products and the increase in fixed cost per tonne of the coal products as compared to the corresponding period last year.

– 28 –

Other incomes and losses, net

The net amount of other incomes and losses of the Group changed from net incomes of RMB9.2 million for the six months ended 30 June 2022 to net losses of RMB15.5 million for the six months ended 30 June 2023. This was mainly attributable to the increase of RMB9.4 million in government grants, decrease of RMB3.7 million in write-down of inventories, increase of RMB63.0 million in donation combined with the gains on disposal of non-current assets of RMB8.0 million for the six months ended 30 June 2023 while losses of RMB11.0 million recognized for the same period last year.

For the six months ended 30 June 2023 and 2022, the Group’s net amount of other incomes and losses mainly comprised government grants, net gains or losses on disposal of noncurrent assets, interest income, donation and write-down of inventories.

Selling expenses

The Group’s selling expenses decreased from approximately RMB12.3 million for the six months ended 30 June 2022 to approximately RMB7.2 million for the six months ended 30 June 2023, representing a decrease of 41.2% as compared with the corresponding period last year. The decrease in the Group’s selling expenses was mainly attributable to the decrease in marketing related expenses. The Group’s selling expenses mainly comprised salaries of sales staff and marketing related expenses.

Administrative expenses

The Group’s administrative expenses increased from approximately RMB123.1 million for the six months ended 30 June 2022 to approximately RMB140.3 million for the six months ended 30 June 2023, representing an increase of 14.0% as compared with the corresponding period last year. The increase in the Group’s administrative expenses was mainly attributable to the increase in staff cost during the reporting period. The Group’s administrative expenses mainly comprised salaries and related personnel expenses of the administrative, finance and human resources departments, consultancy fees and other incidental administrative expenses.

Finance costs

The Group’s finance costs increased from approximately RMB10.9 million for the six months ended 30 June 2022 to approximately RMB37.5 million for the six months ended 30 June 2023, representing an increase of 242.8% as compared with the corresponding period last year. The increase in the Group’s finance costs was mainly attributable to the increase in both average balance of interest-bearing liabilities and interest rate during the period.

– 29 –

Income tax expense

The major components of income tax expense in the consolidated statement of profit or loss and other comprehensive income are:

Current tax — Mainland China Deferred income tax Reversal and origination of temporary differences Total tax expense for the period	Six months ended 30 June 2023 2022 RMB’000 RMB’000 71,978 596,715 (7,692) (23,991) 64,286 572,724

• (a) Pursuant to the rules and regulations of the Cayman Islands and the BVI, the Company and its subsidiary, Blue Gems Worldwide Limited and Porus Power Limited, are not subject to any income tax in the Cayman Islands and BVI, respectively.

• (b) Except for Kinetic Coal, PRC CIT was provided at a rate of 25% on the taxable income of the companies comprising the Group within Mainland China, as adjusted for income and expense items which are not assessable or deductible for income tax purposes. Kinetic Coal was qualified as a “High and New Technology Enterprise” on 14 December 2022, hence it enjoys a preferential income tax rate of 15% from 2022 to 2024.

– 30 –

• (c) Pursuant to the PRC Corporate Income Tax Law, a 10% withholding tax is levied on dividends declared to foreign investors from the foreign investment enterprises established in Mainland China. The requirement is effective from 1 January 2008 and applies to earnings after 31 December 2007. A lower withholding tax rate may be applied if certain criteria are met. The Group is therefore liable for withholding taxes on dividends distributed by those subsidiaries established in Mainland China in respect of earnings generated from 1 January 2008. In 2023, Kinetic Development Group Limited, Blue Gems Worldwide Limited and Kinetic (Asia) Limited obtained Hong Kong SAR certificate of resident status for the calendar year 2022 and the two succeeding calendar years, respectively. As a result, under the “Arrangement between the Mainland China and Hong Kong SAR for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income”, the Group is subject to a withholding tax rate of 5% from 2022 to 2024. The relevant tax authorities in Mainland China has refunded the Group with the difference of PRC withholding tax incurred for the year ended 31 December 2022 which was calculated at the rate of 10% and 5%, amounting to RMB74,558,000. The Group provided for and paid the withholding taxes subject to a tax rate of 5% for the six months ended 30 June 2023.

Profit for the period

As a result of the foregoing, the Group recorded a consolidated net profit attributable to equity shareholders of the Company of approximately RMB570.2 million for the six months ended 30 June 2023, which decreased substantially from the consolidated net profit attributable to equity shareholders of the Company of approximately RMB1,365.3 million for the six months ended 30 June 2022, representing a decrease of 58.2% as compared with the corresponding period last year. Net profit margin decreased from 45.3% for the six months ended 30 June 2022 to 38.1% for the six months ended 30 June 2023.

Interim dividends

The Board proposed an interim dividend of 3.0 HK cents per share, payable to the shareholders of the Company on or before 3 November 2023. The dates for closure of register of members of the Company for ascertaining shareholders’ entitlement to receive the proposed interim dividend will be further announced. The total amount of the interim dividend to be distributed is estimated to be HKD252,900,000 (six months ended 30 June 2022: HKD505,800,000).

– 31 –

OTHER FINANCIAL INFORMATION

Liquidity and Financial Resources

For the six months ended 30 June 2023, the Group’s cash at bank was mainly used for the development of the Group’s Dafanpu Coal Mine and other business projects and for the proposed acquisitions, to service the Group’s indebtedness and to fund the Group’s working capital. The Group financed its funding requirements mainly through a combination of interest-bearing bank loans and cash generated from operating activities. The Group’s gearing ratio was approximately 15.0% as at 30 June 2023 as compared to the Group’s gearing ratio of approximately 5.0% as at 31 December 2022. This ratio is calculated as net debt divided by capital plus net debt. Net debt is calculated as total borrowings less cash at bank. Capital is equivalent to the total equity.

As at 30 June 2023, the Group’s cash at bank, amounting to approximately RMB348.0 million, were denominated in Renminbi (97.5%) and Hong Kong dollars (2.5%).

As at 30 June 2023, the Group had net current liabilities of RMB943,206,000 and has undertaken several acquisitions as disclosed in Note 13 to the financial information extracted from unaudited interim financial report with estimated total consideration of over RMB3.0 billion, of which the remaining amounts for the acquisitions and other capital expenditure amounting to approximately RMB1.2 billion will be paid in the near future. In addition, the Group has also been contemplating to expand existing business through actively seeking potential mining project targets or diversifying its business by stepping into new business other than mining. The Group needs to seek financing from banks or other financial institutions in order to fund the acquisitions and future capital expenditure. In light of our current liquidity position and our projected cash inflows generated from operations, the Directors are of the opinion that the Group will carefully monitor its liquidity position and assuming that the Group is able to generate sufficient cash inflows from future operations and obtain borrowings from bank or other financial institutions when needed, the Group will be able to meet its liabilities as and when they fall due for at least the next twelve months.

As at 30 June 2023 and 31 December 2022, the Group’s secured bank loans were as follows:

Current Non-current	30 June 2023 RMB’ 000 1,267,370 200,000 1,467,370	31 December 2022 RMB’ 000 300,000 583,000 883,000

– 32 –

As at 30 June 2023, the Group’s bank loans amounting to RMB1,434.4 million (As at 31 December 2022: RMB850.0 million) was jointly guaranteed by Mr. Zhang Li and Mr.Zhang Liang, Johnson and/or secured by the Group’s pledged deposits amounting to RMB800.0 million (As at 31 December 2022: RMB400.0 million) and/or the mining right of Dafanpu coal mine held by Kinetic Coal.

As at 30 June 2023, the Group’s bank loans amounting to RMB33.0 million (As at 31 December 2022: RMB33.0 million) was guaranteed by Kinetic Coal and Mr. Ju Wenzhong, a director of the Company.

Capital Expenditures and Commitments

The Group incurred capital expenditure of approximately RMB354.8 million for the six months ended 30 June 2023, which was mainly used for the proposed acquisitions and purchase of machinery and equipment of the Dafanpu Coal Mine.

The Group’s capital commitments as at 30 June 2023 amounted to approximately RMB1,175.6 million which will be mainly used in the acquisition, construction and purchase of mining machinery and properties.

Other commitment

According to the Group’s production plan in the coming few years, the underground extraction activities will go into corresponding agricultural land area currently occupied by various domestic households. As such, management of the Group have been liaising with those affected households for relocation requests and providing monetary compensation. As of 30 June 2023, the Group estimated the aggregate future compensation payable for such purpose to be approximately RMB21.4 million and corresponding payments are still in negotiation.

Significant Acquisitions

On 24 December 2021, the Group entered into an acquisition agreement with Guizhou Liliang, an entity owned by Mr. Zhang Li (a substantial Shareholder of the Company), to acquire its 75% equity interests in Changlin which is expected to own the mining rights of a coal mine in Guizhou upon completion of a restructuring, with a total consideration of RMB1,100,000,000. According to the acquisition agreement, the Group prepaid RMB550,000,000 in 2021 and RMB530,256,000 in 2022 to Guizhou Liliang, respectively. Prior to the completion of the acquisition, certain conditions shall be satisfied. If those conditions were not satisfied, the Group is entitled to require Guizhou Liliang to refund any payment (without interest) which the Group had actually made to it under the acquisition agreement. The recoverability of the prepayments are secured by 100% equity interests of Guizhou Liliang. This transaction, together with the Acquisition of Wuhai Fuliang, is a

– 33 –

connected and major transaction of the Group on an aggregate basis. The transaction with Guizhou Liliang is subject to the independent shareholders’ approval.

On 29 April and 12 July 2022, the Group entered into a property purchase agreement and a supplemental agreement with subsidiaries of Seedland, including Qingdao Shilu Ocean Big Data Investment Development Co., Ltd., Zunyi Field Real Estate Development Co., Ltd., Jingmen Shiqiang Real Estate Co., Ltd., Wuxi Shidi Real Estate Co., Ltd., Zhongshan Shidi Real Estate Co., Ltd. and Wuhan Pingan Zhongxin Real Estate Co., Ltd, all of which are controlled by Mr. Zhang Liang, Johnson (a substantial shareholder of the Company) to acquire certain properties with a total consideration of RMB809,480,000. The transaction is a connected transaction of the Group, which was duly approved by the independent shareholders of the Company on the extraordinary general meeting of the Company held on 25 October 2022.

On 30 May 2022, the Group entered into a property purchase framework agreement with Hainan Hangxiao, an entity controlled by Guangzhou R&F Properties Co., Ltd. of which Mr. Zhang Li (a substantial shareholder of the Company) is one of major shareholders, to acquire certain properties with a total consideration of RMB1,000,939,000. According to the property purchase framework agreement, the Group prepaid RMB564,625,000 to Hainan Hangxiao. The recoverability of the prepayment is secured by rights to 50% of sales proceeds from other properties in the same development project owned by Hainan Hangxiao according to a supplemental agreement signed in March 2023.

On 30 December 2022, the Group entered into an acquisition and subscription agreement with Mr. Zhang Li (a substantial shareholder of the Company) and Star Idea to acquire 36,500 existing shares of Star Idea, representing approximately 73% of the equity interest in Star Idea with a consideration of USD62,757,010. The Group prepaid USD19,435,763 to Mr. Zhang Li. The Group also agreed to subscribe for an additional 16,667 newly issued shares of Star Idea with a consideration of USD28,656,169, for which the Group partially prepaid the consideration as settled with a loan to Star Idea of USD9,098,333 pursuant to the Loan Agreement dated 4 November 2022. On 29 March 2023, due to the changes in macro-economy and regulatory condition and based on the status of the proposed acquisition then, the Group entered into a supplemental agreement with Mr. Zhang Li and Star Idea to terminate the subscription of additional 16,667 newly issued shares of Star Idea. As a result, with effect from 29 March 2023, the Loan Agreement has been reinstated, and the prepayment made by the Group to Star Idea in relation to the subscription agreement has been classified as a loan pursuant to the Loan Agreement and was recognised as other non-current assets. As of 30 June 2023, the total consideration was approximately USD62,757,010 and the consideration has been paid in cumulative amounts of USD33,178,763 (equivalent to RMB232,105,000). The acquisition is a connected transaction of the Group, which was duly approved by the independent shareholders of the Company on the extraordinary general meeting of the Company held on 28 July 2023.

– 34 –

For more details of the above acquisitions, please refer to Note 13 to the financial information extracted from unaudited interim financial report.

All above transactions have not yet been completed as at the date of this announcement. During the six months ended 30 June 2023, the Group had no significant investments in associates or joint ventures, and no material acquisitions or disposals of subsidiaries. The Group’s ability to fund the above-mentioned acquisitions and capital expenditures heavily relies on its future operating cash inflows and its ability to finance through bank loans which may be affected by the government macro-control policy and volatility in coal market price. The Group will carefully monitor its liquidity position.

Events after the Reporting Period

The details of the events after the reporting period are disclosed in Note 24 to the financial information extracted from unaudited interim financial report. Save as disclosed in this announcement, the Group had no significant non-adjusting events subsequent to 30 June 2023.

Financial Risk Management

(a) Interest Rate Risk

The Group’s exposure to the risk of changes in market interest rates relates primarily to the Group’s bank deposits and short-term debt obligations with a floating interest rate. As at 30 June 2023, the Group did not hold short-term debt obligations with a floating interest rate and are not exposed to significant interest rate risk.

(b) Foreign Currency Risk

The Company and its subsidiaries are not exposed to significant foreign currency risk since their transactions and balances are principally denominated in their respective functional currencies.

(c) Liquidity risk

Liquidity risk is the risk that the Group will encounter difficulties in meeting obligations associated with financial liabilities. The Group utilises cash flow forecast and other relevant information to monitor its liquidity requirements and to ensure the Group has sufficient cash to support its business and operational activities.

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Human Resources and Emolument Policy

As at 30 June 2023, the Group had a total of approximately 1,468 full-time employees in the Mainland China and Hong Kong, China. For the six months ended 30 June 2023, the total staff costs, including the directors’ emoluments, amounted to RMB196.0 million.

The Group’s emolument policies are formulated based on the performance and experience of employees and in line with the salary trends in the Mainland China and Hong Kong, China. Other employee benefits include performance-related bonuses, insurance and medical coverage and share options. The share option scheme adopted by the Company on 6 March 2012 expired on 5 March 2022. On 29 November 2022, the Company adopted a new share award scheme, which is funded by existing shares of the Company, providing employees with the opportunity to acquire equity interests in the Company. On 28 April 2023, the Company adopted the 2023 Share Option Scheme and the 2023 Share Award Scheme, pursuant to which only grant of awards involving new shares may be made. Appropriate training programs are also provided to employees by the Group in order to ensure continuous training and development of employees.

OTHER INFORMATION

CORPORATE GOVERNANCE

Corporate Governance Code

As the Company believes that good corporate governance is essential to the shareholders of the Company, the Board is committed to maintaining a high standard of corporate governance practices by placing strong emphasis on a quality Board, sound internal controls and effective accountability to the shareholders of the Company as a whole.

The Board is of the view that the Company has complied with the code provisions of the Corporate Governance Code as set out in Appendix 14 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “ Stock Exchange ”) (the “ Listing Rules ”) for the six months ended 30 June 2023.

Directors’ and Relevant Employees’ securities Transactions

The Company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers (the “ Model Code ”) as set out in Appendix 10 of the Listing Rules as its own code of conduct regarding directors’ securities transactions.

All the directors of the Company have confirmed, following specific enquiries by the Company, that they have fully complied with the required standards set out in the Model Code and the Company’s code of conduct for the six months ended 30 June 2023.

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Relevant employees who are likely to be in possession of inside information of the Group are also subject to compliance with the written guidelines on terms no less exacting than the required standards set out in the Model Code. Each of the relevant employees has been given a copy of the written guidelines.

No incident of non-compliance with these guidelines by the relevant employees was identified by the Company.

Audit Committee

The audit committee of the Company comprises two independent non-executive directors, namely Ms. Liu Peilian and Mr. Chen Liangnuan and one non-executive director, Ms. Zhang Lin. Ms. Liu Peilian is the chairlady of the Audit Committee, who possesses the appropriate professional qualification on accounting or related financial management expertise. The principal duties of the Audit Committee include the review and supervision of the Group’s financial reporting process and internal control system. The Audit Committee has reviewed the interim results of the Group for the six months ended 30 June 2023.

PURCHASE, SALE OR REDEMPTION OF THE COMPANY’S LISTED SECURITIES

During the six months ended 30 June 2023, neither the Company nor any of its subsidiaries has purchased, sold or redeemed any of the Company’s listed securities.

PUBLICATION OF INTERIM RESULTS AND INTERIM REPORT

The interim results announcement is published on the website of the Stock Exchange (http://www.hkexnews.hk) and the Company’s website at (http://www.kineticme.com). The interim report for 2023 will be dispatched to the shareholders of the Company and published on the respective websites of the Stock Exchange and the Company in due course.

By Order of the Board Kinetic Development Group Limited Ju Wenzhong Chairman and Executive Director

25 August 2023

As at the date of this announcement, the board of directors of the Company comprises seven directors, of whom three are executive directors, namely Mr. Ju Wenzhong (Chairman), Mr. Li Bo (Chief Executive Officer) and Mr. Ji Kunpeng; one is a non-executive director, namely Ms. Zhang Lin, and three are independent non-executive directors, namely Mr. Chen Liangnuan, Ms. Liu Peilian and Ms. Xue Hui.

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