Legend Strategy International : Financial Statements/ESG Information - 2017 FIRST QUARTERLY REPORT

First Quarterly Report

2017

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this report, 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 report.

This report, for which the directors (the "Director(s)") of Goldway Education Group Limited (the "Company", together with its subsidiaries, the "Group") collectively and individually accept full responsibility, includes particulars given in compliance with the Rules governing the Listing of Securities on the Growth Enterprise Market of the Stock Exchange (the "GEM Listing Rules") for the purpose of giving information with regard to the Company. The Directors, having made all reasonable enquiries, confirm that, to the best of their knowledge and belief, the information contained in this report is accurate and complete in all material respects and not misleading or deceptive and there are no other matters the omission of which would make any statement herein or this report misleading.

This report will remain on the "Latest Listed Company Information" page of the website of the Stock Exchange at www.hkexnews.hk for at least seven days from the day of its publication. This report will also be published on the Company's website at www. goldwayedugp.com.

For the three months ended 30 June 2017, unaudited operating results of the Group were as follows:

• revenue of approximately HK$9.2 million, representing a slight decrease of 0.7% comparing to the same period of previous financial year;

• profit for the three months ended 30 June 2017 amounted to approximately HK$1.6 million, representing a decrease of 22.5% from the same period of previous financial year; and

• the Directors do not recommend the payment of interim dividend for the three months ended 30 June 2017.

The board of Directors (the "Board") of the Company is pleased to announce the unaudited results of the Group for the three months ended 30 June 2017 together with the comparative unaudited figures for the corresponding period in 2016 as follows:

For the three months ended 30 June 2017

For the three months ended 30 June 2017

HK$'000 HK$'000 HK$'000 HK$'000 HK$'000

Balance as at 1 April 2016 - - 3,372 12,006 15,378

Special dividends declared - - - (3,400) (3,400)

Profit and total comprehensive

income for the year - - - 2,791 2,791 Issue of new shares by share

offer 1,725 33,637 - -35,362

Capitalisation issue of shares 3,500 (3,500) - --

Expenses incurred in connection

with issue of new shares - (6,628) - -(6,628)

At 31 March 2016 and 1 April

2016 5,225 23,509 3,372 11,397 43,503

Profit and total comprehensive

income for the period - - - 1,623 1,623

Balance as at 1 April 2016 - - 3,372 12,006 15,378 Profit and total comprehensive

income for the period - - - 2,095 2,095

1. CORPORATE INFORMATION

   The Company was incorporated as an exempted company with limited liability in the Cayman Islands on 19 October 2015 and its shares have been listed on the Growth Enterprise Market of The Stock Exchange of Hong Kong Limited (the "Stock Exchange") (the "GEM Board") by way of placing and public offer of shares (the "Share Offer") on 2 December 2016 (the "Listing"). The Company's registered office and the principal place of business are at Cricket Square, Hutchins Drive, PO Box 2681, Grand Cayman, KY1-1111, Cayman Islands and Shop 203, Kin Sang Commercial Centre, Kin Sang Estate, Tuen Mun, New Territories, Hong Kong, respectively.

   The Group is principally engaged in the provision of tutoring services in Hong Kong. The Group provides private tutoring services including primary and secondary tutoring services under the trade name of "Logic Tutorial Centre".

   The companies comprising the Group underwent a reorganisation (the "Reorganisation") in preparation for Listing, pursuant to which the Company became the holding company of the Group. The details of the Reorganisation are set out in the prospectus issued by the Company dated 17 November 2016 (the "Prospectus").

2. BASIS OF PRESENTATION AND PREPARATION

   The Company became the holding company of the companies now comprising the Group subsequent to the completion of Reorganisation on 3 November 2016, the Group is regarded as a continuing entity resulting from the Reorganisation since the insertions of certain new holding companies at the top of Billion Bright Management Limited have no commercial substance and do not form a business combination. Accordingly, the consolidated financial statements have been prepared using the principles of merger accounting as if the Reorganisation had occurred as of the beginning of the earliest period presented and the current group structure had always been in existence.

   The consolidated statement of profit or loss and other comprehensive income and the consolidated statement of changes in equity of the Group for the period ended 30 June 2017 and 2016 include the financial performance of all companies now comprising the Group, as if the current structure had been in existence throughout the reporting periods, or since their respective dates of incorporation, where there is a shorter period.

   All significant intra-group transactions and unrealised gains on transactions have been eliminated on consolidation. Unrealised losses are also eliminated unless the transactions provide evidence of an impairment of the asset transferred.

   The consolidated financial statements have been prepared in accordance with Hong Kong Financial Reporting Standards ("HKFRSs"), which collective term includes all applicable individual HKFRSs, Hong Kong Accounting Standards ("HKASs") and also included the applicable disclosure requirements of the Hong Kong Companies Ordinance and the applicable disclosure provisions of the Rules Governing the Listing of Securities on the GEM Board ("GEM Listing Rules").

   The consolidated financial statements have been prepared on the historical cost convention.

   It should be noted that accounting estimates and assumptions are used in the preparation of the consolidated financial statements. Although these estimates are based on the management's best knowledge and judgement of current events and actions, actual results may ultimately differ from those estimates.

   The consolidated financial statements are presented in Hong Kong dollar ("HK$") which is also the functional currency of the Company. All values are rounded to the nearest thousand except when otherwise indicated.

   The accounting policies adopted in preparing the unaudited condensed consolidated financial statements were consistent with those applied for the financial statements of the Group for the year ended 31 March 2017.

   The condensed consolidated financial statements have not been audited by the auditors of the Company but have been reviewed by the audit committee of the Company.

3. REVENUE AND OTHER INCOME

   Revenue from the Group's principal activities, which is also the Group's turnover, represents the income from provision of tutoring services. Revenue and other income recognised during the period is as follows:

   For the three months ended 30 June

   2017	2016
   HK$'000	HK$'000
   (unaudited)	(unaudited)
   Revenue	9,229	9,292
   Income from tutoring services
   Other income	12	1
   Interest income

4. SEGMENT INFORMATION

   An operating segment is a component of the Group that is engaged in business activities from which the Group may earn revenue and incur expenses, and is identified on the basis of the internal management reporting information that is provided to and regularly reviewed by the Group's chief operating decision maker ("CODM") in order to allocate resources and assess performance of the segment. For the reporting period, management of the Company has determined that the Group has only one single business component/operating segment as the Group is only engaged in the provision of tutoring services which is the basis used by the CODM to allocate resources and assess performance. The Group's revenue from external customers is divided into the following types of services:

   Three months ended 30 June

   2017	2016
   HK$'000	HK$'000
   (unaudited)	(unaudited)
   Primary tutoring services	2,117	1,943
   Secondary tutoring services	7,112	7,349
   9,229	9,292

   The Company is an investment holding company and the principal place of the Group's operation is in Hong Kong. For the purpose of segment information disclosures under HKFRS 8, the Group regarded Hong Kong as its place of domicile. All the Group's revenue and non-current assets are principally attributable to Hong Kong, being the single geographical region.

5. INCOME TAX EXPENSES

   Hong Kong profits tax has been provided at the rate of 16.5% on the estimated assessable profit during the three months ended 30 June 2016 and 2017.

6. EARNINGS PER SHARE

   For the three months ended 30 June

   2017	2016
   HK$'000	HK$'000
   (unaudited)	(unaudited)
   Earnings	1,623	2,095
   Profit for the period attributable to the owners of the Company
   Number of shares	522,500,000	350,000,000
   Weighted average number of shares for the purpose of calculating basic earnings per share

   The number of shares used for the purpose of calculating basic earnings per share has been retrospectively adjusted for the issue of shares during the Reorganisation and capitalisation issue as if the shares had been in issue throughout the entire reporting periods.

   Diluted earnings per share amount was the same as basic earnings per share amount as there were no potential dilutive shares outstanding for the three months ended 30 June 2016 and 2017.

7. DIVIDEND

The Directors do not recommend the payment of interim dividend for the three months ended 30 June 2017 (2016: Nil).

Business Review

For the three months ended 30 June 2017 (the "Reporting Period"), the Group continued to focus on its principal business in relation to the provision of tutoring services to secondary school students and primary school students in Hong Kong.

Approximately 77.1% (2016: approximately 79.1%) of the revenue of the Group was generated from the provision of tutoring services to secondary school students and approximately 22.9% (2016: approximately 20.9%) of the revenue of the Group was generated from the provision of tutoring services to primary school students during the three months ended 30 June 2017.

The industry we operated is highly competitive and is generally fragmented. Despite the industry is experiencing the decrease of number of secondary school students in Hong Kong due to the low birth rate in the early 2000s, the number of primary school students in Hong Kong is expected to increase in coming years.

During the three months ended 30 June 2017, we have opened our new centre in Shatin and closed a centre in Tuen Mun due to the end of tenancy period. Recently, we have managed to operate 14 tutorial centres. The Group and our tutor continued to be attentive to the particular circumstances of our students and seek to offer sufficient support necessary for them to succeed.

Outlook

In anticipation that the number of secondary school students in Hong Kong will gradually decrease due to the low birth rate in the early 2000s, the management expects the number of primary school students in Hong Kong will experience a growth in coming years which will lead various business opportunities to the Group.

Moving forward, except continuing to follow the future plans disclosed in the prospectus issued by the Company dated 17 November 2016, the Group will seek for more diversified business opportunities together with implementing cost effective measures so as to enhance the profitability and remain competitive, including developing the tutoring business via franchising in order to achieve faster and larger network expansion. These diversified developments will be funded by the internally generated resources of the Group.

On the other hand, to expand our network in order to gain competitive advantage of geographical coverage, our new centre in Tsz Wan Shan is planned to start operation at the end of September 2017.

The Group will continue to explore new opportunities actively in order to strengthen the positive cash flow and earnings for the Group in long run and to generate greater value to the shareholders of the Group.

Financial Review

For the three months ended 30 June 2017, the Group recorded total revenue of approximately HK$9.2 million, representing a slight decrease of approximately 0.7% as compared to approximately HK$9.3 million for the three months ended 30 June 2016.

Employee benefit expenses mainly consist of wages and salaries, pension costs and other benefits to the staff and the Directors. Employee benefit expenses increased by 9.4% from approximately HK$3.6 million for the three months ended 30 June 2016 to HK$3.9 million for the three months ended 30 June 2017, which was primarily resulted from the recruitment of staff to support its expanding operations and the increase in other benefits incurred for employees.

The operating lease expense comprises rental expenses of tutorial centres. For the period ended 30 June 2017, operating lease expense increased by approximately 11.7% to approximately HK$2.1 million from approximately HK$1.9 million of the same period of previous financial year. The increase was mainly due to rent of new centres, which offset by closure of Lung Mun Centre.

The Group recorded a profit attributable to owners of the Company amounted to approximately HK$1.6 million for the three months ended 30 June 2017 (2016: HK$2.1 million), representing a decrease of approximately 22.5% from the same period of previous financial year. Such decrease was primarily due to i) increase in employee benefit expenses of approximately HK$0.3 million during the three months ended 30 June 2017 and ii) increase in operating lease expenses of approximately HK$0.2 million as compared to the same period of previous financial year. As a result, net profit margin declined to 17.6% for the three months ended 30 June 2017 from 22.5% of the corresponding period in 2016.

As at 30 June 2017, the Group did not have any significant contingent liabilities.

As at 30 June 2017, the interests and short positions of the Directors and chief executive of the Company in the shares (the "Shares"), underlying Shares and debentures of the Company or its associated corporations (within the meaning of Part XV of the Securities and Futures Ordinance) (the "SFO") which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they have taken or deemed to have under such provisions of the SFO) or which were required, pursuant to section 352 of the SFO, to be entered in the register referred to therein, or pursuant to Rules 5.46 to 5.67 of the GEM Listing Rules required to be notified to the Company and the Stock Exchange, were as follows:

Long position in the Shares

Notes:

1. The entire issued share capital of Digital Achiever Limited is legally and beneficially owned by Mr. Cheung Lick Keung. Mr. Cheung Lick Keung is deemed to be interested in the Shares in which Digital Achiever Limited is interested in under Part XV of the SFO.

2. Ms. Chan Hoi Ying Karina is the spouse of Mr. Cheung Lick Keung. Ms. Chan Hoi Ying Karina is deemed to be interested in the Shares in which Mr. Cheung Lick Keung is interested in under Part XV of the SFO.

Save as disclosed above, as at 30 June 2017, none of the Directors and chief executive of the Company or their associates had any interest or short position in any Shares, underlying Shares and debentures of the Company or its associated corporations (within the meaning of Part XV of the SFO which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they have taken or deemed to have under such provisions of the SFO) or which were required, pursuant to section 352 of the SFO, to be entered in the register referred to therein, or pursuant to Rules 5.46 to 5.67 of the GEM Listing Rules required to be notified to the Company and the Stock Exchange.

As at 30 June 2017, so far as the Directors are aware, the interests or short positions owned by the following persons (other than the Directors or chief executive of the Company) in the Shares or underlying Shares of the Company which were required to be notified to the Company under Divisions 2 and 3 of Part XV of the SFO, or who will be, directly or indirectly, interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of the Company or any other members of the Group:

Long position in the Shares