BJ HEALTH (02389) has issued an announcement. Based on the group's preliminary assessment of its unaudited consolidated management accounts for the six months ended June 30, 2026, and other available information, the operating performance of the group's medical and senior care product sales segment has declined due to intensified industry competition.

During the review period, this segment achieved revenue of approximately RMB 19.5 million, a year-on-year decline of about 70%. The segment's operating result is expected to shift from a profit of RMB 2 million in the same period last year to a loss of approximately RMB 15.6 million. The weakening revenue and profitability performance of the medical and senior care product sales segment is primarily attributed to multiple factors, including changes in the industry's operating environment, an increased proportion of low-margin projects, and delays in the acceptance of customer projects. Specific details are as follows:

1. Intensified industry competition and continuously narrowing project gross margins: Competition in the B2B market for commercial furniture used in education, medical, and senior care settings continues to intensify, with industry-wide price wars becoming common. Government procurement projects in many regions have implemented price controls, leading to continuously declining project winning prices, which compresses product gross profit margins. Simultaneously, the overall scale of project releases in the market has contracted, reducing the group's overall order volume.

2. Profit pressure from low-margin projects: Several projects won at low prices have had a combined negative impact of approximately RMB 2.4 million on the segment's profitability.

3. Delays in delivery and acceptance of large college and university projects: Certain large contract projects have had their delivery and acceptance procedures postponed due to client-side reasons. Corresponding expected profits of approximately RMB 12 million could not be recognized in the current review period. These revenues will be recorded in subsequent accounting periods once the recognition conditions are met.

In response to the current operational challenges facing the medical and senior care product sales segment, the group has formulated and is implementing an overall business strategy focused on optimizing operations, maintaining stable cash flow, and improving profitability levels. The group plans to implement the following operational improvement measures in the second half of 2026:

1. Optimize operating expenses and strictly control fixed costs: Implement a tiered salary adjustment mechanism, with management taking the lead in salary optimization to reasonably manage labor costs. Re-evaluate office lease arrangements across all locations, aiming to reduce annual fixed operating expenses by adjusting office space and negotiating lower rents with landlords. Optimize organizational structure and staffing levels, adjusting team size through natural attrition and other methods, with a plan to reduce the overall employee count by 15% by 2027, continuously improving per capita operational efficiency.

2. Broaden market channels and focus on high-margin, quality projects: Continue to deeply cultivate core business areas of furniture supporting education, medical, and senior care institutions. Participate in national professional exhibitions for educational equipment and the senior care industry. Deepen client relationship management, focusing on securing high-margin orders for customized overall space solutions. Deepen R&D cooperation with international brand KI, promoting the localized production of high-end desks, chairs, and office seating products. Reduce manufacturing costs through production process optimization, creating high-value-added products with differentiated market competitiveness.

3. Strengthen asset and project risk management: Formulate a categorized recovery plan based on the risk level of accounts receivable. Link collection performance to team and individual performance appraisals to accelerate the recovery of working capital. Implement dynamic, tiered project management, concentrating resources on prioritizing projects with high implementation probability and high gross margins. For projects with low gross margins or high collection risk, participate in bidding cautiously. Implement refined comprehensive budget management, strictly control non-production expenses, and establish an accounts receivable risk warning mechanism to ensure the group's overall cash flow remains stable.