29 Aug 2008 16:00
29 August 2008
CATHAY INTERNATIONAL HOLDINGS LIMITED
INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2008
| | Pharmaceutical | | | |
| | | Production | | |
| Hotel | Research & | marketing & | Corporate | |
| Operations | development | distribution | Office | Total |
(Stated in USD’000) | | | | | |
| | | | | |
Forthesixmonthsended30June2008 | | | | | |
Revenue | 4,520 | – | 25,001 | – | 29,521 |
Segmentgrossprofit | 575 | – | 12,385 | – | 12,960 |
Segmentoperatingprofit/(loss) | 627 | (521) | 2,245 | (1,087) | 1,264 |
Segmentfinancecosts–net | (1,060) | 2 | (1,043) | (1,393) | (3,494) |
Segmentprofit/(loss)beforeincometax | (433) | (519) | 1,202 | (2,480) | (2,230) |
| | | | | |
Forthesixmonthsended30June2007 | | | | | |
Revenue | 3,387 | – | 10,031 | – | 13,418 |
Segmentgrossprofit/(loss) | (366) | – | 6,903 | – | 6,537 |
Segmentoperatingprofit/(loss) | (230) | (541) | 844 | (1,356) | (1,283) |
Segmentfinancecosts–net | (837) | – | (247) | (972) | (2,056) |
Segmentprofit/(loss)beforeincometax | (1,067) | (541) | 597 | (2,328) | (3,339) |
| | | | | |
Fortheyearended31December2007 | | | | | |
Revenue | 7,495 | – | 26,684 | – | 34,179 |
Segmentgrossprofit/(loss) | (769) | – | 16,833 | – | 16,064 |
Segmentoperatingprofit/(loss) | (674) | (1,213) | 784 | (1,844) | (2,947) |
Shareoflossofanassociate | – | – | (21) | – | (21) |
Segmentfinancecosts–net | (1,630) | 2 | (830) | (2,469) | (4,927) |
Segmentlossbeforeincometax | (2,304) | (1,211) | (67) | (4,313) | (7,895) |
| | | | | |
Gross turnover for the six months ended 30 June 2008 was USD29,521,000 compared with USD13,418,000 for the six months ended 30 June 2007. The increase in turnover was the result of :
i) 66% growth in sales of the existing pharmaceutical production, marketing and distribution businesses of Liwah and Lansen;
ii) growth in sales of Crowne Plaza Hotel & Suites Landmark Shenzhen.
The Group's gross profit for the six month period was USD12,960,000 (2007: USD6,537,000). The increase was due to growth in sales of pharmaceutical products and to an increased contribution from the hotel sector.
The Group recorded an operating profit of USD1,264,000 (2007: loss of USD1,283,000). The pharmaceutical production, marketing and distribution businesses increased operating profit to USD2,245,000 (2007: USD844,000). Corporate office expenses and salaries have been stable when compared to the same period last year.
The Group's loss before income tax for the six month period was USD2,230,000 (2007: loss of USD3,339,000). The reduction of the gross loss was mainly due to increased contributions from the hotel and pharmaceutical production, marketing and distribution sectors.
The finance costs for the six month period were USD3,494,000 (2007: USD2,056,000). The increase was due to the higher utilisation of bank facilities.
BIOTECHNOLOGY AND PHARMACEUTICAL BUSINESS
Ningbo Liwah Pharmaceutical Company Limited ("Liwah") and Lansen Medicine (Shenzhen) Company Limited ("Lansen") continue to be the major contributors to the Group's pharmaceutical business. Their business grew by 66% when compared to the same period in 2007.
The gross profit margin of the Liwah and Lansen pharmaceutical business was 70% (2007: 69%).
CROWNE PLAZA HOTEL & SUITES LANDMARK SHENZHEN
The Shenzhen hotel industry remains highly competitive. In addition, the hotel industry in China was adversely affected by the Sichuan earthquake in May which reduced travel and entertainment throughout China. The travel industry expected the number of foreign visitors to increase in the run up to and during the Olympic Games. However, the Chinese government, in the interests of security for the Games, imposed stringent restrictions on the issuance of foreign visas in the second quarter of 2008. This resulted in the cancellation of numerous business conferences and seminars across China and sharply reduced the expected number of business travellers. This in turn led to reduced occupancy levels at our hotel.
Despite the difficult operating environment, we are pleased to report that the InterContinental Hotels Group ("IHG"), which has been managing the hotel since 18 December 2007, has achieved an average occupancy rate of 43% (2007: 34%) and an average room rate of USD130 (2007: USD118) for the first six months of 2008. The hotel's profit from operations for the first six months of 2008 was USD627,000 (2007: loss of USD230,000).
In accordance with our usual practice, the Group will conduct an annual valuation of the hotel at the year end.
BANK FACILITIES
In June 2008, the Group obtained a 3-5 year banking facility in the amount of USD22 million. The facility will be used to re-finance existing loans and for corporate funding requirements.
CONCLUSION
The Board believes that it is well positioned for continued expansion in the pharmaceutical industry in China. With regard to the hotel business, the Board is of the view that IHG is already having a positive impact on performance in a very difficult market. As conditions return to normal in China, we expect enhanced hotel results.
On behalf of the Board, I would like to thank our management and staff for their continued dedication and commitment.
James Buchanan
Chairman
Enquiries:
Stephen Hunt (Deputy Chairman) (via Brunswick) 020 7404 5959
Patrick Sung (Director - Finance)
GROUP CONDENSED INCOME STATEMENT
| | Six months | Six months | Year ended |
| | ended 30 June | ended 30 June | 31 December |
| | 2008 | 2007 | 2007 |
| | (Unaudited) | (Unaudited) | (Audited) |
| Note | USD'000 | USD'000 | USD'000 |
| | | | |
REVENUE | 2 | 29,521 | 13,418 | 34,179 |
COST OF SALES | | (16,561) | (6,881) | (18,115) |
GROSS PROFIT | | 12,960 | 6,537 | 16,064 |
SELLING AND DISTRIBUTION EXPENSES | | (6,835) | (4,368) | (10,323) |
ADMINISTRATIVE EXPENSES | | (4,633) | (3,287) | (6,025) |
PROVISION FOR DOUBTFUL DEBTS | | (228) | (165) | (2,663) |
PROFIT/ (LOSS) FROM OPERATIONS | | 1,264 | (1,283) | (2,947) |
SHARE OF LOSS OF AN ASSOCIATE | | - | - | (21) |
FINANCE COSTS - NET | | (3,494) | (2,056) | (4,927) |
LOSS BEFORE INCOME TAX | 2 | (2,230) | (3,339) | (7,895) |
INCOME TAX EXPENSE | 3 | (385) | (178) | (370) |
LOSS FOR THE PERIOD | | (2,615) | (3,517) | (8,265) |
| | | | |
ATTRIBUTABLE TO: | | | | |
EQUITY SHAREHOLDERS OF THE PARENT | | (2,411) | (3,504) | (8,026) |
MINORITY INTERESTS | | (204) | (13) | (239) |
| | (2,615) | (3,517) | (8,265) |
| | | | |
LOSS PER SHARE ATTRIBUTABLE TO EQUITY SHAREHOLDERS OF THE PARENT | 4 | | | |
BASIC | | (0.87) cents | (1.27) cents | (2.91) cents |
DILUTED | | N/A | N/A | N/A |
GROUP CONDENSED BALANCE SHEET
| | | As at | | As at | | As at |
| | | 30 June | | 30 June | | 31 December |
| | | 2008 | | 2007 | | 2007 |
| | | (Unaudited) | | (Unaudited) | | (Audited) |
| | | USD'000 | | USD'000 | | USD'000 |
ASSETS | | | | | | | |
| | | | | | | |
NON-CURRENT ASSETS | | | | | | | |
Property, plant and equipment | | | 153,299 | | 147,336 | | 147,843 |
Land use rights | | | 3,099 | | 1,801 | | 2,953 |
Investment property | | | 1,553 | | 1,405 | | 1,464 |
Intangible assets | | | 1,386 | | 499 | | 1,299 |
Goodwill | | | 9,156 | | 7,781 | | 8,702 |
Interest in an associate | | | - | | - | | 804 |
Loans to minority shareholders | | | 645 | | 674 | | 645 |
| | | 169,138 | | 159,496 | | 163,710 |
| | | | | | | |
CURRENT ASSETS | | | | | | | |
Inventories | | | 8,336 | | 2,149 | | 8,559 |
Trade and other receivables | | | 18,996 | | 11,617 | | 24,421 |
Land use rights | | | 67 | | 39 | | 63 |
Pledged bank deposits | | | 6,556 | | - | | 5,466 |
Cash and cash equivalents | | | 11,483 | | 1,412 | | 11,247 |
| | | 45,438 | | 15,217 | | 49,756 |
| | | | | | | |
TOTAL ASSETS | | | 214,576 | | 174,713 | | 213,466 |
| | | | | | | |
EQUITY AND LIABILITIES | | | | | | | |
| | | | | | | |
EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT | | | 64,298 | | 78,358 | | 66,062 |
| | | | | | | |
MINORITY INTERESTS | | | 9,496 | | 7,319 | | 9,784 |
TOTAL EQUITY | | | 73,794 | | 85,677 | | 75,846 |
| | | | | | | |
NON-CURRENT LIABILITIES | | | | | | | |
Borrowings | | | 50,536 | | 2,121 | | 41,410 |
Deferred tax liabilities | | | 16,992 | | 16,820 | | 16,992 |
| | | 67,528 | | 18,941 | | 58,402 |
| | | | | | | |
CURRENT LIABILITIES | | | | | | | |
Borrowings | | | 29,998 | | 29,506 | | 36,823 |
Current tax liabilities | | | 608 | | 457 | | 671 |
Trade and other payables | | | 42,648 | | 40,132 | | 41,724 |
| | | 73,254 | | 70,095 | | 79,218 |
| | | | | | | |
TOTAL LIABILITIES | | | 140,782 | | 89,036 | | 137,620 |
TOTAL EQUITY AND LIABILITIES | | | 214,576 | | 174,713 | | 213,466 |
GROUP CONDENSED STATEMENT OF CHANGES IN EQUITY
| | Minority | Total | |||||||
| Attributable to equity holders of the parent | Interests | Equity | |||||||
| | | Capital and | | Exchange | | Profit | | | |
| Share | Share | Special | Revaluation | Equalisation | Statutory | and Loss | | | |
| Capital | Premium | Reserve | Reserve | Reserve | Reserve | Account | Total | | |
| USD'000 | USD'000 | USD'000 | USD'000 | USD'000 | USD'000 | USD'000 | USD'000 | USD'000 | USD'000 |
| | | | | | | | | | |
Balance at 1 January 2007 | 13,793 | 10,216 | 42,923 | 64,176 | (14,529) | 1,143 | (35,830) | 81,892 | 7,789 | 89,681 |
Exchange differences arising on translation of foreign currency operations | - | - | - | 2,308 | (2,371) | 33 | - | (30) | 6 | (24) |
Net income recognised directly in equity | - | - | - | 2,308 | (2,371) | 33 | - | (30) | 6 | (24) |
Loss for the period | - | - | - | - | - | - | (3,504) | (3,504) | (13) | (3,517) |
Total recognised income and expenses | | | | | | | | | | |
for the period | - | - | - | 2,308 | (2,371) | 33 | (3,504) | (3,534) | (7) | (3,541) |
Deemed disposal of interest in subsidiaries | - | - | - | - | - | - | - | - | 325 | 325 |
Buy back shares from minority interests | - | - | - | - | - | - | - | - | (788) | (788) |
Transfer to statutory reserve | - | - | - | - | - | 223 | (223) | - | - | - |
| | | | | | | | | | |
Balance at 30 June 2007 | 13,793 | 10,216 | 42,923 | 66,484 | (16,900) | 1,399 | (39,557) | 78,358 | 7,319 | 85,677 |
| | | | | | | | | | |
Balance at 1 January 2008 | 13,793 | 10,216 | 42,923 | 63,429 | (21,692) | 1,849 | (44,456) | 66,062 | 9,784 | 75,846 |
Exchange differences arising on | | | | | | | | | | |
translation of foreign currency operations | - | - | 1 | 4,689 | (4,154) | 111 | - | 647 | (64) | 583 |
Net income recognised directly in equity | - | - | 1 | 4,689 | (4,154) | 111 | - | 647 | (64) | 583 |
Loss for the period | - | - | - | - | - | - | (2,411) | (2,411) | (204) | (2,615) |
Total recognised income and expenses | | | | | | | | | | |
for the period | - | - | 1 | 4,689 | (4,154) | 111 | (2,411) | (1,764) | (268) | (2,032) |
Acquisition of a subsidiary | - | - | - | - | - | - | - | - | 104 | 104 |
Adjustments on goodwill | - | - | - | - | - | - | - | - | (124) | (124) |
| | | | | | | | | | |
Balance at 30 June 2008 | 13,793 | 10,216 | 42,924 | 68,118 | (25,846) | 1,960 | (46,867) | 64,298 | 9,496 | 73,794 |
GROUP CONDENSED CASH FLOW STATEMENT
| | Six months | | Six months | | Year ended |
| | ended 30 June | | ended 30 June | | 31 December |
| | 2008 | | 2007 | | 2007 |
| | (Unaudited) | | (Unaudited) | | (Audited) |
| | USD'000 | | USD'000 | | USD'000 |
| | | | | | |
Net cash generated from/(used in) operating activities | | 4,185 | | 3,981 | | (13,926) |
Net cash used in investing activities | | (4,446) | | (3,000) | | (9,393) |
Net cash (used in)/generated from financing activities | | (756) | | (2,054) | | 32,977 |
| | | | | | |
Net (decrease)/increase in cash and cash equivalents | | (1,017) | | (1,073) | | 9,658 |
Effects of exchange rate changes | | 1,248 | | 527 | | (256) |
Cash and cash equivalents at beginning of the period | | 11,125 | | 1,723 | | 1,723 |
| | | | | | |
| | | | | | |
Cash and cash equivalents at end of the period | | 11,356 | | 1,177 | | 11,125 |
| | | | | | |
Analysis of cash and cash equivalents | | | | | | |
Cash and bank balances | | 11,483 | | 1,412 | | 11,247 |
Bank overdrafts | | (127) | | (235) | | (122) |
| | 11,356 | | 1,177 | | 11,125 |
NOTES TO THE ACCOUNTS
| Six months | Six months | Year ended |
| ended 30 June | ended 30 June | 31 December |
| 2008 | 2007 | 2007 |
| (Unaudited) | (Unaudited) | (Audited) |
| USD'000 | USD'000 | USD'000 |
| | | |
Revenue | | | |
Pharmaceutical: | | | |
Research & Development | - | - | - |
Production, Marketing & Distribution | 25,001 | 10,031 | 26,684 |
Hotel Operations | 4,520 | 3,387 | 7,495 |
| 29,521 | 13,418 | 34,179 |
| | | |
(Loss)/Profit before income tax | | | |
Pharmaceutical: | | | |
Research & Development | (519) | (541) | (1,211) |
Production, Marketing & Distribution | 1,202 | 597 | (67) |
Hotel Operations | (433) | (1,067) | (2,304) |
Corporate Office | (2,480) | (2,328) | (4,313) |
| (2,230) | (3,339) | (7,895) |