CTI.L Regulatory News (CTI)

22 Sep 2006 12:55

Cathay International Holdings Ld22 September 2006 22 September 2006 CATHAY INTERNATIONAL HOLDINGS LIMITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2006 Chairman's Interim Statement After the re-positioning of Cathay in 2005, which included the acquisition ofNingbo Liwah Pharmaceutical Company Limited ("Liwah") and Lansen Medicine(Shenzhen) Company Limited ("Lansen") for our pharmaceutical business and there-opening of the extensively renovated Landmark Hotel (Shenzhen) (the "Hotel"),Cathay has in the first six months of 2006 concentrated on the consolidation andintegration of its pharmaceutical business and the re-launch of our Hotel. Results Hotel Pharmaceuticals Corporate Total Operations Office Research & Production, development marketing & distribution (Stated in USD 000)---------------------For the six months ended 30 June2006Revenue - - 7,211 - 7,211Segment grossprofit - - 4,442 - 4,442Segmentoperatingprofit/(loss) (25) (567) 357 (1,368) (1,603)Segmentprofit/(loss)beforetaxation (860) (554) 150 (1,697) (2,961)For the six months ended 30 June2005-------------------------------------Revenue - - - - -Segment gross profit - - - - -Segmentoperatingprofit/(loss) (823) (343) - (1,789) (2,955)Segmentprofit/(loss)beforetaxation (1,554) (335) - (1,742) (3,631)For the year ended 31 December 2005------------------------------------- Revenue - - 6,282 - 6,282Segment grossprofit - - 4,176 - 4,176Segmentoperatingprofit/(loss) (1,051) (400) 827 (3,487) (4,111)Segmentprofit/(loss)beforetaxation (2,298) (396) 708 (3,609) (5,595)-------------------- -------- -------- -------- -------- -------- Turnover for the six months to 30 June 2006 was USD7,211,000 (2005: Nil),generated from the sale of pharmaceutical products by Liwah and Lansen. Liwahand Lansen were acquired by Cathay in August 2005 and therefore no turnover wasrecorded in the comparative period in 2005. During the six months to 30 June 2006, the Hotel was still in its soft-reopeningperiod and its turnover was recorded as a reduction of the pre-operatingexpenses during the renovation period. The gross profit for the period was USD4,442,000 (2005: Nil). This was generatedfrom the sale of pharmaceutical products by Liwah and Lansen. After deducting selling and distribution expenses, administration expenses andfinance costs, the Group had an operating loss for the six month period ofUSD1,603,000 (2005: loss of USD2,955,000). The loss after tax and minorityinterests was USD2,923,000 (2005: loss of USD3,631,000). Biotechnology and Pharmaceutical Business Cathay's first investment in the biotechnology and pharmaceutical industry wasan investment in research and development businesses in 2003. This was followedby an investment in pharmaceutical manufacturing, marketing and distributionbusinesses in 2005. As a result of these investments, Cathay has established ateam of pharmaceutical professionals capable of operating an independentvertically integrated pharmaceutical company. During the six months to 30 June 2006, the biotechnology and pharmaceuticalgroup has gone through an internal restructuring to unify and integrate themanagement team and systems with the goal of operating its business in a morecoherent way and to utilize more effectively its capital and resources. The principal activities of each of the pharmaceutical subsidiaries remainunchanged. - Changchun Botai Medicine and Biological Technology Company Limited ("Botai") has continued to concentrate on the research and development of medical products in the areas of biological materials such as collagen, diagnostic kits and drug delivery systems. In particular, it is engaged in the research and development of drugs that will complement the existing product lines marketed and distributed by Lansen. - Tianjin Longbai Biological Engineering and Technology Company Limited ("Longbai") has continued to proceed with the research and development of drug delivery formats and further progress has been made in the oral fast release drug series. Longbai continues to assist Liwah in the final stage of the application for State Food and Drug Administration ("SFDA") approval of the New Drug Licences and Production Licences for oral fast release analgesics and anti-infectives. - Liwah is principally engaged in the manufacture and sale of Chinese herbal medicine and herbal extracts in the form of capsules, tablets, granules and liquid medication. The construction of Liwah's new herbal extract production facilities is at an advanced stage. The herbal extract plant will produce a whole range of extracts including Ginkgo Biloba, Green Tea, Red Clover, Paeonia Lactiflora and Huperzia Serrate for natural and traditional Chinese medical uses. The construction of Liwah's new drugs production facilities is also progressing. We expect that these new production facilities will become operational and will contribute to Cathay's earnings during the first half of 2007. - Lansen is principally engaged in the marketing and distribution of pharmaceutical products in China. The majority of its products relate to rheumatic, orthopedic and stomatology conditions and diseases. Lansen's extensive sales network covers almost all of the major cities of China. We envisage that Cathay will, in the coming years, expand its biotechnology andpharmaceutical businesses through further acquisitions as well as throughorganic growth. We will seek to acquire companies that offer growth potential,particularly those with products and/or production facilities that would createsynergies with our existing products. Cathay also intends to strengthen itsresearch and development in pharmaceutical products guided by the practicalinsights and the extensive market knowledge of its marketing and sales team. Landmark Hotel (Shenzhen) We believe that the Landmark Hotel is now the leading luxury class hotel inShenzhen and indeed in Southern China. Following its extensive renovation theHotel now has 235 enlarged rooms and suites (the smallest room size is 48 squaremetres), an enlarged banqueting facility, an executive lounge, an Italianrestaurant and coffee shop, a wine and cigar lounge, a lobby lounge and a luxuryspa and fitness centre, operated by Malaysian Lifestyle Spa & Fitness Center, anexperienced international spa operator. A grand opening ceremony of the spa &fitness centre was held on 5 September 2006. The Hotel is preparing its application for a "platinum five-star" hotel ratingof the China National Tourism Administration, the highest hotel standard inChina. The feedback from hotel guests and other hoteliers has been positive, both onhardware (for example the extent of the new facilities and the increased roomsize) and software (for example the range and quality of services, including abutler service, the first to be introduced in Southern China). We have pricedour rooms at the top end of the market and this has resulted in average roomrates twice as high as those achieved prior to the renovation. Occupancy levelshave been increasing gradually over the past few months and we have commenced anactive marketing programme to increase market awareness of the Hotel followingits renovation. Our observation of the market situation in China is that when ahotel is re-positioned and re-launched, it can take up to 18 months after thegrand re-opening of the hotel for the pricing and occupancy to reach normallevels. Private Placement On 20 April 2006, the Company announced that it had raised £1,500,000(approximately USD2,673,000) by way of a private placement of 15,000,000 newcommon shares at an issue price of 10 pence per share. The principal purposes ofthe placing were to ensure that at least 25% of the Company's listed securitiesare in public hands, as required by the listing rules of the UK ListingAuthority, and to introduce new investors to the Company. Conclusion The Board is pleased with the initial performance of the recently acquiredpharmaceutical businesses and believes that the Group will gain significantbenefits through the addition of the manufacturing and marketing capabilitiesand the integration of the management teams. In particular, the Board believesthat it is well positioned for future expansion in this high growth industry inChina. As the market experiences our newly renovated Landmark, the Board is ofthe view that it will make an increasing contribution to group results. The Company will continue actively to seek new business opportunities in China.We believe that a strong professional management team is critical to theimplementation of Cathay's strategy. Our corporate office has been built over anumber of years and consists of a first-rate team of professionals experiencedin China and international capital markets. The team is skilled in evaluatingbusiness opportunities, managing the Group's assets and reacting in a timely wayto changes in market conditions and the legal and regulatory framework in China.Management has been recently reorganised and made more cost effective and theteam now in place is well positioned to manage the expected expansion. As weexpand, the cost/revenue ratio will improve. On behalf of the Board, I would like to thank our management and staff for theircontinued dedication and commitment. James BuchananChairman Enquiries: Stephen Hunt (Deputy Chairman) (via Brunswick) 020 7404 5959Patrick Sung (Director - Finance) Jon Coles, Brunswick 020 7404 5959 CATHAY INTERNATIONAL HOLDINGS LIMITED GROUP CONDENSED INCOME STATEMENT Six months Six months Year ended ended 30 June ended 30 June 31 December 2006 2005 2005 (Unaudited) (Unaudited) (Audited) Note USD'000 USD'000 USD'000--------------------- ------ --------- --------- -------- CONTRACTED INCOME 7,211 - 11,232CONSOLIDATION ADJUSTMENT - - (4,950)--------------------- ------ --------- --------- --------REVENUE 2 7,211 - 6,282COST OF SALES (2,769) - (2,106)--------------------- ------ --------- --------- --------GROSS PROFIT 4,442 - 4,176SELLING AND DISTRIBUTION (3,060) - (2,405)EXPENSESADMINISTRATIVE EXPENSES (2,960) (2,132) (5,006)PRE-OPERATING EXPENSES (25) (823) (876)--------------------- ------ --------- --------- --------LOSS FROM OPERATIONS (1,603) (2,955) (4,111)FINANCE COSTS - NET (1,358) (676) (1,484)--------------------- ------ --------- --------- --------LOSS BEFORE TAXATION 2 (2,961) (3,631) (5,595)TAXATION 3 - - ---------------------- ------ --------- --------- --------LOSS ON ORDINARYACTIVITIESAFTER TAXATION (2,961) (3,631) (5,595)--------------------- ------ --------- --------- --------ATTRIBUTABLE TO:MINORITY INTEREST (38) - 750EQUITY SHAREHOLDERS (2,923) (3,631) (6,345)--------------------- ------ --------- --------- -------- (2,961) (3,631) (5,595)--------------------- ------ --------- --------- --------LOSS PER SHAREBASIC 4 (1.10) cents (2.01) cents (2.87) cents--------------------- ------ --------- --------- -------- CATHAY INTERNATIONAL HOLDINGS LIMITEDGROUP CONDENSED BALANCE SHEET As at As at As at 30 June 30 June 31 December 2006 2005 2005 (Unaudited) (Unaudited) (Audited) Note USD'000 USD'000 USD'000--------------------- ------ -------- -------- --------ASSETS NON-CURRENT ASSETSProperty, plant andequipment 134,227 115,925 129,452Investment property 1,333 - 1,319Intangible assets 545 192 575Goodwill 6,487 180 6,243Investments - 4,910 -Loans to minorityshareholders 1,423 - 126--------------------- -------- -------- -------- 144,015 121,207 137,715--------------------- -------- -------- -------- CURRENT ASSETSInventory 2,240 230 2,520Trade and otherreceivables 13,235 1,922 11,538Cash and cash 4,720 2,582 10,020equivalents -------- -------- ----------------------------- 20,195 4,734 24,078--------------------- -------- -------- -------- TOTAL ASSETS 164,210 125,941 161,793--------------------- -------- -------- -------- EQUITY ANDLIABILITIES CAPITAL AND RESERVES 78,668 68,910 79,640 MINORITY INTEREST 7,466 - 6,383TOTAL EQUITY 86,134 68,910 86,023 NON-CURRENTLIABILTIESBorrowings 3,026 316 23,241Deferred tax 5 15,164 15,264 15,164liabilities ------ -------- -------- ----------------------------- 18,190 15,580 38,405--------------------- -------- -------- -------- CURRENT LIABILITIESBorrowings 29,400 35,915 8,332Trade and other 30,486 5,536 29,033payables -------- -------- ----------------------------- 59,886 41,451 37,365--------------------- -------- -------- -------- TOTAL LIABILITIES 78,076 57,031 75,770TOTAL EQUITY ANDLIABILITIES 164,210 125,941 161,793--------------------- -------- -------- -------- CATHAY INTERNATIONAL HOLDINGS LIMITED GROUP CONDENSED STATEMENT OF CHANGES IN 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---------------- ------ ------ ------ ------ ------ ------ ------ ------ Balance at 1January 2005 9,042 - 43,320 53,529 (10,463) 1,083 (24,170) 72,341---------------- ------ ------ ------ ------ ------ ------ ------ ------Exchange -differencesarising ontranslation offoreigncurrencyoperations - - - (8) 208 - - 200---------------- ------ ------ ------ ------ ------ ------ ------ ------Net incomerecogniseddirectly inequity - - - (8) 208 - - 200Loss for theperiod - - - - - - (3,631) (3,631)---------------- ------ ------ ------ ------ ------ ------ ------ ------Total recognisedincome andexpensesfor the period - - - (8) 208 - (3,631) (3,431)---------------- ------ ------ ------ ------ ------ ------ ------ ------ Balance at 30June 2005 9,042 - 43,320 53,521 (10,255) 1,083 (27,801) 68,910---------------- ------ ------ ------ ------ ------ ------ ------ ------ Balance at 1January 2006 13,043 8,355 43,320 55,884 (11,551) 1,104 (30,515) 79,640---------------- ------ ------ ------ ------ ------ ------ ------ ------Exchange -differencesarising ontranslation offoreigncurrencyoperations - - - 747 (1,022) 12 - (263) Reverse waiverof payable tominorityintereston impairmentof intangibleassets - - (397) - - - - (397)---------------- ------ ------ ------ ------ ------ ------ ------ ------Net incomerecogniseddirectly inequity - - (397) 747 (1,022) 12 - (660)Loss for theperiod - - - - - - (2,923) (2,923)---------------- ------ ------ ------ ------ ------ ------ ------ ------Total recognisedincome andexpensesfor the period - - (397) 747 (1,022) 12 (2,923) (3,583)---------------- ------ ------ ------ ------ ------ ------ ------ ------Issue of sharecapital 750 1,861 - - - - - 2,611---------------- ------ ------ ------ ------ ------ ------ ------ ------ Balance at 30June 2006 13,793 10,216 42,923 56,631 (12,573) 1,116 (33,438) 78,668---------------- ------ ------ ------ ------ ------ ------ ------ ------ GROUP CONDENSED CASH FLOW STATEMENT Six months Six months Year ended ended 30 June ended 30 June 31 December 2006 2005 2005 (Unaudited) (Unaudited) (Audited) USD'000 USD'000 USD'000------------------------ --------- --------- --------- Net cash used in operatingactivities (4,335) (3,307) (9,912)Net cash used in investingactivities (4,707) (8,001) (14,713)Net cash from financingactivities 4,118 10,511 30,234Effects of exchange ratechanges (376) (456) 576------------------------ --------- --------- --------- Net (decrease)/increase incash and cash equivalents (5,300) (1,253) 6,185Cash and cash equivalentsat beginning of the period 10,020 3,835 3,835------------------------ --------- --------- --------- Cash and cash equivalentsat end of the period 4,720 2,582 10,020------------------------ --------- --------- --------- CATHAY INTERNATIONAL HOLDINGS LIMITED NOTES 1. BASIC OF PREPARATION The interim condensed financial statements have been prepared in accordance withInternational Accounting Standard (IAS) 34, Interim Financial Reporting andunder the historical cost convention, modified where appropriate to incorporatea professional valuation of certain fixed assets. The accounting policies adopted are consistent with those followed in thepreparation of the Group's annual financial statements for the year ended 31December 2005. Certain comparative figures for the period ended 30 June 2005 incondensed income statement and segment information have been reclassified toconform to the current period's presentation. There is no impact on the Group'sloss attributable to shareholders for the periods presented. 2. SEGMENTAL INFORMATION Six months Six months Year ended ended 30 June ended 30 June 31 December 2006 2005 2005 (Unaudited) (Unaudited) (Audited) USD'000 USD'000 USD'000------------------- --------- --------- --------Classes of Business RevenuePharmaceuticals:Research & - - -DevelopmentProduction, Marketing& 7,211 - 6,282DistributionHotel Operations - - -------------------- --------- --------- -------- 7,211 - 6,282------------------- --------- --------- -------- (Loss)/Profit beforetaxationPharmaceuticals:Research & Development (554) (335) (396)Production, Marketing& 150 - 708DistributionHotel Operations (860) (1,554) (2,298)Corporate Office (1,697) (1,742) (3,609)------------------- --------- --------- -------- (2,961) (3,631) (5,595)------------------- --------- --------- -------- All turnover during the period arose from activities in China. 3. TAXATION No provision for current tax has been made as there was no assessable profitduring the period. 4. LOSS PER SHARE Loss per share is based upon the loss after tax attributable to shareholders ofUSD2,923,000 for the six months ended 30 June 2006 (six months ended 30 June2005: loss of USD3,631,000) and the weighted average number of A shares andcommon shares in issue during the period of 11,854,143 and 254,005,961respectively (30 June 2005 - A shares: 12,144,615, common shares: 168,697,710). 5. DEFERRED TAX As at As at As at 30 June 2006 30 June 2005 31 December 2005 (Unaudited) (Unaudited) (Audited) USD'000 USD'000 USD'000 --------- --------- ---------- Deferred tax liabilities onrevaluation of properties 16,545 16,134 16,545Deferred tax assets on taxlosses (1,381) (870) (1,381)------------------------ --------- --------- ----------Net position 15,164 15,264 15,164------------------------ --------- --------- ---------- The movement for the period in the net deferred tax position was as follows: As at As at As at 30 June 2006 30 June 2005 31 December 2005 (Unaudited) (Unaudited) (Audited) USD'000 USD'000 USD'000 ------------------------ --------- --------- ---------- At 1 January 15,164 15,264 15,264Charge to equity - - (100)------------------------ --------- --------- ---------- 15,164 15,264 15,164 ------------------------ --------- --------- ---------- 6. PUBLICATION OF NON-STATUTORY ACCOUNTS The unaudited interim results do not constitute full accounts prepared inaccordance with the listing rules of the UK Financial Services Authority. Thefigures for the year ended 31 December 2005 have been based on the full accountsof the Company which were prepared under IFRS and which included an unqualifiedaudit report. The interim financial information in this report has been neitheraudited nor reviewed by the Company's auditors. 7. Copies of this report have been sent to shareholders and are available tothe public from the Company's UK Transfer Agents, Capita Registrars, TheRegistry, 34 Beckenham Road, Beckenham, Kent BR3 4TU. This information is provided by RNS The company news service from the London Stock Exchange