27 Apr 2010 16:22
27 April 2010
CATHAY INTERNATIONAL HOLDINGS LIMITED
PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2009
Chairman's Statement
On behalf of the Board of Directors, I would like to presentthe preliminary statement of the Group for the financial year ended 31 December 2009.
PERFORMANCE
Turnover and Gross Profit
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|
Health Care | Hotel Operations | Corporate Office |
Total | ||
|
(Stated in USD'000) | Research & development | Lansen Group | Haotian Group |
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| For the year ended 31 December 2009 |
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|
|
| Segment revenue | - | 47,932 | 17,888 | 8,379 | - | 74,199 |
| Segment gross profit | - | 32,439 | 2,522 | 485 | - | 35,446 |
| Segment operating profit/(loss) | (595) | 9,357 | 192 | 513 | (3,182) | 6,285 |
| Segment finance costs | - | (454) | (750) | (1,460) | (1,724) | (4,388) |
| Segment profit/(loss) before income tax | (595) | 8,903 | (558) | (947) | (4,906) | 1,897 |
| Segment income tax expense | - | (1,251) | (90) | - | (272) | (1,613) |
| Segment profit/(loss) for the year before non-controlling interests |
(595) |
7,652 |
(648) |
(947) |
(5,178) |
284 |
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|
|
| For the year ended 31 December 2008 |
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|
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| Segment revenue | - | 37,022 | 18,941 | 9,090 | - | 65,053 |
| Segment gross profit | - | 26,024 | 2,409 | 184 | - | 28,617 |
| Segment operating profit/(loss) | (1,231) | 7,290 | 390 | 1,002 | (2,595) | 4,856 |
| Segment finance costs | - | (1,362) | (408) | (2,383) | (2,766) | (6,919) |
| Segment profit/(loss) before income tax | (1,231) | 5,928 | (18) | (1,381) | (5,361) | (2,063) |
| Segment income tax expense | - | (756) | (33) | - | (122) | (911) |
| Segment profit/(loss) for the year before non-controlling interests |
(1,231) |
5,172 |
(51) |
(1,381) |
(5,483) |
(2,974) |
Health Care Division
Lansen Group
Turnover of Lansen Pharmaceutical Holdings Limited and its subsidiaries (the "Lansen Group") increased by 29.5% (2008:53.3%) this year to USD47,932,000 (2008: USD37,022,000) and gross profit increased by 24.6% (2008: 58.2%) this year to USD32,439,000 (2008: USD26,024,000).
This significant improvement largely resulted from the strong performance of the pharmaceutical industry in China (despite the effects of the global financial crisis) and the Lansen Group's continued expansion of its distribution network. The gross profit margin for the Lansen Group was 67.7% in 2009 (2008: 70.3%).
In 2009, the Lansen Group maintained an operating profit margin of 19.5% (2008: 19.7%).
Haotian Group
With Xian Haotian Bio-Engineering Technology Co. Ltd. and its group companies (the "Haotian Group") concentrating on the development of its inositol project, turnover decreased by 5.6% this year to USD17,888,000 (2008: USD18,941,000) and gross profit increased by 4.7% this year to USD2,522,000 (2008: USD2,409,000). Due to an increase in foreign exchange loss, the operating profit decreased 50.8.% to USD192,000 (2008: USD390,000). The Haotian Group's operating profit margin was 1.1% (2008: 2.1%).
As at year end, the Company had increased its ownership of Xian Haotian to 100%. In March 2010, the Company brought its total investment in the Haotian Group to USD32,850,000.
Going forward, the Haotian Group's principal business will be in the manufacture, marketing and sale of inositol, a key ingredient for health care products. The facilities required for this project are expected to be completed in the second half of 2010. The Company expects the Haotian Group to become a significant contributor to its financial results within the next couple of years.
Hotel Division
Turnover of the hotel division decreased this year to USD8,379,000 (2008: USD9,090,000). Despite the difficult hotel operating environment in 2009, the Group's hotel, the Crowne Plaza Hotel & Suites Landmark Shenzhen (the "Hotel") has managed through stringent expense control to increase its gross profit to USD485,000 (2008: USD184,000).
The operating profit of the hotel division for the year was USD513,000 (2008: USD1,002,000).
The Hotel should steadily benefit from the global guest booking network of the InterContinental Hotels Group and its management expertise. The combination of a worldwide economic recovery and a greater market awareness of the hotel following two years of repositioning under a new brand name should lead to growth in the Hotel's contribution to the Group.
Corporate Office
The corporate office expenses were similar to those incurred in 2008. The apparent increase in corporate administrative expenses was primarily due to recognition of a foreign exchange gain of USD390,000 in 2008 compared to a gain of only USD30,000 in 2009.
The Group profit before income tax for 2009 was USD1,897,000 (2008: loss of USD2,063,000).
The Group profit before non-controlling interests for 2009 was USD284,000 (2008: loss of USD2,974,000), which was arrived at mainly after deducting finance costs totalling USD4,388,000 (2008: USD6,919,000). As set out in the table above the gross finance costs were as follows:
• USD1,204,000 (2008: USD1,770,000) in the health care division;
• USD1,460,000 (2008: USD2,383,000) in the hotel division; and
• USD1,724,000 (2008: USD2,766,000) in the corporate office.
The decrease in finance costs in the corporate office was mainly due to a decrease in interest rates in 2009.
Net Assets and Gearing
Net assets at the end of 2009 were USD114,771,000 (2008: USD72,208,000). The increase was primarily owing to the USD45,400,000 (£27,900,000), (USD43,600,000 net of expenses (£26,800,000)) proceeds of the placing and open offer of 101,632,670 New Common Shares at 27.5 pence per share (the "Placing and Open Offer"). As a result, net assets per share at the end of 2009 were USD0.30 (2008: USD0.26) and gearing decreased significantly to 64.5% (2008: 140.1%)
RECENT DEVELOPMENTS
Completion of Placing and Open Offer
As announced on 7 December 2009, the new common shares issued pursuant to the Placing and Open Offer were admitted to trading on the London Stock Exchange. The net proceeds of the Placing and Open Offer were used to reduce the Group's debt and associated financing costs, strengthen its financial position and improve the Group's ability to capitalise on suitable investment opportunities as they arise.
Appointment of Directors
On 21 January 2010 Cathay announced the appointment of Mr. Lee Jin-Yi ("Mr. Lee") and Mr. Siu Ka Chi Eric ("Mr. Siu") to the Board of Directors (the "Board") of the Company with effect from that date. Mr. Lee was appointed Chief Executive Officer, and Mr. Siu was appointed Finance Director. Brief biographical details of Mr. Lee and Mr. Siu are set out in the Annual Report.
The Company also announced that Mr. Wu Zhen Tao, former Chief Executive Officer of the Company remains as an executive director of the Company and was appointed Chairman of a newly-formed Executive Committee. The Executive Committee comprises of all the Company's executive directors and such other senior executives as the Board shall appoint. The Executive Committee shall assist the Board in monitoring and supervising the operations of the Company.
Investment in the Haotian Group
On 12 February 2010, the Company announced that it had settled the acquisition of the 49% interest in Xian Haotian for a total cash consideration of approximately RMB82.8 million (approximately USD12.1 million). The put and call option agreement entered into on 28 September 2007, and subsequently extended was lapsed. It was further announced that, in place of the existing arrangements for the transfer of shares in Dragon Diligent to the management of the Haotian Group, further incentives will apply as set out in the announcement.
Flotation and Partial Disposal of the Lansen Group
On 1 April 2010, the Company announced that it is working towards a flotation of Lansen Pharmaceutical Holdings Company Limited, the proposed new holding company of the Lansen Group, on the Hong Kong Stock Exchange. In preparation for the proposed flotation, a corporate reorganisation of the Lansen Group is to be completed, further details of which were set in the Class 1 Circular sent to shareholders on 1 April 2010 (the "Reorganisation").
The Board, in conjunction with the Lansen Group and in consultation with the sole bookrunner, will in due course make the final decision as to whether or not to proceed with the flotation (and, if so, on what terms) having regard to, amongst other things, prevailing market conditions.
The Group has invested in aggregate USD20,117,000 in the Lansen Group. The Group has received dividends of USD5,556,000 and expects to receive a pre-flotation dividend of approximately USD4,300,000 from the Lansen Group. The net amount invested prior to completion of the flotation will be USD10,261,000. We believe that upon listing, the net proceeds from the partial disposal of the Lansen Group should enable the Group to recoup all its investments made in the Lansen Group and remain a majority shareholder of the Lansen Group.
The special general meeting held to approve the flotation also provided the opportunity to approve certain amendments to the Company's bye-laws to enable the Company to hold treasury shares. Treasury shares may be sold for cash, cancelled or transferred to an employee share plan (should the Company adopt such a plan in the future). The ability to hold treasury shares would provide the Company with greater flexibility in managing its share capital, and may reduce the cost of capital.
The resolutions to approve the flotation and partial disposal of the Group's interest in the Lansen Group and to amend the bye-laws of the Company were approved at a special general meeting held on 19 April 2010.
Share Option Plan
In order to provide long term incentive arrangements for the employees and executive directors of the Company, the Board proposes that the Company adopts a share option plan (the "Plan"). The primary purpose of the Plan is to align the interests of Company employees and executive directors more closely with those of the shareholders of the Company and to enable the development of the Group's businesses by attracting, retaining and motivating personnel with appropriate skills.
Under the Plan, selected eligible employees and executive directors of the Company (the "Eligible Participants") may be granted awards of options exercisable into common shares of the Company at not less than an amount equal to the average of the closing middle-market quotations of the Company's share, as derived from the Daily Official List of the London Stock Exchange over such number of days (not exceeding 30) immediately preceding the date of grant as the Committee may decide. It is expected that the exercise price will usually be an amount equal to the closing middle-market quotations of the Company's share over the preceding 30 days. The options so granted cannot be exercised during the first three years from the time of grant. At the expiry of the three year period from the date of grant, subject to satisfaction of performance conditions to the exercise of options under the Plan, Eligible Participants can exercise options granted in whole or in part at any time but in any event not later than the tenth anniversary from the time of grant (the "Cliff Vesting"). The market value of options at the time of grant to any Eligible Participant will be limited to not more than 200% of his/her annual base salary in the year of grant.
Whilst the Cliff Vesting of awards under the proposed Plan described above is a departure from the best practice guidelines issued by institutional investor bodies in the UK, it is in accordance with market practice in the Hong Kong and PRC markets. The Company will, whenever practicable, adhere to the best practice guidelines in the UK. However, as the principal business operations of the Group are in China, this departure is considered appropriate in order for the Company to put in place long term incentive arrangements, which will allow the Company to attract talents to the Group in this region.
In accordance with best practice and UK corporate governance guidelines, the total number of shares of the Company to be issued under the Plan will be limited to 5% of the Company's issued share capital from time to time, in any rolling ten year period. Following the approval of shareholders in the general meeting, it is proposed that the Plan will be administered and managed by the Company's Executive Committee and approved by the Remuneration Committee.
The resolution proposed to adopt the Plan is set out in the notice of Annual General Meeting to be sent to shareholders separately.
CONCLUSION
Supported by China's dynamic economy, it is expected that our healthcare and related businesses under the guidance of new management should generate long-term organic growth and improve shareholder returns in the future.
We will continue to explore potential business opportunities in the healthcare and pharmaceutical markets in China. The Board will consider opportunities which would strengthen our product pipeline and generate synergies with existing portfolio investments and will also consider, where appropriate, investing in new products and businesses which could lead the Company to other high growth segments within the fast growing China markets.
The Board continues to believe that there are other attractive investment opportunities in China which could provide new sources of earning potential and capital growth.
On behalf of the Board, I would also like to thank our staff for their continued dedication and commitment.
Sum Soon Lim
Chairman
Operation Review
HEALTH CARE BUSINESSES
The Lansen Group
The Lansen Group is a specialty pharmaceutical group principally engaged in the development, production and sale of rheumatic specialty prescription western pharmaceuticals in the PRC. The Lansen Group currently owns and operates modern manufacturing facilities occupying approximately 64,000 square meters of land with total gross floor area of approximately 19,400 square meters located in Ningbo, PRC. Their operating facilities are Good Manufacturing Practice certified by the State Food and Drug Administration and adhere to stringent and closely monitored quality assurance and safety control process. They have three production lines of bulk pharmaceuticals, one modern Chinese medicine extraction line, one solid formulation workshop, one liquid formulation workshop and one cream workshop.
The Lansen Group focuses on the therapeutic treatment of rheumatic diseases involving joints, soft tissues and connective tissues, including rheumatic arthritis, osteoarthritis, back pain and soft tissue pain. In 2008, the Lansen Group had a leading market share with approximately 22.8% of sales of disease modifying anti-rheumatic drugs ("DMARDs") in the PRC.
Lansen operates in the large and fast growing rheumatology market in the PRC. Economy growth in the PRC has been outpacing that of the global economy in recent years. In particular the rate of development of the PRC pharmaceutical industry is faster than the average level in the world. The prescription pharmaceutical market in turn is growing faster than the China's pharmaceutical market as a whole. Within the prescription pharmaceutical market, the rheumatic specialty prescription western pharmaceuticals are among the fastest growing prescription western pharmaceuticals. In recent years, growth of therapeutic treatment by DMARDs has outpaced that of the therapeutic treatment by anti-inflammatory and analgesic drugs in treating rheumatic diseases. This growth is being fueled by a growing population relying on pharmaceutical treatment, increasing patient access to healthcare insurance and greater spending power.
The Lansen Group has continued to perform well in 2009 and is expected to generate high growth for the Group in the coming years due to a number of factors described below:
• The Lansen Group has expanded and strengthened its distribution network, which is now operated by a team of 260 sales professionals. The network covers approximately 1000 hospitals in 29 provinces and cities and is a highly efficient and effective distribution channel;
• China has been and is expected to continue to be one of the fastest growing major economies.
• The pharmaceutical industry has performed better than all industries average in China, even when the global financial crisis started to impact the Chinese economy;
• Demand for drugs applied in specialised diseases has experienced faster growth than demand for common drugs; and
• The Lansen Group is a leader in DMARDs in the rapid growing rheumatology market
As a result of these factors, the Lansen Group has already formed an entry barrier which can not be easily overcome by competitors. The Lansen Group intends to build on its strengths and quality reputation in rheumatology and aims to achieve consistent high growth in the coming years. The Lansen Group also has a pipeline of new drugs to be developed in the next few years.
The Haotian Group
As at year end, the Company had increased its ownership of Xian Haotian to 100%. The Haotian Group is involved in the manufacture, marketing and sale of plant extracts used as active ingredients in food, beverages, cosmetics, dietary supplements and healthcare products.
Since the initial investment by the Company, the Haotian Group has been engaged mainly in the construction of its inositol project. Inositol is a vitamin-like substance commonly extracted from plants and used as an ingredient in dietary healthcare products. It has been reported to prevent hardening of the arteries, is important in fat and cholesterol metabolism and helps remove fats from the liver. The project is in the final stage of the construction and has begun trial production, including fine tuning of the production process. In parallel with construction of the project, the Haotian Group has continued to refine its extraction technology and process, and reduce production costs. The Company anticipates that the inositol business will become the principal business of the Haotian Group and a major contributor to the growth in the Group's profits in 2011 and beyond.
Botai
Botai is currently in the process of applying for a licence for manufacture of collagen products in the PRC for use in aesthetic medicine.
Longbai
Since 2005, Longbai has been applying for product licences for oral fast release drug applications. To date production licences have been granted for two of the six drugs.
HOTEL OPERATIONS
The Hotel is now one of the leading luxury hotels in Shenzhen and in Southern China, having been converted from a configuration of over 550 rooms to a configuration of 304 enlarged superior rooms and suites. The average room size is now 68 sq. m. The Hotel now has enhanced banquet and meeting facilities and a unique butler service for all guests. The Hotel is highly recommended by Tripadvisor, a US website which features advice from travelers covering over 300,000 hotels and attractions. In 2009, the Hotel was also recognised by the Shenzhen Special Zone Daily as Best Business Hotel.
The worldwide business slow down continued to reduce business travel to China in 2009. While average occupancy increased to 45.4% (2008: 43.8%), average room rate decreased to USD113 (2008: USD125), resulting in less improvement than expected.
OUTLOOK
Our healthcare business should generate long-term organic growth and improved shareholder returns.
Rheumatology is still in an early stage of development in China and should offer higher growth potential than the pharmaceutical industry in general. The Lansen Group intends to build on its strengths, particularly its reputation and market position in rheumatology, to achieve consistent high profit growth. The Lansen Group's development of new drugs and drug applications are in progress and it is expected that a pipeline of new drugs will be developed over the next few years.
Our inositol business should become a major contributor to the growth in the Company's profits in 2011 and beyond.
The Hotel should continue to benefit from the experienced management team and we expect it to continue contributing positively to Group profits.
The Company will seek further investment opportunities in the exciting China health care and pharmaceutical markets to create synergies with existing portfolio companies such as the Lansen Group and the Haotian Group, and to identify other fast growing segments for investment to generate further long-term growth for shareholders.
GROUP STATEMENT OF COMPREHENSIVE INCOME
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| Note |
| Year ended |
| Year ended |
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|
|
| 31 December |
| 31 December |
|
|
|
| 2009 |
| 2008 |
|
|
|
| USD'000 |
| USD'000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| REVENUE | 2 |
| 74,199 |
| 65,053 |
| COST OF SALES |
|
| (38,753) |
| (36,436) |
| GROSS PROFIT |
|
| 35,446 |
| 28,617 |
| OTHER INCOME |
|
| 854 |
| 2,287 |
| SELLING AND DISTRIBUTION EXPENSES |
|
| (18,652) |
| (15,353) |
| ADMINISTRATIVE EXPENSES |
|
| (11,363) |
| (10,695) |
| PROFIT FROM OPERATIONS |
|
| 6,285 |
| 4,856 |
| FINANCE COSTS |
|
| (4,388) |
| (6,919) |
| PROFIT/(LOSS) BEFORE INCOME TAX |
|
| 1,897 |
| (2,063) |
| INCOME TAX EXPENSE | 4 |
| (1,613) |
| (911) |
| PROFIT/(LOSS) FOR THE YEAR |
|
| 284 |
| (2,974) |
|
|
|
|
|
|
|
| OTHER COMPREHENSIVE (LOSS)/INCOME |
|
|
|
|
|
| EXCHANGE DIFFERENCES ON TRANSLATING FOREIGN OPERATIONS |
|
|
(726) |
|
1,620 |
| DEFICIT ON REVALUTION OF HOTEL PROPERTIES |
|
| (5,109) |
| (186) |
| DEFERRED TAX RELATING TO DEFICIT ON REVALUATION OF HOTEL PROPERTIES |
|
| 713 |
| (3,285) |
| OTHER COMPREHENSIVE LOSS, NET OF TAX |
|
| (5,122) |
| (1,851) |
|
|
|
|
|
|
|
| TOTAL COMPREHENSIVE LOSS FOR THE YEAR |
|
| (4,838) |
| (4,825) |
|
(LOSS)/PROFIT FOR THE YEAR ATTRIBUTABLE TO: OWNERS OF THE PARENT NON-CONTROLLING INTERESTS |
|
|
(308) 592 |
|
(3,369) 395 |
|
|
|
| 284 |
| (2,974) |
|
TOTAL COMPREHENSIVE (LOSS)/ INCOME ATTRIBUTABLE TO: OWNERS OF THE PARENT NON-CONTROLLING INTERESTS |
|
|
(5,430) 592 |
|
(5,136) 311 |
|
|
|
| (4,838) |
| (4,825) |
|
|
|
|
|
|
|
| LOSS PER SHARE ATTRIBUTABLE TO OWNERS OF THE PARENT | 5 |
|
|
|
|
| BASIC and DILUTED |
|
| (0.11 cents) |
| (1.22 cents) |
|
|
|
|
|
|
|
GROUP STATEMENT OF FINANCIAL POSITION
|
| As at |
| As at |
| As at |
|
| 31 December |
| 31 December |
| 31 December |
|
| 2009 |
| 2008 |
| 2007 |
|
| USD'000 |
| USD'000 |
| USD'000 |
| ASSETS |
|
|
|
|
|
| NON-CURRENT ASSETS |
|
|
|
|
|
| Property, plant and equipment, comprise: | 158,128 |
| 156,137 |
| 147,843 |
| Hotel properties, at valuation (of which, equity investment |
|
|
|
|
|
| cost was USD97,730,000 (2008: USD101,534,000)) | 120,835 |
| 125,850 |
| 124,982 |
| Other property, plant and equipment | 37,293 |
| 30,287 |
| 22,861 |
| Land use rights | 3,438 |
| 3,090 |
| 2,953 |
| Investment property | 1,561 |
| 1,560 |
| 1,464 |
| Intangible assets | 3,861 |
| 2,550 |
| 1,299 |
| Goodwill | 25,622 |
| 10,012 |
| 8,702 |
| Interest in an associate | - |
| - |
| 804 |
| Loans to non-controlling interests | 15 |
| 380 |
| 645 |
|
| 192,625 |
| 173,729 |
| 163,710 |
| CURRENT ASSETS |
|
|
|
|
|
| Inventories | 11,405 |
| 8,997 |
| 8,559 |
| Trade and other receivables | 39,731 |
| 35,600 |
| 24,421 |
| Investments | 385 |
| 385 |
| - |
| Land use rights | 76 |
| 68 |
| 63 |
| Pledged bank deposits | 800 |
| 878 |
| 5,466 |
| Cash and cash equivalents | 31,800 |
| 15,763 |
| 11,247 |
|
| 84,197 |
| 61,691 |
| 49,756 |
|
|
|
|
|
|
|
| TOTAL ASSETS | 276,822 |
| 235,420 |
| 213,466 |
|
|
|
|
|
|
|
| EQUITY AND LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
|
| CAPITAL AND RESERVES |
|
|
|
|
|
| Called up share capital | 18,875 |
| 13,793 |
| 13,793 |
| Share premium | 49,187 |
| 10,216 |
| 10,216 |
| Capital and special reserve | 97,502 |
| 97,502 |
| 42,923 |
| Revaluation reserve | 6,660 |
| 11,056 |
| 63,429 |
| Exchange equalisation reserve | (25,773) |
| (25,047) |
| (21,692) |
| Statutory reserve | 2,011 |
| 1,883 |
| 1,849 |
| Profit and loss account | (48,261) |
| (47,825) |
| (44,456) |
| EQUITY ATTRIBUTABLE TO OWNERS OF THE PARENT | 100,201 |
| 61,578 |
| 66,062 |
| NON-CONTROLLING INTERESTS | 14,570 |
| 10,630 |
| 9,784 |
| TOTAL EQUITY | 114,771 |
| 72,208 |
| 75,846 |
|
|
|
|
|
|
|
| NON-CURRENT LIABILITIES |
|
|
|
|
|
| Borrowings | 59,192 |
| 69,030 |
| 41,410 |
| Deferred tax liabilities | 19,958 |
| 20,399 |
| 16,992 |
|
| 79,150 |
| 89,429 |
| 58,402 |
|
|
|
|
|
|
|
| CURRENT LIABILITIES |
|
|
|
|
|
| Borrowings | 46,411 |
| 31,667 |
| 36,823 |
| Current tax liabilities | 624 |
| 528 |
| 671 |
| Trade and other payables | 35,866 |
| 41,588 |
| 41,724 |
|
| 82,901 |
| 73,783 |
| 79,218 |
|
|
|
|
|
|
|
| TOTAL LIABILITIES | 162,051 |
| 163,212 |
| 137,620 |
| TOTAL EQUITY AND LIABILITIES | 276,822 |
| 235,420 |
| 213,466 |
GROUP STATEMENT OF CASH FLOWS
|
|
|
| Year ended |
| Year ended |
|
|
|
| 31 December |
| 31 December |
|
|
|
| 2009 |
| 2008 |
|
|
|
| USD'000 |
| USD'000 |
|
|
|
|
|
|
|
| Cash flows from operating activities |
|
|
|
|
|
| Profit/(loss) before income tax |
|
| 1,897 |
| (2,063) |
| Adjustments for: |
|
|
|
|
|
| Finance costs recognised in profit or loss |
|
| 4,388 |
| 6,919 |
| Interest income |
|
| (53) |
| (746) |
| Provision for/(reversal of) trade receivables impairment |
|
| 47 |
| (665) |
| Provision for other receivables impairment |
|
| 2 |
| 6 |
| Depreciation |
|
| 2,283 |
| 1,937 |
| Amortisation of land use rights |
|
| 73 |
| 63 |
| Write off of intangible assets |
|
| 15 |
| 16 |
| Loss on disposal of property plant and equipment |
|
| 111 |
| 129 |
| Gain on acquisition of non-controlling interests |
|
| (167) |
| - |
| Operating cash flows before movements in working capital |
|
| 8,596 |
| 5,596 |
| (Increase)/decrease in inventories |
|
| (2,408) |
| 521 |
| Increase in trade and other receivables |
|
| (3,687) |
| (8,794) |
| Decrease in trade and other payables |
|
| (17,429) |
| (1,446) |
| Cash used in operations |
|
| (14,928) |
| (4,123) |
| Interest paid |
|
| (4,388) |
| (6,919) |
| Income tax paid |
|
| (1,282) |
| (808) |
| Net cash used in operating activities |
|
| (20,598) |
| (11,850) |
|
|
|
|
|
|
|
| Cash flows from investing activities |
|
|
|
|
|
| Purchase of property, plant and equipment |
|
| (9,469) |
| (7,417) |
| Purchase of land use rights |
|
| (427) |
| - |
| Purchase of intangible assets |
|
| (1,324) |
| (421) |
| Acquisition of subsidiaries |
|
| - |
| (1,355) |
| Payments for investments |
|
| - |
| (385) |
| Interest received |
|
| 53 |
| 746 |
| Decrease in pledged bank deposits |
|
| 78 |
| 4,876 |
| Net cash used in investing activities |
|
| (11,089) |
| (3,956) |
|
|
|
|
|
|
|
| Cash flows from financing activities |
|
|
|
|
|
| Capital element of finance lease payment |
|
| (6) |
| (12) |
| Proceeds from borrowings |
|
| 38,000 |
| 40,545 |
| Repayment of borrowings |
|
| (33,015) |
| (21,290) |
| Proceeds from issue of shares, net of expenses |
|
| 44,053 |
| - |
| Proceeds from loans to non-controlling interests |
|
| - |
| 286 |
| Loans to non-controlling interests |
|
| - |
| (23) |
| Dividends paid to non-controlling interests |
|
| (401) |
| (288) |
| Capital injection from non-controlling interests |
|
| - |
| 96 |
| Acquisition of non-controlling interests |
|
| (114) |
| (147) |
| Net cash generated from financing activities |
|
| 48,517 |
| 19,167 |
|
|
|
|
|
|
|
| Net increase in cash and cash equivalents |
|
| 16,830 |
| 3,361 |
| Cash and cash equivalents at beginning of year |
|
| 15,668 |
| 11,125 |
| Effects of exchange rate changes |
|
| (698) |
| 1,182 |
| Cash and cash equivalents at end of year |
|
| 31,800 |
| 15,668 |
|
|
|
|
|
|
|
| Analysis of cash and cash equivalents |
|
|
|
|
|
| Cash and bank balances |
|
| 31,800 |
| 15,763 |
| Bank overdrafts |
|
| - |
| (95) |
|
|
|
| 31,800 |
| 15,668 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTES
1. BASIS OF PREPARATION AND ACCOUNTING
This preliminary results statement and the consolidated financial statements of the Company have been prepared in accordance with International Financial Reporting Standards (IFRS) including all new and revised standard effective for the period commencing 1 January 2009.
These consolidated financial statements have been prepared under the historical cost convention as modified by the revaluation of hotel properties and investment property.
The preparation of financial statements in accordance with IFRS requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on management's best knowledge of current events and actions, actual results may ultimately differ from those estimates.
The financial statements have been prepared on a going concern basis which assumes the realisation of assets and satisfaction of liabilities in the ordinary course of business. The Directors are of the opinion that the Group will have sufficient cash resources to satisfy its future working capital and other financial requirements.
The Directors do not foresee that the banks will not continue to make available the loan facilities for the Group. Accordingly, the Directors are satisfied that the Group will be able to meet in full its financial obligations as and when they fall due for the next twelve months from 31 December 2009 without significant curtailment of operations and are satisfied that it is appropriate to prepare the financial statements on a going concern basis.
Should the Group be unable to continue in business as a going concern, adjustments would have to be made to restate the value of assets to their recoverable amounts, to provide for any further liabilities which might arise and to reclassify non-current assets and non-current liabilities as current assets and current liabilities respectively.
2. SEGMENTAL INFORMATION
Operating Segments
Management currently identifies the Group’s four product and service lines as operating segments as follows:
1) The hotel operations segment is a hotel located in the Lowu district of Shenzhen in the PRC;2) The research and development segment is engaged in the development of pharmaceutical projects;3) The Lansen Group segment is focused on the manufacture, marketing and sale of speciality western pharmaceuticals, modern Chinese medicine extracts and generic pharmaceuticals in the PRC; and4) The Haotian Group segment is involved in the manufacture, marketing and sale of plant extracts used as various active ingredients in food, beverages, cosmetics, dietary supplements and healthcare products.
These operating segments are monitored and strategic decisions are made on the basis of adjusted
segment operating results. Segment information can be analysed as follows for the reporting periods
under review.
|
| Health Care | Hotel Operations |
Total | |||
|
| Research & | Lansen | Haotian |
|
| |
|
| Development | Group | Group |
|
| |
|
| 2009 | 2009 | 2009 | 2009 | 2009 | |
|
| USD'000 | USD'000 | USD'000 | USD'000 | USD'000 | |
|
|
|
|
|
|
| |
|
| Segment revenue | - | 47,932 | 17,888 | 8,379 | 74,199 |
|
| Segment operating profit/(loss) | (595) | 9,357 | 192 | 513 | 9,467 |
|
| Segment finance costs | - | (454) | (750) | (1,460) | (2,664) |
|
| Segment profit/(loss) before income tax | (595) | 8,903 | (558) | (947) | 6,803 |
|
| Depreciation and amortisation of non-financial assets | (279) | (912) | (918) | (188) | (2,297) |
|
| (Provision for)/reversal of trade and other receivables impairment | - | (52) | 3 | - | (49) |
|
| Loss on disposal of property, plant and equipment | - | (18) | (93) | - | (111) |
|
|
|
|
|
|
|
|
|
| Segment assets | 4,387 | 57,694 | 49,703 | 140,530 | 252,314 |
|
| Segment liabilities | 137 | 30,177 | 22,029 | 34,624 | 86,967 |
|
| Additions to non-current segment assets during the year |
356 |
5,583 |
5,085 |
144 |
11,168 |
|
| Health Care | Hotel Operations |
Total | |||
|
| Research & | Lansen | Haotian |
|
| |
|
| Development | Group | Group |
|
| |
|
| 2008 | 2008 | 2008 | 2008 | 2008 | |
|
| USD'000 | USD'000 | USD'000 | USD'000 | USD'000 | |
|
|
|
|
|
|
| |
|
| Segment revenue | - | 37,022 | 18,941 | 9,090 | 65,053 |
|
| Segment operating profit/(loss) | (1.231) | 7,290 | 390 | 1,002 | 7,451 |
|
| Segment finance costs | - | (1,362) | (408) | (2,383) | (4,153) |
|
| Segment profit/(loss) before income tax | (1,231) | 5,928 | (18) | (1,381) | 3,298 |
|
| Depreciation and amortisation of non-financial assets | (303) | (811) | (662) | (201) | (1,977) |
|
| (Provision fort)/reversal of trade and other receivables impairment | - | 666 | (7) | - | 659 |
|
| Loss on disposal of property, plant and equipment | - | (128) | (1) | - | (129) |
|
|
|
|
|
|
|
|
|
| Segment assets | 3,588 | 50,981 | 33,071 | 145,778 | 233,418 |
|
| Segment liabilities | 157 | 30,856 | 8,621 | 40,268 | 79,902 |
|
| Additions to non-current segment assets during the year |
17 |
1,075 |
6,087 |
1,284 |
8,463 |
The totals presented for the Group's operating segments reconcile to the entity's key financial figures as presented in its financial statements as follows:
|
|
|
| Year ended |
| Year ended |
|
|
|
| 31 December |
| 31 December |
|
|
|
| 2009 |
| 2008 |
|
|
|
| USD'000 |
| USD'000 |
| Reportable segment finance costs |
|
| (2,664) |
| (4,153) |
| Unallocated corporate finance costs |
|
| (1,724) |
| (2,766) |
| Finance costs |
|
| (4,388) |
| (6,919) |
|
|
|
|
|
|
|
| Reportable segment profit |
|
| 6,803 |
| 3,298 |
| Unallocated corporate income |
|
| 4 |
| 754 |
| Unallocated corporate expenses |
|
| (4,910) |
| (6,115) |
| Profit/(loss) before income tax |
|
| 1,897 |
| (2,063) |
|
|
|
|
|
|
|
| Reportable segment assets |
|
| 252,314 |
| 233,418 |
| Other corporate assets |
|
| 24,508 |
| 2,002 |
| Group assets |
|
| 276,822 |
| 235,420 |
|
|
|
|
|
|
|
| Reportable segment liabilities |
|
| 86,967 |
| 79,902 |
| Unallocated corporate borrowings |
|
| 69,552 |
| 57,655 |
| Other corporate liabilities |
|
| 5,532 |
| 25,655 |
| Group liabilities |
|
| 162,051 |
| 163,212 |
|
|
|
|
|
|
|
| Reportable depreciation and amortisation of non-financial assets |
|
| 2,297 |
| 1,977 |
| Unallocated corporate depreciation |
|
| 59 |
| 23 |
| Group depreciation and amortisation of non-financial assets |
|
|
2,356 |
|
2,000 |
The Group's revenues and its non-current assets (other than financial instruments) are divided into the following geographical areas:
|
|
|
|
|
| ||
|
| Revenue |
| Non-current assets | |||
|
| 2009 | 2008 |
| 2009 | 2008 | |
|
| USD'000 | USD'000 |
| USD'000 | USD'000 | |
|
|
|
|
|
|
| |
|
| PRC (domicile) | 59,132 | 48,990 |
| 192,610 | 173,349 |
|
| Overseas | 15,067 | 16,063 |
| - | - |
|
| Total | 74,199 | 65,053 |
| 192,610 | 173,349 |
|
|
|
|
|
|
|
|
The geographical location of customers is based on the location at which the services were provided or the goods delivered. The geographical location of the non-current assets is based on the physical location of the asset.
No single customer's revenue amounted to 10 per cent or more of the Group's revenue.
3. DIRECTORS' EMOLUMENTS
The Directors at 31 December 2009 were as follows:
James R.H.Buchanan (resigned on 30 April 2009)
Sum Soon Lim (appointed on 30 April 2009)
Wu Zhen Tao
Stephen B. Hunt
Patrick Sung
John H. Cosson (resigned on 30 April 2009)
Kenneth K. Toong (appointed on 30 April 2009)
Their aggregate emoluments for the year ended 31 December 2009 were USD489,000 (2008: USD385,000).
4. INCOME TAX EXPENSE
| | | Year ended | Year ended |
| | | 31 December | 31 December |
| | | 2009 | 2008 |
| | | USD’000 | USD’000 |
| | | | |
| Current tax – PRC Enterprise Income Tax | | 1,288 | 789 |
| Deferred tax – PRC withholding tax | | 325 | 122 |
| | | 1,613 | 911 |
5. LOSS PER SHARE ATTRIBUTABLE TO OWNERS OF THE PARENT
Basic and diluted loss per share is based upon the loss after tax attributable to owners of the parent of USD308,000 (2008: loss of USD3,369,000) and the weighted average number of A Shares and Common Shares in issue during the year of 11,384,659 and 272,944,834 respectively (2008: A Shares, Common Shares: 11,797,446 and 264,062,658).
The Company did not have any potential common shares outstanding.
6. FINANCIAL INFORMATION
This preliminary results statement was approved by the Board of Directors on 27 April 2010. The above results for the year ended 31 December 2009 have been abridged from the full Group accounts for that year, which received an unqualified auditors' report and which will be delivered to the Registrar of Companies shortly.
The Annual Report and Financial Statements will be posted to shareholders as soon as practicable. Further copies will be available from the company's registered office at Canon's Court, 22 Victoria Street, Hamilton HM12, Bermuda.
The Annual General Meeting will be held at the Company's offices at Suites 1203-4, 12/F, Li Po Chun Chambers, 189 Des Voeux Road Central, Hong Kong on 3 June 2010 at 6:00 p.m. (11:00 a.m. London time). In addition, a shareholder information session is to be held on 18 May 2010 at the offices of Piper Jaffray Ltd. at One South Place, London E2M 2RB at 11:00 a.m. Notice of the Annual General Meeting will be sent to shareholders by way of a separate circular.