CTI.L Regulatory News (CTI)

Cathay International Holdings Limited

("Cathay" or the "Company")

The announcement below is a repeat of RNS no 7096I originally released on Friday 27 March at 12:14 (GMT).

Annual Results for the Year Ended 31 December 2014

Hong Kong, 27 March 2015 - Cathay International Holdings Ltd. (LSE: CTI.L), an investment holding company and a leading investor and operator in the growing healthcare sector in the People's Republic of China, today announces its Annual Results for the year ended 31 December 2014. 

Highlights

Group

· Revenue increased by 30.6% to USD150.0 million (2013: USD114.8 million)

· Gross profit increased by 25.2% to USD70.7 million (2013: USD56.4 million)

· Operating profit increased by 129.5% to USD15.8 million (2013: USD6.9 million)

· Share of profits from Starry was USD2.2 million (2013: USD1.6 million)

· Loss attributable to owners of the parent decreased by 79.1% to USD1.3 million (2013: USD6.2 million)

Lansen

· Revenue increased by 22.9% to USD116.8 million (2013: USD95.1 million)

· Revenue from specialty pharmaceuticals increased by 22.9% to USD70.7 million (2013: USD57.6 million)

· Gross profit increased by 19.6% to USD62.5 million (2013: USD52.2 million)

· Gross margin dropped by 1.4% to 53.5% (2013: 54.9%) due to reduced margin on specialty drugs and increase in sale of lower margin products

· Operating profit increased by 24.0% to USD19.5 million (2013: USD15.7 million)

· Net profit increased by 18.6% to USD14.6 million (2013: USD12.3 million)

· Acquired Sicorten PlusTM from Novartis and obtained distribution rights for Kefumei from Shaanxi Biogene Technology Company Limited. Combined products contributed revenue of USD2.3 million

Haizi

· First full year sales of inositol and DCP and recorded revenue of USD15.2 million (2013: USD4.0 million, two months of sales from commencement in November 2013)

· Gross profit increased to USD4.6 million (2013: USD1.7 million)

· Overall gross margin was 30.2% (2013: 43.1%)

· Operating profit USD1.0 million (2013: loss of USD0.7 million)

· Net profit was USD0.05 million (2013: loss of USD1.1 million)

· Inositol production reached 171 tonnes in November 2014, achieving an annualized run rate of 2,000 tonnes.

· New inositol supply capacities flooded the market during 2014 and the price erosion from an average of USD17.2 per kg in the first half to USD8 per kg towards year end affected Haizi's performance.

Yangling

· Revenue increased by 90.3% to USD5.8 million (2013: USD3.0 million)

· Gross profit increased to USD0.9 million (2013: USD0.05 million)

· Operating loss decreased to USD1.8 million (2013: USD4.0 million)

· Multi-function workshop and synthesis workshop expected to complete in 2015

Botai

· Operating loss decreased to USD0.8 million (2013: USD1.1 million)

· Expansion and modification of collagen production facilities should complete in H1 2015

Hotel

· Revenue increased by 4.4% to USD14.6 million (2013: USD14.0 million)

· Occupancy rate increased to 68.7% (2013: 61.4%)

· Average room rate decreased to USD132 (2013: USD141)

· Gross margin increased to 18.4% (2013: 17.3%)

· Food and beverage sales increased by 4.6% to USD4.3 million (2013: USD4.2 million)

· Operating profit increased by 10.7% to USD2.6 million (2013: USD2.3 million)

Commenting on the annual results, Mr. Lee Jin-Yi, CEO of Cathay International Holdings Limited, said: "Healthcare reforms and increasing pressure on drug pricing has made 2014 a challenging year. However, Cathay has been able to put a strategy in place that is now playing out for growth. Cathay has as a consequence had a successful year with all business segments showing improved performance. Haizi recorded its first full year of sales of inositol and DCP and produced 171 tonnes of inositol in November 2014, achieving an annualized run rate of 2000 tonnes. Lansen expanded its specialty drug portfolio to include dermatology and skincare products and we have also diversified into health and nutrition supplements to tap into the growth potential from increasing demand within the Chinese population. We expect to see further challenges in 2015 as the Government continues its reforms to China's economy but we believe the streamlining and synergies within our businesses will give us a competitive edge so we can continue to grow and deliver value to our customers and shareholders."

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About Cathay

Cathay International Holdings Limited (LSE: CTI.L) is a main market listed investment holding company and a leading operator and investor in the growing healthcare sector in the People's Republic of China ("PRC"). Taking advantage of the strong and growing domestic demand for high quality healthcare products in China, Cathay aims to identify investment opportunities with emphasis on high growth healthcare markets and build them into market sector leaders, with a clear exit strategy. Cathay has already demonstrated a strong track record of identifying high-growth potential investment opportunities in this area including: Lansen, China's leading specialty pharmaceutical company focused on rheumatology and dermatology; Haizi, a company engaged in the manufacture, marketing and sales of inositol and its by-product, di-calcium phosphate; Yangling, a company engaged in production and sales of plant extracts for use as key active ingredients in healthcare products; and Botai, a company engaged in collagen products.

The Group employs approximately 2,000 people across the PRC, including over 30 specialist corporate and business development staff based at the holding company's offices in Hong Kong and Shenzhen. Cathay also has a private equity investment arm focused on minority investment opportunities and a hotel investment.

For more information please visit the Company's website: www.cathay-intl.com.hk

Chairman's Statement

China's economic growth slowed to 7.4% in 2014 (2013: 7.7%) as demand for exports decreased, the real estate sector cooled-off and overcapacity remained in many industries. This year saw the Chinese Government begin to restructure the economy, focusing on raising standards of living, expanding domestic demand and increasing its energy-saving and emission-reduction efforts. As a result, China has entered into an expected period of slower growth.

The pharmaceutical sector was less affected by the slowing local economy but more by the continuing government reforms to expand the national healthcare coverage system and to bring down retail drug prices. In 2014, pharmaceutical growth slowed to 13% (2013: 17.9%), dragged by centralized bidding procurement which effectively lowered the price hospitals pay for drugs, and also by the use of caps on reimbursement paid by the national health insurance schemes to encourage the use of lower cost drugs. Pharmaceutical companies in China have suffered not only from margin decline due to increased pressure on drug prices, but also from the increase in operating expenses to meet the new GMP standards, and rising labor costs.

On the other hand, the growth in household income and the increased awareness of healthcare in China has led to an increased demand for health and nutrition supplements. The consumer base has been expanded from the elderly and infant population to include women and younger people and consumption patterns for spending on health areas such as disease prevention, anti-ageing, cerebral stimulation and cosmetics have become higher. China's 12th Five-Year Plan (2011-2015) outlined the opportunity for the health and nutrition supplement industry to reach approximately RMB1 trillion (USD160 billion) by 2015, with a CAGR of 20%.

Anticipating this growth in China's healthcare market, the Group has, over the past few years, built upon its pharmaceutical expertise to diversify into health and nutrition supplements via Lansen and Yangling, with a strategy to develop a portfolio of supplements with a competitive edge. In 2014, plant extracts and ingredients for health supplements contributed 40% towards the Group's pharmaceutical and healthcare revenue, compared to 27% in 2012 and 34% in 2013.

Haizi's focus is on inositol and di-calcium phosphate ("DCP"), a by-product. Haizi has the world's second largest inositol production capacity at 2,500 tonnes per annum. Its production process produces organic inositol, and its strategy is to develop premium quality organic inositol at a competitive price as the market preference is for organic over inorganic sourced inositol. Due to the market being flooded with new supply capacities from Haizi and its major competitors during 2014, inositol selling price dropped from an average of USD17.2 per kg in the first half and stabilized at around USD8 per kg towards year end. This price erosion has significantly affected Haizi's contribution to the Group for 2014. While the continued demand growth of inositol would help its price to recover over time, Haizi is also working towards producing higher margin food grade DCP in the latter part of 2015 to improve the overall profit contribution.

Yangling and Lansen's plant extract division ("Zhiti") have collaborated closely in 2014 and established a position as market leaders in bilberry, gingko extract, and ginseng extract. With the completion of Yangling's multi-function workshop and synthesis workshop for plant extracts expected in the first quarter of 2015, the Group will further expand its product portfolio leveraging on Yangling's production expertise and Lansen Zhiti's market access and R&D capabilities.

During the year, Lansen expanded its specialty drug portfolio for the treatment of autoimmune disorders in rheumatologic indications to include dermatologic indications. Lansen acquired Sicorten Plus, a corticosteroid cream marketed and sold in China for dermatologic indications, from Novartis; and obtained the exclusive distribution rights for Kefumei, a collagen dressing product used in medical skincare, from Shaanxi Biogene Technology Co., Ltd.

At the end of 2014, the distribution agreement with Fujian Huitian Bio-Pharma Co., Ltd., for the exclusive distributorship for leflunomide tablets branded "Tuoshu" was not renewed upon expiry. To replace Tuoshu, Lansen has entered into a new distribution agreement with Dalian Merro Pharmaceutical Factory as the exclusive distributor for leflunomide tablets branded "Hepai" for a term of ten years commencing 1 January 2015. Tuoshu was a key rheumatology product for Lansen, but the discernible trend has been that leflunomide is turning into an over-the-counter product. Lansen expects the market pricing of leflunomide tablets will decline expeditiously, with more than a 20% drop anticipated in 2015. The addition of Hepai would enable Lansen to recapture market share in leflunomide tablets, although at low margins in the medium term. The growth of new drugs in Lansen's product portfolio, including Sicorten Plus and Kefumei, will be a greater contributing factor to mitigate the potential loss of contribution from leflunomide.

Lansen also diversified its distribution channels in 2014 and sold 21% of its specialty drug products through non hospital channels, a 14% increase year on year. Over the next couple of years, it is anticipated that China will gradually start to allow the distribution of prescription drugs via the internet. In anticipation of this potential market opening, the Group has already built pharmacy and internet distribution channels for its dermatology products, currently mainly sold over the counter.

Performance

In 2014, the Group revenue grew 30.6% to USD150.0 million. Haizi recorded its first full year sales of inositol and DCP of USD15.2 million (2013: USD4.0 million - two months of sales from commencement in November 2013) although the sharp fall in inositol price limited Haizi's potential contribution. Lansen's sales increased 22.9%, primarily due to growth in sales of specialty pharmaceutical products. Yangling's sales were relatively small as it was still in the midst of business volume expansion. Botai had not commenced production or sales. The Hotel maintained its 10% contribution to the Group revenue, continued to outperform the competition in terms of occupancy rate and registered a 4.4% growth in sales.

Due to improved performance at Lansen and Haizi, the Group operating profit (before finance costs and tax) increased by 129.5% to USD15.8 million. The Group finance costs increased by 49.0% to USD7.8 million as a result of the increase in average borrowing costs and net bank borrowings.

The Group's profit (after finance costs and tax) was USD5.5 million, compared to a loss of USD0.5 million in 2013. After deducting the minority interests of Lansen, the Group's loss attributable to owners of the parent for the year significantly reduced to USD1.3 million from a loss of USD6.2 million in 2013.

Outlook

There will continue to be challenges to retail drug pricing for pharmaceutical companies operating in China. During recent provincial level drug auctions, local governments set ceiling prices to force pharmaceutical companies to follow. Governments are also encouraging hospitals to conduct second rounds of bidding to further lower retail drug prices. Over time, however, the government would like to abolish price control on most drugs and leave the pricing mechanism to the market. Companies with strong products and competitive costs should prosper.

Lansen will continue to expand its specialty drug portfolio in immunology related indications, through acquisitions, collaborations, in-licensing and product development. Recently, Lansen formed a team of senior financial and production personnel to explore ways to improve its efficiencies in purchasing, manufacturing and sales and marketing activities. Facing a fast changing environment, Lansen must rely on its people, its innovative internet selling model and treatment protocol to create long term competitiveness.

Botai plans to complete the expansion of its collagen injectable filler facility in the first half of 2015. Botai is also exploring the possibilities of leveraging on Lansen's infrastructure to distribute its collagen fillers and create synergies to tap into the potential within the cosmeceutical market in China.

On the other hand, the Group sees sustained growth potential in the health and nutrition supplements business in China. Lansen will lead the Group's venture into the healthcare end-product markets by initially building a small production facility and obtaining licenses for a couple of bilberry/ginseng related products. Lansen and Yangling will collaborate on business synergies in this regard.

We anticipate operating cash flow to improve in all business segments, and will focus on reducing borrowings and finance costs in 2015.

After six years of service as Chairman, I am retiring from this position as Chairman with effect from the end of this year's Annual General Meeting but will remain as a director of the Company. Mr. Wu Zhen Tao, executive director of the Company, will take up the Chairman role. A full announcement concerning his appointment will be made in due course.

On behalf of the Board, I am grateful for your continued support of Cathay and would like to thank all of our employees for their contributions last year.

Sum Soon Lim

Chairman

FINANCIAL REVIEW

GROUP RESULTS

Group's revenue recorded a 30.6% increase to USD150,023,000 (2013: USD114,836,000). The increase mainly came from Lansen and Haizi. Having benefited from organic growth, Lansen's sales grew 22.9% to USD116,817,000 (2013: USD95,074,000). In 2014, Haizi recorded its first full year of sales of inositol and DCP at USD13,828,000 (2013: USD2,777,000 - two months of sales from commencement in November 2013). Part of the inositol sales, amounting to USD1,360,000 (2013: USD1,218,000) were not attributed to Haizi as it was not sold through them, and were instead attributed to Yangling. The Hotel revenue grew 4.4% to USD14,596,000 (2013: USD13,984,000). Yangling's revenue increased by 59.3% to USD4,782,000 (2013: USD3,001,000) due to increased sales of bilberry.

Group's gross profit increased by 25.2% or USD14,243,000 to USD70,671,000 (2013: USD56,428,000) as a result of strong revenue growth. Lansen's gross profit increased by USD10,233,000 to USD62,471,000 (2013: USD52,238,000) and Haizi's gross profit increased by USD2,869,000 to USD4,589,000 (2013: USD1,720,000). Group's gross profit margin decreased to 47.1% (2013: 49.1%), which was mainly due to the decline in Lansen's gross margin resulting from the drop of profit margin for specialty drugs and an increase in the proportion of sales of lower margin products.

Group's operating profit increased by 129.5% or USD8,887,000 to USD15,751,000 (2013: USD6,864,000), of which USD3,776,000 was from Lansen, USD1,644,000 from Haizi and USD2,219,000 from Yangling. Apart from a higher reversal of share option expenses of USD766,000 (2013: USD396,000), the corporate office expenses were at similar level as last year.

Group's finance costs increased by 49.0% to USD7,814,000 (2013: USD5,243,000) mainly due to an increase in the Group's total borrowings and a rise in average borrowing costs. The average borrowing costs during the year was 4.47% (2013: 4.15%). No further interest expense was capitalised during the year (2013: USD1,153,000).

Group share of profit from Starry, a 21.5% owned associate company which is primarily engaged in the production and sales of iohexol for X-CT scan, was USD2,156,000 (2013: USD1,590,000).

Group's profit (after finance costs and tax) was USD5,536,000, compared to a loss of USD501,000 in 2013. After deducting the minority interests of Lansen, Group's loss for the year attributable to owners of the parent was USD1,297,000 (2013: USD6,191,000).

Group's Net Assets and Gearing

The Group's net assets as at 31 December 2014 were USD187,848,000 (2013: USD190,321,000). Net assets per share as at 31 December 2014 were USD0.50 (2013: USD0.50).

The Group increased its net borrowings to USD133,688,000 (2013: USD120,966,000), of which there was a net increase of USD13.0 million related to Lansen; a net increase of USD6.0 million related to Haizi and a repayment of USD6.1 million at the corporate level. Net gearing reached 68.7%, up from 59.2%. At year end, short term borrowings were USD104,306,000 (2013: USD94,811,000). During the year, the Group refinanced USD60,528,000 of the loan facility to a five year term loan facility.

Subsequent to the year end, on 23 February 2015, the Group obtained a new three year term loan facility of USD20,000,000 and repaid a bank loan of USD9,544,000.

OPERATION REVIEW

HEALTHCARE

Lansen

Lansen's revenue increased by 22.9% to USD116,817,000 (2013: USD95,074,000) due to strong growth from all segments.

Revenue from specialty pharmaceuticals increased 22.9% to USD70,730,000 (2013: USD57,571,000), while revenue from plant extracts increased by 24.8% to USD35,854,000 (2013: USD28,720,000) and generic drugs increased by 16.5% to USD 10,233,000 (2013: USD8,783,000).

Within the specialty pharmaceuticals, revenue growth of the three core rheumatoid arthritis ("RA") drugs were 26.9% in Pafulin, 12.3% in Tuoshu and 8.7% in MMF. The new additions of skincare products, Sicorten Plus from Novartis and Kefumei from Shaanxi Biogene Technology Company Limited contributed revenue of USD2,254,000 this year.

Lansen's gross profit increased by 19.6% to USD62,471,000 (2013: USD52,238,000). Gross profit margin dropped 1.4% to 53.5% in 2014 (2013: 54.9%) mainly due to a rise in raw material and packaging material costs of its specialty pharmaceuticals. The gross profit margin of its specialty pharmaceuticals decreased to 71.7% (2013: 75.4%). Generic drugs' gross profit margin increased to 39.7% (2013: 38.0%) and plant extracts' gross profit margin increased to 21.5% (2013: 19.1%).

Lansen's operating profit increased by 24.0% to USD19,499,000 (2013: USD15,723,000). The operating profit margin increased slightly to 16.7% (2013: 16.5%), an improvement of 0.2% in margin which was better than the 1.4% decline in gross profit margin. The improvement was due to Lansen's effort to manage down its selling expenses to 28.7% (2013: 29.2%) and administration expenses to 11.2% of revenue (2013: 12.0%).

Lansen recorded an increase in profits after income tax by 18.6% to USD14,557,000 (2013: USD12,270,000). Benefited from the expanded iohexol production capacity, contribution from Starry increased to USD 2,156,000 (2013: USD1,590,000) during the year.

At year end, the distribution agreement with Fujian Huitian Bio-Pharma Co., Ltd., the exclusive distributor for leflunomide tablets branded "Tuoshu" was not renewed. To replace Tuoshu, Lansen has entered into a new distribution agreement with Dalian Merro Pharmaceutical Factory as the exclusive distributor for leflunomide tablets branded "Hepai" for a term of ten years commencing 1 January 2015.

Haizi

Haizi is focused on the inositol and DCP businesses. During the year, Haizi produced 1,447 tonnes and sold 996 tonnes of inositol, and produced 7,906 tonnes and sold 8,338 tonnes of DCP. It produced 171 tonnes of inositol in November 2014, achieving an annualized run rate of 2,000 tonnes. Due to the market being flooded with new supply capacities from Haizi and its major competitors, inositol selling price dropped from an average of USD17.2 per kg in the first half and stabilized at around USD8 per kg towards year end. With the continued market growth of the nutrition supplements using inositol, the price should gradually recover.

Haizi's revenue was USD15,188,000 (2013: USD3,995,000), of which USD1,360,000 (2013: USD1,218,000) was sold through Yangling. Haizi's gross profit contribution and the gross margin were USD4,589,000 (2013: USD1,720,000) and 30.2% (2013: 43.1%) respectively. The operating profit was USD980,000 (2013: loss of USD664,000). After deducting the finance costs of USD519,000 (2013: USD205,000) and income tax expense of USD414,000 (2013: USD272,000), the profit contribution of Haizi was USD70,000 (2013: loss of USD1,108,000).

With the steady increase in phytin supply, inositol production should continue to climb. We will also work on modifying the additional processes in order to produce higher margin food grade DCP to improve profits.

Yangling

Yangling's business continued to increase during the year. Its revenue, comprising primarily of bilberry and inositol sales, increased by 90.3% to USD5,756,000 (2013: USD3,024,000) and gross profit increased by USD883,000 to USD928,000 (2013: USD45,000). Yangling's operating loss decreased to USD1,770,000 (2013: USD3,989,000).

With its multi-function workshop and synthesis workshop completing in 2015, Yangling will continue to work closely with Lansen on business synergy in marketing and production and for suitable plant extract products and health supplements.

Botai

Botai's operating loss decreased to USD842,000 (2013: USD1,096,000).

Botai should complete its expansion and modification of its collagen production facilities in first half of 2015 and commence trial production thereafter.

HOTEL

Hotel revenue increased 4.4% to USD14,596,000 (2013: USD13,984,000). This was mainly due to an improvement in room occupancy from 61.4% to 68.7%. The average room rate decreased to USD132 (2013: USD141) due to an increase in room sales to large, multinational, corporate clients at preferential corporate rates. Revenue per room, however, increased to USD90 (2013: USD87).

In 2014, the Hotel achieved a strong performance outperforming competing upscale hotels in the Luohu area. Overall, room occupancy grew by 11.9% to 68.7% (2013: 61.4%) while the Shenzhen Industry average occupancy only grew by 3.5%. Special rates were offered to transient bookings and wholesale segment in soft periods which has led to significant volume increases, particularly in the summer and holiday periods. It has also broadened the hotel's client base which contributed further to volume growth. With increased revenue from all outlets, revenue from the food and beverage segment increased by 4.6% to USD4,347,000 (2013: USD4,155,000).

The Hotel's gross profits increased by 10.6% to USD2,683,000 (2013: USD2,425,000), and operating profits increased 10.7% to USD2,559,000 (2013: USD2,312,000). The gross profit margin increased to 18.4% (2013: 17.3%) and the operating profit margin improved to 17.5% (2013: 16.5%).

The Hotel consistently achieved high customer satisfaction and was frequently rated by Tripadvisor as one of the top 10 hotels in Shenzhen.

The Hotel will continue to improve service quality by conducting staff training and addressing individual customer needs. We will continue to focus on attracting more corporate clients to further position our Hotel as one of the high end business hotels in Shenzhen.

Consolidated Statement of Profit or Loss

Consolidated Statement of Comprehensive Income

Consolidated Statement of Financial Position

Consolidated Statement of Changes in Equity

Consolidated Statement of Changes in Equity (continued)

Consolidated Statement of Cash Flows

NOTES:

1. Basis of preparation

The preliminary results statement and the consolidated financial statements of the Group have been prepared in accordance with all applicable International Financial Reporting Standards, International Accounting Standards and Interpretations (hereinafter collectively referred to as "IFRSs") issued by the International Accounting Standards Board ("IASB"). The consolidated financial statements also comply with IFRS as issued by the IASB as adopted by the European Union. The differences between IFRS as adopted by the European Union and IFRS as issued by the IASB have not had a material impact on the consolidated financial statements for the years presented.

The consolidated financial statements have been prepared under historical cost basis except for the hotel properties and certain financial liabilities that we measured at fair values at the end of each reporting period. The consolidated financial statements are presented in United States Dollars ("USD"), which is the same as the functional currency of the Company, and all values are rounded to the nearest thousand except when otherwise indicated.

At the end of reporting period, the Group had current liabilities exceeded its current assets by USD16,633,000. The financial statements have been prepared based on the assumption that the Group can be operated as a going concern and will have sufficient working capital to finance its operation in the next twelve months from 31 December 2014.

In February 2015, the Group obtained a three year banking facility of USD20 million. This facility will be used to re-finance existing borrowings and for corporate funding requirements. Also, as in the past, the Group will start negotiation with the relevant banks on extension or renewal of the bank borrowings few months prior to their respective maturities and obtain the approvals from the relevant banks before their respective maturities. The Group does not foresee that the bank borrowings will not be renewed or extended before maturity. The Group is also exploring options to secure long term funding, including debt and/or equity, to re-finance part of the bank borrowings. Accordingly, the Group should be able to meet in full its financial obligations as and when they fall due for the next twelve months from 31 December 2014 without significant curtailment of operations and the directors of the Company are satisfied that it is appropriate to prepare the consolidated 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 the consolidated financial statements accordingly.

2. Segment information

Information reported to the executive directors, being the chief operating decision maker ("CODM"), for the purposes of resource allocation and assessment of segment performance based on the types of goods delivered.

Management currently identifies the Group's five products and service lines as operating segments as follows:

1) the Lansen segment is focused on the manufacture, marketing and sale of specialty western pharmaceuticals, plant extracts and healthcare products and generic pharmaceuticals in the PRC;

2) the Haizi segment is engaged in the manufacture, marketing and sale of inositol and its by-product, di-calcium phosphate;

3) the Yangling segment is engaged in the production and sales of plant extracts for use as key active ingredients in healthcare products;

4) the Botai segment is engaged in collagen products; and

5) the Hotel operations segment is a hotel located in the Lowu district of Shenzhen in the PRC.

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.

Inter-segment transactions are priced with reference to prices charged to external parties for similar order. Central revenue and expenses are not allocated to the operating segments as they are not included in the measure of the segments' profit/(loss) that is used by CODM for assessment of segment performance.

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:

The Group's revenue and its non-current assets (other than financial instruments) are divided into the following geographical areas:

The geographical location of customers is based on the location at which the services were provided or the goods delivered. The Company is an investment holding company incorporated in Bermuda where the Group does not have any activities, the Group has the majority of its operations and workforce in the PRC, and therefore, the PRC is considered as the Group's country of domicile for the purpose of the disclosures as required by IFRS 8 Operating Segments. The geographical location of the non-current assets is based on the physical location of the assets.

No single customer's revenue amounted to 10% or more of the Group's revenue for both 2014 and 2013.

3. Losses per share attributable to owners of the parent

The calculation of the basic and diluted losses per share attributable to owners of the Company is based on the following data:

For the years ended 31 December 2014 and 2013, the computation of diluted losses per share does not include the 1,292,353 Common Shares contingently issuable to Mr. Lee Jin-Yi, as the conditions for their issue were not met throughout the year.

For the years ended 31 December 2014 and 2013, the computation of diluted losses per share did not assume the incremental shares from outstanding share options because the share options have anti-dilutive effect.

4. Financial information

This preliminary results statement was approved by the Board of Directors on 27 March 2015. The above results for the year ended 31 December 2014 have been abridged from the full Group accounts for that year and received an unqualified auditor's report.

The Annual Report and Financial Statements will be posted to shareholders as soon as practicable. Further copies will be available from the Company's registrars and transfer office at Capita Assets Services, PXS, 34 Beckenham Road, Beckenham, Kent, BR3 4TU, United Kingdom.