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Golden Meditech Announces FY2016/2017 Annual Results

2017-06-28 19:18
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-Hospital Management Business Showing Upward Trend, Sunbow O&G Hospital and Qinghe Hospital Will Be The New Growth Momentum
-Sales of Discontinuing Operation Will Enrich Cash Reserve, Expedite Diversified Growth Strategies

HONG KONG, June 28, 2017 /PRNewswire/ --


For the Year Ended 31 March


2017

(HK$'000)

2016

(HK$'000)

Change

(%)

Continuing Operations

Revenue

 

230,666

 

281,558

 

(18.1)

Healthcare services segment revenue

65,149

65,620

(0.7)

   Hospital management services income

60,456

59,688

1.3

   Medical insurance administration services income 

4,693

5,932

(20.9)

Medical devices segment revenue

160,663

210,670

(23.7)

Strategic investments revenue

4,854

5,268

(7.9)

Gross profit

97,887

129,068

(24.2)

Loss from operations

(312,168)

(265,240)

17.7

Finance costs

(572,119)

(144,467)

296.0

Reversal of impairment loss on investment in Fortress Group Limited ("Fortress")

734,525

-

N/M

Impairment loss on goodwill

(294,995)

-

N/M





(Loss)/profit attributable to the Company's equity shareholders
  - Continuing operations
  - Discontinuing operation 

(147,121)

(436,770)

289,649

(686,512)

(405,561)

(280,951)

(78.6)

7.7

N/M

Basic (loss)/earnings per share (in HK cents)
  - Continuing operations
  - Discontinuing operation

(5.0)

(14.7)

9.7

(29.1)

(17.2)

(11.9)

(82.8)

(14.5)

N/M

Golden Meditech Holdings Limited (SEHK stock code: 00801, TWSE stock code: 910801) ("Golden Meditech" or the "Company", together with its subsidiaries, the "Group"), a leading integrated healthcare enterprise in China, announces today its annual results for the year ended 31 March 2017 (the "Year" or "FY2016/2017").

During the Year, the results from continuing operations were in line with the management's expectations. The Group's total revenue from continuing operations was HK$230,666,000, decreased by 18.1% year-on-year. Of which, revenue from the healthcare services segment and the medical devices segment accounted for 28.2% and 69.7% (FY2015/2016:23.3% and 74.8%) of the Group's total revenue from continuing operations, respectively. The decline in total revenue from continuing operations was mainly attributable to the 23.7% year-on-year decrease in medical devices revenue. Notably, income from hospital management services, one of the Group's key growth focuses, increased by 1.3% year-on-year (FY2015/2016: a decrease of 5.9% year-on-year). Hospital management services income as a % of total revenue from continuing operations showed an upward trend and reached 26.2% (FY2015/2016: 21.2%). The management believes that the accelerating growth of hospital management business will drive the Group's future development.

Operating loss from continuing operations was HK$312,168,000, increased by 17.7% year-on-year, primarily due to the increased costs incurred for the startup operation of Sunbow O&G Hospital and an accrual of directors' retirement benefits of HK$35,150,000. Loss attributable to equity shareholders of the Company from continuing operations was HK$436,770,000, increased by 7.7% year-on-year. Increase was attributable to the substantial increase in finance costs and the recognition of impairment loss on goodwill of HK$294,995,000 during the Year, such increase was partially offset by the reversal of impairment loss on investment in Fortress of HK$734,525,000.

The Group recorded loss attributable to the Company's equity shareholders (including continuing operations and discontinuing operation) of HK$147,121,000, decreased by 78.6% year-on-year; basic loss per share was 5.0 HK cents, decreased by 82.8% year-on-year.

Mr. Kam Yuen, Chairman and Chief Executive Officer of the Group, said, "The PRC government encourages the emerging industries of strategic importance to carry out industry upgrade and structure optimisation, which benefits the further development of healthcare market in China. We will seize these opportunities and optimise our business structure, hoping to accelerate our growth."

The Company submitted a non-binding privatisation proposal to the board of directors of China Cord Blood Corporation ("CCBC") (the "Proposed Privatisation") in April 2015. During the process of the Proposed Privatisation, the Group was approached by Nanjing Xinjiekou Department Store Co., Ltd. ("NJXB") in respect of the disposal of its 65.4% fully-diluted equity interest in CCBC. However, NJXB decided to withdraw the application for the China Securities Regulatory Commission's approval of its acquisition of CCBC shares in August 2016, due to the uncertainty in the regulatory policy at that time regarding significant asset restructuring of listed companies in the PRC. Subsequently in September 2016, Sanpower Group Limited *("Sanpower"), the substantial shareholder of NJXB, paid the Company an earnest money of RMB300,000,000 (equivalent to approximately HK$348,867,000 at the date of receipt) to secure alternative arrangements for the sale and purchase of CCBC shares. In December 2016, both the Company and Nanjing Yingpeng Huikang Medical Industry Investment Partnership (Limited Partnership)* reached an agreement on the disposal of the Company's entire 65.4% fully-diluted equity interest in CCBC for a total cash consideration of RMB5,764,000,000 (equivalent to approximately HK$6,398,000,000) (the "Disposal"). The Disposal was approved by the Company's shareholders on 22 March 2017. Mr. Kam Yuen added, "The Disposal not only enables the Group to realise its investment in the business, resulting in sound returns to the shareholders, but also demonstrates the Group's outstanding capabilities in exploring, cultivating and growing high-potential investment projects in the healthcare sector."

To date, the Disposal has yet to be completed. Meanwhile, the Company terminated the Proposed Privatisation upon receiving a termination letter from CCBC on 13 April 2017.

The Company made a full impairment provision of approximately HK$760 million against its investment in Fortress (a former associate of the Group) in the fiscal year 2014/2015. The Group is committed to maximising returns for its shareholders. Through several negotiations, the Company entered into settlement agreements with each of PAG Asia I LP and its assignee PAGAC Fortress Holding I Limited and Sanpower (the "Fortress Settlement Agreement" and "Sanpower Settlement Agreement"). According to the Fortress Settlement Agreement, the Group was authorised to recover an outstanding amount of approximately US$250 million (equivalent to approximately HK$1.95 billion) from Sanpower (the "Fortress Unsettled Sum"). In return, the Group agreed to pay PAGAC US$180 million (equivalent to approximately HK$1.40 billion) by three instalments within 18 months. Pursuant to the Sanpower Settlement Agreement, Sanpower agreed to pay the Group US$300 million (equivalent to approximately HK$2.34 billion) by five instalments within 36 months as the final settlement to resolve the claim in relation to Fortress Unsettled Sum. These two settlement agreements were approved by the shareholders on 16 January 2017 and were expected to bring cash of approximately US$120 million (equivalent to approximately HK$936 million) to the Group, which exceeded the abovementioned impairment provision of HK$760 million. During the Year, the Group recognised a reversal of impairment loss on its investment in Fortress of approximately $735 million, as a result of the Fortress Settlement Agreement and Sanpower Settlement Agreement.

Mr. Kam Yuen continued, "The Group is still undergoing business upgrade and optimisation. In addition, through collaborations with The University of Texas at MD Anderson Cancer Center and a renowned oncologist in the U.S.A., the Group builds up a solid foundation for future development in autoimmune disease therapies and precision medicines therapies."

As the Disposal has yet to be completed during the Year, the Board did not recommend the payment of a final dividend in respect of the year ended 31 March 2017.

Continuing Operations

Healthcare Services Segment

During the Year, healthcare services revenue decreased slightly by 0.7% year-on-year to HK$65,149,000, accounting for 28.2% of total revenue from continuing operations. Revenue generated from hospital management business and medical insurance administration business were HK$60,456,000 and HK$4,693,000, accounting for 92.8% and 7.2% of healthcare services revenue, respectively.

Hospital Management Business. Over the years, Shanghai East International Medical Center has achieved a stable development and continued to contribute most of the revenue of hospital management services. In addition, Beijing Sunbow Obstetrics & Gynecology Hospital, which opened in October 2016, started contributing revenue to the Group. Beijing Qinghe Hospital, a specialised hospital of the Group, was searching for the right operation and business models since it obtained its license in late 2015. During the Year, the Group adjusted the cooperation models of its hospital management business. Based on the revised cashflow forecast, the Group recognised an impairment loss of goodwill of HK$294,995,000, as the carrying amount allocated to the hospital management business exceeds its recoverable amount. Despite such impairment, the Group is still confident the adjusted cooperation model will bring future growth to its hospital management business.

Medical Insurance Administration Business. The Group's self-developed intellectualised claim administration system offers off-site insurance settlement services. This is not only relieves the financial burden of policy holders but also provides comprehensive solutions to local governments. The Group will summarise collaboration experiences with government in order to provide its third-party administrator services to more insurance companies and healthcare institutions in future.

Medical Devices Segment

Medical devices revenue decreased by 23.7% year-on-year to HK$160,663,000, accounting for 69.7% of the Group's total revenue from continuing operations. The decrease was mainly attributable to the saturated Autologous Blood Recovery System ("ABRS") market in mid and large-sized hospitals in first-tier cities as well as the intensified price competition. Leveraging on product brand and the adjustment on its ABRSs' selling price, the Group managed to stabilise the sale of medical device consumables. The management will strategically adjust the marketing approach to cope with price competition as well as exploit new medical devices and consumables businesses, in order to ease the declining medical devices revenue.

Strategic Investments

The Chinese herbal medicines business recorded an operating loss of HK$23,345,000 during the Year. The Group is working closely with the relevant department regarding the land valuation since it received a possible land resumption notice from the local government in Qingpu District of Shanghai. The Group expects to improve its cash position if the land resumption is successful.

Cord Blood Storage Business – Discontinuing Operation

Revenue from the discontinuing operation increased by 7.8% year-on-year to HK$876,201,000 during the Year, which was largely attributable to increased subscribers. Profit from discontinuing operation amounted to HK$291,399,000. No depreciation and amortisation were charged on the assets of the discontinuing operation subsequent to the classification as "assets of disposal group classified as held for sale" on 31 March 2016. Excluding depreciation and amortisation and changes in fair value of financial liabilities at fair value through profit or loss, adjusted profit from discontinuing operation for the fiscal year 2015/2016 was HK$302,842,000.  

Discontinuing Operation

For the Year Ended 31 March

2017

(HK$'000)

2016

(HK$'000)

Revenue

876,201

812,944

Gross profit

732,034

635,261

Other income

26,974

81,549

Selling and administrative expenses

(418,277)

(399,989)

Impairment loss on available-for-sale securities

(2,943)

(10,474)

Profit from operations

337,788

306,347

Finance costs

(1,704)

(3,739)

Changes in fair value of financial liabilities at fair value through profit or loss

-

(597,170)

Profit/(loss) before tax

336,084

(294,562)

Income tax expense

(44,685)

(62,706)

Profit/(loss) from discontinuing operation

291,399

(357,268)

Outlook

Looking ahead, Mr. Kam commented, "As a leading integrated healthcare enterprise in China, we expect to drive growth across our existing medical devices and healthcare services businesses by tapping onto diversified business opportunities offered in the healthcare industry. Importantly, the Group plans to further develop its healthcare services business by deploying more resources into expanding the scale as well as strengthening the operation capabilities of its existing hospitals. At the same time, by leveraging on its listing status, the Group will actively explore new healthcare-related business opportunities as well as other investment opportunities, at home and abroad, which will yield considerable returns to the shareholders."

About Golden Meditech Holdings Limited (SEHK stock code: 00801, TWSE stock code: 910801)

Golden Meditech (www.goldenmeditech.com) is a leading integrated-healthcare enterprise in China. It is a first-mover in China, having established its dominant positions in several markets including the medical devices market, the cord blood storage market and the hospital management market in the healthcare industry, thanks to its strengths in innovation and market expertise and the ability to capture emerging market opportunities. Going forward, Golden Meditech will continue to pursue a leading position in China's healthcare industry both through organic growth and strategic expansion.

* The English names are for identification purpose only.

SEGMENT RESULTS

Information regarding the Group's reportable segments for the periods ended 31 March 2017 and 2016 is set out below:

(HK$'000 )

Continuing Operations

Discontinuing Operation

 

 

 

Total

Medical Devices

Hospital Management

Medical Insurance
Administration

Chinese Herbal
Medicines

Cord Blood

Storage

2017

2016

2017

2016

2017

2016

2017

2016

2017

2016

2017

2016

Revenue from External Customers

124,183

168,707

60,456

59,688

4,693

5,932

4,854

5,268

876,201

812,944

1,070,387

1,052,539

Inter-segment Revenue

36,480

41,963

-

-

-

-

-

-

-

-

36,480

41,963

Reportable Segment Revenue

160,663

210,670

60,456

59,688

4,693

5,932

4,854

5,268

876,201

812,944

1,106,867

1,094,502

Reportable Segment Profit/(Loss)

34,956

52,473

(441,865)

(137,910)

(31,834)

(37,359)

(23,345)

(16,046)

340,731

316,821

(121,357)

177,979

Reportable Segment Profit/(Loss) is Arrived at After Charging/(Crediting):

Depreciation and Amortisation Charges

7,838

8,440

69,577

60,535

9,425

10,305

19,108

21,139

-

62,940

105,948

163,359

(Reversal)/Increase of Impairment Loss on Trade Receivables

(86)

95

(356)

894

791

495

-

-

34,095

24,830

34,444

26,314

Impairment Loss on Goodwill

-

-

294,995

-

-

-

-

-

-

-

294,995

-

Source: Golden Meditech Holdings Limited

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