Golden Meditech Announces 2013 / 2014 Annual Results

HONG KONG, June 24, 2014 /PRNewswire/ --

Golden Meditech Holdings Limited (the "Company" or "Golden Meditech," together with its subsidiaries collectively as the "Group", 801.HK; 910801.TW), a leading integrated healthcare enterprise in China, is pleased to announce the Group's annual results for the year ended 31 March 2014.

During the reporting period, the annual results of our core businesses were in line with management's expectations while substantial strategic progress had been achieved. Total revenue for the fiscal year 2013/14 rose by 0.6% to HK$1,085,068,000, with the healthcare services segment and medical devices segment contributed 73.6% and 25.3% to the Group's total revenue respectively. Loss attributable to equity shareholders of the Company totaled HK$429,081,000, while basic loss per share was HK33.6 cents. Excluding the non-operating loss as a result of the fair value accounting treatment of financial assets and financial liabilities, one-off impairment losses on certain financial assets, intangible assets and share of losses of a joint venture, adjusted profit attributable to equity shareholders of the Company decreased 18.5% to HK$86,464,000 as compared to the previous reporting period.

Mr. Kam Yuen, Chairman and Chief Executive Officer of the Group, said, "Driven by improving living standard and aging population, the demand for prime healthcare services and medical devices in Mainland China has been growing rapidly. In order to pave ways for a better healthcare system, the Mainland China's government has stepped up pace of its healthcare reforms by encouraging private capital to enter into hospitals sectors and extending national medical insurance coverage. These positive initiatives are set to boost the development of the healthcare industry. Being a visionary with a long history in the Mainland China's healthcare industry, Golden Meditech recognised the growth opportunities in the healthcare services and medical devices markets. It has devoted resources to cultivate the development of healthcare services businesses upon the solid business platform of its medical devices business. During the reporting period, the Beijing Qinghe Hospital ("Qinghe Hospital") has begun its trial run which marked a milestone for the hospital management business and is anticipated to further enhance the competitiveness of Golden Meditech.

The board of directors of the Company has recommended a final dividend of HK2.6 cents per share (2013: HK2.6 cents) to acknowledge the continuous support and trust from our shareholders. The Company will persistently adopt a relatively stable dividend policy and strive to deliver growth and long-term value to all shareholders.

HEALTHCARE SERVICES SEGMENT

During the reporting period, revenue from the healthcare services segment increased by 2.8% to HK$798,289,000. Revenue generated from cord blood storage business, hospital management services and medical insurance administration business were HK$722,167,000, HK$71,181,000 and HK$4,941,000 respectively.

Revenue and profit of China Cord Blood Corporation ("CCBC") increased satisfactorily during the reporting period. Although the number of newborns has dropped from last year's Dragon Year, CCBC successfully implemented new marketing strategies to recruit targeted premium clientele, resulting in increasing cash flow whilst offsetting the effect of reduced volume and rising cost. Focused on the mid-high end market, CCBC recruited 376,623 accumulated subscribers, with 64,641 new subscribers signed up during the reporting period. Accordingly, revenue of CCBC increased 11.6% to HK$722,167,000 as compared to the previous reporting period. However, as a result of the fair value changes of the convertible notes issued to Kohlberg Kravis Roberts investment fund in April 2012, the resulting profit for the year of CCBC declined.

As the combined scale of Guangdong and Zhejiang markets is five to ten times larger than the Beijing market, CCBC is dedicated to speeding up the penetration in both Guangdong and Zhejiang markets through the new facilities that are expected to be in use from the first half of fiscal 2015. At the same time, the Mainland China's government has relaxed its one-child policy during the reporting period, allowing couples for a second child if one of them is a single child. The Company believes the new child policy will promote a balanced mix of population, increase the potential cord blood storage market and create future demand for such services.

Having started its trial run since December 2013, the Qinghe Hospital aims to provide high quality and comprehensive healthcare services to the general public in Beijing. Located at Haidian District in Beijing with a total floor area of approximately 75,000m², the Qinghe Hospital is designed to meet the highest healthcare standards in Mainland China. The hospital specialised not only in haematology but also provides a broad range of medical disciplines such as obstetrics and gynaecology, paediatrics, ophthalmology and dentistry. The capacity of the Qinghe Hospital is about six times of the previous hospital, offering 600 beds of which 48 beds are haematology wards. Golden Meditech fully comprehends the market needs and the importance of its reputation in the industry. Therefore, the Qinghe Hospital works seamlessly with the Peking University People's Hospital for securing the employment of highly competent medical personnel and the provision of quality hospital services. Meanwhile, Shanghai East International Medical Centre ("SEIMC") has continued to deliver significant contributions and is expected to further extend its market share through its renowned brand.

With a view to sustaining the healthy growth of the hospital management business, the Company focuses its resources on developing the two hospitals under its operations and restructured the management service contracts. As a result, the Group has increased its shareholdings in GM Hospital Group Limited to 82.7%, and at the same time made non-cash impairment provision of HK$448,048,000 and HK$61,698,000 respectively on the underlying intangible assets and trade receivables in accordance with current accounting standards. Such impairment losses are non-cash in nature and will not affect the strong fundamentals of both Qinghe Hospital and SEIMC, and the Group will save approximately HK$18million amoritsation charge on intangible assets each year.

Golden Meditech expects the deepening of healthcare reforms to gain impetus for the future development of its hospital management business. Being a pioneer hospital operator, the Company aims to maintain its leading position in the hospital management sector through persistently providing prime quality medical treatment and services to meet the increasing demand, striving to seize vast opportunities emerging from the healthcare reforms

During the reporting period, GM-Medicare Management (China) Company Limited which engages in the medical insurance administration business devoted fruitful resources to enhance claim administration system, explore any market opportunities and let the end-users to gain better understanding of its business models. With its relentless efforts, the medical insurance administration business has been acknowledged and accredited by the market, and is now seeking collaborations with insurance companies and local governments. Although this business is at the early stage of development and has incurred losses, the management believes the extension of national medical insurance coverage and healthcare reforms will generate vast opportunities for this business to grow substantially.

MEDICAL DEVICES SEGMENT

Revenue from the medical devices segment amounted to HK$274,201,000, representing a slight decrease of 1.1% as compared to the previous corresponding period, accounting for 25.3% of the Group's total revenue.

Driven by healthcare reforms, the standard of Mainland China's healthcare industry has been gradually improved, creating higher demand for prime quality medical devices and paving ways for the development of its flagship product, Autologous Blood Recovery System ("ABRS") and its consumables. The Company expects the demand for ABRS and its consumables will rise in the long-run as the Mainland China's government is promoting healthcare policies related to the clinical use of blood. As Golden Meditech develops and manufactures its blood related medical devices in Mainland China, it has gained production and price advantages, enabling it to timely seize any opportunities arise from the healthcare reforms.

Capitalising on its existing business network, the Company has created a business platform to introduce prime quality foreign medical devices to Mainland China. During the reporting period, its imported medical devices distribution business has started distribution of the AXP System, an automated device developed by NASDAQ-listed Cesca Therapeutics Inc. (NASDAQ: KOOL) used for the process of extracting blood stem cells from cord blood.

STRATEGIC INVESTMENTS

During the reporting period, the Company has announced the sale of 2,942 ordinary shares, representing approximately 27.9% of the issued share capital of Fortress Group Limited ("Fortress") (the special private vehicle which privatised the previously NASDAQ-listed FunTalk China Holdings Limited in August 2011) to Sanpower Group Limited for a consideration of US$101,264,437 (equivalent to approximately HK$789,862,611). The proceeds will be used to develop core businesses, and allowing the Company to explore opportunities emerging from Mainland China's healthcare reform.

In addition, the management undertook cost control measures to mitigate losses of the Chinese herbal medicine business's overseas operations and recorded operating loss of HK$32,684,000 during the reporting period. The Company is exploring all options to unlock the commercial value of the Shanghai production facility.

OUTLOOK AND STRATEGIES

Looking ahead, Mr. Kam commented, "Golden Meditech is positive towards the healthcare market in Mainland China and believes the healthcare reforms will gain momentum to facilitate the healthy growth of entire industry. Even though the Qinghe Hospital remains at the early stage of development, it has gained tremendous strategic progress for the development of our hospital management business. We expect the financial performance of the Qinghe Hospital will be greatly improved in the near future, gaining momentum for the hospital management business to become one of our main growth drivers. Being strategically positioned in the unique and lucrative sector in the Mainland China's healthcare market, Golden Meditech will proactively consider the possibility of strengthening its shareholdings in the hospital management business. We are devoted to providing prime quality medical treatment and services to meet the increasing demand and aspired to maintain our leading position in the healthcare industry by upholding our reputation, allowing the competitive advantages of Golden Meditech to be fully demonstrated. For a long-term perspective, we will continue fostering the development of our healthcare services businesses as well as medical devices business. We will ride on our strengths to develop value-added businesses along the value chain of healthcare industry and create a competitive edge at our advantage, with a view to maximize our shareholders' value."

SEGMENT RESULTS

Information regarding the Group's reportable segments for the years ended 31 March 2014 and 2013 is set out below: