Golden Meditech Announces 2014/ 2015 Annual Results

HONG KONG, June 30, 2015 /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 2015.

During the reporting period, the results performance recorded by core business segments of the Group were in line with management's expectations. Total revenue amounted to HK$1,051,350,000, with the healthcare services segment and medical devices segment contributed 82.7% and 16.7% to the Group's total revenue respectively. Loss attributable to equity shareholders of the Company totalled HK$805,860,000, while basic loss per share was HK46.3 cents. Excluding the non-cash impairment losses and the non-operating losses as a result of the fair value accounting treatment of financial assets and financial liabilities, adjusted profit attributable to equity shareholders of the Company was HK$29,885,000.    

Mr. Kam Yuen, Chairman and Chief Executive Officer of the Group, said, "The Mainland China domestic market is flourishing and accumulating economic strength. Increasingly, the development basis of all industries has been strengthened thanks to the government's push in deepening the economic system reforms, which is essential to achieve a steady and orderly long-term domestic growth. The rising demand of the general public for quality healthcare resources, as a result of growing income and ageing population, has prompted the Chinese government to overhaul the healthcare system and place the healthcare reform as its top priority.  Being a company with comprehensive market intelligence and seasoned operating experience, Golden Meditech is able to seize the market advantages arise from the Mainland China's healthcare reform. Thanks to our medical device platform, we are able to establish and develop our healthcare services segment, thus allowing us to grasp firmly onto the shrinking market opportunities as a result of the improved healthcare realm. Exploring new market opportunities, defining our market segment and targeting unique customer base remain important elements of our leading position in hospital management business. We thrive to meet patients demand for quality healthcare services through excellent medical techniques and efficient service standards. This will enhance our brand and reputation as well as strengthening our position in the healthcare market."

The Group proactively explores various potential projects in the healthcare market in order to capture opportunities amid the deepening of Mainland China's healthcare system reforms. After thorough investigation, the Group found that the emerging business opportunities induced excessive commercialisation risks and their future revenue stream was highly unpredictable. Looking back, over the years, China Cord Blood Corporation ("CCBC") has developed into a leading cord blood storage business with a proven and better established business model in the Mainland China. On 27 April 2015, the Company submitted a non-binding proposal to the board of directors of CCBC for the acquisition of the entire ordinary shares owned by other shareholders of CCBC, at US$6.40 per share in cash, with a view to privatise CCBC ("Privatisation Proposal"). Such Privatisation Proposal will complement the Group's overall strategies within the Mainland China healthcare industry, further increases its scale of business and profitability. Meanwhile, the Company proposed to finance the Privatisation Proposal by way of equity offer and debt financing, and will issue a further announcement to inform shareholders on any further progress relating to the Privatisation Proposal.  In addition, the Company also announced, on 4 May and 8 May 2015 respectively, that it had entered into agreements with KKR China Healthcare Investment Limited ("KKR"), Magnum Opus International Holdings Limited ("Magnum") and Cordlife Group Limited ("CGL") to acquire the 7% senior convertible notes due 2017 in an aggregate principal amount of US$115,000,000 (equivalent to approximately HK$897,000,000) issued by CCBC and held by KKR, Magnum and CGL respectively for a total consideration of not less than US$282,838,000 (equivalent to approximately HK$2,206,136,000). Concurrently, the Company has also entered into an agreement with CGL to acquire the CCBC shares held by CGL for a total consideration of not less than US$46,810,000 (equivalent to approximately HK$365,118,000). Upon completion of the above acquisitions (assuming all 7% senior convertible notes were fully converted and all restricted share units of CCBC were vested), the equity interest in CCBC held by the Company would increase from approximately 38.31% to 65.10%.

The board of directors of the Company has recommended a final dividend of HK1.3 cents per share (2014: 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

Driven by the steady growth of cord blood storage business, revenue from the healthcare services segment increased by 9.0% to HK$869,842,000 during the reporting period, accounting for 82.7% of the Group's total revenue

CCBC focused on the penetration of mid-to-high end market. Through strengthening marketing strategies and broadening marketing channels, CCBC continued to optimise its client base in order to increase the penetration rates in its various target markets. During the reporting period, CCBC signed up 64,736 new subscribers and achieved a 441,359 accumulated subscribers. CCBC's revenue increased by 10.9% to HK$800,555,000 as compared to the previous reporting period while its net profit declined due to fair value changes on convertible notes issued by CCBC as compared to the previous period. During the year, CCBC entered into a memorandum of understanding with Cord Blood Registry^®, the world's largest newborn stem cell company, for conducting a joint research on further provision of relevant premium healthcare services business models to potential clients in the Mainland China and overseas.

For the hospital management business, the trial operational Beijing Qinghe Hospital ("Qinghe Hospital"), which is located at Haidian District in Beijing with a gross floor area of approximately 75,000 m² offering 600 beds of which 48 beds are haematology wards, specalised not only in haematology but also provides a broad range of medical disciplines. Through working seamlessly with the Peking University People's Hospital, Qinghe Hospital strives to deliver prime healthcare services to the general public in Beijing. As Qinghe Hospital remains at the trial operation stage, there was no revenue contribution. The depreciation costs of the hospital facilities were amortised during the period and that has affected the operating income of the Qinghe Hospital. Nevertheless, the management believes the revenue, profits and cash flow of the Qinghe Hospital will improve progressively once it is fully operational. As a result, the Company acquired the remaining shareholdings in GM Hospital Group Limited, during the reporting period, and further increased its shareholdings in Qinghe Hospital to 82.7%. Meanwhile, SEIMC continues to deliver contributions under its renowned hospital brand. Being a first mover in the hospital management services, Golden Meditech will unveil various opportunities offered by the deepening healthcare reforms. Despite the fact that huge financial resources and time had been devoted in the hospital management business, the invaluable reputation it created will enable the Company to realise its economic benefits in the future

The government of Mainland China has pledged to widen medical insurance coverage for all citizens.  GM-Medicare Management (China) Company Limited serves as a missing link by providing claims process and bill settlement services to medical insurance companies, hospitals and policy holders, with a view to capturing opportunities brought by the expansion of national medical insurance coverage. Though this medical administration business is still at the development stage, the Company devoted resources to enhance its claims administration system and explore market opportunities in order to gain acknowledgement and accreditation from the end-users. This will help its business in seeking more collaborations with insurance companies and local governments. The management believes that in view of the current circumstances, the Group will build up leading competitive edges on its core operations by summarising the experience, collaborations with the government, and making strategic planning and promoting such business will further enhance returns to the Group.

MEDICAL DEVICES SEGMENT

Revenue from the medical devices segment amounted to HK$175,619,000, decreased by 36.0% as compared to the previous corresponding period, accounting for 16.7% of the Group's total revenue. 

The healthcare reforms not only improve the standard of the healthcare industry and create higher demand for prime quality medical devices, but also intensify market competition at the same time. Sales of the consumables of Autologous Blood Recovery System ("ABRS") has grown steadily with Mainland China's government healthcare policies promoting the clinical application of blood. However, due to rising competitions, management proactively adjusted its marketing strategy and lowered ABRS's selling price during the reporting period. Although sales revenue from ABRS decreased significantly, this pricing strategy has successfully stabilised the demand for medical device consumables. Golden Meditech will endeavour to adjust pricing strategy in a flexible manner by excelling in product mix and quality, self-developed techniques as well as operational efficiency, with a view to strengthen its competitive advantages and maintain market shares. In addition, the Company is capitalising on its existing business network to introduce prime quality foreign medical devices to Mainland China, enabling it to timely seize the opportunities arising from the healthcare reforms.

STRATEGIC INVESTMENTS

The Chinese herbal medicine business is 100% owned by the Group, the management undertook cost control measures to mitigate losses incurred by overseas operations of the Chinese herbal medicine business and an operating loss of HK$32,107,000 was recorded during the year. The Company is exploring better solutions to unlock the commercial value of the Shanghai production facility of the Chinese herbal medicine business.

The Group received a notice in relation to Fortress Group Limited ("Fortress", a former associate of the Group) which requires the ordinary shareholders of Fortress to redeem certain outstanding senior obligations of Fortress from a senior security holder of Fortress, up to the value of the ordinary shares held by such ordinary shareholders, indicating that the disposal of Fortress would not proceed as contemplated. The said notice also requires, under agreed circumstances, the Group to perform under the aforesaid obligation. However, as confirmed from the notice, no further claim against the Group if the Group decides to transfer its entire equity interest in Fortress to the said senior security holder of Fortress.

As such, the Company is currently under discussion with the relevant parties and is also gathering additional information to assess situation including but not limited to legal implications of the said notice. The Company will also continue to evaluate alternatives to maximise the recovery of the Group's interest in Fortress. Based on the information available at this stage, the Group has made a full impairment provision of HK$759,934,000 against the Fortress interest held by the Group in the year ended 31 March 2015. Such non-cash impairment provision is not expected to affect the Group's core businesses which performed in line with management expectation.

OUTLOOK AND STRATEGIES

Looking ahead, Mr. Kam commented, "Mainland China's stable economic development will drive the demand for high quality healthcare services and devices, thanks to its accumulated economic momentum, vigorous healthcare reforms and the improvement of people's living standards, and thus creating huge growth opportunities for the healthcare industry. As a leading integrated healthcare businesses operator, Golden Meditech will continue adhering to the direction of developing premium healthcare services and medical device businesses. This will enable the Company to achieve stronger competitive edges in the healthcare sector and to capture opportunities amid the deepening of Mainland China's healthcare system reforms. Through persistently improving operational efficiency of our core business segments, we are committed to sustaining long-term growth through our pragmatic and prudent approach. At the same time, we will continue to explore viable opportunities along the healthcare value chain for developing value-added businesses, allowing the market to fully acknowledge and appreciate the intrinsic value of Golden Meditech".

About Golden Meditech Holdings Limited

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

SEGMENT RESULTS

Information regarding the Group's reportable segments for the years ended 31 March 2015 and 2014 is set out below: