Interim results

Cathay International Holdings Limited

("Cathay" or the "Company")

Interim results for the six months ended 30 June 2012

Hong Kong, 29 August 2012 - Cathay International Holdings Ltd. (LSE: CTI.L), an investment holding company and a leading investor in the growing healthcare sector in the People's Republic of China, today announces its Interim Results for the six months ended 30 June 2012.

Group

·; Revenues increased by 25.6% to USD48.4 million (2011: USD38.5 million)

·; Gross profit increased by 21.4% to USD24.4 million (2011: USD20.1 million)

·; Operating profit grew by 1.7% to USD3.8 million (2011: USD3.7 million)

·; Net profit decreased to USD2.2 million (2011: USD2.9 million)

Lansen

·; Revenues increased by 33.5% to USD41.4 million (2011: USD31.0 million)

·; 25.7% growth in sales of core anti-rheumatic products (Pafulin, Tuoshu, and MMF)

·; 22.9% increase in gross profit to USD23.4 million (2011: USD19.1 million)

·; Operating profit increased by 16.9% to USD7.4 million (2011: USD6.3 million)

·; Decreased contribution to USD0.7 million (2011: USD1.1 million) from 20% stake in Starry (iohexol X-ray contrast agent)

·; Net profit increased by 5.6% to USD6.5 million (2011: USD6.1 million)

Haotian

·; Revenues of USD0.9 million (2011: USD1.7 million)

·; Gross margin decreased from 11.3% to 10.8%

·; Operating loss increased to USD1.8 million (2011: USD0.4 million)

Botai

·; Expansion of production facilities for collagen injectable filler, targeted to launch in H2 2012

·; Longbai merged into Botai to create future synergies

Hotel

·; Revenues grew by 5.3% to USD6.1 million (2011: USD5.8 million)

·; Operating profit increased by 28.8% to USD0.9 million (2011: USD0.7 million)

·; Average room rate increased to USD148 (2011: USD132)

·; Occupancy rate decreased to 51.1% (2011: 54.7%)

Commenting on the interim results, Mr. Lee Jin-Yi, CEO of Cathay International Holdings Limited, said: "Despite the slow growth seen across China's economy, and also in the pharmaceutical sector, Cathay achieved 25.6% top-line growth in the first half this year. This significantly outperformed the local market and growth was largely driven by Lansen's core rheumatoid drug sales, the positive results of the repositioning of the hotel and a carefully managed cost base across the Group. Our performance was, however, dragged by Haotian. Haotian is going into the pre-operating phase of the inositol project, preparing for the full-scale operation. Botai is working towards market launch of its collagen injectable filler. While we have entered the second half of the year with a cautiously optimistic approach bolstered by the 15-20% projected growth rates for the healthcare and pharmaceutical market in China that should benefit Lansen; the outlook of the Group will also depend on Haotian's inositol project being completed to plan. We remain committed to exploring investment opportunities that strategically fit well with the Group's strategy and remain focused on driving our business forward in order to deliver value for our shareholders."

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About Cathay

Cathay International Holdings Limited (CTI.L), focused on the People's Republic of China ("PRC"), is an investment holding company and a leading investor in the growing healthcare sector in China. The Group employs more than 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 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 demonstrated a strong track record of identifying high-growth potential investment opportunities in this area including: Lansen Group, a leading specialty pharmaceutical company focused on rheumatology and Haotian Group, a company engaged in the manufacture, marketing and sale of key active ingredients for healthcare products, including inositol. To complement its healthcare portfolio, Cathay has a research and product development business focused on bringing new products to the growing Chinese market.

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

During the first half of 2012, China's economy experienced slower growth, with gross domestic product (GDP) growth at 7.6%, compared to 9.5% in the same period last year. China's pharmaceutical sector also grew at a slower rate in the first five months of 2012, up 19.2% year-on-year, compared with around 30% growth in the past five years.

Despite the slower economic growth in China, the Group achieved a top-line growth of 25.6% year-on-year in the first half of this year, significantly outperforming the market. Lansen registered another period of strong growth of 33.5% in revenue mainly from the sales of its three core rheumatic specialty drugs and captured an increased share of the market. The Hotel repositioning started to show positive results and revenue from the Hotel grew by 5.3%, on the back of a 12.1% increase in room rate, exceeding its peers in Shenzhen, which showed an average 4.4% drop in revenue.

In addition to driving growth, the Group also managed its cost base closely. Lansen was able to maintain the gross profit margin of its core specialty drugs at a similar level to the previous year despite of higher white peony prices and labor costs. Lansen also reduced its selling and distribution expenses to 31.1% of its revenue, down from 33.7% in the last period. The Hotel maintained its gross profit margin at 14.8% (15.0% in the last period), despite a 6% rise in staff costs that was in line with the market.

Haotian reported a loss of USD1,883,000 which resulted in the Group recording a loss attributable to owners of the parent company of USD835,000 for the period, compared to a loss of USD127,000 a year ago. Haotian received a one-off government investment incentive of USD965,000 in the last period. Excluding this incentive, the Group had marginally improved its results.

Haotian completed construction of its sixth phytin plant in Yushu, Jilin Province. During the period, Haotian continued with its inositol trial production runs. Haotian is now entering into the pre-operating phase of inositol production and the final phase of workers training, preparing for the full-scale operation of the inositol project. Within Botai, we are working on the expansion of production facilities for its collagen injectable filler product and preparing for its launch in the market in China. The Group merged Longbai into Botai to create future synergies in management and production.

The business environment in second half of 2012 will continue to be challenging with the global economic uncertainty and slow growth in China and Chinese medical reforms proposing to lower drug prices would force the industry to further consolidate. Even with the softened economy, the China healthcare and pharmaceutical markets are projected to grow at 15-20% per annum in the foreseeable future. The outcome for the year as a whole is going to depend upon the Group continuing to benefit from the growth shown by Lansen as well as Haotian delivering an improved performance, which will be dependent upon the final phases of the inositol project being completed to plan.

The Group continues to explore investment opportunities that would strategically fit into its existing businesses and compliment the overall product portfolio. Within Lansen, the investment focus will be on broadening its product portfolio in the rheumatology space via its current development product pipeline; and through potential business collaborations and product acquisitions; and expanding its sales and distribution network to second and third tier China cities. Botai will continue to work on the commercial launch of its product and on building a competitive market share.

Sum Soon Lim

Chairman

29 August 2012

FINANCIAL PERFORMANCE

Group revenue for the first half of 2012 increased by 25.6% to USD48,394,000 (2011: USD38,517,000). The increase was mainly due to a 33.5% growth in Lansen's revenue to USD41,394,000 (2011: USD31,005,000). The Hotel's revenue grew by 5.3% to USD6,072,000 (2011: USD5,767,000).

Group gross profit for the period rose by 21.4% to USD24,446,000 (2011: USD20,141,000). This was mainly due to the 22.9% increase in gross profit from Lansen to USD23,449,000 (2011: USD19,076,000). The Hotel slightly improved its gross profit, while gross profit of Haotian reduced to USD100,000 (2011: USD198,000) due to decrease in bilberry sales.

Group operating profit for the period was USD3,782,000 (2011: USD3,718,000). Lansen's operating profits increased by 16.9% to USD7,385,000 (2011: USD6,316,000). The operating loss of Haotian of USD1,815,000 (2011: USD394,000) was after government grants of USD168,000 (2011: USD1,122,000). Excluding the government grants, Haotian's operating loss was USD1,983,000 (2011: USD1,516,000). The Hotel recorded a 28.8% increase in operating profits to USD899,000 (2011: USD698,000) mainly because it was able to manage down its administrative costs. The corporate office operating expenses was reduced slightly to USD2,387,000 (2011: USD2,447,000).

Group financing costs increased 24.0% to USD1,130,000 (2011: USD911,000), mainly due to increased average bank borrowings and the higher interest rates, at an average of 2.9%, that prevailed in the first half of 2012 (2011: 2.2%). The interest expenses capitalised during the period were USD622,000 (2011: USD232,000).

Zhejiang Starry Pharmaceutical Co. Limited ("Starry") completed the expansion of its iohexol production facilities, doubling the annual capacity to 500 tonnes. Due to the delay in receiving the GMP certification on these expanded facilities and increased costs, contribution from Starry decreased during the period. This situation will be reversed and Starry is expected to increase contribution in the second half of 2012.

Group's after tax profit before non-controlling interests for the first half of 2012 was USD2,194,000 (2011: USD2,859,000). The increase in tax expense was due to the increase in taxable profit of the Group's subsidiaries operating as different entities, not being offset by losses in loss-making entities.

The Group's loss attributable to owners of the parentfor the first half of 2012 was USD835,000 (2011: loss of USD127,000). The increase in loss was primarily due to certain one-off government grants received by Haotian in the last period but not in the current period, as mentioned above.

Group's Gearing

The Group's net bank borrowings decreased to USD86,605,000, compared to USD88,858,000 as at 31 December 2011, mainly due to repayment of bank borrowings. The Group extended or renewed all borrowings matured on or before the date of this report. Net gearing reduced to 43.6% (31 December 2011: 44.4%).

Lansen Group

Revenue for the first half of 2012 increased by 33.5% to USD41,394,000 (2011: USD31,005,000). Revenue from prescription western pharmaceuticals for rheumatic indications rose by 21.0% to USD25,320,000 (2011: USD20,929,000).

Growth in core product revenue was mainly due to the steady growth of its rheumatic specialty drugs - Pafulin (18.5%), Tuoshu (17.1%) and the immunosuppressant mycophenolate mofetil ("MMF") introduced in 2010 (234.8%). The sales in other pharmaceuticals increased by 59.5%, mainly due to a general increase in demand for modern Chinese medicine extracts in the current period and slower sales in the same period last year.

Lansen's gross profit increased by 22.9% to USD23,449,000 (2011: USD19,076,000). Lansen's gross profit margin, however, decreased 4.9% to 56.6% (2011: 61.5%), mainly due to increased sales of lower margin non-core products - modern Chinese medicine extracts and other generic drugs. The gross profit margin of its core rheumatic specialty drugs maintained at 75.2% (2011: 77.0%).

Lansen's operating profit rose by 16.9% to USD7,385,000 (2011: USD6,316,000). The operating profit margin was reduced to 17.8% (2011: 20.4%), a drop of 2.6%. Selling and distribution expenses increased by 23.4% to USD12,888,000 (2011: USD10,442,000) due to Lansen's commitment to continue to raise the visibility of Pafulin, Tuoshu and MMF in its specialty markets; however, such selling and distribution expenses was managed down to 31.1% of Lansen's revenue (2011: 33.7%).

Lansen's profit before non-controlling interests increased by 5.6% to USD6,480,000 (2011: USD6,136,000).

Lansen completed the main building construction of its Pafulin extract production plant and the equipment installation should complete in the second half of 2012. The plant will optimize Lansen's production and management efficiency and meet the anticipated increase in demand for these products.

Lansen's strategy is to broaden its product portfolio in the rheumatology space. Lansen has a pipeline of ten products under development, which are DMARDs and NSAIDs for treatment of autoimmune disorders. Lansen will continue to explore acquisition and collaboration opportunities to obtain new products and will also invest in expanding its sales and distribution network to second and third tier cities in China.

Haotian Group

Haotian's non-inositol business revenue decreased by 46.8% to USD928,000 (2011: USD1,745,000). The non-inositol business revenue comprised mainly of bilberry sales. The global supply of bilberries in the last harvest season was substantially reduced due to bad weather conditions in Europe, leading to a surge of raw material price. Haotian therefore temporarily reduced the procurement of bilberries raw material, resulted in the drop in bilberry sales.

Gross profit of Haotian's non-inositol business reduced to USD100,000 (2011: USD198,000), as a result of the decrease in business volume. The gross profit margin decreased to 10.8% (2011: 11.3%) due to surge in raw material price.

The operating loss of Haotian was USD1,815,000 (2011: loss of USD394,000), after government grants of USD168,000 (2011: USD1,122,000). In the first half of 2011, Haotian received a one-off investment incentive of USD965,000 in the Jilin development district. Excluding government grants, Haotian's operating loss was USD1,983,000 (2011: USD1,516,000).

Haotian completed construction of its sixth phytin plant in Yushu, Jilin Province. During the period, Haotian continued with its trial production runs of inositol. Haotian is entering into the pre-operating phase, with inositol production to reach approximately two-thirds of its capacity, and the final phase of training for workers. This will prepare for the full-scale operation of the inositol project.

Due to the sharp decline in curcumin market prices, which will squeeze profit margins of curcumin products, Haotian is reviewing its curcumin feasibility study and refining its business model.

Botai

Botai received the first ever domestic production license for medical collagen injectable filler (brand name "Fillderm") from the State Food and Drug Administration of the PRC. During the period, Botai has conducted market surveys and interviews with industry professionals and has formulated the marketing and sales strategy for Fillderm. Botai has commenced the building of a sales team and the expansion of the production facilities and remains on target to launch Fillderm towards the end of this year.

During the period, Longbai was merged with Botai and Botai took over the misoprostol project. Botai is preparing the application for regulatory approval of misoprostol. The licensing process could take two to three years.

Hotel Operations

First half of 2012 was a challenging period for the hotel industry in China due to the uncertainty of the global economy and the slow down in the PRC economic growth. The Hotel continues to maintain high service quality through extensive staff training and continues to grow in the domestic market for both business and transient segments through proactive marketing.

Following a repositioning exercise, in the first half of 2012, revenue in the Hotel increased by 5.3% to USD6,072,000 (2011: USD5,767,000). The average room rate increased by 12.1% to USD148 (2011: USD132) while the room occupancy decreased 3.6% to 51.1% (2011: 54.7%). Our Hotel outperformed the peers' average in Shenzhen, which only recorded an average room rate increase of 4.9% with an average 8.9% drop in room occupancy in the same period.

The Hotel's food and beverage revenue grew to USD1,813,000 (2011: USD1,713,000), mainly due to improvements made to its catering and banqueting business.

The Hotel managed its operating costs effectively and maintained the gross profit margin at 14.8% during the period (2011: 15.0%), despite a 6% rise in staff costs that was in line with the Shenzhen market.

The Hotel's operating profit for the first half of 2012 increased substantially by 28.8% to USD899,000 (2011: USD698,000). The increase was mainly due to lower administrative costs and an increase in interest income.

Cathay International Capital ("CIC")

CIC will continue to explore investment opportunities primarily in the pharmaceutical and healthcare sector. Priority will be given to investments that would strategically fit into our existing businesses and compliment our product portfolio.

GRANT OF SHARE OPTIONS

On 3 April 2012, the Company granted 4,310,000 options under a Share Option Plan approved by shareholders of the Company on 3 June 2010. The number of options granted to date to the Group's management and employees represents approximately 63% of the options currently available under the Share Option Plan.

-Ends-

CONSOLIDATED INCOME STATEMENT

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PREPARATION

The condensed consolidated interim financial statements (the "Interim Financial Statements") have been prepared in accordance with International Accounting Standard ("IAS") 34 "Interim Financial Reporting" issued by the International Accounting Standards Board (the "IASB") and under the historical cost convention, modified where appropriate to incorporate a professional valuation of certain fixed assets.

The accounting policies adopted in the Interim Financial Statements are consistent with those used in the preparation of the Group's annual financial statements for the year ended 31 December 2011, except for the adoption of the new and revised International Financial Reporting Standards ("IFRSs") (which collective term includes all applicable individual International Financial Reporting Standards and Interpretations as approved by the IASB, and all applicable individual International Accounting Standards and Interpretations as originated by the Board of the International Accounting Standards Committee and adopted by the IASB). The application of these new and revised IFRSs in the current interim period has no material effect on the amounts reported in the Interim Financial Statements and/or disclosures set out in the Interim Financial Statements.

The Group has not early applied new or revised standards that have been issued but not yet effective.

2. SEGMENT INFORMATION

The Group's operating segments reconciled to the entity's profit before income tax are presented in its condensed consolidated interim financial statements as follows:

3. INCOME TAX EXPENSE

The provision for current tax has been made in respect of the assessable profits arising in the People's Republic of Chinaduring the period.

4. 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 USD835,000 (2011: USD127,000) and the following weighted average number of shares of A Shares and Common Shares in issue during the period:

For the period ended 30 June 2012 and 2011, the computation of diluted loss per share does not assume the exercise of the Company's outstanding share options as the exercise price of those options is higher than the average market price for shares nor does it 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 period.

STATEMENT OF DIRECTORS' RESPONSIBILITIES

Each of the directors confirms that, to the best of his knowledge:

i the condensed set of financial statements, which has been prepared in accordance with the International Financial Reporting Standards and IAS 34 Interim Financial Reporting, gives a true and fair view of the assets, liabilities, financial position and profit or loss of the issuer, or the undertakings included in the consolidation as a whole;

ii the interim management report includes a fair review of the information required by the Disclosure and Transparency Rules 4.2.7R; and

iii the interim management report includes a fair review of the information required by the Disclosure and Transparency Rules 4.2.8R.

PUBLICATION OF NON-STATUTORY ACCOUNTS

The unaudited interim results do not constitute full accounts prepared in accordance with the listing rules of the UK Financial Services Authority. The figures for the year ended 31 December 2011 have been based on the full accounts of the Group which were prepared under IFRS and which included an unqualified audit report. The interim financial information in this report has been neither audited nor reviewed by the Group's auditor.

Copies of this report have been sent to shareholders and are available to the public from the Company's UK Transfer Agents, Capita Registrars, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU.