28th Sep 2005 12:00
Cathay International Holdings Ld28 September 2005 28 September, 2005 CATHAY INTERNATIONAL HOLDINGS LIMITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2005 Chairman's INTERIM Statement RESULTS Turnover for the six months to 30 June 2005 declined to USD105,000 (2004 :USD3,455,000) as a result of the previously reported decision to close theLandmark Hotel (the "Hotel") for an extensive renovation. The operating loss forthe period was USD2,955,000 (2004: loss of USD3,045,000) and pre-tax loss beforeminority interests was USD3,631,000 (2004: loss of USD3,656,000). The loss aftertax and minority interests was USD3,631,000 (2004: loss of USD3,557,000). LANDMARK HOTEL (SHENZHEN) The Landmark Hotel was closed in December 2004 for an extensive renovationprogramme designed to position the Hotel as one of the most luxurious hotels inChina and to meet the new "platinum five-star" hotel rating of the ChinaNational Tourism Administration. On completion of the renovation the Hotel willhave 235 enlarged rooms and suites, a new and enlarged banqueting facility, anew executive lounge, a new Italian restaurant and coffee shop, a new spa andnew meeting room facilities. The renovation programme is within the announced budget parameters (USD10million to USD12 million) and the Hotel is expected to resume operation on afloor by floor basis this Autumn as planned. The Hotel has taken advantage of the closure period to engage a firm associatedwith Singapore Airlines that specialises in developing and enhancing servicequality, to provide training to staff of all ranks in the Hotel. Butler serviceis being introduced into the Hotel. A UK firm specialising in butler traininghas been providing tuition in this service for the Hotel. The Landmark is thefirst hotel in Southern China to offer a butler service. Although the closure of the Hotel will have a very negative impact on theCompany's results for the financial year ending 31 December 2005, the Boardbelieves that the renovation will significantly enhance the revenue and capitalvalue of the Hotel in the future. As far as the Board is aware there iscurrently no hotel in Shenzhen that has been awarded a platinum five star. It istherefore hoped that the Landmark will be the first hotel in Shenzhen to meetthis standard and the Board expects that this will enable the Hotel to capture asignificant market share following its reopening. BIOTECHNOLOGY AND PHARMACEUTICAL INVESTMENTS Botai Changchun Botai Medicine and Biological Technology Company Limited ("Botai") hascontinued to concentrate on the research and development of medical products inthe areas of biological materials, diagnostic kits and drug delivery systems.Botai took occupation of its new research, development and production centreearly this year. The centre consists of office space, a research and developmentlaboratory and four "Good Manufacturing Practice" ("GMP") production lines thatwill allow Botai to develop and manufacture medical products in forms of tablet,capsule, granule and ointment. The GMP certificates for the production lines areexpected to be granted in 2006. In the meantime, applications for New DrugLicences and/or Production Licences have been filed with the Chinese State Foodand Drug Administration ("SFDA") for various products. These include fourdiagnostic kits for prostate and cardiovascular conditions, a hydrogel for therelief of pain caused by rheumatoid arthritis (an ointment), an oral fastrelease drug for anti-infection (a tablet), a drug for fever relief (a granule)and a pain relief drug (a capsule). The relevant licences are expected to begranted by the end of 2006. Longbai Tianjin Longbai Biological Engineering and Technology Company Limited("Longbai") has continued to proceed with the research and development of drugdelivery formats and further progress has been made in the oral fast releasedrug series. Applications for New Drug Licences and Production Licences for twooral fast release drugs have been submitted to the SFDA for approval. It isestimated that one drug will have its New Drug Licence and Production Licenceapproved this year and the other will have both licences approved during 2006.One oral fast release drug for anti-infection has completed bioavailabilitytests and an application for a New Drug Licence and a Production Licence will bemade shortly; another is currently undergoing bioavailability tests. Longbai hasalso obtained approval from the SFDA to carry out bioavailability tests for sixother oral fast release drugs. CI Pharma It was announced on 28 July 2005 that the Company had reached agreement with ateam of senior managers experienced in the pharmaceutical manufacturing anddistribution market in China (the "Management") relating to the establishment ofCathay International Pharma Manufacture and Distribution Limited ("CI Pharma")through which investments would be undertaken in the pharmaceutical industry inChina. Details of the proposed establishment of CI Pharma, including thecontribution in instalments of up to USD16 million to the capital of CI Pharma,and the acquisition by wholly-owned subsidiaries of CI Pharma of Ningbo LiwahPharmaceutical Company Limited ("Liwah") and Shenzhen Lansen Medicine CompanyLimited ("Lansen") were included in the Company's prospectus dated 28 July 2005.The rationale underlying the proposals is to combine the marketing and salesexpertise of the Management, the manufacturing capabilities and distributionnetwork of Liwah and Lansen and the financial and investment experience andresearch and development capabilities of the Company and its subsidiaries. At a Special General Meeting of the Company held on 16 August 2005 the Company'sshareholders approved the proposals. It was announced on 19 August 2005 that theconditions precedent to the obligations of the Company to make the capitalcontributions to CI Pharma, including the completion of due diligence on Liwahand Lansen to the satisfaction of the Company, had been satisfied and that theCompany would therefore proceed with implementation of the proposals. Liwah The principal business of Liwah is the manufacture and sale of Chinese herbalmedicine and herbal extracts, principally in the form of capsules, tablets,granules and liquid medication. The activities of Liwah also include themanufacture of other Chinese and western medicines and the import and export ofits own and third parties' products and technologies. Liwah has six GMPproduction lines. Liwah's customers mainly comprise distributors in the Chinesepharmaceutical industry who then distribute Liwah's products to hospitals,clinics and pharmacies. Longbai will work closely with Liwah to ensure timelyand successful production of new medical products for the market once productionlicenses for such new medical products are obtained. Lansen Lansen is principally engaged in the marketing and distribution ofpharmaceutical products in China. With over 200 professional salesrepresentatives located in eight regional headquarters, Lansen's extensive salesnetwork covers almost all of China. While supporting the production and marketing of new products for Botai andLongbai, Liwah and Lansen will continue focusing on the production, marketingand distribution of their existing medical products. OPEN OFFER On 28 July 2005 the Company proposed an Open Offer to shareholders of126,589,628 new Common Shares at 9 pence per share to raise up to USD19,153,558(£10,991,368) net of expenses. The net proceeds of the Open Offer were to beused in part to fund the first three instalments of the capital contributionsproposed to be made to CI Pharma amounting to USD16 million. A total ofUSD13,033,385 was raised under the Open Offer and 80,017,779 new Common Shareswere issued. The amount raised was insufficient to fund the first threeinstalments of the capital contributions to be made to CI Pharma and the Companytherefore sought additional debt facilities. As announced on 19 August 2005 aloan facility for up to USD18 million, on normal commercial terms and on anunsecured basis, has been entered into by the Company with Cathay InternationalEW No. 43 Limited, the immediate parent undertaking of Cathay InternationalEnterprises Limited, which is itself the immediate parent undertaking of theCompany. CONCLUSION The Company is continuing actively to seek new business opportunities in China.On behalf of the Board, I would like to thank our management and staff for theircontinued dedication and commitment. James BuchananChairman 28 September 2005 Enquiries: Stephen Hunt (Deputy Chairman) (via Brunswick) 020 7404 5959Patrick Sung (Director - Finance) Jon Coles, Brunswick 020 7404 5959 GROUP CONDENSED INCOME STATEMENT Six months Six months Year ended ended 30 June ended 30 June 31 December 2005 2004 2004 (Unaudited) (Unaudited) (Audited) Note USD'000 USD'000 USD'000------------------------ ------ --------- -------- -------- TURNOVER 2 105 3,455 6,918COST OF SALES (963) (3,253) (6,099)------------------------ ------ --------- -------- --------GROSS (LOSS) / PROFIT (858) 202 819ADMINISTRATIVE EXPENSES------------------------ ------ --------- -------- --------Administrative expenses (2,097) (3,247) (5,769)Write off and impairmentof intangiblefixed assets - - (623)------------------------ ------ --------- -------- -------- (2,097) (3,247) (6,392)------------------------ ------ --------- -------- --------LOSS FROM OPERATIONS (2,955) (3,045) (5,573)FINANCE COSTS - NET (676) (611) (1,259)------------------------ ------ --------- -------- --------LOSS BEFORE TAXATION 2 (3,631) (3,656) (6,832)TAXATION 3 - - ------------------------- ------ --------- -------- --------LOSS ON ORDINARYACTIVITIESAFTER TAXATION (3,631) (3,656) (6,832)MINORITY INTERESTS - 99 14------------------------ ------ --------- -------- --------ACCUMULATED LOSS ATTRIBUTABLETOEQUITY SHAREHOLDERS (3,631) (3,557) (6,818)------------------------ ------ --------- -------- -------- LOSS PER SHAREBASIC 4 (2.01) cents (1.97) cents (3.77) cents------------------------ ------ --------- -------- -------- GROUP CONDENSED BALANCE SHEET As at As at As at 30 June 30 June 31 December 2005 2004 2004 (Unaudited) (Unaudited) (Audited) Note USD'000 USD'000 USD'000------------------------- ----- -------- -------- --------ASSETS NON-CURRENT ASSETSProperty, plant andequipment 115,925 105,202 107,288Intangible assets 192 900 192Goodwill 180 192 180Investments 4,910 4,894 4,946------------------------- ----- -------- -------- -------- 121,207 111,188 112,606------------------------- ----- -------- -------- -------- CURRENT ASSETSInventory 230 334 235Trade and otherreceivables 1,922 1,151 2,653Cash and cash equivalents 2,582 8,294 3,835------------------------- ----- -------- -------- -------- 4,734 9,779 6,723------------------------- ----- -------- -------- -------- TOTAL ASSETS 125,941 120,967 119,329------------------------- ----- -------- -------- -------- EQUITY AND LIABILITIES CAPITAL AND RESERVES 68,910 74,961 72,341 MINORITY INTERESTS - 542 - NON-CURRENT LIABILTIESBorrowings 316 21,468 21,331Deferred tax liabilities 5 15,264 14,695 15,264------------------------- ----- -------- -------- -------- 15,580 36,163 36,595------------------------- ----- -------- -------- -------- CURRENT LIABILITIESBorrowings 35,915 3,366 4,391Trade and other payables 5,536 5,935 6,002------------------------- ----- -------- -------- -------- 41,451 9,301 10,393------------------------- ----- -------- -------- -------- TOTAL EQUITY ANDLIABILITIES 125,941 120,967 119,329------------------------- ----- -------- -------- -------- GROUP CONDENSED STATEMENT OF CHANGES IN EQUITY Capital and Exchange Profit Share Revaluation Special Statutory Equalisation and Loss Capital Reserve Reserve Reserve Reserve Account Total USD'000 USD'000 USD'000 USD'000 USD'000 USD'000 USD'000------------- ------ ------- ------- ------ -------- ------- ------ Balance at 1January 2004 9,042 51,422 42,923 1,078 (9,924) (17,351) 77,190Exchangeadjustment - 201 - 3 50 - 254Loss for theperiod - - - - - (3,557) (3,557)Adjustment ofcost of fixedassets - 1,074 - - - - 1,074------------- ------ ------- ------- ------ -------- ------- ------ Balance at 30June 2004 9,042 52,697 42,923 1,081 (9,874) (20,908) 74,961------------- ------ ------- ------- ------ -------- ------- ------ Balance at 1January 2005 9,042 53,529 43,320 1,083 (10,463) (24,170) 72,341Exchangeadjustment - (8) - - 208 - 200Loss for theperiod - - - - - (3,631) (3,631)------------- ------ ------- ------- ------ -------- ------- ------ Balance at 30June 2005 9,042 53,521 43,320 1,083 (10,255) (27,801) 68,910------------- ------ ------- ------- ------ -------- ------- ------ GROUP CONDENSED CASH FLOW STATEMENT Six months Six months Year ended ended 30 June ended 30 June 31 December 2005 2004 2004 (Unaudited) (Unaudited) (Audited) USD'000 USD'000 USD'000------------------------ --------- --- --------- --- -------- Cash flows from operatingactivities (3,307) (2,917) (6,663)Cash flows from investingactivities (8,001) (901) (1,678)Cash flows from financingactivities 10,511 (2,113) (1,404)Effects of exchange ratechanges (456) 258 (387)----------------------- --------- --- --------- --- -------- Net decrease in cash andcash equivalents (1,253) (5,673) (10,132)Cash and cash equivalentsat beginning of the period 3,835 13,967 13,967----------------------- --------- --- --------- --- -------- Cash and cash equivalentsat end of the period 2,582 8,294 3,835----------------------- --------- --- --------- --- -------- NOTES 1. BASIC OF PREPARATIONThe interim condensed financial statements have been prepared in accordance withInternational Financial Reporting Standards ("IFRS") and under the historicalcost convention, modified where appropriate to incorporate a professionalvaluation of certain fixed assets. The accounting policies adopted are consistent with those followed in thepreparation of the Group's annual financial statements for the year ended 31December 2004. 2. SEGMENTAL INFORMATION Six months Six months Year ended ended 30 June ended 30 June 31 December 2005 2004 2004 (Unaudited) (Unaudited) (Audited) USD'000 USD'000 USD'000------------------ ----------- ----------- ---------Classes of Business TurnoverHotel Operations 105 3,455 6,918------------------ ----------- ----------- --------- (Loss)/Profit beforetaxationHotel Operations (1,554) (525) 819Pharmaceuticals (335) (461) (1,509)Corporate Office (1,742) (2,670) (6,142)------------------ ----------- ----------- --------- (3,631) (3,656) (6,832)------------------ ----------- ----------- --------- All turnover during the period arose from activities in China. 3. TAXATION No provision for current tax has been made as there was no assessable profitduring the period. 4. LOSS PER SHARELoss per share is based upon the loss after tax attributable to shareholders ofUSD3,631,000 for the six months ended 30 June 2005 (six months ended 30 June2004: loss of USD3,557,000) and the weighted average number of A shares andcommon shares in issue during the period of 12,144,615 and 168,697,710respectively (30 June 2004 - A shares: 12,182,775, common shares: 168,659,550). 5. DEFERRED TAX As at As at As at 30 June 2005 30 June 2004 31 December 2004 (Unaudited) (Unaudited) (Audited) USD'000 USD'000 USD'000---------------------- --------- ------------ ---------- Deferred taxliabilities onrevaluation ofproperties 16,134 15,761 16,134Deferred tax assetson tax losses (870) (1,066) (870)---------------------- --------- ------------ ----------Net position 15,264 14,695 15,264---------------------- --------- ------------ ---------- The movement for the period in the net deferredtax position was as follows: As at As at As at 30 June 2005 30 June 2004 31 December 2004 (Unaudited) (Unaudited) (Audited) USD'000 USD'000 USD'000---------------------- --------- ------------ ---------- At 1 January 15,264 14,695 14,695Charge to equity - - 569---------------------- --------- ------------ ---------- 15,264 14,695 15,264---------------------- --------- ------------ ---------- 6. PUBLICATION OF NON-STATUTORY ACCOUNTSThe unaudited interim results do not constitute full accounts prepared inaccordance with the listing rules of the UK Financial Services Authority. Thefigures for the year ended 31 December 2004 have been based on the full accountsof the Company which were prepared under IFRS and which included an unqualifiedaudit report. The interim financial information in this report has been neitheraudited nor reviewed by the Company's auditors. 7. Copies of this report have been sent to shareholders and are available tothe public from the Company's UK Transfer Agents, Capita Registrars, TheRegistry, 34 Beckenham Road, Beckenham, Kent BR3 4TU. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
CTI.L