RNS Number:7323E
Taihua Plc
28 September 2007
Taihua plc
("Taihua", the "Group" or the "Company")
Interim financial results
For the six months to 30th June 2007
Chairman's statement
Highlights:
O Pre-tax profits increase 30% to RMB 18.13 million (#1.19 million)
O Sales up 44% to RMB 33.6 million (#2.20 million)
O Continued strong demand growth for all products
O Strategic move to open up US and European markets simultaneously
I am, once again, delighted to be reporting strong growth in both sales and
profits for Taihua, this time for the half-year to 30 June 2007. During this
period of further steady progress for the group, our pre-tax profits increased
30% over the first half of 2006 to RMB 18.13 million (#1.19 million) on sales up
solidly to RMB 33.6 million (#2.20 million), an increase of 44%. We believe this
reflects the strong operational and strategic focus of the Taihua management
team in a range of markets offering significant growth potential, and remain
confident that the results show how Taihua is becoming strongly positioned in
its sector on AIM.
Our sales of the anti-cancer active pharmaceutical ingredients (APIs)
homoharringtonine and paclitaxel to manufacturers in China, Russia and South
America should be enhanced by deliveries to new customers in South Korea where
the company is still progressing the establishment of a distribution network
whilst a key objective remains entry into potentially lucrative Western markets
for paclitaxel. While our two Luonan production lines are keeping pace with
increased demand for our products, we have, in addition, established a strong
record of prompt delivery to distributors and customers, which, we believe,
further strengthens Taihua's position in the market.
This underlying demand, coupled with our supply efficiencies, saw sales of
paclitaxel increase to 9.57kg and of homoharringtonine to 6.12kg during the half
year, up 34% and 89%, respectively, on the corresponding period last year. In
Russia, sales of paclitaxel held steady at 4.6kg. Our sales of traditional
Chinese medicines (TCMs) increased 17% to RMB 5.8m (#0.38 million) compared to
the same period in 2006, and we believe this provides an underlying income
stream to support planned expansion and advance the development of finished
anti-cancer medicines. Two new products, biangtiong pian, used as a purgative
and huoliyuan pian, prescribed for insomnia, have moved into later research
phases. It is anticipated the two products will move into trial production ahead
of anticipated sales during 2008. Taihua also has two other new TCMs currently
awaiting approval from the State Food and Drug Administration of China.
We are, of course, proud of our achievements on these fronts in our existing
markets, from which we anticipate further growth. We have delivered strongly
increased revenues and returned growing profits for the second reporting period
since the Company's admission to AIM last December. To expand our export
business, our application for clearance to sell paclitaxel to drugs
manufacturers in the West remains one of our key objectives. On this front I can
now report that following a strategic re-appraisal of our approach to key future
markets, the Board has decided to submit applications in Europe for the
necessary Certificate of Suitability and Good Manufacturing Practice
simultaneously with applications for approvals in the United States. To support
this approach, the Board has resolved to appoint the Edinburgh-based
pharmaceutical regulatory affairs consultancy Advocates Ltd to work alongside
our existing adviser, Beijing Canny, acknowledging the additional workload
required to expedite both applications. This strategic shift recognises our
commitment to both the European and US markets, underpinned by our belief that
while the regulatory application in Europe will take longer than initially
anticipated, we shall be in position to open up both new markets. This should
result in overall cost savings and accelerate commercialisation of paclitaxel in
these markets.
In summary, with another period of solid advances behind us, I am confident that
backed by our strong operational management team and solid track record we
have every reason to anticipate further growth in our existing markets during
the second half of the year.
Richard Tanner
Chairman
28 September 2007
For further information contact:
David Youngman, W H Ireland Ltd: +44 (0) 161 832 2174
Allan Piper, First City Financial Public Relations: +44 (0) 20 7242 2666
Jiang Lei, First City Financial Public Relations: +44 (0) 20 7242 2666
Unaudited Consolidated Income Statement
for the six months ended 30 June 2007
Six months ended Six months ended
Year ended
30 Jun. 2007 30 Jun.2006
31 Dec.2006
(unaudited) (unaudited)
(audited)
RMB000 RMB000
RMB000
Revenue 33,630 23,388
52,624
Cost of sales (10,222) (7,630)
(16,307)
Gross profit 23,408 15,758
36,317
Other revenue - 127
294
(3,544) (1,227)
(3,013)
Selling expenses
(1,722) (667)
(3,364)
General and administrative
expenses
Operating Profit 18,142 13,991
30,234
Finance costs (10) (46)
(88)
Profit before income tax 18,132 13,945
30,146
Income tax expense (2,886) (1,718)
(4,112)
Profit for the period 15,246 12,227
26,034
Attributable to:
Equity holders of the company 15,246 12,227
26,034
Earnings per share (note 2)
(RMB per share)
Basic earning per share 0.19 0.17
0.35
Diluted earning per share 0.19 0.17
0.35
Unaudited Consolidated Balance Sheet at 30 June 2007
As at As at As
at
30 Jun. 2007 30 Jun.2006 31
Dec.2006
(unaudited) (unaudited)
(audited)
RMB000 RMB000
RMB000
NON-CURRENT ASSETS
Property plant and equipment 3,868 4,558
4,164
Land use rights 1,654 1,658
1,639
Biological assets 830 830
830
6,352 7,046
6,633
CURRENT ASSETS
Inventories 5,879 2,978
6,150
Accounts receivable 10,309 5,074
5,891
Other receivables 89 36
73
Deposits and prepayments 18,043 19,269
17,342
Land use rights 39 39
39
Cash and cash equivalents 60,491 22,972
54,364
94,850 50,368
83,859
TOTAL ASSETS 101,202 57,414
90,492
CURRENT LIABILITIES 291 344
376
Accounts payable 111 158
233
Receipts in advance 6,135 2,514
10,668
Accrued expenses and other payables - 900
-
Short-term borrowings
Amounts due to directors 95 73
399
Income tax payable 1,503 1,028
1,046
Due to previous holding company - 1,503
-
8,135 6,520
12,722
NET CURRENT ASSETS 86,715 43,848
71,137
TOTAL LIABILITIES 8,135 6,520
12,722
NET ASSETS 93,067 50,894
77,770
CAPITAL AND RESERVES ATTRIBUTABLE TO
EQUITY HOLDERS OF THE COMPANY
Share capital
12,280 3,180
12,280
Other reserves
15,196 6,838
12,858
Retained profits
65,591 40,876
52,632
TOTAL EQUITY 93,067 50,894
77,770
Unaudited Consolidated Statement of Changes in Equity for the six months ended
30 June 2007
RMB 000 Share Merger Share Reverse General Enterprise Foreign
Warrants Share Retained TOTAL
capital relief premium acquisition reserve expansion currency
reserve options profits
reserve reserve fund fund translation
reserve
reserve
At 1 January 2006 3,180 3,336 1,668
30,483 38,667
Profit for period
12,227 12,227
Transferred to 1,223 611
(1,834)
statutory reserves
At 30 June 2006 3,180 4,559 2,279
40,876 50,894
Issue of shares by
subsidiary 7,615
7,615
Reverse acquisition
adjustment 278 64,364 (63,408) (1,103)
131
Issue of shares by way
of share placement 1,207 10,860
12,067
Issue costs (6,762)
(6,762)
Grant of share options
18 18
Grant of warrants (935) 7 928
Profit for period
13,807 13,807
Transferred to 1,367 684
(2,051)
statutory reserves
At 31 12,280 64,364 3,163 (63,408) 5,926 2,963 (1,096) 928
18 52,632 77,770
December 2006
Exchange difference 51
51
Profit for period
15,246 15,246
Transferred to 1,525 762
(2,287)
statutory reserves
At 30 June 2007 12,280 64,364 3,163 (63,408) 7,451 3,725 (1,045) 928
18 65,591 93,067
Unaudited Consolidated Cash Flow Statement for the six months ended 30 June 2007
Six months ended Six months ended Year
ended
30 Jun. 2007 30 Jun.2006 31
Dec.2006
(unaudited) (unaudited)
(audited)
RMB000 RMB000
RMB000
CASH FLOWS FROM OPERATING ACTIVITIES
Operating profit 18,142 13,991
30,234
Adjustments:
Provision for bad debts - 30
143
Amortisation of land use rights (15) 19
39
Depreciation 395 416
820
Share-based payments - -
18
Interest income - 14
(175)
Exchange difference 51 -
-
Operating cash flows before working capital 18,573 14,470
31,079
changes
Decrease/(increase) in inventories 271 1,367
(1,807)
(Increase) in receivables (4,418) (2,262)
(3,222)
(Increase)/decrease in other receivables (16) 114
108
(Increase)/decrease in deposits and (701) 678
2,605
prepayments
Decrease in amounts due from directors - 5
5
(Decrease) in accounts payable (85) (38)
(6)
(Decrease)/increase in receipts in advance (122) 41
117
(Decrease)/increase in accrued expenses and (4,077) 120
1,688
other payables
(Decrease)/increase in amounts due to (304) 48
373
directors
CASH GENERATED FROM OPERATIONS 9,121 14,543
30,940
Interest received - 30
175
Profit tax paid (2,886) (2,223)
(4,598)
NET CASH GENERATED FROM OPERATING 6,235 12,350
26,517
ACTIVITIES
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets (99) (32)
(42)
NET CASH USED IN INVESTING ACTIVITIES (99) (32)
(42)
CASH FLOWS FROM FINANCING ACTIVITIES
Issue of shares - -
12,067
Issue of shares by subsidiary prior to - 1,503
7,615
acquisition
Repayment of short-term borrowings - (400)
(1,300)
Interest paid (10) (44)
(88)
NET CASH (USED BY)/ GENERATED FROM (10) 1,059
18,294
FINANCING ACTIVITIES
NET INCREASE IN CASH AND CASH EQUIVALENTS 6,126 13,377
44,769
CASH AND CASH EQUIVALENTS AS AT 1 JANUARY 54,364 9,595
9,595
2007
CASH AND CASH EQUIVALENTS AS AT 30 JUNE 60,490 22,972
54,364
2007
ANALYSIS OF THE BALANCES OF CASH AND CASH
EQUIVALENTS
Cash and bank balances 60,490 22,972
54,364
Notes to the Unaudited Financial Statements for the six months ended 30 June 2007
1. ACCOUNTING POLICIES
Basis of preparation
The interim financial information for the six months ended 30 June 2007 is
unaudited and that for the equivalent period in 2006 is unaudited. The
comparatives for the full year ended 31 December 2006 are not the Group's full
statutory accounts for that year. A copy of the statutory accounts for that year
has been delivered to the Registrar of Companies. The auditors' report on those
accounts for the period ended 31 December 2006 was unqualified, did not include
references to any matters to which the auditors drew attention by way of
emphasis without qualifying their report and did not contain a statement under
parts of the Companies Act 1985 applicable to companies preparing financial
statements under IFRS.
The interim financial information has been prepared in accordance with the
accounting policies and presentation required by International Financial
Reporting Standards, incorporating International Accounting Standards and
Interpretations (collectively "IFRS") as endorsed by the European Union.
The interim report is presented and prepared in a form consistent with that
which has been adopted in the Group's annual accounts having regard to the
accounting standards applicable to such accounts.
The acquisition of China Natural Pharmaceutical Limited ("CNP") by Taihua Plc on
26 September 2006 was accounted for as a reverse acquisition, in accordance with
IFRS3 "Business Combinations". As a consequence of applying reverse acquisition
accounting, the results for the year ended 31 December 2006 comprise the full
year results of CNP and its subsidiary undertaking (Taihua Natural Plant
Pharmaceutical Co Limited) for the year ended 31 December 2006 plus those of
Taihua Plc from 26 September 2006, the date of the reverse acquisition, to 31
December 2006. The figures for the period to 30 June 2007 comprise those of
Taihua Plc and both its subsidiary undertakings. The figures for the period to
30 June 2006 are those of CNP and its subsidiary undertaking.
Foreign currency translation
The functional currency of the subsidiary undertakings is Renminbi ("RMB"), and
the audited financial statements of the subsidiary undertakings have been drawn
up in RMB. As sales and purchases are denominated primarily in RMB and receipts
from operations are usually retained in RMB, the directors are of the opinion
that RMB reflects the economic substance of the underlying events and
circumstances relevant to the Group. Monetary assets and liabilities maintained
in currencies other than RMB are translated into RMB at the approximate rates of
exchange ruling at the balance sheet date. Transactions in currencies other than
RMB are translated at rates ruling on the transaction dates.
The presentation currency of the Group is RMB and therefore the financial
statements have been translated from GBP and HKD to RMB at the following
exchange rates:
Period end rates Average rates
30 June 2007 1=RMB15. 2455 1=RMB15.2272
HKD1=RMB0.9754 HKD1=RMB0.9896
2. EARNINGS PER SHARE
Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to
equity holders of the Company by the weighted average number of ordinary shares
in issue during the year.
Six months ended Six months Year
30 Jun. 2007 ended ended
30 Jun.2006 31 Dec.2006
(unaudited) (unaudited) (audited)
RMB000 RMB000 RMB000
Profit attributable to equity
holders of the company (RMB'000) 15,246 12,227 26,034
Weighted average number of
ordinary shares in issue
(thousands) 81,211 73,391 73,776
Earnings per share
(RMB per share) 0.19 0.17 0.35
Diluted earnings per share
The company has two categories of dilutive shares-share options and warrants. A
calculation is undertaken to determine the number of shares that could have been
acquired at fair value based on the monetary value of the subscription rights
attached to outstanding share options and warrants. It is compared with the
number of shares that would have been issued assuming the exercise of the share
options and warrants.
Six months ended Six months Year
30 Jun. 2007 ended ended
30 Jun.2006 31
Dec.2006
(unaudited) (unaudited)
(audited)
RMB000 RMB000 RMB000
Profit attributable to equity
holders of the company 15,246 12,227 26,034
Weighted average number of ordinary
shares in issue (thousands) 81,211 73,391 73,776
Adjustment for share options and
warrants (thousands) 555 - 70
Weighted average number of ordinary
shares for diluted earnings
(thousands) 81,766 73,391 73,846
Diluted earnings per share
(RMB per share) 0.19 0.17 0.35
INDEPENDENT REVIEW REPORT TO TAIHUA PLC
Introduction
We have been instructed by the company to review the financial information for
the six months ended 30 June 2007 which comprises the Unaudited Consolidated
Income Statement, Unaudited Consolidated Balance Sheet, Unaudited Consolidated
Statement of Changes in Equity and Unaudited Consolidated Cash Flow Statement
and the related notes. We have read the other information contained in the
interim report and considered whether it contains any apparent misstatements or
material inconsistencies with the financial information.
This report is made solely to the company in accordance with the terms of our
engagement. Our review has been undertaken so that we might state to the company
those matters we are required to state to it in this report and for no other
purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company for our review work, for this
report, or for the conclusions we have reached.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the directors. The directors
are responsible for preparing the interim report in accordance with the AIM
Rules issued by the London Stock Exchange which require that the accounting
policies and presentation applied to the interim figures should be consistent
with those applied in preparing the preceding annual accounts except where any
changes, and the reasons for them, are disclosed.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4
issued by the Auditing Practices Board. A review consists principally of making
enquiries of group management and applying analytical procedures to the
financial information and underlying financial data and based thereon, assessing
whether the accounting policies and presentation have been consistently applied
unless otherwise disclosed. A review excludes audit procedures such as tests of
controls and verification of assets, liabilities and transactions. It is
substantially less in scope than an audit performed in accordance with
International Auditing Standards and therefore provides a lower level of
assurance than an audit. Accordingly we do not express an audit opinion on the
financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 June 2007.
PKF (UK) LLP
Chartered Accountants
Leeds
28 September 2007
This information is provided by RNS
The company news service from the London Stock Exchange
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