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Jilin Province Huinan Changlong Bio-pharmacy Company Limited
(a joint stock limited company incorporated in the People's Republic of China)
(Stock Code: 8049)
First Quarterly Report 2012
CHARACTERISTICS OF THE GROWTH ENTERPRISE MARKET ("GEM") OF THE STOCK EXCHANGE OF HONG KONG LIMITED (THE "STOCK EXCHANGE")
GEM has been positioned as a market designed to accommodate companies to which a higher investment risk may be attached than other companies listed on the Stock Exchange. Prospective investors should be aware of the potential risks of investing in such companies and should make the decision to invest only after due and careful consideration. The greater risk profile and other characteristics of GEM mean that it is a market more suited to professional and other sophisticated investors.
Given the emerging of companies listed on GEM, there is a risk that securities traded on GEM may be more susceptible to high market volatility than securities traded on the Main Board and no assurance is given that there will be a liquid market in the securities traded on GEM.
Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this report, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this report.
This report, for which the directors of Jilin Province Huinan Changlong Bio-pharmacy
Company Limited (the "Directors") collectively and individually accept full responsibility,
includes par ticulars given in compliance with the Rules Gover ning the Listing of Securities on GEM (the "GEM Listing Rules") for the purpose of giving information with regard to Jilin Province Huinan Changlong Bio-phar macy Company Limited and its subsidiary ("the Group"). The directors, having made all reasonable enquiries, confirm that, to the best of their knowledge and belief: (1) the information contained in this report
is accurate and complete in all material respects and not misleading; (2) there are no other matters the omission of which would make any statement in this report misleading; and (3) all opinions expressed in this report have been arrived at after due and careful consideration and are founded on bases and assumptions that are fair and reasonable.
FIRST QUARTERLY REPORT (UNAUDITED)
FOR THE THREE MONTHS ENDED 31 MARCH 2012
CONSOLIDATED PROFIT AND LOSS ACCOUNT (UNAUDITED)
The Board of Directors (the "Board") of Jilin Province Huinan
Changlong Biopharmacy Company Limited ("the Company") is
pleased to announce the unaudited consolidated results of the
Company and its subsidiaries (the "Group") for the three
months ended 31 March 2012 together with the comparative
unaudited figures for the corresponding periods in 2011 as
follows:
For the three months ended 31 March
Notes | 2012 RMB'000 | 2011 RMB'000 | ||
Turnover | 3 | 68,034 | 45,123 | |
Cost of sales | (10,266) | (5,156) | ||
Gross profit | 57,768 | 39,967 | ||
Other revenue | 6,402 | 293 | ||
Distribution and selling costs | (48,880) | (22,312) | ||
Administrative expenses | (4,768) | (1,607) | ||
Profit from operations | 10,522 | 16,341 | ||
Finance costs | 0 | 0 | ||
Profit before taxation | 10,522 | 16,341 | ||
Taxation | 5 | (1,578) | (2,451) | |
Profit attributable to equity holders of the Company | 8,944 | 13,890 | ||
Earnings per share - Basic | 6 | 1.60 cents | 2.48 cents |
First Quarterly Report 2012 1
NOTES:
1. ORGANISATION AND OPERATIONS
The Company was established as a state-owned enterprise in
the People's Republic of China (the "PRC") in 1989. On 29
December 1995, under the relevant provisions of the Company
Law of the PRC, the Company was re-organized from a
state-owned enterprise to a limited liability company. On 16
August 1996, with the approval of the Economic Restructuring
Commission of Jilin Province, the Company was further
converted into a joint stock limited company. On
20 April 1999, the Company made a bonus issue from
capitalisation of retained profits at the proportion of one
bonus share for every two existing shares. The Company's H
shares were listed on the Growth Enterprise Market of the
Stock Exchange of Hong Kong Limited on 24 May
2001.
The Group is principally engaged in the manufacture and
distribution of biochemical medicines in the PRC under the
brand names of Changlong and Shendi. There were no changes in
the nature of the Group's principal activities during the
period ended 31 March 2012.
2. BASIS OF PREPARATION
The unaudited consolidated results of the Group have been
prepared under the historical cost convention as modified for
the revaluation of financial instruments which have been
measured at fair value, and in accordance with Hong Kong
Financial Reporting Standards ("HKFRS") and Hong Kong
Accounting Standards ("HKAS") (collectively "HKFRSs"),
accounting principles generally accepted in Hong Kong, the
disclosure requirements of the Hong Kong Companies Ordinance
and the Rules Governing the Listing of Securities on the GEM
of the Stock Exchange (the "GEM Listing Rules").
The accounting policies adopted in preparing the unaudited
consolidated results for the three months ended 31 March 2012
are consistent with those followed in the preparation of the
Group's annual financial statements for the year ended 31
December 2011.
The condensed consolidated results for the three months ended
31 March 2012 are unaudited and have been reviewed by the
audit committee of the Company.
3. TURNOVER
The Group's turnover comprises the invoiced value of merchandise sold net of value-added tax and after allowances for returns and discounts.
4. SEGMENTAL INFORMATION
The Group has only one business segment which is in the manufacture and distribution of biochemical medicines in the PRC. During the period ended 31 March 2012, turnover of the Group is generated entirely from sales in the PRC and all identifiable assets of the Group are located in PRC. Accordingly, no business or geographical segmental analysis is presented.
2 First Quarterly Report 2012
5. TAXATION
Unaudited
For the three months ended 31 March
2012 2011
RMB'000 RMB'000
The charge comprises
PRC income tax 1,578 2,451
The PRC income tax is computed according to the relevant laws
and regulations in the PRC. On
24 July, 2009, the Company was accredited as a "National New
and High-tech Enterprise" by the Jilin Provincial Science and
Technology Bureau (????????) and is entitled to
a reduced PRC Enterprise Income tax rate of 15% for the three
months ended 31 March 2012 (2011: 15%).
6. EARNINGS PER SHARE
The calculation of basic earnings per share for the three
months ended 31 March 2012 is
based on the unaudited profit attributable to equity holders
of the Company of approximately RMB8,944,000 (2011:
RMB13,890,000) and the weighted average of 560,250,000 shares
(2011: 560,250,000 shares).
Diluted earnings per share is not presented as there were no
dilutive potential shares in existence during the periods
ended 31 March 2012 and 2011.
7. DIVIDENDS
The Board does not recommend the payment of an interim
dividend for the three months ended
31 March 2012. (2011: Nil).
8. RESERVES
Other than as disclosed below, there was no movement in
reserves of the Group for the three
months ended 31 March 2012 and 31 March 2011.
Retained Profits
RMB'000
As at 1 January 2011 (Audited) 151,249
Net profit for the three months ended 31 March 2011
(Unaudited) 13,890
As at 31 March 2011 (Unaudited) 165,139
As at 1 January 2012 (Audited) 202,142
Net profit for the three months ended 31 March 2012
(Unaudited) 8,944
As at 31 March 2012 (Unaudited) 211,086
First Quarterly Report 2012 3
BUSINESS REVIEW AND PROSPECTS
OPERATING RESULTS
For the three months ended 31 March 2012, the Group reported
a turnover of approximately RMB68,034,000, representing an
increase of approximately RMB22,911,000 as compared with the
same period last year. Profit attributable to equity holders
of the Company for the three months ended
31 March 2012 was RMB8,944,000, representing a decrease of
55% from RMB13,890,000 for the corresponding period in 2011.
Basic earning per share was RMB1.6 cents.
Turnover increased for approximately RMB22,911,000 as
compared with the same period last year mainly contributed by
the increase in the sale of Hai Kun Shen Xi and Fu Fang Huo
Nao Shu capsule.
The gross profit margin for the three months ended 31 March
2012 was approximately 85%, representing a 3% decrease as
compared to that of 88% for the period ended 31 March 2011.
The reason for the increase of gross profit margin was mainly
due to a change of product sales mix whereby the sale of
products with higher margin had increased. The Board believes
that there were no significant fluctuation for the production
and material cost.
The distribution and selling costs as a percentage of
turnover was 71.8% in 2012. This represented a 22.8% increase
from 49% when compared to the same period last year.
Administrative expenses increase from RMB1,607,000 for the
three months ended 31 March 2011 to RMB4,768,000 for the same
period in 2012. This increase in distribution and selling
costs and increase in administrative expenses did not exceed
the Group's monthly budget and were in line with the Group's
expectation during the strategic planning for 2012.
Production Facilities
In 2011, in addition to optimizing the existing production facilities for unlocking their full potential, we have established a new production line for solid dosage which is in strict compliance with the new GMP standard in the Huinan economic development zone, so as to satisfy the rapid and ever-growing demand for dominant species with a view to achieving better results for popular products.
4 First Quarterly Report 2012
LIQUIDITY AND FINANCIAL RESOURCES
The Group has maintained a sound financial position during
this period. As at 31 March 2012, the Group had cash and bank
balances amounted to RMB74,922,000 (2011: RMB82,055,000). As
at 31 March 2012, the Group had unaudited consolidated net
asset value of approximately RMB351,451,000 (2011:
RMB312,514,000).
For the three months ended 31 March 2012 and 2011, the Group
generated revenue and incurred costs mainly in Hong Kong
dollars and Renminbi. The Directors consider the impact on
foreign exchange exposure of the Group is minimal.
GEARING RATIO
The Group's gearing ratio as at 31 March 2012 was 2.01% (as at 31 March 2011: 2.14%), which was calculated by dividing the amount of bank borrowings of the Group as at 31 March 2012 by total assets as at 31 March 2012 and then multiplied by 100%.
DIRECTORS' AND SUPERVISORS' INTERESTS IN SHARES
As at 31 March 2012, the interests and short positions of the Directors, supervisors and chief executives of the Company in the shares, underlying shares and debentures of the Company and its associated corporations (within the meaning of Part XV of the Securities and Futures Ordinance (the "SFO")) as recorded in the register required to be kept under Section 352 of the SFO or as otherwise notified to the Company and the Stock Exchange of Hong Kong Limited (the "Stock Exchange") pursuant to the minimum standards of dealing by directors as referred to in Rule 5.46 to 5.67 of the GEM Listing Rules were as follows:
Long positions in shares
Type of | Number of | Percentage of Domestic | Percentage of total registered | ||
Director | Interests | Capacity | Domestic Shares | Shares | Share Capital |
Zhang Hong | Personal | Beneficial owner | 101,937,000 | 26.29 | 18.19 |
Zhang Xiao Guang | Personal | Beneficial owner | 42,315,000 | 10.91 | 7.55 |
Wu Guo Wen | Personal | Beneficial owner | 900,000 | 0.232 | 0.161 |
Chen Qi Ming | Personal | Beneficial owner | 300,000 | 0.077 | 0.054 |
Save as disclosed above, as at 31 March 2012, none of the
Directors, supervisors and chief executives of the Company
has any interests and short positions in the shares,
underlying shares and debentures of the Company and its
associated corporations (within the meaning of Part XV of the
SFO) as recorded in the register required to be kept under
Section 352 of the SFO or as otherwise notified to the
Company and the Stock Exchange pursuant to the minimum
standards of dealing by directors as referred to in Rule
5.46 to 5.67 of the GEM Listing Rules.
First Quarterly Report 2012 5
DIRECTORS' RIGHTS TO ACQUIRE SHARES
Apart from as disclosed under the headings "Directors' and Supervisors' interests in shares" above, at no time during the period were rights to acquire benefits by means of the acquisition of shares in or debentures of the Company granted to any director, supervisor and chief executives or their respective spouses or children under 18 years of age, or were any such rights exercised by them; or was the Company, its holding company, or any of its subsidiaries a party to any arrangement to enable the directors, supervisors and chief executives to acquire such rights in any other body corporate.
INTERESTS DISCLOSEABLE UNDER THE SFO AND SUBSTANTIAL SHAREHOLDERS
As at 31 March 2012, the following persons (other than the Directors, supervisors and chief executives of the Company) had interests and short positions in the shares and underlying shares of the Company as recorded in the register required to be kept under Section 336 of the SFO.
Long positions in shares | ||||
Name of | Capacity/ | Number of | Percentage of Domestic | Percentage of total registered |
shareholder | Nature of Interest | Domestic Shares | Shares | share capital |
Huinan County SAB (Note) | Beneficial owner | 81,975,000 | 21.14 | 14.63 |
Note: Apart from the equity interest in the Company, Huinan County SAB does not have any direct or indirect interest in the Company, including representation in the Board of Directors.
Save as disclosed above, as at 31 March 2012, the Directors were not aware of any other person (other than the Directors, supervisors and chief executives of the Company) who had interests and short positions in the shares and underlying shares of the Company as recorded in the register required to be kept under Section 336 of the SFO.
COMPETING INTEREST
During the period under review, none of the Directors or the management shareholders, significant shareholders or substantial shareholders (as defined in the GEM Listing Rules) of the Company had any interest in any business, which competes or may compete with the business of the Group.
6 First Quarterly Report 2012
CODE OF CONDUCT REGARDING SECURITIES TRANSACTIONS BY DIRECTORS
During the period ended 31 March 2012, the Company has adopted a code of conduct regarding securities transactions by directors on terms no less than the required standard of dealings as set out in rules 5.48 to 5.67 of the GEM Listing Rules. The Company has also made specific enquiry of all Directors and the Company was not aware of any non-compliance with the required standard of dealings and its code of conduct regarding securities transactions by Directors.
COMPLIANCE WITH THE CODE OF CORPORATE GOVERNANCE PRACTICES
In the opinion of the Board, the Company has complied with the code provisions in the Code on Corporate Governance Practice (the "Code") as set out in the Appendix 15 of the GEM Listing Rules throughout the period ended 31 March 2012 subject to the deviations disclosed hereof.
BOARD OF DIRECTORS
Under the code provision A.2.1, the roles of chairman and
chief executive officer should be separate and should not be
performed by the same individual. Mr. Zhang Hong assumes the
role of both the chairman and the chief executive officer of
the Company. The Board is of the view that this has not
compromised accountability and independent decision making
for the following reasons:
- the Audit Committee composes exclusively of independent
non-executive directors;
- the independent non-executive directors have free and
direct access to the Company's external auditors and
independent professional advice when considered
necessary.
Mr. Zhang Hong, the chairman, is a substantial shareholder of
the Company and has considerable industry experience. He is
motivated to contribute to the growth and profitability of
the Group. The Board is of the view that it is in the best
interests of the Group to have an executive chairman so that
the Board can have the benefit of a chairman who is
knowledgeable about the business of the Group and is most
capable to guide discussions and brief the Board in a timely
manner on pertinent issues and developments to facilitate
open dialogue between the Board and the management.
First Quarterly Report 2012 7
AUDIT COMMITTEE
The Company set up an audit committee (the "Committee") on 24
May 2001 with written terms of reference in compliance with
the requirements as set out in Rules 5.28 and 5.29 of the GEM
Listing Rules. The primary duties of the Committee are to
review and provide supervision over the financial reporting
procedures and internal control system of the Group.
The committee has reviewed with the management the accounting
principles and practices adopted by the Group and discussed
internal controls and financial reporting matters, including
a review of the unaudited results of the Group for the period
ended 31 March 2012.
PURCHASE, REDEMPTION OR SALE OF LISTED SECURITIES
During the three months ended 31 March 2012, neither the
Company nor its subsidiaries purchased, sold or redeemed any
of the Company's listed shares.
By order of the Board Zhang Hong Chairman
Jilin, the PRC
15 May 2012
As at the date hereof, the executive directors of the Company are Mr. Zhang Hong, Mr. Zhang Xiao Guang, Mr. Tian Xin Guo, Mr. Chen Qi Ming, Mr. Wu Guo Wen, Mr. Zhao Bao Gang; the independent non-executive directors of the Company are Mr. Shen Yu Xiang, Mr. Xue Chang Qing and Mr. Yan Li Jin.
8 First Quarterly Report 2012
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