China Cord Blood Corporation (NYSE: CO) ("CCBC" or the "Company"), China's leading provider of cord blood collection, laboratory testing, hematopoietic stem cell processing, and stem cell storage services, today announced its preliminary unaudited financial results for the first quarter of fiscal year 2012, which ended June 30, 2011.
First Quarter of Fiscal 2012 Highlights
•Revenue for the first quarter of fiscal 2012 increased by 22.0% to RMB87.5 million ($13.5 million) from RMB71.7 million in the prior year period. •New subscriber sign-ups and accumulated subscriber base reached 12,828 and 198,658, respectively. •Gross profit increased by 24.1% to RMB67.6 million ($10.5 million) from RMB54.4 million from the prior year period. •Gross margin was 77.3%, compared to 75.9% for the prior year period. •Operating income increased by 31.7% to RMB30.8 million ($4.8 million) from RMB23.4 million for the prior year period. •Net income attributable to shareholders, inclusive of dividend income of RMB7.2 million ($1.1 million) from Shandong Cord Blood Bank and effect of the preferential tax treatment obtained by the Guangdong subsidiary resulting in a discrete tax benefit of RMB10.2 million ($1.6 million), was RMB40.0 million ($6.2 million), compared to RMB17.6 million in the prior year period. "Our first quarter delivered strong financial performance driven by sustained growth in subscriber demand year-over-year following the upward price adjustment implemented in April 2011," stated Ms. Zheng, Chairperson and Chief Executive Officer of CCBC. "Our strategy to develop a strong sales network while broadening our commercial reach has built a widely-recognized brand and an easily accessible network that will greatly facilitate our efforts to attract new subscribers."
"In addition to solid financial performance, this quarter had several exciting developments," Ms. Zheng further commented. "The Ministry of Health has issued new guidelines extending the 'Ten Licenses Policy', which reiterated that no more than ten licenses will be issued for the provision of cord blood banking services through 2015. We welcome the policy extension as it sets a clear guideline for the industry and the general public. With access to three licenses and our 19.92% investment in Shandong Cord Blood Bank, we are fully committed to the development of the cord blood banking industry in China and will continue to grow by driving subscriber penetration rates. We are also pleased that our Guangdong subsidiary has been approved as a 'High and New Technology Enterprise', with the result that it now enjoys a reduced tax rate of 15% until December 31, 2012."
Summary - The Quarters Ended June 30, 2010 and 2011
Three Months Ended
June 30,
2010 2011
(in thousands) RMB RMB USD
Revenue 71,696 87,458 13,531
Gross Profit 54,444 67,590 10,457
Operating Income 23,355 30,752 4,757
Net Income Attributable to Shareholders 17,586 40,022 6,192
EPS
– Basic (RMB/USD Cents) 0.26 0.53 0.08
Revenue Breakdown (%)
Processing Fee 79.1% 74.2%
Storage Fee 20.9% 25.8%
New Subscribers (persons) 12,180 12,828
Accumulated Total Number of Subscribers (persons) 141,492 198,658
First Quarter Fiscal 2012 Financial Results
REVENUE. Revenue increased by 22.0% to RMB87.5 million ($13.5 million) in the first quarter of fiscal 2012 from RMB71.7 million in the prior year period. The strong revenue growth was driven by continued growth in new subscribers and an increase in the Company's processing fee implemented in April 2011.
Revenue generated from processing fees increased to RMB64.9 million ($10.0 million) from RMB56.7 million in the prior year period, reflecting 12,828 new subscriber sign-ups this quarter, a 5.3% increase in new subscribers from the prior year period, as well as the effect of the processing fee increase.
Revenue generated from storage fees increased to RMB22.6 million ($3.5 million) from RMB15.0 million, which accounted for 25.8% of the total first quarter revenue as compared to 20.9% in the prior year period. The Company's accumulated subscriber base grew 40.4% year-over-year to 198,658, backed by continued strong demand from the Beijing and Guangdong markets.
GROSS PROFIT. Gross profit in the first quarter increased by 24.1% to RMB67.6 million ($10.5 million) from RMB54.4 million in the prior year period. Gross margin reached 77.3%, primarily reflecting greater revenue contribution from higher margin storage fees.
OPERATING INCOME. Operating income for the first quarter increased 31.7% to RMB30.8 million ($4.8 million) from RMB23.4 million in the prior year period, driven by economies of scale, successful cost control measures, and the sustained subscriber base growth. Operating margin rose 260 basis points to 35.2% from 32.6% in the prior year period. Depreciation and amortization expenses for the first quarter were RMB7.1 million ($1.1 million).
Research and Development Expenses. Research and development expenses were RMB1.8 million ($0.3 million), compared to RMB1.5 million in the prior year period.
Sales and Marketing Expenses. Sales and marketing expenses increased by 24.9% to RMB12.6 million ($2.0 million) from RMB10.1 million from the prior year period as the Company continued to roll-out marketing and promotional activities in the Beijing Municipality and Guangdong Province to further drive greater market penetration. Sales and marketing expenses accounted for 14.4% of revenue.
General and Administrative Expenses. General and administrative expenses were RMB22.5 million ($3.5 million), compared to RMB19.5 million in the prior year period. General and administrative expenses as a percentage of revenue dropped to 25.7% as compared to 27.1% during the prior year period, as a result of effective cost control measures and strong revenue performance which led revenue growth to outpace general and administrative expenses growth.
OTHER INCOME. The Company received dividend income of RMB7.2 million ($1.1 million) in the first quarter of fiscal 2012 from the investment in Shandong Cord Blood Bank, in which the Company has accounted for the investment under cost method.
NET INCOME ATTRIBUTABLE TO SHAREHOLDERS. Aside from the solid growth in operating income and the first-time dividend income from Shandong Cord Blood Bank, the Company also recorded a discrete tax benefit of RMB10.2 million ($1.6 million) pursuant to the award of preferential tax treatment for the Company's Guangdong subsidiary in June 2011, which is effective retroactively from January 1, 2010. As a result, net income attributable to shareholders for the first quarter of fiscal 2012 rose 127.6% to RMB40.0 million ($6.2 million) from RMB17.6 million for the prior year period. Net margin for the first quarter of fiscal 2012 was 45.8%. Basic earnings per share for the first quarter of fiscal 2012 were RMB0.53 ($0.08).
LIQUIDITY. As of June 30, 2011, the Company had cash and cash equivalents of RMB643.1 million ($99.5 million) as compared to RMB611.4 million as of March 31, 2011. The Company had bank loan borrowing of RMB45.0 million ($7.0 million) as of June 30, 2011.
"We are pleased with our financial performance as we rebranded ourselves as a "Premium Healthcare Service Provider" with a more favorable payment method and higher price points," Ms. Zheng stated. "We believe this new payment structure will improve our operating cash flow and further strengthen our liquidity position. While we continue to monitor market reactions, the initial market response has been encouraging. We believe strong demand for our services, coupled with our recurring revenue structure, will enable us to continue to expand margins and deliver higher profits for our shareholders."
Ms. Zheng concluded, "We have consistently demonstrated our abilities to develop and penetrate the Beijing and Guangdong regions since entering into these key markets in China. We have a highly-scalable business model with recurring revenues that will continue to grow in proportion to our expanding subscriber base. In addition to enabling consistent growth, our unique model has also created escalating margins and attractive returns. Beijing and Guangdong will provide a stable and profitable foundation that is enhanced by additional future growth potential as we expand into other regions in China. Our exclusive access to multiple regions in China not only differentiates us from our peers but also grants us access to an addressable market of 1.8 million newborns per annum. Going forward, we will continue to strive to enhance our operational efficiency, expand our profit margins, deepen market penetration, enhance brand recognition, optimize cost structure, and expand our subscriber base in our existing markets. As a premium healthcare services provider, our management team is confident that we will continue to deliver long-term growth and consistent returns for our shareholders."
Conference Call
The Company will hold a conference call at 8:00 a.m. ET on Tuesday, August 30, 2011 to discuss its financial performance and give a brief overview of the Company's recent developments, followed by a question and answer session. Interested parties may access the audio webcast through the Company's IR website at ir.chinacordbloodcorp.com. A replay of the webcast will be accessible two hours after the presentation and available for three weeks at the same URL link above. Listeners may also access the call by dialing 1-718-354-1231 or 1-866-519-4004 for US callers or +852-2475-0994 for Hong Kong callers, access code: 88154912.
GLTA... KarinCA ;)
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