TAIH.L Regulatory News (TAIH)

28 Sep 2007 12:21

Taihua Plc28 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 andprofits for Taihua, this time for the half-year to 30 June 2007. During thisperiod of further steady progress for the group, our pre-tax profits increased30% over the first half of 2006 to RMB 18.13 million (£1.19 million) on sales upsolidly to RMB 33.6 million (£2.20 million), an increase of 44%. We believe thisreflects the strong operational and strategic focus of the Taihua managementteam in a range of markets offering significant growth potential, and remainconfident that the results show how Taihua is becoming strongly positioned inits sector on AIM. Our sales of the anti-cancer active pharmaceutical ingredients (APIs)homoharringtonine and paclitaxel to manufacturers in China, Russia and SouthAmerica should be enhanced by deliveries to new customers in South Korea wherethe company is still progressing the establishment of a distribution networkwhilst a key objective remains entry into potentially lucrative Western marketsfor paclitaxel. While our two Luonan production lines are keeping pace withincreased demand for our products, we have, in addition, established a strongrecord 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 ofpaclitaxel increase to 9.57kg and of homoharringtonine to 6.12kg during the halfyear, up 34% and 89%, respectively, on the corresponding period last year. InRussia, sales of paclitaxel held steady at 4.6kg. Our sales of traditionalChinese medicines (TCMs) increased 17% to RMB 5.8m (£0.38 million) compared tothe same period in 2006, and we believe this provides an underlying incomestream to support planned expansion and advance the development of finishedanti-cancer medicines. Two new products, biangtiong pian, used as a purgativeand huoliyuan pian, prescribed for insomnia, have moved into later researchphases. It is anticipated the two products will move into trial production aheadof anticipated sales during 2008. Taihua also has two other new TCMs currentlyawaiting approval from the State Food and Drug Administration of China. We are, of course, proud of our achievements on these fronts in our existingmarkets, from which we anticipate further growth. We have delivered stronglyincreased revenues and returned growing profits for the second reporting periodsince the Company's admission to AIM last December. To expand our exportbusiness, our application for clearance to sell paclitaxel to drugsmanufacturers in the West remains one of our key objectives. On this front I cannow report that following a strategic re-appraisal of our approach to key futuremarkets, the Board has decided to submit applications in Europe for thenecessary Certificate of Suitability and Good Manufacturing Practicesimultaneously with applications for approvals in the United States. To supportthis approach, the Board has resolved to appoint the Edinburgh-basedpharmaceutical regulatory affairs consultancy Advocates Ltd to work alongsideour existing adviser, Beijing Canny, acknowledging the additional workloadrequired to expedite both applications. This strategic shift recognises ourcommitment to both the European and US markets, underpinned by our belief thatwhile the regulatory application in Europe will take longer than initiallyanticipated, we shall be in position to open up both new markets. This shouldresult in overall cost savings and accelerate commercialisation of paclitaxel inthese markets. In summary, with another period of solid advances behind us, I am confident thatbacked by our strong operational management team and solid track record wehave every reason to anticipate further growth in our existing markets duringthe second half of the year. Richard Tanner Chairman28 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 Statementfor 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 administrativeexpensesOperating 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 26,034Attributable 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 0.35Diluted 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 6,633CURRENT 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 TOEQUITY HOLDERS OF THE COMPANY Share capital 12,280 3,180 12,280Other reserves 15,196 6,838 12,858Retained 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 ended30 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 reserveAt 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 bysubsidiary 7,615 7,615 Reverse acquisition adjustment 278 64,364 (63,408) (1,103) 131 Issue of shares by wayof 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 77,770December 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 RMB000CASH FLOWS FROM OPERATING ACTIVITIESOperating profit 18,142 13,991 30,234Adjustments:Provision for bad debts - 30 143Amortisation of land use rights (15) 19 39Depreciation 395 416 820Share-based payments - - 18Interest income - 14 (175)Exchange difference 51 - -Operating cash flows before working capital 18,573 14,470 31,079changesDecrease/(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 2,605prepaymentsDecrease 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 1,688other payables(Decrease)/increase in amounts due to (304) 48 373directors CASH GENERATED FROM OPERATIONS 9,121 14,543 30,940Interest received - 30 175Profit tax paid (2,886) (2,223) (4,598) NET CASH GENERATED FROM OPERATING 6,235 12,350 26,517ACTIVITIES CASH FLOWS FROM INVESTING ACTIVITIESPurchase of fixed assets (99) (32) (42) NET CASH USED IN INVESTING ACTIVITIES (99) (32) (42)CASH FLOWS FROM FINANCING ACTIVITIESIssue of shares - - 12,067Issue of shares by subsidiary prior to - 1,503 7,615acquisitionRepayment of short-term borrowings - (400) (1,300)Interest paid (10) (44) (88) NET CASH (USED BY)/ GENERATED FROM (10) 1,059 18,294FINANCING ACTIVITIES NET INCREASE IN CASH AND CASH EQUIVALENTS 6,126 13,377 44,769CASH AND CASH EQUIVALENTS AS AT 1 JANUARY 54,364 9,595 9,5952007 CASH AND CASH EQUIVALENTS AS AT 30 JUNE 60,490 22,972 54,3642007 ANALYSIS OF THE BALANCES OF CASH AND CASHEQUIVALENTSCash 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 isunaudited and that for the equivalent period in 2006 is unaudited. Thecomparatives for the full year ended 31 December 2006 are not the Group's fullstatutory accounts for that year. A copy of the statutory accounts for that yearhas been delivered to the Registrar of Companies. The auditors' report on thoseaccounts for the period ended 31 December 2006 was unqualified, did not includereferences to any matters to which the auditors drew attention by way ofemphasis without qualifying their report and did not contain a statement underparts of the Companies Act 1985 applicable to companies preparing financialstatements under IFRS. The interim financial information has been prepared in accordance with theaccounting policies and presentation required by International FinancialReporting Standards, incorporating International Accounting Standards andInterpretations (collectively "IFRS") as endorsed by the European Union. The interim report is presented and prepared in a form consistent with thatwhich has been adopted in the Group's annual accounts having regard to theaccounting standards applicable to such accounts. The acquisition of China Natural Pharmaceutical Limited ("CNP") by Taihua Plc on26 September 2006 was accounted for as a reverse acquisition, in accordance withIFRS3 "Business Combinations". As a consequence of applying reverse acquisitionaccounting, the results for the year ended 31 December 2006 comprise the fullyear results of CNP and its subsidiary undertaking (Taihua Natural PlantPharmaceutical Co Limited) for the year ended 31 December 2006 plus those ofTaihua Plc from 26 September 2006, the date of the reverse acquisition, to 31December 2006. The figures for the period to 30 June 2007 comprise those ofTaihua Plc and both its subsidiary undertakings. The figures for the period to30 June 2006 are those of CNP and its subsidiary undertaking. Foreign currency translation The functional currency of the subsidiary undertakings is Renminbi ("RMB"), andthe audited financial statements of the subsidiary undertakings have been drawnup in RMB. As sales and purchases are denominated primarily in RMB and receiptsfrom operations are usually retained in RMB, the directors are of the opinionthat RMB reflects the economic substance of the underlying events andcircumstances relevant to the Group. Monetary assets and liabilities maintainedin currencies other than RMB are translated into RMB at the approximate rates ofexchange ruling at the balance sheet date. Transactions in currencies other thanRMB are translated at rates ruling on the transaction dates. The presentation currency of the Group is RMB and therefore the financialstatements have been translated from GBP and HKD to RMB at the followingexchange 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 toequity holders of the Company by the weighted average number of ordinary sharesin 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 RMB000Profit attributable to equityholders of the company (RMB'000) 15,246 12,227 26,034 Weighted average number ofordinary 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. Acalculation is undertaken to determine the number of shares that could have beenacquired at fair value based on the monetary value of the subscription rightsattached to outstanding share options and warrants. It is compared with thenumber of shares that would have been issued assuming the exercise of the shareoptions and warrants. Six months ended Six months Year 30 Jun. 2007 ended ended 30 Jun.2006 31 Dec.2006 (unaudited) (unaudited) (audited) RMB000 RMB000 RMB000Profit attributable to equityholders of the company 15,246 12,227 26,034 Weighted average number of ordinaryshares in issue (thousands) 81,211 73,391 73,776 Adjustment for share options andwarrants (thousands) 555 - 70 Weighted average number of ordinaryshares 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 forthe six months ended 30 June 2007 which comprises the Unaudited ConsolidatedIncome Statement, Unaudited Consolidated Balance Sheet, Unaudited ConsolidatedStatement of Changes in Equity and Unaudited Consolidated Cash Flow Statementand the related notes. We have read the other information contained in theinterim report and considered whether it contains any apparent misstatements ormaterial inconsistencies with the financial information. This report is made solely to the company in accordance with the terms of ourengagement. Our review has been undertaken so that we might state to the companythose matters we are required to state to it in this report and for no otherpurpose. To the fullest extent permitted by law, we do not accept or assumeresponsibility to anyone other than the company for our review work, for thisreport, or for the conclusions we have reached. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by, the directors. The directorsare responsible for preparing the interim report in accordance with the AIMRules issued by the London Stock Exchange which require that the accountingpolicies and presentation applied to the interim figures should be consistentwith those applied in preparing the preceding annual accounts except where anychanges, and the reasons for them, are disclosed. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4issued by the Auditing Practices Board. A review consists principally of makingenquiries of group management and applying analytical procedures to thefinancial information and underlying financial data and based thereon, assessingwhether the accounting policies and presentation have been consistently appliedunless otherwise disclosed. A review excludes audit procedures such as tests ofcontrols and verification of assets, liabilities and transactions. It issubstantially less in scope than an audit performed in accordance withInternational Auditing Standards and therefore provides a lower level ofassurance than an audit. Accordingly we do not express an audit opinion on thefinancial information. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 30 June 2007. PKF (UK) LLPChartered AccountantsLeeds 28 September 2007 This information is provided by RNS The company news service from the London Stock Exchange