HONG KONG, June 14, 2016 /PRNewswire/ — 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 fourth quarter and full year of the fiscal year 2016 ended March 31, 2016.
Fourth Quarter of Fiscal 2016 Highlights
Full Year of Fiscal 2016 Highlights
Ms. Ting Zheng, Chief Executive Officer of CCBC commented, “Despite the challenges we faced in the reporting period, we recruited 14,472 new subscribers, representing a decrease of 9.4% year-on-year and a decrease of 7.2% quarter-on-quarter. Revenue mix in terms of regional contribution remained stable compared to the last few quarters and our client payment mix was similar to prior quarters. We are pleased that the Group accumulated subscriber base has surpassed the half a million mark for the first time and reached 504,268 subscribers as of March 31, 2016.”
“Looking ahead, the management expects the number of newborns to rebound from the low level during the Year of the Sheep. However, we also expect a slowing economy could dampen demand for high-end medical services, including the services we provide. Additionally, we believe the end of the ‘one-child policy’ is a positive development for the Chinese economy and for our industry over the long term. However, it will take time to attain meaningful traction due to the end of this policy. To overcome these challenges, we plan to continue improving our marketing efforts to increase our penetration and client conversion rates while further tightening our cost structure. Building on our track record of success, established brand and leading market position, we will continue to seek strategic opportunities to further expand our dominant presence in the industry.”
Fourth quarter of Fiscal 2016 Financial Results
REVENUES. Due to the drop in new born babies and the resulting decrease in the number of new subscribers, revenues in the fourth quarter of fiscal 2016 dropped 3.8% to RMB156.8 million ($24.3 million) from RMB163.0 million in the prior year period.
Revenues generated from storage fees increased to RMB64.0 million ($9.9 million), up 16.4% from RMB55.0 million in the prior year period, as the Company’s accumulated subscriber base reached 504,268 at the end of March 2016. Storage fees accounted for 40.8% of the total revenues, compared to 33.7% in the prior year period.
Revenues generated from processing fees in the fourth quarter were RMB92.8 million ($14.4 million), compared with RMB108.0 million in the prior year period as a result of the decrease in new subscriber sign-ups. 14,472 new subscribers signed up during the fourth quarter of fiscal 2016. Revenues generated from processing fees accounted for 59.2% of total revenues, compared to 66.3% in the prior year period.
GROSS PROFIT. Gross profit for the fourth quarter of fiscal 2016 was RMB122.2 million ($18.9 million) compared to RMB128.6 million in the prior year period primarily due to the drop in new subscriber sign-ups. Gross margin was 77.9% in the reporting quarter, compared to 78.9% in the prior year period.
OPERATING INCOME. With decreased gross profit and slight increase in operating expenses, operating income for the fourth quarter was RMB39.7 million ($6.2 million), compared to RMB49.5 million in the prior year period. Operating margin in the current quarter was 25.3%, compared to 30.4% in the prior year period. Depreciation and amortization expenses for the fourth quarter were RMB12.4 million ($1.9 million), compared to RMB13.0 million in the prior year period. Share-based compensation expense was RMB15.1 million ($2.3 million), compared to RMB14.0 million in the prior year period and the increase in share-based compensation amount was mainly attributable to the depreciation of RMB against US dollar. Operating income before depreciation and amortization and share-based compensation expenses totaled RMB67.1 million ($10.4 million), compared to RMB76.6 million in the prior year period.4
OTHER INCOME AND EXPENSES.
NET INCOME ATTRIBUTABLE TO THE COMPANY’S SHAREHOLDERS. Following the decreased operating income, income before income tax for the reporting quarter was RMB16.6 million ($2.6 million), compared to RMB29.0 million in the prior year period. Net income attributable to the Company’s shareholders for the fourth quarter of fiscal 2016 amounted to RMB8.2 million ($1.3 million), down from RMB16.9 million in the prior year period. Net margin for the fourth quarter of fiscal 2016 was 5.3%, compared to 10.4% in the prior year period.
EARNINGS PER SHARE. The terms of the outstanding convertible notes provide each holder with the ability to participate in any Excess Cash Dividend5. Therefore, the calculation of basic and diluted EPS has taken into consideration the negative effect of such participating rights, which was RMB0.06 ($0.009) per share. Basic and diluted earnings per ordinary share for the fourth quarter of fiscal 2016 were RMB0.18 ($0.03).6
LIQUIDITY. As of March 31, 2015, the Company had cash and cash equivalents of RMB3,008.4 million ($466.6 million), up 23.5% from RMB2,436.7 million as of March 31, 2015. The Company had total debt of RMB970.7 million ($150.5 million) as of March 31, 2016. Net cash provided by operating activities for the fourth quarter of fiscal 2016 amounted to RMB138.9 million ($21.5 million).
Full year of Fiscal 2016 Financial Results
For the full year of fiscal 2016, total revenues increased by 4.4% to RMB663.0 million ($102.8 million) from RMB635.1 million in the prior year. The increase was largely attributable to the increase in the Company’s storage revenues from the expanded subscriber base of 504,268 units at the end of March 2016. Gross profit increased by 2.8% to RMB518.4 million ($80.4 million) from RMB504.5 million in the prior year. Operating income was RMB191.3 million ($29.7 million) compared to RMB235.0 million in the prior year. The decrease was mainly due to the increase in share-based compensation expense. Operating income before depreciation and amortization and share-based compensation expenses totaled RMB300.2 million ($46.6 million), which remained stable when compared to RMB302.1 million in the prior year.7 Net income attributable to the Company’s shareholders amounted to RMB91.0 million ($14.1 million). Basic and diluted earnings per share attributable to ordinary shares were RMB1.25 ($0.19). Net cash provided by operating activities in the full year of fiscal 2016 was RMB581.0 million ($90.1 million).
The Company will host a conference call at 8:00 a.m. ET on Wednesday, June 15, 2016 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 can access the audio webcast through the Company’s IR website at http://ir.chinacordbloodcorp.com. A replay of the webcast will be accessible two hours after the conference call and available for three weeks at the same URL link above. Listeners can also access the call by dialing 1-631-514-2526 or 1-855-298-3404 for US callers, or +852-5808-3202 for Hong Kong callers, access code: 8507112.
Use of Non-GAAP Financial Measures
GAAP results for the three months and year ended March 31, 2016 include non-cash items related to the depreciation and amortization and share-based compensation expenses. To supplement the Company’s unaudited condensed consolidated financial statements presented on a U.S. GAAP basis, the Company has provided adjusted financial information excluding the impact of these items in this press release. The non-GAAP financial measure represents non-GAAP operating income. Such adjustment is a departure of U.S. GAAP; however, the Company’s management believes that these adjusted measures provide investors with a better understanding of how the results relate to the Company’s historical performance. Also, management uses non-GAAP operating income as a measurement tool for evaluating actual operating performance compared to budget and prior periods. These adjusted measures should not be considered an alternative to operating income, or any other measure of financial performance or liquidity presented in accordance with U.S. GAAP. These measures are not necessarily comparable to a similarly titled measure of another company. A reconciliation of the adjustments to U.S. GAAP results appears in exhibit 3 accompanying this press release. This additional adjusted information is not meant to be considered in isolation or as a substitute for U.S. GAAP financials. The adjusted financial information that the Company provides also may differ from the adjusted information provided by other companies.
About China Cord Blood Corporation
China Cord Blood Corporation is the first and largest umbilical cord blood banking operator in China in terms of geographical coverage and the only cord blood banking operator with multiple licenses. Under current PRC government regulations, only one licensed cord blood banking operator is permitted to operate in each licensed region and only seven licenses have been authorized as of today. China Cord Blood Corporation provides cord blood collection, laboratory testing, hematopoietic stem cell processing and stem cell storage services. For more information, please visit our website at http://www.chinacordbloodcorp.com.
Safe Harbor Statement
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934. These statements relate to future events or the Company’s future financial performance. The Company has attempted to identify forward-looking statements by terminology including “anticipates”, “believes”, “expects”, “can”, “continue”, “could”, “estimates”, “intends”, “may”, “plans”, “potential”, “predict”, “should” or “will” or the negative of these terms or other comparable terminology. These statements are only predictions, uncertainties and other factors may cause the Company’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. The information in this press release is not intended to project future performance of the Company. Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company does not guarantee future results, levels of activity, performance or achievements. The Company expectations are as of the date this press release is issued, and the Company does not intend to update any of the forward-looking statements after the date this press release is issued to conform these statements to actual results, unless required by law.
The forward-looking statements included in this press release are subject to risks, uncertainties and assumptions about the Company’s businesses and business environments. These statements reflect the Company’s current views with respect to future events and are not a guarantee of future performance. Actual results of the Company’s operations may differ materially from information contained in the forward-looking statements as a result of risk factors some of which include, among other things: continued compliance with government regulations regarding cord blood banking in the People’s Republic of China, or PRC and any other jurisdiction in which the Company conducts its operations; changing legislation or regulatory environments (including the abolishment of China’s one-child policy and implementation of the new two-child policy from January 2016) in the PRC and any other jurisdiction in which the Company conducts its operations; the acceptance by subscribers of the Company’s different pricing and payment options and reaction to the introduction of the Company’s premium-quality pricing strategy; demographic trends in the regions of the PRC in which the Company is the exclusive licensed cord blood banking operator; labor and personnel relations; the existence of a significant shareholder able to influence and direct the corporate policies of the Company; credit risks affecting the Company’s revenue and profitability; changes in the healthcare industry, including those which may result in the use of stem cell therapies becoming redundant or obsolete; the Company’s ability to effectively manage its growth, including implementing effective controls and procedures and attracting and retaining key management and personnel; changing interpretations of generally accepted accounting principles; the availability of capital resources, including in the form of capital markets financing opportunities, in light of industry developments affecting issuers that have pursued a “reverse merger” with an operating company based in China, as well as general economic conditions; compliance with restrictive debt covenants under our senior convertible notes; the non-binding proposal letters from Golden Meditech and Nanjing Xinjiekou and the proposed transactions between the foregoing companies; and other relevant risks detailed in the Company’s filings with the Securities and Exchange Commission in the United States.
This announcement contains translations of certain Renminbi amounts into U.S. dollars at specified rates solely for the convenience of readers. Unless otherwise noted, all translations from Renminbi to U.S. dollars as of and for the periods ending March 31, 2016 were made at the noon buying rate of RMB6.4480 to $1.00 on March 31, 2016 in the City of New York for cable transfers in Renminbi per U.S. dollar as certified for customs purposes by the Federal Reserve Bank of New York. China Cord Blood Corporation makes no representation that the Renminbi or U.S. dollar amounts referred to in this press release could have been or could be converted into U.S. dollars or Renminbi, at any particular rate or at all.
For more information, please contact:
China Cord Blood Corporation
Investor Relations Department
Tel: (+852) 3605-8180
Mr. William Zima
Tel: (+86) 10-6583-7511
U.S. Tel: (646) 405-5185
SOURCE China Cord Blood Corporation