After the close on November 26, the company announced interim results for fiscal year 20 (for the year ended March).
Net profit increased by 30.5% year-on-year, mainly due to improved operating leverage, lower financing costs and one-off gains. Recurrent net profit is about HK $106 million, an increase of 13.5% over the same period last year, which is basically in line with the market consensus forecast (13.8% year-on-year growth for the whole of FY20).
The company is actively introducing licensed drugs to enrich its product portfolio.
The company is expanding its business outside Hong Kong through strategic cooperation. Yunnan Baiyao, a famous traditional Chinese medicine company, is the second largest shareholder, with 9.92% of the shares.
Highlights of interim results in fiscal year 2020
Revenue rose 6.8 per cent year-on-year to HK $872 million. By business, revenue from generic drugs rose 5.3 per cent year-on-year to HK $627 million; revenue from branded drugs rose 17.7 per cent to HK $130.3 million; and wholesale and retail business rose 3.8 per cent to HK $114.5 million. In the brand medicine business, the sales revenue of Baoji pills in the Hong Kong and Macao markets increased by 11.0%, mainly due to the company's implementation of brand building, marketing and promotion plans. He Jigong's income in Hong Kong and Macau increased by 27.3% compared with the same period last year.
Gross profit margin increased from 39% in the first half of fiscal year 19 to 41.1% in fiscal year 20, mainly benefiting from: 1) economies of scale; 2) the company's commitment to promote production automation; and 3) cost control measures.
Net profit rose 30.5 per cent year-on-year to HK $127.2 million, higher than revenue growth, mainly due to improved operating leverage and lower financing costs (financial expense-to-income ratio fell from 4 per cent in the first half of fiscal 19 to 3.5 per cent in the first half of fiscal 20) and one-time gains. Excluding the fair value change in "net other income", recurrent net profit is about HK $106 million, an increase of 13.5 per cent year-on-year, which is close to the market forecast for full-year net profit in fiscal year 20 (13.8 per cent year-on-year growth).
The number of days of accounts receivable in the first half of FY20 was 57.8 days, compared with 57 days in FY19; the number of inventory days in the first half of FY20 was 126 days, compared with 117 days in FY19.
The company's net debt ratio (bank loans and convertible notes minus cash and cash equivalents divided by total equity multiplied by 100%) increased from 24.8% at the end of fiscal year 19 to 27.8% in the first half of fiscal year 20. The increase in the net gearing ratio was due to the purchase of additional bank loans during the reporting period.
License new products to drive growth
The company is actively licensing drugs to enrich its product portfolio. In the first half of FY20, the company signed exclusive licensing agreements with well-known manufacturers in Greece, Spain, South Korea and Taiwan to license a total of 19 specialties in cardiovascular, central nervous system, anti-infective, oncology, gastroenterology, ophthalmology and other therapeutic categories, including medical devices for RSV (respiratory syncytial virus) and rapid influenza diagnostic and testing tools, 12 of which are eligible for bidding in Hong Kong in the coming year.
Expand business outside Hong Kong
In the first half of fiscal year 20, 94% of the company's revenue came from Hong Kong. The company is developing its business in China, Macau, Singapore, Taiwan and other Asian countries through strategic cooperation such as licensing, contract manufacturing, technology transfer and brand product agency. Yunnan Baiyao, a famous traditional Chinese medicine company, is the second largest shareholder of the company, with 9.92% of the company's equity.