Financial Results

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Unaudited Financial Statement and Dividend Announcement

PART I - INFORMATION REQUIRED FOR ANNOUNCEMENTS OF
QUARTERLY (Q1, Q2 & Q3), HALF-YEAR AND FULL YEAR RESULTS

1(a) An income statement and statement of comprehensive income or a statement of comphrensive income for the group together with a comparative statement for the corresponding period of the immediately preceding financial year.

Income Statement

1(a) An income statement and statement of comprehensive income or a statement of comprehensive income for the group together with a comparative statement for the corresponding period of the immediately preceding financial year.

Consolidated Statement of Comprensive Income

Notes:
(i) Operating profit is arrived at after charging(crediting) the following:

1(b)(i) A statement of financial position (for the issuer and group), together with a comparative statement as at the end of the immediately preceding financial year.

1(b)(ii) Aggregate amount of group’s borrowings and debt securities.

Amount repayable in one year or less, or on demand

Amount repayable after one year

Details of any collateral
Nil

1(c) A statement of cash flow (for the group), together with a comparative statement
for the corresponding period of the immediately preceding financial year

Cash and cash equivalents included in the consolidated statement of cash flows comprise the following balance sheet amounts:

1(d)(i) A statement (for the issuer and group) showing either (i) all changes in equity or (ii)changes in equity other than those arising from capitalisation issues and distributions to shareholders, together with a comparative statement for the corresponding period of the immediately preceding financial year.

1(d)(ii) Details of any changes in the company's share capital arising from rights issue, bonus issue, share buy-backs, exercise of share options or warrants, conversion of other issues of equity securities, issue of shares for cash or as consideration for acquisition or for any other purpose since the end of the previous period reported on. State also the number of shares that may be issued on conversion of all the outstanding convertibles as well as the number of shares held as treasury shares, if any, against the total number of issued shares excluding treasury shares of the issuer, as at the end of the current financial period reported on and as at the end of the corresponding period of the immediately preceding financial year.

A) Changes in share capital during the financial period

As at 31^st December 2011, the Company’s issued and paid up capital, excluding treasury shares comprises of 441,947,217 (30^th June 2011: 441,415,217) ordinary shares. Movement in the number of the Company’s issued and paid-up capital, excluding treasury shares are as follows:

B) Share Options – Eu Yan Sang Employees Share Option Scheme

Between 1st October 2011 and 31^st December 2011, the Company has issued 46,000 ordinary share under the Eu Yan Sang Employees Share Option Scheme 2000 (“the 2000 scheme”).

Under the 2000 scheme, options to subscribe for 3,826,500 shares remained outstanding as at 31^st December 2011, compared to 4,234,500 as at 31st December 2010. Movements in the number of the unissued shares of the Company under the 2000 scheme during 2QFY12 were as follows:

Between 1st October 2011 and 31st December 2011, the Company has issued 286,000 ordinary shares under the Eu Yan Sang Employees Share Option Scheme 2006 (“the 2006 scheme”).

Under the 2006 scheme, options to subscribe for 9,115,000 shares remained outstanding as at 31st December 2011, compared to 11,241,000 as at 31st December 2010. Movements in the number of the unissued shares of the Company under the 2006 scheme during 2QFY12 were as follows:

C) Performance Share Plan

At the extraordinary general meeting of the Company held on 25^st October 2007, the Company’s shareholders approved the adoption of the Eu Yan Sang Performance Share Plan ("EYS PSP"). As at 31^st December 2011, no shares were granted and outstanding under the EYS PSP (31^st December 2010: nil).

D) Treasury shares

No treasury shares were held by the Company as at 31^st December 2011 and 31^st December 2010.

1(d)(iii) To show the total number of issued shares excluding treasury shares at the end of the current financial period and as at the end of the immediately preceding year.

The number of issued shares as at 31^st December 2011 is 441,947,217 (30^th June 2011: 441,415,217) ordinary shares.

1(d)(iv) A statement showing all sales, transfers, disposal, cancellation and/or use of treasury shares as at the end of the current financial period reported on.

Not Applicable.

2. Whether the figures have been audited, or reviewed and in accordance with which auditing standard or practice.

The figures have not been audited or reviewed by the auditors.

3. Where the figures have been audited or reviewed, the auditors’ report (including any qualifications or emphasis of matter).

Not applicable

4. Whether the same accounting policies and methods of computation as in the issuer’s most recently audited annual financial statements have been applied.

This financial statement has been prepared based on the accounting policies and methods of computation consistent with those adopted in the most recent audited financial statement for the year ended 30 June 2011.

5. If there are any changes in the accounting policies and methods of computation, including any required by an accounting standard, what has changed, as well as the reasons for, and the effect of, the change.

Not applicable.

6. Earnings per ordinary share of the group for the current financial period reported on and the corresponding period of the immediately preceding financial year, after deducting any provision for preference dividends.

7. Net asset value (for the issuer and group) per ordinary share based on the total number of issued shares excluding treasury shares of the issuer at the end of the:- (a) current financial period reported on; and (b) immediately preceding financial year.

8. A review of the performance of the group, to the extent necessary for a reasonable understanding of the group’s business. It must include a discussion of the following:-

(a) any significant factors that affected the turnover, costs, and earnings of the group for the current financial period reported on, including (where applicable) seasonal or cyclical factors; and

(b) any material factors that affected the cash flow, working capital, assets or liabilities of the group during the current financial period reported on.

Overview

Group revenue for the second financial quarter ended 31^st December 2011 (“2QFY12”) increased 9% to S$69.8 million as compared to the same period in last year (“2QFY11”). The increase was mainly attributable to increase in retail sales in all our 3 core markets. Operating profit was flat at S$7.8 million while loss for the period, net of tax, attributed to Owners of the parent was S$2.8 million.

(A) Revenue

Group revenue for 2QFY12 increased by 9% to S$69.8 million as compared to S$64 million achieved in 2QFY11. The increase was mainly attributable to the increase in retail sales in all our 3 core markets, namely Malaysia, Hong Kong and Singapore.

Revenue by Activities:

* Traditional Chinese Medicine (“TCM”) - comprising Chinese Proprietary Medicine (“CPM”), Health Foods and Medicinal Herbs.

Retail – TCM revenue achieved in 2QFY12 was 8% higher than 2QFY11. Retail activities were relatively resilient at our outlets throughout the regional markets as consumers continue to recognise our premium brand and accept TCM as an alternative to western medicine and health supplements. The Group’s top selling products such as Bo Ying Compound (“BYC”), Bottled Bird’s Nest (“BBN”), Bak Foong Pills (“BFP”), Lingzhi Cracked Spores Capsules (“LCS”) and Essence of Chicken (“EOC”) continue to be our top selling products.

Wholesale – TCM revenue increased by 20% to S$8.5 million in 2QFY12, the increase was mainly due to stock replenishment by wholesalers.

Clinic – TCM revenue increased by 4% to S$4.5 million in 2QFY12, mainly due to recognition of TCM as an alternative to western medicine.

Revenue under Others was mainly contributed from food & beverages and rental income.

Turnover by Geographical Locations:

Malaysia market led our growth by 16% to MYR47 million, Hong Kong market grew 12% to HK$188 million while Singapore market increased by 4% to S$19.6 million. These revenue growth in our core countries signified robust demand for our products as we continue to fulfill our vision to our customer.

(B) 2QFY12 Outlets & Clinics

In 2QFY12, the Group added 16 retail outlets. The establishment of these new outlets will contribute positively to the improvement of our Group turnover.

(C) Profitability

In line with the higher revenue in 2QFY12, Gross Profit increased by 9% to S$35.9 million compared to S$33 million achieved in 2QFY11. Gross Profit margin was stable at 51.4%. Operating Profit was flat at S$7.8 million mainly due to higher operating expenses incurred in 2QFY12.

Loss for the period, net of tax, attributable to Owners of the parent for 2QFY12 was S$2.8 million as compared to a profit of S$4.1 million in 2QFY11. The loss was mainly due to the impairment of investments in associate and its related derivatives.

(D) Distribution and selling expenses

In 2QFY12, distribution and selling expenses increased 11% to S$22.5 million as compared to 2QFY11. The higher distribution and selling expenses were mainly due to higher salaries and rental expenses incurred as a result of the increased in our retail outlets amid escalating rental and salaries cost.

(E) Administrative expenses

In 2QFY12, administrative expenses increased 12% to S$6 million as compared to 2QFY11 was mainly due to increase in manpower to support our retail and clinic operations.

(F) Interest income and Interest expenses

Higher interest income was due to higher fixed deposits interest received from our principal bankers.

Higher interest expenses were attributable to higher proceeds from interest bearings loans and 3% p.a. SGD Notes.

(G) Taxation

Lower tax expenses were mainly due to the absence of a settlement of S$1.8 million to the Malaysian tax authority in 2QFY11.

(H) Investment properties

The increase was due to the completion of an acquisition of a commercial property at 268 Des Voeux Road Central, Sheung Wan, Hong Kong in 2QFY12.

(I) Inventories

Higher inventories were due to stocking up at our retail outlets in anticipation of higher demand in the subsequent quarters.

(J) Trade and other payables

Higher trade and other receivables were due to timing differences of payment from our debtors.

(K) Prepayments

Higher prepayments were mainly due to deposits paid to suppliers to secure inventories in anticipating sales in subsequent quarters, insurance premium and rental paid in advance.

(L) Fixed deposits, cash and bank balances

Increase in fixed deposits, cash and bank balances were mainly due to issuance of 3% p.a. fixed rate SGD Notes.

(M) Trade and other payables

Higher trade and other payables were due to timing differences of payment to our creditors.

(N) Interest bearing loans and borrowings

Higher interest bearing loans and borrowings were mainly due to the financing of stock built-up at our retail outlets in anticipation of higher demand in the subsequent quarters.

(O) Tax Payable

Lower tax expenses were mainly due to the absence of a settlement of S$1.8 million to the Malaysian tax authority in 2QFY11.

(P) 3% p.a. fixed rate SGD Notes

The Notes were issued in 2QFY12 for funding, business expansion into China and other countries in the region; funding (whether in whole or in part) the acquisition of, or investment in, commercial real estate related to the Group’s operations; and for working capital and general business purposes.

Note: The 3% p.a. fixed rate will be stepped up to 4.5% if the Notes are not redeemed by 28th November 2014.

(Q) Cash flows

Net cash used in operating activities for Q2FY12 was S$1.1 million. The decrease was due mainly to foreign currency translation realignment as a result of the weakening of Singapore dollars against other trading currencies which offset the effect of increased in inventories level and trade and other receivables.

Net cash used in investing activities increased by S$24.6 million in Q2FY12 was mainly due to acquisition of a commercial property at 268 Des Voeux Road Central, Sheung Wan (Hong Kong), was completed in 2QFY12.

Net cash provided by financing activities in Q2FY12 increased by S$31.8 million as compared with Q2FY11 was mainly due to proceeds from issuance of 3% p.a. fixed rate SGD Notes and proceeds from interest bearing loans and borrowings.

As at 31st December 2011, the Group had cash and cash equivalent amounting to S$45.4m as compared to S$35.3m as at 31st December 2010.

The Group’s gearing ratio was 77.3% as at 31st December 2011.

9. Where a forecast, or a prospect statement, has been previously disclosed to shareholders, any variance between it and the actual results.

The results for the period are in line with the prospect statement contained in the FY2011 full year announcement made on 25th August 2011.

10. A commentary at the date of the announcement of the significant trends and competitive conditions of the industry in which the group operates and any known factors or events that may affect the group in the next reporting period and the next 12 months.

The demand for quality healthcare products and services remains resilient, driven by growing affluence and ageing population. However, sovereign debts problems in the West, coupled with increasing commodity and food prices may erode economic growth and affect consumer sentiment.

With a backdrop of weaker economic outlook, the general market and business conditions are expected to remain challenging and competitive in the next 12 months. The strong Singapore dollar against Hong Kong dollar may continue to impact our results when expressed in Singapore dollar terms. Moving forward, the Group’s strategy is to continue leveraging on its competency and brand strength to explore opportunities to grow its core business. The Group will continue to manage its business risks prudently and review its business strategy with a view to enhance shareholders’ value.

The Group believes that its acquisition of selected business assets and undertakings in Australia provides a ready platform to expand and broaden its products penetration in line with its strategic vision to become a global integrative healthcare and wellness company.

11. Dividend

(a) Current Financial Period Reported On

Any dividend declared for the current financial period reported on?

None

(b) Corresponding Period of the Immediately Preceding Financial Year

Any dividend declared for the corresponding period of the immediately preceding financial year?

(c) Date payable

Not applicable

(d) Books closure date

Not applicable.

12. If no dividend has been declared/recommended, a statement to that effect.

Not applicable.

13. NEGATIVE CONFIRMATION BY THE BOARD PURSUANT TO RULE 705(5)

The Board of Eu Yan Sang International Ltd does hereby confirm that to the best of its knowledge, nothing has come to the attention of the Board which may render the 2nd quarter FY12 and 1st half FY12 un-audited financial statements for the period ended 31st December 2011 to be false or misleading in any material aspect.

BY ORDER OF THE BOARD

Lam Chee Weng
Chief Financial Officer
6^th February 2012