Financial Results

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Unaudited Financial Statements and Dividend Announcement Q2FY2010

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

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

1(a) Statement of Comprehensive Income

With effect from annual period beginning or after 1 January 2009, FRS1 Presentation of Financial Statement requires an entity to present all non-owner changes in equity in a Statement of Comprehensive Income. Non-owner changes will include income and expenses recognized directly in equity. This is a change of presentation and does not affect the recognition or measurement of the entity’s transactions. Previously, such non-owner changes were included in the Statement of Changes in Equity.

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

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

Note to Consolidated Cash Flow Statement 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

In the quarter ended 31^st December 09, there is no movement in the Company’s share capital.

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

As at 30th September 2009, there were 13,526,250 unexercised share options (30th September 2008: 10,116,250).

Between 1st October 2009 and 31st December 2009, the Company did not issue any ordinary shares under both the Eu Yan Sang Employees Share Option Scheme 2000 (“the 2000 scheme”) and 2006 (“the 2006 scheme”) schemes.

Under the 2000 scheme, options to subscribe for 4,496,250 shares remained outstanding as at 31st December 2009, compared to 4,496,250 as at 31st December 2008.

Under the 2006 scheme, options to subscribe for 12,525,000 shares remained outstanding as at 31st December 2009, compared to 9,065,000 as at 31st December 2008. Movements in the number of the unissued shares of the Company under the 2006 scheme during the second quarter are as follows:

C) Performance Share Plan

At the extraordinary general meeting of the Company held on 25th October 2007, the Company’s shareholders approved the adoption of the Eu Yan Sang Performance Share Plan (“EYS PSP”). As at 31st December 2009, no shares were granted and outstanding under the EYS PSP (31st December 2008: nil).

D) Treasury shares

No treasury shares were held by the Company as at 31st December 2009 and 31st December 2008.

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

The number of issued shares as at 31st December 2009 is 360,435,188 (30th June 2009: 360,435,188) 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 2009. 

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 first half financial year 2010 (“1HFY10”) increased 8% to S$111.6 million as compared to the same period in last year (“1HFY09”). The increase was attributable to the increased in retail sales in all our 3 core markets. Higher operating profit of S$10.7 million and profit after tax of S$8.4 million were in line with the growth in sales.

(A) Revenue

Group revenue for the second quarter ending 31st December 2009 (“Q2FY10”) increased by 10% to S$58.5 million as compared to S$53.4 million achieved in last year same quarter (“Q2FY09”) mainly attributable to the increases in retail sales in all our 3 core markets, namely Hong Kong, Singapore and Malaysia.

Revenue by Activities:

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

Retail – TCM revenue achieved in Q2FY10 was 14% higher than Q2FY09. Retail activities were relatively resilient at our outlets throughout the regional markets as consumers continue to recognize 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”), Bak Foong Pills (“BFP”), Bottled Bird’s Nest (“BBN”), Essence of Chicken (“EOC”) and Lingzhi Cracked Spores Capsules (“LCS”) continue to show steady growth.

Wholesale – TCM revenue decreased by 6% to S$6.8 million in Q2FY10 due to slower wholesale stock replenishment activities in Q2FY10 and the lower wholesales in Wisconsin American Ginseng (“WAG”) products in Hong Kong.

Clinic – TCM revenue was flat at S$3.6 million in Q2FY10.

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

Turnover by Geographical Locations:

Malaysia market lead our growth by 34% to MYR35.3 million, Hong Kong market grew 7% to HK$145.5 million while Singapore market increased by 5% to S$17.2 million. Higher sales in Malaysia were due to timing of the 130 Anniversary Sales which took place in October 09 (accounted in the second quarter FY2010) as opposed to the anniversary sales last year in September 08 (accounted in the first quarter FY2009).

(B) FY2010 Retail Outlets & Clinics

In the quarter ended 31st Dec 2009, the Group added 2 (net) retail outlets. The establishment of these new outlets will further contribute to the improvement in Group turnover.

(C) Profitability

In line with the higher revenue in Q2FY10, Gross Profit increased by 10% to S$30.5 million compared to S$27.8 million achieved in Q2FY09. Gross Profit margin was stable at 52%. Operating Profit increased 41% to S$5.6 million due to the absence of impairment expense in this year as compare to last year, despite higher distribution and selling expenses and administrative expenses.

Net Profit for Q2FY10 increased by 36% to S$4.8 million as compared to S$3.5 million in Q2FY09 was mainly attributable to the higher Group revenue achieved.

(D) Distribution and selling expenses

In Q2FY10, distribution and selling expenses were S$19.5 million or 11% higher than Q2FY09. The higher distribution and selling expenses were mainly due to higher advertising and promotional activities for the quarter gearing toward the Chinese New Year (“CNY”) festive session, and higher rental costs on our existing retail outlets and TCM clinics upon their lease renewals.

(E) Administrative expenses

In Q2FY10, administrative expenses increased by 9% to S$5.5 million as compared to Q2FY09. The increase was due to the higher staff cost incurred to support our expanding scale of operations.

(F) Interest income and Interest expenses

Lower interest income was due to lower fixed deposits interest offered by our principal bankers.

Lower interest expenses were attributable to application of cash to retire interest bearings loans and borrowings.

(G) Trade and other payables

Higher trade and other payables were mainly resulted from the replenishment of inventories to meet the demand for coming CNY festive seasons in the subsequent quarters.

(H) Cash flows

Net cash provided by operating activities improved to S$12.1 million in 1HFY10 as compared to S$11.8 million achieved in 1HFY09.  The increase in inventories by S$7.8 million and increase in trade and other payables by S$12.7 million, were the results of purchasing and stocking up of our products and hampers preparing for the Chinese New Year festive session. 

The Group’s gearing ratio was 31% as at 31st December 2009.

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 FY2009 full year announcement made on 27th August 2009.

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 overall economies in the region have shown signs of recovery from the financial downturn with improved economic indicators and better employment data. These indicators should provide strong support to the retail businesses in the long run. However, there are worries of asset bubbles together with the introduction of various governments’ impending measures and withdrawing of stimulus programs. These worries will continue to diminish the general consumer sentiment in the short-term.

The general market and business conditions are expected to remain challenging and competitive in the next 12 months. The Group’s strategy is to carefully manage the business risks and ride out this period of uncertainty, while cautiously anticipating new opportunities when the markets recover.

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?

None

(c) Date payable

Not applicable

(d) Books closure date

Not applicable

The Annual General Meeting will be held on 29th October 2009.

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

Not applicable

Board negative assurance confirmation for 2nd Quarter FY10 and 1st half FY10 results

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 FY10 and 1st half FY10 un-audited financial statements for the period ended 31st December 2009 to be false or misleading in any material aspect.

BY ORDER OF THE BOARD

Danny Heng Hang Siong
Chief Financial Officer & Company Secretary
11^th February 2010