Financial Results

Click here to download this report in PDF.

Unaudited Financial Statements 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 (for the group) together with a comparative statement for the corresponding period of the immediately preceding financial year

1(a) Consolidated Statement of Comprehensive Income

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

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

As at 31^st December 2010, the Company’s issued and paid up capital, excluding treasury shares comprises of 439,587,217 (30^th June 2010: 362,105,188) 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 1^st October 2010 and 31^st December 2010, the Company issued 2,417,600 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 4,234,500 shares remained outstanding as at 31^st December 2010, compared to 4,496,250 as at 31^st December 2009.

Under the 2006 scheme, options to subscribe for 11,241,000 shares remained outstanding as at 31^st December 2010, compared to 12,525,000 as at 31^st December 2009.

C) Performance Share Plan

At the extraordinary general meeting of the Company held on 25^th October 2007, the Company’s shareholders approved the adoption of the Eu Yan Sang Performance Share Plan (“EYS PSP”). As at 31^st December 2010, no shares were granted and outstanding under the EYS PSP (31^st December 2009: nil).

D) Treasury shares

No treasury shares were held by the Company as at 31^st December 2010 and 31^st December 2009.

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 31st December 2010 is 439,587,217(30^th June 2010: 362,105,188) 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 2010.

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 2010 (“Q2FY11”) increased 9% to S$64 million as compared to the same period in last year (“Q2FY10”). The increase was mainly attributable to the increase in retail sales in all our 3 core markets. Operating profit increased 37% to S$7.7 million while profit for the year, net of tax, attributed to Equity holders of the company decreased 13% to S$4.1 million.

(A) Revenue

Group revenue for Q2FY11 increased by 9% to S$64 million as compared to S$58.5 million achieved in Q2FY10. The increase was mainly attributable to the increase in retail sales in all our 3 core markets, namely Hong Kong, Malaysia and Singapore.

Revenue by Activities:

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

Retail – TCM revenue achieved in Q2FY11 was 9% higher than Q2FY10. 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 Bottled Bird’s Nest (“BBN”), Bo Ying Compound (“BYC”), 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 4% to S$7.1 million in Q2FY11, the increase was mainly due to resumption of export sales to China in Q2FY11.

Clinic – TCM revenue increased by 20% to S$4.4 million in Q2FY11, mainly due to recognition of TCM as an alternative to western medicine.

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

Turnover by Geographical Locations:

Hong Kong market led our growth by 16% to HK$169 million, Malaysia market grew 15% to MYR40.6 million while Singapore market increased by 9% to S$18.8 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) FY2011 Retail Outlets & Clinics

In Q2FY11, the Group added 7 retail outlets. The establishment of these new outlets and clinic will contribute positively to the improvement of our Group turnover.

(C) Profitability

In line with the higher revenue in Q2FY11, Gross Profit increased by 8% to S$33 million compared to S$30.5 million achieved in Q2FY10. Gross Profit margin was stable at 51.5%. Operating Profit increased by 37% to S$7.7 million as compared to Q2FY10 was mainly due higher revenue generated in Q2FY11.

Profit for the period, net of tax, attributable to shareholders of the company for Q2FY11 decreased by 13% to S$4.1 million as compared to S$4.7 million in Q2FY10 was mainly due to additional tax expenses relating to prior year tax assessment finalized by the tax authority in Malaysia.

(D) Other operating income

The increase in other operating income was mainly due to a government grant received in Q2FY11.

(E) Distribution and selling expenses

In Q2FY11, distribution and selling expenses increased by 4% to S$20.2 million as compared to Q2FY10. The higher distribution and selling expenses were mainly due to higher salaries and rental expenses.

(F) Administrative expenses

In Q2FY11, administrative expenses remained stable at S$5.4 million compared to Q2FY10.

(G) 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 interest bearings loans as compared with Q2FY10.

(H) Taxation

Higher tax expenses were mainly due to a settlement of S$1.8 million following a tax investigation by Malaysian tax authority regarding manufacturing rebates given to other Group subsidiaries from 2002 to 2007.

(I) Investment properties

The increase was due to the purchase of an industrial property in Singapore.

(J) Long term investments

The increase was due to the purchase of a stake in Healthzone Limited, a company listed on the Australian Stock Exchange.

(K) Inventories

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

(L) Trade and other receivables

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

(M) Prepayments

Lower prepayments were mainly due to the reclassification of the prepaid portion of an industrial property to investment properties upon the completion of the purchase.

(N) Trade and other payables

Higher trade and other payables were mainly due to replenishment of inventories to meet the demand in the subsequent quarters and the timing of repayments.

(O) Interest bearing loans and borrowings

Higher interest bearing loans and borrowings were mainly due to the purchase of an industrial property in Singapore and financing of inventories in anticipation of demand in subsequent quarters.

(P) Tax payable

Higher tax payable was mainly due additional tax expense accrued relating to prior year tax assessment finalized by the tax authority in Malaysia.

(Q) Cash flows

Net cash used in operating activities for Q2FY11 was S$4.9 million. The decrease was due mainly to higher foreign currency translation realignment as a result of the strengthening of Singapore dollars against other trading currencies and increased in inventories level.

Net cash used in investing activities increased by S$2.8 million in Q2FY11 was mainly due to the purchase of property, plant and equipment.

Net cash provided by financing activities in Q2FY11 increased by S$S$15.2 million as compared with Q2FY10 was mainly due to cash used for building up of inventories.

As at 31^st December 2010, the Group had cash and cash equivalent amounting to S$35.3m as compared to S$27.2m as at 31^st December 2009.

The Group’s gearing ratio was 50.4% as at 31^st December 2010.

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 FY2010 full year announcement made on 26^th August 2010.

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 economic outlook for our core markets remains healthy despite lingering concerns of a double dip in some Western economies. The demand for quality healthcare products and services may remain resilient, driven by growing affluence and population.

Notwithstanding positive sentiments on the economic recovery of our core markets, the global outlook remains uncertain. The general market and business conditions are expected to remain challenging and competitive in the next 12 months. Moving forward, the Group’s strategy is to leverage on its’ competency and 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.

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

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

Not applicable

Board negative assurance confirmation for 2^nd Quarter FY11 and 1^st half FY11 results

BY ORDER OF THE BOARD

Danny Heng Hang Siong
Chief Financial Officer & Company Secretary
10^th February 2011