China Medstar Limited
Interim results for the six months ended 30 June 2007
China Medstar Limited ("Medstar" or ""Group") is a specialist healthcare
provider of radiotherapy and diagnostic equipment for the diagnosis and
treatment of cancer to hospitals in China. The Group enables medical care to
be provided through the provision of financing, equipment and support services
to First Tier hospitals in China. The Group currently operates 17 medical
centres in ten cities.
SIX MONTHS HIGHLIGHTS
- Revenue of the Group increased by 10.3% to RMB 31.6million (2006: RMB
28.6million)
- Gross Profit has increased by 5.3% to RMB 19.5million (2006: RMB 18.6million)
- 2 new centre openings, with a further 6 diagnostic and treatment centres to be
opened this year, bringing the total number of centres to 21 diagnostic and
treatment centres, 2 high intensity focused ultrasound ("HIFU") centres and 1
Leksell Knife Centre
- Strong pipeline of further openings, with 8 signed contracts including those
set out above
Post period end
- In discussions with Varian Medical to form strategic partnership for their new
Linear Accelerator equipment in China
- In the process of applying for a finance lease license which will enable the
Group to have the potential to offer another business model to hospitals
- Key equipment sale identified and to be negotiated in second half of financial
year
Dr. Cheng Zheng, Chairman and CEO, commented:
"As seen in previous years the Group has a large financial second half bias.
While the performance of the Group has not met expectations for the first half
of the year the Directors are confident that with a keen focus on costs and a
number of centres identified for opening the Group can achieve satisfactory
results for 2007 and position the Group for growth in 2008."
28 September 2007
Enquiries
China Medstar Ltd Tel: +86 (10) 5825-6867
Dr Cheng Zheng, Chairman and CEO/
Yap Yaw Kong, CFO
Evolution Securities Tel: +44 (0) 20 7071 4300
Tom Price/Bobbie Hilliam
Nexus Financial Ltd Tel: +44 (0) 20 7451 7050
Nicholas Nelson/Kathy Boate
The Directors are responsible for the preparation of the interim statement as
required by the AIM Rules issued by the London Stock Exchange. The interim
statement, including the financial information contained therein prepared and
presented in accordance with the International Accounting Standards 34 -
Interim Financial Reporting ("IAS 34"), is the responsibility of, and has been
approved by the Directors.
CHAIRMAN AND CHIEF EXECUTIVE OFFICER'S STATEMENT
On 7th September 2007, the Group announced a trading update stating that
revenues for the current financial year would fall below market expectations.
The reasons for this as outlined in the trading update are repeated in the
Financial Summary below. The Directors however do not believe that these issues
detract from the underlying prospects and quality of the business.
Business Summary
Medstar provides private financing to hospitals to solve the funding shortfall
caused by a decrease in state government investment into hospital development.
This comes at a time when demand for radiotherapy equipment is high and cancer
rates in China are rising. Medstar is able to purchase advanced treatment and
diagnostic equipment and finance the establishment of medical centres. In
return the Group receives revenue through profit sharing leasing agreements
with the hospitals. In addition to this equipment leasing and profit sharing
agreements, the Group also sells equipment directly to hospitals.
The Group was admitted to the Alternative Investment Market of the London Stock
Exchange (AIM) in November 2006.
There has been a good response from hospitals to the Group's business model as
it aims to minimize the risks associated with setting up a new medical centre.
The Directors believe it also provides the hospital with a fully integrated
operational solution to maximise the returns from the medical centre, while
allowing the hospital to continue to treat patients without the distraction of
sourcing and maintaining equipment.
As part of the leasing arrangements, the Group provides a number of management
services to the medical centres following the acquisition/lease of the medical
equipment. This includes system purchase and installation, centre start-up,
operational management and business development. The Directors believe that
these management services are a benefit to the hospitals which, as state-owned
enterprises, have not previously been operating with a view to generating
revenues. Consequently, their personnel have limited to no experience in
running the business as a revenue generating centre.
The ability of the Group to co-ordinate the system installation, provide
detailed day-to-day operational procedures and promote the medical centre to
assist in building its patient base, are services which the Directors believe
are valued by the hospitals. Furthermore, by its involvement, the Group can
seek to ensure the medical centre is being operated profitably and achieves
growth targets which will provide higher returns to both the hospital and the
Group under its profit sharing arrangements.
As a service provider to the hospitals, the Group is not involved in the
provision of medical services or in the treatment of patients in the centres,
nor involved in the day-to-day management of the centres, which is the ultimate
responsibility of the hospital.
Financial Summary
Revenue increased by 10.3% to RMB 31,588,226(2006: RMB 28,641,382) compared to
same period last year, while Gross Profit increased by 5.3%.
During the period, the Group was forced to enter into discussions with a
hospital concerning a default in payment to the Group from an existing contract
with a diagnostic and treatment centre. Due to these discussions, Medstar has
not yet been able to recognise the revenue from this centre of RMB 3,105,766.
As a result of this, both gross and operating margins have been affected as the
cost, but not the revenue, of the centre in question has been recognised. The
Directors are working towards a resolution of this matter and will keep
shareholders informed.
In some older centres in operation, revenue has not been increasing as had been
forecast due to the after effects from last year's Ministry of Health
initiative to remove inefficiencies relating to the over treatment of patients.
The result has been that certain hospital administrators are cautious and have
tightened the selection procedure for patients for permitted operations. The
lease revenue from these centres, as a result, has decreased although we are
hopeful of a return to more favourable conditions in due course.
Trading margins were also affected due to the slippage of an order of a 64 CT
Scanner, due to a hospital delay in obtaining the permit for acquisition from
the government, but it is hoped that this will be finalised in the second half
of this year.
The increase in operating and administrative expenses by 188% to RMB 11,138,419
(2006: RMB 3,873,090) is in part a direct reflection of the increased central
office costs following the admission to AIM. However, as announced in the
recent trading update, the Group is going to institute a cost control programme
to be monitored by the non-executive directors alongside the finance director.
This increase in expenses, coupled with additional medical equipment
depreciation arising from the change in accounting estimate for depreciation,
has led to a decrease in net profit to RMB4,117,020 (2006: RMB 10,450,345) for
the Group in the period under review.
Review of Operations
The first six months of the financial year have seen two new centre openings,
namely the PET-CT diagnostic centre with the Beijing Navy Hospital and a Leksell
Knife centre with Guangzhou 458 Air force Hospital.
There is an encouraging pipeline of further centre openings for the remainder
of the year, with signed contracts for eight diagnostic and treatments centres.
As a result the Directors expect to open six new diagnostic and treatment
centres in 2007 and a further HIFU centre, bringing the total number in
operation to 21 diagnostic and treatment centres and 2 HIFU centres by the end
of the year. In addition, the Group's Trading Division is currently in advanced
negotiations on two equipment sales and will actively pursue additional
opportunities.
In addition to the signed agreements for new centre openings in 2007, the Group
also signed key strategic agreements with Toshiba China for the distribution and
leasing of its imaging products, and with GE Healthcare China for its latest
HDeMRI scanner. Discussions are under way with Varian Medical to form a
strategic alliance for distribution of their Linear Accelerators which the
Directors are hoping to finalise in the second half of this year.
The Group is actively seeking out further contracts to open diagnostic and
treatment centres and is confident its leasing arrangements will continue to
prove attractive to hospitals lacking the funding to secure radiotherapy
equipment. In addition to the eight signed contracts mentioned, there are a
number of others currently in discussion or with a signed letter of intent.
Outlook
As seen before due to the seasonality of the centres' revenue where it would be
lower in the first half of the financial year, mainly due to the major festive
seasons and long holidays such as Chinese Lunar New Year and week-long Labour
Day falling on the first half of the calendar year which usually sees less
patients visiting the centres for treatments, there will be a strong second
half bias to the results. The Directors are hopeful that by focusing on
controlling and where possible, reducing operating and administrative costs
without adversely affecting the Group's expansion plans, the Group can position
itself for strong growth in the second half of the current financial year and
in 2008.
Furthermore, the Directors are confident that if the contract discussions in
relation to the default in payment can be resolved, key equipment sales are
made and additional revenue from the new diagnostic and treatment centres is as
forecast, the Group will finish the year in a much stronger position.
Dr. Cheng Zheng
Chairman and CEO
28 September 2007
CHINA MEDSTAR LIMITED
AND ITS SUBSIDIARY
CONSOLIDATED INCOME STATEMENT
FOR THE FINANCIAL PERIOD FROM 1 JANUARY 2007 TO 30 JUNE 2007
(Unaudited) (Unaudited) (Audited)
1.1.2007 1.1.2006 1.1.2006
to to to
30.06.2007 30.6.2006 31.12.2006
NOTE RMB RMB RMB
Revenue 6 31,588,226 28,641,382 80,153,583
Cost of sales (12,051,204) (10,096,304) (37,609,236)
Gross profit 19,537,022 18,545,078 42,544,347
Other income 1,444,671 288,639 3,591,149
Other expenses (413,000) (200,000) (17,270,684)
Selling and
distribution expenses (651,884) (217,982) (912,567)
General and
administrative
expenses 7 (11,138,419) (3,873,090) (11,274,106)
Profit from operations 8,778,390 14,542,645 16,678,139
Finance costs (2,912,027) (2,134,754) (4,562,373)
Profit before income
tax 5,866,363 12,407,891 12,115,766
Income tax expense (1,749,343) (1,957,546) (4,490,566)
Net profit attributable
to equity holders of
the parent 4,117,020 10,450,345 7,625,200
Earnings per share(RMB) 8
Basic 0.31 1.05 0.57
Diluted 0.31 0.68 0.57
CHINA MEDSTAR LIMITED
AND ITS SUBSIDIARY
CONSOLIDATED BALANCE SHEET AS AT 30 JUNE 2007
(Unaudited) (Unaudited) (Audited)
30.6.2007 30.6.2006 31.12.2006
NOTE RMB RMB RMB
ASSETS
Non-current assets
Property, plant and
equipment 9 154,433,037 124,911,289 148,320,470
Intangible asset 141,406 167,150 158,721
Deferred tax assets 1,794,957 697,224 1,322,238
Trade and other receivables 15,351,089 - 16,271,557
171,720,489 125,775,663 166,072,986
Current assets
Inventories 151,160 1,162,452 310,018
Trade and other receivables 82,131,428 17,154,507 19,563,546
Advances to suppliers and
prepayments 18,777,648 41,650,400 53,883,349
Cash and bank balances 10 29,731,357 987,923 62,830,899
130,791,593 60,955,282 136,587,812
Total assets 302,512,082 186,730,945 302,660,798
EQUITY AND LIABILITIES
Capital and reserves
attributable to equity
holders of the parent
Share capital 126,477,963 502,513 126,477,963
Statutory reserves 7,148,163 4,764,688 6,188,583
Other reserve 17,450,811 17,450,811 17,450,811
Share options reserve 1,102,530 - 158,142
Translation reserve 1,757,728 267,899 1,757,728
Accumulated profits 39,527,290 40,618,890 36,369,850
193,464,485 63,604,801 188,403,077
Non-current liabilities
Preference shares - 40,100,276 -
Bank loans 11 43,220,000 57,610,000 27,257,500
Trade and other payables 1,833,513 - 1,772,108
45,053,513 97,710,276 29,029,608
Current liabilities
Trade and other payables 12,752,263 9,035,708 20,527,581
Provision for staff welfare
benefit 20,054 180,230 250,176
Income tax liabilities 2,523,595 2,713,912 3,476,248
Other tax liabilities 1,292,868 836,018 2,224,108
Bank loans 11 47,405,304 12,650,000 58,750,000
63,994,084 25,415,868 85,228,113
Total equity and
liabilities 302,512,082 186,730,945 302,660,798
CHINA MEDSTAR LIMITED
AND ITS SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE FINANCIAL PERIOD FROM 1 JANUARY 2007 TO 30 JUNE 2007
Attributable to equity holders of the parent
Share
Share Statutory Other options Translation Accumulated
capital reserves reserve reserve reserve profits Total
RMB RMB RMB RMB RMB RMB RMB
(Unaudited)
Balance as
at 1
January
2007 126,477,963 6,188,583 17,450,811 158,142 1,757,728 36,369,850 188,403,077
Net profit
for the
period - - - - - 4,117,020 4,117,020
Total
recognised
income and
expense - - - - - 4,117,020 4,117,020
Share
option
expenses - - - 944,388 - - 944,388
Transfer to
statutory
reserves - 959,580 - - - (959,580) -
Balance as
at 30 June
2007 126,477,963 7,148,163 17,450,811 1,102,530 1,757,728 39,527,290 193,464,485
(Unaudited)
Balance as
at 1
January
2006 502,513 3,676,506 17,450,811 - 1,544,133 31,256,727 54,430,690
Translation
difference - - - - (1,276,234) - (1,276,234)
Net expense
recognised
directly
in equity - - - - (1,276,234) - (1,276,234)
Net profit
for the
period - - - - - 10,450,345 10,450,345
Total
recognised
income and
expense - - - - (1,276,234) 10,450,345 9,174,111
Transfer to
statutory
reserves - 1,088,182 - - - (1,088,182) -
Balance as
at 30 June
2006 502,513 4,764,688 17,450,811 - 267,899 40,618,890 63,604,801
CHINA MEDSTAR LIMITED
AND ITS SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE FINANCIAL PERIOD FROM 1 JANUARY 2007 TO 30 JUNE 2007
Attributable to equity holders of the parent
Share
Share Statutory Other options Translation Accumulated
capital reserves reserve reserve reserve profits Total
RMB RMB RMB RMB RMB RMB RMB
(Audited)
Balance as
at 1
January
2006 502,513 3,676,506 17,450,811 - 1,544,133 31,256,727 54,430,690
Translation
difference - - - - 213,595 - 213,595
Net income
recognised
directly in
equity - - - - 213,595 - 213,595
Net profit
for the
year - - - - - 7,625,200 7,625,200
Total
recognised
income and
expense - - - - 213,595 7,625,200 7,838,795
Issue of
share
capital
during the
year 94,024,467 - - - - - 94,024,467
Conversion
of
preference
shares to
ordinary
shares 39,800,932 - - - - - 39,800,932
Transfer to
statutory
reserves - 2,512,077 - - - (2,512,077) -
Share issue
expenses (7,849,949) - - - - - (7,849,949)
Share
options
expense - - - 158,142 - - 158,142
Balance as
at 31
December
2006 126,477,963 6,188,583 17,450,811 158,142 1,757,728 36,369,850 188,403,077
CHINA MEDSTAR LIMITED
AND ITS SUBSIDIARY
CONSOLIDATED CASH FLOW STATEMENT
FOR THE FINANCIAL PERIOD FROM 1 JANUARY 2007 TO 30 JUNE 2007
(Unaudited) (Unaudited) (Audited)
1.1.2007 1.1.2006 1.1.2006
to to to
30.6.2007 30.6.2006 31.12.2006
RMB RMB RMB
Cash flows from operating
activities
Profit before income tax 5,866,363 12,407,891 12,115,766
Adjustments for:
Depreciation of property,
plant and equipment 11,628,121 7,639,886 18,963,275
Exchange loss arising from
conversion of Redeemable Convertible
Preference Shares - - 965,956
Intangible asset amortisation 17,315 - 14,429
Interest expense 2,912,027 2,134,754 4,562,373
Loss on disposal of property,
plant and equipment 413,000 - -
Share options expense 944,388 - 158,142
Provision for staff welfare
benefit 47,979 54,409 125,604
Operating profit before working
capital changes 21,829,193 22,236,940 36,905,545
Inventories 158,858 (269,691) 582,743
Trade and other receivables (61,647,414) (5,535,677) (25,801,572)
Advances to suppliers and
prepayments 35,105,701 (19,122,400) (31,355,349)
Trade and other payables (8,645,153) (7,281,587) 9,192,226
Utilisation of provision of
staff welfare benefit (278,101) - (302,128)
Cash used in operating
activities (13,476,916) (9,972,415) (10,778,535)
Income tax paid (3,174,715) (1,291,472) (3,687,171)
Net cash used in operating
activities (16,651,631) (11,263,887) (14,465,706)
Cash flows from investing
activities
Proceeds from disposal of plant
and equipment 152,815 - -
Purchase of plant and equipment (18,306,503) (859,880) (35,592,680)
Purchase of intangible asset - (167,150) (173,150)
Cash deposits pledged with a
bank 7,423,747 - (17,524,051)
Net cash used in investing
activities (10,729,941) (1,027,030) (53,289,881)
Cash flows from financing
activities
Proceeds from issue of share
capital - - 94,024,467
Share issue expenses paid - - (7,849,949)
Proceeds from bank loans 31,296,250 5,610,000 44,410,000
Repayment of bank loans (26,678,446) (5,000,000) (28,052,500)
Interest paid (2,912,027) (2,134,754) (4,562,373)
Net cash generated from/(used
in) financing
activities 1,705,777 (1,524,754) 97,969,645
Net (decrease)/increase in cash
and cash equivalents (25,675,795) (13,815,671) 30,214,058
Cash and cash equivalents at
beginning of year 45,306,848 14,879,195 14,879,195
Exchange differences on cash
and cash equivalents - (75,601) 213,595
Cash and cash equivalents at
end of year (Note 10) 19,631,053 987,923 45,306,848
CHINA MEDSTAR LIMITED
AND ITS SUBSIDIARY
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL PERIOD FROM 1 JANUARY 2007 TO 30 JUNE 2007
1. General
The Company is domiciled and incorporated in Singapore.
The principal activity of the Company is the holding of investments.
The registered office of the Company is at No. 80 Robinson Road, #11-02, Singapore
068898.
On 30 November 2006, the Company was admitted to the official list of the
Alternative Investment Market of the London Stock Exchange in the United Kingdom.
On 22 January 2007, the name of the subsidiary was changed from
Shanghai Medstar Medical Investment Management Limited Company to Medstar
(Shanghai) Leasing Co., Ltd. The principal activities of the subsidiary, which
is incorporated in Shanghai, People's Republic of China, are the leasing and
sale of medical equipment to hospitals.
The interim financial statements of the Company and its subsidiary ("the
Group") for the financial period ended 30 June 2007 were authorised for issue
by the Board of Directors on 28 September 2007 and the balance sheets were
signed on the board's behalf by Dr. Cheng Zheng and Yap Yaw Kong.
2. Basis of preparation
The interim financial statements for the financial period ended 30 June 2007
have been prepared in accordance with International Accounting Standard 34 -
Interim Financial Reporting ("IAS 34"). The interim financial statements do not
include all the information and disclosures required in the annual financial
statements, and should be read in conjunction with the Group's annual financial
statements for the financial year ended 31 December 2006.
3. Accounting policies
The same accounting policies and methods of computation adopted in the most
recently audited financial statements for the financial year ended 31 December
2006 have been applied to these interim financial statements except that in the
current interim period, the Group has adopted all of the new and revised
standards and interpretations issued by the International Accounting Standards
Board ("IASB") and the International Financial Reporting Interpretations
Committee ("IFRIC") of the IASB that are relevant to its operations and
effective for accounting periods beginning on or after 1 January 2007. The
adoption of the new and revised standards and interpretations did not result in
significant changes to the Group's accounting policies or the amounts or
disclosures in these interim financial statements.
The financial statements for the financial year ended 31 December 2006 were
audited and the report dated 22 June 2007 expressed an unqualified opinion on
those statements. The financial information for the six-month comparative
period ended 30 June 2006 has been extracted from the prospectus prepared for
the purpose of the Company's admission to the official list of the Alternative
Investment Market of the London Stock Exchange in the United Kingdomon 30
November 2006.
4. Change in accounting estimates
In the previous financial year, the Group had changed its accounting estimate
in relation to the residual values of the Group's medical equipment due to
changes in market conditions and customers' expectations. The change has
resulted in an increase in the depreciation charge of RMB 2,317,045 and RMB
1,532,087 with a corresponding decrease in the profit before income tax of the
Group for the financial year ended 31 December 2006 and for the financial
period ended 30 June 2007 respectively.
5. Segment information
The principal activities of the Group are leasing and sale of medical
equipment which are considered by the Directors to be one segment in the "PRC"
only.
Accordingly, no business and geographical segment analysis is required.
6. Revenue
(Unaudited) (Unaudited) (Audited)
1.1.2007 1.1.2006 1.1.2006
to to to
30.6.2007 30.6.2006 31.12.2006
RMB RMB RMB
Equipment leasing (rendering of service) 32,694,905 27,114,217 58,811,736
Sale of goods 536,239 2,692,950 24,107,349
Sales tax (1,642,918) (1,165,785) (2,765,502)
31,588,226 28,641,382 80,153,583
7. General and administrative expenses
(Unaudited) (Unaudited) (Audited)
1.1.2007 1.1.2006 1.1.2006
to to to
30.6.2007 30.6.2006 31.12.2006
RMB RMB RMB
Staff costs 3,016,563 1,595,858 5,547,820
Directors' fees 1,297,116 - -
Foreign exchange losses 617,559 - 965,956
Lease payments under operating leases of building 979,878 436,432 937,301
Professional fees 2,863,939 49,032 1,361,277
Share option expense 944,388 - 158,142
Others 1,418,976 1,791,768 2,303,610
11,138,419 3,873,090 11,274,106
8. Earnings per share
Basic earnings per share is calculated by dividing the Group's net profit
attributable to equity holders by the weighted average number of ordinary
shares in issue during the financial period as follows:
(Unaudited) (Unaudited) (Audited)
1.1.2007 1.1.2006 1.1.2006
to to to
30.6.2007 30.6.2006 31.12.2006
RMB RMB RMB
Basic earnings per share 0.31 1.05 0.57
The calculation of the basic earnings per share is based on:
Net profit attributable to equity holders 4,117,020 10,450,345 7,625,200
Weighted average number of fully paid
ordinary shares issued during the financial year 13,263,499 10,000,000 13,263,499
For the purpose of calculating diluted earnings per share, the Group's net
profit attributable to equity holders and the weighted average number of
ordinary shares in issue are adjusted for the effects of all dilutive potential
ordinary shares.
Diluted earnings per share amounts are calculated by dividing the profit
attributable to the equity holders of the Company by the weighted average
number of ordinary shares outstanding during the financial period/year plus the
weighted average number of ordinary shares that would be issued on the
conversion of all dilutive potential ordinary shares into ordinary shares.
For the financial period ended 30 June 2006, Redeemable Convertible Preference
Shares were assumed to have been converted into ordinary shares.
All the 872,853 share options granted on 27 November 2006 did not have a
dilutive effect on the Group's earnings per share as at 31 December 2006 and 30
June 2006 as the average market price per ordinary share of the Company during
the period from the first day of trading on the Alternative Investment Market
of the London Stock Exchange in the United Kingdom to 30 June 2007 was below
the exercise price of the share option granted.
(Unaudited) (Unaudited) (Audited)
1.1.2007 1.1.2006 1.1.2006
to to to
30.6.2007 30.6.2006 31.12.2006
RMB RMB RMB
Diluted earnings per share 0.31 0.68 0.57
The calculation of the basic earnings per share is based on:
Net profit attributable to equity holders 4,117,020 10,450,345 7,625,200
Weighted average number of fully paid
ordinary shares issued during the financial year 13,263,499 10,000,000 13,263,499
Effect of dilution arising from RCPS - 5,333,337 -
Weighted average number of ordinary shares
adjusted for effect of dilution 13,263,499 15,333,337 13,263,499
9. Property, plant and equipment
Medical Fixtures and Leasehold Assets under
equipment equipment improvements construction Total
RMB RMB RMB RMB RMB
(Unaudited)
30 June 2007
Cost
Balance as
at 1 January
2007 190,516,122 156,194 216,408 - 190,888,724
Additions 17,651,075 127,500 527,928 - 18,306,503
Disposals (669,000) - - - (669,000)
Balance as
at 30 June
2007 207,498,197 283,694 744,336 - 208,526,227
Accumulated
depreciation
Balance as
at 1 January
2007 42,267,544 84,302 216,408 - 42,568,254
Depreciation
charge for
the period 11,574,316 18,610 35,195 - 11,628,121
Disposals (103,185) - - - (103,185)
Balance as
at 30 June
2007 53,738,675 102,912 251,603 - 54,093,190
Net book
value
As at 30
June 2007 153,759,522 180,782 492,733 - 154,433,037
(Unaudited)
30 June 2006
Cost
Balance as
at 1 January
2006 141,246,742 143,894 216,408 13,689,000 155,296,044
Additions 847,580 12,300 - - 859,880
Transfers 13,500,000 - - (13,500,000) -
Exchange
differences - 346 - - 346
Balance as
at 30 June
2006 155,594,322 156,540 216,408 189,000 156,156,270
Accumulated
depreciation
Balance as
at 1 January
2006 23,333,047 55,524 216,408 - 23,604,979
Depreciation
charge for
the period 7,627,763 12,123 - - 7,639,886
Exchange
differences - 116 - - 116
Balance as
at 30 June
2006 30,960,810 67,763 216,408 - 31,244,981
Net book
value
As at 30
June 2006 124,633,512 88,777 - 189,000 124,911,289
(Audited)
31 December 2006
Cost
Balance as
at 1 January
2006 141,246,742 143,894 216,408 13,689,000 155,296,044
Additions 982,380 12,300 - 34,598,000 35,592,680
Transfers 48,287,000 - - (48,287,000) -
Balance as
at 31
December
2006 190,516,122 156,194 216,408 - 190,888,724
Accumulated
depreciation
Balance as
at 1 January
2006 23,333,047 55,524 216,408 - 23,604,979
Depreciation
charge for
the year 18,934,497 28,778 - - 18,963,275
Balance as
at 31
December
2006 42,267,544 84,302 216,408 - 42,568,254
Net book
value
As at 31
December
2006 148,248,578 71,892 - - 148,320,470
Rental income is received from the leasing of the above mentioned Medical
Equipment to the hospitals for medical treatment.
As of 30 June 2007, bank loans of RMB 59,855,000 (30 June 2006: RMB 70,260,000
and 31 December 2006: RMB 71,007,500) were secured by way of mortgage over the
Group's equipment with net book value of RMB 115,860,623 (30 June 2006: RMB
103,073,396 and 31 December 2006: RMB 125,461,724) and a mortgage over the
equipment leased to Beijing Friendship Hospital with total invoice value no
less than RMB 10,000,000 (31 December 2006: RMB 10,000,000). As of 30 June
2007, the net book value of the equipment was RMB 7,369,875 (31 December 2006:
RMB 7,890,101).
10. Cash and bank balances
(Unaudited) (Unaudited) (Audited)
30.06.2007 30.06.2006 31.12.2006
RMB RMB RMB
Cash in hand 273,117 63,214 70,271
Cash at bank 28,458,240 924,709 54,260,628
Guarantee money for bank acceptance 1,000,000 - 8,500,000
deposits
Cash and bank balances as per
consolidated balance
sheet 29,731,357 987,923 62,830,899
Less: Pledge of cash deposit to
secure banking facilities for the
subsidiary (10,100,304) - (17,524,051)
Cash and cash equivalents as per
consolidated cash
flow statement 19,631,053 987,923 45,306,848
11. Bank loans
(Unaudited) (Unaudited) (Audited)
30.06.07 30.06.06 31.12.06
RMB RMB RMB
The borrowings are repayable as
follows:
On demand within one financial year 47,405,304 12,650,000 58,750,000
(secured)
From second to fifth financial year 43,220,000 57,610,000 27,257,500
(secured)
90,625,304 70,260,000 86,007,500
Following are the summaries of the above bank loans obtained from major banking
institutions in People's Republic of China:
(i) These loans carried interest rates ranging from 5.49% - 8.01% (30 June 2006:
5.49% - 8% and 31 December 2006: 5.58% - 8.75%) per annum, which are also the
weighted average effective interest rates.
(ii) These loans have an average maturity period of 1 - 35 months (30 June 2006 and
31 December 2006: 18 - 28 months) from the end of the financial period.
(iii) These loans are secured by:
(a) charges over certain of the Group's property, plant and equipment with net book
value amounting to RMB115,860,623 (30 June 2006: RMB103,073,396 and 31 December
2006: RMB125,461,724);
(b) charges over certain equipment of a related party with net book value amounting
to RMB12,000,000 (30 June 2006 and 31 December 2006: RMB12,000,000);
(c) the pledge of cash deposits of USD1,300,000 (30 June 2006: Nil and 31 December
2006: USD2,000,000) and RMB1,000,000 (30 June 2006: Nil and 31 December 2006:
RMB2,000,000);
(d) a mortgage over the equipment leased to Beijing Friendship Hospital with total
invoice value no less than RMB10,000,000 (30 June 2006: Nil and 31 December
2006: 10,000,000);
(e) the pledge of trade receivable balances due from Oriental Hepatobiliary
Hospital and No.306 of the Chinese People's Liberation Army Hospital; and
(f) guarantees from certain related parties, non-related parties, original investor
and a Director of the Company (30 June 2006 and 31 December 2006: guaranteed by
same entities).
12. Related party transactions
(i) Related parties
Name of the related parties Relationship
Beijng Tengyuan Tongda Under the control of Directors of the
Trading Company from
Co., Ltd. 23 April 2004 to 1 January 2006
Beijing Medstar Hi-Tech Under the control of Directors of the
Investment Co., Ltd. Company
Beijing Medstar Hospital The same Directors as those of the Company
Management Co., Ltd.
CZY Investment Ltd. Major corporate shareholder of the Company
The details of the related party information are disclosed in Sections (iii)
and (iv) below.
(ii) Key management personnel compensation
Key management personnel compensation was as follows:
(Unaudited) (Unaudited) (Audited)
1.1.2007 1.1.2006 1.1.2006
to to to
30.6.2007 30.6.2006 31.12.2006
RMB RMB RMB
Salaries and other short term benefits 2,418,948 943,044 2,047,934
Post-employment benefits - contributions to
defined contribution schemes 228,601 203,963 352,104
Share option expense 944,388 - 158,142
3,591,937 1,147,007 2,558,180
The remuneration disclosed above includes the remuneration of the Directors of
RMB 2,026,644 (30 June 2006: RMB 465,686 and 31 December 2006: RMB 1,195,367)
and other members of key management of the Group. Share options were granted to
four executive Directors and certain key management personnel.
(iii) Transactions
In addition to related party transactions disclosed elsewhere in the interim
financial statements, significant related party transactions during the
financial period/year were as follows:
(Unaudited) (Unaudited) (Audited)
1.1.2007 1.1.2006 1.1.2006
to to to
30.6.2007 30.6.2006 31.12.2006
RMB RMB RMB
With a Director
Payment made on behalf of the Group
for expenses incurred in relation to
Initial Public Offering - - 1,287,932
With related parties
Advancement to:
CZY Investment Ltd - - 47,876
Advancement from:
Beijing Medstar Hi-Tech Company
Limited - - 195,618
(iv) Guaranty
As of 30 June 2007, a bank loan of RMB 26,000,000 (30 June 2006: RMB 36,000,000
and 31 December 2006: RMB 26,000,000) was guaranteed by Beijing Tengyuan Tongda
Trading Co., Ltd. and Beijing Medstar Hi-Tech Medical Investment Co., Ltd. and
secured by a charge over certain equipment of Beijing Tengyuan Tongda Trading
Co., Ltd. amounting to RMB 12,000,000 (30 June 2006: RMB 12,000,000 and 31
December 2006: RMB 12,000,000). The Director, Mr. Cheng Zheng, guaranteed an
aggregate bank loans of RMB 31,800,000 (30 June 2006: RMB 12,150,000 and 31
December 2006: RMB 25,050,000) granted to the subsidiary company (Note 11).
13. Capital commitments
(Unaudited) (Unaudited) (Audited)
30.6.2007 30.6.2006 31.12.2006
RMB RMB RMB
Capital expenditure contracted for at the balance sheet
date 49,921,750 66,160,000 100,950,675
Less: Advances to suppliers (18,500,660) (41,650,400) (53,349,425)
Capital commitments contracted but not provided
for in the financial statements 31,421,090 24,509,600 47,601,250
14. Subsequent events
On 4 July 2007, the Company has increased its investment in the subsidiary by
USD 800,000. After the increase, the total paid up capital of the subsidiary
will be USD 18,500,000.
On 8 May 2007, the Board had approved the application to the local authority
for the change in the scope of the principal activities of the subsidiary,
primarily for the inclusion of finance leasing business operation. At the date
of this announcement, this said application is still subject to the approval by
the local authority.
END
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