China Cord Blood Corporation Reports Financial Results For The Second Quarter And First Half Of Fiscal 2015

HONG KONG, Nov. 25, 2014 /PRNewswire/ -- China Cord Blood Corporation (NYSE: CO) ("CCBC" or the "Company"), China's leading provider of cord blood collection, laboratory testing, hematopoietic stem cell processing, and stem cell storage services, today announced its preliminary unaudited financial results for the second quarter and first half of fiscal year 2015 ended September 30, 2014.

Second Quarter of Fiscal 2015 Highlights

• Revenues for the second quarter of fiscal 2015 increased by 7.4% to RMB152.1 million ($24.8 million) from RMB141.6 million in the prior year period.
• New subscriber sign-ups and accumulated subscriber base were 15,584 and 407,755, respectively.
• Gross profit increased by 6.6% to RMB121.8 million ($19.8 million) from RMB114.3 million in the prior year period.
• Gross margin was 80.1%, compared to 80.7% in the prior year period.
• Operating income increased to RMB57.5 million ($9.4 million) from RMB56.3 million in the prior year period, despite higher depreciation expenses as a result of the completion of the new Guangdong and Zhejiang facilities.
• Operating income before depreciation and amortization expenses of RMB13.3 million ($2.2 million) amounted to RMB70.8 million ($11.5 million), up 8.9% year-over-year.[1]
• Interest expense amounted to RMB25.2 million ($4.1 million), compared to RMB16.5 million in the prior year period due to the absence of interest expense capitalization.
• As higher interest expense was offset by lower income tax expense, net income attributable to the Company's shareholders increased to RMB27.2 million ($4.4 million) from RMB24.9 million in the prior year period.
• Operating cash flow for the quarter increased by 41.4% to RMB171.0 million ($27.9 million) from RMB121.0 million in the prior year period.

First Half of Fiscal 2015 Highlights

• Revenues for the first half of fiscal 2015 increased by 13.0% to RMB305.5 million ($49.8 million) from RMB270.4 million in the prior year period.
• New subscriber sign-up reached 31,132 and accumulated subscriber base expanded to 407,755.
• Gross profit increased by 12.3% to RMB245.3 million ($40.0 million) from RMB218.5 million in the prior year period.
• Operating income increased by 15.1% to RMB117.6 million ($19.2 million) from RMB102.2 million in the prior year period.
• Operating income before depreciation and amortization expenses of RMB24.7 million ($4.0 million) amounted to RMB142.3 million ($23.2 million), up 19.1% year-over-year.[1] 
• Interest expense amounted to RMB50.1 million ($8.2 million), compared to RMB31.2 million in the prior year period due to the absence of interest expense capitalization.
• Net income attributable to the Company's shareholders amounted to RMB57.0 million ($9.3 million), compared to RMB57.8 million in the prior year period.
• Operating cash flow for the first half of fiscal 2015 increased by 28.8% to RMB295.7 million ($48.2 million) from RMB229.6 million in the prior year period.

"In the second quarter, we continued to execute our sales strategy that emphasizes the one-time upfront payment option, resulting in strong operating cash flow," stated Ms. Ting Zheng, Chief Executive Officer of China Cord Blood Corporation. "As of the end of the second quarter, our accumulated subscriber base increased 4% since last quarter and now has over four hundred thousand units, further solidifying our position as one of the largest cord blood banks on a global scale."

Ms. Zheng further commented, "During the second quarter, we began a series of internal reorganization and marketing activities designed to strengthen the company's industry leadership position and long-term competitive advantage. For instance, we are increasing our recruitment efforts and adjusting our remuneration policies, redeploying our sales staff for improved coverage and initiating new advertising campaigns, all of which are aimed at enhancing our overall sales operations. For the second half of fiscal 2015, our primary focus will be reinforcing these new measures that drive customer enrollment."

Second Quarter of Fiscal 2015 Financial Results

REVENUES. Revenues increased by 7.4% to RMB152.1 million ($24.8 million) in the second quarter of fiscal 2015 from RMB141.6 million in the prior year period, driven mainly by the increase of recurring storage revenues derived from the Company's enlarged total subscriber base.

As the Company's accumulated subscriber base expanded to 407,755 by the end of September 2014, revenues generated from storage fees increased to RMB49.6 million ($8.1 million), up 23.4% from RMB40.2 million in the prior year period. As a percentage of total revenues, storage fees accounted for 32.6%, compared to 28.4% in the prior year period.

Revenues generated from processing fees in the second quarter were RMB102.5 million ($16.7 million), up modestly from RMB101.4 million in the prior year period due mainly to the year-over-year difference in processing fees for the contracts signed between the two quarters. 15,584 new subscriber sign-ups were recorded during the second quarter of fiscal 2015, representing a slight decrease from 15,928 in the prior year period but slight improvement from the first quarter of fiscal 2015. Revenues generated from processing fees accounted for 67.4% of total revenues, compared to 71.6% in the prior year period.

GROSS PROFIT. Gross profit for the second quarter of fiscal 2015 increased by 6.6% to RMB121.8 million ($19.8 million) from RMB114.3 million in the prior year period, mainly due to increased revenues and well-controlled direct costs. Despite the increase in depreciation expenses, the Company continued to report a solid gross margin of 80.1%, compared to 80.7% in the prior year period.

OPERATING INCOME. Operating income for the second quarter increased at a slower pace to RMB57.5 million ($9.4 million) from RMB56.3 million in the prior year period, as a result of higher depreciation expenses. Operating margin in this quarter was 37.8%, compared to 39.7% in the prior year period. Depreciation and amortization expenses for the second quarter were RMB13.3 million ($2.2 million), compared to RMB8.7 million in the prior year period. Operating income before depreciation and amortization expenses totaled RMB70.8 million ($11.5 million), up 8.9% compared to the prior year period.[3]

Research and Development Expenses. Research and development expenses, which have been stable in the last few quarters, were RMB2.3 million ($0.4 million).

Sales and Marketing Expenses. Sales and marketing expenses for the second quarter amounted to RMB31.0 million ($5.0 million), compared to RMB27.6 million in the prior year period. As a percentage of revenue, sales and marketing expenses were 20.3%, up from 19.5% in the prior year period but down from 20.7% in the first quarter of the current fiscal year. Sales and marketing expenses continued to be correlated with the Company's revenue performance. Looking ahead, the CCBC management team intends to further expand its sales force and marketing and promotion activities to continue to increase public awareness of cord blood banking.

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