CHINA SHINEWAY PHARMACEUTICAL GROUP LIMITED 中 國 神 威 藥 業 集 團 有 限 公 司
(Incorporated in the Cayman Islands with limited liability)
Stock Code: 2877
LEADING
MODERN CHINESE MEDICINE
PROMOTING HEALTH INDUSTRY
Interim Report 2020
CONTENTS
- 2 Corporate Information
- 4 Interim Results Highlights
- 5 Company Overview
- 6 Management Discussion and Analysis
- 20 Other Information
- 27 琀Report on Review of Condensed Consolidated Financial Statements
- 28 Condensed Consolidated Financial Statements
CORPORATE
INFORMATION
BOARD OF DIRECTORS
Executive Directors
Mr. Li Zhenjiang (Chairman)
Ms. Xin Yunxia
Mr. Li Huimin
Mr. Chen Zhong
Independent Non-executive Directors
Ms. Cheng Li
Prof. Luo Guoan
Mr. Cheung Chun Yue, Anthony
BOARD COMMITTEES
Audit Committee
Mr. Cheung Chun Yue, Anthony (Committee Chairman)
Ms. Cheng Li
Prof. Luo Guoan
Remuneration Committee
Ms. Cheng Li (Committee Chairman)
Ms. Xin Yunxia
Mr. Cheung Chun Yue, Anthony
Nomination Committee
Mr. Li Zhenjiang (Committee Chairman)
Prof. Luo Guoan
Mr. Cheung Chun Yue, Anthony
Corporate Social Responsibility and Sustainability Committee
Mr. Cheung Chun Yue, Anthony (Committee Chairman)
Ms. Xin Yunxia
Ms. Cheng Li
Prof. Luo Guoan
AUTHORIZED REPRESENTATIVES
Mr. Li Huimin
Mr. Lee Bun Ching, Terence
COMPANY SECRETARY
Mr. Lee Bun Ching, Terence
AUDITOR
Deloitte Touche Tohmatsu
Certified Public Accountants
Registered Public Interest Entity Auditors
REGISTERED OFFICE
Cricket Square, Hutchins Drive
P.O. Box 2681, Grand Cayman KY1-1111
Cayman Islands
02 Interim Report 2020
China Shineway Pharmaceutical Group Limited
CORPORATE
INFORMATION
HEAD OFFICE | LEGAL ADVISERS |
Luan Cheng, Shijiazhuang | As to Hong Kong Law |
Hebei Province, The People's Republic of China ("PRC") | Woo Kwan Lee & Lo |
PRINCIPAL PLACE OF BUSINESS IN | As to Cayman Islands Law |
HONG KONG | Conyers Dill & Pearman, Cayman |
Suite 3109, 31/F, Central Plaza | STOCK CODE |
18 Harbour Road, Wanchai, Hong Kong | |
2877 (Main Board of | |
PRINCIPAL SHARE REGISTRAR AND | The Stock Exchange of Hong Kong Limited) |
TRANSFER OFFICE | |
Royal Bank of Canada Trust Company (Cayman) Limited | WEBSITES |
4th Floor, Royal Bank House | www.shineway.com.hk |
24 Shedden Road, George Town | www.shineway.com |
Grand Cayman, KY1-1110, Cayman Islands | |
HONG KONG BRANCH SHARE | |
REGISTRAR AND TRANSFER OFFICE | |
Computershare Hong Kong Investor Services Limited | |
Shops 1712-1716 | |
17th Floor, Hopewell Centre | |
183 Queen's Road East | |
Wanchai | |
Hong Kong | |
PRINCIPAL BANKERS | |
China Construction Bank (Asia) Corporation Limited | |
The Hongkong and Shanghai Banking Corporation Limited | |
The Bank of East Asia, Limited | |
Bank of China, Jin Zhu Xi Lu Branch Lhasa, Xizang | |
China Construction Bank, Luan Cheng Branch, | |
Shijiazhuang, Hebei Province |
Interim Report 2020 | 03 |
China Shineway Pharmaceutical Group Limited | |
INTERIM RESULTS
HIGHLIGHTS
For the six months ended 30 June 2020, the operating results of the Group were as follows:
• | Turnover amounted to RMB1,190,112,000, a decrease of 13.0% as compared to the corresponding period of |
last year; | |
• | Gross profit margin was 73.6% as compared to 71.3% of the corresponding period of last year; |
• | Profit for the period amounted to RMB253,721,000, a decrease of 11.8% as compared to the corresponding |
period of last year; | |
• | Earnings per share amounted to RMB33 cents, a decrease of 8.3% as compared to the corresponding period |
of last year; | |
• | Declared interim dividend of RMB11 cents per share; |
• | Net assets per share amounted to RMB7.1 (equivalent to HKD7.8); and |
• | Net cash per share amounted to RMB4.6 (equivalent to HKD5.0). |
04 Interim Report 2020
China Shineway Pharmaceutical Group Limited
COMPANY
OVERVIEW
China Shineway Pharmaceutical Group Limited (the "Company") and its subsidiaries (hereinafter collectively referred to as the "Group") are principally engaged in research and development, production and sales of modern Chinese medicines mainly in injections, soft capsules, granules formats and traditional Chinese medicine ("TCM") formula granules. The Group's products are primarily being sold in the People's Republic of China ("PRC") market.
During the first six months of 2020, the Group's prescription and over-the-counter ("OTC") medicines accounted for approximately 83.1% and 16.9% of the Group's turnover respectively. These medicines are mainly categorized by curative effects of medications into eight categories including medications for cardiovascular and cerebrovascular diseases, medications for respiratory system diseases, medications for digestive system diseases, pediatric medications, orthopedic medications, medications for strengthening the body, medications for the nervous system and gynecological medications.
The Group's key products are as follows:
• | Qing Kai Ling Injection: a widely used anti-viral medicine for treatment of viral diseases, including respiratory tract |
infection, viral hepatitis, cerebral haemorrhage and cerebral thrombosis | |
• | Shu Xie Ning Injection: for treatment of cardio-cerebrovascular disease |
• | Shen Mai Injection: for treatment of coronary heart disease, viral myocarditis and pulmonary heart disease |
• | Wu Fu Xin Nao Qing Soft Capsule: for prevention and treatment of coronary heart disease and cerebral |
arteriosclerosis | |
• | Traditional Chinese medicine (TCM) formula granules |
• | Huo Xiang Zheng Qi Soft Capsule: for prevention and treatment of heat stroke, stomachache, nausea and |
diarrhoea, acclimatization sickness | |
• | Pediatric Qing Fei Hua Tan Granule: for children infected by respiratory related diseases |
• | Huamoyan Granule: for treatment of both acute and chronic synovitis and treatment after joint surgery |
• | Qing Kai Ling Soft Capsule: for treatment of high fever, viral influenza and respiratory tract infection |
The Group has a total of more than 60 medicines being admitted into the 2012 edition of the National Essential Drugs List published by the Ministry of Health of the PRC.
Interim Report 2020 | 05 |
China Shineway Pharmaceutical Group Limited | |
MANAGEMENT
DISCUSSION AND ANALYSIS
BUSINESS REVIEW
Interim Results Highlights
Affected by the novel coronavirus pandemic, medical visits reduced notably. According to the data published by the National Health Commission, the total number of patients treated in medical institutions in China between January and June 2020 had gone down by 21.6%, while the Group's sales in the first six months of 2020 decreased by 13.0% as compared with the same period last year. Net profit was RMB254 million, representing a 11.8% decrease from the same period last year and was mainly attributable to the decrease in sales. Net profit margin went up from 21.0% in the same period last year to 21.3%, while earnings per share only decreased by 8.3% to RMB33 cents as compared to the same period last year. Although the performance did not meet the original sales growth target, it was better than the amplitude of contraction on the overall medical service utilization.
During the novel coronavirus pandemic, the number of outpatient visits and hospitalization rates in hospitals and grass-root medical institutions had declined. Patients with respiratory system diseases and pediatric patients reduced drastically, which led to declines in prescriptions and sales of pharmaceutical products. This resulted in a decrease in sales for injection products of approximately 24.9% during the period, and impacted the end-user demand of pediatrics and respiratory diseases in the first six months of the year. However, many of the Group's exclusive oral products and medicines for chronic disease treatment with unique curative effects managed to maintain growth despite the decline in medical consumption. Sales volume of TCM formula granules also surpassed that of the same period last year. Furthermore, the sales channels of oral products gradually recovered after the peak of the pandemic. As a result, although sales of the Group's oral products decreased by 9.0% during the peak of the pandemic in the first quarter of this year, sales increased by 4.0% in the second quarter.
The Group's gross profit margin was 73.6% for the first six-month period of 2020, representing a slight increase compared to 71.3% of the same period last year. This is mainly attributable to the continuous increase of proportion of profit contribution from oral products with higher gross profit margin.
As of 30 June 2020, as calculated based on the total issued shares of 827,000,000 and after deducting bank loans of RMB609.8 million, net cash per share of the Group amounted to HKD5.0, and net assets per share amounted to HKD7.8. The proposed interim dividend is set to be RMB11 cents per share.
Impact of the pandemic on end-user demand is gradually recovering
During the peak of the pandemic, population mobility had been drastically reduced, and many medical institutions and retail pharmacy terminals suspended or limited their services. Despite the pandemic being gradually under control, patients with fever were generally refused by grass-root medical terminals, and inpatient and outpatient rates dropped drastically due to concern about the risk of infection. Public data revealed that, in the first six months in 2020, the total number of patients treated in medical institutions in China decreased significantly compared with the same period last year. Among which the number of patients treated at hospitals decreased by 21.4%, and the number of patients treated in gross-root medical institutions decreased by 21.8% period-on-period. With the pandemic gradually being brought under control, the country was accelerating its restoration of normal medical services. Outpatient visits impacted by the pandemic had shown a significant rebound. The only exception was the pediatric outpatient clinics. As youngster patients have been staying home due to school suspension, a wide reduction of respiratory infection has been resulted due to their reduced contact with the public. In addition, there are still many patients who have suppressed their treatment needs and avoided visiting hospitals for treatments nor pharmacies to procure medications.
06 Interim Report 2020
China Shineway Pharmaceutical Group Limited
MANAGEMENT
DISCUSSION AND ANALYSIS
Affected by the novel coronavirus pandemic, the results of the first quarter of this year were lower than that of the same period last year. However, when compared to the magnitude of period-on-period drop in number of patients treated in medical institutions in the country, the Group's overall sales and profit of the Group were still able to hold despite such impact. This is attributable to the Group's efforts in expanding its core competitiveness over the years by continuously optimizing investments in research and development for exclusive medications with unique curative effects to diversify product range, and constantly improving manufacturing process and elevating product quality. Medications produced by the Group are widely recognized by healthcare practitioners and consumers. In addition, with the country's domestic pandemic prevention and control proving to be effective, everyday life was getting back to normal. The impact of the pandemic on domestic medical consumption had gradually lessened in the second quarter. Although such impact on injection products was still significant, the end-user demand for oral products has been gradually restoring.
Sales growth rates of the Group for the first quarter, second quarter and the month of July are set out below.
Year-on-year growth rate | |||
First | Second | July | |
quarter | quarter | 2020 | |
Injection products | -21.4% | -27.7% | -13.2% |
Oral products | -9.0% | 4.0% | 14.1% |
Total sales | -14.6% | -11.6% | 2.0% |
ORAL PRODUCTS CONTRIBUTED TO 72.3% OF GROSS PROFIT
In the first six months of 2020, sales of injection products as a percentage to total turnover of the Group dropped from 47.6% of the same period of last year to 41.1%. The percentage of profit contribution from injection products continued to decline. At the same time, sales of oral products as a percentage to total turnover for the period rose from 52.4% of the same period of last year to 58.9%. The table below shows a comparison of the sales of each dosage form:
Percentage | ||||
Sales | Sales | of sales | ||
First | First | Period- | First six | |
six months | six months | on-period | months of | |
of 2019 | of 2020 | growth rate | 2020 | |
RMB'000 | RMB'000 | |||
Injections | 651,371 | 489,274 | -24.9% | 41.1% |
Soft capsules | 242,591 | 255,648 | 5.4% | 21.5% |
Granules | 162,076 | 147,312 | -9.1% | 12.4% |
TCM formula granules | 241,302 | 239,762 | -0.6% | 20.1% |
Other product formats | 70,940 | 58,116 | -18.1% | 4.9% |
Oral products | 716,909 | 700,838 | -2.2% | 58.9% |
Total sales | 1,368,280 | 1,190,112 | -13.0% | 100.0% |
Interim Report 2020 | 07 |
China Shineway Pharmaceutical Group Limited | |
MANAGEMENT
DISCUSSION AND ANALYSIS
Affected by the sharp decline in both inpatients and outpatients during the pandemic, both sales of Shu Xie Ning Injection and Shen Mai Injection, which are mainly used in hospitals, as well as sales of Qing Kai Ling Injection, which is mostly used in grass-root medical institutions recorded a decline. The overall sales of injection products during the first six months of 2020 decreased by 24.9%.
The overall sales of the Group's soft capsule products decreased during the first quarter of this year, but the growth had resumed in the second quarter. Among them, sales of key products such as Wu Fu Xin Nao Qing Soft Capsule, Huo Xiang Zheng Qi Soft Capsule, and Qing Kai Ling Soft Capsule in the first half of the year went up by 15.3%, 1.8% and 50.8% respectively. Overall sales of soft capsule products increased by 5.4% in the first six months of 2020 as compared to the corresponding period last year.
Huamoyan Granule, the Group's key exclusive product, recorded a 67.2% growth in sales during the period. However, due to the drop in the number of patients for respiratory and pediatric diseases during the pandemic, sales of other key granule products including the Pediatric Qingfei Huatan Granule had shown decline. Overall sales of granule products during the period decreased by 9.1%.
As estimated with internal data for the first six month period of 2020, oral products accounted for 72.3% of the Group's gross profit after adjusting for "Two-Invoices System" effect. The proportion of profit contribution from oral products was much higher than that of injection products. The following shows the estimated percentages of gross profit contribution after adjusting for "Two-Invoices System" effect:
Percentage of | ||
gross profit contribution | ||
First | First | |
six months | six months | |
of 2019 | of 2020 | |
Injection products | 32.6% | 27.7% |
Oral products | 67.4% | 72.3% |
Total sales | 100.0% | 100.0% |
Since our oral products had a higher overall gross profit margin than injection products, an increase in the proportion of sales of oral products would also increase the Group's profitability. The Group will continue to actively cultivate new growth areas of oral products while enhancing their growth momentum to continuously lessen concentration of profit contribution from injection products in the second half of the year.
08 Interim Report 2020
China Shineway Pharmaceutical Group Limited
MANAGEMENT
DISCUSSION AND ANALYSIS
Market share of TCM formula granules continued to increase
Sales of TCM formula granules decreased slightly by 0.6% in the first six months of 2020 as compared with the same period last year. Despite impacts of the pandemic, sales had not increased during the first half of the year due to the reduction in ex-factory prices of TCM formula granules upon negotiations with medical insurance regulators at the end of last year. Sales as calculated using original ex-factory price should had increased by 30.8% as compared with the same period last year. The adjusted ex-factory prices have become a lot closer to those of Chinese medicine decoctions sold at hospitals. This drives patients to become more incline to take TCM formula granules, which created a larger demand while market competitiveness was enhanced. Furthermore, despite new competitors entered the Hebei Province market in these two years, our market shares in terms of the number of customers and total sales to hospitals in Hebei Province of the Group both recorded an increase as compared to last year. Based on the data currently available, the Group's domestic sales of TCM formula granules ranks sixth nationwide at present. In the month of July 2020, sales of TCM formula granules increased by 21.6% year-on-year.
The Group's TCM formula granules sales team expanded their coverage with 68 additional hospital customers in Hebei Province, and 435 new grass-root medical institution customers in the first half of 2020. During the period, new hospitals and clinic customers accounted for 13.1% of sales, while existing hospitals and clinics accounted for 86.9%. In the first half of 2020, a total of 41 new customers in Yunnan Province, comprised mainly of grass-root medical institutions, had been introduced. The Group is now actively promoting to hospital customers of Class II and above in Yunnan Province, and the business development of TCM formula granules of the Group in Yunnan Province will become another major growth driver.
Most of the sales of TCM formula granules in the first six months of 2020 came from hospitals and grass-root medical institution customers in Hebei Province. The key tasks of the Group in the second half of 2020 are to accelerate the market development and team formation in Yunnan Province, and continue to explore opportunities for entering into other provinces to expand the advantageous regions of our TCM formula granules business as well as enhancing its competitive advantages nationwide. While accelerating our positioning of TCM formula granules in key provinces, the Group is also actively preparing for strategy implementation of TCM formula granules for market openings across China. The National Healthcare Security Administration recently published the contents of the "Seminar on the Proposal for Centralized Procurement of Biological Products and Chinese Medicines by the National Healthcare Security Administration", in which it has been clearly stated that TCM formula granules would not be subject to centralized procurement for the time being, creating a clearer opportunity for the development of formula granules and opening of the market in the coming years.
The Group is currently working on the construction of production facilities in a coastal province of northern China. Yet, due to the impact from the pandemic, the expected completion date would now become mid-2022.
Interim Report 2020 | 09 |
China Shineway Pharmaceutical Group Limited | |
MANAGEMENT
DISCUSSION AND ANALYSIS
Exclusive products and drugs for treatment of chronic diseases maintained growth
As of the end of June in 2020, there were in total of more than 110 products regularly manufactured by the Group, covering 17 therapeutic areas. Among them were 19 exclusive products of the Group and 18 products admitted in the National Essential Drugs List. In addition, 23 products were included in the National Low-Priced Medicine Catalogue, whereas 16 products were included in the Provincial Low-Priced Medicine Catalogue; and 3 products were included in the Catalogue of Emergency Use Drugs. Sales of the Group's key products in the first six months of 2020 are set out as follows:
Percentage | ||||||||
First six | First six | of sales in | ||||||
months | months | the first six | ||||||
of 2019 | of 2020 | Year-on-year | months of | |||||
RMB'000 | RMB'000 | growth rate | 2020 | |||||
TCM formula granules | 2 PDRL | - | 241,302 | 239,762 | -0.6% | 20.1% | ||
Shu Xie Ning Injection | NDRL | - | 224,013 | 133,148 | -40.6% | 11.2% | ||
Qing Kai Ling Injection | NDRL | Essential | 194,348 | 128,953 | -33.6% | 10.8% | ||
Drug | ||||||||
Wu Fu Xin Nao Qing Soft | 6 PDRL | - | 83,989 | 96,837 | 15.3% | 8.1% | ||
Capsule | ||||||||
Huo Xiang Zheng Qi Soft | NDRL | Essential | 91,926 | 93,568 | 1.8% | 7.9% | ||
Capsule | Drug | |||||||
Shen Mai Injection | NDRL | Essential | 107,625 | 81,633 | -24.2% | 6.9% | ||
Drug | ||||||||
Huamoyan Granule | * | NDRL | Essential | 22,014 | 36,803 | 67.2% | 3.1% | |
Drug | ||||||||
Qing Kai Ling Soft | NDRL | Essential | 21,267 | 32,063 | 50.8% | 2.7% | ||
Capsule | Drug | |||||||
Pseudomonas Aeruginosa | 9 PDRL | - | 40,772 | 31,163 | -23.6% | 2.6% | ||
Injection | ||||||||
Pediatric Qingfei Huatan | 5 PDRL | - | 42,387 | 23,904 | -43.6% | 2.0% | ||
Granule | ||||||||
Compound Liquorice | NDRL | Essential | 23,703 | 13,040 | -45.0% | 1.1% | ||
Tablet | Drug | |||||||
Xiesaitong Dripping Pill | * | NDRL | - | 14,879 | 11,475 | -22.9% | 1.0% | |
Dan Deng Tong Nao | 3 PDRL | - | 8,531 | 7,128 | -16.4% | 0.6% | ||
Capsule | ||||||||
Qi Huang Tong Mi Soft | * | NDRL | - | 35 | 5,537 | 15,720.0% | 0.5% | |
Capsule | ||||||||
Others | 251,489 | 255,098 | 1.4% | 21.4% | ||||
Total sales | 1,368,280 | 1,190,112 | -13.0% | 100.0% | ||||
* | Newly included into the 2019 edition of National Drugs Reimbursement List |
10 Interim Report 2020
China Shineway Pharmaceutical Group Limited
MANAGEMENT
DISCUSSION AND ANALYSIS
There were sharp declines in both outpatients and inpatients of hospitals and grass-root medical institutions during the pandemic in the country. Impacted also by the decreasing patients for respiratory diseases and influenza as well as pediatrics, demand of Qing Kai Ling Injection, Shu Xie Ning Injection and Shen Mai Injection, and also oral products for pediatrics and respiratory diseases such as Pediatric Qingfei Huatan Granule and Compound Liquorice Tablet deteriorated immensely. As a result, the overall sales in the first six months period of 2020 was far below the Group's target.
On the other hand, the Group's exclusive products with unique therapeutic effect such as Huamoyan Granule, and Wu Fu Xin Nao Qing Soft Capsule for chronic diseases such as cardio-cerebrovascular diseases were comparatively less affected by the pandemic and had a better performance as users consume these products on a long term basis. Sales of retail pharmacy products such as Huo Xiang Zheng Qi Soft Capsule and Qing Kai Ling Soft Capsule had also recorded growth during the first half of 2020.
In the second half of the year, the Group will continue to expand its coverage and services of hospitals and grass- root medical institutions while strengthening academic promotion. We will continue to optimize the coverage of chain pharmacies, securing in-depthwin-win cooperation and strengthening investment in media promotion to drive the business back to its growth track.
THE COUNTRY IS KEEN ON PROMOTING EVIDENCE-BASED CHINESE MEDICINE AND INTEGRATION OF CHINESE AND WESTERN MEDICAL TREATMENTS
In recent years, the country has been driving the development of Chinese medicine. During the pandemic, Chinese medicine had showed its unique role. Thus, the country has clearly expressed that it will expand the coverage of Chinese medicine services by fostering the revitalization and further development of Chinese medicine and accelerating special policies for Chinese medicine's development. Recently, the State Council issued the "Key Tasks of Deepening the Medical and Health System Reform in the second half of 2020", to advance the integration of Chinese and Western medical treatments in general hospitals, hospitals of infectious disease and specialist hospitals, and to speed up the construction of the evidence-based research center for Chinese medicine. Their tasks also include giving full play to the distinctive role of Chinese medicine in treating the pandemic, while also supporting the inheritance, innovation and development of Chinese medicine.
National policies have been implemented to drive the use and stock up inventory of essential drugs as well as boosting their proportion of use, by demanding the grass-root medical institutions, tier-two public hospitals and tier-three public hospitals respectively, in principle, to stock and use not less than 90%, 80% and 60% of essential drugs. A total of 18 medications of the Group, including products such as Qing Kai Ling Soft Capsule, Huamoyan Granule, Huo Xiang Zheng Qi Soft Capsule, Compound Liquorice Tablet, and Shen Mai Injection, have been included in the National Essential Drugs List and are expected to become an accelerator for our future growth.
Interim Report 2020 | 11 |
China Shineway Pharmaceutical Group Limited | |
MANAGEMENT
DISCUSSION AND ANALYSIS
Building three core pillars to enhance core competitiveness
Riding on the country's high attention and policy support, Chinese medicine is entering a new era of development. In recent years, the Group has actively implemented a new blueprint to enhance our core competitiveness, with the aim to become one of the new generation leaders of modern Chinese medicine. Our initiatives mainly include the following:
1. Increase investments in evidence-based research for our exclusive and key products while utilizing medical strategies centered on diseases and academic promotion to cultivate a blue ocean market.
2. Increase investments in research and development on core medical areas such as orthopedics, cardio- cerebrovascular diseases, gastroenterology, antiviral, gynecology and pediatrics, and oncology to accelerate the innovation of exclusive and semi-exclusive products so as to expand pipelines of core products.
3. Deploy new online sales models swiftly and establish new modes of operations for the Internet era.
Increase investments on evidence-based research on exclusive and key products
Chinese medicine has a significant effect on the prevention and treatment of severe diseases, common diseases and rare illnesses. For example, Chinese medicine has a noticeable effect on the prevention and treatments of cardio- cerebrovascular diseases, infectious diseases and endocrine diseases. Moreover, it can improve the quality of life of patients when they undergo treatment for malignant tumors, extend the median survival period, and prevent recurrence and metastasis of malignant tumors.
Some patients in society nowadays have a negative attitude towards Chinese medicine. The key reason is that there are insufficient international and influential researches to prove its effectiveness and safety. Therefore, conducting evidence-based researches on Chinese medicine to provide clear proofs to people in doubt is an essential choice for the innovation and development of Chinese medicine, which also serves as a breakthrough point for the integration of Chinese and Western medical treatments.
For years, the Group has been devoting efforts in evidence-based medical researches and had succeeded in providing evidence-based medical proofs for the effectiveness and safety of the Group's several key products. As early as the year of 2013, the Group had taken the lead in cooperating with Tsinghua University to carry out researches on the basic substance of Chinese medicine injection products and the re-evaluation on the safety of Chinese medicine injections. The Group's three core Chinese medicine injection products, namely Qing Kai Ling Injection, Shen Mai Injection and Shu Xie Ning Injection had each conducted 30,000 cases of clinical researches on its safety to justify the safety of these medications with legitimate evidence-based medical proofs. Among them, Qing Kai Ling Injection and Shu Xie Ning Injection of Shineway have been ranked among top 10 of "Chinese Medicine Clinical Evidence Evaluation Index - Stroke, Areas of Stroke/Angina" since the beginning of this year. The "Chinese Medicine Clinical Evidence Evaluation Index" was established by the Evidence-based Traditional Chinese Medicine Research Alliance based on more than 80,000 clinical research data covering more than 1,700 varieties of basic drug catalogue, catalogue of medicines covered by insurance, and Chinese medicine injection. It is the first complete database of evidence-based evaluation of clinical efficacy of Chinese medicine in China.
12 Interim Report 2020
China Shineway Pharmaceutical Group Limited
MANAGEMENT
DISCUSSION AND ANALYSIS
The Group will speed up our evidence-based medical researches focusing on six therapeutic areas, namely orthopedics, cardio-cerebrovascular diseases, anti-viral, gastroenterology, gynecology and pediatrics, as well as oncology. The Group will be commencing evidence-based medical researches on our exclusive products with proprietary intellectual property rights such as Huamoyan Granule, Dan Deng Tong Nao Soft Capsule, Qi Huang Tong Mi Soft Capsule, Jiangzhi Tongluo Soft Capsule, Lian Su Capsule, Yi Qi Tong Luo Granule, Shu Jin Tong Luo Granule, Qing Kai Ling Soft Capsule, Sechang Zhixie San and Si Wu Pian. Such evidence-based medical researches will be conducted through expert argumentation and other relevant methods.
The argumentation meeting for the randomized, double-blind, positive drug-controlled,multi-center clinical research program of the Group's exclusive product "Sechang Zhixie Powder" for the treatment of children with acute diarrhea has commenced. The formula of this product is originated from the folk prescriptions of the Yi people in Yunnan, and has a history of over 100 years of use. The clinical research is one of the major projects and focused research and development programs of the Yunnan Provincial Department of Science and Technology. Upon completion of the study, "Sechang Zhixie Powder" will become the first-line medication for the treatment of pediatric diarrhea, making the leap from empirical treatment to evidence-based treatment to precise treatment. The study will be led by the First Affiliated Hospital of Tianjin University of Traditional Chinese Medicine, with the participation of 21 nationally renowned children's hospitals, including Guangzhou Women and Children's Medical Center, Children's Hospital of Zhejiang University School of Medicine, and Yunnan University of Chinese Medicine (affiliated hospital).
At present, the Group is strengthening the establishment of a medical expert network at four levels - national, provincial, municipal and county levels. We are working with medical experts and officers on cooperated academic projects, evidence-based research and real-world research in order to provide academic support to clinical guidelines, clinical pathways, expert consensus on the use of drugs and other relevant credentials for our medications.
Accelerating the development of exclusive products to expand new core product pipelines
The Group will focus on the research and development of innovative medications with clinical advantages and unique characteristics in fields where Chinese medicine are advantages, namely cardio-cerebrovascular diseases, gynaecology, paediatrics and orthopedics. We will utilize independent research and development, joint research and development and traded patents to accelerate the development of new core product pipelines. The Group currently has a total of 7 research projects undergoing clinical trials, among which the 3 groundbreaking exclusive medications are as follows:
1. Sailuotong Capsule
The Group's key research initiative "Sailuotong Capsule", an innovative compound TCM, is now under phase III clinical trials in Australia and China. The phase III clinical trial in Australia focuses on the treatment of vascular dementia and Alzheimer's disease, while the phase III clinical trial in China addresses the treatment of vascular dementia. The clinical trials in both countries were originally expected to be completed in 2021 and 2022 respectively. However, due to the impact of the novel coronavirus pandemic, the clinical trials are currently estimated to be completed in 2022 and 2023 respectively.
In early 2019, Sailuotong Capsule was granted an invention patent by IP Australia, and also received a notice of patent family grant from Russia in the same month. Since the first overseas patent granted in 2010, Sailuotong has been granted 8 invention patents by countries including the United States, Japan, Korea, Germany, Russia, Canada and Australia.
Interim Report 2020 | 13 |
China Shineway Pharmaceutical Group Limited | |
MANAGEMENT
DISCUSSION AND ANALYSIS
2. Q-B-Q-F Condensed Pill
Q-B-Q-F Condensed Pill focuses on the treatment of mycoplasma pneumonia in children. It is currently undergoing a phase III clinical trial through the green channel, which was originally expected to be completed in 2021. As a result of the novel coronavirus pandemic, it is currently estimated that the clinical trial will be completed in 2022.
3. JC Soft Capsule
JC Soft Capsule is a compound TCM developed under the guidelines from the traditional medicine theory. It is a new medication of compounded Chinese medicine using "detoxification from the interior to exterior" as the principle for treatment of common cold. It is used for treating upper respiratory tract infection with symptoms such as fever and aversion to cold, dry and sore throat, nasal congestion and runny nose, headache and cough, etc. At present, most traditional Chinese medicine in the market for common cold are heat-clearing detoxifying types or antiseptics, but none of those in the market are available for "detoxification from the interior to exterior". JC Soft Capsule is expected to complete phase III of clinical trials in 2021.
Other details of Sailuotong Capsule and Q-B-Q-F Condensed Pill were both disclosed in the Group's 2019 interim report. In addition, the Group is actively developing, registering, reporting and screening new varieties of nearly 100 classic prescriptions in accordance with the national policies. At the same time, the Group is also strengthening the research on compounded Chinese medicines with clinical value for in-hospital formulations.
Chinese medicine aerosol inhalant has become a major innovative treatment in Chinese medicine pediatrics in recent years. This new way of treatment has excellent curative effect on respiratory tract infections in children, with few side effects, quick effect, short treatment time and long-lasting efficacy. The Group is kickstarting new research and development projects on Chinese medicine aerosol inhalant, and has commenced the preparation to establish a focal point laboratory and technical platform for aerosol inhaler.
The Group's new direction on product pipeline includes applying for production permits of generic drugs in advantageous areas, among which a number of bioequivalence evaluations and confirmatory clinical tests are currently in progress. In recent months, the Group's joint application with Shandong Confucius Pharmaceutical for the listing of a class 4 generic medication called Afatinib Maleate tablet was accepted. Afatinib Maleate, developed by Boehringer Ingelheim, is the world's first irreversible EGFR targeted lung cancer drug and was approved for marketing in the United States in July 2013. In February 2017, Alfatinib Maleate was approved to enter China domestic market for the treatment of patients with EGFR mutation positive lung cancer, and patients with locally advanced or metastatic lung squamous cell carcinoma whose disease has progressed during or after platinum-containing chemotherapy. It is the second-generationEGFR-TKI to be first listed in China. After Alfatinib Maleate successfully entered the National Drug Reimbursement list in 2018, the growth rates of terminal sales in the last two years were more than 200%.
14 Interim Report 2020
China Shineway Pharmaceutical Group Limited
MANAGEMENT
DISCUSSION AND ANALYSIS
Commencement of a new digitalized sales and marketing model
In 2020, the Group's Internet Digital Marketing Department strengthened its strategic partnership with domestic mainstream medical B2B and B2C e-commerce platforms such as Jingdong, Tmall, Ping An Good Doctor, 111, Inc., Yao Shi Bang, Yi Hao Yao, Yao Jing Cai and Xiao Yao Yao to extensively explore cooperation in various fields and to drive the scale of sales. The Group's flagship medicine store on Tmall was also launched in May 2020 to better showcase the Group's high-quality series of products, enhance the brand effect, highlight the advantages of the Group's products, and at the same time provide a convenient platform for end-users to make purchases.
Although online launching of certain products for sales was affected by the pandemic, the Group's internet digital marketing business recorded online sales of RMB33.5 million, representing a 212% increase year-on-year in the first half of 2020.
During the year, another key development of the Group's Internet Digital Marketing Department was to explore innovative piloting of community marketing business and rapidly deploy sports and health marketing and promotion channels. With our sports and health products, the Group rapidly established a community operation team, and explored a new online growth mode through community marketing. In addition to strengthening cooperation with mainstream e-commerce platforms, the Group will also foster market expansion based on big data to promote digital sales and marketing.
FINANCIAL ANALYSIS
Turnover
For the first six months of 2020, the Group continued to produce modern Chinese medicine products of good efficacy and high quality. The Group's turnover had decreased by 13.0% as compared to the corresponding period of last year. This was mainly due to the decrease in sales volume of the Group's products affected by the COVID-19 pandemic as compared with those of the corresponding period in 2019. Sales of our injection products had decreased by 24.9% to RMB489,274,000, accounted for 41.1% of the Group's total turnover. Sales of soft capsule products had increased by 5.4% to RMB255,648,000, accounted for 21.5% of the Group's total turnover. Sales of granule products had decreased by 9.1% to RMB147,312,000, accounted for 12.4% of the Group's total turnover. Sales of TCM formula granules had decreased by 0.6% to RMB239,762,000, accounted for 20.1% of the Group's total turnover. The Group had also sold RMB58,116,000 of medicines in other formats which accounted for 4.9% of the Group's turnover.
Sales of prescription and OTC medicines of the Group for the first six months of 2020 were RMB989,235,000 and RMB200,877,000, equal to 83.1% and 16.9% of the Group's turnover, respectively.
Cost of Sales
Cost of sales for the first six months of 2020 was RMB313,747,000, equals to 26.4% of the Group's turnover. Direct materials, direct labour and other production costs accounted for 57.6%, 16.7% and 25.7% of the total production costs respectively. (For the corresponding period of 2019: 57.7%, 16.9% and 25.4%).
Gross Profit Margin
For the first six months of 2020, average gross margin of injection products, soft capsule products, granule products and TCM formula granule products were approximately 75.6% (for the corresponding period of 2019: 73.6%), 75.3% (for the corresponding period of 2019: 70.1%), 70.0% (for the corresponding period of 2019: 67.3%) and 73.2% (for the corresponding period of 2019: 74.5%) respectively. Overall gross profit margin was 73.6% as compared to 71.3% of the corresponding period of last year.
Interim Report 2020 | 15 |
China Shineway Pharmaceutical Group Limited | |
MANAGEMENT
DISCUSSION AND ANALYSIS
Other Income
Other income mainly includes government subsidies of RMB67,370,000 (for the corresponding period of 2019: RMB73,858,000). The government subsidies mainly represented incentives received from government for research activities and investments in relevant regions in the PRC by the Group.
Investment Income
Investment income mainly includes interest income from bank deposits and investments in financial products of RMB51,256,000 (for the corresponding period of 2019: RMB24,552,000) and RMB19,021,000 (for the corresponding period of 2019: RMB23,158,000) respectively.
Selling and Distribution Costs
Selling and distribution costs for the first six months of 2020 decreased by 1.3% from the corresponding period of last year and were equal to 47.2% of the Group's turnover (for the corresponding period of 2019: 41.6%). The decrease was mainly due to the decrease in advertising and travelling expenses as compared to same period of last year.
Administrative Expenses
During the first six months of 2020, the Group strengthened cost control. Administrative expenses decreased by 9.9% as compared to the corresponding period of last year, representing approximately 10.6% (for the corresponding period of 2019: 10.3%) of the Group's turnover. Administrative expenses mainly comprised of salaries and social security outlay of administration staff, depreciation and amortisation expenses which accounted for 3.4% and 3.4% (for the corresponding period of 2019: 3.0% and 3.0%) of the Group's turnover respectively.
Research and Development Costs
During the first six months of 2020, research and development costs decreased by 56.0% as compared to the corresponding period of last year, which accounted for approximately 1.7% of the Group's turnover (for the corresponding period of 2019: 3.3%). Due to the impact of COVID-19 pandemic, the progress of various research and development projects has been blocked in this period, the research and development costs decreased accordingly as compared to the corresponding period of last year.
Other gains and losses
Other gains and losses comprised of net exchange gain and gain or loss on disposal of property, plant and equipment. The Group recorded net exchange gain of RMB3,822,000 for the first six months of 2020 (for the corresponding period of 2019: net exchange gain of RMB4,378,000), which was mainly resulted from exchange gain arising from change of exchange rate between Australian dollars, Hong Kong dollars and Renminbi. Besides, the net gain on disposal of property, plant and equipment for this period was RMB2,950,000 (for the corresponding period of 2019: net loss of RMB34,000).
Taxation
Taxation for the first six months ended 30 June 2020 amounted to RMB48,088,000 (for the corresponding period of 2019: RMB62,301,000). The effective tax rate was lowered from 17.8% in the corresponding period of last year to 15.9%. This was mainly due to the write-back of overprovision of tax in prior years and the absence of withholding tax related to dividend distribution in the current period.
16 Interim Report 2020
China Shineway Pharmaceutical Group Limited
MANAGEMENT
DISCUSSION AND ANALYSIS
Profit for the Period
The Group's net profit for the first six months ended 30 June 2020 was RMB253,721,000 representing a decrease of 11.8% from the corresponding period of last year. The decrease in profit was mainly attributable to the decreased turnover and operating profit of the period.
Interim Dividend
The board of directors of the Company (the "Board") resolved to declare an interim dividend of RMB11 cents per share amounting to RMB83,006,000 in respect of the six months ended 30 June 2020 and are calculated on the basis of 827,000,000 shares issued less 72,400,000 shares held for share award scheme as at 30 June 2020 (for the six months ended 30 June 2019: RMB11 cents per share, amounting to RMB85,074,000), which will be paid on 29 October 2020, to the shareholders whose names appear on the Company's register of members on 9 October 2020.
The above interim dividend will be payable in cash in Hong Kong dollars and will be converted from Renminbi at the telegraphic transfer exchange rates quoted by bank at 10:00 a.m. on 28 August 2020 (RMB1=HK$1.124). Accordingly, the amount payable on 29 October 2020 will be HK$0.1236 per share.
Capital Structure
For the six months ended 30 June 2020, there was no change in the capital structure and issued share capital of the Group as compared to those on 31 December 2019.
Liquidity and Financial Resources
As at 30 June 2020, bank deposits of the Group, amounting to RMB4,083,437,000 (31 December 2019: RMB3,946,006,000) of which RMB4,022,986,000 (31 December 2019: RMB3,841,511,000), were denominated in Renminbi. Others, being equivalent to RMB37,604,000, RMB19,230,000 and RMB3,617,000 (31 December 2019: RMB99,198,000, RMB1,786,000 and RMB3,511,000), were denominated in Hong Kong dollars, Australian dollars and United States dollars respectively.
The directors of the Company (the "Directors") believe that the financial position of the Group is healthy, with sufficient financial resources to meet the requirement for future development.
Trade Receivables and Trade Receivables backed by Bank Bills
Trade receivables and trade receivables backed by bank bills as at 30 June 2020 increased and decreased by 21.7% and 26.5% respectively from 31 December 2019. Turnover days of trade receivables and trade receivables backed by bank bills were 44.3 days and 55.3 days respectively (for the corresponding period of 2019: 28.0 days and 50.1 days respectively).
Inventories
Inventories balance as at 30 June 2020 increased by 3.2% from 31 December 2019. By inventory categories, raw materials, work in progress and finished products respectively accounted for 24.2%, 34.2% and 41.6% of inventories as at 30 June 2020 (31 December 2019: 27.1%, 32.9% and 40.0% respectively).
Turnover days for finished goods products in the first six months of 2020 were 104.2 days (for the corresponding period of 2019: 60.8 days).
Interim Report 2020 | 17 |
China Shineway Pharmaceutical Group Limited | |
MANAGEMENT
DISCUSSION AND ANALYSIS
Property, Plant and Equipment
In the first six months of 2020, the Group acquired buildings of RMB1,469,000, plant and machinery of RMB25,824,000, office equipment of RMB3,074,000 and the new construction works amounted to approximately RMB4,403,000 in total. Besides, following the adoption of IFRS 16, property, plant and equipment had included the leasehold land and leasehold properties, which had respective net book values of RMB150,186,000 and RMB2,543,000 as at 30 June 2020.
For the six months ended 30 June 2020, depreciation for property, plant and equipment amounted to RMB82,779,000 as compared to RMB86,766,000 during the same period of last year.
Intangible Assets
Intangible assets represent patents and production licenses with finite useful lives, which mainly include the drugs production licenses via acquisition of Shineway Pharmaceutical Group (Shandong) Company Limited (formerly known as Jinan Quanli Pharmaceutical Company Limited) in 2014 and the drugs production licenses via acquisition of Yunnan Shineway Spirin Pharmaceutical Company Limited and Beijing Wanter Bio-pharmaceutical Company Limited in 2015.
Goodwill
Goodwill is comprised of the Group's acquisition of the remaining 20% ownership equity interests of Shineway Pharmaceutical Sales Company Limited in 2005, the acquisition of 100% equity interests of Shineway Pharmaceutical (Zhangjiakou) Co., Ltd and Shineway Pharmaceutical (Sichuan) Company Limited in 2010, the acquisition of 100% equity interest of Shineway Pharmaceutical Group (Shandong) Company Limited in 2014 and the acquisition of 100% equity interest of Yunnan Shineway Spirin Pharmaceutical Company Limited and Beijing Wanter Bio-pharmaceutical Company Limited in 2015.
Trade Payables
During the period under review, turnover days of trade payables were 94.4 days (for the corresponding period of 2019: 80.5 days).
Loans and Bank Borrowings
As at 30 June 2020, the Group had bank borrowings of RMB609,800,000 which comprised of bank loans for general operations of RMB303,000,000 with fixed interest rates ranging from 2.05% to 3.00% per annum and loans associated with the discounted bills of RMB306,800,000. These borrowings are due within one year. As at 30 June 2020, the Group had certain loans associated with the discounted bills of RMB299,319,000 which were pledged by bank deposits amounting RMB300,000,000. The Group's gearing ratio based on interest bearing debt for the first six months was 10.4% (for the corresponding period of 2019: Nil). All these loans have been used to generate financial income.
Employees
As at 30 June 2020, the Group has 3,543 employees (31 December 2019: 3,692 employees). Remuneration was determined and reviewed based on fair principles with reference to market conditions and individual performance. The Group also provided other benefits to its employees, including medical insurance and retirement benefits. The Group's employees in Hong Kong were also enrolled in the Mandatory Provident Fund Scheme.
18 Interim Report 2020
China Shineway Pharmaceutical Group Limited
MANAGEMENT
DISCUSSION AND ANALYSIS
Exposure to Fluctuations in Exchange Rates
A majority of the Group's business transactions and liabilities are denominated in Renminbi and Hong Kong dollars. The Group adopts a conservative financial policy and most of its bank deposits are in Renminbi, Hong Kong dollars and Australian dollars. The exchange gain in the first half of 2020 arose from the change in exchange rate between Renminbi, Hong Kong dollars and Australian dollars. As at 30 June 2020, the Group did not have any foreign exchange contracts, interest or currency swaps or other financial derivatives for hedging purpose.
Contingent Liabilities
The Group did not have any contingent liabilities as at 30 June 2020 (31 December 2019: Nil).
Interim Report 2020 | 19 |
China Shineway Pharmaceutical Group Limited | |
OTHER
INFORMATION
DIRECTORS' AND CHIEF EXECUTIVES' INTERESTS IN SHARES
As at 30 June 2020, the interests and short positions of the Directors and chief executives of the Company and their respective associates in the shares, underlying shares and debentures of the Company and its associated corporations within the meaning of Part XV of the Securities and Futures Ordinance (the "SFO"), which are required to be notified to the Company and The Stock Exchange of Hong Kong Limited (the "Stock Exchange") pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they are taken or deemed to have under such provisions of the SFO) or which are required, pursuant to section 352 of the SFO, to be entered in the register referred to therein, or which are required, pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers (the "Model Code") as set out in Appendix 10 to the Rules Governing the Listing of Securities on the Stock Exchange ("the Listing Rules") to be notified to the Company and the Stock Exchange, were as follows:
Approximate | ||||
percentage of | ||||
Name of relevant | shareholding | |||
Name of Director | company | Capacity | Number of shares | in the Company |
Li Zhenjiang | Company | Founder of | 546,802,990 | 66.12% |
discretionary trust | ||||
(Note) | ||||
Li Huimin | Company | Beneficiary owner | 1,020,000 | 0.12% |
Xin Yunxia | Company | Beneficiary owner | 540,000 | 0.07% |
Chen Zhong | Company | Beneficiary owner | 280,000 | 0.03% |
Note: These 546,802,990 shares of the Company ("Shares") are held by Forway Investment Limited ("Forway"). Forway is owned as to 100% by Fiducia Suisse SA, a trust company, in its capacity as the trustee of The Li Family 2004 Trust. The Li Family 2004 Trust is a discretionary trust, the founder (as defined in the SFO) of which is Mr. Li Zhenjiang and the discretionary objects of which are family members of Mr. Li Zhenjiang (excluding Mr. Li Zhenjiang himself). Accordingly, Mr. Li Zhenjiang is deemed to be interested in the 546,802,990 Shares under the SFO.
Certain Directors have been granted share options under the 2004 Scheme (details are set out in the section headed "Share Option Scheme" below). These constitute interests in underlying shares of equity derivatives of the Company under the SFO.
Save as disclosed above, as at 30 June 2020, none of the Directors or chief executives of the Company or their respective associates had any interest or short position in the shares, underlying shares or debentures of the Company or any of its associated corporations.
DIRECTORS' RIGHTS TO ACQUIRE SHARES OR DEBENTURES
Save as disclosed under the headings "Share Option Scheme" and "Employees' Share Award Scheme" below, at no time during the period was the Company, its holding companies, fellow subsidiaries or any of its subsidiaries a party to any arrangement to enable the Directors to acquire benefits by means of the acquisition of shares in, or debentures of, the Company or any other body corporate.
20 Interim Report 2020
China Shineway Pharmaceutical Group Limited
OTHER
INFORMATION
SUBSTANTIAL SHAREHOLDERS
Interest in the Company
As at 30 June 2020, interest of every person (other than a Director or chief executive of the Company as disclosed in the section "Directors' and Chief Executives' Interests in Shares" above) in the shares and underlying shares in the Company as recorded in the register required to be kept by the Company under Section 336 of the SFO were as follows:
Approximate | |||
percentage of | |||
shareholding in | |||
Name of shareholder | Capacity | Number of shares | the Company |
Forway (Notes 1 and 2) | Beneficial owner | 546,802,990 | 66.12% |
Fiducia Suisse SA (Notes 1 and 2) | Trustee of discretionary trust | 546,802,990 | 66.12% |
Notes:
(1) Interests of Forway and Fiducia Suisse SA in the Shares were duplicated.
(2) The entire issued share capital of Forway is owned by Fiducia Suisse SA in its capacity as the trustee of The Li Family 2004 Trust, a discretionary trust, the founder (as defined in the SFO) of which is Mr. Li Zhenjiang and the discretionary objects of which are family members of Mr. Li Zhenjiang (excluding Mr. Li Zhenjiang himself).
Save as disclosed above, as at 30 June 2020, the Company had not been notified by any persons who (other than the Directors or chief executive of the Company) had interests or short positions in the shares or underlying shares of the Company which would fall to be disclosed to the Company under Divisions 2 and 3 of Part XV of the SFO.
SHARE OPTION SCHEME
The Company adopted a share option scheme on 10 November 2004 and was expired on 9 November 2014 (the "2004 Scheme"). All outstanding options granted under the 2004 Scheme will continue to be valid and exercisable in accordance with the provisions of the 2004 Scheme. The Company adopted a new share option scheme at an extraordinary general meeting of the Company held on 29 May 2015 (the "2015 Scheme"). The purpose of the 2015 Scheme is to provide the Company with a flexible means of incentivizing, rewarding, remunerating, compensating and/ or providing benefits to the participants, and for such other purposes as the Board may approve from time to time. The 2015 Scheme has a life of 10 years and will expire on 28 May 2025.
Interim Report 2020 | 21 |
China Shineway Pharmaceutical Group Limited | |
OTHER
INFORMATION
Details of options granted, exercised, cancelled/lapsed and outstanding under the 2004 Scheme during the review period are as follows:
No. of shares comprised in share options | |||||||||
Exercise | |||||||||
As at | Granted | Lapsed | As at | price per | |||||
Name of | 1 January | during the | during the | 30 June | share | ||||
grantees | Date of grant | 2020 | period | period | 2020 | Note | (HK$) | ||
Ms. Xin Yunxia | 2 September 2013 | - | - | - | - | 1 | 11.84 | ||
Mr. Li Huimin | 2 September 2013 | - | - | - | - | 1 | 11.84 | ||
Mr. Li Huimin | 5 September 2013 | - | - | - | - | 2 | 11.84 | ||
Mr. Chen Zhong | 2 September 2013 | - | - | - | - | 1 | 11.84 | ||
Other Employees | 2 September 2013 | - | - | - | - | 1 | 11.84 | ||
- | - | - | - | ||||||
Notes: | |||||||||
(1) | The options have a validity period of 6 years from the date of grant on 2 September 2013. | ||||||||
The options are exercisable in tranches: | |||||||||
(i) | up to 20% within such period(s) during the year commencing on 2 September 2014 to be designated by the Company; | ||||||||
(ii) | up to 20% within such period(s) during the year commencing on 2 September 2015 to be designated by the Company; | ||||||||
(iii) | up to 20% within such period(s) during the year commencing on 2 September 2016 to be designated by the Company; | ||||||||
(iv) | up to 20% within such period(s) during the year commencing on 2 September 2017 to be designated by the Company; and | ||||||||
(v) | up to 20% within such period(s) during the year commencing on 2 September 2018 to be designated by the Company. | ||||||||
The share options will be exercisable upon achievement of the relevant performance targets. | |||||||||
The closing price per share immediately before the date on which the options were granted was HK$11.64. | |||||||||
(2) | The options have a validity period of 6 years from the date of grant on 5 September 2013. | ||||||||
The options are exercisable in tranches: | |||||||||
(i) | up to 20% within such period(s) during the year commencing on 5 September 2014 to be designated by the Company; | ||||||||
(ii) | up to 20% within such period(s) during the year commencing on 5 September 2015 to be designated by the Company; | ||||||||
(iii) | up to 20% within such period(s) during the year commencing on 5 September 2016 to be designated by the Company; | ||||||||
(iv) | up to 20% within such period(s) during the year commencing on 5 September 2017 to be designated by the Company; and | ||||||||
(v) | up to 20% within such period(s) during the year commencing on 5 September 2018 to be designated by the Company. |
The share options will be exercisable upon achievement of the relevant performance targets.
The closing price per share immediately before the date on which the options were granted was HK$11.84.
22 Interim Report 2020
China Shineway Pharmaceutical Group Limited
OTHER
INFORMATION
Details of options granted, exercised, cancelled/lapsed and outstanding under the 2015 Scheme during the review period are as follows:
No. of shares comprised in share options | |||||||||
Exercise | |||||||||
As at | Granted | Lapsed | As at | price per | |||||
1 January | during the | during the | 30 June | share | |||||
Name of grantees | Date of grant | 2020 | period | period | 2020 | Note | (HK$) | ||
Other Employees | 1 June 2016 | 1,000,000 | - | - | 1,000,000 | 3 | 8.39 | ||
Other Employees | 30 August 2017 | 3,000,000 | - | - | 3,000,000 | 4 | 7.21 | ||
Mr. Xu Sheng | 17 December 2018 | - | - | 5 | 9.56 | ||||
(ceased on 2 July 2019) | |||||||||
4,000,000 | - | - | 4,000,000 | ||||||
(3) The options have a validity period of 6 years from the date of grant on 1 June 2016. | |||||||||
The options are exercisable in tranches: | |||||||||
(i) | up to 20% within such period(s) during the year commencing on 1 June 2017 to be designated by the Company; | ||||||||
(ii) | up to 20% within such period(s) during the year commencing on 1 | June 2018 to be designated by the Company; | |||||||
(iii) | up to 20% within such period(s) during the year commencing on 1 | June 2019 to be designated by the Company; | |||||||
(iv) | up to 20% within such period(s) during the year commencing on 1 | June 2020 to be designated by the Company; and | |||||||
(v) | up to 20% within such period(s) during the year commencing on 1 | June 2021 to be designated by the Company. |
The share options will be exercisable upon achievement of the relevant performance targets.
The closing price per share immediately before the date on which the options were granted was HK$8.39.
Interim Report 2020 | 23 |
China Shineway Pharmaceutical Group Limited | |
OTHER
INFORMATION
(4) | The options have a validity period of 10 years, from 30 August 2017 to 29 August 2027 (both dates inclusive). | ||
The share options will be exercisable upon achievement of the relevant performance targets. | |||
The closing price per share immediately before the date on which the options were granted was HK$7.19. | |||
(5) | The options have a validity period of 6 years from the date of grant on 17 December 2018. | ||
The options are exercisable in tranches: | |||
(i) | up to 20% within such period(s) during the year commencing on 17 December 2019 to be designated by the Company; | ||
(ii) | up to 20% within such period(s) during the year commencing on 17 December 2020 to be designated by the Company; | ||
(iii) | up to 20% within such period(s) during the year commencing on 17 | December 2021 to be designated by the Company; | |
(iv) | up to 20% within such period(s) during the year commencing on 17 | December 2022 to be designated by the Company; and | |
(v) | up to 20% within such period(s) during the year commencing on 17 | December 2023 to be designated by the Company. |
The share options will be exercisable upon achievement of the relevant performance targets.
The closing price per share immediately before the date on which the options were granted was HK$8.90.
Save as disclosed above, no option was granted, exercised, cancelled or lapsed during the period and as at the date of this interim report since adoption. For details of the nature and terms of the 2015 Scheme, please refer to the circular of the Company dated 8 May 2015.
EMPLOYEES' SHARE AWARD SCHEME
On 26 March 2018, the Company adopted the share award scheme (the "Scheme") with objectives to recognise the contributions by certain employees and give incentives thereto in order to motivate them for the continual operation and development of the Group; and to attract suitable personnel for further development of the Group. The Scheme does not constitute a share option scheme or an arrangement analogous to a share option scheme for the purpose of Chapter 17 of the Listing Rules. Unless terminated earlier by the Board of Directors pursuant to the Scheme, the Scheme shall be valid and effective for a period of ten years commencing on the adoption date.
Pursuant to the Scheme, the Board of Directors may, from time to time, at its absolute discretion cause to be paid to the trustee sums of money from the Company's resources for the purchase of shares to be held on trust in accordance with the Scheme and the trust deed. Such sums of money shall be applied towards the purchase of the specific number of shares from the open market according to the written instructions of the Board of Directors. The Board of Directors shall not make any further award which will result in the number of shares awarded by the board of directors under the Scheme exceeding 10% of the issued share capital of the Company as at the adoption date. The maximum aggregate number of the awarded shares which may be awarded to a selected employee under the Scheme shall not exceed 1% of the issued share capital of the Company as at the adoption date.
24 Interim Report 2020
China Shineway Pharmaceutical Group Limited
OTHER
INFORMATION
During the six months ended 30 June 2020, 7,032,000 shares were purchased by the trustee from the market at an average price of approximately HK$5.70 (equivalent to RMB5.18) per share, with an aggregate amount of HK$40,080,000 (equivalent to RMB36,437,000). No shares were granted to eligible employees pursuant to the share award scheme. At the end of the reporting period, there are 72,400,000 shares held by the trustee.
PURCHASE, SALE OR REDEMPTION OF SECURITIES
During the six months ended 30 June 2020, the Company or its subsidiaries did not purchase, sell or redeem any securities of the Company.
COMPLIANCE WITH THE CORPORATE GOVERNANCE CODE
The Company has complied with the code provisions set out in the Corporate Governance Code (the "Code") contained in Appendix 14 to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the "Listing Rules") during the six months ended 30 June 2020, except for code provision A.2.1 as described below.
Code provision A.2.1 of the Code stipulates that the roles of chairman of the board (the "Chairman") and chief executive should be separate and should not be performed by the same individual. The division of responsibilities between the Chairman and chief executive should be clearly established and set out in writing. The Company does not use the title "Chief Executive". The duty of the chief executive has been assumed by the president of the Company (the "President").
Mr. Li Zhenjiang has been both the Chairman and President. His responsibilities are clearly set out in writing and approved by the Board. Given the Group's current stage of development, the Board considers that vesting the roles of Chairman and President in the same person facilitates the execution of the Group's business strategies and maximizes effectiveness of its operations. The Board shall nevertheless review the structure from time to time and shall consider any appropriate adjustments should new circumstances arise.
COMPLIANCE WITH THE MODEL CODE
The Company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers ("Model Code") as set out in Appendix 10 to the Listing Rules as the code of conduct regarding securities transactions by directors of the Company on terms no less exacting than the required standard set out in the Model Code. The prohibitions on securities dealing and disclosure requirements in the Model Code apply to specified individuals including the Group's senior management and also persons who are privy to price sensitive information of the Group. Having made specific enquiry, all directors of the Company confirmed that they had complied with the required standard set out in the Model Code regarding securities transactions of the directors for the six months ended 30 June 2020.
CHANGES IN DIRECTOR'S INFORMATION
During the six months ended 30 June 2020, there are no issues related to the directors of the Company that are required to be disclosed pursuant to Rule 13.51B(1) of the Listing Rules.
Interim Report 2020 | 25 |
China Shineway Pharmaceutical Group Limited | |
OTHER
INFORMATION
AUDIT COMMITTEE
The audit committee of the Company has reviewed with management and external auditors the accounting principles and policies adopted by the Group and the unaudited consolidated results of the Group for the six months ended 30 June 2020.
CLOSURE OF SHARE TRANSFER REGISTRATION
The register of members of the Company will be closed from 8 October 2020 to 9 October 2020 (both days inclusive). In order to qualify for the interim dividend for the six months ended 30 June 2020, all transfer documents accompanied by the relevant share certificates, must be lodged with the Company's Hong Kong branch share registrar, Computershare Hong Kong Investor Services Limited at Shops 1712-16, 17th Floor, Hopewell Centre, 183 Queen's Road East, Wanchai, Hong Kong, not later than 4:30 p.m. on 7 October 2020.
By order of the Board
China Shineway Pharmaceutical Group Limited
Li Zhenjiang
Chairman
Hong Kong, 28 August 2020
26 Interim Report 2020
China Shineway Pharmaceutical Group Limited
REPORT ON REVIEW OF CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
TO THE BOARD OF DIRECTORS OF
CHINA SHINEWAY PHARMACEUTICAL GROUP LIMITED 中國神威藥業集團有限公司
(incorporated in the Cayman Islands with limited liability)
INTRODUCTION
We have reviewed the condensed consolidated financial statements of China Shineway Pharmaceutical Group Limited (the "Company") and its subsidiaries (collectively referred to as the "Group") set out on pages 28 to 44, which comprise the condensed consolidated statement of financial position as of 30 June 2020 and the related condensed consolidated statement of profit or loss and other comprehensive income, statement of changes in equity and statement of cash flows for the six-month period then ended, and certain explanatory notes. The Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited require the preparation of a report on interim financial information to be in compliance with the relevant provisions thereof and International Accounting Standard 34 "Interim Financial Reporting" ("IAS 34") issued by International Accounting Standards Board. The directors of the Company are responsible for the preparation and presentation of these condensed consolidated financial statements in accordance with IAS 34. Our responsibility is to express a conclusion on these condensed consolidated financial statements based on our review, and to report our conclusion solely to you, as a body, in accordance with our agreed terms of engagement, and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report.
SCOPE OF REVIEW
We conducted our review in accordance with Hong Kong Standard on Review Engagements 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Hong Kong Institute of Certified Public Accountants. A review of these condensed consolidated financial statements consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
CONCLUSION
Based on our review, nothing has come to our attention that causes us to believe that these condensed consolidated financial statements are not prepared, in all material respects, in accordance with IAS 34.
Deloitte Touche Tohmatsu
Certified Public Accountants
Hong Kong
28 August 2020
Interim Report 2020 | 27 |
China Shineway Pharmaceutical Group Limited | |
CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE SIX MONTHS ENDED 30 JUNE 2020
Six months ended 30 June | |||
2019 | |||
2020 | |||
NOTES | RMB'000 | RMB'000 | |
(Unaudited) | (Unaudited) | ||
Turnover | 3 | 1,190,112 | 1,368,280 |
Cost of sales | (313,747) | (392,992) | |
Gross profit | 876,365 | 975,288 | |
Other income | 73,732 | 78,295 | |
Investment income | 4 | 70,277 | 47,710 |
Other gains and losses | 6,772 | 4,344 | |
Impairment losses on financial assets, net of reversal | 11 | (3,487) | - |
Selling and distribution costs | (561,832) | (569,256) | |
Administrative expenses | (126,488) | (140,442) | |
Research and development costs | (20,176) | (45,825) | |
Finance costs | (13,354) | (157) | |
Profit before taxation | 301,809 | 349,957 | |
Taxation | 5 | (48,088) | (62,301) |
Profit and total comprehensive income for the period | 6 | 253,721 | 287,656 |
EARNINGS PER SHARE | 8 | ||
Basic | RMB33 cents | RMB36 cents | |
Diluted | RMB33 cents | RMB36 cents | |
28 Interim Report 2020
China Shineway Pharmaceutical Group Limited
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AT 30 JUNE 2020
30.6.2020 | 31.12.2019 | ||
NOTES | RMB'000 | RMB'000 | |
(Unaudited) | (Audited) | ||
Non-current assets | |||
Property, plant and equipment | 9 | 1,422,751 | 1,493,926 |
Intangible assets | 226,952 | 248,267 | |
Goodwill | 159,291 | 159,291 | |
Deferred tax assets | 24,194 | 26,804 | |
1,833,188 | 1,928,288 | ||
Current assets | |||
Inventories | 444,438 | 430,803 | |
Trade receivables | 10 | 316,382 | 260,026 |
Trade receivables backed by bank bills | 10 | 304,487 | 414,285 |
Prepayments, deposits and other receivables | 150,946 | 151,395 | |
Pledged bank deposits | 300,000 | 538 | |
Bank balances and cash | 4,083,437 | 3,946,006 | |
5,599,690 | 5,203,053 | ||
Current liabilities | |||
Trade payables | 12 | 134,813 | 188,907 |
Trade payables backed by bank bills | 12 | - | 538 |
Other payables and accrued expenses | 510,073 | 429,208 | |
Bank borrowings | 13 | 609,800 | 398,392 |
Lease liabilities | 2,829 | 4,658 | |
Contract liabilities | 50,521 | 47,271 | |
Amounts due to related companies | 14,784 | 15,935 | |
Deferred income | 11,349 | 53,616 | |
Tax payable | 33,623 | 39,482 | |
1,367,792 | 1,178,007 | ||
Net current assets | 4,231,898 | 4,025,046 | |
Total assets less current liabilities | 6,065,086 | 5,953,334 | |
Interim Report 2020 | 29 |
China Shineway Pharmaceutical Group Limited | |
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AT 30 JUNE 2020
30.6.2020 | 31.12.2019 | ||
NOTE | RMB'000 | RMB'000 | |
(Unaudited) | (Audited) | ||
Non-current liabilities | |||
Lease liabilities | 1,038 | 1,487 | |
Deferred tax liabilities | 33,760 | 46,997 | |
Deferred income | 194,448 | 127,923 | |
229,246 | 176,407 | ||
Net assets | 5,835,840 | 5,776,927 | |
Capital and reserves | |||
Share capital | 14 | 87,662 | 87,662 |
Reserves | 5,748,178 | 5,689,265 | |
Total equity | 5,835,840 | 5,776,927 | |
30 Interim Report 2020
China Shineway Pharmaceutical Group Limited
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHS ENDED 30 JUNE 2020
Shares held | |||||||||
Statutory | Discretionary | Share | for share | ||||||
Share | Merger | surplus | surplus | options | award | Accumulated | |||
Share capital | premium | reserve | reserve fund | reserve fund | reserve | scheme | profits | Total equity | |
RMB'000 | RMB'000 | RMB'000 | RMB'000 | RMB'000 | RMB'000 | RMB'000 | RMB'000 | RMB'000 | |
(Note 15) | |||||||||
At 1 January 2020 (audited) | |||||||||
87,662 | 422,140 | 83,758 | 396,926 | 154,760 | 7,406 | (548,275) | 5,172,550 | 5,776,927 | |
Profit and total comprehensive income | |||||||||
for the period | - | - | - | - | - | - | - | 253,721 | 253,721 |
Transfer | - | - | - | 927 | - | - | - | (927) | - |
Release upon deregistration of a | |||||||||
subsidiary | - | - | - | (3,234) | - | - | - | 3,234 | - |
Purchase of shares under share award | |||||||||
scheme | - | - | - | - | - | - | (36,437) | - | (36,437) |
Dividends paid | - | - | - | - | - | - | - | (158,466) | (158,466) |
Recognition of equity-settled share | |||||||||
based payments | - | - | - | - | - | 95 | - | - | 95 |
At 30 June 2020 (unaudited) | 87,662 | 422,140 | 83,758 | 394,619 | 154,760 | 7,501 | (584,712) | 5,270,112 | 5,835,840 |
At 1 January 2019 (audited) | 87,662 | 422,140 | 83,758 | 445,262 | 154,760 | 65,828 | (304,256) | 4,810,627 | 5,765,781 |
Profit and total comprehensive income | |||||||||
for the period | - | - | - | - | - | - | - | 287,656 | 287,656 |
Transfer | - | - | - | 4 | - | - | - | (4) | - |
Release upon deregistration of a | |||||||||
subsidiary | - | - | - | (51,789) | - | - | - | 51,789 | - |
Purchase of shares under share award | |||||||||
scheme | - | - | - | - | - | - | (157,617) | - | (157,617) |
Dividends paid | - | - | - | - | - | - | - | (163,997) | (163,997) |
Recognition of equity-settled share | |||||||||
based payments | - | - | - | - | - | 964 | - | - | 964 |
Lapse of share options | - | - | - | - | - | (1,097) | - | 1,097 | - |
At 30 June 2019 (unaudited) | 87,662 | 422,140 | 83,758 | 393,477 | 154,760 | 65,695 | (461,873) | 4,987,168 | 5,732,787 |
Interim Report 2020 | 31 |
China Shineway Pharmaceutical Group Limited | |
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED 30 JUNE 2020
Six months ended 30 June | |||
2019 | |||
2020 | |||
NOTE | RMB'000 | RMB'000 | |
(Unaudited) | (Unaudited) | ||
Net cash from operating activities | 341,635 | 226,272 | |
Investing activities | |||
Placement of financial products | (948,930) | (250,000) | |
Proceeds from redemption of financial products | 967,923 | 255,026 | |
Net proceeds from short-term financial products | 4 | 28 | 18,132 |
Placement of pledged bank deposits | (300,000) | (5,766) | |
Withdrawal of pledged bank deposits | 538 | 16,693 | |
Interest received | 47,934 | 21,229 | |
Purchase of property, plant and equipment | (30,142) | (34,852) | |
Proceeds from disposal of property, plant and equipment | 26,119 | 319 | |
Government grants received | 31,820 | 10,838 | |
Net cash (used in) from investing activities | (204,710) | 31,619 | |
Financing activities | |||
New bank borrowings raised | 740,252 | - | |
Repayments of bank borrowings | (528,844) | - | |
Dividends paid | (158,466) | (163,997) | |
Purchase of shares held for share award scheme | (36,437) | (157,617) | |
Interest paid | (13,354) | (157) | |
Repayment of lease liabilities | (2,278) | (1,777) | |
Net cash from (used in) financing activities | 873 | (323,548) | |
Net increase (decrease) in cash and cash equivalents | 137,798 | (65,657) | |
Cash and cash equivalents at beginning of the period | 3,946,006 | 3,611,485 | |
Effect of foreign exchange rate changes of cash and cash | |||
equivalents | (367) | 226 | |
Cash and cash equivalents at end of the period, representing | |||
bank balances and cash | 4,083,437 | 3,546,054 | |
32 Interim Report 2020
China Shineway Pharmaceutical Group Limited
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2020
1. GENERAL
The condensed consolidated financial statements have been prepared in accordance with the applicable disclosure requirements of Appendix 16 to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the "Listing Rules") and International Accounting Standard 34 "Interim Financial Reporting" issued by International Accounting Standards Board.
The Group's condensed consolidated financial statements are presented in Renminbi ("RMB") which is also the functional currency of the Company.
Certain comparative figures have been reclassified to conform with the current period's presentation of the condensed consolidated financial statements.
The outbreak of coronavirus disease ("COVID-19") during the period has had a negative impact on the operations of the Group in the People's Republic of China (the "PRC"). The Group is faced with a decrease in demand for pharmaceutical products due to mandatory government quarantine and other control measures in an effort to contain the spread of COVID-19. These measures had a negative impact on the Group's business mainly resulted in decrease in revenue as disclosed in the relevant note.
2. PRINCIPAL ACCOUNTING POLICIES
The condensed consolidated financial statements have been prepared on the historical cost basis.
Other than additional accounting policies resulting from application of amendments to International Financial Reporting Standards ("IFRSs"), the accounting policies and methods of computation used in the condensed consolidated financial statements for the six months ended 30 June 2020 are the same as those presented in the preparation of the Group's annual financial statements for the year ended 31 December 2019.
Application of amendments to IFRSs
In the current interim period, the Group has applied the Amendments to References to the Conceptual Framework in IFRSs and the following amendments to IFRSs, for the first time, which are mandatorily effective for the annual period beginning on or after 1 January 2020 for the preparation of the Group's condensed consolidated financial statements:
Amendments to IAS 1 and IAS 8 | Definition of Material | |
Amendments to IFRS | 3 | Definition of a Business |
Amendments to IFRS | 9, IAS 39 and IFRS 7 | Interest Rate Benchmark Reform |
Except as described below, the application of the Amendments to References to the Conceptual Framework in IFRSs and the amendments to IFRSs in the current period has had no material impact on the Group's financial positions and performance for the current and prior periods and/or on the disclosures set out in these condensed consolidated financial statements.
Interim Report 2020 | 33 |
China Shineway Pharmaceutical Group Limited | |
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2020
2. PRINCIPAL ACCOUNTING POLICIES (Cont'd)
Impacts of application on Amendments to IAS 1 and IAS 8 "Definition of Material"
The amendments provide a new definition of material that states "information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements, which provide financial information about a specific reporting entity." The amendments also clarify that materiality depends on the nature or magnitude of information, either individually or in combination with other information, in the context of the financial statements taken as a whole.
The application of the amendments in the current period had no impact on the condensed consolidated financial statements. Changes in presentation and disclosures on the application of the amendments, if any, will be reflected on the consolidated financial statements for the year ending 31 December 2020.
3. TURNOVER AND SEGMENT INFORMATION
Operating segment
The Group is engaged in a single operating segment in research and development, manufacturing and trading of Chinese pharmaceutical products. This operating segment has been identified on the basis of internal management reports that are regularly reviewed by the Chairman of the Board of Directors of the Group, being the chief operating decision maker, for the purpose of resources allocation and performance assessment. No other discrete financial information is provided other than the Group's results and financial position as a whole. Accordingly, only entity-wide disclosures are presented.
Revenue from major products
The following is an analysis of the Group's revenue from its major products:
Six months ended 30 June | ||
2019 | ||
2020 | ||
RMB'000 | RMB'000 | |
(Unaudited) | (Unaudited) | |
Injections | 489,274 | 651,371 |
Soft capsules | 255,648 | 242,591 |
Granules | 147,312 | 162,076 |
Traditional Chinese medicine formula granules | 239,762 | 241,302 |
Others | 58,116 | 70,940 |
1,190,112 | 1,368,280 | |
Sales of the Group to external customers were substantially made in the PRC including Hong Kong.
34 Interim Report 2020
China Shineway Pharmaceutical Group Limited
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2020
4. INVESTMENT INCOME
Six months ended 30 June | ||
2019 | ||
2020 | ||
RMB'000 | RMB'000 | |
(Unaudited) | (Unaudited) | |
Interest on bank deposits | 51,256 | 24,552 |
Investment income from financial products (Note) | 18,993 | 5,026 |
Investment income from short-term financial products (Note) | 28 | 18,132 |
70,277 | 47,710 | |
Note: The financial products and short-term financial products are measured at fair value through profit or loss for both periods. The redemption amount (including the return) of such products is related to the performance of underlying debt instruments, equity instruments or foreign currencies. The investment income represents the difference between initial investment amounts and redemptions amounts. In the opinion of the directors of the Company, the short-term financial products are large in amounts, with quick turnover and short maturities ranging from one to three months. Accordingly, the cash receipts and payments for these short-term financial products are presented on a net basis in the condensed consolidated statement of cash flows.
5. TAXATION
Six months ended 30 June | ||
2019 | ||
2020 | ||
RMB'000 | RMB'000 | |
(Unaudited) | (Unaudited) | |
PRC Enterprise Income Tax ("EIT"): | ||
Current tax | 53,420 | 62,979 |
Overprovision in prior years | (4,705) | (2,471) |
Withholding tax on distributed profits | - | 2,602 |
48,715 | 63,110 | |
Deferred tax | (627) | (809) |
48,088 | 62,301 | |
On 21 March 2018, the Hong Kong Legislative Council passed The Inland Revenue (Amendment) (No. 7) Bill 2017 (the "Bill") which introduces the two-tiered profits tax rates regime. The Bill was signed into law on 28 March 2018 and was gazetted on the following day. Under the two-tiered profits tax rates regime, the first HK$2 million of profits of the qualifying group entity will be taxed at 8.25%, and profits above HK$2 million will be taxed at 16.5%. The profits of group entities not qualifying for the two-tiered profits tax rates regime will continue to be taxed at a flat rate of 16.5%. As the Company and its subsidiaries operating in Hong Kong do not have assessable profits, no provision for Hong Kong Profits Tax has been made in the condensed consolidated financial statements.
Under the Law of the PRC on EIT (the "EIT Law") and Implementation Regulation of the EIT Law, the tax rate of the PRC subsidiaries is 25% for both periods.
Interim Report 2020 | 35 |
China Shineway Pharmaceutical Group Limited | |
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2020
5. TAXATION (Cont'd)
A subsidiary which is operating in Western China has been granted tax concession by the local tax bureau and is entitled to PRC EIT at concessionary rate of 15% for both periods. Certain subsidiaries which are recognised as High and New-tech Enterprises have been granted tax concessions by the local tax bureau and are entitled to PRC EIT at concessionary rate of 15% for both periods. In addition, a subsidiary which is operating in trading of agricultural products business has been granted tax exemption by the local tax bureau.
Under the applicable corporate tax law in Australia, income tax is charged at 27.5% (six months ended 30 June 2019: 27.5%) of the estimated assessable profits. No provision for Australian income tax has been made in the condensed consolidated financial statements as the subsidiary operating in Australia has no assessable profits for both periods.
Under the EIT Law, withholding tax is imposed on dividends declared in respect of profits earned by PRC subsidiaries from 1 January 2008 onwards. Deferred taxation has not been provided for in the condensed consolidated financial statements in respect of temporary differences attributable to accumulated undistributed profits of the PRC subsidiaries amounting to RMB4,765,318,000 (31 December 2019: RMB4,469,335,000) as the Group is able to control the timing of the reversal of the temporary differences and it is probable that the temporary differences will not be reversed in the foreseeable future.
6. PROFIT FOR THE PERIOD
Six months ended 30 June | ||
2019 | ||
2020 | ||
RMB'000 | RMB'000 | |
(Unaudited) | (Unaudited) | |
Profit for the period has been arrived at after charging (crediting): | ||
Amortisation of intangible assets | 21,315 | 21,295 |
Depreciation of property, plant and equipment | 82,779 | 86,766 |
Government subsidies (included in other income) (Note) | (67,370) | (73,858) |
Net exchange gain (included in other gains and losses) | (3,822) | (4,378) |
(Gain) loss on disposal of property, plant and equipment | ||
(included in other gains and losses) | (2,950) | 34 |
Share-based payments expense | 95 | 964 |
Note: The government subsidies represent the amounts received from the local government by the subsidiaries of the Company. During the six months ended 30 June 2020, government subsidies of (a) RMB59,808,000 (six months ended 30 June 2019: RMB65,619,000) represent incentives received in relation to engagement of the subsidiaries of the Company in high technology business. The grants were unconditional, approved and received during the year of recognition; and (b) RMB7,562,000 (six months ended 30 June 2019: RMB8,239,000) represent recognition of deferred income upon completion of related research activities and development projects.
36 Interim Report 2020
China Shineway Pharmaceutical Group Limited
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2020
7. DIVIDENDS
Six months ended 30 June | ||
2019 | ||
2020 | ||
RMB'000 | RMB'000 | |
(Unaudited) | (Unaudited) | |
Dividends | ||
- 2019 final dividend of RMB12 cents | ||
(2019: 2018 final dividend of RMB12 cents) per share paid | 90,552 | 93,713 |
- 2019 special dividend of RMB9 cents | ||
(2019: 2018 special dividend of RMB9 cents) per share paid | 67,914 | 70,284 |
158,466 | 163,997 | |
- 2020 interim dividend of RMB11 cents | ||
(2019: RMB11 cents) per share | 83,006 | 85,074 |
The interim dividend of RMB11 cents per share which was proposed by the directors of the Company for the period has been calculated on the basis of 827,000,000 shares in issue less 72,400,000 shares held for share award scheme as at 30 June 2020, and will be paid on 29 October 2020, to the shareholders of the Company whose names appear in the Company's register of members on 9 October 2020.
8. EARNINGS PER SHARE
The calculation of basic earnings per share attributable to the owners of the Company is based on the following data:
Six months ended 30 June | ||
2019 | ||
2020 | ||
RMB'000 | RMB'000 | |
(Unaudited) | (Unaudited) | |
Profit for the period attributable to the owners of the Company the | ||
purpose of basic and diluted earnings per share | 253,721 | 287,656 |
Interim Report 2020 | 37 |
China Shineway Pharmaceutical Group Limited | |
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2020
8. EARNINGS PER SHARE (Cont'd)
Six months ended 30 June | ||
2019 | ||
2020 | ||
Weighted average number of ordinary shares in issue less shares | ||
held for share award scheme for the purpose of calculation of | ||
basic earnings per share | 758,879,401 | 789,929,497 |
Effect of dilutive potential ordinary shares: | ||
Share options | - | 267,553 |
Weighted average number of ordinary shares in issue less shares | ||
held for share award scheme for the purpose of calculation of | ||
diluted earnings per share | 758,879,401 | 790,197,050 |
The computation of diluted earnings per share does not assume the exercise of all the Company's options at exercise prices of HK$8.39 and HK$7.21 (six months ended 30 June 2019: certain options at exercise prices of HK$11.84, HK$9.56 and HK$8.39) because the exercise prices of those options were higher than the average market price for shares for the six months ended 30 June 2020.
9. PROPERTY, PLANT AND EQUIPMENT
During the six months ended 30 June 2020, the Group made additions to construction in progress of RMB4,403,000 (six months ended 30 June 2019: RMB22,823,000) and acquired other property, plant and equipment of RMB30,367,000 (six months ended 30 June 2019: RMB12,008,000). During the six months ended 30 June 2020, the Group also disposed of certain property, plant and equipment with carrying amount of RMB23,169,000 (six months ended 30 June 2019: RMB353,000) at net consideration of RMB26,119,000 (six months ended 30 June 2019: RMB319,000), resulting in a gain on disposal of RMB2,950,000 (six months ended 30 June 2019: loss on disposal of RMB34,000).
38 Interim Report 2020
China Shineway Pharmaceutical Group Limited
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2020
10. TRADE RECEIVABLES/TRADE RECEIVABLES BACKED BY BANK BILLS
30.6.2020 | 31.12.2019 | |
RMB'000 | RMB'000 | |
(Unaudited) | (Audited) | |
Trade receivables | 323,898 | 264,055 |
Trade receivables backed by bank bills | 304,487 | 414,285 |
628,385 | 678,340 | |
Less: Allowance for credit losses | (7,516) | (4,029) |
620,869 | 674,311 | |
The Group allows credit periods normally ranging from six months to one year to its trade customers. The following is an aged analysis of the trade receivables and trade receivables backed by bank bills, net of allowance for credit losses, presented based on the invoice date at the end of the reporting period, which approximated the respective revenue recognition dates.
30.6.2020 | 31.12.2019 | |
RMB'000 | RMB'000 | |
(Unaudited) | (Audited) | |
Within 6 months | 561,654 | 635,996 |
Over 6 months but less than 1 year | 50,133 | 32,834 |
Over 1 year but less than 2 years | 9,082 | 5,481 |
620,869 | 674,311 | |
As at 30 June 2020, total bills received amounting to RMB304,487,000 (31 December 2019: RMB414,285,000) are held by the Group for future settlement of trade receivables of which certain bills amounting to RMB7,481,000 (31 December 2019: RMB118,392,000) were further discounted by the Group. All bills received by the Group are with a maturity period of less than one year.
Interim Report 2020 | 39 |
China Shineway Pharmaceutical Group Limited | |
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2020
11. IMPAIRMENT ASSESSMENT ON FINANCIAL ASSETS, NET OF REVERSAL
Six months ended 30 June
20202019
RMB'000 RMB'000
(Unaudited) (Unaudited)
Impairment losses on trade receivables | 3,487 | - |
The basis of determining the inputs and assumptions and the estimation techniques used in the condensed consolidation financial statements for the six months ended 30 June 2020 are the same as those followed in the preparation of the Group's annual financial statements for the year ended 31 December 2019.
12. TRADE PAYABLES/TRADE PAYABLES BACKED BY BANK BILLS
30.6.2020 | 31.12.2019 | |
RMB'000 | RMB'000 | |
(Unaudited) | (Audited) | |
Trade payables | 134,813 | 188,907 |
Trade payables backed by bank bills | - | 538 |
134,813 | 189,445 | |
An aged analysis of the Group's trade payables and trade payables backed by bank bills at the end of the reporting period is as follows:
30.6.2020 | 31.12.2019 | |
RMB'000 | RMB'000 | |
(Unaudited) | (Audited) | |
Within 6 months | 125,778 | 173,007 |
Over 6 months but less than 1 year | 3,655 | 2,899 |
Over 1 year but less than 2 years | 2,411 | 1,302 |
Over 2 years but less than 3 years | 1,927 | 1,264 |
Over 3 years | 1,042 | 10,973 |
134,813 | 189,445 | |
The average credit period taken for trade purchases ranges from two months to six months.
40 Interim Report 2020
China Shineway Pharmaceutical Group Limited
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2020
13. BANK BORROWINGS
30.6.2020 | 31.12.2019 | |
RMB'000 | RMB'000 | |
(Unaudited) | (Audited) | |
Bank loans, unsecured | 303,000 | 280,000 |
Loans related to bills discounted with recourse | 306,800 | 118,392 |
609,800 | 398,392 | |
As at 30 June 2020, the bank loans of RMB303,000,000 (31 December 2019: RMB280,000,000) are unsecured and repayable within one year and carry fixed interest rates ranging from 2.05% to 3.00% (31 December 2019: at 3.70%) per annum.
As at 30 June 2020, the loans related to bills discounted with recourse of RMB7,481,000 (31 December 2019: RMB118,392,000) carry a fixed interest rate at 1.46% (31 December 2019: ranging from 2.55% to 2.69%) per annum and are with a maturity period of less than one year. The remaining loans of RMB299,319,000 (31 December 2019: nil) are related to intercompany bills discounted, pledged by bank deposits and repayable within one year and carry a fixed interest rate at 2.72% per annum (31 December 2019: N/A).
14. SHARE CAPITAL
Number of | ||
shares | Amount | |
'000 | '000 | |
Ordinary shares of HK$0.10 each | ||
Authorised: | ||
At 1 January 2019, 31 December 2019 and 30 June 2020 | 5,000,000 | HK$500,000 |
Issued and fully paid: | ||
At 1 January 2019, 31 December 2019 and 30 June 2020 | 827,000 | HK$82,700 |
RMB'000 | |
Shown in the financial statements as | 87,662 |
There were no changes in the Company's authorised, issued and fully paid share capital during both periods.
During the six months ended 30 June 2020, 7,032,000 (six months ended 30 June 2019: 23,730,000) shares were purchased by the trustee from the market. Detail are set out in note 15.
Interim Report 2020 | 41 |
China Shineway Pharmaceutical Group Limited | |
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2020
15. SHARE-BASED PAYMENT TRANSACTIONS
Share option scheme
The Company has share option scheme which were adopted on 10 November 2004 and 29 May 2015. During the period, no share options were granted under the share option scheme of the Company.
Share award scheme
On 26 March 2018, the Company adopted the share award scheme ("the Scheme") with objectives to recognise the contributions by certain employees and give incentives thereto in order to motivate them for the continual operation and development of the Group; and to attract suitable personnel for further development of the Group. The Scheme does not constitute a share option scheme or an arrangement analogous to a share option scheme for the purpose of Chapter 17 of the Listing Rules. Unless terminated earlier by the Board of Directors pursuant to the Scheme, the Scheme shall be valid and effective for a period of ten years commencing on the adoption date.
Pursuant to the Scheme, the Board of Directors may, from time to time, at its absolute discretion cause to be paid to the trustee sums of money from the Company's resources for the purchase of shares to be held on trust in accordance with the Scheme and the trust deed. Such sums of money shall be applied towards the purchase of the specific number of shares from the open market according to the written instructions of the Board of Directors. The Board of Directors shall not make any further award which will result in the number of shares awarded by the Board of Directors under the Scheme exceeding 10% of the issued share capital of the Company as at the adoption date. The maximum aggregate number of the awarded shares which may be awarded to a selected employee under the Scheme shall not exceed 1% of the issued share capital of the Company as at the adoption date.
During the six months ended 30 June 2020, 7,032,000 (six months ended 30 June 2019: 23,730,000) shares were purchased by the trustee from the market at an average price of approximately HK$5.70 (equivalent to RMB5.18) (six months ended 30 June 2019: HK$7.55 (equivalent to RMB6.64)) per share, with an aggregate amount of HK$40,080,000 (equivalent to RMB36,437,000) (six months ended 30 June 2019: HK$179,210,000 (equivalent to RMB157,617,000)). No shares were granted to eligible employees pursuant to the Scheme. At the end of the reporting period, there are 72,400,000 (31 December 2019: 65,368,000) shares held by the trustee.
16. FAIR VALUE MEASUREMENTS OF FINANCIAL INSTRUMENTS
The directors of the Company consider that the carrying amounts of financial assets and financial liabilities recorded at amortised cost in the condensed consolidated financial statements approximate their fair values.
42 Interim Report 2020
China Shineway Pharmaceutical Group Limited
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2020
17. RELATED PARTY DISCLOSURES
Other than as disclosed elsewhere in the condensed consolidated financial statements, the Group has the following transactions and balances with related parties:
Six months ended 30 June | |||
2019 | |||
2020 | |||
Name of related parties | Nature of transactions | RMB'000 | RMB'000 |
(Unaudited) | (Unaudited) | ||
Shineway Medical Science & | Interest expenses on lease | ||
Technology Co., Ltd. | liabilities | 20 | 45 |
("Shineway Medical") | Service fee | 5,417 | 5,110 |
Shineway (Sanhe) Property | Interest expenses on lease | ||
Development Limited | liabilities | 26 | 57 |
("Shineway Sanhe") | Service fee | 1,273 | 1,017 |
Kang Yue Hotel Co., Ltd. | Interest expenses on lease | ||
("Kang Yue Hotel") | liabilities | 25 | 55 |
Hotel service fee | 214 | - | |
Shijiazhuang Municipal Luancheng | Service fee | 936 | 484 |
County Shineway Training School | |||
("Shineway Training School") | |||
31.12.2019 | |||
30.6.2020 | |||
Name of related parties | Nature of balances | RMB'000 | RMB'000 |
(Unaudited) | (Audited) | ||
Shineway Medical | Lease liabilities | 690 | 1,365 |
Shineway Sanhe | Lease liabilities | 541 | 1,072 |
Kang Yue Hotel | Lease liabilities | 675 | 1,333 |
Shineway Medical, Shineway Sanhe, Kang Yue Hotel and Shineway Training School, all of which are ultimately controlled by the controlling shareholder of the Company.
Interim Report 2020 | 43 |
China Shineway Pharmaceutical Group Limited | |
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2020
17. RELATED PARTY DISCLOSURES (Cont'd)
Compensation of key management personnel
Key management personnel is deemed to be the members of the Board of Director of the Company which has responsibility for planning, directing and controlling the activities of the Group. Details of the remuneration paid to them during the period were as follows:
Six months ended 30 June | |||
2019 | |||
2020 | |||
RMB'000 | RMB'000 | ||
(Unaudited) | (Unaudited) | ||
Short-term benefits | 5,011 | 5,459 | |
Post-employment benefits | 33 | 59 | |
Share-based payments expense | 95 | 799 | |
5,139 | 6,317 | ||
18. CAPITAL COMMITMENTS | |||
30.6.2020 | 31.12.2019 | ||
RMB'000 | RMB'000 | ||
(Unaudited) | (Audited) | ||
Capital expenditure contracted for but not provided in the | |||
condensed consolidated financial statements in respect of | |||
acquisition of property, plant and equipment | 164,165 | 142,683 | |
44 Interim Report 2020
China Shineway Pharmaceutical Group Limited
This is an excerpt of the original content. To continue reading it, access the original document here.
Attachments
- Original document
- Permalink
Disclaimer
China Shineway Pharmaceutical Group Ltd. published this content on 23 September 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 23 September 2020 09:49:09 UTC
