CCBC fourth-quarter fiscal 2010 net revenues up 24.6%

Jun 22 2010

China Cord Blood Corporation ("CCBC" or "the Company") (NYSE: CO), China's leading provider of cord blood collection, laboratory testing, hematopoietic stem cell processing, and stem cell storage services, today announced preliminary unaudited financial results for the fourth quarter and full year fiscal 2010.

"Remarkable achievements were made during the fourth quarter and fiscal year 2010," said Ms. Ting Zheng, China Cord Blood Corporation's Chairperson and Chief Executive Officer. "Our listing on the New York Stock Exchange brought us to a new era of growth. During the period, not only did we accomplish a record number of new subscribers, as promised to the investment community, we acquired an equity interest in Jilu Stem Cells, the exclusive operator in the Shandong province. Including Shandong, we now own and partially own three of the six issued licenses in China, and we are the largest cord blood bank operator in China. Beijing, Guangdong and Shandong together have a market size of 2.1 million new born babies per annum or approximately 13% of the total number of new borns in China."

"On June 4, 2010, we agreed to underwrite the rights issue of Cordlife, the largest cord blood bank operator in Southeast Asia with direct presence in India and Indonesia. As the single largest shareholder in Cordlife, we seized this opportunity to raise our ownership in the company. While the transaction is still subject to relevant approvals, we believe Cordlife's current exposure in the Southeast Asia region will add incredible strategic value. Together with Cordlife, we will be the largest global cord blood bank operator in terms of market size and presence. It is our goal to become the largest and most influential cord blood bank operator in China as well as in the Asia Pacific region."

Fourth Quarter Fiscal 2010 Financial Results

Net revenue for the fourth quarter of fiscal 2010 increased 24.6% to RMB70.8 million ($10.4 million) from RMB56.8 million in the fourth quarter of fiscal 2009. Processing fees, representing 78.3% of the total net revenue, increased 12.5% year-over-year to RMB55.5 million ($8.1 million) on the back of a 16.7% increase in new subscribers. Net revenue from storage fees increased 104% year-over-year to RMB15.3 million ($2.2 million) from RMB7.5 million. Total subscriber base as of March 31, 2010 reached 129,312 subscribers, up 53.8% year-over-year. With the increase in total subscriber base, storage fees represented a more material portion of the total revenue mix of 21.7% for the fourth quarter of fiscal 2010 as compared to 13.2% of the total revenue mix for the fourth quarter of fiscal 2009.

For the fourth quarter of fiscal 2010, gross profit increased 28.4% to RMB55.7 million ($8.2 million) from RMB43.4 million in the prior year period, due primarily to rising new subscriber numbers. Gross margin for the fourth quarter of fiscal 2010 increased to 78.7% from 76.4% on the back of economy of scale and favorable change in revenue mix.

Research and development expense amounted to RMB5.8 million ($0.9 million) which consisted of research activities conducted to enhance operating efficiencies, collection and storage technologies, and measures to improve the results in umbilical cord blood stem cells extraction and separation.

Fourth quarter sales and marketing expense and administrative expense together amounted to RMB 25.0 million ($3.7 million) compared to RMB16.8 million for the same period last year. The overall increase was largely attributable to the increase in promotion activities and the scale of operation. The increase in administrative expense was largely attributable to the increase in overhead since our public listing, higher professional fees and the increase in depreciation expense following the establishment of the new Beijing facility in April 2009.

Operating income for the fourth quarter of fiscal 2010 was RMB24.9 million ($3.6 million) compared to RMB26.6 million for the same period last year. Fourth quarter depreciation expense increased to RMB6.3 million ($0.9 million), up from RMB2.4 million last year. Non-GAAP EBITDA in the fourth quarter grew 7.4% to RMB31.4 million ($4.6 million).

Net income attributable to shareholders for the fourth quarter of fiscal 2010 reached to RMB16.1 million ($2.4 million) compared to RMB20.1 million for the prior year period. Net margin for the fourth quarter of fiscal 2010 was 22.8%.

Basic earnings per share and diluted earnings per share for the fourth quarter of fiscal 2010 were RMB0.24 ($0.04) and RMB0.23 ($0.03), respectively. Non-GAAP EPS for the fourth quarter is no longer applicable because all ordinary shares and redeemable shares were exchanged prior to the beginning of the fourth quarter.

As of March 31, 2010, the Company had cash and cash equivalents of RMB280.8 million ($41.1 million), compared to RMB161.4 million as of March 31, 2009.

"With the rising health awareness, the general public is devoting more resources to acquire quality medical care and healthcare services either individually or for other family members," Ms. Ting Zheng further stated. "We will dedicate more resources to enhance market education with a view to entice the rising local demand. In addition, we will continue to explore opportunities to extend our presence in China and the Asia Pacific region to realize our goal of becoming the largest Pan-Asian cord blood bank."

Fiscal 2010 Financial Results

For fiscal 2010, net revenue increased 34.4% to RMB261.5 million ($38.3 million), from RMB194.5 million last year. The increase was largely attributable to the 30.5% increase in new subscriber numbers to 45,252 new subscribers and the expansion in the accumulated subscriber base. During the year, processing fees and storage fees grew 28.2% and 70.9%, respectively. Gross profit in fiscal 2010 increased 34.7% to RMB195.8 million ($28.7 million) from RMB145.4 million in the prior year. In fiscal 2010, operating income increased 14.1% to RMB97.2 million ($14.2 million). Fiscal 2010 net income attributable to shareholders was RMB49.2 million ($7.2 million) compared to RMB20.7 million in the prior year. Basic earnings per share and diluted earnings per share attributable to ordinary shares were RMB0.69 ($0.10) and RMB0.66 ($0.10), respectively. Non-GAAP EBITDA increased 25.5% to RMB117.6 million ($17.2 million) and non-GAAP EPS also increased to RMB1.12 ($0.16) from RMB0.35 in the fiscal 2009.

Financial Outlook

During fiscal 2011, the Company expects that growth momentum in terms of new subscribers will continue and the total number of new subscribers will not be less than 58,000 new subscribers which would translate into at least a 30% increase in net revenue. Management also expects the accumulated total number of subscribers will be at least 187,000 at the end of fiscal 2011.