China Cord Blood first-quarter net revenue increases 23.8% to RMB71.7 million

Sep 10 2010

China Cord Blood Corporation (NYSE: CO) ("CCBC" or "the Company"), China's leading provider of cord blood collection, laboratory testing, hematopoietic stem cell processing, and stem cell storage services, today announced unaudited financial results for the first fiscal quarter ended June 30, 2010.

Highlights -- Net revenue increased 23.8% to RMB71.7 million ($10.6 million). -- Fiscal 2011 first quarter new subscriber sign-ups grew 17.3% to 12,180, exceeding the 12,000 mark for the first time. -- Gross profit rose to RMB54.4 million ($8.0 million) and gross margin improved four percentage points to 75.9%. -- Operating income reached RMB23.4 million ($3.4 million). -- RMB17.6 million ($2.6 million) net income attributable to shareholders compared to a net loss of RMB4.6 million in the prior year period. -- Completed the investment in 19.9% equity interest in the Shandong cord blood bank operator in May 2010.

"We are very pleased with our solid performance in the first quarter of fiscal 2011," said Ms. Ting Zheng, Chairperson and Chief Executive Officer of China Cord Blood Corporation. "We have started off a new fiscal year with a record number of new subscribers and such continued accelerated growth in our business affirms our belief that fiscal 2011 will be another remarkable year. Our sales force and hospital network continue to expand reflecting our commitment to further market penetration and deepening our market influence. Due to the large size of the Beijing and Guangdong markets, our penetration level seems modest when compared with the growth opportunities available to us."

Ms. Zheng further commented, "The first quarter was also very eventful. In May 2010, we completed our investment in a 19.9% equity interest in Qilu Stem Cell Engineering Company Limited, the exclusive cord blood bank operator in the Shandong province. In July 2010, our ownership stake in Cordlife increased after the completion of its rights issue." Ms. Zheng added, "The cancellation of our management incentive warrant plan further aligns management's interests with those of shareholders. We have also been added to the Russell Global Index at the end of June 2010. All these events not only reflect our dedicated efforts to improve shareholder value as we work toward becoming the most influential cord blood bank operator in China and the Asia Pacific region, but more importantly, pave the way for the Company to seize any opportunities for further expansion and development in the future."

First Quarter 2011 Financial Results

Total revenue in the first quarter increased 23.8% to RMB71.7 million ($10.6 million) from RMB57.9 million compared to the same period last year. This is also the first time that our quarterly new subscriber number exceeded the 12,000 mark reaching 12,180. Fueled by the growth in new subscriber numbers, revenue generated from processing fees increased 16.4% year-over-year to RMB56.7 million ($8.4 million). Revenue from storage fees increased 62.9% year over year to RMB15.0 million ($2.2 million), due to an increase in the total number of subscribers during the quarter. Our total subscriber base as of June 30, 2010 reached 141,492 subscribers, up 49.8% year-over-year.

Gross profit in the first quarter of fiscal 2011 increased to RMB54.4 million ($8.0 million) from RMB41.7 million in the prior year period. Gross margin expanded by four percentage points to 75.9% primarily due to favorable change in revenue mix, economies of scale and further cost savings. Storage fees accounted for 20.9% of the total revenue mix in the first quarter of fiscal 2011, as compared to 15.9% for the first quarter of fiscal 2010.

Sales and marketing expense for the first quarter amounted to RMB10.1 million ($1.5 million). As part of our commitment to continuously expand our sales and marketing platform, we continued to invest in marketing activities and develop new marketing channels. Such activities will aid the establishment of a more comprehensive sales network and enhance public awareness of cord blood stem cell storage services.

General administration expenses for the quarter amounted to RMB19.5 million ($2.9 million). The increase in general administrative expenses reflected the increase of corporate overhead after listing on the NYSE and the rise in legal and professional expenses. Research and development expense amounted to RMB1.5 million ($0.2 million) in the first quarter of fiscal 2011, reflecting our continued efforts to improve profitability and operating efficiency.

Operating income and net income attributable to shareholders in first quarter fiscal 2011 was RMB23.4 million ($3.4 million) and RMB17.6 million ($2.6 million), respectively. Net margin for the first quarter of fiscal 2011 was 24.5%.

Basic earnings per share for first quarter of fiscal 2011 were RMB0.26 ($0.04).

As of June 30, 2010, we had cash and cash equivalents of RMB323.3 million ($47.7 million), compared to RMB280.8 million as of March 31, 2010. As of June 30, 2010, total borrowing was RMB45 million ($6.6 million).

Ms. Zheng concluded, "Our solid track record within our local markets makes us the role-model for others to follow. It also results in tremendous credibility and facilitates our geographical expansion strategy within China. We will continue to strive in achieving substantial financial performance through organic growth and by pursuing strategic relationships in domestic and international markets as demonstrated by our past achievements."

Financial Outlook

The Company continues to expect the number of new subscribers to exceed 58,000 for the fiscal year 2011, which would translate into at least a 30% increase in net revenue. The management team also expects to have an accumulated total number of at least 187,000 subscribers at the end of fiscal 2011.