The Globe and Mail

Go to the Globe and Mail homepage

Jump to main navigationJump to main content

Press release from CNW Group

CHINA HEALTH LABS & DIAGNOSTICS LTD. ANNOUNCES THIRD QUARTER 2010 FINANCIAL RESULTS FOR WHOLE VISION LIMITED

Monday, November 29, 2010

CHINA HEALTH LABS & DIAGNOSTICS LTD. ANNOUNCES THIRD QUARTER 2010 FINANCIAL RESULTS FOR WHOLE VISION LIMITED18:08 EST Monday, November 29, 2010Net income for the three- and nine-month periods ended September 30, 2010 both increased by almost 50% compared with the same periods in 2009Revenue for the three- and nine-month periods ended September 30, 2010 increased by 109% and 38%, respectively, compared to the same periods in 2009VANCOUVER, Nov. 29 /CNW/ - China Health Labs & Diagnostics Ltd. ("China Health") (TSXV:CHO) is pleased to announce the financial results for the three- and nine-month periods for Whole Vision Limited ("Whole Vision" or the "Company"), which China Health recently acquired pursuant to its Qualifying Transaction (see China Health's press release dated October 22, 2010).  As the Qualifying Transaction was completed after the 2010 third quarter of both China Health and Whole Vision, the first consolidated financial report will be for the year ended December 31, 2010.  In the interim, China Health has filed Whole Vision's 2010 third quarter financial statements on SEDAR.  As previously disclosed, as part of the Qualifying Transaction, China Health changed its year-end to be the same as that of Whole Vision, which is December 31.For the three-month period ended September 30, 2010, revenue increased 109% to $8.8 million compared to the same period in 2009 driven mostly by increased sales to large urban hospitals.  For the nine-month period ended September 30, 2010, revenue increased by 38% to $18 million compared to the same period in 2009.  In 2009, Whole Vision generated 63% of its gross revenue in the third and fourth quarters, with the fourth quarter accounting for approximately 45% of the gross revenues of 2009.  Whole Vision expects revenue in 2010 will follow a similar pattern as in 2009.Gross margin was 21% and 32% for the three-month and nine-month periods ended September 30, 2010, respectively, compared to 38% and 33% for the same periods in 2009.  Revenue for the third quarter of 2010 was almost entirely from the sale of products to large urban hospitals, which generate lower margins than the Company's products for rural clinics, military and food safety applications.  In addition, while the Company has more than doubled sales of its Point of Care Technology ("POCT") products to the Chinese military in 2010, the delivery and revenue recognition of most of those products was delayed to the fourth quarter of 2010.  Although the Company had expected significant deliveries to the military in the third quarter, it is pleased to report that those products were subsequently delivered in October 2010, which will result in recognition of revenue from these contracts in the fourth quarter of 2010.Operating expenses for the three- and nine-month periods ended September 30, 2010 increased by 22% and 6%, respectively, due partly to increased administration expenses directed at rural clinics and food safety customers and increased research and development expenses for military POCT products.  For the third quarter, selling expense increased due to higher expenses for the sales force and distributors that serve the large city hospitals.  Selling costs decreased for the nine-month period due to the larger percentage of revenues from the military sector where a small sales team has generated larger sales orders.  Operating expenses are expected to increase for the full year of 2010 due to increased resources directed at the rural clinic and food safety customers and expenses related to becoming a public company in October 2010.  In addition, costs related to the Qualifying Transaction and private placement closed subsequent to the end of the third quarter will be expensed in the fourth quarter of 2010.For the three-month period ended September 30, 2010, net income increased by 48% to $1.1 million compared to the same period in 2009, which was mostly due to increases in sales to large urban hospitals.  For the nine-month period ended September 30, 2010, net income increased by 49% to $2.6 million compared to the same period in 2009.  In 2009, the Company earned close to 56% of its total annual $3.9 million of net income in the fourth quarter.  For 2010, China Health expects a similar pattern with a large percentage of its annual net income to be earned in the second half of the year.  As previously announced, the Company has secured significant increases in orders for rural clinics, military POCT and food safety applications compared to 2009, which are expected to be mostly delivered in the fourth quarter of 2010. "We are very pleased to report strong growth for the three- and nine-month periods, meeting our expectations.  While the third quarter growth was driven almost entirely by increased sales to our traditional customers in large urban hospitals, we expect that about 75% of our sales in the fourth quarter will be from rural hospital labs, military and emergency POCT products, and food safety testing applications," said Wilson Yao, CEO of China Health.  "We earn higher margins for these proprietary products because we have no direct competitors.  As a result we expect to generate increased revenues and margins in the fourth quarter of 2010."The 2010 third quarter financial statements of Whole Vision are available on the SEDAR website at www.sedar.com.China Health will be hosting a conference call on Tuesday, November 30, 2010. The purpose of this conference call will be to provide an update of the third quarter results of Whole Vision Limited.  Representing China Health on the conference call will be:   Mr. Shiping (Wilson) Yao, President and Chief Executive OfficerMr. Adam Kniec, Chief Financial OfficerMr. Kim Oishi, Member of the Board of DirectorsMr. Chao Zhang, Vice President, FinanceFollowing the update, a question and answer session will be held.  To participate, the time and call-in instructions are as follows:DATE:TIME: Tuesday, November 30, 20109:45am, Eastern Time  Participant Dial-In Number(s):North America Toll-Free Dial-In Number: (888) 231-8191For Toronto and international callers:  (647) 427-7450A Taped Replay will be available from 12:45pm Eastern Time on November 30, 2010 to 11:59pm Eastern Time on December 7, 2010.Taped Replay Toll Free Dial-in Number: 1-800-642-1687Taped Replay Local Dial-in Numbers: 416-849-0833Taped Replay Password: 26280073Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.FORWARD LOOKING INFORMATIONThis press release contains forward-looking statements and information that are based on the beliefs of management and reflect China Health's current expectations.  When used in this press release, the words "estimate", "project", "belief", "anticipate", "intend", "expect", "plan", "predict", "may" or "should" and the negative of these words or such variations thereon or comparable terminology are intended to identify forward-looking statements and information.  The forward-looking statements and information in this press release includes information relating to the Company's revenues, operating expenses, and annual net income for 2010, the delivery of products in the fourth quarter of 2010, and the growth of certain product lines.  The forward-looking information is based on certain assumptions, which could change materially in the future, including the assumption that the Company's revenues, operating expenses, and annual net income for 2010 will increase or decrease or follow the pattern as expected, that the delivery of products will be made in the fourth quarter of 2010 as expected, that a significant portion of sales will be generated from rural hospital labs, military and emergency POCT products, and food safety testing applications as expected.  Such statements and information reflect the current view of China Health with respect to risks and uncertainties that may cause actual results to differ materially from those contemplated in those forward-looking statements and information.  By their nature, forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements, or other future events, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.  Such factors include, among others, the risks that the Company's revenues, operating expenses, and annual net income for 2010 may not increase, decrease, change or follow the pattern expected, that the delivery of products may be delayed beyond the fourth quarter of 2010 or not be made at all, and that a significant portion of sales may not be generated from rural hospital labs, military and emergency POCT products, and food safety testing applications.  China Health cautions that the foregoing list of material factors is not exhaustive.  When relying on China Health's forward-looking statements and information to make decisions, investors and others should carefully consider the foregoing factors and other uncertainties and potential events.  China Health has assumed a certain progression, which may not be realized.  It has also assumed that the material factors referred to above will not cause such forward-looking statements and information to differ materially from actual results or events.  However, the list of these factors is not exhaustive and is subject to change and there can be no assurance that such assumptions will reflect the actual outcome of such items or factors.THE FORWARD-LOOKING INFORMATION CONTAINED IN THIS PRESS RELEASE REPRESENTS THE EXPECTATIONS OF CHINA HEALTH AS OF THE DATE OF THIS PRESS RELEASE AND, ACCORDINGLY, IS SUBJECT TO CHANGE AFTER SUCH DATE.  READERS SHOULD NOT PLACE UNDUE IMPORTANCE ON FORWARD-LOOKING INFORMATION AND SHOULD NOT RELY UPON THIS INFORMATION AS OF ANY OTHER DATE.  WHILE CHINA HEALTH MAY ELECT TO, IT DOES NOT UNDERTAKE TO UPDATE THIS INFORMATION AT ANY PARTICULAR TIME EXCEPT AS REQUIRED IN ACCORDANCE WITH APPLICABLE LAWS.For further information: Kim Oishi Director Telephone: (778) 997-6228 Email: koishi@grandrockcapital.com