The Globe and Mail

Go to the Globe and Mail homepage

Jump to main navigationJump to main content

Globe Investor

News Sources

Take control of your investments with the latest investing news and analysis

Press release from CNW Group

CHINA HEALTH LABS & DIAGNOSTICS LTD. ANNOUNCES 2010 REVIEW AND GROWTH STRATEGY UPDATE

Thursday, January 13, 2011

CHINA HEALTH LABS & DIAGNOSTICS LTD. ANNOUNCES 2010 REVIEW AND GROWTH STRATEGY UPDATE09:00 EST Thursday, January 13, 2011Increased deliveries of proprietary products and solutions for rural diagnostic labs, military and emergency field diagnostics and food safety in the fourth quarter ended December 31, 2010 Expects to report strong revenue and earnings growth for the year ended December 3, 2010 compared to the same period in 2009Continued strong revenue and earnings growth expected for 2011 driven by increased sales of proprietary products  VANCOUVER, Jan. 13 /CNW/ - China Health Labs & Diagnostics Ltd. ("China Health" or the "Company") (TSXV:CHO) is pleased to announce increased deliveries of its BK Clinlab total lab solution to rural clinics, Point of Care Technology ("POCT") products for the Chinese military and food safety lab solutions in the fourth quarter ended December 31, 2010. These deliveries are expected to result in strong revenue and earnings growth for the fourth quarter and year ended December 31, 2010 compared to the same periods in 2009.The financial results up to and including the 2010 third quarter that are set out in this release are for Whole Vision Limited ("Whole Vision"), 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, which are expected to be filed on SEDAR on or before May 2, 2011.As previously disclosed in press releases dated October 28, November 18, and November 23, 2010, the Company signed agreements to supply over $11 million of its proprietary products which were expected to be mostly delivered in 2010. The Company is pleased to report that it completed delivery of all these proprietary products in the fourth quarter of 2010 and expects to recognize most, if not all, of the revenue in 2010. As a result of these deliveries, the Company expects that about 75% of revenues in the fourth quarter of 2010 will be from proprietary products for rural hospital labs, military and emergency POCT, and food safety customers. Since the Company generates higher margin for its proprietary products, it expects that gross margin in the fourth quarter of 2010 will increase significantly compared to gross margin in the third quarter of 2010, when most sales were generated from sales to large urban hospitals. In addition, the Company expects that about 40% of annual 2010 revenues will be from proprietary products, compared to about 20% in 2009. Whole Vision previously reported revenue growth of 109% and 38% and earnings growth of 48% and 49% for the three-month and nine-month periods ended September 30, 2010 compared to the same periods in 2009. In 2009, Whole Vision generated $23.8 million of annual revenue and earnings of $3.9 million, with the fourth quarter accounting for approximately 45% of revenue and 56% of earnings, and the Company expects a similar pattern in 2010. Accordingly, with an expected strong fourth quarter in 2010, the Company expects to report strong revenue and earnings growth for the year ended December 31, 2010. As set out above, the year ended December 31, 2010 will be the first consolidated financial report for China Health and Whole Vision, so the earnings growth of the consolidated company will be partially offset by expenses from China Health, including non-recurring expenses related to the Qualifying Transaction and ongoing expenses of being a public company. China Health expects that consolidated earnings for the year ended December 31, 2010 will show strong growth compared to the 2009 earnings for the same period, even after accounting for these expenses.In 2011, China Health intends to expand its business by focusing its efforts on expanding its sales network to three areas where it has proprietary products, limited competition and strong government support: rural diagnostic medical facilities in China, military and emergency services, and food testing applications. Going forward, China Health expects revenue growth from proprietary products to continue to be stronger than growth from its traditional business with large urban hospitals. Therefore, in 2011, proprietary products are expected to comprise a higher percentage of revenues compared to 2010, which is expected to provide support for profit margins."Through strategic planning and focused efforts, we achieved our business and financial goals in 2010, including becoming a public company listed on the TSXV. With an experienced management and technology team, proprietary products, an established customer base and the increased access to capital and technology that comes with being a public company, China Health is well positioned to realize on the tremendous opportunities in China's medical diagnostic and food safety sectors," said Wilson Yao, CEO of China Health. "In addition to securing new orders from our existing customers including the Chinese military, Beijing government, and provinces where we have installed BK Clinlabs in rural hospitals, we will continue to focus on expanding our business to new customers. In 2010, we increased our installed base of BK Clinlabs from 86 to 210 rural hospital locations. In 2011, we expect that our first major new customer will be the Jilin provincial government, which selected China Health as the successful bidder to install 587 BK Clinlabs, which will increase our installed base to 797 labs in rural hospitals. We have confidence that we will add value for shareholders in 2011."Neither 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 INFORMATION AND NON-GAAP MEASURESThis 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, gross margins and earnings in the fourth quarter and year ended for 2010, the Company's growth strategy, the growth of the Company's business and revenues in 2011, the Company's new customers, and additional shareholder value. The forward-looking information is based on certain assumptions, which could change materially in the future, including the assumption that the Company's revenues, gross margins and earnings in the fourth quarter and year ended for 2010 will increase and follow the pattern as expected, that a significant portion of revenues will be generated from proprietary products for rural hospital labs, military and emergency POCT and food safety customers, that the Company will proceed with its growth strategy as planned, that the Company will enter into binding agreements with the Jilin provincial government for the installation of BK Clinlabs, and that shareholder value will increase in 2011. 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, gross margins and earnings in the fourth quarter and year ended for 2010 may not increase or follow the pattern expected, that a significant portion of revenues may not be generated from proprietary products for rural hospital labs, military and emergency POCT and food safety testing customers, that the Company's business and revenues in 2011 may not increase, that the Company may not proceed or alter its growth strategy, that the Company may not enter into binding agreements with the Jilin provincial government for the installation of BK Clinlabs, and that shareholder value may not be increased in 2011. 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.China Health has also included in this press release figures based on a selected bid, which is a non-GAAP measure. Readers are cautioned that such a measure is not recognized under Canadian GAAP and should not be construed to be an indicator of performance or liquidity or cash flows. China Health's method of calculating this measure may differ from the method used by other entities and accordingly China Health's measure may not be comparable to the measure used by other entities.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