Quarterly Results

Financial Statements And Related Announcement - Full Yearly Results

Financials Archive

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Condensed interim consolidated statement of profit or loss and other comprehensive income

Condensed interim statements of financial position

Review Of Performance

COMPARING 6 MONTHS ENDED 31 DECEMBER 2023 ("2H2023") AGAINST 6 MONTHS ENDED 31 DECEMBER 2022 ("2H2022")

Income Statement

Revenue

Revenue decreased by 4.5% or S$1.3 million from S$28.9 million in 2H2022 to S$27.6 million in 2H2023, comprising a 4.7% decline in revenue contributed by the banking business unit ("Banking revenue"), from S$26.7 million in 2H2022 to S$25.4 million in 2H2023. The decrease in Banking revenue was mainly due to a 12.0% decrease in new samples processed and stored from 10,000 in 2H2022 to 8,800 in 2H2023, largely based on contributions by Singapore, India and Indonesia.

On 15 December 2023, the Company received a notice from Ministry of Health ("MOH") to stop, for a period up to six months, the collection, testing, processing and/or storage of any new cord blood and human tissues, or provide any new types of tests to clients in Singapore (the "Suspension").

The decrease was offset by an increase in new samples processed in the Philippines and Hong Kong during the year.

The decrease in Banking revenue was less than the decrease in new samples processed and stored was mainly due to higher conversions to high value plans and lower discounts provided.

The diagnostics business unit maintained its revenue contribution ("Diagnostics revenue") of S$2.2 million in both 2H2023 and 2H2022.

Gross profit and gross profit margin

Gross profit decreased from S$19.6 million in 2H2022 to S$18.3 million in 2H2023 mainly due to the decrease in new samples processed and stored. The gross profit margin decreased to 66.4% in 2H2023 as compared to 67.8% in 2H2022 largely due to inflationary pressures affecting the Group's cost of service delivery. In addition, Singapore continued to incur fixed running costs despite the Suspension which further eroded the gross profit and gross profit margin.

Other operating income

The decrease in other income of approximately S$212,000 in 2H2023 compared to 2H2022 was mainly due to decrease in gain on disposal of property, plant and equipment of approximately S$0.5 million in Singapore and a decrease in government grants for COVID-19 of S$101,000 received in Hong Kong and Malaysia. The decrease was slightly mitigated by the gain on investment income of S$15,000 (2H2022: investment loss of S$73,000) and the increase in subsidies received by the Group under a technology talent funding scheme in Hong Kong.

Finance income

Finance income comprises interest income from deposits, short-term investments and note receivable of S$1.8 million (2H2022: S$1.5 million). The increase in finance income was mainly due to the increase in deposit interest rates as well as increase in funds placed in fixed deposits.

Finance costs

Finance costs relate to lease liabilities amounted to S$133,000 (2H2022: interest-bearing borrowings and lease liabilities which amounted to S$77,000). The increase was mainly due to the additions of right-of-use assets for new office unit leases which commenced in FY2023 in India and Singapore.

Profit before income tax from operations

As a result of the foregoing, the profit before income tax from operations of S$0.7 million for 2H2023 was 68.3% lower than for 2H2022.

Fair value gain on investment properties

In 2H2023, the Group recognised fair value gain of S$252,000 (2H2022: S$537,000) on its investment properties held in Singapore and Malaysia.

Share of profit of associate

In 2H2023, the Group recognised the share of profit of associate of S$740,000 compared to S$458,000 recognised in 2H2022.

Tax

In 2H2023, fair value gain on investment properties was not taxable. In 2H2022, government grants, gain on disposal of property, plant and equipment and the fair value gain on investment properties were not taxable.

Over-provision of tax in respect of prior years of S$361,000 for 2H2023 mainly comprises underprovision of deferred tax asset of S$244,000 in the Philippines and an over-provision of corporate income tax of S$212,000 in Singapore, offset by an under-provision of corporate income tax of S$72,000 and S$21,000 in the Philippines and Indonesia respectively.

In 2H2022, over-provision of tax in respect of prior years of S$327,000 was due an underprovision of deferred tax asset of S$361,000 in Singapore in relation to unutilised merger and acquisition allowance for acquisitions made in previous years, over-provision of deferred tax liability and corporate tax of S$18,000 and S$17,000 in Singapore respectively, offset by underprovision of corporate tax of S$69,000 in Malaysia and Indonesia.

Adjusting for the foregoing, the effective tax rate of 37.3% in 2H2023 was higher than 2H2022 at 26.6% mainly due to tax losses not recognised in certain countries as well as the increase in contribution to the profit before tax from countries with higher tax rates.

COMPARING 12 MONTHS ENDED 31 DECEMBER 2023 ("FY2023") AGAINST 12 MONTHS ENDED 31 DECEMBER 2022 ("FY2022")

Income Statement

Revenue

Revenue increased by 1.4% or S$0.8 million from S$55.2 million in FY2022 to S$55.9 million in FY2023. The increase in revenue comprised a 1.3% or S$0.6 million increase in Banking revenue from S$50.8 million in FY2022 to S$51.5 million in FY2023. New samples processed and stored declined by 3.8% from 18,400 samples in FY2022 to 17,700 in FY2023 largely due to a decrease in new samples processed and stored in India, partly offset by an increase in the Philippines and Hong Kong. Banking revenue increased despite the decline in new samples processed and stored, in part due to the higher selling price per contract in the Philippines and Hong Kong compared to India. There was also more conversions to high value plans and lower discounts provided, which increased the overall average revenue per new sample stored, as well as new banking services introduced during the year.

Diagnostics revenue grew by 2.9% or S$125,000 from FY2022 to FY2023, contributed by increase in testing volume in Hong Kong, the Philippines and Singapore.

Gross profit and gross profit margin

Gross profit increased marginally from S$37.2 million in FY2022 to S$37.5 million in FY2023 mainly due to the increase in new samples processed and stored in Hong Kong, which has a higher profit margin, offset by a decrease in new samples processed and stored in India and Indonesia. Gross profit margin decreased to 67.1% in FY2023 as compared to 67.4% in FY2022, largely due to inflationary pressures affecting the Group's cost of service delivery. In addition, Singapore continued to incur fixed running costs despite the Suspension which further eroded the gross profit and gross profit margin.

Other operating income

Other operating income decreased by approximately S$230,000 in FY2023 compared to FY2022. In FY2022, the Group recognised a gain on disposal of property, plant and equipment of approximately S$0.5 million in Singapore. There was no such gain in FY2023. In FY2022, the Group received government grants for COVID-19 of approximately S$249,000 by Hong Kong and Malaysia. There was no such grant in FY2023. The decrease was offset by the decrease in investment loss from short-term investments held by Malaysia, from a loss of S$299,000 to a gain of S$36,000. In addition, there was also an increase in subsidies received by the Group under a technology talent funding scheme in Hong Kong.

Finance income

Finance income comprises interest income from deposits, short-term investments and note receivable of S$3.4 million (FY2022: S$2.7 million). The increase in finance income was mainly due to the increase in deposit interest rates as well as increase in funds placed in fixed deposits.

Finance costs

Finance costs relate to lease liabilities which amounted to S$268,000 (FY2022: interest-bearing borrowings and lease liabilities which amounted to S$152,000). The increase was mainly due to the additions of right-of-use assets for new office unit leases which commenced in FY2023 in India and Singapore.

Profit before income tax from operations

As a result of the foregoing, the profit before income tax from operations of S$2.9 million for FY2023 was 31.0% lower than for FY2022.

Fair value gain on investment properties

In FY2023, the Group recognised fair value gain of S$252,000 (FY2022: S$537,000) on its investment properties held in Singapore and Malaysia.

Share of profit of associate

In FY2023, the Group recognised the share of profit of associate of S$1,263,000, which was a 75.9% increase compared to S$718,000 recognised in FY2022.

Tax

In FY2023, fair value gain on investment properties was not taxable. In FY2022, government grants, gain on disposal of property, plant and equipment and fair value gain on investment properties were not taxable.

Over-provision of tax in respect of prior years of approximately S$603,000 for FY2023 mainly comprises over-provision of corporate income tax of S$212,000 and S$145,000 in Singapore and Indonesia respectively, an over-provision of deferred tax liability of S$74,000 in Malaysia and an under-provision of deferred tax asset of S$244,000 in the Philippines, partly offset by an underprovision of corporate income tax of S$72,000 in the Philippines.

In FY2022, the over-provision of tax in respect of prior years of S$386,000 comprises mainly an under-provision of deferred tax asset of S$415,000 in Singapore in relation to unutilised merger and acquisition allowance for acquisitions made in previous years, over-provision of corporate tax and deferred tax liability in Singapore of S$2,000 and S$18,000 respectively, slightly offset by an under-provision of corporate income tax of S$49,000 in Indonesia.

Adjusting for the foregoing, the effective tax rate of 30.8% in FY2023 was higher than FY2022 at 23.1% due to tax losses not recognised in certain countries as well as the increase in contribution to the profit before tax from countries with higher tax rates.

Balance sheet

Cash and cash equivalents, unpledged and pledged fixed deposits ("fixed deposits"), short-term and long-term investments ("investments")

As at 31 December 2023, the Group maintained a strong balance sheet, with cash and cash equivalents, fixed deposits, investments of S$82.5 million (31 December 2022: S$79.3 million). Investments mainly comprise short-term investments in money market funds and redeemable convertible note ("RCN") from CellResearch Corporation Pte. Ltd. ("CRC").

The increase cash and cash equivalents of S$5.0 million from S$13.4 million as at 31 December 2022 to S$18.4 million as at 31 December 2023 was mainly due to cash generated from operating activities of S$7.9 million and dividend received from associate of S$0.5 million, offset by the purchase of property, plant and equipment and intangible assets of S$2.8 million.

Net cash generated from operating activities comprised mainly operating cash flows before movements in working capital of S$4.5 million, net working capital inflow of S$1.4 million and net interest received of S$3.2 million offset by net income tax paid of S$1.1 million.

Net working capital inflow of approximately S$1.4 million comprised the following:

  • decrease in trade receivables of approximately S$2.2 million;
  • decrease in contract assets of approximately S$0.6 million;
  • increase in other receivables, deposits and prepayments of approximately S$0.1 million;
  • decrease in inventories of approximately S$565,000;
  • increase in trade and other payables of approximately S$1.6 million;
  • decrease in lease liabilities of approximately S$1.9 million; and
  • decrease in contract liabilities of approximately S$1.7 million.

The decrease in current and non-current fixed deposits and short-term investments of S$1.8 million is mainly due to the weakening of the Malaysian Ringgit and Indian Rupee against the Singapore Dollar which resulted in translation losses on fixed deposits in the Malaysia and India subsidiary, offset by the net transfers to term deposits from cash and cash equivalents of S$0.3 million.

Property, plant and equipment

As at 31 December 2023, the Group recorded S$16.3 million on its balance sheet for property, plant and equipment (31 December 2022: S$14.4 million). The increase in property, plant and equipment was due to additions of approximately S$5.3 million, which mainly comprised right-ofuse assets recognised for leased office units in India and Singapore and leasehold improvement made to Hong Kong laboratory and office units, offset by depreciation of S$3.2 million recognised in FY2023.

Investment properties

As at 31 December 2023, the Group recorded S$4.7 million on its balance sheet for investment properties (31 December 2022: S$4.6 million).

Intangible assets

Intangible assets comprise client contracts, brand and goodwill acquired in business combinations and computer software.

Deferred tax assets

As at 31 December 2023 and 31 December 2022, the Group recorded deferred tax assets of S$0.9 million. As of 31 December 2022, deferred tax assets represent prior year tax losses carried forward as a result of the transitional adjustments arising from the adoption of FRS115 in the Hong Kong subsidiary and unutilised merger and acquisition allowance, relating to acquisitions made by the Company in previous years. In FY2023, approximately S$244,000 of additional deferred tax asset was recognised in the Philippines due to deductible temporary differences. The increase was offset by the utilisation of deferred tax asset to offset against FY2023 profit of the Hong Kong subsidiary.

Investment in associate

Investment in associate comprise of a 39.61% stake in TSL through Stemlife Berhad. The increase in investment in associate was due to the recognition of the share of profit of associate of S$1,263,000 in FY2023, slightly offset by the dividend received from TSL.

Contract assets, non-current

Non-current contract assets represent all service revenues arising from the performance obligations identified under instalment payment plans in the cord blood, cord lining and cord tissue banking contracts that have yet to be billed to clients. Upon billing, the billed amount will be receivable under the same terms as the current trade receivables. As at 31 December 2023, the Group recorded non-current contract assets of S$62.8 million (31 December 2022: S$63.6 million).

Inventories

As at 31 December 2023, the Group recorded inventories of S$0.8 million (31 December 2022: S$1.4 million). The decrease in inventories was mainly due to a change in a major supplier for cord blood processing kits. During this transition period, the Group depleted, without replenishment, consumables from the previous supplier, while building up its inventory for consumables from the new supplier, taking into consideration effective inventory management.

Trade receivables, current

Current trade receivables as at 31 December 2023 was S$22.7 million compared to S$25.5 million as at 31 December 2022. The decrease in current trade receivables is partly due to the termination of contracts for clients who have signed up but not yet delivered in Singapore as a result of the Suspension.

Trade and other payables, current and non-current

As at 31 December 2023, the Group recorded current trade and other payables of S$11.0 million (31 December 2022: S$10.0 million) and non-current other payables of S$1.0 million (31 December 2022: S$522,000). The increase was mainly attributable to the increase in provision required for restatement cost of office units in Hong Kong and non-trade payables in FY2023 compared to FY2022.

Lease liabilities, current and non-current

As of 31 December 2023, the Group recognised lease liabilities of S$3.5 million on property and equipment leases (31 December 2022: S$2.2 million). The decrease in lease liabilities was attributable to the payments made during the year.

Contract liabilities, current and non-current

Contract liabilities represent revenue received in advance for services revenues to be rendered under the various performance obligations identified in the cord blood, cord lining, cord tissue banking and diagnostics contracts. As at 31 December 2023, current and non-current contract liabilities were at S$8.8 million and S$64.4 million respectively (31 December 2022: S$9.0 million and S$67.3 million respectively). The decrease in overall contract liabilities is partly due to the termination of contract for clients who have signed up but not yet delivered in Singapore as a result of the Suspension.

Income tax payable

The Group recorded income tax payable of S$0.5 million as at 31 December 2023 (31 December 2022: S$0.7 million).

Deferred tax liabilities

As at 31 December 2023, deferred tax liabilities amounted to S$3.7 million (31 December 2022: S$4.0 million), comprising deferred tax liabilities on temporary differences and on intangible assets recognised on business combination.

Commentary

While the global economic situation has been challenging, industry-level growth factors remain intact. There is an increased awareness for preventive and precautionary care over curative treatment among the youth. In order to capture this potential demand, the Group has been focused on expanding its product offerings regionally. Moreover, there continues to be more research and development initiatives and a rising number of clinical trials directed towards understanding the magnitude of the potential of stem cells to treat incurable, widespread diseases like cancer. The Group will continue to proactively work on developing an ecosystem with doctors and hospitals in the various markets to educate and encourage the utilization of stem cells for various healthcare treatments.

On 15 December 2023, the Company received a notice from Ministry of Health ("MOH") directing the Company to stop, for a period up to six months, the collection, testing, processing and/or storage of any new cord blood and human tissues, or the provision of any new types of tests to clients in Singapore with effect on and from 15 December 2023 (the "Suspension"). As announced by the Company on 30 November 2023, the Suspension is in connection with the MOH's detection that certain cryogenic storage tanks based in Singapore had been exposed to temperatures outside of their normal temperature range, and investigations by the MOH are ongoing. There is no certainty on the outcome of the ongoing investigations. This, along with the fixed costs being incurred during the Suspension, is expected to continue to have a negative financial impact in Singapore, which had in past years been the largest contributor to the revenue of the Group. The Company continues to cooperate fully with all relevant regulatory authorities to address the matter at hand.

Further, as previously announced by the Company, since the end of December 2023, the Company has also started sending donated cord blood samples from certain tanks under investigation to a third-party laboratory in Singapore licensed by MOH for testing in batches. Due to the uncertainty of the outcome of the ongoing testing which is estimated to be ready only in end-March 2024, the Company is at present unable to assess the exact financial impact of the temperature excursions and/or the investigations on the Company for the financial year ending 31 December 2024. However, if the results of the testing confirm that any of the affected tanks are adversely affected by the temperature excursions, such results may have a further adverse impact on the financial results of the Group for the financial year ending 31 December 2024.

The team will continue to work closely with the MOH to investigate and address the identified lapses related to the Singapore operations. The Group is committed towards working through this matter and making rectifications to improve our processes going forward.

The Group would like to emphasise that the Suspension and ongoing investigations are isolated to the Group's operations in Singapore and do not impact the operations of the subsidiaries located outside Singapore. The entities in the other markets outside of Singapore operate independently, with their own dedicated team, and adhere to their respective local laws and regulations.