中国再生医学(08158) - 2018 - 年度财报

Corporate Information During the reporting period, the company's board and committee members underwent multiple changes, including resignations and new appointments - During the reporting period, the company's board and various committee members underwent multiple changes, including the resignation of executive, non-executive, and independent non-executive directors, and the appointment of a new Chairman, Executive Director, and Chief Executive Officer[6][8] Chairman's Statement Chairman's Statement Summary In 2018, new management implemented strategic adjustments focusing on market-oriented operations, strengthening teams, expanding tissue engineering to cosmetics, and restructuring stem cell business, with future growth centered on tissue engineering and global promotion of artificial cornea 'Aierxin' - In 2018, the Group implemented three major strategic adjustments: strengthening the senior management team with experienced biotechnology professionals; expanding the tissue engineering product line from limited medical applications to larger potential markets like anti-aging and cosmetics; and restructuring the stem cell product line to capture the stem cell storage market and develop broader applications[14][15] - Future outlook focuses on four major business segments: Tissue Engineering: centered on the artificial cornea product 'Aierxin', expanding domestic markets while committing to global promotion, including Belt and Road regions; Dermatology: promoting technology commercialization, collaborating with cosmetic brands to enter medical aesthetics and cosmetic markets; Stomatology: striving for stable growth, retaining core technologies and employees, and exploring new channels; Stem Cells: leveraging established high-standard bases in Hong Kong and mainland China, expecting business growth for the Group[17][18][19] Management Discussion and Analysis Operations Review The Group pursued a 'dual-core, dual-wing' strategy, focusing on stem cells and tissue engineering for big health and medical aesthetics, optimizing product lines into activated cells, tissue-engineered cornea, and oral materials, while advancing third-generation artificial cornea R&D and expanding overseas operations - The Group established a 'dual-core, dual-wing' overall development strategy, with stem cells and tissue engineering as two core businesses, and big health and medical aesthetics as two future strategic growth points[29] - The Group formed three core business lines: Activated Cell Product Line: including tissue-engineered skin 'Antifu', newborn biological resource storage, stem cell storage, medical aesthetics, and big health-related products; Tissue-Engineered Cornea Product Line: with the core product being the world's first listed bio-engineered cornea 'Aierxin'; Tissue-Engineered Oral Material Product Line: including natural calcined bone repair material 'Gelu' and others[43][60][61] - Significant R&D progress was made, with the independently developed third-generation tissue-engineered cornea successfully developed and entering the approval process, expected to expand applicable populations and improve surgical success rates[40] - The Group actively expanded overseas markets, completing company establishment and operations in the United States and the United Kingdom, with overseas sales of tissue engineering products now in the implementation phase[71] Financial Review In FY2018, the Group's financial performance sharply deteriorated, with significant revenue decline and a substantial increase in annual loss, primarily driven by reduced sales, strategic adjustments, and large impairment losses on assets and financial instruments, leading to a significant reduction in net assets Key Financial Indicators for FY2018 | Indicator | FY2018 (12 months) | FY2017 (8 months) | YoY Change | | :--- | :--- | :--- | :--- | | Revenue | HKD 73 million | HKD 503.7 million | -85.5% | | Gross Profit | HKD 27 million | HKD 147.3 million | -81.7% | | Gross Profit Margin | 37.0% | 29.2% | +7.8pp | | Annual Loss | HKD 1,283.9 million | HKD 166.2 million | Loss widened | | Loss Attributable to Owners of the Company | HKD 1,193.5 million | HKD 158.5 million | Loss widened | | Loss Per Share | HKD 6.787 cents | HKD 0.901 cents | Loss widened | Revenue Breakdown by Business Segment | Business Segment | FY2018 (12 months) | FY2017 (8 months) | YoY Change | | :--- | :--- | :--- | :--- | | Skin, Cosmetics and Others | HKD 12.5 million | HKD 71.2 million | -82.4% | | Ophthalmic Products | HKD 5.3 million | HKD 55.6 million | -90.4% | | Oral Products and Others | HKD 19.4 million | HKD 63.6 million | -69.5% | | Cell and Big Health Products and Services | HKD 6.9 million | HKD 1.9 million | +271.0% | | Medical Devices | HKD 28.9 million | HKD 311.5 million | -90.7% | - The significant increase in annual loss was primarily attributable to: Reduced gross profit: due to decreased sales of proprietary products, gross profit decreased by approximately HKD 120.3 million; Expected credit losses: due to the adoption of new accounting standards, expected credit losses on trade receivables of HKD 139 million were recognized; Asset impairment: due to poor financial performance of business units and changes in operating strategies, impairment losses on goodwill, property, plant and equipment, and intangible assets totaled approximately HKD 646.7 million; Financial asset losses: financial assets at fair value through profit or loss generated a fair value loss of approximately HKD 113.8 million[76] - As of December 31, 2018, the Group's net assets were HKD 567.3 million, a 68.7% decrease from HKD 1.8133 billion at the end of 2017, primarily due to the substantial loss incurred during the year[76] Contractual Arrangements This section details the Group's control over several PRC domestic companies via contractual arrangements (VIE structure), enabling control and financial consolidation of foreign investment-restricted businesses like human stem cell R&D and application, outlining the rationale, terms, risks, and financial impact Jiangsu Ding Xuan Contractual Arrangements To circumvent Chinese legal restrictions on foreign investment in human stem cell R&D, the Group controls Jiangsu Ding Xuan through contractual arrangements, which generated no revenue and incurred a net loss in FY2018 - The reason for adopting contractual arrangements is that Jiangsu Ding Xuan's business in human stem cell R&D and application technology falls under areas prohibited for foreign investment by Chinese law, preventing the Group from directly acquiring its equity[92] Summary of Jiangsu Ding Xuan Financial Data | Indicator | FY2018 (HKD thousand) | FY2017 (HKD thousand) | | :--- | :--- | :--- | | Revenue | – | – | | Net Loss | 2,003 | 3,910 | | Total Assets | 4,386 | 9,034 | AK (Suzhou) Contractual Arrangements The Group controls AK (Suzhou) through contractual arrangements due to its foreign investment-restricted human stem cell R&D business, which generated revenue but incurred a significant net loss in FY2018 - The reason for adopting contractual arrangements is that AK (Suzhou)'s business in human stem cell R&D and application technology falls under areas prohibited for foreign investment by Chinese law[140] Summary of AK (Suzhou) Financial Data | Indicator | FY2018 (HKD thousand) | FY2017 (HKD thousand) | | :--- | :--- | :--- | | Revenue | 3,244 | 736 | | Net Loss | 53,256 | 4,968 | | Total Assets | 28,590 | 76,964 | Tianjin Weikai Contractual Arrangements The Group controls Tianjin Weikai through contractual arrangements, as it engages in the design and manufacturing of preclinical cell and stem cell-related equipment, generating revenue but incurring a substantial net loss in FY2018 - The reason for adopting contractual arrangements is that Tianjin Weikai's business in human stem cell R&D and application technology falls under areas prohibited for foreign investment by Chinese law[172] Summary of Tianjin Weikai Financial Data | Indicator | FY2018 (HKD thousand) | FY2017 (HKD thousand) | | :--- | :--- | :--- | | Revenue | 1,643 | 742 | | Net Loss | 107,385 | 7,317 | | Total Assets | 10,665 | 101,990 | Other Information This section discloses other important information, including the company's sponsorship commitment to Oxford University, asset pledges for bank loans, and employee numbers as of the reporting period end - The company signed a sponsorship agreement with Oxford University, committing GBP 9 million for cell therapy and tissue engineering research, with GBP 5.05 million paid as of December 31, 2018[206] - As of December 31, 2018, the Group had 334 employees, a decrease from 449 in 2017, with total annual employee remuneration approximately HKD 110.6 million[206] Biographical Details of Directors and Chief Executives This section provides detailed biographies of executive directors, independent non-executive directors, and chief executives, detailing their professional backgrounds, industry experience, and roles within the company - This section provides detailed biographies of executive directors, independent non-executive directors, and chief executives, including Dr. Ye Lei (Chairman of the Board), Mr. Wang Xuejun (Chief Executive Officer), Mr. Chan Ping Huen, Mr. Wong Yiu Kit, and Dr. Fang Jun, detailing their professional backgrounds, industry experience, and roles within the company[208][216][218] Corporate Governance Report This report details the company's adherence to corporate governance principles, board composition, committee structures, and risk management practices - During the reporting period, the company complied with most provisions of the Corporate Governance Code, with a single deviation from code provision A.6.7, where an independent non-executive director was unable to attend the 2018 Annual General Meeting due to other commitments[234][235] - The Board of Directors comprises five directors, including two executive directors and three independent non-executive directors, meeting the requirement that independent non-executive directors constitute at least one-third of the Board, with the roles of Chairman and Chief Executive Officer held by different individuals to ensure checks and balances[248][250][289] - The company has established an Audit Committee, Nomination Committee, and Remuneration Committee, each predominantly or entirely composed of independent non-executive directors, holding regular meetings to fulfill their duties, including reviewing financial statements, nominating directors, and reviewing remuneration policies[295][310][320] - The Board of Directors bears overall responsibility for the Group's risk management and internal control systems, with an established enterprise risk management framework and an internal audit department reporting directly to the Audit Committee[348][351] Environmental, Social and Governance Report 2018 This report outlines the company's environmental, social, and governance policies and performance in accordance with HKEX guidelines - This report is prepared in accordance with Appendix 20 of the HKEX GEM Listing Rules, 'Environmental, Social and Governance Reporting Guide', disclosing the company's policies and performance in environmental protection, employment and labor practices, operating practices, and community investment[374] Summary of 2018 Environmental Performance | Indicator | Emission Data (Approx) | Unit | | :--- | :--- | :--- | | Total Greenhouse Gas Emissions | 3,542 | tonnes of CO2 equivalent | | Greenhouse Gas Emission Intensity | 10.6 | tonnes of CO2 equivalent/employee | | Total Water Consumption | 4,418,484 | cubic meters | | Total Electricity Consumption | 4,418,484 | kWh | | Hazardous Waste | 1 | tonnes | | Non-Hazardous Waste | 15 | tonnes | - As of December 31, 2018, the Group had 334 employees, with 52% female and 48% male; employees aged 30-40 accounted for the highest proportion at 47%; and those with bachelor's degrees also represented the highest proportion at 47%[434][435][436] - The company established a comprehensive supply chain management system, evaluating suppliers and signing customized contracts with agents to strengthen sales management, while strictly monitoring product quality in terms of product responsibility, adhering to ISO 13485:2016 quality management system, and implementing stringent customer data privacy protection measures[453][455] Directors' Report This report covers key corporate actions, including dividend policy, share option scheme changes, major shareholder information, and top customer and supplier details - The Board of Directors does not recommend the payment of a final dividend for the year ended December 31, 2018[473] - During the reporting period, changes occurred in share options under the company's share option scheme, including a significant number of options lapsing due to director resignations, such as the 500 million share options granted to Mr. Chen Chunguo, which all lapsed upon his resignation[497][699] - Major shareholder holdings were disclosed, with China Orient Asset Management Co, Ltd holding approximately 32.08% of shares through its controlled entities as of December 31, 2018, making it the largest shareholder[712] - During the reporting period, sales to the Group's top five customers accounted for approximately 50% of total turnover, with the largest customer accounting for 17%; purchases from the top five suppliers accounted for approximately 54% of total purchases, with the largest supplier accounting for 27%[718] Independent Auditor's Report This report presents the auditor's unmodified opinion on the consolidated financial statements and highlights key audit matters - The auditor, BDO Limited, issued an unmodified opinion on the company's consolidated financial statements for 2018, deeming them to present a true and fair view of the Group's financial position and performance[746] - The report identified two key audit matters: Impairment of goodwill, other intangible assets, and property, plant and equipment: due to the Group's continuous losses, the carrying amounts of these assets posed significant impairment risks; management engaged independent valuers for assessment, ultimately confirming substantial impairment losses; Impairment of trade receivables: assessing the recoverability of trade receivables involved significant management judgment, especially after adopting the new Expected Credit Loss (ECL) model; impairment losses of HKD 139 million were recognized during the year[751][754] Consolidated Financial Statements Consolidated Statement of Profit or Loss and Other Comprehensive Income For the year ended December 31, 2018, the Group recorded significantly reduced revenue and gross profit, leading to a substantial annual loss primarily driven by large asset impairment losses, expected credit losses, and fair value losses on financial assets Summary of Consolidated Statement of Profit or Loss (HKD thousand) | Item | 2018 (12 months) | 2017 (8 months) | | :--- | :--- | :--- | | Revenue | 72,952 | 503,680 | | Gross Profit | 27,006 | 147,296 | | Loss Before Income Tax | (1,352,799) | (171,826) | | Annual Loss | (1,283,915) | (166,216) | | Loss Attributable to Owners of the Company | (1,193,501) | (158,492) | Consolidated Statement of Financial Position As of December 31, 2018, the Group's total assets significantly decreased due to impairment of non-current assets, while total liabilities were substantial, and total equity plummeted due to the large annual loss Summary of Consolidated Statement of Financial Position (HKD thousand) | Item | December 31, 2018 | December 31, 2017 | | :--- | :--- | :--- | | Non-Current Assets | 556,282 | 2,351,617 | | Current Assets | 866,641 | 1,176,356 | | Total Assets | 1,422,923 | 3,527,973 | | Current Liabilities | 623,099 | 761,733 | | Non-Current Liabilities | 232,561 | 952,916 | | Total Liabilities | 855,660 | 1,714,649 | | Total Equity | 567,263 | 1,813,324 | Consolidated Statement of Changes in Equity During the reporting period, equity attributable to owners of the company significantly decreased from the beginning to the end of the year, primarily driven by the substantial annual loss incurred - Equity attributable to owners of the company decreased from HKD 1,760,032 thousand at the end of 2017 to HKD 605,779 thousand at the end of 2018, primarily due to an annual loss of HKD 1,193,501 thousand[783][787] Consolidated Statement of Cash Flows In 2018, the Group experienced a net decrease in cash and cash equivalents, with positive cash flow from operating and investing activities offset by significant net cash outflow from financing activities, primarily for debt repayment Summary of Consolidated Statement of Cash Flows (HKD thousand) | Item | 2018 (12 months) | 2017 (8 months) | | :--- | :--- | :--- | | Net Cash From/(Used In) Operating Activities | 18,751 | (193,291) | | Net Cash From/(Used In) Investing Activities | 350,157 | (559,471) | | Net Cash (Used In)/From Financing Activities | (579,362) | 419,296 | | Net Decrease in Cash and Cash Equivalents | (210,454) | (333,466) | | Cash and Cash Equivalents at Year-End | 20,062 | 244,373 | Notes to the Financial Statements This section provides detailed notes to the financial statements, including company information, a summary of significant accounting policies, the impact of newly adopted HKFRS 9 (Financial Instruments) and HKFRS 15 (Revenue from Contracts with Customers), and detailed explanations and breakdowns of various financial statement items such as revenue composition, asset impairment, financial instruments, and related party transactions - The company adopted new Hong Kong Financial Reporting Standards HKFRS 9 (Financial Instruments) and HKFRS 15 (Revenue from Contracts with Customers) effective January 1, 2018; the adoption of HKFRS 9 resulted in changes to financial asset classification and impairment models, shifting from an 'incurred loss model' to an 'expected credit loss (ECL) model', and led to adjustments to opening retained earnings[797][800] Financial Summary This section provides a summary of the Group's performance, assets, and liabilities over the past five financial years for trend analysis - This section provides a summary of the Group's performance, assets, and liabilities over the past five financial years for trend analysis (Note: specific data is on page 268 of the original report and not included in the provided content)[5]