On behalf of the Board, I hereby present the audited annual report of SSY Group Limited (the "Company") and its subsidiaries (collectively, the "Group") for the year ended 31 December 2015.
I. RESULT AND DIVIDEND DISTRIBUTION
The entire pharmaceutical market showed sluggish demands with escalating competitions during the year. Tenders for pharmaceuticals across the regions saw a slow progress as the low price tender strategy continued. The applications for intravenous infusion solution were limited and the prices of products declined. Facing numerous unprecedented difficulties, the Group achieved hard-won results with a stable growth sustained both in market share and operation under the tremendous pressure from the industry as a whole through different measures, including adjustments for tender strategies, enhancement of product mix, development of new markets and products and reduction of production and operating costs.
During the year, revenue increased by 6.2% compared to last year to HK$2,222 million while the net profits from continuing operations amounted to HK$403 million, representing a year-on-year decrease of 17.9%.
During the year, the Company distributed a special dividend of approximately HK$510 million and repurchased shares of approximately HK$530 million, resulting a decrease in the Group's net asset value. As such, the Company has resolved not to declare any final dividend. We would like to emphasize that dividends distribution to shareholders will continue on an annual basis.
II. BUSINESS REVIEW
(1) Sales of Products
Based on the foundation of reinforcing and expanding the existing advantages in provincial and city level markets, the Company took advantage of its respected brand name during 2015 to shift the focus to the lower end of the market, devoted its efforts to develop the primary healthcare market and continue to expand the end-coverage of the Company's advantageous products such as soft bag infusion solutions and therapeutic infusion solutions, thereby ensuring the continuous growth of the our major products. We also participated in the tendering of certain provinces and regions in order to develop new markets and expand the market presence of our products.
On the other hand, in view of mitigating the adverse effects brought by industry and pricing policies, the Group closely integrated its production and operation as well as constantly improved the efficiency of operating facilities by means of strengthened and optimised management, for example, proactive implementation of technical innovations such as integrated bottle ring pull, efficient utilisation of energy (water, electricity and gas, etc.), monitoring the purchase, production and utilisation of packaging materials, raw materials and auxillary material (plastic granules and co-extrusion film, etc.) and taking structural adjustments and costs reduction as key measures to improve quality and enhance efficiency.
During 2015, the Company completed sales of approximately 397 millions of standard soft bags and approximately 97 millions of upright soft bags, representing an increase of approximately 7% and 250% respectively as compared to last year. The dominance of our core products was further recognised.
(2) Research and Development of New Products
The research and development of new products made a satisfactory progress during the year. The Company completed the clinical research of Type 1.1 new drug Levornidazole and Type 3.1 new drug Blonanserin, obtained clinical approvals for Type 3.1 new drugs including Roflumilast Tablets, Acetaminophen Injection, Ibuprofen & Sodium chloride Injection and over 30 items of mainly Type 6 new drugs as well as other applications' approvals. The Company submitted applications for 22 new drugs products of various types while more than a hundred of products were under development, covering mental and neurological diseases, respiratory diseases, infectious diseases, dialysis and auxiliary treatment, rinsing solution and nutrition infusion solutions. Meanwhile, the Company obtained 9 patents including 3 invention patents; applied for 22 patents including 18 invention patents, obtaining fruitful results in intelligent property rights. All these created momentum for the Company's future development.
Capitalizing on the increasingly comprehensive innovative platform, the Company established a tier-structure with different subjects and young-to-middle-aged combination. The Company established the drug research institution based on the existing research and development centre in September 2015 and was granted approval for building a national post-doctorate scientific research workstation in October. Meanwhile, the chief researcher of the Company's drug research institution, Dr. Sun Lijie and the researcher; Dr. Wei Saili were elected as innovative talents of the "100 People Plan" of Hebei Province and Top Youth Talents of Hebei Province respectively, Dr. Yin Dianshu and Wang Lijiang were awarded as Top Talents of Shijiazhuang City, marking the Company's another step forward in developing high-level talents and consolidating industry-university-research. As such, the Company's innovation capability and strength were further improved.
The Company reached new standards in quality. Subsequent to being granted the quality award of the government of Shijiazhuang City in 2015, the Company received the quality award of the government of Hebei Province in 2016, reflecting the Company's leading position in the province in relation to enhancement of quality management and pursuit for outstanding efficiency.
(3) Key Projects
The Company's small liquid injections and modernised Chinese medicine projects were all completed during the year. The GMP certification had been passed and their production had already commenced up to date. An additional production of 5 billion tablets (granules) of oral preparations per year and 250 million units of PP and glass ampoule per year can be achieved after the commencement of full production. The establishment and production of oral preparations and small liquid injections can create beneficial effects on further enriching the product mix of the Company and promoting diversified product development.
(4) Acquisition of Asset and Business
In order to extend the chain of production of the Company, we wholly acquired a medical packaging materials manufacturer, Jiangsu Best New Medical Material Co., Ltd., to ensure the supply of raw materials and ancillary materials and further lower the production costs so as to significantly enhance the competitive edge of standard soft bags. In addition, we acquired 50%equity interest of Hebei Hanlin Biotechnology Co., Ltd. at the beginning of the year, through which to open the fields in biological polypeptides, antibodies medicines, molecular clinical diagnosis and biochemical reagent.
III. PROSPECTS FOR DEVELOPMENT
As there will not be substantial changes in the policies and developments in pharmaceutical industry in the whole country during 2016, pharmaceutical manufacture enterprises will still be facing intensive challenges in the market. As such, elimination within intravenous infusion solutions industry will continue. The Company will capture the two major momentums — marketing and research & development ("R&D") — to build a solid market foundation, expand business scope, take effective cost control, improve operational efficiency, accelerate scientific research and facilitate technology innovation to stimulate a diversified development for the Company.
This year, the Company will well expand the market of standard soft bag, double soft tube and double hard tube and upright soft bag infusion solution products and further strengthen the market sales of soft bags rinsing solutions, nutrition and therapeutic infusion solutions to bolster the leading position of the Company in the industry. The Company will also engage in the marketing and operation of glass ampoule and PP ampoule injection, expand the product sales of oral preparation, biological products and disinfectant to accelerate the development of product mix diversification and improve the Group's profitability as well as risk-resistant ability. We have planned to achieve the sales of 1.15 billion intravenous infusion products, of which the sales of various soft bags will be no less than 600 million. The plan for selling over 80 million various ampoule products will start to realise the sales increment. Our accelerating marketing efforts in new products will create a brand new growth trend.
In respect of new product development, the Company will seize the opportunity of the speeded-up approval from the PRC to stride steps on driving new product development. We will highlight the distinguished features and characteristics on our products and focus on the integration between exclusive and "short, flat and expedite" general product categories to reasonably allocate time and financial resources for clinical study. It is expected that the production approval for Type 1.1 new drug Levornidazole and Type 3.1 new drug Blonanserin will be submitted, the 26 production approvals mainly for Type 6 new drug and 40 clinical approvals for new products will be obtained in 2016. Meanwhile, applications for 33 new products have been submitted to ensure the Company's long term development.
We are full of confidence on the future development of the Group. Leveraging on the competitive edges on our scale, quality and effective management in the industry, our superiority in infusion solution products among the industry will be further maintained in this challenging market. The R&D of new products over the years has started to reap a harvest, which will render a substantial driving force for the growth of the Group. We will be committed to bringing satisfactory return for our investors.
I would like to take this opportunity to express our gratitude to our investors and all staff in the Group for their support to the development of the Group.
Hong Kong, 30 March 2016