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China Nepstar Chain Drugstore Q4 revenue increased 6.5%

Staff writer |
China Nepstar Chain Drugstore announced its unaudited financial results for the fourth quarter and fiscal year ended December 31, 2015.

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During the fourth quarter of 2015, China Nepstar opened 57 new stores and closed 24 stores. As of December 31, 2015, China Nepstar had a total of 1,998 directly operated stores.

Revenue for the fourth quarter of 2015 increased by 6.5% to RMB905.2 million ($139.7 million) from RMB850.1 million for the same period in 2014. Same store sales for the 1,716 stores for the fourth quarter of 2015 increased by 12.5% compared to the same period in 2014.

The increase in revenue and same store sales was primarily attributable to in-store promotional initiatives and improved average store output.

Fourth quarter revenue contribution by product category was 21.7% from prescription drugs (21.6% for the same period in 2014); 46.9% from over-the-counter (OTC) drugs (43.2% for the same period in 2014); 9.3%from nutritional supplements (11.6% for the same period in 2014); 4.3%from herbal products (4.2% for the same period in 2014); and 17.8% from convenience and other products (19.4% for the same period in 2014).

Gross profit for the fourth quarter increased to RMB405.0 million ($62.5 million) from RMB360.9 million for the same period in 2014. Gross margin in the fourth quarter of 2015 was 44.7%, compared with 42.4% for the same period in 2014.

The company's portfolio of private label products expanded to 2,172 types of products as of December 31, 2015. Sales of private label products represented approximately 12.0% of revenue and 16.3% of gross profit for the fourth quarter of 2015.

Sales, marketing and other operating expenses as a percentage of revenue decreased slightly to 32.7% for the fourth quarter of 2015 from 33.0% for the same period of 2014.

General and administrative expenses as a percentage of revenue were 5.0% for the fourth quarter of 2015, compared to 3.2% for the same period of 2014. This increase was mainly due to the bonus award to certain subsidiaries which have met the performance indicators.

Income from operations in the fourth quarter of 2015 was RMB59.0 million ($9.1 million) compared with income from operations of RMB50.4 million for the same period in 2014. This increase was mainly due to our revenue growth and improved margin.

Interest income for the fourth quarter of 2015 was RMB1.8 million ($0.3 million), compared with RMB1.4 million for the same period of 2014.

The company's income tax expense was RMB23.5 million ($3.6 million) for the fourth quarter of 2015, compared with RMB17.9 million for the same period in 2014. The effective tax rate for the fourth quarter of 2015 was 38.7%, compared to 34.9% for the same period in 2014.

Net income for the fourth quarter of 2015 was RMB37.3 million ($5.8 million), or RMB0.38($0.06) basic and diluted income per ADS, compared to net income of RMB33.4 million, or RMB0.34 basic and diluted income per ADS for the fourth quarter of 2014.

As of December 31, 2015, China Nepstar had approximately 197.4 million outstanding ordinary shares. Each ADS represents two ordinary shares of China Nepstar.

In the fourth quarter of 2015, net cash inflow provided by operating activities was RMB52.3million ($8.1 million), compared to net cash inflow of RMB44.1 million for the same period in 2014.

Fiscal year 2015

In 2015, China Nepstar opened 168 new stores and closed 150 stores. As of December 31, 2015, Nepstar had a total of 1,998 stores in operations.

Total revenue for 2015 increased to RMB3,232.4 million ($499.0 million) from RMB2,953.3 million in 2014. Same store sales (for the 1,716 operating stores opened before December 31, 2013 and which remained in operations as of December 31, 2015) for 2015 increased by 13.8% compared to 2014.

The increase in revenue and same store sales was driven by the closure of underperforming stores and our efforts in improving sales performance.

In 2015, revenue contribution from prescription drugs was 22.9%, OTC drugs was 43.3%, nutritional supplements was 11.2%, herbal products was 4.5% and convenience and other products was 18.1%. Revenue from private label products accounted for 13.8% of total revenue and 20.1% of gross profit, respectively.

Gross profit was RMB1,347.8 million ($208.1 million) for 2015 compared to RMB1,230.5 million in 2014. Gross margin was 41.7% in 2015, compared to 41.7% in 2014.

Total operating expenses decreased to 39.5% of total revenue in 2015, compared to 41.4% recorded in 2014. Income from operations was RMB61.7 million ($9.5 million) for 2015, compared to loss from operations of RMB2.9 million for 2014.

Interest income for 2015 was RMB6.5 million ($1.0million), compared to RMB7.2 million in 2014. Dividend income from cost method investments was RMB3.9 million ($0.6million) for 2015, compared to RMB5.9 million in 2014. Other income was RMB1.0 million ($0.2 million) in 2015, compared to RMB3.1 million in 2014.

The company's effective tax rate was 45.5% in 2015, compared to 208.4% in 2014. The company's income tax expense was RMB33.3 million ($5.1 million) for 2015, compared to RMB26.5 million in 2014.

t income was RMB39.8 million ($6.1 million) for 2015, which represented RMB0.40 ($0.06) basic and diluted income per ADS, compared to a net loss of RMB13.8 million in 2014, which represented RMB0.14 basic and diluted loss per ADS.

Net cash inflows from operating activities were RMB143.6 million ($22.2 million) for 2015, compared with cash outflows of RMB58.7 million recorded in 2014.

The improvement in net cash inflows was primarily due to the revenue growth, improved margins and improved efficiency in working capital management.

As of December 31, 2015, China Nepstar's total cash, cash equivalents, bank deposits and restricted cash were RMB365.7 million ($56.5 million) and its shareholders' equity was RMB871.4 million ($134.5 million), compared to RMB316.9 million and RMB831.6 million, respectively, as of December 31, 2014.


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