12th Oct 2005 07:01
Asian Citrus Holdings Ltd12 October 2005 Under embargo 7.00am, Wednesday 12 October 2005 Asian Citrus Holdings Limited Preliminary Results for the year ended 30 June 2005 Asian Citrus Holdings Limited ("Asian Citrus"), the largest orange plantationowner and operator in China, announces preliminary results for the year ended 30June 2005; its first results as a quoted company on the AIM market of the LondonStock Exchange Key Highlights 2005 2004 2005 2004 % (RMBm) (RMBm) (£m*) (£m*) changeTurnover 322.3 275.2 22.6 19.3 +17.1Profit from operations 273.0 165.1 19.2 11.6 +65.4Pre-tax profit 269.8 164.2 18.9 11.5 +64.3Net profit 248.8 151.8 17.5 10.7 +64.0Basic EPS RMB4.98 RMB3.04 34.9p 21.3p +63.8 *Conversion at £1 = RMB14.25 •Net cash inflow of RMB203.6m (£14.3m) from operating activities •Approximately 1.02 million of orange trees productive during the year •Total output increased 17% to 96,977 tonnes •Further 50,000 trees planted at Hepu in six months to 30 June •Approximately RMB189m (£13.3m) invested in development of Xinfeng in the year €400,000 trees planted at Xinfeng - first harvest expected in winter 2009 Tony Tong, Chairman, commented:"I am delighted to announce our first results as a quoted company. From aturnover improvement of 17% we have produced a two thirds increase in pre-taxprofits to RMB269.8m (£18.9m) and generated net cash of RMB203.6m (£14.3m) fromoperations. "We achieved an important milestone in the Group's development during 2005. On 3August 2005, the Company attained the status of a public company when its sharesstarted trading on the AIM market of the London Stock Exchange. In total,10,775,862 shares were issued at 112 pence of which 9,072,813 shares were newshares raising net proceeds of approximately RMB117 million for the Company. "Building on the management team's professional expertise, solid experience andmarket strategy, Asian Citrus aims to be one of the PRC's leading industrializedcultivators of agricultural produce. Turnover increased by 17% to RMB322.3million for the year ended 30 June 2005 from RMB275.2 million for the year ended30 June 2004. Due to careful field management and economies of scale, operatingcosts were further reduced when compared with 2003/2004. I am pleased that thefinal figures of both the turnover and profit before tax (before gains andlosses on biological assets) are better than the original estimates in July'sAIM Prospectus. "We will explore other business opportunities within the fruit industry and weare negotiating with several national supermarket chains in the PRC in order todevelop direct sales into the retail market. This should lead to an increase inprofit margins as well as the development of closer relationships with endcustomers. In addition, leveraging on our pioneer position within the fruitindustry, the Group will continue to look into different opportunities in orderto further diversify the business and develop shareholder value and potentialreturns. "We believe that Asian Citrus will continue to grow and strengthen its leadingposition with the management's long-term, comprehensive vision. Following theadmission to AIM in August 2005, the Group has further strengthened itsfinancial position and is well-prepared for any future challenges andopportunities." For further information please contact: Tony Tong, Chairman and Chief Executive Officer, Asian Citrus Tel: +852 2559 0323Eric Sung, Group Finance Controller, Asian Citrus Terry Garrett, John Moriarty, Helen ThomasWeber Shandwick Square Mile Tel: 020 7067 0700 Chairman's statement ROBUST GROWTH AND CORPORATE GOVERNANCE Milestone Development Admitted to the AIM market of the London Stock Exchange Asian Citrus Holdings Limited has achieved an important milestone in itsdevelopment during 2005. On 3 August 2005, the Company attained the status of apublic company when its shares started trading on the AIM market of the LondonStock Exchange. In total, 10,775,862 shares were issued at 112 pence of which9,072,813 shares were new shares raising net proceeds of approximately RMB117million for the Company. Issuance of HK$100 million convertible notes In March 2005 the Group issued HK$100 million of convertible notes for thepurpose of raising funds for the development of the Group's two existingplantations. The issue was well received by the investors and also helped theGroup to enlarge its investor base in preparation for the subsequent listing inAugust 2005. Robust Operating Performance in 2004/2005 Building on the management team's professional expertise, solid experience andmarket visions, Asian Citrus aims to be one of the PRC's leading industrializedcultivators of agricultural produce. Turnover increased by 17% to RMB322.3million for the year ended 30 June 2005 from RMB275.2 million for the year ended30 June 2004. Due to careful field management and economies of scale, operatingcosts were further reduced when compared with 2003/2004. In July's AIMprospectus, we estimated that the Group's turnover and profit before tax (beforegains and losses on biological assets) for the year ended 30 June 2005 were notless than approximately RMB322 million and RMB162 million respectively. I ampleased that the final figures of both the turnover and profit before tax(before gains and losses on biological assets) are better than the originalestimated amounts. New Areas of Experience Accountability As Chairman of Asian Citrus, a public company, I feel deeply about theaccountability of the Board of Directors and the management team towards theinterest of all shareholders, particularly our minority shareholders. Allshareholders are our valuable 'business partners' and stakeholders. Withouttheir support, Asian Citrus would not have grown into what it is today. Transparency To safeguard shareholders' interest, the Board is determined to achieve a highlevel of transparency in the company's business model, underlying operations andstrategic investment. The Board is therefore committed to ensuring that allrelevant new information is regularly and efficiently communicated to the marketand shareholders. Corporate Governance Being a growing company and also a young public company, the Board appreciatesthe importance of corporate governance. The Directors therefore plan tostrengthen the Board as well as the senior management team with a number of keynew appointments in the near future. The Company also set up the Audit Committeeand Remuneration Committee on 1 July 2005 in order to strengthen the structurefor efficient corporate governance. Investor Relations The Board recognizes that a meaningful investor relations programme is importantto optimize shareholder value. It should not only help to explain the unique andpioneering business model of Asian Citrus to investors, but also help the Groupto create an inter-active communication channel with all investors. In thisconnection, the Board has decided to launch a corporate website as a base forcommunication between Asian Citrus and its shareholders and potential investors. Shareholder Value To maximize shareholders' value, the Board is committed to observing a strictset of internal financial policies. Depending on the capital expenditure planand working capital requirements of the Group, the Board intends to adopt adividend policy that will recommend a dividend payout equivalent to at least 10%of the net profits starting from the year ending 30 June 2006. As opportunitiesarise, management will consider different ways of fund raising in order to caterfor the Group's investment needs whilst maintaining an appropriately structuredbalance sheet. As a yardstick, to avoid over-expansion, management considersthat it is prudent to maintain gearing of less than 40% of the Group's netassets and an interest coverage of not less than four times. Outlook of 2005/2006 - A Year of Consolidation Continuous development of Xinfeng Plantation The Xinfeng Plantation is still under development. Over the past 12 months, theGroup has further invested approximately RMB189 million to develop the XinfengPlantation and an additional 400,000 Winter Oranges trees have been planted.Looking into the future, we will continue to invest in the development of theXinfeng Plantation, which is expected to be completed by the end of 2006. Thefirst harvest from the Xinfeng Plantation is expected to come in the winter of2007. Productivity in 2005/2006 Over the past few years, the Group has experienced substantial growth in boththe production output and turnover as a result of the increasing maturity of theorange trees at the Hepu Plantation. Looking to the coming year, we expect thatthe production volume from the Hepu Plantation will continue to increase byapproximately 12-14% due to the increasing maturity of the orange trees. Quality Control and Brand Building Asian Citrus has been a successful operator in the citrus industry and the Chinamarket over the past few years. After trading in the Company's shares began onAIM, the important position Asian Citrus occupies within its market has beenfurther recognized by its own customers and potential overseas customers. Activesteps have been taken by the Company to establish a natural brand and the Boardis of the view that quality control should be carefully maintained, especiallyin strict compliance with the Green Food Standards implemented by the ChinaGreen Food Development Centre ('CGFDC'). Prospects We will explore other business opportunities within the fruit industry and weare negotiating with several national supermarket chains in the PRC in order todevelop direct sales into the retail market. This should lead to an increase inprofit margins as well as the development of closer relationships with endcustomers. In addition, leveraging on our pioneer position within the fruitindustry, the Group will continue to look into different opportunities in orderto further diversify the business and develop shareholder value and potentialreturns. We believe that Asian Citrus will continue to grow and strengthen its leadingposition with the management's long-term, comprehensive vision. Following theadmission to AIM in August 2005, the Group has further strengthened itsfinancial position and is well-prepared for any future challenges andopportunities. Tony TongChairman12 October 2005 Review of Operations Admission to AIM on 3 August 2005 represented a landmark in the Group's history.In the Group's first results as an AIM quoted company, it is the Board'spleasure to report record results for the year to 30 June 2005 with a 65%increase in profits before tax to RMB270.3m. The Group is engaged in the cultivation and sale of oranges and currently ownsand operates two orange plantations in PRC, Hepu Plantation, which wasresponsible for the Group's entire production in the year to 30 June 2005, andthe newer Xinfeng Plantation. HEPU PLANTATION The Hepu Plantation is located approximately 20 km from the southern coastalcity of Beihai in the Guangxi Zhuang Autonomous Region. The plantation occupiesapproximately 30.9 sq. km of land and has been producing fruit for the last fiveyears. As at 31 December 2004, the Hepu Plantation contained approximately601,000 Winter Orange trees and approximately 644,000 Summer Orange trees. Ofthese, approximately 1.02 million orange trees were productive during the yearended 30 June 2005. During the six months ended 30 June 2005, another 50,000Winter Orange trees were planted which are expected to produce their firstharvest in 2009. The total output for the year ended 30 June 2005 was approximately 96,977 tonnescompared to 83,170 tonnes for the year ended 30 June 2004, which represents aninter-year increase of 16.6%. The increase was due to the increasing maturity ofthe orange trees and the accumulation of agricultural experience for bettermaintenance of the orange trees. XINFENG PLANTATION The Xinfeng Plantation is located in the Jiangxi province in southeast PRC. TheGroup has leased a total 37.1 sq. km of land to develop the Xinfeng Plantation,and had, as at 31 December 2004, fully developed approximately 6.7 sq. km ofthat, planting 400,000 Winter Orange trees. The first harvest of these orangesis expected to occur during winter of 2007. During the six months ended 30 June 2005, another approximately 6.7 sq. km ofland has been fully developed and planted with an additional 400,000 WinterOrange trees. The first harvest of these oranges is expected to occur duringwinter of 2009. During the year ended 30 June 2005, approximately RMB189 million has beeninvested for the development of the Xinfeng Plantation. The contracted capitalcommitment was approximately RMB129 million as at 30 June 2005. It is expectedthat the entire plantation will be fully developed by the end of 2006. CUSTOMERS During the year ended 30 June 2005, the Group sold its oranges to fruitdistributors and wholesalers in PRC who are engaged in the trading of fruitproduce. The Group's current customers can be divided into the following threecategories: - Corporate customers comprise companies that distribute oranges to a variety of organizations including large retailers. - Wholesale customers who distribute oranges to wholesale markets, usually selling to small retailers. - Sole proprietors, who are also wholesalers, but typically have no fixed location. They sell to a variety of different wholesale markets within PRC. SALES AND MARKETING The Group's sales team comprises 65 staff, divided into four teams, coveringEastern, Southern, Western and Central China. The sales teams, who receive acommission based on sales, are responsible for developing business relationshipswith existing clients and for establishing new relationships with potentialclients. In addition, the sales teams provide market research information on theprice of oranges and report these to the Company. The sales teams are supportedby limited advertising and promotional programme during the period immediatelybefore each harvest. Originally, the Group's strategy was to price oranges by grading them into threecategories and pricing the oranges according to their grade. However, withgrowth in demand, the Group does not currently grade the oranges unlessspecifically asked to do so by customers (and then does so at their expense).The Group has now adopted a policy of selling oranges at a single flat price toall customers. The average selling prices of Winter Oranges and Summer Orangeswere about RMB2.48 and RMB3.82 per kg respectively. RESEARCH AND DEVELOPMENT The Directors believe that research and development is crucial to the long-termdevelopment of the Group. Recommendations from the Group's research anddevelopment team assist the Group to continue to develop and grow high qualityoranges. The R&D expenditure of the year was approximately RMB4.3 million,representing an inter-year increase of 5%. The Group's research and development team is located at the Hepu Plantation andcurrently comprises 17 staff. This team is responsible for conducting qualitycontrol checks on raw materials, seedlings, rootstocks and oranges, and forfurther research and development projects. Major research and developmentprojects that the team has undertaken in the past include the development ofimproved species of oranges, development of techniques for cross-breeding ofselected species, and application of 'green food' and organic plantationtechniques. The Group's research and development team has also collaborated with researchersfrom various government academic and government research institutions, includingthe Guangxi Citrus Research Institute and the Guangdong Entomology ResearchInstitute in PRC, to undertake specific research and development projects. Suchprojects included research on CGFDC 'green food' production techniques andpreventive techniques against plant disease for Summer Oranges. Consolidated income statementFor the year ended 30 June 2005 Year ended 30 June 2005 2004 RMB'000 RMB'000 Turnover 322,313 275,208Gain arising from changes in fair value less estimated point-of-sale costs of biological assets 103,340 10,034Other revenue 25 4 __________ __________ 425,678 285,246 Inventories used (85,424) (62,556)Staff costs (13,131) (10,731)Depreciation (11,764) (11,276) Other operating expenses (41,572) (35,547)Write off of biological assets (782) - __________ __________ Profit from operations 273,005 165,136 Finance income 348 46Finance expenses (3,575) (987) __________ __________ Net finance cost (3,227) (941) __________ __________ Profit from ordinary activities before taxation 269,778 164,195 Taxation (20,970) (12,380) __________ __________ Profit attributable to shareholders 248,808 151,815 ========== ========== Basic earnings per share RMB4.98 RMB3.04 Diluted earnings per share RMB4.87 RMB3.04 ========== ========== Consolidated balance sheetAs at 30 June 2005 As at June 30 2005 2004 RMB'000 RMB'000ASSETS Non-current assetsProperty, plant and equipment 274,184 206,373Land use rights 55,372 29,868Construction-in-progress 315,656 189,652Biological assets 509,206 402,148Deferred development costs 7,000 9,000 __________ __________ 1,161,418 837,041Current assetsInventories 839 252Other receivables 7,906 28,288Cash and bank balances 82,015 19,130 __________ __________ 90,760 47,670 __________ __________ Total assets 1,252,178 884,711 ========== ==========EQUITY AND LIABILITIES EquityIssued capital 5,300 106Reserves 1,085,188 826,573 __________ __________ 1,090,488 826,679 Non-current liabilitiesTaxation payable - 16,993Deferred tax liabilities 10,641 3,215Convertible bond 87,978 - __________ __________ 98,619 20,208 Current liabilitiesInterest bearing loans and borrowings - 20,000Trade payables and accrued expenses 7,051 4,552Due to related parties 14,600 3,557Due to shareholders 1,168 -Due to ultimate holding company 9,715 9,715Taxation payable 30,537 - __________ __________ 63,071 37,824 __________ __________ Total liabilities 161,690 58,032 __________ __________ Total equity and liabilities 1,252,178 884,711 ========== ========== Consolidated cash flow statementFor the year ended 30 June 2005 Year ended 30 June 2005 2004 RMB'000 RMB'000 Cash flows from operating activitiesProfit before taxation 269,788 164,195Interest income (348) (46)Interest expenses 3,575 987Depreciation charges 11,764 11,276Amortisation of land use rights 1,096 532Amortisation of deferred development costs 2,000 1,000Revaluation gain of biological assets (103,340) (10,034)Write off of biological assets 782 - __________ __________ Operating profit before changes in working capital 185,307 167,910(Increase)/decrease in inventories (587) 146Decrease in other receivables, deposits and prepayments 20,276 1,724Increase in trade payable and accrued expenses 47 246Decrease in due from related parties - 80(Decrease)/Increase in due to related parties (1,457) 2,290 __________ __________ Net cash inflow from operating activities 203,586 172,396 __________ __________ Cash flows from investing activitiesPurchase of property, plant and equipment (411) (471)Purchase of land use rights (26,600) (30,400)Purchase of construction-in-progress (204,262) (135,531)Purchase of biological assets (4,500) (2,715)Payment of deferred development costs - (1,040)Interest received 348 46 __________ __________ Net cash used in investing activities (235,425) (170,111) __________ __________ Cash flows from financing activitiesIncrease in amount due to related parties 12,500 -Proceeds from issue of new shares in subsidiaries 21,200 -Advance from shareholders 1,168 -Issue of convertible loan notes 80,212 -Proceeds from new short-term bank loans - 20,000Advance from ultimate holding company - 5,552Repayment of short-term bank loans (20,000) (18,000)Finance costs paid (356) (987) __________ __________ Net cash inflow from financing activities 94,724 6,565 __________ __________ Net increase in cash and cash equivalents 62,885 8,850Cash and cash equivalents at beginning of year 19,130 10,280 __________ __________ Cash and cash equivalents at end of year 82,015 19,130 ========== ========== Consolidated statement of changes in equityFor the year ended 30 June 2005 Share Merger Capital Retained Total capital reserve reserve profit As at 30 June and 1 July 2004 106 827 482,519 343,227 826,679Consolidated profit for the year - - - 248,808 248,808Issue of ordinary shares in a subsidiary - 21,200 - - 21,200Repurchase of ordinary shares in a subsidiary - (21,200) - - (21,200)Issue of ordinary shares 5,194 - - - 5,194Acquisition of subsidiary - (5,300) - - (5,300)Convertible bond - - 15,107 - 15,107 _______ _______ _______ ________ ________ As at 30 June 2005 5,300 (4,473) 497,626 592,035 1,090,488 ======= ======= ======= ======== ======== Notes to the preliminary announcementFor the year ended 30 June 2005 1 Taxation The amount of taxation charged to the consolidated income statements represents: Year ended 30 June 2005 2004 RMB'000 RMB'000 PRC foreign enterprise income tax ("FEIT") 13,544 11,201 Deferred tax 7,426 1,179 ___________ ___________ 20,970 12,380 =========== =========== Taxation payable in the consolidated balance sheet represents: As at 30 June 2005 2004 RMB'000 RMB'000 Balance of provision relating to: Prior years 16,993 5,792 FEIT provision for the year 13,544 11,201 ___________ ___________ 30,537 16,993 =========== =========== 2 Earnings / (losses) per share The calculation of the basic earnings per share is based on the profit attributable to shareholders during the years and assuming 50,000,000 shares were in issue throughout the years ended 30 June 2004 and 2005, being 1,000,000 shares in issue and issuable and taking account of 49,000,000 shares issued on 29 June 2005. The diluted earnings per share is calculated assuming conversion of all potential dilutive potential ordinary shares. The convertible debt is assumed to have been converted into ordinary shares and the net profit is adjusted to eliminate the interest expense. RMB'000 Profit attributable to equity shareholders of the Company 248,808 Interest expense on convertible debt 3,219 ___________ Profit used to determine diluted earnings per share 252,027 ___________ Assumed number of shares in issue (000s) 50,000 Assumed conversion of convertible debt (000s) 1,781 ___________ Weighted average number of shares for diluted earnings per share 51,781 =========== Diluted earnings per share (RMB) 4.87 =========== 3 Dividends No dividend has been declared or paid by the Company during the years ended 30 June 2004 or 2005. 4 Financial Information The preliminary announcement was approved by the board on 12 October 2005. The financial information has been prepared on a going concern basis in accordance with International Financial Reporting Standards. The accounting policies applied in preparing the financial information are consistent with those adopted and disclosed in the Group's statutory accounts for the year ended 30 June 2004. The statutory accounts for the year ended 30 June 2005 will be delivered to the Registrar of Companies following the Company's annual general meeting. The auditors have reported on the accounts for the year ended 30 June 2005 and their report was unqualified and did not contain a statement under section 237 (2) or (3) of the Companies Act 1985. 5 Annual General Meeting The Annual General Meeting of the Company will be held at 9.00am on 14 November 2005 at 9/F, 100 Wood Street, London EC2V 7AN, United Kingdom. 6 Annual Report and Accounts Copies of the full Statutory Accounts will be dispatched to shareholders in due course. Copies will also be available from the head office of the Company: Rm 1109-1111, Wayson Comm. Building, 28 Connaught Road West, Hong Kong. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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