16th Oct 2007 07:00
Asian Citrus Holdings Ltd16 October 2007 Tuesday 16 October 2007 Asian Citrus Holdings Limited ("Asian Citrus", the "Group" or the "Company") Preliminary Results for the year ended 30 June 2007 Asian Citrus Holdings Limited, the largest orange plantation owner and operatorin China, announces preliminary results for the year ended 30 June 2007 Key Highlights For illustration only Year ended Year ended 30 June 30 June 2007 (RMBm) 2006 (RMBm) % change 2007 2006 (RMB) (£m*) (£m*) Reported financial informationRevenue 479.7 404.6 +18.6 31.3 27.4EBITDA 403.3 333.8 +20.8 26.3 22.6Net profit 318.7 257.9 +23.6 20.8 17.5Basic EPS RMB4.88 RMB4.28 +14.0 31.9p 29.0pDiluted EPS RMB4.87 RMB4.16 +17.1 31.8p 28.1pDividend per share RMB0.68 RMB0.62 +9.7 4.4p 4.2p Reported financial information adjusted toexclude biological gain and corresponding taxeffectEBITDA 270.1 218.8 +23.4 17.6 14.8Net profit 205.5 160.2 +28.3 13.4 10.8Basic EPS RMB3.15 RMB2.66 +18.4 20.6p 18.0pDiluted EPS RMB3.14 RMB2.62 +19.8 20.5p 17.7p * Conversion at £1 = RMB15.320 and RMB14.779 for the year ended 30 June 2007 and2006 respectively for reference only Operational Highlights •The Group's profit has increased satisfactorily this year with dividends increasing by 9.7% which reflects our confidence in the Group's prospects. •Hepu Plantation - approximately 1.2 million fruit-bearing trees - produced 117,439 tonnes, up by 5.6% •Xinfeng Plantation - 400,000 fruit-bearing trees - successful trial of 3,652 tonnes •Approximately RMB151.7m (£9.9m) invested in development of Xinfeng Plantation •The final 400,000 trees were planted in spring 2007 to reach a total of 1.6 million •First commercial harvest scheduled for winter 2007 •Significant increase in the contribution of higher margin supermarket business to total sales: €31.1% of total sales for the year (2006: 16.1%) €23.0% of total production volume for the year (2006: 10.9%) Strategic Highlights •Signed agreement with Dao County Government regarding a new plantation in Hunan Province with a land area of approximately 35 sq. km with 2.4 million orange trees after completion •Commenced operations of orange saplings nursery at Hepu Plantation breeding approximately 200,000 saplings of different species •Sales of the first phase of the agricultural wholesale market near the Xinfeng Plantation are proceeding in line with expectations and costs and timescales remain within our forecast •Expanded the sales coverage to Shanghai, one of the major consumer markets in China, by securing a supply contract with Shanghai Lotus Supermarket Chain Store Co., Ltd for 2007/2008 •Further progress in developing freshly squeezed juice •Engaged Nano and Advanced Materials Institute Limited to undertake a research and development project on certain orange-related health supplement products •Mandated Cazenove Asia Limited with a target of achieving an Asian listing by the end of 2008 Tony Tong, Chairman, commented: "The profit has increased satisfactorilythis year and the Group has made good progress in diversifying its saleschannels not only by securing more supplier contracts with supermarkets but alsorecently through expanding its exposure to provinces within China outside theGuangxi area. This expansion represents the first step for the Group'sprogress to achieve nationwide coverage." "In addition, down-streaming developments such as juicing and orange-relatedhealth supplements will give added diversity and enable the Group to achieve thebest value from each single orange we grow." "We are very confident that Asian Citrus is progressing on the right trackand we will continue to deliver good value to our shareholders." - ends - For further information please contact: Asian Citrus Holdings LimitedTony Tong, Chairman and Chief Executive Officer Tel: +852 2559 0323Eric Sung, Finance Director Weber Shandwick Financial Terry Garrett, John Moriarty, Charlie Hooper Tel: 020 7067 0700 STRATEGIC OVERVIEW We have been highly successful in developing our sales into the supermarketsector. During the year ended 30 June 2007, approximately 23.0% of theproduction volume was sold directly to the regional supermarket chains, comparedto 10.9% for the year ended 30 June 2006. The sales to supermarkets for the yearended 30 June 2007 accounted for approximately 31.1% of the Group's revenue,which was up from approximately 16.1% for the year ended 30 June 2006. The Group has renewed its supply contracts with its two largest supermarketcustomers, Guihai Highways Guangxi Xingtong Services Company ("Guihai") andGuangxi Yonghao Supermarket Company Limited ("Yonghao"). The Group willsupply Yonghao and Guihai with a total of 9,000 tonnes of winter oranges for thewinter crop in 2007. In addition to several other supply contracts with certainsupermarket chains in China with a total of 3,300 tonnes of winter oranges, theGroup will be selling a total of 12,300 tonnes of winter oranges to thesupermarkets for the winter crop in 2007 (which represents approximately 25% ofthe Group's winter crop for the six months ended 31 December 2006). Theestimated value of these supplier contracts is approximately RMB52 million,which is equivalent to approximately 36% of the Group's turnover for the sixmonths ended 31 December 2006. The highlight is that the Group has expanded thesales coverage to area outside the Guangxi area by securing a supply contractwith Shanghai Lotus Supermarket Chain Store Co., Ltd. We expect that we will beable to increase our sales coverage to a nationwide level progressively in thecoming future. During the year, the orange saplings nursery at the Hepu Plantation commencedoperations breeding approximately 200,000 saplings of two different species. Allthe new species are imported from the United States and we are delighted to haveachieved a 100% success rate from breeding as of today. It demonstrates theGroup's competency in the research and development area and the excellence ofthe new species of saplings. We will be planting a further one million newsaplings in the spring of 2008 to strengthen further our nursery function. Thesaplings will be used for the Group's own plantations and for sale to thirdparties in the future. It is the Group's intention to expand the nurserybusiness with additional nurseries in order to ensure sufficient supply ofgood-quality saplings for the Group and the whole orange sector in China. As at the date of this report, Phase 1 of the agricultural wholesalers'market and orange processing centre located in the Xinfeng County ZhongduanIndustrial Park ("Xinfeng Development") has been substantially completed.Sales of the units within the Xinfeng Development have commenced with verysatisfactory results during the year. In view of the success of Phase 1, weintend to commence Phase 2 of the Xinfeng Development in the near future whichwill include both saleable units and cold storage facilities. The final phase ofthe Xinfeng Development will commence upon assessment of the results from bothPhase 1 and 2. In March 2007, the Company placed new ordinary shares with investors raising netproceeds of approximately £18 million which will principally be used to fund thedevelopment of the Group's new plantation in the Hunan province. The HunanPlantation will be of a land area of approximately 35 sq. km with 2.4 millionorange trees after completion. In May 2007, the Group reached agreement with theDao County Government of the Hunan province regarding terms of a proposed leaseover 35 sq. km of land for the Hunan Plantation. Subsequently, the Group hasentered into formal leasing agreements for the land with the correspondinglandowners for a period of 50 years. We expect that the infrastructure work forthe Hunan Plantation will commence by the end of 2007. As mentioned in previously, the Group is actively assessing the opportunity ofinvestment in value added products such as fresh orange juice. It is ourintention to develop the Group's juicing business in two phases, firstlyfreshly-squeezed juice and then not-from-concentrated juice. The Group plans todevelop freshly-squeezed juice under its own brand name and intends to outsourcethe manufacturing and distribution of this product to Bosun Health Food R&DCenter of Guangdong, a business based in Guangdong province. We expect that theproduct will be launched in the PRC market before mid-2008. Fornot-from-concentrated juice, as the capital investment is higher and technicalrequirements are more advanced, the Group will continue its discussions withpotential strategic partners about the co-operation arrangements. In addition to the juicing business, we are very actively exploring other valueadded products for oranges. During the year ended 30 June 2007, the Companyengaged Nano and Advanced Materials Institute Limited (hosted by the Hong KongUniversity of Science and Technology) to undertake a research and developmentproject on "High Value-Added Products from Orange Peel" . The major purposeof this research and development programme is to assist the Group in thedevelopment of certain orange-related health supplement products. Lookingforward, we expect that these developments will help the Group to diversify itsbusinesses further and make better use of a whole orange. We have already developed a comprehensive knowledge base about the availabilityand sources of high quality oranges in the Hubei province through our subsidiaryin the local area. As our brand presence is strengthened in the region, weexpect to be able to exploit this knowledge through sourcing high qualityoranges to fulfil the potential excess demand for our products. We are fully committed to maintaining strict quality control of our products. Webelieve that organic farming is one of the healthiest agricultural methods andwe have committed ourselves to organic farming since the very outset. The Grouphas been accredited the Grade A Level of Green Food Standards by the China GreenGood Development Centre which is an excellent endorsement of the high quality ofour products. In addition, we intend to apply for the accreditation as "Organic Food" by the China Organic Food Development and Certification Centre inthe coming future. We are confident that our products and farming methods arefully up to the required standards and such accreditation will create additionalconsumer demand. OPERATING REVIEW The Hepu Plantation is fully developed with approximately 1.2 million orangetrees. The output from the Hepu Plantation was approximately 117,439 tonnes inthe year to 30 June 2007 which represents an increase of approximately 5.6% overthe previous year's production of 111,201 tonnes. The growth was mainly dueto increased production from certain winter orange trees which have not yetachieved their full maturity. After five years of development, the Xinfeng Plantation is now fully plantedwith 1.6 million winter orange trees after the final 400,000 trees were plantedduring the first half of calender 2007. During the year ended 30 June 2007,RMB151.7 million has been invested in the infrastructure at the XinfengPlantation and trial production started in the winter of 2006, yieldingapproximately 3,652 tonnes of oranges. For better plantation management, weintend to install an advanced irrigation system costing approximately RMB 75million, which will help to improve the efficiency of the plantation. We expectthat the orange trees at the Xinfeng Plantation will progressively achieve theirorange-bearing age and contribute increasing production volume as they approachfull maturity. As a result, the potential production capacity from the XinfengPlantation in the coming years will drive a step change in the Group'soverall orange supply. During the year ended 30 June 2007, the Group launched a trial replantingprogramme in the Hepu Plantation in order to improve the quality of the species.The replanting programme includes the replacement of existing species with moreadvanced and better quality species that have stronger resistance to disease andproduce a higher yield. As of today, 55,185 winter orange trees have beenremoved and the corresponding land area has been replanted with the same amountof new species. It is our intention to implement the partial replantingprogramme step-by-step in order to optimise its positive impact on the Group's overall performance. Based on the results of the research we carried out, weare confident that the replanting programme will bring long term economicbenefits to the Group. As mentioned above, Phase 1 of the Xinfeng Development has been substantiallycompleted, creating 238 units available for sale. Since the end of thefinancial year, the formal procedures for the sale of 184 units have beencompleted with total consideration of RMB55 million. Up to date, the Group hasreceived proceed of approximately RMB20 million and the balance will be receivedby completion. We expect that the sale of Phase 1 will be completed within thenext three months. We are keen to commence the next phases of the XinfengDevelopment in the near future and we expect that the average unit price wouldincrease in view of the strong demand in the local area and the increase inactivity in the overall PRC property market. TRADING RESULTS The Group's revenue was RMB479.7 million (2006: RMB404.6 million) in the yearto 30 June 2007 which represents a growth of 18.6%. This was achieved by anincrease of approximately 8.9% in the Group's production combined with a 8.9%increase in the average selling price of the oranges. For the year ended 30 June2007, sales to supermarkets accounted for approximately 23.0% and 31.1% of theGroup's production volume and revenue respectively. We expect that thisproportion will continue to increase and the Group's products will be able toachieve wider geographical exposure as more supermarket contracts in bothGuangxi area and other provinces as secured. The gross margin of the Hepu Plantation increased to approximately 71.1% for theyear ended 30 June 2007 (2006: 67.4%), benefiting from higher average sellingprices to supermarkets and our approach of tight cost controls. The XinfengPlantation was not profitable in 2006/07 as the plantation was still in itstrial production. However, over the medium term, as production volume increasesand economies of scale are achieved, the Xinfeng Plantation will demonstrate itspotential for growth and profitability. As the Hepu Plantation is still themajor production base of the Group, combining the two plantations, produces anoverall gross margin of 69.0% for the year ended 30 June 2007 (2006: 67.4%), a1.6 percentage point increase. The cost of production increased from approximately RMB131.7 million for theyear ended 30 June 2006 to RMB148.6 million for the year ended 30 June 2007principally because of increased consumption of raw materials accompanying thegrowth of the Group's production volume. During the year, the price offertilisers, one of the major raw materials, increased by around 5-10%. Despitethis, the Group was able to manage its costs effectively through tightercontrols and better economies of scale. As a result, the average unit cost ofproduction only increased by 4% to approximately RMB1.23 per kg for the yearended 30 June 2007 (2006: approximately RMB1.18 per kg) and excluding the impactof the trial production of the Xinfeng Plantation fell slightly to RMB1.16 per kg. FUND RAISING IN MARCH 2007 In March 2007, the Company placed 8,333,333 new ordinary shares at a price of240 pence per share, raising net proceeds of approximately £18 million. Thesefunds will principally be used to finance, in part, the development of the HunanPlantation, with the majority of the remaining proceeds allocated for investmentin the Group's proposed juicing business. HK LISTING As announced on 28 March 2007, the Directors have agreed in principle to seek anadditional listing of the Group on the Main Board of the Hong Kong StockExchange. The Company has formally mandated Cazenove Asia Limited to initiatediscussions with the Hong Kong Stock Exchange and the Board is targeting to havecompleted an Asian listing by the end of 2008. INVESTOR RELATIONS The Board recognises the importance of maintaining an interactive relationshipwith shareholders and potential investors through a comprehensive companywebsite (www.asian-citrus.com). Latest information of the Group is updatedregularly and the website is fully compliant with the requirements of Rule 26 ofthe AIM rules. DIVIDENDS The Board recommends the payment of a final dividend of RMB0.68 (equivalent toapproximately 4.4p) per share for the financial year ended 30 June 2007. Thisequates to 15.8% of earnings per share for the year ended 30 June 2007 which theBoard views as an appropriate payout level to provide shareholders withreasonable returns and, at the same time, leaving the Group with sufficientcapital for further developments. The final dividend, if approved at the Annual General Meeting on 7 December2007, will be paid in sterling on or before 28 December 2007, to shareholders onthe register on 7 December 2007, with an ex-dividend date of 28 November 2007.The translation of RMB into sterling is made at the exchange rate of 15.32 as at30 June 2007 for illustration purpose. The actual translation rate for thepurpose of dividend payment in sterling will be referenced to the exchange rateon 7 December 2007. OUTLOOK The profit has increased satisfactorily this year and the Group has made goodprogress in diversifying its sales channels not only by securing more suppliercontracts with supermarkets but also recently through expanding its exposure toprovinces within China outside the Guangxi area. This expansion represents thefirst step for the Group's products to achieve nationwide coverage. Inaddition, down-streaming developments such as juicing and orange-related healthsupplements will give added diversity and enable the Group to achieve the bestvalue from every single orange we grow. We are very confident that Asian Citrusis progressing on the right track and we will continue to deliver good value toour shareholders. Tony TongChairman 16 October 2007 Consolidated income statemetFor the year ended 30 June 2007 Year ended 30 June 2007 2006 RMB '000 RMB '000 (Audited) (Audited) Revenue 479,728 404,566Net gain on change in fair value of biological assets 133,172 115,000Other income 3,294 5,237 --------- --------- 616,194 524,803 Inventories used (122,455) (113,008)Staff costs (34,973) (26,479)Amortisation (3,313) (3,284)Depreciation (24,270) (17,273)Other operating expenses (55,443) (50,391) --------- ---------Profit from operations 375,740 314,368 Interest income 2,649 2,755Finance costs (4,390) (7,145) --------- ---------Net finance costs (1,741) (4,390) Share of loss of associates (14) (1,115) --------- ---------Profit before income tax 373,985 308,863 Income tax expense (55,280) (50,937) --------- ---------Profit for the year and attributable to shareholders 318,705 257,926 ========= =========Proposed final dividend 50,454 38,637 ========= =========Basic earnings per share RMB4.88 RMB4.28 ========= =========Diluted earnings per share RMB4.87 RMB4.16 ========= ========= Consolidated balance sheetAs at June 30 2007 30 June 2007 2006 RMB '000 RMB '000 (Audited) (Audited)ASSETSNon-current assetsProperty, plant and equipment 812,491 538,907Land use rights 34,850 62,742Construction-in-progress 150,927 257,147Biological assets 765,511 628,206Deferred development costs 12,000 10,500Interests in associates 5,074 5,335Deferred tax assets 4,672 3,408 --------- -------- 1,785,525 1,506,245Current assetsProperties under developments for sale 54,080 10,355Inventories 9,261 1,168Other receivables and prepayments 14,324 15,347Cash and cash equivalents 344,513 103,174 --------- -------- 422,178 130,044 --------- --------Total assets 2,207,703 1,636,289 ========= ======== EQUITY AND LIABILITIESEquityShare capital 7,758 6,569Reserves 2,100,725 1,499,080 --------- -------- 2,108,483 1,505,649Non-current liabilitiesDeferred tax liabilities 47,559 29,391Convertible bonds - 47,528 --------- -------- 47,559 76,919 Current liabilitiesTrade payables and accrued expenses 18,745 18,958Due to related parties 2,610 4,260Income tax payables 30,306 30,503 --------- -------- 51,661 53,721 --------- --------Total liabilities 99,220 130,640 --------- --------Total equity and liabilities 2,207,703 1,636,289 ========= ======== Consolidated cash flow statement For the year ended 30 June 2007 Year ended 30 June 2007 2006 RMB '000 RMB '000 (Audited) (Audited) Cash flows from operating activitiesProfit before income tax 373,985 308,863Adjustments for: Unrealised exchange gain (1,581) (1,137) Interest income (2,649) (2,755) Finance costs 4,390 7,145 Depreciation 26,201 17,273 Share-based payments 8,417 2,207 Amortisation of land use rights 1,313 1,284 Amortisation of deferred development costs 2,000 2,000 Gain on change of terms of convertible bonds - (1,537) Loss on disposals of property, plant and equipment - 404 Net gain on change in fair value of biological assets (133,172) (115,000) Write off of biological assets 9 - Share of loss of associates 14 1,115 --------- --------- Operating profit before working capital changes 278,927 219,862Movements in working capital elements: Properties under development for sale (17,146) (10,355) Inventories (8,093) (329) Other receivables and prepayments 1,023 (7,441) Trade payables and accrued expenses (213) 4,294 Due to related parties (1,650) 2,160 --------- ---------Cash generated from operations 252,848 208,191Income tax paid (38,573) (35,629) --------- ---------Net cash generated from operating activities 214,275 172,562 --------- ---------Cash flows from investing activitiesPurchases of property, plant and equipment (2,425) (2,437)Additions to land use rights - (8,654)Additions to construction-in-progress paid (191,140) (213,220)Additions to biological assets (4,142) (4,000)Additions to deferred development costs (3,500) (5,500)Investments in associates - (38)Interest received 2,649 2,755 --------- ---------Net cash used in investing activities (198,558) (231,094) --------- --------- Consolidated cash flow statementFor the year ended 30 June 2007 Year ended 30 June 2007 2006 RMB '000 RMB '000 (Audited) (Audited) Cash flows from financing activitiesRepayments to related parties - (12,500)Repayments to shareholders - (1,168)Advances to an associate - (6,412)Repayment to ultimate holding company - (9,715)Proceeds from issue of new shares 300,000 145,945Issuing costs paid (37,618) (38,296)Proceeds from issue of new shares upon exercise of share options 1,884 3,262Dividend paid (38,637) -Finance costs paid (7) (1,425) --------- ---------Net cash generated from financing activities 225,622 79,691 --------- ---------Net increase in cash and cash equivalents 241,339 21,159Cash and cash equivalents at beginning of year 103,174 82,015 --------- ---------Cash and cash equivalents at end of year 344,513 103,174 ========= ========= Notes to the preliminary announcementFor the year ended 30 June 2007 1 Income tax expense The amount of income tax expense charged to the consolidated income statement represents: Year ended 30 June 2007 2006 RMB '000 RMB '000 (Audited) (Audited) PRC foreign enterprise income tax 38,376 35,595Deferred taxation 16,904 15,342 --------- ------- 55,280 50,937 ========= ======= 2 Earnings per share Year ended 30 June 2007 2006 RMB '000 RMB '000 (Audited) (Audited)Earnings Profit attributable to shareholders used in basic earnings per share calculation 318,705 257,926 Interest saving on convertible bonds outstanding - 7,126 --------- -------Profit attributable to shareholders used in diluted earnings per share calculation 318,705 265,052 --------- -------Weighted average number of shares (thousands) Issued ordinary shares at beginning of year 62,202 50,000Effect of new shares issued 2,123 8,228Effect of conversion of convertible bonds 875 1,947Effect of new shares issued upon exercise of share options 103 58 --------- -------Weighted average number or ordinary shares used in basic earning per share calculation 65,303 60,233 Effect of dilutive optional shares in respect of convertible bonds - 3,433Effect of dilutive optional shares in respect of share options 148 78 --------- -------Weighted average number of ordinary shares used in diluted earnings per share calculation 65,451 63,744 ========= =======Basic earnings per share (RMB) 4.88 4.28 ========= =======Diluted earnings per share (RMB) 4.87 4.16 ========= ======= 3 Proposed Final Dividend Year ended 30 June 2007 2006 RMB '000 RMB '000 (Audited) (Audited) Proposed final dividend of RMB0.68 per ordinary share (2005: RMB 0.62) 50,454 38,637 ========= ======= 4 Financial Information The preliminary announcement was approved by the board on 16 October 2007. Thefinancial information has been prepared on a going concern basis in accordancewith International Financial Reporting Standards. The accounting policiesapplied in preparing the financial information are consistent with those adoptedand disclosed in the Group's statutory accounts for the year ended 30 June 2006. The statutory accounts for the year ended 30 June 2007 will be delivered to theRegistrar of Companies following the Company's annual general meeting. Theauditors have reported on the accounts for the year ended 30 June 2007 and theirreport 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 20 Moorgate, London,EC 2R 6DA, United Kingdom on 7 December 2007 at 10:30 a.m.. 6 Annual Report and Accounts Copies of the annual report and acounts will be dispatched to shareholders indue 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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