17th Oct 2006 07:01
Asian Citrus Holdings Ltd17 October 2006 Tuesday 17 October 2006 Asian Citrus Holdings Limited Preliminary Results for the year ended 30 June 2006 Asian Citrus Holdings Limited ("Asian Citrus"), the largest orange plantationowner and operator in China, announces preliminary results for the year ended 30June 2006 Key Highlights 2006 2005 2006 2005 % RMBm RMBm £m* £m* changeTurnover 404.6 322.3 27.4 21.8 +26EBITDA 333.8 287.9 22.6 19.5 +16Pre-tax profit** 193.9 166.4 13.1 11.3 +17Net profit 257.9 248.8 17.5 16.8 +4 Cash 103.2 82.0 7.0 5.5 +26 Basic EPS RMB4.28 RMB4.98 29.0p 33.7p -14Dividend per share RMB0.62 nil 4.2p nil * Conversion at £1 = RMB14.779 as at 30 June 2006**Before gains arising from change in fair value of biological assets Operational Highlights •Hepu Plantation - 1.2 million orange trees - produced 111,201 tonnes, up by 15% •Xinfeng Plantation - 400,000 oranges trees planted in year to reach a total of 1.2 million and a further 400,000 to be planted in spring 2007. Formal production to start in winter 2007 •Sales to supermarkets accounted for 10.9% of production (selling prices are 60% to 65% higher than to wholesalers) Strategic Highlights •Actively seeking additional supplies of high quality oranges from other farmers: •Established a subsidiary in Hubei province •Identifying co-operation opportunities in Hunan province •Currently negotiating further supermarket contracts with target to sell around 20% of production to supermarkets in 2007 •Commencement and development of orange processing centre, agricultural trade and wholesale market and ancillary serviced apartments •Strategic assessment of opportunities for value added products, such as juicing, to meet the demands of the Chinese market Tony Tong, Chairman, commented: "I am delighted with the progress we haveachieved in the past year and with a strong financial position and cash flow, weare recommending our first dividend to shareholders. "We have made good progress in diversifying our sales channels by securingvarious direct supplier contracts to several supermarket chains in China. In thecoming year, we will not only focus on achieving broader sales channels andgetting greater market share, but will also look to expand the business intovalue added products to benefit from the significant market demand. "We have a clear strategy and leading market position and look forward tocontinuing our strong growth and delivering further value for our shareholders." - ends - For further information please contact: Asian Citrus Holdings Limited Tel:+852 2559 0323Tony Tong, Chairman and Chief Executive OfficerEric Sung, Group Finance Controller Weber Shandwick Square Mile Tel: 020 7067 0700Terry Garrett, John Moriarty, Helen Thomas Chairman's Statement STRATEGIC OVERVIEW I am pleased to report results for the year ended 30 June 2006. As the largestorange plantation owner and operator in China, we are leveraging our leadingmarket standing to develop our position as a major supplier and trader of highquality oranges to both the wholesale and retail markets and to create morevalue for our shareholders. In addition to the supplier contracts entered into with Guangxi YonghaoSupermarket Company Limited, the Group also supplied three other smallersupermarket chains in the Guangxi Zhuang Autonomous Region of China during theyear. The total amount of oranges supplied to the supermarket chains was 12,096tonnes, accounting for about 10.9% of the Group's total production. TheGroup is currently negotiating with other large supermarket chains and we arevery confident that we will conclude more supermarket contracts in the nearfuture. Sales of the Group's oranges to supermarket chains are expected toincrease in the coming years and our target is to increase these sales from thecurrent figure of around 11% of production to around 20% in 2007, withsignificant increase expected to come in the following years. As stated in the interim report, the Group has established a subsidiary in theHubei province of China to source produce from other farmers and we are in theprocess of gathering information about the availability of high quality orangesin this province. In order to secure further supplies to meet the potentialincrease in demand, the Group has also identified the Hunan province of China asanother source of high quality oranges and is exploring co-operationopportunities with the local farmers and identifying potential acquisitiontargets within this province. As announced on 1 September 2006, the Group is developing an orange processingcentre including warehouses, refrigerated storage and a centre for cleaning,grading, packaging and waxing oranges ("Orange Processing Centre") as well as anagricultural trade and wholesale market focused on fruit together withancillary serviced apartments of approximately 150,000 sq. metres in total inthe Jiangxi province of China. The first phase consists of about 250 units, isscheduled for completion in the first quarter of 2007 with pre-sale commencingin October 2006. We expect the Group to derive many long term benefits from this project as it seeks to become the major supplier of high grade oranges in China. Asian Citrus will have first hand knowledge of some of the best orange growers in the region which should lead to excellent sourcing opportunities as demand grows. It will also give the Group access to new customers throughout China with interest in using this new market facility. In addition to the fresh oranges business, we also see the opportunity for theGroup to invest in value-added processed products where there is significantmarket demand and potential to build a profitable market position. As withother developed countries in Europe and America, the demand for orange juice inChina is increasing as a result of the improving quality of life in China. As aresult, the Group is assessing the establishment of its own juicing business inorder to meet the needs of the Chinese market. Details of any development in the juicing business will be announced after strategic planning has been completed. OPERATING REVIEW The Hepu Plantation is already fully developed with more than 1.2 million orangetrees. The output from the Hepu Plantation was approximately 111,201 tonnes inthe year to 30 June 2006 which represents an increase of approximately 15% overthe previous year's production of 96,977 tonnes. The growth in productionwas mainly due to the following reasons: (1) increased maturity of the orangetrees in the Hepu Plantation; (2) approximately 220,000 winter orange treesreached the fruit-bearing age and started to produce oranges in the year; and(3) more effective utilisation of resources. The Group continued to invest in the construction of the Xinfeng Plantation. Wehave spent RMB134.3 million in the development of the Xinfeng Plantation with400,000 oranges trees planted during the year to bring the total number of treesto 1.2 million by the end of June 2006. We expect that another 400,000 orangestrees will be planted this year so that, by June 2007, the Xinfeng Plantationwill be fully developed with 1.6 million orange trees. The total project costfor the Xinfeng plantation is expected to be approximately RMB616 million. Wewill commence product trials at the Xinfeng Plantation in the winter of 2006 toensure that we are achieving a high quality standard and formal production willstart in the winter of 2007. We expect that the potential production capacityfrom the Xinfeng Plantation in the coming years will drive a step change in theGroup's orange supply. TRADING RESULTS The Group's revenue was RMB404.6 million (2005: RMB322.3 million) in the yearto 30 June 2006 which represents growth of 26%. This growth was achieved by anincrease of approximately 15% in the Group's production combined with anincrease in the average selling price of the oranges to both the wholesalers andsupermarkets. Selling prices to the latter are, on average, 60% to 65% higherthan sales to wholesalers. Sales to supermarkets accounted for approximately16.1% of the Group's revenue and we expect that the proportion will continueto increase as the Group secures more supermarket contracts. The gross margin dropped slightly from approximately 69% in the previous year toapproximately 67% in the last 12 months despite the higher average sellingprices. The decrease in the gross margin was a result of two factors:consumption of raw materials rose with higher production volume and increasedproduction costs with unit costs of fertiliser and pesticide increased by around20% to 25%. In addition to the increased production costs, sales tosupermarkets also involved higher selling and distribution expenses as a resultof the higher transportation and packaging costs. The cost of productionincreased from approximately RMB99.2 million in 2005 to approximately RMB131.7million, an increase of approximately 33%. As a result of the tighter costcontrols implemented by the Group, the average unit cost of production onlyincreased by 18% to approximately 1.18 per Kg from approximately RMB1.02 per Kgin 2005. USE OF PROCEEDS Following the Company's listing on AIM and the placing of 9,072,813 newshares, the Group has raised net proceeds of approximately RMB108 million. As at 30 June 2006, the net proceeds from the new issue have been utilised asfollows: •approximately RMB92.4 million for the development and expansion of the XinfengPlantation; •approximately RMB1.0 million for the design and building of the processing andcold storage facilities; and •approximately RMB14.6 million for advertising and brand building. APPOINTMENT OF CHIEF SCIENTIST Dr. Shaoke Wang ("Dr. Wang") was appointed as the Group's Chief Scientistwith effect from 1 April 2006. Dr.Wang is a Faculty Affiliate of the Departmentof Soil and Crop Sciences at the Colorado State University, United States andhas been a Chief Scientist and Acting Director of a large-scale new citrus farmof grapefruits, limes and oranges in Southern China before joining the Group.We believe that Dr. Wang will bring valuable experience and knowledge to theGroup as a highly qualified research fellow with extensive experience in thecitrus industry in China. APPOINTMENT OF NEW ADVISERS On 3 August 2006, JPMorgan Cazenove Limited ("JPMC") was appointed as theCompany's sole financial adviser, nominated adviser and corporate broker. Weare very pleased to have JPMC on board with its excellent reputation in thecapital markets. DIVIDENDS With our strong financial position and cash flow, the Board recommends paymentof a final dividend of RMB0.62 per share for the financial year ended 30 June2006. This equates to 15% of earnings per share for the year ended 30 June 2006which the Board views as a prudent level of payout to provide shareholders witha favourable cash return. OUTLOOK During the year we have made good progress in diversifying our sales channels bysecuring various direct supplier contracts with several supermarket chains inChina. In the coming year, we will not only focus on achieving broader saleschannels and getting greater market share, but will also look to expand thebusiness into value added products to benefit from the significant marketdemand. We are very confident that Asian Citrus is developing on the righttrack that will maximise the considerable opportunities that are available tous. We have a clear strategy and leading market position and look forward tocontinuing our strong growth and delivering further value for our shareholders. Tony TongChairman 17 October 2006 Consolidated income statementFor the year ended 30 June 2006 Year ended 30 June 2006 2005 RMB'000 RMB'000 (Audited) (Audited) Revenue 404,566 322,313Gain arising from changes in fair value 115,000 103,340 less estimated point-of-sale costs of biological assetsOther income 5,237 25 ____________ ____________ 524,803 425,678 Inventories used (113,008) (85,424)Staff costs (26,479) (13,131)Depreciation (17,273) (11,764)Other operating expenses (53,675) (41,572)Write-off of biological assets - (782) ____________ ___________ Profit from operations 314,368 273,005 Interest income 2,755 348Finance expenses (7,145) (3,575) ____________ ____________ Net finance costs (4,390) (3,227) Share of loss of associates (1,115) - ____________ ___________ Profit from ordinary activities before income tax 308,863 269,778 Income tax expenses (50,937) (20,970) ____________ ___________ Profit attributable to shareholders 257,926 248,808 =========== =========== Basic earnings per share RMB4.28 RMB4.98 =========== =========== Diluted earnings per share RMB4.16 RMB4.87 =========== =========== Dividends 38,637 - =========== =========== Consolidated balance sheetAs 30 June 2006 30 June 2006 2005 RMB'000 RMB'000 (Audited) (Audited)ASSETS Non-current assetsProperty, plant and equipment 538,907 274,184Land use rights 62 55,372Construction-in-progress 257,14 315,656Biological assets 628,206 509,206Deferred development costs 10,500 7,000Interests in associates 5,335 - ____________ ___________ 1,502,837 1,161,418 Current assetsProperties under development 10,355 -Inventories 1,168 839Other receivables 15,347 7,906Cash and bank balances 103,17 82,015 ____________ ___________ 130,044 90,760 ____________ ___________ Total assets 1,632,881 1,252,178 ============ =========== EQUITY AND LIABILITIESEquityIssued capital 6,569 5,300Reserves 1,499,080 1,085,188 ____________ ___________ 1,505,649 1,090,488 Non-current liabilitiesDeferred tax liabilities 25,983 10,641Convertible bonds 47,528 87,978 ____________ ____________ 73,511 98,619 Current liabilitiesTrade payables and accrued expenses 18,958 7,051Due to related parties 4,260 14,600Due to shareholders - 1,168Due to ultimate holding company - 9,715Income tax payables 30,503 30,537 ____________ ____________ 53,721 63,071 ____________ ____________Total liabilities 127,232 161,690 ____________ ____________ Total equity and liabilities 1,632,881 1,252,178 ============ ============ Consolidated cash flow statementFor the year ended 30 June 2006 Year ended 30 June 2006 2005 RMB'000 RMB'000 (Audited) (Audited) Cash flows from operating activitiesProfit from ordinary activities before income tax 308,863 269,778Unrealised exchange gain (1,137) -Interest income (2,755) (348)Finance expenses 7,145 3,575Depreciation 17,273 11,764Employee share option benefits 2,207 -Amortisation of land use rights 1,284 1,096Amortisation of deferred development costs 2,000 2,000Gain on change of terms of convertible bonds (1,537) -Loss on disposals of property, plant and equipment 404 -Revaluation gain on biological assets (115,000) (103,340)Share of loss of associates 1,115 -Write off of biological assets - 782 ____________ ____________ Operating profit before changes in working capital 219,862 185,307Increase in inventories (329) (587)(Increase)/decrease in other receivables (7,441) 20,276Increase in properties under development (10,355) -Increase in trade payables and accrued expenses 4,294 47Increase/(decrease) in due to related parties 2,160 (1,457) ____________ ____________ Cash generated from operations 208,191 203,586Income tax paid (35,629) - ____________ ____________ Net cash inflow from operating activities 172,562 203,586 ____________ ____________ Cash flows from investing activitiesPurchases of property, plant and equipment (2,437) (411)Additions to land use rights (8,654) (26,600)Construction-in-progress paid (213,220) (204,262)Purchase of biological assets (4,000) (4,500)Payments of deferred development costs (5,500) -Investments in associates (38) -Interest received 2,755 348 ____________ ____________ Net cash used in investing activities (231,094) (235,425) ____________ ____________ Cash flows from financing activitiesProceeds from issue of new shares in subsidiaries - 21,200(Repayments to)/advances from related parties (12,500) 12,500(Repayments to)/advances from shareholders (1,168) 1,168Advances to an associate (6,412) -Issue of convertible bonds - 80,212Repayments of short-term bank loans - (20,000)Repayments to ultimate holding company (9,715)Proceeds from issue of new shares 145,945 -Issuing costs paid (38,296) -Proceeds from issue of new shares upon exercise of share options 3,262 -Finance costs paid (1,425) (356) ____________ ____________ Net cash inflow from financing activities 79,691 94,724 ____________ ____________ Net increase in cash and cash equivalents 21,159 62,885Cash and cash equivalents at beginning of year 82,015 19,130 ____________ ____________Cash and cash equivalents at end of year 103,174 82,015 ============ ============ Notes to the preliminary announcement 1 Income tax expenses The amount of income tax expenses charged to the consolidated income statementsrepresents: Year ended 30 June 2006 2005 RMB'000 RMB'000 (Audited) (Audited) PRC foreign enterprise income tax ("FEIT") 35,595 13,544Deferred tax 15,342 7,426 ____________ ____________ 50,937 20,970 ============ ============ Income tax payables at the balance sheet date represent: 30 June 2006 2005 RMB'000 RMB'000 (Audited) (Audited) Balance of provision relating to previous years 30,537 16,993FEIT provision for the year 35,595 13,544Income tax paid (35,629) - ____________ ____________ 30,503 30,537 ============ ============= 2 Earnings per share The calculation of the basic earnings per share for the year ended 30 June 2006,is based on the profit attributable to shareholders of RMB257,926,000 during theyear and the weighted average number of approximately 60,233,000 ordinary sharesin issue during the year after adjusting for the effects of the issue of9,072,813 new ordinary shares when the shares of the Company were admitted totrading on AIM, the issue of 1,703,049 new ordinary shares to the holder of theconvertible bonds upon conversion of part of convertible bonds with nominalvalue of HK$24,000,000 on 3 August 2005, the issue of 1,226,087 new ordinaryshares to the holder of the convertible bonds upon conversion of a convertiblebond with nominal value of HK$20,000,000 on 2 March 2006 and the issue of200,000 new ordinary shares to Evolution Securities China Limited, upon theexercise of 200,000 options on 16 March 2006. The calculation of the basic earnings per share for the year ended 30 June 2005is based on the profit attributable to shareholders of RMB248,808,000 during theyear and assuming that 50,000,000 shares were in issue throughout the year ended30 June 2005, being 1,000,000 shares in issue and issuable and taking account of49,000,000 shares issued on 29 June 2005. The diluted earnings per share is calculated assuming conversion of all dilutivepotential ordinary shares. The convertible bonds are assumed to have been converted into ordinary sharesand the net profit is adjusted to eliminate the interest expenses. Theconvertible bonds carry a variable conversion ratio to achieve an internal rateof return of 25%. At the year end, the implied rate had been achieved andtherefore the specified rate of HK$16.31 per share has been used for conversion. For share options, the calculation is done to determine the number of ordinaryshares that could have been acquired at fair value (determined as the averagemarket price of the Company's ordinary shares during the year) based on themonetary value of the subscription rights attached to the outstanding shareoptions. The number of ordinary shares calculated is compared with the number ofordinary shares that would have been issued assuming the exercise of the shareoptions. Year ended 30 June 2006 2005 RMB'000 RMB'000 Profit attributable to shareholders 257,926 248,808Interest on convertible bonds 7,126 3,219 ____________ ___________ Profit used to determine diluted earnings per share 265,052 252,027 ____________ ___________ Weighted average/Assumed number of ordinary shares in issue (thousands) 60,233 50,000Assumed conversion of convertible bonds 3,433 1,781Adjustment for share options 78 - ____________ __________ Weighted average number of shares for dilutedearnings per share 63,744 51,781 =========== ========== Diluted earnings per share (RMB) 4.16 4.87 =========== ========== 3 Dividends Year ended 30 June 2006 2005 RMB'000 RMB'000 (Audited) (Audited) Proposed final dividend of RMB0.62 per ordinaryshare (2005: Nil) 38,637 - =========== =========== 4 Financial Information The preliminary announcement was approved by the board on 17 October 2006. 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 consolidated financial statements for the yearended 30 June 2005. The auditors have reported on the accounts for the year ended 30 June 2006 andtheir 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 10:30am on 1 December2006 at 20 Moorgate, London EC2R 6DA, United Kingdom. 6 Annual Report and Accounts Copies of the annual report and accounts 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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