Final Results

RNS Number : 2049U

Asian Citrus Holdings Ltd

12 October 2010

 

12 October 2010

 

 ASIAN CITRUS HOLDINGS LIMITED

 

Preliminary resultS

for the YEAR ENDED 30 JUNE 2010

 

 

The board of directors (the "Board") of Asian Citrus Holdings Limited (the "Company" or "Asian Citrus") ispleased to announce the audited consolidated results of the Company and its subsidiaries(collectively, the "Group") for the year ended 30 June 2010.

 

Results Highlights

 

				For illustration only
	Year ended 30 June			Year ended 30 June
	2010 (RMBm)	2009 (RMBm)	% change	2010 (£m*)	2009 (£m*)
Reported financial information
Revenue	812.5	668.5	+21.5	80.0	58.8
EBITDA	652.4	501.9	+30.0	64.2	44.1
Profit before tax	587.3	442.3	+32.8	57.8	38.9
Net profit	585.5	440.1	+33.0	57.6	38.7
Basic EPS	RMB0.74	RMB0.58	+27.6	7.3p	5.1p
Final Dividend	RMB0.10	RMB0.08	+25.0	1.0p	0.7p
Special Dividend	RMB0.02	Nil	N/A	0.2p	Nil
Reported financial information adjusted to exclude biological gain
EBITDA	346.4	291.2	+19.0	34.1	25.6
Profit before tax	281.3	231.6	+21.5	27.7	20.4
Net profit	279.5	229.4	+21.8	27.5	20.2
Basic EPS	RMB0.35	RMB0.30	+16.7	3.4p	2.6p
Payout ratio	37.0%	26.9%

 

* Conversion at £1 = RMB10.16 and RMB11.37 for the year ended 30 June 2010 and 2009 respectively for reference only

 

 

Business Overview

 

·; Renewed all existing supermarket supply contracts for the year and added several new supermarkets in different areas in China, including Beijing and Shanghai

·; Increased the number of supermarket customers from two in 2005 to 20 as of 30 June 2010

·; 42.3% increase in sales of oranges to supermarkets to 61,157 tonnes (2008/09: 42,977 tonnes)

·; Our brand "Royal Star" obtained the "Gold Award" at BioFach China 2010

·; Sales of approximately 0.7 million self-bred saplings to local farmers during the year with the agreement for first right to purchase

·; Listed by way of introduction on the Stock Exchange of Hong Kong Limited (the "HKEx") on 26 November 2009

·; Entered into a non-legally binding memorandum of understanding in relation to the acquisition of a citrus fruit plantation with approximately 1.1 m citrus fruits trees occupied a land area of 10,000 mu in Fuchuan Country of Guangxi

·; Entered into a conditional sale and purchase agreement in relation of the acquisition of 92.94% of the equity interest in Beihai Perfuming Juice Company Limited with estimated annual output production capacity of approximately 60,000 tonnes

 

Operational Highlights

 

Hepu Plantation

 

·; Fully developed with approximately 1.3 million orange trees, of which 1.1 million are fruit-bearing trees

·; Production increased by 2.0% to 126,919 tonnes (2008/09: 124,394 tonnes)

·; Replanting programme underway with 64,194 winter trees replaced

 

Xinfeng Plantation

 

·; Fully planted with 1.6 million winter orange trees, of which 1.2 million are fruit-bearing trees

·; Production increased by 117.0% to 60,019 tonnes (2008/09: 27,665 tonnes)

·; Final batch of 400,000 orange trees will start its trial crops in the winter of 2010, thus completing the planting programme

 

Hunan Plantation

 

·; New nursery completed in December 2009

·; RMB101.0m invested which mainly represents expenditure for land clearing, land cultivation and farmland infrastructure

·; Adjusted to plant 1.8 million orange trees from 2.4 million to achieve high degree of automation and mechanisation so as to further enhance our farming efficiency, leading to an anticipated improvement in yields, as well as greater return on investment

·; First batch of trees will be planted before the end of 2010

 

Xinfeng Development (Agricultural wholesale market and processing centre)

 

·; Phase I completed in 2007/08 financial year with approximately 99% of the units sold for a total consideration of RMB90.0 million

·; Phase II of the development postponed until conditions in the real estate sector are more stable

 

Tony Tong, Chairman, commented:

 

"During the year, we made very good progress in expanding our direct sales to supermarkets, raising income from such activities as well as attracting a greater number of new supermarket customers. The Group aims to increase production volume and quality through the potential acquisition of a plantation and the ongoing saplings programme.

 

The Board is very confident that fruit juice consumption will continue to grow in China and has therefore taken steps to enter the concentrated juice market through the proposed acquisition of Beihai BPG. We believe that this acquisition will provide the Group with the techniques, processing capacity and distribution network to prosper from the rapidly growing consumer demand for fruit juice throughout China.

 

We are very excited about the Group's growth, in both our upstream and downstream businesses and we are confident that, benefitting from continuing economic growth in China, Asian Citrus will make further progress and continue to deliver good value to shareholders."

 

- ends -

 

For further information please contact:

Asian Citrus Holdings Limited	Tel: 852 2559 0323
Tony Tong, Chairman and Chief Executive Officer
Eric Sung, Finance Director
Weber Shandwick Financial	Tel: 020 7067 0700
Nick Oborne, John Moriarty, Stephanie Badjonat
J.P. Morgan Cazenove	Tel: 020 7588 2828
James Mitford / Gina Gibson

 

Asian Citrus Holdings Limited

Chairman's Statement

 

I am very pleased to present the annual results of Asian Citrus Holdings Limited (the "Company") and its subsidiaries (collectively referred to as the "Group") for the year ended 30 June 2010. During this period, the Group's revenue increased by 21.5% from RMB668.5 million to RMB812.5 million while net profit increased by 33.0% from RMB440.1 million to RMB585.5 million.

 

Strategic Overview

 

During the year ended 30 June 2010, the Group renewed supply contracts with all of its existing customers. Furthermore, the Group continued to develop its direct sales to supermarkets in China and added several new supermarket customers in different areas of China, including Shanghai and Beijing. The Group's supermarket customers have increased from two in 2005 to 20 as of 30 June 2010 and in terms of geographical coverage, such customers now essentially cover most major cities and coastal provinces in China. We are confident that our supermarket sales will continue to grow with increased volume and further addition of customers in the near future.

 

The Group is mass producing self-bred saplings from its Hepu Plantation. In addition to using these saplings for our own replanting programme in the Hepu Plantation, the Group sold approximately 700,000 saplings to local farmers during the year. Ongoing development of the nursery operation and sale of self-bred saplings enabled the Group to secure a long-term stable supply of high-quality oranges, since in the latter case, reciprocal agreements have been reached with local farmers, thus ensuring the Group has first right to purchase their oranges.

 

In order to strengthen further its leading position in species development, the Group expanded its nursery operation with the construction of a new nursery at the Hunan Plantation, which was completed in December 2009. This new nursery will produce a fresh supply of saplings principally aimed at meeting requirements of the Hunan Plantation, although once the Hunan Plantation is completed, it will also supply local farmers with orange saplings. We believe our strength in species development and ability to mass produce improved species of orange saplings will further bolster our leading position in China's orange market.

 

We are fully committed to maintaining strict quality control over our products. In addition to successfully achieving the annual renewal of the "Organic Products" accreditation from the China Organic Food Certification Center for both our Hepu Plantation and Xinfeng Plantation, our "Royal Star" branded oranges also obtained the "Gold Award" at BioFach China 2010 in May 2010, which is further evidence of the outstanding quality of our products.

 

Operating Review

 

There are approximately 1.3 million orange trees in the Hepu Plantation and approximately 1.1 million trees were producing oranges during the year ended 30 June 2010. Production output for the year was approximately 126,919 tonnes, representing an increase of 2.0% over the previous year's production of 124,394 tonnes. This growth was due mainly to increased production from certain winter orange trees as they became more mature, offsetting the reduction in number of orange-producing trees due to the replanting programme.

 

The Group's replanting programme at the Hepu Plantation is ongoing, and 64,194 winter orange trees have been removed and replanted with the same number of the summer orange trees during the year under review. As at the date of this report, there are approximately 180,000 winter orange trees in the Hepu Plantation, all are due to be replaced over the next three years. We are very confident that the replanting programme will deliver long-term economic benefits by increasing average yields and therefore improve revenue per tonne. The first batch of orange trees replanted in 2007 is due to produce its first crop in 2011.

 

The Xinfeng Plantation is fully planted with 1.6 million winter orange trees, 1.2 million of which produced oranges during the year, yielding approximately 60,019 tonnes of oranges, an increase of approximately 117.0% over the previous year's production of 27,665 tonnes. This growth was mainly due to increased production from the first two batches of 800,000 winter orange trees, which have yet to reach full maturity, together with trial production from the third batch of 400,000 trees. The last batch of 400,000 orange trees is anticipated to begin trial production in the winter of 2010 and by that time the entire Xinfeng Plantation is expected to be producing oranges.

 

During the year, the Group continued construction of the Hunan Plantation, with approximately RMB80.2 million invested. As at 30 June 2010, approximately RMB101.0 million had been invested in the Hunan Plantation. In order to achieve a higher degree of automation and mechanisation, the number of trees to be planted in the plantation has been adjusted from 2.4 million to 1.8 million. The higher degree of automation and mechanisation will further enhance our farming efficiency, leading to an anticipated improvement in yields, as well as greater return on investment. The first batch of 550,000 trees will be planted at the Hunan Plantation before the end of 2010 and the entire plantation will be completed by 2013 as expected.

 

Trading Results

 

The Group's revenue from the sale of oranges was RMB777.7 million (2009: RMB634.9 million) for the year ended 30 June 2010, representing year-on-year growth of 22.5%. This was achieved mainly from increased production of approximately 22.9%. We anticipate that the proportion of sales to supermarkets will continue to increase over time and the Group's products will be able to achieve wider geographical exposure as more supermarket contracts are secured. During the year under review, we further strengthened our sales network in several major cities and coastal provinces in China, including Beijing, Shanghai, Shenzhen, Jiangsu province and Zhejiang province.

 

During the year ended 30 June 2010, the Group sold approximately 61,157 tonnes of oranges to supermarkets directly, representing an increase of 42.3% from 42,977 tonnes sold in the previous year. The volume and revenue derived from sales to supermarkets accounted for 32.7% and 40.8% of the Group's production and revenue from sales of oranges respectively.

 

The gross margin achieved by the Hepu Plantation decreased slightly to 67.7% for the year (2009: 68.6%), due mainly to higher costs associated with organic farming and wage inflation in China. The gross margin achieved by the Xinfeng Plantation was 31.3% for the year compared with 29.1% in the previous year. The higher gross margin at the Xinfeng Plantation was due mainly to the higher average maturity profile of the trees, thus achieving greater economies of scale. Over the medium term, as production volume increases and further economies of scale can be derived, the Group expects the Xinfeng Plantation to continue growing and realise greater profitability. Across the two plantations, the Group's gross margin for its core agricultural business was approximately 58.7% for the year ended 30 June 2010 (2009: 63.0%).

 

The cost of production for the core agricultural business increased from RMB235.0 million for the year ended 30 June 2009 to RMB321.5 million for the year ended 30 June 2010, principally due to increased consumption of raw materials accompanying the growth of the Group's production volume, higher costs associated with organic farming and wage inflation in China. The average unit cost of production at the Hepu Plantation increased from RMB1.38 per kg in the previous year to RMB1.49 per kg in the current year as a result of these higher costs. However, the average unit cost of production at the Xinfeng Plantation decreased from RMB2.31 per kg in previous year to RMB2.22 per kg in the current year due to greater economies of scale benefiting from the increased maturity of trees. Looking at the two plantations collectively, the Group's average unit cost of production increased from RMB1.55 per kg for the year ended 30 June 2009 to approximately RMB1.72 per kg for the year ended 30 June 2010.

 

During the year, the Group continued to sell some of its self-bred saplings to local farmers from the nursery at the Hepu Plantation. Approximately 700,000 orange saplings were sold and the Group recorded RMB7.0 million in revenue.

 

In addition to its core agricultural business the Group completed the transfer of ownership and title for 67 units of Phase 1 at the Xinfeng Development during the year. As a result, the Group realised revenue and incurred corresponding costs (excluding business tax and other relevant taxes and charges that may still be levied) of RMB27.8 million and RMB20.3 million respectively during the year.

 

Hong Kong Listing

 

The Company's shares were successfully listed on the HKEx by way of introduction on 26 November 2009. Together with the original quotations on the AIM of the London Stock Exchange and PLUS Markets, the successful listing on the HKEx will facilitate the development of our business and highlight our leading industry position. More importantly, it will provide an additional platform to strengthen the Company's liquidity.

 

Potential Developments

 

As announced on 15 April 2010, the Company and Guangxi Lixin State-owned Farm entered into a non-legally binding memorandum of understanding in relation to the acquisition of a citrus fruit plantation, with approximately 1.1 million citrus fruits trees and ancillary facilities. The plantation occupies a land area of approximately 10,000 mu and is located in Fuchuan County of the Guangxi Zhuang Autonomous Region in the PRC. We believe this proposed acquisition will further strengthen our own supply of high quality citrus fruit products and we will strive to complete this deal before the end of the exclusivity period which is due to expire on 31 January 2011.

 

Apart from expanding the size of our plantation with the view toward increasing production of citrus fruits, we also see the opportunity for the Group to invest in value-added processed products where there is significant market demand and potential. On 11 October 2010, the Company announced that a conditional sale and purchase agreement was entered in respect of the acquisition (the "Proposed Acquisition") of 92.94% equity interest in Beihai Perfuming Garden Juice Company Limited ("Beihai BPG"). The consideration for this acquisition is approximately HK$2.04 billion. As the Proposed Acquisition will constitute a major acquisition under the Hong Kong Listing Rules, we will convenue to hold a special general meeting in late November 2010 for the purpose of obtaining shareholders' approval for the Proposed Acquisition.

 

Beihai BPG is a leading producer and wholesaler of tropical fruit juice concentrates in the PRC and processes over ten different varieties of tropical fruits, the most significant types of which include pineapples, passion fruits, lychees, mangoes and papayas. Beihai BPG was also the largest producer of pineapple juice concentrate and lychee juice concentrate between 2007 and 2009 and its current annual output production capacity is estimated to be over 60,000 tonnes. Leveraging on the Company's leading position in the production of oranges, increasing demand for healthy food in the PRC (including both fruits and fruit juice beverages) due to rapid urbanisation, continuous growth in household income and consumers' rising health consciousness, we believe the Proposed Acquisition will enable the Group to generate synergies resulting from the vertical integration of a citrus juice and fruit concentrates business and subsequent expansion into other tropical fruit juice concentrates.

 

After taking into account the leading position and scale of Beihai BPG, we consider the Proposed Acquisition will allow the Group to expand into the concentrated juice market in the PRC in an effective and efficient way.

 

Share Placement

 

In April 2010, 68,000,000 new ordinary shares were placed at HK$5.70 each, raising net proceeds of approximately RMB328.4 million. The proceeds will be used principally to finance the acquisition of the state-owned plantation mentioned above, should such an acquisition proceed.

 

Dividends

 

The Board recommends the payment of a final dividend of RMB0.10 per share and a special dividend of RMB0.02 per share for the financial year ended 30 June 2010. This equates to 37.0% of adjusted earnings excluding fair value gain on biological assets for the year ended 30 June 2010, which the Board views as an appropriate payout to provide shareholders with an attractive yield while leaving the Group with sufficient capital for further developments. The Company has decided to institute a Scrip Dividend Scheme whereby shareholders can elect to receive the final dividend for the year ended 30 June 2010 in the form of shares. A document providing further details of this Scrip Dividend Scheme will be sent to shareholders in due course.

 

The final dividend and special dividend, if approved at the Annual General Meeting on 3 December 2010, will be paid in sterling or HK Dollar on or before 31 December 2010, to shareholders whose names appear on the register on 5 November 2010, with an ex-dividend date of 4 November 2010 and 3 November 2010 on the HKEx and London Stock Exchange PLC respectively. The actual translation rate for the purpose of dividend payment in sterling or HK Dollar will be referenced to the exchange rate on 5 November 2010.

 

Outlook

 

During the year, we made very good progress in expanding our direct sales to supermarkets, raising income from such activities as well as attracting a greater number of new supermarket customers. Alongside higher production volume from both the Hepu Plantation and Xinfeng Plantation, the Group aims to increase production of high quality citrus fruits through the possible acquisition of a plantation and by capitalising on the ongoing saplings programme with local farmers, which will enable the Group to source high-quality oranges from the farmers. In addition to the fresh fruits market, the Group is very confident that fruit juice consumption will continue to grow in China; hence the potential acquisition of Beihai BPG will provide the Group with the techniques, processing capacity and distribution network to more effectively and efficiently expand into the concentrated juice market in the PRC.

 

On behalf of the Board, I would like to express my deepest gratitude to the management and employees of the Group for their dedication and contribution to the growth of Asian Citrus. In addition, I would like to take this opportunity to thank all of our shareholders and investors for their ongoing support. We are very excited about the Group's growth, in both upstream and downstream businesses, and we are confident that Asian Citrus will make further progress and deliver good value to shareholders in the wake of continuing economic growth in China.

 

 

Tony Tong Wang Chow

Chairman

 

12 October 2010

 

Asian Citrus Holdings Limited

Management Discussion and Analysis

 

 

OPERATING PERFORMANCE

 

Revenue

 

Revenue from sale of oranges grew by 22.5% to RMB777.7 million for the year ended 30 June 2010. This was achieved by an increase of approximately 22.9% in the Group's production to 186,938 tonnes.

 

The production yield from Hepu Plantation increased by 2.0% to 126,919 tonnes for the year ended 30 June 2010. The orange trees continue to mature and more trees reached orange-bearing age, the production yield from the Xinfeng Plantation increased significantly by 117.0% to 60,019 tonnes for the year ended 30 June 2010 from 27,665 tonnes in the comparable year.

 

The following tables sets out the average selling prices of the Group's oranges for each of the years ended 30 June 2010 and 2009.

 

		Year ended 30 June
				2010		2009
				RMB		RMB
				(per tonne)		(per tonne)
Hepu Plantation
- Winter Oranges				3,567		3,470
- Summer Oranges				5,516		5,057
Xinfeng Plantation
- Winter Oranges				3,330		3,260

 

The first sales of self-bred saplings developed from the nursery centre at the Hepu Plantation took place in April 2009. For the year ended 30 June 2010, RMB7.0 million from the sales of approximately 700,000 selfbred saplings to local farmers was recognised.

 

In addition to the core agricultural business, the transfer of 67 units of Phase I of the Xinfeng Development was completed during the year ended 30 June 2010. The Group recognised revenue and corresponding costs (excluding business tax and other relevant taxes and charges that may be levied) of approximately RMB27.8 million and RMB20.3 million respectively.

 

Combining the above, the Group's revenue increased by 21.5% to RMB812.5 million for the year ended 30 June 2010.

 

The breakdown of sales by types is as follows:

 

		For the year ended 30 June
		2010			2009
			% of			% of
		RMB'000	total revenue		RMB'000	total revenue
Hepu Plantation		583,649	71.8%		544,757	81.5%
Xinfeng Plantation		194,016	23.9%		90,188	13.5%
Sales of oranges		777,665	95.7%		634,945	95.0%
Sales of self-bred saplings		7,056	0.9%		2,246	0.3%
Sales of properties		27,761	3.4%		31,338	4.7%
Total revenue		812,482	100.0%		668,529	100.0%

 

All of the Group's produce was sold domestically. The Group's customers from the sales of oranges can be divided into three categories, namely corporate customers, wholesale customers, and supermarket chains. The breakdown of types of customers is as follows:

 

		For the year ended 30 June
				2010		2009
				% of sale of oranges
Types of customers
Supermarket chains				40.8%		36.7%
Corporate customers				34.5%		38.9%
Wholesale customers				23.8%		23.9%
Other				0.9%		0.5%
Total				100.0%		100.0%

 

For the year ended 30 June 2010, the production volume and revenue to supermarket chains represented approximately 32.7% and 40.8% respectively of the Group, compared to approximately 28.3% and 36.7% respectively for the year ended 30 June 2009. We expect that this proportion will continue to increase and the Group's products will achieve wider geographical exposure as more supermarket contracts in the PRC are secured.

 

For the Hepu Plantation and Xinfeng Plantation, the production volume sold to supermarkets was 45,298 tonnes and 15,859 tonnes for the year ended 30 June 2010, increased from 39,475 tonnes and 3,502 tonnes for the year ended 30 June 2009 respectively.

 

Cost of sales

 

Cost of sale principally consists of the cost of raw materials such as fertilisers, packaging materials, pesticides and other direct costs such as direct labour, depreciation and production overheads. The breakdown of cost of sales is as follows:

 

		For the year ended 30 June
		2010			2009
			% of			% of
		RMB'000	Cost of sales		RMB'000	Cost of sales
Inventories used
Fertilisers		164,613	47.8%		105,072	40.5%
Packaging materials		39,982	11.6%		39,182	15.1%
Pesticides		27,153	7.9%		19,684	7.6%
		231,748	67.3%		163,938	63.2%
Production overheads
Direct labour		30,855	9.0%		25,488	9.8%
Depreciation		49,637	14.4%		38,410	14.8%
Others		9,266	2.7%		7,203	2.8%
Cost of sales of oranges		321,506	93.4%		235,039	90.6%
Cost of sales of self-bred saplings		2,262	0.7%		562	0.2%
Cost of sales of properties		20,337	5.9%		23,704	9.2%
Total		344,105	100%		259,305	100%

 

The production costs of the core agricultural business increased 36.8% to RMB321.5 million (2009: RMB235.0 million). The increase in production costs was principally due to the increase in raw materials utilised for higher production volumes, the higher costs associated with organic farming and wage inflation in China.

 

The average unit cost of production in the Hepu Plantation increased by 8.7% to approximately RMB1.49 per kg for the year ended 30 June 2010 (2009: approximately RMB1.38 per kg) as a result of these higher costs.

 

The average unit cost of production in the Xinfeng Plantation decreased by 3.9% to approximately RMB2.22 per kg for the year ended 30 June 2010 (2009: approximately RMB2.31 per kg) as a result of better economies of scale achieved. As a result, the combined average unit cost of production increased by 11.3% to approximately RMB1.72 per kg for the year ended 30 June 2010 (2009: approximately RMB1.55 per kg).

 

Gross profit

 

The Group's overall gross profit increased by 14.5% to approximately RMB468.4 million for the year ended 30 June 2010 (2009: RMB409.2 million). The improvement in gross profit was the result of an increase in the production output of the Group's orange trees from a total of 152,059 tonnes to 186,938 tonnes.

 

Gross profit margin

 

The following table sets out a breakdown of the Group's gross profit margin by plantation:

 

		For the year ended 30 June
				2010		2009
Hepu Plantation				67.7%		68.6%
Xinfeng Plantation				31.3%		29.1%

 

The gross profit margin of the Hepu Plantation slightly decreased to approximately 67.7% (2009: 68.6%) as a result of the higher costs mentioned above.

 

More trees in the Xinfeng Plantation have reached orange-bearing age and have continued to mature during the year. Benefiting from the increasing maturity of the orange trees in the Xinfeng Plantation, the gross profit margin of the Xinfeng Plantation increased to approximately 31.3% for the year ended 30 June 2010 (2009: 29.1%). As a result of the continuous growth in production volume and economies of scale, we expect that the margin of the Xinfeng Plantation will continue to improve over the medium term.

 

The following table sets out a breakdown of the Group's gross profit margin by business:

 

		For the year ended 30 June
				2010		2009
Cost of sales of oranges				58.7%		63.0%
Cost of sales of self-bred saplings				67.9%		75.0%
Cost of sales of properties				26.7%		24.4%
Overall gross profit				57.6%		61.2%

 

The decrease in gross profit margin on the sales of oranges was mainly due to the higher contribution from Xinfeng Plantation with its lower profit margin due to its early stage of the development.

 

The drop of the gross profit margin on the sales of self-bred saplings was due to the increase in overheads resulted from the full operation of the nursery centre.

 

The increase in gross profit margin on the sale of properties was mainly due to the higher price per sq.m. obtained for property sold. As at 30 June 2010, there were 49 units sold but not yet recognised in the income statement as the occupational permits were under application.

 

Other income

 

The Group recorded a gain of RMB306.0 million from changes in fair value of biological assets for the year ended 30 June 2010, compared to a gain of RMB210.6 million for the last year. The increase was mainly due to the higher selling price of the oranges achieved by the Group and the transfer of 400,000 infant trees to orange trees and the increased maturity of orange trees in our plantations during the year.

 

Selling and distribution expenses

 

Selling and distribution expenses mainly comprise sales commissions, advertising, salaries and welfare of sales personnel, travelling and transportation expenses. The selling and distribution expenses of the Group increased from approximately RMB39.9 million for the year ended 30 June 2009 to approximately RMB45.5 million for the year ended 30 June 2010, representing an increase of 14.1%, mainly resulting from the increased sale activities in Xinfeng Plantation and more direct sales to supermarket customers during the year.

 

General and administrative expenses

 

General and administrative expenses comprise mainly salary, office administration expenses, depreciation, amortization, raw material utilised for infant trees and research costs. The general and administrative expenses of the Group were approximately RMB143.3 million for the year ended 30 June 2010 (2009: RMB137.5 million), representing an increase of 4.2%. The increase was mainly due to the one-off expense of RMB16.3 million for the listing by the way of introduction of the share capital on the Main Board of the HKEx. Excluding this one-off expense, the general and administrative expenses would have been decreased by RMB10.5 million as a result of less raw materials utilised for the infant trees in Xinfeng Plantation. The last batch of 400,000 infant trees is close to fruit-bearing stage with the trial harvest expected in the winter of 2010.

 

Profit

 

Pre-tax profit was approximately RMB587.3 million for the year ended 30 June 2010, representing an increase of 32.8% as compared to last year. The profit attributable to shareholders for the year ended 30 June 2010 increased to RMB585.5 million, compared to RMB440.1 million for 2009, up 33.0%. There were one-off listing expenses of RMB16.3 million for the year ended 30 June 2010 and excluding these one-off expenses, net profit would have been up by 36.7%.

 

Pre-tax profit excluding the biological gain was RMB281.3 million for the year ended 30 June 2010, representing an increase of 21.5% as compared to last year. The profit attributable to shareholders excluding the biological gain for the year ended 30 June 2010 was RMB279.5 million, compared to RMB229.4 million for 2009, up 21.8%. Excluding the one-off listing expenses as mentioned above, net profit excluding the biological gain would have been up by 28.9%.

 

The increase was mainly due to the higher operating profit from greater production volume as the maturity of orange trees in Xinfeng Plantation increased and higher selling price of oranges.

 

FINAL DIVIDEND AND SPECIAL DIVIDEND

 

The Board has recommended a final dividend of RMB0.10 per share and a special dividend of RMB0.02 per share for the year ended 30 June 2010 (2009: RMB0.08 and nil respectively).

 

PRODUCTIVITY

 

The increasing maturity of the oranges trees together with effective managerial planning and production supervision, has led to productivity gains.

 

			For the year ended 30 June
		2010			2009
			% of			% of
Types of produce		Tonnes	Total output		Tonnes	Total output
Winter Oranges		114,530	61.3%		80,807	46.9%
Summer Oranges		72,408	38.7%		71,252	53.1%
Total		186,938			152,059

 

The production volume of Winter Oranges increased to 114,530 tonnes for the year ended 30 June 2010, representing an increase of 41.7%. The production volume of Winter Oranges in Hepu Plantation increased from 53,142 tonnes for the year ended 30 June 2009 to 54,511 tonnes for 2010, representing an increase of approximately 2.6%. As the orange trees matured, the production volume of Winter Oranges from Xinfeng Plantation increased significantly by 117.0% to 60,019 tonnes for the year ended 30 June 2010 from 27,665 tonnes in the last year.

 

The production volume of Summer Oranges slightly increased to 72,408 tonnes for the year ended 30 June 2010 (2009: 71,252 tonnes).

 

CAPITAL STRUCTURE

 

As at 30 June 2010, there were 852,650,094 shares in issue. Based on the closing price of HK$5.47 as at 30 June 2010, the market capitalisation of the Company was approximately 4,664.0 million (GBP417.8 million).

 

HUMAN RESOURCES

 

There were a total of 1,368 employees of the Group as at 30 June 2010. The Group aims to attract, retain and motivate high calibre individuals with a competitive remuneration package. Remuneration packages are performance-linked and business performance, market practices and competitive market conditions are all taken into consideration. The Group reviews the employees' remuneration packages on an annual basis. The Group also places heavy emphasis on staff training and development so that employees can reach their maximum potential.

 

FINANCIAL PERFORMANCE

 

 

		30 June 2010		30 June 2009
Current ratio (x)		21.33		10.92
Quick ratio (x)		19.21		9.19
Asset turnover (x)		0.21		0.23
Basic earnings excluding revaluation gain from biological assets per share (RMB)		0.35		0.30
Basic earnings per share (RMB)		0.74		0.58
Net debt to equity (%)		Net cash		Net cash

 

Liquidity

 

The current ratio and quick ratio was 21.33 and 19.21 respectively. The liquidity of the Group is remained healthy with sufficient reserves for both current operation and future development.

 

Profitability

 

The asset turnover of the Group slightly decreased to 0.21 (2009: 0.23) for the year ended 30 June 2010.

 

The basic earnings per share for the year ended 30 June 2010 was RMB0.74 (2009: RMB0.58).

 

The basic earnings excluding biological gain per share for the year ended 2010 increased to RMB0.35 (2009: RMB0.30). The increase was mainly due to the higher operating profit from greater production volume as the increased maturity of orange trees in Xinfeng Plantation and higher selling price of oranges.

 

Debt ratio

 

The net cash positions of the Group were RMB975.1 million and RMB461.2 million at 30 June 2010 and 2009 respectively.

 

Internal cash resource

 

The Group's major internal cash resource is its cash and bank balances. The Group did not have any outstanding bank borrowings as at 30 June 2010.

 

Charge on assets and contingent liabilities

 

None of the Group's assets were pledged and the Group did not have any material contingent liabilities as at 30 June 2010.

 

Capital Commitments

 

As at 30 June 2010, the Group had capital commitments of approximately RMB91.1 million mainly in relation to the construction of the farmland infrastructure in the Hunan Plantation.

 

Foreign exchange risk

 

The Group is exposed to currency risk primarily through its cash and cash equivalents that are denominated in a currency other than the functional currency of the operation to which they related. The currencies giving rise to this risk are primarily Hong Kong dollars, United States dollars and British pounds.

 

The Group undertakes certain transactions denominated in foreign currencies, hence exposures to exchange rate fluctuation arise. The Group currently does not use any derivative contracts to hedge against its exposure to currency risk. Management manages its currency risk by closely monitoring the movement of the foreign currency rate and considers hedging significant foreign currency exposure should the need arise.

 

 

 

Asian Citrus Holdings Limited

Consolidated Statement of Comprehensive Income

For the year ended 30 June 2010

 

 

		2010 RMB'000		2009 RMB'000
	Note	(Audited)		(Audited)
Revenue	4	812,482		668,529
Net gain on change in fair value of biological assets		306,000		210,631
Inventories used		(289,572)		(222,917)
Staff costs		(56,626)		(49,382)
Amortisation		(3,644)		(4,557)
Depreciation		(63,181)		(57,141)
Other operating expenses		(119,902)		(102,726)
Profit from operations		585,557		442,437
Interest income		1,845		2,105
Finance costs		(81)		(12)
Net finance income		1,764		2,093
Share of loss of associates		-		(368)
Impairment loss on interests in associates		-		(1,896)
Profit before income tax		587,321		442,266
Income tax expense	7	(1,854)		(2,205)
Profit and total comprehensive income for the year attributable to shareholders of the Company		585,467		440,061
		RMB		RMB
Earnings per share	8
- Basic		0.741		0.581
- Diluted		0.735		0.581

 

 

 

Asian Citrus Holdings Limited

Consolidated balance sheet

As at 30 June 2010

 

 

		2010 RMB'000		2009 RMB'000
	Note	(Audited)		(Audited)
ASSETS
Non-current assets
Property, plant and equipment		1,161,437		1,083,758
Land use rights		54,841		56,085
Construction-in-progress		64,328		79,021
Biological assets		1,449,565		1,142,025
Deferred development costs		36,800		30,700
Interests in associates		-		-
		2,766,971		2,391,589
Current assets
Biological assets		90,221		54,638
Properties for sale		18,497		34,111
Inventories		841		639
Trade and other receivable	10	19,629		14,901
Cash and cash equivalents		975,074		461,241
		1,104,262		565,530
Total assets		3,871,233		2,957,119
EQUITY AND LIABILITIES
Equity
Share capital		8,767		8,028
Reserves		3,810,687		2,897,295
		3,819,454		2,905,323
Current liabilities
Trade and other payables	11	44,391		48,735
Due to related parties		7,110		2,754
Income tax payables		278		307
Total liabilities		51,779		51,796
Total equity and liabilities		3,871,233		2,957,119
Net current assets		1,052,483		513,734
Total assets less current liabilities		3,819,454		2,905,323

 

 

 

Asian Citrus Holdings Limited

Consolidated cash flow statement

For the year ended 30 June 2010

 

 

	2010 RMB'000		2009 RMB'000
	(Audited)		(Audited)
Cash flows from operating activities
Profit before income tax	587,321		442,266
Adjustments for:
Interest income	(1,845)		(2,105)
Finance costs	81		12
Depreciation	68,492		61,406
Share-based payments	10,363		8,954
Amortisation of land use rights	1,244		1,157
Amortisation of deferred development costs	2,400		3,400
Net gain on change in fair value of biological assets	(306,000)		(210,631)
Loss on disposal of property, plant and equipment	-		480
Write off of biological assets	-		42
Share of loss of associates	-		368
Impairment loss on interests in associates	-		1,896
Operating profit before working capital changes	362,056		307,245
Movements in working capital elements
Properties for sales	19,656		20,194
Inventories	(202)		848
Biological assets	(35,583)		(37,851)
Trade and other receivables	(4,728)		(4,145)
Trade and other payables	(4,344)		7,431
Due to related parties	4,356		954
Cash generated from operations	341,211		279,814
Income tax paid	(1,883)		(825)
Net cash generated from operating activities	339,328		278,989
Cash flows from investing activities
Purchase of property, plant and equipment	(1,698)		(8,596)
Proceeds from disposal of property, plant and equipment	-		594
Additions to construction-in-progress	(133,822)		(97,040)
Net addition of biological assets	(1,540)		(227)
Additions to deferred development costs	(8,500)		(11,500)
Interest received	1,845		2,105
Net cash used in investing activities	(143,715)		(114,664)
Cash flows from financing activities
Advance to an associate	-		(48)
Proceeds from issue of new shares from placement	328,375
Proceeds from issue of new shares upon exercise of share options	10,138		-
Dividend paid	(20,212)		(12,976)
Finance costs paid	(81)		(12)
Net cash generated from/(used in) financing activities	318,220		(13,036)
Net increase in cash and cash equivalents	513,833		151,289
Cash and cash equivalents at beginning of year	461,241		309,952
Cash and cash equivalents at end of year	975,074		461,241

 

 

Asian Citrus Holdings Limited

Notes to Financial Information

 

1 General Information

 

Asian Citrus Holdings Limited (the "Company") was incorporated in Bermuda on 4 June 2003 as an exempted company with limited liability under the Companies Act of Bermuda and its shares are listed on the HKEx, AIM of the London Stock Exchange and PLUS Markets plc.

 

The address of the registered office of the Company is Clarendon House, 2 Church Street, Hamilton, Bermuda HM11. The address of its principal place of business is Rooms 1109-1112, Wayson Commercial Building, 28 Connaught Road West, Hong Kong.

 

The principal activities of the Company and its subsidiaries (together referred to as the "Group") are planting, cultivation and sale of agricultural produce, and developing and sale of property units in an agricultural wholesale market and orange processing centre.

 

The directors regard Tong Wang Chow and his family through its direct shareholding in Market Ahead Investments Limited, a company incorporated in the British Virgin Islands ("BVI"), as being the ultimate controlling party of the Company as at 30 June 2010.

 

2 Significant Accounting Policies

 

a) Statement of compliance

 

These financial statements have been prepared in accordance with all applicable International Financial Reporting Standards ("IFRSs"), which comprise International Financial Reporting Standards, International Accounting Standards ("IAS") and Interpretations ("IFRIC"), issued by the International Accounting Standards Board ("IASB") and the International Financial Reporting Interpretations Committee, and the disclosure requirements of the Hong Kong Companies Ordinance. These financial statements also comply with the applicable disclosure provisions of the Rules Governing the Listing of Securities on the HKEx and the AIM Rules.

 

The IASB has issued certain new and revised IFRSs that are first effective or available for early adoption for the current accounting period of the Group. Note 3 provides information on any changes in accounting policies resulting from initial application of these developments to the extent that they are relevant to the Group for the current and prior accounting periods reflected in these financial statements.

 

b) Basis of preparation of the financial statements

 

These financial statements are presented in Renminbi ("RMB"), which is also the functional currency of the Group, rounded to the nearest thousand, unless otherwise stated.

 

These financial statements have been prepared under the historical cost convention, as modified by the revaluation of biological assets which are carried at their fair values.

 

The preparation of financial statements in conformity with IFRSs requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

 

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

 

3 Change in Accounting Policies

 

The IASB has issued one new IFRS, a number of amendments to IFRSs and new Interpretations that are first effective for the current accounting period of the Group and the Company. Of these, the following developments are relevant to the Group's financial statements:

 

• IAS 1 (revised 2007) "Presentation of Financial Statements"

 

• IFRS 3 (Revised 2008) "Business Combinations"

 

• IFRS 8 "Operating Segments"

 

• IFRIC 15 "Agreements for the Construction of Real Estate"

 

• Improvements to IFRSs (2008)

 

• Amendments to IAS 27 "Consolidated and Separate Financial Statements"

 

• Amendments to IFRS 7 "Financial instruments: Disclosures" - Improving Disclosures about Financial Instruments

 

With exception for IAS 1 (revised 2007), the new or amendments to IFRSs and Interpretations above have had no material impact on the Group's results of operations and financial position, or do not contain any additional disclosure requirements specifically applicable to these financial statements.

 

As a result of the adoption of IAS 1 (revised 2007), details of changes in equity during the period arising from transactions with equity shareholders in their capacity as such have been presented separately from all other income and expenses in a revised consolidated statement of changes in equity. All other items of income and expenses are presented in the consolidated income statement if they are recognised as part of profit or loss for the period, or otherwise in a new primary statement, the consolidated statement of comprehensive income. The new format for the consolidated statement of comprehensive income and the consolidated statement of changes in equity has been adopted in these statements and corresponding amounts have been restated to conform to the new presentation. This change in presentation has no effect on reported profit or loss, total income and expense or net assets for any period presented.

 

Up to the date of approval of these financial statements, the IASB has issued the following amendments, new standards and Interpretations which are not yet effective for the year ended 30 June 2010 and which have not been adopted in these financial statements.

 

		Effective for accounting periods beginning on or after
·;	Improvements to IFRSs (2009)	1 January 2010
·;	Amendments to IFRS 2 "Share-based Payment - Group Cash - settled Share-based Payment Transactions"	1 January 2010
·;	Improvements to IFRSs (2010)	1 July 2010 or 1 January 2011
·;	IAS 24 (Revised 2009) "Related Party Disclosures"	1 January 2011
·;	IFRS 9 "Financial Instruments"	1 January 2013

 

The Group is in the process of making an assessment of what the impact of these amendments is expected to be in the period of initial application. So far it has concluded that their adoption is unlikely to have a significant impact on the Group's results of operations and financial position.

 

4 Revenue

 

	2010 RMB'000		2009 RMB'000
	(Audited)		(Audited)
Sales of oranges	777,665		634,945
Sales of self-bred saplings	7,056		2,246
Sales of properties	27,761		31,338
	812,482		668,529

 

 

5 Segment Information

 

The Group manages its businesses by lines of business. For the purposes of resource allocation and performance assessment, the Group's most senior executive management is regularly presented with information on the two principal activities comprising the business of the Group, namely, the planting, cultivation and sale of agricultural produce, and developing and sale of property units in an agricultural wholesale market and orange processing centre, both within the PRC.

 

Over 90% of the Group's revenue, expenses, assets, liabilities and capital expenditure is attributable to planting, cultivation and sales of agricultural produce. The balance is attributable to the development and sale of property units in an agricultural wholesale market and orange processing centre. Consequently, further segment information is not presented.

 

Details regarding the Group's revenue from agricultural produces and properties are disclosed in note 4.

 

No customer accounted for 10% or more of the total revenue for the year.

 

6 Profit from Operations

 

Profit from operations is stated after charging/(crediting) the following:

 

	2010 RMB'000		2009 RMB'000
	(Audited)		(Audited)
Inventories used
- production	231,899		164,000
- general and administrative	57,673		58,917
	289,572		222,917
Staff costs
- production	30,980		25,568
- selling and distribution	1,325		1,163
- general and administrative	24,321		22,651
	56,626		49,382
Amortisation
- general and administrative	3,644		4,557
Depreciation
- production	51,291		38,804
- general and administrative	11,890		18,337
	63,181		57,141
Other operating expenses
- production	29,935		30,933
- selling and distribution	44,177		38,724
- general and administrative	45,790		33,069
	119,902		102,726
Of which:
Amortisation of land use rights	1,244		1,157
Amortisation of deferred development costs	2,400		3,400
Auditors' remuneration	1,319		1,450
Cost of agricultural products sold	321,506		235,601
Cost of properties sold	20,337		23,704
Depreciation of property, plant and equipment	68,492		61,406
Add: Realisation of depreciation previously capitalised as biological assets	8,021		3,756
Less: Amount capitalised as biological assets	(13,332)		(8,021)
	63,181		57,141
Exchange losses, net	1,277		747
Loss on disposal of property, plant and equipment	-		480
Operating lease expenses
- plantation base	7,410		6,222
- office premises	775		967
Research and development costs	5,795		6,198
Write off of biological assets	-		42

 

7 Income Tax Expense

 

The amount of income tax expense charged to the consolidated statement of comprehensive income represents:

 

	2010 RMB'000		2009 RMB'000
	(Audited)		(Audited)
PRC enterprise income tax ("EIT") (note a)	1,041		1,403
Land appreciation tax ("LAT") (note b)	813		802
	1,854		2,205

 

a) EIT

 

Pursuant to the PRC Enterprise Income Tax Law (the "New Tax Law") passed by the Tenth National People's Congress on 16 March 2007, the new PRC income tax rates for domestic and foreign enterprises are unified at 25% effective from 1 January 2008.

 

According to Article 27 of the New Tax Law and Article 86(1) of the New Tax Law Implementation Rules, enterprises engaging in certain agricultural activities, including growing of fruits and selection and cultivation of new agricultural species, are exempt from EIT. Accordingly, Lucky Team Biotech Development (Hepu) Limited, Litian Biological Sciences & Technology Development (Xinfeng) Company Limited and Lucky Team (Hepu) Agriculture Development Limited are exempt from EIT from 1 January 2008.

 

b) LAT

 

LAT is levied at progressive rates ranging from 30% to 60% on the appreciation of land value, being the proceeds of sales of properties less deductible expenses including costs for land use rights and all property development expenses.

 

c) Hong Kong profits tax

 

No Hong Kong profits tax has been provided (2009: RMBnil) as the Group had no assessable profit arising in or derived from Hong Kong during the year.

 

8 Earnings per share

	2010 RMB'000		2009 RMB'000
	(Audited)		(Audited)
Earnings
Profit attributable to shareholders used in basic and diluted earnings per share calculation	585,467		440,061
Weighted average number of shares	'000		'000
Issued ordinary shares at beginning of year	770,560		743,570
Effect of shares issued to shareholders participating in the scrip dividend	3,981		13,458
Effect of shares issued upon exercise of share options	2,881		-
Effect of shares issued upon placement	13,227		-
Weighted average number of ordinary shares used in basic earnings per share calculation	790,649		757,028
Effect of dilutive potential shares in respect of share options	5,673		573
Weighted average number of ordinary shares used in diluted earnings per share calculation	796,322		757,601

 

The weighted average number of shares in year ended 30 June 2009 for the purpose of calculating the basic and diluted earnings per share has been retrospectively adjusted for the one-to-ten share subdivision which took place on 2 November 2009.

 

9 Dividends

 

	2010 RMB'000		2009 RMB'000
	(Audited)		(Audited)
Proposed final dividend of RMB0.10 and special dividend of RMB0.02 (2009: RMB0.08 and nil respectively) per ordinary share	103,359		61,645

 

The proposed final dividend and special dividend is not recognised as a liability as at 30 June 2010 as it is subject to the approval of the Company's shareholders at the forthcoming annual general meeting.

 

A final dividend of RMB0.08 per ordinary share for the year ended 30 June 2009 was paid on 31 December 2009.

 

10 Trade and other receivables

 

Included in trade and other receivables are trade receivables with the ageing analysis as follows:

 

	2010 RMB'000		2009 RMB'000
	(Audited)		(Audited)
Neither past due nor impaired	1,348		1,544
Less than 1 month past due	116		493
1 to 3 months past due	-		274
3 to 6 months past due	-		-
6 to 12 months past due	506		-
Over 1 year past due	545		-
Amounts past due	1,167		767
	2,515		2,311

 

Trade receivables at the balance sheet date are mainly receivables from the sales of properties which are due for settlement in accordance with the terms of the related sale and purchase agreements.

 

Included in the Group's trade receivables are debtors with an aggregate carrying amount of RMB1,167,000 (2009: RMB767,000) which are past due at the balance sheet date and for which the Group has not provided for any impairment loss because the Group holds collateral over these balances.

 

11 Trade and other payables

 

Included in trade and other payables are trade payables with the ageing analysis of trade payables including amount due to a related party, by due date as follows:

 

	2010 RMB'000		2009 RMB'000
	(Audited)		(Audited)
Due within 3 months or on demand	26,442		17,232
Due after 3 months but within 6 months	51		297
Due after 6 months but within 1 year	95		-
Due over 1 year	-		11
	26,588		17,540
Represented by:
Trade payables	19,478		14,786-
Amount due to a related party	7,110		2,754-
	26,588		17,540

 

12 Financial Information

 

The results announcement was approved by the board on 12 October 2010. 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 2009.

 

The statutory accounts for the year ended 30 June 2010 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 2010 and their report was unqualified and did not contain a statement under section 237 (2) or (3) of the Companies Act 1985.

 

 

Asian Citrus Holdings Limited

Other Information

DIVIDENDS

 

The Board recommends the payment of a final dividend of RMB0.10 per share and a special dividend of RMB0.02 per share for the financial year ended 30 June 2010. This equates to 37.0% of adjusted earnings excluding fair value gain on biological assets for the year ended 30 June 2010, which the Board views as an appropriate payout to provide shareholders with an attractive yield while leaving the Group with sufficient capital for further developments. The Company has decided to institute a Scrip Dividend Scheme whereby shareholders can elect to receive the final dividend for the year ended 30 June 2010 in the form of shares. A document providing further details of this Scrip Dividend Scheme will be sent to shareholders in due course.

 

The final dividend and special dividend, if approved at the Annual General Meeting on 3 December 2010, will be paid in sterling or HK Dollar on or before 31 December 2010, to shareholders whose names appear on the register on 5 November 2010, with an ex-dividend date of 4 November 2010 and 3 November 2010 on the HKEx and London Stock Exchange PLC respectively. The actual translation rate for the purpose of dividend payment in sterling or HK Dollar will be referenced to the exchange rate on 5 November 2010.

 

PURCHASE, SALE OR REDEMPTION OF THE COMPANY'S LISTED SECURITIES

 

Neither the Company nor any of its subsidiaries had purchased, sold or redeemed any of the Company's listed securities during the year, except for the issue of 6,106,000 ordinary shares under the Share Option Scheme, the issue of 7,984,294 ordinary shares to shareholders participating in the scrip dividend and the placing of 68,000,000 ordinary shares to investors in April 2010 as set out below:

 

Fund Raising Activity

 

For the purpose of strengthening the capital base for further development of the Group, the Group completed the following fund raising activity during the year under review. The Company issued 68,000,000 ordinary shares to not less than six professional institutional and other investors who are independent third parties under a placing and subscription agreement with net proceeds of approximately RMB328.4 million, and mainly intends to apply to acquire a citrus fruit plantation with approximately 1.1 million citrus fruits trees and ancillary facilities which occupies a land area of approximately 10,000 mu located in the PRC, further details of which are stated in the announcement dated 21 April 2010.

 

CODE ON CORPORATE GOVERNANCE PRACTICES

 

During the year ended 30 June 2010, the Directors, where practicable, for an organisation of the Group's size and nature sought to comply with the Combined Code. The Combined Code is the key source of corporate governance recommendations for UK listed companies. It consists of principles of good governance covering the following areas: (i) Directors; (ii) Directors' remuneration; (iii) accountability and audit; (iv) relations with shareholders; and (v) institutional investors.

 

In connection with the listing of the Company on the HKSE in November 2009, the Company adopted the code provisions set out in the Code on Corporate Governance Practices ("CCG") contained in Appendix 14 to the Hong Kong Listing Rules as its additional code on corporate governance practices on 17 November 2009. The Company has complied with the CCG since its listing on the HKSE on 26 November 2009, except the deviation from provision A.2.1 as described below:

 

- Code Provision A.2.1.

 

The roles of Chairman and Chief Executive Officer are performed by the same individual, Mr. Tong Wang Chow, and are not separated. The Board meets regularly to consider issues related to corporate matters affecting operations of the Group. The Board considers the structure will not impair the balance of power and authority of the Board and the Company's management and thus, the Board believes this structure will enable effective planning and implementation of corporate strategies and decisions.

 

COMPLIANCE WITH THE MODEL CODE FOR SECURITIES TRANSACTIONS BY DIRECTORS OF LISTED ISSUERS

 

The Company has adopted a code for Directors' dealings appropriate for a company whose shares are admitted to trading on AIM and takes all reasonable steps to ensure compliance by the Directors and any relevant employees. The form of this code is substantially the same as that set out in Appendix 10 of the Hong Kong Listing Rules.

 

In connection with the listing of the Company on the HKSE in November 2009, the Company adopted the Model Code for Securities Transactions by Directors of Listed Issuers (the "Model Code") as set out in Appendix 10 of the Hong Kong Listing Rules as its own code of conduct regarding securities transactions by the Directors on 17 November 2009. Having made specific enquiry, the Company confirmed that all Directors have complied with the required standard set out in the Model Code for the year under review.

 

AUDIT COMMITTEE

 

The Audit Committee comprises of three independent non-executive directors. Mr. Ma Chiu Cheung Andrew acts as Chairman of the committee with Mr. Nicholas Smith and Mr. Yang Zhenhan act as members. The arrangement of Audit Committee is in compliance with Rule 3.21 of the Hong Kong Listing Rules.

 

The Audit Committee has reviewed with management the accounting principles and practices adopted by the Group, and discussed auditing, internal control and financial reporting matters including the review of the Company's audited financial statements for the year ended 30 June 2010.

 

 

PUBLICATION OF ANNUAL REPORT

 

The annual report will be published on the respective websites of the Company (www.asian-citrus.com) under the investor relations section and the HKEx (www.hkex.com.hk) in due course.

 

 

BY ORDER OF THE BOARD Asian Citrus Holdings Limited Tong Wang Chow Chairman

 

Hong Kong, 12 October 2010

 

As at the date of this announcement, the board of directors of the Company comprises five executive directors, namely Mr. Tong Wang Chow, Mr. Tong Hung Wai, Tommy, Mr. Cheung Wai Sun, Mr. Pang Yi and Mr. Sung Chi Keung; two non-executive directors, namely Mr. Ip Chi Ming and Hon Peregrine Moncreiffe and four independent non-executive directors, namely Mr. Ma Chiu Cheung, Andrew, Mr. Nicholas Smith, Mr. Yang Zhenhan and Dr. Lui Ming Wah, SBS JP.

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