Final Results

15th Sep 2009 07:00



For immediate release

Tuesday 15 September 2009

Asian Citrus Holdings Limited

Preliminary Results for the year ended 30 June 2009

Asian Citrus Holdings Limited ("Asian Citrus"), the largest orange plantation owner and operator in China, announces preliminary results for the year ended 30 June 2009.

Key Highlights

				For illustration only
	Year ended  30 June			Year ended  30 June
	2009 (RMBm)	2008 (RMBm)	% change  (RMB)	2009  (£m*)	2008  (£m*)
Reported financial information
Revenue	668.5	533.8	+25.2	58.8	39.0
EBITDA	501.9	413.6	+21.3	44.1	30.2
Profit before tax	442.3	367.7	+20.3	38.9	26.8
Net profit	440.1	399.3	+10.2	38.7	29.1
Basic EPS	RMB5.81	RMB5.38	+8.0	51.1p	39.3p
Dividend per share	RMB0.80	RMB0.80	-	7.0p	5.8p
Reported financial information adjusted to exclude biological gain
EBITDA	291.2	248.6	+17.1	25.6	18.1
Profit before tax	231.6	202.7	+14.3	20.4	14.8
Net profit	229.4	234.3	-2.1	20.2	17.1
Basic EPS	RMB3.03	RMB3.16	-4.1	26.6p	23.1p

* Conversion at £1 = RMB11.37 and RMB13.70 for the year ended 30 June 2009 and 2008 respectively for reference only

Operational Highlights

•	Revenues from the sales of oranges up 20.5% to RMB634.9 million, achieved by an increase of 16.7% in production and a 3.3% increase in average selling price
•	Revenues from the sales of retail units in Xinfeng Development was RMB31.3 million (2008: RMB6.8 million) with gross margin of 24.4% (2008: 19.4%)
•	Revenues from the first sales of self-bred saplings was RMB2.2 million
•	Gross profit increased by 14.0% to RMB409.2 million with overall profit margin of 61.2% (2008: 67.3%)
•	Profit before tax (ex-biological gain) increased by 14.3% to RMB231.6 million
•	Continued increase in the volume sold to higher margin supermarket customers to 42,977 tonnes (2008: 35,303 tonnes)
•	Signed new contracts with two new supermarket customers in Beijing and Guizhou province
•	Commenced the commercial sales of self-bred saplings to local farmers during the year with reciprocal agreements with the farmers offering the Group the first right to purchase their oranges

Hepu Plantation

•	Fully developed with approximately 1.3 million orange trees, of which approximately 1.2 million trees were fruit-bearing
•	Production increased by 3.5% to 124,394 tonnes (2008: 120,189 tonnes)
•	Gross margin decreased slightly to 68.6% (2008: 69.9%)
•	Replanting underway with approximately 80,000 new summer orange trees planted

Xinfeng Plantation

•	Fully developed with 1.6 million winter orange trees
•	Production increased by 173.4% to 27,665 tonnes from the first 800,000 (two batches of 400,000) winter orange trees (2008: 10,119 tonnes)
•	Gross margin decreased to 29.1% (2008: 33.8%) as a result of the trial production of second batch of 400,000 trees
•	Third batch of 400,000 winter oranges expected to start its trial crops in the winter of 2009
•	Final batch of 400,000 orange trees expected to reach their fruit-bearing age in the winter of 2010

Hunan Plantation

•	Commenced the basic infrastructure with RMB20.3 million invested during the year
•	Started the construction work of a new nursery at Hunan Plantation which occupies approximately 7,000 square metres
•	Plan is to plant a total 2.4 million orange trees before the end of 2013

Tony Tong, Chairman, commented:

"The global financial crisis in the second half of 2008 created an extremely challenging business environment around the world, including in China. There was a sharp drop in consumer confidence and lower demand for consumables. Despite these challenges, we continued to focus our resources on expanding our distribution network and we were able to extend our sales to supermarkets in the Beijing and Guizhou Province given our outstanding species and quality of oranges.

"The business environment has largely improved in 2009 following a series of economic measures adopted by various governments around the world. The most important measure relevant to the Group is China's Stimulus Plan of RMB4 trillion, which aims to promote domestic demand and economic growth of the domestic economy by targeting gross domestic product growth of 8% per annum. We believe that this plan will greatly enhance domestic demand for consumables and we are confident that we will be able to expand our distribution network to more supermarkets in the near future.

"We believe that the proposed Hong Kong listing is desirable and that the liquidity of the Company's shares will be enhanced.

"We are confident that Asian Citrus will continue to progress and deliver good value to its shareholders in the wake of the continued economic growth in China."

- ends -

For further information please contact:
Asian Citrus Holdings Limited Tony Tong, Chairman and Chief Executive Officer Eric Sung, Finance Director	Tel: +852 2559 0323
Weber Shandwick Financial Terry Garrett, John Moriarty, Stephanie Badjonat	Tel: 020 7067 0700

Asian Citrus Holdings Limited

Chairman's Statement

I am very pleased to present the annual results of Asian Citrus Holdings Limited and its subsidiaries for the year ended 30 June 2009.

STRATEGIC OVERVIEW

During the year ended 30 June 2009, the Group renewed supply contracts with all of its existing customers. In addition, the Group continued to develop its direct sales offering to supermarkets in other geographical areas of China and added two new supermarket customers, one in Beijing and another in Guizhou province. We are confident that we will continue to expand our sales coverage to supermarkets in other geographical areas with increased volume in the near future.

During the year ended 30 June 2009, we sold approximately 42,977 tonnes of oranges to supermarkets directly, representing an increase of 21.7% from 35,303 tonnes sold in the previous year. The volume and revenue of sales to supermarkets accounted for 28.3% and 36.7% of the Group's production and revenue respectively.

After two years of operating our orange saplings nursery in the Hepu Plantation, there are now more than 280 advanced species of citrus seedlings in our nursery and mass production of self-bred saplings has commenced. In addition to the supply of self-bred saplings for our own replanting programme in the Hepu Plantation, we sold approximately 220,000 self-bred saplings to local farmers during the year. Apart from providing the Group with a new stream of revenue, the nursery function also enables the Group to secure a long-term stable supply of high-quality oranges as there are reciprocal agreements with the farmers which offer the Group the first right to purchase their oranges.

During the year, the Group expanded its nursery function by the construction of a new nursery at the Hunan Plantation, which was substantially completed in September 2009. This new nursery aims principally to provide saplings for the Hunan Plantation although, after the completion of the Hunan Plantation, it will also supply local farmers with orange saplings. We believe our strength in species development and our capability to mass produce good-species orange saplings will further strengthen our leading position in the Chinese orange market.

OPERATING REVIEW

The Hepu Plantation is now fully developed with approximately 1.3 million orange trees, of which approximately 1.1 million trees were producing oranges during the year ended 30 June 2009. Production output for the year was approximately 124,394 tonnes, representing an increase of 3.5% over the previous year's production of 120,189 tonnes. This growth was due mainly to the increase in production of certain winter orange trees with increasing maturity, offset by reduction in the number of orange-producing trees due to the replanting programme.

The Group's replanting programme in the Hepu Plantation is ongoing and, so far, 81,261 winter trees have been removed and replanted with the same number of the new species of summer orange trees. There are currently approximately 240,000 winter orange trees at the Hepu Plantation, all of which are due to be replaced over the next four years. We are very confident that the replanting programme will deliver long term economic benefits by increasing average yields and achievable revenue per tonne from the improved species of summer oranges trees.

The Xinfeng Plantation is now fully planted with 1.6 million winter orange trees, of which 800,000 trees produced oranges during the year yielding approximately 27,665 tonnes of oranges, an increase of approximately 173% over the previous year's production of 10,119 tonnes. This growth was mainly due to the increased production from the initial planting of 400,000 winter oranges trees, which are still yet to achieve their full maturity, together with trial production from the next 400,000 trees. It is expected that a further 400,000 orange trees will start trial production in the winter of 2009.

 

During the year, the Group commenced construction of the Hunan Plantation, with an initial investment of approximately RMB20.3 million. It is expected that the Hunan Plantation will be fully planted with a total of 2.4 million orange trees before the end of 2013.

TRADING RESULTS

The Group's revenue for sales of oranges was RMB634.9 million (2008: RMB527.0 million) in the year to 30 June 2009, representing growth of 20.5% on the prior year. This was achieved by an increase of approximately 16.7% in the Group's production, combined with a 3.3% increase in the average selling prices of the oranges to both wholesalers and supermarkets. We anticipate that the proportion of sales to supermarkets will continue to increase over time and that the Group's products will be able to achieve wider geographical exposure as further supermarket contracts in the Guangxi area and other provinces are secured. During the year under review, we expanded our sales to supermarkets in Beijing and Guizhou province.

The gross margin achieved by the Hepu Plantation decreased slightly to 68.6% for the year (2008: 69.9%), mainly due to the higher costs associated with organic farming and wage inflation in China. The gross margin achieved by the Xinfeng Plantation was 29.1% for the year compared with 33.8% in the previous year. The reduction in gross margin at the Xinfeng Plantation was due mainly to the lower gross margin on the trial production in the winter of 2008. Over the medium term, as production volume increases and economies of scale are achieved, the Xinfeng Plantation is anticipated to demonstrate its potential for growth and better profitability. Combining the two plantations, the Group's gross margin for the core agricultural business was approximately 61.2% for the year ended 30 June 2009 (2008: 67.3%).

The cost of production for the core agricultural business increased from RMB169.3 million for the year ended 30 June 2008 to RMB235.0 million for the year ended 30 June 2009, principally due to the 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. As a result, the average unit cost of production increased from RMB1.30 per Kg for the year ended 30 June 2008 to approximately RMB1.55 per Kg for the year ended 30 June 2009.

During the year, the Group began to sell some of its self-bred saplings to local farmers following the mass production of saplings from the nursery at the Hepu Plantation. Approximately 220,000 oranges saplings were sold to local farmers and the Group recorded RMB2.2 million of revenue for sales of these saplings during the year.

In addition to the core agricultural business, the transfer of ownerships and titles of 96 units of Phase 1 of the Xinfeng Development were also completed 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 RMB31.3 million and RMB23.7 million respectively during the year

HONG KONG LISTING

As announced on 28 August 2009, the Company has submitted its application to the Stock Exchange of Hong Kong Limited ("HKEx") for a dual primary listing by way of an introduction. This new listing will be in addition to the Company's existing quotes on the AIM and PLUS markets in London. The Company's board of directors is satisfied that the listing is in the best interests of the shareholders. The listing of the Company's shares on the main board of HKEx is subject to, among other things, the approval of the listing sub-committee of the board of directors of the HKEx and, subject to this approval, it is expected that the listing on the HKEx may occur in late 2009.

INVESTOR RELATIONS

The Board is committed to maintaining good communications with its shareholders and potential investors. The Group maintains a regularly-updated website (www.asian-citrus.com), which enables shareholders and potential investors to understand the Group better and to communicate with the senior management of the Group in a user-friendly platform. In addition, the Group's management visited certain institutional investors and private client investment advisers during October and November 2008 to update shareholders on the Group's latest developments and introduce the Group to potential new investors.

DIVIDENDS

The Board recommends the payment of a final dividend of RMB0.8 per share for the financial year ended 30 June 2009. This equates to 26.9% of the adjusted earnings excluding biological gain for the year ended 30 June 2009 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 will be offered the opportunity to elect to receive the final dividend for the year ended 30 June 2009 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, if approved at the Annual General Meeting on 11 December 2009, will be paid in sterling on or before 31 December 2009, to shareholders on the register on 13 November 2009, with an ex-dividend date of 11 November 2009. The translation of RMB into sterling is made at the exchange rate of 11.37 as at 30 June 2009 is for illustration purpose. The actual translation rate for the purpose of dividend payment in sterling will be referenced to the exchange rate on 13 November 2009.

OUTLOOK

The global financial crisis in the second half of 2008 created an extremely challenging business environment around the world, including in China. There was a sharp drop in consumer confidence and lower demand for consumables. Despite these challenges, we continued to focus our resources on expanding our distribution network and we were able to extend our sales to supermarkets in the Beijing and Guizhou Province given our outstanding species and quality of oranges.

The business environment has largely improved in 2009 following a series of economic measures adopted by various governments around the world. The most important measure relevant to the Group is China's Stimulus Plan of RMB4 trillion, which aims to promote domestic demand and economic growth of the domestic economy by targeting gross domestic product growth of 8% per annum. We believe that this plan will greatly enhance domestic demand for consumables and we are confident that we will be able to expand our distribution network to more supermarkets in the near future.

We believe that the proposed Hong Kong listing is desirable and that the liquidity of the Company's shares will be enhanced.

We are confident that Asian Citrus will continue to progress and deliver good value to its shareholders in the wake of the continued economic growth in China.

Tony Tong

Chairman

15 September 2009

Asian Citrus Holdings Limited

Consolidated income statement

For the year ended 30 June 2009

	Year ended 30 June
	2009 RMB'000		2008 RMB'000
	(Audited)		(Audited)
Revenue	668,529		533,775
Net gain on change in fair value of biological assets	210,631		165,000
Inventories used	(222,917)		(160,229)
Staff costs	(49,382)		(37,612)
Amortisation	(4,557)		(3,450)
Depreciation	(57,141)		(48,415)
Other operating expenses	(102,726)		(85,938)
Profit from operations	442,437		363,131
Interest income	2,105		5,982
Finance costs	(12)		(13)
Net finance costs	2,093		5,969
Share of loss of associates	(368)		(1,359)
Impairment loss on interests in associates	(1,896)		-
Profit before income tax	442,266		367,741
Income tax (expense)/credit	(2,205)		31,552
Profit for the year attributable to shareholders	440,061		399,293
Proposed final dividend	61,645		59,486
Basic earnings per share	RMB5.81		RMB5.38
Diluted earnings per share	RMB5.81		RMB5.37

Asian Citrus Holdings Limited

Consolidated balance sheet

As at 30 June 2009

	30 June
	2009 RMB'000		2008 RMB'000
	(Audited)		(Audited)
ASSETS
Non-current assets
Property, plant and equipment	1,083,758		999,155
Land use rights	56,085		48,101
Construction-in-progress	79,021		120,468
Biological assets	1,142,025		931,209
Deferred development costs	30,700		22,600
Interests in associates	-		2,216
	2,391,589		2,123,749
Current assets
Biological assets	54,638		16,787
Properties for sale	34,111		54,305
Inventories	639		1,487
Trade and other receivables	14,901		19,897
Income tax recoverable	-		1,073
Cash and cash equivalents	461,241		309,952
	565,530		403,501
Total assets	2,957,119		2,527,250
EQUITY AND LIABILITIES
Equity
Share capital	8,028		7,785
Reserves	2,897,295		2,461,499
	2,905,323		2,469,284
Current liabilities
Trade and other payables	48,735		56,166
Due to a related party	2,754		1,800
Income tax payables	307		-
Total liabilities	51,796		57,966
Total equity and liabilities	2,957,119		2,527,250

Asian Citrus Holdings Limited

Consolidated cash flow statement

For the year ended 30 June 2009

	Year ended 30 June
	2009 RMB'000		2008 RMB'000
	(Audited)		(Audited)
Cash flows from operating activities
Profit before income tax	442,266		367,741
Adjustments for:
Unrealised exchange loss	-		518
Interest income	(2,105)		(5,982)
Finance costs	12		13
Depreciation	61,406		50,240
Share-based payments	8,954		6,906
Amortisation of land use rights	1,157		1,050
Amortisation of deferred development costs	3,400		2,400
Net gain on change in fair value of biological assets	(210,631)		(165,000)
Loss on disposal of property, plant and equipment	480		-
Write off of biological assets	42		-
Share of loss of associates	368		1,359
Impairment loss on interests in associates	1,896		-
Operating profit before working capital changes	307,245		259,245
Movements in working capital elements:
Properties for sale	20,194		(10,215)
Inventories	848		86
Biological assets	(37,851)		(9,099)
Trade and other receivables	(4,145)		(5,573)
Trade and other payables	(7,431)		37,421
Due to a related party	954		(810)
Cash generated from operations	279,814		271,055
Income tax paid	(825)		(42,714)
Net cash generated from operating activities	278,989		228,341
Cash flows from investing activities
Purchases of property, plant and equipment	(8,596)		(3,775)
Proceeds form disposal of property, plant and equipment	594		-
Additions to Construction-in-progress paid	(97,040)		(206,981)
Net additions to biological assets	(227)		(698)
Additions to deferred development costs	(11,500)		(13,000)
Interest received	2,105		5,982
Net cash used in investing activities	(114,664)		(218,472)

  

Asian Citrus Holdings Limited

Consolidated cash flow statement

For the year ended 30 June 2009

	Year ended 30 June
	2009 RMB'000		2008 RMB'000
	(Audited)		(Audited)
Cash flows from financing activities
(Advance to)/repayment from an associate	(48)		981
Proceeds from issue of new shares upon exercise  of share options	-		5,056
Dividend paid	(12,976)		(50,454)
Finance costs paid	(12)		(13)
Net cash used in financing activities	(13,036)		(44,430)
Net increase/(decrease) in cash and cash equivalents	151,289		(34,561)
Cash and cash equivalents at beginning of year	309,952		344,513
Cash and cash equivalents at end of year	461,241		309,952

Asian Citrus Holdings Limited

Notes to the preliminary announcement

For the year ended 30 June 2009

1.	Income tax (expense)/credit
	The amount of income tax (expense)/credit in the consolidated income statements represents:

	Year ended 30 June
	2009 RMB'000		2008 RMB'000
	(Audited)		(Audited)
PRC foreign enterprise income tax	(1,403)		(11,164)
Land appreciation tax	(802)		(171)
Deferred taxation	-		42,887
	(2,205)		31,552

2.	Earnings per share

	Year ended 30 June
	2009 RMB'000		2008 RMB'000
	(Audited)		(Audited)
Earnings
Profit attributable to shareholders used in diluted earnings per share calculation	440,061		399,293
Weighted average number of shares (thousands)
Issued ordinary shares at beginning of year	74,357		74,084
Effect of shares issued to shareholders participating in the scrip dividend	1,346		-
Effect of new shares issued upon exercise of share options	-		110
Weighted average number of ordinary shares used in basic earning per share calculation	75,703		74,194
Effect of dilutive potential shares in respect of share options	57		209
Weighted average number of ordinary shares used in diluted earnings per share calculation	75,760		74,403
Basic earnings per share (RMB)	5.81		5.38
Diluted earnings per share (RMB)	5.81		5.37

  

3.

Dividends

	Year ended 30 June
	2009 RMB'000		2008 RMB'000
	(Audited)		(Audited)
Proposed final dividend of RMB0.8 (2008: RMB 0.8) per ordinary share	61,645		59,486

4.	Financial Information
The preliminary announcement was approved by the board on 15 September 2009. 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 2008. The statutory accounts for the year ended 30 June 2009 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 2009 and their report was unqualified and did not contain a statement under section 237 (2) or (3) of the Companies Act 1985.
5.	Annual General Meeting
The Annual General Meeting of the Company will be held at 20 Moorgate, London, EC2R 6DA, United Kingdom on 11 December 2009 at 10:30 a.m..
6.	Annual Report and Accounts
Copies of the annual report and accounts will be dispatched to shareholders in due course. Copies will also be available from the head office of the Company: Rm 1109-1111, Wayson Comm. Building, 28 Connaught Road West, Hong Kong.

ENDFR USSVRKORKAAR

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