Half-year Report

JIASEN INTERNATIONAL HOLDINGS LIMITED

嘉森國際控股有限公司

half-yearly results for the six months ended 30 june 2016

Jiasen International Holdings Limited ("Jiasen" or "the Company"), together with its subsidiaries ("the Group"), is pleased to report its unaudited results for the six month period ended 30 June 2016 ("HY2016"). Jiasen is an international property fit-out business specialising in designing, manufacturing, and installing a range of wooden products for residential and commercial properties.

Trading conditions continued to be challenging, driven by slower economic growth and a weaker property development market in China which has led to increased credit risk for the property sector. In response to reduced demand and to insulate the business from the risk of doubtful debts, in Q4 2015 the Company began to restructure the business by scaling back its property segment, shifting its focus to the wholesale distribution segment and significantly reducing its cost base to align to the expected trading revenues.

The restructuring is now complete and the shift in focus has established a stable and sustainable platform from which the business can grow. In the period under review, the Company delivered an increase in operating profit margin of 200 basis points to 24.2%. No trade receivables are more than three months overdue as at 30 June 2016. As a result, no further provisions for bad and doubtful debts were required to be made in HY2016.

Financial Key Points

· Revenue decreased by 58.3% to RMB 178 million (HY2015: RMB 427 million)

· Operating profit margin was 24.2%, up 200 basis points (HY2015: 22.2%)

· Profit before tax decreased by 54.8% to RMB 42 million (HY2015: RMB 93 million)

· Profit after tax decreased by 52.9% to RMB 32 million (HY2015: RMB 68 million)

· Net profit margin was 17.9%, up 200 basis point (HY2015: 15.9%)

· Strong balance sheet with cash and cash equivalents of RMB 373 million as at 30 June 2016 (30 June 2015: RMB 339 million and 31 December 2015: RMB 299 million)

· As at 31 December 2015, a bad debt provision of RMB 52.3 million was made against a trade receivable of RMB 84 million. The Company agreed with the customer that the balance be repaid as and when the properties within which the Group's products are installed are ultimately sold. The Company has actively managed the current debtor and in HY2016, RMB 40 million was received from the customer with a further RMB 44 million to be received as more properties are sold

· The Board has decided to maintain its suspension of dividend payments (as first announced on 30 June 2015) and will review the decision again when conditions and the Company's performance improves.

Operational Key Points

· No new property projects were undertaken in the period in order to insulate the business from risk of doubtful debts. This restructuring of the business by suspending its property segment and reducing its cost base proportionately has allowed for the establishment of a stable and sustainable platform from which the business can grow.

· Wholesale distribution revenue increased by 10% to RMB 148 million (HY2015: RMB 135 million) and accounted for 84% (HY2015: 32%) of the Group's revenue

· Export contributed 16% (HY2015: 12%) of the Group's revenue

· Furniture and fittings accounted for 56% (HY2015: 71%) of the Group's revenue

· Continued focus on the sale of non-door products where there are higher margins

· As indicated in the Company's final results for the year ended 31 December 2015, in light of the wider macroeconomic conditions and the lack of demand for the Company's products in the property segment, the Board has agreed with the local government (Quanzhou Economic Development District - Guangqiao Sector) ("QEDD") to defer the decision to purchase 47 hectares of land for its new factory until the end of 2016. Should the Company decide against the investment, QEDD will refund the down payment in full. Jiasen is exploring the opportunity to finance and develop the new land.

Outlook

· Trading in the first two months of the second half of 2016 has continued to be challenging, and is expected to remain so for the remainder of the year

· Continued focus on the wholesale distribution segment of the business to mitigate exposure to the property segment and the risk of bad debt

· The Company intends to selectively take on new property projects in the future but will only service developers which are financially robust and can demonstrate the ability to meet contractual obligations

· Focus on working more closely with the Company's distributors and seek to appoint new distributors to enhance performance

COMMENTING ON THE RESULTS, WEIGANG CHEN (CHAIRMAN) SAID: 

"In response to the difficult trading environment, the Board initiated a number of actions in Q4 2015 to insulate the business from the turbulent property sector in China. These actions, which included scaling back the property segment and reducing our cost base to better reflect our expected trading revenue, have established a stable and sustainable platform from which the Company can grow. This is evidenced by the improvement in our margin and the reduction of trade receivables in the period. We expect that trading conditions will continue to be challenging for the remainder of the year, however, we are now well positioned and confident of the future."

For further information, please visit www.jsih.net or contact:

Notes to Editors

· Jiasen is an international property fit-out business specialising in designing, manufacturing, kitting and installation of multiple wooden products for residential properties. The Company was established in 2001 and is based in Quanzhou City, Fujian province, located in south-eastern China. Its products are sold and marketed under the 'Fuyou' brand and produced in its 83,000 sqm factory in Nan'an City, Fujian province.

· Jiasen's main products include doors, wall panels and assorted fixtures, such as fitted wardrobes, cupboards and skirting boards, and furniture which are sold principally to property development projects, through branded 'Fuyou' retail stores and to export markets. The Company's products are sold in three main segments: residential and property development projects, wholesale distribution and export.

EXECUTIVE CHAIRMAN'S STATEMENT

Introduction

This has been a challenging half year for the Company. Turnover decreased 58.3% to RMB 178 million (HY2015: RMB 427 million) and profit before tax decreased by 54.8% to RMB 42 million (HY2015: RMB 93 million). Business performance was impacted by China's economic growth and the slowdown in property which has meant property developers have either delayed projects or decreased their investment in residential developments. This has affected demand for Refined Housing Decoration or semi-furnished homes across the country, resulting in significantly reduced demand for our products in the property segment. In light of the difficult trading environment, the Board took swift and prudent action to restructure the business by scaling back its property segment in Q4 2015, significantly reducing its cost base to align to the expected trading revenues and focusing on the wholesale distribution segment. While overall revenue and profit has reduced, profit margins have increased and the prudent strategy has insulated the business from the risk of bad and doubtful debts in the period. Given the scale and size of our property projects, any bad debt would have a significant impact on our business and our actions were necessary to ensure the business is on a stable and sustainable platform from which it can grow. At final results, we made a provision of RMB 52 million against a trade receivable of RMB 84 million. We agreed with the customer that the balance be repaid as the properties within the Group's products are installed and ultimately sold. We actively managed the debtor and in HY2016, RMB 40 million was received from the customer with a further RMB 44 million to be received as more properties are sold.

The wholesale distribution segment of our business performed strongly and revenues grew by 10% to RMB 148 million (HY2015: RMB 135 million) as a result of new outlets in strategic locations which opened in 2015. The Company now has 16 distributors which operate 54 outlets across China. We have focused on working more closely with distributors and seeking to appoint new distributors to enhance our performance.

Export remains a small part of our business, contributing 16% (HY2015: 12%) of the Group's revenue.

Land Purchase and Future Development

As announced at our final results for 2015, in light of a weaker property market, the Board has decided to review the decision to purchase 47 hectares of land for its new factory, and any decision deferred until the end of 2016. This has been verbally agreed with the local government (Quanzhou Economic Development District - Guangqiao Sector) ("QEDD"). The total cost of the land is RMB 217 million and the Company made a down payment of RMB 69 million in February 2015. Should the Company decide against the investment, QEDD will refund the down payment in full.

Dividend Policy

The Board has decided to maintain its suspension of dividend payments (as first announced on 30 June 2015) and will review the decision again when conditions and the Company's performance improves.

Strategy and Outlook

In China, we continue to face difficult trading conditions. The Board's decision to scale back its property segment was necessary in order to insulate the business, and to mitigate exposure to the property segment and the risk of bad and doubtful debts. The Group's business structure provides us with the flexibility to switch our focus as appropriate, and protect the business from the prevailing tough market conditions which we do not expect to change in the short term. As a consequence, the Group is now focused on its wholesale distribution segment and well-located retail outlets which sell our branded premium products principally to homeowners and interior designers. The Company intends to take on new property projects in the future but will only service developers which are financially robust and can demonstrate the ability to meet contractual obligations

Diversification of our product offering remains a core focus and we will continue to increase the sale of non-door products through our wholesale distribution segment. We continue to seek suitable, complementary foreign brands in permanent fixtures for strategic collaboration in the medium to long-term.

Weigang Chen

Executive Chairman

Financial and Operational Review

The Group's revenue reduced by 58.3% to RMB 178 million (HY2015: RMB 427 million) as the result of a weaker economy and property market. As mentioned in the Chairman's review, the Group focused on wholesale distribution which performed well and contributed 84% of total revenue.

Revenue breakdown by channels and products are as follows:-

Revenue from the Group's top three customers contributed approximately RMB 59 million (or 33%) of the total revenue for the six month period ended 30 June 2016 (HY2015: RMB 201 million or 47%).

Note on Expenses

Selling and distribution expenses for the six month period ended 30 June 2016 decreased by 46.6% to RMB 8 million (HY2015: RMB 15 million). This is mainly due to zero installation costs having been incurred during the first half year in 2016 (HY2015: RMB 6 million). Selling and distribution expenses as a proportion of revenue are higher at 4.2% for the six month period ended 30 June 2016 (HY2015: 3.5%).

Administrative expenses for the six month period ended 30 June 2016 decreased by 11.1% to RMB 8 million (HY2015: RMB 9 million) due mainly to reductions in salary-related expenses as a result of a lower headcount during the first half in 2016. Administrative expenses as a proportion of revenue are higher at 4.4% for the six month period ended 30 June 2016 (HY2015: 2.1%).

Included in the other operating income for the six month period ended 30 June 2016 is RMB 9 million (HY2015 : RMB 1 million), being the reversal of impairment of trade receivables of RMB 8 million.

The Group's gross profit margin remained stable for the six month period ended 30 June 2016 at 28.0% (HY2015: 27.5%).

Profit before tax for the year decreased by 54.8% to RMB 42 million (HY2015: RMB 93 million), representing an operating profit before tax margin of 23.9% as compared to 21.8% recorded in HY2015. Net profit after tax for the six month period ended 30 June 2016 decreased by 52.9% to RMB 32 million (HY2015: RMB 68 million).

Notes on Statement of Financial Position

As at 30 June 2016, the Group's total assets amounted to RMB 666 million, total liabilities were RMB 92 million, and shareholders' equity recorded at RMB 573 million.

The average working capital cycle for the period was 139 days (FY2015: 102 days).

Trade receivables decreased by 29% to RMB 101 million as at 30 June 2016 (FY2015: RMB 143 million) due to decrease in revenue in the first half of 2016.

The average inventory turnover cycle increased by 24 days to 47 days as at 30 June 2016, from 23 days as at 31 December 2015. Most of the time, completed finished goods will be shipped out immediately after production. Inventory as at 30 June 2016 amounted to RMB 46 million (FY2015: RMB 41 million)

The average trade payable cycle remained at the relatively low level of 11 days (FY2015: 3 days). Our credit management policy ensures timely payment to suppliers and sub-contractors to secure quality raw materials and timely delivery of subcontracted products. Other payables decreased by 21% to RMB 22 million as at 30 June 2016 (FY2015: RMB 28 million).

The Group has a cash balance of RMB 373 million as at 30 June 2016 (FY2015: RMB 299 million).

Condensed Interim Consolidated Statement Of Comprehensive Income

For The Financial Period Ended 30 June 2016

The notes are an integral part of the condensed interim consolidated financial statements.

Condensed Interim Consolidated Statement Of Financial Position

As At 30 June 2016

The notes are an integral part of the condensed interim consolidated financial statements.

Condensed Interim Consolidated Statement Of Changes In Equity

For The Financial Period Ended 30 June 2016

Condensed Interim Consolidated Statement Of Changes In Equity (Cont'd)

For The Financial Period Ended 30 June 2015

The notes are an integral part of the condensed interim consolidated financial statements.

Condensed Interim Consolidated Statement Of Cash Flows

For The Financial Period Ended 30 June 2016

Condensed Interim Consolidated Statement Of Cash Flows (Cont'd)

For The Financial Period Ended 30 June 2016

1. General Information

Jiasen International Holdings Limited (the "Company" or "Jiasen") was incorporated on 31 October 2012 and is domiciled in the British Virgin Islands. The Company's registered office is Commerce House, Wickhams Cay 1, P. O. Box 3140, Road Town, Tortola, VG1110, British Virgin Islands.

Jiasen was established as an investment holding company for two wholly owned subsidiaries, Jiasen Holdings (HK) Company Limited ("Jiasen HK") and Quanzhou Jiasen Wood Co., Ltd. ("Jiasen PRC"), (together, the "Group").

The main activity of the Company and Jiasen HK is that of an investment holding company. Jiasen PRC is principally engaged in the business of design, manufacturing and wholesalers of high quality wooden doors and home furnishings. The principal place of business of the Group is in the People's Republic of China ("PRC"). Amounts are reported in RMB thousands, unless otherwise stated.

2. Basis of Preparation And Accounting Policies

The condensed interim consolidated financial statements (the "interim financial information") have been prepared on the basis of the accounting policies set out in the last audited consolidated financial statements, which are in accordance with AIM rule 18, "Half yearly reports and accounts", and should be read in conjunction with the annual financial statements for the year ended 31 December 2015.

This interim financial information is unaudited and has not been reviewed by the auditors and does not constitute statutory financial statements for the six month period ended 30 June 2016.

The interim financial information is prepared on the assumption that the group structure has been in place since 1 January 2012. Group accounting policies, accounting estimates and judgements have been consistently applied across all periods. No new standards that have become effective in the period have had a material effect on the Group's financial statements.

3. Basis Of Consolidation 

The interim financial information incorporates the results of the Company and its subsidiaries. A subsidiary is an entity (including special purposes entities) over which the Group has the power to govern the financial operating policies, generally accompanied by a shareholding giving rise to the majority of the voting rights, as to obtain benefits from their activities.

A subsidiary is consolidated from the date on which control is transferred to the Group up to the effective date on which control ceases, as appropriate.

The interim financial information presents the results of the Company and its subsidiaries as if they formed a single entity. Intra-group balances and transactions and any income and expenses arising from intra-group transactions are eliminated on consolidation. Unrealised gains and losses arising from transactions with associates and joint ventures are eliminated against the investment to the extent of the Group's interest in the investee.

4. Earnings per share

Basic and diluted earnings per share are calculated by dividing the profit attributable to equity holders of the Company by the weighted average number of Ordinary shares in issue during the period.

Although the Group reconstruction did not become unconditional until 4 March 2014, the interim financial information is presented as if the Group structure has always been in place, including a share split effected by the Company on 26 May 2014 by which each of its Ordinary shares, with a par value of US$ 1.00 per share, was split into 10 Ordinary shares, with a par value of US$ 0.10 per share.

No adjustment has been made to the basic earnings per share in respect of a dilution as the impact of the warrant outstanding had an anti-dilutive effect on the basic earnings per share.