10th Mar 2006 07:01
Asian Citrus Holdings Ltd10 March 2006 Under embargo 7.00am, Friday 10 March 2006 Asian Citrus Holdings Limited Interim Results for the six months ended 31 December 2005 Asian Citrus Holdings Limited ("Asian Citrus"), the largest orange plantationowner and operator in China, quoted company on the AIM market of the LondonStock Exchange, announces interim results for the six months ended 31 December2005. Key Highlights Six months ended Six months ended 31 December 31 December 2005 2004 2005 2004 % (RMBm) (RMBm) (£m*) (£m*) changeTurnover 105.6 89.1 7.5 6.3 +18.5Profit from operations 62.4 44.4 4.4 3.2 +40.5Pre-tax profit 59.1 44.1 4.2 3.1 +34.0Net profit 49.5 40.5 3.5 2.9 +22.2 Basic EPS RMB0.84 RMB0.81 6.0p 5.8p +3.7Diluted EPS RMB0.84 N/A 6.0p N/A N/A *Conversion at £1 = RMB14.04 • Net cash inflow of RMB44.5m (£3.2m) from operating activities • Approximately 1.25 million of orange trees productive during the period • Total output increased 13% to 40,604 tonnes • Approximately RMB76.1m (£5.4m) invested in development of Xinfeng during the period Tony Tong, Chairman, commented:"I am delighted to announce our first interim results as a quoted company.From a turnover improvement of 19% we have achieved a 34% increase in pre-taxprofits to RMB59.1m (£4.2m) and generated net cash of RMB44.5m (£3.2m) fromoperations. "We have also achieved another important milestone in the Group's development during the six months, moving from being a producer selling only to wholesalers, to a Group selling to both wholesalers and the retail sector by concluding supplier contracts with a local supermarket chain in Guangxi Zhuang Autonomous Region of China. Selling to the latter provides improved margin potential as a wider diversity of customers and a new revenue stream. "Turnover increased by 19% to RMB105.6 million for the six months ended 31December 2005 from RMB89.1 million for the six months ended 31 December 2004. Wewill continue to explore other business opportunities within the fruit industry.Apart from the supplier contracts concluded, we are in the process ofnegotiating with several national supermarket chains in the PRC in order todevelop further into the retail market. "We have also established a subsidiary in Hubei Province that will specialisein sourcing high quality oranges from outside farmers. This will secure avaluable source of extra supply for the Group without substantial capital costsof investment. "We are delighted that Asian Citrus has developed in line with our expectations. The output is positive and we look forward to continue growing and delivering value to our shareholders." For further information please contact: Tony Tong, Chairman and Chief Executive Officer, Asian Citrus Tel: +852 2559 0323Eric Sung, Chief Financial Officer, Asian Citrus Terry Garrett, John MoriartyWeber Shandwick Square Mile Tel: 020 7067 0700 Chairman's Statement Strategic overview I am very pleased with the performance of Asian Citrus Holdings Limited duringthe last 6 months. Our company was listed on AIM in August 2005 and we areprogressing well with our strategy of moving from being a producer with sales towholesalers only to one with sales to wholesalers and regional retailorganisations. Selling to the latter provides improved margin potential as awider diversity of customers and a new revenue stream. The highlight of this strategy was the conclusion of supplier contracts withGuangxi Yonghao Supermarket Company Limited, a regional supermarket chain in theGuangxi Zhuang Autonomous Region of China. This represents the first step ofthe Group's move into selling directly to domestic supermarket chains and, inaddition to higher profit margins, strengthens our leading position in thedomestic market and enhances shareholders' value. During the last 6 months,approximately 5% of the production volume was sold directly to the regionalsupermarket chain, which percentage will increase in future periods. Asian Citrus is also looking to overseas markets. During the last 6 months, theGroup has established a trading joint venture in Hong Kong. Our partner bringsmore than 20 years experience and we will be focussing on fruits trading inoverseas markets, and principally Hong Kong. This should position useffectively in this new business area and enable us to break into new markets. The demand for high quality oranges in both the domestic and overseas markets isgrowing strongly. Ensuring sufficient and stable supplies is thus vital for theGroup's success. At present, the Group has two orange plantations in GuangxiZhuang Autonomous Region ("Hepu Plantation") and Jiangxi province of China("Xinfeng Plantation") respectively. The Hepu Plantation is already wellestablished with a guaranteed supply of more than 100,000 tonnes of high qualityoranges annually. The first revenue harvest in the Xinfeng Plantation willstart in late 2007 which will bring significant extra capacity to the Group. Additionally, the Group has, during the last 6 months, established a subsidiaryin the Hubei province of China will specialise in sourcing high quality orangesfrom outside farmers. Asian Citrus will provide continuing management advicethrough enhanced quality control and the provision of latest agriculturaltechniques to the owners of these plantations. In due course, this will become avaluable source of extra supply for the Group without substantial capital costsof investment. Trading results The Group's turnover was RMB105.6 million (2004: RMB89.1 million) in the 6months to 31 December 2005. Similar to previous years, only approximately 25%of the entire turnover is expected to be generated from the sales of the winteroranges due to the higher selling price obtained for summer oranges. The halfyear turnover represented 19% growth in the Group's turnover which was due tothe increase of approximately 13% in the production volume as well as theincrease in average selling price of the oranges to both the wholesalers andsupermarkets. Selling prices to the latter are, on average, 60% to 65% higherthan sales to wholesalers. Results were in line with management's expectation but during the period represented only a small element of the total turnover figure. The gain arising from changes in fair value of biological assets was RMB20million for the 6 months ended 31 December 2005 compared to RMB8 million for thesame period in 2004. Other revenue of RMB10.7 million derived from exchange gains and returns fromshort-term trading securities. Net proceeds from the placement wereapproximately RMB108 million which, to date, have funded RMB79 million ofconstruction-in-progress and research and development facilities. The balancewill fund future payments of construction-in-progress shortly. Notwithstanding the higher average selling prices, gross margin dropped slightlyfrom approximately 62% for the 6 months ended 31 December 2004 to approximately61% for the 6 months ended 31 December 2005. Tighter cost controls helpedmitigate higher production costs which increased from approximately RMB33.7million for the 6 months ended 31 December 2004 to approximately RMB41.6 millionfor the 6 months ended 31 December 2005, an increase of approximately 23%. Theincrease in the production costs was partly due to the increase in raw materialsutilised for higher production volume as well as to higher costs of fertiliserand pesticide which increased by approximately 27% and 32% respectively in linewith higher prices of agricultural resources in China generally. As a result,the average unit cost of orange increased from approximately RMB0.94 per Kg forthe 6 months ended 31 December 2004 to approximately RMB1.02 per Kg for the 6months ended 31 December 2005. The selling and distribution expenses increased in line with the Group'sturnover while the general and administration expenses increased significantlyfrom approximately RMB11.7 million for the 6 months ended 31 December 2004 toapproximately RMB24.0 million for the 6 months ended 31 December 2005. Theincrease was mainly due to the increase in directors' and senior management's remuneration needed to strengthen the Group's corporate governance andmanagement resources following the listing of the Company on AIM in August 2005. The pre-tax margin for 6 months ended 31 December 2005 was 56%, representing anincrease of approximately 6% as compared to 50% for the same period in 2004.Profit attributable to shareholders was approximately RMB49.5 million for 6months ended 31 December 2005, representing an increase of 22% from thecorresponding period in 2004. The Group's liquidity remained healthy with sufficient reserves for bothoperations and development. The current ratio and quick ratio of the Group was2.76 and 2.71 respectively. Following the Company's listing on AIM and the placement of 9,072,813 newshares raising net proceeds of approximately RMB108 million, the Group'sinternal financial resources have been further strengthened. Operating review The production volume for the 6 months ended 31 December 2005 was approximately40,604 tonnes. Compared to approximately 35,924 tonnes of production of winteroranges in 2004, this represents an annual growth of about 13%. The growth inproduction was mainly due to the following reasons: (1) increasing maturity ofthe trees in the Hepu Plantation, (2) approximately 220,000 winter orange treesreaching the fruit-bearing age which started to produce oranges in the currentperiod, and (3) more effective utilisation of resources and accumulation ofagricultural experience. The Group's total number of orange-bearing trees remained unchanged at1,246,052 during the period. Approximately 400,000 new trees will be planted inSpring 2006. Appointment of new director As mentioned in our last annual report, the Board is committed to improvingcorporate governance through the appointment of competent and experiencedprofessionals to the Board and senior management. Effective from 1 February2006, Hon Peregrine Moncreiffe was appointed as a non-executive director of theCompany. With Peregrine's extensive experience in the field of internationalinvestment banking and thorough understanding of the capital markets andcorporate governance, we believe that he can bring valuable experience andcontribution to the Group. Investor relations The Board recognises that maintaining good communications with shareholders andother relevant audiences is highly important. As part of that process, theCompany's website (www.asian-citrus.com) was formally launched in March 2006to act as a base for communication between Asian Citrus and its shareholders andpotential investors. Outlook During the past 6 months, we have made progress with our strategy to transformourselves into a company with broader sales channels. Following from the firstdirect supplier contract with a regional supermarket, we are now exploringco-operation opportunities with other supermarket groups to increase ourcoverage in the local market. Establishing the fruit trading joint ventureoffers us an opportunity to further diversify our business and pave the way todevelop other overseas markets. Our work in Hubei will provide us with newsources of outside orange supply. With the first harvest of oranges in Xinfengcoming on line in 2007, it will be a time of exciting growth for the Company. Weare confident that the outlook remains positive and we look forward to continuegrowing and delivering value for our shareholders. Tony TongChairman 10 March 2006 Consolidated income statmentFor the six months ended 31 December 2005 Six months ended Year ended 31 December 30 June 2005 2004 2005 RMB'000 RMB'000 RMB'000 (Unaudited) (Audited) (Audited) Turnover 105,552 89,092 322,313Gain arising from changes in fair value less estimated point-of-sale costs of biological assets 20,000 8,000 103,340Other revenue 10,668 30 25 _________ _________ _________ 136,220 97,122 425,678 Inventories used (34,517) (22,750) (85,424)Staff costs (11,000) (5,344) (13,131)Depreciation (7,916) (5,829) (11,764)Other operating expenses (20,398) (18,770) (41,572)Write off of biological assets - - (782) _________ _________ _________Profit from operations 62,389 44,429 273,005 Interest income 1,625 39 348Finance costs (4,144) (351) (3,575) _________ _________ _________Net finance costs (2,519) (312) (3,227)Share of loss of associates (778) - - _________ _________ _________ Profit from ordinary activities before taxation 59,092 44,117 269,778 Taxation (9,590) (3,580) (20,970) _________ _________ _________ Profit attributable to shareholders 49,502 40,537 248,808 ========= ========= =========Basic earnings per share RMB0.84 RMB0.81 RMB4.98 ========= ========= =========Diluted earnings per share RMB0.84 N/A RMB4.87 ========= ========= ========= Consolidated balance sheetAs at 31 December 2005 31 December 30 June 2005 2004 2005 RMB'000 RMB'000 RMB'000 (Unaudited) (Audited) (Audited)ASSETSNon-current assetsProperty, plant and equipment 387,423 222,717 274,184Land use rights 63,399 55,943 55,372Construction-in-progress 273,705 219,004 315,656Biological assets 532,206 410,148 509,206Deferred development costs 6,000 8,000 7,000Interests in associates 13,125 - - _________ _________ _________ 1,275,858 915,812 1,161,418 Current assetsInvestments held for trading 22,724 - -Inventories 1,812 334 839Accounts receivable 2,859 - -Other receivables 2,980 3,601 7,906Cash and bank balances 87,435 27,658 82,015 _________ _________ _________ 117,810 31,593 90,760 _________ _________ _________ Total assets 1,393,668 947,405 1,252,178 ========= ========= ========= EQUITY AND LIABILITIESEquityIssued capital 6,421 106 5,300Reserves 1,268,363 887,674 1,085,188 _________ _________ _________ 1,274,784 887,780 1,090,488 Non-current liabilitiesDeferred tax liabilities 13,654 3,965 10,641Convertible bond 62,500 - 87,978 _________ _________ _________ 76,154 3,965 98,619 Current liabilitiesTrade payables and accrued expenses 21,644 10,253 7,051Due to related parties 3,795 14,701 14,600Due to shareholders - 1,168 1,168Due to ultimate holding company - 9,715 9,715Taxation payable 17,291 19,823 30,537 _________ _________ _________ 42,730 55,660 63,071 _________ _________ _________ Total liabilities 118,884 59,625 161,690 _________ _________ _________ Total equity and liabilities 1,393,668 947,405 1,252,178 ========= ========= ========= Consolidated cash flow statementFor the six months ended 31 December 2005 Six months ended Year ended 31 December 30 June 2005 2004 2005 RMB'000 RMB'000 RMB'000 (Unaudited) (Audited) (Audited) Cash flows from operating activitiesProfit from ordinary activities before taxation 59,092 44,117 269,778Unrealised exchange loss 540 - -Interest income (1,625) (39) (348)Finance costs 4,144 351 3,575Depreciation 7,916 5,829 11,764Employee share option benefits 979 - -Amortisation of land use rights 627 525 1,096Amortisation of deferred development costs 1,000 1,000 2,000Gain on change of terms of convertible bond (1,537) - -Fair value gain on investments held for trading (3,039) - -Revaluation gain of biological assets (20,000) (8,000) (103,340)Share of loss of associates 778 - -Write off of biological assets - - 782 _________ _________ _________Operating profit before changes in working capital 48,875 43,783 185,307Increase in inventories (973) (82) (587)Increase in accounts receivable (2,859) - -Decrease in other receivables 4,916 24,687 20,276Increase in trade payable and accrued expenses 12,672 35 47Increase/(decrease) in due to related parties 1,695 (1,356) (1,457) _________ _________ _________Cash generated from operations 64,326 67,067 203,586Tax paid (19,823) - - _________ _________ _________Net cash inflow from operating activities 44,503 67,067 203,586 _________ _________ _________ Cash flows from investing activitiesPurchases of property, plant and equipment (354) (33) (411)Additions in land use rights (8,654) (21,570) (26,600)Construction-in-progress paid (76,163) (51,492) (204,262)Purchase of biological assets (3,000) - (4,500)Investments in associates (38) - -Investments held for trading (20,122) - -Interest received 1,625 39 348 _________ _________ _________Net cash used in investing activities (106,706) (73,056) (235,425) _________ _________ _________ Cash flows from financing activitiesProceeds from issue of new shares in subsidiaries - 21,200 21,200(Decrease)/increase in amount due to related parties (12,500) 12,500 12,500(Repayments to )/advances from shareholders (1,168) 1,168 1,168Advances to an associate (13,865) - -Issue of convertible bond - - 80,212 _________ _________ _________Repayments of short-term bank loans - (20,000) (20,000)Repayments to ultimate holding company (9,715) - -Proceeds from issue of new shares 145,945 - -Issuing costs paid (38,296) - -Finance costs paid (1,416) (351) (356) _________ _________ _________Net cash inflow from financing activities 68,985 14,517 94,724 _________ _________ _________Effect of exchange rate changes on cash and cash equivalents (1,362) - - _________ _________ _________Net increase in cash and cash equivalents 5,420 8,528 62,885Cash and cash equivalents at beginning of period/year 82,015 19,130 19,130 _________ _________ _________Cash and cash equivalents at end of period/ year 87,435 27,658 82,015 ========= ========= ========= Notes to the interim announcementFor the six months ended 31 December 2005 1 Taxation The amount of taxation charged to the consolidated income statements represents: Six months ended Year ended 31 December 30 June 2005 2004 2005 RMB'000 RMB'000 RMB'000 (Unaudited) (Audited) (Audited) PRC foreign enterprise income tax ("FEIT") 6,577 2,830 13,544Deferred tax 3,013 750 7,426 _________ _________ _________ 9,590 3,580 20,970 ========= ========= ========= 31 December 30 June 2005 2004 2005 RMB'000 RMB'000 RMB'000 (Unaudited) (Audited) (Audited) Balance of provision relating to previous years 30,537 16,993 16,993FEIT provision for the period/year 6,577 2,830 13,544Tax payment (19,823) - - _________ _________ _________ 17,291 19,823 30,537 ========= ========= ========= 2 Earnings per share The calculation of the basic earnings per share for the six months ended 31December 2005, is based on the unaudited profit attributable to shareholders ofapproximately RMB49,502,000 during the period and the weighted average number ofapproximately 58,785,000 ordinary shares in issue during the period afteradjusting the effects of the issue of 9,072,813 new ordinary shares when theshares of the Company was admitted to trading on AIM and the issue of 1,703,049new ordinary shares to a holder of the convertible bond upon conversion of partof the convertible bond with nominal value of HK$24,000,000 on 3 August 2005. The calculation of the basic earnings per share for the six months ended 31December 2004 and the year ended 30 June 2005 is based on the audited profitattributable to shareholders of approximately RMB40,537,000 and RMB248,808,000during the period/year and assuming that 50,000,000 shares were in issuethroughout the period ended 31 December 2004 and the year ended 30 June 2005,being 1,000,000 shares in issue and issuable and taking account 49,000,000shares issued on 29 June 2005. The calculation of the diluted earnings per share for the six months ended 31December 2005 is based on the unaudited profit attributable to shareholders ofapproximately RMB49,502,000 during the period and the weighted average number ofapproximately 58,816,000 ordinary shares in issue after adjusting for the numberof dilutive potential ordinary shares arising from the outstanding share optionsgranted by the Company during the period. The convertible bond has no dilutiveeffect of earnings per share during the period. The diluted earnings per share for the six months ended 31 December 2004 is notcalculated because no dilutive events were in existence during the period. The calculation of the diluted earnings per share for the year ended 30 June2005 is based on the audited profit attributable to shareholders ofapproximately RMB252,027,000 after adjusting for interest on convertible bondand the weighted average number of approximately 51,781,000 ordinary shares inissue after adjusting for the number of dilutive potential ordinary sharesarising from the conversion of convertible bond. 3 Dividends No dividend has been declared or paid by the Company during the six months ended31 December 2004 and 2005 and the year ended 30 June 2005. 4 Financial Information The interim announcement was approved by the board on 10 March 2006. Thefinancial information has been prepared on a going concern basis in accordancewith International Financial Reporting Standards. The accounting policiesapplied in preparing the financial information are consistent with those adoptedand disclosed in the Group's statutory accounts for the year ended 30 June 2005. 5 Interim Report Copies of the interim report 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. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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