21st Mar 2007 07:01
Asian Citrus Holdings Ltd21 March 2007 Under embargo 7.00am Wednesday 21 March 2007 Asian Citrus Holdings Limited Interim Results for the six months ended 31 December 2006 Asian Citrus Holdings Limited ("Asian Citrus"), the largest orange plantationowner and operator in China, announces interim results for the six months ended31 December 2006. Key Highlights Six months ended Six months ended 31 December 31 December 2006 2005 2006 2005 % (RMBm) (RMBm) (£m*) (£m*) changeRevenue 147.1 105.6 9.6 6.9 +39.2 ReportedfinancialinformationEBITDA 141.8 71.2 9.3 4.7 +99.2Net profit 110.3 49.5 7.2 3.2 +122.8Basic EPS RMB1.77 RMB0.84 11.6p 5.5p +110.7Diluted EPS RMB1.72 RMB0.84 11.2p 5.5p +104.8 Reportedfinancialinformationadjusted toexcludebiological gainandcorrespondingtax effectEBITDA 58.6 51.2 3.8 3.3 +14.4Net profit 39.6 32.5 2.6 2.1 +21.8Basic EPS RMB0.64 RMB0.55 4.2p 3.6p +16.4Diluted EPS RMB0.63 RMB0.55 4.1p 3.6p +14.5 * Conversion at £1 = RMB15.30 as at 31 December 2006 for reference only Operational Highlights • Hepu Plantation - 1.2 million fruit-bearing trees - produced 46,219 tonnes, up by 14% • Xinfeng Plantation - 400,000 fruit-bearing trees - successful trial of 3,652 tonnes • Approximately RMB58m (£3.8m) invested in development of Xinfeng Plantation during the period: • A further 400,000 trees to be planted in spring 2007 to reach a total of 1.6 million • First commercial harvest scheduled for winter 2007 • Significant increase in the contribution of higher margin supermarket business to total sales: • 29.3% of total sales for the last six months (H1 2005: 7.9%) • 20.4% of total production volume for the last six months (H1 2005: 5.0%) Strategic Highlights • Signed Memorandum of Understanding with Hunan government regarding a proposed new plantation • Development of an orange tree nursery occupying an area of approximately 10,000 sq. metres at the Hepu Plantation • Pre-sale of the shop units in the first phase of an agricultural wholesale market near the Xinfeng Plantation is expected to commence around the end of March 2007 • Accredited the EurepGAP certification through the Group's joint venture in Hong Kong which permits the potential export of oranges to European customers in the future • Certain discussions held with potential strategic partners about juicing co-operation arrangements. Tony Tong, Chairman, commented: "During the past six months, we have made good progress in increasing ourpresence in the retail market by securing more substantial supplier contractswith several supermarket chains in China. "In addition to maintaining our momentum in building on our supermarketrelationships, we will also be looking to expand our business into value addedproducts to benefit from the expected significant growth in demand. "As a result of the bad weather in California in January 2007 and thecorresponding shortage of orange supply in the market, we have increased theselling price of the summer harvest in 2007 by approximately 5.8%. "We are excited about the growth prospects of the Group, driven by increasingdemand for high quality oranges in China and are very confident that AsianCitrus will continue to develop and deliver good value to our shareholders." For further information please contact: Asian Citrus Holdings Limited Tel: +852 2559 0323Tony Tong, Chairman and Chief Executive OfficerEric Sung, Finance Director JPMorgan Cazenove Tel: 020 7588 2828Michael Wentworth-Stanley/James Mitford Weber Shandwick Financial Tel: 020 7067 0700Terry Garrett/Helen Thomas/John Moriarty ASIAN CITRUS HOLDINGS LIMITED CHAIRMAN'S STATEMENT I am very pleased to report results for the six months ended 31 December 2006.As the largest orange plantation owner and operator in China, we are leveragingour market leading position to create further value for our shareholders. STRATEGIC OVERVIEW During the last six months, the Group has continued to focus on its strategy ofexploring opportunities in supplying directly to supermarkets. In addition tothe renewal of the supply contract with Guangxi Yonghao Supermarket CompanyLimited ("Yonghao"), the Group entered into a new supply contract withGuihai Highways Guangxi Xingtong Services Company which operates 168 conveniencestores and service stations along approximately 4,000 kilometres of highwayswithin the Guangxi Zhuang Autonomous Region of China. Sales of the Group'soranges to supermarket chains are expected to increase from around 11% ofproduction last year to around 20% in the current year. The Group has substantially completed the construction of an orange tree nurseryoccupying an area of approximately 10,000 sq. metres at the Hepu Plantation. Weexpect that the Group's commercial nursery operation will be capable ofproducing 3 to 4.5 million seedlings every 18 months. The nursery will provideboth infant trees for the Group's own use and for sale to third parties. The Group has identified Hunan province as another potential source of highquality oranges and has been exploring various business opportunities in theregion. The Group has undertaken a feasibility study on the proposed Hunandevelopment and on 12 March 2007, signed a memorandum of understanding with theHunan provincial government regarding the plans it has to develop a newplantation in the Dao County area. Through our subsidiary in the Hubei province of China, we have built a knowledgebase about the availability and sources of high quality oranges in thisprovince. This ensures that the Group is well placed to source high qualityoranges from this area to supplement supply from our growing operations. As previously announced, the Group is developing an agricultural wholesalemarket focused on fruit together with ancillary serviced apartments near theXinfeng Plantation in the Jiangxi province of China. This project will beundertaken in three phases and the first phase is expected to be completed inthe second quarter of 2007. The pre-sale of the shop units, numbering about 250,in the first phase is expected to commence around the end of March 2007. Anorange processing centre, including warehouses, refrigerated storage and acentre for cleaning, grading, packaging and waxing oranges, is part of the thirdphase and the Directors currently expect this to be completed in the financialyear 2008/09. The Group has received EurepGAP certification through its joint venture in HongKong. EurepGAP is the European fresh produce food standard set in place by theleading food retailers to give customers assurance of quality. This demonstratesthat the Group has met the stringent technical requirements needed to gain thecertificate ranging from use of fertiliser, irrigation methods and hygienelevels, to employee training and the assessment of the environmental impact offarming. The accreditation of the EurepGAP certificate allows the Group topotentially export to European customers in the future, and this is a major milestone for the Group. In addition to the fresh oranges business, we continue to assess certainbusiness opportunities for value added products such as fresh orange juice. TheGroup has already held certain discussions with potential strategic partnersabout juicing co-operation arrangements. OPERATING REVIEW The orange production volume for the six months ended 31 December 2006 wasapproximately 49,871 tonnes compared to approximately 40,604 tonnes in 2005, anincrease of around 23%. The growth in production was mainly due to: (1) trialproduction of 3,652 tonnes of oranges from the Xinfeng Plantation; (2) theincreasing maturity of the trees in the Hepu Plantation; and (3) the growth inexpertise and efficiency of working practices. The Group's total number of fruit-bearing orange trees increased from1,246,052 as at 30 June 2006 to 1,646,052 at 31 December 2006 as a result of400,000 trees reaching fruit-bearing age at the Xinfeng Plantation. Subsequent to 31 December 2006, we have launched a trial run of replantingprogramme which includes replacement of certain existing species with moreadvanced and better quality species that have stronger resistance againstdiseases and higher yield. As of the date of this report, 37,542 winter orangetrees (which accounted for approximately 2.3% of the total number offruit-bearing trees as at 31 December 2006) have been removed and this area willbe replanted with the new species according to our replanting programme. It isour intention to implement the partial replanting programme step-by-step inorder to optimise its impacts on the Group's overall financial position.Based on the results of the research we carried out, we are confident that thereplanting programme will bring long term economic benefits to the Group. The Group continued to invest in the construction of the Xinfeng Plantationwhich is expected to be completed in the second quarter of 2007. We have spentRMB58 million for the infrastructure at the Xinfeng Plantation in the period andwe are in the process of planting the final 400,000 oranges trees in the XinfengPlantation. We expect that the potential production capacity from the XinfengPlantation in the coming years will drive a step change in the Group's orangesupply. We expect the first commercial harvest at the Xinfeng Plantation to bein November 2007. TRADING RESULTS The Group's turnover was RMB147.1 million (2005: RMB105.6 million) in the sixmonths to 31 December 2006. The 39% year-on-year growth in turnover was achievedby an increase of approximately 23% in the Group's production combined with a13.5% increase in average selling price of the oranges to both wholesalers andsupermarkets. For the six months ended 31 December 2006, sales to supermarketshave increased to 29.3% of the Group's turnover from 7.9% in the comparableperiod. We expect this proportion to continue to increase as the Group securesmore supermarket contracts. The gross margin of the Hepu Plantation increased slightly from approximately60.6% for the six months ended 31 December 2005 to approximately 61.6% for thesix months ended 31 December 2006, benefiting from the higher average sellingprice for supermarket sales and tight cost controls implemented by the Group.The Xinfeng Plantation was not profitable in 2006 as the plantation was still intrial production. However, over the medium term, as production volume increasesand economies of scale are achieved, the Xinfeng Plantation will start todemonstrate its growth potential. Combining the two plantations, the Group'sgross margin decreased from 60.6% for the six months ended 31 December 2005 toapproximately 55.5% for the six months ended 31 December 2006. The cost of production increased from approximately RMB41.6 million in the 2005period to approximately RMB65.5 million in the last six months principallybecause of the increase in consumption of raw materials accompanying the growthof the Group's production volume. In addition to this, the price offertiliser, one of the Group's major raw materials, has increased by around5-10% in the fiscal period. As a result, the average unit cost of oranges fromthe Hepu Plantation increased to approximately RMB1.14 per kg (2005: RMB1.02 perkg). CORPORATE GOVERNANCE ENHANCEMENTS The Board is committed to improving corporate governance through the appointmentof competent and experienced professionals to the Board and senior management. Mr. Sung Chi Keung was appointed to the Board as Finance Director on 15 January2007. Mr. Sung was previously the Chief Financial Officer of the Company. To help ensure there is adequate operational support for the projects that theGroup is presently undertaking, the Group engaged a consultancy company,Questmark Asia Limited ("Questmark") in February 2007. Questmark will,amongst other things, assist the Company with project management focusing onoperations, infrastructure and internal controls. DIVIDEND POLICY The Group expects to have a dividend payout ratio similar to that of thefinancial year 2005/2006 and, in any event, to pay a dividend per share no lessthan the previous year. INVESTOR RELATIONS The Board recognises the importance of maintaining good communications withshareholders and potential investors. The Group's management visited certaininstitutional and private investors during the roadshow in November 2006 inorder to update the shareholders of the Group's latest developments andintroduce the Group to potential investors. OUTLOOK During the past six months, we have made good progress in increasing ourpresence in the retail market by securing more substantial supplier contractswith several supermarket chains in China. In addition to maintaining ourmomentum in building on our supermarket relationships, we will also be lookingto expand our business into value added products to benefit from the expectedsignificant growth in demand. As a result of the bad weather in California inJanuary 2007 and the corresponding shortage of orange supply in the market, wehave increased the selling price of the summer harvest in 2007 by approximately5.8%. We are excited about the growth prospects of the Group, driven byincreasing demand for high quality oranges in China and are very confident thatAsian Citrus will continue to develop and deliver good value to ourshareholders. Tony TongChairman21 March 2007 ASIAN CITRUS HOLDINGS LIMITEDCONSOLIDATED INCOME STATEMENTFOR THE SIX MONTHS ENDED 31 DECEMBER 2006 Six months ended Year ended 31 December 30 June 2006 2005 2006 RMB'000 RMB'000 RMB'000 (Unaudited) (Unaudited) (Audited) Revenue 147,060 105,552 404,566Gain arising from changes in fair valueless estimated point-of-salecosts of biological assets 83,172 20,000 115,000 Other income 786 10,668 5,237 --------- --------- ---------- 231,018 136,220 524,803 Inventories used (48,807) (34,517) (113,008)Staff costs (16,658) (11,000) (26,479)Depreciation (11,436) (7,916) (17,273)Other operating expenses (25,728) (20,398) (53,675)Write-off of biological assets (9) - - --------- --------- ----------Profit from operations 128,380 62,389 314,368 Interest income 601 1,625 2,755Finance expenses (2,983) (4,144) (7,145) --------- --------- ----------Net finance costs (2,382) (2,519) (4,390) Share of profit/(loss) of associates 292 (778) (1,115) --------- --------- ----------Profit from ordinary activities before income tax 126,290 59,092 308,863Income tax expenses (15,990) (9,590) (50,937) --------- --------- ----------Profit attributable to shareholders 110,300 49,502 257,926 ========= ========= ========== Earnings per share Basic earnings per share RMB1.77 RMB0.84 RMB4.28 ========= ========= ==========Diluted earnings per share RMB1.72 RMB0.84 RMB4.16 ========= ========= ==========Dividends - - 38,637 ========= ========= ========== ASIAN CITRUS HOLDINGS LIMITEDCONSOLIDATED BALANCE SHEETAS AT 31 DECEMBER 2006 31 December 30 June 2006 2005 2006 RMB'000 RMB'000 RMB'000 (Unaudited) (Unaudited) (Audited) ASSETS Non-current assetsProperty, plant and equipment 557,200 387,423 538,907Land use rights 62,086 63,399 62,742Construction-in-progress 288,232 273,705 257,147Biological assets 714,369 532,206 628,206Deferred development costs 13,000 6,000 10,500Interests in associates 5,380 13,125 5,335 --------- -------- -------- 1,640,267 1,275,858 1,502,837 Current assetsInvestments held for trading - 22,724 -Properties under development 19,489 - 10,355Inventories 488 1,812 1,168Trade receivable 29,396 2,859 -Other receivables 6,442 2,980 15,347Cash and bank balances 29,762 87,435 103,174 --------- -------- -------- 85,577 117,810 130,044 --------- -------- --------Total assets 1,725,844 1,393,668 1,632,881 ========= ======== ======== EQUITY AND LIABILITIES EquityIssued capital 6,581 6,421 6,569Reserves 1,576,763 1,268,363 1,499,080 --------- -------- -------- 1,583,344 1,274,784 1,505,649 Non-current liabilitiesDeferred tax liabilities 33,728 13,654 25,983Convertible bonds 48,622 62,500 47,528 --------- -------- -------- 82,350 76,154 73,511 Current liabilitiesTrade payables and accruedexpenses 21,402 21,644 18,958Due to related parties - 3,795 4,260Income tax payables 38,748 17,291 30,503 --------- -------- -------- 60,150 42,730 53,721 --------- -------- --------Total liabilities 142,500 118,884 127,232 --------- -------- --------Total equity and liabilities 1,725,844 1,393,668 1,632,881 ========= ======== ======== ASIAN CITRUS HOLDINGS LIMITEDCONSOLIDATED CASH FLOW STATEMENTFOR THE SIX MONTHS ENDED 31 DECEMBER 2006 Six months ended Year ended 31 December 30 June 2006 2005 2006 RMB'000 RMB'000 RMB'000 (Unaudited) (Unaudited) (Audited) Cash flows from operating activitiesProfit from ordinary activities before income tax 126,290 59,092 308,863Unrealised exchange (gain)/loss (1,640) 540 (1,137)Interest income (601) (1,625) (2,755)Finance expenses 2,983 4,144 7,145Depreciation 11,436 7,916 17,273Employee share option benefits 4,149 979 2,207Amortisation of land use rights 656 627 1,284Amortisation of deferreddevelopment costs 1,000 1,000 2,000Gain on change of terms ofconvertible bonds - (1,537) (1,537)Fair value gain on investments held fortrading - (3,039) -Loss on disposals of property, plant andequipment - - 404Revaluation gain of biological assets (83,172) (20,000) (115,000)Share of (profit)/loss of associates (292) 778 1,115Write off of biological assets 9 - - -------- --------- --------- Operating profit beforechanges in working capital 60,818 48,875 219,862Decrease/(increase) in inventories 680 (973) (329)Increase in trade receivable (29,396) (2,859) -Decrease/(increase) in other receivables 8,905 4,916 (7,441)Increase in properties under development (9,134) - (10,355)(Decrease)/Increase in trade payable and accrued expenses (1,061) 12,672 4,294(Decrease)/increase in due to related parties (4,260) 1,695 2,160 -------- --------- ---------Cash generated from operations 26,552 64,326 208,191Income tax paid - (19,823) (35,629) -------- --------- ---------Net cash inflow from operating activities 26,552 44,503 172,562 -------- --------- --------- Cash flows from investing activitiesPurchases of property, plant and equipment (2,097) (354) (2,437)Additions in land use rights - (8,654) (8,654)Construction-in-progress paid (55,212) (76,163) (213,220)Purchase of biological assets (3,000) (3,000) (4,000)Payments of deferred development costs (3,500) - (5,500)Investments in associates - (38) (38)Investments held for trading - (20,122) -Interest received 601 1,625 2,755 -------- --------- ---------Net cash used in investing activities (63,208) (106,706) (231,094) -------- --------- --------- Cash flows from financing activitiesRepayments to related parties - (12,500) (12,500)Repayments to shareholders - (1,168) (1,168)Advances to an associate - (13,865) (6,412)Repayments to ultimate holding company - (9,715) (9,715)Proceeds from issue of new shares - 145,945 145,945Issuing costs paid - (38,296) (38,296)Proceeds from issue of new shares upon exercise of share options 1,883 - 3,262Dividend paid (38,637) - -Finance expenses paid (2) (1,416) (1,425) -------- --------- ---------Net cash (outflow)/inflowfrom financing activities (36,756) 68,985 79,691 -------- --------- ---------Effect of exchange rate changes oncash and cash equivalents - (1,362) - -------- --------- ---------Net (decrease)/increase incash and cash equivalents (73,412) 5,420 21,159 Cash and cash equivalentsat beginning of period/year 103,174 82,015 82,015 -------- --------- ---------Cash and cash equivalentsat end of period/year 29,762 87,435 103,174 ======== ========= ========= ASIAN CITRUS HOLDINGS LIMITEDNOTES TO THE INTERIM ANNOUNCEMENTFOR THE SIX MONTHS ENDED 31 DECEMBER 2006 1 Taxation The amount of taxation charged to the consolidated income statements represents: Six months ended Year ended 31 December 30 June 2006 2005 2006 RMB'000 RMB'000 RMB'000 (Unaudited) (Unaudited) (Audited) PRC foreign enterprise income tax ("FEIT") 8,245 6,577 35,595 Deferred tax 7,745 3,013 15,342 ------- ------ ------ 15,990 9,590 50,937 ======= ====== ====== 31 December 30 June 2006 2005 2006 RMB'000 RMB'000 RMB'000 (Unaudited) (Unaudited) (Audited) Balance of provision relating to previous years 30,503 30,537 30,537 FEIT provision for the period/year 8,245 6,577 35,595 Tax payment - (19,823) (35,629) ------- ------- -------- 38,748 17,291 30,503 ======= ======= ======== 2 Earnings per share (a) Basic earnings per share The calculation of the basic earnings per share for the six months ended 31December 2006, is based on the profit attributable to shareholders ofapproximately RMB110,300,000 during the period and the weighted average numberof approximately 62,292,000 ordinary shares in issue during the period afteradjusting for the effects of the issue of 115,500 new ordinary shares upon theexercise of 115,500 options on 10 August 2006. The calculation of the basic earnings per share for the six months ended 31December 2005 and the year ended 30 June 2006 is based on the profitattributable to shareholders of approximately RMB49,502,000 and RMB257,926,000during the period/year and the weighted average number of approximately58,785,000 and 60,233,000 ordinary shares in issue during the year afteradjusting for the effects of the issue of 9,072,813 new ordinary shares when theshares of the Company were admitted to trading on AIM, the issue of 1,703,049new ordinary shares to the holder of the convertible bonds upon conversion ofpart of convertible bonds with nominal value of HK$24,000,000 on 3 August 2005,the issue of 1,226,087 new ordinary shares to the holder of the convertiblebonds upon conversion of a convertible bond with nominal value of HK$20,000,000on 2 March 2006 and the issue of 200,000 new ordinary shares to EvolutionSecurities China Limited ("ESCL"), upon the exercise of 200,000 options on 16March 2006. (b) Diluted earnings per share The diluted earnings per share is calculated assuming conversion of all dilutivepotential ordinary shares. The convertible bonds are assumed to have been converted into ordinary sharesand the net profit is adjusted to eliminate the interest expenses. Theconvertible bonds carry a variable conversion ratio to achieve an internal rateof return of 25%. At the year end, the implied rate had been achieved andtherefore the specified rate of HK$16.31 per share has been used for conversion.The convertible bond had no dilutive effect of earnings per share for the sixmonths ended 31 December 2005. For share options, the calculation is done to determine the number of ordinaryshares that could have been acquired at fair value (determined as the averagemarket price of the Company's ordinary shares during the year) based on themonetary value of the subscription rights attached to the outstanding shareoptions. The number of ordinary shares calculated is compared with the number ofordinary shares that would have been issued assuming the exercise of the shareoptions. Six months ended Year ended 31 December 30 June 2006 2005 2006 RMB'000 RMB'000 RMB'000 (Unaudited) (Unaudited) (Audited) Profit attributable to shareholders 110,300 49,502 257,926 Interest on convertible bonds 2,980 - 7,126 -------- ------- ------- Profit used to determine dilutedearnings per share 113,280 49,502 265,052 ========= ======= =======Weighted average/Assumed number ofordinary shares in issue(thousands) 62,292 58,785 60,233 Assumed conversion of convertiblebonds (thousands) 3,433 - 3,433Adjustment for share options (thousand) 92 31 78 ------- ------- ------- Weighted average number of sharesfor diluted earnings per share(thousand) 65,817 58,816 63,744 ======== ======== ======== Diluted earnings per share (RMB) 1.72 0.84 4.16 ======== ======== ======== 3 Dividends No dividend has been declared during the six months ended 31 December 2006 and2005. A final dividend of RMB0.62 per ordinary share for the year ended 30 June 2006was paid on 29 December 2006. 4 Financial Information The preliminary announcement was approved by the board on 21 March 2007. Thefinancial information has been prepared on a going concern basis in accordancewith International Financial Reporting Standards. The accounting policiesapplied in preparing the financial information are consistent with those adoptedand disclosed in the Group's consolidated financial statements for the yearended 30 June 2006. 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:
ACHL.L