20th Sep 2011 07:00
20 September 2011 |
Dongfang Shipbuilding (Group) Company Limited
("Dongfang" or the "Group")
Interim Results
Dongfang (AIM:DFS), the international shipping company and shipbuilder, today announces its unaudited results for the six months ended 30 June 2011.
Summary
·; | Dongfang became the first PRC Shipbuilding Group to join AIM, with its shares being admitted to trading on 18 August 2011 |
·; | The Group registered a loss of US$3.7 million after taxation for the six months ended 30 June 2011 (H1 2010: loss US$1.7 million) |
·; | Shipbuilding revenue registered a 24.2% fall compared to the same period in 2010, as the shipbuilding sector as whole continues to operate in a tough and challenging environment |
·; | Encouraging performance of the shipping operations as this business continues to develop. Shipping income from the shipping operations increased by 53.7% to US$12.6 million (H1 2010:US$8.2 million), mainly due to the addition of two new ships in March 2011 taking the shipping fleet to seven |
Chen Tongkao, Chief Executive Officer, commented: "Although the shipbuilding sector has continued to be challenging during the period, the Group has worked to mitigate the impact of this by focusing on growing its shipping business. Since joining AIM in August 2011, the Board continues to work to increase utilisation of production capacity at its two shipyards and, whilst we foresee that the environment will remain challenging, we believe that the longer term prospects for the Group remain strong."
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For further information:
Dongfang Shipbuilding(Group) Company Limited | |
Chen Tongkao, Chief Executive Officer | |
www.dongfangship.com.cn | |
AKM Ismail, Finance Director | Tel: +44 (0) 7786 712 459 |
Northland Capital Partners Limited | |
Luke Cairns / Edward Hutton | Tel: +44 (0) 20 7796 8800 |
Media enquiries:
Abchurch Communications Limited | |
Joanne Shears / Quincy Allan | Tel: +44 (0) 20 7398 7709 |
www.abchurch-group.com |
About Dongfang
The Group is an established PRC manufacturer of small and medium size vessels ranging from 3,000 DWT to 17,000 DWT for commercial customers in the international shipping markets. The Group's principal vessels to date have been specialist chemical tankers and multi-purpose containerships. The Group owns and operates 2 shipyards in Zhejiang and Anhui provinces, with 18 shipbuilding slipways and a current shipbuilding capacity of 500,000 DWT per annum.
In addition to shipbuilding, the Group also operates a shipping business based in Singapore and Hong Kong with a fleet of chemical tankers transporting industrial chemical cargoes from Taiwan and South Korea to the PRC.
Dongfang commenced operations in 1986.
For more information, please see: www.dongfangship.com.cn
Chief Executive Officer's Statement
On behalf of Dongfang Shipbuilding Group, with shipbuilding operations in China and shipping operations in Singapore and Hong Kong, I am delighted to present our maiden interim results since becoming the first PRC Shipbuilding Group to join AIM, when its shares were admitted to trading on 18 August 2011.
Financial Review
The first half of 2011 has seen a mixed performance for the Group with a decline in sales in shipbuilding versus 2010. The directors are seeking to mitigate this by the continued growth of the shipping business, maximising revenues wherever possible out of the Group's seven vessels.
The shipbuilding sector as a whole continues to operate in a tough and challenging environment and this is reflected in the Group's shipbuilding revenues falling 24.2% to US$33.2m as compared to US$43.8m in the half year ended 30 June 2010.
Group gross profit margin was lower at 5.6% (2010:11.2%), mainly due to the weak sales and gross profit margins registered by the shipbuilding operations. As a result, Group gross profit declined by 55.2%, from US$5.8m for the half year ended 2010 to US$2.6m for the half year ended 30 June 2011. Coupled with the increase in administrative expenses of US$1.3m mainly due to the higher bank charges, salaries cost, insurance, flotation and other expenses incurred, the Group registered a loss of US$3.7m for the half year ended 30 June 2011 as compared to a loss of US$1.7m for the half year ended 30 June 2010.
The shipping operations' performance is more encouraging as the business continues to develop. Shipping income increased by 53.7%, from US$8.2m for the half year ended 30 June 2010 to US$12.6m for the half year ended 30 June 2011, mainly due to the addition of two new ships in March 2011 taking the shipping fleet to seven.
Order book
The shipbuilding order book as at 30 June 2011 amounted to approximately US$89m and comprised of 10 vessels. As at 31 August 2011, the order book amounted to approximately US$83m and comprised of six vessels. In each case, the respective order book includes approximately US$17m in respect of two vessels being constructed for the Group's own use. Currently, we are negotiating for new sale contracts worth approximately US$50.8m in the 4200, 3800, and 4999 DWT bunkering tanker series.
Outlook
With no new shipbuilding orders having been contracted by the Group since 30 June 2011, the Directors expect that outlook for the shipbuilding operations to remain weak for at least the next 6 months. The Directors are seeking to mitigate this by focussing on continued growth in the shipping business and the containment of costs in the shipbuilding operations. In addition, we will focus on refinancing of the Group bank loans in the next 6 months to lower our finance costs. This will enable substantial finance costs savings for the Group going forward.
The outlook for the global economy remains uncertain in view of the eurozone sovereign debt crisis and the weak US economy. We therefore remain cautious and envisage a challenging year ahead. The Group will be vigilant in managing its costs as well as striving hard to increase utilisation of production capacity at its 2 shipyards. The Group will also consider potential merger and acquisition opportunities to enhance shareholders' value if and when they arise.
Chen TongKao
Chief Executive Officer
19 September 2011
Consolidated statement of financial position
as at 30 June 2011
The Group | |||
30 June 2011 | 31 December 2010 | ||
Note | USD | USD | |
(unaudited) | (audited) | ||
Consolidated | Combined* | ||
Assets | |||
Non-Current | |||
Intangible asset | 773 | 1,887 | |
Sea area use rights | 885,539 | 890,059 | |
Land use rights | 11,039,143 | 10,883,509 | |
Property, plant and equipment | 2 | 163,665,722 | 178,609,339 |
Available-for-sale financial assets | 679,894 | 603,983 | |
Deferred tax assets | 1,699,734 | 1,660,954 | |
Debt assigned to Chen Tong Kao | 73,797,146 | - | |
251,767,951 | 192,649,731 | ||
Current | |||
Inventories | 13,977,483 | 10,943,055 | |
Work-in-progress | 359,966 | 325,272 | |
Amount due from contract customers | 64,712,906 | 65,098,094 | |
Trade and other receivables | 3 | 82,153,085 | 71,662,208 |
Prepayments | 4,011,589 | 1,240,691 | |
Amounts owing by related parties | 2,911,233 | 1,903,253 | |
Fixed deposits | 6,146,533 | 22,492,050 | |
Cash and cash equivalents | 76,525,168 | 53,517,518 | |
250,797,963 | 227,182,141 | ||
Total assets | 502,565,914 | 419,831,872 | |
Equity and liabilities | |||
Capital and Reserves | |||
Share capital | 98,542,956 | 6,352,008 | |
Statutory common reserve | 785,147 | 785,147 | |
Exchange translation reserve | 1,910,624 | 1,378,484 | |
(Accumulated losses)/retained profits | (3,725,312) | 12,785,963 | |
97,513,415 | 21,301,602 | ||
Liabilities | |||
Non-Current | |||
Amounts owing to the then shareholders | - | 192,971 | |
Bank borrowings | 40,614,629 | 35,347,249 | |
Finance lease obligation | 7,301,825 | 7,890,210 | |
Deferred tax liabilities | 858,775 | 839,182 | |
Deferred capital grant | 8,138,960 | 8,024,405 | |
Subordinated loan | 11,772,541 | - | |
68,686,730 | 52,294,017 | ||
Current | |||
Trade and other payables | 4 | 141,899,791 | 153,498,379 |
Amounts owing to related parties | 14,258,927 | 9,618,008 | |
Bank borrowings | 173,374,821 | 175,879,878 | |
Finance lease obligation | 2,900,348 | 2,834,175 | |
Deferred capital grant | 174,718 | 170,732 | |
Current tax payable | 3,757,164 | 4,235,081 | |
336,365,769 | 346,236,253 | ||
Total equity and liabilities | 502,565,914 | 419,831,872 | |
*combined using pooling-of-interests method (see Note 1)
Consolidated statement of comprehensive income
for the six months ended 30 June 2011
The Group | |||
Six months ended 30 June 2011 | Six months ended 30 June 2010 | Year ended 31 December 2010 | |
Note | USD | USD | USD |
(unaudited) | (unaudited) | (audited) | |
Consolidated | Combined* | Combined* | |
Revenue 5 | 45,815,044 | 52,005,753 | 126,960,308 |
Cost of sales | (43,249,792) | (46,192,084) | (111,306,813) |
Gross profit | 2,565,252 | 5,813,669 | 15,653,495 |
Other operating income 6 | 3,278,080 | 334,410 | 2,030,640 |
Distribution costs | (123,970) | (80,835) | (637,868) |
Administrative costs | (4,063,426) | (2,744,519) | (6,808,115) |
Consultancy fee | - | - | (378,402) |
Other operating expenses | (55,646) | (29,011) | (159,389) |
Finance costs | (5,192,023) | (4,898,486) | (8,166,327) |
Loss/profit before taxation | (3,591,733) | (1,604,772) | 1,534,034 |
Taxation | (92,514) | (115,567) | (231,134) |
(Loss)/profit after taxation for the period/year | (3,684,247) | (1,720,339) | 1,302,900 |
Other comprehensive income/(expense) | |||
- currency translation differences arising from consolidation |
532,140 |
(605,290) |
(1,382,062) |
Total comprehensive loss for the period/year | (3,152,107) | (2,325,629) | (79,162) |
Attributable to: | |||
Equity holders of the Company | (3,152,107) | (2,325,629) | (79,162) |
*combined using pooling-of-interests method (see Note 1)
Consolidated statement of changes in equity
for the six months ended 30 June 2011
Statutory | Exchange | ||||
Share | Accumulated | common | translation | ||
capital | losses | reserve | reserve | Total | |
USD | USD | USD | USD | USD | |
(unaudited) | (unaudited) | (unaudited) | (unaudited) | (unaudited) | |
Balance as at 1 January 2011 | 1,269 | (41,065) | 785,147 | 1,378,484 | 2,123,835 |
Issue of ordinary shares | 98,541,687 | - | - | - | 98,541,687 |
Total comprehensive (loss)/income | - | (3,684,247) | - | 532,140 | (3,152,107) |
Balance as at 30 June 2011 | 98,542,956 | (3,725,312) | 785,147 | 1,910,624 | 97,513,415 |
Combined statement of changes in equity
for the year ended 31 December 2010
Statutory | Exchange | ||||
Share | Retained | common | translation | ||
capital | profits | reserve | reserve | Total | |
USD | USD | USD | USD | USD | |
(audited) | (audited) | (audited) | (audited) | (audited) | |
Balance as at 1 January 2010 | 6,352,008 | 11,786,104 | 629,689 | 2,760,546 | 21,528,347 |
Total comprehensive income | - | 1,302,900 | - | - | 1,302,900 |
Exchange difference not recognised in income statement |
- |
- |
- |
(1,382,062) |
(1,382,062) |
Transfer to statutory common reserve | - | (155,458) | 155,458 | - | - |
Dividend paid | - | (147,583) | - | - | (147,583) |
Balance as at 31 December 2010 | 6,352,008 | 12,785,963 | 785,147 | 1,378,484 | 21,301,602 |
-prepared using pooling-of-interests method (see Note 1).
Consolidated statement of cash flows
for the six months ended 30 June 2011
Note |
Six months ended 30 June 2011 | |
USD | ||
(unaudited) | ||
Consolidated | ||
Cash Flows from Operating Activities | ||
Loss before taxation | (3,591,733) | |
Adjustments for: | ||
Amortisation of deferred capital grant | 86,507 | |
Amortisation of intangible asset | 1,148 | |
Amortisation of sea area use rights and land use rights | 122,569 | |
Depreciation of property, plant and equipment | 3,897,387 | |
Exchange difference translation | 6,081,534 | |
Gain on disposal of property, plant and equipment | (1,094,418) | |
Interest expense | 5,192,023 | |
Interest income | (293,199) | |
Operating profit before working capital changes | 10,401,818 | |
Increase in inventories and work-in-progress | (3,069,121) | |
Increase in operating receivables | (3,468,879) | |
Decrease in amount due from contract customers | 385,189 | |
Decrease in operating payables | (29,414,687) | |
Increase in advances on construction | ||
contracts under work-in-progress | 18,420,081 | |
Cash used in operating activities | (6,745,599) | |
Interest paid | (5,192,023) | |
Income tax paid | (646,766) | |
Net cash used in operating activities | (12,584,388) | |
Cash Flows from Investing Activities | ||
Acquisition of subsidiaries | 7 | 957,289 |
Acquisition of property, plant and equipment | (501,704) | |
Interest received | 293,199 | |
Net cash generated from investing activities | 748,784 | |
Cash Flows from Financing Activities | ||
Proceeds from shares issued | 14,455,534 | |
Amounts owing by related parties, net | (6,406,081) | |
Increase in notes payable | 11,949,295 | |
Subordinated loan obtained | 11,772,541 | |
Bank loan obtained | 136,995,771 | |
Bank loan repaid | (148,900,270) | |
Increase in deposits pledged with banks | (14,836,009) | |
Decrease in advances on construction contracts | ||
under construction-in-progress | (603,983) | |
Payment of lease obligations | (765,070) | |
Net cash generated from financing activities | 3,661,728 | |
Net decrease in cash and cash equivalents | (8,173,876) | |
Cash and cash equivalents at beginning of period | 15,297,289 | |
Cash and cash equivalents at end of period | A | 7,123,413 |
Consolidated statement of cash flows
for the financial period ended 30 June 2011 (cont'd)
A. Reconciliation of cash and cash equivalents
Per consolidated statement | |
of financial position | |
as at 30 June 2011 | |
USD | |
(unaudited) | |
Fixed deposits (maturing more than 3 months from balance sheet date) | 6,146,533 |
Cash and cash equivalents | 76,525,168 |
82,671,701 | |
Less: placement of deposits pledged with financial institutions | (75,548,288) |
Cash and cash equivalents at end of period per consolidated statement of cash flows | 7,123,413 |
Notes to the unaudited interim financial statement
1 BASIS OF PREPARATION
(i) Six months ended 30 June 2010 and the year ended 31 December 2010
The combined financial information in respect of the year ended 31 December 2010 (audited) and the six months ended 30 June 2010 (unaudited) has been prepared using the pooling-of-interests method of accounting. Pursuant to the Restructuring Exercise and the Contractual Arrangements described in the Company's Admission Document dated 12 August 2011, Dongfang Shipbuilding (Group) Company Limited became the holding company of the Group. The entities within the Group were ultimately controlled by Mr. Chen Tongkao both before and after the Restructuring Exercise and the Contractual Arrangements. Accordingly, although Dongfang Shipbuilding (Group) Company Limited was only included within the Group structure in July 2011, the Group is regarded as a continuing entity throughout the financial year ended 31 December 2010.
(ii) Six months ended 30 June 2011
The consolidated financial information in respect of the six months ended 30 June 2011 (unaudited) has been prepared on the basis that the effective date of acquisition of the companies now comprising the Group pursuant to the Restructuring Exercise was 1 January 2011.
2 PROPERTY, PLANT AND EQUIPMENT
USD | |
Cost | |
At 31 December 2010 | 189,663,057 |
Additions | 501,704 |
Disposals | (8,698,478) |
Exchange translation difference | (2,959,556) |
At 30 June 2011 | 178,506,727 |
Accumulated depreciation | |
At 31 December 2010 | 11,053,718 |
Depreciation for the year | 3,897,387 |
Exchange translation difference | (110,100) |
At 30 June 2011 | 14,841,005 |
Net book value | |
At 31 December 2010 | 178,609,339 |
At 30 June 2011 | 163,665,722 |
3 TRADE AND OTHER RECEIVABLES
|
As at 30 June 2011 |
As at 31 December 2010 |
USD | USD | |
Trade receivables | ||
- External parties | 15,559,734 | 13,311,114 |
Less: Impairment loss on trade receivables | ||
Balance at beginning of year | 125,792 | - |
Allowance for the year | - | 125,792 |
Balance at end of year | 125,792 | 125,792 |
Net trade receivables | 15,433,942 | 13,185,322 |
Other receivables | ||
Advances to | ||
- contractors | - | 731,591 |
- Low Yip Nam | - | 14,388 |
- Chen Liyong (陈立勇) | - | 286,608 |
- employees | 149,653 | 168,233 |
- suppliers | 36,508,127 | 31,961,416 |
- third parties | 17,284,685 | 14,584,244 |
Advances for processing fee | 4,796,118 | 328,057 |
Amount owing by a third party | 2,626,862 | 1,056,971 |
Deposits | 3,095,055 | 3,024,546 |
Interest | 24,238 | 251,328 |
Prepayments | 305,157 | 237,908 |
VAT receivables | 1,813,194 | 5,703,483 |
Others | 116,054 | 128,113 |
82,153,085 | 71,662,208 |
4 TRADE AND OTHER PAYABLES
| As at 30 June 2011 | As at 31 December 2010 |
USD | USD | |
Trade payables | 35,559,677 | 48,251,235 |
Accruals | 1,380,039 | 1,522,810 |
36,939,716 | 49,774,045 | |
Other payables | ||
Amount owing to | ||
- employees | 89,795 | 67,412 |
- suppliers of processing service | 2,472 | 2,416 |
- suppliers of property, plant and equipment | 1,353,428 | 1,723,564 |
- suppliers of raw materials | 961,200 | 1,124,620 |
- third parties | 39,594,035 | 26,203,542 |
Advances received on construction | ||
contracts | 61,712,249 | 62,884,867 |
Dividend payable to the then shareholders | - | 120,797 |
Non-trade amount owing to directors | ||
- Chen Guojun (陈国俊) | - | 2,601,763 |
- Chen Liyong (陈立勇) | - | 1,541,803 |
- Chen Tongkao (陈通考) | - | 6,258,971 |
Other governmental taxes | 1,011,101 | 866,683 |
Interest payable | - | 80,722 |
Others | 235,793 | 247,174 |
104,960,073 | 103,724,334 | |
141,899,789 | 153,498,379 |
5 REVENUE
Revenue represents:
Six months ended | Year ended | |||
30 June 2011 | 30 June 2010 | 31 December 2010 |
| |
USD | USD | USD |
| |
| ||||
Shipbuilding | 33,192,223 | 43,851,750 | 110,652,301 |
|
Shipping income | 12,622,821 | 8,154,003 | 16,308,007 |
|
45,815,044 | 52,005,753 | 126,960,308 |
| |
6 OTHER OPERATING INCOME
Six months ended | Year ended | ||
30 June 2011 | 30 June 2010 | 31 December 2010 | |
USD | USD | USD | |
Sale of scrap | 172,519 | 164,472 | 362,623 |
Cost of scrap | - | ||
172,519 | 164,472 | 362,623 | |
Gain on disposal of property, plant | 1,094,418 | - | - |
and equipment | |||
Exchange gain-net | 1,573,585 | 95,080 | - |
Government grant | 13,026 | - | 166,873 |
Government subsidy | 72,089 | - | 581,478 |
Insurance compensation | - | - | 47,005 |
Interest income | 262,686 | - | 666,677 |
Investment income | - | - | 5,064 |
Job credits | - | - | 211 |
Rental income | - | - | 11,069 |
Tax refund | - | - | 100,507 |
Others | 89,757 | 74,858 | 89,133 |
3,278,080 | 334,410 | 2,030,640 | |
7 ACQUISITION OF SUBSIDIARIES
Dongfang Shipbuilding (Group) Company Limited acquired certain subsidiaries during the period. The fair value of the net assets acquired was as follows:
Six months ended 30 June 2011 | ||
USD | ||
(unaudited) | ||
Net assets acquired | 19,177,767 | |
Adjustment to fair value of property, plant and equipment | (4,837,767) | |
14,340,000 | ||
Discharged by: | ||
Cash | 14,340,000 | |
Net cash inflow arising on acquisition | ||
Cash consideration paid | 14,340,000 | |
Less: cash and cash equivalents acquired | (15,297,289) | |
(957,289) |
8 POST BALANCE SHEET EVENTS
On 18 August 2011, 190,000,000 shares of no par value of the Company were admitted to AIM, the London Stock Exchange's international market for smaller growing companies. The Company's Admission Document can be found on its website at http://www.dongfangship.com.cn/investor-information/investor-information.html.
9 GENERAL
This interim report was approved by the Directors on 19 September 2011. The results for the 6 months ended 30 June 2011 have not been audited, but were the subject of an independent review carried out by the Company's auditors, Foo Kon Tan Grant Thornton LLP. Their review confirmed that the figures were prepared using applicable accounting policies and practices consistent with those to be adopted in the 2011 annual report. The financial information contained in this interim report does not constitute statutory accounts as defined by the Companies Act, Chapter 50 of Singapore.
The half year financial report does not include all notes of the type normally included within the annual report and therefore cannot be expected to provide as full an understanding of the financial performance, financial position and financing and investing activities of the consolidated entity as the full financial report. The half yearly report will be available on the Company's website http://www.dongfangship.com.cn/.
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