18th Mar 2008 07:11
Asian Citrus Holdings Ltd18 March 2008 Under embargo 7.00am Tuesday 18 March 2008 Asian Citrus Holdings Limited Interim Results for the six months ended 31 December 2007 Asian Citrus Holdings Limited ("Asian Citrus"), the largest orange plantationowner and operator in China, announces interim results for the six months ended31 December 2007. Key Highlights For illustration only Six months ended Six months ended 31 December 31 December 2007 2006 % change 2007 2006 (RMBm) (RMBm) (RMB) (£m*) (£m*) Reported financial information Revenue 181.2 147.1 +23.2 12.5 9.6EBITDA 151.6 141.8 +6.9 10.5 9.3Net profit 163.7 110.3 +48.4 11.3 7.2Basic EPS RMB2.21 RMB1.77 +24.9 15.3p 11.6pDiluted EPS RMB2.20 RMB1.72 +27.9 15.2p 11.2p Reported financial information adjusted toexclude biological gain EBITDA 63.6 58.6 +8.5 4.4 3.8Net profit 75.7 27.1 +179.3 5.2 1.8Basic EPS RMB1.02 RMB0.44 +131.8 7.1p 2.9pDiluted EPS RMB1.02 RMB0.43 +137.2 7.1p 2.8p * Conversion at £1 = RMB14.45 and RMB15.30 for the year ended 31 December 2007and 2006 respectively for reference only Operational Highlights •Hepu Plantation - 1.2 million orange trees, of which, 1.1 million are fruit-bearing - produced 49,162 tonnes, up by 6.4% •Xinfeng Plantation - 400,000 fruit-bearing trees - first commercial harvest of 10,119 tonnes, up by 177.1% •First full year in operation •Total orange trees of 1.6 million •The Group's income from growing and selling oranges will be exempted from Enterprise Income Tax from 1 January 2008 onwards Strategic Highlights • Signed a new supply contract with Shanghai Lotus Supermarket Chain Store Co., Ltd. to expand the exposure to provinces outside Guangxi• Continued to develop the nursery business and the first batch of saplings is expected to be ready for planting in the fourth quarter of 2008• Delayed the commencement of the infrastructure work for Hunan Plantation by six months due to the cold weather in the Hunan province• Entered a contract with Bosun Health Food R&D Center of Guangdong with an aim to manufacture and distribute the Group's own-branded freshly-squeezed juice products• Implemented a wider replanting programme in Hepu Plantation• Asian listing delayed because of uncertain and difficult market conditions Tony Tong, Chairman, commented:The Group has made good progress in the first half of 2007/08. The Xinfeng Plantation's first commercial harvest of winter oranges was on target and will provide significant extra growth for the Group in the future. The replanting programme in the Hepu Plantation commenced prefacing the introduction of higher yielding and more disease resistant new summer trees throughout the next decade. Sales to supermarkets are now expanding from a regional base with a first national contract. The Phase I of the Xinfeng Development is moving towards completion with 68% of units sold. The implementation of Phase II is under consideration. However, the recent extreme cold weather in China has delayed the initial infrastructure work in the Hunan Plantation by six months and will also result in reduced growth of sales to supermarkets in the second half of this year. As previously advised, there has been some short term impact on our income for the second half of 2007/08. The above progress, however, together with the implementation of the new tax laws in China, we should be positive for our earnings performance in the coming years. - ends - For further information please contact: Asian Citrus Holdings Limited Tel: +852 2559 0323Tony Tong, Chairman and Chief Executive Officer Eric Sung, Finance Director Weber Shandwick Financial Tel: 020 7067 0700Terry Garrett, John Moriarty, Charlie Hooper Chairman's Statement I am very pleased to report the results of Asian Citrus Holdings Limited (the "Company") or "Asian Citrus") and its subsidiaries (collectively referred to as the "Group") for the six months ended 31 December 2007. Strategic overview During the last 6 months, the Group has continued to focus on its strategy of exploring opportunities to supply directly to supermarkets. In addition to the renewal of the supply contracts with Guangxi Yonghao Supermarket Company Limited nd Guihai Highways Guangxi Xingtong Services Company, the Group entered into a new supply contract with Shanghai Lotus Supermarket Chain Store Co., Ltd. which represents the Group's first step to achieving nationwide sales coverage. However, the exceptional cold weather in China during January and February 2008 has affected the Group's current sales by slightly impacting the quality of the Group's harvest and causing short term oversupply as local farmers, who could not get their produce to customers, stored crops which have now been released to the market. As a result, the Group has not been able to increase the proportion of sales to supermarkets, or increase prices, as much as originally expected. Approximately 280,000 saplings of 2 different species are currently being bred in the orange saplings nursery at the Hepu Plantation. The first batch of approximately 200,000 saplings is expected to be ready for planting in the fourth quarter of 2008 and these saplings will be used for the Group's new plantation in the Hunan province over the medium term. It is also the Group's intention to further expand the nursery business with more nurseries in order to ensure sufficient supply of good-quality saplings for both the Group and the whole orange sector in China. As at the date of this report, Phase I of the agricultural wholesalers' market and orange processing centre located in the Xinfeng County Zhongduan Industrial Park ("Xinfeng Development") is moving towards completion with 68% of units sold. The implementation of Phase II is under consideration. For the new plantation in the Hunan province (the "Hunan Plantation"), the Group has entered into formal leasing agreements for the 35 sq. km of land with the corresponding landowners for a period of 50 years. The Group is in the process of registering all the formal leases with the corresponding government authorities. Due to the cold weather in the Hunan province, the commencement of the infrastructure work for the Hunan Plantation has been delayed by 6 months to the third quarter of 2008. This implies that the first commercial harvest fromthe Hunan Plantation is unlikely to be until the summer of 2012. As mentioned previously, the Group is actively assessing the opportunity in value-added products such as fresh orange juice. The Group has entered into a contract with Bosun Health Food R&D Center of Guangdong, a business based in Guangdong province, with an aim to manufacture and distribute the Group's own-branded freshly-squeezed juice products. We expect that the orange juice will be launched in the second quarter of 2008 in the Guangdong province. OPERATING REVIEW The Hepu Plantation is fully developed with approximately 1.2 million orange trees. The output from the Hepu Plantation was approximately 49,162 tonnes for the six months ended 31 December 2007 which represents an increase of approximately 6.4% over the previous year's production of 46,219 tonnes. The growth was mainly due to increased production from certain winter orange trees which have not yet achieved their full maturity. The Xinfeng Plantation is now fully planted with 1.6 million winter orange trees. During the six months ended 31 December 2007, RMB48.3 million has been invested in the infrastructure at the Xinfeng Plantation and the first commercial harvest started during the six months ended 31 December 2007, yielding approximately 10,119 tonnes of oranges, which represents an increase of approximately 177.1% over the previous year's trial production of 3,652 tonnes. We expect that the orange trees at the Xinfeng Plantation will progressively achieve their orange bearing age and contribute increasing production volume as they approach full maturity. As a result, the growth in production from the Xinfeng Plantation in the coming years will drive a step change in the Group's overall orange supply. Following the successful trial replanting programme in last financial year, the Group initiated a wider replanting programme in the Hepu Plantation. The replanting programme replaces existing species with better quality summer species that have stronger resistance to disease and produce a higher yield. Subsequent to 31 December 2007, 76,135 summer orange trees have been removed and the corresponding land area will be replanted with the same amount of new species. The ongoing replanting strategy is currently under review but is expected to equate to approximately 5% of total trees in the Hepu plantation per annum and it will be principally focused around replanting the winter orange trees with new species of summer orange trees. Based on the results of the research we carried out, we are confident that the replanting programme will bring long term economic benefits to the Group by increasing average yields and the revenue per tonne achievable. The replanting while beneficial for the long prospects of the Group will impact on the medium term yield from the Hepu Plantation, there will be approximately a 3% decline of yield from previous year for the summer 2008 harvest impact. As mentioned above, Phase I of the Xinfeng Development has been substantially completed, creating 238 units available for sale. As of 18 March 2008, formal procedures for the sale of 161 units have been completed and the corresponding proceeds of approximately RMB24.2 million have already been received by the Group. The occupational permit is under application. The tighter credit conditions in China combined with the cold weather have had a temporary dampening effect on the completion rate and sales of the units. No revenue or profit has been recognised from the Phase I of the Xinfeng Development during the six months ended 31 December 2007. The Company plans the remaining units to be sold over the next 12 months and the commencement of Phase II is under consideration and will be dependent on the successful completion of Phase I. According to the Enterprise Income Tax ("EIT") Law of the People's Republic of China promulgated by the National People's Congress with effect from 1 January 2008, income derived by an enterprise engaging in the growing of fruits shall be exempt from EIT. As the Group's core business is the growing of oranges, it is expected that the Group's income from growing and selling oranges will be exempt from EIT from 1 January 2008 onwards. In the year ended 30 June 2007, the Group paid income tax of RMB38.6 million and has reviewed its deferred taxation to reflect the future realisation at the newly enacted tax rate. An one-off tax credit resulting from the reversal of net deferred tax liabilities of RMB42.9 million was recognised for the period and the change in the new tax laws will have a significant and positive impact on the Group's overall earnings performance for the current and future years. TRADING RESULTS The Group's revenue was RMB181.2 million (2006: RMB147.1 million) for the six months ended 31 December 2007 which represents growth of 23.2%. This was achieved by an increase of approximately 18.9% in the Group's production combined with a 3.7% increase in the average selling prices of the oranges to both wholesalers and supermarkets. For the six months ended 31 December 2007, sales to supermarkets accounted for approximately 21.1% and 29.3% of the Group's production volume and revenue respectively (against 20.4% and 29.3% in 2006). We expect that this proportion will increase in the future and the Group's products will be able to achieve wider geographical exposure as more supermarket contracts in both Guangxi area and other provinces are secured. The gross margin increased to approximately 57.5% for the six months ended 31 December 2007 (2006: 55.5%) benefiting from higher average selling prices to supermarkets and our tight cost controls. Whilst the Xinfeng Plantation achieved a positive contribution in the period under review, as it remains at an early stage, it will not be profitable for the year as a whole. However, over the medium term, as production volume increases and economies of scale are achieved, the Xinfeng Plantation will demonstrate its potential for growth and profitability. As the Hepu Plantation is still the major production base of the Group, taking that plantation alone, produces an overall gross margin of 62.1% for the six months ended 31 December 2007 (2006: 61.6%), a 0.5 percentage point increase. The cost of production increased from approximately RMB65.5 million for the six months ended 31 December 2006 to RMB77.0 million for the six months ended 31 December 2007 reflecting the growth of the Group's production volume. The Group was able to manage its costs effectively through tighter controls and achieve better economies of scale. As a result, the average unit cost of production decreased by 0.8% to approximately RMB1.30 per Kg for the six months ended 31 December 2007 (2006: approximately RMB1.31 per Kg). Dividend policy The Group expects to have a dividend payout ratio similar to that of the financial year 2006/2007 and, in any event, to pay a dividend per share no less than the previous year. HK Listing At the time of its 2007 results, the Board announced that it was targeting to have completed an Asian listing by the end of 2008. Given the current uncertain and difficult market conditions, the Board now believes that it is appropriate to delay this process but still considers that a Hong Kong listing is desirable when the timing is appropriate. Investor relations The Board recognises the importance of maintaining good communications with shareholders and potential investors. The Group's management visited certain institutional and private client investment advisers during the roadshow in November and December 2007 in order to update the existing holders on the Group's latest developments and introduce the Group to potential new investors. Outlook The Group has made good progress in the first half of 2007/08. The Xinfeng Plantation's first commercial harvest of winter oranges was on target and will provide significant extra growth for the Group in the future. The replanting programme in the Hepu Plantation commenced prefacing the introduction of higher yielding and more disease resistant new summer trees throughout the next decade. Sales to supermarkets are now expanding from a regional base with a first national contract. The Phase I of the Xinfeng Development is moving towards completion with 68% of units sold. The implementation of Phase II is under consideration. However, the recent extreme cold weather in China has delayed the initial infrastructure work in the Hunan Plantation by six months and will also result in reduced growth of sales to supermarkets in the second half of this year. As previously advised, there has been some short term impact on our income for the second half of 2007/08. The above progress, however, together with the implementation of the new tax laws in China, we should be positive for our earnings performance in the coming years. Tony TongChairman18 March 2008 Consolidated Income StatementFor the six months ended 31 December 2007 Six months ended Year ended 31 December 30 June 2007 2006 2007 RMB'000 RMB'000 RMB'000 (Unaudited) (Unaudited) (Audited) Revenue 181,227 147,060 479,728Net gain on change in fair valueof biological assets 88,000 83,172 133,172Other income - 786 3,294 ---------- ---------- ---------- 269,227 231,018 616,194 Inventories used (62,778) (48,807) (122,455)Staff costs (19,922) (16,658) (34,973)Amortisation (1,372) (1,656) (3,313)Depreciation (23,495) (11,436) (24,270)Other operating expenses (33,254) (24,081) (55,443) ---------- ---------- ---------- Profit from operations 128,406 128,380 375,740 Interest income 4,904 601 2,649Finance costs (8) (2,983) (4,390) ---------- ---------- ---------- Net finance income/(costs) 4,896 (2,382) (1,741)Share of (loss)/profit of associates (1,650) 292 (14) ---------- ---------- ---------- Profit before income tax 131,652 126,290 373,985 Income tax credit/(expenses) 32,063 (15,990) (55,280) ---------- ---------- ----------Profit attributable to shareholders 163,715 110,300 318,705 ========== ========== ==========Proposed dividends - - 50,454 ========== ========== ========== Earnings per shareBasic earnings per share RMB2.21 RMB1.77 RMB4.28 ========== ========== ==========Diluted earnings per share RMB2.20 RMB1.72 RMB4.16 ========== ========== ========== Consolidated Balance SheetAs at 31 December 2007 31 December 30 June 2007 2006 2007 RMB'000 RMB'000 RMB'000 (Unaudited) (Unaudited) (Audited)ASSETSNon-current assetsProperty, plant and equipment 1,009,670 557,200 812,491Land use rights 34,478 62,086 34,850Construction-in-progress 23,674 288,232 150,927Biological assets 854,141 714,369 765,511Deferred development costs 24,000 13,000 12,000Interests in associates 3,424 5,380 5,074Deferred tax assets - 18,513 4,672 ---------- ---------- ---------- 1,949,387 1,658,780 1,785,525 Current assetsProperties under development for sale 61,813 19,489 54,080Inventories 920 488 9,261Trade receivable 14,292 29,396 -Other receivables andprepayments 20,416 6,442 14,324Cash and cash equivalents 227,907 29,762 344,513 ---------- ---------- ---------- 325,348 85,577 422,178 ---------- ---------- ---------- Total assets 2,274,735 1,744,357 2,207,703 ========== ========== ========== EQUITY AND LIABILITIESEquityShare capital 7,769 6,581 7,758Reserves 2,219,949 1,576,763 2,100,725 ---------- ---------- ---------- 2,227,718 1,583,344 2,108,483 Non-current liabilitiesDeferred tax liabilities - 52,241 47,559Convertible bonds - 48,622 - ---------- ---------- ---------- - 100,863 47,559 Current liabilitiesTrade payables and accrued expenses 36,193 21,402 18,745Due to related parties - - 2,610Income tax payables 10,824 38,748 30,306 ---------- ---------- ---------- 47,017 60,150 51,661 ---------- ---------- ---------- Total liabilities 47,017 161,013 99,220 ---------- ---------- ---------- Total equity and liabilities 2,274,735 1,744,357 2,207,703 ========== ========== ========== Consolidated Cash Flow StatementFor the six months ended 31 December 2007 Six months ended Year ended 31 December 30 June 2007 2006 2007 RMB'000 RMB'000 RMB'000 (Unaudited) (Unaudited) (Audited) Cash flows from operating activitiesProfit before income tax 131,652 126,290 373,985 Adjustment for: Unrealised exchange gain - (1,640) (1,581) Interest income (4,904) (601) (2,649) Finance costs 8 2,983 4,390 Depreciation 21,564 11,436 26,201 Share-based payments 3,751 4,148 8,417 Amortisation of land use 3 rights 372 656 1,31 Amortisation of deferred development costs 1,000 1,000 2,000 Net gain on change in fair value of biological assets (88,000) (83,172) (133,172) Write off of biological assets - 9 9 Share of (profit)/loss of associates 1,650 (292) 14 ---------- ---------- ---------- Operating profit befor working capital changes 67,093 60,817 278,927Movements in working capital elementsProperties under development for sales (7,733) (9,134) (17,146)Inventories 8,341 680 (8,093)Trade receivables (14,292) (29,396) -Other receivables and prepayments (6,092) 8,905 1,023Trade payable and accrued expenses 17,448 (1,061) (213)Due to related parties (2,610) (4,260) (1,650) ---------- ---------- ---------- Cash generated from operations 62,155 26,551 252,848Income tax paid (30,306) - (38,573) ---------- ---------- ---------- Net cash generated from operating activities 31,849 26,551 214,275 ---------- ---------- ---------- Cash flows from investing activitiesPurchases of property, plant and equipment (1,850) (2,097) (2,425)Additions to construction-in-progress (89,640) (55,212) (191,140)Additions to biological assets (630) (3,000) (4,142)Additions to deferred development costs (13,000) (3,500) (3,500)Interest received 4,904 601 2,649 ---------- ---------- ---------- Net cash used in investing activities (100,216) (63,208) (198,558) ---------- ---------- ---------- Cash flows from financing activitiesProceeds from issue of new shares - - 300,000Issuing costs paid - - (37,618)Proceeds from issue of new shares upon exercise of share options 2,223 1,884 1,884Dividend paid (50,454) (38,637) (38,637)Finance costs paid (8) (2) (7) ---------- ---------- ----------Net cash (used in)/generated from financing activities (48,239) (36,755) 225,622 ---------- ---------- ---------- Net (decrease)/increase in cash and cash equivalents (116,606) (73,412) 241,339 Cash and cash equivalents at beginning of period/year 344,513 103,174 103,174 ---------- ---------- ----------Cash and cash equivalents at end of period/year 227,907 29,762 344,513 ========== ========== ========== Notes to the interim announcementFor the six months ended 31 December 2007 1 Taxation The amount of income tax (credit)/expense (credited)/charged to the consolidated income statements represents: Six months ended Year ended 31 December 30 June 2007 2006 2007 RMB'000 RMB'000 RMB'000 (Unaudited) (Unaudited) (Audited) PRC enterprise income tax 10,824 8,245 38,376Deferred taxation (42,887) 7,745 16,904 --------- --------- --------- (32,063) 15,990 55,280 ========= ========= ========= 2 Earnings per share Six months ended Year ended 31 December 30 June 2007 2006 2007 RMB'000 RMB'000 RMB'000 (Unaudited) (Unaudited) (Audited)Earnings Profit attributable to shareholders used in basic earnings per share calculation 163,715 110,300 318,705 Interest saving on convertible bonds outstanding - 2,980 - ---------- ---------- ----------Profit attributable to shareholders used in diluted earnings per share 163,715 113,280 318,705 ========== ========== ========== Weighted average number of shares '000 '000 '000 Issued ordinary shares at beginning of period/year 74,084 62,202 62,202Effect of new shares issued - - 2,123Effect of conversion of convertible bonds - - 875Effect of new shares issuedupon exercise of share options 89 90 103 ---------- ---------- ---------- Weighted average number of ordinary shares used in basic earnings per share calculation 74,173 62,292 65,303Effect of dilutive potential shares in respect of convertible bonds - 3,433 -Effect of dilutive potential shares in respect of share options 220 92 148 ---------- ---------- ---------- Weighted average number of ordinary shares used in diluted earnings per share calculation 74,393 65,817 65,451 ========== ========== ========== 3 Dividends No dividend has been declared during the six months ended 31 December 2007 and2006. A final dividend of RMB0.68 (2006: RMB0.62) per ordinary share for the yearended 30 June 2007 was paid on 28 December 2007. 4 Financial Information The preliminary announcement was approved by the board on 18 March 2008. 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 2007. 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