TIDMACHL
RNS Number : 7711A
Asian Citrus Holdings Ltd
30 September 2015
Hong Kong Exchanges and Clearing Limited and The Stock Exchange
of Hong Kong Limited take no responsibility for the contents of
this announcement, make no representation as to its accuracy or
completeness and expressly disclaim any liability whatsoever for
any loss howsoever arising from or in reliance upon the whole or
any part of the contents of this announcement.
ASIAN CITRUS HOLDINGS LIMITED
*
(Incorporated in Bermuda with limited liability)
(Stock Code: HKSE: 73; AIM: ACHL)
ANNOUNCEMENT OF THE ANNUAL RESULTS
FoR THE YEAR ENDED 30 JUNE 2015
The board of directors (the "Board") of Asian Citrus Holdings
Limited (the "Company" or "Asian Citrus") announces the audited
consolidated results of the Company and its subsidiaries
(collectively, the "Group") for the year ended 30 June 2015
together with its comparative figures for the year ended 30 June
2014.
Results Highlights
For illustration
Year ended 30 only
June Year ended 30
June
2015 2014 2015 2014
(RMB (RMB (GBP m**) (GBP
m) m) m**)
Reported financial
information
Revenue 962.7 1,271.2 98.8 120.4
Gross (loss)/profit -418.8 133.9 -43.0 12.7
EBITDA -1,070.1 -1,708.2 -109.9 -161.8
Loss attributable to
shareholders -1,222.4 -1,839.2 -125.5 -174.2
Basic loss per share -RMB0.98 -RMB1.48 -10.1p -14.0p
Adjusted core financial information#
EBITDA -402.6 79.2 -41.3 7.5
Loss before tax -556.5 -49.1 -57.1 -4.6
Loss attributable to
shareholders -554.9 -51.8 -57.0 -4.9
Basic loss per share -RMB0.44 -RMB0.04 -4.5p -0.4p
** Conversion at GBP1 = RMB9.74 and RMB10.56 for the years ended
30 June 2015 and 2014 respectively (for reference only).
# Adjusted core financial information refers to activities for
the year excluding impairment of goodwill, write off of biological
assets, change in fair value of biological assets and share-based
payments.
RESULTS HIGHLIGHTS
l Results for the year are as follows:
- Total orange production yield decreased by 34.1% to 130,125
tonnes (2014: 197,467 tonnes) due to (i) extensive damage at Hepu
Plantation from the impact of Typhoon Rammasun and Typhoon Seagull;
(ii) the effect of cryogenic freezing rain and frosts in Xinfeng in
early 2014 on the fruit blossom; and (iii) the effect of high
temperature and drought in Xinfeng area during the period from
September to December 2014 resulting in water scarcity for
irrigation, which affected the fruit size as well as production
volume of the orange crop.
- Revenue down by 24.3% to RMB962.7 million (2014: RMB1,271.2 million).
- Adjusted core loss attributable to shareholders of RMB554.9
million (2014: RMB51.8 million) due to (i) the reduction in
production volume and average selling price of oranges crop, as a
result of those occurrences already mentioned; (ii) the increase in
cost of sales of oranges, reflecting the increase in consumption of
both fertilisers and pesticides to minimise further damage from the
Typhoons and to prevent citrus canker infection and soil leaching
at Hepu Plantation areas; and also prevent the spread of
Huanglongbing disease and protect the unaffected orange trees in
Xinfeng Plantation; and (iii) the processed fruit business was loss
making for the year due to increased cost of raw materials owing to
limited supplies; increased material scrap and maintenance costs
caused by low productivity of the production equipment; and
increased labour costs.
- Net operating activities cash outflow of RMB501.5 million
(2014: net operating activities cash inflow RMB33.4 million) and
cash and cash equivalents of RMB937.6 million as at 30 June 2015
(2014: RMB1,804.7 million).
l 317,839 orange trees with a value of approximately RMB114.1
million were removed during the period between May 2015 and June
2015 due to the infection of Huanglongbing disease, which indicated
the infection rate of approximately 19.9% of the number of total
orange trees planted in Xinfeng Plantation. 2,563 orange trees were
replanted in June 2015.
l The construction of Hunan Plantation was completed after
26,960 grapefruit trees were planted during the year.
l In view of the Group's net loss for the year, the Board does
not recommend the payment of any dividend for the year ended 30
June 2015 (2014: Nil).
For further enquiries please contact:
Asian Citrus +852 2559 0323
Mark Ng, Executive Director and
Chief Financial Officer
Cantor Fitzgerald Europe (NOMAD +44 (0) 20 7894
and Broker) 7000
Rick Thompson / David Foreman
(Corporate Finance)
+44 (0) 20 7067
Weber Shandwick Financial 0000
Nick Oborne, Stephanie Badjonat,
Tom Jenkins
CHAIRMAN'S STATEMENT
It is my pleasure to present the annual results of Asian Citrus
Holdings Limited (the "Company"), together with its subsidiaries
(the "Group"). The Group has faced significant challenges in the
year ended 30 June 2015 and has endeavoured to overcome setbacks
resulting mainly from the adverse weather conditions which reduced
harvest volumes and increased our cost base, in addition to a
significant drop in the average selling price.
The aftermath of Typhoon Rammasun and Typhoon Seagull (the
"Typhoons"), combined with the substantial impact of the
Huanglongbing disease infection at the Group's Xinfeng Plantation,
put significant downward pressure on both the production yield and
selling price of the orange harvests and resulted in
underutilisation of our processed fruit business plants as
well.
FINANCIAL HIGHLIGHTS
For the year ended 30 June 2015, the Group's total revenue
decreased by 24.3% to RMB962.7 million (2014: RMB1,271.2 million).
Adjusted core loss attributable to shareholders for the year
(before the impairment of goodwill, write off of biological assets,
change in fair value of biological assets and share-based payments)
was RMB554.9 million (2014: RMB51.8 million). This deterioration in
the performance reflected the significant impact of the
Huanglongbing disease infection at the Group's Xinfeng Plantation,
which was announced by the Company on 15 April 2015 and 7 May 2015,
and the damage sustained from the Typhoons which affected both
production yield and selling price of the orange harvests as
highlighted in the Company's announcement dated 9 September
2015.
The Group incurred impairment losses of RMB303.9 million and
RMB242.8 million from the change in the carrying value of goodwill
and change in fair value of biological assets respectively during
the year ended 30 June 2015. Furthermore, the Group's Xinfeng
Plantation removed 317,839 orange trees with aggregate value of
RMB114.1 million in the second quarter of 2015 due to the infection
of Huanglongbing disease. We would like to stress that the
impairment of goodwill, change in fair value of biological assets
and write off of biological assets are non-operational and have no
effect on the cash flow for the Group.
After taking into account the non-cash items, including the
impairment of goodwill, write off of biological assets, change in
fair value of biological assets and share-based payments, the net
loss attributable to shareholders for the year was RMB1,222.4
million (2014: RMB1,839.2 million).
OPERATIONAL REVIEW
The Group has three plantations in mainland China, occupying a
total area of approximately 103 square kilometres, with two
currently in operation: Hepu Plantation in Guangxi Zhuang
Autonomous Region ("Guangxi") and Xinfeng Plantation in Jiangxi
Province. Production at the third plantation in Hunan Province,
Hunan Plantation, is scheduled to begin in 2016. For the year ended
30 June 2015, the production yield at Hepu Plantation decreased by
64.6% to 26,278 tonnes (2014: 74,239 tonnes). The decreased
production was mainly due to the extensive damage suffered from the
impact of the Typhoons. The gross profit margin for Hepu Plantation
fell from 12.8% last year to gross loss margin of 402.6%, as a
result of a further decrease in the average selling price by 33.6%
as compared with last year, as well as increased direct costs
incurred as a result of the adverse weather.
The production yield for the year ended 30 June 2015 at Xinfeng
Plantation decreased by 15.7% to 103,847 tonnes (2014: 123,228
tonnes) owing to the effect of cryogenic freezing rain and frosts
in Xinfeng in early 2014 on the fruit blossom and the effect of
high temperature and drought in the Xinfeng area during the fourth
quarter of 2014 resulting in water scarcity for irrigation, which
adversely affected the fruit size as well as production volume of
the winter orange crop. The gross profit margin for Xinfeng
Plantation decreased from 2.9% last year to a gross loss margin of
28.8%, which was due to increases in direct costs to prevent the
spread of the Huanglongbing disease and to protect the unaffected
orange trees. The costs of maintaining the trees and plantation are
fixed, and when applied against a lower turnover, severely affected
the gross profit margin.
Through our 92.94% equity interest in Beihai BPG, the Group
operates two fruit processing plants in Beihai City and Hepu County
in Guangxi, covering a total site area of nearly 110,000 square
metres, with an annual production capacity of around 60,000
tonnes.
(MORE TO FOLLOW) Dow Jones Newswires
September 30, 2015 09:22 ET (13:22 GMT)
The processed fruit business, which involves the manufacture and
sale of fruit juice concentrates, purees and frozen fruit and
vegetables, saw comparable sales tonnage decrease marginally
compared to the prior year, while the loss was mainly due to
increased cost of raw materials owing to limited supplies,
increased material scrap and maintenance costs caused by low
productivity of the production equipment, and increased labour
costs.
The Group has decided to delay further investment in the third
plant in Baise City, Guangxi, due to deteriorating market
conditions. Although it normally takes three to five years for a
new plant to achieve full capacity, the Group has decided to invest
and improve the utilisation at the two current plants in Beihai
City and Hepu County which are in full operation.
STRATEGIC OVERVIEW
We are currently formulating a number of strategies to improve
the utilisation of all our assets. Further, we are still working on
supply chain optimisation, which includes but is not limited to,
methods to reduce costs of pesticides and fertilisers, exploring
new export opportunities, and changing the product mix in order to
improve margins. We are also combining our efforts in finding
innovative ways to recover our products from citrus diseases,
although trials and breakthroughs take a long time.
We still put a great deal of effort into exploring international
networks in order to assess potential new market entries in premium
growth regions, mainly aiming to charge premium prices for our
quality products. New sales initiatives within our current markets
will also be a cornerstone of our strategy for the upcoming years.
This also included identifying attractive investment opportunities
in line with our business abroad. In line with the aforesaid, the
Group is conducting research on improving quality standards by
means of size, i.e. larger citruses, and taste, which should lead
to premium pricing of our products in both the current market as
well as new potential export markets.
CORPORATE GOVERNANCE
At the forthcoming annual general meeting to be held at United
Conference Centre, Level 10, United Centre, 95 Queensway,
Admiralty, Hong Kong on Thursday, 12 November 2015 at 10:30 a.m.
(Hong Kong time), there will be a number of changes in our
management and the composition of the Company's board of directors
(the "Board"). On behalf of the Board, I would like to express my
appreciation to Mr. CHEUNG Wai Sun, Executive Director, Mr. PANG
Yi, Executive Director and Mr. NG Cheuk Lun, Executive Director and
Chief Financial Officer for their valuable contributions over the
years as they will not offer themselves for re-election.
DIVIDENDS
In light of the results last year, the Board does not recommend
a dividend in respect of the year ended 30 June 2015. Nevertheless,
the Board will consider recommending dividend payments when the
profits and general financial situation improve. The Group's
existing dividend policy, which stipulates a dividend of not less
than 30% of our adjusted core net profit, remains unchanged. As
mentioned in my statement last year, the Group is taking a prudent
approach in managing its capital and reserves to ensure sufficient
funds are available to develop new products, investments, and
growth opportunities.
Last but not least, on behalf of the Board, I would like to take
this opportunity to thank all our colleagues, shareholders and
other stakeholders for their hard work, commitment and support over
the last year. Although the road is challenging, we will continue
to strive for quality and building a prosperous future for the
Group. The Board believes that the success of the Group will not be
far away through the continuing hard work, passion and dedication
of our people in delivering our strategy, despite the challenging
market conditions.
Ng Ong Nee
Chairman
30 September 2015
MANAGEMENT DISCUSSION AND ANALYSIS
OPERATING PERFORMANCE
Revenue
The breakdown of revenue by type is as follows:
For the year ended 30 June
2015 2014
% of % of
RMB'000 total revenue RMB'000 total
revenue
Hepu Plantation 84,100 8.7% 357,534 28.1%
Xinfeng Plantation 324,834 33.8% 375,273 29.5%
------- ------------- --------- --------
Sales of oranges 408,934 42.5% 732,807 57.6%
Sales of processed
fruit 552,622 57.4% 537,472 42.3%
Sales of self-bred
saplings 1,171 0.1% 892 0.1%
------- ------------- --------- --------
Total revenue 962,727 100.0% 1,271,171 100.0%
======= ============= ========= ========
Sales of oranges
Revenue from sales of oranges decreased by approximately 44.2%
to RMB408.9 million for the year ended 30 June 2015. This was
mainly due to a decrease of approximately 34.1% in the production
yield to 130,125 tonnes (2014: 197,467 tonnes) but also a decrease
of approximately 15.2% in the average selling price.
The production yield from Hepu Plantation decreased by
approximately 64.6% from 74,239 tonnes last year to 26,278 tonnes
for the year ended 30 June 2015. This decrease was mainly due to
the extensive damage suffered from the impact of Typhoon Rammasun
in July 2014, the strongest in the region for over the past 40
years, and Typhoon Seagull in September 2014 (collectively, the
"Typhoons"), and in particular the significant drop in the volume
of pre-mature fruit and leaves from the existing orange trees.
Furthermore, the impact of the Typhoons prolonged both the
susceptibility of the orange trees to citrus canker infection and
soil leaching in the plantation areas, which subsequently affected
the plantation.
The production yield from Xinfeng Plantation decreased by
approximately 15.7% from 123,228 tonnes last year to 103,847 tonnes
for the year ended 30 June 2015. This resulted from the effect of
cryogenic freezing rain and frosts in Xinfeng in early 2014 on the
fruit blossom and the effect of high temperature and drought in the
Xinfeng area during the period from September to December 2014
resulting in water scarcity for irrigation, which adversely
affected the fruit size as well as production volume of the winter
orange crop.
The following table sets out the average selling prices of
oranges in Hepu Plantation and Xinfeng Plantation and illustrates
the monetary effects of the above-mentioned adverse
occurrences:
Year ended 30 June
2009 2010 2011 2012 2013 2014 2015
(RMB/tonne) (RMB/tonne) (RMB/tonne) (RMB/tonne) (RMB/tonne) (RMB/tonne) (RMB/tonne)
Hepu Plantation
- Summer
Oranges 5,057 5,516 6,061 5,856 5,694 5,446 3,620
- Winter
Oranges 3,470 3,567 3,922 4,085 4,013 3,863 2,310
Xinfeng Plantation
- Winter
Oranges 3,260 3,330 3,660 3,770 3,776 3,137 3,221
The average selling price of the winter orange crop at Xinfeng
Plantation increased by approximately 2.7% for the year ended 30
June 2015. However, the average selling price of the winter orange
crop and summer orange crop at Hepu Plantation decreased by
approximately 40.2% and 33.5% respectively reflecting both the
extensive typhoon damage and the poor appearance of oranges
infected by citrus canker.
All of the Group's oranges were sold on the domestic market. The
Group's customers can be classified into three categories, namely
supermarket chains, corporate customers and wholesale customers.
The breakdown of sales revenues by type of customer is as
follows:
For the year ended
30 June
2015 2014
% of sales of
oranges
Supermarket chains 27.2% 24.2%
Corporate customers 43.5% 43.1%
Wholesale customers 28.9% 32.3%
Other 0.4% 0.4%
--------- ---------
Total 100.0% 100.0%
========= =========
For the year ended 30 June 2015, sales volume and revenue
derived from sales in supermarket chains increased to approximately
26.3% and 27.2% respectively of the total sales for the Group
(2014: 20.4% and 24.2% respectively) due to the increased sale of
oranges to supermarket chains by Xinfeng Plantation.
For Hepu Plantation and Xinfeng Plantation, the sales volume to
supermarket chains was 9,031 tonnes and 25,218 tonnes respectively
for the year ended 30 June 2015 (2014: 18,860 tonnes and 21,434
tonnes respectively).
(MORE TO FOLLOW) Dow Jones Newswires
September 30, 2015 09:22 ET (13:22 GMT)
The Group sells two types of oranges to customers, namely
ungraded oranges and graded oranges. Ungraded oranges are packaged
and customers are required to arrange for transportation at their
own expense. Generally, ungraded oranges are sold to wholesale
customers. Graded oranges are oranges that the Group grades,
packages and delivers to the customers at the Group's cost, usually
to supermarket chains and some corporate customers. The graded
oranges are branded under our label "Royal Star", at a premium
price compared to the ungraded oranges. The sales breakdown of the
types of oranges is as follows:
For the year ended
30 June
2015 2014
% of sales of oranges
Graded oranges 2.5% 13.4%
Ungraded oranges 97.5% 86.6%
Total 100.0% 100.0%
=========== ==========
The decrease in sales of graded oranges was caused by the
extensive typhoon damage and the poor appearance of oranges
infected by citrus canker in Hepu Plantation.
Sales of processed fruit
The table below sets out the sales volume and revenue from the
sales of processed fruit:
2014 2015
Volume Revenue Volume Revenue
(Tonnes) RMB'000 (Tonnes) RMB'000
Pineapple juice concentrates 11,813 124,466 16,275 144,209
Other juice concentrates 9,449 144,270 8,585 141,741
Mango purees 8,299 57,959 8,603 55,954
Other fruit purees 2,338 17,361 4,646 33,799
Frozen mango 6,577 69,205 4,286 35,967
Frozen and dried fruit and
vegetables 16,125 132,519 13,218 125,166
-------- ------- -------- -------
54,601 545,780 55,613 536,836
Fruit juice trading N/A 6,842 N/A 636
-------- ------- -------- -------
Total 54,601 552,622 55,613 537,472
-------- ------- -------- -------
The Group has three fruit processing plants in the People's
Republic of China (the "PRC"), which are located in Beihai City,
Hepu County and Baise City, Guangxi ("BPG"). BPG processes over 22
different types of tropical fruit, including pineapples, passion
fruit, lychees, mangoes and papayas (only products that account for
over 10% of the revenue from the sales of processed fruit are shown
in the table above).
Revenue derived from the sales of processed fruit increased
slightly by approximately 2.8% to approximately RMB552.6 million
for the year ended 30 June 2015, mainly due to increased sales of
red dates and medlar juice concentrates, frozen mango and frozen
tomato, largely offset by lower sales of pineapple juice
concentrates owing to limited raw material supplies after Typhoon
Rammasun.
The average utilisation rate of BPG was approximately 75.2% for
the year ended 30 June 2015 (2014: 86.2%).
Sales of self-bred saplings
For the year ended 30 June 2015, approximately RMB1,171,000 was
generated from the sales of 97,590 self-bred saplings to local
farmers (2014: approximately RMB892,000 was generated from the
sales of 74,334 self-bred saplings).
Cost of sales
The breakdown of the Group's cost of sales is as follows:
For the year ended 30 June
2015 2014
% of % of
cost of cost of
sales sales
of respective of respective
RMB'000 segment RMB'000 segment
Inventories used
Fertilisers 423,618 50.4% 351,279 52.0%
Packaging materials 11,266 1.3% 28,982 4.3%
Pesticides 183,501 21.8% 117,356 17.4%
--------- ------------- --------- -------------
618,385 73.5% 497,617 73.7%
Production overheads
Direct labour 68,128 8.1% 66,482 9.8%
Depreciation 90,599 10.8% 73,821 10.9%
Others 63,985 7.6% 38,044 5.6%
Cost of sales of
oranges 841,097 100.0% 675,964 100.0%
--------- ============= --------- =============
Fruit 393,896 73.1% 316,476 69.0%
Packaging materials 26,387 4.9% 30,468 6.7%
Direct labour 42,006 7.8% 33,647 7.3%
Other production
overheads 76,706 14.2% 77,811 17.0%
Cost of sales of
processed fruit 538,995 100.0% 458,402 100.0%
--------- ============= --------- =============
Cost of sales of
self-bred saplings 1,473 2,875
Total 1,381,565 1,137,241
========= =========
Cost of sales of oranges consists of raw materials such as
fertilisers, packaging materials, pesticides and other direct costs
such as direct labour, depreciation and production overheads. The
cost of sales of oranges increased by approximately 24.4% from
approximately RMB676.0 million to RMB841.1 million. The increase in
cost of sales was mainly due to (i) the increase in consumption of
both fertilisers and pesticides, to minimise damage from the
Typhoons to prevent citrus canker infection and soil leaching in
Hepu Plantation, prevent the spread of the Huanglongbing disease
and protect the unaffected orange trees in Xinfeng Plantation; (ii)
the increase in production overheads including weed covering, drip
irrigation system maintenance and orange tree pruning owing to
unfavourable weather in 2014. Consequently, the unit cost of
production in Hepu Plantation and Xinfeng Plantation increased to
approximately RMB16.08 per kg and RMB4.03 per kg respectively for
the year ended 30 June 2015 (2014: RMB4.2 per kg and RMB2.96 per kg
respectively). It is expected that this high cost environment will
continue in the short term.
Cost of sales of processed fruit mainly includes the costs of
raw material fruit and packaging materials and other direct costs
such as direct labour and production overheads. For the year ended
30 June 2015, the cost of sales of processed fruit increased by
approximately 17.6% from approximately RMB458.4 million to RMB539.0
million. This was mainly due to the increase in the cost of raw
materials as a result of limited supplies and higher labour costs
incurred.
Gross loss
The Group recorded an overall gross loss of approximately
RMB418.8 million for the year ended 30 June 2015 compared to the
gross profit of approximately RMB133.9 million last year. The
overall gross loss margin was 43.5% for the year ended 30 June 2015
compared to the gross profit margin of 10.5% last year.
The following table sets out a breakdown of the Group's gross
(loss)/profit margin by plantation:
For the year ended
30 June
2015 2014
Hepu Plantation -402.6% 12.8%
Xinfeng Plantation -28.8% 2.9%
=========== =======
The gross loss margin was mainly due to (i) the decrease in the
total production yield of the orange crop by approximately 34.1%;
(ii) the drop in the average selling prices of the winter orange
crop and summer orange crop in Hepu Plantation by approximately
40.2% and 33.5% respectively; and (iii) the increase in the cost of
sales of oranges by approximately 24.4%, reflecting the increase in
consumption of both fertilisers and pesticides to minimise further
damage from the Typhoons and to prevent citrus canker infection and
soil leaching in Hepu Plantation; and also prevent the spread of
Huanglongbing disease and protect the unaffected orange trees in
Xinfeng Plantation.
The following table sets out a breakdown of the Group's gross
(loss)/profit margin by business:
For the year ended
30 June
2015 2014
Sales of oranges -105.7% 7.8%
Sales of processed fruit 2.5% 14.7%
For BPG, the gross profit margin for the year ended 30 June 2015
decreased to approximately 2.5% compared to 14.7% last year, mainly
due to (i) increased cost of raw materials owing to limited
supplies, such as the increase in average purchase costs of
pineapple and mango by 39.6% and 23.6% to RMB1.28 per kg and
RMB2.29 per kg respectively (2014: RMB0.91 per kg and RMB1.85 per
kg respectively); (ii) increased material scrap and maintenance
costs caused by low productivity of the production equipment of
Beihai BPG, which has been in operation for more than eight years;
and (iii) increased labour costs.
Change in fair value of biological assets
(MORE TO FOLLOW) Dow Jones Newswires
September 30, 2015 09:22 ET (13:22 GMT)
The Group recognised a loss of RMB242.8 million from an
adjustment in the fair value of biological assets for the year
ended 30 June 2015, compared to a loss of RMB923.9 million last
year. The loss was mainly due to decreased production yield,
increased cost of sales and reduced market prices of both winter
and summer oranges. The Board wishes to emphasise that the change
in fair value of biological assets is non-operational and does not
have any effect on the cash flow of the Group for the year ended 30
June 2015. Further details regarding the valuation of biological
assets are set out on pages 19 to 21.
Selling and distribution expenses
Selling and distribution expenses comprise mainly advertising
expenses, staff commission, salaries and welfare of sales
personnel, travelling and transportation expenses. The selling and
distribution expenses of the Group decreased by 16.8% from
approximately RMB45.3 million last year to approximately RMB37.7
million for the year ended 30 June 2015. The decrease in sales of
graded oranges resulted in lower transportation costs.
General and administrative expenses
General and administrative expenses comprise primarily of
salaries, office administration expenses, depreciation,
amortisation and research costs. These costs decreased by 6.3% from
approximately RMB143.5 million last year to approximately RMB134.4
million for the year ended 30 June 2015, mainly due to a decrease
of share option expenses recognised in respect of share options
granted in previous years.
Other operating expenses
Other operating expenses were approximately RMB418.4 million for
the year ended 30 June 2015 (2014: RMB895.2 million), which
included:
Write offs relating to damage caused by the Typhoon
Raw materials of approximately RMB488,000 were written off as a
result of the damage caused by Typhoon Rammasun.
Write offs relating to the infection of Huanglongbing
disease
In April 2015 Xinfeng Plantation identified the presence of
Huanglongbing disease, also known as citrus greening disease, which
is a bacterial plant disease not harmful to humans and spread by an
insect called the Asian citrus psyllid, a tiny insect that feeds on
the leaves and stems of citrus trees. Detection of Huanglongbing
disease can be difficult, as symptoms may not show up for more than
a year after the tree has become infected. The first symptoms are
yellowed and mottled leaves, which are often just associated with
nutritional deficiencies. Whilst the spread of the disease in a
plantation can only be limited by the use of pesticides against the
insect, the disease itself is fatal once the trees are infected.
The disease destroys the production, appearance and economic value
of citrus trees. Diseased trees produce bitter, hard, misshapen
fruit and die within a few years of being infected.
In the Gannan region of the province where Xinfeng Plantation is
located, plantations in the neighbouring counties have witnessed
the infection with Huanglongbing disease. Thus management believes
that the source of the infection came from insect transmission from
the nearby regions.
317,839 orange trees with a value of approximately RMB114.1
million were removed during the period between May 2015 and June
2015 due to the infection of Huanglongbing disease, which indicated
the infection rate of approximately 19.9% of the total number of
orange trees planted in Xinfeng Plantation.
2,563 orange trees were replanted in June 2015.
Impairment of goodwill
Goodwill, arising from acquisition of BPG Food & Beverage
Holdings Limited and its subsidiaries ("Beihai BPG") on 30 November
2010 for a consideration of approximately HK$2.31 billion
(equivalent to approximately RMB1.97 billion), has been allocated
to the cash-generating unit ("CGU") of the fruit processing
business in the PRC.
In considering the impairment loss that may be required for
certain assets of the CGU, the recoverable amount of the CGU needs
to be determined. The recoverable amount is the greater of its fair
value less costs of disposal and the value in use. It is not
practicable to precisely estimate fair value less costs of disposal
of the CGU of the fruit processing business, because quoted market
prices for those assets allocated to that CGU may not be readily
available, and therefore the recoverable amount of the CGU has been
determined based on a value in use calculation. The value in use
calculation uses cash flow projections from financial budgets
approved by management covering a 5-year period (2014: 5-year
period) and a discount rate of 12% (2014: 12%) per annum. The cash
flows for the 5-year period are extrapolated using a steady 10%
(2014: 10%) growth rate. The discount rate was determined by
management with reference to other public companies which are
engaged in processed fruits or similar business. This growth rate
does not exceed the average long-term growth rate for the business
in which the CGU operates. Other key assumptions for the value in
use calculations relates to the estimation of cash flows which
include budgeted sales and gross margin, such estimations are based
on the CGU's past performance and management's expectations for the
market development.
At 30 June 2015, the Directors of the Company have assessed the
recoverable amount of the CGU of the fruit processing business and
determined that an impairment loss of approximately RMB303.9
million (2014: RMB853.4 million) was allocated to reduce the
carrying amount of goodwill, representing the difference between
the aggregate carrying amount of assets allocated to the CGU of
fruit processing business as at 30 June 2015 and the recoverable
amount of the CGU, based on the current business and operating
environment of Beihai BPG. As at 30 June 2015, the carrying amount
of the CGU has been reduced to its recoverable amount of RMB763.2
million (2014: RMB1,076.1 million). The decrease was mainly
contributed by the decrease in the budgeted gross profit margin by
2% resulting from the increase in production costs incurred for the
year. The Board wishes to emphasize that the change in carrying
value of goodwill is non-operational and does not have any effect
on the cash flow of the Group for the year ended 30 June 2015.
Loss attributable to shareholders for the year
The loss attributable to shareholders for the year ended 30 June
2015 was approximately RMB1,222.4 million, compared to a loss of
approximately RMB1,839.2 million last year, representing a decrease
of approximately 33.5%.
The adjusted core loss attributable to shareholders, which
refers to the loss for the year excluding the impairment of
goodwill, write off of biological assets, change in fair value of
biological assets and share-based payments for the year ended 30
June 2015 was approximately RMB554.9 million (2014: RMB51.8
million).
DIVIDENDS
In view of the Group's net loss for the year, the Board does not
recommend the payment of any dividend for the year ended 30 June
2015 (2014: nil). Our existing dividend policy, which stipulates a
dividend of not less than 30% of our adjusted core net profit,
remains unchanged.
PRODUCTIVITY For the year ended 30 June
2015 2014
% of % of
Types of total
product Tonnes total output Tonnes output
Winter oranges 110,993 85.3% 147,927 74.9%
Summer oranges 19,132 14.7% 49,540 25.1%
Total 130,125 197,467
======= =======
The production yield of winter oranges decreased by 25.0% to
110,993 tonnes for the year ended 30 June 2015. The production
yield of winter oranges in Hepu Plantation decreased by 71.1% from
24,699 tonnes last year to 7,146 tonnes this year, due to the
extensive damage suffered from the impact of the Typhoons.
The production yield of winter oranges in Xinfeng Plantation
decreased by 15.7% from 123,228 tonnes last year to 103,847 tonnes
this year, due to the effect of cryogenic freezing rain and frosts
in Xinfeng in early 2014 on the fruit blossom and the effect of
high temperatures and drought in Xinfeng area during the period
from September to December 2014 resulting in water scarcity for
irrigation, which affected the size of fruit as well as production
volume of the winter orange crop.
The production yield of summer oranges in Hepu Plantation
decreased by 61.4% from 49,540 tonnes last year to 19,132 tonnes
this year, due to the previously stated reasons.
317,839 orange trees infected with Huanglongbing disease were
removed in Xinfeng Plantation, which will result in decreased
production yield, in particular for the upcoming harvest of winter
oranges.
CAPITAL STRUCTURE
As at 30 June 2015, there were 1,249,637,884 shares in issue.
Based on the closing price of HK$1.72 as at 30 June 2015, the
market capitalisation of the Company was approximately HK$2,149.4
million (GBP176.7 million).
HUMAN RESOURCES
The Group had a total of 1,960 employees (excluding directors)
as at 30 June 2015 (2014: 1,746 employees), and the staff costs for
the year ended 30 June 2015 were approximately RMB149.2 million
(2014: RMB143.0 million). The Group aims to attract, retain and
motivate high calibre individuals with competitive remuneration
packages. Remuneration packages are performance-linked and business
performance, market practices and competitive market conditions are
all taken into consideration in calculating remuneration.
Remuneration packages, which are reviewed annually, include
salaries/wages and other employee benefits, such as discretionary
bonuses, mandatory provident fund contributions and share
options.
FINANCIAL PERFORMANCE Year ended / As at
30 June 30 June
2015 2014
Current ratio (x) 10.83 21.84
Quick ratio (x) 8.16 19.18
Asset turnover (x) 0.18 0.20
Adjusted core net loss
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September 30, 2015 09:22 ET (13:22 GMT)
per share (RMB) -0.44 -0.04
Basic loss per share (RMB) -0.98 -1.48
Net debt to equity (%) Net cash Net cash
Liquidity
The current ratio and quick ratio were 10.83 and 8.16
respectively. Despite the fall in these ratios from the prior year,
the liquidity of the Group remained healthy with sufficient
reserves for both current operation and future development.
Profitability
The asset turnover of the Group was approximately 0.18 (2014:
0.20) for the year ended 30 June 2015.
The basic loss per share for the year ended 30 June 2015 was
approximately RMB0.98 (2014: RMB1.48).
The adjusted core net loss per share for the year ended 30 June
2015 was approximately RMB0.44 (2014: RMB0.04).
Debt ratio
The net cash position of the Group was approximately RMB937.6
million as at 30 June 2015 (2014: RMB1,804.7 million).
Internal cash resource
The Group's funding resource comprises internal cash and cash
equivalents. The Group did not have any outstanding borrowings as
at 30 June 2015.
Charge on assets and contingent liabilities
Except for certain farmland infrastructure and machinery with
aggregate value of approximately RMB719,000, none of the Group's
assets were pledged and the Group did not have any material
contingent liabilities as at 30 June 2015.
Capital commitments
As at 30 June 2015, the Group had capital commitments of
approximately RMB43.5 million, mainly in relation to the
construction of the farmland infrastructure in Hepu Plantation and
the acquisition of plant and machinery in BPG.
Foreign exchange risk
The Group is exposed to currency risk, primarily through its
cash and cash equivalents that are denominated in a currency other
than the functional currency of the operation to which they
related. The currencies giving rise to this risk are primarily Hong
Kong dollars, United States dollars and British pounds.
The Group has limited transactions denominated in foreign
currencies, hence exposure to exchange rate fluctuation is minimal.
The Group currently does not use any derivative contracts to hedge
against its exposure to currency risk. Management manages its
currency risk by closely monitoring the movement of the foreign
currency exchange rate.
PLANTATIONS
The Group has three orange plantations in the PRC occupying
approximately 155,000 mu (equivalent to approximately 103.3 sq.km.)
of land in total, with (i) approximately 46,000 mu (equivalent to
approximately 30.7 sq.km.) located in the Hepu County of the
Guangxi Zhuang Autonomous Region, Hepu Plantation, (ii)
approximately 56,000 mu (equivalent to approximately 37.3 sq.km.)
in the Xinfeng County of the Jiangxi province, Xinfeng Plantation,
and (iii) approximately 53,000 mu (equivalent to approximately 35.3
sq.km.) in the Dao County of the Hunan province, Hunan
Plantation.
Hepu Plantation
Hepu Plantation is fully planted and comprises approximately 1.2
million orange trees as at 30 June 2015. A total of 221,769 banana
trees were naturally re-seeded from the original banana trees in
August 2014, following clearance of the damage caused by Typhoon
Rammasun. The first crop of banana trees was harvested during July
2015 to September 2015. The production volume and the average
selling price of bananas are expected to be 5,930 tonnes and
RMB3,146 per tonne respectively. The financial results of banana
harvest will be recognised in the financial year of 2016.
Xinfeng Plantation
Xinfeng Plantation comprises approximately 1.3 million winter
orange trees as at 30 June 2015. During the year, 317,839 winter
orange trees suffering from Huanglongbing disease were removed and
2,563 orange trees were replanted.
Hunan Plantation
Hunan Plantation is fully planted and comprises approximately
1.05 million summer orange trees and approximately 750,320
grapefruit trees as at 30 June 2015. The first harvest of oranges
trees is expected in 2016.
The tables below set out the age profile as at 30 June 2015 and
the production yield of the plantations for the year ended 30 June
2015:
Summer orange trees
Hepu Hepu Hunan Hunan
Age Plantation Plantation Plantation Plantation Total Total
No. of Yield No. of Yield No. of Yield
trees (tonnes) trees (tonnes) trees (tonnes)
3 66,449 622,475 688,924
4 63,584 427,400 490,984
5 64,194 239 64,194 239
6 81,261 922 81,261 922
7 76,135 1,451 76,135 1,451
8 55,185 509 55,185 509
18 29,996 788 29,996 788
19 128,966 3,406 128,966 3,406
20 186,003 5,428 186,003 5,428
21 223,741 6,389 223,741 6,389
975,514 19,132 1,049,875 2,025,389 19,132
Grapefruit trees
Hepu Hepu Hunan Hunan
Age Plantation Plantation Plantation Plantation Total Total
No. of Yield No. of Yield No. of Yield
trees (tonnes) trees (tonnes) trees (tonnes)
0 26,960 26,960
1 422,160 422,160
2 301,200 301,200
750,320 750,320
Note: Grapefruit is a type of citrus fruit and is harvested
during the winter period in the PRC.
Banana trees
Hepu Hepu Hunan Hunan
Age Plantation Plantation Plantation Plantation Total Total
No. of Yield No. of Yield No. of Yield
trees (tonnes) trees (tonnes) trees (tonnes)
0 221,769 221,769
221,769 221,769
Note: The first crop of banana trees was harvested during July
2015 to September 2015.
Winter orange trees
Hepu Hepu Xinfeng Xinfeng
Age Plantation Plantation Plantation Plantation Total Total
No. of Yield No. of Yield No. of Yield
trees (tonnes) trees (tonnes) trees (tonnes)
0 2,563 2,563
8 390,124 25,525 390,124 25,525
9 283,287 25,571 283,287 25,571
10 46,077 1,680 314,272 25,308 360,349 26,988
12 180,180 4,383 294,478 27,443 474,658 31,826
13 42,300 1,083 42,300 1,083
268,557 7,146 1,284,724 103,847 1,553,281 110,993
Total 4,550,759 130,125
========= =========
The tables below set out the age profile as at 30 June 2014 and
the production yield of the plantations for the year ended 30 June
2014:
Summer orange trees
Hepu Hepu Hunan Hunan
Age Plantation Plantation Plantation Plantation Total Total
No. of Yield No. of Yield No. of Yield
trees (tonnes) trees (tonnes) trees (tonnes)
2 66,449 622,475 688,924
3 63,584 427,400 490,984
4 64,194 666 64,194 666
5 81,261 2,844 81,261 2,844
6 76,135 4,087 76,135 4,087
7 55,185 3,656 55,185 3,656
17 29,996 1,860 29,996 1,860
18 128,966 8,824 128,966 8,824
19 186,003 12,540 186,003 12,540
20 223,741 15,063 223,741 15,063
975,514 49,540 1,049,875 2,025,389 49,540
Grapefruit trees
Hepu Hepu Hunan Hunan
Age Plantation Plantation Plantation Plantation Total Total
No. of Yield No. of Yield No. of Yield
trees (tonnes) trees (tonnes) trees (tonnes)
0 422,160 422,160
1 301,200 301,200
723,360 723,360
Note: Grapefruit is a type of citrus fruit and is harvested
during the winter period in the PRC.
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September 30, 2015 09:22 ET (13:22 GMT)
Winter orange trees
Hepu Hepu Xinfeng Xinfeng
Age Plantation Plantation Plantation Plantation Total Total
No. of Yield No. of Yield No. of Yield
trees (tonnes) trees (tonnes) trees (tonnes)
7 400,000 27,757 400,000 27,757
8 400,000 27,503 400,000 27,503
9 46,077 4,061 400,000 29,644 446,077 33,705
11 180,180 16,462 400,000 38,324 580,180 54,786
12 42,300 4,176 42,300 4,176
268,557 24,699 1,600,000 123,228 1,868,557 147,927
Total 4,617,306 197,467
========= =========
VALUATION OF BIOLOGICAL ASSETS
Qualification of valuer
The Group engaged LCH (Asia-Pacific) Surveyors Limited (the
"Valuer"), an independent valuer, to perform a valuation on the
fair value of the orange trees less costs to sell as at 30 June
2015.
The Valuer is a firm of qualified professional surveyors and
international valuation consultants with over 20 years of valuation
experience. The Valuer has staff who are members of the Hong Kong
Institute of Surveyors ("HKIS") with recent experience in the
valuation of biological assets. The project leader of the Valuer
(the "Project Leader") in charge of this valuation exercise has
been involved in the provision of similar services for over 8 years
and is a member of the HKIS. The Project Leader is also a valuer on
the "List of Property Valuers for Undertaking Valuation for
Incorporation of Reference in Listing Particulars and Circular and
Valuations in Connection with Takeovers and Mergers" published by
the HKIS. After due consideration of the experience and credentials
of the Valuer, the Directors of the Company are satisfied that the
Valuer is competent to assess the valuation of the Group's
biological assets. Further, after reasonable enquiry with the
Directors of the Company, the Directors of the Company are
satisfied that the Valuer is independent from the Directors of the
Company.
Physical inspection of biological assets
The Valuer conducted physical field inspection at the respective
sites in relation to the biological assets in May 2015 and July
2015 to verify the physical existence and quality of the biological
assets. Random sampling on every subzone has been conducted to
check the reasonableness of the quantities in the subzone. The
Valuer measured the tree spacing and counted the tree numbers on an
area of, on a when and where appropriate basis, 50m x 50m in the
sampling points. In every subzone, 3 to 8 sampling points
(depending on the area of the subzone) were selected while in each
sampling point, 10 to 20 trees were selected for detailed tree
study. A total of 675 sample trees in Hepu Plantation and Xinfeng
Plantation have been studied.
Valuation methodology
The valuations of the Group's orange trees were calculated using
discounted cash flow technique. The market-derived discount rate
applied to the discounted cash flow model is based on Capital Asset
Pricing Model. The Valuer began with the appraised value of the
Group's orange trees by discounting the future income streams
attributable to the Group's orange trees to arrive at a present
value and then deducted the value of machinery and equipment and
other assets (including plantation related machinery and equipment
and land improvements) from the appraised value which are employed
in the operation of the Group's plantations to arrive at a fair
value of the orange trees.
Major assumptions
The discounted cash flow method adopted a number of key
assumptions, which include the discount rate, market prices of
oranges, production yield per tree and related production costs.
The values of such variables were determined by the Valuer using
information supplied by the Group, as well as proprietary and
third-party data, as follows:
1) The discount rate applied for the year ended 30 June 2015 was
18.0% (2014: 18.0%). The discount rate reflected the expected
market return on the asset and can be affected by the interest
rate, market sentiments and risk of the asset versus the general
market risk. Comparable listed companies which engage in similar
agricultural or fruit businesses have been referred to when
determining the risk of the asset versus the general market
risk.
2) The yield per tree variables represent the harvest level of
the orange trees. The yield of orange trees is affected by the age,
species and health of the orange trees, the climate, location, soil
conditions, topography and infrastructure. In general, yield per
tree increases from age 3 to 15, remains stable for about 10 years,
and then starts to decline from age 25 to 35.
3) The market prices variables represent the assumed market
price for the summer oranges and winter oranges produced by the
Group. The Valuer adopted the market sales prices prevailing as at
the relevant reporting date for each type of orange produced by the
Group as the sales price estimate. For the year ended 30 June 2015,
the wholesale prices per tonne of winter and summer oranges from
Hepu Plantation and winter oranges from Xinfeng Plantation adopted
were RMB2,310, RMB3,620 and RMB3,180 respectively (2014: RMB3,270,
RMB5,150 and RMB3,110 respectively); the supermarket selling prices
per tonne of winter and summer oranges from Hepu Plantation and
winter oranges from Xinfeng Plantation adopted were RMB5,320,
RMB7,030 and RMB5,320 respectively (2014: RMB5,320, RMB7,030 and
RMB5,180 respectively). The market prices are assumed to increase
by 3.0% per annum, taking into account to the historical inflation
rate in the PRC.
4) The direct production cost variables represent the direct
costs necessary to bring the oranges to their sales form, which
mainly include raw material costs and direct labour costs. The
direct production cost variables are determined by reference to
actual costs incurred for areas that have been previously
harvested, and have taken into account the projected long-term
inflation rate of 3.0% per annum.
Sensitivity analysis
1) Changes in the discount rate applied result in significant
fluctuations in the changes in fair value of orange trees less
costs to sell. The following table illustrates the sensitivity of
the Group's change in fair value of orange trees less costs to sell
to an increase or decrease of 1.0% in the discount rate of 18.0%
applied by the Valuer for the year ended 30 June 2015:
1.0% Decrease Base Case 1.0% Increase
Discount rate 17.0% 18.0% 19.0%
Change in fair value
of biological assets
(RMB'000) (92,833) (242,833) (382,833)
2) Changes in the yield per orange tree can also result in
significant fluctuations in the changes in fair value of orange
trees less costs to sell. The following table illustrates the
sensitivity of the Group's change in fair value of orange trees
less costs to sell to a 5.0% increase or decrease in the yield per
tree applied for the year ended 30 June 2015:
5.0% Decrease Base Case 5.0% Increase
Change in fair value
of biological assets
(RMB'000) (372,833) (242,833) (102,833)
3) Changes in assumed market prices of the oranges can also
result in significant fluctuations in the changes in fair value of
orange trees less costs to sell. The following table illustrates
the sensitivity of the Group's change in fair value of orange trees
less costs to sell to a 5.0% increase or decrease in the assumed
market prices of oranges as at 30 June 2015 used to calculate the
changes in fair value of orange trees less costs to sell for the
year ended 30 June 2015:
5.0% Decrease Base Case 5.0% Increase
Change in fair value
of biological assets
(RMB'000) (502,833) (242,833) 17,167
4) Changes in the assumed cost of sales can also result in
significant fluctuations in the changes in fair value of orange
trees less costs to sell. The following table illustrates the
sensitivity of the Group's change in fair value of orange trees
less costs to sell to a 5.0% increase or decrease in the Group's
assumed cost of sales used to calculate the changes in fair value
of orange trees less costs to sell for the year ended 30 June
2015:
5.0% Decrease Base Case 5.0% Increase
Change in fair value
of biological assets
(RMB'000) (92,833) (242,833) (392,833)
The above sensitivity analyses are intended for illustrative
purposes only, and any variation could exceed the amounts shown
above.
Valuation
According to the valuation report of the Valuer, the aggregate
value of the orange trees in Hepu Plantation and Xinfeng Plantation
as at 30 June 2015 was estimated to be approximately RMB780 million
(2014: RMB1,080 million).
CONSOLIDATED STATEMENT OF PROFIT OR LOSS
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September 30, 2015 09:22 ET (13:22 GMT)
For the year ended 30 June 2015
2015 2014
-------------------------------------
Note RMB'000 RMB'000
Turnover 4 962,727 1,271,171
Cost of sales (1,381,565) (1,137,241)
----------- -------------
Gross (loss)/profit (418,838) 133,930
Other income 28,363 37,604
Change in fair value of biological
assets (242,833) (923,857)
Selling and distribution expenses (37,734) (45,339)
General and administrative expenses (134,448) (143,481)
Other operating expenses 5 (418,442) (895,159)
Loss from operations (1,223,932) (1,836,302)
Finance costs (67) (144)
Loss before income tax 7 (1,223,999) (1,836,446)
Income tax expense 8 - -
----------- -------------
Loss for the year (1,223,999) (1,836,446)
=========== =============
Attributable to
Equity shareholders of the Company (1,222,371) (1,839,179)
Non-controlling interests (1,628) 2,733
----------- -------------
(1,223,999) (1,836,446)
RMB RMB
Loss per share 9
- Basic (0.978) (1.483)
=========== ===========
- Diluted (0.978) (1.483)
=========== ===========
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE
INCOME
For the year ended 30 June 2015
2015 2014
-------------------------------------------
RMB'000 RMB'000
Loss for the year (1,223,999) (1,836,446)
Other comprehensive loss for the
year
Item that may be reclassified subsequently
to profit or loss:
- Exchange differences on translation
of financial statements of
foreign operations, net of nil
tax (7) (7)
----------- -------------
Total comprehensive loss for the
year (1,224,006) (1,836,453)
=========== =============
Attributable to
Equity shareholders of the Company (1,222,378) (1,839,186)
Non-controlling interests (1,628) 2,733
----------- -------------
(1,224,006) (1,836,453)
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
At 30 June 2015
2015 2014
Note RMB'000 RMB'000
ASSETS
Non-current assets
Property, plant and equipment 2,253,506 2,305,246
Land use rights 74,625 76,178
Construction-in-progress 49,430 76,039
Biological assets 1,332,482 1,406,801
Intangible assets 51,091 53,715
Deposits 11,012 1,443
Goodwill - 303,883
---------
3,772,146 4,223,305
--------- ---------
Current assets
Biological assets 264,300 214,971
Properties for sale - -
Inventories 106,033 57,387
Trade and other receivables 11 194,607 155,172
Cash and cash equivalents 937,571 1,804,742
--------- ---------
1,502,511 2,232,272
--------- ---------
Total assets 5,274,657 6,455,577
========= =========
EQUITY AND LIABILITIES
Equity
Share capital 12,340 12,340
Reserves 5,009,497 6,225,165
--------- ---------
Total equity attributable
to equity
shareholders of the Company 5,021,837 6,237,505
Non-controlling interests 113,525 115,153
--------- ---------
5,135,362 6,352,658
--------- ---------
2015 2014
Note RMB'000 RMB'000
Non-current liabilities
Obligations under finance
leases 596 719
--------- ---------
Current liabilities
Trade and other payables 12 138,576 102,087
Obligations under finance
leases 123 113
138,699 102,200
--------- ---------
Total liabilities 139,295 102,919
--------- ---------
Total equity and liabilities 5,274,657 6,455,577
========= =========
Net current assets 1,363,812 2,130,072
========= =========
Total assets less current
liabilities 5,135,958 6,353,377
========= =========
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 30 June 2015
2015 2014
RMB'000 RMB'000
Cash flows from operating activities
Loss before income tax (1,223,999) (1,836,446)
Adjustments for:
Interest income (28,273) (35,855)
Write off of biological assets 114,071 -
Impairment of goodwill 303,883 853,378
Impairment of property, plant
and equipment - 15,690
Impairment of biological assets - 11,802
Impairment of properties for
sale - 5,830
Finance costs 67 144
Share-based payments 6,710 10,131
Amortisation of land use rights 1,553 1,521
Amortisation of intangible assets 10,824 10,748
Depreciation of property, plant
and equipment 201,098 181,378
Write off of inventories 9,072 22,577
Write off of trade and other
receivables 2,717 -
Loss on disposals of property,
plant and equipment 1,905 12,192
Change in fair value of biological
assets 242,833 923,857
Operating (loss)/profit before
working capital changes (357,539) 176,947
Movements in working capital elements:
Biological assets (80,579) (14,675)
Inventories (57,718) (39,687)
Trade and other receivables (42,152) (86,857)
Trade and other payables 36,482 (2,310)
Net cash (used in)/generated from
operating activities (501,506) 33,418
----------- ----------
Cash flows from investing activities
Proceeds from disposals of property,
plant and equipment 14,425 7,434
Purchases of property, plant and
equipment (51,396) (18,967)
Purchase of land use right - (4,998)
Additions to construction-in-progress (86,240) (200,888)
Deposits paid for acquisition
of property, plant and equipment (11,012) (1,443)
Net additions to biological assets (251,335) (162,157)
Additions to intangible assets (8,200) -
Interest received 28,273 35,855
Net cash used in investing activities (365,485) (345,164)
----------- ----------
2015 2014
RMB'000 RMB'000
Cash flows from financing activities
Proceeds from issue of new shares
upon exercises of
share options - 14,362
Repayments of obligations under
finance leases (113) (105)
Dividends paid - (38,849)
Finance costs paid (67) (144)
--------- ---------
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September 30, 2015 09:22 ET (13:22 GMT)
Net cash used in financing activities (180) (24,736)
--------- ---------
Net decrease in cash and cash equivalents (867,171) (336,482)
Cash and cash equivalents at beginning
of year 1,804,742 2,141,224
--------- ---------
Cash and cash equivalents at end
of year 937,571 1,804,742
========= =========
Major non-cash transactions
During the year, purchases of property, plant and equipment
included an amount of RMB1,443,000 (2014: RMB84,303,000)
transferred from non-current deposits.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1 GENERAL INFORMATION
The Company was incorporated in Bermuda on 4 June 2003 as an
exempted company with limited liability under the Companies Act of
Bermuda and its shares are listed on the Main Board of The Stock
Exchange of Hong Kong Limited (the "HKEx") and AIM of the London
Stock Exchange.
The address of the Company's registered office is Clarendon
House, 2 Church Street, Hamilton, HM11, Bermuda. The principal
place of business of the Company is located at Rooms 1109-1111,
Wayson Commercial Building, 28 Connaught Road West, Hong Kong.
The principal activities of the Group are planting, cultivation
and sale of agricultural produce and manufacture and sale of fruit
juice concentrates, fruit purees, frozen fruits and vegetables.
2 SIGNIFICANT ACCOUNTING POLICIES
(a) Statement of compliance
These consolidated financial statements have been prepared in
accordance with all applicable International Financial Reporting
Standards ("IFRSs"), which comprise International Financial
Reporting Standards, International Accounting Standards ("IASs")
and Interpretations, issued by the International Accounting
Standards Board ("IASB") and the International Financial Reporting
Interpretations Committee, and the disclosure requirements of the
Hong Kong Companies Ordinance. The consolidated financial
statements also comply with the applicable disclosure provisions of
the Rules Governing the Listing of Securities on the HKEx and the
AIM Rules.
The IASB has issued certain new and revised IFRSs that are first
effective or available for early adoption for the current
accounting period of the Group. Note 3 provides information on any
changes in accounting policies resulting from initial application
of these developments to the extent that they are relevant to the
Group for the current and prior accounting periods reflected in
these consolidated financial statements.
(b) Basis of preparation of the consolidated financial
statements
These consolidated financial statements are presented in
Renminbi ("RMB"), the functional currency of the Group, rounded to
the nearest thousand, unless otherwise stated. They have been
prepared under the historical cost convention, except that certain
biological assets are carried at their fair values.
The preparation of consolidated financial statements in
conformity with IFRSs requires management to make judgements,
estimates and assumptions that affect the application of policies
and reported amounts of assets, liabilities, income and expenses.
The estimates and associated assumptions are based on historical
experience and various other factors that are believed to be
reasonable under the circumstances, the results of which form the
basis of making the judgements about carrying values of assets and
liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognised in
the period in which the estimate is revised if the revision affects
only that period, or in the period of the revision and future
periods if the revision affects both current and future
periods.
3 APPLICATIONS OF NEW AND REVISED IFRSs
Up to the date of issue of the consolidated financial
statements, the IASB has issued a number of amendments, new
standards and interpretations which are not yet effective for the
year ended 30 June 2015 and which have not been adopted in the
consolidated financial statements. Of these developments, the
following relates to matters that may be relevant to the Group's
operations and consolidated financial statements:
Amendments to IFRS Mandatory effective date of
9 and IFRS 7 IFRS 9 and transition disclosures(3)
Amendments to IAS The Classification of acceptable
16 and methods of depreciation and
IAS 38 amortisation(1)
Amendments to IAS Bringing bearer plants into
16 and the scope of IAS 16(1)
IAS 41
IFRS 9 Financial instruments(3)
IFRS 15 Revenue from contracts with
customers(2)
(1) Effective for annual periods beginning on or after 1 January
2016.
(2) Effective for annual periods beginning on or after 1 January
2017.
(3) Effective for annual periods beginning on or after 1 January
2018.
The Group is in the process of making an assessment of what the
impact of these amendments and new standards is expected to be in
the period of initial application, but is not yet in a position to
state whether these amendments and new standards would have a
significant impact on the Group's financial statements.
4 TURNOVER
Turnover represented the total invoiced value of goods supplied
to customers. The amount of each significant category of revenue
recognised in turnover is as follows:
2015 2014
RMB'000 RMB'000
Sales of oranges 408,934 732,807
Sales of self-bred saplings 1,171 892
Sales of processed fruits 552,622 537,472
962,727 1,271,171
======= =========
5 OTHER OPERATING EXPENSES
2015 2014
RMB'000 RMB'000
Write off of biological assets 114,071 -
Impairment of goodwill 303,883 853,378
Write off of inventories(#) 488 8,459
Impairment of property, plant and equipment(#) - 15,690
Impairment of biological assets(#) - 11,802
Impairment of properties for sale - 5,830
418,442 895,159
======= =======
(#) These expenses were resulted from the widespread damage
caused by Typhoon Rammasun in July 2014.
6 SEGMENT INFORMATION
The Group manages its business by lines of business. In a manner
consistent with the way in which information is reported internally
to the Group's most senior executive management for the purposes of
resources allocation and performance assessment, the Group has two
reportable segments. The segments are managed separately as each
business offers different products and requires different business
strategies. The following summary describes the operations in each
of the Group's reportable segments in the year ended 30 June
2015:
-- Agricultural produce - planting, cultivation and sale of agricultural produce
-- Processed fruits - manufacture and sale of fruit juice
concentrates, fruit purees, frozen fruits and vegetables
No inter-segment transactions incurred between the companies in
the Group.
No customer accounted for 10% or more of the total revenue for
both years.
As majority of the Group's non-current assets and revenue are
located in/derived from the PRC, geographical information is not
presented.
The directors assess the performance of the operating segments
based on a measure of reportable segment results. This measurement
basis excludes the central other income, expenses and finance
costs.
Segment assets mainly exclude goodwill, certain property, plant
and equipment, land use rights and other assets that are managed on
a central basis. Segment liabilities mainly exclude liabilities
that are managed on a central basis.
Agricultural Processed Total
produce fruits
2015 2014 2015 2014 2015 2014
RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000
RESULTS
Reportable segment
revenue and
revenue from external
customers 410,105 733,699 552,622 537,472 962,727 1,271,171
--------- --------- --------- --------- ----------- ----------
Reportable segment
results (844,519) (960,043) (47,853) 12,900 (892,372) (947,143)
--------- --------- --------- ---------
Unallocated corporate
expenses (333,846) (892,115)
Unallocated corporate
other income 2,219 2,812
----------- ----------
Loss before income
tax (1,223,999) (1,836,446)
Income tax expense - -
----------- ----------
Loss for the year (1,223,999) (1,836,446)
(MORE TO FOLLOW) Dow Jones Newswires
September 30, 2015 09:22 ET (13:22 GMT)
=========== ==========
ASSETS
Segment assets 3,485,363 4,294,283 1,653,675 1,700,650 5,139,038 5,994,933
Unallocated corporate
assets 135,619 460,644
----------- ----------
Total assets 5,274,657 6,455,577
=========== ==========
LIABILITIES
Segment liabilities (111,349) (75,748) (23,453) (22,566) (134,802) (98,314)
Unallocated corporate
liabilities (4,493) (4,605)
----------- ----------
Total liabilities (139,295) (102,919)
=========== ==========
OTHER INFORMATION
Additions to segment
non-current assets 66,615 159,390 91,658 149,493 158,273 308,883
Amortisation of
land use rights - - 500 466 500 466
Amortisation of
intangible assets 5,360 5,360 5,464 5,388 10,824 10,748
Depreciation 95,253 78,229 73,491 72,560 168,744 150,789
Loss on disposals
of property,
plant and equipment 26 1,010 1,879 10,814 1,905 11,824
Interest income 14,800 20,258 11,255 12,786 26,055 33,044
Finance charges
on obligations
under finance leases 67 75 - - 67 75
Change in fair
value of
biological assets 242,833 923,857 - - 242,833 923,857
Impairment of biological
assets - 11,802 - - - 11,802
Impairment of property,
plant
and equipment - 13,079 - 2,611 - 15,690
Write off of biological
assets 114,071 - - - 114,071 -
Write off of inventories - - 9,072 22,577 9,072 22,577
Share-based payments 617 246 5,773 9,750 6,390 9,996
========= ========= ======== ========= ========= =========
7 LOSS BEFORE INCOME TAX
Loss before income tax is stated after charging/(crediting) the
following:
2015 2014
RMB'000 RMB'000
(a) Finance costs
Bank charges - 69
Finance charges on obligations under
finance leases 67 75
67 144
======== ========
(b) Staff costs (including directors'
emoluments)
- salaries, wages and other benefits 144,810 135,369
- share-based payments 6,710 10,131
- contribution to defined contribution
retirement plans 3,960 3,322
-------- --------
155,480 148,822
======== ========
(c) Other items
Amortisation of land use
rights 1,553 1,521
Amortisation of intangible
assets 10,824 10,748
Auditor's remuneration 2,199 2,522
Cost of agricultural produce
sold(#) 842,570 678,839
Cost of inventories of processed
fruits
recognised as expenses(##) 538,995 458,402
Depreciation of property,
plant and equipment 201,098 181,378
Add: Realisation of depreciation
previously
capitalised as biological
assets 26,979 25,346
Less: Amount capitalised
as biological assets (58,386) (54,974)
-------- --------
169,691 151,750
Exchange gains, net 2,744 14
Operating lease expenses
- plantation bases 9,335 9,163
- properties 1,197 1,184
Research and development costs 8,592 13,556
Write off of inventories(###) 9,072 22,577
Write off of trade and other
receivables 2,717 -
Loss on disposals of property,
plant and equipment 1,905 12,192
======== ========
(#) Cost of agricultural produce sold includes RMB170,062,000
(2014: RMB151,422,000) relating to staff costs, depreciation and
operating lease expenses, which amount is also included in the
respective total amount disclosed separately above for each of
these types of expenses.
(##) Cost of inventories of processed fruits recognised as
expenses includes RMB100,572,000 (2014: RMB94,190,000) relating to
staff costs, amortisation of land use rights, amortisation of
intangible assets and depreciation, which amount is also included
in the respective total amount disclosed separately above for each
of these types of expenses.
(###) The write off of inventories for the year of RMB8,584,000
(2014: RMB14,118,000) and RMB488,000 (2014: RMB8,459,000) is
included in general and administrative expenses and other operating
expenses, respectively, in the consolidated statement of profit or
loss.
8 INCOME TAX EXPENSE
On the basis stated below, no income tax has been provided by
the Group:
(a) Pursuant to the rules and regulations of Bermuda, Cayman
Islands and the British Virgin Islands, the Group is not subject to
any income tax in the respective tax jurisdictions.
(b) No Hong Kong profits tax has been provided as the Group did
not have assessable profits arising in or derived from Hong
Kong.
(c) No PRC enterprise income tax has been provided as the Group
did not have assessable profit in the PRC during the year. The
provision for PRC enterprise income tax for is based on the
respective applicable rates on the estimated assessable income of
the Group's subsidiaries in the PRC as determined in accordance
with the relevant income tax laws, rules and regulations of the
PRC.
According to the PRC tax law, its rules and regulations,
enterprises that engage in certain qualifying agricultural business
are eligible for certain tax benefits, including full enterprise
income tax exemption on profits derived from such business. Certain
operating subsidiaries of the Group in the PRC engaged in
qualifying agricultural business are entitled to full exemption of
enterprise income tax.
The applicable enterprise income tax rate of the Group's other
operating subsidiaries in the PRC is 25%.
(d) PRC withholding income tax
Under the PRC tax law, profits of the Group's subsidiaries in
the PRC derived since 1 January 2008 is subject to withholding
income tax at rates of 5% or 10% upon the distribution of such
profits to foreign investors or companies incorporated in Hong
Kong, or for other foreign investors, respectively. Pursuant to the
grandfathering arrangements of the PRC tax law, dividends
receivable by the Group from its PRC subsidiaries in respect of the
undistributed profits derived prior to 31 December 2007 are exempt
from the withholding income tax. At 30 June 2015, no deferred tax
liabilities have been recognised in respect of the tax that would
be payable on the unremitted profits of the PRC subsidiaries
derived since 1 January 2008 as the Company is in a position to
control the dividend policies of the PRC subsidiaries and no
distribution of such profits is expected to be declared from the
PRC subsidiaries in the foreseeable future.
9 LOSS PER SHARE
The calculation of the basic and diluted loss per share is based
on the following:
2015 2014
RMB'000 RMB'000
Loss
Loss attributable to equity shareholders
of the Company used in basic
and diluted loss per share calculation (1,222,371) (1,839,179)
=========== ===========
Weighted average number of shares '000 '000
Issued ordinary shares at beginning
of year 1,249,638 1,229,559
Effect of shares issued to shareholders
participating
in the scrip dividend - 5,238
Effect of shares issued upon
exercises of share options - 5,371
Weighted average number of ordinary
shares
used in basic loss per share
calculation 1,249,638 1,240,168
Effect of dilutive potential
shares in respect of
share options (Note) - -
(MORE TO FOLLOW) Dow Jones Newswires
September 30, 2015 09:22 ET (13:22 GMT)
----------- -----------
Weighted average number of ordinary
shares
used in diluted loss per share
calculation 1,249,638 1,240,168
=========== ===========
Note:
The potential ordinary shares arising from the conversion of
share options had an anti-dilutive effect on the basic loss per
share, hence they were ignored in the calculation of diluted loss
per share.
10 DIVIDENDS
The directors do not declare the payment of any dividend in
respect of the years ended 30 June 2015 and 2014.
11 TRADE AND OTHER RECEIVABLES
2015 2014
RMB'000 RMB'000
Trade receivables 112,986 53,717
Other receivables, deposits and prepayments 81,621 101,455
------- -------
194,607 155,172
======= =======
Trade receivables from sales of goods are normally due for
settlement within 30 to 90 days from the date of billing, while
that from the sale of property units are due for settlement in
accordance with the terms of the related sale and purchase
agreements.
The ageing analysis of trade receivables that are neither
individually nor collectively considered to be impaired is as
follows:
2015 2014
RMB'000 RMB'000
Neither past due nor impaired 110,615 53,253
------- -------
Less than 1 month past due 1,382 -
1 to 3 months past due 989 438
Over 1 year past due - 26
------- -------
Amounts past due but not impaired 2,371 464
112,986 53,717
======= =======
Receivables that were neither past due nor impaired relate to a
wide range of customers for whom there was no recent history of
default.
Receivables that were past due but not impaired relate to a
number of independent customers that have a good track record with
the Group. Based on past experience, management believes that no
impairment allowance is necessary in respect of these balances as
there has not been a significant change in credit quality and the
balances are considered fully recoverable.
12 TRADE AND OTHER PAYABLES
Included in trade and other payables are trade payables with the
ageing analysis of trade payables by invoice date is as
follows:
2015 2014
RMB'000 RMB'000
Less than 3 months 102,966 62,783
3 to 6 months 129 46
6 to 12 months 2,009 516
Over 1 year 531 3
------- -------
105,635 63,348
======= =======
13 Financial Information
The results announcement was approved by the Board on 30
September 2015. The financial information has been prepared on a
going concern basis in accordance with International Financial
Reporting Standards. The accounting policies applied in preparing
the financial information are consistent with those adopted and
disclosed in the Group's consolidated financial statements for the
year ended 30 June 2014, except for the accounting policies changes
as detailed in Note 3.
The consolidated financial statements for the year ended 30 June
2015 will be delivered to the Registrar of Companies following the
Company's annual general meeting. The auditors have reported on the
consolidated financial statements for the year ended 30 June 2015
and their report was modified due to a subsidiary of the Group
having purchased fertilisers from a supplier who did not possess a
valid business licence (the amount of which represents
approximately 7.7% of the total purchases for the year ended 30
June 2015). An extract of the auditor's report issued by Baker
Tilly Hong Kong Limited is as follows:
Basis for qualified opinion
During the year ended 30 June 2015, the Group recorded purchases
of fertilisers from an enterprise in the People's Republic of China
(the "Supplier") with a reported value of RMB104,317,000 and a
corresponding recorded trade payable balance with a carrying amount
of RMB24,800,000 as at 30 June 2015.
We note that the Supplier's business registration is not
currently included in the records of the State Administration for
Industry & Commerce of the People's Republic of China.
Consequently, we performed appropriate additional audit procedures
to ascertain the occurrence and commercial substance of the
recorded transactions and the existence and valuation of the
recorded trade payable balance.
We were unable to obtain sufficient appropriate audit evidence
relating to the recorded purchases from the Supplier and the
corresponding recorded trade payable because (a) we were unable to
obtain adequate appropriate documentary audit evidence to satisfy
ourselves of the identity of the Supplier and the recorded
recipient of the Group's payments for the recorded purchases; (b)
we were unable to obtain satisfactory documentary audit evidence to
explain how the Supplier was able to conduct the recorded
transactions with and receive the recorded payments from the Group
while not possessing a valid business licence; and (c) there were
no alternative audit procedures that we could perform to satisfy
ourselves as to whether the recorded purchases referred to above
and trade payable balance of the Supplier were free from material
misstatement or whether any adjustments to these recorded purchases
or balance may be necessary.
Any adjustments found to be necessary would have an effect on
the Group's trade payables and the current portion of biological
assets as at 30 June 2015, the Group's cost of sales and
consequently the loss and cash flows for the year ended 30 June
2015, and the disclosures relating to those items in the
consolidated financial statements.
Qualified opinion
In our opinion, except for the possible effects of the matters
described in the basis for qualified opinion section, the
consolidated financial statements give a true and fair view of the
state of the affairs of the Company and of the Group as at 30 June
2015, and of the Group's loss and cash flows for the year then
ended in accordance with International Financial Reporting
Standards and have been properly prepared in accordance with the
disclosure requirements of the Hong Kong Companies Ordinance.
OTHER INFORMATION
DIVIDENDS
The Directors do not recommend the payment of a final dividend
for the year ended 30 June 2015 (2014: Nil).
PURCHASE, SALE OR REDEMPTION OF THE COMPANY'S LISTED
SECURITIES
The Company did not redeem any of its listed securities nor did
the Company or any of its subsidiaries purchase or sell any of such
securities during the year ended 30 June 2015.
CORPORATE GOVERNACE CODE
During the year ended 30 June 2015, the Directors, where
practicable, for an organisation of the Group's size and nature
sought to adopt the two corporate governance codes below:
1. the UK Corporate Governance Code which is the key source of
corporate governance recommendations for listed companies in the
United Kingdom and consists of principles of good governance covers
the following areas: (i) Leadership; (ii) Effectiveness; (iii)
Accountability; (iv) Remuneration; and (v) Relations with
shareholders; and
2. the Corporate Governance Code (the "Code") contained in the
Appendix 14 to the Rules Governing the Listing of Securities on the
HKEx (the "Hong Kong Listing Rules"), which took effect on 1 April
2012.
The Company has complied with all the code provisions as set out
in the Code for the year ended 30 June 2015 except the deviations
set out below:
Code Provision A.5.1
The Company does not have a nomination committee. The Directors
do not consider that, given the size of the Group and the current
stage of its development, it is necessary to have a nomination
committee. However, this will be kept under regular review by the
Board. The Board as a whole regularly reviews the plans for orderly
succession to the Board and its structure, size and composition. If
the Board considers that it is necessary to appoint new
Director(s), it will set the relevant appointment criteria which
may include, where applicable, the background, experience,
professional skills, personal qualities, availability to commit to
the affairs of the Company and, in case of Independent
Non-executive Directors ("INEDs"), the independence requirements
set out in the Hong Kong Listing Rules from time to time.
Nomination of new Director(s) will normally be made by the
Executive Directors and is subject to the Board's approval.
External consultants may be engaged, if necessary, to access a
wider range of potential candidate(s).
DIRECTORS' SECURITIES TRANSACTIONS
The Company has adopted a code for Directors' dealings
appropriate for a company whose shares are admitted to trading on
AIM of the London Stock Exchange and takes all reasonable steps to
ensure compliance by the Directors and any relevant employees. The
Company also adopted the Model Code for Securities Transactions by
Directors of Listed Issuers (the "Model Code") as set out in
Appendix 10 to the Hong Kong Listing Rules as its own code of
conduct for dealings in the securities. Following a specific
enquiry made of all Directors by the Company, each of them has
confirmed that he had fully complied with the required standard as
set out in the Model Code throughout the year ended 30 June
2015.
CHANGE IN THE COMPOSITION OF THE BOARD AND OTHER POSITIONS OF
DIRECTORS
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