REG - Asian Citrus Hldgs - Final Results <Origin Href="QuoteRef">0073.HK</Origin> - Part 1
RNS Number : 7100SAsian Citrus Holdings Ltd26 September 2014Hong 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 2014
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 2014 together with its comparative figures for the year ended 30 June 2013.
Results Highlights
Year ended 30 June
For illustration only
Year ended 30 June
2014
2013
2014
2013
(RMB m)
(RMB m)
( m**)
( m**)
Reported financial information
Revenue
1,271.2
1,485.9
120.4
158.8
Gross profit
133.9
497.6
12.7
53.2
EBITDA
-1,708.2
211.3
-161.8
22.6
(Loss)/profit attributable to shareholders
-1,839.2
114.4
-174.2
12.2
Basic (loss)/earnings per share
-RMB1.48
RMB0.09
-14.0p
1.0p
Interim dividend per share
-
RMB0.03
-
0.3p
Interim special dividend per share
-
RMB0.02
-
0.2p
Final dividend per share
-
RMB0.05
-
0.5p
Total dividend per share
-
RMB0.10
-
1.1p
Adjusted core financial information#
EBITDA
79.2
496.5
7.5
53.0
(Loss)/profit before tax
-49.1
409.8
-4.6
43.8
(Loss)/profit attributable to shareholders
-51.8
399.6
-4.9
42.7
Basic (loss)/earnings per share
-RMB0.04
RMB0.33
-0.4p
3.5p
** Conversion at 1 = RMB10.56 and RMB9.36 for the years ended 30 June 2014and 2013 respectively (for reference only).
# Adjusted core financial information refers to activities for the year excluding change in the carrying value of goodwill, change in fair value of biological assets and share-based payments.
RESULTS HIGHLIGHTS
l Results for the year are as anticipated:
- Total orange production yield decreased by 9.7% to 197,467tonnes (2013: 218,600 tonnes) due to the replanting programme in Hepu Plantation; the production yield not yet returning to volumes reported prior to the citrus canker; the impact of frosts in Hepu in early 2014 and the inclement weather and persistent heavy rainfall in Xinfeng Plantation.
- Revenue down by 14.4% to RMB1,271.2million (2013: RMB1,485.9million).
- Adjusted core loss attributable to shareholders down by 113.0% to RMB51.8 million (2013: adjusted core profit attributable to shareholders of RMB399.6 million) reflectingthe reduction in production yield of the orange crop and higher direct costs as a result of inclement weather; the decrease in the average selling prices of both oranges and processed fruit; and the loss relating to damage caused by Typhoon Rammasun.
- Net operating activities cash inflow of RMB33.4 million (2013: RMB560.3 million) and cash and cash equivalents of RMB1,804.7 million as at 30 June2014 (2013: RMB2,141.2million).
l The construction of the third plantation in Hunan was completed. 422,160 grapefruit trees were planted during the year and a further 26,960grapefruit trees were planted in July 2014.
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 2014 (2013: RMB0.10 per share, which included the final dividend of RMB0.05, interim dividend of RMB0.03 and special dividend of RMB0.02). The Group is taking a prudent approach in managing its capital and reserves to maintain the appropriate financial position and ensure sufficient funds are available to develop new products and growth opportunities, including through R&D and restructuring projects.
For further enquiries please contact:
Asian Citrus
Mark Ng, Chief Financial Officer
+852 2559 0323
Cantor Fitzgerald Europe (NOMAD and Broker)
+44 (0) 20 78947000
Rick Thompson / David Foreman (Corporate Finance)
Richard Redmayne(Corporate Broking)
Weber Shandwick Financial
+44 (0) 20 7067 0700
Nick Oborne, Stephanie Badjonat, Tom Jenkins
CHIEF EXECUTIVE OFFICER'S STATEMENT
It is my pleasure to present the annual results of the Group. Looking back on my first six months as the Chief Executive Officer, it is clear that the Group faced numerous challenges in the year ended 30 June 2014. Whilst many of the challenges are of a temporary nature, they still take time to address. Accordingly, we have implemented new long-term and short-term strategic plans that we believe will restore the profitability of the Group through new sales initiatives as well as reducing costs.
Post the financial year end, Typhoon Rammasun (the "Typhoon") destroyed all banana trees planted in 2013, damaged certain farmland infrastructure and equipment and caused a significant volume of pre-mature fruit drop from existing oranges trees in Hepu Plantation and the temporary suspension of activities at two of BPG's plants. Approximately 220,000 banana trees are being replanted, following clearance of the damage caused by the Typhoon, with an expected harvest by the end of 2015. However, it will take a number of years for Hepu Plantation and harvests to fully recover. We nevertheless remain confident that the Group's performance will improve under our strong management team's leadership.
FINANCIAL HIGHLIGHTS
For the year ended 30 June 2014, the Group's total revenue decreased by 14.4% to RMB1,271.2 million (2013: RMB1,485.9 million). Adjusted core loss attributable to shareholders for the year (before the change in the carrying value of goodwill, change in fair value of biological assets and share-based payments) declined by 113% to RMB51.8 million (2013: adjusted core net profit RMB399.6 million), primarily reflecting the reduction in production yield and higher direct costs as a result of inclement weather; the decrease in average selling prices of both oranges and processed fruit; and the loss relating to damage caused by the Typhoon as highlighted in the Company's announcement to the market on 11 August 2014.
The Group recorded impairment losses of RMB853.4 million and RMB923.9 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 2014. It is however worth noting that the change in the carrying value of goodwill and change in fair value 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 of the change in the carrying value of goodwill, change in fair value of biological assets and share-based payments, the net loss attributable to shareholders for the year was RMB1,839.2 million (2013: net profit attributable to shareholders of RMB114.4 million).
OPERATIONAL REVIEW
The Group's three plantations in mainland China occupy 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 delayed due to the impact of frosts but is scheduled to begin in 2016.
For the year ended 30 June 2014, the production yield at Hepu Plantation decreased by 17.7% to 74,239 tonnes (2013: 90,205 tonnes). The decreased production was mainly due to the replanting programme to replace the existing winter orange trees; the production yield not yet returning to volumes reported prior to the citrus canker; and the impact of frosts in Hepu in early 2014. The gross profit margin for Hepu Plantation fell from 43.0% last year to 12.8%, as a result of a decreased average selling price of 3.2% compared with last year, as well as increased direct costs incurred as a result of the inclement weather.
The production yield for the year ended 30 June 2014 at Xinfeng Plantation decreased by 4% to 123,228 tonnes (2013: 128,395 tonnes). The gross profit margin for Xinfeng Plantation decreased from 33.4% last year to 2.9%. The costs of maintaining the trees and plantation are fixed and when applied against a lower turnover this severely impacted the gross profit margin. This was further affected by (i) the persistent heavy rainfall, which not only negatively affected the growth of the winter orange crop but also caused some leaching of soil nutrients in Xinfeng Plantation, resulting in a higher volumes of fertilisers and pesticides being consumed in order to maintain output levels, and (ii) dyed oranges being sold by other individual suppliers in the Gannan areas which negatively impacted the selling prices of Xinfeng Plantation winter orange crop, resulting in a 16.9% decrease compared to last year.
Through our 92.94% equity interest in Beihai BPG, we also operate two fruit processing plants in Beihai City and Hepu County in Guangxi, covering a total site area of nearly 110,000 square metres, and have an annual production capacity of around 60,000 tonnes.
The Group will start to increase the overall production capacity with a third plant in Baise City, Guangxi, which commenced operations in 2014, after successfully completing trial productions. It normally takes between three to five years for a new plant to achieve full capacity, and therefore, it is expected that the utilisation rate of the new plant in the coming year will not be as high as the two existing plants.
STRATEGIC OVERVIEW
We are currently evaluating a number of accelerated strategies to streamline and restructure multiple aspects of our supply chain, including methods of reducing costs of pesticides and fertilisers, exploring new export opportunities, and changing the product mix in order to improve margins. Although the Group incurred increased costs due to adverse weather during the year, we are developing advanced management systems and cost reduction plans in order to mitigate the effect of future adverse weather events.
We have also been collaborating with renowned specialists and scientists, who visited our three plantations during the year. They have been instrumental in providing advice on production and product improvements as well as innovation in harvesting methods. We are also combining our efforts in finding innovative ways to recover our products from citrus canker. Separately, our current R&D effort is focusing on improving quality 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.
Furthermore, we have been putting a great deal of effort into our international networks in order to assess potential new market entries in premium growth regions. This will subsequently allow us to charge premium prices for our products. New sales initiatives within our current markets will also be a cornerstone of our strategy for the upcoming years.
CORPORATE GOVERNANCE
During the year, there were a number of changes to our management and the composition of the Company's Board. On behalf of the Board, I would like to express my appreciation to Mr. Tong Wang Chow, Hon Peregrine Moncreiffe and Mr. Ma Chiu Cheung, Andrew for their valuable contributions over the years. I would also like to welcome and congratulate Mr. Ng Hoi Yue, Mr. Tong Hung Wai, Tommy, Mr. Chung Koon Yan, Mr. Ho Wai Leung and Mr. Ng Cheuk Lun to their new positions in the Company.
With the changes to the Board's composition, five of the board members (over half) are independent non-executive directors and the roles of chairman and chief executive are now performed by separate individuals, in accordance with the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited and reflects our commitment to good corporate governance.
DIVIDENDS
Our existing dividend policy stipulates a dividend of not less than 30% on our adjusted core net profit. However, in view of the Group's net loss in the current reporting year, the Board is recommending that no dividend is paid in respect of the year ended 30 June 2014, with the intention of recommending dividend payments when adjusted core net profit improves.
The Group is taking a prudent approach in managing its capital and reserves, in order to maintain the appropriate financial position and ensure sufficient funds are available to develop new products and growth opportunities, including through R&D and restructuring projects.
Finally, on behalf of the Board, I would like to take this opportunity to thank the whole team for their hard work and enthusiasm over the last year. Although I only accepted this position in March this year, it is already clear to me that, with their continued drive and determination, we can continue to deliver for our customers, our communities and our shareholders, building a bigger and better business for the years to come.
Ng Ong Nee
Chief Executive Officer
26 September 2014
MANAGEMENT DISCUSSION AND ANALYSIS
OPERATING PERFORMANCE
Revenue
The breakdown of revenue by type is as follows:
For the year ended 30 June
2014
2013
% of
% of
RMB'000
total revenue
RMB'000
total revenue
Hepu Plantation
357,534
28.1%
449,230
30.2%
Xinfeng Plantation
375,273
29.5%
470,753
31.7%
Sales of oranges
732,807
57.6%
919,983
61.9%
Sales of processed fruit
537,472
42.3%
564,089
38.0%
Sales of self-bred saplings
892
0.1%
1,840
0.1%
Total revenue
1,271,171
100.0%
1,485,912
100.0%
Sales of oranges
Revenue from sales of oranges decreased by approximately 20.3% to RMB732.8 million for the year ended 30 June 2014. This was mainly due to a decrease of approximately 9.7% in the production yield to 197,467tonnes (2013: 218,600 tonnes) andapproximately 11.8% decrease in average selling price.
The production yield from Hepu Plantation decreased by approximately 17.7% from 90,205 tonnes last year to 74,239 tonnes for the year ended 30 June 2014. The decreased production was mainly due to the replanting programme to replace the existing winter orange trees in the last year; the production yield not yet returning to volumes reported prior to the citrus canker; and the impact of frosts in Hepu in early 2014.
The production yield from Xinfeng Plantation decreased by approximately 4% from 128,395 tonnes last year to 123,228 tonnes for the year ended 30 June 2014, due to the inclement weather and persistent heavy rainfall, which not only negatively affected the growth of the winter orange crop but also resulted in the leaching of nutrients from the soil in Xinfeng Plantation. As a result of the poor growth and leaching, higher volumes of fertilisers and pesticides were consumed during the year in order to maintain output levels.
The following table sets out the average selling prices of oranges in different plantations:
Year ended 30 June
2009
2010
2011
2012
2013
2014
(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
- Winter Oranges
3,470
3,567
3,922
4,085
4,013
3,863
Xinfeng Plantation
- Winter Oranges
3,260
3,330
3,660
3,770
3,776
3,137
The average selling prices of the winter orange crop in both Hepu Plantation and Xinfeng Plantation decreased by approximately 3.7% and 16.9% respectively for the year ended 30 June 2014. This was mainly due to an increase in overall market supply of winter oranges in the Gannan areas (where Xinfeng Plantation is located) and an increase in the average maturity yield of orange trees reaching the peak level across the region. Additionally, local media reported that dyed oranges were sold in the Gannan areas, an incident which was unrelated to Asian Citrus. This negatively affected customer confidence in the domestic orange market as a whole and, in particular, the oranges from Jiangxi province.
The average selling price of the summer orange crop in Hepu Plantation decreased by approximately 4.4% for the year ended 30 June 2014. This was mainly due to the adverse impact on the yield of high quality oranges suffered from frosting weather early in 2014 at Hepu County, which decreased the sales volume of graded oranges to supermarkets, thereby reducing the average selling price.
All of the Group's oranges were sold on the domesticmarket. The Group's customers can be divided into three categories, namely supermarket chains, corporate customers and wholesale customers. The breakdown of sales by type of customer is as follows:
For the year ended 30 June
2014
2013
% of sales of oranges
Supermarket chains
24.2%
27.9%
Corporate customers
43.1%
43.6%
Wholesale customers
32.3%
28.1%
Other
0.4%
0.4%
Total
100.0%
100.0%
For the year ended 30 June 2014, the volume and revenue from supermarket chains represented approximately 20.4% and 24.2% respectively of the total for the Group, compared to approximately 23.7% and 27.9% respectively for the year ended 30 June 2013; this percentage decrease reflects the inclement weather's disproportionate impact on the yield of graded oranges in 2014.
For Hepu Plantation and Xinfeng Plantation, the volume sold to supermarkets was 18,860 tonnes and 21,434 tonnes respectively for the year ended 30 June 2014(2013: 24,907 tonnes and 26,901 tonnes).
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 the 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 orangesis as follows:
For the year ended 30 June
2014
2013
% of sales of oranges
Graded oranges
13.4%
18.2%
Ungraded oranges
86.6%
81.8%
Total
100.0%
100.0%
Sales of processed fruit
The below table sets out the volume and revenue from the sales of processed fruit:
For the yearended 30 June
2014
2013
Volume
Revenue
Volume
Revenue
(Tonnes)
RMB'000
(Tonnes)
RMB'000
Pineapple juice concentrates
16,275
144,209
18,295
176,929
Other juice concentrates
8,585
141,741
11,230
191,606
Mango purees
8,603
55,954
8,667
54,110
Other fruit purees
4,646
33,799
4,687
34,852
Frozen and dried fruit and vegetables
17,504
161,133
14,051
93,743
55,613
536,836
56,930
551,240
Fruit juice trading
N/A
636
N/A
12,849
Total
55,613
537,472
56,930
564,089
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 from the sales of processed fruit decreased by approximately 4.7% to approximately RMB537.5 million for the year ended 30 June 2014, mainly due to (i) a decrease in fruit juice trading; (ii) a decrease in sales of pineapple juice concentrates; and (iii) a decrease in the selling price of these products as a result of competitive market.
The average utilisation rate of the BPG was approximately 86.2% for the year ended 30 June 2014.
BPG currently generates most of its sales from the PRC market, with key customers being beverage mixers supplying major beverage groups.
Sales of self-bred saplings
For the year ended 30 June 2014, approximately RMB892,000was generated from the sales of 74,334 self-bred saplings to local farmers.
Cost of sales
The breakdown of the Group's cost of sales is as follows:
For the year ended 30 June
2014
2013
% of
% of
cost of sales
cost of sales
RMB'000
of respective segment
RMB'000
ofrespective segment
Inventories used
Fertilisers
351,279
52.0%
297,510
52.2%
Packaging materials
28,982
4.3%
34,597
6.1%
Pesticides
117,356
17.4%
74,664
13.1%
497,617
73.7%
406,771
71.4%
Production overheads
Direct labour
66,482
9.8%
55,836
9.8%
Depreciation
73,821
10.9%
67,557
11.9%
Others
38,044
5.6%
39,600
6.9%
Cost of sales of oranges
675,964
100.0%
569,764
100.0%
Fruit
316,476
69.0%
258,550
62.0%
Packaging materials
30,468
6.7%
34,696
8.3%
Direct labour
33,647
7.3%
28,903
6.9%
Other production overheads
77,811
17.0%
95,017
22.8%
Cost of sales of processed fruit
458,402
100.0%
417,166
100.0%
Cost of sales of self-bred saplings
2,875
1,383
Total
1,137,241
988,313
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 18.6% from approximately RMB569.8 million to RMB676.0 million. The increase in cost of sales was mainly due to the increase in consumption of both fertilisers and pesticides to minimise further damage from the inclement weather and persistent heavy rainfall in order to maintain output levels and higher labour costs incurred due to general wage inflation in the PRC. Consequently, the unit cost of production in Hepu Plantation and Xinfeng Plantation increased to approximately RMB4.20 and RMB2.96 per kg respectively for the year ended 30 June 2014 (2013: RMB2.84 per kg and RMB2.44 per kg respectively).
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 2014, the cost of sales of processed fruit increased by approximately 9.9% from approximately RMB417.2 million to RMB458.4 million. This was mainly due to the increase in the cost of raw material as a result of limited supplies.
Gross profit
The Group's overall gross profit decreased by approximately 73.1% to approximately RMB133.9 million for the year ended 30 June 2014 (2013: RMB497.6 million). The overall gross profit margin decreased from approximately 33.5% to 10.5% for the year ended 30 June 2014.
The following table sets out a breakdown of the Group's gross profit margin by plantation:
For the year ended 30 June
2014
2013
Hepu Plantation
12.8%
43.0%
Xinfeng Plantation
2.9%
33.4%
The decrease in gross profit margin was mainly due to (i) the average selling prices of the orange crop in Hepu Plantation and Xinfeng Plantation dropping by approximately 3.2% and 16.9% respectively; (ii) the cost of sales of oranges increased by approximately 18.6%, reflecting the increase in consumption of both fertilisers and pesticides to minimise further damage from the inclement weather and persistent heavy rainfall in order to maintain output levels; and (iii) higher labour costs incurred due to general wage inflation in the PRC.
The following table sets out a breakdown of the Group's gross profit margin by business:
For the year ended 30 June
2014
2013
Sales of oranges
7.8%
38.1%
Sales of processed fruit
14.7%
26.0%
For BPG, the normalised gross profit margin for the year ended 30 June 2014 decreased to approximately 14.7% compared to 26.0% in the last year. It was mainly due to (i) the decrease in selling price; (ii) the increase in cost of raw materials due to limited supplies; and (iii) higher labour costs incurred.
Change in fair value of biological assets
The Group recognised a loss of RMB923.9 million from an adjustment in the fair value of biological assets for the year ended 30 June 2014, compared to a loss of RMB260.5 million in last year. The loss was mainly due to the decrease in production yield, higher cost of sales, the decrease in the market prices of both winter and summer oranges and the post year-end effect of Typhoon Rammasun (the "Typhoon"). 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 2014.
Selling and distribution expenses
Selling and distribution expenses comprise mainly of advertising, staff commission, salaries and welfare of sales personnel, traveling and transportation expenses. The selling and distribution expenses of the Group were broadly in line with last year at approximately RMB45.3 million for the year ended 30 June 2014 (2013: RMB45.6 million).
General and administrative expenses
General and administrative expenses comprise mainly of salaries, office administration expenses, depreciation, amortisation, and research costs. The general and administrative expenses of the Group increased by 19.5% from approximately RMB120.1 million last year to approximately RMB143.5 million for the year ended 30 June 2014. The increase included the loss on disposal of plant and machinery and written off of inventories for the year.
Other operating expenses
The Group recorded impairment losses of approximately RMB895.2 million on certain assets for the year ended 30 June 2014 (2013: Nil), which included:
Impairment losses relating to damage caused by the Typhoon
Impairment losses of approximately RMB36 million were provided relating to damage caused by the Typhoon, which was the largest typhoon to hit South China in 41 years. The Typhoon landed in Guangxi, where Hepu Plantation is located, in July 2014. The Typhoon (i) destroyed all banana trees, and as a result there was no harvest in September 2014; (ii) damaged certain farmland infrastructure, machinery and buildings such as windbreaks, greenhouse facilities, high and low voltage wires at Hepu Plantation and BPG; and (iii) caused BPG to temporarily suspend the activities of its two production plants, as a result of the suspension of electricity supply. Consequently, some inventories such as raw material were not used for the purposes for which they were originally acquired.
Change in the carrying value of goodwill
An impairment loss of approximately RMB853.4 million was provided for the change in the carrying value of goodwill (arising initially from the acquisition of Beihai BPG in November 2010 for a consideration of approximately HK$2.31 billion (equivalent to approximately RMB1.97 billion)), according to a comparison of the carrying value of goodwill as at 30 June 2014 and the recoverable amount assessed based on the current business and operating environment of Beihai BPG. The Board wishes to emphasise 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 2014.
Impairment loss on a project related to properties for sale
An impairment loss of approximately RMB5.8 million was provided on a project related to properties for sale in relation to the second phase of the agricultural wholesalers' market and orange processing centre, which is located in the Xinfeng County Zhongduan Industrial Park.
Loss for the year
The loss for the yearended 30 June 2014wasapproximately RMB1,836.4million, compared to a profit of approximately RMB124.7 million in last year, representing a decrease of approximately 15.7 times.
The adjusted core loss, which refers to the loss for the yearexcluding the change in carrying value of goodwill, change in fair valueof biological assetsand share-based payments for the year ended 30 June 2014 wasapproximately RMB49.1million, compared to the adjusted core profit of approximately RMB409.8 million in last year, representing a decrease of approximately 112.0%.
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 2014 (2013: RMB0.10 per ordinary share, which included the final dividend of RMB0.05, interim dividend of RMB0.03 and special dividend of RMB0.02).
The Group is taking a prudent approach in managing its capital and reserves, in order to maintain the appropriate financial position and ensure sufficient funds are available to develop new products and growth opportunities, including through R&D and restructuring projects.
PRODUCTIVITY
For the year ended 30 June
2014
2013
% of
% of
Types of product
Tonnes
total output
Tonnes
total output
Winter oranges
147,927
74.9%
161,233
73.8%
Summer oranges
49,540
25.1%
57,367
26.2%
Total
197,467
218,600
The production yield of winter oranges decreased by 8.3% to 147,927 tonnes for the year ended 30 June 2014. The production yield of winter oranges in Hepu Plantation decreased by 24.8% from 32,838 tonnes last year to 24,699 tonnes this year, due to the replanting programme to replace the existing winter orange trees. In the previous year, 48,058 winter orange trees were removed and replanted with approximately 221,769 banana trees. The production yield of winter oranges in Xinfeng Plantation decreased by 4% from 128,395 tonnes last year to 123,228 tonnes this year, due to the inclement weather and persistent heavy rainfall, which not only affected the growth of the winter orange crop but also resulted in the leaching of nutrients from the soil in Xinfeng Plantation. Higher volumes of fertilisers and pesticides were consumed during the year in order to maintain output levels.
The production yield of summer oranges in Hepu Plantation decreased by 13.6% from 57,367 tonnes last year to 49,540 tonnes this year, due to the fact that production yield has not yet returned to volumes reported prior to the citrus canker, and production was also negatively impacted by frosts in Hepu in early 2014.
Unfortunately, the Typhoon destroyed all banana trees, and as a result there was no harvest in September 2014. The Typhoon also caused a significant volume of pre-mature fruit drop from existing oranges trees in Hepu Plantation, which will result in decreased production yield in particular for the upcoming winter and summer oranges in the financial year of 2015.
CAPITAL STRUCTURE
As at 30 June 2014there were 1,249,637,884 shares in issue. Based on the closing price of HK$1.74 as at 28 June2014, the market capitalisation of the Company was approximately HK$2,174.4 million (GBP165.0million).
HUMAN RESOURCES
There were a total of 1,746employees (excluding directors) of the Group as at 30 June 2014 (2013: 1,697 employees), staff costs for the year ended 30 June 2014 were approximately RMB143.0 million (2013: RMB131.4 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 considerationin 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
30 June 2014
30 June 2013
Current ratio (x)
21.84
23.62
Quick ratio (x)
19.18
21.14
Asset turnover (x)
0.20
0.18
Adjusted core net (loss)/profit per share (RMB)
-0.04
0.33
Basic (loss)/earnings per share (RMB)
-1.48
0.09
Net debt to equity (%)
Net cash
Net cash
Liquidity
The current ratio and quick ratio were21.84 and 19.18respectively. The liquidity of the Group hasremained healthy with sufficient reserves for both current operational and future development.
Profitability
The asset turnover of the Group was approximately 0.20 (2013: 0.18) for the year ended 30 June 2014. The ratio has remained stable when compared to last year due to a decrease in revenue offset by a decrease in total assets as detailed previously.
The basic loss per share for the year ended 30 June 2014 was approximately RMB1.48(2013: basic earnings per share of RMB0.09). This was mainly due toanincrease in loss attributable to shareholders for the year.
The adjusted core net lossper share for the year ended 30 June 2014 was approximately RMB0.04 (2013: adjusted core net profit per share of RMB0.33), representing a decrease of approximately 112.1%.
Debt ratio
The net cash position of the Group wasapproximately RMB1,804.7million at 30 June 2014(2013: RMB2,141.2 million).
Internal cash resource
The Group's funding resource is internal cash and cash equivalents. The Group did not have any outstanding borrowings as at 30 June 2014.
Charge on assets and contingent liabilities
None of the Group's assets were pledged and the Group did not have any material contingent liabilities as at 30 June 2014.
Capital Commitments
As at 30 June 2014, the Group had capital commitments of approximately RMB9.7million, mainly in relation to the construction of the farmland infrastructure in Hepu Plantation, Hunan Plantationand 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 limitedtransactions denominated in foreign currencies, hence exposures 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 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 approximately 46,000 mu (equivalent to approximately 30.7 sq.km.) located in the Hepu County of the Guangxi Zhuang Autonomous Region, Hepu Plantation, approximately 56,000 mu (equivalent to approximately 37.3 sq.km.) in the Xinfeng County of the Jiangxi province, Xinfeng Plantation, and approximately 53,000mu (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. The last batch of 48,058 winter orange trees was removed according to the replanting programme and we commenced a trial planting of banana trees in the same area for product diversification. A total of 221,769 banana trees were planted in August 2013. There was no harvest in September 2014 as all banana trees were destroyed by the Typhoon in July 2014.
Xinfeng Plantation
Xinfeng Plantation is fully planted and comprises 1.6 million winter orange trees.
Hunan Plantation
Hunan Plantation is under development and comprises approximately 1.05 million summer orange trees and approximately 723,360 grapefruit trees as at 30 June 2014. A further 26,960 grapefruit trees were planted in July 2014. At that time, the construction of Hunan Planation was completed. The first harvest of oranges is expected in 2016.
The below tables 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
Age
Hepu Plantation
Hepu Plantation
Hunan
Plantation
Hunan Plantation
Total
Total
No. of trees
Yield (tonnes)
No. of trees
Yield (tonnes)
No. of trees
Yield (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
Age
Hepu Plantation
Hepu Plantation
Hunan Plantation
Hunan Plantation
Total
Total
No. of trees
Yield (tonnes)
No. of trees
Yield (tonnes)
No. of trees
Yield (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.
Winter orange trees
Age
Hepu Plantation
Hepu Plantation
Xinfeng Plantation
Xinfeng Plantation
Total
Total
No. of trees
Yield (tonnes)
No. of trees
Yield (tonnes)
No. of trees
Yield (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
The below tables set out the age profile as at 30 June 2013 and the production volume of the plantations for the year ended 30 June 2013:
Summer orange trees
Age
Hepu Plantation
Hepu Plantation
Hunan
Plantation
Hunan Plantation
Total
Total
No. of trees
Yield (tonnes)
No. of trees
Yield (tonnes)
No. of trees
Yield (tonnes)
1
66,449
622,475
688,924
2
63,584
427,400
490,984
3
64,194
64,194
4
81,261
1,326
81,261
1,326
5
76,135
2,831
76,135
2,831
6
55,185
2,689
55,185
2,689
16
29,996
2,587
29,996
2,587
17
128,966
11,134
128,966
11,134
18
186,003
17,436
186,003
17,436
19
223,741
19,364
223,741
19,364
975,514
57,367
1,049,875
2,025,389
57,367
Grapefruit trees
Age
Hepu Plantation
Hepu Plantation
Hunan Plantation
Hunan Plantation
Total
Total
No. of trees
Yield (tonnes)
No. of trees
Yield (tonnes)
No. of trees
Yield (tonnes)
0
301,200
301,200
301,200
301,200
Note: Grapefruit is a type of citrus fruit and is harvested during the winter period in the PRC.
Winter orange trees
Age
Hepu Plantation
Hepu Plantation
Xinfeng Plantation
Xinfeng Plantation
Total
Total
No. of trees
Yield (tonnes)
No. of trees
Yield (tonnes)
No. of trees
Yield (tonnes)
6
400,000
27,860
400,000
27,860
7
400,000
28,907
400,000
28,907
8
46,077
3,963
400,000
31,052
446,077
35,015
10
180,180
18,341
400,000
40,576
580,180
58,917
11
42,300
4,574
42,300
4,574
16
3,142
3,142
17
1,246
1,246
18
1,572
1,572
268,557
32,838
1,600,000
128,395
1,868,557
161,233
Total
4,195,146
218,600
Note: 24,937 winter orange trees (age: 16), 10,133 winter orange trees (age: 17) and 12,988 winter orange trees (age: 18) were removed during the year ended 30 June 2013.
VALUATION OF BIOLOGICAL ASSETS
The Group engaged an independent valuer to perform a valuation on the fair value of the orange trees less costs to sell as at 30 June 2014.
The valuations of the Group's orange trees were conducted on the basis of discounted cash flow. The discount rate being applied to the discounted cash flow model is based on Capital Asset Pricing Model. The independent 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 tangible 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 biological assets.
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, related production costs, etc. The values of such variables are determined by the independent 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 2014 was 18.0% (2013: 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.
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 independent 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 2014, the wholesale prices per tonne of winter and summer oranges from Hepu Plantation and winter oranges from Xinfeng Plantation adopted were 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 RMB5,180, respectively. For the year ended 30 June 2013, the selling prices per tonne of winter and summer oranges from Hepu Plantation and winter oranges from Xinfeng Plantation adopted were RMB3,320, RMB5,220 and RMB3,740, respectively.
4) The cost of sales 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 cost of sales variables are determined by reference to actual costs incurred for areas that have been previously harvested and cost information for comparable areas with regards to areas that have not been harvested previously.
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 net 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 independent valuer for the year ended 30 June 2014:
1.0% Decrease
Base Case
1.0% Increase
Discount rate
17.0%
18.0%
19.0%
Net change in fair value of biological assets (RMB'000)
(793,857)
(923,857)
(1,043,857)
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 net 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 2014:
5.0% Decrease
Base Case
5.0% Increase
Net change in fair value of biological
assets (RMB'000)
(1,063,857)
(923,857)
(783,857)
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 net 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 2014 used to calculate the changes in fair value of orange trees less costs to sell for the year ended 30 June 2014:
5.0% Decrease
Base Case
5.0% Increase
Net change in fair value of biological assets (RMB'000)
(1,243,857)
(923,857)
(603,857)
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 net 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 2014:
5.0% Decrease
Base Case
5.0% Increase
Net change in fair value of biological assets (RMB'000)
(723,857)
(923,857)
(1,113,857)
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 independent valuer, the aggregate value of the orange trees in Hepu Plantation and Xinfeng Plantation as at 30 June 2014 was estimated to be approximately RMB1,080 million (2013: RMB1,983 million).
CONSOLIDATED STATEMENT OF PROFIT OR LOSS
For the year ended 30 June 2014
2014
2013
Note
RMB'000
RMB'000
Turnover
4
1,271,171
1,485,912
Cost of sales
(1,137,241)
(988,313)
Gross profit
133,930
497,599
Other income
37,604
53,438
Net loss on change in fair value of biological assets
(923,857)
(260,468)
Selling and distribution expenses
(45,339)
(45,640)
General and administrative expenses
(143,481)
(120,141)
Other operating expenses
5
(895,159)
-
(Loss)/profit from operations
(1,836,302)
124,788
Finance costs
(144)
(126)
(Loss)/profit before income tax
7
(1,836,446)
124,662
Income tax expense
8
-
-
(Loss)/profit for the year
(1,836,446)
124,662
Attributable to
Equity shareholders of the Company
(1,839,179)
114,395
Non-controlling interests
2,733
10,267
(1,836,446)
124,662
RMB
RMB
(Loss)/earnings per share
9
- Basic
(1.483)
0.094
- Diluted
(1.483)
0.093
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
For the year ended 30 June 2014
2014
2013
RMB'000
RMB'000
(Loss)/profit for the year
(1,836,446)
124,662
Other comprehensive expense 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)
(352)
Total comprehensive (loss)/income for the year
(1,836,453)
124,310
Attributable to
Equity shareholders of the Company
(1,839,186)
114,043
Non-controlling interests
2,733
10,267
(1,836,453)
124,310
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
At 30 June 2014
2014
2013
Note
RMB'000
RMB'000
ASSETS
Non-current assets
Property, plant and equipment
2,305,246
1,989,625
Land use rights
76,178
72,701
Construction-in-progress
76,039
304,196
Biological assets
1,406,801
2,168,501
Intangible assets
53,715
64,463
Deposits
1,443
84,303
Goodwill
303,883
1,157,261
4,223,305
5,841,050
Current assets
Biological assets
214,971
212,098
Properties for sale
-
5,830
Inventories
57,387
40,277
Trade and other receivables
11
155,172
68,315
Cash and cash equivalents
1,804,742
2,141,224
2,232,272
2,467,744
Total assets
6,455,577
8,308,794
EQUITY AND LIABILITIES
Equity
Share capital
12,340
12,159
Reserves
6,225,165
8,078,888
Total equity attributable to equity
shareholders of the Company
6,237,505
8,091,047
Non-controlling interests
115,153
112,420
6,352,658
8,203,467
2014
2013
Note
RMB'000
RMB'000
Non-current liabilities
Obligations under finance leases
719
832
Current liabilities
Trade and other payables
12
102,087
104,390
Obligations under finance leases
113
105
102,200
104,495
Total liabilities
102,919
105,327
Total equity and liabilities
6,455,577
8,308,794
Net current assets
2,130,072
2,363,249
Total assets less current liabilities
6,353,377
8,204,299
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 30 June 2014
2014
2013
RMB'000
RMB'000
Cash flows from operating activities
(Loss)/profit before income tax
(1,836,446)
124,662
Adjustments for:
Interest income
(35,855)
(50,509)
Impairment of goodwill
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
144
126
Share-based payments
10,131
24,698
Amortisation of land use rights
1,521
1,360
Amortisation of intangible assets
10,748
12,723
Depreciation of property, plant and equipment
181,378
144,603
Written off of inventories
22,577
-
Loss on disposals of property, plant and equipment
12,192
2,172
Loss on disposal of land use right
-
4,902
Loss on deregistration of subsidiaries
-
192
Net loss on change in fair value of biological assets
923,857
260,468
Operating profit before working capital changes
176,947
525,397
Movements in working capital elements:
Biological assets
(14,675)
(53,462)
Inventories
(39,687)
22,817
Trade and other receivables
(86,857)
18,342
Trade and other payables
(2,310)
47,232
Net cash generated from operating activities
33,418
560,326
Cash flows from investing activities
Proceeds from disposals of property, plant and equipment
7,434
1,853
Proceed from disposal of land use right
-
3,565
Purchases of property, plant and equipment
(18,967)
(32,823)
Purchase of land use right
(4,998)
(14,001)
Additions to construction-in-progress
(200,888)
(391,561)
Deposits paid for acquisition of property, plant and equipment
(1,443)
(84,297)
Net additions to biological assets
(162,157)
(123,745)
Additions to intangible assets
-
(18,680)
Decrease in time deposits with terms over three months
-
62,960
Interest received
35,855
50,509
Net cash used in investing activities
(345,164)
(546,220)
2014
2013
RMB'000
RMB'000
Cash flows from financing activities
Proceeds from issue of new shares upon exercises of
share options
14,362
2,746
Repurchase of shares
-
(34,548)
Repayments of obligations under finance leases
(105)
(97)
Dividends paid
(38,849)
(166,011)
Finance costs paid
(144)
(126)
Net cash used in financing activities
(24,736)
(198,036)
Net decrease in cash and cash equivalents
(336,482)
(183,930)
Cash and cash equivalents at beginning of year
2,141,224
2,325,154
Cash and cash equivalents at end of year
1,804,742
2,141,224
Major non-cash transactions
During the year, purchases of property, plant and equipment included an amount of RMB84,303,000 (2013: RMB4,245,000) 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 2014 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:
Improvements to IFRSs
Annual improvements to IFRSs 2010-2012 cycles2
Improvements to IFRSs
Annual improvements to IFRSs 2011-2013 cycle2
Amendments to IFRS 9
and IFRS 7
Mandatory effective date of IFRS 9 and transition disclosures5
Amendments to IFRS 10,
IFRS 12 and IFRS 27
Investing entities1
Amendments to IAS 16
and IAS 38
The Classification of acceptable methods of depreciation and
amortisation3
Amendments to IAS 16
and IAS 41
Bringing bearer plants into the scope of IAS 163
Amendments to IAS 32
Offsetting financial assets and financial liabilities1
Amendments to IAS 36
Recoverable amount disclosures for non-financial assets1
IFRS 9
Financial instruments5
IFRS 15
Revenue from contracts with customers4
1 Effective for annual periods beginning on or after 1 January 2014.
2 Effective for annual periods beginning on or after 1 July 2014.
3 Effective for annual periods beginning on or after 1 January 2016.
4 Effective for annual periods beginning on or after 1 January 2017.
5 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:
2014
2013
RMB'000
RMB'000
Sales of oranges
732,807
919,983
Sales of self-bred saplings
892
1,840
Sales of processed fruits
537,472
564,089
1,271,171
1,485,912
5 OTHER OPERATING EXPENSES
2014
2013
RMB'000
RMB'000
Impairment of goodwill
853,378
-
Written off of inventories#
8,459
-
Impairment of property, plant and equipment#
15,690
-
Impairment of biological assets#
11,802
-
Impairment of properties for sale
5,830
-
895,159
-
# These expenses were resulted from the widespread damage caused by Typhoon Rammasun in July 2014, accounted for as adjusting events after the reporting period.
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 (2013: 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 2014:
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 produce
Processed fruits
Total
2014
2013
2014
2013
2014
2013
RMB'000
RMB'000
RMB'000
RMB'000
RMB'000
RMB'000
RESULTS
Reportable segment revenue and
revenue from external customers
733,699
921,823
537,472
564,089
1,271,171
1,485,912
Reportable segment results
(960,043)
31,912
12,900
138,711
(947,143)
170,623
Unallocated corporate expenses
(892,115)
(50,557)
Unallocated corporate other income
2,812
4,596
(Loss)/profit before income tax
(1,836,446)
124,662
Income tax expense
-
-
(Loss)/profit for the year
(1,836,446)
124,662
ASSETS
Segment assets
4,294,283
5,253,592
1,700,650
1,689,669
5,994,933
6,943,261
Unallocated corporate assets
460,644
1,365,533
Total assets
6,455,577
8,308,794
LIABILITIES
Segment liabilities
(75,748)
(76,016)
(22,566)
(24,483)
(98,314)
(100,499)
Unallocated corporate liabilities
(4,605)
(4,828)
Total liabilities
(102,919)
(105,327)
OTHER INFORMATION
Additions to segment
non-current assets
159,390
225,539
149,493
321,737
308,883
547,276
Amortisation of land use rights
-
-
466
306
466
306
Amortisation of intangible assets
5,360
7,360
5,388
5,363
10,748
12,723
Depreciation
78,229
71,225
72,560
50,764
150,789
121,989
Loss on disposals of property,
plant and equipment
1,010
-
10,814
2,168
11,824
2,168
Construction-in-progress written off
-
1,480
-
189
-
1,669
Interest income
20,258
32,799
12,786
13,114
33,044
45,913
Finance charges on obligations
under finance leases
75
83
-
-
75
83
Net loss on change in fair value of
biological assets
923,857
260,468
-
-
923,857
260,468
Impairment of biological assets
11,802
-
-
-
11,802
-
Impairment of property, plant
and equipment
13,079
-
2,611
-
15,690
-
Written off of inventories
-
-
22,577
-
22,577
-
Share-based payments
246
4,980
9,750
16,086
9,996
21,066
7 (LOSS)/PROFIT BEFORE INCOME TAX
(Loss)/profit before income tax is stated after charging/(crediting) the following:
2014
2013
RMB'000
RMB'000
(a) Finance costs
Bank charges
69
43
Finance charges on obligations under finance leases
75
83
144
126
(b) Staff costs (including directors' emoluments)
- salaries, wages and other benefits
135,369
114,510
- share-based payments
10,131
24,698
- contribution to defined contribution retirement plans
3,322
2,775
148,822
141,983
(c) Other items
Amortisation of land use rights
1,521
1,360
Amortisation of intangible assets
10,748
12,723
Auditor's remuneration
2,522
2,432
Cost of agricultural produce sold#
678,839
571,147
Cost of inventories of processed fruits
recognised as expenses##
458,402
417,166
Depreciation of property, plant and equipment
181,378
144,603
Add: Realisation of depreciation previously
capitalised as biological assets
25,346
23,423
Less: Amount capitalised as biological assets
(54,974)
(45,059)
151,750
122,967
Construction-in-progress written off
-
1,669
Exchange gains, net
14
989
Operating lease expenses
- plantation bases
9,163
9,470
- properties
1,184
1,020
Research and development costs
13,556
4,963
Written off of inventories###
22,577
-
Loss on disposals of property, plant and equipment
12,192
2,172
Loss on disposal of land use right
-
4,902
Loss on deregistration of subsidiaries
-
192
# Cost of agricultural produce sold includes RMB151,422,000 (2013: RMB133,321,000) 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 RMB94,190,000 (2013: RMB82,422,000) 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 written off of inventories for the year of RMB14,118,000 (2013: RMBNil) and RMB8,459,000 (2013: RMBNil) 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:
(i) Pursuant to the rules and regulations of Bermuda, Cayman Islands and the British Virgin Islands ("BVI"), the Group is not subject to any income tax in the respective tax jurisdictions.
(ii) No Hong Kong profits tax has been provided as the Group did not have assessable profits arising in or derived from Hong Kong.
(iii) 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%.
(iv) 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 2014, 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)/EARNINGS PER SHARE
The calculation of the basic and diluted (loss)/earnings per share is based on the following:
2014
2013
RMB'000
RMB'000
(Loss)/earnings
(Loss)/profit attributable to equity shareholders of the Company used in basic and diluted (loss)/earnings per share calculation
(1,839,179)
114,395
Weighted average number of shares
'000
'000
Issued ordinary shares at beginning of year
1,229,559
1,221,097
Effect of shares issued to shareholders participating
in the scrip dividend
5,238
8,811
Effect of shares issued upon exercises of share options
5,371
55
Effect of shares repurchased and cancelled
-
(7,236)
Weighted average number of ordinary shares
used in basic (loss)/earnings per share calculation
1,240,168
1,222,727
Effect of dilutive potential shares in respect of
share options (Note)
-
10,035
Weighted average number of ordinary shares
used in diluted (loss)/earnings per share calculation
1,240,168
1,232,762
Note:
The potential ordinary shares arising from the conversion of share options had an anti-dilutive effect on the basic loss per share for the year ended 30 June 2014, hence they were ignored in the calculation of diluted loss per share.
10 DIVIDENDS
(i) Dividends payable to equity shareholders of the Company attributable to the year:
2014
2013
RMB'000
RMB'000
Interim dividend declared and paid during the year:
RMBNil per ordinary share (2013: interim dividend
of RMB0.03and special dividend of RMB0.02 per
ordinary share)
-
61,386
Final dividend proposed after the end of the reporting period:
RMBNil per ordinary share (2013: RMB0.05 per
ordinary share)
-
61,478
-
122,864
The final dividend proposed after the end of the reporting period has not been recognised as a liability at the end of the reporting period.
(ii) Dividends payable to equity shareholders of the Company attributable to the previous financial year, approved and paid during the year:
2014
2013
RMB'000
RMB'000
Interim dividend for the year, approved and paid during the
year: RMBNil per ordinary share (2013: interim dividend
of RMB0.03 and special dividend of RMB0.02 per ordinary
share)
-
61,386
Final dividend of RMB0.05 per ordinary share in respect of
the previous financial year, approved and paid during the
year (2013: final dividend of RMB0.13 per ordinary share)
61,478
158,531
61,478
219,917
11 TRADE AND OTHER RECEIVABLES
2014
2013
RMB'000
RMB'000
Trade receivables
53,717
42,736
Other receivables, deposits and prepayments
101,455
25,579
155,172
68,315
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:
2014
2013
RMB'000
RMB'000
Neither past due nor impaired
53,253
41,492
Less than 1 month past due
-
1,174
1 to 3 months past due
438
-
3 to 6 months past due
-
-
6 to 12 months past due
-
-
Over 1 year past due
26
70
Amounts past due but not impaired
464
1,244
53,717
42,736
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:
2014
2013
RMB'000
RMB'000
Less than 3 months
62,783
62,881
3 to 6 months
46
68
6 to 12 months
516
304
Over 1 year
3
299
63,348
63,552
13 Financial Information
The results announcement was approved by the Board on 26 September 2014. 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 2013, except for the accounting policies changes as detailed in Note 3.
The consolidated financial statements for the year ended 30 June 2014 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 2014 and their report was unqualified and did not contain a statement under section 237 (2) or (3) of the Companies Act 1985.
OTHER INFORMATION
DIVIDENDS
The Board does not recommend the payment of any dividend for the year ended 30 June 2014 (2013: RMB0.10 per ordinary share, including the final dividend of RMB0.05, interim dividend of RMB0.03 and special dividend of RMB0.02).
PURCHASE, SALE OR REDEMPTION OF THE COMPANY'S LISTED SECURITIES
On 6 December 2013, 1,715,000 and 7,802,000 new ordinary shares of HK$0.01 each were issued at the exercise prices of GBP0.112 and GBP0.139 respectively upon the exercise of a total of 9,517,000 share options under the share option scheme.
On 19 December 2013, 10,562,329 new ordinary shares of HK$0.01 each were issued at the price of HK$2.74 per share to shareholders participating in the scrip dividend.
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 2014.
CODE ON CORPORATE GOVERNACE PRACTICES
The Company is committed to the principles of corporate governance and corporate responsibility consistent with prudent management. It is the belief of the Board that such commitment will in the long term serve to enhance shareholders' value.
The Directors, where practicable, for an organisation of the Group's size and nature sought to adopt two corporate governance codes set out 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. It consists of principles of good governance covering the following areas: (i) Leadership; (ii) Effectiveness; (iii) Accountability; (iv) Remuneration; and (v) Relations with shareholders.
2. On 23 February 2012, the Company also adopted the Corporate Governance Code (the "Code") contained in the amended 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 as its code on corporate governance practices.
The Company has complied with all the code provisions as set out in the Code for the year ended 30 June 2014 except the deviations set out below:
Code Provision A.2.1
Chairman and Chief Executive
During the period from 1 July 2013 to 2 March 2014, the roles of Chairman and Chief Executive Officer were performed by the same individual, Mr. Tong Wang Chow, and were not separated. The Board meets regularly to consider issues related to corporate matters affecting the operations of the Group. The Board considers that the structure will not impair the balance of power and authority of the Board and the Company's management and, thus, believes that this structure will enable effective planning and implementation of corporate strategies and decisions.
With effect from 3 March 2014, Mr. Tong Wang Chow resigned as an Executive Director of the Company and ceased all his other offices of the Company (including the Executive Chairman). On the same date, Mr. Ng Hoi Yue was appointed as the Non-executive Chairman. Also with effect from the same date, Mr. Ng Ong Nee was appointed as the Chief Executive Officer of the Company. Since then, the roles of chairman and chief executive have been performed by separate individuals, in compliance with provision A.2.1 of the Code.
Mr. Ng Hoi Yue, the Non-executive Chairman, is responsible for overseeing the functions of the Board, ensuring that the Board works effectively and performs its responsibilities, and that all key and appropriate issues are discussed by it in a timely manner. These are all in compliance with the provision set forward in paragraph A.2 of the Code.
Mr. Ng Ong Nee, the Chief Executive Officer, is responsible for leadership of the Group's business, the development and implementation of strategies and managing the overall operations. Within the authorities delegated by the Board he is responsible for developing strategy proposals, ensuring that the financial results, business strategies and, where appropriate, targets and milestones are communicated to the investment community, shareholders and other relevant stakeholders.
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 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 for appointments 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 down 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 (the "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 subject to the Board's approval. External consultants may be engaged, if necessary, to access a wider range of potential candidate(s).
Code Provision E.1.2
The chairman of the Board should attend the annual general meeting. He should also invite the chairmen of the Audit Committee and the Remuneration Committee to attend. However, Mr. Tong Wang Chow, the former Executive Chairman, was unable to attend the annual general meeting of the Company held on 12 November 2013 (the "2013 AGM") due to other business engagements. In the absence of the former Executive Chairman, Mr. Tong Hung Wai, Tommy, an Executive Director, took the chair of the 2013 AGM pursuant to the provisions of the Company's Bye-Laws to ensure an effective communication with the shareholders thereat.
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 of all Directors made 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 2014.
CHANGE IN THE INFORMATION OF DIRECTORS
Hon Peregrine Moncreiffe retired as an INED and ceased to be a member of the remuneration committee of the Board (the "Remuneration Committee") with effect from the conclusion of the 2013 AGM.
Mr. Ma Chiu Cheung, Andrew retired as an INED and ceased to be the chairman of the audit committee of the Board (the "Audit Committee") and a member of the Remuneration Committee with effect from the conclusion of the 2013 AGM.
Mr. Chung Koon Yan was appointed as an INED and a member of both the Audit Committee and the Remuneration Committee with effect from 12 November 2013.
Mr. Ho Wai Leung was appointed as an INED and a member of the Remuneration Committee with effect
from 12 November 2013.
Mr. Tong Wang Chow resigned as an Executive Director and ceased all his other offices of the Company (including the Executive Chairman and an authorised representative under the Hong Kong Listing Rules (the "Authorised Representative)) but was appointed as the Honorary Chairman of the Company and Group Consultant of the Company, all with effect from 3 March 2014.
Mr. Ng Hoi Yue was appointed as the chairman of the Audit Committee and the Non-executive Chairman of the Company with effect from 12 November 2013 and 3 March 2014, respectively.
Mr. Tong Hung Wai, Tommy was appointed as the Vice Chairman and an Authorised Representative of the Company with effect from 3 March 2014.
Mr. Ng Ong Nee was appointed as an Executive Director and the Chief Executive Officer of the Company with effect from 3 March 2014. With effect from the same date, he was also appointed as a member of the Remuneration Committee.
The Board would like to express its gratitude to Mr. Tong Wang Chow, Hon Peregrine Moncreiffe and Mr. Ma Chiu Cheung, Andrew for their valuable contributions over the years, and welcome and congratulate Mr. Ng Hoi Yue, Mr. Ng Ong Nee, Mr. Tong Hung Wai, Tommy, Mr. Chung Koon Yan and Mr. Ho Wai Leung to their new positions in the Company.
REVIEW OF THE FINAL RESULTS BY AUDIT COMMITTEE
The Audit Committee comprises three INEDs. Mr. Ng Hoi Yue acts as chairman of the committee with Mr. Yang Zhen Han and Mr. Chung Koon Yan as members. The arrangement of Audit Committee is in compliance with Rule 3.21 of the Hong Kong Listing Rules.
The Audit Committee has reviewed with the management and the Company's independent auditor the accounting principles and practices adopted by the Group and has discussed auditing, internal control and financial reporting matters, including the review of the audited consolidated financial statements of the Group for the year ended 30 June 2014.
PUBLICATION OF ANNUAL REPORT
The annual report will be published on the respective websites of the Company (www.asian-citrus.com) under the investor relations section and the HKEx (www.hkex.com.hk) in due course.
BY ORDER OF THE BOARD
Asian Citrus Holdings Limited
Ng Hoi Yue
Non-executive Chairman
Hong Kong,26 September 2014
As at the date of this announcement, the board of directors of the Company comprises four Executive Directors, namely Mr. Ng Ong Nee (Chief Executive Officer), Mr. Tong Hung Wai, Tommy (Vice Chairman), Mr. Cheung Wai Sun and Mr. Pang Yi; and five Independent Non-executive Directors, namely Mr. Ng Hoi Yue (Non-executive Chairman), Dr. Lui Ming Wah, SBS JP, Mr. Yang Zhen Han, Mr. Chung Koon Yan and Mr. Ho Wai Leung.
*For identification purposes only
This information is provided by RNSThe company news service from the London Stock ExchangeENDFR UNVBRSSAKURR
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