REG - Asian Citrus Hldgs - Half Yearly Report <Origin Href="QuoteRef">0073.HK</Origin> - Part 3
26/02/2016 10:20
- Part 3: For the preceding part double click ID:nRSZ2838Qb
period 1,182 17 - 9 - 580,290 581,498
Written back on disposals (1,760 ) - (3,136 ) (1,165 ) (4 ) - (6,065 )
At 31 December 2015 (unaudited) 89,946 1,431 136,119 9,917 8,641 1,376,998 1,623,052
Carrying amount
At 31 December 2015 (unaudited) 357,088 2,237 339,283 3,694 3,368 945,188 1,650,858
At 31 December 2014 (unaudited) 366,837 2,379 344,536 4,664 4,338 1,571,743 2,294,497
At 30 June 2015 (audited) 362,146 2,317 351,960 4,106 3,755 1,529,222 2,253,506
At 31 December 2015, the carrying amount of farmland infrastructure and machinery held under finance lease was RMB665,000
(31 December 2014: RMB775,000, 30 June 2015: RMB715,000).
Xinfeng Plantation was suffered from massive infection of Huanglongbing diseaseas identified in the reports from the
Investigations mentioned in note 7 and it was shut down with operations ceasing permanently. As a result, property, plant
and equipment of RMB581,498,000 at Xinfeng Plantation has been impaired for the six months ended 31 December 2015.
13 BIOLOGICAL ASSETS
Biological assets are analysed as follows:
Citrus Others
Self-bredsaplings Infanttrees Citrustrees Bananatrees Total
RMB'000 RMB'000 RMB'000 RMB'000 RMB'000
At 1 July 2014 2,832 323,969 1,294,971 - 1,621,772
Net additions 5,474 - - 192 5,666
Sales of citrus self-bred saplings (1,472 ) - - - (1,472 )
Intra transfer to citrus infant trees (390 ) 390 - - -
Intra transfer to citrus trees - (25,654 ) 25,654 - -
Net increase due to cultivation - 247,333 69,620 10,767 327,720
Write off of citrus trees - - (114,071 ) - (114,071 )
Change in fair value due to price, yield, maturity and cost changes - - (242,833 ) - (242,833 )
At 30 June 2015 (audited) 6,444 546,038 1,033,341 10,959 1,596,782
Net additions 2,601 - - 193 2,794
Sales of citrus self-bred saplings (686 ) - - - (686 )
Impairment - (401) (270,000 ) - (270,401 )
Net increase/(decrease) due to cultivation/(harvest) - 139,724 (101,473 ) (7,928 ) 30,323
Change in fair value due to price, yield, maturity and cost changes - - (190,000 ) - (190,000 )
At 31 December 2015 (unaudited) 8,359 685,361 471,868 3,224 1,168,812
At 31 December 2014 (unaudited) 4,498 482,913 1,188,398 4,225 1,680,034
At 30 June 2015 (audited) 6,444 546,038 1,033,341 10,959 1,596,782
Represented by:
Citrus Others 31 December 30 June
Self-bred Infant Citrus Banana 2015 2014 2015
saplings trees trees trees Total Total Total
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000
Non-current 8,359 685,361 320,000 - 1,013,720 1,527,411 1,332,482
Current - - 151,868 3,224 155,092 152,623 264,300
8,359 685,361 471,868 3,224 1,168,812 1,680,034 1,596,782
13 BIOLOGICAL ASSETS (Continued)
The movements in biological assets are summarised as follows:
Citrus Others
Self-bredsaplings Infanttrees Citrustrees Bananatrees
Number Number Number Number
At 1 July 2014 265,602 1,903,268 2,714,038 -
Net additions 121,190 - - 221,769
Sales of citrus self-bred saplings (97,590 ) - - -
Intra transfer to citrus infant trees (29,523 ) 29,523 - -
Intra transfer to citrus trees - (63,584 ) 63,584 -
Write off of citrus trees# - - (317,839 ) -
At 30 June 2015 (audited) 259,679 1,869,207 2,459,783 221,769
Impairment## - (2,563) (1,282,161 ) -
Sales of citrus self-bred saplings (50,484 ) - - -
At 31 December 2015 (unaudited) 209,195 1,866,644 1,177,622 221,769
# The Group has identified the presence of Huanglongbing disease at Xinfeng Plantation since April 2015.
317,839 winter orange trees with carrying amount of RMB114,071,000 suffering from Huanglongbing disease were removed during
the year ended 30 June 2015 so to prevent the spread of Huanglongbing disease and protect the unaffected orange trees.
## Xinfeng Plantation was suffered from massive infection of Huanglongbing disease as identified in the reports
from the Investigations mentioned in note 7 and it was shut down with operations ceasing permanently. As a result, 2,563
infant trees and 1,282,161 citrus trees were impaired by RMB401,000 and RMB270,000,000 respectively for the six months
ended 31 December 2015.
Self-bred saplings and infant trees are undergoing biological transformation leading to them being able to produce oranges
and grapefruits. Once the self-bred saplings and infant trees become mature and productive, they will be transferred to the
category of citrus trees. The role of citrus trees is to supply oranges and grapefruits through the processes of growth in
each production cycle. As at 31 December 2014, 30 June 2015 and 31 December 2015, citrus trees comprised orange trees
only.
The role of banana trees is to supply bananas through the processes of growth in their production cycle. As at 31 December
2015 and 2014, banana trees are stated at cost as little biological transformation has taken place since initial cost
incurrence as banana trees were naturally re-seeded from the original banana trees towards the end of the reporting
period.
The Group has engaged an independent valuer to determine the fair value of orange trees as at 31 December 2015. The
valuation methodology used to determine the fair value of orange trees is in compliance with both IAS 41, Agriculture, and
the International Valuation Standards issued by the International Valuation Standards Council which aims to determine the
fair value of a biological asset in its present location and condition.
13 BIOLOGICAL ASSETS (Continued)
The fair value of orange trees less costs to sell is calculated by deducting the estimated costs directly attributable to
the disposal of the orange trees from the fair value of the orange trees. The fair value has been determined by calculating
expected future cash flows from the assets, discounted at a rate that reflects management's best estimation of the expected
risk level, and deducting therefrom the value of plantation-related machinery and equipment and land improvements. In
estimating the future cash flows and discount rate, the following key assumptions were applied:
(a) The market price variables, which represent the assumed market price for summer oranges and winter oranges produced
by the Group. The valuation adopted the historical market sales prices for each type of orange produced by the Group as the
basis of sales price estimation. The market prices are assumed to have increased by 3% per annum, which is similar to the
projected long-term inflation rate.
(b) The yield per tree variables represents the harvest level of the orange trees. The yield of orange trees is affected
by the age, species and health of the orange trees, as well as the climate, location, soil condition, 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.
(c) The direct production cost variables, which represent the direct costs necessary to bring the oranges to their sale
form. These 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% per annum.
(d) The Capital Asset Pricing Model has been used to determine a discount rate of 18% (six months ended 31 December
2014: 18%, year ended 30 June 2015: 18%) to be applied to the orange trees operations.
(e) Other key assumptions which have taken into account in valuing the Group's biological assets include, among other
things,
(i) cash flows are calculated from the current rotation of orange trees only, without taking into account the
projected revenue or costs related to the re-establishment of new orange trees;
(ii) projected cash flows have taken into account the projected long-term inflation rate of 3% per annum and
excluded financial costs and taxation;
(iii) as discounted cash flows are based on current orange prices, planned future business activities that may impact
the future prices of oranges harvested from the Group's plantations are not considered; and
(iv) no allowance is made for cost improvements in future operations.
The fair value measurement of the orange trees is categorised as level 3 fair value measurement within the three-level fair
value hierarchy as defined in IFRS 13, Fair value measurement. Significant unobservable inputs are mainly the expected
future cash flow and the discount rate. The higher the future cash flows or the lower the discount rate, the higher the
fair value determined.
13 BIOLOGICAL ASSETS (Continued)
During the six months ended 31 December 2015, six months ended 31 December 2014 and year ended 30 June 2015, there was no
transfer occurred between levels in the hierarchy.
The land currently occupied by the Group is leased from independent third parties, and has no commercial value. With
reference to the value of machinery and equipment and other assets (represented by improvements in structures and
buildings, wind breakers, etc.), the total values of the assets as at 31 December 2015 for Hepu Plantation and Xinfeng
Plantation are approximately RMB376 million (31 December 2014: RMB399 million, 30 June 2015: RMB368 million) and RMBNil (31
December 2014: RMB612 million, 30 June 2015: RMB593 million), respectively.
The quantity and value of agricultural produce harvested during the period/year were as follows:
Six months ended 31 December Year ended 30 June
2015 2014 2015
Quantity Value Quantity Value Quantity Value
(unaudited) (unaudited) (audited)
Tonnes RMB'000 Tonnes RMB'000 Tonnes RMB'000
Oranges 15,565 36,779 110,993 340,999 130,125 408,934
Bananas 5,931 18,656 - - - -
21,496 55,435 110,993 340,999 130,125 408,934
The Group is exposed to a number of risks relating to its plantations:
(1) Regulatory and environmental risks
The Group is subject to laws and regulations in the jurisdiction in which it operates. The Group has established
environmental policies and procedures aimed at compliance with local environmental and other laws. Management performs
regular reviews to identify environmental risks and to ensure that the systems in place are adequate to manage those
risks.
(2) Supply and demand risks
The Group is exposed to risks arising from fluctuations in the price and sales volume of oranges and bananas. Where
possible the Group manages these risks by aligning its harvest volume to market supply and demand. Management performs
regular industry trend analyses to ensure that the Group's pricing structure is in line with the market and to ensure that
projected harvest volumes are consistent with the expected demand.
(3) Climate and other risks
The Group's plantations are exposed to the risk of damage from climatic changes, diseases, forest fires and other natural
forces. The Group has extensive processes in place aimed to minimise those risks, including regular forest health
inspections and industry pest and disease surveys.
14 INTANGIBLE ASSETS
Capitaliseddevelopment costs Trademark Total
RMB'000 RMB'000 RMB'000
Cost
At 1 July 2014 107,726 3 107,729
Additions 8,200 - 8,200
At 30 June 2015 (audited) and 31 December 2015 (unaudited) 115,926 3 115,929
Accumulated amortisation and impairment
At 1 July 2014 54,012 2 54,014
Charge for the year 10,823 1 10,824
At 30 June 2015 (audited) Charge for the period 64,8355,904 3- 64,8385,904
Impairment loss recognised for the period 45,187 - 45,187
At 31 December 2015 (unaudited) 115,926 3 115,929
Carrying amount
At 31 December 2015 (unaudited) - - -
At 31 December 2014 (unaudited) 48,340 1 48,341
At 30 June 2015 (audited) 51,091 - 51,091
The amortisation charge for the period of RMB3,507,000 (six months ended 31 December 2014: RMB2,694,000, year ended 30 June
2015: RMB5,464,000) and RMB2,397,000 (six months ended 31 December 2014: RMB2,680,000, year ended 30 June 2015:
RMB5,360,000) is included in cost of sales and general and administrative expenses, respectively, in the condensed
consolidated statement of profit or loss.
Capitalised development costs represent expenditure incurred in developing techniques relating to the cultivation of citrus
trees and processing of fruit, which will increase the productivity of the relevant operations in the future periods.
The directors of the Company have determined that there is impairment on intangible assets as the aggregate carrying
amounts of capitalised development costs is in excess of their recoverable amount based on a value in use calculation.
During the six months ended 31 December 2015, the Group recognised an impairment loss of RMB10,780,000 and RMB34,407,000 in
the agricultural produce segment and the processed fruit segment respectively (six months ended 31 December 2014: RMBNil,
year ended 30 June 2015: RMBNil) so as to reflect the reduced recoverable amount of the intangible assets as assessed by
management based on the current business and operating environment.
14 INTANGIBLE ASSETS (Continued)
For the six months ended 31 December 2015, the recoverable amount of the intangible assets in the agricultural produce
segment has been determined based on a value in use calculation which uses cash flow projections from financial budgets
approved by management covering a 5-year period, and a discount rate of 18%. Other key assumptions for the value in use
calculations relate to the estimation of cash flows which include budgeted sales and gross margin, and such estimations are
based on the past performance of the agricultural produce segment and management's expectations based on market
developments.
For the six months ended 31 December 2015, the recoverable amount of the intangible assets in the processed fruit segment
has been determined based on a value in use calculation which uses cash flow projections from financial budgets approved by
management covering a 5-year period, and a discount rate of 12%. Other key assumptions for the value in use calculations
relate to the estimation of cash flows which include budgeted sales and gross margin, and such estimations are based on the
past performance of the processed fruit segment and management's expectations based on market developments.
15 TRADE AND OTHER RECEIVABLES
Included in trade and other receivables are trade receivables with the ageing analysis of trade receivables based on
invoice date is as follows:
31 December 30 June
2015 2014 2015
(unaudited) (unaudited) (audited)
RMB'000 RMB'000 RMB'000
Less than 1 month 24,836 68,243 59,183
1 to 3 months 30,994 33,970 51,464
3 to 6 months 824 7 2,339
Over 1 year - 49 -
56,654 102,269 112,986
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.
15 TRADE AND OTHER RECEIVABLES (Continued)
The ageing analysis of trade receivables that are neither individually nor collectively considered to be impaired is as
follows:
31 December 30 June
2015 2014 2015
(unaudited) (unaudited) (audited)
RMB'000 RMB'000 RMB'000
Neither past due nor impaired 54,077 73,067 110,615
Less than 1 month past due 2,388 22,414 1,382
1 to 3 months past due 189 6,762 989
Over 1 year past due - 26 -
Amounts past due but not impaired 2,577 29,202 2,371
56,654 102,269 112,986
Trade receivables that were neither past due nor impaired relate to a wide range of customers for whom there was no recent
history of default.
Trade 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.
16 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:
31 December 30 June
2015 2014 2015
(unaudited) (unaudited) (audited)
RMB'000 RMB'000 RMB'000
Less than 3 months 96,935 68,410 102,966
3 to 6 months 1,283 260 129
6 to 12 months 6,432 658 2,009
Over 1 year 584 9 531
105,234 69,337 105,635
17 FINANCIAL INFORMATION
The results announcement was approved by the Board on 26 February 2016. The interim financial information has been prepared
on a going concern basis in accordance with IAS 34, Interim financial reporting. The accounting policies applied in
preparing the interim financial information are consistent with those adopted and disclosed in the Group's consolidated
financial statements for the year ended 30 June 2015, except for the accounting policy changes as detailed in note 3.
The Company's auditors have reviewed and reported on the Group's interim financial information for the six months ended 31
December 2015. An extract of the modified review report issued by HLB Hodgson Impey Cheng Limited is as follows:
Basis for qualified conclusion
Opening balances and comparative figures
The consolidated financial statements of the Group for the year ended 30 June 2015, which form the basis for the
corresponding figures presented in the current period's interim financial information, were not audited by us. The
predecessor auditor's audit opinion on the consolidated financial statements of the Group for the year ended 30 June 2015
were qualified because of the possible effect of the limitation on the scope of the audit in relation to the Group's
recorded purchases of fertilisers from an enterprise in the People's Republic of China with a reported value of
RMB104,317,000 for the year and a corresponding recorded trade payable balance at a carrying amount of RMB24,800,000 as at
30 June 2015. Details of the qualified audit opinion were set out in the independent auditor's report dated 30 September
2015 and included in the Company's annual report for the year ended 30 June 2015.
We were not able to obtain sufficient appropriate audit evidence to enable us to assess the limitation of scope for the
year ended 30 June 2015. Any adjustment found to be necessary to the opening balances as at 1 July 2015 may affect the
balance of retained profits as at 1 July 2015, the Group's cost of sales, the results and related disclosures in the notes
to the interim financial information of the Group for the six months ended 31 December 2015.
Qualified conclusion
Based on our review, except for the possible effects of the matter described in the basis for qualified conclusion
paragraph, nothing has come to our attention that causes us to believe that the interim financial information is not
prepared, in all material respects, in accordance with International Accounting Standard 34, Interim financial reporting.
OTHER INFORMATION
DIVIDENDS
The Board does not recommend the payment of an interim dividend for the six months ended 31 December 2015 (six months ended
31 December 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 six months ended 31 December 2015.
CORPORATE GOVERNANCE CODE
During the six months ended 31 December 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 and 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 Appendix 14 to 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 during the six months ended 31 December 2015
except for 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
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 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
("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).
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 has 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 to 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 six months ended 31 December 2015.
CHANGES IN THE COMPOSITION OF THE BOARD AND OTHER POSITIONS OF DIRECTORS
Changes in the composition of the Board during the six months ended 31 December 2015 and up to the date of this report are
as follows:
With effect from 4 August 2015:
(a) Mr. Ng Hoi Yue was re-designated from an INED to an Executive Director and resigned as the Non-executive Chairman of
the Board; and
(b) Mr. Ng Ong Nee was appointed the Chairman of the Board.
With effect from 12 November 2015:
(a) Mr. Cheung Wai Sun, Mr. Pang Yi and Mr. Ng Cheuk Lun retired from the Board, effective from the conclusion of the
annual general meeting of the Company held on 12 November 215 (the "AGM") as they did not offer themselves for re-election
as Executive Directors of the Company at the AGM.
(b) Mr. Tong Hung Wai, Tommy resigned as an Executive Director of the Company and the Vice Chairman of the Company;
and
(c) Mr. Ho Wai Leung resigned as an INED of the Company.
Changes in other positions of the Directors during the six months ended 31 December 2015 are as follows:
With effect from 3 August 2015:
(a) Mr. Ng Cheuk Lun resigned as the Secretary of the Company and an authorised representative of the Company under the
Hong Kong Listing Rules (the "LR Representative"); and
(b) Mr. Ng Ong Nee was appointed as a LR Representative.
With effect from 4 August 2015:
(a) Mr. Tong Hung Wai, Tommy resigned as a LR Representative, and an authorised representative (the "CO Representative")
of the Company for accepting service of process and notices in Hong Kong on behalf of the Company under Part 16 of the
Companies Ordinance (Chapter 622 of the Laws of Hong Kong) (the "Companies Ordinance");
(b) Mr. Ng Hoi Yue was appointed as the Deputy Chief Executive Officer of the Company, a LR Representative and a CO
Representative and resigned as the chairman and a member of the Audit Committee and the Remuneration Committee of the
Company;
(c) Mr. Chung Koon Yan was appointed as the chairman of the Audit Committee and the Remuneration Committee; and
(d) Dr. Lui Ming Wah, SBS JP was appointed as a member of the Audit Committee.
CHANGES IN THE COMPOSITION OF THE BOARD AND OTHER POSITIONS OF DIRECTORS (Continued)
With effect from 12 November 2015:
(a) Mr. Ho Wai Leung resigned as a member of the Remuneration Committee; and
(b) Dr. Lui Ming Wah, SBS JP was appointed as a member of the Remuneration Committee.
REVIEW OF FINANCIAL STATEMENTS
The Audit Committee comprises three INEDs. Mr. Chung Koon Yan acts as chairman of the committee with Dr. Lui Ming Wah, SBS
JP and Mr. Yang Zhen Han acting as members. The establishment of Audit Committee is in compliance with Rule 3.21 of the
Hong Kong Listing Rules.
The Audit Committee has the primary responsibility for monitoring the quality of internal control and ensuring that the
financial performance of the Company is properly measured and reported on, receiving and reviewing reports from management
and the external auditors relating to the annual and interim financial statements, and monitoring the accounting and
internal control systems in use throughout the Group for the six months ended 31 December 2015.
PUBLICATION OF INTERIM REPORT
The interim 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).
By Order of the Board
Asian Citrus Holdings Limited
Ng Ong Nee
Chairman
Hong Kong, 26 February 2016
As at the date of this announcement, the board of directors of the Company comprises two executive directors, namely Mr. Ng
Ong Nee (Chairman and Chief Executive Officer) and Mr. Ng Hoi Yue (Deputy Chief Executive Officer); and three independent
non-executive directors, namely Mr. Chung Koon Yan, Dr. Lui Ming Wah, SBS, JP and Mr. Yang Zhen Han.
This information is provided by RNS
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