Share Name Share Symbol Market Type Share ISIN Share Description
Aquatic Food LSE:AFG London Ordinary Share JE00BQQG1J93 ORD NPV
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  +0.00p +0.00% 13.00p 11.00p 15.00p 13.00p 13.00p 13.00p 1,620 08:00:00
Industry Sector Turnover (m) Profit (m) EPS - Basic PE Ratio Market Cap (m)
Food Producers 10,229.1 1,900.0 13.1 0.9 14.72

Aquatic Foods Group PLC Interim Results

28/09/2016 7:00am

UK Regulatory (RNS & others)


Aquatic Food (LSE:AFG)
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TIDMAFG

RNS Number : 0014L

Aquatic Foods Group PLC

28 September 2016

 
 Press Release   28 September 2016 
 

Aquatic Foods Group Plc

("Aquatic Foods" or "AFG" or the "Group" or the "Company")

Interim Results

Aquatic Foods Group Plc (AIM: AFG), a leading Chinese marine foods and seafood processor and producer supplying to export and local markets, today announces its unaudited results for the six months ended 30 June 2016.

Financial Highlights

-- Revenue decreased by 5.6% to RMB 419 million (H1 2015: RMB 444 million) although volumes, particularly in the Company's principal fish products, have increased albeit against lower margins

-- Overall gross margin has stabilised at 24.5% during H1 2016 (Q2 2016 aggregate gross margin of 24.5% compared with 24.5% in Q1 2016) although still significantly lower than in the first half of 2015 (33.0%)

   --     Aggregate gross profit decreased by 30.0% to RMB 103 million (H1 2015: RMB 147 million) 
   --     Profit before tax decreased by 51.3% to RMB 49 million (H1 2015: RMB 101 million) 
   --     Net profit after tax decreased by 51.6% to RMB 38 million (H1 2015: RMB 78 million) 
   --     Earnings per share of RMB 0.33 (H1 2015: RMB 0.70) 
   --     Cash as at 30 June 2016 was RMB 417 million (as at 30 June 2015: RMB 367 million) 

-- Interim dividend of 0.2p a share (2015 interim dividend 0.7p) reflecting the more challenging trading environment

   --     51 regional distributors as at 30 June 2016 (H1 2015: 51) 

Li Xianzhi, Chief Executive of Aquatic Foods, commented: "Despite the fall in profitability, AFG has performed credibly in what remains a challenging economic environment. Gross margin has stabilised, volumes continue to increase, and we have made continued progress in building new sales channels. As a result, AFG's business remains profitable and cash generative. The Directors have resolved to pay an interim dividend of 0.2p per share but will review the full year dividend in light of trading and market conditions at that time.

"The Directors expect the current challenging market conditions, reflected in cost inflation pressures combined with softening product pricing, to continue in the near term though the Board is pleased to note that gross margins achieved by the Company have stabilised. AFG's strategy in a competitive market and in the face of these pressures is to continue to focus on operational efficiency, developing new sales channels including supermarkets, increasing sales to our existing distribution network, expanding our distribution network and increasing our focus on export markets. AFG will also focus on advertising and promoting awareness of the "Zhenhaitang" brand standards. In particular, the Company is seeking to build on the success of its supply contract with Yihee International Corporation, the extension of which is expected to be considered during Q4.

"AFG adopts the highest standards for quality, safety and sustainability and is committed to producing high-end, pre-processed seafood products which provides confidence to both local PRC and overseas consumers alike. The Group's current extensive distribution network puts us in a very strong trading position and the Board is confident that, despite the current slowdown in the Chinese economy, the Group will continue to adapt and to expand its share in what is still a growing Chinese seafood and marine food market. The Group also remains committed in growing export sales and is confident that AFG will continue to leverage on its established position in the overseas market to further benefit from the high growth potential of the international seafood market.

"Whilst the Board is mindful of the potential challenges that lie ahead in the short term, the Board believes that these challenges also present potential growth and expansion opportunities for the Group. AFG's strong cash position allows the Group to take advantage of the challenging market environment to potentially grow and increase its presence within China through mergers and acquisitions as well as expanding through increasing process automation."

For further information:

 
 Aquatic Foods Group Plc         Tel: +44 (0)7706 814 895 
 Po Ling Low, Finance Director             pllow@kanwa.cn 
 
 
 SP Angel Corporate Finance LLP   Tel: +44 (0) 20 3470 0470 
  Nominated Adviser and Broker            www.spangel.co.uk 
 Stuart Gledhill / David Facey 
 

Media enquiries:

 
 Abchurch                                  Tel: +44 (0) 20 7398 7700 
 Julian Bosdet / Jenny Lee / George           www.abchurch-group.com 
  Robinson 
                                      AquaticFoods@abchurchgroup.com 
 

Chief Executive's Review

Operations in the first half of 2016 have been subdued, reflecting the continuation of the challenging business environment in the second half of 2015 caused by the slowdown of economic growth in China, the adverse impact from foreign exchange together with operating in a highly competitive market place. Against this volatile market backdrop, the Group experienced a decline in average selling prices across all product categories, and this has resulted in a decline in revenue by 5.6% to RMB 419 million (H1 2015: RMB 444 million). Cost of sales increased by 6.4%, in line with the increase in sale volume and general cost inflation which has also been impacted by foreign exchange.

Gross profit for H1 2016 was RMB 103 million and gross margin was 24.5% (H1 2015: RMB 147 million and 33% respectively). The fall in gross margin occurred in the second half of 2015 and has stabilised over the first half of 2016 at the current 24.5% level. Cost inflation remains an issue, especially raw materials, accessories and packaging materials and labour costs. Provided that the economic situation does not significantly worsen we expect that margins will not deteriorate further by a material amount, however we continue to monitor the situation closely.

As a result of this fall in gross profit, coupled with a modest increase in expenses, profit before tax and profit after tax fell to RMB 49 million (H1 2015: RMB 101 million) and RMB 38 million (H1 2015: RMB 78 million) respectively after taking into account foreign exchange losses of RMB 5 million, of which RMB 3 million related to an unrealized loss arising from translation of bank balances denominated in GBP.

AFG remains highly cash generative and the Group maintains a strong balance sheet with cash as at 30 June 2016 amounting to RMB 417 million (as at 31 Dec 2015: RMB 380 million). As the Group seeks to expand in the difficult operating environment, it is anticipated that the working capital requirement will increase due to enhanced credit terms and higher inventory levels.

As at 30 June 2016, AFG had 51 regional distributors (H1 2015: 51), covering 16 provinces, municipalities and autonomous regions in China. The Group works closely with its distributors to monitor performance and grow sales and remains committed to identifying and appointing new distributors to further expand its coverage in both urban and rural areas in China.

Currently, approximately 60% of fish processed originates from various overseas countries, including US, Canada, Norway, UK, and Ireland. The Group will continue to look for strategic alliances and partnerships to diversify the Company's supply chain.

Product categories

 
 Revenue breakdown by        Six months      Six months   Changes      Year ended 
  product category              30 June         30 June      %        31 December 
                                   2016            2015                      2015 
                              Unaudited       Unaudited                   Audited 
 Currency: RMB'000 
 Fish                           282,052         301,114     -6.3%         704,942 
 Sea Cucumbers                   63,849          65,199     -2.1%         137,531 
 Cephalopods                     28,449          26,923      5.7%          41,753 
 Shrimp & Shellfish              23,876          25,864     -7.7%          38,688 
 Others                          20,762          24,853    -16.5%          55,833 
                        ---------------  --------------  --------  -------------- 
 Total                          418,988         443,953     -5.6%         978,747 
 
 
 Sale volume breakdown         Six months        Six months   Changes     Year ended 
  by product category             30 June           30 June      %       31 December 
                                     2016              2015                     2015 
 Thousand kilograms 
 Fish                               8,564             8,091      5.8%         19,062 
 Sea Cucumbers                         22                23     -4.8%             49 
 Cephalopods                          852               774     10.1%          1,116 
 Shrimp & Shellfish                   640               646     -1.0%            993 
 Others                               239               246     -2.6%            558 
                         ----------------  ----------------  --------  ------------- 
 Total                             10,317             9,780      5.5%         21,778 
 
 
 Gross Margin by Product    Six months   Six months     Year ended 
  Category                     30 June      30 June    31 December 
                                  2016         2015           2015 
                             Unaudited    Unaudited        Audited 
 
 Fish                              23%          32%            27% 
 Sea Cucumbers                     30%          42%            36% 
 Cephalopods                       25%          31%            29% 
 Shrimp & Shellfish                26%          31%            30% 
 Others                            25%          32%            27% 
                           -----------  -----------  ------------- 
 Total                             25%          33%            28% 
 

Fish

Sales of fish products accounted for approximately 67% of Group's revenue (H1 2015: 68%). The Group's top three fish products are mackerel, saury and cod. The revenue generated from fish products decreased by approximately 6% compared with H1 2015. This decrease was principally due to decrease in average unit selling price, which was in turn due to the slower consumer spending and increase competition in China.

Compared with H1 2015, sales volume of fish products, in kilograms, increased by approximately 6% and cost of sales increased by approximately 6%, which was in line with the increase in sales volume during the period under review. The average unit cost of fish products remained stable.

The lower average prices have resulted in a reduction in gross profit margin of fish products to 23% (H1 2015: 32%).

Sea Cucumbers

Sales of sea cucumber products decreased slightly by 2% compared with H1 2015. This has been impacted by the Chinese Government's anti-corruption policy, which has resulted in lower spending on corporate entertainment and banquets as well as high value gift practices in business. This has led to a fall in sales volume of sea cucumber products by approximately 5% compared with H1 2015.

Compared with H1 2015, average unit selling price increased modestly by approximately 3%, pressured by the rising cost, whilst average unit cost increased significantly by 24% mainly as a result of higher raw material input cost. This has resulted in a fall in gross margin to 30% (H1 2015: 42%).

Cephalopods

Sales of Cephalopods (principally squid and cuttlefish), though only a modest proportion of total group sales, were the only product category that has reported a revenue growth compared with H1 2015, driven by higher sales volume.

Sales of cephalopods products increased by approximately 6% in value and 10% in volume compared with H1 2015. Nevertheless, gross margin declined to 25% (H1 2015: 31%) due to lower average unit selling price and higher unit cost.

Shrimp and Shellfish

Sales value decreased by approximately 8% whilst volume decreased by approximately 1% compared with H1 2015, reflecting the general price pressure in the current market. As a result, gross profit margins were down to approximately 26%.

Others

These are primarily sales of gift boxes. Sales decreased by 16% and cost of sales decreased by 8%. Gross profit were down to 25% (H1 2015: 30%), reflecting the general price pressure in the market.

Strategy

The Board continues to evaluate options for expanding capacity through outsourcing, increasing process automation and expanding to an additional site or acquiring an existing factory from a third party. As previously noted, the Group is currently awaiting final regulatory approval for its expansion plans from the relevant regional authorities. Owing to the current market environment the Group has not been actively chasing this consent although it is expected that the Group will still seek to acquire additional processing and cold storage capacity.

Successful brand building remains key to AFG's continued business success. The Group's core brand "Zhenhaitang" has, in recent years, achieved wider recognition and awareness in the marine foods and seafood industry in the PRC. The Group plans to continue its focus on advertising and promotion and will carry out further cross-promotion for different product types. The Group will also continue to support its regional distributors to establish further "Zhenhaitang" branded retail stores where appropriate to do so.

Product development to expand and enhance product offerings is an important factor to expand market share. The Group plans to continue to invest in product development and innovation in order to stand out from competition and to meet changing consumer preferences.

While market growth in China has slowed, the Group is taking the opportunity to review internal processes and strategies in preparation for a time when the market returns to full strength. This includes monitoring the success of increased advertising as well as continuing to finalise expansion plans, including additional processing and cold storage capacity given the increase in processing volumes. With this in place, the Board believes that the Company will be in the strongest position possible to take advantage of a revived trading environment.

The Group believes that with its current cash resources and the positive trading cash flow, the Group will have sufficient funds internally to support the expected further growth of Aquatic Foods.

Outlook

The Group's operating environment remains challenging and the Board expects these challenging conditions to continue in the near term. However, whilst gross margin declined in the last 12 months, AFG is now seeing a stabilisation in gross margins at around 24% since April 2016.

Whilst the Board is mindful of the potential challenges that lie ahead in the short term, the Board believes that these challenges also present potential growth and expansion opportunities for the Group. AFG's strong cash position allows the Group to take advantage of this difficult time to grow and increase its presence within China by mergers and acquisitions as well as expanding through increasing process automation.

In the wider PRC market, demand has continued to move towards pre-processed and ready to eat products as opposed to the procurement of daily foods from traditional markets. These consumers are the major consumption group of natural seafood products as they pursue a healthier lifestyle. Such consumers are concerned about food hygiene and safety and look to recognised branded goods, where the brand values support enhanced food safety.

As a leading PRC marine foods and seafood processor, with a history in servicing demanding export markets, AFG is known for adopting the highest standards for quality, safety and sustainability, and the Board is optimistic that AFGs' growth will be supported by its continued commitment to produce high-end, pre-processed, seafood products.

As a result of increasing popularity of English and Scottish fish products and to satisfy this increasing demand, the Group has entered into the following new contracts with English and Scottish based suppliers:

-- a US $850,000 purchase contract with Peterhead based supplier Northbay Pelagic for the supply of 615 metric tonnes of Atlantic Mackerel per annum.

-- a contract with Scottish based supplier Lunar Freezing & Cold Storage for the supply of 575 metric tonnes of mackerel

-- a contract with Seychelles based supplier Flying Fish International for the supply of 162 metric tonnes of mackerel

As a result of these recent contracts, AFG has become one of the leading importers of fish from the UK amongst other Chinese companies and this is expected to continue to increase its credibility and profile in the industry in the UK.

The Group will continue to look for strategic alliances and partnerships in the UK as well as other parts of the world to diversify its supply chain.

As an established and modern marine foods supplier and retailer, the Board is confident that, despite current slowdown of the Chinese economy, the Group will continue to adapt and to expand its market share in what is still a growing Chinese seafood and marine food market. The Group also remains committed in growing export sales and is confident that AFG will continue to leverage on its established position in the overseas market to benefit further from the high growth potential of the international seafood market.

Appointment and Resignation of Directors

On 9 August 2016, Aquatic Foods appointed Ms Po Ling Low as Finance Director to fill the vacancy following the departure of Mr Sean Lim on 3 February 2016. Ms Low is a qualified accountant with over 18 years' experience across the UK and Asia. Ms Low has worked in the PRC in the last 8 years and was the finance director of a Chinese company which had previously been listed on AIM before moving to a Hong Kong main board listing in 2010. Pursuant to her appointment, Ms. Low has been granted a total of 500,000 warrants over Ordinary Shares and the details of these warrants shares can be found on AFG's RNS announcement dated 9 August 2016. The Board is confident that Ms Low's appointment as Finance Director will be invaluable to the Company as AFG continues to improve its operational efficiency and expand in both the local Chinese and international markets.

Dividends

The Board has adopted a dividend policy that fundamentally takes into account the Group's profitability and growth after the requirement to finance the development and expansion of business.

Given the positive cash flow of the Group and profitability during the first half of the year, the Board is pleased to announce that the Group intends to retain an interim dividend however this has been reduced to 0.2 pence per share reflecting the more challenging trading environment in which the Company is operating. While the Company retains a strong balance sheet and cash position, the Board has considered future costs relating to the planned expansion as well as the desire to retain a significant cash buffer to provide future business flexibility.

The interim dividend will be payable around 1 November 2016 to shareholders on the register at the close of business on Friday, 7 October 2016. The shares will go ex-dividend on 6 October 2016. The Board intends to review the level of full year dividend in light of the trading results for the year and market conditions at that time.

Li Xianzhi

Chief Executive Officer

27 September 2016

Condensed Consolidated Statements of Comprehensive Income

 
 
                                                       Six months   Six months 
                                                          30 June      30 June 
                                                             2016         2015 
                                                        Unaudited    Unaudited 
                                                Note      RMB'000      RMB'000 
 Revenue                                                  418,988      443,953 
 Cost of sales                                          (316,363)    (297,264) 
                                                      -----------  ----------- 
 Gross profit                                             102,625      146,689 
 
 Other income                                               4,755        5,086 
 Selling and distribution expenses                       (43,592)     (40,290) 
 Administrative expenses                                  (7,969)      (9,186) 
 Other operating expenses                                 (5,338)         (81) 
                                                      -----------  ----------- 
 Operating profit                                          50,481      102,218 
 
 Finance income                                               505          477 
 Finance costs                                            (1,574)      (1,219) 
                                                      -----------  ----------- 
 Profit on ordinary activities before 
  taxation                                                 49,412      101,476 
 
 Income tax expense                              4       (11,756)     (23,728) 
                                                      -----------  ----------- 
 Profit after taxation                                     37,656       77,748 
 Other comprehensive income 
 Items that will or may be reclassified to profit 
  or loss: 
                                                      -----------  ----------- 
 Exchange differences arising on translation 
  of foreign operation                                        594        2,778 
                                                      -----------  ----------- 
 Total comprehensive income attributable to 
  owners of the parent                                     38,250       80,526 
                                                      ===========  =========== 
 
 Earnings per share (EPS): 
 Basic and diluted                               5           0.33         0.70 
                                                      ===========  =========== 
 

Condensed Consolidated Statements of Financial Position

As at 30 June 2016

 
                                              As at        As at          As at 
                                            30 June      30 June    31 December 
                                               2016         2015           2015 
                                          Unaudited    Unaudited        Audited 
                                  Note      RMB'000      RMB'000        RMB'000 
 Non-current assets 
 Property, plant and equipment     6         27,925       21,238         29,321 
 Land use rights                   7          1,853        1,898          1,876 
                                        -----------  -----------  ------------- 
                                             29,778       23,136         31,197 
                                        -----------  -----------  ------------- 
 
 
 Current assets 
 Inventories                       8         46,939       36,827         55,627 
 Trade receivables                          247,372      226,053        306,694 
 Other receivables, deposit 
  and prepayment                   9            228          186          4,620 
 Cash and bank balances                     417,083      366,630        380,419 
                                        -----------  -----------  ------------- 
                                            711,622      629,696        747,360 
                                        -----------  -----------  ------------- 
 
 Total Assets                               741,400      652,832        778,557 
                                        ===========  ===========  ============= 
 
 Current liabilities 
 Trade payables                              76,770       71,917        131,885 
 Other payables and accruals                 24,020       26,085         35,847 
 Short term borrowings                       36,511       37,042         42,040 
 Income tax payable                           6,338       10,531          9,274 
                                        -----------  -----------  ------------- 
                                            143,639      145,575        219,046 
                                        -----------  -----------  ------------- 
 
 Equity 
 Stated capital                    10        85,238       85,238         85,238 
 Reserves                                   512,523      422,019        474,273 
                                        -----------  -----------  ------------- 
                                            597,761      507,257        559,511 
                                        -----------  -----------  ------------- 
 
 
 Total Equity and Liabilities               741,400      652,832        778,557 
                                        ===========  ===========  ============= 
 

Condensed Consolidated Statements of Changes in Equity

For the six month period ended 30 June 2016 (Unaudited)

 
 
                          Stated          Capital  Statutory        Merger    Translation    Retained          Total 
                         Capital          reserve    reserve       reserve        reserve     profits         equity 
 
                         RMB'000          RMB'000    RMB'000       RMB'000        RMB'000     RMB'000        RMB'000 
 
Balance at 1 
 January 
 2015                          -               31     11,193         7,394            546     322,329        341,493 
 
  Profit for the 
  period                       -                -          -             -              -      77,748         77,748 
 
    Other 
    comprehensive 
    income: 
    Foreign 
    currency 
    translation 
    differences 
    for foreign 
    operations                 -                -          -             -          2,778           -          2,778 
                    ------------  ---------------  ---------  ------------  -------------  ----------  ------------- 
Total 
 comprehensive 
 income 
 for the period                -                -          -             -          2,778      77,748         80,526 
                    ------------  ---------------  ---------  ------------  -------------  ----------  ------------- 
 
  Issuance of 
  share capital           87,167                -          -             -              -           -         87,167 
Share issue costs        (1,929)                -          -             -              -           -        (1,929) 
                    ------------  ---------------  ---------  ------------  -------------  ----------  ------------- 
 
Balance at 30 June 
 2015                     85,238               31     11,193         7,394          3,324     400,077        507,257 
                    ============  ===============  =========  ============  =============  ==========  ============= 
 
  Profit for the 
  period                       -                -          -             -              -      62,656         62,656 
 
    Other 
    comprehensive 
    income: 
    Foreign 
    currency 
    translation 
    differences 
    for foreign 
    operations                 -                -          -             -        (2,675)           -        (2,675) 
                    ------------  ---------------  ---------  ------------  -------------  ----------  ------------- 
Total 
 comprehensive 
 income 
 for the period                -                -          -             -        (2,675)      62,656         59,981 
                    ------------  ---------------  ---------  ------------  -------------  ----------  ------------- 
 
  Dividend paid                -                -          -             -              -     (7,727)        (7,727) 
 
  Transfer to 
  statutory 
  reserve                      -                -      3,524             -              -     (3,524)              - 
                    ------------  ---------------  ---------  ------------  -------------  ----------  ------------- 
 
  Balance at 31 
  December 
  2015                    85,238               31     14,717         7,394            649     451,482        559,511 
                    ============  ===============  =========  ============  =============  ==========  ============= 
 
 
  Profit for the 
  period                       -                -          -             -              -      37,656         37,656 
 
  Other 
  comprehensive 
  income: 
  Foreign currency 
  translation 
  differences for 
  foreign 
  operations                   -                -          -             -            594           -            594 
                    ------------  ---------------  ---------  ------------  -------------  ----------  ------------- 
Total 
 comprehensive 
 income 
 for the period                -                -          -             -            594      37,656         38,250 
                    ------------  ---------------  ---------  ------------  -------------  ----------  ------------- 
 
  Balance at 30 
  June 
  2016                    85,238               31     14,717         7,394          1,243     489,138        597,761 
                    ============  ===============  =========  ============  =============  ==========  ============= 
 
 

Condensed Consolidated Statements of Cash Flows

For the six month period ended 30 June 2016

 
 
                                                     Six months   Six months 
                                                        30 June      30 June 
                                                                        2015 
                                                 2016 Unaudited    Unaudited 
                                                        RMB'000      RMB'000 
 
 Cash flow from operating activities 
 Profit before taxation                                  49,412      101,476 
 Adjustment for: 
 Amortisation of land use rights                             23           22 
 Depreciation of property, plant and 
  equipment                                               1,494        1,096 
 Interest expense                                         1,574        1,219 
 Unrealised loss on foreign exchange                      2,944            - 
 Interest income                                          (505)        (477) 
 Operating cash flows before movements 
  in working capital                                     54,942      103,336 
 Decrease / (increase) in inventories                     8,688       10,683 
 Decrease / (increase) in trade and 
  other receivables                                      63,714       53,697 
 (Decrease) / increase in trade and 
  other payables                                       (66,942)     (49,325) 
 Cash generated from operating activities                60,402      118,391 
 
 Interest paid                                          (1,574)      (1,219) 
 Income tax paid                                       (14,692)     (28,491) 
                                                ---------------  ----------- 
 Net cash generated from operating 
  activities                                             44,136       88,681 
                                                ---------------  ----------- 
 
 Cash flows (for)/from investing activities 
 Acquisition of property, plant and 
  equipment                                                (98)         (20) 
 Interest received                                          505          477 
 Net cash used in/ generated from investing 
  activities                                                407          457 
                                                ---------------  ----------- 
 
 Cash flows from/(for) financing activities 
 Proceeds from issue of share capital                         -       87,167 
 Share issue costs                                            -      (1,929) 
 Net drawdown of interest-bearing bank 
  borrowings                                            (5,529)      (4,428) 
                                                ---------------  ----------- 
 Net cash generated from/ (use in) 
  financing activities                                  (5,529)       80,810 
                                                ---------------  ----------- 
 
 Net increase in cash & cash equivalents                 39,014      169,948 
 Effects of foreign exchange translation                (2,350)        2,779 
 Cash and equivalent at beginning of 
  year                                                  380,419      187,576 
                                                ---------------  ----------- 
 Cash and equivalent at end of year                     417,083      360,303 
                                                ===============  =========== 
 

NOTES TO THE FINANCIAL INFORMATION

   1.        GENERAL INFORMATION AND PRINCIPAL ACTIVITIES 

The Company was incorporated in Jersey as a public limited company with company number 116402. The registered office of the Company is Queensway House, Hilgrove Street, St Helier, Jersey, JE1 1ES.

This financial information is for the Company and its subsidiaries undertakings (together, the "Group").

The principal activities of the entities of the Group are as follows:-

 
                                     Country 
                                        of 
        Name of Company           Incorporation   Principal Activities 
 
 i)     Aquatic Foods Group          Jersey       Investment holding 
         Plc 
 ii)    Hong Kong Hanhe Holding     Hong Kong     Investment holding 
         Company Limited 
 
 iii)   Yantai Kanwa Food              PRC        Processing and trading of aquatic 
         Co., Limited                              products 
                                                   agricultural and meat products. 
 
 iv)    Yantai Zhenhaitang             PRC        Trading and distributing of 
         Foodstuff Co., Limited                    processed frozen 
                                                   aquatic products and pre-packaged 
                                                   food. 
 

The principal place of business of the Group is in the People's Republic of China ("PRC").

The interim consolidated financial statements are presented in the nearest thousands of Renminbi (RMB'000), which is the presentation currency of the group. The functional currency of each of the individual entity is the local currency of each individual entity. For reference the period end exchange rate from Pounds Sterling to RMB was 8.9212 (30 June 2015: 9.748 and 31 December 2015: 9.5923).

   2.             BASIS OF PREPARATION 

The interim consolidated financial statements for the six months ended 30 June 2016 have been prepared in accordance with IAS 34, Interim Financial Reporting.

The principal accounting policies used in preparing the interim results are the same as those applied in the Group's Financial Statements as at and for the year ended 31 December 2015.

The interim financial information has not been reviewed nor audited by the Company's auditors. A copy of the audited consolidated financial statements for the period ended 31 December 2015, which was prepared under IFRS, is available on the Company's website.

The interim report for the six months ended 30 June 2016 was approved by the Directors on 27 September 2016.

   3.            OPERATING SEGMENTS 

Operating segments are prepared in a manner consistent with the internal reporting provided to the management as its chief operating decision maker in order to allocate resources to segments and to assess their performance.

Information on business segments is not presented as the Group operates mainly in processing and trading of aquatic products agricultural and meat products and all its assets, capital expenditure and operations are in the PRC.

Geographical Segments

The analysis of the Group's revenue by geographical segments based on customers' locations is as follows:-

 
                       30 June   30 June 
                          2016      2015 
                       RMB'000   RMB'000 
 
 PRC                   387,036   414,041 
 Outside PRC            31,952    29,912 
 
 
                       418,988   443,953 
 
 Non-current assets     29,778    23,136 
                      --------  -------- 
 

The segment assets are based on geographical locations of the assets, the entire non-current assets are based in the PRC at the end of reporting period.

There was no customer which contributed more than 10% of the revenue for the Group.

   4.            Income Tax Expense 
 
                         30 June   30 June 
                            2016      2015 
                         RMB'000   RMB'000 
 
 Current tax expenses     11,756    23,728 
 
 
 

According to the China Income Tax Law, income derived from preliminary processing of fishery or aquiculture products are tax exempted.

The Group's activities in the PRC are subject to corporation tax of 25% during the financial year on profit before taxation in accordance with the relevant laws and regulations in the PRC.

No deferred tax has been provided, as the Group did not have any significant temporary differences which gave rise to a deferred tax asset or liability at the reporting dates.

   5.            EARNINGS PER SHARE 

On 3 February 2015, Aquatic Foods Group PLC's shares were admitted to trading on the AIM market of the London Stock Exchange. The Company issued 5,792,081 Placing Shares and 7,434,000 Subscription Shares at 70 pence per Share. The earnings per share information based upon the 113,226,081 ordinary shares are as follows:

 
                                                  30 June       30 June 
                                                     2016          2015 
 
       Profit after taxation (RMB)             37,656,000    77,748,000 
       Weighted average number of ordinary 
        shares                                113,226,081   110,741,624 
       Basic earnings per share                      0.33          0.70 
                                             ------------  ------------ 
 
 

At 30 June 2016, there were 50,000 potentially dilutive ordinary shares. Potentially dilutive ordinary shares relates to warrants issued to third parties. The potential ordinary shares are anti-dilutive and therefore the diluted earnings per share is the same as basic earnings per share.

   6.        PROPERTY, PLANT AND Equipment 
 
                              Leasehold                      Research   Plant and 
                              buildings  Office equipment   equipment   machinery  Motor vehicles    Total 
                                RMB'000           RMB'000     RMB'000     RMB'000         RMB'000  RMB'000 
Cost 
Pro forma as at 1 
 January 2015                    25,804               675          48      12,792             741   40,060 
Additions                            14                 -           -           6               -       20 
Disposals                             -                 -           -           -               -        - 
                             ----------  ----------------  ----------  ----------  --------------  ------- 
At 30 June 2015                  25,818               675          48      12,798             741   40,080 
                             ----------  ----------------  ----------  ----------  --------------  ------- 
Additions                            14                 -           -       9,042             129    9,185 
Disposals                             -                 -           -           -           (142)    (142) 
                             ----------  ----------------  ----------  ----------  --------------  ------- 
At 31 December 2015              25,832               675          48      21,840             728   49,123 
                             ----------  ----------------  ----------  ----------  --------------  ------- 
Additions                             8                46           -          44               -       98 
Disposals                             -                 -           -           -               -        - 
                             ----------  ----------------  ----------  ----------  --------------  ------- 
At 30 June 2016                  25,840               721          48      21,884             728   49,221 
                             ----------  ----------------  ----------  ----------  --------------  ------- 
 
  Accumulated depreciation 
Pro forma as at 1 
 January 2015                    10,008               508          34       6,796             400   17,746 
Charge for the period               586                24           3         428              55    1,096 
Disposals                             -                 -           -           -               -        - 
                                         ----------------  ----------  ----------  -------------- 
At 30 June 2015                  10,594               532          37       7,224             455   18,842 
                                         ----------------  ----------  ----------  -------------- 
Charge for the period               587                21           1         429              50    1,088 
Disposals                             -                 -           -           -           (128)    (128) 
                             ----------  ----------------  ----------  ----------  --------------  ------- 
At 31 December 2015              11,181               553          38       7,653             377   19,802 
                             ----------  ----------------  ----------  ----------  --------------  ------- 
Charge for the period               589                17           2         829              57    1,494 
Disposals                             -                 -           -           -               -        - 
At 30 June 2016                  11,770               570          40       8,482             434   21,296 
 
Net carrying amount 
As at 30 June 2016               14,070               151           8      13,402             294   27,925 
                             ==========  ================  ==========  ==========  ==============  ======= 
As at 31 December 
 2015                            14,651               122          10      14,187             351   29,321 
                                                                                   ============== 
As at 30 June 2015               15,224               143          11       5,574             286   21,238 
                                                                                   ============== 
 
 
   7.        Land Use Rights 
 
                     30 June   30 June   31 December 
                        2016      2015          2015 
                     RMB'000   RMB'000       RMB'000 
 At cost:- 
 Opening at 1 Jan      2,228     2,228         2,228 
                    --------  --------  ------------ 
 
 
 Accumulated amortisation:- 
 Opening balance               352   308   308 
 Amortisation charge            23    22    44 
                              ----  ----  ---- 
 Closing balance               375   330   352 
                              ----  ----  ---- 
 
 
 Carrying amounts:- 
 At 30 June / 31 December    1,853   1,898   1,876 
                            ======  ======  ====== 
 
 
   8.            Inventories 
 
                      30 June   30 June   31 December 
                         2016      2015          2015 
                      RMB'000   RMB'000       RMB'000 
 At cost:- 
 Raw materials         28,461    23,332        29,610 
 Finished goods        18,478    13,495        26,017 
 
 
                       46,939    36,827        55,627 
 
 
 
   9.        Other Receivables, Deposit And Prepayment 
 
                            30 June   30 June   31 December 
                               2016      2015          2015 
                            RMB'000   RMB'000       RMB'000 
 
 Other receivables              123       115            48 
 Prepayments                    105        71         4,572 
 
 
                                228       186         4,620 
 
 
   10.     Stated Capital 
 
                                           Number 
                                          of shares      RMB'000 
 Issued: 
 As at 1 Jan 2015                         50,000,000           - 
 Subdivision of existing shares as        50,000,000           - 
  at 28 January 2015 
 Placing Shares and Subscriber Shares 
  as at 
  3 February 2015                         13,226,081      87,167 
 Less: Issuance costs                              -     (1,929) 
 
 
 As at 30 June 2015, 31 December 
  2015 and 30 June 2016                  113,226,081      85,238 
 
 

On incorporation, the Company issued two ordinary shares at no par value with an unlimited share capital.

On 23 October 2014, the company allotted and issued 49,999,998 Ordinary Shares of no par value pursuant to the Framework Agreement.

On 28 January 2015, the company had been subdivided its existing 50,000,000 ordinary shares into 100,000,000 of ordinary shares. On 3 February 2015, the company's shares had been admitted to trading on the AIM market of the London Stock Exchange. The Company had further issued 5,792,081 Placing Shares and 7,434,000 Subscriber Shares. The total issued ordinary shares of the company were 113,226,081.

   11.     SEASONALITY OF THE GROUP BUSINESS 

The Group businesses are subject to seasonal fluctuations as result of the festive periods observed in the local market. In particular, the Chinese New Year always falls in January or February of the year, the demand for the products packed in gift box or high value gifts are likely to be strong in this period. The Group will collaborate with the regional distributors to drive the revenue growth through the products promotion and marketing campaigns in other festive periods throughout the year.

   12.     BORROWING 

The borrowings consist of trade finance and secured interest-bearing bank borrowings.

Trade finance was secured by cross guarantees of the subsidiaries between Yantai Kanwa and Yantai Zhenhaitang.

Interest-bearing bank borrowings were secured by:

   a)    land use rights of the Group 
   b)    property of the Group 
   c)     personal guarantees by a director of the Group 
   13.     WARRANTS 

On 28 January 2015, the company granted 50,000 warrants to S.P. Angel Corporate Finance LLP, the company's nominated adviser, at the exercise price of 70 pence each with expiring date of 5 years. The directors have used Black Scholes model as recommended under IFRS 2 in valuing the share based payment charge. The directors are of the opinion that the estimated fair value is immaterial, hence no charge has been made in the accounts.

- ENDS -

This information is provided by RNS

The company news service from the London Stock Exchange

END

IR LLFVRAVIDFIR

(END) Dow Jones Newswires

September 28, 2016 02:00 ET (06:00 GMT)

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