China Chaintek United Co., Ltd Trading Update (8951V)

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RNS Number : 8951V

China Chaintek United Co., Ltd

12 August 2015

 
 Press Release   12 August 2015 
 

China Chaintek United Co., Ltd

("Chaintek" or the "Group")

Trading Update

Chaintek (AIM: CTEK), the provider of logistics services to manufacturers of consumer goods in China, is pleased to provide the following trading update ahead of the Group's Interim Results for the six months ended 30 June 2015, which will be announced in September 2015. Financial information contained in this announcement for the six months period is unaudited.

Trading for the period is in line with the guidance previously given in the Group's final results for 2014, with unaudited revenues down 25% to RMB129.9 million (GBP13.4 million) (H1-2014: RMB173.8 million). Of this, the logistics services business represented approximately RMB110.8 million (GBP11.4 million), with the inventory solutions business accounting for approximately RMB19 million (GBP1.9 million).

Unaudited profit before tax is down 56% when compared to the prior year at RMB64.2 million (GBP6.6 million) (H1-2014: RMB144.7 million) with the Group's profit margin falling to 77% (H1 2014: 83%) resulting from rebate payments due to suppliers, principally to transportation partners, and additional discretionary marketing expenses incurred in the context of new marketing initiatives aimed at expanding the business into new regional markets.

Management wish to sound a cautionary note about market conditions, which have significantly worsened during the period under review. Retail sales in the shoes and apparel sector have been slowing in China for some time, and after having benefitted for the last 18-24 months from sustained volumes due to de-stocking sales, the effect of the retail downturn is now starting to bite. Many of the Company's key suppliers have been particularly hard hit by these conditions, with lower volumes combining with higher fuel prices to create the worsening trading conditions which have led them to seek better terms from the Company, resulting in the payment of the rebates. Management are of the view that these challenging conditions are likely to continue for some time, with the corresponding effect on trading and margins.

However, the Group continues to be highly cash-generative, resulting in a cash position at the half year of RMB514.1 million (GBP53.3 million) (H1-2014: RMB411.6 million).

The Group maintained customer levels in its logistics services business (covering sectors including shoes and apparel, food, building materials, textile and trading) with 10 out of the top 20 customers being listed companies. ANTA, a Hong Kong Stock Exchange listed sporting goods and apparel manufacturer is considered by the Group to be a significant customer, contributing approximately 9.9% to the Group's logistics services revenue.

The management team remains focused on expanding capacity and growing its customer base despite the slowdown in the growth of the Chinese economy.

The Group will continue to update shareholders in relation to obtaining a full refund from the Local Government ("LDC") for the purchase of Land Use Rights ("LUR"), for the intended site to build the Group's new Logistics Park. As reported in the Company's final results statement, the Group has the right to request full re-payment of RMB 273 million from the LDC. The Group continues to negotiate the refund with the Local Government, and shall update shareholders as and when appropriate.

As announced in June, the Group has entered into an agreement to lease a Regional Distribution Centre ("RDC") in Changsha, the capital of Hunan Province in South-Central China. The facility is intended to service Chaintek's existing manufacturing customers which are relocating to Central China to reduce land and labour costs.

On 30 April 2015, a final scrip dividend of 4 pence per share, in respect of the year ended 31 December 2014 was announced. The new ordinary shares were issued to shareholders on the register on 20 May 2015.

Xu Meijin, Chief Executive Officer of Chaintek, said: "As previously indicated in our final results,

the Group's operations has been facing pressure from the slowdown of the Chinese economy and the changes in the shoe and apparel manufacturers' business model. These factors, in addition to increased costs from our suppliers and the increased spending in advertising, have impacted the Group's bottom line in the first half of the year."

"The Group, however is pleased that significant progress has been made in promoting the Company and its' development plans. In addition, the opening of the Group's RDC in Changsha will continue to progress the Group's aim of becoming a national logistics Company.

- Ends -

 
 
   For further information: 
    China Chaintek United          www.chaintek-united-ir.com/ 
     Co., Ltd 
    Derrick Wong (Finance                        [phone] 
     Director)                               [phone] 
 
    ZAI Corporate Finance 
    Ray Zimmerman / Ivy 
     Wang (Nomad) 
     Steven Baird (Broker)                [phone] 
 
    Abchurch Communications 
    Quincy Allan / Canace 
     Wong                                 [phone] 
    [e-mail]         www.abchurch-group.com 
 

This information is provided by RNS

The company news service from the London Stock Exchange

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