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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Jarlway | LSE:JWY | London | Ordinary Share | GB00B09JC675 | ORD 0.25P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 0.375 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
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RNS Number:1051J
Jarlway Holdings plc
19 September 2006
Jarlway Holdings plc
Interim Results and Chairman's Statement
for the six months to June 30 2006
Highlights
* Sales up 40% to #3.6 million
* Gross margins remain high at 38%
* 53% of sales in period converted to cash by period end
* 13 contracts concluded on key infrastructure projects
* Continued development of product lines, and expanded product range
* On course for year-on-year financial improvement
I am pleased to report the results of Jarlway Holdings Plc (the "Company" or
"Jarlway") for the six months ended 30 June 2006. As I said in the annual report
of 2005, the board is very positive about current trading and believes the
Company is on course to deliver a considerably improved performance in the
current year. Against this background I am pleased to report a significantly
improved financial performance during the first half of 2006 when compared to
the second half of 2005.
In terms of the Company's financial performance, turnover was #3,637,000 (2005
#2,594,000) and gross margin was 38% (2005 40%). However, higher overheads
reflecting an increased spend on sales and marketing, ongoing costs associated
with the AIM Listing and a further increase in bad debt provisions limited the
after tax profit for the 6 months to #344,000 (2005 #534,000). During the period
the net cash inflow was #230,000 (2005 #90,000).
The results for the second half of 2005 were impacted by the listing and related
costs and by a significant provision for doubtful debts we felt it prudent to
make, together with increased fuel and transportation costs.
The board expects to see a reduction of such costs in the second half 2006.
During the first half of 2006, orders where full payment was made on delivery
accounted for 25% of total turnover, up from 10% during the first half of 2005.
The group also lifted its minimum requirement on downpayments from customers, so
that 53% of sales arising in the period were converted to cash by the period
end. The group remains committed to maintaining a balance between sustainable
market share and trade receivable management.
During the period the construction machinery market in China recovered much
faster and better than expected. Jarlway's adaptive sales and marketing strategy
in meeting the changed market has achieved good results and has provided
momentum for the company's future growth.
The newly implemented recruitment plan and the training programme designed for
the sales team, targeting sizable private enterprises and medium to large-sized
State Owned Enterprises, is proving to be successful. Despite the significant
constraints resulting from Chinese domestic banks' tightening of the credit
available to our customers on the purchase of construction machinery, our sales
increased without the Company suffering from undue pressure on its working
capital. We attribute this accomplishment to our customer base transformation -a
strategic penetration into the high end market - represented by customers with
greater financial strength. In combination with the progress made in the
development of our network of agents, I am pleased with the progress Jarlway has
made in terms of unit sales and gross margin.
We have also achieved an enhanced gross margin and better payment terms through
the sale of new trailer pump models and through targeting stronger clients, as I
outlined in the 2005 Annual Report.
In addition, the Company has strengthened production and purchase management
with a view to guaranteeing the high quality of its products while maintaining a
low level of production cost. We have been able to renegotiate some component
prices and the terms on which we buy components from our major suppliers which
has enabled us to reduce the production cost of our pumps.
China has embarked on a long term plan to develop its railway system and the
construction of some sections is already in process generating a high demand for
concrete construction equipment. Jarlway's patented concrete pump tailored for
railway girder moulding has won substantial recognition from railway
constructors. Since the first concrete pump contract received from Zhuzhou Road
and Bridge Co., Ltd, Jarlway has concluded 13 contracts with railway contractors
involving a total order of 29 units. These successes in the railway construction
market are evidence of the competitive advantages Jarlway has in a number of
areas, such as excellent quality, strong R&D capability to deliver solutions for
customers, accurate market positioning and reasonable pricing all leading to
high customer loyalty. Jarlway is steadily improving its brand image and this is
expected to make an important contribution in boosting the profitability of the
Company.
We remain cautious and have reflected at length on the difficulties and
challenges lying ahead, despite the improvements achieved in the first half of
the year. We are aware of the disadvantage of being small in size, the limited
product varieties and the reliance on the domestic market. As we all know, the
construction machinery industry is highly periodic and easily affected by
economic cycles. Responding to such risks, the management has been working
towards a feasible and achievable strategy. We are constantly striving to expand
our product range. When sufficient funds can be put in place, we will step up
the production and sale of placing booms (which should have significant export
potential) and concrete mixing plants. In addition, we are currently expanding
our R&D resources for the development of tower cranes aimed at the export
market. This product shares the same customer base as concrete pumps and offers
great market potential both at home and abroad. Efforts are also being made to
reduce the size of the tower crane so as to minimize the transportation space
and thus improve its competitiveness in the overseas market with lower
transportation costs.
Looking forward, I am confident of the prospects for the company during the
second half of the year. The pricing of certain machinery models now matches
that of our leading competitors and even betters those brands in certain regions
thanks to our increasingly influential and recognised Jarlway brand.
The purchase of machinery for use in the construction of the railways will reach
its peak within the coming two to three years. I am confident that Jarlway will
secure an important role as a principal machinery supplier in this market, from
which we will reap the benefits over many years, as the upgrading of the
railways is a fifteen year project and one of the most important
government-supported projects in China today.
As well as the progress Jarlway is making in the railway industry, we are also
building growing customer loyalty in our clearly focused target customer group.
For example, the Company continues to receive further orders for trailer pumps
from the largest real estate developer in China, who has been a valued customer
since Jarlway's formation.
In the light of the tightening monetary supply within China, we are giving
careful consideration to possible working capital financing solutions proposed
to us by financial institutions within China. We may be able to utilize the
capital which would be raised to accelerate the development and roll out of
production of our new products.
Overall, I believe that improved financial risk management, customer
differentiation and tighter credit control have all had a positive effect on our
financial performance. We will continue our efforts in all areas where we think
improvements can be made.
I am confident that through our determination to improve constantly in all
aspects of our business, and the tremendous efforts of the management and staff
as a whole, Jarlway will overcome the challenges and difficulties that will be
encountered in the future. Last but not least, I would like to extend the
heart-felt gratitude of the entire Board for the understanding and support
afforded to the Company by its shareholders.
WU Zhi Jia
Chairman
18 September 2006
Introduction
We have been instructed by the company to review the financial information for
the period ended 30 June 2006 set out on pages 5 to 15 and we have read the
other information contained in the interim report for any apparent misstatements
or material inconsistencies with the financial information.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by the directors. The Listing Rules
of the Financial Services Authority as applicable to AIM listed companies
require that the accounting policies and presentation applied to the interim
figures should be consistent with those applied in preparing the preceding
annual accounts except where any changes, and the reason for them, are
disclosed.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4
issued by the Auditing Practices Board. A review consists principally of making
enquiries of management and applying analytical procedures to the financial
information and underlying financial data, and based thereon, assessing whether
the accounting policies and presentation have been consistently applied unless
otherwise disclosed. A review excludes audit procedures such as tests of
controls and verification of assets, liabilities and transactions. It is
substantially less in scope than an audit performed in accordance with Auditing
Standards and therefore provides a lower level of assurance than an audit.
Accordingly we do not express an audit opinion on the financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the period ended 30
June 2006.
MRI Moores Rowland LLP
Chartered Accountants
Registered Auditor
3 Sheldon Square
London
W2 6PS
Year ended
Six months ended 30 June 31 December
2006 2005 2005
(unaudited) (unaudited) (audited)
Notes #'000 #'000 #'000
Turnover 5 3,637 2,594 4,853
Cost of sales (2,270) (1,564) (3,091)
Gross profit 1,367 1,030 1,762
Other revenue 12 3 7
Distribution costs (435) (267) (636)
Administrative expenses (509) (188) (790)
Profit before taxation 435 578 343
Taxation 6 (91) (44) (49)
Profit for the period 344 534 294
Attributable to:
Shareholders of the Company 344 534 294
Earnings per share
Basic and diluted 7 1.41p 6.71p 1.33p
Proforma Basic 7 N/A 4.45p N/A
6 months 6 months Year ended
to June to June 31 December
2006 2005 2005
(unaudited) (unaudited) (audited)
#'000 #'000 #'000
Shareholders' equity as at the beginning of the period 3,823 2,845 2,845
Issue of ordinary shares - 50 61
Premium on issue of ordinary shares - - 228
Merger reserve - (49) (49)
Employee share option benefits 3 - 6
Exchange differences on translation of:
- financial statements of overseas subsidiaries (170) 193 438
Profit for the period 344 534 294
Shareholders' equity as at the end of the period 4,000 3,573 3,823
As at As at As at
30 June 30 June 31 December
2006 2005 2005
(unaudited) (unaudited) (audited)
Notes #'000 #'000 #'000
Non-current assets
Property, plant and equipment 286 391 261
Trade receivables 11 74 327 165
Restricted bank balance 10 146 410 257
Deferred tax assets 81 38 81
587 1,166 764
Current assets
Assets held for sale 9 316 - 332
Inventories 870 576 812
Trade and other receivables 11 5,143 5,908 5,484
Financial assets at fair value through 5 6 5
profit or loss
Restricted bank balance, current 10 134 85 104
Cash and cash equivalents 516 236 298
6,984 6,811 7,035
Total Asset 7,571 7,977 7,799
Equity and liabilities
Capital and reserves
Share capital 14 61 50 61
Other reserves 15 3,939 3,523 3,762
Total equity 4,000 3,573 3,823
Non-current liabilities
Non-current portion of bank borrowings 12 57 144 89
Current liabilities
Trade and other payables 13 3,165 3,097 3,133
Current portion of bank borrowings 12 190 1,059 642
Income tax payable 159 104 112
3,514 4,260 3,887
Total liabilities 3,571 4,404 3,976
Total equity and liabilities 7,571 7,977 7,799
......................... ..............
Director Date
Six months ended 30 June As at
31 December
2006 2005 2005
(unaudited) (unaudited) (audited)
#'000 #'000 #'000
Cash generated from operations 715 311 778
Tax paid (41) (58) (107)
Net cash generated from operating activities 674 253 671
Net cash from investing activities 6 425 539
Net cash used in financing activities (450) (588) (1,046)
Net increase in cash and cash equivalents 230 90 164
Cash and cash equivalents at 1 January 298 120 121
Effect of exchange rate differences (12) 26 13
Cash and cash equivalents at 30 June 516 236 298
Operating activities:
Profit for the period 435 578 343
Adjustment for:
Provision for doubtful debts 109 57 360
Depreciation of property, plant and equipment 20 12 29
Employee share based compensation 3 - 6
Interest income (2) (3) (7)
Interest expense 16 - -
Operating cash flows before movements in working 581 644 731
capital
Increase in assets held for sale - - (332)
Change in inventories (95) (235) (445)
Change in trade and other receivables 61 (351) 685
Change in trade and other payables 182 250 132
729 308 771
Interest received 2 3 7
Interest paid (16) - -
Cash generated from operations 715 311 778
1. General information
The interim results for the period ended 30 June 2006 are unaudited and do not
constitute statutory accounts within the meaning of s.240 of the Companies Act
1985. They have been prepared in accordance with accounting policies adopted in
the 2005 annual accounts.
2. Basis of preparation
The Directors are responsible for the preparation of the Group's unaudited
interim financial statements. These unaudited interim financial statements have
been prepared in accordance with International Financial Reporting Standards
No.34 "Interim Financial Reporting" as adopted for use in the European Union.
These condensed interim financial statements should be read in conjunction with
the 2005 annual financial statements. The accounting policies adopted in
preparing the unaudited interim financial statements for the six months ended 30
June 2006 are consistent with those in the preparation of the Group's annual
financial statements for the year ended 31 December 2005.
3. Consolidation
The Group comprises: Jarlway Holdings plc, the ultimate holding company; Jarlway
International Limited, an intermediate holding company; Jarlway Machinery Inc.
and Jarlway Xinxin Machinery Inc. The Group profit and loss account for the six
months ended 30 June 2006 comprises the results of all of the above companies
for the six months ended 30 June 2006.
4. Foreign currency
Renminbi ("RMB") is the currency of the primary economic environment in which
the entity operates ("The functional currency").
Pounds sterling is the currency in which the interim results are
presented ("The presentational currency"). For the purposes of the interim
results, the financial information has been translated from RMB to # at the
exchange rate ruling at 30 June 2006. The results of the foreign subsidiaries
have been translated at the average rate ruling during the six-month period.
The presentational currency does not reflect the economic substance of
the underlying events and circumstances of the enterprise.
5. Turnover
The principal activity of the company is investment holding.
Details of the principal activities of the wholly-owned subsidiaries are
as follows:
Subsidiaries Principal activities
Jarlway International Limited Investment holding
Jarlway Machinery Inc. Developing, manufacturing and sale of
large scale construction machinery
Jarlway Xinxin Machinery Inc. Inactive
Turnover represented the sale of concrete pumps in the People's Republic of
China excluding Hong Kong ("PRC" or "China").
6. Taxation
Six months ended 30 June Year ended
31 December
2006 2005 2005
(unaudited) (unaudited) (audited)
#'000 #'000 #'000
PRC Enterprise income tax on income for the period 91 44 49
No provision for Hong Kong Profit tax has been made in the Group as the Group's
Hong Kong subsidiary has no estimated profit for the period.
The subsidiaries operating in the PRC are subject to state and local income
taxes in the PRC at their respective tax rates based on the taxable income
reported in their statutory financial statements in accordance with applicable
state and local income tax laws.
Following approval by the charge tax bureau, pursuant to the relevant PRC income
tax rules and regulations, being a foreign investment enterprise, Jarlway
Machinery Inc. "Jarlway Machinery" was entitled to exemption from PRC foreign
enterprise income tax for the two years ended 31 December 2003 and is entitled
to a 50% reduction from PRC foreign enterprise income tax for the three years
ending 31 December 2006 ("tax holiday").
Jarlway Machinery is subject to state and local income taxes in the PRC at
standard rates of 12% and 3% respectively in accordance with the PRC foreign
enterprise income tax law, applicable to wholly owned foreign enterprises.
Jarlway Machinery is exempted from local income tax during the tax holding. As
a result, the effective foreign enterprise income tax rate for Jarlway Machinery
was 12% for the six months ended 30 June 2006 (2005: 12%).
Pursuant to the Income Tax Law and the Detailed Rules for the Implementation of
the Income Tax Law of the PRC for Foreign Investment Enterprises and Foreign
Enterprises, Jarlway Xinxin Machinery Inc. ("Jarlway Xinxin") is entitled to a
two-year exemption from the PRC foreign enterprise income tax starting from its
first profit making year and followed by a 50% reduction from the PRC foreign
enterprise income tax for the subsequent three years. Jarlway Xinxin suffered a
loss for this period.
7. Earnings per share
The calculation of basic earnings per share is based on the profit for
the period attributable to shareholders of the Company of #344,000 and the
weighted average number of 24,413,333 shares in issue during the period.
The 2005 proforma basic earnings per share was based on the assumption
that the shares issued upon admission to AIM had been in issue for the whole
period giving a weighted average number of ordinary shares for the six month
period ended 30 June 2005 of 12,007,159.
Diluted earnings per share for the six months ended 30 June 2006 are
equal to the basic earnings per shares as the exercise price of the share
options granted by the Company was higher than the average market price for
shares during the period. For the six months ended 30 June 2005, there were no
dilutive potential ordinary shares in issue.
8. Dividend
The directors do not propose an interim dividend for the six months ended 30
June 2006 (June and December 2005: nil).
9. Assets held for sale
Assets held for sale represent properties received from trade debtors in
lieu of settlement which are carried at the lower of cost and net realisable
value. Net realisable value represents the estimated selling price less all
estimated costs of completion and costs to be incurred in marketing and selling.
10. Restricted bank balances
As at As at As at
30 June 30 June 31 December
2006 2005 2005
(unaudited) (unaudited) (audited)
#'000 #'000 #'000
Current 134 85 104
Non-current 146 410 257
280 495 361
The restricted bank balance was pledged to secure bank borrowings granted
to Jarlway Machinery Inc to finance certain trade receivables. Amounts that will
be released back to Jarlway Machinery Inc. within one year have been classified
as current.
11. Trade and other receivables
As at As at As at
30 June 30 June 31 December
2006 2005 2005
(unaudited) (unaudited) (audited)
#'000 #'000 #'000
Trade receivables
From third parties 4,554 5,657 5,139
Less : Non-current portion (74) (327) (165)
Current portion 4,480 5,330 4,974
Other receivables
Deposits, prepayment and other debtors 663 578 510
5,143 5,908 5,484
Trade receivables are shown net of accumulated provision for doubtful
debt amounting to #652,000 (June 2005: #223,000; December 2005: #543,000).
Included in trade receivables are amounts relating to bank financing
arrangements. Theses are comprised of a current element amounting to #190,000
(June 2005: #1,059,000; December 2005: #642,000) and a non-current element
amounting to #57,000 (June 2005: #144,000; December 2005: #89,000).
The fair value of trade and other receivables approximate the carrying value.
12. Bank borrowings
As at As at As at
30 June 2006 30 June 2005 31 December 2005
(unaudited) (unaudited) (audited)
#'000 #'000 #'000
Bank loan:
Current portion 190 1,059 642
Non-current portion 57 144 89
247 1,203 731
The bank borrowings are secured by certain trade receivables as well as
restricted bank balances (note 10). Interest is calculated at 6% to 7% per annum
and is borne by the customers concerned.
13. Trade and other payables
As at As at As at
30 June 2006 30 June 31 December
2005 2005
(unaudited) (unaudited) (audited)
#'000 #'000 #'000
Trade payables
To third parties 1,482 1,746 1,514
Other payables
Accrued charges and other creditors 1,683 1,351 1,619
3,165 3,097 3,133
Included in other payables is an amount due to a director of #518,000
(June 2005: #525,000; December 2005: #547,000). The amount due is unsecured,
has no fixed term of repayment and interest is charged at 6% per annum.
The fair value of trade and other payables approximate the carrying
value.
14. Share capital
Ordinary shares of #0.0025 each
No. of shares #'000
Authorised:
At 30 June 2005, 31 December 2005 and 30 June 2006 (unaudited) 50,000,000 125
Issued and fully paid:
At 30 June 2005 (unaudited) 20,000,000 50
Issue of shares 4,413,333 11
At 31 December 2005 and 30 June 2006 (unaudited) 24,413,333 61
15. Other reserves (Unaudited)
Employee Share Exchange Merger Retained Total
share-based premium reserve profits
compensation translation (Note 1) (Note 2)
reserve reserve
(Note 3)
#'000 #'000 #'000 #'000 #'000 #'000
At 30 June 2005 - - 92 (49) 3,480 3,523
Exchange translation - - 245 - - 245
difference
Issue of shares - 228 - - - 228
Employee share option 6 - - - - 6
benefit
Loss for the period - - - - (240) (240)
At 31 December 2005 6 228 337 (49) 3,240 3,762
Exchange translation - - (170) - - (170)
difference
Employee share option 3 - - - - 3
benefit
Profit for the period - - - - 344 344
9 228 167 (49) 3,584 3,939
At 30 June 2006
Note:
1. The merger reserve represents the difference between the nominal value of
shares of the subsidiary company acquired, and the nominal value of the
Company's shares issued in 2005.
2. The Group's accumulated profits included an amount of approximately
#172,000 (June 2005 and December 2005: #172,000) reserved by the subsidiary in
the People's Republic of China (the "PRC") in accordance with the relevant PRC
regulations. This reserve is only distributable in the event of liquidation of
this PRC subsidiary.
3. On 12 July 2005, 341,787 share options were granted for nil consideration
to the directors and senior employees of the Group (no share options were
granted during the six months ended 30 June 2006 and 2005). Each option gives
the holder the right to subscribe for one ordinary share of #0.0025 each of the
Company at an exercise price of #0.30. Unless otherwise cancelled or amended,
the share options will remain in force for 10 years from 12 July 2005.
No options were exercised during the six months ended 30 June 2006 or in
2005.
16. Commitments
Capital expenditure commitments
As at As at As at
30 June 30 June
2006 2005 31 December
2005
(unaudited) (unaudited) (audited)
#'000 #'000 #'000
Contracted but not provided net of deposit paid 15 - 15
in the financial statements
Commitments under operating leases
The company leases a number of properties under operating leases, which
typically run for an initial period of 2 - 5 years, with an option to renew the
lease when all terms are renegotiated. None of the leases include contingent
rentals.
At the balance sheet date, the Company had total future minimum lease payments
under non-cancellable operating leases, which are payable as follows:
As at As at As at
30 June 2006 30 June 2005 31 December
2005
(unaudited) (unaudited) (audited)
#'000 #'000 #'000
Within one year 42 40 55
In the second to fifth years inclusively 17 37 35
59 77 90
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR ZVLFFQKBZBBK
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