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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Sorbic Int | LSE:SORB | London | Ordinary Share | GB00B3CX3F30 | ORD 0.1P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 2.50 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From May 2019 to May 2024
TIDMSORB
RNS Number : 6812R
Sorbic International PLC
30 June 2015
30 June 2015
Sorbic International Plc
("Sorbic" or the "Group" or the "Company")
Interim Results
Sorbic International plc, (AIM:SORB), a leading sorbates producer in China, today announces its unaudited Interim Results for the six months period ended 31 March 2015.
Summary
Hot Features
Premium
-- Revenue for the period was GBP6.6 million
(H1 2014: GBP7.5 million)
-- Gross profit margin for the period of 6.9%
(H1 2014: 11.9%)
-- EBITDA for the period of GBP0.05 million (H1
2014: GBP0.554 million)
-- Net loss after tax of GBP0.46 million (H1
2014: loss of GBP0.08 million)
-- Net cash balance at the end of the period
were GBP7.93 million* (H1 2014: GBP6.61 million)
-- Net assets of GBP11.30 million* as at 31 March
2015 (H1 2014: GBP9.95 million)
*Due to the 'events' described below, the Company has no control over the cash balances which may no longer be in a Company controlled bank account.
- Ends-
For further information:
Sorbic International
Plc
John McLean, Non-Executive Tel: +44 (0) 7768
Chairman 031 454
www.sorbicinternational.com
Media enquiries:
Abchurch Communications Henry Harrison-Topham Tel: +44 (0) 20 7398 / Canace Wong 7709 Canace.Wong@abchurch-group.com www.abchurch-group.com
Notes to Editors:
Sorbic International's principal activity is the production and sale of the food preservatives Sorbic Acid and Potassium Sorbate from its base in Linyi City, Shandong Province, Peoples Republic of China. Approximately half of Sorbic International's production is sold to overseas markets, across 46 countries and half into the Chinese domestic market.
Sorbic Acid is a naturally occurring organic compound that is used in all kinds of foods for its anti-decomposition and anti-fungus function and also in grains, medicines, cosmetics, toothpaste, tobacco, animal feed, latex, paper-manufacturing and pesticides. Potassium Sorbate is used to inhibit moulds and yeasts in many foods, such as cheese, wine, yogurt, dried meat, baked goods, cosmetics and pharmaceuticals.
Sorbic International operates through its wholly owned subsidiary Linyi Van Science and Technique Co., Ltd ("LVST").
Chairman's statement
Introduction
The Board reports that the Group's operating subsidiary, Linyi Van Science and Technique Co., Ltd ("LVST") revenues for the six months ended 31 March 2015 were GBP6.6 million (RMB 62 million), which is down on the prior period (2014: GBP7.5 million and RMB 75 million), and is mainly due to a reduction in selling prices (particularly in February and March) and an element of foreign exchange. This has impacted LVST's overall operating margin for the half year, which was 6.9% (2014: 11.9%), as well as a reduction in LVST's EBITDA to GBP0.05 million compared to GBP0.55 million for 2014. The finance cost for the period includes GBP0.49 million representing the redemption premium which was agreed at the time of the roll-over in August 2014 in the event that the loan-notes were not redeemed by 31 December 2014.
Revenues continue to be dominated by exports to the US (via the APAC Chemical Corporation) and Chinese domestic business.
Margins for Sorbic Acid have fluctuated widely during the period from 9% in January to a negative 3% in March, whilst Potassium Sorbate margins have also moved significantly from 14% in January to 4% in March. The significant margin change was partly due to the timing issue of Chinese New Year, and according to Mr Wang Yan Ting ('Wang'), the Company's former CEO, an increase in power costs due to a move from coal generation to gas generation. As further explained below, due to the events on 22 April ('events'), it has not been possible for the Board to gain any further information from the Linyi management.
UK and Singapore overheads remain in line with budget, with the exception of an approximate additional GBP75,000 to GBP100,000 to cover legal and other costs associated with the events.
The net assets as at 31 March 2015, show an improvement to GBP11.3 million compared to the full year as at 30 September 2014 of GBP10.12 million, which is due to currency appreciation against Sterling. Notwithstanding the events, the cash balance as at the period end has been reflected without any adjustment.
Loan Notes repayment
As announced on 29 August 2014, the outstanding loan note principal of GBP2.5 million was rolled over until 31 December 2014 to allow sufficient time for the loan notes to be repaid. Discussions took place with Mr Wang and the Company's advisors and a plan had been agreed to take the necessary action to repay the outstanding loan note as the Company's subsidiary ("LVST") had approximately GBP6.9 million in the bank at the year-end.
Mr Wang agreed in the October 2014 Board meeting for LVST's funds to be transferred and again at the Board meeting on 7 December 2014, he confirmed this statement. To ensure that the transfer actually happened, the Board appointed eCFO, which is a business consultancy, based in China with over 20 years' experience of dealing with such issues, both to advise and to implement the Board's funds repatriation policy.
During January and February 2015, it became apparent that Mr Wang had no intention of releasing any funds, which was confirmed at a Board meeting in March.
In addition, during that time, the Board had been unable to adequately progress resolution of the compensation due regarding Inner Mongolia and the proposed expansion of the Company's operations in Linyi.
To remedy this position, the two UK-based directors sought and followed the advice from the Company's lawyers and advisers in China and announced on 22 April 2015, the removal of Mr Wang, the Group and Company CEO, from office, both at the Board (plc) level and in respect of the operating subsidiary ("LVST") in China. Furthermore, the Board voted to terminate Mr Wang's role as Legal Representative in China and to replace him with Mr Cai Jun, the Managing Partner of Guolan, a Beijing law firm. As part of the change, the remaining two Directors of LVST were also replaced.
For the change in Legal Representative to be legally (as opposed to corporately) effective, the change has to be registered with the relevant branch of the State Administration of Industry and Commerce. This has not occurred for the reasons explained below.
Since being replaced as the Company's Legal Representative for LVST in China and from the LVST board, Mr. Wang has declined to hand-over the Company's corporate seals (chops) and business licences, which were removed from the premises before he was dismissed. The local police were contacted, but deemed Mr. Wang's non-cooperation as a commercial matter and were therefore unwilling to assist.
Further, members of the new LVST board attempted to enter LVST's premises on 23 April, but non-uniformed security personnel prevented entry.
As a result of Mr. Wang's non-cooperation, the bank accounts and the day-to-day operations of the Company still remain under the control of Mr. Wang. Furthermore, Mr. Wang has confirmed that he has transferred funds belonging to the Company which remain under his control and, to date, he has refused to return them. At 31 March 2015, the management accounts showed total cash balances of approximately GBP7.9 million.
The Board has been informed that the Company's factory in Linyi continues to be fully operational and Mr. Wang remains in regular contact with the Company.
Following the events of 22 April, 2015 in Linyi, the Board has adopted a pro-active approach and has initiated the following actions:
A legal route via our lawyers Zhong Lun and a direct approach to the Police in Linyi and the Public Security Bureau in Beijing and Linyi;
A diplomatic route via British Embassy in Beijing, the Chinese Embassy in London and UKTI in the UK;
A direct route via the appointment of Tim Clissold as special advisor to the Board ( UK based, fluent in Chinese, experienced in dispute resolution in China, and the author of 'Mr China') and his colleague Frank Li (China based and an ex China Foreign Affairs Ministry diplomat).
The above actions have been complemented by articles in the Financial Times and The Times.
Negotiations are now ongoing with Mr Wang and the Board will provide an update as and when appropriate. Shareholders should be aware that all of the disclosures contained with this statement may be read by Mr Wang. In addition, as the events have taken place after the period end, consideration will need to be given in the year-end accounts as to whether any accounting adjustments will be required.
Cash
Sorbic International plc is wholly reliant on the transfer of funds from China to meet its operating costs and to repay the loan notes (approximately GBP3.75 million including redemption premium and interest) which remain outstanding and are in default. During the entire process, regular communication has occurred between the Company and the loan-stock holders through their representative and Board director, Jay Newman.
As announced on 8 December 2014, 6,000,000 shares were issued to raise GBP240,000 to fund the Company whilst the then plans for the funds transfer from LVST were put in place.
Following the series of events above, the financial position of Sorbic International plc is uncertain.
Inner Mongolia
In addition, the Board has been unable to progress resolution of the outstanding compensation due in respect of Inner Mongolia.
As previously reported, a framework to determine the amount of compensation had been agreed and within that framework, preliminary indicative figures would indicate that the compensation could be sufficient to cover the current carrying costs (GBP2.5 million). Currently, the Board were informed by Mr Wang that negotiations are on hold whilst an IM audit takes place.
In my statement in June 2014, I indicated that the balance sheet had previously stated that the funding for the land purchases had been provided by the Company's CEO, Mr Wang. However, this was proven not to be the case as the funding was provided by either loans or grants from the local industrial zone. As the documentation for the loans/grants from the local authorities is minimal, the Board has adopted a prudent approach in assuming the entire purchase was loan funded. Accordingly, the accounts were reclassified to reflect the change in liability which has had no effect on the reported net assets. Shareholders should be aware that when it was discovered that the funding was not provided by Mr Wang and that various other transactions took place, legal action was initiated with the Chinese authorities, the outcome of which was that the Inner Mongolian Public Security Bureau visited Linyi and subsequently concluded that no criminal event had taken place. Following these events, Mr Wang became more cooperative for a short while, and the Board was alerted to Mr Wang's approach to corporate governance and the rights of other shareholders.
Linyi
According to Mr Wang, in respect of the proposed move to a new site within Linyi, an agreement has largely been reached with the new land identified and the relocation package outline agreed, however given the events, the details of the proposed move are now uncertain and will be revisited when control of the subsidiary has been regained.
Nomad
Finncap, the Company's Nomad, has the right under the Company's agreement to resign if Sorbic's shares are suspended. On 16 June, Finncap announced their resignation. Discussions have taken place with a number of Nomads over the last year, however, none were willing to replace Finncap until the Company and Board were regularised. Accordingly, it is unlikely that there will be a satisfactory resolution (the return of control of LVST and the control and return of the cash) for the Company by 17 July, 2015 and therefore, the Company will be delisted.
Legal representative
Included within the interim statement is a paragraph setting out the role and responsibilities of the Legal Representative and the associated use of the corporate seal or 'chop'. Such controls work within a benign environment, but it is clear from our experience that the ability of the Company to remove a rogue Legal Representative is severely restricted, if not impossible, if he takes the chops and business licences and refuses to affix the chop to the documents appointing his replacement. Prior to 22 April 2015, the Company had sought to change the Legal Representative; however Mr Wang refused such a change.
Board changes
As I reported on 19 January 2015, Jay Newman was appointed as a non-executive director. Jay has over 20 years' experience of working in China and specifically, he has been working with the Company since autumn 2013 as the Loan Notes observer. As I have mentioned above, on 22 April Mr Wang was removed as CEO and as a director of the Company.
Going concern
Whether the Group will have sufficient resources to continue in operational existence for the foreseeable future will ultimately be dependent on the repayment of the outstanding loan notes and the successful resolution and return of the funds controlled by Mr Wang.
Outlook
Demand for the Group's products continues, but the hurdles of cash transfers, Inner Mongolian negotiations, the Linyi move and Mr Wang's behaviour have all contributed to a very challenging period since the year-end.
At the AGM on 7 May and post the events on 22 April, the Board was unanimously re-appointed: both Jay and I would like to thank the shareholders, loan-stock holders and the current professionals for their help and support and both of us will continue to work tirelessly to seek an acceptable resolution.
John McLean
Non-executive Chairman
30 June 2015
Unaudited condensed consolidated statement of comprehensive income
For the six month period ended 31 March 2015
Six months Six months
ended ended Year ended
31 March 31 March 30 September
Notes 2015 2014 2014
Unaudited Unaudited Audited
GBP GBP GBP
Revenue 6,544,044 7,472,712 14,074,421
Cost of sales (6,093,102) (6,580,780) (12,698,901)
------------ ------------ --------------
Gross profit 450,942 891,932 1,375,520
Distribution and
selling expenses (94,253) (88,653) (187,905)
Administrative expenses (621,097) (545,748) (1,108,425)
------------ ------------ ==============
Operating (loss)
/ profit (264,408) 257,531 79,190
Impairment loss - - -
Other income 9,632 16,404 33,424
Finance costs (646,978) (2,488) (547,176)
Unrealised foreign
exchange (loss)/gain 447,859 (237,124) (28,386)
(Loss) / Profit before
taxation (453,895) 34,323 (462,948)
Income tax expense (7,543) (109,512) (132,322)
------------ ------------ --------------
(Loss) for the period (461,438) (75,189) (595,270)
Other comprehensive
income
- Exchange differences
on translating foreign
operations 1,393,267 (431,134) (88,562)
------------ ------------ --------------
Total comprehensive
income/ (loss), net
of tax 931,829 (506,323) (683,832)
------------ ------------ --------------
(Loss) attributable
to equity holders
of the parent (461,438) (75,189) (595,270)
============ ============ ==============
Total comprehensive
income / (loss) for
the year attributable
to equity holders
of the parent 931,829 (506,323) (683,832)
============ ============ ==============
Earnings per share
(pence):
Basic (0.73) (0.14) (1.03)
Diluted (0.73) (0.14) (1.03)
Unaudited consolidated statement of financial position
As at 31 March 2015
As at As at As at
31 March 31 March 30 September
Unaudited Unaudited Audited
GBP GBP GBP
Assets
Non-current assets
Property, plant and
equipment 6,044,636 5,569,982 5,388,472
Land use rights 2,512,200 2,097,746 2,163,567
8,556,836 7,667,728 7,552,039
------------- ------------- --------------
Current assets
Inventories 959,933 520,810 436,577
Trade receivables 963,655 762,220 1,138,403
Prepayments, deposits
and other receivables 246,837 199,831 251,520
Amount due from director 6,632,236 5,895,483 6,115,280
Cash and cash equivalents 7,934,280 6,607,177 6,947,186
------------- -------------
16,736,941 13,985,521 14,888,966
------------- ------------- --------------
Total assets 25,293,777 21,653,249 22,441,005
============= ============= ==============
Equity and liabilities
Current liabilities
Trade payables 290,478 136,390 167,462
Advanced payments - - 180,476
Accruals and other
payables 591,050 378,838 312,428
Amount due to directors 7,615,112 8,324,430 6,929,129
Amount due to Inner
Mongolia 1,758,400 - 1,600,000
Current tax liabilities - 34,470 30,735
Convertible loan notes 3,742,911 2,833,290 3,096,778
------------- ------------- --------------
13,997,951 11,707,418 12,317,008
Non-current liability
Convertible loan notes - - -
------------- ------------- --------------
Total liabilities 13,997,951 11,707,418 12,317,008
------------- ------------- --------------
Capital and reserves
Share capital 3,491,773 3,203,159 3,431,773
Share premium 22,427,326 22,120,265 22,247,326
Capital reserve 3,043,715 2,703,062 2,769,531
Surplus reserve 542,582 481,856 493,705
Retained earnings (174,686) 806,833 286,752
Share based payment - - -
reserve
Reverse acquisition
reserve (20,911,925) (20,911,925) (20,911,925)
Foreign currency translation
reserve 3,250,327 1,916,092 2,180,121
Hedging reserve (451,353) (451,353) (451,353)
Convertible loan notes
- Equity 78,067 77,842 78,067
------------- ------------- ==============
Total equity 11,295,826 9,945,831 10,123,997
--------------
Total equity and liabilities 25,293,777 21,653,249 22,441,005
============= ============= ==============
Unaudited condensed statement of cash flows
For the six month period ended 31 March 2015
Six months Six months Year
ended ended ended
31 March 31 March 30 September
2015 2014 2014
Unaudited Unaudited Audited
GBP GBP GBP
Cash flows from operating
activities
(Loss)/Profit for the period (453,895) 34,323 (462,948)
Adjustments for:
Amortisation of prepaid land
lease payments 27,666 26,322 51,801
Depreciation 282,064 270,491 532,320
Impairment loss - - -
Interest income (9,632) (16,404) (33,425)
Interest expense 646,978 2,488 547,176
Operating profit before working
capital changes: 493,181 317,220 634,924
Changes in working capital
(Increase)/decrease in Inventories (480,135) 529,268 639,321
(Increase)/decrease in trade
and other receivables (113,017) 689,827 138,207
Increase/(decrease) in trade
and other payables 145,146 58,113 109,118
----------- ----------- --------------
Cash generated from operating
activities 45,175 1,594,428 1,521,570
Interest paid (844) (2,488) (3,662)
Income tax paid (7,548) (136,903) (132,322)
----------- ----------- ==============
Net cash generated from operating
activities 36,783 1,455,037 1,385,586
----------- ----------- --------------
Cash flows from investing
activities
Interest received 9,632 16,404 33,437
Net cash generated from investing
activities 9,632 16,404 33,437
----------- ----------- --------------
Cash flows from financing
activities
Proceeds from issuance of
new share 240,000 - 111,875
Proceeds from issuance of
convertible loans notes - - 111,875
Net cash generated from financing
activities 240,000 - 223,750
----------- ----------- --------------
Net increase in cash and cash
equivalents 286,415 1,471,441 1,642,773
Cash and cash equivalents
at the beginning of the period 6,947,186 5,311,311 5,311,311
Exchange (loss)/ gain on cash
and cash equivalents 700,679 (175,575) (6,898)
Cash and cash equivalents
at the end of the period 7,934,280 6,607,177 6,947,186
=========== =========== ==============
Unaudited condensed consolidated statement of changes in equity
For the six month period ended 31 March 2014
Total
equity
attributable
to
Share Foreign Convertible equity
based currency Reverse loan holders
Share Share Capital Surplus Retained payment translation acquisition Hedging notes of the
capital premium reserve reserve earning reserve reserve reserve Reserve - equity parent
GBP GBP GBP GBP GBP GBP GBP GBP GBP GBP GBP
------------ ------------- ------------
Balance at 1
October 2013 3,203,159 22,120,265 2,788,918 497,161 882,022 - 2,246,065 (20,911,925) (451,353) 77,842 10,452,154
Issue of - - - - - - - - - - -
ordinary
share
Share issue - - - - - - - - - - -
costs
---------- ----------- ---------- --------- ---------- -------- ------------ ------------- ---------- ------------ -------------
Profit for the
period - - - - (75,189) - - - - - (75,189)
Other
comprehensive
income:
Exchange
differences
on translation
of foreign
operations - - (85,856) (15,305) - - (329,973) - - - (431,134)
---------- ----------- ---------- --------- ---------- -------- ------------ ------------- ---------- ------------ -------------
Total
comprehensive
income for the
period - - (85,856) (15,305) (75,189) - (329,973) - - - (506,323)
---------- ----------- ---------- --------- ---------- -------- ------------ ------------- ---------- ------------ -------------
Balance at 31
March 2014 3,203,159 22,120,265 2,703,062 481,856 806,833 - 1,916,092 (20,911,925) (451,353) 77,842 9,945,831
========== =========== ========== ========= ========== ======== ============ ============= ========== ============ =============
Balance at 1
October 2014 3,431,773 22,247,326 2,769,531 493,705 286,752 - 2,180,121 (20,911,925) (451,353) 78,067 10,123,997
Issue of
ordinary
share 60,000 - - - - - - - - 60,000
Share issue
costs 180,000 - - - - - - 180,000
Loss for the
period - - - - (461,438) - - - - - (461,438)
Other
comprehensive
income:
Exchange
differences
on translation
of foreign
operations - - 274,184 48,877 - - 1,070,206 - - - 1,393,267
---------- ----------- ---------- --------- ---------- -------- ------------ ------------- ---------- ------------ -------------
Total
comprehensive
income for the
period - - 274,184 48,877 (461,438) - 1,070,206 - - - 931,829
---------- ----------- ---------- --------- ---------- -------- ------------ ------------- ---------- ------------ -------------
Balance at 31
March 2015 3,491,773 22,427,326 3,043,715 542,582 (174,686) - 3,250,327 (20,911,925) (451,353) 78,067 11,295,826
========== =========== ========== ========= ========== ======== ============ ============= ========== ============ =============
Legal Representative
Every business established in China, whether domestic or foreign, is required to have a legal representative. He/she is the main principal of the company and is the employee with the legal power to represent - and enter into binding obligations on behalf of - the company in accordance with the law or articles of association of the company. The legal representative is authorised to perform all acts regarding the general administration of a company according to the company's aims and objectives, which includes:
-- Acting to conserve the company's assets; -- Executing powers of attorney on the company's behalf; -- Authorising legal representation of and litigation by the company;
-- And executing any legal transactions that are within the nature and scope of that company's business.
Chops
In China, every company is required to have a "chop" which will be in the custody of the legal representative. Control of the chop is important in order to minimise risks. The legal representative's chop is required on numerous company documents and is regarded as a signature and the legal representative can, by using the chop, bind the company.
If a legal representative is to be changed, such a change has to be chopped using the corporate seal and thus approved by the outgoing legal representative.
The Company's registered legal representative in China is still Mr Wang.
- Ends -
This information is provided by RNS
The company news service from the London Stock Exchange
END
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