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RNS Number : 4753D
China Shoto plc
17 September 2008
China Shoto plc
("China Shoto" or the "Group")
Interim results for the six months to 30th June 2008
Highlights
* Turnover up 81% to £68.6million (H1 2007: £38.0million)
* Profit for the period up 29% to £3.9million (H1 2007: £3.0million)
* Foreign sales revenue increased to £ 11.7million (H1 2007: £0.5million)
* Basic earnings per share from continuing operations up 44% to 16.3p(H1 2007:
11.4p)
* New product large capacity spiral wound battery achieves successful market
introduction
* The Board recommends an interim dividend of 1.5 pence per share (H1 2007:
nil)
Chairman's Statement
Despite the snowstorms across China, the Sichuan Wenchuan Earthquake and the pressure of growing inflation in H1 2008, China's economy
has sustained its recent rapid growth. According to a report issued by the National Bureau of Statistics of China, the Gross Domestic
Product growth was 10.4% for the first half of 2008.
In the six months ending 30 June 2008, China Shoto plc has achieved results which have exceeded expectations. In particular, the Group
has made progress in overseas sales and in the OEM market, highlighting a successful strategy focusing on core markets involving an
assessment of the market, renovating current products and developing new products.
Operational Review
Back up batteries*
During the first half of the year the revenue from back up batteries increased by 142% to*59.3 million compared to *24.5 million in the
same period last year, representing 86% of the Group's total revenue. The division realised a profit of*4.3 million, an increase of 30%
compared with*3.3 million in H1 2007.
China Mobile, China Unicom, China Telecom, China Netcom and China Tietong remain the main customers of the Group. Sales revenues from
telecommunication service operators are up 91% compared to the same period last year.
The Group achieved £11.7million of overseas sales in H1 2008, 23 times the figure of £0.5 million in H1 2007. In particular, sales to
India represented 82.8% of overseas sales. As the Indian telecommunications market is the second largest telecommunications market after
China amongst developing countries, the Group has focused on marketing to this market following the successful cooperation with Reliance
Communications. An active program and cooperation with Indian's key telecommunications operators is in place.
Power type batteries:
In H1 2008 the Group adjusted its manufacturing configuration because of capacity shortage for back up batteries, and the margin are
more attractive in Back up batteries. This resulted in a decrease of 31% in PTB business compared to the same period of 2007.
Research and Development
R&D for back up batteries has focused on creating smaller products to meet demand; the Group successfully developed four types of 12V
series Narrow Front Terminal AGM Batteries, and two types of 12V series Narrow Front Terminal Gel Batteries. These new products are more
compact and save space in the installation.
In R&D program for power type batteries, the Group successfully finished the development of 12V 25AH and a series of new power batteries
used in electric motorcycles.
An environmentally friendly super energy storage system-super capacitor developed and produced by the research laboratory in the first
half of the year was successfully installed and used in solar-energy street lighting systems at the Beijing Olympic Village.
A large capacity spiral wound battery used by heavy machines has been introduced into the market. Revenues of 8 million RMB are
anticipated.
Financial Review
The sales revenue in H1 2008 increased by 81% to £68.6 million compared to £38.0 million in H1 2007. The net profit achieved of £3.9
million was an increase of 29% compared to the £3.0 million achieved in H1 2007. The overseas sales for H1 2008 were £11.7million which is
23 times the sales in H1 2007 which were £0.5 million.
Principal risks and uncertainties
In overseas markets, the Group has adjusted the price of its products in line with RMB appreciation and adopted exchange rate risk
avoidance mechanisms such as export finance under letter of credits and bill discounts and other methods to reduce risks in exchange rates.
Changes in national monetary policy have limited the growth of bank loans which is slowing down cash flows from our customers.
Interim Dividend
The Board recommends an interim dividend for 2008 of 1.5 pence per share.
Outlook
The Government has an investment plan of over 300 billion RMB in the telecom networks following the corporate restructurings of China's
Telecom Operators and the issuance of 3G license. The plan could bring new market opportunities for the Group in the next 2 years. The Group
continues to seek opportunities to achieve continuous and sustainable growth, both organically and, where appropriate, through acquisitions.
Our core objective to increase shareholder value remains unchanged and the whole of our team is committed to achieving this.
Our objective of becoming the largest lead acid battery producer in Asia continues. We plan to gradually enter into renewable energy
industries to become a powerful green energy solution provider.
Cao Guifa
Chairman
Consolidated income statement
For the six months ended 30 June 2008
30 June 30 June 31 December
Notes 2008 2007 2007
(Unaudited) (Unaudited) (Audited)
£000 £000 £000
Revenue 68,594 37,990 107,497
Cost of sales (51,510) (28,472) (82,376)
*
Gross profit 17,084 9,518 25,121
Other operating income 620 614 503
Distribution expenses (8,265) (3,753) (11,131)
Administrative expenses (4,016) (2,394) (5,869)
Other operating expenses (21) (3) (96)
*
Profit from operations 5,402 3,982 8,528
Finance income 59 35 73
Finance costs (1,106) (549) (1,445)
*
Profit before tax from 4,355 3,468 7,156
continuing operations
Tax expense 4 (480) (489) (1,255)
*
Profit from continuing 3,875 2,979 5,901
operations
Profit/(loss) on discontinued - 32 (14)
operations, net of tax
*
Profit for the period 3,875 3,011 5,887
*
Attributable to:
Equity holders of the parent 3,813 2,870 5,618
Minority interests 62 141 269
*
3,875 3,011 5,887
*
Earnings per share for profit
attributable to the
equity holders of the parent
during the period
-Basic 16.33p 12.29p 24.07p
*
-Diluted 16.29p 12.08p 23.66p
*
Continuing operation
-Basic 16.33p 11.37p 24.87p
*
-Diluted 16.29p 11.17p 24.45p
Consolidated balance sheet
As at 30 June 2008
* 30 June 30 June * 31 December
2008 2007 2007
(Unaudited) (Unaudited) (Audited)
Assets £000 £000 * £000
Non-current assets * * *
Property, plant and equipment 16,716 13,183 * 15,590
Available-for-sale investment 148 131 * 137
Intangible assets 1,891 1,735 1,778
Deferred tax assets 81 118 * 92
* 118 * *
* 18,836 15,167 * 17,597
* * *
Current assets * *
Inventories 29,270 17,135 * 19,426
Trade and other receivables 42,568 29,361 31,479
Due from related parties 1,263 2,193 * 1,299
Short-term investments 4,311 578 * 1,290
Cash and cash equivalents 7,344 4,331 * 11,087
* * *
* 84,756 53,598 * 64,581
* 68,765 * *
Total assets 103,592 68,765 * 82,178
* * *
Liabilities * *
Current liabilities * *
Bank borrowings 30,656 18,727 * 23,284
Trade and other payables 36,816 23,650 * 27,817
Income tax payable 260 199 * 516
* * *
1,416
67,732 42,576 51,617
* * *
Non-current liabilities
Deferred tax liabilities - 56 * -
* * *
1,416
- 56 * -
* * *
Total liabilities 67,732 42,632 51,617
Equity * *
Share capital 2,334 2,334 * 2,334
Share premium 8,630 8,630 * 8,630
Other reserves 2,916 2,916 * 2,916
Statutory reserves 6,678 5,071 * 6,678
Retained earnings 13,332 9,102 * 10,406
Foreign currency translation 1,402 (2,960) * (871)
reserve
* * *
25,093
Total equity attributable to equity 35,292 25,093 * 30,093
holders of the parent
* * *
Minority interests 568 1,040 * 468
* * *
Total equity and liabilities 103,592 68,765 * 82,178
* * *
Consolidated statement of changes in equity
For the period ended 30 June 2008
Attributable to equity holders Minorityinterests Total
For the six months ended 30 Share Share Other Statutory Retained ForeignCurrency Total
June 2008 (Unaudited)
capital premium Reserves reserves earnings TranslationReserve *
£000 £000 £000 £000 £000 £000 £000 £000 £000
Balance as at 1 January 2008 2,334 8,630 2,916 6,678 10,406 (871) 30,093 468 30,561
Net profit for the financial - - - - 3,813 - 3,813 62 3,875
period
Foreign currency translation - - - - - 2,273 2,273 38 2,311
Total recognized income and 6,086 100 6,186
expense
Share based payment expense
Employee share options - - - - 163 - 163 - 163
Dividends paid - - - - (1,050) - (1,050) - (1,050)
Balance as at 30 June 2008 2,334 8,630 2,916 6,678 13,332 1,402 35,292 568 35,860
Attributable to equity holders Minorityinterests Total
For the six months ended 30 Share Share Other Statutory Retained ForeignCurrency Total
June 2007(Unaudited)
capital premium Reserves reserves earnings Translation Reserve *
£000 £000 £000 £000 £000 £000 £000 £000 £000
Balance as at 1 January 2007 2,334 8,630 2,916 5,071 6,769 (2,272) 23,448 1,140 24,588
Net profit for the financial - - - - 2,870 - 2,870 141 3,011
period
Foreign currency translation - - - - - (688) (688) 5 (683)
Total recognized income and 2,182 146 2,328
expense
*
Share based payment expense
Employee share options - - - - 163 - 163 - 163
Dividends paid - - - - (700) - (700) - (700)
Dividends paid to minority - - - - - - - (246) (246)
shareholders of subsidiaries
Balance as at 30 June 2007 2,334 8,630 2,916 5,071 9,102 (2,960) 25,093 1,040 26,133
2,334 8,630 2,916 5,071 6,769 (2,272) 23,448 1,140 24,588
For the twelve months ended 31
December 2007 (audited)
Balance as at 1 January 2007
Net profit for the financial - - - - 5,618 - 5,618 269 5,887
period
Foreign currency translation - - - - - 1,401 1,401 17 1,418
Total recognized income and 7,019 7,305
expense
Disposal of subsidiary - - - - - - - (712) (712)
Transfer to statutory reserves - - - 1,607 (1,607) - - - -
Share based payment expense *
Employee share options - - - - 326 - 326 - 326
Dividends paid - - - - (700) - (700) - (700)
Dividends announced to - - - - - - - (246) (246)
minority shareholders of
subsidiaries
Balance as at 31 December 2007 2,334 8,630 2,916 6,678* 10,406* (871)* 30,093* 468* 30,561
Consolidated cash flow statements
For the period ended 30 June 2008
30 June 30 June 31 December
2008 2007 2007
(Unaudited) (Unaudited)
(Audited)
Cash flows from operating £000 £000 £000
activities*
Profit before tax from 4,355 3,468 7,156
continuing operations
Profit/(Loss) before tax from - 1 351
discontinued operations
Profit before tax 4,355 3,469 7,507
Adjustments for:
Amortisation of intangible 23 41 50
assets
Depreciation of property, 683 560 1,137
plant and equipment
Losses/(profit) on disposal of 20 (10) 42
property, plant and equipment
Share based payment expense 163 163 326
Financial income (59) (48) (88)
Financial expense 1,106 493 1,460
Cash flow from operating
activities before changes of 6,291 4,668 10,434
working capital and provisions
Working capital changes:
Gain on payable write-off - - (9)
(Increase)/decrease in:
Inventories (8,085) (6,990) (8,997)
Trade and other receivables (8,447) (10,259) (12,504)
Due from related parties 132 937 (228)
Increase/(decrease) in:
Trade and other payables 6,848 1,077 9,817
Due to related parties - - (651)
Cash generated from/(used in) (3,261) (10,567) (2,138)
operations
Interest received 59 48 88
Income tax paid (749) (422) (976)
Net cash flows from operating (3,951) (10,941) (3,026)
activities
Cash flows from investing
activities
Purchase of land use right (2) (241) (422)
Purchase of property, plant (1,004) (1,106) (3,627)
and equip
Purchase of short-term (2,832) 375 (283)
investment
Disposal of a subsidiary - - (361)
undertaking, net of cash
transferred
Proceeds from disposal of 133 288 307
property, plant and equipment
Dividend from former - - 175
subsidiary (declared before
disposal)
Cash flows used in investing (3,705) (684) (4,211)
activities
Cash flows from financing
activities
Increase in bank borrowings 23,993 7,837 37,853
Decrease in bank borrowings (18,593) (1,383) (27,864)
Interest paid (1,106) (493) (1,460)
Dividends paid (1,050) - (700)
Cash flows from financing 3,244 5,961 7,829
activities
Net increase in cash and cash (4,412) (5,664) 592
equivalents
Cash and cash equivalents at 11,087 9,937 9,937
beginning of period
Foreign exchange differences 669 58 558
Cash and cash equivalents at 7,344 4,331 11,087
end of period
Notes to the interim consolidated financial information
For the six months ended 30 June 2008
1. General information
China Shoto plc is a company incorporated in the United Kingdom on 10 May 2005 under the Companies Act 1985. The interim consolidated
financial information of the Company for the six months ended 30 June 2008 comprises China Shoto plc (the 'Company') and its subsidiary
undertakings (the 'Group').
The interim consolidated financial information was authorised for issue on 17 Sep 2008.
2. Accounting policies
Basis of preparation
This unaudited consolidated interim financial information has been prepared using the recognition and measurement principles of
International Accounting Standards, International Financial Reporting Standards and Interpretations adopted for use in the European Union
(collectively EU IFRSs). The principal accounting policies used in preparing the interim results are unchanged from those disclosed in the
group's financial statements for the year ended 31 December 2007.
While the financial information included in this interim consolidated financial information has been prepared in accordance with the
recognition and measurement criteria of International Financial Reporting Standards as adopted by the EU (IFRSs), this interim consolidated
financial information does not itself contain sufficient information to comply fully with IFRSs.
The financial information for the six months ended 30 June 2008 and 30 June 2007 is unreviewed and unaudited and does not constitute the
group's statutory financial statements for those periods. The comparative financial information for the full year ended 31 December 2007
has, however, been derived from the statutory financial statement for that period. A copy of those statutory financial statements has been
delivered to the Registrar of Companies. The auditors' report on those accounts was unqualified, did not include references to any matters
to which the auditors drew attention by way of emphasis without qualifying their report and did not contain a statement under section
237(2)-(3) of the Companies Act 1985.
Foreign currencies
The functional currency of the subsidiary undertakings is Renminbi ('RMB'), and the unaudited interim consolidated financial information
of the subsidiary undertakings have been drawn up in RMB. The presentation currency of the Group is pounds sterling and therefore the
interim consolidated financial information has been translated from RMB to pounds sterling at the following exchange rates:
Period-end rates Average rates
30 June 2007 £1 = RMB 15.2455 £1 = RMB 15.1841
31 December 2007 £1 = RMB 14.5807 £1 = RMB 15.2166
30 June 2008 £1 = RMB 13.5342 £1 = RMB 13.9622
Assets and liabilities are translated into sterling at the closing rate, and all income and expenses are translated at the average rate
during the financial period, being an approximation for the actual rates at the date of the transactions. All resulting exchange differences
are taken to the Foreign Currency Translation within equity.
3. Segment reports
Reporting format
The primary segment reporting format is determined to be business segments as the Group's risks and rates of return are affected
predominantly by differences in the products and services produced. The operating businesses are organized and managed separately according
to the nature of the products and services provided, with each segment representing a strategic business unit that offers different products
and serves different markets. The operating businesses are all located in the People's Republic of China, and therefore geographic
information is provided only in respect of the destination of sales.
Business segments
The Group is comprised of the following business segments:
The Back up batteries business segment includes Value Regulated Lead Acid Batteries and Flooded and Gel Batteries.
The Turbine business segment includes the development and construction of new turbines and the refurbishment and reconstruction of
existing turbines. On 7 November 2007 the Group disposed of Beijing Full Three Dimension Engineering Co. Ltd which carried out all of the
Group's turbine manufacturing operation.
Allocation basis and transfer pricing
Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a
reasonable basis.
Business segments
The following tables present certain sales, profit regarding the Group's business segments for the period ended 30 June 2007 and 2008
and 31 December 2007.
Six months to 30 June 2008 Back up Batteries PTB Eliminations Continuing Turbine Total
(Unaudited) operations
2008 2008 2008 2008 2008 2008
* £000 £000 £000 £000 £000 £000
Revenue* * * * * * *
Sales to external customers 59,312 9,282 - 68,594 - 68,594
Inter-segment sales - 13,840 (13,840) - - -
* * * * * * *
Total revenue 59,312 23,122 (13,840) 68,594 - 68,594
* * * * * * *
* * * * * * *
Results: * * * * * *
Segment profit 4,305 383 - 4,688 - 4,688
* * * * * * *
Unallocated corporate expenses * * * (333) - (333)
* * * * * * *
Profit from operations before * * * 4,355 - 4,355
taxation
Income taxation * * * (480) - (480)
* * * * * * *
Profit for the period * * * 3,875 - 3,875
Six months to 30 June 2007 Back up Batteries PTB Eliminations Continuing Turbine Total
(Unaudited) operations
2007 2007 2007 2007 2007 2007
* £000 £000 £000 £000 £000 £000
Revenue: * * * * * *
Sales to external customers 24,525 13,465 - 37,990 3,602 41,592
Inter-segment sales 3 - (3) - - -
* * * * * * *
Total revenue 24,528 13,465 (3) 37,990 3,602 41,592
* * * * * * *
* * * * * * *
Results: * * * * * *
Segment profit 3,302 726 - 4,028 1 4,029
* * * * * * *
Unallocated corporate expenses * * * (560) - (560)
* * * * * * *
Profit from operations before * * * 3,468 1 3,469
taxation
Income taxation * * * (489) 31 (458)
* * * * * * *
Profit for the year * * * 2,979 32 3,011
Twelve months to 31 December Back up Batteries PTB Eliminations Continuing Turbine Total
2007 (Audited) operations
2007 2007 2007 2007 2007 2007
* £000 £000 £000 £000 £000 £000
Revenue: * * * * * *
Sales to external customers 78,018 29,479 - 107,497 5,817 113,314
Inter-segment sales - 5,814 (5,814) - - -
* * * * * * *
Total revenue 78,018 35,293 (5,814) 107,497 5,817 113,314
* * * * * * *
* * * * * * *
Results: * * * * * *
Segment profit 7,535 1,149 - 8,684 351 9,035
* * * * * * *
Unallocated corporate expenses * * * (1,528) - (1,528)
* * * * * * *
Profit from operations before * * * 7,156 351 7,507
taxation
Income taxation * * * (1,255) 1 (1,254)
Loss from selling discontinued * * * - (366) (366)
operation
* * * * * * *
Profit/*loss* for the year * * * 5,901 (14) 5,887
Geographical segments
Six months to 30 June 2008 (Unaudited)
Domestic sales Export sales Elimination * * Total
2008 2007 2008 2007 2008 2007 2008 2007
£000 £000 * £000 £000 * £000 £000 * £000 £000
Segment sales 56,894 41,117 11,700 475 - 3,602 68,594 37,990
Twelve months to 31 December 2007 (Audited)
Domestic sales Export sales Elimination Total
2007 2007 2007 2007
£000 * £000 * £000 * £000
Segment sales 106,394 6,920 * 5,817 107,497
* * * *
All export sales originate from the Back up Batteries segment.
4. Income tax
* 30 June 2008 * 30 June 2007 31 December 2007
(Unaudited) (Unaudited) (Audited)
£000 * £000 £000
Income tax expense is as
follows:
Current income tax 463 * 509 1,324
* * *
Deferred income tax: *
Origination and reversal of 17 (20) (57)
temporary differences
Previously recognized deferred
tax liability written off in - - (12)
the period
* * *
17 (20) (69)
* * *
480 * 489 1,255
5. Dividends
* 30 June * 30 June 2007 31 December 2007
2008
(Unaudited) (Unaudited) (Audited)
£000 * £000 £000
Dividends on ordinary shares 1,050 * 700 700
declared and paid
during the six months period
* * * * *
China Shoto plc declared a dividend of 4.5p per ordinary share amounting to £1,050,000 on 22 April 2008 and the dividend was approved by
the shareholders on 22 May 2008. China Shoto plc declared a dividend of 3p per ordinary share amounting to £700,000 on 26 April 2007 and the
dividend was approved by the shareholders on 12 June 2007.
6. Earnings per share from continuing operations
Earnings for the purpose of basic and diluted earnings per share are the net profit attributable to equity holders of the parent for the
six months ended 30 June 2008 of £3,813,000 (30 June 2007: £2,870,000) and twelve months ended 31 December 2007 of £5,618,000.
The profit from continuing operations for the financial period attributable to equity holders of the parent is as follows:
30 June * 30 June 31 December 2007
2008 2007
(Unaudited) (Unaudited) (Audited)
£000 £000 £000
Profit attributable to equity 3,813 2,870 5,618
holders of the parent
Profit/*Loss* on discontinued - (32) 14
operation, net of
tax
Minority interest of - 16 173
discontinued operation
*
Profit from continuing 3,813 2,854 5,805
operations attributable to
equity holders of the parent
The weighted average number of ordinary shares used in the calculation of earnings per share from continuing operations has been derived
as follows:
30 June * 30 June 31 December 2007
2008 2007
(Unaudited) (Unaudited) (Audited)
£000 £000 £000
Number of ordinary shares
Weighted average number of 23,744,755 23,343,770 23,343,770
ordinary shares - basic
Dilutive effect of share 66,642 411,971 400,985
options
*
Weighted average number of 23,811,397 23,755,741 23,744,755
ordinary shares - diluted
This information is provided by RNS
The company news service from the London Stock Exchange
END
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