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| 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 | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 12.50 | 0.00 | 00:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Jan 2020 to Jan 2025
TIDMAFG
RNS Number : 6185L
Aquatic Foods Group PLC
29 April 2015
Press Release 29 April 2015
Aquatic Foods Group Plc
("Aquatic Foods" or the "Group")
Final 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 maiden set of Final Results for the year ended 31 December 2014.
Financial Highlights
Hot Features
Premium
-- Revenue increased by 28% to RMB 856 million (2013: RMB 667
million)
-- Gross profit margins across all product categories were averaged
32%
-- Profit before tax increased 19.4% to RMB 184 million (2013:
RMB 154 million). This includes one-off IPO expenses of RMB
8 million.
-- Net profit after tax increased by 17% to RMB 138 million (2013:
RMB 118 million)
-- EBITDA increased by 18.4% to RMB 187 million (2013: RMB 158
million)
-- The notional EPS, based on the total number of shares at IPO
of 113,226,081 is 12.6 pence*
-- Cash as at 31 December 2014 of RMB 194 million (2013: RMB 153
million)
-- Robust cash position excludes the gross proceeds from the Placing
and Admission to AIM, which occurred post period end on 3 February
2015 and totalled GBP 9.3 million
-- 50 regional distributors as at 31 December 2014 (2013: 48)
-- Trading in Q1 2015 has started well and significantly above
2014 and in line with expectation
*The illustrative exchange rate as at 31 December 2014 was 1 GBP: 9.6 RMB
Li Xianzhi, Chief Executive of Aquatic Foods, commented: "The Board is delighted to announce our maiden annual results, which show a considerable increase in revenue and our continued strength in maintaining our gross profit margins. 2014 is the year that created a solid foundation for the Group, culminating in our successful flotation in February 2015. The Board is also delighted that Aquatic Foods continues to perform in 2015 and trading in Q1 has started well and is significantly above 2014."
"Aquatic Foods' successful listing on AIM has enhanced our corporate profile, which provides confidence to both suppliers and end customers within the Chinese market, particularly as these customers are becoming increasingly concerned about food hygiene, safety and quality. This further strengthens our ability to capitalise on the increasing demand for high quality marine foods and seafood products in the PRC."
"Aquatic Foods has also received more frequent sales enquiries from overseas suppliers, driven by the heightened publicity achieved through our AIM listing. The Board is therefore exploring opportunities to grow export sales, leveraging on the Group's already established position in this market."
For further information:
Aquatic Foods Group Plc
Sean Lim, Finance Director Tel: +44 (0) 20 7398
7719
John McLean, Deputy Chairman www.aquatic-foods.com
SP Angel Corporate Finance LLP
Nominated Adviser and Broker
Stuart Gledhill / Liz Yong Tel: +44 (0) 20 3470
0470
www.spangel.co.uk
Media enquiries:
Abchurch Communications Limited Henry Harrison-Topham / Jamie Hooper / Canace Tel: +44 (0) 20 7398 Wong 7719 AquaticFoods@abchurch-group.com www.abchurch-group.com
Chairman's Statement
2014 was a transformational year for Aquatic Foods, culminating post the year end in the successful admission to the AIM market of the London Stock Exchange on 3 February 2015 in which the Group successfully raised gross proceeds of GBP9.3 million. We are pleased to announce today our maiden set of results, which show a considerable uplift in both revenue and gross and net profit. This has, so far, been the most important year in Aquatic Foods' history. However, the Board hopes for more exciting years to come.
Aquatic Foods is delighted to have joined the AIM market of the London Stock Exchange. As a Chinese marine foods and seafood processor and producer, supplying to export and local markets, Aquatic Foods believes that a public profile on an international stock market enhances the Group's reputation and profile in both our domestic and international markets. We believe it will also help the Group to attract more customers, distributors and suppliers both in China and internationally in part through the added transparency and governance that are the requirements of an AIM traded business.
The Group's growth has been driven by a combination of factors, including increasing levels of disposable income currently seen across China for both urban and rural residents, wider recognition of the benefits of natural seafood products and increasing awareness towards foods safety (Source: 2014 National Economic and Social Development, National Bureau of Statistics of China). Aquatic Foods has been able to capitalise on all these factors as with a history in servicing demanding export markets, the Group is known for adopting the highest standards for quality, safety and sustainability and commitment to produce high-end, pre-processed seafood products.
The Group has an excellent record of food safety and has established stringent quality control procedures. The Group has obtained and will continue to improve adherence to following key standards:
- ISO 9001 Quality Management System certification - HACCP Food Safety System certification - BRC certification - Marine Stewardship Council certification
Aquatic Foods' robust cash position and the net proceeds raised from the Placing and Admission to AIM are planned to be deployed to continue the Group's strategy to increase its presence within the PRC by expanding production capacity both through increasing process automation and expanding to an additional site or acquiring an existing factory from a third party, adding new regional distributors, providing assistance to distributors to establish more "Zhenhaitang" branded retail stores, focusing on advertising and promotion and will carry out further cross-promotion in the Group's different product types and continuous product development to expand and enhance product offerings.
The strong growth already achieved by the Group, the considerable opportunities for future expansion as the market continues to develop and Aquatic Foods' commitment to highest standards of quality, safety and sustainability provide the Board with increased confidence in its future.
I would personally like to thank the Board and all of our employees for their continued hard work, as well as our existing and new shareholders for all their support. The Board is excited by the opportunities that it has identified in the market and it looks forward to providing further updates as the Group makes progress in these areas over the coming years.
The Board has adopted a dividend policy that fundamentally takes into account the Group's profitability and growth and availability of cash and distributable reserves after the requirement to finance the development and expansion of the business. As set out in the Group's Admission Document upon joining AIM, the Board does not intend to propose a dividend for the 2014 financial year, however the Board expects to propose an interim dividend in respect of the 2015 unaudited interim results, to be announced during Q3 2015, as part of the Group's stated dividend policy of at least a 2 per cent. annual yield, or 1.4 pence per share, based on the IPO price of 70 pence per share.
Dr. Wang Shaodong
Non-Executive Chairman
29 April 2015
Chief Executive's Review
Results
Revenue increased by 28% to RMB 856 million (2013: RMB 667 million) and the Group's gross profit margins were broadly stable across all product categories, achieving approximately 32% in the year. This has led to pre-tax profits post IPO expenses (RMB 8 million) increasing to RMB 184 million (2013: RMB 156 million) and net profit after tax post IPO expenses increasing to RMB 138 million (2013: RMB 119 million).
Aquatic Foods remains highly cash generative and the Group maintains its strong balance sheet with cash as at 31 December 2014 amounting to RMB 194 million (2013: RMB 153 million). This robust cash position excludes the gross proceeds from the Placing and Admission to AIM, which occurred post period end on 3 February 2015 and totalled GBP9.3 million before expenses. EBITDA for 2014 was RMB 187 million which compares to RMB 158 million for 2013.
The main trading activity of the Group is either in the first or last quarter of the year and therefore, the resultant receivables and payables at the year-end are increased. In respect of the receivables at the 2014 year-end, all of the cash has now been received. As the Group expands, it is anticipated that the working capital requirment will increase, both in terms of increased credit terms and inventory levels.
As at 31 December 2014, Aquatic Foods had 50 regional distributors (2013: 48), covering 16 provinces, municipalities and autonomous regions in China, and hopes to capitalise on the increasing levels of disposable income currently seen across China which is occurring for both urban and rural residents.
Currently, approximately 60% of Aquatic Food's fish are sourced from various overseas countries, including Norway, UK, and Ireland. The Group will continue to look for strategic alliances and partnerships to diversify the company's supply chain.
Aquatic Foods has also received increased sales enquiries from overseas customers, driven by the Group's enhanced publicity achieved through its AIM admission. The Group is thus currently exploring the possibility to grow its exports sales, leveraging the Group's already established position in the international market.
Product categories
Revenue breakdown by product category
2014 2013 GROWTH %
Currency: RMB'000
Fish 586,180 454,976 28.8
Sea Cucumbers 132,315 120,832 9.5
Cephalopods 44,003 29,684 48.2
Others 93,582 61,784 51.5
-------- -------- ---------
Total 856,080 667,276 28.3
Gross Margin by Product Category
Gross margin 2014 2013 Fish 29% 30% Sea cucumbers 44% 43% Cephalopods 30% 31% Others 30% 27% Total 32% 32%
Fish
Sales of fish products have continued to increase (up 28.8% from 2013 to 2014) with margins at approximately 29%. The Group's top three fish products are mackerel, greenling and cod.
Sea Cucumbers
Sales increased modestly at 9.5% compared to 2013 partly as a result of Chinese Government anti-corruption policy, which has led to increasing pressure towards the giving of high value gifts, such as sea cucumbers. Margins have remained steady at approximately 44% despite average unit sales prices decreasing.
Cephalopods
Sales of Cephalopods have made a strong recovery in 2014 following disappointing sales in 2013 in part due to increased management focus. Margins have slightly declined to 30%
Others
Sales have increased substantially on the same period last year particularly as a result of strong gift box sales. Margins have improved to 30%
Q1 trading to 31 March 2015
Trading in the first quarter of 2015 has started well and are significantly up on 2014 and in line with expectation for 2015. Unaudited aggregate revenues for the Operating Group for the three months to 31 March 2015 (one of the stronger quarters and including Chinese New Year) were approximately RMB 231 million, which is approximately 25% higher when compared to Q1 2014. Growth in revenue was achieved in all product categories, with fish accounting for approximately 63% of revenue, followed by sea cucumber at approximately 13%.
Approximate unaudited revenue for Q1-2015 for each of the Group's principal product categories were as follows:
Currency: RMB million
Fish 146
Sea Cucumbers 30
Cephalopods 17
Others 38
----
Total 231
Compared to the corresponding period last year, revenue generated from fish and sea cucumber increased by approximately 30% and 10% respectively. The proportion of revenue contributed by cephalopods and others (including shellfish and shrimp) were maintained at approximately 24%. Unaudited gross margins across all product categories, achieved approximately 31% in aggregate in Q1-2015.
Strategy
The Board estimates that the Group's current production facilities will reach full capacity by the end of the year on the basis that production continues to grow as it has been to date and, although the Group has the option to outsource elements of its product, the Board continues to evaluate options for expanding capacity both through increasing process automation and expanding to an additional site or acquiring an existing factory from a third party. The Group also requires further cold storage capabilities in order to meet expected increased production. The Group believes that with its current cash resources, the IPO funding and the positive trading cash flow, the Group will have sufficient funds internally to support the continued expansion. The Board looks forward to providing future updates in relation to this area.
Successful brand building is key to Aquatic Foods continued business success. Through successful marketing and promotion strategies, 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 focus on advertising and promotion and will carry out further cross-promotion for our different product types. The Group will also continue to support its regional distributors to establish "Zhenhaitang" branded retail stores. By the end of 2015, the Group plans to establish "Zhenhaitang" branded retail stores in Beijing, Shanghai, Jinan and Henan Province.
Further expansion of the existing distribution network is critical to expand the Group's market share and coverage and to capitalise on the increasing spending power of the end consumers. This is especially necessary in terms of smaller cities, which have been benefiting from the PRC's continued economic development and urbanisation. By the end of 2015, the Group intends to add 10 regional distributors in Beijing, Shenzhen, Guangzhou, Sichuan and Henan.
Continuous product development to expand and enhance product offerings is an important factor to expand market share. The Group plans to invest and strengthen market-oriented product development activities to continue to provide innovative products in order to stand out from competition and to meet changing consumer preferences.
Outlook
On the back of continuing growth in China's per capita wealth and the resulting higher standard of living, demand has started 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 healthy 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, Aquatic Foods is known for adopting the highest standards for quality, safety and sustainability, and the Board is optimistic that Aquatic Foods' growth will be supported by its continued commitment to produce high-end, pre-processed, seafood products and that 2015 will be a promising year for the Group.
Li Xianzhi
Chief Executive Officer
29 April 2015
Consolidated Statements of Comprehensive Income
For the year ended 31 December 2014
Proforma
2014 2013
Note RMB'000 RMB'000
Revenue 5 856,080 667,276
Cost of sales (586,317) (454,480)
---------- ----------
Gross profit 269,763 212,796
Other income 9,000 8,891
Selling and distribution expenses (69,484) (52,867)
Administrative expenses (17,409) (13,067)
IPO expenses (7,838) -
Other operating expenses (49) (121)
---------- ----------
Operating profit 183,983 155,632
Finance income 739 471
Finance costs (2,777) (2,535)
---------- ----------
Profit on ordinary activities before
taxation 181,945 153,568
Income tax expense 6 (44,939) (35,531)
---------- ----------
Profit after taxation 137,006 118,037
Profit after taxation brought forward 137,006 118,037
Other comprehensive income 546 -
---------- ----------
Total comprehensive income attributable to
owners of the parent 137,552 118,037
========== ==========
Earnings per share (EPS):
Basic and diluted 7 1.37 1.18
========== ==========
Consolidated Statements of Financial Position
As at 31 December 2014
Proforma
Year ended Year ended
31 December 31 December
2014 2013
Note RMB'000 RMB'000
Non-current assets
Property, plant and equipment 9 22,314 21,160
Land use rights 10 1,920 1,964
24,234 23,124
------------- -------------
Current assets
Inventories 11 47,510 40,135
Trade receivables 277,066 143,720
Other receivables, deposit and
prepayment 12 2,871 327
Cash and bank balances 13 193,903 153,057
------------- -------------
521,350 337,239
------------- -------------
Total Assets 545,584 360,363
============= =============
Current liabilities
Trade payables 102,934 61,113
Other payables and accruals 14 44,393 30,460
Short term borrowings 17 41,470 37,970
Income tax payable 15,294 11,879
------------- -------------
204,091 141,422
------------- -------------
Equity
Stated capital 15 - -
Reserves 16 341,493 218,941
------------- -------------
341,493 218,941
------------- -------------
Total Equity and Liabilities 545,584 360,363
============= =============
Consolidated Statements of Changes in Equity
For the year ended 31 December 2014
Distributable
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
Proforma balance at 1
January 2013 - 31 11,193 22,394 - 86,757 120,375
Profit for the year - - - - - 118,037 118,037
-------- --------- --------- --------- ------------- ------------- --------
Total comprehensive income
for the year - - - - - 118,037 118,037
-------- --------- --------- --------- ------------- ------------- --------
Dividends - - - - - (19,471) (19,471)
Proforma balance
at 31 December 2013 - 31 11,193 22,394 - 185,323 218,941
======== ========= ========= ========= ============= ============= ========
Profit for the year - - - - - 137,006 137,006
Other comprehensive income:
Foreign currency translation
differences for foreign
operations - - - - 546 - 546
-------- --------- --------- --------- ------------- ------------- --------
Total comprehensive income
for the year - - - - 546 137,006 137,552
-------- --------- --------- --------- ------------- ------------- --------
Adjustment arising from
restructuring exercise - - - (15,000) - - (15,000)
Balance at 31 December
2014 - 31 11,193 7,394 546 322,329 341,493
======== ========= ========= ========= ============= ============= ========
Consolidated Statements of Cash Flows
For the year ended 31 December 2014
Note
Proforma
2014 2013
RMB'000 RMB'000
Cash flow from operating activities
Profit before taxation 181,945 153,568
Adjustment for:
Amortisation of land use rights 44 45
Depreciation of property, plant and
equipment 2,214 2,155
Interest expense 2,777 2,535
Loss on disposal of plant and equipment 11 31
Interest income (739) (471)
Unrealised gain on foreign exchange (753) (798)
---------- ----------
Operating cash flows before movements
in working capital 185,499 157,065
Increase in inventories (7,375) (181)
Increase in trade and other receivables (137,235) (51,241)
Increase in trade and other payables 58,445 15,351
(Increase)/decrease in bank balance
restricted in use (1,361) 556
---------- ----------
Cash generated from operating activities 97,973 121,550
Interest paid (2,777) (2,535)
Income tax paid (41,524) (31,028)
Net cash generated from operating activities 53,672 87,987
---------- ----------
Cash flows (for)/from investing activities
Acquisition of property, plant and equipment (3,389) (316)
Proceeds from disposal of property,
plant and equipment 10 31
Interest received 739 471
Cash outflow on group construction (15,000) -
---------- ----------
Net cash used in/ generated from investing
activities (17,640) 186
---------- ----------
Cash flows from/(for) financing activities
Dividends declared and paid 8 - (19,471)
Net drawdown of interest-bearing bank
borrowings 3,500 5,994
Net cash generated from/ (use in) financing
activities 3,500 (13,477)
---------- ----------
Net increase in cash & cash equivalents 39,532 74,696
Effects of foreign exchange translation (47) 413
Cash and equivalent at beginning of
year 148,091 72,982
Cash and equivalent at end
of year 13 187,576 148,091
========== ==========
NOTES TO THE FINANCIAL INFORMATION
1. GENERAL INFORMATION
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.
On 11 August 2014, the Company was incorporated with the issuance of two ordinary shares at no par value. On 16 October 2014, the two shares of Aquatic Foods Group PLC were transferred to Li Xianzhi, the largest shareholder of the Company as at the date of the financial statements (to be held through Oceanic Expert) and with de-facto control of the Company.
Pursuant to a framework agreement (the "Framework Agreement") dated 23 October 2014 between, inter alia, the Company, Aquatic Foods Group PLC ("AFG"), Hong Kong Hanhe Holding Company Limited ("Hong Kong Han He"), Li Xianzhi and the Founder Investors, AFG agreed to subscribe for 100,000 shares of HKD 0.001 each in the issued share capital of Hong Kong Han He and agreed to acquire 10,000 shares of HKD 1 each in the share capital of Hong Kong Han He from Li Xianzhi.
Pursuant to the Framework Agreement, the Consideration Shares were allotted and issued, 49,999,998 Ordinary Shares to the Initial Investors: 25,499,998 Ordinary Shares to Li Xianzhi (to be held through Oceanic Expert), 2,000,000 Ordinary Shares to First Honour Ventures Limited, 3,250,000 Ordinary Shares to Righton Investment Limited, 2,400,000 Ordinary Shares to One Capital Group Investment (Malta) Limited, 2,250,000 Ordinary Shares to Lim Koon Keong, 2,350,000 Ordinary Shares to Thomas Tan Hock Nieh, 2,750,000 Ordinary Shares to Midasi (Malta) Investment Limited, 3,250,000 Ordinary Shares to Pioneer Sky Investments Limited, 2,100,000 Ordinary Shares to East Sincerity Capital China Co., Ltd., 2,250,000 Ordinary Shares to Eternal View Investments Limited and 1,900,000 Ordinary Shares to United Talent Investments Limited.
Hong Kong Hanhe was incorporated in Hong Kong on 25 September 2012 and acquired a wholly owned subsidiary, Yantai Kanwa Food Co., Ltd ("Yantai Kanwa") on 25 May 2013. Yantai Kanwa is a company established as a wholly foreign owned enterprise ("WFOE") in the PRC, and was incorporated on 15 November 1999.
Yantai Zhenhaitang was incorporated in the PRC on 1 November 2007. On 16 September 2014, Yantai Kanwa acquired the entire issued share capital of Yantai Zhenhaitang Foodstuff Co., Ltd ("Yantai Zhenhaitang").
The consolidation financial statements reflect the historical operations of the Group as if the current organisation structure had existed since 1 January 2013.
The principal activities of the entities of the Group are as follows:-
Country
of
Name of Company Incorporation Principal Activities
i) AFG Jersey Investment holding
ii) Hong Kong Hanhe Hong Kong Investment holding.
iii) Yantai Kanwa PRC Processing and trading of aquatic
products
agricultural and meat products.
iv) Yantai Zhenhaitang PRC Trading and distributing of
processed frozen
aquatic products and pre-packaged
food.
2. Basis Of Preparation
The consolidated financial information of the Group has been prepared using accounting policies which are consistent with those adopted in Part 3 of the AIM Admission Document of the Company dated 28 January 2015, as well as applying the following accounting policy in respect of the basis of consolidation as extracted from the financial statements.
The consolidated financial information has been prepared on a historical cost basis. The consolidated financial information is presented in RMB, except when otherwise indicated.
The financial information does not constitute the Company's statutory financial statements for the year ended 31 December 2014 but is derived from those financial statements. The statutory financial statements will be delivered following the Company's Annual General Meeting. The Auditors have reported on those financial statements; their reports were unqualified.
The directors do not recommend the payment of a dividend.
The Directors considered IFRS 3 "Business Combinations" (Revised 2008) as the appropriate accounting treatment. However, they concluded that the Group fell outside of the scope of IFRS 3 (revised 2008) since the Group represents a combination of entities under common control.
In accordance with IAS 8 - Accounting Policies, Changes in Accounting Estimates and Errors, in developing an appropriate accounting policy, the Directors have considered the pronouncements of other standard setting bodies and specifically looked to accounting principles generally accepted in the United Kingdom ("UK GAAP") for guidance (FRS 6 - Acquisitions and Mergers) which does not conflict with IFRS and reflects the economic substance of the transaction.
Under UK GAAP, the assets and liabilities of both entities are recorded at book value, not fair value. Intangible assets and contingent liabilities are recognised only to the extent that they were recognised by the legal acquirer in accordance within applicable IFRS, no goodwill is recognised, any expenses of the combination are written off immediately to the income statement and comparative amounts, if applicable, are restated as if the combination had taken place at the beginning of the earliest accounting period presented.
Therefore, although the Group reconstruction did not become unconditional until 23 October 2014, these consolidated financial statements are presented as if the Group structure has always been in place, including the activity from incorporation of the Group's principal subsidiary. All entities had the same management as well as majority shareholders.
On this basis, the Directors have decided that it is appropriate to reflect the combination using merger accounting principles as a group reconstruction under FRS 6 - Acquisitions and Mergers in order to give a true and fair view. No fair value adjustments have been made as a result of the combination.
Functional and presentation currency
The financial statements are measured and presented in the currency of the primary economic environment in which the key trading entities operates (its functional currency). The consolidated financial statements of the Group are presented in Renminbi ("RMB"), which is the presentation currency for the consolidated financial statements. The functional currency of each of the individual entity is the local currency of each individual entity. For reference the year end exchange rate from Pounds Sterling to RMB was 9.5467 (2013: Nil).
All financial information presented in RMB has been recorded to the nearest thousand ("RMB'000"). They have been prepared under the historical cost convention, except for financial instruments that have been measured at fair value through profit and loss.
Going concern
After the assessment of the available financial information and reviews, and also taking into account the nature of the business that has continuing recurring revenue with high cash conversion that generates significant cash resources as reflected in the current financial position of the Group with cash position of RMB194 million as at 31 December 2014, the Directors believe that the Group has adequate resources to continue to operate for the foreseeable future. Therefore it is appropriate to continue to adopt the going concern basis of accounting in the preparation of the consolidated financial statements.
3. Basis Of CONSOLIDATION
The consolidated financial statements include the financial statements of all subsidiaries. The financial year ends of all entities in the Group are coterminous.
The financial statements of subsidiaries are included in the consolidated financial statements from the date on which control over the operating and financial decisions is obtained and cease to be consolidated from the date on which control is transferred out of the Group. Control exists when the Company has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain economic benefits from its activities.
All intercompany balances and transactions, including recognised gains arising from inter--group transactions, have been eliminated in full. Unrealised losses are eliminated in the same manner as recognised gains except to the extent that they provide evidence of impairment.
The financial information of the subsidiary is prepared for the same reporting period as that of Group, using consistent accounting policies.
4. Significant Accounting Policies
Critical accounting estimates and assumptions
The preparation of financial information in conformity with IFRS requires the use of certain critical accounting estimates. It also requires the Directors of the Company to exercise their judgement in the process of applying the accounting policies which are detailed below. These judgements are continually evaluated by the Directors and management and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
The key estimates and underlying assumptions concerning the future and other key sources of estimation uncertainty at the statement of financial position date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial period are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods, are discussed below:
(a) Allowance for trade and other receivables
Management reviews its loans and receivables for objective evidence of impairment at least quarterly. Significant financial difficulties of the debtor, the probability that the debtor will enter bankruptcy, and default or significant delay in payments are considered objective evidence that a receivable is impaired. In determining this, management makes judgment as to whether there is observable data indicating that there has been a significant change in the payment ability of the debtor, or whether there have been significant changes with adverse effect in the technological, market, economic or legal environment in which the debtor operates in.
The allowance policy for doubtful debts of the Group is based on the ageing analysis and management's ongoing evaluation of the recoverability of the outstanding receivables. Once a debtor has been identified as having evidence of impairment, it is regularly reviewed and an appropriate impairment provision applied.
(b) Income taxes
There are certain transactions and computations for which the ultimate tax determination may be different from the initial estimate. The Group recognises tax liabilities based on its understanding of the prevailing tax laws and estimates of whether such taxes will be due in the ordinary course of business. Where the final outcome of these matters is different from the amounts that were initially recognised, such difference will impact the income tax and deferred tax provisions in the year in which such determination is made.
(c) Write-down of Inventories
Reviews are made periodically by management on damaged, obsolete and slow-moving inventories. These reviews require judgement and estimates. Possible changes in these estimates could result in revisions to the valuation of inventories.
5. revenue
Revenue represents the net invoiced value of goods sold, after allowances for returns and trade discounts.
Analysis of revenue from the sales of goods is as follow:
Proforma
2014 2013
RMB'000 RMB'000
Fish 586,180 454,976
Holothurian 132,315 120,832
Cephalopods 44,003 29,684
Shrimps and shellfish 33,935 24,631
Others 59,647 37,153
856,080 667,276
6. Income Tax Expense
Proforma
2014 2013
RMB'000 RMB'000
Current tax expense 44,939 35,531
A reconciliation of income tax expense applicable to the profit before taxation at the statutory tax rate to income tax expense at the effective tax rate is as follows:-
2014 2013
RMB'000 RMB'000
Profit before taxation 181,945 153,568
Tax at the applicable tax rate of 25% 45,486 38,392
Tax effects of:-
Non-deductible expenses 9 5
Under provision in prior year 381 60
Tax exempt (3,321) (2,178)
Tax rate differential 2,384 (748)
--------- ---------
44,939 35,531
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.
7. EARNINGS PER SHARE
On 28 January 2015, the company subdivided its existing 50,000,000 ordinary shares into 100,000,000 ordinary shares. The earnings per share information based upon the 100,000,000 ordinary shares as follow:
Proforma
2014 2013
Profit after taxation (RMB) 137,006,000 118,037,000
Weighted average number of ordinary
shares 100,000,000 100,000,000
Basic earnings per share 1.37 1.18
The diluted loss per share was not applicable as there were no dilutive potential ordinary shares outstanding at the end of the reporting period.
8. Dividends
Proforma
2014 2013
RMB'000 RMB'000
Dividends declared and paid in respect
of (prior to group reconstruction):
- 31 December 2013 - 19,471
- 19,471
The dividends were declared by Yantai Kanwa Food Co., Ltd before the group reconstruction to the former shareholders of Hong Kong Hang He Holding Company Limited in the prior year. These former shareholders of Hong Kong Han He Holding Company Limited have become a Director of the Company and a substantial shareholder subsequent to this reconstruction. The dividends were paid at RMB 1,947per share.
The dividend declared and paid was subjected to 10% withholding tax in accordance with the relevant laws and regulations in the PRC.
9. 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 2013 25,781 647 40 9,597 653 36,718
Additions - 48 5 148 115 316
Disposals - (20) - (133) (90) (243)
---------- ---------------- ---------- ---------- -------------- -------
As at 1 January 2014 25,781 675 45 9,612 678 36,791
Additions 23 28 3 3,234 101 3,389
Disposals - (28) - (54) (38) (120)
---------------- ---------- ---------- -------------- -------
At 31 December 2014 25,804 675 48 12,792 741 40,060
---------------- ---------- ---------- -------------- -------
Accumulated depreciation
Pro forma as at 1
January 2013 7,670 434 22 5,228 303 13,657
Charge for the year 1,169 61 6 813 106 2,155
Disposals - (20) - (81) (80) (181)
---------- ---------------- ---------- ---------- -------------- -------
As at 1 January 2014 8,839 475 28 5,960 329 15,631
Charge for the year 1,169 57 6 879 103 2,214
Disposals - (24) - (43) (32) (99)
---------------- ---------- ---------- --------------
At 31 December 2014 10,008 508 34 6,796 400 17,746
---------------- ---------- ---------- --------------
Net carrying amount
As at 31 December
2014 15,796 167 14 5,996 341 22,314
========== ================ ========== ========== ============== =======
As at 31 December
2013 16,942 200 17 3,652 349 21,160
==============
(a) All property, plant and equipment held by the Group are located in the PRC.
(b) The following property, plant and equipment have been pledged to licensed banks as security for banking facilities granted to the Group as disclosed in Note 20 to the financial information:-
Proforma
2014 2013
RMB'000 RMB'000
At carrying
amount:-
Leasehold buildings 14,423 15,469
10. Land Use Rights
Proforma
2014 2013
RMB'000 RMB'000
At cost:-
At 1 January/At 31 December 2,228 2,228
-------- ---------
Accumulated amortisation:-
At 1 January 264 219
Amortisation charge 44 45
-------- ---------
At 31 December 308 264
-------- ---------
Carrying amounts:-
Amortisation due:
- not later than one year 44 45
- later than one year 1,876 1,919
------ ------
At 31 December/30 June 1,920 1,964
m2 m2
Land areas 20,416 20,416
------- -------
The carrying amounts of the land use rights that have been pledged to licensed banks as security for banking facilities granted to the Group as disclosed in Note 15 to the financial information are as follows:
Proforma
2014 2013
RMB'000 RMB'000
Land use rights 1,920 1,964
Amortisation is provided to write off the cost of the land use rights over the leasehold periods of 50 years.
11. Inventories
Proforma
2014 2013
RMB'000 RMB'000
At cost:-
Raw materials 27,599 27,545
Finished goods 19,911 12,590
47,510 40,135
Recognised in profit
or loss
Inventories recognised
as cost of sales 543,877 418,815
12. Other Receivables, Deposit And Prepayment
Proforma
2014 2013
RMB'000 RMB'000
Other receivables 50 113
Advances to suppliers 1,909 203
Prepayments 912 -
Amount owing by
a director - 11
-------- ---------
2,871 327
13. Cash And Bank Balances
Proforma
2014 2013
RMB'000 RMB'000
Cash in hand 119 123
Cash at banks 193,784 152,934
Cash and bank balances 193,903 153,057
Less: Bank balances restricted in
use (6,327) (4,966)
Cash and cash equivalents 187,576 148,091
-------- ---------
Effective interest rate (per annum) 0.39% 0.39%
The Chinese Renminbi is not freely convertible into foreign currencies. Under the PRC Foreign Exchange Regulations and Administration of Settlement, Sales and Payment of Foreign Exchange Regulations, the Group is permitted to exchange Chinese Renminbi for foreign currencies through banks that are authorised to conduct foreign exchange business.
14. Other Payables And Accruals
Proforma
2014 2013
RMB'000 RMB'000
Other payable 12,912 9,394
Accrued salary 6,544 5,197
Accruals 24,928 15,869
Amount owing to 9 -
a director
44,393 30,460
The amount owing to a director is unsecured, interest-free and repayable on demand.
15. Stated Capital
2014
Number
of shares RMB'000
Issued:
On incorporation as at 11 August 2 -
2014
Issued in pursuant to the Framework 49,998 -
Agreement
At the end of the year 50,000 -
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 (Note 1).
Subsequent to the year end, 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.
16. Reserves
Proforma
2014 2013
Note RMB'000 RMB'000
Capital reserve (a) 31 31
Statutory
reserves (b) 11,193 11,193
Merger reserves (c) 7,394 22,394
Translation 546 -
reserve
Distributable
retained profits 322,329 185,323
341,493 218,941
(a) Capital Reserve
Capital reserve is premium received on the issue of share capital.
(b) Statutory Reserve
According to the relevant PRC regulations and the Articles of Association of the subsidiaries, it is required to transfer 10% of each subsidiary's respective profit after income tax to its statutory surplus reserve until its reserve balance reaches 50% of its registered capital. The transfer to this reserve must be made before the distribution of dividends to equity owners. Statutory surplus reserve can be used to make good previous years' losses, if any, and be converted into paid-in capital in proportion to the existing interests of equity owners, provided that the balance after such conversion is not less than 25% of the registered capital.
(c) Merger Reserve
The accounting treatment for Group reorganisations is scoped out of IFRS 3. Accordingly, as required under IAS 8 - Accounting Policies, Changes in Accounting Estimates and Errors the Group has referred to current UK GAAP to assist its judgement in identifying a suitable accounting policy. The introduction of the new holding company has been accounted for as a capital reorganisation using the merger accounting principles prescribed under current UK GAAP. Therefore the consolidated financial statement of Aquatic Foods Group PLC is presented as if Aquatic Foods Group PLC has always been the holding company for the Group.
The use of merger accounting principles has resulted in a balance on Group capital and reserves that have been classified as a merger reserve and included in the Group's shareholders' funds. The consolidated financial statements include the results of the Company and all its subsidiary undertakings made up to the same accounting date.
17. BorroWINGS
Proforma
2014 2013
RMB'000 RMB'000
Trade finance 13,470 9,970
Interest-bearing bank borrowings
- secured 28,000 28,000
-------- ------------
Total amount reclassified
as current liabilities 41,470 37,970
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 (Note 10) (b) property of the Group (Note 9) (c) personal guarantees by a director of the Group
Interest-bearing bank borrowings bear effective interest rates of 5.75% (2013: 6.97%) per annum is repayable within one year.
18. Related Party Disclosure (a) Identities of related parties
The company has related party relationships with its subsidiaries as disclosed in note 1, its directors, key management personnel and entities of which the director and/or by management have significant financial interests.
(b) Other than those disclosed elsewhere in the financial information, the Group also carried out the following significant transactions with the related parties as disclosed below:-
Proforma
2014 2013
RMB'000 RMB'000
Director's remuneration:
* short-term employee benefits 666 271
* defined contribution plans 8 7
674 278
Other key management personnel:
* short-term employee benefits 1,636 1,042
* defined contribution plans 35 26
1,671 1,068
Total key management personnel
remuneration 2,345 1,346
======== ============
19. Subsequent events
On 28 January 2015, the entire issued share capital of 50,000,000 of ordinary shares of no par value in the capital of the Company were subdivided into 100,000,000 ordinary shares of no par value.
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 with total gross proceeds of GBP9.3 million.
- ENDS -
This information is provided by RNS
The company news service from the London Stock Exchange
END
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