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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
---|---|---|---|---|---|
China Food Co. | LSE:CFC | London | Ordinary Share | GB00B290WV95 | ORD 4P |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 5.50 | 0.00 | 01:00:00 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
---|---|---|---|---|---|
0 | 0 | N/A | 0 |
TIDMCFC
RNS Number : 9189M
China Food Company PLC
24 September 2012
Press Release 24 September 2012
China Food Company Plc
("China Food" or the "Group")
Interim Results
China Food Company Plc (AIM:CFC), a leading Chinese manufacturer of cooking and dipping sauces, announces its interim results for the six months ended 30 June 2012.
Highlights
-- Revenue of the condiments business increased by 15.9% to GBP9.7 million (2011: GBP8.4 million) of which soya sauce increased by 30% -- Xaka revenues have increased to GBP2.2 million over the last six months from a standing start -- Gross profit of GBP2.7 million in respect of the condiments business -- Cash position of the Group stands at GBP7.2 million as at 30 June 2012 -- Secured over 173 tier-one distributors (defined as those distributors with an annual turnover in excess of RMB30 million (GBP3 million)) -- Strong momentum gained in terms of sales of Xaka, the Group's premium brand soya sauce. Since the launch, GBP4.2 million (H1 2011: GBP0.75 million) has been invested in sales and marketing, resulting in a loss after tax for the continuing operations of GBP2.8 million (H1 2011: profit of GBP0.4 million) -- Significant brand-building investment in Xaka has now created a platform and the focus for the future is on sales and local promotion -- Feed business revenues increased by 12.5% to GBP11.8 million - now shown as discontinued operations
Post period end
-- Entered into an agreement to dispose of Fuss Feed to Wisehand Planning Co. Ltd for a total consideration of US$16 million payable in stages. Regulatory approval on behalf of the buyer from the Korean Financial Supervisory Service remains outstanding -- Appointment of Clifford Halvorsen as Non-Executive Director -- The sales growth rate in the second half is expected to exceed 20% with the latest monthly soya sales figures already in excess of this amount -- Modest profitability expected in H2 on increased sales and reduced marketing spend
John McLean, Chairman of China Food Company, commented: "The period under review has seen sustained and committed investment from the Group in developing Xaka, the Group's premium soya sauce brand and, as such, we are pleased to report strong gains in terms of sales of the product. Whilst the marketing expenditure in establishing the Xaka brand has impinged upon profitability, the Board believes that it has established a robust platform which will provide the Group with a much greater foundation for growth over the coming years.
"The sale of the Group's feed business is ongoing and in line with the Group's core focus on the vast condiments market within Northern China. In turn, we are pleased to report the appointment of Clifford Halvorsen as Non-Executive Director, whose experience will prove invaluable as the Group embarks on this next period of growth."
For further information:
China Food Company Plc Tel: +44 (0) 20 7930 8888 John McLean, Chairman Tel: +44 (0) 7768 031 454 www.chinafoodcompany.com finnCap Geoff Nash / Ben Thompson (Corporate Tel: +44 (0) 20 7220 Finance) 0500 Simon Starr (Broking) Numis Securities David Poutney (Joint Broker) Tel: +44 (0) 20 7260 1000
Media enquiries:
Abchurch Communications Henry Harrison-Topham / Joanne Shears Tel: +44 (0) 20 7398 7702 henry.ht@abchurch-group.com www.abchurch-group.com
Chairman's Statement
The Board is pleased to report a successful period with momentum gained in terms of sales of Xaka, the Group's premium brand soya sauce, in particular. The period under review has been a period of brand-building, with advertising and marketing being a particular focus, as the Group looks to sign up new distributors. This has successfully been achieved and the Board now looks forward to capitalising on the platform that has been established through these marketing activities and utilising further capacity at the Company's new facility.
The Group achieved a revenue increase (for the condiments business) of 15.9% to reach GBP9.7 million compared to GBP8.4 million in the same period last year.(1) This is largely due to the growth of Xaka which accounted for GBP2.2 million of revenues in the period after being officially launched in October 2011.
In the last few months of 2011 and the first half of 2012, the Group has invested significantly to build brand awareness through advertisements. GBP4.2 million has been invested in sales and marketing over the last six months, an increase of over GBP3.5 million on the corresponding prior period, as the Board has invested in sustainably building a premium brand. This expenditure on sales and marketing is expected to decline going forward, as the Group enters the next phase of its marketing having now built strong brand awareness. To date, the Group has secured over net 173 tier-one distributors (defined as those distributors with an annual turnover of at least RMB30 million (GBP3 million)) across 5 provinces and has a presence across major supermarket chains in those cities. To this effect, the Board is satisfied that the Group has made significant progress as a premium grade condiments brand in Northern China. The Group has refined its marketing strategy for Xaka during the period, which is now concentrated on more targeted markets with increasingly focused advertising campaigns. Xaka has been developed to offer the market a high quality taste, appropriate price point, and beneficial product attributes such as being low in salt and complying with international food production standards. The Board is pleased with the traction that Xaka is successfully achieving, particularly as this success has been achieved in less than a year since the launch of the product.
Moving ahead, the Group will work with the distributors to drive sales within the existing retail network through continued promotions and to roll out more retail points progressively. It will also focus more targeted advertisements in the key provinces and cities in which it has appointed distributors to reinforce the brand presence but more importantly to increase sales. As a result, overall marketing expenditure will be focused on supporting the provincial distributors and sales efforts rather than brand building. The Board is pleased that distributors are already re-ordering stock and starting to roll-out China Food's products to their network, typically 100 - 1,000 outlets per distributor.
The Group's existing Hao Tai Tai soya sauce business is also changing. With the launch of Xaka and the commissioning of our new factory, the Group is slowly phasing out its low-end, lower margin soya sauce which contributed the bulk of the Group's soya sauce sales in the past, as the low-end products are facing increased competition in the shrinking market due to consumers migrating towards higher end products. The development of Xaka has also increased the growth of the higher end Hao Tai Tai products being taken up and represented by the newly appointed distributors as well. The Group is capitalising on opportunities such as selling Xaka and high end Hao Tai Tai products as a package and is benefiting from this marketing strategy. This strategy enables the Group to sell its full range of products whilst providing consumers with a variety of price-points to suit their respective needs.
In addition, increasingly sophisticated consumer tastes and food safety requirements have resulted in higher standards and longer fermentation periods for our vinegar and bean paste production. This reduced the Group's production output by 15% in Q2 2012, despite operating at full capacity. Nevertheless, China Food remains the number one vinegar brand in Weifang city, which has a population of approximately 9 million. As the Group focuses its efforts on building its premium condiments brand, Xaka, and a pan-provincial distribution channel, it will review its vinegar and bean paste operations with regard to increasing capacity over the next twelve months, and the Board will update shareholders as appropriate.
Overall, the Group's condiments business' gross profit fell significantly to GBP2.7 million, a gross profit margin of 27.4%. This is largely due to the increased expenses incurred in building a pan-provincial sales and marketing team; aggressive product promotions in rolling out Xaka the Group's new premium grade soya sauce and higher start-up depreciation. In the second half, the depreciation will return to more normal levels.
Administrative expenses have been relatively consistent but sales and marketing costs have increased by 400% compared to the same period last year, totalling GBP4.2 million. These costs are expected to decline with the Group's next phase of marketing focusing on targeted advertising and promotions; these costs are also beginning to reduce as a proportion of sales.
Overall, the Group has a satisfactory cash position of GBP7.2 million (as at 30 June 2012) which will be boosted significantly by the anticipated proceeds from the sale of the feed business. The cash position is more than adequate to fund the expected growth of the business in China, but due to the current environment which makes it more difficult to transfer funds out of China, the Group in the near term is reliant on the proceeds from the feed business to meet the ongoing costs of China Food Company Plc, including the interest due on the GBP4.38 million of convertible loan notes outstanding. Interest was due to be paid on 30 June 2012 and, following the passing of a resolution by the majority of loan note holders, this has now been deferred until the redemption of the loan notes which is due in November / December 2012. To the extent that the loan notes are not converted into ordinary shares, the notes will be redeemed from the anticipated proceeds from the disposal of the feed business. In the event that the disposal proceeds are not received by the redemption date and the Company is not able to transfer sufficient funds out of China, it will need to seek alternative funding or restructure the loan notes. The Company continues to explore suitable mechanisms to transfer funds out of China to meet costs of the AIM quoted entity, to the extent that the GBP7.2 million of cash held is not required for the operating business. The Company has today agreed to issue GBP45,000 of C Loan Notes as security in respect of professional fees due.
Revenue from the Group's discontinued operations, the animal feed business, grew 12.5% to GBP11.8 million during the same period. Gross operating profit for the business amounted to GBP940,000 for the first six months of the year. The slight drop in margins to 8% (1H2011: 9.6%) was due largely to commodity price fluctuations which are expected to continue into the second half of 2012.
The sale of the Group's animal feed business is on-going. On 12 July 2012, the Group signed a contract with Wisehand Planning Co. Ltd, a Korean based investment holding company owned 100% by Mr Kim Woo Chang ("Wisehand") to sell the Animal Feed business (and corresponding assets) for a combined consideration of US$16 million. On 4 September 2012 the Group announced that Wisehand was satisfied with its due diligence and had agreed to proceed with the transaction, which would be effected by the acquisition of the animal feed business via an existing listed shell company listed on the Korean Stock Exchange. The proposed shell company proved to be unavailable. A newly listed shell company was acquired and is now controlled by Mr Kim. Regulatory clearance from the Financial Supervisory Service (FSS) of Korea with regard to the payment of funds to the Group is still pending. Given that this more protracted process was not initially anticipated when the deal was first agreed, the Board has maintained regular communication with Wisehand and Mr Kim. The Board remains confident that Wisehand is committed to the deal and the transaction will be completed. The proceeds of the sale will repay any convertible loan notes outstanding in the event that they are not converted into common shares of the Group. The Board currently anticipates receiving US$4.5 million of the US$ 16 million agreed consideration before November 2012 which can be used to repay the convertible loan notes. Of the remaining consideration to be received, US$3.5 million is payable shortly thereafter with US$ 8 million due before the end of 2012.
It is the Board's intention to consider a dividend, once the feed sale is complete.
Board and Management Changes
Given the structural changes to China Food, the Group has agreed with immediate effect a series of Board changes to ensure that the Group has the right Board composition for the next phase of growth. Raphael Tham will step down as Chief Executive Officer but remains an Executive Director to lead the Group's corporate activities, in particular, the sale of the animal feed business. Feng Bo, Chief Operating Officer, will take over the position of Chief Executive Officer. John McLean, current Non-executive Chairman will assume an Executive Chairman position. Along with his Executive Chairman position, he will also oversee the Group's financial position. Tang Lin, the Group's Chief Financial Officer will step down as a director and as Chief Financial Officer with immediate effect. The Company intends to appoint a new Finance Director in due course and will update the market accordingly.
The Group thanks Ms Tang for her contribution during her tenure and Mr Tham for his contribution as Chief Executive Officer, a position he held for five years, and looks forward to his continued efforts in selling the Group's animal feed business and his input into other corporate activities.
The Board is also pleased to announce the appointment of Clifford Halvorsen as a Non-Executive Director. Mr Halvorsen has over 25 years corporate finance experience within the Investment Banking industry, during which time he has advised on a wide range of transactions within the UK, continental Europe, the USA and South Africa. Mr Halvorsen's primary focus has been within the consumer industry for over 20 years and the Group looks forward to Mr Halvorsen's contribution in creating value for the Group.
The Group expects the restructuring of the Group's Board to be more aligned to the skill-sets of the individuals and to the priorities of the Group. In addition to the above, the management of the China operations has been streamlined to create focus on the growth and development of the condiments business, which includes the appointment of Mr Fu Guoping, founder of China Food, as China CEO, as previously announced.
Outlook
Growth in China is forecast to be between 7.5 and 8.0% for 2012, and the Group is pleased to note that in China Food's specific markets, during the first half of 2012, growth was between 9.5 and 12.0%, underpinning our strategy. Inflation is declining, however global commodity prices are starting to increase and this may impact our Xaka margins in the short term. The Board is pleased that capacity utilisation continues to grow, owing to the Group's regional sales strategy as well as to exports and bulk sales to an industrial third party.
Sales in the continuing business are currently growing at over 15% quarter-on-quarter and this is expected to further increase, excluding seasonal fluctuations. Accordingly the Directors expect the second half of the year to be broadly breakeven as the overall marketing expenditure continues to decline as a proportion of revenues and as sales continue to grow.
As the Chinese consumer market continues to expand, the Board believes that it is essential that Xaka is supported so that it can capitalise on its first mover advantage The Group's focus will now be on sales and marketing, having established the production capacity and brand profile in its target markets, and the Board views the future with confidence.
John McLean Chairman 24 September 2012
(1) The revenue only refers to the condiments business with the animal feed business segregated and presented as "discontinued operations".
Condensed Consolidated Income Statement
For the period ended 30 June 2012
(Restated) Unaudited Unaudited (Restated) 6 months 6 months Audited to to Year ended 30 June 30 June 31 December Notes 2012 2011 2011 GBP'000 GBP'000 GBP'000 Continuing operations Revenue 9,699 8,365 16,890 Cost of sales (7,042) (4,892) (10,370) Gross profit 2,657 3,473 6,520 Other operating income 13 - 457 Selling and marketing costs (4,244) (748) (5,222) Administrative costs (1,337) (1,335) (2,370) Operating result (2,911) 1,390 (615) Finance costs (703) (558) (1,336) Finance income 174 176 25 (Loss)/profit before tax for continuing operations (3,440) 1,008 (1,926) Taxation 661 (566) 29 ----------------------------- --------------------------- -------------------------- (Loss)/profit after tax for continuing operations (2,779) 442 (1,897) Profit from discontinued operations 13 512 600 1,191 (Loss)/profit for the period (2,267) 1,042 (706) ============================= =========================== ========================== (Loss)/earnings per share - Basic (pence) 14 (3.17) 1.53 (1.01) - Fully diluted (pence) 14 (3.17) 1.52 (1.01) - Basic (pence) - continuing 14 (3.89) 0.65 (2.72) - Fully diluted (pence) - continuing 14 (3.89) 0.65 (2.72) - Basic (pence) - discontinued 14 0.72 0.88 1.71 - Fully diluted (pence) - discontinued 14 0.72 0.87 1.71
Condensed Consolidated Statement of Comprehensive Income
For the period ended 30 June 2012
Unaudited Unaudited 6 months 6 months Audited to to Year ended 30 June 30 June 31 December 2012 2011 2011 GBP'000 GBP'000 GBP'000 (Loss)/profit for the period (2,267) 1,042 (706) Other comprehensive income Exchange differences on translating foreign operations (906) (356) 2,548 ---------------- ---------------- ---------------------- Other comprehensive income, net of tax (906) (365) 2,548 Total comprehensive income for the period attributable to equity holders of the parent (3,173) (686) 1,842 ================ ================ ======================
Condensed Consolidated Statement of Financial Position
As at 30 June 2012
(Restated) (Restated) Unaudited Unaudited Audited As at As at As at 30 June 31 December Notes 2012 30 June 2011 2011 GBP'000 GBP'000 GBP'000 ASSETS Non-current assets Property, plant and equipment 9 39,454 38,751 40,792 Land use rights lease prepayments 7,578 7,584 7,746 Deferred tax assets 11 2,537 110 1,311 ---------- Total non-current assets 49,569 46,445 49,849 ---------- ------------- ------------ Current assets Assets held for sale 12 3,911 1,726 2,988 Inventories 4,911 4,496 5,611 Land use rights lease prepayments 154 175 194 Trade and other receivables 2,714 1,439 2,626 Cash and cash equivalents 7,249 5,816 6,584 ---------- Total current assets 18,939 13,652 18,003 ---------- ------------- ------------ Total assets 68,508 60,097 67,852 LIABILITIES Current liabilities Trade and other payables 12,241 5,273 8,334 Bank loans 8,470 6,939 8,702 Current portion of convertible loan notes 10 4,308 - 4,276 Current portion of shareholders' loans 1,974 507 1,889 Amount due to director's 40 - - Current tax payable 277 413 315 Liabilities held for sale 12 1,571 1,426 1,559 ---------- Total current liabilities 28,881 14,558 25,075 ---------- ------------- ------------ Net current liabilities (9,942) (906) (7,091) ---------- ------------- ------------ Total assets less current liabilities 39,627 45,539 42,777 ---------- ------------- ------------ Non-current liabilities Deferred tax liabilities 11 111 - 113 Convertible loan notes 10 - 4,128 - Shareholder's loan 3,742 3,638 3,769 ---------- 3,853 7,766 3,882 ---------- ------------- ------------ Net assets 35,774 37,773 38,895 ========== ============= ============ EQUITY Share capital 6 2,858 2,858 2,858 Share premium 7 24,972 24,972 24,972 PRC statutory reserves 3,581 3,098 3,581 Reverse acquisition reserve (23,992) (23,992) (23,992) Shares to be issued reserve 351 242 300 Convertible loan notes - equity 10 160 160 160 Foreign exchange translation reserve 9,995 7,996 10,900 Merger reserve 2,216 2,216 2,216 Retained profits 15,633 20,223 17,900 ---------- 35,774 37,773 38,895 ========== ============= ============
Condensed Consolidated Statement of Cash Flows
For the period ended 30 June 2012
Unaudited Unaudited 6 months 6 months Audited to to Year ended 30 June 30 June 31 December 2012 2011 2011 GBP'000 GBP'000 GBP'000 Cash flows from operating activities Profit before tax (2,575) 1,808 (338) Adjustments for: Deprecation 810 688 1,264 Amortisation of land use rights lease prepayments 95 93 189 (Gain)/loss on disposal of property, plant and equipment (1) 7 (449) Employee share options 51 94 152 Interest expenses 703 558 1,336 Other income (174) (176) (25) --------------- Operating (loss)/profit before working capital changes (1,273) 3,072 2,129 Changes in working capital: Inventories 454 (2,588) (3,206) Trade and other receivables (782) (689) (2,758) Trade and other payables 3,726 (1,061) 2,093 --------------- Cash (used in)/generated from operations 2,125 (1,266) (1,742) Interest received 15 8 25 Income taxes paid (776) (873) (1,613) --------------- Net cash generated from/(used in) operating activities 1,364 (2,131) (3,330) --------------- ----------------- ---------------- Cash flows from investing activities Payment for acquisition of property, plant and equipment (100) (345) (744) Proceeds from disposal of property, plant and equipment 6 5 45 Net cash used in investing activities (94) (340) (699) --------------- ----------------- ---------------- Cash flows from financing activities Proceeds from bank loan 3,397 2,837 4,147 Repayment of bank loan (3,496) - - Net proceeds from issued of ordinary shares - 2,496 2,497 Proceeds from shareholders' loan 83 - 1,396 Net proceeds from convertible loan notes - 240 240 Proceed from director's loan 40 - - Interest paid (477) (343) (797) Dividend paid - - (93) --------------- Net cash (used in)/generated from financing activities (453) 5,230 7,390 --------------- ----------------- ---------------- Net increase in cash and cash equivalents 817 2,759 3,361 Effect of foreign exchange rate changes (152) 139 305 Cash and cash equivalents at beginning of period 6,584 2,918 2,918 --------------- Cash and cash equivalents at end of period 7,249 5,816 6,584 =============== ================= ================
Condensed Consolidated Statement of Changes in Equity
For the period ended 30 June 2012
Total Convertible equity Shares loan notes Foreign attributable to be Reverse PRC - equity exchange to owners Share Share issued acquisition Merger statutory translation Retained of the capital premium reserve reserve reserve reserves reserve profits parent GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 As at 1 January 2012 2,858 24,972 300 (23,992) 2,216 3,581 160 10,900 17,900 38,895 Employee share options granted - - 51 - - - - - - 51 Transactions with owners - - 51 - - - - - - 51 ----------------- --------------- ----------------- ------------------- --------------- ------------- ------------- ---------------------------- --------- ------------- Loss for the period - - - - - - - - (2,267) (2,267) Other comprehensive income: Exchange differences on translation of foreign operations - - - - - - - (905) - (905) Total comprehensive loss for the period - - - - - - - (905) (2,267) (3,172) ----------------- --------------- ----------------- ------------------- --------------- ------------- ------------- ---------------------------- --------- ------------- As at 30 June 2012 2,858 24,972 351 (23,992) 2,216 3,581 160 9,995 15,633 35,774 ----------------- --------------- ----------------- ------------------- --------------- ------------- ------------- ---------------------------- --------- ------------- As at 1 January 2011 2,656 25,678 148 (23,992) 2,216 3,098 152 8,352 16,181 34,489 Employee share options granted - - 94 - - - - - - 94 Issue of ordinary shares 202 2,294 - - - - - - - 2,496 Capital reduction - (3,000) - - - - - - 3,000 - Convertible loan notes - equity - - - - - - 8 - - 8 Transactions with owners 202 (706) 94 - - - 8 - 3,000 2,598 ----------------- --------------- ----------------- ------------------- --------------- ------------- ------------- ---------------------------- --------- ------------- Profit for the period - - - - - - - - 1,042 1,042 Other comprehensive income: Exchange differences on translation of foreign operations - - - - - - - (356) - (356) Total comprehensive income/(loss) for the period - - - - - - - (356) 1,042 686 ----------------- --------------- ----------------- ------------------- --------------- ------------- ------------- ---------------------------- --------- ------------- As at 30 June 2011 2,858 24,972 242 (23,992) 2,216 3,098 160 7,996 20,223 37,773 ----------------- --------------- ----------------- ------------------- --------------- ------------- ------------- ---------------------------- --------- ------------- As at 1 January 2011 2,656 25,678 148 (23,992) 2,216 3,098 152 8,352 16,181 34,489 Employee share options granted - - 152 - - - - - - 152 Transfer to PRC statutory reserves - - - - - 483 - - (483) - Issue of ordinary shares 202 2,294 - - - - - - - 2,496 Capital reduction - (3,000) - - - - - - 3,000 - Convertible loan notes - equity - - - - - - 8 - - 8 Dividend paid - - - - - - - - (93) (93) Transactions with owners 202 (706) 152 - - 483 8 - 2,424 2,563 ----------------- --------------- ----------------- ------------------- --------------- ------------- ------------- ---------------------------- --------- ------------- Loss for the period - - - - - - - - (706) (706) Other comprehensive income: Exchange differences on translation of foreign operations - - - - - - - 2,548 - 2,548 ----------------- --------------- ----------------- ------------------- --------------- ------------- ------------- ---------------------------- --------- ------------- Total comprehensive income for the period - - - - - - - 2,548 (706) 1,842 Rounding adjustment - - - - - - - - 1 1 ----------------- --------------- ----------------- ------------------- --------------- ------------- ------------- ---------------------------- --------- ------------- As at 31 December 2011 2,858 24,972 300 (23,992) 2,216 3,581 160 10,900 17,900 38,895 ----------------- --------------- ----------------- ------------------- --------------- ------------- ------------- ---------------------------- --------- ------------- 1. General Information
Principal activities of China Food Company Plc ("China Food" or the "Company") and its subsidiaries (the "Group") include the development, manufacture and distribution of cooking and dipping sauces and animal feed products. The Group's main operations are in the People's Republic of China (the "PRC").
China Food, a public limited company, is the Group's ultimate parent company. It is incorporated and domiciled in the United Kingdom. The address of China Food's registered office is 49 Whitehall, London SW1A 2BX. China Food's shares are listed on the AIM market of the London Stock Exchange.
China Food's condensed consolidated interim financial statements are presented in Pounds Sterling (GBP), which is also the functional currency of the parent company. These condensed consolidated interim financial statements have been approved for issue by the Board of Directors on 21 September 2012.
The financial information set out in this interim report does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006. The Group's statutory financial statements for the year ended 31 December 2011 have been delivered to the Registrar of Companies. The auditor's report on those financial statements was unqualified and did not contain statements under Section 498(2) or Section 498(3) of the Companies Act 2006.
2. Basis of preparation
These condensed consolidated interim financial statements (the interim financial statements) are for the six months ended 30 June 2012 and have been prepared in accordance with IAS 34 "Interim Financial Reporting". They do not include all of the information required for full annual financial statements, and should be read in conjunction with the consolidated financial statements of the Group for the year ended 31 December 2011.
The interim financial statements comprise the financial statements of all the entities within the Group. The financial statements of the subsidiaries are prepared for the same reporting date as the parent company. Consistent accounting policies are applied for like transactions and events in similar circumstances.
The interim financial statements have been prepared under the historical cost convention, except for revaluation of certain financial instruments.
All intra-group balances, transactions, income and expenses and profits and losses resulting from intra-group transactions that are recognised in assets, are eliminated in full.
3. Going Concern
As described in the Chairman's Statement, as a result of the initial investment period spent building the new brand, the company has reported an operating loss for the period. The directors consider that the outlook remains positive in terms of sales volume and pricing as the new product Xaka gains traction. With the current cash position and cash flow, coupled with the improved progress of the Xaka operations, the directors feel there is adequate cash flow for the trading operations.
As explained in the Chairman's Statement the directors are in the advance stages of selling the animal feed business. The buyer is in the final stages of obtaining regulatory approval. The risk remains that a sale may not proceed or complete in line with the original timetable. Based on negotiations conducted to date the directors have a reasonable expectation that it will proceed successfully, but if not the group will need to secure additional finance facilities.
As explained in the Chairman's Statement, the company has certain obligations, including but not limited to the loan notes expiring in November and December 2012 and the company has considered alternate financing options that may prove to be necessary should the sale of the animal feed business not proceed or should material adverse changes in sales volumes or margins occur. Management will continue to monitor the situation, and if necessary, seek alternative financing or changing the business strategy to repay the obligations.
The directors have concluded that the combination of these circumstances may affect the strategy of the Company moving ahead and it may be unable to develop its Xaka business at the pace it hopes. Nevertheless after making enquiries, and despite the uncertainties described above, the directors have a reasonable expectation that the company have adequate resources to continue in operational existence for the foreseeable future.
4. Subsequent events
Sale of animal feed business
On 4 Sep 2012, the Company announced that due diligence by Wisehand Planning Co., Ltd, the potential Buyer of the Group's animal feed business had been completed to the Buyer's satisfaction. Regulatory approval for the Buyer is still awaiting, the first stage payment of USD4.5 million to be received following approval.
Convertible loan notes
On 19 September 2012, following approval by the majority of Loan Note holders, it was agreed that any rights to receive any interest due on 30 June 2012was waived and deferred until on or around 2 November 2012.
5. Accounting policies
The accounting policies applied are consistent with those of the annual financial statements for the year ended 31 December 2011, as described in those financial statements.
The following is a list of newly issued standards but not yet effective:
- IFRS 9 Financial Instruments (effective 1 January 2015) - IFRS 10 Consolidated Financial Statements (effective 1 January 2013) - IFRS 11 Joint Arrangements (effective 1 January 2013) - IFRS 12 Disclosure of Interests in Other Entities (effective 1 January 2013) - IFRS 13 Fair Value Measurement (effective 1 January 2013) - IAS 19 Employee Benefits (Revised June 2011) (effective 1 January 2013) - IAS 27 (Revised), Separate Financial Statements (effective 1 January 2013) - IAS 28 (Revised), Investments in Associates and Joint Ventures (effective 1 January 2013)
- Disclosures - Transfers of Financial Assets - Amendments to IFRS 7 (effective 1 July 2011)
- Deferred Tax: Recovery of Underlying Assets - Amendments to IAS 12 Income Taxes (effective 1 January 2012)
- Presentation of Items of Other Comprehensive Income - Amendments to IAS 1 (effective 1 July 2012)
- Disclosures - Offsetting Financial Assets and Financial Liabilities - Amendments to IFRS 7 (effective 1 January 2013)
- Offsetting Financial Assets and Financial Liabilities - Amendments to IAS 32 (effective 1 January 2014)
- Mandatory Effective Date and Transition Disclosures - Amendments to IFRS 9 and IFRS 7 (effective 1 January 2015)
- Government Loans - Amendments to IFRS 1 (effective 1 January 2013)
- IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine (effective 1 January 2013)
6. Share capital
On 28 April 2011, the Company issued 5,046,981 new shares at GBP0.53 each. The movement on the share capital account was as follows:-
No. of shares GBP'000 Authorised As at 31 December 2011, 30 June 2011and 30 June 2012 * Ordinary shares of 4p each 100,000,000 4,000 ---------------------- -------------- Issued, called up and fully paid As at 1 January 2011 - Ordinary shares of 4p each 66,399,991 2,656 Shares issued on 28 April 2011 5,046,981 202 As at 31 December 2011, 30 June 2011 and 30 June 2012 71,446,972 2,858 ---------------------- -------------- 7. Share premium As at As at As at 31 December 30 Jun 2012 30 Jun 2011 2011 GBP'000 GBP'000 GBP'000 As at 1 January 24,972 25,678 25,678 Premium on shares issued on 28 April 2011 - 2,473 2,473 Share issue expenses - (179) (179) Capital reduction - (3,000) (3,000) 24,972 24,972 24,972 ------------ -------------- --------------
The Capital reduction was approved by the court on 22 June 2011 and resulted in GBP3 million of share premium being converted into distributable reserves.
8. Employee share option
The Group established a share option scheme in 2007 (the "Share Option Scheme"). On 10 June 2009, the Group granted 4,648,000 options to its Directors and employees with an exercise price of GBP0.355 per ordinary share (2009 Options). On 25 May 2011, the Group granted additional 1,950,000 options to its Directors and employees with an exercise price of GBP0.53 per ordinary share (2011 Options). The purpose of granting options under the Share Option Scheme was to incentivise and reward the Group's employees.
Details of the grant of share options to the Directors and employees are as follows:
Number of options granted Date at which Exercise Expiry Directors Employees Total exercisable price date 2009 Options 9 June Lot 1 464,800 1,084,533 1,549,333 10 June 2009 GBP0.355 2019 9 June Lot 2 464,800 1,084,533 1,549,333 10 June 2010 GBP0.355 2019 9 June Lot 3 464,800 1,084,534 1,549,334 10 June 2011 GBP0.355 2019 1,394,400 3,253,600 4,648,000 ------------- -------------- ------------- 2011 Options 24 May Lot 1 583,334 66,666 650,000 25 May 2011 GBP0.53 2014 24 May Lot 2 583,333 66,667 650,000 25 May 2012 GBP0.53 2014 24 May Lot 3 583,333 66,667 650,000 25 May 2013 GBP0.53 2014 1,750,000 200,000 1,950,000 ------------- -------------- -------------
As at 30 June 2012, all options remained unexercised.
The fair values of the options granted were determined using the Black Scholes model. The following principal assumptions were used in the valuation of 2011 Options:
2011 Options 2009 Options Exercise price (GBP) 0.53 0.355 Share price at date of grant (GBP) 0.485 0.313 Option life 3 years 730 days Volatility 40% 20% Risk free interest rate 0.50% 1.115% Dividend yield - - Fair value at date of grant (GBP) 0.119 0.0225
In accordance with the requirements of IFRS2, a total charge of GBP52,000 (1H2011: GBP94,000) has been recognised in the income statement for the share options granted to the directors and certain employees. Charges for 2009 options and 2011 options amounted to GBPnil (1H2011: GBP7,000) and GBP52,000 (1H2011: GBP87,000) respectively.
9. Additions and disposals of property, plant and equipment Construction Plant Motor Buildings in progress and machineries Equipment vehicles Total GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 Carrying amount at 1 January 2012 22,395 - 18,043 126 228 40,792 Additions - - 49 51 - 100 Disposals - - - - (5) (5) Depreciation (454) - (306) (17) (33) (810) Net exchange differences (343) - (279) 3 (4) (623) Carrying amount at 30 June 2012 21,598 - 17,507 163 186 39,454 ---------- ------------- ----------------- ---------- ---------- -------- Construction Plant Motor Buildings in progress and machineries Equipment vehicles Total GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 Carrying amount at 1 January 2011 22,220 5 16,944 82 197 39,448 Additions - - 267 25 53 345 Disposals - (5) (7) - - (12) Depreciation (361) - (289) (10) (28) (688) Net exchange differences (197) - (143) (1) (1) (342) Carrying amount at 30 June 2011 21,662 - 16,772 96 221 38,751 ---------- ------------- ----------------- ---------- ---------- -------- Construction Plant Motor Buildings in progress and machineries Equipment vehicles Total GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 Carrying amount at 1 January 2011 22,220 5 16,944 82 197 39,448 Additions - - 565 67 113 745 Disposals (140) (5) (12) (2) (35) (194) Depreciation (810) - (368) (27) (59) (1,264) Net exchange differences 1,125 - 914 6 12 2,057 Carrying amount at 31 December 2011 22,395 - 18,043 126 228 40,792 ---------- ------------- ----------------- ---------- ---------- -------- 10. Convertible loan notes
The convertible loan notes A&B (Notes A&B) were issued between 3 November 2009 and 15 December 2009. The Notes A&B are convertible into ordinary shares of the Company at any time between the date of issue of the notes and their maturity date, i.e. three years after the date of issue. The loan notes are convertible at GBP0.32 per share. The effective interest rate used to calculate the interest charged to the income statement was 12%. If the Notes A&B have not been converted, they will be redeemed on their maturity date at par. Interest of 10% per annum will be paid biannually up until that date.
The convertible loan notes C (Notes C) were first issued on 23 June 2010. Additional Notes C with a nominal amount of GBP250,000 were issued on 11 March 2011. The Notes C are convertible into ordinary shares of the Company at any time between the date of issue of the notes and their maturity date, i.e. two years after the date of issue. The loan notes are convertible at GBP0.50 per share. The effective interest rate used to calculate the interest charged to the income statement was 10%. If the Notes C have not been converted, they will be redeemed on their maturity date at par. Interest of 8% per annum will be paid biannually up until that date.
On 14 June 2012, the Company announced that following approval by the majority of Note C holders, it has been agreed that the Note C has been rolled into the Note A. These terms have been amended to reflect those of the Notes A that carry a coupon of 10% per annum and are convertible at 32 pence per ordinary share. The modification is not deemed to be significant. The Company currently has GBP1.380 million of Notes C outstanding, which will now be repayable on 3 November 2012.
The net proceeds received from the issue of the convertible loan notes have been split between the liability element and an equity component, representing the fair value of the embedded option to convert the liability into equity of the Group, as follows:
Notes A&B Notes C Total ------------------------------ ----------------------------- ------- Gross Transaction Net Gross Transaction Net Net amount costs amount amount costs amount amount GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 Convertible loan notes issued 3,004 188 2,816 1,380 96 1,284 4,100 Equity component (127) (8) (119) (44) (3) (41) (160) -------- ----------- ------- ------- ----------- ------- ------- Liability component at date of issue 2,877 180 2,697 1,336 93 1,243 3,940 Interest charged 912 253 1,165 Interest paid (643) (154) (797) Liability component at 30 June 2012 2,966 1,342 4,308 ------- ------- ------- Notes A&B Notes C Total ------------------------------ ------------------------------ ------- Gross Transaction Net Gross Transaction Net Net amount costs amount amount costs amount amount GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 Convertible loan notes issued 3,004 188 2,816 1,380 96 1,284 4,100 Equity component (127) (8) (119) (44) (3) (41) (160) -------- ----------- ------- -------- ----------- ------- ------- Liability component at date of issue 2,877 180 2,697 1,336 93 1,243 3,940 Interest charged 566 119 685 Interest paid (405) (92) (497) Liability component at 30 June 2011 2,858 1,270 4,128 ------- ------- ------- Notes A&B Notes C Total ------------------------------ ------------------------------ ------- Gross Transaction Net Gross Transaction Net Net amount costs amount amount costs amount amount GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 Convertible loan notes issued 3,004 188 2,816 1,380 96 1,284 4,100 Equity component (127) (8) (119) (44) (3) (41) (160) -------- ----------- ------- -------- ----------- ------- ------- Liability component at date of issue 2,877 180 2,697 1,336 93 1,243 3,940 Interest charged 740 186 926 Interest paid (492) (98) (590) Liability component at 31 December 2011 2,945 1,331 4,276 ------- ------- -------
The directors estimate the fair value of the liability component of the convertible loan notes at 30 June 2012 to be approximately GBP4,308,000 (31 December 2011: GBP4,276,000).
11. Deferred tax
The deferred tax assets recognised as at 30 June 2012 was GBP2.5 million calculated on the basis of accumulated losses of Fortune Food at the tax rates that are expected to apply in the years when the deferred income tax assets will be realised.
The deferred tax liabilities recognised as at 30 June 2012 was GBP111,000 calculated on the basis of net profit of disposal of Fuss Feed's land use rights lease prepayments and the plant on top of the land which is not a taxable income for the period ended 30 June 2012.
12. Assets and liabilities held for sale As at As at As at 30 June 30 June 31 December 2012 2011 2011 GBP'000 GBP'000 GBP'000 Non-current assets Land use rights lease prepayments 647 632 665 Current assets Inventories 843 1,094 597 Trade receivables* - - - Prepayment** 2,421 - 1,726 -------- -------- ----------- Total assets held for sale 3,911 1,726 2,988 -------- -------- ----------- Current liabilities Trade payables 1,571 1,426 1,559 -------- -------- ----------- Total liabilities held for sale 1,571 1,426 1,559 -------- -------- -----------
As at 31 December 2011, 30 June 2011 and 30 June 2012, the assets and associated relating to the animal feed were held for sale in light of the decision to sell this business.
* No trade receivables as all sales are made on cash basis.
** As at 30 June 2012, RMB24,007,000 had been paid for the construction of the new animal feed plant. This balance has been treated as a current asset in prepayments as the Company had entered into an agreement to dispose of the animal business, which includes the new animal feed plant. It would not be appropriate to treat this as a non-current asset as the Company does not intend to use the factory in the business.
13. Discontinued operations
On 12 July 2012, the Group had entered into an agreement with Wisehand Planning Co., Ltd ("Wisehand" or the "Buyer"), a Korean-owned investment holding company, to dispose of the Group's animal feed business for a total consideration of US$16 million.
The results of the feed business for the year ended 31 December 2011, period ended 30 June 2011 and period ended 30 June 2012 are included in discontinued operations in the Group's consolidated income statement. The results of discontinued operations are as follows:
6 months 6 months to to Year ended 30 Jun 31 December 2012 30 Jun 2011 2011 GBP'000 GBP'000 GBP'000 Revenue 11,761 10.458 23,337 Operating expenses (11,078) (9,658) (21,749) --------- ------------ ------------ Profit before taxation 683 800 1,588 Taxation (171) (200) (397) --------- ------------ ------------ Total profit arising from discontinued operations 512 600 1,191 --------- ------------ ------------ 14. Earnings per share 6 months 6 months to to Year ended 31 December 30 June 2012 30 June 2011 2011 Profit after tax and earnings attributable to ordinary shareholders - GBP'000 (2,267) 1,042 (706) --------------------------------- ------------------------------- ---------------------- Profit after tax and earnings attributable to ordinary shareholders for calculation of diluted earnings - GBP'000 (2,267) 1,042 (706) --------------------------------- ------------------------------- ---------------------- Weighted average number of shares (used for basic earnings per share) 71,446,972 68,184,559 69,764,645 Dilutive effect - 523,772 - --------------------------------- ------------------------------- ---------------------- Dilutive weighted average number of shares (used for diluted earnings per share) 71,446,972 68,708,331 69,764,645 --------------------------------- ------------------------------- ---------------------- Basic earnings per share (pence) (3.17) 1.53 (1.01) --------------------------------- ------------------------------- ---------------------- Diluted earnings per share (pence) (3.17) 1.52 (1.01) --------------------------------- ------------------------------- ----------------------
Basic earnings per share has been calculated on 71,446,972 shares (1H2011: 68,184,559 shares) and on attributable earnings of -GBP2,267,000 (1H2010: GBP1,042,000).
Diluted earnings per share has been calculated on 71,446,972 shares (1H2010: 68,708,331 shares) and on attributable earnings of -GBP2,267,000 (1H2010: GBP1,042,000).
In 1H2012, the warrant granted to Strand Partners to subscribe 1,328,000 shares (1H2011: 1,328,000 shares) at GBP0.50 per share, the convertible loan notes A&B (see note 10) issued, the convertible loan notes C (see note 10) issued, the 2009 Options granted to the Directors and employees (see note 8) to subscribe 4,648,000 shares (1H2011: 4,648,000)and the 2011 Options granted to the Directors and employees (see note 8) to subscribe 1,950,000 shares (1H2011: 1,950,000) had no dilution effect on the calculation of the earnings per share.
In 1H2011, the 2009 Options granted to the Directors and employees have dilution effect on the calculation of the diluted earnings per share as the market price of the Company's shares was higher than the exercise price at 30 June 2011.
(Restated) (Restated) 6 months 6 months Earnings per share - continuing to to Year ended 31 December 30 June 2012 30 June 2011 2011 Profit after tax and earnings attributable to ordinary shareholders - GBP'000 (2,779) 442 (1,897) ------------------------------------------ ------------------------------- ---------------------- Profit after tax and earnings attributable to ordinary shareholders for calculation of diluted earnings - GBP'000 (2,779) 442 (1,897) ------------------------------------------ ------------------------------- ---------------------- Weighted average number of shares (used for basic earnings per share) 71,446,972 68,184,559 69,764,645 Dilutive effect - 523,772 - ------------------------------------------ ------------------------------- ---------------------- Dilutive weighted average number of shares (used for diluted earnings per share) 71,446,972 68,708,331 69,764,645 ------------------------------------------ ------------------------------- ---------------------- Basic earnings per share (pence) - continuing (3.89) 0.65 (2.72) ------------------------------------------ ------------------------------- ---------------------- Diluted earnings per share (pence) - continuing (3.89) 0.65 (2.72) ------------------------------------------ ------------------------------- ---------------------- (Restated) (Restated) 6 months 6 months Earnings per share - discontinued to to Year ended 31 December 30 June 2012 30 June 2011 2011 Profit after tax and earnings attributable to ordinary shareholders - GBP'000 512 600 1,191 ------------------------------------------ ------------------------------- ---------------------- Profit after tax and earnings attributable to ordinary shareholders for calculation of diluted earnings - GBP'000 512 600 1,191 ------------------------------------------ ------------------------------- ---------------------- Weighted average number of shares (used for basic earnings per share) 71,446,972 68,184,559 69,764,645 Dilutive effect - 523,772 - ------------------------------------------ ------------------------------- ---------------------- Dilutive weighted average number of shares (used for diluted earnings per share) 71,446,972 68,708,331 69,764,645 ------------------------------------------ ------------------------------- ---------------------- Basic earnings per share (pence) - discontinued 0.72 0.88 1.71 ------------------------------------------ ------------------------------- ---------------------- Diluted earnings per share (pence) - discontinued 0.72 0.87 1.71 ------------------------------------------ ------------------------------- ---------------------- 15. Earnings Before Interest, Taxes, Depreciation and Amortisation ("EBITDA")
The reconciliation of EBITDA to income statement is as follows:
6 months 6 months to to Year ended 30 June 30 June 31 December 2012 2011 2011 GBP'000 GBP'000 GBP'000 (Loss)/profit before tax (2,757) 1,808 (338) Less: Finance income (174) (176) (25) Add: Finance costs 703 558 1,336 Depreciation * 523 281 672 Deprecation - FY2011** 592 - - Effect on foreign exchange rate change** 21 - - Amortisation 95 93 188 EBITDA (997) 2,564 1,833 -------- -------- ----------- *This represents depreciation charges recognised in the income statement. It is different from the total depreciation charge as depreciation of the new production facilities is based on actual production capacity levels; accordingly GBP287,000 (1H2011: GBP407,000 and FY2011: GBP592,000) of the charges were included as part of work-in-progress under the inventory. ** This represents depreciation charges included as part of work-in-progress in FY2011 recognised in the cost of sales in 1H 2012 (Restated) (Restated) 6 months 6 months to to Year ended 30 June 30 June 31 December 2012 2011 2011 Continuing operations GBP'000 GBP'000 GBP'000 (Loss)/profit before tax (3,440) 1,008 (1,926) Less: Finance income (174) (176) (25) Add: Finance costs 703 558 1,336 Depreciation 490 249 607 Depreciation - FY2011 592 Effect on foreign exchange rate change 21 Amortisation 88 86 175 EBITDA - continuing (1,720) 1,725 167 ------------------- ------------------ ----------------------- (Restated) (Restated) 6 months 6 months to to Year ended 30 June 30 June 31 December 2012 2011 2011 Discontinued GBP'000 GBP'000 GBP'000 Profit before tax 683 800 1,588 Less: Finance income - - - Add: Finance costs - - - Depreciation 33 32 64 Amortisation 7 7 14 EBITDA - discontinued 723 839 1,666 ------------------- ------------------ ----------------------- 16. Segmental reporting
In identifying its operating segments, management generally follows the Group's service lines, which represent the main products and services provided by the Group. Management currently identifies the Group's two service lines as operating segments.
The activities undertaken by the condiments segment include the sale of cooking and dipping sauces. The activities undertaken by the animal feed segment include the sale of animal feed. Each of these operating segments is managed separately as each of these service lines requires different technologies and other resources as well as marketing approaches. As a result of the Group's announcement to sell the animal feed business, results for the animal feed operating segment are presented as discontinued operations in the current period ended 30 June 2012 and the comparatives. After the disposal of the animal feed business, only one reportable segment remains.
There were no inter-segment sales and transfers during the period under review.
The measurement policies the Group used for segment reporting under IFRS8 are the same as those used in its financial statements, except that:
Expenses relating to share-based payments are not included in arriving at the operating profit of the operating segments. In addition, corporate assets which are not directly attributable to the business activities of any operating segment are not allocated to a segment. In the financial period under review, this primarily applies to the Group's headquarters.
No geographical segment information is presented as the Group mainly operates in the PRC.
17. Interim Financial Statements
A copy of China Food's interim financial statements is available from the Company's registered office at 49 Whitehall, London SW1A 2BX, registered company no: 06077223 and is also available for download from the Company's website at www.chinafoodcompany.com
18. Independent review report to China Food Company PLC
Introduction
We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2012 which comprises the condensed consolidated income statement, the condensed consolidated statement of comprehensive income, the condensed consolidated statement of financial position, the condensed consolidated statement of cash flows, the condensed consolidated statement of changes in equity, and notes 1 to 17. We have read the other information contained in the half yearly financial report which comprises only the Chairman's Statement and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
This report is made solely to the company in accordance with guidance contained in ISRE (UK and Ireland) 2410, 'Review of Interim Financial Information performed by the Independent Auditor of the Entity'. Our review work has been undertaken so that we might state to the company those matters we are required to state to them in a review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our review work, for this report, or for the conclusion we have formed.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the directors.
As disclosed in Note 3, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting,' as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2012 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union.
Emphasis of Matter
In forming our opinion on the condensed set of financial statements, which is not modified, we have considered the adequacy of the disclosure made in note 3 to the condensed financial statements concerning the company's ability to continue as a going concern. The company incurred a net loss of GBP2.267m during the six month period ended 30 June 2012. As explained in note 3, the directors are in advance stages of selling the animal feed business and are considering alternate financing options that may prove to be necessary to repay convertible loan notes due November and December 2012 should the sale of the animal feed business not proceed. These conditions, along with the other matters explained in note 3 indicate the existence of a material uncertainty which may cast significant doubt about the company's ability to continue as a going concern. The condensed financial statements do not include the adjustments that would result if the company was unable to continue as a going concern.
GRANT THORNTON UK LLP
AUDITOR
LONDON
This information is provided by RNS
The company news service from the London Stock Exchange
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