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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 : 3838N
China Food Company PLC
01 September 2011
Press Release 1 September 2011
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 half year results for the six months ended 30 June 2011.
Highlights
-- Revenue increased by 9.6% to GBP18.8 million (H1 2010: GBP17.2 million) -- EBITDA increased 6.9% to GBP2.6 million (H1 2010: GBP2.4 million) -- Adjusted profit before tax and set up costs* up by 21% to approximately GBP2.7 million (H1 2010: GBP2.2 million). EBITDA on that basis would total GBP3.0 million (H1 2010: GBP2.6 million), with adjusted EPS of 2.64 pence (H1 2010: 2.22 pence) -- Profit before tax of GBP1.8 million, (H1 2010: GBP1.9 million), stated after set up costs of GBP0.9 million (H1 2010: GBP0.3 million)* -- Proposed maiden interim dividend of 0.0013 pence per share payable on 30 November 2011 -- Sales of main brand Hao Tai Tai soya sauce in H1 2011 grew 23.0% -- Launch of new premium grade soya sauce brand, "Xaka" in August 2011 with distribution planned throughout Shandong and across a further 16 cities in Northern China -- ISO22000, ISO9001 and HACCP accreditations obtained from international certification agency SGS Global for the new factory -- Started exports to Singapore in July 2011 as a validation of the product's quality and taste and to generate additional demand for the Group's increased production facilities
*Set up costs relate to preparatory expenses and depreciation of GBP0.9m (H1 2010: GBP0.3m) on the new factory for which there has yet to be any revenue.
John McLean, Chairman of China Food Company, commented: "During the period the Group continued to progress on its stated strategy to become a brand leader in Northern China for condiments. With our increased world-class production facilities, we are now putting the distribution channels in place to take our new brand to market, as well as the ability to further develop our existing brands and products.
"The management team has been significantly strengthened and this process will continue to ensure that we have the right team in place to take the products forward and capitalise on the considerable market opportunity that is present in Northern China."
For further information:
China Food Company Plc Tel: +44 (0) 207 930 8888 John McLean, Non-Executive Chairman Tel: +44 (0) 7768 031 454 Raphael Tham Wai Mun, Chief Executive www.chinafoodcompany.com finnCap Geoff Nash / Ben Thompson (Corporate Tel: +44 (0) 20 7600 Finance) 1658 Simon Starr (Broking)
Media enquiries:
Abchurch Communications Henry Harrison-Topham / Joanne Shears Tel: +44 (0) 20 7398 / Mark Dixon 7709 henry.ht@abchurch-group.com www.abchurch-group.com
Chairman's and Chief Executive Officer's Statement
The Group achieved GBP18.8 million in revenue in H1 2011, an increase of 9.6% (H1 2010: GBP17.2 million). EBITDA also increased from GBP2.4 million (H1 2010) to GBP2.6 million (H1 2011) as the core condiments business continued to grow. Profit before tax was GBP1.8 million in H1 2011 (H1 2010: GBP1.9 million) as the Group incurred increased overheads from China Food's new facility and preparatory marketing expenses in anticipation for the Group's launch in H2 2011, increased depreciation from the new factory and higher finance costs. The impact on first half profit before tax was approximately GBP0.9 million (H1 2010: GBP0.3 million). The net assets of the Group increased to GBP37.8 million which included cash and cash equivalents of GBP5.8 million as at 30 June 2011.
The Group's revenue in RMB grew by 11.9%. This growth is largely contributable to China Food's existing condiments business which reached RMB88.5 million in revenue for H1 2011, an increase of 18.4% compared to the same period last year as well as the feed business which grew 7.1% to reach RMB110.6 million (H1 2010: RMB103.2 million).(1)
Profit after tax for the Group's existing condiments business increased to RMB21.5 million compared to RMB17.5 million in H1 2010, a growth of 22.6%, or 57.6% of the total condiments revenue for FYE 2010. The Group has filled up 123 silos and has opened 29 silos to date in respect of the new factory.
Overheads from the new facility amounted to RMB9.1 million in H1 2011, an increase of 163% over the same period last year due to depreciation and additional factory and management staff. The Board expects sales to increase significantly in H2 2011 with the launch of its new products.
Inventory turnover also increased from 18 days to 54 days as the Group moved towards producing higher grade naturally brewed soya sauce. The average fermentation process will average out at 120-150 days for soya sauce while the vinegar and bean paste will continue to operate below 30 days. This is significantly higher than the Group's previous soya sauce production cycle which could only produce low-to-medium grade soya sauce and had a fermentation cycle of less than 30 days. Inventory also increased as China Food took on stock in preparation for the launch of the Group's new products in August 2011.
Following market testing in Jinan in late spring 2011 China Food has completed its review of Hao Tai Tai's existing sales channels to increase penetration levels, refine Hao Tai Tai's product lines, and develop a sales and marketing strategy to rejuvenate and strengthen the brand. The Group believes there is substantial room for Hao Tai Tai to increase sales further and in so doing, take up to 60% of the targeted new soya sauce production from the Group's new plant for its first year. Sales in Hao Tai Tai soya sauce in H1 2011 grew 23.0% while gross margins remained constant.
The Group launched its new soya sauce brand, "Xaka", in August 2011 and will be distributing it throughout Shandong and across a further 16 cities in Northern China through distributors and key accounts to take up the remaining production output for this year. The Group has started signing up the distributors, scheduled an extensive advertising campaign (including slots on CCTV, China's main TV channel), established China Food's Beijing office and has hired a sales team. Positioned as a high to premium grade brand, Xaka will be China Food's vehicle to penetrate into the Northern China region and the increasingly brand conscious consumers due to its premium branding and associated price points which will allow the Company to achieve better gross margins. The consumers are now more aware and demanding of taste, quality, price and food safety, and China Food's international brand appeals to all of these aspects. The Board is optimistic that the impact of the launch will be reflected in the coming months. A sample sales and marketing video is available to view on the Group's website demonstrating the scale and world class nature of China Food's operations.
China Food has now shifted the majority of its soya sauce production to the new factory, freeing up space in the old condiments factory to produce more vinegar and bean paste compared to the 10,739 tonnes of vinegar and 5,481 tonnes of bean paste the Group produces currently. This will allow China Food to expand its range of condiment products whilst also leveraging the new channels opened through its soya sauce sales.
The Board is delighted to have recently obtained ISO22000, ISO9001 and HACCP accreditations from international certification agency SGS Global for its new factory, having recently renewed its ISO22000 in the Group's old condiments factory. In addition, the Group is at an advanced stage of obtaining further global food certifications for the new factory. China Food has also started exporting to Singapore in July 2011 as a validation of the Group's product quality and taste and also to generate demand for the Group's increased production facilities.
Profit after tax of the animal feed business improved by 18.8% to RMB6.3 million for H1 2011 (H1 2010: RMB5.3 million) and the business remains cash-flow positive. However, the Board recognises that the business is not core to the Group's activities going forward and with reference to earlier announcements, discussions are taking place with several parties on potential corporate merger or disposal. The Group will update the market on progress in due course.
The Chinese economy continues to grow strongly, but the rise in inflation has caused the Chinese Government to introduce tougher financial controls designed to control growth in the economy. As a result, credit terms are both tighter and more expensive and this will have an impact on the Group.
Commodity and livestock prices have also increased significantly. However, to date, the impact on soybean and wheat, China Food's largest commodity purchases for the condiment business, has been marginal. This is due to the strategic location of Shandong as an agricultural hub for China. The feed business however is likely to be more susceptible to such commodity price inflations.
The Group has further strengthened its management team in recent months, and in addition to the appointment of Mr. Tom Coley as a Non-Executive Director, the Group has also appointed Mr. Zheng as the Group's Sales Director. Since the period end, Ms Tang Lin joined China Food as the new Chief Financial Officer replacing Mr. Frank Chau. These appointments have been made in order to ensure that the Group is fully able to meet the challenges ahead and to fulfill China Food's ambitions. The Board would like to thank Frank for his contribution to the Company over the years. Frank has been instrumental throughout this period of significant progress for the Company, and will work with Tang Lin to ensure an orderly handover. To align the interests of the Group's employees with those of China Food's shareholders, as previously announced the Company has also issued 1.95 million employee options in May 2011 to directors and senior management. These were issued at 53 pence per share, a premium to the share price at the time.
The Company also successfully issued a further five million shares at 53 pence each to new investors, raising net proceeds of GBP2.5 million demonstrating investor appetite in China Food Company. A further 10% convertible loan note of GBP250,000 was also raised with a two year term and conversion price of 50 pence.
With the completion of the capital restructuring exercise earlier in the year and the Board past disclosure to pay a dividend to shareholders, it is now pleased to announce the commencement of China Food's dividend policy with a maiden interim dividend of 0.0013 pence per share payable on 30 November 2011 to shareholders on the register on 25 November 2011.
China Food's strategy is to become a brand leader in Northern China for condiments. To achieve this vision, the Group has increased production facilities, and is now investing in building up the Xaka brand and the Northern China distribution channels. Building this brand and the distribution channels requires significant investment and the Board remains confident of China Food's long-term prospects.
The Chinese sauces, dressings and condiments market is expected to be worth CNY115 billion (US$15 billion) by 2013 (Source: Datamonitor report: Sauces, Dressings and Condiments in China to 2013, April 2010) with a compounded annual growth rate of over 6.0%. The Directors believe China Food's rising market share and investment in creating a world-class production facility that can be tailored to suit consumer demand puts the Group in an excellent position going forward.
The initial launch of the Xaka brand has been promising and China Food's market research indicates that a combination of the food safety scares in the recent past as well as the growing affluence and demands of the Chinese population should mean that the introduction of a top grade soya sauce will be well received by consumers. China Food has invested heavily in this process and new brand and is committed to its success. The second half of the year has started well and the Board expects a significant uplift in sales in Q4 2011 and a satisfactory result for the year as a whole.
John McLean Raphael Tham Chairman Chief Executive Officer 1 September 2011 1 September 2011
(1) As the Group's main operating currency is in RMB, the discussion of the actual business performance of the business units are presented in RMB.
Condensed Consolidated Income Statement
For the period ended 30 June 2011
Unaudited Unaudited 6 months 6 months Audited to to Year to 30 June 30 June 31 December Notes 2011 2010 2010 GBP'000 GBP'000 GBP'000 Revenue 18,823 17,175 35,891 Cost of sales (14,349) (13,225) (28,060) Gross profit 4,474 3,950 7,831 Other operating income 6 5 9 Selling and marketing costs (894) (697) (1,517) Administrative costs (1,396) (1,136) (2,359) Operating result 2,190 2,122 3,964 Finance costs (558) (345) (726) Finance income 176 98 515 Profit before tax 1,808 1,875 3,753 Taxation (766) (735) (1,434) Profit for the period 1,042 1,140 2,319 ========== ========== ============ Earnings per share - Basic (pence) 11 1.53 1.72 3.49 - Fully diluted (pence) 11 1.52 1.72 3.48
There are no discontinued operations.
Condensed Consolidated Statement of Comprehensive Income
For the period ended 30 June 2011
Unaudited Unaudited 6 months 6 months Audited to to Year to 30 June 30 June 31 December 2011 2010 2010 GBP'000 GBP'000 GBP'000 Profit for the period 1,042 1,140 2,319 Other comprehensive income Exchange differences on translating foreign operations (356) 2,887 2,053 ---------- ---------- ------------ Other comprehensive income, net of tax (356) 2,887 2,053 Total comprehensive income for the period attributable to equity holders of the parent 686 4,027 4,372 ========== ========== ============
Condensed Consolidated Statement of Financial Position
As at 30 June 2011
Unaudited Unaudited Audited As at As at As at 30 June 30 June 31 December Notes 2011 2010 2010 GBP'000 GBP'000 GBP'000 ASSETS Non-current assets Property, plant and equipment 8 38,751 37,278 39,448 Land use rights lease prepayments 8,203 8,592 8,368 ---------- Total non-current assets 46,954 45,870 47,816 ---------- ---------- ------------ Current assets Inventories 5,590 1,333 3,002 Land use rights lease prepayments 188 193 190 Trade and other receivables 1,439 723 750 Deferred tax assets 10 110 - - Cash and cash equivalents 5,816 8,671 2,918 ---------- Total current assets 13,143 10,920 6,860 ---------- ---------- ------------ Total assets 60,097 56,790 54,676 LIABILITIES Current liabilities Trade and other payables 6,699 6,300 7,583 Bank loans 6,939 3,039 1,166 Current portion of shareholders' loans 507 2,255 501 Current tax payable 413 355 415 ---------- Total current liabilities 14,558 11,949 9,665 ---------- ---------- ------------ Net current liabilities (1,415) (1,029) (2,805) ---------- ---------- ------------ Total assets less current liabilities 45,539 44,841 45,011 ---------- ---------- ------------ Non-current liabilities Bank loan - 2,961 2,916 Convertible loan notes 9 4,128 3,840 3,858 Shareholder's loan 3,638 3,907 3,748 ---------- 7,766 10,708 10,522 ---------- ---------- ------------ Net assets 37,773 34,133 34,489 ========== ========== ============ EQUITY Share capital 5 2,858 2,656 2,656 Share premium 6 24,972 25,678 25,678 PRC statutory reserves 3,098 2,671 3,098 Reverse acquisition reserve (23,992) (23,992) (23,992) Shares to be issued reserve 242 139 148 Convertible loan notes - equity 9 160 150 152 Foreign exchange translation reserve 7,996 9,186 8,352 Merger reserve 2,216 2,216 2,216 Retained profits 20,223 15,429 16,181 ---------- 37,773 34,133 34,489 ========== ========== ============
Condensed Consolidated Statement of Cash Flows
For the period ended 30 June 2011
Unaudited Unaudited 6 months 6 months Audited to to Year to 30 June 30 June 31 December 2011 2010 2010 GBP'000 GBP'000 GBP'000 Cash flows from operating activities Profit before tax 1,808 1,875 3,753 Adjustments for: Deprecation 281 183 368 Deprecation included in inventories 407 - - Amortisation of land use rights lease prepayments 93 94 187 Loss on disposal of property, plant and equipment 7 6 6 Employee share options 94 23 32 Interest expenses 558 345 726 Other income (176) (98) (515) ---------- Operating profit before working capital changes 3,072 2,428 4,557 Changes in working capital: Inventories (2,588) (2) (1,671) Trade and other receivables (689) (303) (330) Trade and other payables (1,061) 1,836 645 ---------- Cash (used in)/generated from operations (1,266) 3,959 3,201 Interest received 8 6 22 Income taxes paid (873) (751) (1,385) ---------- Net cash (used in)/generated from operating activities (2,131) 3,214 1,838 ---------- ---------- ------------ Cash flows from investing activities Payment for acquisition of property, plant and equipment (345) (3,945) (4,400) Proceeds from disposal of property, plant and equipment 5 10 11 Net cash used in investing activities (340) (3,935) (4,389) ---------- ---------- ------------ Cash flows from financing activities Proceeds from bank loan 2,837 3,475 3,442 Repayment of bank loan - - (1,797) Net proceeds from issued of ordinary shares 2,496 - - Proceeds from shareholder's loan - 1,737 - Net proceeds from convertible loan notes 240 902 995 Interest paid (343) (76) (436) ---------- Net cash generated from/(used in) financing activities 5,230 6,038 2,204 ---------- ---------- ------------ Net increase/(decrease) in cash and cash equivalents 2,759 5,317 (347) Effect of foreign exchange rate changes 139 106 17 Cash and cash equivalents at beginning of period 2,918 3,248 3,248 ---------- Cash and cash equivalents at end of period 5,816 8,671 2,918 ========== ========== ============
Condensed Consolidated Statement of Changes in Equity
For the period ended 30 June 2011
Shares Foreign Total equity to be Reverse PRC Convertible exchange attributable Share Share issued acquisition Merger statutory loan notes translation Retained to owners of capital premium reserve reserve reserve reserves - equity reserve profits the 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 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 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 2010 2,656 25,678 116 (23,992) 2,216 2,671 121 6,299 14,289 30,054 Employee share options granted - - 23 - - - - - - 23 Convertible loan notes - equity - - - - - - 29 - - 29 Transactions with owners - - 23 - - - 29 - - 52 -------- -------- -------- ------------ -------- ---------- ------------ ------------ --------- ------------- Profit for the period - - - - - - - - 1,140 1,140 Other comprehensive income: Exchange differences on translation of foreign operations - - - - - - - 2,887 - 2,887 Total comprehensive income for the period - - - - - - - 2,887 1,140 4,027 -------- -------- -------- ------------ -------- ---------- ------------ ------------ --------- ------------- As at 30 June 2010 2,656 25,678 139 (23,992) 2,216 2,671 150 9,186 15,429 34,133 -------- -------- -------- ------------ -------- ---------- ------------ ------------ --------- ------------- As at 1 January 2010 2,656 25,678 116 (23,992) 2,216 2,671 121 6,299 14,289 30,054 Employee share options granted - - 32 - - - - - - 32 Transfer to PRC statutory reserves - - - - - 427 - - (427) - Convertible loan notes - equity - - - - - - 31 - - 31 Transactions with owners - - 32 - - 427 31 - (427) 63 -------- -------- -------- ------------ -------- ---------- ------------ ------------ --------- ------------- Profit for the period - - - - - - - - 2,319 2,319 Other comprehensive income: Exchange differences on translation of foreign operations - - - - - - - 2,053 - 2,053 Total comprehensive income for the period - - - - - - - 2,053 2,319 4,372 -------- -------- -------- ------------ -------- ---------- ------------ ------------ --------- ------------- As at 31 December 2010 2,656 25,678 148 (23,992) 2,216 3,098 152 8,352 16,181 34,489 -------- -------- -------- ------------ -------- ---------- ------------ ------------ --------- -------------
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 1 September2011.
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 2010 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 2011 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 2010.
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. Accounting policies and changes thereto
The interim financial statements have been prepared in accordance with the accounting policies adopted in the Group's last annual financial statements for the year ended 31 December 2010, except for the adoption of Improvements to IFRSs 2010 (2010 Improvements) as of 1 January 2011. The 2010 Improvements made several minor amendments to IFRSs. The relevant amendments and their effects on the current period or prior periods are described below.
The accounting policies have been applied consistently throughout the Group for the purposes of preparation of these interim financial statements.
Amendment to IAS 1 Presentation of Financial Statements
The amendment provides a choice of presenting the reconciliations for each component of other comprehensive income either in the statement of changes in equity or in the notes to the financial statements. The Group chose to present such reconciliations in the Consolidated Statement of Changes in Equity, same as last year.
Amendments to IAS 34 Interim Financial Reporting
The amendments clarified certain disclosures relating to events and transactions that are significant to an understanding of changes in the Group's circumstances since the last annual financial statements. The Group's interim financial statements as of 30 June 2011 reflect these amended disclosure requirements, where applicable.
4. Seasonal fluctuations
The sale of condiments and animal feed products is subject to seasonal fluctuations. Historically, peak demand is in the second half of each year. For the six months ended 30 June 2011, revenue of the condiments and animal feed products represented approximately 57.0% and 49.3% of their annual levels in the year ended 31 December 2010. For the six months ended 30 June 2010, the levels of condiments and animal feed products represented approximately 49.1% and 47.0% of their annual sales in the year ended 31 December 2010.
5. 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 2010, 30 June 2010 and 30 June 2011 - Ordinary shares of 4p each 100,000,000 4,000 -------------- -------- Issued, called up and fully paid As at 31 December 2010 and 30 June 2010 - Ordinary shares of 4p each 66,399,991 2,656 Shares issued on 28 April 2011 5,046,981 202 As at 30 June 2011 71,446,972 2,858 -------------- --------
6. Share premium
As at As at As at 30 Jun 30 Jun 31 December 2011 2010 2010 GBP'000 GBP'000 GBP'000 As at 1 January 25,678 25,678 25,678 Premium on shares issued on 28 April 2011 2,473 - - Share issue expenses (179) - - Capital reduction (3,000) - - 24,972 25,678 25,678 -------- ----------- --------------
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.
7. 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:
Date at Number of options granted 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 2011, 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:
Exercise price (GBP) 0.53 Share price at date of grant (GBP) 0.485 Option life 3 years Volatility 40% Risk free interest rate 0.50% Dividend yield - Fair value at date of grant (GBP) 0.119
In accordance with the requirements of IFRS2, a total charge of GBP94,000 (1H2010: GBP23,000) 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 GBP7,000 (1H2010: GBP23,000) and GBP87,000 (1H2010: nil) respectively.
8. Additions and disposals of property, plant and equipment
Construction Plant and Motor Buildings in progress machineries Equipment vehicles Total GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 Carrying amount at 1 January 2011 22,219 5 16,945 82 197 39,448 Additions - - 267 25 53 345 Transfer - - - - - - Disposals - (5) (7) - - (12) Depreciation (361) - (289) (10) (28) (688) Net exchange differences (196) - (144) (1) (1) (342) Carrying amount at 30 June 2011 21,662 - 16,772 96 221 38,751 ---------- ------------- ------------ ---------- --------- -------- Construction Plant and Motor Buildings in progress machineries Equipment vehicles Total GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 Carrying amount at 1 January 2010 3,103 26,904 537 48 110 30,702 Additions - 3,809 27 23 87 3,946 Transfer - (13) 13 - - - Disposals - - (14) (1) (1) (16) Depreciation (109) - (46) (11) (17) (183) Net exchange differences 275 2,490 48 5 11 2,829 Carrying amount at 30 June 2010 3,269 33,190 565 64 190 37,278 ---------- ------------- ------------ ---------- --------- -------- Construction Plant and Motor Buildings in progress machineries Equipment vehicles Total GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 Carrying amount at 1 January 2010 3,103 26,904 537 48 110 30,702 Additions - 5 6,606 50 120 6,781 Transfer 18,794 (28,394) 9,600 - - - Disposals - - (15) (1) (1) (17) Depreciation (216) - (92) (19) (41) (368) Net exchange differences 538 1,490 309 4 9 2,350 Carrying amount at 31 December 2010 22,219 5 16,945 82 197 39,448 ---------- ------------- ------------ ---------- --------- --------
9. 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.
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 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 1,025 74 951 3,767 Equity component (127) (8) (119) (33) (2) (31) (150) -------- ----------- ------- ------- ----------- ------- ------- Liability component at date of issue 2,877 180 2,697 992 72 920 3,617 Interest charged 221 2 223 Interest paid - - - Liability component at 30 June 2010 2,918 923 3,840 ------- ------- ------- 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 1,130 86 1,044 3,860 Equity component (127) (8) (119) (36) (3) (33) (152) -------- ----------- ------- ------- ----------- ------- ------- Liability component at date of issue 2,877 180 2,697 1,094 83 1,011 3,708 Interest charged 395 57 452 Interest paid (255) (47) (302) Liability component at 31 December 2010 2,837 1,021 3,858 ------- ------- -------
Interest charged for the six months ended 30 June 2010 is reclassified from other payables to the liability component of the convertible loan notes at 30 June 2010.
The directors estimate the fair value of the liability component of the convertible loan notes at 30 June 2011 to be approximately GBP4,128,000 (31 December 2010: GBP3,858,000).
10. Deferred tax
The group incurred tax losses of GBP864,000 (RMB9.1 million) in the six months to 30 June 2011 which will be utilised resulting in a deferred tax asset of GBP110,000 (effective tax rate of 12.5%).
The group also has unutilised tax losses of GBP1,559,000 resulting in an unprovided deferred tax asset of GBP312,000 at current effective tax rate of 20%. Management is presently reviewing the group's tax position and expects to crystalise this asset going forward.
11. Earnings per share and dividends
6 months 6 months to to Year to 30 June 30 June 31 December 2011 2010 2010 Profit after tax and earnings attributable to ordinary shareholders - GBP'000 1,042 1,140 2,319 ----------- ----------- --------------- Profit after tax and earnings attributable to ordinary shareholders for calculation of diluted earnings - GBP'000 1,042 1,140 2,665 ----------- ----------- --------------- Weighted average number of shares (used for basic earnings per share) 68,184,559 66,399,991 66,399,991 Dilutive effect 523,772 70,098 10,148,880 ----------- ----------- --------------- Dilutive weighted average number of shares (used for diluted earnings per share) 68,708,331 66,470,089 76,548,871 ----------- ----------- --------------- Basic earnings per share (pence) 1.53 1.72 3,49 ----------- ----------- --------------- Diluted earnings per share (pence) 1.52 1.72 3.48 ----------- ----------- ---------------
Basic earnings per share has been calculated on 68,184,559 shares (1H2010: 66,399,991 shares) and on attributable earnings of GBP1,042,000 (1H2010: GBP1,140,000).
Diluted earnings per share has been calculated on 68,708,331 shares (1H2010: 66,470,089 shares) and on attributable earnings of GBP1,042,000 (1H2010: GBP1,140,000).
In 1H2011, the 2009 Options granted to the Directors and employees to subscribe 4,648,000 shares (1H2010: 4,648,000 shares) at GBP0.355 per share 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.
In 1H2011, the warrant granted to Strand Partners to subscribe 1,328,000 shares (1H2010: 1,328,000 shares) at GBP0.50 per share, the convertible loan notes A&B (see note 8) issued, the convertible loan notes C (see note 8) issued and the 2011 Options granted to the Directors and employees (see note 7) to subscribe 1,950,000 shares (1H2010: nil) had no dilution effect on the calculation of the earnings per share.
In 1H2010, the share options granted to the 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 2010.
In 1H2010, the warrant granted to Strand Partners, the convertible loan notes A&B issued and the convertible loan notes C issued had no dilution effect on the calculation of the earnings per share.
A maiden interim dividend of 0.0013 pence per share is proposed for the period ended 30 June 2011 (1H 2010: nil).
12. 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 to 30 June 30 June 31 December 2011 2010 2010 GBP'000 GBP'000 GBP'000 Profit before tax 1,808 1,875 3,753 Less: Finance income (176) (98) (515) Add: Finance costs 558 345 726 Depreciation 281* 183 368 Amortisation 93 94 187 EBITDA 2,564 2,399 4,519 -------- -------- ----------- *Depreciation amount represents those expensed off during the period. It is different from the total depreciation charge for the period of GBP688,000 as GBP407,000 of the charges were capitalised in the inventory of the new soya sauce products.
13. 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.
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.
Business segments
6 months to 30 June 2011 6 months to 30 June 2010 Year to 31 December 2010 Animal Animal Animal feed Condiments Total feed Condiments Total feed Condiments Total GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 Revenue from external customers 10,458 8,365 18,823 9,964 7,211 17,175 21,214 14,677 35,891 -------- ----------- --------- -------- ----------- --------- --------- ----------- --------- Cost of sales (9,457) (4,892) (14,349) (9,036) (4,189) (13,225) (19,281) (8,779) (28,060) Finance income 2 5 7 1 3 4 2 6 8 Finance costs - - - - (76) (76) - (134) (134) Other expenses (211) (769) (980) (247) (693) (940) (449) (1,553) (2,002) -------- ----------- --------- -------- ----------- --------- --------- ----------- --------- Segment operating profit 792 2,709 3,501 682 2,256 2,938 1,486 4,217 5,703 Taxation (198) (677) (875) (171) (564) (735) (376) (1,058) (1,434) -------- ----------- --------- -------- ----------- --------- --------- ----------- --------- Segment profit for the period 594 2,032 2,626 511 1,692 2,203 1,110 3,159 4,269 -------- ----------- --------- -------- ----------- --------- --------- ----------- --------- Segment assets 3,160 56,643 59,803 2,772 52,974 55,746 2,938 51,554 54,492 -------- ----------- --------- -------- ----------- --------- --------- ----------- --------- Depreciation and amortisation 48 732 780 47 228 275 93 460 553 Unallocated depreciation and amortization 1 2 2 --------- --------- --------- Total depreciation and amortization 781 277 555 --------- --------- --------- The totals presented for the Group's operating segments reconcile to the entity's key financial figures as presented in its financial statements as follows: As at As at As at 30 June 30 June 31 December 2011 2010 2010 GBP'000 GBP'000 GBP'000 Revenues Total segment revenue 18,823 17,175 35,891 -------- -------- ---------------------------- Group revenues 18,823 17,175 35,891 -------- -------- ---------------------------- Profit or loss Segment operating profit 3,501 2,938 5,703 Finance income not allocated 169 94 507 Finance costs not allocated (558) (269) (592) Other expenses not allocated (1,304) (888) (1,865) -------- -------- ---------------------------- Group profit before tax 1,808 1,875 3,753 -------- -------- ---------------------------- As at As at As at 30 June 30 June 31 December 2011 2010 2010 GBP'000 GBP'000 GBP'000 Assets Total segment assets 59,803 55,746 54,492 Group headquarters 294 1,044 184 -------- -------- ---------------------------- Total assets 60,097 56,790 54,676 -------- -------- ----------------------------
14. 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.
15. 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 2011 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 14. 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 2, 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 2011 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union.
GRANT THORNTON UK LLP
AUDITOR
LONDON
1 September 2011
- Ends -
This information is provided by RNS
The company news service from the London Stock Exchange
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