TIDMGCH
RNS Number : 8351H
Green China Holdings Limited
26 June 2013
26 June 2013
Green China Holdings Limited
("Green China" or the "Company")
Final Results
Green China HoldingsLimited (AIM: GCH), a fertiliser franchise
operator and leading provider of fertiliser products in Hunan
Province, China, today releases its full year results for the
period ended 31 December 2012.
Highlights
* Successful listing on AIM in December 2012;
* GBP1 million fund raising;
* Revenue RMB 278 million (2011: RMB 432 million);
* PBT RMB 10.74 million (2011: RMB 23.17 million);
* Continued development of Company strategy to create a
higher profit margin business;
* Increase in the number of GCH branded franchise
stores to 767 at the end of the reporting period
(2011: 584);
* The Group was granted a licence by the PRC Government
to operate a franchise operation under the
Huifengnian brand in Hunan Province.
Commenting on the results, Ivor Shrago, Non-Executive Chairman
of Green China, said: "2012 has been a year of transition for the
Company as it moves from a direct sales model to focus on its
franchise stores. We were very pleased to have completed a
successful listing on AIM and associated fund raising during the
year. This has helped raise the profile of the business within
China. We are pleased with how the transition is progressing and
look forward to adding further revenue streams to our business in
2013."
For further information:
Green China Holdings Limited
Luke Webster, Executive Director Tel: +44 7970 066390
www.greenchinaholdingslimited.com
Cairn Financial Advisers LLP
Nominated Adviser
James Caithie / Avi Robinson Tel: +44 207 148 7900
Northland Capital Partners Limited
Broker
Gavin Burnell / Luke Cairns Tel: +44 207 796 8800
Business Review
2012 has been a significant year of development for the Company.
In late 2011, the Board took the decision to divest itself of its
manufacturing subsidiary Xiangzhu Xiangbei, which manufactured its
proprietary brand fertilisers, in order to re-focus the business on
distribution of its brands and development of the franchise store
network. During 2012, we have further developed this strategy by
securing a licence to operate franchise stores in Hunan Province
from the PRC Government. This has helped the Company reduce its
reliance on its lower margin direct sales business and reduce its
annual working capital requirements. The focus on further franchise
stores will help the Company!--s gross profit margin by being able
to charge annual franchise and consultancy fees for the use of the
Huifengnian brand. The overriding focus of the management team has
been to move away from its historical reliance on direct sales to
furthering its franchise store network. As a result, during the
period under review the Company has grown the number of franchise
stores in operation under the Huifengnian brand from 584 to
767.
Financial Results
As discussed above, by redirecting its focus from direct sales
to sales to its contracted franchise stores both revenue (RMB
277,992,000 (2011: RMB 431,574,000)) and profit before tax (RMB
10,742,000 (2011: 23,168,000)) have fallen. In addition, PBT was
affected by one off expenses of approximately RMB 4,500,000 related
to the company!--s IPO on AIM.
By altering its strategy, the Group has been able to create
further revenue streams via franchise and consultancy fees from
franchise store owners which carry significantly higher margins
than sales of the products alone. In addition, as the franchisees
typically enter into three year contracts, there is more visibility
on future revenues and more predictable returns as further
franchise stores are opened.
The Group!--s transition is evidenced by the change in ratio of
revenues from direct sales to sales to franchise stores (including
franchise and consultancy fees) from 2011 to 2012. In 2011 this
split was 89%:11%. At the end of 2012 this ratio was 68%:32%. We
expect this ratio to continue to balance out into 2013 and beyond.
The following table shows a breakdown of the Group!--s turnover by
category for the period from incorporation to 31 December 2010, for
the year ended 31 December 2011 and the year ended 31 December
2012.
Period from incorporation Year ended 31 December Year ended 31 December
to 31 December 2010 2011 2012
---------------- ---------------------------- ------------------------- -------------------------
RMB'000 % RMB'000 % RMB'000 %
---------------- ------------------ -------- --------------- -------- --------------- --------
Direct Sales 333,184 100 384,431 89.1 188,821 68.0
---------------- ------------------ -------- --------------- -------- --------------- --------
Sales to
Franchise
Stores -- 39,893 9.2 78,504 28.2
---------------- ------------------ -------- --------------- -------- --------------- --------
Franchise
& Consultancy
Fees -- 7,250 1.7 10,667 3.8
---------------- ------------------ -------- --------------- -------- --------------- --------
Totals 333,184 100 431,574 100 277,992 100
---------------- ------------------ -------- --------------- -------- --------------- --------
Through 2012 the Company has managed its debt collection more
efficiently so that trade receivables had fallen at the year end to
RMB 29,815,428 (2011: RMB 37,008,000). In addition, as a result of
the Company placing less reliance on its direct sales business the
debt position of the business has improved in 2012. Bank and other
borrowings at the year end totalled RMB 13,000,000 (2011:
29,500,000).
Outlook
The first few months of the 2013 year have seen a slower than
expected development of the franchise store network. However, the
Board expects to be able to report further tangible progress in the
addition of shops to the Huifengnian brand when it reports its
interim results later in the year. The Board continues to develop
its strategy in relation to new franchisees and believes that a
more selective approach to recruiting franchisees in the future
will create a more stable and profitable business in the long term
with larger sales to long term franchisee partners. In practice
this will mean that Green China will be targeting fewer store
openings than it envisaged at the time of admission to AIM but
should mean less churn in its franchisee pool and a higher revenue
per store.
As has been widely reported, the new PRC Government took their
seats in April. Early indications are that the new Government
continues to offer a great deal of protection and support for the
agricultural industry as a whole, given its importance to the
nation. It has been deemed to be one of the !degkey industries!+/-
under the recent 5-Year Plan published by the PRC Government. This
continued focus of the PRC Government on helping the agricultural
industry and the Company!--s position as a listed business with a
demonstrable track record in the industry has meant that other
opportunities within the agricultural sector have been forthcoming
in the first few months of 2013. The Board are pursuing these
opportunities intently and hope to update shareholders in due
course.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2012
Year ended Year ended
31 December 31 December
2012 2011
Note RMB'000 RMB'000
Revenue 277,992 431,574
Cost of sales (254,711) (401,420)
Gross profit 23,281 30,154
Other income 953 912
Other gains - 1,315
Distribution and selling expenses (1,729) (2,551)
Administrative expenses (9,984) (3,485)
Other operating expense (195) (2)
Finance costs (1,584) (2,385)
Share of loss of an associate - (790)
Profit before tax 10,742 23,168
Income tax expense (4,948) (6,221)
Profit for the year 5,794 16,947
Other comprehensive income
Exchange differences on translating foreign operations 55 151
Total comprehensive income for the year 5,849 17,098
Profit attributable to:
Owners of the Company 5,519 16,666
Non-controlling interests 275 281
5,794 16,947
Total comprehensive income attributable to:
Owners of the Company 5,574 16,817
Non-controlling interests 275 281
5,849 17,098
Earnings per share
Basic and diluted (RMB per share) 3 0.11 0.33
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 December 2012
As at As at
31 December 31 December
2012 2011
RMB'000 RMB'000
Non-current assets
Property, plant and equipment 1,025 1,184
Deposit - 5,000
Goodwill 7,839 7,839
Intangible assets - 457
Deferred tax assets 49 -
8,913 14,480
Current assets
Inventories 640 6,713
Trade and other receivables 88,313 73,365
Pledged bank deposit 5,000 -
Cash and bank balances 13,331 13,177
107,284 93,255
Current liabilities
Trade and other payables 52,356 45,373
Bank and other borrowings 13,000 29,500
Current tax liabilities 4,295 3,264
69,651 78,137
Net current assets 37,633 15,118
Total assets less current liabilities 46,546 29,598
Non-current liabilities
Deferred tax liabilities 707 452
Net assets 45,839 29,146
Capital and reserves
Share capital 65 -
Reserves 44,865 28,512
Equity attributable to owners of the Company 44,930 28,512
Non-controlling interests 909 634
Total equity 45,839 29,146
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 December 2012
Year ended Year ended
31 December 31 December
2012 2011
RMB'000 RMB'000
Cash flows from operating activities
Profit before tax . 10,742 23,168
Adjustments for .
Share of losses of an associate . - 790
Finance costs . 1,584 2,385
Interest income . (98) (28)
Gain on disposal of an associate . - (901)
Gain on disposal of a subsidiary . - (414)
Loss on disposal of property, plant and
equipment . - 26
Impairment loss recognised on trade receivables . 195 2
Depreciation of property, plant and equipment . 247 481
Amortisation of intangible assets . 457 75
Amortisation of prepaid lease payments . - 19
. 13,127 25,603
Movements in working capital
Decrease/(increase) in inventories . 6,073 (4,458)
(Increase)/decrease in trade and other receivables . (10,143) 87,867
Increase/(decrease) in trade and other payables . 6,983 (91,298)
Decrease in amount due to an associate . - (6,009)
Cash generated from operations . 16,040 11,705
Income taxes paid . (3,711) (3,761)
Net cash generated by operating activities . 12,329 7,944
.
Cash flows from investing activities
Proceeds from disposal of interest in an
associate . - 5,500
Interest received . 98 28
(Increase)/decrease in pledged bank deposit . (5,000) 5,000
Payments for property, plant and equipment . (88) (1,024)
Proceeds from disposal of property, plant and
equipment . - 12
Net cash inflow on disposal of a subsidiary . - 3,175
Net cash (used in)/generated by investing activities (4,990)
12,691
.
.
Cash flows from financing activities
Proceeds from bank and other borrowings . 23,000 75,500
Repayment of bank and other borrowings . (39,500) (81,000)
Increase in share capital of a subsidiary . 1,355 -
Proceeds from issue of new ordinary shares . 6 -
Proceeds from issue of new ordinary shares by way
of placing upon admission on the AIM Market . 9,503 -
Payment for transaction costs attributable to issue of
new shares . (20) -
Interest paid . (1,584) (2,385)
Net cash used in financing activities . (7,240) (7,885)
.
.
Net increase in cash and cash equivalents . 99 12,750
Cash and cash equivalents at the beginning of
year . 13,177 276
Effect of foreign exchange rate changes, net . 55 151
Cash and cash equivalents at the end of
year . 13,331 13,177
.
Representing:
Cash and bank balances . 13,331 13,177
.
NOTES TO THE FINANCIAL STATEMENTS
1. CORPORATE INFORMATION
Green China Holdings Limited (the "Company") was incorporated on
18 October 2012 as an exempted company in the Cayman Islands with
limited liability as a result of a corporate reorganisation in
preparation for the proposed listing of the Company's shares on the
Alternative Investment Market of the London Stock Exchange plc.
("AIM Market"). The directors of the Company consider that the
Company's ultimate controlling party is Ms. Hellena Wang. The
addresses of the registered office and principal place of business
of the Company are Cricket Square, Hutchins Drive, P.O. Box 2681,
Grand Cayman KY1 - 1111, Cayman Islands and 150 Yellow River Road,
Tianyuan District, Zhuzhou, Hunan Province, China, respectively.
The Company's shares were admitted to trading on the AIM Market on
19 December 2012.
The Company is an investment holding company. The Company and
its subsidiaries (hereinafter collectively referred to as the
"Group") are principally engaged in the sale and distribution of
fertiliser products and the operation of a network of franchise
stores selling fertilisers and agricultural related products in the
People's Republic of China (the "PRC").
2. CORPORATE REORGANISATION AND BASIS OF PRESENTATION OF THE
CONSOLIDATED FINANCIAL STATEMENTS
The Group underwent a corporate reorganisation (the "Corporate
Reorganisation") which principally involves the following
steps:
(i) Maxfield International Enterprises Limited was incorporated
on 20 August 2009 under the laws of Hong Kong with an authorised
share capital of Hong Kong dollars ("HK$") 10,000 divided into
10,000 shares of HK$1 each. Prior to 6 January 2012, the business
of the Group carried out by Maxfield International Enterprises
Limited and its subsidiaries, Zhuzhou Wanfeng Agricultural Means of
Production Co., Ltd. ("Wanfeng"), Hunan Huifengnian Agricultural
Means of Production Chain Supermarket Co., Ltd. ("Huifengnian") and
Hunan Huifengnian Agricultural Means of Production Chain
Supermarket Co., Ltd. Branch Huarong, were under control by the
controlling shareholder, Mr. ONG Se Mon ("Mr. Ong").
(ii) On 14 October 2011, Green China Investments Limited was
incorporated under the laws of the British Virgin Islands ("BVI")
and is authorised to issue a maximum of 50,000 no par value shares
of a single class, and one share was allotted and issued to Mr.
Ong.
(iii) On 6 January 2012, Mr. Ong transferred one share,
representing the entire issued share capital of Maxfield
International Enterprises Limited to Green China Investments
Limited at a consideration of HK$1.
(iv) On 18 January 2012, the issued ordinary share capital of
Green China Investments Limited was increased from US$1 to
US$10,000 by the allotment of 9,999 ordinary shares of US$1 each
for cash.
(v) Pursuant to the subscription agreement entered into between
Green China Investments Limited and an independent third party, on
12 February 2012, the issued ordinary share capital of Green China
Investments Limited was increased from US$10,000 to US$216,093 by
the allotment of 119 ordinary shares for a cash consideration of
HK$1,600,000.
(vi) On 1 November 2012, the Company issued 898,810 ordinary
shares of US$0.01 each at par value to the shareholders of Green
China Investments Limited to effect the acquisition of the entire
issued share capital of Green China Investments Limited.
Through the Corporate Reorganisation, the Company became the
holding company of the companies now comprising the Group on 1
November 2012. The Group comprising the Company and its
subsidiaries resulting from the Corporate Reorganisation is
regarded as a continuing entity. Accordingly, for the purpose of
the preparation of the consolidated financial statements of the
Group, the Company has been considered as the holding company of
the companies now comprising the Group throughout the years
presented.
The consolidated statement of comprehensive income, consolidated
statement of changes in equity and consolidated statement of cash
flows which include the results, changes in equity and cash flows
of the companies comprising the Group have been prepared as if the
current group structure had been in existence throughout the years
presented, or since their respective dates of
incorporation/establishment where it is a shorter period. The
consolidated statement of financial position as at 31 December 2011
has been prepared to present the assets and liabilities of the
companies comprising the Group as if the current group structure
had been in existence at that date.
Items included in the financial statements of each of the
Group's subsidiaries are measured using the currency of the primary
economic environment in which the respective entity operates (the
"functional currency"). The functional currencies of the Group's
operating subsidiaries and the Company are Renminbi ("RMB") and
United States dollars ("US$") respectively. The consolidated
financial statements are presented in RMB, which is different from
the functional currency of the Company. The choice of presentation
currency is to better reflect the currency that mainly determines
economic effects of transactions, events and conditions of the
Group.
3. EARNINGS PER SHARE
The calculation of the basic and diluted earnings per share
attributable to owners of the Company for the year is based on the
following data:
Year ended Year ended
31 December 31 December
2012 2011
RMB'000 RMB'000
Earnings for the purpose of basic and diluted
earnings per share . 5,519 16,666
Number of shares
'000 '000
Weighted average number of ordinary shares for
purpose of basic and diluted earnings per share 50,055 50,000
The calculation of the basic and diluted earnings per share for
both years is based on (i) the profit attributable to owners of the
Company; and (ii) the weighted average number of 50,055,173 (2011:
50,000,000) ordinary shares in issue during the year which is on
the assumption that the 50,000,000 shares issued as a result of the
Corporate Reorganisation (comprising 10,119 shares in issue,
898,810 shares issued under the Corporate Reorganisation and taking
into account the effect of subdivision of shares in November 2012)
were outstanding since 1 January 2011.
The diluted earnings per share is equal to the basic earnings
per share as there were no dilutive potential ordinary shares in
issue during both years.
4. Publication of Annual Report & Notice of AGM
The Annual Report and Accounts have been sent to all
shareholders today along with the AGM Notice both of which are
available on the Company's website at: www.greenchinaholdings.com.
The AGM will be held at 3.30pm on 16 August 2013 at the offices of
Proton Invest Holdings Ltd.,7 Floor, 10 Block Shenzhen Software
Park Keji Middle 2nd Road, Nanshan District, Shenzhen, Guangdong,
P.R.China 518000.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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