TIDMAFG
RNS Number : 5944Q
Aquatic Foods Group PLC
01 March 2016
Press Release 1 March 2016
Aquatic Foods Group Plc
("Aquatic Foods", the "Company" or the "Group")
Trading Update
Revenue up 14%, gross profit up 4% and intention to recommend a
full year dividend
Aquatic Foods Group Plc (AIM: AFG), a leading Chinese marine
foods and seafood processor and producer, supplying to export and
local markets, is pleased to provide the following trading update
for the full year ended 31 December 2015.
Highlights:
-- Unaudited Group revenue for the FY 2015 increased by 14.3% to
RMB 978.7 million (cGBP107.4m) (2014: RMB 856.1 million)
-- Unaudited gross profit margins came under pressure during the
second half of the year due to more challenging market conditions;
pricing pressure from AFG's customers, along with upper income
consumer purchases being impacted by the Chinese economy, resulted
in a lower average price per Kilo of fish sold during the
period.
-- Unaudited Gross profit during FY 2015 increased by 3.9% to
RMB 280.2 million (cGBP30.8 million) (2014: RMB 269.7 million),
although the gross margin reduced from an average of 32% during FY
2014 to 29% during FY 2015. This reflects a decline in gross margin
during the year from an average 33% during H1 to an average 25%
during H2. Average gross margins have now stabilised at around
25%.
-- Unaudited profit after tax for the FY 2015 is expected to be
similar to that achieved during 2014, which is slightly down on
previous expectations
-- Unaudited cash balance at 31 December 2015 of RMB 380.2
million (cGBP41.7m) (2014: RMB 193.9 million), the growth in cash
reflects the net IPO proceeds of GBP8.3 million received in
February 2015 as well as cash generated from operations during the
year
-- The Board continues to progress the appointment of a
replacement CFO and will provide updates as appropriate
-- As previously indicated, the Board intends to recommend a
full year dividend for the full year ended 31 December 2015
Revenue breakdown by product category
Full Year Full Year Full Year Full Year Growth (%)
31 December 31 December 31 December 31 December
2015 2015 2014 2014
Unaudited Unaudited Audited Audited
(RMB 000s) (GBP 000s) (RMB 000s) (GBP 000s)
Fish 704,942 77,381 586,180 64,345 20.3
Sea Cucumbers 137,531 15,097 132,315 14,524 3.9
Cephalopods 42,375 4,651 44,003 4,830 (3.7)
Shrimp & Shellfish 38,066 4,178 33,935 3,725 12.2
Others 55,833 6,129 59,647 6,547 (6.4)
-------- ------------- ------------- ------------- -----------
Total 978,747 107,437 856,080 93,971 14.3
*The illustrative exchange rate as at 29 February 2016 is 1GBP:
9.11RMB
Gross Profit margin by Product Category
Full Year Full Year
31 December 31 December
2015 2014
Unaudited Unaudited
Gross Profit
margin
Fish 27% 29%
Sea Cucumbers 36% 44%
Cephalopods 29% 30%
Shrimp & Shellfish 30% 31%
Others 27% 26%
------------- -------------
Total 29% 32%
Fish
The revenue generated from fish products increased by over 20%
on the previous year and has continued to represent SFG's largest
product category, representing 72% of sales for the full year ended
31 December 2015 (2014: 68%).
The revenue generated from fish increased by approximately 20%,
this increase was principally generated from higher sales of
mackerel, cod and saury which tend to be lower priced and margin
products.
The weight of processed fish during FY 2015 increased by 24%
compared with that processed during FY 2014.
Sea Cucumbers
The sales value of Sea Cucumber products have increased
slightly, but average prices have fallen leading to a reduction in
gross profit margin to 36% from 44%.
Cephalopods
The sales of Cephalopods (principally squid and cuttlefish) for
the full year ended 31 December 2015 were down approximately 4%
compared to the prior year. Gross profit margins were down slightly
from 30% to 29%.
Shrimp and Shellfish
Sales have increased by 12.2% for the full year ended 31
December 2015, whilst the Gross profit margins for the full year
ended 31 December 2015 were down to approximately 30%, reflecting
the general price pressure in the market.
Other revenue
This includes gift boxes. Sales have decreased by 6.4% for the
full year ended 31 December 2015, whilst the Gross profit margins
for the full year ended 31 December 2015 were up slightly to
approximately 27%.
Export markets
The revenue from exports for the full year ended 31 December
2015 were RMB 69 million (cGBP7.6m) which represented 7% of
revenue, down from the previous year where exports represented 10%
of revenue. The Group began to supply products to Yihe, distributor
to Walmart and other US supermarkets, under a sales contract
announced in September 2015, and the Company expects to secure more
similar export contracts from US and Europe markets as their
economies continue to recover.
Appointment of new Finance Director
Following the departure of Sean Lim the Finance Director on 3
February 2016, the Company has been reviewing potential candidates
for the position. The Company will make a further announcement
regarding this in due course.
Cash and working capital
The Group maintains a strong cash position, the majority of
which is held in the PRC although funds are also held in the UK and
Hong Kong in order to more easily meet international payments. The
Group continues to actively manage its trade debtor balances. The
Group has not been required to provide for any bad debts at the
present time.
New Facility
As previously noted, the Group is currently awaiting final
regulatory approval for its expansion plans from the relevant
regional authorities. Due to the current demand environment the
Group has not been actively chasing this consent although it is
expected that as demand increases the Group will still seek to
acquire additional processing and cold storage capacity.
Market environment and Outlook
While the Group expects to report strong results for 2015, the
trading environment continues to be challenging in the domestic PRC
market, particularly in the higher income consumer sector.
Consequently, the Group is seeking to grow new sales channels by
specifically targeting sales to supermarkets in the PRC. This will
be achieved through expanding the distribution partners as well as
focusing on export markets due to the fall in value of the
Renminbi, although the latter will tend to attract lower gross
profit margins.
The Directors expect the current market conditions to continue
during H1 2016, resulting in a more measured growth trajectory
during 2016. The Directors will focus their growth strategy to
capitalise on renewed economic growth in China from 2017 and
onwards as well as seeking to grow exports into the US and European
markets.
The Group intends to pay a full year dividend for the year ended
31 December 2015 in addition to the 0.7p interim dividend already
paid. Further details relating to the dividend payment will be made
following the publication of the Company's annual report for
2015.
Li Xianzhi, Chief Executive Officer of Aquatic Foods Group Plc,
said: "China's economy grew 6.9% last year, its slowest rate in a
quarter of a century, as the leadership steers the economy on a
more qualitative growth path by, inter alia, overseeing the closure
of outdated factories in the steel, coal and cement sectors and
supporting new areas of growth such as green energy or the service
sector. During the last year whilst our gross margin declined,
primarily as a result of this slower growth, it has now stabilised
at an aggregate of 25%. We expect the current market conditions to
continue during H1 2016 and AFG will seek to overcome this by
concentrating on operational efficiency, developing new sales
channels including supermarkets, increasing sales to our existing
distribution network, expanding our distribution network and
increasing our focus on export markets."
- Ends -
For further information:
Aquatic Foods Group Plc Tel: +44 (0) 20 7398 7714
Dr Wang Shaodong, Non-Executive www.aquatic-foods.com
Chairman
SP Angel Corporate Finance LLP
Nominated Adviser and Broker Tel: +44 (0) 20 3470 0470
Stuart Gledhill / David Facey www.spangel.co.uk
Media enquiries:
Abchurch Communications Limited
Jamie Hooper / James Burman Tel: +44 (0) 20 7398 7719
AquaticFoods@abchurch-group.com www.abchurch-group.com
Notes to Editors:
Aquatic Foods Group is a leading marine foods and seafood
processor and supplier based in China. The Group initially built
its business through focusing on the export market (principally
Japan under the "Kanwa Foods" brand), and subsequently established
the "Zhenhaitang" brand in 2007 in mainland China to take advantage
of the growing market driven by growing disposable income within
the Chinese middle-classes and a more health conscious consumer
base.
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