TIDMAFG
RNS Number : 5505C
Aquatic Foods Group PLC
29 June 2016
Press Release 29 June 2016
Aquatic Foods Group Plc
("Aquatic Foods" or "AFG" or the "Group")
Final Results
Aquatic Foods Group Plc (AIM: AFG), a leading Chinese marine
foods and seafood processor and producer, supplying to export and
local markets, today announces its Final Results for the year ended
31 December 2015.
Financial Highlights
-- Revenue increased by 14% to RMB 979 million (cGBP102.4m) (2014: RMB 856 million)
-- Gross profit margins across all product categories averaged 28% (2014: 32%)
-- Profit before tax kept at RMB 182 million (cGBP19.0m) (2014:
RMB 182 million, this includes one-off IPO expenses of RMB 8
million)
-- Net profit after tax increased by 2% to RMB 140 million
(cGBP14.6m) (2014: RMB 137 million)
-- EPS at 12.9 pence (2014 notional EPS, based on the total
number of shares at IPO of 113,226,081, was 12.6 pence)
-- Cash as at 31 December 2015 of RMB 380 million (cGBP39.8m)
(2014: RMB 194 million, excludes the gross proceeds from the
Placing and Admission to AIM, which occurred post period end on 3
February 2015 and totalled GBP9.3 million, equivalent to
approximately RMB 89.3 million)
-- 51 regional distributors as at 31 December 2015 (2014: 50)
-- Trading in 2016 has been challenging with declines in gross
margins across all product categories
-- Final dividend of 0.7p proposed, giving a total dividend for the year of 1.4p
*The illustrative exchange rate as at 31 December 2015 was 1
GBP: 9.6 RMB (2014: 1 GBP: 9.6 RMB)
Li Xianzhi, Chief Executive of Aquatic Foods, commented: "The
Board is satisfied with this set of results, which show an uplift
in revenue and stable gross and net profit during a period of
difficult market conditions. Against the challenging business
environment buffeted by international financial volatility and
slowing growth in emerging markets including China, Aquatic Foods
has performed credibly. The Company has demonstrated its ability in
keeping overheads under control and restructuring its operations
and resources that will stand Aquatic Foods in good stead for the
long term.
"The Directors expect the current challenging market conditions
to continue in the near term, and AFG will seek to overcome this by
focusing 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.
"Aquatic Foods' successful listing on AIM has improved our
corporate profile, which provides enhanced confidence to both
suppliers and end customers within the Chinese market, particularly
as these customers are becoming increasingly concerned about food
hygiene, safety and quality. This further strengthens our ability
to capitalise on the increasing demand for high quality marine
foods and seafood products in China."
For further information:
Aquatic Foods Group Plc Tel: +44 (0) 20 7398
7714
Dr Wang Shaodong, Non-Executive Chairman www.aquatic-foods.com
SP Angel Corporate Finance LLP
Nominated Adviser and Broker
Stuart Gledhill / David Facey Tel: +44 (0) 20 3470
0470
www.spangel.co.uk
Media enquiries:
Abchurch Communications Limited
Julian Bosdet / Canace Wong Tel: +44 (0) 20 7398
7714
AquaticFoods@abchurch-group.com www.abchurch-group.com
Chairman's Statement
2015 was a challenging year for businesses including
international financial volatility and slowing growth in emerging
markets including China. Against this volatile market backdrop,
Aquatic Foods performed credibly, demonstrating the Company's
ability to keep close control over its overheads, operations and
resources, which should stand Aquatic Foods in good stead for the
future. We are pleased to announce today our results, which show an
uplift in revenue and stable gross and net profit.
The Board views the future with optimism, however we remain
highly mindful of the potential challenges that lie ahead in the
short term. The Group is aware of the current uncertain condition
of the global economy which includes the slowdown of economic
growth in China, currency fluctuations, as well as concerns
surrounding operating in a highly competitive market place. In
order to maintain AFG's solid revenues and profitability the Group
will look to capitalise on the continued increasing levels of
disposable income amongst both the urban and rural population in
China. The burgeoning Chinese middle class seek natural seafood
products in addition to being increasingly aware of the importance
of having high food safety standards. These factors present
encouraging future growth opportunities for the Company.
The Group is committed to adopting the highest standards of
quality, safety and sustainability and we are focused on producing
high-end, pre-processed seafood products. The Group has an
excellent record of food safety and has established stringent
globally recognised quality control procedures. The Group has
obtained and will continue to improve adherence to the following
key standards: ISO 9001 Quality Management System Certification,
HACCP Food Safety System Certification, BRC Certification and
Marine Stewardship Council Certification.
Aquatic Foods' strong cash position is expected to be deployed
to continue the Group's strategy stated at the time of IPO which
aims to increase its presence within China. This will be seen
through expanding production capacity both by increasing process
automation and expanding to an additional site or acquiring an
existing factory from a third party. Moreover AFG will add new
regional distributors, provide assistance to distributors to
establish more "Zhenhaitang" branded retail stores, focus on
advertising, promotion and will carry out further cross-promotion
in the Group's different product types and continue product
development to expand and enhance our product offerings. The total
output of Aquatic Foods Group in 2015 equates to approximately 21.8
million KG of fish products in total, a 21.8% increase compared to
2014 output of 17.9 million KG and the Group is currently awaiting
final regulatory approval for its expansion plans from the relevant
regional authority which, once implemented, will further increase
the Group's production capabilities.
We believe that although the road ahead holds challenges, it
also presents considerable future growth opportunities. With a
sound strategy, we are confident that we will be able to navigate
the current volatile climate, while capturing opportunities for
future growth.
On behalf of the Board, we would like to thank our staff for
their dedication and commitment. We would also like to thank our
shareholders, customers and other stakeholders for their continued
support and trust in Aquatic Foods Group.
The Board has adopted a dividend policy that fundamentally takes
into account the Group's profitability, growth and availability of
cash and distributable reserves after the requirement to finance
the development and expansion of the business. We are pleased to
announce that despite the challenging market conditions, the Board
is proposing a final dividend of 0.7 pence per share for 2015
giving a total dividend for the year of 1.4 pence per share as
anticipated in the Group's AIM Admission Document.
The full year dividend to be approved at the Company's AGM will
be payable around 12 August 2016 to shareholders on the register at
the close of business on 29 July 2016. The shares will go
ex-dividend on 28 July 2016. This is in line with the yield
indicated at IPO of a 2 per cent. annual yield based on the IPO
price.
Dr. Wang Shaodong
Non-Executive Chairman
28 June 2016
Chief Executive's Review
Results
Revenue increased by 14% to RMB 979 million (c.GBP102.4
million[1]) (2014: RMB 856 million) but the Group's gross profit
margins declined across all product categories to approximately 28%
in the year (2014 32%). Pre-tax profits and EBITDA remained at RMB
182 million (c.GBP19.6 million) and RMB 187 million (c.19.5
million) respectively before taking into account that RMB 8 million
IPO expenses were incurred in 2014. Net profit after tax was
marginally higher at RMB 140 million (2014: RMB 137 million) due to
lower income tax expense.
Aquatic Foods remains highly cash generative and the Group
maintains its strong balance sheet with cash as at 31 December 2015
amounting to RMB 380 million (c.GBP39.8 million) (2013: RMB 194
million excludes the gross proceeds from the Placing and Admission
to AIM, which occurred post period end on 3 February 2015 and
totaled GBP9.3 million [c.RMB 89 million] before expenses).
As at 31 December 2015, Aquatic Foods had 51 regional
distributors (2014: 50), covering 16 provinces, municipalities and
autonomous regions in China, and hopes to capitalise on the
increasing levels of disposable income currently seen across China
which is occurring for both urban and rural residents.
Currently, approximately 60% of Aquatic Foods' fish is sourced
from various overseas countries, including Norway, UK, and Ireland.
The Group will continue to look for strategic alliances and
partnerships to diversify the Company's supply chain.
Aquatic Foods has received increased sales enquiries from
overseas customers, driven by the Group's enhanced commercial
profile achieved through its admission to trading on AIM. The Group
is thus currently exploring the possibility to grow its export
sales, leveraging the Group's already established position in the
international market. The Group is also reviewing selected
opportunities to build its international footprint.
Product categories
Revenue breakdown by product category
2015 2015 2014 2014 GROWTH %
Currency: RMB'000 GBP'000 RMB'000 GBP'000
Fish 704,942 73,737 586,180 61,314 20.3
Sea Cucumbers 137,531 14,386 132,315 13,840 3.9
Cephalopods 41,753 4,367 44,003 4,603 (5.1)
Shrimp & Shellfish 38,688 4,047 33,935 3,550 14.0
Others 55,833 5,840 59,647 6,239 (6.4)
-------- -------- -------- -------- ---------
Total 978,747 102,377 858,080 89,755 14.1
Gross Margin by Product Category
Gross margin 2015 2014
Fish 27% 29%
Sea cucumbers 36% 44%
Cephalopods 29% 30%
Shrimp & Shellfish 30% 31%
Others 27% 26%
----- -----
Total 28% 32%
Fish
The revenue generated from fish products increased by over 20%
on the previous year and has continued to represent AFG'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 sale value of Sea Cucumber products have increased slightly,
but average prices in FY 2015 have fallen leading to a reduction in
gross profit margin to 36% from 44%. Sales of Sea Cucumbers have
been impacted on the Chinese Governments continued focus on
tackling high value gift giving practices in business and this has
led to a fall in average price per kilo and the margins achieved by
the Group.
Cephalopods
The sales of Cephalopods (principally squid and cuttlefish) for
the full year ended 31 December 2015 were down approximately 5%
compared to the prior year. Gross profit margins were down slightly
from 30% to 29%.
Shrimp and Shellfish
Sales have increased by 14% 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 current 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%.
Q1 trading to 31 March 2016
As previously announced on 23 May 2016, trading in the first
quarter of 2016 has been subdued, reflecting the continuation of
challenging market conditions in the second half of 2015. Unaudited
aggregate revenues for the Group for the three months to 31 March
2016 were approximately RMB 215 million (GBP.22.5m), which is
approximately 7% lower when compared to Q1 2015.
Unaudited revenue for Q1 2016 for each of the Group's principal
product categories were as follows:
Currency: RMB million GBP million
Fish 136 14.2
Sea Cucumbers 32 3.3
Cephalopods 16 1.7
Others 31 3.2
------------ ------------
Total 213 22.4
Gross Profit margin by Product Category
Three months Three months Three months
31 March 31 March 31 December
2016 Unaudited 2015 2015 Unaudited
Unaudited
Fish 23% 29% 23%
Sea Cucumbers 30% 44% 30%
Cephalopods 25% 28% 26%
Shrimp & Shellfish 26% 32% 26%
Others 25% 31% 24%
Total 24% 31% 25%
Strategy
The Board continues to evaluate options for expanding production
capacity both through increasing process automation and expanding
to an additional site or acquiring an existing factory from a third
party. The Group is currently awaiting final regulatory approval
for its expansion plans from the relevant regional authorities.
Owing to the current market environment the Group has not been
actively chasing this consent although it is expected that the
Group will still seek to acquire additional processing and cold
storage capacity.
Successful brand building remains key to Aquatic Foods'
continued business success. The Group plans to continue its focus
on advertising and promotion and will carry out further
cross-promotion for our different product types over the next year.
The Group will also continue to support its regional distributors
to establish further "Zhenhaitang" branded retail stores where
appropriate to do so.
As previously announced, the Group is seeking to grow new sales
channels by specifically targeting sales to supermarkets in China.
This will be achieved through expanding our distribution partners
as well as increasing our focus on export markets due to the fall
in value of the Renminbi, although the latter can potentially
attract lower gross profit margins. Further expansion of the
existing distribution network, especially to smaller cities in
China, is also critical to expand the Group's market share.
As announced in the Q1 trading update, due to increasing
popularity of British and Scottish fish products, the Company's
sales of mackerel in the period in China increased by 10% on the
previous year. To help satisfy this demand, the Company signed a US
$850,000 purchase contract with Peterhead based supplier Northbay
Pelagic in February 2016 for the supply of 615 metric tonnes of
Atlantic Mackerel per annum. Since then, two further purchase
contracts for mackerels, including a contract with Scottish based
supplier Lunar Freezing & Cold Storage and a contract with
Seychelles based supplier Flying Fish International has been
signed. The former will supply 575 metric tonnes of Mackerel and
the latter 162 metric tonnes of Mackerel to Aquatic Foods. As a
result of these recent contracts, Aquatic Foods has become one of
the leading importers of fish from the UK amongst other Chinese
companies and this is expected to increase its credibility and
profile in the industry in the UK.
Continuous product development and enhancement of product
offerings is an important factor to hold and expand Aquatic Foods'
market share. The Group plans to invest and strengthen
market-oriented product development activities to continue to
provide innovative and high quality products in order to stand out
from competition and to meet changing consumer preferences.
While market growth in China has slowed in the past year, the
Group will take the opportunity to review internal processes and
strategies in preparation for a time when the market returns to
full strength. This includes monitoring the success of increased
advertising as well as continuing to finalise expansion plans,
including additional processing and cold storage capacity given the
increase in processing volumes. With this in place, the Board
believes that the Company will be in the strongest position
possible to take advantage of a revived trading environment.
Cash and working capital
The cash position of The Company remains solid the majority of
which is held in the PRC with the remaining funds located in the UK
and Hong Kong in order to more easily meet international
payments.
The Group continues to actively manage its trade debtor balances
and has not been required to provide for any bad debts. The full
RMB 306.7 million (c.GBP32.1m) of trade receivables outstanding as
at 31 December 2015 has been received since the year end.
Appointment of new Finance Director
The Company continues its search for a replacement Finance
Director, following the departure of Sean Lim on 3 February 2016.
AFG has been making good progress in finding a suitable candidate
to replace Mr. Lim and will make a further announcement regarding
this in due course.
Outlook
As noted in the Company's Q1 trading update, the Group's markets
remain challenging, and the Company has faced continued challenging
trading into Q2, however whilst our gross margin declined during
2015 we are now seeing a stabilization in margins though with gross
margins in April stable at approximately 24%. The Board expects
these challenging conditions to continue in the near term.
To mitigate this, the Company has increased its marketing and
advertising efforts in order to preserve its market position in
China. The Group intends for this to combine with its strategy of
specifically targeting increased sales to supermarkets in the
PRC.
China still experiences high levels of economic growth, and
achieved growth of 6.9% last year, although its slowest rate in a
quarter of a century. The Government is looking to steer the
economy on a more qualitative growth path by, inter alia,
overseeing the closure of outdated industries and sectors and by
supporting new areas of growth such as the service sector. As an
established and modern marine foods supplier and retailer, Aquatic
Foods Group is in a good position to continue to benefit from
Chinese economic growth and Government support in the long
term.
Li Xianzhi
Chief Executive Officer
28 June 2016
CORPORATE GOVERNANCE
The Company is committed to observing good standards of
corporate governance. In this report, we describe the Company's
corporate governance processes and activities with reference to the
principles of the Quoted Companies Alliance's Corporate Governance
Guidelines. Although there is no requirement to adopt these
principles as an AIM company, the directors intend to continue to
comply with its main provisions as far as is practicable and
appropriate having regard to the size and nature of the
Company.
At the admission date, the directors have established an audit
committee (the "Audit Committee") and a remuneration committee (the
"Remuneration Committee") with formally delegated duties and
responsibilities.
Audit Committee
The Audit Committee, which comprises Jonathan Quirk, Richard
Sweet and Mircle Yap, is responsible for:
-- assessing the integrity of the Group's financial reporting
and satisfying itself that any significant financial judgements
made by management are sound
-- evaluating the effectiveness of the Group's internal
controls, including internal financial controls and
-- scrutinising the activities and performance of the external
auditors, Crowe Clark Whitehill LLP, including monitoring their
independence and objectivity.
The Audit Committee receives and reviews reports from the
management and Crowe Clark Whitehill LLP relating to the annual and
interim financial statements and the accounting and internal
control systems of the Group. Crowe Clark Whitehill is invited to a
meeting of the Audit Committee to discuss their reports.
In addition, the Audit Committee considers the financial
performance, position and prospects of the Group and ensures that
they are properly monitored and reported on.
The Audit Committee met one time in 2015. The principal
activities and significant issues considered include:
Key area Action taken
----------------------- --------------------------------------------------
Relationships with The Audit Committee requested that the
suppliers auditor visit a sample of the group's suppliers
of their choosing as part of their audit
procedures. This additional step was taken
to understand and gain assurance over the
integrity of the supply chain.
----------------------- --------------------------------------------------
Operation of financial The Audit Committee considered the Group's
controls application of its financial policies and
procedures which were established following
the Group's AIM listing in 2015. The Audit
Committee requested that management report
to them on compliance with these policies
and procedures as well as asking the auditor
to additionally review compliance, particularly
in respect of the approval of significant
payments.
----------------------- --------------------------------------------------
Cash balances The Audit Committee reviews the appropriateness
of the Group's banking arrangements. It
noted that the majority of the Group's
funds were held with HuaXia Bank in China.
Additionally, as part of this review, the
Audit Committee requested that the auditor
perform additional procedures around the
verification of cash balances, including
physically visiting the various bank branches
to obtain direct confirmations.
----------------------- --------------------------------------------------
Revenue, trade The Audit Committee considered the group's
receivables and application of the accounting policies
inventory specifically in relation to revenue recognition,
trade receivables and inventory. The Audit
Committee requested that the auditor provide
additional focus on these areas in reporting
their findings to the Audit Committee.
----------------------- --------------------------------------------------
External audit In considering the quality of the external
audit, the Audit Committee assessed the
reports from Crowe Clark Whitehill LLP
during the 2015 audit. The actions included
approving the audit plan and discussing
and challenging the significant findings
of the audit.
----------------------- --------------------------------------------------
Remuneration Committee
The Remuneration Committee, which comprises Richard Sweet, Dr.
Wang Shaodong, Jonathan Quirk and Mircle Yap, is responsible for
making recommendations to the Board on remuneration policy for
directors, including the setting of directors' salaries and
incentive payments. The Committee reviews the performance of the
executive Directors and senior management and sets and reviews
their remuneration and the terms of the service contracts,
determines the payment of bonuses to the Executive Directors and
considers the Group's bonus and other incentive schemes.
Nomination Committee
The Remuneration Committee, which comprises Dr. Wang Shaodong,
Jonathan Quirk, Richard Sweet, and Mircle Yap, is responsible for
the selection and appointment of Directors and the regular review
of the structure, size and composition of the Board in relations to
the requisite skills, knowledge and experience of the Board.
AIM Rules Compliance Committee
The Compliance Committee which comprises Jonathan Quirk, Dr.
Wang Shaodong, Li Xianzhi and Mircle Yap, has the primary
responsibility to ensure compliance with the AIM Rules in
particular concerning disclosure of information required under the
AIM Rules. The Committee will function closely with the Board to
ensure that the Company's Nominated Adviser (NOMAD) is provided
with the information required by the NOMAD to carry out their
responsibilities under the AIM Rules.
The meetings of Compliance Committee are carried out in
conjunction with the proceedings in the Board meetings wherein
compliance with the AIM Rules and the release of information and
communications with the Company's NOMAD and the market are
highlighted and informed to the Board.
Internal Controls
The Board is ultimately responsible for the Group's system of
internal controls, including financial, operational, compliance
control and risk management, and for reviewing and monitoring its
effectiveness. The system of internal controls is designed to
manage and minimise risk, rather than eliminate it. In pursuing
these objectives, internal controls can only provide a reasonable
and not absolute assurance against material misstatements or
loss.
The key elements of the control systems in operation are:
-- the Board meets regularly with a formal schedule of matters reserved to it for decision
-- the Board has put in place an organisational structure with
clear and defined lines of responsibility and with appropriate
dilatation of authority
-- procedures have been established for the planning, approval
and monitoring of capital expenditure and information systems for
monitoring the Group's financial performance against approved
budgets and forecasts
-- significant risks and associated controls and monitoring
procedures are reported regularly to the Board to enable the
Directors to review the effectiveness of the systems of internal
control
Investors Relations
The Company meets with its institutional shareholders and
analysts as appropriate and encourages communication with private
shareholders via the AGM. In addition, the Company uses the annual
report and accounts, interim statement and website
(www.aquaticfoods-ir.com) to provide further information to
shareholders.
Auditor
In accordance with Section 113 of the Companies (Jersey) Law
1991, a resolution for the reappointment of Crowe Clark Whitehill
LLP will be proposed at the next Annual General Meeting.
Signed by order of the directors
Li Xianzhi
Director
28 June 2016
Consolidated Statements of Comprehensive Income
For the year ended 31 December 2015
2015 2014
Note RMB'000 RMB'000
Revenue 5 978,747 856,080
Cost of sales (700,646) (586,317)
---------- ----------
Gross profit 278,101 269,763
Other income 11,955 9,000
Selling and distribution expenses (85,592) (69,484)
Administrative expenses (21,247) (17,409)
IPO expenses - (7,838)
Other operating expenses (2) (49)
---------- ----------
Operating profit 183,215 183,983
Finance income 1,037 739
Finance costs (2,458) (2,777)
---------- ----------
Profit on ordinary activities before
taxation 181,794 181,945
Income tax expense 6 (41,390) (44,939)
---------- ----------
Profit after taxation 140,404 137,006
Profit after taxation brought forward 140,404 137,006
Other comprehensive income 103 546
---------- ----------
Total comprehensive income attributable to
owners of the parent 140,507 137,552
========== ==========
Earnings per share (EPS):
Basic and diluted 7 1.27 1.37
========== ==========
Consolidated Statements of Financial Position
As at 31 December 2015
Year ended Year ended
31 December 31 December
2015 2014
Note RMB'000 RMB'000
Non-current assets
Property, plant and equipment 9 29,321 22,314
Land use rights 10 1,876 1,920
31,197 24,234
------------- -------------
Current assets
Inventories 11 55,627 47,510
Trade receivables 306,694 277,066
Other receivables, deposit and
prepayment 12 4,620 2,871
Cash and bank balances 13 380,419 193,903
------------- -------------
747,360 521,350
------------- -------------
Total Assets 778,557 545,584
============= =============
Current liabilities
Trade payables 131,885 102,934
Other payables and accruals 14 35,847 44,393
Short term borrowings 17 42,040 41,470
Income tax payable 9,274 15,294
------------- -------------
219,046 204,091
------------- -------------
Equity
Stated capital 15 85,238 -
Reserves 16 474,273 341,493
------------- -------------
559,511 341,493
------------- -------------
Total Equity and Liabilities 778,557 545,584
============= =============
Consolidated Statements of Changes in Equity
For the year ended 31 December 2015
Distributable
Stated Capital Statutory Merger Translation Retained Total
Capital reserve reserve reserve reserve profits equity
RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000
Balance at 1
January
2014 - 31 11,193 22,394 - 185,323 218,941
Profit for the
year - - - - - 137,006 137,006
Other
comprehensive
income:
Foreign currency
translation
differences for
foreign
operations - - - - 546 - 546
-------- ----------------- ------------------ -------- ------------- ------------- ---------
Total
comprehensive
income
for the year - - - - 546 137,006 137,552
-------- ----------------- ------------------ -------- ------------- ------------- ---------
Adjustment
arising from
restructuring
exercise - - - (15,000) - - (15,000)
Balance at 31
December
2014 - 31 11,193 7,394 546 322,329 341,493
======== ================= ================== ======== ============= ============= =========
Profit for the
year - - - - - 140,404 140,404
Other
comprehensive
income:
Foreign
currency
translation
differences for
foreign
operations - - - - 103 - 103
-------- ----------------- ------------------ -------- ------------- ------------- ---------
Total
comprehensive
income
for the year - - - - 103 140,404 140,507
-------- ----------------- ------------------ -------- ------------- ------------- ---------
Issuance of
share capital 87,167 - - - - - 87,167
Share issuance
costs (1,929) - - - - - (1,929)
Dividend paid - - - - - (7,727) (7,727)
Transferred to
statutory
reserve - - 3,524 - - (3,524) -
Balance at 31
December
2015 85,238 31 14,717 7,394 649 451,482 559,511
======== ================= ================== ======== ============= ============= =========
Consolidated Statements of Cash Flows
For the year ended 31 December 2015
Note
2015 2014
RMB'000 RMB'000
Cash flow from operating activities
Profit before taxation 181,794 181,945
Adjustment for:
Amortisation of land use rights 44 44
Depreciation of property, plant and
equipment 2,185 2,214
Interest expense 2,458 2,777
Loss on disposal of plant and equipment 14 11
Interest income (1,037) (739)
Unrealised gain on foreign exchange (1,678) (753)
--------- ----------
Operating cash flows before movements
in working capital 183,780 185,499
Increase in inventories (8,117) (7,375)
Increase in trade and other receivables (31,708) (137,235)
Increase in trade and other payables 20,266 58,445
(Increase)/decrease in bank balance
restricted in use 1,895 (1,361)
--------- ----------
Cash generated from operating activities 166,116 97,973
Interest paid (2,458) (2,777)
Income tax paid (47,410) (41,524)
Net cash generated from operating activities 116,428 53,672
--------- ----------
Cash flows (for)/from investing activities
Acquisition of property, plant and equipment (9,205) (3,389)
Proceeds from disposal of property,
plant and equipment - 10
Interest received 1,037 739
Share capital issuance 86,279 -
Cash outflow on group construction - (15,000)
--------- ----------
Net cash used in/ generated from investing
activities 78,111 (17,640)
--------- ----------
Cash flows from/(for) financing activities
Dividends declared and paid 8 (7,602) -
Net drawdown of interest-bearing bank
borrowings 570 3,500
Net cash generated from/ (use in) financing
activities (7,032) 3,500
--------- ----------
Net increase in cash & cash equivalents 187,327 39,532
Effects of foreign exchange translation 1,084 (47)
Cash and equivalent at beginning of
year 187,576 148,091
Cash and equivalent at end
of year 13 375,987 187,576
========= ==========
NOTES TO THE FINANCIAL INFORMATION
1. GENERAL INFORMATION
The Company was incorporated in Jersey as a public limited
company with company number 116402. The registered office of the
Company is Queensway House, Hilgrove Street, St Helier, Jersey, JE1
1ES.
Hong Kong Hanhe was incorporated in Hong Kong on 25 September
2012 and acquired a wholly owned subsidiary, Yantai Kanwa Food Co.,
Ltd ("Yantai Kanwa") on 25 May 2013. Yantai Kanwa is a company
established as a wholly foreign owned enterprise ("WFOE") in the
PRC, and was incorporated on 15 November 1999.
Yantai Zhenhaitang was incorporated in the PRC on 1 November
2007. On 16 September 2014, Yantai Kanwa acquired the entire issued
share capital of Yantai Zhenhaitang Foodstuff Co., Ltd ("Yantai
Zhenhaitang").
The principal activities of the entities of the Group are as
follows:-
Country
of
Name of Company Incorporation Principal Activities
i) AFG Jersey Investment holding
ii) Hong Kong Hanhe Hong Kong Investment holding.
iii) Yantai Kanwa PRC Processing and trading of aquatic
products
agricultural and meat products.
iv) Yantai Zhenhaitang PRC Trading and distributing of
processed frozen
aquatic products and pre-packaged
food.
2. Basis Of Preparation
The consolidated financial information of the Group has been
prepared using accounting policies which are consistent with those
adopted in Part 3 of the AIM Admission Document of the Company
dated 28 January 2015, as well as applying the following accounting
policy in respect of the basis of consolidation as extracted from
the financial statements.
The consolidated financial information has been prepared on a
historical cost basis. The consolidated financial information is
presented in RMB, except when otherwise indicated.
The financial information does not constitute the Company's
statutory financial statements for the year ended 31 December 2015
but is derived from those financial statements. The statutory
financial statements will be delivered following the Company's
Annual General Meeting. The Auditors have reported on those
financial statements; their reports were unqualified.
The directors do not recommend the payment of a dividend.
The Directors considered IFRS 3 "Business Combinations" (Revised
2008) as the appropriate accounting treatment. However, they
concluded that the Group fell outside of the scope of IFRS 3
(revised 2008) since the Group represents a combination of entities
under common control.
In accordance with IAS 8 - Accounting Policies, Changes in
Accounting Estimates and Errors, in developing an appropriate
accounting policy, the Directors have considered the pronouncements
of other standard setting bodies and specifically looked to
accounting principles generally accepted in the United Kingdom ("UK
GAAP") for guidance (FRS 102) which does not conflict with IFRS and
reflects the economic substance of the transaction.
2. Basis Of Preparation (CONT'D)
Under UK GAAP, the assets and liabilities of both entities are
recorded at book value, not fair value. Intangible assets and
contingent liabilities are recognised only to the extent that they
were recognised by the legal acquirer in accordance within
applicable IFRS, no goodwill is recognised, any expenses of the
combination are written off immediately to the income statement and
comparative amounts, if applicable, are restated as if the
combination had taken place at the beginning of the earliest
accounting period presented.
Therefore, although the Group reconstruction did not become
unconditional until 23 October 2014, these consolidated financial
statements are presented as if the Group structure has always been
in place, including the activity from incorporation of the Group's
principal subsidiary. All entities had the same management as well
as majority shareholders.
On this basis, the Directors have decided that it is appropriate
to reflect the combination using merger accounting principles as a
group reconstruction under FRS 102 in order to give a true and fair
view. No fair value adjustments have been made as a result of the
combination.
Functional and presentation currency
The financial statements are measured and presented in the
currency of the primary economic environment in which the key
trading entities operates (its functional currency). The
consolidated financial statements of the Group are presented in
Renminbi ("RMB"), which is the presentation currency for the
consolidated financial statements. The functional currency of each
of the individual entity is the local currency of each individual
entity. For reference the year end exchange rate from Pounds
Sterling to RMB was 9.5467 (2013: Nil).
All financial information presented in RMB has been recorded to
the nearest thousand ("RMB'000"). They have been prepared under the
historical cost convention, except for financial instruments that
have been measured at fair value through profit and loss.
Going concern
After the assessment of the available financial information and
reviews, and also taking into account the nature of the business
that has continuing recurring revenue with high cash conversion
that generates significant cash resources as reflected in the
current financial position of the Group with cash position of
RMB194 million as at 31 December 2014, the Directors believe that
the Group has adequate resources to continue to operate for the
foreseeable future. Therefore it is appropriate to continue to
adopt the going concern basis of accounting in the preparation of
the consolidated financial statements.
3. Basis Of CONSOLIDATION
The consolidated financial statements include the financial
statements of all subsidiaries. The financial year ends of all
entities in the Group are coterminous.
The financial statements of subsidiaries are included in the
consolidated financial statements from the date on which control
over the operating and financial decisions is obtained and cease to
be consolidated from the date on which control is transferred out
of the Group. Control exists when the Company has the power,
directly or indirectly, to govern the financial and operating
policies of an entity so as to obtain economic benefits from its
activities.
All intercompany balances and transactions, including recognised
gains arising from inter--group transactions, have been eliminated
in full. Unrealised losses are eliminated in the same manner as
recognised gains except to the extent that they provide evidence of
impairment.
The financial information of the subsidiary is prepared for the
same reporting period as that of Group, using consistent accounting
policies.
4. Significant Accounting Policies
Critical accounting estimates and assumptions
The preparation of financial information in conformity with IFRS
requires the use of certain critical accounting estimates. It also
requires the Directors of the Company to exercise their judgement
in the process of applying the accounting policies which are
detailed below. These judgements are continually evaluated by the
Directors and management and are based on historical experience and
other factors, including expectations of future events that are
believed to be reasonable under the circumstances.
The key estimates and underlying assumptions concerning the
future and other key sources of estimation uncertainty at the
statement of financial position date, that have a significant risk
of causing a material adjustment to the carrying amounts of assets
and liabilities within the next financial period are reviewed on an
ongoing basis. Revisions to accounting estimates are recognised in
the period in which the estimate is revised if the revision affects
only that period or in the period of the revision and future
periods if the revision affects both current and future periods,
are discussed below:
(a) Allowance for trade and other receivables
Management reviews its loans and receivables for objective
evidence of impairment at least quarterly. Significant financial
difficulties of the debtor, the probability that the debtor will
enter bankruptcy, and default or significant delay in payments are
considered objective evidence that a receivable is impaired. In
determining this, management makes judgment as to whether there is
observable data indicating that there has been a significant change
in the payment ability of the debtor, or whether there have been
significant changes with adverse effect in the technological,
market, economic or legal environment in which the debtor operates
in.
The allowance policy for doubtful debts of the Group is based on
the ageing analysis and management's ongoing evaluation of the
recoverability of the outstanding receivables. Once a debtor has
been identified as having evidence of impairment, it is regularly
reviewed and an appropriate impairment provision applied.
(b) Income taxes
There are certain transactions and computations for which the
ultimate tax determination may be different from the initial
estimate. The Group recognises tax liabilities based on its
understanding of the prevailing tax laws and estimates of whether
such taxes will be due in the ordinary course of business. Where
the final outcome of these matters is different from the amounts
that were initially recognised, such difference will impact the
income tax and deferred tax provisions in the year in which such
determination is made.
(c) Write-down of Inventories
Reviews are made periodically by management on damaged, obsolete
and slow-moving inventories. These reviews require judgement and
estimates. Possible changes in these estimates could result in
revisions to the valuation of inventories.
5. revenue
Revenue represents the net invoiced value of goods sold, after
allowances for returns and trade discounts.
Analysis of revenue from the sales of goods is as follow:
2015 2014
RMB'000 RMB'000
Fish 704,942 586,180
Holothurian 137,531 132,315
Cephalopods 41,753 44,003
Shrimps and shellfish 38,688 33,935
Others 55,833 59,647
978,747 856,080
6. Income Tax Expense
2015 2014
RMB'000 RMB'000
Current tax expense 44,939 44,939
A reconciliation of income tax expense applicable to the profit
before taxation at the statutory tax rate to income tax expense at
the effective tax rate is as follows:-
2015 2014
RMB'000 RMB'000
Profit before taxation 181,794 181,945
Tax at the applicable tax rate of 25% 45,448 45,486
Tax effects of:-
Non-deductible expenses - 9
Under provision in prior year 448 381
Tax exempt (5,560) (3,321)
Tax rate differential 1,054 2,384
--------- ---------
41,390 44,939
According to the China Income Tax Law, income derived from
preliminary processing of fishery or aquiculture products are tax
exempted.
The Group's activities in the PRC are subject to corporation tax
of 25% during the financial year on profit before taxation in
accordance with the relevant laws and regulations in the PRC.
No deferred tax has been provided, as the Group did not have any
significant temporary differences which gave rise to a deferred tax
asset or liability at the reporting dates.
7. EARNINGS PER SHARE
On 3 February 2015, the company's shares had been admitted to
trading on the AIM market of the London Stock Exchange. The Company
had further issued 5,792,081 Placing Shares and 7,434,000
Subscriber Shares. The total issued ordinary shares of the company
were 113,226,081. The earnings per share information is as
follow:
2015 2014
Profit after taxation (RMB) 140,404,000 137,006,000
Weighted average number of ordinary
shares 110,741,624 100,000,000
Basic earnings per share 1.27 1.37
The diluted loss per share was not applicable as there were no
dilutive potential ordinary shares outstanding at the end of the
reporting period.
8. Dividends
2015 2014
RMB'000 RMB'000
Dividends declared 7,727 -
and paid
7,727 -
The dividend declared and paid was subjected to 10% withholding
tax in accordance with the relevant laws and regulations in the
PRC.
9. PROPERTY, PLANT AND Equipment
Leasehold Research Plant and
buildings Office equipment equipment machinery Motor vehicles Total
RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000
Cost
As at 1 January 2014 25,781 675 45 9,612 678 36,791
Additions 23 28 3 3,234 101 3,389
Disposals - (28) - (54) (38) (120)
---------- ---------------- ---------- ---------- -------------- -------
As at 1 January 2015 25,804 675 48 12,792 741 40,060
Additions 28 - - 9,048 129 9,205
Disposals - - - - (142) (142)
---------------- ---------- ---------- -------------- -------
At 31 December 2015 25,832 675 48 21,840 728 49,123
---------------- ---------- ---------- -------------- -------
Accumulated depreciation
As at 1 January 2014 8,839 475 28 5,960 329 15,631
Charge for the year 1,169 57 6 879 103 2,214
Disposals - (24) - (43) (32) (99)
---------- ---------------- ---------- ---------- -------------- -------
As at 1 January 2015 10,008 508 34 6,796 400 17,746
Charge for the year 1,173 45 4 857 105 2,184
Disposals - - - - (128) (128)
---------------- ---------- ---------- --------------
At 31 December 2015 11,181 553 38 7,653 377 19,802
---------------- ---------- ---------- --------------
Net carrying amount
As at 31 December
2015 14,651 122 10 14,187 351 29,321
========== ================ ========== ========== ============== =======
As at 31 December
2014 15,796 167 14 5,996 341 22,314
==============
(a) All property, plant and equipment held by the Group are located in the PRC.
(b) The following property, plant and equipment have been
pledged to licensed banks as security for banking facilities
granted to the Group as disclosed in Note 20 to the financial
information:-
2015 2014
RMB'000 RMB'000
At carrying
amount:-
Leasehold buildings 13,377 14,423
10. Land Use Rights
2015 2014
RMB'000 RMB'000
2,228 2,228
Accumulated amortisation:-
At 1 January 308 264
Amortisation charge 44 44
-------- --------
At 31 December 352 308
-------- --------
Carrying amounts:-
Amortisation due:
- not later than one year 44 44
- later than one year 1,832 1,876
------ ------
At 31 December 1,876 1,920
m2 m2
Land areas 20,416 20,416
------- -------
The carrying amounts of the land use rights that have been
pledged to licensed banks as security for banking facilities
granted to the Group as disclosed in Note 15 to the financial
information are as follows:
2015 2014
RMB'000 RMB'000
Land use rights 1,876 1,920
Amortisation is provided to write off the cost of the land use
rights over the leasehold periods of 50 years.
11. Inventories
2015 2014
RMB'000 RMB'000
At cost:-
Raw materials 29,610 27,599
Finished goods 26,017 19,911
55,627 47,510
Recognised in profit
or loss
Inventories recognised
as cost of sales 647,772 543,877
12. Other Receivables, Deposit And Prepayment
2015 2014
RMB'000 RMB'000
Other receivables - 50
Advances to suppliers - 1,909
Prepayments 4,620 912
4,620 327
13. Cash And Bank Balances
2015 2014
RMB'000 RMB'000
Cash in hand 11 119
Cash at banks 380,408 193,784
Cash and bank balances 380,419 193,903
Less: Bank balances restricted in
use (4,432) (6,327)
Cash and cash equivalents 375,987 187,576
--------- --------
Effective interest rate (per annum) 0.35% 0.39%
The Chinese Renminbi is not freely convertible into foreign
currencies. Under the PRC Foreign Exchange Regulations and
Administration of Settlement, Sales and Payment of Foreign Exchange
Regulations, the Group is permitted to exchange Chinese Renminbi
for foreign currencies through banks that are authorised to conduct
foreign exchange business.
14. Other Payables And Accruals
2015 2014
RMB'000 RMB'000
Other payable 8,125 12,912
Accrued salary 7,257 6,544
Accruals 20,433 24,928
Amount owing to
a director 32 9
35,847 44,393
The amount owing to a director is unsecured, interest-free and
repayable on demand.
15. Stated Capital
2015
Number
of shares RMB'000
Issued:
On incorporation as at 11 August 2 -
2014
Issued in pursuant to the Framework
Agreement as at
23 October 2014 49,999,998
Subdivision of existing shares as 50,000,000 -
at 28 February 2015
Placing Shares and Subscriber Shares
as at
3 February 2015 13,226,081 87,167
Less: Issuance costs - (1,929)
At the end of the year 113,226 85,238
On incorporation, the Company issued two ordinary shares at no
par value with an unlimited share capital.
On 23 October 2014, the company allotted and issued 49,999,998
Ordinary Shares of no par value pursuant to the Framework
Agreement.
On 28 January 2015, the company had been subdivided its existing
50,000,000 ordinary shares into 100,000,000 of ordinary shares. On
3 February 2015, the company's shares had been admitted to trading
on the AIM market of the London Stock Exchange. The Company had
further issued 5,792,081 Placing Shares and 7,434,000 Subscriber
Shares. The total issued ordinary shares of the company were
113,226,081.
16. Reserves
2015 2014
Note RMB'000 RMB'000
Capital reserve (a) 31 31
Statutory
reserves (b) 14,717 11,193
Merger reserves (c) 7,394 7,394
Translation
reserve 649 546
Distributable
retained profits 451,482 322,329
474,273 341,493
(a) Capital Reserve
Capital reserve is premium received on the issue of share
capital.
(b) Statutory Reserve
According to the relevant PRC regulations and the Articles of
Association of the subsidiaries, it is required to transfer 10% of
each subsidiary's respective profit after income tax to its
statutory surplus reserve until its reserve balance reaches 50% of
its registered capital. The transfer to this reserve must be made
before the distribution of dividends to equity owners. Statutory
surplus reserve can be used to make good previous years' losses, if
any, and be converted into paid-in capital in proportion to the
existing interests of equity owners, provided that the balance
after such conversion is not less than 25% of the registered
capital.
(c) Merger Reserve
The accounting treatment for Group reorganisations is scoped out
of IFRS 3. Accordingly, as required under IAS 8 - Accounting
Policies, Changes in Accounting Estimates and Errors the Group has
referred to current UK GAAP to assist its judgement in identifying
a suitable accounting policy. The introduction of the new holding
company has been accounted for as a capital reorganisation using
the merger accounting principles prescribed under current UK GAAP.
Therefore the consolidated financial statement of Aquatic Foods
Group PLC is presented as if Aquatic Foods Group PLC has always
been the holding company for the Group.
The use of merger accounting principles has resulted in a
balance on Group capital and reserves that have been classified as
a merger reserve and included in the Group's shareholders' funds.
The consolidated financial statements include the results of the
Company and all its subsidiary undertakings made up to the same
accounting date.
17. BorroWINGS
2015 2014
RMB'000 RMB'000
Trade finance 14,040 13,470
Interest-bearing bank borrowings
- secured 28,000 28,000
-------- ---------------
Total amount reclassified
as current liabilities 42,040 41,470
Trade finance was secured by cross guarantees of the
subsidiaries between Yantai Kanwa and Yantai Zhenhaitang.
Interest-bearing bank borrowings were secured by:
(a) land use rights of the Group (Note 10)
(b) property of the Group (Note 9)
(c) personal guarantees by a director of the Group
Interest-bearing bank borrowings bear effective interest rates
of 6.33% (2014: 5.75%) per annum is repayable within one year.
18. Related Party Disclosure
(a) Identities of related parties
The company has related party relationships with its
subsidiaries as disclosed in note 1, its directors, key management
personnel and entities of which the director and/or by management
have significant financial interests.
(b) Other than those disclosed elsewhere in the financial
information, the Group also carried out the following significant
transactions with the related parties as disclosed below:-
2015 2014
RMB'000 RMB'000
Director's remuneration:
* short-term employee benefits 1,460 666
* defined contribution plans 18 8
1,478 674
Other key management personnel:
* short-term employee benefits 1,341 1,636
* defined contribution plans 27 35
1,368 1,671
Total key management personnel
remuneration 2,846 2,345
======== =========
19. WARRANT ISSUED
On 28 January 2015, the company granted 50,000 warrants to S.P.
Angel Corporate Finance LLP, the company's nominated adviser, at
the exercise price of 70 pence each with expiring date of 5 years.
The directors have used Black Scholes model as recommended under
IFRS 2 in valuing the share based payment charge. The directors are
of the opinion that the estimated fair value is immaterial, hence
no charge has been made in the accounts.
20. Subsequent events
There were no material events subsequent to the end of the
financial year under review that have not been reflected in this
report as at the date of this report.
- ENDS -
[1] The illustrative exchange rate as at 31 December 2015 was 1
GBP: 9.6 RMB (2014: 1 GBP: 9.6 RMB)
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR AKFDKABKDQAB
(END) Dow Jones Newswires
June 29, 2016 02:00 ET (06:00 GMT)
Aquatic Food (LSE:AFG)
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Aquatic Food (LSE:AFG)
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