TIDMCFC
RNS Number : 9281O
China Food Company PLC
26 September 2013
Press Release 26 September 2013
China Food Company Plc
("China Food", "Group" or the "Company")
Interim Results
China Food Company Plc (AIM:CFC), a leading Chinese manufacturer
of cooking and dipping sauces, announces its interim results for
the six months ended 30 June 2013.
Highlights:
-- Adjusted EBITDA loss of GBP770,000 (H1 2012: (GBP1.7 million))
-- Sales of mid-range soya sauce product grew from GBP2.8
million to GBP2.9 million despite overall fall in marketing
spend of approximately GBP2 million
-- Total condiment sales of GBP6.3 million (H1 2012 GBP9.7
million) reflecting reduced marketing spend and streamlining
of distribution network to focus on core geographic regions
-- New animal feed facility fully commissioned and operational
from March 2013 with overall tonnage rates expected to
nearly double in H2 and a return to profitability after
a small loss for H1 2013
-- Sale of animal feed business underway with an expected
completion date of summer 2014
-- Strong cash position of GBP5.6 million as at 30 June 2013
subsequently augmented by raising of GBP850,000 before
expenses through a subscription of Convertible Loan Notes
-- Strengthened board and management team in place to drive
streamlined business to sustainable profitability
Commenting on the Results, John McLean, Chairman of China Food
Company plc, said: "The Board is pleased that considerable progress
has been made on improving and refining the structure and focus of
the Group's operations during the period. The operational changes
that are being made are focused on driving profitability, although
this is impacting revenues in the short term. Whilst sales of Xaka
have reduced as a result of this refocusing, EBITDA has improved,
fermentation times have been shortened and efficiencies achieved in
the manufacturing process. The Group's marketing strategy is being
rebalanced and, with a new management team on board, China Food is
a more focused, streamlined business that is well positioned for
future growth."
- Ends -
For further information:
China Food Company Plc
John McLean, Chairman Tel: +44 (0) 7768 031 454
www.chinafoodcompany.com
finnCap
Geoff Nash / Ben Thompson (Corporate Tel: +44 (0) 20 7220
Finance) 0500
Simon Starr (Broking)
Numis Securities
David Poutney (Joint Broker) Tel: +44 (0) 20 7260
1000
Media enquiries:
Abchurch Communications
Henry Harrison-Topham / Joanne Shears Tel: +44 (0) 20 7398
7702
henry.ht@abchurch-group.com www.abchurch-group.com
Chairman's Statement
Overview
The Board is pleased that the market in which the Group operates
continues to grow, and China Food is well positioned to capitalise
on changes in China such as urbanisation and the increasing
affluence of consumers. Overall demand for the Group's condiments
products remains strong, although the Board has identified a
stronger emphasis in demand towards mid-range products, away from
higher price points. The Board remains focused on the further
growth of the condiments business, with increased emphasis on
balancing marketing spend with sales volume. The sale process of
the Group's animal feed business is being progressed and is
expected to complete during summer 2014, which will enable the
Group to wholly focus on developing its condiments business.
Board and Management Changes
As previously announced, the Board is putting in place a strong
and experienced management team to drive the future growth of the
business. This will result in a robust management team with
significant industry experience of developing soya sauce and
condiments in China.
At the Board level, China Food was pleased to appoint Daniel Saw
as Non-Executive Director with effect from 31 July 2013, bringing
considerable sector expertise from his extensive experience of
working with Chinese food manufacturers. Previously, he served as
the president of Asia at Campbell Soup Company, a New York Stock
Exchange listed company, and before that he was Chief Executive
Officer and board member of Lee Kum Kee, a global Chinese soya
sauce brand with annual revenues exceeding HK$1 billion. His
experience in global FMCG businesses includes roles at Cadbury
Confectionery, Kraft Foods and Philip Morris, at both a regional
and an international level.
The Group also announced the appointment of Fung Shek Lee
("Jeffrey") on 19 September 2013 as Managing Director (Condiments),
with effect from 16 October 2013. Jeffrey brings to the Board
significant sales and distribution experience with branded consumer
companies in Greater China, South East Asia and the Middle East,
and was previously the Managing Director, North Asia and Pacific
Region, of Lee Kum Kee (International) Trading Limited. Before his
role at Lee Kum Kee, Jeffrey was the Head of Sales &
Distribution for China and Hong Kong for Phillip Morris Asia
Limited.
At senior management level, Ricky Mak King Pui was appointed as
Chief Financial Officer with effect from 1 August 2013. Ricky has
significant international experience in working with listed
companies and is a Hong Kong CPA, a FCCA, bilingual and based in
China.
Against this backdrop of new appointments, the Group announces a
series of changes to the existing Board and management team in
order to create a team that is well positioned and has the right
skillset to drive China Food in the next stage of its development.
Paul Fu will be stepping down as Chairman of China Operations with
effect from mid-October 2013. Having established the business and
overseen the completion of the new facility, now is an appropriate
time for this move as Mr Fu will no longer be involved in day to
day operations but will be available to support the management team
on an ad hoc basis. The Board wishes to thank him for his efforts
in helping to drive the Company to this stage of its
development.
The Board also announces that Feng Bo will be stepping down as
Chief Executive Officer and will wholly focus on the management and
running of the Group's animal feed business and its sale.
Raphael Tham will move from his current role as Executive
Director to become a Non-Executive Director of the Group, with
effect from 1 December 2013. The Board thanks him for his efforts
to date and looks forward to his continued input.
On conclusion of the sale of the Group's animal feed business,
which is expected to conclude during the summer of 2014, it is
anticipated that John McLean will become Non-Executive
Chairman.
Overall, this reshaping of the Board and senior management
positions the Group well to capitalise on the opportunities in
China Food's target markets, with the benefit of in depth industry
knowledge and experience.
The Market
The ongoing growth in the Chinese economy was evidenced by the
strong retail sales growth of 12.7 per cent in the first half of
2013 (source: the National Bureau of Statistics). Retail sales
increased by 13.4% in August 2013, with growth of rural consumption
continuing to outpace urban consumption and sales of food showing
the largest increases (source: UKTI). The Consumer Price Index is
running at 2.6% in August 2013, in line with market expectations,
of which food prices remained the main contributor at 1.54%
(source: UKTI).
The Board maintains its confidence in the growth of the
condiments market in China, given the ongoing urbanisation and
increasing affluence of the Chinese consumer. The Group has
identified a shift away from high end products in the current
market and has adapted its product range in response to this to
ensure that volumes are maintained, although it is anticipated that
as a result of this revenues will decline in the short term. The
Board is confident that there is still strong demand for the
Group's products, albeit with the focus being on the medium to high
end products rather than premium products.
Consumers remain wary of products at the very low end of the
market due to concerns over food safety, and China Food's strong
brand is therefore attractive as it gives reassurance of the high
standards of manufacturing. Additionally, the Group's entire range
of products benefit from the image and branding associated with
Xaka, China Food's premium soya sauce product, as consumers
perceive the Group's other products to be higher grade given their
association with Xaka.
The Board has identified that consumers are becoming
increasingly focused on price and quality, and China Food has
responded to this by introducing new products and packaging at a
variety of different price points in order to keep stimulating
demand for its condiments.
Condiments business
During the period the Board is pleased to report that
significant progress has been made in terms of China Food's
condiments operations. The Board has worked to substantially reduce
marketing expenditure to reach GBP1.9 million (1H 2012: GBP4.2
million), as well as reviewing all distributors and improving the
focus of the Group's distribution network. New products are being
developed, some of which are being launched in H2 2013 (see Group
website), and price increases of 5% have been made to some existing
products. The Group has made changes to its manufacturing process,
thereby improving its stock turn and reducing the cost of
manufacturing whilst maintaining quality and yield. Additionally,
the Group has reviewed its suppliers and has secured savings in
areas such as packaging. The EBITDA loss for condiments has
improved from GBP1,123,000 in H1 2012 to GBP304,000 for H1 2013
despite the reduction in sales.
Against this backdrop, the Group has experienced a reduction in
activity due to the removal of a number of underperforming
distributors, which has enabled the Group to focus its geographic
presence on key target markets in China. Despite this, profit has
not been impacted significantly by these changes, which the Board
believes will benefit the Group's strategy in the medium and longer
term.
In response to consumer demand, the Group has invested in
research and development of new products, and it is anticipated
that these will be launched from H2 2013 onwards. New products will
be launched periodically in order to continually stimulate demand
for the Group's condiments.
As previously indicated, the Group has worked to reduce its
marketing spend both as a proportion of turnover and absolutely,
and consequently has not undertaken any significant promotion of
Xaka, the Group's high end soya sauce product, during the period.
Less costly marketing initiatives have been undertaken and a larger
proportion of the marketing spend has been directed towards Hao Tai
Tai, the Group's mid-range soya sauce product, which has enjoyed
increasing demand in China Food's core market of Shandong and the
surrounding regions. Sales of Hao Tai Tai are returning to growth
at GBP2.9 million for the period (H1 2012: GBP2.8 million), as the
Group's emphasis on its product offering becomes more balanced. The
Board is also pleased that sales of condiments during the autumn
festival, traditionally a strong trading period for the Group, have
gone well.
Aside from soya sauce, vinegar sales have continued to perform
strongly with demand exceeding supply, although bean paste sales
have fallen as competitive pressure increases. Overall, revenue for
vinegar and bean paste during the period was GBP2.82 million (H1
2012: GBP4.42 million). The Board anticipates making further
investment in new vinegar production in 2014.
1H2013 1H2012
GBP'000 GBP'000
REVENUE
Xaka 649 2,468
Hao Tai Tai 2,861 2,815
Soya source 3,509 5,283
Vinegar / Bean Paste 2,823 4,416
Total revenue 6,332 9,699
------------------------------------ ---------------------------------
MARGIN
Soya source 630 1,029
Vinegar / Bean Paste 933 1,628
1,564 2,657
Add back depreciation 611 947
Gross Margin before depreciation 2,175 3,604
==================================== =================================
Gross Margin % before depreciation 34% 37%
Soya source 18.0% 19.5%
Vinegar / Bean Paste 33.1% 36.9%
Margin 25% 27%
EBITDA (before distributor
clearance costs) (770) (1,670)
With all the initiatives that are now being instigated, it is
anticipated that EBITDA in the condiments business will become
positive in the second half.
Production
In the condiments business, the duration of the fermentation
cycle (180 to 120 days) determines the level of the amino acid (in
g/cm(3) ) within the raw soya sauce and as a consequence it defines
the product as either premium (1.3 g/cm(3) ) or medium (<1.3 g/
cm(3) ) grade. The Group's new condiments facility has the ability
to adapt the production process in response to demand and the
Group's requirements in terms of stock rotation. During the period
under review the Board took the decision to achieve considerable
improvements in production efficiency by shortening the
fermentation cycle from 180 to 120 days and still achieving the
amino acid levels of a 180 day cycle. This reduced fermentation
period enables the Group to increase production capacity, reduce
energy and blending costs and respond quickly to any changes in
consumer taste.
The costs of raw materials, in particular wheat, increased
moderately in H1 2013. The soya price is expected to rise in H2
2013 by between 6% and 10% as a result of flooding in particular
regions of China. Aside from raw materials, overhead costs,
specifically wages, increased largely in line with the GDP growth
rate in China, however, overheads do not represent a high
proportion of the overall costs of sale. The Group intends to
partially mitigate these price rises with selected increases in
selling prices of certain products.
Sales and Distribution
During the period, the Board has worked to streamline its
network of distributors in order to focus its geographic targets
and remove underperforming distributors from the network at a cost
of approximately GBP300,000, which has resulted in some impact in
terms of additional costs. Additional resources are being aimed at
regions where demand for the Group's products is particularly high,
and the management will continually review the performance of
distributors and assess the overall shape of the Group's
distribution network.
Animal Feed Business
The Group's animal feed business made a loss of GBP147,000
during the period, having commenced production at the new factory
from the beginning of March 2013, but is now trading profitably in
H2 2013. The Board is pleased that the compound feed line is now
fully commissioned, and overall tonnage rates at the year end are
expected to be approximately 9,000 per month; consequently by the
end of 2013, the activity rate will be almost double that of 12
months ago.
Since the period end, the Group successfully added a further
revenue stream for ruminants (i.e. cows, goats and sheep) resulting
in four sales teams; covering pigs, ruminants and two teams for
poultry. Further products, such as vitamins for livestock and
poultry, have also been launched. The Group will continue to seek
further opportunities to develop its product range as
appropriate.
Revenues during the period were affected by the outbreak of H7N9
on the poultry industry across Northern China. However, this issue
has now dissipated. The current market environment in China is
increasingly demanding higher safety standards for animal feed, and
the investment required by manufacturers in licences and operating
costs is resulting in some attrition of smaller competitors. Given
the Group's recent investment in the new animal feed factory, China
Food is extremely well placed in this changing market in terms of
equipment, skilled personnel, laboratory control and qualified
nutritionists.
As previously announced, the Group has now appointed PwC to
manage the sale of the animal feed business. This process is
underway and documentation has been sent out. It is anticipated
that the animal feed business will be sold by summer 2014. The sale
of this business will enable China Food to increase its focus on
its condiments business and to inject new capital into the Group to
repay its debts and provide additional working capital to the
condiments business. Until any sale is concluded, the feed business
is expected to make a positive contribution to the Group.
Cash / Subscription of Convertible Loan Notes
The Group's cash position at 30 June 2013 was GBP5.6 million (as
at 30 June 2012: GBP7.2 million); this reduction was largely due to
cash used in operating activities particularly in the increase in
inventory, trade and other receivables.
The Group announced, on 6 September 2013, that it had raised
GBP850,000 before expenses through a subscription of 850
Convertible Loan Notes of GBP1,000 each ("Loan Notes") by existing
and new investors (the "Subscription"). The Loan Notes subscribed
for will provide interim support until the sale of the animal feed
business is completed and the funds from this disposal are
received.
At the same time as the Subscription, a number of parties
converted existing unsecured debt owed to them by the Company into
a total of 390 A Loan Notes and 75 B Loan Notes (the "Conversion").
These parties included three directors, who converted debt totaling
GBP390,000.
The Group's borrowings have increased to GBP12.0 million (H1
2012: GBP8.5 million), approximately half of which has been used to
fund the construction of the new feed factory and for the related
inventory. As at 30 June 2013, the cash position was GBP5.6
million, and at 31 August 2013 it was GBP5.9 million. The finance
costs of GBP1.2 million include exchange losses of GBP217,000
compared to an exchange gain of GBP163,000 in H1 2012.
During the period, the Group successfully put a structure in
place to enable it to remit funds out of China. The first tranche
of funds was received by the Singapore holding company in April
2013 and the Board is pleased to have overcome a restriction on the
Group's ability to settle liabilities arising in Singapore and the
UK. The movement of funds out of China remains essential to fund
the costs of the listed entity, China Food Company plc.
Outlook
Whilst the subdued sales for the first half of this year reflect
the refocusing that has taken place, the Board maintains its
confidence in the condiments market in China and believes that the
Group is particularly well placed in the medium and longer term
given the recent improvements made to the manufacturing process as
well as its marketing strategy. Having established a team with the
track record and industry knowledge to drive China Food to the next
stage of its development, the Board also has confidence in the
market environment and consumer demand for its products. The Board
expects a stronger second half, and anticipates that both the
condiments and animal feed businesses will be EBITDA positive.
The sale of the animal feed business will be a significant step,
and the Group looks forward to reporting on this development.
The Board is pleased that the Company has made considerable
progress during the period in the following areas:
-- Enhancement of management team
-- Reduction in cost of sales
-- Improvements to manufacturing processes
-- Reduction in marketing spend
-- Removal of non-performing distributors
-- Tightening focus on geographic area
-- Launch of new products and price increases
Having started to refocus and refine the business during the
period, and given the significant market opportunity in China, the
Board has confidence in the future of the Group.
John Mclean
Executive Chairman
25 September 2013
Condensed Consolidated Income Statement
For the period ended 30 June 2013
Unaudited Unaudited
6 months 6 months Audited
to to Year ended
30 June 30 June 31 December
Notes 2013 2012 2012
GBP'000 GBP'000 GBP'000
Continuing
operations
Revenue 6,332 9,699 20,101
Cost of sales (4,781) (7,042) (13,928)
Gross profit 1,551 2,657 6,173
Other operating
income 40 13 68
Selling and
marketing costs (1,902) (4,244) (6,785)
Administrative costs (1,448) (1,337) (2,900)
Operating result (1,759) (2,911) (3,444)
Finance costs (1,440) (703) (1,562)
Finance income 73 174 440
Loss before tax for
continuing
operations (3,126) (3,440) (4,566)
Taxation (1) 661 (849)
----------------------------- ----------------------------- -------------------------
Loss after tax for
continuing
operations (3,127) (2,779) (5,415)
(Loss)/profit from
discontinued
operations 13 (147) 512 (8)
Loss for the period (3,274) (2,267) (5,423)
============================= ============================= =========================
(Loss)/earnings per
share
- Basic (pence) 14 (4.58) (3.17) (7.59)
- Fully diluted
(pence) 14 (4.58) (3.17) (7.59)
- Basic (pence) -
continuing 14 (4.37) (3.89) (7.58)
- Fully diluted
(pence) -
continuing 14 (4.37) (3.89) (7.58)
- Basic (pence) -
discontinued 14 (0.21) 0.72 (0.01)
- Fully diluted
(pence) -
discontinued 14 (0.21) 0.72 (0.01)
Condensed Consolidated Statement of Comprehensive Income
For the period ended 30 June 2013
Unaudited Unaudited
6 months 6 months Audited
to to Year ended
30 June 30 June 31 December
2013 2012 2012
GBP'000 GBP'000 GBP'000
Loss for the period (3,274) (2,267) (5,423)
Other comprehensive income
Exchange differences on
translating foreign operations 3,102 (905) (1,872)
---------------- ---------------- ------------------------
Other comprehensive income,
net of tax 3,102 (905) (1,872)
Total comprehensive income
for the period attributable
to equity holders of the
parent (172) (3,172) (7,295)
================ ================ ========================
Condensed Consolidated Statement of Financial Position
As at 30 June 2013
Unaudited Unaudited Audited
As at As at As at
30 June 31 December
Notes 2013 30 June 2012 2012
GBP'000 GBP'000 GBP'000
ASSETS
Non-current assets
Property, plant and equipment 9 41,223 39,454 38,922
Land use rights lease prepayments 7,807 7,578 7,331
Deferred tax assets 11 1,625 2,537 1,333
--------------
Total non-current assets 50,655 49,569 47,586
-------------- --------------- -------------------------
Current assets
Assets held for sale 12 5,388 3,911 4,271
Inventories 6,562 4,911 5,831
Land use rights lease prepayments 162 154 151
Trade and other receivables 4,815 2,714 3,578
Cash and cash equivalents 5,628 7,249 7,968
--------------
Total current assets 22,555 18,939 21,799
-------------- --------------- -------------------------
Total assets 73,210 68,508 69,385
LIABILITIES
Current liabilities
Trade and other payables 17,085 12,241 15,743
Bank loans 12,008 8,470 10,067
Current portion of convertible
loan notes 10 942 4,308 622
Current portion of shareholders'
loans 2,045 1,974 1,949
Amount due to director's 142 40 87
Current tax payable - 277 -
Liabilities held for sale 12 1,533 1,571 1,562
--------------
Total current liabilities 33,755 28,881 30,030
-------------- --------------- -------------------------
Net current liabilities (11,200) (9,942) (8,231)
-------------- --------------- -------------------------
Total assets less current
liabilities 39,455 39,627 39,355
-------------- --------------- -------------------------
Non-current liabilities
Deferred tax liabilities 11 117 111 108
Convertible loan notes 10 3,985 - 3,985
Shareholder's loan 3,838 3,742 3,591
--------------
Total non-current liabilities 7,940 3,853 7,684
-------------- --------------- -------------------------
Net assets 31,515 35,774 31,671
============== =============== =========================
EQUITY
Share capital 6 2,858 2,858 2,858
Share premium 7 24,972 24,972 24,972
PRC statutory reserves 3,833 3,581 3,833
Reverse acquisition reserve (23,992) (23,992) (23,992)
Shares to be issued reserve 387 351 371
Convertible loan notes - equity 10 160 160 160
Foreign exchange translation
reserve 12,130 9,995 9,028
Merger reserve 2,216 2,216 2,216
Retained profits 8,951 15,633 12,225
--------------
Total equity 31,515 35,774 31,671
============== =============== =========================
Condensed Consolidated Statement of Cash Flows
For the period ended 30 June 2013
Unaudited Unaudited
6 months 6 months Audited
to to Year ended
30 June 30 June 31 December
2013 2012 2012
GBP'000 GBP'000 GBP'000
Cash flows from operating activities
Loss before
tax (3,126) (2,575) (4,566)
Adjustments for:
Deprecation 788 810 1,865
Amortisation of land use rights
lease prepayments 98 95 189
Gain on disposal of property,
plant and equipment - (1) (7)
Employee share options 16 51 71
Interest expenses 1,440 703 1,562
Other (income)/expenses 138 (174) (440)
-----------------
Operating loss before working capital
changes (646) (1,273) (1,326)
Changes in working capital:
Inventories (730) 454 (221)
Trade and other receivables (1,237) (782) (951)
Trade and other payables 854 3,726 7,018
-----------------
Cash (used in)/generated from continuing
operations (1,759) 2,125 4,520
Discontinued operations (1,343) - 26
----------------- ------------------- --------------------
Cash (used in)/generated from operations (3,102) 2,125 4,546
Interest received 74 15 56
Income taxes paid (136) (776) (1,222)
-----------------
Net cash (used in)/generated from
operating activities (3,164) 1,364 (3,380)
----------------- ------------------- --------------------
Cash flows from investing activities
Payment for acquisition of
property, plant and equipment (87) (100) (1,468)
Proceeds from disposal of property,
plant and equipment - 6 16
Proceeds from disposal of property,
plant and equipment - - (1,354)
Net cash used in investing activities (87) (94) (2,806)
----------------- ------------------- --------------------
Cash flows from financing activities
Proceeds from bank loan 4,769 3,397 2,192
Repayment of bank loan (3,639) (3,496) (498)
Repayment of shareholders'
loan (13) - -
Proceeds from shareholders'
loan - 83 117
Net proceeds from convertible
loan notes - - 45
Proceed from director's loan 54 40 87
Interest paid (631) (477) (885)
Net cash generated/(used in) from
financing activities 540 (453) 1,058
----------------- ------------------- --------------------
Net (decrease)/increase in cash
and cash equivalents (2,711) 817 1,632
Effect of foreign exchange rate
changes 371 (152) (248)
Cash and cash equivalents at beginning
of period 7,968 6,584 6,584
-----------------
Cash and cash equivalents at end
of period 5,628 7,249 7,968
================= =================== ====================
China Food Company Plc
Condensed Consolidated Statement of Changes in Equity
For the period ended 30 June 2013
Total
Convertible equity
Shares loan notes Foreign attributable
to be Reverse PRC - equity exchange to owners
Share Share issued acquisition Merger statutory translation Retained of the
capital premium reserve reserve reserve reserves reserve profits parent
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
As at 1
January 2013 2,858 24,972 371 (23,992) 2,216 3,833 160 9,028 12,225 31,671
Employee share
options granted - - 16 - - - - - - 16
Transactions
with owners - - 16 - - - - - - 16
----------------- --------------- ----------------- ------------------- -------------- ------------- ------------- ---------------------------- --------- -------------
Loss for the
period - - - - - - - - (3,274) (3,274)
Other
comprehensive
income:
Exchange
differences on
translation
of foreign
operations - - - - - - - 3,102 - 3,102
Total
comprehensive
loss for
the period - - - - - - - 3,102 (3,274) (172)
----------------- --------------- ----------------- ------------------- -------------- ------------- ------------- ---------------------------- --------- -------------
As at 30 June
2013 2,858 24,972 387 (23,992) 2,216 3,833 160 12,130 8,951 31,515
----------------- --------------- ----------------- ------------------- -------------- ------------- ------------- ---------------------------- --------- -------------
As at 1 January
2012 2,858 24,972 300 (23,992) 2,216 3,581 160 10,900 17,900 38,895
Employee share
options granted - - 51 - - - - - - 51
Transactions
with owners - - 51 - - - - - - 51
----------------- --------------- ----------------- ------------------- -------------- ------------- ------------- ---------------------------- --------- -------------
Profit for the
period - - - - - - - - (2,267) (2,267)
Other
comprehensive
income:
Exchange
differences on
translation
of foreign
operations - - - - - - - (905) - (905)
Total
comprehensive
income/(loss)
for the period - - - - - - - (905) (2,267) (3,172)
----------------- --------------- ----------------- ------------------- -------------- ------------- ------------- ---------------------------- --------- -------------
As at 30 June
2012 2,858 24,972 351 (23,992) 2,216 3,098 160 9,995 15,633 35,774
----------------- --------------- ----------------- ------------------- -------------- ------------- ------------- ---------------------------- --------- -------------
As at 1 January
2012 2,858 24,972 300 (23,992) 2,216 3,581 160 10,900 17,900 38,895
Employee share
options granted - - 71 - - - - - - 71
Transfer to PRC
statutory
reserves - - - - - 252 - - (252) -
Transactions
with owners - - 71 - - 252 - - (252) 71
----------------- --------------- ----------------- ------------------- -------------- ------------- ------------- ---------------------------- --------- -------------
Loss for the
period - - - - - - - - (5,423) (5,423)
Other
comprehensive
income:
Exchange
differences on
translation
of foreign
operations - - - - - - - (1,872) - (1,872)
----------------- --------------- ----------------- ------------------- -------------- ------------- ------------- ---------------------------- --------- -------------
Total
comprehensive
income
for the period - - - - - - - (1,872) (5,423) (7,295)
Rounding
adjustment - - - - - - - -
----------------- --------------- ----------------- ------------------- -------------- ------------- ------------- ---------------------------- --------- -------------
As at 31
December 2012 2,858 24,972 371 (23,992) 2,216 3,883 160 9,028 12,225 31,671
----------------- --------------- ----------------- ------------------- -------------- ------------- ------------- ---------------------------- --------- -------------
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 17
Hanover Sq, London W1S 1HU. 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 [26 September 2013].
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 2012 have been delivered to the
Registrar of Companies. The auditor's opinion on these interim
financial statements was modified and contained an emphasis of
matter in respect of the Group's ability to continue as a going
concern.
2. Basis of preparation
These condensed consolidated interim financial statements (the
interim financial statements) are for the six months ended 30 June
2013 and have been prepared in accordance with IAS 34 "Interim
Financial Reporting" as adopted by the European Union. 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
2012.
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.
Currency rates used to translate into presentation currency are
as follows:
- closing rate RMB/GBP 30 June 2013: 9.4022 (31 Dec 2012:
10.1316)
- average rate RMB/GBP 30 June 2013: 9.6457 (31 Dec 2012:
10.0358)
3. Going Concern
As described in the Chairman's Statement, and in light of the
continued operating losses, the Group has continued its review of
the condiments business, primarily the reduction in marketing
expenditure and the review of distributors. Meanwhile, the Group
has invested in Hao Tai Tai products and markets (the Group's
existing mid-tier brand) and the revenue of Hao Tai Tai has
responded accordingly.
The directors have appointed PwC to manage the potential sale of
the animal feed business which is targeted by summer of 2014. The
risk remains that a sale may not proceed or complete in line with
the original timetable. Based on discussions conducted to date with
the advisors, the directors have a reasonable expectation that it
will proceed successfully, but if not the group will need to secure
additional finance facilities. In the meanwhile, the feed business
is expected to have positive impact on the Group for 2H2013.
The company has certain short term obligations of which some are
allayed with additional issuance if convertible loan notes of
GBP850,000 and the conversion of director's loans into convertible
loan notes. However, the company continues to face certain medium
term obligations, including but not limited to the loan notes
expiring in November 2014 and the company has considered alternate
financing options that may prove to be necessary should the sale of
the animal feed business not proceed or should material adverse
changes in sales volumes or margins occur. Management will continue
to monitor the situation, and if necessary, seek alternative
financing or changing the business strategy to repay the
obligations.
The directors have concluded that the combination of these
circumstances may represent a material uncertainity that casts
doubt upon the Company's ability to continue as a going concern and
affect the strategy of the Company moving ahead. Nevertheless after
making enquiries, and despite the uncertainties described above,
the directors have a reasonable expectation that the company has
adequate resources to continue in operational existence for the
foreseeable future.
4. Subsequent event
The Group announced on 6 September 2013 that it raised
GBP850,000 before expenses through a subscription of 850
Convertible Loan Notes of 1,000 each ("Loan Notes") by existing and
new investors (the "Subscription"). The Loan Notes subscribed for
will provide interim support until the sale of the animal feed
business is completed and the funds from this disposal are
received.
At the Board level, China Food appointed Daniel Saw as
Non-Executive Director with effect from 31 July 2013. The Group
also announced the appointment of Fung Shek ("Jeffrey") Lee on 19
September 2013 as Managing Director (Condiments), with effect from
16 October 2013.
5. Accounting policies
The accounting policies applied are consistent with those of the
annual financial statements for the year ended 31 December 2012, as
described in those financial statements.
The following is a list of newly issued standards but not yet
effective:
- IFRS 9 Financial Instruments (effective 1 January 2015)
- IFRS 10 Consolidated Financial Statements (effective 1 January 2014)
- IFRS 11 Joint Arrangements (effective 1 January 2014)
- IFRS 12 Disclosure of Interests in Other Entities (effective 1 January 2014)
- IAS 27 (Revised), Separate Financial Statements (effective 1 January 2014)
- IAS 28 (Revised), Investments in Associates and Joint Ventures (effective 1 January 2014)
- Offsetting Financial Assets and Financial Liabilities -
Amendments to IAS 32 (effective 1 January 2014)
- Mandatory Effective Date and Transition Disclosures -
Amendments to IFRS 9 and IFRS 7 (effective 1 January 2015)
- IFRIC Intepretation 21 Levies(effective 1 January 2014)
- Transition Guidance - Amendments to IFRS 10, IFRS 12 and IAS 27 (effective 1 January 2014)
- Recoverable Amount Disclosure for Non Financial Assets
(amendments to IAS 36) (effective 1 January 2014)
- Narrative of Derivatives and Continuation of Hedge Accounting
(amendments to iAS 39) (effective 1 January 2014)
- Investment Entities - Amendments to IFRS 10, IFRS 12, and IAS 2 (effective 1 January 2014)
6. Share capital
No. of shares GBP'000
Authorised
As at 31 December 2012, 30 June
2012 and 30 June 2013
* Ordinary shares of 4p each 100,000,000 4,000
---------------- --------------
Issued, called up and fully paid
As at 31 December 2012, 30 June
2012 and 30 June 2013
- Ordinary shares of 4p each 71,446,972 2,858
---------------- --------------
7. Share premium
As at As at As at
31 December
30 Jun 2013 30 Jun 2012 2012
GBP'000 GBP'000 GBP'000
As at 1 January 2012 24,972 24,972 24,972
Movement - - -
------------ -------------- --------------
24,972 24,972 24,972
------------ -------------- --------------
8. Employee share option
In accordance with the requirements of IFRS2, a total charge of
GBP16,000 (1H2012: GBP52,000) has been recognised in the income
statement for the share options granted to the directors and
certain employees. Charges for 2011 options amounted to GBP16,000
(1H2011: GBP52,000) respectively.
The weighted average contractual life remaining for 2011 Options
and 2009 Options as at 30 June 2013 was 0.9 years (1H2012: 1.9
years) and 5.9 years (1H2012: 6.9 years) respectively.
9. Additions and disposals of property, plant and equipment
Plant Motor
Buildings and machinery Equipment vehicles Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Carrying amount at 1
January 2013 20,752 17,874 148 148 38,922
Additions - 63 4 21 88
Disposals - - - - -
Depreciation (388) (365) (21) (14) (788)
Net exchange differences 1,600 1,379 11 11 3,001
Carrying amount at 30
June 2013 21,964 18,951 142 166 41,223
----------------- --------------- ---------- ---------- --------
Plant Motor
Buildings and machinery Equipment vehicles Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Carrying amount at 1
January 2012 22,395 18,043 126 228 40,792
Additions - 49 51 - 100
Disposals - - - (5) (5)
Depreciation (454) (306) (17) (33) (810)
Net exchange differences (343) (279) 3 (4) (623)
Carrying amount at 30
June 2012 21,598 17,507 163 186 39,454
----------------- --------------- ---------- ---------- --------
Plant Motor
Buildings and machinery Equipment vehicles Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Carrying amount at 1
January 2012 22,395 18,043 126 228 40,792
Additions - 1,407 61 - 1,468
Disposals - (1) (1) (8) (10)
Transfers - (4) 4 - -
Depreciation (845) (918) (37) (65) (1,865)
Net exchange differences (798) (653) (5) (7) (1,463)
Carrying amount at 31
December 2012 20,752 17,874 148 148 38,922
----------------- --------------- ---------- ---------- --------
10. Convertible loan notes
The convertible loan notes A&B (Notes A&B) were issued
between 3 November 2009 and 15 December 2009. The Notes A&B are
convertible into ordinary shares of the Company at any time between
the date of issue of the notes and their maturity date, i.e. three
years after the date of issue. The loan notes are convertible at
GBP0.32 per share. The effective interest rate used to calculate
the interest charged to the income statement was 12%.
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%.
On 14 June 2012, the Company announced that following approval
by the majority of Note C holders, it has been agreed that the Note
C has been rolled into the Note A. These terms have been amended to
reflect those of the Notes A that carry a coupon of 10% per annum
and are convertible at 32 pence per ordinary share. The
modification is not deemed to be significant.
On 2 November 2012, the Company announced that, following
approval by the majority of A, B & C Loan Noteholders, the
terms of the A, B & C Loan Notes ("Loan Notes") have been
amended as detailed below.
The Loan Notes were initially extended to 31 January 2013 to
accommodate the delay in Korean regulatory approvals required to
consummate the disposal of the Fuss Feed subsidiary ("Disposal")
announced in July 2012.
If the disposal was not completed by 31 January 2013 then the
Loan Note holders have agreed to further extend the redemption date
to 3 November 2014. A redemption premium of 1% of the Loan Note
holder's original holding will be payable on redemption. The
Company and the Loan Note holders have agreed that interest will be
charged at a rate of 12.5% p.a. from 3 November 2012 to 31 January
2013; from 1 February 2013 to 30 June 2013, the rate of interest
will rise to 15% p.a.; from 1 July to 30 September 2013 to 17.5%
p.a.; from 1 October to 31 December 2013 to 20% p.a. and 25% p.a.
thereafter until redemption. The Loan Note holders retain the right
not to redeem their holding until maturity of the Loan Notes on 3
November 2014, in which case the interest rate will be fixed at the
rate prevailing on the date of the Company's proposed redemption.
In the event the Company is unable to transfer funds from the PRC
to pay interest when due, the A, B, & C Loan Note holders have
agreed that interest charged will be rolled up and compounded
semi-annually to maturity.
On 1 February 2013, the Company announced that, the Board
decided to terminate negotiations due to ongoing delays by Wisehand
Planning Co. Ltd. As the disposal was unable to be completed by 31
January 2013, the redemption dates of the Loan Notes is 3 November
2014 and the price at which the Loan Notes are convertible is
re-set to 0.155 per share.
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 1,425 96 1,329 4,145
Equity component (127) (8) (119) (44) (3) (41) (160)
-------- ----------- ------- -------- ----------- ------- -------
Liability component at
date of issue 2,877 180 2,697 1,381 93 1,288 3,985
Interest charged 1,307 432 1,739
Interest paid (643) (154) (797)
Liability component at
30 June 2013 3,361 1,566 4,927
------- ------- -------
Notes A&B Notes C Total
------------------------------ ------------------------------ -------
Gross Transaction Net Gross Transaction Net Net
amount costs amount amount costs amount amount
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Convertible loan notes
issued 3,004 188 2,816 1,380 96 1,284 4,100
Equity component (127) (8) (119) (44) (3) (41) (160)
-------- ----------- ------- -------- ----------- ------- -------
Liability component at
date of issue 2,877 180 2,697 1,336 93 1,243 3,940
Interest charged 912 253 1,165
Interest paid (643) (154) (797)
Liability component at
30 June 2012 2,966 1,342 4,308
------- ------- -------
Notes A&B Notes C Total
------------------------------ ------------------------------ -------
Gross Transaction Net Gross Transaction Net Net
amount costs amount amount costs amount amount
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Convertible loan notes
issued 3,004 188 2,816 1,425 96 1,329 4,145
Equity component (127) (8) (119) (44) (3) (41) (160)
-------- ----------- ------- -------- ----------- ------- -------
Liability component at
date of issue 2,877 180 2,697 1,381 93 1,288 3,985
Interest charged 1,090 329 1,419
Interest paid (643) (154) (797)
Liability component at
31 December 2012 3,144 1,463 4,607
------- ------- -------
The directors estimate the fair value of the liability component
of the convertible loan notes at 30 June 2013 to be approximately
GBP4,927,000 (31 December 2012: GBP4,607,000).
11. Deferred tax
The deferred tax assets recognised as at 30 June 2013 was GBP1.4
million (1H2012: GBP2.5 million) calculated on the basis of
accumulated losses of Fortune Food at the tax rates that are
expected to apply in the years when the deferred income tax assets
will be realised.
The deferred tax liabilities recognised as at 30 June 2013 was
GBP0.1 million(1H2012: GBP0.1 million) calculated on the basis of
net profit of disposal of Fuss Feed's land use rights lease
prepayments and the plant on top of the land which is not a taxable
income for the period ended 30 June 2013.
12. Assets and liabilities held for sale
As at As at As at
30 June 30 June 31 December
2013 2012 2012
GBP'000 GBP'000 GBP'000
Non-current assets
Land use rights lease
prepayments 667 647 627
Property, plant and equipment 3,508 - -
Current assets
Inventories 1,213 843 564
Trade receivables* - - -
Construction in Progress** - 2,421 3,080
-------- -------- -----------
Total assets held for
sale 5,388 3,911 4,271
-------- -------- -----------
Current liabilities
Trade payables 1,533 1,571 1,562
-------- -------- -----------
Total liabilities held
for sale 1,533 1,571 1,559
-------- -------- -----------
As at 31 December 2012, 30 June 2012 and 30 June 2013, the
assets and associated liabilities relating to the animal feed were
held for sale in light of the decision to sell this business.
* No trade receivables as all sales are made on cash basis.
** As at 30 June 2013, RMB32,987,000 (1H2012: RMB24,007,000) had
been incurred for the construction of the new animal feed
plant.
13. Discontinued operations
The results of the feed business for the year ended 31 December
2012, period ended 30 June 2012 and period ended 30 June 2013 are
included in discontinued operations in the Group's consolidated
income statement. The results of discontinued operations are as
follows:
6 months 6 months
to to Year ended
30 Jun 30 Jun 31 December
2013 2012 2012
GBP'000 GBP'000 GBP'000
Revenue 6,745 11.761 21,842
Operating expenses (6,941) (11,078) (21,853)
--------- --------- --------------
Profit before taxation (196) 683 (11)
Taxation 49 (171) 3
--------- --------- --------------
Total (loss)/profit arising
from discontinued operations (147) 512 (8)
--------- --------- --------------
14. Earnings per share
6 months 6 months
to to Year ended
30 June 30 June 31 December
2013 2012 2012
Loss after tax and earnings
attributable to ordinary
shareholders - GBP'000 (3,274) (2,267) (5,423)
---------------------------- ---------------------------- ---------------------
Loss after tax and earnings
attributable to ordinary
shareholders for calculation
of diluted earnings
- GBP'000 (3,274) (2,267) (5,423)
---------------------------- ---------------------------- ---------------------
6 months 6 months
to to Year ended
30 June 30 June 31 December
2013 2012 2012
Weighted average
number
of shares
(used for basic
earnings
per share) 71,446,972 71,446,972 71,446,972
Dilutive effect - - -
------------------------------------------ --------------------------------- ----------------------
Dilutive
weighted
average
number of
shares (used
for diluted
earnings
per share) 71,446,972 71,446,972 71,446,972
------------------------------------------ --------------------------------- ----------------------
Basic loss per
share
(pence) (4.58) (3.17) (7.59)
------------------------------------------ --------------------------------- ----------------------
Diluted loss per
share
(pence) (4.58) (3.17) (7.59)
------------------------------------------ --------------------------------- ----------------------
Basic earnings per share has been calculated on 71,446,972
shares (1H2012: 71,446,972 shares) and on attributable loss of
GBP3,274,000 (1H2012: GBP2,267,000).
The warrant grantedto Strand Partners in 2007 to subscribe
1,328,000 shares (1H2012: 1,328,000 shares) at GBP0.50 per share,
the convertible loan notes A&B (see note 10) issued, the
convertible loan notes C (see note 10) issued, the 2009 Options
granted to the Directors and employees (see note 8) to subscribe
4,648,000 shares (1H2012: 4,648,000)and the 2011 Options granted to
the Directors and employees (see note 8) to subscribe 1,950,000
shares (1H2012: 1,950,000) had no dilution effect on the
calculation of the earnings per share as the market price of the
Company's shares was lower than the exercise prices and the
conversion price as at 30 June 2013.
Earnings per
share - 6 months 6 months
continuing to to Year ended
30 June 30 June 31 December
2013 2012 2012
Loss after tax
and
attributable
to ordinary
shareholders
- GBP'000 (3,127) (2,779) (5,415)
------------------------------------------ --------------------------------- ----------------------
Loss after tax
and
attributable
to ordinary
shareholders
for calculation
of diluted
earnings -
GBP'000 (3,127) (2,779) (5,415)
------------------------------------------ --------------------------------- ----------------------
Weighted average
number
of shares
(used for basic
earnings
per share) 71,446,972 71,446,972 71,446,972
Dilutive effect - - -
------------------------------------------ --------------------------------- ----------------------
Dilutive
weighted
average
number of
shares (used
for diluted
earnings per
share) 71,446,972 71,446,972 71,446,972
------------------------------------------ --------------------------------- ----------------------
Basic loss per
share (pence)
- continuing (4.37) (3.89) (7.58)
------------------------------------------ --------------------------------- ----------------------
Diluted loss per
share
(pence) -
continuing (4.37) (3.89) (7.58)
------------------------------------------ --------------------------------- ----------------------
Earnings per
share - 6 months 6 months
discontinued to to Year ended
30 June 30 June 31 December
2013 2012 2012
Profit/(loss)
after tax
and earnings
attributable
to ordinary
shareholders
- GBP'000 (147) 512 (8)
------------------------------------------ ------------------------------- ----------------------
Profit/(loss)
after tax
and earnings
attributable
to ordinary
shareholders
for calculation
of diluted
earnings -
GBP'000 (147) 512 (8)
------------------------------------------ ------------------------------- ----------------------
Weighted average
number
of shares
(used for basic
earnings
per share) 71,446,972 71,446,972 71,446,972
Dilutive effect - - -
------------------------------------------ ------------------------------- ----------------------
Dilutive
weighted
average
number of
shares (used
for diluted
earnings per
share) 71,446,972 71,446,972 71,446,972
------------------------------------------ ------------------------------- ----------------------
Basic
(loss)/earnings
per share
(pence) -
discontinued (0.21) 0.72 (0.01)
------------------------------------------ ------------------------------- ----------------------
Diluted
(loss)/earnings
per share
(pence) -
discontinued (0.21) 0.72 (0.01)
------------------------------------------ ------------------------------- ----------------------
15. Earnings Before Interest, Taxes, Depreciation and Amortisation ("EBITDA")
The reconciliation of EBITDA to income statement is as
follows:
6 months 6 months
to to Year ended
30 June 30 June 31 December
2013 2012 2012
GBP'000 GBP'000 GBP'000
Loss before tax (3,322) (2,757) (4,577)
Less:
Finance income (74) (174) (440)
Add:
Finance costs 843 270 650
Interest to convertible
loans 320 238 492
Interest to shareholder's
loans 277 195 420
Depreciation 788 523 1,865
Deprecation - FY2011* 592 -
Effect on foreign exchange
rate change** 21 -
Amortisation 98 95 189
EBITDA (1,070) (997) (1,401)
-------- -------- -----------
* This represents depreciation charges included as
part of work-in-progress in FY2011 recognised in the
cost of sales in 1H 2012
6 months 6 months
to to Year ended
30 June 30 June 31 December
2013 2012 2012
Continuing operations GBP'000 GBP'000 GBP'000
(Loss)/profit before
tax (3,126) (3,440) (4,566)
Less:
Finance income (73) (174) (440)
Add:
Finance costs 843 270 650
Interest on convertible
loans 320 238 492
Interest on convertible
loans 277 195 420
Depreciation 756 490 1,798
Depreciation - FY2011 - 592 -
Effect on foreign exchange
rate change - 21 -
Amortisation 91 88 175
EBITDA - continuing (912) (1,720) (1,471)
------------------- -------------------- -----------------------
6 months 6 months
to to Year ended
30 June 30 June 31 December
2013 2012 2012
Discontinued GBP'000 GBP'000 GBP'000
(Loss)/profit before
tax (197) 683 (11)
Less:
Finance income (1) - -
Add:
Finance costs - - -
Depreciation 32 33 67
Amortisation 7 7 14
EBITDA - discontinued (159) 723 70
------------------- -------------------- -----------------------
16. Segmental reporting
In identifying its operating segments, management generally
follows the Group's service lines, which represent the main
products and services provided by the Group. Management currently
identifies the Group's two service lines as operating segments.
The activities undertaken by the condiments segment include the
sale of cooking and dipping sauces. The activities undertaken by
the animal feed segment include the sale of animal feed. Each of
these operating segments is managed separately as each of these
service lines requires different technologies and other resources
as well as marketing approaches. As a result of the Group's
announcement to sell the animal feed business, results for the
animal feed operating segment are presented as discontinued
operations in the current period ended 30 June 2013 and the
comparatives. After the disposal of the animal feed business, only
one reportable segment remains.
There were no inter-segment sales and transfers during the
period under review.
The measurement policies the Group used for segment reporting
under IFRS8 are the same as those used in its financial statements,
except that:
Expenses relating to share-based payments are not included in
arriving at the operating profit of the operating segments. In
addition, corporate assets which are not directly attributable to
the business activities of any operating segment are not allocated
to a segment. In the financial period under review, this primarily
applies to the Group's headquarters.
No geographical segment information is presented as the Group
mainly operates in the PRC.
17. Interim Financial Statements
A copy of China Food's interim financial statements is available
from the Company's registered office at 17 Hanover Sq, London W1S
1HU, registered company no: 06077223 and is also available for
download from the Company's website at www.chinafoodcompany.com
18. Independent review report to the members of 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 2013 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 16. We have read the other information contained in
the half yearly financial report which comprises highlights, post
period end events and 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's members, as a body
in accordance with 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's members 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 and the company's members, as a
body, 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 2013 is not prepared, in all material respects, in accordance
with International Accounting Standard 34 as adopted by the
European Union.
Emphasis of Matter
In forming our opinion on the condensed set of financial
statements, which is not modified, we have considered the adequacy
of the disclosure made in note 3 to the condensed financial
statements concerning the company's ability to continue as a going
concern. The company incurred a net loss of GBP3.274m during the
six month period ended 30 June 2013. As explained in note 3, the
directors are progressing the sale of the animal feed business and
are considering alternate financing options that may prove to be
necessary to finance operations and to repay convertible loan notes
due November 2014. Should the sale of the animal feed business not
proceed to timetable, these conditions, along with the other
matters explained in note 3 indicate the existence of a material
uncertainty which may cast significant doubt about the company's
ability to continue as a going concern. The condensed financial
statements do not include the adjustments that would result if the
company was unable to continue as a going concern.
GRANT THORNTON UK LLP
AUDITOR
LONDON
- ENDS -
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR SESFWIFDSEDU
China Food Co. (LSE:CFC)
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China Food Co. (LSE:CFC)
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