RNS Number : 1419X
Natsun Holdings Limited
20 June 2008
For Immediate Release 20 June 2008
Natsun Holdings Limited
("Natsun" or the "Company")
MAIDEN PRELIMINARY AUDITED RESULTS
FOR THE PERIOD ENDED 31 DECEMBER 2007
Natsun Holdings Limited, (AIM:NTS), the integrated worsted fabric and garment producer, is pleased to announce its maiden audited
preliminary results for the financial period from 14 May 2007 to 31 December 2007 (the "Period"). The principal financial statements have
also been presented on a pro forma basis (for the financial year ended 31 December 2007).
Financial Highlights
* Proforma revenue* up 25.4% to RMB 464.6m (2006: RMB 370.6m)
* Proforma net profit* up 30.2% to RMB 55.8m (2006: RMB 42.8m)
* Cash & cash equivalents as at 31 December 2007 of RMB 116.5m
* Successful admission to trading on AIM on 24 December 2007, raising �6.3million (before expenses)
* figures are unaudited
Operational Highlights
* Garment production - 353,341 suits (2006: 32,003 suits),
* Fabric production - 10,667km (2006: 9,015km)
* Construction of new 4,000km annual capacity worsted wool factory commenced May 2007 (full production expected August 2008)
* Opened research and design office in Milan office - local sales and marketing expertise focusing on the European region
* Natsun Australia Pty. Limited ("Natsun Australia") incorporated as wholly-owned subsidiary to take on wool purchasing activities
Post Period Highlights
* Two leased suit lines have started production since January 2008
* New dyeing centre ready for test production
* Third suit line coming on stream in July 2008
* New worsted wool factory has commenced test production
* New suit line started production in mid 2008 to cater for the increased suit sales to its 25% joint venture ("JV") partner, Berwin
Holdings Limited
* Launch of Betenly suit brand in March 2008, targeting growing and influential young professional market in China
* Established US sales office to capitalise on the anticipated lifting of quota restrictions at the end of 2008
Commenting on the results, the Company's Chairman, Song Jianbo said:
"I am pleased to report our first results since Natsun's admission to AIM. Although 2007 was a demanding year for us due to the
increased wool prices, we have met our expectations. The flotation of the Company marks a leap in the Group's development as we evolve
further as a global supplier of quality textiles. Our status as an AIM quoted company with improved corporate governance and financial
controls has helped raise our profile with customers, suppliers and employees and our new worsted wool factory will make us one of the
leading compact spinning fabric manufacturers in China. We have been able to market our brand name internationally, particularly in Europe
and provide new funding to expand the Group's production facilities, and to incentivise key employees through the introduction of the share
option plan. However, the Group will continue to face difficult market conditions and increasing wool prices which will put its margins
under further pressure until prices can be passed on to our customers. Going forward, the management will place a strong emphasis on improving margins with a long term focus of creating greater value for our
shareholders.''
For further information please contact:
EVOLUTION SECURITIES LIMITED Tel No: +44 (0) 20 7071 4300
(Nominated adviser)
Bobbie Hilliam
EVOLUTION SECURITIES CHINA LIMITED Tel No: +44 (0)20 7220 4850
(Financial adviser and broker)
Barry Saint
Esther Lee
BUCHANAN COMMUNICATIONS Tel No: +44 (0)20 7466 5000
Lisa Baderoon
Mary-Jane Johnson
Robin Haddrill
CHAIRMAN'S STATEMENT
I am pleased to report our first results since the Company's admission to AIM in December 2007. Although 2007 was a challenging year for
us due to the increased wool prices, we have met our expectations.
Despite the cost pressures resulting from rising wool costs, the increasing cost of domestic labour and the appreciation of the Renminbi
(RMB) against the U.S. dollar, we achieved unaudited proforma revenues of RMB 464.6 million and net profits of RMB 55.8 million for the year
ended 31 December 2007, representing year on year increases of 25.4% and 30.2% respectively from 2006.
2007 has been a milestone year in the development of the Group. A restructuring exercise was undertaken to form the Group from the
Nanshan Group, where the Group's businesses were originally founded. The Group commenced construction of a new worsted wool factory in May
2007 which is due for completion in August 2008, two suit production lines were leased from Nanshan Group in January 2008 and a third is due
later this year. The Group has also set up an office in Milan, Italy, to assist the Group in keeping up-to-date with the latest fashion
trends for its fabric and suit production.
In October 2007, Natsun Australia Pty. Limited ("Natsun Australia") was incorporated as a wholly-owned subsidiary of Natsun to take on
the Group's wool purchasing activities, substantially reducing the Group's previous dependency on Donghai Australia Pty Limited, a related
company.
In December 2007, the Company was successfully admitted to trading on AIM and raised �6.3million (before expenses), to partly finance
the expansion plans of the Group. The expanded operations will also be financed by a loan of up to RMB 200 million loan from Nanshan Group
pursuant to an agreement signed in November 2007.
Financial review
There are no comparative figures as these are the first preliminary results for the Group from the date of incorporation of the Company
on 14 May 2007, up to 31 December 2007. However, proforma results have been prepared for comparison purposes as if the Group had existed
since 1 January 2005.
Turnover and profit attributable to shareholders for the period from 14 May 2007 to 31 December 2007 amounted to RMB 291.0 million and
RMB 41.4 million respectively. The proforma revenue and net profit were RMB 464.6 million and RMB55.8 million, representing year on year
increases of 25.4% and 30.2% respectively.
Proforma fabric sales increased to RMB 377.9 million for the 2007 financial year, from RMB 362.0 million in 2006. The average selling
price of fabric in 2007 increased by about 9% compared with the prior year. However, the gross profit margin increased by only about 1% due
to the increased wool price, evidenced by the increase in the Australian wool price index by about 24% in 2007.
Proforma garment sales increased to RMB 86.7 million from RMB 8.7 million in 2006 and over 70% of the sales were produced for Berwin
Holdings Limited ("Berwin"). Gross margin for these sales for the 2007 financial year was 5.9%, representing an increase of 28.4 percentage
points from 2006 (loss of 22.5%).
The inventory level increased sharply to RMB235.7 million (2006 proforma : RMB122.7 million) as at 31 December 2007 to cater for the
increased production and sales of both garments and fabric.
Taking into account the net cash position of RMB 31.2 million as at 31 May 2008, the Group's forecast cash flows and the Group's
expansion plans, the Group requires approximately RMB 250 million to finance the capital expenditure requirement of its fabric and garment
production capacity expansion. The Group will draw down up to RMB200 million from Nanshan Group by end of June 2008, with the remaining RMB
50 million to be financed by local bank loans or a separate loan agreement with Nanshan Group which have not yet been in place . The
increased gearing would lead to higher interest costs, which in turn directly impact the Group's profitability and cashflow.
No dividend has been declared nor paid in relation to the year ended 31 December 2007.
Operational review
The Group's businesses consist of two major segments : worsted wool fabric production and suit production.
Fabrics
The Group produced approximately 11,000 kilometres ("km") and sold 9,900 km worsted wool fabric in the year ended 31 December 2007. This
represented 100% of our full production capacity, and a 4.4% increase from the previous year. Fabric revenues amounted to RMB377.9 million,
accounting for 81% of the total proforma group revenue. Products were predominantly sold domestically, accounting for 77% of the total
revenues. The top 10 customers contributed approximately 59% of the Group's fabric revenues, and have continued to work on annually renewed
contracts with Natsun.
In order to cope with increasing orders, the development of a new production line commenced in May 2007, and is expected to be fully
operational by August 2008, providing an additional annual production capacity increase of approximately 4,000 km. The construction of our
new dyeing centre also started in 2007 and was completed in May 2008. The new dyeing centre is more automated, more environmentally-friendly
and more reliable, resulting in a more stable dyeing process. To further improve the fabric quality, we have also recruited experienced
Italian technicians and experts for the key steps of fabric production such as dyeing, spinning, weaving and finishing.
The largest challenge we faced was the increased price for raw wool imported from Australia. According to a Nanjing Wool Market report
(a major wool trading market in China), the Eastern Index for Australian wool increased from US$ 716.4 cents/kg at the first day of 2007 to
US$ 888.9 cents/kg at the last day of 2007, representing an annual increase of 24%, reaching the highest level in the past 16 years since
1991. To partly mitigate this issue, Natsun Australia monitors the price fluctuations on a daily basis, helping the Group to purchase its
wool requirements at favourable price levels.
Our Milan design and marketing office started operations on schedule in 2007. Located in one of the world's fashion centres, this office
assists the Group in keeping up-to-date to produce fabrics in line with the latest fashion trends.
Garments
The Group produced approximately 353,000 suits and sold 328,000 suits in the financial year ended 31 December 2007. This represented 78%
of our full production capacity and was a 902% increase in production from the previous year. Natsun exported the majority of its suits,
accounting for almost 72% of total garment revenues of RMB62 million for the 2007 financial year. The majority of our export orders came
from Berwin.
In 2007, the suit production capacity of the JV was 450,000 suits per annum, and the Group established a new production line in early
2008 to increase its annual capacity by an additional 150,000 suits.
Moreover, in January 2008, the Group has leased two production lines from Nanshan Group focusing on high quality suits including its own
branded suits, which has provided the Group with additional annual production capacity of 500,000 suits. The Group also intends to lease
another suit line from Nanshan Group in the second half of 2008. The Group is in discussions with existing and new customers to secure
additional orders, including Aoyama, one of the largest suit distributors in Japan. Aoyama has recently acquired the "Hilton" brand and is
in discussions with the Group regarding production on an original equipment manufacturer basis.
Current trading and outlook
In 2008, we have faced and expected to face, similar cost pressures and challenges as we did in 2007 and we do not anticipate that
business conditions will improve significantly in the foreseeable future. More specifically, the Group has been loss making for the five
months to 31 May 2008. Any further increase in costs not passed onto our customers will continue to place the Group's margins under
increased pressure and it is possible that the overall performance, in particular in our worsted fabric business, will be adversely
affected.
Despite the challenges ahead, we are determined to take every measure to alleviate the negative impact and take advantage of
opportunities as they arise to achieve our goals for the 2008 financial year. Currently, we are in the process of researching and expanding
our suit sales into the US with the establishment of a sales office in New York as a base to sell our worsted fabrics and suits. This will
enable us to capitalise on the anticipated lifting of quota restrictions on China's textile and clothing exports to the US from the end of
2008. In addition, we are looking to strengthen our Milan office by recruiting local sales and marketing expertise to improve our focus on
Europe.
Despite the implications of the current global economic conditions on the retail and trading outlook, our order book from our
international client base remains stable as a result of our competitive product quality and prices. In our domestic market, the gross
domestic product per capita of China rose by approximately 13% in 2007. To capitalise on this, we have started to develop our own suit
brand, Betenly, launched in March 2008, targeting the growing and influential young professional market in China.
Operationally, our expansion plans are on track and augur well for the anticipated increased international and domestic sales. Our new
worsted fabric factory is expected to be producing at full capacity in August 2008, making the Group one of the leading compact spinning
fabric manufacturers in China. As well as the three suit lines leased already in 2008, the Group also plans to install an additional new
suit line to cater for the increased suit sales to our 25% JV partner, Berwin.
This has been a challenging year so far for us but we look forward to a better second half year, as our additional fabric production
capacity comes on stream, our new suit lines build their production and the various marketing initiatives undertaken in the first half year
begin to generate revenues. Finally, on behalf of the Board, I would like to thank our senior management and employees for their dedication,
commitment and efforts. I would also like to thank you, our shareholders, customers and suppliers for your continued support since the
admission.
SONG Jianbo
Chairman
Audited Consolidated Income Statement
For the period from 14 May 2007 (date of incorporation) to 31 December 2007
Note 2007
RMB'000
Revenue 290,955
Cost of sales (209,773)
Gross profit 81,182
Other income 947
Distribution and marketing costs (10,798)
Administrative expenses (15,841)
Profit from operations 55,490
Finance costs (14,065)
Profit before taxation 41,425
Taxation -
Profit for the period 41,425
Attributable to:
Equity holders of the Company 41,575
Minority interest (150)
41,425
Earnings per share from total and continuing operations 2
attributable to equity shareholders
Basic RMB2.97
Diluted RMB2.97
Audited Consolidated Balance Sheet
As at 31 December 2007
Note 2007
RMB'000
Non-current assets
Property, plant and equipment 390,283
Goodwill 16
390,299
Current assets
Inventories 235,739
Trade and other receivables 151,327
Amount due from a related company 150
Cash and bank balances 116,469
503,685
Current liabilities
Trade and other payables 115,764
Amounts due to related companies 60,065
Loan from a related party 5,948
Bank overdrafts 117
181,894
Net current assets 321,791
Total assets less current liabilities 712,090
Non-current liabilities
Loan from a related company 341,910
NET ASSETS 370,180
Capital and reserves
Share capital 4 284,152
Reserves 5 72,544
Total equity attributable to equity shareholders of the 356,696
Company
Minority interests 13,484
TOTAL EQUITY 370,180
Audited Company Balance Sheet
As at 31 December 2007
Note 2007
RMB'000
Non-current assets
Interest in subsidiaries 3 242,170
Current assets
Trade and other receivables 8,465
Cash and bank balances 73,481
81,946
Current liabilities
Other payables 14
Amount due to a related company 3,833
Loan from a related party 4,748
8,595
Net current assets 73,351
NET ASSETS 315,521
Capital and reserves
Share capital 4 284,152
Reserves 5 31,369
TOTAL EQUITY 315,521
Audited Consolidated Statement of Changes in Equity
For the period from 14 May 2007 (date of incorporation) to 31 December 2007
Share Share Share option Exchange Retained Minority Total
capital premium reserve reserve earnings interests equity
RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000
New shares issued 284,152 44,629 - - - - 328,781
Acquisition of a subsidiary - - - - - 13,634 13,634
Issuing costs upon admission - (16,239) - - - - (16,239)
to AIM
Equity-settled share based - - 2,577 - - - 2,577
payment
Exchange adjustment on - - - 2 - - 2
translation of overseas
subsidiaries
Profit for the period - - - - 41,575 (150) 41,425
At 31 December 2007 284,152 28,390 2,577 2 41,575 13,484 370,180
Audited Consolidated Cash Flow Statement
For the period from 14 May 2007 (date of incorporation) to 31 December 2007
2007
RMB'000
Operating activities
Profit before taxation 41,425
Adjustments for
- Loss on disposal of property, plant and equipment 11
- Depreciation 26,561
- Interest income (291)
- Interest expense 11,539
- Equity-settled share based payment 113
- Exchange adjustment on translation of overseas 2
subsidiaries
Operating profit before changes in working capital 79,360
Increase in inventories (90,689)
Increase in trade and other receivables (53,568)
Increase in amounts due from a related company (150)
Decrease in trade and other payables (248,167)
Increase in amounts due to related companies 60,065
Cash used in operations (253,149)
Interest paid (11,539)
Net cash used in operating activities (264,688)
Investing activities
Purchases of property, plant and equipment (34,408)
Proceed from disposal of property, plant and equipment 516
Interest received 291
Acquisition of subsidiaries, net of cash acquired (248,223)
Net cash used in investing activities (281,824)
Financing activities
Loan from a related party 5,948
Loan from a related company 341,910
Net receipt from issue of shares 315,006
Net cash provided by financing activities 662,864
Net increase in cash and cash equivalents at end of period 116,352
Analysis of the balances of cash and cash equivalents
Cash and bank balances 116,469
Bank overdrafts (117)
116,352
Unaudited Proforma Consolidated Income Statement
For the year ended 31 December 2007
2007 2006
RMB'000 RMB'000
Revenue 464,587 370,621
Cost of sales (320,103) (257,726)
Gross profit 144,484 112,895
Other income 257 192
Distribution and marketing costs (16,635) (12,341)
Administrative expenses (26,527) (14,101)
Profit from operations 101,579 86,645
Finance costs (36,928) (18,949)
Profit before taxation 64,651 67,696
Taxation (8,890) (24,859)
Profit for the year 55,761 42,837
Attributable to:
Equity shareholders of the Company 56,732 44,394
Minority interests (971) (1,557)
55,761 42,837
Unaudited Proforma Consolidated Balance Sheet
As at 31 December 2007
2007 2006
RMB'000 RMB'000
Non-current assets
Property, plant and equipment 390,283 384,055
Goodwill 16 -
390,299 384,055
Current assets
Inventories 235,739 122,718
Trade and other receivables 151,327 254,866
Amount due from related companies 150 -
Cash and bank balances 116,469 5,838
503,685 383,422
Current liabilities
Trade and other payables 115,764 319,107
Amounts due to related companies 60,065 -
Loan from a related party 5,948 -
Bank overdrafts 117 -
181,894 319,107
Net current assets 321,791 64,315
Total assets less current liabilities 712,090 448,370
Non-current liabilities
Loan from a related company 341,910 324,670
NET ASSETS 370,180 123,700
Capital and reserves
Share capital 284,152 -
Reserves 72,544 118,863
Total equity attributable to equity shareholders of 356,696 118,863
the Company
Minority interests 13,484 4,837
TOTAL EQUITY 370,180 123,700
Note: The unaudited proforma consolidated income statement and balance sheet have been prepared in accordance with the International
Financial Reporting Standards and under the historical cost convention as if the Group had existed since 1 January 2005.
Notes to the Financial Statements
For the period from 14 May 2007 (date of incorporation) to 31 December 2007
1. BASIS OF PREPARATION
The financial information set out above does not constitute statutory accounts but is derived from the full audited financial statements
of the Group, and as such, does not contain all information required to be disclosed in the financial statements in accordance with the
International Financial Reporting Standards ("IFRS"). The auditors' report and the full financial statements for the financial year 2007
will be available in the annual report.
These financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS").
2. EARNINGS PER SHARE
(a) Basic earnings per share
The calculation of basic earnings per share is based on the profit attributable to ordinary equity shareholders of the Company of
RMB41,575,000 and the weighted average of 14,016,843 ordinary shares issued during the period, calculated as follows:
Weighted average number of ordinary shares
2007
Issued ordinary shares at the date of incorporation 1
Effect of new issue 34,359,308
Effect of shares consolidation (20,342,466)
Weighted average number of ordinary shares at 31 December 14,016,843
(b) Diluted earnings per share
The calculation of diluted earnings per share is based on the profit attributable to ordinary equity shareholders of the Company of
RMB41,575,000 and the weighted average number of ordinary shares of 14,019,704 shares, calculated as follows:
Weighted average number of ordinary shares (diluted)
2007
Weighted average number of ordinary shares at 31 December 14,016,843
Effect of deemed issue of shares under the Company's share 2,861
option scheme for nil consideration
Weighted average number of ordinary shares (diluted) at 31 14,019,704
December
Notes to the Financial Statements
For the period from 14 May 2007 (date of incorporation) to 31 December 2007
3. INTEREST IN SUBSIDIARIES
2007
RMB'000
Unlisted investments, at cost 243,947
Less: Amount due to a subsidiary (1,777)
242,170
Particulars of the subsidiaries as at 31 December 2007 are as follows:
Percentage of equity
Place of interest attributable
Incorporation/ to the Group
Name of Company operations Direct Indirect Principal activities
Shandong Nanshan Fabric & PRC 100% - Spinning, dyeing and
Garments Co., Ltd.("Nanshan weaving finishing of
Fabric") top grade fabrics,
developing and
producing of
garments and
marketing of its own
products
Yantai Nanshan Berwin Garments PRC 75% - Processing and
Co., Ltd. ("Nanshan Berwin") finishing of top
grade fabrics,
manufacturing and
processing of OEM
product
Longkou Nanshan Second Fabric PRC 25% 75% Manufacturing
& Garment Co., Ltd. ("Second
Fabric")
Natsun Australia Pty. Ltd. Australia 100% - Trading
4. CAPITAL
Number of
Note shares RMB'000
Authorised:
Ordinary shares of HK$1.00 each at the date (a) 10,000 10
of incorporation
Increase in authorised share capital (b)(i) 299,990,000 299,990
Increase in authorised share capital (b)(ii) 500,000,000 500,000
Share consolidation on 1 for 10 basis (b)(iv) (720,000,000) -
Conversion to ordinary shares with nominal (b)(v) - -
value of GBP0.625 each at the exchange rate
of HK$16: GBP1
Ordinary shares of GBP0.625 each at 31 80,000,000 800,000
December 2007
Issued and fully paid:
Ordinary shares of HK$1.00 each at the date (a) 1 -
of incorporation
Issue of new shares (b)(iii) 249,999,999 250,000
Share consolidation on 1 for 10 basis (b)(iv) (225,000,000) -
Conversion to ordinary shares with nominal (b)(v) - -
value of GBP0.625 each at the exchange rate
of HK$16: GBP1
Issue of new shares (b)(vi) 5,143,442 34,152
Ordinary shares of GBP0.625 each at 31 30,143,442 284,152
December 2007
Notes to the Financial Statements
For the period from 14 May 2007 (date of incorporation) to 31 December 2007
4. CAPITAL (CONTINUED)
Note:
(a) On incorporation, the share capital of the Company was HK$10,000 divided into 10,000 ordinary shares
of HK$1.00 each of which one ordinary share of HK$1.00 was issued to the subscriber of the
Company's Memorandum of Association.
(b) Since incorporation, there have been the following changes in the authorised and issued share capital of
the Company:
(i) on 18 October 2007, the authorised share capital was increased to HK$300,000,000, divided into 300,000,000 ordinary shares of
HK$1.00 each;
(ii) on 8 November 2007, the authorised share capital was increased by HK$500,000,000 to HK$800,000,000, divided into 800,000,000
ordinary shares of HK$1.00 each;
(iii) on 12 November 2007, 249,999,999 new ordinary shares of HK$1.00 each were issued of which 237,499,999 ordinary shares were in
exchange for capitalisation of loan from shareholder;
(iv) on 29 November 2007, the share capital of the Company was consolidated on a 1 for 10 basis so that the authorised share capital of
HK$800,000,000 was divided into 80,000,000 ordinary shares of HK$ 10.00 each and the issued share capital of 250,000,000 ordinary shares of
HK$1.00 each became 25,000,000 ordinary shares of HK$ 10.00 each;
(v) on 13 December 2007, the Company changed the denomination of its share capital from Hong Kong Dollars to Pounds Sterling using the
exchange rate applicable on such date, being GBP1 = HK$16, so that the authorised share capital of the Company became GBP50,000,000 divided
into 80,000,000 ordinary shares of GBP0.625 each; and
(vi) on 24 December 2007, being the date of Admission to the AIM of the London Stock Exchange, the Company issued 5,143,442 new Ordinary
Shares of GBP0.625 each pursuant to the Placing.
Notes to the Financial Statements
For the period from 14 May 2007 (date of incorporation) to 31 December 2007
4. CAPITAL (CONTINUED)
Capital Management
The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern and to maintain an
optimal capital structure so as to maximise shareholder value. In order to maintain or achieve an optimal capital structure, the Group may
adjust the amount of dividend payment, return capital to shareholders, issue new shares, buy back issued shares, obtain new borrowings or
sell assets to reduce borrowings. Management monitors capital based on a gearing ratio.
During the financial period, the Group's strategy was to maintain the gearing ratio at the lower end of the range 100% to 200%.
The gearing ratio at 31 December 2007 was as follows:
Note The Group The Company
2007 2007
RMB'000 RMB'000
Current liabilities:
Trade and other payables 115,764 14
Amounts due to related companies 60,065 3,833
Loan from a related party 5,948 4,748
Bank overdrafts 117 -
Non-current liabilities:
Loan from a related company 341,910 -
Total debts 523,804 8,595
Less: Cash and bank balances (116,469) (73,481)
Net debt/(assets) 407,335 (64,886)
Total equity 370,180 315,521
Gearing ratio 110.0% n/a
Neither the Company nor any of its subsidiaries are subject to externally imposed capital requirements.
Notes to the Financial Statements
For the period from 14 May 2007 (date of incorporation) to 31 December 2007
5. RESERVES
The Group
Share
Share option Exchange Retained
premium reserve reserve earnings Total
RMB'000 RMB'000 RMB'000 RMB'000 RMB'000
Issue of new shares 44,629 - - - 44,629
Issuing costs upon Admission (16,239) - - - (16,239)
to AIM
Equity-settled share-based - 2,577 - - 2,577
payments
Exchange adjustment on - - 2 - 2
translation of overseas
subsidiaries
Profit for the period - - - 41,575 41,575
At 31 December 2007 28,390 2,577 2 41,575 72,544
The Company
Share
Share option Retained
premium reserve earnings Total
RMB'000 RMB'000 RMB'000 RMB'000
Issue of new shares 44,629 - - 44,629
Issuing costs upon Admission (16,239) - - (16,239)
to AIM
Equity-settled share-based - 2,577 - 2,577
payments
Profit for the period - - 402 402
At 31 December 2007 28,390 2,577 402 31,369
During the period ended 31 December 2007, the Group recognised the equity settled share-based payments of RMB2,577,000 in the share
option reserve, of which RMB113,000 was charged to the consolidated income statement and RMB2,464,000 was charged against equity.
The Directors consider that a total of the equity settled share-based payments of RMB12,297,000 will likely be expensed over the
remaining vesting period in the next three years.
Notes to the Financial Statements
For the period from 14 May 2007 (date of incorporation) to 31 December 2007
6. EQUITY SETTLED SHARE-BASED TRANSACTIONS
The Company has a share option scheme which was adopted on 21 December 2007 whereby the directors of the Company are authorised at their
discretion to grant the right to acquire ordinary shares to the directors, employees, contractors and consultants of the Company.
(a) The terms and conditions of the grants that existed during the period are as follows:
Contracted
Number of life of
options Vesting conditions options
Options granted to directors:
- on 21 December 2007 1,205,740 Three years from the 10 years
date of grant
Options granted to employees:
- on 21 December 2007 602,868 Three years from the 10 years
date of grant
Options granted to 3rd party:
- on 21 December 2007 602,869 Nil 4 years
2,411,477
Notes to the Financial Statements
For the period from 14 May 2007 (date of incorporation) to 31 December 2007
6. EQUITY SETTLED SHARE-BASED TRANSACTIONS (CONTINUED)
(b) Movements in the number of share options outstanding and their related weighted average exercise prices of the share option are
as follows:
Weighted
average
exercise Number of
price options
�
Granted during the period 1.22 2,411,477
Exercised during the period -
Outstanding at 31 December 2007 1.22 2,411,477
Exercisable at 31 December 2007 1.22 602,869
(c) The fair value of services received in return for share options granted is measured by reference to the fair value of share
options granted. The estimate of the fair value of the share options granted is measured based on a Binomial Option Pricing Model. The
contractual life of the share option is used as an input into this model. Expectations of early exercise are incorporated into the model.
Fair value of share options and assumptions are as follows:
2007
Fair value at measurement date �0.4230
Share price �1.22
Exercise price �1.22
Expected volatility 40.75% - 57.98%
Option life 4 years - 10 years
Expected dividends 5.70%
Risk-free interest rate 2.86 - 3.33%
The expected volatility is determined by calculating the average historical volatility of the share prices of the comparable listed
companies over the same period of time. Expected dividends are based on the Group's dividend policy. Changes in the subjective input
assumptions could materially affect the fair value estimate.
Share options were granted under a service condition. This condition has not been taken into account in the grant date fair value
measurement of the services received. There were no market conditions associated with the share option granted.
Notes to the Financial Statements
For the period from 14 May 2007 (date of incorporation) to 31 December 2007
7. CAPITAL COMMITMENTS
The Group is constructing a new plant and installing production equipments under non-cancellable purchase agreements. These procurements
have varying terms, escalation clauses and renewal rights.
The future minimum purchase payables under non-cancellable purchase contracted for at the balance sheet date but not recognised as
liabilities, are as follows:
2007
RMB'000
Not later than one year 76,893
======
8. POST BALANCE SHEET EVENTS
The Group has setup a subsidiary in the United States of America for selling fabric and garment on 29 January 2008.
On 29 January 2008, the issued and paid-up share capital of Second Fabric was increased from US$2,100,000 to US$12,600,000.
Subsequently, the Company and Nanshan Fabric hold 87.5% and 12.5% respectively of the enlarged share capital.
Second Fabric has started operation by leasing the garment production lines from Nanshan Group and fabric finishing workshop from
Nanshan Fabric at the beginning of January 2008.
9. COMPARATIVE FIGURES
The Company was incorporated on 14 May 2007 and no audited financial statements have previously been prepared. Accordingly, there are no
comparative figures presented.
10. ANNUAL GENERAL MEETING
The Annual General Meeting of the Company will be held at 3:00pm (China time) on 8 August 2008 at Nanshan Industrial Park, Longkou City,
Shandong Province, PRC. The Notice of the Annual General Meeting will be posted to the shareholders together with the annual report.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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