RNS Number:9759D
China Shoto plc
18 September 2007
Press Release 18 September 2007
China Shoto plc
("China Shoto" or "the Company" or "the Group")
Unaudited Interim Results
China Shoto plc (AIM:CHNS), a leading Chinese producer of industrial batteries
and power supply systems, announces its unaudited Interim Results for the six
months ended 30 June 2007.
Highlights
* Turnover up 46.5% to #41.6 million (H1 2006: #28.4 million)
* Profit after tax up 30.4% to #3.0 million (H1 2006: #2.3 million)
* The second phase project of the Power Type Battery ("PTB") manufacturing
facility extension was accomplished
and commenced commercial production in May 2007
* Revenue of the power type batteries business up 105% to #13.5 million
(H1 2006: #6.6 million)
* Basic earnings per share up 22.5% to 12.29p (H1 2006: 10.03p)
Commenting on the unaudited Interim Results, Cao Guifa, Executive Chairman,
said: "The Group has made excellent progress despite a number of external
factors such as increased raw materials cost, Renminbi appreciation and
increased competition. We look forward to the future with confidence."
- Ends -
For further information:
China Shoto plc
Cao Guifa, Executive Chairman Tel: +44 (0) 20 7398 7700
www.chinashoto.com
Seymour Pierce Limited
Stuart Lane / John Depasquale Tel: +44 (0) 20 7107 8000
jdp@seymourpierce.com www.seymourpierce.com
Media enquiries:
Abchurch Communications
Henry Harrison-Topham / Ariane Comstive Tel: +44 (0) 20 7398 7705
henry.ht@abchurch-group.com www.abchurch-group.com
Chairman's Statement
I am delighted to present China Shoto's interim results for the six months ended
30 June 2007. Building on a strong performance in 2006 the Group has continued
its progress, which is an endorsement of our strategy of focusing sales efforts
on growth opportunities in our core markets.
In H1 2007, the Group achieved sales revenue of #41.6 million, an increase of
46.5% compared with #28.4 million in H1 2006; net profit was #3.0 million, an
increase of 30.4% compared with #2.3 million in H1 2006.
Despite a number of adverse external factors such as increased raw materials
cost, Renminbi appreciation and increased competition in H1 2007, the Group has
achieved excellent results and maintained growth and the Group anticipates that
the second half working capital outflow will be reversed into the positive.
The Group has become a certified supplier of Huawei Technologies which is
China's largest next-generation telecommunications equipment manufacturer.
Additionally sales revenue from the OEM market has rapidly increased from #1.13
million in H1 2006 to #2.87 million in H1 2007, an increase of 154%.
Debtor days have been reduced from 102 days in H1 2006 to 78 days in H1 2007.
However in the second quarter central purchases by China Mobile and China Unicom
resulted in deliveries of larger quantities of back up batteries which were then
treated as sales revenue. However, payments had not been received as at 30 June
2007 in accordance with the terms of these contracts, as a consequence of which
the trade receivables increased by #5.81 million to #20.82 million compared with
#15.01 million at the end of last year.
Operation Review
Back up Batteries: The revenue of the back-up batteries business was #24.5
million in H1 2007, contributing 59% of the Group's total revenues. Profit
before tax was #3.3 million in H1 2007 an increase of 65% when compared with
#2.0 million in H1 2006.
China Mobile, China Unicom, China Telecom, China Netcom and China Tietong remain
the major customers of the Group. Sales revenues to these telecommunication
service operators continued to grow in H1 2007, up 51.3% to #17.4 million from
#11.5 million in H1 2006 contributing 71% of the total back up battery business
revenues.
Power Type Batteries: The revenue of power type batteries was #13.5 million in
H1 2007, contributing 32.5% of the total revenues and increasing by 105%
compared with #6.6 million in H1 2006; the profit before tax was #0.73 million
in H1 2007, an increase of 7.4% when compared with #0.68 million in H1 2006.
During the period, the daily production capacity for power type batteries
increased from 18,000 units to 24,000 units. This is the result of the
completion in May 2007 of the second phase of construction of a new production
facility undertaken by Best Co., the first phase having been completed in July
2006. The Group's primary market for these batteries is the electrical bicycle
manufacturers in Tianjin, Jiangsu and Zhejiang provinces. In this market, we
have targeted large manufacturers with an annual production of over 100,000
bicycles. In addition, the sales revenue from the retail market for electric
bicycles and accessories was #3.4 million in H1 2007, contributing 25.2% of the
total PTB revenue which represents a six fold increase on the #0.48 million
reported in H1 2006. The Group intends to develop the retail market for the
Group's power type batteries business in the future.
Turbine Business: The sales revenue of the turbine business was #3.6 million in
H1 2007 (compared with #6.6 million in H1 2006) representing 8.7% of Group
revenues and a marginal contribution to Group profits. The turbine business is
not expected to make a material contribution to the Group this financial year.
Dividend policy
Against a background of growing demands for its products, the Company has
invested significantly in expanding its manufacturing capacity. The directors
believe that investing for continued growth rather than distributing profits is
in the best interests of the Company and its shareholders at the current time.
Accordingly the directors are not recommending an interim dividend. A decision
concerning the sum to be paid in respect of the final dividend will be taken at
the end of the financial year.
Board changes
In the period there have been some changes to the Board; Zhu Shiping reached
retirement age and stepped down from the Board, Wang Zhaobin retired by
rotation, and David Thomas left the Board as non-executive director and Company
Secretary. On 12 July 2007 the Board appointed Zhou Weigang and Zhou Ping as
executive directors and Peter Crystal as a non-executive director to the Board
with immediate effect. These directors will be subject to retirement by
rotation at the AGM in 2008 at which time they will be eligible for re-election
by the shareholders.
Outlook
We will continue to focus on strategic fast growing sectors of the Chinese
market. The intention is to both increase the Company's own production capacity
and where appropriate make selective acquisitions. We look forward to reporting
continued progress for the whole year as a whole.
Cao Guifa
Chairman
17 September 2007
Consolidated income statement
For the six months ended 30 June 2007
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2007 2006 2006
(Unaudited) (Unaudited) (Audited)
#000 #000 #000
Revenue 41,592 28,367 66,454
Cost of sales (31,769) (20,624) (47,654)
Gross profit 9,823 7,743 18,800
Other operating income 614 517 790
Selling and distribution expenses (3,811) (3,351) (8,579)
Administrative expenses (2,639) (1,907) (5,172)
Other operating expenses (3) (5) (47)
Profit from operations 3,984 2,997 5,792
Finance income 48 27 91
Finance costs (563) (319) (822)
Profit before tax 3,469 2,705 5,061
Tax (458) (401) (789)
Profit after tax 3,011 2,304 4,272
Attibutable to:
Equity holders of the parent 2,870 2,045 4,003
Minority interests 141 259 269
3,011 2,304 4,272
Earnings per share in pence:
Basic 12.29p 10.03p 18.30p
Diluted 12.08p 9.88p 17.93p
All amounts relate to continuing operations.
Consolidated balance sheet
As at 30 June 2007
Notes 30 June 30 June 31 December
2007 2006 2006
(Unaudited) (Unaudited) (Audited)
#000 #000 #000
Assets
Non current assets
Property, plant and equipment 13,183 9,559 12,409
Other investment 131 - 130
Land use right 1,574 1,328 1,361
Other intangible assets 161 200 167
Deferred tax assets 118 27 31
15,167 11,114 14,098
Current assets
Inventories 17,135 7,026 10,122
Trade receivables 20,819 20,051 15,009
Other receivables and prepayments 8,542 6,780 7,224
Due from related parties 2,193 3,010 1,011
Short-term investments 578 2,214 947
Cash and cash equivalents 4,331 10,274 9,937
53,598 49,355 44,250
Total assets 68,765 60,469 58,348
Liabilities
Current liabilities
Bank borrowings 18,727 13,433 12,236
Trade payables 11,577 6,862 7,547
Notes payable 3,917 5,642 4,041
Other payables and accruals 6,740 8,164 6,805
Amount due to customers for construction 1,416 2,084 2,309
contract work
Due to related parties - 180 656
Income tax payable 199 164 145
Deferred tax liabilities 56 - 21
Total liabilities 42,632 36,529 33,760
Capital and reserves
Share capital 2,334 2,334 2,334
Share premium 8,630 8,630 8,630
Other reserves 2,916 2,916 2,916
Statutory reserves 5,071 4,024 5,071
Retained earnings 9,102 6,045 6,769
Foreign currency translation reserve (2,960) (1,146) (2,272)
Total equity attributable to equity holders
of the parent 25,093 22,803 23,448
Minority interests 1,040 1,137 1,140
Total equity and liabilities 68,765 60,469 58,348
Consolidated statement of changes in equity
For the six months ended 30 June 2007
Attributable to equity holders
Share Share Other Statutory Retained Currency Total Minority Total
capital premium reserves reserves earnings translation interests
reserve
#000 #000 #000 #000 #000 #000 #000 #000 #000
Balance as at 1 January 2006 2,000 3,875 2,916 4,024 3,837 (590) 16,062 16,062
-
Net profit for the financial - - - - 2,045 - 2,045 259 2,304
period
Foreign currency translation - - - - - (556) (556) (556)
Total recognized income and 1,489 1,748
expense
Acquisition of subsidiary - - - - - - - 878 878
Issue of ordinary shares on 314 4,716 - - - 5,030 - 5,030
placing
Share issue costs - (201) - - - - (201) (201)
Exercise of share options 20 240 - - - - 260 - 260
Share based payment expense
Employee share options - - - - 163 - 163 163
Balance as at 30 June 2006 2,334 8,630 2,916 4,024 6,045 (1,146) 22,803 1,137 23,940
(unaudited)
Net profit for the financial - - - - 1,958 - 1,958 10 1,968
period
Foreign currency translation - - - - - (1,126) (1,126) (7) (1,133)
Total recognized income and 832 835
expense
Transfer to statutory reserves - - - 1,047 (1,047) - - - -
Share based payment expense
Employee share options - - - - 163 - 163 - 163
Dividends paid - - - - (350) - (350) - (350)
Balance as at 31 December 2006 2,334 8,630 2,916 5,071 6,769 (2,272) 23,448 1,140 24,588
(audited)
Net profit for the financial - - - - 2,870 - 2,870 141 3,011
period
Foreign currency translation - - - - - (688) (688) 5 (683)
Total recognized income and 2,182 2,328
expense
Share based payment expense
Employee share options - - - - 163 - 163 - 163
Dividends paid to external - - - - (700) - (700) - (700)
shareholders
Dividends paid to minority - - - - - - - (246) (246)
Balance as at 30 June 2007 2,334 8,630 2,916 5,071 9,102 (2,960) 25,093 1,040 26,133
(unaudited)
Consolidated cash flow statement
For the six months ended 30 June 2007
Notes Six months Six months Year
ended ended ended
30 June 30 June 31 December
2007 2006 2006
(Unaudited) (Unaudited) (Audited)
#000 #000 #000
Net cash from operating activities (10,941) (3,011) 1,606
Cash flows from investing activities
Purchase of associate - - -
Purchase of land use right (241) - (807)
Purchase of property, plant and equipment (1,106) (1,025) (4,905)
Purchase of subsidiary undertakings - (499) 666
Purchase of investment - - (130)
Purchase of short-term investment 375 (88) 1,664
Proceeds from disposal of property, plant and
equipment
288 - 186
Cash flows used in investing activities (684) (1,612) (3,326)
Cash flows from financing activities
Net cash inflow from share placing - 5,163 5,089
Increase in short-term bank borrowings 6,454 1,350 153
Interest paid (493) (319) (822)
Dividends paid - - (350)
Cash flows from financing activities 5,961 6,194 4,070
Net increase in cash and cash equivalents (5,664) 1,571 2,350
Cash and cash equivalents at beginning of year 9,937 8,300 8,300
Foreign exchange differences 58 403 (713)
Cash and cash equivalents at end of period 4,331 10,274 9,937
Notes to the consolidated cash flow statement
(a) Cash flows from operating activities
Six months Six months Year ended
ended ended
30 June 2007 30 June 2006 31 December 2006
#000 #000 #000
(Unaudited) (Unaudited) (Audited)
Profit before tax 3,469 2,705 5,061
Adjustments for:
Amortisation of other intangible assets 7 1 14
Amortisation of land use right 34 65 29
Allowance for doubtful trade debts 546 - 104
Allowance for doubtful non-trade debts 10 - 200
Depreciation of property, plant and equipment 560 719 820
Losses on disposal of property, plant and equipment (10) - 21
Gain on disposal of short-term investment - - -
Profit on acquisition of subsidiary undertaking - 287 -
Share based payment expense 163 163 326
Financial income (48) (27) (91)
Financial expense 493 319 822
Operating profit before working capital changes 5,224 4,232 7,306
Working capital changes:
(Increase)/decrease in:
Inventories (6,990) (3,479) (6,392)
Trade receivables (8,572) (8,098) 714
Other receivables, deposits and prepayments (2,243) (3,300) (115)
Due from related parties 937 (1,047) 952
Increase/(decrease) in:
Trade payables 3,710 2,943 444
Other payable and accruals (2,480) 5,190 (593)
Notes payables (153) 1,516 (85)
Due to related parties - (585) (109)
Cash generated from/(used in) operations (10,567) (2,628) 2,122
Interest received 48 27 91
Income tax paid (422) (410) (607)
Net cash from operating activities (10,941) (3,011) 1,606
Notes to the consolidated financial statements
For the six months ended 30 June 2007
1. General information
China Shoto plc is a company incorporated in the United Kingdom on 10 May 2005
under the Companies Act 1985. The consolidated financial statements of the
Company for the six months ended 30 June 2007 comprise China Shoto plc (the '
Company') and its subsidiary undertakings (the 'Group').
The consolidated interim financial statements were authorised for issue on 17
September 2007.
2. Accounting policies
Basis of preparation
The unaudited consolidated financial information has been prepared using
accounting policies consistent with those International Financial Reporting
Standards and Interpretations in force ('IFRS'), as adopted by the European
Union, and on the basis of the accounting policies disclosed in the financial
statements for the year ended 31 December 2006, which are also expected to apply
for the year ending 31 December 2007. This report is prepared in compliance with
IAS 34 'Interim Financial Reporting'.
The comparatives for the full year ended 31 December 2006 are not the Company's
full statutory accounts for that year. A copy of the statutory accounts for that
year has been delivered to the Registrar of Companies. The auditors' report on
those accounts was unqualified, did not include references to any matters to
which the auditors drew attention by way of emphasis without qualifying their
report and did not contain a statement under section 237(2)-(3) of the Companies
Act 1985.
Foreign currencies
The functional currency of the subsidiary undertakings is Renminbi ('RMB'), and
the unaudited financial statements of the subsidiary undertakings have been
drawn up in RMB. The presentation currency of the Group is pounds sterling and
therefore the financial statements have been translated from RMB to pounds
sterling at the following exchange rates:
Period-end rates Average rates
30 June 2006 #1 = RMB 14.6280 #1 = RMB 14.2700
31 December 2006 #1 = RMB 15.3232 #1 = RMB 14.7505
30 June 2007 #1 = RMB 15.2455 #1 = RMB 15.1841
Assets and liabilities are translated into sterling at the closing rate, and all
income and expenses are translated at the average rate during the financial
period, being an approximation for the actual rates at the date of the
transactions. All resulting exchange differences are taken to the Exchange
reserve within equity.
3. Segment reporting
Reporting format
The primary segment reporting format is determined to be business segments as
the Group's risks and rates of return are affected predominantly by differences
in the products and services produced. The operating businesses are organized
and managed separately according to the nature of the products and services
provided, with each segment representing a strategic business unit that offers
different products and serves different markets. The operating businesses are
all located in the People's Republic of China.
Business segments
The Group is comprised of the following business segments:
The Power Type Batteries ('PTB') business segment is comprised of power-aided
bicycle batteries.
The Back up batteries business segment includes Value Regulated Lead Acid
Batteries and Flooded and Gel Batteries.
The Turbine business segment includes the development and construction of new
turbines and the refurbishment and reconstruction of existing turbines.
Allocation basis and transfer pricing
Segment results include items directly attributable to a segment as well as
those that can be allocated on a reasonable basis.
The following tables present certain sales, profit, assets, liability and other
information regarding the Group's business segment for the years ended 30 June
2007, 30 June 2006 and 31 December 2006.
Six months to June 30 2007 Back up PTB Turbine Eliminations Consolidated
Batteries
#000 #000 #000 #000 #000
Unaudited Unaudited Unaudited Unaudited Unaudited
Revenue:
Sales to external customers 24,525 13,465 3,602 - 41,592
Inter-segment sales 3 - - (3) -
Total revenue 24,528 13,465 3,602 (3) 41,592
Results:
Segment profit 3,302 726 1 - 4,029
Unallocated corporate expenses (560)
Profit from operations before
taxation 3,469
Income taxation (458)
Profit for the year 3,011
Six months to June 30 2006 Back up PTB Turbine Eliminations Consolidated
Batteries
#000 #000 #000 #000 #000
Unaudited Unaudited Unaudited Unaudited Unaudited
Revenue:
Sales to external customers 15,088 6,637 6,642 - 28,367
Inter-segment sales 176 - - (176) -
Total revenue 15,264 6,637 6,642 (176) 28,367
Results:
Segment profit 1,952 683 620 - 3,255
Unallocated corporate expenses (550)
Profit from operations before 2,705
taxation
Income taxation (401)
Profit for the year 2,304
Twelve months to December 31 Back up PTB Turbine Eliminations Consolidated
2006 Batteries
#000 #000 #000 #000 #000
Audited Audited Audited Audited Audited
Revenue:
Sales to external customers 39,218 20,326 6,910 - 66,454
Inter-segment sales 1,706 1,166 - (2,872) -
Total revenue 40,924 21,492 6,910 (2,872) 66,454
Results:
Segment profit 3,961 1,566 552 - 6,079
Unallocated corporate expenses (1,018)
Profit from operations before 5,061
taxation
Income taxation (789)
Profit for the year 4,272
4. Income Tax
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2007 2006 2006
(Unaudited) (Unaudited) (Audited)
#000 #000 #000
Income tax expense is as follows:
Current income tax 509 406 778
Deferred income tax (51) (5) 11
458 401 789
5. Dividends
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2007 2006 2006
#000 #000 #000
(Unaudited) (Unaudited) (Audited)
Interim dividends 700 - 350
China Shoto plc declared a dividend of 1.5p per ordinary share amounting to
#350,215.5 on 3 November 2006 to its shareholders at that date.
China Shoto plc declared a dividend of 3p per ordinary share amounting to
#700,431 on 26 April 2007 to its shareholders at that date.
6. Earnings per share
Earnings for the purpose of basic and diluted earnings per share are the net
profit for the financial period for the six months ended 30 June 2007 of
#2,870,000 (30 June 2006: #2,045,000) and twelve months ended 31 December 2006
of #4,003,000.
The weighted average number of ordinary shares used in the calculation of
earnings per share has been derived as follows:
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2007 2006 2006
#000 #000 #000
(Unaudited) (Unaudited) (Audited)
Number of ordinary shares
Weighted average number of ordinary
shares - basic 23,343,770 20,388,348 21,880,671
Dilutive effect of share options 411,971 320,746 441,050
Weighted average number of ordinary
shares - diluted 23,755,741 20,709,094 22,321,721
7. Share capital
30 June 30 June 31 December
2007 2006 2006
#000 #000 #000
(Unaudited) (Unaudited) (Audited)
Authorised
100,000,000 Ordinary shares of 10p each 10,000 10,000 10,000
Allotted, called up and fully paid:
23,343,770 (2005 : 20,000,020) Ordinary shares
of 10p each 2,334 2,334 2,334
The numbers of share capital is 20,000,020 as at 1 January 2006. The changes
from1 January 2006 are the following:
On 3 April and 5 May 2006, 200,000 ordinary shares of 10p were issued in respect
of the exercise of share options granted to the Company's advisers at the time
of the flotation. The weighted average price of options exercised in the year
was 130 pence.
On 12 June 2006, 3,143,750 ordinary shares of 10p were issued in connection with
the placing.
8. Other
Copies of this document will be made available to the public free of charge for
a period of one month at the offices of Seymour Piece Limited, 20 Old Bailey,
London, EC4M 7EN.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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