-3x Short China Regulatory News (CHNS)

18 Sep 2007 07:00

China Shoto plc18 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 batteriesand power supply systems, announces its unaudited Interim Results for the sixmonths 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 externalfactors such as increased raw materials cost, Renminbi appreciation andincreased competition. We look forward to the future with confidence." - Ends - For further information:China Shoto plcCao Guifa, Executive Chairman Tel: +44 (0) 20 7398 7700 www.chinashoto.com Seymour Pierce LimitedStuart Lane / John Depasquale Tel: +44 (0) 20 7107 8000jdp@seymourpierce.com www.seymourpierce.com Media enquiries:Abchurch CommunicationsHenry Harrison-Topham / Ariane Comstive Tel: +44 (0) 20 7398 7705henry.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 ended30 June 2007. Building on a strong performance in 2006 the Group has continuedits progress, which is an endorsement of our strategy of focusing sales effortson growth opportunities in our core markets. In H1 2007, the Group achieved sales revenue of £41.6 million, an increase of46.5% compared with £28.4 million in H1 2006; net profit was £3.0 million, anincrease of 30.4% compared with £2.3 million in H1 2006. Despite a number of adverse external factors such as increased raw materialscost, Renminbi appreciation and increased competition in H1 2007, the Group hasachieved excellent results and maintained growth and the Group anticipates thatthe second half working capital outflow will be reversed into the positive. The Group has become a certified supplier of Huawei Technologies which isChina's largest next-generation telecommunications equipment manufacturer.Additionally sales revenue from the OEM market has rapidly increased from £1.13million 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 Unicomresulted in deliveries of larger quantities of back up batteries which were thentreated as sales revenue. However, payments had not been received as at 30 June2007 in accordance with the terms of these contracts, as a consequence of whichthe 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 £24.5million in H1 2007, contributing 59% of the Group's total revenues. Profitbefore 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 remainthe major customers of the Group. Sales revenues to these telecommunicationservice 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 businessrevenues. Power Type Batteries: The revenue of power type batteries was £13.5 million inH1 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 millionin 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 batteriesincreased from 18,000 units to 24,000 units. This is the result of thecompletion in May 2007 of the second phase of construction of a new productionfacility undertaken by Best Co., the first phase having been completed in July2006. The Group's primary market for these batteries is the electrical bicyclemanufacturers in Tianjin, Jiangsu and Zhejiang provinces. In this market, wehave targeted large manufacturers with an annual production of over 100,000bicycles. In addition, the sales revenue from the retail market for electricbicycles and accessories was £3.4 million in H1 2007, contributing 25.2% of thetotal PTB revenue which represents a six fold increase on the £0.48 millionreported in H1 2006. The Group intends to develop the retail market for theGroup's power type batteries business in the future. Turbine Business: The sales revenue of the turbine business was £3.6 million inH1 2007 (compared with £6.6 million in H1 2006) representing 8.7% of Grouprevenues and a marginal contribution to Group profits. The turbine business isnot 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 hasinvested significantly in expanding its manufacturing capacity. The directorsbelieve that investing for continued growth rather than distributing profits isin the best interests of the Company and its shareholders at the current time.Accordingly the directors are not recommending an interim dividend. A decisionconcerning the sum to be paid in respect of the final dividend will be taken atthe end of the financial year. Board changes In the period there have been some changes to the Board; Zhu Shiping reachedretirement age and stepped down from the Board, Wang Zhaobin retired byrotation, and David Thomas left the Board as non-executive director and CompanySecretary. On 12 July 2007 the Board appointed Zhou Weigang and Zhou Ping asexecutive directors and Peter Crystal as a non-executive director to the Boardwith immediate effect. These directors will be subject to retirement byrotation at the AGM in 2008 at which time they will be eligible for re-electionby the shareholders. Outlook We will continue to focus on strategic fast growing sectors of the Chinesemarket. The intention is to both increase the Company's own production capacityand where appropriate make selective acquisitions. We look forward to reportingcontinued progress for the whole year as a whole. Cao Guifa Chairman17 September 2007 Consolidated income statementFor 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 66,454Cost of sales (31,769) (20,624) (47,654)Gross profit 9,823 7,743 18,800Other operating income 614 517 790Selling 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 5,792Finance income 48 27 91Finance costs (563) (319) (822)Profit before tax 3,469 2,705 5,061Tax (458) (401) (789)Profit after tax 3,011 2,304 4,272Attibutable to:Equity holders of the parent 2,870 2,045 4,003Minority interests 141 259 269 3,011 2,304 4,272Earnings per share in pence:Basic 12.29p 10.03p 18.30pDiluted 12.08p 9.88p 17.93p All amounts relate to continuing operations. Consolidated balance sheetAs at 30 June 2007 Notes 30 June 30 June 31 December 2007 2006 2006 (Unaudited) (Unaudited) (Audited) £000 £000 £000AssetsNon current assetsProperty, plant and equipment 13,183 9,559 12,409Other investment 131 - 130Land use right 1,574 1,328 1,361Other intangible assets 161 200 167Deferred tax assets 118 27 31 15,167 11,114 14,098 Current assetsInventories 17,135 7,026 10,122Trade receivables 20,819 20,051 15,009Other receivables and prepayments 8,542 6,780 7,224Due from related parties 2,193 3,010 1,011Short-term investments 578 2,214 947Cash and cash equivalents 4,331 10,274 9,937 53,598 49,355 44,250 Total assets 68,765 60,469 58,348 LiabilitiesCurrent liabilitiesBank borrowings 18,727 13,433 12,236Trade payables 11,577 6,862 7,547Notes payable 3,917 5,642 4,041Other payables and accruals 6,740 8,164 6,805Amount due to customers for construction 1,416 2,084 2,309contract workDue to related parties - 180 656Income tax payable 199 164 145Deferred tax liabilities 56 - 21 Total liabilities 42,632 36,529 33,760 Capital and reservesShare capital 2,334 2,334 2,334Share premium 8,630 8,630 8,630Other reserves 2,916 2,916 2,916Statutory reserves 5,071 4,024 5,071Retained earnings 9,102 6,045 6,769Foreign currency translation reserve (2,960) (1,146) (2,272)Total equity attributable to equity holdersof 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 equityFor 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 2,304period Foreign currency translation - - - - - (556) (556) (556)Total recognized income and 1,489 1,748expense Acquisition of subsidiary - - - - - - - 878 878Issue of ordinary shares on 314 4,716 - - - 5,030 - 5,030placing Share issue costs - (201) - - - - (201) (201)Exercise of share options 20 240 - - - - 260 - 260Share based payment expenseEmployee 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 1,968period Foreign currency translation - - - - - (1,126) (1,126) (7) (1,133)Total recognized income and 832 835expense Transfer to statutory reserves - - - 1,047 (1,047) - - - - Share based payment expenseEmployee share options - - - - 163 - 163 - 163Dividends 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 3,011period Foreign currency translation - - - - - (688) (688) 5 (683)Total recognized income and 2,182 2,328expense Share based payment expense Employee share options - - - - 163 - 163 - 163Dividends 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 statementFor 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) 1,606Cash flows from investing activitiesPurchase 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) 666Purchase of investment - - (130)Purchase of short-term investment 375 (88) 1,664Proceeds from disposal of property, plant andequipment 288 - 186Cash flows used in investing activities (684) (1,612) (3,326)Cash flows from financing activitiesNet cash inflow from share placing - 5,163 5,089Increase in short-term bank borrowings 6,454 1,350 153Interest 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 2,350Cash and cash equivalents at beginning of year 9,937 8,300 8,300Foreign 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 5,061Adjustments for: Amortisation of other intangible assets 7 1 14Amortisation of land use right 34 65 29Allowance for doubtful trade debts 546 - 104 Allowance for doubtful non-trade debts 10 - 200 Depreciation of property, plant and equipment 560 719 820Losses 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 326Financial income (48) (27) (91)Financial expense 493 319 822 Operating profit before working capital changes 5,224 4,232 7,306Working capital changes: (Increase)/decrease in: Inventories (6,990) (3,479) (6,392)Trade receivables (8,572) (8,098) 714Other receivables, deposits and prepayments (2,243) (3,300) (115)Due from related parties 937 (1,047) 952Increase/(decrease) in: Trade payables 3,710 2,943 444Other 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) 2,122Interest received 48 27 91Income tax paid (422) (410) (607) Net cash from operating activities (10,941) (3,011) 1,606 Notes to the consolidated financial statementsFor the six months ended 30 June 2007 1. General information China Shoto plc is a company incorporated in the United Kingdom on 10 May 2005under the Companies Act 1985. The consolidated financial statements of theCompany 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 17September 2007. 2. Accounting policies Basis of preparation The unaudited consolidated financial information has been prepared usingaccounting policies consistent with those International Financial ReportingStandards and Interpretations in force ('IFRS'), as adopted by the EuropeanUnion, and on the basis of the accounting policies disclosed in the financialstatements for the year ended 31 December 2006, which are also expected to applyfor the year ending 31 December 2007. This report is prepared in compliance withIAS 34 'Interim Financial Reporting'. The comparatives for the full year ended 31 December 2006 are not the Company'sfull statutory accounts for that year. A copy of the statutory accounts for thatyear has been delivered to the Registrar of Companies. The auditors' report onthose accounts was unqualified, did not include references to any matters towhich the auditors drew attention by way of emphasis without qualifying theirreport and did not contain a statement under section 237(2)-(3) of the CompaniesAct 1985. Foreign currencies The functional currency of the subsidiary undertakings is Renminbi ('RMB'), andthe unaudited financial statements of the subsidiary undertakings have beendrawn up in RMB. The presentation currency of the Group is pounds sterling andtherefore the financial statements have been translated from RMB to poundssterling at the following exchange rates: Period-end rates Average rates 30 June 2006 £1 = RMB 14.6280 £1 = RMB 14.270031 December 2006 £1 = RMB 15.3232 £1 = RMB 14.750530 June 2007 £1 = RMB 15.2455 £1 = RMB 15.1841 Assets and liabilities are translated into sterling at the closing rate, and allincome and expenses are translated at the average rate during the financialperiod, being an approximation for the actual rates at the date of thetransactions. All resulting exchange differences are taken to the Exchangereserve within equity. 3. Segment reporting Reporting format The primary segment reporting format is determined to be business segments asthe Group's risks and rates of return are affected predominantly by differencesin the products and services produced. The operating businesses are organizedand managed separately according to the nature of the products and servicesprovided, with each segment representing a strategic business unit that offersdifferent products and serves different markets. The operating businesses areall 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-aidedbicycle batteries. The Back up batteries business segment includes Value Regulated Lead AcidBatteries and Flooded and Gel Batteries. The Turbine business segment includes the development and construction of newturbines and the refurbishment and reconstruction of existing turbines. Allocation basis and transfer pricing Segment results include items directly attributable to a segment as well asthose that can be allocated on a reasonable basis. The following tables present certain sales, profit, assets, liability and otherinformation regarding the Group's business segment for the years ended 30 June2007, 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 UnauditedRevenue:Sales to external customers 24,525 13,465 3,602 - 41,592Inter-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 beforetaxation 3,469Income 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 UnauditedRevenue:Sales to external customers 15,088 6,637 6,642 - 28,367Inter-segment sales 176 - - (176) - Total revenue 15,264 6,637 6,642 (176) 28,367 Results:Segment profit 1,952 683 620 - 3,255Unallocated corporate expenses (550)Profit from operations before 2,705taxationIncome taxation (401)Profit for the year 2,304 Twelve months to December 31 Back up PTB Turbine Eliminations Consolidated2006 Batteries £000 £000 £000 £000 £000 Audited Audited Audited Audited AuditedRevenue:Sales to external customers 39,218 20,326 6,910 - 66,454Inter-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 5,061taxationIncome 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 778Deferred 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 netprofit 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 2006of £4,003,000. The weighted average number of ordinary shares used in the calculation ofearnings 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 sharesWeighted average number of ordinaryshares - basic 23,343,770 20,388,348 21,880,671Dilutive effect of share options 411,971 320,746 441,050Weighted average number of ordinaryshares - 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 10,000Allotted, called up and fully paid:23,343,770 (2005 : 20,000,020) Ordinary sharesof 10p each 2,334 2,334 2,334 The numbers of share capital is 20,000,020 as at 1 January 2006. The changesfrom1 January 2006 are the following: On 3 April and 5 May 2006, 200,000 ordinary shares of 10p were issued in respectof the exercise of share options granted to the Company's advisers at the timeof the flotation. The weighted average price of options exercised in the yearwas 130 pence. On 12 June 2006, 3,143,750 ordinary shares of 10p were issued in connection withthe placing. 8. Other Copies of this document will be made available to the public free of charge fora 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