NTLG.L Regulatory News (NTLG)

New Trend Lifestyle Group Plc

("NTLG" or the "Company")

Interim results for the 6 months ended 30 June 2013

New Trend Lifestyle Group (AIM: NTLG), the Singapore-based Feng Shui products and services group, announces its interim results for the six months to 30 June 2013.

At present, the majority of NTLG's business is transacted in Singapore Dollars (S$) and therefore Group figures are presented in that currency (S$1.93 to £1.00 on 30th June 2013).

Highlights

Financial

Operational

Post Period

* Before other income

** Before other income and exceptional cost relating to AIM admission

Robert Goddard, Chairman of NTLG, commented:

"It has been an exciting period for NTLG as it develops its retail product and service model in China and trading performance has strengthened in Singapore.

The strategy to link and cross-sell a range of Feng Shui-related products and services is now in its early stages of implementation. The mid-brain training programme and temple management service are two examples. This renewed clarity of purpose has enabled us to reduce overhead cost in both China and Singapore and support profitability.

We look forward to seeing the fruits of the imaginative and hard work from our loyal management and staff"

Chairman's Statement

Summary

Trading, balance sheet and cash flow

The Company is pleased to report improved trading. At S$5,617k, sales of product and services overall were 7.9% above the same period in 2012, when they stood at S$5,204k. Like-for-like sales were almost constant at S$4,132k (H1 2012: S$4,173k). Though containing some element of growth from operation in China, these turnover figures reflect largely the performance of the Singapore operation, which accounted for nearly 95% of Group sales in the period.

The as-reported cost of sales includes commission expense and certain sales charges. Adjusting for these for both half years in order to provide a useful period-to-period comparison reveals a pleasing increase in gross margin, which rose to 90.2% from 86.8% in the first half of 2012.

Expenses before other income and AIM admission costs were well-contained at S$3,312k, a 4.6% drop on the same period last year. The Other Income, amounting to S$732k was mainly a gain on sale of a property and income from rented property. This was substantially above last yearÕs S$210k; largely because of the gain on the sale of the property. The proceeds from disposal were used to pay down a loan previously secured against the now-disposed-of property.

For much of the first half of 2012 there was little activity in China and this explains the sharp rise in expenses from SG$131k to SG$589k in the first half of the current year. 

The as-reported operating profit for the period was S$1,392k against a loss of S$733k last year. Adjusting for AIM admission costs of S$1,157 in H1 of 2012 and for other income in both periods, results in a more than tripling of operating profit from S$214k to S$660k.

A net increase in cash and cash equivalents in the period of S$255k was achieved, as a result of the cash flow from operating activities of S$451k offset by changes in working capital of S$435k and income tax paid of S$202k. The issue of convertible loan notes in April 2013 of S$192k and the sale of the property of Sims Avenue (net of loan repayment) resulted in the overall cash inflow in the period.

Marketing and business development

Additional Feng Shui-related services have been trialled and developed in Singapore and China. These include "Temple Management"and "Mid-brain Training". 

Based on the experience of the two trial outlets in Shenzhen, our business model in China now envisages larger outlets that will be franchised rather than operated directly by the company. 

Outlook

Though not without its challenges, the board expects that the clarification of its business model in China, tightened cost control in both China and Singapore, together with the roll-out of the new franchising model in China and the creation of new sources of revenue, mean that NTLG is well positioned for further growth.

Business description

New Trend Lifestyle ("NTL") is an established and profitable business offering products and services based on Feng Shui and the associated Emperor Star Astrology. Feng Shui is a 5,000-year-old Chinese system of geomancy intended to help individuals improve their lives by promoting positive energy or "Qi". Numerous people, especially those from Chinese cultures, follow the principles of Feng Shui. However, it is becoming increasingly important to multinational corporations who operate in the Far East including Disney Land in Hong Kong and Donald Trump.

Established in 2005 by Grand Master Hillary Phang, the Company is based in Singapore where it has its head office and eight retail outlets, all of which are profitable. The Company now employs 78 people in Singapore and 23 in China.

The two main drivers of the business are the provision of Feng Shui services and products. The retail outlets sell items such as precious stones, crystals and other "energy" products designed for various purposes. At the same time, the shops also promote NTL's palmistry, astrology and geomancy services. Those who receive consultations are led to the purchase of ornaments and charms.

Profit & loss account and trading

Sales

Revenue from services in Singapore strengthened considerably by 15.2% from S$1,776k in H1 of 2012 to S$2,045k in H1 of 2013. Offsetting this slightly was a modest decrease of S$155k in sales of product to S$3,272. Overall sales in Singapore were S$5,319k compared with S$5,204k.

This overall 2.2% improvement in sales in Singapore versus flat like-for-like sales demonstrates that management has responded well to the continuous change in demographics and spending habits by opening of new outlets and retiring those that have experienced a natural decline.

At S$298k, sales In China during the period amounted to 5.3% of Group sales (H2 2012: nil).

In percentage terms the two directly-managed trial outlets in Shenzhen showed strong growth in sales for the period compared with the last six months of 2012 and at nearly 92%, margins were very strong. However, being small trial outlets, their profitability was not sufficient to justify continued trading. 

Development in China has been slower than expected. Partly, this is due to caution over expanding too fast and partly because the trial outlets established in the second half of 2012 showed that a style of outlet is needed that is more specific to China. As intended, the operation of the trial outlets in Shenzhen have helped refine the approach needed for China. In this sense, the exercise has been a success but it is disappointing that growth has not been faster.

The Company is now embarking on expanding its presence by way of large franchised outlets. The first such was opened In Anhui at the end of June 2013.

Gross profit

Gross profit at S$3,972k (H1 2012: S$3,684) was held at the same percentage of sales (71%) as the same period last year. However, before commissions and certain sales charges, the gross profit margin improved to 90% from 87% last year.

Other income

Other income of S$732k was comprised mainly of a gain of S$482k on the sale of a property and S$198k in property rental income. This was substantially above last year's S$210k when there was no gain on the sale of property.

Expenses

Recurring administrative expenses were broadly in line with the same period last year, with the reduction in finance lease payments, which had been reclassified to finance expense in the current period. These were mainly offset by an increase in staff cost to support expansion of the business, and additional depreciation as a result of recent refurbishments.

Development in China in the first half of 2012 was only just getting underway and S$131k was spent in that period. During the first half of 2013, S$589k was expended in building our position from our main offices in Shenzhen.

Profit

As expected, the China operation recorded a loss. This amounted to S$277k (H1 2012: S$131k). In Singapore on the other hand, after adjusting for other income in both periods and for the costs of AIM admission in the first half of 2012, operating profit rose by S$446k to S$660k. After the inclusion of other income and AIM admission costs, an operating loss in H1 2012 becomes an operating profit of S$1,392k.The increase in finance expense of S$797k was a result of inclusion of finance lease expenses in the current period.

Balance sheet

Particularly notable features of the balance sheet were the effects of the sale during the period of the Sims Avenue property. This meant that the "Asset held for sale" of S$2,873k was eliminated and this more than accounted for the reduction S$2,351k in "Total assets" from S$12,653k to S$10,302k. There was a corresponding elimination of the S$ 2,348k "Financial liabilities" present at the start of the period.

Cash flow

After adding back AIM admission costs of S$1,157k "Profit before tax" for the first half of 2012 was S$372k compared with S$543k in the first half of 2013. After adjusting for non-cash items, cash flow from operations but before changes in working capital and tax paid, inward cash flow was S$451k (H1 2012: S$609k). A reduction in inventories (S$55k) was offset by an increase in debtors (S$102k) and a decrease in creditors (S$388k), resulting in a net decrease in cash flow of S$435k from working capital changes. The increase of debtors was as a result of an increase in credit sales in China and the decrease in creditors was as a result of prompt payment to suppliers close to the period end. After payment of S$202k tax, net cash outflow before financing and investing activities was S$186k compared with cash inflow of S$583k in H1 2012, before AIM admission costs.

Post balance sheet events

Due to other commitments, Lawrence Cheung resigned as main board director but we are pleased to say that he will remain part-time on the executive team. The role of interim finance director was assumed by Ajay Rajpal.

Board members were each granted 150,000 options on ordinary shares.

Following clarification of commercial objectives, cost reduction programmes have been implemented in Singapore and China.

Marketing and business development

Using its strong brand and presence in Singapore, NTL has developed a new programme called ÔMid-brain TrainingÕ. This programme is designed to promote family harmony and help children develop their senses to such a high degree that they are able to perceive features of the world about them that would not normally be achieved in a conventional educational environment.

Other initiatives designed to increase turnover and widen the revenue base include the sale of additional Feng Shui-related, company-branded products. Also just beginning its roll-out is a temple management service that will include design and operation of temples, as well as construction management of new temples.

A market study is underway that will assess the potential of using the NTL brand to endorse a range of products that have suitable Feng Shui connotations. These may include items of furniture and artwork.

The frequency of client seminars will be increased over the coming months. These events, hosted by Grand Master Phang have proven to be effective in boosting demand for NTL's products and services.

In co-operation with China Telecom, NTL has developed an "app" that enables on line-guidance to individuals seeking auspicious dates for life events and recommendations for their major decisions, such as choice of partner.

Outlook

In Singapore, we will continue to refresh our network of retail outlets and keep pace with ever‑changing demographics. Unless additional ideal sites become available, we do not intend to increase the total number of outlets but instead work to enhance overall profitability by promoting the sale of higher margin products and selling additional services such as the "Mid-brain" development programme.

In China, negotiations are underway with a number of potential franchisees for shops adopting the new franchise model. We expect to conclude at least some of these during the second half of 2013 and to accelerate in 2014. In order to support this kind of business model, new managers have been recruited who have experience of franchise management both in in China and overseas.

Clarification of the business model for China has enabled a simplification of our marketing effort. This has resulted in a reduction in overheads and will mean that breakeven point will be brought forward.

Also in China, we have a programme to roll out our "Temple Management" service.

With greater profitability in Singapore and an increased pace of development in China, we look forward to improved overall profitability. Revenue investment to develop our network in China will continue and until at least the end of 2013, the cost of the China operations will continue to exceed the gross profit and licence fee income.

Robert Goddard

Chairman

New Trend Lifestyle Group Plc

Consolidated Comprehensive Income Statement

For the period to 30 June 2013

New Trend Lifestyle Group Plc

Consolidated Statement of Financial Position as at 30 June 2013

New Trend Lifestyle Group Plc

Consolidated Statement of Cash Flows

For the six months to 30 June 2013

New Trend Lifestyle Group Plc

Consolidated statement of changes in equity

For six months to 30 June 2013

New Trend Lifestyle Group Plc

Notes to the Interim Financial Information

1. General Information

New Trend Lifestyle Group Plc ("NTLG" or "Group") is a public limited company incorporated in England and Wales with company number 8000104 and is quoted on the AIM market of the London Stock Exchange Plc.

2. Basis of Preparation

This interim report, which incorporates the financial information of the Company, has been prepared using the historical cost convention, on a going concern basis and in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union, using accounting policies which are consistent with those set out in the financial statement for the year ended 31 December 2012.

Taxes

Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected total annual earnings.

Standards and Interpretations adopted with no material effect on financial statements

There are no IFRS or IFRIC interpretations that are effective for the first time in this financial period that would be expected to have a material impact on the Group.

There are no other IFRS or IFRIC interpretations that are not yet effective that would be expected to have material impact on the Group.

3. Segmental Analysis

Segmental reporting

In the opinion of the Directors the Group has one class of business, being the provider of Feng Shui products and services in Singapore and mainland China.

The Group's primary reporting format is determined by the geographical segment according to the location of its establishments. There are currently two geographic reporting segments: Singapore and China.

4. Operating loss for the period is stated after charging/(crediting)

5. Directors emoluments

6. Profit/(Loss) per share

Earnings per share has been calculated on the net basis on the profit after tax of SGD383,000 (31 December 2012 Ð loss SGD495,000; 30 June 2012 - loss SGD872,000) using the weighted average number of ordinary shares in issue of 94,114,849 (fully diluted Ð 103,000,000) (31 December 2012 Ð 94,015,849; 30 June 2012 Ð 9,868,159).

Earnings per share before admission costs has been calculated by adding back AIM admission costs to the profit after tax using the weighted average number of ordinary shares in issue.

7. Called up Share Capital

The issued share capital as at 30 June 2013 was 100,000,000 Ordinary Shares of 0.1p each.

8. Cash and cash equivalents

9. On 8 May 2013, £100,000 convertible loan notes (Òloan notesÓ) were issued with a final repayment date of 30 April 2016. The loan notes bear interest at 12 per cent annum and will be convertible by the note holder into new ordinary shares in the company at a price of 10p per ordinary share at any time between the date of issue and the third anniversary thereof.

10. Related-party transactions

Transactions between the Group and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note.

11. Events subsequent to 30 June 2013

On 31 July 2013, the company granted options over 600,000 ordinary shares in the capital of the company to be divided equally among the directors. The exercise price of the option is 8p per share and can be exercised at any time from date of grant until 31 July 2023 at which time any unexercised options will be cancelled.

12. The unaudited results for period ended 30 June 2013 do not constitute statutory accounts within the meaning of Section 435 of the Companies Act 2006. The comparative figures for the period ended 31 December 2012 for NTLG extracted from the audited financial statements which contained an unqualified audit report and did not contain statements under Sections 498 to 502 of the Companies Act 2006.

13. This interim financial statement will be, in accordance with Rule 26 of the AIM Rules for Companies, available shortly on the Company's website at www.newtrendlifestylegroup.com.