TIDMCHRR
RNS Number : 9363Y
China Rerun Chemical Group Ltd
31 January 2014
CHINA RERUN CHEMICAL GROUP LTD
("China Rerun" or the "Group")
Final results for the period from 30 May 2012 to 31 August
2013
China Rerun Chemical Group Ltd (CHRR.L), the producer of
lubricant products for the People's Republic of China's ("PRC")
domestic automotive, industrial and agricultural markets, today
announces its audited consolidated results for the period from 30
May 2012 to 31 August 2013.
As part of the Group's restructuring in anticipation of its
Admission to AIM, a new operating subsidiary was incorporated in
May 2012 which took over and commenced trading activities in March
2013. The final results therefore are for the 15 month period from
incorporation to 31 August 2013 of which only six months trading
results, from 1 March 2013 to 31 August 2013 ("the period"), are
included. For comparative purposes, trading results for the year
ended 31 August 2012 and 31 August 2013 (pro-forma results) are
included in the Chairman's Statement and Financial Review. The
pro-forma results are presented separately in the note 5 of the
announcement results.
Financial Highlights
Audited Pro forma FY2012 Growth (FY2013
30 May 2012 FY2013 and FY2012)
to 31 August
2013
---------------- -------------- ----------- ------------ ---------------
Revenue RMB 150.71m RMB273.29m RMB 226.13m + 20.9%
---------------- -------------- ----------- ------------ ---------------
Gross profit RMB 39.35m RMB 72.78m RMB59.78m +21.7%
---------------- -------------- ----------- ------------ ---------------
Gross margin 26.1% 26.6% 26.4% 20bps
---------------- -------------- ----------- ------------ ---------------
Pre-tax profit RMB25.58m RMB45.02m RMB26.87 +67.6%
---------------- -------------- ----------- ------------ ---------------
Indicative exchange rate as at 31 August 2013: GBP1: RMB
9.56
Source: www.oanda.com
Operational Highlights
-- Like for like sales volume was 14,488,965 litres, up 15% compared with FY2012
-- Introduced eight new types of lubricant oils, raising quality
and specification of the Group's lubricants offering
-- Attained ISO 14001 accreditation for environmental controls
and OHSAS 18001 accreditation for health and safety
-- Brand recognition and product quality allowed for passing on
of raw material costs, maintaining margin
-- Consolidated distribution network, with fewer distributors
covering larger sale areas, setting higher sales targets with
average revenue per distributor increasing to RMB 7.6m (2012: RMB
5.6m)
-- Reduction in sales commission enabled savings to be made to distribution costs
-- Meeting growing demand for high quality lubricants in the PRC
driven by the rise in volume of automotive sales
Commenting on the results, Mr Xinghe Wu, Executive Chairman of
China Rerun said:
"In our 20(th) year, we are delighted to present an excellent
set of results coupled with our recent admission to AIM. The market
is growing and changing rapidly and with our robust financial base
and our high quality branded products, we are strongly positioned
to take advantage of commercial opportunities and grow our market
share."
For further enquiries, please visit www.chinarerun.com/ or
contact:
China Rerun Xinghe Wu +86 459 666 9777
Yan Liu www.chinarerun.com/
Nick Lyth +44 776 990 6686
-------------------------- ----------------------- -----------------------------
Cairn Financial Advisers
LLP Jo Turner
(Nominated Adviser) Liam Murray +44 20 7148 7905
-------------------------- ----------------------- -----------------------------
Beaufort Securities
Limited Guy Wheatley
(Broker) Chris Rourke +44 20 7382 8300
-------------------------- ----------------------- -----------------------------
Cardew Group Shan Shan Willenbrock +44 20 7930 0777
(Financial PR) Georgina Hall
Tom Horsman chinarerun@cardewgroup.com.
-------------------------- ----------------------- -----------------------------
Notes to Editors
China Rerun Chemical Group Ltd is an established and profitable
producer of lubricant products for the PRC's domestic automotive,
industrial and agricultural markets. Based in Daqing, northeastern
China, it operates principally under the "Runyuan" and "Black E"
brands. The Group's products are sold through a network of third
party distributors across 13 provinces and two municipalities of
the PRC to end users, some of whom operate branded automotive
garages.
Chairman's Statement
Introduction
I am pleased to report our first set of financial results since
China Rerun was admitted to trading on AIM on 16 October 2013,
which also marked our 20(th) anniversary. Our listing on AIM
represents a significant milestone for the business and we believe
it will create commercial opportunities as well as enhance our
profile and position as a leading lubricant oil producer in the
PRC.
The Group commenced trading in March 2013 having taken over the
principal operating activities of the business as part of its
restructuring in anticipation of its Admission to AIM. The trading
results therefore reflect the six months from 1 March 2013 to 31
August 2013 ("the period"). For comparative purposes, trading
results for the year ended 31 August 2012 and 31 August 2013
(pro-forma results) are included in the Financial Review.
It is particularly pleasing to report a positive and strong set
of results. The Group audited revenue for the fifteen-month period
to 31 August 2013 was RMB 150.71m with the full year Group
pro-forma revenue FY2013 being RMB 273.29m (FY2012: RMB 226.13m)
representing growth of 20.9%. The Group achieved a pro-forma
pre-tax profit of RMB 45.02m in FY2013, up 67.6% on the prior year
(FY2012: RMB 26.87m) which takes into account the costs of listing.
Pre-tax profit for the period was RMB 25.58m. The significant
increase in revenue and profit continues the positive growth trend
since we began trading 20 years ago, driven by a solid business,
strong brand recognition, which is underpinned by increased demand
for high quality lubricant oils in our domestic market.
We upgraded the quality and specification of our lubricant oils,
raised prices by an average of 5%, consolidated the distributor
network and reduced sales staff commissions. One of our stated
goals was to restructure the distributor base to support our
intentions of broadening our geographic representation in the PRC.
At the period end, the Group had 36 distributors (FY2012: 40) which
was a result of Group policy of retaining only high quality
distributers that are able to meet higher sales targets for our
premium quality lubricant oils. This also led to a reduction in
pro-forma sales and distribution costs amounting to RMB14.19m
(FY2012: RMB27.14 m). Sales volume was 14,488,965 litres, up 15%
compared with FY2012 at 12,584,002 litres. Although this will have
led to slower volume growth rate, management consider the shift in
emphasis towards high quality distributors successful as the
average revenue per distributor increased to RMB 7.6m (2012: RMB
5.6m). It remains our intention to continue to expand our network
with high quality distributors.
Growing Demand
We manufacture 37 types of lubricant oils for the automotive,
industrial and construction industries, as well as one anti-freeze
product. More than 70% of our lubricant oils are supplied to the
automotive industry, which continues to expand at an impressive
rate. According to the Chinese Automotive Industry Association, car
sales reached 22 million units in 2013 (2012: 19 million units)
driven by increased purchasing power as more people aspire to
owning a car, particularly in tier two, three and four cities
across the PRC. The expansion of the primary market also means a
growth in the secondary market, which is even more important for
our business as these second hand cars are no longer under dealer
warranty service restrictions. This growth in the domestic
automotive industry has benefitted our business and we expect the
trend to continue into FY2014 and beyond. As a direct result,
demand for lubricant oils is expected to double in the next decade
and the industry is estimated to be worth RMB200 billion by 2021
(source: Asia Markets Information and Development Co.). We expect
this increase in demand to be met by financially strong domestic
producers, like China Rerun.
At present, the lubricant oil market is highly fragmented,
comprising approximately 4,000 enterprises, most of which are very
small. It is estimated that only 5% of these companies have a
turnover of RMB 100 million and above whilst China Rerun is
positioned amongst the top 10% of the largest suppliers to the
domestic market for lubricant oils. It is likely that with
increased government intervention and enforcement of legislation in
the sector, the market will, going forward, commence
rationalisation and consolidation. China Rerun, as a larger, more
mature and financially stronger business, which adheres to the
highest industrial standards, would seek to gain market share as
the industry begins to adjust to these external pressures. The
Company is therefore well placed to grow both organically and by
acquisition.
Research & Development, Quality Control
Research and Development is a key part of our business and we
are dedicated to continuously improving our products to ensure they
are of the highest quality and we retain our competitive edge. In
2013, we introduced eight new types of lubricant oils and upgraded
the quality of our existing product base, which also enabled us to
increase our prices. Our products are process tested regularly, and
as a result, we have attained ISO 9001 accreditation for our
quality control procedures. Furthermore, we have also attained ISO
14001 accreditation for environmental controls and OHSAS 18001
accreditation for health and safety.
Branding
We place a great deal of emphasis on our brands: Black E,
Panther, Tiger, Deer and Horse. We have undertaken a number of
marketing, advertising and promotional activities to reinforce the
strong brand recognition that our flagship products enjoy. Our
focus on branding is driving our sales growth and will allow us to
integrate more distributors, in more provinces, into our network
and protect our gross margin. We now have one of the best selling
lubricant oils in the Heilongjiang province, as well as winning
several awards along the way, including the "Well-known Brand of
China".
Financial Review
The financial review covers the period 30 May 2012 to 31 August
2013. As part of the restructuring for our IPO, trade passed the
listed entity from 1 March 2013. These accounts therefore cover six
month's trading results from 1 March 2013 to 31 August 2013. For
the purposes of comparison, results for the year ended 31 August
2012 and 31 August 2013 (pro-forma results) are included in this
review. The pro-forma results are presented separately in the note
5 of the financial statement.
The Group generated turnover of revenue of RMB 150.71m in the
six months to 31 August 2013 and RMB 273.29m for FY2013 (FY2012:
RMB 226.13m) representing a growth of 20.9%.
In FY2013, the Group achieved a pro forma gross profit of RMB
72.78m (FY2012: RMB 59.78m), with gross margins maintained at 26.6%
and 26.4% in FY2013 and FY2012 respectively. In the six months to
31 August 2013, gross profit margin was 26.1%. We extended our
range of lubricant oil products in the year. Raw materials and
labour cost price increases were offset by raising our selling
prices by 5% which was successfully passed on to our customers in
the most part.
The Group achieved a pro-forma pre-tax profit of RMB 45.02m in
FY2013, up 67.6% (FY2012: RMB 26.87m). In the period under review,
the pre-tax profit was RMB 25.58m afterabsorbing one-off listing
costs. By driving through a reduction in fixed overheads, the
strong sales growth positively impacted the Group's net earnings.
The pro-forma sales and distribution costs fell to RMB 14.91m
(FY2012: 27.14m) driven by a reduction in the commission paid to
sales staff of the Group from 5% to 1.5% and widening the
distribution areas. The Group also decreased the number of
distributors from 40 to 36, as a small number of these distributors
failed to meet the increased sales targets set by the Group. Only
high quality and higher performing distributors were retained.
The pro-forma tax charge for the 12 month period of RMB 12.04m
was 26.7% of pre-tax profit compared to 25.0% in the previous year.
The ongoing taxation rate is expected to remain at 25%. At the year
end, the Group's Balance Sheet had RMB 3.7m of fixed assets, RMB
2.66m of inventory, minimal trade receivables and payables.
This is a positive performance for the business and we have a
sound financial base from which to further expand our customer base
and grow our market presence.
People
On behalf of the Board of Directors, I would like to thank all
our employees for their hard work and efforts in our 20(th) year,
which has seen us become a publicly-quoted company and deliver a
positive set of financial results.
I would also like to welcome Yan Liu as our new Chief Financial
Officer. Mr. Liu has over 16 years of accounting and corporate
advisory experience in the PRC and Australia and was previously
Vice President of Agile Partners, a financial advisory company
based in the PRC, where he specialised in overseas IPO's,
fundraising and M&A projects. Prior to this, he was Financial
Controller at Legalwise Seminars Pty Limited based in New South
Wales, Australia and had spent 8 years at Chinatex Corporation as
an Assistant Accountant and latterly as a Project Manager in their
Investment Management department. He holds a Bachelors degree in
Economics from CUFE, Beijing, and a Masters degree in Commerce,
specialised in finance, from the University of New South Wales,
Australia. He is bilingual in Mandarin and English. We look forward
to the contribution that he will make to our business as we
continue with our focused growth strategy.
I would also like to take this opportunity to thank Mr. Liu's
predecessor, Kenny Chow. We are very grateful for his dedication to
China Rerun, particularly during the listing process and wish him
the best in his future endeavours.
Outlook
We appointed four new distributors post the period end taking
the total to 40. During the course of this year, we expect to make
further appointments in the five regions we operate to increase our
market presence. The Group is currently formulating a plan to roll
out mobile lubrication services, via China Rerun branded service
vehicles, which will serve as an additional distribution channel
for our products, as well as having the added benefit of acting as
a strong billboard for China Rerun's products.
The Company is satisfying a fundamental and fast growing need
for high quality lubricant oils in its domestic market. With our
focus on high quality products, branding and stringent control over
our distribution network, we are well positioned to participate in
the strong growth and evolution of the PRC's lubricant oil market
going forward.
CONSOLIDATED AND COMPANY STATEMENT OF COMPREHENSIVE INCOME
FOR THE PERIOD ENDED 31 AUGUST 2013
Group Company
Period from Period from
30 May 2012 30 May 2012
to 31 August to 31 August
2013 2013
RMB'000 RMB'000
Revenue 150,714 -
Cost of sales (111,359) -
-------------- --------------
Gross profit 39,355 -
Distribution costs (7,420) -
Administrative expenses (1,823) (227)
Listing costs (4,543) (3,424)
-------------- --------------
Operating profit/(loss) 25,569 (3,651)
Finance income 12 -
-------------- --------------
Profit / (loss) before
tax 25,581 (3,651)
Income tax expense (7,308) -
-------------- --------------
Profit/(loss) for the
period 18,273 (3,651)
Other comprehensive income - -
Currency translation
difference 108 61
-------------- --------------
Total comprehensive income/(loss)
for the period 18,381 (3,590)
============== ==============
Profit/(loss) for the
year attributable to:
Owners of the company 18,543 (3,651)
Non-controlling interest (270) -
-------------- --------------
18,273 (3,651)
============== ==============
Total comprehensive income/(loss)
attributable to:
Owners of the company 18,651 (3,590)
Non-controlling interest (270) -
-------------- --------------
18,381 (3,590)
============== ==============
Earnings per share
Basic and diluted (in
RMB 1.00) 9,272 (1,823)
============== ==============
CONSOLIDATED AND COMPANY STATEMENT OF FINANCIAL POSITION
AT 31 AUGUSUT 2013
Group Company
2013 2013
RMB'000 RMB'000
Non-current assets
Property, plant and equipment 3,701 -
Intangible assets -* -
Investment in subsidiaries - 632
-------- --------
3,701 632
-------- --------
Current assets
Inventories 2,655 -
Trade and other receivables 16,602 -
Cash and cash equivalents 46,836 -
-------- --------
66,093 -
-------- --------
Total assets 69,794 632
======== ========
Equity attributable to owners
of the parent
Share capital 12 12
Share premium 620 620
Statutory reserve 2,287 -
Translation reserve 108 61
Retained earnings 16,066 (3,651)
-------- --------
19,093 (2,958)
Non-controlling interest - -
--------
Total equity 19,093 (2,958)
--------
Current liabilities
Trade and other payables 43,393 3,590
Income tax liabilities 7,308 -
-------- --------
Total current liabilities 50,701 3,590
--------
Total equity and liabilities 69,794 632
======== ========
CONSOLIDATED AND COMPANY STATEMENTS OF CHANGES IN EQUITY
FOR THE PERIOD ENDED 31 AUGUST 2013
The Group
Share Share Translation Statutory Retained Non-controlling
capital premium reserve reserve earnings Total interest Total
RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000
Balance at 30
May 2012 - - - - - - -
========= =========== ============ ========== =========== ======== ================ ========
Profit/(loss)
for the year - - - - 18,543 18,543 (270) 18,273
Transfer to
statutory
reserve - - - 2,287 (2,287) - - -
Exchange
difference - - 108 - - 108 - 108
--------- ----------- ------------ ---------- ----------- -------- ---------------- --------
Total
comprehensive
income for the
year - - 108 2,287 16,256 18,651 (270) 18,381
--------- ----------- ------------ ---------- ----------- -------- ---------------- --------
Issue of shares 12 620 - - - 632 - 632
Acquisition of
non-controlling
interest
without a
change in
control (190) (190) 270 80
------------
Balance at 31
August 2013 12 620 108 2,287 16,066 19,093 - 19,093
========= =========== ============ ========== =========== ======== ================ ========
The Company
Share
capital Share premium Translation reserve Retained earnings Total
RMB'000 RMB'000 RMB'000 RMB'000 RMB'000
Balance at 30 May 2012 - - - - -
========= ============== ==================== ================== ========
Profit/(loss) for the year - - - (3,651) (3,651)
Exchange difference - - 61 - 61
--------- -------------- -------------------- ------------------ --------
Total comprehensive income for the
year - - 61 (3,651) (3,590)
--------- -------------- -------------------- ------------------ --------
Issue of shares 12 620 - - 632
--------------------
Balance at 31 August 2013 12 620 61 (3,651) (2,958)
========= ============== ==================== ================== ========
Statutory reserve: The statutory reserve represents the amount
set aside in accordance with the legislation in the People's
Republic of China.
CONSOLIDATED AND COMPANY STATEMENT OF CASH FLOW
FOR THE PERIOD ENDED 31 AUGUST 2013
Group Company
Period from Period from
30 May 2012 30 May 2012
to 31 August to 31 August
2013 2013
RMB'000 RMB'000
Cash flow from operating activities
Profit /(loss) before tax 25,581 (3,651)
Interest income (12) -
Depreciation 368 -
--------------
Operating cash inflows before
movements in working capital 25,937 (3,651)
Increase in inventories (2,655) -
Increase in receivables (16,602) -
Increase in payables 33,950 3,651
-------------- --------------
Net cash generated from operations 40,630 -
Income tax paid - -
-------------- --------------
Net cash generated from operating
activities 40,630 -
============== ==============
Investing activities
Interest received 12 -
Purchase of property, plant
and equipment (112) -
Acquisition of subsidiary - (632)
-------------- --------------
Net cash used in investing
activities (100) (632)
============== ==============
Financing activities
Loan from the director 5,674
Proceed from issue of shares 632 632
--------------
Net cash from financing activities 6,306 632
============== ==============
Net increase in cash and cash
equivalents 46,836 -
Cash and cash equivalents
at beginning of period - -
-------------- --------------
Cash and cash equivalents
at end of period 46,836 -
============== ==============
NOTES
1 GENERAL INFORMATION
China Rerun Chemical Group Limited ("China Rerun" or the
"Company") was incorporated on 30 May 2012 in Cayman Islands. The
registered office of the Company is located at 89 Nexus Way, Camana
Bay, Grand Cayman KY1-9007 Cayman Islands.
The principal activity of the Company is that of an investment
holding company and the principal activities of the Group are
production and distribution of lubricating oil for the automotive,
agricultural and certain industrial markets in PRC. The principal
place of business is at No 99, Zhongsan Road, Sa'ertu district,
Daqing, Heilongjiang Province, PRC.
The company was set up as part of the group restructuring for
proposed admission to AIM Market, the group is taking over the
business and trade of Daqing Economic Development Zone Runyuan
Chemical Co., Limited ("Daqing Runyuan"). The historical financial
information of Daqing Runyuan can be found in Part III of the
Admission Document. The group commenced trading in March 2013.
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
2.1 Statement of compliance
The financial statements have been prepared in accordance with
International Financial Reporting Standards as adopted by the EU
("IFRS") issued by the International Accounting Standard Board
(IASB) and interpretations of the International Financial Reporting
Interpretations Committee (IFRIC).
2.2 Basis of preparation
The consolidated and company financial statements have been
prepared on the historical cost basis except for certain financial
instruments, which are measured at fair values as explained in the
accounting policies set out below. Historical cost is generally
based on the fair value of the consideration given in exchange for
assets.
The consolidated financial statements are rounded to the nearest
thousand ('000) and they are presented in Chinese Renminbi (RMB),
the official currency of the People's Republic of China. RMB is the
functional currency of the company.
The pro-forma income statements of the Group for the year ended
31 August 2013 will be presented with Daqing Runyuan's results for
comparative purpose. This financial information is presented
separately on note 5.
2.3 Basis of consolidation
The consolidated financial statements incorporate the financial
statements of the Company and entities controlled by the Company
(its subsidiaries). Control is achieved where the Company has the
power to govern the financial and operating policies of an entity
so as to obtain benefits from its activities.
The results of subsidiaries acquired or disposed of during the
year are included in the consolidated statement of comprehensive
income from the effective date of acquisition and up to the
effective date of disposal, as appropriate. Total comprehensive
income of subsidiaries is attributed to the owners of the Company
and to the non-controlling interest even if this result in the
non-controlling interest having a deficit balance.
Where necessary, adjustments are made to the consolidated and
company financial statements of subsidiaries to bring their
accounting policies into line with those used by other members of
the Group.
2.4 Going concern
The financial statements have been prepared assuming the Group
will continue as a going concern.
After making enquiries, the Directors consider that the Group
has adequate resources and committed borrowing facilities to
continue in operational existence for the foreseeable future.
Consequently, they have adopted the going concern basis in
preparing the Financial Statements.
4 EARNINGS PER SHARE
(a) Basic earnings per share
Basic earnings per share is calculated by dividing the profit
attributable to equity shareholders of the Company by the weighted
average number of ordinary shares in issue during the year.
2013 2013
RMB RMB
Net profit / (loss)
attributable to owners
of parent (RMB'000) 18,543 (3,651)
======= ========
Number of ordinary shares
('000) 2 2
======= ========
Basic earnings per share
(RMB) 9,272 (1,823)
======= ========
(b) Diluted earnings per share
As there were no potential dilutive ordinary shares during the
financial years and period presented in these consolidated
financial statements, no diluted earnings per share is
presented.
5 ADDITIONAL FINANCIAL INFORMATION
The Group commenced to trade on 1 March 2013 and the pro-forma
income statements are presented to integrate with six months'
trading results of Daqing Runyuan for the comparative purpose.
Details of the financial information of Daqing Runyuan
(extracted from the Admission Document) are as follow:
Income statement
Daqing
Audited Group's Daqing Runyuan's Pro-forma Runyuan's
results results results results
Period from Six month Period from
30 May 2013 to 28 February 30 May 2013 Year ended
to 31 August 2013 to 31 August 31 August
2013 2013 2012
RMB'000 RMB'000 RMB'000 RMB'000
Revenue 150,714 122,579 273,293 226,133
Cost of sales (111,359) (89,153) (200,512) (166,352)
-------------- -----------
Gross Profit 39,355 33,426 72,781 59,781
Distribution expense (7,420) (7,490) (14,910) (27,143)
Administrative
expense (1,823) (6,248) (8,071) (5,840)
Listing costs (4,543) - (4,543) -
Other losses - (270) (270) -
---------------- ----------------- -------------- -----------
Operating profit 25,569 19,418 44,987 26,798
Finance income 12 25 37 71
-------------- -----------
Profit before
tax 25,581 19,443 45,024 26,869
Income tax (7,308) (4,732) (12,040) (6,727)
Profit for the
period 18,273 14,711 32,984 20,142
================ ================= ============== ===========
6 POSTING OF ACCOUNTS
The Company will post a copy of the final report and accounts to
all shareholders on or around 4 February 2014 which will include a
Notice of Annual General Meeting.
7 ANNUAL GENERAL MEETING
The Group's Annual General Meeting will be held on Friday 28
February at 16.30 pm (China Time) Room 407, Block B-11, Service
Outsourcing Industrial Park, High-tech Industrial Development Zone,
Daqing, Heilongjiang, P.R. China 163316.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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