RNS Number : 9805B
Canton Property Investment Limited
26 August 2008
Canton Property Investment Limited
("the Company" or "the Group")
INTERIM RESULTS FOR THE SIX MONTHS PERIOD ENDED 30 JUNE 2008
Canton Property Investment Limited (AIM: CPIL), a listed commercial real estate developer focused on establishing itself as the leading
commercial property developer in China, is pleased to announce its unaudited results for the six month period ended 30 June 2008.
HIGHLIGHTS:
* Canton Finance Project ("CFC"): Acquisition was completed on 30 June 2008, the portfolio size nearly tripled in terms of Gross
Floor Area ("GFA"), or increased by 87 per cent in terms of value
* Mall of Canton ("MoC"): 88.4 per cent of substructure and 49.2 per cent of super-structure have been completed as at 30 June 2008
* Comic City: Occupancy rate remain high at 96.6 per cent as at 30 June 2008
* Consolidated revenue generated for the six month period ended 30 June 2008 was RMB32.98 million
* Net asset was up 24 per cent from RMB2,373 million to RMB2,933 million
FOR ENQUIRIES:
Canton Property Investment Limited
Dennis Yau, Chief Financial Officer Tel: +852 2219 9669
Libertas Capital
Jakob Kinde/Tim Murray Tel: +44 20 7569 9650
First City Financial Public Relations
Allan Piper/Jiang Lei Tel: +44 20 7242 2666
Chairman's Statement
The first half of 2008 has been a very active period for Canton Property Investment Limited. The Company has been making good progress
in all key areas. I am pleased to present the performance report for the six months ended 30 June 2008.
Results
The consolidated revenue for the six month ended 30 June 2008 was RMB32.98 million (US$4.8 million) with a major component of revenue
from Comic City. As at 30 June 2008, the Company had unaudited net asset of RMB2,933 million (US$427.9 million). The current portfolio was
nearly tripled to 352 thousand square metres in terms of GFA or 87 per cent up to RMB6,528 million in terms of value.
(USD vs. CNY as at 30 June 2008 was 6.8553 sourced from Bloomberg)
Asset Management
The Group's current portfolio comprises three projects at strategic prime locations in Guangzhou, Guangdong province, China.
Comic City, our first completed and operational commercial property, is a three-storey underground shopping mall located at the busiest
metro interchange station in Guangzhou, which enjoys a daily pedestrian flow of 560,000 people. It is always the Company's aim to generate
stable and sustainable rental income and to improve the quality of the mall going forward. Through proactive planning, the management has
continued to upgrade the tenant base of Comic City by introducing popular food & beverage chain stores and selecting good quality tenants.
Various asset enhancement initiatives including zone renovation and hosting exciting promotional events have been carried out to raise the
mall's rental return and improve the overall mall ambience, to attract more shoppers and quality tenants. As at 30 June 2008, Comic City has
maintained an occupancy rate as high as 96.6 per cent.
Located at the south end of the most established Beijing Road pedestrian street, Mall of Canton is going to be the first "unban
life-style centre" in Guangzhou which will provide a variety of shopping, dining and entertainment choices under one roof. It is an
eight-storey, free standing shopping mall with a three-storey basement complex directly connected to the new Beijing Road station on metro
line � 6 which will be completed in 2010. Aiming to capitalise on the heavy shopper traffic coming from the pedestrian street and the
upcoming metro station, MOC is carefully designed to accommodate landscape and water features in order to create a natural and comfortable
ambience for shoppers. As at 30 June 2008, 88.4 per cent of substructure and 49.2 per cent of super-structure have been completed.
At the same time, important breakthroughs on leasing progress have been taking place at MOC. United Artist ("UA"), a successful cinema
operator in Hong Kong with all basic terms in tentative agreement, is expected to sign a Memorandum of Understanding ("MOU") with the
Company shortly in August 2008. MOC is expected to be the first mall in Guangzhou to have an IMAX theatre and this would be a major draw for
shoppers. Negotiation with key international fashion brands, renowned KTV operators and department stores are in progress. The management is
optimistic that MOC will become one of the leading shopping destinations in Guangzhou.
Acquisition
Further to the announcement dated 12 March 2008, the acquisition of the Canton Finance Centre project was completed on 30 June 2008.
Situated at the core area of Pearl River New City, Guangzhou's new Central Business District in the 21st century, Canton Finance Centre is
positioned to be a mixed-use complex comprising super grade A office, prime retail podium, a luxury five-star hotel and serviced apartments.
Our portfolio's value was increased by 87 per cent to RMB 6.53 billion after the acquisition. The successful acquisition of Canton Finance
Centre makes the Company one step closer to its goal of becoming a leading commercial real estate player in China.
Outlook
Despite the turbulent macro-environment and the Sichuan earthquake in the first half of 2008, China's retail sales of consumer goods in
urban areas reached RMB 3,481.9 billion, rising 22.1 percent over the same period in the previous year. Although the global credit crunch
and high inflation will continue to exert some downward pressure on China's economy growth in the second half of 2008, trends are such that
the Company is positive about the outlook for the domestic retail market.
Lastly, I would like to thank my Board members for their invaluable guidance and contributions, and to thank the management team for
their dedication towards achieving greater value for our shareholders.
Keng Wong
Executive Chairman
Canton Property Investment Limited
25 August 2008
Consolidated Income Statement for the six months ended 30 June 2008
Notes Six months ended
Six months ended 30 Jun 2007
30 Jun 2008 (Pro forma)
RMB'000 RMB'000
Continuing operations
Revenue 5 32,983 -
Cost of sales (4,044) -
Gross profit 28,939 -
Other income 123 -
Selling and distribution expenses (4,175)
Marketing expenses (283) -
Administrative expenses (25,609) (7,226)
Other operating expenses (2,101) -
Operating loss (3,106) (7,226)
Finance cost (17) -
Finance income 755 793
Loss before taxation (2,368) (6,433)
Taxation 6 (693) -
Loss for the period attributable (3,061) (6,433)
to the
equity shareholders of the parent
RMB RMB
Loss per share :
Basic 7 (0.0075) (139.67)
Diluted 7 (0.0075) (139.67)
Consolidated Balance Sheet as at 30 June 2008
Notes 30 Jun 2007
30 Jun 2008 31 Dec 2007 (Pro forma)
RMB'000 RMB'000 RMB'000
Non-current assets
Investment property 8 1,351,000 1,351,000 -
Property, plant and equipment 9 12,509 12,297 1,424
Goodwill 17 45,797 - -
Intangible assets 10 321 110 -
Properties under development 11 4,024,118 964,719 915,259
5,433,745 2,328,126 916,683
Current assets
Deposit for investment - 312,099 -
Trade and other receivables 12 34,780 16,008 8,814
Cash and cash equivalents 118,821 213,838 238,304
153,601 541,945 247,118
Current Liabilities
Trade and other payables 13 151,042 167,457 962,125
Tax payables 772 8,363 21
Provisions for resettlement 14 76,260 76,260 76,260
cost
228,074 252,080 1,038,406
Non-current liabilities
Deferred tax liabilities 15 807,192 206,154 -
Trade and other payables 13 1,593,339 - -
Provisions for resettlement 14 25,514 38,450 80,930
cost
2,426,045 244,604 80,930
2,933,227 2,373,387 44,465
Capital and reserves
Share capital 16(a) 3,370,901 45,119
3,956,306
Share based payment reserve 16(b) 23,382 39,329 -
Translation reserve 16(d) 76,544 83,101 16,204
Retained earnings 6,451 (16,858)
3,390
Merger reserve 16(c) (1,126,395) (1,126,395) -
2,933,227 2,373,387 44,465
Consolidated Statement of Changes in Equity for the six months ended 30 June 2008
Share Retained Translation Merger Total
capital Share based earnings reserve reserve
payment
reserve
RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000
Balance at 1 January 2007 - - (10,425) 465 - (9,960)
Issue of shares 45,119 - - - - 45,119
Loss for the period - - (6,433) - - (6,433)
Exchange reserve - - - 15,739 - 15,739
Balance at 30 June 2007 45,119 - (16,858) 16,204 - 44,465
Balance at 1 January 2008 3,370,901 39,329 6,451 83,101 (1,126,395) 2,373,387
Issue of shares (15,947) - - 569,458
585,405
Loss for the period - - (3,061) - - (3,061)
Exchange reserve - - - (6,557) - (6,557)
Balance at 30 June 2008 23,382 76,544 (1,126,395) 2,933,227
3,956,306 3,390
Consolidated Cash Flow Statement for the six months ended 30 June 2008
Six months Six months ended
ended 30 30 Jun 2007
Jun (Pro forma)
2008
Notes RMB'000 RMB'000
Cash flow from operating activities
Net loss from ordinary activities before taxation (2,368) (6,433)
Adjustments for
Property, plant & equipment - depreciation 1,780 315
Property, plant & equipment - loss on disposal 12 -
Amortisation of intangible assets 9 -
Interest income (755) (793)
Operating loss before working capital changes (1,322) (6,911)
Receivables (18,344) (3,558)
Payables (4,102) 6,930
Cash used in operations (23,768) (3,539)
Income tax paid (8,284) -
Net cash flow used in operating activities (32,052) (3,539)
Cash flow from investing activities
Acquisition of subsidiary 17 (5,817) -
Interest received 755 793
Land & development expenditure (58,023) (34,771)
Property, plant & equipment - additions (1,051) (225)
Property, plant & equipment - disposals 731 -
Acquisition of intangible assets (191) -
Net cash used in investing activities (63,596) (34,203)
Cash flow from financing activities
Repayments of bank borrowing - (300,000)
Proceeds from issuance of shares 6,864 45,119
Shareholders' loans - 325,602
Borrowing cost capitalised - (5,147)
Net cash flow generated from financing activities 6,864 65,574
Net (decrease)/increase in cash and cash (88,784) 27,832
equivalents
Cash and cash equivalents at start of period 213,838 194,724
Effect of exchange rate changes (6,233) 15,748
Cash and cash equivalent at end of period 118,821 238,304
Notes to the Interim Financial Information
For the six months ended 30 June 2008
1. General information
Canton Property Investment Limited ("Canton Properties" or "the Company") was incorporated in British Virgin Islands ("BVI") under the
BVI Business Companies Act, 2004 on 19 February 2007. The Company's registered office is located at Craigmuir Chambers, Road Town, Tortola,
British Virgin Islands. The principal activities of the Group are to develop, manage and operate shopping malls in the city of Guangzhou,
the People's Republic of China.
This consolidated interim financial information was approved for issue on 25 August 2008
This consolidated interim financial information has not been audited, nor reviewed by the Company's auditors.
2. Basis of preparation
The consolidated interim financial information has been prepared in accordance with International Financial Reporting Standards
("IFRS"), and IFRIC interpretations issued, and effective, or issued and early adopted, as at the date of these financial statements. The
consolidated interim financial information has been prepared under the historical cost convention as modified for financial assets and
financial liabilities at fair value and investment properties, which are carried at fair value.
This consolidated interim financial information for the six months ended 30 June 2008 has been prepared in accordance with IAS 34
'Interim financial reporting'. The consolidated interim financial information should be read in conjunction with the annual financial
statements for the year ended 31 December 2007, which have been prepared in accordance with IFRSs.
3. Accounting policies
Except as described below, the accounting policies applied are consistent with those of the annual financial statements for the year
ended 31 December 2007, as described in those annual financial statements.
The comparative financial information for the six months ended 30 June 2007 has been presented on a different basis to the annual
financial statements for the year ended 31 December 2007 as well as the financial information for the six months ended 30 June 2008. The
annual financial statements of the Company for the period ended 31 December 2007 covered the period from incorporation of the Company and
included the consolidated results of the Company's subsidiary undertakings for the period from 6 August 2007 (when the Canton Group was
created) to 31 December 2007.
The financial information on the underlying Canton Group businesses contained in the Company's document issued in relation to the
admission of the Company to the AIM Market of the London Stock Exchange and these comparative information covering the six months ended 30
June 2007 related to the period before the Company acquired the mall of Canton and Comic City through the acquisition of Glory Horn
International Limited and Forelle Holdings Limited as disclosed in the annual financial statements for the period ended 31 December 2007,
and have been drawn up on a pro forma aggregated basis as if the Group had been in existence throughout that period.
Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected total annual earnings.
The following new standards, amendments to standards or interpretations are mandatory for the first time for the financial year
beginning 1 January 2008 but are not currently relevant for the Group.
* IFRIC 11, 'IFRS 2 - Group and treasury share transactions'.
* IFRIC 12, 'Service concession arrangements'.
* IFRIC 14, 'IAS 19 - the limit on a defined benefit asset, minimum fundingrequirements and their interaction'.
The following new standards, amendments to standards and interpretations have been issued but are not effective for the financial year
beginning 1 January 2008 and have not been early adopted:
* IFRS 8, 'Operating segments', effective for annual periods beginning on or after 1 January 2009. IFRS 8 replaces IAS 14, 'Segment
reporting', and requires a 'management approach' under which segment information is presented on the same basis as that used for internal
reporting purposes. The expected impact is still being assessed in detail, but it appears likely that the number of reported segments may
increase.
* IAS 23 (amendment), 'Borrowing costs', effective for annual periods beginning on or after 1 January 2009. This amendment is not
relevant to the Group, as the Group currently applies a policy of capitalising borrowing costs.
* IFRS 2 (amendment), 'Share-based payment', effective for annual periods beginning on or after 1 January 2009. Management is
assessing the impact of the changes.
* IFRS 3 (amendment), 'Business combinations' and consequential amendments to IAS 27, 'Consolidated and separate financial
statements', IAS 28, 'Investments in associates' and IAS 31, 'Interests in joint ventures', effective prospectively to business combinations
for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after 1 July 2009.
Management is assessing the impact of the new requirements regarding acquisition accounting, consolidation and associates on the Group. The
group does not have any associates and joint ventures.
* IAS 1 (amendment), 'Presentation of financial statements', effective for annual periods beginning on or after 1 January 2009.
Management is in the process of developing proforma accounts under the revised disclosure requirements of this standard.
* IAS 32 (amendment), 'Financial instruments: presentation', and consequential amendments to IAS 1, 'Presentation of financial
statements', effective for annual periods beginning on or after 1 January 2009. This is not relevant to the Group, as the Group does not
have any puttable instruments.
* IFRIC 13, 'Customer loyalty programmes', effective for annual periods beginning on or after 1 July 2008. Management is evaluating
the effect of this interpretation on its revenue recognition.
4. Segment reporting
The following table provides an analysis of the Group's revenue and results by business segment for the six-month periods ended 30 June
2008 and 30 June 2007 and of the Group's assets and liabilities at the end of each of the periods.
Six months ended 30 June 2008
Property Property Property
development investment management Unallocated Consolidated
RMB'000 RMB'000 RMB'000 RMB'000 RMB'000
Turnover - 28,313 4,670 - 32,983
Profit/(loss) before taxation (4,561) 16,697 92 (14,596) (2,368)
Taxation - (675) (18) *- (693)
Net profit/(loss) for the (4,561) 16,022 74 (14,596) (3,061)
period
Non-current assets 4,027,455 1,355,383 403 50,504 5,433,745
Current assets 54,989 59,527 6,113 32,972 153,601
Current liabilities (156,348) (19,202) (2,370) (50,154) (228,074)
Non-current liabilities (626,552) (206,154) - (1,593,339) (2,426,045)
Net assets/(liabilities) 3,299,544 1,189,554 4,146 (1,560,017) 2,933,227
Six months ended 30 June 2007
Property Property Property
development investment management Unallocated Pro forma Aggregated
RMB'000 RMB'000 RMB'000 RMB'000 RMB'000
Turnover - - - - -
Profit/(loss) before taxation (6,735) - - 302 (6,433)
Taxation - - - - -
Net profit/(loss) for the (6,735) - - 302 (6,433)
period
Non-current assets 916,429 - - 254 916,683
Current assets 191,823 - - 55,295 247,118
Current liabilities (146,632) - - (891,774) (1,038,406)
Non-current liabilities (80,930) - - - (80,930)
Net assets/(liabilities) 880,690 - - (836,225) 44,465
5. Revenue
Six months Six months ended
ended 30 30 Jun 2007
Jun 2008 (Pro forma)
RMB'000 RMB'000
Rental income from investment property 29,820 -
Property management service income 5,016 -
Value added/sales related tax (1,853) -
32,983 -
6. Taxation
Six months Six months ended
ended 30 30 Jun 2007
Jun 2008 (Pro forma)
RMB'000 RMB'000
Current tax charge - PRC Enterprises Income 693 -
Tax at 25%
Deferred tax charges - -
693 -
7. Loss per share
Six months Six months ended
ended 30 30 Jun 2007
Jun 2008 (Pro forma)
RMB'000 RMB'000
Loss after taxation (3,061) (6,433)
Number Number
Basic weighted average ordinary shares in 410,050,189 46,058
issue
during the period
Effect of dilutive potential ordinary - -
shares - share options
Diluted weighted average ordinary shares in
issue 46,058
during the period
410,050,189
Six months Six months ended
ended 30 30 Jun 2007
Jun 2008 (Pro forma)
RMB RMB
Basic loss per share (0.0075) (139.67)
Diluted loss per share (0.0075) (139.67)
In accordance with IAS 33, 16,137,356 (2007: nil) potential ordinary shares are anti-dilutive.
8. Investment property
Comic City 2008 2007
RMB'000 RMB'000
At valuation
Balance at 1 Jan 1,351,000 -
Additions - -
Revaluation - -
Balance at 30 June 1,351,000 -
It is the Group's policy to carry investment property at fair value in accordance with IAS 40 'Investment Property'. Investment property
was valued at 31 December 2007 by Knight Frank Petty Limited, valuers external to the Group. The valuation was made by reference to sales
evidence as available in the market and where appropriate on the basis of capitalisation of net income. Outgoings have been allowed and in
appropriate cases provisions for reversionary income potential have been made in the valuation.
In the opinion of the directors, the fair value of the investment properties at 30 June 2008 is not materially different from its
carrying value.
9. Property, plant and equipment
Furniture and Office equipment Motor vehicles Gaming equipment Renovation Total
fittings
RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000
Six months ended 30 June 2008
Cost
At 1 January 2008 935 2,946 2,881 2,482 5,731 14,975
From acquisition of 429 682 373 - 524 2,008
subsidiaries
Additions 75 847 - - 129 1,051
Disposals - (13) (1,739) - - (1,752)
Exchange adjustment (26) (6) (19) - (288) (339)
At 30 June 2008 1,413 4,456 1,496 2,482 6,096 15,943
Accumulated depreciation
At 1 January 2008 211 618 1,127 209 513 2,678
Charge for the period 45 334 281 251 869 1,780
Disposals - (9) (1,000) - - (1,009)
Exchange adjustment - (1) (7) - (7) (15)
At 30 June 2008 256 942 401 460 1,375 3,434
Net Book Value
At 30 June 2008 1,157 3,514 1,095 2,022 4,721 12,509
At 31 December 2007 724 2,328 1,754 2,273 5,218 12,297
Furniture and Office equipment Motor vehicles Gaming equipment Renovation Total
fittings
Pro forma RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000
Six months ended 30 June 2007
Cost
At 1 January 2007 339 926 1,140 - 364 2,769
Additions - 84 - - 141 225
Exchange adjustment - (11) - - - (11)
* * * * * *
At 30 June 2007 339 999 1,140 - 505 2983
Accumulated depreciation
At 1 January 2007 124 323 695 - 104 1,246
Charge for the period 30 55 103 - 127 315
Exchange adjustment - (2) - - - (2)
* * * * * *
At 30 June 2007 154 376 798 - 231 1,559
Net Book Value
At 30 June 2007 185 623 342 - 274 1,424
At 31 December 2006 215 603 445 - 260 1,523
10. Intangible assets
Total
Trademark Software
RMB'000 RMB'000 RMB'000
Six months ended 30 June 2008
Cost
At 1 January 2008 114 - 114
From acquisition of subsidiaries - 29 29
Additions 106 85 191
At 30 June 2008 220 114 334
Accumulated amortisation
At 1 January 2008 4 - 4
Charge for the period 6 3 9
At 30 June 2008 10 3 13
Net Book Value
At 30 June 2008 210 111 321
At 31 December 2007 110 - 110
Six months ended 30 June 2007 - Pro forma
Cost
At 1 January 2007 - - -
From acquisition of subsidiaries - - -
Additions - - -
At 30 June 2007 - - -
Accumulated amortisation
At 1 January 2007 - - -
Charge for the period - - -
At 30 June 2007 - - -
Net Book Value
At 30 June 2007 - - -
At 31 December 2006 - - -
11. Properties under development
Land Development Borrowing Other indirect
use right cost cost capitalised costs Total
At cost RMB'000 RMB'000 RMB'000 RMB'000 RMB'000
Six months ended 30 June 2008
Mall of Canton
At 1 January 2008 266,881 618,306 72,091 7,441 964,719
Additions - 28,019 - 1,582 29,601
At 30 June 2008 266,881 646,325 72,091 9,023 994,320
Canton Finance Centre
At 1 January 2008 - - - - -
From acquisition of 3,029,798 - - - 3,029,798
subsidiaries
At 30 June 2008 3,029,798 - - - 3,029,798
Total
At 1 January 2008 266,881 618,306 72,091 7,441 964,719
Additions - 28,019 - 1,582 29,601
From acquisition of 3,029,798 - - - 3,029,798
subsidiaries
At 30 June 2008 3,296,679 646,325 72,091 9,023 4,024,118
Six months ended 30 June 2007
Mall of Canton - Pro forma
At 1 January 2007 266,881 556,802 66,944 5,358 895,985
Additions - 12,530 5,147 1,597 19,274
At 30 June 2007 266,881 569,332 72,091 6,955 915,259
12. Trade and other receivables
31 Dec 2007 30 June 2007
30 Jun 2008 Pro forma
RMB'000 RMB'000 RMB'000
Trade receivables 19,142 103 -
Accrued rental income 7,142 7,142 -
Other receivables 364 161 5,300
Rental and other deposits 6,196 6,573 292
Prepayments 1,936 2,029 3,222
34,780 16,008 8,814
13. Trade and other payables
30 Jun 2008 31 Dec 2007 30 June 2007
Pro forma
RMB'000 RMB'000 RMB'000
Social welfare payable 857 1,930 -
Other tax payable 4,906 10,838 -
Accrued construction cost of
properties under development 79,918 95,404 69,818
Deferred consideration in respect
of the acquisition of 1,627,803 37,197 -
subsidiaries
Due to shareholders 3,775 4,043 884,851
Other payables 5,725 8,455 7,362
Other accruals 11,972 1,554 94
Deposits received 9,425 8,036 -
1,744,381 167,457 962,125
Fair value of deferred (1,593,339) - -
consideration in respect of
the acquisition of subsidiaries
payable in more than
one year classified under
non-current liabilities (*)
Under current liabilities 151,042 167,457 962,125
(*) The fair value of deferred consideration was determined based on the present value of the estimated future cash outflows discounted
using a rate of 3.11% p.a. (LIBOR at 30 June 2008).
14. Provisions
30 Jun 2008 30 Jun 2007
(Pro forma)
RMB'000 RMB'000
Balance at 1 January 114,710 157,190
Provision made during the period - -
Amount utilised during the period (12,936) -
Balance at 30 June 101,774 157,190
Current portion 76,260 76,260
Non-current portion 25,514 80,930
101,774 157,190
The provision is made in relation to the resettlement liabilities payable to the previous owners and occupiers of the properties under
development. The provision at 30 June 2008 represents the Directors' estimate of the net cash outflow in respect of the resettlement
liabilities during the next two years.
15. Deferred taxation
30 Jun 2008 30 Jun 2007
(Pro forma)
RMB'000 RMB'000
Deferred tax liability arising from revaluation of investment property
Balance at 1 January (206,154) -
From acquisition of subsidiaries (601,038) -
Charged to income statement - -
Balance at 30 June (807,192) -
16. Share capital and reserve
(a) Share capital
Authorised
Number of shares
No par value shares of a single class 1,000,000,000
Issued and fully paid
Group and Company
Number of shares RMB'000
Issued on 28 February 2007 (US$1 per share) 1 -
Issued on 22 March 2007 (US$0.2 per share) 999,999 1,455
Issued on 23 March 2007 (US$1.2 per share) 5,000,000 43,664
At 30 June 2007 6,000,000 45,119
Issued on 6 August 2007 (US$$1.2 per share) 347,900,000 3,042,589
Issued on 16 August 2007 (US$0.9 per share) 55,000,000 360,231
Listing expenses - cash payments - (37,709)
- share-based payments - (39,329)
At 31 December 2007 408,900,000 3,370,901
Issued on 22 May 2008 (US$0.89 or 45 pence per 1,119,724 9,556
share)
Issued on 22 May 2008 (US$1.29 or 65 pence per 2,756,244 13,255
share)
Issued on 30 June 2008 (US$1.46 or 74 pence 54,295,606 562,594
per share)
At 30 June 2008 467,071,574 3,956,306
On 22 May 2008, share options over 1,119,724 shares of no par value were exercised at an exercise price of 45 pence per share. In
addition, share options over a further 5,512,488 shares were cancelled in exchange for the issue of 2,756,244 new shares. The new shares
rank pari passu in all respects with the then existing shares.
On 30 June 2008, 54,295,606 new shares, credited as fully paid, were issued at 74 pence per share as the non-cash portion of the
purchase consideration of the acquisition of Canton Finance Centre Project.
(b) Share-based payment reserve
The fair value of the share options was calculated using the Black-Scholes pricing model. The inputs into the model were as follows:
Share price at grant date: �0.595
Exercise price: �0.595
Expected volatility: 30%
Contractual life: 3 years
Risk free rate: 5.75%
Expected dividend yield: -
The weighted average fair value of the share options at the grant date is �0.16542. The expected volatility is based on the historical
share price volatility over the past 6 months. The share price volatility of other similar listed companies has been considered as a
reference in determining the expected volatility input into the model.
The movements of share options during the period are as follows:
Number of share options RMB'000
At 1 January and 30 June 2007 - -
Granted on 16 August 2007 16,356,000 39,329
At 31 December 2007 16,356,000 39,329
Exercised during the period (1,119,724) (2,692)
Cancelled during the period (5,512,488) (13,255)
At 30 June 2008 9,723,788 23,382
2008 2007
Number of share options Number of share options
Exercisable at 30 June 9,723,788 -
(exercise price: �0.595)
Remaining contractual life 2.125 years -
On 22 May 2008, share options over 1,119,724 shares of no par value were exercised at an exercise price of 45 pence per share. In
addition, share options over a further 5,512,488 shares were cancelled in exchange for the issue of 2,756,244 new shares. The new shares
rank pari passu in all respects with the then existing shares.
(c) Merger reserve - Arising on Group Reorganisation
The merger reserve of the Group represents the deficit of the fair value of the net assets of the subsidiaries acquired by the Company
pursuant to the Group Reorganisation, in preparation for the admission of the shares in the Company to the AIM market of the London Stock
Exchange, over the value of the share capital in the Company issued in consideration thereof.
(d) Translation reserve
Exchange reserve represents the exchange difference arising from the translation of the financial statements of the Group's subsidiaries
which are presented in Hong Kong dollars.
17. Acquisition of subsidiaries
On 30 June 2008, the Group acquired 100% of the issued share capital of Rail Commercial International Holdings Limited and Fortune
Foundation Commercial Estate Investment Group Limited (collectively referred to as Canton Finance Centre Project) for a consideration of
RMB2.5 billion.
The net assets acquired and the goodwill arising are as follows:-
Acquiree's carrying Fair value Fair value
amount before adjustment
combination
RMB'000 RMB'000 RMB'000
Cash and cash equivalent 2,076 - 2,076
Property, plant & equipment 2,008 - 2,008
Properties under development 625,646 2,404,152 3,029,798
Intangible assets 29 - 29
Other receivable and 428 - 428
prepayment
Other payables and accruals (3,173) - (3,173)
Deferred tax liabilities - (601,038) (601,038)
627,014 1,803,114 2,430,128
Positive goodwill 45,797
2,475,925
RMB'000
Consideration satisfied by:
Allotment of shares by the 562,594
company
Fair value of deferred cash 1,593,339
consideration
Deposit paid in 2007 312,099
2,468,032
Legal and professional fees 7,893
relating to
the acquisition capitalised
2,475,925
Net cash outflow arising on
acquisition:
Legal and professional fees (7,893)
relating to
the acquisition capitalised
Bank balances and cash 2,076
acquired
(5,817)
The Group and the sellers have entered into a supplemental agreement whereby they have agreed that the Group can postpone the payment of
the remaining balance of the cash portion of the purchase consideration amounting to approximately RMB1.62 billion until 30 June 2012 at the
latest and the Group will pay interest at a rate equivalent to LIBOR on the outstanding balance of the cash portion of the purchase
consideration owed to the sellers. Interest is payable from 1 January 2009.
No revenue and profit was contributed to the Group by the acquired subsidiaries for the six months ended 30 June 2008.
If the acquisition had been completed on 1 January 2008, total group revenue and profit for the six months ended 30 June 2008 would have
been RMB32.98 million and RMB60.41 million respectively.
18. Related party disclosures
Identity of related parties
Transactions between the parent company and its subsidiaries are eliminated in this consolidated and aggregated financial information.
Transactions with shareholders and Directors are shown separately below.
Directors compensation (key management personnel's remunerations)
Six months Six months ended
ended 30 30 Jun 2007
June 2008 (Pro forma)
RMB'000 RMB'000
Short-term employee benefit - Directors' 3,926 -
salaries
Post-employment benefits - -
Other long-term benefits - -
Termination benefits - -
Share-based payment - -
3,926 -
Balances owed to related parties
Included in the trade and other payables are the following balances due to related parties:
30 Jun 2008 31 Dec 2007
RMB'000 RMB'000
Due to shareholders 3,775 4,043
The balance due is unsecured and interest-free with no fixed repayment terms.
Transaction with related parties
Mr. Wong Keng, a significant shareholder and executive director of the Group, is one of the sellers who owned 50% interest in the Canton
Finance Centre Project (CFC) acquired by the Group during the six months ended 30 June 2008. Details of the acquisition of subsidiaries by
the Group are disclosed in note 17. Details of the consideration attributable to the sale of 50% share of CFC by Mr. Wong are as follows:
RMB'000
Consideration 1,246,404
Deposit paid in 2007 (156,050)
Non-cash portion of consideration satisfied by the allotment (281,297)
of 27,147,803 shares
Deferred cash consideration payable to Mr. Wong 809,057
Less: Fair value adjustment (12,388)
Fair value of deferred cash consideration payable to Mr. Wong 796,669
19. Contingent liabilities
On 28 February and 21 March 2007, Guangzhou Tian Yuan Investment Management Limited, an indirect subsidiary of the Company, pledged the
investment property owned by the Group included in the financial statements at a revalued carrying amount of RMB 1,351 million in the form
of mortgages granted for borrowings of up to RMB 230,000,000 and RMB 275,000,000 made to Guangzhou Feihang Electronic Equipment Co., Limited
and Guangzhou Zhongjin Import and Export Trading Co., Limited respectively, companies independent of the Group. Mr Wong, Chairman of the
Company, gave an undertaking in favour of the Group on 11 March 2008 that he would fully discharge the mortgages within 30 days of the date
of completion of the sale of the Canton Finance Centre Project to the Group and would remove the registration of the mortgages from the
Government Records in the PRC. On 28 July 2008, the Group has agreed to defer Mr Wong's obligation to discharge these mortgages until such
time as the Group has obtained debt and/or equity finance and has paid to him that part of the total outstanding balance of the cash consideration due to him as one of the vendors of Canton
Finance Centre Project.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR IIFLRTFIRFIT
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