RNS Number:8119S
China Shoto plc
22 April 2008
Preliminary Results Press Release 22 April 2008
China Shoto plc
("China Shoto" or "the Company" or "the Group")
Preliminary Results
China Shoto plc (AIM:CHNS), a leading Chinese producer of industrial batteries
and power supply systems, announces its preliminary results for the
year ended 31 December 2007.
Highlights
* Revenue increased by 81% to �107.50 million (2006: �59.54 million)
* Net profit attributable to equity holders of the parent increased by 41% to
�5.62 million (2006: �4.00 million)
* Sales revenue of back up battery in 2007 increased by 99% to �78.02 million
(2006: �39.22 million)
* Foreign sales revenue in 2007 increased 482% to �6.92 million (2006: �1.19
million).
* Headline diluted earnings per share from continuing operations in 2007
increased 45.8% to 24.45 p (2006: 16.77 p).
* The Technology Center of China Shoto was recognized as a State Class
Enterprise Technology Center in September 2007.
* The Board recommend a final dividend for 2007 of 4.5 pence per share.
The introduction of the Third Generation Mobile infrastructure
and the holding of the Olympic Games in China will give us a huge market
opportunity. We believe that our expanded range of quality products and sharply
increased production output will underpin the prospects for continuous success
in 2008. China Shoto has become the largest back up lead acid battery producer
in China and we intend to become the largest lead acid battery producer in Asia.
China Shoto also plans to gradually enter into renewable energy industries to
become an environmental-friendly energy solution provider.
For further information:
China Shoto plc
Cao Guifa, Executive Chairman Tel: +44 (0) 20 7242 2666/ +86 159 6108 0515
www.chinashoto.com
Seymour Pierce Limited
Stuart Lane / John Depasquale Tel: +44 (0) 20 7107 8000
jdp@seymourpierce.com
www.seymourpierce.com
Media enquiries:
Allan Piper/ Jiang Lei Tel: +44 (0) 20 7242 2666/ +852 2854 2666
lei@firstcitypr.com
www.firstcitypr.cn
Chairman's Statement
In 2007 China's economy has seen major developments. China Shoto, as a leading
Chinese producer of lead acid batteries has achieved another year of substantial
growth and revenue in this environment. To focus on the fast increase in our
core market sector and expansion of our business, China Shoto disposed of its
51% share in 2007 of the Beijing Full Three Dimension Power Engineering Co.,
Ltd. ("FTD")'s turbine business. Our company is taking full advantage of the
favorable opportunities in our high growth market sectors.
Results and Dividend
Revenue increased by 81% to �107.50 million in 2007 (2006: �59.54 million).
Operating profit increased by 63% to �8.53 million (2006: �5.24 million).
On 7 November 2007 the Group signed a contract to dispose of the turbine
business operated by FTD, which is a 51% owned subsidiary undertaking. The
disposal was fully settled in cash.
Earnings for the purpose of basic and diluted earnings per share are the net
profit for the financial year attributable to equity holders of the parent
company of �5,618,000 (2006: �4,003,000). The Directors recommend payment of a
final dividend for 2007 of 4.5 pence per share in line with its stated dividend
policy.
Business Progress
The sales revenue of the back up battery business in 2007 was �78.02 million.
Sales to the six major telecommunication operators cover 88% of the total
business revenues in this division.
The sales revenue of the power battery business in 2007 was �29.48 million, an
increase of 45% compared with �20.33 million in 2006.
Global telecommunications expansion, especially the fast expansion of the Indian
Telecom market and the accelerated construction of the Chinese 3G network, offer
considerable scope for our company's continuous expansion in 2008.
Directorate Changes
On 13 July 2007 Zhu Shiping, Wang Zhaobin and David Thomas retired from the
Board and we thank them for their efforts to our company. David Thomas also
retired as company secretary. Zhou Ping and Zhou Weigang were appointed as
executive directors and Peter Maurice Crystal was appointed as a non-executive
director on 13 July 2007. Peter Crystal was appointed as company secretary on 31
December 2007.
Social Responsibility
Our Company is committed to the welfare of its employees and responsibilities to
the community. We are dedicated to offering our customers quality products and
excellent services. China Shoto will continue to strive towards best practice
and standards in our industry consistent with profitability. The average return
on equity ratio for the last three years was 22%, and return on equity ratio for
2005, 2006 and 2007 was 26%, 20% and 21% respectively. At the same time we will
seek to deliver attractive returns to our shareholders. China Shoto offers
employees career development opportunities and supports their goals outside
their family life and work.
Environmental Standards
The Group passed the certification of ISO14001 and GB/T18001 vocation health and
safety management system, and its products passed the CE Verification, UL
Verification and EU RoHS test.
Outlook
The Issuance of the Third Generation Mobile Telecommunication Technology License
and the holding of the Olympic Games in China will give us a huge market
opportunity. We believe that our expanded range of quality products and sharply
increased production output will underpin the prospects for continuous success
in 2008. China Shoto has become the largest back up lead acid battery producer
in China and we intend to become the largest lead acid battery producer in Asia.
China Shoto also plans to gradually enter into renewable energy industries to
become an environmental-friendly energy solution provider.
Cao Guifa
Chairman
Chief Executive's Review
I am delighted to report China Shoto's results for 2007, which show a
substantial growth in our core businesses, disposal of our controlling interest
in the turbine business and further consolidation and enhancement of our leading
position among communication operators and key OEM industries.
Market Overview
Market Sectors
The revenue from back up battery sales was �78.02 million in 2007, an increase
of 99% compared with �39.22 million in 2006.
The revenue from PTB business was �29.48 million in 2007, an increase of 45%
compared with �20.33 million in 2006.
International Market
Foreign sales in 2007 were �6.92 million, including Absorbed Glass Matt (AGM)
batteries of �5.86 million, compared with �1.19 million in 2006. In 2007, China
Shoto made a big step in attracting strategic large clients such as India
Reliance and American GE, and took new market opportunities with a fast
expansion in gross revenue.
AGM Batteries
In October 2007, our company won a $10 million order from one of India's largest
telecom operators, Reliance Telecom. In addition, we successfully became the
locomotive battery supplier to GE Transportation System a subsidiary of American
GE.
Gel and Flooded Batteries
Our Gel and Flooded Batteries are mainly sold in Europe, America and South-East
Asia. In addition, with China Mobile developing in the Pakistani market, our
product also entered that market.
Key Customers
Back up Batteries
Sales to five major telecommunication service providers increased by 118% to
�64.22 million compared to �29.49 million in 2006. Sales to China Mobile and
China Unicom in particular have increased by 120% to �49.29 million, as compared
to �22.38 million in 2006.
PTB Business
The key customers of the PTB business are Beijing Xinri in Wuxi, Tianjin Taimei,
Tianjin Taifeng and Jiangsu Yadea, which are important domestic manufacturers.
The above four key customers accounted for 22.9 %, 6.6%, 5.2% and 2.3% of total
PTB sales, respectively.
Sales and Marketing
Back up battery
Our company successfully became a qualified supplier to Huawei Technologies, the
largest next generation telecom equipment manufacturer in China. In addition,
our company has entered into five new provincial telecommunication markets,
including Guangdong, Shanghai, Fujian, Hainan and Guizhou and maintained its
high market shares in Jiangsu and Zhejiang telecommunication markets.
PTB Business
In 2007, our company selected distributors of well-known electric bicycle
manufacturers and appointed experienced sales region agents.
Technical Support and Fairs
Our company strengthened its communications with our customers with greater
technical support and attended the major product fairs.
In 2007, our company provided 29 technical trainings for China Mobile, China
Unicom, China Telecom, China Netcom, China Power and other customers.
Our company was also represented at the China Sourcing Fair in Hong Kong in
April and October 2007, and the Russian Telecommunication Fair in May and
October 2007.
Operating Review
Product
Quality control
China Shoto manufactures batteries according to IEC and German DIN standards,
and ensures the highest quality control using advanced manufacturing equipment
and production processes. The company successfully developed the 12V Tubular Gel
Battery meeting the EU 40744 Standard. Both the 2V and 12V series of batteries
have been recognized as "State-designated Product Exempt from Quality
Inspection" by the General Administration of Quality Supervision, Inspection and
Quarantine of P. R. China. In addition, our products passed the examination and
approval of the Quality Award Examination and Approval Committee to gain the
Jiangsu Province Quality Award of 2007. In addition, the lead-acid battery used
in power-assisted electric bicycle won the Product award of Jiangsu Province.
Manufacturing
Product quality has been guaranteed by strict monitoring in manufacturing
processes and detailed checks. Production capacity has also been increased
through the installation of new equipment and the recruitment of additional
labour.
Cost management
In 2007, the price of the main raw material, lead ingot, increased from an
average price of 14,430RMB in January to 19,830 RMB in December, which lead to
increased cost pressure. The Group initiated negotiations with the
telecommunications operators and its OEM Customers, resulting in a linkage to
the price of lead, which effectively alleviated pressure arising from the
increase in the raw material price by passing it on to the customer, by
agreement.
Research and development
In 2007, the Group increased its input in Scientific and Technological R&D to
reflect the demands of our market and its customers and increased research in
new technologies to ensure the industrial development of new intellectual
property and the advancement of our new technical programs.
Patents Granted
Two patents were granted in 2007. The Company now holds 98 patents among which
there are 10 invention patents.
Back up battery
AGM Battery
The company successfully developed its fifth model of AGM battery ranging from
2V200 to 2V1000Ah which had been introduced into the market. At the same time,
the 12V Tubular Gel Battery was successfully developed under the EU 40744
Standard and was put to the market.
Spiral Wound Battery
The spiral wound battery team developed a large capacity spiral wound battery of
12V 50Ah.
Power type batteries
To meet demand on large capacity battery in the electric bicycle market, our
company successfully developed the 16V18Ah power type battery, which was also
put to the market.
Prospects
China Shoto intends to become a recognised environmentally friendly energy
solution provider. Our high quality products and excellent service record fully
demonstrates our growth both in China and abroad. The company will continue with
its brand strategy, and will exploit development opportunities of 3G and
overseas telecommunications markets. The company intends to reduce operation
risk and achieve larger market share through acquisition or accessory parts
outsourcing. Looking forward to the future, the company will firmly consolidate
its core business.
Yang Shanji
Chief Executive
Finance Director's Review
Results
Sales revenues of the Group have increased by 81% to �107.50 million (2006:
�59.54 million).
Operating profit of the Group is �8.53 million, an increase of 63% (2006: �5.24
million).
Pre-tax profit of the Group is �7.16 million, an increase of 59% (2006: �4.51
million).
Net profit of the Group attributable to equity holders of the parent is �5.62
million, an increase of 41% (2006: �4.00 million).
Diluted earnings per share from continuing operations in 2007 is 24.45 p, an
increase of 45.8% (2006: 16.77 p).
Income tax
The Company and significant subsidiary undertakings are subject to income tax on
the following bases and at the following rates:
China Shoto plc
The Company is a non-resident UK company, subject to UK corporation tax at the
standard rate of 30% on UK profits.
Jiangsu Shuangdeng Group Co. Ltd
In 2005 the company reregistered as a foreign enterprise and is entitled to
exemptions from PRC income tax for the two years commencing from its first
profit-making year of operation and to a 50% relief from PRC income tax for
another three years thereafter. Its standard applicable tax rate is 24% during
tax holiday.
In accordance with the latest PRC taxation laws which will come into effect on 1
January 2008, starting from 1 January 2008, enterprises who once enjoyed a
preference on taxation exemption or relief on certain period such as "exemption
from tax in the first two years and half of the tax in the next three years" or
"exemption from tax in the first five years and half of the tax in the next five
years", will apply the original taxation law and administration law regulation
as well as the preferential system and preferential term till the end of the
period regulated in the relevant regulation after the implementation of the new
taxation. However, those who haven't enjoyed the taxation preferential because
of no profit-making will account its preferential term from the year 2008. Since
2008 is the company's first profit-making year, it is free from income tax in
2008 and 2009, and a half tax rate of 12% will be imposed in 2010, 2011 and
2012.
Jiangsu Fuste Power Supply Co. Ltd and Jiangsu Best Power Supply Co. Ltd
The companies are located in an area designated as an Economic Development
Coastal Region in accordance with PRC tax regulations and are entitled to an
applicable tax rate of 24%; meanwhile as a production enterprise in accordance
with the PRC tax legislation applicable to foreign investment enterprises each
company is entitled to exemptions from PRC income tax for the two years
commencing from their first profit-making year of operation (2004 for Jiangsu
Fuste Power Supply Co. Ltd and 2006 for Jiangsu Best Power Supply Co. Ltd) and
for another three years thereafter they are entitled to a 50% relief from PRC
income tax. After the tax holiday, its applicable tax rate is 25% according to
the latest taxation laws, which will come into effect in 1 January 2008.
Jiangsu Shuangdeng Power Supply Co. Ltd
The company is recognised as a "technology and knowledge concentrated
enterprise" and entitled to a 15% PRC income tax rate because it is a production
enterprise and also located in an area designated as an Economic Development
Costal Region in accordance with PRC tax regulations. Its applicable tax rate in
2008 is 18% (2009: 20%, 2010: 22%, 2011: 24% and 2012: 25% thereafter) according
to the latest taxation laws which will come into effect in 1 January 2008.
Nanjing Shuangdeng Science and Technology Development Academy Co. Ltd
In 2005 the company reregistered as a foreign investment enterprise and
meanwhile it is a production enterprise located in a development zone in
accordance with the PRC income tax legislation so it is entitled to exemptions
from PRC income tax for the two years commencing from its first profit-making
year of operation and thereafter it is entitled to a 50% relief from PRC income
tax for the next three years. Its applicable tax rate is 24%.
In accordance with the latest PRC taxation laws which will come into effect on 1
January 2008, starting from 1 January 2008, enterprises who once enjoyed a
preference on taxation exemption or relief on certain period such as "exemption
from tax in the first two years and half of the tax in the next three years" or
"exemption from tax in the first five years and half of the tax in the next five
years", will apply the original taxation law and administration law regulation
as well as the preferential system and preferential term till the end of the
period regulated in the relevant regulation after the implementation of the new
taxation. However, those who haven't enjoyed the taxation preferential because
of no profit-making will account its preferential term from the year 2008. Since
2008 is the company's first profit-making year, it is free from income tax in
2008 and 2009, and a half tax rate of 12% will be imposed in 2010, 2011 and
2012.
Yangzhou Zhenghe Power Supply Co., Ltd
The company is a production enterprise and in accordance with the PRC tax
legislation applicable to foreign investment enterprises the company is entitled
to exemptions from PRC income tax for the two years commencing from its first
profit-making year of operation (2007 for Yangzhou Zhenghe Power Supply Co.,
Ltd) and for another three years thereafter they are entitled to a 50% relief
from PRC income tax. Its applicable tax rate is 24% during tax holiday. After
the tax holiday, its applicable tax rate is 25% according to the latest taxation
laws which will come into effect in 1 January 2008.
Earnings and Dividends
Diluted earnings per share from continuing operations in 2007 increased 45.8% to
24.45 p (2006: 16.77 p). The Directors recommend the payment of a final dividend
for 2007 of 4.5 pence per share (2006: 4.5 p).
Equity shareholders' funds
Shareholders' funds have increased to �30.09 million (2006: �23.44 million).
Retained earnings total �10.41 million (2006: �6.77 million).
Cash Flow
The considerable increase in sales volume in 2007 resulted in the need for
greater working capital. Although debtor days reduced by 6 days from that of
2006, cash flow from operating activities in 2007 was still negative, at �3.03
million. The Group covered its deficit in operating cash flows by increased bank
borrowings. Interest paid was �1.46 million (2006: �822,000) and tax payments
were �976,000 (2006: �607,000).
Debtor days
Debtor days fell from 75 days in 2006 to 69 days in 2007.
In the back up battery business, debtor days fell from 91 days in 2006 to 77
days in 2007.
In the power type battery business, debtor days fell from 38 days in 2006 to 26
days in 2007
Borrowing
The Group entered into credit agreements with Jiangyan Branch of Bank of China,
Jiangyan Branch of China Construction Bank, Jiangyan Branch of Agricultural Bank
of China and Nanjing Branch of Shenzhen Development Bank, Taizhou Branch of Bank
of Communication. In addition, the Group was entitled to be the honor credit
enterprise by Jiangsu Provincial Bank Industry in 2007.
At 31 December 2007, the Group had short term bank loans of �23.28 million
(2006: �12.24 million).
Liquidity risk
Liquidity risk arises from the Group's management of working capital.
The Group's policy as regards liquidity is to ensure sufficient cash resources
are maintained to meet short-term liabilities. To achieve this aim, the group
improved receivable turnover ratio by requiring customers who do not pay within
allowed credit terms, to pay interest on top of their debt. The Group also seeks
to reduce liquidity risk by obtaining high credit level in banks.
Foreign exchange risks
Approximately 6% of the Group's sales are denominated in USD. The Group's policy
in regard to currency risk is to limit payment terms to immediate letters of
credit or prepayment before transporting goods to clients.
In 2007, the foreign sales revenue increased 482% to �6.92 million (2006: �1.19
million). At 31st December 2007, the year-end exchange rate between RMB and
Pound Sterling had appreciated by 5.09% to 14.5807 (2006: 15.3232). Directors
believe that RMB will continue appreciating in 2008. The appreciation of the RMB
will have a positive impact on the operating results of the Group.
Interest rate risk
The borrowing rate for the Group changes in line with the Central Bank interest
rate. The one-year RMB loan benchmark interest rate increased to 7.47% on 31st
Dec 2007 (2006: 6.12%). A tight currency policy implemented in 2007 also
increased the finance costs borne by the Group. The Group will continue to
carefully monitor its borrowings and strengthen control over trade receivables
to minimize any risks and improve its cash utilization.
Zhou Weigang
Finance Director
Unaudited Consolidated Income Statement
For the year ended 31 December 2007
Notes 2007 2006
Unaudited Audited
�000 �000
Revenue 107,497 59,544
Cost of sales (82,376) (41,839)
---------- ---------
Gross profit 25,121 17,705
Other operating income 503 774
Distribution expenses (11,131) (8,456)
Administrative expenses (5,869) (4,739)
Other operating expenses (96) (43)
---------- ---------
Profit from operations 8,528 5,241
Finance income 73 76
Finance costs (1,445) (808)
---------- ---------
Profit before tax from continuing operations 7,156 4,509
Tax expense 4 (1,255) (746)
---------- ---------
Profit from continuing operations 5,901 3,763
(Loss)/profit on discontinued operations, net
of tax 7 (14) 509
---------- ---------
Profit for the year 5,887 4,272
========== =========
Attributable to:
Equity holders of the parent 5,618 4,003
Minority interests 269 269
---------- ---------
5,887 4,272
========== =========
Earnings per share for profit attributable to
the
equity holders of the parent during the year
-Basic 6 24.07p 18.30p
========== =========
-Diluted 6 23.66p 17.93p
========== =========
Continuing operations
-Basic 6 24.87p 17.11p
========== =========
-Diluted 6 24.45p 16.77p
========== =========
Unaudited Consolidated Balance Sheet
As at 31 December 2007
Notes 2007 2006
Unaudited Audited
Assets �000 �000
Non-current assets
Property, plant and equipment 15,590 12,409
Available-for-sale investment 137 130
Intangible assets 1,778 1,528
Deferred tax assets 92 31
--------- ---------
17,597 14,098
--------- ---------
Current assets
Inventories 19,426 10,122
Trade and other receivables 31,479 22,233
Due from related parties 1,299 1,011
Short-term investments 1,290 947
Cash and cash equivalents 11,087 9,937
--------- ---------
64,581 44,250
--------- ---------
Total assets 82,178 58,348
========= =========
Liabilities
Current liabilities
Bank borrowings 23,284 12,236
Trade and other payables 27,817 20,702
Income tax payable 516 145
Due to related parties - 656
--------- ---------
51,617 33,739
--------- ---------
Non-current liabilities
Deferred tax liabilities - 21
--------- ---------
- 21
--------- ---------
Total liabilities 51,617 33,760
--------- ---------
Equity
Share capital 8 2,334 2,334
Share premium 8,630 8,630
Other reserves 2,916 2,916
Statutory reserves 6,678 5,071
Retained earnings 10,406 6,769
Foreign currency translation reserve (871) (2,272)
--------- ---------
Total equity attributable to equity holders
of the parent 30,093 23,448
--------- ---------
Minority interests 468 1,140
--------- ---------
Total equity and liabilities 82,178 58,348
========= =========
Unaudited Consolidated Statement of Changes in Equity
For the year ended 31 December 2007
Attributable to equity holders Minority Total
Foreign interests
Share Share Other Statutory Retained currency Total
capital premium reserves reserves earnings translation
reserve
Note 25 Note 26 Note 26 Note 26 Note 26 Note 26
�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
year - - - - 4,003 - 4,003 269 4,272
Foreign
currency
translation - - - - - (1,682) (1,682) (97) (1,779)
------ ------ ------ ------ ------ ------ ----- ------ ------
Total
recognized
income and
expense 2,321 2,493
Acquisition of
subsidiary - - - - - - - 968 968
Issue of
ordinary
shares on
placing 314 4,716 - - - - 5,030 - 5,030
Share issue
costs - (201) - - - - (201) - (201)
Exercise of
share options 20 240 - - - - 260 - 260
Transfer to
statutory
reserves - - - 1,047 (1,047) - - - -
Share based
payment
expense
Employee share
options - - - - 326 - 326 - 326
Dividends paid - - - - (350) - (350) - (350)
------ ------ ------ ------ ------ ------ ----- ------ ------
Balance as at
31 December
2006 2,334 8,630 2,916 5,071 6,769 (2,272) 23,448 1,140 24,588
Net profit for
the financial
year - - - - 5,618 - 5,618 269 5,887
Foreign
currency
translation - - - - - 1,401 1,401 17 1,418
------ ------ ------ ------ ------ ------ ----- ------ ------
Total
recognized
income and
expense 7,019 7,305
Disposal of
subsidiary - - - - - - - (712) (712)
Transfer to
statutory
reserves - - - 1,607 (1,607) - - - -
Share based
payment
expense
Employee share
options - - - - 326 - 326 - 326
Dividends paid - - - - (700) - (700) - (700)
Dividends
announced to
minority - - - - - - - (246) (246)
shareholders
of
subsidiaries
------ ------ ------ ------ ------ ------ ----- ------ ------
Balance as at
31 December
2007 2,334 8,630 2,916 6,678 10,406 (871) 30,093 468 30,561
Unaudited Consolidated Cash Flow Statements
For the year ended 31 December 2007
Notes 2007 2006
Unaudited Audited
Cash flows from operating activities
Profit before tax from continuing
operations 7,156 4,509
Profit before tax from discontinued
operations 351 552
---------- ---------
Profit before tax 7,507 5,061
Adjustments for:
Amortisation of intangible assets 50 43
Depreciation of property, plant and
equipment 1,137 820
Losses on disposal of property, plant and
equipment 42 21
Share based payment expense 326 326
Financial income (88) (91)
Financial expense 1,460 822
---------- ---------
Cash flow from operating activities
before 10,434 7,002
changes of working capital and provisions
Working capital changes:
Gain on payable write-off (9) -
(Increase)/decrease in:
Inventories (8,997) (6,392)
Trade and other receivables (12,504) 903
Due from related parties (228) 952
Increase/(decrease) in:
Trade and other payables 9,817 (234)
Due to related parties (651) (109)
---------- ---------
Cash (used in)/generated from operations (2,138) 2,122
Interest received 88 91
Income tax paid (976) (607)
---------- ---------
Net cash flows from operating activities (3,026) 1,606
---------- ---------
Cash flows from investing activities
Purchase of land use right (422) (807)
Purchase of property, plant and equipment (3,627) (4,905)
Purchase of subsidiary undertakings - 666
Purchase of investment - (130)
Purchase of short-term investment (283) 1,664
Disposal of a subsidiary undertaking, net
of cash transferred 7 (361) -
Proceeds from disposal of property, plant
and equipment 307 186
Dividend from former subsidiary (declared
before disposal) undertaking 175 -
---------- ---------
Cash flows used in investing activities (4,211) (3,326)
---------- ---------
Cash flows from financing activities
Net cash inflow from share placing - 5,089
Increase in bank borrowings 37,853 32,657
Decrease in bank borrowings (27,864) (32,504)
Interest paid (1,460) (822)
Dividends paid (700) (350)
---------- ---------
Cash flows from financing activities 7,829 4,070
---------- ---------
---------- ---------
Net increase in cash and cash equivalents 592 2,350
Cash and cash equivalents at beginning of
year 9,937 8,300
Foreign exchange differences 558 (713)
---------- ---------
Cash and cash equivalents at end of year 11,087 9,937
Notes to the financial statements
For the year ended 31 December 2007
1. General information
The financial information set out above does not constitute the Company's
statutory accounts for the years ended 31 December 2007 or 2006. The financial
information for the year ended 31 December 2006 is derived from the Company's
statutory accounts for that year and those statutory accounts have been
delivered to the Registrar of Companies. The auditors have reported on those
accounts; their report was unqualified and did not contain any statements under
the Companies Act 1985, s237(2) or (3). The statutory accounts for the year
ended 31 December 2007 will be finalised on the basis of the financial
information presented in this preliminary announcement and will be delivered to
the Registrar of Companies following the Company's annual general meeting.
China Shoto plc is a company incorporated in the United Kingdom under the
Companies Act 1985.
2. Accounting policies
The consolidated financial statements of China Shoto plc and its subsidiary
undertakings (the 'Group') and the individual financial statements of China
Shoto plc (the 'Company') have been prepared in accordance with those
International Financial Reporting Standards and Interpretations in force ('IFRS
'), as adopted by the European Union, and those parts of the Companies Act 1985
applicable to companies preparing financial statements under IFRS.
The Group profit for the year includes a loss of �141,000 (2006: profit after
tax of �1,282,000), which is dealt with in the financial statements of the
Company.
Principles of consolidation
The consolidated financial statements comprise the financial statements of the
China Shoto plc and its subsidiaries as at the balance sheet date. The financial
statements of the subsidiaries are prepared for the same reporting date as the
parent company. Consistent accounting policies are applied for like transactions
and events in similar circumstances.
Foreign currencies
The functional currency of the subsidiary undertakings is Renminbi ("RMB"), and
the financial statements of the subsidiary undertakings have been drawn up in
RMB. As sales and purchases are denominated primarily in RMB and receipts from
operations are usually retained in RMB, the directors are of the opinion that
RMB reflects the economic substance of the underlying events and circumstances
relevant to the Group. Monetary assets and liabilities maintained in currencies
other than RMB are translated into the RMB at the rates of exchange ruling at
the balance sheet date. Transactions in currencies other than RMB are translated
at rates ruling on the transaction dates. All resulting exchange differences are
dealt with in the income statements.
The presentation currency of the Group is pounds sterling and therefore the
financial statements have been translated from RMB to pounds sterling at the
following exchange rates:
Year-end rates Average rates
31 December 2006 �1 = RMB 15.3232 �1 = RMB 14.7505
31 December 2007 �1 = RMB 14.5807 �1 = RMB 15.2166
Assets and liabilities are translated into sterling at the closing rate, and all
income and expenses are translated at the average rate during the financial
period, being an approximation for the actual rates at the date of the
transactions. All resulting exchange differences are taken to the foreign
currency translation reserve within equity.
3. Segment reports
Reporting format
The primary segment reporting format is determined to be business segments as
the Group's risks and rates of return are affected predominantly by differences
in the products and services produced. The operating businesses are organized
and managed separately according to the nature of the products and services
provided, with each segment representing a strategic business unit that offers
different products and serves different markets. The operating businesses are
all located in the People's Republic of China, and therefore geographic
information is provided only in respect of the destination of sales.
Business segments
The Group is comprised of the following business segments:
The Power Type Batteries ('PTB') business segment is comprised of power-aided
bicycle batteries.
The Back up batteries business segment includes Value Regulated Lead Acid
Batteries and Flooded and Gel Batteries.
The Turbine business segment includes the development and construction of new
turbines and the refurbishment and reconstruction of existing turbines.
Allocation basis and transfer pricing
Segment results, assets and liabilities include items directly attributable to a
segment as well as those that can be allocated on a reasonable basis.
Business segments
The following tables present certain sales, profit, asset, liability and other
information regarding the Group's business segments for the years ended 31
December 2007 and 2006.
Back up Batteries PTB Eliminations Continuing Turbine
Total operations
2007 2006 2007 2006 2007 2006 2007 2006 2007 2006 2007 2006
�000 �000 �000 �000 �000 �000 �000 �000 �000 �000 �000 �000
Revenue:
Sales to
external
customers 78,018 39,218 29,479 20,326 - - 107,497 59,544 5,817 6,910 113,314 66,454
Inter-segment
sales - 1,706 5,814 1,166 (5,814) (2,872) - - - - - -
------ ------ ------ ------ ------ ------ ------ ----- ------ ------ ----- ------
------
Total revenue 78,018 40,924 35,293 21,492 (5,814) (2,872) 107,497 59,544 5,817 6,910 113,314 66,454
====== ====== ====== ====== ====== ====== ====== ===== ====== ====== ====== ======
Results:
Segment profit 7,535 3,961 1,149 1,566 - - 8,684 5,527 351 552 9,035 6,079
Unallocated
corporate
expenses (1,528) (1,018) - - (1,528)(1,018)
------ ----- ------ ------ ------ ------
Profit from
operations
before
taxation 7,156 4,509 351 552 7,507 5,061
Income
taxation (1,255) (746) 1 (43) (1,254) (789)
Loss from
selling
discontinued
operation - - (366) - (366)
------ ----- ------ ------ ----- ------
Profit for the
year 5,901 3,763 (14) 509 5,887 4,272
Back up Batteries PTB Turbine Eliminations Consolidated
2007 2006 2007 2006 2007 2006 2007 2006 2007 2006
�000 �000 �000 �000 �000 �000 �000 �000 �000 �000
Assets and liabilites:
Segment assets 60,591 39,574 2,122 9,587 - 6,753 (11,621) (1,706) 51,092 54,208
Unallocated
assets 31,086 4,140
------ ------
Total assets 82,178 58,348
====== ======
Segment
liabilities 42,792 27,278 - 5,119 - 5,139 (22,036) (4,721) 20,756 32,815
Unallocated
liabilities 30,861 945
------ ------
Total
liabilites 51,617 33,760
====== ======
Other segment information:
Capital expenditure:
Property,
plant and
equipment 3,388 2,265 599 2,748 1 76 - - 3,988 5,089
Intangible
assets - 130 356 - - - - - 356 130
Depreciation
and
amortization 915 775 256 71 16 17 - - 1,187 863
- -
======= ====== ====== ====== ===== ====== ====== ====== ====== ======
b) Geographical segments
Domestic sales Export sales Elimination Total
2007 2006 2007 2006 2007 2006 2007 2006
�000 �000 �000 �000 �000 �000 �000 �000
Segment sales 106,394 65,260 6,920 1,194 - - 113,314 66,454
======== ======= ======= ======= ====== ====== ======== =======
4 Income tax
Group Group
2007 2006
Unaudited Audited
�000 �000
Income tax expense is as follows:
Current income tax 1,324 731
Deferred income tax:
Origination and reversal of temporary differences (57) 15
Previously recognised deferred tax liability
written (12) -
off in the year
(69) 15
--------- ---------
1,255 746
========= =========
Profit before tax 7,156 4,509
Expected tax charge based on the standard tax rate
of individual group companies 1,729 689
Effect of reduction in tax rate (726) (112)
Tax effect of non-deductible expenses 276 169
Difference in tax rate of tax rate relief (13) -
Double tax relief applied on sale of discontinued
operation (11) -
--------- ---------
1,255 746
========= =========
========= =========
5 Dividends
Group Group Company Company
2007 2006 2007 2006
Unaudited Audited Unaudited Audited
�000 �000 �000 �000
Interim dividends paid 700 350 700 350
========= ========= ========= ========
China Shoto plc declared a dividend of 1.5p per ordinary share amounting to
�350,000 on 3 November 2006 to its shareholders at that date. China Shoto plc
declared a dividend of 3p per ordinary share amounting to �700,000 on 26 April
2007 to its shareholders at that date.
6 Earnings per share from continuing operations
Earnings for the purpose of basic and diluted earnings per share are the net
profit for the financial year attributable to equity holders of the parent of
�5,618,000 (2006: �4,003,000).
The profit from continuing operations for the financial year attributable to
equity holders of the parent is as follows:
Group Group
2007 2006
Unaudited Audited
� �
Profit attributable to equity holders of the parent 5,618,000 4,003,000
Loss on discontinued operation, net of tax 14,000 (509,000)
Minority interest of discontinued operation 172,751 249,410
---------- ---------
Profit from continuing operations attributable to
equity holders of the parent 5,804,751 3,743,410
========== =========
The weighted average number of ordinary shares used in the calculation of
earnings per share from continuing operations has been derived as follows:
Group Group
Number of ordinary shares 2007 2006
Unaudited Audited
Weighted average number of ordinary shares -
basic 23,343,770 21,880,671
Dilutive effect of share options 400,985 441,050
---------- ---------
Weighted average number of ordinary shares -
diluted 23,744,755 22,321,721
7 Disposal of a subsidiary undertaking
On 7 November 2007 the Group signed a contract to dispose of Beijing Full Three
Dimension Engineering Co. Ltd (FTD) which was a 51% is owned subsidiary
undertaking. The disposal consideration was fully settled in cash. The net
assets of FTD as of the date of disposal were as follows:
7 November
2007
Unaudited
�000
Property, plant and equipment 64
Inventories 566
Trade receivables 3,979
Bank balances and cash 879
Deferred tax liability (7)
Trade payables (4,023)
Minority interest (712)
Attributable goodwill 138
---------
884
Loss on disposal (366)
---------
Total consideration 518
=========
Satisfied by:
Cash 518
---------
Net cash inflow arising on disposal:
Cash consideration 518
Bank balances and cash disposed of (879)
---------
(361)
8 Share capital
2007 2006
Unaudited Audited
�000 �000
Authorised
100,000,000 Ordinary shares of 10p each 10,000 10,000
========= ==========
Allotted, called up and fully paid:
23,343,770 Ordinary shares of 10p each 2,334 2,334
========= ==========
Number �000
Issued on incorporation - 2 �1 ordinary shares 2 -
Sub-division into 10 ordinary shares 18 -
Issue of 10p ordinary shares on reverse acquisition
of Leadstar Enterprises Ltd on 30 November 2005 15,384,615 1,538
Issue of 10p ordinary shares on placing on 6 December
2005 4,615,385 462
--------- ----------
At 31 December 2005 20,000,020 2,000
Exercise of 10p share options on 3 April 2006 100,000 10
Exercise of 10p share options on 5 May 2006 100,000 10
Issue of 10p ordinary shares on placing on 12 June
2006 3,143,750 314
--------- ----------
At 31 December 2006 and 2007 23,343,770 2,334
========= ==========
The Company was incorporated on 10 May 2005 with authorised share capital of
�1,000 divided into 1,000 ordinary shares of �1 each. On incorporation, 2
ordinary shares of �1 each were issued for cash at �1 per share. On 30 November
2005 the authorised share capital was sub-divided into 10,000 ordinary shares of
10p each, and the authorised share capital was increased to �10,000,000 by the
creation of a further 99,990,000 ordinary shares of 10p each, and 15,384,615
shares were issued in consideration for the entire issued share capital of
Leadstar Enterprises Limited. On 5 December 2005, 4,615,385 ordinary shares of
10p were issued in connection with the placing. On 3 April and 5 May 2006,
200,000 ordinary shares of 10p were issued in respect of the exercise of share
options granted to the Company's advisers at the time of the flotation. The
weighted average price of options exercised in the year was 130 pence. On 12
June 2006, 3,143,750 ordinary shares of 10 p were issued in connection with the
placing.
- Ends -
This information is provided by RNS
The company news service from the London Stock Exchange
END
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