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Sorbic International (SORB)

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Thursday 24 June, 2010

Sorbic International

Interim Results

RNS Number : 1926O
Sorbic International PLC
24 June 2010
 



 

Press Release

 24 June 2010

 

Sorbic International Plc

 

("Sorbic International" or "the Group" or "the Company")

 

Interim Results

 

Sorbic International plc, (AIM:SORB), the third largest sorbates producer in China today announces its interim results for the six months period ended 31 March 2010.

 

Summary

 

·   

Demand for the Company's products remains strong, with order levels beyond the Company's current capacity to be met through the new facility in Inner Mongolia

·   

Revenue for the period was £5.4 million (six months ended 31 March 2009: £8.5 million). This reduction was as a result of a number of power outages

·   

Gross profit margin for the period of 21.8% (six months ended 31 March 2009: 40.8%)

·   

Net profit after tax of £0.22 million, a decrease of £1.99 million over the comparative six month period ended 31 March 2009

·   

Basic earnings per share are 0.7 pence (six months ended 31 March 2009: 9.6 pence)

·   

Cash reserves at the end of the period were £6.03 million, reflecting reliable cash flow and strength of the business model (six months ended 31 March 2009: £5.17 million)

·   

Net assets of £13.85 million as at 31 March 2010 (six months ended 31 March 2009: £13.96 million)

 

 

Since period end

 

·   

Construction in Inner Mongolia began in April 2010, with an estimated total capital commitment of RMB103 million (£9.96 million)

·   

Production at the site is scheduled to start in summer 2011

·   

Selling prices are starting to increase, thereby supporting a recovery in margins

 

John McLean, Non-Executive Chairman of Sorbic, commented:  "During a period when the Company has experienced significant pressure on its margins, as well as disruption from environmental factors such as power outages, Sorbic has remained profitable.  The new facility in Inner Mongolia will be key to driving growth, and this significant development will double the Company's production capacity.  The long-term prospects for Sorbic therefore remain strong."

 

- Ends-

For further information:

Sorbic International Plc


John McLean, Non-Executive Chairman

Tel: +44 (0) 7768 031 454


www.sorbicinternational.com

 

FinnCap


Geoff Nash / Ed Frisby (Corporate Finance)

Tel: +44 (0) 20 7600 1658

Tom Jenkins / Simon Starr (Broking)


 

Media enquiries:

Abchurch Communications


Henry Harrison-Topham / Joanne Shears

Tel: +44 (0) 20 7398 7709

joanne.shears@abchurch-group.com

www.abchurch-group.com

 

Notes to Editors:

Sorbic International's principal activity is the production and sale of the food preservatives Sorbic Acid and Potassium Sorbate from its base in Linyi City, Shandong Province, Peoples Republic of China. Approximately half of Sorbic International's production is sold to overseas markets, across 46 countries and half into the Chinese domestic market.

 

Sorbic Acid is a naturally occurring organic compound that is used in all kinds of foods for its anti-decomposition and anti-fungus function and also in grains, medicines, cosmetics, toothpaste, tobacco, animal feed, latex, paper-manufacturing and pesticides. Potassium Sorbate is used to inhibit moulds and yeasts in many foods, such as cheese, wine, yogurt, dried meat, baked goods, cosmetics and pharmaceuticals.

 

Sorbic International operates through its wholly owned subsidiary Linyi Van Science and Technique Co., Ltd ("LVST").



Operational Overview

 

Demand for the Company's products remains strong, with order levels beyond the Company's current capacity.

 

During the period, the Company experienced interrupted production due to unforeseen environmental factors.  Sales were affected by intermittent stoppages of the production lines for the following reasons:

 

November 2009 - Power shortage due to snow storm (4 days)

December 2009 - Environmental improvement to water treatment plant mandated by the Linyi Business Park from 5 to 19 December (15 days)

January 2010 -  Power shortage due to snow storm in Northern China  from 7 to 13 January (7 days)

March 2010 - Environmental inspection mandated by the Linyi Industrial Park authorities (4 days)

 

Estimated losses as a result of the 30 days of lost production total approximately RMB 3.7 million (£350,000) in profit before tax.  The Board looks forward to operating in Inner Mongolia, where the new business park is well connected in terms of resources such as coal, electricity and water. 

 

LVST Financials

Descriptions

2nd Half 2009

1st Half 2010





RMB

RMB




Quantity (tons)

3,110

2,637




Sales

65,105,959

59,060,229

Cost of sales

(47,420,350)

(46,183,286)

Gross profit

17,685,609

12,876,943

Other income

130,423

163,122

Total expenses

(4,376,102)

(4,181,668)

Finance cost

(1,026,294)

(1,004,073)

Operating profit before tax

12,413,637

7,854,324

Taxation

(1,551,705)

(1,249,860)

Operating profit for the period

10,861,932

6,604,464

 

 

The prices of raw materials are escalating, and although selling prices are increasing, this has not fully offset the increases in raw materials prices.  This has resulted in gross profit margins decreasing to 22% (six months to 31 March 2009: 35%).  WithinLVST the average cost of producing Sorbic Acid has risen by 19% over the six month period to 31 March 2010, whereas the average selling price has only risen by 7%. Similarly the average cost of producing Potassium Sorbate has risen by 14% whereas the average selling price as only risen by 7%.However, selling prices are starting to increase and the Board expects the firming of prices to continue, thereby improving margins over the coming months. 

 

Part of the cost increase is due to under recovery of fixed costs such as depreciation, wages and utilities as a result of not operating a full capacity.  Further, from January 2010 onwards, the Company has incurred additional recurring cost from the enhancement to the water treatment process at its site in Linyi City.  This government directed enhancement will cost the Company an additional RMB 600 for every ton of sorbates produced which reduces gross margins by 2.5 to 2.7 percentage points.

 

New production facility

The new production facility in Ulanqab City, Inner Mongolia, is currently being built on newly acquired factory site of 290,167sqm. The ground breaking ceremony took place on 25 April 2010 with actual work beginning early May 2010. Due to the unusually cold and prolonged winter, construction work did not start as planned in early April 2010, but despite this construction is on target and the foundations are nearly complete.  Production is expected to commence in summer 2011.   

 

The new site on the Chahar Industrial Park benefits from:

·      Modern infrastructure, with excellent energy, water and transport links

·      Availability of resources such as coal, electricity and water at a lower cost than the current site in Linyi

·      Industrial land resources costing only 45% of the national benchmark rate

 

The Board remains extremely optimistic about the next stage of Sorbic's development. Once the plant turns operational in the summer of 2011 with the completion of the two new lines, production capacity will reach 15,000 tonnes per annum, which will double the existing production capacity. Gross profit margins at the new facility are expected to be 20% better than existing facility which will greatly enhance the Company's competitive advantage. The new site has further expansion possibility up to an additional six more lines.

 

Loan from Albany

Albany Capital Group Limited ("ACGL") (formerly Albany Capital plc), which is a significant shareholder (20.4%) in the Company, has agreed to extend its one year term loan facility to Sorbic International plc from £500,000 to £550,000 on the same terms as the loan advanced in November 2009 in order to fund head office operating costs.

 

Outlook

China GDP growth exceeded the government's 8 percent target in 2009 and is expected to be close to 10 percent in both 2010 and 2011.  

 

The Purchasing Managers' Index ("PMI") for China's manufacturing sector stood at 53.9 percent in May. (source: the China Federation of Logistics and Purchasing), as an indication of the economic health of the manufacturing sector. The PMI index is based on five major indicators: new orders, inventory levels, production, supplier deliveries, and the employment environment. A PMI of more than 50 represents expansion of the manufacturing sector, compared to the previous month. This is the eleventh consecutive month that China manufacturing activities achieve expansionary growth.

 

Whilst the food additive industry in PRC remains highly competitive, and the business environment continues to be challenging, Sorbic is well placed within the industry due to the long-standing emphasis on quality of its product.  Going forward, the Group will continue to monitor the business environment closely, while at the same time exploring various expansion options and opportunities to attain long term sustainable and profitable growth. 

 

We have registered a new subsidiary, Inner Mongolia Gold Van Science and Technique Company in January 2010 with registered capital of 10 million RMB. The company in Inner Mongolia expects to recruit 60-80 supervisory staff for the new plant. The first batch of 20 workers from Ulanqab, Inner Mongolia has arrived in Linyi for training in April 2010.

 

Whilst in the short term the Group's profitability will continue to be impacted by the environmental factors such as power outages, the move to the Inner Mongolia site underpins Sorbic's growth prospects for the longer term.  We are excited about the opportunities in the sector, and are confident that the Group is well positioned to capitalise on the rapid growth in the Chinese domestic market. 

 

John McLean, Non-executive Chairman

24 June 2010

 

Unaudited condensed consolidated statement of comprehensive income

For the six month period ended 31 March 2010

 

 

 

 

 


Notes

Six months ended

31 March

2010

Six months ended

31 March

2009

Year ended  30 September

2009




Unaudited

Unaudited

Audited




£

£

£







Revenue



5,420,919

8,522,328

14,445,097

Cost of sales



(4,238,992)

(5,044,005)

(9,392,628)

Gross profit



1,181,927

3,478,323

5,052,469







Distribution and selling expenses



(64,037)

(121,759)

(230,580)

Administrative expenses



(706,088)

(694,173)

(1,360,508)







Operating profit



411,802

2,662,391

3,461,281







Finance income



14,973

20,757

32,765

Finance costs



(92,160)

(97,051)

(190,764)

Profit before taxation



334,615

2,586,097

3,303,382







Income tax expense


4

(114,720)

(375,311)

(511,330)







Profit for the year



219,895

2,210,786

2,792,052

Other comprehensive income






- Exchange differences on translating    foreign operations



618,499

1,788,442

742,147

Total comprehensive income, net of tax



838,394

3,999,228

3,534,199

Profit attributable to equity holders of the parent



219,895

2,210,786

2,792,052

Total comprehensive income for the year attributable to equity holders of the parent



838,394

3,999,228

3,534,199













Earnings per share (pence):


5




Basic



0.66

9.55

9.87



0.66

9.31

9.66







 

 

 

 

 

 

 

 

 

 








Unaudited condensed consolidated statement of financial position

As at 31 March 2010

 


 

 

 

 

Notes

As at

31 March 2010

As at

31 March 2009

As at

30 September 2009



Unaudited

Unaudited

Audited



£

£

£

Assets





Non-current assets





Property, plant and equipment


4,085,359

4,737,415

7,778,036

Land use rights


2,332,839

2,522,822

2,218,282

Construction in progress prepayments


4,088,508

3,707,368

-



10,506,706

10,967,605

9,996,318

Current assets





Inventories


372,884

501,749

325,179

Trade receivables


1,134,750

1,150,154

989,697

Prepayments, deposits and other receivables


251,896

181,094

60,637

Amount due from related company- Hermes Cap

6

301,625

301,625

301,625

Amount due from director


5,644,341

-

-

Cash and cash equivalents


6,028,247

5,170,829

5,992,035



13,733,743

7,305,451

7,669,173






Total assets


24,240,449

18,273,056

17,665,491

 


 

Equity and liabilities

 

 



Current liabilities

 

 



Trade payables

 

117,851

90,537

199,495

Advanced payments

 

-

88,872

138,339

Accruals and other payables

 

674,845

555,461

554,888

Amount due to directors

 

5,927,542

870,000

773,244

Borrowings

 

2,901,330

2,446,189

2,729,046

Current tax liabilities

 

78,394

132,880

95,500

Amount due to related company- Hermes Cap

6

177,274

124,952

144,727

Amount due to related company- Albany Cap

 

508,942

-

14,375

 

 

10,386,178

4,308,891

4,649,614

Total liabilities

 

10,386,178

4,308,891

4,649,614

Capital and reserves

 

 


 

Share capital

 

2,003,310

2,003,310

2,003,310

Share premium

 

21,079,289

21,111,196

21,079,289

Capital reserve

 

2,678,441

2,834,643

2,519,393

Surplus reserve

 

477,467

505,312

449,114

Retained earnings

 

7,222,207

6,421,045

7,002,312

Share based payment reserve

 

30,000

30,000

30,000

Reverse acquisition reserve

 

(20,911,925)

(20,911,925)

(20,911,925)

Foreign currency translation reserve

 

1,726,835

1,970,584

1,295,737

Hedging reserve

 

(451,353)

-

(451,353)

 

 




Total equity

 

13,854,271

13,964,165

13,015,877

 

 

 


 

Total equity and liabilities

 

24,240,449

18,273,056

17,665,491

 

 

 

Unaudited condensed statement of cash flows

For the six month period ended31 March 2010



Six months ended

 31 March 2010

Six months ended

31 March 2009

Year ended  30 September 2009



Unaudited

Unaudited

Audited



£

£

£

Cash flows from operating activities










Profit for the period


334,615

2,586,097

2,852,030






Adjustments for:





Amortisation of prepaid land lease payments


24,184

22,336

46,669

Depreciation


228,863

242,642

469,073

Interest income


(14,973)

(20,757)

(31,177)

Interest expense


92,160

97,051

190,375

Gain/ (loss) on disposal of fixed assets


20,961

-

(1,588)

Operating profit before working capital changes:


685,810

2,927,369

3,525,382

Changes in working capital





   (Increase)/ decrease in Inventories


(27,176)

(17,514)

105,202

   (Increase)/ decrease in trade receivables


(82,574)

747,865

937,338

   (Increase)/ decrease in other receivables


(4,368)

70,221

35,402

   Decrease in trade payables


(94,237)

(472,189)

(338,903)

   (Decrease)/ increase in other payables


(32,276)

(405,883)

156,055

Increase/ (decrease) in amount due to taxation


11,681

-

(110,568)

Increase in amount due from related company - Hermes Capital


-

1,914,758

1,914,758

Increase in amount due to related company - Hermes Capital


32,547

52,506

72,282

Increase/ (decrease) in amount due to related company- Albany


494,567

(222,271)

(207,896)

Decrease in amount due to directors


-

(3,163,418)

(3,163,924)

Increase in amount due from directors


-

(61,195)

-

Cash generated from operating activities


983,974

1,370,249

2,925,128

   Interest (paid)/ received


(92,160)

20,757

(658,206)

   Income tax paid


(147,763)

(279,850)

(190,375)

Net cash generated from operating activities


744,051

1,111,156

2,076,547






Cash flows from investing activities





      Payment for construction in progress


(54,429)

-

-

       Acquisition of property, plant and equipment


(105,046)

(3,621,224)

(3,786,482)

Sales of property, plant and equipment


-

-

3,083

Interest received


14,973

-

31,177

      Additions to prepaid lease payment


-

-

(89,718)






Net cash used in investing activities


(144,502)

(3,621,224)

(3,841,940)






Cash flows from financing activities





     Share issue costs


-

-

(301,907)

     Shareholders loan raised


193,422

870,000

773,244

     Loan from Financial Institution raised


-

1,985,609

423,002

     Repayment of loan from Financial Institution


-

(2,134,018)

-

     Interest paid


-

(97,051)

-

     Payment of deemed dividend tax


(1,169,194)

-

-






Net cash (used in)/ from financing activities


(975,772)

624,540

894,339






Net decrease in cash and cash equivalents


(376,223)

(1,885,528)

(871,054)






Cash and cash equivalents at the beginning of the period


5,992,035

6,501,950

6,501,950

Effect of foreign exchange rate changes


412,435

554,407

361,139






 

Cash and cash equivalents at the end of the period


6,028,247

5,170,829

5,992,035






 

 

 

 


Unaudited condensed consolidated statement of changes in equity

For the six month period ended31 March2010

 


Share capital

 

Share premium

 

Capital reserve

 

Surplus reserve

 

Retained earning 

Share based payment reserve

Foreign currency translation reserve

Reverse acquisition reserve

Shares to be issued- Escrow scheme

 

Total equity attributable to equity holders of the parent


£

£

£

£

£

£

£

£

£

£












Balance at 1 October 2008

1,385,310

14,274,196

2,290,956

408,393

4,210,259

30,000

822,748

(20,911,925)

7,725,000

10,234,937

Issue of ordinary shares

618,000

7,107,000

-

-

-

-

-

-

(7,725,000)

-

Reverse acquisition of Honour Field

-

(270,000)

-

-

-

-

-

-

-

(270,000)

Profit for the period

-

-

-

-

2,210,786

-

-

-

-

2,210,786

Other comprehensive income:











Exchange differences on translation of foreign operations

-

-

543,687

96,919

-

-

1,147,836

-

-

1,788,442

Total comprehensive income for the period

-

-

543,687

96,919

2,210,786

-

1,147,936

-

-

3,999,228

 











 











Balance at 31 March 2009

2,003,310

21,111,196

2,834,643

505,312

6,421,045

30,000

1,970,584

(20,911,925)

-

13,964,165

 


Share capital

 

Share premium

 

Capital reserve

 

Surplus reserve

 

Retained earning 

Share based payment reserve

Foreign currency translation reserve

Reverse acquisition reserve

Hedging Reserve

 

Total equity attributable to equity holders of the parent


£

£

£

£

£

£

£

£

£

£












Balance at 1 October 2009

2,003,310

21,079,289

2,519,393

449,114

7,002,312

30,000

1,295,737

(20,911,925)

(451,353)

13,015,877

 











Profit for the period

-

-

-

-

219,895

-

-

-

-

219,895

Other comprehensive income:











Exchange differences on translation of foreign operations

-

-

159,048

28,353

-

-

431,098

-

-

618,499

Total comprehensive income for the period

-

-

159,048

28,353

219,895

-

431,098

-

-

838,394

 











Balance at 31 March 2010

2,003,310

21,079,289

2,678,441

477,467

7,222,207

30,000

1,726,835

(20,911,925)

(451,353)

13,854,271

 


Basis of Presentation and Summary of Significant Accounting Policies

 

 

1.

General information

          

The Company was established to seek to acquire a controlling interest in a company located in Europe, North America or Asia. Following the change of name from Ninety plc to Sorbic International plc and the completion of the acquisition of Honour Field International Limited ("HF") and its subsidiary ("Honour Field Group") on 29 September 2008, the Group's principal activities comprise the production and sale of food preservatives, namely Sorbic Acid and Potassium Sorbate. The Group's main operations are in the People's Republic of China.

 

Sorbic International, a public limited company, is the Group's ultimate parent company. It is incorporated and domiciled in the United Kingdom. The address of Sorbic International's registered office is 17 Hanover Square, London W12 1HU. Sorbic International's shares are traded on the AIM market of the London Stock Exchange.

 

2.

Basis of preparation

 

            The financial information for the six months ended 31 March 2009 and 31 March 2010 set out in this interim financial information is unaudited and does not constitute statutory financial statements.  The financial information for the year ended 30 September 2009 set out in this interim financial information does not comprise the Group's statutory financial statements as defined in Section 435 Companies Act 2006 but has been extracted from those financial statements.

 

The interim financial information for the six months ended 31 March 2010 was approved by the directors on 20 June 2010.

 

Copies of this interim financial information will be available on the Company's website: www.sorbicinternational.com

 

The interim financial information has been prepared in accordance with IAS 34 "Interim financial reporting" as adopted by the European Union. The standards have been applied consistently (except as otherwise stated).

 

The statutory financial statements for the year ended 30 September 2009, which have been filed at Companies House, were prepared under IFRS and IFRIC interpretations as adopted by the European Union and with those parts of the Companies Act 2006 applicable to companies preparing their financial statements under IFRS. The auditors reported on those financial statements; their Audit Report was unqualified and did not contain a statement under either Section 498(2) or 498(3) of the Companies Act 2006.

 

The interim financial information for the six months ended 31 March 2010 has been prepared on the basis of the accounting policies set out in the most recently published financial statements for the Group for the year ended 30 September 2009, which are available on the Company's website; www.sorbicinternational.com, as the Company does not anticipate the addition of new standards to the Group's results for the year ending 30 September 2010.

 

With effect from 1 October 2009, the Group has implemented IFRS 8 - operating segments and IAS 1 (revised 2007) - presentation of financial statements.

 

a.              IFRS 8 - Operating Segments

 

IFRS 8 is effective for annual periods beginning on or after 1 January 2009. IFRS 8 is a disclosure standard. The adoption of this standard does not affect the identified operating segments for the Group and has no impact on the reported results or financial position of the Group. The accounting policy for identifying segments is based on internal management reporting information that is regularly reviewed by the chief operating decision maker.

 

The Group has adopted IFRS 8 which is required for all annual reports and interim financial statements starting 1 January 2009 or later. Implementation of IFRS 8 has not resulted in changes to the Group policy in measuring/valuing the amounts included in segmental reporting. However, the composition of the reportable segment in March 2010 interim reporting compared to March 2009 and September 2009 has changed and there are additional narrative disclosures. The measures of profit or loss, revenues and expenses included in segmental reporting are the same as those used in the consolidated financial statements and remain unchanged from 2009.

 

The reportable segments identified make up the Group's revenue, which is derived from the sale of its products. The reportable segments are an aggregation of operating segments within the Group as prescribed by IFRS 8. The reportable segments are determined based on the Group's management structures and the consequent reporting to the chief operating decision maker. Thus, they are determined based on both geographical segments and business segments of the Group.

 

Income and expenses included in profit for the year are allocated to the extent that they can be directly or indirectly attributed to the segments on a reliable basis. Expenses allocated as either directly or indirectly attributable comprise: cost of sales, other operating expenses and administrative expenses.

 

The income and expenses allocated as indirectly attributable to the segments are allocated by means of sharing key resources determined on the basis of utilisation of key resources in the segment.

 

Non-current segment assets comprise the non-current assets used directly for the segment operations, including property, plant and equipment, land use rights and construction in progress prepayments.

 

Current segment assets comprise the current assets used directly for segment operations, including inventories, trade receivables, other receivables and prepayments.

 

 

b.  IAS 1 (revised 2007) - Presentation of Financial Statements

 

IAS 1 (revised 2007) introduces a number of changes to the requirements for the presentation of financial statements which include the followings:- the separate presentation of owner and non-owner changes in equity; requirement for entities making restatements of classifications of comparative information to present a statement of financial position at the beginning of the comparative period, and voluntary name changes for certain primary statements.

 

 

3.

Segmental reporting

 

The Group has adopted IFRS 8, Operating Segments for the March 2010 interim reporting. IFRS 8 requires that segments represent the level at which financial information is reported to the Board of directors ("The Board") of the Group, being the chief operating decision maker as defined in IFRS 8. The Board consists of the Chairman, the President, the Chief Executive Officer, the Chief Financial Officer and the independent director. The Board determines the operating segments based on reports reviewed and used by the Board for strategic decision making and resource allocation.

 

Segment information is presented in respect of the Group's geographical and operating segments.

The Group's operating segments are as follows:

(i)         Sorbic acid

(ii)         Potassium sorbate

 

There were no inter-segment sales and transfers during the year ended 31 March 2010.

 

 

Geographical Information - Six months ended 31 March 2010

                                                  


PRC

United States

Russia

Netherlands

Others

Consolidated


£

£

£

£

£

£















Revenue

2,807,412

1,057,397

355,485

549,382

651,243

5,420,919








 



 

         Operating Segments - Six months ended 31 March 2010          

 







Sorbic Acid

Potassium Sorbate

Others

Consolidated


£

£

£

£






Revenue

2,574,463

2,846,456

-

5,420,919

Gross profit

532,586

649,341

-

1,181,927

Profit before taxation



334,615

334,615

Taxation



(114,720)

(114,720)

Net profit after tax



219,895

219,895

Segment assets

495,206

395,275

23,349,968

24,240,449

Segment liabilities

-

-

10,386,178

10,386,178

Finance income

-

-

14,973

14,973

Finance costs

-

-

(92,160)

(92,160)

Depreciation and amortisation

125,185

127,862

-

253,047

Capital expenditure

-

-

54,429

54,429











 

Geographical Information - Six months ended 31 March 2009

                                                  


PRC

United States

Russia

Netherlands

Others

Consolidated


£

£

£

£

£

£















Revenue

4,192,449

1,845,602

1,019,552

834,298

630,427

8,522,328















 

         Operating Segments - Six months ended 31 March 2009          

 







Sorbic Acid

Potassium Sorbate

Others

Consolidated


£

£

£

£






Revenue

3,730,072

4,792,256

-

8,522,328

Gross profit

1,552,781

1,925,542

-

3,478,323

Profit before taxation



2,586,097

2,586,097

Taxation



(375,311)

(375,311)

Net profit after tax



2,210,786

2,210,786

Segment assets

573,904

449,178

17,249,974

18,273,056

Segment liabilities

-

-

4,308,891

4,308,891

Finance income

-

-

20,757

20,757

Finance costs

-

-

(97,051)

(97,051)

Depreciation and amortisation

158,072

106,906

-

264,978

Capital expenditure

-

-

3,621,224

3,621,224











 

Geographical Information - Year ended 30 September 2009

                                                  


PRC

United States

Russia

Netherlands

Others

Consolidated


£

£

£

£

£

£















Revenue

7,211,642

3,045,263

1,410,255

1,629,531

1,148,406

14,445,097















 



         Operating Segments - Year ended 30 September 2009

 







Sorbic Acid

Potassium Sorbate

Others

Consolidated


£

£

£

£






Revenue

6,655,770

7,789,327

-

14,445,097

Gross profit

2,350,903

2,701,566

-

5,052,469

Profit before taxation



3,303,382

3,303,382

Taxation



(511,330)

(511,330)

Net profit after tax



2,792,052

2,792,052

Segment assets

499,807

394,802

16,770,882

17,665,491

Segment liabilities

-

-

4,649,614

4,649,614

Finance income

-

-

32,765

32,765

Finance costs

-

-

(190,764)

(190,764)

Depreciation and amortisation

249,137

266,604

-

515,741

Capital expenditure

-

-

3,830,602

3,830,602











 

 

4.

Taxation

 

The taxation charge for the six months ended 31 March 2010 has been based on the estimated effective rate of 12.5% from October to December 2009 and 25% from January 2010 onwards (31 March 2009 - 12.5%).

 

The Group's subsidiary, Linyi Van Science and Technique Company Limited ("LVST") has had the benefit of a tax holiday from 2004 in which it is entitled to be exempted from the Enterprise Income Tax ("EIT") for tax years starting from the first profit making year followed by a 50% tax relief for the next three years. The tax holiday granted expired from 1 January 2010 onwards.

 

 

5.

Earnings per share

 

(a)    Basic

Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the period:

 

Profit attributable to equity holders of the company: £219,895 (2009: £2,210,786)

Weighted average number of ordinary shares in issue: 33,388,500 (2009: 23,144,784)

Basic earnings per share: 0.66 pence (2009: 9.55 pence)

 

(b)    Diluted

Diluted earnings per share is calculated by adjusting the weighted number of ordinary shares in issue to assume conversion of all potential dilutive ordinary shares during the period.

 

Profit attributable to equity holders of the Company: £219,895 (2009: £2,210,786)

Weighted average number of ordinary shares in issue: 33,388,500 (2009: 23,744,784)

Diluted earnings per share: 0.66 pence (2009: 9.31 pence)

 

The dilutive effect of the options granted to Hermes Capital and Finn Cap to subscribe 400,000 shares and 200,000 shares respectively at 75 pence per share has no impact on the calculation of the earnings per share. There were no potential dilutive share arrangements in place during the six months ended 31 March 2010.

 

 

6.

Amount due from/ to related companies - Hermes Financial and Hermes Capital

 

The balance due from Hermes Financial of £301,625 was the remaining fund that Hermes Financial owed in relation to the reverse acquisition exercise.

 

The amount due to Hermes Capital of £177,274 was related to the provision of advisory and consultancy service to Honour Field International for the reverse acquisition exercise.

 

In respect to the work that Hermes Capital carried out for Sorbic International in relation to the reverse acquisition exercise, an accrual of £250,000, being approximately 1.0% of Sorbic's gross market capitalisation at the time of listing was provided in addition to £73,917 of expenses.

 

7.

Contingent Liabilities

 

The Company disclosed in its financial statements for the year ended 30 September 2009 that a contingent liability of up to £1 million may be due arising from the acquisition of LVST.

 

In order to resolve the position, a loan of £4.6 million was made by Wang Yan Ting ("WYT"), a director and shareholder in Sorbic International plc and the former owner of LVST to LVST, and a contribution of the same amount was made by WYT to Honour Field International Limited ("HF"). These amounts are repayable on demand. Since the legal agreements relating to the set off of the above transactions have not been executed at the date of statement of financial position, the amounts due to and due from WYT are included in other payables and other receivables respectively.

 

As a result of the arrangements, there is no contingent liability at the date of statement of financial position.

 

 

8.

Acquisition of Inner Mongolia Van Science and Technique Company Limited ("IMGVST")

On 22 January 2010, the Group has, via LVST, incorporated IMGVST with registered capital of RMB 10 million (£0.97 million). Total cash consideration of RMB 2 million (£0.19 million) has been paid (refer to Note 9).

 

 

9.

Financial commitment

 

The registered capital of the Inner Mongolia entity is RMB 10 million (£0.97 million). As at 31 March 2010, RMB 2 million (£0.19 million) has been paid by LVST and Chen Zhi Chang in a 90:10 split. Chen Zhi Qiang, an employee of the Company, is holding the 10% in trust for the Company to allow the Company to stagger payments for the remaining RMB 8 million (£0.77 million) over the two years of set up.

 

 

10.

Events after the statement of financial position date

 

During the board meeting held on the 26 of April 2010, the Board has agreed to a management incentive of RMB 16 million (£1.55 million) payable to WYT, the president of the Company upon the completion of the new production facilities in Inner Mongolia within the approved budget and timeline.

 

 

- Ends -


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