RNS Number:7577E
Prince Catering & Mgmnt (Overseas)
28 September 2007
Prince Catering and Management (Overseas) Limited
(the "Company)
Interim results for the six months ended 30 June 2007
Chairman's Statement
Despite the backdrop of China's continuing consumer boom, the first half of 2007
nonetheless proved to be a difficult period for Prince Catering and Management
(Overseas) Ltd, with the twin challenges of increased competition and higher raw
material costs impacting the Group's sales and profits. As we progress through
the second half, we continue to focus on moves to strengthen our appeal to our
core customers from China's increasingly wealthy middle class and business
communities, and look forward to further restaurant openings which we hope will
help to reverse the downtrend of the first six months.
Success with our Hong Kong restaurant, where sales improved during the period,
has already helped us identify factors that we believe can be implemented with
similar results at our other operations. We have developed a style of service
specifically targeting our high-end consumers, and are experiencing encouraging
levels of regular repeat business. The style and location of our Prince State
Banquet Restaurant in Shenzhen have also proved extremely popular, with first
half revenues strengthening, and the restaurant has won two awards during the
year, providing a clear indication of the potential to meet the demands of a
fashionable clientele.
Even so, across the Group as a whole, sales declined 13% to #2.88 million during
the first half, bringing pre-tax profits down to #130,000 from #538,000. Our
performance was impacted by the closure of the Macau Prince restaurant and the
late opening of the new Xi'an Platinum Prince restaurant which did not open
until July, after the end of the period. The Shenzhen Prince restaurant has also
been shut since May for refurbishment, ahead of a planned re-opening around the
start of next year. The Group is now operating 13 restaurants in 11 Chinese
cities from Hong Kong in the South to Zhejiang in the North, along with the
Xi'an Prince Hotel in Shaanxi Province. Our first restaurant in Shanghai is on
course to open around the start of next year, and the Group has now also signed
management contracts with planned new restaurants in Nantong and Ningbo.
The impact on our operating margins during the first half reflects the twin
pressures we are now facing from the onset of new competition offering diners
increasingly fashionable dishes, and the rising cost of raw materials that
cannot be passed on to customers in the face of that competition. Our moves to
address these challenges depend heavily upon the skill and experience of our
management team and chefs, and we are working hard to create menus that will
help attract an increase in customers and maintain the high quality of our
management and operating personnel. But at the same time, in Xi'an in
particular, we also continue to feel the impact of restaurant taxes that levy
33% on operating profit and 5% on turnover.
At the same time, the increasingly competitive pressures in Xi'an, where
revenues fell significantly, illustrate how we are having to frame our approach
to deal with different challenges across different parts of the country. We are
working hard to improve the quality and service standards of the Xi'an Prince
Hotel, and to attract more spending from the entertainment budgets of provincial
and municipal government officials there.
Alongside our new restaurant management contracts and planned restaurant
openings, the Group is also in talks about the opening of Prince hotels in three
key cities - Beijing, Shanghai and Zhengzhou. With these discussions underway,
and our continuing efforts to provide high quality standards and services for
visitors to our restaurants, the Group is working to overcome the setbacks of
the first half, and aiming for improvements during the remainder of the year.
Mr. Guangfan Mai
Chairman
28 September 2007
For further information please contact:
David Youngman, WH Ireland Limited +44 (0) 161 832 2174
Allan Piper, First City Financial +44 (0) 20 7242 2666
UNAUDITED CONSOLIDATED INCOME STATEMENT
For the six months ended 30 June 2007
6 months to 6 months to Year to 31
30 June 2007 30 June 2006 December 2006
(unaudited) (unaudited) (audited)
#000 #000 #000
Revenue 2,884 3,318 6,410
Cost of sales (1,138) (1,211) (2,398)
Gross profit 1,746 2,107 4,012
Selling, distribution and administrative expenses (1,527) (1,569) (3,300)
Operating Profit 219 538 712
Exceptional costs of AIM listing (89) - (546)
Investment income - - 19
Profit before income taxes 130 538 185
Income Taxes (58) (104) (176)
Profit for the period 72 434 9
Attributable to Equity holders of the parent 4 361 (112)
company
Minority Interest 68 73 121
Earnings (loss) per share
-Basic (pence) 0.0p 0.4p (0.1p)
-Fully diluted (pence) 0.0p 0.4p (0.1p)
UNAUDITED CONSOLIDATED BALANCE SHEET
At 30 June 2007
30 June 2007 30 June 2006 31 December 2006
(unaudited) (unaudited) (audited)
#000 #000 #000
Non-current assets
Intangible fixed assets 8 30 16
Property, plant and equipment 1,263 1,617 1,428
Deferred tax asset 65 12 65
Total non-current assets 1,336 1,659 1,509
Current assets
Inventories 214 219 214
Trade and other receivables 2,696 1,743 1,967
Cash and cash equivalents 679 803 841
Total current assets 3,589 2,765 3,022
Total assets 4,925 4,424 4,531
Current Liabilities
Trade and other payables (2,559) (1,507) (2,209)
Total assets less current liabilities 2,366 2,917 2,322
Net assets 2,366 2,917 2,322
Equity
Share capital 1,760 1,789 1,756
Foreign currency translation reserve (31) 81 13
Statutory reserves 362 305 343
Pooling Reserve 176 132 176
Warrant reserve 29 - 29
Retained Earnings (718) 30 (713)
Equity attributable to the equity holders of 1578 2,337 1,604
the parent company
Minority Interest 788 580 718
Total Equity 2,366 2,917 2,322
UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the six months ended 30 June 2007
Share Retained Share Pooling Minority Statutory Warrants Foreign Total
Capital Earnings Premium Reserve interest Reserves Reserve Currency Equity
Translation
Reserve
#000 #000 #000 #000 #000 #000 #000 #000 #000
At 1 January 1,846 (162) - 48 675 276 - 287 2,970
2006
Profit for - 361 - - 73 - - - 434
period
Exchange rate (57) (140) - 84 (168) - - (206) (487)
adjustments
Statutory - (29) - - - 29 - - -
transfer
At 30 June 1,789 30 - 132 580 305 - 81 2,917
2006
Share Retained Share Pooling Minority Statutory Warrants Foreign Total
Earnings Premium Reserve interest Reserves Reserve Currency Equity
Capital Translation
Reserve
#000 #000 '000 #000 #000 #000 #000 #000 #000
At 1 July 2006 1,789 30 - 132 580 305 - 81 2,917
Profit for - (473) - - 48 - - - (425)
period
Dividends paid - (469) - - - - - - (469)
pre IPO and to
minorities
Exchange rate (127) 255 - 44 90 (18) - (68) 176
adjustments
Increase in 94 - - - - - - - 94
share capital
Premium on - - 331 - - - - - 331
shares issued
Issue cost of - - (331) - - - - - (331)
shares issued
Statutory - (56) - - - 56 - - -
transfer
Warrants issued - - - - - - 29 - 29
in the period
At 31 December 1,756 (713) - 176 718 343 29 13 2,322
2006
Share Retained Share Pooling Minority Statutory Warrants Foreign Total
Capital Earnings Premium Reserve interest Reserve Reserve Currency Equity
Translation
Reserve
#000 #000 '000 #000 #000 #000 #000 #000 #000
At 1 January 1,756 (713) - 176 718 343 29 13 2,322
2007
Profit for - 4 - - 68 - - - 72
period
Exchange rate 4 (2) - - 2 12 - (44) (28)
adjustments
Statutory - (7) - - - 7 - - -
transfer
At 30 June 2007 1,760 (718) - 176 788 362 29 (31) 2,366
UNAUDITED CONSOLIDATED CASH FLOW STATEMENT
For the six months ended 30 June 2007
6 months to 30 6 months to 30 Year to 31
June 2007 June 2006 December 2006
(unaudited) (unaudited) (audited)
#000 #000 #000
Profit / (loss) attributable to equity holders of the parent 4 361 (112)
company
Adjustments for:
Depreciation of property, plant and equipment 165 173 336
Amortisation 8 14 24
Interest Income - 11 -
Income Tax 58 104 176
Minority Interest 68 73 121
Operating cash flow before movements in working capital 303 736 545
Change in inventories - 70 75
Change in receivables (728) 179 (46)
Change in payables 530 (271) 454
Cash generated by operations 105 714 1,028
Income taxes paid (240) (47) (89)
Change in deferred tax - - (56)
Share based payment - - 29
Net cash generated from operating activities (135) 667 912
Investing activities
Purchase of property, plant and equipment (2) (22) (20)
Net cash used in investing activities (2) (22) (20)
Financing activities
Proceeds of issue of new shares - - 94
Dividends paid to minority shareholders - (322) (593)
Foreign exchange differences (25) (112) (144)
Net cash (used in)/ from financing activities (25) (434) (643)
Net (decrease) / increase in cash and cash equivalents (162) 211 249
Cash and cash equivalents at start of period 841 592 592
Cash and cash equivalents at end of period 679 803 841
Cash and bank balances 679 803 841
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS
For the six months ended 30 June 2007
1. General Information
Prince Catering and Management (Overseas) Limited was incorporated on 6 June
2005 in the British Virgin Islands. The address of the registered office is at
OMC Chambers, PO Box 3152 Road Town, Tortola, British Virgin Islands. The
company is domiciled in the British Virgin Islands.
The Company is an investment holding company. The principal activity of its
subsidiaries is the operation of luxury Cantonese restaurants in the People's
Republic of China. The consolidated interim statements are presented in
sterling.
2. Accounting Policies
1. Basis of Preparation
The unaudited consolidated interim financial statements of Prince Catering and
Management (Overseas) Limited and its subsidiary undertakings (the ''Group'')
have been prepared in accordance with those International Financial Reporting
Standards and Interpretations in force, as adopted by the European Union. They
have been prepared using the same accounting policies and on the same basis as
the annual financial statements for the year ended 31 December 2006. The interim
financial information for the six months ended 30 June 2007 and that for the
equivalent period in 2006 are unaudited, and these unaudited interim financial
statements do not constitute statutory accounts. The comparatives for the full
year ended 31 December 2006 are not the Group's full statutory accounts for that
year but have been extracted from those accounts. The auditors' report on those
accounts was unqualified and did not include references to any matters to which
the auditors drew attention by way of emphasis without qualifying their report.
2. Basis of Consolidation
The Group interim statements consolidate the accounts of Prince Catering and
Management (Overseas) Limited and all its subsidiary undertakings drawn up to 30
June 2007. Subsidiary undertakings comprise Xi'an Prince Restaurant Co Ltd,
Hong Kong Prince Restaurant Co Ltd and Shenzhen Prince Catering Management Co
Ltd.
Subsidiary undertakings have been consolidated using the pooling of interests
method. The assets and liabilities of the combining entities are reflected at
their carrying amounts. No adjustments have been made to reflect fair values.
This enables presentation of the results and comparatives to reflect the ongoing
business.
The income statement reflects the results of the combining entities for the full
period irrespective of when the combination took place.
All intra-group transactions, balances income and expenses are eliminated on
consolidation.
Comparative figures are presented as if the entities had always been combined.
3. Foreign Exchange
The functional currency of the Group is the Renminbi (RMB). The presentational
currency is pounds sterling (#) for the benefit of investors.
Transactions denominated in foreign currencies are translated into sterling and
recorded at the rate of exchange ruling at the date of the transactions.
Monetary assets and liabilities denominated in foreign currencies at the Balance
Sheet date are retranslated at the rates ruling at that date. These translation
differences are dealt with in the Group Income Statement.
The financial statements of foreign subsidiaries are translated into sterling at
the closing rate of exchange and the differences arising from the translation of
the opening net investment in the subsidiary are taken to reserves.
For the period ended 30 June 2007, the foreign operations financial statements
have been translated from RMB to Sterling at the following exchange rates:
Period end rate Average rate
RMB: GB # 15.279 15.227
4. Revenue Recognition
Revenue is measured at the fair value of the consideration received or
receivable and represents amounts receivable for goods or services provided in
the normal course of business, net of discounts and other sales related charges.
Revenue from the restaurant business is recognised when goods or services are
delivered.
Revenue from the restaurant management business is recognised when the service
is fully provided.
5. Operating Leases
Leases where substantially all the rewards and risks of ownership of assets
remain with the lessor are accounted for as operating leases. Where the
companies within the Group are lessees, rentals payable under the operating
leases are charged to the income statement on the straight-line basis over the
lease terms.
6. Income Tax
Income tax for the period comprises current and deferred tax. Income tax is
recognised in the income statement except to the extent that it relates to items
recognised directly in equity, in which case such tax is recognised in equity.
Current tax is the expected tax payable on the taxable income for the period,
using tax rates enacted or substantially enacted at the balance sheet date, and
any adjustment to tax payable in respect of previous financial years.
Deferred tax is provided using the balance sheet liability method, providing for
temporary differences as at the balance sheet date between the carrying amounts
of assets and liabilities for financial reporting purposes and the corresponding
tax bases used in the computation of taxable profit. The amount of deferred tax
provided is based on the expected manner of realisation or settlement of the
carrying amount of assets and liabilities, using tax rates enacted or
substantially enacted at the balance sheet date.
Deferred tax liabilities are generally recognised for all taxable temporary
differences and deferred tax assets are recognised only to the extent that it is
probable that future taxable profits will be available against which the asset
can be utilised.
7. Dividends
Equity dividends are recognised when paid or when they become legal obligations
of the company.
8. Property, Plant and Equipment
Property, plant and equipment are stated at cost less accumulated depreciation
and impairment losses.
Depreciation is calculated on the straight-line method so as to write off the
cost of property, plant and equipment reduced by the estimated residual value of
the assets over their estimated useful lives. The annual depreciation rates
used for this purpose are as follows:
Annual
Depreciation
Item Rates
Leasehold premises refurbishment 10-20%
Motor vehicles 20%
Office equipment 20%
9. Intangible assets
Intangible assets are stated at cost less any impairment losses. Intangible
assets are amortised on the straight-line basis.
Software 20%
Franchise 20%
The carrying values of intangible assets are reviewed for impairment when events
or changes in circumstances indicate that the carrying value may not be
recoverable. Amortisation charges are included within administrative expenses.
10. Impairment of Assets
The carrying amounts of non-current assets are reviewed at each balance sheet
date to determine whether there is any indication of impairment. If any such
indication exists, the asset's recoverable amount is estimated. An impairment
loss is recognised whenever the carrying amount of the asset or cash generating
unit exceeds its recoverable amount. Impairment losses are recognised in the
income statements. The recoverable amount is the higher of an asset's net
selling price and its value in use. The net selling price is the amount
obtainable from the sale of an asset in an arm's length transaction. Value in
use is the present value of estimated future cash flows expected to arise from
the continuing use of an asset and from its disposal at the end of its useful
life. Recoverable amounts are estimated for individual assets or, if it is not
possible, for the cash generating unit.
An impairment loss is reversed if there has been a change in the estimates used
to determine the recoverable amount. An impairment loss is reversed only to the
extent that the asset's carrying amount does not exceed the carrying amount that
would have been determined net of depreciation, if no impairment loss had been
recognised. Reversals of impairment losses are recognised in the income
statement.
11. Share Based Payments
The cost of granting share options and other share-based remuneration to
employees and Directors is recognized through the income statement on a
straight-line basis over the vesting period, based on the Group's estimate of
shares that will eventually vest. These share-based payments are measured at
fair value at the date of grant by use of the option pricing model known as the
Black - Scholes formula using assumptions deemed to be consistent with the price
which the incentive might have been worth if it were traded in the open market.
For equity-settled transactions with non-employees, the costs are recognised
through the income statement (or where they relate to issue costs, taken against
the share premium account if appropriate) with measurement normally based on the
fair value of goods or services received.
12. Inventories
Inventories are stated at the lower of cost and net realisable value.
13. Financial Instruments
(a) Trade and Other Receivables
Trade receivables do not carry any interest and are stated at their nominal
value as reduced by appropriate allowances for estimated irrecoverable amounts.
Other receivables are initially recognised at fair value and thereafter stated
at amortised cost less provision for impairment. When the effect of discounting
would be immaterial, the receivables are stated at cost less provision for
impairment.
(b) Cash and Cash Equivalents
Cash equivalents are short-term, highly liquid investments which are readily
convertible into known amounts of cash and which are subject to an insignificant
risk of changes in value.
(c) Trade and Other Payables
Trade payables are not interest bearing and are stated at their nominal value.
Other payables which are normally settled on credit terms are stated at
amortised cost unless the effect of discounting would be immaterial, in which
case they are stated at cost which is the fair value of the consideration to be
paid in the future for goods and services received, whether or not billed to the
Group.
(d) Borrowings
All loans and borrowings which are interest-bearing are initially recognised at
cost, being the fair value of the consideration received net of issue costs
associated with borrowing, and are subsequently measured at amortised cost using
the effective interest rate method. Amortised cost is calculated by taking into
account any issue costs, and any discount or premium on settlement.
Gain and losses are recognised in net profit or loss when liabilities are
derecognised or impaired, as well as through the amortisation process.
(e) Equity instruments
Equity instruments issued by the Company are recorded at the proceeds received,
net of direct issue costs.
14. Critical Accounting Estimates and Judgements
In the process of applying the Group's accounting policies, management makes
various estimates and judgements based on past experience, expectations of the
future and other information. The key sources of estimation uncertainty and the
critical judgements that can significantly affect the amounts recognised in the
financial information are:
(a) Depreciation of property, plant and equipment
Property, plant and equipment are depreciated on a straight-line basis over
their estimated useful lives, after taking account of their estimated residual
values. The determination of the useful lives and residual values involve
management's estimation.
(b) Provision for bad and doubtful debts
The Group continuously monitors collections and payments from its customers and
other debtors and maintains a provision for estimated credit losses based upon
its historical experience and any specific customer collection issues that it
has been identified.
(c) Income tax
There are certain transactions and calculations for which the ultimate tax
determination is uncertain during the ordinary course of business. Where the
final tax outcome of these matters is different from the amounts that were
initially recorded, such differences will impact the current income tax and
deferred income tax provisions in the year in which such determination is made.
3. Segment Information
The Group can be divided into two business segments: the restaurants segment and
the restaurant management segment.
30 June 2007 30 June 2006 31 December 2006
(unaudited) (unaudited) (audited)
#000 #000 #000
Revenue Restaurant Segment 2,685 2,987 5,820
Restaurant Management Segment 199 331 590
Total 2,884 3,318 6,410
Net profit Restaurant Segment 104 222 365
Restaurant Management Segment (32) 212 (356)
Total 72 434 9
Assets Restaurant Segment 4,505 4,003 4,126
Restaurant Management Segment 420 421 405
Total 4,925 4,424 4,531
Liabilities Restaurant Segment 2,008 1,410 1,738
Restaurant Management Segment 551 97 471
Total 2,559 1,507 2,209
Capital Restaurant Segment - 8 18
expenditure Restaurant Management Segment 2 1 2
Total 2 9 20
Depreciation Restaurant Segment 172 186 358
and
amortisation Restaurant Management Segment 1 1 2
Total 173 187 360
4. Related Parties
Amounts due from and to related parties are as follows:
Trade and other receivables 30 June 2007 30 June 31 December
2006 2006
(unaudited) (unaudited) (audited)
#000 #000 #000
Xi'an Prince Restaurant Investment
Management Co Ltd 5 20 833
Prince Overseas Investment Ltd 48 49 211
Xi'an Mai Ke Metal International Group Co Ltd - 168 -
Xi'an Mai Ke Investment Holding Group 103 100 2
Xi'an Prince Health Co Ltd - - 2
Shenzhen Prince Restaurant Co Ltd 87 - 47
Zhong Shan Prince Restaurant Co Ltd - - 7
Mai Guangfan - - 4
Xian Platinum Prince Restaurant Co Ltd 109 - -
Xian Prince Catering Investment Management Group Co 1,237 988 -
Ltd
Dong Zingen - 1 -
Shenzhen Mai Guangfan Catering Management Co Ltd 14 - -
Feng Deming 1 - -
1,604 1,326 1,106
Trade and other payables 30 June 2007 30 June 31 December
2006 2006
(unaudited) (unaudited) (audited)
#000 #000 #000
Xi'an Mai Ke Metal International
Group Co Ltd 157 - 40
Prince Hotel - 80 -
157 80 40
In addition to the related party information disclosed elsewhere in the
financial information, significant transactions during the financial years with
related parties, at rates and terms agreed between the parties were as follows:
Provision of goods and services to: 30 June 2007 30 June 31 December
2006 2006
(unaudited) (unaudited) (audited)
#000 #000 #000
Xi'an Prince Restaurant Investment
Management Group Co Ltd 24 27 212
Xi'an Mai Ke Metal International
Group Co Ltd 6 - 4
Xi'an Mai Ke Enterprise Co Ltd 5 - 22
Xi'an Prince Health Co Ltd - - 146
Xi'an Catering investment Group 13 - -
Shenzhen Prince Restaurant Co Ltd - - 110
Xian Platinum Prince Restaurant Co Ltd 99 - -
Zhong Shan Prince Restaurant Co Ltd - - 172
147 27 666
Rental expense paid to: 30 June 2007 30 June 31 December
2006 2006
(unaudited) (unaudited) (audited)
#000 #000 #000
Xi'an Mai Ke Metal International
Group Co Ltd 164 172 336
Purchases of goods from: 30 June 2007 30 June 31 December
2006 2006
(unaudited) (unaudited) (audited)
#000 #000 #000
Xian Platinum Prince Restaurant Co Ltd 11 - -
5. Earnings per share
Basic earnings per share
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 year.
30 June 2007 30 June 2006 31 December
2006
(unaudited) (unaudited) (audited)
#000 #000 #000
Profit attributable to the equity holders of the company 4 361 (112)
(#000)
Weighted average number of ordinary shares in issue (number 85,875 81,250 82,791
000)
Earnings per share (p/share) 0.0p 0.4p (0.1p)
Diluted Earnings per Share
Company has one category of dilutive potential ordinary shares - warrants.
Calculation is done to determine the number of shares that could have been
acquired at fair value,
30 June 2007 30 June 2006 31 December
2006
(unaudited) (unaudited) (audited)
#000 #000 #000
Profit attributable to the equity holders of the company 4 361 (112)
(#000)
Weighted average number of ordinary shares in issue (number 85,875 81,250 82,791
000)
Adjustment for warrants (number 000) 910 - 158
Weighted average number of ordinary shares for diluted 86,785 81,250 82,949
earnings (number 000)
Diluted earnings per share (p/share) 0.0p 0.4p (0.1p)
This information is provided by RNS
The company news service from the London Stock Exchange
END
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