Prince Catering and Management (Overseas) Limited
(the “Company” or “Prince”)
INTERIM RESULTS FOR PERIOD ENDED 30 JUNE 2006
Chief Executive’s Statement
Highlights
It is my pleasure to present the inaugural set of interim results on behalf of Prince, the first China-based catering service company trading on AIM. The directors believe that the Company’s admission to AIM has raised its profile and positioned it to build on its existing reputation and expand its market share of the luxury Cantonese restaurant market in the People’s Republic of China. Although the results for the period have been impacted by a one-off change in our tax position and slippage in the signing of expected contracts, we are encouraged by a sound performance in sales from our Group owned restaurants.
Overview
At present Prince and its subsidiaries (the “Group”) operate one restaurant through a wholly owned subsidiary, one restaurant through a 51% owned subsidiary and 11 others as managed restaurants. A further managed restaurant opened in Xi’an in September 2006 following the end of the period under review. In addition, the Group operates a hotel and a separate health club under management contracts, with a further hotel expected to open in Beijing later this year.
Background
Since the first Prince restaurant was established in Xi’an in 2002 the Group has grown rapidly and, as set out above, now manages 14 restaurants, all branded with the Prince name. Discussions are currently under way with potential investors for a further 3 restaurants, although at this stage the Directors do not know how many of the potential opportunities will be realised or exactly how many new restaurants will be opened.
Of the Group’s two main operating streams, the Directors believe that the management contract concept will become the main source of new income for the Group and is the area where the management will focus much of their efforts. The management contract concept has a higher profit margin and lower capital requirements than the Group owned restaurant concept as third party investors usually own the restaurant and are responsible for all associated costs, paying only a set fee to the Group to operate that restaurant on its behalf. Usually, but not always, the fee paid by the third party investor to the Group takes the form of an initial contract fee (in the region of £100,000) and monthly management fees, usually calculated as a percentage of restaurant turnover.
The income and fees received by the Group depend significantly on new restaurant openings. During the period under review the Group executed fewer management contracts for new restaurants than in the same 6 months’ period of 2005. This has affected the Group’s trading performance for that 6 months’ period.
Results
|
|
6 months ended |
6 months ended |
|
|
30/06/06 |
30/06/05 |
|
|
£'000 |
£'000 |
|
|
|
|
|
Turnover |
3,373 |
3,591 |
|
Profit before tax |
593 |
893 |
|
|
|
|
Turnover in the period under review decreased to £3,373,000, compared with the same period in 2005 (2005: £3,591,000). More specifically, the turnover generated from the two Group owned restaurants increased to £2,987,000 (2005: £2,937,000) whilst the turnover generated from managed restaurants, for the reasons set out above, decreased to £386,000 (2005: £654,000) . Overall, the profit before tax for the period under review decreased to £593,000 against the same period in 2005 (2005: £893,000 ).
In addition, profit after tax (not shown above) decreased to £481,000 (2005: £807,000) impacted by the expiry of a tax free period for one of the owned restaurants at the end of 2005.
Outlook
The second half of the year has started positively with the signing of a further management contract and the opening of the Xi’an Kingfar restaurant for which the management contract was executed earlier this year. Following various conversations with potential investors in the management contract concept, the Directors are confident for the future.
Mr Guangfan Mai
For more information please contact:
David Youngman, WH Ireland Limited +44 161 832 2174
|
CONSOLIDATED INCOME STATEMENT | ||||||||
|
Interim results for the six months to 30 June 2006 |
Notes |
6 months to 30 Jun 2006 |
6 months to 30 Jun 2005 |
Year to 31 Dec 2005 | ||||
|
|
|
(Unaudited) £’000 |
(Unaudited) £’000 |
(Audited) £’000 | ||||
|
Revenue |
|
3,373 |
3,591 |
7,296 | ||||
|
Cost of sales |
|
(1,211) |
(1,235) |
(2,502) | ||||
|
|
|
_______ |
_______ |
_______ | ||||
|
|
|
|
|
| ||||
|
Gross profit |
|
2,162 |
2,356 |
4,794 | ||||
|
Other operating income |
|
0 |
0 |
1 | ||||
|
Selling and distribution expenses |
|
(1,518) |
(1,418) |
(2,793) | ||||
|
Administrative expenses
|
|
(51) |
(45) |
(319) | ||||
|
|
|
_______ |
_______ |
_______ | ||||
|
Profit from operations |
|
593
|
893 |
1,683 | ||||
|
Investment income |
|
0 |
0 |
2 | ||||
|
|
|
_______ |
_______ |
_______ | ||||
|
Profit before income tax |
|
593 |
893 |
1,685 | ||||
|
Income tax |
|
(112) |
(86) |
(182) | ||||
|
|
|
_______ |
_______ |
_______ | ||||
|
Net profit for the period |
|
481 |
807 |
1,503 | ||||
|
|
|
_______ |
_______ |
_______ | ||||
|
Attributable to |
|
|
|
| ||||
|
Equity holders of the parent
|
|
408 |
742 |
1,353 | ||||
|
Minority interest
|
|
73 |
65 |
150 | ||||
|
|
|
_______ |
_______ |
_______ | ||||
|
All amounts relate to continuing activities. No meaningful Earnings per Share calculation is possible as the group structure and AIM flotation occurred since June 2006 | ||||||||
|
CONSOLIDATED BALANCE SHEET | ||||||||
|
At 30 June 2006 |
Notes |
As at 30 June 06 |
As at 30 Jun 05 |
As at 31 Dec 05 | ||||
|
|
|
(Unaudited) £’000 |
(Unaudited) £’000 |
(Audited) £’000 | ||||
|
Non-current assets |
|
|
|
| ||||
|
Property, plant and equipment |
|
1,617 |
1,797 |
1,908 | ||||
|
Intangible assets |
|
30 |
52 |
44 | ||||
|
|
|
_______ |
_______ |
_______ | ||||
|
Total non-current assets |
|
1,647 |
1,849 |
1,952 | ||||
|
|
|
_______ |
_______ |
_______ | ||||
|
Current assets |
|
|
|
| ||||
|
Deferred tax assets |
|
4 |
25 |
14 | ||||
|
Inventories |
|
219 |
257 |
289 | ||||
|
Trade and other receivables |
|
1,743 |
2,460 |
1,922 | ||||
|
Cash and cash equivalents |
|
803 |
730 |
592 | ||||
|
|
|
_______ |
_______ |
_______ | ||||
|
Total current assets |
|
2,769 |
3,472 |
2,817 | ||||
|
|
|
_______ |
_______ |
_______ | ||||
|
Total assets |
|
4,416 |
5,321 |
4,769 | ||||
|
|
|
_______ |
_______ |
_______ | ||||
|
Equity and liabilities |
|
|
|
| ||||
|
Combined capital and reserves |
|
|
|
| ||||
|
Paid-up capital |
|
1,912 |
1,877 |
1,894 | ||||
|
Other reserves |
|
305 |
215 |
276 | ||||
|
Foreign currency translation reserve |
|
90 |
(44) |
287 | ||||
|
Retained earnings |
|
77 |
866 |
(162) | ||||
|
|
|
_______ |
_______ |
_______ | ||||
|
|
|
2,384 |
2,914 |
2,295 | ||||
|
Minority interest |
|
580 |
543 |
675 | ||||
|
|
|
_______ |
_______ |
_______ | ||||
|
Total Equity |
|
2,964 |
3,457 |
2,970 | ||||
|
|
|
_______ |
_______ |
_______ | ||||
|
Current liabilities |
|
|
|
| ||||
|
Trade and other payables |
|
1,315 |
1,748 |
1,641 | ||||
|
Dividends payable |
|
48 |
0 |
124 | ||||
|
Income tax payable |
|
71 |
111 |
29 | ||||
|
Deferred tax liability |
|
18 |
5 |
5 | ||||
|
|
|
_______ |
_______ |
_______ | ||||
|
Total liabilities |
|
1,452 |
1,864 |
1,799 | ||||
|
|
|
_______ |
_______ |
_______ | ||||
|
Total equity and liabilities |
|
4,416 |
5,321 |
4,769 | ||||
|
|
|
_______ |
_______ |
_______ | ||||
|
COMBINED STATEMENTS OF CHANGES IN EQUITY | |||||||||||||||
|
|
|
|
|
|
|
|
Foreign |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
currency |
|
|
|
|
|
|
|
|
|
|
|
|
Paid up |
|
Other |
|
translation |
|
Retained |
|
|
|
Minority |
|
Total |
|
|
|
|
capital |
|
reserves |
|
reserve |
|
earnings |
|
Total |
|
interest |
|
equity |
|
|
|
£000 |
|
£000 |
|
£000 |
|
£000 |
|
£000 |
|
£000 |
|
£000 | |
|
Year to 31.12.05 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
At 31.12.04 |
|
1,894 |
|
93 |
|
(106) |
|
184 |
|
2,065 |
|
459 |
|
2,524 |
|
|
Transfer to reserves |
|
|
|
183 |
|
|
|
(183) |
|
- |
|
|
|
- |
|
|
Profit for the period |
|
|
|
|
|
|
|
1,353 |
|
1,353 |
|
150 |
|
1,503 |
|
|
Dividends |
|
|
|
|
|
|
|
(1,516) |
|
(1,516) |
|
|
|
(1,516) |
|
|
Foreign currency |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
translation |
|
|
|
|
|
393 |
|
|
|
393 |
|
|
|
393 |
|
|
Other movements |
|
|
|
|
|
|
|
|
|
- |
|
66 |
|
66 |
|
|
At 31.12.05 |
|
1,894 |
|
276 |
|
287 |
|
(162) |
|
2,295 |
|
675 |
|
2,970 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months to 30.06.05 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
At 31.12.04 |
|
1,894 |
|
93 |
|
(106) |
|
184 |
|
2,065 |
|
459 |
|
2,524 |
|
|
Transfer to reserves |
|
|
|
119 |
|
|
|
(119) |
|
- |
|
|
|
- |
|
|
Profit for the period |
|
|
|
|
|
|
|
742 |
|
742 |
|
65 |
|
807 |
|
|
Dividends |
|
|
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
Foreign currency |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
translation |
|
|
|
|
|
62 |
|
|
|
62 |
|
|
|
62 |
|
|
Other movements |
|
(17) |
|
3 |
|
|
|
59 |
|
45 |
|
19 |
|
64 |
|
|
At 30.06.05 |
|
1,877 |
|
215 |
|
(44) |
|
866 |
|
2,914 |
|
543 |
|
3,457 |
|
|
COMBINED STATEMENTS OF CHANGES IN EQUITY (CONT’D) | ||||||||||||||
|
Six months to 30.06.06 |
|
Paid up capital |
|
Other reserves |
|
Foreign currency translation reserve |
|
Retained Earnings |
|
Total |
|
Minority Interest |
|
Total Equity | |
|
|
At 31.12.05 |
|
1,894 |
|
276 |
|
287 |
|
(162) |
|
2,295 |
|
675 |
|
2,970 |
|
|
Transfer to reserves |
|
|
|
37 |
|
|
|
(37) |
|
- |
|
|
|
- |
|
|
Profit for the period |
|
|
|
|
|
|
|
408 |
|
408 |
|
73 |
|
481 |
|
|
Dividends |
|
|
|
|
|
|
|
(132) |
|
(132) |
|
(132) |
|
(264) |
|
|
Foreign currency |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
translation |
|
|
|
|
|
(197) |
|
|
|
(197) |
|
|
|
(197) |
|
|
Other movements |
|
18 |
|
(8) |
|
|
|
|
|
10 |
|
(36) |
|
(26) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 30.06.06 |
|
1,912 |
|
305 |
|
90 |
|
77 |
|
2,384 |
|
580 |
|
2,964 |
CONSOLIDATED CASH FLOW STATEMENTS
|
|
Notes |
6 months to 30 Jun 2006 |
6 months to 30 Jun 2005 |
Year to 31 Dec 2005 |
|
|
|
(Unaudited) £’000 |
(Unaudited) £’000 |
(Audited) £’000 |
|
Cash flows from operating activities
|
See note |
667 |
317
|
251 |
|
|
|
_______ |
_______ |
_______ |
|
Cash flows from investing activities
|
|
|
|
|
|
Purchase of franchise |
|
- |
- |
(39) |
|
Purchase of property, plant and equipment
|
|
(22)
|
4 |
(147) |
|
Interest received |
|
- |
- |
2 |
|
|
|
_______ |
_______ |
_______ |
|
Cash flows used in investing activities
|
|
(22) |
4 |
(184) |
|
|
|
_______ |
_______ |
_______ |
|
Cash flows from financing activities
|
|
|
|
|
|
Dividend paid |
|
(322) |
- |
- |
|
|
|
_______ |
_______ |
_______ |
|
Cash flows from financing activities
|
|
(322)
|
- |
- |
|
|
|
_______ |
_______ |
_______ |
|
|
|
|
|
|
|
Net increase in cash and cash equivalents
|
|
323 |
321
|
67 |
|
Cash and cash equivalents at beginning of period
|
|
592 |
403
|
403 |
|
Foreign exchange differences |
|
(112) |
6
|
122 |
|
|
|
_______ |
_______ |
_______ |
|
Cash and cash equivalents at end of period
|
|
803 |
730 |
592 |
|
|
|
_______ |
_______ |
_______ |
NOTE TO THE CASH FLOW STATEMENT
For the six months ended 30 June 2006
Cash flows from operating activities
6 months to 30 Jun
06 6 months to 30 Jun
05 Year to
31 Dec 05
£'000 £'000 £'000 Net profit after minority
interest
408 742
1,353 Adjustments for: Amortisation of intangible
assets
14
17
24 Depreciation of property, plant and
equipment
173
154 323 Losses on disposal of property, plant and equipment
- -
5 Interest income
11
11
(2) Income tax
expenses
112
86
182 Minority interests 73 65 150 ______
______
______
Operating profit before working
capital changes:
791 1,075 2,035 (Increase)/decrease
in: Inventories 70 (23) (68) Trade and other
receivables 179 (811) (1,840) Increase/(decrease) in:
Trade and other
payables
(326)
162
273 ______ ______ ______
Cash generated from (used in)
operations
714
403 400 Income tax paid (47) (86) (149) Cash
flows from operating activities 667 317 251
NOTES TO THE INTERIM REPORT
1 Responsibility
The directors of Prince Catering & Management (Overseas) Limited are responsible for the financial information set out in this interim report.
2 Basis of preparation and aggregation
The financial information is based on the combined financial information of Xi’an Prince Restaurant Co. Ltd, Hong Kong Prince Restaurant Co. Ltd, and Shenzhen Prince Beverage and Catering Management Co. Ltd (the 'Combined Group') for the six month period ended 30 June 2006. The aforementioned undertakings of the Combined Group have been under common management and control throughout the period, irrespective of actual shareholdings, and therefore financial information in respect of these subsidiary undertakings has been prepared as if they had been part of the Combined Group throughout the period. Results and net assets of the relevant entities are aggregated (with eliminations for inter-company transactions and balances).
The combined Group does not comprise a “group” as defined by International Financial Reporting Standards at 30 June 2006. Since that date, the ownership has been reorganised to form a group and the parent company was admitted to the AIM on 31 August 2006.
The directors of Prince Catering & Management (Overseas) Limited have elected to prepare pro-forma consolidated financial statements for the Combined Group which comply, as far as reasonably practicable, with International Financial Reporting Standards (“IFRSs”) as adopted by the European Union.
The preparation of financial statements in conformity with generally accepted accounting principles requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses for the period. Although the estimates are based on management’s best knowledge of current events, actual results ultimately may differ from these estimates.<0}
3. Accounting policies
The financial information has been prepared under the historical cost convention and in accordance with those International Financial Reporting Standards in force, insofar as is practicable in the light of the basis of preparation set out above.
The following principal accounting policies have been applied consistently throughout the period in dealing with items which are considered material in relation to the financial information, and are consistent with those of the previous year.
Foreign currency
The functional currency of the Combined Group is the Renminbi ("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 Combined Group. Monetary assets and liabilities maintained in currencies other than Renminbi are translated into Renminbi at the approximate rates of exchange ruling at the balance sheet date. Transactions in currencies other than Renminbi are translated at rates ruling on the transaction dates.
The presentation currency of the Combined Group is pounds sterling and therefore the financial information has been translated from Renminbi (RMB) to pounds sterling at the following exchange rates, which originate from the State Administration of Foreign Exchange.
Year-end rate Average rate
31 December 2004 £1 = RMB 15.890 £1 = RMB 15.165
30 June 2005 £1 = RMB 15.242 £1 = RMB 15.595
31 December 2005 £1 = RMB 13.855 £1 = RMB 14.914
30 June 2006 £1 = RMB 14.941 £1 = RMB 14.558
On combination, assets and liabilities of overseas operations are translated into RMB 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. Exchange differences arising on translating the opening net assets on combination of overseas operations at the opening rate and results of overseas operations at actual rate are recognized directly in equity (the foreign currency translation reserve).
Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods provided in the normal course of business, net of discounts, sales taxes and other sales related charges.
Revenue from the restaurant business is recognised when goods are delivered.
Revenue from the restaurant management business is recognised when the service is fully provided or when the Combined Group has the legal right to the service income.
4. Taxation
The corporation tax holiday expired at the end of 2005 for Xi’an Prince Restaurant Ltd. Though Management considered that this could be extended to 2008 as long as the Company still satisfies the criteria, this has not been confirmed by the local tax authority. Tax has been projected to be paid with the group’s financial projections. Corporation tax has therefore increased significantly compared to the same period in 2005.
The taxation charge for each group company has been calculated by reference to the expected effective corporation tax and deferred tax rates for the full financial year to end on 31 December 2006 applied against the profit before tax for the period ended 30 June 2006. The underlying effective full year tax charge for the year including deferred tax is estimated to be 17.5% for Hong Kong Prince Restaurant Ltd, 15% for Shenzhen Prince Beverage and Catering Management Co Ltd, and 33% for Xi’an Prince Restaurant Co Ltd.
5. Segment information
The Combined Group can be divided into two business segments: the restaurant segment and the restaurant management segment.
|
|
30-Jun-06 |
30-Jun-05 |
31-Dec-05 | |
|
£’000 |
£’000 |
£’000 | ||
|
Restaurant Segment |
2,987 |
2,937 |
6,247 | |
|
Restaurant Management Segment |
386 |
654 |
1,049 | |
|
Total |
3,373 |
3,591 |
7,296 | |
|
Net profit |
Restaurant Segment |
221 |
367 |
818 |
|
Restaurant Management Segment |
259 |
440 |
685 | |
|
Total |
481 |
807 |
1,503 | |
|
Assets |
Restaurant Segment |
4,003 |
4,388 |
4,437 |
|
Restaurant Management Segment |
413 |
933 |
332 | |
|
Total |
4,416 |
5,321 |
4,769 | |
|
Liabilities |
Restaurant Segment |
1,410 |
1,338 |
1,612 |
|
Restaurant Management Segment |
42 |
526 |
187 | |
|
Total |
1,452 |
1,864 |
1,799 | |
|
Capital expenditure |
Restaurant Segment |
8 |
15 |
147 |
|
Restaurant Management Segment |
1 |
0 |
- | |
|
Total |
9 |
15 |
147 | |
|
Depreciation and amortisation |
Restaurant Segment |
171 |
149 |
346 |
|
Restaurant Management Segment |
1 |
1 |
1 | |
|
Total |
172 |
150 |
347 | |
Financial ratio--Segmental analysis for the six months ended 30 June
|
Gross profit Margin |
|
30-Jun-06 |
30-Jun-05 |
|
Restaurant Segment |
60% |
58% | |
|
Restaurant Management Segment |
95% |
95% |
6. Events after the balance sheet date
Since the year end, a group structure has been established, the holding company being Prince Catering & Management (Overseas) Limited.
On 31 August 2006 this company was floated on AIM.
END