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First Quarter Financial Statement And Dividend Announcement 2017

Financials Archive

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UNAUDITED FINANCIAL STATEMENTS FOR THE FIRST QUARTER ENDED 31 MARCH 2017 ("Q1 2017") IN RESPECT OF THE FINANCIAL YEAR ENDING 31 DECEMBER 2017 ("FY2017")

Income Statement

"Q1 2016" and "Q1 2017" denotes the 3 financial months of financial period ended 31 March 2016 and 31 March 2017 respectively

"% Change" denotes increase/(decrease) in the relevant profit or loss item as compared with the comparative figure

"N/M" denotes "Not meaningful"

Balance Sheet

Review of Performance

(a) Review of consolidated statement of comprehensive income of the Group for Q1 2017 (relative to that for Q1 2016)

Turnover

The overall turnover, generated mainly from the sales of developed properties, decreased by RMB3.3 million from RMB3.5 million in Q1 2016 to RMB267,000 in Q1 2017. The decrease was principally attributed to fewer completed units being delivered to the buyers in Q1 2017 relative to Q1 2016 in respect of the Xinxiang Sunny Town Project (新乡阳光新城项目) (the "Xinxiang Project").

Gross profit

The Group registered a lower gross profit of RMB11,000 in Q1 2017 compared to that of RMB987,000 in Q1 2016 with a significant reduction in our gross profit margin from 28% in Q1 2016 to 4% in Q1 2017. The decreased gross profit margin was attributed primarily to the sales of relatively low yielding units.

Selling and distribution expenses / general and administrative expenses

In line with decreased business activities and coupled with our cost-control efforts, our selling and distribution expenses decreased by RMB96,000 or 84% from RMB114,000 in Q1 2016 to RMB18,000 in Q1 2017 and our general and administrative expenses decreased by RMB1.4 million or 25% from RMB5.6 million in Q1 2016 to RMB4.2 million in Q1 2017.

Other income

Our other income decreased by RMB1.1 million or 96% from RMB1.1 million in Q1 2016 to RMB40,000 in Q1 2017.

Our other income attained in Q1 2016 relates principally to the fair value gain of RMB966,000 on derivative financial instruments in respect of an investment of RMB65.0 million made during FY2015 in an integrated property project, Yi Feng Holiday Plaza Project (懿丰假日广场项目) (the "Yi Feng Project"), located at Henan Province Zhu Ma Dian City Zhu Ping County (河南省驻马店逐平县), for a share of profit of 10% thereof (the "Fair Value Gain"). The Fair Value Gain was derived based on the discounted cash flow stream of the Yi Feng Project.

Our other income attained in Q1 2017 relates principally to interest income earned on a term deposit placed with a bank.

Other Expenses

Our other expenses increased by RMB22,000 from RMB101,000 in Q1 2016 to RMB123,000 in Q1 2017.

The other expense recognized in Q1 2016 and Q1 2017 were due principally to exchange losses resulting from weakened Renminbi against Singapore dollar and US dollar.

Share of losses of joint ventures

The Group's share of loss of joint ventures decreased by RMB5,000 or 19% from RMB27,000 in Q1 2016 to RMB22,000 in Q1 2017. The decrease was attributed mainly to decreased operating expenses incurred by Tian Cheng Holdings Limited ("天晟控股有限公司"), particularly in respect of the two iron ore mines it owned which have yet to commence production (the "Joint Venture").

Loss before tax

Consequence to the above, the Group's loss before tax increased by RMB2.3 million from RMB2.0 million in Q1 2016 to RMB4.4 million in Q1 2017.

Income tax expense

The Group registered an income tax credit of RMB57,000 Q1 2017 vis-à-vis an income tax expense of RMB149,000 in Q1 2016.

The income tax expense for Q1 2016 was principally attributed to income tax on sales of completed properties.

The income tax credit for Q1 2017 was principally attributed to write-back of over accrued income tax.

Net loss attributable to owners of the Company

Accordingly, the net loss attributable to the owners of the Company increased from RMB2.2 million in Q1 2016 to RMB4.3 million for Q1 2017.

(b) Review of statements of financial position of the Group as at 31 March 2017 (relative to that as at 31 December 2016)

Current assets

The decrease in cash and bank balances by RMB5.6 million or 16% was principally attributed to payments made in connection with daily operational expenses.

Taken as a whole, our current assets decreased by RMB5.8 million or 3% from RMB188.1 million as at 31 December 2016 to RMB182.4 million as at 31 March 2017.

Current liabilities

The decreases in the trade payables by RMB980,000 or 15% from 6.5 million as at 31 December 2016 to RMB5.5 million as at 31 March 2017 and accruals and other payables by RMB1.3 million or 14% from RMB9.1 million as at 31 December 2016 to RMB7.8 million as at 31 March 2017 were due principally to repayments made by the Group.

The increase in the amount due to the joint ventures by RMB799,000 or 43% from RMB1.9 million as at 31 December 2016 to RMB2.7 million as at 31 March 2017 was in connection with the expenses paid by the Joint Venture on behalf of the Group in Q1 2017.

Taken as a whole, our current liabilities were decreased by RMB1.8 million or 2% from RMB89.1 million as at 31 December 2016 to RMB87.3 million as at 31 March 2017.

Consequence to the above, our cash used in operating activities increased to RMB6.1 million in Q1 2017 from RMB4.6 million in Q1 2016.

Commentary

With regard to the reverse takeover transaction as first announced by the Company on 11 July 2013 and periodically thereafter on its progress, the latest being made on 28 February 2017 (the "Proposed RTO"), the ongoing internal restructuring by the proposed target company, China Minerals Energy Ltd, has resulted in the parties to the Proposed RTO, while awaiting for certain technical reports to be completed, requiring further time to work out possible revised terms to the supplemental agreement, which may include, but not limited to, the portfolio of the exploration and mining projects that will form part of the group of companies to be acquired by the Company pursuant to the Proposed RTO. Appropriate announcement concerning the Proposed RTO will be made as and when there is any significant development.

As regards the investment in the Thabazimbi Project, in connection with a prospecting right granted by the relevant South African authority for a duration of 5 years from 4 February 2015 in respect of iron mineral, as first announced by the Company on 25 April 2016 and on 17 April 2017 of its completion (the "Mining Investment"), the Company, through Aero Wind Properties (Pty) Limited ("AWP"), presently holds an effective interest of 16.06% in the Mining Investment.

Notwithstanding the ongoing Proposed RTO, the Company is continually exploring all business opportunities to enhance shareholder value, including the acquisition of shareholding interests in companies holding rights to mineral assets, such as through the Mining Investment. The Mining Investment represents an opportunity for the Company to, together with the Proposed RTO, consolidate its business in the exploration, mining and trading of mineral resources, which in turn will potentially provide it with a regular stream of revenue. In addition, it is anticipated that the Mining Investment will have the potential to increase the value of the Company.

Some of the statements in this release constitute "forward-looking statements" that do not directly or exclusively relate to historical facts. These forward-looking statements reflect our current intentions, plans, expectations, assumptions and beliefs about future events and are subject to risks, uncertainties and other factors, many of which are outside our control. Important factors that could cause actual results to differ materially from the expectations expressed or implied in the forward-looking statements include known and unknown risks. Because actual results could differ materially from our intentions, plans, expectations, assumptions and beliefs about the future, undue reliance must not be placed on these statements.