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Full Year Financial Statement And Dividend Announcement 2016

Financials Archive

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UNAUDITED FULL YEAR FINANCIAL STATEMENTS AND RELATED ANNOUNCEMENT FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2016 ("FY2016")

Income Statement

"FY2015" and "FY2016" denotes the full year or the twelve-month financial period ended 31 December 2015 and 31 December 2016 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 FY2016 (relative to that for FY2015)

Turnover

Our overall turnover, generated mainly from the sales of developed properties, decreased by RMB693,000 from RMB17.1 million in FY2015 to RMB16.4 million in FY2016. The decrease was principally attributed to fewer completed units being delivered to the buyers in FY2016 relative to FY2015 in respect of the Xinxiang Sunny Town Project (新乡阳光新城项目).

Gross profit

The Group registered a lower gross profit of RMB3.8 million in FY2016 compared to that of RMB3.9 million in FY2015 at maintained gross profit margin of about 23%.

Selling and distribution expenses

Our selling and distribution expenses increased by RMB1.6 million from RMB1.0 million in FY2015 to RMB2.6 million in FY2016 due principally to stepped-up marketing efforts in selling the remaining completed property units for the Xinxiang Sunny Town Project (新乡阳光新城项目).

General and administrative expenses

In line with our decreased business activities and coupled with our concerted cost-control efforts, our general and administrative expenses decreased by RMB18.1 million or 41% from RMB44.0 million in FY2015 to RMB25.9 million in FY2016.

Other income

Our other income decreased by RMB12.1 million from RMB24.9 million in FY2015 to RMB12.8 million in FY2016.

Our other income attained in FY2016 relates principally to: (i) a foreign exchange gain of RMB1.3 million resulting from the currency fluctuation of RMB against US$; (ii) a gain of RMB5.6 million in connection with the disposal of Whitewood Corporation Limited by the Group to an unrelated party; and (iii) a write back on impairment of RMB5.9 million was due principally to the improved sales of the completed commercial property units in FY2016.

Other Expenses

Our other expenses decreased by RMB19.6 million from RMB28.1 million in FY2015 to RMB8.5 million in FY2016.

Our other expenses for FY2016 relate principally to (i) an impairment loss of RMB387,000 on an amount due from a joint venture; (ii) office restoration expenses of RMB207,000; (iii) a loss on disposal of property, plant and equipment of RMB158,000; and (iv) fair value loss on derivative financial instruments of RMB7.7 million in respect of the 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), 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 "Yi Feng Project").

Share of losses of joint ventures

The Group's share of losses of joint ventures decreased by RMB406,000 or 84% from RMB484,000 in FY2015 to RMB78,000 in FY2016. The decrease was attributed mainly to decreased operating expenses incurred by the Company's 50% equity interest in Tian Cheng Holdings Limited (天晟控股有限公司), particularly in respect of the 2 iron ore mines held through its 2 Mining Joint Ventures which have yet to commence production.

Finance income

Our finance income increased by RMB5.3 million or over 2-fold from RMB2.0 million in FY2015 to RMB7.3 million in FY2016.

Our finance income attained in FY2015 was attributed mainly to interest earned on structured cash deposits pertains to principal-protected short-term investment deposits with local PRC banks while those attained in FY2016 was attributed principally to the amortization of unwinding discount of the long-term other investment in respect of the Yi Feng Project.

Loss before tax

Consequence to the above, loss before tax decreased by RMB29.6 million from RMB42.9 million in FY2015 to RMB13.3 million in FY2016.

Income tax credit/(expense)

We registered an income tax credit of RMB2.3 million in FY2016 vis-à-vis an income tax expense of RMB89,000 in FY2015.

The income tax expense for FY2015 was principally attributed to income tax on sales of completed properties.

The income tax credit for FY2016 was principally attributed to deferred tax in respect of impairment loss on completed properties for sale (the "Deferred Tax Credit").

Net loss attributable to owners of the Company

Accordingly, the net loss attributable to the owners of the Company was reduced from RMB43.0 million in FY2015 to RMB11.0 million in FY2016.

(b) Review of statements of financial position of the Group as at 31 December 2016 (relative to that as at 31 December 2015)

Non-Current assets

Our non-current assets decreased by RMB69.8 million or 92% from RMB76.1 million as at 31 December 2015 to RMB6.3 million as at 31 December 2016. Albeit a deferred tax asset registered as at 31 December 2016 brought about as a result of the Deferred Tax Credit, the decrease in non-current assets was attributed principally to the balance of other investments and derivative financial instruments in connection to the Yi Feng Project being reclassed as "current asset" as the investment is expected to be realised at end of FY2017 based on the investment agreement (the "Asset Reclassification").

Current assets

The increase in amounts due from joint ventures by RMB376,000 or 12% was due principally to advances made to the mining joint ventures in support of their operational needs.

The other investment and financial assets at fair value through profit or loss had been reclassified from 'non-current asset' as at 31 December 2015 to 'current asset' as at 31 December 2016 due to the Asset Reclassification.

The decrease in completed properties for sale by RMB6.7 million or 9% was due principally to the delivery of completed units to buyers concerned.

The decrease in pledged bank deposits by RMB1.1 million or 15% was mainly attributed to the decrease in deposits placed with local banks to facilitate the procurement of housing loans by buyers of the Group's properties; pledged bank deposits will be released to the Group upon the issuance of the relevant property ownership certificates to the buyers concerned.

The decrease in cash and bank balances by RMB15.0 million or 30% was principally attributed to payments made in connection with daily operational expenses.

Taken as a whole, our current assets increased by RMB45.7 million or 32% from RMB142.4 million as at 31 December 2015 to RMB188.1 million as at 31 December 2016.

Current liabilities

The decrease in the trade payables by RMB2.1 million or 24% from RMB8.6 million as at 31 December 2015 to RMB6.5 million as at 31 December 2016 and the decreases in accruals and other payables by RMB1.8 million or 17% from RMB10.9 million as at 31 December 2015 to RMB9.1 million as at 31 December 2016 were due principally to repayments made by the Group.

Our sales and rental deposits decreased by RMB3.7 million or 9%, due principally to the recognition of sales deposits as revenue upon the delivery of the completed property units to the buyers concerned.

The income tax payables decreased by RMB5.4 million or 13%, due principally to the disposal of a subsidiary during the year.

Taken as a whole, our current liabilities were decreased by RMB13.1 million or 13% from RMB102.2 million as at 31 December 2015 to RMB89.1 million as at 31 December 2016.

Consequence to the above, we registered a net cash used in operating activities of RMB26.3 million in FY2015 compared to RMB15.5 million in FY2016.

Commentary

As at the date of this announcement, the Group's ongoing property development business comprises the following:

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 30 June 2016 (the "Proposed RTO"), the relevant parties to the amended and restated conditional sale and purchase agreement entered into on 31 December 2014 in respect of the Proposed RTO (the "Amended and Restated SPA") have entered into a supplementary agreement in extending the long-stop date for the completion of the Proposed RTO from 30 June 2016 to 30 June 2017 (the "Supplemental Agreement"). The relevant parties currently still await for certain technical reports to be completed in order that they may 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 proposed acquisition of the Thabazimbi Project as announced by the Company on 25 April 2016 (the "Proposed Acquisition"), we expect the appointed professionals to finalize the necessary independent qualified persons' technical reports and valuation report soon. The Company will keep the shareholders of the Company updated accordingly once the relevant reports are made available to it.

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.