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Second Quarter Financial Statement And Dividend Announcement 2018

Financials Archive

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UNAUDITED FINANCIAL STATEMENTS FOR THE SECOND QUARTER ENDED 30 JUNE 2018 ("Q2 2018") IN RESPECT OF THE FINANCIAL YEAR ENDING 31 DECEMBER 2017 ("FY2018")

Income Statement

"Q2 2017" and "Q2 2018" denotes the second quarter or the three-month period ended 30 June 2017 and 30 June 2018 respectively

"H1 2017" and "H1 2018" denotes the six-month period ended 30 June 2017 and 30 June 2018 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 Q2 2018 (relative to that for Q2 2017)

Turnover

The overall turnover, generated mainly from the sales of developed properties, increased by RMB11.9 million from RMB5.1 million in Q2 2017 to RMB17 million in Q2 2018. The increase was principally attributed to more completed units being handed over to buyers in Q2 2018 (relative to Q2 2017) in respect of the Xinxiang Sunny Town Project (新乡阳光新城项目).

Gross profit

As a result of the increased turnover, the Group registered a higher gross profit of RMB9.2 million in Q2 2018 compared to that of RMB1.1 million in Q2 2017.

Other expenses

The other expense in Q2 2017 was principally attributed to the impairment of the non-current assets in a leasehold housing our Beijing office following an early termination of the lease.

Other income

Our other income attained in Q2 2018 relates principally to interest income earned on deposit recallable at any time at our option (the "Recallable Deposit").

Share of losses of joint ventures

The Group's share of loss of joint ventures increased by RMB31,000 or 194% from RMB16,000 in Q2 2017 to RMB47,000 in Q2 2018. The increase was attributed mainly to increased 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").

General and administrative expenses

In line with our business activities coupled with our concerted cost-control efforts, our general and administrative expenses decreased by RMB2.7 million or 41% from RMB6.7 million in Q2 2017 to RMB3.9 million in Q2 2018.

Selling and distribution expenses

Our selling and distribution expenses increased by RMB965,000 from RMB25,000 in Q2 2017 to RMB988,000 in Q2 2018 chiefly as a result of various sales promotions in promoting the sales of the remaining units at Xinxiang Sunny Town Project (新 乡阳光新城项目).

Finance income

Our finance income attained in Q2 2018 was attributed to the interest earned from a deposit placed with a bank.

Profit before tax

Consequence to the above, the Group reversed its bottom line to a pre-tax profit of RMB4.8 million in Q2 2018 from a pre-tax loss of RMB6.7 million in Q2 2017.

Income tax (expense)

We registered an income tax expense (comprising tax expenses relating to land appreciation tax and corporate income tax) of RMB2.4 million in Q2 2018 and RMB333,000 in Q2 2017.

Net income/loss attributable to owners of the Company

Accordingly, the net income attributable to the owners of the Company reversed from a loss of RMB7.0 million in Q2 2017 to a profit of RMB2.3 million in Q2 2018.

(b) Review of consolidated statement of comprehensive income of the Group for Q2 2018 (relative to that for Q2 2017)

Non-current assets

Our non-current assets decreased by RMB795,000 million from RMB75.9 million as at 31 December 2017 to RMB75.1 million as at 30 June 2018. The decrease was principally due to the depreciation of property, plant and equipment.

Current assets

Our current assets decreased by RMB12.7 million or 11% from RMB119.6 million as at 31 December 2017 to RMB106.9 million as at 30 June 2018. The decrease was mainly attributed to the sale of some completed units at Xinxiang Sunny Town Project (新乡阳光新城项目). The increase in cash and bank balances of about RMB10 million was chiefly attributed to the recalling of the Recallable Deposit towards the end of 30 June 2018.

Current liabilities

In line with our business activities, our trade payables decreased by RMB2.5 million or 21% from RMB11.6 million as at 31 December 2017 to RMB9.1 million as at 30 June 2018.

Our Sales and rental deposit decreased by RMB12.6 million or 29% from RMB43.9 million as at 31 December 2017 to RMB31.3 million as at 30 June 2018. The decrease was in relation to the recognising of the sales deposits into revenue upon hand-over of the completed properties units in H1 2018.

Taken as a whole, our current liabilities decreased by RMB15.1 million or 14% from RMB106.2 million as at 31 December 2017 to RMB91.2 million as at 30 June 2018.

Consequence to the above, our cash used in operating activities increased to RMB2.1 million in Q2 2018 from RMB766,000 in Q2 2017.

Commentary

On 18 July 2018, the Company announced the expiry of the long-stop date of 30 June 2018 concerning the amended and restated conditional sale and purchase agreement governing the reverse-takeover transaction involving the injection of certain mines into the Group as first announced by the Company on 11 July 2013 and periodically thereafter (with the latest being on 30 June 2017) (the "Proposed RTO"). As such, following the expiry of the Proposed RTO on 30 June 2018, the Group will no longer actively undertake any business activities related to the exploration, mining and trading, including mining consultancy, of mineral resources save that it will continue to hold its shareholding interests in its exploration and mining assets and joint ventures.

In place of the Proposed RTO and with an aim to seize the opportunity to participate in the growth prospects of the agricultural industry, thereby availing long-term growth and sustaining returns to the Group, the Company had also on 18 July 2018 announced that it seeks the approval of the shareholders of the Company (the "Shareholders"), among others, to diversify the existing core business of the Group to include the new agriculture business (which would result in a change in the risk profile of the Group) through the acquisition of 63.11% of the registered capital of Henan Zhongnong Huasheng Agricultural Science and Technology Co. Ltd., the consideration for which will be satisfied by the issue and allotment of 143,076,923 new ordinary shares in the capital of the Company at an issue price of S$0.26 per consideration share (the Proposed Business Diversification Cum Acquisition").

Further details on the Proposed Business Diversification Cum Acquisition, including the risk factors involved, will be set out in a circular to be circulated to the Shareholders in due course.

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.