SOURCE: China Metro-Rural Holdings Limited

China Metro-Rural Holdings Limited

November 30, 2012 08:37 ET

CNR Announces Its Results for the Six Months Ended September 30, 2012

NEW YORK, NY--(Marketwire - Nov 30, 2012) - China Metro-Rural Holdings Limited (NYSE MKT: CNR) (the "Company") is pleased to announce its unaudited consolidated financial results of the Company and its subsidiaries (collectively the "Group") for the six months ended September 30, 2012.

Major Events:

  • Issuance of US$60 million guaranteed secured convertible bonds and warrants during the six months ended September 30, 2012

On August 15, 2012 (the "CB Closing"), the Company completed a private placement of US$60,000,000, 14 per cent. guaranteed secured convertible bonds (the "CBs") due 2017 to Willis Plus Limited, a BVI company associated with the Company's majority shareholders (the "Investor") (the "CB Offering"). In addition, the bondholders have options to convert the CBs into the ordinary shares of the Company (the "Shares") or require the Company to redeem all, but not less than all, of such holder's CBs on August 15, 2015 (collectively, the "Embedded Derivatives"). The CBs are initially convertible into 55,499,028 Shares, based on an initial conversion price of US$1.0811 per share. Simultaneously with the CB Offering, the Company granted to the Investor warrants exercisable to purchase up to 6,000,000 ordinary shares of the Company at an initial exercise price of US$1.2973 per share and with a term of four years, commencing one year after the date of issue of the CBs (the "Warrant"). As of the CB Closing, the fair values of the Embedded Derivatives and the Warrants were approximately HK$156,593,000 (US$20,076,000) and HK$26,267,000 (US$3,368,000), respectively. As a result of the CB Offering, an amount of approximately HK$182,860,000 was recorded as "Derivative financial liabilities" and an amount of approximately HK$285,140,000, being the difference between the gross proceeds and the fair value of these embedded derivatives and warrants, was recorded as "Convertible bonds", before commissions and offering expenses, as at the date of issue of the CBs.

  • Agreement to dispose a project in Qiqihar City, Heilongjiang, the PRC

On October 15, 2012, the Company, through its subsidiary, entered into an agreement for the disposition of 100% of its equity interest in China Focus City (H.K.) Holdings Limited and 75% of its equity interest in Qiqihar China Focus City Holdings (Group) Co. Ltd. ("Qiqihar CFC") to Run Xing Investments Limited and Honour Noble Holdings Limited (collectively, the "Purchasers") (collectively the "Sale"). Pursuant to the agreement, the Company, through its subsidiaries, is to receive considerations of RMB150,000,000 plus an amount of RMB85,595,967, representing certain post-tax profits arising from Qiqihar CFC prior to the Sale, and interest on the pre-tax balance of such amount calculated from July 28, 2012 through the date of payment. In addition, the Purchasers are to enter into a legally binding guaranty with respect to the Company's remaining 25% interest in Qiqihar CFC that the Company will receive (X) a pre-tax 21% of the Company's remaining 25% interest in Qiqihar CFC, a fixed annual return equal to RMB10,500,000, beginning October 15, 2013 and (Y) RMB50,000,000. The Purchasers shall have the right to purchase the remaining 25% interest in Qiqihar CFC at any time for RMB50,000,000 (plus any amounts due and payable under (X) and (Y) above). Finally, in the event that the Purchasers intend to sell its interests in Qiqihar CFC, they must first purchase the Company's remaining 25% interest in Qiqihar CFC. The payments of the amounts described above shall be guaranteed by the Purchasers and Qiqihar CFC, as well as Mr. Su Shaobin, who is a director of the Company. The disposition was approved by the audit committee and the board of directors of the Company on October 12, 2012.

  • Commencement of the second phase constructions for logistics platform in Dezhou City, Shandong, the PRC

Construction of the Company's logistics platform in Dezhou ("Dezhou Project") has commenced its second phase which consists of trade centers of approximately 150,000 square meters and other supporting facilities. The pre-sale of this second phase of Dezhou Project is expected to commence by the end of 2013 and it is expected to be completed by the middle of 2014.

Financial Highlights:

The Group has two reportable operating segments, agricultural logistics business and rural-urban migration and city re-development business. Our agricultural logistics business is comprised of (1) development, sales and leasing properties of integrated agricultural logistics and trade centers and supporting facilities and (2) property management which engages in the management of developed properties within the logistics platforms. Our rural-urban migration and city re-development business is comprised of (1) servicing and assignments of development rights and (2) development and sales of residential, commercial and other auxiliary properties in new city districts.

Agricultural Logistics Business

  • Net revenue generated by the Group increased from HK$109,756,000 for the six months ended September 30, 2011 to HK$206,579,000 for the six months ended September 30, 2012, representing a year-over-year increase of 88.2%.
  • Sales of gross floor area increased from 27,289 square meters for the six months ended September 30, 2011 to 35,994 square meters for the six months ended September 30, 2012, representing a year-over-year increase of 31.9%. Gross floor area sold during the period consisted of trade centers of 35,994 square meters (2011: 18,687 square meters). Sales for the six months ended September 30, 2011 also included residential properties of 8,602 square meters.
  • Gross profit percentage decreased from 45.9% for the six months ended September 30, 2011 to 37.1% for the six months ended September 30, 2012.
  • Other income and losses, net, increased from HK$23,779,000 for the six months ended September 30, 2011 to HK$26,833,000 for the six months ended September 30, 2012, representing a year-over-year increase of 12.8%. Included in other income and losses, net, was a government subsidy of HK$35,027,000 (2011: HK$23,541,000) for the six months ended September 30, 2012, representing a year-over-year increase of 48.8%. Other income and losses, net, for the six month ended September 30, 2012 also included the transaction cost related to the derivative components of convertible bonds of HK$7,156,000.
  • Selling expenses increased from HK$5,598,000 for the six months ended September 30, 2011 to HK$32,123,000 for the six months ended September 30, 2012, representing a year-over-year increase of 473.8%.
  • Administrative expenses increased from HK$40,093,000 for the six months ended September 30, 2011 to HK$54,925,000 for the six months ended September 30, 2012, representing a year-over-year increase of 37.0%.
  • Net profit attributable to the equity holders of the Company increased from HK$11,310,000 for the six months ended September 30, 2011 to HK$23,813,000 for the six months ended September 30, 2012, representing a year-over-year increase of 110.5%.

Rural-Urban Migration and City Re-development Business

  • Other income and losses, net for the six months ended September 30, 2012 was HK$4,677,000 (2011: Nil). Included in other income and losses, net, was an interest income of HK$4,023,000 (2011: Nil).
  • Selling expenses for the six months ended September 30, 2012 was HK$9,901,000 (2011: Nil).
  • Administrative expenses increase from HK$2,512,000 for the six months ended September 30, 2011 to HK$8,772,000 for the six months ended September 30, 2012, representing a year-over-year increase of 249.2%.
  • Net loss attributable to the equity holders of the Company increase from HK$1,842,000 for the six months ended September 30, 2011 to HK$9,503,000 for the six months ended September 30, 2012, representing a year-over-year increase of 415.9%.

ABOUT CHINA METRO-RURAL HOLDINGS LIMITED

China Metro-Rural Holdings Limited is a leading agricultural logistics platform development and rural-urban migration redevelopment company in China.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which are, by their nature, subject to risks and uncertainties. This Act provides a "safe harbor" for forward-looking statements to encourage companies to provide prospective information about themselves so long as they identify these statements as forward-looking and provide meaningful cautionary statements identifying important factors that could cause actual results to differ from the projected results. All statements, including statements regarding industry prospects and future results of operations or financial position, made in this press release are forward looking.

Words such as "anticipate," "believe," "estimate," "expect," "intend," "may," "plan," "predict," "project," "will," "would" and similar expressions may identify forward-looking statements. These forward-looking statements include, without limitation, statements relating to: the Company's future performance, the Company's expansion efforts, the state of economic conditions, the Company's market and the governmental policy. These forward-looking statements are based on assumptions and analyses made by the Company in light of its experience and perception of historical trends, current conditions and expected future developments, as well as other factors the Company believes to be appropriate in particular circumstances. However, whether actual results and developments will meet the Company's expectations and predictions depends on a number of known and unknown risks and uncertainties and other factors, any or all of which could cause actual results, performance or achievements to differ materially from the Company's expectations, whether expressed or implied by such forward-looking statements.

 
 
 
CHINA METRO-RURAL HOLDINGS LIMITED
UNAUDITED CONDENSED CONSOLIDATED INCOME STATEMENT
FOR THE SIX MONTHS ENDED SEPTEMBER 30
 
    2012     2012     2011  
    US$'000     HK$'000     HK$'000  
    (Unaudited)     (Unaudited)     (Unaudited)  
    (Note 3)              
                   
Revenue   26,484     206,579     109,756  
Cost of sales   (16,651 )   (129,883 )   (59,389 )
                   
Gross profit   9,833     76,696     50,367  
                   
Other income, net   5,166     40,298     23,779  
Other losses, net   (1,126 )   (8,788 )   -  
Selling expenses   (5,388 )   (42,024 )   (5,598 )
Administrative expenses   (8,166 )   (63,697 )   (42,605 )
Decrease in fair value of derivative financial liabilities   6,695     52,221     3,424  
Operating profit   7,014     54,706     29,367  
                   
Finance income   89     698     387  
Finance costs   (1,612 )   (12,570 )   (122 )
Finance costs -net   (1,523 )   (11,872 )   265  
Share of losses of an associate   (472 )   (3,681 )   (2,215 )
Profit before income tax   5,019     39,153     27,417  
                   
Income tax expenses   (2,160 )   (16,849 )   (18,553 )
Profit for the period   2,859     22,304     8,864  
                   
Attributable to:                  
  Equity holders of the Company   1,834     14,310     9,468  
  Non-controlling interests   1,025     7,994     (604 )
    2,859     22,304     8,864  
                   
Earnings per share attributable to equity holders of the Company during the period                  
                   
  Basic earnings per share   US$ 0.02     HK$ 0.19     HK$ 0.14  
                     
  Diluted (loss)/earning per share   US$ (0.04 )   HK$ (0.32 )   HK$ 0.14  
                     
                     
                     

The accompanying notes are an integral part of this press release.

   
   
   
CHINA METRO-RURAL HOLDINGS LIMITED  
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME  
FOR THE SIX MONTHS ENDED SEPTEMBER 30  
   
    2012     2012     2011  
    US$'000     HK$'000     HK$'000  
    (Unaudited)     (Unaudited)     (Unaudited)  
    (Note 3)              
                   
Profit for the period   2,859     22,304     8,864  
Other comprehensive (loss)/income, net of tax:                  
Exchange difference on translation of foreign operations  
(545
)  
(4,251
)  
23,387
 
                   
Total comprehensive income for the period   2,314     18,053     32,251  
                   
Total comprehensive income for the period attributable to:                  
  Equity holders of the Company   1,319     10,294     32,720  
  Non-controlling interests   995     7,759     (469 )
                   
    2,314     18,053     32,251  
                   
                   
                   

The accompanying notes are an integral part of this press release.

 
 
 
CHINA METRO-RURAL HOLDINGS LIMITED
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
 
         
    September 30,   March 31,
    2012   2012   2012
    US$'000   HK$'000   HK$'000
    (Unaudited)   (Unaudited)   (Unaudited)
    (Note 3)        
             
Non-current assets            
  Investment properties   69,368   541,070   542,598
  Investment properties under construction   2,028   15,818   14,854
  Property, plant and equipment   15,563   121,390   108,727
  Land use rights   8,413   65,620   70,695
  Deposit for investment properties   1,872   14,599   14,640
  Deposit for acquisition of land use rights   15,945   124,373   124,724
  Deposits for property, plant and equipment   273   2,134   -
  Interest in an associate   3,074   23,973   27,728
  Deferred income tax assets   1,651   12,879   -
    118,187   921,856   903,966
Current assets            
  Completed properties held for sale   65,304   509,370   475,413
  Properties under development   130,770   1,020,002   811,000
  Land use rights   234   1,823   1,911
  Deposit for acquisition of land use rights   2,354   18,363   160,169
  Trade and other receivables   52,512   409,598   462,334
  Restricted and pledged bank deposits   4,409   34,392   17,508
  Cash and cash equivalents   72,254   563,580   343,578
    327,837   2,557,128   2,271,913
Current liabilities            
  Trade payables, other payables and accruals   70,792   552,176   599,883
  Receipt in advance   36,815   287,155   179,507
  Current income tax liabilities   31,838   248,340   245,553
  Bank and other borrowings   59,952   467,621   478,763
  Derivative financial liabilities   17,126   133,580   2,941
    216,523   1,688,872   1,506,647
             
Net current assets   111,314   868,256   765,266
Total assets less current liabilities   229,501   1,790,112   1,669,232
Non-current liabilities            
  Deferred income tax liabilities   10,353   80,755   80,983
  Bank and other borrowings   8,946   69,776   253,839
  Convertible bonds   36,810   287,118   -
  Loan from a non-controlling interest of a subsidiary   7,538   58,800   58,800
    63,647   496,449   393,622
Net assets   165,854   1,293,663   1,275,610
             
             
             

The accompanying notes are an integral part of this press release.

 
 
 
CHINA METRO-RURAL HOLDINGS LIMITED
UNAUDITED CONSOLIDATED STATEMENT OF FINANCIAL POSITION - (Continued)
 
    September 30,   March 31,
    2012   2012   2012
    US$'000   HK$'000   HK$'000
    (Unaudited)   (Unaudited)   (Unaudited)
    (Note 3)        
             
Equity            
Equity attributable to equity holders of the Company            
  Share capital   73   573   573
  Reserves   161,967   1,263,344   1,253,050
    162,040   1,263,917   1,253,623
Non-controlling interests   3,814   29,746   21,987
Total equity   165,854   1,293,663   1,275,610
             
             
             

The accompanying notes are an integral part of this press release.

   
   
   
CHINA METRO-RURAL HOLDINGS LIMITED  
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS  
FOR THE SIX MONTHS ENDED SEPTEMBER 30  
   
                   
    2012     2012     2011  
    US$'000     HK$'000     HK$'000  
    (Unaudited)     (Unaudited)     (Unaudited)  
    (Note 3)              
                   
Net cash generated from/(used in) operating activities   150     1,169     (533,689 )
                   
Net cash used in investing activities   (2,477 )   (19,318 )   (37,384 )
                   
Net cash generated from financing activities   30,651     239,079     527,614  
                   
Net increase/(decrease) in cash and cash equivalents   28,324     220,930     (43,459 )
                   
Cash and cash equivalents at beginning of the period   44,048     343,578     156,928  
Effect of foreign exchange rate changes   (118 )   (928 )   345  
                   
Cash and cash equivalents at end of the period   72,254     563,580     113,814  
                   
                   
                   

The accompanying notes are an integral part of this press release.

CHINA METRO-RURAL HOLDINGS LIMITED
NOTES TO UNAUDITED FINANCIAL INFORMATION

1. BASIS OF PREPARATION AND ACCOUNTING POLICIES

The financial information presented herein have not been audited by an independent registered public accounting firm, but include all material adjustments (consisting of normal recurring adjustments) which are, in the opinion of management, necessary for a fair statement of financial information. However, this information is not necessarily indicative of results of any other interim period or for the full fiscal year. The accounting policies and basis of preparation adopted in the preparation of the condensed consolidated income statement, condensed consolidated statement of comprehensive income, condensed consolidated statement of financial positions and condensed consolidated statement of cash flows (collectively the "Condensed Statements") are consistent with those used in the annual financial statements of the Group for the fiscal year ended March 31, 2012.

2. POST BALANCE SHEET DATE EVENT

On October 15, 2012, the Company, through its subsidiary, entered into an agreement for the disposition of 100% of its equity interest in China Focus City (H.K.) Holdings Limited and 75% of its equity interest in Qiqihar China Focus City Holdings (Group) Co. Ltd. ("Qiqihar CFC") to Run Xing Investments Limited and Honour Noble Holdings Limited (collectively, the "Purchasers") (collectively the "Sale").

Pursuant to the agreement, the Company, through its subsidiaries, is to receive considerations of RMB150,000,000 plus an amount of RMB85,595,967, representing certain post-tax profits arising from Qiqihar CFC prior to the Sale, and interest on the pre-tax balance of such amount calculated from July 28, 2012 through the date of payment. In addition, the Purchasers are to enter into a legally binding guaranty with respect to the Company's remaining 25% interest in Qiqihar CFC that the Company will receive (X) a pre-tax 21% of the Company's remaining 25% interest in Qiqihar CFC, a fixed annual return equal to RMB10,500,000, beginning October 15, 2013 and (Y) RMB50,000,000. The Purchasers shall have the right to purchase the remaining 25% interest in Qiqihar CFC at any time for RMB50,000,000 (plus any amounts due and payable under (X) and (Y) above). Finally, in the event that the Purchasers intend to sell its interests in Qiqihar CFC, they must first purchase the Company's remaining 25% interest in Qiqihar CFC. The payments of the amounts described above shall be guaranteed by the Purchasers and Qiqihar CFC, as well as Mr. Su Shaobin, who is a director of the Company. The disposition was approved by the audit committee and the board of directors of the Company on October 12, 2012.

3. US DOLLAR EQUIVALENTS

The US dollar equivalents of the figures shown in the Condensed Statements are supplementary information and have been translated at HK$7.8 to US$1.00. Such translation should not be construed as representations that the Hong Kong dollar amounts represent, or have been or could be converted into, US dollar at that or any other rate.

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