Le Gaga Holdings Limited (Nasdaq:GAGA) ("Le Gaga" or "the
Company"), a leading greenhouse vegetable producer in China, today
announced its financial results for the fourth fiscal quarter and
fiscal year ended June 30, 2013.1
Highlights of the Fourth Quarter and Fiscal Year Ended
June 30, 20132
- Revenue increased by 22.6% to RMB151.1 million (US$24.6
million) for Q4 FY2013, compared to RMB123.2 million a year ago.
Revenue increased by 11.0% to RMB576.3 million (US$93.9 million) in
FY2013, compared to RMB519.3 million a year ago.
- Loss for the period was RMB13.0 million (US$2.1 million) for Q4
FY2013, compared to a loss of RMB8.5 million a year
ago. Profit for the year increased by 8.1% to RMB153.1 million
(US$25.0 million), compared to a profit of RMB141.7 million a year
ago.
- Adjusted profit for the period3 (non-IFRS measure) decreased by
9.0% to RMB31.6 million (US$5.1 million) for Q4 FY2013, compared to
RMB34.7 million a year ago. Adjusted profit for the year
decreased by 12.5% to RMB166.8 million (US$27.2 million) in FY2013,
compared to RMB190.7 million a year ago. A reconciliation of
the adjusted profit for the period to (loss)/profit for the period
determined in accordance with IFRS is set forth in Appendix V.
1 This announcement contains translations of
certain Renminbi (RMB) amounts into U.S. dollars (US$) at specified
rates solely for the convenience of the reader. Unless otherwise
noted, all translations from RMB to U.S. dollars are made at a rate
of RMB6.1374 to US$1.00, the effective noon buying rate as of June
28, 2013 in The City of New York for cable transfers of RMB as set
forth in H.10 weekly statistical release of the Federal Reserve
Board. |
2 On August 24, 2012, the Company's board of
directors approved a change in the Company's fiscal year end from
March 31 to June 30. Unless otherwise noted, the comparable
period for the fourth quarter ended June 30, 2013 throughout this
announcement is the three-month period ended June 30, 2012, while
the comparable period for the twelve-month period ended June 30,
2013 throughout this announcement is the twelve-month period ended
June 30, 2012. |
3 Defined as profit for the period before the
net impact of biological assets fair value adjustment and further
adjusted to exclude, as applicable, the effects of non-cash
share-based compensation, impairment losses on property, plant and
equipment and prepayments and offering expenses charged to the
income statement. |
- Adjusted EBITDA4 (non-IFRS measure) increased by 0.2% to
RMB56.2 million (US$9.2 million) for Q4 FY2013, compared to RMB56.1
million a year ago. Adjusted EBITDA decreased by 1.8% to
RMB261.3 million (US$42.6 million) in FY2013, compared to RMB266.2
million a year ago. A reconciliation of the adjusted EBITDA to
(loss)/profit for the period determined in accordance with IFRS is
set forth in Appendix VI.
- Basic and diluted loss per share were RMB0.59 cents (0.10 US
cents) for Q4 FY2013. Basic and diluted loss per ADS5 were
RMB29.50 cents (4.81 US cents) for Q4 FY2013.
- Basic and diluted earnings per share were RMB6.80 cents (1.11
US cents) for FY2013. Basic and diluted earnings per ADS were
RMB340.00 cents (55.40 US cents) for FY2013.
- Cash generated from operating activities increased by 105.3% to
RMB109.5 million (US$17.8 million) for Q4 FY2013, compared to
RMB53.4 million a year ago. Cash generated from operating
activities increased by 0.5% to RMB259.0 million (US$42.2 million)
in FY2013, compared to RMB257.5 million a year ago.
- Revenue-per-mu decreased to RMB6,030 (US$982) for Q4 FY2013,
compared to RMB6,129 a year ago. Revenue-per-mu decreased to
RMB24,547 (US$4,000) in FY2013, compared to RMB25,296 a year ago.
- Production output increased to 39,980 metric tons for Q4
FY2013, compared to 34,947 metric tons a year ago. Production
output increased to 138,212 metric tons in FY2013, compared to
137,547 metric tons a year ago.
4 Defined as EBITDA (earnings before net
finance income (costs), income tax expense, depreciation and
amortization), as further adjusted to exclude, as applicable, the
effects of non-cash share-based compensation, the net impact of
biological assets fair value adjustment, impairment losses on
property, plant and equipment and prepayments and offering expenses
charged to the income statement. |
5 American depositary shares, which are
traded on the NASDAQ Global Select Market, each represents 50
ordinary shares of the Company. |
- For Q4 FY2013 revenue from solanaceous, leafy and cruciferous
vegetables increased. For FY2013 our product mix shifted
further towards solanaceous vegetables. Solanaceous vegetables
sold to third parties in the PRC mainland represented 65% of total
revenue in FY2013, compared to 61% of total revenue a year ago.
- Average selling price (ASP) of vegetables sold to third parties
in the PRC mainland increased by 6.8% to 3.76 RMB/kg for Q4 FY2013,
compared to 3.52 RMB/kg a year ago. ASP of vegetables sold to
third parties in the PRC mainland increased by 10.3% to 4.07 RMB/kg
for FY2013, compared to 3.69 RMB/kg a year ago.
- Total arable land as of June 30, 2013 was 29,382 mu (1,959
hectare), the same as of March 31, 2013, and an increase of 3,258
mu compared to June 30, 2012.
- Total greenhouse area as of June 30, 2013 was 11,963 mu (798
hectare), representing an increase of 921 mu compared to March 31,
2013 and an increase of 3,048 mu compared to June 30, 2012.
Mr. Shing Yung Ma, the CEO of Le Gaga, commented, "Our
performance in the fourth fiscal quarter and the fiscal year 2013
was affected by the overall slowdown of the Chinese economy and
lower government spending, which resulted in significantly lower
market prices during the winter months, as compared to the previous
year. The milder weather in South China further contributed to
lower market prices. Although production volume and product quality
were in line with our expectations, the lower market prices
resulted in lower revenue than initially expected. During
fiscal year 2013 we upgraded our product mix and further focused on
the off-season production of solanaceous products.
Favorable weather allowed us to make progress on greenhouse
construction and we added over 900 mu of greenhouses during the
quarter. During the fiscal year 2013 we have spent much
R&D effort on soil-less production systems. Following the
completion of the solanaceous season in May, we have started the
conversion of part of our greenhouse area to soil-less
production. Although we did not add any new land during the
quarter, we added over 3,000 mu of land during the fiscal year and
our land expansion plans are on track."
Mr. Auke Cnossen, the CFO of Le Gaga, added, "Despite lower
market prices, we achieved higher average selling prices in the
fourth fiscal quarter compared to the same three-month period last
year. The higher selling prices were partly a result of better
product mix, product quality and more spending on product
packaging. Furthermore, fewer customers came to our farms to
pick up the products, which resulted in more transportation
incurred by the company, but passed on to customers through higher
selling prices. These also resulted in higher packing as well as
transportation costs as a percentage of revenue. Our focus on
high value products, which typically have higher selling prices but
lower volume, remains important because four of our major expenses,
including labor, fertilizer, packing and transportation, are all
proportionally related to production volume.
Our cost of goods sold increased year over year as a result of
higher direct material costs such as fertilizers, higher labor
costs due to wage inflation, higher depreciation due to more
greenhouse coverage, and higher rental expenses as recently leased
land with higher rents came into production during the quarter. A
large negative net impact of biological assets fair value
adjustment was recorded for the quarter. The negative net impact
was due to the completion of the solanaceous production cycle,
which resulted in a switch from high value solanaceous crops on our
fields at the end of March to mostly low value leafy crops on our
fields at the end of June. Our operating cash flow during the
current quarter was higher compared to last year primarily due to
the collection of trade receivables outstanding as at March 31,
2013."
Summary of Operating Data
|
As of Jun 30,
2012 |
As of Mar 31,
2013 |
As of Jun 30,
2013 |
Arable land |
|
|
|
- Operating land |
20,110 mu |
24,913 mu |
25,213 mu |
|
(1,341 hectare) |
(1,661 hectare) |
(1,681 hectare) |
- Land under construction or reserved
(1) |
6,014 mu |
4,469 mu |
4,169 mu |
|
(401 hectare) |
(298 hectare) |
(278 hectare) |
- Total |
26,124 mu |
29,382 mu |
29,382 mu |
|
(1,742 hectare) |
(1,959 hectare) |
(1,959 hectare) |
|
|
|
|
Greenhouse area (2) |
|
|
|
- Total |
8,915 mu |
11,042 mu |
11,963 mu |
|
(594 hectare) |
(736 hectare) |
(798 hectare) |
|
|
|
|
Greenhouse area as a percentage
of |
|
|
|
- Operating land |
44.3% |
44.3% |
47.4% |
- Total arable land |
34.1% |
37.6% |
40.7% |
|
|
|
|
Three Months Ended June
30, |
Twelve Months Ended June
30, |
|
2012 |
2013 |
2012 |
2013 |
|
|
|
|
|
Total production output (metric tons) |
34,947 |
39,980 |
137,547 |
138,212 |
Production yield (metric tons per mu) |
1.7 |
1.6 |
6.7 |
5.9 |
Revenue-per-mu (RMB) |
6,129 |
6,030 |
25,296 |
24,547 |
|
|
|
|
|
(1) |
Land under construction or reserved includes
(i) newly leased land which has not yet been put into production
and is either under construction or in reserve for future
development, and (ii) land which we plan to return and is not in
operation. |
|
As of June 30, 2013, we had 3,470 mu of newly
leased land and 699 mu of land which we plan to return. |
|
|
(2) |
As of June 30, 2012, there were 450 mu
bamboo-made greenhouses and 8,465 mu steel-made greenhouses. |
|
As of March 31, 2013, there were 450 mu
bamboo-made greenhouses and 10,592 mu steel-made greenhouses. |
|
As of June 30, 2013, there were 450 mu
bamboo-made greenhouses and 11,513 mu steel-made greenhouses. |
Financial Results for the Fourth Quarter and Fiscal Year
Ended June 30, 2013
Revenue increased by 22.6% to RMB151.1 million (US$24.6 million)
for Q4 FY2013, compared to RMB123.2 million a year ago. The
increase in revenue was due to an increase in our land area,
greenhouse area and open field utilization. Our average operating
land increased 24.9% to 25,061 mu for Q4 FY2013, compared to 20,062
mu a year ago.
Revenue increased by 11.0% to RMB576.3 million (US$93.9 million)
for FY2013, compared to RMB519.3 million a year ago. The
increase in revenue was due to an increase in our land area,
greenhouse area and open field utilization. Our average operating
land increased 14.3% to 23,476 mu for FY2013, compared to 20,530 mu
a year ago.
Our ASP for the quarter as well as for FY2013 increased due to
(1) the upgrade in our product mix, (2) better product quality, (3)
more spending on product packaging, (4) more transportation costs
incurred and passed on to customers as fewer customers came to our
farms to pick up the produce, which was partially off-set by (5)
lower market prices. Our revenue per mu decreased slightly as
the upgrade in product mix resulted in lower volume per mu.
|
Three Months Ended June
30, |
Twelve Months Ended June
30, |
|
2012 |
2013 |
2012 |
2013 |
|
Revenue (%) |
ASP (RMB/kg) |
Revenue (%) |
ASP (RMB/kg) |
Revenue (%) |
ASP (RMB/kg) |
Revenue (%) |
ASP (RMB/kg) |
|
|
|
|
|
|
|
|
|
PRC revenue6 |
|
|
|
|
|
|
|
|
Solanaceous |
65% |
3.88 |
57% |
3.96 |
61% |
4.41 |
65% |
4.76 |
Leafy |
29% |
2.92 |
28% |
3.51 |
25% |
2.81 |
21% |
3.17 |
Cruciferous |
4% |
3.19 |
13% |
3.33 |
8% |
2.93 |
11% |
3.04 |
Others |
1% |
8.50 |
2% |
6.88 |
1% |
3.35 |
2% |
4.72 |
Sub-total |
99% |
3.52 |
100% |
3.76 |
95% |
3.69 |
99% |
4.07 |
Hong Kong revenue |
1% |
|
0% |
|
5% |
|
1% |
|
Total |
100% |
|
100% |
|
100% |
|
100% |
|
|
|
|
|
|
|
|
|
|
6 Defined as revenue from sales
of respective products in the PRC mainland to external
customers |
We primarily grow solanaceous vegetables (primarily peppers and
tomatoes), green leafy and cruciferous vegetables during the period
ended June 30. Solanaceous vegetables generally have a higher
selling price per kg. In Q4 FY2013, more cruciferous
vegetables were planted and sold to capture the high market
prices. The production volume of solanaceous and leafy
vegetables did not significantly change, compared to a year
ago. For FY2013, our product mix shifted further towards
solanaceous products compared to a year ago.
Cost of inventories sold increased by RMB19.8 million, or 18.3%,
to RMB127.8 million (US$20.8 million) for Q4 FY2013, compared to
RMB108.0 million a year ago. Cost of inventories sold
increased by RMB37.1 million, or 8.1%, to RMB494.2 million (US$80.5
million) for FY2013, compared to RMB457.1 million a year ago.
Adjusted cost of inventories sold7 (non-IFRS measure) increased
by RMB19.9 million, or 43.3%, to RMB65.9 million (US$10.7 million)
for Q4 FY2013, compared to RMB46.0 million a year
ago. Adjusted cost of inventories sold as a percentage of
revenue increased from 37.3% for the three months ended June 30,
2012 to 43.6% for the three months ended June 30, 2013, primarily
due to increased direct materials, labor and rental costs as well
as higher depreciation charges, as a percentage of revenue.
Adjusted cost of inventories sold increased by RMB39.1 million,
or 22.7%, to RMB211.1 million (US$34.4 million) for FY2013,
compared to RMB172.0 million a year ago. Adjusted cost of
inventories sold as a percentage of revenue increased from 33.1%
for the twelve months ended June 30, 2012 to 36.6% for the twelve
months ended June 30, 2013, primarily due to increased direct
materials, labor, rental and overhead costs as well as higher
depreciation charges, as a percentage of revenue.
A reconciliation of adjusted cost of inventories sold to cost of
inventories sold determined in accordance with IFRS is set forth in
Appendix IV.
|
Three Months Ended June
30, |
Twelve Months Ended June
30, |
|
2012 |
2013 |
2012 |
2013 |
|
RMB |
RMB |
US$ |
RMB |
RMB |
US$ |
|
|
|
|
|
|
|
Biological assets fair value adjustment
included in cost of inventories sold |
(61,963) |
(61,835) |
(10,075) |
(285,137) |
(283,170) |
(46,138) |
|
|
|
|
|
|
|
Changes in fair value less costs to sell of
biological assets |
22,964 |
18,219 |
2,969 |
273,728 |
277,504 |
45,215 |
|
|
|
|
|
|
|
Net impact of biological assets fair value
adjustment |
(38,999) |
(43,616) |
(7,106) |
(11,409) |
(5,666) |
(923) |
|
|
|
|
|
|
|
7 Defined as cost of inventories
sold before biological assets fair value adjustment |
The net impact of the biological assets fair value adjustment
represents the net increase or decrease in gain from fair value
less costs to sell of crops on our farmland at the end of the
reporting period compared to the end of the immediately preceding
reporting period.
A net loss of RMB43.6 million was recognized arising from
biological assets fair value adjustment for Q4 FY2013, as compared
to a net loss of RMB39.0 million recognized a year ago.
The net loss of RMB43.6 million for Q4 FY2013 primarily arose
from the harvesting activities of solanaceous products. As we
ended the solanaceous products season and most solanaceous products
had been harvested, we switched from high value solanaceous crops
on our fields at the end of March (the immediately preceding
reporting period end) to mostly low value leafy crops on our fields
at the end of June, resulting in a negative net impact.
The larger negative net impact for Q4 FY2013 compared to that of
a year ago was primarily due to a lower expected volume of crops on
our fields on June 30, 2013, when compared with that of June 30,
2012.
The net impact of biological assets fair value adjustment was a
loss of RMB5.7 million for FY2013, primarily due to a lower
expected volume of crops on our fields on June 30, 2013, when
compared with that of June 30, 2012, primarily due to (1) our
strategy of focusing more on the off-season (winter months) and
less on the summer months and (2) an increase in land not in
operation due to the conversion of part of our greenhouses to the
soil-less production system. The smaller negative net impact
for FY2013, compared to that of a year ago, was due to the effect
from increasing seasonality leveling off as our business model
focusing on off-season production has been progressively
implemented.
Our packing expenses increased by RMB4.0 million, or 45.2%, to
RMB12.9 million (US$2.1 million) for Q4 FY2013, compared to RMB8.9
million a year ago, primarily due to an increase of RMB4.4 million
in packing materials consumed, as a result of (1) the increase in
sales volume, (2) better packaging used to enhance the selling
price, and (3) our effort to enhance our brand awareness.
Our packing expenses increased by RMB13.9 million, or 40.9%, to
RMB47.8 million (US$7.8 million) for FY2013, compared to RMB33.9
million a year ago, primarily due to an increase of RMB15.2 million
in packing materials consumed, as a result of (1) the increased
production volume of solanaceous products, which require more
packaging compared to leafy and cruciferous products, (2) better
packaging used to enhance the selling price, and (3) our effort to
enhance our brand awareness.
Our land preparation costs increased by RMB2.9 million, or
22.7%, to RMB15.8 million (US$2.6 million) for Q4 FY2013, compared
to RMB12.9 million a year ago, which was primarily due to (1) an
increase in greenhouse coverage which increased the unit land
preparation cost and (2) an increase in the amount of land in
reserve or under construction due to longer construction period for
new farms under construction.
Our land preparation costs increased by RMB12.6 million, or
29.0%, to RMB56.1 million (US$9.1 million) for FY2013, compared to
RMB43.5 million a year ago, which was primarily due to (1) an
increase in greenhouse coverage which increased the unit land
preparation cost and (2) an increase in the amount of land in
reserve or under construction due to longer construction period for
new farms under construction.
Our selling and distribution expenses increased by RMB5.9
million, or 90.5%, to RMB12.4 million (US$2.0 million) for Q4
FY2013, compared to RMB6.5 million a year ago, which was primarily
due to the increase of RMB6.2 million in transportation costs, as a
result of (1) higher transportation costs incurred by the company
as fewer customers picked up the produce at our farms, (2) the
increase in our production volume and, (3) increased fuel
costs.
Our selling and distribution expenses increased by RMB13.1
million, or 44.2%, to RMB42.9 million (US$7.0 million) for FY2013,
compared to RMB29.8 million a year ago, which was primarily due to
the increase of RMB14.9 million in transportation costs, as a
result of (1) the increase in sales of solanaceous products, which
are shipped further away compared to leafy and cruciferous
vegetables, (2) higher transportation costs incurred by the company
as fewer customers picked up the produce at our farms, and (3)
increased fuel costs.
Our administrative expenses decreased by RMB0.9 million, or
6.8%, to RMB12.3 million (US$2.0 million) for Q4 FY2013, compared
to RMB13.2 million a year ago.
Our administrative expenses decreased by RMB12.7 million, or
22.1%, to RMB44.6 million (US$7.3 million) for FY2013, compared to
RMB57.3 million a year ago, primarily due to (1) a decrease of
RMB14.8 million in equity-settled share-based compensation and (2)
a decrease of RMB1.6 million in travelling expenses. The
decrease in administrative expenses is partially offset by an
increase of RMB2.8 million in legal and professional fees.
As a result of the foregoing factors, the loss for Q4 FY2013 was
RMB13.0 million (US$2.1 million), compared to a loss of RMB8.5
million a year ago. Profit for the year increased by RMB11.4
million, or 8.1%, to RMB153.1 million (US$25.0 million) for FY2013,
compared to a profit of RMB141.7 million a year ago.
Adjusted profit for the period decreased by 9.0% to RMB31.6
million (US$5.1 million) for Q4 FY2013, compared to RMB34.7 million
a year ago. Adjusted profit for the year decreased by 12.5% to
RMB166.8 million (US$27.2 million) for FY2013, compared to RMB190.7
million a year ago.
Basic and diluted loss per share were RMB0.59 cents (0.10 US
cents) for Q4 FY2013. Basic and diluted loss per ADS were
RMB29.50 cents (4.81 US cents) for Q4 FY2013.
Basic and diluted earnings per share were RMB6.80 cents (1.11 US
cents) for FY2013. Basic and diluted earnings per ADS were
RMB340.00 cents (55.40 US cents) for FY2013.
Our operating cash inflow increased by RMB56.1 million, or
105.3%, to RMB109.5 million (US$17.8 million) for Q4 FY2013,
compared to RMB53.4 million a year ago. The increase in cash
inflow resulted primarily from an increase of RMB68.6 million in
cash received, as a result of the collection of RMB93.0 million in
trade receivables outstanding as at March 31, 2013.
Our operating cash inflow increased by RMB1.5 million, or 0.5%,
to RMB259.0 million (US$42.2 million) for FY2013, compared to
RMB257.5 million a year ago. The slight change in operating
cash inflow is the offsetting effect of (1) an increase of RMB42.3
million in cash received from sales and (2) an increase of RMB40.8
million in cash paid for our cost of revenue and operating
expenses, compared to last year.
Cash used in investing activities increased by RMB73.9 million,
or 113.3%, to RMB139.1 million (US$22.7 million) for Q4 FY2013,
compared to RMB65.2 million a year ago. The net cash outflow
of RMB139.1 million in Q4 FY2013 was primarily due to our payment
for construction in progress and prepayments for construction works
totalling RMB140.9 million, which consisted of (1) payment of
RMB102.3 million for agricultural infrastructure, including RMB43.6
million for the conversion to soil-less production, (2) payment for
construction of greenhouses of RMB37.3 million, and (3) payment for
land improvements of RMB1.3 million.
Cash used in investing activities increased by RMB131.2 million,
or 45.2%, to RMB421.3 million (US$68.6 million) for FY2013,
compared to RMB290.1 million a year ago. The net cash outflow
of RMB421.3 million for FY2013 was primarily due to our payment for
construction in progress and prepayments for construction works
totalling RMB399.7 million, which consisted of (1) payment of
RMB198.1 million for agricultural infrastructure, including RMB48.7
million for the conversion to soil-less production, (2) payment for
construction of greenhouses of RMB150.9 million, and (3) payment
for land improvements of RMB50.7 million.
Recent developments
Following the completion of the solanaceous season in May we
have started the conversion of part of our greenhouse area to a
soil-less production system. The key reasons for shifting to
the soil-less system are:
(1) The increasing difficulty in finding farm land with
unpolluted soil and a safe and reliable water supply in China;
(2) The increasing disease pressure in recent years due to ever
more intensive farming methods around China;
(3) The increasing difficulty in finding skilled farm workers in
China.
The soil-less system provides more control over the growing
environment as well as the application of production inputs such as
fertilizer, water and pesticide and helps to mitigate soil-borne
disease and pollution issues. Furthermore, this system is less
labor intensive compared to production in the soil. Lastly, the
central government has commenced a series of R&D activities on
soil-less production this year, as it is increasingly focusing on
the environmental impact of farming as well as food safety issues.
Thus, we believe that this is the future development of the
agricultural industry in China.
Business Outlook for the Fiscal Year Ending June 30,
2014
For the fiscal year ending June 30, 2014, the Company expects
lower revenue per mu as compared to the fiscal year ended June 30,
2013, due to operational disruption resulting from the conversion
of a large area of our greenhouses to the soil-less production
system. The Company estimates its revenue for the fiscal year
ending June 30, 2014 to be between RM585 million and RMB625
million, representing a year over year growth rate of approximately
1.6% to 8.5% for the fiscal year ending June 30, 2014 from the
fiscal year ended June 30, 2013. This forecast reflects the
Company's current and preliminary estimate, which is subject to
change. See "Safe Harbor Statements" below.
Conference Call
The Company will host a conference call at 8:00 a.m. ET on Sep
17, 2013 (8:00 p.m. Hong Kong Time) to review the Company's
financial results and answer questions. You may access the live
interactive call via:
- +1 866 978 9970 (U.S. Toll Free)
- +8008 0361 03 (China Toll Free)
- +852 3027 5500 (International)
- Pass Code: 534242#
Please dial-in approximately 10 minutes in advance to facilitate
an on-time start.
A replay will be available for two weeks after the call and may
be accessed via:
- +852 3027 5520
- Passcode: 135415#
A live and archived webcast of the call, as well as a
presentation with the Company's financial results will be available
on the Company's website at www.legaga.com.hk/html/index.php.
About Le Gaga Holdings Limited
(Nasdaq:GAGA)
Le Gaga is a leading greenhouse vegetable producer in China. The
Company sells and markets greenhouse vegetables such as peppers,
tomatoes, cucumbers and eggplants, as well as green leafy
vegetables to wholesalers, institutional customers and supermarkets
in China and Hong Kong. The Company has successfully built a
trusted brand among its customers.
The Company currently operates farms in the Chinese provinces of
Fujian, Guangdong and Hebei. Leveraging its large-scale
greenhouses, proprietary horticultural know-how and comprehensive
database, the Company specializes in producing and selling
high-quality, off-season vegetables during the winter months.
Safe Harbor Statements
This press release contains statements of a forward-looking
nature. These statements are made under the "safe harbor"
provisions of the Private Securities Litigation Reform Act of 1995,
including certain plans, expectations, goals, and projections,
which are subject to numerous assumptions, risks, and
uncertainties. Forward-looking statements typically are identified
by the use of terms such as "may," "could," "would," "will,"
"plan," "anticipate," "believe," "estimate," "predict," "outlook,"
"on track," "potential," "expect," "intend" and "future" or similar
expressions, although some forward-looking statements are expressed
differently. You should consider statements that contain these
words carefully because they describe our expectations, plans,
strategies and goals and our beliefs concerning future business
conditions, our results of operations, financial position, and our
business outlook or they state other ''forward-looking''
information based on currently available
information. Assumptions and other important factors could
cause our actual results to differ materially from those
anticipated in our forward-looking statements include, but not
limited to: our ability to continue to lease farmland or
forestland; the legality or validity of our leases of agricultural
land; risks associated with extreme weather conditions, natural
disasters, crops diseases, pests and other natural conditions;
fluctuations in market prices and demand for our products; risks
attributable to our growth strategies, including increasing our
greenhouse coverage, increasing our production scale, strengthening
our sales, marketing and distribution efforts, focusing on
off-season products, increasingly shifting our product mix to
solanaceous products, and expanding our research and development
capability; risks of product contamination and product liability
claims as well as negative publicity associated with food safety
issues in China; risks of labor shortage and rising labor costs;
regulatory compliance, changes or action, including environmental
and trade regulation, our ability to comply with U.S. public
accounting reporting requirements, including maintenance of an
effective system of internal controls over financial reporting; our
susceptibility to adverse changes in political, economic and other
policies of the Chinese government that could materially harm its
business; the risk factors or uncertainties are listed from time to
time in our filings with the Securities and Exchange Commission.
Other factors and assumptions not identified above are also
relevant to the forward-looking statements, and if they prove
incorrect, could also cause actual results to differ materially
from those projected. All forward-looking statements are expressly
qualified in their entirety by the foregoing cautionary statements.
Our forward-looking statements speak only as of the date made. We
assume no obligation to update or to publicly announce the results
of any revisions to any of the forward-looking statements to
reflect actual results, future events or developments, changes in
assumptions or changes in other factors affecting the
forward-looking statements.
Information Related to Certain Non-IFRS
measures
This press release contains the following financial measures
that differ from the comparable measures under International
Financial Reporting Standards (IFRS): adjusted cost of inventories
sold, adjusted profit for the period and adjusted
EBITDA. Reconciliations between those non-IFRS measures and
the comparable IFRS measures are included elsewhere in this press
release. While we believe these measures are useful for
investors to assess our financial results, these non-IFRS measures
should not be considered substitutes for the most directly
comparable IFRS measures. Additional information concerning
non-IFRS measures are included in our filings with the Securities
and Exchange Commission that are available in the "Investors – SEC
Filings" section of our website, www.legaga.com.hk.
Adjusted cost of inventories sold is defined as
cost of inventories sold before biological assets fair value
adjustment. We are primarily engaged in
agricultural activities of cultivating, processing and distributing
vegetables and have therefore adopted International Accounting
Standard 41 "Agriculture", or IAS 41, in accounting for biological
assets and agricultural produce. Unlike the historical cost
accounting model, IAS 41 requires us to recognize in our income
statements the gain or loss arising from the change in fair value
less costs to sell of biological assets and agricultural produce
for each reporting period. Cost of inventories sold determined
under IAS 41 reflects the deemed cost of agricultural produce,
which is based on their fair value (less costs to sell) at the
point of harvest. Biological assets fair value adjustment is
the difference between the deemed cost of the agricultural produce
and the plantation expenditure we incurred to cultivate the produce
to the point of harvest. Although an "adjusted" cost of
inventories sold excluding these fair value adjustments is a
non-IFRS measure, we believe that separate analysis of the cost of
inventories sold excluding these fair value adjustments adds
clarity to the constituent parts of our cost of inventories sold
and provides additional useful information for investors to assess
our cost structure. A reconciliation of adjusted cost of
inventories sold to IFRS cost of inventories sold is set forth in
Appendix IV.
Adjusted profit for the period represents
profit for the period before the net impact of biological assets
fair value adjustment and further adjusted to exclude, as
applicable, the effects of non-cash share-based compensation,
offering expenses and impairment losses on property, plant and
equipment and prepayments charged to the income statement. We
believe that separate analysis of the net impact of the biological
assets fair value adjustments, non-cash share-based compensation,
offering expenses and impairment losses on property, plant and
equipment and prepayments adds clarity to the constituent part of
our results of operations and provides additional useful
information for investors to assess the operating performance of
our business. A reconciliation of adjusted profit for the period is
set forth in Appendix V.
Adjusted EBITDA is defined as EBITDA (earnings
before net finance income (costs), income tax expense, depreciation
and amortization), as further adjusted to exclude, as applicable,
the effects of non-cash share-based compensation, the net impact of
biological assets fair value adjustment, offering expenses and
impairment losses on property, plant and equipment and prepayments
charged to the income statement. We believe adjusted EBITDA is
useful to investors because it is frequently used by securities
analysts, investors and other interested parties in the evaluation
of companies in our industry. You should use adjusted EBITDA as a
supplemental analytical measure to, and in conjunction with, our
IFRS financial data. In addition, we believe that adjusted EBITDA
is useful in evaluating our operating performance compared to that
of other companies in our industry because the calculation of
adjusted EBITDA generally eliminates the effects of financing and
income taxes and the accounting effects of capital spending, which
items may vary for different companies for reasons unrelated to
overall operating performance. We use these non-IFRS financial
measures for planning and forecasting and measuring results against
the forecast. Using several measures to evaluate the business
allows us and investors to assess our relative performance against
our competitors and ultimately monitor our capacity to generate
returns for our shareholders. A reconciliation of the adjusted
EBITDA to profit for the period is set forth in Appendix VI.
Appendix I |
Le Gaga Holdings Limited |
Unaudited Condensed
Consolidated Income Statements |
For the three months and
twelve months ended June 30, 2012 and 2013 |
|
|
Three Months Ended June
30, |
Twelve Months Ended June
30, |
|
2012 |
2013 |
2012 |
2013 |
|
RMB |
RMB |
US$ |
RMB |
RMB |
US$ |
|
(In thousands, except per share
data) |
|
|
|
|
|
|
|
Revenue |
123,248 |
151,112 |
24,622 |
519,315 |
576,274 |
93,895 |
Cost of inventories sold |
(107,983) |
(127,769) |
(20,818) |
(457,087) |
(494,235) |
(80,528) |
Changes in fair value less costs to sell
related to |
|
|
|
|
|
|
Crops harvested during the period |
5,067 |
6,651 |
1,084 |
251,848 |
260,928 |
42,514 |
Growing crops on the farmland at the
period end |
17,897 |
11,568 |
1,885 |
21,880 |
16,576 |
2,701 |
Total changes in fair value less costs to
sell of biological assets |
22,964 |
18,219 |
2,969 |
273,728 |
277,504 |
45,215 |
Packing expenses |
(8,913) |
(12,942) |
(2,109) |
(33,887) |
(47,754) |
(7,781) |
Land preparation costs |
(12,887) |
(15,807) |
(2,576) |
(43,472) |
(56,078) |
(9,137) |
Other income |
466 |
546 |
89 |
3,661 |
1,830 |
298 |
Research and development expenses |
(2,291) |
(3,612) |
(589) |
(9,321) |
(13,283) |
(2,164) |
Selling and distribution expenses |
(6,516) |
(12,414) |
(2,023) |
(29,754) |
(42,899) |
(6,990) |
Administrative expenses |
(13,155) |
(12,264) |
(1,998) |
(57,313) |
(44,631) |
(7,272) |
Impairment losses on property, plant and
equipment and prepayments |
-- |
-- |
-- |
(14,823) |
-- |
-- |
Other expenses |
(132) |
(254) |
(41) |
(2,550) |
(797) |
(130) |
Results from operating
activities |
(5,199) |
(15,185) |
(2,474) |
148,497 |
155,931 |
25,406 |
Finance income |
909 |
3,397 |
553 |
8,556 |
8,382 |
1,366 |
Finance costs |
(4,046) |
(3,472) |
(566) |
(10,786) |
(13,017) |
(2,121) |
Net finance
(costs)/income |
(3,137) |
(75) |
(13) |
(2,230) |
(4,635) |
(755) |
(Loss)/profit before
taxation |
(8,336) |
(15,260) |
(2,487) |
146,267 |
151,296 |
24,651 |
Income tax (expense)/credit |
(128) |
2,225 |
363 |
(4,543) |
1,840 |
300 |
(Loss)/profit for the
period |
(8,464) |
(13,035) |
(2,124) |
141,724 |
153,136 |
24,951 |
(Loss)/earnings per share (in
cents) |
|
|
|
|
|
|
Basic |
(0.37) |
(0.59) |
(0.10) |
6.20 |
6.80 |
1.11 |
Diluted |
(0.37) |
(0.59) |
(0.10) |
6.12 |
6.80 |
1.11 |
Weighted average number of shares
outstanding: |
|
|
|
|
|
|
Basic |
2,281,430,300 |
2,198,845,700 |
|
2,284,111,692 |
2,251,662,527 |
|
Diluted |
2,281,430,300 |
2,198,845,700 |
|
2,314,312,815 |
2,252,439,907 |
|
(Loss)/earnings per ADS (in
cents) |
|
|
|
|
|
|
Basic |
(18.50) |
(29.50) |
(4.81) |
310.00 |
340.00 |
55.40 |
Diluted |
(18.50) |
(29.50) |
(4.81) |
306.00 |
340.00 |
55.40 |
Weighted average number of ADSs
outstanding: |
|
|
|
|
|
|
Basic |
45,628,606 |
43,976,914 |
|
45,682,234 |
45,033,251 |
|
Diluted |
45,628,606 |
43,976,914 |
|
46,286,256 |
45,048,798 |
|
|
|
|
|
|
|
|
Appendix II |
Le Gaga Holdings Limited |
Unaudited Condensed
Consolidated Balance Sheets |
As of June 30, 2012 and
2013 |
|
|
June 30, 2012 |
June 30, 2013 |
|
RMB |
RMB |
US$ |
|
(In thousands) |
Non-current assets |
|
|
|
Property, plant and equipment |
700,245 |
1,049,311 |
170,970 |
Construction in progress |
68,627 |
70,508 |
11,488 |
Lease prepayments |
1,256 |
1,171 |
191 |
Long-term deposits and prepayments |
163,494 |
166,916 |
27,197 |
Biological assets |
7,833 |
12,439 |
2,027 |
Deferred tax assets |
1,943 |
2,321 |
378 |
Total non-current
assets |
943,398 |
1,302,666 |
212,251 |
|
|
|
|
Current assets |
|
|
|
Biological assets |
30,709 |
26,268 |
4,280 |
Inventories |
16,427 |
14,941 |
2,434 |
Trade and other receivables |
64,566 |
84,558 |
13,776 |
Pledged bank deposits |
-- |
45,065 |
7,343 |
Cash |
504,506 |
305,487 |
49,775 |
Total current assets |
616,208 |
476,319 |
77,608 |
|
|
|
|
Total assets |
1,559,606 |
1,778,985 |
289,859 |
|
|
|
|
Equity |
|
|
|
Capital |
692,833 |
644,397 |
104,995 |
Reserves |
742,820 |
908,126 |
147,966 |
Total equity |
1,435,653 |
1,552,523 |
252,961 |
|
|
|
|
Non-current liabilities |
|
|
|
Bank loans |
61,998 |
-- |
-- |
|
|
|
|
Current liabilities |
|
|
|
Bank loans |
24,307 |
146,110 |
23,806 |
Trade and other payables |
31,111 |
75,246 |
12,260 |
Current taxation |
6,537 |
5,106 |
832 |
Total current
liabilities |
61,955 |
226,462 |
36,898 |
|
|
|
|
Total liabilities |
123,953 |
226,462 |
36,898 |
|
|
|
|
Total equity and
liabilities |
1,559,606 |
1,778,985 |
289,859 |
|
|
|
|
Appendix III |
Le Gaga Holdings Limited |
Unaudited Condensed
Consolidated Statements of Cash Flow |
For the three months and
twelve months ended June 30, 2012 and 2013 |
|
|
Three Months Ended June
30, |
Twelve Months Ended June
30, |
|
2012 |
2013 |
2012 |
2013 |
|
RMB |
RMB |
US$ |
RMB |
RMB |
US$ |
|
(In thousands) |
Operating activities |
|
|
|
|
|
|
(Loss)/profit before taxation |
(8,336) |
(15,260) |
(2,487) |
146,267 |
151,296 |
24,651 |
|
|
|
|
|
|
|
Adjustments for: |
|
|
|
|
|
|
Amortization of lease prepayments |
14 |
14 |
2 |
75 |
56 |
9 |
Depreciation |
18,065 |
26,718 |
4,353 |
68,621 |
91,647 |
14,933 |
Equity settled share-based transactions |
4,192 |
1,011 |
165 |
22,778 |
7,999 |
1,303 |
Changes in fair value less costs to sell of
biological assets |
(22,964) |
(18,219) |
(2,969) |
(273,728) |
(277,504) |
(45,215) |
Interest income |
(909) |
(372) |
(61) |
(1,927) |
(2,084) |
(340) |
Interest expense |
2,792 |
3,472 |
566 |
10,786 |
13,017 |
2,121 |
Gain on disposal of a subsidiary |
-- |
-- |
-- |
(1,309) |
-- |
-- |
Net loss on disposal of property, plant and
equipment and lease prepayments |
79 |
17 |
3 |
2,159 |
21 |
3 |
Impairment losses: |
|
|
|
|
|
|
- Property, plant and equipment |
-- |
-- |
-- |
12,771 |
-- |
-- |
- Prepayments |
-- |
-- |
-- |
2,052 |
-- |
-- |
Foreign exchange loss/(gain) |
330 |
(2,910) |
(473) |
(5,974) |
(5,529) |
(900) |
|
|
|
|
|
|
|
|
(6,737) |
(5,529) |
(901) |
(17,429) |
(21,081) |
(3,435) |
|
|
|
|
|
|
|
Changes in current biological assets due to
plantations |
(37,627) |
(51,553) |
(8,400) |
(159,097) |
(206,499) |
(33,646) |
Changes in inventories, net of effect of
harvested crops transferred to inventories |
102,089 |
126,123 |
20,550 |
440,218 |
487,180 |
79,379 |
(Increase)/decrease in trade and other
receivables |
(4,724) |
40,213 |
6,552 |
(20,135) |
(19,914) |
(3,245) |
Decrease in long-term deposits and
prepayments |
3,192 |
2,422 |
395 |
7,720 |
11,451 |
1,866 |
(Decrease)/increase in trade and other
payables |
(2,842) |
(2,136) |
(348) |
9,146 |
7,814 |
1,273 |
|
|
|
|
|
|
|
Cash generated from
operations |
53,351 |
109,540 |
17,848 |
260,423 |
258,951 |
42,192 |
|
|
|
|
|
|
|
Income tax paid |
-- |
-- |
-- |
(2,881) |
-- |
-- |
|
|
|
|
|
|
|
Net cash generated from operating
activities |
53,351 |
109,540 |
17,848 |
257,542 |
258,951 |
42,192 |
|
|
|
|
|
|
|
Appendix III |
Le Gaga Holdings Limited |
Unaudited Condensed
Consolidated Statements of Cash Flow |
For the three months and
twelve months ended June 30, 2012 and 2013 |
|
|
Three Months Ended June
30, |
Twelve Months Ended June
30, |
|
2012 |
2013 |
2012 |
2013 |
|
RMB |
RMB |
US$ |
RMB |
RMB |
US$ |
|
(In thousands) |
Investing activities |
|
|
|
|
|
|
Interest received |
909 |
372 |
61 |
1,927 |
2,084 |
340 |
Plantations of non-current biological
assets |
(480) |
(525) |
(86) |
(1,618) |
(1,856) |
(302) |
Payment for the purchase of property, plant
and equipment |
(4,746) |
(8,061) |
(1,313) |
(7,792) |
(21,878) |
(3,565) |
Payment for construction in progress and
prepayments for construction works |
(60,904) |
(140,880) |
(22,954) |
(290,706) |
(399,657) |
(65,118) |
Net cash inflow of disposal of a
subsidiary |
-- |
-- |
-- |
3,737 |
-- |
-- |
Proceeds from disposal of property, plant and
equipment and lease prepayments |
-- |
-- |
-- |
4,331 |
-- |
-- |
Decrease in pledged bank deposits related to
construction work |
-- |
10,000 |
1,629 |
-- |
-- |
-- |
|
|
|
|
|
|
|
Net cash used in investing
activities |
(65,221) |
(139,094) |
(22,663) |
(290,121) |
(421,307) |
(68,645) |
|
|
|
|
|
|
|
Financing activities |
|
|
|
|
|
|
Interest paid |
(5,305) |
(6,455) |
(1,052) |
(10,448) |
(13,238) |
(2,157) |
Proceeds from bank loans |
-- |
78,492 |
12,789 |
10,000 |
113,492 |
18,492 |
Repayments of bank loan |
-- |
(42,011) |
(6,845) |
-- |
(52,011) |
(8,474) |
Increase in pledged bank deposits related to
financing |
-- |
(45,065) |
(7,343) |
-- |
(45,065) |
(7,343) |
Proceeds from exercise of share options |
-- |
-- |
-- |
3,161 |
-- |
-- |
Payment for repurchase of shares |
-- |
(6,280) |
(1,023) |
(10,185) |
(37,923) |
(6,179) |
|
|
|
|
|
|
|
Net cash used in financing
activities |
(5,305) |
(21,319) |
(3,474) |
(7,472) |
(34,745) |
(5,661) |
|
|
|
|
|
|
|
Net decrease in cash |
(17,175) |
(50,873) |
(8,289) |
(40,051) |
(197,101) |
(32,114) |
|
|
|
|
|
|
|
Cash at beginning of the
period |
520,475 |
357,214 |
58,203 |
551,491 |
504,506 |
82,202 |
|
|
|
|
|
|
|
Effect of foreign exchange rate
changes |
1,206 |
(854) |
(139) |
(6,934) |
(1,918) |
(313) |
|
|
|
|
|
|
|
Cash at June 30 |
504,506 |
305,487 |
49,775 |
504,506 |
305,487 |
49,775 |
|
|
|
|
|
|
|
Appendix IV |
Le Gaga Holdings Limited |
Reconciliation of Non-IFRS
adjusted cost of inventories sold to cost of inventories sold |
For the three months and
twelve months ended June 30, 2012 and 2013 |
|
|
Three Months Ended June
30, |
Twelve Months Ended June
30, |
|
2012 |
2013 |
2012 |
2013 |
|
RMB |
RMB |
US$ |
RMB |
RMB |
US$ |
|
(In thousands) |
Cost of inventories sold |
(107,983) |
(127,769) |
(20,818) |
(457,087) |
(494,235) |
(80,528) |
Less: biological assets fair value
adjustment |
61,963 |
61,835 |
10,075 |
285,137 |
283,170 |
46,138 |
|
|
|
|
|
|
|
Adjusted cost of inventories sold |
(46,020) |
(65,934) |
(10,743) |
(171,950) |
(211,065) |
(34,390) |
|
|
|
|
|
|
|
Appendix V |
Le Gaga Holdings Limited |
Reconciliation of Non-IFRS
adjusted profit for the period to (loss)/profit for the period |
For the three months and
twelve months ended June 30, 2012 and 2013 |
|
|
Three Months Ended June
30, |
Twelve Months Ended June
30, |
|
2012 |
2013 |
2012 |
2013 |
|
RMB |
RMB |
US$ |
RMB |
RMB |
US$ |
|
(In thousands) |
(Loss)/profit for the period |
(8,464) |
(13,035) |
(2,124) |
141,724 |
153,136 |
24,951 |
|
|
|
|
|
|
|
Add: |
|
|
|
|
|
|
Non-cash share-based compensation |
4,192 |
1,011 |
165 |
22,778 |
7,999 |
1,303 |
Impairment losses from property, plant
and equipment and prepayments |
-- |
-- |
-- |
14,823 |
-- |
-- |
Net impact of biological assets fair
value adjustment |
38,999 |
43,616 |
7,106 |
11,409 |
5,666 |
923 |
|
|
|
|
|
|
|
Adjusted profit for the period |
34,727 |
31,592 |
5,147 |
190,734 |
166,801 |
27,177 |
|
|
|
|
|
|
|
Appendix VI |
Le Gaga Holdings Limited |
Reconciliation of Non-IFRS
adjusted EBITDA to (loss)/profit for the period |
For the three months and
twelve months ended June 30, 2012 and 2013 |
|
|
Three Months Ended June
30, |
Twelve Months Ended June
30, |
|
2012 |
2013 |
2012 |
2013 |
|
RMB |
RMB |
US$ |
RMB |
RMB |
US$ |
|
(In thousands) |
(Loss)/profit for the period |
(8,464) |
(13,035) |
(2,124) |
141,724 |
153,136 |
24,951 |
Add: |
|
|
|
|
|
|
Amortization of lease prepayments |
14 |
14 |
2 |
75 |
56 |
9 |
Depreciation |
18,065 |
26,718 |
4,353 |
68,621 |
91,647 |
14,933 |
Finance costs |
4,046 |
3,472 |
566 |
10,786 |
13,017 |
2,121 |
Income tax expense |
128 |
(2,225) |
(363) |
4,543 |
(1,840) |
(300) |
Non-cash share-based
compensation |
4,192 |
1,011 |
165 |
22,778 |
7,999 |
1,303 |
Impairment losses from property, plant
and equipment and prepayments |
-- |
-- |
-- |
14,823 |
-- |
-- |
Biological assets fair value adjustment
included in cost of inventories sold |
61,963 |
61,835 |
10,075 |
285,137 |
283,170 |
46,138 |
Less: |
|
|
|
|
|
|
Finance income |
(909) |
(3,397) |
(553) |
(8,556) |
(8,382) |
(1,366) |
Changes in fair value less costs to sell
of biological assets |
(22,964) |
(18,219) |
(2,969) |
(273,728) |
(277,504) |
(45,215) |
|
|
|
|
|
|
|
Adjusted EBITDA |
56,071 |
56,174 |
9,152 |
266,203 |
261,299 |
42,574 |
CONTACT: For further information, please contact:
PRChina
Jane Liu
Tel: (852) 2522 1838
Email: jliu@prchina.com.hk
Henry Chik
Tel: (852) 2522 1368
Email: hchik@prchina.com.hk
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