RNS Number : 0697C
EBT Mobile China PLC
27 August 2008
For immediate Release 27 August 2008
EBT Mobile China plc
("EBT" or "the Company")
Interim Results for the Six Months ended 30 June 2008
EBT Mobile China plc (AIM: EBT), a leading China-based retailer of mobile phone
products and services, is pleased to announce its interim results for the six months
ended 30 June 2008.
Key Highlights
* EBT is on track to generate a modest adjusted net profit (1) for the full year 2008
* Adjusted operating loss (1) of RMB3.4m (�0.2m) (H1 2007: RMB7.7m, �0.6m)
* Loss after tax narrowed to RMB0.7m (�0.1m) (H1 2007: RMB9.9m, �0.7m)
* Gross margin improved to 12.6% (H1 2007: 10.7%), reflecting an increasing proportion of non-phone sales and service revenue
* Cash and cash equivalents of RMB92.6m (�6.8m) (2) as at 30 June 2008
* Number of stores at period end up by 9% to 259 (H1 2007: 238)
* National footprint increased to 28 cities (H1 2007: 26)
* Revenue of RMB302.0m (�22.1m) (H1 2007: RMB317.0m, �23.2m)
Zhang Ge, CEO of EBT said, "EBT faced a number of challenges in the first half of 2008 and as a result we have adjusted our aggressive
expansion programme to focus on operational improvements. These efforts produced a much improved operating margin in the first half as well
as providing a solid base for future progress. EBT is on track to generate a modest adjusted profit for the full year."
For the six months ended 30 June
2008 2008 2007 2007 %
(RMB' (�'m) (RMB' chan
(�'m) m) m) ge
Revenue 22.1 302.0 23.2 317.0 - 5
Gross profit 2.8 38.2 2.5 33.9 +12
Gross margin 12.6% 12.6% 10.7% 10.7% +17
Adjusted operating loss (1) (0.2) (3.4) (0.6) (7.7)
Operating loss (0.3) (4.0) (1.0) (13.6)
Adjusted loss after tax (1) (0.0) (0.1) (0.3) (4.0)
Loss after tax (0.1) (0.7) (0.7) (9.9)
EPS 0p 0fen (0.4)p (5)fen
Cash (2) 6.8 92.6 9.2 126.5
Note: figures in � are for illustrative purposes only, all translated using the RMB:� exchange rate of 13.6836 as at 30 June 2008.
(1) Figures before adjusted items, include share-based payments, exchange difference, financial guarantee, contingent liabilities,
investment loss in a joint venture and acquisition costs. The total figures of adjusted items are RMB0.6m in 2008 (H1 2007:
RMB5.9m).
(2) Cash figures exclude a restricted deposit of RMB45.2m in 2008, �3.3m (2007: RMB33.5m, �2.4m) for standby letters of credit, which
is disclosed under deposits and prepayments.
For more information contact:
Terry Garrett / Stephanie Badjonat / John Moriarty
Weber Shandwick Financial 020 7067 0700
Aubrey Powell / Giles Stewart / Adam Pollock
Panmure Gordon (UK) Limited 020 7459 3600
The contents of this Press Release may contain forward-looking statements which can be generally identified as such because the context
of the statement will include the words such as EBT "expects", "should", "believes", "anticipates" or words of similar import. Such forward
looking statements are subject to certain risks and uncertainties including the financial performance of EBT which could cause actual
results, performance or achievements of EBT to differ materially from any future results, performance or achievements expressed or implied
by such forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements.
Business Overview
As indicated in the trading update announced on 12 July 2008, there have been a number of challenging factors, largely outside the
Group's control, that restrained our sales performance in the six months to 30 June 2008 including several well-publicised natural disasters
in China. Yet, despite a small decline in revenue, the Group has made significant progress in improving its overall operating performance
in the period whilst achieving further growth in its store network.
Having faced a tougher trading environment since the second half of 2007, the Board adjusted our strategy from an aggressive expansion
programme to drive volume, to one focused upon operational improvements to enhance margins. We continue to see the benefits of this strategy
in our operating performance and to believe that this approach will establish a more stable base for future development. As a result of
this strategy, the Group has moved to break-even at the adjusted level in the first half and the Board expects the Group to achieve
profitability on an adjusted basis in the second half of the year.
This performance was underpinned by focused internal operational improvements including incentivising our management teams at the local
level to provide quality improved customer solutions, value added services, after-sales service and category management. Further
developments to the Group's internal management information systems and supply chain management were implemented.
Our strategy of focusing on gross margin rather than volume-driven discounting has generated progressive business activity during these
challenging market conditions. As a result of all these initiatives we have increased our margins on non-phone sales and service revenues.
In addition, our "Win with Winners" strategy continues to bear fruit; we maintain strong relationships with our existing major partners
such as Carrefour, Metro, China Mobile and Nokia. These partners are also adjusting their operation strategies to fit into the current
economy environment and the forthcoming development of 3G.
Further to the announcement made in December 2007 and confirmed in July's trading update, the Company remains in talks with the party
from which it received an initial takeover approach. While discussions are ongoing and constructive, the Company now considers that any
transaction resulting from these talks is likely to result, if it were to proceed, in a corporate transaction other than a takeover.
The Company, together with a committee of non executive directors (the "Committee"), is also considering the feasibility and
desirability from a shareholder perspective of a partial tender for the majority of the Company's shares not already owned by certain
controlling shareholders (principally Audley Capital, Gartmore, James Reiman and senior management). To the extent possible, the Company and
the Committee expects to consult with shareholders through its broker before embarking on such a course of action, which would be a related
party transaction under the AIM Rules by virtue of the substantial holdings of each of the controlling shareholders above and Mr. Reiman's
position as a director of the Company.
There can be no certainty of any corporate transaction taking place. Further announcements will be made in due course as appropriate.
Financial Performance
In the six months to 30 June 2008, revenue was RMB302.0m (H1 2007: RMB317.0) which is the equivalent of �22.1m note (H1 2007 �23.2m).
Factors which effected top-line growth included several well-publicised natural disasters in China during the first half of 2008.
Gross profit for the period increased by 12.7% to RMB38.2m (H1 2007: RMB33.9m) or �2.8m (H1 2007: �2.5m). Operational improvements and
an increasing proportion of non-phone sales and service revenue have helped to increase gross margins to 12.6% in the first half, compared
to 10.7% in the same period of 2007.
Excluding the effect of adjusted items, like share-based payments, exchange rate difference, financial guarantee, contingent
liabilities, investment loss in a joint venture and acquisition cost, the loss after tax was RMB0.1m (H1 2007: RMB4.0m). The loss for the
period after adjusted items was RMB0.7m (H1 2007:RMB9.9m) or �0.1m (H1 2007: �0.7m).
The balance sheet remains strong as at 30 June 2008. Cash and cash equivalents amounted to RMB92.6m (H1 2007: RMB126.5m) equivalent to
�6.8m (H1 2007: �9.2m), excluding restricted cash. This cash balance is reduced by the timing effects of certain working capital movements
within the six months to June 2008, which are expected to reverse in the second half, with the result that management expects an improved
working capital at the end of 2008.
Note: figures in � are for illustrative purposes only, all translated using the RMB:� exchange rate of 13.6836 as at 30 June 2008.
Outlook
EBT faced a number of challenges in the first half of the year but we adapted our strategy to the changing environment and continued to
make good progress towards our goal of attaining profitability. As our business continues to expand and gain critical mass, we are
increasingly seeing the benefits of our scale, in cost terms.
Many of the challenges we have faced are, in the Board's view, temporary, and we believe that the outlook for the Chinese mobile phone
market remains extremely positive. We will continue to selectively grow our store footprint in what is the world's largest wireless
telecommunications market. Leading wireless providers are set to invest heavily to provide 3G services, the introduction of which will
bring the market to the next stage and provide substantial additional growth opportunities in due course.
While the near term environment is likely to remain challenging, the Board considers its operational systems and profit focused strategy
to be appropriate to consolidating the Group's position. The Board therefore retains its positive outlook for the prospects of the Group
and believes EBT is well placed to become China's leading end to end provider of wireless products and services.
EBT MOBILE CHINA PLC
UNAUDITED CONSOLIDATED INCOME STATEMENT
FOR THE SIX MONTHS ENDED 30 JUNE 2008
Six months ended 30 Six months ended 30 Jun
Jun 2008 2007 Year ended 31 Dec 2007
RMB'000 RMB'000 RMB'000
CONTINUING OPERATIONS
Revenue 301,988 316,971 628,084
Cost of sales (263,819) (283,092) (554,038)
Gross profit 38,169 33,879 74,046
Other operating income 2,073 14 4,077
Distribution costs (31,755) (26,990) (66,465)
Administrative expenses (12,510) (20,533) (32,399)
Share of losses of a joint - - (500)
venture
Operating loss before (4,023) (13,630) (21,241)
financial guarantee
Financial guarantee - - 1,204
Operating loss (4,023) (13,630) (20,037)
Finance costs - - (23)
Investment revenues 3,347 3,756 7,454
Loss before tax (676) (9,874) (12,606)
Taxation - - -
Loss for the year (676) (9,874) (12,606)
Attributable to equity holders (676) (9,874) (12,606)
of the parent
RMB RMB RMB
Loss per share
Basic 0.00 (0.05) (0.06)
UNAUDITED CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE
FOR THE SIX MONTHS ENDED 30 JUNE 2008
Six months ended 30 Six months ended 30 Year ended 31 Dec
Jun 2008 Jun 2007 2007
RMB'000 RMB'000 RMB'000
Exchange differences on (9,127) 676 (7,713)
translation of foreign
operations and net gain/(loss)
recognised directly in equity
Loss for the year (676) (9,874) (12,606)
Total recognised income and (9,803) (9,198) (20,319)
expense for the year
Attributable to equity holders (9,803) (9,198) (20,319)
of the parent
EBT MOBILE CHINA PLC
UNAUDITED CONSOLIDATED BALANCE SHEET
AS AT 30 JUNE 2008
As at 30 As at 31
Jun 08 Dec 2007
RMB'000 RMB'000
Non-current assets
Investment in subsidiaries - -
Other intangible assets 959 2,111
Property, plant and equipment 4,242 3,924
5,201 6,035
Current assets
Inventories 52,033 52,339
Trade receivables 60,932 48,332
Other receivables 22,533 6,326
Cash and cash equivalents 92,639 132,415
Deposits and prepayments 54,287 56,878
Prepaid taxes 136 32
Amounts due from related parties - 2,800
282,560 299,122
TOTAL ASSETS 287,761 305,157
Current liabilities
Trade payables 18,130 19,673
Notes payables 6,116 14,839
Accruals and other payables 7,453 6,905
Provisions 909 969
Other tax liabilities 2,794 1,745
35,402 44,131
Net current assets 247,158 254,991
Total liabilities 35,402 44,131
NET ASSETS 252,359 261,026
EQUITY
Share capital 53,609 53,609
Share premium account 288,170 288,170
Other reserves 81,543 89,534
Retained losses (170,963) (170,287)
TOTAL EQUITY 252,359 261,026
EBT MOBILE CHINA PLC
UNAUDITED CONSOLIDATED CASHFLOW
FOR THE SIX MONTHS ENDED 30 JUNE 2008
Six months ended 30 Six months ended 30 Year ended 31 Dec
Jun 2008 Jun 2007 2007
RMB'000 RMB'000 RMB'000
CASH FLOWS FROM OPERATING
ACTIVITIES
Loss before tax from (676) (9,874) (12,606)
continuing operations
Adjustments for:
Loss/(gain) on disposals of - - 500
discontinued operation
Depreciation of property, 423 370 778
plant and equipment
Amortisation of intangible 1,714 2,776 5,536
assets
Impairment of intangible (555) - 789
assets
Share-based payments expense 1,136 970 2,872
Loss/(gain) on disposals of 5 14 16
property, plant and equipment
Allowances for doubtful - - (3,747)
debts
Finance costs - - 23
Interest income (3,347) (3,778) (7,454)
Net foreign exchange loss (1,687) 1,335 (2,481)
Operating cash flows before (2,987) (8,187) (15,774)
movements in working capital
(Increase)/decrease in 306 (16,542) 6,404
inventory
(Increase)/decrease in trade (12,600) (11,941) 4,155
receivables
(Increase)/decrease in other (16,207) (11,079) (2,102)
receivables
(Increase)/decrease in 2,591 (6,846) 19,273)
deposits and prepayments
(Increase)/decrease in 2,800 - -
amounts due from a related
party
Increase/(decrease) in (104) 1,787 1,755
prepaid taxes
Increase/(decrease) in trade (1,543) 5,180 (5,134)
payables
Increase/(decrease) in notes (8,723) 2,773 (4,620)
payables
Increase/(decrease) in 548 7,668 2,048
accruals and other payables
Increase/(decrease) in (60) 30 (1,299)
provisions
Increase/(decrease) in other 1,049 (2,419) (474)
tax liabilities
Cash generated from/(used in) (34,930) (39,576) (34,314)
operations
Interest paid - - (23)
Income tax paid - 474 (470)
Net cash generated from/(used (34,930) (39,102) (34,807)
in) operating activities
EBT MOBILE CHINA PLC
UNAUDITED CONSOLIDATED CASHFLOW
FOR THE SIX MONTHS ENDED 30 JUNE 2008
Six months ended 30 Six months ended 30 Year ended 31 Dec 2007
Jun 2008 Jun 2007
RMB'000 RMB'000 RMB'000
CASH FLOWS FROM INVESTING
ACTIVITIES
Interest received 3,347 3,778 7,454
Proceeds on disposal of 44 79 84
property, plant and equipment
Purchase of property, plant (790) (1,062) (2,241)
and equipment
Purchase of intangible assets (7) - -
Business combination - (685) (900)
Acquisition of a joint venture - (2,500) (2,500)
Proceeds on disposal of - - * 2,000
investment in a joint venture
Net cash generated from/(used 2,594 (390) 3,897
in) investing activities
CASH FLOWS FROM FINANCING
ACTIVITIES
New bank loans raised - - 9,000
Repayments of borrowings - - (9,000)
Proceeds on issue of shares - 113,650 115,652
Net cash from financing - 113,650 115,652
activities
NET INCREASE IN CASH AND CASH (32,336) 74,158 84,742
EQUIVALENTS
CASH AND CASH EQUIVALENTS AT 132,415 52,959 52,959
BEGINNING OF YEAR
Effect of foreign exchange (7,440) (660) (5,286)
rate change
CASH AND CASH EQUIVALENTS AT 92,639 126,457 132,415
END OF YEAR
EBT MOBILE CHINA PLC
NOTES TO THE UNAUDITED INTERIM ACCOUNTS
FOR THE SIX MONTHS ENDED 30 JUNE 2008
The main accounting policies that were adopted by EBT were as follows.
Basis of Accounting
The financial information set out in the Preliminary Announcement does not constitute statutory accounts within the meaning of Section
240 of the Companies Act 1985, but is derived from those accounts. While the financial information in this Preliminary Announcement has been
prepared in accordance with International Financial Reporting Standards (IFRS) adopted for use in the European Union and therefore complies
with Article 4 of the EU IAS Regulation, this announcement does not itself contain sufficient information to comply with IFRS. Statutory
accounts for the year ended 31 December 2007 have been delivered to the Registrar of Companies.
Business Combinations
The acquisition of subsidiaries is accounted for using the Purchase Method. Where an entity whose shares have been acquired (the legal
subsidiary) is deemed to be the acquirer and the entity issuing shares (the legal parent) is deemed to be the acquiree, the transaction is
termed a reverse acquisition under the requirements of IFRS3 Business Combinations.
Presentation Currency
The individual financial statements of each Group company are presented in the currency of the primary economic environment in which it
operates (its functional currency). For the purpose of the consolidated financial statements, the results and financial position of each
Group company are expressed in Renminbi (RMB), which is the presentation currency for the consolidated financial statements.
Revenue Recognition
Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods and
services provided in the normal course of business, net of discounts and other sales-related tax. Sales of mobile phone handsets and phone
cards are recognised when goods are delivered and title has passed. Where the Group recognises revenue through the sale of goods out of
retail stores within department stores and hypermarkets, the revenue is recognised at the gross value billed to the customer rather than the
net value retained after costs incurred with the department stores and hypermarkets. Where the Group recognises revenue through the sale of
goods out of stores within the China Mobile service halls, the revenue is recognised at the gross value billed to China Mobile rather than
the net value retained after costs incurred with China Mobile.
Share-Based Payments
The Group has applied the requirements of IFRS 2 Share-based Payments. In accordance with the transitional provisions, IFRS 2 has been
applied to all grants of equity instruments after 7 November 2002 that were unvested at 1 January 2005. The Group issues equity-settled
payments to certain employees. Equity-settled share-based payments are measured at fair value (excluding the effect of non market-based
vesting conditions) at the date of grant. The fair value determined at the grant date of the equity-settled share-based payments is expensed
on a straight-line basis over the vesting period, based on the Group's estimate of shares that will eventually vest and adjusted for the
effect of non market-based vesting conditions.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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