Final Results
GruppeM Investments PLC
15 August 2007
15 August 2007
GruppeM Investments PLC
(LSE: GRP, 'GruppeM' or the 'Company')
Preliminary results for the 17 months ended 31 December 2006
GruppeM Investments PLC, the retailer of luxury motor cars in China, announces
its unaudited preliminary results for the 17 months ended 31 December 2006.
Operational highlights:
• 4th largest Porsche dealer in the Chinese market by volume
• 278 Porsche cars ordered and 222 cars delivered by the Qingdao dealership
in the period
• Second Porsche dealership planned to open in September in Jinan - the
capital of Shandong region
• Increasing consumer demand for luxury sports cars
• Significant post-balance sheet event: appointed as the only distributor of
Aston Martin motor cars for Mainland China in August 2007
Financial highlights:
• Revenues of £12.3 million (2005 restated: £0.12 million)
• Loss before tax of £0.84 million (2005 restated: £0.56 million)
• Loss per share 2.87p (2005 restated: 5.70p)
Commenting on the results, Kenny Chen, Chief Executive Officer, said:
'These results reflect our first significant period of trading and therefore
take into account the substantial set-up costs associated with the formation of
a luxury motor car retailing operation in China. The high quality of the
investment we have made, both in terms of premises and personnel, will enable
the Company to take full advantage of the exciting opportunities which exist
within this fast-growing market. Demand for Porsche cars throughout the
Shandong region remains very strong and believe we are now in a sound position
to replicate the success of our Qingdao dealership in the region's capital
Jinan. The appointment of GruppeM Investments PLC as the only distributor of
Aston Martin motor cars in Mainland China will diversify our brand offering as
well as our revenue generating operations. We are looking forward to partnering
the premier British luxury motor manufacturer in one of the world's fastest
growing luxury car markets. This will assist in our goal to become the leading
supplier of luxury motor cars in China and ensure the Company is in an excellent
position to capture a greater share of a large market.'
Enquiries:
GruppeM Investments PLC Shore Capital and Corporate Limited
Kenny Chen Alex Borrelli/Pascal Keane
Tel: +44 (0) 207 233 2952 Tel: +44 (0) 207 408 4090
CHAIRMAN'S STATEMENT
Background
GruppeM Investments PLC's initial annual report covered the period from its
incorporation on 16 July 2004 to 31 July 2005. The comparative period shown in
the financial statements below is therefore from 16 July 2004 to 31 July 2005.
We have since changed our accounting reference date from 31 July to 31 December,
to bring it into line with our Chinese trading operations. This means that the
results below are for a 17-month accounting period from 1 August 2005 to 31
December 2006.
GruppeM Investments PLC was floated on the AIM market in February 2005 and
remained a cash shell until the reverse takeover of GruppeM Hong Kong Limited in
October 2006. GruppeM Hong Kong Limited is a Hong Kong based holding company
with two Chinese based subsidiaries operating a Porsche franchise in the
Shandong region of China. It was incorporated on 1 February 2005 and was wholly
owned and controlled by Pinocelle S.A. - a nominee company of Kenny Chen.
Therefore, the reverse acquisition was deemed a related-party transaction as
both GruppeM Investments PLC and GruppeM Hong Kong Limited were under the common
control of Kenny Chen. Accordingly, the consolidated figures presented below
have been prepared under merger accounting rules, i.e., the financial statements
of GruppeM Investments PLC and GruppeM Hong Kong Limited have been aggregated
and presented as if the two companies had been part of the same group since
incorporation.
Financial timetable
Further to our announcement on 13 June 2007, the results for the 17-month period
to 31 December 2006 have been delayed due to the audit of our Chinese
subsidiaries being interrupted by a routine but random audit by the Chinese tax
authority. Also, further to our announcement on 13 June 2007 following the
engagement of PricewaterhouseCoopers China to perform the audit of our
subsidiaries in China, PricewaterhouseCoopers UK has advised us that, it is
unable to accept the appointment in the UK (for the Group as a whole) due to
certain client acceptance procedures. Therefore, the results below are
unaudited. Following this major setback to our timetable we are currently in
discussions with several other audit firms with a view to releasing the annual
report and accounts by the end of October 2007. Our unaudited interim
statements for the 6 months ended 30 June 2007 will be released by the end of
September 2007. It is expected that the share suspension will be lifted, and
trading in the Company's shares will resume, following the posting of the annual
report and accounts at the end of October 2007.
Results
The Group has grown rapidly in the 17-month start-up period to 31 December 2006.
Turnover increased significantly to £12.3 million (period to 31 July 2005:
£0.12 million). The pre-tax loss from operations for the period was £0.84
million against a loss of £0.56 million for the period to 31 July 2005. Losses
per share were 2.87 pence (2005: 5.70 pence). The directors will not be
recommending the payment of a dividend until such time as the Group reaches an
appropriate level of profitability.
Porsche car sales from our Qingdao dealership were strong with 278 cars ordered
and 222 cars delivered in the period with healthy margins earned. Of the 222
cars sold, 91% were the large four-wheel-drive Cayenne model, however, demand
for the sports cars range is strengthening as the market becomes more aware of
the Porsche brand and heritage. Sales of Porsche cars remain strong with no
signs of slowing. Demand continues to outstrip supply, with a waiting time of
approximately 6 months from the customer placing the order to receiving the car.
We are delighted that GruppeM Hong Kong Limited has now signed a formal
dealership agreement with Porsche China. This replaces the letter of intent
under which the Qingdao dealership was operating until March 2007.
Trading in the first half of 2007 has been brisk with the strong demand seen at
the end of 2006 continuing into this year. As a result, the board is confident
of delivering enhanced shareholder value for the financial year ending 31
December 2007 as the business expands with future dealerships.
Market prospects
China's economy continues to grow strongly - recording double digit growth
(11.9%) for the fifth year in a row - and is poised to overtake Germany as the
third largest economy in the world within the next year.
In 2006 the Chinese automobile market became the second largest in the world
with sales of 7.2 million. Sales of luxury cars increased by 25.1% over the
previous year to 320,000 (China Association of Auto Manufacturers). According
to China View, 'sales of luxury cars are booming and top luxury automakers see
China as an increasingly important market'.
The latest statistics released by the Chinese Ministry of Public Security on 4
June 2007 show that, in the first 5 months of 2007, the number of private cars
increased by 16 per cent. to 13.4 million. It is anticipated that sales volume
in the Chinese market will overtake the USA by 2010.
Board changes
There have been several board changes in the period. I took over from Lord
Marsh as Chairman, following the reverse acquisition of GruppeM Hong Kong
Limited in October 2006 and Peter Kent joined the board shortly afterwards.
Julian Hardy also joined us as sales director at the time of the acquisition.
Marvin Tien and Paul McIlwaine, our finance director, resigned during the
period. We are currently interviewing suitable candidates to replace Paul and
hope to make an announcement of his replacement in the near future. In June
this year we were all saddened by the news that Stephen Chen had passed away
after a long illness. We send our condolences to his wife and family.
Strategy
The board is aiming to expand the business both organically, by increasing our
Porsche retailing footprint in the Shandong region, and by partnering other
premium brand manufacturers in order to distribute luxury cars throughout
Mainland China.
The Shandong region, with a population of approximately 92 million, is located
on the burgeoning east coast of China between Beijing and Shanghai. In
September 2007 the Company is planning to open a further Porsche dealership in
the region's capital Jinan. Jinan has a population of 5.9 million, compared to
Qingdao with 7.2 million, and its information technology related economic output
ranks number 4 in China.
The Company is also in high-level discussions with other luxury car
manufacturers with a view to diversifying: our geographical market (to include
the whole of Mainland China); our operations (to include luxury car distribution
as well as retail); and our brand offering.
I am delighted to announce the recent appointment of GruppeM Investments PLC as
the only distributor of Aston Martin motor cars in Mainland China. This
represents a fantastic opportunity for both parties to take full advantage of
this exciting marketplace. We are confident that the combination of Britain's
finest luxury sporting cars manufacturer, and our expertise in the Chinese car
market, will pay great dividends and we look forward to a long and successful
future together.
The board believes that the Company is in a position of strength to capitalise
on the current opportunities within the Chinese luxury car market in order to
grow the business, and shareholder value, rapidly.
I would like to thank all our employees for their contribution to our success
and their support during the Company's early high-growth stage.
Don McCrickard
Chairman
15 August 2007
GRUPPEM INVESTMENTS PLC
Consolidated income statement for the 17 months ended 31 December 2006
17 months Period from
ended 31 16 July 2004
December 2006 to 31 July
2005
Unaudited
Restated
Unaudited
Note £ £
Revenue 12,285,042 121,130
Cost of sales (11,647,383) (193,425)
Gross profit 637,659 (72,295)
Distribution expenses (212,940) (1,487)
Administrative expenses (1,314,707) (347,615)
Exceptional items 2 - (142,512)
(Loss) / profit from operations before interest (889,988) (563,909)
Finance income and expense (net) (920) (6)
(Loss) / profit for the period before taxation (890,908) (563,915)
Tax 46,058 -
(Loss) / profit for the period (844,850) (563,915)
(Loss ) / earnings per share expressed in pence per share 3
- Basic (2.87)p (5.70)p
- Diluted (2.83)p (5.70)p
Statement of recognised income and expense for the 17 months ended 31 December
2006
17 months Period from 16
ended 31 July 2004 to 31
December2006 July 2005
Unaudited Restated
Unaudited
£ £
(Loss) / profit for the financial year (844,850) (563,915)
Exchange adjustments (40,712) 1,935
Total recognised income and expense for the year (885,562) (561,980)
All amounts relate to continuing activities.
GRUPPEM INVESTMENTS PLC
Consolidated balance sheet as at 31 December 2006
Notes As at As at
31 December 31 July
2006 2005
Unaudited Restated
Unaudited
£ £
Assets
Non-current assets
Property, plant and equipment 345,795 108,492
Deferred tax asset 56,246 -
402,041 108,492
Current assets
Inventory 886,825 -
Trade and other receivables 2,969,120 294,710
Cash and cash equivalents 132,350 135,733
3,988,295 430,443
Total assets 4,390,336 538,935
Liabilities
Current liabilities
Current tax payable (11,640) -
Trade and other payables (5,262,005) (722,785)
(5,273,645) (722,785)
Non-current liabilities
Director's loan account (577,556) -
Other loan (19,877) -
Related party loan (182,000) (182,000)
(779,433) (182,000)
Total liabilities (6,053,078) (904,785)
Capital and reserves
Share capital 4 (1,000,000) (200,000)
Merger reserve 5 1,392,156 -
Foreign operation translation reserve (38,777) 1,935
Convertible loan (99,402) -
Retained loss 5 1,408,765 563,915
1,662,742 365,850
Total equity and liabilities (4,390,336) (538,935)
GRUPPEM INVESTMENTS PLC
Consolidated cash flow statement for the 17 months ended 31 December 2006
17 months Period from 16
ended 31 July 2004 to 31
December 2006 July 2005
Unaudited Restated
Unaudited
£ £
Cash flow from operating activities
(Loss) / profit from operating activities (889,988) (563,909)
Adjustments for:
Depreciation 36,710 125
Forex adjustment on property, plant and equipment 6,622 -
Net cash flow from operating activities before changes in working (846,656) (563,784)
capital
Increase in inventories (886,825) -
Increase in payables 4,539,220 722,785
Increase in receivables (2,674,410) (294,710)
Net cash flow from operating activities before interest and 131,329 (135,709)
taxation paid
Interest paid (16,594) (6)
Taxation received 1,452 -
Net cash flow from operating activities 116,187 (135,715)
Investing activities
Purchase of property, plant and equipment (280,635) (7,834)
Assets under construction - (100,783)
Interest received 76 -
Net cash flow from investing activities (280,559) (108,617)
Financing activities
Proceeds from issue of ordinary shares - 200,000
Cost of share issue (592,156) -
Issue of convertible loan notes 115,000 -
Director's loan 577,556 -
Other loan 19,877 -
Related party loan - 182,000
Net cash flow from financing activities 120,277 382,000
Net (decrease) / increase in cash and cash equivalents in the (44,095) 137,668
period
Cash and cash equivalents at the beginning of the year 135,733 -
Effect of foreign exchange rate changes on cash and cash 40,712 (1,935)
equivalents
Cash and cash equivalents at the end of the year 132,350 135,733
NOTES TO THE PRELIMINARY ANNOUNCEMENT
1. Basis of preparation
The financial information set out in this announcement does not constitute
Statutory Accounts within the meaning of Section 240(5) of the Companies Act
1985. The statutory accounts have not been delivered to the Registrar of
Companies but will be delivered in due course.
Adoption of IFRS for the 17 months ended 31 December 2006
The financial statements have been prepared in accordance with EU Endorsed
International Financial Reporting Standards ('IFRS') and the Companies Act 1985
applicable to companies reporting under IFRS. In the current period GruppeM
Investments PLC and its subsidiaries ('the Group') has adopted all of the
standards and interpretations issued by the International Accounting Standards
Board and the International Financial Reporting Interpretations Committee that
are relevant to its operations and effective for the Group's financial period
beginning on 1 August 2005.
As at the date of approval of these consolidated financial statements, the
following interpretations were in issue but not yet effective:
• IFRS 7, Financial Instruments: Disclosures;
• IFRS 8, Operating Segments;
• IFRIC 8, Scope of IFRS 2;
• IFRIC 9, Reassessment of embedded derivatives;
• IFRIC 10, Interim Financial Reporting and Impairment;
• IFRIC 11, IFRS 2: Group and Treasury share transactions; and
• IFRIC 12, Service concession arrangements.
The directors do not anticipate that the adoption of these interpretations in
future reporting periods will have a material impact on the Group's results.
Basis of consolidation
The consolidated financial statements consist of GruppeM Investments PLC and its
subsidiaries. All intra-group transactions have been excluded. The
consolidated financial statements of GruppeM Investments PLC have been prepared
under merger accounting rules. This means that the financial statements of
GruppeM Investments PLC, and its wholly owned subsidiary GruppeM Hong Kong
Limited, have been aggregated and presented as if the two companies have always
formed a group.
Accordingly, although GruppeM Investments PLC acquired the entire share capital
of GruppeM Hong Kong Limited on 25 October 2006, the results for both companies
are reflected in the Group financial statements for the whole of the 17-month
period ended 31 December 2006 and the comparatives are presented on the same
basis. The reason being that due to common ownership of the respective entities,
the business combination falls outside the scope of IFRS 3.
Where necessary, adjustments are made to the financial statements of the
subsidiaries to bring their accounting policies into line with those used by
other members of the Group. All intra-group transactions, balances, income and
expenses are eliminated on consolidation.
2. Exceptional expenses
These expenses, in the prior year, relate to legal and professional expenses
arising through the listing on AIM in February 2005, including the preparation
of an AIM admission document.
3. Loss per ordinary share
Basic earnings per share is calculated by dividing the earnings attributable to
ordinary shareholders by the weighted average number of ordinary shares
outstanding during the year.
In order to calculate diluted earnings per share, the weighted average number of
ordinary shares in issue is adjusted to assume conversion of all dilutive
potential ordinary shares according to IAS 33. Dilutive potential ordinary
shares include convertible loan notes.
2006 2005
Weighted Per share Weighted Per share
average amount average amount
number of number of
shares shares
Loss Loss
£ pence £ pence
Basic EPS
Loss attributable to ordinary (844,850) 29,411,765 (2.87) (563,915) 9,895,350 (5.70)
shareholders
Convertible loan note - 405,882 - - - -
Diluted EPS (844,850) 29,817,647 (2.83) (563,915) 9,895,350 (5.70)
4. Share capital
2006 2006 2005 2005
No. £ No. £
Authorised:
Ordinary shares of 1p each 200,000,000 2,000,000 100,000,000 1,000,000
Issued and fully paid:
Ordinary shares of 1p each 100,000,000 1,000,000 20,000,000 200,000
Shares issued during the year
Ordinary shares
No. Exercise / share £
issue price
At 31 July 2005 20,000,000 200,000
Acquisition of subsidiary 80,000,000 1p 800,000
At 31 December 2006 100,000,000 1,000,000
On 25 October 2006 the Company issued 80,000,000 new ordinary shares of 1p each
to Pinocelle S.A. for GruppeM Hong Kong. The reverse acquisition has been
recognised under the principles of merger accounting.
5. Movement on reserves
The merger reserve represents a reserve arising on consolidation, being the
share capital and share premium account balances of GruppeM Hong Kong Limited at
1 Februay 2005, i.e., its date of incorporation less the nominal value of the
shares issued by the Company to acquire the shares, reflecting the position as
if the merger had occurred on 1 February 2005.
Group Foreign currency
translation
reserve
Merger reserve Retained
earnings
£ £ £
At 16 July 2004 - - -
Loss for the year (563,915)
Foreign exchange loss on translation 1,935
Share issue expenses -
Elimination of share capital -
At 31 July 2005 - 1,935 (563,915)
Loss for the year (844,850)
Foreign exchange gain on translation (40,712)
Share issue expenses 592,156
Arising on share issue (3,200,000)
Reversal of investment 4,000,000
At 31 December 2006 1,392,156 (38,777) (1,408,765)
Circulation to shareholders
The annual report and accounts will be posted to shareholders in due course and
will be available to the public from the Company's registered office at GruppeM
Investments PLC, Suite 1.3 Buckingham Court, 78 Buckingham Gate, London, SW1E
6PD.
For more information please contact:
GruppeM Investments PLC
Kenny Chen
Tel: +44 (0) 207 233 2952
Shore Capital and Corporate Limited
Alex Borrelli
Pascal Keane
Tel: +44 (0) 207 408 4090
Further information on GruppeM Investments PLC can be found on the Company's
website: www.gruppemplc.com.
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