Taihua : Half Yearly report -30 Sep 2015

Half Yearly report -30 Sep 2015

RNS Number : 7142A

Taihua Plc

30 September 2015

Taihua plc

('Taihua' or the 'Company')

Interim Results for the six months ended 30 June 2015

Highlights

· Sales in 2015 H1 RMB 5,399,000 (2014 H1: RMB 4,266,000)

· Profit after Tax in 2015 H1 RMB 848,000 (Loss after tax in 2014 H1 RMB (326,000))

Chairman's Statement

As the forsythia harvest is sold in the second half of the year, H1 financial performance is as a result of the supply and sale of the Company's Paclitaxel and Homoharringtonine products along with its range of prescription-only finished TCM products.

Forsythia

All costs associated with cultivation during the first half of the year are included in inventory for release when sales are made in the second half of the year. Therefore the forsythia plantation has no effect on the consolidated statement on comprehensive income. As at the end of the reporting period, trade debtors generated from forsythia sales were RMB 49,700,000 at the end of this reporting period. Approximately RMB 20,000,000 of cash has been received from forsythia customers post period end.

The Company is aware that the growing conditions in 2015 were poor. The region suffered frosts during the key flowering period. On April 14 the minimum temperature recorded was minus 2.2 degrees C and as a result the harvest is likely to be significantly effected

Prescription - only Traditional Chinese Medicines

Sales in 2015 H1 were RMB 3,383,000 (2014 H1: 2,382,000)

There were increases in the sales of Bian Tong Pian and Zao Ren An Shen. These increases were due to two factors; firstly Taihua has been working to penetrate new markets such as Sichuan Province and we are seeing some initial successes. Secondly, customers are anticipating disruptions to our manufacturing as we upgrade some facilities to meet Chinese GMP standards and have increased orders accordingly.

Paclitaxel

Paclitaxel sales were 4,150g at an average price of RMB 391.48 per gram, generating a total revenue of RMB 1,614,000 (2014 H1: RMB 1,326,000). Given the recent historic falls in both volumes and prices of this product it is encouraging that this is the first period for several years where we have seen increases both in volume and price

Homoharringtonine

Sales in the reporting period was RMB 552,000 (2014 H1: RMB 676,000)

Whilst the volumes have fallen considerably in the past years the Company intends to remain in the business of Homoharringtonine supply as there is still, in the opinion of the Board, the possibility that volumes may recover once we have gone through the GMP reaccreditation process. Homoharringtonine has always been a relatively high Gross Margin % product (2014 H1 45.1%) and any upturn in volumes would have a significant positive profit effect.

Consolidated Statement of Financial Position

Cashflow was significantly negative in the period as we invested in upgrading our facilities to meet Chinese GMP standards. Cash at the end of the period stood at RMB 25,546,000 (2014 H1: 36,353,000)

Strategic Direction

Following the realignment of the business to focus more on Traditional Chinese Medicines and less on Active Pharmaceutical Ingredients the business has become more exposed to one-off weather events. In recent years these weather events have adversely effected the harvest of the key forsythia crop. However, the Board consider that with input from external agencies the performance of the forsythia plantations can be improved.

Reaccreditation to Chinese GMP is a key target to achieve. Considerable investment has been made. A large number of smaller suppliers did not have Taihua's strong cash position and as such have had to exit this market. Taihua believes that this presents an opportunity over the coming years.

For more information please contact:

Nicholas Lyth, Taihua plc 0776 990 6686

Katy Mitchell, WH Ireland Limited [phone]

TAIHUA PLC

CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND COMPREHENSIVE INCOME

FOR THE PERIOD ENDED 30 JUNE 2015

		Six months ended		Six months ended		Year ended
		30 June 2015		30 Jun 2014		31 December 2014
		(unaudited)		(unaudited)		(audited)
		RMB'000		RMB'000		RMB'000
				(restated	)
Revenue		5,399		4,266		50,948
Cost of sales		(3,828	)	(3,492	)	(37,336	)
Gross profit		1,571		774		13,612
Gain/(Loss) arising on revaluation of biological assets		960		(240	)	388
Other revenue		1,159		1,154		1,728
Selling expenses		(1,125	)	(862	)	(6,118	)
General and administrative expenses		(1,410	)	(1,247	)	(3,026	)
Operating profit/(loss)		1,155		(421	)	6,584
Finance cost		-		(2	)	-
Profit/(loss) before income tax		1,155		(423	)	6,584
Income tax expense		(307	)	97		(2,082	)
Profit/(loss) for the period/year		848		(326	)	4,502
Other comprehensive income/(loss)
Exchange differences arising on translation of financial statements of foreign of operations		52		(308	)	473
Other comprehensive income/(loss) for the period/year, net of tax		52		(308	)	473
Total comprehensive income/(loss) for the period/year		900		(634	)	4,975
Total profit/(loss) for the period/year attributable to equity holders of the Company		848		(326	)	4,502
Total comprehensive income/(loss) for the period/year attributable to equity holders of the Company		900		(634	)	4,975
Earnings/(Loss) per share :
Basic (RMB per share)		0.010		(0.004	)	0.055
Diluted (RMB per share)		0.010		(0.004	)	0.055

TAIHUA PLC

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 30 JUNE 2015	As at		As at		As at
	30 June 2015		30 June 2014		31 Decembe, 2014
	(unaudited)		(unaudited)		(audited)
ASSETS	RMB'000		RMB'000		RMB'000
NON-CURRENT ASSETS
Property, plant and equipment	15,104		1,910		2,575
Prepaid lease payments	49,025		51,975		50,500
Land use rights	1,350		1,389		1,369
Biological assets	5,347		4,323		4,387
Deferred tax assets	65		-		306
	70,891		59,597		59,137
CURRENT ASSETS
Inventories	15,108		13,300		10,592
Trade receivables	54,405		52,380		54,722
Other receivables	378		256		465
Deposits and prepayments	3,521		2,330		2,715
Amount due from a director	-		331		-
Cash and cash equivalents	25,546		36,353		46,876
	98,958		104,950		115,370
TOTAL ASSETS	169,849		164,547		174,507
LIABILITIES
CURRENT LIABILITIES
Trade payables	2,393		2,112		1,281
Receipts in advance	1,494		167		987
Accrued expenses and other payables	12,307		14,202		15,814
Amounts due to related companies	-		1,147		1,107
Amount due to a director	26		6,983		26
Amounts due to shareholders	8,030		649		8,001
Income tax payable	77		261		2,669
	24,327		25,521		29,885
NET CURRENT ASSETS	74,631		79,429		85,485
NON-CURRENT LIABILITY
Deferred tax liability	-		13		-
TOTAL LIABILITIES	24,327		25,534		29,885
NET ASSETS	145,522		139,013		144,622
EQUITY
CAPITAL AND RESERVES ATTRIBUTABLE TO
EQUITY HOLDERS OF THE COMPANY
Share capital	12,357		12,357		12,357
Other reserves	19,673		18,840		19,621
Retained profits	113,492		107,816		112,644
TOTAL EQUITY	145,522		139,013		144,622

TAIHUA PLC

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE PERIOD ENDED 30 JUNE 2015

														Foreign
				Merger				Reverse		General		Enterprise		currency		Share
		Share		relief		Share		acquisition		reserve		expansion		translation		options		Retained
		capital		reserve		premium		reserve		fund		fund		reserve		reserve		profits		Total
		RMB'000		RMB'000		RMB'000		RMB'000		RMB'000		RMB'000		RMB'000		RMB'000		RMB'000		RMB'000
At 1 January 2014		12,357		64,364		4,783		(63,408	)	9,297		4,648		(1,030	)	494		108,142		139,647
Loss for the period		-		-		-		-		-		-		-		-		(326	)	(326	)
Other comprehensive income		-		-		-		-		-		-		(308	)	-		-		(308	)
Total comprehensive income/(loss) for
the period		-		-		-		-		-		-		(308	)	-		(326	)	(634	)
	At 30 June 2014	12,357		64,364		4,783		(63,408	)	9,297		4,648		(1,338	)	494		107,816		139,013
At 1 January 2014		12,357		64,364		4,783		(63,408	)	9,297		4,648		(1,030	)	494		108,142		139,647
Profit for the period		-		-		-		-		-		-		-		-		4,502		4,502
Other comprehensive income		-		-		-		-		-		-		473		-		-		473
Total comprehensive income for
the period		-		-		-		-		-		-		473		-		4,502		4,975
At 31 December 2014		12,357		64,364		4,783		(63,408	)	9,297		4,648		(557	)	494		112,644		144,622
Profit for the period		-		-		-		-		-		-		-		-		848		848
Other comprehensive income		-		-		-		-		-		-		52		-		-		52
Total comprehensive income for the
period		-		-		-		-		-		-		52		-		848		900
At 30 June 2015		12,357		64,364		4,783		(63,408	)	9,297		4,648		(505	)	494		113,492		145,522

TAIHUA PLC

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE PERIOD ENDED 30 JUNE 2015

	Six months		Six months
	ended		ended		Year ended
	30 June, 2015		30 June, 2014		31 December, 2014
	(unaudited)		(unaudited)		(audited)
	RMB'000		RMB'000		RMB'000
CASH FLOWS FROM OPERATING ACTIVITIES
Profit/(Loss) before income tax	1,155		(423	)	6,584
Adjustments for :-
Reversal in allowance for bad debts	-		-		(188	)
Amortisation on prepaid lease premium	-		-		2,950
Amortisation on land use rights	19		19		39
Depreciation	152		138		261
Gain/loss arising on revaluation of biological assets	(960	)	240		(388	)
Change in fair value of harvested products	-		-		564
Interest income	(1,160	)	(58	)	(1,540	)
Increase in allowance for write-down of inventories	-		-		1,908
Operating (loss)/profit before working capital changes	(794	)	(84	)	10,190
(Increase)/decrease in inventories	(3,041	)	(1,905	)	(2,580	)
Decrease/(increase) in trade receivables	1,420		5,659		3,520
Decrease/(increase) in other receivables	87		458		234
(Increase)/decrease in deposits and prepayments	(806	)	461		76
Increase in amount due from a director	-		(331	)	-
Increase/(decrease) in trade payables	1,112		(124	)	(955	)
Increase/(decrease) in receipts in advance	507		(15	)	805
(Decrease)/increase in accrued expenses
and other payables	(3,507	)	(520	)	1,051
Decrease in amounts due to related companies	(1,107	)	(1	)	-
Increase in amounts due to directors	-		262		-
Increase in amount due to a shareholder	29		44		701
Cash (used in)/generated from operations	(6,100	)	3,904		13,042
Interest received	57		58		1,540
Profits tax paid	(2,658	)	(1,810	)	(1,901	)
NET CASH (USED IN)/FROM OPERATING ACTIVITIES	(8,701	)	2,152		12,681
CASH FLOWS FROM INVESTING ACTIVITY
Purchase of property, plant and equipment	(12,681	)	(2	)	(790	)
NET CASH USED IN INVESTING ACTIVITY	(12,681	)	(2	)	(790	)
NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS	(21,382	)	2,150		11,891
CASH AND CASH EQUIVALENTS AS AT 1 JANUARY	46,876		34,512		34,512
EFFECT OF FOREIGN EXCHANGE CHANGE	52		(309	)	473
CASH AND CASH EQUIVALENTS AS AT 30 JUNE/ 31 DECEMBER	25,546		36,353		46,876
ANALYSIS OF THE BALANCES OF CASH AND CASH EQUIVALENTS
Cash and bank balances	25,546		36,353		46,876

TAIHUA PLC

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED 30 JUNE 2015

1. GENERAL INFORMATION

Taihua Plc (the 'Company') was incorporated and registered in England and Wales on 29 August 2006 under the Companies Act 1985 as a public company limited by shares with the name 'China Natural plc' with registered number 05918155. On 8 September 2006, the Company changed its name to 'Taihua plc'. The address of the registered office is 4 Harefield Place, St. Albans, Hertfordshire AL4 9JQ.

The Company is an investment holding company and its subsidiaries are principally engaged in the manufacturing and sales of pharmaceutical products, and the principal place of business is Room 201, Unit 3, No. 16 Zhong Hua, ShiJiCheng, FuZeYuan, 239 KeJi Road, Hi-tech Zone, XiAn, 710077, People's Republic of China (the 'PRC').

2. BASIS OF PREPARATION

The consolidated condensed financial statements have been prepared in accordance with International Accounting Standard 34 Interim Financial Reporting.

The consolidated condensed financial statements have been prepared on the historical cost basis except for certain financial instruments, which are measured at fair values as explained in the accounting policies set out below. Historical cost is generally based on the fair value of the consideration given in exchange for assets.

The consolidated condensed financial statements are rounded to the nearest thousand ('000) and they are presented in Chinese Renminbi (RMB), the official currency of the People's Republic of China. RMB is the functional currency of the Company.

The consolidated condensed financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries). Control is achieved where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

All intra-group transactions, balances, income and expenses are eliminated in full on consolidation.

The interim report was approved by the Board of Directors on 30 September 2015. The report is unaudited and does not constitute the company's statutory accounts for the six months ended 30 June 2015.

3. SIGNIFICANT ACCOUNTING POLICIES

These consolidated condensed financial statements have been prepared in accordance with International Financial Reporting Standards (''IFRS'') issued by the International Accounting Standard Board (IASB) and interpretations of the International Financial Reporting Interpretations Committee (IFRIC), as adopted by European Union.

From the beginning of the reporting period the Company has adopted all relevant standards effective for accounting periods beginning on or after 1 January 2015.

The presentation currency of the Group is RMB and therefore the financial statements have been translated from GBP and HKD to RMB at the following exchange rates:

Period end rates Average rates

30 June 2015 GBP1=RMB9.57 GBP1=RMB9.3112

HKD1=RMB0.7906 HKD1=RMB0.79164

4. REVENUE

Revenue on sale of goods represents the invoiced value of goods sold, net of value added tax ('VAT'), consumption tax ('CT') and other sales taxes, after allowances for goods returns and trade discounts.

An analysis of the Group's turnover and other revenue is set out below:-

	Six months ended		Six months ended		Year ended
	30 June, 2015		30 June, 2014		31 December, 2014
	(unaudited)		(unaudited)		(audited)
	RMB'000		RMB'000		RMB'000
Revenue	5,399		4,266		50,948
Other revenue
Interest on trade receivables	1,103		1,096		1,415
Interest income	56		58		125
Reversal of impairment loss
on trade receivables	-		-		188
	1,159		1,154		1,728

5. OPERATING SEGMENTS

For the purposes of resources allocation and performance assessment, the chief operating decision makers, who are the Board of Directors, regularly review revenue and cost of sales for eachproduct. The financial information provided to the Board of Directors contains profit or loss information of each product line. Therefore, the operation of the Group constitutes four reportable segments.

The Group's reportable segments under IFRS 8 Operating Segments are as follows:

· Paclitaxel - Paclitaxel is extracted from the bark of the yew tree (Taxus). This drug is one of the main-stream treatments for cancer of the ovaries, breast, certain types of lung cancer, and a cancer of the skin and mucous membranes more commonly found in patients with acquired immunodeficiency syndrome (AIDS).

· Homoharringtonine - Homoharringtonine is an alkaloid extracted from the branches and leaves of the Cephalotaxus tree. This drug has been prescribed for acute myeloid leukaemia and other cancers in China.

· TCM products - Traditional Chinese Medicine has recognition as a viable alternative health treatment and has been recognised by the World Health Organisation for its effectiveness in the treatment of certain forms of illnesses and diseases. The Company currently manufactures eight TCM products which are Gengnianan Tablet, Duzhong Pingya Tablet, Zaoren Anshen Keli, Bunao Anshen Tablet, Jiangzi Jianfei Tablet, Dabaidu Capsule, Runing Tablet and Bian Tong Pian.

· Forsythia - Known as lian qiao in PRC, is a flowering shrub. The seeds and seed cases of this are harvested and, when dried, form the basis of TCM preparations. Forsythia TCMs are primarily sold to alleviate flu and cold like symptons.

The Group's revenues are significantly impacted by the seasonality of the forsythia sales. Forsythia is mainly harvested during autumn every year and therefore sales of forsythia are recognised in the fourth quarter. Costs incurred to 30 June with regard to the forsythia plantations have been included in inventories for release when the forsythia is harvested later in the year.

The following is an analysis of the Group's revenue and cost of sales by reportable segments:-

	Six months ended 30 June, 2015							TCM
	(unaudited)	Paclitaxel		Homoharringtonine		Forsythia		products		Consolidated
		RMB'000		RMB'000		RMB'000		RMB'000		RMB'000
	Revenue	1,614		552		-		3,383		5,549
	Discounting of revenue on deferred
	credit terms									(150	)
	Revenue per Consolidated
	Statement of Comprehensive									5,399
	Income
	Cost of sales	(1,473	)	(303	)	-		(2,052	)	(3,828	)
	Gross (loss)/ profit	141		249		-		1,331		1,571

	Six months ended 30 June, 2014							TCM
	(unaudited),	Paclitaxel		Homoharringtonine		Forsythia		products		Consolidated
		RMB'000		RMB'000		RMB'000		RMB'000		RMB'000
	Revenue	1,326		676		-		2,382		4,384
	Discounting of revenue on deferred
	credit terms									(118	)
	Revenue per Consolidated
	Statement of Comprehensive									4,266
	Income
	Cost of sales	(1,866	)	(368	)	-		(1,258	)	(3,492	)
	Gross profit	(540	)	308		-		1,124		774

								TCM
	Year ended 31 December, 2014	Paclitaxel		Homoharringtonine		Forsythia		products		Consolidated
		RMB'000		RMB'000		RMB'000		RMB'000		RMB'000
	Revenue	2,870		1,363		41,845		4,870		50,948
	Cost of sales	(3,088	)	(2,597	)	(28,320	)	(3,331	)	(37,336	)
	Gross (loss)/profit	(218	)	(1,234	)	13,525		1,539		13,612

The management of the Company take into account revenue and costs of sales as the key performance indicators when they make management decisions. Other costs are not allocated to operating segments as these are considered to be central operating costs of the business. Assets and liabilities are not considered to be specific to individual operating segments and therefore separate analysis is not undertaken.

The difference between the information presented to the Board of Directors and the information per the Consolidated Statement of Comprehensive Income relates to the discount applied to revenues to reflect the 180 day credit period granted to customers.

6. TAXATION

The tax charge represents the charge to PRC Income Tax on the assessable profits for the period at the rate of 25%.

7. EARNINGS PER SHARE

Basic earnings per share

Basic earnings per share are calculated by dividing the profit attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the period.

	Six months ended		Six months ended		Year ended
	30 June, 2015		30 June, 2014		31 December, 2014
	(unaudited)		(unaudited)		(audited)
	RMB'000		RMB'000		RMB'000
Profit/(loss) attributable to equity holders of the Company (RMB'000)	848		(326	)	4,502
Weighted average number of ordinary shares in issue (Thousands)	81,737		81,737		81,737
Earnings/(Loss) per share (RMB per share)	0.010		(0.004	)	0.055

Diluted earnings per share

The company has one category of dilutive potential shares - share options. A calculation is performed to determine the number of shares that could have been issued at fair value based on the monetary value of the subscription rights attached to outstanding share options and warrants. It is compared with the number of shares that would have been issued assuming the exercise of the share options.

	Six months ended		Six months ended		Year ended
	30 June, 2015		30 June, 2014		31 December, 2014
	(unaudited)		(unaudited)		(audited)
	RMB'000		RMB'000		RMB'000
Profit/(loss) attributable to equity holders of the Company (RMB'000)	848		(326	)	4,502
Weighted average number of ordinary shares in issue (Thousands)	81,737		81,737		81,737
Adjustment for share options (Thousands) - Note	-		-		-
Weighted average number of ordinary shares for diluted earnings (thousands)	81,737		81,737		81,737
Diluted earnings/(loss) per share (RMB per share)	0.010		(0.004	)	0.055

Note: The share options have no dilutive effect for the six months ended 30 June 2015.

8. PROPERTY, PLANT AND EQUIPMENT

During the period ended 30 June 2015, the Group further incurred cost of RMB12,657,000 in respect of construction in progress in order to upgrade the facilities to meet Chinese GMP standards. Capital commitment in respect of this construction work is disclosed in note 12.

9. BIOLOGICAL ASSETS

Biological assets represent Chinese Yew trees (infant trees and seedlings). The role of Chinese Yew trees is to provide the raw material for the extraction of Paclitaxel compound. For many years the Group has purchased this raw material from third party suppliers. In 2006, 2007 and 2008, it planted Chinese Yew trees in its own plantation.

	Chinese		Eucommia
	Yew trees		bush		Total
	RMB'000		RMB'000		RMB'000
At 1 January 2014	4,509		54		4,563
Net change in fair value	(240	)	-		(240	)
At 30 June 2014	4,269		54		4,323
At 1 January 2014	4,509		54		4,563
Transfer of harvested products	(564	)	-		(564	)
Net change in fair value	388		-		388
At 31 December 2014	4,333		54		4,387
Net change in fair value	960		-		960
Valuation at 30 June 2015	5,293		54		5,347

Eucommia bush is the key raw materials to make one of the traditional Chinese medicine ('TCM') products. The Group does not harvest them as demand for TCM products are low. The quantity of these plants are a fraction of the whole plantation, the directors considered they are immaterial for fair value measurement, accordingly they are recognised at costs.

The number of Infant Trees can be summarised as follows:-

		As at 30 June, 2015				As at 30 June, 2014
		Infant Trees		Mature Trees		Infant Trees		Mature Trees
	Infant Trees planted in 2006	-		60,000		-		60,000
	Infant Trees planted in 2007	-		50,000		-		50,000
	Infant Trees planted in 2008	-		65,000		-		65,000
	Total trees planted	-		175,000		-		175,000

The initial harvest from infant trees is 5 years after planting. The trees continue to mature and are estimated to have a harvestable life of 15 years. The harvest from any one Chinese Yew tree is 2kg per harvest. The trees can be harvested on a 3-4 year cycle.

In previous years it has not been possible to measure the fair value of infant trees reliably and they have therefore been valued at cost. However, as the trees approached maturity and the directors expected to commence harvesting during 2011, the trees were valued at their fair value less harvesting and initial processing costs in compliance with IAS 41 in the financial statements for the year ended 31 December, 2010. However, as the permit to harvest in 2011 was not obtained from the relevant government body the first harvest now has take place in 2012. The effect of applying IAS 41 on the basis of valuation in the current period has been to increase the value of the biological assets by RMB960,000 (2014 H1: decreased by RMB240,000).

The infant Chinese Yew trees are still undergoing biological transformation leading to them being able to produce material from which Paclitaxel compound can be extracted. Once these infant trees become mature and productive they are transferred into the mature trees category.

In arriving at the fair value less estimated harvesting and initial processing costs of the infant trees, the following major assumptions were made :-

(a) The market price variable represents the current price paid by the Group to its third party suppliers plus an allowance for inflation. No consideration has been given to any potential impact on the market price of the Chinese Yew resulting from the commencement of harvesting at the Group's own plantation.

(b) The harvest yield per tree is dependent on the age and health of the trees. This is affected in turn by climate, location and soil condition. Generally, harvesting can commence once the tree is 5 years old and will cease when it is 20 years old.

(c) The estimation of the costs of harvesting and initial processing have been determined by reference to actual costs incurred by the Group in the current year.

(d) A discount rate of 13% has been applied in determining the valuation.

(e) The harvest quantity is limited by reference to the local Government 'Forestry Stocking Amounts' regulations. No consideration has been given to the potential impact of a change in these regulations.

(f) Other key assumptions include:-

(i) The demand for Chinese Yew will remain at current levels throughout the life of the plantation. The plantation does have a potential output approximately double the current demand.

(ii) Projected cashflows do not take into account taxation.

(iii) Cashflows are based on the current plantings and take no account of the impact of any additional or replacement plantings in the future.

The Group is exposed to number of risks in relation to its Chinese Yew plantation:-

(a) Regulatory and environmental risk

The Group is subject to laws and regulations in the jurisdiction in which it operates. The Group has established environmental policies and procedures aimed at compliance with local environmental and other laws. Management performs regular reviews to identify environmental risks and to ensure that the systems in place are adequate to manage those risks.

(b) Demand risk

The Group is exposed to risk from fluctuations in the demand for Paclitaxel and thus Chinese Yew. The Group undertakes regular reviews of its forecast of future demand for Paclitaxel and will modify its harvesting strategy as appropriate. The effect of a 10% decrease in market price of agricultural produces from the harvested trees on the fair value of the plantation would be RMB770,000.

(c) Climate and other risks

The Group's plantation is exposed to the risk of damage from climatic changes, diseases, forest fires and other natural forces. The Group has extensive processes in place aimed at monitoring and mitigating those risks, including regular forest health inspections.

(d) Discount rate risk

The Board of Directors have assessed the model for assessing the fair value of the plantation and, bearing in mind the Group's capital costs and the risks associated with the project, the Board have decided that a discount rate of 13% is appropriate. Were circumstances to change that would warrant an increase in that rate by 1.0% to 14%, the fair value of the assets would fall by RMB271,000.

7.FORSYTHIA PLANTATION

On 11 January, 2011, TNP signed an agreement with Qin Bang Forsythia Cooperative in respect of leasing 893 hectares of Forsythia plantation for the period from 11 January, 2011 to 11 January, 2031, which are located in the Luonan region of Shanxi Province, the PRC.

Pursuant to the terms of the lease, TNP will manage the cultivation and benefit from the harvest from the plantation. The annual lease cost is RMB1,300,000 per annum, but it is a term of the lease that all 20 years were paid in advance. This payment has been capitalised and treated as a prepaid lease payment within non-current assets and will be amortised over the lease term of 20 years.

On 17 December, 2012, TNP signed an agreement with Qin Yuan Forsythia Cooperative in respect of leasing 1,013 hectares of Forsythia plantation for the period from 1 January, 2013 to 31 December, 2032, which are located in the Luonan region of Shanxi Province, the PRC.

Pursuant to the terms of the lease, TNP will manage the cultivation and benefit from the harvest from the plantation. The annual lease cost is RMB1,650,000 per annum, but it is a term of the lease that all 20 years were paid in advance. This payment has been capitalised and treated as a prepaid lease payment within non-current assets and will be amortised over the lease term of 20 years.

10 SHARE CAPITAL

The total issued number of ordinary shares at the beginning and by the end of the reporting period were both 81,737,330 at GBP0.01 per share.

11. RELATED PARTY TRANSACTIONS

	As at		As at		As at
	30 June, 2015		30 June, 2014		31 December, 2014
	(unaudited)		(unaudited)		(audited)
Amount due to directors	RMB'000		RMB'000		RMB'000
Yunwu Liu	-		331		-
Chun Chai	(26	)	(26	)	(26	)
Liyi Chen	-		(6,957	)	-
	(26	)	(6,983	)	(26	)

The amounts are interest-free, unsecured and repayable on demand.

12. CAPITAL COMMITMENTS

During the period under review, RMB12.7million (Note 8) has been spent on improving manufactory facilities to meet Chinese GMP standards. The upgrade facilities are expected to go into operation in early November 2015. Further expenditure on this construction work is budgeted as RMB 5 million approximately.

This information is provided by RNS

The company news service from the London Stock Exchange