TIDMGIPO
RNS Number : 4219L
Grand Group Investment PLC
30 September 2016
Grand Group Investment PLC
("Grand Group", the "Company" or the "Group")
30 September 2016
Further re suspension of trading
Disposal of Investments
The Company wishes to update the market following suspension of
trading in its shares on 29 June 2016 pending publication of its
audited report and accounts in respect of its year ended 31
December 2015.
The Company is an investing company which floated on AIM in
January 2015, raising GBP7.16 million before expenses. It currently
holds two investments:
-- an indirect 33 per cent holding in Wuxi Victory Media and
Culture Co., Ltd ("Victory") acquired on 3 June 2014. Victory is an
unquoted company whose principal activity is as an online learning
solutions provider to China's urban and rural vocational education
industry. The holding was acquired, for a consideration of RMB 196
million. It is held at fair value through profit and loss and at 31
December 2014 was subject to a revaluation uplift of RMB 284
million to give a valuation of RMB 480 million in the Company's
audited accounts for the year ended 31 December 2014.
-- A 15 per cent holding in WuXi Jin Xun Tong Technology Limited
("JXT") acquired on 22 April 2015. JXT is an unquoted company whose
principal activity is the production of video courseware for the
provision of vocational training to migrant workers in China,
through its website Gong Yuan Wang (http://www.gongyuannet.com/).
This investment was acquired for a consideration of RMB 20
million.
Victory also has an 18 per cent shareholding in JXT and
distributes courseware through JXT's website as well as Victory's
own channels.
The Company's draft unaudited consolidated accounts for its year
ended 31 December 2015 showed:
-- a profit after tax of RMB 38.5 million (2014 audited RMB
205.0 million) after a gain on unquoted financial assets of RMB
46.0 million relating to its investment in Victory (2014 audited
RMB 284.0 million) and dividend income, as announced on 19 October
2015, of RMB 19.8 million (2014 Nil). The investment in JXT is held
at cost of RMB 20.0 million.
-- net assets of RMB 512.8 million (2014 audited RMB 401.0
million) including unquoted financial assets at fair value through
profit or loss of RMB 546.0 million (Victory RMB 526 million; JXT
RMB 20 million) and cash and cash equivalents of RMB 66.6 million
(2014 audited RMB 0.0 million) liabilities principally consist of a
deferred tax liability of RMB 82.5 million and shareholder loans of
RMB 13.0 million (2014 audited RMB 71.0 million and RMB 6.7 million
respectively).
As stated in the Company's suspension announcement of 29 June
2016, the Company was looking for production of its investee
company accounts prior to finalising its own audited accounts for
the year ended 31 December 2015. Investee company accounts for
their years ended 31 December 2015 have now been produced. These
show:
For Victory:
-- profit for the year of RMB 178.6 million (2014 RMB 144.5
million), up 23.6 per cent on revenue of RMB 352.4 million (2014
RMB 237.5 million), up 48.4 per cent.
-- Net assets of RMB 552.8 million (2014: RMB 394.0 million)
including prepayments of RMB 330.0 million (2014: RMB 18.5 million)
and cash and trade receivables of RMB 54.7 million and RMB 64.8
million respectively (2014: RMB 181.0 million and RMB 119.2 million
respectively). Non-current prepayments represent payment in advance
in respect of the development of new courseware which are expected
to be delivered over the course of 2016 and 2017.
For JXT:
-- profit for the year of RMB 95.1 million, on revenue of RMB
230.7 million, increases of over 330 per cent (profit) and 460 per
cent (revenue) on the previous year, as disclosed in the Company's
further investment announcement dated 22 April 2015
-- Net assets of RMB 166.3 million including non-current
prepayments of RMB 210.0 million in respect of website enhancement,
current prepayments of RMB 48.0 million in respect of advertising
expenses, cash and cash equivalents of RMB 56.7 million and
receipts in advance (being the unamortised portion of membership
income received from members) of RMB 129.8 million.
The investee company accounts have now been audited. The
auditors of the investee companies have not however been able to
express an opinion on the relevant accounts, for Victory in respect
of the carrying value of the RMB 330.0 million courseware
acquisition prepayment and for JXT in respect of the RMB 210.0
million prepayment for website development and whether any
adjustments might have been found necessary which would have a
consequential effect on the investee companies' financial
performance.
The Company's auditors have indicated that, because of the lack
of opinion on the investee company accounts, they would be unable
without more work to form an opinion on the carrying value of the
Company's investments in Victory and JXT which amount to 89.1 per
cent of the Company's consolidated total assets RMB 612.632 million
and 106.5 per cent of its consolidated net assets.
The Directors do not believe that it is in the interests of the
Company or its shareholders to produce accounts on which its
auditors are unable to express an opinion. They have accordingly
spent considerable time and effort, together with investee company
management, to provide appropriate audit evidence sufficient for
these purposes. However, because of the potential long term nature
of the prepayment contracts in investee companies, they have as yet
been unable to form a view. Regrettably the investee companies have
also indicted that they are not prepared to commit further resource
or effort to this process. If the Company is unable to publish its
audited accounts on or before 29 December 2016, admission of its
shares to trading on AIM will be cancelled. The Directors have
therefore taken the decision to enter into sales contracts in
respect of the Company's investments in both Victory and JXT. Given
that the investment valuations are adjusted to agreed contracted
sales values, this should serve to remove or ameliorate the
auditors' concerns on the carrying values for each investment.
Accordingly, the Company has today contracted for the sale of
its entire holdings in each of Victory and JXT on the following
terms:
In respect of Victory, for the sale of the Group's 33 per cent
shareholding directly to Wuxi Victory Media and Culture Co.,
Limited for a total consideration of RMB 235.2 million to be
settled in cash by instalments, with RMB 20.0 million payable
within 10 working days of signature of the agreement, followed by
ten monthly instalments of RMB 20.0 million with a final payment of
RMB 15.2 million payable before 30 September 2017. This represents
a premium of RMB 39.2 million to the Company's original April 2014
investment of RMB 196 million, or a simple annual return over a two
and a half year period of 8 per cent per annum. It also represents
a discount of RMB 244.8 million to the carrying value of the
Company's investment in Victory in its audited 2014 accounts and
the Company will write down the investment accordingly in its
accounts for the year ended 31 December 2015.
In respect of JXT, for the sale of its 15 per cent shareholding
directly to WuXi Jin Xun Tong Technology Limited for a total
consideration of RMB 30.0 million to be settled in cash in two
equal instalments of RMB 15.0 million, the first to be satisfied
within 30 days with the second instalment to be paid before 31
December 2016. The consideration of RMB 30.0 million represents a
premium of RMB 10.0 million or fifty per cent to the Company's
original April 2015 investment of RMB 20.0 million.
Both contracts are subject to completion of legal modification
and registration formalities in the PRC. The Company is
additionally subject to a two year non-compete provision in respect
of both the Victory and JXT businesses.
Sale proceeds of both transactions will be applied towards
further investments in accordance with the Company's investing
policy, set out at the end of this announcement. The Company will
now work with its auditors to finalise its audited accounts in
respect of its year ended 31 December 2015 and to making
appropriate adjustments to the carrying value of its investments
for the interim period ending 30 June 2016.
For further information:
Grand Group Investment PLC
James Newman, Non-Executive Tel: +44 (0) 20
Chairman 7398 7710
www.grandgroupplc.com
ZAI Corporate Finance Limited
Ray Zimmerman / Songdi Lin Tel: +44 (0) 20
(Nomad and Broker) 7060 2220
www.zaicf.com
Investing Policy
The Company seeks to be an active value-added investor and to
operate as a later stage, value adding incubator fund. The Company
will seek to identify potential investee companies where its access
to research, technology and university support can have a positive
effect on the investee companies.
The Company aims to provide equity and equity-related investment
capital, such as convertible loans, to companies which are seeking
capital for growth and development, consolidation or acquisition,
or as a pre-IPO round of financing. These investments may be made
in combination with additional debt or equity-related financing
and, in appropriate circumstances, in collaboration with other
financial and/or strategic investors.
The Company will aim to invest primarily in private companies
with high growth potential, where a timely investment will allow
the investee to increase market share and create shareholder value.
The Company will target small and mid-sized companies and will seek
substantial minority stakes with potential or actual board
representation to enable participation in management with a view to
improving performance and growth of the investee business. The
Company intends to work closely with the management of each
investee company to create value by focusing on driving growth
through revenue creation, margin enhancement and extracting cost
efficiencies, as well as by creating appropriate capital structures
to enhance returns. The Company may on occasion take controlling
stakes where sufficient separation is maintained between the
Company and the investment to ensure that the Company does not
become a trading company.
The Company may also invest up to 15 per cent. of its gross
assets at the time of investment in publicly traded securities. No
restrictions will be placed on the size of any public companies in
which the Company may make an investment. The Company may in
addition invest up to 20 per cent. of its gross assets at the time
of investment in other collective investment undertakings, which
themselves have substantially similar investing policies as the
Company. Crossholdings between investments are possible. The
Company will not invest in derivative financial instruments, money
market instruments or currencies other than for the purposes of
efficient portfolio management.
Grand will invest in companies operating within the Greater
China Region. The Company will not invest in the natural resource
or real estate sectors. Investments will be primarily in education
or training related sectors or in sectors where investee company
access to research, technology or university support should enhance
or enable commercialisation of products or services. The Company
will not invest in fundamental scientific research.
Typical investments are expected to range in size from GBP3
million - GBP50 million. There is no limit on the maximum size of
an investment, nor any minimum number of investments. As
investments are made and new opportunities arise, further equity
funding of the Company may be required although the Company will
not raise additional funds until at least 70 per cent. of the
Placing proceeds have been invested.
It is not intended for the Company to use borrowings for long
term structural gearing, and it is intended that any borrowing
would only be used on a tactical basis where the Directors believe
gearing will enhance returns to Shareholders. The Company will not
be subject to any borrowing or leveraging limits.
The Company expects to derive returns on investments principally
through capital gains and/or the receipt of dividends from investee
companies. For private investee companies, the typical investment
holding period is currently expected to be between two and four
years. Exits may be effected by flotation on an international or
domestic stock exchange, trade sale, secondary private equity
buy-out, sale to institutional and/or private investors, or
structured exit by contract. On flotation of any investee company,
Grand would likely retain a part of its investment in the listed
entity going forward. For publicly quoted investee companies the
objective is to maximize capital appreciation without any generally
expected investment holding period. Should the Company consider
that any capital appreciation of a particular public equity
investment has peaked or is likely to or has begun to decline, then
the Company will consider the sale of that investment.
The Directors are confident that the Investing Policy can be
substantially implemented within eighteen months of Admission,
failing which they will seek the consent of Shareholders for the
Investing Policy at the Company's next ensuing annual general
meeting and on an annual basis thereafter until such time as its
Investing Policy has been substantially implemented. If it appears
unlikely that the Investing Policy can be substantially implemented
at any time, the Directors may consider returning any remaining
funds to Shareholders. The Investing Policy can only be varied
materially by the prior consent of Shareholders in a general
meeting.
This announcement contains inside information as defined in
Article 7 of the EU Market Abuse Regulation no 596/2014 and has
been announced in accordance with the Company's obligations under
Article 17 of that Regulation.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FURAKKDPABKDPCN
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September 30, 2016 12:58 ET (16:58 GMT)
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