REACH RESOURCES LIMITED — Annual Report 2003

Sep 11, 2003

Appendix 4E

Preliminary Final Report to the Australian Stock Exchange

Part I
Name of Entity	Cervantes Seafood Limited
ABN	79 097 982 235
Financial Year Ended	30 June 2003
Previous Corresponding Reporting Period	Period ended 30 June 2002

Part 2 - Results for Announcement to the Market

	$'000	Percentageincrease/(decrease) overpreviouscorresponding
	9.528	period
Revenue from ordinary activities
Profit / (loss) from ordinary activities after tax attributable to
members	(4,260)
Net profit / (loss) for the period attributable to members	(4.260)

Dividends (distributions)	Amount per security		Franked amount per security
Final Dividend	Nil		Nil
Interim Dividend	Nil		Nil
Record date for determining entitlements to the
dividends (if any)			N/A

Brief explanation of any of the figures reported above necessary to enable the figures to be understood:

Refer Part 10 for commentary on the results for the year.

Part 3 - Contents of ASX Appendix 4E

Section	Contents
Part 1	Details of entity, reporting period
Part 2	Results for announcement to the market
Part 3	Contents of ASX Appendix 4E
Part 4	Statement of financial performance
Part 5	Accumulated losses
Part 6	Statement of financial position
Part 7	Statement of cash flows
Part 8	Basis of preparation
Part 9	Loss from ordinary activities
Part 10	Commentary on results
Part 11	Details relating to dividends
Part 12	Earnings per share
Part 13	Net tangible assets per security
Part 14	Details of entities over which control has been gained or lost
Part 15	Details of associates and joint venture entities
Part 16	Issued securities
Part 17	Segment information
Part 18	Subsequent events
Part 19	Information on audit or review
Part 20	Authorisation

Part 4 – Statement of Financial Performance

	2003(S)	2002$(S)$
Revenue from sale of goods	9,494,398
Interest income	33,360
Total revenue	9,527,708
Cost of goods sold	(11,518,271)
Operational expenses	(943, 882)
Administrative expenses	(690, 122)	(2,023)
Marketing expenses	(51, 854)
Borrowing costs	(40, 688)
Goodwill written off	(542,998)
Loss from ordinary activities before related income taxbenefit	(4,260,107)	(2,023)
Income tax benefit relating to ordinary activities
Loss from ordinary activities after related income taxbenefit	(4,260,107)	(2,023)

Part 5 - Accumulated losses

	2003(S)	2002($)
Accumulated losses at the beginning of the periodLoss for the period	(2,023)(4,260,107)	1000(2023)
Accumulated losses at the end of the period	(4,262,130)	(2,023

Part 6 - Statement of Financial Position

	2003(S)	2002(S)
CURRENT ASSETS
Cash assets	156,708	123,923
Receivables	539,033	5,191
InventoriesOther - Prepaid expenditure	388,064291,630	88,325
Total Current Assets
	1,375,435	217,439
NON CURRENT ASSETS
Plant & equipment	1,453,077
Total Non Current Assets	1,453,077
TOTAL ASSETS	2,828,512	217,439
CURRENT LIABILITIES
Payables	669,921	50,462
Interest bearing liabilities	180,779
Non-interest bearing liabilities		169,000
Total Current Liabilities	850,700	219,462
NON-CURRENT LIABILITIES
Interest bearing liabilities	783,574
Total Non Current Liabilities	783,574
TOTAL LIABILITIES	1,634,274	219,462
NET ASSETS/(DEFICIENCY)	1,194,238	(2,023)
EQUITY
Contributed equity	5,456,368
Accumulated losses	(4,262,130)	(2,023)
TOTAL EQUITY/(DEFICIENCY)	1,194,238	(2,023)

	2003(S)	2002(S)
Cash flows from operating activities
Cash receipts in the course of operationsCash payments in the course of operationsInterest received	9,226,956(13, 189, 691)4,009	(4, 854)
Net cash used in operating activities	(3,958,726)	(4, 854)
Cash flows from investing activities
Payments for plant and equipmentPayments for goodwillPayments for research and development	(1, 173, 634)(626, 800)
Net cash used in investing activities	(1,800,434)
Cash flows from financing activities
Proceeds from issue of securitiesTransaction costs from issue of securitiesProceeds from borrowingsRepayment of borrowings	5,751,817(755, 225)1,603,990(808, 637)	(40, 223)169,000
Net cash provided by financing activities	5,791,945	128,777
NET INCREASE IN CASH HELDCash at the beginning of the financial period	32,785123,923	123,923
Cash at the end of the financial period	156,708	123,923

Part 8 - Basis of Preparation

This preliminary final report has been prepared in accordance with ASX Listing Rule 4.3A and the disclosure requirements of ASX Appendix 4E.

The accounting policies adopted in the preparation of the preliminary final report are consistent with those adopted and disclosed in the 2002 annual financial report.

Part 9 - Loss from Ordinary Activities

The loss from ordinary activities before income tax benefit includesthe following items of revenue and expense:
	2003	2002
	(S)	(S)
Revenue
Sale of goods revenue from operating activities	9,494,348
Interest income	33,360
Expenses
Depreciation - plant and equipment	221,224
Amortisation of goodwill	83,802
Total depreciation and amortisation	305,026
Goodwill written off	542.998
Provision for doubtful debts	588,931
Interest expense	40,688

Part 10 – Commentary on Results

The operating results for the year have been adversely affected by high beach prices for lobster products during the 2002/03 season. The competitive forces for products in the early part of the season gave rise to an unrealistically high beach price range. This has the effect of suppressing profit margins for all participants in the lobster industry.

During the year, there has also been a significant drop in demand for lobster products in key buying markets of Japan and China. The global uncertainty emanating from the Middle East unrest has had a dampening effect on lobster sales. The Iraqi war was the initial global factor that negatively affected demand sentiment in the key markets for lobsters in China. USA, Taiwan and Japan. The outbreak of the SARS virus in GuangDong Province in China occurred in December 2002 with an immediate drop in demand for our lobsters. In March 2003, the admission by China of the SARS epidemic and the subsequent spreading of the virus to Hong Kong, Singapore, Canada, Taiwan and other countries contributed to a significant drop in demand for the product and a correspondingly weaker market price. A fire, which occurred in December 2002 in the Cervantes township vicinity resulting in power failure, interrupted the Company's operational activities for over a week.

The continuing rise in the strength of the Australian Dollar as the season progressed has also adversely affected profit margins for Australian suppliers. This factor also had an adverse impact on the costs of our products to buyers relative to previous years. It also has the effect of causing our traditional buyers to substitute our product for the inferior, but lower cost and better margin products sourced from Mexico. Cuba and Florida.

The trading difficulties have been encountered generally by both fishermen and processors and the industry will require substantial review and planning for the following season.

In view of the highly disappointing operating results for the year, the Company decided to write off fully the carrying value of goodwill ($542,998).

The Company has also announced on 14 July 2003 the merger of its operations with INF Pty Ltd. The merger represents a key strategy for growth and consolidation within the lobster export business. The proposed merger will contribute significant working capital resources to the Company. The expanded catch base and working capital resource will improve the Company's ability to retain existing boats and fishermen and at the same time, enhance its control over this important supply factor.

Date the dividend is payable	N/A
Record date to determine entitlement to the dividend
Amount per security
Total dividend
Amount per security of foreign sourced dividend ordistribution
Details of any dividend reinvestment plans in operation
The last date for receipt of an election notice for participationin any dividend reinvestment plans

Part 11 - Details Relating to Dividends

Part 12 - Earnings per Share

$\blacksquare$

	2003	2002
Basic earnings/(loss) per share
Ordinary shares	$(9.04 \text{ cents})$	N/A
The Company's potential ordinary shares are not considered dilutive and accordingly basic lossper share is the same as diluted loss per share.
	No.	No.
average number of ordinary shares used as theWeighteddenominator in the calculation of basic earnings per share	47.107,534	N/A

Part 13 - Net Tangible Assets per Security

	Current period	Previouscorrespondingperiod
Net tangible asset backing per ordinary security	1.9 cents	N/A

Part 14 - Details of Entities Over Which Control has been Gained or Lost

Name of entity (or group of entities)	Not Applicable
Date control gained or lost
Contribution of the controlled entity (or group of entities) to theprofit/(loss) from ordinary activities during the period, from thedate of gaining or losing control
Profit (loss) from ordinary activities of the controlled entity (orgroup of entities) for the whole of the previous correspondingperiod
Contribution to consolidated profit/(loss) from ordinary activitiesfrom sale of interest leading to loss of control

	Ownership Interest		Contribution to netprofit/(loss)
	2003%	2002%	2003$A'000	2002$A'000
Name of entity	N/A	N/A	N/A	N/A
Associates
Joint Venture Entities
Aggregate Share of Losses

Part 15 - Details of Associates and Joint Venture Entities

Part 16 – Issued Securities

	Current period	Previouscorrespondingperiod
Issued and paid-up capital63,583,334 [2002: 1] fully paid ordinary shares	5,456,368
The following movements in contributed equity occurred during the year:
	Number ofOrdinary FullyPaid Shares	Issued CapitalS
Balance 1 July 2002	1
Issue of shares for cash at 0.01 cents each on 15 August 2002	18,166,666	1,817
Issue of shares for cash at 15 cents each on 20 September2002	7,950,000	1,192,500
Issue of shares for cash at 15 cents each on 30 October 2002	18,716,667	2,807,500
Issue of shares to acquire assets at 5 cents each on 31October 2002	10,000,000	500,000
Issue of shares for cash at 20 cents each on 31 October 2002	8,750,000	1,750,000
Transaction costs arising from issues of shares		(795, 449)
Balance 30 June 2003	63,583,334	5,456,368

Part 17 – Segment Information

Segment revenues and results include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. The Company operates as an exporter of lobster and other seafood.

Geographical Segments

	Revenue	Loss
	S	Ŝ
Taiwan	2,118,189	(732, 802)
Japan	2,399,931	(830, 272)
Australia	958.503	(877,950)
China	3,073,478	(1,063,290)
USA	944.247	(326, 669)
Unallocated	33,360	(429, 124)
Total	9,527,708	(4,260,107)

Part 18 - Subsequent Events

Subsequent to balance date, the Company entered into a heads of agreement with INF Pty Ltd ("INF") in which its operations will be merged with that of INF. In consideration of the merger, the Company will issue to INF, 57,527,778 fully paid ordinary shares in the capital of the Company at an issue price of $0.107. The merger is subject to shareholder approval of Cervantes Seafood Limited. Further details of the agreement are set out in an announcement to ASX on 14 July 2003.

Part 19 - Audit/Review Status

This report is based on accounts to which one of the following applies:
l (Tick one)
The accounts have been audited		The accounts have been subject to review
The accounts are in the process of beingaudited or subject to review		The accounts have not yet been audited orreviewed

If the accounts have not yet been audited or subject to review and are likely to be subject to dispute or qualification, a description of the likely dispute or qualification:

Not applicable

If the accounts have been audited or subject to review and are subject to dispute or qualification, a description of the dispute or qualification:

Not applicable

Part 20

Signed By:
Print Name	Chen Hao, Managing Director
Date	12 September 2003