TIDMQIH
RNS Number : 2869F
Qihang Equipment Company Limited
13 June 2012
Qihang Equipment Company Limited
Results for the year ended 31 December 2011
For the year ended 31 December 2011 Qihang Equipment and its
subsidiaries (the "Group") recorded a profit excluding the listing
costs from continuing operation of RMB25.62 million (approximately
GBP2.6 million) (2010 - RMB16.52 million) on sales revenue of
RMB262.11 million (approximately GBP26.6 million) (2010 - RMB209.67
million). Basic earnings per ordinary share amounted to RMB0.17
(approximately 1.7 pence) (2010 - RMB0.38). At the year end, Group
cash and cash equivalents amounted to RMB47.16 million
(approximately GBP4.8 million) (2010 - RMB32.63 million);
borrowings amounted to RMB186.35 million (approximately GBP18.9
million) (2010 - RMB147.35 million).
This was a year of change for Qihang Equipment. We sold our
original operation companies for an acceptable price to an owner
who could develop it much faster than we were capable of doing.
The purchase of Qihang Equipment, through acquiring its Hong
Kong parent, means that we are now a leading supplier of machine
tool equipment in China to what is still one of the world's fastest
growing economies.
Since the year end, the slowdown in growth in China has meant
that business has been slower than hoped. As conditions improve in
China we expect our performance to improve. We have seen a small
improvement in the last month.
The acquisition of Anda in January brought another area of
industrial activity into the Company. Performance has so far met
our expectations.
I would like to take this opportunity to thank all our staff for
their hard work over the last twelve months.
Mark Chapman
Chairman
For further information please contact:
Qihang Equipment Company Limited
Mark Chapman Tel: 01483 894 627
Northland Capital Partners Limited (Nominated Adviser and
Broker) Tel: 020 7796 8800
William Vandyk
Tim Metcalfe
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 December 2011
Note Group 2011 Group 2010
RMB'000 RMB'000
Revenue 4 262,107 209,669
Cost of sales (189,903) (154,306)
----------- -----------
Gross profit 72,204 55,363
Other operating income 1,597 143
Distribution expenses (18,024) (12,049)
Administrative expenses (26,925) (19,324)
Specific bad debts written off - (5,947)
Research and development costs (3,236) (1,668)
Listing costs 7 (6,747) -
Profit/(loss) from operation 18,869 16,518
Non-operating income net of expenses 5 (240)
(Loss)/profit on disposal of subsidiaries 28/14 (63) -
Fair value (loss)/gain on financial
instrument 16 (461)
Income from subsidies 50 10,238
Investment income 8 2,799 2,295
Finance costs 9 (12,331) (7,045)
----------- -----------
Profit before taxation 8,868 21,766
Income tax expenses 10 (754) (2,213)
----------- -----------
Profit for the year 8,114 19,553
----------- ===========
Profit attributable to:
Equity holders of the company 8,114 14,664
Non-controlling interest - 4,889
----------- -----------
8,114 19,553
=========== ===========
Other comprehensive income
Exchange difference (380) -
Gains on revaluation of land and buildings
net of tax - 54,712
Revaluation of available-for-sale investment 15 (1,241) -
Total comprehensive income for the
year 6,493 74,265
=========== ===========
Profit attributable to:
Equity holders of the company 6,493 69,376
Non-controlling interest 26 - 4,889
----------- -----------
6,493 74,265
=========== ===========
Earnings per share 11
Basic and diluted (RMB) 0.17 0.38
=========== ===========
Basic and diluted (pence) 1.73 3.73
=========== ===========
All amounts are derived from continuing operations
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
At 31 December 2011
Note 20 11 20 10
RMB'000 RMB'000
Group Group
Non-current assets
Property, plant and equipment 12 201,454 164,335
Intangible assets 13 42,920 40,718
Investments 14 - -
Available-for-sale financial asset 15 657 -
Derivative financial instrument 16 - -
Deferred tax asset 25 456 554
---------- --------
245,487 205,607
---------- --------
Current assets
Inventories 17 92,264 78,805
Trade and other receivables 18 55,129 67,503
Available-for-sale-financial asset 19 100 100
Cash and cash equivalents 20 47,160 32,632
---------- --------
194,653 179,040
---------- --------
Total assets 440,140 384,647
========== ========
Equity and reserves
Share capital 21 15,196 4,612
Share premium 21 86,711 19,842
Other reserves 22 (15,344) 59,776
Retained earnings 18,764 2,507
---------- --------
105,327 86,737
---------- --------
Current liabilities
Bank borrowings 23 186,350 97,350
Income tax liabilities 2,399 1,459
Trade and other payables 24 90,964 97,446
---------- --------
279,713 196,255
---------- --------
Non-current liabilities
Bank borrowings 23 - 50,000
Other borrowings 23 45,445 42,000
Deferred tax liabilities 25 9,655 9,655
---------- --------
55,100 101,655
---------- --------
Total liabilities 334,813 297,910
========== ========
Total equity and liabilities 440,140 384,647
========== ========
The financial statements were approved by the Board of Directors
and authorised for issue on 13 June 2012
Li Yuanqing Hao Qiang
Chief ExecutiveDirector Executive Finance Director
CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 31 December 2011
20 11 20 10
Note RMB'000 RMB'000
Group Group
Net cash (used in)/generated from operating
activities 27 (6,808) 14,213
---------- ----------
Investing activities
Purchase of property, plant and equipment (49,561) (34,487)
Purchase of intangible assets (3,548) -
Purchase of investments (2,484) (100)
Investment in subsidiaries - -
Proceeds from disposal of subsidiary - -
Net cash inflow from business combination 10,805
Net cash inflow from disposal of subsidiary 5,893
Dividends received - -
Interest received 2,799 2,296
---------- ----------
Net cash (used in)/generated from in
investing activities (36,096) (32,291)
---------- ----------
Financing activities
Proceeds from bank borrowings 191,350 127,350
Repayment of bank borrowings (138,400) (82,150)
Proceeds from other borrowings 3,555 -
Shares issued 3,437 -
Share Issue Costs (2,984) -
---------- ----------
Net cash from financing activities 56,958 45,200
---------- ----------
Net increase/(decrease) in cash and
cash equivalents 14,054 27,122
Cash and cash equivalents at beginning
of period 32,632 5,510
Exchange difference 474 -
Cash and cash equivalents at end of
period 20 47,160 32,632
========== ==========
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2011
Group Share Share Other Retained Total Non-controlling Total
capital premium reserves earnings interest
RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000
Balance at 1 January 2010 - - 28,749 6,233 34,982 16,483 51,465
========= ========= ========== ========== ========= ================ =========
Comprehensive income
Profit for the year - - - 14,664 14,664 4,889 19,553
Gains on the revaluation of
land and
buildings, net of tax - - 54,712 - 54,712 - 54,712
--------- --------- ---------- ---------- --------- ---------------- ---------
Total comprehensive income for
the
year - - 54,712 14,664 69,376 4,889 74,265
--------- --------- ---------- ---------- --------- ---------------- ---------
Transaction with owner
Issue of shares 8 - - - 8 - 8
Transfer - - 761 (761) - - -
Purchase of shares from
non-controlling
party - - - (17,629) (17,629) (21,372) (39,001)
Capital structuring after
merger 4,604 19,842 (24,446) - - - -
--------- --------- ---------- ---------- --------- ---------------- ---------
Total transaction with owner 4,612 19,842 (23,685) (18,390) (17,621) (21,372) (38,993)
--------- --------- ---------- ---------- --------- ---------------- ---------
Balance at 31 December 2010 4,612 19,842 59,776 2,507 86,737 - 86,737
========= ========= ========== ========== ========= ================ =========
Comprehensive income
Profit for the year - - - 8,114 8,114 - 8,114
Exchange difference - - (380) - (380) - (380)
Revaluation of
available-for-sale financial
assets - - (1,241) - (1,241) - (1,241)
---------- ---------- --------- ---------------- ---------
Total comprehensive income for
the
year - - (1,621) 8,114 6,493 - 6,493
--------- --------- ---------- ---------- --------- ---------------- ---------
Transaction with owner
Issue of shares 10,584 69,853 - - 80,437 - 80,437
Transfer - - 2,106 (2,106) - - -
Disposal of subsidiary - - (8) 8 - - -
Capital structuring after
merger - (2,984) (75,597) 10,241 (68,340) - (68,340)
--------- ---------- ---------- --------- ---------------- ---------
Total transaction with owner 10,584 66,869 (73,499) 8,143 12,097 - 12,097
--------- --------- ---------- ---------- --------- ---------------- ---------
Balance at 31 December 2011 15,196 86,711 (15,344) 18,764 105,327 - 105,327
========= ========= ========== ========== ========= ================ =========
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2011
1 GENERAL INFORMATION
Qihang Equipment Company Limited is a company incorporated in
Jersey under the Companies (Jersey) Law 1991. The address of the
registered office is given on page 1. The nature of the Group's
operation and its principal activities are set out in the
Directors' Report. The principal place of business of the Group's
operation is Zhenjiang New Development Area, Dingmao Nanwei Road 2,
Zhenjiang Province, P. R. China ("PRC").
The principal activity of the company is that of an investment
holding company. The principal activities of its subsidiaries are
set out in note 14.
On 1 July 2011, by special resolution, the name of the Company
changed to Qihang Equipment Company Limited to reflect the new
business; and the Company changed its presentational currency to
produce its annual report to shareholders in Renminbi ("RMB") of
the PRC for the year ended 31 December 2011 and subsequent
periods.
As of result of the above, these financial statements present
information about the consolidated group of companies, and are set
out in RMB, which is the functional currency of the Group's
operating subsidiaries in PRC.
These financial statements are rounded to the nearest thousand
('000).
2 ACCOUNTING POLICIES
2.1 Statement of compliance
These financial statements have been prepared in accordance with
International Financial Reporting Standards and Interpretation in
force ("IFRSs"), as adopted by European Union, in accordance with
the provision of the Companies (Jersey) Law 1991, and the AIM
Rules.
The Group has adopted all relevant standards effective for
accounting periods beginning on or after 1 January 2011.
At the date of authorisation of these financial statements, the
Group has not adopted the following standard as it is either not
effective of not applicable to the Group's business.
Amendment to IFRS 7 - Enhanced Derecognition Disclosure
Requirements - effective 1 July 2011
The IASB introduced enhanced disclosure requirements to IFRS 7
Financial Instruments as part of its comprehensive review of
off-balance sheet activities. The amendments are designed to ensure
that users of financial statements are able to more readily
understand transactions involving the transfer of financial assets
(for example, securitisations), including the possible effects of
any risks that may remain with the entity that transferred the
assets. The amendments also require additional disclosures if a
disproportionate amount of transfer transactions are undertaken
around the end of a reporting period. As the change only results in
additional disclosures, there is no impact on the Group's financial
statement.
It is considered that this does not apply to the Group and that
this standard is not expected to result in changes in accounting
policies, changes to the carrying amounts of assets or liabilities
or the published results. If any, but expect there will be no
material impact to the income statement and balance sheet when
implemented, although further disclosure may be required.
There are no other standards and interpretations in issue but
not yet adopted that the directors anticipate will have material
effect on the reported income or net assets of the Group.
2.2 Basis of preparation
These consolidated financial statements have been prepared on
the historical cost basis except for certain properties and
financial instruments that are measure at revalued amounts or fair
values, as explained in the accounting policies below. Historical
cost is generally based on the fair value of the consideration
given in exchange for assets.
The Group's financial statements have been prepared in the name
of Qihang on the basis of continuing business of Win Yu ("acquirer
accounting") and business combination with Qihang, the parent
company ("acquiree accounting") occurs on date of business
combination.
Win Yu Group financial information is presented separately on
note 34 to these financial statements.
2.3 Basis of consolidation
(a) Subsidiaries
The consolidated 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 investee
entity so as to obtain benefits from its activities.
The results of subsidiaries acquired or disposed of during the
period are included in the consolidated income statement from the
effective date of acquisition or up to the effective date of
disposal, as appropriate. Where necessary, adjustments are made to
the financial statements of subsidiaries to bring the accounting
policies used into line with those used by the Group.
All intra-group transactions, balances, income and expenses are
eliminated on consolidation.
(b) Non-controlling interests
Non-controlling interests in the net assets of consolidated
subsidiaries are identified separately from the Group's equity
therein. Non-controlling interests consist of the amount of those
interests at the date of the original business combination and the
minority's share of changes in equity since the date of the
combination. Losses applicable to the minority in excess of the
minority's interest in the subsidiary's equity are allocated
against the interests of the Group except to the extent that the
minority has a binding obligation and is able to make an additional
investment to cover the losses.
(c) Associates
Associates are all entitles over which the Group has significant
influence but not control, generally accompanying by a shareholding
of between 20% - 50% of the voting rights. Investments in
associates are accounted for using the equity method of accounting
and are initially recognised at cost.
2.4 Business combinations
The acquisition of subsidiaries is accounted for using the
acquisition method of accounting. The consideration transferred in
a business combination is measured at the aggregate of the fair
values, at the date of exchange, of assets given, liabilities
incurred or assumed, and equity instruments issued by the Group in
exchange for control of the acquire. Acquisition related costs are
generally recognised in profit or loss. The acquiree's identifiable
assets, liabilities and contingent liabilities that meet the
conditions for recognition under IFRS 3: Business Combinations are
recognised at their fair value at the acquisition date, except for
non-current assets (or disposal groups) that are classified as held
for sale in accordance with IFRS 5: Non-Current Assets Held for
Sale and Discontinued Operations, which are recognised and measured
at fair value less costs to sell.
Goodwill arising on acquisition is recognised as an asset and
initially measured as the excess of the consideration transferred
over the Group's interest in the net fair value of the identifiable
assets, liabilities and contingent liabilities recognised. If,
after reassessment, the Group's interest in the net fair value of
the acquiree's identifiable assets, liabilities and contingent
liabilities exceed the consideration transferred, the excess is
recognised immediately in the profit and loss as a bargain
purchase.
Non-controlling interests that are present ownership interest
and entitle their holders to a proportionate share of the entity's
net assets in the event of liquidation may be initially measured
either at fair value or at the non- controlling interests'
proportionate share of the recognised amounts of the acquiree's
identifiable net assets. The choice of measurement basis is made on
a transaction-by-transaction basis. Other types of non-controlling
interests are measured at fair value, when applicable, on the basis
specified in another IFRS.
2.5 Reverse acquisitions
A reverse acquisition occurs when the entity that issues
securities (the legal acquirer) is identified as the acquiree for
accounting purposes under business combination. The entity whose
equity interests are acquired (the legal acquiree) must be the
acquirer for accounting purposes for the transaction to be
considered a reverse acquisition.
The merger of a private operating entity into a non-operating
public shell corporation with nominal net assets typically results
in the owners of the private entity gaining control over the
combined entity after the transaction and the shareholders of the
former public shell corporation continuing only as passive
investors. IRFS 3 clarifies that this transaction is usually not
considered a business combination, instead this transactions are
considered to be a capital transactions of the legal acquiree.
However, the accounting result is similar to reverse acquisition
accounting.
2.6 Comparative
The comparative information of the Group's financial statements
will be presented with Win Yu's results, retroactively adjusted to
reflect the legal capital of Qihang.
2.7 Foreign currency
Transactions entered into by Group entities in a currency other
than the currency of the primary economic environment in which it
operates (the "functional currency") are recorded at the rates
ruling when the transactions occur. Foreign currency monetary
assets and liabilities are translated at the rates ruling at the
balance sheet date and the gains and losses on translation are
included in the income statement.
The presentational currency of the Group has been changed to RMB
from pounds sterling ("GBP") and therefore the financial statements
of the parent company's including comparative have been
re-translated from GBP to RMB.
Exchange rates used as follow:
Year end rates Average rates
31 December 2011 GBP1 = RMB9.7318 GBP1 = RMB10.3630
30 June 2011 GBP1 = RMB10.3754 GBP1 = RMB10.5644
31 December 2010 GBP1 = RMB10.2492 GBP1 = RMB10.4624
On consolidation, the results of overseas operations are
translated into RMB at rates approximating to those ruling when the
transactions took place. All assets and liabilities of overseas
operations including goodwill arising on the acquisition of those
operations are translated at the rate ruling at the statement of
financial position date. Exchange differences arising on
translating the opening net assets at opening rate and the results
of the overseas operations at actual rate are recognised directly
in the equity ("translation reserves"). Exchange differences
recognised in the statement of comprehensive income of Group
entities' separate financial statements on the translation of
long-term monetary items forming part of the Group's net investment
in the overseas operation concerned are reclassified to the
translation reserves.
On disposal of a foreign operation, the cumulative exchange
differences recognised in the foreign exchange reserves relating to
that operation up to the date of disposal are transferred to the
statement of comprehensive income as part of the profit or loss on
disposal.
2.8 Borrowing costs
All borrowings costs are recognised in the income statement in
the period in which they are incurred except for borrowing costs
attributable to qualifying assets. Borrowing costs that are
directly attributable to the acquisition, construction or
production of a qualifying asset is to be capitalised as a cost of
that asset. A qualifying asset is an asset that necessarily takes a
substantial period of time to get ready for its intended use or
sale.
2.9 Income tax
Income tax for the financial year comprises current and deferred
tax. Income tax is recognised in the income statement except to the
extent that it relates to items recognised directly in other
comprehensive income or directly in equity. In this case the tax is
recognised in other comprehensive income or directly in equity,
respectively.
Current tax is the expected tax payable on the taxable income
for the financial year, using tax rates enacted or substantively
enacted at the statement of financial position date, and any
adjustment to tax payable in respect of previous financial
years.
Deferred tax is provided using the liability method, providing
for temporary differences as at the statement of financial position
date between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for taxation
purposes except for differences arising on:
- the initial recognition of goodwill;
- the initial recognition of an asset or liability in a
transaction which is not a business combination and,
at the time of the transaction, affects neither accounting or taxable profit; and
- investment in subsidiaries and jointly controlled entities
where the group is able to control the timing of the reversal of
the difference and it is probable that the difference will not
reverse in the foreseeable future.
The amount of deferred tax provided is based on the expected
manner of realisation or settlement of the carrying amount of
assets and liabilities, using tax rates enacted or substantively
enacted at the statement of financial position date.
A deferred tax asset is recognised only to the extent that it is
probable that future taxable profits will be available against
which the asset can be utilised. Deferred tax assets are reduced to
the extent that it is no longer probable that the related tax
benefit will be realised.
2.10 Property, plant and equipment
Land use rights (note 2.11a) and buildings are stated at their
revalued amounts, being the fair value at the date of revaluation,
less any subsequent accumulated depreciation and subsequent
accumulated impairment losses. Revaluations are performed with
sufficient regularity such that the carrying amounts do not differ
materially from those that would be determined using fair values at
the end of the reporting period. Any revaluation increase arising
is recognised in other comprehensive income and accumulated in
equity, except to the extent that it reverses a revaluation
decrease for the same asset previously recognised in profit and
loss, in which case the increase is credited to profit and loss to
the extent of the decrease previously expensed. A decrease in the
carrying amount arising on the revaluation is recognised in profit
or loss to the extent that it exceeds the balance, if any, held in
the revaluation reserve relating to a previous revaluation of that
asset.
Plant and equipment are stated at cost less accumulated
depreciation and impairment. The cost of an asset comprises its
purchase price and any directly attributable costs of bringing the
asset to its working condition and location for its intended use.
Depreciation is calculated so as to write off the cost of an asset,
less its estimated residual value, over its useful economic life,
using the straight-line method. The estimated useful lives are as
follows:
Buildings 20 years
Plant and machinery 5-10 years
Motor vehicles 5 years
Fixtures, fittings and equipment 5 years
Other assets 5 years over cost
An asset's carrying amount is written down immediately to its
recoverable amount if the asset's carrying amount is greater than
its estimated recoverable amount (refer note 2.12).
Gains and losses on disposals are determined by comparing the
disposal proceeds with the carrying amount and are included in the
profit and loss.
Asset in the course of construction is stated at cost less
impairment losses. Cost comprises direct costs of construction
capitalised during the periods of construction. Capitalisation of
these costs ceases and construction-in-progress is transferred to
property, plant and equipment when substantially all the activities
necessary to prepare the assets for their intended use are
completed. No depreciation is provided for in respect of
construction-in-progress until it is completed and ready for its
intended use.
2.11 Intangible assets
(a) Land use rights
Land use rights are amortised through administrative expenses
over the period to which the rights relate. The estimated useful
lives are 50 years.
(b) Software Licences
Software licences are stated at cost less accumulated
amortisation and accumulated impairment losses. Amortisation is
calculated using the straight-line method to allocate the cost of
the licence over 5 years.
(c) Internally generated intangible assets - research and
development expenditure
Research expenditure is recognised as an expense as
incurred.
Costs incurred on development projects are recognised as
internally generated intangible assets only if all of the following
conditions are met by the Group:
- the technical feasibility of completing the intangible assets
so that it will be available for use or sales;
- its intention to complete the intangible asset and use or sell it;
- its ability to use or sell the intangible assets;
- it is probable that the intangible asset created will generate future economic benefits;
- the availability of adequate technical financial and other
resources to complete the development and use or sell the
intangible assets; and
- its ability to measure reliably the expenditure attributable
to the intangible assets during its development.
Internally generated intangible assets are amortised on a
straight-line basis over their estimated useful lives, from the
date the intangible is ready for use. Amortisation charge is
recognised in the income statement within administrative
expenses.
2.12 Impairment of non-current assets
The carrying amounts of assets are reviewed at each statement of
financial position date to determine whether there is any
indication of impairment. If any such indication exists, the
asset's recoverable amount is estimated. For goodwill, the
recoverable amount is estimated at each statement of financial
position date. An impairment loss is recognised whenever the
carrying amount of the asset or its cash-generating unit exceeds
its recoverable amount. Impairment losses are recognised through
administrative expenses in the income statement.
The recoverable amount is the higher of an asset's net selling
price and value in use. The net selling price is the amount
obtainable from the sale of an asset in an arm's length
transaction. Value in use is the present value of estimated future
cash flows expected to arise from the continuing use of an asset
and from its disposal at the end of its useful life.
Recoverable amounts are estimated for individual assets or, if
it is not possible, for the cash generating unit. An impairment
loss is reversed if there has been a change in the estimates used
to determine the recoverable amount. An impairment loss is reversed
only to the extent that the asset's carrying amount does not exceed
the carrying amount that would have been determined, net of
depreciation, if no impairment loss had been recognised. Reversals
of impairment losses are recognised in the income statement.
Impairment losses in respect of goodwill are not reversed.
2.13 Investment in subsidiary undertakings
Investments in subsidiaries are stated at cost less provision
for any impairment in value.
2.14 Inventories
Inventories are stated at the lower of cost and net realisable
value. Cost is determined using the weighted average cost method.
The cost of finished goods comprises raw materials, direct labour,
other direct costs and related production overheads but excludes
borrowing costs. Net realisable value is the estimated selling
price in the ordinary course of business, less the costs of
completion and selling expenses.
2.15 Financial instruments
Financial assets and financial liabilities are recognised when a
group entity becomes a party to the contractual provisions of the
instrument.
Financial assets and financial liabilities are initially
measured at fair value. Transaction costs that are directly
attributable to the acquisition or issue of financial assets and
financial liabilities (other than financial assets and financial
liabilities at fair value through profit or loss) are added to or
deducted from the fair value of the financial assets or financial
liabilities, as appropriate, on initial recognition. Transaction
costs directly attributable to the acquisition of financial assets
or financial liabilities at fair value through profit or loss are
recognised immediately in profit or loss.
2.16 Financial assets
Financial assets within the scope of IAS 39 are classified as
either financial asset at 'fair value through profit and loss'
(FVTPL), loans and receivables, held to maturity investments, or
available-for-sale financial assets, as appropriate.
The Group determines the classification of its financial assets
after initial recognition and, where allowed and appropriate,
re-evaluates this designation or convention in the market place
concerned.
All arm's length purchases and sales of financial assets are
recognised on the trade date i.e. the date that the Group commits
to purchase the asset. Such purchases or sales are purchases or
sales of financial assets that require delivery of assets within
the period generally established by regulation or convention in the
market place concerned.
2.16.1 Effective interest method
This is a method of calculating the amortised cost of a debt
instrument and of allocating interest income over the relevant
period. The effective interest rate is the rate that exactly
discounts estimated future cash receipts (including all fees and
points paid or received that form an integral part of the effective
interest rate, transaction costs and other premiums or discounts)
through the expected life of debt instrument, or where appropriate,
a shorter period, to the net carrying amount on initial
recognition.
Income is recognised on an effective interest basis for debt
instruments other than those financial assets classified at
FVTPL.
2.16.2 Financial assets at FVTPL
Financial assets classified as held for trading are included in
the category financial assets at fair value through profit or loss.
Financial assets are classified as held for trading if they are
acquired for the purpose of sale in the short term. Derivative
financial instruments are also classified as held for trading
unless they are designated and effective as a hedging instrument.
Financial assets at FVTPL are stated at fair value with any gains
or losses arising on re-measurement recognised in profit or
loss.
2.16.3 Loans and receivables
Loans and receivables are non-derivative financial assets with
fixed or determinable payments that are not quoted in an active
market. They are measured at amortised cost using the effective
interest method less any impairment and are included in current
assets, except for maturities greater than twelve months after the
statement of financial position date. These are classified as
non-current assets. The Group's loans and receivables comprise
"trade and other receivables" and "cash and cash equivalents" in
the statement of financial position.
Interest income is recognised by applying the effective interest
rate except for short-term receivables when the recognition of
interest would be immaterial.
2.16.4 Held-to-maturity investments
Non-derivative financial assets with fixed or determinable
payments and fixed maturity are classified as held-to-maturity when
the Group has the positive intent and ability to hold the assets to
maturity. Investments intended to be held for an undefined period
are not included in this classification. Other long-term
investments that are intended to be held-to-maturity, such as
bonds, are subsequently measured at amortised cost using the
effective interest method less any impairment.
2.16.5 Available-for-sale financial assets
Available-for-sale financial assets are non-derivative financial
assets that are designated as available-for-sale or are not
classified in any of the three preceding categories. After initial
recognition, available-for-sale assets are measured at fair value
with gains or losses being recognised in other comprehensive income
and accumulated under fair value adjustment reserve until the
investment is derecognised or until the investment is determined to
be impaired at which time the accumulate gain or loss previously
reported in equity is included in the profit or loss. The fair
value of investments that are traded in active market at the end of
each reporting period is determined by reference to the relevant
stock exchange's quoted market bid prices at the close of business
on the reporting period date. For investments where there is no
active market, fair value is determined using valuation techniques.
Such techniques include using recent arm's length market
transactions; reference to the current market value of another
instrument, which is substantially the same; discounted cash flow
analysis and option pricing models.
2.17 Cash and cash equivalents
Cash comprises cash in hand and demand deposits. Cash
equivalents are short-term, highly liquid investments that are
readily convertible to known amounts of cash and which are subject
to an insignificant risk of changes in value. For the purpose of
the cash flow statement, cash equivalents would include advances
from banks repayable within 3 months from the date of the
advance.
2.18 Financial liabilities and equity
Financial liabilities and equity instruments are classified
according to the substance of the contractual arrangements entered
into. Financial liabilities include trade and other payables,
amounts due to related parties and shareholders, bank borrowings
and notes payable.
Trade and other payables are carried at cost which is the fair
value of the consideration to be paid in the future for goods and
services received, whether or not billed to the Group.
All borrowings and overdrafts are recorded at the amount of the
proceeds received, net of direct issue costs. Finance charges are
charged to the income statement on an accruals basis using the
effective interest rate method.
Equity instruments are recorded at the fair value of the
consideration received, net of direct issue costs.
2.19 Impairment of financial assets
Financial assets, other than those at FVTPL, are assessed for
indicators of impairment at the end of each reporting date.
Financial assets are considered to be impaired when there is
objective evidence that, as a result of one or more events that
occurred after the initial recognition of the financial assets, the
estimated future cash flows of the investment have been
affected.
An impairment loss in respect of a financial asset measured at
amortised cost is calculated as the difference between its carrying
amount, and present value of the estimated future cash flows
discounted at the original effective interest rate. An impairment
loss in respect of an available-for-sale financial asset is
calculated by reference to its fair value.
For certain categories of financial assets, such as trade
receivables, assets that are assessed not to be impaired
individually are, in addition, assessed for impairment on a
collective basis that share similar credit risk
characteristics.
For financial assets carried at cost, the amount of the
impairment loss is measured as the difference between the asset's
carrying amount and the present value of the estimated future cash
flows discounted at the current market rate of return for a similar
financial asset. Such impairment loss will not be reversed in
subsequent periods.
The carrying amount of the financial assets is reduced by the
impairment loss directly for all financial assets with the
exception of trade receivables, where the carrying amount is
reduced through the use of an allowance account. Changes in the
carrying amount of the allowance account are recognised in profit
or loss.
When available-for-sale financial asset is considered to be
impaired, cumulative gains or losses previously recognised in other
comprehensive income are reclassified to profit or loss in the
period.
For financial assets measured at amortised cost, if, in a
subsequent period, the amount of the impairment loss decreases
which can be related objectively to an event occurring after the
impairment was recognised, the previously recognised impairment
loss is reversed through profit or loss to the extent that the
carrying amount of the investment at the date the impairment is
reversed does not exceed what the amortised cost would have been
had the impairment not been recognised.
In respect of available-for-sale equity securities, impairment
losses previously recognised in profit or loss are not reversed
through profit or loss. Any increase in fair value subsequent to an
impairment loss is recognised in other comprehensive income and
accumulated under fair value adjustment reserve. In respect of
available-for-sale debt securities, impairment losses are
subsequently reversed through profit or loss if an increase in the
fair value of the investment can be objectively related to an event
occurring after the recognition
2.20 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, VAT and other sales related taxes.
Universal lathes and CNC machinery tools sales
Sales of goods are recognised when goods are delivered and title
has passed and all revenue recognised is in respect of the sale of
goods.
2.21 Segment reporting
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision-maker.
The chief operating decision-maker is responsible for allocating
resources and assessing performance of the operating segments.
2.22 Government grants
Government grants received on capital expenditure are deducted
in arriving at the carrying amount of the asset purchased.
Grants for revenue expenditure are presented separately on the
face of the consolidated income statement.
Where retention of the government grant is dependent on the
Group satisfying certain criteria it is initially recognised as
deferred income. When the criteria for retention have been
satisfied, the deferred income balance is released to the income
statement or netted against the asset purchased as appropriate.
2.23 Related parties
Parties are considered to be related if one party has the
ability, directly or indirectly, to control the other party, or
exercise significant influence over the other party in making
financial and operating decisions. Parties are also considered to
be related if they are subject to common control or common
significant influence. Related parties may be individuals or
corporate entities.
2.24 Leases
Leases in which a significant portion of the risks and rewards
of ownership are retained by the lessor are classified as operating
leases. Payments made under operating leases (net of any incentives
received from the lessor) are charged to the profit and loss on a
straight-line basis over the period of the lease.)
2.25 Contingent liabilities and contingent assets
A contingent liability is a possible obligation that arises from
past events and whose existence will only be confirmed by the
occurrence or non-occurrence of one or more uncertain future events
not wholly within the control of the Group. It can also be a
present obligation arising from past events that is not recognised
because it is not probable that outflow of economic resources will
be required or the amount of obligation cannot be measured
reliably.
A contingent liability is not recognised but is disclosed in the
notes to the accounts. When a change in the probability of an
outflow occurs so that the outflow is probable, it will then be
recognised as a provision. A contingent asset is a possible asset
that arises from past events and whose existence will be confirmed
only by the occurrence or non-occurrence of one or more uncertain
events not wholly within the control of the Group. Contingent
assets are not recognised but are disclosed in the notes to the
accounts when an inflow of economic benefits is probable. When
inflow is virtually certain, an asset is recognised.
2.26 Provisions
Provisions are recognised when the Group has a present legal or
constructive obligation as a result of a past event, it is probable
that an outflow of economic benefit will be required to settle the
obligation, and a reliable estimate of the amount can be made.
3 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
The preparation of financial statements in conformity with IFRSs
requires management to make assumptions that affects the
application of accounting policies and the amounts of assets,
liabilities, income and expenditure. The estimates and associated
assumptions are based on historical experience and other relevant
factors, the results of which form the basis for the judgements
that underlie the carrying value of the assets and liabilities.
Actual results may differ from these estimates. The most
significant areas in which judgements are required relate to the
estimate of useful economic lives and residual values of
non-current assets and the recoverable amount of current and
non-current assets (in particular inventories and trade
receivables). The estimates and underlying assumptions are reviewed
on an ongoing basis. Revisions to accounting estimates are
recognised in the period in which the estimates are revised if the
revision affects only that period or in the period of revision and
future periods if the revision affects both the current and future
periods.
The Group makes estimates and assumptions concerning the future.
The estimates and assumptions that have a significant risk of
causing a material adjustment to the carrying amounts of assets and
liabilities within the next financial year are discussed below.
(a) Provisions for doubtful debts
The Group makes sales on credit. A proportion of the outstanding
credit sales may prove uncollectible in due course. An estimate is
made of the uncollectible portion of accounts receivables using a
calculation based on prior experience and an evaluation of the
amounts outstanding. In aggregate, RMB183,282 (2010: RMB180,019) is
considered to be at risk in respect of amounts due from trade
customers. There is a degree of uncertainty as to actions the Group
is able to undertake to enforce collection of these debts, which
may impact the eventual recoverable amounts. Accordingly, the
Directors have assessed their best estimate of the recoverability
of these debts. More details of the allowance for doubtful trade
and other receivables are provided in note 18.
(b) Provisions for inventories
The Group reviews the net realisable value of, and demand for,
its inventory on a regular basis to provide assurance that recorded
inventory is stated at the lower of cost and net realisable value.
Factors that could impact estimated demand and selling prices
include the timing and success of future technological innovations,
competitor actions, supplier prices and economic trends. Changes of
the expected net realisable value of inventory could potentially
result in the reduction of the profit for the year. The Group has
not made significant provisions for slow moving and obsolete stock
as its amount was negligible.
(c) Revaluation of land and buildings
The Group has used a valuation from an independent valuer to
estimate the fair value of land and property and to calculate the
deferred income tax liabilities accordingly based on management's
best judgement. The fair value of land and property relies upon
open market transactions. If the operating subsidiary in China
fails to maintain its high technology enterprise status the actual
outcome on deferred income tax liabilities would differ by 10 per
cent. from management's estimate and the Group would need to
increase the deferred tax liabilities by RMB6.44 million.
4 SEGMENT INFORMATION
The sales revenue arises from the sale of universal lathes, CNC
machinery, large-scale machinery, and relevant spare parts which
forms the Group's main business.
All the activities are within the PRC. Therefore management
considers no detail of operating and geographical segments
information is to be reported.
8.86% (2010: 4.24%) of sales made via PRC agents to customers
overseas.
Analysis of revenue from the sale of goods and services are as
follows:
Group Group
2011 2010
RMB'000 RMB'000
Universal 142,540 114,621
CNC 74,892 51,492
Large-scale 44,245 32,302
Others 1,830 11,542
Sales related taxes (1,400) (288)
262,107 209,669
========= ===========
5 EXPENSES BY NATURE
Group Group
2011 2010
RMB'000 RMB'000
Changes in inventories of finished goods and
work in progress (13,459) (26,615)
Raw materials, consumables used, direct costs,
and overheads 183,998 164,526
Employee benefit expense (note 6) 33,030 23,722
Exchange difference (832) -
Sales agents' commissions 5,074 3,902
Warranty costs 2,249 1,525
Depreciation, amortisation and impairment charges 12,060 7,797
Operating lease payments 446 594
Transportation costs 2,146 1,638
Travel and entertaining 4,606 3,901
Other expenses 5,534 5,404
--------- ---------
Total cost of sales, distribution costs and administrative
expenses 234,852 186,394
========= =========
6 EMPLOYEE BENEFIT EXPENSE
Group Group
2011 2010
RMB'000 RMB'000
Wages and salaries - normal 20,284 12,398
Wages and salaries - annual bonus 6,538 6,043
Social security costs and welfare 9,780 6,950
--------- --------
36,602 25,391
Included in inventories (3,572) (1,669)
33,030 23,722
========= ========
2011 2010
Number Number
The average monthly number of
people employed 760 678
======== ========
7 LISTING COSTS
Win Yu reversing into Qihang was to obtain the listing status.
The substance of this transaction is Qihang received approximate
RMB3.4 million in placing and incurred approximate RMB6.7 million
listing costs. This is an equity-settled share-based payment
transaction. Qihang received RMB3.4 million and obtained listing
status which does not quality for recognition as an asset.
Therefore it has recognised as an expense.
8 INVESTMENT INCOME
Group Group
2011 2010
RMB'000 RMB'000
Interest income on short-term bank deposits 799 283
Interest income on loans to related parties 1,133 1,133
Interest income on other loans 867 867
Income from available-for-sale financial assets - 12
Dividend received - -
2,799 2,295
========= ========
9 FINANCE COSTS
Group Group
2011 2010
RMB'000 RMB'000
Interest on bank borrowings 11,793 7,094
Bank charges 1,605 715
Less: amount capitalised for qualifying assets (1,119) (764)
Interest on other borrowings 52 -
12,331 7,045
========= ========
10 INCOME TAX EXPENSE
10.1 Income taxes recognised in profit and loss
2011 2010
RMB'000 RMB'000
Current income tax 3.417 2,695
Adjustment in respect of prior year (2,761) 430
-------- --------
Total tax charge 656 3,125
-------- --------
Deferred tax assets
Origination and reversal of timing
difference 98 (912)
-------- --------
Total deferred tax 98 (912)
-------- --------
Income tax expense 754 2,213
======== ========
Reconciliation at effective tax rates
Profit before tax 8,868 21,766
======== ========
Tax on profit at the prevailing rate
applicable 2,217 5,442
Exempt company status 2,859 -
Preferential tax rate (2,278) (1,778)
Expenses not deductible for tax 638 1,564
Income not subject to tax - (2,533)
On timing differences 98 (912)
Adjustment in respect of prior years (2,761) 430
Unrelieved tax losses c/f 65 -
Others (84) -
754 2,213
======== ========
The Company is regarded as resident for tax purposes in Jersey
and on the basis that the Company is neither a financial services
company nor a utility company for the purposes of the Income Tax
(Jersey) Law 1961, as amended; the company is subject to income tax
in Jersey at a rate of zero per cent.
Win Yu International Investments Company Limited is regarded as
resident for the tax purposes in Hong Kong. There is no tax
liability due to losses during the year.
Heng Tai Feng International Holdings Limited was registered in
BVI. It is not regarded as resident for the tax purposes in BVI.
Therefore, it will not be liable to BVI income tax in this respect
other than on BVI source income.
The Group's operating subsidiaries in PRC are subject to income
tax rate at 25% (2010: 25%) except certain operating subsidiaries
which are entitled to a reduction in tax rate at 15% (2010: 15%)
and due to its high technology enterprise status.
10.2 Income taxes recognised in comprehensive income
2011 2010
RMB'000 RMB'000
The tax charge relating to components of other
comprehensive
income is as follows:
Fair value gain on land and buildings
Before tax - 64,367
Tax charge - (9,655)
--------- --------
After tax - 54,712
Other comprehensive income - 54,712
========= ========
Deferred tax (note 25) - (9,655)
========= ========
11 EARNINGS PER SHARE
Earnings per share are calculated by dividing the profit
attributable to equity shareholders of the Company by the weighted
average pre-combination ordinary shares multiplied by exchange
ratio established in the acquisition, and the weighted average
total actual shares of the parent in issue after the date of
acquisition.
For comparative, earnings per share are calculated by dividing
the profit attributable to equity shareholders of the Company by
the weighted average ordinary shares multiplied by exchange ratio
established at acquisition.
Diluted earnings per share are calculated by adjusting the
weighted average number of ordinary shares outstanding to assume
conversion of all dilutive potential ordinary shares. The dilutive
potential ordinary shares in the company are convertible loan
notes. This convertible loan notes have been settled after the year
end, therefore the management considered diluted effect is
immaterial.
2011 2010
RMB RMB
Earnings
Earnings for the purposes of basic and
diluted earnings per share being net
profit attributable to equity holders
of the parent 8,113,560 14,663,684
Number of shares
Weighted average number of ordinary shares
for the purposes of basic earnings per
share 48,099,998 38,325,737
=========== ===========
12 PROPERTY, PLANT AND EQUIPMENT
Group
Asset Building Plant and Fixtures Motor vehicles Other Total
under construction machinery fittings assets
&
equipment
RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000
Cost
At 1 January 2010 6,785 56,831 69,530 2,643 2,478 1,316 139,583
Revaluation surplus - 36,568 - - - - 36,568
Additions 32,852 - 786 522 163 164 34,487
Transfers (39,484) 37,762 1,722 - - - -
Disposals - (3,167) (1,122) (275) - - (4,564)
-------------------- --------- ----------- ----------- --------
At 31 December 2010 153 127,994 70,916 2,890 2,641 1,480 206,074
Adjustment - 3,236 - - - - 3,236
Additions 41,068 1,418 6,370 382 323 - 49,561
Transfers (2,059) 224 1,835 - - - -
Disposal of
subsidiary - - - (125) - - (125)
Disposal - - (264) (1) - - (265)
-------------------- --------- ----------- ----------- --------------- -------- ---------
At 31 December 2011 39,162 132,872 78,857 3,146 2,964 1,480 258,481
==================== ========= =========== =========== =============== ======== =========
Accumulated
depreciation
At 1 January 2010 - 6,824 26,984 1,459 938 316 36,521
Charge for the year - 3,419 4,751 232 426 396 9,224
Disposals - (2,809) (959) (238) - - (4,006)
-------------------- --------- ----------- ----------- --------------- -------- ---------
At 31 December 2010 - 7,434 30,776 1,453 1,364 712 41,739
Adjustment - 3,236 - - - - 3,236
Charge for the
period - 4,242 5,124 342 380 340 10,428
Charge for the
period -
on revaluation - 1,925 - - - - 1,925
On disposal of
subsidiary - - - (63) - - (63)
On disposal - - (237) (1) - - (238)
-------------------- --------- ----------- ----------- --------------- -------- ---------
At 31 December 2011 - 16,837 35,663 1,731 1,744 1,052 57,027
==================== ========= =========== =========== =============== ======== =========
Carrying value
At 31 December 2011 39,162 116,035 43,194 1,415 1,220 428 201,454
==================== ========= =========== =========== =============== ======== =========
At 31 December 2010 153 120,560 40,140 1,437 1,277 768 164,335
==================== ========= =========== =========== =============== ======== =========
Asset under construction represent the construction of new
production line to increase the production capacity.
Revaluation of asset
The Group's land use right and buildings were revalued on 27
March 2012 by independent valuers. The revaluation amount are RMB41
million and RMB119 million respectively. The valuation was made on
the basis of recent market transactions on arm's length terms and
depreciated replacement cost for land and buildings respectively.
The Directors considered that the carrying value of the land use
right and buildings do not differ materially from that which would
be determined using revaluation amount at the end of the reporting
period. Therefore carrying amounts are at their approximate fair
value.
Assets pledged as security
Land use right and buildings with carrying amounts of
approximate RMB156 million has been pledged to secure the
borrowings of the Company (see note 23).
Had the Group's land use right and building been measured on a
historical cost basis, their carrying amount would have been as
follow:
2011 2010
RMB'000 RMB'000
Land use right 12,494 12,778
Buildings 81,391 83,992
========= ========
13 INTANGIBLE ASSETS
The Company obtained the right to occupy the land at Zhenjiang
New Development Area, Dingmao Nanwei Road 2, Zhenjiang Province,
PRC for a period of 50 year from June 2005. The remaining period of
amortisation is approximate 45.5 years.
Refer to note 12(b) and 12(c) for revaluation of asset and
assets pledged as security.
Land use Purchased Patent Total
right software
RMB'000 RMB'000 RMB'000 RMB'000
Cost
At 1 January 2010 21,689 258 - 21,947
Revaluation surplus 27,799 - - 27,799
Disposals (7,451) - - (7,451)
--------- ---------- -------- --------
At 31 December 2010 42,037 258 - 42,295
Adjustment (1,447) - - (1,447)
Additions - 364 3,184 3,548
Disposals - - - -
--------- ---------- -------- --------
At 31 December 2011 40,590 622 3,184 44,396
========= ========== ======== ========
Amortisation
At 1 January 2010 1,966 32 - 1,998
Charge for the year 350 85 - 435
On disposal (856) - - (856)
--------- ---------- -------- --------
At 31 December 2010 1,460 117 - 1,577
Adjustment (1,447) - - (1,447)
Charge for the year 285 218 212 715
Charge for the year - on revaluation 631 - - 631
On disposal - - - -
--------- ---------- -------- --------
At 31 December 2011 929 335 212 1,476
========= ========== ======== ========
Carrying value
At 31 December 2011 39,661 287 2,972 42,920
========= ========== ======== ========
At 31 December 2010 40,577 141 - 40,718
========= ========== ======== ========
14 INVESTMENTS
Details of the Company's investment in subsidiaries at 31
December 2011 are as follows:
Name of Place of Proportion Principal activities
subsidiary incorporation of ownership
(or registration) interest
and operation %
Win Yu International Investments Hong Kong 100% Holding company
Company Limited
Heng Tai Feng International British Virgin 100% Holding company
Holdings Limited** Islands
100% Manufacture of
Jiangsu Qihang CNC Machine PRC lathes and machinery
Tool Co., Limited** tools
** Held by subsidiary company
On 28 October 2011, Heng Tai Feng International Holdings Limited
transferred its 30% holding in Jiangsu Qihang CNC Machine Tool Co.,
Limited to Win Yu International Investments Company for cash
consideration of RMB19 million. As a result of this Win Yu
International Investments Company Limited owned entire share
capital of Jiangsu Qihang CNC Machine Tool Co., Limited.
15 AVAILABLE FOR SALE FINANCIAL ASSET
Group Group
2011 2010
RMB'000 RMB'000
At 1 January - -
On business combination 2,023 -
Fair value adjustment (1,241) -
Exchange difference (125) -
-------- --------
At 31 December 657 -
======== ========
The above available-for-sale investment is fairly stated at its
fair value. The historical cost of investment is GBP200,000.
16 DERIVATIVE FINANCIAL INSTRUMENTS
Group Group
2011 2010
RMB'000 RMB'000
At 1 January - -
On business combination 461 -
Fair value adjustment (461) -
At 31 December - -
======== ========
The fair value of the share option was calculated using a
Black-Scholes option pricing model. The volatility was
measured at 25%, the risk free rate was 0.5% and the expected
dividend was nil. The fair values and other details which were
processed into the model are as follows:
Number Grant date Exercise Fair value Exercise period
of options price
22/12/2009
50,000,000 22/12/2009 0.8p nil - 21/12/2012
On 23 February 2012, the company has transferred 50,000,000
options to subscribe for ordinary shares, exercisable at 0.8 pence
per share, in Metroelectric plc to Wonder Employee Capital Limited
("WECL") in part settlement of the loan of GBP200,000 received by
the company from WECL in 2009, see note 23.
17 INVENTORIES
2011 2010
RMB'000 RMB'000
Raw materials and consumables 33,000 32,246
Work in progress 57,403 44.825
Finished goods 1,861 1,734
92,264 78,805
========= ========
The cost of inventories recognised as an expense includes
RMB51,103 (2010: RMB364,103 write down) in respect of write back of
inventories to net realisable value.
18 TRADE AND OTHER RECEIVABLES
Group Group
2011 2010
RMB'000 RMB'000
Trade receivables - net 11,652 5,097
Notes receivables 17,435 1,768
Other receivables - net 24,875 49,304
Loans to related parties - 11,334
Prepayments and accrued income 1,167 -
55,129 67,503
======== ========
Provision for impairment has been made for estimated
irrecoverable amount from the sale of goods and other loans which
has been determined by reference to past default experience. It is
the Group's policy to made general allowance for doubtful debts on
outstanding balances of more than 180 days as at period end.
Movements on the Group provision for impairment of trade
receivables are as follows:
2011 2010
RMB'000 RMB'000
At 1 January 180 147
Allowance for the year 3 33
At 31 December 183 180
========= ========
Movements on the Group provision for impairment of other
receivables are as follows:
2011 2010
RMB'000 RMB'000
At 1 January 2,779 2,995
Allowance for the year (2,379) (216)
At 31 December 400 2,779
========= ========
At 31 December 2011, the aging analysis of trade receivables is
as follows:
2011 2010
RMB'000 RMB'000
Up to 3 months 11,220 4,735
3 - 6 months 9 142
6 - 12 months 41 142
1 - 2 years 382 59
Over 2 years - 19
At 31 December 11,652 5,097
========= ========
The Company provides loans to certain trading partners at
commercial terms. These are generally repayable within a year and
are included in other receivables above.
2011 2010
RMB'000 RMB'000
Loan to Zhenjiang Xinrun - 4,972
Loan to Shenzhen Zhonghemei - 8,666
Loan to Zhenjiang Anda Machinery
Co Ltd - 16,750
Loan to Shenzhen Century Feng
Tai - 365
- 30,753
============================================= ========
Also included in other receivables are:
2011 2010
RMB'000 RMB'000
Payments on account 10,116 12,140
Payment to be refunded on cancellation of 10,800 -
contract on plant ordered
Deposit for guarantee on bank borrowings 3,571 5,186
24,487 17,326
========= ========
The directors consider that the carrying amount of trade and
other receivables approximate their fair value.
19 AVAILABLE-FOR-SALE FINANCIAL ASSETS
The available-for-sale financial assets represent investment in
mutual fund under the Bank of Communications in PRC. The carrying
amount is approximate its fair value and the maximum exposure to
credit risk at the reporting period is the carrying value of the
fund classified as available for sale.
20 CASH AND CASH EQUIVALENTS
Group Group
2011 2010
RMB'000 RMB'000
Cash at bank and on hand 16,440 18,512
Short-term bank deposits 30,720 14,120
47,160 32,632
========= =========
Bank balances and cash comprise cash held by the Group and
short-term bank deposits with an original maturity of six months or
less. The carrying amount of these assets approximates their fair
value.
21 SHARE CAPITAL AND SHARE PREMIUM
2011 2010 2011 2010
GBP'000 GBP'000 RMB'000 RMB'000
Authorised:
200,000,000 ordinary shares of
2.5p each 5,000 1,625 52,343 16,655
======== ======== ======== ========
Pursuant to a special resolution of the company on 1 July 2011
the authorised share capital of the Company was increased from
65,000,000 shares to 200,000,000 shares.
Issued and fully paid: Number Share Share
of Capital Premium
shares
GBP GBP
At 1 January and 31 December
2010 18,000,000 450,000 1,935,980
Placing on 4 July 2011 1,710,526 42,763 282,237
On 4 July 2011 38,325,737 958,143 6,323,747
Less share issue costs (note
7) - - (282,237)
------------ ----------- -----------
At 31 December 2011 58,036,263 1,450,906 8,259,727
============ =========== ===========
RMB'000 RMB'000
At 31 December 2011 15,196 86,711
=========== ===========
On 4 July 2011, the Company's shares were re-admitted to AIM
market and received GBP325,000 in placing through the issue of
1,710,526 shares at 19p each.
On the same day, the Company issued 38,325,737 shares at 19p
each to the vendor of Win Yu as part of the consideration paid for
the acquisition of Win Yu Group.
22. OTHER RESERVES
Group Group
RMB'000 RMB'000
Revaluation reserves 54,712 54,712
Available-for-sale financial assets (1,241) -
Other reserves 26,318 26,318
Translation reserves (380) -
Statutory reserves 5,290 3,192
Merger reserves (100,043) (24,446)
---------- ---------
(15,344) 59,776
========== =========
Other reserves
Other reserves represent loans waived by Mr Li Yuanqing, a
shareholder and a director of the Company.
Statutory reserves
In accordance with the relevant regulations applicable in the
PRC, companies now comprising the Group established in the PRC are
required to transfer at least 10% of their statutory annual profits
after tax to the statutory reserve until the balance of the reserve
reaches 50% of their respective registered share capital. Subject
to certain restrictions as set out in the relevant PRC regulations,
the statutory reserve may be used to offset against accumulated
losses of the respective PRC companies. The amount of the transfer
is subject to the approval of the board of directors of the
respective companies.
Merger reserves
Merger reserves arose due to capital restructuring of the Group
whereby Win Yu Group reversing into Qihang, cash shell as at date
of business combination.
23 BORROWINGS
Non-current Group Group
2011 2010
RMB'000 RMB'000
Bank borrowings - 50,000
Loan from a director 42,000 42,000
Loan from WECL 2,445 -
Other 1,000 -
45,445 92,000
======== ========
Current Group Group
2011 2010
RMB'000 RMB'000
Bank borrowings 186,350 97,930
186,350 97,930
======== ========
Loan from a director represents interest free loan from Mr Li
Yuanqing. The loan is repayable after 12 months.
The loan from Wonder Employee Capital Limited ("WECL") was
entered into on 6 January 2010. The loan of GBP200,000 is for a 3
year period with interest accruing at 5% per annum. WECL has the
right to convert the loan into ordinary shares in the capital of
the Company at a price of 10p per ordinary share.
On 23 February 2012, the Company has transferred 25,000,000
ordinary shares and 50,000,000 options to subscribe for ordinary
shares, exercisable at 0.8 pence per share, in Metroelectric plc to
Wonder Employee Capital Limited ("WECL") in full and final
settlement of the above loan.
The bank borrowings are secured by:
- land use right and property of the Group (note 12 and 13);
- land use right and property owned by Zhenjiang Anda Machinery
Co Ltd
- Zhenjiang SME Investments Security Co., Limited; and
- Personal guarantee from Mr Li Yuanqing
Zhenjiang Anda Machinery Co Ltd is the parent company of
Zhenjiang Anda Coal Mine Special Equipment Co Ltd (see note
32).
The average interest rate paid is 7.5% (2010: 5.8%) annually.
The borrowings are arranged at fixed interest rates and the
directors consider that the carrying amount of the borrowings
approximate to their fair value.
24 TRADE AND OTHER PAYABLES
Group Group
2011 2010
RMB'000 RMB'000
Trade payables 56,913 53,993
Notes payables 21,038 22,144
Customer advances 5,710 14,822
Social security and other taxes 1,217 867
Other creditors 6,086 5,620
90,964 97,446
======== ========
The directors consider that the carrying amount of trade and
other payables approximate to their fair value.
25 DEFFERED INCOME TAX
2011 2010
RMB'000 RMB'000
The analysis of deferred tax assets and deferred
tax liabilities is as follows:
Deferred tax assets
- -
* Deferred tax assets to be recovered after more than
12 months
* Deferred tax assets to be recovered within 12 months (456) (554)
-------- --------
(456) (554)
-------- --------
Deferred tax liabilities
* Deferred tax liabilities due after more than 12
months 9,655 9,655
- -
* Deferred tax liabilities due within 12 months
-------- --------
9.655 9,655
-------- --------
Deferred tax liabilities (net) 9,199 9,101
======== ========
The movement in deferred income tax assets and liabilities
during the year, without taking into consideration the offsetting
of balances within the same jurisdiction, is as follow:
Accelerated Fair Total
Tax depreciation value
gains
RMB'000 RMB'000 RMB'000
At 1 January 2010 358 - 358
Credit to income statement (912) - (912)
Charge to other comprehensive income - 9,655 9,655
------------------ -------- --------
At 31 December 2010 (554) 9,655 9,101
Charge to income statement 98 - 98
At 31 December 2011 (456) 9,655 9,199
================== ======== ========
26 NON-CONTROLLING INTEREST
2011 2010
RMB'000 RMB'000
At 1 January - 16,483
Share of profit - 4,889
Purchase of shares from non-controlling interest - (21,372)
-------- ---------
At 31 December - -
======== =========
In November 2010, Win Yu acquired entire share capital of Heng
Tai Feng International Holdings Limited which owned 30% of Jiangsu
Qihang CNC Machine Tool Co., Limited for a total consideration of
RMB20 million. This has been accounted for as transaction between
parent and non-controlling interest. The difference between the
amount paid for and the carrying value of net assets is just
adjusted through equity. As a result of this, Jiangsu Qihang CNC
Machine Tool Co., Limited become wholly owned subsidiary of the Win
Yu.
27 NOTES TO THE CASH FLOW STATEMENT
Group Group
2011 2010
RMB'000 RMB'000
Profit before interest and tax 18,400 25,800
Adjustments for:
Depreciation of property, plant and equipment 12,353 9,224
Amortisation of intangibles 1,346 435
Loss on disposal of assets 27 7,153
Loss/(gain) on disposal of investment in subsidiary 63 -
Fair value gain on derivative financial instrument 461 -
Bad debts written off - 5,947
Dividends received - -
Operating cash flows before movements in working
capital 32,650 48,559
Increase in inventory (14,057) (26,615)
(Increase)/decrease in trade and other receivables (10,443) (10,706)
(Decrease)/increase in trade and other payables (2,911) 10,998
--------- ---------
Net cash generated from/(used in) operations 5,239 22,236
Finance costs paid (12,331) (6,330)
Income tax refunded 2,761
Income taxes paid (2,477) (1,693)
Net cash (used in)/generated from operating activities (6,808) 14,213
========= =========
28 DISPOSAL OF SUBSIDIARY COMPANIES
On 1 January 2011, the Group disposed of its gear operations.
Details of the disposal are as follow:
Book value of net assets sold
RMB'000
Current assets
Inventories 598
Notes receivables 694
Trade receivables 22,122
Cash and cash equivalents 4,107
Non-current assets
Property, plant and equipment 62
Current liabilities
Bank borrowings (13,950)
Trade payables (3,439)
Other payables (131)
Net assets disposed of 10,063
Cash consideration 10,000
---------
Loss on disposal 63
=========
Net cash inflow on disposal
Consideration received 10,000
Less: cash and cash equivalent balances disposed
off (4,107)
---------
5,893
=========
29 COMMITMENTS
Capital commitments
2011 2010
RMB'000 RMB'000
Commitments for the construction
of additional production line 50,000 -
(note 12)
========= ========
Commitments under operating leases
At the reporting date, the Group had outstanding commitments for
future minimum lease payments under non-cancellable operating
leases, which fall due as follow:
2011 2010
RMB'000 RMB'000
Land and buildings
Within one year - 410
- 410
=============================== ========
Operating lease payments represent rentals payable by the Group
for its properties.
30 GUARANTEE
The Group provided cash guarantees to bank borrowings of RMB23.5
million and RMB5 million taken out by Zhenjiang Anda Machine Co Ltd
and Zhenjiang Anda Coal Mine Special Equipment Co Ltd respectively.
The guarantees on borrowings of RMB11 million, RMB12.5 million and
RMB5 million are expiring on 30 June 2014, 3 November 2012 and 10
December 2012 respectively.
31 RELATED PARTY TRANSACTIONS
Transactions within the Group have been eliminated in the
preparation of the financial information set out in this report and
are not disclosed in this note. Balance with other related parties
have been disclosed under the relevant notes.
The Group is controlled by Proud Style Limited by virtue of its
shareholding, a company owned by Mr Li Yuanqing, a director of the
Group.
Key management compensation
Key management includes directors of the company and its
subsidiaries. The compensation paid or payable to key management
for the employee services is shown on page 5 of the Report of the
Directors.
32 EVENT AFTER THE REPORTING DATE
On 6 January 2012, the Group acquired the entire share capital
of Zhenjiang Anda Coal Mine Special Equipment Co Ltd ("ZACM"), a
manufacturer of coal mining equipment such as drilling machines,
pumps, dust catchers, drill pipe and accessories for a cash
consideration up to RMB35 million. RMB30 million of the
consideration was paid immediately and the balance of RMB5 million
is payable by 31 March 2013 conditional upon ZACM reporting profit
after tax of at least RMB9 million for the year ended 31 December
2012. In the event that ZACM does not achieve this profit target
then the deferred consideration will be reduced proportionally. The
unaudited net assets of ZACM at 31 December 2011 were RMB23.84
million.
33 FINANCIAL INSTRUMENTS
In common with all other businesses, the Group is exposed to
risks that arise from its use of financial instruments. This note
describes the Group's objectives, policies and processes for
managing those risks and the methods used to measure them.
There have been no substantive changes in the Group's exposure
to financial instrument risks, its objectives, policies and
processes for managing those risks or the methods used to measure
them from previous periods, unless otherwise stated in this
note.
Principal financial instruments
The principal financial instruments used by the Group, from
which financial instrument risk arises, are as follows:
- Trade and other receivables
- Cash and cash equivalents
- Trade and other payables
- Borrowings
The above are designated as receivables and financial
liabilities which are measured at amortised cost.
- Available-for-sale financial assets
- Derivative financial instruments
The above are designated as investments and measured at fair
value.
General objective, policies and procedures
The Board has overall responsibility for the determination of
the Group's risk management objectives and policies and, whilst
retaining ultimate responsibility for them, it has delegated the
authority for designing and operating processes to executive
management.
The overall objective of the Board is to set policies that seek
to reduce risk as far as possible without unduly affecting the
Group's competitiveness and flexibility. Further details regarding
these policies are set out below:
(a) Credit risk
Credit risk arises principally from the Group's trade and other
receivables. Cash is placed with creditworthy financial
institutions.
The Group controls the credit risk from customers through
deposit payments prior to delivery of goods. Trade and other
receivables presented in the balance sheet are net of an allowance
for doubtful receivables, estimated by management based on current
economic conditions. Receivables net of this allowance for doubtful
receivables is the Group's maximum exposure to credit risk, being
RMB55 million (2010: RMB67 million).
Quantitative disclosures of the credit risk in relation to trade
and other receivables are disclosed in note 18.
(b) Liquidity risk
Liquidity risk arises from the Group's management of working
capital. It is the risk that the Group will encounter difficulty in
meeting its financial obligations as they fall due.
The Group's policy as regards liquidity is to ensure sufficient
cash resources are maintained to meet short-term liabilities. The
Group has no defaults or breaches on its financial liabilities.
(c) Currency risk
Foreign exchange risk refers to the risk that movement in
foreign currency exchange rates against the Group's functional or
reporting currency will affect the Group's financial results and
cash flows. The Group has transaction currency exposures. Such
exposure arises from sales by an operating unit in currencies other
than its functional currency.
During the period under review the Group has no export sales,
therefore, no foreign currency sales. The Group's policy, as it
relates to currency risk, is to limit payment terms to immediate
letters of credit or prepayment before transporting goods to
customers.
If the exchange rate on uncovered exposures were to move
significantly between the year end and date of payment or receipt,
there could be an impact on the Group's net income. As such,
financial assets and liabilities are short term in nature; this
risk is not considered to be substantial.
Foreign exchange risk has not been considered to be material in
either the current or preceding period.
(d) Interest rate risk
Interest rate risk arises from the potential changes in interest
rates that may have an adverse effect on the Group in the current
reporting period and in future years.
The Group is exposed to interest rate risk through the impact of
change in interest rates on interest bearing debts and
interest-bearing cash. Other than the bank deposits and borrowings,
the Group has no other significant interest-bearing assets and
liabilities. The Group's policy is to secure all to its borrowings
at fixed borrowing rates.
Interest rate risk has not been considered to be material in
either the current or preceding period.
(e) Capital
The Group considers its capital to comprise its ordinary share
capital, share premium and retained earnings. In managing its
capital, the Group's primary objective is to ensure its continued
ability to provide a consistent return for its equity shareholders
through a combination of capital growth and distributions. The
Group has historically considered a mix of debt and equity funding
as the most appropriate form of capital for the Group.
(f) Market price risk
The Group manages its market risks associated with quoted equity
shares on its own and does not engage the services of fund
managers. The Group monitors fluctuations of the indices on London
Stock Exchange and trading is kept at a minimum.
34 ADDITIONAL FINANCIAL INFORMATION
Details of the financial information of Win Yu Group are as
follow:
Income statement
2011 RMB'000
Revenue 262,107
Cost of sales (189,903)
-------------
Gross profit 72,204
Other operating income 1,597
Distribution expenses (18,024)
Administrative expenses (22,657)
Research and development
costs (3,236)
Profit/(loss) from operation 29,884
Non-operating income net
of expenses 5
(Loss)/profit on disposal
of subsidiaries (63)
Income from subsidies 50
Investment income 2,707
Finance costs (12,279)
-------------
Profit before taxation 20,304
Income tax expenses (754)
-------------
Profit for the year 19,550
-------------
Statement of financial position
20 11
RMB'000
Non-current assets
Property, plant and equipment 201,446
Intangible assets 42,920
Deferred tax asset 456
--------
244,822
--------
Current assets
Inventories 92,264
Trade and other receivables 55,728
Available-for-sale-financial asset 100
Cash and cash equivalents 42,925
--------
191,017
--------
Total assets 435,839
========
Equity and reserves
Share capital 8
Revaluation reserves 54,712
Other reserves 26,318
Statutory reserves 5,290
Retained earnings 19,952
--------
106,280
--------
Current liabilities
Bank borrowings 186,350
Income tax liabilities 1,371
Trade and other payables 89,183
--------
276,904
--------
Non-current liabilities
Bank borrowings -
Other borrowings 43,000
Deferred tax liabilities 9,655
--------
52,655
--------
Total liabilities 329,559
========
Total equity and liabilities 435,839
========
Profit reconciliation
RMB'000
Win Yu Group profit 19,550
Qihang loss for the period from date of business
combination (5,111)
Adjustment to listing cost due to capital restructuring (6,325)
--------
Qihang Group profit 8,114
========
This information is provided by RNS
The company news service from the London Stock Exchange
END
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