TIDMCNEL
RNS Number : 7517C
China New Energy Ltd
30 June 2016
30 June 2016
China New Energy Limited
("CNE" or "the Company")
Final Results for the Year Ended 31 December 2015
The Board of CNE (AIM:CNEL), the AIM quoted engineering and
technology solutions provider to the bioenergy sector, presents its
final results for the year ended 31 December 2015.
The full version of the report and accounts for the year ended
31 December 2015 is be available from the Company's website
www.chinanewenergy.co.uk and notification of posting of the
accounts, together with the Notice of AGM, will shortly be sent to
all shareholders.
The Company also announces, further to the announcement of 2
June 2016, that it has been advised by Sunbird Bioenergy Africa
Limited of a further postponement of the signing if the Investment
Promotional and Protection Agreement ("IPPA") which was expected by
the end of June 2016. The Company will update the market once this
document has been signed.
Mr. Yu commented "Despite the low oil price and, consequently,
the lower level of investment in the biofuel industry during the
year under review, I am pleased that we have increased our revenue
and have won contracts and opportunities to expand into new
regions. We still see deploying first generation technology in
developing countries as an area of core growth however we remain
determined to progress second generation biofuel production".
For further information, please visit www.chinanewenergy.co.uk
or contact:
China New Energy Limited www.chinanewenergy.co.uk
Richard Bennett rbennett@zkty.com.cn Tel:
+44 7966 388374
Ivy Xu xuhj@zkty.com.cn Tel:
+86 20 8705 9371
Cairn Financial Advisers Tel: +44 20 7148 7900
LLP (Nomad)
Jo Turner / Sandy Jamieson
Daniel Stewart and Co Tel: +44 20 7776 6550
Martin Lampshire / David
Coffman
CHAIRMAN'S STATEMENT
I am pleased that we continue to make progress, albeit slow and
in the face of many industry headwinds, most notably the continued
depressed oil price.
For the year ended 31 December 2015, the Group's total revenue
was RMB61.7 million (c. GBP 6.4million), an increase of 7.6% from
RMB57 million (c. GBP5.9million).
As a developer of biofuel projects, our industry is healthy when
biofuel is cost competitive with petrol, and when oil the oil price
is low as it is today, then projects become marginal which tends to
cause delays in projects. To mitigate this, the management have
focussed on three areas; maintenance and efficiency of existing
projects, diversification into other technologies, and development
of projects where there are intangible benefits such as reduced
carbon dioxide emissions or job creation as is the case with the
pipeline of projects in sub-Saharan Africa.
During the period, the majority of the revenues were derived by
providing maintenance services to existing clients. The company
placed significant effort into diversification of technology and
was thrilled to win its first order from BioNeutra North America
Inc ("BioNeutra") to design, manufacture and install a 5,000 ton
per isomaltooligosaccharide ("IMO") production line extension to
BioNeutra's existing facilities. This order will be fulfilled and
contribute to revenues in 2016, and presents a potential new
business line in the years beyond.
The company continues to develop it sales pipeline of projects
outside of China. We are disappointed to learn that there will be
delays in the projects in Thailand and Hungary which are largely
attributed to the low oil price and consequently the project owners
have been unable to complete the project finance. The company does
not consider these to be lost, and will continue the sales process,
and in particular seek a new finance partner for the Visontai
project in Hungary.
I remain optimistic about the sales pipeline of the projects in
Sub-Saharan Africa through our partner Sunbird Bioenergy Africa.
They report that they continue to make good progress, in particular
that they expect to make significant progress on the project in
Zambia this year. They have however just reported that the IPPA
signing has been postponed due to the current election in Zambia,
but they remain confident the IPPA and the environmental impact
study will be completed in Q3, and work on the project will
commence in 2016.
I expect the low oil price will continue to create challenges
for the industry during 2016. However, I am pleased the company
retains confidence of investors, and post the period end raised
GBP750k of working capital that will help the company to meet its
objectives this year. We will continue to carefully monitor the
cash flow and in particular the bad debt and other provisions, as
well as the ring-fenced funds relating to the court case with
Tangshan Chenhong Industry. It will also remain a priority for the
management team to fulfil the current order book and to convert the
sales pipeline into significant orders during the year.
On behalf of the Board, I would like to extend my appreciation
to our valued shareholders, supportive business partners and
associates, insightful management and dedicated staff for all their
contribution and commitment towards the Company. I would also like
to thank the Board of Directors for their invaluable counsel in
steering the Group through this challenging time.
Yu Weijun
Chairman
DIRECTORS' REPORT
The Directors present their report, together with the audited
financial statements for China New Energy Limited ('the Company')
and its subsidiary undertakings (together 'the Group) for the year
ended 31 December 2015.
Principal activities
The principal activity of the Company is an investment
holding.
The Group's principal activity is providing turnkey technology
solutions to manufacturers of ethanol, edible alcohol and acetic
acid from a range of bio-resources including corn, sugarcane,
cassava and other bio-resources.
Business review
The Group recorded an increase of 7.6% in revenue to RMB61.7
million (c.GBP6.4 million) for the financial year 2015 ("FY2015"),
reflecting the increased volume of contracts signed and executed.
The total value of contracts secured in FY2015 was RMB127 million.
It shows the business recovery is moderate in the year despite the
difficult trading conditions in the global ethanol market.
Our contracts' gross profit also increased to RMB7.7million in
FY2015 compared to a gross profit of RMB4.3million in FY2014.
Provisions including those for trade and other receivables for
the year total RMB9.0million (c. GBP0.93 million), compared to an
impairment of RMB7.0million (c. GBP0.73million) in last year.
Loss for the year is RMB 25.6 million and our revenue at
present, which we attribute to the low level of investment in the
industry, was not enough to make a profit in this period.
Risks and uncertainties
There are a number of potential risks and uncertainties which
could have a material impact on the Group's performance and could
cause actual results to differ materially from expected and
historic results. The Board monitors risks on an ongoing basis and
implements appropriate procedures and processes to try and mitigate
the adverse consequences of such risks.
The business faces three principal risks. Firstly, the Group
needs to expand, retain and improve its current position in the
industry. Future growth will be both organic and through potential
acquisitions. There are a number of uncertainties relating to
future acquisitions and there can be no guarantee that the Group
will be able to expand as envisaged.
The Board of Directors meets regularly to review the future of
the Group and potential areas for growth.
Secondly, the Group may need to raise additional capital to fund
its future expansion. There can be no assurance that the Group will
be able to obtain such funding.
The Board of Directors actively monitors its capital to ensure
that the Group operates as a going concern and maintains sufficient
flexibility to process planned wishes. This process considers the
variety of capital and the sources from which it would be
found.
Thirdly, the Group's operating subsidiaries' functional currency
is Chinese Yuan ("RMB"), the fluctuations in RMB could have an
adverse effect on the Group's business and operating results.
Group's financial risk management objectives, policies and
strategies are set out in Note 31. In addition, the risk profile
and financial instruments of the Group are set out in Notes 31 and
32.
Results and dividends
The financial results of the Group are set out below.
The directors do not recommend a dividend payment for the
year.
Directors' interests
The following directors have held office during the period under
review and their interests as at 31 December 2015, all of which are
beneficial unless otherwise stated, whether direct or indirect, of
the Directors and their families in the issued share capital of the
Company and options over ordinary shares which had been granted,
are as follows:
Number of % of issued
Name of Directors shares share capital
Yu Weijun * 90,932,440 22.35%
Tang Zhaoxing ** (Re-appointed
26 June 2015) 48,000,000 11.80%
Richard Bennett (Re-appointed
26 June 2015) - -
* Held through Leader Vision Investments Limited and Tewin Capital Holding Limited
** Held through Asia Tianxing Investment Limited
In accordance with Article 22.2 of the Articles of Association
of the Company, all directors shall not remain in office for longer
than 2 years since their last election or re-election without
submitting themselves for re-election. The directors will retire by
rotation, for which one third of directors who have been in the
office longest shall retire by rotation.
Directors' remuneration
2015 2014
RMB'000 RMB'000
Yu Weijun 487 615
Tang Zhaoxing 487 615
Chen Yong (resigned on
30 June 2014) - 48
Richard Bennett 192 194
Total 1,166 1,472
======== ========
Employment policies
The Group pursues a policy of equal opportunities to all
employees and potential employees. The Group has continued its
policy of giving fair consideration to applications for employment
made by disabled persons bearing in mind the requirements for
skills and aptitude for the job. In the areas of planned employee
training and career development, the Group strives to ensure that
disabled employees receive equal treatment, including opportunities
for promotion. Every effort is made to ensure that continuing
employment and opportunities are also provided for employees who
become disabled. It is the Group's policy to take the views of
employees into account in making decisions, and wherever possible
to encourage the involvement of employees in the Group's
performance.
Payments to suppliers
The Group's policy for the year ended 31 December 2015 is to
settle the terms of payment with suppliers when agreeing the terms
of the business transactions:
-- To ensure that suppliers are aware of the terms of payments
by the inclusion of the relevant terms in contracts; and
-- To pay in accordance with the Company's contractual and other legal obligations.
The number of days of trade purchases outstanding for the Group
as at 31 December 2015 was 265 days (2014: 251 days).
Substantial shareholders
The Group had been notified of the following beneficial interest
of 3% or more in its shares as at 31 May 2016:
Number of % of issued
Name of shareholders shares share capital
Leader Vision Investments
Limited (Yu Weijun)
* 64,000,000 15.73%
Asia Tianxing Investment
Limited (Tang Zhaoxing) 48,000,000 11.80%
Best Full Investments
Limited (Liang Hongtao) 48,000,000 11.80%
Jet-Air (HK) Limited 44,652,107 10.97%
Cobalt Ventures Limited 40,398,640 9.93%
Tewin Capital Holding
Limited (Yu Weijun)
* 26,932,440 6.62%
Mr Qiu Weiming 14,000,000 3.44%
Barclayshare Nominees
Limited 12,909,806 3.17%
* Both Held shares for Mr Yu Weijun, aggregated % of issued share capital is 22.35%
Going concern
The financial statements have been prepared assuming the Group
will continue as a going concern.
During the year ended 31 December 2015, the Group made a loss of
RMB25.6 million, which includes a provision on trade and other
receivables of RMB9.0 million (note 10 and 11), a provision on a
court case of RMB6.5 million (note 22), and research and
development expense of RMB2.4 million (note 22). At the year-end
date, the Group had net liabilities of RMB5.7 million (2014: net
assets of RMB21.8 million), of which RMB19.4 million (2014: RMB14.9
million) was cash in bank (note 12), including a restricted cash of
RMB8.1 million.
The Group has a cash balance of RMB13.4 million at 31 May 2016,
including restricted cash of RMB8.1 million.
The Directors consider that the Group has adequate resources,
especially with sufficient cash in bank and a proceeds of
GBP750,000 rose from new shares issuance recently, to continue in
operational existence for at least the next twelve months from the
date of approval of these financial statements.
However, at the year-end date, the Group's net liabilities
position led to a negative debt-to-equity ratio, means the Group's
net worth was negative. The ratio measured Group's capital
structure at year end was in an insolvent situation and indicated
the Group's trading as non-going concern unless there're
extenuating circumstances. The Group existing business suffered
significant operating losses to the year end 31 December 2015, also
spread to the current period. Due to the uncertainty of the
industry and economic slowdown in P.R. China, together with working
capital risks, the Directors consider 2016 is not going to be a
good year. The Group is currently evaluating new funding options,
operations are partially relying on project payments in advance
from customers and delaying payments to suppliers, which gives
uncertainty in the future going concern. This is because there can
be no guarantee that required funding can be raised and flexibility
on receipts and payments are going to be continued. Consequently, a
material uncertainty exists that may cast doubt on the Group's
ability to continue to operate as planned and to be able to meet
its commitments and discharge its liabilities in the normal course
of business for a period not less than twelve months for the date
of this report.
The financial statements do not include the adjustments that
would result if the Group was unable to continue in operation.
Events after the reporting period
The Group has raised GBP750,000 by way of a subscription in new
ordinary shares at a price of 2p per share from funds managed by an
institutional fund manager. The Group has issued 37,500,000 new
shares represents 8.44% of the enlarged issued share capital (note
36).
Statement of directors' responsibilities
Company law requires the directors to prepare financial
statements for each financial year which give a true and fair view
of the state of affairs of the Company and Group and of the profit
or loss of the Group for that period. In preparing those financial
statements, the directors are required to:
- select suitable accounting policies and then apply them consistently;
- make judgements and estimates that are reasonable and prudent;
- state whether applicable accounting standards have been
followed, subject to any material departures disclosed and
explained in the financial statements; and
- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business.
The directors confirm that they have complied with the above
requirements in preparing the financial statements.
The directors are responsible for keeping proper accounting
records which disclose with reasonable accuracy at any time the
financial position of the Company and the Group to enable them to
ensure that the financial statements comply with the Companies
(Jersey) Law, 1991. They are also responsible for safeguarding the
assets of the Company and the Group and hence for taking reasonable
steps for the prevention and detection of fraud and other
irregularities.
Statement of disclosure to auditors
The directors have confirmed that:
-- so far as each director is aware, there is no relevant audit
information of which the Company's auditors is unaware; and
-- each director has taken all the necessary steps he ought to
have taken as a director in order to make himself aware of any
relevant audit information and to establish that the Company's
auditor is aware of that information.
Auditors
In accordance with Article 109 of the Companies (Jersey) Law
1991, a resolution proposing that UHY Hacker Young LLP be
re-appointed for the forthcoming year will be put to the Annual
General Meeting.
By order of the Board
Yu Weijun
Director
CORPORATE GOVERNANCE STATEMENT
Principles of Corporate Governance
As a Group listed on AIM, the Group is not governed by the UK
Code of Corporate Governance adopted by the London Stock Exchange
('the Code'), but is required to operate principles of good
governance and best practice. Accordingly, the directors are
committed to the Code and believe that an effective system of
corporate governance supports the enhancement of shareholder value.
These principles have been in place since the Group's listing on 23
May 2011.
The directors acknowledge the importance of the Code and intend
to apply its principles so far as is practicable taking into
account the Group's size and stage of development. However, the
directors considered to update their FPP according to current
business situation, also identified a few risk areas and are trying
to make improvements.
The Group has one non-executive director.
The directors have established an Audit Committee (the "Audit
Committee"), a Remuneration Committee (the "Remuneration
Committee") and an AIM Rules Compliance Committee (the "AIM Rules
Compliance Committee") with formally delegated duties and
responsibilities to operate.
Audit Committee
The Audit Committee, which comprises of Richard Bennett as
Chairman, as well as Yu Weijun, determines and examines any matters
relating to the financial affairs of the Group including the terms
of engagement of the Group's auditors and, in consultation with the
auditors, the scope of the audit. The Audit Committee receives and
reviews reports from the management and the external auditor of the
Group relating to the annual and interim accounts and the
accounting and internal control systems of the Group. In addition,
it considers the financial performance, position and prospects of
the Group and ensures they are properly monitored and reported
on.
Remuneration Committee
The Remuneration Committee, which comprises Yu Weijun and
Richard Bennett, with Yu Weijun acting as Chairman, is responsible
for making recommendations to the Board on the Group's framework of
executive remuneration and its cost. The Committee determines the
contract terms, remuneration and other benefits for each of the
Executive Directors and senior employees, including performance
related bonus schemes, pension rights, option schemes and
compensation payments.
The Board
The Board is responsible to shareholders for the proper
management of the Group. The Non-Executive Director has a
particular responsibility to ensure that the strategies proposed by
the Executive Directors are fully considered. The Board has a
formal schedule of matters reserved to it and has discussions on a
frequent basis since its listing on the AIM Market. The Board is
responsible for overall strategy, reviewing management accounts,
approval of major capital expenditure projects and consideration of
significant financing matters.
Directors
During the year, the Board comprised the Chairman, Yu Weijun,
the Chief Executive Officer, Tang Zhaoxing, and a London based
Non-Executive Director, Richard Bennett.
The directors comply with Rule 21 of the AIM Rules relating to
directors' dealings and take all reasonable steps to ensure
compliance by the Group's applicable employees. The Group has
adopted and operates a share dealing code for directors, and
employees in accordance with the AIM Rules.
Internal controls
The directors are responsible for the Group's system of internal
controls and reviewing its effectiveness. The Board has designed
the Group's system of internal controls in order to provide the
directors with reasonable assurance that its assets are
safeguarded, that transactions are authorised and properly recorded
and that material errors and irregularities are either prevented or
would be detected within a timely period. However, no system of
internal controls can eliminate the risk of failure to achieve
business objectives or provide absolute assurance against material
misstatement or loss.
The key elements of the control systems in operation are:
-- The Board meets regularly with a formal schedule of matters reserved to it for decision.
-- It has put in place an organisational structure with clear
lines of responsibility defined and with appropriate delegation of
authority.
-- Established procedures for the planning, approval and
monitoring of capital expenditure and information systems for
monitoring the Group's financial performance against approved
budgets and forecasts.
-- Departmental heads are required annually to undertake a full
assessment process to identify and quantify the risks that face
their businesses and functions and assess the adequacy of the
prevention, monitoring and modification practices in place for
those risks.
-- Significant risks and associated controls and monitoring
procedures are reported regularly to the Board to enable the
Directors to review the effectiveness of the system of internal
controls.
Relations with shareholders
The Board attaches great importance to maintain a good
relationship with shareholders. The Board regards the annual
general meeting as a good opportunity to communicate directly with
investors who are encouraged to make inquiries to officers of the
Group.
INDEPENT AUDITORS' REPORT
We have audited the financial statements of China New Energy
Limited for the year ended 31 December 2015, which comprise the
consolidated and Group statement of comprehensive income, the
consolidated and Group statement of financial position, the
consolidated and Group statement of cash flows, the consolidated
and Group statement of changes in equity, and related notes. The
financial reporting framework that has been applied in their
preparation is applicable law and International Financial Reporting
Standards as adopted by the European Union (together, "IFRSs").
This report is made solely to the Group's members, as a body.
Our audit work has been undertaken so that we might state to the
Group's members those matters we are required to state to them in
an auditor's report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to
anyone other than the Group and the Group's members as a body, for
our audit work, for this report, or for the opinions we have
formed.
Respective responsibilities of directors and auditors
As explained more fully in the Statement of responsibilities of
those charged with governance in the Directors' Report, the
directors are responsible for the preparation of the financial
statements and for being satisfied that they give a true and fair
view. Our responsibility is to audit the financial statements in
accordance with relevant legal and regulatory requirements and
International Standards on Auditing (UK and Ireland). Those
standards require us to comply with the Auditing Practices Board's
(APB's) Ethical Standards for Auditors. We are not required to
consider whether the board's statements on internal control cover
all risks and controls, or form an opinion on the effectiveness of
the Group's corporate governance procedures or its risk and control
procedures.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements
is provided on the APB's website at
www.frc.org.uk/auditscopeukprivate
Opinion of financial statements
In our opinion:
-- the financial statements give a true and fair view of the
state of the Group's and of the parent Group's affairs as at 31
December 2015 and of the Group's loss and parent Group's loss for
the year then ended;
-- the financial statements have been properly prepared in
accordance with IFRS as adopted by the European Union; and
-- the financial statements have been prepared in accordance
with the requirements of the Companies (Jersey) Law 1991.
Emphasis of matter - Going concern
In forming our opinion on the financial statements, which is
unqualified as described above, we have considered the adequacy of
the disclosure made in directors' report, note 2.2 and note 32 to
the financial statements concerning the Group's ability to continue
as a going concern. The Group incurred a net loss of RMB25.6million
during the year ended 31 December 2015 and is still incurring
losses in the current period. In result of this year's losses, the
Group had net liabilities of RMB5.7million at year end. The Group's
forecasting is estimated an overall loss within next two years.
These conditions, along with other matters explained in note 2.2 to
the financial statements, indicate the existence of a material
uncertainty which may cast significant doubt about the Group's and
Group's ability to continue as a going concern. The financial
statements do not include the adjustments that would result (such
as impairment of assets) if the Group and Group were unable to
continue as a going concern.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters
where the Companies (Jersey) Law 1991 requires us to report to you
if, in our opinion:
-- proper accounting records have not been kept, or proper
returns adequate for our audit have not been received from branches
not visited by us; or
-- the financial statements are not in agreement with the accounting records and returns; or
-- we have not received any information or explanation that was necessary for our audit.
Julie Wilson
(Senior Statutory Auditor)
For and on behalf of
UHY Hacker Young LLP
CONSOLIDATED AND GROUP STATEMENT OF FINANCIAL POSITION
FOR THE YEARED 31 DECEMBER 2015
Group Company
Note As at 31 December As at 31 December
--------------------- ---------------------
2015 2014 2015 2014
RMB'000 RMB'000 RMB'000 RMB'000
Non-current assets
Property, plant
and equipment 5 5,887 7,900 - -
Intangible assets 6 12,150 8,139 - -
Trade receivables 11 - 3,523 - -
Investment in
subsidiary 7 - - 11,948 37,141
Investment 8 - - - -
---------- --------- ---------- ---------
18,037 19,562 11,948 37,141
---------- --------- ---------- ---------
Current assets
Inventories 9 9,938 11,840 - -
Due from customers
for construction
contracts 10 30,240 38,075 - -
Trade and other
receivables 11 43,152 45,167 5,895 3,631
Cash and cash
equivalents 12 19,426 14,875 2,806 4,497
---------- --------- ---------- ---------
102,756 109,957 8,701 8,128
---------- --------- ---------- ---------
Current liabilities
Borrowings 13 - 6,600 - -
Trade and other
payables 14 90,190 77,452 11,760 11,063
Due to customers
for construction
contracts 10 27,566 14,040 - -
Income tax payable 8,776 8,776 - 17
126,532 106,868 11,760 11,080
---------- --------- ---------- ---------
Net current assets/(liabilities) (23,776) 3,089 (3,059) (2,952)
========== ========= ========== =========
Non-current liabilities
Deferred tax
liabilities 27 - 815 - -
---------- --------- ---------- ---------
- 815 - -
---------- --------- ---------- ---------
Net assets/(liabilities) (5,739) 21,836 8,889 34,189
========== ========= ========== =========
Equity
Share capital 15 1,357 1,325 1,357 1,325
Share premium 15 56,696 54,925 56,696 54,925
Combination reserve 16 (33,156) (33,156) - -
Statutory reserve 17 12,328 12,328 - -
Warrant reserve 18 1,673 1,673 1,673 1,673
Accumulated losses (64,493) (38,895) (44,095) (17,182)
Prior year adjustments 19 (3,830) - - -
Foreign currency
translation reserve 20 23,686 23,636 (6,742) (6,552)
---------- --------- ---------- ---------
(5,739) 21,836 8,889 34,189
========== ========= ========== =========
The financial statements were approved and authorised for issue
by the board and were signed on its behalf on 29 June 2016.
Yu Weijun
Director
CONSOLIDATED AND GROUP STATEMENT OF PROFIT OR LOSS AND OTHER
COMPREHENSIVE INCOME
FOR THE YEARED 31 DECEMBER 2015
Group Company
Year ended Year ended
Note 31 December 31 December
-------------------- --------------------
2015 2014 2015 2014
RMB'000 RMB'000 RMB'000 RMB'000
Revenue 34 61,669 57,309 - -
Cost of sales (54,002) (53,010) - -
--------- --------- --------- ---------
Gross profit/(loss) 7,667 4,299 - -
Selling and distribution
expenses (5,754) (3,200) - -
Administrative
expenses (11,091) (11,517) (1,984) (3,332)
Other income 21 2,473 14,241 17 -
Other expenses 22 (9,450) (1,444) - -
Interest income 53 92 - -
Finance costs 23 (944) (1,204) 30 (8)
Provision - due
from customers 10 (262) 8,722 - -
Provision - trade
receivables 11 (8,724) (9,766) - -
Provision - Other
receivables 11 9 (5,996) - -
Impairment loss
on investment - (150) (24,976) -
Impairment loss
on PPE - (1,500) - -
Impairment on
inventories 9 (400) (1,031) - -
Other gains and
losses 24 - - - (5,741)
(Loss)/profit
before tax (26,423) (8,454) (26,913) (9,081)
Income tax expense 27 10 (10) - -
Deferred tax expense 27 815 - - -
--------- --------- --------- ---------
(Loss)/profit
for the year attributable
to owners of the
Group (25,598) (8,464) (26,913) (9,081)
========= ========= ========= =========
Other comprehensive
income
Items that may
be reclassified
subsequently to
profit or loss
Exchange difference:
On translating
foreign operations 50 95 (190) (1,163)
On cancellation
of EBT - 112 - -
--------- --------- --------- ---------
Other comprehensive
income for the
year 50 207 (190) (1,163)
--------- --------- --------- ---------
Total comprehensive
income for the
year attributable
to owners of the
Group (25,548) (8,257) (27,103) (10,244)
========= ========= ========= =========
Loss per share
(RMB)
Basic 28 (0.065) (0.023)
Diluted 28 (0.065) (0.023)
Loss per share
(Pence)
Basic (0.675) (0.242)
Diluted (0.675) (0.242)
Exchange rate GBP1: RMB9.6206 (2014: GBP1: RMB9.6841)
All amounts are derived from continuing operations.
CONSOLIDATED AND GROUP STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 31 DECEMBER 2015
Own
shares Foreign
& currency
Share Combination Statutory Warrant Accumulated translation
Group Share capital premium reserve reserve reserve losses reserve Total
RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000
Balance at 31
December 2013 1,214 49,118 (33,156) 12,328 (4,180) (24,690) 23,541 24,175
================== ======= =========== ========= ======= =========== =========== ========
Loss for the
year - - - - - (8,464) - (8,464)
Other
comprehensive
income - - - - - - 207 207
------------------ ------- ----------- --------- ------- ----------- ----------- --------
Total
comprehensive
income for the
year - - - - - (8,464) 207 (8,257)
----------- --------- ------- ----------- ----------- --------
Issue of
shares, net of
share issue
cost 111 5,807 - - - - - 5,918
Redemption of
convertible
bonds - - - - 5,853 (5,741) (112) -
------------------ ------- ----------- --------- ------- ----------- ----------- --------
Balance at 31
December 2014 1,325 54,925 (33,156) 12,328 1,673 (38,895) 23,636 21,836
================== ======= =========== ========= ======= =========== =========== ========
Loss for the
year - - - - - (25,598) - (25,598)
Other
comprehensive
income - - - - - - 50 50
Correction of
prior period
error - - - - - (3,830) - (3,830)
Total
comprehensive
income for the
year - - - - - (29,428) 50 (29,378)
----------- --------- ------- ----------- ----------- --------
Issue of
shares, net of
share issue
cost 32 1,771 - - - - - 1,803
- - - - -
Balance at 31
December 2015 1,357 56,696 (33,156) 12,328 1,673 (68,323) 23,686 (5,739)
================== ======= =========== ========= ======= =========== =========== ========
Foreign
currency
Accumulated translation
Company Share capital Share premium Warrant reserve losses reserve Total
RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000
Balance at 31
December 2013 1,214 49,118 1,673 (8,101) (5,389) 38,515
================== ================== ================== =========== =========== ========
Profit for the
year - - - (9,081) - (9,081)
Other
comprehensive
income - - - - (1,163) (1,163)
------------------ ------------------ ------------------ ----------- ----------- --------
Total
comprehensive
income for the
year - - - (9,081) (1,163) (10,244)
Issue of
shares, net of
share issue
cost 111 5,807 - - - 5,918
Redemption of
convertible
bonds - - - -
------------------ ------------------ ------------------ ----------- ----------- --------
Balance at 31
December 2014 1,325 54,925 1,673 (17,182) (6,552) 34,189
================== ================== ================== =========== =========== ========
Loss for the
year - - - (26,913) - (26,913)
Other
comprehensive
income - - - - (190) (190)
Total
comprehensive
income for the
year - - - (26,913) (190) (27,103)
Issue of
shares, net of
share issue
cost 32 1,771 - - - 1,803
Balance at 31
December 2015 1,357 56,696 1,673 (44,095) (6,742) 8,889
================== ================== ================== =========== =========== ========
CONSOLIDATED AND GROUP STATEMENT OF CASH FLOWS
FOR THE YEARED 31 DECEMBER 2015
Group Company
As at 31 December As at 31 December
2015 2014 2015 2014
RMB'000 RMB'000 RMB'000 RMB'000
Operating activities
(Loss)/profit before
tax (26,423) (8,454) (26,913) (9,081)
Adjustments for:
Depreciation and amortisation 5&6 2,409 2,619 - -
Bad debt provision (net) 8,977 (6,970) - -
Loss/(gain) on disposal
of PPE 22 104 2 - -
Interest income (53) (92) (2) -
Interest expenses 23 535 791 - -
Impairment of inventories 9 400 1,031 - -
Impairment of PPE - 1,500 - -
Impairment of investment - 150 24,976 -
Cancellation of EBT - - - 5,477
Exchange difference 28 207 27 472
----------- -------- ----------- --------
Operating cash flows
before movements in
working capital (14,023) (9,216) (1,912) (3,132)
Decrease/(increase)
in inventories 1,502 2,826 - -
Decrease/(increase)
in due from customers
for construction contract 7,835 10,283 - -
Decrease/(increase)
in trade and other receivables 5,538 (9,125) (2,264) 71
Increase/(decrease)
in trade and other payables 8,931 2,529 680 (2,091)
Increase/(decrease)
in due to customers
for construction contract 13,526 (809) - -
Increase/(decrease)
in provision (8,977) - - -
----------- -------- ----------- --------
Cash generated in operations 14,332 (3,512) (3,496) (5,152)
Income tax refund 10 (10) - -
----------- -------- ----------- --------
Net cash generated from
operating activities 14,342 (3,522) (3,496) (5,152)
=========== ======== =========== ========
Investing activities
Purchase of property,
plant and equipment (181) (71) - -
Expenditure on intangible
assets (4,331) (1,949) - -
----------- -------- ----------- --------
Net cash used in investing
activities (4,512) (2,020) - -
=========== ======== =========== ========
Financing activities
Proceeds from borrowings - 6,600 - -
Repayment of borrowings (6,600) (6,600) - -
Proceeds from issuance
of shares 1,803 5,918 1,803 5,918
Interest received 53 92 2 -
Interest paid (535) (791) - -
Net cash from financing
activities (5,279) 5,219 1,805 5,918
=========== ======== =========== ========
Net (decrease)/increase
in cash and cash equivalents 4,551 (323) (1,691) 766
Cash and cash equivalents
at beginning of year 14,875 15,198 4,497 3,731
Effect of exchange rate
changes - - - -
----------- -------- ----------- --------
Cash and cash equivalents
at end of year 19,426 14,875 2,806 4,497
=========== ======== =========== ========
Included in cash and cash equivalents, RMB8.1million has been
frozen under a court order (Note 35).
NOTES TO THE FINANCIAL STATEMENTS
1. General information
The Group (or "CNE") with registration number 93306 was
incorporated in Jersey on 2 May 2006 as an investment holding
Group. The Group is domiciled in Jersey with its registered office
at Queensway House, Hilgrove Street, St Helier, Jersey JE1 1ES.
The principal activities of its main subsidiary, Guangdong
Zhongke Tianyuan New Energy Science and Technology Co Ltd. ("ZKTY")
are engaged in turnkey technology solutions to manufacturers of
ethanol, edible alcohol and acetic acid from a range of
bio-resources including corn, sugarcane, cassava and other
bio-resources.
The principal place of business is located at No 4, Nengyuan
Road, Wushan, Tianhe District, Guangzhou, People's Republic of
China ("PRC").
2. Summary of significant accounting policies
2.1. Basis of preparation
The consolidated financial statements have been prepared in
accordance with International Financial Reporting Standards as
adopted by the EU ("IFRS") issued by the International Accounting
Standards Board ("IASB"), including related Interpretations issued
by the International Financial Reporting Interpretations Committee
("IFRIC").
The consolidated financial statements incorporate the financial
information of the Group and the Group. The subsidiaries are
entities (including special purposes entities) over which the Group
has the power to govern the financial operating policies, generally
accompanied by a shareholding giving rise to the majority of the
voting rights, as to obtain benefits from their activities.
The individual financial statements of each Group entity are
measured and presented in the currency of the primary economic
environment in which the entity operates (its functional currency).
The consolidated financial statements of the Group are presented in
Chinese Renminbi ("RMB"), which is the presentation currency for
the consolidated and Group financial statements. The functional
currency of the Group is British pound sterling ("GBP"). As the
Group mainly operates in the PRC, RMB is used as the presentation
currency of the Group. All financial information presented in RMB
has been recorded to the nearest thousand.
The Group has adopted all relevant standards effective for
accounting periods beginning on or after 1 January 2015.
As at end of the reporting year, the Group has not adopted the
following standard as it is either not effective or not applicable
to the Group's business.
Standards, amendments and interpretations (not yet endorsed by
EU at 8 June 2016)
- IFRS 9 Financial Instruments (July 2014)
- IFRS 14 Regulatory Deferral Accounts (January 2014)
- IFRS 15 Revenue from Contracts with Customers (May 2014)
including amendments to IFRS 15: Effective date of IFRS 15
(September 2015)
- IFRS 16 Lease (January 2016)
- Amendments to IFRS 10, IFRS 12 and IAS 28: Investment Entities
- Applying the Consolidation Exception (December 2014)
- Amendments to IFRS10 and IAS 28: Sales or Contribution of
Assets between an Investor and its Associate or Joint Venture
(September 2014)
- Amendments to IAS 12: Recognition of Deferred Tax Assets for
Unrealised Losses (January 2016)
- Amendments to IAS 7: Disclosure Initiative (January 2016)
- Clarifications to IFRS 15 Revenue from Contracts with Customers (April 2016)
- Amendments to IAS 27: Equity Method in Separate Financial
Statements (August 2014) - EU effective date 1 January 2016
- Amendments to IAS 1: Disclosure Initiative (December 2014) -
EU effective date 1 January 2016
- Annual Improvements to IFRSs 2012-2014 Cycle (September 2014)
- EU effective date 1 January 2016
- Amendments to IAS 16 and IAS 38: Clarification of Acceptable
Methods of Depreciation and Amortisation (May 2014) - EU effective
date 1 January 2016
- Amendments to IFRS 11: Accounting for Acquisitions of
Interests in Joint Operations (May 2014) - EU effective date 1
January 2016
- Amendments to IAS 16 and IAS 41: Bearer Plants (Jun 2014) - EU
effective date 1 January 2016
There are no other standards, amendments 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 Going concern
The financial statements have been prepared assuming the Group
will continue as a going concern.
During the year ended 31 December 2015, the Group made a loss of
RMB25.6milliom, which includes a provision on trade and other
receivables of RMB9.0million (note 10 and 11), a provision on court
case of RMB6.5million (note 22), and research and development
expense of RMB2.4million (note 22). At the year-end date, the Group
had net liabilities of RMB5.7million (2014: net assets of
RMB21.8million), of which RMB19.4million (2014: RMB14.9million) was
cash in bank (note 12), including a restricted cash of
RMB8.1million.
The Group has a cash balance of RMB13.4million at 31 May 2016,
including a restricted cash of RMB8.1million.
The Directors consider that the Group has adequate resources,
especially with sufficient cash in bank and a proceeds of
GBP750,000 rose from new shares issuance recently, to continue in
operational existence for at least the next twelve months from the
date of approval of these financial statements.
However, at the year-end date, the Group's net liabilities
position led to a negative debt-to-equity ratio, means the Group's
net worth was negative. The ratio measured Group's capital
structure at year end was in an insolvent situation and indicated
the Group's trading as non-going concern unless there're
extenuating circumstances. The Group existing business suffered
significant operating losses to the year end 31 December 2015, also
spread to the current period. Due to the uncertainty of the
industry and economic slowdown in P.R. China, together with working
capital risks, the Directors consider 2016 is not going to be a
good year. The Group is currently evaluating new funding options,
operations are partially relying on project payments in advance
from customers and delaying payments to suppliers, which gives
uncertainty in the future going concern. This is because that no
guarantee that required funds is going to be raised and flexibility
on receipts and payments are going to be continued. Consequently, a
material uncertainty exists that may cast doubt on the Group's
ability to continue to operate as planned and to be able to meet
its commitments and discharge its liabilities in the normal course
of business for a period not less than twelve months for the date
of this report.
The financial statements do not include the adjustments that
would result if the Group was unable to continue in operation.
2.3 Basis of consolidation
The subsidiaries are consolidated from the date on which control
is transferred to the Group up to the effective date on which
control ceases, as appropriate.
Intra-Group balances and transactions and any unrealised income
and expenses arising from intra-Group transactions are eliminated
on consolidation. Unrealised gains arising from transactions with
associates and joint ventures are eliminated against the investment
to the extent of the Group's interest in the investee. Unrealised
losses are eliminated in the same way as unrealised gains, but only
to the extent that there is no impairment.
The financial statements of the subsidiary companies are
prepared for the same reporting period as that of the Group, using
consistent accounting policies. Where necessary, the accounting
policies of the subsidiaries are changed to ensure consistency with
the policies adopted by other members of the Group.
2.4 Business combinations
2.4.1 Business combinations involving entities not under common
control
The acquisition of subsidiaries is accounted for using the
purchase method. The cost of the acquisition 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 acquiree, plus
any costs directly attributable to the business combination. 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 values 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 the lower of cost
and fair value less costs to sell.
Goodwill arising on acquisition is recognised as an asset and
initially measured at cost, being the excess of the cost of the
business combination over the Group's interest in the net fair
value of the identifiable assets, liabilities and contingent
liabilities recognised.
When the Group's interest in the net fair value of the
identifiable assets, liabilities and contingent liabilities of the
subsidiary acquired exceeds the cost of the business combination,
and if, after reassessment, the net fair value of the identifiable
assets, liabilities and contingent liabilities of the subsidiary
acquired remains higher than the cost of the business combination,
the excess is recognised immediately in the statement of profit or
loss.
The interest of minority shareholders in the acquiree is
measured at the minority's proportion of the net fair value of the
assets, liabilities and contingent liabilities recognised.
2.4.2 Business combinations involving entities under common
control
A business combination involving entities under common control
is a business combination in which all the combining entities or
businesses are ultimately controlled by the same party or parties
both before and after the business combination, and that control is
not transitory. For such common control business combinations, the
merger accounting principles are used to include the assets,
liabilities, results, equity changes and cash flows of the
combining entities in the combined financial statements.
In applying merger accounting principles, financial statement
items of the combining entities or businesses for the reporting
period in which the common control combination occurs, and for any
comparative periods disclosed, are included in the combined
financial statements of the combined entity as if the combination
had occurred from the date when the coming entities or businesses
first came under the control of the controlling party or
parties.
A single uniform set of accounting policies is adopted by the
combined entity. Therefore, the combined entity recognises the
assets, liabilities and equity of the combining entities or
businesses at the carrying amounts in the combined financial
statements of the controlling party or parties prior to the common
control combination. The carrying amounts are included as if such
combined entity's accounting policies and applying those policies
to all periods presented. There is no recognition of any goodwill
or excess of the acquirer's interest in the net fair value of the
acquiree's identifiable assets, liabilities and contingent
liabilities over cost at the time of the common control
combination. The effects of all transactions between the combining
entities or businesses, whether occurring before or after the
combination, are eliminated in preparing the combined financial
statements of the combined entity.
The combination reserve represents the differences between the
nominal amount of the share capital of the combining entities at
the date on which it was acquired by the Group and the nominal
amount of the share capital issued as consideration for the
acquisition.
In determining the appropriate accounting treatment for the
acquisition of ZKTY, the directors concluded that this transaction
fell outside the scope of IFRS 3.
However, the transaction described above represents a
combination of entities under common control.
In accordance with IAS 8 "Accounting Policies, changes in
accounting estimates and errors", in developing an appropriate
accounting policy, the directors have considered the pronouncements
of other standard setting bodies, specifically looking to
accounting principles generally accepted in the United Kingdom ("UK
GAAP") for guidance (FRS 6 - Acquisitions and mergers) which do not
conflict with IFRS and reflect the economic substance of the
transaction as a Group reconstruction.
Under UK GAAP the assets and liabilities of both entities are
recorded at book value, not fair value (although adjustments are
made to achieve uniform accounting policies); intangible assets and
contingent liabilities are recognised only to the extent that they
were recognised by the legal acquiree in accordance with applicable
IFRS, no goodwill is recognised, and any comparative amounts, if
applicable, are restated as if the combination had taken place at
the beginning of the earliest accounting period present.
Both entities had the same management as well as majority
shareholders, illustrating common control.
On this basis the directors decided that it was appropriate to
reflect the combination using merger accounting principles as a
Group reconstruction under FRS 6 - acquisitions and mergers in
order to give a true and fair view.
2.5 Investment in associates
The Group's investment in associates is accounted for using the
equity method. An associate is an entity in which the Group has
significant influence. Under the equity method, the investment in
the associate is carried in the consolidated statement of financial
position at cost plus post acquisition changes in the Group's share
of net assets of the associate. Goodwill relating to the associate
is included in the carrying amount of the investment and is neither
amortised nor individually tested for impairment.
The statement of consolidated profit or loss reflects the share
of the results of operations of the associate unless immaterial to
the Group. Where there has been a change recognised directly in the
equity of the associate, the Group recognises its share of any
changes and discloses this, when applicable, in the consolidated
statement of changes in equity. Unrealised gains and losses
resulting from transactions between the Group and the associate are
eliminated to the extent of the interest in the associate. The
share of profit of associates is shown on the face of the
consolidated statement of profit or loss. This is the profit
attributable to equity holders of the associate and therefore is
profit after tax and non-controlling interests in the subsidiaries
of the associates.
The financial statements of the associate are prepared for the
same reporting period as the parent Group. Where necessary,
adjustments are made to bring the accounting policies in line with
those of the Group. After application of the equity method, the
Group determines whether it is necessary to recognise an additional
impairment loss on the Group's investment in its associates. The
Group determines at each reporting date whether there is any
objective evidence that the investment in the associate is
impaired. If this is the case the Group calculates the amount of
impairment as the difference between the recoverable amount of the
associate and its carrying value and recognises the amount in the
consolidated statement of profit or loss.
Upon loss of significant influence over the associate, the Group
measures and recognises any retaining investment at its fair value.
Any difference between the carrying amount of the associate upon
loss of significant influence and the fair value of the retaining
investment and proceeds from disposal is recognised in the
consolidated statement of profit or loss.
2.6 Property, plant and equipment
Property, plant and equipment are stated at cost less
accumulated depreciation and any accumulated impairment losses. The
cost of property, plant and equipment includes its purchase price
and any costs directly attributable to bringing the asset to the
location and condition necessary for it to be capable of operating
in the manner intended by management. Dismantlement, removal or
restoration costs are included as part of the cost of property,
plant and equipment if the obligation for dismantlement, removal or
restoration is incurred as a consequence of acquiring or using the
property, plant and equipment.
Depreciation of property, plant and equipment is calculated
using the straight-line method to allocate their depreciable
amounts over their estimated useful lives as follows:
Plant and machinery 5 - 10
years
Motor vehicles 5 - 10
years
Office equipment 3 - 5 years
Buildings and leasehold
improvement 20 years
The carrying values of property, plant and equipment are
reviewed for impairment when events or changes in circumstances
indicate that the carrying value may not be recoverable.
The estimated useful lives, residual values and depreciation
methods are reviewed, and adjusted as appropriate, at the end of
each financial year.
The gain or loss arising on disposal or retirement of an item of
property, plant and equipment is determined as the difference
between the sales proceeds and the carrying amount of the asset and
is recognised in the statement of profit or loss.
Fully depreciated plant and equipment are retained in the
financial statements until they are no longer in use.
2.7 Intangible assets
Computer software
Acquired computer software licenses are initially capitalised at
cost which includes the purchase price (net of any discounts and
rebates) and other directly attributable costs of preparing the
software for its intended use. Direct expenditure which enhances or
extends the performance of computer software beyond its
specifications and which can be reliably measured is added to the
original cost of the software. Costs associated with maintaining
computer software are recognised as an expense as incurred.
Computer software licenses are subsequently carried at cost less
accumulated amortisation and accumulated impairment losses. These
costs are amortised to the statement of profit or loss using the
straight-line method over their estimated useful lives of 3 -10
years.
Land use rights
Land use rights are capitalised and stated at cost less
accumulated amortisation and impairment losses. Amortisation is
provided on a straight line basis over the term of the rights, 50
years.
Patent rights
Patent rights acquired are initially recognised at cost less
accumulated amortisation and accumulated impairment losses. These
costs are amortised to the statement of profit or loss within
administrative expenses using the straight-line method over 10-20
years.
Internally generated patents are amortised on a straight-line
basis over their estimated useful lives, from the date is ready for
use. Amortisation charge is recognised in the statement of profit
or loss within administrative expenses.
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 statement of profit or loss within administrative
expenses.
2.8 Impairment of tangible and intangible assets excluding goodwill
At the end of each financial year, the Group reviews the
carrying amounts of its tangible and intangible assets to determine
whether there is any indication that those assets have suffered an
impairment loss. If any such indication exists, the recoverable
amount of the asset is estimated in order to determine the extent
of the impairment loss (if any). Where it is not possible to
estimate the recoverable amount of an individual asset, the Group
estimates the recoverable amount of the cash-generating unit to
which the asset belongs.
Intangible assets with indefinite useful lives and intangible
assets not yet available for use are tested for impairment
annually, and whenever there is an indication that the asset may be
impaired.
The recoverable amount of an asset or cash-generating unit is
the higher of its fair value less costs to sell and its value in
use. In assessing value in use, the estimated future cash flows are
discounted to their present value using a pre-tax discount rate
that reflects current market assessments of the time value of money
and the risks specific to the asset.
If the recoverable amount of an asset (or cash-generating unit)
is estimated to be less than its carrying amount, the carrying
amount of the asset (cash-generating unit) is reduced to its
recoverable amount. An impairment loss is recognised immediately in
the statement of profit or loss, unless the relevant asset is
carried at a revalued amount, in which case the impairment loss is
treated as a revaluation decrease.
Where an impairment loss subsequently reverses, the carrying
amount of the asset or cash-generating unit is increased to the
revised estimate of its recoverable amount, but so that the
increased carrying amount does not exceed the carrying amount that
would have been determined had no impairment loss been recognised
for the asset or the cash-generating unit in prior years. A
reversal of an impairment loss is recognised immediately in the
statement of profit or loss, unless the relevant asset is carried
at a revalued amount, in which case the reversal of the impairment
loss is treated as a revaluation increase.
2.9 Income tax
Income tax expense represents the sum of the tax currently
payable and deferred tax.
The tax currently payable is based on taxable profit for the
year. Taxable profit differs from profit as reported in the
statement of profit or loss because it excludes items of income or
expense that are taxable or deductible in other years and it
further excludes items that are not taxable or tax deductible in
the current period. The Group's liability for current tax is
calculated using tax rates (and tax laws) that have been enacted or
substantively enacted in countries where the Group and its
subsidiaries operate by the end of the financial year.
Deferred tax is recognised using the liability method for all
temporary differences between the carrying amounts of assets and
liabilities in the statement of financial position and their tax
bases. Deferred tax is not recognised for the temporary differences
arising from the initial recognition of goodwill, the initial
recognition of assets and liabilities in a transaction which is not
a business combination and that affects neither accounting nor
taxable profit or loss. Deferred tax is measured at the tax rates
that are expected to be applied to the temporary differences when
they reverse, based on the laws that have been enacted or
substantively enacted by the end of the reporting period.
The measurement of deferred tax is based on the expected manner
of realisation or settlement of the carrying amount of the assets
and liabilities, at the end of the reporting period.
Deferred tax assets and liabilities are offset if there is a
legally enforceable right to offset current tax liabilities and
assets, and they relate to income taxes levied by the same tax
authority on the same taxable entity, or on different tax entities,
but they intend to settle current tax liabilities and assets on a
net basis or their tax assets and liabilities will be realised
simultaneously.
A deferred tax asset is recognised to the extent that it is
probable that future taxable profits will be available against
which the temporary difference can be utilised. Deferred tax assets
are reviewed at the end of each reporting period and are reduced to
the extent that it is no longer probable that the related tax
benefit will be realised.
2.10 Financial instruments
Financial assets and financial liabilities are recognised on the
Group's consolidated statement of financial position when the Group
becomes a party to the contractual provisions of the
instrument.
Effective interest method
The effective interest method is a method of calculating the
amortised cost of a financial instrument and allocating the
interest income or expense over the relevant period. The effective
interest rate is the rate that exactly discounts estimated future
cash flows (including all fees on points paid or received that form
an integral part of the effective interest rate, transaction costs
and other premiums or discounts) throughout the expected life of
the financial instrument, (or where appropriate, a shorter period),
to the net carrying amount of the financial instrument. Income and
expenditure are recognised on an effective interest basis for debt
instruments other than those financial instruments recognised at
fair value through the statement of profit or loss.
Financial assets
Financial assets within the scope of IAS 39 are classified as
either:
(i) financial assets at fair value through profit or loss ("FVTPL")
(ii) loans and receivables
(iii) held-to-maturity investments
(iv) available-for-sale financial assets
The classification depends on the purpose for which the
financial assets were acquired. Management determines the
classification of financial assets at initial recognition and
re-evaluates this classification at every reporting date.
All standard purchases and sales of financial assets are
recognised on the trade date, i.e. the date that the Group commits
to purchase the asset. Regular way purchases and sales are
purchases or sales of financial assets that require delivery of the
financial assets within the period generally established by
regulation or convention of the market place concerned.
Financial assets are derecognised when the rights to receive
cash flow from the financial assets have expired or have been
transferred and the Group have transferred substantially all risks
and rewards of ownership.
Financial assets at fair value through profit and loss
("FVTPL")
Financial assets are classified in this category if they are
acquired for the purpose of selling in the short term. Gains or
losses on investments held for trading are recognised in the
statement of profit or loss.
Loans and receivables
Trade receivables, loans and other receivables that have fixed
or determinable payments that are not quoted in active market are
classified as loans and receivables. Loans and receivables are
measured at amortised cost, using the effective interest method
less impairment. Interest is recognised by applying the effective
interest method, except for short-term receivables when the
recognition of interest would be immaterial.
Available-for- sale financial assets
Available-for-sale financial assets are those non-derivative
financial assets that are designated as available for sale or are
not classified as loans and receivables, held to maturity
investments or financial assets at fair value through profit and
loss. After initial recognition, available-for-sale financial
assets are measured at fair value with gains or losses being
recognised as a separate component of equity until the investment
is derecognised or until the investment is determined to be
impaired at which time the cumulative gain or loss previously
reported in equity is included in the statement of profit or
loss.
The fair value of investments that are actively traded in
organised financial markets is determined by reference to quoted
market bid prices at the closure of business on the statement of
financial position 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, discounted cash flow
analysis and option pricing models.
Impairment of financial assets
Financial assets, other than those at FVTPL, are assessed for
indicators of impairment at the end of each reporting period.
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.
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.
Derecognition of financial assets
The Group derecognises a financial asset only when the
contractual rights to the cash flows from the asset expire, or it
transfers the financial asset and substantially all the risks and
rewards of ownership of the asset to another entity. If the Group
neither transfers nor retains substantially all the risks and
rewards of ownership of the financial asset and continues to
control the transferred asset, the Group recognises its retained
interest in the asset and an associated liability for amounts it
may have to pay. If the Group retains substantially all the risks
and rewards of ownership of a transferred financial asset, the
Group continues to recognise the financial asset and also
recognises a collateralised borrowing for the proceeds
receivables.
Financial liabilities and equity instruments
Classification as debt or equity
Financial liabilities and equity instruments issued by Group are
classified according to the substance of the contractual
arrangements entered into and the definitions of a financial
liability and an equity instrument.
Equity instruments
An equity instrument is any contract that evidences a residual
interest in the assets of the Group after deducting all of its
liabilities. Equity instruments are recorded at the proceeds
received, net of direct issue costs.
Financial liabilities
Financial liabilities are classified as either financial
liabilities or other financial liabilities at fair value through
profit or loss other financial liabilities.
Financial liabilities are classified as fair value through
profit or loss if the financial liability is either held for
trading or it is designated as such upon initial recognition.
Other financial liabilities
Trade and other payables are initially measured at fair value,
net of transaction costs, and are subsequently measured at
amortised cost, where applicable, using the effective interest
method, with interest expense recognised on an effective yield
basis.
Derecognition of financial liabilities
The Group derecognises financial liabilities when, and only
when, the Group's obligations are discharged, cancelled or they
expire.
2.11 Inventories
Inventories are stated at the lower of cost and net realisable
value. Costs comprise direct materials and, where applicable,
direct labour costs and those overheads that have been incurred in
bringing inventories to their present location and condition. Cost
is calculated using the weighted average method. Net realisable
value represents the estimated selling price less all estimated
costs of completion and costs to be incurred in marketing, selling
and distribution.
2.12 Contract to construct specialised equipment ("Construction contracts")
When the outcome of a construction contract can be estimated
reliably, contract revenue and contract costs are recognised as
revenue and expenses respectively by reference to the stage of
completion of the contract activity at the end of the reporting
period ("percentage-of-completion method"). When the outcome of a
construction contract cannot be estimated reliably, contract
revenue is recognised to the extent of contract costs incurred that
are likely to be recoverable. When it is probable that total
contract costs will exceed total contract revenue, the expected
loss is recognised as an expense immediately.
Contract revenue comprises the initial amount of revenue agreed
in the contract and variations in the contract work and claims that
can be measured reliably. A variation or a claim is recognised as
contract revenue when it is probable that the customer will approve
the variation, or negotiations have reached an advanced stage such
that it is probable that the customer will accept the claim.
The stage of completion is measured by reference to the contract
costs incurred to date compared to the estimated total costs for
the contract. Costs incurred during the financial year in
connection with future activity on a contract are excluded from
costs incurred to date when determining the stage of completion of
a contract. Such costs are shown as construction contract
work-in-progress at the end of the reporting period unless it is
not probable that such contract costs are recoverable from the
customers, in which case, such costs are recognised as an expense
immediately.
At the end of the reporting period, the aggregated costs
incurred plus recognised profit (less recognised loss) on each
contract is compared against the progress billings. Where costs
incurred plus the recognised profits (less recognised losses)
exceed progress billings, the balance is presented as due from
customers on construction contracts. Where progress billings exceed
costs incurred plus recognised profits (less recognised losses),
the balance is presented as due to customers on construction
contracts.
2.13 Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand
deposits, and other short-term highly liquid investments which are
readily convertible to known amounts of cash and are subject to
insignificant risk of changes in value.
2.14 Leases
Operating Leases
Rentals payable under operating leases are charged to profit or
loss on a straight-line basis over the term of the relevant lease
unless another systematic basis is more representative of the time
pattern in which economic benefits from the leased asset are
consumed. Contingent rentals arising under operating leases are
recognised as an expense in the period in which they are
incurred.
In the event that lease incentives are received to enter into
operating leases, such incentives are recognised as a liability and
released to the profit or loss as a reduction of rental expense on
a straight-line basis, except where another systematic basis is
more representative of the time pattern in which economic benefits
from the leased asset are consumed.
2.15 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 the Group will be required to settle the obligation, and a
reliable estimate can be made of the amount of the obligation.
The amount recognised as a provision is the best estimate of the
consideration required to settle the present obligation at the end
of the financial year, taking into account the risks and
uncertainties surrounding the obligation. Where a provision is
measured using the cash flows estimated to settle the present
obligation, its carrying amount is the present value of those cash
flows.
When some or all of the economic benefits required to settle a
provision are expected to be recovered from a third party, the
receivable is recognised as an asset if it is virtually certain
that reimbursement will be received and the amount of the
receivable can be measured reliably.
Changes in the estimated timing or amount of the expenditure or
discount rate are recognised in comprehensive income statement when
the changes arise.
2.16 Retirement benefit costs
Defined contribution plans are post-employment benefit plans
under which the Group pays fixed contributions into separate
entities such as the social security plan in the PRC on a
mandatory, contractual or voluntary basis. The Group has no further
payment obligations once the contributions have been paid.
Contributions to defined contribution plans are recognised as an
expense in the profit or loss in the same financial year as the
employment that gives rise to the contributions.
2.17 Compound financial instruments
Compound financial instruments issued by the Group comprise
convertible bonds that can be converted to share capital at the
option of the holder, and the number of shares to be issued does
not vary with changes in their fair values.
The liability component of a compound financial instrument is
recognised initially at the fair value of a similar liability that
does not have an equity conversion option. The equity component is
recognised initially at the difference between the fair value of
the compound financial instrument as a whole and the fair value of
the liability component. Any directly attributable transaction
costs are allocated to the liability and equity components in
proportion to their initial carrying amounts.
Subsequent to initial recognition, the liability component of a
compound financial instrument is measured at amortised cost using
the effective interest method. The equity component of a compound
financial instrument is not re-measured subsequent to initial
recognition except on conversion or expiry.
Borrowings are classified as current liabilities unless the
Group has an unconditional right to defer settlement of the
liability for at least 12 months after the end of the reporting
period.
2.18 Revenue recognition
Revenue from construction contracts
The Group's policy for recognition of revenue from construction
contracts is described in note 2.12 above.
Interest income
Interest income is accrued on a time basis, by reference to the
principal outstanding and at the applicable effective interest
rate.
Income from sale of scrap materials
Income from sale of scrap materials is recognised upon the
transfer of significant risks and rewards of ownership of the goods
to customers, which generally coincides with delivery and
acceptance of the goods sold.
2.19 Foreign currencies
In preparing the financial statements of the individual
entities, transactions in currencies other than the entity's
functional currency are recorded at the rate of exchange prevailing
on the date of the transaction. At the end of each reporting
period, monetary items denominated in foreign currencies are
retranslated at the rates prevailing at that date. Non-monetary
items carried at fair value that are denominated in foreign
currencies are retranslated at the rates prevailing on the date
when the fair value was determined. Non-monetary items that are
measured in terms of historical cost in a foreign currency are not
retranslated.
Exchange differences arising from the settlement of monetary
items, and on the translation of monetary items, are included in
profit or loss for the reporting year. Exchange difference arising
on the translation of non-monetary items carried at fair value are
included in profit or loss for the reporting period except for the
differences arising on the retranslation of non-monetary items in
respect of which gains and losses are recognised directly in
equity. Exchange differences arising from such non-monetary items
are also recognised directly in equity.
For the purpose of presenting consolidated financial statements,
the assets and liabilities of the Group's foreign operations
(including comparatives) are expressed in Renminbi using exchange
rates prevailing at the end of the reporting period. Income and
expense items (including comparatives) are translated at the
average exchange rates for the period, unless exchange rates
fluctuated significantly during that period, in which case the
exchange rates at the dates of the transactions are used. Exchange
differences arising, if any, are classified as equity and
transferred to the Group's translation reserve. Such translation
differences are recognised in profit or loss in the period in which
the foreign operation is disposed of.
On consolidation, exchange differences arising from the
translation of the net investment in foreign entities (including
monetary items that, in substance, form part of the net investment
in foreign entities), are taken to the foreign currency translation
reserve.
Goodwill and fair value adjustments arising on the acquisition
of a foreign operation are treated as assets and liabilities of the
foreign operation and translated at the closing rate.
2.20 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, who is responsible for
allocating resources and assessing performance of the operating
segments, has been identified as the executive directors and the
chief executive officer who make strategic decisions.
3. Critical accounting judgements and key sources of estimation uncertainty
In the application of the Group's accounting policies, which are
described in note 2, management made judgements, estimates and
assumptions about the carrying amounts of assets and liabilities
that were not readily apparent from other sources. The estimates
and associated assumptions were based on historical experience and
other factors that were considered to be reasonable under the
circumstances. Actual results may differ from these estimates.
These estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognised in
the period in which the estimate is revised if the revision affects
only that period or in the period of the revision and future
periods if the revision affects both current and future
periods.
3.1 Critical judgements in applying the entity's accounting policies
The following are the critical judgements, apart from those
involving estimations (see below) that management has made in the
process of applying the Group's accounting policies and which have
the significant effect on the amounts recognised in the financial
statements.
Impairment of financial assets
The Group follows the guidance of IAS 39 - Financial
Instruments: Recognition and Measurement, in determining whether a
financial asset is impaired. This determination requires
significant judgement, the Group evaluates, among other factors,
the duration and extent to which the fair value of a financial
asset is less than its cost and the financial health of and
near-term business outlook for the financial asset, including
factors such as industry and sector performance, changes in
technology and operational and financing cash flow.
Deferred tax assets
Deferred tax assets are recognised to the extent that it is
probable that the taxable profit will be available against which
the deferred tax asset recognised can be utilised. Management's
judgement is required to determine the amount of deferred tax
assets that can be recognised, based upon the likely timing and
level of future tax planning strategies.
Impairment of construction in progress
Provision for impairment on construction in progress is made
when the construction project is suspended for a long period; the
construction project is technically and physically obsolete and its
economic benefits to the Group is uncertain; or other evidences can
prove the existence of the decline in value of construction
project. An impairment loss is recognised individually for the
shortfall of the recoverable amount of construction in progress
below its carrying amount. The carrying amounts of the Group's
construction in progress at the reporting period are disclosed in
note 10.
3.2 Key sources of estimation uncertainty
The key assumptions concerning the future and other key sources
of estimation uncertainty at the end of the financial year, 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.
Allowance for trade and other receivables
Management reviews its loans and receivables for objective
evidence of impairment at least quarterly. Significant financial
difficulties of the debtor, the probability that the debtor will
enter bankruptcy, and default or significant delay in payments are
considered objective evidence that a receivable is impaired. In
determining this, management makes judgement as to whether there is
observable data indicating that there has been a significant change
in the payment ability of the debtor, or whether there have been
significant changes with adverse effect in the technological,
market, economic or legal environment in which the debtor operates
in.
Where there is objective evidence of impairment, management
makes judgement as to whether impairment in value should be
recorded in the profit or loss. In determining this, management
uses estimates based on historical loss experience for assets with
similar credit risk characteristics. The methodology and
assumptions used for estimating both the amount and timing of
future cash flows are reviewed regularly to reduce any differences
between the estimated loss and actual loss experience.
The allowance policy for doubtful debts of the Group is based on
the ageing analysis and management's ongoing evaluation of the
recoverability of the outstanding receivables. A considerable
amount of judgement is required in assessing the ultimate
realisation of these receivables, including the assessment of the
creditworthiness and the past collection history of each customer.
If the financial conditions of these customers were to deteriorate,
resulting in an impairment of their ability to make payments,
additional allowances may be required. The carrying amounts of the
Group's trade and other receivables including impairment are
disclosed in note 10. The current market conditions indicate that
there is material uncertainty regarding the recoverability of trade
receivables.
Construction contracts
Where the outcome of a construction contract can be estimated
reliably, the Group recognises revenue and costs by reference to
the stage of completion of the contract.
Where the outcome of a construction contract cannot be estimated
reliably, contract revenue is recognised to the extent it is
probable that contract costs incurred will be recoverable. Contract
costs are recognised as expenses in the period in which they are
incurred.
When it is probable that total contract costs will exceed total
contract revenue, the expected loss is recognised as an expense
immediately.
The Group's accounting approach reflects a sound judgement as
potential losses on contract are being considered and reflected
with its probability immediately upon occurrence while contract
revenue which cannot be estimated reliably is realised only after
confirmed by written agreement. The carrying amounts of the Group's
construction contracts due from (to) customers at the end of the
reporting period are disclosed in note 9 including allowance for
impairment. There is material uncertainty to fully recover costs of
each contract.
Impairment of intangible assets
Determining whether intangible assets are impaired requires an
estimation of the value in use of the cash-generating units ("CGU")
to which intangible assets have been allocated. The value-in-use
calculation requires the entity to estimate the future cash flows
expected to arise from the CGU and a suitable discount rate in
order to calculate present value. No impairment loss was recognised
during the financial year. The carrying amount of the intangible
assets at the end of the reporting period is RMB12.2million (2014:
RMB8.14million).
Depreciation of property, plant and equipment
The Group depreciates the property, plant and equipment, using
the straight-line method, over their estimated useful lives after
taking into account of their estimated residual values. The
estimated useful life reflects management's estimate of the period
that the Group intends to derive future economic benefits from the
use of the Group's property, plant and equipment. The residual
value reflects management's estimated amount that the Group would
currently obtain from the disposal of the asset, after deducting
the estimated costs of disposal, as if the asset were already of
the age and in the condition expected at the end of its useful
life. Changes in the expected level of usage and technological
developments could affect the economics, useful lives and the
residual values of these assets which could then consequentially
impact future depreciation charges. The carrying amounts of the
Group's property, plant and equipment at the period end is RMB5.9
million (2014: RMB7.9 million) after an impairment loss of Nil
(2014:RMB1.5 million) recognised in the period.
Net realisable value of inventories
Net realisable value of inventories is the estimated selling
price in the ordinary course of business, less estimated costs of
completion and selling expenses. These estimates are based on the
current market condition and the historical experience of
manufacturing and selling products of similar nature. It could
change significantly as a result of changes in customer demand and
competitor actions in response to severe industry cycle. Management
reassesses these estimates at each period end. The carrying amount
of the Group's inventories at the year- end is RMB9.9million (2014:
RMB11.8million) after inventories written down of RMB0.4 million
(2014: RMB1.03 million).
Impairment of investment
The Group follows the guidance of IAS 36 to determine when the
investment is impaired. This determination requires significant
judgment. In making this judgment, the Group evaluates, among other
factors, the duration and extent to which the investment is less
than its cost and the recoverable amounts, including factors such
as market conditions, changes in business, operational strategies
and significant changes expected to take place in the near
future.
The directors are of the opinion that the Group's interest in
the investee will not generate profit and cash flows in the near
future accordingly impairment provision is required against the
carrying value on the investment. The carrying amounts of the
Group's investment are disclosed in note 8.
4. Comparative figures and reclassification
Certain reclassifications have been made to the prior year's
financial statements to enhance comparability with the current
year's results.
5. Property, plant and equipment - Group
Plant and Motor Office equipment Buildings Total
machinery vehicles &Leasehold
improvements
RMB'000 RMB'000 RMB'000 RMB'000 RMB'000
Cost
At 1 January
2014 10,231 8,865 643 82 19,821
Additions 39 - 32 - 71
Disposals (18) - - - (18)
Adjustment 136 - - - 136
Reclassification (6,162) - (3) 6,165 -
---------- --------- ---------------- ------------- -------
At 31 December
2014 4,226 8,865 672 6,247 20,010
---------- --------- ---------------- ------------- -------
Additions 16 - 165 - 181
Disposals (1,044) (1,000) (39) - (2,083)
---------- --------- ---------------- ------------- -------
At 31 December
2015 3,198 7,865 798 6,247 18,108
========== ========= ================ ============= =======
Accumulated depreciation
At 1 January
2014 4,989 2,637 402 46 8,074
Impairment losses - 1,500 - - 1,500
Charge for the
year 768 1,512 136 - 2,416
On disposals (16) - - - (16)
Adjustment 136 - - - 136
Reclassification (3,413) - (96) 3,509 -
---------- --------- ---------------- ------------- -------
At 31 December
2014 2,464 5,649 442 3,555 12,110
---------- --------- ---------------- ------------- -------
Charge for the
year 695 1,237 127 31 2,090
On disposals (992) (950) (37) - (1,979)
---------- --------- ---------------- ------------- -------
At 31 December
2015 2,167 5,936 532 3,586 12,221
========== ========= ================ ============= =======
Carrying value
At 31 December
2015 1,031 1,929 266 2,661 5,887
At 31 December
2014 1,762 3,216 230 2,692 7,900
Assets pledged as security
The borrowings of the Group (Note 13) secured on Land use right
(note 6) and buildings was fully repaid during the year.
6. Intangible assets - Group
Land
Computer Technology use Development
software Patent knowhow rights cost Total
RM'000 RM'000 RM'000 RM'000 RM'000 RM'000
Cost
As at 1
January
2014 70 1,283 250 3,613 2,260 7,476
Additions - - - - 1,949 1,949
Disposals (10) - (250) - - (260)
Transfer - - - - - -
As at 31
December
2014 60 1,283 - 3,613 4,209 9,166
------------------ ------------------ ------------------ ------------------ ------------------ ------------------
Additions - 132 - - 4,199 4,331
Disposals - - - - - -
Transfer - 1,493 - - (1,493) -
As at 31
December
2015 60 2,908 - 3,613 6,914 13,495
================== ================== ================== ================== ================== ==================
Accumulated
amortisation
As at 1
January
2014 49 191 250 593 - 1,083
Charge for
the period 6 114 - 83 - 203
On disposals (10) - (250) - - (260)
As at 31
December
2014 45 305 - 676 - 1,026
------------------ ------------------ ------------------ ------------------ ------------------ ------------------
Charge for
the period 6 230 - 83 - 319
On disposals - - - - - -
As at 31
December
2015 51 535 - 759 - 1,345
================== ================== ================== ================== ================== ==================
Carrying
value
At 31
December
2015 9 2,373 - 2,854 6,914 12,150
At 31
December
2014 15 978 - 2,937 4,209 8,139
The Group obtained the right to occupy the land at Continental
High & New Technology Industry Development Zone, Boluo,
Guangdong Province, PRC through its subsidiary undertaking Boluo
(note 7).
The land use rights were acquired in July 2000 for a period of
50 years. On 12 Oct 2010 Boluo was acquired by ZKTY (note 7) and
the land use rights were revalued to reflect to the market value.
The revaluation amount at date of acquisition was treated as
"deemed cost". The remaining period of amortisation of the land use
rights is approximate 35 years.
The Group undertakes development projects to improve and upgrade
its technology and engineering solutions in the field of bioethanol
production. Once the certificate has been obtained, the development
costs incurred will be transferred to patent.
The intangible assets are tested for impairment as part of the
cash generating unit to which it belongs, and no indication in
request for an impairment of the intangible assets.
Amortisation of intangible assets is included in the profit or
loss within administrative expenses.
7. Investment in subsidiary
Group
RMB'000
Cost
At 1 January 2014 61,609
Disposals of Employee Benefit Trust (5,853)
Exchange differences (1,900)
---------
At 31 December 2014 53,856
Exchange differences (353)
---------
At 31 December 2015 53,503
=========
Accumulated impairment losses
At 1 January 2014 17,356
Exchange differences (641)
---------
At 31 December 2014 16,715
Impairment in 2015 25,114
Exchange differences (274)
---------
At 31 December 2015 41,555
=========
Carrying amount
At 31 December 2015 11,948
At 31 December 2014 37,141
The details of the subsidiary are as follows:
Effective equity
Name / place interest held
of incorporation Principal activity by the Group
As at 31 December
Intermedia parent
Group 2015 2014
------------------ -------
Guangdong
Zhongke Tianyuan
New Energy
Science and
Technology Provision of engineering,
Co Ltd ("ZKTY") procurement and
/ PRC construction services
Subsidiary to ethanol producers 100% 100%
Fabrication and
manufacture of
Guangdong equipment in accordance
Boluo Jiuneng with project requirements
High Technology and designs of
Engineering ZKTY and provision
Co Ltd ("Boluo") of services to
/ PRC ZKTY 100% 100%
8. Investment
Investment in Jilin Tianshun and Songyuan carry almost zero
intrinsic value since 2014, due to their accumulated trading losses
and inability to return to profitability in the near future.
Accordingly, 100% impairment loss was recognised.
9. Inventories
Group
As at 31 December
2015 2014
RMB'000 RMB'000
Raw materials 4,559 4,620
Work-in-progress 5,379 7,220
-------- -------------
9,938 11,840
======== =============
The cost of inventories recognised as expenses includes
RMB0.4million (2014: RMB1.03million) in respect of write-down of
inventory to net realisable value.
10. Due from (to) customers for construction contracts
Group
As at 31 December
----------------------
2015 2014
RMB'000 RMB'000
Aggregate costs incurred plus
profits less
recognised losses to date 349,172 307,708
Less: progress billings (328,791) (272,641)
----------- ---------
20,381 35,067
Advance from customers (6,413) -
Allowance for impairment (11,294) (11,032)
2,674 24,035
=========== =========
Presented as:
Due from customers for construction
contracts 30,240 38,075
Due to customers for construction
contracts (27,566) (14,040)
----------- ---------
2,674 24,035
=========== =========
Movements in allowance for impairment on amount due from
customers for construction contracts are as follows:
Group
As at 31 December
---------------------
2015 2014
RMB'000 RMB'000
At beginning of the year 11,032 19,754
Transfer to trade receivables
(Note 10) - (8,315)
Impairment losses reversed - (564)
Allowance for impairment 262 157
At end of the year 11,294 11,032
========== =========
11. Trade and other receivables
Group Company
As at 31 December As at 31 December
----------------------------------------------- ---------------------
2015 2014 2015 2014
RMB'000 RMB'000 RMB'000 RMB'000
Current
Trade receivables 106,285 96,772 - -
Discount on trade
receivables - *(456) - -
Allowance for impairment *(78,087) *(72,886) - -
Transfer to advance
from customer (1,500) - - -
--------- --------- ---------- ---------
26,698 23,430 - -
Other receivables
Others receivables 7,791 7,201 ***2,264 -
Allowance for impairment (2,262) (2,283)
Advance to suppliers 6,195 11,856 - -
Allowance for impairment (3,728) (3,716)
--------- --------- ---------- ---------
7,996 13,058 2,264 -
Due from Group
undertakings - - 3,631 3,631
Due from related
parties **8,019 **8,019 - -
Notes receivables 400 500 - -
Prepayments 39 160 - -
--------- --------- ---------- ---------
43,152 45,167 5,895 3,631
========= ========= ========== =========
Non-current
Trade receivables 3,523 3,776 - -
Discount on trade
receivables - *(253) - -
Allowance for impairment *(3,523) - - -
--------- --------- ---------- ---------
- 3,523 - -
The carrying amounts of trade and other receivables approximate
their fair values.
* There is one trade receivable represents a project from a
customer repayable in 5 years, which has been fully discounted and
impaired. Within the impairment on current receivables, the amount
in relation to this project is RMB0.69million (2014: nil).
** The amounts due from related parties are non-trade,
unsecured, non-interest bearing and repayable on demand.
*** This includes an unpaid share capital of RMB50,000 due from
existing shareholders and a payment (EUR250,000) made to Visontai
Ethanol Development Group Limited ("Visontai"), to acquire 24% of
the issued equity. Due to pre-emption right issue has been raised
by the majority shareholder, this acquisition is not been able to
complete. The Group expects to receive full refund of EUR250,000 in
foreseeable future.
Movements in allowance for doubtful debts in trade receivables
are as follows:
Group
As at 31 December
---------------------
2015 2014
RMB'000 RMB'000
At beginning of the year 72,886 63,120
Transfer from amount due from
customers
for construction contracts
(Note 9) - 8,315
Allowance during the year 5,201 2,951
Impairment losses reversed - (1,500)
At end of the year 78,087 72,886
Movements in allowance for doubtful debts in advance to
suppliers and other receivables are as follows:
Group
As at 31 December
---------------------
2015 2014
RMB'000 RMB'000
At beginning of the year 5,999 3
Allowance during the year 842 5,996
Reversal during the year (851) -
At end of the year 5,990 5,999
The Group's trade receivables that are past due but not impaired
are as follows:
As at 31 December
--------------------
2015 2014
RMB'000 RMB'000
Less than 30 days 6,780 4,032
31-60 days 382 2,281
Over 60 days 19,536 17,117
26,698 23,430
12. Cash and cash equivalents
Group Company
As at 31 December As at 31 December
---------------------------------- ----------------------------
2015 2014 2015 2014
RMB'000 RMB'000 RMB'000 RMB'000
Cash at bank
and on hand 19,426 14,875 2,806 4,497
Within the cash and cash equivalents, RMB8.1million has been
frozen under a court order (Note 35).
The currency profiles of the Group's cash and cash equivalents
at the end of the year are disclosed in Note 31.
13. Borrowings
This is bank borrowings obtained from Ping An Bank, PRC, with a
fixed rate at 8.4% has been fully settled during the year. The
borrowing was secured on the Group's buildings and land use
right.
14. Trade and other payables
Group Company
As at 31 December As at 31 December
--------------------- -----------------------
2015 2014 2015 2014
RMB'000 RMB'000 RMB'000 RMB'000
Trade payables 39,157 34,767 - -
Other payables
* Advance from customer 2,538 15,957 - -
* Other payables and accruals 31,362 10,480 427 317
* VAT payables 15,371 14,939 - -
* Due to Group undertakings - - 10,185 10,185
* Due to directors 1,762 1,309 1,148 561
90,190 77,452 11,760 11,063
=========== ======== ========== =========
Included in other payables, a loan from a business partner of
RMB3.5million (2014: RMB3.5million) with interest chargeable at 10%
per annum and renewable on yearly basis.
Included in other payables, a provision on court case of
RMB6.5million (note 22) and relevant legal costs of RMB180K were
accrued.
The carrying amounts of trade and other payables approximate
their fair values.
15. Share capital - Group
Number
of Share Capital Share premium
Shares GBP'000 RMB'000 GBP'000 RMB'000
As at 31 December
2012 316,616,862 1,134 39,171
============ ========= =========
Placing on 4
Nov 2013 10,000,000 2 24 248 2,425
Less: share issue
costs (17) (171)
Placing on 25
Nov 2013 8,571,429 2 21 298 2,966
Less: share issue
costs (21) (209)
Placing on 26
Nov 2013 6,666,667 2 17 248 2,462
Placing on 29
Nov 2013 7,107,143 2 18 247 2,474
As at 31 December
2013 348,962,101 1,214 49,118
============ ========= =========
Placing on 29
Sept 2014 44,652,107 11 111 584 5,807
As at 31 December
2014 393,614,208 1,325 54,925
============ ========= =========
Placing on 29
Dec 2015 13,333,333 3 32 197 1,886
Less: share issue
costs - - (12) (115)
============ ========= =========
As at 31 December
2015 406,947,541 1,357 56,696
============ ========= =========
On 4 November 2013, the Group placed 10,000,000 new ordinary
shares of 0.025p each at a price of 2.5 pence per share, raising
gross proceeds of GBP250,000 for the Group.
On 25 November 2013, the Group placed 8,571,429 new ordinary
shares of 0.025p each at a price of 3.5 pence per share, raising
gross proceeds of GBP300,000 for the Group.
On 26 November 2013, the Group placed 6,666,667 new ordinary
shares of 0.025p each at a price of 3.75 pence per share, raising
gross proceeds of GBP250,000 for the Group.
On 29 November 2013, the Group placed 7,107,143 new ordinary
shares of 0.025p each at a price of 3.5 pence per share, raising
gross proceeds of GBP248,750 for the Group.
On 29 September 2014, the Group placed 44,652,107 new ordinary
shares of 0.025p each at a price of 1.332 pence per share, raising
gross proceeds of GBP594,766 for the Group.
On 29 December2015, the Group placed 13,333,333 new ordinary
shares of 0.025p each at a price of 1.5 pence per share, raising
gross proceeds of GBP200,000 for the Group.
The Group has one class of ordinary shares which carry rights to
dividends.
16. Combination reserve
Combination reserve represents the differences between the
nominal amount of share capital of the combining entities at the
date on which it was acquired by the Group and the nominal amount
of the share capital issued as consideration for the acquisition of
ZKTY as described further in Note 2.4.2.
17. Statutory reserve
(a) Statutory surplus reserve
According to the relevant PRC regulations and the Articles of
Association of the subsidiary, it is required to transfer 10% of
its profit after enterprise income tax to the statutory surplus
reserve until the reserve balance reaches 50% of their registered
capital. The transfer to this reserve must be made before the
distribution of dividends to equity owners. Statutory surplus
reserve can be used to make good previous years' losses, if any,
and may be converted into paid-in capital in proportion to the
existing interests of equity owners, provided that the balance
after such conversion is not less than 25% of the registered
capital.
(b) Statutory public welfare fund
According to the relevant PRC regulations and the Articles of
Association of the subsidiary, it is required to transfer 5% of its
profit after income tax to the statutory public welfare fund. The
statutory public welfare fund is established for the purpose of
providing employee facilities and other collective benefits to its
employees.
18. Warrant reserve
On 23 May 2011, the Group issued 2,966,845 warrants for services
provided to the Group. The fair value of the warrants was
RMB1,673,000 which was calculated using the Black Scholes option
pricing model.
As at 31 December 2015, none of the above warrants had been
exercised.
Details of the warrants outstanding during the year are as
follows:
2015 2014
------------------------ ------------------------
Average Average
exercise exercise
price price
in GBP Number in GBP Number
per share of shares per share of shares
GBP GBP
At beginning
of the year 0.07 2,966,845 0.07 2,966,845
Granted - - - -
Forfeited - - - -
Executed - - - -
Expired - - - -
----------- ----------- ----------- -----------
At end of year 0.07 2,966,845 0.07 2,966,845
=========== =========== =========== ===========
The estimated fair values were calculated using the
Black-Scholes option pricing model. The model inputs were as
follow:
Exercise price GBP0.07
Expected volatility 1%
Expected dividend -
yield
Risk-free interest
rate 6.65%
The expected volatility is based on the historical share prices
to the management's best estimate. The expected life used in the
model has been adjusted, based on management's best estimate, for
the effects of non-transferability, exercise restriction and
behavioural considerations.
19. Prior year adjustments
Prior year adjustments arose due to duplicated revenue
(RMB2.1million) recognised in 2014 and understated social security
provision (RMB1.7million). The total sum of RMB3.8million is shown
as a prior year correction in the Group's accounts for 2014 as
revenue reduction and increase of provision respectively, and an
increase in retained losses of the Group.
20. Foreign currency translation reserve
The foreign currency translation reserve represents exchange
differences arising from the translation of the financial
statements of foreign operations where functional currencies are
different from that of the Group's presentation currency.
21. Other income
Group
Year ended 31
December
--------------------
2015 2014
RMB'000 RMB'000
Sale of scrap materials 42 171
Subsidy income 215 10
Sundry income 17 50
Other 2,199 14,010
2,473 14,241
======== ========
22. Other expenses
Group
Year ended 31
December
------------------
2015 2014
RMB'000 RMB'000
Research and development expense 2,422 1,142
Costs of scrap materials 424 -
Loss on disposal of property,
plant and equipment 104 2
Provision on court case *6,500 300
-------- --------
9,450 1,444
*The provision is in relation to a court case in between
Shenzhen Baixie Investment Group ('Baixie') and an employee of
ZKTY, who acts on behalf of ZKTY in this case. The amount provided
at year end is based on the notice of enforcement, which is in
favour in Baixie, including penalty of RMB1.5million.
23. Finance costs
Group
Year ended 31
December
--------------------
2015 2014
RMB'000 RMB'000
Interest expenses 535 791
Foreign currency exchange loss (28) 189
Bank charges 437 224
944 1,204
======== ========
24. Other gains and losses
This represents shares held by the Employee Benefit Trust
('EBT'). On 19 August 2014, the EBT has been cancelled, which
result a loss of RMB5.7million recognised in the Group's
accounts.
25. (Loss)/profit before tax
Group
Year ended 31
December
-----------------------
Loss before taxation is 2015 2014
arrived at after charging/(crediting): RMB'000 RMB'000
Staff costs including directors
remuneration 10,155 10,825
Depreciation of property, plant
and equipment 2,090 2,416
Net loss/(gain) on disposal
of property, plant and equipment 104 2
Amortisation of intangible
assets 319 203
Impairment of inventories 400 1,031
Impairment of investment - 150
Impairment of PPE - 1,500
Bad debts and other provisions
(note 10 and 11) 9,828 *17,419
Reversal of provisions (note
10 and 11) (851) *(10,379)
Operating lease 960 497
Auditors Remuneration:
Audit Services 300 305
Non audit services - 457
* Including a transfer of provisions amounting to RMB8,315K in
between trade receivables and due from customers for construction
contracts
26. Employee benefit expense
2015 2014
RMB'000 RMB'000
Wages and salaries 7,912 8,128
Social security costs 2,243 997
Prior year correction
(note 19) - 1,700
--------- ---------
10,155 10,825
========= =========
Included in:
Cost of sales 1,726 2,792
Selling and distribution
expenses 2,598 1,690
Administrative expenses 2,609 2,728
Research and development
costs (note 22) 979 918
7,912 8,128
========= =========
Number Number
Average number of employees 87 92
========= =========
27. Income tax (credit) / expense
Group
Year ended 31
December
----------------------
2015 2014
RMB'000 RMB'000
Current income tax (10) 10
Deferred tax reversed (815) -
------------ --------
Income tax credit recognised
in profit or loss in 2015 (825) 10
============ ========
(2014: expense)
The Group is regarded as resident for tax purposes in Jersey and
on the basis that the Group is neither a financial services Group
nor a utility Group for the purposes of the Income Tax (Jersey) Law
1961, as amended; the Group is subject to income tax in Jersey at a
rate of zero per cent.
The operating subsidiaries are regarded as residents for the tax
purposes in PRC and subject to national income tax rate at 25%
(2014: 25%). The main operating subsidiary, ZKTY is entitled to a
reduction in tax rate at 15% due to its high technology enterprise
status. Accordingly, the tax rate used for the reconciliation below
is the preferential rate of 15% (2014: 15%).
Reconciliation at effective tax rate:
Group
Year ended 31
December
------------------
2015 2014
RMB'000 RMB'000
Loss before tax (26,423) (8,454)
Income tax using PRC tax rate
of 15% (2014: 15%) (3,963) (1,268)
Tax effects of:
* Non-deductible expenses 287 97
* Zero tax rate 291 1,362
* Unrelieved tax losses carried forward 1,131 2,047
* Preferential tax rate (457) 200
* Change in temporary difference 2,721 (1,009)
* Other adjustment - (950)
* Deferred tax reversed 815 -
* Tax losses utilised - (89)
-------- --------
825 (10)
Movements in deferred tax asset are as follows:
Group
Year ended 31
December
------------------
2015 2014
RMB'000 RMB'000
At beginning of the year 177 177
Reversal for the year (177) -
At end of the year - 177
Deferred tax assets are recognised for all unutilised tax losses
to the extent that it is probable that taxable profit will be
available against which the losses can be utilised.
Movements in deferred tax liabilities are as follows:
Group
Year ended 31
December
------------------
2015 2014
RMB'000 RMB'000
At beginning of the year 992 992
Reversal for the year (992) -
At end of the year - 992
Net deferred tax liabilities: Group
Year ended 31
December
------------------
2015 2014
RMB'000 RMB'000
At beginning of the year 815 815
Reversal for the year (815) -
-------- --------
At end of the year - 815
28. Loss per share
The calculation of loss per share is based on Group's loss for
the year and the weighted average number of shares in issue after
adjusting for movement in own shares during the financial year.
There is no potential dilutive share or share options outstanding
and therefore, the diluted loss per share is the same as basic loss
per share.
Weighted
average Loss
number per
Loss of shares share
2015 RMB'000 '000 RMB
Basic (25,598) 393,687 (0.065)
Diluted (25,598) 393,687 (0.065)
2014
Basic (8,464) 361,318 (0.023)
Diluted (8,464) 361,318 (0.023)
29. Operating lease commitments
At the end of the reporting period, the future aggregate minimum
lease payments under non-cancellable operating leases contracted
for but not recognised as liabilities, are as follows:
Group
Year ended 31 December
2015 2014
RMB'000 RMB'000
Within one year 472 759
After one year but before
five years - 24
472 783
Operating lease payments represent rents payable by the Group
for office premises and other operating facilities. Leases are
negotiated for an average term of 6months to 3 years and rentals
are fixed during the term of lease.
30. Significant related party transactions
a) Related parties are entities with common direct or indirect
shareholders and/or directors. Parties are considered to be related
if one party has the ability to control the other party in making
financial and operating decisions.
Certain of the Group's transactions and arrangements are with
related parties and the effect of these on the basis determined
between the parties is reflected in these financial statements. The
balances are unsecured, interest-free and repayable on demand
unless otherwise stated.
At the end of reporting period, the Group has a non-trade
receivable of RMB8,019,000 (2014: RMB8,019,000) and a non-trade
payable of RMB3,000,000 (2014: nil), due from Guangdong Zhongke
Tianyuan Regeneration Energy Co., Ltd and due to Guangzhou Jizhihui
Ecommerce Co., Ltd, respectively. Both companies are controlled by
Mr Yu Weijun and Mr Tang Zhaoxing, whom are directors of the
Group.
b) Key management personnel compensation is analysed as follows:
Year ended 31
December
------------------
2015 2014
RMB'000 RMB'000
Directors' remuneration
(short term employment
benefits) 1,166 1,472
1,166 1,472
Breakdown of directors' remuneration is detailed in Directors'
Report.
31. Financial risk management
The Group's activities expose it to credit risk, liquidity risk
and market risk (including interest rate risk, currency risk and
commodity price risk). The Group's overall risk management strategy
seeks to minimise adverse effects from the volatility of financial
markets on the Group's financial performance.
The Board of Directors is responsible for setting the objectives
and underlying principles of financial risk management for the
Group. The Group management then establishes the detailed policies
such as risk identification and measurement, exposure limits and
hedging strategies, in accordance with the objectives and
underlying principles approved by the Board of Directors.
There has been no change to the Group's exposure to these
financial risks or the manner in which it manages and measures the
risk. Market risk exposures are measured using sensitivity analysis
indicated below.
Credit risk
Credit risk refers to the risk that counterparty will default on
its contractual obligations resulting in a loss to the Group. The
Group has adopted a policy of only dealing with creditworthy
counterparties and obtaining sufficient collateral where
appropriate, as a means of mitigating the risk of financial loss
from defaults. The Group performs on-going credit evaluation of its
counterparties' financial condition. The Group does not hold any
collateral as security over its customers. The Group's major
classes of financial assets are cash and bank balances, trade and
other receivables and notes receivable.
At the end of the reporting period, the Group's maximum exposure
to credit risk is represented by the carrying amount of each class
of financial assets recognised in the statements of financial
position.
At the end of the reporting period, the cash and bank balances
as detailed in Note 11 to the financial statements, are held in
major financial institutions which are regulated and located in the
PRC, which management believes are of high credit quality. The
management does not expect any losses arising from non-performance
by these counterparties.
The carrying amount of financial assets represents the maximum
credit exposure. The maximum exposure to credit risk at the
reporting date of the Group is as follows:
As at 31 December
--------------------
2015 2014
RMB'000 RMB'000
Cash and cash equivalents 19,426 14,875
Trade and other receivables 43,152 45,167
62,578 60,042
At the end of reporting period the Group's trade and other
receivable was due from the related parties and third parties.
There was significant concentration of credit risk in the Group's
trade receivables as that accounted for 61.9% (2014: 53.5%) of the
total trade and other receivables. The aggregate of the single
customer's trade receivable is more than 10% were amounting to
RMB13.1million (2014: RMB10.2 million)
The Group establishes an allowance for impairment that
represents its estimate of incurred losses in respect of trade
receivables and amount due from customers for construction
contracts. The main components of this allowance are a specific
loss component that relates to individually significant exposures,
and a collective loss but not yet identified. The collective loss
allowance is determined based on historical data of payment
statistics for similar financial assets. The management judgments
for this allowance are disclosed in Note 3.2.
The allowance for impairments in respect to trade receivables
and amount due from customers for construction contracts are
disclosed in Note 11 and Note 10 respectively.
Credit risk (cont'd)
The Group's historical experience in the collection of third
parties trade receivable falls within the recorded allowances. Due
to these factors, management believes that no additional credit
risk beyond amounts provided for collection losses is inherent in
the Group's receivables.
Currency risk
Currency risk arises from a change in foreign currency exchange
rate, which is expected to have adverse effect on the Group in the
current reporting year and in future years.
The Group and its subsidiary maintain their respective books and
accounts in their functional currencies. As a result, the Group is
subject to transaction and translation exposures resulting from
currency exchange rate fluctuations. However, to minimise such
foreign currency exposures, the Group uses natural hedges between
sales receipts and purchases, and operating expenses disbursement.
It is, and has been throughout the current and previous financial
year the Group's policy that no derivatives shall be undertaken
except for the use as hedging instruments where appropriate and
cost-efficient. The Group does not apply hedge accounting.
The Group incurs foreign currency risk on sales, purchases and
operating expenses that are denominated in currencies other than
the respective functional currencies of Group entities.
The Group's currency exposure based on the information provided
by key management is as follows:
At 31 December
2015 RMB'000 GBP'000 US$'000 EUR'000 Total
Financial assets
--------- -------- -------- -------- ---------
Trade and other
receivables 40,888 481 - 1,783 43,152
Cash and bank balances 16,596 2,802 26 2 19,426
--------- -------- -------- -------- ---------
Financial liabilities
--------- -------- -------- -------- ---------
Trade and other
payables 88,616 1,574 - - 90,190
Net financial assets (31,132) 1,709 26 1,785 (27,612)
Less: Net financial
assets denominated
in the functional
currency (31,132) - - - (31,132)
-------------------------- --------- -------- -------- -------- ---------
Net currency exposure - 1,709 26 1,785 3,520
========================== ========= ======== ======== ======== =========
At 31 December
2014 RMB'000 GBP'000 US$'000 EUR'000 Total
Financial assets
--------- -------- -------- -------- ---------
Trade and other
receivables 45,167 - - - 45,167
Cash and bank balances 10,340 4,486 36 13 14,875
--------- -------- -------- -------- ---------
Financial liabilities
--------- -------- -------- -------- ---------
Trade and other
payables 76,559 878 - - 77,437
Net financial assets (21,052) 3,608 36 13 (17,395)
Less: Net financial
assets denominated
in the functional
currency (21,052) - - - (21,052)
-------------------------- --------- -------- -------- -------- ---------
Net currency exposure - 3,608 36 13 3,657
========================== ========= ======== ======== ======== =========
Sensitivity analysis
If the GBP sterling, US$ and EUR vary against the RMB by 10%
with all other variables including tax rate being held constant,
the effect on the net profit will be as follows:
Years ended
31 December
------------------
2015 2014
GBP against RMB RMB'000 RMB'000
- strengthen 155 328
- weaken (190) (401)
US$ against RMB
- strengthen 2 3
- weaken (3) (4)
EUR against RMB
- strengthen 162 1
- weaken (198) (1)
Interest rate risk
The Group has no significant interest-bearing liabilities and
assets.
The Group monitors the interest rates on its interest bearing
assets closely to ensure favourable rates are secured.
Liquidity risk
Liquidity risk is the risk that the Group will encounter
difficulty in meeting financial obligations due to shortage of
funds. The Group's exposure to liquidity risk arises primarily from
mismatches of the maturities of financial assets and liabilities.
The Group's objective is to maintain a balance between continuity
of funding and flexibility through financial support of business
partners and suppliers.
The Group's policy is to regularly monitor current and expected
liquidity requirements to ensure that it maintains sufficient
reserve of cash to meet its liquidity requirements in the short and
long term. At present, the Group is financed by advance payments
from customers.
The table below summarises the maturity profile of the Group's
financial liabilities at the reporting date based on contractual
undiscounted payments:
Less than
one year Total
RMB'000 RMB'000
31 December 2015
Borrowing - -
Trade and other payables 90,190 90,190
90,190 90,190
------------- --------
31 December 2014
Borrowing 6,600 6,600
Trade and other payables 77,452 77,452
84,052 84,052
------------- --------
Commodity price risk
The Group has commodity price risk as steel is one of the main
components of raw materials. Metals are traded commodities and
their prices are subject to the fluctuations of the world commodity
markets. Any significant increases in the prices for metals will
have a material adverse impact on the financial position and
results of operation. The Group's profitability will be adversely
affected if the Group is unable to pass on any increase in raw
material prices to its customers on a timely basis or find cheaper
alternative sources of supply.
The Group monitors the material price fluctuation closely and
constantly studies other ways to reduce material wastage in order
to reduce the impact of material price risk.
32. Capital risk management
The Group's objectives when managing capital are to safeguard
the Group's ability to continue as a going concern in order to
provide returns for shareholders and benefits for other
stakeholders and to maintain an optimal capital structure to reduce
the cost of capital.
The capital structure of the Group consists of equity
attributable to equity holders of the parent Group, comprising
share capital, share premium, combined reserve, statutory reserve,
warrant reserve, foreign currency translation reserve, and
accumulated losses as disclosed in the statements of financial
position.
The Group manages its capital structure by making necessary
adjustments to it in response to the changes in economic
conditions.
The Group's strategy was to maintain gearing ratio in between
80% and 100%. Gearing ratio is calculated as net debt divided by
total of capital. Net debt is calculated as total debt (as shown in
the statements of financial position) less cash and bank balances.
Total capital is calculated as total equity plus net debt.
The gearing ratios as at the
period end were as follows: Year ended 31 December
---------------------------
2015 2014
RMB'000 RMB'000
Total debt 126,532 106,868
Less: Cash and bank balances (19,426) (14,875)
------------- ------------
Net debt 107,106 91,993
Total equity (5,739) 21,836
Total capital 101,367 113,829
Gearing ratio ** 81%
**At year end, the Group had net liabilities
of RMB5.7million (note 2.2), of which led to
a negative debt-to-equity ratio, means the Group's
net worth was negative. The ratio measured Group's
capital structure at year end was in an insolvent
situation and indicated the Group's trading
as non-going concern unless there're extenuating
circumstances. Since the Group has cash in bank
of RMB19.4million and RMB13.4million at year
end and 31 May 2016 respectively, together with
a proceed of GBP750,000 from new share issuance
in June 2016, the Directors consider that the
Group has adequate fund resources, to continue
in operational existence for the foreseeable
future. However, due to the uncertainty of the
industry and economic slowdown in P.R. China,
together with ongoing issues on trade receivable
collections, which gives uncertainty in the
future going concern.
The financial statements do not include the
adjustments that would result if the Group was
unable to continue in operation.
33. Fair value of financial instruments
The carrying amount of the financial assets and financial
liabilities in the consolidated financial statements approximate
their fair values due to the relative short term maturity of these
financial instruments. The fair values of other classes of
financial assets and liabilities are disclosed in the respective
notes to the consolidated financial statements.
Fair value hierarchy
The Group's and the Group's financial instruments carried at
fair value are analysed as follows:
Level 1: Quoted prices (unadjusted) in active markets for
identical assets or liabilities;
Level 2: Inputs other than quoted prices included within Level 1
that are observable for the assets or liabilities, either directly
(i.e. as prices) or indirectly (i.e. derived from prices);
Level 3: Inputs for the assets or liabilities that are not based
on observable market date (unobservable inputs).
As at reporting date, the Group and the Group do not have any
financial instruments classified as Level 1, Level 2 and Level
3.
34. Segment reporting
A business segment is a Group of assets and operations engaged
in providing products or services that are subject to risks and
returns that are different from those of other business segments. A
geographical segment is engaged in providing products or services
within a particular economic environment that is subject to risks
and returns that are different from those of segments operating in
other economic environments.
The Group's revenue breakdown by geographical location is
determined based on its customers' country of incorporation. The
Group's cost of sales and operating expenses are aggregated on a
cumulative basis and are not attributable to specific geographical
regions. Therefore, a breakdown of gross profit for the financial
years by geographical regions is not shown.
Year ended
Geographical segment 31 December
--------------------
2015 2014
RMB'000 RMB'000
PRC 61,476 44,802
Myanmar 180 12,507
Indonesia 13 -
61,669 57,309
Business segment
The Group's assets, liabilities and capital expenditure are
almost entirely attributable to a single business segment of
provision of technology and engineering services to ethanol,
ethanol downstream product and biobutanol producers. Therefore, the
Group does not have separately reportable business segments under
IFRS 8 Segmental Reporting. Nonetheless the Group's revenue and
results can be classified into the following streams:
a. EPC of plants producing ethanol and ethanol downstream products ("EPC activities"); and
b. Value-added and other value added services ("VAS") services.
EPC
activities VAS Total
RMB'000 RMB'000 RMB'000
Revenue
Year ended 31 December
2015 34,889 26,780 61,669
Year ended 31 December
2014 56,690 619 57,309
Results
Year ended 31 December
2015 5,467 2,200 7,667
Year ended 31 December
2014 4,093 206 4,299
Information about major customers
Included in revenue arising from the sales of project of
approximate RMB33.1million (2014: RMB36.2 million) which arose from
sales to Group's 5 top largest customers.
35. Litigation and contingent liability
At year end, the Group has an ongoing legal case with its
customer Tangshan Chenhong Industry Co., Ltd ('TSCH') on quality
dispute in relation to a project in 2012. The court first instance
verdict in 2015 was in favour of TSCH. However, the Group has
appealed subsequently, and second trial has begun on 25 March 2016
and not yet started court hearing. As a result of this court case
and appeal, the Group's cash in bank of RMB8.1million was frozen
and continued to be frozen. The extent to which an outflow of funds
might be required is dependent on the result of the dispute.
The contingent liability and relevant legal expense incurred by
the Group is not provided in the accounts, since the Group expects
a positive verdict in second trial, as the Directors believe TSCH
is not able to provide further evidence.
Currently, TSCH is in the process of administration, negotiation
and settlement is possible to carry out in between the Group and
plaintiff.
36 Post balance sheet events
The Group has raised GBP750,000 by way of a subscription in
37,500,000 new ordinary shares at a price of 2p per share from an
institutional fund. The proceeds have been received by the Group on
10(th) June 2016. These new shares represent 8.44% of the enlarged
issued
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR SDLSISFMSEDM
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June 30, 2016 02:01 ET (06:01 GMT)
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