TIDMCNEL
RNS Number : 7438H
China New Energy Ltd
26 March 2020
26 March 2020
China New Energy Limited
("CNE" or "the Company")
Final Results for the Year Ended 31 December 2019
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 2019.
Highlights for the year include:
-- Revenue has substantially increased to RMB398.6 million
(c.GBP45.9 million) from RMB250.0 million (c. GBP28.4 million) in
prior year increase of 59.4%
-- Net profit increases by 29.3% to RMB59.2 million (c. GBP6.8
million) from RMB45.8 million (c. GBP5.2 million) for the year
ended 31 December 2018
-- Order book and contract backlog increase by 77.5% to RMB584.9
million (c. GBP67.4 million) from RMB329.6 million (c. GBP37.4
million) for the year ended 31 December 2018
The full version of the report and accounts for the year ended
31 December 2019 will 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.
Mr. Yu commented, "I am very pleased to report our best
financial results since our listing on AIM and 4(th) consecutive
net profit. We continue to have a strong order book which we
attribute to the 13(th) Five Year Plan for Renewable Energy
Development that clearly demonstrates the intention of the PRC
government to develop the ethanol fuel industry.
As widely reported in the press, business activities in China
have been disrupted by the COVID-19 outbreak. We are confident and
are of the view that the potential impact on our Group's business
operations and financial conditions caused by the outbreak of
COVID-19 will only be temporary and short-term.
We continue to pursue our strategy of re-listing the Company on
the mainboard of the Hong Kong Stock Exchange, and I am very
confident about the outlook for 2020 and the investment value of
our shares which is expected to be reflected in our medium to long
term market valuation.".
This announcement contains inside information for the purposes
of Article 7 of EU Regulation 596/2014.
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 LLP Tel: +44 20 7213 0880
Nominated Adviser and Broker
Jo Turner / Sandy Jamieson
CHAIRMAN'S STATEMENT
I am pleased to report that the Group recorded its best ever
financial performance and 4(th) consecutive year of generating
profit after tax ("net profit").
Our total revenue has substantially increased from RMB250.0
million (c. GBP28.4 million) for the year ended 31 December 2018 to
RMB398.6 million (c.GBP45.9 million) for the year ended 31 December
2019, representing an increase of 59.4% which was due to completing
projects in our order book for the provision of ethanol production
system technology integrated services in the ethanol fuel,
alcoholic beverages and other industries respectively.
Our net profit substantially increased from RMB45.8 million (c.
GBP5.2 million) for the year ended 31 December 2018 to RMB59.2
million (c. GBP6.8 million) for the year ended 31 December 2019,
representing an increase of 29.3%. This would have been higher, if
not for exceptional expenses such as fees relating to the proposed
re-listing of the Company on the Main Board of the Hong Kong Stock
Exchange ("HKSE").
The significant growth in our revenue and net profit from 2017
to 2019 was primarily due to the increased market demand as well as
the favourable policies introduced by the People's Republic of
China ("PRC") government, such as:
i. The 13th Five Year Plan for Renewable Energy Development
clearly demonstrated the intention of the PRC government to
vigorously develop the ethanol fuel industry. In September 2017,
the PRC government announced a new nationwide ethanol mandate (NEA)
that was designated to expand the mandatory use of E10 fuel
(gasoline containing 10 percent ethanol) from 12 trial provinces to
the entire country by 2020. In addition, the State Council of the
PRC executive meeting decided to promote the usage of ethanol fuel
in another 14 provinces in addition to the original 12 trial
provinces; and
ii. The building of "ecological civilization" is listed as one
of the top ten goals of the 13th Five Year Plan.
Driven by the policies mentioned above, ethanol producers have
to replace outdated equipment by investing in more advanced
production systems that generate high production efficiency and low
pollutant discharge. The necessity for upgrades of manufacturing
facilities, replacement of production systems and mass-production
trends drive demand for advanced ethanol production systems in the
alcoholic beverage industry in the PRC. We believe that, with our
extensive experience and expertise in the ethanol production system
industry, we are well positioned to capture growth opportunities in
the PRC. For the year ended 31 December 2019, ethanol production
system technology integrated services projects for the ethanol fuel
industry included Inner Mongolia Zhongneng Biological Technology
Co., Ltd, Heilongjiang Province Wanlirunda Biotechnology Co., Ltd
and for the alcoholic beverage industry included Fuyu Huihai Wine
Industry Co., Ltd.
The gross profit increased by 50.7% to RMB109.4 million (c.
GBP12.6 million) for the year ended 31 December 2019 from RMB72.6
million (c. GBP8.2 million) for the year ended 31 December 2018.
Our overall gross profit margin decreased slightly from 29.0% for
the year ended 31 December 2018 to 27.4% for the year ended 31
December 2019.
The net profit for the year increased by 29.3% to RMB59.2
million (GBP6.8 million) for the year ended 31 December 2019 from
RMB45.8 million (c. GBP5.2 million) for the year ended 31 December
2018.
Net profit margin decreased from 18.3% for the year ended 31
December 2018 and 14.9% for the year ended 31 December 2019.
Order Book and Contract Backlog
We entered 2020 with a strong order book of RMB584.9 million (c.
GBP67.4 million) for the year ended 31 December 2019. This number
includes new contracts to be started and the proportion of
anticipated revenue from contracts which have started but not yet
completed. This represents an increase of 77.5% from RMB329.6
million (c. GBP37.4 million) for the year ended 31 December
2018.
The following table sets forth the movement of backlog of our
projects during the years ended 31 December 2017, 2018 and
2019:
For the year ended 31 December
2017 2018 2019
RMB'000 RMB'000 RMB'000
Contract value (exclusive of value-added tax) of the beginning of the
year 138,142 98,565 329,577
Contract value (exclusive of value-added tax) of new contracts awarded
during the year 217,532 480,990 653,882
Less:
Revenue recognised during the year (257,109) (249,978) (398,558)
Contract value (exclusive of value-added tax) at the end of year 98,565 329,577 584,901
Business
The Group is a leading ethanol production system technology
integrated service provider in the PRC. The Group primarily
provided integrated services including engineering design,
equipment manufacturing, installation and commissioning and
subsequent maintenance for the core system of ethanol production
system in the ethanol fuel and alcoholic beverage industries in the
PRC. In addition, the Group also provided its technology integrated
services for other chemical production systems in Canada, Russia
and other countries.
With 13 years of operating history, the Company has gained
substantial experience and established a solid reputation in terms
of advanced technology skills and proven track records in the
ethanol production system industry in the PRC. According to a
recently commissioned report from the China Insights Consultancy
Limited, an independent market research and consulting company, we
ranked the first in terms of revenue with a market share of 7.2%,
in the ethanol production system industry in the PRC in 2018.
Research and Development
We have established a solid reputation in terms of advanced
technology skills and proven track records in the ethanol
production system industry in the PRC. Over the years, we have been
devoted to research and development to drive improvement and
innovation in technologies to be applied to the core system of the
ethanol production system, we intend to continue to invest in our
research and development efforts.
As at the date of this report, we had 32 patented technologies,
which we have incorporated into our production procedures. In
addition, as at the date of this report, the Group has submitted 14
patent registrations in the PRC and 1 in Brazil and are engaging in
two ongoing research and development projects. We believe our
advanced technologies and research and development capabilities
have given us a competitive edge and allowed us to continue in
securing contracts from customers through our provision of
high-quality and innovative ethanol production system technology
integrated services.
Business Strategies
Our goal is to continue to enhance our overall competitiveness
and to capture greater market share in the ethanol production
system industry and expand our presence to solidify our position as
a leading ethanol production system technology integrated service
provider in the PRC. To achieve this goal, we intend to pursue the
following strategies:
-- Continue to maintain our leading market position by
undertaking more projects in the PRC; and
-- Continue to focus on research and development to strengthen
our design and engineering capability.
COVID-19 and Business Continuity
Recently, there has been an outbreak of COVID-19, a respiratory
illness which was first emerged in Wuhan city, Hubei province,
China in late 2019 and later continues to spread within the PRC and
globally. On 23 January 2020, the PRC government announced the
lockdown of Wuhan city in an attempt to quarantine the city. Since
then, draconian measures including travel restrictions have been
imposed in other major cities in the PRC, as well as other
countries and territories, in an effort to control the
outbreak.
As at the date of this report, confirmed cases of COVID-19 have
been reported in various provinces in the PRC and had spread across
countries and territories globally. The outbreak of COVID-19, which
is expected to result in a high number of fatalities, is likely to
have an adverse impact on the livelihood of the people and the
economy in the PRC, particularly Wuhan city and Hubei province.
Impact on our business operation
While our office was temporarily closed during the Chinese New
Year holiday and until 9 February 2020 in accordance with the
extension of the Chinese New Year holiday and delay in resumption
of work announced by the PRC government, we have resumed our
operation on 10 February 2020.
Although a majority of our income during the year ended 31
December 2019 and 2019 was generated in the PRC and our customers
are mainly based in the PRC, our Directors, after careful and due
consideration, confirm that the business, financial conditions and
result of operations of our Group would not be materially affected
by the outbreak of COVID-19 for the following reasons:
i. As at the date of the report, we had been able to honour all
of our obligations under the existing contracts with our customers,
and we did not have loss of existing contracts due to the outbreak
of COVID-19;
ii. all of our principal business operations and major customers
during the year ended 31 December 2019 and 2018 were not located in
Wuhan city or Hubei province. As at date of this report, we did not
have any customer based in Wuhan city or Hubei province; and
iii. we have not encountered and do not expect to encounter any
disruption of our supplies of raw materials and equipment in light
of the outbreak of COVID-19 and we do not have reliance on any
particular suppliers in Wuhan city or Hubei province for the above
raw materials and equipment.
Impact on our employees
In line with our continuing efforts to provide a safe and
healthy working environment to our own employees, we have prepared
an internal manual on prevention of spread of COVID-19 and have
implemented epidemic prevention measures in response to the
outbreak of COVID-19:
i. we have set up an epidemic prevention group led by our
general manager, Mr. Jiang Xinchun, to coordinate the
implementation of epidemic prevention measures in accordance with
the requirements of the PRC government;
ii. before an employee returns to work, we will obtain
information and keep record on his/her travelling history in the
past 14 days, health conditions and whether he/she has close
contact with persons with symptoms of respiratory diseases; and
iii. we will carry out disinfection of our office area on a daily basis.
We believe such measures are effective in reducing the risk of
spreading of COVID-19 among our employees. As at the date of this
report, none of our employees had been suspected or confirmed to
have contracted COVID-19.
We are confident and are of the view that the potential impact
on our Group's business operations and financial conditions caused
by the outbreak of COVID-19 will only be temporary and short-term.
We will continue to assess the impact of COVID-19 on our Group's
operation and financial performance and closely monitor our Group's
exposure to the risks and uncertainties in connection with the
epidemic. We will take appropriate measures as necessary and inform
our Shareholders and potential investors as and where
necessary.
We have confirmed that, since 31 December 2019 and up to the
date of this report, there has been no material adverse change in
our financial or trading position or prospects and no event has
occurred that would materially and adversely affect subsequent to
the reporting period.
Preparation for Submission of an Application for Listing on the
Main Board of the Hong Kong Stock Exchange
The Company continues to make good progress with its application
to re-list on the HKSE, which is being undertaken to improve
shareholder value and to raise additional capital to expand the
business. The Company intends to immediately resubmit the
application to list on the HKSE with the inclusion of the 2019
financial results which should substantially support our
application. Subject to acceptance of the application by the HKSE
listing committee, Admission to HKSE is now expected to be in the
first half of 2020.
The Company expects to imminently convene an AGM or
extraordinary general meeting to re-seek shareholder approval for
resolutions in relation to its proposed listing on the Main Board
of HKSE which will include shareholders approving the cancellation
of trading of the Company's shares on AIM simultaneous with
admission to HKSE.
We continue to stress that should application to the HKSE not be
successful, we are committed to remaining public and for our shares
to be traded on an internationally recognised stock exchange.
Outlook
The board and I are very optimistic about 2020 and the long-term
future of CNE. The continuous favourable changes in the PRC ethanol
production policies in recent year such as the 13(th) Five Year
Plan for Renewable Energy Development clearly demonstrated the
intention of the PRC government to develop the ethanol fuel
industry. We believe that our advanced technologies and research
and development capabilities have given us a competitive edge and
allowed us to continue in securing contracts from customers through
our provision of high-quality and innovative ethanol production
system technology integrated services in the PRC.
I am very confident about the immediate outlook for 2020 and the
investment value of our shares which is expected to be reflected in
our medium to long term market valuation.
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 for their invaluable counsel in steering the
Group through this exciting time.
Yu Weijun
Chairman
CONSOLIDATED AND COMPANY STATEMENTS OF FINANCIAL POSITION
AT 31 DECEMBER 2019
As at As at
31 December 31 December
2019 2018
RMB'000 RMB'000
ASSETS
Non-current assets
Financial assets at fair value
through other comprehensive
income 5,015 -
Investment in an associate - -
Property, plant and equipment 11,589 6,457
Land use rights - 2,608
Intangible assets 18,252 12,782
Right-of-use assets 6,281 -
Deferred tax assets 4,325 5,752
------------- -------------
45,462 27,599
------------- -------------
Current assets
Inventories 3,358 3,661
Contract assets 118,108 88,465
Trade and bills receivables 94,628 103,629
Other receivables and prepayments 110,688 17,980
Restricted cash 2,321 1,230
Cash and cash equivalents 26,466 6,358
------------- -------------
355,569 221,323
------------- -------------
Total assets 401,031 248,922
============= =============
LIABILITIES
Non-current liability
Lease liabilities 2,889 -
-------- --------
Current liabilities
Contract liabilities 15,140 21,028
Bank and other borrowings 18,941 6,540
Convertible notes 11,847 -
Trade payables 114,755 69,250
Other payables 72,916 59,355
Lease liabilities 1,073 -
Current income tax liabilities 33,040 21,723
-------- --------
267,712 177,896
-------- --------
Total liabilities 270,601 177,896
======== ========
Equity
Equity attributable to Owners
of the Company
Share capital 1,444 1,541
Reserves 128,986 69,485
130,430 71,026
-------- --------
Total equity and liabilities 401,031 248,922
======== ========
Net current assets 87,857 43,427
======== ========
CONSOLIDATED AND COMPANY STATEMENTS OF PROFIT OR LOSS AND OTHER
COMPREHENSIVE INCOME
FOR THE YEARED 31 DECEMBER 2019
Year ended 31 December
-------------------------
2019 2018
RMB'000 RMB'000
Revenue 398,558 249,978
Cost of sales (289,141) (177,374)
------------ -----------
Gross profit 109,417 72,604
Selling and marketing expenses (8,617) (5,801)
Administrative expenses (27,700) (20,218)
Net impairment losses on financial
assets and contract assets (3,555) (362)
Other income 1,836 1,685
Other gains - net 2,409 263
Operating profit 73,790 48,171
Finance income 49 22
Finance costs (1,384) (1,094)
------------ -----------
Finance costs - net (1,335) (1,072)
Profit before income tax 72,455 47,099
Income tax expenses (13,287) (1,278)
Profit for the year attributable to
Owners of the Company 59,168 45,821
============ ===========
Other comprehensive income
Item that may not be reclassified
to profit or loss
* Change in the fair value of financial assets at fair
value through other comprehensive income, net of tax 13 -
Item that may be reclassified to profit
or loss
- Exchange differences on translation
of foreign operations (238) (224)
------------ -----------
Other comprehensive income for the
year, net of tax (225) (224)
Total comprehensive income for the
year attributable to Owners of the
Company 58,943 45,597
============ ===========
Earnings per share for profit attributable
to Owners of the Company (expressed
in RMB per share)
Basic earnings per share 0.133 0.102
Diluted earnings per share 0.128 0.102
Note: The exchange rate used in 2018 is GBP1:RMB 8.6842 (2018:
GBP1:RMB 8.8178).
CONSOLIDATED AND COMPANY STATEMENTS OF CHANGES IN EQUITY
FOR THE YEARED 31 DECEMBER 2019
Share Other reserves (Accumulated Total
Capital losses)/
retained
earnings
RMB'000 RMB'000 RMB'000 RMB'000
Balance at 1 January 2018 1,541 72,273 (44,164) 29,650
Comprehensive income
- Profit for the year - - 45,821 45,821
- Other comprehensive income - (224) - (224)
-------- -------------- ------------ -------
Total comprehensive income
for the year - (224) 45,821 45,597
-------- -------------- ------------ -------
Transactions with owners,
recognised directly in equity
Share-based payment expenses - 460 - 460
Buy-back of shares - (4,681) - (4,681)
-------- -------------- ------------ -------
Total transactions with owners - (4,221) - (4,221)
-------- -------------- ------------ -------
Balance at 31 December 2018 1,541 67,828 1,657 71,026
======== ============== ============ =======
Balance at 1 January 2019 1,541 67,828 1,657 71,026
Comprehensive income
- Profit for the year - - 59,168 59,168
- Other comprehensive income - (225) - (225)
-------- -------------- ------------ -------
Total comprehensive income
for the year - (225) 59,168 58,943
-------- -------------- ------------ -------
Transfer to statutory reserves - 7,498 (7,498) -
Share-based payment expenses - 461 - 461
Cancellation of treasury
shares (97) 97 - -
-------- -------------- ------------ -------
Total transactions with owners (97) 8,056 (7,498) 461
-------- -------------- ------------ -------
Balance at 31 December 2019 1,444 75,659 53,327 130,430
======== ============== ============ =======
CONSOLIDATED AND COMPANY STATEMENTS OF CASH FLOWS
FOR THE YEARED 31 DECEMBER 2019
2019 2018
RMB'000 RMB'000
Cash flows from operating activities
Cash generated from operations 24,935 10,069
Income tax paid (545) (3,425)
Interest paid (1,335) (1,072)
--------- ---------
Net cash generated from operating activities 23,055 5,572
--------- ---------
Cash flows from investing activities
Purchases of property, plant and equipment (7,526) (889)
Purchase of intangible assets (6,192) (5,954)
Proceeds from disposal of property, plant and equipment - 3
Investment in financial assets at fair value through other comprehensive income (5,000) -
Net cash used in investing activities (18,718) (6,840)
--------- ---------
Cash flows from financing activities
Proceeds from bank and other borrowings 23,060 6,800
Proceeds from convertible notes 10,606 -
Repayments of bank and other borrowings (10,659) (10,367)
Principal elements of lease payments (842) -
Cash advance from related parties - 15,404
Repayment to related parties (1,949) (11,165)
Payment for listing related expenses (4,098) -
Increase in guarantee deposits for borrowings (1,091) (1,230)
--------- ---------
Net cash generated from/(used in) financing activities 15,027 (558)
--------- ---------
Net increase/(decrease) in cash and cash equivalents 19,364 (1,826)
Cash and cash equivalents at beginning of year 6,358 8,180
Translation differences on cash and cash equivalents 744 4
--------- ---------
Cash and cash equivalents at end of year 26,466 6,358
========= =========
NOTES TO THE FINANCIAL STATEMENTS
The financial information above and the notes to the accounts
have been extracted from the Annual Report and Financial Statements
for the year ended 31 December 2019. As such, note references and
page numbers may not appear correctly in this announcement.
Shareholders are advised to read the Annual Report and Financial
Statements for the year ended 31 December 2019 in full which will
shortly be available from the Company's website,
www.chinanewenergy.co.uk .
1. General information
The consolidated financial statements of China New Energy
Limited (the "Company") and its subsidiaries (the "Group") with
registration number 93306 was incorporated in Jersey on 2 May 2006
as an investment holding Company. The Company 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 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.
The principal place of business is located at 8 Floor, Zone B,
Energy Saving and Environmental Protection Building of GIEC, No 2,
Nengyuan Road, 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
("IFRSs") issued by the International Accounting Standards Board
("IASB"), including related interpretations issued by the
International Financial Reporting Interpretations Committee
("IFRIC").
The consolidated financial statements have been prepared under
the historical cost convention, except for certain financial assets
and liabilities measured at fair value.
The consolidated financial statements of the Group are presented
in Chinese Renminbi ("RMB"), which is the presentation currency of
the Group financial statements as the Group mainly operates in the
PRC. 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),
with the exception of the parent entity whose functional currency
is GBP but has a presentational currency of RMB. All financial
information presented in RMB has been recorded to the nearest
thousand.
The preparation of consolidated financial statements in
conformity with IFRS requires the use of certain critical
accounting estimates. It also requires management to exercise its
judgement in the process of applying the Group's accounting
policies. The areas involving a higher degree of judgement or
complexity, or areas where assumptions and estimates are
significant to the consolidated financial statements are disclosed
in Note 3.
Save as disclosed below, all standards, amendments to standards
and interpretations, which are effective during the year beginning
on 1 January 2019 have been adopted by the Group.
2.1.1. New and revised standard adopted
IFRS 16 Lease
The Group has adopted IFRS 16 retrospectively from 1 January
2019, but has not restated the 2018 reporting periods, as permitted
under the specific transitional provisions in the standard. The
reclassifications and the adjustments arising from the new leasing
rules are therefore recognised in the opening statement of
financial position on 1 January 2019.
(i) Adjustments recognised on adoption of IFRS 16
On adoption of IFRS 16, the Group recognised lease liabilities
in relation to leases which had previously been classified as
'operating leases' under the principles of IAS 17 Leases. These
liabilities were measured at the present value of the remaining
lease payments, discounted using the lessee's incremental borrowing
rate as of 1 January 2019. The lessee's incremental borrowing rate
applied to the lease liabilities on 1 January 2019 was 6.53%.
RMB'000
Operating lease commitments disclosed as at 31 December
2018 6,019
Less: short-term leases recognised on a straight-line
basis as expense (423)
--------------
5,596
--------------
Discounted using the lessee's incremental borrowing
rate of at the date of initial application 4,804
Lease liability recognised as at 1 January 2019 4,804
--------------
Of which are:
Current lease liabilities 1,489
Non-current lease liabilities 3,315
--------------
4,804
--------------
Right-of use assets were measured at the amount equal to the
lease liability, adjusted by the amount of any prepaid or accrued
lease payments relating to that lease recognised in the statement
of financial position as at 31 December 2018. There were no onerous
lease contracts that would have required an adjustment to the
right-of-use assets at the date of initial application.
The recognised right-of-use assets relate to properties.
The change in accounting policy affected the following items in
the statement of financial position on 1 January 2019:
-- land use rights - decreased by RMB2,608,000
-- right-of-use assets - increased by RMB7,412,000
-- lease liabilities - increased by RMB4,804,000
(ii) Practical expedients applied
In applying IFRS 16 for the first time, the Group has used the
following practical expedients permitted by the standard:
-- reliance on previous assessments on whether leases are onerous
-- the accounting for operating leases with a remaining lease
term of less than 12 months as at 1 January 2019 as short-term
leases; and
-- the exclusion of initial direct costs for the measurement of
the right-of-use asset at the date of initial application.
The Group has also elected not to reassess whether a contract
is, or contains a lease at the date of initial application.
Instead, for contracts entered into before the transition date the
Group relied on its assessment made applying IAS 17 and IFRIC 4
Determining whether an Arrangement contains a Lease.
(iii) The Group's leasing activities and how these are accounted for
The Group leases an office, the rental contract for which is
made for a fixed period of 55 months. The lease agreement does not
impose any covenants, but leased asset may not be used as security
for borrowing purposes.
Until the 2018 financial year, payments made under operating
leases (net of any incentives received from the lessor) were
charged to profit or loss on a straight-line basis over the period
of the lease.
From 1 January 2019, leases are recognised as a right-of-use
asset and a corresponding liability at the date at which the leased
asset is available for use by the Group. Each lease payment is
allocated between the liability and finance cost. The finance cost
is charged to profit or loss over the lease period so as to produce
a constant periodic rate of interest on the remaining balance of
the liability for each period. The right-of-use asset is
depreciated over the shorter of the asset's useful life and the
lease term on a straight-line basis.
Right-of-use assets are measured at cost comprising the
following:
-- the amount of the initial measurement of lease liability
-- any lease payments made at or before the commencement date
less any lease incentives received
-- any initial direct costs, and
-- restoration costs.
Payments associated with short-term leases are recognised on a
straight-line basis as an expense in profit or loss. Short-term
leases are leases with a lease term of 12 months or less.
2.1.2. New and revised standards, amendments and interpretations
to existing standards that have been issued but are not effective
for the year beginning on 1 January 2019 and have not been early
adopted
Up to the date of issuance of this report, the IASB has issued
the following new standards, amendments and interpretations which
are not yet effective and have not been early adopted:
Effective for
annual periods
beginning on
or after
IFRS 3 (Amendment) Definition of a business 1 January 2020
Conceptual framework Revised conceptual framework 1 January 2020
for financial reporting for financial reporting
2018
IAS 1 and IAS 8 Definition of material 1 January 2020
(Amendments)
IFRS 7, IFRS 9 and Interest rate benchmark reform 1 January 2020
IAS 39 (Amendments)
IFRS 17 Insurance contracts 1 January 2021
IAS 1 (Amendment) Classification of liabilities 1 January 2022
Sale or contribution of assets To be determined
IFRS 10 and IAS between an investor and its
28 (Amendments) associate or joint venture
There are no new and revised standards, amendments and
interpretations that are not yet effective and that would be
expected to have a material impact on the Group in the current or
future reporting periods and on foreseeable future
transactions.
2.2. Principles of consolidation and equity accounting
(a) Subsidiaries
Subsidiaries are all entities (including structured entities)
over which the Group has control. The Group controls an entity when
the Group is exposed to, or has rights to, variable returns from
its involvement with the entity and has the ability to affect those
returns through its power to direct the activities of the entity.
Subsidiaries are fully consolidated from the date on which control
is transferred to the Group. They are de-consolidated from the date
that control ceases.
Intercompany transactions, balances and unrealised gains on
transactions between group companies are eliminated. Unrealised
losses are also eliminated unless the transaction provides evidence
of an impairment of the transferred asset. Accounting policies of
subsidiaries have been changed where necessary to ensure
consistency with the policies adopted by the Group.
(b) Associates
Associates are all entities over which the Group has significant
influence but not control or joint control. This is generally the
case where the Group holds between 20% and 50% of the voting
rights. Investment in an associate is accounted for using the
equity method of accounting (see (c) below), after initially being
recognised at cost.
(c) Equity method
Under the equity method of accounting, the investments are
initially recognised at cost and adjusted thereafter to recognise
the Group's share of the post-acquisition profits or losses of the
investee in profit or loss, and the Group's share of movements in
other comprehensive income of the investee in other comprehensive
income. Dividends received or receivable from associates are
recognised as a reduction in the carrying amount of the
investment.
When the Group's share of losses in an equity-accounted
investment equals or exceeds its interest in the entity, including
any other unsecured long-term receivables, the Group does not
recognise further losses, unless it has incurred obligations or
made payments on behalf of the other entity.
Unrealised gains on transactions between the Group and its
associate are eliminated to the extent of the Group's interest in
these entities. Unrealised losses are also eliminated unless the
transaction provides evidence of an impairment of the asset
transferred. Accounting policies of equity accounted investees have
been changed where necessary to ensure consistency with the
policies adopted by the Group.
The carrying amount of equity-accounted investments is tested
for impairment in accordance with the policy described in note
2.8.
3. Earnings per share
(a) Basic earnings per share
2019 2018
------- -------
RMB'000 RMB'000
Profit attributable to Owners of the
Company 59,168 45,821
Weighted average number of ordinary
shares in issue (thousand shares) 444,448 449,319
Basic earnings per share 0.133 0.102
======= =======
(b) Diluted earnings per share
2019 2018
------- -------
RMB'000 RMB'000
Profit attributable to Owners of the
Company 60,409 45,821
Weighted average number of ordinary
shares in issue (thousand shares) 471,402 449,319
Dilutive earnings per share 0.128 0.102
======= =======
(c) Reconciliations of earnings used in calculating earnings per share
2019 2018
------- -------
RMB'000 RMB'000
Basic earnings per share
Profit from continuing operations attributable
to the ordinary equity holders of the
Company used in calculating basic earnings
per share: 59,168 45,821
======= =======
Diluted earnings per share
Profit from continuing operations attributable
to the ordinary equity holders of the
Company:
Used in calculating basic earnings per
share 59,168 45,821
Add: fair value loss on convertible
notes 1,241 -
------- -------
Used in calculating diluted earnings
per share 60,409 45,821
======= =======
(d) Weighted average number of shares used as the denominator
2019 2018
------- -------
RMB'000 RMB'000
Weighted average number of ordinary
shares (thousand shares) used as the
denominator in calculating basic earnings
per share 444,448 449,319
Adjustments for calculation of diluted
earnings per share:
Share options granted under the Pre-IPO
Share Option Scheme (thousand shares)
(note i) 5,979 -
Convertible notes (thousand shares)
(note ii) 20,975 -
------- -------
Weighted average number of ordinary
shares (thousand shares) and potential
ordinary shares used as the denominator
in calculating diluted earnings per
share 471,402 449,319
======= =======
Note i
On 20 October 2017, the Group granted 39,300,508 share options
for the long-term incentive of directors and senior employees of
the Group. For details, please refer to Note 21.
The number of shares that would have been issued assuming the
exercise of the share options less the number of shares that could
have been issued at fair value (determined as the average market
price per share for the year) for the same total proceeds is the
number of shares issued for no consideration. The resulting number
of shares issued for no consideration is included in the weighted
average number of ordinary shares as the denominator for
calculating diluted earnings per share.
The share options granted under the Pre-IPO Share Option Scheme
are not included in the calculation of diluted earnings per share
because they are antidilutive for the years ended 31 December
2018.
Note ii
The Company issued 12% convertible notes for HKD5,250,000 and
HKD6,250,000 on 8 February 2019 and 15 February 2019 respectively.
For details, please refer to Note 17. Convertible notes are
included in the determination of dilutive earnings per share from
their date of issue.
4. Subsequent events
After the outbreak of Coronavirus Disease 2019 ("COVID-19
outbreak") in early 2020, a series of precautionary and control
measures have been and continued to be implemented across the
country/region. The Group will pay close attention to the
development of the COVID-19 outbreak and evaluate its impact on the
financial position and operating results of the Group. As at the
date on which this set of financial statements were authorised for
issue, the Group was not aware of any material adverse effects on
the financial statements as a result of the COVID-19 outbreak.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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