TIDMGLOK
RNS Number : 5116K
Global Lock Safety (Intl) Grp CoLtd
25 June 2014
Global Lock Safety (International) Group Co., Limited
("Global Lock" or the "Company")
Final results
Global Lock, the provider of security solutions to retailers and
other organisations in China, announces its final results for the
year ended 31 December 2013.
Chairman's statement
-- Revenue of RMB 118.56m (an increase of 32.68% over 2012's RMB 89.36m)
-- Net profit for the year of RMB 5.35m (2012: Profit for the year RMB 1.46m)
-- Net assets (including minority interests) of RMB 51.95m (2012: RMB 47.10m )
-- Cash and cash equivalents of RMB 3.26m (2012: RMB 5.39m)
-- Loss per share of RMB 0.45 (2012: loss of RMB 0.45)
As at 31 December 2013, the Group had 70 branches, 31,912
customers and 1,135 employees. These compare with 2012 as shown in
the following table:
2012 2013 % increase
No. Branches 67 70 4%-
------- ------- -----------
No. Customers 24,107 31,912 32%
------- ------- -----------
No. Employees 1,320 1,135 -10%
------- ------- -----------
Revenues (RMB
m) 89.36 118.06 32%
------- ------- -----------
The improved performance in 2013 is attributable to the
following factors:
- a significant improvement in revenue quality due to strict control of receivables;
- better customer service following customer visits to gain feedback;
- staffing optimisation coupled with efficient performance
assessment, and improved operational procedures as well as the
simplification of approval processes;
- efficient execution of the branch incentive system and an overall upgrade of technology; and
- a general improvement in operational efficiency.
Labour costs have historically been Global Lock's largest
expenditure and 2013 was no exception. Labour costs were up to RM
37.20m, accounting for 31.51% of the gross revenues, a percentage
reduction of 2.1% compared with 2012 in which the labour costs were
RM 30.03m accounting for 33.61% of the year's revenues.
The Company is currently undertaking construction of a Master
Alarm Response Centre located in Shenzhen, which is designed to
receive and handle alarms from all branches and issue instructions
to guard patrols. It is anticipated that the centre will have the
capacity to provide alarm response and processing services for more
than 500,000 clients at the same time and this will result in cost
savings. At the same time, alarm response efficiency is expected to
improve through the use of a real time video monitoring system.
Global Lock believes that the Master Alarm Response Centre will be
one of the largest in China, integrating front-end terminal
alarm/monitoring servers, detectors, cameras and patrol guard
intelligent terminals, back-end automatic command & control and
video analysis system, cloud computing, data storage system,
financial management system and client management systems to create
a fully integrated platform. Supported by the Master Alarm Response
Centre, data applications will be developed utilising intelligent
video analysis of user behaviour which open the possibilities of
future revenue streams.
The Group's regular Annual Review and Planning Meeting was held
in Changsha from 9 January to 11 January 2013 where the work and
results of 2012 were analysed to determine the Group's overall
operating target for 2013. Attendees included the Group Chairman,
senior management and managers and accountants from 63 branches.
Branches that had delivered outstanding performances for
profitability, safety and customer service were given awards.
The first Global Lock Alliance was held on 25 April 2013 in
Shenzhen and was attended by more than 100 security companies from
all over China as well as representatives of local authorities and
more than 20 other organisations, including, China Legal Daily,
Shenzhen Security Bureau, Shenzhen Securities Association, Shenzhen
Video Alarming Association and China Pacific Insurance Group.
As announced on 31 May 2013, on 27 February 2013 the Group
transferred its holding of 15.789% shares in Shenzhen Zhong An Fang
Investment Holdings, and recovered its RMB 1.0m investment. Also
the Group purchased the remaining 50% shares of Yuxi City Global
Lock Security Engineering Co., Ltd in order to achieve 100%
ownership of the Branch, further details of which were announced on
21 March 2013.
On 1 June 2013, the Group entered an agreement with Changsha
Shenying Security Co., Limited to acquire its entire customer
database together with certain other tangible assets and equipment
for a total cash consideration of RMB 488,000 to be paid in three
installments of RMB 100,000 and RMB 300,000. The retention balance
of RMB 88,000 will be payable after one year.
On 22 August 2013, Global Lock entered into a strategic
cooperation agreement with Shenzhen SDG Property Management Co.
Ltd. ("SDG"), a large-scale state-owned property company with Grade
I qualification under which Global Lock will introduce SDG
prospective property projects for SDG to provide property
management services in return for which Global Lock will be given a
right of priority to provided prospective security services to
clients recommended by SDG.
On 22 August 2013, 506 clients were acquired by Global Lock from
Qiandong Nanzhou Yuanxiang Security Co., Ltd. for a total cash
consideration of RMB783,000 to be paid in instalments with the
initial ones being MB160,000 and RMB544,700. The retention balance
of RMB78,300 will be payable after one year.
On 28 August 2013, Shenzhen Infinova Technology Co. Ltd.
("Infinova") signed a strategic cooperation agreement with Global
Lock. Infinova is a high-tech international company engaged in the
research, production and sale of security and optical equipment.
Under this agreement, Global Lock will provide resources in
relation to system projects to Infinova which undertakes
construction and operation of such projects. In return, Global Lock
will receive a proportion of the projected profits from these
projects.
Recent developments and trading update
At 30 April 2014, Global Lock had a total of 32,699 clients, an
increase of 2.5% from the end of 2013's 31,912. The number of
branches remained unchanged from the year end at 70. By 1 June
2014, the integration of the management information system and
Kingdee EAS will be completed, which will improve management
efficiency and provide decision-makers with real-time financial and
business data.
The Group held its Annual Planning Meeting in Changsha from 9 to
11 January 2014 to review the achievements of 2013 and to plan for
2014, as well as to determine the operating targets for the
forthcoming year. Attendees included the Group's Chairman, members
of Senior Management, and Branch Managers and accountants.
Outstanding branches were rewarded for achieving exceptional profit
levels, in meeting their operating targets and for attaining
excellent security service levels. In addition, numbers of
high-achieving individuals were also rewarded.
Directorate changes
On 11 February 2013, Mr Xiaohua Zhang ceased to act as Director.
On 18 March 2013, Mr Yong Luo was re-appointed, as Chairman in
place of Mr Moxiang Li who continued as CEO. On 16 September 2013,
Mr Luo Yong has resigned as its Chairman and Director, Mr Moxiang
Li will take over as Chairman.
Although not a board appointments, Mr. Jonathan Fu, acting CEO
of the Group's operating arm in China, Shenzhen Global Lock
Security System Engineering Co., Ltd. has recently left the
Group.
Emphasis of matter - going concern
The financial statements include an emphasis of matter from the
Group's auditors, UHY Hacker Young, in relation to the Group's
ability to continue as going concern arising from its net current
liabilities of RMB 8.5m as at 31 December 2013. Notwithstanding
this, the Directors consider that the Group's prospects remain
sound.
The annual report and accounts for the year ended 31 December
2013 will be posted to shareholders in the coming few days and will
shortly be available from the Company's website www.globalock.com
in accordance with AIM Rule 20.
Mr.MoXiang Li
Chairman
Enquiries:
Global Lock Safety (International) Group Limited
Moxiang Li, Chairman & Chief Executive Officer Tel:+86 755 8366 0755
Andrew Gee, Non-Executive Director Tel: +44 777 565 3564
Allenby Capital Limited Tel: +44 203 328 5656
Nick Naylor
Alex Price
- Ends -
CONSOLIDATED AND COMPANY STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED31 DECEMBER 2013
Group Company
-------------------------------------- -------------------
2013 2012 2013 2012
Note RMB'000 RMB'000 RMB'000 RMB'000
Revenue
Billing fees income 118,056 89,355 - -
Sales business tax (5,289) (3,599) - -
--------------------------- --------- --------- --------
112,767 85,756 - -
Cost of sales (43,653) (21,863) - -
--------------------------- --------- --------- --------
Gross profit 69,114 63,893 - -
Selling and distribution
costs (55,271) (49,664) - -
Administrative expenses (6.516) (12,032) (1,648) (1,888)
Other income 4 26 535 - -
--------------------------- --------- --------- --------
Profit /(loss) from
operations 7,353 2,732 (1,648) (1,888)
Finance cost 6 (1,268) (974) (1)
--------------------------- --------- --------- --------
Profit /(loss) on ordinary
activities before taxation 3 6,085 1,758 (1,649) (1,888)
Taxation 8 (738) (300) - -
--------------------------- --------- --------- --------
Profit /(loss) for
the year 5,347 1,458 (1,649) (1,888)
Other comprehensive
income - - - -
--------------------------- --------- --------- --------
Total comprehensive
Profit /(loss) for
the year 5,347 1,458 (1,649) (1,888)
=========================== ========= ========= ========
Profit /(loss) attributable
to:
Owners of the parent (433) (1,114)
Non-controlling interests 19 5,780 2,572
--------------------------- ---------
5,347 1,458
=========================== =========
Total comprehensive
Profit (loss) attributable
to:
Owners of the parent (433) (1,114)
Non-controlling interests 19 5,780 2,572
--------------------------- ---------
5,347 1,458
=========================== =========
Loss per share 9
Basic (in cents) (0.17) (0.45)
=========================== =========
Diluted (in cents) (0.17) (0.45)
=========================== =========
CONSOLIDATED AND COMPANY STATEMENT OF FINANCIAL POSITION
FOR THE YEAR ENDED 31 DECEMBER 2013
Group Company
------------------- ------------------
2013 2012 2013 2012
Note RMB'000 RMB'000 RMB'000 RMB'000
Non-current assets
Intangible assets 11 36,204 36,260 - -
Property, plant and equipment 12 22,047 22,696 - -
Investment in subsidiary 13 3,000 3,000 9 9
--------- -------- -------- --------
Total non-current assets 61,251 61,956 9 9
Current assets
Inventories 17 4,853 2,472 - -
Due from customers for
construction contracts 23 10,380 15,110 - -
Trade and other receivables 15 60,274 36,196 13,553 14,942
Cash and cash equivalents 16 3,257 5,388 60 94
--------- -------- -------- --------
Total current assets 78,764 59,166 13,613 15,036
--------- -------- -------- --------
Total assets 140,015 121,122 13,622 15,045
========= ======== ======== ========
Equity and reserves
Share capital 18 20,324 20,324 20,324 20,324
Shares to be issued - - - -
Statutory reserve 188 66
Reserves 963 963 963 963
Accumulated losses (8,406) (7,335) (8,401) (6,752)
--------- -------- -------- --------
13,069 14,018 12,886 14,535
Non-controlling interest 19 38,879 33,083 - -
--------- -------- -------- --------
Total equity 51,948 47,101 12,886 14,535
--------- -------- -------- --------
Current liabilities
Borrowings 21 2,105 2,169 - -
Trade and other payables 20 83,946 68,352 736 510
Taxation 1,213 632 - -
--------- -------- -------- --------
87,264 71,153 736 510
Non-Current liabilities
Long-term payables 21 803 2,868 - -
Total liability 88,067 74,021 736 510
--------- -------- -------- --------
Total equity and liabilities 140,015 121,122 13,622 15,045
========= ======== ======== ========
CONSOLIDATED AND COMPANY STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2013
Group Company
-------------------- ------------------
2013 2012 2013 2012
RMB'000 RMB'000 RMB'000 RMB'000
Cash flows from operating activities
Profit/ (loss) on ordinary
activities before taxation 6,085 1,758 (1,649) (1,888)
Adjustments for:
Amortization of intangible
assets 3,831 3,368 - -
Depreciation of property, plant
and equipment 6,124 5,389 - -
Loss on disposal (500) - -
Financial costs 1,268 974 1 -
Impairment of property, plant
and equipment - 622 - -
--------- --------- -------- --------
17,308 11,611 (1,648) (1,785)
Increase in inventories (2,381) (1,171) -
Increase in trade and other
receivables (19,348) (23,066) 1,389 3,672
Increase in trade and other
payables 13,288 5,006 226 (1,704)
--------- --------- -------- --------
Cash from/(used in) operations 8,867 (7,620) (33) 80
Income taxes paid (109) (174) - -
--------- --------- -------- --------
Net cash from/(used in) operating
activities 8,758 (7,794) (33) 80
--------- --------- -------- --------
Cash flows from investing activities
Purchase of property, plant
and equipment (5,475) (5,976) - -
Research and development costs (290) (765) - -
Purchase of customer relationship (3,485)
Acquisition of subsidiary (500) - - -
--------- --------- -------- --------
Net cash used in investing
activities (9,750) (6,741) - -
--------- --------- -------- --------
Cash flows from financing activities
Loan from directors 2,258 13,839 - -
Financial income - - - -
Financial costs (1,268) (974) (1) -
Borrowings - 5,037 - -
Repayment of borrowing (2,129) (1,236) - -
Loan repayment from subsidiary - - - -
--------- --------- -------- --------
Net cash from financing activities (1,139) 16,666 (1) -
--------- --------- -------- --------
Net change in cash and cash
equivalents (2,131 ) 2,131 (34) 80
Cash and cash equivalents at
beginning of year 5,388 3,257 94 14
--------- --------- -------- --------
Cash and cash equivalents at
end of year 3,257 5,388 60 94
========= ========= ======== ========
CONDOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2013
Shares
Share to be Statutory Other Accumulated Non-controlling Total
capital issued reserve reserve losses Total interest equity
RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000
Group
At 1 January
2012 20,324 4,000 - 963 (6,155) 19,132 30,511 49,643
Loss for the
year - - - - (1,114) (1,114) 2,572 1,458
---------- ---------- ---------- --------- ------------ -------- ---------------- ----------
Total
comprehensive
loss for the
year - - - - (1,114) (1,114) 2,572 1,458
---------- ---------- ---------- --------- ------------ -------- ---------------- ----------
Deferred share
consideration
withdrawn - (4,000) - - (4,000) - (4,000)
Transfer of
statutory
reserve - - 66 - (66) - - -
At 31 December
2012 20,324 - 66 963 (7,335) 14,018 33,083 47,101
========== ========== ========== ========= ============ ======== ================ ==========
Profit (Loss)
for the
year - - - - (433) (433) 5,780 5,347
---------- ---------- ---------- --------- ------------ -------- ---------------- ----------
Total
comprehensive
profit (loss)
for the
year - - - - (433) (433) 5, 780 5,347
---------- ---------- ---------- --------- ------------ -------- ---------------- ----------
Acquisition of
non-controlling
interest
without a
change
in control - - - (516) (516) 16 (500)
Transfer of
statutory
reserve - - 122 - (122) - - -
At 31 December
2013 20,324 - 188 963 (8,406) 13,069 38,879 51,948
========== ========== ========== ========= ============ ======== ================ ==========
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2013
Shares Accumulated
Share capital to be issued Other reserve losses Total
RMB'000 RMB'000 RMB'000 RMB'000 RMB'000
Company
At 1 January 2012 20,324 4,000 963 (4,863) 20,423
Loss for the year - - - (1,888) (1,888)
-------------- -------------- -------------- ------------ --------
Total comprehensive loss
for the year - - - (1,888) (1,888)
-------------- -------------- -------------- ------------ --------
Deferred share consideration
withdrawn - (4,000) - - (4,000)
At 31 December 2012 20,324 - 963 (6,752) 14,535
============== ============== ============== ============ ========
Loss for the year - - - (1,649) (1,649)
-------------- -------------- -------------- ------------ --------
Total comprehensive loss
for the year - - - (1,649) (1.649)
-------------- -------------- -------------- ------------ --------
At 31 December 2013 20,324 - 963 (8,401) 12,886
============== ============== ============== ============ ========
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2013
1 Accounting policies
1.1 General information
The Company is a company incorporated in the British Virgin
Islands ("BVI") under the BVI Law. The Company is governed by its
articles of association and the principal statute governing the
company is BVI law. The company has an unlimited life. The
liability of the members of the company is limited. The Company is
domiciled and has its registered office in BVI and the company's
registration number is given on page 1. The nature of the Group's
operations and its principal activities are set out in the
Directors' report on pages 8 to 11.
The Group's places of business are in the People's Republic of
China ("PRC"). The principal place of business of the Global Lock
Group's operation is at Room 2002, Great China International
Exchange Plaza, Jin Tian Road, Futian District, Shenzhen, P.R
China.
These consolidated financial statements are rounded to the
nearest thousand ('000) and they are presented in Renminbi ("RMB")
which is also the functional currency of the company
1.2 Basis of preparation
The financial statements have been prepared in accordance with
International Financial Reporting Standards as adopted by the EU
(together, "IFRS"). These financial statements are for the year
ended 31 December 2013.
New IFRS standards and interpretations newly adopted
The Group has adopted the following new and amended IFRS
standards and IFRIC interpretations:
-- Amendments to IAS 12 "Deferred tax: Recovery of Underlying Assets"; and
-- Amendments to IAS 1 "Presentation of items of Other Comprehensive Income"
The adoption of these revised standards has not had a material
impact for the Group's result for the year and equity
New IFRS standards and interpretations not yet adopted
The following standards, amendments and interpretations are not
yet effective and have not yet been adopted early by the Group:
-- Amendments to IFRS 7, IAS 1, IAS 19, IAS 27, IAS 32, IAS 36 and IAS 39;
-- IFRS 9 Financial Instruments ;
-- IFRS 10 Consolidated Financial Statements;
-- IFRS 11 Joint Arrangement;
-- IFRS 12 Disclosure of Interests in Other Entities;
-- IFRS 13 Fair Value Measurement;
The management does not anticipate that the adoption of the
above IFRS (including consequential amendments) and interpretations
will result in any material impact to the financial statements in
the period of initial application.
1.3 Going concern policy
Despite the Group is profitable, the Group had net current
liabilities of RMB 8.5 m as at 31 December 2013. The Group has been
monitored its cash flow and constantly negotiated with its
creditors for acceptable trading terms and payment arrangements for
its liabilities to ensure continuity in its operations. The
directors and certain substantial shareholders have expressed their
willingness to continue supporting the Group for the foreseeable
future. They have also provided assurance that they will not call
on their loans and the transaction with the directors are disclosed
in Note 26.
Under the going concern assumption, an entity is ordinarily
viewed as continuing in business for the foreseeable future with
neither the necessity of liquidation, nor ceasing trading or
seeking protection from creditors pursuant to laws or regulations.
In assessing whether the going concern assumption is appropriate,
management takes into account all available information for the
foreseeable future, in particular for the twelve months from the
date of approval of the financial statements. Based on the budgets
prepared, management have a reasonable expectation that the group
has adequate resources to continue its operational exercises for
the foreseeable future and the group has adopted the going concern
basis of accounting in preparing the non-statutory financial
statements.
1.3 Basis of consolidation
The consolidated financial statements incorporate the financial
statements of the Company and entities controlled by the Company
(its subsidiaries). Control is achieved where the Company has the
power to govern the financial and operating policies of an investee
entity so as to obtain benefits from its activities.
Non-controlling interests in the net assets of consolidated
subsidiaries are identified separately from the Group's equity
therein. Non-controlling interests consist of the amount of those
interests at the date of the original business combination (see
below) and the non-controlling interests' share of changes in
equity since the date of the combination. Losses applicable to the
minority in excess of the non-controlling interest in the
subsidiary's equity are allocated against the interests of the
Group except to the extent that the non-controlling interest has a
binding obligation and is able to make an additional investment to
cover the losses.
The results of subsidiaries acquired or disposed of during the
year are included in the Consolidated Statement of Comprehensive
Income from the effective date of acquisition or up to the
effective date of disposal, as appropriate.
Where necessary, adjustments are made to the financial
statements of subsidiaries to bring the accounting policies used
into line with those used by the Group. All intra-group
transactions, balances, income and expenses are eliminated on
consolidation.
The Group entered into the following agreements on 17 October
2010:
-- An Exclusive Technology Support Agreement between Global Lock
Safety (Shenzhen) Limited ("Global Lock WFOE") and Shenzhen Global
Lock Security System Engineering Co., Ltd ("Shenzhen Global Lock"),
with a quarterly services fee of 20 to 25 per cent of total monthly
operating revenues is payable by Shenzhen Global Lock to Global
Lock WFOE on a quarterly basis. The condition requires Shenzhen
Global Lock has profitability in the financial year in order to
meet this obligation.
-- On 17 May 2013, Global Lock WFOE and Shenzhen Global Lock
have agreed to vary the exclusive Technology Support Agreement with
effect from 1 January 2012 so that instead of the service fee being
calculated by reference to the operating revenue of Shenzhen Global
Lock in any profitable quarter it will be 25 percent. Shenzhen
Global Lock's profit before tax for the financial year in
question.
-- Accordingly 75% of the net profit of Shenzhen Global Lock is
attributable to the non-controlling interest in Shenzhen Global
Lock.
-- A Business Operation Agreement between Global Lock WFOE and
Shenzhen Global Lock and the shareholders of Shenzhen Global Lock
(who are also the founder and controlling shareholders of the
Company) under which Shenzhen Global Lock cannot carry out any
activities which may affect its capital, personnel, obligations,
rights or business operations. In addition, the Founder
Shareholders grant Global Lock WFOE the rights to exercise their
respective voting rights in Shenzhen Global Lock.
-- An Exclusive Option Agreement entered into between Global
Lock WFOE, the Founder Shareholders and Shenzhen Global Lock, under
which Global Lock WFOE has an exclusive option to purchase by
itself or through a nominee, to the extent permitted by the laws of
the PRC, all or any part of the equity interests of each Founder
Shareholder in Shenzhen Global Lock. Each Founder Shareholder has
agreed that Shenzhen Global Lock will accept payment from Global
Lock WFOE on their behalf and that the payment received shall be a
loan to Shenzhen Global Lock to be used for the business operations
of Shenzhen Global Lock.
-- An Exclusive Sales Agreement entered into by Shenzhen Global
Lock and Global Lock WFOE, under which, Global Lock WFOE is allowed
to sell the various antitheft systems and ancillary products of
Shenzhen Global Lock, exclusively within the territories and period
as agreed between the parties.
-- An Equity Pledge Agreement entered into between Global Lock
WFOE, Shenzhen Global Lock and the Founder Shareholders under which
the Founder Shareholders have pledged their respective equity
interests in Shenzhen Global Lock to Global Lock WFOE as security
for the protection of the rights of Global Lock WFOE under the
Exclusive Technology Support Agreements, the Business Operation
Agreement, the Exclusive Option Agreement and the Exclusive Sales
Agreement referred to above (the "Contractual Arrangements"). In
addition, the Founder Shareholders have agreed not to transfer,
sell, pledge, dispose or create any encumbrance over their equity
interests in Shenzhen Global Lock.
The Group, through these contractual agreements, gained control
of Shenzhen Global Lock on that date.
In determining the appropriate accounting treatment for this
transaction, the Directors considered IFRS 3 "Business
Combinations" (Revised 2008). However, they concluded that this
transaction fell outside the scope of IFRS 3 (revised 2008) since
the transaction described above represents a combination of
entities under common control as the same group of individuals
acting in concert were shareholders of Shenzhen Global Lock as well
as the controlling shareholders of the Company
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 and specifically looked to
accounting principles generally accepted in the United Kingdom ("UK
GAAP") for guidance (FRS 6 - Acquisitions and mergers) which does
not conflict with IFRS and reflects the economic substance of the
transaction.
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 within
applicable IFRS, no goodwill is recognised, any expenses of the
combination are written off immediately to the income statement and
comparative amounts, if applicable, are restated as if the
combination had taken place at the beginning of the earliest
accounting period presented.
Therefore, although the Group reconstruction did not become
unconditional until 17 October 2010, these consolidated financial
statements are presented as if the Group structure has always been
in place, including the activity from incorporation of the group's
principal trading subsidiary. Both entities had the same management
as well as majority shareholders.
Business combinations
The acquisition of subsidiaries is accounted for using the
purchase method of accounting. 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
value at the acquisition date, except for non-current assets (or
disposal groups) that are classified as held for sale in accordance
with IFRS 5: Non-Current Assets Held for Sale and Discontinued
Operations, which are recognised and measured at fair value less
costs to sell.
Goodwill arising on acquisition is recognised as an asset and
initially measured 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. If, after reassessment, the Group's
interest in the net fair value of the acquiree's identifiable
assets, liabilities and contingent liabilities exceed the cost of
the business combination, the excess is recognised immediately in
the Statement of Comprehensive Income.
Non-controlling interests that are present ownership interest
and entitle their holders to a proportionate share of the entity's
net assets in the event of liquidation may be initially measured
either at fair value or at the non- controlling interests'
proportionate share of the recognised amounts of the acquiree's
identifiable net assets. The choice of measurement basis is made on
a transaction-by-transaction basis. Other types of non-controlling
interests are measured at fair value, when applicable, on the basis
specified in another IFRS.
1.4 Intangible assets
(a) Patent rights
Patent rights acquired are initially recognised at cost and are
subsequently carried at cost less accumulated amortisation and
accumulated impairment losses. These costs are amortised to the
income statement using the straight-line method over 14.6 years,
which is the shorter of the remaining useful life and periods of
contractual rights. The remaining useful life of 14.6 years of the
20 years patent is calculated from the date the patent was
transferred to the Group on 1 August 2009.
(b) 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 Company:
- the technical feasibility of completing the intangible assets
so that it will be available for use or sales;
- its intention to complete the intangible asset and use or sell it;
- its ability to use or sell the intangible assets;
- it is probable that the intangible asset created will generate future economic benefits;
- the availability of adequate technical financial and other
resources to complete the development and use or sell the
intangible assets; and
- its ability to measure reliably the expenditure attributable
to the intangible assets during its development.
Internally generated intangible assets are amortised on a
straight-line basis over their estimated useful lives, from the
date the intangible is ready for use. Amortisation charge is
recognised in the income statement within "Cost of sales".
Development costs that have been capitalised as intangible
assets are amortised on a straight-line basis over the period of
its expected benefits.
(c) Customer relationship
Customer relationships are measured initially at purchase cost
and are amortised on a straight-line basis over their estimated
useful life of 5 years.
1.5 Property, plant and equipment
Property, plant and equipment are stated at cost less any
subsequent accumulated depreciation and subsequent accumulated
impairment losses.
Depreciation is charged so as to write off the cost, less
estimated residual value on assets other than land, over their
estimated useful lives, using the reducing balance method, on the
following bases:
Machinery equipment under construction straight line 5 years
Machinery equipment straight line 5 years
Office equipment and motor vehicles straight line 5 years
Gains and losses on disposals are determined by comparing
proceeds with the carrying amount of the asset. These are included
in statement of comprehensive income.
Security equipment of installed at customers is initially
included in balance sheet at cost, and classified as "installed at
customers" on transfer to a customer's site. Depreciation is charge
on straight line basis over a five year life. When any equipment is
returned to the group, the net book value is reclassified as "not
installed at customers" and no depreciation is charged.
1.6 Impairment of tangible and intangible assets excluding goodwill
At each balance sheet date, 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.
The recoverable amount is the higher of fair value less costs to
sell and 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 the 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 profit or
loss, unless the relevant asset is carried at a re-valued 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 (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 (cash-generating unit) in prior years. A reversal of
an impairment loss is recognised immediately in profit or loss,
unless the relevant asset is carried at a re-valued amount, in
which case the reversal of the impairment loss is treated as a
revaluation increase.
1.7 Taxation
Current taxation
Current tax assets and liabilities for the current and prior
periods are measured at the amount expected to be recovered from or
paid to the tax authorities. The tax rates and the tax laws used to
compute the amount are those that are enacted, or substantively
enacted, by the balance sheet date.
Deferred taxation
Deferred tax is provided in full using the balance sheet
liability method for all taxable temporary timing differences
arising between the tax bases of assets and liabilities and their
carrying values for financial reporting purposes. Deferred tax is
measured using currently enacted or substantially enacted tax
rates.
Deferred tax assets are recognised to the extent the temporary
difference will reverse in the foreseeable future and that it is
probable that future taxable profit will be available against which
the asset can be utilised.
1.8 Revenue recognition
Revenue is measured at the fair value of the consideration
received or receivable and represents amounts receivable in
accordance with the Group's principal activity, net of VAT and
trade discounts, also deducted sales business tax.
Security solutions
Revenue is general recognised in the period when the services
are provided, using a straight-line basis over the term of the
contract.
Security system integration centre
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
completion of a physical proportion of the contract work. When the
outcome of a construction contract cannot be estimated reliably,
contract revenue is recognised only to the extent of contract costs
incurred that are likely to be recoverable.
1.9 Leases
Leases in which a significant portion of the risks and rewards
of ownership are retained by the lesser are classified as operating
leases. Payments made under operating leases (net of any incentives
received from the lesser) are charged to the profit and loss on a
straight-line basis over the period of the lease.)
1.10 Investment in subsidiaries
Investments in subsidiaries are stated at cost less provision
for permanent diminution in value.
1.11 Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits, bank
balances, demand deposits and other short term, highly liquid
investments that are readily convertible to known amount of cash
and are subject to an insignificant risk of changes in value.
1.12 Construction contracts in progress
Construction contract in progress represents the gross amount
expected to be collected from customers for contract work performed
to date. It is measured at costs incurred plus profits recognised
to date (see Note 1.9) less progress billings and recognised
losses. Cost includes all expenditure related directly to specific
projects and an allocation of fixed and variable overheads incurred
in the Group's contract activities based on normal operating
capacity.
At the balance sheet date, 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.
1.13 Financial instruments
Financial assets and financial liabilities are recognised on the
group's balance sheet when the group becomes a party to the
contractual provisions of the instrument.
Trade and other receivables
Trade and other receivables are initially measured at fair value
and are subsequently reassessed at the end of each accounting
period.
Financial liabilities and equity
Financial liabilities and equity instruments issued by the group
are classified according to the substance of the contractual
arrangements entered into and the definitions of a financial
liability and an equity instrument. An equity instrument is any
contract that evidences a residual interest in the assets of the
group after deducting all of its liabilities. The accounting
policies adopted for specific financial liabilities and equity
instruments are set out below.
Trade payables
Trade payables are initially measured at fair value and are
subsequently measured at amortised cost, using the effective
interest rate method.
Equity instruments
Equity instruments issued by the company are recorded at the
proceeds received, net of direct issue costs. Shares issued are
held at their fair value.
1.14 Inventory
Inventory is stated at the lower of cost and net realisable
value. Cost is determined on a first-in first-out basis. Net
realisable value is based on estimated selling price allowing for
all further costs to completion and disposal.
The inventory is included within finished goods (spare parts and
uniform) and low-value consumption goods.
1.15 Borrowings
Borrowings are recognised initially at the proceeds received,
net of transaction costs incurred, and subsequently measured at
amortised cost using the effective interest method. Borrowings are
classified as current liabilities unless the Group has an
unconditional right to defer settlement of the liability for at
least twelve months after the end of reporting date.
1.16 Provisions
Provisions are recognised when the group has a present
obligation (legal or constructive) as a result of a past event and
it is probable that an outflow of resources embodying economic
benefits will be required to settle the obligation and a reliable
estimate can be made of the amount of the obligation. Where the
group expects some or all of a provision to be reimbursed, the
reimbursement is recognised as a separate asset but only when the
reimbursement is virtually certain. The expense relating to any
provision is presented in the income statement net of any
reimbursement. If the effect of the time value of money is
material, provisions are discounted using a current pre-tax rate
that reflects, where appropriate, the risks specific to the
liability. Where discounting is used, the increase in the provision
due to the passage of time is recognised as a borrowing cost.
1.17 Commitments and contingencies
Commitments and contingent liabilities are disclosed in the
financial statements. They are disclosed unless the possibility of
an outflow of resources embodying economic benefits is remote. A
contingent asset is not recognised in the financial statements but
disclosed when an inflow of economic benefits is probable.
1.18 Events after the balance sheet date
Post year-end events that provide additional information about a
company's position at the balance sheet date and are adjusting
events are reflected in the financial statements. Post year-end
events that are not adjusting events are disclosed in the notes
when material.
1.19 Foreign currencies
The financial information is presented in Renminbi ("RMB") which
is the functional currency of the Group.
Monetary assets and liabilities denominated in foreign
currencies in each company are translated at the rates of exchange
prevailing at the accounting date. Transactions in foreign
currencies are translated at the rate prevailing at the date of
transaction.
1.20 Share-based payment arrangement
Equity-settled share-based payment transactions with parties
other than employees are measured at the fair value of the goods or
services received, except where that fair value cannot be estimated
reliably, in which case they are measured at the fair value of the
equity instruments granted, measured at the date the entity obtains
the goods or the counterparty renders the services. Details
regarding the determination of the fair value of equity-settled
share-based transactions are set out in note 22.
Fair value is measured by use of the Black-Scholes model. The
expected life used in the model has been adjusted, based on
management's best estimate, for the effects of non-transferability,
exercise restrictions, and behavioural considerations
1.21 Employee Benefits
Short Term Employee Benefits
Wages, salaries, annual leave and sick leave, social security
contributions, bonuses and non-monetary benefits are accrued in the
period in which the associated services are rendered by the
employees.
Post-employment benefits
For the subsidiary of the Group in PRC, there are contributory
retirement plans operated by the local government. The employees
participate in the defined contribution retirement plan whereby the
company is required to contribute to the schemes at fixed rates of
the employees' salary costs. The company's contributions to these
plans are charged to profit or loss when incurred. The company has
no obligation for the payment of retirement and other
post-retirement benefits of staff other than the contributions
described above.
Contribution made to the defined contribution retirement plan
includes basic pension insurance in PRC which is charged to the
profit and loss in the period to which they are related.
Under the pension plan which the Group pays fixed contributions
and will have no legal or constructive obligations to pay further
contributions if the fund does not hold sufficient assets to pay
all employee benefits relating to employee service in the current
or prior financial periods. Once the contributions have been paid,
the Group has no further payment obligations.
1.22 Government grants
Government grants are recognised as income over the periods
necessary to match them with the related costs which they are
intended to compensate; and are recognised only when there is
reasonable assurance that:
- the company will comply with the conditions attached to them; and
- the grants will be received.
Unconditional government grant is recognised in profit or loss
as other income when the grant becomes receivables
1.23 Accounting estimates and judgments
The preparation of financial statements in conforming to adopted
IFRSs requires management to make judgments, estimates and
assumptions that affect the application of policies and reported
amounts of assets, liabilities, income and expenses. The estimates
and assumptions are based on historical experience and other
factors considered reasonable at the time, but actual results may
differ from those estimates. Revisions to these estimates are made
in the period in which they are recognised.
Consolidation
The Group does not consolidate the results of Henan Xinxiang
Jingan Security Technology Co., Limited ("Henan Xinxiang") as the
Directors are of the opinion the control is not significant
influence on its daily business operation.
1.24 Use of estimates
The assumptions concerning the future, and other key sources of
estimation at the balance sheet date, 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:
Intangible Assets
Amortisation
Intangible assets (other than goodwill) are amortised over their
useful lives. Useful lives are based on management's estimates of
the periods over which the assets are expected to generate
revenues. These estimates are periodically reviewed for
reasonableness. Due to the long lives of these assets, especially
patent rights long lives (14 years) changes to the estimates can
result in significant changes to the carrying value. A decrease of
10% in the charge in the next year would reduce costs by RMB270,000
approximately.
Impairment review
The Group assesses the impairment of intangible assets subject
to amortisation or depreciation whenever events or changes in
circumstances suggest that the carrying amount of the asset may not
be recoverable or may have been impaired. Factors that may trigger
an impairment review include the following:
i. Significant underperformance relative to historical or projected operating results.
ii. Significant changes in the manner of the use of the assets
or the overall business strategy.
iii. Significant negative industry or macro-economic trends.
The key assumptions used in the value in use calculations for
the customer list included with intangible assets are customer
attrition rates, revenue growth rates and appropriate discount
rates.
Management has assessed the net present value and thereby
impairment on variety of bases and assumptions. The impairment test
are particularly sensitive to changes in the key assumptions and
changes to the assumptions could result in impairment; however all
of the varying bases indicate a net present value in excess of the
carrying value of the intangible assets.
The key assumptions in the value in use calculations are as
follows:
Customer Attrition Rate 5.3%
Growth Rate 50%
Discount Factor 14.26%
A decrease of 10% in the key assumptions rates would result in
the request for an impairment of the intangible asset.
1.25 Use of estimates - continued
Share-based payment
The Group has share option schemes for certain suppliers.
Judgements and estimates are required in determining the
share-based payment charge as an expense in the income statement.
The directors have used Black-Scholes model which has been widely
used in valuing the share based payment charge. The directors are
in the opinion that the model used has been adjusted to their best
estimate in arriving at the charge.
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 activity at the statement
of financial position, measured based on the physical proportion of
contract work performed to date, except where this would not be
representative of the stage of completion. Variations in contract
work, claims and incentive payments are included to the extent that
they have been agreed with the customer.
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.
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 as at 31 December 2012 and
2013 were RMB 22.7 million and RMB 22.0 million respectively.
2 Business segments
For the purpose of IFRS 8, the chief operating decision maker
takes the form of the Board of Directors. The Directors are of the
opinion that the business of the Group comprises of a single
activity, being the provider of security solutions to retail stores
in the PRC. At the meetings between the Directors, the income,
expenditure cash flows, assets and liabilities are reviewed on a
whole-group basis. Nonetheless the Group's revenue and results can
be classified into the following streams:
-- Security solution
-- Security system integration
Security
Security system
solution integration Company Total
RMB'000 RMB'000 RMB'000 RMB'000
Billing fees income
Year ended 31 December
2013 76,286 41,770 - 118,056
Year ended 31 December
2012 56,245 33,110 - 89,355
Results
Year ended 31 December
2013 (722) 7,717 (1,648) 5,347
Year ended 31 December
2012 (16,889) 21,448 (1,888) 2,671
The investment criterion of the Group is to invest in sales
opportunities in prime locations. Sub-division of sales by type,
function or by town or city of location is therefore of little
significance in reviewing operations.
Based on the above considerations, there is considered to be one
reportable segment, the provider of security solutions to retail
stores in PRC. Internal and external reporting is on a consolidated
basis, with transactions between Group companies eliminated on
consolidation. Therefore the financial information of the single
segment is the same as that set out in the Consolidated Statement
of Comprehensive Income, the Consolidated Statement of Changes in
Equity, the Consolidated Statement of Financial Position and
Consolidated Statement of Cash Flows.
All Group non-current assets are located in the PRC. No Group
non-current assets are located in the entity's country of
domicile.
3 Profit on ordinary activities before taxation
Profit on ordinary activities before taxation is stated after
charging the following amounts:
Group Company
---------------------------------------- ------------------
2013 2012 2013 2012
RMB'000 RMB'000 RMB'000 RMB'000
Amortisation of intangible assets 3,831 3,368 - -
Depreciation of property, plant and equipment 6,124 5,389 - -
Share based payment charge 963 - - -
Staff costs 37,204 32,204 203 242
(Gain)/loss on foreign exchange 43 67 11 71
Operating lease rental 2,958 2,862 - -
Audit fee 360 342 - -
=================== =================== ======== ========
4 Other income
Group Company
------------------ ------------------
2013 2012 2013 2012
RMB'000 RMB'000 RMB'000 RMB'000
Gain on disposal of investment 500 - -
Sundry income 26 35 - -
-------- -------- -------- --------
26 535 - -
======== ======== ======== ========
5 Finance income
Group Company
------------------ ------------------
2013 2012 2013 2012
RMB'000 RMB'000 RMB'000 RMB'000
Bank interest receivable 8 7 - -
======== ======== ======== ========
6 Finance costs
Group Company
------------- ------------
2013 2012 2013 2012
RMB RMB RMB RMB
Bank interest payables 241 117 - -
Interest on bank borrowings 1,026 857 3 -
1,268 974 3 -
====== ===== ===== =====
7 Staff costs
Group Company
------------------ ------------------
2013 2012 2013 2012
RMB'000 RMB'000 RMB'000 RMB'000
Wages and salaries 35,265 30,221 203 242
Other benefits 1,939 1,983 - -
-------- -------- -------- --------
37,204 32,204 203 242
======== ======== ======== ========
Directors emoluments
Included within staff costs 257 323 203 242
Included within research and development cost capitalised 120 240
377 563 203 242
======== ======== ======== ========
The directors had no other benefits other than the salaries
included in emoluments.
The average number of persons employed by the Group during the
year including directors is analyzed below:
Group Company
-------------- ------------
2013 2012 2013 2012
Director 6 6 1 1
Senior management 6 6 - -
Local branch staff 1,129 1,308 - -
1,135 1,320 1 1
====== ====== ===== =====
Directors' emoluments
Directors' remuneration for the year was:
Short term Post employment Total
employment benefits
benefits
RMB'000 RMB'000 RMB'000
2013
Yong Luo - 4 4
Moxiang Li - 4 4
Jiafa Wang 120 - 120
Jianbin Wang - - -
Hualiang Jiang 21 - 21
You Feng 33 - 33
Andrew Gee 203 - 203
------------ ---------------- --------
Aggregate emoluments 377 8 385
============ ================ ========
2012
Xuean Yan - - -
Yong Luo - 4 4
Moxiang Li - 4 4
Jun Gai - - -
Jiafa Wang 240 - 240
Jianbin Wang 13 - 13
Hualiang Jiang 44 - 44
You Feng 16 - 16
Andrew Gee 242 - 242
Aggregate emoluments 555 8 563
============ ================ ========
8 Taxation
Group Company
------------------ ------------------------------
2013 2012 2013 2012
RMB'000 RMB'000 RMB'000 RMB'000
Current tax 738 300 - -
Deferred tax - - - -
-------- -------- -------- --------------------
Tax charge/(credit)
on ordinary activities 738 300 - -
======== ======== ======== ====================
Reconciliation of the tax expense
The tax assessed for the year is different from the standard
rate of corporation tax in the PRC (25%). The differences are
explained below:
Group Company
------------------ ------------------------------
2013 2012 2013 2012
RMB'000 RMB'000 RMB'000 RMB'000
Profit / (loss)
on ordinary activities
before taxation 6,085 1,758 (1,649) (1,785)
======== ======== ======== ====================
Loss on ordinary
activities multiplied
by standard rate
of corporation tax
in the PRC of 25%
(2012: 25%) 1,521 440 - -
Effects of:
Non-deductible expenses 90 97 - -
Tax exempt (687) 472 - -
Differences in foreign
tax rates - 139 - -
Utilized of tax
losses (477) (34) - -
Tax loss not recognised 291 (814) - -
Tax charge/(credit)
on ordinary activities 738 300 - -
======== ======== ======== ====================
The company is regarded as resident for the tax purposes in BVI.
There are no applicable taxes in the BVI for the company.
The Group is regarded as residents for the tax purposes in PRC
and subject to national income tax rate at 25%.
A deferred tax asset of approximately RMB 1,720,000 (2012: RMB
3,200,000) has not been recognized in respect of timing differences
relating to losses not utilized and carried forward at the year end
as there is insufficient evidence that the amount will be recovered
in future years.
9 Loss per share
The calculation of basic and diluted loss per share at 31
December 2013 was based on the loss attributable to ordinary
shareholders of RMB 434,697 (2012: RMB 1,113,669). The weighted
average number of ordinary shares outstanding during the year ended
31 December 2011 and the effect of the potentially dilutive
ordinary shares to be issued are shown below.
Group
-----------------------------
2013 2012
Number Number
Issued ordinary shares at beginning
of the year 250,000,000 250,000,000
Effect of shares issued - -
--------------- ------------
Basic weighted average number of
shares in issue during the year 250,000,000 250,000,000
=============== ============
Diluted weighted average number
of shares in issue during the year 250,000,000 250,000,000
=============== ============
Group
-----------------------------
2013 2012
RMB RMB
Net loss for the year attributable
to equity holders (434,697) (1,113,669)
=============== ============
Basic loss per share (in cents) (0.17) (0.45)
=============== ============
Diluted loss per share (in cents) (0.17) (0.45)
=============== ============
At 31 December 2013, 2.5m share options (2012: 2.5m) were
excluded from the diluted weighted average number of ordinary
shares calculation as their effect would have been
anti-dilutive.
The average market value of the Company's shares for purposes of
calculating the dilutive effect of the share options was based on
quoted market prices for the period during which the options were
outstanding.
10 Acquisitions
On 10 September 2012, the Group entered agreement with GuiZhou
LiuPanShui PinSan Trading Co., Limited to pursuant the acquisition
of the entire customer database together with certain other fixed
assets and equipment for a total cash consideration of RMB
1,900,000 to be paid in four installments of RMB 200,000, RMB
650,000 and RMB 860,000. The retention balance of RMB 190,000 will
be payable after one year.
On 28 October 2012, the Group entered agreement with GuiZhou
LiuPanShui WeiDun Security Services Co., Limited to pursuant the
acquisition of the entire customer database together with certain
other fixed assets and equipment for a total cash consideration of
RMB 900,000 to be paid in four installments of RMB 200,000, RMB
400,000, RMB 200,000 and retention balance of RMB 100,000 will be
payable after one year
The above acquisitions were integrated in the Shenzhen Global
Lock LiuPanShui Branch in this year financial statement.
On 1 June 2013, the Group entered an agreement with ChangSha
ShenYing Security Co., Limited to acquire its entire customer
database together with certain other tangible assets and equipment
for a total cash consideration of RMB 488,000 to be paid in three
instalments, the first two of which are RMB 100,000 and RMB
300,000. The retention balance of RMB 88,000 will be payable after
one year.
10 Acquisitions - continued
On 22 August 2013, the Group entered agreement with
QianDongNanZhou YuanXiang Security Co Limited to pursuant the
acquisition of the entire customer database together with certain
other fixed assets and equipment for a total cash consideration of
RMB 783,000 to be paid in three installments of RMB 160,000 and RMB
544,700. The retention balance of RMB 78,300 will be payable after
one year.
On 8 October 2013, the Group entered agreement with TianMen
FangZhou Vision Development Co Limited to pursuant the acquisition
of the entire customer database together with certain other fixed
assets and equipment for a total cash consideration of RMB 400,000
to be paid in three installments of RMB 40,000 and RMB 320,000. The
retention balance of RMB 40,000 will be payable after one year.
11 Intangible assets
Development Customer
Group Patent rights cost relationship Total
RMB'000 RMB'000 RMB'000 RMB'000
Cost
As at 1 January 2012 39,204 3,054 3,413 45,671
Additions - 765 - 765
--------------- ------------- --------------- --------
As at 31 December
2012 39,204 3,819 3,413 46,436
Additions - 290 3,485 3,775
--------------- ------------- --------------- --------
As at 31 December
2013 39,204 4,109 6,898 50,211
--------------- ------------- --------------- --------
Less:
Accumulated amortization
As at 1 January 2011 6,483 - 325 6,808
Amortization for the
year 2,685 - 683 3,368
--------------- ------------- --------------- --------
As at 31 December
2011 9,168 - 1,008 10,176
Amortization for the
year 2,685 - 1,146 3,831
--------------- ------------- --------------- --------
As at 31 December
2012 11,853 - 2,154 14,007
--------------- ------------- --------------- --------
Carrying amounts
At 31 December 2013 27,351 4,109 4,744 36,204
=============== ============= =============== ========
At 31 December 2012 30,036 3,819 2,405 36,260
=============== ============= =============== ========
Intangible assets include patent rights, development costs and
customer relationship.
The Group undertakes development projects to improve and upgrade
its software solution that includes the peripheral devices used for
the security and the related software.
The goodwill arising on the acquisition of local business
operators is attributable to the anticipated profitability of the
foreseeable future contracts to be obtained by the customer
relationships in the security solutions sectors, the expertise of
the technical staffs and the anticipated future operating synergies
from the combination.
12 Property, plant and equipment
Security equipment Security equipment Office equipment
not installed Assets under installed at Security and motor
Group at customer construction customer centre vehicles Total
RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000
At cost
As at 1 January
2012 3,667 70 17,233 1,900 5,872 28,742
Additions 4,960 3 - 266 1,513 6,742
Disposal - - - - - -
Transfer (4,873) (70) (746) 70 - (5,619)
------------------- -------------- ------------------- --------- ----------------- --------
As at 31 December
2012 3,754 3 16,487 2,236 7,385 29,865
------------------- -------------- ------------------- --------- ----------------- --------
Accumulated
depreciation
As at 1 January
2012 - - 4,277 236 1,498 6,011
Charge for the year - - 4,423 336 630 5,389
Eliminated - - - - - -
Impairment loss 622 - - - - 622
Transfer - - (4,853) - - (4,853)
------------------- -------------- ------------------- --------- ----------------- --------
As at 31 December
2012 622 - 3,847 572 2,128 7,169
------------------- -------------- ------------------- --------- ----------------- --------
Net book value of property, plant and equipment
At 31 December 2012 3,132 3 12,640 1,664 5,257 22,696
=================== ============== =================== ========= ================= ========
At 31 December 2011 3,667 70 12,956 1.664 4.374 22,731
=================== ============== =================== ========= ================= ========
Security equipment Security equipment Office equipment
not installed Assets under installed at Security and motor
Group at customer construction customer centre vehicles Total
RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000
At cost
As at 1 January
2013 3,754 3 16,487 2,236 7,385 29,865
Additions 4,129 - 36 129 1,181 5,475
Disposal - - - - - -
Transfer (4,515) (3) 2,881 (571) (2,013) (4,221)
------------------- -------------- ------------------- --------- ----------------- --------
As at 31 December
2013 3,368 - 19,404 1,794 6,553 31,119
------------------- -------------- ------------------- --------- ----------------- --------
Accumulated
depreciation
As at 1 January
2013 622 - 3,847 572 2,128 7,169
Charge for the year - - 4,361 354 1,409 6,124
Eliminated - - - - - -
Transfer - - (3,410) (10) (801) (4,221)
------------------- -------------- ------------------- --------- ----------------- --------
As at 31 December
2013 622 - 4,798 916 2,736 9,072
------------------- -------------- ------------------- --------- ----------------- --------
Net book value of property, plant and equipment
At 31 December 2013 2,746 - 14,606 878 3,817 22,047
=================== ============== =================== ========= ================= ========
At 31 December 2012 3,132 3 12,640 1,664 5,257 22,696
=================== ============== =================== ========= ================= ========
13 Shares in subsidiary undertakings
Group Company
------------------ ------------------
2013 2012 2013 2012
RMB'000 RMB'000 RMB'000 RMB'000
Investment costs
As at 1 January 3,000 8,000 9 4,009
Additions - - - -
Disposal* - (1,000) - -
Withdrawn** - (4,000) - (4,000)
-------- -------- -------- --------
As at 31 December 3,000 3,000 9 9
-------- -------- -------- --------
Impairment
From 1 January - 500 - -
Impairment loss - - - -
Elimination - (500) - -
-------- -------- -------- --------
As at 31 December - - - -
-------- -------- -------- --------
Carrying value
As at 31 December 3,000 3,000 9 9
======== ======== ======== ========
*On 27 February 2013, the Group completed the disposal of its
entire shareholding of Shenzhen China Security Investment Holding
Co., Limited ("Shenzhen CSI") to 3(rd) party for a total
consideration of RMB 9 million of which RMB 8 million have been
received in FY2012 and the remaining RMB 1 million was paid to
Shenzhen Global Lock on 29 March 2013.
**On 31 August 2012, the Group has signed amendment agreement
with other shareholders in Henan Xinxiang Jingan Security
Electronic Co., Limited ("Henan Xinxiang") to pursuant the
cancellation of deferred consideration of RMB 4 million. The group
will therefore retain the 30% indirect interest held via Shenzhen
Global Lock. The Group does not consolidate the results of Henan
Xinxiang as the directors are of the opinion the control is not
significant influence on its daily business operation.
On 31 March 2013, the Group entered the share purchase agreement
with other shareholders of Yuxi City Global Lock Security System
Engineering Co., Limited ("Yuxi"), to pursuant the acquisition of
the remaining 50% of the entire share capital of company for the
cash consideration of RMB 500,000. The Group recognised an increase
in non-controlling interest of RMB 16,000 and a decrease in
retained earnings of RMB 516,000
On 12 July 2013, the Group invested RMB 1.53 million to
incorporate Hebei Global Lock Security System Engineering Co.,
Limited in exchange for 51% of the entire share capital of that
company.
Details of the subsidiaries, all of which have ordinary shares
and a year ended 31 December 2013, are as follows:
Effective Share of
equity Control profit
interest exercised attributable
held by by the to the Country
Subsidiary the Group group group of registration Nature of business
------------------------------ ------------ ----------- -------------- ----------------- -------------------
HK Global Lock Safety 100% n/a - Hong Kong Investment holding
(International) Group
Co Limited
Held by subsidiaries:
Global Lock Safety 100% n/a - PRC Investment holding
(Shenzhen) Limited
Shenzhen Global Lock Provide security
Security System Engineering solutions to
Co., Ltd. - 100% 25% PRC retail stores.
Yuxi City Global Lock - 100% - PRC Provide security
Security Engineering solutions to
Co., Ltd ("Yuxi") retail stores.
Shenzhen Global Lock - 100% - PRC Dormant
Security Technology
Co., Limited
Henan Xinxiang Jingan - 30% - PRC Provide security
Security Electronic solutions to
Co., Limited * retail stores.
Hunan Family Fortune - 100% - PRC Provide security
Security Service Co., solutions to
Limited retail stores
Hebei Global Lock - 51% - PRC Dormant
Security System Engineering
/Co., Limited
*The Group does not consolidate the results of Henan Xinxiang
Jingan Security Electronic Co., Limited as the directors are of the
opinion the control is not significant influence on its daily
business operation.
14 Deferred tax assets
Group
------------------
2013 2012
RMB'000 RMB'000
At 1 January - -
Charged to income statement (Note 8) - -
At 31 December - -
======== ========
The Group has the following unutilised tax losses at end of the
financial year to offset against future profits in PRC:
Group
-------------------
2013 2012
RMB'000 RMB'000
Unutilised tax losses - 1,900
========= ========
There are no significant temporary differences. The realisation
of deferred tax is dependent on suitable taxable profits made in
future periods.
15 Trade and other receivables
Group Company
------------------ ------------------
2013 2012 2013 2012
RMB'000 RMB'000 RMB'000 RMB'000
Trade receivables 38,375 5,311 - -
Amount due from group
undertakings - - 13,497 14,785
Amount due from connected
party 3,592 3,251 9 9
Other receivables 13,569 19,246 - -
Deposit 839 2,610 - -
Prepayments 1,726 3,820 46 148
Prepaid insurance 2,173 1,958 - -
60,274 36,196 13,553 14,942
======== ======== ======== ========
There are no trade or other receivables past due and the
carrying amount of trade and other receivables approximates their
fair value.
16 Cash and cash equivalents
Group Company
------------------ ------------------
2013 2012 2013 2012
RMB'000 RMB'000 RMB'000 RMB'000
Cash on hand 2,165 1,752 - -
Bank balances 1,092 3,636 74 94
--------
3,257 5,388 74 94
======== ======== ======== ========
Cash and cash equivalents were denominated in the following
currencies:
Group Company
------------------ ------------------
2013 2012 2013 2012
RMB'000 RMB'000 RMB'000 RMB'000
Great Britain
Pounds 34 - 16 73
United States
Dollars 58 371 58 21
Hong Kong Dollars 1 4 - -
Renminbi 3,164 2,882 - -
--------
3,257 3,257 74 94
======== ======== ======== ========
17 Inventories
Group
As at 31 December
2013 2012
RMB'000 RMB'000
Consumables 4,853 2,472
========== =========
18 Share capital
Share capital
Share capital 2013 2012 2013 2012
Number RMB'000 Number RMB'000
Ordinary shares of
no face value
- brought forward 250,000,000 20,324 250,000,000 20,324
- share issues - - - -
250,000,000 20,324 250,000,000 20,324
============ ======== ============ ========
Authorized Unlimited Unlimited
============ ======== ============ ========
On 29 December 2009, the company issued 50,000 ordinary shares
of US$1 each at par.
On 20 September 2010, the company increased the authorised share
capital from 50,000 ordinary shares of US$1 each to 250,000,000
ordinary shares of US$1 each. The company subsequently converted
all the existing and issued ordinary shares of US$1 each par value
into 500 shares of no par value.
On 2 October 2010, the company further increase the authorised
share capital to an unlimited number of no par value shares.
On 2 October 2010, the company issued 212,500.000 ordinary
shares of no par value for US$0.000001 per share.
Subsequently, the company issued 12,500,000 ordinary shares of
no par value of RMB 20,000,000.
The holders of ordinary shares are entitled to receive dividends
from time to time and are entitled to one vote per share at
meetings of the company.
19 Non-controlling interests
Group
As at 31 December
2013 2012
RMB'000 RMB'000
At 1 January 33,083 30,511
Profit for the year 5,796 2,572
At 31 December 38,879 33,083
========== =========
The company's Chairman, Mr. Moxiang Li, is the controlling party
of, and has a 99% beneficial ownership in, Shenzhen Global Lock
Security System Engineering Co., Limited group.
20 Trade and other payables
Group Company
---------------------------- ------------------
2013 2012 2013 2012
RMB'000 RMB'000 RMB'000 RMB'000
Trade payables 14,911 1,770 265 7
Loan from directors 20,065 18,300 - -
Amount due to connected
party 392 - - -
Net wages control 4,000 3,876 - -
Other creditors 19,825 12,904 - -
Accruals 1,342 1,185 471 503
Deferred income 23,411 30.317 - -
83,947 68,352 736 510
============= ============= ======== ========
21 Borrowing
Group Company
------------------ ------------------
2013 2012 2013 2012
RMB'000 RMB'000 RMB'000 RMB'000
Bank Borrowing 2,908 5,037 - -
======== ======== ======== ========
The borrowings are repayable
as follow:
On demand or within one
year 2,105 2,169 - -
Between one and two years 803 2,868 - -
2,908 5,037 - -
====== ======
The bank borrowings are unsecured loans. The interest rate paid
is 15.6% annually. The borrowings are arranged at fixed interest
rates and the directors consider that the carrying amount of the
borrowings approximate to their fair value.
22 Share based payment
On 17 October 2010, the Company executed a deed poll
constituting warrants to subscribe for ordinary shares in favour of
Allenby Capital. Pursuant to this instrument, Allenby Capital will
be entitled to subscribe for such number of Ordinary Shares as is
equal to 1 per cent. of the fully diluted share capital of the
company on Admission at an exercise price of GBP0.16 until the
fifth anniversary of Admission.
As at 31 December 2013, none of the above options had been
exercised or lapsed.
Details of the share options outstanding during the year are as
follows:
2013 2012
----------------------- -----------------------
Average Average
exercise exercise
price in price in
GBP per Number GBP per Number
share of shares share of shares
GBP GBP
At beginning of the year 0.16 2,500,000 0.16 2,500,000
Granted - - - -
Forfeited - - - -
Executed - - - -
Expired - - - -
---------- ----------- ---------- -----------
At end of year 0.16 2,500,000 0.16 2,500,000
========== =========== ========== ===========
These estimated fair values were calculated using the
Black-Scholes option pricing model. The model inputs were as
follow:
Bid price GBP0.165
Exercise price GBP0.16
Expected volatility 40%
Expected dividend yield -
Risk-free interest rate 0.50%
16 October
Date of expiry 2015
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.
The management has discounted the bid price by 20% in the
calculation as the management estimated that in order to place
substantial block of shares in the market a discount in the region
of 20% to 25% of bid price would be needed.
23. Due from/to customers for construction contracts
Group
As at 31 December
---------------------
2013 2012
RMB'000 RMB'000
Aggregate costs incurred and profits recognised
to - date 74,880 33,110
Less: Progress billings on outstanding
contracts as at the year end (64,500) (18,000)
---------- ---------
10,380 15,110
Allowance for impairment - -
---------- ---------
10,380 15,110
========== =========
Presented as:
Due from customers for construction contracts 10,380 15,110
Due to customers for construction contracts - -
---------- ---------
10,380 15,110
========== =========
24. Financial commitments
Financial commitments in relation to non-cancellable operating
leases for office premises contracted for at the date of the
statement of financial position but not recognised as liabilities,
are payable as follows:
2013 2012
RMB'000 RMB'000
Less than 1 year 1,828 5,155
More than 1 year and not more than 5 years 1,222 2,566
More than 5 years 71 51
3,121 7,772
============= =============
25. Financial instruments
The Group's and the Company's principal financial instruments
comprise cash and cash equivalents, trade and other receivables and
trade and other payable. The Group's and the Company's accounting
policies and method adopted, including the criteria for
recognition, the basis on which income and expenses are recognised
in respect of each class of financial assets, financial liability
and equity instrument are set out in Note 1. The Group and the
Company do not use financial instruments for speculative
purposes.
The principal financial instruments used by the Group and the
Company, from which financial instrument risk arises, are as
follows:
Group Company
-------------------- ------------------
2013 2012 2013 2012
RMB'000 RMB'000 RMB'000 RMB'000
Trade and other receivables 60,274 36,196 - -
Cash and cash equivalents 3,257 5,388 60 94
Trade and other payables (83,946) (68,352) (736) (510)
--------- --------- -------- --------
(20,415) (26,768) (676) (156)
========= ========= ======== ========
There are no investments held to maturity or financial assets
available for sale. There are no fair value adjustments to assets
or liabilities through profit and loss. There are no financial
assets that are either past due or impaired.
Capital risk management
The Group and the Company are financed through equity, bank
loans and director's loan. It is the intention of the directors
that the Group will in future be financed by a mixture of debt and
equity as appropriate to maintain robust statements of financial
position to support its business and maximise shareholders
value.
Derivatives, financial instruments and risk management
The Group and the Company do not use derivative instruments or
other financial instruments to manage its exposure to fluctuations
in foreign currency exchange rates, interest rates and commodity
prices.
Foreign currency risks
The Group and the Company had no significant exposure to foreign
exchange risk during the period under review as its cash flows and
financial assets and liabilities are mainly denominated in RMB.
Treasury risk management
The Group and the Company manage a variety of market risks,
including the effects of changes in foreign exchange rates,
liquidity and counterparty risks.
Liquidity risk
Liquidity risk arises from the Group's and the Company's
management of working capital. It is the risk that the Group and
the Company will encounter difficulty in meeting its financial
obligations as they fall due.
The Group's and the Company's policy are to ensure that it will
always have sufficient cash to allow it to meet its liabilities
when they become due. The principal liabilities of the Group and
the Company arise in respect of on-going research and development
programs, trade and other payables. Trade and other payables are
all payable within one year.
The table below summarises the maturity profile of the Group's
and the Company's financial liabilities at the reporting date based
on contractual undiscounted payments:
Less than
Later than
one year one year Total
RMB'000 RMB'000 RMB'000
Group
31 December 2013
Trade and other payables 83,946 - 83,946
31 December 2012
Trade and other payables 68,352 - 68,352
============ =========== ========
Company
31 December 2013
Trade and other payables 736 - 736
31 December 2012
Trade and other payables 510 - 510
============ =========== ========
Credit risk
Credit risk refers to the risk that a counter party will default
on its contractual obligations resulting in financial loss to the
Group and the Company. The Group and the Company have adopted a
policy of only dealing with creditworthy counterparties. The
Group's and the Company's exposure and the credit ratings of its
trading counterparties are monitored by the board of directors to
ensure that the aggregate value of transactions is spread amongst
approved counterparties.
The Group's and the Company's principal financial assets are
cash and cash equivalents, trade and other receivables. Cash
equivalents include amounts held on deposit with financial
institutions.
The Group and the Company have no significant concentrations of
credit risk. Cash is placed with established financial
institutions. The maximum exposure to credit risk is represented by
the carrying amount of each financial asset in the balance
sheet.
The carrying amount of financial assets represents the maximum
credit exposure. The maximum exposures to credit risk at the
reporting date of the Group and Company are as follows:
Group Company
As at 31 December As at 31 December
2013 2012 2013 2012
RMB'000 RMB'000 RMB'000 RMB'000
Cash and cash equivalents 3,257 5,388 60 94
Trade and other receivables 60,274 36,196 - -
-------------- ---------------- --------- ----------------
63,531 41,584 60 94
============== ================ ========= ================
Total trade receivables of RMB 36,500,000 (2012: RMB Nil) which
were individual more than 10 percent of the Group's revenue were
revenue from transactions with one single customer. The directors
are of the opinion that this single customer was the local
government and the default risk will be low. In overall the trade
receivables are not past due and not impaired.
26 Related party transactions
Key management personnel are considered to be the directors and
their emoluments are included in Note 7.
As at balance sheet date, the amount due to Mr. Moxiang Li was
RMB 20,558,212 (2012: RMB 18,299,962) and the amount due from the
rest of the directors are as follow:
RMB
Mr.Yong Luo (ex-director) 200,000
Mr. Hualiang Jiang 26,900
Mr. You Feng 30,315
Mr. Jianbin Wang 300,000
In addition to the related party information disclosed elsewhere
in the financial statements, the following were significant related
party transactions during the year under review and at terms and
rates agreed between the parties:
XinHua XiangHui Electronic Technology Co., Limited ("XiangHui")
- formerly known as Hunan Xiang Long Electronics Development Co.,
Ltd
XiangHui, the key supplier of the Group's equipment, is owned by
some of the directors. Details of transactions with XiangHui are
presented below:
2013 2012
RMB RMB
Purchase of equipment 4,128,782 4,959,476
Balance payable - 2,654
Prepayment for machinery equipment 1,435,872 1,414,087
Family Fortune International Investment Holding Co., Ltd
The Group has a non-trade balance receivable from a shareholder
of the Company, Family Fortune International Investment Holding
Co., Ltd, of RMB 111,091 (2012: RMB 102,650).
Shenzhen Family Fortune Investment Co., Ltd
The Group has non-trade balance receivable from Shenzhen Family
Fortune Investment Co., Ltd, a company with some common directors,
of RMB 1,323,450 (2012: RMB 1,323,450).
Shenzhen Lin En Energy Investment Co., Ltd
The Group has non-trade balance receivable from Shenzhen Lin En
Energy Investment Co., Ltd, a company with some common directors,
of RMB 198,418 (2012: RMB 198,418).
Shenzhen National Security Technology Co Limited
The Group has non-trade balance receivable from Shenzhen
National Security Technology Co Limited, a company with some common
directors, of RMB 155,794 (2012: RMB 151,473).
Shenzhen Family Fortune Security System Engineering Co., Ltd
The Group has non-trade balance receivable from Shenzhen Family
Fortune Security System Engineering Co., Ltd, a company with some
common directors, of RMB 206,560 (2012: RMB 52,237).
Henan Xinxiang Jingan Security Electronic Co., Limited
("XinXiang")
The amount due to the associate company was RMB 392,120 (2012:
RMB 392,120).
Global Lock International Investment Limited
The amount due from Global Lock International Investment
Limited, a company with some common directors, of RMB 7,235 (2012:
RMB NIL).
This information is provided by RNS
The company news service from the London Stock Exchange
END
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