TIDMLED
RNS Number : 9651I
LED International Holdings Ltd
31 March 2015
LED International Holdings Limited
(the "Company")
Interim results
For the six-month period ended 31 December 2014
LED International Holdings Limited (AIM: LED) and its
subsidiaries (together the "Group") announces its interim results
for the six-month period ended 31 December 2014.
Overview
-- Increase in revenue to HK$12,388,000 (approximately
GBP1,077,000) over H1 2013 (HK$10,769,000)
-- Increase in gross profit to HK$3,183,000 (approximately
GBP277,000) (2013: HK$21,000) as a result of an increase in
operating revenue and decreased manufacturing and production
costs
-- Decrease in Loss Attributable to Shareholders to HK$3,773,000
(approximately GBP328,000) (2013: HK$6,057,000)
-- Issued equity to raise RMB25,000,000 (approximately
HK$32,170,000 or GBP2,350,000) at a price of 75 pence per share
representing a premium of 780 per cent. to the then closing
mid-price
-- Amended agreement relating to capitalisation of liabilities
of approximately HK$3,461,000 (approximately GBP300,000) at an
increased share price approximately 160 per cent. higher that the
original settlement share price determined in March 2014
-- Disposal of Kepu Electronic Technology (Shenzhen) Company Limited
-- Proposed acquisition of Shenzhen Ruihetai Industry Co.
Limited leading to a suspension in the trading of the Company's
shares. This was restructured post-period end and a proposed new
joint venture will seek to establish a new distribution business
instead of the acquisition. The temporary suspension in trading of
the Company's shares was lifted with effect from 7:30am on 31 March
2015
Post-period end
-- Leasing finance business continues to gain traction by a
lease-financing contract with Jiangsu Siyuan Port Company
Limited
For further information:
LED International Holdings Limited
Stephen Chan - Chief Executive Officer +852 2243 3100
Allenby Capital Limited
+44 (0) 20 3328
Nick Naylor / Alex Price 5656
Notes to Editors:
LED International Holdings Limited and its subsidiaries
specialize in the provision of EMC contracts under which the Group
installs energy saving products in its customers' premises,
including lighting and reactance filtering equipment supplied by
the Group, and the subsequent savings made by the customers in
their electricity charges are then shared between the Group and the
customers thereby enabling the Group to generate recurring revenue
rather than one-off sales revenue. Historically, the Group's
business has been the development, manufacture and sale of
low-powered light-emitting diode ("LED") display screens and
modules.
Under EMC contracts, the Group provides energy efficiency
solutions, including LED lighting, reactance filtering energy
saving and other energy efficiency solutions. Specifically, the
Group overhauls its customers' existing lighting and power
consumption systems (which are based on traditional lighting
technology and power generation equipment) with proprietary LED
lighting products, reactance filtering equipment and other
solutions provided by the Group. These energy efficiency products
are installed in customers' premises. The Group bears all the
upfront costs associated with the supply and installation of the
energy efficiency solutions and these costs are then recouped by
sharing in the monthly energy savings generated by the customers'
use of the energy efficiency solutions over the period of the
contracts. The Group receives revenue from customers on several
different payment terms including on a pre-payment, monthly or
quarterly basis.
The Company's wholly-owned direct subsidiary, Green Pearl
Leasing (China) Co. Ltd. operates a lease financing business having
been granted a highly sought after leasing finance licence to
enable the Group to provide lease financing to customers.
For more information, please visit: http://www.led-intl.com
CHAIRMAN'S STATEMENT
LED International Holdings Limited (AIM: LED) (the "Company")
and its subsidiaries (together the "Group") specialise in the
provision of energy management contract services ("EMC contracts")
or energy performance contracting services under which the Group
installs energy saving products in its customers' premises,
including lighting and reactance filtering equipment supplied by
the Group. The subsequent savings made by customers in their
electricity charges are then shared between the Group and the
customers thereby enabling the Group to generate recurring revenue
rather than one-off sales revenue. Through the Company's
wholly-owned direct subsidiary, Green Pearl Leasing (China) Co.
Ltd. ("GP Leasing Co"), the Group operates a lease financing
business in China having been granted a highly sought after leasing
finance licence to enable the Group to provide lease financing to
customers.
The Board of Directors (the "Board") is pleased to report on the
interim results of the Group for the period ended 31 December
2014.
MARKET REVIEW
According to its 12th Five-Year Plan (the "Five-Year Plan"),
China plans to lower its energy consumption by 16 per cent. and cut
its carbon dioxide emission by 17 per cent. by 2015. Against the
background of the Chinese government's introduction of a series of
policies and regulations designed to promote, encourage and
regulate energy conservation within the People's Republic of China
(the "PRC"), the Chinese government intends to continue to build
its economic growth on energy sustainability and ecological
conservation. This signifies energy savings and conservation,
promising opportunities in the energy management market and the
Group aims to become one of the leading energy and green management
service providers in the PRC.
OPERATING REVIEW
China experienceda gradual slow down in growth during the period
under review as structural transformation of its economy continued
during the financial period. This resulted in continued difficult
trading conditions for the Group and, domestically, its operation
was also burdened by inflation and slowing economic growth within
the PRC for the financial period. These factors impacted on the
Group's gross margin and resulted in an operating loss for the
financial period ended 31 December 2014.
Over the past few years, the Group has provided EMC services in
the PRC. The Group's EMC company ("EMCO") has been operated through
Shenzhen Green Pearl Energy Management Services Company Limited
("GPEMCO"), a company with a valid and effective EMCO registration
with the National Development and Reform Commission. Operating
through GPEMCO enables the Group to take advantage of certain
favorable policies and terms for the EMC industry within the PRC.
In previous periods, the Group secured a number of contracts to
support the Group's strategy and mark the commencement of the
successful implementation of its energy efficiency solutions under
the EMC business model. On 5 December 2014, GPEMCO was awarded an
EMC contract by Tianjin Tian Gang United Special Steels Company
Limited, a subsidiary of Tianjin Iron & Steel Group Company
Limited, based in Tianjin, the PRC, for a contract amount of
RMB1,830,000 (approximately HK$2,283,000 or GBP189,000) over a
six-year period. Further contracts continue to be negotiated,
details of which will be announced as appropriate.
The Board continues gradually to drive the Group to secure
meaningful revenues from the domestic PRC EMC market, as well as
implementing measures to reduce the Group's overhead expenditure.
The Board remains convinced that the Group's overall operations
remain sound.
The Group has not engaged in any manufacturing operation after
the disposal of its remaining effective equity interest (60%) in
Kepu Electronic Technology (Shenzhen) Company Limited ("Kepu").
On 5 December 2014 the Company announced that the required
capital contribution to be made to its leasing finance company, GP
Leasing Co in an amount of approximately USD2,692,000 (equivalent
to approximately RMB16,535,000, HK$20,996,000 or GBP1,700,000) has
been made as required.
FINANCIAL REVIEW
Revenue and loss attributable to shareholders of the Company for
the financial period ended 31 December 2014 amounted to
HK$12,388,000 (approximately GBP1,077,000) (2013: HK$10,769,000)
and HK$3,773,000 (approximately GBP328,000) (2013: HK$6,057,000)
respectively. During the financial period ended 31 December 2014,
the Group recorded a rise in operating revenue by HK$1,619,000
(approximately GBP140,700) over 2013. The rise in operating revenue
was brought about mainly by general demand for LED element products
in the domestic market in the PRC. Furthermore, the Group generated
a gross profit in the amount of HK$3,183,000 (approximately
GBP277,000) for the financial period as a result of strengthening
controls over manufacturing and production costs.
Operating revenue for the financial period generated from LED
element products mainly supplied to major home appliance
manufacturers in the PRC, increased by HK$1,633,000 (approximately
GBP142,000) from the same period in 2013. The Group strengthened
its product quality controls and customer relationships with
existing major customers and attempted to diversify these sources
of revenue and customers during the financial period. The Group's
operating revenue from EMC contracts decreased by HK$14,000
(approximately GBP1,200) over 2013.
An operating gross profit for LED element products of
approximately 25.69 per cent. was attained during the financial
period, 25.49 per cent. higher than 2013, as a result of lower
manufacturing and production costs. The operating gross margin of
EMC contracts was approximately 50 per cent. (2013: 52 per cent.)
for the financial period.
CAPITALISATION OF LIABILITIES
As announced on 31 March 2014 (the "March Announcement"), the
Company agreed to allot 3,536,606 ordinary shares in the Company
(the "Ordinary Shares") at a price per Ordinary Share of HK$2.50
(approximately 19.37 pence) in settlement and/or in reduction of
its liability in the outstanding loans, service fees and salaries
owed to various directors, employees and other creditors.
In the event, as further announced on 30 September 2014, the
arrangements outlined in the March Announcement did not take place
since, as specified in the March Announcement, these were
conditional on the calling of an Extraordinary General Meeting of
the Company which was not subsequently called.
The Company subsequently agreed revised arrangements in
settlement and/or in reduction of its certain liabilities in the
outstanding sums owed to various creditors and allotted a total of
532,875 ordinary shares at a price per ordinary share of HK$6.496
(approximately 51.00 pence) (the "Settlement"). An aggregate amount
of approximately HK$3,461,000 (approximately GBP300,000) is treated
as paid to the various creditors under the Settlement.
PROVISION AND CONVERSION OF WORKING CAPITAL LOAN AND PLACING OF
NEW ORDINARY SHARES
The Company entered into a working capital loan on 16 December
2013 in the sum of RMB6,000,000 (approximately HK$7,720,000 or
GBP600,000) provided by Rubyfield Holdings Limited and Speedy
Dragon Holdings Limited (collectively, the "Subscribers") in equal
tranches (the "Loan"). On 30 December 2013, the Company completed a
conditional placing of new ordinary shares with the Subscribers,
raising RMB31,000,000 (approximately HK$39,890,000 or GBP3,090,000)
(including fees and expenses) (the "Placing"). The RMB31,000,000
(approximately HK$39,890,000 or GBP3,090,000) would be satisfied as
to the first RMB25,000,000 (approximately HK$32,170,000 or
GBP2,500,000) (the "Subscription Funds")by way of new funds and, as
to the balance, by the application of the current outstanding
balance of the Loan (currently RMB6,000,000, approximately
HK$7,720,000 or GBP600,000) (the "Conversion"). Pursuant to the
Placing, the Subscribers were to subscribe for 3,875,000 new
ordinary shares (the "Placing Shares") at a price of HK$10.29
(being approximately 79.96 pence) per Placing Share (the "Placing
Price"). The Conversion was also to take place at the Placing Price
on 26 February 2014, further details of which were contained in the
Company's previous announcements on 16 December 2013, 30 December
2013 and 26 February 2014.
As announced on 11 July 2014, the Company and the Subscribers
reached a supplementary agreement in relation to the placing of the
Placing Shares and the conversion of the Loan under the terms of
which payment of the Subscription Funds to the Company had been
made in full and final settlement of all of the Subscribers' legal
obligations under the Placing. The Placing Shares were issued at a
price of 75 pence per share representing a premium of 780 per cent.
to the closing mid price on 10 July 2014 and the Company, via its
indirect subsidiary, Shenzhen Green Pearl Energy Management
Services Company Limited, received the Subscription Funds from the
Subscribers at that time. The Company is utilising the proceeds of
the Subscription Funds for general working capital purposes and to
provide the necessary capital contribution to GP Leasing Co.
ENERGY MANAGEMENT CONTRACT UPDATE
The Company's indirect subsidiary, GPEMCO, was awarded an energy
management contract (the "EMC Contract") on 5 December 2014 by
Tianjin Tian Gang United Special Steels Co., Ltd. ("TG United"), a
subsidiary of Tianjin Iron & Steel Group Co., Ltd., based in
Tianjin, China. The projected revenue under the EMC Contract to
GPEMCO is approximately RMB1,830,000 (approximately HK$2,283,000 or
GBP190,000) over a six year period.
Under the EMC Contract, GPEMCO will fit out one of TG United's
manufacturing facilities with its energy-saving solutions.
Specifically, GPEMCO will incorporate reactance filtering equipment
into TG United's existing power consumption systems which are based
on traditional power generation equipment. It is expected that the
new energy-saving solutions introduced by GPEMCO will bring about
energy cost savings in the region of 10% to TG United.
DISPOSAL OF KEPU ELECTRONIC TECHNOLOGY (SHENZHEN) COMPANY
LIMITED ("KEPU")
On 17 December 2014 the Company entered into a sale and purchase
agreement with Mr. Fu Wei ("Fu"), a director of Kepu, relating to
the disposal by the Group of the remaining effective equity
interest (60%) in Kepu.
Kepu specialises in the research, development and manufacturing
of its own brand of opto-electronic products, such as LED modules,
LED unit boards and LED bar-screens, which are used in consumer
electronic goods such as air-conditioners, microwave ovens,
conventional ovens, refrigerators, washing machines and fixed line
telephones.
This disposal was brought about following the Board's
determination that the activities of Kepu presented considerable,
but different opportunities from LED's primary focus of its EMC
business model.
The proceeds of the sale of Kepu have been used to facilitate
the Group's working capital and support its EMC development
plans.
PROPOSED ACQUISITION OF SHENZHEN RUIHETAI INDUSTRY CO.
LIMITED
The Company entered into a conditional agreement on 22 December
2014 under which it, or a nominated member of its Group, will
acquire the majority of the issued share capital of Shenzhen
Ruihetai Industry Co. Limited ("RHT") (the "Acquisition") from Ms.
Li Sai Ying and Mr. Lin Zhong (together, the "Vendors") at a
maximum consideration of approximately RMB11,260,000 (approximately
HK$14,048,000 or GBP1,136,000) (the "Consideration"). The exact
shareholding of RHT after the Acquisition is to be determined and
is subject to the local laws and regulations governing foreign
investments in PRC companies.
RHT is a large-scale grain enterprise incorporated in the PRC.
It is mainly engaged in the business of rice storage, processing,
distribution, and the wholesale and retail sale of rice. RHT has
long established relationships with business partners in major
grain-producing areas in Northeast China, Hunan, Hubei, Jiangxi,
Jiangsu, Guangxi as well as internationally in Thailand. RHT has
established rice counters in major shopping malls, supermarkets and
chain stores in residential areas throughout the PRC and, in doing
so, RHT has built a strong and reputable food distribution network
in the PRC.
By reason of the size of RHT in relation to the Company, the
Acquisition is classified as a reverse takeover under the AIM
Rules. In pursuance of the AIM Rules, trading in the Company's
shares was suspended from 8 a.m. on 22 December 2014.
Since the announcement in relation to the Acquisition made on 22
December 2014, the Board has been in discussion with the Vendors
and has consulted its PRC lawyers regarding the appropriate
structure of the Acquisition. The Company has received a legal
opinion from its PRC lawyers advising that the industry area in
which RHT operates falls under the category of "restricted foreign
investment industries".
Under the current Foreign Investment Laws, foreign investors
cannot invest directly in Chinese companies that operate in
sensitive industries prohibited or restricted to foreign
investments. However, foreign investors can take effective control
of the restricted foreign investment industries through the use of
variable interest entity ("VIE") arrangements. The current proposed
structure of the Acquisition is that it would be effected through
the use of a VIE arrangement.
However, subsequent to the Company entering into terms relating
to the Acquisition, on 19 January 2015 the PRCMinistry of Commerce
announced a review of VIE arrangements and published a draft of a
new Foreign Investment Law to define foreign investment in terms of
the "actual controller" of a PRC company. There is no proposed
grandfathering provision for the existing foreign controlled VIE
arrangements in the restricted industries. Therefore, if enacted,
the new Foreign Investment Law would increase the risks for the
Company in proceeding with the Acquisition by way of a VIE
arrangement since it may retrospectively invalidate the structure
of the Acquisition.
Having considered the legal and regulatory implications of
various options of the structure of the Acquisition, the Board has
decided not to proceed with the Acquisition but instead to form a
new joint venture with the Vendors (the "Joint Venture"). The Joint
Venturewill seek to establish a new distribution business, in part
by utilising the Vendor's network of long established relationships
with business partners in the PRC as well as internationally in
Thailand and through the establishment of new relationships. The
Joint Venture will primarily distribute rice and other food
substances and will look to establish counters in major shopping
malls, supermarkets and chain stores in residential areas
throughout the PRC. The Company envisages that through the Joint
Venture the Company will be able to leverage the distribution
network to market its "Green Pearl" green products.
It is anticipated that 99 per cent. of the Joint Venture will be
owned by the Company with 1 per cent. being owned by the Vendors.
The Company will provide a working capital loan to the Joint
Venture in the amount of RMB50 million, the proceeds of which will
be utilised for business development and general working capital.
In order to finance this working capital loan, the Company intends
to raise additional funding through equity and/or debt
financing.
The Vendors will be responsible for the management and operation
of the Joint Venture. Also, the Vendors will provide a profit
guarantee that the annual net profit of the Joint Venture shall be
at least RMB70 million per year for each of the three years
following the formation of the Joint Venture, and such amount shall
exclude the green products introduced by the Company and
distributed through the Joint Venture within the PRC during the
three-year period.
As part of the Joint Venture, the Vendors will be issued with up
to 1,114,000 new ordinary shares in the Company (the "Shares"),
which represents 11.80 per cent. of LED's current issued share
capital. The Shares will be issued in three equal annual tranches
commencing on the date of formation of the Joint Venture. The
Shares will be issued at a price of 12.49806 per Share. In the
event that the profit guarantee is not met, the number of Shares to
be issued to the Vendors will reduce proportionately.
On the basis that the Acquisition is no longer proceeding, the
temporary suspension to trading in the Company's ordinary shares
was lifted with effect from 7:30am on 31 March 2015 and trading in
the Company's ordinary shares resumed on the same day.
Further announcements in relation to the Joint Venture will be
made at the appropriate time.
LEASE FINANCE CONTRACT UPDATE
As announced on 2 January 2015, the Company's wholly-owned
direct subsidiary, Green Pearl Leasing (China) Company Limited ("GP
Leasing Co"),entered into a leasing finance contract (the
"Contract") with Siyuan, based in Jiangsu, China. The projected
total interest receivable by GP Leasing Co under the Contract is
approximately RMB1,320,000 (approximately HK$1,647,000 or
GBP137,000) over a two-year period.
Pursuant to the Contract, GP Leasing Co purchased various port
loading and reloading equipment (the "Equipment") from Siyuan at a
consideration of RMB12,000,000 (approximately HK$14,971,000 or
GBP1,246,000) and the Equipment will be leased back to Siyuan for a
term of two years from 25 December 2014 to 25 December 2016.
BOARD CHANGES
Mr. Kevin Miu resigned as a Non-Executive Director with effect
from 30 November 2014.
DIVIDENDS
The Directors do not recommend the payment of any dividend for
the period under review and the Board is committed to an ongoing
review of the Company's dividend policy.
CURRENT OUTLOOK AND PROSPECTS
EMC business
The Group is focused on the domestic PRC economy and adopts a
conservative but proactive approach towards entering into the
growing EMC market under the brand name "Green Pearl".
Notwithstanding the recent slowdown in China's GDP growth, the
Board believes that the Chinese government will implement fiscal
and monetary policies to stimulate continuing economic growth in
the PRC.
The energy saving and environmental protection industry ranks
top among the seven strategic emerging industries outlined in the
Five-Year Plan. Following the gradual import and sale of
incandescent lamps complemented by fiscal subsidies, this presents
a tremendous market opportunity for green lighting. In view of
rising national power consumption, the Board believes that measures
that the Chinese government has taken to reduce energy consumption
and carbon emissions will lead to increasing opportunities for
energy saving and carbon reduction products, services and solutions
within the PRC.
In addition to the supply of LED lighting and reactance
filtering equipment to the domestic PRC market, the Group has also
been considering the introduction of other carbon reduction
solutions to offer a total carbon reduction solution. On 22
December 2014, the Company entered into a conditional agreement
subject to shareholder approval to acquire a distribution network
in the PRC through RHT. The Board envisages that the acquisition
will enable the Group to take advantage of the operating cash
flows, market its "Green Pearl" green products and give the Group
immediate access to this distribution network through which the
Group will be able to better promote its EMC business in the
PRC.
The Group is also exploring the possible export of its energy
saving and carbon reduction products, services and solutions,
mainly solar lighting products and solutions, to the emerging
markets in the African and Pacific regions, where potential demand
for solar related products and services is prominent.
The Board remains cautiously optimistic and confident in the
Group's business, market and products as well as its long-term
growth potential in the PRC. Furthermore, the Board considers that
the overall operations of the Group remain sound and that the
transformation of the Group into an energy management service
provider in the PRC is the correct strategy.
Green Pearl Leasing (China) Company Limited
As announced previously the Shanghai Municipal Commission of
Commerce granted the Group a highly sought after leasing finance
licence to enable the Company to provide lease financing to
customers. The Company formed a new wholly owned direct subsidiary,
GP Leasing Co, in order to carry on this business.
GP Leasing Co was formed as the Board believes that the Group's
EMC business model will be financed substantially by debt capital
finance, mainly bank finance for the Group or equipment leasing
finance for its customers. The Board believes that equipment
leasing finance will become one of the major sources of finance for
EMC contracts in the foreseeable future.
As announced on 5 December 2014, the Company made the required
capital contribution to GP Leasing Co in an amount of approximately
USD2,692,000 (approximately RMB16,535,000, HK$20,996,000 or
GBP1,700,000) (the "Contribution"). An independent certified public
accounting firm in China confirmed that the Company had made the
Contribution as required.
In order to focus on its EMC business model, the Company has
been considering forming joint ventures to develop this aspect of
the business further and identify how the Company can leverage
knowledge, experience and contacts.
APPRECIATION
Finally, on behalf of the Board, I would like to thank all of
our management team and staff members for their valuable
contribution and dedication to the Group. I would also like to
thank Mr. Miu for his invaluable contribution to the Group during
his tenure. I also express my gratitude to our customers, suppliers
and government authorities for their continuous support.
Stephen Weatherseed
Non-Executive Director and Chairman
Hong Kong, 31 March 2015
LED INTERNATIONAL HOLDINGS LIMITED
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE SIX-MONTH PERIOD ENDED 31 DECEMBER 2014
Notes Six-month Six-month
period ended period ended
31 December 31 December
2014 2013
(Unaudited) (Unaudited)
HK$'000 HK$'000
Revenue 3 12,388 10,769
Cost of sales (9,205) (10,748)
--------------- ---------------
Gross profit 3,183 21
Other income 255 540
Distribution costs (286) (279)
Administrative expenses (5,649) (6,632)
Other operating expenses (1,372) (1,331)
Loss on disposal of subsidiaries -
Finance costs (1,481) (843)
Loss before income tax (5,350) (8,524)
Income tax - -
--------------- ---------------
Loss for the year (5,350) (8,524)
Other comprehensive income
Items that may by reclassified
subsequently to profit or loss:
* Exchange losses on translating foreign presentations (40) (369)
Other comprehensive income for
the period, including reclassification
adjustments (40) (369)
--------------- ---------------
Total comprehensive income for
the period (5,390) (8,893)
=============== ===============
Loss for the period attributable
to
Owners of the Company (3,733) (5,688)
Non-controlling interests (1,617) (2,836)
--------------- ---------------
(5,350) (8,524)
=============== ===============
Total comprehensive income attributable
to:
Owners of the Company (3,773) (6,057)
Non-controlling interests (1,617) (2,836)
--------------- ---------------
(5,390) (8,893)
=============== ===============
Losses per share for loss attributable (Restated)
to the owners of the Company
Basic and diluted (HK$ per share) 5 (42) (113)
=============== ===============
LED INTERNATIONAL HOLDINGS LIMITED
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2014
Notes At 31 December At 30June
2014 2014
(Unaudited) (Audited)
HK$'000 HK$'000
ASSETS AND LIABILITIES
Non-current assets
Property, plant and equipment 1,955 2,057
Goodwill - -
Deposit paid for acquisition
of a subsidiary 7 2,125 2,125
4,080 4,182
Current assets
Inventories 9,448 6,338
Trade and other receivables 35,460 13,272
Amount due from a former director 6 - 3,329
Amount due from a related company 5,608 3,333
Pledged bank deposit 8 10,041 10,024
Cash and bank balances 9 6,129 154
--------------- -----------
66,686 36,450
Current liabilities
Trade and other payables 58,821 58,381
Borrowings 18,773 20,535
Amount due to a director 11,821 3,811
Amounts due to non-controlling
interests 568
Amounts due to related companies 739 3,127
Loan from a former director 6 - 3,979
Current tax liabilities 2,922 1,569
93,076 91,970
Net current liabilities (26,390) (55,520)
--------------- -----------
Non-current liabilities
Convertible loan notes 10,000 10,000
--------------- -----------
Net liabilities (32,310) (61,338)
=============== ===========
EQUITY
Share capital 210,925 166,846
Reserves (217,875) (204,507)
Equity attributable to owners
of the Company (6,950) (37,661)
Non-controlling interests (25,360) (23,677)
Capital deficiency (32,310) (61,338)
=============== ===========
LED INTERNATIONAL HOLDINGS LIMITED
CONSOLIDATED STATEMENT OF CASH FLOWS
AS AT 31 DECEMBER 2014
Note Six-month Six-month
period ended period ended
31 December 31 December
2014 2013
(Unaudited) (Unaudited)
HK$'000 HK$'000
Net cash generated from/(used
in) operating activities (31,657) 5,546
Net cash used in investing activities 17 (308)
Net cash used in financing activities 37,362 (3,978)
Net increase/(decrease) in cash
and cash equivalents 5,723 1,260
Cash and cash equivalents at
beginning of the period (9,568) (8,618)
Effect of foreign exchange rate
changes (40) (369)
-------------- --------------
Cash and cash equivalents at
end of the period 9 (3,886) (7,727)
============== ==============
LED INTERNATIONAL HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX-MONTH PERIOD ENDED 31 DECEMBER 2014
1. GENERAL INFORMATION
LED International Holdings Limited (the "Company") was domiciled
and incorporated in Hong Kong with limited liability under the Hong
Kong Companies Ordinance. The address of the Company's registered
office and principal place of business is Unit A1, 6/F., One
Capital Place, 18 Luard Road, Wan Chai, Hong Kong.
The principal activity of the Company is investment holding. The
principal activities of the Company's subsidiaries (together with
the Company referred to as the "Group") are specialising in the
provision of energy management contract services ("EMC contracts")
under which the Group installs energy saving products in its
customers' premises, including lighting and reactance filtering
equipment supplied by the Group, and the subsequent savings made by
the customers in their electricity charges are then shared between
the Group and the customers thereby enabling the Group to generate
recurring revenue rather than one-off sales revenue. Historically,
the Group's business has been the development, manufacture and sale
of low-powered light-emitting diode ("LED") display screens and
modules.
On 23 October 2006, the Company was admitted to trading on the
AIM Market of the London Stock Exchange.
The interim financial information is presented in Hong Kong
dollars ("HK$"), which is the functional currency of the Company,
and all values are rounded to the nearest thousand except when
other indicated.
2. BASIS OF PREPARATION
(a) Statement of compliance
These consolidated financial statements have been prepared in
accordance with all applicable IFRSs, which collective term
includes all applicable individual International Financial
Reporting Standards, International Accounting Standards, ("IAS")
and Interpretations issued by the International Accounting
Standards Board and the Hong Kong Companies Ordinance, which
concern the preparation of financial statements, which for this
financial year and the comparative period continue to be those of
the Hong Kong Companies Ordinance, Cap.32 in accordance with the
transitional and saving arrangements for Part 9 of the Hong Kong
Companies Ordinance, Cap.622 "Accounts and Audit" which are set out
in sections 76 to 87 of Schedule 11 to that Ordinance. The
consolidated financial statements also comply with IFRS as issued
by the IASB as adopted by the European Union. The differences
between IFRS as adopted by the European Union and IFRS as issued by
the IASB have not had a material impact on the consolidated
financial statements for the years presented.
(b) Basis of measurement
The financial statements have been prepared under the historical
cost convention. The measurement bases are fully described in the
accounting policies below.
The Group incurred a loss of approximately HK$5,350,000 for the
period ended 31 December 2014 and, as of that date, the Group had
net current liabilities and net liabilities of approximately
HK$26,390,000 and HK$32,310,000 respectively. These conditions
indicate the existence of material uncertainty which may cast
significant doubt on the Group's ability to continue as a going
concern, with a potential consequence that the Group may be unable
to realise its assets and discharge its liabilities in the normal
course of business.
The management have taken certain measures ("Measures")
including to secure further contracts, which the management have
assessed to be profitable, negotiate with certain directors to
obtain their undertakings not to demand repayments of amounts due
to them until there are funds available for repayment, secure new
funding from existing shareholders and/or new investors, and
negotiate with its banker to renew bank facilities of the Group. In
the opinion of the directors, based on the successful execution of
the Measures, the Group will have sufficient cash resources to
satisfy its working capital and other financing requirements for
the foreseeable future. Accordingly, the directors are of the
opinion that it is appropriate to prepare the consolidated
financial statements on a going concern basis.
These financial statements have been prepared on a going concern
basis, the validity of which depends upon the ongoing financial
support from the Company's substantial shareholder and successful
execution of the Group's business plan, attainment of profitable
operations and securing of new financing. These include successful
securing of further EMC contracts which the management have
assessed to be profitable, obtaining of undertakings from certain
directors and a former director not to demand repayments of amounts
due to them until there are funds available for the repayments and
the renewal of bank facilities after the reporting date.
Should the use of the going concern basis in preparing the
consolidated financial statements be determined to be
inappropriate, adjustments might have to be made to reduce the
value of assets to their recoverable amounts, to provide for any
further liabilities which might arise and to reclassify non-current
assets and liabilities as current assets and liabilities.
(c) Deconsolidation of a subsidiary, Shenzhen China-LED
Photo-Technology Limited ("Shenzhen LED")
The Group entered into a preliminary sale and purchase agreement
dated 11 February 2009 to dispose of its entire interest in a
wholly-owned subsidiary, Shenzhen LED. The assets and liabilities
of Shenzhen LED had been reclassified as held for sale as at 30
June 2009 and the results of Shenzhen LED were previously presented
under discontinued operations in the consolidated financial
statements for the year ended 30 June 2009. However, the disposal
of Shenzhen LED did not proceed. The sale and purchase agreement
dated 11 February 2009 was effectively terminated on 17 April
2010.
Notwithstanding that the Group owned the entire equity interests
in Shenzhen LED, Shenzhen LED was no longer regarded as a
subsidiary of the Group as the directors of the Company are of the
opinion that the control of Shenzhen LED had been lost in the prior
year.
The directors of Company considered that Shenzhen LED is not
under the control of the Company given (i) the Company was unable
to obtain any books and records from Shenzhen LED; (ii) the Company
had not been provided with any up-to-date financial reports of
Shenzhen LED and thus had no information as to the current
financial situation of Shenzhen LED and (iii) the current
management of the Group had lost contact with the then management
of Shenzhen LED. As a result, the Company expressed a lack of
confidence in its ability to properly control and manage Shenzhen
LED. In light of this situation, the directors of the Company
resolved to deconsolidate Shenzhen LED from the effective date of
17 April 2010.
(d) Use of estimation and judgements
It should be noted that accounting estimates and assumptions are
used in preparation of these financial statements. Although these
estimates and assumptions are based on management's best knowledge
and judgement of current events and actions, actual results may
ultimately differ from those estimates and assumptions. The areas
involving a higher degree of judgement or complexity, or areas
where assumptions and estimates are significant to the consolidated
financial statements.
3. REVENUE
An analysis of the revenue from the Group's principal activities
(note 1), which is also the Group's turnover, is as follows:
Six-month Six-month
period ended period ended
31 December 31 December
(Unaudited) (Unaudited)
2014 2013
HK$'000 HK$'000
Revenue from sales of LED element
products 12,381 10,748
Revenue from rendering energy
management contracts services 7 21
-------------- --------------
12,388 10,769
============== ==============
4. SEGMENT INFORMATION
Operating segments are identified on the basis of internal
reports about components of the Group that are regularly reviewed
by the chief operating decision maker in order to allocate
resources to the segment and to assess their performance.
Segment information reported was analysed on the basis of the
types of products sold by the Group's operating division (i.e. LED
element products and energy management contracts services). The
Group's reportable segments are as follows:
Operations:
- LED element products
- Energy management contracts services
- Leasing services
Segment revenues and results
The following is an analysis of the Group's revenue and results
from operations by reportable segment.
LED element products EMC contracts Leasing services Total
Six-month Six-month Six-month Six-month Six-month Six-month Six-month Six-month
period period period period period period period period
ended ended ended ended ended ended ended ended
31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December
2014 2013 2014 2013 2014 2013 2014 2013
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000
Revenue
and results
Segment
revenue 12,381 10,748 7 21 - - 12,388 10,769
Segment
results (1,577) (3,431) (392) (359) (463) (400) (2,432) (4,190)
Other
income 217 65
Unallocated
administrative
expense (1,842) (4,184)
Finance
costs (1,293) (215)
Loss
before
tax (5,350) (8,524)
Revenue reported above represents revenue generated from
external customers. There were no inter-segment sales during the
periods ended 31 December 2014 and 2013.
The accounting policies of the reportable segment are the same
as the Group's accounting policies described.
Segment loss represents the loss incurred by each segment
without allocation of certain administration costs including
directors' salaries, finance costs and income tax expense. This is
the measure reported to the chief operation decision maker for the
purposes of resource allocation and assessment of segment
performance.
Segment assets and liabilities
At 31 December At 30 June
2014 2014
(Unaudited) (Audited)
HK$'000 HK$'000
Segment assets
LED element products 17,167 14,579
EMC contracts 2,285 8,623
--------------- -----------
Total segment assets 19,452 23,202
Unallocated assets:
Amount due from a former director - 3,329
Amount due from a related company 5,608 3,333
Pledged bank deposit 10,041 10,024
Others 35,665 744
--------------- -----------
Consolidated assets 70,766 40,632
=============== ===========
Segment liabilities
LED element products 55,686 47,326
EMC contracts 14,815 4,680
Total segment liabilities 70,501 52,006
Unallocated liabilities:
Bank overdrafts 10,015 10,264
Amount due to a director 11,821 3,811
Amounts due to related companies 739 3,127
Loan from a former director - 3,979
Convertible loan notes 10,000 10,000
Others - 18,783
--------------- -----------
Consolidated liabilities 103,076 101,970
=============== ===========
For the purposes of monitoring segment performance and
allocating resources between segments:
-- all assets are allocated to reportable segments other than
unallocated assets including amounts due from a former director and
a related company and pledge bank deposit. Goodwill is allocated to
respective reportable segment. Assets used jointly by reportable
segments are allocated on the basis of the revenue earned by
individual reportable segments; and
-- all liabilities are allocated to reportable segment other
than current tax liabilities and unallocated liabilities including
interest payables, bank overdrafts, amounts due to a director and
related companies, loans from a director and a former director and
convertible loan notes. Liabilities for which a reportable segment
is jointly liable are allocated in proportion to segment
assets.
The Group's revenue from its operations from its major products
and services is disclosed in "segment revenue and results".
5. LOSSES PER SHARE
The calculation of the basic and diluted losses per share
attributable to owners of the Company is based on the
following:
Six-month Six-month
period period
ended 31 ended 31
December December
2014 2013
(Unaudited) (Unaudited)
HK$'000 HK$'000
Loss for the year:
Loss for the purpose of basic
and diluted losses per share
(loss for the period attributable
to owners of the Company) 3,733 5,688
============= =============
Number of shares:
(Restated)
Weighted average number of ordinary
shares for the purpose of basic
and diluted losses per share 8,969,566 5,032,934
============= =============
In calculating the diluted losses per share attributable to the
owners of the Company for the six month ended 31 December 2014 and
2013, the potential issue of shares arising from the exercise of
share options would decrease the losses per share attributable to
the owners of the Company and is not taken into account as they
have an anti-dilutive effect. Therefore, the diluted losses per
share attributable to the owners of the Company for the six month
ended 31 December 2014 and 2013 is based on the loss attributable
to the owners of the Company of approximately HK$3,733,000 (2013:
HK$5,688,000) and on the weighted average of 8,969,566 (2013:
5,032,934 (restated)) ordinary shares outstanding during the six
month ended 31 December 2014, which are the amounts used in
calculating the basic losses per share for the period.
The weighted average number of ordinary shares held in 2013, for
the purpose of calculating basic and diluted loss per share, has
been retrospectively adjusted for the ten-for-one share
consolidation during the period ended 31 December 2014.
6. LOANS FROM A DIRECTOR / A FORMER DIRECTOR
As at 30 June 2013, a loan from a director of approximately
US$1,282,000 (equivalent to HK$10,000,000) to the Group was
interest-bearing at its rate of 9% per annum and due for repayment
within the next twelve months and the interest will be settled in
the form of the shares of the Company. The fair value of the
liability component and the equity component were determined at
inception of the received loan. The fair value of the liability
component was calculated using a market interest rate for a similar
loan and subsequently measured at amortised cost. The residual
amount, representing the value of the equity as shares to be
issued, was included in shareholders' equity. The loan was secured
by a charge over Green Pearl BVI's entire shareholding in its
subsidiaries, Carten and Yanford Limited.
The loan was due on 26 April 2013 and became immediately
repayable on demand. On 27 March 2014, the loan was settled by
convertible loan notes (the "Convertible Loan Notes") issued by
Green Pearl Energy Conservation Holdings Limited ("Green Pearl
BVI") in the aggregate principal amount of US$1,282,000 with
maturity date of 31 December 2015. The Convertible Loan Notes are
interest-bearing at a rate of 9% per annum and convertible into
shares of Green Pearl BVI at a conversion price of US$2.589 per
share of Green Pearl BVI. At any time on or after the date of
issuance of the Convertible Loan Notes, the noteholder may require
the issuer to convert any or all his Convertible Loan Notes (in
multiples of not less than US$1,000) into shares of Green Pearl BVI
at the conversion price by written notice. A total of 495,172
shares of Green Pearl BVI will be allotted and issued upon full
conversion of the Convertible Loan Notes. Green Pearl BVI has a
right to redeem the Convertible Loan Notes at their principal
amount and interest accrued up to the date of redemption by a 7 day
written notice to the director at any time from the date of
issuance. The interest on the Convertible Loan Notes shall be
satisfied by the issue of ordinary shares of the Company on
redemption or maturity date, calculated by reference to the closing
middle market price of the Company's share on the date of
redemption or maturity.
As at 30 June 2014, a loan from a former director to the Group
and the Company of approximately HK$600,000 was interest-bearing at
a rate of three months LIBOR plus 4% per annum and repayable on
demand and approximately HK$3,379,000 was interest-bearing at the
rate of three months LIBOR plus 4% per annum and repayable on 7
September 2014. On 30 September 2014, 442,118 ordinary shares of
the Company were issued to the former director to settle the
liabilities with him in the net amount of approximately
HK$2,872,000.
7. DEPOSIT PAID FOR ACQUISITION OF A SUBSIDIARY
The amount represented deposit paid for acquisition of a 100%
equity interest in Shenzhen Green Pearl Energy Management Services
Company Limited as at 31 December 2014.
8. PLEDGED BANK DEPOSIT
The amount represented deposit pledged to a bank to secure
banking facilities granted to the Group.
9. CASH AND BANK BALANCES
At 31 December
2014
(Unaudited) At 30 June
2014
(Audited)
HK$'000 HK$'000
Cash and bank balances in the
consolidated statement of financial
positions 6,129 396
Less: Bank overdrafts (10,015) (9,964)
--------------- ------------
Cash and cash equivalent in the
consolidated statement of cash
flows (3,886) (9,568)
=============== ================
10. RELATED PARTY TRANSACTIONS
In addition to the transactions and balances disclosed elsewhere
in these consolidated financial statements, the Group had the
following significant transactions with related parties during the
period:
Six-month Six-month
period period
ended ended
31 December 31 December
2014 2013
(Unaudited) (Unaudited)
Notes HK$'000 HK$'000
Interest on convertible loan note (a) 1,061 -
to a director
Loan interest to a former director (b) - 85
Consultancy and management fee
expense (c) 360 366
-
Consideration received for disposal (d) 20 -
of a subsidiary
Notes:
(a) Interest on Convertible Loan Notes (note 6) of approximately
HK$1,061,000 (2013: nil) was charged at a rate of 9% per annum on
the aggregate principal amount and shall be satisfied by the issue
of ordinary shares of the Company on redemption or maturity date to
a director, calculated by reference to the closing middle market
price of the Company's shares on the date of redemption or
maturity.
(b) Loan interest payable was accrued as payable to a former director of the Company.
(c) Consultancy and management fee expense of HK$360,000 (2013:
HK$366,000) was charged by a non-controlling interest for the
provision of consultancy services in relation to EMC contracts.
(d) On 22 December 2014, the Company disposed of its entire
interest in Osmar Limited at a consideration of USD2,500 to a
related company, in which a director, Mr. Stephen Chan, has an
interest.
The directors of the Company are of the opinion that the above
related party transactions were conducted on normal commercial
terms and in the ordinary course of business.
Compensation to key management personnel
The remuneration of directors and other members of key
management during the year were as follows:
Six-month Six-month
period period
ended 31 ended 31
December December
(Unaudited) (Unaudited)
2014 2013
HK$'000 HK$'000
Short-term employee benefits 320 1,073
11. EVENTS IN REPORTING PERIOD
(a) Placing of new shares
The Placing of 3,875,000 new ordinary shares to two potential
investors was completed on 11 July 2014 with settlement of the
balancing payment of RMB25,000,000 (approximately
HK$31,040,000).
(b) Capitialisation of liabilities
On 29 September 2014, the Company entered into agreements to
settle liabilities of certain creditors with an aggregate amount of
approximately HK$3,461,000 by issuing 532,875 ordinary shares of
the Company (the "Settlement"). The price per ordinary share was
HK$6.496 (approximately 51 pence) represented the closing
mid-market price on 26 September 2014. On 30 September 2014,
532,875 ordinary shares were issued, including 442,118 ordinary
shares being issued to a former director to settle the liabilities
with him of approximately HK$2,872,000.
(c) Disposal of Kepu
On 17 December 2014, the Company entered into a sale and
purchase agreement with Mr. Fu Wei ("Fu"), a director of Kepu,
relating to the disposal by the Group of the remaining effective
equity interest (60%) in Kepu.
Kepu specialises in the research, development and manufacturing
of its own brand of opto-electronic products, such as LED modules,
LED unit boards and LED bar-screens, which are used in consumer
electronic goods such as air-conditioners, microwave ovens,
conventional ovens, refrigerators, washing machines and fixed line
telephones.
As announced on 17 May 2012 and as a part of its ongoing
business review, the Board had determined that the activities of
Kepu present considerable, but different opportunities from LED's
primary focus of its EMC business model. As currently structured,
the Company does not have the resources to take full advantage of
the opportunities available to Kepu nor does the Board foresee Kepu
becoming a profitable member of the Group in the foreseeable
future. For this reason, the Company has taken the decision to sell
its remaining interest in Kepu. This will provide the Company with
further resources to promote and focus on the EMC business
model.
In pursuance of this strategy, the Company entered into a sale
and purchase agreement with Mr. Fu to dispose of its effective
equity interest in Kepu to Fu for a consideration of RMB360,000
(approximately HK$450,000 or GBP37,000). Included within the sale
was Far East, the immediate holding company of Kepu and a
subsidiary of the Company in which the Company held 60% and in
which Mr. Weng Xiao Yong holds the remaining 40 % equity
interest.
The proceeds of the sale of Kepu will be used to facilitate the
Group's working capital and support its EMC development plans.
Further details are set out in the Company's announcements dated
17 December 2014.
(d) Proposed acquisition of Shenzhen Ruihetai Industry Co. Limited
On 22 December 2014, the Company entered into a conditional
agreement under which it, or a nominated member of its Group, will
acquire the majority of the issued share capital of Shenzhen
Ruihetai Industry Co. Limited ("RHT") (the "Acquisition") from Ms.
Li Sai Ying and Mr. Lin Zhong (together, the "Vendors") at a
maximum consideration of RMB11,259,903 (approximately GBP1,136,000)
(the "Consideration"). The exact shareholding of RHT after the
Acquisition is to be determined and is subject to the local laws
and regulations governing foreign investments in PRC companies.
RHT is a large-scale grain enterprise incorporated in the PRC.
It is mainly engaged in the business of rice storage, processing,
distribution, and the wholesale and retail sale of rice. RHT has
long established relationships with business partners in major
grain-producing areas in Northeast China, Hunan, Hubei, Jiangxi,
Jiangsu, Guangxi as well as internationally in Thailand. RHT has
established rice counters in major shopping malls, supermarkets and
chain stores in residential areas throughout the PRC and, in doing
so, RHT has built a strong and reputable food distribution network
in the PRC.
By reason of the size of RHT in relation to the Company, the
Acquisition is classified as a reverse takeover under the AIM
Rules. In pursuance of the AIM Rules, trading in the Company's
shares was suspended from 8 a.m. on 22 December 2014.
Since the announcement in relation to the Acquisition made on 22
December 2014, the Board has been in discussion with the Vendors
and has consulted its PRC lawyers regarding the appropriate
structure of the Acquisition. The Company has received a legal
opinion from its PRC lawyers advising that the industry area in
which RHT operates falls under the category of "restricted foreign
investment industries".
Under the current Foreign Investment Laws, foreign investors
cannot invest directly in Chinese companies that operate in
sensitive industries prohibited or restricted to foreign
investments. However, foreign investors can take effective control
of the restricted foreign investment industries through the use of
variable interest entity ("VIE") arrangements. The current proposed
structure of the Acquisition is that it would be effected through
the use of a VIE arrangement.
However, subsequent to the Company entering into terms relating
to the Acquisition, on 19 January 2015 the PRC Ministry of Commerce
announced a review of VIE arrangements and published a draft of a
new Foreign Investment Law to define foreign investment in terms of
the "actual controller" of a PRC company. There is no proposed
grandfathering provision for the existing foreign controlled VIE
arrangements in the restricted industries. Therefore, if enacted,
the new Foreign Investment Law would increase the risks for the
Company in proceeding with the Acquisition by way of a VIE
arrangement since it may retrospectively invalidate the structure
of the Acquisition.
Having considered the legal and regulatory implications of
various options of the structure of the Acquisition, the Board has
decided not to proceed with the Acquisition but instead to form a
new joint venture with the Vendors (the "Joint Venture"). The Joint
Venture will seek to establish a new distribution business, in part
by utilising the Vendor's network of long established relationships
with business partners in the PRC as well as internationally in
Thailand, gained through their operation of RHT, and through the
establishment of new relationships. The Joint Venture will
primarily distribute rice and other food substances and will look
to establish counters in major shopping malls, supermarkets and
chain stores in residential areas throughout the PRC. The Company
envisages that through the Joint Venture the Company will be able
to leverage the distribution network to market its "Green Pearl"
green products.
It is anticipated that 99 per cent. of the Joint Venture will be
owned by the Company with 1 per cent. being owned by the Vendors.
The Company will provide a working capital loan to the Joint
Venture in the amount of RMB50 million, the proceeds of which will
be utilised for business development and general working capital.
In order to finance this working capital loan, the Company intends
to raise additional funding through equity and/or debt
financing.
The Vendors will be responsible for the management and operation
of the Joint Venture. Also, the Vendors will provide a profit
guarantee that the annual net profit of the Joint Venture shall be
at least RMB70 million per year for each of the three years
following the formation of the Joint Venture, and such amount shall
exclude the green products introduced by the Company and
distributed through the Joint Venture within the PRC during the
three-year period.
As part of the Joint Venture, the Vendors will be issued with up
to 1,114,000 new ordinary shares in the Company (the "Shares"),
which represents 11.80 per cent. of LED's current issued share
capital. The Shares will be issued in three equal annual tranches
commencing on the date of formation of the Joint Venture. The
Shares will be issued at a price of 12.49806 per Share. In the
event that the profit guarantee is not met, the number of Shares to
be issued to the Vendors will reduce proportionately.
On the basis that the Acquisition is no longer proceeding, the
temporary suspension to trading in the Company's ordinary shares
was lifted with effect from 7:30am on 31 March 2015 and trading in
the Company's ordinary shares resumed on the same day.
Further announcements in relation to the Joint Venture will be
made at the appropriate time.
(e) Disposal of Osmar Limited
On 22 December 2014, the Company disposed of its entire interest
in Osmar Limited at a consideration of USD2,500 to a related
company, in which a director, Mr. Stephen Chan, has an interest.
Osmar Limited is principally engaged in investment holding.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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