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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
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Glbal Lck Grp | LSE:GLOK | London | Ordinary Share | VGG393181034 | ORD NPV (DI) |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 1.125 | 0.00 | 01:00:00 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
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0 | 0 | N/A | 0 |
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
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