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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Gts Chemical | LSE:GTS | London | Ordinary Share | JE00BKX4SF95 | ORD GBP0.01 |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 48.50 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMGTS
RNS Number : 7046C
GTS Chemical Holdings PLC
29 June 2016
29 June 2016
GTS Chemical Holdings plc
("GTS" or the "Company" or the "Group")
GTS Chemical Holdings plc (AIM: GTS), the specialty chemicals and lubricating oil producer, and China's largest producer of ammonium sulfite, reports its financial results for the year ended 31 December 2015.
The Company's annual report will shortly be made available on the Company's website (http://www.gtschemical.com/) and will be posted to shareholders later today.
Enquiries:
GTS Chemical Holdings plc Mr Roy Su, CFO Tel: +86 159 5935 8899 Website www.gtschemical.com SP Angel Corporate Finance Tel: +44 (0) 20 3470 0470 LLP Nominated Adviser and Broker David Facey / Stuart Gledhill
Key points:
-- Revenue nears GBP100m
-- Revenue up 32.0%
-- Specialty chemicals and lubricant oils divisions performing strongly
-- Stable gross margin of 21.1% (2014: 21.1%)
-- Profit before tax up 34.4%
-- New lubricant oil plant which has increased capacity by 167%
-- No full year dividend proposed
-- Delisting proposals to be sent to shareholders
Chairman's Statement
Andrew Harding is delighted by continued success in 2015
"2015 has been another excellent year, building on our success in 2014. Our commitment to excellence, which has recently been recognised by the American Petroleum Institute ("API"), is at the heart of our success as we continue to expand our market reach in both of our core sectors and we continue to invest to ensure that we remain at the forefront."
Performance
I am delighted to report an excellent performance in 2015. Our two core sectors continue to grow at a rate above market expectations and we have done so, importantly, without diluting gross margins. Overall, revenue was up 32% to RMB929.9m, which is approximately GBP97.2m(1) , specialty chemicals revenue was up 30.2% and lubricant oils up 52.8%. I am pleased to say that the results for the first quarter of 2016 show a similar trend.
Our success is based on our commitment to quality and compliance with regulations. This is important for our specialty chemicals division as we grow our sales into the sensitive pharmaceutical and food sectors. It is equally important in the lubricant oil division as regulations become tighter, the Chinese car parc becomes newer and more expensive and the consumer requires better quality oils.
Investment
Our strong cash flow has enabled us to invest continuously in the business and we intend to continue to do this.
During the year we have not only increased capacity of our specialty chemicals division but in addition have overhauled some of our existing lines to improve quality, particularly in relation to controlling output, which is particularly important in the food and pharmaceutical sectors.
During the year we have not only increased capacity of our speciality chemicals division but in addition have overhauled some of our existing lines to improve quality, particularly in relation to controlling output, which is particularly important in the food and pharmaceutical sectors.
Our new lubricant oil plant which was constructed on the land that we acquired at the end of 2014 not only increased our capacity to 26,667 tonnes per year(2) but also ensures that we are able to produce quality oils at a competitive price. The quality of our processes has been recognised by the API which has recently awarded us the Q1 specification.
(1) Using the average exchange rate for the year of RMB1=GBP0.1045 (2) On a single shift basis
Board and Governance
Our board combines strong experience in chemicals, accountancy, capital markets, corporate governance and Chinese operations.
Each of our Non-Executive Directors bring independent character and judgement to bear on strategic matters, the performance of the Group and standards of conduct. Our Non-Executive Directors provide a complementary mix of specialised industry knowledge and financial reporting in China and elsewhere combined with in depth experience of UK corporate governance matters.
Dividend
Given the proposed delisting of shares from trading on AIM, the directors no longer intend to propose a dividend for the year ended 31 December 2015.
Delisting
The primary purpose of the Company's Admission was the opportunity it provided to raise capital in support of the Company's growth prospects. Given current market conditions, and in particular the lack of investors for businesses operating in the PRC, the Directors are of the opinion that it is difficult for the Company to attract any or meaningful equity investment through its listing on AIM and accordingly the Directors will be assessing potential alternatives to raise growth capital. Also, there are significant professional fees and other costs associated with the maintaining of the Company's AIM listing.
Our people
Finally, on behalf of the board, I would like to thank all of our people for their contribution to our success this year. We continue to grow at an impressive rate and we would like to wholeheartedly thank our team for making this possible.
Andrew Harding
Chairman
29 June 2016
Group Chief Executive's Review
Cheng Liu is pleased to report growth despite a tough economic environment
"GTS has continued to grow throughout the period at rates higher than market expectations. Our success is driven by our absolute commitment to excellence enabling us to grow market share in a difficult economic environment without suffering any reduction in gross margin. We understand the importance of investing in our assets, human and technical and this remains a key part of our strategy going forward"
2015 performance overview
GTS has delivered revenue growth of 32.0% exceeding expectations.
Segmental sales analysis
Hot Features
Premium
12 months % of 12 months % of
RMB to total to total Increase
(millions) 31 December sales 31 December sales
2015 2014
Specialty
Chemicals 656.6 70.6% 504.2 71.6% +30%
Lubricant
Oils 211.8 22.8% 138.6 19.7% +53%
Recarburizer 61.5 6.6% 61.7 8.7% 0%
Total 929.9 100.0% 704.5 100.0% +32%
Specialty chemicals delivered growth of 30% compared with the previous year. Although the paper industry remained a large part of our sales, unlike 2014 the majority of the growth was driven by our success in accessing other segments of the market, in particular food and pharmaceuticals. These two sectors demand the highest quality standards in our product and our processes and we are pleased that our efforts in this regard have not only been recognised by our customers but also by the API.
Our lubricant oil division grew by 53% in the year compared with a growth rate of 67%(3) in 2014. Whilst this is slightly lower growth than experienced 2014, this is only to be expected as we grow. Our growth is supported by our expanding distribution network and through the support that we give to our distributors to encourage them to grow their own sales. As the Lubricant Oil Division is growing at a faster rate than our specialty chemicals division its share of our total sales has increased to 22.8%.
Sales of recarburizer remain flat. Whilst this continues to make a gross margin comparable to our core sectors with negligible investment we will continue to operate this division, but we have no plans to expand these activities. We anticipate that recarburizer will represent less than 5.5% of our total sales in 2016.
Specialty Chemicals
Specialty chemicals remains our largest division representing 70.6% of total turnover (2014: 71.6%).
(3) Calculated by reference to H1 2014 and H2 2013 as the lubricant oil division commenced in July 2013
Ammonium sulfite
The chemical properties of liquid ammonium sulfite and solid ammonium sulfite are the same and are produced on the same production line. As the liquid form has a shorter shelf life and is more expensive to transport; liquid ammonium sulfite is almost exclusively produced for local customers whilst solid ammonium sulfite is shipped to all parts of China and indeed exported. Our sales mix is, thus, determined by our customers. Aggregate growth for both ammonium sulfite products is 25.6%.
Ammonium bisulfite
Ammonium bisulfite is only produced in liquid form. The biggest increase in sales in 2015 has been to the Pharmaceuticals sector.
The biggest drivers of growth in the year was the Chemical and Pharmaceutical sector together with the increased emphasis on sales via our distributor network. Sales to the paper industry have remained flat because of a temporary delay in the expansion at Tralin, our largest single customer.
We have focussed on developing our distributor network for the specialty chemical division. At the end of the year the number of distributors stood at 62 spread over 20 provinces. We will continue to focus on this channel and provide support to our distributors to encourage them to market our products effectively.
Lubricant Oils
Lubricant oil sales increased by 52.8% in the year from RMB138.6 million to RMB211.8 million and now represents 22.8% of our total sales. In order to meet the anticipated increase in demand we constructed a new lubricant plant on our new site which utilises the latest technology and has almost tripled our capacity. We have decided to concentrate on marketing and developing one brand, Ogistar, which is aimed at the mid to high end of the market although we continue to offer two other brands. By concentrating on Ogistar we are able to differentiate it more easily from our competitors.
Our sales continue to grow by gaining market share from other producers who are unable to supply oil of similar quality at competitive prices. We also focus heavily on marketing our brand and providing support to our distribution network; this is vital in the current economic climate. We continue to grow our distribution network but, equally importantly, average sales per distributor have been increasing in part because of the support that we provide. Sales in the first quarter of 2016 have continued this trend.
In 2015 97% of the lubricant oils division's sales (2014, 91.3%) consisted of automotive oils and 3% (2014: 8.7%) of industrial oils. Upon our observation, approximately 80% of the sales of automotive oils are to repair workshops and the remainder to petrol stations through our distributors. As part of the process of increasing our market presence in the automotive sector we have commenced production of allied products such as anti-freeze and brake fluid, in order to be able to offer a more complete product range. Similarly, we have begun production of cutting fluid to expand our range of products to our industrial customers.
In 2015, the average sales price for our mid-range brand, Changyun, was RMB15,500 per tonne, for Ogistar, our premium brand, RMB16,700 per tonne, and for Qiaoke, which is aimed at the lower to mid end of the market RMB13,800 per tonne.
Recarburizer
Recarburizer sales have remained flat in line with our policy for this division.
Gross profit for the year increased by 31.9% to RMB196.2 million from RMB148.7 million in 2014.
RMB (millions) 12 months to 12 months to Increase in
31 December 31 December Gross
2015 2014 Profit
%
Specialty
Chemicals 139.4 106.5 +30.8%
Lubricant
Oils 44.4 29.1 +52.6%
Recarburizer 12.4 13.1 (5.3%)
Total Gross
Profit 196.2 148.7 +31.9%
Overall gross margin is the same as 2014.
We have seen an increase in the gross margin for the chemicals division. This has been driven in part by concentrating on the efficiency of our processes and in part because of the increase in our sales in particular to the higher quality, higher value pharmaceuticals sector. By continuing to focus on quality and customer service we anticipate that as we grow we should be able to maintain margins in this division at the levels we have achieved so far.
The gross profit margin for lubricant oil has reduced slightly due to the increased depreciation charge following the construction of the new plant.
The gross margin achieved by the recarburizer division is down from 21.2% to 20.2%, although it is immaterial in the context of our business as a whole. Our strategy for this business is that we will continue to operate it whilst it continues to make a reasonable margin as it requires little or no capital cost.
Seasonality
In general, none of our businesses are subject to seasonal demand other than the impact of Chinese New Year, which is common to most businesses. Chinese New Year has an impact upon sales in the run up to New Year, but has most impact upon the results for Q1 each year.
Costs
Selling and distribution expenses and administrative expenses have both reduced significantly as a percentage of sales. This is due in part to economies of scale as we grow but more importantly due to our focus on the efficiency of our operations. The investments that we have made during the year are a key factor in our increased operation efficiency and we will continue to invest to ensure that this process continues.
Cash Flow
Net cash generated from operations have grown from RMB50.2 million to RMB155.8 million as follows:
RMB (millions) 2015 2014 Operating cash flows 154.33 114.82 Change in inventories (13.44) 0.41
Change in trade and
other receivables (1.66) (15.42)
Change in trade and
other payables 15.51 (49.63)
Net cash generated from
operating activities 154.74 50.18
Operating cash flows before working capital movements have moved in line with the general profitability of the Group. In
2015, we have focused on controlling our working capital whilst we continue to grow. The large difference between net cash generated from operating activities in 2015 and 2014 arises from the decision taken in 2014 to support our suppliers by paying them earlier than hitherto. In 2015, we have relaxed this policy slightly resulting in a slight increase in our trade payable balance increasing broadly in line with our overall growth.
Interest
The increase in interest paid reflects an increase in the average level of borrowing in the period, although we remain a lightly geared company.
Financing
During 2015 there has been an increase in borrowings of RMB37.6 million. These funds were used to finance in part the investment of RMB114.4m as shown below.
Investment
Our total investment activities in 2015 amounted to RMB115.4 million (2014: RMB33.1 million). This is a considerable investment and represents the majority of our operating cash flows for the year.
We propose to continue to invest heavily in our business as our customers continue to demand greater levels of production, quality and efficiency.
Dividend
Given the proposed delisting of shares from trading on AIM, the directors no longer intend to propose a dividend for the year ended 31 December 2015.
Outlook
The outlook for our core business segments is strong. As already reported, Q1 continues the trend seen in 2015.
Cheng Liu
Group Chief Executive
29 June 2016
CONSOLIDATED AND COMPANY STATEMENT OF COMPREHENSIVE INCOME FOR THE YEARED 31 DECEMBER 2015
Group Group Company Company
Note Year Year Year Period
ended ended ended 22 January
31 December 31 December 31 December to
2015 2014 2015 31 December
2014
RMB'000 RMB'000 RMB'000 RMB'000
Revenue 4 929,913 704,567 - -
Cost of sales 5 (733,693) (555,829) - -
Gross profit 196,220 148,738 - -
Selling and distribution
expenses 5 (27,171) (21,584) - -
Administrative
expenses 5 (21,821) (18,139) (2,717) (2,119)
Operating profit 147,228 109,015 (2,717) (2,119)
Interest on bank
deposits 712 783 - -
Finance costs 7 (10,440) (7,846) (7) (10)
Investment income 8 - - 17,863 -
Grants received 999 420 - -
Non-operating
income 2 9 - -
Non-operating
expenses 8 (951) - - -
Profit before
tax 137,550 102,381 15,139 (2,129)
Income tax expense 9 (21,559) (16,228) -
Profit for the
period 115,991 86,153 15,139 (2,129)
Other comprehensive - - - -
income
Total comprehensive
income for the
period 115,991 86,153 15,139 (2.129)
Earnings per share
Basic (RMB) 10 1.13 0.90
Diluted (RMB) 1.12 0.90
CONSOLIDATED AND COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2015
Group Group Company Company
Notes 2015 2014 2015 2014
RMB'000 RMB'000 RMB'000 RMB'000
Non-current assets
Property, plant
and equipment 11 156,120 46,431 - -
Intangible assets 12 28,233 28,763 - -
Investment in
subsidiaries 13 - - 10 10
--------- ---------------- ----------------- -----------------
184,353 75,194 10 10
--------- ---------------- ----------------- -----------------
Current assets
Inventories 14 44,721 31,275 - -
Trade and other
receivables 15 149,891 148,280 68,473 57,029
Pledged deposits 16 1,993 11,000 - -
Cash and cash
equivalents 16 169,677 113,121 2 2
--------- ---------------- ----------------- -----------------
366,282 303,676 68,475 57,031
--------- ---------------- ----------------- -----------------
Total assets 550,635 378,870 68,485 57,041
Capital and reserves
Share capital 17 10,241 10,241 10,241 10,241
Share premium 17 44,167 44,167 44,167 44,167
Capital reserve 18 51,141 51,277 - -
Merger reserves 19 (6,167) (6,167) - -
Statutory reserve 20 1,648 1,648 - -
Option reserve 21 197 197 197 197
Retained earnings 199,376 101,112 (4,853) (2,129)
--------- ---------------- ----------------- -----------------
Total equity 300,603 202,475 49,752 52,476
Current liabilities
Borrowings 22 108,950 75,900 - -
Trade and other
payables 23 78,212 62,706 18,733 4,565
Current income
tax liabilities 10,515 4,660 - -
--------- ---------------- ----------------- -----------------
197,677 143,266 18,733 4,565
--------- ---------------- ----------------- -----------------
Non-Current liabilities
Long-term borrowings 22 11,140 6,590 - -
Long-term loans 24 41,215 26,539 - -
----------------- -----------------
52,355 33,129 - -
----------------- -----------------
Total liabilities 250,032 176,395 18,733 4,565
Total equity
and liabilities 550,635 378,870 68,485 57,041
The notes on pages 16 to 45 form part of these financial statements.
The financial statements were approved by the Board of Directors and authorised for issue on 29 June 2016.
Cheng Liu
Executive Director
GTS CHEMICAL HOLDINGS PLC
CONSOLIDATED AND COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 31 DECEMBER 2015
The Group
Share Share Capital Merger Statutory Option Retained Total
capital premium reserve reserve reserve reserve earnings
RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000
Balance at
31 December
2013 10,000 43,930 - (6,165) 1,648 - 14,832 64,245
========= ========= ========= ========== ========== ======== ========== ==========
(pro forma)
Comprehensive
income - - - - - - 86,153 86,153
Issued of
new shares 241 8,439 - - - - - 8,680
Share issue
costs - (8,202) - - - - - (8,202)
Capital
contribution - - 51,404 - - - - 51,404
Merger reserve - - - (2) - - - (2)
Share based
payment
expenses - - - - - 197 - 197
Recognised
interest
expenses - - (127) - - - 127 -
--------- --------- ----------
Balance at
31 December
2014 10,241 44,167 51,277 (6,167) 1,648 197 101,112 202,475
========= ========= ========= ========== ========== ======== ========== ==========
Comprehensive
income - - - - - - 115,991 115,991
Dividend
issued - - - - - - (17,863) (17,863)
Recognised
interest
expenses - - (136) - - - 136 -
--------- --------- --------- ---------- ---------- -------- ---------- ----------
Balance at
31 December
2015 10,241 44,167 51,141 (6,167) 1,648 197 199,376 300,603
========= ========= ========= ========== ========== ======== ========== ==========
CONSOLIDATED AND COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 31 DECEMBER 2015
The Company
Share Share Option Retained Total
capital premium reserve earnings
RMB'000 RMB'000 RMB'000 RMB'000 RMB'000
Balance at 31 December - - - - -
2013
========= ========= ========= ========== =========
Comprehensive income - - - (2,129) (2,129)
Issued of new shares 10,241 44,167 - - 54,408
Share based payment
expenses - - 197 - 197
Balance at 31 December
2014 10,241 44,167 197 (2,129) 52,476
========= ========= ========= ========== =========
Comprehensive income - - - 15,139 15,139
Dividend issued - - - (17,863) (17,863)
Balance at 31 December
2015 10,241 44,167 197 (4,853) 49,752
========= ========= ========= ========== =========
CONSOLIDATED AND COMPANY STATEMENT OF CASH FLOWS
FOR THE YEARED 31 DECEMBER 2015
Group Group Company Company
Year Year Year Period
ended ended ended 22 January
31 December 31 December 31 December to
2015 2014 2015 31 December
2014
Cash flow from operating Note RMB'000 RMB'000 RMB'000 RMB'000
activities
Profits before tax 137,550 102,381 15,139 (2,129)
Depreciation of property,
plant and equipment 11 5,697 4,714 - -
Amortisation of intangible
assets 12 595 340 - -
Investment income - - (17,863) -
(Company)
Interest income (712) (783) - -
Interest expenses 7 10,280 7,846 - -
Non-operating income (2) - - -
Non-operating expenses 8 951 - - -
Exchange difference (25) - (25) -
Share based payment
expense - 197 - 197
Recognised interest - 127 - -
expenses
Share for share exchange - (2) - -
adjustments
Reversal of impairment - (781) - -
of non-current assets
Loss on disposal of - 781 - -
property, plant and
equipment
---------------- ------------- -------------
Operating cash inflows
before movements in
working capital 154,334 114,820 (2,749) (1,932)
Increase/(decrease)
in inventories (13,444) 406 -
Increase in trade
and other receivables (1,611) (15,421) (11,444) (3,109)
Waiver of other receivables (50)
Increase/(decrease)
in trade and other
payables 15,506 (49,634) 14,168 4,565
------------- ---------------- ------------- -------------
Net cash generated
from/(used in) operations 154,735 50,171 (25) (476)
Interest paid 7 (9,232) (7,846) - -
Withholding tax paid 8 (951) - - -
Income taxes paid (15,704) (16,620) - -
------------- ---------------- ------------- -------------
Net cash generated
from/(used in) operating
activities 128,848 25,705 (25) (476)
============= ================ ============= =============
Investing activities
Purchase of property,
plant and equipment 11 (115,386) (13,051) - -
Expenditure on intangible
assets 12 (15) (20,000) - -
Interest received 712 783 - -
-------------
Net cash used in investing
activities (114,689) (32,268) - -
============= ================ ============= =============
Financing activities
Proceed from issue
of shares - 8,677 - 8,677
Payment of listing
costs - (8,199) - (8,199)
Proceed from bank
borrowings 22 129,810 82,490 - -
Repayment of bank
borrowings 22 (92,210) (69,450) - -
Long term / short - 28,252 - -
term loans from directors
Long term / short - 5,365 - -
term loan from subsidiary
directors
Loan from the Company's - 668 - -
shareholders
Capital contribution - 51,277 - -
Receive of dividend - 4,235 -
Payment of dividend (4,210) (8 7,200) (4,210) -
------------- ---------------- ------------- -------------
Net cash from financing
activities 33,390 11,880 25 478
============= ================ ============= =============
Net increase in cash
and cash equivalents 47,549 5,317 - 2
CONSOLIDATED AND COMPANY STATEMENT OF CASH FLOWS - CONTINUTED FOR THE YEARED 31 DECEMBER 2015
Group Group Company Company
Year Year Year Period
ended ended ended 22 January
31 December 31 December 31 December to
2015 2014 2015 31 December
2014
Note RMB'000 RMB'000 RMB'000 RMB'000
Cash and cash equivalents
at beginning of period 124,121 118,804 2 -
------------- -------------- ------------- -------------
Cash and cash equivalents
at end of period 16 171,670 124,121 2 2
------------- -------------- ------------- -------------
Analysis of balance
of cash and cash equivalents
Cash and cash equivalent
as stated in the consolidated
statement of financial
position 169,677 113,121 2 2
Time deposits with
original maturity
of less than 6 months
when acquired, pledged
for notes payable 1,993 11,000 - -
------------- -------------- ------------- -------------
Cash and cash equivalents
as stated in the consolidated
statement of cash
flows 16 171,670 124,121 2 2
============= ============== ============= =============
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARED 31 DECEMBER 2015
1 GENERAL INFORMATION
GTS Chemical Holdings Plc (the "Company") was incorporated in Jersey on 22 January 2014. The registered office of the Company is 11 Bath Street, St Helier, Jersey JE2 4ST.
The principal activity of the Company is that of an investment holding company and the principal activities of the Group are manufacturing of ammonium sulfite, ammonium bisulfite, blending and distribution of lubricating oils and trading of recarburizer. The principal place of business is at Luzhuang Village, Jiangdian Town, Gaotang County, Shandong Province, P. R. China.
The Company was set up as part of the group restructuring for admission to AIM, the Group has taken over the business and trade of Shandong Tiantai Steel-Plastic Co., Ltd ("Shandong Tiantai") before admission to AIM on 1st August 2014.
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 2.1 Statement of compliance
The financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the EU ("IFRS") issued by the International Accounting Standard Board (IASB) and interpretations of the International Financial Reporting Interpretations Committee (IFRIC).
The group has adopted all relevant standards effective for accounting periods beginning on or after 1 January 2015 from the beginning of the reporting period.
As at end of the reporting period, the Group has not adopted the following standard as it is either not effective or not applicable to the Group's business.
Standards, amendments and interpretations (not yet endorsed by EU at 8 June 2016)
- IFRS 9 Financial Instruments (July 2014) - IFRS 14 Regulatory Deferral Accounts (January 2014)
- IFRS 15 Revenue from Contracts with Customers (May 2014) including amendments to IFRS 15: Effective date of IFRS 15 (September 2015)
- IFRS 16 Lease (January 2016)
- Amendments to IFRS 10, IFRS 12 and IAS 28: Investment Entities - Applying the Consolidation Exception (December 2014)
- Amendments to IFRS10 and IAS 28: Sales or Contribution of Assets between an Investor and its Associate or Joint Venture (September 2014)
- Amendments to IAS 12: Recognition of Deferred Tax Assets for Unrealised Losses (January 2016)
- Amendments to IAS 7: Disclosure Initiative (January 2016) - Clarifications to IFRS 15 Revenue from Contracts with Customers (April 2016)
- Amendments to IAS 27: Equity Method in Separate Financial Statements (August 2014) - EU effective date 1 January 2016
- Amendments to IAS 1: Disclosure Initiative (December 2014) - EU effective date 1 January 2016
- Annual Improvements to IFRSs 2012-2014 Cycle (September 2014) - EU effective date 1 January 2016
- Amendments to IAS 16 and IAS 38: Clarification of Acceptable Methods of Depreciation and Amortisation (May 2014) - EU effective date 1 January 2016
- Amendments to IFRS 11: Accounting for Acquisitions of Interests in Joint Operations (May 2014) - EU effective date 1 January 2016
- Amendments to IAS 16 and IAS 41: Bearer Plants (Jun 2014) - EU effective date 1 January 2016
There are no other standards, amendments and interpretations in issue but not yet adopted that the directors anticipate will have material effect on the reported income or net assets of the group.
2.2 Basis of preparation
The consolidated and company financial statements have been prepared on the historical cost basis except for certain financial instruments, which are measured at fair values as explained in the accounting policies set out below. Historical cost is generally based on the fair value of the consideration given in exchange for assets.
The consolidated financial statements are rounded to the nearest thousand ('000) and they are presented in Chinese Renminbi (RMB), the official currency of the People's Republic of China. RMB is the functional currency of the Company.
2.3 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 entity so as to obtain benefits from its activities.
All intra-group transactions, balances, income and expenses are eliminated on consolidation.
Where necessary, adjustments are made to the consolidated and company financial statements of subsidiaries to bring their accounting policies into line with those used by other members of the Group.
Non-controlling interests in subsidiaries are presented separately from the Group's equity therein.
Comparative
The comparatives information in the consolidated financial statements is pro forma. On this basis, the Directors have decided that it is appropriate to reflect the combination using merger accounting policies as a group reconstruction, in order to give true and fair view. No fair value adjustments have been made as a result of the combination.
As previous year was the Company's first annual financial statements, in order to provide meaningful financial information, the statements have been prepared as if the Company and the group had been in existence prior to the date of combination.
Merger accounting
The Group was formed in stages since 25 October 2013, when Runtai Environment Protection International Limited ("Runtai HK"), a company incorporated in Hong Kong, acquired the entire share capital of Shandong Tiantai from its shareholders for a total cash consideration of RMB53,918,900. As a result of this, Shandong Tiantai became a wholly owned subsidiary of Runtai HK. The Company then acquired the shares of Runtai HK on 29 March 2014 by way of a share exchange.
As the Company acquired another company, by means of such a share-for-share exchange, resulting in a business combination involving entities under common control and where no acquirer is identified, the "pooling of interests" method of consolidation has been used. Therefore, the difference between the purchase consideration and the carrying value of the share capital and premium acquired is adjusted to equity (merger reserve) and the comparative consolidated figures are stated on a combined basis.
Therefore, although the Group reconstruction did not become unconditional until 29 March 2014, these consolidated financial statements are presented as if the Group structure has always been in place.
2.4 Going concern
The financial statements have been prepared assuming the Group will continue as a going concern.
After making enquiries, the Directors consider that the Group has adequate resources and committed borrowing facilities to continue in operational existence for the foreseeable future. Consequently, they have adopted the going concern basis in preparing the Financial Statements.
2.5 Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods and services provided in the normal course of business, net of discounts, VAT and other sales related taxes.
The company recognises revenue when the amount of revenue can be reliably measured, it is probable that the future economic benefits will flow to the entity.
Sale of goods
The company's business involves selling the products of ammonium sulfite, ammonium bisulfite, lubricant oil and recarburizer in varies retail size containers to a network of agents in China. Sales of goods are recognised when goods are delivered and title has passed.
Interest income
Interest income is recognised on a time proportion basis using the effective interest method.
2.6 Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker is responsible for allocating resources and assessing performance of the operating segments.
2.7 Leases
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.
The company as lessee
Assets held under finance leases are initially recognised as assets of the company at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the statement of financial position as a finance lease obligation.
Lease payments are apportioned between finance expenses and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance expenses are recognised immediately in profit or loss. Contingent rentals are recognised as expenses in the periods in which they are incurred.
Operating lease payments are recognised as an expense on a straight-line basis over the lease term.
2.8 Subsidiaries
Subsidiaries are entities controlled by the Group. Control exists when the Group has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are fully combined from the date on which control is transferred to the Group. They are excluded from the date that control ceases.
For acquisition of subsidiaries under common control, the identifiable assets and liabilities were accounted for at their carrying values, in a manner similar to the pooling-of-interest method of consolidation.
For acquisition of subsidiaries that is not under common control, the acquisition method of accounting is adopted. The cost of such acquisition is measured as the fair value of the assets given, equity instruments issued or liabilities incurred or assumed at the dates of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at fair value on the date of the acquisition, irrespective of the extent of minority interest.
The excess of the consideration transferred the amount of any minority interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the net identified assets acquired is recorded as goodwill.
2.9 Foreign currencies
Transactions in foreign currencies are recorded using the rate of exchange ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated using the rate of exchange ruling at the balance sheet date and the gains or losses on translation are included in the income statement.
2.10 Borrowing costs
All borrowings costs are recognised in the profit and loss in the period in which they are incurred except for borrowing costs attributable to qualifying assets. Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset is to be capitalised as a cost of that asset. A qualifying asset is an asset that necessarily takes a substantial period of time to get ready for its intended use or sale.
2.11 Taxation
The tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the comprehensive income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The company's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date, and any adjustment to tax payable in respect of previous periods.
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited directly to equity, in which case it is recognised in equity.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the company intends to settle its current tax assets and liabilities on a net basis.
2.12 Property, plant and equipment
Property, plant and equipment are stated in the balance sheet at cost less any subsequent accumulated depreciation and any recognised impairment loss.
Cost includes purchase price and all directly attributable costs of bringing the asset to its location and condition necessary to operate as intended.
Depreciation is provided at rates calculated to write off the cost less estimated residual value of each asset over its estimated useful economic life as follows:
Building 20 years Plant and machinery 3 - 10 years Furniture, fittings and equipment 3 - 5 years Motor vehicles 4 years
An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount (refer note 2.14).
Gains and losses on disposals are determined by comparing the disposal proceeds with the carrying amount and are included in the income statement.
Asset in the course of construction is stated at cost less impairment losses. Cost comprises direct costs of construction capitalised during the periods of construction. Capitalisation of these costs ceases and construction-in-progress is transferred to property, plant and equipment when substantially all the activities necessary to prepare the assets for their intended use are completed. No depreciation is provided for in respect of construction-in-progress until it is completed and ready for its intended use.
2.13 Intangible assets
Intangible assets are accounted for using the cost model. Capitalised costs are amortised on a straight-line basis over their estimated useful lives for intangible assets that have finite useful lives. After initial recognition, they are carried at cost less accumulated amortisation and accumulated impairment losses, if any. The amortisation period and amortisation method of intangible assets are reviewed at each balance sheet date. The effects of any review are recognised in profit or loss when the changes arise.
Intangible assets are written off where, in the opinion of the directors, no further future economic benefits are expected to arise.
Land use right
Land use rights are amortised through administrative expenses over the period to which the rights relate. The estimated useful lives are 50 years.
Software licences
Software licences are stated at cost less accumulated amortisation and accumulated impairment losses. Amortisation is calculated using the straight-line method to allocate the cost of the licence over 5 years.
Patents and trademarks
Costs relating to patents and trademarks which are acquired are capitalised and amortised on straight-line basis over their useful life of 20 years.
Internally generated intangible assets - research and development expenditure
Research expenditure is recognised as an expense as incurred.
Costs incurred on development projects are recognised as internally generated intangible assets only if all of the following conditions are met by the 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 statement of profit and loss within administrative expenses.
2.14 Impairment of non-current assets (other than goodwill)
The carrying amounts of assets are reviewed at each statement of financial position date to determine whether there is any indication of impairment. If any such indication exists, the asset's recoverable amount is estimated. Impairment losses are recognised through administrative expenses in the income statement.
The recoverable amount is the higher of an asset's net selling price and value in use. The net selling price is the amount obtainable from the sale of an asset in an arm's length transaction.
Recoverable amounts are estimated for individual assets. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation, if no impairment loss had been recognised. Reversals of impairment losses are recognised in the income statement.
2.15 Investment in subsidiary undertakings
Investments in subsidiaries are stated at cost less provision for any impairment in value.
2.16 Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is determined on a first-in, first-out basis, and includes all costs in bringing the inventories to their present location and condition. In the case of manufactured products, cost includes all direct expenditure and production overheads based on the normal level of activity.
Provision is made for obsolete, slow-moving and defective inventories in arriving at the net realisable value.
Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs necessary to make the sale.
2.17 Financial instruments
Financial assets and financial liabilities are recognised when a company becomes a party to the contractual provisions of the instrument.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in profit or loss.
2.18 Financial assets
Financial assets which are under the scope of IAS 39, other than hedging instruments, can be divided into the following categories: financial assets at fair value through profit or loss (FVTPL), held-to-maturity investments, loans and receivables, and available-for-sale financial assets. Financial assets are assigned to the different categories by management on initial recognition, depending on the purpose for which the assets were acquired. The designation of financial assets is re-evaluated and classification may be changed at the reporting date with the exception that the designation of financial assets at fair value through profit or loss is not revocable.
All financial assets are recognised when, and only when, the Group becomes a party to the contractual provisions of the instrument. Regular way purchases and sales of financial assets are accounted for at trade date, ie, the date that the Group commits itself to purchase or sell the asset. When financial assets are recognised initially, they are measured at fair value, plus directly attributable transaction costs.
De-recognition of financial assets occurs when the rights to receive cash flows from the instruments expire or are transferred and substantially all of the risks and rewards of ownership have been transferred. At each of the balance sheet date, financial assets are reviewed to assess whether there is objective evidence of impairment. If any such evidence exists, an impairment loss is determined and recognised.
Other than loans, receivables and derivative financial assets, the Group does not have any financial assets at fair value through profit or loss, held-to-maturity investments or available-for-sale financial assets.
2.18.1 Effective interest method
This is a method of calculating the amortised cost of a debt instrument and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of debt instrument, or where appropriate, a shorter period, to the net carrying amount on initial recognition.
Income is recognised on an effective interest basis for debt instruments other than those financial assets classified at FVTPL.
2.18.2 Financial assets at FVTPL
Financial assets classified as held for trading are included in the category financial assets at fair value through profit or loss. Financial assets are classified as held for trading if they are acquired for the purpose of sale in the short term. Derivative financial instruments are also classified as held for trading unless they are designated and effective as a hedging instrument. Financial assets at FVTPL are stated at fair value with any gains or losses arising on re-measurement recognised in profit or loss.
2.18.3 Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are measured at amortised cost using the effective interest method less any impairment and are included in current assets, except for maturities greater than twelve months after the end of the reporting period. These are classified as non-current assets. The company's loans and receivables comprise "trade and other receivables" and "cash and cash equivalents".
Interest income is recognised by applying the effective interest rate except for short-term receivables when the recognition of interest would be immaterial.
2.18.4 Held-to-maturity investments
Non-derivative financial assets with fixed or determinable payments and fixed maturity are classified as held-to-maturity when the company has the positive intent and ability to hold the assets to maturity. Investments intended to be held for an undefined period are not included in this classification. Other long-term investments that are intended to be held-to-maturity, such as bonds, are subsequently measured at amortised cost using the effective interest method less any impairment.
2.18.5 Available-for-sale financial assets
Available-for-sale financial assets are non-derivative financial assets that are designated as available-for-sale or are not classified in any of the three preceding categories. After initial recognition, available-for-sale assets are measured at fair value with gains or losses being recognised in other comprehensive income and accumulated under fair value adjustment reserve until the investment is derecognised or until the investment is determined to be impaired at which time the accumulate gain or loss previously reported in equity is included in the profit or loss. The fair value of investments that are traded in active market at the end of each reporting period is determined by reference to the relevant stock exchange's quoted market bid prices at the close of business on the reporting period date. For investments where there is no active market, fair value is determined using valuation techniques. Such techniques include using recent arm's length market transactions; reference to the current market value of another instrument, which is substantially the same; discounted cash flow analysis and option pricing models.
2.19 Impairment of financial assets
Financial assets, other than those at FVTPL, are assessed for indicators of impairment at the end of each reporting date. Financial assets are considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial assets, the estimated future cash flows of the investment have been affected.
An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount, and present value of the estimated future cash flows discounted at the original effective interest rate. An impairment loss in respect of an available-for-sale financial asset is calculated by reference to its fair value.
For certain categories of financial assets, such as trade receivables, assets that are assessed not to be impaired individually are, in addition, assessed for impairment on a collective basis that share similar credit risk characteristics.
For financial assets carried at cost, the amount of the impairment loss is measured as the difference between the asset's carrying amount and the present value of the estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment loss will not be reversed in subsequent periods.
The carrying amount of the financial assets is reduced by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss.
When available-for-sale financial asset is considered to be impaired, cumulative gains or losses previously recognised in other comprehensive income are reclassified to profit or loss in the period.
For financial assets measured at amortised cost, if, in a subsequent period, the amount of the impairment loss decreases which can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.
2.20 Cash and cash equivalents
Cash comprises cash in hand and demand deposits. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. For the purpose of the cash flow statement, cash equivalents would include advances from banks repayable within 3 months from the date of the advance.
2.21 Trade and other receivables
Receivables are measured on initial recognition at fair value, and are subsequently measured at amortised cost using the effective interest rate method. Appropriate allowances for estimated irrecoverable amounts are recognised in the profit or loss when there is objective evidence that the asset is impaired. The allowance recognised is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows discounted at the effective interest rate computed at initial recognition.
2.22 Financial liabilities and equity
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. Financial liabilities include trade and other payables, amounts due to related parties and shareholders, bank borrowings and notes payable.
Trade and other payables are carried at cost which is the fair value of the consideration to be paid in the future for goods and services received, whether or not billed to the company.
All borrowings and overdrafts are recorded at the amount of the proceeds received, net of direct issue costs. Finance charges are charged to the income statement on an accruals basis using the effective interest rate method.
Equity instruments are recorded at the fair value of the consideration received, net of direct issue costs.
2.23 Commitments and contingencies
Commitments and contingent liabilities are disclosed in the financial statement. 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 benefit is probable.
2.24 Related parties
Parties are considered to be related if one party has the ability (directly or indirectly) to control the other party or exercise significant influence over the other party in making financial and operating decisions. Parties are also considered related if they are subject to common control or common significant influence. Related parties may be individuals or corporate entities
2.25 Dividend distribution
Dividend distribution to the company's shareholders is recognised as a liability in the financial statements in the period in which the dividends are approved by the company's shareholders.
2.26 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:
a) the company will comply with the conditions attached to them; and b) the grants will be received.
Government grants received during the year, which were recognised as other income, were one off payments received from the local government to subsidies research and development.
2.27 Share-based payments
The Group issues equity-settled share-based payments to certain directors, which are measured at fair value at the date of grant.
The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Group's estimate of shares that will eventually vest and adjusted for the effect of non-market based vesting conditions. At each balance sheet date, the Group revises its estimate of the number of equity instruments expected to vest. The impact of the revision of the original estimates, if any, is recognised in profit and loss over the remaining vesting period, with a corresponding adjustment to the equity-settled employee benefits reserve.
Equity-settled share-based payment transactions with other parties are measured at fair value of the goods or services received, except where the 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 render the service.
For cash-settled share-based payments, a liability equal to the portion of the goods or services received is recognised at the current fair value determined at each balance date.
Fair value is measured by use of Black Scholes model. The expected life used in the model has been adjusted, based on management's best estimate, the effects of non-transferability, exercise restriction, and behavioural consideration.
2.28 Critical accounting estimates and judgements
The preparation of financial information requires management to make judgement estimates and assumptions that effect the application of accounting policies together with the reported amounts of assets, liabilities, income and expenses.
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates may differ from the related actual results.
The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within future financial years are addressed below.
a) Impairment of property, plant and equipment
The carrying value of the property, plant and equipment is reviewed for impairment when events or changes in circumstances indicate the carrying value may not be recoverable in accordance with the accounting policies as disclosed in the relevant parts of note 2.12. If such indication exists, the recoverable amounts of the property, plant and equipment are determined on value-in-use calculations, which require the use of judgment and estimates.
b) Depreciation
The Group's management determines the estimated residual value, useful lives and related depreciation charges for the property, plant and equipment with reference to the estimated periods that the Group intends to derive future economic benefits from the use of these assets. Management will revise the depreciation and amortisation charge where useful lives are different to previously estimated.
c) Net realisable value of inventories
Net realisable value of inventories is the estimated selling price in the ordinary course of business, less estimated costs of completion and selling expenses. These estimates are based on the current market condition and the historical experience of manufacturing and selling products of similar nature. It could change significantly as a result of changes in customer demand and competitor actions in response to severe industry cycle. Management reassesses these estimates at each balance sheet date.
d) Income tax and other taxes
The Company's subsidiaries that operate in the People's Republic of China are subject to corporate income tax in the People's Republic of China. Significant judgement is required in determining the provision for income taxes and other taxes. There are some transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The Company recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and Value-added tax in the period in which such determination is made.
e) Measurement of fair values
A number of the group's accounting policies and disclosures require the measurement of fair values, for both financial and non-financial assets and liabilities.
The group currently does not have a control framework with respect to the measurement of fair values. The significant unobservable inputs were provided by the management to their best knowledge.
When measuring the fair value of an asset or a liability, the management uses market observable data as far possible. Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows.
-- Level 1: quoted prices (unadjusted) in active markets or identical assets or liabilities;
-- Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. prices) or indirectly (i.e. derived from prices);
-- Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
The information about the assumptions made in measuring fair values is included in the relevant notes.
f) Share issue costs
The listing costs which are incremental costs directly attributable to the restructuring and placement have been offset against the proceeds arising from the issuance of shares by the Company in accordance to IAS32 - "Financial Instruments". The excess of the incremental cost was charge to the statement of comprehensive income.
Costs that related to the stock market listing, or are otherwise not incremental and directly attributable to issuing new shares were recorded as an expense in the statement of comprehensive income.
Costs that relate to both share issuance and listing were allocated between those functions on a rational and consistent basis.
The costs of public relations, the corporate website, D&O insurance and part of the cost related to both share issuance and listing have been allocated to expenses in the statement of comprehensive income.
3 Comparative figures and reclassification
Certain reclassifications have been made to the prior year's financial statements to enhance comparability with the current year's results.
4 REVENUE
Currently, the Group's principal revenue is derived from the sale of ammonium sulfite, ammonium bisulfite, lubricant oil and recarburizer. All activities are within PRC. Therefore no detail of geographic segmental reporting is required.
Analysis of revenue from the sale of goods is as follows:
2015 2014
RMB'000 RMB'000
Specialty chemicals
Solid ammonium sulfite 358,075 260,077
Liquid ammonium sulfite 186,433 173,419
Liquid ammonium bisulfite 112,063 70,709
--------- ---------
656,571 504,205
Lubricant oil 211,833 138,627
Recarburizer 61,509 61,735
929,913 704,567
========= =========
77.23% (2014: 77.42%) of the ammonium sulfite and bisulfite sales are industrial grade. The remaining are food and medical grades.
Information about major customers
Included in revenue, RMB128.3 million (2014: RMB109.8 million) was generated from sales to the Group's largest customer, Tralin Paper.
5 EXPENSES BY NATURE
2015 2014
RMB'000 RMB'000
Changes in inventories 2,023 3,819
Raw materials and direct
costs 712,353 543,538
Business taxes and surcharges 19,317 8,463
Customers rebate 2,337 1,458
Employee benefit expense
(note 5) 16,900 12,520
Depreciation and amortisation
charges 2,527 908
Reversal of impairment
of non-current assets - (781)
Loss on disposal of plant
and machinery - 781
Transportation costs 14,489 9,835
Network service and advertising
fee 3,097 4,895
Motor, travel and entertaining 3,398 3,822
Research and development
costs 1,726 1,730
Listing costs - 604
Other expenses `4,518 4,070
---------- ----------
Total cost of sales,
selling, distribution
and
administrative expenses 782,685 595,552
========== ==========
Included in direct costs, depreciation charge of RMB5.6 million (2014: RMB4.0 million).
6 EMPLOYEE BENEFIT EXPENSE
2015 2014
RMB'000 RMB'000
Wages and salaries 17,178 13,254
Social security costs 5,235 4,148
---------
22,413 17,402
Included in:
Cost of productions (5,173) (4,528)
Research and development
costs (340) (354)
16,900 12,520
========= =========
Number Number
Average number of employees 227 198
========= =========
7 FINANCE COSTS
2015 2014
RMB'000 RMB'000
Bank interest 9,232 7,131
Loan interest 1,048 466
Bank charges 98 124
Exchange loss 62 125
10,440 7,846
======== ========
8 INVESTMENT INCOME
Group has distributed dividends of RMB17.9 million according to its dividend policy during the year, which suffered withholding tax (5% of gross value) of RMB951K in P. R. China.
9 INCOME TAX EXPENSE
2015 2014
RMB'000 RMB'000
Current tax charge
Tax charge for the year 21,559 16,228
Deferred tax charge (note - -
25)
--------- ---------
Income tax expense 21,559 16,228
========= =========
Reconciliation at effective
tax rate
Profit before tax 137,550 102,381
========= =========
Tax on profit at prevailing
rate of 25% 34,387 25,595
Factors affecting income
tax charge:
Expenses not deductible 970 1,158
Preferential tax rate (14,131) (10,818)
Other tax adjustment (607) (216)
Unrelieved tax losses 837 498
Differences in foreign
tax rate 103 11
Current tax charge 21,559 16,228
========= =========
The Company is regarded as resident for tax purposes in Jersey, and subject to income tax at 0%.
Shandong Tiantai is regarded as resident for tax purposes in PR China, where the prevailing rate of enterprise income tax is 25%. On 12 July 2012, Shandong Tiantai, obtained high technology enterprise status for three years during which the Shandong Tiantai is subject to a reduced enterprise income tax rate of 15%.
On 11 June 2014, the Department of Science and Technology of Shandong Province extended the period of Shandong Tiantai's high tech enterprise designation to 31 December 2019 and on the same date, the Shandong Gaotang State Taxation Bureau extended the period of favourable tax treatment for an additional period of five fiscal years ending on 31 December 2019.
10 EARNINGS PER SHARE
Basic and diluted earnings per share are calculated by dividing the profit attributable to equity shareholders of the Company by the weighted average number of ordinary shares in issue during the year.
Group Group
2015 2014
RMB'000 RMB'000
Net profit attributable
to owners of parent 115,991 86,153
Weighted average number
of ordinary shares ('000)
- basic 102,313 95,216
Weighted average number
of ordinary shares ('000)
- diluted 103,108 95216
Basic earnings per share
(RMB) 1.13 0.90
Diluted earnings per
share (RMB) (note 21) 1.12 0.90
Basic earnings per share in 2014 have been revised due to calculation error in weighted average number of ordinary shares. Share option has no dilutive effect as the average market price of ordinary shares as at year end in 2014 was below the exercise price of the share option. However, dilutive effect has been considered in 2015 due to the average market price was high than option exercise price.
11 PROPERTY, PLANT AND EQUIPMENT
Buildings Plant Fixtures, Motor Assets Total
and fittings vehicles under
machinery and construction
equipment
Cost RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000
At 31 December
2013 11,469 26,343 1,343 490 7,700 47,345
Additions 348 11,929 774 - - 13,051
Disposals - (1,050) (42) - - (1,092)
Net transfer - 7,700 - - (7,700) -
---------- --------------
At 31 December
2014 11,817 44,922 2,075 490 - 59,304
Additions 44,702 51,338 636 - 18,710 115,386
Disposals - - - - - -
Net transfer - - - - - -
---------- ----------- ----------- ---------- -------------- --------
At 31 December
2015 56,519 96,260 2,711 490 18,710 174,690
========== =========== =========== ========== ============== ========
Accumulated depreciation
At 31 December
2013 2,251 4,675 428 68 1,829 9,251
Charge for the
year 560 3,660 394 100 - 4,714
On disposals - (291) (20) - - (311)
Net transfer - 1,829 - - (1,829) -
Reversal of impairment
losses - (781) - - - (781)
---------- ----------- ----------- ---------- -------------- --------
At 31 December
2014 2,811 9,092 802 168 - 12,873
Charge for the
year 1,290 3,767 540 100 - 5,697
On disposals - - - - - -
Net transfer - - - - - -
At 31 December
2015 4,101 12,859 1,342 268 - 18,570
========== =========== =========== ========== ============== ========
11 PROPERTY, PLANT AND EQUIPMENT - continued
Buildings Plant Fixtures, Motor Assets Total
and fittings vehicles under
machinery and construction
equipment
RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000
Carrying value
At 31 December 2015 52,418 83,401 1,369 222 18,710 156,120
========== =========== =========== ========== ============== ========
At 31 December 2014 9,006 35,830 1,273 322 - 46,431
====== ======= ====== ==== ====== =======
At 31 December 2013 9,218 21,668 915 422 5,871 38,094
====== ======= ====== ==== ====== =======
On 15 March 2013, four main buildings located at 105 State Road West, Luzhuang Village, Jiangdian Town were pledged against bank loans up to RMB11.5 million for a period of 3 year from 24 January 2013 to 23 January 2016.
On 14 January 2016, the above pledged was extended for further 3 years from 14 January 2016 to 13 January 2019.
11.1 Assets under construction
Assets under construction at the end of 2015 consist of installation of a newly acquired liquid ammonium production line and an existing liquid ammonium production line under upgrade and alteration work to improve the efficiency in production and the quality of products. The new production line has been completed and transferred to Plant and machinery in January 2016. The upgrading production line is expected to be completed in August 2016.
11.2 Impairment losses recognised in profit and loss
In year 2013, certain fixtures, fittings and equipment with carrying value of RMB 780,963 were scrapped due to wear and tear. An impairment loss of RMB780,963 was recognised.
In year 2014, the fixtures, fittings and equipment were disposed of with a disposal loss of RMB 780,963 and the impairment loss recognised in 2013 was reversed.
12 INTANGIBLE ASSETS
Land Purchased Trademark Total
use software and patent
right
RMB'000 RMB'000 RMB'000 RMB'000
Cost
At 31 December
2013 9,676 32 - 9,708
Additions 19,250 - 750 20,000
-------- ---------- ------------ --------
At 31 December
2014 28,926 32 750 29,708
Additions - 15 50 65
-------- ---------- ------------ --------
At 31 December
2015 28,926 47 800 29,773
======== ========== ============ ========
Amortisation
At 31 December
2013 590 15 - 605
Charge for
the year 234 6 100 340
-------- ---------- ------------ --------
At 31 December
2014 824 21 100 945
Charge for
the year 579 9 7 595
-------- ---------- ------------ --------
At 31 December
2015 1,403 30 107 1,540
======== ========== ============ ========
Carrying amount
At 31 December
2015 27,523 17 693 28,233
======== ========== ============ ========
At 31 December
2014 28,102 11 650 28,763
======== ========== ============ ========
At 31 December
2013 9,086 17 - 9,103
======== ========== ============ ========
On 15 March 2013, the land use right for an area of 18,883 m(2) at 105 State Road West, Luzhuang Village, Jiangdian Town was pledged against bank loans up to RMB11.5 million for a period of 3 years from 24 January 2013 to 23 January 2016. On 14 January 2016, the pledged was extended for further 3 years from 14 January 2016 to 13 January 2019.
On 24 December 2014, Shandong Tiantai obtained the right to occupy the land with area 51,333 m(2) at 105 State Road West, Luzhuang Village, Jiangdian Town (opposite to the second piece) for a period of 50 years from 24 December 2014. The total transfer cost was RMB19.25 million.
In October 2014, Shandong Tiantai successfully registered two patents over processing highly pure ammonium sulfite and bisulfite methods valid for 20 years effective from the date of application on 2 May 2012. The total cost was RMB 750,000.
In 2015, Shandong Tiantai successfully registered the brand name for its lubricant oil 'Ogistar' valid for 10 years effective from the date of application on 14 April 2014. The total cost was RMB 50,000.
13 INVESTMENT IN SUBSIDIARIES
Company Company
2015 2014
RMB'000 RMB'000
At 1 January 10 -
Additions - 10
Disposals - -
--------
At 31 December 10 10
======== ========
On 29 March 2014, SinoEuro Runtai and Bright Fortune, as the shareholders of Hong Kong Runtai, entered into a share exchange agreement with the Company, pursuant to which each of SinoEuro Runtai and Bright Fortune transferred all of their shareholdings in Hong Kong Runtai to the Company. Total number of shares in Hong Kong Runtai was 10,000 ordinary shares @ HK$1 each = HK$10,000.
The exchange rate used was RMB1: HK$1.2615
Details of the Company's subsidiaries are as follows.
Place Proportion
of of ownership Principal activities
Name of incorporation interest
subsidiary and operation %
Runtai Environment Hong Kong 100 Holding company
Protection International
Limited
Shandong Tiantai P. R. 100 Manufacturing
Steel-Plastic China and distribution
Co., Limited of ammonium sulfite,
ammonium bisulfite,
lubricant oils
and recarburizer.
14 INVENTORIES
Group Group Company Company
2015 2014 2015 2014
RMB'000 RMB'000 RMB'000 RMB'000
Raw materials 11,858 5,796 - -
Packaging and
consumables 12,104 2,698 - -
Finished goods 6,598 11,141 - -
Work in progress 14,161 11,640 -
-------- -------------
44,721 31,275 - -
======== ======== ======== =============
15 TRADE AND OTHER RECEIVABLES
Group Group Company Company
2015 2014 2015 2014
RMB'000 RMB'000 RMB'000 RMB'000
Trade receivables 142,876 131,967 - -
Other receivables 821 1,378 - -
Amount owed by
subsidiary - - 68,473 57,029
Advance paid to
suppliers 5,366 14,367 - -
Prepayments 828 568 - -
--------
149,891 148,280 68,473 57,029
======== =============== ======== ==============
Included in other receivables amount of nil (2014: RMB1.3 million) were loans to business partners. These are interest free loans with no fixed repayment terms and are repayable on demand.
The directors consider that the carrying amount of trade and other receivables approximate their fair value.
16 CASH AND CASH EQUIVALENTS
Group Group Company Company
2015 2014 2015 2014
RMB'000 RMB'000 RMB'000 RMB'000
Cash at bank and
on hand 169,677 113,121 2 2
Short-term fixed
deposits pledged
for notes payables 1,993 11,000 - -
-------- --------
171,670 124,121 2 2
======== ======== ======== ========
Bank balances and cash comprise cash held by the company and short-term fixed deposits with maturity of six months or less which are pledged for notes payables.
The carrying amount of these assets approximates their fair value.
17 SHARE CAPITAL AND SHARE PREMIUM
Number Share Share Share
of shares capital capital Premium
GBP RMB'000 RMB'000
As at 22 January
2014 100 100 1 -
Shares issued on
29 March 2014 1,000 1,000 10 -
As at 29 March 2014 1,100 1,100 11 -
Subdivision of shares
on 16 April 2014 110,000 1,100 11 -
Shares issued on
16 April 2014 99,890,000 998,900 9,989 43,930
Shares issued on
1 August 2014 2,313,056 23,131 241 8,436
Share issue costs - - - (8,199)
------------ ------------ --------- ---------
As at 31 December
2014 and 31 December
2015 102,313,056 1,023,131 10,241 44,167
============ ============ ========= =========
On incorporation, 94 ordinary shares of GBP1 each and 6 ordinary shares of GBP1 each were issued fully paid to Trident Nominees Limited and Xenith Trust Company Limited respectively as the subscribers to the Memorandum of Association.
On 22 January 2014, Trident Nominees Limited and Xenith Trust Company Limited transferred 94 ordinary shares of GBP1 each and 6 ordinary shares of GBP1 each to SinoEuro Runtai Environmental Protection Resource Co., Ltd. ("SinoEuro Runtai"), and Bright Fortune Global Finance Co., Ltd. ("Bright Fortune") respectively.
On 29 March 2014 SinoEuro Runtai and Bright Fortune, as the shareholders of Hong Kong Runtai, entered into a share exchange agreement with the Company, pursuant to which each of SinoEuro Runtai and Bright Fortune transferred all of their shareholdings in Hong Kong Runtai to the Company. The consideration for the sale and purchase of the shares was the issue and allotment to the sellers of 1,000 ordinary shares of GBP1.00 each in the capital of the Company pro rata to their shareholdings in Hong Kong Runtai.
On 16 April 2014, the Company, by a written resolution of all of its shareholders (i) reduced the authorised but unissued share capital of the Company from GBP5,000,000 to GBP2,500,000, (ii) carried out a sub-division of the entire issued share capital of 2,500,000 ordinary shares of GBP1.00 each into 250,000,000 Ordinary Shares of GBP0.01 each and (iii) adopted the new Memorandum.
Prior to the period, in preparation for the Company's application for admission to trading on AIM, the Group underwent a number of restructuring activities, including, on 30 September 2013, the issue of a loan (the "Shareholders Loan") of an aggregate sum of USD 8,829,905 from SinoEuro Runtai and Bright Fortune to Hong Kong Runtai. Subsequent to this, on 16 April 2014, the obligation to repay the Shareholders Loan was novated from Hong Kong Runtai to the Company pursuant to a novation agreement, and by resolutions of the Board, on 16 April 2014 the Board approved the issue and allotment of 99,890,000 Ordinary Shares in aggregate to SinoEuro Runtai and Bright Fortune in settlement of the Shareholders Loan.
The exchange rate used for the issued shares up to 16 April 2014 was GBP1: RMB10.
On 1 August 2014, the Company has been admitted to trading on the AIM market of London Stock Exchange plc ("Admission"). The Company has raised approximately GBP832,700 before expenses through a subscription of 2,313,056 new ordinary shares at 1p per share.
The listing costs which are incremental costs directly attributable to the restructuring and placement have been offset against the proceeds arising from the issuance of shares by the Company in accordance to IAS32 - "Financial Instruments". The excess of the incremental cost was charge to statement of comprehensive income.
The exchange rate used for the issued shares on 1 August 2014 was GBP1: RMB10.42.
18 CAPITAL RESERVE
The initial amount of the capital contribution reserve was the difference between the proceeds of the loan received from Ms Guiping Li (spouse of CEO, Cheng Liu) on 21 February 2014, and the amount of that loan measured at amortised cost using the effective interest method ("the discount"). An amount equal to the interest expense on the loan is recognised in the profit and loss account in the year, is transferred from the capital contribution reserve to retained earnings. The amount of capital contribution reserve is therefore equal the unamortised discount on the loan.
The net effect of the loan and eventual repayment on retained earnings will be nil in each period and cumulatively.
19 MERGER RESERVE
Merger reserves arose from:
- The difference between the purchase consideration and the fair value of the acquired business
- The differences between the carrying value of the investment and carrying value of the share capital and premium acquired
20 STATUTORY RESERVE
In accordance with the relevant financial regulations of the PRC and provision within the Articles of Association of Shandong Tiantai in the preparation of its accounting records and financial statements, Shandong Tiantai is required to appropriate no less than 10% of the profit arrived at in accordance with PRC GAAP for each calendar year to a statutory reserve. Profit must be used initially to set off against any accumulated losses and must be made before the distribution of dividends to shareholders. The appropriation is required until the statutory reserve reaches 50% of the registered capital. This statutory reserve is not distributable in the form of cash dividends, but may be used to set off losses or be converted into paid-in capital.
21 OPTION RESERVE
The Company has established the Share Option Scheme. The Share Option Scheme is designed to support the strategy of generating significant sustainable value for Shareholders by linking the rewards of key executives with the value created for Shareholders and thereby aligning the interests of key executives with those of Shareholders.
As at the date of admission to AIM, options to subscribe for 804,888 Ordinary Shares (equal to approximately 0.8% of the Enlarged Share Capital) were granted to the four non-executive directors at an exercise price of GBP0.36 per share (being equal to the Placing Price). These Options were granted on 11 June 2014 and are exercisable in whole from the second anniversary of the date of the grant and on a change of control or winding up of the Company.
Details of the option outstanding during the year are as follows:
2015
----------- ---------- --------- --------- -----------
Average Option Option Option Option
exercise 1 2 3 4
price Andrew David Derek Zhi
in GBP Harding Weir Welch (George)
per Zeng
share
At beginning
of the year 0.36 201,222 201,222 201,222 201,222
Granted - - - - -
Executed - - - - -
Forfeited - - - - -
Expired - - - - -
----------- ----------- --------- ---------- ------------
At end of the
year 0.36 201,222 201,222 201,222 201,222
=========== =========== ========= ========== ============
The weighted average estimated fair value of option granted in the option agreements dated 11 June 2014 is 2.45 pence.
The estimated fair values for the option reserve were calculated using the Black-Scholes option pricing model. The model inputs were as follow:
Bid price GBP0.385
Exercise price GBP0.360
Expected volatility 25%
Expected dividend yield 5%
Risk-free interest
rate 2.75%
The expected volatility is based on the historical share prices to the management's best estimate. The expected life used in the model is three years, 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.
22 BORROWINGS
During the year, borrowings increased by RMB37.6 million (2014: RMB13 million) with RMB11.1 million (2014: RMB6.6 million) was over 1 year. The average interest rate was 8.27% (2014: 8.5%)
The bank borrowings are secured by:
- guarantee provided by Shandong Sanli Agricultural Machinery Co Ltd ; - guarantee provided by Shandong Lingtong Heavy Machinery Co Ltd ; - guarantee provided by Shandong Sanli Environmental Protection Engineering Co. Ltd; - guarantee provided by Gaotang Lida Construction Material Co. Ltd; - guarantee provided by Shandong Jinghua Petroleum Equipment Co. Ltd; - guarantee provided by Gaotang Botai Packaging Material Co. Ltd; - guarantee provided by Gaotang Minshun Cotton Co Ltd ; - guarantee provided by Gaotang Qianyi Foods Co. Ltd; - personal guarantee from Guiping Li (director of Hong Kong Runtai and Shandong Tiantai); - personal guarantee from Cheng Liu (CEO of the Company);
- personal guarantee from Jianchao Zhang (director of Shandong Sanli Agricultural Machinery Co Ltd);
- personal guarantee from Ziyun Zhao (director of Shandong Sanli Agricultural Machinery Co Ltd);
- personal guarantee from Shifeng Zhang (director of Shandong Lingtong Heavy Machinery Co Ltd);
- Land and buildings.
23 TRADE AND OTHER PAYABLES
Group Group Company Company
2015 2014 2015 2014
RMB'000 RMB'000 RMB'000 RMB'000
Trade payables 40,369 25,304 - -
Notes payables 1,993 11,000 - -
Advance from customers 728 2,551 - -
Loan from director
- Cheng Liu 3,646 3,646 - -
Loan from Company's
shareholders 668 668 - -
Amount owed to subsidiary - - 14,364 385
Net wages control 1,379 1,343 95 -
Other taxes payables 18,569 7,781 - -
Other payables 9,634 9,484 3,646 4,180
Accruals 1,226 929 628 -
-------- ------------- -------------- -------------
78,212 62,706 18,733 4,565
======== ============= ============== =============
Included in other payables, amount of RMB272K (2014: RMB3.4 million) was due to Guiping Li, a director of Hong Kong Runtai and Shandong Tiantai.
The directors consider that the carrying amount of trade and other payables approximates to their fair value.
24 LONG TERM LOANS
On 21 February 2014, Guiping Li entered into a loan agreement with Shandong Tiantai whereby Guiping Li granted an interest free loan in the sum of the net dividend payable of RMB 53,209,440 for a term of 50 years. This loan is ranked lower than other creditors in the event of a winding up of the company. Guiping Li is a director of Hong Kong Runtai and Shandong Tiantai. The accounting treatment of this loan is descripted in Note 16.
On 15 July 2014, Cheng Liu, the CEO entered into a loan agreement with Shandong Tiantai where by Cheng Liu granted a loan of RMB24,267,200 over the period of 10 years at the interest rate of 3% per annum.
On 20 July 2015, Cheng Liu, the CEO entered into a loan agreement with Shandong Tiantai where by Cheng Liu granted a loan of RMB13,628,287 (the equivalent of GBP1,405,036) over the period of 10 years at the interest rate of 3% per annum.
25 DEFERRED INCOME TAX
During the year, no deferred income tax assets and deferred tax liabilities are recognised.
26 CONTINGENCIES
As at 31 December 2015, there were no cash guarantees provided by Shandong Tiantai to any business partners (2014: RMB58.7 million).
27 CAPITAL COMMITMENTS
2015 2014
RMB'000 RMB'000
Commitments for the
construction of additional
production line for
liquid and solid form
of ammonium sulfite 7,200 3,500
======== ========
In May 2015, the Group has committed RMB25.9 million for construction of new production lines of liquid and solid form ammonium sulfite and an alteration work of an existing production line. As at 31 December 2015, RMB18.7 million has been spent with further RMB7.2 million committed.
28 RELATED PARTY TRANSACTIONS
At the end of the reporting period, balances due from/(to) related parties are as follow:
2015 2014
RMB'000 RMB'000
Short term loan
Cheng Liu paid for IPO expenses (3,646) (3,646)
Long term loan
Guiping Li long term loan *(2,068) *(1,933)
Cheng Liu long term loan *(39,147) *(24,606)
Guiping Li (194) (3,432)
Shareholders (SinoEuro Ruitai) (668) (668)
(45,723) (34,285)
=========== ===========
* under loan agreements
Except those are under loan agreements (*), there is no fixed repayment terms due to and no interest is payable for the rest of the above.
a) Guiping Li is a director of Hong Kong Runtai and Shandong Tiantai, and is wife of Cheng Liu; b) Cheng Liu, CEO and director of the Company;
In addition to the related party information disclosed above, the company enjoyed the benefit of 7 trademarks of lubricant brand names and 8 patents of lubricant container design registered under the name of Mr Changliang Zhu. Mr Changliang Zhu has agreed to transfer these rights to the company at nil cost. Mr Changliang Zhu is a sales director of lubricant oil department of Shandong Tiantai.
29 FINANCIAL INSTRUMENTS
The Group's principal financial instruments comprise cash and cash equivalents, trade and other receivables and trade and other payable. The Group's accounting policies and method adopted, including the criteria for recognition, the basis on which income and expenses are recognized in respect of each class of financial assets, financial liability and equity instrument are set out in Note 1. The Group does not use financial instruments for speculative purposes.
The principal financial instruments used by the company, from which financial instrument risk arises, are as follows:
Group Group Company Company
2015 2014 2015 2014
RMB'000 RMB'000 RMB'000 RMB'000
Trade and other receivables 149,891 148,280 68,473 57,029
Cash and cash equivalents 171,670 124,121 2 2
Borrowings (120,090) (82,490) - -
Term loans (41,215) (26,539) - -
Trade and other payables (78,212) (62,706) (18,733) (4,565)
---------- ---------- --------- --------
82,044 100,666 49,742 52,466
========== ========== ========= ========
There are no investments held to maturity or financial assets available for sale. There are no financial assets that are either past due or impaired.
Capital management
The Group manages its capital to ensure that it will be able to continue as going concern while maximising the return to shareholders through the optimisation of the debt and equity balance.
The capital structure of the Group consists of net debt (borrowings offset by cash and bank balances) and equity of the Group (comprising issued capital, reserves and retained earnings).
The Group is not subject to any externally imposed capital requirements. The gearing ratio at the end of the reporting period was as follow:
Group Group Company Company
2015 2014 2015 2014
RMB'000 RMB'000 RMB'000 RMB'000
Debt (120,090) (82,490) - -
Cash and cash equivalents 171,670 124,121 2 2
----------
Net (debt)/cash 51,580 41,631 2 2
---------- --------- -------- --------
Equity 300,603 202,475 49,752 52,476
---------- --------- -------- --------
Net debt to equity ratio - - - -
========== ========= ======== ========
Foreign currency risks
The Group 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.
Liquidity risk
Liquidity risk arises from the Group's management of working capital. It is the risk that the Group will encounter difficulty in meeting its financial obligations as they fall due.
The Group's policies 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 arise in respect of trade and other payables, borrowings and term loans. The aging of trade payables at the reporting dates are less than six months.
Group Group Company Company
2015 2014 2015 2014
Group Repayment RMB'000 RMB'000 RMB'000 RMB'000
Trade and Less than
other payables one year 78,212 62,706 18,733 4,564
Less than
Borrowings one year 108,950 75,900 - -
More than
Borrowings one year 11,140 6,590 - -
More than
Term loans five years 41,215 26,539 - -
--------
239,517 171,735 18,733 4,564
======== ======== ======== ========
Credit risk
Credit risk refers to the risk that a counter party will default on its contractual obligations resulting in financial loss to a company. The Group has adopted a policy of only dealing with creditworthy counterparties. The Group's exposure and the credit ratings of its trading counterparties are monitored by the boards of directors to ensure that the aggregate value of transactions is spread amongst approved counterparties.
The Group'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 is exposed to credit risk from its operating activities (primarily trade receivables) and from it financing activities, including deposits with banks and financial institutions. 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 are as follows:
Group Group Group Company
2015 2014 2015 2014
RMB'000 RMB'000 RMB'000 RMB'000
Trade and other receivables 149,891 148,280 68,473 57,029
Cash and cash equivalents 171,670 124,121 2 2
-------- -------- -------- --------
321,561 272,401 68,475 57,031
======== ======== ======== ========
As at 31 December 2015, the Group had 3 customers (2014: 3 customers) that owed more than RMB 5 million each to the Group, and accounted for approximately 24% (2014: 36%) of all the receivables outstanding. There was 1 customer (2014: 1 customer) with balances greater than RMB10 million accounting for approximate 16% (2014: 25%) of the total amount receivables.
The aging of trade receivables at the reporting dates were less than three months and they are not impaired.
Interest rate risk
Interest rate risk arises from the potential changes in interest rates that may have an adverse effect on a company in the current reporting period and in future years.
The Group is exposed to interest rate risk because the company borrows fund at both fixed and floating interest rates. The risk is managed by the Group by maintaining as appropriate mix between fixed and floating rate borrowings.
Interest rate sensitivity analysis
The sensitivity analyses below have been determined based on the exposure to interest rate for bank borrowings at the end of the reporting period. The analysis is prepared assuming the amount of the liability outstanding at the end of the reporting period was outstanding for the whole year. A 50 basis point increase or decrease is used when reporting interest rate risk internally to key management personnel and represents management's assessment of the reasonable possible change in interest rates.
If interest rate had been 50 basis points higher/lower and all other variables were held constant, the Group's profit for the year ended 31 December 2015 would increase/decrease by RMB331,634 (2014: RMB412,450).
30 EVENTS AFTER THE REPORTING PERIOD
The Directors have undertaken a review of the merits or otherwise of the Company continuing to be admitted to trading on AIM, and have concluded that a proposal to cancel the Admission of the Company's Ordinary Shares to trading on AIM will be made to Shareholders at the next Annual General Meeting.
31 SEGMENT INFORMATION
Management determines the operating segments, which represents product category, based on reports reviewed and used for strategic decisions. The Group's operating segments are organised the following product segments:
- Solid ammonium sulfite - Liquid ammonium sulfite - Liquid ammonium bisulfite - Lubricant oil - Recarburizer
Other operations of the Group comprises investment holding which does not constitute a separately reportable segment. As the business of the Group is engaged primarily in the China, no reporting by geographical location of operations is presented.
Solid Liquid Liquid Lubricant Recaburizer Total
ammonium ammonium ammonium oil
sulfite sulfite bi-sulfite
2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014
RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000
Revenue 358,075 260,077 186,433 173,419 112,063 70,709 211,833 138,627 61,509 61,735 929,913 704,567
Segment
results 77,534 55,687 39,209 36,568 22,611 14,280 44,428 29,141 12,438 13,062 196,220 148,738
Other
income 1,713 1,212
Unallocated
expense (60,383) (47,569)
--------------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Profit
before
taxation 137,550 102,381
Income
tax
expense (21,559) (16,228)
--------------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Total
profit 77,534 55,687 39,209 36,568 22,611 14,280 44,428 29,141 12,438 13,062 115,991 86,153
=============== ======== ======== ======== ======== ======== ======== ======== ======== ======== ======== ========= =========
Other
information
Capital
expenditure
- allocated 20,924 4,904 10,456 3,270 6,835 1,333 76,535 2,757 - - 114,750 12,264
- unallocated 636 787
Amortisation 595 232
Depreciation
of plant
and
equipment 5,697 4,714
- allocated 1,509 1,648 1,262 1,099 759 448 1,119 823 - - 4,649 4,018
- unallocated 1,048 696
=============== ======== ======== ======== ======== ======== ======== ======== ======== ======== ======== ========= =========
Solid Liquid Liquid Lubricant Recaburizer Total
ammonium ammonium ammonium oil
sulfite sulfite bi-sulfite
2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014
RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000
Segment
assets 43,451 20,595 22,623 13,732 13,598 5,599 80,811 12,762 - - 160,483 52,688
Unallocated
corporate
assets 390,152 326,182
--------------- --------- --------- --------- --------- ----------- -------- ---------- --------- -------- -------- ---------- ----------
Total
assets 43,451 20,595 22,623 13,732 13,598 5,599 80,811 12,762 - - 550,635 378,870
=============== ========= ========= ========= ========= =========== ======== ========== ========= ======== ======== ========== ==========
Segment
liabilities -
Unallocated
corporate
liabilities 250,032 176,395
--------------- --------- --------- --------- --------- ----------- -------- ---------- --------- -------- -------- ---------- ----------
Total
liabilities 250,032 176,395
=============== ========= ========= ========= ========= =========== ======== ========== ========= ======== ======== ========== ==========
The above revenue is all from external sales and there are minimal intersegmental transactions. The revenue is measured in a manner consistent with that in the statement of comprehensive income.
Management assesses the performance of the operating segments based on segment results.
These segment results represent the profit earned by each segment without the allocation of central administration, transportation, advertising and entertainment cost. This is the measure reported to the management for the purposes of resource allocation and assessment of segment performance.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR EKLFLQQFEBBF
(END) Dow Jones Newswires
June 29, 2016 11:53 ET (15:53 GMT)
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