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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Led Hldgs | LSE:LED | London | Ordinary Share | HK0000181880 | ORD NPV (DI) |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 35.00 | 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
TIDMLED
RNS Number : 0088C
LED International Holdings Ltd
22 June 2016
22 June 2016
LED International Holdings Limited
("LED" or the "Company")
Final Results for the year ended 30 June 2015
The board of directors of LED presents the Company's annual report and audited financial statements for the year ended 30 June 2015 (the "Accounts").
The Accounts are currently being sent to shareholders and will shortly be available for download from the Company's website, www.led-intl.com, in accordance with AIM Rule 20.
The Company's shares will remain suspended from trading pending the announcement of LED's half-yearly report in respect of the six months to 31 December 2015. The Board anticipates that the Company's half-yearly report in respect of the six months to 31 December 2015 will be announced during the first half of July 2016, and at that point the board will seek a return from the suspension of trading of the Company's shares on the AIM. However, if the Company's half-yearly report in respect of the six months to 31 December 2015 is not announced by 30 September 2016, then the admission of the Company's shares to AIM will be cancelled.
For further information:
LED International Holdings Limited Stephen Chan - Chief Executive Officer +852 2243 3100 Allenby Capital Limited John Depasquale / Nick Naylor +44 (0) 20 3328 / Alex Brearley 5656
CHAIRMAN'S STATEMENT
The Board of Directors (the "Board") of LED International Holdings Limited (AIM: LED) (the "Company") is pleased to report on the final results of the Company and its subsidiaries (together the "Group") for the year ended 30 June 2015.
INDEPENT AUDITOR'S DISCLAIMER OF OPINION
The Company's independent auditor issued a report containing a disclaimer of opinion on the consolidated financial statements for the year ended 30 June 2014 in respect of a number of matters. In the past months, the Board had been working to resolve the matters leading to the auditor's disclaimer of opinion in the preparation of the Company's consolidated financial statements for the year ended 30 June 2015.
However, Shareholders should note that BDO Limited, our independent auditor, has issued a disclaimer of opinion on the consolidated financial statements for the year ended 30 June 2015, in respect of a number of matters, which has been reproduced below. Further details of the basis of the disclaimer of opinion and disclaimer of opinion are contained on the Independent Auditor's Report.
EMC Assets and Liabilities and EMC business retained from the disposal of Yanford Limited and Shenzhen Strongbase New Opto-Electronics Technology Company Limited (together referred to as "Yanford Group")
The Group completed the disposal of the entire interest in the Yanford Group and certain energy management business ("EMC business") related assets and liabilities being retained by the Group ("EMC Assets and Liabilities") during the year ended 30 June 2013. After the disposal of the Yanford Group, Shenzhen Green Pearl Energy Management Services Company Limited ("GPEMCO") has provided EMC services in the People's Republic of China, the further details of information in relation to GPEMCO are contained in the Operating Review section. The EMC Assets and Liabilities should have been dealt with mostly in the books and records of GPEMCO. However, the acquisition of GPEMCO has yet to be completed, the details are contained in the Shenzhen Lamp Energy Management Investment Company Limited section. Therefore, the independent auditor is unable to access the underlying supporting information and documentary evidence in relation to these EMC Assets and Liabilities and the performance of EMC business and the subsequent realization of such EMC Assets and Liabilities and the subsequent carrying out of the EMC business. Moreover, there was no movement in the EMC Assets and Liabilities per the Group's accounting records during the year ended 30 June 2015. As such, notwithstanding the disposal of the Yanford Group on 21 March 2013, the Group retained EMC Assets and Liabilities. Due to the limitations on the scope of audit in relation to these EMC Assets and Liabilities and the performance of EMC business, the independent auditor has qualified its opinion in this respect.
The Board believes that should the acquisition of GPEMCO be completed in the future, the independent auditor will then be able to access to the books and records of GPEMCO in relation to the EMC Assets and Liabilities and the performance of EMC business. As such, these limitations should potentially be resolved in the subsequent financial years. Owing to the recent downturn of the Chinese economy, the Board is considering whether the acquisition of GPEMCO is an appropriate near-term strategy.
Disposal of interests in LED International (Far East) Limited ("LED Far East"), Kepu Electronic Technology (Shenzhen) Company Limited ("Kepu") and Shenzhen China-LED Photo-Technology Limited ("Shenzhen LED")(together referred to "LED Far East Group")
On 17 December 2014, the Company entered into a sale and purchase agreement with Mr. Fu Wei relating to the disposal by the Group of the equity interests (60%) in LED Far East and it subsidiaries, Kepu and Shenzhen LED. On 13 April 2015, the Group completed the disposal of the equity interests (60%) in LED Far East, the details are contained in the Disposal of Kepu section.
Subsequent to the disposal, as the Group's management had no access to the accounting records of LED Far East Group, the Group's management was unable to allow the independent auditor access to the books and records of the LED Far East Group without the consent and cooperation from the new owner of the LED Far East Group, which the new owner of LED Far East Group had no obligation to provide and in fact did not provide. As such, the Group's management had not been able to provide the independent auditor with all the underlying supporting information and documentary evidence in relation to LED Far East Group's management accounts as at the disposal date and the performance and cash flows attributable to LED Far East Group up to the date of disposal.
The Board believes that the disposal is completed, and the LED Far East Group shall not be consolidated into the Group's consolidated financial statements in the future, these limitations shall be resolved in the subsequent financial years.
Going Concern
The Group incurred a loss for the year ended 30 June 2015, as of that date, the Group had net current liabilities and net liabilities. These conditions indicate the existence of material uncertainty which may cast significant doubt on the Group's ability to continue as a going concern, with a potential consequence that the Group may not be able to realise its assets and discharge its liabilities in the normal course of business. The Board has prepared a cash flow forecast (the "Forecast") on which their assessment of the appropriateness of the preparation of the Group's consolidated financial statements on a going concern basis was based. These financial statements have been prepared on a going concern basis, the validity of which depends upon the future successful attainment of the Forecast so that the Group will have sufficient working capital to finance its operations and/or settle or arrange its financial obligations. However, the independent auditor has not been able to obtain sufficient appropriate audit evidence to assess whether it is appropriate to use going concern basis in preparing the consolidated financial statements. As a result, the independent auditor has qualified the aspect of the use of the going concern basis.
The Board believes with the formation of the joint venture with Shanghai Guang Dian Asset Management Company Limited dated 27 May 2016, the details of which are contained in the Current Outlook and Prospect section, the Group shall have sufficient working capital to finance its operations and/or settle or arrange its financial obligations. Therefore, these limitations shall be resolved in the subsequent financial years.
Without further modifying their opinion, our independent auditor also draws attention to note 41(a) to the consolidated financial statements, which describes a contingency relating to the Company in relation to the fire at the Harbour Grand Hotel, North Point, Hong Kong, further details of which were announced on 23 April 2012. Further background on this issue is contained in the Operating Review section below.
LATE PUBLICATION OF THE FINAL RESULTS
The Company acknowledges that the audited financial statements should have been published by no later than 31 December 2015. However, due to a number of issues out of the control of the Board, the Company was unable to publish its audited financial statements by 31 December 2015. The Board sincerely apologises to the shareholders for late publication of the final results and has undertaken measures to avoid a similar situation from arising again in the future.
As announced on 8 February 2016, the Company was seeking to publish its audited report and accounts for the year ended 30 June 2015 during the second quarter of 2016. The delay was primarily due to the fact that the Board has been negotiating, finalising and closing the shareholder agreement with Shanghai Guan Dian Asset Management Company Limited, details of which are contained in the Current Outlook and Prospects/Green Pearl Leasing (China) Company Limited section.
HALF-YEARLY REPORT
The Board anticipates that the Company's half-yearly report in respect of the six months to 31 December 2015 will be announced during the first half of July 2016.
ABOUT THE GROUP
The Group specialises in the provision of energy management contract services or energy performance contracting services under which the Group installs energy saving products in its customers' premises, including lighting and reactance filtering equipment supplied by the Group, and the subsequent savings made by customers in their electricity charges are then shared between the Group and the customers thereby enabling the Group to generate recurring revenue rather than one-off sales revenue. The Group is also engaged in the provision of equipment leasing finance to its customers in the People's Republic of China (the "PRC"). A finance lease is one where the risks and rewards of an asset have been substantially transferred from the Group to its customers. The payments received under the equipment leasing finance contracts are no longer recorded as sales, but are split into receipt of repayments for finance lease receivables, finance lease interest income and lease service income, if any. Historically, the Group's business has been the development, manufacture and sale of low-powered light-emitting diode ("LED") display screens and modules. Over the past years, the Group has transformed its business to the provision of EMC contracts and equipment leasing finance in the PRC.
MARKET REVIEW
According to its 13(th) Five-Year Plan (the "Five-Year Plan"), China targets a 15 per cent. reduction in energy consumption and a cut in its carbon dioxide emission by 18 per cent. on 2015 levels by 2020. Against the background of the Chinese government's introduction of a series of policies and regulations designed to promote, encourage and regulate energy conservation within the PRC, the Chinese government will continue to build its economic growth on energy sustainability and ecological conservation. The Board believes that this should provide for opportunities in the energy management market and the Group aims to become one of the leading energy and green management service providers in the PRC.
OPERATING REVIEW
The Chinese economy has slowed in recent years, due to sharp slowdowns in the growth rates and fixed investments. This has also coincided with the Chinese government's attempts to steer the economy to a "new normal" of slower, but more stable and sustainable economic growth. China's growth depends largely on the ability of the Chinese government to implement comprehensive economic reforms and other initiatives to alter its economic models. Issues within the Chinese economy resulted in continued difficult trading conditions for the Group and, domestically, our operation was also burdened by rising inflation, appreciating Renminbi ("RMB") and slowing economic growth for the first half of the financial year, although the impact of these factors was to a certain extent reversed at the second half of the financial year, within the PRC. These factors impacted on the Group's revenues and gross margin and resulted in an operating loss for the financial year ended 30 June 2015.
Over the past few years, GPEMCO, a company, which the Group intended to acquire as a subsidiary, with a valid and effective energy management services registration with the National Development and Reform Commission, has provided EMC Services in the PRC. Operating with GPEMCO enables the Group to take advantage of certain favorable policies and terms for the EMC industry within the PRC. In previous periods, GPEMCO secured a number of contracts to support and implement the Group's strategy of its energy efficiency solutions under the EMC business model. Owing to the recent downturn of the Chinese economy, the Board is considering whether the acquisition of GPEMCO is an appropriate near-term strategy. As announced previously on 2 January 2015, the Shanghai Municipal Commission of Commerce permitted the Company to form a new wholly owned direct subsidiary, Green Pearl Leasing (China) Company Limited ("Green Pearl China"), in order to enable the Group to provide lease financing to customers. During the financial year, Green Pearl China has entered into its first two-year period leasing finance contract with Jiangsu Siyuan Port Company Limited ("Siyuan"), based in Jiangsu, China. Owing to downturn of the Chinese economy, some customers of EMC contracts and leasing finance contract are unable to meet their obligations in accordance with the terms of the contracts.
In response to the above, the Board is continuing to gradually drive the Group to secure meaningful revenues from the growing domestic PRC EMC market and leasing finance market, and as well as implementing measures to reduce the Group's overhead expenditure.
On 25 September 2013, the Company received a letter from an adjudicator alleging that its principal and its principal's insured have suffered substantial losses in the form of property damage, consequential loss and public liability (the "Potential Claim") from a fire at Harbour Grand Hotel (the "Hotel"), North Point, Hong Kong, that may have started at the giant LED display screen supplied by the Company, further details of which were announced on 23 April 2012. The Company's legal advisor has made repeated requests to the adjudicator to disclose any reports compiled by the Hotel and/or government investigator but, to date, the adjudicator has failed to respond to these requests or communicated with the Company. Further, to date, the Company has not received any communications from the investigator in relation to this fire.
In the absence of any response from the adjudicator since late 2013, the Board considers that the Potential Claim is without legal basis or merit and intends to defend any attempts by the adjudicator to seek recourse for the fire from the Company. Further updates will be made at the appropriate time.
FINANCIAL REVIEW
Revenue from continuing operations for the financial year ended 30 June 2015 amounted to HK$7,000 (approximately GBP1,000) (2014: HK$33,000). The loss attributable to shareholders of the Company for the financial year ended 30 June 2015 amounted to HK$5,190,000 (approximately GBP450,000) (2014: HK$13,237,000).
During the financial year ended 30 June 2015, the Group recorded a decrease in operating revenue by HK$26,000 (approximately GBP2,000) from the previous year. This decrease in operating revenue was mainly brought about by the set off of the inception of the first leasing finance contract with Siyuan and provision for impairment against the leasing contract receivable. The Group generated a gross profit in the amount of HK$3,000 (approximately GBP1,000) for the financial year.
The Group reported a profit from discontinued operations which amounted to HK$20,494,000 (approximately GBP1,782,000) (2014: loss of HK$11,906,000), which related to the disposal of its effective equity interest in Kepu, a provider of LED element products. The disposal of Kepu allows the Group to focus on its EMC business model and leasing finance model.
An operating gross profit for leasing finance contracts of 11.0 per cent. The operating gross margin of EMC contracts was approximately 100.0 per cent. (2014: 100.0 per cent.) for the year ended 30 June 2015.
During the financial year under review, the Group's major operating expenses, comprising administrative expenses, other operating expenses and finance costs, were HK7,158,000 (approximately GBP622,000), HK$22,603,000 (approximately GBP1,965,000) and HK$2,121,000 (approximately GBP184,000) respectively (2014: HK$9,358,000, Nil and HK$1,324,000 respectively). Such expenses mainly comprised (i) employee benefits expense in the sum of HK$605,000 (approximately GBP52,000) (2014: HK$1,191,000); (ii) depreciation in the sum of HK$95,000 (approximately GBP8,000) (2014: HK$218,000); (iii) operating lease rental in the sum of HK$350,000 (approximately GBP30,000) (2014: HK$1,006,000); (iv) impairment losses in the sum of HK$20,191,000 (approximately GBP1,755,000) (2014: Nil).
The Group continued to strengthen its controls on continuing operating expenditures during the financial year.
CAPITALISATION OF LIABILITIES UPDATE
As announced on 31 March 2014 (the "March Announcement"), the Company agreed to allot 3,536,606 ordinary shares in the Company (the "Ordinary Shares") at a price per Ordinary Share of HK$2.50 (approximately 19.37 pence) in settlement and/or in reduction of its liability in the outstanding loans, service fees and salaries owed to various directors, employees and other creditors.
As further announced on 30 September 2014, the arrangements outlined in the March Announcement did not take place since, as specified in the March Announcement, these were conditional on the calling of an Extraordinary General Meeting of the Company which was not subsequently called.
The Company has subsequently agreed revised arrangements in settlement and/or in reduction of its certain liabilities in the outstanding sums owed to various creditors and has resolved to allot a total of 532,875 Ordinary Shares at a price per Ordinary Share of HK$6.5 (approximately 51.00 pence) (the "Settlement"). Under the Settlement, 457,443 Ordinary Shares and 75,432 Ordinary Shares of HK$6.5 per Ordinary Share were issued to settle financial liabilities of approximately HK$2,971,000 and HK$490,000 on 30 September 2014 and 30 January 2015 respectively. An aggregate amount of HK$3,461,000 (approximately GBP274,940) is treated as paid to the various creditors under the Settlement.
FINANCING
1. Provision and conversion of working capital loan and placing of new ordinary shares
As announced on 16 December 2013, the Company had entered into a working capital loan in the sum of RMB6 million (approximately HK$7.72 million or GBP0.60 million) provided by Rubyfield Holdings Limited and Speedy Dragon Holdings Limited (collectively, the "Subscribers") in equal tranches (the "Loan"). The Loan, which was unsecured, was interest free and was repayable on demand. It was also announced that it is the intention of the parties that the Loan would be converted on the issue of any equity raised as part of the fundraising process.
As further announced on 30 December 2013, the Company completed a conditional placing of new ordinary shares with the Subscribers, raising RMB31 million (approximately HK$39.89 million or GBP3.09 million) (including fees and expenses) (the "Placing"). The RMB31 million (approximately HK$39.89 million or GBP3.09 million) would be satisfied as to the first RMB25 million (approximately HK$32.17 million or GBP2.50 million) by way of new funds and, as to the balance, by the application of the current outstanding balance of the Loan (currently RMB6.00 million, approximately HK$7.72 million or GBP0.60 million) (the "Conversion"). The net proceeds of the Placing would be used by the Company for general working capital purposes and to provide the necessary capital contribution to Green Pearl China, the Company's new lease finance company.
The Placing was conditional upon, inter alia, the: (i) consolidation of every 100 existing authorised issued and unissued ordinary shares of HK$0.10 each in the capital of the Company into 1 new ordinary share of HK$10.00 each in the capital of the Company ("New Ordinary Share") (the "Share Consolidation"); (ii) passing of resolutions to give the Directors the authority to issue shares pursuant to the Placing and Conversion free of any rights of pre-emption at the 2013 Annual General Meeting of the Company, which was held on 26 February 2014 (the "2013 AGM"); and (iii) the Hong Kong Securities and Futures Commission ruling that The Codes on Takeovers and Mergers and Share Repurchases did not apply to the Company.
On 26 February 2014, the consolidation of every 100 existing authorised issued and unissued ordinary shares of HK$0.10 each in the capital of the Company into 1 new ordinary share of HK$10.00 each in the capital of the Company was approved at the 2013 AGM of the Company. Pursuant to the Placing, the Subscribers were to subscribe for 3,875,000 new ordinary shares (the "Placing Shares") at a price of HK$10.29 (being approximately 79.96 pence) per Placing Share (the "Placing Price"). The Conversion was also to take place at the Placing Price.
As announced on 11 July 2014, the Company and the Subscribers reached a supplementary agreement in relation to the placing of the Placing Shares and the conversion of the Loan under the terms of which payment of the Subscription Funds to the Company had been made in full and final settlement of all of the Subscribers' legal obligations under the Placing. The Placing Shares were issued at a price of 75 pence per share representing a premium of 780 per cent. to the closing mid-price on 10 July 2014 and the Company received the subscription funds of RMB25 million (approximately HK$32.17 million or GBP2.35 million) (the "Subscription Funds") from the Subscribers at that time. The Company utilised the proceeds of the Subscription Funds for general working capital purposes.
2. Issue of convertible loan notes and placing of new ordinary shares
As announced on 31 March 2014, the Company entered into agreements with Best Merchant Ventures Limited (the "Noteholder"), Legend Giant Ventures Limited ("LGV"), Talent Plus Ventures Limited ("TPV") and Y&C International Holding Group Limited ("Y&C") (collectively, the "Investors") for the issue of convertible loan notes and the conditional placing of new ordinary shares, raising a total sum of RMB100 million (approximately HK$128.68 million or GBP9.68 million) (the "Transaction").
Pursuant to the terms of the Transaction, the Company's new wholly-owned subsidiary, Osmar Limited ("Osmar") would issue convertible loan notes to the Noteholder (the "Loan Notes"), raising RMB95 million (approximately HK$122.25 million or GBP9.20 million) (the "Osmar Loan"). The net proceeds of the Osmar Loan would be used by the Company to provide the necessary capital contribution to Green Pearl China and also for general working capital purposes. The Company would also carry out a restructuring exercise whereby the beneficial interest in Green Pearl China shall be transferred to Osmar.
Pursuant to the terms of the Transaction, the Company had also conditionally placed 2,500,000 shares with LGV, TPV and Y&C at a placing price of RMB2 per share (approximately 19.37 pence) raising RMB5 million (approximately GBP0.48 million) (the "Subscription Funds"). The Subscription Funds would be used to assist in continued development of the Company's EMC business model and to augment the Company's working capital position.
However, as further announced on 16 May 2014, the Company did not receive any of the funds from the Noteholder and the Investors in relation to the Transaction. Due to the non-receipt of the funds from the Noteholder and the Investors, the Transaction did not, in the event, proceed.
On 22 December 2014, the Company disposed of its entire interest in Osmar at net book value to a connected party, in which a director, Dr. Stephen Chan has an interest.
LEASING FINANCE CONTRACT
As announced on 2 January 2015, the Company's wholly-owned direct subsidiary, Green Pearl China, entered into a leasing finance contract (the "Contract") with Siyuan. The projected total interest receivable by Green Pearl China under the Contract is approximately RMB1,320,000 (approximately GBP137,000) over a two-year period.
Pursuant to the Contract, Green Pearl China purchased various port loading and reloading equipment (the "Equipment") from Siyuan at a consideration of RMB12,000,000 (approximately GBP1,246,000) and the Equipment shall be leased back to Siyuan for a term of two years from 25 December 2014 to 25 December 2016 (the "Lease Period").
Owing to the personal detention of the major owner by the PRC authorities, Siyuan's operations have not gained traction and Siyuan has been in default in respect of payments of leasing rentals to the Group since February 2015. The Group issued a legal letter demanding the immediate payment of approximately RMB7,211,000 (approximately GBP627,000) on 9 November 2015. The Board has adopted a conservative approach in respect of this matter and has made a full provision for an impairment loss of finance lease receivables of HK$7,159,000 (approximately GBP622,000) in these consolidated financial statements, the Board has currently been negotiating and working out with the management of Siyuan on the collection of the outstanding lease contract receivables plus default interest receivables. Further updates will be made at the appropriate time.
EMC CONTRACTS
As announced on 5 December 2014, GPEMCO has been awarded an energy management contract (the "EMC Contract") by Tianjin Tian Gang United Special Steels Co., Ltd. ("TG United"), a subsidiary of Tianjin Iron & Steel Group Co., Ltd., based in Tianjin, China. The projected revenue under the EMC Contract to GPEMCO is approximately RMB1,830,000.00 (approximately GBP190,000.00) over a six year period.
Owing to the sudden downturn of the Chinese economy during the year, GPEMCO and TG United have yet to execute the EMC Contract. As such, GPEMCO has already held up the purchase of the relevant equipment under the EMC Contract. Meanwhile, GPEMCO has been negotiating with TG United on the execution of the EMC Contract. The Board is also considering whether the acquisition of GPEMCO is an appropriate near-term strategy. Further updates will be made at the appropriate time.
DISPOSAL OF KEPU
As announced on 17 December 2014, the Company entered into sale and purchase agreements with Mr. Fu Wei ("Fu") relating to the disposal by the Group of the remaining effective equity interest (60 per cent.) in Kepu.
As announced on 17 May 2012 and as a part of its ongoing business review, the Board had determined that the activities of Kepu present considerable, but different, opportunities from LED's primary focus on its EMC business model. As currently structured, the Company does not have the resources to take full advantage of the opportunities available to Kepu nor does the Board foresee Kepu becoming a profitable member of the Group in the foreseeable future. For this reason, the Company has taken the decision to sell its remaining interest in Kepu. This will provide the Company with further resources to promote and focus on its EMC business model.
In pursuance of this strategy, the Company has disposed of its effective equity interest in Kepu to Fu for a consideration of RMB360,000 (approximately HK$450,000 or GBP37,000).
Shenzhen Lamp Energy Management Investment Company Limited
On 25 March 2013, LED announced the acquisition of Shenzhen Lamp Energy Management Investment Company Limited (subsequently renamed to Shenzhen Green Pearl Energy Management Services Company Limited). This acquisition was structured as a direct acquisition of GPEMCO's immediate parent company, Shenzhen Green Pearl Energy Management Technology Development Company Limited ("Shenzhen GP Energy"), by the Company's 60% subsidiary, Green Pearl Energy Conservation Holdings Limited ("GP Energy Holdings") (the "Acquisition").
The Acquisition has been restructured in such a way such that GP Energy Holdings had set up Carten International Limited, a wholly owned subsidiary in Hong Kong, as an investment company to acquire Shenzhen GP Energy, which will subsequently be restructured and transformed from a domestic PRC company to a Wholly Foreign Owned Enterprise ("WFOE") under the laws of the PRC.
GP Energy Holdings signed the relevant acquisition agreement with Mr. So Hing Chung (the "Acquisition Agreement") on 21 March 2013. One of the terms of the Acquisition Agreement is that the business and assets, including patents and intellectual property rights, inventories and energy management contracts of Strongbase New Opto-Electronics Technology Company Limited (a former subsidiary of the Company, the disposal of which was announced on 25 March 2013) (together the "Assets") be transferred to GPEMCO.
As announced on 8 February 2016, the Acquisition has yet to be fully completed as the Company is in the process of obtaining consent from the PRC government for the transformation of Shenzhen GP Energy into a WFOE. To date, the validity of the previous submission documents, including the formal applications, attestations and contracts etc., has lapsed. Furthermore, the Group has been working through its process agents, including a local accounting firm, to progress the transformation. Owing to the recent downturn of the Chinese economy, the Board is considering whether the acquisition of GPEMCO is an appropriate near-term strategy. Further updates will be made at the appropriate time.
BOARD CHANGES
On 30 November 2014, Mr. Kevin Miu resigned as a Non-Executive Director.
CHANGE IN REGISTRAR
As announced on 3 June 2015, the Company's share register will be administered by Computershare Investor Services (BVI) Limited with effect from 1 June 2015.
DIVIDS
The Directors do not recommend the payment of any dividend for the year and the Board is committed to an ongoing review of the Company's dividend policy.
CURRENT OUTLOOK AND PROSPECTS
EMC business
The Group is focused on the domestic PRC economy and adopts a conservative approach towards entering into the growing EMC market under the brand name "Green Pearl".
Notwithstanding the recent slowdown in China's GDP growth, the Board believes that the Chinese government will implement fiscal and monetary policies to stimulate steady economic growth in the PRC.
The energy saving and environmental protection industry ranks top among the seven strategic emerging industries outlined in the Five-Year Plan. Following the gradual import and sale of incandescent lamps complemented by fiscal subsidies, this presents a tremendous market opportunity for green lighting. In view of rising national power consumption, the Board believes that measures that the Chinese government has taken to reduce energy consumption and carbon emissions will lead to increasing opportunities for energy saving and carbon reduction products, services and solutions within the PRC.
In addition to the supply of LED lighting and reactance filtering equipment to the domestic PRC market, the Group has also been considering the introduction of other carbon reduction solutions to offer a total carbon reduction solution to the PRC.
The Group is exploring the possible export of its energy saving and carbon reduction products, services and solutions, mainly solar lighting products and solutions, to the emerging markets in the Atlantic and Pacific regions, where potential demand for solar related products and services is prominent.
The Board remains cautiously optimistic and confident in the Group's business, market and products as well as its long-term growth potential in the PRC. Owing to the recent downturn of the Chinese economy, the Board is considering whether the transformation of the Group into an energy management service provider in the PRC is an appropriate near-term strategy.
Green Pearl Leasing (China) Company Limited
As announced previously the Shanghai Municipal Commission of Commerce granted the Group a highly sought after leasing finance license to enable the Company to provide lease financing to customers. The Company formed a new wholly owned direct subsidiary, Green Pearl China, in order to carry on this business.
Green Pearl China was formed as the Board believes that the Group's EMC business model will be financed substantially by debt finance, mainly bank finance for the Group or equipment leasing finance for its customers. The Board believes that equipment leasing finance will become one of the major sources of finance for EMC contracts in the foreseeable future.
As announced on 5 December 2014, the Company made the required capital contribution to Green Pearl China in an amount of USD2,691,900 (approximately RMB16,535,000, HK$20,996,000 or GBP1,700,000) (the "Contribution"). An independent certified public accounting firm in China confirmed that the Company had made the Contribution as required.
In order to focus on its EMC business model, the Company has been considering forming joint ventures in order to develop this aspect of the business further and identify how the Company can leverage knowledge, experience and contacts.
In this regard and as announced on 31 May 2016, the Company has entered into an agreement with Shanghai Guang Dian Asset Management Company Limited ("SHGD") dated 27 May 2016 (the "Shareholders' Agreement"), under which LED and SHGD will make a total capital contribution of RMB200.0 million (being approximately GBP21.3 million) to Green Pearl China. Green Pearl China is currently a 100% owned subsidiary of LED.
The required capital contribution shall be made by LED and SHGD in equal shares of RMB100.0 million (being approximately GBP10.7 million) each. LED's contribution shall be inclusive of the previous capital contributions made by LED, being approximately RMB16.5 million (being approximately GBP1.7 million). Further details of LED's previous capital contribution to Green Pearl China are contained in the Company's announcement of 5 December 2014. LED intends to fund its approximately RMB83.5 million (being approximately GBP9.0 million) by raising the required relevant fund from the potential investors, including SHGD, within twelve months as stipulated in the Shareholders' Agreement. SHGD's capital contribution will be by way of a cash investment in Green Pearl China, in return for which they will receive new shares in Green Pearl China which represent 50% of Green Pearl China's enlarged issued share capital. Further updates regarding progress in respect of the above matters will be provided as appropriate.
APPRECIATION
Finally, on behalf of the Board, I would like to thank all of our management team and staff members for their valuable contribution and dedication to the Group. I would also like to thank Mr. Miu for his invaluable contribution to the Group during his tenure. I also express my gratitude to our customers, suppliers and government authorities for their continuous support.
Stephen Weatherseed
Non-Executive Director and Chairman
Hong Kong, 22 June 2016
INDEPENT AUDITOR'S REPORT
TO THE SHAREHOLDERS OF LED INTERNATIONAL HOLDINGS LIMITED
(incorporated in Hong Kong with limited liability)
Report on the financial statements
We were engaged to audit the consolidated financial statements of LED International Holdings Limited (the "Company") and its subsidiaries (together the "Group") set out on pages 41 to 106, which comprise the consolidated statement of financial position as at 30 June 2015, and the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information.
Directors' responsibility for the consolidated financial statements
The directors are responsible for the preparation of consolidated financial statements that give a true and fair view in accordance with International Financial Reporting Standards, Hong Kong Financial Reporting Standards and the Hong Kong Companies Ordinance, and for such internal control as the directors determine is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
Auditor's responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audit, conducted in accordance with International Standards on Auditing. This report is made solely to you, as a body, in accordance with Section 405 of the Hong Kong Companies Ordinance, and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report.
Except for the inability to obtain sufficient appropriate audit evidence as explained below, we conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. Because of the matters described in the Basis for Disclaimer of Opinion paragraphs, however, we were not able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion.
Basis for Disclaimer of Opinion
1. EMC Assets and Liabilities and EMC business retained from the disposal of subsidiaries, Yanford Limited and Shenzhen Strongbase New Opto-Electronics Technology Company Limited ("Strongbase New") (together referred to as "Yanford Group")
On 21 March 2013, the Group completed the disposal of the entire equity interests in Yanford Limited and its subsidiary, Strongbase New (the "Yanford Group") to a substantial shareholder of the Company with certain energy management business ("EMC business") related assets and liabilities being retained by the Group ("EMC Assets and Liabilities").
As at 30 June 2014 and 2015, the EMC Assets and Liabilities included in the consolidated statement of financial position of the Group were property, plant and equipment of approximately HK$39,000, inventories of approximately HK$2,468,000, trade and other receivables of approximately HK$3,967,000, cash and bank balances of approximately HK$15,000 and trade and other payables of approximately HK$5,306,000 ("EMC Balances"). There was no movement in the EMC Balances per the Group's accounting records during the year ended 30 June 2015.
As Yanford Group was disposed of on 21 March 2013, in the course of our audit of the financial statements for the year ended 30 June 2014, the Group's management, had no access to the accounting records subsequent to the disposal and the Group's management was unable to allow us access to the books and records of the Yanford Group without the consent and cooperation from the new owner of Yanford Group, which the new owner of Yanford Group had no obligation to provide and in fact did not provide and did not provide information as to the subsequent realization of such EMC Assets and Liabilities and the subsequent carrying out of the EMC business that we considered necessary for the purpose of our audit. As such the Group's management had not been able to provide us with all the underlying supporting information and documentary evidence which we considered necessary for our audit purpose in relation to the items making up the assets and liabilities of the Yanford Group at the date of disposal, the EMC Balances as at 30 June 2014 and the performance of EMC business for the year then ended.
Due to the limitations on our scope of audit in relation to these EMC Assets and Liabilities and the performance of EMC business, together with other matters we disclaimed our opinion on the consolidated financial statements for the year ended 30 June 2014.
These limitations were unresolved in the current year. As a result, we have not been able to obtain information and evidence relating to the existence and correctness of the EMC Balances as at 30 June 2015 and the EMC activities during the financial year then ended as we considered necessary for the purpose of our audit of the consolidated financial statements. There were no other satisfactory audit procedures that we could adopt in order to satisfy ourselves as to the EMC Balances as at 30 June 2015 and the performance of EMC business for the year then ended. Any adjustment considered necessary to the EMC Balances as at 30 June 2015 and to the performance of EMC business for the year then ended would have a consequential effect on the Group's consolidated statement of financial position as at 30 June 2015 and its results for the year then ended.
2. Disposal of interests in LED International (Far East) Limited ("LED Far East"), Kepu Electronic Technology (Shenzhen) Company Limited ("Kepu"), and Shenzhen China-LED Photo-Technology Limited ("Shenzhen LED") (together referred to as "LED Far East Group")
(a) Disposal of of LED Far East Group
As set out in notes 14 and 37(a) to the consolidated financial statements, on 17 December 2014, the Company entered into a sale and purchase agreement with Mr. Fu Wei ("Fu"), a director of Kepu, relating to the disposal by the Group of the equity interests (60%) in LED Far East and its wholly owned subsidiary, Kepu, and its interest in Shenzhen LED, at a consideration of RMB360,000. On 13 April 2015, the Group completed the disposal of the equity interests (60%) in LED Far East.
In the course of our audit of the financial statements for the year ended 30 June 2015, which was subsequent to the disposal, as the Group's management had no access to the accounting records of LED Far East Group, the Group's management was unable to allow us access to the books and records of LED Far East Group without the consent and cooperation from the new owner of the LED Far East Group, which the new owner of LED Far East Group had no obligation to provide and in fact did not provide. As such the Group's management had not been able to provide us with all the underlying supporting information and documentary evidence which we considered necessary for our audit purpose in relation to LED Far East Group's management accounts as at the disposal date and the performance and cash flows attributable to LED Far East Group up to the date of disposal ("LED Far East Group Disposal Results and Cash Flows"). Accordingly, and together with the audit scope limitations that we had in prior year and during the course of our audit for the year ended 30 June 2015 as explained in (b) and (c) below, we were unable to satisfy ourselves as to whether i) the gain on disposal of LED Far East Group of approximately HK$26,382,000 has been arrived at properly and ii) LED Far East Group Disposal Results and Cash Flows, which represented LED element products segment and included as discontinued operation, for the year ended 30 June 2015 have been appropriately arrived at. Any adjustment considered necessary to i) the carrying amount of the assets and liabilities of LED Far East Group so disposed of as at 13 April 2015 would have a consequential effect on the gain on disposal of LED Far East Group for the year ended 30 June 2015 and the elements making up the consolidated statement of cash flows and ii) the LED Far East Group Disposal Results for the year ended 30 June 2015 would have a consequential effect on the Group's loss and total comprehensive income for the year ended 30 June 2015 and the elements making up the consolidated statement of cash flows.
(b) Trade receivables, inventories and sales of Kepu
Included in the consolidated statement of financial position of the Group as at 30 June 2014 are trade receivables of Kepu, a subsidiary of the Company at that time, of approximately HK$4,750,000 due from its major customers whereas included in the consolidated statement of comprehensive income for the year ended 30 June 2014 were sales of Kepu to these major customers of approximately HK$19,471,000. These balances and amounts were mainly attributable to Kepu's sales to the major customers in the PRC on a consignment basis. In relation to the consignment sales, no consignment stock was included in the inventories of approximately HK$6,338,000 in the consolidated statement of financial position of the Group as at 30 June 2014. In the course of our audit of the financial statements for the year ended 30 June 2014, we noted that the local management of Kepu had not maintained satisfactory accounting records on these consignment sales and stocks. Together with other matters, we disclaimed our opinion on the Company's consolidated financial statements for the year ended 30 June 2014.
These limitations were unresolved in current year. There were no other satisfactory audit procedures that we could adopt in order to satisfy ourselves as to the existence and accuracy of such trade receivables, the completeness of such inventories and the existence of such sales. Any adjustments which might have found necessary in respect of these items would have a consequential effect on the gain on disposal of LED Far East Group for the year ended 30 June 2015, the Group's loss and total comprehensive income for the year ended 30 June 2015 and the elements making up the consolidated statement of cash flows.
(c) Deconsolidation of Shenzhen LED
As explained in note 3(c) to the consolidated financial statements, the directors of the Company considered that the Group's control over Shenzhen LED had been lost and therefore, the Company had deconsolidated Shenzhen LED as from 17 April 2010, prior to our appointment as auditor. Same as last year, during the course of our audit, we were unable to obtain satisfactory documentary evidence from the Group's management regarding the loss of control. The Group's management represented to us that they no longer had possession of the accounting and other records of Shenzhen LED and had lost contact with the then management of Shenzhen LED which might have provided the necessary alternative evidence. Other than the representation, the Group's management have not provided to us other evidence regarding their loss of control. There were no other satisfactory audit procedures that we could adopt to satisfy ourselves that the control of Shenzhen LED has been lost and therefore, with regard to the deconsolidation of Shenzhen LED, we were unable to determine whether any adjustment might be necessary to consolidate Shenzhen LED as part of the Group as if no deconsolidation had happened before. Together with other matters, we disclaimed our opinion on the Company's consolidated financial statements for the financial year ended 30 June 2014. Any adjustment considered necessary to the consolidation of Shenzhen LED would have a consequential effect on the gain on disposal of LED Far East Group for the year ended 30 June 2015, the Group's loss and total comprehensive income for the year ended 30 June 2015 and the elements making up the consolidated statement of cash flows.
In addition, due to the limitation as explained above, we have been unable to carry out any audit procedures to satisfy ourselves as to the existence and correctness of the amounts of contingent liabilities attributable to Shenzhen LED as at 30 June 2014 as set out in note 41(b) to the consolidated financial statements.
3. Going concern
The Group incurred a loss from continuing operations of approximately HK$31,564,000 for the year ended 30 June 2015 and, as of that date, the Group had net current liabilities and net liabilities of approximately HK$18,701,000 and HK$18,662,000 respectively. These conditions indicate the existence of material uncertainty which may cast significant doubt on the Group's ability to continue as a going concern, with a potential consequence that the Group may be unable to realise its assets and discharge its liabilities in the normal course of business.
As explained in note 3(b) to the consolidated financial statements, the directors of the Company have prepared a cash flow forecast (the "Forecast") on which their assessment of the appropriateness of the preparation of the Group's consolidated financial statements on a going concern basis was based. These financial statements have been prepared on a going concern basis, the validity of which depends upon the future successful attainment of the Forecast so that the Group will have sufficient working capital to finance its operations and/or settle or arrange its financial obligations. However, the Company's directors have not provided us with an cashflow forecast of up to date details and information relating to the basis of the preparation of the Forecast including the underlying assumptions made and supporting information thereof that we consider necessary to satisfy ourselves as to the reasonableness of the Forecast and there was no other satisfactory evidence on which we could rely for the purpose of our assessment of the appropriateness of the preparation of the Group's consolidated financial statements on a going concern basis. Due to this limitation on our scope of work, we are unable to obtain sufficient appropriate audit evidence to assess whether it is appropriate to use going concern basis in preparing the consolidated financial statements.
Should the use of the going concern basis in preparing the consolidated financial statements be determined to be inappropriate, adjustments might have to be made to reduce the value of assets to their recoverable amounts, to provide for any further liabilities which might arise and to reclassify non-current assets and liabilities as current assets and liabilities.
Disclaimer of Opinion
Because of the significance of the matters described in the Basis for Disclaimer of Opinion paragraphs, we have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion and, accordingly, we do not express an opinion on the consolidated financial statements of the Group, and whether the financial statements have been properly prepared in accordance with the Hong Kong Companies Ordinance.
Emphasis of matter
Without further modifying our disclaimer of opinion, we draw your attention to note 41(a) to the consolidated financial statements, which describes a contingency relating to the Company.
REPORT ON MATTER UNDER SECTIONS 407(2) AND 407(3) OF THE HONG KONG COMPANIES ORDINANCE
In respect alone of the inability to obtain sufficient appropriate audit evidence about the matters described in the Basis for Disclaimer of Opinion paragraphs above:
- We were unable to determine whether adequate accounting records had been kept; and
- We have not obtained all the information and explanations that, to the best of our knowledge and belief, are necessary and material for the purpose of our audit.
BDO Limited Certified Public Accountants Chiu Wing Cheung Ringo Practising Certificate Number P04434
Hong Kong, 22 June 2016
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEARED 30 JUNE 2015
Hot Features
Premium
Notes 2015 2014
HK$'000 HK$'000
(Restated)
Continuing operations
Revenue 7 7 33
Other income 9 311 2,143
Administrative expenses (7,158) (9,358)
Other operating expenses (22,603) -
Finance costs 10 (2,121) (1,324)
Loss before income tax 11 (31,564) (8,506)
Income tax 12 - -
---------- -----------
Loss for the year from
continuing operations (31,564) (8,506)
Discontinued operation
Profit/(loss) for the year
from discontinued
operation 14 20,494 (11,906)
---------- -----------
Loss for the year (11,070) (20,412)
Other comprehensive income
Items that may by reclassified
subsequently to profit
or loss:
* Exchange gains on translating foreign presentations 148 264
* Exchange gains reclassified upon disposal of (1,220) -
discontinued operation
Other comprehensive income
for the year, including
reclassification adjustments (1,072) 264
---------- -----------
Total comprehensive income
for the year (12,142) (20,148)
========== ===========
Loss for the year attributable
to:
Owners of the Company (5,190) (13,237)
Non-controlling interests (5,880) (7,175)
---------- -----------
(11,070) (20,412)
========== ===========
Total comprehensive income
attributable to:
Owners of the Company (6,296) (13,110)
Non-controlling interests (5,846) (7,038)
---------- -----------
(12,142) (20,148)
========== ===========
Losses per share from continuing
and discontinued operations
Basic and diluted (HK$
per share) 15 (0.57) (2.63)
========== ===========
Losses per share from continuing
operations
Basic and diluted (HK$
per share) 15 (3.06) (1.21)
========== ===========
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2015
Notes At 30 June 2015 At 30 June 2014 At 1 July 2013
HK$'000 HK$'000 HK$'000
(Restated)
ASSETS AND LIABILITIES
Non-current assets
Property, plant and equipment 16 39 2,057 182
Goodwill 17 - - -
Deposit paid for acquisition of a subsidiary 18 - 2,125 2,125
39 4,182 2,307
Current assets
Inventories 19 2,539 6,338 6,663
Trade and other receivables 20 15,129 13,272 14,585
Finance lease receivables 21 - - -
Amount due from a former director 26 700 3,329 3,497
Amounts due from a shareholder/ non-controlling
interests 26 469 - -
Amounts due from related companies 26 1,771 3,333 -
Pledged bank deposit 22 - 10,024 10,110
Cash and bank balances 23 1,732 154 1,403
---------------- ---------------- ---------------
22,340 36,450 36,258
Current liabilities
Trade and other payables 24 23,189 58,381 49,219
Borrowings 25 - 20,535 18,006
Amount due to a director 26 3,047 3,574 1,655
Amounts due to a shareholder/
non-controlling interests 26 - 568 550
Amounts due to related companies 26 4,330 3,127 1,310
Loan from a director 27 - - 10,160
Loan from a former director 27 - 3,979 600
Convertible loan notes 28 10,475 - -
Current tax liabilities - 1,569 1,653
41,041 91,733 83,153
Net current liabilities (18,701) (55,283) (46,895)
---------------- ---------------- ---------------
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2015
Notes At 30 June 2015 At 30 June 2014 At 1 July 2013
HK$'000 HK$'000 HK$'000
(Restated)
Non-current liabilities
Loan from a former director 27 - - 3,379
Convertible loan notes 28 - 8,581 -
---------------- ---------------- ---------------
- 8,581 3,379
Net liabilities (18,662) (59,682) (47,967)
================ ================ ===============
EQUITY
Share capital 29 211,363 166,846 50,329
Reserves 30 (217,080) (203,181) (81,987)
Equity attributable to owners of the Company (5,717) (36,335) (31,658)
Non-controlling interests (12,945) (23,347) (16,309)
Capital deficiency (18,662) (59,682) (47,967)
================ ================ ===============
On behalf of the Board
Stephen Weatherseed Stephen Chan
Director Director
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 30 JUNE 2015
Attributable to shareholders of the Company
-------------------------------------------------------------------------------------------------
Shares PRC Convertible
Share Share to be Capital Exchange statutory loan notes Accumulated Total Non-controlling Total
capital premium issued reserve reserve reserve reserve losses reserve interests equity
HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000
(Restated)
(note 4)
At 1 July 2013 50,329 121,941 826 (5,076) 912 617 - (201,207) (81,987) (16,309) (47,967)
Loss for the
year - - - - - - - (13,237) (13,237) (7,175) (20,412)
Other
comprehensive
income:
Exchange gains
on translating
foreign
operations - - - - 127 - - - 127 137 264
Total
comprehensive
income for the
year - - - - 127 - - (13,237) (13,110) (7,038) (20,148)
Transition to
no-par value
regime on 3
March 2014
(note 30(a)) 116,517 (121,941) - 5,424 - - - - (116,517) - -
Issue of
convertible
bonds - - - - - - 1,656 - 1,656 - 1,656
Shares to be
issued by the
way of placing
(note 30(b)) - - 7,603 - - - - - 7,603 - 7,603
Extinguishment
of liabilities
(note 30(b)) - - (826) - - - - - (826) - (826)
Transaction
with owners 116,517 (121,941) 6,777 5,424 - - 1,656 - (108,084) - 8,433
------- --------- ------- ------- -------- --------- ----------- ----------- ------------ --------------- --------
At 30 June
2014, as
restated 166,846 - 7,603 348 1,039 617 1,656 (214,444) (203,181) (23,347) (59,682)
======= ========= ======= ======= ======== ========= =========== =========== ============ =============== ========
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 30 JUNE 2015
Attributable to shareholders of the Company
--------------------------------------------------------------------------------------------
Shares PRC Convertible
Share Share to be Capital Exchange statutory loan notes Accumulated Total Non-controlling Total
capital premium issued reserve reserve reserve reserve losses reserve interests equity
HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000
(Restated)
(note 4)
At 1 July 2014, as
previously reported 166,846 - 8,429 348 1,039 617 - (214,940) (204,507) (23,677) (61,338)
Correction of
prior year
errors/transition
differences on
convertible loan
notes (note 4) - - (826) - - - 1,656 496 1,326 330 1,656
At 1 July 2014, as
restated 166,846 - 7,603 348 1,039 617 1,656 (214,444) (203,181) (23,347) (59,682)
Loss for the year - - - - - - - (5,190) (5,190) (5,880) (11,070)
Other comprehensive
income:
Exchange gains on
translating foreign
operations - - - - 114 - - - 114 34 148
Exchange gains
reclassified upon
disposal of
discontinued
operation (note
37(a)) - - - - (1,220) - - - (1,220) - (1,220)
Total comprehensive
income for the year - - - - (1,106) - - (5,190) (6,296) (5,846) (12,142)
Shares issued by the
way of placing
(note 29(d)) 38,644 - (7,603) - - - - - (7,603) - 31,041
Share issued to
extinguish
financial
liabilities (note
29(e) and (f)) 5,873 - - - - - - - - - 5,873
Disposal of
discontinued
operation (note
37(a)) - - - - - - - - - 16,248 16,248
Release of PRC
statutory reserve
upon disposal of
discontinued
operation - - - - - (617) - 617 - - -
Transaction with
owners 44,517 - (7,603) - - (617) - 617 (7,603) 16,248 53,162
At 30 June 2015 211,363 - - 348 (67) - 1,656 (219,017) (217,080) (12,945) (18,662)
======= ======= ======= ======= ======== ========= =========== =========== ========= =============== ==========
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARED 30 JUNE 2015
Notes 2015 2014
HK$'000 HK$'000
(Restated)
Cash flows from operating
activities
Loss before income tax from
continuing operations (31,564) (8,506)
Profit/(loss) before income
tax from discontinued operation 20,494 (11,906)
-------- ----------
Loss before income tax (11,070) (20,412)
Adjustments for:
Interest income (428) (33)
Interest expense 4,047 3,595
Depreciation of property,
plant and equipment 370 284
Loss on extinguishment of
financial liabilities 2,412 -
Provision for impairment
of deposit paid for acquisition
of a subsidiary 2,125 -
Provision for impairment
of obsolete inventory - 1,388
Provision for impairment
of trade and other receivables - 958
Provision for impairment
of finance lease receivables 7,159 -
Provision for impairment
of amounts due from related
companies 10,907 -
Write back of long outstanding
payables and reversal of
overprovision - (827)
Gain on extinguishment of
liabilities by issuing convertible
loan notes - (826)
Gain on disposal of discontinued
operation 37(a) (26,382) -
Gain on disposal of subsidiaries 37(b) (19) -
Operating loss before working
capital changes (10,879) (15,873)
Increase in inventories (251) (1,064)
(Increase)/decrease in trade
and other receivables (10,778) 355
Increase in finance lease
receivables (7,159) -
Increase in trade and other
payables 11,957 9,905
Increase in amounts due to
a shareholder/non-controlling
interests - 18
Net cash used in operating
activities (17,110) (6,659)
Cash flows from investing
activities
Payments for purchase of
property, plant and equipment (151) (2,165)
Decrease in amount due from
a former director 1,522 -
Increase in amount due from
a shareholder/non-controlling
interests (1,037) -
Proceeds from disposal of
subsidiaries 39 -
Disposal of discontinued
operation, net of cash disposed
of (152) -
Decrease in pledged bank
deposit 10,024 86
Interest received 428 33
------- ------------
Net cash generated from/(used
in) investing activities 10,673 (2,046)
------- ------------
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARED 30 JUNE 2015
Notes 2015 2014
HK$'000 HK$'000
(Restated)
Cash flows from financing
activities
(Decrease)/increase in amount
due to a director (527) 1,094
Decrease in amounts due to
related companies (8,142) (1,516)
Net proceeds from issue of
shares 29(d) 31,041 -
Net proceeds from shares
to be issued for the Placing 30(b) - 7,603
Proceeds from borrowings - 8,554
Repayments of borrowings (2,114) (6,267)
Interest paid (2,153) (2,526)
Net cash generated from financing
activities 18,105 6,942
-------- ----------
Net increase/(decrease) in
cash and cash equivalents 11,668 (1,763)
Cash and cash equivalents
at beginning of the year (10,110) (8,618)
Effect of foreign exchange
rate changes 174 271
-------- ----------
Cash and cash equivalents
at end of the year 23 1,732 (10,110)
======== ==========
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
30 JUNE 2015
1. GENERAL INFORMATION
LED International Holdings Limited (the "Company") was domiciled and incorporated in Hong Kong with limited liability under the Hong Kong Companies Ordinance. The address of the Company's registered office and principal place of business is Unit A1, 6/F., One Capital Place, 18 Luard Road, Wan Chai, Hong Kong.
The principal activity of the Company is investment holding. The principal activities of the Company's subsidiaries (together with the Company referred to as the "Group") were specialising in the provision of energy management contract services ("EMC contracts") under which the Group installs energy saving products in its customers' premises, including lighting and reactance filtering equipment supplied by the Group, and the subsequent savings made by the customers in their electricity charges are then shared between the Group and the customers thereby enabling the Group to generate recurring revenue rather than one-off sales revenue and lease financing, including providing financing for leasing businesses, financing acquisitions of assets from outsides the PRC for the purpose of leasing, maintaining and improving the depreciation values of the leasing assets, leasing related consultancy and guarantee services. Historically, the Group's business had been the development, manufacture and sale of low-powered light-emitting diode ("LED") display screens and modules.
On 13 April 2015, the Group disposed of its entire 60% equity interest in LED International (Far East) Limited ("LED Far East") and its wholly owned subsidiary, Kepu Electronic Technology (Shenzhen) Company Limited ("Kepu"), and its interest in Shenzhen China-LED Photo-Technology Limited ("Shenzhen LED") for a cash consideration of RMB360,000 (approximately HK$450,000 or GBP37,000) (the "Disposal Group"). The Disposal Group is principally engaged in the development, manufacture and sale of low-powered LED display screens and modules. As the operation and cash flows of which can be clearly distinguished from the rest of the Group and represent separate major line of business, the Group presented the Disposal Group as discontinued operation in accordance with International Financial Reporting Standard/Hong Kong Financial Reporting Standard 5 ("IFRS/HKFRS 5"). Further details regarding the discontinued operation are set out in note 14 to the consolidated financial statements.
On 23 October 2006, the Company was admitted to trading on the Alternative Investment Market ("AIM") of the London Stock Exchange. The shares of the Company are under suspension of trading as at the date of approval of these financial statements.
The consolidated financial statements are presented in Hong Kong dollars ("HK$"), which is the functional currency of the Company, and all values are rounded to the nearest thousand except when other indicated.
The financial statements for the year ended 30 June 2015 were approved for issue by the Board of Directors on 22 June 2016.
2. ADOPTION OF INTERNATIONAL FINANCIAL REPORTING STANDARDS/HONG KONG FINANCIAL REPORTING STANDARDS ("IFRSs/HKFRSs")
(a) Adoption of new / revised IFRSs/HKFRSs - effective 1 July 2014
In the current year, the Group has applied for the first time the following new standards, amendments and interpretations (the "New IFRSs/HKFRSs") issued by the International Accounting Standards Board (the "IASB") and the International Financial Reporting Interpretations Committee (the "IFRIC") of the IASB, and the Hong Kong Institute of Certified Public Accountants ("HKICPA"), which are relevant to and effective for the Group's financial statements for the annual period beginning on 1 July 2014:
Amendments to IAS/HKAS Financial Instruments:
32 Presentation - Offsetting
Financial Assets and Financial
Liabilities
Amendments to IAS/HKAS Impairment of Assets -
36 Recoverable Amount Disclosures
for Non-financial Assets
Amendments to IFRS/HKFRS Investment entities
10,
IFRS/HKFRS 12 and
IAS/HKAS 27
IFRSs/HKFRSs (Amendments) Annual Improvements 2010-2012
Cycle
IFRSs/HKFRSs (Amendments) Annual Improvements 2011-2013
Cycle
Except as explained below, the adoption of the New IFRSs/HKFRSs has no material impact on the Group's financial statements.
Amendments to IAS/HKAS 32 - Offsetting Financial Assets and Financial Liabilities
The amendments clarify the offsetting requirements by adding appliance guidance to IAS/HKAS 32 which clarifies when an entity "currently has a legally enforceable right to set off" and when a gross settlement mechanism is considered equivalent to net settlement.
The adoption of the amendments has no impact on these financial statements as the Group does not have any offsetting arrangements.
(b) New / Revised IFRSs/HKFRSs that have been issued but are not yet effective
The following new/revised IFRSs/HKFRSs, potentially relevant to the Group's financial statements, have been issued, but are not yet effective and have not been early adopted by the Group
Amendments to Disclosure Initative(1)
IAS/HKAS 1
Amendments to Clarification of Acceptable
IAS/HKAS 16 and Methods of Depreciation
IAS/HKAS 38 and Amortisation(1)
Amendments to Equity Method in Separate
IAS/HKAS 27 Financial Statements(1)
IFRS/HKFRS 9 Financial Instruments(3)
IFRS/HKFRS 14 Regulatory Deferral Accounts(1)
IFRS/HKFRS 15 Revenue from Contract with
Customers(3)
IFRS/HKFRS 16 Leases(4)
(1) Effective for annual periods beginning
on or after 1 January 2016
(2) Effective for annual periods beginning
on or after 1 January 2017
(3) Effective for annual periods beginning
on or after 1 January 2018
(4) Effective for annual periods beginning
on or after 1 January 2019
Amendments to IAS/HKAS 1 - Disclosure Initative
The amendments are designed to encourage entities to use judgement in the application of IAS/HKAS 1 when considering the layout and content of their financial statements.
Amendments to IAS/HKAS 16 and IAS/HKAS 38 - Clarification of Acceptable Methods of Depreciation and Amortisation
The amendments to IAS/HKAS 16 prohibit the use of a revenue-based depreciation method for items of property, plant and equipment. The amendments to IAS/HKAS 38 introduce a rebuttable presumption that amortisation based on revenue is not appropriate for intangible assets. This presumption can be rebutted if either the intangible asset is expressed as a measure of revenue or revenue and the consumption of the economic benefits of the intangible asset are highly correlated.
Amendments to IAS/HKAS 27 - Equity Method in Separate Financial Statements
The amendments allow an entity to apply the equity method in accounting for its investments in subsidiaries, joint ventures and associates in its separate financial statements.
IFRS/HKFRS 9 - Financial Instruments
Under IFRS/HKFRS 9, financial assets are classified into financial assets measured at fair value or at amortised cost depending on the entity's business model for managing the financial assets and the contractual cash flow characteristics of the financial assets. Fair value gains or losses will be recognised in profit or loss except for those nontrade equity investments, which the entity will have a choice to recognise the gains and losses in other comprehensive income. A third measurement category has been added for debt instruments - fair value through other comprehensive income. This measurement category applies to debt instruments that meet the Solely Payments of Principal and Interest contractual cash flow characteristics test and where the entity is holding the debt instrument to both collect the contractual cash flows and to sell the financial assets. IFRS/HKFRS 9 introduced a new "expected loss" impairment model and replaces the "incurred loss" model in IAS/HKAS 39 Financial Instruments: Recognition and Measurement. The impairment model is a more "forward looking" model in that a credit event (or impairment "trigger") no longer has to occur before credit losses are recognised. For financial assets at amortised cost or fair value through other comprehensive income, an entity will now always recognise (at a minimum) 12 months of expected losses in profit or loss. Lifetime expected losses will be recognised on these assets when there is a significant increase in credit risk after initial recognition. IFRS/HKFRS 9 also introduced a new hedge accounting model which allows entities to apply hedge accounting more broadly to manage profit or loss mismatches, and as a result reduce "artificial" hedge ineffectiveness that can arise under IAS/HKAS 39.
IFRS/HKFRS 9 carries forward the recognition, classification and measurement requirements for financial liabilities from IAS/HKAS 39, except for financial liabilities that are designated at fair value through profit or loss, where the amount of change in fair value attributable to change in credit risk of that liability is recognised in other comprehensive income unless that would create or enlarge an accounting mismatch. In addition, IFRS/HKAFS 9 (2014) retains the requirements in IAS/HKAS 39 for de-recognition of financial assets and financial liabilities.
IFRS/HKFRS 15 - Revenue from Contracts with Customers
The new standard establishes a single revenue recognition framework. The core principle of the framework is that an entity should recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. IFRS/HKFRS 15 supersedes existing revenue recognition guidance including IAS/HKAS 18 Revenue, IAS/HKAS 11 Construction Contracts and related interpretations.
IFRS/HKFRS 15 requires the application of a 5 steps approach to revenue recognition:
Step 1: Identify the contract(s) with a customer Step 2: Identify the performance obligations in the contract Step 3: Determine the transaction price Step 4: Allocate the transaction price to each performance obligation Step 5: Recognise revenue when each performance obligation is satisfied
IFRS/HKFRS 15 includes specific guidance on particular revenue related topics that may change the current approach taken under IFRS/HKFRS. The standard also significantly enhances the qualitative and quantitative disclosures related to revenue.
IFRS/HKFRS 16 - Leases
IFRS/HKFRS 16 introduces a comprehensive model for the identification of lease arrangements and accounting treatments for both lessors and lessees. It distinguishes leases and service contracts on the basis of whether an identified asset is controlled by a customer. Subject to limited exceptions for short-term leases and low value assets, distinctions of operating and finance leases are removed for lessee accounting, and is replaced by a model where a right-of-use asset and a corresponding liability have to be recognised for all leases by lessees. However, the standard does not significantly change the accounting of lessors.
The Group is in the process of making an assessment of the potential impact of these new/ revised IFRSs/HKFRSs.
(c) New Hong Kong Companies Ordinance provisions relating to the preparation of financial statements
The provisions of the new Hong Kong Companies Ordinance, Cap. 622, in relation to the preparation of financial statements apply to the Company in this financial year.
The directors consider that there is no impact on the Group's financial position or performance, however the new Hong Kong Companies Ordinance, Cap. 622, impacts on the presentation and disclosures in the consolidated financial statements. For example, the statement of financial position of the Company is now presented in the notes to the consolidated financial statements rather than as a primary statement and related notes to the statement of financial position of the Company are generally no longer presented.
3. BASIS OF PREPARATION (a) First-time Adoption of HKFRS and Statement of compliance
In compliance with section 380(4)(b) of Hong Kong Company Ordinance, Cap. 622, the Group has adopted HKFRS for the first time.
These consolidated financial statements have been prepared in accordance with all applicable IFRSs, which collective term includes all applicable individual International Financial Reporting Standards, International Accounting Standards ("IAS") and Interpretations issued by IASB, and HKFRSs, which collective term includes all applicable individual Hong Kong Financial Reporting Standards, Hong Kong Accounting Standards ("HKASs") and Interpretations issued by the HKICPA. These financial statements also comply with IFRSs, which are consistent with HKFRSs, as well as the requirements of the Hong Kong Companies Ordinance.
The consolidated financial statements also comply with IFRS as issued by the IASB as adopted by the European Union. The differences between IFRS as adopted by the European Union and IFRS as issued by the IASB have not had a material impact on the consolidated financial statements for the years presented.
Although HKFRSs have been fully converged with IFRSs in all material respects since 1 January 2005, these consolidated financial statements are the first published financial statements in which the Group makes an explicit and unreserved statement of compliance with HKFRSs. Therefore, in preparing these consolidated financial statements, management has given due consideration to the requirements of HKFRS 1, "First-time Adoption of Hong Kong Financial Reporting Standards". As the Group's consolidated financial statements for the year ended 30 June 2015 are the first annual financial statements that comply with IFRSs and HKFRSs, the Group is required to establish its accounting policies for the year ended 30 June 2015 and apply these retrospectively to determine the HKFRS opening balance sheet at its date of transition, 1 July 2013, being the beginning of the earliest period for which the Group presents full comparative information in these financial statements.
The conversion from IFRSs to dual compliance with HKFRSs/IFRSs did not result in any impact on the Group's accounts and accounting policies, except for the transition differences described in note 4. As such, the Group makes an explicit and unreserved statement of compliance with HKFRSs in the first HKFRS financial statements. Accordingly, these financial statements continue to include a statement of compliance with IFRSs as well as including for the first time a statement of compliance with HKFRSs, after transition adjustments to the Group's financial position, the Group's financial performance or cash flows in note 4.
(b) Basis of measurement
The financial statements have been prepared under the historical cost convention. The measurement bases are fully described in the accounting policies below.
The Group incurred a loss from continuing operations of approximately HK$31,564,000 for the year ended 30 June 2015 and, as of that date, the Group had net current liabilities and net liabilities of approximately HK$18,701,000 and HK$18,662,000 respectively. These conditions indicate the existence of material uncertainty which may cast significant doubt on the Group's ability to continue as a going concern, with a potential consequence that the Group may be unable to realise its assets and discharge its liabilities in the normal course of business.
The management have prepared a cash flow forecast (the "Forecast") for year ending 30 June 2017. In the opinion of the directors, based on the future successful attainment of the Forecast, the Group will have sufficient cash resources to satisfy its working capital and other financing requirements for the foreseeable future. Accordingly, the directors are of the opinion that it is appropriate to prepare the consolidated financial statements on a going concern basis.
These financial statements have been prepared on a going concern basis, the validity of which depends upon the successful execution of the Group's business plan, attainment of profitable operations and securing of new financing. These include obtaining of undertakings from certain directors and related companies not to demand repayments of amounts due to them until there are funds available for the repayments.
Should the use of the going concern basis in preparing the consolidated financial statements be determined to be inappropriate, adjustments might have to be made to reduce the value of assets to their recoverable amounts, to provide for any further liabilities which might arise and to reclassify non-current assets and liabilities as current assets and liabilities.
(c) Deconsolidation of a subsidiary, Shenzhen LED
The Group entered into a preliminary sale and purchase agreement dated 11 February 2009 to dispose of its entire interest in a wholly-owned subsidiary, Shenzhen LED. The assets and liabilities of Shenzhen LED had been reclassified as held for sale as at 30 June 2009 and the results of Shenzhen LED were previously presented under discontinued operations in the consolidated financial statements for the year ended 30 June 2009. However, the disposal of Shenzhen LED did not proceed. The sale and purchase agreement dated 11 February 2009 was effectively terminated on 17 April 2010.
Notwithstanding that the Group owned the entire equity interests in Shenzhen LED, Shenzhen LED was no longer regarded as a subsidiary of the Group as the directors of the Company are of the opinion that the control of Shenzhen LED had been lost on 17 April 2010.
The directors of Company considered that Shenzhen LED was not under the control of the Company given (i) the Company was unable to obtain any books and records from Shenzhen LED; (ii) the Company had not been provided with any up-to-date financial reports of Shenzhen LED and thus had no information as to the current financial situation of Shenzhen LED and (iii) the current management of the Group had lost contact with the then management of Shenzhen LED. As a result, the Company expressed a lack of confidence in its ability to properly control and manage Shenzhen LED. In light of this situation, the directors of the Company resolved to deconsolidate Shenzhen LED from the effective date of 17 April 2010.
The entire interest in Shenzhen LED had been disposed of on 13 April 2015 as detailed in note 37(a).
(d) Use of estimation and judgements
It should be noted that accounting estimates and assumptions are used in preparation of these financial statements. Although these estimates and assumptions are based on management's best knowledge and judgement of current events and actions, actual results may ultimately differ from those estimates and assumptions. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements, are disclosed in note 6.
4. CORRECTION OF PRIOR YEAR'S ERRORS AND TRANSITION DIFFERENCES
On 27 March 2014, the Convertible Loan Notes of approximately HK$10,000,000 (US$1,282,000) were issued to the director of the Company to settle an original loan and its interest due from the Company to him (the "Original Loan and Interest"). Last year, the initial fair value of the Convertible Loan Notes was determined by the Company's management at HK$10,000,000 which was approximately the principal amount of the Convertible Loan Notes and equaled the carrying amount of the Original Loan and Interest (the "Valuation 2014"). As a result, there was no gain or loss on settlement of the Original Loan. On initial recognition of the Convertible Loan Notes, no fair value was allocated to the equity component and no derivative was separately stated. As at 30 June 2014, the Convertible Loan Notes was also stated at HK$10,000,000. For the year ended 30 June 2014, interest charge of approximately HK$237,000 was recognized in the consolidated income statement with the corresponding credit recognized in the account "Amount due to a director".
In the current year, the directors of the Company re-estimated the fair value of Convertible Loan Notes on initial recognition with reference to the valuation performed by a professional valuer (the "Valuation 2015"). Accordingly, it has come to the attention of the directors of the Company that the prior year financial statements of the Group under IFRS contained errors. On initial recognition, the Convertible Loan Notes as a whole should be measured at fair value of approximately HK$10,000,000. As a result, gain on extinguishment of the Original Loan and Interest of approximately HK$826,000, represented difference between the fair value of the Convertible Loan Notes and the carrying amount of the original loan of approximately HK$10,000,000 and interest of approximately HK826,000, shall be recognized in the consolidated income statement and the shares to be issued in respect of the interest of HK$826,000 shall be derecognised. On initial recognition the fair value of the liability component of approximately HK$8,344,000 shall be measured first. The equity component of HK$1,656,000 shall be measured at the fair value on initial recognition. As such, the carrying amounts of convertible loan notes and convertible loan notes equity reserve shall be debited by and credited respectively by HK$1,656,000. For the year ended 30 June 2014, interest charge of approximately HK$237,000 shall be recognized in the consolidated income statement with the corresponding credit recognized in the account "Convertible Loan Notes", instead of "Amount due to a director".
Correction of prior year's errors for each prior year financial statement line item affected under IFRS are presented in the below. The Group has adopted HKFRS for the first time, so the transition differences were adjusted from the prior year financial statements by line item previously stated under IFRS summarized below:
IFRS errors/
As previously HKFRS IFRS
presented transition as restated/
under IFRS adjustments HKFRS
HK$'000 HK$'000 HK$'000
As at 30 June 2014
Consolidated statement of financial
position
Current liabilities
Amount due to a director 3,811 (237) 3,574
Non-current liabilities
Convertible loan notes 10,000 (1,419) 8,581
Equity
Reserves (204,507) 1,326 (203,181)
* convertible loan note reserve - 1,656 1,656
* shares to be issued 8,429 (826) 7,603
* accumulated losses (214,940) 496 (214,444)
Non-controlling interests (23,677) 330 (23,347)
Statement of financial position
Current liabilities
Amounts due to subsidiaries 24,731 826 25,557
Equity
Reserves (206,023) (826) (206,849)
- shares to be issued 8,429 (826) 7,603
================ ================ =================
For the year ended 30 June 2014
Consolidated statement of
comprehensive income
Other income(1) 1,317 826 2,143
* gain on extinguishment of liabilities by issuing
convertible loan notes - 826 826
Loss for the year (21,238) 826 (20,412)
================ ================ =================
Consolidated statement of
cash flows
Cash flows from operating activities
Loss before income tax (21,238) 826 (20,412)
Adjustments for:-
Gain on extinguishment of liabilities by issuing convertible loan notes - (826) (826)
========= ====== =========
Note 1: the balance was re-presented as LED elements products were classified as discontinued operation.
Accordingly, prior year adjustments/transition adjustments have been made retrospectively in the consolidated financial statements for the year ended 30 June 2014 and certain comparative figures have been restated.
5. SIGNIFICANT ACCOUNTING POLICIES (a) Business combination and basis of consolidation
The consolidated financial statements comprise the financial statements of the Company and its subsidiaries. Inter-company transactions and balances between group companies together with unrealised profits are eliminated in full in preparing the consolidated financial statements. Unrealised losses are also eliminated unless the transaction provides evidence of impairment on the asset transferred, in which case the loss is recognised in profit or loss.
The results of subsidiaries acquired or disposed of during the year are included in the consolidated statement of comprehensive income from the effective dates of acquisition or up to the effective dates of disposal, as appropriate. Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by other members of the Group.
The acquisition of subsidiaries or businesses is accounted for using the acquisition method. The cost of an acquisition is measured at the aggregate of the acquisition-date fair value of assets transferred, liabilities incurred and equity interests issued by the Group, as the acquirer. The identifiable assets acquired and liabilities assumed are principally measured at acquisition-date fair value. The Group's previously held equity interest in the acquiree is re-measured at acquisition-date fair value and the resulting gains or losses are recognised in profit or loss. The Group may elect, on a transaction-by-transaction basis, to measure the non-controlling interest that represent present ownership interests in the subsidiary either at fair value or at the proportionate share of the acquiree's identifiable net assets. Acquisition-related costs incurred are expensed.
Changes in the Group's interests in subsidiaries that do not result in a loss of control are accounted for as equity transactions. The carrying amounts of the Group's interest and the non-controlling interest are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling interest is adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to owners of the Company.
When the Group loses control of a subsidiary, the profit or loss on disposal is calculated as the difference between (i) the aggregate of the fair value of the consideration received and the fair value of any retained interest and (ii) the previous carrying amount of the assets (including goodwill), and liabilities of the subsidiary and any non-controlling interest. Amounts previously recognised in other comprehensive income in relation to the subsidiary are accounted for in the same manner as would be required if the relevant assets or liabilities were disposed of.
Subsequent to acquisition, the carrying amount of non-controlling interest that represent present ownership interests in the subsidiary is the amount of those interests at initial recognition plus the non-controlling interest's share of subsequent changes in equity. Total comprehensive income is attributed to non-controlling interests even if this results in the non-controlling interest having a deficit balance.
(b) Subsidiaries
A subsidiary is an investee over which the Company is able to exercise control. The Company controls an investee if all three of the following elements are present: power over the investee, exposure, or rights, to variable returns from the investee, and the ability to use its power to affect those variable returns. Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these elements of control.
In the Company's statement of financial position, investments in subsidiaries are stated at cost less impairment loss, if any. The results of subsidiaries are accounted for by the Company on the basis of dividend received and receivable.
(c) Goodwill
Goodwill is initially recognised at cost being the excess of the aggregate of consideration transferred and the amount recognised for non-controlling interests over the fair value of identifiable assets, liabilities and contingent liabilities acquired.
Where the fair value of identifiable assets, liabilities and contingent liabilities exceed the fair value of consideration paid, the excess is recognised in profit or loss on the acquisition date, after re-assessment.
Goodwill is measured at cost less impairment losses. Any impairment loss for goodwill is recognised in profit or loss and is not reversed in subsequent periods.
(d) Property, plant and equipment
Property, plant and equipment are stated at cost, less subsequent accumulated depreciation and subsequent accumulated impairment losses, if any. Depreciation is recognised so as to write off the cost of assets less their residual values over their estimated useful lives, using the straight-line method at the following rates per annum.
Leasehold improvement 2% - 8% Plant and machinery 10 - 33% Furniture, fixture and equipment 20 - 50% Motor vehicles 12.5 - 25%
The estimated useful lives, residual value and depreciation method are reviewed, and adjusted if appropriate, at the end of each reporting period.
Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other costs such as repairs and maintenance are charged to profit or loss during the financial period in which they are incurred.
(e) Inventories
Inventories are stated at the lower of cost and net realisable value. Costs, including an appropriate portion of fixed and variable overhead expenses, are assigned to inventories by the method most appropriate to the particular class of inventory, with the majority being valued using weighted average basis. Net realisable value represents the estimated selling price in the ordinary business less estimated costs necessary to make the sale.
(f) Impairment of non-financial assets
Goodwill is tested for impairment at least annually and whenever there is any indication that it is impaired. Property, plant and equipment are subject to impairment testing whenever there are indications that the asset's carrying amount may not be recoverable.
An impairment loss is recognised as an expense immediately for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of fair value, reflecting market conditions less costs to sell, and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessment of time value of money and the risk specific to the asset.
For the purposes of assessing impairment, where an asset does not generate cash flows largely independent of those from other assets, the recoverable amount is determined for the smallest group of assets that generate cash inflows independently (i.e. a cash-generating unit ("CGU")). As a result, some assets are tested individually for impairment and some are tested at CGU level.
An impairment loss on goodwill is not reversed in subsequent periods. In respect of other assets, an impairment loss is reversed if there has been a favourable change in the estimates used to determine the asset's recoverable amount and only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.
(g) Financial assets
Financial assets of the Group are classified into loans and receivables. Management determines the classification of its financial assets at initial recognition depending on the purpose for which the financial assets were acquired and where allowed and appropriate, re-evaluates this designation at every reporting date.
All financial assets are recognised when, and only when, the Group becomes a party to the contractual provisions of the instrument. Regular way purchases of financial assets are recognised on trade date. Financial assets are initially measured at fair value plus transaction costs that are directly attributable to the acquisition of the financial assets. Derecognition of financial assets occurs when the rights to receive cash flows from the investments expire or are transferred and substantially all of the risks and rewards of ownership have been transferred.
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise principally through the provision of goods and services to customers (trade debtors), and also incorporate other types of contractual monetary asset. Subsequent to initial recognition, they are carried at amortised cost using the effective interest method, less any identified impairment losses. Amortised cost is calculated taking into account any discount or premium on acquisition and includes fees that are an integral part of the effective interest rate and transaction cost. Gain and losses are recognised in profit or loss when the loans and receivables are derecognised or impaired as well as through the amortisation process.
Impairment of financial assets
At each reporting date, financial assets other than at fair value through profit or loss are reviewed to determine whether there is any objective evidence of impairment.
Objective evidence of impairment of individual financial assets includes observable data that comes to the attention of the Group about one or more of the following loss events:
(i) Significant financial difficulty of the debtor; (ii) A breach of contract, such as a default or delinquency in interest or principal payments;
(iii) It becoming probable that the debtor will enter bankruptcy or other financial reorganisation;
(iv) Significant changes in the technological, market, economic or legal environment that have an adverse effect on the debtor; and
(v) A significant or prolonged decline in the fair value of an investment in an equity instrument below its cost.
Loss events in respect of a group of financial assets include observable data indicating that there is a measurable decrease in the estimated future cash flows from the group of financial assets. Such observable data includes but not limited to adverse changes in the payment status of debtors in the group and, national or local economic conditions that correlate with defaults on the assets in the group.
If there is objective evidence that an impairment loss on loans and receivables has been incurred, the amount of the loss is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset's original effective interest rate (i.e. the effective interest rate computed at initial recognition). The amount of the loss is recognised in the profit or loss of the period in which the impairment occurs.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed to the extent that it does not result in a carrying amount of the financial asset exceeding what the amortised cost would have been had the impairment not been recognized at the date the impairment is reversed. The amount of the reversal is recognised in profit or loss of the period in which the reversal occurs.
Impairment loss on financial assets, other than financial assets at fair value through profit or loss and trade receivables that are stated at amortised cost, are written off against the corresponding assets directly. Where the recovery of trade receivables is considered doubtful but not remote, the impairment losses for doubtful receivables are recorded using an allowance account. When the Group is satisfied that recovery of trade receivables is remote, the amount considered irrecoverable is written off against trade receivables directly and any amounts held in the allowance account in respect of that receivable are reversed. Subsequent recoveries of amounts previously charged to the allowance account are reversed against the allowance account. Other changes in the allowance account and subsequent recoveries of amounts previously written off directly are recognised in profit or loss.
(h) Cash and cash equivalents
Cash and cash equivalents include cash at banks and in hand, demand deposits and short-term, highly liquid investments with original maturities of three months or less from inception that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value. For the purpose of the consolidated statement of cash flows presentation, cash and cash equivalents include bank overdrafts which are repayable on demand and form an integral part of the Group's cash management.
(i) Financial liabilities
The Group's financial liabilities include trade and other payables, borrowings, amounts due to a director/a shareholder/non-controlling interests and related companies, loan from a former director and convertible loan notes, which are financial liabilities at amortised cost.
Financial liabilities are recognised when the Group becomes a party to the contractual provisions of the instrument. All interest related charges are recognised as an expense in financial costs in the profit or loss. A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires.
Where an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amount is recognised in profit or loss.
Bank borrowings
Bank borrowings are recognised initially at fair value, net of transaction costs incurred. Bank borrowings are subsequently stated at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the profit or loss over the period of the borrowings using the effective interest method.
Bank borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least twelve months after the reporting date.
Financial liabilities at amortised cost
Financial liabilities at amortised cost are recognised initially at their fair values and subsequently measured at amortised cost, using the effective interest method. The related interest expense is recognised in profit or loss.
Convertible loan notes containing liability and equity components
Convertible loan notes issued by the Group that contain both the liability and conversion option components are classified separately into their respective items on initial recognition. A conversion option that will be settled by the exchange of a fixed amount of cash or another financial asset for a fixed number of the own equity instruments of a subsidiary of the Company is classified as an equity instrument.
On initial recognition, the fair value of the liability component is determined using the prevailing market interest of similar non-convertible debts. The difference between the proceeds of the issue of the convertible loan notes and the fair value assigned to the liability component, representing the conversion option for the holder to convert the loan notes into equity, is included in equity (convertible loan notes equity reserve).
In subsequent periods, the liability component of the convertible loan notes is carried at amortised cost using the effective interest method. The equity component, represented by the option to convert the liability component into ordinary shares of the Company, will remain in convertible loan notes equity reserve until the embedded option is exercised. Where the option remains unexercised at the expiry dates, the balance stated in convertible loan notes equity reserve will be released to the accumulated losses. No gain or loss is recognised upon conversion or expiration of the option.
Financial liabilities are derecognised when the obligation specified in the relevant contract is discharged, cancelled or expires.
Where the Group issues its own equity instruments to a creditor to settle a financial liability in whole or in part as a result of renegotiating the terms of that liability, the equity instruments issued are the consideration paid and are recognised initially and measured at their fair value on the date the financial liability or part thereof is extinguished. If the fair value of the equity instruments issued cannot be reliably measured, the equity instruments are measured to reflect the fair value of the financial liability extinguished. The difference between the carrying amount of the financial liability or part thereof extinguished and the consideration paid is recognised in profit or loss for the year.
(j) Provisions and contingent liabilities
Provisions are recognised for liabilities of uncertain timing or amount when the Group has a legal or constructive obligation arising as a result of a past event, which will probably result in an outflow of economic benefits that can be reasonably estimated.
Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated reliably, the obligation is disclosed as a contingent liability, unless the probability of outflow of economic benefits is remote. Possible obligations, the existence of which will only be confirmed by the occurrence or non-occurrence of one or more future events, are also disclosed as contingent liabilities unless the probability of outflow of economic benefits is remote.
(k) Revenue and other income recognition
Revenue is measured at the fair value of the consideration received or receivable for the sales of goods and services rendered, net of applicable value-added tax, rebates and discounts. Revenue is reduced for estimated customer returns and other similar allowances. Provided it is probable that the economic benefits will flow to the Group and the revenue and other income can be measured reliably, revenue and other income is recognised as follows:
(i) Sale of goods
Revenue (net of discounts and sales related taxes) from the sale of goods is recognised when all the following conditions are satisfied:
- the Group has transferred to the buyer the significant risks and rewards of ownership of the goods. This is usually taken as the time when the goods are delivered and the customer has accepted the goods;
- the Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;
- the amount of revenue can be measured reliably;
- it is probable the economic benefits associated with the transaction will flow to the entity; and
- the costs incurred or to be incurred in respect of the transaction can be measured reliably. (ii) Services income
Revenue from providing energy management contract services ("EMC") are recognised as the services are being provided.
(iii) Finance lease interest income
Finance lease interest income is allocated to accounting periods so as to reflect a constant periodic rate of return on the Group's net investment outstanding in respect of the leases.
(iv) Interest income
Interest income from a financial asset is accrued on a time basis, by reference to the principle outstanding and at the effective interest rate applicable, which is the rate that exactly discounts the estimated future cash receipts through the expected life of the financial asset to the asset's net carrying amount.
(l) Foreign currencies
The financial statements are presented in Hong Kong Dollars ("HK$"), which is also the functional currency of the Company.
In the individual financial statements of the consolidated entities, foreign currency transactions are translated into the functional currency of the individual entity using the exchange rates prevailing at the dates of the transactions. At the reporting date, monetary assets and liabilities denominated in foreign currencies are translated at the foreign exchange rates ruling at that date. Foreign exchange gains and losses resulting from the settlement of such transactions and from the reporting date retranslation of monetary assets and liabilities are recognised in profit or loss.
Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
In the consolidated financial statements, all individual financial statements of foreign operations, originally presented in a currency different from the Group's presentation currency, have been converted into HK$. Assets and liabilities have been translated into HK$ at the closing rates at the reporting date. Income and expenses have been converted into the HK$ at the exchange rates ruling at the transaction dates, or at the average rates over the reporting period provided that the exchange rates do not fluctuate significantly. Any differences arising from this procedure have been recognised in other comprehensive income and accumulated separately in the translation reserve in equity. Such translation differences are recognised as profit or loss in the period in which the foreign entity is disposed.
(m) Borrowing costs
Borrowing costs are recognised in profit or loss in the period in which they are incurred.
(n) Retirement benefit costs and short-term employee benefits
Retirement benefit costs
Retirement benefits to employees are provided through defined contribution plans. The Group operates a defined contribution retirement benefit plan under the Mandatory Provident Fund Schemes Ordinance (the "MPF Scheme"), for all of its employees who are eligible to participate in the MPF Scheme in Hong Kong. Contributions are made based on a percentage of the employees' basic salaries. The employees of the Group's subsidiaries which operate in the People's Republic of China (the "PRC") are required to participate in a central pension scheme operated by the local municipal government. These subsidiaries are required to contribute a certain percentage of employees' salaries to the central pension scheme.
Contributions are recognised as an expense in profit or loss as employees render services during the year. The Group's obligations under these plans are limited to the fixed percentage contributions payable.
Short-term employee benefits
Short term employee benefits are employee benefits (other than termination benefits) that are expected to be settled wholly before twelve months after the end of the annual reporting period in which the employees render the related service.
Employee entitlements to annual leave are recognised when these accrue to employees. A provision is made for the estimated liability for annual leave as a result of services rendered by employees up to the reporting date.
(o) Share-based payments
Share options granted to employees and others providing similar services in an equity-settled share-based payment transaction
For grants of share options that are conditional upon satisfying specified vesting conditions, the fair value of services received is determined by reference to the fair value of share options granted at the grant date and is expensed on a straight-line basis over the vesting period, with a corresponding increase in equity (share options reserve). At the end of the reporting period, the Group revises its estimates of the number of options that are expected to ultimately vest. The impact of the revision of the original estimates, if any, is recognised in profit or loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to share options reserve.
For share options that are vested at the date of grant, the fair value of the share options granted is expensed immediately to profit or loss.
At the time when the share options are exercised, the amount previously recognised in share options reserve will be transferred to share capital. When the share options are forfeited after the vesting date or are still not exercised at the expiry date, the amount previously recognised in share options reserve will be transferred to retained earnings.
(p) Taxation
Income 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 profit as reported in the consolidated statement of comprehensive income because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates (and laws) that have been enacted or substantively enacted by the end of the reporting period.
Deferred tax is recognised on temporary 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. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. Such deferred tax assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences associated with investments in subsidiaries, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period 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 assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.
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 Group intends to settle its current tax assets and liabilities on a net basis.
Current and deferred tax are recognised as an expense or income in profit or loss, except when they relate to items that are recognised outside profit or loss (whether in other comprehensive income or directly in equity), in which case the tax is also recognised outside profit or loss, or where they arise from the initial accounting for a business combination. In the case of a business combination, the tax effect is included in the accounting for the business combination.
(q) Leasing
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 Group as lessor
Amounts due from lessees under finance leases are recognised as receivables at the amount of the Group's net investment in the leases. Finance lease income is allocated to accounting periods so as to reflect a constant periodic rate of return on the Group's net investment outstanding in respect of the leases.
The Group as lessee
Operating lease payments are recognised as an expense on a straight-line basis over the lease term, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. Contingent rentals arising under operating leases are recognised as an expense in the period in which they are incurred.
In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability. The aggregate benefit of incentives is recognised as a reduction of rental expense on a straight-line basis, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.
(r) Segment reporting
The Group identifies operating segments and prepares segment information based on the regular internal financial information reported to the executive directors for their decisions about resources allocation to the Group's business components and for their review of the performance of those components. The business components in the internal financial information reported to the executive directors are determined following the Group's line of business.
The measurement policies the Group uses for reporting segment results under IFRS/HKFRS 8 Operating Segments are the same as those used in its financial statements prepared under IFRSs/HKFRSs, except that interest income, interest expense, loss on disposal of subsidiaries, provision for impairment of trade and other receivables, income tax and corporate income and expenses which are not directly attributable to the business activities of any operating segment are not included in arriving at the operating results of the operating segment.
(s) Related parties
A party is considered to be related to the Group if:
1) the party is a person or a close member to that person's family and that person: (i) has control or joint control over the Group; (ii) has significant influence over the Group; or
(iii) is a member of the key management personnel of the Group or of a parent of the Group;
2) the party is an entity where any of the following conditions applies: (i) the entity and the Group are members of the same group;
(ii) one entity is an associate or joint venture of the other entity (or of a parent, subsidiary or fellow subsidiary of the other entity);
(iii) the entity and the Group are joint ventures of the same third party;
(iv) one entity is a joint venture of a third party and the other party is an associate of the third party;
(v) the entity is a post-employment benefit plan for the benefit of employees of either the Group or an entity related to the Group;
(vi) the entity is controlled or jointly controlled by a person identified in (1); and
(vii) a person identified in (1)(i) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity).
(viii) The entity, or any member of a group of which it is a part, provides key management personnel services to the Group or to the Group's parent.
Close members of the family of a person are those family members who may be expected to influence, or be influenced by, that individual in their dealings with the entity and include:
(i) that person's children and spouse or domestic partner; (ii) children of that person's spouse or domestic partner; and (iii) dependents of that person or that person's spouse or domestic partner. 6. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
In the application of the Group's accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may ultimately differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.
Going concern consideration
The assessment of the going concern assumption involves making a judgement by the directors, at a particular point of time, about the future outcome of events or conditions which are inherently uncertain. The directors consider that the Group has the capability to continue as a going concern and the major events or conditions, which may give rise to business risks, that individually or collectively may cast significant doubt upon the going concern assumption are set out in note 3(b).
Impairment of property, plant and equipment
The Group assesses impairment by evaluating conditions specific to the Group that may lead to impairment of the assets. If such condition exists, the recoverable amounts of the assets would be determined by reference to value in use and net selling price. Value in use is determined using the discounted cash flow method. Owing to inherent risks associated with estimations in the timing and magnitude of the future cash flows and net selling prices, the estimated recoverable amount of the assets may be different from its actual recoverable amount and profit or loss could be affected by accuracy of the estimations.
Impairment of receivables
The Group determines impairment losses for bad and doubtful debts resulting from the inability of the customers/debtors/lessee to make the required payments. A considerable amount of estimate and judgement is required in assessing the ultimate realisation of these receivables which is based on the ageing of the receivable balance and customer credit-worthiness. If the financial conditions of customers/debtors/lessee deteriorate, additional allowance for bad and doubtful debts may be required.
Estimate of current tax and deferred tax
The Group is subject to income taxes mainly in the PRC. Significant estimates are required in determining the provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will affect the income tax provisions in the period in which such determination is made.
Inventory valuation
In determining the amount of allowance required for obsolete and slow-moving inventories, the Group assess realisability of the inventories and the Group may make reference to the ageing analysis of the inventories. A considerable amount of judgement and estimation is required in determining such allowance. If conditions which have an impact on the net realisable value of inventories deteriorate, additional allowances may be required.
Valuation of liability component of convertible bonds
The fair values of liability component of convertible loan notes that are not traded in an active market are estimated by management based on the valuation performed by an independent valuer. The fair values of liability component of convertible bonds are valued using discounted cash flow model based on assumptions supported, where possible, by observable market prices or rates.
Deconsolidation of a subsidiary, Shenzhen LED
As explained in note 3(c), the directors of the Company considered that the Group's control over Shenzhen LED had been lost and, therefore, the Company had deconsolidated Shenzhen LED as from 17 April 2010. In determining whether such control had been lost, it involves making a judgement by the directors on three elements, power over the subsidiary, exposure, or rights, to variable returns from the subsidiary, and the ability to use its power to affect those variable returns.
7. REVENUE
An analysis of the revenue from the Group's principal activities (note 1), which is also the Group's turnover, is as follows:
2015 2014
HK$'000 HK$'000
(Restated)
Continuing operations
Revenue from rendering energy
management contracts services 7 33
7 33
Discontinued operation (note
14)
Revenue from sales of LED
element products 16,409 21,903
16,416 21,936
======== ===========
Information about major customers
Revenue from customers contributing over 10% of total revenue of the Group, which are under LED element product segment, is as follows:
2015 2014
HK$'000 HK$'000
Discontinued operation
Customer A 3,789 4,413
Customer B -* 3,067
Customer C 1,802 2,891
Customer D 2,121 2,723
Customer E -* 2,318
======== ========
(*) Revenue from each of Customer B and Customer E did not contribute over 10% of total revenue of the Group during the year ended 30 June 2015.
8. SEGMENT INFORMATION
Operating segments are identified on the basis of internal reports about components of the Group that are regularly reviewed by the chief operating decision maker in order to allocate resources to the segment and to assess their performance.
Segment information reported was analysed on the basis of the types of products sold by the Group's operating division (i.e. LED element products, energy management contracts services and lease financing). The Group's reportable segments are as follows:
Continuing Operations:
- Energy management contracts services - Lease financing
Discontinued Operation:
- LED element products (note 14)
Segment revenues and results
The following is an analysis of the Group's revenue and results from operations by reportable segment.
Continuing operations Discontinued
operation
---------------------------------------------------------------- ---------------------
EMC contracts Lease financing Total LED element products Consolidated
2015 2014 2015 2014 2015 2014 2015 2014 2015 2014
HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000
(Restated) (Restated) (Restated) (Restated) (Restated)
Revenue
and results
Segment
revenue 7 33 - - 7 33 16,409 21,903 16,416 21,936
======= ========== ======= ========== ========== ========== ======== =========== ========== ==========
Segment
results (4,953) (4,927) (686) (1,164) (5,639) (6,091) (4,361) (8,956) (10,000) (15,047)
======= ========== ======= ==========
Other income 292 490 399 279 691 769
Gain on
disposal
of
subsidiaries 19 - - - 19 -
Gain on
disposal
of
discontinued
operation - - 26,382 - 26,382 -
Gain on
extinguishment
of liabilities
by issuing
convertible
loan notes - 826 - - - 826
Write-back
of long
outstanding
payables
and reversal
of
overprovision
in prior
years - 827 - - - 827
Loss on
extinguishment
of financial
liabilities (2,412) - - - (2,412) -
Provision
for impairment
of deposit
paid for
acquisition
of a
subsidiary (2,125) - - - (2,125) -
Provision
for impairment
of trade
and other
receivables - - - (958) - (958)
Provision
for impairment
of finance
lease
receivables (7,159) - - - (7,159) -
Provision
for impairment
of amounts
due from
related
companies (10,907) - - - (10,907) -
Unallocated
depreciation (95) (218) - - (95) (218)
Unallocated
administrative
expense (1,417) (3,016) - - (1,417) (3,016)
Finance
costs (2,121) (1,324) (1,926) (2,271) (4,047) (3,595)
---------- ---------- -------- ----------- ---------- ----------
Loss/(profit)
before
tax (31,564) (8,506) 20,494 (11,906) (11,070) (20,412)
========== ========== ======== =========== ========== ==========
Revenue reported above represents revenue generated from external customers. There were no inter-segment sales during the years ended 30 June 2015 and 2014.
The accounting policies of the reportable segment are the same as the Group's accounting policies described in note 5(r).
Segment (loss)/profit represents the (loss)/profit incurred by each segment without allocation of certain administration costs including directors' salaries, finance costs and income tax expense. This is the measure reported to the chief operation decision maker for the purposes of resource allocation and assessment of segment performance.
Segment assets and liabilities
Continuing operations Discontinued
operation
------------------------------------------------------------- --------------------
EMC contracts Lease financing Total LED element products Consolidated
2015 2014 2015 2014 2015 2014 2015 2014 2015 2014
HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000
(Restated) (Restated) (Restated) (Restated) (Restated)
Segment
assets 7,185 8,714 1,872 283 9,057 8,997 - 14,488 9,057 23,485
======= ========== ======= ==========
Unallocated
assets:
Amount
due from
a former
director 700 3,329 - - 700 3,329
Amounts
due from
a
shareholder/non-controlling
interests 469 - - - 469 -
Amounts
due from
related
companies 1,771 3,333 - - 1,771 3,333
Pledged
bank deposit - 10,024 - - - 10,024
Other receivables 9,759 359 - - 9,759 359
Others 623 102 - - 623 102
------- ---------- ------- ----------- ------- ----------
Consolidated
assets 22,379 26,144 - 14,488 22,379 40,632
======= ========== ======= =========== ======= ==========
Segment
liabilities 4,668 5,295 804 316 5,472 5,611 - 46,711 5,472 52,322
===== ===== === ===
Unallocated
liabilities:
Bank overdrafts - 10,264 - - - 10,264
Amount
due to
a director 3,407 3,574 - - 3,407 3,574
Amounts
due to
related
companies 4,330 3,127 - - 4,330 3,127
Loan from
a former
director - 3,979 - - - 3,979
Convertible
loan notes 10,475 8,581 - - 10,475 8,581
Other payables
and accrued
expenses 17,357 15,525 - 2,942 17,357 18,467
-------- -------- --- ------- -------- --------
Consolidated
liabilities 41,041 50,661 - 49,653 41,041 100,314
======== ======== === ======= ======== ========
For the purposes of monitoring segment performance and allocating resources between segments:
-- all assets are allocated to reportable segments other than unallocated assets including amounts due from a former director and related companies, pledge bank deposit and other debtors. Goodwill is allocated to respective reportable segment as described in note 17. Assets used jointly by reportable segments are allocated on the basis of the revenue earned by individual reportable segments; and
-- all liabilities are allocated to reportable segment other than current tax liabilities and unallocated liabilities including interest payables, bank overdrafts, amounts due to a director and related companies, loans from a former director, convertible loan notes and other payables and accrued expenses. Liabilities for which a reportable segment is jointly liable are allocated in proportion to segment assets.
Discontinued
Continuing operations operation
---------------------------------------------------------------------- -----------------
LED element
EMC contracts Lease financing Unallocated Total products Consolidated
2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014
HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000
(Restated) (Restated) (Restated) (Restated) (Restated) (Restated)
Other
information
Depreciation - - 95 218 - - 95 218 275 66 370 284
Gain on
disposal
of
subsidiaries - - - - (19) - (19) - - - (19) -
Gain on
disposal
of
discontinued
operation - - - - - - - - (26,382) - (26,382) -
Gain on
extinguishment
of liabilities
by issuing
convertible
loan notes - - - - - (826) - (826) - - (826)
Write-back of
long
outstanding
payables and
reversal of
overprovision
in prior years - - - - - (827) - (827) - - - (827)
Loss on
extinguishment
of financial
liabilities - - - - 2,412 - 2,412 - - - 2,412 -
Cost of
defective
inventories
being sold - - - - - - - - - 1,796 - 1,796
Provision for
deposit paid
for
acquisition
of a
subsidiary - - - - 2,125 - 2,125 - - - 2,125 -
Provision for
impairment
loss
of inventories - - - - - - - - - 1,388 - 1,388
Provision for
impairment of
trade and
other
receivables - - - - - - - - - 958 - 958
Provision for
impairment of
finance lease
receivables - - - - 7,159 - 7,159 - - - 7,159 -
Provision for
impairment of
amounts due
from related
companies - - - 10,907 - 10,907 - - - 10,907 -
Additions to
non-current
assets - - 151 310 - - 151 310 - 1,855 151 2,165
======= ======= ======= ======= ======= ======= ======= ======= ======== ======= ======== =======
The Group's revenue from its operations from its major products and services is disclosed in "segment revenue and results".
Geographical information
The Group operates in two principal geographical areas - Hong Kong and the PRC (place of domicile) excluding Hong Kong. The Group's revenue by geographical locations is determined based on the shipment destination instructed by customers. The Group's non-current assets by geographical locations are determined based on physical location of the assets. The Group's revenue from operations from external customers and information about its non-current assets by geographical location are detailed below.
Continuing Discontinued Consolidated
operations operation
--------------------- ---------------------
2015 2014 2015 2014 2015 2014
HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000
(Restated) (Restated) (Restated)
Revenue from external
customers
Hong Kong 7 33 646 1,171 653 1,204
The PRC - - 15,763 20,732 15,763 20,732
-------- ----------- -------- ----------- -------- -----------
7 33 16,409 21,903 16,416 21,936
======== =========== ======== =========== ======== ===========
Non
Non-current
assets
Hong Kong - - - - - -
The PRC 39 134 - 1,923 39 2,057
-------- ----------- -------- ----------- -------- -----------
39 134 - 1,923 39 2,057
======== =========== ======== =========== ======== ===========
Capital expenditure
Hong Kong - - - - - -
The PRC 151 246 - 1,850 151 2,096
151 246 - 1,850 151 2,096
======== =========== ======== =========== ======== ===========
9. OTHER INCOME
2015 2014
HK$'000 HK$'000
(Restated)
Continuing operations
Interest income 29 33
Net foreign exchange gain 217 -
Sundry income 46 457
Gain on disposal of subsidiaries 19 -
(note 37(b))
Gain on extinguishment of
liabilities by issuing convertible
loan notes - 826
Write back of long outstanding
payables and reversal of
overprovision in prior years - 827
311 2,143
Discontinued operation (note
14)
Interest income 399 -
Sundry income - 279
399 279
-------- -----------
710 2,422
======== ===========
10. FINANCE COSTS
2015 2014
HK$'000 HK$'000
(Restated)
Continuing operations
Interest on bank borrowings
and bank overdrafts wholly
repayable within five years 184 255
Interest on other borrowings 43 832
Interest on convertible
loan notes (note 28) 1,894 237
-------- -----------
2,121 1,324
Discontinued operation (note
14)
Interest on bank borrowings
and bank overdrafts wholly
repayable within five years 321 217
Interest on other borrowings 1,605 2,054
-------- -----------
1,926 2,271
-------- -----------
4,047 3,595
======== ===========
11. LOSS BEFORE INCOME TAX
Loss before income tax for continuing operations has been arrived after charging/(crediting):
2015 2014
HK$'000 HK$'000
(Restated)
Continuing operations
Employee benefits expense
(including directors' remuneration):
Wages, salaries and allowance 590 1,158
Pension scheme contributions 15 33
--------- -----------
605 1,191
========= ===========
Auditor's remuneration 556 500
Operating lease rental in
respect of office premises 350 1,006
Depreciation of property,
plant and equipment 95 218
Net foreign exchange (gain)/loss (217) 33
Loss on extinguishment of 2,412 -
financial liabilities
Provision for impairment
of deposit paid for acquisition -
of a subsidiary 2,125
Provision for impairment 7,159 -
of finance lease receivables
Provision for impairment
of amounts due from related 10,907 -
companies
12. INCOME TAX
Hong Kong Profits Tax is calculated at 16.5% (2014:16.5%) of the estimated assessable profits for the year. Under the Corporate Income Tax Law of the People's Republic of China ("PRC"), the statutory income tax rate applicable to the Company's subsidiaries in the PRC is 25%.
Taxation arising in other jurisdictions is calculated at the rates prevailing in the relevant jurisdictions. No provision for current tax expense has been made as the Group incurred a tax loss for both years.
2015 2014
HK$'000 HK$'000
Continuing operations
Tax for the year is as follows:
Income tax expense - -
======== ========
The income tax expense can be reconciled to the accounting loss as follows:
2015 2014
HK$'000 HK$'000
Continuing operations
Loss before tax (31,564) (8,506)
========== ==========
Tax at the Hong Kong Profits
Tax rate of 16.5% (2014:
16.5%) (5,208) (1,403)
Tax effect of expense not
deductible for tax purposes 5,463 1,567
Tax effect of income not
taxable for tax purposes (24) (281)
Effect of different tax
rates of subsidiaries operating
in other jurisdictions (231) 117
---------- ----------
Income tax expense - -
========== ==========
At the end of the reporting period, the Group had unrecognised tax losses arising in Hong Kong of approximately HK$13,403,000 (2014: HK$13,398,000) to carry forward against future taxable income and these tax losses do not expire under current legislation. There were no unrecognised tax losses arising in the PRC as at 30 June 2015 and 2014. No deferred tax asset has been recognised in respect of the unused tax losses incurred by group entities due to the unpredictability of future profit streams.
13. DIRECTORS' REMUNERATION
Directors' emoluments disclosed pursuant to Section 383 of the Hong Kong Companies Ordinance (Cap.622) (the Ordinance) and the Companies (Disclosure of Information about Benefits of Directors) Regulation (Cap.622G) (the Regulation) is as follows:
Salaries, Total Equity settled
allowances and Pension directors' share-based
Directors' fee other benefits schemes emoluments in payment
contributions cash Total
HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000
For the year ended 30 June 2015
Executive
director
Chan Wing Bun
Stephen - 300 15 315 - 315
Independent
non-executive
directors
Stephen
Weatherseed 145 - - 145 - 145
Miu Ka Keung - - - - - -
Kevin (note
(c))
Hao Bo 145 - - 145 - 145
-------------- ---------------
290 300 15 605 - 605
=============== ============== =============== =============== =============== =======
For the year ended 30 June 2014
Executive
directors
Chan Wing Bun
Stephen - 300 15 315 - 315
Independent
non-executive
directors
Stephen
Weatherseed 120 - - 120 - 120
Miu Ka Keung
Kevin (note
(c)) 120 - - 120 - 120
Janagol Harby - - - - - -
(note (d))
Hao Bo 210 - - 210 - 210
--------------- -------------- --------------- --------------- --------------- -------
450 300 15 765 - 765
=============== ============== =============== =============== =============== =======
Notes:
(a) Directors' emoluments, including fees, sums and benefits in kind paid or payable in cash to the directors, are presented pursuant to their employment and other relevant contracts in relation to their directorship.
(b) During the year, no director waived any emoluments (2014: nil). (c) Miu Ka Keung Kevin resigned as non-executive director on 30 November 2014. (d) Janagol Harby resigned as non-executive director on 15 November 2013.
14. DISCONTINUED OPERATION
On 13 April 2015, the Group disposed of its entire 60% equity interest in LED Far East and its subsidiary, Kepu, and its interest in Shenzhen LED for a cash consideration of RMB360,000 (approximately HK$450,000 or GBP37,000) as described in note 1. As the operation and cash flows of which can be clearly distinguished from the rest of the Group and represent separate major line of business, the Group presented the Disposal Group as discontinued operation in accordance with IFRS/HKFRS 5. Profit/(loss) for the year from the discontinued operation is as follows:
2015 2014
HK$'000 HK$'000
Profit/(loss) for the year
from discontinued operation:
Revenue (note 7) 16,409 21,903
Cost of sales (12,184) (21,227)
--------- ----------
Gross profit 4,225 676
Other income (note 9) 399 279
Distribution costs (409) (568)
Administrative expenses (2,440) (5,154)
Other operating expenses (5,737) (4,868)
Finance costs (note 10) (1,926) (2,271)
--------- ----------
Loss before income tax (5,888) (11,906)
Gain on disposal of discontinued 26,382 -
operation (note 37(a))
--------- ----------
Profit/(loss) for the year 20,494 (11,906)
========= ==========
Profit/(loss) for the year
from discontinued operation
attributable to:
Owners of the Company (note
15) 22,849 (7,144)
Non-controlling interests (2,355) (4,762)
--------- ----------
Profit/(loss) for the year 20,494 (11,906)
========= ==========
Cash flow from discontinued
operation:
Operation cash inflows/(outflows) 4,620 (1,027)
Investing cash inflows/(outflows) 156 (1,838)
Financing cash (outflows)/inflows (4,041) 1,283
--------- ----------
Total cash inflows/(outflows) 735 (1,582)
========= ==========
For the purpose of presenting the discontinued operation, the comparative consolidated statement of comprehensive income and the related notes have been re-stated as if the operation discontinued during the year had been discontinued at the beginning of the comparative period.
15. LOSSES PER SHARE
For continuing and discontinued operations
The calculations of the basic and diluted earnings/(losses) per share from continuing and discontinued operations attributable to owners of the Company are based on the following data:
2015 2014
HK$'000 HK$'000
(Restated)
Loss for the purpose of basic and diluted losses per share
Loss for the year attributable to owners of the Company (5,190) (13,237)
================= =================
Number of shares Number of shares
Weighted average number of ordinary shares for the purpose of basic and
diluted losses per
share 9,176,578 5,032,934
================= =================
For continuing operations
The calculations of the basic and diluted losses per share from continuing operations attributable to owners of the Company are based on the following data:
2015 2014
HK$'000 HK$'000
(Restated)
Losses for the purpose of
basic and diluted losses
per share
Loss for the year attributable
to owners of the Company (5,190) (13,237)
Less: (profit)/loss for
the year attributable to
owners of the Company from
discontinued operation (note
14) (22,849) 7,144
----------- -----------
Losses for the year attributable
to owners of the Company
from continuing operations (28,039) (6,093)
=========== ===========
Number Number
of shares of shares
Weighted average number
of ordinary shares for the
purpose of basic and diluted
losses per share 9,176,578 5,032,934
=========== ===========
For continuing operations
Basic and diluted losses per for the continuing operations are HK$3.06 (2014: HK$1.21) based on the loss for the year attributable to the owners of the Company from the continuing operations of approximately HK$28,039,000 (2014: HK$6,093,000) and the weighted average number of ordinary shares as set out above.
For discontinued operation
Basic and diluted earnings per for the discontinued operation are HK$2.49 (2014: basic and diluted losses of HK$1.42) based on the profit for the year attributable to the owners of the Company from the discontinued operation of approximately HK$22,849,000 (2014: loss of HK$7,144,000) and the weighted average number of ordinary shares as set out above.
In calculating the diluted losses per share attributable to the owners of the Company for the year ended 30 June 2015 and 2014, the potential issue of shares arising from the exercise of share options (note 32) and the conversion of the convertible loan notes (note 28) would decrease the losses from continuing operations per share attributable to the owners of the Company and is not taken into account as they have an anti-dilutive effect.
16. PROPERTY, PLANT AND EQUIPMENT
Furniture,
fixtures
Leasehold Plant and Motor
improvement and equipment vehicles Total
machinery
HK$'000 HK$'000 HK$'000 HK$'000 HK$'000
At 1 July 2013
Cost 1,781 9,374 718 819 12,692
Accumulated depreciation (944) (7,084) (586) (496) (9,110)
Accumulated impairment (778) (2,233) (66) (323) (3,400)
Net book amount 59 57 66 - 182
Year ended 30
June 2014
Opening net book
amount 59 57 66 - 182
Additions 224 1,853 88 - 2,165
Disposals, net - - - - -
Depreciation (194) (15) (75) - (284)
Effect of foreign
currency exchange
difference (1) (5) - - (6)
-------------- ------------ ----------- ----------- ----------
Closing net book
amount 88 1,890 79 - 2,057
At 1 July 2014
and 30 June 2014
Cost 2,004 11,222 806 554 14,586
Accumulated depreciation (1,138) (7,099) (661) (276) (9,174)
Accumulated impairment (778) (2,233) (66) (278) (3,355)
Net book amount 88 1,890 79 - 2,057
Year ended 30
June 2015
Opening net book
amount 88 1,890 79 - 2,057
Additions 151 - - - 151
Disposal of discontinued
operation (note
37(a)) (172) (1,624) (3) - (1,799)
Depreciation (68) (265) (37) - (370)
Effect of foreign
currency exchange
difference 1 (1) - - -
-------------- ------------ ----------- ----------- ----------
Closing net book
amount - - 39 - 39
============== ============ =========== =========== ==========
At 30 June 2015
Cost 222 - 256 - 478
Accumulated depreciation (222) - (217) - (439)
Net book amount - - 39 - 39
============== ============ =========== =========== ==========
17. GOODWILL
2015 2014
HK$'000 HK$'000
Cost 28,107 28,107
Accumulated impairment
losses (28,107) (28,107)
- -
========= ============
Cost:
Balance at beginning
of year 28,107 28,107
Derecognised on disposal
of subsidiaries (28,107) -
--------- ---------
Balance at end of
year - 28,107
========= =========
Accumulated Impairment
losses:
Balance at beginning
of year 28,107 28,107
Derecognised on disposal
of subsidiaries (28,107) -
---------- ---------
Balance at end of
year - 28,107
========== =========
The carrying amount of goodwill after impairment is allocated to the Group's CGU identified according to operating segment as follows:
2015 2014
HK$'000 HK$'000
LED element products - -
======== ========
LED element products
As detailed in note 37(a), LED Far East and its subsidiaries were disposed of on 13 April 2015 and the corresponding goodwill arising from acquisition and impairment loss recognised in prior year of approximately HK$28,107,000 were written off for the year.
As the goodwill for this CGU had been fully impaired in the prior year, no impairment test for goodwill was carried out during the year ended 30 June 2015 and 2014.
18. DEPOSIT PAID FOR ACQUISITION OF A SUBSIDIARY
The amount represented the deposit paid for the acquisition of a 100% equity interest in Shenzhen Green Pearl Energy Management Technology Development Company Limited as at 30 June 2015, 2014 and 2013.
2015 2014 2013
HK$'000 HK$'000 HK$'000
Deposit paid for acquisition of a subsidiary 2,125 2,125 2,125
Less: provision for impairment (2,125) - -
-------- -------- --------
- 2,125 2,125
======== ======== ========
During the year, the management assessed that the deposit was impaired due to the uncertainty of proceeding with the completion of the acquisition by the Company.
19. INVENTORIES
2015 2014 2013
HK$'000 HK$'000 HK$'000
Raw materials and consumables 1,573 3,858 3,516
Work in progress 240 1,472 1,594
Finished goods 726 1,008 1,553
-------- -------- --------
2,539 6,338 6,663
======== ======== ========
20. TRADE AND OTHER RECEIVABLES
2015 2014 2013
HK$'000 HK$'000 HK$'000
Trade receivables (note (c)) 3 8,746 8,463
Less: allowance for doubtful debts - (2,389) (1,576)
-------- --------- ---------
3 6,357 6,887
Other debtors (note (a) and (b)) 14,483 5,912 6,949
Deposits 194 608 424
Prepayments 449 395 325
-------- --------- ---------
Other debtors, deposits and prepayments 15,126 6,915 7,698
-------- --------- ---------
15,129 13,272 14,585
======== ========= =========
Note:
(a) Other debtors as at 30 June 2015 included receivables of approximately HK$10,000,000 (2014: nil; 2013: nil) from an independent third party, against which a director of the Company who is also the owner of Convertible Loan Notes as disclosed in note 28 has provided undertaking as to the recoverability of that amount.
(b) Other debtors as at 30 June 2014 included a receivable of approximately HK$1,301,000 (2013: nil) from a related party, who was a director of the Company's subsidiary. The maximum balance outstanding during the year ended 30 June 2014 was approximately HK$2,162,000.
(c) Trade receivables as at 30 June 2013 included a trade receivable of approximately HK$1,185,000 from a related company, Shenzhen Fu Shi Jia Electronic Technology Company Limited. The maximum balance outstanding during the year ended 30 June 2013 was approximately HK$1,185,000. One of the key management personnel of the Company's subsidiary, Kepu had beneficial interests in this related company.
At 30 June 2015, an amount of approximately HK$219,000 of trade and other receivables (2014: approximately HK$12,896,000; 2013: approximately HK$12,995,000) of the Group was denominated in RMB.
The credit period on sales of goods was within a range of 30-90 days from the invoice date. Trade receivables disclosed above include amounts which are past due at the end of the reporting period but against which the Group has not recognised an allowance for doubtful receivables based on a review of the credit history of its customers, indication of financial difficulties, default in payments and current market conditions, and the amounts (which include interest accrued) are still considered recoverable. The Group does not hold any collateral or other credit enhancement over these balances nor does it have a legal right of offset against any amounts owed by the Group to the counterparty.
The ageing analysis (based on due date) of the Group's trade receivables that are past due but not impaired at the reporting date is as follows:
2015 2014 2013
HK$'000 HK$'000 HK$'000
Overdue by:
Within 1 month - 760 4,991
1-3 months - 405 593
Over 3 months 3 3,964 1,303
-------- -------- --------
3 5,129 6,887
======== ======== ========
As at 30 June 2014, trade receivables that were past due but not impaired relate to a large number of diversified customers that have a good track record of credit with the Company. Based on past credit history, management believes that no impairment allowance is necessary in respect of these balances as there has not been a significant change in credit quality and no recent history of default and the balances are still considered fully recoverable.
The following is the movement in the allowance for doubtful debts:
2015 2014 2013
HK$'000 HK$'000 HK$'000
Balance at the beginning of the year 2,389 1,576 2,001
Impairment loss of prior year written off against trade receivables
- (130) -
Impairment loss for the year - 958 -
Written off allowance upon disposal - - (447)
Disposal of discontinued operation (2,386) - -
Foreign exchange translation (3) (15) 22
-------- -------- --------
Balance at the end of the year - 2,389 1,576
======== ======== ========
As at 30 June 2014, trade receivables of approximately HK$2,389,000 (2013: HK$1,576,000) were fully impaired. The impaired receivables mainly relate to customers that were in financial difficulties and have prolonged delay in repayment and management assessed that the entire amount of the receivable balances is unlikely to be recovered.
Ageing of impaired trade receivables:
2015 2014 2013
HK$'000 HK$'000 HK$'000
Overdue by:
Over 3 months - 2,389 1,576
========== ======== ========
21. FINANCE LEASE RECEIVABLES
Certain of the machineries and equipments are leased out under finance leases. All interest rates inherent in the leases are fixed at the contract date over the lease terms.
Present value of minimum lease payment
Minimum lease payments
----------------------------- -------------------------------------------
2015 2014 2013 2015 2014 2013
HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000
Finance lease receivables
comprise:
* Within one year 8,818 - - 7,159 - -
-------- -------------
8,818 - - 7,159 - -
Less: Unearned finance income (1,659) - - - - -
Less: Allowance for doubtful
debts (7,159) - - (7,159) - -
-------- -------------
Present value of minimum lease
payment receivables - - - - - -
========= ======== ======== ============= ============= =============
Analysed for reporting purposes
as:
- - -
* Current assets
============= ============= =============
Effective interest rate of the above finance lease is 20% per annum.
There was no unguaranteed residual value in connection with finance lease arrangements or contingent lease arrangements of the Group that needed to be recorded as at 30 June 2015.
Finance lease receivables are secured over the machineries and equipments leased. In addition to the leased assets, all finance lease receivables are secured by personal guarantee from a director of the lessee.
The ownership of leased assets will be transferred to the lessees at a purchase option of RMB1 upon the settlement of the receivables under the finance lease arrangement and the interest accrued under the lease arrangement.
The following is the movement in the allowance for doubtful debts:
2015 2014 2013
HK$'000 HK$'000 HK$'000
Balance at the beginning - - -
of the year
Impairment loss (7,159) - -
for the year
Balance at the end
of the year (7,159) - -
As at 30 June 2015, finance lease receivables of approximately HK$7,159,000 were fully impaired. The impaired receivables mainly relate to a customer that has prolonged delay in repayment and management assessed that the entire amount of the receivable balances is unlikely to be recovered.
The fair value of receivable under finance lease arrangement approximates to its carrying amount.
The Group's finance lease receivables are denominated in RMB, the functional currency of the relevant group entity.
22. PLEDGED BANK DEPOSIT
As at 30 June 2014, the amount represented a deposit pledged to a bank to secure banking facilities (note 25(c)) granted to the Group.
23. CASH AND BANK BALANCES
2015 2014 2013
HK$'000 HK$'000 HK$'000
Cash and bank balances in the consolidated statement of financial positions 1,732 154 1,403
Less: Bank overdrafts (note 25) - (10,264) (10,021)
Cash and cash equivalents in the consolidated statement of cash flows 1,732 (10,110) (8,618)
24. TRADE AND OTHER PAYABLES
2015 2014 2013
HK$'000 HK$'000 HK$'000
Trade payables 1,872 13,732 11,169
Other payables (note (a) and (b)) 9,554 29,912 23,228
Accrued expenses (note (c)) 11,763 14,427 14,509
Deposits received - 310 313
23,189 58,381 49,219
Notes:
(a) Other payables as at 30 June 2015 included a payable of approximately HK$1,533,000 (2014: nil) to a related party, who is the owner of a substantial shareholder company of the Company. Such balance arose from receipts of approximately HK$32,574,000 from such related party during the year, of which approximately HK$31,041,000 was credited to the share capital of the Company as part of the proceeds from the issue of shares as disclosed in note 29(d).
(b) Other payables as at 30 June 2014 included payables of HK$2,744,000 (2013: nil) due to related parties, who are directors of the Company's subsidiary.
(c) Included in the balance of accrued expenses of the Group as at 30 June 2015 were salaries payable to former directors/directors of approximately HK$6,350,000 (2014: HK$7,600,000; 2013: HK$8,019,000).
25. BORROWINGS
2015 2014 2013
Current liabilities HK$'000 HK$'000 HK$'000
Bank borrowings - secured (note (a)) - 3,122 3,153
Bank borrowings - unsecured (note (b)) - 1,454 -
Bank overdrafts (note (c)) - 10,264 10,021
Other borrowings - secured ((notes (d) and (e)) - 5,286 4,832
Other borrowings - unsecured ((note (f)) - 409 -
- 20,535 18,006
Notes:
(a) As at 30 June 2014, the secured bank borrowings were denominated in RMB. The carrying amounts were equivalent to RMB2,480,000 (2013: RMB2,480,000) and were bearing interest at 120% to 140% of the benchmark lending rate in the PRC per annum (2013: 106% to 125% of the benchmark lending rate in the PRC per annum). The secured bank borrowings were secured by personal guarantees and a charge over a property owned by key management personnel of a subsidiary.
(b) As at 30 June 2014, the unsecured bank borrowing was denominated in RMB. The carrying amounts were equivalent to RMB1,155,000 (2013: nil) and bearing interest at 130% of the benchmark lending rate in the PRC per annum (2013: nil).
(c) As at 30 June 2014, the bank overdrafts were denominated in HK$ and obtained under banking facilities granted to the Group. The bank overdrafts were interest bearing at the fixed deposit rate plus 2.25% per annum. The banking facilities were secured by a pledged deposit of approximately HK$10,024,000 (2013: HK$10,110,000) (note 22) and the Group was required to ensure that Mr. Stephen Chan continued to hold directorships of the Company and (ii) Mr. Stephen Chan to hold not less than 20% shareholdings of the Company. On 27 August 2013, the relevant bank revised the banking facilities with requirement (ii) removed.
(d) As at 30 June 2014, the secured other borrowings of approximately HK$2,769,000 (2013: HK$2,769,000) was denominated in RMB. The carrying amount was equivalent to RMB2,200,000 (2013: RMB2,200,000) and was arranged at fixed interest rates of 3.5% (2013: 3.5%) per month. The loan was due on 6 May 2013 and became immediately repayable on demand. The secured borrowing was secured by the assets of a subsidiary. However, the pledge is contrary to the terms of borrowing as detailed in note 25(a). The bank, as mentioned in note 25(a), had the right to demand repayment of the borrowing immediately.
(e) As at 30 June 2014, including in the secured other borrowings, approximately HK$2,517,000 (2013: nil) was denominated in RMB. The carrying amount was equivalent to RMB2,000,000 (2013: nil) and was arranged at fixed interest rate of 0.05% per day. The loan was due on 6 August 2014. The secured borrowing was secured by the property of a director of the Company's subsidiary.
(f) As at 30 June 2014, included in the unsecured other borrowings, approximately HK$409,000 (2013: nil) was denominated in RMB. The carrying amount was equivalent to RMB325,000 (2013: nil) and was arranged at fixed interest rate of 3% (2013: nil) per month. The loan was due on 10 December 2013.
26. AMOUNTS DUE FROM/TO A DIRECTOR/A SHAREHOLDER/NON-CONTROLLING INTERESTS/A FORMER DIRECTOR/RELATED COMPANIES
The amounts due from/to a director/a shareholder/non-controlling interests/a former director/related companies are unsecured, interest-free and repayable on demand.
The following is the movement in the allowance for doubtful debts:
2015 2014 2013
HK$'000 HK$'000 HK$'000
Balance at the beginning of the year - - -
Impairment loss for the year (10,907) - -
Balance at the end of the year (10,907) - -
As at 30 June 2015, amounts due from related companies of approximately HK$10,907,000 were impaired. The impaired receivables mainly relate to related companies that have prolonged delay and uncertainty in repayment and management assessed that the entire amounts of the balances due from are unlikely to be recovered.
27. LOANS FROM A FORMER DIRECTOR/LOANS FROM A DIRECTOR
As at 30 June 2014, a loan from a former director to the Group and the Company of approximately HK$600,000 was interest-bearing at a rate of three months LIBOR plus 4% per annum and repayable on demand and approximately HK$3,379,000 was interest-bearing at the rate of three months LIBOR plus 4% per annum and repayable on 7 September 2014. On 30 September 2014, 442,118 ordinary shares of the Company were issued to the former director to settle the liabilities with him in the net amount of approximately HK$2,872,000.
As at 30 June 2013, a loan from a director of approximately US$1,282,000 (equivalent to HK$10,000,000) to the Group was interest-bearing at rate of 9% per annum and due for repayment within the next twelve months and the interest would be settled in the form of the shares of the Company. The fair value of the liability component and the equity component (note 30) were determined at inception of the received loan. The fair value of the liability component was calculated using a market interest rate for a similar loan and subsequently measured at amortised cost. The residual amount, representing the value of the equity as shares to be issued, was included in shareholders' equity (note 30). The loan was secured by a charge over Green Pearl BVI's entire shareholding in its subsidiary, Carten (note 34).
28. CONVERTIBLE LOAN NOTES
On 27 March 2014, a subsidiary of the Company, Green Pearl BVI, entered into an agreement (the "CN agreement") with a director of the Company, Mr. Stephen Chan, to issue convertible loan notes (the "Convertible Loan Notes") in the aggregate principal amount of US$1,282,000 with maturity date of 31 December 2015 to settle his loan of US$1,282,000 to the Group and its interest. The Convertible Loan Notes are interest-bearing at a rate of 9% per annum and convertible into shares of Green Pearl BVI at a conversion price of US$2.589 per share of Green Pearl BVI. At any time on or after the date of issuance of the Convertible Loan Notes, the noteholder may require the issuer to convert any or all his Convertible Loan Notes (in multiples of not less than US$1,000) into shares of Green Pearl BVI at the conversion price by written notice. A total of 495,172 shares of Green Pearl BVI will be allotted and issued upon full conversion of the Convertible Loan Notes. In accordance with the CN Agreement, Green Pearl BVI has a right to redeem the Convertible Loan Notes at their principal amount and interest accrued up to the date of redemption by a 7 day written notice to the director at any time from the date of issuance (the "Call Option"). On the same date, the Company and Mr. Stephen Chan entered into a sale and purchase agreement (the "Share Swap Agreement") to exchange 495,000 ordinary shares of Green Pearl BVI into 4,000,000 ordinary shares of the Company (the "Share Swap"). The interest on the Convertible Loan Notes shall be satisfied by the issue of ordinary shares of the Company on redemption or maturity date, calculated by reference to the closing middle market price of the Company's share on the date of redemption or maturity. On 27 March 2014, the Convertible Loan Notes were issued to Mr. Chan.
From the Group's perspective, the Convertible Loan Notes are separated into two components: a financial liability and an equity instrument.
On initial recognition, the fair value of the consideration in respect of the liability component was measured first, at the fair value of a similar liability that does not have any associated equity conversion option. The equity component was measured at the fair value after deducting from the fair value of the Convertible Loan Notes as a whole the amount separately determined for the liability portion.
On initial recognition, 27 March 2014, the fair value of the liability component of the Convertible Loan Notes was calculated at the present value of the estimated coupon interest payments and principal amount. The discount rate used in the calculation is 11.86% representing the cost of debt applicable to the Company for a similar financial instrument without equity conversion option. The fair value of the equity component was determined by reference to valuations performed by Grant Sherman Appraisals Limited, independent professionally qualified valuers, using the Binomial Option Pricing Model. Details of the parameters and assumptions used in the model are as follows:
27 March 2014
Share price of the Company GBP0.180
Expected dividend yield 0%
Expected volatility 71.38%
Risk-free rate 0.95%
Credit spread 8.91%
Liquidity risk premium 2.00%
Subsequently, the financial liability component is carried at amortised cost using the effective interest rate of 22.7% while the equity component remains in equity until conversion or redemption.
The movements of the liability and equity components of the Convertible Loan Notes are set out below:
Liability Equity
component component Total
HK$'000 HK$'000 HK$'000
Initial recognition on 27 March 2014, as previously reported 10,000 - 10,000
Correction of prior year errors of convertible notes loans (note 4) (1,656) 1,656 -
Initial recognition on 27 March 2014, as restated 8,344 1,656 10,000
Imputed interest expense recognised (note 10) 237 - 237
At 30 June 2014 and 1 July 2014 8,581 1,656 10,237
Imputed interest expense recognised (note 10) 1,894 - 1,894
At 30 June 2015 10,475 1,656 12,131
At 30 June 2015, none of the Convertible Loan Notes had been converted into ordinary shares of Green Pearl BVI.
29. SHARE CAPITAL
Number of
Notes ordinary shares Total
HK$'000
Authorised
At 30 June 2013, ordinary shares of HK$0.1 each 700,000,000 700,000
Increase in authorised share capital (b) 4,300,000,000 4,300,000
Share consolidation (c) (4,950,000,000) (4,950,000)
The concept of authorised share capital
abolished on 3 March 2014 30(a) (50,000,000) (50,000)
At 30 June 2014 and 30 June 2015 - -
The movements of the Company's issued share capital are as follows:
Number of shares
Notes Share capital
HK$'000
Issued and fully paid
At 30 June 2013 and 1 July 2013 503,293,492 50,329
Issue of shares (a) 8 -
Share consolidation (c) (498,260,566) -
Transition to no-par value regime on 3 March 2014 30(a) - 116,517
At 30 June 2014 and 1 July 2014 5,032,934 166,846
Issue of shares (d) 3,875,000 38,644
Issue of shares for the extinguishment of loans (e)(f) 532,875 5,873
At 30 June 2015 9,440,809 211,363
Notes:
(a) On 26 February 2014, 8 new ordinary shares were issued at HK$0.1 per ordinary share to an independent third party.
(b) Pursuant to a resolution passed by the shareholders of the Company at the annual general meeting of the Company held on 26 February 2014, the authorised share capital of the Company was increased from HK$70,000,000 divided into 700,000,000 ordinary shares of the Company of HK$0.1 each to HK$500,000,000 divided into 5,000,000,000 ordinary shares of HK$0.1 each was approved.
(c) On 26 February 2014, the consolidation of ordinary shares in the share capital of the Company (on the basis that every 100 then existing issued and unissued ordinary shares of HK$0.10 each were consolidated into 1 ordinary share of HK$10 each) was approved and the share consolidation was effective from 27 February 2014.
(d) On 11 July 2014, 3,875,000 new ordinary shares were issued at HK$9.97 per ordinary share to independent third parties. Part of the proceeds from such share issues were received as to approximately HK$31,041,000 during the year as disclosed in note 24(a)
(e) On 30 September 2014, 457,443 new ordinary shares of 85.5 pence each were issued in full to settle financial liabilities of approximately HK$2,971,000 (note 38(b)).
(f) On 30 January 2015, 75,432 new ordinary shares of 107.5 pence each were issued in full to settle financial liabilities of approximately HK$490,000 (note 38(b)).
30. RESERVES
The reconciliation between the opening and closing balances of each component of the Group's consolidated reserve is set out in the consolidated statement of changes in equity. Details of the changes in the Company's individual components of reserve between the beginning and the end of the year are set out below:
Share premium Shares to be issued Capital reserve Accumulated losses Total reserve
HK$'000 HK$'000 HK$'000 HK$'000 HK$'000
The Company
Balance at 1 July
2013 116,517 826 348 (208,778) (91,087)
Total comprehensive
expense for the
year - - - (6,022) (6,022)
Transition to
no-par value
regime on 3 March
2014 (note (a)) (116,517) - - - (116,517)
Extinguishment of
liabilities (note
(b)) - (826) - - (826)
Shares to be issued
for new share
placing (note (b)) - 7,603 - - 7,603
Balance at 30 June
2014, as restated - 7,603 348 (214,800) (206,849)
Balance at 1 July
2014, as
previously
reported - 8,429 348 (214,800) (206,023)
Correction of prior
year
errors/transition
difference on
convertible loan
notes (note 4) - (826) - - (826)
Balance at 1 July
2014, as restated - 7,603 348 (214,800) (206,849)
Total comprehensive
expense for the
year - - - (12,426) (12,426)
Issue of new shares
(note (b)) - (7,603) - - (7,603)
Balance at 30 June
2015 - - 348 (227,226) (226,878)
The Group
(a) Share premium
Share premium comprises the difference between the consolidated shareholders' fund of LED Far East and its subsidiaries at the date in which the group restructuring became effective and the nominal amount of the Company's shares issued under the group restructuring, and premium arising from the issue of shares at a price in excess of their par value. Under Section 135 of the Hong Kong Companies Ordinance, Cap. 622 (the "New Companies Ordinance"), which commenced operation on 3 March 2014, the concepts of "authorised share capital" and "par value" no longer exist. As part of the transition to the no-par value regime, the amount standing to the credit of the share premium account of HK$121,941,000 and the debit of the capital reserve of HK$5,424,000 respectively in the consolidated statement of changes in equity, and the credit of the share premium account of HK$116,517,000 in the statement of changes in equity on 3 March 2014, have become part of the Company's share capital, under the transitional provisions set out in Schedule 11 of the New Companies Ordinance. These changes do not have an impact on the number of shares in issue or the relative entitlement of any of the members.
(b) Shares to be issued
Pursuant to the subscription agreements in relation to shares to be issued to two potential investors, the Company shall issue 3,875,000 new ordinary shares at approximately HK$9.93 per ordinary share (the "Placing") for a total cash consideration of RMB31,000,000 (approximately HK$38,490,000) (before expenses). The net proceeds of the Placing shall be used for general working capital of the Company. As at 30 June 2014, the shares have not yet been issued and deposits received of RMB6,000,000 (approximately approximately HK$7,603,000) for the Placing have been recognised as "shares to be issued" in the equity. On 11 July 2015, 3,875,000 new ordinary shares were issued for the Placing.
The shares to be issued in respect of the director's loan represented the residual amount after deducting the fair value of the loan from the total proceeds received. On 27 March 2014, the Convertible Loan Notes (note 28) was issued to settle the loan from a director and the loan interest. The loan interest originally to be settled by shares and recognised as shares to be issued in respect of the director's loan amounted to HK$826,000, therefore, recycled to extinguish financial liabilities by the Convertible Loan Notes.
(c) Capital reserve
The capital reserve comprises (i) the grant date fair value of unexercised share options granted to the Company's nominated adviser and broker, and to the management of the Group recognised in accordance with the accounting policy adopted for share-based payments in note 5(o), and (ii) the difference between the fair value and par value of the shares issued for the acquisition of a subsidiary.
(d) Convertible loan notes equity reserve represents the amount allocated to the equity component of Convertible Loan Notes issued by the Group recognised in accordance with the accounting policy adopted for Convertible Loan Notes in note 5(i).
(e) Exchange reserve
The exchange reserve comprises all foreign exchange differences arising from the translation of the financial statements of foreign operations. The reserve is dealt with in accordance with the accounting policy set out in note 5(l).
(f) PRC statutory reserve
Transfer from retained profits to the PRC statutory reserve is made in accordance with the relevant PRC rules and regulations and the articles of association of the Group's subsidiaries established in the PRC and have been approved by the respective boards of directors.
Subsidiaries in the PRC are required to transfer at least 10% of net profits, as determined in accordance with PRC accounting rules and regulations, to the general reserve fund until the reserve balance reaches 50% of the registered capital. The transfer to this fund must be made before distribution of dividend to owners.
The general reserve fund can be used to make good previous years' losses, if any, and may be converted into paid-up capital provided that the balance of the general reserve fund after such conversion is not less than 25% of their registered capital.
31. RETIREMENT BENEFIT PLANS
The Group operates pension schemes for all qualifying employees in Hong Kong and the PRC. The assets of the plans are held separately from those of the Group in funds under the control of trustees. The total expense recognised in the consolidated statement of comprehensive income of approximately HK$40,000 (2014: approximately HK$947,000) represents contributions payable to these plans by the Group at rates specified in the rules of the plans.
32. SHARE-BASED PAYMENT TRANSACTIONS
The Company's management option agreement is established for the purpose of providing incentives to the directors and the employees of the Group. The following table discloses the movement of share options granted during the years ended 30 June 2015 and 2014:
For the year ended 30 June 2015
Number of shares issuable under options
granted
Movement
Category of Exercise Outstanding during the Outstanding
eligible price per as at year ended as at
Date of grant party Exercise share 1 July 2014 30 June 2015 30 June 2015
period
13 January
2011
to 12 January 1.6313
13 January 2011 Director 2016 pounds(1) 25,000 - 25,000
25,000 - 25,000
For the year ended 30 June 2014
Number of shares issuable under options
granted
Share
consolidation
Category of Exercise Outstanding during the year Outstanding
eligible price per as at ended 30 June as at
Date of party Exercise share 1 July 2013 2014 30 June
grant period 2014
13 January
2011
13 January to 12 January 1.6313
2011 Director 2016 pounds(1) 2,500,000 (2,475,000)(1) 25,000
2,500,000 (2,475,000) 25,000
Notes:
1. The effect of share consolidation (note 29(c)) was taken into account. The exercise price of the share options has been changed from 1.6313 pence to 1.6313 pounds as a result of the share consolidation passed by the shareholders at the annual general meeting of the Company held on 26 February 2014, whereby every 100 shares of the Company of HK$0.10 each were consolidated into 1 ordinary share of HK$10 each.
No share options were granted or vested during the years ended 30 June 2015 and 2014.
The share options outstanding at 30 June 2015 had a weighted average remaining contractual life of 0.54 years (2014: 1.54 years).
33. HOLDING COMPANY STATEMENT OF FINANCIAL POSITION
Notes At 30 June 2015 At 30 At 1
June July
2014 2013
HK$'000 HK$'000 HK$'000
ASSETS AND LIABILITIES (Restated)
Non-current assets
Investments in subsidiaries 5,338 80 41
Current assets
Trade and other receivables 9,759 359 712
Amounts due from subsidiaries - 229 -
Amount due from a former director 700 3,329 3,497
Amount due from a shareholder/non-controlling interests
1,037 - -
Amount due from a related company
- 3,333 -
Pledged bank deposit - 10,024 10,110
Cash and bank balances 55 91 66
11,551 17,365 14,385
Current liabilities
Trade and other payables 17,716 15,807 15,829
Borrowings - 9,964 10,021
Amounts due to subsidiaries 11,336 25,557 24,693
Amount due to a director 474 463 185
Amounts due to related companies 2,878 1,678 477
Loan from a former director - 3,979 600
32,404 57,448 51,805
Net current liabilities (20,853) (40,083) (37,420)
Non-current liability
Loan from a former director - - 3,379
Net liabilities (15,515) (40,003) (40,758)
EQUITY
Share capital 29 211,363 166,846 50,329
Reserves 30 (226,878) (206,849) (91,087)
Capital deficiency (15,515) (40,003) (40,758)
On behalf of the Board
Stephen Weatherseed Stephen Chan
Director Director
34. INTERESTS IN SUBSIDIARIES
The particulars of the subsidiaries at 30 June 2015 are as follows:
Place of incorporation/ Effective
establishment and Particulars of issued share capital/ interests
operation registered capital held by the Principal activities
Name of subsidiaries Company
Green Pearl Energy Conservation Holdings Limited ("Green Pearl BVI") The British Virgin Islands 5,000 ordinary shares of US$0.1 each 60% Investment holding
(the "BVI") (Direct)
( ) ("Green Pearl China") (note (a)) The PRC Registered capital of Renminbi ("RMB") 100% Lease financing
100,000,000 (Direct)
Green Pearl Energy Management Limited ("Green Pearl") Hong Kong ("HK") HK$1 60% Provision for energy management services and products
(Indirect)
Carten International Limited ("Carten") HK HK$1 60% Investment holding
(Indirect)
Notes:
(a) On 5 December 2014, the Company had made the capital contribution of approximately HK$20,800,000 (equivalent to RMB16,535,803) to Green Pearl China.
The following table lists out the information relating to a subsidiary of the Group which has material non-controlling interests (NCI). The summarised financial information presented below represents the amounts before any inter-company elimination.
2015 2014 2013
HK$'000 HK$'000 HK$'000
Continuing operations
Green Pearl
NCI percentage 40% 40% 40%
As at 30 June
Current assets 91 96 94
Current liabilities (17,334) (12,567) (6,612)
Net liabilities (17,243) (12,471) (6,518)
Carrying amount of NCI (6,897) (4,988) (2,607)
For the year ended 30 June
Revenue 7 33 373
Loss for the year (4,772) (5,952) (6,457)
Loss allocated to NCI (1,909) (2,381) (2,583)
Cash flows from operating activities (598) (922) (1,801)
Cash flows from investing activities - - -
Cash flows from financing activities 723 920 1,675
35. CAPITAL RISK MANAGEMENT
The Group manages its capital to ensure that the Group will be able to continue as going concern while maximising the return to shareholders through the optimisation of the debt and equity balance. The Group's overall strategy remains unchanged from the year ended 30 June 2014.
The Group manages its capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of the underlying assets. To maintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders, return capital to shareholders, issue new shares, or sell assets to reduce debt.
In order to safeguard the Group's ability to continue as a going concern, the Group has adopted certain measures as disclosure in note 3(b).
The capital structure of the Group consists of net debt (which included bank overdrafts, bank borrowings and loans from a director/former director), cash and bank balances and equity attributable to shareholders of the Company (comprising issued share capital, reserves and accumulated losses and non-controlling interests).
As at 30 June 2015, the Group had net current liabilities and a capital deficiency of approximately HK$18,701,000 and HK$18,662,000 respectively. Details of the consideration of the Group's going concern basis in preparing these financial statements are provided in notes 3(b).
No gearing ratio is presented as the Group had net liabilities at the end of the reporting period.
36. FINANCIAL INSTRUMENTS
Categories of financial instruments
The carrying amounts of the Group's financial instruments as at 30 June 2015 and 2014 are as follows:
2015 2014 2013
HK$'000 HK$'000 HK$'000
Financial assets (Restated)
Loan and receivables
Financial assets included in trade and other receivables 14,680 12,877 14,260
Finance lease receivables - - -
Amount due from a former director 700 3,329 3,497
Amounts due from a shareholder/non-controlling interests
469 - -
Amounts due from related companies 1,771 3,333 -
Pledged bank deposit - 10,024 10,110
Cash and bank balances 1,732 154 1,403
---------
19,352 29,717 29,270
=========
Financial liabilities
At amortised cost:
Financial liabilities included in trade and other payables 23,189 58,071 48,906
Borrowings - 20,535 18,006
Amount due to a director 3,047 3,574 1,655
Amounts due to a shareholder/non-controlling interests - 568 550
Amounts due to related companies 4,330 3,127 1,310
Loan from a former director/a director - 3,979 14,139
Convertible loan notes 10,475 8,581 -
---------
41,041 98,435 84,566
=========
Financial risk management and objectives
The Group's major financial instruments include trade and other receivables, finance lease receivables, amounts due from/to a former director/a director, a shareholder/non-controlling interests and related companies, pledged bank deposit, cash and bank balances, trade and other payables, borrowings and convertible loan notes. Details of these financial instruments are disclosed in respective notes. The risks associated with these financial instruments and the policies on how to mitigate these risks are set out below. These risks include market risk (including foreign currency risk, interest rate risk and other price risks), credit risk and liquidity risk. Management manages and monitors these exposures to ensure appropriate measures are implemented in a timely and effective manner.
Foreign currency risk management
The Group has minimal exposure to foreign currency risk as most of its business transactions, assets and liabilities are denominated in a functional currency of the operation (i.e. HK$ and RMB). The Group currently does not have a foreign currency hedging policy in respect of foreign currency operation transactions, assets and liabilities. The Group monitors its foreign currency exposure closely and considers hedging significant foreign currency exposure should the need arise.
Interest rate risk management
The Group's cash flow interest rate risk relates primarily to variable-rate borrowings. The Group's cash flow interest rate risk is mainly concentrated on the fluctuation of the benchmark lending rate of the PRC from the Group's RMB bank borrowing. The Group does not use derivative financial instruments to hedge its interest rate risk.
The sensitivity analyses below have been determined based on the exposure to interest rates for non-derivative instruments at the end of the reporting period. The analysis is prepared assuming the financial instruments outstanding at the end of the reporting period were outstanding for the whole year. A 50 basis points (2014: 50 basis points; 2013: 50 basis points) increase or decrease is used when reporting interest rate risk internally to key management personnel and represents management's assessment of the reasonably possible change in interest rates.
If the floating rates had been 50 basis points higher/lower, with all other variables held constant, the Group's loss before tax for the year ended 30 June 2015 would increase/decrease by approximately HK$8,000 (2014: approximately HK$23,000; 2013: approximately HK$16,000).
Other price risks
The Group has minimal exposure to price risk as the Group did not have any listed equity securities investments at 30 June 2015, 2014 and 2013.
Credit risk
Credit risk refers to the risk that the counterparty to a financial instrument would fail to discharge its obligation under the terms of the financial instrument and cause a financial loss to the Group.
In order to minimise the credit risk, management of the Group has delegated a team responsible for determination of credit limits, credit approvals and other monitoring procedures to ensure that follow-up action is taken to recover overdue debts. In addition, the Group regularly reviews the recoverable amount of each individual trade debt at the end of the reporting period to ensure that adequate impairment allowances are made for irrecoverable amounts. In this regard, management of the Group considers that the Group's credit risk is significantly reduced.
The credit risk on liquid funds is limited because the counterparties are banks with high credit ratings assigned by international credit-rating agencies.
As at 30 June 2015 and 2014, trade and other receivables, amounts due from a former director, a shareholder/non-controlling interests and related companies, pledged bank deposit and cash and bank balances represent the Group's maximum credit risk exposure.
As at 30 June 2015, the Group has a certain concentration of credit risk as other receivables of approximately HK$10,000,000 were due from a debtor.
As at 30 June 2014, the Group has a certain concentration of credit risk as 11% and 45% of the total trade receivables were due from the Group's largest customer and the five largest customers respectively.
Liquidity risk
Ultimate responsibility for liquidity risk management rests with the board of directors, which has built an appropriate liquidity risk management framework to meet the Group's short, medium and long-term funding and liquidity management requirements. The Group manages liquidity risk by monitoring adequate reserves, banking facilities and reserve borrowing facilities, by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities.
Liquidity tables
The following tables detail the Group's remaining contractual maturity for its non-derivative financial liabilities based on the agreed repayment terms. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be required to pay. The tables include both interest and principal cash flows.
Maturities of the financial liabilities of the Group as at 30 June 2015 and 2014 were as follows:
2015 2014 2013
HK$'000 HK$'000 HK$'000
(Restated)
Total amounts of contractual undiscounted obligations:
Non-derivative financial liabilities
Financial liabilities included in trade and other payables 23,189 58,071 48,906
Borrowings - 20,535 18,006
Amount due to a director 3,047 3,574 1,655
Amounts due to a shareholder/non-controlling interests - 568 550
Amounts due to related companies 4,330 3,127 1,310
Loans from a former director/directors - 3,979 14,139
Convertible loan notes 11,125 10,225 -
41,691 100,079 84,566
Due for repayment:
Repayable on demand 23,720 82,761 73,399
Within one year 17,321 7,093 7,788
In the second to fifth years - 8,581 3,379
41,041 98,435 84,566
Financial instruments not measured at fair value
Financial instruments not measured at fair value include trade and other receivables, finance lease receivables, amounts due from/to a former director/a director, a shareholder/non-controlling interests and related companies, pledged bank deposit, cash and bank balances, trade and other payables, borrowings and convertible loan notes.
Due to their short term nature, the carrying value of trade and other receivables, amounts due from/to a former director/a director, a shareholder/non-controlling interests and related companies, pledged bank deposit and cash and bank balances approximates fair value.
The fair value of finance lease receivables, borrowings and convertible loan notes for disclosure purposes has been determined using discounted cash flow models and is classified as level 3 in the fair value hierarchy. Significant inputs include the discount rate used to reflect the credit risks of the borrowers or the Company.
37. DISPOSAL OF SUBSIDIARIES
(a) Disposal of LED Far East
On 13 April 2015, the Group disposed of its entire 60% equity interest of LED Far East. LED Far East and its subsidiary were principally engaged in the manufacturing of LED element products in Hong Kong and PRC as detailed in note 1. The disposal was completed during the year and the gain on disposal of discontinued operation of approximately HK$26,382,000 was recorded at that time.
Carrying amount
HK$'000
Net liabilities disposed of:
Property, plant and equipment (note 16) 1,799
Inventories 4,050
Trade and other receivables 8,901
Cash and cash equivalents 152
Amount due from a fellow subsidiary 131
Trade and other payables (46,110)
Tax liabilities (1,595)
Borrowings (8,157)
(40,829)
Gain on disposal of discontinued operation:
Consideration receivables 450
Less: Net liabilities 40,829
Exchange reserve 1,220
Non-controlling interests (16,248)
Waiver of amount due from a fellow subsidiary 131
Gain on disposal (note 14) 26,382
The analysis of the net inflow of cash and cash equivalents in respect of the disposal of discontinued operation is as follows:
2015
HK$'000
Cash consideration received -
Cash and cash equivalents disposed of (152)
Net cash inflow on disposal (152)
(b) Disposal of Osmar Limited
On 22 December 2014, the Company disposed of its entire equity interest in Osmar Limited ("Osmar") together with its wholly owned subsidiary, Green Pearl Leasing Holdings Limited ("Green Pearl Leasing"), at a consideration of USD2,500 (approximately HK$39,000) to a director of the Company, Mr. Stephen Chan. Osmar and Green Pearl Leasing are principally engaged in investment holding. The gain on disposal of subsidiaries of approximately HK$19,000 was recorded at that time.
Carrying amount
HK$'000
Net assets disposed of:
Other receivables 20
20
Gain on disposal of subsidiaries:
Consideration received 39
Less: Net assets (20)
Gain on disposal (note 9) 19
The analysis of the net outflow of cash and cash equivalents in respect of the disposal of subsidiaries is as follows:
2015
HK$'000
Cash consideration received 39
Cash and cash equivalents disposed of -
Net cash outflow on disposal 39
38. MAJOR NON-CASH TRANSACTIONS
(a) Issuance of Convertible Loan Notes and its interest
As detailed in note 28, on 27 March 2014, Green Pearl BVI, entered into the CN agreement with a director of the Company, Mr. Stephen Chan, to issue the Convertible Loan Notes in the aggregate principal amount of US$1,282,000 to settle his loan of US$1,282,000 (note 27) to the Group and the loan interest. The interest on convertible loan notes of approximately HK$1,894,000 (2014: HK$237,000) was credited to the convertible loan notes. The coupon interest on convertible loan notes shall be satisfied by the issue of ordinary shares of the Company on redemption or maturity date, and which is calculated by reference to the closing middle market price of the Company's shares on the date of redemption or maturity.
(b) Extinguishment of financial liabilities by issuing shares
As detailed in note 29(e) and (f), the Group allotted 532,875 ordinary shares of 85.5 pence or 107.5 pence each to extinguish financial liabilities of approximately HK$3,461,000 during the year. A loss on extinguishment of finance liabilities of approximately HK$2,412,000 is included in the profit or loss for the year representing the difference between the book value of the shares issued and their estimated fair value, based on the current market price.
(c) Interest payable to a director and a former director
For the year ended 30 June 2014, the interest of approximately HK$664,000 and HK$168,000 in respect of loan from a director and loan from a former director respectively, were settled through the current accounts and credited to the liabilities component maintained with the respective director and a former director (note 27).
39. OPERATING LEASES
The Group as lessee
At the end of the reporting period, the Group had commitments for future minimum lease payments under non-cancellable operating leases which fall due as follows:
2015 2014 2013
HK$'000 HK$'000 HK$'000
Within one year 181 1,885 1,970
Two to five years 362 152 2,058
543 2,037 4,028
Operating lease payments represent rentals payable by the subsidiaries for the office premises (2014: manufacturing plants and office premises; 2013: manufacturing plants and office premises). Leases are negotiated, and rentals fixed, for an average term of three (2014: two to five; 2013: two to five) years. No arrangements have been entered into for contingent rental agreements.
40. COMMITMENTS
2015 2014 2013
HK$'000 HK$'000 HK$'000
Contracted but not provided for
- Acquisition of a subsidiary (note) 1,257 1,259 1,230
Note:
On 28 June 2013, one of the Group's subsidiaries entered into a share transfer agreement to acquire 100% equity interests of an entity at a cash consideration of RMB1,000,000 and 75,494,024 ordinary shares of the Company. The Company allotted the shares to the vendor and the shares issued are classified as deposit paid for acquisition of a subsidiary as at 30 June 2015, 2014 and 2013.
41. CONTINGENT LIABILITIES
(a) In prior year, the Company received letters from an adjudicator stating its principal and principal's insured have suffered a substantial loss arising from a fire at a hotel in Hong Kong. The Company's legal advisor has made requests to the adjudicator to disclose any reports compiled by the Hotel and/or the government investigator but, to date, these requests have not been responded to. In the absence of further information, the directors, based on the best information available, do not consider that the Company has any obligation relating to the fire and it is not practicable at this stage to make a reliable estimate for any possible loss or expenses arising from this in future. Accordingly, no provision has been made in the consolidated financial statements for this matter.
(b) From financial year 2006 onward, the Group's former subsidiary, Shenzhen LED, qualified as a small-scale VAT taxpayer by Shenzhen Municipal Nanshan District State Tax Bureau under the PRC tax laws and continued to be subject to 6% VAT on its taxable sales revenues. VAT was payable when the right to receive sales proceeds was established when delivery of goods was made to the buyer. Shenzhen LED had not been paying VAT to the state tax bureau since financial year 2006 and had carried VAT payables of approximately HK$19,275,000, equivalent to RMB15,177,000 as at 30 June 2014. According to the tax laws, a penalty might be charged up to a maximum of five times the VAT tax liability plus late payment interest of 0.05% per day on unpaid VAT amounts. In addition, those persons involved could be subject to criminal proceedings and severely punished. In the absence of any reliable information on penalties and/or late payment interest that the state tax bureau might charge the Group, the directors of the Company were unable to estimate the amount of penalty potentially payable for the late payment of VAT as at 30 June 2014 and considered that the probability of payment of such penalty is remote. On 13 April 2015, the Group disposed of its entire 60% equity interest of Shenzhen LED as details in note 37(a).
42. RELATED PARTY TRANSACTIONS
In addition to the transactions and balances disclosed elsewhere in these consolidated financial statements, the Group had the following significant transactions with related parties during the year:
2015 2014
Notes HK$'000 HK$'000
Interest on convertible loan notes to a director (a) 1,894 237
Gain on extinguishment of liabilities by issuing convertible loan notes (b) - 826
Loan interest to director (c) - 664
Loan interest to a former director (d) - 168
Loan interest to a related party (e) - 309
Consultancy and management fee expense (f) 1,920 1,920
Consideration for disposal of subsidiaries (note 37 (b)) (g) 39 -
Consideration for disposal of discontinued operation (note 37 (a))
(h) 450 -
Notes:
(a) Interest on convertible loan notes (note 28) of approximately HK$1,894,000 (2014: HK$237,000) was accrued at an effective interest rate of 22.7% per annum on the amortised cost. The coupon interest was charged at a rate of 9% per annum on the aggregate principal amount and shall be satisfied by the issue of ordinary shares of the Company on redemption or maturity date to a director, calculated by reference to the closing middle market price of the Company's shares on the date of redemption or maturity.
(b) The gain on extinguishment of liabilities by issuing convertible loan notes represented a gain arising from extinguishment of a loan from a director of approximately US$1,282,000 (equivalent to HK$10,000,000) and its interest of approximately HK$826,000 by issuance of the Convertible Loan Notes (note 28).
(c) Loan interest payable was accrued as payable to a director of the Company and the imputed interest was credited to the liabilities component in respect of the loans from director.
(d) Loan interest payable was accrued as payable to a former director of the Company.
(e) Loan interest was charged by a related party, who is a director of the Company's subsidiary, at rates ranging from 2% to 9% per month.
(f) Consultancy and management fee expense of HK$720,000 (2014: HK$720,000) was charged by a non-controlling interest for the provision of consultancy services in relation to EMC contracts and consultancy and management fee expense of HK$1,200,000 (2014: HK$1,200,000) was charged by a related company, in which one of directors of the Company has beneficial interest, for provision of consultancy, advisory and management services to the Group.
(g) The consideration was received from a director of the Company in respect of the disposal of subsidiaries.
(h) The consideration was receivable from a director of the Company's subsidiary in respect of the disposal of discontinued operation.
The directors of the Company are of the opinion that the above related party transactions were conducted on normal commercial terms and in the ordinary course of business.
Compensation to key management personnel
The remuneration of key management comprising directors (note 13) during the year were as follows:
2015 2014
HK$'000 HK$'000
Short-term employee benefits 590 750
Post employment benefits 15 15
605 765
43. EVENTS AFTER REPORTING PERIOD
(a) Suspension of trading in the Company's shares on AIM
On 22 December 2015, the directors of the Company announced that it has become apparent that the Company will not be in a position to publish its audited report and accounts for the year ended 30 June 2015 by 31 December 2015 in accordance with the AIM Rules for Companies. As a result, the Company's shares have been suspended from 22 December 2015. The suspension will remain in place until the Company's audited report and accounts for the year ended 30 June 2015 have been published and posted to shareholders.
Further details are set out in the Company's announcements dated 22 December 2015.
(b) Shareholders' agreements with Shanghai Guang Dian Asset Management Company Limited ("SHGD")
On 27 May 2016, the Company entered into a shareholders' agreement with SHGD, an independent third party, on the contributions to Green Pearl China, a subsidiary of the Group, amounted to RMB200 million. The contribution shall be made by the Company and SHGD in equal share of RMB100 million and the Company and SHGP will each hold a 50 per cent shareholding in Green Pearl China. The contribution of the Company shall be inclusive of the paid up contribution of RMB16.5 million.
Green Pearl China engages in lease financing, including providing financing for leasing businesses, financing acquisitions of assets from outsides the PRC for the purpose of leasing, maintaining and improving the depreciation values of the leasing assets, leasing related consultancy and guarantee services.
After approval by Shanghai Administration for Industry and Commerce for the capital contribution, the Company and SHGD will each be required to make their respective capital contributions to Green Pearl China within thirty working days.
The Company and SHGD are entitled to appoint two and one director(s) respectively to the board of Green Pearl China.
The Company and SHGD are prohibited from disposing of their respective shares in Green Pearl China for a period of three years from the date of their obtaining of the respective shares (the "Lock-in Period").
After the Lock-in Period, should either the Company or SHGD decide to dispose of its shares in Green Pearl China, the non-disposing party is entitled to the right of first refusal.
Further details are set out in the Company's announcement dated 31 May 2016.
-ENDS-
This information is provided by RNS
The company news service from the London Stock Exchange
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