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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Paq Intl | LSE:PAQ | London | Ordinary Share | KYG689191024 | ORD USD0.01 (DI) |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 0.275 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
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TIDMPAQ
RNS Number : 7898U
PAQ International Holdings Limited
30 June 2009
30 June 2009
PAQ INTERNATIONAL HOLDINGS LIMITED
Annual Report and Accounts
For the period from 1 January 2008 to 31 December 2008
CHAIRMAN'S STATEMENT
Whilst this has been a challenging year, I am pleased to report on the financial
results for PAQ International Holdings Limited (the "Company" or "PAQ") and its
subsidiaries (collectively referred to as the "Group") for the financial year
ended 31 December 2008.
Financial highlights
+--------------------------------------+--+---------------+-+---------------+
| | | 2008 | | 2007 |
+--------------------------------------+--+---------------+-+---------------+
| | | HK$'000 | | HK$'000 |
+--------------------------------------+--+---------------+-+---------------+
| | | | | |
+--------------------------------------+--+---------------+-+---------------+
| Revenue | | 76,319 | | 24,637 |
+--------------------------------------+--+---------------+-+---------------+
| | | | | |
+--------------------------------------+--+---------------+-+---------------+
| Gross profit | | 11,396 | | 6,367 |
+--------------------------------------+--+---------------+-+---------------+
| | | | | |
+--------------------------------------+--+---------------+-+---------------+
| (Loss) / profit for the year | | (9,478) | | 12,990 |
+--------------------------------------+--+---------------+-+---------------+
| | | | | |
+--------------------------------------+--+---------------+-+---------------+
| Total shareholders' equity | | 14,781 | | 9,343 |
+--------------------------------------+--+---------------+-+---------------+
| | | | | |
+--------------------------------------+--+---------------+-+---------------+
| | | % | | % |
+--------------------------------------+--+---------------+-+---------------+
| Gross profit margin | | 14.9 | | 25.8 |
+--------------------------------------+--+---------------+-+---------------+
| | | | | |
+--------------------------------------+--+---------------+-+---------------+
* Revenue increased by approximately 209% from approximately HK$24.6 million in
2007 to approximately HK$76.3 million in 2008
* Loss after tax of approximately HK$9.5 million in 2008, resulting primarily from
an increased bad debt provision of HK$9.6 million
* Continued business expansion and growth of branded products
* Commencement of Fobazo project in 2009
* The Group's cash resources declined in the financial year ended 31 December 2008
due to the loss incurred by the business. The Directors believe that the Group
will have sufficient cash flows generated from new licensing businesses and
improving operating performance from the second quarter of 2009 to support the
operation for the coming year. The Group has existing banking facilities
(including overdrafts and short-term bank loans) of HKD15 million of which
approximately HK$12 million is currently utilized.
* As is to be seen above, provision has been made for bad debts HK$9.6 million.
Due to certain litigation brought by a former manufacturer for the Company
against one of the Company's major customers that customer and certain other
customers who were aware of the litigation determined not to pay licence fees
due to the Company until the litigation was settled. The litigation was lost by
the manufacturer a few months ago and the Company has received assurances that
the debts will now be paid. While the Company was satisfied what the outcome
would be it was deemed prudent to make provision for these debts. They comprise
about 90% of the total for which provision has been made.
* Due to the global economic slowdown, PAQ sales turnover in Q1 2009 was down
37.1% against Q1 2008 which equates to HK4.4 million versus HK7 million
respectively.
Pursuant to Rule 20 of the AIM Rules, the Company hereby notifies that copies of
its Report and Financial Statements for the period ended 31 December 2008 have
today been mailed to shareholders.
Further copies are available from the Company's website.
Achievements
The Company's admission to AIM in 2008 has given us the opportunity to access
international capital markets as well as enhancing our reputation and image in
the markets where we operate. This is particularly true in Asia and Europe, as
we continue to lay the foundations for growth in the coming years.
Amongst buyers we have seen increasing brand recognition as we leverage on our
historical manufacturing strengths in cases and bags for electronic products and
accessories.
We have, notwithstanding the general economic downturn, focused on building for
the future by seeking strategic contracts and partnerships. As an example of
our efforts in this respect, we have entered into and are in the process of
concluding a series of agreements with Fobazo.com A/S (Denmark). Fobazo hold
exclusive rights to some of the world's most well known and recognized names in
football. I refer to these later.
As a commitment to our brand and customers, we continue to develop our expertise
in designing and producing high quality, reliable and innovative products.
Over the year we have particularly focused on developing our market in China
while maintaining our substantial existing overseas market. We are continuing to
build and expand our sales and distribution network in the Greater China
market so as to meet the needs of increasingly affluent Chinese consumers who
are now demanding higher end accessories.
Given the resilience of the Chinese economy and our own efforts in this respect,
we have developed a strong understanding of the Chinese market.
In the meantime we continue to seek opportunities in working with overseas
brands to licence and
develop their brands, particularly in China.
Future growth
The launch of our 11 sales outlets for PAQ branded accessories in Beijing and
Tianjin, China has been a success as this has led to the signing of an agreement
with a Shenzhen Stock Exchange listed company called Suning Appliance, the
second largest consumer appliance retailer in China to launch a "PAQ" point of
sales. Suning Appliance currently operates over 600 stores, in 190 cities across
28 provinces, with an expectation of increasing this number of stores to 1,500
by the end of 2009. These agreements have added credence and improved our
negotiating position in efforts to further develop our brand and assist foreign
licensors to introduce their own specialty brands to China.
Operating Review
The global business environment deteriorated substantially throughout the fiscal
year and, similar to many other businesses, our operating performance was
adversely affected by the general global deterioration in trade. Although, as
mentioned above, China's economy has proved remarkably resilient, there has
nevertheless been some slowdown in China's domestic market and so our own sales
have adversely been affected. The Group experienced an operating loss for the
year ended 30 December 2008. This is mainly attributable to (i) a reduction in
export orders from the Group's customers in overseas countries as a result of a
general economic slowdown during the year 2008, (ii) similar to most of the
companies with a production base in China, an increase in production costs of
the manufacturing business owing to the appreciation of the Renminbi (the
Chinese local currency) and an increase in overall material costs, labour costs
and general overheads and (iii) the loss of business from a major overseas
customer due to the litigation brought by a former manufacturer against one of
the Company's major customers as referred to above
That litigation was recently lost by the Claimant and our customer has
recommenced carrying on business with us
We continue to implement measures to diversify sources of revenue and to reduce
expenditure, control production costs and at the same time to expand our
customer base.
Joint Venture Agreement with Fobazo re: footballers image rights
We have entered into two agreements with Fobazo (www.fobazo.com ), a
specialist agency holding exclusive rights to the images and signatures of many
of the most well known names of international football players.
Under these agreement PAQ and Fobazo will create two new joint venture companies
in each of which PAQ will have a majority holding of 51% in return for
manufacturing, distributing and marketing products bearing the names of these
players. Fobazo will have the responsibility for procuring and maintaining
exclusive world wide licensing rights (and web rights in the Greater China
Region) in respect of both the existing players for whom it already has rights
and to new players as appropriate. Fobazo will initially seek to distribute PAQ
merchandise carrying the Rights to the Greater China market given the current
market focus of PAQ. PAQ is to set up the infrastructure, distribution network
and procure the necessary investment capital required
At present these agreements will include the existing rights held by Fobazo to
the following football players: Ryan Miguel Guno ("Babel"), Cro Jode Cre
("Cicinho"), Roberto ("Mancini"), Lu Fabiano Clemente, Christian Bager Poulsen
("Ronaldo"), Luis Naz o de Lima, Hugo Morais, Rafael van der Vaart, Wensley
Sneijder, John Gijsbert Alan Heitinga, Clarence ("Seedorf"), Robson de Souza
('Robinho'), Anderson Luis de Souza ("Deco"), Anderson Lu de Abreu Oliveira, and
Samuel ("Eto'o").
The Group is delighted with these agreements as this has enabled it to access
many of today's world class football players. This fits well with our strategy
to move beyond the competitive margin manufacturing platform and transform PAQ
into a branding platform building on increasing licensing revenues.
Relocation of Factory
PAQ has relocated its factory in Shenzhen Baoan to Foshan Guangdong, as part of
a reorganization of its production facilities. The relocation is aimed at more
efficient management of both the production facilities and supply chain as the
new location is closer to major material suppliers and OEM subcontractors. The
new location enables the company to be more price competitive and is also
logistically well positioned, which will assist the Company to supply bags and
computer accessories around China effectively and help deliver its strategic aim
of developing China's domestic market over the coming years.
Outlook and Future Prospects
We are continuing to enhance the PAQ brand, leveraging on our historical
manufacturing strengths We have also continued to develop our designs to meet
current trends. We are continuing to develop our expertise in producing high
quality, reliable and innovative products. To maintain flexibility and our
advantage as a cost competitive manufacturer and to cope with the growth and
demand of our business, we continually review the efficiency and control of our
production facilities.
We continue to develop and improve our core business in manufacturing cases and
bags for electronic goods and accessories and we pride on our reputation for
producing high quality, reliable and innovative products. We are further
developing the value of our brand by improving the profit potential of our
product mix for retailers. We have focused on releasing products with better
margins and through our China retail channels we will significantly increase our
share of total distribution channel profits. A recent test initiative has shown
promise in optimizing product mix and tailored products to develop the
profitability of selected clients. Working with a leading European design group,
we anticipate that we can further enhance operating margins by streamlining our
product mix with custom components tailored to specific geographic markets and
tastes.
Prospects in the long term are positive given the difficulties in the current
global economy we are proactively working with clients to develop strategies
that reflect the deteriorating conditions in many markets while deferring the
implementation of any contracts that might require immediate substantial
financial outlay. On the other hand, China is a continual expanding market and
we are focusing much of our efforts there.
Issue of Equity
The Accounts of the Company refer (under Note 25(b)) to two debts totaling
HK$954,000 which are convertible into equity. One of those debts has been so
converted and the Company will be issuing 1,000,000 ordinary shares of US$0.01
to Ng, Ngai Hung Jimmy following a conversion of a loan of HK$445,000. The
conversion strike price of HK$0.445 (2.88p) was fixed at an exchange rate of 1
GBP = HK$15.438, at the time of the agreement, and this conversion is at a
significant premium to the current share price of 0.38p.
Following the issue of shares as detailed above the total number of ordinary
shares in issue is 121,516,667.
Appreciation
Finally, on behalf of the Board, I would like to thank our customers, suppliers
and shareholders for their continued support of PAQ International Holdings
Limited. I would also like to recognize the hard work from the management team
and our highly dedicated team of employees for their contributions to the Group.
Kelvin Kwong Chi Yau
Chairman and Chief Executive Officer
Hong Kong
Date: 30 June 2009
Contact details:
+------------------+------------------+
| PAQ | Tel: |
| International | +852 9135 1811 |
| Holdings | |
+------------------+------------------+
| Kelvin | www.paq-intl.com |
| Yau, | |
| Chief | |
| Executive | |
+------------------+------------------+
| Dennis | Tel : |
| Ow | +852 9197 9332 |
| Executive | |
| Director | |
+------------------+------------------+
| | |
+------------------+------------------+
| Zimmerman | Tel: +44 |
| Adams | (0) 20 |
| | 7060 1760 |
+------------------+------------------+
| Dominique | www.zimmint.com |
| Doussot/Jonathan | |
| Evans/David | |
| Newton | |
+------------------+------------------+
FINANCIAL REVIEW
Consolidated income statement
For the year ended 31 December 2008
+----------------------------------------+-------+---------------+---------------+
| | | 2008 | 2007 |
+----------------------------------------+-------+---------------+---------------+
| | | HK$'000 | HK$'000 |
+----------------------------------------+-------+---------------+---------------+
| Revenue | | 76,319 | 24,637 |
+----------------------------------------+-------+---------------+---------------+
| Cost of sales | | (64,923) | (18,270) |
+----------------------------------------+-------+---------------+---------------+
| | | | |
+----------------------------------------+-------+---------------+---------------+
| Gross profit | | 11,396 | 6,367 |
+----------------------------------------+-------+---------------+---------------+
| Other income | | 7,504 | 17,826 |
+----------------------------------------+-------+---------------+---------------+
| Other (losses) / gains | | (883) | 30 |
+----------------------------------------+-------+---------------+---------------+
| Distribution costs | | (2,733) | (666) |
+----------------------------------------+-------+---------------+---------------+
| Administrative expenses | | (8,698) | (4,876) |
+----------------------------------------+-------+---------------+---------------+
| Other operating expenses | | (15,409) | (2,067) |
+----------------------------------------+-------+---------------+---------------+
| | | | |
+----------------------------------------+-------+---------------+---------------+
| Operating (loss) / profit | | (8,823) | 16,614 |
+----------------------------------------+-------+---------------+---------------+
| Finance costs | | (655) | (724) |
+----------------------------------------+-------+---------------+---------------+
| | | | |
+----------------------------------------+-------+---------------+---------------+
| (Loss) / Profit before income tax | | (9,478) | 15,890 |
+----------------------------------------+-------+---------------+---------------+
| Income tax expense | | - | (2,900) |
+----------------------------------------+-------+---------------+---------------+
| | | | |
+----------------------------------------+-------+---------------+---------------+
| (Loss) / Profit for the year | | (9,478) | 12,990 |
+----------------------------------------+-------+---------------+---------------+
| | | | |
+----------------------------------------+-------+---------------+---------------+
| Attributable to: | | | |
+----------------------------------------+-------+---------------+---------------+
| Equity holders of the | | (10,488) | 12,990 |
| Company | | | |
+----------------------------------------+-------+---------------+---------------+
| Minority interests | | 1,010 | - |
+----------------------------------------+-------+---------------+---------------+
| | | | |
+----------------------------------------+-------+---------------+---------------+
| | | (9,478) | 12,990 |
+----------------------------------------+-------+---------------+---------------+
| | | | |
+----------------------------------------+-------+---------------+---------------+
| Dividend | | - | 10,000 |
+----------------------------------------+-------+---------------+---------------+
FINANCIAL REVIEW (Continued)
The consolidated financial statements incorporate the financial statements of
the Company and entities controlled by the Company (its subsidiaries). Control
is achieved where the Company has the power to govern the financial and
operating policies of an entity so as to obtain benefits from its activities.
The consolidated financial statements incorporate the effects of the group
reorganisation completed on 18 January 2008 as described in note 1 to the
consolidated financial statements. For the purposes of the presentation, the
group reorganisation has been accounted for by using merger accounting as if the
current group structure has been in existence as at 1 January 2007 or since date
of incorporation where this is a shorter period.
The results of subsidiaries acquired or disposed of during the year are included
in the consolidated income statement from the effective date of acquisition or
up to the effective date of disposal, as appropriate. As such, the revenue and
result of Plato Leatherware Company Limited ("Plato") is consolidated into the
Group's revenue and result in 2008 when the contribution of Plato to the Group
is only reflected in other income (commission, production quality assurance and
design fees) received from Plato.
Over, the Group incurred a loss for the year ended 31 December 2008 due to the
following reasons:
* The impairment loss on other receivables of approximately HK$9.2 million;
* The significant increase in administrative costs, in particular, salaries and
professional fees after the admission to AIM market;
* A reduction in export orders from the Group's customers in overseas countries as
a result of a general economic slowdown during the year 2008; and
* An increase in production costs of the manufacturing business owing to the
appreciation of Renminbi and the increase in overall material costs, labour
costs and general overheads.
FINANCIAL REVIEW (Continued)
Consolidated balance sheet as at 31 December 2008
+----------------------------------------+---------+--------------+--------------+
| | | 2008 | 2007 |
+----------------------------------------+---------+--------------+--------------+
| | | HK$'000 | HK$'000 |
+----------------------------------------+---------+--------------+--------------+
| Non-current assets | | | |
+----------------------------------------+---------+--------------+--------------+
| Property, plant and equipment | | 6,341 | 1,586 |
+----------------------------------------+---------+--------------+--------------+
| Goodwill | | 14,227 | - |
+----------------------------------------+---------+--------------+--------------+
| | | 20,568 | 1,586 |
+----------------------------------------+---------+--------------+--------------+
| Current assets | | | |
+----------------------------------------+---------+--------------+--------------+
| Inventories | | - | 4,735 |
+----------------------------------------+---------+--------------+--------------+
| Trade and other receivables | | 18,500 | 19,612 |
+----------------------------------------+---------+--------------+--------------+
| Amount due from a related company | | 24 | 2,866 |
+----------------------------------------+---------+--------------+--------------+
| Pledged bank deposit | | 549 | 543 |
+----------------------------------------+---------+--------------+--------------+
| Bank and cash balances | | 189 | 49 |
+----------------------------------------+---------+--------------+--------------+
| | | 19,262 | 27,805 |
+----------------------------------------+---------+--------------+--------------+
| | | | |
+----------------------------------------+---------+--------------+--------------+
| Current liabilities | | | |
+----------------------------------------+---------+--------------+--------------+
| Trade and other payables | | 6,235 | 6,689 |
+----------------------------------------+---------+--------------+--------------+
| Amounts due to directors | | 954 | 1,114 |
+----------------------------------------+---------+--------------+--------------+
| Amount due to a related company | | - | 34 |
+----------------------------------------+---------+--------------+--------------+
| Borrowings | | 12,861 | 7,802 |
+----------------------------------------+---------+--------------+--------------+
| Obligation under finance lease | | 214 | - |
+----------------------------------------+---------+--------------+--------------+
| Income tax liabilities | | 4,400 | 4,400 |
+----------------------------------------+---------+--------------+--------------+
| | | 24,664 | 20,039 |
+----------------------------------------+---------+--------------+--------------+
| Net current (liabilities) / assets | | (5,402) | 7,766 |
+----------------------------------------+---------+--------------+--------------+
| Total assets less current liabilities | | 15,166 | 9,352 |
+----------------------------------------+---------+--------------+--------------+
| | | | |
+----------------------------------------+---------+--------------+--------------+
| Non-current liabilities | | | |
+----------------------------------------+---------+--------------+--------------+
| Borrowings | | 347 | 9 |
+----------------------------------------+---------+--------------+--------------+
| Obligation under finance lease | | 38 | - |
+----------------------------------------+---------+--------------+--------------+
| | | 385 | 9 |
+----------------------------------------+---------+--------------+--------------+
| Net assets | | 14,781 | 9,343 |
+----------------------------------------+---------+--------------+--------------+
| Capital and reserves | | | |
+----------------------------------------+---------+--------------+--------------+
| Share capital | | 9,400 | - |
+----------------------------------------+---------+--------------+--------------+
| Reserves | | 5,381 | 9,343 |
+----------------------------------------+---------+--------------+--------------+
| Total equity | | 14,781 | 9,343 |
+----------------------------------------+---------+--------------+--------------+
FINANCIAL REVIEW (Continued)
The Company was incorporated on 23 November 2007, on which date the authorised
share capital was US$50,000 divided into 500,000 ordinary shares of US$0.10
each, 1 of which was issued at par for cash. On 18 January 2008, (i) issued and
unissued shares of the Company were sub-divided into 10 shares of US$0.01 each
such that the authorised share capital of the Company became US$50,000 divided
into 5,000,000 ordinary shares; and (ii) the authorised share capital of the
Company was increased to US$3,000,000 by the creation of 295,000,000 new
ordinary shares.
On 18 January 2008, the Company underwent the group reorganisation and acquired
the entire equity interests in PAQ Manufacturing Limited, through the issue of
103,850,000 ordinary shares of US$0.01 each to Mr. Yau Kwong Chi, Kelvin and Mr.
Edmund Lui. The Company became the registered holder of the entire issued share
capital of PAQ Manufacturing Limited. PAQ Manufacturing Limited in turn holds
the entire equity interests in Hai Na Sporting Goods (Shenzhen) Company Limited,
and 51% of the equity interests in Plato Leatherware Company Limited, a company
incorporated in Hong Kong.
On 25 February 2008, 16,666,667 new ordinary shares of US$0.01 each of the
Company were issued at GBP0.06 per share by way of placing of shares. Through
the admission of AIM and the issue of new shares, the Company has significantly
improved its financial position (in particular, shareholders' fund and capital
base) and obtained a platform to access the capital market for future business
growth.
PAQ INTERNATIONAL HOLDINGS LIMITED
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2008
+----------------------------------------+-------+-----------------+---------------+
| |Notes | 2008 | 2007 |
+----------------------------------------+-------+-----------------+---------------+
| | | HK$'000 | HK$'000 |
+----------------------------------------+-------+-----------------+---------------+
| | | | |
+----------------------------------------+-------+-----------------+---------------+
| Revenue | 7 | 76,319 | 24,637 |
+----------------------------------------+-------+-----------------+---------------+
| | | | |
+----------------------------------------+-------+-----------------+---------------+
| Cost of sales | | (64,923) | (18,270) |
+----------------------------------------+-------+-----------------+---------------+
| | | | |
+----------------------------------------+-------+-----------------+---------------+
| Gross profit | | 11,396 | 6,367 |
+----------------------------------------+-------+-----------------+---------------+
| | | | |
+----------------------------------------+-------+-----------------+---------------+
| Other income | 9 | 7,504 | 17,826 |
+----------------------------------------+-------+-----------------+---------------+
| Other gains and losses | 10 | (883) | 30 |
+----------------------------------------+-------+-----------------+---------------+
| Distribution costs | | (2,733) | (666) |
+----------------------------------------+-------+-----------------+---------------+
| Administrative expenses | | (8,698) | (4,876) |
+----------------------------------------+-------+-----------------+---------------+
| Other operating expenses | | (15,409) | (2,067) |
+----------------------------------------+-------+-----------------+---------------+
| | | | |
+----------------------------------------+-------+-----------------+---------------+
| Operating (loss) / profit | | (8,823) | 16,614 |
+----------------------------------------+-------+-----------------+---------------+
| | | | |
+----------------------------------------+-------+-----------------+---------------+
| Finance costs | 11 | (655) | (724) |
+----------------------------------------+-------+-----------------+---------------+
| | | | |
+----------------------------------------+-------+-----------------+---------------+
| (Loss) / Profit before income tax | 12 | (9,478) | 15,890 |
+----------------------------------------+-------+-----------------+---------------+
| | | | |
+----------------------------------------+-------+-----------------+---------------+
| Income tax expense | 14 | - | (2,900) |
+----------------------------------------+-------+-----------------+---------------+
| | | | |
+----------------------------------------+-------+-----------------+---------------+
| (Loss) / Profit for the year | | (9,478) | 12,990 |
+----------------------------------------+-------+-----------------+---------------+
| | | | |
+----------------------------------------+-------+-----------------+---------------+
| Attributable to: | | | |
+----------------------------------------+-------+-----------------+---------------+
| Equity holders of the | | (10,488) | 12,990 |
| Company | | | |
+----------------------------------------+-------+-----------------+---------------+
| Minority interests | | 1,010 | - |
+----------------------------------------+-------+-----------------+---------------+
| | | | |
+----------------------------------------+-------+-----------------+---------------+
| | | (9,478) | 12,990 |
+----------------------------------------+-------+-----------------+---------------+
| | | | |
+----------------------------------------+-------+-----------------+---------------+
| Dividends | 15 | - | 10,000 |
+----------------------------------------+-------+-----------------+---------------+
| | | | |
+----------------------------------------+-------+-----------------+---------------+
| (Loss) / Earnings per share for (loss) | 16 | | |
| / profit attributable to the equity | | | |
| holders of the Company during the year | | | |
+----------------------------------------+-------+-----------------+---------------+
| | | | |
+----------------------------------------+-------+-----------------+---------------+
| - Basic | | (9.24) HK cents | 12.51 HK |
| | | | cents |
+----------------------------------------+-------+-----------------+---------------+
| | | | |
+----------------------------------------+-------+-----------------+---------------+
| - Diluted | | (9.54) HK cents | 12.51 HK |
| | | | cents |
+----------------------------------------+-------+-----------------+---------------+
PAQ INTERNATIONAL HOLDINGS LIMITED
CONSOLIDATED BALANCE SHEET
AS AT 31 DECEMBER 2008
+----------------------------------------+---------+--------------+--------------+
| | Notes | 2008 | 2007 |
+----------------------------------------+---------+--------------+--------------+
| | | HK$'000 | HK$'000 |
+----------------------------------------+---------+--------------+--------------+
| | | | |
+----------------------------------------+---------+--------------+--------------+
| Non-current assets | | | |
+----------------------------------------+---------+--------------+--------------+
| Property, plant and equipment | 17 | 6,341 | 1,586 |
+----------------------------------------+---------+--------------+--------------+
| Goodwill | 18 | 14,227 | - |
+----------------------------------------+---------+--------------+--------------+
| | | | |
+----------------------------------------+---------+--------------+--------------+
| | | 20,568 | 1,586 |
+----------------------------------------+---------+--------------+--------------+
| | | | |
+----------------------------------------+---------+--------------+--------------+
| Current assets | | | |
+----------------------------------------+---------+--------------+--------------+
| Inventories | 19 | - | 4,735 |
+----------------------------------------+---------+--------------+--------------+
| Trade and other receivables | 20 | 18,500 | 19,612 |
+----------------------------------------+---------+--------------+--------------+
| Amount due from a related company | 21 | 24 | 2,866 |
+----------------------------------------+---------+--------------+--------------+
| Pledged bank deposit | 22 | 549 | 543 |
+----------------------------------------+---------+--------------+--------------+
| Bank and cash balances | 22 | 189 | 49 |
+----------------------------------------+---------+--------------+--------------+
| | | | |
+----------------------------------------+---------+--------------+--------------+
| | | 19,262 | 27,805 |
+----------------------------------------+---------+--------------+--------------+
| | | | |
+----------------------------------------+---------+--------------+--------------+
| Current liabilities | | | |
+----------------------------------------+---------+--------------+--------------+
| Trade and other payables | 23 | 6,235 | 6,689 |
+----------------------------------------+---------+--------------+--------------+
| Amounts due to directors | 24 | 954 | 1,114 |
+----------------------------------------+---------+--------------+--------------+
| Amount due to a related company | 21 | - | 34 |
+----------------------------------------+---------+--------------+--------------+
| Borrowings | 25 | 12,416 | 7,802 |
+----------------------------------------+---------+--------------+--------------+
| Obligation under finance lease | 26 | 214 | - |
+----------------------------------------+---------+--------------+--------------+
| Income tax liabilities | | 4,400 | 4,400 |
+----------------------------------------+---------+--------------+--------------+
| | | | |
+----------------------------------------+---------+--------------+--------------+
| | | 24,219 | 20,039 |
+----------------------------------------+---------+--------------+--------------+
| | | | |
+----------------------------------------+---------+--------------+--------------+
| Net current (liabilities) / assets | | (4,957) | 7,766 |
+----------------------------------------+---------+--------------+--------------+
| | | | |
+----------------------------------------+---------+--------------+--------------+
| Total assets less current liabilities | | 15,611 | 9,352 |
+----------------------------------------+---------+--------------+--------------+
| | | | |
+----------------------------------------+---------+--------------+--------------+
| Non-current liabilities | | | |
+----------------------------------------+---------+--------------+--------------+
| Borrowings | 25 | 347 | 9 |
+----------------------------------------+---------+--------------+--------------+
| Obligation under finance lease | 26 | 38 | - |
+----------------------------------------+---------+--------------+--------------+
| | | | |
+----------------------------------------+---------+--------------+--------------+
| | | 385 | 9 |
+----------------------------------------+---------+--------------+--------------+
| | | | |
+----------------------------------------+---------+--------------+--------------+
| Net assets | | 15,226 | 9,343 |
+----------------------------------------+---------+--------------+--------------+
| | | | |
+----------------------------------------+---------+--------------+--------------+
| Capital and reserves | | | |
+----------------------------------------+---------+--------------+--------------+
| Share capital | 27 | 9,400 | - |
+----------------------------------------+---------+--------------+--------------+
| Reserves | 28 | 5,826 | 9,343 |
+----------------------------------------+---------+--------------+--------------+
| | | | |
+----------------------------------------+---------+--------------+--------------+
| Equity attributable to the Company's | | 15,226 | 9,343 |
| equity holders | | | |
+----------------------------------------+---------+--------------+--------------+
| Minority interests | | - | - |
+----------------------------------------+---------+--------------+--------------+
| | | | |
+----------------------------------------+---------+--------------+--------------+
| Total equity | | 15,226 | 9,343 |
+----------------------------------------+---------+--------------+--------------+
+------------------------------------------+--------------------------------+
| __________________________ | __________________________ |
+------------------------------------------+--------------------------------+
| Yau Kwong Chi Kelvin | Edmund Lui |
+------------------------------------------+--------------------------------+
| Director | Director |
+------------------------------------------+--------------------------------+
PAQ INTERNATIONAL HOLDINGS LIMITED
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2008
+-------------------------------------+---------+---------+---------+----------+---------+---------+---------------+-------------+--------------+----------+-----------+----------+
| | Attributable to equity holders of the Company | | |
+-------------------------------------+--------------------------------------------------------------------------------------------------------------------+-----------+----------+
| The Group | Share | Share | Shares | Treasury | Share | Merger | Shareholder's | Translation | (Accumulated | Total | Minority | Total |
| | capital | premium | to | shares | options | reserve | contribution | reserve | losses) / | | interests | |
| | | | be | | | | | | retained | | | |
| | | | issued | | reserve | | | | profits | | | |
+-------------------------------------+---------+---------+---------+----------+---------+---------+---------------+-------------+--------------+----------+-----------+----------+
| | HK$'000 | HK$'000 | HK$'000 | HK$'000 | HK$'000 | HK$'000 | HK$'000 | HK$'000 | HK$'000 | HK$'000 | HK$'000 | HK$'000 |
| | | | | | | | | | | | | |
+-------------------------------------+---------+---------+---------+----------+---------+---------+---------------+-------------+--------------+----------+-----------+----------+
| | (Note | | | | | (Note | | | | | | |
| | 27) | | | | | 28) | | | | | | |
+-------------------------------------+---------+---------+---------+----------+---------+---------+---------------+-------------+--------------+----------+-----------+----------+
| | | | | | | | | | | | | |
+-------------------------------------+---------+---------+---------+----------+---------+---------+---------------+-------------+--------------+----------+-----------+----------+
| At 1 January 2007 | - | - | - | - | - | - | - | - | 6,353 | 6,353 | - | 6,353 |
+-------------------------------------+---------+---------+---------+----------+---------+---------+---------------+-------------+--------------+----------+-----------+----------+
| | | | | | | | | | | | | |
+-------------------------------------+---------+---------+---------+----------+---------+---------+---------------+-------------+--------------+----------+-----------+----------+
| Profit for the year | - | - | - | - | - | - | - | - | 12,990 | 12,990 | - | 12,990 |
+-------------------------------------+---------+---------+---------+----------+---------+---------+---------------+-------------+--------------+----------+-----------+----------+
| | | | | | | | | | | | | |
+-------------------------------------+---------+---------+---------+----------+---------+---------+---------------+-------------+--------------+----------+-----------+----------+
| Total recognised income and expense | - | - | - | - | - | - | - | - | 12,990 | 12,990 | - | 12,990 |
| for the year | | | | | | | | | | | | |
+-------------------------------------+---------+---------+---------+----------+---------+---------+---------------+-------------+--------------+----------+-----------+----------+
| | | | | | | | | | | | | |
+-------------------------------------+---------+---------+---------+----------+---------+---------+---------------+-------------+--------------+----------+-----------+----------+
| Dividend recognised as distribution | - | - | - | - | - | - | - | - | (10,000) | (10,000) | - | (10,000) |
+-------------------------------------+---------+---------+---------+----------+---------+---------+---------------+-------------+--------------+----------+-----------+----------+
| | | | | | | | | | | | | |
+-------------------------------------+---------+---------+---------+----------+---------+---------+---------------+-------------+--------------+----------+-----------+----------+
| At 31 December 2007 | - | - | - | - | - | - | - | - | 9,343 | 9,343 | - | 9,343 |
+-------------------------------------+---------+---------+---------+----------+---------+---------+---------------+-------------+--------------+----------+-----------+----------+
| | | | | | | | | | | | | |
+-------------------------------------+---------+---------+---------+----------+---------+---------+---------------+-------------+--------------+----------+-----------+----------+
| At 1 January 2008 | - | - | - | - | - | - | - | - | 9,343 | 9,343 | - | 9,343 |
+-------------------------------------+---------+---------+---------+----------+---------+---------+---------------+-------------+--------------+----------+-----------+----------+
| | | | | | | | | | | | | |
+-------------------------------------+---------+---------+---------+----------+---------+---------+---------------+-------------+--------------+----------+-----------+----------+
| Exchange differences arising on | - | - | - | - | - | - | - | 172 | - | 172 | - | 172 |
| translation of foreign operations | | | | | | | | | | | | |
+-------------------------------------+---------+---------+---------+----------+---------+---------+---------------+-------------+--------------+----------+-----------+----------+
| | | | | | | | | | | | | |
+-------------------------------------+---------+---------+---------+----------+---------+---------+---------------+-------------+--------------+----------+-----------+----------+
| Net income recognised directly in | - | - | - | - | - | - | - | 172 | - | 172 | - | 172 |
| equity | | | | | | | | | | | | |
+-------------------------------------+---------+---------+---------+----------+---------+---------+---------------+-------------+--------------+----------+-----------+----------+
| | | | | | | | | | | | | |
+-------------------------------------+---------+---------+---------+----------+---------+---------+---------------+-------------+--------------+----------+-----------+----------+
| Loss for the year | - | - | - | - | - | - | - | - | (10,488) | (10,488) | 1,010 | (9,478) |
+-------------------------------------+---------+---------+---------+----------+---------+---------+---------------+-------------+--------------+----------+-----------+----------+
| | | | | | | | | | | | | |
+-------------------------------------+---------+---------+---------+----------+---------+---------+---------------+-------------+--------------+----------+-----------+----------+
| Total recognised income and expense | - | - | - | - | - | - | - | 172 | (10,488) | (10,316) | 1,010 | (9,306) |
| for the year | | | | | | | | | | | | |
+-------------------------------------+---------+---------+---------+----------+---------+---------+---------------+-------------+--------------+----------+-----------+----------+
| | | | | | | | | | | | | |
+-------------------------------------+---------+---------+---------+----------+---------+---------+---------------+-------------+--------------+----------+-----------+----------+
| Arising from Reorganisation | 8,100 | - | - | - | - | (8,091) | - | - | - | 9 | - | 9 |
+-------------------------------------+---------+---------+---------+----------+---------+---------+---------------+-------------+--------------+----------+-----------+----------+
| Issue of shares by way of | 1,300 | 14,160 | - | - | - | - | - | - | - | 15,460 | - | 15,460 |
| placements | | | | | | | | | | | | |
+-------------------------------------+---------+---------+---------+----------+---------+---------+---------------+-------------+--------------+----------+-----------+----------+
| Expenses incurred in connection | - | (9,021) | - | - | - | - | 9,021 | - | - | - | - | - |
| with the issue of shares (Note (i)) | | | | | | | | | | | | |
+-------------------------------------+---------+---------+---------+----------+---------+---------+---------------+-------------+--------------+----------+-----------+----------+
| Recognition of equity settled share | - | (670) | - | - | 670 | - | - | - | - | - | - | - |
| based payments (Note 29) | | | | | | | | | | | | |
+-------------------------------------+---------+---------+---------+----------+---------+---------+---------------+-------------+--------------+----------+-----------+----------+
| Purchase of own shares and held as | - | - | - | (3,583) | - | - | - | - | - | (3,583) | - | (3,583) |
| treasury shares | | | | | | | | | | | | |
+-------------------------------------+---------+---------+---------+----------+---------+---------+---------------+-------------+--------------+----------+-----------+----------+
| Shares to be issued in respect of | - | - | 445 | - | - | - | - | - | - | 445 | - | 445 |
| conversion of loan into shares | | | | | | | | | | | | |
| (Note 25 (b)(ii)) | | | | | | | | | | | | |
+-------------------------------------+---------+---------+---------+----------+---------+---------+---------------+-------------+--------------+----------+-----------+----------+
| Fair value of consideration shares | - | - | 3,868 | - | - | - | - | - | - | 3,868 | - | 3,868 |
| to be issued in respect of | | | | | | | | | | | | |
| acquisition of additional interest | | | | | | | | | | | | |
| in a subsidiary (Note 30) | | | | | | | | | | | | |
+-------------------------------------+---------+---------+---------+----------+---------+---------+---------------+-------------+--------------+----------+-----------+----------+
| Acquisition of additional interest | - | - | - | - | - | - | - | - | - | - | (1,010) | (1,010) |
| in a subsidiary (Note 30) | | | | | | | | | | | | |
+-------------------------------------+---------+---------+---------+----------+---------+---------+---------------+-------------+--------------+----------+-----------+----------+
| | | | | | | | | | | | | |
+-------------------------------------+---------+---------+---------+----------+---------+---------+---------------+-------------+--------------+----------+-----------+----------+
| At 31 December 2008 | 9,400 | 4,469 | 4,313 | (3,583) | 670 | (8,091) | 9,021 | 172 | (1,145) | 15,226 | - | 15,226 |
+-------------------------------------+---------+---------+---------+----------+---------+---------+---------------+-------------+--------------+----------+-----------+----------+
Note:
(i) The Company entered into an agreement with Mr. Yau Kwong Chi, Kelvin, a
director and major shareholder of the Company, and Madam Ng Oi Chun, Patty on 28
November 2007 in connection with the expenses incurred by the Company in
relation to the admission to AIM and the related placing of shares. Under the
terms of this agreement, Madam Ng Oi Chun, Patty agreed to take responsibility
for the payment of all professional fees incurred by the Company in connection
with the admission to AIM and placing of shares. In return, Mr. Yau Kwong Chi,
Kelvin transferred a total of 26,272,500 ordinary shares of the Company to Madam
Ng Oi Chun, Patty and her nominees.
PAQ INTERNATIONAL HOLDINGS LIMITED
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2008
+--------------------------------------------+-------+-------------+-------------+
| |Notes | 2008 | 2007 |
+--------------------------------------------+-------+-------------+-------------+
| | | HK$'000 | HK$'000 |
+--------------------------------------------+-------+-------------+-------------+
| Cash flows from operating activities | | | |
+--------------------------------------------+-------+-------------+-------------+
| (Loss) / Profit before income tax | | (9,478) | 15,890 |
+--------------------------------------------+-------+-------------+-------------+
| Adjustments for : | | | |
+--------------------------------------------+-------+-------------+-------------+
| Interest income | | (9) | (18) |
+--------------------------------------------+-------+-------------+-------------+
| Interest expenses | | 655 | 724 |
+--------------------------------------------+-------+-------------+-------------+
| Gain on disposal of property, | | (6) | - |
| plant and equipment | | | |
+--------------------------------------------+-------+-------------+-------------+
| Depreciation of property, plant | | 1,985 | 616 |
| and equipment | | | |
+--------------------------------------------+-------+-------------+-------------+
| Impairment loss of trade | | 390 | 90 |
| receivables | | | |
+--------------------------------------------+-------+-------------+-------------+
| Impairment loss of other | | 9,235 | - |
| receivables | | | |
+--------------------------------------------+-------+-------------+-------------+
| | | | |
+--------------------------------------------+-------+-------------+-------------+
| Operating cash flows before movements in | | 2,772 | 17,302 |
| working capital | | | |
+--------------------------------------------+-------+-------------+-------------+
| Decrease in inventories | | 4,735 | 1,384 |
+--------------------------------------------+-------+-------------+-------------+
| Increase in trade and other | | (7,749) | (11,519) |
| receivables | | | |
+--------------------------------------------+-------+-------------+-------------+
| Decrease in amount due from a | | 2,842 | 2,750 |
| related company | | | |
+--------------------------------------------+-------+-------------+-------------+
| Decrease in trade and other | | (6,057) | (513) |
| payables | | | |
+--------------------------------------------+-------+-------------+-------------+
| Decrease in amounts due to | | (160) | - |
| directors | | | |
+--------------------------------------------+-------+-------------+-------------+
| Decrease in amount due to a | | (34) | - |
| related company | | | |
+--------------------------------------------+-------+-------------+-------------+
| | | | |
+--------------------------------------------+-------+-------------+-------------+
| Cash (used in) / generated from operations | | (3,651) | 9,404 |
+--------------------------------------------+-------+-------------+-------------+
| Interest paid | | (560) | (662) |
+--------------------------------------------+-------+-------------+-------------+
| | | | |
+--------------------------------------------+-------+-------------+-------------+
| Net cash (used in) / generated from | | (4,211) | 8,742 |
| operating activities | | | |
+--------------------------------------------+-------+-------------+-------------+
| | | | |
+--------------------------------------------+-------+-------------+-------------+
| | | | |
+--------------------------------------------+-------+-------------+-------------+
| Investing activities | | | |
+--------------------------------------------+-------+-------------+-------------+
| Purchase of property, plant and equipment | | (6,194) | (108) |
+--------------------------------------------+-------+-------------+-------------+
| Acquisition of a subsidiary, net | 30 | (2,656) | - |
| cash acquired | | | |
+--------------------------------------------+-------+-------------+-------------+
| Acquisition of additional | 30 | (7,453) | - |
| interest in a subsidiary | | | |
+--------------------------------------------+-------+-------------+-------------+
| Proceeds from disposal of | | 20 | - |
| property, plant and equipment | | | |
+--------------------------------------------+-------+-------------+-------------+
| Interest received | | 9 | 18 |
+--------------------------------------------+-------+-------------+-------------+
| Increase in pledged bank deposit | | (6) | (17) |
+--------------------------------------------+-------+-------------+-------------+
| | | | |
+--------------------------------------------+-------+-------------+-------------+
| Net cash used in investing activities | | (16,280) | (107) |
+--------------------------------------------+-------+-------------+-------------+
| | | | |
+--------------------------------------------+-------+-------------+-------------+
| | | | |
+--------------------------------------------+-------+-------------+-------------+
| Financing activities | | | |
+--------------------------------------------+-------+-------------+-------------+
| Proceeds from issue of ordinary shares | | 15,460 | - |
+--------------------------------------------+-------+-------------+-------------+
| Proceeds from borrowings | | 2,111 | - |
+--------------------------------------------+-------+-------------+-------------+
| Repayments of borrowings | | - | (280) |
+--------------------------------------------+-------+-------------+-------------+
| Dividends paid | | - | (10,000) |
+--------------------------------------------+-------+-------------+-------------+
| Interest paid | | (95) | (62) |
+--------------------------------------------+-------+-------------+-------------+
| Repayments of obligation under | | (168) | - |
| finance lease | | | |
+--------------------------------------------+-------+-------------+-------------+
| | | | |
+--------------------------------------------+-------+-------------+-------------+
| Net cash generated from / (used in) | | 17,308 | (10,342) |
| financing activities | | | |
+--------------------------------------------+-------+-------------+-------------+
| | | | |
+--------------------------------------------+-------+-------------+-------------+
| | | | |
+--------------------------------------------+-------+-------------+-------------+
| Net decrease in cash and cash | | (3,183) | (1,707) |
| equivalents | | | |
+--------------------------------------------+-------+-------------+-------------+
| | | | |
+--------------------------------------------+-------+-------------+-------------+
| Cash, cash equivalents and bank | | (7,644) | (5,937) |
| overdrafts | | | |
| at the beginning of the year | | | |
+--------------------------------------------+-------+-------------+-------------+
| Effects of exchange rate changes | | 37 | - |
+--------------------------------------------+-------+-------------+-------------+
| | | | |
+--------------------------------------------+-------+-------------+-------------+
| Cash, cash equivalents and bank overdrafts | 22 | (10,790) | (7,644) |
| | | | |
| at the end of the year | | | |
+--------------------------------------------+-------+-------------+-------------+
PAQ INTERNATIONAL HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2008
1. GENERAL INFORMATION
PAQ International Holdings Limited (the "Company") was incorporated in the
Cayman Islands on 23 November 2007 as an exempted company with limited liability
under the Companies Law of the Cayman Islands. The Company is domiciled in the
Cayman Islands and has its registered office at Cricket Square, Hutchins Drive,
P.O. Box 2681, Grand Cayman, KY1-1111, Cayman Islands and principal place of
business at Room 2, 12th Floor, Hung Tai Industrial Building, No. 37-39 Hung To
Road, Kwun Tong, Kowloon, Hong Kong. On 25 February 2008, the Company was
admitted to the Alternative Investment Market ("AIM") operated by the London
Stock Exchange plc.
The principal activity of the Company is investment holding. The principal
activities of its subsidiaries are disclosed in Note 37.
The Company underwent a corporate reorganisation and acquired the entire equity
interests in PAQ Manufacturing Limited, a company incorporated in Hong Kong,
through the issue of 103,850,000 ordinary shares of US$0.01 each to Mr. Yau
Kwong Chi, Kelvin and Mr. Edmund Lui on 18 January 2008 (the "Reorganisation").
The Company became the registered holder of the entire issued share capital of
PAQ Manufacturing Limited. PAQ Manufacturing Limited in turn holds the entire
equity interests in Hai Na Sporting Goods (Shenzhen) Company Limited, and 51 per
cent. of the equity interests in Plato Leatherware Company Limited, a company
incorporated in Hong Kong. Details of the Reorganisation are fully explained in
the admission document of the Company dated 19 February 2008.
The Group resulting from the Reorganisation is regarded as a continuity entity.
Accordingly, the business combination resulting from the Reorganisation has been
accounted for using the principles of merger accounting. In applying the
principles of merger accounting, the consolidated financial statements have been
prepared as if the group structure after the completion of the Reorganisation
had been in existence as at 1 January 2007 or since date of incorporation where
this is a shorter period.
The consolidated financial statements are presented in Hong Kong dollars
("HK$"), which is the same as the functional currency of the Company, and all
values are rounded to the nearest thousand except when otherwise indicated.
2. APPLICATION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS
("IFRSs")
In the current year, the Group has applied the following amendments and
interpretations to the International Financial Reporting Standards ("new
IFRSs"), which are effective for the Group's financial year beginning 1 January
2008.
+------------------------+-----------------------------------------------+
| IAS 39 and IFRS 7 | Reclassification of Financial Assets |
| (Amendments) | |
+------------------------+-----------------------------------------------+
| IFRIC 11 | IFRS 2 - Group and Treasury Share |
| | Transactions |
+------------------------+-----------------------------------------------+
| IFRIC 12 | Service Concession Arrangements |
+------------------------+-----------------------------------------------+
| IFRIC 14 | IAS 19 - The Limit on a Defined Benefit |
| | Asset, Minimum Funding Requirements and their |
| | Interaction |
+------------------------+-----------------------------------------------+
The adoption of the new IFRSs had no material effect on how the results and
financial position for the current or prior accounting periods have been
prepared and presented. Accordingly, no prior period adjustment has been
required.
The Group has not early applied the following new and revised standards,
amendments or interpretations that have been issued but are not yet effective.
+------------------------+-----------------------------------------------+
| IFRSs | Improvements to IFRSs 1 |
| (Amendments) | |
+------------------------+-----------------------------------------------+
| IAS 1 | Presentation of Financial Statements |
| (Revised) | 2 |
+------------------------+-----------------------------------------------+
| IAS 23 | Borrowing Costs 2 |
| (Revised) | |
+------------------------+-----------------------------------------------+
| IAS 27 | Consolidated and Separate Financial |
| (Revised) | Statements 3 |
+------------------------+-----------------------------------------------+
| IAS 32 and IAS | Puttable Financial Instruments and |
| 1 (Amendments) | Obligations Arising on Liquidation 2 |
+------------------------+-----------------------------------------------+
| IAS 39 | Eligible Hedged Items 3 |
| (Amendment) | |
+------------------------+-----------------------------------------------+
| IFRS 1 and IAS | Cost of an Investment in a |
| 27 | Subsidiary, Jointly Controlled Entity |
| (Amendments) | or Associate 2 |
+------------------------+-----------------------------------------------+
| IFRS 2 | Vesting Conditions and Cancellations |
| (Amendment) | 2 |
+------------------------+-----------------------------------------------+
| IFRS 3 | Business Combinations 3 |
| (Revised) | |
+------------------------+-----------------------------------------------+
| IFRS 7 | Improving Disclosures about Financial |
| (Amendment) | Instruments 2 |
+------------------------+-----------------------------------------------+
| IFRS 8 | Operating Segments 2 |
+------------------------+-----------------------------------------------+
| IFRIC 9 and | Embedded Derivatives 4 |
| IAS 39 | |
| (Amendments) | |
+------------------------+-----------------------------------------------+
| IFRIC 13 | Customer Loyalty Programmes 5 |
+------------------------+-----------------------------------------------+
| IFRIC 15 | Agreements for the Construction of |
| | Real Estate 2 |
+------------------------+-----------------------------------------------+
| IFRIC 16 | Hedges of a Net Investment in a |
| | Foreign Operation 6 |
+------------------------+-----------------------------------------------+
| IFRIC 17 | Distribution of Non-cash Assets to |
| | Owners 3 |
+------------------------+-----------------------------------------------+
| IFRIC 18 | Transfers of Assets from Customers 7 |
+------------------------+-----------------------------------------------+
1 Effective for annual periods beginning on or after 1 January 2009 except
the amendments to IFRS 5, effective for annual periods beginning on or after 1
July 2009
2 Effective for annual periods beginning on or after 1 January 2009
3 Effective for annual periods beginning on or after 1 July 2009
4 Effective for annual periods ending on or after 30 June 2009
5 Effective for annual periods beginning on or after 1 July 2008
6 Effective for annual periods beginning on or after 1 October 2008
7 Effective for transfers of assets from customers received on or after 1
July 2009
The application of IFRS 3 (Revised) may affect the Group's accounting for
business combination for which the acquisition date is on or after 1 January
2010. IAS 27 (Revised) will affect the accounting treatment for changes in the
Group's ownership interest in a subsidiary. Management of the Company
anticipates that the adoption of the other new and revised standards, amendments
or interpretations will have no material impact on the results and the financial
position of the Group.
3. SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements have been prepared on the historical cost
basis except for certain financial instruments, which are measured at fair
values. The principal accounting policies adopted are set out below.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of
the Company and entities controlled by the Company (its subsidiaries). Control
is achieved where the Company has the power to govern the financial and
operating policies of an entity so as to obtain benefits from its activities.
The consolidated financial statements incorporate the effects of the
Reorganisation as described in note 1 above. For the purposes of the
presentation, the Reorganisation has been accounted for by using merger
accounting as if the current group structure has been in existence as at 1
January 2007 or since date of incorporation where this is a shorter period.
The results of subsidiaries acquired or disposed of during the year are included
in the consolidated income statement from the effective date of acquisition or
up to the effective date of disposal, as appropriate.
Where necessary, adjustments are made to the financial statements of
subsidiaries to bring their accounting policies into line with those used by
other members of the Group.
All intra-group transactions, balances, income and expenses are eliminated on
consolidation.
Minority interests in the net assets of consolidated subsidiaries are presented
separately from the Group's equity therein. Minority interests in the net assets
consist of the amount of those interests at the date of original business
combination and the minority's share of changes in equity since the date of the
combination. Losses applicable to the minority in excess of the minority's
interest in the subsidiary's equity are allocated against the interest of the
Group except to the extent that the minority has a binding obligation and is
able to make an additional investment to cover the losses.
Business combinations
The acquisition of businesses is accounted for using the purchase method. The
cost of the acquisition is measured at the aggregate of the fair values, at the
date of exchange, of assets given, liabilities incurred or assumed, and equity
instruments issued by the Group in exchange for control of the acquiree, plus
any costs directly attributable to the business combination. The acquiree's
identifiable assets, liabilities and contingent liabilities that meet the
conditions for recognition under IFRS 3 Business Combinations are recognised at
their fair values at the acquisition date, except for non-current assets (or
disposal groups) that are classified as held for sale in accordance with IFRS 5
Non-current Assets Held for Sale and Discontinued Operations, which are
recognised and measured at fair value less costs to sell.
Goodwill arising on acquisition is recognised as an asset and initially measured
at cost, being the excess of the cost of the business combination over the
Group's interest in the net fair value of the identifiable assets, liabilities
and contingent liabilities recognised. If, after reassessment, the Group's
interest in the net fair value of the acquiree's identifiable assets,
liabilities and contingent liabilities exceeds the cost of the business
combination, the excess is recognised immediately in profit or loss.
The interest of minority shareholders in the acquiree is initially measured at
the minority's proportion of the net fair value of the assets, liabilities and
contingent liabilities recognised.
Goodwill
Goodwill arising on an acquisition of a business represents the excess of the
cost of acquisition over the Group's interest in the fair value of the
identifiable assets, liabilities and contingent liabilities of the relevant
business at the date of acquisition. Such goodwill is carried at cost less any
accumulated impairment losses.
Capitalised goodwill arising on an acquisition of a business is presented
separately in the consolidated balance sheet.
For the purposes of impairment testing, goodwill arising from an acquisition is
allocated to each of the relevant cash-generating units, or groups of
cash-generating units, that are expected to benefit from the synergies of the
acquisition. A cash-generating unit to which goodwill has been allocated is
tested for impairment annually, and whenever there is an indication that the
unit may be impaired. For goodwill arising on an acquisition in a financial
year, the cash-generating unit to which goodwill has been allocated is tested
for impairment before the end of that financial year. When the recoverable
amount of the cash-generating unit is less than the carrying amount of the unit,
the impairment loss is allocated to reduce the carrying amount of any goodwill
allocated to the unit first, and then to the other assets of the unit pro rata
on the basis of the carrying amount of each asset in the unit. Any impairment
loss for goodwill is recognised directly in the consolidated income statement.
An impairment loss for goodwill is not reversed in subsequent periods.
On subsequent disposal of the relevant cash-generating unit, the attributable
amount of goodwill capitalised is included in the determination of the amount of
profit or loss on disposal.
Property, plant and equipment
Property, plant and equipment are stated at cost less subsequent depreciation
and impairment losses.
Depreciation is provided to write off the cost of items of property, plant and
equipment over their estimated useful lives and after taking into account of
their estimated residual value, using the straight-line method.
Assets held under finance leases are depreciated over their expected useful
lives on the same basis as owned assets or, where shorter, the term of the
relevant lease.
An item of property, plant and equipment is derecognised upon disposal or when
no future economic benefits are expected to arise from the continued use of the
asset. Any gain or loss arising on derecognition of the asset (calculated as the
difference between the net disposal proceeds and the carrying amount of the
item) is included in the consolidated income statement in the year in which the
item is derecognised.
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 lessee
Assets held under finance leases are recognised as assets of the Group at their
fair value at the
inception of the lease or, if lower, at the present value of the minimum lease
payments. The corresponding liability to the lessor is included in the
consolidated balance sheet as a finance lease obligation. Lease payments are
apportioned between finance charges and reduction of the lease obligation so as
to achieve a constant rate of interest on the remaining balance of the
liability. Finance charges are charged directly to profit or loss, unless they
are directly attributable to qualifying assets, in which case they are
capitalised in accordance with the Group's general policy on borrowing costs
(see below).
Rentals payable under operating leases are charged to profit or loss on a
straight-line basis over the term of the relevant lease. Benefits received and
receivable as an incentive to enter into an operating lease are recognised as a
reduction of rental expense over the lease term on a straight-line basis.
Foreign currencies
In preparing the financial statements of each individual group entity,
transactions in currencies other than the functional currency of that entity
(foreign currencies) are recorded in the respective functional currency (i.e.
the currency of the primary economic environment in which the entity operates)
at the rates of exchanges prevailing on the dates of the transactions. At each
balance sheet date, monetary items denominated in foreign currencies are
retranslated at the rates prevailing on the balance sheet date. Non-monetary
items carried at fair value that are denominated in foreign currencies are
retranslated at the rates prevailing on the date when the fair value was
determined. Non-monetary items that are measured in terms of historical cost in
a foreign currency are not retranslated.
Exchange differences arising on the settlement of monetary items, and on the
translation of monetary items, are recognised in profit or loss in the period in
which they arise, except for exchange differences arising on a monetary item
that forms part of the Company's net investment in a foreign operation, in which
case, such exchange differences are recognised in equity in the consolidated
financial statements. Exchange differences arising on the retranslation of
non-monetary items carried at fair value are included in profit or loss for the
period except for differences arising on the retranslation of non-monetary items
in respect of which gains and losses are recognised directly in equity, in which
cases, the exchange differences are also recognised directly in equity.
For the purposes of presenting the consolidated financial statements, the assets
and liabilities of the Group's foreign operations are translated into the
presentation currency of the Group (i.e. Hong Kong dollars) at the rate of
exchange prevailing at the balance sheet date, and their income and expenses are
translated at the average exchange rates for the year, unless exchange rates
fluctuate significantly during the period, in which case, the exchange rates
prevailing at the dates of transactions are used. Exchange differences arising,
if any, are recognised as a separate component of equity (the translation
reserve). Such exchange differences are recognised in profit or loss in the
period in which the foreign operation is disposed of.
Goodwill and fair value adjustments on identifiable assets acquired arising on
an acquisition of a foreign operation are treated as assets and liabilities of
that foreign operation and translated at the rate of exchange prevailing at the
balance sheet date. Exchange differences arising are recognised in the
translation reserve.
Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or
production of qualifying assets, are capitalised as part of the cost of those
assets. Capitalisation of such borrowing costs ceases when the assets are
substantially ready for their intended use or sale. To the extent that
fixed-rate bank borrowings are used to finance a qualifying asset and are hedged
in an effective fair value hedge of interest rate risk, the capitalised
borrowing costs reflected the hedged interest rate.
All other borrowing costs are recognised in profit or loss in the period in
which they are incurred.
Retirement benefit costs
Payments to defined contribution retirement benefit plans are charged as an
expense when employees have rendered service entitling them to the
contributions.
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 income statement
because it excludes items of income or expense that are taxable or deductible in
other years and it further excludes items that are never taxable or deductible.
The Group's liability for current tax is calculated using tax rates that have
been enacted or substantively enacted by the balance sheet date.
Deferred tax is recognised on differences between the carrying amounts of assets
and liabilities in the consolidated financial statements and the corresponding
tax bases used in the computation of taxable profit, and is accounted for using
the balance sheet liability method. Deferred tax liabilities are generally
recognised for all taxable temporary differences and deferred tax assets are
recognised to the extent that it is probable that taxable profits will be
available against which deductible temporary differences can be utilised. Such
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
arising on 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.
The carrying amount of deferred tax assets is reviewed at each balance sheet
date and reduced to the extent that it is no longer probable that sufficient
taxable profits will be available to allow all or part of the asset to be
recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the
period when the liability is settled or the asset realised, based on tax rates
(and tax laws) that have been enacted or substantively enacted by the balance
sheet date. Deferred tax is charged or credited to profit or loss, except when
it relates to items charged or credited directly to equity, in which case the
deferred tax is also dealt with in equity.
Research and development expenditures
Expenditure on research activities is recognised as an expense in the period in
which it is incurred.
An internally-generated intangible asset arising from development expenditure is
recognised only if it is anticipated that the development costs incurred on a
clearly-defined project will be recovered through future commercial activity.
The amount initially recognised for internally-generated intangible asset is the
sum of the expenditure incurred from the date when the intangible asset first
meets the recognition criteria. Where no internally-generated intangible asset
can be recognised, development expenditure is charged to profit or loss in the
period in which it is incurred.
Subsequent to initial recognition, internally-generated intangible asset is
reported at cost less accumulated amortisation and accumulated impairment
losses, on the same basis as intangible assets acquired separately.
Impairment of tangible and intangible assets other than goodwill
At each balance sheet date, the Group reviews the carrying amounts of its
tangible and intangible assets to determine whether there is any indication that
those assets have suffered an impairment loss. In addition, intangible assets
with indefinite useful lives and intangible assets not yet available for use are
tested for impairment annually, and whenever there is an indication that they
may be impaired. If the recoverable amount of an asset is estimated to be less
than its carrying amount, the carrying amount of the asset is reduced to its
recoverable amount. An impairment loss is recognised as an expense immediately,
unless the relevant asset is carried at a revalued amount under another
standard, in which case the impairment loss is treated as revaluation decrease
under that standard.
Where an impairment loss subsequently reverses, the carrying amount of the asset
is increased to the revised estimate of its recoverable amount, but so that the
increased carrying amount does not exceed the carrying amount that would have
been determined had no impairment loss been recognised for the asset in prior
years. A reversal of an impairment loss is recognised as income immediately,
unless the relevant asset is carried at a revalued amount under another
standard, in which case the reversal of the impairment loss is treated as
revaluation increase under that standard.
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is
calculated using the weighted average basis. The cost of finished goods and work
in progress comprises raw materials, direct labour and an appropriate proportion
of all production overhead expenditure, and where appropriate, subcontracting
charges. Net realisable value is the estimated selling price in the ordinary
course of business, less the estimated costs of completion and the estimated
costs necessary to make the sale.
Financial instruments
Financial assets and financial liabilities are recognised on the balance sheet
when a group entity becomes a party to the contractual provisions of the
instrument. Financial assets and financial liabilities are initially measured at
fair value. Transaction costs that are directly attributable to the acquisition
or issue of financial assets and financial liabilities (other than financial
assets and financial liabilities at fair value through profit or loss) are added
to or deducted from the fair value of the financial assets or financial
liabilities, as appropriate, on initial recognition. Transaction costs directly
attributable to the acquisition of financial assets or financial liabilities at
fair value through profit or loss are recognised immediately in profit or loss.
Financial assets
The Group's financial assets are classified into one of the three categories,
including financial assets at fair value through profit or loss ("FVTPL"), loans
and receivables and available-for-sale financial assets. All regular way
purchases or sales of financial assets are recognised and derecognised on a
trade date basis. Regular way purchases or sales are purchases or sales of
financial assets that require delivery of assets within the time frame
established by regulation or convention in the marketplace.
Effective interest method
The effective interest method is a method of calculating the amortised cost of a
financial asset and of allocating interest income over the relevant period. The
effective interest rate is the rate that exactly discounts estimated future cash
receipts (including all fees and points paid or received that form an integral
part of the effective interest rate, transaction costs and other premiums or
discounts) through the expected life of the financial asset, or, where
appropriate, a shorter period.
Income is recognised on an effective interest basis for debt instruments other
than those financial assets designated as at FVTPL, of which interest income is
included in net gains or losses.
Financial assets at fair value through profit or loss
Financial assets at FVTPL has two subcategories, including financial assets held
for trading and those designated as at FVTPL on initial recognition.
A financial asset is classified as held for trading if:
- it has been acquired principally for the purpose of selling in the near
future; or
- it is a part of an identified portfolio of financial instruments that the
Group manages together and has a recent actual pattern of short-term
profit-taking; or
- it is a derivative that is not designated and effective as a hedging
instrument.
Financial assets at fair value through profit or loss (continued)
A financial asset other than a financial asset held for trading may be
designated as at FVTPL upon initial recognition if:
- such designation eliminates or significantly reduces a measurement or
recognition inconsistency that would otherwise arise; or
- the financial asset forms part of a group of financial assets or financial
liabilities or both, which is managed and its performance is evaluated on a fair
value basis, in accordance with the Group's documented risk management or
investment strategy, and information about the grouping is provided internally
on that basis; or
- it forms part of a contract containing one or more embedded derivatives,
and IAS 39 permits the entire combined contract (asset or liability) to be
designated as at FVTPL.
At each balance sheet date subsequent to initial recognition, financial assets
at FVTPL are measured at fair value, with changes in fair value recognised
directly in profit or loss in the period in which they arise. The net gain or
loss recognised in profit or loss includes any dividend or interest earned on
the financial assets.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or
determinable payments that are not quoted in an active market. At each balance
sheet date subsequent to initial recognition, loans and receivables (including
trade and other receivables, amount due from a related company, pledged bank
deposit, bank balances and cash) are carried at amortised cost using the
effective interest method, less any identified impairment losses (see accounting
policy in respect of impairment loss on financial assets below).
Available-for-sale financial assets
Available-for-sale financial assets are non-derivatives that are either
designated or not classified as financial assets at FVTPL or loans and
receivables.
At each balance sheet date subsequent to initial recognition, available-for-sale
financial assets are measured at fair value. Changes in fair value are
recognised in equity, until the financial asset is disposed of or is determined
to be impaired, at which time, the cumulative gain or loss previously recognised
in equity is removed from equity and recognised in profit or loss (see
accounting policy in respect of impairment loss on financial assets below).
For available-for-sale equity investments that do not have a quoted market price
in an active market and whose fair value cannot be reliably measured and
derivatives that are linked to and must be settled by delivery of such unquoted
equity instruments, they are measured at cost less any identified impairment
losses at each balance sheet date subsequent to initial recognition (see
accounting policy in respect of impairment loss on financial assets below).
Impairment of financial assets
Financial assets, other than those at FVTPL, are assessed for indicators of
impairment at each
balance sheet date. Financial assets are impaired where there is objective
evidence that, as a result of one or more events that occurred after the initial
recognition of the financial asset, the estimated future cash flows of the
financial assets have been impacted.
For an available-for sale equity investment, a significant or prolonged decline
in the fair value of that investment below its cost is considered to be
objective evidence of impairment.
For all other financial assets, objective evidence of impairment could include:
- significant financial difficulty of the issuer or counterparty; or
- default or delinquency in interest or principal payments; or
- it becoming probable that the borrower will enter bankruptcy or financial
re-organisation.
For certain categories of financial asset, such as trade receivables, assets
that are assessed not to be impaired individually are subsequently assessed for
impairment on a collective basis. Objective evidence of impairment for a
portfolio of receivables could include the Group's past experience of collecting
payments, an increase in the number of delayed payments in the portfolio past
the average credit period, observable changes in national or local economic
conditions that correlate with default on receivables.
For financial assets carried at amortised cost, an impairment loss is recognised
in profit or loss when there is objective evidence that the asset is impaired,
and is measured as the difference between the asset's carrying amount and the
present value of the estimated future cash flows discounted at the original
effective interest rate.
For financial assets carried at cost, the amount of the impairment loss is
measured as the difference between the asset's carrying amount and the present
value of the estimated future cash flows discounted at the current market rate
of return for a similar financial asset. Such impairment loss will not be
reversed in subsequent periods.
The carrying amount of the financial asset is reduced by the impairment loss
directly for all financial assets with the exception of trade receivables, where
the carrying amount is reduced through the use of an allowance account. Changes
in the carrying amount of the allowance account are recognised in profit or
loss. When a trade receivable is considered uncollectible, it is written off
against the allowance account. Subsequent recoveries of amounts previously
written off are credited to profit or loss.
For financial assets measured at amortised cost, if, in a subsequent period, the
amount of impairment loss decreases and the decrease can be related objectively
to an event occurring after the impairment losses was recognised, the previously
recognised impairment loss is reversed through profit or loss to the extent that
the carrying amount of the asset at the date the impairment is reversed does not
exceed what the amortised cost would have been had the impairment not been
recognised.
Impairment losses on available-for-sale equity investments will not be reversed
in profit or loss in subsequent periods. Any increase in fair value subsequent
to impairment loss is recognised directly in equity. For available-for-sale debt
investments, impairment losses are subsequently reversed if an increase in the
fair value of the investment can be objectively related to an event occurring
after the recognition of the impairment loss.
Financial liabilities and equity
Financial liabilities and equity instruments issued by a group entity are
classified according to the substance of the contractual arrangements entered
into and the definitions of a financial liability and an equity instrument.
An equity instrument is any contract that evidences a residual interest in the
assets of the group after deducting all of its liabilities. The Group's
financial liabilities are generally classified into financial liabilities at
FVTPL and other financial liabilities.
Effective interest method
The effective interest method is a method of calculating the amortised cost of a
financial liability and of allocating interest expense over the relevant period.
The effective interest rate is the rate that exactly discounts estimated future
cash payments through the expected life of the financial liability, or, where
appropriate, a shorter period.
Interest expense is recognised on an effective interest basis other than those
financial liabilities designated as at FVTPL, of which the interest expense is
included in net gains or losses.
Financial liabilities at fair value through profit or loss
Financial liabilities at FVTPL has two subcategories, including financial
liabilities held for trading and those designated as at FVTPL on initial
recognition.
A financial liability is classified as held for trading if:
- it has been incurred principally for the purpose of repurchasing in the
near future; or
- it is a part of an identified portfolio of financial instruments that the
Group manages together and has a recent actual pattern of short-term
profit-taking; or
- it is a derivative that is not designated and effective as a hedging
instrument.
A financial liability other than a financial liability held for trading may be
designated as at FVTPL upon initial recognition if:
- such designation eliminates or significantly reduces a measurement or
recognition inconsistency that would otherwise arise; or
- the financial liability forms part of a group of financial assets or
financial liabilities or both, which is managed and its performance is evaluated
on a fair value basis, in accordance with the Group's documented risk management
or investment strategy, and information about the grouping is provided
internally on that basis; or
- it forms part of a contract containing one or more embedded derivatives,
and IAS 39 permits the entire combined contract (asset or liability) to be
designated as at FVTPL.
At each balance sheet date subsequent to initial recognition, financial
liabilities at FVTPL are measured at fair value, with changes in fair value
recognised directly in profit or loss in the period in which they arise. The net
gain or loss recognised in profit or loss includes any interest paid on the
financial liability.
Other financial liabilities
Other financial liabilities (including trade and other payables, amounts due to
directors, amount due to a related company, borrowings and obligation under
finance lease) are subsequently measured at amortised cost, using the effective
interest method.
Equity instruments
Equity instruments issued by the Company are recorded at the proceeds received,
net of direct
issue costs.
Repurchase of the Company's own equity instruments is recognised and deducted
directly in equity. No gain or loss is recognised in profit or loss on the
purchase, sale, issue or cancellation of the Company's own equity instruments.
Derecognition
Financial assets are derecognised when the rights to receive cash flows from the
assets expire or, the financial assets are transferred and the Group has
transferred substantially all the risks and rewards of ownership of the
financial assets. On derecognition of a financial asset, the difference between
the asset's carrying amount and the sum of the consideration received and
receivable and the cumulative gain or loss that had been recognised directly in
equity is recognised in profit or loss. If the Group retains substantially all
the risks and rewards of ownership of a transferred financial asset, the Group
continues to recognise the financial asset and also recognises a collateralised
borrowing for the proceeds received.
Financial liabilities are derecognised when the obligation specified in the
relevant contract is discharged, cancelled or expires. The difference between
the carrying amount of the financial liability derecognised and the
consideration paid and payable is recognised in profit or loss.
Provisions
Provisions are recognised when the Group has a present obligation as a result of
a past event, and it is probable that the Group will be required to settle that
obligation. Provisions are measured at the management's best estimate of the
expenditure required to settle the obligation at the balance sheet date, and are
discounted to present value where the effect is material.
Revenue recognition
Revenue is measured at the fair value of the consideration received or
receivable and represents amounts receivable for goods sold and services
provided in the normal course of business.
(i)Sale of goods
Revenue is recognised when goods are delivered at the customers' premise which
is taken to be the point in time when the customer has accepted the goods and
the related risks and rewards of ownership. Revenue excludes value added tax or
other sales taxes and is after deduction of any trade discounts.
(ii) Interest income
Interest income from a financial asset excluding financial assets at fair value
through profit or loss is accrued on a time basis, by reference to the principal
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 that asset's net carrying amount.
(iii) Management fee income, commission income, design fee income, licensing
fee income and production quality assurance income
Management fee income, commission income, design fee income, licensing fee
income and production quality assurance income are recognised on an accrual
basis in accordance with the substance of the relevant agreements.
Equity-settled share-based payment transactions
Share options granted to the brokers of the Company
Share options issued in exchange for services in connection with the placing of
shares and admission to AIM are measured at the fair values of services
received, unless that fair value cannot be reliably measured, in which case the
services received are measured by reference to the fair value of the share
option granted. The fair values of the services received in relation to issue of
new shares are recognised in the equity (share premium).
At the time when the share options are exercised, the amount previously
recognised in share options reserve will be transferred to share premium. 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 profits.
4. KEY SOURCES OF ESTIMATION UNCERTAINTY
In the application of the Group's accounting policies, which are described in
Note 3, management is 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 differ from these estimates.
The following are the key assumptions concerning the future, and other key
sources of estimation uncertainty at the balance sheet date, that have a
significant risk of causing a material adjustment to the carrying amounts of
assets and liabilities within the next financial year:
Estimated impairment of goodwill
The Group tests annually whether goodwill has suffered any impairment, in
accordance with the accounting policy stated in Note 3. The recoverable amounts
of cash-generating units have been determined based on value-in-use
calculations. These calculations require the use of estimates.
Estimated useful lives of property, plant and equipment
Management determines the estimated useful lives and related depreciation
charges for its property, plant and equipment. This estimate is based on the
historical experience of the actual useful lives of property, plant and
equipment of similar nature and functions. It could change significantly as a
result of technical innovations and competitor actions in response to server
industry cycles. Management will increase the depreciation charges where useful
lives are less than previously estimated, or it will write-off or write-down
obsolete or non-strategic assets that have been abandoned or sold.
Impairment loss of trade and other receivables
The Group's policy for doubtful receivables is based on the on-going evaluation
of the collectibility and ageing analysis of trade and other receivables and on
the management's judgement. Considerable judgement is required in assessing the
ultimate realisation of these receivables, including the current
creditworthiness and the past collection history of each debtor, and the present
values of the estimated future cash flows discounted at the effective interest
rates. If the financial conditions of the Group's debtors were to deteriorate,
resulting in an impairment of their ability to make payments, additional
impairment loss of trade and other receivables may be required. When the
management determines the debtors are uncollectible, they are written off
against the allowance account for the debtors.
Income tax
The Group is subject to income taxes in Hong Kong and the PRC. Significant
judgement is required in determining the amount of the provision for income
taxes. There are certain 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 impact the income tax provisions in
the period in which such determination is made.
5. FINANCIAL INSTRUMENTS
(a) Categories of financial instruments
+---------------------------------------------+--------------+--------------+
| | 2008 | 2007 |
+---------------------------------------------+--------------+--------------+
| | HK$'000 | HK$'000 |
+---------------------------------------------+--------------+--------------+
| Financial | | |
| assets | | |
+---------------------------------------------+--------------+--------------+
| Loans | | |
| and | | |
| receivables: | | |
+---------------------------------------------+--------------+--------------+
| - | 8,610 | 682 |
| Trade | | |
| receivables | | |
+---------------------------------------------+--------------+--------------+
| - | 9,612 | 18,789 |
| Financial | | |
| assets | | |
| included | | |
| in other | | |
| receivables | | |
+---------------------------------------------+--------------+--------------+
| - | 24 | 2,866 |
| Amount | | |
| due | | |
| from a | | |
| related | | |
| company | | |
+---------------------------------------------+--------------+--------------+
| - | 549 | 543 |
| Pledged | | |
| bank | | |
| deposit | | |
+---------------------------------------------+--------------+--------------+
| - | 189 | 49 |
| Bank | | |
| and | | |
| cash | | |
| balances | | |
+---------------------------------------------+--------------+--------------+
| | | |
+---------------------------------------------+--------------+--------------+
| | 18,984 | 22,929 |
+---------------------------------------------+--------------+--------------+
| | | |
+---------------------------------------------+--------------+--------------+
| Financial | | |
| liabilities | | |
+---------------------------------------------+--------------+--------------+
| At | | |
| amortised | | |
| costs: | | |
+---------------------------------------------+--------------+--------------+
| - | 1,668 | 4,374 |
| Trade | | |
| payables | | |
+---------------------------------------------+--------------+--------------+
| - | 3,471 | 2,021 |
| Financial | | |
| liabilities | | |
| included in | | |
| other | | |
| payables | | |
+---------------------------------------------+--------------+--------------+
| - | 954 | 1,114 |
| Amounts | | |
| due to | | |
| directors | | |
+---------------------------------------------+--------------+--------------+
| - | - | 34 |
| Amount | | |
| due to | | |
| a | | |
| related | | |
| company | | |
+---------------------------------------------+--------------+--------------+
| - | 252 | - |
| Obligation | | |
| under | | |
| finance | | |
| lease | | |
+---------------------------------------------+--------------+--------------+
| - | 12,763 | 7,811 |
| Borrowings | | |
+---------------------------------------------+--------------+--------------+
| | | |
+---------------------------------------------+--------------+--------------+
| | 19,108 | 15,354 |
+---------------------------------------------+--------------+--------------+
(b) Financial risk management objectives and policies
The Group's major financial instruments include bank and cash balances, pledged
bank deposit, trade and other receivables, trade and other payables and
borrowings. Details of these financial instruments are disclosed in the
respective notes. The risks associated with these financial instruments and the
policies on how to mitigate these risks are set out below. Management manages
and monitors these exposures to ensure appropriate measures are implemented on a
timely and effective manner.
There has been no change to the Group's risk exposure relating to financial
instruments or the manner in which it manages and measures the risks.
Market risk
The Group's activities expose it to market risk (including currency risk,
interest rate risk and price risk), credit risk and liquidity risk. The Group
does not enter into or trade derivative financial instruments for speculative
purposes.
Currency risk
The subsidiaries of the Group have foreign currency sales, which expose the
Group to foreign currency risk. Approximately 95% (2007: 100%) of the Group's
sales are denominated in currencies other than the functional currency of the
group entity making the sale, whilst all purchases are denominated in the group
entity's respective functional currencies.
Certain trade and other receivables, bank balances, and trade and other payables
are denominated in foreign currencies. The Group currently does not have a
foreign currency hedging policy, as the management considers the exposure to
foreign currency risk is insignificant to the Group. However, the management
monitors foreign exchange exposure and will consider hedging significant foreign
currency exposure should the need arise.
The carrying amounts of the Group's foreign currency denominated monetary assets
and monetary liabilities at the reporting date are as follows:
+-------------------------------------+-----------+-----------+--+-----------+----------+
| | Assets | | Liabilities |
+-------------------------------------+-----------------------+--+----------------------+
| | 2008 | 2007 | | 2008 | 2007 |
+-------------------------------------+-----------+-----------+--+-----------+----------+
| | HK$'000 | HK$'000 | | HK$'000 | HK$'000 |
+-------------------------------------+-----------+-----------+--+-----------+----------+
| | | | | | |
+-------------------------------------+-----------+-----------+--+-----------+----------+
| EURO | 1,778 | 1,710 | | - | - |
+-------------------------------------+-----------+-----------+--+-----------+----------+
| GBP | 1,224 | - | | (527) | - |
+-------------------------------------+-----------+-----------+--+-----------+----------+
| US$ | 6,723 | 2,215 | | (1,411) | (293) |
+-------------------------------------+-----------+-----------+--+-----------+----------+
Sensitivity analysis
The following table details the Group's sensitivity to a 5% (2007: 5%) increase
and decrease in Hong Kong dollars against EURO, GBP and US$ respectively. 5%
(2007: 5%) are the sensitivity rates used in the current year when reporting
foreign currency risk internally to key management personnel and represent
management's assessment of the reasonably possible change in foreign exchange
rates. The sensitivity analysis includes outstanding foreign currency
denominated monetary items. A positive number below indicates an increase in
profit where the Hong Kong dollars weaken 5% (2007: 5%) against EURO, GBP and
US$. For a 5% (2007: 5%) strengthening of the Hong Kong dollars against EURO,
GBP and US$, there would be an equal and opposite impact on the profit, and the
balances below would be negative.
+------------------------------------------------+--------------+--------------+
| | Profit or Loss |
+------------------------------------------------+-----------------------------+
| | 2008 | 2007 |
+------------------------------------------------+--------------+--------------+
| | HK$'000 | HK$'000 |
+------------------------------------------------+--------------+--------------+
| | | |
+------------------------------------------------+--------------+--------------+
| Impact | 89 | 86 |
| of | | |
| EURO | | |
+------------------------------------------------+--------------+--------------+
| Impact | 35 | - |
| of GBP | | |
+------------------------------------------------+--------------+--------------+
| Impact | 266 | 96 |
| of US$ | | |
+------------------------------------------------+--------------+--------------+
Note:
(i) This is mainly attributable to the exposure outstanding on receivables
and payables denominated in EURO, GBP and US$ respectively at the balance sheet
date.
Interest rate risk
The Group's fair value interest rate risk relates primarily to fixed-rate
borrowings, while the Group's cash flow interest rate risk relates primarily to
variable-rate borrowings (see Note 25 for details of these borrowings). It is
the Group's policy to keep its borrowings at floating rate of interests so as to
minimise the fair value interest rate risk. The Group's cash flow interest rate
risk is mainly concentrated on the fluctuation of the Hong Kong dollars prime
lending rate arising from the Group's Hong Kong dollars denominated bank
borrowings.
The Group currently does not have a formal interest rate hedging policy in
relation to fair value and cash flow interest rate risks. Management monitors
the Group's exposure on an ongoing basis and will consider hedging the interest
rate should the need arise.
Sensitivity analysis
The sensitivity analyses below have been determined based on the exposure to
interest rates for variable rate borrowings at the balance sheet date. For
variable-rate borrowings, the analysis is prepared assuming the amount of
liability outstanding at the balance sheet date was outstanding for the whole
year. A 100 basis points increase or decrease is used which represents
management's assessment of the reasonably possible change in interest rates.
If interest rates had been 100 basis points higher and all other variables were
held constant, the Group's loss for the year ended 31 December 2008 would
increase by approximately HK$88,000 (2007: HK$57,000).
Price risk
As the Group has no significant investments, the Group is not subject to
significant price risk.
Credit risk
The Group reviews the recoverability of its financial assets periodically to
ensure that potential credit risk of the counterparty is managed at an early
stage and sufficient provision is made for possible defaults.
The credit risk of the Group's other financial assets, which comprise cash and
cash equivalents, and other receivables, arises from default of the
counterparty, with a maximum exposure equal to the carrying amounts of these
instruments.
At the balance sheet date, the Group has certain concentrations of credit risk
as 45% (2007: 38%) and 96% (2007: 86%) of the Group's trade receivables were due
from the Group's largest customer and the five largest customers, respectively.
Further quantitative data in respect of the Group's exposure to credit risk
arising from trade receivables are disclosed in Note 20 to the consolidated
financial statements.
The credit risk on liquid funds is limited because the counterparties are banks
with high credit ratings. Other than concentration of credit risk on liquid
funds which are deposited with several banks with high credit ratings, the Group
does not have any other significant concentration of credit risk.
Liquidity risk
Ultimate responsibility for liquidity risk management rests with the management,
which have built an appropriate liquidity risk management framework for the
management of the Group's short, medium and long-term funding and liquidity
management requirements. The Group manages liquidity risk by maintaining
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
financial liabilities which are included in the maturity analysis provided
internally to the key management personnel for the purpose of managing liquidity
risk. The tables reflect the undiscounted cash flows of financial liabilities
based on the earliest date on which the Group can be required to pay.
+----------------------------------+-----------+----------+--------------+-----------+
| | On demand | Over 1 | Total | Total |
| | or less | year | undiscounted | carrying |
| | than | | cash flows | amount |
| | 1 year | | | |
+----------------------------------+-----------+----------+--------------+-----------+
| | HK$'000 | HK$'000 | HK$'000 | HK$'000 |
+----------------------------------+-----------+----------+--------------+-----------+
| | | | | |
+----------------------------------+-----------+----------+--------------+-----------+
| 31 | | | | |
| December | | | | |
| 2008 | | | | |
+----------------------------------+-----------+----------+--------------+-----------+
| Trade | 1,668 | - | 1,668 | 1,668 |
| payables | | | | |
+----------------------------------+-----------+----------+--------------+-----------+
| Other | 3,471 | - | 3,471 | 3,471 |
| payables | | | | |
| and | | | | |
| accruals | | | | |
+----------------------------------+-----------+----------+--------------+-----------+
| Amounts | 954 | - | 954 | 954 |
| due to | | | | |
| directors | | | | |
+----------------------------------+-----------+----------+--------------+-----------+
| Borrowings | 12,416 | 347 | 12,763 | 12,763 |
+----------------------------------+-----------+----------+--------------+-----------+
| Obligation under | 229 | 38 | 267 | 252 |
| finance lease | | | | |
+----------------------------------+-----------+----------+--------------+-----------+
| | | | | |
+----------------------------------+-----------+----------+--------------+-----------+
| | 18,738 | 385 | 19,123 | 19,108 |
+----------------------------------+-----------+----------+--------------+-----------+
| | | | | |
+----------------------------------+-----------+----------+--------------+-----------+
| 31 | | | | |
| December | | | | |
| 2007 | | | | |
+----------------------------------+-----------+----------+--------------+-----------+
| Trade | 4,374 | - | 4,374 | 4,374 |
| payables | | | | |
+----------------------------------+-----------+----------+--------------+-----------+
| Other | 2,021 | - | 2,021 | 2,021 |
| payables | | | | |
| and | | | | |
| accruals | | | | |
+----------------------------------+-----------+----------+--------------+-----------+
| Amounts | 1,114 | - | 1,114 | 1,114 |
| due to | | | | |
| directors | | | | |
+----------------------------------+-----------+----------+--------------+-----------+
| Amount due to a | 34 | - | 34 | 34 |
| related company | | | | |
+----------------------------------+-----------+----------+--------------+-----------+
| Borrowings | 7,802 | 9 | 7,811 | 7,811 |
+----------------------------------+-----------+----------+--------------+-----------+
| | | | | |
+----------------------------------+-----------+----------+--------------+-----------+
| | 15,345 | 9 | 15,354 | 15,354 |
+----------------------------------+-----------+----------+--------------+-----------+
6. CAPITAL RISK MANAGEMENT
The Group manages its capital to ensure that entities in the Group will be able
to continue as a
going concern while maximising the return to stakeholders through the
optimisation of the debt and equity balance.
The capital structure of the Group consists of debt (which includes borrowings
and obligation under finance lease), bank and cash balances and equity
attributable to equity holders of the Company, comprising issued share capital
and reserves. The management reviews the capital structure by considering the
cost of capital and the risks associated with each class of capital. In view of
this, the Group will balance its overall capital structure through the
redemption of existing debt or issue of shares.
Net debt to equity ratio
The Group monitors capital on the basis of the net debt to equity ratio. This
ratio is calculated as net debt divided by total equity. Net debt is calculated
as total debt (including borrowings and obligation under finance lease, as shown
in the consolidated balance sheet) less bank and cash balances. Equity includes
all capital and reserves of the Group.
The net debt to equity ratio at the year end was as follows:
+-----------------------------------------------------+--------------+--------------+
| | 2008 | 2007 |
+-----------------------------------------------------+--------------+--------------+
| | HK$'000 | HK$'000 |
+-----------------------------------------------------+--------------+--------------+
| | | |
+-----------------------------------------------------+--------------+--------------+
| Total | 13,015 | 7,811 |
| debt | | |
+-----------------------------------------------------+--------------+--------------+
| | | |
+-----------------------------------------------------+--------------+--------------+
| Less: | (189) | (49) |
| bank | | |
| and | | |
| cash | | |
| balances | | |
+-----------------------------------------------------+--------------+--------------+
| | | |
+-----------------------------------------------------+--------------+--------------+
| Net | 12,826 | 7,762 |
| debt | | |
+-----------------------------------------------------+--------------+--------------+
| | | |
+-----------------------------------------------------+--------------+--------------+
| Equity | 15,226 | 9,343 |
+-----------------------------------------------------+--------------+--------------+
| | | |
+-----------------------------------------------------+--------------+--------------+
| Net | 84% | 83% |
| debt | | |
| to | | |
| equity | | |
| ratio | | |
+-----------------------------------------------------+--------------+--------------+
7. REVENUE
+----------------------------------------------------+--------------+--------------+
| | 2008 | 2007 |
+----------------------------------------------------+--------------+--------------+
| | HK$'000 | HK$'000 |
+----------------------------------------------------+--------------+--------------+
| | | |
+----------------------------------------------------+--------------+--------------+
| Sale | 76,319 | 24,637 |
| of | | |
| goods | | |
+----------------------------------------------------+--------------+--------------+
8. SEGMENT INFORMATION
Business segment
No business segment information is presented as the Group is principally engaged
in the manufacturing and distributing branded softwear for branded electronic
products and accessories which comprise a single business segment.
Geographical segments
The Group operates in two principal geographical areas - the People's Republic
of China (the "PRC") (excluding Hong Kong) and Hong Kong. The following table
provides an analysis of the Group's sales by geographical markets, irrespective
of the origin of the goods:
+-------------------------------------------------------+--------------+--------------+
| | 2008 | 2007 |
+-------------------------------------------------------+--------------+--------------+
| | HK$'000 | HK$'000 |
+-------------------------------------------------------+--------------+--------------+
| Revenue | | |
| from | | |
| external | | |
| customers: | | |
+-------------------------------------------------------+--------------+--------------+
| - | 13,642 | 18,278 |
| Europe | | |
+-------------------------------------------------------+--------------+--------------+
| - | 18,228 | 2,401 |
| PRC | | |
+-------------------------------------------------------+--------------+--------------+
| - | 41,633 | 2,265 |
| United | | |
| States | | |
| of | | |
| America | | |
+-------------------------------------------------------+--------------+--------------+
| - | 2,569 | 1,448 |
| Australia | | |
+-------------------------------------------------------+--------------+--------------+
| - | 247 | 245 |
| Others | | |
+-------------------------------------------------------+--------------+--------------+
| | | |
+-------------------------------------------------------+--------------+--------------+
| | 76,319 | 24,637 |
+-------------------------------------------------------+--------------+--------------+
The following is an analysis of the carrying amount of segment assets, and
additions to property, plant and equipment and intangible assets, analysed by
the geographical area in which the assets are located:
+---------------------------------------------------------+--------------+--------------+
| | 2008 | 2007 |
+---------------------------------------------------------+--------------+--------------+
| | HK$'000 | HK$'000 |
+---------------------------------------------------------+--------------+--------------+
| Assets | | |
| located | | |
| in: | | |
+---------------------------------------------------------+--------------+--------------+
| - | 29,778 | 22,525 |
| Hong | | |
| Kong | | |
+---------------------------------------------------------+--------------+--------------+
| - | 10,052 | 6,866 |
| PRC | | |
+---------------------------------------------------------+--------------+--------------+
| | | |
+---------------------------------------------------------+--------------+--------------+
| | 39,830 | 29,391 |
+---------------------------------------------------------+--------------+--------------+
| | | |
+---------------------------------------------------------+--------------+--------------+
| Capital | | |
| expenditure: | | |
+---------------------------------------------------------+--------------+--------------+
| - | 6,612 | 95 |
| Hong | | |
| Kong | | |
+---------------------------------------------------------+--------------+--------------+
| - | 2 | 13 |
| PRC | | |
+---------------------------------------------------------+--------------+--------------+
| | | |
+---------------------------------------------------------+--------------+--------------+
| | 6,614 | 108 |
+---------------------------------------------------------+--------------+--------------+
9. OTHER INCOME
+---------------------------------------------------------+--------------+--------------+
| | 2008 | 2007 |
+---------------------------------------------------------+--------------+--------------+
| | HK$'000 | HK$'000 |
+---------------------------------------------------------+--------------+--------------+
| | | |
+---------------------------------------------------------+--------------+--------------+
| Bank | 9 | 18 |
| interest | | |
| income | | |
+---------------------------------------------------------+--------------+--------------+
| Management | 207 | 603 |
| fee income | | |
+---------------------------------------------------------+--------------+--------------+
| Commission | - | 4,584 |
| income | | |
+---------------------------------------------------------+--------------+--------------+
| Design | - | 2,808 |
| fee | | |
| income | | |
+---------------------------------------------------------+--------------+--------------+
| Licensing | 7,133 | 7,257 |
| fee | | |
| income | | |
+---------------------------------------------------------+--------------+--------------+
| Production | - | 2,400 |
| quality | | |
| assurance | | |
| income | | |
+---------------------------------------------------------+--------------+--------------+
| Sundry | 155 | 156 |
| income | | |
+---------------------------------------------------------+--------------+--------------+
| | | |
+---------------------------------------------------------+--------------+--------------+
| | 7,504 | 17,826 |
+---------------------------------------------------------+--------------+--------------+
10. OTHER GAINS AND LOSSES
+--------------------------------------------------------+--------------+--------------+
| | 2008 | 2007 |
+--------------------------------------------------------+--------------+--------------+
| | HK$'000 | HK$'000 |
+--------------------------------------------------------+--------------+--------------+
| | | |
+--------------------------------------------------------+--------------+--------------+
| Gain | 6 | - |
| on | | |
| disposal | | |
| of | | |
| property, | | |
| plant and | | |
| equipment | | |
+--------------------------------------------------------+--------------+--------------+
| Net | (889) | 30 |
| foreign | | |
| exchange | | |
| (losses) | | |
| / gains | | |
+--------------------------------------------------------+--------------+--------------+
| | | |
+--------------------------------------------------------+--------------+--------------+
| | (883) | 30 |
+--------------------------------------------------------+--------------+--------------+
11. FINANCE COSTS
+------------------------------------------------+--------------+--------------+
| | 2008 | 2007 |
+------------------------------------------------+--------------+--------------+
| | HK$'000 | HK$'000 |
+------------------------------------------------+--------------+--------------+
| Interest | | |
| on: | | |
+------------------------------------------------+--------------+--------------+
| Bank | 632 | 724 |
| borrowings | | |
| wholly | | |
| repayable | | |
| within | | |
| five years | | |
+------------------------------------------------+--------------+--------------+
| Finance | 23 | - |
| leases | | |
+------------------------------------------------+--------------+--------------+
| | | |
+------------------------------------------------+--------------+--------------+
| | 655 | 724 |
+------------------------------------------------+--------------+--------------+
12. (LOSS) / PROFIT BEFORE INCOME TAX
+------------------------------------------+----------------------+--------------+--------------+
| | Notes | 2008 | 2007 |
+------------------------------------------+----------------------+--------------+--------------+
| | | HK$'000 | HK$'000 |
+------------------------------------------+----------------------+--------------+--------------+
| | | | |
+------------------------------------------+----------------------+--------------+--------------+
| (Loss) / | | | |
| Profit | | | |
| before | | | |
| income | | | |
| tax has | | | |
| been | | | |
| arrived | | | |
| at after | | | |
| charging: | | | |
+------------------------------------------+----------------------+--------------+--------------+
| | | | |
+------------------------------------------+----------------------+--------------+--------------+
| Employee | | | |
| benefits | | | |
| expense, | | | |
| including | | | |
| directors' | | | |
| remuneration: | | | |
+------------------------------------------+----------------------+--------------+--------------+
| Salaries, | | 9,082 | 6,456 |
| wages and | | | |
| other | | | |
| benefits | | | |
+------------------------------------------+----------------------+--------------+--------------+
| Contributions | | 274 | 152 |
| to retirement | | | |
| benefits | | | |
| schemes | | | |
+------------------------------------------+----------------------+--------------+--------------+
| | | | |
+------------------------------------------+----------------------+--------------+--------------+
| | | 9,356 | 6,608 |
+------------------------------------------+----------------------+--------------+--------------+
| | | | |
+------------------------------------------+----------------------+--------------+--------------+
| Auditors' | | 410 | 450 |
| remuneration | | | |
+------------------------------------------+----------------------+--------------+--------------+
| Cost of | | 64,923 | 18,270 |
| inventories | | | |
| sold | | | |
+------------------------------------------+----------------------+--------------+--------------+
| Depreciation | (a) | 1,985 | 616 |
| of property, | | | |
| plant and | | | |
| equipment | | | |
+------------------------------------------+----------------------+--------------+--------------+
| Minimum | | 1,414 | 833 |
| lease | | - | 6 |
| payments | | | |
| under | | | |
| operating | | | |
| lease | | | |
| - | | | |
| rented | | | |
| premises | | | |
| - | | | |
| office | | | |
| equipment | | | |
+------------------------------------------+----------------------+--------------+--------------+
| Impairment | (b) | 390 | 90 |
| loss of | | | |
| trade | | | |
| receivables | | | |
+------------------------------------------+----------------------+--------------+--------------+
| Impairment | (b) | 9,235 | - |
| loss of | | | |
| other | | | |
| receivables | | | |
+------------------------------------------+----------------------+--------------+--------------+
| Research | (c) | 458 | 452 |
| and | | | |
| development | | | |
| costs | | | |
+------------------------------------------+----------------------+--------------+--------------+
Notes:
(a) Depreciation of approximately HK$1,701,000 (2007: HK$384,000) and
approximately HK$284,000 (2007: HK$232,000) were included in cost of sales and
other operating expenses respectively.
(b) Impairment loss of both trade receivables and other receivables were
included in other operating expenses.
(c) Research and development costs were included in employee benefits
expense.
13. DIRECTORS' REMUNERATION
The emoluments paid or payable to the directors of the Company were as follows:
+----------------------+-------+----------+-------------+---------------+----------+
| | Notes | Fees | Salaries, | Contributions | Total |
| | | | allowances | | |
| | | | and | to retirement | |
| | | | benefits | benefits | |
| | | | in kind | schemes | |
+----------------------+-------+----------+-------------+---------------+----------+
| | | HK$'000 | HK$'000 | HK$'000 | HK$'000 |
+----------------------+-------+----------+-------------+---------------+----------+
| | | | | | |
+----------------------+-------+----------+-------------+---------------+----------+
| 2008 | | | | | |
+----------------------+-------+----------+-------------+---------------+----------+
| Executive directors | | | | | |
+----------------------+-------+----------+-------------+---------------+----------+
| Mr. Yau Kwong Chi, | (a) | - | 420 | 2 | 422 |
| Kelvin | | | | | |
+----------------------+-------+----------+-------------+---------------+----------+
| Mr. Edmund Lui | (a) | - | 420 | 2 | 422 |
+----------------------+-------+----------+-------------+---------------+----------+
| Mr. Wang Hong Yi | (c) | - | 300 | - | 300 |
+----------------------+-------+----------+-------------+---------------+----------+
| Mr. Dennis Ow | (d) | 60 | - | - | 60 |
+----------------------+-------+----------+-------------+---------------+----------+
| | | | | | |
+----------------------+-------+----------+-------------+---------------+----------+
| Non-executive | | | | | |
| directors | | | | | |
+----------------------+-------+----------+-------------+---------------+----------+
| Mr. Miu Ka Keung, | (b) | 200 | - | - | 200 |
| Kevin | | | | | |
+----------------------+-------+----------+-------------+---------------+----------+
| Mr. Ivor Colin | (b) | 263 | - | - | 263 |
| Shrago | | | | | |
+----------------------+-------+----------+-------------+---------------+----------+
| | | | | | |
+----------------------+-------+----------+-------------+---------------+----------+
| | | 523 | 1,140 | 4 | 1,667 |
+----------------------+-------+----------+-------------+---------------+----------+
| | | | | | |
+----------------------+-------+----------+-------------+---------------+----------+
| 2007 | | | | | |
+----------------------+-------+----------+-------------+---------------+----------+
| Executive directors | | | | | |
+----------------------+-------+----------+-------------+---------------+----------+
| Mr. Yau Kwong Chi, | (a) | - | 120 | 6 | 126 |
| Kelvin | | | | | |
+----------------------+-------+----------+-------------+---------------+----------+
| Mr. Edmund Lui | (a) | - | 120 | 6 | 126 |
+----------------------+-------+----------+-------------+---------------+----------+
| | | | | | |
+----------------------+-------+----------+-------------+---------------+----------+
| | | - | 240 | 12 | 252 |
+----------------------+-------+----------+-------------+---------------+----------+
Notes:
(a) Mr. Yau Kwong Chi, Kelvin and Mr. Edmund Lui were appointed as executive
directors on 23 November 2007.
(b) Mr. Miu Ka Keung, Kevin and Mr. Ivor Colin Shrago were appointed as
non-executive directors on 17 January 2008.
(c) Mr. Wang Hong Yi was appointed as an executive director on 17 January
2008.
(d) Mr. Dennis Ow was appointed as an executive director on 1 October 2008.
14. INCOME TAX EXPENSE
+---------------------------------------------+--------------+--------------+
| | 2008 | 2007 |
+---------------------------------------------+--------------+--------------+
| | HK$'000 | HK$'000 |
+---------------------------------------------+--------------+--------------+
| | | |
+---------------------------------------------+--------------+--------------+
| Current income tax | | |
+---------------------------------------------+--------------+--------------+
| - Hong Kong Profits Tax | - | 2,900 |
+---------------------------------------------+--------------+--------------+
On 26 June 2008, the Hong Kong Legislative Council passed the Revenue Bill 2008
and reduced the corporate profits tax rate from 17.5% to 16.5% which is
effective from the year of assessment 2008/2009. Hong Kong Profits Tax is
calculated at 16.5% (2007: 17.5%) of the estimated assessable profit arising in
or derived from Hong Kong for the year. No provision for Hong Kong Profits Tax
has been made in the consolidated financial statements for the year ended 31
December 2008 as the Company and its subsidiaries had no assessable profits
arising in Hong Kong for the year.
On 16 March 2007, the PRC promulgated the Law of the PRC on Enterprise Income
Tax (the "New Law") by Order No. 63 of the President of the PRC. On 6 December
2007, the State Council issued Implementation Regulation of the New Law. The New
Law and Implementation Regulation changed the tax rate of the PRC subsidiary
from 33% to 25% from 1 January 2008 onwards.
The Group's PRC subsidiary is subject to PRC Enterprise Income Tax at 25% (2007:
33%). Pursuant to relevant laws and regulations in the PRC, the Group's PRC
subsidiary is exempted from PRC Enterprise Income Tax for the two years from the
first profit-making year and thereafter is entitled to a 50% relief from PRC
Enterprise Income Tax for the following three years. For the year ended 31
December 2007, the Group's PRC subsidiary was in its second profit-making year.
For the year ended 31 December 2008, the Group's PRC subsidiary incurred a loss
for the year.
The tax charge for the year can be reconciled to the (loss) / profit per the
consolidated income statement as follows:
+--------------------------------------------+--------------+--------------+
| | 2008 | 2007 |
+--------------------------------------------+--------------+--------------+
| | HK$'000 | HK$'000 |
+--------------------------------------------+--------------+--------------+
| | | |
+--------------------------------------------+--------------+--------------+
| (Loss) / Profit before income tax | (9,478) | 15,890 |
+--------------------------------------------+--------------+--------------+
| | | |
+--------------------------------------------+--------------+--------------+
| Tax at applicable tax rate of 16.5% (2007: | (1,564) | 2,781 |
| 17.5%) | | |
+--------------------------------------------+--------------+--------------+
| Tax effect of expenses not deductible for | 4,205 | 2,799 |
| tax purpose | | |
+--------------------------------------------+--------------+--------------+
| Tax effect of income not taxable for tax | (2,275) | - |
| purpose | | |
+--------------------------------------------+--------------+--------------+
| Tax effect of unused tax losses not | 624 | - |
| recognised | | |
+--------------------------------------------+--------------+--------------+
| Tax effect of temporary differences not | (855) | 12 |
| recognised | | |
+--------------------------------------------+--------------+--------------+
| Effect of different applicable | (135) | - |
| tax rate of a subsidiary in | | |
| other jurisdiction | | |
+--------------------------------------------+--------------+--------------+
| Tax effect of tax concession | - | (2,788) |
+--------------------------------------------+--------------+--------------+
| Others | - | 96 |
+--------------------------------------------+--------------+--------------+
| | | |
+--------------------------------------------+--------------+--------------+
| Tax charge for the year | - | 2,900 |
+--------------------------------------------+--------------+--------------+
No deferred tax liabilities have been recognised as the Group and the Company
did not have material temporary difference arising between the tax bases of
assets and liabilities and their carrying amounts as at 31 December 2008 (2007:
Nil).
At the balance sheet date, the Group has unused tax losses of approximately
HK$5,270,000 (2007: HK$1,487,000) available for offset against future profits
that may be carried forward indefinitely. No deferred tax asset has been
recognised in respect of the tax losses due to the unpredictability of future
profit streams.
15. DIVIDENDS
+--------------------------------------------+--------------+--------------+
| | 2008 | 2007 |
+--------------------------------------------+--------------+--------------+
| | HK$'000 | HK$'000 |
+--------------------------------------------+--------------+--------------+
| | | |
+--------------------------------------------+--------------+--------------+
| Interim dividend declared and paid | - | 10,000 |
+--------------------------------------------+--------------+--------------+
No dividend has been paid or declared by the Company since the date of its
incorporation. For the year ended 31 December 2007, the dividends were paid by
PAQ Manufacturing Limited, a wholly-owned subsidiary of the Company, to their
then shareholders prior to the Reorganisation.
16. (LOSS) / EARNINGS PER SHARE
The calculation of basic and diluted (loss)/earnings per share attributable to
the ordinary equity holders of the Company is based on the following data:
+--------------------------------------------+--------------+--------------+
| | 2008 | 2007 |
+--------------------------------------------+--------------+--------------+
| | HK$'000 | HK$'000 |
+--------------------------------------------+--------------+--------------+
| (Loss) / Earnings | | |
+--------------------------------------------+--------------+--------------+
| (Loss) / Earnings for the | | |
| purpose of basic and | | |
| diluted (loss) / earnings | | |
| per share | | |
+--------------------------------------------+--------------+--------------+
| (Loss) / Profit for the | (10,488) | 12,990 |
| year attributable to equity | | |
| holders of the Company | | |
+--------------------------------------------+--------------+--------------+
| | | |
+--------------------------------------------+--------------+--------------+
| Number of shares | | |
+--------------------------------------------+--------------+--------------+
| Weighted average number of | 113,463,092 | 103,850,010 |
| ordinary shares for the | | |
| purpose of basic (loss) / | | |
| earnings per share (Note) | | |
+--------------------------------------------+--------------+--------------+
| Effect of dilutive | (3,559,590) | - |
| potential ordinary shares: | | |
| Share options issued by the | | |
| Company | | |
+--------------------------------------------+--------------+--------------+
| | | |
+--------------------------------------------+--------------+--------------+
| Weighted average number of | 109,903,502 | 103,850,010 |
| ordinary shares for the | | |
| purpose of diluted (loss) / | | |
| earnings per share | | |
+--------------------------------------------+--------------+--------------+
Note:
The weighted average number of ordinary shares deemed to be in issue on the
assumption that the Reorganisation had been completed on 1 January 2007.
17. PROPERTY, PLANT AND EQUIPMENT
+---------------------+--------------+-----------+-----------+-----------+----------+
| | Leasehold | Plant | Furniture | Office | Total |
| | improvements | and | and | equipment | |
| | | machinery | fixtures | | |
+---------------------+--------------+-----------+-----------+-----------+----------+
| | HK$'000 | HK$'000 | HK$'000 | HK$'000 | HK$'000 |
+---------------------+--------------+-----------+-----------+-----------+----------+
| COST | | | | | |
+---------------------+--------------+-----------+-----------+-----------+----------+
| At 1 January 2007 | 591 | 1,603 | 378 | 402 | 2,974 |
+---------------------+--------------+-----------+-----------+-----------+----------+
| Additions | - | - | 75 | 33 | 108 |
+---------------------+--------------+-----------+-----------+-----------+----------+
| | | | | | |
+---------------------+--------------+-----------+-----------+-----------+----------+
| At 31 December 2007 | 591 | 1,603 | 453 | 435 | 3,082 |
+---------------------+--------------+-----------+-----------+-----------+----------+
| Exchange | 61 | 166 | 9 | 21 | 257 |
| adjustments | | | | | |
+---------------------+--------------+-----------+-----------+-----------+----------+
| Additions | - | 6,106 | - | 508 | 6,614 |
+---------------------+--------------+-----------+-----------+-----------+----------+
| Acquired on | - | - | - | 5 | 5 |
| acquisition of a | | | | | |
| subsidiary | | | | | |
+---------------------+--------------+-----------+-----------+-----------+----------+
| Disposals | - | - | - | (26) | (26) |
+---------------------+--------------+-----------+-----------+-----------+----------+
| | | | | | |
+---------------------+--------------+-----------+-----------+-----------+----------+
| At 31 December 2008 | 652 | 7,875 | 462 | 943 | 9,932 |
+---------------------+--------------+-----------+-----------+-----------+----------+
| | | | | | |
+---------------------+--------------+-----------+-----------+-----------+----------+
| | | | | | |
+---------------------+--------------+-----------+-----------+-----------+----------+
| DEPRECIATION | | | | | |
+---------------------+--------------+-----------+-----------+-----------+----------+
| At 1 January 2007 | 158 | 404 | 183 | 135 | 880 |
+---------------------+--------------+-----------+-----------+-----------+----------+
| Provided for the | 118 | 327 | 88 | 83 | 616 |
| year | | | | | |
+---------------------+--------------+-----------+-----------+-----------+----------+
| | | | | | |
+---------------------+--------------+-----------+-----------+-----------+----------+
| At 31 December 2007 | 276 | 731 | 271 | 218 | 1,496 |
+---------------------+--------------+-----------+-----------+-----------+----------+
| Exchange | 30 | 79 | 4 | 9 | 122 |
| adjustments | | | | | |
+---------------------+--------------+-----------+-----------+-----------+----------+
| Provided for the | 129 | 1,572 | 89 | 195 | 1,985 |
| year | | | | | |
+---------------------+--------------+-----------+-----------+-----------+----------+
| Disposals | - | - | - | (12) | (12) |
+---------------------+--------------+-----------+-----------+-----------+----------+
| | | | | | |
+---------------------+--------------+-----------+-----------+-----------+----------+
| At 31 December 2008 | 435 | 2,382 | 364 | 410 | 3,591 |
+---------------------+--------------+-----------+-----------+-----------+----------+
| | | | | | |
+---------------------+--------------+-----------+-----------+-----------+----------+
| | | | | | |
+---------------------+--------------+-----------+-----------+-----------+----------+
| CARRYING AMOUNTS | | | | | |
+---------------------+--------------+-----------+-----------+-----------+----------+
| At 31 December 2008 | 217 | 5,493 | 98 | 533 | 6,341 |
+---------------------+--------------+-----------+-----------+-----------+----------+
| | | | | | |
+---------------------+--------------+-----------+-----------+-----------+----------+
| At 31 December 2007 | 315 | 872 | 182 | 217 | 1,586 |
+---------------------+--------------+-----------+-----------+-----------+----------+
The carrying amount of office equipment includes an amount of approximately
HK$336,000 (2007: Nil) in respect of assets held under finance lease.
The above items of property, plant and equipment are depreciated on a
straight-line basis at the following rates per annum:
Leasehold improvements 20%
Plant and machinery 20%
Furniture and fixtures 20-25%
Office equipment 20-25%
18. GOODWILL
+--------------------------------------------+--------------+--------------+
| | 2008 | 2007 |
+--------------------------------------------+--------------+--------------+
| | HK$'000 | HK$'000 |
+--------------------------------------------+--------------+--------------+
| COST | | |
+--------------------------------------------+--------------+--------------+
| At 1 January | - | - |
+--------------------------------------------+--------------+--------------+
| Acquired on acquisition of | 14,227 | - |
| a subsidiary (Note 30) | | |
+--------------------------------------------+--------------+--------------+
| | | |
+--------------------------------------------+--------------+--------------+
| At 31 December | 14,227 | - |
+--------------------------------------------+--------------+--------------+
Goodwill is allocated to the Group's cash-generating unit ("CGU") which is
principally engaged in the sale of bags for OEM products and accessories. The
recoverable amount of a CGU is determined based on value-in-use calculation.
The value-in-use calculation uses pre-tax cash flow projections based on
financial budgets approved by management covering a three-year period. The key
assumptions used for the cash flow projections include budgeted revenue and
budgeted expenses during the forecasting periods, which are determined by
management based on past performance and its expectation of market development.
All cash flows are discounted at a discount rate of 17.77% per annum which
reflects the specific risks relating to this CGU.
19. INVENTORIES
+---------------------------------------------+--------------+--------------+
| | 2008 | 2007 |
+---------------------------------------------+--------------+--------------+
| | HK$'000 | HK$'000 |
+---------------------------------------------+--------------+--------------+
| | | |
+---------------------------------------------+--------------+--------------+
| Raw materials | - | 1,375 |
+---------------------------------------------+--------------+--------------+
| Work in progress | - | 1,123 |
+---------------------------------------------+--------------+--------------+
| Finished goods | - | 2,237 |
+---------------------------------------------+--------------+--------------+
| | | |
+---------------------------------------------+--------------+--------------+
| | - | 4,735 |
+---------------------------------------------+--------------+--------------+
20. TRADE AND OTHER RECEIVABLES
+--------------------------------------------+---------------+--------------+
| | 2008 | 2007 |
+--------------------------------------------+---------------+--------------+
| | HK$'000 | HK$'000 |
+--------------------------------------------+---------------+--------------+
| | | |
+--------------------------------------------+---------------+--------------+
| Trade receivables | 9,240 | 922 |
+--------------------------------------------+---------------+--------------+
| Less: Allowance for doubtful debts | (630) | (240) |
+--------------------------------------------+---------------+--------------+
| | | |
+--------------------------------------------+---------------+--------------+
| | 8,610 | 682 |
+--------------------------------------------+---------------+--------------+
| | | |
+--------------------------------------------+---------------+--------------+
| Other receivables | 18,847 | 18,789 |
+--------------------------------------------+---------------+--------------+
| Prepayments and deposits | 278 | 141 |
+--------------------------------------------+---------------+--------------+
| | | |
+--------------------------------------------+---------------+--------------+
| | 19,125 | 18,930 |
+--------------------------------------------+---------------+--------------+
| Less: Allowance for doubtful debts | (9,235) | - |
+--------------------------------------------+---------------+--------------+
| | | |
+--------------------------------------------+---------------+--------------+
| | 9,890 | 18,930 |
+--------------------------------------------+---------------+--------------+
| | | |
+--------------------------------------------+---------------+--------------+
| | 18,500 | 19,612 |
+--------------------------------------------+---------------+--------------+
The following is an aging analysis of trade receivables (net of allowance for
doubtful debts) which are past due but not impaired at the balance sheet date:
+--------------------------------------------+---------------+--------------+
| | 2008 | 2007 |
+--------------------------------------------+---------------+--------------+
| | HK$'000 | HK$'000 |
+--------------------------------------------+---------------+--------------+
| | | |
+--------------------------------------------+---------------+--------------+
| Less than 1 month past due | 6,811 | 453 |
+--------------------------------------------+---------------+--------------+
| 1 month to 3 months past due | 1,223 | 33 |
+--------------------------------------------+---------------+--------------+
| More than 3 months but less than 1 year | 576 | 33 |
| past due | | |
+--------------------------------------------+---------------+--------------+
| Over 1 year past due | - | 163 |
+--------------------------------------------+---------------+--------------+
| | | |
+--------------------------------------------+---------------+--------------+
| Amounts past due | 8,610 | 682 |
+--------------------------------------------+---------------+--------------+
Trade receivables are due upon the date of billing.
Receivables that were past due but not impaired relate to a number of
independent customers that have a good track record with the Group. Based on
past experience, the management of the Company is of the opinion that no
provision for impairment is necessary in respect of these balances as there has
not been a significant change in credit quality and the balances are still
considered fully recoverable. The Group does not hold any collateral or other
credit enhancements over these balances.
The movements in the allowance for doubtful debts on trade receivables are as
follows:
+--------------------------------------------+---------------+--------------+
| | 2008 | 2007 |
+--------------------------------------------+---------------+--------------+
| | HK$'000 | HK$'000 |
+--------------------------------------------+---------------+--------------+
| | | |
+--------------------------------------------+---------------+--------------+
| Balance at beginning of the year | 240 | 388 |
+--------------------------------------------+---------------+--------------+
| Impairment loss recognised | 390 | 90 |
+--------------------------------------------+---------------+--------------+
| Uncollectible amounts written off | - | (238) |
+--------------------------------------------+---------------+--------------+
| | | |
+--------------------------------------------+---------------+--------------+
| Balance at end of the year | 630 | 240 |
+--------------------------------------------+---------------+--------------+
The movements in the allowance for doubtful debts on other receivables are as
follows:
+--------------------------------------------+---------------+--------------+
| | 2008 | 2007 |
+--------------------------------------------+---------------+--------------+
| | HK$'000 | HK$'000 |
+--------------------------------------------+---------------+--------------+
| | | |
+--------------------------------------------+---------------+--------------+
| Balance at beginning of the year | - | - |
+--------------------------------------------+---------------+--------------+
| Impairment loss recognised | 9,235 | - |
+--------------------------------------------+---------------+--------------+
| | | |
+--------------------------------------------+---------------+--------------+
| Balance at end of the year | 9,235 | - |
+--------------------------------------------+---------------+--------------+
Included in the allowances for doubtful debts are individually impaired trade
receivables and other receivables with balances of approximately HK$630,000 and
HK$9,235,000 (2007: HK$240,000 and nil) respectively. The individually impaired
receivables related to customers or debtors that were in financial difficulties
or in dispute and the management assessed that the recovery of the receivables
is doubtful. The Group does not hold any collateral over these balances.
21. AMOUNT DUE FROM / (TO) A RELATED COMPANY
+----------------------------+---------------+--+--------------+--------------+
| | Maximum | | 2008 | 2007 |
| | balance | | | |
| | outstanding | | | |
| | during the | | | |
| | year | | | |
+----------------------------+---------------+--+--------------+--------------+
| | HK$'000 | | HK$'000 | HK$'000 |
+----------------------------+---------------+--+--------------+--------------+
| | | | | |
+----------------------------+---------------+--+--------------+--------------+
| Riverstone Manufacturing | | | - | 2,866 |
| Limited | | | | |
+----------------------------+---------------+--+--------------+--------------+
| | | | | |
+----------------------------+---------------+--+--------------+--------------+
| One Plus Manufacturing | 24 | | 24 | - |
| Limited | | | | |
+----------------------------+---------------+--+--------------+--------------+
| | | | | |
+----------------------------+---------------+--+--------------+--------------+
| | | | 24 | 2,866 |
+----------------------------+---------------+--+--------------+--------------+
The amount due from / (to) a related company is unsecured, interest-free and
has no fixed terms of repayment.
At 31 December 2007, Mr. Edmund Lui and Mr. Yau Kwong Chi, Kelvin, directors of
the Company, had beneficial interests in Riverstone Manufacturing Limited.
At 31 December 2008, Mr. Edmund Lui and Mr. Yau Kwong Chi, Kelvin, directors of
the Company, have beneficial interests in One Plus Manufacturing Limited.
22. BANK AND CASH BALANCES / PLEDGED BANK DEPOSIT
The pledged bank deposit and bank balances carried interest at prevailing market
rates. Included in bank and cash balances of the Group totalling approximately
HK$89,000 (2007: HK$37,000) were denominated in Renminbi ("RMB"). RMB is not
freely convertible into foreign currencies and the remittance of funds out of
the Mainland China is subject to exchange restrictions imposed by the PRC
government.
Pledged bank deposit represents deposit pledged to a bank to secure banking
facilities granted to the Group. The bank deposit amounting to approximately
HK$549,000 (2007: HK$543,000) have been pledged to secure bank overdrafts and
bank loans and are therefore classified as current assets. The pledged bank
deposit will be released upon the settlement of relevant bank borrowings.
For the purposes of the consolidated cash flow statement, cash and cash
equivalents include cash on hand and in banks, net of outstanding bank
overdrafts. Cash and cash equivalents at the end of the financial year as shown
in the consolidated cash flow statement can be reconciled to the related items
in the consolidated balance sheet as follows:
+---------------------------------------------+--------------+--------------+
| | 2008 | 2007 |
+---------------------------------------------+--------------+--------------+
| | HK$'000 | HK$'000 |
+---------------------------------------------+--------------+--------------+
| | | |
+---------------------------------------------+--------------+--------------+
| Bank and cash balances | 189 | 49 |
+---------------------------------------------+--------------+--------------+
| Bank overdrafts (Note 25) | (10,979) | (7,693) |
+---------------------------------------------+--------------+--------------+
| | | |
+---------------------------------------------+--------------+--------------+
| | (10,790) | (7,644) |
+---------------------------------------------+--------------+--------------+
23. TRADE AND OTHER PAYABLES
+--------------------------------------------+---------------+--------------+
| | 2008 | 2007 |
+--------------------------------------------+---------------+--------------+
| | HK$'000 | HK$'000 |
+--------------------------------------------+---------------+--------------+
| | | |
+--------------------------------------------+---------------+--------------+
| Trade payables | 1,668 | 4,374 |
+--------------------------------------------+---------------+--------------+
| Other payables and accruals | 3,471 | 2,021 |
+--------------------------------------------+---------------+--------------+
| Deposits received | 1,096 | 294 |
+--------------------------------------------+---------------+--------------+
| | | |
+--------------------------------------------+---------------+--------------+
| | 6,235 | 6,689 |
+--------------------------------------------+---------------+--------------+
The following is an aging analysis of trade payables at the balance sheet date:
+--------------------------------------------+---------------+--------------+
| | 2008 | 2007 |
+--------------------------------------------+---------------+--------------+
| | HK$'000 | HK$'000 |
+--------------------------------------------+---------------+--------------+
| | | |
+--------------------------------------------+---------------+--------------+
| Less than 1 month | 457 | 545 |
+--------------------------------------------+---------------+--------------+
| 1 month to 3 months | 5 | 2,023 |
+--------------------------------------------+---------------+--------------+
| Over 3 months but less than 1 year | 1,206 | 1,806 |
+--------------------------------------------+---------------+--------------+
| | | |
+--------------------------------------------+---------------+--------------+
| | 1,668 | 4,374 |
+--------------------------------------------+---------------+--------------+
The average credit period on purchase of goods is 30 days.
24. AMOUNTS DUE TO DIRECTORS
The amounts due to directors are unsecured, interest-free and have no fixed
terms of repayment.
25. BORROWINGS
+--------------------------------------------+---------------+--------------+
| | 2008 | 2007 |
+--------------------------------------------+---------------+--------------+
| | HK$'000 | HK$'000 |
+--------------------------------------------+---------------+--------------+
| | | |
+--------------------------------------------+---------------+--------------+
| Secured | | |
+--------------------------------------------+---------------+--------------+
| - Bank overdrafts (Note (a)) | 10,979 | 7,693 |
+--------------------------------------------+---------------+--------------+
| - Bank loans (Note (a)) | 1,284 | 118 |
+--------------------------------------------+---------------+--------------+
| Unsecured | | |
+--------------------------------------------+---------------+--------------+
| - Other loans (Note (b)(i)) | 500 | - |
+--------------------------------------------+---------------+--------------+
| | | |
+--------------------------------------------+---------------+--------------+
| | 12,763 | 7,811 |
+--------------------------------------------+---------------+--------------+
At the balance sheet date, the borrowings were repayable as follows:
+---------------------------------------------------------+---------------+--------------+
| | 2008 | 2007 |
+---------------------------------------------------------+---------------+--------------+
| | HK$'000 | HK$'000 |
+---------------------------------------------------------+---------------+--------------+
| | | |
+---------------------------------------------------------+---------------+--------------+
| Carrying amount repayable: | | |
+---------------------------------------------------------+---------------+--------------+
| On demand or within one year | 12,416 | 7,802 |
+---------------------------------------------------------+---------------+--------------+
| More than one year, but not exceeding two | 347 | 9 |
| years | | |
+---------------------------------------------------------+---------------+--------------+
| | | |
+---------------------------------------------------------+---------------+--------------+
| | 12,763 | 7,811 |
+---------------------------------------------------------+---------------+--------------+
| Less: | (12,416) | (7,802) |
| Amounts | | |
| due | | |
| within | | |
| one | | |
| year | | |
| shown | | |
| under | | |
| current | | |
| liabilities | | |
+---------------------------------------------------------+---------------+--------------+
| | | |
+---------------------------------------------------------+---------------+--------------+
| | 347 | 9 |
+---------------------------------------------------------+---------------+--------------+
Notes:
(a) The Hong Kong dollar denominated secured bank loans bore interest ranging
from 6% to 6.25% (2007: 8.25% to 9.25%) per annum. At 31 December 2008 and 2007,
the Hong Kong dollar denominated bank overdrafts bore interest ranging from 0.5%
to 1% per annum above the Hong Kong dollar prime lending rate.
As at 31 December 2008, the Group had general banking facilities granted by
banks to the extent of HK$13,300,000 (2007: HK$10,300,000). The Group's bank
borrowings and other banking facilities were secured by:
(i) Personal guarantees provided by Mr. Edmund Lui and Mr. Yau Kwong Chi,
Kelvin, directors of the Company;
(ii) Pledge of fixed deposits of the Group and a close family member of a
director of PAQ Manufacturing Limited, a wholly owned subsidiary of the Company;
and
(iii) Pledge of a property of a related company, Triple Grand Limited. Mr.
Yau Kwong Chi, Kelvin, director of the Company, had the beneficial interests in
Triple Grand Limited.
(b) (i) Pursuant to an agreement entered into between the Company and Ms.
Ho Wing Yee ("Ms. Ho"), an independent third party, on 17 June 2008, Ms. Ho
agreed to advance to the Company a sum of HK$500,000 (the "1st Loan"). The 1st
Loan is unsecured, interest-free and has no fixed terms of repayment. The 1st
Loan is convertible at the option of the lender into ordinary shares of the
Company. The conversion rights attached to the 1st Loan can be exercised at any
time after the expiry of one month from the date of the agreement and the
conversion price of the 1st Loan is HK$0.442 per share.
(b) (ii) Pursuant to an agreement entered into between the Company and Mr.
Ng Ngai Hung ("Mr. Ng"), an independent third party, on 23 June 2008, Mr. Ng
agreed to advance to the Company a sum of HK$445,000 (the "2nd Loan"). The 2nd
Loan is unsecured, interest-free and has no fixed terms of repayment. The 2nd
Loan is convertible at the option of the lender into ordinary shares of the
Company. The conversion rights attached to the 2nd Loan can be exercised at any
time after the expiry of one month from the date of agreement and the conversion
price of the 2nd Loan is HK$0.445 per share.
During the year ended 31 December 2008, Mr. Ng exercised the conversion
rights to convert the 2nd Loan into 1,000,000 shares of the Company. Up to the
date of issuance of these consolidated financial statements, the Company is yet
to complete the relevant procedures to convert the 2nd Loan into shares of the
Company and therefore the sum of HK$445,000 was treated as "Shares to be issued"
included in the reserves of the Company.
26. OBLIGATION UNDER FINANCE LEASE
The Group leased certain of its office equipment under finance lease. The lease
term was two years. Interest rate underlying obligation under finance lease was
fixed at 9.31% per annum. This lease had no terms of renewal or purchase options
and escalation clauses. No arrangement was entered into for contingent rental
payments.
+-------------------------------------------------+--------------+--------------+
| | 2008 | 2007 |
+-------------------------------------------------+--------------+--------------+
| | HK$'000 | HK$'000 |
+-------------------------------------------------+--------------+--------------+
| Amounts | | |
| payable | | |
| under | | |
| finance | | |
| lease: | | |
+-------------------------------------------------+--------------+--------------+
| Within | 229 | - |
| one | | |
| year | | |
+-------------------------------------------------+--------------+--------------+
| In more | 38 | - |
| than | | |
| one | | |
| year | | |
| but not | | |
| more | | |
| than | | |
| five | | |
| years | | |
+-------------------------------------------------+--------------+--------------+
| | | |
+-------------------------------------------------+--------------+--------------+
| | 267 | - |
+-------------------------------------------------+--------------+--------------+
| Less: | (15) | - |
| future | | |
| finance | | |
| charges | | |
+-------------------------------------------------+--------------+--------------+
| | | |
+-------------------------------------------------+--------------+--------------+
| Present | 252 | - |
| value | | |
| of | | |
| lease | | |
| obligation | | |
+-------------------------------------------------+--------------+--------------+
| Less: | (214) | - |
| Amount | | |
| due for | | |
| settlement | | |
| within 12 | | |
| months | | |
| shown | | |
| under | | |
| current | | |
| liabilities | | |
+-------------------------------------------------+--------------+--------------+
| | | |
+-------------------------------------------------+--------------+--------------+
| Amount | 38 | - |
| due for | | |
| settlement | | |
| after 12 | | |
| months | | |
+-------------------------------------------------+--------------+--------------+
The Group's obligation under finance lease was secured by the charge over the
leased asset. Financial lease obligation was denominated in Hong Kong dollars.
27. SHARE CAPITAL
+-------------------------------------------+--------+-------+---------------+---------------+
| | Notes | Par | Number of | Amount |
| | | value | shares | |
+-------------------------------------------+--------+-------+---------------+---------------+
| | | US$ | | HK$'000 |
+-------------------------------------------+--------+-------+---------------+---------------+
| Authorised | | | | |
| share | | | | |
| capital: | | | | |
+-------------------------------------------+--------+-------+---------------+---------------+
| At | (a) | 0.10 | 500,000 | 390 |
| date | | | | |
| of | | | | |
| incorporation | | | | |
| and at | | | | |
| 1 January | | | | |
| 2008 | | | | |
+-------------------------------------------+--------+-------+---------------+---------------+
| Sub-division of the par | (b) | | 4,500,000 | - |
| value of ordinary shares of | | | | |
| US$0.10 to US$0.01 each | | | | |
+-------------------------------------------+--------+-------+---------------+---------------+
| | | | | |
+-------------------------------------------+--------+-------+---------------+---------------+
| | | 0.01 | 5,000,000 | 390 |
+-------------------------------------------+--------+-------+---------------+---------------+
| Increase | (c) | 0.01 | 295,000,000 | 23,010 |
| in | | | | |
| authorised | | | | |
| share | | | | |
| capital | | | | |
+-------------------------------------------+--------+-------+---------------+---------------+
| | | | | |
+-------------------------------------------+--------+-------+---------------+---------------+
| At | | | 300,000,000 | 23,400 |
| 31 | | | | |
| December | | | | |
| 2008 | | | | |
+-------------------------------------------+--------+-------+---------------+---------------+
| | | | | |
+-------------------------------------------+--------+-------+---------------+---------------+
| Issued | | | | |
| and | | | | |
| fully | | | | |
| paid: | | | | |
+-------------------------------------------+--------+-------+---------------+---------------+
| At | (a) | 0.10 | 1 | - |
| date | | | | |
| of | | | | |
| incorporation | | | | |
| and at | | | | |
| 1 January | | | | |
| 2008 | | | | |
+-------------------------------------------+--------+-------+---------------+---------------+
| Sub-division | (b) | | 9 | - |
| of the par | | | | |
| value of | | | | |
| ordinary | | | | |
| shares of | | | | |
| US$0.10 to | | | | |
| US$0.01 each | | | | |
+-------------------------------------------+--------+-------+---------------+---------------+
| | | | | |
+-------------------------------------------+--------+-------+---------------+---------------+
| | | 0.01 | 10 | - |
+-------------------------------------------+--------+-------+---------------+---------------+
| Issue | (c) | 0.01 | 103,850,000 | 8,100 |
| of | | | | |
| shares | | | | |
| upon | | | | |
| Reorganisation | | | | |
+-------------------------------------------+--------+-------+---------------+---------------+
| Issue | (d) | 0.01 | 16,666,667 | 1,300 |
| of | | | | |
| shares | | | | |
| upon | | | | |
| placing | | | | |
+-------------------------------------------+--------+-------+---------------+---------------+
| | | | | |
+-------------------------------------------+--------+-------+---------------+---------------+
| At | | | 120,516,677 | 9,400 |
| 31 | | | | |
| December | | | | |
| 2008 | | | | |
+-------------------------------------------+--------+-------+---------------+---------------+
Notes:
(a) The Company was incorporated on 23 November 2007, on which date the
authorised share capital was US$50,000 divided into 500,000 ordinary shares of
US$0.10 each, 1 of which was issued at par for cash.
(b) On 18 January 2008, (i) issued and unissued shares of the Company were
sub-divided into 10 shares of US$0.01 each such that the authorised share
capital of the Company became US$50,000 divided into 5,000,000 ordinary shares;
and (ii) the authorised share capital of the Company was increased to
US$3,000,000 by the creation of 295,000,000 new ordinary shares.
(c) On 18 January 2008, the Company underwent the Reorganisation and acquired
the entire equity interests in PAQ Manufacturing Limited, a company incorporated
in Hong Kong, through the issue of 103,850,000 ordinary shares of US$0.01 each
to Mr. Yau Kwong Chi, Kelvin and Mr. Edmund Lui.
(d) On 25 February 2008, 16,666,667 new ordinary shares of US$0.01 each of
the Company were issued at GBP0.06 per share by way of placing of shares.
All the new shares issued during the financial period rank pari passu in all
respects with the existing shares of the Company.
28. RESERVES
Merger reserve
The merger reserve of the Group represents the difference between the nominal
value of the issued share capital of PAQ Manufacturing Limited acquired pursuant
to the Reorganisation in January 2008 and the nominal value of the share capital
issued by the Company as consideration for the reorganisation of business under
common control.
29. SHARE-BASED PAYMENT TRANSACTION
On 19 February 2008, the Company granted an option to subscribe for 1,205,166
ordinary shares of the Company to each of ZAI Corporate Finance Ltd. (formerly
known as Zimmerman Adams International Limited), the nominated adviser and
broker of the Company, and Hichens, Harrison & Co. plc, the co-broker of the
Company, in connection with the placing of shares and admission to AIM. The
share options will expire on 24 February 2013 and have an exercise price of
GBP0.06 per share. The estimated fair value per share of these options is
GBP0.017844 (equivalent to HK$0.2778) with a total fair value of GBP43,010
(approximately HK$670,000). The Group recognised the fair values of these
options to a share options reserve and deducted the same amount from a share
premium as these options were granted by the Company in connection with the
placing of shares and admission to AIM. Expected volatility is based on the
expected volatility of comparable listed companies as of the grant date. The
Black-Scholes Option Pricing Model has been used to estimate the fair value of
the options. The variables and assumptions used in computing the fair value of
the share options are based on the management's best estimate. The value of an
option varies with different variables of certain subjective assumptions.
The fair values of the options were calculated using the Black-Scholes Option
Pricing Model. The inputs into the model were as follows:
+-------------------------------------------+--------------+-----------------+
| | | 2008 |
+-------------------------------------------+--------------+-----------------+
| | | |
+-------------------------------------------+--------------+-----------------+
| Grant date share price | | GBP0.06 |
+-------------------------------------------+--------------+-----------------+
| Exercise price | | GBP0.06 |
+-------------------------------------------+--------------+-----------------+
| Expected volatility | | 24.12% |
+-------------------------------------------+--------------+-----------------+
| Option life | | 5 years |
+-------------------------------------------+--------------+-----------------+
| Dividend yield | | 0% |
+-------------------------------------------+--------------+-----------------+
| Risk-free interest rate | | 4.297% |
+-------------------------------------------+--------------+-----------------+
ZAI Corporate Finance Ltd. and Hichens, Harrison & Co. plc had not exercised the
options during the year.
30. ACQUISITION OF A SUBSIDIARY
On 18 January 2008, PAQ Manufacturing Limited, a wholly owned subsidiary of the
Company, acquired 51% equity interests in Plato Leatherware Company Limited at a
cash consideration of HK$2,448,000.
The net liabilities acquired on 18 January 2008 and the goodwill arising are as
follows:
+-------------------------------------------+--------------+-----------------+
| | | Acquiree's |
| | | carrying |
| | | amounts |
| | | before |
| | | combination |
| | | and fair value |
+-------------------------------------------+--------------+-----------------+
| | | HK$'000 |
+-------------------------------------------+--------------+-----------------+
| | | |
+-------------------------------------------+--------------+-----------------+
| Net assets / (liabilities) acquired: | | |
+-------------------------------------------+--------------+-----------------+
| Property, plant and equipment | | 5 |
+-------------------------------------------+--------------+-----------------+
| Trade and other receivables | | 4,338 |
+-------------------------------------------+--------------+-----------------+
| Bank and cash balances | | 6 |
+-------------------------------------------+--------------+-----------------+
| Trade and other payables | | (5,603) |
+-------------------------------------------+--------------+-----------------+
| Bank overdrafts | | (214) |
+-------------------------------------------+--------------+-----------------+
| | | |
+-------------------------------------------+--------------+-----------------+
| Net liabilities acquired | | (1,468) |
+-------------------------------------------+--------------+-----------------+
| Goodwill | | 3,916 |
+-------------------------------------------+--------------+-----------------+
| | | |
+-------------------------------------------+--------------+-----------------+
| | | 2,448 |
+-------------------------------------------+--------------+-----------------+
| | | |
+-------------------------------------------+--------------+-----------------+
| Total consideration satisfied by: | | |
+-------------------------------------------+--------------+-----------------+
| Cash | | 2,448 |
+-------------------------------------------+--------------+-----------------+
| | | |
+-------------------------------------------+--------------+-----------------+
| Net cash outflow arising on acquisition: | | |
+-------------------------------------------+--------------+-----------------+
| Cash consideration paid | | 2,448 |
+-------------------------------------------+--------------+-----------------+
| Bank balances and cash, bank overdrafts | | 208 |
| acquired | | |
+-------------------------------------------+--------------+-----------------+
| | | |
+-------------------------------------------+--------------+-----------------+
| | | 2,656 |
+-------------------------------------------+--------------+-----------------+
On 11 June 2008, PAQ Manufacturing Limited further acquired the remaining 49%
equity interests in Plato Leatherware Company Limited at a cash consideration of
approximately HK$9,901,000 and 8,772,000 issued shares of the Company. Plato
Leatherware Company Limited became a wholly owned subsidiary of the Company
thereafter.
Pursuant to the sale and purchase agreement in relation to the acquisition of
the remaining 49% equity interests in Plato Leatherware Company Limited, a part
of cash consideration of HK$2,448,000 for the acquisition was contingent on the
fund raising by the Company after admission to the AIM by means of share
placement on or before 1 May 2009. Management of the Company considered that the
fund raising exercise was not probable and did not include the aforesaid cash
consideration of HK$2,448,000 in the cost of acquisition at the acquisition
date. Subsequent to the date of acquisition of the remaining 49% equity
interests in Plato Leatherware Company Limited and up to 1 May 2009, no fund
raising by the Company occurred.
After the completion of the acquisition of the remaining 49% equity interests in
Plato Leatherware Company Limited on 11 June 2008, the goodwill arising is as
follows:
+-------------------------------------------+--------------+-----------------+
| | | HK$'000 |
+-------------------------------------------+--------------+-----------------+
| | | |
+-------------------------------------------+--------------+-----------------+
| Purchase consideration: | | |
+-------------------------------------------+--------------+-----------------+
| Cash consideration | | 7,453 |
+-------------------------------------------+--------------+-----------------+
| Fair value of 8,772,000 | | 3,868 |
| shares of | | |
| the Company to be issued | | |
| (Note) | | |
+-------------------------------------------+--------------+-----------------+
| | | |
+-------------------------------------------+--------------+-----------------+
| | | 11,321 |
+-------------------------------------------+--------------+-----------------+
| Acquisition of additional interest in a | | (1,010) |
| subsidiary | | |
| from a minority shareholder | | |
+-------------------------------------------+--------------+-----------------+
| | | |
+-------------------------------------------+--------------+-----------------+
| Goodwill arising | | 10,311 |
+-------------------------------------------+--------------+-----------------+
| Goodwill arising from | | 3,916 |
| acquisition on 18 | | |
| January 2008 - shown as | | |
| above | | |
+-------------------------------------------+--------------+-----------------+
| | | |
+-------------------------------------------+--------------+-----------------+
| Total goodwill | | 14,227 |
+-------------------------------------------+--------------+-----------------+
Note:
At 31 December 2008, the consideration of 8,772,000 shares of the Company for
the acquisition had not yet been issued and therefore the fair value of
8,772,000 shares to be issued for the acquisition had been recognised as "shares
to be issued" in the equity. Shares to be issued was based the published price
of the Company's shares as quoted on the AIM on 11 June 2008.
Plato Leatherware Company Limited contributed approximately HK$2,331,000 to
the Group's profit for the period between the date of acquisition and the
balance sheet date.
If the acquisition had been completed on 1 January 2008, total group revenue for
the year would have been approximately HK$76,319,000, and loss for the year
would have been approximately HK$9,478,000. The proforma information is for
illustrative purposes only and is not necessarily an indication of revenue and
results of the Group that actually would have been achieved had the acquisition
been completed on 1 January 2008, nor is it intended to be a projection of
future results.
31. COMMITMENTS
Capital commitments outstanding at the balance sheet date not provided for in
the consolidated financial statements were as follows:
+-------------------------------------------+---------------+---------------+
| | 2008 | 2007 |
+-------------------------------------------+---------------+---------------+
| | HK$'000 | HK$'000 |
+-------------------------------------------+---------------+---------------+
| | | |
+-------------------------------------------+---------------+---------------+
| Commitments for the | - | 293 |
| acquisition of | | |
| property, plant and | | |
| equipment | | |
+-------------------------------------------+---------------+---------------+
32. OPERATING LEASES
At the balance sheet date, the Group had commitments for future minimum lease
payments under non-cancellable operating leases in respect of rented premises
which fall due as follows:
+-------------------------------------------+---------------+---------------+
| | 2008 | 2007 |
+-------------------------------------------+---------------+---------------+
| | HK$'000 | HK$'000 |
+-------------------------------------------+---------------+---------------+
| | | |
+-------------------------------------------+---------------+---------------+
| Within one year | 991 | 833 |
+-------------------------------------------+---------------+---------------+
| In the second to fifth years inclusive | 1,338 | 1,760 |
+-------------------------------------------+---------------+---------------+
| | | |
+-------------------------------------------+---------------+---------------+
| | 2,329 | 2,593 |
+-------------------------------------------+---------------+---------------+
Operating leases related to rental premises with lease terms of between two to
five years (2007: two to five years). None of the leases include contingent
rentals.
33. RETIREMENT BENEFIT PLANS
Defined contribution plan
The Group operates a Mandatory Provident Fund Scheme for all qualifying
employees in Hong Kong. The assets of the plans are held separately from those
of the Group in funds under the control of trustees.
The employees of the Group's subsidiary in the PRC are members of a
state-managed retirement benefit plan operated by the government of the PRC. The
subsidiary is required to contribute a specified percentage of payroll costs to
the retirement benefit scheme to fund the benefits. The only obligation of the
Group with respect to the retirement benefit plan is to make the specified
contributions.
The total expense recognised in the consolidated income statement of
approximately HK$274,000 (2007: HK$152,000) represents contributions payable to
these plans by the Group at rates specified in the rules of the plans.
34. SIGNIFICANT RELATED PARTY TRANSACTIONS
(a) Save as disclosed elsewhere in the consolidated financial statements, the
Group had the following significant related party transactions during the year
ended 31 December 2008:
+----------------------------------+-------+---------------+---------------+
| |Notes | 2008 | 2007 |
+----------------------------------+-------+---------------+---------------+
| | | HK$'000 | HK$'000 |
+----------------------------------+-------+---------------+---------------+
| | | | |
+----------------------------------+-------+---------------+---------------+
| Licensing | (i) | - | 1,500 |
| fee income | | | |
| receivable | | | |
| from | | | |
| Riverstone | | | |
| Manufacturing | | | |
| Limited | | | |
| ("Riverstone") | | | |
+----------------------------------+-------+---------------+---------------+
| Management | (ii) | - | 395 |
| fee income | | | |
| receivable | | | |
| from | | | |
| Riverstone | | | |
+----------------------------------+-------+---------------+---------------+
| | | | |
+----------------------------------+-------+---------------+---------------+
Notes:
(i) The licensing fee income was charged at prices and terms mutually agreed
by both parties.
(ii) The management fee income was charged on a cost reimbursement basis.
(b) Compensation to key management personnel of the Group
The remuneration of key management personnel during the year was as follows:
+---------------------------------------------+---------------+---------------+
| | 2008 | 2007 |
+---------------------------------------------+---------------+---------------+
| | HK$'000 | HK$'000 |
+---------------------------------------------+---------------+---------------+
| | | |
+---------------------------------------------+---------------+---------------+
| Short-term | 1,663 | 240 |
| employee | | |
| benefits | | |
+---------------------------------------------+---------------+---------------+
| Post-employment | 4 | 12 |
| benefits | | |
+---------------------------------------------+---------------+---------------+
| | | |
+---------------------------------------------+---------------+---------------+
| | 1,667 | 252 |
+---------------------------------------------+---------------+---------------+
The directors are the key management personnel of the Group and details of their
remuneration are disclosed in note 13.
35. PENDING LITIGATION
As at 31 December 2008, PAQ Manufacturing Limited, a wholly owned subsidiary of
the Company, was one of the defendants in a pending litigation and dispute
arising from the ownership of a copyright with a supplier. The supplier's claims
against the defendants are mainly for damages in respect of the defendants' acts
of copyright infringement. After taking into account of legal advices from the
Company's legal advisor, the directors consider that PAQ Manufacturing Limited
has a good defence against such claim and no provision has been made in the
consolidated financial statements.
36. POST BALANCE SHEET EVENT
In February 2009, PAQ Concept Limited, which was incorporated in the British
Virgin Islands on 9 February 2009 and was wholly owned by the Company, entered
into a joint venture agreement with Fobazo.com AS, to form two joint venture
companies, Fobazo Licensing Holdings Limited and Fobazo Asia Holdings Limited.
PAQ Concept Limited shall contribute to Fobazo Licensing Holdings Limited by
investing merchandise, sales networks, logistics, and supplies, marketing and
brand building, and staffing with a total value of not less than HK$15,000,000.
PAQ Concept Limited shall contribute to Fobazo Asia Holdings Limited by setting
up infrastructure of internet hosting in China, Hong Kong and Taiwan. The Group
will have a 51% equity interest each of the joint venture companies.
37. SUBSIDIARIES OF THE COMPANY
Particulars of the subsidiaries as at 31 December 2008 are as follows:
+-----------------------------------+----------------+--------------+------------+---------------+
| Name | Place of | Particulars | Proportion | |
| | incorporation/ | of | of | Principal |
| | establishment | issued | ownership | activities |
| | and operations | share | interests | |
| | | capital/ | held by | |
| | | registered | the | |
| | | capital | Company | |
+-----------------------------------+----------------+--------------+------------+---------------+
| | | | | |
+-----------------------------------+----------------+--------------+------------+---------------+
| PAQ | Hong Kong | 9,095 | 100% | Sale of |
| Manufacturing | | ordinary | (Direct) | softwear for |
| Limited | | shares of | | branded and |
| | | HK$1 each | | OEM |
| | | | | electronic |
| | | | | products and |
| | | | | accessories |
+-----------------------------------+----------------+--------------+------------+---------------+
| | | | | |
+-----------------------------------+----------------+--------------+------------+---------------+
| Placeday | British | 100 | 100% | Investment |
| Holdings | Virgin | ordinary | (Indirect) | holding |
| Limited | Islands | shares of | | |
| | | US$1 each | | |
+-----------------------------------+----------------+--------------+------------+---------------+
| | | | | |
+-----------------------------------+----------------+--------------+------------+---------------+
| ??????(??) | The | Registered | 100% | Manufacture |
| ???? | People's | capital of | (Indirect) | of softwear |
| (transliterated | Republic | HK$1,000,000 | | for branded |
| as Hai Na | of China | | | and OEM |
| Sporting Goods | | | | electronic |
| (Shenzhen) | | | | products and |
| Company | | | | accessories |
| Limited) | | | | |
+-----------------------------------+----------------+--------------+------------+---------------+
| | | | | |
+-----------------------------------+----------------+--------------+------------+---------------+
| Plato | Hong Kong | 15,000 | 100% | Sale of bags |
| Leatherware | | ordinary | (Indirect) | for OEM |
| Company | | shares of | | products and |
| Limited | | HK$1 each | | accessories |
+-----------------------------------+----------------+--------------+------------+---------------+
- End -
This information is provided by RNS
The company news service from the London Stock Exchange
END
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