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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Qihang Equip | LSE:QIH | London | Ordinary Share | GB00B030LW50 | ORD 2.5P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 5.50 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From May 2019 to May 2024
TIDMQIH
RNS Number : 2869F
Qihang Equipment Company Limited
13 June 2012
Qihang Equipment Company Limited
Results for the year ended 31 December 2011
For the year ended 31 December 2011 Qihang Equipment and its subsidiaries (the "Group") recorded a profit excluding the listing costs from continuing operation of RMB25.62 million (approximately GBP2.6 million) (2010 - RMB16.52 million) on sales revenue of RMB262.11 million (approximately GBP26.6 million) (2010 - RMB209.67 million). Basic earnings per ordinary share amounted to RMB0.17 (approximately 1.7 pence) (2010 - RMB0.38). At the year end, Group cash and cash equivalents amounted to RMB47.16 million (approximately GBP4.8 million) (2010 - RMB32.63 million); borrowings amounted to RMB186.35 million (approximately GBP18.9 million) (2010 - RMB147.35 million).
This was a year of change for Qihang Equipment. We sold our original operation companies for an acceptable price to an owner who could develop it much faster than we were capable of doing.
The purchase of Qihang Equipment, through acquiring its Hong Kong parent, means that we are now a leading supplier of machine tool equipment in China to what is still one of the world's fastest growing economies.
Since the year end, the slowdown in growth in China has meant that business has been slower than hoped. As conditions improve in China we expect our performance to improve. We have seen a small improvement in the last month.
The acquisition of Anda in January brought another area of industrial activity into the Company. Performance has so far met our expectations.
I would like to take this opportunity to thank all our staff for their hard work over the last twelve months.
Mark Chapman
Chairman
For further information please contact:
Qihang Equipment Company Limited
Mark Chapman Tel: 01483 894 627
Northland Capital Partners Limited (Nominated Adviser and Broker) Tel: 020 7796 8800
William Vandyk
Tim Metcalfe
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 December 2011
Hot Features
Premium
Note Group 2011 Group 2010
RMB'000 RMB'000
Revenue 4 262,107 209,669
Cost of sales (189,903) (154,306)
----------- -----------
Gross profit 72,204 55,363
Other operating income 1,597 143
Distribution expenses (18,024) (12,049)
Administrative expenses (26,925) (19,324)
Specific bad debts written off - (5,947)
Research and development costs (3,236) (1,668)
Listing costs 7 (6,747) -
Profit/(loss) from operation 18,869 16,518
Non-operating income net of expenses 5 (240)
(Loss)/profit on disposal of subsidiaries 28/14 (63) -
Fair value (loss)/gain on financial
instrument 16 (461)
Income from subsidies 50 10,238
Investment income 8 2,799 2,295
Finance costs 9 (12,331) (7,045)
----------- -----------
Profit before taxation 8,868 21,766
Income tax expenses 10 (754) (2,213)
----------- -----------
Profit for the year 8,114 19,553
----------- ===========
Profit attributable to:
Equity holders of the company 8,114 14,664
Non-controlling interest - 4,889
----------- -----------
8,114 19,553
=========== ===========
Other comprehensive income
Exchange difference (380) -
Gains on revaluation of land and buildings
net of tax - 54,712
Revaluation of available-for-sale investment 15 (1,241) -
Total comprehensive income for the
year 6,493 74,265
=========== ===========
Profit attributable to:
Equity holders of the company 6,493 69,376
Non-controlling interest 26 - 4,889
----------- -----------
6,493 74,265
=========== ===========
Earnings per share 11
Basic and diluted (RMB) 0.17 0.38
=========== ===========
Basic and diluted (pence) 1.73 3.73
=========== ===========
All amounts are derived from continuing operations
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
At 31 December 2011
Note 20 11 20 10
RMB'000 RMB'000
Group Group
Non-current assets
Property, plant and equipment 12 201,454 164,335
Intangible assets 13 42,920 40,718
Investments 14 - -
Available-for-sale financial asset 15 657 -
Derivative financial instrument 16 - -
Deferred tax asset 25 456 554
---------- --------
245,487 205,607
---------- --------
Current assets
Inventories 17 92,264 78,805
Trade and other receivables 18 55,129 67,503
Available-for-sale-financial asset 19 100 100
Cash and cash equivalents 20 47,160 32,632
---------- --------
194,653 179,040
---------- --------
Total assets 440,140 384,647
========== ========
Equity and reserves
Share capital 21 15,196 4,612
Share premium 21 86,711 19,842
Other reserves 22 (15,344) 59,776
Retained earnings 18,764 2,507
---------- --------
105,327 86,737
---------- --------
Current liabilities
Bank borrowings 23 186,350 97,350
Income tax liabilities 2,399 1,459
Trade and other payables 24 90,964 97,446
---------- --------
279,713 196,255
---------- --------
Non-current liabilities
Bank borrowings 23 - 50,000
Other borrowings 23 45,445 42,000
Deferred tax liabilities 25 9,655 9,655
---------- --------
55,100 101,655
---------- --------
Total liabilities 334,813 297,910
========== ========
Total equity and liabilities 440,140 384,647
========== ========
The financial statements were approved by the Board of Directors and authorised for issue on 13 June 2012
Li Yuanqing Hao Qiang Chief ExecutiveDirector Executive Finance Director
CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 31 December 2011
20 11 20 10
Note RMB'000 RMB'000
Group Group
Net cash (used in)/generated from operating
activities 27 (6,808) 14,213
---------- ----------
Investing activities
Purchase of property, plant and equipment (49,561) (34,487)
Purchase of intangible assets (3,548) -
Purchase of investments (2,484) (100)
Investment in subsidiaries - -
Proceeds from disposal of subsidiary - -
Net cash inflow from business combination 10,805
Net cash inflow from disposal of subsidiary 5,893
Dividends received - -
Interest received 2,799 2,296
---------- ----------
Net cash (used in)/generated from in
investing activities (36,096) (32,291)
---------- ----------
Financing activities
Proceeds from bank borrowings 191,350 127,350
Repayment of bank borrowings (138,400) (82,150)
Proceeds from other borrowings 3,555 -
Shares issued 3,437 -
Share Issue Costs (2,984) -
---------- ----------
Net cash from financing activities 56,958 45,200
---------- ----------
Net increase/(decrease) in cash and
cash equivalents 14,054 27,122
Cash and cash equivalents at beginning
of period 32,632 5,510
Exchange difference 474 -
Cash and cash equivalents at end of
period 20 47,160 32,632
========== ==========
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2011
Group Share Share Other Retained Total Non-controlling Total
capital premium reserves earnings interest
RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000
Balance at 1 January 2010 - - 28,749 6,233 34,982 16,483 51,465
========= ========= ========== ========== ========= ================ =========
Comprehensive income
Profit for the year - - - 14,664 14,664 4,889 19,553
Gains on the revaluation of
land and
buildings, net of tax - - 54,712 - 54,712 - 54,712
--------- --------- ---------- ---------- --------- ---------------- ---------
Total comprehensive income for
the
year - - 54,712 14,664 69,376 4,889 74,265
--------- --------- ---------- ---------- --------- ---------------- ---------
Transaction with owner
Issue of shares 8 - - - 8 - 8
Transfer - - 761 (761) - - -
Purchase of shares from
non-controlling
party - - - (17,629) (17,629) (21,372) (39,001)
Capital structuring after
merger 4,604 19,842 (24,446) - - - -
--------- --------- ---------- ---------- --------- ---------------- ---------
Total transaction with owner 4,612 19,842 (23,685) (18,390) (17,621) (21,372) (38,993)
--------- --------- ---------- ---------- --------- ---------------- ---------
Balance at 31 December 2010 4,612 19,842 59,776 2,507 86,737 - 86,737
========= ========= ========== ========== ========= ================ =========
Comprehensive income
Profit for the year - - - 8,114 8,114 - 8,114
Exchange difference - - (380) - (380) - (380)
Revaluation of
available-for-sale financial
assets - - (1,241) - (1,241) - (1,241)
---------- ---------- --------- ---------------- ---------
Total comprehensive income for
the
year - - (1,621) 8,114 6,493 - 6,493
--------- --------- ---------- ---------- --------- ---------------- ---------
Transaction with owner
Issue of shares 10,584 69,853 - - 80,437 - 80,437
Transfer - - 2,106 (2,106) - - -
Disposal of subsidiary - - (8) 8 - - -
Capital structuring after
merger - (2,984) (75,597) 10,241 (68,340) - (68,340)
--------- ---------- ---------- --------- ---------------- ---------
Total transaction with owner 10,584 66,869 (73,499) 8,143 12,097 - 12,097
--------- --------- ---------- ---------- --------- ---------------- ---------
Balance at 31 December 2011 15,196 86,711 (15,344) 18,764 105,327 - 105,327
========= ========= ========== ========== ========= ================ =========
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2011
1 GENERAL INFORMATION
Qihang Equipment Company Limited is a company incorporated in Jersey under the Companies (Jersey) Law 1991. The address of the registered office is given on page 1. The nature of the Group's operation and its principal activities are set out in the Directors' Report. The principal place of business of the Group's operation is Zhenjiang New Development Area, Dingmao Nanwei Road 2, Zhenjiang Province, P. R. China ("PRC").
The principal activity of the company is that of an investment holding company. The principal activities of its subsidiaries are set out in note 14.
On 1 July 2011, by special resolution, the name of the Company changed to Qihang Equipment Company Limited to reflect the new business; and the Company changed its presentational currency to produce its annual report to shareholders in Renminbi ("RMB") of the PRC for the year ended 31 December 2011 and subsequent periods.
As of result of the above, these financial statements present information about the consolidated group of companies, and are set out in RMB, which is the functional currency of the Group's operating subsidiaries in PRC.
These financial statements are rounded to the nearest thousand ('000).
2 ACCOUNTING POLICIES 2.1 Statement of compliance
These financial statements have been prepared in accordance with International Financial Reporting Standards and Interpretation in force ("IFRSs"), as adopted by European Union, in accordance with the provision of the Companies (Jersey) Law 1991, and the AIM Rules.
The Group has adopted all relevant standards effective for accounting periods beginning on or after 1 January 2011.
At the date of authorisation of these financial statements, the Group has not adopted the following standard as it is either not effective of not applicable to the Group's business.
Amendment to IFRS 7 - Enhanced Derecognition Disclosure Requirements - effective 1 July 2011
The IASB introduced enhanced disclosure requirements to IFRS 7 Financial Instruments as part of its comprehensive review of off-balance sheet activities. The amendments are designed to ensure that users of financial statements are able to more readily understand transactions involving the transfer of financial assets (for example, securitisations), including the possible effects of any risks that may remain with the entity that transferred the assets. The amendments also require additional disclosures if a disproportionate amount of transfer transactions are undertaken around the end of a reporting period. As the change only results in additional disclosures, there is no impact on the Group's financial statement.
It is considered that this does not apply to the Group and that this standard is not expected to result in changes in accounting policies, changes to the carrying amounts of assets or liabilities or the published results. If any, but expect there will be no material impact to the income statement and balance sheet when implemented, although further disclosure may be required.
There are no other standards and interpretations in issue but not yet adopted that the directors anticipate will have material effect on the reported income or net assets of the Group.
2.2 Basis of preparation
These consolidated financial statements have been prepared on the historical cost basis except for certain properties and financial instruments that are measure at revalued amounts or fair values, as explained in the accounting policies below. Historical cost is generally based on the fair value of the consideration given in exchange for assets.
The Group's financial statements have been prepared in the name of Qihang on the basis of continuing business of Win Yu ("acquirer accounting") and business combination with Qihang, the parent company ("acquiree accounting") occurs on date of business combination.
Win Yu Group financial information is presented separately on note 34 to these financial statements.
2.3 Basis of consolidation
(a) Subsidiaries
The consolidated financial statements incorporate the financial statements of the company and entities controlled by the Company (its subsidiaries). Control is achieved where the company has the power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities.
The results of subsidiaries acquired or disposed of during the period 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 the accounting policies used into line with those used by the Group.
All intra-group transactions, balances, income and expenses are eliminated on consolidation.
(b) Non-controlling interests
Non-controlling interests in the net assets of consolidated subsidiaries are identified separately from the Group's equity therein. Non-controlling interests consist of the amount of those interests at the date of the original business combination 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 interests 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.
(c) Associates
Associates are all entitles over which the Group has significant influence but not control, generally accompanying by a shareholding of between 20% - 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting and are initially recognised at cost.
2.4 Business combinations
The acquisition of subsidiaries is accounted for using the acquisition method of accounting. The consideration transferred in a business combination 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 acquire. Acquisition related costs are generally recognised in profit or loss. The acquiree's identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3: Business Combinations are recognised at their fair value at the acquisition date, except for non-current assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5: Non-Current Assets Held for Sale and Discontinued Operations, which are recognised and measured at fair value less costs to sell.
Goodwill arising on acquisition is recognised as an asset and initially measured as the excess of the consideration transferred over the Group's interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised. If, after reassessment, the Group's interest in the net fair value of the acquiree's identifiable assets, liabilities and contingent liabilities exceed the consideration transferred, the excess is recognised immediately in the profit and loss as a bargain purchase.
Non-controlling interests that are present ownership interest and entitle their holders to a proportionate share of the entity's net assets in the event of liquidation may be initially measured either at fair value or at the non- controlling interests' proportionate share of the recognised amounts of the acquiree's identifiable net assets. The choice of measurement basis is made on a transaction-by-transaction basis. Other types of non-controlling interests are measured at fair value, when applicable, on the basis specified in another IFRS.
2.5 Reverse acquisitions
A reverse acquisition occurs when the entity that issues securities (the legal acquirer) is identified as the acquiree for accounting purposes under business combination. The entity whose equity interests are acquired (the legal acquiree) must be the acquirer for accounting purposes for the transaction to be considered a reverse acquisition.
The merger of a private operating entity into a non-operating public shell corporation with nominal net assets typically results in the owners of the private entity gaining control over the combined entity after the transaction and the shareholders of the former public shell corporation continuing only as passive investors. IRFS 3 clarifies that this transaction is usually not considered a business combination, instead this transactions are considered to be a capital transactions of the legal acquiree. However, the accounting result is similar to reverse acquisition accounting.
2.6 Comparative
The comparative information of the Group's financial statements will be presented with Win Yu's results, retroactively adjusted to reflect the legal capital of Qihang.
2.7 Foreign currency
Transactions entered into by Group entities in a currency other than the currency of the primary economic environment in which it operates (the "functional currency") are recorded at the rates ruling when the transactions occur. Foreign currency monetary assets and liabilities are translated at the rates ruling at the balance sheet date and the gains and losses on translation are included in the income statement.
The presentational currency of the Group has been changed to RMB from pounds sterling ("GBP") and therefore the financial statements of the parent company's including comparative have been re-translated from GBP to RMB.
Exchange rates used as follow:
Year end rates Average rates
31 December 2011 GBP1 = RMB9.7318 GBP1 = RMB10.3630
30 June 2011 GBP1 = RMB10.3754 GBP1 = RMB10.5644
31 December 2010 GBP1 = RMB10.2492 GBP1 = RMB10.4624
On consolidation, the results of overseas operations are translated into RMB at rates approximating to those ruling when the transactions took place. All assets and liabilities of overseas operations including goodwill arising on the acquisition of those operations are translated at the rate ruling at the statement of financial position date. Exchange differences arising on translating the opening net assets at opening rate and the results of the overseas operations at actual rate are recognised directly in the equity ("translation reserves"). Exchange differences recognised in the statement of comprehensive income of Group entities' separate financial statements on the translation of long-term monetary items forming part of the Group's net investment in the overseas operation concerned are reclassified to the translation reserves.
On disposal of a foreign operation, the cumulative exchange differences recognised in the foreign exchange reserves relating to that operation up to the date of disposal are transferred to the statement of comprehensive income as part of the profit or loss on disposal.
2.8 Borrowing costs
All borrowings costs are recognised in the income statement in the period in which they are incurred except for borrowing costs attributable to qualifying assets. Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset is to be capitalised as a cost of that asset. A qualifying asset is an asset that necessarily takes a substantial period of time to get ready for its intended use or sale.
2.9 Income tax
Income tax for the financial year comprises current and deferred tax. Income tax is recognised in the income statement except to the extent that it relates to items recognised directly in other comprehensive income or directly in equity. In this case the tax is recognised in other comprehensive income or directly in equity, respectively.
Current tax is the expected tax payable on the taxable income for the financial year, using tax rates enacted or substantively enacted at the statement of financial position date, and any adjustment to tax payable in respect of previous financial years.
Deferred tax is provided using the liability method, providing for temporary differences as at the statement of financial position date between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes except for differences arising on:
- the initial recognition of goodwill;
- the initial recognition of an asset or liability in a transaction which is not a business combination and,
at the time of the transaction, affects neither accounting or taxable profit; and
- investment in subsidiaries and jointly controlled entities where the group is able to control the timing of the reversal of the difference and it is probable that the difference will not reverse in the foreseeable future.
The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the statement of financial position date.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised.
2.10 Property, plant and equipment
Land use rights (note 2.11a) and buildings are stated at their revalued amounts, being the fair value at the date of revaluation, less any subsequent accumulated depreciation and subsequent accumulated impairment losses. Revaluations are performed with sufficient regularity such that the carrying amounts do not differ materially from those that would be determined using fair values at the end of the reporting period. Any revaluation increase arising is recognised in other comprehensive income and accumulated in equity, except to the extent that it reverses a revaluation decrease for the same asset previously recognised in profit and loss, in which case the increase is credited to profit and loss to the extent of the decrease previously expensed. A decrease in the carrying amount arising on the revaluation is recognised in profit or loss to the extent that it exceeds the balance, if any, held in the revaluation reserve relating to a previous revaluation of that asset.
Plant and equipment are stated at cost less accumulated depreciation and impairment. The cost of an asset comprises its purchase price and any directly attributable costs of bringing the asset to its working condition and location for its intended use. Depreciation is calculated so as to write off the cost of an asset, less its estimated residual value, over its useful economic life, using the straight-line method. The estimated useful lives are as follows:
Buildings 20 years
Plant and machinery 5-10 years
Motor vehicles 5 years
Fixtures, fittings and equipment 5 years
Other assets 5 years over cost
An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount (refer note 2.12).
Gains and losses on disposals are determined by comparing the disposal proceeds with the carrying amount and are included in the profit and loss.
Asset in the course of construction is stated at cost less impairment losses. Cost comprises direct costs of construction capitalised during the periods of construction. Capitalisation of these costs ceases and construction-in-progress is transferred to property, plant and equipment when substantially all the activities necessary to prepare the assets for their intended use are completed. No depreciation is provided for in respect of construction-in-progress until it is completed and ready for its intended use.
2.11 Intangible assets
(a) Land use rights
Land use rights are amortised through administrative expenses over the period to which the rights relate. The estimated useful lives are 50 years.
(b) Software Licences
Software licences are stated at cost less accumulated amortisation and accumulated impairment losses. Amortisation is calculated using the straight-line method to allocate the cost of the licence over 5 years.
(c) Internally generated intangible assets - research and development expenditure
Research expenditure is recognised as an expense as incurred.
Costs incurred on development projects are recognised as internally generated intangible assets only if all of the following conditions are met by the Group:
- the technical feasibility of completing the intangible assets so that it will be available for use or sales;
- its intention to complete the intangible asset and use or sell it; - its ability to use or sell the intangible assets; - it is probable that the intangible asset created will generate future economic benefits;
- the availability of adequate technical financial and other resources to complete the development and use or sell the intangible assets; and
- its ability to measure reliably the expenditure attributable to the intangible assets during its development.
Internally generated intangible assets are amortised on a straight-line basis over their estimated useful lives, from the date the intangible is ready for use. Amortisation charge is recognised in the income statement within administrative expenses.
2.12 Impairment of non-current assets
The carrying amounts of assets are reviewed at each statement of financial position date to determine whether there is any indication of impairment. If any such indication exists, the asset's recoverable amount is estimated. For goodwill, the recoverable amount is estimated at each statement of financial position date. An impairment loss is recognised whenever the carrying amount of the asset or its cash-generating unit exceeds its recoverable amount. Impairment losses are recognised through administrative expenses in the income statement.
The recoverable amount is the higher of an asset's net selling price and value in use. The net selling price is the amount obtainable from the sale of an asset in an arm's length transaction. Value in use is the present value of estimated future cash flows expected to arise from the continuing use of an asset and from its disposal at the end of its useful life.
Recoverable amounts are estimated for individual assets or, if it is not possible, for the cash generating unit. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation, if no impairment loss had been recognised. Reversals of impairment losses are recognised in the income statement. Impairment losses in respect of goodwill are not reversed.
2.13 Investment in subsidiary undertakings
Investments in subsidiaries are stated at cost less provision for any impairment in value.
2.14 Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is determined using the weighted average cost method. The cost of finished goods comprises raw materials, direct labour, other direct costs and related production overheads but excludes borrowing costs. Net realisable value is the estimated selling price in the ordinary course of business, less the costs of completion and selling expenses.
2.15 Financial instruments
Financial assets and financial liabilities are recognised 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.
2.16 Financial assets
Financial assets within the scope of IAS 39 are classified as either financial asset at 'fair value through profit and loss' (FVTPL), loans and receivables, held to maturity investments, or available-for-sale financial assets, as appropriate.
The Group determines the classification of its financial assets after initial recognition and, where allowed and appropriate, re-evaluates this designation or convention in the market place concerned.
All arm's length purchases and sales of financial assets are recognised on the trade date i.e. the date that the Group commits to purchase the asset. Such purchases or sales are purchases or sales of financial assets that require delivery of assets within the period generally established by regulation or convention in the market place concerned.
2.16.1 Effective interest method
This is a method of calculating the amortised cost of a debt instrument and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of debt instrument, or where appropriate, a shorter period, to the net carrying amount on initial recognition.
Income is recognised on an effective interest basis for debt instruments other than those financial assets classified at FVTPL.
2.16.2 Financial assets at FVTPL
Financial assets classified as held for trading are included in the category financial assets at fair value through profit or loss. Financial assets are classified as held for trading if they are acquired for the purpose of sale in the short term. Derivative financial instruments are also classified as held for trading unless they are designated and effective as a hedging instrument. Financial assets at FVTPL are stated at fair value with any gains or losses arising on re-measurement recognised in profit or loss.
2.16.3 Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are measured at amortised cost using the effective interest method less any impairment and are included in current assets, except for maturities greater than twelve months after the statement of financial position date. These are classified as non-current assets. The Group's loans and receivables comprise "trade and other receivables" and "cash and cash equivalents" in the statement of financial position.
Interest income is recognised by applying the effective interest rate except for short-term receivables when the recognition of interest would be immaterial.
2.16.4 Held-to-maturity investments
Non-derivative financial assets with fixed or determinable payments and fixed maturity are classified as held-to-maturity when the Group has the positive intent and ability to hold the assets to maturity. Investments intended to be held for an undefined period are not included in this classification. Other long-term investments that are intended to be held-to-maturity, such as bonds, are subsequently measured at amortised cost using the effective interest method less any impairment.
2.16.5 Available-for-sale financial assets
Available-for-sale financial assets are non-derivative financial assets that are designated as available-for-sale or are not classified in any of the three preceding categories. After initial recognition, available-for-sale assets are measured at fair value with gains or losses being recognised in other comprehensive income and accumulated under fair value adjustment reserve until the investment is derecognised or until the investment is determined to be impaired at which time the accumulate gain or loss previously reported in equity is included in the profit or loss. The fair value of investments that are traded in active market at the end of each reporting period is determined by reference to the relevant stock exchange's quoted market bid prices at the close of business on the reporting period date. For investments where there is no active market, fair value is determined using valuation techniques. Such techniques include using recent arm's length market transactions; reference to the current market value of another instrument, which is substantially the same; discounted cash flow analysis and option pricing models.
2.17 Cash and cash equivalents
Cash comprises cash in hand and demand deposits. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. For the purpose of the cash flow statement, cash equivalents would include advances from banks repayable within 3 months from the date of the advance.
2.18 Financial liabilities and equity
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. Financial liabilities include trade and other payables, amounts due to related parties and shareholders, bank borrowings and notes payable.
Trade and other payables are carried at cost which is the fair value of the consideration to be paid in the future for goods and services received, whether or not billed to the Group.
All borrowings and overdrafts are recorded at the amount of the proceeds received, net of direct issue costs. Finance charges are charged to the income statement on an accruals basis using the effective interest rate method.
Equity instruments are recorded at the fair value of the consideration received, net of direct issue costs.
2.19 Impairment of financial assets
Financial assets, other than those at FVTPL, are assessed for indicators of impairment at the end of each reporting date. Financial assets are considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial assets, the estimated future cash flows of the investment have been affected.
An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount, and present value of the estimated future cash flows discounted at the original effective interest rate. An impairment loss in respect of an available-for-sale financial asset is calculated by reference to its fair value.
For certain categories of financial assets, such as trade receivables, assets that are assessed not to be impaired individually are, in addition, assessed for impairment on a collective basis that share similar credit risk characteristics.
For financial assets carried at cost, the amount of the impairment loss is measured as the difference between the asset's carrying amount and the present value of the estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment loss will not be reversed in subsequent periods.
The carrying amount of the financial assets is reduced by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss.
When available-for-sale financial asset is considered to be impaired, cumulative gains or losses previously recognised in other comprehensive income are reclassified to profit or loss in the period.
For financial assets measured at amortised cost, if, in a subsequent period, the amount of the impairment loss decreases which can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.
In respect of available-for-sale equity securities, impairment losses previously recognised in profit or loss are not reversed through profit or loss. Any increase in fair value subsequent to an impairment loss is recognised in other comprehensive income and accumulated under fair value adjustment reserve. In respect of available-for-sale debt securities, impairment losses are subsequently reversed through profit or loss if an increase in the fair value of the investment can be objectively related to an event occurring after the recognition
2.20 Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods and services provided in the normal course of business, net of discounts, VAT and other sales related taxes.
Universal lathes and CNC machinery tools sales
Sales of goods are recognised when goods are delivered and title has passed and all revenue recognised is in respect of the sale of goods.
2.21 Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker is responsible for allocating resources and assessing performance of the operating segments.
2.22 Government grants
Government grants received on capital expenditure are deducted in arriving at the carrying amount of the asset purchased.
Grants for revenue expenditure are presented separately on the face of the consolidated income statement.
Where retention of the government grant is dependent on the Group satisfying certain criteria it is initially recognised as deferred income. When the criteria for retention have been satisfied, the deferred income balance is released to the income statement or netted against the asset purchased as appropriate.
2.23 Related parties
Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party, or exercise significant influence over the other party in making financial and operating decisions. Parties are also considered to be related if they are subject to common control or common significant influence. Related parties may be individuals or corporate entities.
2.24 Leases
Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the profit and loss on a straight-line basis over the period of the lease.)
2.25 Contingent liabilities and contingent assets
A contingent liability is a possible obligation that arises from past events and whose existence will only be confirmed by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Group. It can also be a present obligation arising from past events that is not recognised because it is not probable that outflow of economic resources will be required or the amount of obligation cannot be measured reliably.
A contingent liability is not recognised but is disclosed in the notes to the accounts. When a change in the probability of an outflow occurs so that the outflow is probable, it will then be recognised as a provision. A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain events not wholly within the control of the Group. Contingent assets are not recognised but are disclosed in the notes to the accounts when an inflow of economic benefits is probable. When inflow is virtually certain, an asset is recognised.
2.26 Provisions
Provisions are recognised when the Group has a present legal or constructive obligation as a result of a past event, it is probable that an outflow of economic benefit will be required to settle the obligation, and a reliable estimate of the amount can be made.
3 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
The preparation of financial statements in conformity with IFRSs requires management to make assumptions that affects the application of accounting policies and the amounts of assets, liabilities, income and expenditure. The estimates and associated assumptions are based on historical experience and other relevant factors, the results of which form the basis for the judgements that underlie the carrying value of the assets and liabilities. Actual results may differ from these estimates. The most significant areas in which judgements are required relate to the estimate of useful economic lives and residual values of non-current assets and the recoverable amount of current and non-current assets (in particular inventories and trade receivables). The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised if the revision affects only that period or in the period of revision and future periods if the revision affects both the current and future periods.
The Group makes estimates and assumptions concerning the future. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.
(a) Provisions for doubtful debts
The Group makes sales on credit. A proportion of the outstanding credit sales may prove uncollectible in due course. An estimate is made of the uncollectible portion of accounts receivables using a calculation based on prior experience and an evaluation of the amounts outstanding. In aggregate, RMB183,282 (2010: RMB180,019) is considered to be at risk in respect of amounts due from trade customers. There is a degree of uncertainty as to actions the Group is able to undertake to enforce collection of these debts, which may impact the eventual recoverable amounts. Accordingly, the Directors have assessed their best estimate of the recoverability of these debts. More details of the allowance for doubtful trade and other receivables are provided in note 18.
(b) Provisions for inventories
The Group reviews the net realisable value of, and demand for, its inventory on a regular basis to provide assurance that recorded inventory is stated at the lower of cost and net realisable value. Factors that could impact estimated demand and selling prices include the timing and success of future technological innovations, competitor actions, supplier prices and economic trends. Changes of the expected net realisable value of inventory could potentially result in the reduction of the profit for the year. The Group has not made significant provisions for slow moving and obsolete stock as its amount was negligible.
(c) Revaluation of land and buildings
The Group has used a valuation from an independent valuer to estimate the fair value of land and property and to calculate the deferred income tax liabilities accordingly based on management's best judgement. The fair value of land and property relies upon open market transactions. If the operating subsidiary in China fails to maintain its high technology enterprise status the actual outcome on deferred income tax liabilities would differ by 10 per cent. from management's estimate and the Group would need to increase the deferred tax liabilities by RMB6.44 million.
4 SEGMENT INFORMATION
The sales revenue arises from the sale of universal lathes, CNC machinery, large-scale machinery, and relevant spare parts which forms the Group's main business.
All the activities are within the PRC. Therefore management considers no detail of operating and geographical segments information is to be reported.
8.86% (2010: 4.24%) of sales made via PRC agents to customers overseas.
Analysis of revenue from the sale of goods and services are as follows:
Group Group
2011 2010
RMB'000 RMB'000
Universal 142,540 114,621
CNC 74,892 51,492
Large-scale 44,245 32,302
Others 1,830 11,542
Sales related taxes (1,400) (288)
262,107 209,669
========= ===========
5 EXPENSES BY NATURE
Group Group
2011 2010
RMB'000 RMB'000
Changes in inventories of finished goods and
work in progress (13,459) (26,615)
Raw materials, consumables used, direct costs,
and overheads 183,998 164,526
Employee benefit expense (note 6) 33,030 23,722
Exchange difference (832) -
Sales agents' commissions 5,074 3,902
Warranty costs 2,249 1,525
Depreciation, amortisation and impairment charges 12,060 7,797
Operating lease payments 446 594
Transportation costs 2,146 1,638
Travel and entertaining 4,606 3,901
Other expenses 5,534 5,404
--------- ---------
Total cost of sales, distribution costs and administrative
expenses 234,852 186,394
========= =========
6 EMPLOYEE BENEFIT EXPENSE
Group Group
2011 2010
RMB'000 RMB'000
Wages and salaries - normal 20,284 12,398
Wages and salaries - annual bonus 6,538 6,043
Social security costs and welfare 9,780 6,950
--------- --------
36,602 25,391
Included in inventories (3,572) (1,669)
33,030 23,722
========= ========
2011 2010
Number Number
The average monthly number of
people employed 760 678
======== ========
7 LISTING COSTS
Win Yu reversing into Qihang was to obtain the listing status. The substance of this transaction is Qihang received approximate RMB3.4 million in placing and incurred approximate RMB6.7 million listing costs. This is an equity-settled share-based payment transaction. Qihang received RMB3.4 million and obtained listing status which does not quality for recognition as an asset. Therefore it has recognised as an expense.
8 INVESTMENT INCOME
Group Group
2011 2010
RMB'000 RMB'000
Interest income on short-term bank deposits 799 283
Interest income on loans to related parties 1,133 1,133
Interest income on other loans 867 867
Income from available-for-sale financial assets - 12
Dividend received - -
2,799 2,295
========= ========
9 FINANCE COSTS
Group Group
2011 2010
RMB'000 RMB'000
Interest on bank borrowings 11,793 7,094
Bank charges 1,605 715
Less: amount capitalised for qualifying assets (1,119) (764)
Interest on other borrowings 52 -
12,331 7,045
========= ========
10 INCOME TAX EXPENSE
10.1 Income taxes recognised in profit and loss
2011 2010
RMB'000 RMB'000
Current income tax 3.417 2,695
Adjustment in respect of prior year (2,761) 430
-------- --------
Total tax charge 656 3,125
-------- --------
Deferred tax assets
Origination and reversal of timing
difference 98 (912)
-------- --------
Total deferred tax 98 (912)
-------- --------
Income tax expense 754 2,213
======== ========
Reconciliation at effective tax rates
Profit before tax 8,868 21,766
======== ========
Tax on profit at the prevailing rate
applicable 2,217 5,442
Exempt company status 2,859 -
Preferential tax rate (2,278) (1,778)
Expenses not deductible for tax 638 1,564
Income not subject to tax - (2,533)
On timing differences 98 (912)
Adjustment in respect of prior years (2,761) 430
Unrelieved tax losses c/f 65 -
Others (84) -
754 2,213
======== ========
The Company is regarded as resident for tax purposes in Jersey and on the basis that the Company is neither a financial services company nor a utility company for the purposes of the Income Tax (Jersey) Law 1961, as amended; the company is subject to income tax in Jersey at a rate of zero per cent.
Win Yu International Investments Company Limited is regarded as resident for the tax purposes in Hong Kong. There is no tax liability due to losses during the year.
Heng Tai Feng International Holdings Limited was registered in BVI. It is not regarded as resident for the tax purposes in BVI. Therefore, it will not be liable to BVI income tax in this respect other than on BVI source income.
The Group's operating subsidiaries in PRC are subject to income tax rate at 25% (2010: 25%) except certain operating subsidiaries which are entitled to a reduction in tax rate at 15% (2010: 15%) and due to its high technology enterprise status.
10.2 Income taxes recognised in comprehensive income
2011 2010
RMB'000 RMB'000
The tax charge relating to components of other
comprehensive
income is as follows:
Fair value gain on land and buildings
Before tax - 64,367
Tax charge - (9,655)
--------- --------
After tax - 54,712
Other comprehensive income - 54,712
========= ========
Deferred tax (note 25) - (9,655)
========= ========
11 EARNINGS PER SHARE
Earnings per share are calculated by dividing the profit attributable to equity shareholders of the Company by the weighted average pre-combination ordinary shares multiplied by exchange ratio established in the acquisition, and the weighted average total actual shares of the parent in issue after the date of acquisition.
For comparative, earnings per share are calculated by dividing the profit attributable to equity shareholders of the Company by the weighted average ordinary shares multiplied by exchange ratio established at acquisition.
Diluted earnings per share are calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. The dilutive potential ordinary shares in the company are convertible loan notes. This convertible loan notes have been settled after the year end, therefore the management considered diluted effect is immaterial.
2011 2010
RMB RMB
Earnings
Earnings for the purposes of basic and
diluted earnings per share being net
profit attributable to equity holders
of the parent 8,113,560 14,663,684
Number of shares
Weighted average number of ordinary shares
for the purposes of basic earnings per
share 48,099,998 38,325,737
=========== ===========
12 PROPERTY, PLANT AND EQUIPMENT
Group
Asset Building Plant and Fixtures Motor vehicles Other Total
under construction machinery fittings assets
&
equipment
RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000
Cost
At 1 January 2010 6,785 56,831 69,530 2,643 2,478 1,316 139,583
Revaluation surplus - 36,568 - - - - 36,568
Additions 32,852 - 786 522 163 164 34,487
Transfers (39,484) 37,762 1,722 - - - -
Disposals - (3,167) (1,122) (275) - - (4,564)
-------------------- --------- ----------- ----------- --------
At 31 December 2010 153 127,994 70,916 2,890 2,641 1,480 206,074
Adjustment - 3,236 - - - - 3,236
Additions 41,068 1,418 6,370 382 323 - 49,561
Transfers (2,059) 224 1,835 - - - -
Disposal of
subsidiary - - - (125) - - (125)
Disposal - - (264) (1) - - (265)
-------------------- --------- ----------- ----------- --------------- -------- ---------
At 31 December 2011 39,162 132,872 78,857 3,146 2,964 1,480 258,481
==================== ========= =========== =========== =============== ======== =========
Accumulated
depreciation
At 1 January 2010 - 6,824 26,984 1,459 938 316 36,521
Charge for the year - 3,419 4,751 232 426 396 9,224
Disposals - (2,809) (959) (238) - - (4,006)
-------------------- --------- ----------- ----------- --------------- -------- ---------
At 31 December 2010 - 7,434 30,776 1,453 1,364 712 41,739
Adjustment - 3,236 - - - - 3,236
Charge for the
period - 4,242 5,124 342 380 340 10,428
Charge for the
period -
on revaluation - 1,925 - - - - 1,925
On disposal of
subsidiary - - - (63) - - (63)
On disposal - - (237) (1) - - (238)
-------------------- --------- ----------- ----------- --------------- -------- ---------
At 31 December 2011 - 16,837 35,663 1,731 1,744 1,052 57,027
==================== ========= =========== =========== =============== ======== =========
Carrying value
At 31 December 2011 39,162 116,035 43,194 1,415 1,220 428 201,454
==================== ========= =========== =========== =============== ======== =========
At 31 December 2010 153 120,560 40,140 1,437 1,277 768 164,335
==================== ========= =========== =========== =============== ======== =========
Asset under construction represent the construction of new production line to increase the production capacity.
Revaluation of asset
The Group's land use right and buildings were revalued on 27 March 2012 by independent valuers. The revaluation amount are RMB41 million and RMB119 million respectively. The valuation was made on the basis of recent market transactions on arm's length terms and depreciated replacement cost for land and buildings respectively. The Directors considered that the carrying value of the land use right and buildings do not differ materially from that which would be determined using revaluation amount at the end of the reporting period. Therefore carrying amounts are at their approximate fair value.
Assets pledged as security
Land use right and buildings with carrying amounts of approximate RMB156 million has been pledged to secure the borrowings of the Company (see note 23).
Had the Group's land use right and building been measured on a historical cost basis, their carrying amount would have been as follow:
2011 2010
RMB'000 RMB'000
Land use right 12,494 12,778
Buildings 81,391 83,992
========= ========
13 INTANGIBLE ASSETS
The Company obtained the right to occupy the land at Zhenjiang New Development Area, Dingmao Nanwei Road 2, Zhenjiang Province, PRC for a period of 50 year from June 2005. The remaining period of amortisation is approximate 45.5 years.
Refer to note 12(b) and 12(c) for revaluation of asset and assets pledged as security.
Land use Purchased Patent Total
right software
RMB'000 RMB'000 RMB'000 RMB'000
Cost
At 1 January 2010 21,689 258 - 21,947
Revaluation surplus 27,799 - - 27,799
Disposals (7,451) - - (7,451)
--------- ---------- -------- --------
At 31 December 2010 42,037 258 - 42,295
Adjustment (1,447) - - (1,447)
Additions - 364 3,184 3,548
Disposals - - - -
--------- ---------- -------- --------
At 31 December 2011 40,590 622 3,184 44,396
========= ========== ======== ========
Amortisation
At 1 January 2010 1,966 32 - 1,998
Charge for the year 350 85 - 435
On disposal (856) - - (856)
--------- ---------- -------- --------
At 31 December 2010 1,460 117 - 1,577
Adjustment (1,447) - - (1,447)
Charge for the year 285 218 212 715
Charge for the year - on revaluation 631 - - 631
On disposal - - - -
--------- ---------- -------- --------
At 31 December 2011 929 335 212 1,476
========= ========== ======== ========
Carrying value
At 31 December 2011 39,661 287 2,972 42,920
========= ========== ======== ========
At 31 December 2010 40,577 141 - 40,718
========= ========== ======== ========
14 INVESTMENTS
Details of the Company's investment in subsidiaries at 31 December 2011 are as follows:
Name of Place of Proportion Principal activities
subsidiary incorporation of ownership
(or registration) interest
and operation %
Win Yu International Investments Hong Kong 100% Holding company
Company Limited
Heng Tai Feng International British Virgin 100% Holding company
Holdings Limited** Islands
100% Manufacture of
Jiangsu Qihang CNC Machine PRC lathes and machinery
Tool Co., Limited** tools
** Held by subsidiary company
On 28 October 2011, Heng Tai Feng International Holdings Limited transferred its 30% holding in Jiangsu Qihang CNC Machine Tool Co., Limited to Win Yu International Investments Company for cash consideration of RMB19 million. As a result of this Win Yu International Investments Company Limited owned entire share capital of Jiangsu Qihang CNC Machine Tool Co., Limited.
15 AVAILABLE FOR SALE FINANCIAL ASSET
Group Group
2011 2010
RMB'000 RMB'000
At 1 January - -
On business combination 2,023 -
Fair value adjustment (1,241) -
Exchange difference (125) -
-------- --------
At 31 December 657 -
======== ========
The above available-for-sale investment is fairly stated at its fair value. The historical cost of investment is GBP200,000.
16 DERIVATIVE FINANCIAL INSTRUMENTS
Group Group
2011 2010
RMB'000 RMB'000
At 1 January - -
On business combination 461 -
Fair value adjustment (461) -
At 31 December - -
======== ========
The fair value of the share option was calculated using a Black-Scholes option pricing model. The volatility was
measured at 25%, the risk free rate was 0.5% and the expected dividend was nil. The fair values and other details which were processed into the model are as follows:
Number Grant date Exercise Fair value Exercise period
of options price
22/12/2009
50,000,000 22/12/2009 0.8p nil - 21/12/2012
On 23 February 2012, the company has transferred 50,000,000 options to subscribe for ordinary shares, exercisable at 0.8 pence per share, in Metroelectric plc to Wonder Employee Capital Limited ("WECL") in part settlement of the loan of GBP200,000 received by the company from WECL in 2009, see note 23.
17 INVENTORIES
2011 2010
RMB'000 RMB'000
Raw materials and consumables 33,000 32,246
Work in progress 57,403 44.825
Finished goods 1,861 1,734
92,264 78,805
========= ========
The cost of inventories recognised as an expense includes RMB51,103 (2010: RMB364,103 write down) in respect of write back of inventories to net realisable value.
18 TRADE AND OTHER RECEIVABLES
Group Group
2011 2010
RMB'000 RMB'000
Trade receivables - net 11,652 5,097
Notes receivables 17,435 1,768
Other receivables - net 24,875 49,304
Loans to related parties - 11,334
Prepayments and accrued income 1,167 -
55,129 67,503
======== ========
Provision for impairment has been made for estimated irrecoverable amount from the sale of goods and other loans which has been determined by reference to past default experience. It is the Group's policy to made general allowance for doubtful debts on outstanding balances of more than 180 days as at period end.
Movements on the Group provision for impairment of trade receivables are as follows:
2011 2010
RMB'000 RMB'000
At 1 January 180 147
Allowance for the year 3 33
At 31 December 183 180
========= ========
Movements on the Group provision for impairment of other receivables are as follows:
2011 2010
RMB'000 RMB'000
At 1 January 2,779 2,995
Allowance for the year (2,379) (216)
At 31 December 400 2,779
========= ========
At 31 December 2011, the aging analysis of trade receivables is as follows:
2011 2010
RMB'000 RMB'000
Up to 3 months 11,220 4,735
3 - 6 months 9 142
6 - 12 months 41 142
1 - 2 years 382 59
Over 2 years - 19
At 31 December 11,652 5,097
========= ========
The Company provides loans to certain trading partners at commercial terms. These are generally repayable within a year and are included in other receivables above.
2011 2010
RMB'000 RMB'000
Loan to Zhenjiang Xinrun - 4,972
Loan to Shenzhen Zhonghemei - 8,666
Loan to Zhenjiang Anda Machinery
Co Ltd - 16,750
Loan to Shenzhen Century Feng
Tai - 365
- 30,753
============================================= ========
Also included in other receivables are:
2011 2010
RMB'000 RMB'000
Payments on account 10,116 12,140
Payment to be refunded on cancellation of 10,800 -
contract on plant ordered
Deposit for guarantee on bank borrowings 3,571 5,186
24,487 17,326
========= ========
The directors consider that the carrying amount of trade and other receivables approximate their fair value.
19 AVAILABLE-FOR-SALE FINANCIAL ASSETS
The available-for-sale financial assets represent investment in mutual fund under the Bank of Communications in PRC. The carrying amount is approximate its fair value and the maximum exposure to credit risk at the reporting period is the carrying value of the fund classified as available for sale.
20 CASH AND CASH EQUIVALENTS
Group Group
2011 2010
RMB'000 RMB'000
Cash at bank and on hand 16,440 18,512
Short-term bank deposits 30,720 14,120
47,160 32,632
========= =========
Bank balances and cash comprise cash held by the Group and short-term bank deposits with an original maturity of six months or less. The carrying amount of these assets approximates their fair value.
21 SHARE CAPITAL AND SHARE PREMIUM
2011 2010 2011 2010
GBP'000 GBP'000 RMB'000 RMB'000
Authorised:
200,000,000 ordinary shares of
2.5p each 5,000 1,625 52,343 16,655
======== ======== ======== ========
Pursuant to a special resolution of the company on 1 July 2011 the authorised share capital of the Company was increased from 65,000,000 shares to 200,000,000 shares.
Issued and fully paid: Number Share Share
of Capital Premium
shares
GBP GBP
At 1 January and 31 December
2010 18,000,000 450,000 1,935,980
Placing on 4 July 2011 1,710,526 42,763 282,237
On 4 July 2011 38,325,737 958,143 6,323,747
Less share issue costs (note
7) - - (282,237)
------------ ----------- -----------
At 31 December 2011 58,036,263 1,450,906 8,259,727
============ =========== ===========
RMB'000 RMB'000
At 31 December 2011 15,196 86,711
=========== ===========
On 4 July 2011, the Company's shares were re-admitted to AIM market and received GBP325,000 in placing through the issue of 1,710,526 shares at 19p each.
On the same day, the Company issued 38,325,737 shares at 19p each to the vendor of Win Yu as part of the consideration paid for the acquisition of Win Yu Group.
22. OTHER RESERVES
Group Group
RMB'000 RMB'000
Revaluation reserves 54,712 54,712
Available-for-sale financial assets (1,241) -
Other reserves 26,318 26,318
Translation reserves (380) -
Statutory reserves 5,290 3,192
Merger reserves (100,043) (24,446)
---------- ---------
(15,344) 59,776
========== =========
Other reserves
Other reserves represent loans waived by Mr Li Yuanqing, a shareholder and a director of the Company.
Statutory reserves
In accordance with the relevant regulations applicable in the PRC, companies now comprising the Group established in the PRC are required to transfer at least 10% of their statutory annual profits after tax to the statutory reserve until the balance of the reserve reaches 50% of their respective registered share capital. Subject to certain restrictions as set out in the relevant PRC regulations, the statutory reserve may be used to offset against accumulated losses of the respective PRC companies. The amount of the transfer is subject to the approval of the board of directors of the respective companies.
Merger reserves
Merger reserves arose due to capital restructuring of the Group whereby Win Yu Group reversing into Qihang, cash shell as at date of business combination.
23 BORROWINGS
Non-current Group Group
2011 2010
RMB'000 RMB'000
Bank borrowings - 50,000
Loan from a director 42,000 42,000
Loan from WECL 2,445 -
Other 1,000 -
45,445 92,000
======== ========
Current Group Group
2011 2010
RMB'000 RMB'000
Bank borrowings 186,350 97,930
186,350 97,930
======== ========
Loan from a director represents interest free loan from Mr Li Yuanqing. The loan is repayable after 12 months.
The loan from Wonder Employee Capital Limited ("WECL") was entered into on 6 January 2010. The loan of GBP200,000 is for a 3 year period with interest accruing at 5% per annum. WECL has the right to convert the loan into ordinary shares in the capital of the Company at a price of 10p per ordinary share.
On 23 February 2012, the Company has transferred 25,000,000 ordinary shares and 50,000,000 options to subscribe for ordinary shares, exercisable at 0.8 pence per share, in Metroelectric plc to Wonder Employee Capital Limited ("WECL") in full and final settlement of the above loan.
The bank borrowings are secured by:
- land use right and property of the Group (note 12 and 13);
- land use right and property owned by Zhenjiang Anda Machinery Co Ltd
- Zhenjiang SME Investments Security Co., Limited; and
- Personal guarantee from Mr Li Yuanqing
Zhenjiang Anda Machinery Co Ltd is the parent company of Zhenjiang Anda Coal Mine Special Equipment Co Ltd (see note 32).
The average interest rate paid is 7.5% (2010: 5.8%) annually. The borrowings are arranged at fixed interest rates and the directors consider that the carrying amount of the borrowings approximate to their fair value.
24 TRADE AND OTHER PAYABLES
Group Group
2011 2010
RMB'000 RMB'000
Trade payables 56,913 53,993
Notes payables 21,038 22,144
Customer advances 5,710 14,822
Social security and other taxes 1,217 867
Other creditors 6,086 5,620
90,964 97,446
======== ========
The directors consider that the carrying amount of trade and other payables approximate to their fair value.
25 DEFFERED INCOME TAX
2011 2010
RMB'000 RMB'000
The analysis of deferred tax assets and deferred
tax liabilities is as follows:
Deferred tax assets
- -
* Deferred tax assets to be recovered after more than
12 months
* Deferred tax assets to be recovered within 12 months (456) (554)
-------- --------
(456) (554)
-------- --------
Deferred tax liabilities
* Deferred tax liabilities due after more than 12
months 9,655 9,655
- -
* Deferred tax liabilities due within 12 months
-------- --------
9.655 9,655
-------- --------
Deferred tax liabilities (net) 9,199 9,101
======== ========
The movement in deferred income tax assets and liabilities during the year, without taking into consideration the offsetting of balances within the same jurisdiction, is as follow:
Accelerated Fair Total
Tax depreciation value
gains
RMB'000 RMB'000 RMB'000
At 1 January 2010 358 - 358
Credit to income statement (912) - (912)
Charge to other comprehensive income - 9,655 9,655
------------------ -------- --------
At 31 December 2010 (554) 9,655 9,101
Charge to income statement 98 - 98
At 31 December 2011 (456) 9,655 9,199
================== ======== ========
26 NON-CONTROLLING INTEREST
2011 2010
RMB'000 RMB'000
At 1 January - 16,483
Share of profit - 4,889
Purchase of shares from non-controlling interest - (21,372)
-------- ---------
At 31 December - -
======== =========
In November 2010, Win Yu acquired entire share capital of Heng Tai Feng International Holdings Limited which owned 30% of Jiangsu Qihang CNC Machine Tool Co., Limited for a total consideration of RMB20 million. This has been accounted for as transaction between parent and non-controlling interest. The difference between the amount paid for and the carrying value of net assets is just adjusted through equity. As a result of this, Jiangsu Qihang CNC Machine Tool Co., Limited become wholly owned subsidiary of the Win Yu.
27 NOTES TO THE CASH FLOW STATEMENT
Group Group
2011 2010
RMB'000 RMB'000
Profit before interest and tax 18,400 25,800
Adjustments for:
Depreciation of property, plant and equipment 12,353 9,224
Amortisation of intangibles 1,346 435
Loss on disposal of assets 27 7,153
Loss/(gain) on disposal of investment in subsidiary 63 -
Fair value gain on derivative financial instrument 461 -
Bad debts written off - 5,947
Dividends received - -
Operating cash flows before movements in working
capital 32,650 48,559
Increase in inventory (14,057) (26,615)
(Increase)/decrease in trade and other receivables (10,443) (10,706)
(Decrease)/increase in trade and other payables (2,911) 10,998
--------- ---------
Net cash generated from/(used in) operations 5,239 22,236
Finance costs paid (12,331) (6,330)
Income tax refunded 2,761
Income taxes paid (2,477) (1,693)
Net cash (used in)/generated from operating activities (6,808) 14,213
========= =========
28 DISPOSAL OF SUBSIDIARY COMPANIES
On 1 January 2011, the Group disposed of its gear operations. Details of the disposal are as follow:
Book value of net assets sold
RMB'000
Current assets
Inventories 598
Notes receivables 694
Trade receivables 22,122
Cash and cash equivalents 4,107
Non-current assets
Property, plant and equipment 62
Current liabilities
Bank borrowings (13,950)
Trade payables (3,439)
Other payables (131)
Net assets disposed of 10,063
Cash consideration 10,000
---------
Loss on disposal 63
=========
Net cash inflow on disposal
Consideration received 10,000
Less: cash and cash equivalent balances disposed
off (4,107)
---------
5,893
=========
29 COMMITMENTS
Capital commitments
2011 2010
RMB'000 RMB'000
Commitments for the construction
of additional production line 50,000 -
(note 12)
========= ========
Commitments under operating leases
At the reporting date, the Group had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follow:
2011 2010
RMB'000 RMB'000
Land and buildings
Within one year - 410
- 410
=============================== ========
Operating lease payments represent rentals payable by the Group for its properties.
30 GUARANTEE
The Group provided cash guarantees to bank borrowings of RMB23.5 million and RMB5 million taken out by Zhenjiang Anda Machine Co Ltd and Zhenjiang Anda Coal Mine Special Equipment Co Ltd respectively. The guarantees on borrowings of RMB11 million, RMB12.5 million and RMB5 million are expiring on 30 June 2014, 3 November 2012 and 10 December 2012 respectively.
31 RELATED PARTY TRANSACTIONS
Transactions within the Group have been eliminated in the preparation of the financial information set out in this report and are not disclosed in this note. Balance with other related parties have been disclosed under the relevant notes.
The Group is controlled by Proud Style Limited by virtue of its shareholding, a company owned by Mr Li Yuanqing, a director of the Group.
Key management compensation
Key management includes directors of the company and its subsidiaries. The compensation paid or payable to key management for the employee services is shown on page 5 of the Report of the Directors.
32 EVENT AFTER THE REPORTING DATE
On 6 January 2012, the Group acquired the entire share capital of Zhenjiang Anda Coal Mine Special Equipment Co Ltd ("ZACM"), a manufacturer of coal mining equipment such as drilling machines, pumps, dust catchers, drill pipe and accessories for a cash consideration up to RMB35 million. RMB30 million of the consideration was paid immediately and the balance of RMB5 million is payable by 31 March 2013 conditional upon ZACM reporting profit after tax of at least RMB9 million for the year ended 31 December 2012. In the event that ZACM does not achieve this profit target then the deferred consideration will be reduced proportionally. The unaudited net assets of ZACM at 31 December 2011 were RMB23.84 million.
33 FINANCIAL INSTRUMENTS
In common with all other businesses, the Group is exposed to risks that arise from its use of financial instruments. This note describes the Group's objectives, policies and processes for managing those risks and the methods used to measure them.
There have been no substantive changes in the Group's exposure to financial instrument risks, its objectives, policies and processes for managing those risks or the methods used to measure them from previous periods, unless otherwise stated in this note.
Principal financial instruments
The principal financial instruments used by the Group, from which financial instrument risk arises, are as follows:
- Trade and other receivables
- Cash and cash equivalents
- Trade and other payables
- Borrowings
The above are designated as receivables and financial liabilities which are measured at amortised cost.
- Available-for-sale financial assets
- Derivative financial instruments
The above are designated as investments and measured at fair value.
General objective, policies and procedures
The Board has overall responsibility for the determination of the Group's risk management objectives and policies and, whilst retaining ultimate responsibility for them, it has delegated the authority for designing and operating processes to executive management.
The overall objective of the Board is to set policies that seek to reduce risk as far as possible without unduly affecting the Group's competitiveness and flexibility. Further details regarding these policies are set out below:
(a) Credit risk
Credit risk arises principally from the Group's trade and other receivables. Cash is placed with creditworthy financial institutions.
The Group controls the credit risk from customers through deposit payments prior to delivery of goods. Trade and other receivables presented in the balance sheet are net of an allowance for doubtful receivables, estimated by management based on current economic conditions. Receivables net of this allowance for doubtful receivables is the Group's maximum exposure to credit risk, being RMB55 million (2010: RMB67 million).
Quantitative disclosures of the credit risk in relation to trade and other receivables are disclosed in note 18.
(b) Liquidity risk
Liquidity risk arises from the Group's management of working capital. It is the risk that the Group will encounter difficulty in meeting its financial obligations as they fall due.
The Group's policy as regards liquidity is to ensure sufficient cash resources are maintained to meet short-term liabilities. The Group has no defaults or breaches on its financial liabilities.
(c) Currency risk
Foreign exchange risk refers to the risk that movement in foreign currency exchange rates against the Group's functional or reporting currency will affect the Group's financial results and cash flows. The Group has transaction currency exposures. Such exposure arises from sales by an operating unit in currencies other than its functional currency.
During the period under review the Group has no export sales, therefore, no foreign currency sales. The Group's policy, as it relates to currency risk, is to limit payment terms to immediate letters of credit or prepayment before transporting goods to customers.
If the exchange rate on uncovered exposures were to move significantly between the year end and date of payment or receipt, there could be an impact on the Group's net income. As such, financial assets and liabilities are short term in nature; this risk is not considered to be substantial.
Foreign exchange risk has not been considered to be material in either the current or preceding period.
(d) Interest rate risk
Interest rate risk arises from the potential changes in interest rates that may have an adverse effect on the Group in the current reporting period and in future years.
The Group is exposed to interest rate risk through the impact of change in interest rates on interest bearing debts and interest-bearing cash. Other than the bank deposits and borrowings, the Group has no other significant interest-bearing assets and liabilities. The Group's policy is to secure all to its borrowings at fixed borrowing rates.
Interest rate risk has not been considered to be material in either the current or preceding period.
(e) Capital
The Group considers its capital to comprise its ordinary share capital, share premium and retained earnings. In managing its capital, the Group's primary objective is to ensure its continued ability to provide a consistent return for its equity shareholders through a combination of capital growth and distributions. The Group has historically considered a mix of debt and equity funding as the most appropriate form of capital for the Group.
(f) Market price risk
The Group manages its market risks associated with quoted equity shares on its own and does not engage the services of fund managers. The Group monitors fluctuations of the indices on London Stock Exchange and trading is kept at a minimum.
34 ADDITIONAL FINANCIAL INFORMATION
Details of the financial information of Win Yu Group are as follow:
Income statement
2011 RMB'000
Revenue 262,107
Cost of sales (189,903)
-------------
Gross profit 72,204
Other operating income 1,597
Distribution expenses (18,024)
Administrative expenses (22,657)
Research and development
costs (3,236)
Profit/(loss) from operation 29,884
Non-operating income net
of expenses 5
(Loss)/profit on disposal
of subsidiaries (63)
Income from subsidies 50
Investment income 2,707
Finance costs (12,279)
-------------
Profit before taxation 20,304
Income tax expenses (754)
-------------
Profit for the year 19,550
-------------
Statement of financial position
20 11
RMB'000
Non-current assets
Property, plant and equipment 201,446
Intangible assets 42,920
Deferred tax asset 456
--------
244,822
--------
Current assets
Inventories 92,264
Trade and other receivables 55,728
Available-for-sale-financial asset 100
Cash and cash equivalents 42,925
--------
191,017
--------
Total assets 435,839
========
Equity and reserves
Share capital 8
Revaluation reserves 54,712
Other reserves 26,318
Statutory reserves 5,290
Retained earnings 19,952
--------
106,280
--------
Current liabilities
Bank borrowings 186,350
Income tax liabilities 1,371
Trade and other payables 89,183
--------
276,904
--------
Non-current liabilities
Bank borrowings -
Other borrowings 43,000
Deferred tax liabilities 9,655
--------
52,655
--------
Total liabilities 329,559
========
Total equity and liabilities 435,839
========
Profit reconciliation
RMB'000
Win Yu Group profit 19,550
Qihang loss for the period from date of business
combination (5,111)
Adjustment to listing cost due to capital restructuring (6,325)
--------
Qihang Group profit 8,114
========
This information is provided by RNS
The company news service from the London Stock Exchange
END
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