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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 : 1324J
Qihang Equipment Company Limited
09 June 2014
Qihang Equipment Company Limited
Results for the year ended 31 December 2013
This was another difficult year for the Machine Tool Industry in China and, like our competitors, we experienced another year of turnover reduction. The board have also taken a prudent view of the group's unsold inventory and the debtor book and both of these have increased the loss for the year.
However our operating subsidiary JSQH, in common with its peers, has reported a return to growth this year. Margins remain satisfactory if not at the levels of 30% experienced during the boom years of 2009 and 2010.
JSQH has worked extremely hard to increase turnover and improve the quality of production and one result of this has been a number of recent unsolicited approaches by less well placed companies seeking some form of commercial or corporate transaction with Qihang.
Management accounts for the first 4 months indicate that, assuming no material change in the marketplace or status of the Company we may return to profit this year. With Government figures this month showing a return to growth in the Chinese manufacturing economy we remain optimistic.
I would like to thank the Staff of JSQH and the Board of QIH for their hard work this past year.
Yours sincerely
Mark E. Chapman
Chairman
For further information:
Qihang Equipment Company Limited
Li Yuanqing Tel: 0086 139 2159 4638 Mark Chapman Tel: 01483 892130/07449 842717
Northland Capital Partners Limited
William Vandyk Tel: 020 7382 1100
CONSOLIDATED AND COMPANY STATEMENT OF PROFIT OR LOSS
AND OTHER COMPREHENSIVE INCOME
for the year ended 31 December 2013
Hot Features
Premium
Note Group Group Company Company
2013 2012 2013 2012
Continuing operations RMB'000 RMB'000 RMB'000 RMB'000
Revenue 4 124,845 152,468 - -
Cost of sales (102,864) (112,233) - -
----------- ----------- -------- --------
Gross profit 21,981 40,235 - -
Other operating income 593 797 - -
Distribution expenses (9,411) (9,458) - -
Administrative expenses (51,121) (33,471) (2,169) (3,344)
Loss from operation (37,958) (1,897) (2,169) (3,344)
Non-operating income net
of (expenses) (32) 206 - -
Other gains and losses 7 - 1,283 - 1,289
Profit on disposal of subsidiaries 31.3 - 5 - -
Income from subsidies 100 225 - -
Investment income 8 452 1,091 13 2
Finance costs 9 (15,180) (15,940) - -
----------- ----------- -------- --------
Loss before taxation (52,618) (15,027) (2,156) (2,053)
Income tax credit 10 3,345 1,006 - -
----------- ----------- -------- --------
Loss for the year from continuing
operations (49,273) (14,021) (2,156) (2,053)
======== ========
Discontinued operations
Profit for the year from 11 - -
discontinued operation
----------- -----------
Loss for the year (49,273) (14,021)
----------- -----------
Other comprehensive income,
net of income tax
Items that will not be reclassified
subsequently to profit or
loss
Gain on revaluation of property - -
----------- -----------
Total comprehensive income
for the year (49,273) (14,021)
=========== ===========
Loss attributable to equity
holders of the company (49,273) (14,021)
=========== ===========
Loss per share 12
From continuing and discontinued
operations:
Basic and diluted (RMB per
share) (0.85) (0.24)
=========== ===========
Basic and diluted (pence
per share) (8.49) (2.40)
=========== ===========
The notes below form part of these financial statements.
All amounts are derived from continuing operations
CONSOLIDATED AND COMPANY STATEMENT OF FINANCIAL POSITION
at 31 December 2013
Note 2013 2012 2013 2012
RMB'000 RMB'000 RMB'000 RMB'000
Group Group Company Company
Non-current assets
Property, plant and equipment 13 179,113 192,287 3 6
Intangible assets 14 40,228 41,591 - -
Investment 15 - - 130,000 130,000
Available-for-sale financial 16 - - - -
assets
Deferred tax asset 23 4,895 1,448 - -
---------- ----------
224,236 235,326 130,003 130,006
---------- ---------- --------- ---------
Current assets
Inventories 17 92,198 97,836 - -
Trade and other receivables 18 45,954 63,489 260 260
Cash and cash equivalents 19 42,581 26,460 454 2,528
---------- ---------- --------- ---------
180,733 187,785 714 2,788
---------- ---------- --------- ---------
Total assets 404,969 423,111 130,717 132,794
========== ========== ========= =========
Equity and reserves
Share capital 20 15,196 15,196 15,196 15,196
Share premium 20 86,711 86,711 86,711 86,711
Other reserves 21 (13,635) (13,635) - -
Retained earnings (46,239) 3,034 22,930 25,086
---------- ---------- --------- ---------
42,033 91,306 124,837 126,993
---------- ---------- --------- ---------
Non-current liabilities
Borrowings 22 46,297 44,000 - -
Deferred tax liabilities 23 9,655 9,655 - -
---------- ---------- --------- ---------
55,952 53,655 - -
---------- ---------- --------- ---------
Current liabilities
Borrowings 22 151,876 163,000 - -
Income tax liabilities 1,028 1,070 1,028 1,028
Trade and other payables 24 154,080 114,080 4,852 4,773
---------- ---------- --------- ---------
306,984 278,150 5,880 5,801
---------- ---------- --------- ---------
Total liabilities 362,936 331,805 5,880 5,801
========== ========== ========= =========
Total equity and liabilities 404,969 423,111 130,717 132,794
========== ========== ========= =========
The notes below form an integral part of these financial statements.
The financial statements were approved by the Board of Directors and authorised for issue on 6 June 2014.
Li Yuanqing Hao Qiang Chief ExecutiveDirector Executive Finance Director
CONSOLIDATED AND COMPANY STATEMENT OF CASH FLOWS
for the year ended 31 December 2013
2013 2012 2013 2012
Note RMB'000 RMB'000 RMB'000 RMB000
Group Group Company Company
Net cash used in operating
activities 25 25,207 (28,314) (2,087) (1,709)
---------- ----------- ---------- ----------
Investing activities
Payment for property, plant
and equipment (1,238) (24,463) - -
Refund on cancellation of plant - 19,500 - -
ordered
Proceeds from sale of plant
and equipment 527 358 - -
Purchase of intangible assets - (85) - -
Proceeds from sale of investment - 94 - -
Net cash inflow from disposal
of subsidiary 31.2/3 - 16,573 - -
Net cash inflow from acquisition
of subsidiary 31.1 - 8,396 - -
Interest received 452 1,091 13 2
---------- -----------
Net cash (used in)/generated
from investing activities (259) 21,464 13 2
---------- ----------- ---------- ----------
Financing activities
Proceeds from bank borrowings 164,000 235,100 - -
Repayment of bank borrowings (177,500) (249,950) - -
Proceeds from other borrowings 4,673 1,000 - -
Net cash used in financing
activities (8,827) (13,850) - -
---------- ----------- ---------- ----------
Net increase/(decrease) in
cash and cash equivalents 16,121 (20,700) (2,074) (1,707)
Cash and cash equivalents at
beginning of period 26,460 47,160 2,528 4,235
Cash and cash equivalents at
end of period 19 42,581 26,460 454 2,528
========== =========== ========== ==========
CONSOLIDATED AND COMPANY STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2013
Group Share Share Other Retained Total
capital premium reserves earnings
RMB'000 RMB'000 RMB'000 RMB'000 RMB'000
Balance at 1 January 2012 15,196 86,711 (15,344) 18,764 105,327
========= ========= =========== ========== =========
Comprehensive income
Loss for the year - - - (14,021) (14,021)
Total comprehensive income for the year - - - (14,021) (14,021)
--------- --------- ----------- ---------- ---------
Transfer statutory reserves - - 88 (88) -
Transfer exchange difference - - 380 (380) -
Settlement of available-for-sale financial assets - - 1,241 (1,241) -
--------- --------- ----------- ---------- ---------
Balance at 31 December 2012 15,196 86,711 (13,635) 3,034 91,306
========= ========= =========== ========== =========
Comprehensive income
Loss for the year - - - (49,273) (49,273)
Total comprehensive income for the year - - - (49,273) (49,273)
--------- --------- ----------- ---------- ---------
Transfer statutory reserves - - - - -
Balance at 31 December 2013 15,196 86,711 (13,635) (46,239) 42,033
========= ========= =========== ========== =========
CONSOLIDATED AND COMPANY STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2013
Company Share Share Other Retained Total
capital premium reserves earnings
RMB'000 RMB'000 RMB'000 RMB'000 RMB'000
Balance at 1 January 2012 15,196 86,711 (1,622) 28,761 129,046
========= ========= ========== ========== ==========
Comprehensive income
Loss for the year - - - (2,053) (2,053)
Total comprehensive income for the year - - - (2,053) (2,053)
--------- --------- ---------- ---------- ----------
Transfer exchange difference - - 378 (378) -
Settlement of available-for-sale financial assets - - 1,244 (1,244) -
--------- --------- ---------- ---------- ----------
Balance at 31 December 2012 15,196 86,711 - 25,086 126,993
========= ========= ========== ========== ==========
Comprehensive income
Loss for the year - - - (2,156) (2,156)
--------- --------- ---------- ---------- ----------
Total comprehensive income for the year - - - (2,156) (2,156)
--------- --------- ---------- ---------- ----------
Balance at 31 December 2013 15,196 86,711 - 22,930 124,837
========= ========= ========== ========== ==========
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2013
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 above. 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 15.
These financial statements present information about the Company on a stand-alone basis and as a 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 2013.
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.
Standards, amendments and interpretations
EU effective date
IFRS 10 Consolidated Financial Statements 1 January 2014 IFRS 11 Joint Arrangements 1 January 2014
IFRS 12 Disclosure of Interests in Other Entities 1 January 2014
IAS 27 Separate Financial Statements (2011) 1 January 2014 IAS 28 Investments in Associates and Joint Ventures 1 January 2014
Arrangements and Disclosure of Interests in Other Entities: Transition Guidance 1 January 2014
Standards, amendments and interpretations (not yet endorsed by EU at 12 May 2014)
IFRS 9 Financial Instruments (2009) and subsequent amendments (amendments to IFRS 9 and IFRS 7: Mandatory Effective Date and Transition Disclosures (2011); Hedge Accounting and amendments to IFRS 9, IFRS 7 and IAS 39 (2003)
IFRS 14 Regulatory Deferral Accounts (2014)
Amendments to IAS 16 and IAS 38: Clarification of Acceptable Methods of Depreciation and Amortisation (2014)
Amendments to IFRS 11: Accounting for Acquisitions of Interests in Joint Operations (2014)
Defined Benefit Plans: Employee Contributions (Amendments to IAS 19) (2013)
Annual Improvements to IFRSs 2010-2012 Cycle (2013)
Annual Improvements to IFRSs 2011-2013 Cycle (2013)
IFRIC Interpretation 21 Levies (2013)
There are no other standards, amendments and interpretations in issue but not yet adopted that the directors anticipate will have material effect on the reported income or net assets of the Group.
2.2 Basis of preparation
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.
Win Yu Group financial information is presented separately on note 33 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 statement of profit or loss 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 Going concern
The Group had net current liabilities of RMB126 million at 31 December 2013. The Group has been monitored its cash flow and constantly negotiated with its sales agents and creditors for acceptable trading terms and payment arrangements for its liabilities to ensure continuity in its operations.
The directors are required to report that the business is a going concern, with supporting assumptions or qualifications as necessary. After making enquiries, the directors consider that the Group has adequate resources and committed borrowing facilities to continue in operational existence for the foreseeable future. The directors are confident that the short term bank borrowings facilities are renewable in the normal course of business when they fall due. In addition, the directors have obtained confirmation from the majority shareholder that he will continue to support the Group for the foreseeable future. Consequently, they have adopted the going concern basis in preparing these financial statements.
2.6 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 statement of profit or loss.
2.7 Borrowing costs
All borrowings costs are recognised in the statement of profit or loss in the period in which they are incurred except for borrowing costs attributable to qualifying assets. Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset is to be capitalised as a cost of that asset. A qualifying asset is an asset that necessarily takes a substantial period of time to get ready for its intended use or sale.
2.8 Income tax
Income tax for the financial year comprises current and deferred tax. Income tax is recognised in the statement of profit or loss 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.
2.9 Property, plant and equipment
Land use rights (note 2.10a) 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 2.11).
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.
2.10 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.
2.11 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.
2.12 Investment in subsidiary undertakings
Investments in subsidiaries are stated at cost less provision for any impairment in value.
2.13 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.
2.14 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.
2.15 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.
2.15.1 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.
2.15.2 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.
2.15.3 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.
2.15.4 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.
2.15.5 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.
2.16 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.
2.17 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 statement of profit or loss 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.
2.18 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.
2.19 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.
2.20 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 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 statement of profit or loss.
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 statement of profit or loss or netted against the asset purchased as appropriate.
2.22 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.
2.23 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 lease.
Assets held under finance leases are initially 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 lease payments. The corresponding liability to the lessor is included in the consolidated statement of the financial position as a finance lease obligation.
Lease payments are apportioned between finance expenses and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance expenses are recognised immediately in the 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 note 2.7). Contingent rentals are recognised as expenses in the period in which they are incurred.
Operating lease payments are recognised as an expense on a straight-line basis over the lease term. Contingent rentals arising under operating leases are recognised as an expense in the period in which they are incurred.
In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability. The aggregate benefit of incentives is recognised as a reduction of rental expenses on a straight line basis.
2.24 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.
2.25 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, RMB553,728 (2012: RMB380,896) 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 made an aggregate provision of RMB17,351,158 (2012: RMB3,258,694) for slow moving and obsolete stock.
(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.
(d) Impairment of investment in subsidiary
Determining whether the investment in subsidiary is impaired requires an estimation of the value in use of the cash-generating unit ("CGU"). The value in use calculation requires the directors to estimate the future cash flows expected to arise from the CGU and a suitable discount rate in order to calculate present value.
The recoverable amount of this CGU is determined based on VIU calculation which uses cash flow projections based on financial budgets approved by the directors covering a two-year period and a discount rate of 9.75% per annum.
Cash flows projections during the budget period are based on the same expected gross margins and raw materials price inflation throughout the budgeted period. The cash flows beyond that two-year period have been extrapolated using a steady 15% per annum growth rate which is half the projected long term average growth rate for PRC market. The directors believe that any reasonable possible change in the key assumptions on which recoverable amount is based would not cause the carrying amount to exceed the recoverable amount of the CGU. Therefore no impairment is provided.
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.
More than 95% (2012: 100%) of the activities are within the PRC. Therefore management considers no detail of operating and geographical segments information is to be reported.
10.17% (2012: 10.66%) of sales made via PRC agents to customers overseas.
Analysis of revenue from the sale of goods and services are as follows:
Group Group
2013 2012
RMB'000 RMB'000
Universal 50,975 60,656
CNC 46,553 58,172
Large-scale 25,267 32,156
Others 2,050 1,484
124,845 152,468
========= ===========
5 EXPENSES BY NATURE
Group Group
2013 2012
RMB'000 RMB'000
Changes in inventories of finished goods and
work in progress 5,638 (5,572)
Raw materials, consumables used, direct costs,
and overheads 81,448 94,690
Business taxes and surcharges 186 965
Employee benefit expense (note 6) 26,575 32,649
Research and development costs 2,020 6,070
Exchange difference 45 (14)
Impairment of stock 14,092 2,946
Bad debts written off 5,687 -
Sales agents' commissions - 860
Warranty costs 1,346 790
Depreciation, amortisation and impairment charges 14,811 14,476
Operating lease payments 4,558 622
Transportation costs 1,065 1,399
Travel and entertaining 3,768 2,780
Other expenses 2,157 2,501
---------- ----------
Total cost of sales, distribution costs and administrative
expenses 163,396 155,162
========== ==========
6 EMPLOYEE BENEFIT EXPENSE
Group Group
2013 2012
RMB'000 RMB'000
Wages and salaries - normal 18,077 22,808
Wages and salaries - annual bonus 1,368 2,848
Social security costs and welfare 7,930 8,469
--------- ---------
27,375 34,125
Included in inventories (800) (1,476)
26,575 32,649
========= =========
2013 2012
Number Number
The average monthly number of
people employed 560 707
======== ========
7 OTHER GAINS/(LOSSES)
In 2012, other gains and losses include amount of RMB1,289,031 related to the gain arising from the transfer of 25,000,000 ordinary shares and 50,000,000 options to subscribe for ordinary shares in Metroelectric plc to Wonder Employee Capital Limited ("WECL") in full and final settlement of GBP200,000 loan.
Also included in the balance amount of RMB5,824 related to loss arising from sale of investment in mutual fund under the Bank of Communications in PRC.
8 INVESTMENT INCOME
Group Group Company Company
2013 2012 2013 2012
RMB'000 RMB'000 RMB'000 RMB'000
Interest income on short-term
bank deposits 452 1,091 13 2
452 1,091 13 2
========= ======== ======== ========
9 FINANCE COSTS
Group Group
2013 2012
RMB'000 RMB'000
Interest on bank borrowings 13,466 14,198
Bank charges 152 699
Reversal of interest capitalised - 1,043
Foreign exchange 5 -
Other finance charges 1,557 -
15,180 15,940
========= =========
10 INCOME TAX (CREDIT)/EXPENSE
2013 2012
RMB'000 RMB'000
Current income tax - 155
Adjustment in respect of prior year 102 (169)
--------- ---------
Total tax charge/(credit) 102 (14)
--------- ---------
Deferred tax assets (note 23)
Origination and reversal of timing
difference (446) (244)
Deferred tax income and expense in
the current year (3,001) (748)
--------- ---------
Total deferred tax (3,447) (992)
--------- ---------
Income tax credit (3,345) (1,006)
========= =========
Reconciliation at effective tax rates
Loss before taxation (52,618) (15,027)
========= =========
Tax on profit at the prevailing rate
applicable (25%) (13,154) (3,757)
Zero tax rate 399 370
Preferential tax rate 4,790 1,042
Expenses not deductible for tax 1,770 1,616
Allowance for research and development
cost (164) (232)
On timing differences (446) (244)
Adjustment in respect of prior years 102 (169)
Unrelieved tax losses c/f 3,235 226
Others 123 142
(3,345) (1,006)
========= =========
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.
The Group's operating subsidiary in PRC is subject to income tax rate at 25% (2012: 25%). However, due to its high technology enterprise status it is entitled to a reduction in tax rate at 15% (2012: 15%).
11 DISCONTINUED OPERATION
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 payable immediately and the balance RMB5 million was payable by 31 March 2013 conditional upon ZACM reporting profit after tax of at least RMB9 million for the year ended 31 December 2012.
ZACM was not capable of meeting its profit target for the year ended 31 December 2012. As a result, the directors reached agreement with the original vendors to sell ZACM back to them for a consideration of RMB30 million in cash, representing the consideration paid originally. The disposal was completed on 29 November 2012 on which date control of the company passed to the original vendors.
Details of asset and liabilities acquired and disposed of, and the calculation of the profit or loss on acquisition and disposal, are disclosed in note 31.1 and 31.2.
Analysis of loss for the year from discontinued operation
The results of ZACM included in 2012 consolidated statement
of profit or loss are set out below:
Profit for the year from discontinued operation
2012
RMB'000
Revenue 35,103
Other income 100
---------
35,203
Expenses (40,818)
---------
Loss before tax (5,615)
Income tax expense (88)
(5,703)
=========
Bargain purchase (note 31.1) 2,324
Gain on disposal (note 31.2) 3,379
---------
5,703
=========
Profit for the year from discontinued operation -
=========
Cash flows from discontinued operation
Net cash inflows from operating activities (33,472)
Net cash inflows from investing activities -
Net cash inflows from financing activities 8,500
---------
Net cash outflows (24,972)
=========
12 EARNINGS PER SHARE
Basic loss per share is calculated by dividing the loss attributable to equity shareholders of the Company by the weighted average number of ordinary shares in issue during the year. There is no dilutive potential ordinary share in the Company.
2013 2012
(Loss)/earnings RMB RMB
Loss for the purposes of basic and diluted
earnings per share being net loss attributable
to equity holders of the parent (49,272,442) (14,021,110)
Number of shares
Weighted average number of ordinary shares
for the purposes of basic earnings per
share 58,036,263 58,036,263
=============== ===============
13 PROPERTY, PLANT AND EQUIPMENT - Group
Asset Building Plant and Fixtures Motor vehicles Other Total
under construction machinery fittings assets
&
equipment
Cost or valuation RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000
At 1 January 2012 39,162 132,872 78,857 3,146 2,964 1,480 258,481
Acquisition of
subsidiary - - 2,285 67 903 - 3,255
Additions 19,311 776 1,789 2,587 - - 24,463
Transfers (1,391) - 1,391 - - - -
Refunded on contract
cancelled (19,500) - - - - - (19,500)
Adjustment (1,344) 601 (1) - - - (744)
Disposal of
subsidiary - - (2,472) (76) (903) - (3,451)
Disposal - - (816) - - - (816)
At 31 December 2012 36,238 134,249 81,033 5,724 2,964 1,480 261,688
Additions 349 - 3,515 2,047 - - 5,911
Transfers (8,960) - 8,960 - - - -
Disposal - - (7,156) (2,556) - - (9,712)
-------------------- --------- ----------- ----------- --------------- -------- ---------
At 31 December 2013 27,627 134,249 86,352 5,215 2,964 1,480 257,887
==================== ========= =========== =========== =============== ======== =========
Accumulated
depreciation
At 1 January 2012 - 16,837 35,663 1,731 1,744 1,052 57,027
Charge for the
period - 4,699 5,659 406 534 237 11,535
Charge for the
period -
on revaluation - 1,925 - - - - 1,925
On disposal of
subsidiary - - (215) (14) (169) - (398)
On disposal - - (688) - - - (688)
-------------------- --------- ----------- ----------- --------------- -------- ---------
At 31 December 2012 - 23,461 40,419 2,123 2,109 1,289 69,401
Charge for the
period - 4,693 5,929 437 292 172 11,523
Charge for the
period -
on revaluation - 1,925 - - - - 1,925
On disposal - - (3,355) (720) - - (4,075)
-------------------- --------- ----------- ----------- --------------- -------- ---------
At 31 December 2013 - 30,079 42,993 1,840 2,401 1,461 78,774
==================== ========= =========== =========== =============== ======== =========
Carrying value
At 31 December 2013 27,627 104,170 43,359 3,375 563 19 179,113
==================== ========= =========== =========== =============== ======== =========
At 31 December 2012 36,238 110,788 40,614 3,601 855 191 192,287
==================== ========= =========== =========== =============== ======== =========
PROPERTY, PLANT AND EQUIPMENT - continue
a) Asset under construction
Asset under construction represent the construction of new production line to increase the production capacity. The construction was temporarily halted in year 2013 and is expected to resume by end of 2014.
b) Revaluation of asset
The Group's land use right and buildings were revalued on 23 April 2014 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.
c) Assets pledged as security
Land use right and buildings with carrying amounts of approximate RMB142 million and certain plant and machinery of the company (value pledged at RMB9 million) have been pledged to secure the borrowings of the Company (see note 22).
Had the Group's land use right and building been measured on a historical cost basis, their carrying amount would have been as follow:
2013 2012
RMB'000 RMB'000
Land use right 11,924 12,209
Buildings 73,375 78,069
========= ========
d) Leased assets
Included in the property, plant and equipment are 8 units of machineries and equipments acquired under finance lease with carrying value as follows:
2013 2012
RMB'000 RMB'000
Machinery 3,329 -
Equipment 1,794 -
========= ========
PROPERTY, PLANT AND EQUIPMENT - Company
Fixtures
fittings
&
equipment
RMB'000
Cost
At 1 January 2012 and 2013 8
Additions -
At 31 December 2012 and 2013 8
===========
Accumulated depreciation
At 1 January 2012 -
Charge for the year 2
-----------
At 31 December 2012 2
Charge for the year 3
-----------
At 31 December 2013 5
===========
Carrying value
At 31 December 2013 3
===========
At 31 December 2012 6
===========
14 INTANGIBLE ASSETS
Land use Purchased Patent Total
right software / know-how
Cost or valuation RMB'000 RMB'000 RMB'000 RMB'000
At 1 January 2012 40,590 622 3,184 44,396
Acquisition of subsidiary - - 9,833 9,833
Additions - 85 - 85
Disposal of subsidiary - - (9,833) (9,833)
At 31 December 2012 40,590 707 3,184 44,481
Additions - - - -
At 31 December 2013 40,590 707 3,184 44,481
========= ========== ============ =========
Amortisation
At 1 January 2012 929 335 212 1,476
Charge for the year 285 178 819 1,282
Charge for the year - on revaluation 632 - - 632
Disposal of subsidiary - - (500) (500)
--------- ---------- ------------ ---------
At 31 December 2012 1,846 513 531 2,890
Charge for the year 285 128 318 731
Charge for the year - on revaluation 632 - - 632
At 31 December 2013 2,763 641 849 4,253
========= ========== ============ =========
Carrying value
At 31 December 2013 37,827 66 2,335 40,228
========= ========== ============ =========
At 31 December 2012 38,744 194 2,653 41,591
========= ========== ============ =========
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 43.5 years.
Refer to note 13(b) and 13(c) for revaluation of asset and assets pledged as security.
15 INVESTMENT
Company
2013 2012
RMB'000 RMB'000
At 1 January 130,000 130,000
Additions - -
Disposals - -
At 31 December 130,000 130,000
========== ==========
Details of the Company's investment in subsidiaries at 31 December 2013 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
Jiangsu Qihang CNC Machine PRC 100% Manufacture of
Tool Co., Limited** lathes and machinery
tools
** Held by subsidiary company
16 AVAILABLE FOR SALE FINANCIAL ASSET
Group Group Company Company
2013 2012 2013 2012
RMB'000 RMB'000 RMB'000 RMB'000
At 1 January - 657 - 657
Fair value adjustment - - - -
Exchange difference - - - -
On disposal - (657) - (657)
--------- --------
At 31 December - - - -
========= ======== ========= ========
The above available-for-sale investment was settled by the loan from Wonder Employee Capital Limited ("WECL") on 23 February 2012.
17 INVENTORIES
2013 2012
RMB'000 RMB'000
Raw materials and consumables 23,127 23,169
Work in progress 54,945 63,211
Finished goods 14,126 11,456
92,198 97,836
========= =========
The cost of inventories recognised as an expense includes RMB14,092,463 (2012: RMB2,945,875) in respect of write down of inventories to net realisable value.
18 TRADE AND OTHER RECEIVABLES
Group Group Company Company
2013 2012 2013 2012
RMB'000 RMB'000 RMB'000 RMB'000
Trade receivables - net 8,921 13,570 - -
Notes receivables 11,525 27,195 - -
Other receivables - net 14,974 17,775 260 260
Prepayments and accrued income 10,534 4,949 - -
45,954 63,489 260 260
========= ========= ========= ========
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:
2013 2012
RMB'000 RMB'000
At 1 January 381 183
Allowance for the year 173 198
At 31 December 554 381
========= ========
Movements on the Group provision for impairment of other receivables are as follows:
2013 2012
RMB'000 RMB'000
At 1 January 1,581 400
Bad debt written off 5,687 -
Allowance for the year (566) 1,181
At 31 December 6,702 1,581
========= ========
At 31 December 2013, the aging analysis of trade receivables is as follows:
2013 2012
RMB'000 RMB'000
Up to 6 months 6,396 9,089
6 - 12 months 1,310 4,364
1 - 2 years 1,103 49
Over 2 years 112 68
At 31 December 8,921 13,570
========= =========
Included in other receivables are:
2013 2012
RMB'000 RMB'000
Payments on account to suppliers 10,325 8,058
Deposit for guarantee on bank borrowings 2,537 6,778
VAT - 1,364
Staffs advances and others 2,112 1,575
14,974 17,775
========= =========
The directors consider that the carrying amount of trade and other receivables approximate their fair value.
19 CASH AND CASH EQUIVALENTS
Group Group Company Company
2013 2012 2013 RMB'000 2012
RMB'000 RMB'000 RMB'000
Cash at bank and on hand 7,656 10,841 454 2,528
Short-term bank deposits 33,690 15,619 - -
Restricted bank balance 1,235 - - -
42,581 26,460 454 2,528
========= ========= ============== =========
The restricted bank balance represents amount frozen due to pending litigation. As at 31 March 2014, the balance has reduced to RMB340,000.
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.
20 SHARE CAPITAL AND SHARE PREMIUM
2013 2012 2013 2012
GBP'000 GBP'000 RMB'000 RMB'000
Authorised:
200,000,000 ordinary shares of
2.5p each 5,000 5,000 52,343 52,343
======== ============ ============== =============
Issued and fully paid: Number Share Share
of Capital Premium
shares
GBP GBP
At 1 January and 31 December
2012 58,036,263 1,450,906 8,259,727
------------- --------------- ------------
At 31 December 2013 58,036,263 1,450,906 8,259,727
============= =============== ============
RMB'000 RMB'000
At 31 December 2012 and 31
December
2013 15,196 86,711
=============== ============
21 OTHER RESERVES
Group Group
2013 2012
RMB'000 RMB'000
Revaluation reserves 54,712 54,712
Other reserves 26,318 26,318
Statutory reserves 5,378 5,378
Merger reserves (100,043) (100,043)
---------- ----------
(13,635) (13,635)
========== ==========
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.
22 BORROWINGS
Non-current Group Group
2013 2012
RMB'000 RMB'000
Loan from a director 42,000 42,000
Finance lease liabilities 3,297 -
Loan from local authority 1,000 2,000
46,297 44,000
======== ========
Current Group Group
2013 2012
RMB'000 RMB'000
Bank borrowings 149,500 163,000
Finance lease liabilities 1,376 -
Loan from local authority 1,000 -
151,876 163,000
======== ========
Loan from a director represents interest free loan from Mr Li Yuanqing. The loan is repayable after 12 months subject to the Company having sufficient funds to meet the repayments.
The bank borrowings are secured by:
- land use right and property of the Group (note 13 and 14); - land use right and property owned by Zhenjiang Anda Machinery Co Ltd; - Zhenjiang SME Investments Security Co., Limited; - Zhenjiang Investments Security Co; - certain plant and machinery of the company; - Zhenjiang Zhong Jin Zhong Gong Technology Co; 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 31).
Finance lease liabilities are secured by the assets leased, Mr Li Yuanqing and Mr Zhang Yunfeng. The borrowing is at a fixed interest rate with repayment period of 3 years (see note 29). Mr Zhang Yunfeng is the legal representative of Jiangsu Qihang CNC Machine Tool Co., Limited.
The average interest rate paid is 7.5% (2012: 7.5%) annually. The borrowings are arranged at fixed and floating interest rates and the directors consider that the carrying amount of the borrowings approximate to their fair value.
23 DEFERRED INCOME TAX
2013 2012
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 (4,895) (1,448)
-------- --------
(4,895) (1,448)
-------- --------
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) 4,760 8,207
======== ========
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:
Deferred Accelerated Fair Total
income tax depreciation value
and expenses gains
RMB'000 RMB'000 RMB'000 RMB'000
At 1 January 2012 - (456) 9,655 9,199
Credit to income statement (748) (244) - (992)
--------------
At 31 December 2012 (748) (700) 9,655 8,207
Credit to income statement (3,001) (446) - (3,447)
--------------
At 31 December 2013 (3,749) (1,146) 9,655 4,760
============== ================== ======== ========
24 TRADE AND OTHER PAYABLES
Group Group Company Company
2013 2012 2013 2012
RMB'000 RMB'000 RMB'000 RMB'000
Trade payables 71,468 53,143 - -
Notes payables 48,467 28,739 - -
Customer advances 20,070 10,001 - -
Social security and other taxes 338 279 - -
Other creditors 13,737 21,918 4,852 4,773
154,080 114,080 4,852 4,773
======== ======== ========== ==========
The directors consider that the carrying amount of trade and other payables approximate to their fair value.
25 NOTES TO THE CASH FLOW STATEMENT
Group Group Company Company
2013 2012 2013 2012
RMB'000 RMB'000 RMB'000 RMB'000
Loss before taxation (52,618) (15,027) (2,156) (2,053)
Adjustments for:
Investment income recognised in
profit or loss (452) (1,091) (13) (2)
Finance costs recognised in profit
or loss 15,180 15,940 - -
Depreciation of property, plant
and equipment 13,448 13,460 3 2
Amortisation of intangibles assets 1,363 1,914 - -
Loss/(gain) on disposal of plant
and equipment 437 (486) - -
Gain on business combination - (5,701) - -
Gain on disposal of financial
instrument - (1,289) - (1,289)
Reversal of impairment loss on (393) - - -
receivables
Impairment loss recognised on - 1,379 - -
receivables
Bad debts written off 5,687 - - -
Impairment of inventory 14,092 2,946 - -
Operating cash flows before movements
in working capital (3,256) 12,045 (2,166) (3,342)
Increase in inventory (8,453) (8,325) - -
Decrease/(increase) in trade and
other receivables 12,240 (19,549) - (254)
Increase in trade and other payables 39,999 3,727 79 1,887
--------- --------- -------- --------
Net cash generated from/(used
in) operations 40,530 (12,102) (2,087) (1,709)
Finance costs paid (15,180) (14,897) - -
Income taxes paid (143) (1,315) - -
Net cash generated from/(used
in) operating activities 25,207 (28,314) (2,087) (1,709)
========= ========= ======== ========
26 CAPITAL COMMITMENTS
2013 2012
RMB'000 RMB'000
Commitments for the construction
of additional production line
(note 13) 50,000 50,000
========= =========
27 GUARANTEE
The Group provided cash guarantees of RMB22.5 million and RMB20 million to the bank borrowings taken out by Zhenjiang Anda Machine Co Ltd and Zhenjiang Anda Coal Mine Special Equipment Co Ltd respectively. These cash guarantees are expiring as follow:
Guarantee amount Period for Zhenjiang Anda Machine Co Ltd RMB 10 million 2013.04.24 - 2014.04.23 RMB 2.5 million 2013.06.20 - 2014.06.18 RMB 10 million 2014.01.09 - 2015.01.08 for Zhenjiang Anda Coal Mine Special Equipment Co Ltd RMB 1.5 million 2013.11.21 - 2014.11.20 RMB 8.5 million 2014.01.15 - 2015.01.14 RMB 3.5 million 2014.03.05 - 2015.03.03 RMB 3.5 million 2014.03.07 - 2015.03.05 RMB 3 million 2014.03.01 - 2015.03.06 28 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 in the Report of the Directors.
29 OBLIGATION UNDER FINANCE LEASE 29.1 Leasing arrangement
The Group leased certain of its production equipments under finance lease. The lease term is 3 years. The Group has option to purchase the equipments for a nil amount at the end of the lease terms. The Group's obligations under finance leases are secured by the lessor's title to the leased assets and personal guarantee by Mr Li Yuanqing and Mr Zhang Yunfeng.
Interest rate underlying the obligation under finance lease is fixed at respective contract date at 6.5% per annum.
29.2 Finance lease liabilities
Minimum lease Present value
payments of minimum lease
payments
Group Group Group Group
2013 2012 2013 2012
RMB'000 RMB'000 RMB'000 RMB'000
Not later than one year 1,863 - 1,376 -
Later than one year and not later
than 5 years 3,725 - 3,297 -
--------- --------- --------- ---------
5,588 - 4,673 -
Less: future finance charge (915) - - -
4,673 - 4,673 -
========= ========= ========= =========
2013 2012
RMB'000 RMB'000
Included in the consolidated financial
statements as:
1,376 -
* current borrowings 3,297 -
* non-current borrowings
--------- --------
4,673 -
========= ========
30 OPERATING LEASE COMMITMENTS
2013 2012
RMB'000 RMB'000
Not later than one year 3,769 -
Later than one year and not later - -
than 5 years
--------- --------
3,769 -
========= ========
Operating leases relating to leases of warehouse, plant and equipment of between 2 and 10 years respectively; On 9 May 2014, the Group decided to terminate the lease on plant and equipment on 30 September 2014.
31 BUSINESS COMBINATION 31.1 Acquisition of subsidiary
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 payable immediately and the balance RMB5 million was 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. Details of the acquisition are as follows:
Fair value of assets and liabilities acquired
Book value Fair value Fair
adjustment value
RMB'000 RMB'000 RMB'000
Non-current assets
Property, plant and equipment 2,977 278 3,255
Intangible assets 9,833 - 9,833
Deferred taxation 2,960 - 2,960
Current assets
Inventories 25,869 9,952 35,821
Trade and other receivables 35,252 - 35,252
Cash and cash equivalents 29,849 - 29,849
Current liabilities
Bank borrowings (19,000) - (19,000)
Trade and other payables (65,646) - (65,646)
22,094 10,230 32,324
Bargain purchase 2,324
---------
Fair value of consideration transferred 30,000
=========
Satisfied by:
Cash - paid 21,453
Cash - deferred 8,547
---------
30,000
=========
Net cash inflow arising on acquisition
Cash consideration paid 21,453
Cash and cash equivalent balances acquired 29,849
8,396
=======
31.2 Disposal of subsidiary
ZACM was not capable of meeting its profit target for the year ended 31 December 2012. As a result, the directors reached agreement with the original vendors to sell ZACM back to them for a consideration of RMB30 million in cash, representing the consideration paid originally. The disposal was completed on 29 November 2012 on which date control of the company passed to the original vendors.
Book value of net assets sold
RMB'000
Non-current assets
Property, plant and equipment 3,053
Intangible assets 9,333
Deferred taxation 2,960
Current assets
Inventories 35,627
Trade and other receivables 45,063
Cash and cash equivalents 4,877
Current liabilities
Bank borrowings (27,500)
Trade and other payables (46,792)
Net assets disposed of 26,621
Cash consideration 30,000
---------
Gain on disposal 3,379
=========
Net cash inflow on disposal
Consideration received 21,452
Cash and cash equivalent balances disposed off 4,877
---------
16,575
=========
31.3 Disposal of subsidiary
On 30 October 2011, Win Yu disposed of the entire share capital of Tai Feng International Holdings Limited for a cash consideration of USD100.
Book value of net assets sold
RMB'000
Current assets
Cash and cash equivalents 3
Current liabilities
Trade and other payables (7)
Net liabilities disposed of 4
Cash consideration 1
--------
Gain on disposal 5
========
Net cash outflow on disposal
Consideration received 1
Cash and cash equivalent balances disposed off 3
--------
2
========
32 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 RMB46 million (2012: RMB63 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 because entities in the Group borrow fund at both fixed and floating interest rates. The risk is managed by the Group by maintaining as appropriate mix between fixed and floating rate borrowings.
Interest rate sensitivity analysis
The sensitivity analyses below have been determined based on the exposure to interest rate for bank borrowings at the end of the reporting period. The analysis is prepared assuming the amount of the liability outstanding at the end of the reporting period was outstanding for the whole year. A 50 basis point increase or decrease is used when reporting interest rate risk internally to key management personnel and represents management's assessment of the reasonable possible change in interest rates.
If interest rate had been 50 basis points higher/lower and all other variables were held constant, the Group's loss for the year ended 31 December 2013 would increase/decrease by RMB796,000.
(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.
33 ADDITIONAL FINANCIAL INFORMATION
Details of the financial information of Win Yu Group are as follow:
Income statement
2013 2012
RMB'000 RMB'000
Revenue 124,845 152,468
Cost of sales (102,864) (112,233)
---------- ----------
Gross profit 21,981 40,235
Other operating income 593 797
Distribution expenses (9,411) (9,458)
Administrative expenses (48,952) (30,127)
----------
Profit from operation (35,789) 1,447
Non-operating income net
of (expenses) (32) 206
Other gains and losses - (6)
Profit on disposal of subsidiaries - 5
Income from subsidies 100 224
Investment income 439 1,090
Finance costs (15,180) (15,940)
---------- ----------
Loss before taxation (50,462) (12,974)
Income tax credit 3,345 1,006
---------- ----------
Loss for the year (47,117) (11,968)
========== ==========
Statement of financial position
2013 2012
RMB'000 RMB'000
Non-current assets
Property, plant and equipment 179,110 192,281
Intangible assets 40,228 41,591
Deferred tax asset 4,895 1,448
---------- ---------
224,233 235,320
---------- ---------
Current assets
Inventories 92,198 97,836
Trade and other receivables 48,268 65,360
Cash and cash equivalents 42,127 23,933
---------- ---------
182,593 187,129
---------- ---------
Total assets 406,826 422,449
========== =========
Equity and reserves
Share capital 8 8
Revaluation reserves 54,712 54,712
Other reserves 26,318 26,318
Statutory reserves 5,378 5,378
Retained earnings (39,221) 7,896
---------- ---------
47,195 94,312
---------- ---------
Current liabilities
Borrowings 150,500 163,000
Income tax liabilities - 42
Trade and other payables 153,179 111,440
---------- ---------
303,679 274,482
---------- ---------
Non-current liabilities
Borrowings 46,297 44,000
Deferred tax liabilities 9,655 9,655
---------- ---------
55,952 53,655
---------- ---------
Total liabilities 359,631 328,137
========== =========
Total equity and liabilities 406,826 422,449
========== =========
Profit reconciliation
RMB'000 RMB'000
Win Yu Group loss (47,117) (11,968)
Qihang loss for the period (2,156) (2,053)
Qihang Group loss (49,273) (14,021)
========== =========
This information is provided by RNS
The company news service from the London Stock Exchange
END
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