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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Arko Hldgs | LSE:AKO | London | Ordinary Share | GB0003754743 | ORD 0.5P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 0.425 | 0.00 | 00:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
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RNS Number : 9257D
Arko Holdings PLC
22 September 2008
Stock Exchange Announcement
22 September 2008
For release at: 07:00 hours.
Arko Holdings plc ("the Company" or "Arko")
Results of the Company for the interim period ended 30 June 2008.
The Board of Arko announces the results of the Company for the interim period ended 30 June 2008, which are set out below. Copies of the
Company's interim report and accounts will be sent to shareholders on 24 September 2008 and will be available on the Company's website
www.arkoholdings.com from that date.
CHAIRMAN'S STATEMENT
I am pleased to report the unaudited interim results of the Company and its subsidiaries (the "Group") for the six months ended 30 June
2008.
During the period under review the Company made progress with its shipping and container terminal businesses. The closure and write
down of the power plant in second half year of 2007 enabled the Company to focus on managing its profitable container terminal and shipping
businesses. It has invested more resources in upgrading the container terminal and the river trade fleet.
Results
The Company reported revenue of US$6.33 million, representing an increase of US$247,000 or 4.06% from the US$6.08 million reported for
the comparable period in 2007. Gross profit increased by 3.79% to US$2.30 million (2007: US$2.21 million). Gross margins decreased to
36.26% for the six months ended 30 June 2008 from 36.35% for the same period last year. The net operating profit of US$592,000 for the six
month period ended June 2008 was US$126,000 greater than the net operating profit of US$466,000 for the same period in 2007, representing an
increase of 27% as there are no losses incurred from discontinued operations - Huibei Changzhou Power Development Ltd. The Company regards
the revenue and gross margin of its principal container terminal operation and river trade shipping business between Hong Kong and Guangdong
Province as its key performance metrics.
As at 30 June 2008, the Company's NAV per share was US$0.0146, which represented a decrease of 51.66% compared to 30 June 2007 (2007:
US$0.0302). This figure reflects the effect of the write down of the power plant. Cashflow from operating activities increased to US$2.65
million from US$1.37 million compared to the same period last year. There was a decrease in the Company's cash and cash equivalents to
US$189,000 versus US$834,000 at 30 June 2007; this was primarily due to increased expenditure on purchasing machinery and equipment for the
Company's container terminal operation. During the six month period to 30 June 2008, the Company incurred capital expenditure of US$2.88
million (2007: US$1.11 million), predominantly on such purchases.
Summary and Outlook
The sales results for the first half of 2008 reflect the continued effect of the expansion of the terminal and shipping logistics
business. We expect a stronger second half for the current year as throughput and turnover in the shipping business have significantly
increased, a trend which started in the second quarter of 2008. As a result of the write down of the power plant in 2007, we expect a
profitable year in 2008. However, the Board believes that pressure on gross margins is unlikely to be alleviated in the short-term should
the fuel price remain at current levels. Coupled with the new labour law in China as well as other inflationary pressure on the cost base
of the business, we remain cautious on the operating profit margins for the business as a whole. The Board believes that the economic
environment is unlikely to improve in the short term so management have been directed to manage the business more prudently. In the
meantime, we will closely monitor our cash position and continue to explore options this year to strengthen our liquidity by raising additional necessary capital.
In order to facilitate the rapid growth in throughput, a new depot has been identified near the terminal for an unspecified lease term
and negotiation is underway with the local government to purchase the freehold interest. On the other hand, we anticipate a delay for the
delivery of the brand new 45 tonne quayside container cranes due to delays in agreeing terms for the lease finance. The Company's
management is now negotiating with the supplier to find payment alternatives in the event that lease finance cannot be found within the
necessary time. We expect the first crane, costing US$2.1 million, will be funded by internally generated cash and it that will be delivered
by end of the year 2008.
In summary, on the assumption that trading continues at existing levels, the Board expects to deliver a satisfactory outcome for the
current year. The Board remains confident in its strategy for growth and in the prospects for the Group in the future.
Resignation of the Nominated Advisor
The Board made an announcement on 1 September 2008 in relation to the resignation of Nabarro Wells & Co. Limited, the Company's
Nominated Adviser. The resignation will take effect from 1 October 2008. In accordance with Rule 1 of the AIM Rules, in the absence of the
appointment of a replacement Nominated Adviser on or before 1 October 2008, the Company's shares will be suspended from trading on AIM. If
within one month of that suspension the Company has failed to appoint a replacement Nominated Adviser, the admission of its shares to
trading on AIM will be cancelled. The Company is currently in discussions with a potential replacement Nominated Adviser and will provide a
further update on progress in due course.
Qin Shun Chao
Chairman.
ARKO HOLDINGS PLC
FINANCIAL HIGHLIGHTS
FOR THE SIX MONTHS ENDED 30 JUNE 2008
(Audited)
(Unaudited) Year ended
Six months ended 30 June 31 December
2008 2007 2007
US$'000 US$'000 US$'000
Turnover 6,330 6,083 10,860
EBITDA * - Continuing operations 572 1,297 (19,413)
Profit/(loss) after tax for the 592 466 (32,239)
period
Shareholders' equity and minority 28,931 59,677 27,644
interest
*Earnings/ (loss) attributable to equity holders before interest, tax, depreciation and goodwill impairment on continuing operations.
-ends-
For further information:
Angela Leung + 852 2219 9999
Arko Holdings plc
Marc Cramsie + 44 (0) 20 7634 4705
Nominated Adviser
Nabarro Wells & Co. Limited
ARKO HOLDINGS PLC
CONDENSED CONSOLIDATED INCOME STATEMENT
FOR THE SIX MONTHS ENDED 30 JUNE 2008
(Audited )
(Unaudited) Year ended
Six months ended 30 June 31 December
2008 2007 2007
Note US$'000 US$'000 US$'000
Turnover 3 6,330 6,083 10,860
Cost of sales (4,035) (3,872) (7,972)
Gross profit 2,295 2,211 2,888
Other income 62 322 605
Administrative expenses (1,420) (1,285) (4,041)
Impairment of property, plant and equipment, - - (1,131)
investment
Impairment of goodwill - - (9,010)
Profit / (Loss) from operations 937 1,248 (10,689)
Finance costs - - -
Profit / (Loss) before 937 1,248 (10,689)
taxation
Taxation 4 (345) (320) (142)
Profit / (Loss) for the period from continuing 592 928 (10,831)
operations
Loss for the period from discontinued operations - (462) (21,408)
Profit / (Loss) for the period 592 466 (32,239)
Attributable to :
Equity holders of the parent Company 117 259 (31,275)
Minority interest - continuing 475 207 (964)
operations
592 466 (32,239)
Earnings / (Loss) per share
(US cents):
Continuing operations:
Basic and diluted earnings 5 0.006 0.036 (0.499)
Continuing and discontinued
operations:
Basic and diluted earnings 5 0.006 0.013 (1.580)
ARKO HOLDINGS PLC
CONDENSED CONSOLIDATED BALANCE SHEET
AS AT 30 JUNE 2008
(Audited)
(Unaudited) As at
As at 30 June 31 December
Note 2008 2007 2007
US$'000 US$'000 US$'000
NON-CURRENT ASSETS
Goodwill 7 1,834 20,807 1,834
Property, plant and equipment 8 25,640 33,237 24,376
Available-for-sale investment 12 12 12
27,486 54,056 26,222
CURRENT ASSETS
Inventories 138 100 124
Trade and other receivables 9,235 10,303 8,312
Cash and cash equivalents 189 834 428
9,562 11,237 8,864
TOTAL ASSETS 37,048 65,293 35,086
CAPITAL AND RESERVES
Share capital 10 14,922 14,922 14,922
Share premium 15,662 15,662 15,662
Merger reserve 26,043 26,043 26,043
Exchange reserve 1,940 - 1,440
Retained earnings (43,771) (11,771) (44,139)
Other reserve 1,681 1,682 1,681
Total equity attributable to 16,477 46,538 15,609
equity holders of
the Company
Minority Interest 12,454 13,139 12,035
TOTAL EQUITY 28,931 59,677 27,644
NON-CURRENT LIABILITIES
Bank loans 1,915 1,906 1,915
Obligations under finance lease 9 - -
Loans from fellow investors in 787 783 787
subsidiary
companies
2,711 2,689 2,702
CURRENT LIABILITIES
Trade and other payables 4,036 2,384 3,606
Taxation 4 1,370 543 1,134
5,406 2,927 4,740
TOTAL LIABILITIES 8,117 5,616 7,442
NET CURRENT ASSETS 4,156 8,310 4,124
TOTAL EQUITY AND LIABILITIES 37,048 65,293 35,086
ARKO HOLDINGS PLC
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHS ENDED 30 JUNE 2008
Unaudited attributable to equity holders of the Company
Share Statutory Accumulated Total Minority
interests
capital surplus losses/
reserve retained
profit
Total
Share premium Merger Exchange
reserve reserve
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
US$'000 US$'000
At 1 January 2007 14,922 1,681 44,913
12,932
15,662 26,043 (531) (12,864)
57,845
(as restated *)
Exchange translation - - - - - 1,372
-
difference
1,372
1,372
Profit for the period - - - - - 259
207
259
466
At 30 June 2007 14,922 1,681 26,043 46,544
13,139
15,662 (531) (11,233)
59,683
At 1 January 2008 1,681 15,609
12,035
14,922 15,662 26,043 1,440 (44,139)
27,644
Exchange translation - - - 751
(56)
difference
- 500 251
695
Profit for the period - - - 117
475
- - 117
592
At 30 June 2008 14,922 1,681 26,043 16,477
12,454
15,662 1,940 (43,771)
28,931
At 1 January 2007 1,681 44,913
12,932
14,922 15,662 26,043 (531) (12,864)
57,845
(as restated *)
Exchange translation - - - 1,971
67
difference
- 1,971 -
2,038
Loss for the period - - - (31,275)
(964)
- - (31,275)
(32,239)
At 31 December 2007 14,922 1,681 26,043 15,609
12,035
15,662 1,440 (44,139)
27,644
* represented the restatement of opening balances in respect of exchange reserve and accumulated losses in order to reflect the
first-year adoption of IFRS as adopted by EU and conform with the presentation of the 2007 annual financial statements.
ARKO HOLDINGS PLC
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
FOR THE SIX MONTHS ENDED 30 JUNE 2008
Six months ended Year ended
30 June 31 December
2008 2007 2007
US$'000 US$'000 US$'000
Cashflow from operating activities
Profit /(Loss) before taxation
- Continuing operations 937 1248 (10,689)
- Discontinued operation - (462) (21,408)
937 786 (32,097)
Adjustments for :
Interest expenses - - 120
Interest income - - (14)
Depreciation 110 718 1,579
Loss on disposal of property, plant and 2 - 95
equipment
Impairment loss - goodwill - - 18,977
Impairment loss - property, plant and - - 13,194
equipment
Exchange adjustments 2,211 1,372 728
Operating profit before working capital 3,260 2,876 2,582
changes
Increase in inventories (14) (23) (47)
(Increase) / decrease in receivables (923) (155) 1,836
Increase / (decrease) in payables 430 (1,007) 567
Net cashflow generated from operations 2,753 1,691 4,938
Interest paid - - (120)
Taxes paid (108) (320) (152)
Net cash generated from operating 2,645 1,371 4,666
activities
Investing activities
Purchase of property, plant and (2,884) (1,113) (5,187)
equipments
Sales proceeds on disposal of property, - - 97
plant and equipments
Interest Income - - 14
Net cash used in investing activities (2,884) (1,113) (5,076)
Financing activities
Increase / (decrease) in advances from - (262) -
fellow investors
Net cash used in financing activities - (262) -
Net decrease in cash and cash equivalents (239) (4) (410)
Cash and cash equivalents at the beginning 428 838 838
of the period
Cash and cash equivalents at the end of 189 834 428
the period
ARKO HOLDINGS PLC
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
FOR THE SIX MONTHS ENDED 30 JUNE 2008
1. GENERAL INFORMATION
The Company is a public limited company incorporated and domiciled in the United Kingdom. The registered office of the Company is
located at 2 Bloomsbury Street, London WC1B 3ST. Its principal place of business is located at Hong Kong and People's Republic of China.
The principal activities of the Company and its subsidiaries (hereinafter collectively referred to as the "Group") are terminal
operation and shipping logistics.
The Company's shares were admitted to trading on the Alternative Investment Market ("AIM") of the London Stock Exchange. These condensed
consolidated interim financial statements are presented in United States Dollars, unless otherwise stated, and were reviewed by the Audit
Committee and approved for issue by the Board of Directors on ___________.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of preparation and statement of compliance
The Company has a financial year end date of 31 December. These condensed consolidated interim financial statements for the six months
ended 30 June 2008 have been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting". These
condensed consolidated interim financial statements should be read in conjunction with the annual financial statements of the Group for the
year ended 31 December 2007, which have been prepared in accordance with International Financial Reporting Standards ("IFRSs") as adopted
for use in the European Union ("EU").
EU-endorsed IFRSs may differ from IFRSs, as issued by the International Accounting Standards' Board ("IASB") if, at any point in time,
new or amended IFRSs have not been endorsed by the EU. At 30 June 2008, there were no unendorsed standards effective for the period ended 30
June 2008 affecting these condensed consolidated interim financial statements, and there was no difference between IFRSs endorsed by the EU
and IFRSs issued by the IASB in terms of their application to Arko Holdings Plc.
(b) Significant accounting policies
The condensed consolidated interim financial statements have been prepared under the historical cost convention except for certain
financial assets and liabilities which are stated at fair values.
The accounting policies and methods of computation used in the preparation of these condensed consolidated interim financial statements
are consistent with those used in the annual financial statements for the year ended 31 December 2007 except for the adoption of standards,
amendments and interpretations issued by the IASB mandatory for annual financial periods beginning 1 January 2008.
The adoption of these standards, amendments and interpretations was not material to the Group's results of operations or financial
position.
The presentation of comparative information in respect of the six months ended 30 June 2007 which appears in these condensed interim
financial statements has been reclassified to conform to the presentation adopted in the 2007 annual financial statements.
(c) Possible impact of amendments, new standards and interpretations issued but not yet effective for the
six months ended 30 June 2008.
Up to the date of issue of these financial statements, the IASB has issued a number of amendments, new standards and interpretations
which are not yet effective for the period ended 30 June 2008 and which have not been adopted in these condensed consolidated interim
financial statements.
The Group has not early adopted the following new and revised standards, amendment, or interpretations that have been issued but are not
yet effective.
Effective for accounting
periods beginning
on or after
IFRS 8 Operating segments 1 January 2009
Revised IAS 1 Presentation of financial 1 January 2009
statements
Revised IAS 23 Borrowing costs 1 January 2009
Revised IFRS 3 Business combinations 1 July 2009
Amendments to IAS 27 Consolidated and separate 1 July 2009
financial statements
IFRIC 13 Customer loyalty 1 July 2008
programmes
The Group is in the process of making an assessment of what the impact of these amendments, new standards and new interpretations is
expected to be in the period of initial application. The directors do not anticipate that the adoption of these IFRSs in future periods will
have a material impact on the Group's result of operations and financial position.
(d) Use of estimates and assumptions
The preparation of financial information requires the use of estimates and assumptions about future conditions. The use of available
information and the application of judgement are inherent in the formation of estimates. Actual results in the future may differ from those
reported as a result of the use of estimates and assumptions about future conditions. Management believes that the Company's critical
accounting estimates involving a higher degree of judgement or complexity with those assumptions and estimates mainly relate to the
impairment of loans and advances, the goodwill impairment and the valuation of financial instruments.
(e) Consolidation
The condensed consolidated interim financial statements of Arko Holdings Plc comprise the financial statements of Arko Holdings Plc. and
its subsidiaries.
3. TURNOVER AND SEGMENT INFORMATION
The principal activities of the Group are the provision of logistics and other related services including sea freight forwarding and
barge hire.
Turnover represents income earned from the provision of logistics and other related services. Business (primary) segment information is
as follows:
Segment revenue and result:
(i) Six months ended 30 June (Unaudited)
Revenue Segment profit/(loss)
2008 2007 2008 2007
US$'000 US$'000 US$'000 US$'000
Continuing operations:
Terminals and shipping 6,330 6,083 592 928
logistics
Trading and others - - - -
Mining - - - -
6,330 6,083 592 928
Discontinued operations:
Power plant - - - (462)
6,330 6,083 592 466
(ii) Year ended 31 December 2007 (Audited)
Revenue Segment profit/(loss)
2007 2007
US$'000 US$'000
Continuing operations:
Terminals and shipping logistics 10,860 (820)
Trading and others - (8,776)
Mining - (1,235)
10,860 (10,831)
Discontinued operations:
Power plant - (21,408)
10,860 (32,239)
During the second half of 2007, the Group has discontinued the power plant operation owing to State Council and local government
macroeconomic and administrative measures in closing down small and ineffective coal-fired power plants in Hubei province. The discontinued
operations contributed to a segment loss of approximately US$ 21 million.
4. TAXATION
(Unaudited) (Audited)
Six months ended Year ended
30 June 31 December
2008 2007 2007
US$'000 US$'000 US$'000
PRC Enterprise income tax for the period 345 320 142
The Group has no estimated assessable profits in Hong Kong and the United Kingdom for the period (2007: Nil).
In respect of subsidiary companies operating in Hong Kong, provisions for Hong Kong profits tax 2008/2009 are calculated at 16.5%
(2007/2008 : 17.5%) of the estimated assessable profits for the period.
PRC corporate income tax represents the tax charged on the estimated assessable profits arising from PRC subsidiaries in China. Pursuant
to the PRC corporate income tax law passed by the 10th National People's Congress on 16 March 2007, the new corporate income taxes for
domestic and foreign enterprises are to be unified at 25% on a gradual basis over 5 years effective from 1 January 2008. As a result, the
corporate income tax rate of PRC subsidiaries of the Group will be gradually changed from 18% to 25% with effect from 1 January 2008.
No deferred tax is recognised on the unremitted earnings of the overseas subsidiary companies, as no dividend payments due to UK parent
company are expected to be made in the foreseeable future.
5. EARNINGS (LOSS) PER SHARE
Basic and diluted earnings (loss) per share are calculated by dividing the earnings (loss) attributable to equity holders of the
parent by the weighted average number of ordinary shares in issue during the periods ended 30 June 2008, 30 June 2007 and 31 December 2007.
(Unaudited) (Audited)
Six months ended Year ended
30 June 31 December
2008 2007 2007
Continuing operations:
Profit / (Loss) attributable
to equity 117 721 (9,867)
holders of the parent (US$
'000)
Weighted average number of
shares in 1,978,895,097 1,978,895,097 1,978,895,097
issue
Earnings / (Loss) per share
(Basic and diluted) (US 0.006 0.036 (0.499)
cents)
Continuing and discontinued
operations:
Profit / (Loss) attributable
to equity 117 259 (31,275)
holders of the parent (US$
'000)
Weighted average number of
shares in 1,978,895,097 1,978,895,097 1,978,895,097
issue
Earnings / (Loss) per share
(Basic and diluted) (US 0.006 0.013 (1.580)
cents)
6. DIVIDEND
The directors do not recommend the payment of any dividend.
7. PROFIT / (LOSS) FOR THE PERIOD IS ARRIVED AFTER CHARGING THE FOLLOWING :-
(Unaudited) (Audited)
Six months ended Year ended
30 June 31 December
2008 2007 2007
USD'000 USD'000 USD'000
Depreciation on property, plant and
equipment 110 718 1,579
Loss on disposal of property, plant and
equipment 2 - 95
Impairment loss on goodwill - - 18,977
Impairment loss on property, plant and
equipment - - 13,194
The impairment loss on goodwill in the year ended 31 December 2007 is in respect of the cessation of the Group's power plant
operation and other discontinued activities during that period. The goodwill balance at 30 June 2008 relates to the Group's remaining
terminal and logistics operations.
The impairment loss on property, plant and equipment in the year ended 31 December 2007 has been made as a result of the cessation
of the Group's power plant operation during that period.
8. PROPERTY, PLANT AND EQUIPMENT
During the period , the Group spent approximately US$2,884,000 in acquiring property, plant and equipments (Six months ended 30 June
2007: US$1,113,000).
9. SUBSIDIARY COMPANIES
At 30 June 2008, the company held 100% of the ordinary shares of Arko Offshore Holdings Limited, a company incorporated in the British
Virgin Islands ("BVI"), whose principal activity was that of a holding company. Arko Offshore Holdings Limited had the following subsidiary
undertakings:
Equity interests
attributable
Name to the group Principal activities Place of
incorporation
Arko Energy Ltd. 100% Investment holding BVI
Arko Consultants Ltd. 100% Providing BVI
management services
Arko Pacific Ltd. 100% Investment holding BVI
Long Prosperity Industrial 100% Investment holding Republic of
Ltd. * Seychelles
Arko Silicon (Hubei) Ltd. * 100% Dormant People's Republic of
China
Sanko Mineral Ltd. * 100% Sub-letting of BVI
yachts, ships and
vessels
Arko Shipping Ltd. * 100% Providing logistics Hong Kong
(Formerly known as Arko and related services
Logistics Ltd.)
Arko Satellite Ltd. * 100% Dormant BVI
Arko Terminal Ltd. ("ATL")* 100% Investment holding Republic of
Seychelles
Changzhou Power 59.2% Inactive People's Republic of
Development Company
Ltd.* China
Keen Chance Terminal (GZ) 40% Investing in and People's Republic of
Company Ltd. ("KCT") * operation of a
terminal and China
providing logistics
services
Fujian Sanko Mining Ltd. * 70% Dormant People's Republic of
China
*a subsidiary indirectly held by Arko Offshore Holdings Limited
.
In the opinion of directors and a Hong Kong lawyer expressed his view that KCT is a subsidiary of ATL under Companies Act 1985 as it
could controls the board of KCT.
During the second half 2007, pursuant to an agreement signed with the Hubei Provincial Economic Committee Bureau, Suizhou City
Government and the Hubei Provincial Electricity Co., Ltd. on 30 June 2007, the power plant factory of Changzhou Power Development Company
Ltd. has been ordered to close down its operation from July 2007 onwards owing to the macroeconomic and administrative measures imposed by
the order of State Council to clear off those ineffective coal-fired power plants in Hubei Province. Thereafter, Changzhou Power Development
Company Ltd. becomes inactive.
10. SHARE CAPITAL
Ordinary shares of
0.5 sterling pence each
No. of shares (equivalent) US$
Authorised: '000
At 30 June 2007, 31 December 2007 and 30 30,000,000 265,395,280
June 2008
Issued and fully paid:
At 30 June 2007, 31 December 2007 and 30 1,978,895 14,921,520
June 2008
There is no movement in authorised and issued capital during the periods ended 30 June 2008, 30 June 2007 and 31 December 2007.
11. OPERATING LEASE COMMITMENTS
At 30 June 2008, the Group was committed to make the following payments in respect of land and building under operating leases :
US$'000
Leases which expire:
in the next year 181
in the second to fifth years 299
480
12. CAPITAL COMMITMENTS
At 30 June 2008, the Group had capital commitments contracted in respect of the acquisition of 3 sets of "45t quayside container cranes"
from a non-related supplier in the sum of RMB51,000,000 intended for use by a subsidiary company, Keen Chance Terminal (GZ) Company Limited.
At 30 June 2008, the Group has settled RMB3,440,986.
The Company had no other significant capital commitments.
13. CONTINGENT LIABILITIES
(a) On 23 July 1998, a subsidiary of the Company, Keen Chance Terminal (GZ) Company Limited ("KCT"), gave a guarantee for RMB50
million (equivalent to approximately US$5.9 million) in favour of the Huangpu Branch of the Industry and Commercial Bank of China for
banking facilities granted to Harbour Economic Development Company Limited ("HEDCL"), a fellow investor in KCT and its ultimate controlling
party, Guangzhou Huangpu Foreign Trade Group Company Limited and secured over their equity interests in KCT. HEDCL was unable to repay the
loans due to the bank. The bank took action against KCT to enforce the guarantee for the outstanding loan.
(b) On 9 November 1999, KCT gave a guarantee for RMB18 million (equivalent to approximately US$2.1 million) in favour of
Nangang Rural Credit Co-operation Bank for banking facilities granted to Miaotou Economic Development Company Limited ("MEDCL"), a fellow
investor in KCT, secured over its equity interests in KCT. MEDCL was unable to repay the outstanding loan.
On 27 September 2001, the Guangzhou Law Court delivered an order and notice that the guarantees above were invalid and MEDCL's equity
interest in KCT was frozen.
Based on legal advice, the equity interests had no material impact on the operations of KCT and the directors consider that no
provision is required.
KCT maintains that the guarantee given was invalid on the following grounds:
* such guarantee did not have approval from the board of directors of KCT;
* in accordance with the law of the People's Republic of China, the board of directors and the management of KCT cannot give KCT's
properties for guarantee to its shareholder; and
* the controlling party of HEDCL has not held a valid business licence since 1998 and ceased operations in 1999. In accordance with
the banking regulations of the People's Republic of China, the bank cannot lend money to enterprises which do not have a valid business
licence.
The legal proceedings are still in progress. Based on legal advice, the directors are of the opinion that, the loan agreement was void
because it was illegal and accordingly, the guarantee contract was also invalid.
Furthermore, Keen Lloyd Holdings Limited, the Company's parent company, has indemnified the Group against any loss KCT will suffer
should the guarantee be enforceable.
Accordingly, the directors are of the opinion that no provision should be made in the financial statements for any possible claim from
the bank in respect of the litigation.
(c) Following the closure of the power plant on 30 June 2007, the Group may be required to incur decommissioning costs in respect
of the power plant site. The Group is unable to estimate such costs since the power plant can be sold to other larger power plant companies
in China before end of 2010 (the date at which the plant is required to be demolished). If a sale is achieved, no decommissioning costs will
be incurred. Accordingly, no provision is made in respect of these costs in these financial statements.
14. RELATED PARTY TRANSACTIONS
Other than transactions otherwise disclosed in the financial statements, the Group and the Company had the following material
transactions which were carried out on an arm's length basis with related parties during the following periods :
(Unaudited) (Audited)
Six months ended Year ended
30 June 31 December
2008 2007 2007
Name of company Note Nature US$'000 US$'000 US$'000
Guangzhou Tung (a) Agency charges 41 39 77
Lloyd Shipping
Agency Limited
Winko Metal (b) Hiring charges for - 8 8
Limited motor vehicle
Notes:
(a) The agency charges are paid to Guangzhou Tung Lloyd Shipping Agency Limited in which the Chairman, Mr Qin Shun Chao, is a
director.
(b) There are no hiring charges paid to Winko Metal Limited during the current interim period, which is controlled by Keen Lloyd
Holdings Limited.
15. FINANCIAL STATEMENTS
This statement does not comprise full financial statements within the meaning of Section 240 of the Companies Act 1985.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR FKDKNKBKDNCB
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