Share Name Share Symbol Market Type Share ISIN Share Description
China New Energy Limited LSE:CNEL London Ordinary Share JE00B3RWLF12 ORD 0.025P
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  +0.00p +0.00% 1.275p 1.20p 1.35p 1.275p 1.275p 1.275p 0 08:00:00
Industry Sector Turnover (m) Profit (m) EPS - Basic PE Ratio Market Cap (m)
Alternative Energy 2,850.2 537.0 114.0 0.0 6

China New Energy Ltd Final Results

19/06/2019 6:00pm

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China New Energy Ltd

19 June 2019

19 June 2019

China New Energy Limited

("CNE" or "the Company")

Final Results for the Year Ended 31 December 2018

The Board of CNE (AIM: CNEL), the AIM quoted engineering and technology solutions provider to the bioenergy sector, presents its final results for the year ended 31 December 2018.

Highlights for the year include:

   --      Change of Auditor to PricewaterhouseCoopers LLP ("PwC") 
   --      Announcement of Prior Year Adjustments on FY2017 audited figures made by PwC 
   --      Slight decrease in revenue of 2.8% against FY2017 to RMB250.0 million (c. GBP28.1 million) 
   --      Net profit remains stable at RMB45.8 million (GBP5.2 million) 
   --      Order book and contract backlog increase by 207.8% to RMB329.6 million (c. GBP37.7 million) 
   --      Continued positive market outlook with third consecutive year of profit 

The full version of the report and accounts for the year ended 31 December 2018 will be available from the Company's website www.chinanewenergy.co.uk and notification of posting of the accounts, together with the Notice of AGM, will shortly be sent to all shareholders.

Mr. Yu commented, "I am very pleased that we have sustained our recovery and have recorded our third consecutive net profit. The 13(th) Five Year Plan for Renewable Energy Development clearly demonstrated the intention of the PRC government to develop the ethanol fuel industry. We believe that our advanced technologies and research and development capabilities have given us a competitive edge and allowed us to continue to secure contracts from customers through our provision of high-quality and innovative ethanol production system technology integrated services in the PRC. I am very confident about the outlook for 2019 and the investment value of our shares which is expected to be reflected in our medium to long term market valuation".

This announcement contains inside information for the purposes of Article 7 of EU Regulation 596/2014.

For further information, please visit www.chinanewenergy.co.uk or contact:

 
  China New Energy Limited                   www.chinanewenergy.co.uk 
  Richard Bennett                  rbennett@zkty.com.cn Tel: +44 7966 
                                                               388374 
  Ivy Xu                            xuhj@zkty.com.cn Tel: +86 20 8705 
                                                                 9371 
 
  Cairn Financial Advisers LLP                  Tel: +44 20 7213 0880 
  Nominated Adviser and Broker 
  Jo Turner / Sandy Jamieson 
 
 
 

CHAIRMAN'S STATEMENT

I am pleased to report that the Group recorded its third consecutive profit after tax ("net profit").

Our total revenue has slightly decreased from RMB257.1 million (c. GBP29.2 million) for the year ended 31 December 2017 to RMB250.0 million (c. GBP28.1 million) for the year ended 31 December 2018, representing a decrease of 2.8% which was due to the decrease in revenue generated from the provision of ethanol production system technology integrated services in the ethanol fuel industry although this was partially offset by the growth in revenue of RMB46.5 million and RMB13.5 million generated from projects in the alcoholic beverages and other industries respectively. Our net profit increased marginally from RMB45.7 million (c. GBP5.2 million) for the year ended 31 December 2017 to RMB45.8 million (c. GBP5.2 million) for the year ended 31 December 2018, representing an increase of 0.2%.

The significant growth in our revenue and net profit from 2016 to 2018 was primarily due to the increased market demand as well as the favourable policies introduced by the People's Republic of China ("PRC") government, such as: i.) The 13th Five Year Plan for Renewable Energy Development clearly demonstrated the intention of the PRC government to vigorously develop the ethanol fuel industry. In September 2017, the PRC government announced a new nationwide ethanol mandate (NEA) that was designated to expand the mandatory use of E10 fuel (gasoline containing 10 percent ethanol) from 12 trial provinces to the entire country by 2020. In addition, the State Council of the PRC executive meeting decided to promote the usage of ethanol fuel in another 14 provinces in addition to the original 12 trial provinces; and ii.) The building of "ecological civilization" is listed as one of the top ten goals of the 13th Five Year Plan. Driven by the policies mentioned by policies mentioned above, ethanol producers have to replace outdated equipment by investing in more advanced production systems that generate high production efficiency and low pollutant discharge. The necessity for upgrades of manufacturing facilities, replacement of production systems and mass-production trends drive demand for advanced ethanol production system in the alcoholic beverage industry in the PRC. We believe that, with our extensive experience and expertise in ethanol production system industry, we are well positioned to capture growth opportunities in the PRC. For the year ended 31 December 2018, the major ethanol production system technology integrated services projects for the ethanol fuel industry were with Heilongjiang Hongzhan Biotechnology Co., Ltd and for the alcoholic beverage industry were with Jilin Xintianlong Industries Co., Ltd, Mengzhou City Houyuan Biotechnology Co., Ltd, and Henan Xinheyang Alcohol Co., Ltd respectively.

The gross profit decreased by 6.1% to RMB72.6 million (c. GBP8.2 million) for the year ended 31 December 2018 from RMB77.3 million (c. GBP8.8 million) for the year ended 31 December 2017. Our overall gross profit margin decreased slightly from 30.1% for the year ended 31 December 2017 to 29.0% for the year ended 31 December 2018.

The net profit for the year increased by 0.2% to RMB45.8 million (GBP5.2 million) for the year ended 31 December 2018 from RMB45.7 million (GBP5.2 million) for the year ended 31 December 2017. Net profit margin remained relatively stable at 17.8% for the year ended 31 December 2017 and 18.3% for the year ended 31 December 2018.

Order Book and Contract Backlog

We entered 2019 with a strong order book of RMB329.6 million (c. GBP37.7 million). This number includes new contracts to be started and the proportion of anticipated revenue from contracts which have started but not yet completed. This represents an increase of 234.3% from RMB98.6 million (c. GBP11.2 million) for the year ended 31 December 2017.

The following table sets forth the movement of backlog of our projects during the years ended 31 December 2017 and 2018:

 
                                              For the year ended 31 December 
                                                  2017              2018 
                                                 RMB'000           RMB'000 
 Contract value (exclusive of value-added 
  tax) of the beginning of the year              138,142           98,565 
 Contract value (exclusive of value-added 
  tax) of new contracts awarded during 
  the year                                       217,532          480,990 
 Less: 
    Revenue recognised during the year          (257,109)        (249,978) 
 Contract value (exclusive of value-added 
  tax) at the end of year                        98,565           329,577 
 

Business

The Group is a leading ethanol production system technology integrated service provider in the PRC. The Group primarily provide integrated services including engineering design, equipment manufacturing, installation and commissioning and subsequent maintenance for the core system of ethanol production system in the ethanol fuel and alcoholic beverage industries in the PRC. In addition, the Group also provided its technology integrated services for other chemical production systems in Canada, Russia and other countries.

With 13 years of operating history, the company have gained substantial experience and established a solid reputation in terms of advanced technology skills and proven track records in ethanol production system industry in the PRC .According to a recently commissioned report from the China Insights Consultancy Limited, an independent market research and consulting company, we ranked second in terms of revenue with a market share of approximately 8.4%, in the ethanol production system industry in the PRC in 2017.

Research and Development

We have established a solid reputation in terms of advanced technology skills and proven track records in the ethanol production system industry in the PRC. Over the years, we have been devoted to research and development to drive improvement and innovation in technologies to be applied to the core system of the ethanol production system, we intend to continue to invest in our research and development efforts.

As at the date of this report, we had 31 patented technologies, which we have incorporated into our production procedures. In addition, as at the date of this report, the Group have submitted nine patent registrations in the PRC and two ongoing research and development projects. We believe our advanced technologies and research and development capabilities have given us a competitive edge and allowed us to continue in securing contracts from customers through our provision of high-quality and innovative ethanol production system technology integrated services.

Business Strategies

Our goal is to continue to enhance our overall competitiveness and to capture greater market share in the ethanol production system industry and expand our presence to solidify our position as a leading ethanol production system technology integrated service provider in the PRC. To achieve this goal, we intend to pursue the following strategies:

-- Continue to maintain our leading market position by undertaking more projects in the PRC; and

-- Continue to focus on research and development to strengthen our design and engineering capability.

Whilst the business fundamentals and outlook have substantially grown over the last three years, we are not seeing the value reflected in the Company's share price. This is both causing frustration amongst the board and investors, as well as making it unattractive for the Company to raise additional capital to expand the business. Our Directors are of the view that we will be better served by listing our shares on a stock exchange in Asia, a larger and more liquid stock market with investors who can more readily understand our business operations and the industry and market we are in. We believe this will better accommodate our growth and, at the same time, increase the investment value of our shares which is expected to be reflected in our medium to long term market valuation.

As a result, the Company is actively seeking a listing in Asia where there is a greater understanding of our primary market in the PRC, which we believe will lead to an increased share price and offer more opportunity to us to raise capital. I am pleased to report that the Company is now in late stage preparation of submitting an application for listing on a stock market in Asia for improving shareholder value, but there is no certainty when the submission will be lodged. We continue to stress that we are committed to remaining public and for our shares to be traded on an internationally recognised stock exchange.

Outlook

The board and I are very optimistic about 2019 and the long-term future of CNE. The continuous favourable changes in the PRC ethanol production policies in recent year such as the 13(th) Five Year Plan for Renewable Energy Development clearly demonstrated the intention of the PRC government to develop the ethanol fuel industry. We believe that, our advanced technologies and research and development capabilities have given us a competitive edge and allowed us to continue in securing contracts from customers through our provision of high-quality and innovative ethanol production system technology integrated services in the PRC. .

I am very confident about the immediate outlook for 2019 and the investment value of our shares which is expected to be reflected in our medium to long term market valuation.

On behalf of the board, I would like to extend my appreciation to our valued shareholders, supportive business partners and associates, insightful management and dedicated staff for all their contribution and commitment towards the Company. I would also like to thank the board for their invaluable counsel in steering the Group through this exciting time.

Yu Weijun

Chairman

CONSOLIDATED AND COMPANY STATEMENTS OF FINANCIAL POSITION

AT 31 DECEMBER 2018

 
                         Note                       Group                                  Company 
                               ---------------------------------------------- 
                                     As at 31        As at 31         As at 1         As at 31        As at 31 
                                December 2018   December 2017    January 2017    December 2018   December 2017 
                                      RMB'000         RMB'000         RMB'000          RMB'000         RMB'000 
                                                    (Restated   (Restated See                    (Restated See 
                                                See note 2.2)       note 2.2)                        note 2.2) 
 Non-current assets 
 Property, plant and 
  equipment               4             6,457           7,887           9,465                -               - 
 Land use rights          5             2,608           2,691           2,771                -               - 
 Intangible assets        6            12,782           5,989           5,905                -               - 
 Investments in 
  subsidiaries            7                 -               -               -            9,548           9,203 
 Deferred tax assets      8             5,752               -               -                -               - 
                                                               -------------- 
                                       27,599          16,567          18,141            9,548           9,203 
                               --------------  --------------  --------------  ---------------  -------------- 
 Current assets 
 Inventories              9             3,661          13,742           5,619                -               - 
 Contract assets          10           88,465          60,658           7,170                -               - 
 Trade and other 
  receivables             11          121,609          82,546          52,387            6,582           8,620 
 Cash and cash 
  equivalents             12            7,588          19,368          13,854               22             240 
                                      221,323         176,314          79,030            6,604           8,860 
                               --------------  --------------  --------------  ---------------  -------------- 
 Current liabilities 
 Short-term borrowings    13            6,540          10,107               -                -               - 
 Trade and other 
  payables                14          128,605          97,136          67,472            8,247           6,327 
 Contract liabilities     10           21,028          33,234          36,244                -               - 
 Provision for 
  liabilities             15                -           4,636           6,612                -               - 
 Income tax payable                    21,723          18,118           9,057              316               - 
                                      177,896         163,231         119,385            8,563           6,327 
                               --------------  --------------  --------------  ---------------  -------------- 
 Net current 
  assets/(liabilities)                 43,427          13,083        (40,355)          (1,959)           2,533 
                               --------------  --------------  --------------  ---------------  -------------- 
 
 Net 
  assets/(liabilities)                 71,026          29,650        (22,214)            7,589          11,736 
                               ==============  ==============  ==============  ===============  ============== 
 
 Equity 
 Share capital            16            1,541           1,541           1,441            1,541           1,541 
 Share premium            16           68,830          68,830          62,905           68,830          68,830 
 Combination reserve      17         (33,156)        (33,156)        (33,156)                -               - 
 Other reserves                        32,154          36,599          36,419         (11,803)         (7,244) 
 Retained earnings/ 
  (accumulated losses)                  1,657        (44,164)        (89,823)         (50,979)        (51,391) 
                                       71,026          29,650        (22,214)            7,589          11,736 
                               ==============  ==============  ==============  ===============  ============== 
 
 

CONSOLIDATED AND COMPANY STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

FOR THE YEARED 31 DECEMBER 2018

 
                                                Group                      Company 
                               Note     Year ended 31 December      Year ended 31 December 
                                     --------------------------  -------------------------- 
                                             2018          2017         2018           2017 
                                          RMB'000       RMB'000      RMB'000        RMB'000 
                                                      (Restated                   (Restated 
                                                       See note                    See note 
                                                           2.2)                        2.2) 
 
 Revenue                        33        249,978       257,109            -              - 
 Cost of sales                  25      (177,374)     (179,788)            -              - 
                                     ------------  ------------  -----------  ------------- 
 Gross profit                              72,604        77,321            -              - 
 
 Selling and distribution 
  expenses                      25        (5,801)       (5,573)            -              - 
 Administrative expenses        25       (19,758)      (14,334)      (2,668)        (2,314) 
 Share-based payments           25          (460)          (96)            -              - 
 Other income                   22          1,685         1,061            -              - 
 Other gains                    23            263         2,937          233              - 
 Net impairment losses 
  on financial assets 
  and contract assets                       (362)       (6,193)            -              - 
 Investment income                              -             -        3,163              - 
 
 Operating profit/(loss)                   48,171        55,123          728        (2,314) 
 
 Finance income                 24             22            87            -             80 
 Finance costs                  24        (1,094)         (747)            -              - 
                                     ------------  ------------  -----------  ------------- 
 Finance costs - net            24        (1,072)         (660)            -              - 
 
 Profit/(loss) before 
  tax                                      47,099        54,463          728        (2,234) 
 Income tax expense             27        (1,278)       (8,804)        (316)              - 
 Profit/(loss) for 
  the year attributable 
  to owners of the 
  Group/Company                            45,821        45,659          412        (2,234) 
                                     ============  ============  ===========  ============= 
 
 Other comprehensive 
  (expense)/income 
 Exchange difference 
  on translating foreign 
  operations                                (224)            84        (338)            340 
 
 Total comprehensive 
  income/(expense) 
  for the year attributable 
  to owners of the 
  Group/Company                            45,597        45,743           74        (1,894) 
                                     ============  ============  ===========  ============= 
 
 Earnings per share 
  (RMB)                                2018 (RMB)    2017 (RMB) 
 Basic                          28           0.10          0.09 
 Diluted                        28           0.10          0.09 
 
 

Note: The exchange rate used in 2018 is GBP1:RMB 8.8178 (2017: GBP1:RMB 8.7348).

CONSOLIDATED AND COMPANY STATEMENTS OF CHANGES IN EQUITY

FOR THE YEARED 31 DECEMBER 2018

 
Group                      Share                                                              Other reserves 
                         Capital 
                         RMB'000    Share premium      Combination        Statutory      Share based          Foreign  Treasury shares            Total         Retained    Total equity 
                                          RMB'000          reserve          reserve          payment         currency          RMB'000          RMB'000         earnings         RMB'000 
                                                           RMB'000          RMB'000          reserve      translation                                      /(Accumulated 
                                                                                             RMB'000          reserve                                              loss) 
                                                                                                              RMB'000                                           RMB '000 
                         Note 16          Note 16          Note 17          Note 18          Note 19          Note 20          Note 21 
                 ---------------  ---------------  ---------------  ---------------  ---------------  ---------------  ---------------  ---------------  ---------------  -------------- 
Balance at 31 
 December 2016 
 as originally 
 presented                 1,441           62,905         (33,156)           12,328                -           24,091                -           36,419         (63,039)           4,570 
Correction of 
 prior year 
 errors, net of 
 tax (note 2.2)                -                -                -                -                -                -                -                -         (24,357)        (24,357) 
Adjustment on 
 full 
 retrospective 
 application of 
 IFRS 9, net of 
 tax (note 2.3)                -                -                -                -                -                -                -                -          (2,427)         (2,427) 
Balance at 1 
 January 2017, 
 as restated               1,441           62,905         (33,156)           12,328                -           24,091                -           36,419         (89,823)        (22,214) 
                 ---------------  ---------------  ---------------  ---------------  ---------------  ---------------  ---------------  ---------------  ---------------  -------------- 
Profit for the 
 year, as 
 restated                      -                -                -                -                -                -                -                -           45,659          45,659 
Other 
 comprehensive 
 income                        -                -                -                -                -               84                -               84                -              84 
Total 
 comprehensive 
 income for the 
 year, as 
 restated                      -                -                -                -                -               84                -               84           45,659          45,743 
                 ---------------  ---------------  ---------------  ---------------  ---------------  ---------------  ---------------  ---------------  ---------------  -------------- 
Transactions 
with owners, 
recognised 
directly in 
equity 
Share-based 
 payment 
 expenses                      -                -                -                -               96                -                -               96                -              96 
Issue of 
 shares, net of 
 share issue 
 cost                        100            5,925                -                -                -                -                -                -                -           6,025 
                 ---------------  ---------------  ---------------  ---------------  ---------------  ---------------  ---------------  ---------------  ---------------  -------------- 
Balance at 31 
 December 2017, 
 as restated               1,541           68,830         (33,156)           12,328               96           24,175                -           36,599         (44,164)          29,650 
                 ---------------  ---------------  ---------------  ---------------  ---------------  ---------------  ---------------  ---------------  ---------------  -------------- 
 
Balance at 31 
 December 2017 
 as originally 
 presented                 1,541           68,830         (33,156)           12,328              528           24,175                -           37,031         (32,954)          41,292 
Correction of 
 prior year 
 errors, net of 
 tax (note 2.2)                -                -                -                -            (432)                -                -            (432)          (6,025)         (6,457) 
Adjustment on 
 full 
 retrospective 
 application of 
 IFRS 9, net of 
 tax (note 2.3)                -                -                -                -                -                -                -                -          (5,185)         (5,185) 
Balance at 31 
 December 2017 
 as restated               1,541           68,830         (33,156)           12,328               96           24,175                -           36,599         (44,164)          29,650 
                 ---------------  ---------------  ---------------  ---------------  ---------------  ---------------  ---------------  ---------------  ---------------  -------------- 
Profit for the 
 year                          -                -                -                -                -                -                -                -           45,821          45,821 
Other 
 comprehensive 
 expense                       -                -                -                -                -            (224)                -            (224)                -           (224) 
Total 
 comprehensive 
 income for the 
 year                          -                -                -                -                -            (224)                -            (224)           45,821          45,597 
                 ---------------  ---------------  ---------------  ---------------  ---------------  ---------------  ---------------  ---------------  ---------------  -------------- 
Transactions 
with owners, 
recognised 
directly in 
equity 
Share-based 
 payment 
 expenses                      -                -                -                -              460                -                -              460                -             460 
Buy-back of 
 shares                        -                -                -                -                -                -          (4,681)          (4,681)                -         (4,681) 
                 ---------------  ---------------  ---------------  ---------------  ---------------  ---------------  ---------------  ---------------  ---------------  -------------- 
Balance at 31 
 December 2018             1,541           68,830         (33,156)           12,328              556           23,951          (4,681)           32,154            1,657          71,026 
                 ---------------  ---------------  ---------------  ---------------  ---------------  ---------------  ---------------  ---------------  ---------------  -------------- 
 
 
 
                                                              Foreign  Subtotal 
                                   Share-based               currency        of 
                   Share    Share      payment  Treasury  translation     other  Accumulated     Total 
Company          capital  premium      reserve    shares      reserve   reserve         loss    equity 
                 RMB'000  RMB'000      RMB'000   RMB'000      RMB'000   RMB'000      RMB'000   RMB'000 
 
Balance at 1 
 January 2017      1,441   62,905            -         -      (7,680)   (7,680)     (49,157)     7,509 
                 -------  -------  -----------  --------  -----------  --------  -----------  -------- 
 
Loss for the 
 year, as 
 restated              -        -            -         -            -         -      (2,234)   (2,234) 
Other 
 comprehensive 
 income                -        -            -         -          340       340            -       340 
Total 
 comprehensive 
 income for the 
 year, as 
 restated              -        -            -         -          340       340      (2,234)   (1,894) 
                 -------  -------  -----------  --------  -----------  --------  -----------  -------- 
 
Transactions 
with owners, 
recognised 
directly in 
equity 
Share-based 
 payment 
 expenses              -        -           96         -            -        96            -        96 
Issue of 
 shares, net of 
 share issue 
 cost                100    5,925            -         -            -         -            -     6,025 
 
Balance at 31 
 December 2017     1,541   68,830           96         -      (7,340)   (7,244)     (51,391)    11,736 
                 -------  -------  -----------  --------  -----------  --------  -----------  -------- 
 
Balance at 31 
 December 2017 
 as originally 
 presented         1,541   68,830          528         -      (7,340)   (6,812)     (51,919)    11,640 
Correction of 
 prior year 
 errors, net of 
 tax (note 2.2)        -        -        (432)         -            -     (432)          528        96 
Balance at 31 
 December 2017 
 as restated       1,541   68,830           96         -      (7,340)   (7,244)     (51,391)    11,736 
                 -------  -------  -----------  --------  -----------  --------  -----------  -------- 
Profit for the 
 year                  -        -            -         -            -         -          412       412 
Other 
 comprehensive 
 expense                                                        (338)     (338)            -     (338) 
Total 
 comprehensive 
 income for the 
 year                  -        -            -         -        (338)     (338)          412        74 
                 -------  -------  -----------  --------  -----------  --------  -----------  -------- 
 
Transactions 
with owners, 
recognised 
directly in 
equity 
Share-based 
 payment 
 expenses              -        -          460         -            -       460            -       460 
Buy-back of 
 shares                -        -            -   (4,681)            -   (4,681)            -   (4,681) 
                 -------  -------  -----------  --------  -----------  --------  -----------  -------- 
 
Balance at 31 
 December 2018     1,541   68,830          556   (4,681)      (7,678)  (11,803)     (50,979)     7,589 
                 =======  =======  ===========  ========  ===========  ========  ===========  ======== 
 

CONSOLIDATED AND COMPANY STATEMENTS OF CASH FLOWS

FOR THE YEARED 31 DECEMBER 2018

 
                                                               Group                          Company 
                                                     -------------------------  ---------------------------------- 
                                                          2018            2017      2018                      2017 
                                                       RMB'000         RMB'000   RMB'000                   RMB'000 
                                                                     (Restated             (Restated See note 2.2) 
                                                                 See note 2.2) 
 Cash flows from operating activities 
 Cash generated from/(used in) operations               10,069        (13,135)     (895)                   (7,673) 
 Income tax paid                                       (3,425)           (175)         -                         - 
 Interest paid                                         (1,072)           (660)         -                         - 
                                                     ---------  --------------  --------  ------------------------ 
 Net cash generated from/(used in) operating 
  activities                                             5,572        (13,970)     (895)                   (7,673) 
                                                     ---------  --------------  --------  ------------------------ 
 
 Cash flows from investing activities 
 Purchases of property, plant and equipment              (889)           (687)         -                         - 
 Purchase of other intangible assets                   (5,954)           (595)         -                         - 
 Proceeds from disposal of property, plant and 
 equipment                                                   3               -         -                         - 
 Dividend received                                           -               -       444                         - 
                                                     ---------  --------------  --------  ------------------------ 
 Net cash used in investing activities                 (6,840)         (1,282)       444                         - 
                                                     ---------  --------------  --------  ------------------------ 
 
   Cash flows from financing activities 
   Proceeds from bank and other borrowings               6,800          10,257         -                         - 
   Repayments of borrowings                           (10,367)           (150)         -                         - 
   Proceeds from shares issued                               -           6,025         -                     6,025 
   Repurchase of shares                                      -         (4,681)         -                         - 
 Cash advance from related parties                      15,404          52,410 
 Repayment to related parties                         (11,165)        (43,175) 
   Restricted cash pledged for bank borrowings         (1,230)               -         -                         - 
                                                     ---------  --------------  --------  ------------------------ 
 Net cash (used in)/ generated from financing 
  activities                                             (558)          20,686         -                     6,025 
                                                     ---------  --------------  --------  ------------------------ 
 
 Net (decrease)/increase in cash and cash 
  equivalents                                          (1,826)           5,434     (451)                   (1,648) 
   Cash and cash equivalents at beginning of year        8,180           2,666       240                     1,808 
   Exchange gains on cash and cash equivalents               4              80       233                        80 
                                                     ---------  --------------  --------  ------------------------ 
   Cash and cash equivalents at end of year              6,358           8,180        22                       240 
                                                     ---------  --------------  --------  ------------------------ 
 
   Profit/(loss) before income tax                      47,099          54,463       728                   (2,234) 
  - Finance costs                                        1,072             660         -                      (80) 
  - Depreciation                                         2,316           2,187         -                         - 
  - Amortisation                                           618             591         -                         - 
  - Net impairment losses on financial assets and 
   contract assets                                         362           6,193         -                         - 
  - Share-based employee expense                           460              96         -                         - 
  - Exchange gain                                          (4)            (80)     (233)                         - 
  - Non cash item-Investments in subsidiaries                -               -   (3,163)                         - 
                                                        51,923          64,110   (2,668)                   (2,314) 
   Changes in working capital: 
    - Contract assets                                 (27,807)        (53,488)         -                         - 
    - Inventories                                       10,081         (8,123)         -                         - 
    - Restricted cash                                   11,188               -         -                         - 
     -Trade and other receivables                     (49,185)        (39,623)     (147)                   (4,819) 
     -Contract liabilities                            (12,206)         (3,010)         -                         - 
    - Trade and other payables                          26,075          26,999     1,920                     (540) 
                                                     ---------  --------------  --------  ------------------------ 
   Cash generated from/(used in) operations             10,069        (13,135)     (895)                   (7,673) 
                                                     =========  ==============  ========  ======================== 
 

NOTES TO THE FINANCIAL STATEMENTS

The financial information above and the notes to the accounts have been extracted from the Annual Report and Financial Statements for the year ended 31 December 2018. As such, note references and page numbers may not appear correctly in this announcement. Shareholders are advised to read the Annual Report and Financial Statements for the year ended 31 December 2018 in full which will shortly be available from the Company's website, www.chinanewenergy.co.uk.

   1.      General information 

The Company (or "CNE") with registration number 93306 was incorporated in Jersey on 2 May 2006 as an investment holding Company. The Company is domiciled in Jersey with its registered office at Queensway House, Hilgrove Street, St Helier, Jersey JE1 1ES.

The principal activities of its main subsidiary, Guangdong Zhongke Tianyuan New Energy Science and Technology Co Ltd. ("ZKTY") are providing turnkey technology solutions to manufacturers of ethanol, edible alcohol and acetic acid from a range of bio-resources including corn, sugarcane, cassava and other bio-resources.

The principal place of business is located at No 4, Nengyuan Road, Wushan, Tianhe District, Guangzhou, People's Republic of China ("PRC").

   2.      Summary of significant accounting policies 
   2.1.   Basis of preparation 

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards, as adopted by the EU ("IFRS") issued by the International Accounting Standards Board ("IASB"), including related Interpretations issued by the International Financial Reporting Interpretations Committee ("IFRIC").

The consolidated financial statements incorporate the financial information of the Company and the Group. The subsidiaries are entities (including special purposes entities) over which the Group has the power to govern the financial operating policies, generally accompanied by a shareholding giving rise to the majority of the voting rights, as to obtain benefits from their activities.

The consolidated financial statements of the Group are presented in Chinese Renminbi ("RMB"), which is the presentation currency of the Group financial statements as the Group mainly operates in the PRC. The individual financial statements of each group entity are measured and presented in the currency of the primary economic environment in which the entity operates (its functional currency), with the exception of the parent entity whose functional currency is GBP but has a presentational currency of RMB. All financial information presented in RMB has been recorded to the nearest thousand.

The Group has adopted all relevant IFRS standards effective for accounting periods beginning on or after 1 January 2018.

As at end of the reporting year, the Group has not adopted the following IFRS standards as they are either not yet effective or not applicable to the Group's business.

IFRS standards, amendments and interpretations

Up to the date of issuance of this report, the IASB has issued the following new standards, amendments and interpretations which are not yet effective and have not been early adopted:

 
                                                                                          Effective for annual periods 
                                                                                                 beginning on or after 
 IFRS 16 (i)                             Leases                                                         1 January 2019 
 Interpretation 23                       Uncertainty over Income Tax                                    1 January 2019 
                                         Treatments 
 IAS 28 (Amendment)                      Long-term Interests in Associates and                          1 January 2019 
                                         Joint Ventures 
 IFRS 9 (Amendment)                      Prepayment features with negative                              1 January 2019 
                                         compensation 
 
 IAS 19 (Amendment)                      Plan amendment, curtailment or                                 1 January 2019 
                                         settlement 
 Annual Improvements to IFRSs            Clarifying previously held interest                            1 January 2019 
 2015-2017 cycle                         in a joint operation under IFRS3 
                                         Business Combinations 
                                         and IFRS 11 Joint Arrangements 
                                         Clarifying income tax consequences of 
                                         payments on financial instruments 
                                         classified as equity 
                                         under IAS 12 Income Taxes 
                                         Clarifying borrowing costs eligible 
                                         for capitalisation under IAS 23 
                                         Borrowing Costs 
 IFRS 3 (Amendment)                      Definition of a Business                                       1 January 2020 
 Conceptual framework for financial      Revised conceptual framework for                               1 January 2020 
 reporting 2018                          financial reporting 
 IAS 1 and IAS 8                         Disclosure initiative-Definition of 
                                         method                                                         1 January 2020 
 IFRS 17                                 Insurance contracts                                            1 January 2021 
 IFRS 10 and IAS 28 (Amendment)          Sale or contribution of assets                               To be determined 
                                         between an investor and its associate 
                                         or joint venture 
 

(i): IFRS 16 leases

Nature of change

IFRS 16 was issued in January 2016. It will result in almost all leases being recognized on the balance sheet by lessees, as the distinction between operating and finance leases is removed. Under the new standard, an asset (the right to use the leased item) and a financial liability to pay rentals are recognized. The only exceptions are short-term and low-value leases.

Impact

The Group has set up a project team which has reviewed all of the Group's leasing arrangements over the last year in light of the new lease accounting rules in IFRS 16. The standard will affect primarily the accounting for the Group's operating leases.

As at 31 December 2018, the Group has non-cancellable operating lease commitments of RMB6,019,000. Of these commitments, approximately RMB222,000 relate to short-term leases which will be recognized on a straight-line basis as expense in profit or loss. For the remaining lease commitments, the Group expects to recognize right-of-use assets of approximately RMB4,625,000 on 1 January 2019, lease liabilities of RMB4,625,000 (after adjustments for prepayments and accrued lease payments recognized as at 31 December 2018) and deferred tax assets of RMB26,000.

The Group expects that net profit after tax will decrease by approximately RMB146,000 in the year ending December 31, 2019 as a result of adopting the new rules.

   2.2.   Correction of prior year errors 

During the year ended 31 December 2018, management revisited the accounting treatments for certain transactions entered into by the Group in previous years and concluded that adjustments are required to be made to the comparative information presented so as to ensure that the consolidated financial statements presented are in compliance with IFRS. Certain reclassification have also been made to the prior year's consolidated financial statements to enhance the comparability with the current year's results. The comparative figures that show the impact of prior year adjustments ("PYA") and the adoption of IFRS9 are shown in the table below:

 
Consolidated 
statement of                                            PYA 3 -                                       Other 
financial                      PYA 1 -                 Research                                       prior 
position         Original      Revenue     PYA 2 -          and      PYA 4 -   PYA 5 -        PYA      year  Adoption 
(extract)          stated  Recognition  Litigation  Development  Receivables       Tax   Subtotal    errors  of IFRS9   Restated 
                       31                                                                                              1 January 
                 December     Note 2.2    Note 2.2     Note 2.2     Note 2.2  Note 2.2             Note 2.2                 2018 
                     2017          (a)         (b)          (c)          (d)       (e)                  (f)  Note 2.3 
                  RMB'000      RMB'000     RMB'000      RMB'000      RMB'000   RMB'000    RMB'000   RMB'000   RMB'000    RMB'000 
Non-current 
assets 
Property, 
 plant and 
 equipment          3,854            -           -        4,033            -         -      4,033         -         -      7,887 
Land Use 
 Rights                 -            -           -            -            -         -          -     2,691         -      2,691 
Intangible 
 assets            15,814            -           -      (7,134)            -         -    (7,134)   (2,691)         -      5,989 
Total 
 non-current 
 assets            19,668            -           -      (3,101)            -         -    (3,101)         -         -     16,567 
 
Current 
assets 
Inventories        18,745            -     (5,003)            -            -         -    (5,003)         -         -     13,742 
Contract 
 assets            55,866        7,526         (8)            -          342         -      7,860   (2,540)     (528)     60,658 
Trade and 
 other 
 receivables       92,791        1,656           -            -      (5,970)         -    (4,314)   (1,274)   (4,657)     82,546 
Total current 
 assets           186,770        9,182     (5,011)            -      (5,628)         -    (1,457)   (3,814)   (5,185)    176,314 
 
Current 
liabilities 
Short-term 
 borrowings         7,447            -           -            -            -         -          -     2,660         -     10,107 
Trade and 
 other 
 payables          96,632      (2,080)           -            -            -         -    (2,080)     2,584         -     97,136 
Contract 
 liabilities       31,055            -      11,237            -            -         -     11,237   (9,058)         -     33,234 
Provision for 
 liabilities       15,873            -    (11,237)            -            -         -   (11,237)         -         -      4,636 
Income tax 
 payable           12,014        1,397       (751)        (612)        (844)     4,789      3,979     2,125         -     18,118 
Total current 
 liabilities      163,021        (683)       (751)        (612)        (844)     4,789      1,899   (1,689)         -    163,231 
 
Non-current 
liability 
Deferred tax 
 liability          2,125            -           -            -            -         -          -   (2,125)         -          - 
 
Equity 
Share based 
 payment 
 reserve              528            -           -            -            -         -          -     (432)         -         96 
Accumulated 
 losses          (32,954)        9,865     (4,260)      (2,489)      (4,784)   (4,789)    (6,457)       432   (5,185)   (44,164) 
Total equity       41,292        9,865     (4,260)      (2,489)      (4,784)   (4,789)    (6,457)         -   (5,185)     29,650 
 
 
 
 
 
Consolidated 
statement of                                                                                 Other 
financial                                                                                    prior 
position         Original                                                           PYA       year  Adoption 
(extract)          stated     PYA 1     PYA 2     PYA 3      PYA 4     PYA 5   Subtotal     errors  of IFRS9   Restated 
                ---------  --------  --------  --------  ---------  --------  ---------  ---------  --------  --------- 
                       31                                                                                     1 January 
                 December  Note 2.2  Note 2.2  Note 2.2   Note 2.2  Note 2.2              Note 2.2                 2017 
                     2016       (a)       (b)       (c)        (d)       (e)                   (f)  Note 2.3 
                ---------  --------  --------  --------  ---------  --------  ---------  ---------  --------  --------- 
                  RMB'000   RMB'000   RMB'000   RMB'000    RMB'000   RMB'000    RMB'000    RMB'000   RMB'000    RMB'000 
                ---------  --------  --------  --------  ---------  --------  ---------  ---------  --------  --------- 
Non-current 
assets 
                ---------  --------  --------  --------  ---------  --------  ---------  ---------  --------  --------- 
Property, 
 plant and 
 equipment          4,774         -         -     4,691          -         -      4,691          -         -      9,465 
                ---------  --------  --------  --------  ---------  --------  ---------  ---------  --------  --------- 
Land use 
 rights                 -         -         -         -          -         -          -      2,771         -      2,771 
                ---------  --------  --------  --------  ---------  --------  ---------  ---------  --------  --------- 
Intangible 
 assets            14,541         -         -   (5,865)          -         -    (5,865)    (2,771)         -      5,905 
                ---------  --------  --------  --------  ---------  --------  ---------  ---------  --------  --------- 
Total 
 non-current 
 assets            19,315         -         -   (1,174)          -         -    (1,174)          -         -     18,141 
                ---------  --------  --------  --------  ---------  --------  ---------  ---------  --------  --------- 
 
Current 
assets                                                                                                                - 
                ---------  --------  --------  --------  ---------  --------  ---------  ---------  --------  --------- 
Inventories         3,438         -     2,181         -          -         -      2,181          -         -      5,619 
                ---------  --------  --------  --------  ---------  --------  ---------  ---------  --------  --------- 
Contract 
 assets            35,713       361       (8)         -    (5,521)         -    (5,168)   (23,155)     (220)      7,170 
                ---------  --------  --------  --------  ---------  --------  ---------  ---------  --------  --------- 
Trade and 
 other 
 receivables       73,217     (260)         -         -   (16,719)         -   (16,979)    (1,644)   (2,207)     52,387 
                ---------  --------  --------  --------  ---------  --------  ---------  ---------  --------  --------- 
Total current 
 assets           126,222       101     2,173         -   (22,240)         -   (19,966)   (24,799)   (2,427)     79,030 
                ---------  --------  --------  --------  ---------  --------  ---------  ---------  --------  --------- 
 
Current 
liabilities 
                ---------  --------  --------  --------  ---------  --------  ---------  ---------  --------  --------- 
Short-term                                                                                                 - 
borrowings              -         -         -         -          -         -          -          -                    - 
                ---------  --------  --------  --------  ---------  --------  ---------  ---------  --------  --------- 
Trade and 
 other 
 payables          91,976   (4,913)         -         -          -         -    (4,913)   (19,591)         -     67,472 
                ---------  --------  --------  --------  ---------  --------  ---------  ---------  --------  --------- 
Contract 
 liabilities       30,215         -    11,237         -          -         -     11,237    (5,208)         -     36,244 
                ---------  --------  --------  --------  ---------  --------  ---------  ---------  --------  --------- 
Provision for 
 liabilities       10,000         -   (3,388)         -          -         -    (3,388)          -         -      6,612 
                ---------  --------  --------  --------  ---------  --------  ---------  ---------  --------  --------- 
Income tax 
 payable            8,776        29     (851)     (248)    (3,336)     4,687        281          -         -      9,057 
                ---------  --------  --------  --------  ---------  --------  ---------  ---------  --------  --------- 
Total current 
 liabilities      140,967   (4,884)     6,998     (248)    (3,336)     4,687      3,217   (24,799)         -    119,385 
                ---------  --------  --------  --------  ---------  --------  ---------  ---------  --------  --------- 
 
Equity 
                ---------  --------  --------  --------  ---------  --------  ---------  ---------  --------  --------- 
Accumulated 
 losses          (63,039)     4,985   (4,825)     (926)   (18,904)   (4,687)   (24,357)          -   (2,427)   (89,823) 
                ---------  --------  --------  --------  ---------  --------  ---------  ---------  --------  --------- 
Total equity        4,570     4,985   (4,825)     (926)   (18,904)   (4,687)   (24,357)          -   (2,427)   (22,214) 
                ---------  --------  --------  --------  ---------  --------  ---------  ---------  --------  --------- 
 
 
 
Consolidated                                                                                Other 
statement of                                                                                prior 
profit or loss        Original                                                      PYA      year  Adoption 
(extract)               stated    PYA 1     PYA 2     PYA 3    PYA 4    PYA 5  Subtotal    errors  of IFRS9    Restated 
                    ----------  -------  --------  --------  -------  -------  --------  --------  --------  ---------- 
                          2017     Note  Note 2.2  Note 2.2     Note     Note            Note 2.2                  2017 
                                2.2 (a)       (b)       (c)  2.2 (d)  2.2 (e)                 (f)  Note 2.3 
                    ----------  -------  --------  --------  -------  -------  --------  --------  --------  ---------- 
                       RMB'000  RMB'000   RMB'000   RMB'000  RMB'000  RMB'000   RMB'000   RMB'000   RMB'000     RMB'000 
                    ----------  -------  --------  --------  -------  -------  --------  --------  --------  ---------- 
 
Revenue                252,400    4,709         -         -        -        -     4,709         -         -     257,109 
                    ----------  -------  --------  --------  -------  -------  --------  --------  --------  ---------- 
Cost of sales        (178,802)    1,539     (553)     (934)        -        -        52   (1,038)         -   (179,788) 
                    ----------  -------  --------  --------  -------  -------  --------  --------  --------  ---------- 
Selling and 
 distribution 
 expenses              (5,890)        -         -         -        -        -         -       317         -     (5,573) 
                    ----------  -------  --------  --------  -------  -------  --------  --------  --------  ---------- 
Administrative 
 expenses              (5,044)        -         -     (993)        -        -     (993)   (8,297)         -    (14,334) 
                    ----------  -------  --------  --------  -------  -------  --------  --------  --------  ---------- 
Share-based 
 payment                 (528)        -         -         -        -        -         -       432         -        (96) 
                    ----------  -------  --------  --------  -------  -------  --------  --------  --------  ---------- 
Other income             7,642        -   (6,631)         -        -        -   (6,631)        50         -       1,061 
                    ----------  -------  --------  --------  -------  -------  --------  --------  --------  ---------- 
Other 
 gains/(expenses) 
 - net                 (7,150)        -     7,849         -        -        -     7,849     2,238         -       2,937 
                    ----------  -------  --------  --------  -------  -------  --------  --------  --------  ---------- 
Net impairment 
 losses on 
 financial assets 
 and contract 
 assets               (26,828)        -         -         -   16,612        -    16,612     6,781   (2,758)     (6,193) 
                    ----------  -------  --------  --------  -------  -------  --------  --------  --------  ---------- 
Finance income              57        -         -         -        -        -         -        30         -          87 
                    ----------  -------  --------  --------  -------  -------  --------  --------  --------  ---------- 
Finance costs            (666)        -         -         -        -        -         -      (81)         -       (747) 
                    ----------  -------  --------  --------  -------  -------  --------  --------  --------  ---------- 
Income tax expense     (5,106)  (1,368)     (100)       364  (2,492)    (102)   (3,698)         -         -     (8,804) 
                    ----------  -------  --------  --------  -------  -------  --------  --------  --------  ---------- 
Profit for the 
 year                   30,085    4,880       565   (1,563)   14,120    (102)    17,900       432   (2,758)      45,659 
                    ----------  -------  --------  --------  -------  -------  --------  --------  --------  ---------- 
 
 
   2.2.a       Adjustments in relation to revenue recognition from construction contracts 

In prior years, the Group recognised revenue from construction contracts on the basis of actual services provided as a proportion of the expected total service to be provided, measured using costs as a percentage of total expected costs applied to expected revenue. On reviewing the estimates made and the information previously used to determine those estimates it has been determined that when actual costs were in excess of budget, but were recoverable due to associated increases in revenue, only a decline in margin had been recognised. It would have been more appropriate to reflect additional revenue at the actual margin that would still be achieved and the liabilities associated with the additional actual costs when these amounts were known or considered highly probable prior period ends. There was an accumulated impact identified across 2016 and 2017. The total impact for 2017 was that revenue in the year was understated by RMB4,709,000 and cost of sales were overstated by RMB1,539,000, leading to associated adjustments to contract assets, trade receivables and trade payables in line with the Group's accounting policies. The restated amounts better reflect management's best estimate of stage of completion and expected margin on construction contracts based on the information that was available at that time and the previous calculations are deemed to be in error. The increase in equity and net assets was RMB4,985,000 at 31 December 2016 and RMB9,865,000 at 31 December 2017 with an increase in profit for the year ended 31 December 2017 of RMB4,880,000.

   2.2.b       Adjustments related to litigation 

In 2012, the Group was involved in a litigation with Tangshan Chenhong Industry Co. Ltd ("Tangshan Chenhong") as products sold under a contract failed to pass the trial test stated in the agreement signed by both parties. Therefore, the contract signed was terminated and the Group had to repay amounts that had already been recovered under the contract and also pay additional compensation to Tangshan Chenhong. The Group has re-assessed that the revenue earned under the contract of RMB11,237,000 should not have been recognised, and the need to repay this has been reflected in the balance sheet as a contract liability as at 1 January 2017 as the amount was repaid after this date. As part of agreeing to repay the revenue the Group still had the rights over the inventory associated with the contract, so this has been recognised as at 1 January 2017 at its recoverable amount whereas previously recovery of the inventory had been taken as a gain in the year to 31 December 2017 at its historic inventory value. The Group has then furthermore re-assessed the timings as to when it was probable compensation would be payable and the likely amounts. As at 1 January 2017 based on current court rulings this amount was deemed to be RMB6,612,000. Previously RMB10,000,000 was included in provisions as at 1 January 2017 to cover both repayments of revenue received and compensation, so the net adjustment of recognising the corrected liability to repay revenue, the associated inventory value and the appropriate level of provision reduced net assets as at 1 January 2017 by RMB4,825,000 after taxation.

Following a further court appeal and ruling in 2017 the compensation to Tangshan Chenhong was reduced to RMB4,636,000. Previously the original provision of RMB10,000,000 had been increased to the final known settlement amounts, where as now it is deemed more appropriate to recognise a reduction in the provision in the year, a reversal of the gain previously taken on recognising the inventory in 2017, and an adjustment to true up the actual recoverable value of the inventory as at 31 December 2017. Therefore as at 31 December 2017 net assets have been decreased by RMB4,260,000 as a net effect of the above, and net income for the year increased by RMB565,000.

   2.2.c       Adjustments in relation to research and development expenditure 

The Group has re-reviewed certain costs that had been capitalised as research and development expenditure within intangible assets. Following this review it has been determined that a) certain items should have been more appropriately capitalised into property, plant and equipment in accordance with group accounting policies based on items being equipment purchased, or b) the amounts should not have been capitalised and should have been expensed as incurred for not meeting the required criteria under IAS 38 "Intangible Assets" for capitalisation of development costs. The decrease in equity and net assets was RMB926,000 at 31 December 2016 and RMB2,489,000 at 31 December 2017 with a decrease in profit for the year ended 31 December 2017 of RMB1,563,000.

   2.2.d       Adjustments in relation to impairment loss on trade receivables and contract assets 

In 2018, management undertook a detailed review of its trade receivables and contract assets and it has been determined that certain receivables were not being provided for in accordance with Group accounting policies as at 1 January 2017, some of which had then been impaired during the year to 31 December 2017. This exercise was completed as part of the impact assessment prior to the adoption of IFRS 9, however where certain trade receivables and contract assets should have been provided for under previous policies these have been separately identified as prior year errors. Based on information available at the end of 2017 and 2016 management should have provided for specific debtors which would have deemed to have been non recoverable based on information available at that time considering specific disputes, credit risk analysis and ageing. As a consequence, provisions for the impairment loss on trade receivables and contract assets have been increased by RMB22,240,000 at 31 December 2016 and RMB5,628,000 at 31 December 2017 resulting in a decrease in equity and net assets of RMB18,904,000 at 31 December 2016 and RMB4,784,000 at 31 December 2017 together with an increase in profit for the year ended 31 December 2017 of RMB14,120,000.

   2.2.e       Adjustments in relation to income tax expenses 

The Group has re-assessed the level of tax liability it should have recognised as at 31 December 2016 based on previous accounting for taxation and corrected the liability as certain deductions and timing differences had been accounted for in error. The correction increased the current tax liability and reduced net assets by RMB4,687,000 as at 1 January 2017, and increased the taxation charge by RMB102,000 in the year ended 31 December 2017 and increased the current taxation liability and reduced net assets by RMB4,789,000 as at 31 December 2017.

   2.2.f      Other prior year errors 

In addition to the prior year adjustments referred to in 2.2a-2.2e certain comparative figures have been restated to show an appropriate presentation under IFRS. This does not have an impact on net assets, and the only item impacting net income is a share based payment adjustment which also has no impact on net assets. Details are as follows:

   2.2.f.i)        Intangible Assets and Land Use Rights 

Land use rights have been disclosed as a separate asset on the face of the balance sheet rather than within intangible assets, as is permitted under IFRS, with this resulting in a reclassification of RMB2,691,000 at 31 December 2017 (2016: RMB2,771,000).

   2.2.f.ii)        Contract Assets 

For 2017, a reclassification between contract assets and contract liabilities of RMB11,419,000 (2016: 24,222,000) was required which resulted in reducing both balances as amounts were being grossed up with certain customers which were entitled to be offset as they related to payments received in advance against levels of accrued income. In addition to this an RMB8,879,000 (2016: RMB 1,066,000) increase in contract assets was required as described in in 2.2 f v) below. This therefore has resulted in a decrease in contract assets RMB2,540,000 at 31 December 2017 (2016:RMB 23,155,000).

   2.2.f.iii)       Trade and other receivables 

In 2016 and 2017 certain payments in advance had been included in other payables and contract liabilities whereas they should have been offset against applicable trade and other receivables. Therefore there is a reduction of RMB1,274,000 and RMB1,644,000 on trade and other receivables at 31 December 2017 and 31 December 2016 respectively.

   2.2.f.iv)       Short term-borrowings 

In 2017 amounts borrowed by the Group from employees, under interest bearing loan arrangements were classified as other payables. However, on a review of these arrangements it has been determined that these ought to have been classified as short term borrowings and therefore a reclassification of RMB2,660,000 has been made at 31 December 2017 from other payables.

   2.2.f.v)        Trade and other payables 

In 2017 an increase in other payables of RMB8,879,000 (2016: RMB1,066,000) was required to appropriately disclose VAT payable that had been incorrectly netted against contract assets, and a reduction of RMB2,660,000 resulted from 2.2f iv.

A further decrease of RMB3,635,000 (2016: RMB20,657,000) related to consideration received in advance which ought to have been reclassified to contract liabilities and trade and other receivables.

These resulted in a net increase of RMB2,584,000 in trade and other payables at 31 December 2017 (2016: decrease of RMB19,591,000)

   2.2.f.vi)       Contract liabilities 

For 2017, there is a requirement to make an adjustment of RMB11,419,000 (2016: RMB24,222,000) to reduce contract liabilities as described in section ii) above. As a result of the adjustment referred to in section iii) and section v) relating to the amounts paid in advance by customers there was also a requirement to increase contract liabilities by RMB2,361,000.(2016: RMB19,014,000) Therefore at 31 December 2017 contract liabilities has been reduced by RMB9,058,000 (2016: RMB5,208,000).

   2.2.f.vii)      Income tax payable and deferred tax liability 

In 2017 a deferred tax liability was recorded for RMB2,125,000 that has been reclassified as a current taxation liability.

   2.2.f.viii)     Selling and distribution expenses 

Selling and distribution expenses have been decreased by RMB317,000 for the year ended 31 December 2017 as a result of certain expenses being more appropriately presented as an impairment loss on financial assets due to difficulty in recovering payment rather than as a sales expense.

   2.2 f ix)              Administrative expenses 

Various costs and incomes within the 2017 income statement have been reanalysed as set out below with the corresponding adjustment being recognised in administration expenses. The net impact of these reclassifications was to increase administration expenses by RMB8,297,000.

   2.2.f.x)               Cost of sales 

Included within administration expenses was RMB1,038,000 which related to operational and productions costs and has now been reclassified to cost of sales.

   2.2.f.xi)       Other income 

Other income has been increased by RMB50,000 for the year ended 31 December 2017 with a corresponding increase in administrative expenses as a result of reclassifying the gain on disposals of vehicles as other income that was previously recognised within administrative expenses.

   2.2.f.xii)      Other gains and expenses 

There has been an increase of RMB2,238,000 in other gains (previously shown as a net expense) as a result of reclassifying RMB1,248,000 R&D expenses as administrative expenses, RMB1,492,000 of bad debt expenses as impairment loss, offset by RMB502,000 relating to a release of a provision previously shown in administration expenses.

   2.2.f.xiii)     Impairment loss on financial assets and contract assets 

There has been an increase of RMB317,000 as referred to in section viii) above and RMB1,492,000 in section xii) above. There has also been a reduction of RMB8,590,000 in the impairment loss with the amount reclassified against administrative expenses with the overall impact for the year ended 31 December 2017 being a decrease of RMB6,781,000 in impairment loss.

   2.2.f.xiv)     Finance income 

Finance income has been increased by RMB30,000 for the year ended 31 December 2017 as a result of ensuring only interest income was included and no exchange gains or losses were included in the amount. The reclassification was made against administrative expenses.

   2.2.f.xv)      Finance costs 

Finance costs have been increased by RMB81,000 for the year ended 31 December 2017 as a result of ensuring interest costs were included and no exchange gains or losses were included in the amount. The reclassification was made against administrative expenses.

   2.2.f.xvi)     Share based payments 

In 2017 the charge for share options under IFRS2 was spread over an incorrect vesting period. Therefore this has been restated in the current year, with this having no impact on the Group's equity as at 31 December 2017 but has resulted in an increase in profit for the year ended 31 December 2017 of RMB432,000.

   2.2.g          Impact on cash flow statement 

The prior year cash flow statement has been restated as a result of the prior year errors detailed in notes 2.2a to 2.2f. Furthermore the definition of cash and cash equivalents has been restated to exclude short term borrowings of RMB7,447,000 at 31 December 2017 as previously presented.

In addition the directors have reanalysed the nature of certain cash flows and represented these in more appropriate categories between operating, investing and financing activities.

As a result of the above:

(i) The net cash used in operating activities increased for the year ended 31 December 2017 by RMB8,800,000.

(ii) The net cash used in investing activities decreased for the year ended 31 December 2017 by RMB995,000.

(iii) The net cash generated from financing activities increased for the year ended 31 December 2017 by RMB15,172,000.

   2.2.h          Impact on Earnings Per Share (EPS) 
 
                                            Weighted 
                                             average 
                                              number     Earnings 
                                 Profit    of shares    per share 
 2017 (as previously stated)    RMB'000   shares'000          RMB 
 Basic                           30,085      449,012         0.07 
 Diluted                         30,085      488,312         0.06 
 2017 (restated) 
 Basic                           45,659      480,997         0.09 
 Diluted                         45,659      480,997         0.09 
 
 

As a result of the full retrospective application of IFRS 9 and also the prior year errors in note 2.2a-f the earnings per share have been restated as above.

In addition, on considering the weighted average number of shares management has noted this was calculated incorrectly and so has revised this calculation appropriately, as well as noting there is no expected dilutive impact of share options, as disclosed in note 28.

   2.2.i           Company Level Adjustments 

The adjustments in the earlier sections of note 2.2 all relate to the Group with none of these items impacting the Company other than the item detailed below.

In 2017 the Company classified the share based payment as an expense in the Company. However, as the charge reflects the fair value of employee services provided to the subsidiaries then to be appropriately following IFRS 2 the amount ought to be recognised as a capital contribution, and therefore an investment in the Company with the charge being recognised in the subsidiaries. Therefore, investments in subsidiaries at 31 December 2017 has increased by RMB96,000 (consistent with the restated charge for the Group in note 2.2f.xvi following the spreading of the value of the share options over the vesting period) with the same increase noted in non-current assets, total assets and equity. There is also an increase noted in profit for the year of RMB528,000 (through a reduction in share based payment expense) while the share based payment reserve within equity has been reduced by RMB432,000.

As the share options were only granted during the year ended 31 December 2017 there is no impact from this adjustment on the statement of financial position as at 31 December 2016 and therefore no third balance sheet has been presented.

   2.3.   Changes in accounting policies 

This note explains the impact of the adoption of IFRS 9 Financial Instruments and IFRS 15 Revenue from Contracts with Customers on the Group's financial statements.

2.3.a IFRS 9 Financial Instruments

IFRS 9 replaces the provisions of IAS 39 Financial Instruments ("IAS 39") that relate to the recognition, classification and measurement of financial assets and financial liabilities; derecognition of financial instruments; impairment of financial assets and hedge accounting. IFRS 9 also significantly amends other standards dealing with financial instruments such as IFRS 7 Financial Instruments - Disclosures.

The Group has adopted IFRS 9 from 1 January 2018 applying the fully retrospective approach, which has resulted in changes in accounting policies and adjustments to the amounts recognised in the consolidated financial statements.

Classification and measurement

On 1 January 2018 (the date of initial application of IFRS 9), the Group's management has assessed the classification of the financial assets held by the Group and has classified its financial instruments into the appropriate IFRS 9 categories, that is, financial assets at amortised cost. There are no changes in the measurement basis of financial assets that occur as a result of this.

Impairment of financial and contract assets

The following financial assets are subject to the revised expected credit loss model under IFRS 9:

-- Trade and other receivables

-- Contract assets

-- Cash and cash equivalents

-- Amounts owed by group undertakings/related parties

The Group was required to revise its impairment methodology under IFRS 9 for this class of assets. The impact of the change in impairment methodology on the Group's retained earnings and equity is disclosed in the table in note 2.2.

While restricted cash and cash and cash equivalents are also subject to the impairment requirements of IFRS 9, the identified impairment loss was immaterial.

For trade receivables and contract assets, the Group applies the simplified approach prescribed by IFRS 9 to provide for expected credit losses, which uses lifetime expected loss provision for all trade receivables and contract assets.

To measure the expected credit losses, trade receivables and contract assets have been grouped based on shared credit risk characteristics and aging. The contract assets relate to unbilled work in progress and have substantially the same risk characteristics as the trade receivables for the same types of contracts. See note 3c for the expected loss rates for trade receivables and the contract assets.

The table in note 2.2 shows the adjustments recognised for each individual line item. Line items that were not affected by the changes have not been included.

2.3.b IFRS 15 Revenue from Contracts with Customers

IFRS 15 replaces the provisions of IAS 18 Revenue ("IAS 18") and IAS 11 Construction Contracts ("IAS 11") that relate to the recognition, classification and measurement of revenue and costs.

The Group has adopted IFRS 15 Revenue from Contracts with Customers from 1 January 2018 which resulted in changes in accounting policies. In accordance with the transition provisions in IFRS 15, the Group has adopted the new rules retrospectively but this has not caused the requirement to restate comparatives for the 2017 financial year as the impact was not material.

   2.4.   Principles of consolidation 

Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases.

Intercompany transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the transferred asset. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

   3.      Earnings per share 

The calculation of earnings per share is based on Group's profit for the year and the weighted average number of shares in issue after adjusting for movement in own shares during the financial year as disclosed in note 21. There are no potentially dilutive shares or share options outstanding and therefore, the diluted earnings per share is the same as basic earnings per share.

 
                                         Weighted 
                                          average 
                                           number     Earnings 
                              Profit    of shares    per share 
 2018                        RMB'000   shares'000          RMB 
 Basic/Diluted                45,821      449,319         0.10 
 2017 
 Basic/Diluted (Restated)     45,659      480,997         0.09 
 

The Company has one category of dilutive potential ordinary shares: share options granted under the Share Option Scheme. As at 31 December 2018 the exercise price of the share options in issue were in excess of the current market price and therefore there is no dilution to the earnings per share as presented.

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

END

FR SFMFMUFUSEIM

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