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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Ztc Tele. | LSE:ZTC | London | Ordinary Share | GB00B1RDDK95 | ORD 10P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 2.75 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
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TIDMZTC
RNS Number : 6768P
ZTC Telecommunications plc
30 March 2009
ZTC Telecommunications Plc
("ZTC Plc" or the "Company")
Final Results for Year Ended 30 June 2008
The Company announces that it has today sent its report and accounts for the
year ended 30 June 2008 to shareholders.
The Chairman's Statement, Directors' Report, Report of the Independent Auditors
and the financial statements are set out below. Copies of the report and
accounts are available on request from the Company's registered office at 14 New
Street, London EC2M 4HE and on the Company's website at www.chinaevoline.com
Contact:
ZTC Telecommunications plc
Frank Lewis, Chairman
+44 (0)7775 504 313
Fairfax I.S. PLC
Nominated Adviser and Broker
Adam Hart / Laura Littley
+44 (0)207 598 5368
Chairman's Statement
On 13 October 2008 we informed shareholders that trading and credit conditions
for small and medium-sized entities (SME's) in the People's Republic of
China (PRC) had become increasingly difficult throughout the third quarter of
2008. This was due to deteriorating macro economic conditions outside the PRC,
slowing economic growth and restrictive credit policies in China. As a
consequence, our markets became increasingly competitive, disrupted and
oversupplied.
Following this announcement, and as notified on 10 November 2008, the Directors
became aware that Charles Huang, CEO, majority shareholder and a major creditor
of the Company's subsidiary Zhong Tian and Yang Ruqiang, the General Manager of
the Group's China Operating subsidiary, Shenzhen Zhongtian Communication
Equipments Co Ltd ("Zhong Tian"), and Charles Huang's brother in law, had been
absent from the Group's offices and factory in Longgang, Shenzhen, (China) and
had been uncontactable since 5 November 2008.
The unexplained absence of key personnel in the highly charged economic
environment of southern China, destabilised the Group's employees and creditors
and, your Board believes, resulted in the unauthorised removal of some of Zhong
Tian's assets from its factory site in Longgang, Shenzhen (China). The local
authorities subsequently moved to take control of the situation and the People's
Court of the Longgang district of Shenzhen (the "People's Court") sealed the
factory and its buildings, sequestering all of the assets. Up to the date of
this report, none of the Directors or employees of the Group have been able to
gain access to the factory and its buildings which remain sealed.
As a result of the management control issues arising and in order to ensure that
an orderly market in the Company's shares was maintained, the Directors
requested a suspension of trading in the Existing Ordinary Shares on AIM, and
such suspension was granted by the London Stock Exchange on 7 November 2008.
Further investigations by the Directors revealed that on, 14 November 2008, the
local government paid compensation to, and dismissed, a majority of the
employees of Zhong Tian. It is believed that the People's Court subsequently
auctioned the Group's remaining inventory and equipment for RMB 1,220,765
(approximately GBP90,000) and this sum was, the Directors believe, credited
against the Government payments to employees (although this has not been capable
of verification by the Directors).
The Directors of Praise Ease ("PE"), the Company's wholly-owned Hong Kong
holding company and the sole shareholder of Zhong Tian, appointed China legal
counsel on 12 November 2008 and instructed them to conduct legal due diligence,
interacting with the local relevant authorities and other stakeholders including
employees, debtors and creditors, and to provide an opinion as to the prospects
of any economic recovery. Following the official authorisations and requisite
payments, China legal counsel commenced its investigations on 25 November 2008.
China legal counsel found that as of 19 December 2008, 29 creditor claims had
been lodged against Zhong Tian, totalling approximately RMB21m (approximately
GBP2.2m).
At the end of November 2008, it transpired that Tomorrow's Focus Limited
(Tomorrow's Focus"), the company which then held 68,000,000 Ordinary Shares
beneficially owned by Charles Huang, had, without the knowledge of the Company
or the Directors and in contravention of the AIM Rules, entered into loan
agreements with Maiden Undertaking Limited ("Maiden Undertaking"), a company
beneficially owned by Mr Tong. Documentation produced to the Company showed that
Maiden Undertaking had lent an aggregate amount of HK$27,390,000 (approximately
GBP2,000,000) to Tomorrow's Focus, and that the repayment of the loans was
secured against the Ordinary Shares held by Tomorrow's Focus (representing
approximately 62.57 per cent. of the total issued share capital) and by personal
guarantees given by Charles Huang in favour of Maiden Undertaking (the
"Charges").
It further transpired during the preparations for putting the Proposals to
Shareholders that Charles Huang on 14 April 2008 had transferred his holding of
shares in Pan Europe Capital Limited, the legal entity which held 12,750,000
Existing Ordinary Shares amounting at that time to approximately 11.7% of the
then issued Existing Ordinary Share capital, to Ms.Cheung Yiu Shan. The Company
has been unable to contact Ms. Cheung Yiu Shan to establish the basis for the
transfer of the shares in Pan Europe Capital Limited to her and whether that
shareholding is for the benefit of Ms. Cheung Yiu Shan or another person, but,
as yet, has had no response to its enquiries.
To date, the factory and all buildings remain under seal and all assets
sequestered by the People's Court. All key management of the Subsidiaries have
continued to take unexplained leave and all remaining employees have been
dismissed. The whereabouts of Charles Huang and Mr Yang Ruqiang remain unknown.
While the Company's investigations continue, it is the Board's unanimous view
that Zhong Tian is unlikely to be able to continue as a going concern. Following
the alleged looting at the factory and the auction conducted by the People's
Court, the quantity of remaining equipment and inventory is unknown and its
value is likely to be negligible.
Further legal opinion indicates that, in order for the Company to gain access to
the assets of Zhong Tian, it would have to replace Charles Huang as legal
representative of Zhong Tian, a lengthy and expensive procedure, and then
commence one of the following processes:
i)The settlement of existing claims and/or appointment of a liquidation team
(any voluntary liquidation process could take up to two years and would incur
considerable expense including the payment of uncalled capital, being
approximately RMB 170m (GBP12.4m); or
ii)An involuntary winding up process initiated by the local relevant authority
of Shenzhen, which the Directors believe, could also be very time consuming and
the likely focus on tangible assets would mean that any proceeds are likely to
be minimal.
After due investigations, taking into account the limited resources of the
Company, the Directors have concluded that the Company's business in China will
be unable to resume trading and, as such, the ability to realise any net assets
for the benefit of Shareholders will be extremely difficult and not
cost-effective. Given the potentially long recovery procedures and the Company's
limited resources, the Directors have concluded that the Subsidiaries of the
Company have negligible or no recoverable value. In addition, the disposal of
Praise Ease is also a condition precedent of the party wishing to assist in the
refinancing of the Company.
Following discussions between the Company and Maiden Undertaking, and on the
basis that there had been a breach of the terms of the two loan agreements dated
16 May 2008 and 3 June 2008 by Tomorrow's Focus and Charles Huang, Maiden
Undertaking is entitled, under the Charges, to retain the Charged Shares and
register itself as owner of the Charged Shares or sell or dispose the Charged
Shares in its absolute discretion. It was subsequently agreed that Maiden
Undertaking would assert its rights under the Charges and assign the Charged
Shares to Staybest Limited ("Staybest"), an associated company, and, subject to
the passing of the resolutions at the forthcoming General Meeting (the
"Proposals") (details of which are set out in the circular to shareholders dated
27 March 2009 (the "Circular")), that Staybest and Wellhigh Limited (a company
introduced to ZTC Plc by the principals of Maiden Undertaking ("Wellhigh"))
would support the Company by making the Investment to allow it to continue to
operate and in due course, seek to acquire new businesses.
On the basis that the Board has no reason to believe that the Charges are not
enforceable and against appropriate indemnities received from Staybest Limited,
the Directors, pursuant to the Investment Agreement, on 27 March 2009 agreed to
register Staybest Limited as the holder of the Charged Shares. As a result of
the discussions with Maiden Undertaking and conditional upon the passing of the
Resolutions and Admission, Staybest Limited and Wellhigh Limited have agreed to
make the Investment which will provide the Company with sufficient working
capital to operate for at least the next 12 months so that, following the
passing of the Resolutions, the Company will be able to instruct Fairfax to
apply to the London Stock Exchange for the suspension of dealings in the
Company's shares on AIM to be lifted.
The Directors believe that Charles Huang's personal guarantee and the
indebtedness of his company to Maiden Undertaking may have been the reason for
his sudden disappearance. As at the date of this report, the Directors, having
made reasonable enquiries, are not aware of any other circumstances which may
relate to his disappearance.
Proposed Disposal of PE
PE must be disposed of as a condition of the refinancing arrangements. PE is
currently the intermediate holding company of Zhong Tian, and since Zhong Tian
is no longer considered a going concern, the Directors have concluded to dispose
of PE for a nominal sum subject to shareholder approval on 21 April 2009, on the
terms that the Company will participate in any economic recovery of PE.
The Directors believe, based on legal advice, that ZTC Plc is not liable for any
of the liabilities within PE's subsidiary, Zhong Tian.
Operating Results - 2008
Turnover in the year ended 30 June 2008 showed an increase of GBP4,375,000 over
the previous year (an increase of 19.7%, while gross margins remained steady at
20.8% (2007: 21.5%). Whilst business was generally buoyant in the first half
trading conditions in the second half were difficult due to the Sichuan
earthquake, severe winter conditions and flooding in southern China. Competition
increased significantly post the year end and, following the holding of the
Olympic Games in Beijing in August 2008, wholesale orders fell dramatically
reflecting reduced consumer demand and economic activity.
In the event, while the operating profit for the year ended 30 June 2008, net of
finance income and costs, amounted to GBP2,415,000 (2007: GBP2,016,000), the
final audited loss before tax for the year of GBP16,581,000 reflects an
impairment charge in respect of assets in the subsidiary of GBP18,996,000.
Recent Board Changes
Dr Yi Xie, Non-executive director, resigned from the Board on 18 December 2008.
Following Charles Huang's disappearance in November 2008 and his failure to
reappear, the Board resolved to remove him as a director of the Company on 22
December 2008.
Basis of preparation of the 2008 Report and Financial Statements
Based on the best information available to the Directors, and taking into
account the prospects for the Company following the implementation of the
Proposals as set out in the circular to shareholders dated 27 March 2009 (the
"Circular"), your Board has concluded that it is appropriate to prepare the
accounts for the parent company on a going concern basis. This basis is
considered appropriate on the basis that the company has secured new finance of
GBP280,000 (which is subject to shareholder approval on 21 April 2009) which is
an integral part of proposals to shareholders as set out in the Circular to
shareholders. Clearly the ability of the company with limited resources to
continue to trade as a going concern after the fund raising will be dependent
upon the successful execution of the changed investment strategy which again is
set out in the Circular to shareholders. Given the difficulty of establishing
the legal ownership of any remaining assets in China, and the likely costs of
achieving any recovery and of settling any liabilities of Zhong Tian, the Board
does not believe that Zhong Tian is a going concern, and hence has prepared its
accounts under a break up basis.
Due to the loss of all value of Zhong Tian, it is appropriate to write off the
investment and inter-company debtors in the accounts of the ultimate parent
company ZTC Plc.
Further details of the impact of these assumptions are set out in the Directors'
Report.
Outlook
Assuming the Proposals are implemented, the strategy of the Directors will be
for the Company to invest in one or more companies established in the Asia
Pacific region, but which have a significant focus on the People's Republic of
China (the "PRC") (assets, customers or suppliers) and have the need for capital
prior to them achieving a flotation on the public markets, either within or
outside the PRC, or achieving a trade sale in due course. Such companies will be
sourced largely through the contacts of the Directors, and any funding required
by the Company to make such an investment will be raised prior thereto. While
the Company is not currently able to identify the specific types of businesses
which it might invest in, it is more likely than not that the sectors which will
be targeted will be resources, technology and property - all areas where the
Board has existing knowledge and contacts.
The Board believes that the Directors have relevant experience in identifying,
assessing, and negotiating such acquisitions. The Directors believe that their
broad collective experience in acquisitions, accounting, corporate and financial
management together with their wide industry contacts will enable the Company to
achieve its objectives.
Investment propositions will be considered when the Directors consider that
enhanced values may be achieved. A particular consideration will be to identify
investments where the Directors believe that their expertise and experience can
be deployed to facilitate growth or unlock value. There is no limit to the
number of projects in which the Company may invest.
The Directors will conduct initial due diligence appraisals of potential
projects and where they believe further investigation is warranted they will
appoint suitably qualified, and where appropriate independent persons to conduct
further due diligence.
The Company, as currently proposed, is unlikely to have sufficient cash
resources to expend in undertaking due diligence on any potential projects. In
the event that a suitable project is identified, the Company would either seek
to raise further funds in order to finance any due diligence and acquisition
costs or seek to pass on the costs to a third party, possibly in return for a
success-related fee payable in shares or in cash. Staybest and Wellhigh have
indicated that they would be willing to participate in the funding of such
costs.
The Directors intend to take an active role in assessing and management of any
investment that the Company may make. Accordingly, the Company is likely to seek
participation in the board of directors of any company which the Company
acquires with a view to improving its performance and using of its assets in
such ways as should result in an increase in the value of such a company. The
Directors hope that the resulting benefit would provide a satisfactory return to
the Company's Shareholders.
In the event no substantial acquisition is made within 12 months of the date of
the 2009 AGM, in accordance with the AIM rules for Companies, trading in the
Company's shares will be suspended and if no reverse transaction is achieved in
the following 6 months, the London Stock Exchange will cancel the admission of
the shares.
If for any reason the Company's shares are not re-admitted to trading on the
Alternative Investment Market on the London Stock Exchange by 30 April 2009, the
GBP280,000 new finance will become immediately repayable.
If the company fails to secure a new investment opportunity or additional new
finance within the next 12 months, the company will be unable to continue as a
going concern as it will have insufficient funds to trade.
Frank Lewis
Chairman
27 March 2009
Directors' Report
The Directors present their report on the affairs of the Company and the Group,
together with the audited financial statements, for the year ended 30 June 2008.
Principal activities
On 21 March 2007, following the acquisition of the whole of the issued share
capital of Praise Ease Limited ("Praise Ease" or "PE"), the Company was admitted
to the Alternative Investment Market ("AIM") of the London Stock Exchange.
Praise Ease is the holding company of Shenzhen Zhong Tian Communication
Equipments Co. Ltd ("Zhong Tian") which is incorporated in China and which,
during the year ended 30 June 2008, designed, assembled and marketed mobile
phone handsets under the ZTC brand name in China. Zhong Tian is located in the
Longgang District of Shenzhen, China, and was the principal operating company in
the Group during the year.
Business review and future developments
Details of the Group's business and expected future developments are also set
out in the Chairman's Statement and the Circular to shareholders.
Cessation of trading of subsidiary
As noted in the Chairman's Statement, Mr Chaohui (aka Charles) Huang, CEO, major
creditor and majority shareholder of ZTC Plc and Mr Yang Rugiang,, Zhong Tian's
General Manager have been absent from the Zhong Tian and uncontactable since 5
November 2008. As a result of the uncertainty that this caused and the
interruption to the running of the business, trading of shares in ZTC Plc was
suspended as of 7 November 2008.
The main company in the Group that has been affected by this is Zhong Tian", the
trading company of the Group. Due to the events noted in the Chairman's
statement, and the fact that Zhong Tian has not traded since 5 November 2008,
the Directors believe that the assets and liabilities of Zhong Tian should be
valued on a break-up basis, that this is the only appropriate basis for valuing
the assets and liabilities of Zhong Tian, and that this basis should be applied
at the balance sheet date.
As the Directors have no access to any of Zhong Tian's financial information,
the Directors have made the following write-downs, based on best estimates, of
Zhong Tian's assets in preparing the year end financial statements:
+------------------------+---------------------+---------------------+---------------------+
| | Going concern value | Amounts written off | Written down value |
| | at | 30 June 2008 | at |
| | 30 June 2008 | (GBPGBP) | 30 June 2008 |
| | (GBPGBP) | | (GBPGBP) |
+------------------------+---------------------+---------------------+---------------------+
| Property, Plant & | 495,675 | (405,647) | 90,028 |
| Equipment | | | |
+------------------------+---------------------+---------------------+---------------------+
| Inventories | 1,255,021 | (1,255,021) | - |
+------------------------+---------------------+---------------------+---------------------+
| Trade receivables | 12,016,929 | (10,121,523) | 1,895,406 |
+------------------------+---------------------+---------------------+---------------------+
| Prepayments | 7,153,810 | (6,160,508) | 993,302 |
+------------------------+---------------------+---------------------+---------------------+
| Other receivables | 1,052,389 | (1,052,389) | - |
+------------------------+---------------------+---------------------+---------------------+
| Cash & cash | 1,616,760 | - | 1,616,760 |
| equivalents | | | |
+------------------------+---------------------+---------------------+---------------------+
| TOTAL | 23,590,584 | (18,995,088) | 4,595,496 |
+------------------------+---------------------+---------------------+---------------------+
The consolidated position of the Group reflects these adjustments, with a total
of GBP23,590,584 of assets held within Zhong Tian at 30 June 2008 being written
down to their recoverable value. The liabilities of Zhong Tian have not been
written down since these liabilities have not been legally extinguished and
therefore continue to be recognised at their year end values. This is in
accordance with IAS 39 paragraph 39.
Although the values above represent the directors' best estimate of recoverable
amounts, the recoverability would have occurred within Zhong Tian, and ZTC Plc
would have received no financial benefit from their recovery.
As discussed in the Chairman's statement, directors' report and Circular to
shareholders, as part of the re-financing of the Company, Zhong Tian and its
immediate holding company, PE, are being disposed of for a nominal sum.
In the parent company, the investment and intercompany receivables have been
written down to zero value to reflect the non-recoverability of these assets. A
total charge of GBP18,066,000 has been reflected in the accounts of the parent
company in respect of these write-downs.
Based on the best information available to the Directors, and taking into
account the prospects for the Company following the implementation of the
Proposals, your Board has concluded that it is appropriate to prepare the
accounts for the parent company on a going concern basis, subject to fundamental
uncertainty and accordingly continue to present these accounts on that basis.
The board also believe that the accounts of the intermediate parent company,
Praise Ease Limited should be prepared on the going concern basis however, the
Board does not believe the subsidiary Zhong Tian is a going concern, and hence
have prepared its accounts under a break up basis.
The Directors believe, based on legal advice, that ZTC Plc is not liable for any
of the liabilities within Zhong Tian and also believe that, subject to
completion of the proposed transaction, details of which are set out in the
Circular to shareholders dated 27 March 2009, there is sufficient funding
available to the Company to enable it to continue to meet its own liabilities
(excluding that of other Group companies) for the foreseeable future. Clearly
the future prospects of the company will be wholly dependent on the ability of
the Board and the new major investors to successfully implement the investment
strategy as outlined in the Chairman's statement and the Circular to
shareholders.
Results and dividend
The results of the Group for the year ended 30 June 2008 are set out below.
The Directors do not recommend the payment of a dividend for the year.
Directors
The present Directors of the Company, who served throughout the year, are as
follows:
Frank Lewis
Mark Syropoulo
Michael Liu
On 18 December 2008, Dr Yi Xie tendered his resignation from his position as a
Non-Executive Director of ZTC Plc
On 22 December 2008, the Board resolved to remove Charles Huang as a director of
the Company with immediate effect.
Directors' interests
The beneficial interests of the present Directors and their families at 30 June
2008 in the ordinary share capital of the Company were as follows:
+-------------------------+---------------+--------------+---------------+------------+
| | 30-Jun-08 | 30-Jun-07 |
+-------------------------+------------------------------+----------------------------+
| | Ordinary | Share | Ordinary | Share |
| | Share | Options | Share | Options |
+-------------------------+---------------+--------------+---------------+------------+
| F Lewis | - | 100,000 | - | 100,000 |
+-------------------------+---------------+--------------+---------------+------------+
| M Syropoulo | 425,000 | 500,000 | 350,000 | 500,000 |
+-------------------------+---------------+--------------+---------------+------------+
| M Liu | 3,400,000 | 500,000 | 2,800,000 | 500,000 |
+-------------------------+---------------+--------------+---------------+------------+
The ordinary shares beneficially owned by Mr Syropoulo and Mr Liu are registered
in the name of Higher Performance Team Limited.
A full list of share options outstanding during the year is set out below:
+------------------+---------+---------+------------+-----------+-----+----------+-----------------+
| Share options | | | | | | | |
+------------------+---------+---------+------------+-----------+-----+----------+-----------------+
| | At 1 | | Exercised/ | At 30 | | Exercise | Exercisable |
| | July | | | June | | | |
+------------------+---------+---------+------------+-----------+-----+----------+-----------------+
| | 2007 | Granted | Lapsed | 2008 | | Price | From To |
+------------------+---------+---------+------------+-----------+-----+----------+-----------------+
| F Lewis | 100,000 | - | - | 100,000 | ** | 20p | 21.03.08 |
| | | | | | | | 20.03.17 |
+------------------+---------+---------+------------+-----------+-----+----------+-----------------+
| C Huang | 500,000 | - | - | 500,000 | *** | 20p | 21.03.08 |
| | | | | | | | 20.03.17 |
+------------------+---------+---------+------------+-----------+-----+----------+-----------------+
| M Syropoulo | 500,000 | - | - | 500,000 | ** | 20p | 21.03.08 |
| | | | | | | | 20.03.17 |
+------------------+---------+---------+------------+-----------+-----+----------+-----------------+
| M Liu | 500,000 | - | - | 500,000 | ** | 20p | 21.03.08 |
| | | | | | | | 20.03.17 |
+------------------+---------+---------+------------+-----------+-----+----------+-----------------+
| Dr Y Xie | 100,000 | - | - | 100,000 | *** | 20p | 21.03.08 |
| | | | | | | | 20.03.17 |
+------------------+---------+---------+------------+-----------+-----+----------+-----------------+
| Ru qiang Yang | 100,000 | - | - | 100,000 | * | 20p | 21.03.08 |
| | | | | | | | 20.03.17 |
+------------------+---------+---------+------------+-----------+-----+----------+-----------------+
| Qing min Qu | 80,000 | - | - | 80,000 | * | 20p | 21.03.08 |
| | | | | | | | 20.03.17 |
+------------------+---------+---------+------------+-----------+-----+----------+-----------------+
| Jian yang Shu | 100,000 | - | - | 100,000 | * | 20p | 21.03.08 |
| | | | | | | | 20.03.17 |
+------------------+---------+---------+------------+-----------+-----+----------+-----------------+
| Jian Wang | 20,000 | - | - | 20,000 | * | 20p | 21.03.08 |
| | | | | | | | 20.03.17 |
+------------------+---------+---------+------------+-----------+-----+----------+-----------------+
| Fei zhou Yie | 20,000 | - | - | 20,000 | * | 20p | 21.03.08 |
| | | | | | | | 20.03.17 |
+------------------+---------+---------+------------+-----------+-----+----------+-----------------+
| Guo hong Li | 30,000 | - | - | 30,000 | * | 20p | 21.03.08 |
| | | | | | | | 20.03.17 |
+------------------+---------+---------+------------+-----------+-----+----------+-----------------+
| Guang jun Zhu | 20,000 | - | - | 20,000 | * | 20p | 21.03.08 |
| | | | | | | | 20.03.17 |
+------------------+---------+---------+------------+-----------+-----+----------+-----------------+
| Xiu shan Guan | 20,000 | - | - | 20,000 | * | 20p | 21.03.08 |
| | | | | | | | 20.03.17 |
+------------------+---------+---------+------------+-----------+-----+----------+-----------------+
| Guo ji Jiang | 10,000 | - | - | 10,000 | * | 20p | 21.03.08 |
| | | | | | | | 20.03.17 |
+------------------+---------+---------+------------+-----------+-----+----------+-----------------+
| Shuang qiang | 30,000 | - | - | 30,000 | * | 20p | 21.03.08 |
| Yuan | | | | | | | 20.03.17 |
+------------------+---------+---------+------------+-----------+-----+----------+-----------------+
| Jian Guo | 30,000 | - | - | 30,000 | * | 20p | 21.03.08 |
| | | | | | | | 20.03.17 |
+------------------+---------+---------+------------+-----------+-----+----------+-----------------+
The share options set out above were exercisable in three equal successive
annual instalments commencing on and/or after the first anniversary of the date
of grant.
No performance conditions were imposed on any of the above share options and no
consideration was payable for their award.
Since 30 June 2008, the share options above marked** have been surrendered for
nil consideration. Those marked *** relate to the former Directors Charles Huang
Dr Xie whose options, under the Rules of the Option Plan, lapse after they cease
to hold office with the Group. In case of Charles Huang these options will
therefore lapse on 21 July 2009 and in case of Dr Xie these have lapsed on 18
February 2009. Those marked * will lapse on 14 May 2009.
The market price of the Company's ordinary shares at 30 June 2008 was 8.25p; the
range during the year was 6p to 17p.
Related party transactions
During the year, the Group entered into the following transactions with related
parties:
An amount of GBP1,487,209 (30 June 2007: GBP1,519,345) was owed to Charles Huang
(a Director of ZTC) at 30 June 2008, being the balance of funds loaned to ZTC by
Charles Huang.
A rental expense of circa GBP67,813 (year ended 30 June 2007: GBP65,630) was
incurred and payable to a relative of Charles Huang. A balance of GBP255,694 (30
June 2007: GBP164,588) was outstanding in respect of rental payments to Charles
Huang's relative at 30 June 2008.
Financial Instruments and Treasury policy
During the year, the following were the policies adopted by the Board. The
Chairman's statement provides an updated assessment of the current position of
the company.
The Group's multi-national operations could expose it to certain financial
risks.
The most significant financial risk occurs upon translation of the foreign
operation's results into sterling upon consolidation. Almost 100% of foreign
revenues and the bulk of operating costs are incurred in the local currency, the
RMB. Group companies therefore do not engage in foreign exchange risk hedges.
Prudent liquidity risk management in the context of the Group implies
maintaining sufficient cash balances or marketable securities in the necessary
currencies to be able to pay creditors as and when they fall due. The bulk of
the Group's balances are held in RMB, sterling and HK dollars.
Funds surplus to monthly requirements are normally kept on interest bearing
financial instruments. Cash balances are deposited with banks carrying high
credit ratings in their respective country jurisdictions.
Creditor payment policy
During the year, the following were the policies adopted by the Board. The
Chairman's statement provides an updated assessment of the current position of
the company.
The Company's policy is to agree payment terms with all suppliers when
establishing the terms of each business transaction and to abide by the agreed
terms of payment. Trade creditors of the Company at 30 June 2008 were equivalent
to 76 days purchases based on the average daily amount invoiced by the suppliers
during the year ended on that date.
Substantial shareholdings
At 23 March 2009 the Directors had been notified or were otherwise aware of the
following registered holdings of 3% or more of the Company's issued share
capital:
+-----------------------------+---------------------+----------------------+
| | Number of ordinary | Percentage of issued |
| | shares | ordinary share |
| | | capital |
+-----------------------------+---------------------+----------------------+
| Tomorrow's Focus Limited | 68,000,000 | 62.57% |
+-----------------------------+---------------------+----------------------+
| Pan-Europe Capital Limited | 12,750,000 | 11.73% |
+-----------------------------+---------------------+----------------------+
| Albany Capital Limited | 5,448,008 | 5.01% |
+-----------------------------+---------------------+----------------------+
| Higher Performance Team | 4,250,000 | 3.91% |
| Limited | | |
+-----------------------------+---------------------+----------------------+
As noted above, during the year, Charles Huang was beneficially interested in
the shares which were registered in the names of Tomorrow's Focus Limited and
Pan-Europe Capital Limited.
Mr Syropoulo and Mr Liu are beneficially interested in 425,000 and 3,400,000 of
the ordinary shares, respectively, which are registered in the name of Higher
Performance Team Limited.
Share capital
On 13 February 2007, Praise Ease Limited was acquired by ZTC Plc for an initial
consideration of 70 million ordinary shares of 10p each ("Ordinary Shares"),
issued at 20p per Ordinary Share.
The acquisition agreement provided for the issue of up to 15 million Ordinary
Shares by way of deferred consideration to the previous shareholders of Praise
Ease Limited, subject to the main operating subsidiary, Shenzhen Zhong Tian
Communication Equipments Co Ltd ("Zhong Tian") achieving a post tax profit in
excess of RMB 35 million in the 12 month period to 30 June 2007.
Zhong Tian achieved the agreed level of profitability for the year ended 30 June
2007, and accordingly an additional 15 million Ordinary Shares were issued to
the vendors of Praise Ease Limited on 21 December 2007.
Employees
During the year, the following were the policies adopted by the Board. The
Chairman's statement provides an updated assessment of the current position of
the company.
The commitment and ability of our employees are key factors in achieving the
Group's objectives. We seek to give equal opportunities in employment and ensure
that all employees receive fair treatment irrespective of sex, religion, ethnic
origin or disability including those who become disabled during their
employment. The Group supports and aids employee welfare as well as personal and
career development.
Our communications aim is to increase the understanding of the business through
regular employee briefings at all levels.
Charitable and political donations
The Company made no charitable or political donations in the financial year
(2007: Nil).
International Financial Reporting Standards
The financial statements have been prepared in accordance with applicable
International Financial Reporting Standards as endorsed by the European Union.
The financial statements of the company's own accounts have been prepared in
accordance with United Kingdom Generally Accepted Accounting Practice.
Events after the Balance Sheet date
The events referred to in this Directors' Report and the Chairman's statement
regarding the cessation of trading of Zhong Tian are disclosed further in note 2
and note 3 to the consolidated financial statements.
Disclosure of information to auditors
So far as each Director at the date of approval of this report is aware, there
is no relevant audit information of which the Company's auditors are unaware and
each Director has taken all steps that he ought to have taken to make himself
aware of any relevant audit information and to establish that the auditors are
aware of that information.
Auditors
BDO Stoy Hayward LLP have expressed their willingness to continue in office as
auditors and a resolution to reappoint them will be proposed at the forthcoming
Annual General Meeting.
Recommendation
The Board considers that the resolutions to be proposed at the Annual General
Meeting are in the best interests of the Company and it is their unanimous
recommendation that shareholders support these proposals as the Board intends to
do so in respect of their own holdings.
By order of the Board
J P Gorman FCA, Company Secretary
27 March 2009
Report of the Independent Auditors
Independent auditor's report to the shareholders of ZTC Telecommunications Plc
We have audited the financial statements of ZTC Telecommunications Plc for the
year ended 30 June 2008 which comprise the consolidated income statement, the
consolidated statement of changes in equity, the consolidated balance sheet, the
company balance sheet, the consolidated cash flow statement and the related
notes. These financial statements have been prepared under the accounting
policies set out therein.
Respective responsibilities of directors and auditors
The directors' responsibilities for preparing the group financial statements in
accordance with applicable law and International Financial Reporting Standards
(IFRS) as adopted by the European Union, and for preparing the parent company
financial statements in accordance with applicable law and United Kingdom
Accounting Standards (United Kingdom Generally Accepted Accounting Practice) are
set out in the statement of directors' responsibilities.
Our responsibility is to audit the financial statements in accordance with
relevant legal and regulatory requirements and International Standards on
Auditing (UK and Ireland).
We report to you our opinion as to whether the financial statements give a true
and fair view and have been properly prepared in accordance with the Companies
Act 1985 and whether the information given in the directors' report is
consistent with those financial statements. We also report to you if, in our
opinion, the company has not kept proper accounting records, if we have not
received all the information and explanations we require for our audit, or if
information specified by law regarding directors' remuneration and other
transactions is not disclosed.
We read other information contained in the annual report, and consider whether
it is consistent with the audited financial statements. The other information
comprises only Directors and Advisors, the Chairman's Statement, the Directors'
Report, the Corporate Governance Statement, the Report of the Remuneration
Committee and the Statement of Directors' Responsibilities. We consider the
implications for our report if we become aware of any apparent misstatements or
material inconsistencies with the financial statements. Our responsibilities do
not extend to any other information.
Our report has been prepared pursuant to the requirements of the Companies Act
1985 and for no other purpose. No person is entitled to rely on this report
unless such a person is a person entitled to rely upon this report by virtue of
and for the purpose of the Companies Act 1985 or has been expressly authorised
to do so by our prior written consent. Save as above, we do not accept
responsibility for this report to any other person or for any other purpose and
we hereby expressly disclaim any and all such liability.
Basis of audit opinion
We conducted our audit in accordance with International Standards on Auditing
(UK and Ireland) issued by the Auditing Practices Board, except that the scope
of our work was limited as explained below.
An audit includes examination, on a test basis, of evidence relevant to the
amounts and disclosures in the financial statements. It also includes an
assessment of the significant estimates and judgments made by the directors in
the preparation of the financial statements, and of whether the accounting
policies are appropriate to the company's circumstances, consistently applied
and adequately disclosed.
We planned our audit so as to obtain all the information and explanations which
we considered necessary in order to provide us with sufficient evidence to give
reasonable assurance that the financial statements are free from material
misstatement, whether caused by fraud or other irregularity or error, however,
the information available to us was limited.
As noted in further detail in the Chairman's Statement and the notes to the
financial statements, the disappearance of Charles Huang in early November and
the subsequent serious disruptions to the trading operations in China, resulted
in the Group losing control of certain assets held in the trading subsidiary
company Shenzehn Zhong Tian Communications Equipments Co. Limited. After
consideration, and taking legal advice on the options available to recover
control of the subsidiary company, the ultimate conclusion by the Directors was
that in the circumstances they had no option but to prepare the financial
statements of this subsidiary company using the break-up basis of accounting.
However, due to the fact that the directors no longer had access to the assets
or accounting records of this subsidiary, the evidence available to us in
respect to the ownership and existence of these assets and the impairments made
against them was limited. In particular, we have been unable to obtain
sufficient appropriate audit evidence concerning the write down of assets with
an original going concern value of GBP23,590,584 by GBP18,995,088 to
GBP4,595,496 included within the consolidated balance sheet and further detailed
in note 3 to the financial statements.
Any adjustments to these figures would have a corresponding adjustment to the
consolidated loss and consolidated net assets for the year ended 30 June 2008.
Further information regarding the circumstances contributing to these
limitations of audit evidence is contained within the Chairman's Statement,
Directors' Report and notes 1 and 31 to the financial statements.
In forming our opinion we also evaluated the overall adequacy of the
presentation of information in the financial statements.
Qualified opinion arising from limitation in audit scope
Except for the financial effect on the group financial statements of such
adjustments, if any, that might have been determined to be necessary had we been
able to satisfy ourselves as to the break-up values to assets, in our opinion:
- the group financial statements give a true and fair view, in accordance
with IFRSs as adopted by the European Union, of the state of the group's affairs
as at 30 June 2008 and of its loss for the year then ended;
- the parent company financial statements give a true and fair view, in
accordance with United Kingdom Generally Accepted Accounting Practice, of the
state of the parent company's affairs as at 30 June 2008; and
- the group and parent company financial statements have been properly
prepared in accordance with the Companies Act 1985.
In respect solely of the limitation on our work relating to the ownership and
existence of group assets and related impairments:
- we have not obtained all the information and explanations that we
considered necessary for the purpose of our audit; and
- we were unable to determine whether proper accounting records have been
maintained.
In our opinion the information given in the directors' report is consistent with
the financial statements.
Emphasis of matter - going concern
In forming our opinion on the financial statements of ZTC Plc, which is
qualified as above, we have considered the adequacy of the disclosures made in
note 1 to the financial statements concerning the company's ability to continue
as a going concern. The company has secured new finance of GBP280,000 (subject
to shareholder approval on 21 April 2009) to fund working capital requirements
until the company sources a new investment opportunity. As described in note 1
this funding in also contingent upon shareholder approval for the sale of the
subsidiary company "Praise Ease" and if the company fails to resume trading of
its shares on the Alternative Investment Market of the London Stock Exchange by
30 April 2009 then this funding becomes immediately repayable in full.
The Directors expect shareholder approval to be granted for both the sale of the
subsidiary company and the refinancing package and hence the subsequent
reinstatement of its Shares on the Alternative Investment Market. However,
should any of these approvals not be granted, or the shares not be re-admitted
for trading purposes, then the company would be unable to continue as a going
concern.
In addition, if the company fails to secure a new investment opportunity or
additional new finance within the next 12 months, the company will be unable to
continue as a going concern as it will have insufficient funds to trade.
These conditions along with the matters disclosed in note 1 to the financial
statements, indicate the existence of a material uncertainty which may cast
significant doubt about the company's ability to continue as a going concern.
The financial statements of the parent company do not include the adjustments
that would result if the company was unable to continue as a going concern.
BDO Stoy Hayward LLP
Chartered Accountants and Registered Auditors
Epsom, Surrey
27 March 2009
ZTC Telecommunications Plc
Consolidated Income Statement
for the year ended 30 June 2008
+---------------------------------------------+----------+----------+
| | 2008 | 2007 |
| | GBP'000 | GBP'000 |
+---------------------------------------------+----------+----------+
| Revenue | 26,532 | 22,157 |
+---------------------------------------------+----------+----------+
| Cost of sales | (20,990) | (17,384) |
+---------------------------------------------+----------+----------+
| Gross profit | 5,542 | 4,773 |
+---------------------------------------------+----------+----------+
| Other operating income | 445 | 435 |
+---------------------------------------------+----------+----------+
| IPO expenses | - | (280) |
+---------------------------------------------+----------+----------+
| Impairment of assets in subsidiary | (18,996) | - |
+---------------------------------------------+----------+----------+
| Other administrative expenses | (1,464) | (1,151) |
+---------------------------------------------+----------+----------+
| Total administrative expenses | (20,460) | (1,431) |
+---------------------------------------------+----------+----------+
| Distribution costs | (1,828) | (1,368) |
+---------------------------------------------+----------+----------+
| Other operating expenses | (219) | (373) |
+---------------------------------------------+----------+----------+
| Operating (loss) / profit | (16,520) | 2,036 |
+---------------------------------------------+----------+----------+
| Finance income | 70 | 19 |
+---------------------------------------------+----------+----------+
| Finance costs | (131) | (39) |
+---------------------------------------------+----------+----------+
| (Loss)/profit before tax | (16,581) | 2,016 |
+---------------------------------------------+----------+----------+
| Tax | (251) | (128) |
+---------------------------------------------+----------+----------+
| (Loss)/profit for the year attributable to | (16,832) | 1,888 |
| equity holders of the parent | | |
+---------------------------------------------+----------+----------+
| Basic (loss)/earnings per share | (16.6p) | 2.4p |
+---------------------------------------------+----------+----------+
| Diluted (loss)/earnings per share | (16.6p) | 2.3p |
+---------------------------------------------+----------+----------+
ZTC Telecommunications Plc
Consolidated Statement of Changes in Equity
for the year ended 30 June 2008
+--------------+---------------+-------------+---------+---------+---------+-------------+--------------+----------+----------+
| | Share capital | Reverse | Share | General | Merger | Translation | Capital | Retained | Total |
| | GBP'000 | acquisition | premium | reserve | reserve | reserve | contribution | earnings | equity |
| | | reserve | reserve | GBP'000 | GBP'000 | GBP'000 | reserve | GBP'000 | GBP'000 |
| | | GBP'000 | GBP'000 | | | | GBP'000 | | |
+--------------+---------------+-------------+---------+---------+---------+-------------+--------------+----------+----------+
| At 1 July | 1 | - | - | 178 | 766 | (42) | - | 1,596 | 2,499 |
| 2006 | | | | | | | | | |
+--------------+---------------+-------------+---------+---------+---------+-------------+--------------+----------+----------+
| Foreign | - | - | - | - | - | (54) | - | - | (54) |
| currency | | | | | | | | | |
| translation | | | | | | | | | |
+--------------+---------------+-------------+---------+---------+---------+-------------+--------------+----------+----------+
| Net expense | - | - | - | - | - | (54) | - | - | (54) |
| recognised | | | | | | | | | |
| directly in | | | | | | | | | |
| equity | | | | | | | | | |
+--------------+---------------+-------------+---------+---------+---------+-------------+--------------+----------+----------+
| Profit for | - | - | - | - | - | - | - | 1,888 | 1,888 |
| the year | | | | | | | | | |
+--------------+---------------+-------------+---------+---------+---------+-------------+--------------+----------+----------+
| Total | - | - | - | - | - | (54) | - | 1,888 | 1,834 |
| recognised | | | | | | | | | |
| income and | | | | | | | | | |
| expense for | | | | | | | | | |
| the year | | | | | | | | | |
+--------------+---------------+-------------+---------+---------+---------+-------------+--------------+----------+----------+
| Transfer of | - | - | - | 249 | - | - | - | (249) | - |
| profit to | | | | | | | | | |
| general | | | | | | | | | |
| reserve | | | | | | | | | |
+--------------+---------------+-------------+---------+---------+---------+-------------+--------------+----------+----------+
| Share | - | - | 151 | - | - | - | - | - | 151 |
| premium | | | | | | | | | |
| recognised | | | | | | | | | |
| on reverse | | | | | | | | | |
| acquisition | | | | | | | | | |
+--------------+---------------+-------------+---------+---------+---------+-------------+--------------+----------+----------+
| Issue of | 9,367 | - | 6,226 | - | - | - | - | - | 15,593 |
| share | | | | | | | | | |
| capital, | | | | | | | | | |
| (net of | | | | | | | | | |
| issue | | | | | | | | | |
| expenses) | | | | | | | | | |
+--------------+---------------+-------------+---------+---------+---------+-------------+--------------+----------+----------+
| Acquisition | - | (12,583) | - | - | - | - | - | - | (12,583) |
| of | - | - | - | - | - | - | - | 260 | 260 |
| subsidiary | | | | | | | | | |
| Share based | | | | | | | | | |
| payment | | | | | | | | | |
| charge | | | | | | | | | |
+--------------+---------------+-------------+---------+---------+---------+-------------+--------------+----------+----------+
| At 1 July | 9,368 | (12,583) | 6,377 | 427 | 766 | (96) | - | 3,495 | 7,754 |
| 2007 | | | | | | | | | |
+--------------+---------------+-------------+---------+---------+---------+-------------+--------------+----------+----------+
ZTC Telecommunications Plc
Consolidated Statement of Changes in Equity
for the year ended 30 June 2008
+---------------+---------+-------------+---------+---------+---------+-------------+--------------+----------+----------+
| | Share | Reverse | Share | General | Merger | Translation | Capital | Retained | Total |
| | capital | acquisition | premium | reserve | reserve | reserve | contribution | earnings | equity |
| | GBP'000 | reserve | reserve | GBP'000 | GBP'000 | GBP'000 | reserve | GBP'000 | GBP'000 |
| | | GBP'000 | GBP'000 | | | | GBP'000 | | |
+---------------+---------+-------------+---------+---------+---------+-------------+--------------+----------+----------+
| At 1 July | 9,368 | (12,583) | 6,377 | 427 | 766 | (96) | - | 3,495 | 7,754 |
| 2007 | | | | | | | | | |
+---------------+---------+-------------+---------+---------+---------+-------------+--------------+----------+----------+
| Foreign | - | - | - | - | - | 588 | - | - | 588 |
| currency | | | | | | | | | |
| translation | | | | | | | | | |
+---------------+---------+-------------+---------+---------+---------+-------------+--------------+----------+----------+
| Net income | - | - | - | - | - | 588 | - | - | 588 |
| recognised | | | | | | | | | |
| directly in | | | | | | | | | |
| equity | | | | | | | | | |
+---------------+---------+-------------+---------+---------+---------+-------------+--------------+----------+----------+
| Loss for the | - | - | - | - | - | - | - | (16,832) | (16,832) |
| year | | | | | | | | | |
+---------------+---------+-------------+---------+---------+---------+-------------+--------------+----------+----------+
| Total | - | - | - | - | - | 588 | - | (16,832) | (16,244) |
| recognised | | | | | | | | | |
| income and | | | | | | | | | |
| expense for | | | | | | | | | |
| the period | | | | | | | | | |
+---------------+---------+-------------+---------+---------+---------+-------------+--------------+----------+----------+
| Issue of | 1,500 | (1,987) | 487 | - | - | - | - | - | - |
| deferred | | | | | | | | | |
| shares | | | | | | | | | |
+---------------+---------+-------------+---------+---------+---------+-------------+--------------+----------+----------+
| Issue of | - | - | - | - | - | - | 448 | - | 448 |
| share capital | | | | | | | | | |
| by subsidiary | | | | | | | | | |
+---------------+---------+-------------+---------+---------+---------+-------------+--------------+----------+----------+
| Transfer to | - | - | - | (427) | - | - | - | 427 | - |
| of loss from | | | | | | | | | |
| general | | | | | | | | | |
| reserve | | | | | | | | | |
+---------------+---------+-------------+---------+---------+---------+-------------+--------------+----------+----------+
| Recognition | - | - | - | - | - | - | - | 172 | 172 |
| of share | | | | | | | | | |
| based | | | | | | | | | |
| payments | | | | | | | | | |
+---------------+---------+-------------+---------+---------+---------+-------------+--------------+----------+----------+
| At 30 June | 10,868 | (14,570) | 6,864 | - | 766 | 492 | 448 | (12,738) | (7,870) |
| 2008 | | | | | | | | | |
+---------------+---------+-------------+---------+---------+---------+-------------+--------------+----------+----------+
Share capital account
Share capital records the nominal value of shares in issue.
Reverse acquisition reserve
A reverse acquisition reserve is established to take account of acquisitions
that are deemed to be reverse acquisitions under International Financial
Reporting Standards.
Share premium reserve
Share premium records the receipts from issue of share capital above the nominal
value of the shares. Share premium is stated net of direct issue costs.
General reserve
In accordance with the "Law of China on Joint Ventures Using Chinese and Foreign
Investment", 10% of the retained earnings has been transferred as ZTC Plc's
general reserve fund.
Merger reserve
The merger reserve arose as a result of the acquisition by the group's
subsidiary undertaking, Praise Ease Limited of Shenzhen Zhong Tian Communication
Equipments Co. Ltd, which was acquired through a transaction under common
control and accounted for using the pooling of interests method.
Translation reserve
Translation gains and losses arising on the retranslation of net assets of
subsidiaries whose presentational currency is not sterling are recognised
directly in equity in the Translation reserve.
Capital contribution reserve
Contributions provided to entities by shareholders that are not intended by
either party to be repaid are accounted for as capital contributions.
Retained earnings
Retained earnings records the cumulative profits less losses recognised in the
income statement, net of any distributions and share-based payments made.
ZTC Telecommunications Plc
Consolidated Balance Sheet
as at 30 June 2008
+------------------------------------------------------+----------+----------+
| | 2008 | 2007 |
| | GBP'000 | GBP'000 |
+------------------------------------------------------+----------+----------+
| Non-current assets | | |
+------------------------------------------------------+----------+----------+
| Property, plant and equipment | 90 | 571 |
+------------------------------------------------------+----------+----------+
| Deferred tax asset | - | 1 |
+------------------------------------------------------+----------+----------+
| Total non-current assets | 90 | 572 |
+------------------------------------------------------+----------+----------+
| Current assets | | |
+------------------------------------------------------+----------+----------+
| Inventories | - | 889 |
+------------------------------------------------------+----------+----------+
| Trade and other receivables | 2,919 | 10,898 |
+------------------------------------------------------+----------+----------+
| Cash and cash equivalents | 1,962 | 2,499 |
+------------------------------------------------------+----------+----------+
| Total current assets | 4,881 | 14,286 |
+------------------------------------------------------+----------+----------+
| Total assets | 4,971 | 14,858 |
+------------------------------------------------------+----------+----------+
| Current liabilities | | |
+------------------------------------------------------+----------+----------+
| Trade and other payables | (6,977) | (4,525) |
+------------------------------------------------------+----------+----------+
| Interest bearing liabilities | (2,877) | (1,688) |
+------------------------------------------------------+----------+----------+
| Current tax liabilities | (2,987) | (891) |
+------------------------------------------------------+----------+----------+
| Total current liabilities | (12,841) | (7,104) |
+------------------------------------------------------+----------+----------+
| Total liabilities | (12,841) | (7,104) |
+------------------------------------------------------+----------+----------+
| Net (liabilities)/assets | (7,870) | 7,754 |
+------------------------------------------------------+----------+----------+
+------------------------------------------------------+----------+----------+
| | 2008 | 2007 |
| | GBP'000 | GBP'000 |
+------------------------------------------------------+----------+----------+
| Equity | | |
+------------------------------------------------------+----------+----------+
| Share capital | 10,868 | 9,368 |
+------------------------------------------------------+----------+----------+
| Reverse acquisition reserve | (14,570) | (12,583) |
+------------------------------------------------------+----------+----------+
| Share premium reserve | 6,864 | 6,377 |
+------------------------------------------------------+----------+----------+
| General reserve | - | 427 |
+------------------------------------------------------+----------+----------+
| Merger reserve | 766 | 766 |
+------------------------------------------------------+----------+----------+
| Capital contribution reserve | 448 | - |
+------------------------------------------------------+----------+----------+
| Translation reserve | 492 | (96) |
+------------------------------------------------------+----------+----------+
| Retained earnings | (12,738) | 3,495 |
+------------------------------------------------------+----------+----------+
| Total equity attributable to equity holders of the | (7,870) | 7,754 |
| parent | | |
+------------------------------------------------------+----------+----------+
ZTC Telecommunications Plc
Consolidated Cash Flow Statement
as at 30 June 2008
+------------------------------------------------------+----------+----------+
| | 2008 | 2007 |
| | GBP'000 | GBP'000 |
+------------------------------------------------------+----------+----------+
| Cash flows from operations | | |
+------------------------------------------------------+----------+----------+
| Net cash outflow from operations | (734) | (1,399) |
+------------------------------------------------------+----------+----------+
| Interest paid | - | - |
+------------------------------------------------------+----------+----------+
| Tax refunded | 1 | - |
+------------------------------------------------------+----------+----------+
| Net cash outflows from operating activities | (733) | (1,399) |
+------------------------------------------------------+----------+----------+
| Investing activities | | |
+------------------------------------------------------+----------+----------+
| Interest received | 37 | 19 |
+------------------------------------------------------+----------+----------+
| Purchase of property, plant and equipment | (26) | (23) |
+------------------------------------------------------+----------+----------+
| Acquisition of parent through reverse acquisition, | - | (226) |
| net cash used | | |
+------------------------------------------------------+----------+----------+
| Net cash generated from/(used in) investing | 11 | (230) |
| activities | | |
+------------------------------------------------------+----------+----------+
| Financing activities | | |
+------------------------------------------------------+----------+----------+
| Issue of shares prior to acquisition | - | 763 |
+------------------------------------------------------+----------+----------+
| Issue of share capital | - | 1,605 |
+------------------------------------------------------+----------+----------+
| Interest paid | - | (39) |
+------------------------------------------------------+----------+----------+
| Net increase in cash from financing activities | - | 2,329 |
+------------------------------------------------------+----------+----------+
| Net (decrease)/increase in cash and cash equivalents | (722) | 700 |
+------------------------------------------------------+----------+----------+
| Cash and cash equivalents at beginning of year | 2,499 | 1,772 |
+------------------------------------------------------+----------+----------+
| Exchange gains on cash and cash equivalents | 185 | 27 |
+------------------------------------------------------+----------+----------+
| Cash and cash equivalents at end of year | 1,962 | 2,499 |
+------------------------------------------------------+----------+----------+
The financial information included in this announcement does not comprise
statutory accounts within the meaning of section 240 of the Companies Act 1985.
The annual report and accounts of the Company for the year ended 30 June
2008, including the notes to the financial statements, are being posted to
shareholders today and can be viewed on the Company's website at
www.chinaevoline.com
This information is provided by RNS
The company news service from the London Stock Exchange
END
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