TIDMACHP
RNS Number : 9283D
Asia Ceramics Holdings PLC
02 May 2013
Asia Ceramics Holdings Plc
('the Company' or together with its subsidiaries 'the
Group')
Final Results for the year ended 31 December 2012
The Directors of Asia Ceramics Holdings Plc are pleased to
present the Company's final results for the year ended 31 December
2012.
A copy of the Company's annual report will be sent to
shareholders and will be available shortly on the Company's website
at www.asiaceramicplc.com.
Enquiries
Frank Lewis Asia Ceramics Holdings Tel: 07775 504 313
plc
James Joyce / James Bavister WH Ireland Limited Tel: 020 7220 1666
CHAIRMAN'S STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2012
Highlights include:
-- Profit for the year at GBP57k (2011: Loss GBP225k)
-- Net assets at GBP935k (2011: GBP386k)
-- Cash at bank of GBP497k (2011: GBP669k)
-- Basic profit /(loss) per share of 0.52 pence (2011: loss 2.18 pence)
Chairman's Statement
Introduction
I have great pleasure in presenting the Report and Accounts for
Asia Ceramics Holdings Plc for the financial year ending 31
December 2012.
Results
The Group's turnover for the year to 31 December 2012 was
GBP9,577k (2011: GBP4,252k). The profit for the year was GBP57k
(2011: loss GBP225k).
Review for the year
The Group's main trading activity is the export of ceramic
products from China, which has grown substantially during the year
under review. The Group's main export markets are Europe, Far East,
America and Australia. Export sales for the year ended 31 December
2012 amounted to GBP7.8 million of sales (2011: GBP2.8 million),
which represented 81% (2011: 65%) of Group turnover for the
year.
The Group had a good first half of the year in respect of sales
and profitability. However, due to the economic turmoil in Europe
and other areas, the second half to the year saw much tougher
trading conditions, which were announced, which impacted on the
growth in sales and margins and thus profitability for the period
under review.
Employees
The Board would like to extend their personal thanks to all
employees of the Group for their enthusiasm, hard work and
commitments. In particular the Board would like to thank the Chief
Executive Officer, Dr Dingxin Pu, for his continued contribution to
the development of the Group.
Outlook
Despite the complex economic climate in the Group's export
markets at present, your Board is looking to achieve in 2013
further growth in sales in its export markets, as well as in China
and thus increase the Group's profits.
I look forward to reporting further progress in my interim
statement at the half year.
Frank Lewis
Chairman
30 April 2013
CHIEF EXECUTIVE OFFICER'S STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2012
The Group was established in July 2010 to distribute and sell
ceramic wall and floor tiles, sanitary ware products and other home
improvement products in China and internationally.
Financial Performance
-- Group net sales of GBP9,577k (2011: GBP4,252k)
-- Profit for the year of GBP57k (2011: loss GBP225k)
Group operating net cash used for the year ended 31 December
2012 was GBP321k (2011: GBP540k). Cash at bank at 31 December 2012
was GBP497k (2011: GBP669k).
Operations
During the year to 31 December 2012, the Group employed 56
members of staff. The head office is in Foshan as well as the main
showroom.
The Group's administration, information technology, human
resources, finance, sales and marketing is controlled from the head
office in Foshan. The Group also designs its own ceramic tiles, and
enters into contracts with OEM suppliers to manufacture its own
designed products.
The Group's main trading operations are:
-- Our export division that exports ceramic and sanitary ware product internationally; and
-- Three retail stores, one in Hong Kong, the other two in
mainland China that sell ceramic and sanitary ware products.
The head office in Foshan:
-- seeks appropriate locations for stores;
-- provides IT, logistics, finance and administration support;
-- manages the wholesale and export division;
-- provides training for the staff;
-- ensures that all rules and regulations are complied with; and
-- ensures that the UK Bribery Act of 2010 is complied with.
Outlook
We are looking to make further progress in increasing sales in
our export division, despite the difficult trading conditions as
well as in our domestic markets. I look forward therefore, to
demonstrating further growth in profits and building shareholders'
value in 2013.
Dr Dingxin Pu
Chief Executive Officer
CORPORATE GOVERNANCE STATEMENT
Principles of Corporate Governance
As a company listed on AIM, the company is not governed by the
Combined Code adopted by the London Stock Exchange ('the Combined
Code') but is required to operate principles of good governance and
best practice. Accordingly, the directors are committed to the
Combined Code and believe that an effective system of corporate
governance supports the enhancement of shareholder value. These
principles have been in place since the company's listing on 6
September 2010.
The directors acknowledge the importance of the Combined Code
and intend, following Admission, to continue to apply its
principles so far as is practicable taking into account the
company's size and stage of development. The company has three
non-executive directors.
The directors have established an audit committee (the "Audit
Committee"), a remuneration committee (the "Remuneration
Committee") and an AIM rules compliance committee (the "AIM Rules
Compliance Committee") with formally delegated duties and
responsibilities to operate with effect from Admission.
Audit Committee
The Audit Committee, which initially comprise Frank Lewis as
Chairman, as well as Alei Duan and Wenxian Liu, will determine and
examine any matters relating to the financial affairs of the
company including the terms of engagement of the Group's auditor
and, in consultation with the auditors, the scope of the audit. The
Audit Committee will receive and review reports from the management
and the external auditors of the Group relating to the annual and
interim accounts and the accounting and internal control systems of
the Group. In addition, it will consider the financial performance,
position and prospects of the company and ensure they are properly
monitored and reported on.
Remuneration Committee
The Remuneration Committee is responsible for making
recommendations to the Board on the company's framework of
executive remuneration and its cost. The Committee determines the
contract terms, remuneration and other benefits for each of the
executive directors and senior employees, including performance
related bonus schemes, pension rights and compensation
payments.
The Remuneration Committee, which comprise Frank Lewis, Alei
Duan and Wenxian Liu with Frank Lewis acting as Chairman, will
review the performance of the executive directors and senior
management, set and review their remunerations and the terms of
their service contracts, determine the payment of bonuses to the
executive directors and consider the Group's bonus and option
schemes.
AIM Compliance Committee
In addition, the Board has established an AIM Rules Compliance
Committee comprising Frank Lewis and Shouyuan Wu which has
responsibility for ensuring that the company complies fully with
the AIM Rules.
The directors will comply with Rule 21 of the AIM Rules relating
to directors' dealings and will take all reasonable steps to ensure
compliance by the company's applicable employees. The company has
adopted and operates a share dealing code for directors, and
employees in accordance with the AIM Rules.
The Board
The Board is responsible to shareholders for the proper
management of the company. The non-executive directors have a
particular responsibility to ensure that the strategies proposed by
the executive directors are fully considered. The Board has a
formal schedule of matters reserved to it and has discussions on a
monthly basis since its listing on the AIM. The Board is
responsible for overall strategies, reviewing management accounts,
approval of major capital expenditure projects and consider of
significant financing matters.
Directors
During the year, the Board comprised the non-executive chairman
Frank Lewis (London based), the chief executive officer, the
finance director, two executive directors and two further
non-executive directors, one being based in London.
CORPORATE GOVERNANCE STATEMENT
Internal Controls
The directors are responsible for the company's system of
internal controls and reviewing its effectiveness. The Board has
designed the company's system of internal controls in order to
provide the directors with reasonable assurance that its assets are
safeguarded, that transactions are authorised and properly recorded
and that material errors and irregularities are either prevented or
would be detected within a timely period. However, no system of
internal controls can eliminate the risk of failure to achieve
business objectives or provide absolute assurance against material
misstatements or losses.
The key elements of the control systems in operation are:
-- the Board meets regularly with a formal schedule of matters reserved to it for decision;
-- it has put in place an organisational structure with clear
lines of responsibility defined and with appropriate delegation of
authority;
-- established procedures for the planning, approval and
monitoring of capital expenditure and information systems for
monitoring the company's financial performance against approved
budgets and forecasts;
-- departmental heads are required annually to undertake a full
assessment process to identify and quantify the risks that face
their businesses and functions and assess the adequacy of the
prevention, monitoring and modification practices in place for
those risks;
-- significant risks and associated controls and monitoring
procedures are reported regularly to the Board to enable the
directors to review the effectiveness of the system of internal
controls.
Relations with shareholders
The Board attaches great importance to maintain a good
relationship with shareholders. The Board regards the annual
general meeting as a good opportunity to communicate directly with
investors who are encouraged to make inquiries to officers of the
company.
DIRECTORS' REPORT
FOR THE YEAR ENDED 31 DECEMBER 2012
The Directors present their report and financial statements for
the year ended 31 December 2012.
Principal activities
The principal activity of the Group is the sale of ceramic wall
and floor tiles and sanitary ware products in China and
internationally.
Business review
A detailed review of the business and a description of the main
trends and factors likely to affect the future development,
performance and position of the Group can be found in the
Chairman's Statement and Chief Executive Officer's Statement on
pages 3 and 4.
Risks and uncertainties
There are a number of potential risks and uncertainties which
could have a material impact on the Group's performance and could
cause actual results to differ materially from expected and
historic results. The Board monitors risks on an ongoing basis and
implements appropriate procedures and processes to try and mitigate
the adverse consequences of such risks.
The business faces two principal risks. Firstly, the Group needs
to expand and retain its current position in the retail ceramic
industry. Future growth will be both organic and through potential
acquisitions. There are a number of uncertainties relating to
future acquisitions and there can be no guarantee that the Group
will be able to expand as envisaged. Secondly, the Group may need
to raise additional capital to fund its future expansion. There can
be no assurance that the Group will be able to obtain such
funding.
In addition, the financial instruments and risk profiles of the
Group are set in note 26 on page 33.
Results and dividends
The results of the year are set out in the Statement of
Comprehensive Income.
The directors do not recommend a dividend payment for the
year.
Directors and their interests
The following directors have held office during the year and
their interests as at 31 December 2012, all of which are beneficial
unless otherwise stated; whether direct or indirect, of the
directors and their families in the issued share capital of the
company is as follows:
Number of Percentage
Ordinary of
Director Shares Ordinary
Shares
Dr Dingxin Pu 7,572,071 68.90%
Yangjing Zhang 72,180 0.66%
Weifeng Liu 92,803 0.84%
Frank Lewis - -
Alei Duan 185,700 1.69%
Wenxian Liu 742,424 6.76%
Shouyuan Wu - -
DIRECTORS' REPORT
FOR THE YEAR ENDED 31 DECEMBER 2012
Directors' remuneration
2012 2011
GBP'000 GBP'000
Frank Lewis 32 32
Dr Dingxin Pu 59 58
Tsui David Kar Ning - 10
Yangjing Zhang 17 17
Weifeng Liu 18 17
Alei Duan 10 10
Wenxian Liu - -
Shouyuan Wu 18 13
154 157
============ ============
Employment policies
The Group pursues a policy of equal opportunities to all
employees and potential employees. The Group has continued its
policy of giving fair consideration to applications for employment
made by disabled persons, bearing in mind the requirements for
skills and aptitude for the job. In the areas of planned employee
training and career development, the Group strives to ensure that
disabled employees receive equal treatments, including
opportunities for promotion. Every effort is made to ensure that
continuing employment and opportunities are also provided for
employees who become disabled. It is the Company's policy to take
views of employees into account in making decisions, and wherever
possible to encourage the involvement of employees in Group's
performance.
Payments to suppliers
The company's policy for the year ended 31 December 2012 is to
settle payments with suppliers when agreeing the terms of the
business transactions;
- ensure that suppliers are aware of the terms of payments by
the inclusion of the relevant terms in contracts;
- pay in accordance with the company's contractual and other legal obligations
The number of days of trade purchases outstanding for the Group
as at 31 December was 30 days.
Going concern
The directors are required to report that the business is a
going concern, with supporting assumptions or qualifications as
necessary. After making enquiries, the directors consider that the
Group has adequate resources and committed borrowing facilities to
continue in operational existence for the foreseeable future.
Consequently, they have adopted the going concern basis in
preparing the financial statements.
Financial instruments
Details of the Group financial instruments are set out in note
26.
DIRECTORS' REPORT
FOR THE YEAR ENDED 31 DECEMBER 2012
Substantial shareholders
As at 31 March 2013, the company had been notified of the
following beneficial interest of 3% or more in its shares other
than directors:
Name of holder Number Percentage
of shares shareholding
Weiguo Peng 425,757 3.87%
Jianwei Huang 425,757 3.87%
Better Group (Holding) Co Limited 632,900 5.76%
Statement of directors' responsibilities
The directors are responsible for preparing the annual report
and financial statements for each financial year which give a true
and fair view of the state of affairs of the Group and Company of
the profit or loss of the Group for that period. In preparing those
financial statements, the directors are required to:
- select suitable accounting policies and then apply them consistently;
- make judgments and estimates that are reasonable and prudent;
- state whether applicable accounting standards have been
followed, subject to any material departures disclosed and
explained in the financial statements; and
- Prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the company will
continue in business.
The directors confirm that they have complied with the above
requirements in preparing the financial statements.
The directors are responsible for keeping proper accounting
records which disclose with reasonable accuracy at any time the
financial position of the Group and the Company to enable them to
ensure that the financial statements comply with the Companies
(Jersey) Law, 1991. They are also responsible for safeguarding the
assets of the Company and the Group and hence for taking reasonable
steps for the prevention and detection of fraud and other
irregularities.
Statement of disclosure to auditor
The Directors have confirmed that:
- so far as each director is aware, there is no relevant audit
information of which the company's auditor is unaware; and
- each director has taken all the necessary steps he ought to
have taken as a director in order to make himself aware of any
relevant audit information and to establish that the company's
auditor is aware of that information.
Auditors
In accordance with Article 109 of the Companies (Jersey) Law
1991, a resolution proposing that UHY Hacker Young be re-appointed
for the forthcoming year will be put to the Annual General
Meeting.
By order of the Board
Dr Dingxin Pu
Director
INDEPENDENT AUDITORS' REPORT
TO THE MEMBERS OF ASIA CERAMICS HOLDINGS PLC
We have audited the financial statements of Asia Ceramics
Holdings Plc for the year ended 31 December2012 which comprise the
Consolidated and Company Statement of Comprehensive Income, the
Consolidated and Company Statements of Financial Position, the
Consolidated and Company Statements of Cash Flows, the Consolidated
and Company Statements of Changes in Equity and the related notes.
The financial reporting framework that has been applied in their
preparation is applicable law and International Financial Reporting
Standards (IFRSs) as adopted by the European Union.
This report is made solely to the company's members, as a body,
in accordance with Article 113A of the Companies (Jersey) Law 1991.
Our audit work has been undertaken so that we might state to the
company's members those matters we are required to state to them in
an auditor's report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to
anyone other than the company and the company's members as a body,
for our audit work, for this report, or for the opinions we have
formed.
Respective responsibilities of directors and auditor
As explained more fully in the Directors' Responsibilities
Statement set out on page 9, the directors are responsible for the
preparation of the financial statements and for being satisfied
that they give a true and fair view. Our responsibility is to audit
and express an opinion on the financial statements in accordance
with applicable law and International Standards on Auditing (UK and
Ireland). Those standards require us to comply with the Auditing
Practices Board's (APB's) Ethical Standards for Auditors.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements
is provided on the APB's website at
www.frc.org.uk/apb/scope/private.cfm.
Opinion on financial statements
In our opinion:
-- the financial statements give a true and fair view of the
state of the group's and of the parent company's affairs as at 31
December 2012 and of the group's and the parent company's profit or
loss for the year then ended;
-- the financial statements have been properly prepared in
accordance with IFRSs as adopted by the European Union; and
-- have been properly prepared in accordance with the
requirements of the Companies (Jersey) Law 1991.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters
where the Companies (Jersey) Law 1991 requires us to report to you
if, in our opinion:
-- proper accounting records have not been kept, or proper
returns adequate for our audit have not been received from branches
not visited by us; or
-- the financial statements are not in agreement with the
accounting records and returns; or
-- we have not received any information or explanation that was
necessary for our audit.
Julie Wilson
for and on behalf of UHY Hacker Young
Chartered Accountants
Quadrant House
4 Thomas More Square
London E1W 1YW
The maintenance and integrity of the Asia Ceramics Holdings Plc
website is the responsibility of the directors; the work carried
out by the auditors does not involve consideration of these matters
and, accordingly, the auditors accept no responsibility for any
changes that may have occurred to the financial statements since
they were initially presented on the website; and legislation
governing the preparation and dissemination of financial statements
may differ from one jurisdiction to another.
CONSOLIDATED AND COMPANY STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2012
Note Group Year Group Company Company
ended 31 Year ended Year ended Year ended
December 31 December 31 December 31 December
2012 2011 2012 2011
GBP'000 GBP'000 GBP'000 GBP'000
Revenue 5 9,577 4,252 - -
Cost of sales (7,850) (3,691) - -
----------- ------------- ------------- -------------
Gross profit 1,727 561 - -
Distribution expenses (694) (123) - -
Administrative expenses (868) (634) (147) (252)
----------- ------------- ------------- -------------
Profit /(loss) from operation 165 (196) (147) (252)
Non-operating income/(expenses) (10) - - -
Net finance income /(costs) 8 7 4 (1)
----------- ------------- ------------- -------------
Profit /(loss) before taxation 162 (192) (147) (253)
Income tax expenses 9 (105) (33) - -
----------- ------------- ------------- -------------
Profit /(loss) for the year 57 (225) (147) (253)
----------- ============= ------------- -------------
Other comprehensive income
Exchange difference arising
on translation of foreign
operations - 48
----------- -------------
Total comprehensive income
for the year attributable
to equity holders 57 (177)
=========== =============
Earnings per ordinary share
(pence) 10
Basic 0.52 (2.18)
=========== =============
Diluted 0.52 (2.17)
=========== =============
The notes on pages 15 to 36 form part of these financial
statements.
All amounts are derived from continuing operations
CONSOLIDATED AND COMPANY STATEMENT OF FINANCIAL POSITION
AT 31 DECEMBER 2012
Note 2012 2011 2012 2011
GBP'000 GBP'000 GBP'000 GBP'000
Group Group Company Company
Non-current assets
Property, plant and equipment 11 197 244 - -
Investments 12 - - 1 1
Trade and other receivables - - 1,363 907
------------ -----------
197 244 1,364 908
------------ ----------- ----------- -----------
Current assets
Inventory 13 4 56 - -
Trade and other receivables 14 2,231 1,308 - -
Cash and cash equivalents 15 497 669 3 134
------------ ----------- ----------- -----------
2,732 2,033 3 134
------------ ----------- ----------- -----------
Total assets 2,929 2,277 1,367 1,042
============ =========== =========== ===========
Equity and reserves
Share capital 16 55 52 55 52
Share premium 16 1,201 712 1,201 712
Other reserves 18 114 82 49 49
Retained earnings (435) (460) (472) (325)
------------ ----------- ----------- -----------
935 386 833 488
------------ ----------- ----------- -----------
Current liabilities
Borrowings 19 163 346 - -
Income tax liabilities 2 39 - -
Trade and other payables 20 1,327 1,339 34 54
------------ ----------- ----------- -----------
1,492 1,724 34 54
------------ ----------- ----------- -----------
Non-current liabilities
Other borrowings 19 502 167 500 500
------------ ----------- ----------- -----------
502 167 500 500
------------ ----------- ----------- -----------
Total equity and liabilities 2,929 2,277 1,367 1,042
============ =========== =========== ===========
The notes on pages 15 to 36 form an integral part of these
financial statements.
The financial statements were approved by the Board of Directors
and authorised for issue on 30 April 2013.
Dr Dingxin Pu Shouyuan Wu
Chief ExecutiveDirector Executive Finance Director
CONSOLIDATED AND COMPANY STATEMENT OF CASHFLOWS
FOR THE YEAR ENDED 31 DECEMBER 2012
2012 2011 2012 2011
Notes GBP'000 GBP'000 GBP'000 GBP'000
Group Group Company Company
Net cash used in operating activities 21 (321) (540) 324 -
----------- ----------- ------------ ------------
Investing activities
Purchase of property, plant
and equipment (10) (122) - -
Interest received 1 1 - -
----------- -----------
Net cash used in investing activities (9) (121) - -
----------- ----------- ------------ ------------
Financing activities
Loans to subsidiaries - - (455) (245)
Proceed from investor - 492 - -
Bank borrowing 158 - - -
----------- -----------
Net cash from financing activities 158 492 (455) (245)
----------- ----------- ------------ ------------
Net decrease in cash and cash
equivalents (172) (169) (131) (245)
Cash and cash equivalents at
beginning of period 669 834 134 379
Exchange difference - 4 - -
Cash and cash equivalents at
end of period 15 497 669 3 134
=========== =========== ============ ============
CONDOLIDATED AND COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2012
Group Share Share Other Retained Total
capital premium reserves earnings
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 31 December 2010 52 712 (25) (225) 514
============ ============ ============= ============= ============
Comprehensive income
Exchange difference arising
on the translation of
foreign
operations - - 48 - 48
Loss for the year - - - (225) (225)
------------ ------------ ------------- ------------- ------------
Total comprehensive income
for the year - - 48 (225) (177)
------------ ------------ ------------- ------------- ------------
Transaction with owner
Transfer statutory reserves - - 10 (10) -
Share-based payment - - 49 - 49
------------
Balance at 31 December
2011 52 712 82 (460) 386
============ ============ ============= ============= ============
Comprehensive income
Exchange difference arising
on the translation of - - - - -
foreign
operations
Profit for the year - - - 57 57
------------ ------------ ------------- ------------- ------------
Total comprehensive income
for the year - - - 57 57
------------ ------------ ------------- ------------- ------------
Transaction with owner
Issue of shares 3 489 - - 492
Transfer statutory reserves - - 32 (32) -
Balance at 31 December 2012 55 1,201 114 (435) 935
============ ============ ============= ============= ============
Company Share Share Other Retained Total
capital premium reserves earnings
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 31 December 2010 52 712 - (72) 692
============= ============= ============== ============== ============
Comprehensive income
Loss for the year - - - (253) (253)
------------- ------------- -------------- -------------- ------------
Total comprehensive income
for the year - - - (253) (253)
------------- ------------- -------------- -------------- ------------
Transaction with owner
Share-based payment - - 49 - 49
Balance at 31 December 2011 52 712 49 (325) 488
============= ============= ============== ============== ============
Comprehensive income
Loss for the year - - - (147) (147)
------------- ------------- -------------- -------------- ------------
Total comprehensive income
for the year - - - (147) (147)
------------- ------------- -------------- -------------- ------------
Transaction with owner
Issue of shares 3 489 - - 492
Balance at 31 December 2012 55 1,201 49 (472) 833
============= ============= ============== ============== ============
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012
1 GENERAL INFORMATION
Asia Ceramics Holdings Plc is a company incorporated in Jersey
under the Companies (Jersey) Law 1991. The company is governed by
its articles of association and the principal statute governing the
company is Jersey law. The company has an unlimited life and the
liability of the members of the company is limited. The company is
domiciled in Jersey and its registered office is 12 Castle Street,
St. Helier, Jersey JE2 3RT. The principal places of the business of
the Group's are at G/F, No 17 Wah Hong Building, 13 - 20 Hong Lok
Street, Mongkok, Kowloon in Hong Kong and No 9 Zhangcuo Street,
Tancheng Disctrict, Foshan City in People's Republic of China
("PRC").
The principal activity of the company is that of an investment
holding company. The principal activities of its subsidiaries are
set out in note 12.
These financial statements are presented in pounds sterling and
rounded to the nearest thousand ('000).
2 ADOPTION OF NEW AND REVISED STANDARDS
Asia Ceramics Holding Plc has adopted all relevant standards
effective for accounting periods beginning on or after 1 January
2012.
At the date of authorisation of these financial statements, the
Group has not adopted the following standards and interpretations
as they are either not effective or not applicable to the Group's
business.
Standards and interpretations
IFRS 10 Consolidated Financial Statements - effective 1 January
2013
This requires a parent to present consolidated financial
statements as those of a single economic entity, replacing the
requirement previously contained in IAS27 and SIC12.
IFRS 10 uses control as a single basis for consolidation,
irrespective of the nature of the investee, thus elimination the
risks and rewards approach included in SIC-12.
An investor must possess all the three elements to conclude it
controls an investee.
-- power over the investee; and
-- exposure, or rights, to variable returns from involvement
with the investee; and the ability to use power over the investee
to affect the amount of the investor's returns.
IFRS 13 Fair Value Measurement - effective 1 January 2013
Establishes a single framework for measuring fair value and is
applicable for both financial and non-financial items. The Standard
does not include requirements on when fair value measurement is
required; it prescribes how fair value is to be measured if
required by another standard.
Amendment to IFRS 7 - Enhanced Derecognition Disclosure
Requirements - effective 1 July 2011
The IASB introduced enhanced disclosure requirements to IFRS 7
Financial Instruments as part of its comprehensive review of
off-balance sheet activities. The amendments are designed to ensure
that users of financial statements are able to more readily
understand transactions involving the transfer of financial assets
(for example, securitisations), including the possible effects of
any risks that may remain with the entity that transferred the
assets. The amendments also require additional disclosures if a
disproportionate amount of transfer transactions are undertaken
around the end of a reporting period. As the change only results in
additional disclosures, there is no impact on the company's
financial statement.
It is considered that this does not apply to the Group and that
this standard is not expected to result in changes in accounting
policies, changes to the carrying amounts of assets or liabilities
or the published results. If any, but expect there will be no
material impact to the income statement and balance sheet when
implemented, although further disclosure may be required.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012 - continued
Standards and interpretations (not yet endorsed by EU at 4 April
2013)
IFRS 9 Financial Instrument - Classification and Measurement of
Financial Assets - effective 1 January 2015
IFRS 9 introduces new requirements for classifying and measuring
financial assets as follow:
-- Debt instruments meeting both a 'business model' test and a
'cash flow characteristics' test are measured at amortised cost
(the use of fair value is optional in some limited
circumstances';
-- Investments in equity instruments can be designed as 'fair
value through other comprehensive income' with only dividends being
recognised in profit or loss; and
-- All other instruments (including all derivatives) are
measured at fair value with changes recognised in the profit and
loss.
The concept of 'embedded derivatives' does not apply to
financial assets within the scope of the Standard and the entire
instrument must be classified and measured in accordance with the
above guidelines.
IFRS 9 - Incorporation of requirements on the accounting for
financial liabilities- effective 1 January 2015
The guidance in IFRS 9 retains the classification criteria for
financial liabilities currently contained in IAS 39. However, there
are two key differences, relating to presentation and
measurement:
-- the presentation of the effects of changes in fair value
attributable to a liability's credit risk; and
-- the elimination of the cost exemption for derivative
liabilities to be settled by delivery of unquoted equity
instruments.
3 SIGNIFICANT ACCOUNTING POLICIES
3.1 Statement of compliance
These financial statements have been prepared in accordance with
International Financial Reporting Standards ("IFRS"), IFRIC
interpretations and the AIM Rules.
3.2 Basis of preparation
These consolidated financial statements have been prepared on
the historical cost basis except as disclosed in the accounting
policies below. Historical cost is generally based on the fair
value of the consideration given in exchange for assets.
The Board has reviewed the accounting policies set out in these
financial statements and consider them to be the most appropriate
to the Group's business activities.
3.3 Going Concern policy
The financial statements have been prepared assuming the Group
will continue as a going concern. Under the going concern
assumption, an entity is ordinarily viewed as continuing in
business for the foreseeable future with neither the necessity of
liquidation, nor ceasing trading or seeking protection from
creditors pursuant to laws or regulations. In assessing whether the
going concern assumption is appropriate, management takes into
account all available information for the foreseeable future, in
particular for the twelve months from the date of approval of the
financial statements. Based on the budgets prepared, management
have a reasonable expectation that the group has adequate resources
to continue its operational exercises for the foreseeable future
and the group has adopted the going concern basis of accounting in
preparing the financial statements.
3.4 Basis of consolidation
The consolidated financial statements incorporate the financial
statements of the company and entities controlled by the Company
(its subsidiaries). Control is achieved where the Company has the
power to govern the financial and operating policies of an investee
entity so as to obtain benefits from its activities.
The results of subsidiaries acquired or disposed of during the
year are included in the Consolidated Statement of Comprehensive
Income from the effective date of acquisition or up to the
effective date of disposal, as appropriate.
Where necessary, adjustments are made to the financial
statements of subsidiaries to bring the accounting policies used
into line with those used by the Group.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012 - continued
All intra-group transactions, balances, income and expenses are
eliminated on consolidation.
Business combinations
The acquisition of subsidiaries is accounted for using the
acquisition method of accounting. The consideration transferred in
a business combination is measured at the aggregate of the fair
values, at the date of exchange, of assets given, liabilities
incurred or assumed, and equity instruments issued by the Group in
exchange for control of the acquire. Acquisition related costs are
generally recognised in profit or loss. The acquiree's identifiable
assets, liabilities and contingent liabilities that meet the
conditions for recognition under IFRS 3: Business Combinations are
recognised at their fair value at the acquisition date, except for
non-current assets (or disposal groups) that are classified as held
for sale in accordance with IFRS 5: Non-Current Assets Held for
Sale and Discontinued Operations, which are recognised and measured
at fair value less costs to sell.
Goodwill arising on acquisition is recognised as an asset and
initially measured as the excess of the consideration transferred
over the Group's interest in the net fair value of the identifiable
assets, liabilities and contingent liabilities recognised. If,
after reassessment, the Group's interest in the net fair value of
the acquiree's identifiable assets, liabilities and contingent
liabilities exceed the consideration transferred, the excess is
recognised immediately in the profit and loss as a bargain
purchase.
Non-controlling interests that are present ownership interest
and entitle their holders to a proportionate share of the entity's
net assets in the event of liquidation may be initially measured
either at fair value or at the non- controlling interests'
proportionate share of the recognised amounts of the recognised
identifiable net assets. The choice of measurement basis is made on
a transaction-by-transaction basis. Other types of non-controlling
interests are measured at fair value, when applicable, on the basis
specified in another IFRS.
3.5 Foreign currencies
.
Functional and presentational currency
Items included in the financial statements of each group entity
are presented in the currency of the primary economic environment
in which the entity operates. The functional currencies of the
operating subsidiaries are Renminibi (RMB), US Dollars (USD) and
Hong Kong Dollars (HKD). For the purpose of the consolidated
financial statements, the results and financial position of the
Group is expressed in Pounds Sterling (GBP), for reporting in the
United Kingdom, which is the company's presentational currency.
The presentational currency of the Group is Pounds Sterling and
therefore the financial statements have been translated from RMB to
GBP and from HKD to GBP at the following exchange rates:
Year end rates Average rates
31 December 2012 GBP1 = RMB10.13 GBP1 = RMB10.04
GBP1 = HKD12.60 GBP1 = HKD12.50
31 December 2011 GBP1 = RMB9.76 GBP1 = RMB10.39
GBP1 = HKD12.04 GBP1 = HKD12.47
Foreign currency transactions are translated into the functional
currency using the exchange rates prevailing at the dates of
transactions. Foreign exchange gains and losses resulting from the
settlement of such transactions and from the re-translation at
period end exchange rates of the monetary assets and liabilities
denominated in foreign currencies are recognised in profit and loss
in the period. Non-monetary items that are measured in terms of
historical cost in a foreign currency are not re-translated.
Group companies
The results and financial position of the Group's foreign
operations (none of which has the currency of a hyperinflationary
economy) that have a functional currency different from the
presentational currency are translated into the presentational
currency as follows:
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012 - continued
-- assets and liabilities of the Group's foreign operations are
translated using exchange rates prevailing at the end of the
reporting period;
-- income and expense items are translated at average exchange
rates for the period unless this average is not a reasonable
approximation of the cumulative effect of the rates prevailing on
the transaction dates, in which case income and expense items are
translated at the rate on the dates of the transactions; and all
resulting exchange differences are recognised in other
comprehensive income and accumulated in equity (attributed to
non-controlling interest as appropriate).
3.6 Revenue recognition
Revenue is measured at the fair value of the consideration
received or receivable and represents amounts receivable for goods
and services provided in the normal course of business, net of
discounts, VAT and other sales related taxes.
Domestic sales
Sales of goods are recognised when goods are delivered and title
has passed and all revenue recognised is in respect of the sale of
goods.
Export sales
Sales of goods are recognised when the goods cleared the customs
and the title has passed.
3.7 Segment reporting
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision-maker.
The chief operating decision-maker is responsible for allocating
resources and assessing performance of the operating segments.
3.8 Taxation
Income tax expense represents the sum of the tax currently
payable and deferred tax.
The tax currently payable is based on taxable profit for the
year. Taxable profit differs from profit as reported in the
consolidated statement of comprehensive income because it excludes
items of income or expense that are taxable or deductible in other
years and items that are never taxable or deductible. The Group's
liability for current tax is calculated using tax rates that have
been enacted or substantively enacted by the end of the reporting
period.
Deferred tax is the tax expected to be payable or recoverable on
temporary differences between the carrying amounts of assets and
liabilities in the financial statements and the corresponding tax
bases used in the computation of taxable profit, and is accounted
for using the balance sheet method. Deferred tax liabilities are
generally recognised for all taxable temporary differences and
deferred tax assets are recognised to the extent that it is
probable that future taxable profits will be available against
which the asset can be utilised. Such assets and liabilities are
not recognised if the temporary difference arises from the initial
recognition of goodwill or from the initial recognition (other than
in a business combination) of other assets and liabilities in a
transaction that affects neither the tax profit nor the accounting
profit.
The carrying amount of deferred tax assets is reviewed at the
end of each reporting period and reduced to the extent that it is
no longer probable that sufficient taxable profits will be
available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to
apply in the period when the liability is settled or the asset is
realised. Deferred tax is charged or credited in the profit and
loss, except when it relates to items charged or credited directly
to equity, in which case it is recognised in equity.
Deferred tax assets and liabilities are offset when there is a
legally enforceable right to set off current tax assets against
current tax liabilities and when they relate to income taxes levied
by the same taxation authority and the Group intends to settle its
current tax assets and liabilities on a net basis.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012 - continued
3.9 Leases
Leases in which a significant portion of the risks and rewards
of ownership are retained by the lessor are classified as operating
leases. Payments made under operating leases (net of any incentives
received from the lessor) are charged to the profit and loss on a
straight-line basis over the period of the lease.)
3.10 Share-based payment arrangement
Equity-settled share-based payment transactions with parties
other than employees are measured at the fair value of the goods or
services received, except where that fair value cannot be estimated
reliably, in which case they are measured at the fair value of the
equity instruments granted, measured at the date the entity obtains
the goods or the counterparty renders the services. Details
regarding the determination of the fair value of equity-settled
share-based transactions are set out in note 17.
Fair value is measured by use of the Black-Scholes model. The
expected life used in the model has been adjusted, based on
management's best estimate, for the effects of non-transferability,
exercise restrictions, and behavioural considerations.
3.11 Property, plant and equipment
Property, plant and equipment are stated in the consolidated
statement of financial position at cost less any subsequent
accumulated depreciation and any recognised impairment loss.
Cost includes purchase price and all directly attributable costs
of bringing the asset to its location and condition necessary to
operate as intended.
Depreciation is provided at rates calculated to write off the
cost less estimated residual value from 0-10% of each asset over
its estimated useful economic life as follows
Furniture, fixtures and equipment 2 - 5 years
Motor vehicles 5 years
Showroom and office renovation 5 years
An asset's carrying amount is written down immediately to its
recoverable amount if the asset's carrying amount is greater than
its estimated recoverable amount (refer note 3.18.2).
Gains and losses on disposals are determined by comparing the
disposal proceeds with the carrying amount and are included in the
profit and loss.
Asset in the course of construction is stated at cost less
impairment losses. Cost comprises direct costs of construction
capitalised during the periods of construction. Capitalisation of
these costs ceases and construction-in-progress is transferred to
property, plant and equipment when substantially all the activities
necessary to prepare the assets for their intended use are
completed. No depreciation is provided for in respect of
construction-in-progress until it is completed and ready for its
intended use.
3.12 Investment in subsidiaries
Investment in subsidiaries is stated at cost less provision for
impairment.
3.13 Inventories
Inventories and work in progress are measured at the lower of
cost and net realisable value.
Net realisable value is the estimated selling price in the
ordinary course of business less the estimated costs of completion
and the estimated costs necessary to make the sale. Cost includes
all costs of purchase, costs of conversion and other costs incurred
in bringing the inventories to their present location and
condition. The cost of inventories and work in progress, other than
those for which specific identification of costs are appropriate,
is assigned by using the first-in, first-out (FIFO basis). When the
inventories and work in progress are sold, the carrying amount of
those inventories and work in progress are recognised as an expense
in the same period as the revenue.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012 - continued
The amount of any write-down of inventories and work in progress
to net realisable value are recognised as an expense in the period
the write-down or loss occurs. The amount of any reversal of a
write-down of inventories and work in progress are recognised as a
reduction in the amount of inventories and work in progress
recognised as an expense in the period in which the reversal
occurs.
3.14 Financial instruments
Financial assets and financial liabilities are recognised when a
group entity becomes a party to the contractual provisions of the
instrument.
Financial assets and financial liabilities are initially
measured at fair value. Transaction costs that are directly
attributable to the acquisition or issue of financial assets and
financial liabilities (other than financial assets and financial
liabilities at fair value through profit or loss) are added to or
deducted from the fair value of the financial assets or financial
liabilities, as appropriate, on initial recognition. Transaction
costs directly attributable to the acquisition of financial assets
or financial liabilities at fair value through profit or loss are
recognised immediately in profit or loss.
3.15 Financial assets
Financial assets within the scope of IAS 39 are classified as
either financial asset at 'fair value through profit and loss'
(FVTPL), loans and receivables, held to maturity investments, or
available-for-sale financial assets, as appropriate.
The Group determines the classification of its financial assets
after initial recognition and, where allowed and appropriate,
re-evaluates this designation or convention in the market place
concerned.
All arm's length purchases and sales of financial assets are
recognised on the trade date i.e. the date that the Group commits
to purchase the asset. Such purchases or sales are purchases or
sales of financial assets that require delivery of assets within
the period generally established by regulation or convention in the
market place concerned.
3.15.1 Effective interest method
This is a method of calculating the amortised cost of a debt
instrument and of allocating interest income over the relevant
period. The effective interest rate is the rate that exactly
discounts estimated future cash receipts (including all fees and
points paid or received that form an integral part of the effective
interest rate, transaction costs and other premiums or discounts)
through the expected life of debt instrument, or where appropriate,
a shorter period, to the net carrying amount on initial
recognition.
Income is recognised on an effective interest basis for debt
instruments other than those financial assets classified at
FVTPL.
3.15.2 Financial assets at FVTPL
Financial assets classified as held for trading are included in
the category financial assets at fair value through profit or loss.
Financial assets are classified as held for trading if they are
acquired for the purpose of sale in the short term. Derivative
financial instruments are also classified as held for trading
unless they are designated and effective as a hedging instrument.
Financial assets at FVTPL are stated at fair value with any gains
or losses arising on re-measurement recognised in profit or
loss.
The Group does not designate any financial assets not held for
trading as financial assets as fair value through profit and
loss.
3.15.3 Held-to-maturity investments
Non-derivative financial assets with fixed or determinable
payments and fixed maturity are classified as held-to-maturity when
the Group has the positive intent and ability to hold the assets to
maturity. Investments intended to be held for an undefined period
are not included in this classification. Other long-term
investments that are intended to be held-to-maturity, such as
bonds, are subsequently measured at amortised cost using the
effective interest method less any impairment.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012 - continued
3.15.4 Loans and receivables
Non-derivative financial assets with fixed or determinable
payments that are not quoted in an active market are classified as
loans and receivables. Loans and receivables (including trade and
other receivables, bank balances and cash) are measured at
amortised cost using the effective interest method less any
impairment.
Interest income is recognised by applying the effective interest
rate except for short-term receivables when the recognition of
interest would be immaterial.
3.15.5 Available-for-sale financial assets
Available-for-sale financial assets are non-derivative financial
assets that are designated as available-for-sale or are not
classified in any of the three preceding categories. After initial
recognition, available-for-sale assets are measured at fair value
with gains or losses being recognised in other comprehensive income
and accumulated under fair value adjustment reserve until the
investment is derecognised or until the investment is determined to
be impaired at which time the accumulate gain or loss previously
reported in equity is included in the profit or loss. The fair
value of investments that are traded in active market at the end of
each reporting period is determined by reference to the relevant
stock exchange's quoted market bid prices at the close of business
on the reporting period date. For investments where there is no
active market, fair value is determined using valuation techniques.
Such techniques include using recent arm's length market
transactions; reference to the current market value of another
instrument, which is substantially the same; discounted cash flow
analysis and option pricing models.
3.16 Financial liabilities and equity
Financial liabilities and equity instruments are classified
according to the substance of the contractual arrangements entered
into. Significant financial liabilities include trade payables and
other payables.
Trade and other payables are stated initially at their fair
value and subsequently measured at amortised cost suing the
effective interest method unless the effect of discounting would be
immaterial, in which case they are stated at cost.
Equity instruments are recorded at the fair value of
consideration received, net of direct issue costs.
3.17 Borrowings
Borrowings are recognised initially at the proceeds received,
net of transaction costs incurred, and subsequently measured at
amortised cost using the effective interest method. Borrowings are
classified as current liabilities unless the Group has an
unconditional right to defer settlement of the liability for at
least twelve months after the end of reporting date.
3.18 Impairment of assets
3.18.1 Financial assets
Financial assets, other than those at FVTPL, are assessed for
indicators of impairment at the end of each reporting date.
Financial assets are considered to be impaired when there is
objective evidence that, as a result of one or more events that
occurred after the initial recognition of the financial assets, the
estimated future cash flows of the investment have been
affected.
An impairment loss in respect of a financial asset measured at
amortised cost is calculated as the difference between its carrying
amount, and present value of the estimated future cash flows
discounted at the original effective interest rate. An impairment
loss in respect of an available-for-sale financial asset is
calculated by reference to its fair value.
For certain categories of financial assets, such as trade
receivables, assets that are assessed not to be impaired
individually are, in addition, assessed for impairment on a
collective basis that share similar credit risk
characteristics.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012 - continued
For financial assets carried at cost, the amount of the
impairment loss is measured as the difference between the asset's
carrying amount and the present value of the estimated future cash
flows discounted at the current market rate of return for a similar
financial asset. Such impairment loss will not be reversed in
subsequent periods.
The carrying amount of the financial assets is reduced by the
impairment loss directly for all financial assets with the
exception of trade receivables, where the carrying amount is
reduced through the use of an allowance account. Changes in the
carrying amount of the allowance account are recognised in profit
or loss.
When available-for-sale financial asset is considered to be
impaired, cumulative gains or losses previously recognised in other
comprehensive income are reclassified to profit or loss in the
period.
For financial assets measured at amortised cost, if, in a
subsequent period, the amount of the impairment loss decreases
which can be related objectively to an event occurring after the
impairment was recognised, the previously recognised impairment
loss is reversed through profit or loss to the extent that the
carrying amount of the investment at the date the impairment is
reversed does not exceed what the amortised cost would have been
had the impairment not been recognised.
In respect of available-for-sale equity securities, impairment
losses previously recognised in profit or loss are not reversed
through profit or loss. Any increase in fair value subsequent to an
impairment loss is recognised in other comprehensive income and
accumulated under fair value adjustment reserve. In respect of
available-for-sale debt securities, impairment losses are
subsequently reversed through profit or loss if an increase in the
fair value of the investment can be objectively related to an event
occurring after the recognition of the impairment loss.
3.18.2 Non-financial assets
The carrying amounts of the Group's non-financial assets, other
than deferred tax assets, are reviewed at each reporting date to
determine whether there is any indication of impairment. If any
such indication exists, then the asset's recoverable amount is
estimated. For assets that have indefinite lives, the recoverable
amount is estimated at each reporting date.
The recoverable amount of an asset or cash-generating unit is
the greater of its value in use and its fair value less costs to
sell. In assessing value in use, the estimated future cash flows
are discounted to their present value using a pre-tax discount rate
that reflects current market assessments of the time value of money
and risk specific to the asset. For the purpose of impairment
testing, assets are grouped together into the smallest group of
assets that generates cash inflows from continuing use that are
largely independent of the cash inflows of other assets or group of
assets (the "cash generating unit"). The goodwill acquired in a
business combination, for the purposes of impairment testing, is
allocated to cash-generating units that are expected to benefit
from the synergies of the combination.
An impairment loss is recognised if the carrying amount of an
asset or its cash generating unit exceeds its estimated recoverable
amount. Impairment losses recognised in respect of cash generating
units are allocated first to reduce the carrying amount of the
other assets in the unit (or group of units) on a pro rata
basis.
An impairment loss in respect of goodwill is not reversed. In
respect of other assets, impairment losses recognised in prior
periods are assessed at each reporting date for any indications
that the loss has decreased or no longer exists. An impairment loss
is reversed if there has been a change in the estimates used to
determine the recoverable amount. An impairment loss is reversed
only to the extent that the asset's carrying amount does not exceed
the carrying amount that has been determined, net of depreciation
or amortisation, if no impairment loss had been recognised.
3.19 Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits, bank
balances, demand deposits and other short term, highly liquid
investments that are readily convertible to known amount of cash
and are subject to an insignificant risk of changes in value.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012 - continued
3.20 Contingent liabilities and contingent assets
A contingent liability is a possible obligation that arises from
past events and whose existence will only be confirmed by the
occurrence or non-occurrence of one or more uncertain future events
not wholly within the control of the Group. It can also be a
present obligation arising from past events that is not recognised
because it is not probable that outflow of economic resources will
be required or the amount of obligation cannot be measured
reliably.
A contingent liability is not recognised but is disclosed in the
notes to the accounts. When a change in the probability of an
outflow occurs so that the outflow is probable, it will then be
recognised as a provision. A contingent asset is a possible asset
that arises from past events and whose existence will be confirmed
only by the occurrence or non-occurrence of one or more uncertain
events not wholly within the control of the Group. Contingent
assets are not recognised but are disclosed in the notes to the
accounts when an inflow of economic benefits is probable. When
inflow is virtually certain, an asset is recognised.
3.21 Provisions
Provisions are recognised when the Group has a present legal or
constructive obligation as a result of a past event, it is probable
that an outflow of economic benefit will be required to settle the
obligation, and a reliable estimate of the amount can be made.
3.22 Employee Benefits
Short Term Employee Benefits
Wages, salaries, annual leave and sick leave, social security
contributions, bonuses and non-monetary benefits are accrued in the
period in which the associated services are rendered by the
employees.
Post-employment benefits
For the subsidiary of the Group in PRC, there are contributory
retirement plans operated by the local government. The employees
participate in the defined contribution retirement plan whereby the
company is required to contribute to the schemes at fixed rates of
the employees' salary costs. The company's contributions to these
plans are charged to profit or loss when incurred. The company has
no obligation for the payment of retirement and other
post-retirement benefits of staff other than the contributions
described above.
Contribution made to the defined contribution retirement plan
includes basic pension insurance in PRC which is charged to the
profit and loss in the period to which they are related.
Under the pension plan which the Group pays fixed contributions
and will have no legal or constructive obligations to pay further
contributions if the fund does not hold sufficient assets to pay
all employee benefits relating to employee service in the current
or prior financial periods. Once the contributions have been paid,
the Group has no further payment obligations.
3.23 Capital Risk Management
The Group manages its capital to ensure that entities in the
Group will be able to continue as going concerns while maximising
the return to stakeholders through the optimisation of the debt and
equity balance. The capital structure of the Group consists of
debt, which includes the loan disclosed in note 19, cash and cash
equivalents and equity attributable to equity holders of the
parent, comprising issued capital, reserves and retained
earnings.
4. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
Estimates, assumptions and judgements concerning the future are
made in the preparation of the Financial Statements. They affect
the application of the Group's accounting policies, reported
amounts of assets, liabilities, income and expenses and disclosures
made. They are assessed on an on-going basis and are based on
historical experience and other factors, including expectations of
future events that are believed to be reasonable under the
circumstances.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012 - continued
4.1 Critical accounting estimates and assumptions
The Group makes estimates and assumptions concerning the future.
The resulting accounting estimates and assumptions will, by
definition, seldom equal the related actual results. The estimates
and assumptions that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities within
the next financial year are discussed below.
(a) Provisions for doubtful debts
Each debtor balance is assessed to determine recoverability of
debt. Provisions are made for all those debtors where evidence
indicates that recoverability is doubtful. Amounts are written off
when they are deemed irrecoverable. Any changes to estimates made
in relation to debtors' recoverability may result in material
difference amounts being reported in the Group's financial
statements.
(b) Share-based payment
The Group has share option schemes for certain suppliers.
Judgements and estimates are required in determining the
share-based payment charge as an expense in the income statement.
The directors have used Black-Scholes model one of the most widely
used models in valuing the share based payment charge. The
directors are in the opinion that the model used has been adjusted
to their best estimate in arriving at the charge.
5. BUSINESS AND GEOGRAPHICAL SEGMENTS
For the purpose of IFRS 8, the chief operating decision maker
takes the form of the Board of Directors. The Directors are of the
opinion that the business of the Group comprises of a single
activity, being the sale of ceramic products in PRC (including Hong
Kong). In Sep 2011, the operating subsidiary in PRC obtained the
export licence. Therefore the Group has expanded its sales
overseas. At the meetings between the Directors, the income,
expenditure cash flows, assets and liabilities are reviewed on a
whole-group basis.
The Group has a policy to invest in prime locations in PRC.
Sub-division of sales by type, function, by town or city of
location in PRC is therefore of little significance in reviewing
operations.
Based on the above considerations, there is considered to be one
reportable business segment, the sale of ceramic products.
Internal and external reporting is on a consolidated basis, with
transactions between Group companies eliminated on consolidation.
Therefore the financial information of the single segment is the
same as that set out in the consolidated statement of comprehensive
income, the consolidated statement of financial position, the
consolidated statement of changes in equity and the consolidated
statement of cash flows.
All the Group's non-current assets are located within PRC. No
Group non-current assets are located in the entity's country of
domicile.
Geographical information:
Analysis of revenue by geographical area:
Group Group
2012 2011
GBP'000 GBP'000
PRC (including Hong Kong) 1,785 1,486
Europe 5,055 596
Far East 1,314 1,537
America & Australia 1,423 633
------------- -------------
9,577 4,252
============= =============
Information about major customers
Including in revenue sales of approximate GBP4.14 million are
revenues which arose from sales to the Group's three largest
customers.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012 - continued
The Group export sales in PRC are exempted from value-added tax.
In addition to this, approximate 9% of the value-added tax paid on
purchases relating to export sales will be refunded by the tax
authority.
6. EXPENSES BY NATURE
Group Group Company Company
2012 2011 2012 2011
GBP'000 GBP'000 GBP'000 GBP'000
Changes in inventories 52 (56) - -
Inventory costs 7,798 3,747 - -
Employee benefit expense (note
7) 405 363 42 42
Depreciation 49 3 - -
Operating lease payments 99 58 - -
Legal and professional 105 152 105 152
Share-based payment charge - 49 - 49
Other expenses 904 132 - 9
------------- ------------- ------------- -------------
Total cost of sales, distribution
costs and administrative expenses 9,412 4,448 147 252
============= ============= ============= =============
Included in legal and professional, audit fees of GBP26,000
(2011: GBP26,000) for parent company and group auditors and
GBP3,333 (2011: GBP3,333) to overseas subsidiary auditors.
7. EMPLOYEE BENEFIT EXPENSE
Group Group Company Company
2012 2011 2012 2011
GBP'000 GBP'000 GBP'000 GBP'000
Wages and salaries 375 344 42 42
Social security costs and welfare 2 9 - -
Pension costs 28 10 - -
405 363 42 42
============= ============= ============= =============
2012 2011
Number Number
The average monthly number of
employees:
Management (including Executive
Directors) 22 8
Sales and marketing staff 43 45
65 53
============ ============
8. NET FINANCE INCOME /(COSTS)
Group Group Company Company
2012 2011 2012 2011
GBP'000 GBP'000 GBP'000 GBP'000
Bank interest paid (2) - - -
Bank charges (11) (8) - (1)
Foreign exchange gains 19 11 - -
Bank interest received 1 1 - -
7 4 - (1)
============= ============= ============= =============
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012 - continued
9. INCOME TAX EXPENSE
2012 2011
GBP'000 GBP'000
Current tax charge 105 33
The income tax expense for the year can
be reconciled as follow:
Profit /(loss) before taxation 162 (192)
============= =============
Income tax calculated at 25% 41 (48)
Effect of income that is exempt from taxation 37 64
Effect of different tax rate of subsidiary
operating in other jurisdiction - (2)
Effect of different tax rate of timing difference 11 (1)
Unrelieved tax losses c/f 7 14
Others 9 6
105 33
============= =============
The applicable tax of the Group is derived from the
consolidation of all Group companies applicable tax band on their
domestic tax rates. The applicable tax rate for Asia Ceramics (HK)
Ltd is 16.5% and 25% for all Chinese subsidiaries.
10. PROFIT /(LOSS) PER SHARE
Basic profit /(loss) per share is calculated by dividing the
loss attributable to equity shareholders of the company by the
weighted average number of ordinary shares in issue during the
year.
Diluted profit (loss) per share is calculated by adjusting the
weighted average number of ordinary shares outstanding to assume
conversion of all dilutive potential ordinary shares. The dilutive
potential ordinary shares in the company are share options. A
calculation is done to determine the number of shares that could
have been acquired at fair value (determined as the average annual
market share price of the company's shares) based on the monetary
rights attached to outstanding share options. The number of shares
calculated above is compared with the number of shares that would
have issued assuming the exercise of the share options.
2012 2011
GBP GBP
Earnings
Earnings for the purposes of basic
and diluted earnings per share being
net profit attributable to equity
holders of the parent 56,592 (225,194)
Number of shares
Weighted average number of ordinary
shares for the purposes of basic
earnings per share 10,824,598 10,311,444
Effect of dilutive potential ordinary
shares:
Share options - 46,857
Weighted average number of ordinary
shares for the purposes of diluted
earnings per share 10,824,598 10,358,301
================ ====================
Profit / (loss) per share
Basic (pence) 0.52 (2.18)
================ ====================
Diluted (pence) 0.52 (2.17)
================ ====================
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012 - continued
11. PROPERTY, PLANT AND EQUIPMENT
GROUP
Assets Showroom Fixtures Motor Total
Under and and vehicles
Construction office fittings
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cost
At 31 December 2010 110 - 4 - 114
Additions 94 - - 28 122
Exchange differences 11 - - 1 12
----------------- ------------- ------------- ------------- ------------
At 31 December 2011 215 - 4 29 248
Additions 5 - - 5 10
Transfer (220) 220 - - -
Exchange differences - (8) - - (8)
At 31 December 2012 - 212 4 34 250
================= ============= ============= ============= ============
Accumulated
depreciation
At 31 December 2010 - - 1 - 1
Charge for the period - - - 3 3
Exchange differences - - - - -
----------------- ------------- ------------- ------------- ------------
At 31 December 2011 - - 1 3 4
Charge for the period - 42 1 6 49
At 31 December 2012 - 42 2 9 53
================= ============= ============= ============= ============
Carrying amount
At 31 December 2012 - 170 2 25 197
================= ============= ============= ============= ============
At 31 December 2011 215 - 3 26 244
================= ============= ============= ============= ============
Asset under construction comprises expenditure incurred on
construction and renovation to a showroom and office in Foshan,
Guangdong which has fully completed and used by the company.
Payments on this construction contract were made in instalments as
the work progresses. The unpaid portion of the contract has not
been capitalised and is disclosed as a capital commitment. During
the year, the asset under construction has been transferred to
Showroom and office, and depreciated over 5 years.
No fixed assets were held by the Company.
12. INVESTMENTS
COMPANY
2012 2011
GBP'000 GBP'000
At beginning of the period 1 1
Investment in subsidiaries - -
At 31 December 2012 1 1
============= =============
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012 - continued
Details of the Company's investment in subsidiaries at 31
December 2012 are as follows:
Name of Place of Proportion Principal activities
subsidiary incorporation of ownership
(or registration) interest
and operation %
Asia Ceramics (HK) Hong Kong 100 Retail of ceramics products
Ltd in
Hong Kong market
Shenyang Louis Building P.R. China 100 Establishment of ceramics
Materials Co., Ltd retail shops in PRC and
** sale of ceramics products.
Foshan Louis Valentino P.R. China 100 Sale of ceramics products
Ceramics Co., Ltd in PRC and export market
**
** Held by subsidiary company
Foshan Louis Valentino Ceramics Co., Ltd was established on 5
July 2011 with registered share capital of RMB500,000. On the same
day, Shenyang Louis Buildings Materials Co., Ltd subscribed 50% of
the registered share capital of the company for RMB250,000. On 8
August 2011, the remaining 50% of the registered share capital was
transferred to Shenyang Louis Buildings Materials Co., Ltd for
RMB250,000. As a result of this, Foshan Louis Valentino Ceramics
Co., Ltd is wholly owned by the Group.
13. INVENTORIES
GROUP
2012 2011
GBP'000 GBP'000
Finished goods 4 56
4 56
============= =============
All inventories can be sold in the normal business operating
process. No finished goods in the current year have been carried at
fair value less costs to sell, same for previous year.
14. TRADE AND OTHER RECEIVABLES
Group Group Company Company
2012 2011 2012 2011
GBP'000 GBP'000 GBP'000 GBP'000
Non-current
Intercompany balances - - 1,363 907
------------ ------------ ------------ ------------
- - 1,363 907
============ ============ ============ ============
Current
Account receivables 392 126 - -
Payment on accounts 1,220 381 - -
Other debtors 122 197 - -
Account due from related party
(note 24) 312 536 - -
VAT 185 68 - -
2,231 1,308 - -
============ ============ ============ ============
Intercompany balances are deemed to be recoverable and are
carried at their approximate fair value.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012 - continued
15. CASH AND CASH EQUIVALENTS
Group Group Company Company
2012 2010 2012 2011
GBP'000 GBP'000 GBP'000 GBP'000
Cash at bank and in hand 497 669 3 134
497 669 3 134
============ ============ ============== ==============
Bank balances and cash comprise cash held by the Group and
short-term bank deposits with an original maturity of three months
or less. The carrying amount of these assets approximates their
fair value.
16. SHARE CAPITAL AND SHARE PREMIUM
The company has one class of ordinary share capital which carry
no rights to fixed income, any preferences or restrictions.
2012 2011
GBP'000 GBP'000
Authorised:
20,000,000,000 Ordinary shares of GBP0.005 each 100,000 100,000
============ ============
Issued and fully paid:
10,990,071 Ordinary shares of GBP0.005 each 55 52
============ ============
On 17 March 2012 the company signed a share subscription
agreement with Better Group (Holding) Co., Ltd where Better Group
(Holding) Co., Ltd subscribes 678,627 shares at 72.5p each and the
company agrees to issue new shares within 90 days from date of this
agreement. The shares were issued on 29 March 2012 and fully
paid.
Share Share
Capital Premium
GBP GBP
Balance at 1 January 2011
and 2012 51,557 712,091
Issue of share on 17 March
2012 3,393 488,611
------------------- --------------
Balance at 31 December 2012 54,950 1,200,702
=================== ==============
At 31 December 2012, the company had the following outstanding
share options:
Number Exercise Date of grant Exercise period
price
257,786 GBP0.66 31.08 2010 31.08.2010 - 06.09.2013
206,229 GBP0.66 31.08.2010 31.08.2010 - 06.09.2015
17. SHARE OPTIONS
On 31 August 2010 the company executed a deed poll constituting
warrants to subscribe for ordinary shares in favour of WH Ireland.
Pursuant to this instrument, WH Ireland will be entitled to
subscribe for such number of Ordinary Shares as is equal to 2.5 per
cent. of the fully diluted share capital of the company on
Admission at an exercise price of GBP0.66 until the third
anniversary of Admission.
On the same date, the company granted warrants to Alexander
David to subscribe for such number of Ordinary Shares as is equal
to 2 per cent. of the company's issued Ordinary Share capital
following Admission at an exercise price of GBP0.66 per Ordinary
Share. The warrants are exercisable at any time following Admission
until the fifth anniversary of Admission.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012 - continued
As at 31 December 2012, none of the above options had been
exercised.
Details of the share options outstanding during the year are as
follows:
2012 2011
----------------------------------------------- ------------------------------------------------
Average Option Option Average Option Option
exercise 1 2 exercise 1 2
price price
in GBP in GBP
per share per share
At beginning
of
the year 0.66 257,786 206,229 0.66 257,786 206,229
Granted - - - - - -
Forfeited - - - - - -
Executed - - - - - -
Expired - - - - - -
--------------
At end of
year 0.66 257,786 206,229 0.66 257,786 206,229
=============== ============== ============== ================ ============== ==============
The weighted average estimated fair value of each share option
granted in the share option agreements both dated 31 August 2010
are 8.72 pence for option 1 and 12.8 pence for option 2.
These estimated fair values were calculated using the
Black-Scholes option pricing model. The model inputs were as
follow:
Option Option
1 2
Bid price GBP0.58 GBP0.58
Exercise price GBP0.66 GBP0.66
Expected volatility 25% 25%
Expected dividend yield - -
Risk-free interest rate 2.75% 2.75%
The expected volatility is based on the historical share prices
to the management's best estimate. The expected life used in the
model has been adjusted, based on management's best estimate, for
the effects of non-transferability, exercise restriction and
behavioural considerations.
The management has discounted the bid price by 25% in the
calculation as the management estimated that in order to place
substantial block of shares in the market a discount in the region
of 20% to 25% of bid price would be needed.
18. OTHER RESERVES
Other reserves include translation reserves which arising from
the translation of foreign operations into presentational currency,
share option reserves and statutory reserves.
In accordance with the relevant regulations applicable in the
PRC, companies now comprising the Group established in the PRC are
required to transfer at least 10% of their statutory annual profits
after tax to the statutory reserve until the balance of the reserve
reaches 50% of their respective registered share capital. Subject
to certain restrictions as set out in the relevant PRC regulations,
the statutory reserve may be used to offset against accumulated
losses of the respective PRC companies. The amount of the transfer
is subject to the approval of the board of directors of the
respective companies.
19. BORROWINGS
Non-current Group Group Company Company
2012 2011 2012 2011
GBP'000 GBP'000 GBP'000 GBP'000
Loan from a shareholder (note
24) 500 100 500 500
Other 2 67 - -
502 167 500 500
============ ============ ============== ==============
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012 - continued
Current Group Group Company Company
2012 2011 2012 2011
GBP'000 GBP'000 GBP'000 GBP'000
Loan from shareholder (note 24) - 333 - -
Bank borrowing 158 - - -
Other 5 13 - -
163 346 - -
============ ============ ============== ==============
On 17 September 2012, Foshan Louis Valentino Ceramics Co., Ltd
borrowed RMB1.6 million loan from ICBC bank with maturity date on16
September 2013 with annual interest rate of 6.6%.
Other borrowing represents personal bank loan taken on behalf of
the company by an employee for the purchase of vehicle. The
borrowing is free of interest and the directors consider that the
carrying amount of the borrowings approximate to their fair
value.
20. TRADE AND OTHER PAYABLES
Group Group Company Company
2012 2011 2012 2011
GBP'000 GBP'000 GBP'000 GBP'000
Trade payables 99 270 - -
Payments received in advance 549 298 - -
Bills payable 567 - - -
Other payables 112 771 34 54
1,327 1,339 34 54
============ ============ ============== ==============
21. NOTES TO THE CASH FLOW STATEMENTS
Group Group Company Company
2012 2011 2012 2011
GBP'000 GBP'000 GBP'000 GBP'000
Profit (loss) from operations 162 (192) (147) (253)
Adjustments for:
Share-based payments - 49 - 49
Depreciation of property, plant
and equipment 49 4 - -
------------ ------------ -------------- --------------
Operating cash flows before movements
in working capital 211 (139) (147) (204)
Decrease/(increase) in inventory 51 (56) - -
(Increase)/decrease in trade
and other receivables (923) (1,101) 203
Increase in trade and other payables 480 756 471 1
------------ ------------ -------------- --------------
Net cash (used in) /generated
from operations (181) (540) 324 -
Interest paid (2) - - -
Income taxes paid (138) - - -
Net cash (used in) /generated
from operating activities (321) (540) 324 -
============ ============ ============== ==============
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012 - continued
22. COMMITMENTS
GROUP
Capital commitments
2012 2011
GBP'000 GBP'000
Commitments for the renovation
of office and showroom (note 11) 34 41
============= =============
Commitments under operating leases
At the reporting date, the Group had outstanding commitments for
future minimum lease payments under non-cancellable operating
leases, which fall due as follow:
2012 2011
GBP'000 GBP'000
Land and buildings
Within one year 105 50
In two to five years 225 199
More than five years 48 100
------------- -------------
379 349
============= =============
Operating lease payments represent rentals payable by the Group
for its office and showroom.
23. ULTIMATE CONTROLLING PARTY
The ultimate controlling party of the Group is Dr Dingxin Pu,
the majority shareholder and a director of the company.
24. RELATED PARTY TRANSACTIONS
Transactions within the Group have been eliminated in the
preparation of the financial information set out in this report and
are not disclosed in this note. Balance with other related parties
have been disclosed under the relevant notes.
i) On 18 August 2010, Dr Dingxin Pu, the Chief Executive Officer
and the majority shareholder of the company entered into a loan
facility agreement with the company, whereby Dr Dingxin Pu agreed
to make available to the company a loan facility of GBP500,000. The
loan is interest free and is repayable over five equal quarterly
instalments commencing from 18 months following the date of the
loan facility agreement. The loan was fully drawn down on 18 August
2010.
On 20 February 2013, the loan has extended the date of repayment
to five equal instalments commencing on 31 January 2015 subject to
the Company having sufficient funds to meet the repayments.
ii) At 31 December 2012, included in other creditors an amount
of HKD29,584 (2011: HKD5,319) due to Dr Dingxin Pu, Chief Executive
Officer and majority shareholder of the company. This balance is
unsecured, interest free and repayable on demand.
iii) At 31 December 2012, included in other debtors an amount of
HKD14,977 (2011: HKD30,398) due from Dongen Jin, a director of
Shenyang Louis Building Materials Co., Limited. The amount is
unsecured, interest free and repayable on demand.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012 - continued
iv) The company has entered into a relationship and non-compete
agreement dated 31 August 2010 with Dr Dingxin Pu, Asia Ceramics
(HK) Limited and China Ceramics Holdings Limited ("CCH") pursuant
to which Dr Dingxin Pu has agreed to certain conditions in respect
of his control of the company. The agreement contains terms and
conditions intended to ensure that the company will be at all times
capable of carrying on its business independently of Dr Dingxin Pu
and companies controlled by him, including CCH. This agreement also
contains obligations to ensure that CCH, Dr Dingxin Pu and
employees of companies controlled by him, do not compete with the
business carried on by the Group in the PRC and Hong Kong.
v) The Company has entered into a brand licensing agreements
dated 22 August 2010 with Dr Dingxin Pu, Asia Ceramics (HK) Limited
and Shenyang Louis Building Materials Co., Limited pursuant to
which Dr Dingxin Pu has granted an exclusive, irrevocable and
royalty free licence to use the trademark "Baitao" and "Bally"in
the PRC and Hong Kong, and a non-exclusive licence throughout the
rest of the world, until such time as the trademark is registered
in the company's name.
vi) During the year, the Group made sales to Louis Valentino
Investment & Development Co. Ltd ("LVID") for the amount of
approximate GBP1.9 million (2011: GBP1.8 million). Due to lack of
export experience and expertise in dealing with international
business, the Group requested LVID to assist its export business in
the initial stage, and will gradually takeover by signing contracts
with customers on its own name and receiving payments from
customers directly. During this period, LVID has not made profits
or commissions from its assistance. On 5 March 2013, the company
has entered into an agreement with LVID and its parent company, CCH
to formalise this relationship.
At the end of reporting period, the balance due from LVID is
GBP312k (2011: GBP549k). LVID is company connected to Dr Dingxin
Pu, a director and majority shareholder of the Asia Ceramics
Holdings Plc.
Key management compensation
Key management includes directors of the company and its
subsidiaries. The compensation paid or payable to key management
for the employee services is shown on page 8 of the Directors'
Report.
25. EVENT AFTER THE REPORTING DATE
On 20 February 2013, the company has extended the loan agreement
with Dr Dingxin Pu, the Chief Executive Officer which modified the
date of repayment to five equal instalments commencing on 31
January 2015 subject to the Company having sufficient funds to meet
the repayments.
26. FINANCIAL INSTRUMENTS
A financial instrument is any contract that gives arise to both
a financial asset of one enterprise and a financial liability or
equity instrument of another enterprise.
The Group's financial instruments comprise cash and cash
equivalents, receivables, payables and borrowings. The accounting
policies and methods adopted, including the basis of measurement
applied are disclosed above, where relevant. The information about
the extent and nature of these recognised financial instruments,
including significant terms and conditions that may affect the
amount, timing and certainty of future cash flows are disclosed in
the respective notes above, where applicable.
The Group does not enter into derivative transactions (such as
interest rate swaps and forward foreign currency contracts) and it
is, and has been throughout the period under review, the Group's
policy that no trading in financial instruments shall be
undertaken.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012 - continued
The following table details the carrying amounts and fair values
of financial assets and financial liabilities:
GROUP Carrying value Fair value
2012 2011 2012 2011
GBP'000 GBP'000 GBP'000 GBP'000
Financial assets
Cash and cash equivalents 497 669 497 669
Trade and other receivables 2,231 1,308 2,231 1,308
2,728 1,977 2,728 1,977
============= ============= ============= =============
Financial liabilities
Trade and other payables 1,322 1,339 1,322 1,339
Borrowings 670 513 670 513
------------- ------------- ------------- -------------
1,992 1,852 1,992 1,852
============= ============= ============= =============
COMPANY Carrying value Fair value
2012 2011 2012 2011
GBP'000 GBP'000 GBP'000 GBP'000
Financial assets
Cash and cash equivalents 3 134 3 134
Trade and other receivables - - - -
3 134 3 134
============= ============= ============= =============
Financial liabilities
Trade and other payables 34 54 34 54
Borrowings 500 500 500 500
534 554 534 554
======== ======== ======== ========
The Group's activities expose it to a variety of financial
risks; currency risk, credit risk, liquidity risk and interest rate
risk. These risks are limited by the Group's financial management
policies and practices as described below:
Credit Risk
Credit risk is the risk of financial loss to the Group if a
customer or counterparty to a financial instrument fails to meet
its contractual obligations, and arises principally from the
Group's receivables from customers and investment securities.
The Group has credit risk management policies in place and
exposure to credit risk is monitored on an ongoing basis.
Management generally adopts conservative strategies and tight
control on credit policy. The Group has limited the amount of
credit exposure to customers.
The average credit period on sales is 30 days. No interest is
charged on the trade receivables. Trade receivable due from LVID,
the connect party, is guaranteed by Dr Pu personally.
Before accepting any new customer, the Group will check the
credit worthiness of any new customers. No provision for doubtful
debts was made during the year.
The trade and other receivables do not contain impaired assets
as they are still considered recoverable by reference to no default
experience so far. In determining the recoverability of trade
receivable, the Group considers any change in the credit quality of
the trade receivable from the date credit was initially granted up
to the reporting date.
The credit risk on cash and cash equivalent is limited because
the counterparties are banks with high credit ratings recognised by
international credit rating agencies.
The Group does not hold any collateral as security.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012 - continued
Liquidity risks
Liquidity risk is the risk that the Group will not be able to
meet its financial obligations as they fall due. The Group's
approach to managing liquidity is to ensure as far as possible,
that it will always have sufficient liquidity to meet its
liabilities when due, under both normal and stressed conditions,
without incurring unacceptable losses or risking damage to the
Group's reputation.
To ensure liquidity, the Group maintains sufficient cash and
cash equivalents on demand to meet its obligations as and when they
fall due.
Market risks
Market risk is the risk that changes in market prices, such as
foreign exchange rates, interest rates and equity prices will
affect the Group's income or the value of its holdings of financial
instrument. The objective of market risk management is to manage
and control market risk exposures within acceptable parameters,
while optimising return on risk.
Foreign currency exchange risks
The Group does not hedge its foreign currencies. Transactions
with customers and vendors are mainly denominated in Hong Kong
Dollars (HKD), Chinese Yuan (RMB) and US Dollars (USD). Management
considered that the currency exposure arising from these
transactions is not significant to the Group. Transactions with
Group companies denominated in Pounds Sterling (GBP), which are
exposed to foreign currency translation risks, are not significant
to the Group. The Group has bank accounts in HKD, RMB, USD and GBP
in order to mitigate against exchange risks.
The Group's exposure to foreign currency risk was as follow:
2012 HKD RMB USD Total
GBP'000 GBP'000 GBP'000 GBP'000
Trade and other receivables 67 1,486 629 2,182
Cash and cash equivalent 19 369 61 449
Trade and other payables 10 1,550 425 1,985
Bank borrowings - 158 - 158
96 3,563 1,115 4,774
============= ============= ============= =============
2011 HKD RMB USD Total
GBP'000 GBP'000 GBP'000 GBP'000
Trade and other receivables 18 679 430 1,127
Cash and cash equivalent 109 375 - 484
Trade and other payables - 467 - 467
127 1,521 430 2,078
============= ============= ============= =============
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012 - continued
Sensitivity analysis
A 10% strengthening of GBP against the following currencies at
the reporting date would have increased/(decreased) equity and
profit or loss by amounts shown below. This analysis assumes that
all variables, in particular interest rates, remain constant.
2012 2011
Equity Effect Equity Effect
in profit in profit
or (loss) or (loss)
GBP'000 GBP'000 GBP'000 GBP'000
HKD (9) (9) (12) (12)
RMB (324) (324) (137) (137)
USD (101) (101) (39) (39)
A 10% weakening of GBP against the following currencies at the
reporting date would have increased/(decreased) equity and profit
or loss by amounts shown below. This analysis assumes that all
variables, in particular interest rates, remain constant.
2012 2011
Equity Effect Equity Effect
in profit in profit
or (loss) or (loss)
GBP'000 GBP'000 GBP'000 GBP'000
HKD 11 11 14 14
RMB 396 396 169 169
USD 124 124 48 48
Cash flow and fair value interest rate risks
The Group's primary interest rate risk relates to interest
bearing debts. Investments in financial assets are mainly short
term in nature and are not held for speculative purposes but are
placed in fixed deposits.
The Group manages its interest rate exposure by maintaining a
fixed rate borrowing to mitigate the risk associated to interest
rate fluctuation.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR NKBDKOBKDDPK
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