TIDMCHRR
RNS Number : 0299G
China Rerun Chemical Group Ltd
27 February 2015
CHINA RERUN CHEMICAL GROUP LTD
("China Rerun" or the "Group")
Final results for the year ended 31 August 2014
China Rerun Chemical Group Ltd (CHRR.L), the producer of
lubricant products for the domestic automotive, industrial and
agricultural markets in the People's Republic of China ("PRC"),
today announces its audited consolidated results for the year ended
31 August 2014.
As part of the Group's restructuring in anticipation of its
Admission to AIM in October 2013, a new operating subsidiary was
incorporated in May 2012 which took over and commenced trading
activities in March 2013. The accounts of the last financial year
were therefore six months' results from 1 March 2013 to 31 August
2013. For the purposes of comparison, financial results from FY2013
have been combined with the six months' audited results of the
private Company from 1 September 2012 to 28 February 2013, as
detailed in the Admission Document.
Financial Highlights
Audited FY 2014 Pro forma FY Growth (FY2014 and
2013 FY2013)
---------------- ---------------- ------------- -------------------
Revenue RMB 319.3m RMB 273.3m + 16.8%
---------------- ---------------- ------------- -------------------
Gross profit RMB 86.9m RMB 72.8m + 19.4%
---------------- ---------------- ------------- -------------------
Gross margin 27.2% 26.6% 60bps
---------------- ---------------- ------------- -------------------
Pre-tax profit RMB 48.9 RMB 45.02m + 8.6%
---------------- ---------------- ------------- -------------------
Indicative exchange rates as at 26 February 2015: GBP1: RMB
9.52
Source:www.oanda.com
Operational Highlights
-- Like for like sales volume increased by 9.4% to 15.9 million
litres (FY2013: 14.5 million litres)
-- Gross margins increased by 60bps to 27.2% (FY2013: 26.6%) as
a result of selling higher quality products at higher prices whilst
benefitting from economies of scale
-- Average selling price increased to RMB20 per litre
-- Increased demand for our products across all major customer
segments, including automotive, construction and agricultural
industries
-- Maturing automotive market enables the Group to benefit from
customers switching to China Rerun's products as dealer warranties
expire
-- Developed 14 new products in our dedicated R&D facility
Commenting on the results, Mr Xinghe Wu, Executive Chairman of
China Rerun said:
"The Group has a clear and focused strategy which has delivered
a positive performance in the period with strong growth in both
revenue and profit. A rigorous focus on high quality products, high
quality distributors and brand building has enabled China Rerun to
take full advantage of strong demand. We are well positioned to
take advantage of market developments and commercial opportunities
in the year ahead and we will continue to focus on creating
shareholder value."
For further enquiries, please visit www.chinarerun.com or
contact:
China Rerun Xinghe Wu +86 459 666 9777
Yan Liu www.chinarerun.com/
Nick Lyth +44 776 990 6686
-------------------------- ----------------------- -----------------------------
Cairn Financial Advisers
LLP Jo Turner
(Nominated Adviser) Liam Murray +44 20 7148 7900
-------------------------- ----------------------- -----------------------------
Beaufort Securities
Limited
(Broker) Chris Rourke +44 20 7382 8300
-------------------------- ----------------------- -----------------------------
Cardew Group Shan Shan Willenbrock +44 20 7930 0777
(Financial PR) Georgina Hall
Tom Horsman chinarerun@cardewgroup.com.
-------------------------- ----------------------- -----------------------------
Notes to Editors
China Rerun Chemical Group Ltd is an established producer of
lubricant products for the PRC's domestic automotive, industrial
and agricultural markets. Based in Daqing, northeastern China, it
operates principally under the "Runyuan" and "Black E" brands. The
Group's products are sold through a network of third party
distributors to end users, some of whom operate branded automotive
garages.
Chairman's Statement
We have made good progress in growing the business and I am
pleased to report a positive set of results for the year ended 31
August 2014. In addition to sustained demand for lubricant oils in
the domestic market, we have benefitted from our focus on high
quality branded products, maintaining our high quality distribution
network and broadening our geographic representation in China. As a
result, the Group delivered revenues of RMB 319.3m, up 17% (FY2013:
RMB 273.3m) compared to the previous year. Gross profit rose by
19.4% to RMB 86.9m (FY2013: RMB 72.8m).
Like-for like sales volumes were 15.9 million litres, up 9.4%
compared with FY2013. Gross margin grew slightly to 27.2% (FY2013:
26.6%). The Group's pricing strategy, improved branding and product
quality have enabled us to maintain our margins. In the period
under review, average selling prices increased to RMB 20 per litre
(FY 2013: RMB 18.9).
Demand for high quality lubricants oils
The Group currently manufactures 29 types of lubricant oils for
the automotive, industrial and construction industries, as well as
one antifreeze product. More than 70% of our lubricant oils are
sold to the automotive industry. According to the China Association
of Automobile Manufacturers sales reached 23.5 million units in
2014 (2013: 21.9 million units) and the growth in vehicle numbers
is expected to continue into 2015 and beyond. The automotive market
in China is maturing and the expansion of the primary market is
expected to result in the growth of the secondary market which is
not underpinned by dealer warranties. The Group has benefitted from
customers switching to China Rerun's products as their main dealer
restrictions expire. Strong demand for lubricant oils from the
construction and agricultural industries continued in the period
under review and we developed a new mix of oils in response to this
demand.
Branding
We continue to place strong emphasis on the quality of our
products by upgrading the quality and specification of oil types to
achieve higher average selling prices. Our focus on building brand
awareness for our flagship brands: Runyuan, Black E, Panther,
Tiger, Deer and Horse, is driving our sales growth and this has
allowed us to integrate more distributors across a larger number of
provinces into our network and therefore protect our gross
margins.
We now have one of the best-selling lubricant oils in
Heilongjiang province and have won several industry awards along
the way, including the "Well-known Brand of China".
In March 2014, the Group was accredited as a training centre by
the Economic and Management College of China University of
Petroleum. The training centre will offer an Executive Master of
Business Administration programme for delegates in the oil and gas
sectors. The management believes this important accreditation will
enhance the Company's reputation and raise brand awareness.
Distribution network
We commenced FY2014 with 36 distributors. We have since
appointed six new distributors, bringing the total number of
distributors to 42 at the end of FY2014. The Group has a strict
policy of engaging only with high quality distributors who are able
to meet our sales targets. China Rerun's brand awareness has
strengthened in recent years and as a result we have benefitted
from selling a higher volume of high-grade products to our
distributors. This rigorous approach has enabled us to grow sales
volume, maintain our profits and achieve economies of scale. For
the full year 2014, average revenues per distributor was RMB 7.6m
(FY2013: RM B7.6m). We will continue to look to expand our
distribution network and increase our presence in the market
place.
People
Our people are our most valuable asset in sustaining our growth
and profitability and on, behalf of the Board, I would like to take
this opportunity to express my appreciation to all of them for
their hard work and dedication. Lastly, I would like to express my
deepest gratitude to our shareholders, customers and business
partners for their support of China Rerun.
Financial Review
As part of the Group's restructuring in anticipation of its
Admission to AIM in October 2013, a new operating subsidiary was
incorporated in May 2012 which took over and commenced trading
activities in March 2013. The accounts of the last financial year
were therefore six months' results from 1 March 2013 to 31 August
2013. For the purposes of comparison, financial results from FY2013
have been combined with the six months' audited results of the
private Company from 1 September 2012 to 28 February 2013, as
detailed in the Admission Document.
In the period under review the Group generated revenue of RMB
319.3 million, representing a growth of 16.8% (FY2013: RMB 273.3
million). The Group achieved gross profit of RMB 86.9 million
(FY2013: RMB 72.8 million) and average gross profit margins
increased to 27.2% (FY2013: 26.6%). The improvement in gross profit
was driven mainly by product upgrades as well as benefits from
economies of scale as volumes increased by 9.4%.
Profit after tax was up by 7% to RMB 35.1 million (FY2013: RMB
32.9 million). At 31 August 2014, the Company's cash and cash
equivalents were RMB 51.9 million (2013: RMB 46.8 million).
Sales and distribution costs were RMB 25.2 million (FY2013: RMB
14.9 million). The increase in costs was mainly driven by increased
sales commission, distributors' rebates to attract higher quality
distributors. Advertising costs accounted for 1.2% of revenue as
the Group continues to focus on brand building through marketing
initiatives, in line with its strategy.
Administrative costs rose to RMB 8.3 million (FY2013: RMB 6.2
million) as a result of increased direct overheads and staff costs.
Research and Development expenses increased to RMB 2.2 million
(FY2013: RMB 1.08 million) as the Group continues to focus on
upgrading and introducing new products to the market to meet
demand.
Inventories at the year end were RMB 2.6 million (FY2013: RMB
2.66 million), to meet demand. This has led to shorter delivery
lead times and therefore improved customer satisfaction.
There was an increase to RMB 34.4 million (FY2013: RMB 16.02
million) of advance payments to raw materials suppliers to prevent
our costs being affected by base oil price fluctuations.
Total liabilities of RMB 146.6 million include RMB 117.1 million
of taxation liability and will be paid when required. The Group has
made the appropriate accrual to recognise the liability as a
precautionary measure.
Net cash generated from operating activities was RMB 114 million
for the year (2013: RMB 40.6 million).
Outlook
We are pleased with the progress we have made in the period
under review and our focused strategy has enabled the Group to
deliver a positive performance.
The Group has made an encouraging start to the new financial
year. In Q1 2015, we have delivered growth in revenue and sales
volumes and gross margin is broadly in line with FY2014 at 27%. We
have also appointed two new distributors since the period end. Like
many other lubricant oil producers, the fall in the crude oil Brent
Price has impacted our business, however domestic price controls on
oil products have ensured that price movements are less volatile.
Nevertheless, the prices of our raw materials have fallen recently
and our distributors are coming under pressure to reduce selling
prices to reflect this. As a result, we have entered into
promotional activities and discounting, such as "buy 5 and get 1
free", which we can withdraw as and when the crude oil price
increases. In doing so, we are able to protect gross margins within
5% which we expect will be affected in Q2 while the crude oil price
remains low. Importantly, this strategy protects our average
selling prices as it is difficult to increase prices once discounts
are introduced and it also provides our distributors with stability
under the current circumstances.
Global economic conditions remain uncertain and we can see both
challenges and opportunities for the business in the year ahead.
The lubricant oil industry is highly fragmented, comprising more
than 4,000 participants, many of which are small or have a narrow
product offering. Industry consolidation will provide excellent
future expansion opportunities. We will actively seek acquisition
opportunities and joint distribution partnerships to complement our
existing business and we remain confident and optimistic about our
business.
CHINA RERUN CHEMICAL GROUP LIMITED
CONSOLIDATED AND COMPANY STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 AUGUST 2014
Group Group Company Company
Period Period
from from
30 May 30 May
Year ended 2012 to Year ended 2012 to
31 August 31 August 31 August 31 August
2014 2013 2014 2013
RMB'000 RMB'000 RMB'000 RMB'000
Revenue 319,332 150,714 - -
Cost of sales (232,353) (111,359) - -
----------- ------------ ------------- ------------
Gross profit 86,979 39,355 - -
Distribution costs (25,231) (7,420) - -
Administrative expenses (8,296) (1,823) (3,390) (227)
Listing costs (4,735) (4,543) (4,728) (3,424)
----------- ------------ ------------- ------------
Operating profit/(loss) 48,717 25,569 (8,118) (3,651)
Net finance income /(costs) 266 12 (4) -
----------- ------------ ------------- ------------
Profit / (loss) before
tax 48,983 25,581 (8,122) (3,651)
Income tax expense (13,855) (7,308) - -
----------- ------------ ------------- ------------
Profit/(loss) for the period 35,128 18,273 (8,122) (3,651)
Other comprehensive income - - - -
Currency translation difference 4 108 - 61
----------- ------------ ------------- ------------
Total comprehensive income
for the period 35,132 18,381 (8,122) (3,590)
=========== ============ ============= ============
Profit/(loss) for the year
attributable to:
Owners of the company 35,128 18,543 (8,122) (3,651)
Non-controlling interest - (270) - -
----------- ------------ ------------- ------------
35,128 18,273 (8,122) (3,651)
=========== ============ ============= ============
Total comprehensive income/(loss)
attributable to:
Owners of the company 35,132 18,651
Non-controlling interest - (270)
----------- ------------
35,132 18,381
=========== ============
Earnings per share
Basic (in RMB 1.00) 0.137 9,272
=========== ============
Diluted (in RMB 1.00) 0.136 9,272
=========== ============
CHINA RERUN CHEMICAL GROUP LIMITED
CONSOLIDATED AND COMPANY STATEMENT OF FINANCIAL POSITION
AT 31 AUGUST 2014
Group Group Company Company
2014 2013 2014 2013
RMB'000 RMB'000 RMB'000 RMB'000
Non-current assets
Property, plant and equipment 3,087 3,701 - -
Intangible assets -* -* - -
Investment in subsidiaries - - 632 632
-------- -------- --------- --------
3,087 3,701 632 632
-------- -------- --------- --------
Current assets
Inventories 2,596 2,655 - -
Trade and other receivables 145,471 16,602 - -
Cash and cash equivalents 51,960 46,836 2 -
-------- -------- --------- --------
200,027 66,093 2 -
-------- -------- --------- --------
Total assets 203,114 69,794 634 632
======== ======== ========= ========
Equity attributable to owners
of the parent
Share capital 12 12 12 12
Share premium 2,414 620 2,414 620
Statutory reserve 2,287 2,287 - -
Warrant reserve 496 - 496 -
Translation reserve 112 108 61 61
Retained earnings 51,194 16,066 (11,773) (3,651)
-------- -------- --------- --------
56,515 19,093 (8,790) (2,958)
Non-controlling interest - - - -
-------- -------- ---------
Total equity 56,515 19,093 (8,790) (2,958)
-------- -------- ---------
Non-current liabilities
Borrowings 3,891 - - -
-------- -------- --------- --------
3,891 - - -
-------- -------- --------- --------
Current liabilities
Trade and other payables 121,545 43,393 9,424 3,590
Income tax liabilities 21,163 7,308 - -
-------- -------- --------- --------
142,708 50,701 9,424 3,590
-------- -------- --------- --------
Total current liabilities 146,599 50,701 9,424 3,590
-------- -------- --------
Total equity and liabilities 203,114 69,794 634 632
======== ======== ========= ========
*amount is less than RMB1,000
CHINA RERUN CHEMICAL GROUP LIMITED
CONSOLIDATED AND COMPANY STATEMENTS OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 AUGUST 2014
The Group
Share Share Statutory Warrant Translation Retained Non-controlling
capital premium reserve reserve reserve earnings Total interest Total
RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000
Balance at 30 May 2012 - - - - - - - - -
======== ======== ========== ======== ============ ========= ======== ================ ========
Profit for the period - - - - - 18,543 18,543 (270) 18,273
Transfer to statutory
reserve - - 2,287 - - (2,287) - - -
Exchange difference - - - - 108 - 108 - 108
-------- -------- ---------- -------- ------------ --------- -------- ---------------- --------
Total comprehensive income
for the period - - 2,287 - 108 16,256 18,651 (270) 18,381
-------- -------- ---------- -------- ------------ --------- -------- ---------------- --------
Issue of shares 12 620 - - - - 632 - 632
Acquisition of
non-controlling
interest without a change
in control - - - - - (190) (190) 270 80
----------
Balance at 31 August 2013 12 620 2,287 - 108 16,066 19,093 - 19,093
======== ======== ---------- ======== ============ ========= ======== ================ ========
Profit for the year - - - - - 35,128 35,128 - 35,128
Exchange difference - - - - 4 - 4 - 4
-------- -------- ---------- -------- ------------ --------- -------- ---------------- --------
Total comprehensive income
for the year - - - - 4 35,128 35,132 - 35,132
-------- -------- ---------- -------- ------------ --------- -------- ---------------- --------
Issue of shares -* 1,794 - - - - 1,794 - 1,794
Warrant reserve - - - 496 - - 496 - 496
Balance at 31 August 2014 12 2,414 2,287 496 112 51,194 56,515 - 56,515
======== ======== ========== ======== ============ ========= ======== ================ ========
*amount is less than RMB1,000
Statutory reserve: The statutory reserve represents the amount
set aside in accordance with the legislation in the People's
Republic of China.
CHINA RERUN CHEMICAL GROUP LIMITED
CONSOLIDATED AND COMPANY STATEMENTS OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 AUGUST 2014
The Company
Share Warrant Translation Retained
capital Share premium reserve reserve earnings Total
RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000
Balance at 30 May 2012 - - - - - -
========= ============== ========= ============ ========== ========
Loss for the period - - - - (3,651) (3,651)
Exchange difference - - - 61 - 61
--------- -------------- --------- ------------ ---------- --------
Total comprehensive income for
the period - - - 61 (3,651) (3,590)
--------- -------------- --------- ------------ ---------- --------
Issue of shares 12 620 - - - 632
---------
Balance at 31 August 2013 12 620 - 61 (3,651) (2,958)
========= ============== ========= ============ ========== ========
Loss for the year - - - - (8,122) (8,122)
Exchange difference - - - - - -
--------- -------------- --------- ------------ ---------- --------
Total comprehensive income for
the year - - - - (8,122) (8,122)
--------- -------------- --------- ------------ ---------- --------
Issue of shares -* 1,794 - - - 1,794
Warrant reserve - - 496 - - 496
---------
Balance at 31 August 2014 12 2,414 496 61 (11,773) (8,790)
========= ============== ========= ============ ========== ========
*amount is less than RMB1,000
CHINA RERUN CHEMICAL GROUP LIMITED
CONSOLIDATED AND COMPANY STATEMENT OF CASH FLOW
FOR THE YEAR ENDED 31 AUGUST 2014
Group Group Company Company
Period Period
from from
30 May 30 May
Year ended 2012 to Year ended 2012 to
31 August 31 August 31 August 31 August
2014 2013 2014 2013
RMB'000 RMB'000 RMB'000 RMB'000
Cash flow from operating
activities
Profit /(loss) before
tax 48,983 25,581 (8,122) (3,651)
Interest expense 8 - - -
Interest income (274) (12) - -
Depreciation 639 368 - -
Warrant costs 496 - - -
----------- ----------- -----------
Operating cash inflows
before movements in working
capital 49,852 25,937 (8,122) (3,651)
Decrease/(Increase) in
inventories 59 (2,655) - -
Increase in receivables (17,885) (16,602) - -
Increase in payables 82,047 33,950 5,834 3,651
----------- ----------- ----------- -----------
Net cash generated from
operations 114,073 40,630 (2,288) -
Income tax paid - - - -
----------- ----------- ----------- -----------
Net cash generated from
operating activities 114,073 40,630 (2,288) -
=========== =========== =========== ===========
Investing activities
Interest received 274 12 - -
Purchase of property,
plant and equipment (25) (112) - -
Acquisition of subsidiary - - - (632)
----------- ----------- ----------- -----------
Net cash used in investing
activities 249 (100) - (632)
=========== =========== =========== ===========
Financing activities
Interest paid (8) - - -
Loan (to)/from the director (110,984) 5,674 - -
Proceed from issue of
shares 1,794 632 1,794 632
----------- -----------
Net cash from financing
activities (109,198) 6,306 2,290 632
=========== =========== =========== ===========
Net increase in cash and
cash equivalents 5,124 46,836 2 -
Cash and cash equivalents
at beginning of period 46,836 - - -
----------- ----------- ----------- -----------
Cash and cash equivalents
at end of period 51,960 46,836 2 -
=========== =========== =========== ===========
ABBREVIATED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 AUGUST 2014
The following notes are in abbreviated form. A full version of
the notes accompanying the final results, which should be read in
full, can be found on the Company's website.
1 GENERAL INFORMATION
China Rerun Chemical Group Limited ("China Rerun" or the
"Company") was incorporated in Cayman Islands. The registered
office of the Company is located at 89 Nexus Way, Camana Bay, Grand
Cayman KY1-9007 Cayman Islands.
The principal activity of the Company continued to be that of an
investment holding company and the principal activities of the
Group are production and distribution of lubricating oil for the
automotive, agricultural and certain industrial markets in P.R.
China. The principal place of business is at Room 407, Block B-11,
Service Outsourcing Industrial Park, High-tech Industrial
Development Zone, Daqing, Heilongjiang, P. R. China 163316.
The company was set up as part of the group restructuring for
admission to AIM, the group has taken over the business and trade
of Daqing Economic Development Zone Runyuan Chemical Co., Limited
("Daqing Runyuan") before admission to AIM.
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
2.1 Statement of compliance
The financial statements have been prepared in accordance with
International Financial Reporting Standards as adopted by the EU
("IFRS") issued by the International Accounting Standard Board
(IASB) and interpretations of the International Financial Reporting
Interpretations Committee (IFRIC).
The group has adopted all relevant standards effective for
accounting periods beginning on or after 1 January 2014 from the
beginning of the reporting period.
As at end of the reporting period, the group has not adopted the
following standard as it is either not effective or not applicable
to the group's business.
2.2 Basis of preparation
The consolidated and company financial statements have been
prepared on the historical cost basis except for certain financial
instruments, which are measured at fair values as explained in the
accounting policies set out below.
Historical cost is generally based on the fair value of the
consideration given in exchange for assets.
Fair value is the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between
market participants at the measurement date, regardless of whether
that price is directly observable or estimate using another
valuation technique.
The consolidated financial statements are rounded to the nearest
thousand ('000) and they are presented in Chinese Renminbi (RMB),
the official currency of the People's Republic of China. RMB is the
functional currency of the company.
2.3 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
power over the investee; is exposed, or has rights, to variable
returns from its involvement with the investee; and has the ability
to use its power to affect its return.
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 and up to the
effective date of disposal, as appropriate. Total comprehensive
income of subsidiaries is attributed to the owners of the Company
and to the non-controlling interest even if this result in the
non-controlling interest having a deficit balance.
Where necessary, adjustments are made to the consolidated and
company financial statements of subsidiaries to bring their
accounting policies into line with those used by other members of
the Group.
All intra-group transactions, balances, income and expenses are
eliminated in full on consolidation.
Non-controlling interests in subsidiaries are presented
separately from the Group's equity therein.
2.4 Going concern
The financial statements have been prepared assuming the Group
will continue as a going concern.
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.
2.5 Significant accounting estimates and judgements
Overview
The preparation of financial information requires management to
make judgement estimates and assumptions that effect the
application of accounting policies together with the reported
amounts of assets, liabilities, income and expenses.
Estimates and judgements are continually evaluated and are based
on historical experience and other factors, including expectations
of future events that are believed to be reasonable under the
circumstances.
The Group makes estimates and assumptions concerning the future.
The resulting accounting estimates may differ from 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 future financial years are addressed below.
a) Impairment of property, plant and equipment
The carrying value of the property, plant and equipment is
reviewed for impairment when events or changes in circumstances
indicate the carrying value may not be recoverable in accordance
with the accounting policies as disclosed in the relevant parts of
note 2.12. If such indication exists, the recoverable amounts of
the property, plant and equipment are determined on value-in-use
calculations, which require the use of judgment and estimates.
b) Depreciation
The Group's management determines the estimated residual value,
useful lives and related depreciation charges for the property,
plant and equipment with reference to the estimated periods that
the Company intends to derive future economic benefits from the use
of these assets. Management will revise the depreciation and
amortisation charge where useful lives are different to previously
estimated.
c) Operating lease
The Group follows the guidance of IAS17 to specify the
appropriate accounting policies and disclosure applicable to
leases. In considering whether the leases agreements as described
in note 22 are operating leases which require significant judgment
and the directors apply those judgments. The directors are of the
opinion that there is no commercial benefit to exercise the right
to purchase where there is no lease payment obligation. The leases
therefore do not transfer substantially all risk and rewards
incidental to ownership and it does not meet the definition of
assets and liabilities in accordance to the Conceptual Framework
for Financial Reporting.
d) Net realisable value of inventories
Net realisable value of inventories is the estimated selling
price in the ordinary course of business, less estimated costs of
completion and selling expenses. These estimates are based on the
current market condition and the historical experience of
manufacturing and selling products of similar nature. It could
change significantly as a result of changes in customer demand and
competitor actions in response to severe industry cycle. Management
reassesses these estimates at each balance sheet date. The carrying
amount of the Group's inventories as at 31 August 2014 was RMB
2.6million.
e) Income tax and other taxes
The Company's subsidiaries that operate in the People's Republic
of China are subject to corporate income tax in the People's
Republic of China. Significant judgement is required in determining
the provision for income taxes and other taxes. There are some
transactions and calculations for which the ultimate tax
determination is uncertain during the ordinary course of business.
The Company recognises liabilities for anticipated tax audit issues
based on estimates of whether additional taxes will be due. Where
the final tax outcome of these matters is different from the
amounts that were initially recorded, such differences will impact
the income tax and Value-added tax in the period in which such
determination is made. Accordingly, reversal or additional tax
provision might be made. As at 31 August 2014, the Group's income
tax, VAT and other tax liabilities were RMB 21.2million (2013: RMB
7.3million), RMB 84.1million (2013: RMB 26.0million), and RMB
33.0million (2013: 26.0million), respectively. No provision has
been made for possible penalties or interest.
f) Measurement of fair values
A number of the group's accounting policies and disclosures
require the measurement of fair values, for both financial and
non-financial assets and liabilities.
The group currently does not have a control framework with
respect to the measurement of fair values. The significant
unobservable inputs were provided by the management to their best
knowledge.
When measuring the fair value of an asset or a liability, the
management uses market observable data as far possible. Fair values
are categorised into different levels in a fair value hierarchy
based on the inputs used in the valuation techniques as
follows.
-- Level 1: quoted prices (unadjusted) in active markets or identical assets or liabilities;
-- Level 2: inputs other than quoted prices included in Level 1
that are observable for the asset or liability, either directly
(i.e. prices) or indirectly (i.e. derived from prices);
-- Level 3: inputs for the asset or liability that are not based
on observable market data (unobservable inputs).
The information account the assumptions made in measuring fair
values is included in the relevant notes.
3 EARNINGS PER SHARE
Basic earnings per share are calculated by dividing the profit
attributable to equity shareholders of the Company by the weighted
average number of ordinary shares in issue during the year.
Group Group
2014 2013
RMB RMB
Net profit attributable
to owners of parent
(RMB'000) 35,128 18,543
======== =======
Number of ordinary shares
('000) 255,810 2
======== =======
Basic earnings per share
(RMB) 0.137 9,272
======== =======
Diluted earnings per
share (RMB) 0.136 9,272
======== =======
4 POSTING OF ACCOUNTS
The Company will post a copy of the final report and accounts to
all shareholders on Friday 27 February which will include a Notice
of Annual General Meeting.
5 ANNUAL GENERAL MEETING
The Group's Annual General Meeting will be held at Room 2004,
Building C, Zhongke Pioneer Park, 88 Zhongbao Road, Saertu
District, Daqing City, Heilongjiang Province, P.R. China 163312 on
31 March 2015 at 16:30hrs (China Time).
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR SEDFAMFISEDE
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