TIDMKADA
RNS Number : 0776I
Kada Technology Holdings
28 June 2013
Kada Technology Holdings Limited
("Kada" or the "Group")
Final Results
Kada Technology Holdings Limited (AIM:KADA), the China-based
provider of components and devices for the IT industry and consumer
electronics, today announces its audited full year results for the
period ended 31 December 2012.
Highlights
-- Kada successfully joined AIM on 5 July 2012
-- Revenues increased by 14% to US$93.92 million (2011:
US$82.39 million)
-- Normalised Profit before tax of US$9.78 million (2011:
US$ 13.61 million)
-- Earnings per share of US$0.24 (2011: US$0.36)
-- Net assets US$28.13 million (2011: US$19.50 million)
Post Period End
-- KADA enters into a contract in June 2013 worth US$60m over 12
months with Beijing Great Dragon Information Technology
International Co., Ltd. who is part of China Potevio Co., Ltd's
group of companies ("Putian"). Putian is a state-owned enterprise
and a leading domestic IT equipment manufacturer and service
provider. The agreement will see KADA provide LCD screens and other
compnenets on an on-going basis.
Chairman's Statement
Commenting on the Final Results, Ivor Shrago, Chairman of Kada,
said: "2012 has proven to be a mixed year for Kada. We have won new
business in our Electronic Components Division despite the slowdown
in export-driven demand. However, our Solutions Package business
has struggled in 2012 as the demand for tablet computers has
affected netbook sales for our key customers. However, we believe
that the long term future for our Solutions Division looks strong
as China continues to adopt new technology and media solutions at a
rapid pace. This reliance on the Electronic Components division in
2012 has meant our overall margins have shrunk during the period
under review. We are confident that the revenues in our Electronic
Components division will continue to grow and look forward to
developing our Media Platform business in 2013 and beyond."
- Ends -
For further information:
Kada Technology Holdings Limited
Paul He Xuebo, Chief Executive Officer Tel: +44 (0) 20 7398
7719
www.kada-ir.com
finnCap Limited
Geoff Nash / Christopher Raggett Tel: +44 (0) 20 7220
0500
www.finncap.com
Notes to Editors
Kada was founded in 2004 and provides solutions for electronic
devices, systems and media platforms (the "Solution Packages
Business"). The Group also distributes and sells electronic
components and provides technical support (the "Electronic
Component Business"). Kada is headquartered in Shenzhen with
offices in Hong Kong, Beijing, Shanghai, Zhuzhou and Mianyang in
China, as well as Kuala Lumpur in Malaysia.
Kada's Distributorship Division distributes and trades a
multitude of electronic components, predominantly Integrated
Circuits ("ICs"). Kada sources electronic components from a number
of suppliers that are based locally as well as from countries
including Taiwan, Hong Kong and the USA. Many of Kada's electronic
components are used in the manufacture of consumer electronics,
internet terminals and routers as well as communication devices and
media players.
The Company's Solutions Business involves the design,
development and sale of solutions packages for electronic devices
(such as netbooks, Netbox, handheld/tablet PC). Solutions packages
include product definition, structural, mechanical, visual and
circuitry design, prototype testing, underlying software
development, pilot production and production support. Solutions
packages are either commissioned by customers or conceptualised
in-house. The solutions packages offered by the Company are
flexible ranging from designs of motherboard, to the development of
a complete electronic device. Kada is currently expanding
downstream into the provision and operation of a wireless media
solution that incorporate small display terminals, mounted on a
taxi's front passenger headrest that disseminates multimedia
information and advertising programs for passengers. Taxis on the
road will receive uploads of real-time information and data (for
example local attractions, history, news highlights, public
services information and simple interactive games and animations),
via 3G or WiFi network, which are automatically displayed to the
taxi passengers.
For further information on the Group, please visit Kada's
investor relations website at www.kada-ir.com.
Chairman's Statement
I am delighted to present our maiden year end results since the
Group joined AIM in July 2012. Overall, 2012 proved to be a
challenging year for the Company. Revenues have grown to US$93.92
million (2011: US$82.39 million) through the increased sales in our
Electronic Components division. I am particularly pleased with this
result as demand from overseas have slowed which has been offset by
our domestic business. This has been franked by our ability to win
blue chip clients such as Putian, Haier, Innolux, Mostlike and
Eternal Asia. We believe that our track record in this space will
lead to further larger client wins into 2013. In 2012, we have seen
a continued growth in demand for LCD screens and this is where the
majority of our new orders have been placed and an area where we
are particularly strong.
Revenues in our Solutions Package business fell to USD$13.090
million (2011: USD$16.14 million) but still maintained a healthy
gross profit margin of 68%. This drop was due to the continued
decline in demand for some of our customers products as our
existing developed solution business continues to focus on netbooks
and handheld PC's. However, the Solutions business looks set to
profit from its continued R & D spend in 2012 on its wireless
media division. These new products include the following:
City Service Media Kiosk: - a multimedia terminal with the
capability to provide a range of wireless electronic services
including credit card and utility bill payment, ticket purchases
for public transportation and commercial airlines, virtual
shopping, e-coupons on top of standard infotainment programs like
commercial advertising, public services announcements, tourist
information and simple interactive games and animations. These
media kiosks will be positioned in commercial hubs like malls and
office buildings and target China's growing affluent, urban
population. There are currently agreements in place with various
partners including government departments to install the terminals.
These will begin pilot runs during 2013 with the first being a
batch of 800 being deployed in Guangdong.
Airport Trolley Media System - a multimedia device designed to
be positioned on the handle-bar of airport trolleys and will
provide both valuable information services such as flight search,
check-in details, airport announcements and airport facilities and
layout as well as a variety of additional options such as virtual
shopping, tourist information, advertising programs and interactive
entertainment. We are currently in discussions with several
airports where there has been significant interest and are hopeful
of securing sales during 2013.
Wireless Taxi Media - small display terminals, mounted on a
taxi's front passenger headrest that disseminate multimedia
information and advertising programs for taxi passengers. The
device is designed to be low in power consumption and durable with
touch-screen ability. Using the relevant telecom operator's leased
network, server rooms are set up to disseminate uploads to devices.
Taxis on the road within the city will receive uploads of real-time
information and data (for example, this could include: city
attractions, history, news highlights, public services information
and simple interactive games and animations), via a 3G network,
which are automatically displayed to the taxi customers. After
successful pilot tests in 2012, taxis in Xian, Mianyang and
Shanghai are in the process of launching the system while Harbin,
Nanjing, Luoyang are undergoing pilot stage testing in 2013.
On the basis of these new product offerings, we feel confident
in the strength of our Solutions business as well as our Electronic
Components division. We are excited about the development and roll
out of our new products in our Solutions business through 2012 and
into 2013. We look forward to updating shareholders during the
remainder of 2013 on the progress of our new Solutions division
products.
Financial Results
The Group analyses its revenue and gross profit margin business
divisions as shown in the table below:
Solution Packages Electronic Components
2012 2011 2012 2011
USD'000 USD'000 USD'000 USD'000
Revenue 13,090 16,143 80,830 66,255
Gross Profit 8,937 11,006 3,580 8,109
GP Margin 68% 68% 4% 12%
The significant increase in the total revenue was attributable
to the continued growth in our Electronic Componentsegments that
benefitted from the encouraging growth experienced in China's ICT
industry. 92% of KADA's revenue in 2012 came from within China with
the remaining 8% sourced from Hong Kong and Malaysia. During 2012
KADA maintained its client numbers at approximately 300. However,
to improve its cash flow the Company has focused on upgrading its
customer list. We expect to continue this by focusing on larger key
clients while ceasing trade with smaller lower margin SME's. During
2012 the Group saw more success in its LCD business which carries a
lower GP margin compared to its IC component business that requires
more field support to customers. This coupled with rising product
costs has seen a fall in our GP margin from 12% to 4%.
The Group's working capital position improved during the course
of 2012 seeing a net cash inflow of approximately US$ 13 million.
This was due to the gross proceeds of the AIM listing of
approximately US$ 2,000,000 and operating profit before tax of US$
9,306,000 (The one off listing expenses incurred in 2012 amounted
to US$470k). Meanwhile, the cash outflow was mainly caused by the
increase in trade receivables. It is important to note that
historically, and going forward, KADA will consistently carry a
relatively high level of trade receivables compared to other
industries. This is as a result of granting 120 days credit period
to customers which KADA has to offer to remain competitive when
submitting tenders for new business. The level of trade receivables
is constantly monitored and we believe that by continuing to
upgrade our customer list, the management of debtors should become
easier. Most of the trade receivables have been collected
subsequent to the reporting date. The management of the Group
believes that, with the continuous net cash generated from
operating activities and available banking facilities, the Group
would be able to further improve its working capital position.
As the business has continued to grow during 2012 the net asset
value of the Group has increased from approximately US$ 19,499,000
to US$ 28,134,000. This has been predominantly due to the increase
of the Group's cash and cash equivalent (approximately US$
13,009,000 in 2013 and US$ 9,365,000 in 2012) and trade and other
receivables (approximately US$ 47,592,000 and US$ 37,537,000
respectively).
Trading Update
Trading in 2013 has been broadly similar to 2012. The majority
of our revenues continue to come from our Electronic Components
division. This has been bolstered by the signing of a contract
worth US$60m in June this year with Putian as out lined above and
other contract wins. We expect this revenue to be recorded over the
next 12 months at an expected gross profit margin of between 5%-7%.
We believe that this is a key win for KADA as it demonstrates our
ability to facilitate larger trades for more established clients.
We hope that this will lead to other new client wins during
2013.
In order to facilitate the growth in the trading division KADA
have agreed further borrowing facilities with Dah Sing Bank (China)
and China Citic Bank International, both for US$5m which will help
with the Company's cash flow during 2013. The Board believe that a
further facility of up to US$5m may be required during the year
depending on the amount of new business won.
The trading conditions for the Solutions Package division
continue to be difficult for its existing products as the Netbook
and handheld PC market continue to contract. However, the Board
believes that the new products market, as outlined above, will
start to mature in 2013. For example, we expect to initiate our
pilot run of Media Kiosk terminals in 2013. The first step will be
a pilot run of 800 terminals across Guangdong province with a
further 30,000 expected to be installed over the next 12 months.
Our wireless taxi media system is being launched in Xian, Mianyang
and Shanghai while Harbin, Nanjing are Luoyang are undergoing pilot
tests. The Board believes that we will be able to install 10,000
units over the next 12 months. We expect our airport trolley
muiltimedia system to begin to be installed and tested during 2013
and we look forward to updating our shareholders on new contract
wins in this area in due course.
The Board believes that the rapid development of the media
industry in China coupled with the continued dramatic growth in the
use of technology across China puts KADA in a strong position going
forward. KADA will continue to capitalise on these trends by
consolidating the strength and appeal of its existing products and
technologies while developing new technological applications and
platforms to tap into new niches and markets.
The Annual Report and Accounts have been sent to all
shareholders today along with the AGM Notice both of which are
available on the Company's website at: www.kada-ir.com. The AGM
will be held at 12.30pm on 16 August 2013 at the offices of Proton
Invest Holdings Ltd.,7 Floor, 10 Block Shenzhen Software Park Keji
Middle 2nd Road, Nanshan District, Shenzhen, Guangdong, P.R.China
518000.
CONSOLIDATED AND COMPANY STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2012
Note Group Company
Pro forma
2012 2011 2012 2011
USD'000 USD'000 USD'000 USD'000
Revenue 3 93,920 82,398 - -
Cost of sales (81,403) (63,303) - -
--------- ---------- ------------------------- -------------------------
Gross profit 12,517 19,095 - -
Other income 3 558 483 - -
Selling and distribution
expenses (632) (557) - -
Administrative expenses (2,728) (5,188) (677) (705)
Finance cost on bank
borrowings (409) (221) - -
--------- ---------- ------------------------- -------------------------
Profit /(loss) before
taxation 4 9,306 13,612 (677) (705)
Income tax expense 6 (2,660) (3,268) - -
--------- ---------- ------------------------- -------------------------
Profit/(loss) for
the year 6,646 10,344 (677) (705)
Other comprehensive
income
Currency translation
differences 77 77 - -
---------
Total comprehensive
income/(loss) for
the year 6,723 10,421 (677) (705)
========= ========== ========================= =========================
Profit/(loss) for
the year attributable
to:
Owners of the Company 6,706 10,357 (677) (705)
Non-controlling interest (60) (13) - -
--------- ---------- ------------------------- -------------------------
6,646 10,344 (677) (705)
========= ========== ========================= =========================
Total comprehensive
income/(loss) attributable
to:
Owners of the Company 6,783 10,434 (677) (705)
Non-controlling interest (60) (13) - -
--------- ---------- ------------------------- -------------------------
6,723 10,421 (677) (705)
========= ========== ========================= =========================
Earnings per share
Basic and diluted
(in USD 1.00) 7 0.24 0.36 (0.02) (0.02)
========= ========== ========================= =========================
CONSOLIDATED AND COMPANY STATEMENT OF FINANCIAL POSITION
FOR THE YEAR ENDED 31 DECEMBER 2012
Note Group Company
Pro forma
2012 2011 2012 2011
USD'000 USD'000 USD'000 USD'000
ASSETS
Non-current assets
Plant and equipment 8 142 225 - -
Intangible assets 9 34 45 - -
Investment in subsidiaries 10 - - 5,721 -
Deferred tax assets 17 601 345 - -
-------- ---------- -------- --------
Total non-current assets 777 615 5,721 -
-------- ---------- -------- --------
Current assets
Inventories 11 833 1,449 - -
Trade and other receivables 12 47,592 37,537 638 110
Derivative financial assets 13 81 163 - -
Cash and cash equivalents 14 13,009 9,365 - 80
Total current assets 61,515 48,514 638 190
-------- ---------- -------- --------
Total assets 62,292 49,129 6,359 190
======== ========== ======== ========
EQUITY AND LIABILITIES
Equity attributable to owners of the parent
Share capital 15 5,796 - 5,796 -*
Share premium 1,924 - 1,924 -
Combination reserves 16 (4,388) 1,333 - -
Translation reserves 16 190 113 - -
Statutory reserves 16 77 164 - -
Retained earnings 24,545 17,839 (1,751) (1,074)
-------- ---------- -------- --------
28,144 19,449 5,969 (1,074)
Non-controlling Interest 20 (10) 50 - -
Total equity 28,134 19,499 5,969 (1,074)
-------- ---------- -------- --------
Current liabilities
Bank borrowings 18 11,398 5,372 - -
Trade and other payables 19 10,856 14,804 390 1,264
Corporate income tax payable 6 10,896 8,084 - -
Total current liabilities 33,150 28,260 390 1,264
-------- ---------- -------- --------
*Amount is less than USD1,000
CONSOLIDATED AND COMPANY STATEMENT OF FINANCIAL POSITION
FOR THE YEAR ENDED 31 DECEMBER 2012
Note Group Company
Pro forma
2012 2011 2012 2011
USD'000 USD'000 USD'000 USD'000
Non-current liabilities
Deferred tax liabilities 17 50 50 - -
Borrowings 18 958 1,320 - -
-------- ---------- --------- --------
Total non-current liabilities 1,008 1,370 - -
-------- ---------- --------- --------
Total liabilities 34,158 29,630 390 1,264
-------- ---------- --------- --------
Total equity and liabilities 62,292 49,129 6,359 190
======== ========== ========= ========
The consolidatedand company financial statements were approved
by the board of directors and authorised for issue on 27 June 2013
and were signed on its behalf by:
Mr He Xuebo
Chief Executive Officer
Date: 27 June 2013
CONSOLIDATED AND COMPANY STATEMENT OF CASH FLOW
FOR THE YEAR ENDED 31 DECEMBER 2012
Group Company
Pro forma
2012 2011 2012 2011
USD'000 USD'000 USD'000 USD'000
Cash flows from operating activities
Profit/(loss) before taxation 9,306 13,612 (677) (705)
Adjustments for:
Interest expenses 410 221 - -
Interest income (324) (157) - -
Depreciation of plant and equipment 86 54 - -
Loss on disposal of plant and equipment 3 - - -
Amortisation of intangible assets 14 11 - -
Impairment loss recognised on trade and other receivables 80 2,487 80 -
Gain on disposal of derivative financial assets 82 (163) - -
Operating cash flows before movement in working capital 9,657 16,065 (597) (705)
Decrease in inventories 616 - - -
Decrease/(increase) in trade and other receivables (10,135) (19,274) (1,589) 171
Decrease in other current assets - 315 - -
Increase/(decrease) in trade and other payables (3,948) 2,309 107 48
--------- ---------- -------- --------
Cash generated/(used in) from operations (3,810) (585) (2,079) (486)
Interest received 324 157 - -
Tax paid (103) (555) - -
--------- ---------- -------- --------
Net cash generated from/(used in) operating activities (3,589) (983) (2,079) (486)
--------- ---------- -------- --------
Cash flow from investing activities
Purchase of plant and equipment (4) (146) - -
Purchase of intangible assets (2) (2) - -
Net cash used in investing activities (6) (148) (2,079) -
--------- ---------- -------- --------
Cash flow from financing activities
Interest paid (410) (221) - -
Borrowings 5,664 1,335 - -
Redemption of shares - (420) - -
Contribution from non-controlling interest - 63 - -
Transfer between reserves (87) - - -
Proceed from shares issued 1,999 - 1,999 -
Net cash generated from /(used in) financing activities 7,166 757 1,999 -
--------- ---------- -------- --------
CONSOLIDATED AND COMPANY STATEMENT OF CASH FLOW
FOR THE YEAR ENDED 31 DECEMBER 2012
Group Company
Pro forma
2012 2011 2012 2011
USD'000 USD'000 USD'000 USD'000
Net increase/(decrease) in cash and cash equivalents 3,571 (374) (80) (486)
Effect of foreign exchange rate changes 73 76 - -
Cash and cash equivalents at the beginning of the year 9,365 9,663 80 566
-------- ---------- -------- --------
Cash and cash equivalents at the end of the year 13,009 9,365 - 80
======== ========== ======== ========
CONSOLIDATED AND COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2012
The Group
Non-
Share Share Combination Translation Statutory Retained controlling
capital premium reserves reserves reserves earnings Total interest Total
USD'000 USD'000 USD'000 USD'000 USD'000 USD'000 USD'000 USD'000 USD'000
Balance at 31
December 2010 -* - 1,753 36 47 17,599 19,435 - 19,435
Total
comprehensive
income for the
year - - - 77 - 10,357 10,434 (13) 10,421
Dividends
distribution - - - - - (10,000) (10,000) - (10,000)
Capital
contribution
from
non-controlling
interest - - - - - - - 63 63
Transfer to
statutory
reserve - - - - 117 (117) - - -
Redemption of
cash
contribution
capitalised - - (420) - - - (420) - (420)
-------- -------- ------------ ------------ ---------- --------- --------- ------------ ---------
Balance as at 31
December 2011 -* - 1,333 113 164 17,839 19,449 50 19,499
Total
comprehensive
income for the
year - - - 77 - 6,706 6,783 (60) 6,723
Issue of shares
under the
Reorganisation 5,721 - (5,721) - - - - - -
Issue of shares 75 1,924 - - - 1,999 - 1,999
Transfer to
statutory
reserve - - - - (87) - (87) - (87)
Balance as at 31
December 2012 5,796 1,924 (4,388) 190 77 24,545 28,144 (10) 28,134
======== ======== ============ ============ ========== ========= ========= ============ =========
*Amount is less than USD1,000
Combination reserve: The combination reserve represents shares
that have been issued at a premium to their nominal value on
acquisition of another company.
Statutory reserve: The statutory reserve represents the amount
set aside in accordance with the legislation in the People's
Republic of China.
CONSOLIDATED AND COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2012
The Company
Share capital Share premium Retained earnings Total
USD'000 USD'000 USD'000 USD'000
Balance at 31 December 2010 -* - (369) (369)
Total comprehensive loss for the year - - (705) (705)
Balance at 31 December 2011 -* - (1,074) (1,074)
Total comprehensive loss for the year - - (677) (677)
Issue of shares under the Reorganisation 5,721 - - 5,721
Issue of shares 75 1,924 - 1,999
Balance at 31 December 2012 5,796 1,924 (1,751) 5,969
============== ============== ================== ========
*Amount is less than USD1,000
NOTES TO THE CONSOLIDATED AND COMPANY FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012
1. GENERAL INFORMATION
Kada Technology Holdings Limited ("Kada") was incorporated in
Bermuda under the Act on 3 May 2010 under Bermuda Companies Acts.
The registered office of the Company is located at Clarendon House,
2 Church Street, Hamilton HM11, Bermunda.
The principal activity of the Company is that of investment
holding and the principal activities of the Group is distributing
electronic components and solution packages to the consumer
electronic manufacturing industry. The principal activities of the
various operating subsidiaries are disclosed in Note 10.
As at 31 December 2011, there was only one class of shares in
the Company, being ordinary shares of US$1 each. The authorised
share capital of the Company was 10,000 ordinary shares of US$1
each and at 31 December 2011 there was one share in issue. The
rights and privileges of the shares are stated in the Bye-laws.
There are no founders, management, deferred or unissued shares
reserved for issuance for any purpose.
The consolidated financial statements are rounded to the nearest
thousand ('000) and they are presented in United States Dollars
("USD.
2. SIGNIFICANT ACCOUNTING POLICIES
The consolidated and company financial statements have been
prepared in accordance with International Financial Reporting
Standards ("IFRS") including related interpretations, and have been
consistently applied throughout the financial years ended 31
December 2012.
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.
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.
Comparative
The comparative information in the consolidated statement of
comprehensive income, the consolidated statement of financial
position, the consolidated statement of changes in equity and the
consolidated cash flow statements are pro-forma. On this basis, the
Directors have decided that it is appropriate to reflect the
combination using merger accounting principles as a group
reconstruction under FRS6 - Acquisitions and mergers in order to
give true and fair view. No fair value adjustments have been made
as a result of the combination.
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 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 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
theiraccounting 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.
Merger accounting
The Group has been formed piecemeal since April 2008 when Yoho
King Limited ("Yoho King") acquired all the ordinary shares of Kada
Technical Innovation Company Limited. The Company acquired the
shares in Yoho King on 25 June 2012, pursuant to the reorganisation
which was effected by way of issue of shares.
In determining the appropriate accounting treatment for this
transaction, the Directors considered IFRS 3 "Business
Combinations" (Revised 2008). However, they concluded that this
transaction fell outside the scope of IFRS 3 (revised 2008) and
there is no international accounting standards dealing with
business combination outside the scope of IFRS 3.
In accordance with IAS 8 "Accounting Policies, changes in
accounting estimates and errors", in developing an appropriate
accounting policy, the Directors have considered the pronouncements
of other standard setting bodies and specifically looked to
accounting principles generally accepted in the United Kingdom ("UK
GAAP") for guidance (FRS 6 - Acquisitions and mergers) which does
not conflict with IFRS and reflects the economic substance of the
transaction.
Under UK GAAP, the assets and liabilities of both entities are
recorded at book value, not fair value (although adjustments are
made to achieve uniform accounting policies), intangible assets and
contingent liabilities are recognised only to the extent that they
were recognised by the legal acquiree in accordance within
applicable IFRS, no goodwill is recognised, any expenses of the
combination are written off immediately to the income statement and
comparative amounts, if applicable, are restated as if the
combination had taken place at the beginning of the earliest
accounting period presented.
Therefore, although the Group reconstruction did not become
unconditional until 25 June 2012, these consolidated financial
statements are presented as if the Group structure has always been
in place, including the activity from incorporation of the group's
principal trading subsidiary. Both entities had the same management
as well as majority shareholders.
New IFRS standards and interpretations newly adopted
The Group has adopted the following new and amended IFRS
standards and IFRIC interpretations:
-- IFRIC 19 Extinguishing financial liabilities with equity instruments
-- IAS 24 Related Party Disclosures (2009)
-- Amendments to IFRIC 14 Prepayments of a Minimum Funding Requirement
-- Annual improvements to IFRSs (2010)
The adoption of these revised standards has not had a material
impact for the Group's result for the year and equity
New IFRS standards and interpretations not yet adopted
The following standards, amendments and interpretations are not
yet effective and have not yet been adopted early by the Group:
-- Amendments to IFRS 7 Financial Instruments: Disclosures
-- IAS 27 Separate Financial Statements (2011).
-- IAS 28 Investments in Associates and Joint Ventures (2011).
-- IFRS 9 Financial Instruments
-- IFRS 10 Consolidated Financial Statements
-- IFRS 12 Disclosure of Interests in Other Entities
-- IFRS 13 Fair Value Measurement.
-- Amendments to IAS 19 Employee Benefits
-- Amendments to IAS 1 Presentation of Items of Other Comprehensive Income
-- Amendments to IFRS 7 Disclosures - Offsetting Financial Assets and Financial Liabilities
-- Amendments to IAS 32 Offsetting Financial Assets and Financial Liabilities
-- Annual improvements to IFRSs (2009 - 2011)
The management does not anticipate that the adoption of the
above IFRS (including consequential amendments) and interpretations
will result in any material impact to the financial statements in
the period of initial application.
At the date of this report, certain new standards, amendments
and interpretations to existing standards have been published and
are mandatory for the Group's accounting periods after 1 December
2011 or later periods and which the Group has not early
adopted.
The consolidated and company financial statements have been
prepared in accordance with the significant accounting policies set
out below and these accounting policies are in accordance with
IFRS.
Significant accounting estimates and judgment
The preparation of the consolidated and company financial
statements in conformity with IFRS requires the use of judgments,
estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of theconsolidated and companyfinancial
statements and the reported amounts of revenues and expenses during
the financial year. Although these estimates are based on
management's best knowledge of current events and actions, actual
results may differ from those estimates.
Estimates and judgments are continually evaluated and are based
on historical experiences and other factors, including expectations
of future events that are believed to be reasonable under the
circumstances.
In the process of applying the Group's accounting policies as
described below, management is of the opinion that there are no
instances of application of judgments which are expected to have a
significant effect on the amounts recognised in the consolidated
and company financial statements.
Critical judgment made in applying accounting policies
Depreciation of plant and equipment
Plant and equipment are depreciated on a straight-line basis
over their estimated useful lives. Management estimates the useful
lives of plant and equipment to be within 3 to 5 years. The
carrying amount of the Group's plant and equipment as at 31
December 2012 is approximately USD 142,200 (2011: USD 225,000).
Changes in the expected level of usage and technological
developments could impact the economic useful lives and the
residual values of these assets. Therefore, future depreciation
charges could be revised. A 5% difference in the expected useful
lives of the plant and equipment would not result in a significant
change to the Group's net profit for the respective financial years
and period.
Key sources of estimation uncertainty
Income tax
The Group has exposure to income taxes in the PRC and Hong Kong
SAR. Significant judgment is required in determining the provision
for income taxes. There are also claims for which ultimate tax
determination is uncertained during the ordinary course of
business. The Group recognises liabilities for expected tax issues
based on estimates of whether additional taxes will be due. When
the final tax outcome of these matters is different from the
amounts that were initially recognised, such differences will
impact the income tax and deferred tax provisions in the period in
which such determination is made. Accordingly, reversal or
additional tax provision might be made.
Impairment of trade receivables
The Group's management assesses the collectability of trade
receivables. This estimate is based on the credit history of the
Group's customers and the current market condition. Management
assesses the collectability of trade receivables at the balance
sheet date and makes the provision, if any.
Impairment of property, plant and equipment
Property, plant and equipment have been assessed for any
indication of impairment in accordance with the accounting policy.
If such indication exists, the recoverable amounts of property,
plant and equipment are determined on value-in-use calculations,
which require the use of judgment and estimates.
Impairment of inventories
The Group reviews the ageing analysis of inventories at each
reporting date, and makes provision for obsolete and slow moving
inventory items identified that are no longer suitable for sale, if
any. The net realisable value for such inventories are estimated
based primarily on the latest invoice prices and current market
conditions. Possible changes in these estimates could result in
revisions to the valuation of inventories.
Subsidiaries
Subsidiaries are entities controlled by the Group. Control
exists when the Group has the power to govern the financial and
operating policies of an entity so as to obtain benefits from its
activities. The existence and effect of potential voting rights
that are currently exercisable or convertible are considered when
assessing whether the Group controls another entity. Subsidiaries
are fully combined from the date on which control is transferred to
the Group. They are excluded from the date that control ceases.
For acquisition of subsidiaries under common control, the
identifiable assets and liabilities were accounted for at their
carrying values, in a manner similar to the pooling-of-interest
method of consolidation.
For acquisition of subsidiaries that is not under common
control, the purchase method of accounting is adopted. The cost of
such acquisition is measured as the fair value of the assets given,
equity instruments issued or liabilities incurred or assumed at the
dates of exchange, plus costs directly attributable to the
acquisition. Identifiable assets acquired and liabilities and
contingent liabilities assumed in a business combination are
measured initially at fair value on the date of the acquisition,
irrespective of the extent of minority interest.
The excess of the consideration transferred the amount of any
minority interest in the acquiree and the acquisition-date fair
value of any previous equity interest in the acquiree over the fair
value of the net identified assets acquired is recorded as
goodwill.
Plant and equipment and depreciation
Plant and equipment are stated at cost less accumulated
depreciation and impairment losses, if any. Depreciation is
computed utilising the straight-line method to write off the cost
of these assets over their estimated useful lives as follows:
Furniture, fixtures and office equipment 3 to 5 years
Motor vehicles 3 to 4 years
The cost of plant and equipment includes expenditure that is
directly attributable to the acquisition of the items.
Dismantlement, removal or restoration costs are included as part of
the cost of plant and equipment if the obligation for
dismantlement, removal or restoration is incurred as a consequence
of acquiring or using the asset. Cost may also include transfers
from equity of any gains/losses on qualifying cash flow hedges of
foreign currency purchases of plant and equipment.
Subsequent expenditure relating to plant and equipment that have
been recognised is added to the carrying amount of the asset when
it is probable that future economic benefits, in excess of the
standard of performance of the asset before the expenditure was
made, will flow to the Group and the cost can be reliably measured.
Other subsequent expenditure is recognised as an expense during the
financial year in which it is incurred.
For acquisitions and disposals during the financial year,
depreciation is provided from the month of acquisition and to the
month before disposal respectively. Fully depreciated plant and
equipment are retained in the books of accounts until they are no
longer in use.
Depreciation methods, useful lives and residual values are
reviewed, and adjusted as appropriate, at each reporting date as a
change in estimates.
Intangible assets
Intangible assets are accounted for using the cost model.
Capitalised costs are amortised on a straight-line basis over their
estimated useful lives for intangible assets that have finite
useful lives. After initial recognition, they are carried at cost
less accumulated amortisation and accumulated impairment losses, if
any. The amortisation period and amortisation method of intangible
assets are reviewed at each balance sheet date. The effects of any
review are recognised in profit or loss when the changes arise.
Intangible assets are written off where, in the opinion of the
directors, no further future economic benefits are expected to
arise.
Patents and licenses
Costs relating to patents and licenses which are acquired are
capitalised and amortised on straight-line basis over their useful
life of six years.
Computer software
Costs relating to computer software acquired, which are not an
integral part of related hardware, are capitalised and amortised on
a straight-line basis over their useful life of five years.
Impairment of non-financial assets
An assessment is made at each balance sheet date to determine
whether there is any indication of impairment of the Group's
property, plant and equipment and land use rights, or whether there
is any indication that an impairment loss previously recognised for
an asset in prior years may no longer exist or may have decreased.
If any such indication exists, the asset's recoverable amount is
estimated. An asset's recoverable amount is calculated as the
higher of the asset's value in use or its net selling price.
An impairment loss is recognised only if the carrying amount of
an asset exceeds its recoverable amount. An impairment loss is
charged to the profit or loss in the period in which it arises
unless the asset is carried at revalued amount, in which case, such
impairment loss is charged to the equity.
For the purpose of impairment testing, the recoverable amount
(i.e. the higher of the fair value less cost to sell and the
value-in-use) is determined on an individual asset basis unless the
asset does not generate cash flows that are largely independent of
those from other assets. If this is the case, the recoverable
amount is determined for the cash-generating-unit to which the
asset belongs.
A previously recognised impairment loss is reversed only if
there has been a change in the estimates used to determine the
recoverable amount of an asset, however not to an amount higher
than the carrying amount that would have been determined had no
impairment loss been recognised for the asset in prior years. A
reversal of an impairment loss is credited to the profit or loss in
the period in which it arises.
Financial assets
Financial assets which are under the scope of IAS 39, other than
hedging instruments, can be divided into the following categories:
financial assets at fair value through profit or loss,
held-to-maturity investments, loans and receivables, and
available-for-sale financial assets. Financial assets are assigned
to the different categories by management on initial recognition,
depending on the purpose for which the assets were acquired. The
designation of financial assets is re-evaluated and classification
may be changed at the reporting date with the exception that the
designation of financial assets at fair value through profit or
loss is not revocable.
All financial assets are recognised when, and only when, the
Group becomes a party to the contractual provisions of the
instrument. Regular way purchases and sales of financial assets are
accounted for at trade date, ie, the date that the Group commits
itself to purchase or sell the asset. When financial assets are
recognised initially, they are measured at fair value, plus
directly attributable transaction costs.
De-recognition of financial assets occurs when the rights to
receive cash flows from the instruments expire or are transferred
and substantially all of the risks and rewards of ownership have
been transferred. At each of the balance sheet date, financial
assets are reviewed to assess whether there is objective evidence
of impairment. If any such evidence exists, impairment loss is
determined and recognised.
Other than loans, receivables and derivative financial assets,
the Group does not have any financial assets at fair value through
profit or loss, held-to-maturity investments or available-for-sale
financial assets.
Trade and other receivables
Receivables are measured on initial recognition at fair value,
and are subsequently measured at amortised cost using the effective
interest rate method. Appropriate allowances for estimated
irrecoverable amounts are recognised in the profit or loss when
there is objective evidence that the asset is impaired. The
allowance recognised is measured as the difference between the
asset's carrying amount and the present value of estimated future
cash flows discounted at the effective interest rate computed at
initial recognition.
Inventories
Inventories are stated at the lower of cost and net realisable
value. Cost is determined on a first-in, first-out basis, and
includes all costs in bringing the inventories to their present
location and condition. In the case of manufactured products, cost
includes all direct expenditure and production overheads based on
the normal level of activity.
Provision is made for obsolete, slow-moving and defective
inventories in arriving at the net realisable value.
Net realisable value is the estimated selling price in the
ordinary course of business less the estimated costs necessary to
make the sale.
Derivative financial instruments and hedging activities
A derivative financial instrument is initially recognised at its
fair value on the date the contract is entered into and is
subsequently carried at its fair value. The method of recognising
the resulting gain or loss depends on whether the derivative is
designated as a hedging instrument, and if so, the nature of the
item being hedged. The Group designates each hedge as either: (a)
fair value hedge; (b) cash flow hedge; or (c) net investment
hedge.
The Group documents at the inception of the transaction the
relationship between the hedging instruments and hedged items, as
well as its risk management objectives and strategies for
undertaking various hedge transactions. The Group also documents
its assessment, both at hedge inception and on an ongoing basis, of
whether the derivatives designated as hedging instruments are
highly effective in offsetting changes in fair value or cash flows
of the hedged items.
The carrying amount of a derivative designated as a hedge is
presented as a non-current asset or liability if the remaining
expected life of the hedged item is more than 12 months, and as a
current asset or liability if the remaining expected life of the
hedged item is less than 12 months. The fair value of a trading
derivative is presented as a current asset or liability.
The Group has entered into forward foreign exchange contracts
that are not for any hedging purposes. Accordingly, the change in
the value is recognised in the profit and loss account.
Financial liabilities
The Group's financial liabilities include borrowings, trade and
other payables and dividend payable.
Financial liabilities are recognised when the Group becomes a
party to the contractual agreements of the instrument. All
interest-related charges are recognised as an expense in "finance
cost" in the income statement. Financial liabilities are
derecognised if the Group's obligations specified in the contract
expire or are discharged or cancelled.
Borrowings are recognised initially at the fair value of
proceeds received less attributable transaction costs, if any.
Borrowings are subsequently stated at amortised cost which is the
initial fair value less any principal repayments. Any difference
between the proceeds (net of transaction costs) and the redemption
value is taken to the income statement over the period of the
borrowings using the effective interest method. The interest
expense is chargeable on the amortised cost over the period of the
borrowings using the effective interest method.
Gains and losses are recognised in the profit and loss account
when the liabilities are derecognised as well as through the
amortisation process.
Borrowings which are due to be settled within twelve months
after the balance sheet are included in current borrowings in the
balance sheet even though the original terms was for a period
longer than twelve months and an agreement to refinance, or to
reschedule payments, on a long-term basis is completed after the
financial position date. Borrowings to be settled within the
Group's normal operating cycle are classified as current. Other
borrowings due to be settled more than twelve months after the
financial position date are included in non-current borrowings in
the balance sheet.
Trade and other payables are initially measured at fair value,
and subsequently measured at amortised cost, using the effective
interest method.
Dividend distributions to shareholders are included in current
financial liabilities when the dividends are payable.
Dividends
Final dividends proposed by the directors are not accounted for
in shareholders' equity as an appropriation of retained profit,
until they have been approved by the shareholders in a general
meeting. When these dividends have been approved by the
shareholders and declared, they are recognised as a liability.
Interim dividends are simultaneously proposed and declared,
because of the articles of association of the Company grant the
directors the authority to declare interim dividends. Consequently,
interim dividends are recognised directly as a liability when they
are proposed
Provisions
Provisions are recognised when the Company and the Group have a
present obligation (legal or constructive) as a result of a past
event, it is probable that an outflow of resources embodying
economic benefits will be required to settle the obligation and a
reliable estimate can be made of the amount of the obligation.
Present obligations arising from onerous contracts are recognised
as provisions.
The directors review the provisions annually and where in their
opinion, the provision is inadequate or excessive, due adjustment
is made.
If the effect of the time value of money is material, provisions
are discounted using a current pretax rate that reflects, where
appropriate, the risks specific to the liability. Where discounting
is used, the increase in the provision due to the passage of the
time is recognised as finance costs.
Revenue recognition
Revenue is measured at the fair value of the consideration
received or receivable and represents amounts receivable in
accordance with the Group's principal activity, net of VAT and
trade discounts, also deducted sales business tax
Revenue is recognised when the significant risks and rewards of
ownership have been transferred to the buyer which is when a group
entity has delivered the electronic components or solutions
packages to the customers and the customers have accepted the
electronic components or solution packages. Revenue excludes goods
and services taxes and is arrived at after deduction of trade
discounts. No revenue is recognised if there are significant
uncertainties regarding recovery of the consideration due,
associated costs or the possible return of goods.
Interest income is recognised on a time-apportioned basis using
the effective interest method.
Employee benefits - Pension obligations
The Group participates in the defined contribution national
pension schemes as provided by the laws of the countries in which
it has operations. In particular, pursuant to the relevant
regulations of the PRC government, the Group participates in a
local municipal government retirement benefits scheme (the
"Scheme"), whereby subsidiaries located in the PRC are required to
contribute a certain percentage of the basic salaries of its
employees to the Scheme to fund their retirement benefits. The
local municipal government undertakes to assume the retirement
benefits obligations of all existing and future retired employees
of the subsidiaries located in the PRC. The only obligation of the
Group with respect to the Scheme is to pay the ongoing required
contributions under the Scheme mentioned above. Contributions under
the Scheme are charged to the profit or loss as incurred. There are
no provisions under the Scheme whereby forfeited contributions may
be used to reduce future contributions.
Key management personnel
Key management personnel are those persons having the authority
and responsibility for planning, directing and controlling the
activities of the entity. Directors (and certain department
managers) are considered key management personnel.
Income tax
Current income tax for current and prior periods is recognised
at the amount expected to be paid to or recovered from the tax
authorities, using the tax rates and tax laws that have been
enacted or substantively enacted by the financial position
date.
Deferred income tax is recognised for all temporary differences
arising between the tax bases of assets and liabilities and their
carrying amounts in the financial statements except when the
deferred income tax arises from the initial recognition of goodwill
or an asset or liability in a transaction that is not a business
combination and affects neither accounting or taxable profit or
loss at the time of the transaction.
A deferred income tax liability is recognised on temporary
differences arising on investments in subsidiaries, associates and
joint ventures, except where the Group is able to control the
timing of the reversal of the temporary difference and it is
probable that the temporary difference will not reverse in the
foreseeable future.
A deferred income tax asset is recognised to the extent that it
is probable that future taxable profit will be available against
which the deductible temporary differences and tax losses can be
utilised.
Deferred income tax is measured:
i. at the tax rates that are expected to apply when the related
deferred income tax asset is realised or the deferred income tax
liability is settled, based on tax rates and tax laws that have
been enacted or substantively enacted by the date of the financial
position; and
ii. based on the tax consequence that will follow from the
manner in which the Group expects, at the date of the financial
position, to recover or settle the carrying amounts of its assets
and liabilities.
Current and deferred income taxes are recognised as income or
expense in the profit or loss, except to the extent that the tax
arises from a business combination or a transaction which is
recognised directly in equity. Deferred tax arising from a business
combination is adjusted against goodwill on acquisition.
The Unified Enterprise Income Tax
The unified enterprise income tax rates for domestic and foreign
enterprises are at 25 per cent. The Malaysia operation is not taxed
in that jurisdiction due to High Tech (MSC) tax exemption. However
taxation liabilities may arise in the PRC as it could be deemed as
PRC tax resident and liable for payment of the PRC enterprise
income tax in respect of their worldwide income. Accordingly, the
current income tax arising from operation in Malaysia has been
provided at 25 per cent rate
Value-added tax ("VAT")
The Group's sale of goods in the PRC is subject to VAT at the
applicable tax rate of 17% for the PRC domestic sales. Input VAT on
purchases can be deducted from output VAT. The net amount of VAT
recoverable from, or payable to, the tax authority is included as
part of "other receivables" or "other payables" in the consolidated
statements of financial position.
Revenue, expenses and assets are recognised net of the amount of
VAT except:
(i) where the VAT incurred on a purchase of assets or services
is not recoverable from the tax authority, in which case the VAT is
recognised as part of the cost of acquisition of the asset or as
part of the expense item as applicable; and
(ii) receivables and payables that are stated with the amount of
VAT included.
Functional currencies
Functional and presentation currency
Items included in the financial statements of each entity in the
Group are measured using the currency of the primary economic
environment in which the entity operates (the "functional
currency"). TheConsolidated Financial Statements of the Group are
presented in United States dollars ("USD"), which is the Company's
functional currency. The functional currency of the principal
operating subsidiaries of the Group in China is Renminbi ("RMB")
while those operating subsidiaries not in China are United States
dollars.
Transactions and balances
Transactions in a currency other than the functional currency
("foreign currency") are translated into the functional currency
using the exchange rates at the dates of the transactions. Currency
translation differences from the settlement of such transactions
and from the translation of monetary assets and liabilities
denominated in foreign currencies at the closing rates at the
financial position date are recognised in the income statement,
unless they arise from borrowings in foreign currencies, other
currency instruments designated and qualifying as net investment
hedges and net investment in foreign operations. Those currency
translation differences are recognised in the currency translation
reserve in the Consolidated Financial Statements and transferred to
the profit or loss as part of the gain or loss on disposal of the
foreign operation.
Non-monetary items measured at fair values in foreign currencies
are translated using the exchange rates at the date when the fair
values are determined.
Group entities
The results and financial positions of all the entities (none of
which has the currency of a hyperinflationary economy) within the
Group that has functional currencies different from the
presentation currency are translated into the presentation currency
as follows:
(1) Assets and liabilities are translated at the closing
exchange rates at the reporting dates;
(2) Income and expenses are translated at average exchange rates
(unless the average is not a reasonable approximation of the
cumulative effect of the rates prevailing on the transaction dates,
in which case income and expenses are translated using the exchange
rates at the dates of the transactions); and
(3) All resulting currency translation differences are
recognised in the currency translation reserve in equity.
Related parties
Parties are considered to be related if one party has the
ability, directly or indirectly, to control the other party or
exercise significant influence over the other party in making
financial and operating decisions. Parties are also considered
related if they are subject to common control or common significant
influence. Related parties may be individuals or corporate
entities
Research costs
Research costs are recognised as an expense when incurred.
Operating leases
Rentals on operating leases are charged to income statement on a
straight-line basis over the lease term. Lease incentives, if any,
are recognised as an integral part of the net consideration agreed
for the use of the leased asset. Penalty payments on early
termination, if any, are recognised in the income statement when
incurred.
Segment reporting
Operating segments are reported in a manner consistent with the
internal reporting provided to the management who is responsible
for allocating resources and assessing performance of the operating
segments.
Events after the balance sheet date
Post year-end events that provide additional information about a
company's position at the balance sheet date and are adjusting
events are reflected in the financial statements. Post year-end
events that are not adjusting events are disclosed in the notes
when material
Investment in subsidiaries
Investments in subsidiaries are stated at cost less provision
for permanent diminution in value
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.
Share capital
Ordinary shares are classified as equity. Incremental costs
directly attributable to the issuance of new ordinary shares are
deducted against the share capital amount.
Retained earnings include all current and prior period results
as determined in the statement of comprehensive income.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and deposits
with financial institutions which are subjected to an insignificant
risk of change in value.
This information is provided by RNS
The company news service from the London Stock Exchange
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