TIDMZBO
RNS Number : 0550O
Zibao Metals Recycling Holdings PLC
30 September 2019
30 September 2019
Final Results
THE INFORMATION COMMUNICATED IN THIS ANNOUNCEMENT CONTAINS
INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF THE MARKET
ABUSE REGULATION EU NO. 596/2014 ("MAR").
Zibao Metals Recycling Holdings Plc
("Zibao" or "the Company" or "the Group")
Final Results for year ended 31 March 2019
The Directors of Zibao (AIM: ZBO.L) present the Group's audited
final results for the year ended 31 March 2019.
The full Annual Report and Accounts will be despatched to
shareholders today and will also be made available on the Company's
website http://www.zibaometals.com and from the Company's
registered office.
For further information please contact:
Zibao Metals Recycling Holdings Plc
Wenjie "Joe" Zhou, Chairman
Jianfeng "Eddy" Li, Chief Executive Officer
Ajay Rajpal, Non-Executive Director
www.zibaometals.com +852 2769 7662
SPARK Advisory Partners Limited (Nominated
Adviser)
Mark Brady
Neil Baldwin
www.sparkadvisorypartners.com +44 (0) 203 368 3551
SI Capital Ltd (Broker)
Nick Emerson
www.sicapital.co.uk +44 (0)1483 413500
Chairman's Statement
Results (Note: all figures are rounded)
As the Board have been reporting for over a year, the Group has
struggled to adapt to the change in legislative environment in
China. Revenue decreased by 58% from HKD857.1 million to HKD363.2
million due to significant trading difficulties faced by the Group
with a fall in the price of recycled metals and new laws in China
reducing the import of scrap metals, reducing the Group's access to
inputs
From a gross profit in 2018 of HKD9.3 million, the company has
recorded a gross loss of HKD14.4 million in the current period.
This is as a result of reduced sales volumes and margins caused by
increasingly difficult trading conditions. From an after-tax profit
in 2018 of HKD1.8 million this has deteriorated to a loss of
HKD64.8 million in the current period.
Administrative expenses increased from HKD7.3 million to HKD9.1
million due to HKD2 million legal & professional cost
specifically legal advice on restructuring
The Group has recognised impairment of property, plant and
equipment HKD19.8 million, restructuring provisions cost of HKD20
million and amounts written back on intangibles 1.3 million as a
result of the significant reduction in sales and the lack of
visibility of a return to normal trading volumes.
The cash position decreased from HKD12.3 million to HKD8.9
million due to the fall in revenue as discussed above.
No dividends are recommended paid in the year.
Trading and Outlook
The new regulations have had a severe impact on the Group,
resulting in a significant decrease in revenue. This has been
compounded by the limited supply and higher cost of source material
of the quality required. To minimise the impact of these factors
and to mitigate against the trading losses, the Group has scaled
back its operations at the Zhengbao facility. This has resulted in
additional costs such as stock write-off, impairment of asset
values and provisions for restructuring costs.
The Group has not been able to implement a trading strategy in
response to the change in legislative environment, which is
highlighted by the poor results in the current period. The future
viability of the Group, in its current form, is under review, and
an announcement will be made as and when appropriate.
Wenjie Zhou
Chairman
Consolidated Statement of Comprehensive Income for the year
ended 31 March 2019
Notes 2019 2018
HKD'000 HKD'000
Continuing operations
Revenue from contracts with customers 4 363,228 857,145
Cost of sales (377,678) (847,884)
-------------- --------------
Gross (loss)/profit (14,450) 9,261
Other revenue 5 23 11
Selling and distribution expenses (133) (139)
Administrative expenses 8 (9,071) (7,338)
Other Operating expenses (20,000) -
Impairment losses (21,134) -
-------------- --------------
(Loss)/profit before tax (64,765) 1,795
Income tax expense 9 (37) (102)
-------------- --------------
(Loss)/profit for the year (64,802) 1,693
Other comprehensive income
Foreign exchange differences (860) -
-------------- --------------
(Loss)/profit and total comprehensive income for the year (65,662) 1,693
(Loss)/profit and total comprehensive income for the year attributable to
the owners of the
Parent (65,662) 1,693
(Loss)/earnings per share 2019 2018
HKD HKD
Basic 10 (0.531) 0.014
Diluted (0.531) 0.013
Consolidated Statement of Financial Position as at 31 March
2019
Notes 2019 2018
HKD'000 HKD'000
Assets
Non-Current Assets
Property, plant and equipment 13 17,658 40,571
Intangible assets 12 - 1,457
-------------- --------------
17,658 42,028
-------------- --------------
Current Assets
Inventories 14 3,055 25,792
Trade receivables 15 12,100 11,440
Prepayments, deposits and other receivables 15 7,261 10,066
Tax recoverable - 2,367
Cash and cash equivalents 16 8,943 12,275
-------------- --------------
31,359 61,940
-------------- --------------
Total Assets 49,017 103,968
Equity and liabilities
Equity attributable to owners
Share capital 19 15,549 15,549
Share Premium 42,167 42,167
Share based payment reserve 662 662
Group reorganisation reserve 20 (527) (527)
Foreign exchange reserve (1,770) (910)
Accumulated (Loss)/Retained earnings (54,881) 9,921
-------------- --------------
Total Equity 1,200 66,862
-------------- --------------
Non-current liabilities
Deferred tax 18 118 137
-------------- --------------
Total Non-current Liabilities 118 137
-------------- --------------
Current liabilities
Trade payables 17 12,958 18,295
Accrued liabilities and other payables 17 25,609 9,500
Tax payable 9,132 9,174
-------------- --------------
Total Current Liabilities 47,699 36,969
-------------- --------------
-------------- --------------
Total Equity and Liabilities 49,017 103,968
Consolidated Statement of Cash Flows
Notes 2019 2018
HKD'000 HKD'000
Cash flows from operating activities
Net cash from operating activities 26 (3,985) 13,092
Taxation - (776)
---------- ----------
Net Cashflow from Operating activities (3,985) 12,316
Investing activities
Addition of property, plant and equipment (12) -
---------- ----------
Net cash used in investing activities (12) -
---------- ----------
Net increase / (decrease) in cash and cash equivalents (3,997) 12,316
Cash and cash equivalents at beginning of the year 12,275 1,288
Decrease in foreign exchange reserve 665 (1,329)
---------- ----------
Cash and cash equivalents at the end of the year 8,943 12,275
Represented by:
Bank balances and cash 8,943 12,275
---------- ----------
8,943 12,275
Cash and cash equivalents (which are presented as a single class
of assets on the face of the balance sheet) comprise cash at bank
and other short-term highly liquid investments with maturity of
three months or less, as adjusted for any bank overdrafts.
Consolidated Statement of Changes in Equity
Share Share Retained Share Group Foreign Total
Capital Premium Earnings/ based Reorgan-isation exchange
(Accumulated payment Reserve reserve
Loss) reserve
HKD'000 HKD'000 HKD'000 HKD'000 HKD'000 HKD'000 HKD'000
As at 31
March
2017 15,549 42,167 8,228 662 (527) (1,267) 64,812
Profit for
the
year - - 1,693 - - - 1,693
Foreign
exchange
differences - - - - - 357 357
-------- -------- -------- -------- -------- -------- ------
As at 31
March
2018 15,549 42,167 9,921 662 (527) (910) 66,862
Loss for the
year - - (64,802) - - - (64,802)
Foreign
exchange
differences - - - - - (860) (860)
-------- -------- -------- -------- -------- -------- --------
As at 31
March
2019 15,549 42,167 (54,881) 662 (527) (1,770) 1,200
Notes to the Consolidated Financial Statements
1. General information
Zibao Metals Recycling Holdings Plc is a company incorporated in
England on 9 October 2013 under the Companies Act 2006 but
domiciled in Hong Kong. It was listed on the AIM market on 20 June
2014. The address of the registered office is given at the start of
the annual report. The Group's principal activity is that of
trading scrap metals. Further details are set out in the Chairman's
Statement on pages 3 and 4.
2. Basis of preparation and significant accounting policies
The consolidated financial statements of Zibao Metals Recycling
Holdings Plc have been prepared in accordance with International
Financial Reporting Standards as adopted by the European Union
(IFRS's as adopted by the EU), IFRS Interpretations Committee and
the Companies Act 2006 applicable to companies reporting under
IFRS.
The consolidated financial statements have been prepared under
the historical cost convention.
The preparation of financial statements in conformity with IFRS
requires the use of certain critical accounting estimates. It also
requires management to exercise its judgement in the process of
applying the Group's accounting policies. The areas involving a
higher degree of judgment or complexity, or areas where assumptions
and estimates are significant to the consolidated financial
statements are disclosed in Note 3.
The preparation of financial statements in conformity with IFRSs
requires management to make judgments, estimates and assumptions
that affect the application of accounting policies and reported
amounts of assets, liabilities, income and expenses. Although these
estimates are based on management's experience and knowledge of
current events and actions, actual results may ultimately differ
from these estimates.
The estimates and underlying assumptions are reviewed on an
on-going basis. Revisions to accounting estimates are recognised in
the period in which the estimates are revised if the revision
affects only that period or in the period of the revision and
future periods if the revision affects both current and future
periods.
Going concern
These financial statements have been prepared on the assumption
that the Group is a going concern.
When assessing the foreseeable future, the directors have looked
at a period of at least twelve months from the date of approval of
this report. The forecast cash-flow requirements of the business
are contingent upon the ability of the Group to generate future
sales and renew long term borrowings. The Group incurred a loss of
HK 64,802,000 for the year ended 31 March 2019. Changes in China
legislation has resulted in new regulations that have had a severe
impact on the group. To reduce continuing losses, the group had
decided to cut costs by scaling down its operations of the Zhengbao
yard. The Group is planning on divesting away from scrap metals and
undertaking a reverse takeover. This should introduce enough cash
to the Group to fund its ongoing costs for a period of at least 12
months from the date of authorisation of these accounts.
After making enquiries, the directors firmly believe that the
Group has adequate resources to continue in operational existence
for the foreseeable future. Accordingly, they continue to adopt the
going concern basis in preparing the financial statements.
New and amended standards adopted by the Company
There are no IFRSs or IFRIC interpretations that are effective
for the first time for the financial year beginning on or after 1
April 2018 that would be expected to have a material impact on the
Group.
The new IFRS adopted during the year areas as follows:
- IFRS 9 - Financial instruments
- IFRS 15 - Revenue from contracts with customers including amendments and clarifications.
Standards, interpretations and amendments to published standards
that are not yet effective.
The following new standards, amendments to standards and
interpretations have been issued, but are not effective for the
financial year beginning 1 April 2018 and have not been early
adopted:
Reference Title Summary Application date Application
of standard date of
Group
---------- ---------------- -------------------------------- ------------------- -----------
IFRS 16 Lease IFRS 16 Leases published Periods commencing 1 April
on or after 1 2020
January 2020
---------- ---------------- -------------------------------- ------------------- -----------
IFRIC 23 Uncertainty Clarifies application Periods commencing 1 April
over Income of recognition and measurement on or after 1 2019
Tax Treatments requirements in IAS January 2019
12 Income Taxes when
there is uncertainty
over income tax treatments.
---------- ---------------- -------------------------------- ------------------- -----------
IFRS 17 Insurance Applies a model that Periods commencing 1 April
Contracts combines a current balance on or after 1 2021
sheet measurement of January 2021
insurance contracts
with recognition of
profit over the period
that services are provided.
---------- ---------------- -------------------------------- ------------------- -----------
The directors anticipate that the adoption of these standards
and the interpretations in future periods will have no material
impact on the financial statements of the Group.
(a) Basis of consolidation
The consolidated financial statements incorporate the financial
statements of the Company and entities controlled by the Company
(its subsidiaries) made up to 31(st) March each year. 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 their accounting policies into
line with those used by other members of the Group.
All intra-group transactions, balances, income and expenses are
eliminated on consolidation.
Changes in the Group's ownership interests in existing
subsidiaries
Changes in the Group's ownership interests in subsidiaries that
do not result in the Group losing control over the subsidiaries are
accounted for as equity transactions. The carrying amounts of the
Group's interests and the non-controlling interests are adjusted to
reflect the changes in their relative interests in the
subsidiaries. Any difference between the amount by which the
non-controlling interests are adjusted and the fair value of the
consideration paid or received is recognised directly in equity and
attributed to owners of Zibao.
When the Group loses control of a subsidiary, the profit or loss
on disposal is calculated as the difference between (i) the
aggregate of the fair value of the consideration received and the
fair value of any retained interest and (ii) the previous carrying
amount of the assets (including goodwill), and liabilities of the
subsidiary and any non-controlling interests. Where certain assets
of the subsidiary are measured at revalued amounts or fair values
and the related cumulative gain or loss has been recognised in
other comprehensive income and accumulated in equity, the amounts
previously recognised in other comprehensive income and accumulated
in equity are accounted for as if the Company had directly disposed
of the related assets (i.e. reclassified to profit or loss or
transferred directly to retained earnings). The fair value of any
investment retained in the former subsidiary at the date when
control is lost is regarded as the fair value on initial
recognition for subsequent accounting under IAS 39 "Financial
Instruments: Recognition and Measurement" or, when applicable, the
cost on initial recognition of an investment in an associate or a
jointly controlled entity.
Business combinations
Acquisitions of businesses are accounted for using the
acquisition method. The consideration transferred in a business
combination is measured at fair value, which is calculated as the
sum of the acquisition-date fair values of the assets transferred
by the Group, liabilities incurred by the Group to the former
owners of the acquiree and the equity interests issued by the Group
in exchange for control of the acquiree. Acquisition-related costs
are recognised in profit or loss as incurred.
At the acquisition date, the identifiable assets acquired and
the liabilities assumed are recognised at their fair value at the
acquisition date, except that:
- deferred tax assets or liabilities and liabilities or assets
related to employee benefit arrangements are recognised and
measured in accordance with IAS 12 Income Taxes and IAS 19 Employee
Benefits respectively;
- liabilities or equity instruments related to share-based
payment transactions of the acquiree or the replacement of an
acquiree's share-based payment transactions with share-based
payment transactions of the Group are measured in accordance with
IFRS 2 Share-based Payment at the acquisition date; and
- 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 are measured in accordance with that
standard.
Goodwill is measured as the excess of the sum of the
consideration transferred, the amount of any non-controlling
interests in the acquiree, and the fair value of the acquirer's
previously held equity interest in the acquiree (if any) over the
net of the acquisition-date amounts of the identifiable assets
acquired and the liabilities assumed. If, after assessment, the net
of the acquisition-date amounts of the identifiable assets acquired
and liabilities assumed exceeds the sum of the consideration
transferred, the amount of any non-controlling interests in the
acquiree and the fair value of the acquirer's previously held
interest in the acquiree (if any), the excess is recognised
immediately in profit or loss as a bargain purchase gain.
Group reorganisation accounting
The Company acquired its 100% interest in Masterpiece
Enterprises Limited ("MEL") in 2014 by way of a share for share
exchange. This is a business combination involving entities under
common control and the consolidated financial statements are issued
in the name of the Group but they are a continuance of those of
MEL. Therefore the assets and liabilities of MEL have been
recognised and measured in these consolidated financial statements
at their pre combination carrying values. The retained earnings and
other equity balances recognised in these consolidated financial
statements are the retained earnings and other equity balances of
the Company and MEL. The equity structure appearing in these
consolidated financial statements (the number and the type of
equity instruments issued) reflect the equity structure of the
Company including equity instruments issued by the Company to
effect the consolidation. The difference between consideration
given and net assets of MEL at the date of acquisition is included
in a group reorganisation reserve.
(b) Property, plant and equipment
Property, plant and equipment are stated at historical cost less
subsequent accumulated depreciation and accumulated impairment
losses, if any. Historical cost includes expenditure that is
directly attributable to the acquisition of the items.
Subsequent costs are included in the asset's carrying amount or
recognised as a separate asset, as appropriate, only when it is
probable that future economic benefits associated with the item
will flow to the Group and the cost of the item can be measured
reliably. All other repairs and maintenance are charged to profit
or loss during the financial period in which they are incurred.
Depreciation on property, plant and equipment is calculated
using the straight-line method to write off their cost over their
estimated useful lives at the following annual rates:
Land and building 40-50 years
Furniture, fixtures and equipment 20%-50%
Leasehold improvements 5%-20%
Plant and machinery 20%
Computer equipment 30%
Useful lives and depreciation method are reviewed and adjusted
if appropriate, at the end of each reporting period.
An item of property, plant and equipment is derecognised upon
disposal or when no future economic benefits are expected to arise
from the continued use of the asset. Any gain or loss arising on
the disposal or retirement of an item of property, plant and
equipment is determined as the difference between the sales
proceeds and the carrying amount of the relevant asset, and is
recognised in profit or loss in the year in which the asset is
derecognised.
(c) Intangible assets
Goodwill arises on the acquisition of subsidiaries and
represents the excess of the consideration transferred over the
fair value of the net assets acquired. In the event that the
consideration is less than the fair value of net assets acquired, a
gain on bargain purchase is recognised directly in the income
statement. Goodwill is reviewed annually for impairment by
reference to the recoverable amount of each cash generating unit.
The recoverable amount is taken as the higher of the value in use
or fair value less costs to sell. Any impairment is recognised
immediately as an expense within the income statement and is
considered irreversible.
(d) Investments in subsidiaries
Investments in subsidiaries are stated at cost less, where
appropriate, provisions for impairment.
(e) Inventories
Inventories are carried at the lower of cost and net realisable
value. Cost is determined using specific identification or
first-in, first-out method as appropriate, and in the case of work
in progress and finished goods, comprises the cost of purchase,
cost of conversion and other costs incurred in bringing the
inventories to their present location and condition. Net realisable
value is the estimated selling price in the ordinary course of
business less the estimated cost of completion and applicable
selling expenses.
When the inventories are sold, the carrying amount of those
inventories is recognised as an expense in the year in which the
related revenue is recognised. The amount of any write-down of
inventories to net realisable value and all losses of inventories
are recognised as an expense in the year in which the write-down or
loss occurs. The amount of any reversal of any write-down of
inventories is recognised as an expense in the year in which the
reversal occurs.
(f) Impairment of non-financial assets
The Group assesses at each reporting date whether there is an
indication that an asset may be impaired. If any such indication
exists, or when an annual impairment assessment for an asset is
required, the Group makes an estimate of the asset's recoverable
amount. An asset's recoverable amount is the higher of an asset's
or cash-generating unit's fair value less costs to sell and its
value in use and is determined for an individual asset, unless the
asset does not generate cash inflows that are largely dependent on
those from other assets. Where the carrying amount of an asset or
cash generating unit exceeds its recoverable amount, the asset is
considered impaired and is written down to its recoverable amount.
In assessing value in use, the estimated future cash flows expected
to be generated by the asset are discounted to their present value
using a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks specific to
the asset. In determining fair value less costs to sell, recent
market transactions are taken into account, if available. If no
such transactions can be identified, an appropriate valuation model
is used. These calculations are corroborated by valuation multiples
or other available fair value indicators.
Impairment losses are recognised in profit or loss in those
expense categories consistent with the function of the impaired
asset, except for assets that are previously revalued where the
revaluation was taken to other comprehensive income. In this case,
the impairment is also recognised in other comprehensive income up
to the amount of any previous revaluation.
An assessment is made at each reporting date as to whether there
is any indication that previously recognised impairment losses may
no longer exist or may have decreased. If such indication exists,
the Group estimates the asset's or cash-generating unit's
recoverable amount. 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 since the last
impairment loss was recognised. If that is the case, the carrying
amount of the asset is increased to its recoverable amount. This
increase cannot exceed the carrying amount that would have been
determined, net of depreciation, had no impairment loss been
recognised previously. Such a reversal is recognised in the profit
and loss unless the asset is measured at revalued amount, in which
case the reversal is treated as a revaluation increase.
(g) Financial instruments
Financial assets and financial liabilities are initially
classified as measured at amortised cost, fair value through other
comprehensive income, or fair value through profit and loss when
the Company becomes a party to the contractual provisions of the
instrument. Financial assets are derecognised when the contractual
rights to the cash flows expire, or the Company no longer retains
the significant risks or rewards of ownership of the financial
asset. Financial liabilities are derecognised when the obligation
is discharged, cancelled or expires.
Financial assets are classified dependent on the Company's
business model for managing the financial and the cash flow
characteristics of the asset. Financial liabilities are classified
and measured at amortised cost except for trading liabilities, or
where designated at original recognition to achieve more relevant
presentation. The Company classifies its financial assets and
liabilities into the following categories:
Financial assets at amortised cost
The Company's financial assets at amortised cost comprise trade
and other receivables. These represent debt instruments with fixed
or determinable payments that represent principal or interest and
where the intention is to hold to collect these contractual cash
flows. They are initially recognised at fair value, included in
current and non-current assets, depending on the nature of the
transaction, and are subsequently measured at amortised cost using
the effective interest method less any provision for
impairment.
Impairment of trade and other receivables
In accordance with IFRS 9 an expected loss provisioning model is
used to calculate an impairment provision. We have implemented the
IFRS 9 simplified approach to measuring expected credit losses
arising from trade and other receivables, being a lifetime expected
credit loss. This is calculated based on an evaluation of our
historic experience plus an adjustment based on our judgement of
whether this historic experience is likely reflective of our view
of the future at the balance sheet date. In the previous year the
incurred loss model is used to calculate the impairment
provision.
Financial liabilities at amortised cost
Financial liabilities at amortised cost comprise loan
liabilities, including convertible loan note liability elements,
and trade and other payables. They are classified as current and
non-current liabilities depending on the nature of the transaction,
are subsequently measured at amortised cost using the effective
interest method. All convertible loan notes are held at amortised
cost and no election has been made to hold them as fair value
through profit and loss.
Financial assets at fair value through profit and loss
Financial assets at fair value are recognized and measured at
fair value using the most recent available market price with gains
and losses recognized immediately in the profit and loss.
The fair value measurement of the Company's financial and non-
financial assets and liabilities utilises market observable inputs
and data as far as possible. Inputs used in determining fair value
measurements are categorised into different levels based on how
observable the inputs used in the valuation technique utilised are
(the 'fair value hierarchy').
Level 1 - Quoted prices in active markets
Level 2 - Observable direct or indirect inputs other than Level
1 inputs
Level 3 - Inputs that are not based on observable market
(h) Borrowings
Borrowings are presented as current liabilities unless the Group
has an unconditional right to defer settlement for at least 12
months after the statement of financial position date, in which
case they are presented as non-current liabilities.
Borrowings are initially recorded at fair value, net of
transaction costs and subsequently carried for at amortised costs
using the effective interest method. Any difference between the
proceeds (net of transaction costs) and the redemption value is
recognised in profit or loss over the period of the borrowings
using the effective interest method. Borrowings which are due to be
settled within twelve months after the statement of financial
position date are included in current borrowings in the statement
of financial position even though the original term 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
statement of financial position date and before the financial
statements are authorised for issue.
(i) Revenue recognition
Revenue comprises the fair value of the consideration received
or receivable in relation to the proceeds of the sale of scrap
metals. Revenue is shown net of value-added tax, returns, rebates
and discounts and after eliminating sales within the group. Revenue
is recognised when the metal produced is despatched and received by
the customers. The directors consider this in line with when the
performance obligation is satisfied and the contract is fulfilled.
Standard payment terms are discussed in note 17.
The directors have elected to apply the 'modified retrospective'
approach to transition permitted by IFRS 15 under which comparative
financial information is not restated. Given the nature of the
sales arrangements, with control passing to the customer upon
transfer of physical possession, the Company principally satisfies
its performance obligations at a point in time as opposed to over a
period of time. Therefore, the accounting of revenue under IFRS 15
did not have a material effect on the financial statements as at 1
April 2018 and so no transition adjustment has been made. The
Standard has not had a material impact on the accounting policy
adopted in respect to revenue as previously disclosed in the 2018
financial statements.
The directors consider that revenue generation relates
exclusively to scrap metal sales in China and so no further
segmentation is required.
(j) Cost of sales
Cost of sales consists of all costs of purchase and other
directly incurred costs.
Cost of purchase comprises the purchase price, import duties and
other taxes (other than those subsequently recoverable by the Group
from the taxing authorities), if any, and transport, handling and
other costs directly attributable to the acquisition of goods.
Trade discounts, rebates and other similar items are deducted in
determining the costs of purchase.
Cost of conversion primarily consists of hiring charges of
subcontractors incurred during the course of conversion.
(k) Borrowing costs
Borrowing costs are expensed in the period in which they occur.
Borrowing costs consist of interest and other costs that an entity
incurs in connection with the borrowing of funds.
(l) 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 net profit as reported in the
statement of comprehensive income because it excludes items of
income and expense that are taxable or deductible in other years,
and it further excludes 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 recognised on temporary differences between the
carrying amount of assets and liabilities in the consolidated
financial statements and the corresponding tax bases used in the
computation of taxable profit. Deferred tax liabilities are
generally recognised for all taxable temporary differences.
Deferred tax assets are generally recognised for all deductible
temporary differences to the extent that it is probable that
taxable profits will be available against which those deductible
temporary differences can be utilised. Such deferred tax assets and
liabilities are not recognised if the temporary differences arise
from goodwill or from the initial recognition (other than in a
business combination) of other assets and liabilities in a
transaction that affects neither the taxable profit nor the
accounting profit.
Deferred tax liabilities are recognised for taxable temporary
differences associated with investments in subsidiaries, except
where the Group is able to control the reversal of the temporary
difference and it is probable that the temporary difference will
not reverse in the foreseeable future. Deferred tax assets arising
from deductible temporary differences associated with such
investments are only recognised to the extent that it is probable
that there will be sufficient taxable profits against which to
utilise the benefits of the temporary differences and they are
expected to reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at the
end of the 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 assets and liabilities are measured at the tax
rates that are expected to apply in the period in which the
liability is settled or the asset realised. The measurement of
deferred tax assets and liabilities reflects the tax consequences
that would follow from the manner in which the Group expects, at
the end of the reporting period, to recover or settle the carrying
amount of its assets and liabilities.
Current or deferred tax for the year is recognised in profit or
loss, except when it relates to items that are recognised in other
comprehensive income or directly in equity, in which case the
current and deferred tax is also recognised in other comprehensive
income or directly in equity respectively. Where current tax or
deferred tax arises from the initial accounting for a business
combination, the tax effect is included in the accounting for the
business combination.
(m) Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and on hand,
demand deposits with banks and other financial institutions, and
short-term, highly liquid investments that are readily convertible
into known amounts of cash and which are subject to an
insignificant risk of changes in value, having been within three
months of maturity at acquisition. Bank overdrafts that are
repayable on demand and form an integral part of the Group's cash
management are also included as a component of cash and cash
equivalents for the purpose of the consolidated statement of cash
flows.
(n) Provisions and contingencies
Provisions are recognised when the Group has a present
obligation as a result of a past event, and it is probable that the
Group will be required to settle that obligation. Provisions are
measured at the directors' best estimate of the expenditure
required to settle the obligation at the statement of financial
position date, and are discounted to present value where the effect
is material. Provisions are not recognised for future operating
losses.
Where there are a number of similar obligations, the likelihood
that an outflow will be required in settlement is determined by
considering the class of obligations as a whole. A provision is
recognised even if the likelihood of an outflow with respect to any
one item included in the same class of obligations may be
small.
(o) Provisions and contingencies (continued)
When the effect of discounting is material, the amount
recognised for a provision is the present value at the reporting
date of the future expenditures expected to be required to settle
the obligation. The increase in the discounted present value amount
arising from the passage of time is included in finance costs in
the statement of comprehensive income.
Contingent liabilities are not recognised in the financial
statements. They are disclosed unless the possibility of an outflow
of resources embodying economic benefits is remote. A contingent
asset is not recognised in the financial statements but disclosed
when an inflow of economic benefits is probable.
(p) Share Capital
Ordinary shares are classified as equity. Proceeds from issuance
of ordinary shares are classified as equity. Incremental costs
directly attributable to the issuance of new ordinary shares are
deducted against share capital.
(q) Foreign currencies
In preparing the financial statements of each individual group
entity, transactions in currencies other than the functional
currency of that entity (foreign currencies) are recorded in the
respective functional currency (i.e. the currency of the primary
economic environment in which the entity operates) at the rates of
exchanges prevailing on the dates of the transactions. At the end
of the reporting period, monetary items denominated in foreign
currencies are retranslated at the rates prevailing at that date.
Non-monetary items carried at fair value that are denominated in
foreign currencies are retranslated at the rates prevailing on the
date when the fair value was determined. Non-monetary items that
are measured in terms of historical costs in a foreign currency are
not retranslated.
Exchange differences arising on the settlement of monetary
items, and on translation of monetary items, are recognised in
profit or loss in the period in which they arise. Exchange
differences arising on the retranslation of non-monetary items
carried at fair value are included in profit or loss for the period
except for differences arising on the retranslation of non-monetary
items in respect of which gains and losses are recognised directly
in other comprehensive income, in which cases, the exchange
differences are also recognised directly in other comprehensive
income.
For the purposes of presenting the consolidated financial
statements, assets and liabilities of the Group's foreign
operations are translated into the presentation currency of the
Group (i.e. Hong Kong Dollars) at the rate of exchange prevailing
at the end of the reporting period, and their income and expenses
are translated at the average exchange rates for the period, unless
exchange rates fluctuate significantly during that period, in which
cases, the exchange rates prevailing at the dates of transactions
are used. Exchange differences arising, if any, are recognised in
other comprehensive income and accumulated in equity.
The principal exchange rates during the year are set out in the
table below:
Rate compared Average rate Average Year end rate Year end
to HK$ 2019 rate 2018 2019 rate 2018
------------------ ---------------- -------------- ----------------- --------------
GBP 10.29 10.61 10.24 11.01
US Dollar 7.84 7.82 7.85 7.84
Euro 9.08 9.35 8.82 9.67
------------------ ---------------- -------------- ----------------- --------------
(r) Operating leases
Assets held under finance leases are initially recognised as
assets of the Group at their fair value at the inception of the
lease or, if lower, at the present value of the minimum lease
payments. The corresponding liability to the lessor is included in
the statement of financial position as a finance lease obligation.
Lease payments are treated as reduction of the lease obligation on
the remaining balance of the liability. Finance expenses are
recognised immediately in profit or loss, unless they are directly
attributable to qualifying assets, in which case they are
capitalised. Contingent rentals are recognised as expenses in the
periods in which they are incurred.
Where the Group has the use of assets held under operating
leases, payment made under the leases are charged to profit or loss
over the accounting periods covered by the lease term except where
an alternative basis is more representative of the pattern of
benefits to be derived from the leased asset. Lease incentives
received are recognised in profit or loss as an integral part of
the aggregate net lease payments made. Contingent rentals are
charged to profit or loss in the accounting period in which they
are incurred.
(s) Employee benefits
(i) Salaries, annual bonuses, paid annual leave, leave passage
and the cost to the Group of non-monetary benefits are accrued in
the period in which employees of the Group render the associated
services. Where payment or settlement is deferred and the effect
would be material, these amounts are stated at their present
values.
(ii) The Group participates in the mandatory provident fund for
its employees in Hong Kong. Contributions to the funds by the Group
and the employees are calculated as a percentage of the employees'
basic salaries. The retirement benefit cost charged to the
statement of comprehensive income represents contributions payable
by the Group to the fund. The Group's contributions to the fund are
expensed as incurred and the Group's voluntary contributions are
reduced by contributions forfeited by those employees who leave the
fund prior to vesting fully in the contributions. The assets of the
fund are held separately from those of the Group in an
independently administered fund.
(iii) Several employees of the Group have completed the required
number of years of services to the Group in order to be eligible
for long service payments under the Hong Kong Employment Ordinance
in the event of the termination of their employment. The Group is
liable to make such payments in the event that such a termination
of employment meets the circumstances specified in the Employment
Ordinance.
Provision has not been recognised in respect of such possible
payments, as it is not considered probable that the situation will
result in a material outflow of resources from the Group.
(t) Segmental 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, who is responsible for
allocating resources and assessing performance of the operating
segments, has been identified as the executive directors who make
strategic decisions.
3. Critical accounting estimates and judgements
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.
In the application of the Group's accounting policies, which are
described above, management is required to make estimates and
assumptions about the carrying amounts of assets and liabilities
that are not readily apparent from other sources. The estimates and
assumptions that had a significant risk of causing a material
adjustment to the carrying amount of assets and liabilities are
discussed below.
(a) Inventory valuation
Inventory is valued at the lower of cost and net realisable
value. 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 conditions and the historical experience of selling
products of a similar nature. It could change significantly as a
result of competitors' actions in response to severe industry
cycles. The Group reviews its inventories in order to identify
slow-moving merchandise and uses markdowns to clear merchandise.
Inventory value is reduced when the decision to markdown below cost
is made.
(b) Impairment of receivables
The Group's management reviews receivables on a regular basis to
determine if any provision for impairment is necessary. The policy
for the impairment of receivables of the Group is based on, where
appropriate, the evaluation of collectability and ageing analysis
of the receivables and on management's judgement. A considerable
amount of judgement is required in assessing the ultimate
realisation of these outstanding's, including the current
creditworthiness and the past collection history of each debtor. If
the financial conditions of debtors of the Group were to
deteriorate, resulting in an impairment of their ability to make
payments, provision for impairment may be required.
(c) Income Taxes
The Group is subject to income taxes in Hong Kong and Macau.
Significant judgement is required in determining the provision for
income taxes and the timing of payment of the related tax. There
are certain transactions and calculations for which the ultimate
tax determination is uncertain during the ordinary course of
business. The Group recognises liabilities for anticipated tax
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 provision in the period in which such determination
is made.
(d) Depreciation and amortisation
The Group depreciates property, plant and equipment and
amortises the leasehold land and land use rights on a straight-line
method over the estimated useful lives. The estimated useful lives
reflect the directors' estimate of the periods that the Group
intends to derive future economic benefits from the use of the
Group's property, plant and equipment and the leasehold land and
land use rights.
4. Segmental reporting
In the opinion of the directors, the Group has one class of
business, being the trading of scrap materials. The Group's primary
reporting format is determined by the geographical segment
according to the location of its establishments. There is currently
only one geographic reporting segment, which is China. All revenues
and costs are derived from the single segment.
5. Other revenue
2019 2018
HKD'000 HKD'000
Sundry income 14 1
Exchange gains - -
Bank interest income 9 10
------------ ------------
Total other revenue 23 11
_________ _________
6. Personnel expenses and staff numbers (excluding directors)
Group Company
-------------------- ---------------------
2019 2018 2019 2018
Number Number Number Number
The average number of
employees in the year
were:
* Management 8 13 - -
* Accounts and administration 4 12 - -
* Production 17 112
-------- -------- -------- --------
29 137 - -
______ ______ ________ ________
HKD'000 HKD'000 HKD'000 HKD'000
The aggregate payroll
costs for these persons
were:
* Staff costs other than mandatory provident fund
contributions 1,835 2,392 - -
* Mandatory provident fund contributions for employees 37 37 - -
-------- -------- -------- --------
Total personnel expense 1,872 2,429 - -
______ ______ ________ ________
7. Directors' remuneration
2019 2019 2019 2018
Salaries Share based Total
and fees payment charge Total
HKD'000 HKD'000 HKD'000 HKD'000
Wenjie Zhou 240 - 240 240
Jianfeng Li 240 - 240 240
Chor Wei Ong 132 - 132 116
Chin Phang Kwok 132 - 132 116
Peter George Greenhalgh 132 - 132 116
Ajay Kumar Rajpal* 132 - 132 116
------------ -------------- ------------ ------------
Total 1,008 - 1,008 944
_________ _________ _________ _________
* Mr Rajpal is paid through NAS Corporate Services Ltd, a
company controlled by him.
8. Expenses - analysis by nature
2019 2018
HKD'000 HKD'000
Auditors' remuneration for audit services
(company only HKD 211,392 (2018: HKD
164,900)) 341 375
Depreciation on property, plant and
equipment 858 893
Rentals of premises under operating
leases 191 222
Employee benefits (Note 6) 1,872 2,429
Other expenses 5,809 3,419
------------ ------------
Total administrative expenses 9,071 7,338
_________ _________
9. Taxation
The charge for the year can be reconciled to the profit
before taxation per the consolidated statement of comprehensive
income as follows:
2019 2018
HKD'000 HKD'000
(Loss)/Profit before taxation (64,765) 1,795
_________ _________
Current income tax expense-
Hong Kong 56 122
Deferred tax credit (19) (20)
-------------- ------------
Total income tax expense
/ (credit) 37 102
_________ _________
The Company is incorporated in the UK but is treated as a Hong
Kong resident for tax purposes.
Macau and Hong Kong tax has been provided at a rate of 12%
(2018:12%) and 8.25% (2018 -16.5%) respectively.
There was no unprovided deferred taxation in respect of the year
(2018: HKD Nil).
The reconciliation of the current tax expense and the product
of accounting profit multiplied by the applicable tax rate
is as follows:
2019 2018
HKD'000 HKD'000
Accounting profit/(loss) (64,765) 1,992
------------ ----------
Tax at the domestic tax rate
of 8.25% (2018: 16.5%) (5,343) 299
Other adjustments 5,380 (197)
------------ ----------
Income tax expense 37 102
_________ _________
The tax payable of HKD 9,132,634 (2018: 9,174,000) disclosed in
the Consolidated Statement of Financial Position includes a
liability for the current income tax expense and a provision that
has been brought forward as at 1 April 2012 for tax payable in
Macau.
10. Profit per share
Profit per share data is based on the Group profit or loss for
the year and the weighted average number of shares in issue.
2019 2018
HKD'000 HKD'000
(Loss)/ Profit for the year from:
Continuing operations used in the calculation of basic and diluted earnings per share
from
continuing operations (64,802) 1,693
---------- ----------
(Loss)/Profit for the year attributable to owners of Company (64,802) 1,693
Weighted average number of ordinary shares for the purposes of basic earnings per share
(000's) 122,010 122,010
diluted earnings per share (000's) 125,453 125,453
2019 2018
HKD HKD
Basic earnings per share (0.531) 0.014
Diluted earnings per share (0.531) 0.013
The Detailed earnings per share is the same as the basic
earnings per share as the loss for the current period has an
antidilutive effect.
11. Fixed asset investments
Company 2019 2018
HKD'000 HKD'000
Cost
At 1 April 30,046 30,046
Addition - -
---------- ----------
At 31 March 30,046 30,046
Impairment
At 1 April - -
Addition 28,817 -
---------- ----------
At 31 March 28,817 -
Carrying amount
At 31 March 1,229 30,046
As at 31 March 2019, the company directly and indirectly had the
following subsidiaries:
Name of entity Principal Country of incorporation Proportion
activities and place of business (%) of
equity interest
2018 and
2019
%
Masterpiece Enterprises British Virgin
Limited Holding company Islands 100
Trading of scrap
materials and
provision of
Zibao Metals Company management related
Limited* services Hong Kong 100
Trading of scrap
Top Able Enterprises materials and
Limited (Trading provision of
as Global Metals management related British Virgin
Limited)* services Islands 100
Fine Luck Trading Trading of scrap
Limited* materials Hong Kong 100
Non-ferrous
metal processing
and stockholding
Zheng Bao* yard PRC 100
Zibao Metals Company Limited, Top Able Enterprises Limited, Fine
Luck Trading Limited and Zheng Bao are wholly owned subsidiaries of
Masterpiece Enterprises Limited.
*Indirectly held
12. Intangible assets
Group Goodwill Customer Relationships
Total
HKD'000 HKD'000 HKD'000
Cost
At 1 April 2018 764 1,008 1,772
Additions - - -
---------- ---------- ----------
At 31 March 2019 764 1,008 1,772
Amortisation and impairment
At 1 April 2018 - (315) (315)
Amortisation charge for the year - (101) (101)
Impairment (764) (592) (1,356)
---------- ---------- ----------
At 31 March 2019 (764) (1,008) (1,772)
Carrying amount
At 31 March 2019 - - -
At 31 March 2018 764 693 1,457
There is an accumulated impairment loss of HKD 1,356,000.
Goodwill has arisen as a result of the purchase of Zheng Bao.
Zheng Bao was acquired on 16 February 2015, whose principal
activity is the operation of non-ferrous metal processing and
stock-holding yard.
The goodwill intangible asset represents the excess
consideration paid over and above the fair value of the net assets
of Zheng Bao.
13. Property, plant and equipment
Group
Land and Leasehold Furniture Computer Plant
buildings improve-ment and fixtures equipment and machinery Total
HKD'000 HKD'000 HKD'000 HKD'000 HKD'000 HKD'000
Cost
As at 31 March
2017 44,741 9,495 488 566 1,824 57,114
Exchange translation
difference 1,864 391 10 - 76 2,341
---------- ---------- ---------- ---------- ---------- --------
As at 31 March
2018 46,605 9,886 498 566 1,900 59,455
Additions - - - 12 - 12
Exchange translation
difference (1,864) (391) (10) - (76) (2,341)
Disposals/written
off - - (23) (534) - (557)
---------- ---------- ---------- ---------- ---------- --------
As at 31 March
2019 44,741 9,495 465 44 1,824 56,569
---------- ---------- ---------- ---------- ---------- --------
Accumulated depreciation
As at 31 March
2017 7,353 6,485 487 543 1,771 16,639
Charge for the
year 1,097 465 1 8 19 1,590
Exchange translation
difference 306 265 10 - 74 655
---------- ---------- ---------- ---------- ---------- --------
As at 31 March
2018 8,756 7,215 498 551 1,864 18,884
Change for the
year 1,053 445 9 18 1,525
Exchange translation
difference (350) (284) (10) - (75) (719)
Disposals/Written
off/Impairment 17,641 2,119 (23) (533) 17 19,221
---------- ---------- ---------- ---------- ---------- --------
As at 31 March
2019 27,100 9,495 465 27 1,824 38,911
---------- ---------- ---------- ---------- ---------- --------
Carrying amount
As at 31 March
2019 17,641 - - 17 - 17,658
As at 31 March
2018 37,849 2,671 - 15 36 40,571
14. Inventories
Group 2019 2018
HKD'000 HKD'000
Stock in trade 3,055 25,792
------------ --------------
3,055 25,792
_________ _________
The amount of inventories recognised as an expense during the
year is HKD 377,677,878 (2018: HKD 847,884,000).
15. Trade and other receivables
Group Company
2019 2018 2019 2018
HKD'000 HKD'000 HKD'000 HKD'000
Trade receivables 12,100 11,440 - -
_________ _________ _________ _________
Other receivables:
Deposits 3,859 6,599 - -
Prepayments 57 105 45 82
Other receivables (non-trade) 3,345 3,362 - -
Amounts due from subsidiaries - - - 42,873
---------- ---------- ---------- ----------
7,261 10,066 45 42,955
_________ _________ _________ _________
Trade receivables represent amounts receivable on the sale of
scrap materials and are included at amortised cost. The average
credit period taken is 30 days, there are no provisions for
doubtful debts and 2 customers account for 100% of the total trade
receivables. There are no debts past due at the year end based on
credit term of 30 days with the exception of a balance of HKD
1,122,000 which is expected to be fully recoverable.
16. Cash and cash equivalents
Group 2019 2018
HKD'000 HKD'000
Cash and bank balances 8,943 12,275
---------- ----------
Cash and bank balances
as presented in balance
sheets 8,943 12,275
---------- ----------
Cash and cash equivalents
as presented in consolidated
statement of cash flows 8,943 12,275
_________ _________
17. Trade and other payables
Group Company
2019 2018 2019 2018
HKD'000 HKD'000 HKD'000 HKD'000
Trade payables 12,958 18,295 - -
_________ _________ _________ _________
Other payables:
* Accrued expenses 487 679 240 240
* Other payables 20,178 193 - -
* Trade deposit received 4,944 8,628 - -
- ------------ ---------- ---------- ----------
25,609 9,500 240 240
_________ _________ _________ _________
Trade payables represent amounts due for the purchase of scrap
materials and administrative expenses and are included at amortised
cost. The average credit period taken is 10 days. The directors
consider that the carrying amount of trade payables approximates to
their fair value. Included within other payables is HKD 20,000,000
relating to restructuring costs.
18. Deferred tax liability
2019 2018
HKD'000 HKD'000
At 1 April 137 157
Arising on acquisition of - -
Zheng Bao
Deferred tax release (19) (20)
---------- ----------
At 31 March 118 137
_________ _________
The deferred tax liability has arisen in respect of taxable
timing differences in relation to the customer relationships
intangible asset as mentioned in note 14.
19. Share capital
Group & Company 2019 2018
HKD HKD
Class Nominal
Value
Allotted, issued and
fully paid
122,010,000 Ordinary GBP0.01 15,549,000 15,549,000
_________ _________
The ordinary shares have attached to them full voting, dividend
and capital distribution (including on winding up) rights; they do
not confer any rights of redemption.
20. Other reserves
Group
2019 2018
HKD'000 HKD'000
Group reorganisation reserve (527) (527)
_________ _________
The Group reorganisation reserve was a result of the group
reorganisation of the old Masterpiece Enterprises Group.
Masterpiece Enterprises Limited was formed before the acquisition
by Zibao Metals Recycling Holdings Plc to hold the trading
subsidiaries. The difference between the nominal value of the
shares acquired of the trading subsidiaries and the value of the
shares issued by Masterpiece Enterprises in exchange is taken as a
reserve movement.
20. Other reserves (continued)
Company
2019 2018
HKD'000 HKD'000
Merger relief reserve - 19,516
_________ _________
The merger relief reserve arises from the 100% acquisition of
the Masterpiece Group on 10 March 2014 whereby the excess of the
fair value of the issued ordinary share capital issued over the
nominal value of these shares is transferred to this reserve in
accordance with section 612 of the Companies Act 2006.
21. Related-party transactions
During the year, the Group entered into the following trading
transactions with related parties that are not members of the
Group:
Sales of goods Purchase of goods
2019 2018 2019 2018
HKD'000 HKD'000 HKD'000 HKD'000
Wang Kei Yip Development - 11,288 - -
Limited
There were no amounts outstanding as at the year end.
Ben Lee is the brother in law of the director, and is a director
of Wang Kei Yip Development Limited. Wang Kei Yip Development
Limited is therefore a related party. The transaction was at arms
length.
The parent Company only statement of financial position includes
amounts of HKD nil (2018: HKD 42,873,000) due from Masterpiece
Enterprises Limited. Provision of HKD 25,888,916 is included
against this balance in the current period. All entities are wholly
owned subsidiaries and all balance are repayable on demand.
22. Operating lease commitments
The Group has commitments for leases with independent third
parties in respect of rented premises and staff quarters. The
leases have varying terms and renewal rights.
The future aggregate minimum lease payments under
non-cancellable operating leases contracted for at the balance
sheet date but not recognised as liabilities are as follows:
2019 2018
HKD'000 HKD'000
Within one year 96 -
Between two to five years 72 -
---------- ----------
168 -
_________ _________
The lease on the rented premises will expire on 31 December
2020. The current rent payable on the leases ranges from HKD 18,500
to HKD 8,000 (2018: HKD 18,500 ) per month.
23. Financial instruments
Financial risk management objectives and policies
The Group's major financial instruments include trade and other
receivables, amounts due to/from related companies, bank balances
and cash, trade and other payables, and amounts due to a director.
Details of these financial instruments are disclosed in respective
notes. The risks associated with these financial instruments
include market risk (foreign exchange risk), credit risk, interest
rate risk, liquidity risk and capital management risk. The Group's
overall risk management programme focuses on the unpredictability
of financial markets and seeks to minimise potential adverse
effects on the Group's financial performance. The policies for
managing these risks are summarised below.
It is the Group's policy not to trade in derivative
contracts.
(a) Market risk
Foreign currency risk
Currency risk is the risk that the holding of foreign currencies
will affect the Group's position as a result of a change in foreign
currency exchange rates. The Group has no significant foreign
currency risk as most of the Group's financial assets and
liabilities are denominated in functional currencies of relevant
group entities. Accordingly, no quantitative market risk
disclosures or sensitivity analysis for currency risk have been
prepared.
(b) Cash flow and fair value interest rate risk
The Group currently does not have any interest bearing
borrowings or financial instruments or any interest rate hedging
policy. The director monitors the Group's exposure on an ongoing
basis and will consider hedging interest rate risk should the need
arise. Accordingly, no quantitative market risk disclosures or
sensitivity analysis for interest rate risk have been prepared
(c) Liquidity risks
The Group manages its liquidity risk by maintaining sufficient
cash, by monitoring the liquidity requirements in the short and
longer term.
The Group monitors its liquidity risk and maintains a level of
cash and cash equivalents deemed adequate by management to finance
the Group's operations and to mitigate the effects of fluctuations
in cash flows. Typically, the Group ensures that it has sufficient
cash on demand to meet expected operational expenses including the
servicing of financial obligations. Management monitors the Group's
liquidity reserve, comprising cash and cash equivalents (Note 18)
on the basis of expected cash flows.
The following tables detail the remaining contractual maturity
for non-derivative financial liabilities. The tables have been
drawn up based on the undiscounted cash flows of financial
liabilities based on the earliest date on which the Group can be
required to pay.
2019 On demand Later than
or not later 1 year and
than 1 year not later
than 5 years
HKD'000 HKD'000
Trade and other payables 38,567 -
Borrowings - -
-------------- ------------
38,567 -
_________ _________
2018 On demand Later than
or not later 1 year and
than 1 year not later
than 5 years
HKD'000 HKD'000
Trade and other payables 27,795 -
Borrowings - -
-------------- ------------
27,795 -
_________ _________
(d) Credit risk
Credit risk refers to the risk that counterparty will default on
its contractual obligations resulting in financial loss to the
Group. The carrying amount of financial assets recorded in the
consolidated financial statements, which is net of impairment
losses, represents the Group's maximum exposure to credit risk. The
Group has adopted a policy of only dealing with creditworthy
counterparties as a means of mitigating the risk of financial loss
from defaults. The Group's exposure and the credit ratings of its
counterparties are continuously monitored. Credit exposure is
controlled by counterparty limits that are reviewed and approved by
the management regularly.
The Group has put in place policies to ensure that sales of
products are made to customers with an appropriate credit history
and the Group performs periodic credit evaluations of its
customers. In this regard, the director of the Group considers that
the Company's credit risk is significantly reduced.
The Group's bank balances and cash are deposited with banks in
Hong Kong. The credit risk on liquid funds is limited because the
counterparties are banks with good credit-rating.
(e) Financial instruments by category
The following table sets out the financial instruments as at the
statement of balance sheet date:
2019 2018
HKD'000 HKD'000
Financial assets:
Loans and receivables:
Trade receivables 12,100 11,440
Deposits and other receivables 7,204 9,961
Bank balances and cash
* denominated in HKD 1,011 383
- denominated in USD 2,112 11,295
* denominated in CNY 5,810 596
* denominated in JPY 5 1
5 -
* denominated in GBP
---------- ----------
28,247 33,676
Financial liabilities:
Financial liabilities measured
at amortised cost:
Trade payables 12,958 18,295
Accrued liabilities and other
payables 25,609 9,500
---------- ----------
38,567 27,795
(f) Capital management risk
The Group's objectives when managing capital are to safeguard
the Group's ability to continue as a going concern, so that it can
continue to provide returns for shareholders and benefits for other
stakeholders, and to provide an adequate return to
shareholders.
The Group manages its capital structure and makes adjustments to
it in the light of changes in economic conditions and the risk
characteristics of the underlying assets. In order to maintain or
adjust the capital structure, the Group may adjust the amount of
dividends paid to shareholders, return capital to shareholders,
issue new shares, or sell assets to reduce debt.
No changes were made in the objectives, policies and processes
during the years of 2018 and 2019.
The Group monitors capital using a gearing ratio, which is the
Group's net debts divided by its
total capital. Net debt is calculated as total liabilities as
shown in the statement of financial position less cash and bank
balances. Total capital is calculated as equity, as shown in the
statement of financial position, plus net debt. The Group's gearing
ratios are as follows:
2019 2018
HKD'000 HKD'000
Total liabilities 47,669 36,969
Less: Cash and bank balances (8,943) (12,275)
-------- ----------
Net debt 38,726 24,694
Total equity 1,200 66,862
-------- ----------
Total capital 39,926 91,556
Gearing ratio 97% 27%
24. Fair value of financial instruments
Fair value estimates are made at a specific point in time and
based on relevant market information and information about the
financial instruments. These estimates are subjective in nature and
involve uncertainties and matters of significant judgment and
therefore cannot be determined with precision. Changes in
assumptions could significantly affect these estimates. The Group
does not currently have any derivative or other financial
instruments measured at fair value through profit and loss and the
carrying amounts of financial instruments in the balance sheet
approximated their fair values.
25. Controlling Party
The ultimate controlling party is Wenjie Zhou.
26. Cash generated from operations
2019 2018
HKD'000 HKD'000
Cash flows from operating activities before changes in working capital and provisions
(Loss)/Profit before income tax (64,765) 1,795
Adjustments for:
Depreciation on property, plant and equipment 1,525 1,590
Amortisation 101 100
Provision for obsolete inventories 15,722 -
Impairment of property, plant and equipment 19,778 -
Impairment of goodwill 1,355 -
(Increase) / decrease in inventories 7,016 9,361
Decrease/(Increase) in trade receivables (660) (9,755)
Decrease / (increase) in prepayments, deposits and other receivables 4,789 (4,405)
(Decrease) / Increase in trade payables (5,338) 12,190
Increase in accrued liabilities and other payables 16,492 2,216
-------- ----------
Cash used in operations (3,985) 13,092
27. Share options
On 16 June 2014 the Company granted options on 525,000 ordinary
shares to certain directors. The options are exercisable at GBP0.08
per share after the first anniversary of Admission, provided that
the director remains in office until then.
Weighted
average
remaining
Number Exercise contractual
of options price life
At 31 March 2017 525,000 GBP0.08 5 years
Options issued in the period - - -
---------- ---------- ----------
At 31 March 2018 525,000 GBP0.08 5 years
Options issued in the period - - -
---------- ---------- ----------
At 31 March 2019 525,000 GBP0.08 5 years
The fair value of the share options issued in the current period
is HKD 0.19 and was derived using the Black Scholes model. The
following assumptions were used in the calculation:
Bid price discount 25%
Risk-free rate 1.5%
Volatility 60%
Expected life 3 years
Expected volatility is based on a conservative estimate for a
newly listed entity. 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.
A charge of HKD nil (2018: HKD nil) has been recognised for the
share-based payments during the year.
28. Warrants
On 16 June 2014, the Company granted to ZAI warrants to
subscribe for 2,917,500 Ordinary shares at an issue price of
GBP0.08 at any time in the period to 16 June 2019.
Weighted
average
remaining
Number Exercise contractual
of warrants price life
At 31 March 2017 2,917,500 GBP0.08 5 years
Warrants issued in the period - - -
---------- ---------- ----------
At 31 March 2018 2,917,500 GBP0.08 5 years
Warrants issued in the period - - -
---------- ---------- ----------
At 31 March 2019 2,917,500 GBP0.08 5 years
The fair value of the warrants issued in the current period is
HKD 0.19 and was derived using
the Black Scholes model. The following assumptions were used in
the calculations:
Bid price discount 25%
Risk-free rate 1.5%
Volatility 60%
Expected life 3 years
Expected volatility is based on a conservative estimate for a
newly listed entity. 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.
A charge of HKD nil (2018: HKD nil) has been recognised for the
share-based payments in the period as the warrants vested
immediately in the prior year upon listing.
29. Events subsequent to 31 March 2019
There were no subsequent events.
END
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR GGGDCDSXBGCG
(END) Dow Jones Newswires
September 30, 2019 05:40 ET (09:40 GMT)
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