TIDMGTS
RNS Number : 7046C
GTS Chemical Holdings PLC
29 June 2016
29 June 2016
GTS Chemical Holdings plc
("GTS" or the "Company" or the "Group")
GTS Chemical Holdings plc (AIM: GTS), the specialty chemicals
and lubricating oil producer, and China's largest producer of
ammonium sulfite, reports its financial results for the year ended
31 December 2015.
The Company's annual report will shortly be made available on
the Company's website (http://www.gtschemical.com/) and will be
posted to shareholders later today.
Enquiries:
GTS Chemical Holdings plc
Mr Roy Su, CFO Tel: +86 159 5935 8899
Website www.gtschemical.com
SP Angel Corporate Finance Tel: +44 (0) 20 3470 0470
LLP
Nominated Adviser and Broker
David Facey / Stuart Gledhill
Key points:
-- Revenue nears GBP100m
-- Revenue up 32.0%
-- Specialty chemicals and lubricant oils divisions performing
strongly
-- Stable gross margin of 21.1% (2014: 21.1%)
-- Profit before tax up 34.4%
-- New lubricant oil plant which has increased capacity by
167%
-- No full year dividend proposed
-- Delisting proposals to be sent to shareholders
Chairman's Statement
Andrew Harding is delighted by continued success in 2015
"2015 has been another excellent year, building on our success
in 2014. Our commitment to excellence, which has recently been
recognised by the American Petroleum Institute ("API"), is at the
heart of our success as we continue to expand our market reach in
both of our core sectors and we continue to invest to ensure that
we remain at the forefront."
Performance
I am delighted to report an excellent performance in 2015. Our
two core sectors continue to grow at a rate above market
expectations and we have done so, importantly, without diluting
gross margins. Overall, revenue was up 32% to RMB929.9m, which is
approximately GBP97.2m(1) , specialty chemicals revenue was up
30.2% and lubricant oils up 52.8%. I am pleased to say that the
results for the first quarter of 2016 show a similar trend.
Our success is based on our commitment to quality and compliance
with regulations. This is important for our specialty chemicals
division as we grow our sales into the sensitive pharmaceutical and
food sectors. It is equally important in the lubricant oil division
as regulations become tighter, the Chinese car parc becomes newer
and more expensive and the consumer requires better quality
oils.
Investment
Our strong cash flow has enabled us to invest continuously in
the business and we intend to continue to do this.
During the year we have not only increased capacity of our
specialty chemicals division but in addition have overhauled some
of our existing lines to improve quality, particularly in relation
to controlling output, which is particularly important in the food
and pharmaceutical sectors.
During the year we have not only increased capacity of our
speciality chemicals division but in addition have overhauled some
of our existing lines to improve quality, particularly in relation
to controlling output, which is particularly important in the food
and pharmaceutical sectors.
Our new lubricant oil plant which was constructed on the land
that we acquired at the end of 2014 not only increased our capacity
to 26,667 tonnes per year(2) but also ensures that we are able to
produce quality oils at a competitive price. The quality of our
processes has been recognised by the API which has recently awarded
us the Q1 specification.
(1) Using the average exchange rate for the year of RMB1=GBP0.1045
(2) On a single shift basis
Board and Governance
Our board combines strong experience in chemicals, accountancy,
capital markets, corporate governance and Chinese operations.
Each of our Non-Executive Directors bring independent character
and judgement to bear on strategic matters, the performance of the
Group and standards of conduct. Our Non-Executive Directors provide
a complementary mix of specialised industry knowledge and financial
reporting in China and elsewhere combined with in depth experience
of UK corporate governance matters.
Dividend
Given the proposed delisting of shares from trading on AIM, the
directors no longer intend to propose a dividend for the year ended
31 December 2015.
Delisting
The primary purpose of the Company's Admission was the
opportunity it provided to raise capital in support of the
Company's growth prospects. Given current market conditions, and in
particular the lack of investors for businesses operating in the
PRC, the Directors are of the opinion that it is difficult for the
Company to attract any or meaningful equity investment through its
listing on AIM and accordingly the Directors will be assessing
potential alternatives to raise growth capital. Also, there are
significant professional fees and other costs associated with the
maintaining of the Company's AIM listing.
Our people
Finally, on behalf of the board, I would like to thank all of
our people for their contribution to our success this year. We
continue to grow at an impressive rate and we would like to
wholeheartedly thank our team for making this possible.
Andrew Harding
Chairman
29 June 2016
Group Chief Executive's Review
Cheng Liu is pleased to report growth despite a tough economic
environment
"GTS has continued to grow throughout the period at rates higher
than market expectations. Our success is driven by our absolute
commitment to excellence enabling us to grow market share in a
difficult economic environment without suffering any reduction in
gross margin. We understand the importance of investing in our
assets, human and technical and this remains a key part of our
strategy going forward"
2015 performance overview
GTS has delivered revenue growth of 32.0% exceeding
expectations.
Segmental sales analysis
12 months % of 12 months % of
RMB to total to total Increase
(millions) 31 December sales 31 December sales
2015 2014
Specialty
Chemicals 656.6 70.6% 504.2 71.6% +30%
Lubricant
Oils 211.8 22.8% 138.6 19.7% +53%
Recarburizer 61.5 6.6% 61.7 8.7% 0%
Total 929.9 100.0% 704.5 100.0% +32%
Specialty chemicals delivered growth of 30% compared with the
previous year. Although the paper industry remained a large part of
our sales, unlike 2014 the majority of the growth was driven by our
success in accessing other segments of the market, in particular
food and pharmaceuticals. These two sectors demand the highest
quality standards in our product and our processes and we are
pleased that our efforts in this regard have not only been
recognised by our customers but also by the API.
Our lubricant oil division grew by 53% in the year compared with
a growth rate of 67%(3) in 2014. Whilst this is slightly lower
growth than experienced 2014, this is only to be expected as we
grow. Our growth is supported by our expanding distribution network
and through the support that we give to our distributors to
encourage them to grow their own sales. As the Lubricant Oil
Division is growing at a faster rate than our specialty chemicals
division its share of our total sales has increased to 22.8%.
Sales of recarburizer remain flat. Whilst this continues to make
a gross margin comparable to our core sectors with negligible
investment we will continue to operate this division, but we have
no plans to expand these activities. We anticipate that
recarburizer will represent less than 5.5% of our total sales in
2016.
Specialty Chemicals
Specialty chemicals remains our largest division representing
70.6% of total turnover (2014: 71.6%).
(3) Calculated by reference to H1 2014 and H2 2013 as the
lubricant oil division commenced in July 2013
Ammonium sulfite
The chemical properties of liquid ammonium sulfite and solid
ammonium sulfite are the same and are produced on the same
production line. As the liquid form has a shorter shelf life and is
more expensive to transport; liquid ammonium sulfite is almost
exclusively produced for local customers whilst solid ammonium
sulfite is shipped to all parts of China and indeed exported. Our
sales mix is, thus, determined by our customers. Aggregate growth
for both ammonium sulfite products is 25.6%.
Ammonium bisulfite
Ammonium bisulfite is only produced in liquid form. The biggest
increase in sales in 2015 has been to the Pharmaceuticals
sector.
The biggest drivers of growth in the year was the Chemical and
Pharmaceutical sector together with the increased emphasis on sales
via our distributor network. Sales to the paper industry have
remained flat because of a temporary delay in the expansion at
Tralin, our largest single customer.
We have focussed on developing our distributor network for the
specialty chemical division. At the end of the year the number of
distributors stood at 62 spread over 20 provinces. We will continue
to focus on this channel and provide support to our distributors to
encourage them to market our products effectively.
Lubricant Oils
Lubricant oil sales increased by 52.8% in the year from RMB138.6
million to RMB211.8 million and now represents 22.8% of our total
sales. In order to meet the anticipated increase in demand we
constructed a new lubricant plant on our new site which utilises
the latest technology and has almost tripled our capacity. We have
decided to concentrate on marketing and developing one brand,
Ogistar, which is aimed at the mid to high end of the market
although we continue to offer two other brands. By concentrating on
Ogistar we are able to differentiate it more easily from our
competitors.
Our sales continue to grow by gaining market share from other
producers who are unable to supply oil of similar quality at
competitive prices. We also focus heavily on marketing our brand
and providing support to our distribution network; this is vital in
the current economic climate. We continue to grow our distribution
network but, equally importantly, average sales per distributor
have been increasing in part because of the support that we
provide. Sales in the first quarter of 2016 have continued this
trend.
In 2015 97% of the lubricant oils division's sales (2014, 91.3%)
consisted of automotive oils and 3% (2014: 8.7%) of industrial
oils. Upon our observation, approximately 80% of the sales of
automotive oils are to repair workshops and the remainder to petrol
stations through our distributors. As part of the process of
increasing our market presence in the automotive sector we have
commenced production of allied products such as anti-freeze and
brake fluid, in order to be able to offer a more complete product
range. Similarly, we have begun production of cutting fluid to
expand our range of products to our industrial customers.
In 2015, the average sales price for our mid-range brand,
Changyun, was RMB15,500 per tonne, for Ogistar, our premium brand,
RMB16,700 per tonne, and for Qiaoke, which is aimed at the lower to
mid end of the market RMB13,800 per tonne.
Recarburizer
Recarburizer sales have remained flat in line with our policy
for this division.
Gross profit for the year increased by 31.9% to RMB196.2 million
from RMB148.7 million in 2014.
RMB (millions) 12 months to 12 months to Increase in
31 December 31 December Gross
2015 2014 Profit
%
Specialty
Chemicals 139.4 106.5 +30.8%
Lubricant
Oils 44.4 29.1 +52.6%
Recarburizer 12.4 13.1 (5.3%)
Total Gross
Profit 196.2 148.7 +31.9%
Overall gross margin is the same as 2014.
We have seen an increase in the gross margin for the chemicals
division. This has been driven in part by concentrating on the
efficiency of our processes and in part because of the increase in
our sales in particular to the higher quality, higher value
pharmaceuticals sector. By continuing to focus on quality and
customer service we anticipate that as we grow we should be able to
maintain margins in this division at the levels we have achieved so
far.
The gross profit margin for lubricant oil has reduced slightly
due to the increased depreciation charge following the construction
of the new plant.
The gross margin achieved by the recarburizer division is down
from 21.2% to 20.2%, although it is immaterial in the context of
our business as a whole. Our strategy for this business is that we
will continue to operate it whilst it continues to make a
reasonable margin as it requires little or no capital cost.
Seasonality
In general, none of our businesses are subject to seasonal
demand other than the impact of Chinese New Year, which is common
to most businesses. Chinese New Year has an impact upon sales in
the run up to New Year, but has most impact upon the results for Q1
each year.
Costs
Selling and distribution expenses and administrative expenses
have both reduced significantly as a percentage of sales. This is
due in part to economies of scale as we grow but more importantly
due to our focus on the efficiency of our operations. The
investments that we have made during the year are a key factor in
our increased operation efficiency and we will continue to invest
to ensure that this process continues.
Cash Flow
Net cash generated from operations have grown from RMB50.2
million to RMB155.8 million as follows:
RMB (millions) 2015 2014
Operating cash flows 154.33 114.82
Change in inventories (13.44) 0.41
Change in trade and
other receivables (1.66) (15.42)
Change in trade and
other payables 15.51 (49.63)
Net cash generated from
operating activities 154.74 50.18
Operating cash flows before working capital movements have moved
in line with the general profitability of the Group. In
2015, we have focused on controlling our working capital whilst
we continue to grow. The large difference between net cash
generated from operating activities in 2015 and 2014 arises from
the decision taken in 2014 to support our suppliers by paying them
earlier than hitherto. In 2015, we have relaxed this policy
slightly resulting in a slight increase in our trade payable
balance increasing broadly in line with our overall growth.
Interest
The increase in interest paid reflects an increase in the
average level of borrowing in the period, although we remain a
lightly geared company.
Financing
During 2015 there has been an increase in borrowings of RMB37.6
million. These funds were used to finance in part the investment of
RMB114.4m as shown below.
Investment
Our total investment activities in 2015 amounted to RMB115.4
million (2014: RMB33.1 million). This is a considerable investment
and represents the majority of our operating cash flows for the
year.
We propose to continue to invest heavily in our business as our
customers continue to demand greater levels of production, quality
and efficiency.
Dividend
Given the proposed delisting of shares from trading on AIM, the
directors no longer intend to propose a dividend for the year ended
31 December 2015.
Outlook
The outlook for our core business segments is strong. As already
reported, Q1 continues the trend seen in 2015.
Cheng Liu
Group Chief Executive
29 June 2016
CONSOLIDATED AND COMPANY STATEMENT OF COMPREHENSIVE INCOME FOR
THE YEARED 31 DECEMBER 2015
Group Group Company Company
Note Year Year Year Period
ended ended ended 22 January
31 December 31 December 31 December to
2015 2014 2015 31 December
2014
RMB'000 RMB'000 RMB'000 RMB'000
Revenue 4 929,913 704,567 - -
Cost of sales 5 (733,693) (555,829) - -
Gross profit 196,220 148,738 - -
Selling and distribution
expenses 5 (27,171) (21,584) - -
Administrative
expenses 5 (21,821) (18,139) (2,717) (2,119)
Operating profit 147,228 109,015 (2,717) (2,119)
Interest on bank
deposits 712 783 - -
Finance costs 7 (10,440) (7,846) (7) (10)
Investment income 8 - - 17,863 -
Grants received 999 420 - -
Non-operating
income 2 9 - -
Non-operating
expenses 8 (951) - - -
Profit before
tax 137,550 102,381 15,139 (2,129)
Income tax expense 9 (21,559) (16,228) -
Profit for the
period 115,991 86,153 15,139 (2,129)
Other comprehensive - - - -
income
Total comprehensive
income for the
period 115,991 86,153 15,139 (2.129)
Earnings per share
Basic (RMB) 10 1.13 0.90
Diluted (RMB) 1.12 0.90
CONSOLIDATED AND COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2015
Group Group Company Company
Notes 2015 2014 2015 2014
RMB'000 RMB'000 RMB'000 RMB'000
Non-current assets
Property, plant
and equipment 11 156,120 46,431 - -
Intangible assets 12 28,233 28,763 - -
Investment in
subsidiaries 13 - - 10 10
--------- ---------------- ----------------- -----------------
184,353 75,194 10 10
--------- ---------------- ----------------- -----------------
Current assets
Inventories 14 44,721 31,275 - -
Trade and other
receivables 15 149,891 148,280 68,473 57,029
Pledged deposits 16 1,993 11,000 - -
Cash and cash
equivalents 16 169,677 113,121 2 2
--------- ---------------- ----------------- -----------------
366,282 303,676 68,475 57,031
--------- ---------------- ----------------- -----------------
Total assets 550,635 378,870 68,485 57,041
Capital and reserves
Share capital 17 10,241 10,241 10,241 10,241
Share premium 17 44,167 44,167 44,167 44,167
Capital reserve 18 51,141 51,277 - -
Merger reserves 19 (6,167) (6,167) - -
Statutory reserve 20 1,648 1,648 - -
Option reserve 21 197 197 197 197
Retained earnings 199,376 101,112 (4,853) (2,129)
--------- ---------------- ----------------- -----------------
Total equity 300,603 202,475 49,752 52,476
Current liabilities
Borrowings 22 108,950 75,900 - -
Trade and other
payables 23 78,212 62,706 18,733 4,565
Current income
tax liabilities 10,515 4,660 - -
--------- ---------------- ----------------- -----------------
197,677 143,266 18,733 4,565
--------- ---------------- ----------------- -----------------
Non-Current liabilities
Long-term borrowings 22 11,140 6,590 - -
Long-term loans 24 41,215 26,539 - -
----------------- -----------------
52,355 33,129 - -
----------------- -----------------
Total liabilities 250,032 176,395 18,733 4,565
Total equity
and liabilities 550,635 378,870 68,485 57,041
The notes on pages 16 to 45 form part of these financial
statements.
The financial statements were approved by the Board of Directors
and authorised for issue on 29 June 2016.
Cheng Liu
Executive Director
GTS CHEMICAL HOLDINGS PLC
CONSOLIDATED AND COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 31 DECEMBER 2015
The Group
Share Share Capital Merger Statutory Option Retained Total
capital premium reserve reserve reserve reserve earnings
RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000
Balance at
31 December
2013 10,000 43,930 - (6,165) 1,648 - 14,832 64,245
========= ========= ========= ========== ========== ======== ========== ==========
(pro forma)
Comprehensive
income - - - - - - 86,153 86,153
Issued of
new shares 241 8,439 - - - - - 8,680
Share issue
costs - (8,202) - - - - - (8,202)
Capital
contribution - - 51,404 - - - - 51,404
Merger reserve - - - (2) - - - (2)
Share based
payment
expenses - - - - - 197 - 197
Recognised
interest
expenses - - (127) - - - 127 -
--------- --------- ----------
Balance at
31 December
2014 10,241 44,167 51,277 (6,167) 1,648 197 101,112 202,475
========= ========= ========= ========== ========== ======== ========== ==========
Comprehensive
income - - - - - - 115,991 115,991
Dividend
issued - - - - - - (17,863) (17,863)
Recognised
interest
expenses - - (136) - - - 136 -
--------- --------- --------- ---------- ---------- -------- ---------- ----------
Balance at
31 December
2015 10,241 44,167 51,141 (6,167) 1,648 197 199,376 300,603
========= ========= ========= ========== ========== ======== ========== ==========
CONSOLIDATED AND COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 31 DECEMBER 2015
The Company
Share Share Option Retained Total
capital premium reserve earnings
RMB'000 RMB'000 RMB'000 RMB'000 RMB'000
Balance at 31 December - - - - -
2013
========= ========= ========= ========== =========
Comprehensive income - - - (2,129) (2,129)
Issued of new shares 10,241 44,167 - - 54,408
Share based payment
expenses - - 197 - 197
Balance at 31 December
2014 10,241 44,167 197 (2,129) 52,476
========= ========= ========= ========== =========
Comprehensive income - - - 15,139 15,139
Dividend issued - - - (17,863) (17,863)
Balance at 31 December
2015 10,241 44,167 197 (4,853) 49,752
========= ========= ========= ========== =========
CONSOLIDATED AND COMPANY STATEMENT OF CASH FLOWS
FOR THE YEARED 31 DECEMBER 2015
Group Group Company Company
Year Year Year Period
ended ended ended 22 January
31 December 31 December 31 December to
2015 2014 2015 31 December
2014
Cash flow from operating Note RMB'000 RMB'000 RMB'000 RMB'000
activities
Profits before tax 137,550 102,381 15,139 (2,129)
Depreciation of property,
plant and equipment 11 5,697 4,714 - -
Amortisation of intangible
assets 12 595 340 - -
Investment income - - (17,863) -
(Company)
Interest income (712) (783) - -
Interest expenses 7 10,280 7,846 - -
Non-operating income (2) - - -
Non-operating expenses 8 951 - - -
Exchange difference (25) - (25) -
Share based payment
expense - 197 - 197
Recognised interest - 127 - -
expenses
Share for share exchange - (2) - -
adjustments
Reversal of impairment - (781) - -
of non-current assets
Loss on disposal of - 781 - -
property, plant and
equipment
---------------- ------------- -------------
Operating cash inflows
before movements in
working capital 154,334 114,820 (2,749) (1,932)
Increase/(decrease)
in inventories (13,444) 406 -
Increase in trade
and other receivables (1,611) (15,421) (11,444) (3,109)
Waiver of other receivables (50)
Increase/(decrease)
in trade and other
payables 15,506 (49,634) 14,168 4,565
------------- ---------------- ------------- -------------
Net cash generated
from/(used in) operations 154,735 50,171 (25) (476)
Interest paid 7 (9,232) (7,846) - -
Withholding tax paid 8 (951) - - -
Income taxes paid (15,704) (16,620) - -
------------- ---------------- ------------- -------------
Net cash generated
from/(used in) operating
activities 128,848 25,705 (25) (476)
============= ================ ============= =============
Investing activities
Purchase of property,
plant and equipment 11 (115,386) (13,051) - -
Expenditure on intangible
assets 12 (15) (20,000) - -
Interest received 712 783 - -
-------------
Net cash used in investing
activities (114,689) (32,268) - -
============= ================ ============= =============
Financing activities
Proceed from issue
of shares - 8,677 - 8,677
Payment of listing
costs - (8,199) - (8,199)
Proceed from bank
borrowings 22 129,810 82,490 - -
Repayment of bank
borrowings 22 (92,210) (69,450) - -
Long term / short - 28,252 - -
term loans from directors
Long term / short - 5,365 - -
term loan from subsidiary
directors
Loan from the Company's - 668 - -
shareholders
Capital contribution - 51,277 - -
Receive of dividend - 4,235 -
Payment of dividend (4,210) (8 7,200) (4,210) -
------------- ---------------- ------------- -------------
Net cash from financing
activities 33,390 11,880 25 478
============= ================ ============= =============
Net increase in cash
and cash equivalents 47,549 5,317 - 2
CONSOLIDATED AND COMPANY STATEMENT OF CASH FLOWS - CONTINUTED
FOR THE YEARED 31 DECEMBER 2015
Group Group Company Company
Year Year Year Period
ended ended ended 22 January
31 December 31 December 31 December to
2015 2014 2015 31 December
2014
Note RMB'000 RMB'000 RMB'000 RMB'000
Cash and cash equivalents
at beginning of period 124,121 118,804 2 -
------------- -------------- ------------- -------------
Cash and cash equivalents
at end of period 16 171,670 124,121 2 2
------------- -------------- ------------- -------------
Analysis of balance
of cash and cash equivalents
Cash and cash equivalent
as stated in the consolidated
statement of financial
position 169,677 113,121 2 2
Time deposits with
original maturity
of less than 6 months
when acquired, pledged
for notes payable 1,993 11,000 - -
------------- -------------- ------------- -------------
Cash and cash equivalents
as stated in the consolidated
statement of cash
flows 16 171,670 124,121 2 2
============= ============== ============= =============
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARED 31
DECEMBER 2015
1 GENERAL INFORMATION
GTS Chemical Holdings Plc (the "Company") was incorporated in
Jersey on 22 January 2014. The registered office of the Company is
11 Bath Street, St Helier, Jersey JE2 4ST.
The principal activity of the Company is that of an investment
holding company and the principal activities of the Group are
manufacturing of ammonium sulfite, ammonium bisulfite, blending and
distribution of lubricating oils and trading of recarburizer. The
principal place of business is at Luzhuang Village, Jiangdian Town,
Gaotang County, Shandong Province, P. R. China.
The Company was set up as part of the group restructuring for
admission to AIM, the Group has taken over the business and trade
of Shandong Tiantai Steel-Plastic Co., Ltd ("Shandong Tiantai")
before admission to AIM on 1st August 2014.
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
2.1 Statement of compliance
The financial statements have been prepared in accordance with
International Financial Reporting Standards as adopted by the EU
("IFRS") issued by the International Accounting Standard Board
(IASB) and interpretations of the International Financial Reporting
Interpretations Committee (IFRIC).
The group has adopted all relevant standards effective for
accounting periods beginning on or after 1 January 2015 from the
beginning of the reporting period.
As at end of the reporting period, the Group has not adopted the
following standard as it is either not effective or not applicable
to the Group's business.
Standards, amendments and interpretations (not yet endorsed by
EU at 8 June 2016)
- IFRS 9 Financial Instruments (July 2014)
- IFRS 14 Regulatory Deferral Accounts (January 2014)
- IFRS 15 Revenue from Contracts with Customers (May 2014)
including amendments to IFRS 15: Effective date of IFRS 15
(September 2015)
- IFRS 16 Lease (January 2016)
- Amendments to IFRS 10, IFRS 12 and IAS 28: Investment Entities
- Applying the Consolidation Exception (December 2014)
- Amendments to IFRS10 and IAS 28: Sales or Contribution of
Assets between an Investor and its Associate or Joint Venture
(September 2014)
- Amendments to IAS 12: Recognition of Deferred Tax Assets for
Unrealised Losses (January 2016)
- Amendments to IAS 7: Disclosure Initiative (January 2016)
- Clarifications to IFRS 15 Revenue from Contracts with Customers (April 2016)
- Amendments to IAS 27: Equity Method in Separate Financial
Statements (August 2014) - EU effective date 1 January 2016
- Amendments to IAS 1: Disclosure Initiative (December 2014) -
EU effective date 1 January 2016
- Annual Improvements to IFRSs 2012-2014 Cycle (September 2014)
- EU effective date 1 January 2016
- Amendments to IAS 16 and IAS 38: Clarification of Acceptable
Methods of Depreciation and Amortisation (May 2014) - EU effective
date 1 January 2016
- Amendments to IFRS 11: Accounting for Acquisitions of
Interests in Joint Operations (May 2014) - EU effective date 1
January 2016
- Amendments to IAS 16 and IAS 41: Bearer Plants (Jun 2014) - EU
effective date 1 January 2016
There are no other standards, amendments and interpretations in
issue but not yet adopted that the directors anticipate will have
material effect on the reported income or net assets of the
group.
2.2 Basis of preparation
The consolidated and company financial statements have been
prepared on the historical cost basis except for certain financial
instruments, which are measured at fair values as explained in the
accounting policies set out below. Historical cost is generally
based on the fair value of the consideration given in exchange for
assets.
The consolidated financial statements are rounded to the nearest
thousand ('000) and they are presented in Chinese Renminbi (RMB),
the official currency of the People's Republic of China. RMB is the
functional currency of the Company.
2.3 Basis of consolidation
The consolidated financial statements incorporate the financial
statements of the Company and entities controlled by the Company
(its subsidiaries). Control is achieved where the Company has the
power to govern the financial and operating policies of an entity
so as to obtain benefits from its activities.
All intra-group transactions, balances, income and expenses are
eliminated on consolidation.
Where necessary, adjustments are made to the consolidated and
company financial statements of subsidiaries to bring their
accounting policies into line with those used by other members of
the Group.
Non-controlling interests in subsidiaries are presented
separately from the Group's equity therein.
Comparative
The comparatives information in the consolidated financial
statements is pro forma. On this basis, the Directors have decided
that it is appropriate to reflect the combination using merger
accounting policies as a group reconstruction, in order to give
true and fair view. No fair value adjustments have been made as a
result of the combination.
As previous year was the Company's first annual financial
statements, in order to provide meaningful financial information,
the statements have been prepared as if the Company and the group
had been in existence prior to the date of combination.
Merger accounting
The Group was formed in stages since 25 October 2013, when
Runtai Environment Protection International Limited ("Runtai HK"),
a company incorporated in Hong Kong, acquired the entire share
capital of Shandong Tiantai from its shareholders for a total cash
consideration of RMB53,918,900. As a result of this, Shandong
Tiantai became a wholly owned subsidiary of Runtai HK. The Company
then acquired the shares of Runtai HK on 29 March 2014 by way of a
share exchange.
As the Company acquired another company, by means of such a
share-for-share exchange, resulting in a business combination
involving entities under common control and where no acquirer is
identified, the "pooling of interests" method of consolidation has
been used. Therefore, the difference between the purchase
consideration and the carrying value of the share capital and
premium acquired is adjusted to equity (merger reserve) and the
comparative consolidated figures are stated on a combined
basis.
Therefore, although the Group reconstruction did not become
unconditional until 29 March 2014, these consolidated financial
statements are presented as if the Group structure has always been
in place.
2.4 Going concern
The financial statements have been prepared assuming the Group
will continue as a going concern.
After making enquiries, the Directors consider that the Group
has adequate resources and committed borrowing facilities to
continue in operational existence for the foreseeable future.
Consequently, they have adopted the going concern basis in
preparing the Financial Statements.
2.5 Revenue recognition
Revenue is measured at the fair value of the consideration
received or receivable and represents amounts receivable for goods
and services provided in the normal course of business, net of
discounts, VAT and other sales related taxes.
The company recognises revenue when the amount of revenue can be
reliably measured, it is probable that the future economic benefits
will flow to the entity.
Sale of goods
The company's business involves selling the products of ammonium
sulfite, ammonium bisulfite, lubricant oil and recarburizer in
varies retail size containers to a network of agents in China.
Sales of goods are recognised when goods are delivered and title
has passed.
Interest income
Interest income is recognised on a time proportion basis using
the effective interest method.
2.6 Segment reporting
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision-maker.
The chief operating decision-maker is responsible for allocating
resources and assessing performance of the operating segments.
2.7 Leases
Leases are classified as finance leases whenever the terms of
the lease transfer substantially all the risks and rewards of
ownership to the lessee. All other leases are classified as
operating leases.
The company as lessee
Assets held under finance leases are initially recognised as
assets of the company 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 apportioned between finance expenses and
reduction of the lease obligation so as to achieve a constant rate
of interest on the remaining balance of the liability. Finance
expenses are recognised immediately in profit or loss. Contingent
rentals are recognised as expenses in the periods in which they are
incurred.
Operating lease payments are recognised as an expense on a
straight-line basis over the lease term.
2.8 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 acquisition 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.
2.9 Foreign currencies
Transactions in foreign currencies are recorded using the rate
of exchange ruling at the date of the transaction. Monetary assets
and liabilities denominated in foreign currencies are translated
using the rate of exchange ruling at the balance sheet date and the
gains or losses on translation are included in the income
statement.
2.10 Borrowing costs
All borrowings costs are recognised in the profit and loss in
the period in which they are incurred except for borrowing costs
attributable to qualifying assets. Borrowing costs that are
directly attributable to the acquisition, construction or
production of a qualifying asset is to be capitalised as a cost of
that asset. A qualifying asset is an asset that necessarily takes a
substantial period of time to get ready for its intended use or
sale.
2.11 Taxation
The 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
comprehensive income statement because it excludes items of income
or expense that are taxable or deductible in other years and it
further excludes items that are never taxable or deductible. The
company's liability for current tax is calculated using tax rates
that have been enacted or substantively enacted by the balance
sheet date, and any adjustment to tax payable in respect of
previous periods.
Deferred tax is the tax expected to be payable or recoverable on
differences between the carrying amounts of assets and liabilities
in the financial statements and the corresponding tax bases used in
the computation of taxable profit, and is accounted for using the
balance sheet method. Deferred tax liabilities are generally
recognised for all taxable temporary differences and deferred tax
assets are recognised to the extent that it is probable that future
taxable profits will be available against which the asset can be
utilised. Such assets and liabilities are not recognised if the
temporary difference arises from the initial recognition of
goodwill or from the initial recognition (other than in a business
combination) of other assets and liabilities in a transaction that
affects neither the tax profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at each
balance sheet date and reduced to the extent that it is no longer
probable that sufficient taxable profits will be available to allow
all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to
apply in the period when the liability is settled or the asset is
realised. Deferred tax is charged or credited in the income
statement, except when it relates to items charged or credited
directly to equity, in which case it is recognised in equity.
Deferred tax assets and liabilities are offset when there is a
legally enforceable right to set off current tax assets against
current tax liabilities and when they relate to income taxes levied
by the same taxation authority and the company intends to settle
its current tax assets and liabilities on a net basis.
2.12 Property, plant and equipment
Property, plant and equipment are stated in the balance sheet at
cost less any subsequent accumulated depreciation and any
recognised impairment loss.
Cost includes purchase price and all directly attributable costs
of bringing the asset to its location and condition necessary to
operate as intended.
Depreciation is provided at rates calculated to write off the
cost less estimated residual value of each asset over its estimated
useful economic life as follows:
Building 20 years
Plant and machinery 3 - 10 years
Furniture, fittings and equipment 3 - 5 years
Motor vehicles 4 years
An asset's carrying amount is written down immediately to its
recoverable amount if the asset's carrying amount is greater than
its estimated recoverable amount (refer note 2.14).
Gains and losses on disposals are determined by comparing the
disposal proceeds with the carrying amount and are included in the
income statement.
Asset in the course of construction is stated at cost less
impairment losses. Cost comprises direct costs of construction
capitalised during the periods of construction. Capitalisation of
these costs ceases and construction-in-progress is transferred to
property, plant and equipment when substantially all the activities
necessary to prepare the assets for their intended use are
completed. No depreciation is provided for in respect of
construction-in-progress until it is completed and ready for its
intended use.
2.13 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.
Land use right
Land use rights are amortised through administrative expenses
over the period to which the rights relate. The estimated useful
lives are 50 years.
Software licences
Software licences are stated at cost less accumulated
amortisation and accumulated impairment losses. Amortisation is
calculated using the straight-line method to allocate the cost of
the licence over 5 years.
Patents and trademarks
Costs relating to patents and trademarks which are acquired are
capitalised and amortised on straight-line basis over their useful
life of 20 years.
Internally generated intangible assets - research and
development expenditure
Research expenditure is recognised as an expense as
incurred.
Costs incurred on development projects are recognised as
internally generated intangible assets only if all of the following
conditions are met by the company:
- the technical feasibility of completing the intangible assets
so that it will be available for use or sales;
- its intention to complete the intangible asset and use or sell it;
- its ability to use or sell the intangible assets;
- it is probable that the intangible asset created will generate future economic benefits;
- the availability of adequate technical financial and other
resources to complete the development and use or sell the
intangible assets; and
- its ability to measure reliably the expenditure attributable
to the intangible assets during its development.
Internally generated intangible assets are amortised on a
straight-line basis over their estimated useful lives, from the
date the intangible is ready for use. Amortisation charge is
recognised in the statement of profit and loss within
administrative expenses.
2.14 Impairment of non-current assets (other than goodwill)
The carrying amounts of assets are reviewed at each statement of
financial position date to determine whether there is any
indication of impairment. If any such indication exists, the
asset's recoverable amount is estimated. Impairment losses are
recognised through administrative expenses in the income
statement.
The recoverable amount is the higher of an asset's net selling
price and value in use. The net selling price is the amount
obtainable from the sale of an asset in an arm's length
transaction.
Recoverable amounts are estimated for individual assets. An
impairment loss is reversed if there has been a change in the
estimates used to determine the recoverable amount. An impairment
loss is reversed only to the extent that the asset's carrying
amount does not exceed the carrying amount that would have been
determined, net of depreciation, if no impairment loss had been
recognised. Reversals of impairment losses are recognised in the
income statement.
2.15 Investment in subsidiary undertakings
Investments in subsidiaries are stated at cost less provision
for any impairment in value.
2.16 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.
2.17 Financial instruments
Financial assets and financial liabilities are recognised when a
company becomes a party to the contractual provisions of the
instrument.
Financial assets and financial liabilities are initially
measured at fair value. Transaction costs that are directly
attributable to the acquisition or issue of financial assets and
financial liabilities (other than financial assets and financial
liabilities at fair value through profit or loss) are added to or
deducted from the fair value of the financial assets or financial
liabilities, as appropriate, on initial recognition. Transaction
costs directly attributable to the acquisition of financial assets
or financial liabilities at fair value through profit or loss are
recognised immediately in profit or loss.
2.18 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 (FVTPL),
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, an 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.
2.18.1 Effective interest method
This is a method of calculating the amortised cost of a debt
instrument and of allocating interest income over the relevant
period. The effective interest rate is the rate that exactly
discounts estimated future cash receipts (including all fees and
points paid or received that form an integral part of the effective
interest rate, transaction costs and other premiums or discounts)
through the expected life of debt instrument, or where appropriate,
a shorter period, to the net carrying amount on initial
recognition.
Income is recognised on an effective interest basis for debt
instruments other than those financial assets classified at
FVTPL.
2.18.2 Financial assets at FVTPL
Financial assets classified as held for trading are included in
the category financial assets at fair value through profit or loss.
Financial assets are classified as held for trading if they are
acquired for the purpose of sale in the short term. Derivative
financial instruments are also classified as held for trading
unless they are designated and effective as a hedging instrument.
Financial assets at FVTPL are stated at fair value with any gains
or losses arising on re-measurement recognised in profit or
loss.
2.18.3 Loans and receivables
Loans and receivables are non-derivative financial assets with
fixed or determinable payments that are not quoted in an active
market. They are measured at amortised cost using the effective
interest method less any impairment and are included in current
assets, except for maturities greater than twelve months after the
end of the reporting period. These are classified as non-current
assets. The company's loans and receivables comprise "trade and
other receivables" and "cash and cash equivalents".
Interest income is recognised by applying the effective interest
rate except for short-term receivables when the recognition of
interest would be immaterial.
2.18.4 Held-to-maturity investments
Non-derivative financial assets with fixed or determinable
payments and fixed maturity are classified as held-to-maturity when
the company has the positive intent and ability to hold the assets
to maturity. Investments intended to be held for an undefined
period are not included in this classification. Other long-term
investments that are intended to be held-to-maturity, such as
bonds, are subsequently measured at amortised cost using the
effective interest method less any impairment.
2.18.5 Available-for-sale financial assets
Available-for-sale financial assets are non-derivative financial
assets that are designated as available-for-sale or are not
classified in any of the three preceding categories. After initial
recognition, available-for-sale assets are measured at fair value
with gains or losses being recognised in other comprehensive income
and accumulated under fair value adjustment reserve until the
investment is derecognised or until the investment is determined to
be impaired at which time the accumulate gain or loss previously
reported in equity is included in the profit or loss. The fair
value of investments that are traded in active market at the end of
each reporting period is determined by reference to the relevant
stock exchange's quoted market bid prices at the close of business
on the reporting period date. For investments where there is no
active market, fair value is determined using valuation techniques.
Such techniques include using recent arm's length market
transactions; reference to the current market value of another
instrument, which is substantially the same; discounted cash flow
analysis and option pricing models.
2.19 Impairment of financial assets
Financial assets, other than those at FVTPL, are assessed for
indicators of impairment at the end of each reporting date.
Financial assets are considered to be impaired when there is
objective evidence that, as a result of one or more events that
occurred after the initial recognition of the financial assets, the
estimated future cash flows of the investment have been
affected.
An impairment loss in respect of a financial asset measured at
amortised cost is calculated as the difference between its carrying
amount, and present value of the estimated future cash flows
discounted at the original effective interest rate. An impairment
loss in respect of an available-for-sale financial asset is
calculated by reference to its fair value.
For certain categories of financial assets, such as trade
receivables, assets that are assessed not to be impaired
individually are, in addition, assessed for impairment on a
collective basis that share similar credit risk
characteristics.
For financial assets carried at cost, the amount of the
impairment loss is measured as the difference between the asset's
carrying amount and the present value of the estimated future cash
flows discounted at the current market rate of return for a similar
financial asset. Such impairment loss will not be reversed in
subsequent periods.
The carrying amount of the financial assets is reduced by the
impairment loss directly for all financial assets with the
exception of trade receivables, where the carrying amount is
reduced through the use of an allowance account. Changes in the
carrying amount of the allowance account are recognised in profit
or loss.
When available-for-sale financial asset is considered to be
impaired, cumulative gains or losses previously recognised in other
comprehensive income are reclassified to profit or loss in the
period.
For financial assets measured at amortised cost, if, in a
subsequent period, the amount of the impairment loss decreases
which can be related objectively to an event occurring after the
impairment was recognised, the previously recognised impairment
loss is reversed through profit or loss to the extent that the
carrying amount of the investment at the date the impairment is
reversed does not exceed what the amortised cost would have been
had the impairment not been recognised.
2.20 Cash and cash equivalents
Cash comprises cash in hand and demand deposits. Cash
equivalents are short-term, highly liquid investments that are
readily convertible to known amounts of cash and which are subject
to an insignificant risk of changes in value. For the purpose of
the cash flow statement, cash equivalents would include advances
from banks repayable within 3 months from the date of the
advance.
2.21 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.
2.22 Financial liabilities and equity
Financial liabilities and equity instruments are classified
according to the substance of the contractual arrangements entered
into. Financial liabilities include trade and other payables,
amounts due to related parties and shareholders, bank borrowings
and notes payable.
Trade and other payables are carried at cost which is the fair
value of the consideration to be paid in the future for goods and
services received, whether or not billed to the company.
All borrowings and overdrafts are recorded at the amount of the
proceeds received, net of direct issue costs. Finance charges are
charged to the income statement on an accruals basis using the
effective interest rate method.
Equity instruments are recorded at the fair value of the
consideration received, net of direct issue costs.
2.23 Commitments and contingencies
Commitments and contingent liabilities are disclosed in the
financial statement. 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 benefit is probable.
2.24 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
2.25 Dividend distribution
Dividend distribution to the company's shareholders is
recognised as a liability in the financial statements in the period
in which the dividends are approved by the company's
shareholders.
2.26 Government grants
Government grants are recognised as income over the periods
necessary to match them with the related costs which they are
intended to compensate; and are recognised only when there is
reasonable assurance that:
a) the company will comply with the conditions attached to them; and
b) the grants will be received.
Government grants received during the year, which were
recognised as other income, were one off payments received from the
local government to subsidies research and development.
2.27 Share-based payments
The Group issues equity-settled share-based payments to certain
directors, which are measured at fair value at the date of
grant.
The fair value determined at the grant date of the
equity-settled share-based payments is expensed on a straight-line
basis over the vesting period, based on the Group's estimate of
shares that will eventually vest and adjusted for the effect of
non-market based vesting conditions. At each balance sheet date,
the Group revises its estimate of the number of equity instruments
expected to vest. The impact of the revision of the original
estimates, if any, is recognised in profit and loss over the
remaining vesting period, with a corresponding adjustment to the
equity-settled employee benefits reserve.
Equity-settled share-based payment transactions with other
parties are measured at fair value of the goods or services
received, except where the fair value cannot be estimated reliably,
in which case they are measured at the fair value of the equity
instruments granted, measured at the date the entity obtains the
goods or the counterparty render the service.
For cash-settled share-based payments, a liability equal to the
portion of the goods or services received is recognised at the
current fair value determined at each balance date.
Fair value is measured by use of Black Scholes model. The
expected life used in the model has been adjusted, based on
management's best estimate, the effects of non-transferability,
exercise restriction, and behavioural consideration.
2.28 Critical accounting estimates and judgements
The preparation of financial information requires management to
make judgement estimates and assumptions that effect the
application of accounting policies together with the reported
amounts of assets, liabilities, income and expenses.
Estimates and judgements are continually evaluated and are based
on historical experience and other factors, including expectations
of future events that are believed to be reasonable under the
circumstances.
The Group makes estimates and assumptions concerning the future.
The resulting accounting estimates may differ from the related
actual results.
The estimates and assumptions that have a significant risk of
causing a material adjustment to the carrying amounts of assets and
liabilities within future financial years are addressed below.
a) Impairment of property, plant and equipment
The carrying value of the property, plant and equipment is
reviewed for impairment when events or changes in circumstances
indicate the carrying value may not be recoverable in accordance
with the accounting policies as disclosed in the relevant parts of
note 2.12. If such indication exists, the recoverable amounts of
the property, plant and equipment are determined on value-in-use
calculations, which require the use of judgment and estimates.
b) Depreciation
The Group's management determines the estimated residual value,
useful lives and related depreciation charges for the property,
plant and equipment with reference to the estimated periods that
the Group intends to derive future economic benefits from the use
of these assets. Management will revise the depreciation and
amortisation charge where useful lives are different to previously
estimated.
c) Net realisable value of inventories
Net realisable value of inventories is the estimated selling
price in the ordinary course of business, less estimated costs of
completion and selling expenses. These estimates are based on the
current market condition and the historical experience of
manufacturing and selling products of similar nature. It could
change significantly as a result of changes in customer demand and
competitor actions in response to severe industry cycle. Management
reassesses these estimates at each balance sheet date.
d) Income tax and other taxes
The Company's subsidiaries that operate in the People's Republic
of China are subject to corporate income tax in the People's
Republic of China. Significant judgement is required in determining
the provision for income taxes and other taxes. There are some
transactions and calculations for which the ultimate tax
determination is uncertain during the ordinary course of business.
The Company recognises liabilities for anticipated tax audit issues
based on estimates of whether additional taxes will be due. Where
the final tax outcome of these matters is different from the
amounts that were initially recorded, such differences will impact
the income tax and Value-added tax in the period in which such
determination is made.
e) Measurement of fair values
A number of the group's accounting policies and disclosures
require the measurement of fair values, for both financial and
non-financial assets and liabilities.
The group currently does not have a control framework with
respect to the measurement of fair values. The significant
unobservable inputs were provided by the management to their best
knowledge.
When measuring the fair value of an asset or a liability, the
management uses market observable data as far possible. Fair values
are categorised into different levels in a fair value hierarchy
based on the inputs used in the valuation techniques as
follows.
-- Level 1: quoted prices (unadjusted) in active markets or identical assets or liabilities;
-- Level 2: inputs other than quoted prices included in Level 1
that are observable for the asset or liability, either directly
(i.e. prices) or indirectly (i.e. derived from prices);
-- Level 3: inputs for the asset or liability that are not based
on observable market data (unobservable inputs).
The information about the assumptions made in measuring fair
values is included in the relevant notes.
f) Share issue costs
The listing costs which are incremental costs directly
attributable to the restructuring and placement have been offset
against the proceeds arising from the issuance of shares by the
Company in accordance to IAS32 - "Financial Instruments". The
excess of the incremental cost was charge to the statement of
comprehensive income.
Costs that related to the stock market listing, or are otherwise
not incremental and directly attributable to issuing new shares
were recorded as an expense in the statement of comprehensive
income.
Costs that relate to both share issuance and listing were
allocated between those functions on a rational and consistent
basis.
The costs of public relations, the corporate website, D&O
insurance and part of the cost related to both share issuance and
listing have been allocated to expenses in the statement of
comprehensive income.
3 Comparative figures and reclassification
Certain reclassifications have been made to the prior year's
financial statements to enhance comparability with the current
year's results.
4 REVENUE
Currently, the Group's principal revenue is derived from the
sale of ammonium sulfite, ammonium bisulfite, lubricant oil and
recarburizer. All activities are within PRC. Therefore no detail of
geographic segmental reporting is required.
Analysis of revenue from the sale of goods is as follows:
2015 2014
RMB'000 RMB'000
Specialty chemicals
Solid ammonium sulfite 358,075 260,077
Liquid ammonium sulfite 186,433 173,419
Liquid ammonium bisulfite 112,063 70,709
--------- ---------
656,571 504,205
Lubricant oil 211,833 138,627
Recarburizer 61,509 61,735
929,913 704,567
========= =========
77.23% (2014: 77.42%) of the ammonium sulfite and bisulfite
sales are industrial grade. The remaining are food and medical
grades.
Information about major customers
Included in revenue, RMB128.3 million (2014: RMB109.8 million)
was generated from sales to the Group's largest customer, Tralin
Paper.
5 EXPENSES BY NATURE
2015 2014
RMB'000 RMB'000
Changes in inventories 2,023 3,819
Raw materials and direct
costs 712,353 543,538
Business taxes and surcharges 19,317 8,463
Customers rebate 2,337 1,458
Employee benefit expense
(note 5) 16,900 12,520
Depreciation and amortisation
charges 2,527 908
Reversal of impairment
of non-current assets - (781)
Loss on disposal of plant
and machinery - 781
Transportation costs 14,489 9,835
Network service and advertising
fee 3,097 4,895
Motor, travel and entertaining 3,398 3,822
Research and development
costs 1,726 1,730
Listing costs - 604
Other expenses `4,518 4,070
---------- ----------
Total cost of sales,
selling, distribution
and
administrative expenses 782,685 595,552
========== ==========
Included in direct costs, depreciation charge of RMB5.6 million
(2014: RMB4.0 million).
6 EMPLOYEE BENEFIT EXPENSE
2015 2014
RMB'000 RMB'000
Wages and salaries 17,178 13,254
Social security costs 5,235 4,148
---------
22,413 17,402
Included in:
Cost of productions (5,173) (4,528)
Research and development
costs (340) (354)
16,900 12,520
========= =========
Number Number
Average number of employees 227 198
========= =========
7 FINANCE COSTS
2015 2014
RMB'000 RMB'000
Bank interest 9,232 7,131
Loan interest 1,048 466
Bank charges 98 124
Exchange loss 62 125
10,440 7,846
======== ========
8 INVESTMENT INCOME
Group has distributed dividends of RMB17.9 million according to
its dividend policy during the year, which suffered withholding tax
(5% of gross value) of RMB951K in P. R. China.
9 INCOME TAX EXPENSE
2015 2014
RMB'000 RMB'000
Current tax charge
Tax charge for the year 21,559 16,228
Deferred tax charge (note - -
25)
--------- ---------
Income tax expense 21,559 16,228
========= =========
Reconciliation at effective
tax rate
Profit before tax 137,550 102,381
========= =========
Tax on profit at prevailing
rate of 25% 34,387 25,595
Factors affecting income
tax charge:
Expenses not deductible 970 1,158
Preferential tax rate (14,131) (10,818)
Other tax adjustment (607) (216)
Unrelieved tax losses 837 498
Differences in foreign
tax rate 103 11
Current tax charge 21,559 16,228
========= =========
The Company is regarded as resident for tax purposes in Jersey,
and subject to income tax at 0%.
Shandong Tiantai is regarded as resident for tax purposes in PR
China, where the prevailing rate of enterprise income tax is 25%.
On 12 July 2012, Shandong Tiantai, obtained high technology
enterprise status for three years during which the Shandong Tiantai
is subject to a reduced enterprise income tax rate of 15%.
On 11 June 2014, the Department of Science and Technology of
Shandong Province extended the period of Shandong Tiantai's high
tech enterprise designation to 31 December 2019 and on the same
date, the Shandong Gaotang State Taxation Bureau extended the
period of favourable tax treatment for an additional period of five
fiscal years ending on 31 December 2019.
10 EARNINGS PER SHARE
Basic and diluted earnings per share are calculated by dividing
the profit attributable to equity shareholders of the Company by
the weighted average number of ordinary shares in issue during the
year.
Group Group
2015 2014
RMB'000 RMB'000
Net profit attributable
to owners of parent 115,991 86,153
Weighted average number
of ordinary shares ('000)
- basic 102,313 95,216
Weighted average number
of ordinary shares ('000)
- diluted 103,108 95216
Basic earnings per share
(RMB) 1.13 0.90
Diluted earnings per
share (RMB) (note 21) 1.12 0.90
Basic earnings per share in 2014 have been revised due to
calculation error in weighted average number of ordinary shares.
Share option has no dilutive effect as the average market price of
ordinary shares as at year end in 2014 was below the exercise price
of the share option. However, dilutive effect has been considered
in 2015 due to the average market price was high than option
exercise price.
11 PROPERTY, PLANT AND EQUIPMENT
Buildings Plant Fixtures, Motor Assets Total
and fittings vehicles under
machinery and construction
equipment
Cost RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000
At 31 December
2013 11,469 26,343 1,343 490 7,700 47,345
Additions 348 11,929 774 - - 13,051
Disposals - (1,050) (42) - - (1,092)
Net transfer - 7,700 - - (7,700) -
---------- --------------
At 31 December
2014 11,817 44,922 2,075 490 - 59,304
Additions 44,702 51,338 636 - 18,710 115,386
Disposals - - - - - -
Net transfer - - - - - -
---------- ----------- ----------- ---------- -------------- --------
At 31 December
2015 56,519 96,260 2,711 490 18,710 174,690
========== =========== =========== ========== ============== ========
Accumulated depreciation
At 31 December
2013 2,251 4,675 428 68 1,829 9,251
Charge for the
year 560 3,660 394 100 - 4,714
On disposals - (291) (20) - - (311)
Net transfer - 1,829 - - (1,829) -
Reversal of impairment
losses - (781) - - - (781)
---------- ----------- ----------- ---------- -------------- --------
At 31 December
2014 2,811 9,092 802 168 - 12,873
Charge for the
year 1,290 3,767 540 100 - 5,697
On disposals - - - - - -
Net transfer - - - - - -
At 31 December
2015 4,101 12,859 1,342 268 - 18,570
========== =========== =========== ========== ============== ========
11 PROPERTY, PLANT AND EQUIPMENT - continued
Buildings Plant Fixtures, Motor Assets Total
and fittings vehicles under
machinery and construction
equipment
RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000
Carrying value
At 31 December 2015 52,418 83,401 1,369 222 18,710 156,120
========== =========== =========== ========== ============== ========
At 31 December 2014 9,006 35,830 1,273 322 - 46,431
====== ======= ====== ==== ====== =======
At 31 December 2013 9,218 21,668 915 422 5,871 38,094
====== ======= ====== ==== ====== =======
On 15 March 2013, four main buildings located at 105 State Road
West, Luzhuang Village, Jiangdian Town were pledged against bank
loans up to RMB11.5 million for a period of 3 year from 24 January
2013 to 23 January 2016.
On 14 January 2016, the above pledged was extended for further 3
years from 14 January 2016 to 13 January 2019.
11.1 Assets under construction
Assets under construction at the end of 2015 consist of
installation of a newly acquired liquid ammonium production line
and an existing liquid ammonium production line under upgrade and
alteration work to improve the efficiency in production and the
quality of products. The new production line has been completed and
transferred to Plant and machinery in January 2016. The upgrading
production line is expected to be completed in August 2016.
11.2 Impairment losses recognised in profit and loss
In year 2013, certain fixtures, fittings and equipment with
carrying value of RMB 780,963 were scrapped due to wear and tear.
An impairment loss of RMB780,963 was recognised.
In year 2014, the fixtures, fittings and equipment were disposed
of with a disposal loss of RMB 780,963 and the impairment loss
recognised in 2013 was reversed.
12 INTANGIBLE ASSETS
Land Purchased Trademark Total
use software and patent
right
RMB'000 RMB'000 RMB'000 RMB'000
Cost
At 31 December
2013 9,676 32 - 9,708
Additions 19,250 - 750 20,000
-------- ---------- ------------ --------
At 31 December
2014 28,926 32 750 29,708
Additions - 15 50 65
-------- ---------- ------------ --------
At 31 December
2015 28,926 47 800 29,773
======== ========== ============ ========
Amortisation
At 31 December
2013 590 15 - 605
Charge for
the year 234 6 100 340
-------- ---------- ------------ --------
At 31 December
2014 824 21 100 945
Charge for
the year 579 9 7 595
-------- ---------- ------------ --------
At 31 December
2015 1,403 30 107 1,540
======== ========== ============ ========
Carrying amount
At 31 December
2015 27,523 17 693 28,233
======== ========== ============ ========
At 31 December
2014 28,102 11 650 28,763
======== ========== ============ ========
At 31 December
2013 9,086 17 - 9,103
======== ========== ============ ========
On 15 March 2013, the land use right for an area of 18,883 m(2)
at 105 State Road West, Luzhuang Village, Jiangdian Town was
pledged against bank loans up to RMB11.5 million for a period of 3
years from 24 January 2013 to 23 January 2016. On 14 January 2016,
the pledged was extended for further 3 years from 14 January 2016
to 13 January 2019.
On 24 December 2014, Shandong Tiantai obtained the right to
occupy the land with area 51,333 m(2) at 105 State Road West,
Luzhuang Village, Jiangdian Town (opposite to the second piece) for
a period of 50 years from 24 December 2014. The total transfer cost
was RMB19.25 million.
In October 2014, Shandong Tiantai successfully registered two
patents over processing highly pure ammonium sulfite and bisulfite
methods valid for 20 years effective from the date of application
on 2 May 2012. The total cost was RMB 750,000.
In 2015, Shandong Tiantai successfully registered the brand name
for its lubricant oil 'Ogistar' valid for 10 years effective from
the date of application on 14 April 2014. The total cost was RMB
50,000.
13 INVESTMENT IN SUBSIDIARIES
Company Company
2015 2014
RMB'000 RMB'000
At 1 January 10 -
Additions - 10
Disposals - -
--------
At 31 December 10 10
======== ========
On 29 March 2014, SinoEuro Runtai and Bright Fortune, as the
shareholders of Hong Kong Runtai, entered into a share exchange
agreement with the Company, pursuant to which each of SinoEuro
Runtai and Bright Fortune transferred all of their shareholdings in
Hong Kong Runtai to the Company. Total number of shares in Hong
Kong Runtai was 10,000 ordinary shares @ HK$1 each = HK$10,000.
The exchange rate used was RMB1: HK$1.2615
Details of the Company's subsidiaries are as follows.
Place Proportion
of of ownership Principal activities
Name of incorporation interest
subsidiary and operation %
Runtai Environment Hong Kong 100 Holding company
Protection International
Limited
Shandong Tiantai P. R. 100 Manufacturing
Steel-Plastic China and distribution
Co., Limited of ammonium sulfite,
ammonium bisulfite,
lubricant oils
and recarburizer.
14 INVENTORIES
Group Group Company Company
2015 2014 2015 2014
RMB'000 RMB'000 RMB'000 RMB'000
Raw materials 11,858 5,796 - -
Packaging and
consumables 12,104 2,698 - -
Finished goods 6,598 11,141 - -
Work in progress 14,161 11,640 -
-------- -------------
44,721 31,275 - -
======== ======== ======== =============
15 TRADE AND OTHER RECEIVABLES
Group Group Company Company
2015 2014 2015 2014
RMB'000 RMB'000 RMB'000 RMB'000
Trade receivables 142,876 131,967 - -
Other receivables 821 1,378 - -
Amount owed by
subsidiary - - 68,473 57,029
Advance paid to
suppliers 5,366 14,367 - -
Prepayments 828 568 - -
--------
149,891 148,280 68,473 57,029
======== =============== ======== ==============
Included in other receivables amount of nil (2014: RMB1.3
million) were loans to business partners. These are interest free
loans with no fixed repayment terms and are repayable on
demand.
The directors consider that the carrying amount of trade and
other receivables approximate their fair value.
16 CASH AND CASH EQUIVALENTS
Group Group Company Company
2015 2014 2015 2014
RMB'000 RMB'000 RMB'000 RMB'000
Cash at bank and
on hand 169,677 113,121 2 2
Short-term fixed
deposits pledged
for notes payables 1,993 11,000 - -
-------- --------
171,670 124,121 2 2
======== ======== ======== ========
Bank balances and cash comprise cash held by the company and
short-term fixed deposits with maturity of six months or less which
are pledged for notes payables.
The carrying amount of these assets approximates their fair
value.
17 SHARE CAPITAL AND SHARE PREMIUM
Number Share Share Share
of shares capital capital Premium
GBP RMB'000 RMB'000
As at 22 January
2014 100 100 1 -
Shares issued on
29 March 2014 1,000 1,000 10 -
As at 29 March 2014 1,100 1,100 11 -
Subdivision of shares
on 16 April 2014 110,000 1,100 11 -
Shares issued on
16 April 2014 99,890,000 998,900 9,989 43,930
Shares issued on
1 August 2014 2,313,056 23,131 241 8,436
Share issue costs - - - (8,199)
------------ ------------ --------- ---------
As at 31 December
2014 and 31 December
2015 102,313,056 1,023,131 10,241 44,167
============ ============ ========= =========
On incorporation, 94 ordinary shares of GBP1 each and 6 ordinary
shares of GBP1 each were issued fully paid to Trident Nominees
Limited and Xenith Trust Company Limited respectively as the
subscribers to the Memorandum of Association.
On 22 January 2014, Trident Nominees Limited and Xenith Trust
Company Limited transferred 94 ordinary shares of GBP1 each and 6
ordinary shares of GBP1 each to SinoEuro Runtai Environmental
Protection Resource Co., Ltd. ("SinoEuro Runtai"), and Bright
Fortune Global Finance Co., Ltd. ("Bright Fortune")
respectively.
On 29 March 2014 SinoEuro Runtai and Bright Fortune, as the
shareholders of Hong Kong Runtai, entered into a share exchange
agreement with the Company, pursuant to which each of SinoEuro
Runtai and Bright Fortune transferred all of their shareholdings in
Hong Kong Runtai to the Company. The consideration for the sale and
purchase of the shares was the issue and allotment to the sellers
of 1,000 ordinary shares of GBP1.00 each in the capital of the
Company pro rata to their shareholdings in Hong Kong Runtai.
On 16 April 2014, the Company, by a written resolution of all of
its shareholders (i) reduced the authorised but unissued share
capital of the Company from GBP5,000,000 to GBP2,500,000, (ii)
carried out a sub-division of the entire issued share capital of
2,500,000 ordinary shares of GBP1.00 each into 250,000,000 Ordinary
Shares of GBP0.01 each and (iii) adopted the new Memorandum.
Prior to the period, in preparation for the Company's
application for admission to trading on AIM, the Group underwent a
number of restructuring activities, including, on 30 September
2013, the issue of a loan (the "Shareholders Loan") of an aggregate
sum of USD 8,829,905 from SinoEuro Runtai and Bright Fortune to
Hong Kong Runtai. Subsequent to this, on 16 April 2014, the
obligation to repay the Shareholders Loan was novated from Hong
Kong Runtai to the Company pursuant to a novation agreement, and by
resolutions of the Board, on 16 April 2014 the Board approved the
issue and allotment of 99,890,000 Ordinary Shares in aggregate to
SinoEuro Runtai and Bright Fortune in settlement of the
Shareholders Loan.
The exchange rate used for the issued shares up to 16 April 2014
was GBP1: RMB10.
On 1 August 2014, the Company has been admitted to trading on
the AIM market of London Stock Exchange plc ("Admission"). The
Company has raised approximately GBP832,700 before expenses through
a subscription of 2,313,056 new ordinary shares at 1p per
share.
The listing costs which are incremental costs directly
attributable to the restructuring and placement have been offset
against the proceeds arising from the issuance of shares by the
Company in accordance to IAS32 - "Financial Instruments". The
excess of the incremental cost was charge to statement of
comprehensive income.
The exchange rate used for the issued shares on 1 August 2014
was GBP1: RMB10.42.
18 CAPITAL RESERVE
The initial amount of the capital contribution reserve was the
difference between the proceeds of the loan received from Ms
Guiping Li (spouse of CEO, Cheng Liu) on 21 February 2014, and the
amount of that loan measured at amortised cost using the effective
interest method ("the discount"). An amount equal to the interest
expense on the loan is recognised in the profit and loss account in
the year, is transferred from the capital contribution reserve to
retained earnings. The amount of capital contribution reserve is
therefore equal the unamortised discount on the loan.
The net effect of the loan and eventual repayment on retained
earnings will be nil in each period and cumulatively.
19 MERGER RESERVE
Merger reserves arose from:
- The difference between the purchase consideration and the fair value of the acquired business
- The differences between the carrying value of the investment
and carrying value of the share capital and premium acquired
20 STATUTORY RESERVE
In accordance with the relevant financial regulations of the PRC
and provision within the Articles of Association of Shandong
Tiantai in the preparation of its accounting records and financial
statements, Shandong Tiantai is required to appropriate no less
than 10% of the profit arrived at in accordance with PRC GAAP for
each calendar year to a statutory reserve. Profit must be used
initially to set off against any accumulated losses and must be
made before the distribution of dividends to shareholders. The
appropriation is required until the statutory reserve reaches 50%
of the registered capital. This statutory reserve is not
distributable in the form of cash dividends, but may be used to set
off losses or be converted into paid-in capital.
21 OPTION RESERVE
The Company has established the Share Option Scheme. The Share
Option Scheme is designed to support the strategy of generating
significant sustainable value for Shareholders by linking the
rewards of key executives with the value created for Shareholders
and thereby aligning the interests of key executives with those of
Shareholders.
As at the date of admission to AIM, options to subscribe for
804,888 Ordinary Shares (equal to approximately 0.8% of the
Enlarged Share Capital) were granted to the four non-executive
directors at an exercise price of GBP0.36 per share (being equal to
the Placing Price). These Options were granted on 11 June 2014 and
are exercisable in whole from the second anniversary of the date of
the grant and on a change of control or winding up of the
Company.
Details of the option outstanding during the year are as
follows:
2015
----------- ---------- --------- --------- -----------
Average Option Option Option Option
exercise 1 2 3 4
price Andrew David Derek Zhi
in GBP Harding Weir Welch (George)
per Zeng
share
At beginning
of the year 0.36 201,222 201,222 201,222 201,222
Granted - - - - -
Executed - - - - -
Forfeited - - - - -
Expired - - - - -
----------- ----------- --------- ---------- ------------
At end of the
year 0.36 201,222 201,222 201,222 201,222
=========== =========== ========= ========== ============
The weighted average estimated fair value of option granted in
the option agreements dated 11 June 2014 is 2.45 pence.
The estimated fair values for the option reserve were calculated
using the Black-Scholes option pricing model. The model inputs were
as follow:
Bid price GBP0.385
Exercise price GBP0.360
Expected volatility 25%
Expected dividend yield 5%
Risk-free interest
rate 2.75%
The expected volatility is based on the historical share prices
to the management's best estimate. The expected life used in the
model is three years, based on management's best estimate, for the
effects of non-transferability, exercise restriction and
behavioural considerations.
The management has discounted the bid price by 20% in the
calculation as the management estimated that in order to place
substantial block of shares in the market a discount in the region
of 20% to 25% of bid price would be needed.
22 BORROWINGS
During the year, borrowings increased by RMB37.6 million (2014:
RMB13 million) with RMB11.1 million (2014: RMB6.6 million) was over
1 year. The average interest rate was 8.27% (2014: 8.5%)
The bank borrowings are secured by:
- guarantee provided by Shandong Sanli Agricultural Machinery Co Ltd ;
- guarantee provided by Shandong Lingtong Heavy Machinery Co Ltd ;
- guarantee provided by Shandong Sanli Environmental Protection Engineering Co. Ltd;
- guarantee provided by Gaotang Lida Construction Material Co. Ltd;
- guarantee provided by Shandong Jinghua Petroleum Equipment Co. Ltd;
- guarantee provided by Gaotang Botai Packaging Material Co. Ltd;
- guarantee provided by Gaotang Minshun Cotton Co Ltd ;
- guarantee provided by Gaotang Qianyi Foods Co. Ltd;
- personal guarantee from Guiping Li (director of Hong Kong Runtai and Shandong Tiantai);
- personal guarantee from Cheng Liu (CEO of the Company);
- personal guarantee from Jianchao Zhang (director of Shandong
Sanli Agricultural Machinery Co Ltd);
- personal guarantee from Ziyun Zhao (director of Shandong Sanli
Agricultural Machinery Co Ltd);
- personal guarantee from Shifeng Zhang (director of Shandong Lingtong Heavy Machinery Co Ltd);
- Land and buildings.
23 TRADE AND OTHER PAYABLES
Group Group Company Company
2015 2014 2015 2014
RMB'000 RMB'000 RMB'000 RMB'000
Trade payables 40,369 25,304 - -
Notes payables 1,993 11,000 - -
Advance from customers 728 2,551 - -
Loan from director
- Cheng Liu 3,646 3,646 - -
Loan from Company's
shareholders 668 668 - -
Amount owed to subsidiary - - 14,364 385
Net wages control 1,379 1,343 95 -
Other taxes payables 18,569 7,781 - -
Other payables 9,634 9,484 3,646 4,180
Accruals 1,226 929 628 -
-------- ------------- -------------- -------------
78,212 62,706 18,733 4,565
======== ============= ============== =============
Included in other payables, amount of RMB272K (2014: RMB3.4
million) was due to Guiping Li, a director of Hong Kong Runtai and
Shandong Tiantai.
The directors consider that the carrying amount of trade and
other payables approximates to their fair value.
24 LONG TERM LOANS
On 21 February 2014, Guiping Li entered into a loan agreement
with Shandong Tiantai whereby Guiping Li granted an interest free
loan in the sum of the net dividend payable of RMB 53,209,440 for a
term of 50 years. This loan is ranked lower than other creditors in
the event of a winding up of the company. Guiping Li is a director
of Hong Kong Runtai and Shandong Tiantai. The accounting treatment
of this loan is descripted in Note 16.
On 15 July 2014, Cheng Liu, the CEO entered into a loan
agreement with Shandong Tiantai where by Cheng Liu granted a loan
of RMB24,267,200 over the period of 10 years at the interest rate
of 3% per annum.
On 20 July 2015, Cheng Liu, the CEO entered into a loan
agreement with Shandong Tiantai where by Cheng Liu granted a loan
of RMB13,628,287 (the equivalent of GBP1,405,036) over the period
of 10 years at the interest rate of 3% per annum.
25 DEFERRED INCOME TAX
During the year, no deferred income tax assets and deferred tax
liabilities are recognised.
26 CONTINGENCIES
As at 31 December 2015, there were no cash guarantees provided
by Shandong Tiantai to any business partners (2014: RMB58.7
million).
27 CAPITAL COMMITMENTS
2015 2014
RMB'000 RMB'000
Commitments for the
construction of additional
production line for
liquid and solid form
of ammonium sulfite 7,200 3,500
======== ========
In May 2015, the Group has committed RMB25.9 million for
construction of new production lines of liquid and solid form
ammonium sulfite and an alteration work of an existing production
line. As at 31 December 2015, RMB18.7 million has been spent with
further RMB7.2 million committed.
28 RELATED PARTY TRANSACTIONS
At the end of the reporting period, balances due from/(to)
related parties are as follow:
2015 2014
RMB'000 RMB'000
Short term loan
Cheng Liu paid for IPO expenses (3,646) (3,646)
Long term loan
Guiping Li long term loan *(2,068) *(1,933)
Cheng Liu long term loan *(39,147) *(24,606)
Guiping Li (194) (3,432)
Shareholders (SinoEuro Ruitai) (668) (668)
(45,723) (34,285)
=========== ===========
* under loan agreements
Except those are under loan agreements (*), there is no fixed
repayment terms due to and no interest is payable for the rest of
the above.
a) Guiping Li is a director of Hong Kong Runtai and Shandong Tiantai, and is wife of Cheng Liu;
b) Cheng Liu, CEO and director of the Company;
In addition to the related party information disclosed above,
the company enjoyed the benefit of 7 trademarks of lubricant brand
names and 8 patents of lubricant container design registered under
the name of Mr Changliang Zhu. Mr Changliang Zhu has agreed to
transfer these rights to the company at nil cost. Mr Changliang Zhu
is a sales director of lubricant oil department of Shandong
Tiantai.
29 FINANCIAL INSTRUMENTS
The Group's principal financial instruments comprise cash and
cash equivalents, trade and other receivables and trade and other
payable. The Group's accounting policies and method adopted,
including the criteria for recognition, the basis on which income
and expenses are recognized in respect of each class of financial
assets, financial liability and equity instrument are set out in
Note 1. The Group does not use financial instruments for
speculative purposes.
The principal financial instruments used by the company, from
which financial instrument risk arises, are as follows:
Group Group Company Company
2015 2014 2015 2014
RMB'000 RMB'000 RMB'000 RMB'000
Trade and other receivables 149,891 148,280 68,473 57,029
Cash and cash equivalents 171,670 124,121 2 2
Borrowings (120,090) (82,490) - -
Term loans (41,215) (26,539) - -
Trade and other payables (78,212) (62,706) (18,733) (4,565)
---------- ---------- --------- --------
82,044 100,666 49,742 52,466
========== ========== ========= ========
There are no investments held to maturity or financial assets
available for sale. There are no financial assets that are either
past due or impaired.
Capital management
The Group manages its capital to ensure that it will be able to
continue as going concern while maximising the return to
shareholders through the optimisation of the debt and equity
balance.
The capital structure of the Group consists of net debt
(borrowings offset by cash and bank balances) and equity of the
Group (comprising issued capital, reserves and retained
earnings).
The Group is not subject to any externally imposed capital
requirements. The gearing ratio at the end of the reporting period
was as follow:
Group Group Company Company
2015 2014 2015 2014
RMB'000 RMB'000 RMB'000 RMB'000
Debt (120,090) (82,490) - -
Cash and cash equivalents 171,670 124,121 2 2
----------
Net (debt)/cash 51,580 41,631 2 2
---------- --------- -------- --------
Equity 300,603 202,475 49,752 52,476
---------- --------- -------- --------
Net debt to equity ratio - - - -
========== ========= ======== ========
Foreign currency risks
The Group had no significant exposure to foreign exchange risk
during the period under review as its cash flows and financial
assets and liabilities are mainly denominated in RMB.
Liquidity risk
Liquidity risk arises from the Group's management of working
capital. It is the risk that the Group will encounter difficulty in
meeting its financial obligations as they fall due.
The Group's policies are to ensure that it will always have
sufficient cash to allow it to meet its liabilities when they
become due. The principal liabilities of the Group arise in respect
of trade and other payables, borrowings and term loans. The aging
of trade payables at the reporting dates are less than six
months.
Group Group Company Company
2015 2014 2015 2014
Group Repayment RMB'000 RMB'000 RMB'000 RMB'000
Trade and Less than
other payables one year 78,212 62,706 18,733 4,564
Less than
Borrowings one year 108,950 75,900 - -
More than
Borrowings one year 11,140 6,590 - -
More than
Term loans five years 41,215 26,539 - -
--------
239,517 171,735 18,733 4,564
======== ======== ======== ========
Credit risk
Credit risk refers to the risk that a counter party will default
on its contractual obligations resulting in financial loss to a
company. The Group has adopted a policy of only dealing with
creditworthy counterparties. The Group's exposure and the credit
ratings of its trading counterparties are monitored by the boards
of directors to ensure that the aggregate value of transactions is
spread amongst approved counterparties.
The Group's principal financial assets are cash and cash
equivalents, trade and other receivables. Cash equivalents include
amounts held on deposit with financial institutions.
The Group is exposed to credit risk from its operating
activities (primarily trade receivables) and from it financing
activities, including deposits with banks and financial
institutions. Cash is placed with established financial
institutions. The maximum exposure to credit risk is represented by
the carrying amount of each financial asset in the balance
sheet.
The carrying amount of financial assets represents the maximum
credit exposure. The maximum exposures to credit risk at the
reporting date are as follows:
Group Group Group Company
2015 2014 2015 2014
RMB'000 RMB'000 RMB'000 RMB'000
Trade and other receivables 149,891 148,280 68,473 57,029
Cash and cash equivalents 171,670 124,121 2 2
-------- -------- -------- --------
321,561 272,401 68,475 57,031
======== ======== ======== ========
As at 31 December 2015, the Group had 3 customers (2014: 3
customers) that owed more than RMB 5 million each to the Group, and
accounted for approximately 24% (2014: 36%) of all the receivables
outstanding. There was 1 customer (2014: 1 customer) with balances
greater than RMB10 million accounting for approximate 16% (2014:
25%) of the total amount receivables.
The aging of trade receivables at the reporting dates were less
than three months and they are not impaired.
Interest rate risk
Interest rate risk arises from the potential changes in interest
rates that may have an adverse effect on a company in the current
reporting period and in future years.
The Group is exposed to interest rate risk because the company
borrows fund at both fixed and floating interest rates. The risk is
managed by the Group by maintaining as appropriate mix between
fixed and floating rate borrowings.
Interest rate sensitivity analysis
The sensitivity analyses below have been determined based on the
exposure to interest rate for bank borrowings at the end of the
reporting period. The analysis is prepared assuming the amount of
the liability outstanding at the end of the reporting period was
outstanding for the whole year. A 50 basis point increase or
decrease is used when reporting interest rate risk internally to
key management personnel and represents management's assessment of
the reasonable possible change in interest rates.
If interest rate had been 50 basis points higher/lower and all
other variables were held constant, the Group's profit for the year
ended 31 December 2015 would increase/decrease by RMB331,634 (2014:
RMB412,450).
30 EVENTS AFTER THE REPORTING PERIOD
The Directors have undertaken a review of the merits or
otherwise of the Company continuing to be admitted to trading on
AIM, and have concluded that a proposal to cancel the Admission of
the Company's Ordinary Shares to trading on AIM will be made to
Shareholders at the next Annual General Meeting.
31 SEGMENT INFORMATION
Management determines the operating segments, which represents
product category, based on reports reviewed and used for strategic
decisions. The Group's operating segments are organised the
following product segments:
- Solid ammonium sulfite
- Liquid ammonium sulfite
- Liquid ammonium bisulfite
- Lubricant oil
- Recarburizer
Other operations of the Group comprises investment holding which
does not constitute a separately reportable segment. As the
business of the Group is engaged primarily in the China, no
reporting by geographical location of operations is presented.
Solid Liquid Liquid Lubricant Recaburizer Total
ammonium ammonium ammonium oil
sulfite sulfite bi-sulfite
2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014
RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000
Revenue 358,075 260,077 186,433 173,419 112,063 70,709 211,833 138,627 61,509 61,735 929,913 704,567
Segment
results 77,534 55,687 39,209 36,568 22,611 14,280 44,428 29,141 12,438 13,062 196,220 148,738
Other
income 1,713 1,212
Unallocated
expense (60,383) (47,569)
--------------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Profit
before
taxation 137,550 102,381
Income
tax
expense (21,559) (16,228)
--------------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Total
profit 77,534 55,687 39,209 36,568 22,611 14,280 44,428 29,141 12,438 13,062 115,991 86,153
=============== ======== ======== ======== ======== ======== ======== ======== ======== ======== ======== ========= =========
Other
information
Capital
expenditure
- allocated 20,924 4,904 10,456 3,270 6,835 1,333 76,535 2,757 - - 114,750 12,264
- unallocated 636 787
Amortisation 595 232
Depreciation
of plant
and
equipment 5,697 4,714
- allocated 1,509 1,648 1,262 1,099 759 448 1,119 823 - - 4,649 4,018
- unallocated 1,048 696
=============== ======== ======== ======== ======== ======== ======== ======== ======== ======== ======== ========= =========
Solid Liquid Liquid Lubricant Recaburizer Total
ammonium ammonium ammonium oil
sulfite sulfite bi-sulfite
2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014
RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000
Segment
assets 43,451 20,595 22,623 13,732 13,598 5,599 80,811 12,762 - - 160,483 52,688
Unallocated
corporate
assets 390,152 326,182
--------------- --------- --------- --------- --------- ----------- -------- ---------- --------- -------- -------- ---------- ----------
Total
assets 43,451 20,595 22,623 13,732 13,598 5,599 80,811 12,762 - - 550,635 378,870
=============== ========= ========= ========= ========= =========== ======== ========== ========= ======== ======== ========== ==========
Segment
liabilities -
Unallocated
corporate
liabilities 250,032 176,395
--------------- --------- --------- --------- --------- ----------- -------- ---------- --------- -------- -------- ---------- ----------
Total
liabilities 250,032 176,395
=============== ========= ========= ========= ========= =========== ======== ========== ========= ======== ======== ========== ==========
The above revenue is all from external sales and there are
minimal intersegmental transactions. The revenue is measured in a
manner consistent with that in the statement of comprehensive
income.
Management assesses the performance of the operating segments
based on segment results.
These segment results represent the profit earned by each
segment without the allocation of central administration,
transportation, advertising and entertainment cost. This is the
measure reported to the management for the purposes of resource
allocation and assessment of segment performance.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR EKLFLQQFEBBF
(END) Dow Jones Newswires
June 29, 2016 11:53 ET (15:53 GMT)
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