TIDMACE

RNS Number : 5773R

Auhua Clean Energy Plc

29 June 2015

AUHUA CLEAN ENERGY PLC

("Auhua" or the "Company")

Final Results and Notice of AGM

29 June 2015: Auhua Clean Energy Plc (AIM: ACE) (the "Company"), the environmental technology group, is pleased to announce its final results for the year ended 31 December 2014.

Financial highlights:

-- Revenues of RMB 248.9 million (GBP 24.6 million) (2013: RMB 250.9 million (GBP 26.1 million))

   --      Gross margin of 38.6% (2013: 43.6%) 
   --      EBITDA of RMB 53.4 million (GBP 5.3 million) (2013: RMB 71.8 million (GBP 7.5 million)) 

-- Profit before tax of RMB 48.2 million (GBP 4.8 million) (2013: RMB 65.8 million (GBP 6.8 million))

-- Cash balances of RMB 47.0 million (GBP4.6 million) (2013: RMB 48.7 million, (GBP 5.1 million))

   --      Basic earnings per share of RMB 0.37 (GBP 4 pence) (2013: RMB 0.71 (GBP 8 pence)) 

-- Net assets up to RMB 252.6 million (GBP 24.9 million) (2013: RMB 191.8 million (GBP 19.9 million))

   --      Net assets per share up 22% to RMB 2.82 (GBP 28 pence) (2013: RMB 2.32 (GBP 24 pence)) 

-- Significant R&D advancements in the solar thermal panel manufacturing and building integration solar thermal technologies (BIST) with Purdue University in the USA.

Post balance sheet events:

   --      Entered into the Dubai Green Economy Partnership in May 2015 
   --      Raised GBP1,724,500 through a placing and subscription, as announced on 19 June 2015 

The Company has performed strongly amidst the slower growth in the Chinese economy and the property sector. This is largely because the Chinese government remains committed to the renewable energy sector and, in particular, the promotion of solar technologies in building developments. The Company was recently awarded a significant technology accolade by the Weihai Science and Technology Department for its technology advancements in solar thermal panel efficiencies. Demand in solar thermal projects remains strong among the property developers.

David Sumner, Chairman and Non-Executive Director of Auhua, said: "We are delighted with this sound set of financial results despite price pressures and the tougher market conditions in China. In spite of a challenging economic backdrop in the country, Auhua has had a good year. Our close ties with regulatory authorities, governments and property developers have helped ensure stable growth in sales domestically. We have ambitious domestic and international plans as global demand for solar products continues to thrive and the competitive adoption of clean power becomes more firmly fixed in the minds and actions of countries and governments. We look forward to a promising future ahead."

Chen Anxiang, Chief Executive Officer of Auhua, commented: "Auhua's investments into research and development has significantly helped the Company to develop the innovation needed to maintain a strong competitive advantage against its competitors. The 2014 joint research project between Taiwan Ziolar and Purdue University, USA has resulted in the filing of four Chinese patents and two U.S. patents since July 2014. We expect to form a pilot solar thermal coating production line in the second half of 2015. This technology will fill the gap in the market for innovative thermal solutions in property development."

On 19 June 2015, the Company completed a fundraising of GBP 1,724,500 (before expenses) through a placing and subscription of new Ordinary Shares of no par value of the Company at 4.5 pence per new Ordinary Share. While the Group's operations in China are profitable and cash positive, liquidity in China continues to be tight and the working capital requirements to operate the business have increased year on year. As such, the Company raised monies from the market to fund its capital expansion and provide working capital for its overseas expansion.

The Company will hold its Annual General Meeting at 11am (BST) on Wednesday 22 July 2015 at the offices of Grant Thornton UK LLP at 30 Finsbury Square, London, EC2P 2YU. Notice of the Annual General Meeting will be sent to shareholders tomorrow, 30 June 2015.

The financial information in this announcement is derived from the Company's audited financial statements for the year ended 31 December 2014 which are available on the Company's website www.auhuacleanenergy.com.

Copies of the Company's Annual Report and Accounts for the year ended 31 December 2014 will be sent to shareholders tomorrow, 30 June 2015 and will be available on the Company's website www.auhuacleanenergy.com.

All RMB amounts have been translated using the below exchange rates:

RMB 1: GBP 0.09870 (average exchange rate for 2014)

RMB 1: GBP 0.10396 (average exchange rate for 2013)

--ends---

Media Enquiries

 
 Brunswick Group     auhua@brunswickgroup.com 
----------------    ------------------------- 
 

Further information

 
 Auhua Clean           David Sumner, non-executive    davidjsumner@auhuacleanenergy.com 
  Energy plc            Chairman 
--------------------  -----------------------------  ---------------------------------- 
 Grant Thornton        Philip Secrett / Maureen 
  UK LLP (Nominated     Tai / 
  Adviser)              Jamie Barklem                 +44 (0)20 7383 5100 
--------------------  -----------------------------  ---------------------------------- 
 WH Ireland            Tim Feather                     +44 (0) 207 220 1666 
  (Broker)                                              Tim.feather@wh-ireland.co.uk 
--------------------  -----------------------------  ---------------------------------- 
 

About Auhua:

Auhua Clean Energy (www.auhuacleanenergy.com) is an environmental technology group based in the Shandong Province of Eastern China specialising in the development and application of green energy and energy efficient solar thermal solutions. In particular, the Group is focused on the manufacture and sale of split-unit solar water heating systems.

Auhua Clean Energy operates through its wholly owned subsidiaries Shandong Auhua New Energy Co., Ltd, Weihua Auhua New Energy Co., Ltd., and Taiwan Ziolar Technology Co. Ltd, of which Auhua Holdings Pte Ltd is the intermediate holding company.

CHAIRMAN'S STATEMENT

On behalf of the Board of Directors (the "Board"), I am pleased to deliver our results for the year ended 31 December 2014.

The Company has continued to make good progress in our product development and penetration into new markets. We did not proceed with a fund raise in 2014, and as such were unable to increase the paid-up share capital of our Chinese subsidiaries or increase our production capacity. This restricted our growth and resulted in the Company maintaining its production output. Amidst price pressures in China and our strategic move towards larger customers, we suffered a small dip in revenues and gross margins. The Company has however made significant technological advances during 2014 and, following a key strategic acquisition, is strongly positioned to enter the solar energy market on a global scale.

Financial Review

Group revenue was RMB 248.9 million (GBP 24.6 million) in FY14 compared to RMB 250.9 million (GBP 26.1 million) in FY13. The Group had received considerable orders in the fourth quarter of 2014, but was unable to fulfil them all since it was already operating at full production capacity. Some of the orders were also delayed due to the poor property climate in China. Meanwhile, stainless steel prices increased in the second half of 2014, adding to our cost of goods, and price pressures from the larger customers caused our gross margins to dip to 38.6 per cent and gross profit of RMB 96.1 million (GBP 9.5 million) compared to 2013 where gross profit was RMB 109.4 million (GBP 11.4 million).

Administrative expenses increased significantly to RMB 27.2 million (GBP 2.7 million) during the period (2013: RMB 18.2 million (GBP 1.9 million)). The higher costs in 2014 were largely due to the operating overheads of Taiwan Ziolar and the increased training expenses in China to build up our sales and marketing teams. Selling and distribution costs fell to RMB 19.5 million (GBP 1.9 million) in 2014 compared to RMB 24.1 million (GBP 2.5 million) in 2013.

The Group also made several new adjustments this year, including an impairment of obsolete equipment of RMB 1 million (GBP 0.1 million), compared with nil in 2013, and amortisation of the intangibles derived from its acquisition of Taiwan Ziolar of RMB 1.0 million (GBP 0.1 million).

As a result of the lower gross profit margins and the higher administrative overheads, impairments and amortisations, profit before tax dropped by 27 per cent to RMB 48.2 million (GBP 4.8 million) (2013: RMB 65.8 million (GBP 6.8 million)) and net profit after tax from RMB 47.9 million (GBP 5.0 million) to RMB 32.5 million (GBP 3.2 million) in 2014. The Group's EBITDA dropped 26% to RMB 53.4 million (GBP 5.3 million, (2013: RMB 71.8 million (GBP 7.5 million)).

Fixed assets of the Group increased to RMB122.0 million (GBP 12.0 million) in 2014 compared to RMB 82.5 million (GBP 8.6 million) in 2013 largely due to the increase in construction in progress and the intangibles realised on the acquisition of Taiwan Ziolar, which completed in May 2014. Trade receivables increased to RMB90.9 million (GBP 9.0 million) from RMB76.0 million (GBP 7.9 million) as customers delayed payments and demanded longer credit terms. These customers are generally mid to large sized property developers and have a very small risk of bad debt. However, the Group has continued to provided RMB 2.5 million (GBP 0.2 million) in bad debt provisions for FYE2014, as was also provided in 2013.

As at 31 December 2014, total bank loans dropped to RMB 9.0 million (GBP 0.9 million) from RMB 14.5 million (GBP 1.5 million) and cash and cash equivalents maintained at RMB 47.0 million (GBP 4.6 million) as at 31 December 2014 (2013: RMB 48.7 million (GBP 5.1 million)).

Overall, net asset per share increased by 22 per cent from RMB 2.32 (GBP 0.24) in 2013 to RMB 2.82 (GBP 0.28) in 2014.

All RMB amounts have been translated using the below exchange rates:

RMB 1: GBP 0.09870 (average exchange rate for 2014)

RMB 1: GBP 0.10396 (average exchange rate for 2013)

Operational Review

Auhua continued to make good inroads into the mid to large property developers. This included the securing of an agreement with a subsidiary of Green Land Group to supply 1,570 units of solar thermal water heaters. Green Land Group was ranked No. 268 among the Fortune Global 500 companies in 2014 and one of China's largest property developer groups. The Group would have been in a stronger position to secure similar projects if not for the limited production capacity and the small paid up capital of its Chinese subsidiaries. The Group is already operating at full capacity and because it has taken longer than initially expected to raise capital from the market, the Group has therefore had to use its own internal funds to finance its production expansion. Since these funds were sourced in China the Group was unable to increase the paid-up capital of its Chinese subsidiaries since the fund injection needed to come from overseas. Nevertheless, the Group continued to make investment in sales, marketing and training in preparation for the Group's future expansion.

The Group is also looking to grow its overseas business and has made significant progress in Dubai. It has entered into the Dubai Green Economy Partnership ("Dubai GEP"), a government-backed initiative led by His Highness Sheikh Hamdan bin Mohammed bin Rashid al Maktoum, Crown Prince of Dubai and Chairman of the Dubai Executive Council and has been selected as one of the only solar thermal water heater providers under the programme.

The Company's ongoing strategy is to focus on research and development and innovation and to ensure it remains the technological leader in energy saving split-unit solar water heaters. In August 2014, the Group signed a joint development programme with Lyles School of Civil Engineering, Purdue University to enhance Auhua's existing solar thermal technologies by further developing its advanced composite material and proprietary coating technologies. These innovations will aim to achieve breakthrough performance in a number of ways, including system efficiency, structural strength, safety, durability, building lighting, and thermal management, and advance the Building Integrated Solar Thermal (BIST) applications of the design. In November 2014, Weihai Auhua New Energy Co Ltd, one of the Company's subsidiaries, was awarded the status of "Shandong Provincial Enterprise Technical Center". Conferred by the Shandong Economic and Information Technology Committee, the award is only made to companies with certain competitive advantages in terms of technology and operating results over its competitors in the same industry and with strong research and development capability. To date, the Group has already accumulated over forty patents under its Chinese subsidiaries with another five patents pending, and one patent has now been granted in China and the USA from its Taiwan Ziolar subsidiary.

Outlook

China's growth continues to look challenging but there are tangible signs of recovery in the property sector. Liquidity remains tight with the property developers and this will filter down to the building contractors and suppliers like ourselves. We believe the Chinese property market will recover. In the meantime, the progress we are making in Dubai will bring an alternative growth market and a diversification of our market risks. We will continue to be selective with our customers, manage our working capital, look to build production capacity for future growth and to invest in and nurture our technologies.

2014 has marked a consolidation year for the Company from a commercial perspective and a significant milestone with our technology development. It affirms our commitment to growing a world-class, renewable and profitable technology company. I would like to thank our staff for their continued efforts in ensuring Auhua remains at the forefront of solar thermal innovations and lastly, I would also like to thank all our partners, shareholders, customers, business associates and suppliers for their continued support over the year.

David Sumner

Non-executive Chairman

29 June 2015

Consolidated Statement of Comprehensive Income

For the year ended 31 December 2014

 
                                                           Year ended      Year ended 
                                                          31 December     31 December 
                                                                 2014            2013 
 
 
 
                                                         30 September 
                                                                 2011 
                                   Notes                      RMB'000         RMB'000 
                                          ===========================  ============== 
 
  Revenue                       4                             248,865         250,854 
Cost of sales                                               (152,794)       (141,419) 
                                          ===========================  ============== 
Gross pro t                                                    96,071         109,435 
Distribution and 
 selling expenses                                            (19,516)        (24,080) 
Administrative 
 expenses                                                    (27,206)        (18,188) 
                                          ===========================  ============== 
Pro t from operations          7                               49,349          67,167 
Other income                                                       34             363 
Finance costs                                                 (1,145)         (1,601) 
Foreign exchange 
 loss                                                            (20)           (161) 
                                          ===========================  ============== 
Pro t before tax                                               48,218          65,768 
 
Income tax expense                                           (15,688)        (17,891) 
                                          ===========================  ============== 
Profit for the 
 year, attributable 
 to equity holders 
 of the parent parent                                          32,530          47,877 
 

Other comprehensive income

 
 
  *    Exchange differences on translating foreign operation                        580                505 
Total comprehensive income, 
 net of tax, attributable 
 to equity holders of the 
 parent                                                                          33,110             48,382 
 
Earnings per share (RMB) 
 From continuing operations: 
                                                                -----------------------  ----------------- 
 
    *    Basic (note 24)                                                          0.37                0.73 
                                                                -----------------------  ----------------- 
 
 
 
    *    Diluted (note 24)                      0.37     0.73 
                              ----------------------  ------- 
 

Consolidated Statement Of Financial Position

For the year ended 31 December 2014

 
 
 
                                                As at           As at 
                                          31 December     31 December 
                                                 2014            2013 
 
                                 Notes        RMB'000         RMB'000 
 Assets 
 Non-current assets 
 Property, plant and 
  equipment                        8           77,386          67,145 
 Prepaid lease payments                        15,072          15,340 
 Intangible assets                 9           29,556               - 
 
                                              122,014          82,485 
                                        -------------  -------------- 
 
 Current assets 
 Inventories                                   11,208           6,321 
 Trade and other receivables      10          124,666          94,414 
 Cash and cash equivalents                     46,998          48,666 
                                              182,872         149,401 
 
 Total assets                                 304,886         231,886 
                                        =============  ============== 
 
 Equity and liabilities 
 Stated capital                   11           53,016          25,239 
 Share based payment 
  reserve                                         257             257 
 Statutory surplus 
  reserve                                       2,100           2,100 
 Foreign currency translation 
  reserve                                       1,670           1,090 
 Retained profits                             195,600         163,070 
                                              252,643         191,756 
 
   Current liabilities 
 Trade and other payables         12           30,044          17,775 
 Short term loans                               8,411           5,450 
 Provision for taxation                         4,788           7,905 
                                               43,243          31,130 
 
 Non-current liabilities 
 Long term loans                                9,000           9,000 
                                                9,000           9,000 
 
 Total equity and liabilities                 304,886         231,886 
                                        =============  ============== 
 

Consolidated Cash Flow Statement

For year ended 31 December 2014

 
                                         Year ended    Year ended 
                                        31 December   31 December 
                                               2014          2013 
                                            RMB'000       RMB'000 
CASH FLOWS FROM OPERATING ACTIVITIES 
Profit for the year before tax               48,218        65,768 
Adjustments for: 
Depreciation                                  4,808         4,148 
Amortisation                                  1,156           322 
Disposal of property, plant and 
 equipment                                        -           (3) 
Allowance for doubtful debts- 
 Trade                                            -           986 
Interest expenses                             1,145         1,568 
                                       ------------  ------------ 
Operating cash flows before working 
 capital changes                             55,327        72,789 
Decrease/(increase) in inventories          (4,887)       (2,694) 
(Increase) in trade and other 
 receivables                               (49,576)      (36,801) 
Increase/(decrease) in trade 
 and other payables                          23,798       (2,693) 
 
 
Cash generated from operations               24,661        30,600 
Interest paid                               (1,145)       (1,568) 
Corporate tax paid                         (18,805)      (16,435) 
 
Net cash generated from operating 
 activities                                   4,712        12,597 
 
CASH FLOWS FROM INVESTING ACTIVITIES 
Payment for construction in progress       (15,049)       (7,498) 
Proceeds from disposal of property, 
 plant and equipment                              -            23 
Purchase of property, plant and 
 equipment                                        -       (4,782) 
 
Net cash (used in) investing 
 activities                                (15,049)      (12,257) 
 
CASH FLOWS FROM FINANCING ACTIVITIES 
Proceeds from term loan                      11,143         5,500 
Repayments of term loans                    (5,450)       (4,550) 
Proceeds from the issue of shares                 -        12,119 
(Repayment of loans) /loans from 
 directors & shareholders                     2,694       (5,454) 
Loans from related parties                      236           151 
 
Net cash from financing activities            8,623         7,766 
                                       ------------  ------------ 
 
NET INCREASE IN CASH AND CASH 
 EQUIVALENTS                                (1,714)         8,106 
 
Exchange gains on cash and cash 
 equivalents                                     46           505 
 
CASH AND CASH EQUIVALENTS AT 
 BEGINNING OF YEAR                           48,666        40,054 
                                       ------------  ------------ 
 
CASH AND CASH EQUIVALENTS AT 
 END OF YEAR                                 46,998        48,666 
                                       ------------  ------------ 
 
 

Consolidated Statement of Changes in Equity

 
                                                                           Statutory               Foreign currency 
                             Stated               Retained                   surplus                    translation         Share based 
                            capital                profits                   reserve                        reserve             reserve             Total equity 
                            RMB'000                RMB'000                   RMB'000                        RMB'000             RMB'000                  RMB'000 
 At 1 January 
  2013                       13,120                115,193                     2,100                            585                 257                  131,255 
 Transaction 
 with 
 owners 
 Share issue                 12,119                      -                         -                              -                   -                   12,119 
                 ==================  =====================  ========================  =============================  ==================  ======================= 
                             12,119                      -                         -                              -                   -                   12,119 
 Comprehensive 
 income 
 Profit for the 
  year                            -                 47,877                         -                              -                   -                   47,877 
 Other 
 comprehensive 
 income 
 Foreign 
  currency 
  translation 
  differences                     -                      -                         -                            505                   -                      505 
                 ==================  =====================  ========================  =============================  ==================  ======================= 
 Total 
  comprehensive 
  income                          -                 47,877                         -                            505                   -                   48,382 
                 ------------------  ---------------------  ------------------------  -----------------------------  ------------------  ----------------------- 
 At 31 December 
  2013                       25,239                163,070                     2,100                          1,090                 257                  191,756 
 Transaction 
 with 
 owners 
 Share issue                 27,777                      -                         -                              -                   -                   27,777 
                 ==================  =====================  ========================  =============================  ==================  ======================= 
                             27,777                      -                         -                              -                   -                   27,777 
 Comprehensive 
 income 
 Profit for the 
  year                            -                 32,530                         -                              -                   -                   32,530 
 Other 
 comprehensive 
 income 
 Foreign 
  currency 
  translation 
  differences                     -                      -                         -                            580                   -                      580 
                 ==================  =====================  ========================  =============================  ==================  ======================= 
 Total 
  comprehensive 
  income                          -                 32,530                         -                            580                   -                   33,110 
 
 At 31 December 
  2014                       53,016                195,600                     2,100                          1,670                 257                  252,643 
                 ==================  =====================  ========================  =============================  ==================  ======================= 
 

Material Notes to the financial statements

   1.      General information and principal activities 

The principal activities of Auhua Clean Energy Plc (the "Company" or "Auhua") and its subsidiaries (the "Group") include technology research and the development and production and sale of solar-powered water heater systems.

Auhua, a public limited company, is the Group's ultimate parent company. It was incorporated on 21 November 2011 in Jersey, Channel Islands and its registered office address is Queensway House, Hilgrove Street, St. Helier, Jersey JE1 1ES, Channel Islands. The Company's shares are listed on the AIM Market of the London Stock Exchange.

The principal subsidiary of Auhua is Auhua Holdings Pte Ltd ("Auhua Holdings"), the holding company for the Auhua Trading Group (together, "the Auhua Holdings Group"). The Auhua Trading Group is made up of Shandong Auhua New Energy Co., Ltd, Weihai Auhua New Energy Co., Ltd, and Taiwan Ziolar Technology Co. Ltd.

   2.      Significant accounting policies 

2.1 Basis of preparation

The Group prepares its financial statements in accordance with applicable International Financial Reporting Standards (IFRS) and interpretations issued by the International Accounting Standards Board as adopted by the European Union.

The Directors have considered those standards and interpretations, which have not been applied in the Financial Statements but are relevant to the Group's operations, that are in issue but not yet effective and do not consider that any will have a material impact on the future results of the Group. The Company has not presented a statement of cashflows as no bank account is maintained by the Company.

2.2 Subsidiaries

As at 31 December 2014, the Company had the following subsidiaries:

 
 Name of Subsidiary      Date and        Percentage           Principal 
                         place of         of equity           activities 
                       establishment     attributable 
                                        to Auhua Clean 
                                          Energy Plc 
 
 Auhua Holdings       18 February           100%         Holding Company 
  Pte Ltd              2011 
                       Singapore 
 
 Held by Auhua 
  Holdings Pte 
  Ltd                   21 August            100%          R&D and production 
  Shandong Auhua        2002                               and sale 
  New Energy            PRC                                of solar-powered 
  Co. Ltd                                                  water heater 
                                                           system 
                                             100% 
                        12 August                          R&D and production 
  Weihai Auhua          2008                               and sale 
  New Energy            PRC                                of solar-powered 
  Co. Ltd                                                  water heater 
                                             100%          system 
 
                        26 April                           R&D and production 
  Taiwan Ziolar         2013                               and sale 
  Technology            Taiwan                             of solar 
  Co. Ltd.                                                 thermal panels 
 

2.3 Impairment of tangible and intangible assets excluding goodwill

At each balance sheet date, the Group reviews the net book amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If such an indication of impairment is identified, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows thatare independent from other assets, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. An intangible asset with an indefinite useful life is tested for impairment annually and whenever there is an indication that the asset may be impaired.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. In determining fair value less costs to sell, an appropriate valuation model is used.

If the recoverable amount is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately.

2.4 Trade receivables

Trade receivables are measured at 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 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.

2.5 Key assumptions and sources of estimation uncertainty

The preparation of nancial statements in conformity with IFRS requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the nancial statements and the reported amounts of expenses during the reporting period.

Although these estimates are based on management's best knowledge of the amount, event or actions, results ultimately may differ from those estimates. The Directors have reviewed the accounting policies set out above and consider them to be the most appropriate to the Group's business activities.

The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by de nition, seldom equal the related actual results. The estimates and assumptions that have a signi cant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next nancial year are discussed below:

2.5.1 Going concern

The preparation of financial statements requires an assessment on the validity of the going concern assumption. The validity of the going concern assumption is dependent on finance being available for the continuing working capital requirements of the Group, including the Company. The Directors have reviewed forecasts and budgets for the coming year, which have been drawn up with appropriate regard for the current economic environment and the particular industry in which the Group operates. These were prepared with reference to historical and current industry knowledge, taking future strategy of the Group into account. The existing operations have been generating funds to meet short-term operating cash requirements. Depending on its ability to raise further capital, it is within the Directors' ability to control the pace of any capital expenditure required.

The Directors consider that the trading subsidiaries in PRC are profitable and cashflow generative. They have adequate resources and committed borrowing facilities to continue in operational existence for the foreseeable future. The entity in Taiwan has been supported by the Company through shareholder loans and, subsequent to the year end, as detailed in note 21 to the financial statements, through a placing of GBP1.72 million (RMB17.2 million). . Accordingly, the Board believes it is appropriate to adopt the going concern basis in the preparation of the financial statements.

2.5.2 Valuation of intangible assets acquired

The intellectual property assets were acquired through the business combination outlined in note 6. The intellectual property is amortised over ten years. The determination of the fair value of assets and liabilities including goodwill arising on the acquisition of businesses, the acquisition of intellectual property, whether arising from separate purchases or from the acquisition as part of business combinations, and development expenditure which is expected to generate future economic benefits, are based, to a considerable extent, on management's judgement. The fair value of these assets is determined by discounting estimated future net cash flows generated by the asset where no active market for the assets exists. The use of different assumptions for the expectations of future cash flows and the discount rate would change the valuation of the intangible assets.

Allocation of the purchase price affects the results of the Group as finite lived intangible assets are amortised, whereas indefinite lived intangible assets, including goodwill, are not amortised and could result in differing amortisation charges based on the allocation to indefinite lived and finite lived intangible assets. The useful life used to amortise intangible assets relates to the expected future performance of the assets acquired and management's estimate of the period over which economic benefit will be derived from the asset. The estimated useful life principally reflects management's view of the average economic life of each asset and is assessed by reference to historical data and future expectations. Any reduction in the estimated useful life would lead to an increase in the amortisation charge.

Goodwill also arose through the business combination outlined in note 6. The Group tests goodwill recognised through business combinations annually for impairment using the method outlined above.

2.6 Key assumptions and sources of estimation uncertainty (continued)

The Group also uses the following estimates and assumptions that do not have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities within the next financial year. These are:

2.6.1 Allowance for trade and other receivables

Management reviews its loans and receivables for objective evidence of impairment at least quarterly. Significant financial difficulties of the debtor, the probability that the debtor will enter bankruptcy, and default or significant delay in payments are considered objective evidence that a receivable is impaired. In determining this, management makes judgment as to whether there is observable data indicating that there has been a significant change in the payment ability of the debtor, or whether there have been significant changes with adverse effect in the technological, market, economic or legal environment in which the debtor operates in.

Where there is objective evidence of impairment, management makes judgment as to whether impairment in value should be recorded in the income statement. In determining this, management uses estimates based on historical loss experience for assets with similar credit risk characteristics. The methodology and assumptions used for estimating both the amount and timing of future cash flows are reviewed regularly to reduce any differences between the estimated loss and actual loss experience.

The allowance policy for doubtful debts of the Group is based on the ageing analysis and management's ongoing evaluation of the recoverability of the outstanding receivables. A considerable amount of judgment is required in assessing the ultimate realisation of these receivables, including the assessment of the creditworthiness and the past collection history of each customer. If the financial conditions of these customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.

   3        Capital risk management 

The Group defines capital as the total equity of the Group. The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern, to maintain a strong credit rating and healthy capital ratios in order to provide returns for shareholders and benefits for other stakeholders, and to maintain an optimal capital structure to reduce the cost of capital.

The capital structure of the Group consists of equity attributable to equity holders as disclosed in the statement of financial position. The Group manages its capital structure and makes adjustments to it, in light of changes in economic conditions. To maintain or adjust the capital structure, the Group may adjust the capital to shareholders or issue new shares. Changes were made in the period as disclosed in the statement of changes in equity. The Group monitors capital using a gearing ratio and debt to equity ratio:

   3.1          Gearing ratio 

The gearing ratio is defined as and calculated by the Group as total of interest-bearing borrowings to the owners' equity. Equity includes equity attributable to the equity holders of the Group. During the year ended 31 December 2014, the Group's strategy was to maintain the gearing ratio at a moderate level in order to secure access to finance at a reasonable cost. The gearing ratios as at the financial position dates were as follows:

 
 Group                                       As at          As at 
                                       31 December    31 December 
                                              2014           2013 
 Total interest bearing borrowings         RMB'000        RMB'000 
 Short term loan                             8,411          5,450 
 Long term loan                              9,000          9,000 
                                            17,411         14,450 
                                     =============  ============= 
 
 Total equity                              252,643        191,756 
                                     =============  ============= 
 
 Gearing ratio (%)                              7%             8% 
                                     =============  ============= 
 
   3.2          Debt to equity ratio 

The debt to equity ratio is defined and calculated by the Group as total debt (total liabilities) to the owner's equity as at 31 December 2014 as follows:

 
 Group                              As at          As at 
                              31 December    31 December 
                                     2014           2013 
                                  RMB'000        RMB'000 
 
 Total debts                       52,243         40,130 
                            -------------  ------------- 
 
 Total equity                     252,643        191,756 
                            -------------  ------------- 
 
 Debt to equity ratio (%)             21%            21% 
                            =============  ============= 
 
   4.       Revenue 
 
 Group                   As at          As at 
                   31 December    31 December 
                          2014           2013 
                       RMB'000        RMB'000 
 
 Sale of goods         248,865        250,854 
                 =============  ============= 
 
 
   5.         Operating segments 

For the purpose of IFRS 8, the chief operating decision-maker ("CODM"), who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board of Directors.

The Group is engaged in technology, R&D and the production and sale of solar-powered water heater systems. The Group's revenue and profit before taxation were all derived from its principal activity.

Revenues from all periods were derived from external customers based in the PRC. The Group's operations are principally based in the PRC and its assets and liabilities related to this single business segment.

   6.       Investments 
 
 Company                                            As at          As at 
                                              31 December    31 December 
                                                     2014           2013 
                                                  RMB'000        RMB'000 
 Investments in subsidiaries 
 
    *    Auhua Holdings Pte Ltd                    12,613         12,613 
                                                   27,777              - 
    *    Taiwan Ziolar Technology Co. Ltd 
                                            -------------  ------------- 
                                                   40,390         12,613 
 
 

The Company completed the acquisition of Taiwan Ziolar Technology Co. Ltd on 23 May 2014 for a consideration of USD 4.5 million through the issuance of 6,944,400 ordinary shares at 40 pence per Auhua Share.

Acquisition of Taiwan Ziolar Technology Co. Ltd

On 23 May 2014, the Group acquired 100% of the share capital of Taiwan Ziolar Technology Co. Ltd, a company based in Taiwan, in exchange for the Group's shares. Taiwan Ziolar Technology Co. Ltd was acquired to enable the Group to significantly enhance its solar thermal panel technology.

At the time of authorising these financial statements for issuance, the Group was still in the process of finalising the valuation of certain assets and liabilities acquired. Any changes to the amounts disclosed below, arising from finalisation of these valuations, will be reflected in the Group's next set of financial statements.

Details of the purchase consideration, net assets acquired and goodwill are as follows

 
 
                                                  RMB'000 
 Purchase consideration 
 
    *    6,944,400 Ordinary Shares at 40 pence     27,777 
 
 Fair value of identifiable 
  net assets 
  Cash                                                214 
 Intellectual property                             24,316 
 Other payables                                   (2,881) 
 Total identifiable net assets 
  at fair value                                    21,649 
 
 Goodwill arising on acquisition 
  (note 9)                                          6,128 
 
 

The goodwill is primarily attributable to expected synergies arising from the acquisition, which is not separately recognised. From the date of acquisition, Taiwan Ziolar Technology Group contributed nil revenue and a loss of RMB 2,674k to profit before tax from the operations of the Group.

   7.       Profit from operations 

Profit from operations in the period under review has been arrived after charging the following amounts:

 
                                     Year ended    Year ended 
                                    31 December   31 December 
                                           2014          2013 
                                        RMB'000       RMB'000 
 Inventory recognised as expense        152,794       141,419 
 Foreign exchange (profit)/loss              20           161 
 Amortisation of intangible 
  assets                                  1,156           322 
 Depreciation of property, 
  plant and equipment included 
  in: 
 - Cost of goods sold                     2,957         3,595 
 - Operating expenses                       851           553 
                                   ------------ 
                                          3,808         4,148 
                                   ============  ============ 
 
   8.       Property, plant and equipment 
 
                                 Machinery       Motor     Construction 
 Cost               Buildings    & equipment    vehicles    in progress    Total 
                      RMB'000        RMB'000     RMB'000        RMB'000   RMB'000 
                   ----------  -------------  ----------  -------------  -------- 
 At 1 January 
  2012                 22,021         29,183          34              -    51,238 
 Disposals                  -          (500)           -              -     (500) 
 Additions              6,901          2,469           -         10,816    20,186 
                   ----------  -------------  ----------  -------------  -------- 
 At 31 December 
  2012                 28,922         31,152          34         10,816    70,924 
 Disposals                  -           (23)           -              -      (23) 
 Additions                  -          4,782           -          7,498    12,280 
 At 31 December 
  2013                 28,922         35,911          34         18,314    83,181 
 Disposals                  -              -           -              -         - 
 Additions                  -              -           -         15,049    15,049 
                   ----------  -------------  ----------  -------------  -------- 
 At 31 December 
  2014                 28,922         35,911          34         33,363    98,230 
                   ==========  =============  ==========  =============  ======== 
 
 Accumulated 
  Depreciation 
 At 1 January 
  2012                    583          7,895           7              -     8,485 
 Charge for 
  the year                726          3,121           6              -     3,853 
 Disposals                  -          (447)           -              -     (447) 
                   ----------  -------------  ----------  -------------  -------- 
 At 31 December 
  2012                  1,309         10,569          13              -    11,891 
 Charge for 
  the year                940          3,202           6              -     4,148 
 Disposals                  -            (3)           -              -       (3) 
 At 31 December 
  2013                  2,249         13,768          19              -    16,036 
 Charge for 
  the year                940          2,862           6              -     3,808 
 Provision 
  for diminution            -          1,000           -              -     1,000 
 Disposals                  -              -           -              -         - 
                   ----------  -------------  ----------  -------------  -------- 
 At 31 December 
  2014                  3,189         17,630          25              -    20,844 
                   ==========  =============  ==========  =============  ======== 
 
 Net book value 
 At 31 December 
  2013                 26,673         22,143          15         18,314    67,145 
                   ==========  =============  ==========  =============  ======== 
 
 At 31 December 
  2014                 25,733         18,281           9         33,363    77,386 
                   ==========  =============  ==========  =============  ======== 
 
   9.       Intangibles 
 
                      Intellectual 
 Cost                     property   Goodwill     Total 
                           RMB'000    RMB'000   RMB'000 
-------------------  -------------  ---------  -------- 
 At 1 January 2014               -          -         - 
 Additions                  24,316      6,128    30,444 
-------------------  -------------  ---------  -------- 
 At 31 December 
  2014                      24,316      6,128    30,444 
-------------------  -------------  ---------  -------- 
 
 Amortisation 
 At 1 January 2014               -          -         - 
 Charge for the 
  year                         888          -       888 
-------------------  -------------  ---------  -------- 
 At 31 December 
  2014                         888          -       888 
-------------------  -------------  ---------  -------- 
 
 Net book value 
 At 31 December 
  2013                           -          -         - 
-------------------  -------------  ---------  -------- 
 
 At 31 December 
  2014                      23,428      6,128    29,556 
-------------------  -------------  ---------  -------- 
 

Acquisition during the year

The intellectual property of RMB16.6 million was acquired through the business combination outlined in note 6. The intellectual property is amortised over the expected life of the asset.

Goodwill

The recoverable amount of goodwill of RMB6.1 million at 31 December 2014 is determined based on a value in use calculation using cash flow projections from financial budgets approved by senior management covering a five year period. Cash flow projections beyond the five year timeframe are extrapolated by applying a flat growth rate in perpetuity. The pre-tax discount rate applied to the cash flow projections is 11%. As a result of the analysis, management did not identify any impairment to the goodwill.

   10.     Trade and other receivables 
 
                                      31 December   31 December 
                                             2014          2013 
                                          RMB'000       RMB'000 
 
 Trade receivables                         90,696        76,030 
 Less: Allowance for doubtful 
  debts                                   (2,453)       (2,453) 
                                     ------------  ------------ 
                                           88,243        73,577 
 Other receivables                            692           822 
                                     ------------ 
                                           88,935        74,399 
 Deposits                                       -           500 
 Prepayments                               35,731        19,515 
                                     ------------ 
 Total trade and other receivables        124,666        94,414 
                                     ============  ============ 
 

There are no material differences between the fair value of trade and other receivables and their carrying value at the year end.

Receivables of RMB 90,696,000 (2013: RMB 76,030,000) were past due but not impaired by the year end. The ageing analysis of these receivables at the year end is as follows:

 
                       31 December   31 December 
                              2014          2013 
                           RMB'000       RMB'000 
 
 Up to 3 months old         44,816        42,237 
 3-6 months old             15,255        13,181 
 Over 6 months old          30,625        20,612 
                      ------------  ------------ 
                            90,696        76,030 
 

Management have assessed the recoverability of debtors, which includes consideration of amounts settled post year end and based on their assessment consider that the amounts above are recoverable.

The company trade and receivables balance relates to amounts due from subsidiary companies. This was the same for the prior year amounts.

   11.     Stated capital 
 
 Issued, called up and fully 
  paid                                 No. of shares   RMB'000 
 As at 1 January 2014                     82,527,845    25,239 
 
 
 Ordinary shares in relation 
  to the acquisition of Taiwan 
  Ziolar Technology Co Ltd ("Taiwan 
  Ziolar") on 23 May 2014                  6,944,400    27,777 
 
 At 31 December 2014                      89,472,245    53,016 
                                      ==============  ======== 
 
   12.     Trade and other payables 
 
                                                            31 December   31 December 
                                                                   2014          2013 
                                                                RMB'000       RMB'000 
 
 Trade payables                                                  14,509        11,138 
 Other payables 
 
   *    Directors                                                 3,491           747 
 
   *    Third parties/Deposits received/Advance receipts          9,361         2,894 
 Accruals                                                           543           924 
 Related parties                                                  1,573         1,337 
 Provision for staff costs                                          566           735 
                                                           ------------  ------------ 
 Total trade and other payables                                  30,043        17,775 
                                                           ============  ============ 
 
    All amounts included in trade and other payables 
    are non-interest bearing and are not secured 
    on the assets of the Group. 
    The Directors consider that the carrying amount 
    of trade and other payables approximates their 
    fair value. All trade payables are less than 
    30 days overdue. 
 
   13.     Related party transactions 

a) Related parties are entities with common direct or indirect shareholders and/or previous and/or current directors. Parties are considered to be related if one party has the ability to control the other party in making financial and operating decisions.

Certain of Group's transactions and arrangements are with related parties and the effect of these on the basis determined between the parties is reflected in the financial statements.

The balances are unsecured, interest-free and repayable on demand unless otherwise stated.

 
                                  Year ended   Year ended 
                                 31 December  31 December 
                                        2014         2013 
                                     RMB'000      RMB'000 
 
Director- Chen Anxiang 
Shareholder loan                          50           50 
Director- Tham Wai Mun Raphael 
Shareholder loan                       2,352          697 
Director- David Sumner 
Shareholder loan                       1,089            - 
 

Tham Wai Mun Raphael provided additional loan finance of RMB1.65 million during the year. David Sumner provided additional loan finance of RMB1.09 million during the year.

b) Key management personnel compensation is analysed as follows:

 
                        Year ended   Year ended 
                       31 December  31 December 
                              2014         2013 
                           RMB'000      RMB'000 
 
 Short term benefits 
Remuneration                 1,585        1,797 
Other benefits                  14           37 
                       -----------  ----------- 
                             1,599        1,834 
                       ===========  =========== 
 

Key management personnel above refer to the executive directors.

c) Augrains Capital Pte Ltd

 
                                    Year ended    Year ended 
                                   31 December   31 December 
                                          2014          2013 
                                       RMB'000       RMB'000 
 
 
 Invoices raised for advisory              236             - 
  work during the period 
 Payments for advisory work 
  during the period                          -           134 
                                  ============  ============ 
 
 Amount due to Augrains Capital 
  Pte Ltd                                1,573         1,337 
                                  ============  ============ 
 

Augrains Capital Pte. Ltd. is controlled by Tham Wai Mun Raphael, a director of the Group as at the balance sheet date.

This information is provided by RNS

The company news service from the London Stock Exchange

END

FR EAXKNAFXSEFF

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