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
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