TIDMTAIH
RNS Number : 8776C
Taihua Plc
30 June 2016
TAIHUA PLC
("Taihua" or the "Company")
Annual Report and Accounts for the period ended 31 December
2015
CHAIRMAN'S STATEMENT
2015 was a challenging year with a significant, weather induced,
reduction in Forsythia harvest and no opportunity to increase sales
of APIs or TCMs as the Company worked towards GMP
reaccreditation.
The Board of Directors have made two one-off adjustments to the
financial statements that need explaining so that the underlying
performance of the business can be understood.
Firstly, the Bad Debt provision has been increased by RMB24.369m
from RMB3.4m to RMB27.369m. Following a review of the
recoverability of trade receivables by the Board of Directors,
together with the current economic slowdown in China, the Directors
have decided to revise Group's provision policy and make full
provision against trade receivables which are outstanding more than
12 months. However, the Directors will make every effort to recover
the cash from its customers.
Secondly, the Board of Directors have decided to cease
production of Paclitaxel for foreseeable future, following a review
of the market conditions and risks concluded at the end of June
2016. Competition from semi-synthetic Paclitaxel has driven the
market price down to RMB 280/gram which is lower than Taihua's
costs of extraction. As a consequence, this has resulted in a full
impairment for the plantation of Biological Asset, amounting to
RMB4.387m. The ability to extract Paclitaxel might be retained so
that should market conditions improve extraction can
recommence.
Key points 2015 2014
RMB'000 RMB'000
Sales 34,229 50,948
Profit/(Loss) Before
tax (30,648) 4,502
Increase in Bad
Debt Provision 24,369 (203)
Biological Asset
write off 4,387 (388)
Underlying Profit/(Loss)
before Tax (1,892) 3,911
Sales Segmental 2015 2014 2013
Analysis
RMB'000 RMB'000 RMB'000
Forsythia 26,670 41,845 41,838
TCMs 4,592 4,870 5,667
APIs 2,967 4,233 4,797
----------------- -------- -------- --------
Total 34,229 50,948 52,302
Forsythia
The tonnage in 2015 fell to 704 tonnes (2014: 1,146 tonnes). The
reason was the particularly poor weather in the plantation area.
The plantation is at, on average, 1,200 m altitude and as such is
susceptible to spring snows and frosts during the flowering period.
The average selling price excluding sales tax was RMB 38.9/kg
(2014: RMB 37.8/kg).
APIs
As already mentioned, the Company has now ceased to extract
Paclitaxel. However, the production of Pacliataxel and
Homoharringtonine had been suspended from August 2015 pending the
Company's GMP reaccreditation, which was issued in January 2016.
Now that this has been awarded the Directors do not believe there
are any regulatory impediments to recovering lost Homoharringtonine
market share.
TCMs
Progress in developing wider distribution of TCMs, particularly
Bian Tong Pian, had been prevented by the GMP reaccreditation
process. That has been achieved so Taihua is actively seeking
distribution of its TCM products.
Bian Tong Pian sales totalled 193,000 boxes (2014: 191,600
boxes). The average price per box fell to RMB11.15 (2014:
RMB13.30). This was due to the Chinese government introducing a
bidding system for many healthcare products to reduce prices and
improve transparency.
Balance Sheet
Cash fell to RMB8.354m (2014: RMB46.876m). This was in the main
due to the capital investment necessary to meet the requirements
for GMP reaccreditation.
2015 has been a challenging year and the Board of Directors wish
to place on record their appreciation of the patience shown by
shareholders. The reaccreditation of GMP was a key milestone for
Taihua and it is hoped that the removal of this impediment to
growth will allow the company to return to a more stable and
successful environment
Qualified Opinion by Auditors
The Board reports, regrettably, that the auditors have given a
qualified opinion in this annual report and accounts. This is
because the auditors have been unable to confirm a significant
trade receivable of RMB9.69million (net of a provision of
RMB6.06million) with one customer, Xi'an Tianyi Bio-Technology Co.,
Ltd. ("Xi'an Tianyi").
The Company understands that the transaction between Taihua
Natural Plant Pharmaceutical Co., Ltd. ("TNP"), the trading
subsidiary of the Group and Xi'an Tianyi was undertaken on behalf
of a third party, Xi'an Weike Bio-Technology Co., Ltd. ("Xi'an
Weike"). Xi'an Weike intended to purchase product from TNP,
however, due to a lack of permit to acquire such product, Xi'an
Weike transacted with TNP in the name of Xi'an Tianyi who has such
a permit. The directors have confirmed the existence of the
contractual arrangement but Xi'an Tianyi state they cannot provide
further comfort on the trade, as required by the auditors, due to
the arrangement with Xi'an Weike.
As a consequence of this process, the Board have decided to
terminate all future business cooperation with either Xi'an Weike
or Xi'an Tianyi from 30 June 2016. In addition, the Board can
assure the shareholders that they will take all necessary steps to
recover the trade receivables from Xi'an Tianyi and Xi'an Weike and
shall update shareholders of the progress, in due course. The Board
will ensure the relevant internal control procedures will be
updated to avoid the occurrence of similar incident.
Notice of AGM and Dispatch of Accounts
The Company confirms that it has today dispatched a noticeto
shareholder to convene an Annual General Meeting at Dentons UKMEA
LLP, One Fleet Place, London EC4M 7WS on 12 August 2016 at 11
am.
The Annual Report and Accounts have been posted to shareholders
today and will be available from the Company's website
www.taihplc.com in the meantime.
Nicholas Lyth
Chairman
30 June 2016
Enquiries:
Nicholas Lyth, Taihua plc 07769 906 686
Katy Mitchell, WH Ireland Limited +44 161 832 2174
STRATEGIC REPORT
The Directors present their Strategic Report for the year ended
31 December 2015.
Principal Activity and strategy
The principal activities of the Group are the development,
production, distribution and sale of Traditional Chinese Medicine
("TCM") products. In addition, the Group also develops,
manufactures and distributes active pharmaceutical ingredients,
namely paclitaxel and homoharringtonine, predominately for the use
in the treatment of cancer. However, due to the paclitaxel current
market price being lower than its production costs, the Group
decided to cease production of paclitaxel for the foreseeable
future.
The principal activity of the Company is that of a holding
company.
Review of the business and future prospects
Business Review
A review of the Group's trading for the year ended 31 December
2015, development and prospects are provided in the Chairman's
Statement.
Risks
The principal risks to the Group are the risk of disease or an
event (such as forest fire) that could be detrimental to the supply
or quality of the raw material on which Taihua is dependent; the
limitation in the supply of Homoharringtonine and the risk that
Taihua may be unable to retain its Good Manufacturing Practice
("GMP"), Drug Production Permit ("DPP") and/or other licences; or,
in the medium to long term, to develop new markets. The Group seeks
to mitigate these and other risks where appropriate, including
financial risks such as bad debts or any exposure to foreign
currency risk.
Funding position
The Directors confirm that it is appropriate for the financial
statements to have been drawn up on the going concern basis. In
reaching this conclusion the Directors have taken into account all
relevant matters of which they are aware and have considered a
future period of at least one year from the date on which the
financial statements were approved.
Financial Instruments
The Group does not actively use financial instruments as part of
its financial risk management. It is exposed to the usual credit
risk and cash flow risk associated with selling on credit and
manages this through credit control procedures.
Hedging
The Group makes no use of forward currency contracts, other
financial derivatives or hedging.
Interest rate risk
The Group finances its operations through a combination of
equity and borrowings. The Group does not have an interest rate
policy in isolation but regularly reviews the interest rates being
charged on borrowings and assesses alternative sources of
borrowings and other methods of finance.
Liquidity risk
The principal policy of the Group in managing liquidity risk is
to align the anticipated sales revenue with the cash flows of its
financial assets and liabilities.
The Group's financial risks are disclosed in more detail in Note
29.
DIRECTORS
Mr. Nicholas James Lyth, aged 48, Non-Executive Chairman
Nicholas is an experienced finance professional having spent
many years as a financial director of UK companies and having lived
and worked in China. Nicholas speaks and writes Mandarin. Nicholas
is currently a director of NL Consulting Limited. In the past five
years Nicholas has been a director of Avon Equipment Limited, Belle
Engineering (Sheen) Limited, Belle Holdings Limited, Defiant
Diamond Tools Limited, Errut Products Limited, Panther
International Engineering Limited. Nicholas is a qualified
accountant.
Mr Yunwu Liu, aged 56, Chief Executive Officer
Mr Liu is a director, the general manager and one of the
founders of Taihua Natural Plant Pharmaceutical Co. Limited (the
wholly owned subsidiary of Taihua) ("TNP"). He obtained a diploma
in economics and management from Shaanxi Economic Management
College in 1992 and completed an EMBA course in Northwest
University, China. In 1987, Mr Liu founded Luonan Natural Resources
Research Factory. In 1993, Mr Liu incorporated TNP. Mr Liu has
nearly 20 years' experience in the natural medicine material
industry. He was also granted the honour of "National Youth Leader
of Spark Program" (sponsored by the Chinese Government) in the
China Spark Program by the China Science and Technology Committee,
which is the highest level of award granted in this area.
Mr Chun Chai, aged 63, Executive Director and Vice General
Manager
Mr Chai started his career in the pharmaceutical industry in
1968 as an assistant in the Shaanxi Province Traditional Chinese
Medicine Research Institute. He worked at the Institute within the
purchasing department until 1985 when he established Taiyou
Development Company Limited and in 1994 he founded Jihao Company
Limited which specialised in international trading. In 1993, he
established TNP along with Mr Liu and since then he has worked on a
full time basis on the development of TNP. Mr Chai is the vice
general manager of TNP in charge of raw material medicine
sales.
Mr Zhaoyang Ma, aged 48, Executive Director
Mr Ma has a bachelor's degree in engineering, a master's degree
in management and a PhD degree. He worked at Xian Aeronautics
Computing Technology Institute from 1990 to 1994. He became an
associate professor at Northwest Polytechnic University in 1997.
Professor Ma is the chairman of Shaanxi Dewei Investment Consulting
Co., Ltd. and the independent director of Xi'an Jiefand Group Joint
Stock Co., Ltd., a listed company in PRC.
Mr. Chong Cao, aged 45, Non-Executive Director
Chong is a counsel at Dentons, Shenyang Office. He is also the
partner at Athena Solicitors LLP. From 2013 to 2015, he was the
Head of China Practice at DWF LLP. From August 2010 to December
2014, Chong worked as a corporate partner at Gateley LLP. From
October 2005 to July 2010 Chong worked as the Chinese legal
consultant to Halliwells LLP advising on numerous cross border AIM
transactions involving Chinese companies. Prior to joining
Halliwells LLP, Chong worked at Wen & Partners, a law firm in
Dalian, Liaoning Province, China, dealing with legal affairs
relating to international trade and investment. Chong is a fluent
Mandarin and English speaker.
Mr Mingjian Yin, aged 33, Executive Director
Mr Yin has been working in the textile industry in China since
July 2007 when he worked as an assistant to the sales manager at
Beijing JinsanhuanTextile Import & Export Co., Ltd. ("Beijing
Jinsanhuan"). In March 2009, he was promoted to the vice general
manager of Beijing Jinsanhuan. Mr Yin became a director of Beijing
Jinsanhuan in February 2013 responsible for the development and
maintenance of sales network and sourcing of investment
opportunities. He is also the general manager of Beijing Jiasheng
Xinrui Cashmere Products Co., Ltd. and he has been in this post
since April 2012. Mr Yin obtained a bachelor's degree in business
administration from Hebei Agricultural University in China.
DIRECTORS' REPORT
___________________________________________________________________________________
The Directors present their Directors' report together with the
audited accounts of the Group ("Taihua plc and its subsidiary
undertakings") and the Company ("Taihua plc") for the year ended 31
December 2015.
Results and dividends
The loss of the Group for the year ended 31 December 2015 was
RMB30.65m (2014: profit RMB4.50m), of which the amount attributable
to the equity holders of the Group, was RMB30.85m (2014: profit
RMB4.98m).
The Directors do not recommend any distribution by way of a
dividend for the year ended 31 December 2015.
The Board
The following Directors served during the year ended 31 December
2015.
Mr Nicholas James Lyth - Non-Executive Chairman
Mr Yunwu Liu - Chief Executive officer
Mr Zhaoyang Ma - Executive Director
Mr Chun Chai - Executive Director
Mr Chong Cao - Non-Executive Director
Mr Mingjian Yin - Executive Director
In accordance with the Company's Articles of Association, each
of Mr Nicholas James Lyth and Mr Chong Cao will retire at the
Group's AGM and will offer himself for re-election for this
year.
Directors' interests in shares
The interests of the Directors (including those of their
immediate families) in the 1p ordinary share capital of the Company
as at 31 December 2015 were:
Percentage
Number of of
Ordinary ordinary
share share
Nicholas Lyth* 340,000 0.42%
Yunwu Liu 11,008,650 13.47%
Zhaoyang Ma - -
Chun Chai 5,504,325 6.73%
Mingjian Yin 23,703,826 29.00%
Chong Cao - -
* Held through Chase Nominees Limited
Directors' interests in the Group's share option schemes as at
31 December 2015 were as follows:
No. of No. of Exercise
option option price
as at as at per
1 January Granted Lapsed 31 December share Exercisable
Director in in 2015 (GBP) to
2015 2015 2015 From
Nicholas 31 August 30 August
Lyth 816,473 - - 816,473 0.07 2009 2019
Yunwu - - - - -
Liu - -
Zhaoyang - - - - -
Ma - -
Chun Chai - - - - - - -
Mingjian - - - - -
Yin - -
Chong 31 August 30 August
Cao 816,473 - - 816,473 0.07 2009 2019
No options were exercised in the year.
The Remuneration Committee makes share option awards and options
are available to all employees of the Group. The exercise price of
the options and the associated vesting criteria are also determined
by the Remuneration Committee. The closing mid-market price of the
Group's shares at 31 December 2015 was 1.625p.
Directors' remuneration and service contracts
Gross salary Pension Total
Directors Year to Bonus Year Year to Year to
31 December to 31 December 31 December 31 December
2015 2015 2015 2015
RMB RMB RMB RMB
Nicholas
Lyth 190,019 - - 190,019
Yunwu Liu 108,000 - 31,860 139,800
Zhaoyang
Ma 108,000 - 31,860 139,800
Chun Chai 108,000 - 31,860 139,800
Mingjian - - -
Yin -
Chong Cao 190,019 - - 190,019
-------------- ------------- ---------------- ------------- -------------
Substantial share interests
At 31 May 2016 the Group had been notified of the following
material interests, in addition to the Directors' holdings
identified above, which represented 3% or more of the issued share
capital of the Company:
Number of
Ordinary Percentage
shares Holdings
Tao Ji 5,652,574 6.92%
Botting Family Trust 5,625,151 6.89%
Gary Lyons 4,850,000 5.93%
Neubauer Family Trust 3,342,099 4.09%
Research and development
The Group's research and development efforts are focused on
developing new products and enhancing existing products to support
the requirements of current and prospective customers.
Share Capital
No changes to the Company's share capital during the year,
details are given in Note 24.
Charitable and political donations
No charitable or political donations were paid or accrued during
the year ended 31 December 2015.
Employees
The number of employees employed by the Group was 55 as at 31
December 2015. The Group continues to encourage employees to be
involved in the operation of the business and to present their
views and ideas on performance. There is daily contact between
management and staff at every level of the business to facilitate
the flow of information and positive ideas. The Group gives full
consideration to applications for employment from disabled persons
where a disabled person can adequately fulfil the requirements of
the job. Where existing employees become disabled, it is the
Group's policy, wherever practicable, to provide continuing
employment with appropriate training or redeployment where
necessary.
Payment to suppliers
It is the Group's policy to pay suppliers in accordance with the
terms and conditions agreed in advance. The Company is an
investment holding company and as such does not have significant
trade creditors and therefore creditor days have not been
calculated. For the Group the average time taken to pay suppliers
was 91 days (2014: 73 days).
Statement of Directors' Responsibilities
The directors are responsible for preparing the Directors'
report and the financial statements in accordance with applicable
law and regulations. Company law requires the directors to prepare
financial statements for each financial year. Under that law the
directors have elected to prepare the group and company financial
statements in accordance with International Financial Reporting
Standards (IFRSs) as adopted by the European Union. Under company
law the directors must not approve the financial statements unless
they are satisfied that they give a true and fair view of the state
of affairs of the group and company and of the profit or loss of
the group and company for that period. The directors are also
required to prepare financial statements in accordance with the
rules of the London Stock Exchange for companies trading securities
on the Alternative Investment Market.
In preparing these financial statements, the directors are
required to:
-- select suitable accounting policies and then apply them consistently;
-- make judgements and accounting estimates that are reasonable and prudent;
-- state whether they have been prepared in accordance with
IFRSs as adopted by the European Union, subject to any material
departures disclosed and explained in the financial statements;
and
-- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Group will continue
in business.
The directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Group's
transactions and disclose with reasonable accuracy at any time the
financial position of the Group and enable them to ensure that the
financial statements comply with the requirements of the Companies
Act 2006. They are also responsible for safeguarding the assets of
the company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
Website publication
The directors are responsible for ensuring the annual report and
the financial statements are made available on a website. Financial
statements are published on the Group's website in accordance with
legislation in the United Kingdom governing the preparation and
dissemination of financial statements, which may vary from
legislation in other jurisdictions. The maintenance and integrity
of the Group's website is the responsibility of the directors. The
directors' responsibility also extends to the ongoing integrity of
the financial statements contained therein.
Subsequent event
Events after the reporting period have been disclosed in Note
31.
Going concern
The financial statements have been prepared assuming the Group
will continue as a going concern.
During the year ended 31 December 2015, the Group made a loss of
RMB30.65milliom, which includes a provision on trade and other
receivables and payments in advance of RMB25.96million. At the
year-end date, the Group had net assets of RMB113.77million (2014:
RMB144.62million), of which RMB8.35million (2014: RMB46.88million)
was cash in bank with no restriction for use.
The Group has a cash balance of RMB14.9million as at 31 May
2016.
The Directors consider that the Group has adequate resources,
especially to obtain bank borrowings (normally 50% of the market
value of land and buildings) by giving bank security using Group's
buildings (net book value of RMB19.44million), to continue in
operational existence for the foreseeable future. However, there's
no guarantee on bank borrowings, together with the uncertainty of
the industry and economic slowdown in P.R. China, the operations of
the Group currently are relying on cash in bank and collection from
receivables, which gives uncertainty in the future going
concern.
The financial statements do not include the adjustments that
would result if the Group was unable to continue in operation.
Provision of information to auditor
Each of the persons who is a Director at the date of approval of
this report confirms that:
-- So far as the Director is aware, there is no relevant audit
information of which the Company and the Group's auditor is
unaware;
-- The Director has taken all the steps that he ought to have
taken as a Director in order to make himself aware of any relevant
audit information and to establish that the Company and the Group's
auditor is aware of that information.
Auditors
In accordance with Section 489 of the Companies Act 2006, a
resolution proposing that UHY Hacker Young be re-appointed as
auditors of the Company and that the Directors be authorised to fix
their remuneration will be put to the next Annual General
Meeting.
This report was approved by the board on 30 June 2016 and signed
on its behalf.
By order of the Board
Chong Cao
Director
30 June 2016
CORPORATE GOVERNANCE
As a Company listed on AIM, the Company is not governed by the
UK Code of Corporate Governance adopted by the London Stock
Exchange ('the Code'), but is required to operate principles of
good governance and best practice. Accordingly, the directors are
committed to the Code and believe that an effective system of
corporate governance supports the enhancement of shareholder value.
These principles have been in place since the Company's listing on
14 December 2006.
The Board includes two non-executive Directors.
The Directors have established an Audit Committee (the "Audit
Committee") and a Remuneration Committee (the "Remuneration
Committee") with formally delegated duties and responsibilities to
operate.
The Board
The Board is responsible to shareholders for the proper
management of the Company. The Non-Executive Director has a
particular responsibility to ensure that the strategies proposed by
the Executive Directors are fully considered. The Board has a
formal schedule of matters reserved to it and has discussions on a
frequent basis since its listing on the AIM Market. The Board is
responsible for overall strategy, reviewing management accounts,
approval of major capital expenditure projects and consideration of
significant financing matters.
Internal control
The Board meets formally on a regular basis to review issues
requiring formal discussion. All significant business decisions are
discussed and sanctioned by the Board.
The Board as a whole appoints new Directors.
The Board of Directors is responsible for the maintenance of the
Group's internal financial control and for reviewing its
effectiveness. There are inherent limitations in all systems of
internal financial control and, therefore, the systems adopted can
only provide reasonable, not absolute, assurance with respect to
the preparation of financial information and the safeguarding of
assets.
The Group operates a comprehensive budgeting, forecasting and
financial reporting system. Management accounts are promptly
prepared on a monthly basis and presented at Board meetings. Any
variances are examined in detail.
The Board has established control procedures for all key
financial areas of the business, which enable the Board to maintain
full and effective control. These controls include procedures for
seeking and obtaining approval for major transactions and controls
relating to the safeguarding of assets.
Relations with shareholders
The Board attaches great importance to maintain a good
relationship with shareholders. The Board regards the annual
general meeting as a good opportunity to communicate directly with
investors who are encouraged to make inquiries to officers of the
Company.
The Group encourages dialogue with all shareholders whether
private or institutional and responds quickly to all queries.
REMUNERATION COMMITTEE REPORT
The Directors have applied the principles of Good Corporate
Governance relating to the Directors' remuneration as described
below.
Remuneration Committee
The Remuneration Committee comprises Chong Cao and Nicholas
Lyth, both of whom are independent Non-Executive Directors of the
Company.
Pursuant to the terms of reference of the Remuneration
Committee, the Remuneration Committee shall, inter alia:
- ensure that the Executive Directors are fairly rewarded for
their individual contributions to the overall performance of the
Company;
- consider the remuneration packages of the Executive Directors
and any recommendations made by the Chief Executive Officer for
changes to their remuneration packages including in respect of
bonuses (including associated performance criteria), other
benefits, pension arrangements and other terms of their service
contracts and any other matters relating to the remuneration of or
terms of employment applicable to the Executive Directors that may
be referred to the Remuneration Committee by the Board;
- oversee and review all aspects of any share option schemes
adopted by the Company including the selection of eligible
Directors and other employees and the terms of any options
granted;
- demonstrate to the Company's shareholders that the
remuneration of the Executive Directors is set by an independent
committee of the Board; and
- consider and make recommendations to the Board about the
public disclosure of information about the Executive Directors'
remuneration packages and structures in addition to those required
by law or by the London Stock Exchange.
The Chairman of the Remuneration Committee formally reports to
the Board on its proceedings after each meeting on all matters
within its duties and responsibilities.
The Remuneration Committee is authorised to:
- investigate any activity within its terms of reference;
- seek any information it requires from any employee of the Company;
- assess the remuneration paid by other UK listed companies of a
similar size in any comparable industry sector and to assess
whether changes to the Executive Directors remuneration is
appropriate for the purpose of making their remuneration
competitive; and
- obtain, at the Company's expense, outside legal or other
independent professional advice and to secure the attendance of
such persons to meetings as it considers necessary and
appropriate.
Share Options
The Directors have established the Taihua Unapproved Option
Scheme.
The details of the unapproved share option awards during the
period under review are reflected within the Directors' Report.
Vesting of the share options awarded to Directors under the
Taihua Unapproved Share Option Scheme is not subject to performance
conditions.
Chong Cao
Chairman, Remuneration Committee
30 June 2016
AUDIT COMMITTEE REPORT
The Directors have applied the principles of good corporate
governance relating to external audit as described below.
Audit Committee
Audit Committee meetings are held as required. The Audit
Committee comprises Nicholas Lyth and Chong Cao, both of whom are
independent Non-Executive Directors of the Company. The Audit
Committee has unrestricted access to the Group's external auditors.
The Audit Committee meets twice in every year and any other time as
required by either the Chairman of the Audit Committee, or the
external auditors of the Company. In addition, the Audit Committee
meets with the external auditors of the Company (without any of the
executives attending) at least once a year.
Pursuant to the terms of reference of the Audit Committee, the
Audit Committee shall, inter alia:
- monitor the financial reporting and internal control principles of the Company;
- maintain appropriate relationships with the external auditor
including considering the appointment and remuneration of the
external auditors;
- review all financial results of the Company, including all
announcements in respect thereof before submission of the relevant
documents to the Board;
- review and discuss (where necessary) any issues and
recommendations of the external auditor including reviewing the
external auditor's management letter and management's response;
- consider all major findings of internal operational audit
reviews and management's response to ensure co-ordination between
the internal auditor and the external auditors; and
- review the Board's statement on internal reporting systems and
keep the effectiveness of such systems under review.
The Audit Committee is authorised to:
- investigate any activity within its terms of reference;
- seek any information it requires from any employee of the Company; and
- obtain, at the Company's expense, outside legal or other
independent professional advice and to secure the attendance of
such persons at meetings as it considers necessary and
appropriate.
Nicholas Lyth
Chairman, Audit Committee
30 June 2016
INDEPENT AUDITORS' REPORT
TO THE SHAREHOLDERS OF TAIHUA PLC
We have audited the financial statements of Taihua plc for the
year ended 31 December 2015 which comprise the Consolidated and
parent company statement of comprehensive income, the Consolidated
and parent company statements of financial position, the
Consolidated and parent company statements of changes in equity,
the Consolidated and parent company statements of cash flows and
the related notes. The financial reporting framework that has been
applied in their preparation is applicable law and International
Financial Reporting Standards (IFRSs) as adopted by the European
Union and, as regards the parent company financial statements, as
applied in accordance with the provisions of the Companies Act
2006.
This report is made solely to the company's members, as a body,
in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the
Company's members those matters we are required to state to them in
an auditor's report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to
anyone other than the company and the company's members as a body,
for our audit work, for this report, or for the opinions we have
formed.
Respective responsibilities of Directors and Auditors
As explained more fully in the Statement of responsibilities of
those charged with governance in the Directors' Report, the
Directors are responsible for the preparation of the financial
statements and for being satisfied that they give a true and fair
view. Our responsibility is to audit the financial statements in
accordance with relevant legal and regulatory requirements and
International Standards on Auditing (UK and Ireland). Those
standards require us to comply with the Auditing Practices Board's
(APB's) Ethical Standards for Auditors.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements
is provided on the APB's website at
www.frc.org.uk/auditscopeukprivate
Basis for Qualified Opinion
With respect trade receivables of RMB41.71million, the audit
evidence available to us was limited because we have not been able
to confirm a significant balance of RMB9.69million (net of a
provision of RMB6.06million) directly with the customer, nor have
we been able to carry out alternative procedures within our audit
time schedule. Therefore, we were unable to obtain sufficient
appropriate audit evidence regarding the existence and valuation of
these trade receivables.
Qualified Opinion
In our opinion, except for the possible effects of the matter
described in the Basis for Qualified Opinion paragraph, the
financial statements:
-- give a true and fair view of the state of the Group's and of
the parent company affairs as at 31 December 2015 and of the
Group's and the parent company's loss for the year then ended;
-- have been properly prepared in accordance with IFRSs as adopted by the European Union; and
-- have been prepared in accordance with the requirements of the Companies Act 2006.
Opinion on other matters prescribed by the Companies Act
2006
In our opinion the information given in the Directors' Report
and the Strategic Report for the financial year for which the
financial statements are prepared is consistent with the financial
statements.
Matters on which we are required to report by exception
In respect solely of the limitation of our work relating to
trade receivables, described above:
-- we have not received all the information and explanations we
require for our audit; and
-- we were unable to determine whether adequate accounting records had been kept.
We have nothing to report in respect of the following matters
where the Companies Act 2006 requires us to report to you if, in
our opinion:
-- returns adequate for our audit have not been received from
branches not visited by us; or
-- the Group financial statements are not in agreement with the
accounting records and returns; or
-- certain disclosures of directors' remuneration specified by law are not made.
Emphasis of matter - Going concern
In forming our opinion on the financial statements, which is
qualified as described above, we have considered the adequacy of
the disclosure made in Directors' report and Note 2(c) to the
financial statements concerning the company's ability to continue
as a going concern. The Group incurred a net loss of
RMB30.65million during the year ended 31 December 2015. The Group's
operation is currently relying on cash in bank, collection from
receivables, and potential bank borrowings. These conditions,
together with the other matters explained in Note 2(c) to the
financial statements, indicate the existence of a material
uncertainty which may cast significant doubt about the group's
ability to continue as a going concern. The financial statements do
not include the adjustments that would result if the Group was
unable to continue in operation.
Julie Wilson (Senior Statutory Auditor)
For and on behalf of UHY Hacker Young
Chartered Accountants
Statutory Auditor
Quadrant House
4 Thomas More Square
London E1W 1YW
30 June 2016
TAIHUA PLC
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE
INCOME
Note 2015 2014
RMB'000 RMB'000
Revenue 5 34,229 50,948
Cost of sales (27,363) (37,336)
------- -------
Gross profit 6,866 13,612
Impairment loss on biological
assets 12 (4,387) 388
Other income 5 1,499 1,728
Selling expenses (4,275) (6,118)
General and administrative
expenses (29,867) (3,026)
------- -------
(Loss)/profit before income
tax 6 (30,164) 6,584
Income tax expense 7(a) (484) (2,082)
(Loss)/profit for the year (30,648) 4,502
------- -------
Other comprehensive income
:-
Items that may be classified
subsequently to profit or loss
:-
Exchange differences arising
on translation of
financial statements of foreign
operations (204 ) 473
------- -------
Other comprehensive (loss)/income
for the year (204) 473
Total comprehensive (loss)/income
for the year (30,852) 4,975
======= =======
(Loss)/profit attributable
to :
Equity holders of the parent
company (30,648) 4,502
======= =======
Total comprehensive (loss)/income
attributable to :
Equity holders of the parent
company (30,852) 4,975
======= =======
(Loss)/earnings per share :
Basic (RMB per share) 8 (0.375) 0.055
======= =======
Diluted (RMB per share) (0.375) 0.055
======= =======
TAIHUA PLC
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Note 2015 2014
ASSETS RMB'000 RMB'000
Non-current assets
Property, plant and equipment 9 23,068 2,575
Prepaid lease payments 10 47,550 50,500
Land use rights 11 1,331 1,369
Biological assets 12 - 4,387
Intangible assets 13 - -
Deferred tax assets 7(b) - 306
------- -------
71,949 59,137
------- -------
Current assets
Inventories 14 14,449 10,592
Trade receivables 15 41,319 54,722
Other receivables 16 50 465
Deposits and prepayments 17 3,856 2,715
Cash and cash equivalents 19 8,354 46,876
------- -------
68,028 115,370
------- -------
TOTAL ASSETS 139,977 174,507
------- -------
LIABILITIES
Current liabilities
Trade payables 20 2,012 1,281
Receipts in advance 4,167 987
Accrued expenses and other
payables 21 10,788 15,814
Amount due to a related company 18 1,109 1,107
Amount due to a shareholder 22 7,468 8,001
Amounts due to directors 23 598 26
Income tax payable 65 2,669
------- -------
26,207 29,885
------- -------
Net current assets 41,821 85,485
------- -------
NET ASSETS 113,770 144,622
======= =======
EQUITY
Capital and reserves attributable
to
Equity holders of the company
Share capital 24 12,357 12,357
Other reserves 25 19,417 19,621
Retained profits 81,996 112,644
-------
TOTAL EQUITY 113,770 144,622
======= =======
The consolidated financial statements were approved and
authorised for issue by the Board of Directors on 30 June 2016.
.................................
..................................
Mr Yunwu Liu Mr Mingjian Yin
Director Director
TAIHUA PLC
CONSOLIDATED STATEMENT OF CHANGES in EQUITY
Foreign
Merger Reverse General Enterprise currency Share
Share relief Share acquisition reserve expansion translation options Retained
capital reserve premium reserve fund fund reserve reserve profits Total
RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000
At 1 January
2014 12,357 64,364 4,783 (63,408) 9,297 4,648 (1,030) 494 108,142 139,647
Profit for the
year - - - - - - - - 4,502 4,502
Other
comprehensive
income - - - - - - 473 - - 473
------- ------- ------- ----------- ------- ---------- ----------- ------- -------- -------
Total
comprehensive
income
for the year - - - - - - 473 - 4,502 4,975
At 31 December
2014 12,357 64,364 4,783 (63,408) 9,297 4,648 (557) 494 112,644 144,622
======= ======= ======= =========== ======= ========== =========== ======= ======== =======
At 1 January
2015 12,357 64,364 4,783 (63,408) 9,297 4,648 (557) 494 112,644 144,622
Loss for the
year - - - - - - - - (30,648) (30,648)
Other
comprehensive
loss - - - - - - (204) - - (204)
------- ------- ------- ----------- ------- ---------- ----------- ------- -------- -------
Total
comprehensive
loss
for the year - - - - - - (204) - (30,648) (30,852)
At 31 December
2015 12,357 64,364 4,783 (63,408) 9,297 4,648 (761) 494 81,996 113,770
======= ======= ======= =========== ======= ========== =========== ======= ======== =======
CONSOLIDATED STATEMENT OF CASH FLOWS
2015 2014
RMB'000 RMB'000
Cash flows from operating activities
Operating (loss)/profit (30,164) 6,584
Adjustments for :-
Increase in/(reversal of) allowance
for bad debts 25,964 (188)
Amortisation of prepaid lease payments 2,950 2,950
Amortisation of land use rights 38 39
Depreciation 282 261
Loss/(gain) arising on revaluation
of biological assets 4,387 (388)
Provision for impairment of property,
plant and equipment 510 -
Change in fair value of harvested
products - 564
Interest income (1,465) (1,540)
Provision for write-down of inventories 528 1,908
Operating cash flows before working
capital changes 3,030 10,190
(Increase)/decrease in inventories (4,385) (2,580)
(Increase)/decrease in trade receivables (10,966) 3,520
(Increase)/decrease in other receivables 166 234
(Increase)/decrease in deposits
and prepayments (2,487) 76
Increase/(decrease) in trade payables 731 (955)
Increase/(decrease) in receipts
in advance 3,180 805
Increase/(decrease) in accrued
expenses and other payables (5,026) 1,051
Increase/(decrease) in amount due
to a related company 2 -
Increase/(decrease) in amount due
to a shareholder (533) 701
Increase/(decrease) in amounts
due to directors 572 -
Cash (used in)/generated from operations (15,716) 13,042
Interest received 1,465 1,540
Profits tax paid (2,782) (1,901)
------- -------
Net cash (used in)/generated from
operating activities (17,033) 12,681
------- -------
Cash flows from investing activity
Purchase of property, plant and
equipment (21,285) (790)
Net cash used in investing activity (21,285) (790)
------- -------
Net (decrease)/increase in cash
and cash equivalents (38,318) 11,891
Cash and cash equivalents as at
1 January 46,876 34,512
Effect of foreign exchange change (204) 473
Cash and cash equivalents as at
31 December 8,354 46,876
======= =======
Analysis of the balances of cash
and cash equivalents
Cash and bank balances 8,354 46,876
======= =======
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL INFORMATION
Taihua Plc (the "Company") was incorporated and registered in
England and Wales on 29 August 2006 under the Companies Act 1985 as
a public company limited by shares with the name "China Natural
plc" with registered number 05918155. On 8 September 2006, the
Company changed its name to "Taihua plc". The address of the
registered office is 4 Harefield Place, St Albans, Hertfordshire
AL4 9JQ, U.K., and the principal place of business is Room 201,
Unit 3, No. 16 Zhong Hua, ShiJiCheng, FuZeYuan, 239 KeJi Road,
Hi-tech Zone, Xi An, 710077, People's Republic of China (the
"PRC").
The Company is an investment holding company and its
subsidiaries are principally engaged in the manufacturing and sales
of pharmaceutical products. The consolidated financial statements
are presented in Renminbi ("RMB"), the currency of the primary
economic environment in which the trading company operates (note
3(r)).
2. Basis of preparation
(a) Compliance with International Financial Reporting Standards
The consolidated financial statements of the Company and its
subsidiaries undertakings (the "Group") and the individual
financial statements of the Company have been prepared in
accordance with those International Financial Reporting Standards
and Interpretations in force ("IFRSs"), as adopted by the European
Union, and those parts of the Companies Act 2006 applicable to
companies preparing financial statements under IFRSs.
The preparation of these financial statements in conformity with
IFRSs also requires the use of certain critical accounting
estimates. It also requires management to exercise its judgement in
the process of applying the Group's accounting policies. The areas
involving a higher degree of judgement and complexity, or areas
where assumptions and estimates are significant to the financial
statements are disclosed in Note 4 "Critical accounting estimates
and judgements".
(b) Basis of consolidation
The consolidated financial statements include the financial
statements of the Company and all of its subsidiaries undertakings
as at 31 December 2015 using the acquisition method of accounting.
The results of subsidiary undertakings acquired or disposed of
during the year are included in the consolidated statement of
profit or loss from the effective date of acquisition or up to the
effective date of disposal, as appropriate.
All intra-group transactions, balances, income and expenses are
eliminated on consolidation.
The acquisition of China Natural Pharmaceutical Limited ("CNP")
by the Company on 26 September 2006 has been accounted for as a
reverse acquisition in accordance with IFRS 3 "Business
Combinations".
The Company became the legal parent of CNP by way of share
exchange agreement. According to the share exchange agreement, the
shareholders of CNP transferred the entire issued share capital of
CNP to the Company in consideration for 73,390,800 ordinary shares
of GBP 0.01 each. This business combination is regarded as a
reverse acquisition whereby CNP, the legal subsidiary, is the
acquirer and has the power to govern the financial and operating
policies of the legal parent so as to obtain benefits from its
activities.
(c) Going concern
The financial statements have been prepared assuming the Group
will continue as a going concern.
During the year ended 31 December 2015, the Group made a loss of
RMB30.65milliom, which includes a provision on trade and other
receivables and payments in advance of RMB25.96million. At the
year-end date, the Group had net assets of RMB113.77million (2014:
RMB144.62million), of which RMB8.35million (2014: RMB46.88million)
was cash in bank with no restriction for use.
The Group has a cash balance of RMB14.9million at 31 May
2016.
The Directors consider that the Group has adequate resources,
including the potential to obtain bank borrowings (normally
available to the extent of 50% of the market value of land and
buildings) by giving a bank security over the Group's buildings
(net book value of RMB19.44million), to continue in operational
existence for the foreseeable future. However, no arrangements have
been made to obtain bank borrowings, and taken together with the
uncertainty of the industry and economic slowdown in P.R. China,
this means that the operations of the Group currently are relying
on cash in bank and collection from receivables, which gives
uncertainty regarding the Group's ability to continue as a going
concern.
The financial statements do not include the adjustments that
would result if the Group was unable to continue in operation.
(d) International Financial Reporting Standards in issue but not yet effective
The Group has adopted all relevant standards effective for
accounting periods beginning on or after 1 January 2015. As at end
of the reporting year, the Group has not adopted the following
standard as it is either not effective or not applicable to the
Group's business.
Standards, amendments and interpretations (not yet endorsed by
EU at 8 June 2016)
- IFRS 9 Financial Instruments (July 2014)
- IFRS 14 Regulatory Deferral Accounts (January 2014)
- IFRS 15 Revenue from Contracts with Customers (May 2014)
including amendments to IFRS 15: Effective date of IFRS 15
(September 2015)
- IFRS 16 Lease (January 2016)
- Amendments to IFRS 10, IFRS 12 and IAS 28: Investment Entities
- Applying the Consolidation Exception (December 2014)
- Amendments to IFRS10 and IAS 28: Sales or Contribution of
Assets between an Investor and its Associate or Joint Venture
(September 2014)
- Amendments to IAS 12: Recognition of Deferred Tax Assets for
Unrealised Losses (January 2016)
- Amendments to IAS 7: Disclosure Initiative (January 2016)
- Clarifications to IFRS 15 Revenue from Contracts with Customers (April 2016)
- Amendments to IAS 27: Equity Method in Separate Financial
Statements (August 2014) - EU effective date 1 January 2016
- Amendments to IAS 1: Disclosure Initiative (December 2014) -
EU effective date 1 January 2016
- Annual Improvements to IFRSs 2012-2014 Cycle (September 2014)
- EU effective date 1 January 2016
- Amendments to IAS 16 and IAS 38: Clarification of Acceptable
Methods of Depreciation and Amortisation (May 2014) - EU effective
date 1 January 2016
- Amendments to IFRS 11: Accounting for Acquisitions of
Interests in Joint Operations (May 2014) - EU effective date 1
January 2016
- Amendments to IAS 16 and IAS 41: Bearer Plants (Jun 2014) - EU
effective date 1 January 2016
(d) International Financial Reporting Standards in issue but not yet effective (cont'd)
There are no other standards, amendments and interpretations in
issue but not yet adopted that the directors anticipate will have
material effect on the reported income or net assets of the
Group.
3. SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies adopted in the preparation
of these financial statements are set out below. These policies
have been consistently applied to all the years presented, unless
otherwise stated.
(a) Subsidiaries
Subsidiaries are entities controlled by the Group. The Group
controls an entity when it is exposed, or has rights, to variable
returns from its involvement with the entity and has the ability to
affect those returns through its power over the entity. When
assessing whether the Group has power, only substantive rights
(held by the Group and other parties) are considered.
Details of the subsidiaries of the Company at 31 December 2015
are as follows:
Percentage
of equity
holding
held Proportion
by the of voting
Company power held
Place
Name of of Registered Directly Indirectly Principal
subsidiary establishment capital % % % activities
China
Natural
Pharmaceutical Intermediate
Limited holding
("CNP") BVI US$1,000 100 - 100 company
Taihua
Natural
Plant Production
Pharmaceutical and sales
Company of
Limited pharmaceutical
("TNP") The PRC HK$10,500,000 - 100 100 drugs
(b) Revenue recognition
Revenue from sales of goods is recognised when the significant
risks and rewards of ownership of goods have been transferred to
the buyer and measured at the fair value of the consideration
received or receivable. Where a period of extended credit is given
such that the time value of money is material the amounts
receivable are discounted using prevailing market interest rates.
The unwinding of this discount is recognised as interest on trade
receivables and presented within other revenue.
Interest income is recognised on an effective interest
basis.
(c) Segment reporting
Operating segments, and the amounts of each segment item
reported in the financial statements, are identified from the
financial information provided regularly to the Group's most senior
executive management for the purposes of allocating resources to,
and assessing the performance of, the Group's various lines of
business and geographical locations.
Individually material operating segments are not aggregated for
financial reporting purposes unless the segments have similar
economic characteristics and are similar in respect of the nature
of products and services, the nature of production processes, the
type or class of customers, the methods used to distribute the
products or provide the services, and the nature of the regulatory
environment.
(d) Property, plant and equipment
Property, plant and equipment are stated at cost less
accumulated depreciation and impairment losses.
Depreciation of property, plant and equipment is calculated on
the straight-line basis to write off the cost of each asset to its
estimated residual value over its estimated useful life. The
estimated useful lives of property, plant and equipment are as
follows:
Buildings 20 - 40 years
Plant and machinery 5 - 8 years
Furniture, fixtures and equipment 5 - 10 years
Motor vehicles 5 years
Construction in progress represents property, plant and
equipment under construction or pending installation, and is stated
at cost less impairment losses. The cost of self-constructed items
of property, plant and equipment includes the cost of materials,
direct labour, the initial estimate, where relevant, of the costs
of dismantling and removing the items and restoring the site on
which they are located, and an appropriate proportion of production
overheads and borrowing costs.
Capitalisation of these costs ceases and the construction in
progress is transferred to property, plant and equipment when the
asset is substantially completed and ready for its intended
use.
No depreciation is provided in respect of construction in
progress until it is substantially completed and ready for its
intended use.
(e) Land use rights
Land use rights represent operating lease payments paid to the
PRC government authorities and a local cooperative for rights of 20
to 60 years.
Land use rights are stated at cost less accumulated amortisation
and impairment losses. Land use rights are amortised using the
straight-line basis over the unexpired period of the rights.
(f) Impairment of assets
Where an indication of impairment exists, or when annual
impairment testing for an asset is required, recoverable amount is
estimated. The recoverable amount is calculated as the higher of
the asset's or cash-generating unit's value in use and its fair
value less costs to sell, and is determined for an individual
asset, unless the asset does not generate cash inflows that are
largely independent of those from other assets or groups of assets,
in which case, recoverable amount is determined for the
cash-generating unit to which the asset belongs.
An impairment loss is recognised if the carrying amount of an
asset exceeds its recoverable amount. 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. An impairment loss is charged to profit or loss in the
period in which it arises.
(g) Biological assets
A biological asset is defined as a living plant managed by an
enterprise which is involved in the agricultural activity of the
transformation of biological assets for sale, into agricultural
produce, or into additional biological assets.
The fair values of Chinese Yew tree biological assets are based
on the present value of expected net cash flows from the trees
discounted at a current market-determined pre-tax rate (the
"Valuation Methodology").
In the absence of an active open market, self-bred seedlings are
stated at cost at the end of the reporting period and will be
transferred to the category of infant trees upon transfer from the
nursery to the plantation at their carrying value.
A gain or loss arising on initial recognition of biological
assets at fair value less estimated harvesting and initial
processing costs is recognised in profit or loss.
Agricultural produce harvested from the Group's biological
assets is transferred to inventories at its deemed cost. The fair
value of agricultural produce is based on market prices of Chinese
Yew output from third party suppliers.
The biological assets growing on land that is occupied under an
operating lease should be considered as biological assets where
such living plant have a productive life that falls within the
length of the operating leases. Accordingly shorter life plants
cultivated on land utilised in accordance with an operating lease,
are recognised as biological assets, and carried at fair value.
(h) Intangible assets
Intangible assets are stated in the consolidated statement of
financial position at cost less accumulated amortisation and any
impairment losses (see note 3(f)).
Amortisation of intangible assets is charged to profit or loss
on a straight-line basis over the assets' estimated useful lives
unless such lives are indefinite. Intangible assets represent
non-patented technical know-how, which are amortised over their
estimated useful lives.
(i) Inventories
Inventories are stated at the lower of cost and net realisable
value. Cost is determined on the weighted average basis and, in the
case of work in progress and finished goods, cost comprises direct
materials, direct labour, and an appropriate proportion of
overheads.
Net realisable value is based on estimated selling price less
all further costs expected to be incurred to completion and
disposal.
(j) Trade and other receivables
Trade receivables are measured at amortised cost using the
effective interest method less allowances for impairments in
respect of doubtful debts. An estimate for doubtful debts is made
when there is objective evidence of impairment.
Other receivables, deposits and prepayments, and amounts due
from related companies are recognised and carried at cost less
allowance for any uncollectible amounts.
(k) Trade and other payables
Liabilities for trade and other payables which are normally
settled on credit term of 180 days are carried at cost which is the
fair value of the consideration to be paid in the future for goods
and services received, whether or not billed to the Group.
Trade and other payables are not discounted as the time value of
money in respect of these liabilities is not considered
material.
(l) Provisions
A provision is recognised when a present obligation (legal or
constructive) has arisen as a result of a past event and it is
probable that an outflow of resources embodying economic benefits
will be required to settle the obligation, provided that a reliable
estimate can be made of the amount of the obligation.
When the effect of discounting is material, the amount
recognised for a provision is the present value at the end of the
reporting period of the future expenditure expected to be required
to settle the obligation. The increase in the discounted present
value amount arising from the passage of time is included in
finance costs in profit or loss.
(m) Loans and borrowings
All loans and borrowings, which are interest-bearing, are
initially recognised at cost, being the fair value of the
consideration received net of issue costs associated with
borrowing, and are subsequently measured at amortised cost using
the effective interest rate method. Amortised cost is calculated by
taking into account any issue costs, and any discount or premium on
settlement.
Gains and losses are recognised in net profit or loss when
liabilities are derecognised, as well as through the amortisation
process.
(n) Borrowing costs
Borrowing costs directly attributable to the acquisition,
construction or production of qualifying assets (that is, assets
that necessarily take a substantial period of time to get ready for
their intended use), are capitalised as part of the cost of those
assets. Capitalisation of such borrowing costs ceases when the
assets are substantially ready for their intended use.
Other borrowing costs are recognised as expenses in the period
in which they are incurred.
(o) Operating leases
Leases where substantially all the rewards and risks of
ownership of asset remain with the lessor are accounted for as
operating leases. Rentals applicable to such operating leases are
charged or credited to profit or loss on a straight-line basis over
the lease terms.
(p) Research and development costs
Research and development costs are expensed as incurred.
An intangible asset would be recognised for certain development
expenditure if applicable conditions were met, but to date all such
expenditure has been expensed as incurred.
(q) Retirement benefits
Obligatory retirement benefits in the form of contribution under
a defined contribution retirement schedule administered by local
government agencies are charged to profit or loss as incurred.
(r) Foreign currency translation
The functional currency and the presentation currency of the
Company are GBP and RMB respectively.
The functional currency of TNP is Renminbi ("RMB"), and the
audited financial statements of TNP have been drawn up in RMB. As
sales and purchases are denominated primarily in RMB and receipts
from operations are usually retained in RMB, the Directors are of
the opinion that RMB reflects the economic substance of the
underlying events and circumstances relevant to the Group. Monetary
assets and liabilities maintained in currencies other than RMB are
translated into RMB at the approximate rates of exchange ruling at
the end of the reporting period, differences on translation of
monetary assets and liabilities are recognised in profit or loss.
Transactions in currencies other than RMB are translated at rates
ruling on the transaction dates.
For the purposes of presenting the consolidated financial
statements, the assets and liabilities of the Company and CNP, the
Group's foreign operations, are translated into the presentation
currency of the Group (i.e. RMB) at the rate of exchange prevailing
at the end of the reporting period, and their income and expenses
are translated at the average exchange rates for the year, unless
exchange rates fluctuate significantly during the period, in which
case, the exchange rates prevailing at the dates of transactions
are used. Exchange differences arising, if any, are recognised in
other comprehensive income and accumulated as a separate component
of equity (the foreign currency translation reserve). Such exchange
differences are recognised in profit or loss in the period in which
the foreign operation is disposed of.
The financial statements of the Company and CNP have been
translated from GBP and HKD to RMB at the following exchange
rates:
Year-end rates Average rates
31 December 2015 GBP1 = RMB9.6076 GBP1 = RMB9.5020
HKD1 = RMB0.8372 HKD1 = RMB0.8020
(s) Income tax
Income tax comprises current and deferred tax. Current income
tax is calculated based on the results for the year, adjusted for
items which are not assessable or are disallowed.
Deferred tax is provided, using the liability method, on all
temporary differences at the end of the reporting period between
the tax bases of assets and liabilities and their carrying amounts
for financial reporting purposes. Deferred tax assets and
liabilities are measured at the tax rates that are expected to
apply to the period when the asset is realised or the liability is
settled, based on tax rates that have been enacted or substantively
enacted at the end of the reporting period.
Deferred tax liabilities are recognised for all taxable
temporary differences. Deferred tax assets are recognised for all
deductible temporary differences, carry-forward of unused tax
assets and unused tax losses, to the extent that it is probable
that taxable profits will be available against which the deductible
temporary differences, carry-forward of unused tax assets and
unused tax losses can be utilised.
The Group does not recognise deferred tax liabilities, or
deferred tax assets, on temporary differences associated with
investments in subsidiaries where the parent company is able to
control the timing of the reversal of the temporary differences and
it is not considered probable that the temporary differences will
reverse in the foreseeable future.
(t) Share-based payments
The cost of granting share options and other share-based
remuneration to employees and Directors is recognised in profit or
loss on a straight-line basis over the vesting period, based on the
Group's estimate of shares that will eventually vest. These
share-based payments are measured at fair value at the date of
grant by use of the option pricing model known as the Black-Scholes
formula using assumptions deemed to be consistent with the price
which the incentive might have been worth if it was traded in the
open market.
For equity-settled transactions with non-employees, the costs
are recognised in profit or loss (or where they relate to issue
costs, taken against the share premium account if appropriate) with
measurement normally based on the fair value of goods or services
received.
(u) Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and in hand,
demand deposits with banks, and short-term, highly liquid
investments that are readily convertible into known amounts of cash
and which are subject to insignificant risk of changes in
value.
(v) Related parties
For the purposes of these consolidated financial statements,
parties are considered to be related to the Group if the Group has
the ability, directly or indirectly, to control the party or
exercise significant influence over the party in making financial
and operating decisions, or vice versa, or where the Group and the
party are subject to common control or common significant
influence. Related parties may be individuals (being members of key
management personnel, significant shareholders and/or their close
family members) or other entities and include entities which are
under the significant influence of related parties of the Group
where those parties are individuals, and post-employment benefit
plans which are for the benefit of employees of the Group or of any
entity that is a related party of the Group.
4. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
In the process of applying the Group's accounting policies,
management make various estimates and judgements (other than those
involving estimates) based on past experience, expectations of the
future and other information. The key sources of estimation
uncertainty and the critical judgements that can significantly
affect the amounts recognised in the financial statements are:
Critical judgement
Forsythia plantation and prepaid lease agreements
Management has considered whether the prepaid lease arrangements
described in note 10 should be classified as operating or finance
leases. Although 20 years is an extended period of time, land has
an indefinite useful life, and accordingly the lease term can
reasonably be seen as less than the major part of the economic life
of the underlying land. At the end of the lease all rights in the
land revert to the lessor. Taking these factors into account,
management has concluded that it does not enjoy substantially all
the risks and rewards incidental to ownership of the land, and has
concluded that these arrangements should be accounted for as
operating leases.
Biological assets
Management has considered whether biological assets that are
growing on land that is occupied under an operating lease should
also be recognised as biological assets in the group's accounts in
accordance with the requirements of IAS 41. Management has
concluded that where plants have a productive life that falls
within the length of the operating leases, the assets can be
properly said to be controlled by the Group, and accordingly
shorter life plants cultivated on land utilised in accordance with
an operating lease, are recognised as biological assets, and
carried at fair value.
However, where the Group benefits from harvesting plants that
has a useful life in excess of the length of the operating lease
applying to the underlying land, management has concluded that it
does not control the assets and accordingly does not recognise the
land owner's biological assets in the Group's consolidated
statement of financial position.
Consistent with these judgments, agricultural produce harvested
from the landowner's biological assets is considered to be outside
of the scope of IAS 41 and is recognised at cost. (Whereas
agricultural produce from the Group's recognised biological assets
is recognised at the point of harvest at fair value less costs to
sell, in accordance with IAS 41).
Key Sources of Estimation Uncertainty
Fair Value of Biological Assets
Management estimates the current market prices less estimated
harvesting and initial processing costs of biological assets at the
end of the reporting period with reference to market prices.
Management considers that there is presently an absence of
effective financial instruments for hedging against the pricing
risks with the underlying agricultural produce. Unexpected
volatility in market prices of the underlying agricultural produce
could significantly affect the fair values of these biological
assets and result in fair value re-measurement changes in future
accounting periods.
Further details on assumptions used and the sensitivity of the
fair value of those assumptions are within note 12.
Depreciation of property, plant and equipment
Property, plant and equipment are depreciated on a straight-line
basis over their estimated useful lives, after taking into account
their estimated residual values. The determination of the useful
lives and residual values involves management's estimation. The
Group assesses annually the residual values and the useful lives of
the property, plant and equipment and if the expectation differs
from the original estimate, such a difference may impact the
depreciation in the year the estimate is changed and the future
period.
Amortisation of intangible assets
Amortisation is charged to profit or loss on a straight-line
basis over the estimated useful lives of intangible assets unless
such lives are indefinite.
Intangible assets represent non-patented technical know-how,
which is amortised over its definite useful lives.
Allowance for bad and doubtful debts
The Group makes provision for impairment of trade and other
receivables based on an assessment of the recoverability of trade
and other receivables. Provisions are applied to trade and other
receivables where there is objective evidence that indicates the
balances may not be collectible. The identification of doubtful
debts requires the use of judgement and estimates based on the
credit history of the customers or debtors and the current market
conditions. Where the expectation is different from the original
estimate, such difference will impact the carrying amount of
receivables and impairment allowance in the period in which such
estimate has been changed.
Allowance for inventories
The management of the Group reviews an ageing analysis at the
end of each reporting period, and makes allowance for obsolete and
slow-moving inventory items identified that are no longer suitable
for use in production. The management estimates the net realisable
value for such finished goods based primarily on the latest invoice
prices and current market conditions. The Group carries out an
inventory review on a product-by-product basis at the end of each
reporting period and makes allowances for obsolete items.
Income tax expense
The Group is subject to income tax in the PRC. There are certain
transactions and calculations for which the ultimate tax
determination is uncertain during the ordinary course of business.
Where the final tax outcome on these matters is different from the
amounts that were initially recorded, such differences will impact
the current income tax and deferred tax provisions in the period in
which such determination is made.
5. REVENUE AND OTHER INCOME
Revenue on sale of goods represents the fair value of
consideration received or receivable, net of value added tax
("VAT"), consumption tax ("CT") and other sales taxes and
additional levy, after allowances for goods returns and trade
discounts.
An analysis of the Group's revenue and other income is set out
below:
2015 2014
RMB'000 RMB'000
Revenue 34,229 50,948
======= =======
Other income
Interest on trade receivables 1,388 1,415
Interest income 77 125
Exchange gain 34 -
Reversal of impairment loss
on trade receivables - 188
1,499 1,728
======= =======
(LOSS)/PROFIT BEFORE INCOME
6. TAX 2015 2014
RMB'000 RMB'000
(Loss)/profit before income
tax is arrived at after charging/(crediting)
:-
Auditors' remuneration
- Fees payable to the Company's
auditor for the audit of the
Company's financial statements 190 202
- Fees payable to the Company's
auditor and its associates
for other services
- Other services charge pursuant
to legislation - 51
Operating lease payments 143 220
Directors' remuneration (plc)
------- -------
- Salaries 704 836
- Pension scheme costs 96 128
800 964
Other staff costs
- Salaries 1,510 1,491
- Pension scheme costs 624 629
2,134 2,120
Depreciation 282 261
Amortisation of prepaid lease
payments 2,950 2,950
Amortisation of land use rights 38 39
Provision for impairment of
property, plant and equipment 510 -
Provision for write-down of
inventories 528 1,908
Increase in allowance for other
receivables 249 15
Increase in allowance for prepayment 1,346 -
Increase in/(reversal of) allowance
for trade receivables 24,369 (203)
======= =======
In addition to the auditors' remuneration disclosed above, fees
of RMB261K (2014: RMB261K) were payable to PKF Hong Kong.
The average monthly number of employees (including Executive
Directors) for the year for each of the Group's principal divisions
was as follows:
2015 2014
Sales representatives 11 32
Production and quality control 29 29
Administration department 14 15
Plantation area 1 1
---- ----
55 77
==== ====
7. Income tax expense
(a) TNP is subject to PRC enterprise income tax at the rate of
25% on its assessable profits being the main operating subsidiary
for the years ended 31 December 2014 and 2015. A unified income tax
rate has been set at 25% for all enterprise within the Group.
Income tax expense in the consolidated statement of profit or
loss represents:
2015 2014
RMB'000 RMB'000
Current tax :-
Provision for the year 178 2,588
Under-provision in respect
of prior year - 21
------- -------
178 2,609
Deferred tax - Note 7(b)
Origination and reversal
of temporary differences 306 (527)
------- -------
Income tax expense 484 2,082
======= =======
The income tax expense of the Group's (loss)/profit before
income tax differs from the theoretical amount that would arise
using the tax rate applicable to (loss)/profit of the Group as
follows :-
2015 2014
RMB'000 RMB'000
(Loss)/ profit before income
tax (30,164) 6,584
======= =======
Income tax based on the PRC
statutory tax rate of 25% (7,541) 1,646
Tax effect of non-taxable
income (163) (2)
Tax effect of non-deductible
expenses 6,404 -
Tax effect of unrecognised
temporary differences 1,097 -
Tax effect of unrecognised
tax losses 381 417
Reversal of deferred tax
- Note 7(b) 306 -
Under-provision in respect
of prior year - 21
Income tax expense 484 2,082
======= =======
(b) Deferred tax (asset)/liability recognised by the Group and
movements thereon during the current and prior years are as
follows:
Fair value Change
in
gain of fair value
of Other
biological harvested timing
assets products Differences Total
RMB'000 RMB'000 RMB'000 RMB'000
At 1 January
2014 as restated 934 147 (860) 221
Charged/(credited)
to profit or
loss for the )
year 97 (147) (477 (527 )
---------- ---------- ----------- -------
At 31 December
2014 1,031 - (1,337) (306)
And at 1 January
2015
(Credited)/charged
to profit or
loss for the
year - Note
7(a) (1,031) - 1,337 306
---------- ---------- ----------- -------
At 31 December - -
2015 - -
========== ========== =========== =======
(c) The components of unrecognised temporary differences are as follows:-
2015 2014
RMB'000 RMB'000
Deductible temporary differences
* Unused tax losses - Note 7(c)(i) 16,112 14,589
* Provision - Note 7(c)(ii) 24,962 -
------- -------
41,074 14,589
Taxable temporary difference
* Investment in subsidiaries - Note 7(c)(iii) (81,892) (81,224)
(40,818) (66,635)
======= =======
i. It represents the maximum benefit from unutilised tax losses
of Taihua plc and China Natural Pharmaceutical Limited, which can
be carried forward to offset against future taxable profits. The
deferred tax assets of RMB3,222K (2014: RMB2,918K) relating to the
tax losses have not been recognised as it is not certain whether
the potential taxation benefit will be realised in the foreseeable
future. All unutilised tax losses in Taihua plc and China Natural
Pharmaceutical Ltd can be carried forward indefinitely.
ii. It represents the impairment loss on property, plant and
equipment, write-down value of inventories and provision for trade
and other receivables in the Group. No deferred tax asset has been
recognised as there is no certainty that future taxable profit
would be available, against which the temporary difference can be
utilised.
iii. It represents the aggregate amount of temporary differences
associated with investments in subsidiaries for which deferred tax
liabilities have not been recognised was RMB8,189K (2014:
RMB8,122K). These differences arise on the profits retained by
those subsidiaries that would be subject to withholding taxes if
dividends were paid to their parent companies. Deferred tax has not
been recognised in the consolidated statements of financial
position as the Group is in a position to control the timing of the
reversal of these temporary differences and it is probable that
such differences will not reverse in the foreseeable future.
8. (LOSS)/EARNINGS PER SHARE
Basic (loss)/earnings per share
Basic (loss)/earnings per share is calculated by dividing the
(loss)/profit attributable to equity holders of the Company by the
weighted average number of ordinary shares in issue during the
year.
2015 2014
(Loss)/profit attributable
to equity holders of
the Company (RMB'000) (30,648) 4,502
======= ======
Weighted average number
of ordinary
shares in issue (thousands) 81,737 81,737
======= ======
(Loss)/earnings per share (RMB
per share) (0.375) 0.055
======= ======
Diluted (loss)/earnings per share
The Company has only one category of dilutive potential shares -
share options. A calculation is done to determine the number of
shares that could have been acquired at fair value based on the
monetary value of the subscription rights attached to outstanding
share options. It is compared with the number of shares that would
have been issued assuming the exercise of the share options.
2015 2014
(Loss)/profit attributable
to equity holders of the
Company (RMB'000) (30,648) 4,502
======= =======
Weighted average number of
ordinary shares
in issue (thousands) 81,737 81,737
Adjustment for share options - -
(thousands)
------- -------
Weighted average number of
ordinary shares
for diluted earnings (thousands) 81,737 81,737
======= =======
Diluted (loss)/earnings per
share (RMB per share) (0.375) 0.055
======= =======
Share option have no dilutive effect as the average market price
of ordinary shares as at year end is below the exercise price of
the share option.
9. Property, plant and equipment
Furniture,
fixtures Construction
Plant and Motor in
and
Buildings machinery equipment vehicles progress Total
RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000
Cost:
At 1 January
2014 3,022 4,547 233 749 - 8,551
Additions - 38 2 - 750 790
--------- --------- ---------- -------- ------------ -------
At 31 December
2014 3,022 4,585 235 749 750 9,341
--------- --------- ---------- -------- ------------ -------
Depreciation:
At 1 January
2014 1,796 3,791 233 685 - 6,505
Provided 166 95 -** - - 261
------------
At 31 December
2014 1,962 3,886 233 685 - 6,766
------------
Net book
value:
At 31 December
2014 1,060 699 2 64 750 2,575
========= ========= ========== ======== ============ =======
Cost:
At 1 January
2015 3,022 4,585 235 749 750 9,341
Additions - 62 39 - 21,184 21,285
Transfer 18,550 3,384 - - (21,934) -
------------
At 31 December
2015 21,572 8,031 274 749 - 30,626
--------- --------- ---------- -------- ------------ -------
Depreciation:
At 1 January
2015 1,962 3,886 233 685 - 6,766
Provided 166 99 17 - - 282
------------
At 31 December
2015 2,128 3,985 250 685 - 7,048
--------- --------- ---------- -------- ------------ -------
Impairment
;-
Provided - 510 - - - 510
--------- --------- ---------- -------- ------------ -------
At 31 December
2015 - 510 - - - 510
------------
Net book
value :-
At 31 December
2015 19,444 3,536 24 64 - 23,068
========= ========= ========== ======== ============ =======
** Value less than RMB 1,000
10. PREPAID LEASE PAYMENTS
RMB'000
Cost:
At 1 January 2014, 31 December
2014 and 31 December 2015 59,000
Amortisation:
At 1 January 2014 5,550
Provided 2,950
---------
At 31 December 2014 and 1 January
2015 8,500
Provided 2,950
---------
At 31 December 2015 11,450
---------
Net book value:
At 31 December 2015 47,550
=========
At 31 December 2014 50,500
=========
On 11 January 2012, TNP signed an agreement with Qin Bang
Forsythia Cooperative in respect of leasing 893 hectares of
Forsythia plantation for the period from 11 January 2012 to 11
January 2031, which are located in the Luonan region of Shanxi
Province, the PRC.
Pursuant to the terms of the lease, TNP will manage the
cultivation and benefit from the harvest from the plantation. The
annual lease cost is RMB1,300K per annum, but it is a term of the
lease that all 20 years were paid in advance. This payment has been
capitalised and treated as a prepaid lease payment within
non-current assets and will be amortised over the lease term of 20
years.
On 17 December 2013, TNP signed an agreement with Qin Yuan
Forsythia Cooperative in respect of leasing 1,013 hectares of
Forsythia plantation for the period from 1 January 2014 to 31
December 2032, which are located in the Luonan region of Shanxi
Province, the PRC.
Pursuant to the terms of the lease, TNP will manage the
cultivation and benefit from the harvest from the plantation. The
annual lease cost is RMB1,650K per annum, but it is a term of the
lease that all 20 years were paid in advance. This payment has been
capitalised and treated as a prepaid lease payment within
non-current assets and will be amortised over the lease term of 20
years.
11. LAND USE RIGHTS
The Group's interests in land use rights represent prepaid
operating lease payments and their net book value is analysed as
follows :-
RMB'000
Cost:
At 1 January 2014, 31 December
2014 and 31 December 2015 1,911
-------
Amortisation:
At 1 January 2014 503
Provided 39
-------
At 31 December 2014 and 1 January
2015 542
Provided 38
-------
At 31 December 2015 580
-------
Net book value:
At 31 December 2015 1,331
=======
At 31 December 2014 1,369
=======
12. biological assets
Biological assets represent Chinese Yew trees (infant trees and
seedlings) and Eucommia bush.
The role of Chinese Yew trees is to provide the raw material for
the extraction of Paclitaxel compound. For many years the Group has
purchased this raw material from third party suppliers. In 2006,
2007 and 2008, it planted Chinese Yew trees in its own plantation,
these infant trees were undergoing biological transformation
leading them to mature, being able to produce material from which
Paclitaxel compound can be extracted. The initial harvest from
infant Chinese Yew trees is 5 years after planting. The trees
continue to mature and are estimated to have a harvestable life of
15 years. The harvest from any one Chinese Yew tree is 2kg per
harvest. The trees can be harvested on a 3-4 year cycle. In
previous years it has not been possible to measure the fair value
of infant Yew trees reliably and they have therefore been valued at
cost. However, as the trees approached maturity and the directors
expected to commence harvesting during 2011, the trees were valued
at their fair value less harvesting and initial processing costs in
compliance with IAS 41 in the financial statements for the year
ended 31 December 2010. The permit to harvest in 2011 was not
granted by relevant government body and first harvest has taken
place in 2012. The effect of applying IAS 41 on the basis of
valuation from 2012 to 2014 has been adjusted and brought
biological assets to its fair value during that year.
Eucommia bush is the key raw materials to make one of the
traditional Chinese medicine ("TCM") products. The Group does not
harvest them as demand for TCM products is low. As the quantity of
these plants is a fraction of the whole plantation and the
directors considered they are immaterial for fair value
measurement, accordingly they are recognised at costs.
In 2015, there's no harvest on Yew Tree and Eucommia bush, due
to paclitaxel market price is lower than its production costs and
no demand on TCM products. The Group is currently exposed to the
risk from price fluctuation of Paclitaxel and thus Chinese Yew. The
Board of Directors have assessed the market conditions and risks,
and decided to cease paclitaxel production for foreseeable future,
and fully impair biological assets.
Impairment of biological Chinese Eucommia
assets Yew Trees bush Total
RMB'000 RMB'000 RMB'000
Valuation at 1 January
2014 4,509 54 4,563
Transfer of harvested
product (564) - (564)
Net change in fair value 388 - 388
---------- -------- -------
Valuation at 31 December
2014 and
1 January 2015 4,333 54 4,387
Transfer of harvested - - -
product
Impairment loss (4,333) (54) (4,387)
---------- -------- -------
Valuation at 31 December - - -
2015
========== ======== =======
13. INTANGIBLE ASSETS 2015 2014
RMB'000 RMB'000
Cost :-
At beginning of the year and
at the end of the year 1,350 1,350
------- -------
Accumulated amortisation :-
At beginning of the year and
at the end of the year 1,350 1,350
------- -------
Net book value :-
At end of the year - -
======= =======
Intangible assets represent non-patented technical know-how
obtained. They are amortised on a straight-line basis over their
estimated useful lives. The amortisation charge for the year is
included in cost of sales in the consolidated statement of profit
or loss.
14. Inventories 2015 2014
RMB'000 RMB'000
Raw materials 9,235 7,042
Work in progress 9,900 7,560
Finished goods 1,554 1,702
------- -------
20,689 16,304
Less : Write-down (6,240) (5,712)
------- -------
14,449 10,592
======= =======
The amount of inventory recognised as an expense during the year
was RMB26,031K (2014: RMB36,276K).
The allowance for provision of inventories made in this year was
RMB528K (2014: RMB1,908K).
At 31 December 2015, the value of inventories carried at net
realisable value was RMB14,449K (2014: RMB10,592K).
15. Trade receivableS 2015 2014
RMB'000 RMB'000
Trade receivables 69,088 58,122
Less : Allowance for bad debts (27,769) (3,400)
------- -------
41,319 54,722
======= =======
The Group has granted general credit term of 180 days (2014: 180
days) to its customers.
The Directors consider that the carrying value of trade
receivables approximates its fair value due to the short-term
maturity.
Included in trade receivables of RMB41,319K (2014: RMB 54,722K),
RMB9,689K (2014: RMB8,560K) were receivables from a customer. Under
a contractual arrangement, transactions with this customer are gone
through a related party, of which within the shareholders, two of
them are close family members of Mr Liu, a director of the Group
(Note 28).
Movements on the allowance for trade receivables are as
follows:
2015 2014
RMB'000 RMB'000
At 1 January 3,400 3,603
Increase in/(reversal of) allowance
for trade receivables 24,369 (203)
At 31 December 27,769 3,400
======= =======
As at 31 December 2015, trade receivables of approximately
RMB4,684K (2014: RMB8,323K) were past due but not impaired. These
related to a number of independent customers for whom there is no
recent history of default. The ageing analysis of these receivables
is as follows:
2015 2014
RMB'000 RMB'000
Outstanding balances with ages
:-
7 - 9 months 378 1,356
10 - 12 months 1,901 1,376
------- -------
Within one year 2,279 2,732
Between one to two years 2,228 5,169
Between two to three years 177 279
Over three years - 143
4,684 8,323
======= =======
16. other receivables 2015 2014
RMB'000 RMB'000
Other receivables 383 549
Less: provision (333) (84)
------- -------
50 465
======= =======
The Directors consider that the carrying value of other
receivables approximates its fair value due to the short-term
maturity.
Movements on the allowance for other receivables are as
follows:
2015 2014
RMB'000 RMB'000
At 1 January 84 69
Increase in allowance for other
receivables 249 15
At 31 December 333 84
======= =======
As at 31 December 2015, other receivables of approximately
RMB50K (2014: RMB465K) were past due but not impaired. These
related to a number of independent parties for whom there is no
recent history of default. The ageing analysis of these receivables
is as follows:
2015 2014
RMB'000 RMB'000
Outstanding balances with ages
:-
Within one year 50 1
Between one to two years - 209
Between two to three years - 43
Over 3 years - 212
50 465
======= =======
17. deposits and prepayments 2015 2014
RMB'000 RMB'000
Deposits - 44
Prepayments 5,202 2,671
Less: provision (1,346) -
------- -------
3,856 2,715
======= =======
Movements on the allowance for prepayments are as follows:
2015 2014
RMB'000 RMB'000
At 1 January - -
Increase in allowance for other
receivables 1,346 -
At 31 December 1,346 -
======= =======
18. AMOUNT DUE to A RELATED companY
2015 2014
RMB'000 RMB'000
Xian Hai Sheng Technology Co.
Ltd* 1,109 1,107
======= =======
The amount is interest-free, unsecured and repayable on
demand.
*Majority shareholder of this company is Mr Liyi Chen, also the
substantial shareholder of the Group, and a director of TNP.
19. CASH AND CASH EQUIVALENTS
As at 31 December 2015, about 91.48% of the cash and bank
balances of the Group were denominated in Renminbi, the remainder
were held in GBP, USD and HKD at the year end. Conversion of
Renminbi balances into foreign currencies is subject to the rules
and regulations on foreign exchange controls promulgated by the PRC
government.
20. tRADE PAYABLES 2015 2014
RMB'000 RMB'000
Trade payables 2,012 1,281
======= =======
21. accrued expenses and other payables 2015 2014
RMB'000 RMB'000
Salaries payable 210 204
Accruals 2,406 3,874
Pensions payable 7,148 6,556
Salaries tax payable 264 2,090
Sales tax payable 171 2,030
Other payables 589 1,060
10,788 15,814
======= =======
22. AMOUNT DUE TO A SHAREHOLDER
The entire amount represents a balance due to Mr Liyi Chen, who
is a majority shareholder of the Group, and also a director of
TNP.
The amount is interest-free, unsecured and repayable on
demand.
23. Amounts due TO directors 2015 2014
RMB'000 RMB'000
Chun Chai 26 26
Yunwu Liu 572 -
------- -------
598 26
======= =======
The amounts are interest-free, unsecured and repayable on
demand.
24. SHARE Capital 2015 2014
Authorised :-
185,000,000 ordinary shares GBP 1,850,000 GBP 1,850,000
of GBP0.01 each
============== ==============
Issued and fully paid :-
81,737,330 ordinary shares RMB 12,357,000 RMB 12,357,000
of GBP0.01 each
============== ==============
Taihua plc has one class of ordinary shares which carries no
right to fixed income.
Share options
On 31 August 2009, the Company granted 1,632,946 share options
to the Non-Executive Directors. The exercise price of the options
is GBP0.07 per ordinary share. The exercise period begins one year
from the date of grant and ends on the tenth anniversary of the
date of grant. The total estimated fair value of the options at the
date of grant was RMB494K. The options have been valued using the
Black-Scholes model with the following main assumptions:
Grant date 31 August
2009
Exercise price GBP0.07
Expected life 5.5 years
Expected volatility 30.79%
Expected dividend
yield p.a. 0%
Risk-free rate 2.71%
Expected forfeiture
p.a. 0%
Volatility is the average annualised volatility of returns of
the underlying stock's comparable.
No share-based payments were charged to profit or loss during
both years.
25. OTHER RESERVES
The merger relief reserve represents the premium arising on the
issue of equity shares by the Company to acquire TNP.
The share premium account represents the premium arising on the
issue of equity shares by way of share placement, less expenses
incurred.
The reverse acquisition reserve arose as a result of its reverse
acquisition of the Company by TNP.
TNP, being a foreign investment enterprise, is required to
appropriate an amount from the net profit reported in the statutory
accounts to three statutory reserves, namely general reserve fund,
enterprise expansion fund and staff welfare fund. All these funds
are designated for specific purposes. Appropriations to the staff
welfare fund are made at the discretion of the Directors. In
accordance with the relevant laws and regulations of the PRC, it is
required that not less than 10% of its net income (the percentage
is upon approval from the Board of Directors' meeting), after
offsetting any prior years' losses, for PRC reporting purpose is
made to the general reserve fund. When the balance of such reserve
reaches 50% of the registered capital, any further appropriation is
optional. Upon approval from the Board of Directors of TNP, the
statutory reserve can mainly be used to offset accumulated losses
or to increase registered capital. Based on directors' resolutions,
TNP appropriated 10% and 5% of its statutory net profit to the
general reserve fund and the enterprise expansion fund for the
period ended 31 December 2007. No such reserves were appropriated
afterwards as they reached 50% of the registered capital.
The foreign currency translation reserve arose on translating
financial statements of foreign operations into RMB.
The share option reserve arises on the recognition of expenses
in respect of share-based payments to be settled with equity.
26. PENSION COSTS
The Group operates a statutory defined contribution pension plan
for those employees who are eligible to participate in the plan.
Contribution are made based on a percentage of the employees'
relevant compensation to the state-managed retirement benefit
scheme operated by the municipal government, and charged to profit
or loss in the year in which they became payable.
The local municipal government undertakes to assume the
retirement benefit obligations of all existing and future retired
employees of the Group. The Group has no further payment
obligations once the contributions have been paid.
The pension costs charged to profits or loss represent
contributions paid and payable by the Group to the plan amounted to
RMB720K and RMB757K respectively for the years ended 31 December
2015 and 2014.
27. commitments 2015 2014
RMB'000 RMB'000
Capital commitments
Capital commitments in respect
of the acquisition of intangible
assets and property, plant
and equipment - 646
Contracted but not provided
for - 300
------- -------
- 946
======= =======
28. Related party transactions
Apart from the transactions as disclosed in Notes 15, 18, 22, 23
and 28(b) to the consolidated financial statements, the Group had
no other material transactions with its related parties during the
year.
(a) Remuneration of Directors and key management personnel
2015 2014
RMB'000 RMB'000
Salaries, allowances and other
benefits in kind 812 836
Pension scheme costs 128 128
940 964
======= =======
The remuneration of Directors and key management personnel is
analysed as follows:
2015
Pensions
scheme 2014
Salaries costs Total Total
RMB'000 RMB'000 RMB'000 RMB'000
Chong Cao* 190 - 190 202
Nicholas James Lyth* 190 - 190 202
Yunwu Liu* 108 32 140 140
Chun Chai* 108 32 140 140
Liyi Chen** (Resigned
as director
on 9 December 2014) - - - 140
Zhaoyang Ma* 108 32 140 140
704 96 800 964
======== ======== ======= =======
* Directors at 31 December 2015
**A director resigned in Dec 2014, but still holds a director
position in TNP and paid same amount of remuneration in 2015.
(b) Sale of goods
Under a contractual arrangement, sales amounting to RMB6,362K
(2014: RMB10,916K) with one major customer are gone through a
related company, of which within the shareholders, two of them are
close family members of Mr Liu, a director of the Group (Note
15).
The selling price under this arrangement was determined by
reference to the prevailing market rates, in line with the other
customers.
29. FINANCIAL RISK MANAGEMENT, OBJECTIVES AND POLICIES
The Group's activities expose it to a variety of financial
risks: foreign exchange risk, credit risk, liquidity risk and cash
flow interest rate risk. The Group's overall risk management
programme seeks to minimise potential adverse effects on the
Group's financial performance.
(a) Categories of financial instruments
2015 2014
Financial Financial
liabilities liabilities
measured measured
at at
Loans amortised Loans and amortised
and
receivables cost receivables cost
RMB'000 RMB'000 RMB'000 RMB'000
Trade receivables 41,319 - 54,722 -
Other receivables 50 - 465 -
Deposits - - 44 -
Cash and cash
equivalents 8,354 - 46,876 -
Trade payables - 2,012 - 1,281
Accrued expenses
and other payables - 3,205 - 5,138
Amount due to
a related company - 1,109 - 1,107
Amount due to
a shareholder - 7,468 - 8,001
Amounts due to
directors - 598 - 26
----------- -----------
49,723 14,392 102,107 15,553
=========== =========== =========== ===========
(b) Financial risk factors
Foreign exchange risk
Currency risk is the risk that the fair value or future cash
flows of a financial instrument will fluctuate because of changes
in foreign exchange rates.
The Group mainly operates in the PRC with most of the
transactions settled in RMB. It did not have significant exposure
to foreign exchange risk.
During the year ended 31 December 2015, the Group had not
entered into any forward exchange contracts.
Credit risk
Credit risk is the risk that a party to a financial instrument
will cause a financial loss for the Group by failing to discharge
an obligation.
The Group's credit risk is primarily attributable to trade
receivables, other receivables and cash and cash equivalents. With
respect to trade receivables, the Group has adopted credit
policies, which include the analysis of the financial position of
its clients and a regular review of their credit limits. The Group
maintains an allowance for doubtful accounts and actual losses have
been less than management's expectations and the Group has policies
in place to ensure that sales are made to clients with an
appropriate credit history. Also, the Group's cash and cash
equivalents were held by major financial institutions located in
the PRC, which management believes are of high credit quality.
Accordingly, the overall credit risk is considered limited.
Carrying amounts of financial assets as at 31 December 2015,
which represented the amounts of maximum exposure to credit risk,
were as follows :-
2015 2014
RMB'000 RMB'000
Trade receivables 41,319 54,722
Other receivables 50 465
Deposits - 44
Cash and cash equivalents 8,354 46,876
49,723 102,107
======= =======
Liquidity risk
Liquidity risk is the risk that the Group will encounter
difficulty in meeting obligations associated with financial
liabilities.
The Group monitors its liquidity risk and maintains a level of
cash and cash equivalents deemed adequate by the management to
finance the Group's operations and to mitigate the effects of
fluctuations in its cash flows.
Maturities of the non-derivative financial liabilities of the
Group as at 31 December 2015 were as follows:
2015 2014
RMB'000 RMB'000
Total amounts of contractual
undiscounted obligations
:-
Trade payables 2,012 1,281
Accrued expenses and other
payables 3,205 5,138
Amount due to related companies 1,109 1,107
Amount due to a shareholder 7,468 8,001
Amounts due to directors 598 26
14,392 15,553
======= =======
Due for payment :-
Within one year or on demand 14,392 15,553
======= =======
Interest rate risk
Interest rate risk is the risk that the fair value or future
cash flows of a financial instrument will fluctuate because of
changes in market interest rates.
The Group's income and operating cash flows are substantially
independent of the changes in market interest rates and the Group
has no significant interest-bearing assets. The Group's exposure to
changes in interest rates is mainly attributable to its short-term
borrowings. The Group has not used any interest rate swaps to hedge
its exposure to interest rate risk.
(c) Capital management
The primary objective of the Group's capital management is to
ensure that it maintains a strong credit rating and healthy capital
ratios in order to support its business and to secure shareholders'
investments.
The Group manages its capital structure and makes adjustments if
required. To maintain or adjust the capital structure, the Group
may adjust the dividend payment to shareholders, return capital to
shareholders by the means of share buy-backs or issue new shares.
No changes were made in the objectives, policies or processes
during 2015 and 2014.
As the Group operates in a high growth, fast moving industry, it
is the Group's policy to maintain a high degree of flexibility in
its capital structure by maintaining a high availability of liquid
funds. The Group monitors its capital base using the equity ratio,
which is total equity attributable to the Company's equity holders
divided by total assets. The Group's current policy is to maintain
an equity ratio of 50% or higher.
2015 2014
RMB'000 RMB'000
Total assets 139,977 174,507
Total equity attributable
to the Company's equity holders 113,770 144,622
------- -------
Equity ratio 81.3% 82.9%
======= =======
(d) Fair value estimation
(i) Financial instruments carried at fair value
At 31 December 2015, the Group did not have any financial
instruments carried at fair value.
(ii) Fair value of financial instruments carried at other than fair value
The carrying amounts of the Group's financial instruments
carried at cost or amortised cost were not materially different
from their fair values as at 31 December 2015 and 2014.
30. SEGMENT REPORTING
For the purposes of resources allocation and performance
assessment, the chief operating decision maker, Executive Director,
regularly reviews revenue and cost of sales for each product. The
financial information provided to Executive Director, contain
profit or loss information of each product line. Therefore, the
operation of the Group constitutes four reportable segments.
The Group's reportable segments under IFRS8 Operating Segments
are as follows:
-- Paclitaxel - Paclitaxel is extracted from the bark of the yew
tree (Taxus). This drug is one of the main-stream treatments for
cancer of the ovaries, breast, certain types of lung cancer, and a
cancer of the skin and mucous membranes more commonly found in
patients with acquired immunodeficiency syndrome (AIDS).
-- Homoharringtonine - Homoharringtonine is an alkaloid
extracted from the branches and leaves of the Cephalotaxus tree.
This drug has been prescribed for acute myeloid leukaemia and other
cancers in China.
-- TCM product - Traditional Chinese Medicine has recognition as
a viable alternative health treatment and has been recognised by
the World Health Organisation for its effectiveness in the
treatment of certain forms of illnesses and diseases. The Company
currently manufactures eight TCM products including Gengnianan
Tablet, Duzhong Pingya Tablet, Zaoren Anshen Keli, Bunao Anshen
Tablet, Jiangzi Jianfei Tablet, Dabaidu Capsule, Runing Tablet and
Bian Tong Pian.
-- Forsythia - Known as lian qiao in PRC, is a flowering shrub.
The seeds and seed cases of this are harvested and, when dried,
form the basis of TCM preparations. Forsythia TCMs are primarily
sold to alleviate flu and cold like symptoms.
The Group's revenues are not significantly impacted by
seasonality, except sales of forsythia. Forsythia is mainly
harvested during autumn every year and therefore sales of forsythia
are recognised in the fourth quarter.
Segment revenues and costs of sales
The following is an analysis of the Group's revenue and cost of
sales by reportable segments:
Homo- TCM
Paclitaxel* harringtonine Forsythia products Consolidated
Year ended 31 RMB'000 RMB'000 RMB'000 RMB'000
December 2015 RMB'000
Revenue 2,411 556 26,670 4,592 34,229
Cost of sales (2,120) (815) (21,091) (3,337) (27,363)
----------- ------------- --------- -------- ------------
Gross profit 291 (259) 5,579 1,255 6,866
=========== ============= ========= ======== ============
Homo- TCM
Paclitaxel harringtonine Forsythia products Consolidated
Year ended 31 RMB'000 RMB'000 RMB'000 RMB'000
December 2014 RMB'000
Revenue 2,870 1,363 41,845 4,870 50,948
Cost of sales (3,088) (2,597) (28,320) (3,331) (37,336)
---------- ------------- --------- -------- ------------
Gross (loss)/profit (218) (1,234) 13,525 1,539 13,612
========== ============= ========= ======== ============
*During the year, there's no harvest of Yee Tree and production
of paclitaxel. This revenue has been generated due to GMP
application, the Group has to demonstrate their production
activities.
The management of the Group takes into account revenue and costs
of sales as the key performance indicators when they make
management decisions. Other costs are not allocated to operating
segments as these are considered to be central operating costs of
the business. Assets and liabilities are not considered to be
specific to individual operating segments and therefore separate
analysis is not undertaken.
Entity-wide disclosures
All non-current assets and sales are located and generated in
the PRC.
Total amounts of RMB27,406K (2014: RMB43,252K), which were
individually more than 10 percent of the Group's revenue were
revenue from transactions with four single customers (same as in
2014), details as follows:
2015 2014
Forsythia segment RMB'000 RMB'000
Customer A 8,861 11,368
Customer B 6,399 10,881
Customer C 6,362 10,916
Customer D 5,784 10,087
27,406 43,252
======= =======
31. POST BALANCE SHEET EVENTS
There is no significant event after year end to be reported.
Note 2015 2014
RMB'000 RMB'000
Auditors' remuneration (450) (491)
Directors' remuneration (380) (405)
Legal and professional fees (371) (358)
Sundry expenses (306) (405)
------- -------
Loss before income tax (1,507) (1,659)
Income tax expense 2(a) - -
------- -------
Loss for the year (1,507) (1,659)
------- -------
Other comprehensive (loss)/income:
Exchange differences arising
on translation
of financial statements (115) 635
------- -------
Other comprehensive (loss)/income
for the year, net of tax (115) 635
------- -------
Total comprehensive loss for
the year (1,622) (1,024)
======= =======
Loss attributable to:
Equity holders of the parent
company (1,507) (1,659)
======= =======
Total comprehensive loss attributable
to:
Equity holders of the parent
company (1,622) (1,024)
======= =======
Note 2015 2014
RMB'000 RMB'000
ASSETS
NON-CURRENT ASSET
Investment in subsidiaries 3 75,437 75,437
------- -------
CURRENT ASSETS
Amount due from a subsidiary 4 9 -
Cash and cash equivalents 24 182
------- -------
33 182
TOTAL ASSETS 75,470 75,619
------- -------
CURRENT LIABILITIES
Accrued expenses and other
payables 1,069 559
Amount due to a subsidiary 4 3,457 2,617
Amount due to a shareholder 5 7,432 7,939
Amount due to a director 6 630 -
------- -------
12,588 11,115
NET CURRENT LIABILITIES (12,555) (10,933)
------- -------
NET ASSETS 62,882 64,504
======= =======
EQUITY
Share capital 7 12,357 12,357
Merger relief reserve 64,364 64,364
Share premium 4,783 4,783
Share options reserve 494 494
Foreign currency translation
reserve 212 327
Accumulated losses (19,328) (17,821)
------- -------
EQUITY ATTRIBUTABLE TO EQUITY
HOLDERS OF THE COMPANY 62,882 64,504
======= =======
The financial statements were approved and authorised for issue
by the Board of Directors on 30 June 2016.
.................................
..................................
Mr Yunwu Liu Mr Mingjian Yin
Director Director
COMPANY STATEMENT OF CHANGES IN EQUITY
Foreign
Merger Share currency
Share relief Share options translation Accumulated
capital reserve premium reserve reserve losses Total
RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000
At 1 January 2014 12,357 64,364 4,783 494 (308) (16,162) 65,528
Loss for the year - - - - - (1,659) (1,659)
Other comprehensive
income - - - - 635 - 635
-------- -------- -------- -------- ------------ ----------- -------
Total comprehensive
income/(loss) for the
year - - - - 635 (1,659) (1,024)
At 31 December 2014 and
1 January 2015 12,357 64,364 4,783 494 327 (17,821) 64,504
Loss for the year - - - - - (1,507) (1,507)
Other comprehensive loss - - - - (115) - (115)
Total comprehensive
loss for the year - - - - (115) (1,507) (1,622)
At 31 December 2015 12,357 64,364 4,783 494 212 (19,328) 62,882
======== ======== ======== ======== ============ =========== =======
The merger relief reserve represents the premium arising on
issue of equity shares by the Company to acquire TNP.
The share premium account represents the premium arising on the
issue of equity shares by way of share placement, less expenses
incurred.
The share option reserve arises on the recognition of expenses
in respect of share-based payments to be settled with equity.
The foreign currency translation reserve arose on translating
financial statements from functional currency into RMB.
COMPANY STATEMENT OF CASH FLOWS
2015 2014
RMB'000 RMB'000
Cash flows from operating activities
Loss before income tax and operating
loss before working
capital changes (1,507) (1,659)
Increase in accrued expenses and
other payables 510 23
Increase in amount due to a subsidiary 831 445
(Decrease) in amount due to a shareholder (507) 700
Increase in amount due to a director 630 -
Net cash used in operating activities
and net decrease
in cash and cash equivalents (43) (491)
Cash and cash equivalents as at
1 January 2015 182 38
Effect of foreign exchange change (115) 635
------- -------
Cash and cash equivalents as at
31 December 2015 24 182
======= =======
NOTES TO THE COMPANY FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The separate financial statements have been prepared in
accordance with International Financial Reporting Standards as
adopted by the European Union and with those parts of the Companies
Act 2006 that is applicable to companies reporting under IFRS. The
principal accounting policies adopted are the same as those set out
in Note 3 to the consolidated financial statements except as noted
below.
(a) Investment in subsidiaries
Investment in subsidiaries is stated at cost less, where
appropriate, provisions for impairment.
(b) Foreign currency
The functional currency of the Company is Sterling. Monetary
assets and liabilities maintained in currencies other than Sterling
are translated into Sterling at the approximate rates of exchange
ruling at the end of the reporting period, with any exchange
difference recognised in profit or loss. Transactions in currencies
other than Sterling are translated at rates ruling on the
transaction dates.
The financial statements of the Company are presented in RMB,
chosen because the revenue and expenses of the Group's main
operation are ultimately denominated in RMB. Transactions in
Sterling are translated to RMB at the average exchange rates for
the year unless exchange rates fluctuate significantly. Sterling
denominated assets and liabilities are converted to RMB at the
exchange rate prevailing at the end of the reporting period.
Exchange differences arising are transferred to foreign currency
translation reserve.
2. Income tax expense
(a) No provision for income tax has been made in these financial
statements as the Company has no assessable profits for the years
ended 31 December 2015 and 2014.
The income tax expense of the Company's loss before income tax
differs from the theoretical amount that would arise using the tax
rate applicable to loss of the Company as follows :-
2015 2014
RMB'000 RMB'000
Loss before income tax (1,507) (1,659)
======= =======
Income tax based on the UK
statutory tax rate of 20%
(2014: 20%) (301 ) (322 )
Tax effect of unrecognised
tax losses 301 322
Income tax expense - -
======= =======
(b) At the end of the reporting period, the Company has unused
tax losses of RMB16,087K (2014: RMB14,580K) which represent the
maximum benefit from unutilised tax losses, which can be carried
forward to offset against future taxable profits. The deferred tax
assets of RMB3,217K (2014: RMB2,916K) relating to the tax losses
have not been recognised as it is not certain whether the potential
taxation benefit will be realised in the foreseeable future. All
unutilised tax losses can be carried forward indefinitely.
3. INVESTMENT IN SUBSIDIARIES 2015 2014
RMB'000 RMB'000
Investment at cost 75,437 75,437
======= =======
On 26 September 2006, the Company issued 73,390,800 ordinary
share of GBP0.01 each in exchange for the entire share capital of
China Natural Pharmaceutical Limited (BVI). The cost of acquisition
was the fair value of the subsidiary, estimated by the Directors as
being RMB75,437,000, equivalent of GBP5,000,000.
Details of the subsidiaries at 31 December 2015 are as
follows:
Percentage
of equity Proportion
holding held
Name Place of Date of by the Company of voting Principal
of subsidiary establishment incorporation Directly Indirectly power activities
and capital % % held
%
China Natural
Pharmaceutical 13 June Intermediate
Limited 2006 holding
("CNP") BVI US$1,000 100 - 100 company
Taihua
Natural
Plant
Pharmaceutical Production
Company 22 February and sales
Limited 1993 of pharmaceutical
("TNP") PRC HK$10,500,000 - 100 100 drugs
4. AMOUNTS DUE FROM/TO A SUBSIDIARY
The amounts are interest-free, unsecured and repayable on
demand.
5. AMOUNT DUE TO A SHAREHOLDER
The amount is interest-free, unsecured and repayable on
demand.
6. AMOUNT DUE TO A DIRECTOR 2015 2014
RMB'000 RMB'000
Yunwu Liu 630 -
======= =======
The amount is interest-free, unsecured and repayable on
demand.
7. SHARE CAPITAL
Details of share capital are given in Note 24 to the
consolidated financial statements.
8. EMPLOYEES, DIRECTORS' REMUNERATION AND SHARE-BASED PAYMENTS
Apart from the Directors, this Company has no employees. Details
of the remuneration of Directors including share-based payments are
shown in Note 28 to the consolidated financial statements, with
further details regarding the share-based payments (all of which
relate to this Company) in Note 24 to the consolidated financial
statements.
Directors' remuneration of RMB380K (2014: RMB404K) (relating to
Mr. Chong Cao and Mr. Nicholas James Lyth) has been borne by this
Company.
9. AUDITORS' REMUNERATION
Details of the remuneration of auditors are given in Note 6 to
the consolidated financial statements.
10. RELATED PARTY TRANSACTIONS
Apart from the information as disclosed in Notes 4, 5, 6 and 8
above, the Company had no other material transactions with its
related parties during the year.
11. FINANCIAL RISK MANAGEMENT, OBJECTIVES AND POLICIES
The Company's activities expose it to a variety of financial
risks: foreign exchange risk, credit risk, liquidity risk and cash
flow interest rate risk. The Company's overall risk management
programme seeks to minimise potential adverse effects on the
Company's financial performance.
(a) Categories of financial instruments
2015 2014
Financial Financial
liabilities liabilities
measured measured
at at
Loans amortised Loans amortised
and and
receivables cost receivables cost
RMB'000 RMB'000 RMB'000 RMB'000
Amount due from a subsidiary 9 - - -
Cash and cash equivalents 24 - 182 -
Accrued expenses and other
payables - 1,069 - 559
Amount due to a subsidiary - 3,457 - 2,617
Amount due to a shareholder - 7,432 - 7,939
Amount due to a director - 630 - -
----------- ----------- -----------
33 12,588 182 11,115
=========== =========== =========== ===========
(b) Financial risk factors
Foreign exchange risk
Currency risk is the risk that the fair value or future cash
flows of a financial instrument will fluctuate because of changes
in foreign exchange rates.
As most of the transactions of the Company were settled in
Sterling, the functional currency of the Company, it did not have
significant exposure to foreign exchange risk.
During the year ended 31 December 2015, the Company had not
entered into any forward exchange contracts.
11. FINANCIAL RISK MANAGEMENT, OBJECTIVES AND POLICIES (CONT'D)
(b) Financial risk factors (cont'd)
Credit risk
Credit risk is the risk that a party to a financial instrument
will cause a financial loss for the Company by failing to discharge
an obligation.
The Company's credit risk is primarily attributable to amount
due from a subsidiary and cash and cash equivalents. The Company's
cash and cash equivalents were held by major financial institutions
located in the UK, which management believes are of high credit
quality. Accordingly, the overall credit risk is considered
limited.
Carrying amounts of financial assets as at 31 December 2015,
which represented the amounts of maximum exposure to credit risk,
were as follows:
2015 2014
RMB'000 RMB'000
Amount due from a subsidiary 9 -
Cash and cash equivalents 24 182
33 182
======= =======
Liquidity risk
Liquidity risk is the risk that the Company will encounter
difficulty in meeting obligations associated with financial
liabilities.
The Company monitors its liquidity risk and maintains a level of
cash and cash equivalents deemed adequate by the management to
finance the Company's operations and to mitigate the effects of
fluctuations in its cash flows.
Maturities of the financial liabilities of the Company as at 31
December 2015 were as follows :-
2015 2014
RMB'000 RMB'000
Total amounts of contractual
undiscounted obligations
:-
Accrued expenses and other
payables 1,069 559
Amount due to a subsidiary 3,457 2,617
Amount due to a shareholder 7,432 7,939
Amount due to a director 630 -
12,588 11,115
======= =======
Due for payment :-
Within one year or on demand 12,588 11,115
======= =======
Interest rate risk
Interest rate risk is the risk that the fair value or future
cash flows of a financial instrument will fluctuate because of
changes in market interest rates.
The Company's income and operating cash flows are substantially
independent of the changes in market interest rates and the Company
has no significant interest-bearing assets. The Company's exposure
to changes in interest rates is mainly attributable to its
short-term borrowings. The Company has not used any interest rate
swaps to hedge its exposure to interest rate risk.
(c) Capital management
The primary objective of the Company's capital management is to
ensure that it maintains a strong credit rating and healthy capital
ratios in order to support its business and to secure shareholders'
investments.
The Company manages its capital structure and makes adjustments
if required. To maintain or adjust the capital structure, the
Company may return capital to shareholders by the means of share
buy-backs or issue new shares. No changes were made in the
objectives, policies or processes during 2015 and 2014.
As the Company operates in a high growth, fast moving industry,
it is the Company's policy to maintain a high degree of flexibility
in its capital structure by maintaining a high availability of
liquid funds. The Company monitors its capital base using the
equity ratio, which is total equity attributable to the company's
equity holders divided by total assets. The Group's current policy
is to maintain an equity ratio of 50% or higher.
2015 2014
RMB'000 RMB'000
Total assets 75,470 75,619
Total equity attributable
to the Company's equity holders 62,882 64,504
Equity ratio 83.3% 85.3%
======= =======
(d) Fair value estimation
(i) Financial instruments carried at fair value
At 31 December 2015, the Company did not have any financial
instruments carried at fair value.
(ii) Fair value of financial instruments carried at other than fair value
The carrying amounts of the Company's financial instruments
carried at cost or amortised cost were not materially different
from their fair values as at 31 December 2015 and 2014.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR SDWFISFMSELM
(END) Dow Jones Newswires
June 30, 2016 11:52 ET (15:52 GMT)
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