Month: August 2014
- 2014.08 SHOUGANG TECH
Company Name: Shougang Concord Technology Holdings LimitedStock Code: 00521Year end: June 30, 2014
Basis for Disclaimer of Conclusion
The sales agreement entered into between the Group and Hong Kong Guang Hua Resources Investments Company Limited, an independent third party, in relation to the disposal of certain subsidiaries of the Group (collectively referred as the “DTV Disposal Group”) lapsed on 30 June 2013. The directors of the Company are seeking for a potential buyer for the disposal of the DTV Disposal Group and consider the disposal transaction remains highly probable, however, no formal sales agreement has been signed up to the date of this report. The directors are of the view that the carrying amounts of the assets included in the DTV Disposal Group are measured in accordance with applicable Hong Kong Financial Reporting Standards (“HKFRSs”) taking into account of the potential disposal and are also confident that the recoverable amount of DTV Disposal Group in its entirety would not be less than the net assets value of the DTV Disposal Group included in condensed consolidated statement of financial position as at 30 June 2014.
However, no formal sales agreement and valuation in relation to the DTV Disposal Group has been concluded as at the date of this report. In the absence of a formal sales agreement and an appropriate valuation performed as at 30 June 2014, we were unable to obtain sufficient information to assess (i) whether the disposal of the DTV Disposal Group is still highly probable and the classification of the DTV Disposal Group as held-for-sale in the condensed consolidated financial statements remains appropriate; (ii) whether certain assets included in the DTV Disposal Group are measured in accordance with the applicable HKFRSs; and (iii) the DTV Disposal Group in its entirety is measured at the lower of its net assets value and fair value less cost of disposal in accordance with HKFRS 5 “Non-current Assets Held for Sale and Discontinued Operations” issued by the HKICPA.
Disclaimer of Conclusion
Because of the significance of the matters described in the Basis for Disclaimer of Conclusion paragraphs, we have not been able to obtain sufficient appropriate evidence to form a conclusion on the condensed consolidated financial statements. Accordingly, we do not express a conclusion on these condensed consolidation financial statements.
- 2014.08 GLOBAL BIO-CHEM
Company Name: Global Bio-chem Technology Group Company LimitedStock Code: 00809Year end: June 30, 2014
Basis for Qualified Conclusion
As explained in note 22 to the interim condensed consolidated financial statements and the section headed “Litigation” in this announcement, the Company and certain subsidiaries of the Group were involved in litigations relating to certain infringed patents. A judgment was concluded by the court that the Company and these subsidiaries were in violation of an injunction and a penalty was imposed. We have been unable to obtain sufficient appropriate evidence to determine whether adequate provision has been made for the penalty as at 30 June 2014 in accordance with Hong Kong Accounting Standard 37 Provision, Contingent Liabilities and Contingent Assets issued by the Hong Kong Institute of Certified Accountants (“HKAS 37”). Any adjustment found to be necessary would affect the Group’s statement of profit or loss for the period ended 30 June 2014 and the Group’s statements of financial position as at that date, and the related disclosures in the financial statements.
Qualified Conclusion
Based on our review, except for the possible effects of the matter described in the basis for qualified conclusion paragraph, nothing has come to our attention that causes us to believe that the interim financial information is not prepared, in all material respects, in accordance with HKAS 34.
Emphasis of Matter
Without further qualifying our opinion, we draw attention to note 2.1 to the interim condensed consolidated financial statements which indicates that the Group incurred a consolidated net loss of HK$1,431 million during the period ended 30 June 2014 and, as of that date, the Group’s current liabilities exceeded its current assets by HK$2,974 million. These conditions, along with other matters as set forth in note 2.1 to the interim condensed consolidated financial statements, indicate the existence of a material uncertainty that may cast significant doubt on the Group’s ability to continue as a going concern.
- 2014.08 WISON ENGRG
Company Name: Wison Engineering Services Co. Ltd.Stock Code: 02236Year end: June 30, 2014
Basis for Disclaimer of Conclusion
Impairment of trade receivables and amounts due from contract customers
The Group had outstanding trade receivables of RMB333,323,000 and RMB261,567,000 as of June 30, 2014 and December 31, 2013 and amounts due from contract customers of RMB3,211,631,000 and RMB2,923,402,000 as of June 30, 2014 and December 31, 2013, respectively, of which trade receivables of RMB130,439,000 and RMB134,157,000 as of June 30, 2014 and December 31, 2013, respectively, and amounts due from contract customers of RMB1,578,639,000and RMB1,533,567,000 as of June 30, 2014 and December 31, 2013, respectively, have been identified as overdue in accordance with contract terms. In addition, an amount due from customer for contract works of RMB369,883,000 and RMB660,463,000 as of June 30, 2014 and December 31, 2013, respectively, relates to a project which has been substantially behind the contract schedule with slow progress payments. The Group has recorded an impairment provision of RMB765,000 as of June 30, 2014 and December 31, 2013 against the balance of trade receivables and amounts due from contract customers. We were unable to obtain sufficient evidence on the recoverability of the balance of trade receivables and amounts due from contract customers as of June 30, 2014 and December 31, 2013. Accordingly, we were unable to satisfy ourselves regarding the adequacy of the impairment provision against the balance of trade receivables and amounts due from contract customers as at June 30, 2014 and Decemberm31, 2013. Any under provision for the recoverability of these balances would reduce the net assets of the Group as at June 30, 2014 and December 31, 2013 and decrease the Group’s net profit or increase the net loss for the six months ended June 30, 2014 and for the year ended December 31, 2013, respectively.
Impairment of property, plant and equipment and other long-term assets
Included in the consolidated statement of financial position of the Group as at June 30, 2014 and December 31, 2013 are property, plant and equipment of approximately RMB1,240,892,000 and RMB1,274,438,000 (net of depreciation and impairment), prepaid land lease payments of approximately RMB180,505,000 and RMB182,732,000, goodwill of approximately RMB15,752,000 and RMB15,752,000 and long-term prepayments relating to the purchase of property, plant and equipment of approximately RMB1,603,000 and RMB2,042,000, respectively. The management has performed impairment assessment on these assets based on discounted cash flows. As a result of the assessment, the management is of the view that there was no impairment provision required as at June 30, 2014 and December 31, 2013.
Due to the uncertainty as to whether the Group will remain as a viable going concern, as set out in further detail in the paragraph headed “Going concern basis” below, we are unable to obtain sufficient evidence to assess the appropriateness of the management’s estimation of the recoverable amounts of the property, plant and equipment, prepaid land lease payments, long-term prepayments relating to the purchase of property, plant and equipment and goodwill and whether these assets as at June 30, 2014 and December 31, 2013 were impaired. Any under provision for impairment of these assets will reduce the net assets of the Group as at June 30, 2014 and December 31, 2013 and decrease the net profit or increase the net loss of the Group for six months ended June 30, 2014 and year ended December 31, 2013, respectively.
Assistance in an investigation in Mainland China
Certain books and records belonging to a subsidiary of the Company in Mainland China have been seized as part of an investigation in the PRC. In this connection, certain bank accounts of the relevant subsidiary have been frozen. We have been unable to obtain further information regarding the nature, scope and status of the investigation and ascertain whether such investigation will have any significant impact on the Group’s financial position.
Going concern basis
In September 2013, the Group received a demand notice from a bank for the repayment of loans in an aggregate amount of RMB186 million. In December 2013, the bank reached an agreement on a repayment schedule with the Group and withdrew the repayment demand. In addition, the Group’s office buildings have been frozen as a condition for the withdrawal of the demand notice. Thereafter, the Group also failed to settle certain secured bank borrowings in the principal amount of RMB250 million due to China Development Bank (“CDB”) on December30, 2013, which lead to a cross-default across the Group’s bank borrowing facilities. The Group subsequently repaid RMB210 million to CDB during the six months ended June 30, 2014, and the Group remained in default on certain secured bank borrowings of RMB40milliondue to CDB as at June 30, 2014.As a result of the default, other banks have the right to demand immediate repayment for loans at June 30, 2014 and December 31, 2013 with an aggregate outstanding principal amount of RMB682millionand RMB1,304million, respectively.
The directors of the Company have taken steps to improve the Group’s liquidity and solvency position. These steps include (i) negotiations with potential strategic investors in respect of a possible equity investment in the Company; (ii) negotiations with banks and other creditors to defer, roll over or refinance the Group’s bank and other borrowings and during the six months ended June 30, 2014,certainbank loans repayment periods were extended by written agreement between the Group and the relevant banks;(iii) actively following up with its customers on outstanding trade receivables and amounts due from contract customers; (iv) making arrangements with certain customers whereby the relevant customers will pay part of the procurement costs (relating to their projects)on behalf of the Group;(v) on-going communications with the relevant PRC regulatory authorities with a view to release the frozen bank accounts; and (vi) monitoring the operating cash flows through cutting costs and capital expenditure.
As at the date of approval of the financial statements notwithstanding the implementation of the measures referred to in the previous paragraph, the foregoing events still indicate the existence of material uncertainties which may cast significant doubt about the Group’s ability to continue as a going concern. The validity of the going concern assumption on which the interim financial information is prepared is dependent on the successful and favourable outcomes of the steps being taken by the directors of the Company as described above. The interim financial information has been prepared on the assumption that the Group will continue as a going concern and, therefore, does not include any adjustments relating to the realisation and classification of non-current assets and non-current liabilities that may be necessary if the Group is unable to continue as a going concern. Should the going concern assumption be inappropriate, adjustments may have to be made to reflect the situation that assets may need to be realised at amounts other than those currently recorded in the statement of financial position. In addition, the Group may have to provide for further liabilities that might arise, and to reclassify non-current assets and non-current liabilities as current assets and current liabilities.
Disclaimer of Conclusion
Because of the significance of the matters described in the Basis for Disclaimer of Conclusion paragraphs, we were unable to obtain sufficient appropriate evidence to provide a basis for a review conclusion. Accordingly, we do not express a conclusion on the interim financial information.
- 2014.08 TIANJIN DEV
Company Name: Tianjin Development Holdings LimitedStock Code: 00882Year end: June 30, 2014
Basis for Qualified Conclusion
As set out in Note 8 to the condensed consolidated financial statements, on 25 June 2014 (the “Disposal Date”), the Group disposed of its entire 44.7% equity interest in a listed associate, Dynasty, to its ultimate holding company, Tsinlien, for a consideration of HK$890 million (the “Disposal Consideration”), resulting in a gain recognised in profit or loss of approximately HK$235 million (the “Disposal Gain”) for the six months ended 30 June 2014.
As further detailed in Note 13 to the condensed consolidated financial statements, Dynasty has not published any financial information since its interim report for the six months ended 30 June 2012 and trading of its shares has been suspended since 22 March 2013. For the six months ended 30 June 2013 and the year ended 31 December 2013, the Group was accordingly not in a position to equity account for its share of results of Dynasty and share of net assets of Dynasty as well as assess whether any impairment of its interest in Dynasty was necessary. Consequently, the Group was unable to fulfil the requirements of Hong Kong Accounting Standard 28 (as revised in 2011) “Investments in Associates and Joint Ventures” (“HKAS 28”) issued by the HKICPA, which requires the application of the equity method for accounting for investments in associates and an impairment assessment thereof. This caused us to qualify our review conclusion on the condensed consolidated financial statements for the six months ended 30 June 2013 and audit opinion on the consolidated financial statements for the year ended 31 December 2013.
Because of the circumstances of Dynasty mentioned above, in preparing the condensed consolidated financial statements for the six months ended 30 June 2014, the Group continued to be unable to fulfil the requirements of HKAS 28 and was not in a position to equity account for its share of results of Dynasty and share of net assets of Dynasty up to the Disposal Date. As a consequence we were unable to evaluate the carrying value of the Group’s interest in Dynasty at the Disposal Date and whether any adjustment to the Disposal Gain was necessary. Also, in the absence of an independent valuation and/or other relevant information, we were unable to determine whether the amount of the Disposal Consideration represented the fair value of the Group’s interest in Dynasty at the Disposal Date (the “Fair Value”). Any difference between the Fair Value and the Disposal Consideration should have been adjusted to the Disposal Gain recognised in profit or loss, with a corresponding adjustment to equity.
Qualified Conclusion
Based on our review, with the exception of the matters described in the Basis for Qualified Conclusion paragraphs, nothing has come to our attention that causes us to believe that the condensed consolidated financial statements are not prepared, in all material respects, in accordance with HKAS 34.
- 2014.08 CHANGFENG AXLE
Company Name: Changfeng Axle (China) Company LimitedStock Code: 01039Year end: June 30, 2014
Basis for Qualified Conclusion
Included in the condensed consolidated financial statements as at 30 June 2014 was property, plant and equipment related to the train and railway business with carrying amount of approximately RMB223,000,000. As set out in note 9 to the condensed consolidated financial statements, the directors of the Company determined that the recoverable amount of the property, plant and equipment approximated to the carrying amount and therefore no impairment loss was recognised for the period ended 30 June 2014.
However, the sales of train and railway components to one of the major customers in Russia have been suspended since May 2014 and have not recommenced as at the date of this report. The cash flow projection on which the Group’s impairment analysis is based assumes a significant volume of sales to this customer in the coming twelve months and thereafter. The directors of the Company considered the suspension in the sales to be temporary and therefore did not adjust the assumptions made in the cash flow projection. However, due to the ongoing suspension of sales to this customer, we were unable to satisfy ourselves as to whether such assumption is reasonable and accordingly whether any impairment in respect of the property, plant and equipment should be recognised in respect of the six months ended 30 June 2014. Any adjustments found to be necessary would affect the Group’s financial position as at 30 June 2014 and the loss for the six months ended 30 June 2014.
Qualified Conclusion
Except for the adjustments to the condensed consolidated financial statements that we might have become aware of had it not been for the situation described above, based on our review, nothing has come to our attention that causes us to believe that the condensed consolidated financial statements are not prepared, in all material respects, in accordance with HKAS 34.
Emphasis of Matter
Without qualifying our conclusion, we draw attention to note 1 to the condensed consolidated financial statements which indicates that the Group incurred a loss of approximately RMB48,820,000 for the six months then ended. The directors of the Company consider that the Group will have sufficient working capital to finance its operations provided that it is able to successfully renew the banking facilities and implement the other measures as set out in note 1 to the condensed consolidated financial statements.
However, these conditions indicate the existence of a material uncertainty which may cast significant doubt about the Group’s ability to continue as a going concern.
The Board will continue to monitor the matters in relation to the qualified conclusion and emphasis of matter referred to above and keep the shareholders and potential investors informed by way of an announcement as necessary
- 2014.08 CHI KINGSTONE
Company Name: China Kingstone Mining Holdings LimitedStock Code: 01380Year end: June 30, 2014
Basis for qualified conclusion
Corresponding figures
Our audit opinion on the consolidated financial statements of the Group for the year ended 31 December 2013 was qualified because of the significance of the possible effect of the limitations on the scope of our audit on the impairment loss of RMB213,502,000 for the year ended 31 December 2013, details of which are set out in our audit report dated 28 February 2014. Accordingly, our opinion on the current period’s consolidated financial statements is also qualified because of the possible effects of this matter on the comparability of the current period’s figures and the corresponding figures.
Qualified conclusion
Based on our review, except for any adjustments that might have been found to be necessary concerning the matter as set out in the basis for qualified conclusion, nothing has come to our attention that cause us to believe that the interim financial information is not prepared in accordance with IAS 34.