TIDMHAIK
RNS Number : 8066G
HaiKe Chemical Group Ltd.
01 June 2017
HaiKe Chemical Group Limited
Audited results for the year ended 31 December 2016
HaiKe Chemical Group Ltd. ("HaiKe" or the "Company", together
with its subsidiaries as the "Group" or "HaiKe Group"), the AIM
quoted (AIM: HAIK) specialty chemical company based in Shandong
Province, China, announces its results for the period ended 31
December 2016.
The Company performed well and delivered sustainable profit
growth in 2016, which was driven by the decision to focus on higher
margin specialty chemical products, product innovation, customer
relationships and cost controls.
Key Points
Financial*
-- Turnover was CNY728.3 million / GBP81.0 million (2015: CNY727.5 million / GBP76.3 million)
-- Profit for the year was CNY16.9 million / GBP1.9 million
(2015: CNY4.1 million / GBP0.4 million)
-- Earnings per share was CNY0.4 / GBP 0.05 (2015: CNY0.1 / GBP 0.01)
-- Cash and cash equivalents balance as at 31 December 2016 was
CNY55.0 million / GBP6.5 million (2015: CNY35.4 million / GBP3.7
million)
-- Total borrowings at 31 December 2016 were CNY80 million /
GBP9.4 million (2015: CNY80 million / GBP8.4 million)
-- The Board does not recommend a final dividend
Operational
-- Tightly controlled and managed inventory
-- Maintained market share in face of strong competition
-- Increased the proportion of high-end products to adjust the
product mix to better position the business in the continued
challenging environment
-- Strengthened the marketing team and optimized internal
business support functions to improve business development and
customer relationships. This has resulted in a significant number
of new customers
Outlook
-- For the first four months of 2017 unaudited turnover of
CNY302.8 million / GPB35.4 million (the first four months of 2016:
CNY225.5 million / GPB24.2 million).
-- For the first four months of 2017 unaudited net profit of
CNY12.8 million / GPB1.5 million (the first four months of 2016:
CNY7.3 million / GPB0.8 million).
-- Provide specialist technical services to enhance product
value and improve overall customer service
-- Continue to increase marketing investment and develop high-end product offerings
-- Further improve product quality through technical innovation
* as at 31 December 2016 the GBP/CNY exchange rate was
1:8.5094
the arithmetic average of the exchange rate for 2016 was
1:8.9855
Mr. Xiaohong Yang, Executive Chairman, said:
"We are pleased to be able to report a positive set of results
for 2016 that reflects continued growth and progress, having seen
improvements in trading performance across the business, with
significant improvement in the underlying trading profits.
Our strategy to focus on higher margin products together with a
strong emphasis on product innovation and value added customer
services has enabled us to deliver sustainable growth and it is
particularly pleasing that the first four months of the new
financial year have seen the positive momentum continue. The Board
remains mindful of a difficult trading environment but is confident
in the delivery of the long term business objectives."
For further information please contact:
HaiKe Chemical Jes Cui, Chief Financial +86 546 7787789
Group Officer cuizhiqiang@haikegroup.com
yolanda.zhang@haikegroup.com
Richard Johnson / Antonio
Stockdale Securities Bossi +44 (0) 20 7601 6100
Shan Shan Willenbrock
/
Emma Crawshaw
Cardew Group haike@cardewgroup.com +44 (0) 20 7930 0777
Chairman's Statement
Review of 2016 Performance
Trading conditions were challenging in 2016. The domestic
economy in mainland China continued to slow down with GDP growth
falling to 6.7%.
The collapse in the crude oil price made conditions difficult
for the specialty chemicals industry and the domestic economy had a
negative impact on demand. Turnover was CNY728.3 million, slightly
ahead of FY2015 (2015: CNY727.5 million).
The business performance was, however, supported by the decision
to focus on higher margin specialty chemical products, product
innovation and cost control, which resulted in the profit for the
year increasing significantly to CNY16.9 million (2015: CNY4.1
million).
Gross margins increased to 15.8% (2015: 11.6%) as the Company
continued to adjust its product mix. Sales of more profitable,
high-end products accounted for 11.2% of main product sales in 2016
(2015: 3.0%).
People
Mr. George Zeng stepped down as Executive Director and resigned
as Chief Financial Officer in July 2016. Mr. Jes Cui was appointed
as Chief Financial Officer in February 2017 and joined the Board on
26 May 2017. Mr. Cui has more than a decade of experience working
for Fortune 500 companies as Chief Financial Officer. Prior to
joining the Company, he was Executive Vice President of ENN Group
and President of ENN Solar Energy Group. On behalf of the Board, I
would like to thank Mr. George Zeng for his significant
contribution to HaiKe during his tenure, and take this opportunity
to welcome Mr. Jes Cui on board.
Dividend
No dividend is proposed for 2016. The Company is accelerating
its strategic transformation to become a high-end specialty
chemical enterprise, and, as such, investment for research and
development, quality growth and HSE is being prioritised and be
increased. When the Group's free cash flow is further improved, the
Board intends to consider the resumption of dividend payments.
Outlook
In the first four months of 2017, the Company recorded an
unaudited turnover of CNY302.8 million (the first four months of
2016: CNY225.5 million). Unaudited net profit was CNY12.8 million,
compared with CNY7.3 million in the first four months of 2016.
In order to continue to better position the business to
withstand the current challenging trading environment, the Company
intends to further improve and expand its offering by:
-- Establishing a complete understanding of customer demands,
actively manage customer relationships and establish strategic
cooperation with customers
-- Establishing an R&D Experiment Centre equipped with the
capabilities of authoritative verification, analysis and
formulation development for downstream industry solutions
-- Optimizing the development process and increasing the degree
of automation to meet the quality requirements of high-end
products
-- Promoting industry integration and synergy to conduct business model innovation
-- Increasing our exposure to overseas markets
-- Enhancing brand identity and recognition
Further, the Company intends to upgrade products and supply
multiple types of supporting products, such as: upgrade industrial
grade Dimethyl Carbonate to battery grade Dimethyl Carbonate,
upgrade industrial Propylene Carbonate to battery grade Propylene
Carbonate, produce battery grade Ethyl Methyl Carbonate and battery
grade Diethyl Carbonate with industrial grade Dimethyl Carbonate as
raw materials, produce battery grade Ethylene carbonate, and serve
as a one-stop supplier of 50 thousand tonnes/year electrolyte
solvent.
Product quality remains paramount and we will further enhance
this, as well as continue to seek technical improvements within our
manufacturing processes to drive operational efficiency and
profitability.
We believe these actions will allow us to become a
market-oriented innovative technology service provider of high-end
specialty chemicals with a focus on strong customer
relationships.
Chief Executive Officer's Report
For the year ended 31 December 2016, the Group sold 125,395 tons
of specialty chemical products, which was comparable to FY2015.
Sales Volume ('000 ton)
Change
2016 2015 y-o-y(%)
------------------- ---------- -------- ------------
Dimethyl Carbonate 43 44 -0.7%
Propylene
glycol 35 35 -0.8%
Isopropyl
alcohol 44 42 4.0%
Diisopropyl
ether 3 4 -18.9%
------------------------- ----- ----- -------------
Total 125 125 0.3%
------------------------- ----- ----- -------------
The average realised price of specialty chemicals decreased by
1.7% year-on-year, in the face of continued strong competition.
One of our major products, Propylene glycol, faced severe
competition from other producers during the period. Selling prices
were impacted as a result of market overcapacity of Unsaturated
Polyester Resin (UPR), the main downstream product of Propylene
glycol.
In order to maintain market share we continued to suppress our
selling prices over the period. Additionally, in order to address
the oversupply of the mid to lower-end speciality chemicals market,
we have continued to shift the Company's focus towards more
high-end speciality chemical products. .
During the year, turnover was CNY728.3 million, slightly higher
than the prior year (2015: CNY727.5 million). Gross profit was
CNY114.9 million, 36.1% higher than 2015 (CNY84.4 million) driven
by both the changing product mix and lower cost of sales. Gross
margins increased to 15.8% from 11.6% in 2015, as a result of the
altered product mix.
Reflecting the changing product mix, sales of high-end specialty
chemicals accounted for 11.2% of main products sales in 2016,
compared to 3.0% in 2015.
Profit after tax of CNY16.9 million was recorded for the
reporting period, compared to CNY4.1 million in 2015.
Total borrowings at the year-end were CNY80.0 million, remaining
unchanged from 31 December 2015
Raw material prices remained volatile over the period, but we
have worked to manage this as best as possible, reducing inventory
when the prices of raw materials were high and taking advantage of
lower prices to increase stock.
The Company refocused the marketing team's efforts during the
period, strengthening the core management level. This had a
consequential impact on performance with 587 new customer wins
during the year. The quality of service was also enhanced, with the
reorganisation of the business support functions.
During the year under review, the Company successfully expanded
applications for medical Propylene glycol and Dipropylene glycol.
We increased sales volumes to high-end customers and strengthened
cooperation with them. Pleasingly, the Company's increased emphasis
on R&D has achieved scientific and technical innovations, which
have resulted in improvements to product quality.
The trading of raw products, sold without processing, generated
a profit of CNY1.9 million. This trading created an additional
source of income.
Looking forward, we expect trading conditions to remain
challenging especially in the mid to lower-end specialty chemical
market. The Chinese government has implemented stricter
environmental protection systems, which places greater emphasis on
the need for innovative products and techniques. While this
presents its challenges, the business is well placed to deliver to
these new standards and also capitalise on the opportunities these
stricter systems invite.
Our routine shutdown period for regular maintenance is expected
to be shortened by a technical upgrade to reduce loss on production
downtime.
We will continue to drive business performance by further
optimising our product mix, supporting new product development and
through our sustained focus on cost control.
Chief Financial Officer's Report
Turnover
Turnover was CNY728.3 million, slightly ahead of the previous
year (2015: CNY727.5 million). Overall sales volumes were 141,360
tonnes. Main product sales volumes were 125,395 tonnes, comparable
to FY2015 (2015: 125,098 tonnes). Average selling prices decreased
by 1.7% to CNY5,532 / tonne (2015: CNY5,629 / tonne), in the face
of strong competition. The table below sets out the external sales
volumes and average realized prices for the major products sold by
the Group in 2016 and 2015, and the corresponding percentage change
year-on-year.
Sales Volume Change Average Realized Change
('000 tonne) Price (CNY/tonne)
----------------- ----------------------
2016 2015 y-o-y 2016 2015 y-o-y
(%) (%)
--------------------- -------- ------- -------- ---------- ---------- --------
Dimethyl Carbonate 43 44 -0.7 4,407 4,011 9.9
Propylene
glycol 35 35 -0.8 6,891 7,732 -10.9
Isopropyl
alcohol 44 42 4.0 5,261 5,068 3.8
Diisopropyl
ether 3 4 -18.9 9,847 10,973 -10.3
--------------------- -------- ------- -------- ---------- ---------- --------
Total 125 125 0.3% 5,532 5,629 -1.7%
--------------------- -------- ------- -------- ---------- ---------- --------
Gross Profit
Gross profit was CNY114.9 million for 2016, up 36.1% compared
with 2015 (2015: CNY84.4 million). The growth in gross profit was
mainly attributable to increased sales of higher margin products
and a decline in cost of sales. Sales of high-end specialty
chemicals accounted for 11.2% of main products sales in 2016 (2015:
3.0%). Cost of sales decreased 4.6% compared to the same period in
the previous year. The price of Propylene Oxide and Methanol, the
two main raw materials, deceased 14.7% and 2.0% respectively in the
period under review. The Company correctly judged prices trends
through analysis of the raw material market, reducing inventory
when the prices of raw materials were high and taking advantage of
lower prices to increase stock.
Staff Remuneration Costs
Staff remuneration costs were CNY27.9 million, representing a
16.8% increase year-on-year (2015: CNY23.9 million). The increase
mainly arose from the appointment of new marketing personnel,
brought in to enhance the sales and marketing campaign, as well as
overall salary adjustments to compensate for inflation.
Depreciation and Amortization
Depreciation and amortization decreased to CNY27.2 million
(2015: CNY25.2 million) as a result of equipment scrapping.
Selling, General and Administrative Expenses
Selling expenses rose by 16.7% to CNY40.5 million (2015: CNY34.7
million) due to more aggressive sales and marketing activities in
restrained market conditions, which has resulted in an improvement
to customer service and profit growth. General and administrative
expenses increased by 24.0% to CNY51.1 million (2015: CNY41.2
million). This was attributable to increases in labour costs and
R&D expenses of 16.8% and 35.6% respectively. Social Security
and Public Accumulation Funds increased by19.2% and 9.6%,
respectively, as a result of increased labour costs. During the
period, the Company introduced a DuPont safety management system
and increased investment in safety and environmental protection by
27.9%, including pollution control, smoke monitoring and device
monitoring.
Net Exchange Gain
The Group recorded a net exchange gain of CNY2.4 million,
compared with CNY4.7 million in 2015.
Net Interest Expenses
Interest income decreased to CNY11.1 million (2015: CNY12.8
million), representing a decrease of 13.5%, mainly attributable to
a reduction in deposits to letters of credit.
Interest expenses decreased 27.5% to CNY15.0 million (2015:
CNY20.7 million) following repayment of bank loans during 2015.
Net interest expenses decreased to CNY4.0 million (2015: CNY8.0
million), representing a decrease of 49.9%.
Profit Before Taxation
Profit before taxation was CNY20.7 million for 2016 (2015:
CNY5.8 million). The Company generated better earnings, by focusing
on a higher margin product mix, although the average realized price
decreased. Meanwhile, cost of sales decreased 4.6% because
reduction of price of two main raw materials: Propylene Oxide and
Methanol.
Tax Expense
Tax expenses increased to CNY3.8 million (2015: CNY1.7 million)
as a result of higher taxable income.
Profit for the Financial Period
Profit for the year was CNY16.9 million (2015: CNY 4.1
million)
Cash and Cash Equivalents
Cash and cash equivalents increased to CNY55.0 million as at 31
December 2016, compared to CNY35.4 million for the same period in
2015 due to a decrease in working capital. The restricted cash was
CNY4.2 million as at 31 December 2016 (31 December 2015: CNY13.3
million). The decrease in restricted cash was attributable to the
reduction of letters of credit at the end of 2016.
Bank Loans
Bank loans remained unchanged of CNY80 million compared to FY
2015.
Cash Flow from Operating Activities
Cash flow from operating activities was CNY110.7 million for the
12 months ended 31 December 2016, compared to cash flow of CNY639.2
million for the prior year. In 2015 working capital was used to
repay bank loan.
Going Concern
The positive net asset position, positive earnings and cash flow
from operating activities for the reporting period, together with
the reduction in gearing ratio, have ensured that the Group is able
to operate as a going concern.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEARED 31 DECEMBER 2016
Notes 2016 2015
CNY'000 CNY'000
----------------------------------------------- ------- ----------- -----------
Revenue 3 728,274 727,521
Cost of sales (613,366) (643,092)
----------------------------------------------- ------- ----------- -----------
Gross profit 114,908 84,429
Other operating expenses 3 (1,070) 485
Administrative expenses (51,060) (41,175)
Selling and distribution expenses (40,542) (34,749)
----------------------------------------------- ------- ----------- -----------
Profit from operations 4 22,237 8,990
Finance expenses 6 (15,043) (20,742)
Finance income 3 13,509 17,529
----------------------------------------------- ------- ----------- -----------
Profit before tax 20,703 5,777
Tax expense 18 (3,757) (1,709)
----------------------------------------------- ------- ----------- -----------
Profit for the year 16,946 4,068
Other comprehensive profit, net of
tax
Items that will be reclassified subsequently
to profit or loss
----------------------------------------------- ------- ----------- -----------
Total comprehensive profit/(loss)
for the year, net of tax 16,946 4,068
----------------------------------------------- ------- ----------- -----------
Profit/(Loss) for the year attributable
to:
Owners of parent 16,921 4,059
Non-controlling interests 25 9
----------------------------------------------- ------- ----------- -----------
4,068
----------------------------------------------- ------- ----------- -----------
Total comprehensive profit/(loss)
for the year attributable to:
Owners of parent 16,921 4,059
Non-controlling interests 25 9
----------------------------------------------- ------- ----------- -----------
16,946 4,068
----------------------------------------------- ------- ----------- -----------
Earnings per share for profit/(loss)
attributable to the
ordinary equity holders of the parent
during the year
Basic 7 CNY0.442 CNY0.106
Diluted 8 CNY0.442 CNY0.106
----------------------------------------------- ------- ----------- -----------
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
FOR THE YEARED 31 DECMEBER 2016
Notes 2016 2015
CNY'000 CNY'000
----------------------------------- ------- ------------- -------------
ASSETS
Non-current assets
Property, plant and equipment 9 181,287 135,164
Intangible assets 10 10,819 12,111
192,106 147,275
----------------------------------- ------- ------------- -------------
Current assets
Inventories 12 39,798 28,595
Trade and other receivables 13 142,196 101,307
Amounts due from related parties 23 149,221 402,535
Restricted cash 14 4,156 13,259
Cash and cash equivalents 14 54,978 35,405
390,349 581,101
----------------------------------- ------- ------------- -------------
Total assets 582,455 728,376
----------------------------------- ------- ------------- -------------
LIABILITIES
Current liabilities
Short-term loans 15 80,000 80,000
Trade and other payables 17 121,570 89,182
Income tax payable 7,921 4,668
Amounts due to related parties 23 241,657 440,029
451,148 613,879
----------------------------------- ------- ------------- -------------
Non-current liabilities
Deferred income 16 2,129 2,250
----------------------------------- ------- ------------- -------------
2,129 2,250
----------------------------------- ------- ------------- -------------
Total liabilities 453,277 616,129
----------------------------------- ------- ------------- -------------
CAPITAL AND RESERVES
Share capital 19 598 598
Share premium 19 1,564,667 1,564,667
Other reserves 1,818 1,818
Foreign currency translation
reserve (587)
(587)
Statutory reserves 19 34,205 32,268
Accumulated losses 19 (1,471,616) (1,486,585)
----------------------------------- ------- ------------- -------------
Equity attributable to holders
of the parent 129,085 112,179
Non-controlling interests 93 68
----------------------------------- ------- ------------- -------------
Total equity 129,178 112,247
----------------------------------- ------- ------------- -------------
Total liabilities and equity 582,455 728,376
----------------------------------- ------- ------------- -------------
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 31 DECEMBER 2016
Attributable to equity holders of the parent
Foreign
currency Acc-
Share Share Other translation Statutory umulated Non-controlling Total
capital premium reserves reserve reserves losses Total interest equity
CNY'000 CNY'000 CNY'000 CNY'000 CNY'000 CNY'000 CNY'000 CNY'000 CNY'000
---------------- --------- ----------- ---------- ------------- ----------- ------------- --------- ----------------- ----------
Balance
as at 1
January
2015 598 1,564,686 1,818 (587) 31,575 (1,498,313) 99,777 48 99,825
Transfer
to statutory
reserves - (19) - - 693 (674 - 11 11
Previous
year
adjustment - - - - - 8,343 8,343 - 8,343
Transactions
with owners - (19) - - 693 7,669 8,343 11 8,354
Profit for
the year - - - - - 4,059 4,059 9 4,068
Other
comprehensive
income - - - - - - - - -
- Foreign
currency
translation - - - - - - - -
Total
comprehensive
prrofit
for the
year - - - - - 4,059 4,059 9 4,068
---------------- --------- ----------- ---------- ------------- ----------- ------------- --------- ----------------- ----------
Balance
as at 31
December
2015 598 1,564,667 1,818 (587) 32,268 (1,486,585) 112,179 68 112,247
---------------- --------- ----------- ---------- ------------- ----------- ------------- --------- ----------------- ----------
Foreign
currency Acc-
Share Share Other translation Statutory umulated Non-controlling Total
capital premium reserves reserve reserves losses Total interest equity
CNY'000 CNY'000 CNY'000 CNY'000 CNY'000 CNY'000 CNY'000 CNY'000 CNY'000
---------------- --------- ----------- ---------- ------------- ----------- ------------- --------- ----------------- ----------
Balance
as at 1
January
2016 598 1,564,667 1,818 (587) 32,268 (1,486,585) 112,179 68 112,247
Transfer
to statutory
reserves - - - 1,937 (1,937) - -
Previous
year
adjustment - - - - - (15) (15) - (15)
Transactions
with owners - - - - 1,937 (1,952) (15) - (15)
Profit for
the year - - - - - 16,921 16,921 25 16,946
Other
comprehensive
income - - - - - - - - -
- Foreign
currency
translation - - - - - - - - -
Total
comprehensive
prrofit
for the
year - - - - - 16,921 16,921 25 16,946
---------------- --------- ----------- ---------- ------------- ----------- ------------- --------- ----------------- ----------
Balance
as at 31
December
2016 598 1,564,667 1,818 (587) 34,205 (1,471,616) 129,085 93 129,178
---------------- --------- ----------- ---------- ------------- ----------- ------------- --------- ----------------- ----------
CONSOLIDATED STATEMENT OF CASH FLOW
FOR THE YEARED 31 DECEMBER 2016
2016 2015
CNY'000 CNY'000
Net cash generated from (used in) operating
activities([Note 2]) 110,716 639,200
-------------------------------------------------------- ----------- -----------
Cash flow from investing activities
Purchase of property, plant and equipment (76,421) (12,818)
Interest received - 12,790
Government grant received 321 459
-------------------------------------------------------- ----------- -----------
Cash flow generated from (used in) investing
activities (76,100) 431
-------------------------------------------------------- ----------- -----------
Cash flow from financing activities
Proceeds from bank borrowings 120,000 80,000
Repayment of bank borrowings (120,000) (702,888)
Interest paid (15,043) (20,742)
Dividends paid to shareholders - -
------------------------------------------------------- ----------- -----------
Cash flow generated from (used in) financing
activities (15,043) (643,630)
-------------------------------------------------------- ----------- -----------
Net increase (decrease) in cash and cash equivalents 19,573 (3,999)
Cash at beginning of year 35,405 39,404
Cash at end of year 54,978 35,405
-------------------------------------------------------- ----------- -----------
NOTES TO THE CONSOLIDATED STATEMENT OF CASH FLOW
FOR THE YEARED 31 DECEMBER 2016
(a) Cash flow from operating activities
2016 2015
CNY'000 CNY'000
------------------------------------------- ---------- -----------
Profit before tax 20,703 5,777
Adjustments for:
Amortisation of intangible assets 1,291 802
Provisions for doubtful debts 885 136
Depreciation of property, plant and
equipment 26,203 24,413
Loss on disposal of property, plant
and equipment 1,448 (51)
Amortisation of deferred capital
grants 1,050 1,000
Interest income (11,062) (12,790)
Finance expense 15,043 20,742
-------------------------------------------- ---------- -----------
Operating cash flows before working
capital changes 55,561 40,029
Working capital changes:
(Increase)/decrease in:
Inventories (11,204) 2,603
Trade and other receivables (40,88) 22,346
Amounts due from related parties 62,256 809,285
Restricted cash 9,104 3,361
Increase/(decrease) in:
Trade and other payables 32,388 (238,707)
-------------------------------------------- ---------- -----------
Cash generated from (used in) operations 107,220 638,917
Income tax paid 3,496 283
-------------------------------------------- ---------- -----------
Net cash generated from (used in)
operations 110,716 639,200
Net cash generated from (used in)
operating activities 110,716 639,200
-------------------------------------------- ---------- -----------
COMPANY INCOME STATEMENT
FOR THE YEARED 31 DECEMBER 2016
Notes 2016 2015
CNY'000 CNY'000
------------------------------------- ------- --------- ---------
Revenue 3 - -
Cost of sales - -
------------------------------------- ------- --------- ---------
Gross profit - -
Other operating expenses 3 - -
Administrative expenses (2,332) (2,487)
Selling and distribution expenses - -
------------------------------------- ------- --------- ---------
Loss from operations 4 (2,332) (2,487)
Finance expenses 6 - -
Finance income 3 - -
------------------------------------- ------- --------- ---------
Loss before tax (2,332) (2,487)
Tax expense 18 - -
------------------------------------- ------- --------- ---------
Loss for the year (2,332) (2,487)
------------------------------------- ------- --------- ---------
Other comprehensive profit, net of - -
tax
------------------------------------- ------- --------- ---------
Total comprehensive profit/ (loss)
for the year, net of tax (2,332) (2,487)
------------------------------------- ------- --------- ---------
COMPANY STATEMENT OF FINANCIAL POSITION
FOR THE YEARED 31 DECEMBER 2016
2016 2015
Notes CNY'000 CNY'000
---------------------------------------- ------- ---------- ----------
ASSETS
Non-current assets
Investment in subsidiary undertakings 10 307 307
Amount due from related parties 23 54,027 56,359
Other receivables 6 6
---------------------------------------- ------- ---------- ----------
54,340 56,672
---------------------------------------- ------- ---------- ----------
Current assets
Cash and cash equivalents - -
---------------------------------------- ------- ---------- ----------
Total assets 54,340 56,672
---------------------------------------- ------- ---------- ----------
CAPITAL AND RESERVES
Share capital 19 598 598
Share premium 19 140,390 140,390
Other reserve 1,922 1,922
Accumulated losses 19 (88,570) (86,238)
---------------------------------------- ------- ---------- ----------
Total equity 54,340 56,672
---------------------------------------- ------- ---------- ----------
COMPANY STATEMENT OF CHANGE IN EQUITY
FOR THE YEARED 31 DECEMBER 2016
Share capital Share premium Other reserve Accumulated Total
losses
CNY'000 CNY'000 CNY'000 CNY'000 CNY'000
---------------------------- --------------- --------------- --------------- ------------- ---------
Balance as at 1 January
2015 598 140,390 1,922 (83,751) 59,159
Loss for the year - - - (2,487) (2,487)
---------------------------- --------------- --------------- --------------- ------------- ---------
Balance as at 31 December
2015 598 140,390 1,922 (86,238) 56,672
---------------------------- --------------- --------------- --------------- ------------- ---------
CNY'000 CNY'000 CNY'000 CNY'000 CNY'000
---------------------------- --------------- --------------- --------------- ------------- ---------
Balance as at 1 January
2016 598 140,390 1,922 (86,238) 56,672
Loss for the year - - - (2,332) (2,332)
---------------------------- --------------- --------------- --------------- ------------- ---------
Balance as at 31 December
2016 598 140,390 1,922 (88,570) 54,340
---------------------------- --------------- --------------- --------------- ------------- ---------
COMPANY STATEMENT OF CASH FLOW
FOR THE YEARED 31 DECEMBER 2016
2016 2015
CNY'000 CNY'000
-------------------------------------------- --------- ---------
Cash flow from operating activities
Loss before income tax (2,332) (2,487)
Decrease in amounts due from related
parties 2,332 2,487
-------------------------------------------- --------- ---------
Cash flow from operating activities - -
-------------------------------------------- --------- ---------
Cash flow from financing activities
Dividends paid to shareholders - -
-------------------------------------------- --------- ---------
Cash flow from financing activities - -
-------------------------------------------- --------- ---------
Net increase in cash and cash equivalents - -
-------------------------------------------- --------- ---------
Cash at beginning of year - -
-------------------------------------------- --------- ---------
Cash at end of year - -
-------------------------------------------- --------- ---------
NOTES TO FINANCIAL STATEMENTS
1. Background and Basis of Preparation
1.1 The Company
HaiKe Chemical Group Ltd. (the "Company") was incorporated on 20
June 2006. The address of the registered office is at Scotia Center
4(th) Floor, P.O. Box 2804, George Town, Grand Cayman, Cayman
Islands. The principal activity of the Company is that of
investment holding. The Company's ultimate parent company is HiTech
Chemical Investment Ltd., a company incorporated in the British
Virgin Islands.
The principal activities of the Group were manufacturing and
sale of petrochemical and chemical products during the reporting
period. Following the trading update announced in December 2013,
Board of Directors decided a major restructuring plan by disposing
of all investments except for Spring Chemical and HaiKe Trading.
The proposal of restructuring was approved in shareholder's meeting
on 15 May 2014. The restructuring was completed in June 2014. The
principal place of business of the Company is Shengli Industrial
Park, Dongying City, Shandong Province, China.
The financial statements present information about the Company
and its subsidiaries (the "Group") as a consolidated group of
companies.
1.2 Basis of Preparation
The consolidated financial statements of the Group have been
prepared in accordance with those International Financial Reporting
Standards and Interpretations in force ("IFRS"), which comprise
standards and interpretations issued by the International
Accounting Standards Board ("IASB"), and International Accounting
Standards ("IASs") and Interpretations issued by the International
Financial Reporting Interpretations Committee ("IFRICs") that
remain in effect, as adopted by the European Union.
The Company's functional and presentational currency is the
Chinese Yuan ("CNY"). All values are rounded to the nearest
thousand (CNY'000) except when otherwise indicated.
The preparation of financial statements requires an assessment
on the validity of the going concern assumption. The validity of
the going concern assumption is dependent on finance being
available for the continuing working capital requirements of the
Group.
As at 31 December 2016, the Group had net assets of CNY129.1
million (2015: CNY112.2 million) and net current liabilities of
CNY60.8million (2015: net current liabilities CNY32.8 million).
The Directors have reviewed forecasts and budgets for the period
ended 31 December 2016, which have been drawn up with appropriate
regard for the current economic environment and the particular
industry in which the Group operates. These were prepared with
reference to historical and current industry knowledge, taking
group restructuring and future strategy of the Group into
account.
The Directors consider that the Group and its remaining
subsidiaries following its restructuring have adequate resources
and committed borrowing facilities to continue in operational
existence for the foreseeable future.
However, the Group is reliant on the renewal of the short term
bank loans. Although the Directors believe that the Group will be
able to renew their facilities due to the Group's relationships
with its banks, there is the risk that in the future, the Group,
may not be a going concern if the Group is unable to meet its debts
as they fall due.
In approving the financial statements, the Board has recognized
that these circumstances create a level of uncertainty. However,
having made enquiries and considered the uncertainties outlined
above, the directors have a reasonable expectation that the Group
has sufficient resources to continue in operational existence for
the foreseeable future. Accordingly, the Board believes it is
appropriate to adopt the going concern basis in the preparation of
the financial statements.
1.3 Changes in Accounting Policies
New standards, interpretations and amendments
1.3.1 Standards/Amendments that are effective and have
been adopted in the financial statements for the current
year.
The following new standards and amendments to standards
are mandatory for the Group for financial year beginning
1 January 2016. Except as noted, the implementations
of these standards have not a material effect on the
Group. Disclosure Initiative - Amendments to IAS 1
IAS 16 and IAS 38 Clarification of Acceptable
Methods of Depreciation and Amortisation - Amendments
to IAS 16 and IAS 38
IFRS 10, IFRS 12 and IAS 28 Investment Entities:
Applying the Consolidation Exception - Amendments
to IFRS 10, IFRS 12 and IAS 28
1.3.2 Standards/Amendments that have been issued but
are not yet effective for the period presented.
Standards, amendments and interpretations which are
effective for reporting periods beginning after the
date of these financial statements which have not been
adopted early: Standard Impact on initial application Effective
date
Disclosure Initiative - Amendments to 1 January
IAS 7 2017
IFRS 15 Revenue from contracts with customers 1 January
2018
IFRS 9 Financial instruments 1 January
2018
IFRS 2 Classification and Measurement 1 January
of Share-based Payment Transactions - 2018
Amendments to IFRS 2
Applying IFRS 9 Financial Instruments 1 January
with IFRS 4 Insurance Contracts - Amendments 2018
to IFRS 4
IFRIC Interpretation 22 Foreign Currency 1 January
Transactions and Advance Consideration 2018
IFRS 16 Leases 1 January
2019
Except as noted, the implementation of these standards is not
expected to have a material effect on the Group.
2. Significant Accounting Policies
2.1 Significant management judgment and estimation
uncertainty
The preparation of financial statements in conformity with IFRS
requires management to exercise judgment in the process of applying
the Group's accounting policies and requires the use of accounting
estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of financial statements and the reported
amount of revenue and expenses during the reporting period.
The following judgments and estimates that have a significant
risk of causing a material adjustment to the carrying amount of
assets and liabilities within the reporting period are disclosed
below:
2.1.1 Significant management judgment
In the process of applying the Company's accounting policies,
management has made the following judgments, apart from those
involving estimations, which have the most significant effect on
the amounts recognized in the financial statements:
Research and development costs
Charge all research cost to expense.
Development costs are capitalised only after technical and
commercial feasibility of the asset for sale or use have been
established. This means that the entity must intend and be able to
complete the intangible asset and either use it or sell it and be
able to demonstrate how the asset will generate future economic
benefits.
2.1.2 Estimation uncertainty
The key assumptions concerning the future and other key sources
of estimation uncertainty at the reporting date, that have a
significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year
are discussed below.
a) Provision for impairment of account receivables
The Group makes sales on credit. A proportion of the outstanding
credit sales may prove uncollectible in due course. An estimate is
made of the uncollectible portion of accounts receivables using a
percentage based on the aging profile of the amounts
outstanding.
Although these estimates are based on management's best
knowledge of current events and actions, actual results may differ
from these estimates.
b) Depreciation of plant and equipment
The cost of plant and equipment used for the manufacturing
process is depreciated on a straight line basis over its estimated
useful life. Managements' estimate of the useful life of plant and
equipment is within 3 to 30 years. Management believes that these
are common life expectancies applied in the chemical industry.
Changes in the expected level of usage and technological
developments could impact the economic use life and the residual
value of these assets, therefore, future depreciation charges could
be revised. More details including carrying values are included in
Note 8.
c) Inventory
The Group reviews the net realizable value of, and demand for
its inventory on a monthly basis to provide assurance that recorded
inventory is stated at lower of cost and net realizable value.
Factors that could impact estimated demand and selling prices
include the timing and success of future technological innovations,
competitor actions, suppliers' prices and economic trends. Changes
of the expected net realizable value of inventory could potentially
result in an increase or reduction in the profit for the year.
d) Fair value measurement
Management uses valuation techniques to determine the fair value
of financial instruments (where active market quotes are not
available) and non-financial assets. This involves developing
estimates and assumptions consistent with how market participants
would price the instrument. Management bases its assumptions on
observable data as far as possible but this is not always
available. In that case management uses the best information
available. Estimated fair values may vary from the actual prices
that would be achieved in an arm's length transaction at the
reporting date (see Note 23).
2.2 Functional and Presentation Currency
a) Functional currency
The directors have determined the currency of the primary
economic environment in which the Company and the Group operates,
to be Renminbi ("CNY"). Sales and major costs of the providing
goods and services including major operating expenses are primarily
influenced by fluctuations in CNY against US$.
b) Foreign currency transactions
Transactions in foreign currencies are measured in the
respective functional currencies of the consolidated entities and
are recorded on initial recognition in the functional currencies at
exchange rates approximating those ruling at the transaction dates.
Monetary assets and liabilities denominated in foreign currencies
are translated at the closing rate of exchange ruling at the
reporting date.
Non-monetary items that are measured in terms of historical cost
in a foreign currency are translated using the exchange rates as at
the date of the initial transactions. Non-monetary items measured
at fair value in a foreign currency are translated using the
exchange rates at the date when the fair values are determined.
Exchange differences arising on the settlement of monetary items
or on translating monetary items at the reporting date are
recognized in the statement of comprehensive income except for
exchange differences arising on monetary items that form part of
the Company and the Group's net investment in foreign subsidiaries,
which are recognized initially in a separate component of equity as
foreign currency translation reserve in the consolidated statement
of financial position and recognized in the consolidated statement
of comprehensive income on disposal of the subsidiary.
c) Foreign currency translation
The presentation currency of the Company and the Group is CNY,
financial information denominated in other currencies have been
translated into CNY.
Assets and liabilities for each reporting are presented at the
closing rate ruling at that reporting date; and income and expenses
for statement of comprehensive income are translated at average
exchange rates for the year, which approximates to the exchange
rates at the date of transactions.
All resulting exchange differences are recognized in the
currency translation reserve, a separate component of equity.
Goodwill and fair value adjustments arising on the acquisition of
foreign operations are treated as assets and liabilities of the
foreign operations and are recorded in the functional currency of
the foreign operations and translated at the closing rate at the
reporting date.
2.3 Subsidiaries and Principles of Consolidation
a) Subsidiaries
Where the Company has control over an investee, it is classified
as a subsidiary. The Company controls an investee if all three of
the following elements are present: power over the investee,
exposure to variable returns from the investee, and the ability of
the investor to use its power to affect those variable returns.
Control is reassessed whenever facts and circumstances indicate
that there may be a change in any of these elements of control. The
results of acquired operations are included in the consolidated
statement of comprehensive income from the date on which control is
obtained. Subsidiaries are deconsolidated from the date on which
control ceases.
b) Principles of consolidation
The consolidated financial statements comprise the financial
statements of the Group and its subsidiaries as at the reporting
date. The financial statements of the subsidiaries are prepared for
the same reporting date as the parent company. Consistent
accounting policies are applied for like transactions and events in
similar circumstances.
All intra-group balances, transactions, income, expenses,
profits and losses resulting from inter-group transactions that are
recognized and eliminated in full.
Subsidiaries are fully consolidated from the date of
acquisition, being the date on which the Group obtains control, and
continue to be consolidated until the date such control ceases.
Acquisitions of subsidiaries are accounted for using the
purchase method. The cost of an acquisition is measured as the fair
value of the assets given, equity instruments issued and
liabilities incurred or assumed at the date of exchange.
Any excess of the cost of the business combination over the
Group's interest in the net fair value of the identified assets,
liabilities and contingent liabilities represents goodwill. The
goodwill is accounted for in accordance with the accounting policy
for goodwill stated below.
Any excess of the Group's interest in the net fair value of the
identifiable assets, liabilities and contingent liabilities over
the cost of business combination is recognized in the statement of
comprehensive income on the date of acquisition.
Non-controlling interests represent the portion of net assets in
subsidiaries not held by the Group. These are presented in the
consolidated statement of comprehensive income within equity,
separately from the parent shareholder's equity, and the share of
profit or loss is separately disclosed in the consolidated
statement of comprehensive income.
2.4 Property, Plant and Equipment
Property, plant and equipment are recorded at historic cost,
less accumulated depreciation and any impairment loss where the
recoverable amount of the asset is estimated to be lower than its
carrying amount.
Property, plant and equipment in the course of construction for
production or administrative purposes is carried at cost, less any
recognized impairment loss. Depreciation of these assets commences
when the assets are ready for their intended use.
Depreciation is charged so as to write off the cost of the
assets over their estimated useful lives, using the straight-line
method, as follows:
Buildings 5 - 30 years
Machinery equipment 5 - 19 years
Electronic equipment, furniture and fixtures 3 - 10 years
Motor vehicles 3 - 10 years
Land use rights 18.75 years
The residual values, useful life and depreciation method are
reviewed at each financial year-end to ensure that the amount,
method and period of depreciation are consistent with previous
estimates and the expected pattern of consumption of the future
economic benefits embodied in the items of property, plant and
equipment. The carrying values of property, plant and equipment are
reviewed for impairment when events or changes in circumstances
indicate that the carrying value may not be recoverable.
The up-front payments made for land use rights are expensed in
the consolidated statement of comprehensive income on a
straight-line basis over the period of the lease, which is 18.75
years, or where there is impairment, the impairment is expensed in
the consolidated statement of comprehensive income.
The gain or loss arising on the disposal or retirement of an
item of property, plant and equipment is determined as the
difference between the sales proceeds and the carrying amount of
the asset and is recognized in the consolidated statement of
comprehensive income.
At the end of each reporting period, an entity is required to
assess whether there is any indication that an asset may be
impaired (i.e. its carrying amount may be higher than its
recoverable amount). If there is an indication that an asset may be
impaired, then the asset's recoverable amount must be
calculated.
Indications of impairment
External sources:
l market value declines
l negative changes in technology, markets, economy, or laws
l increases in market interest rates
l net assets of the company higher than market
capitalization
Internal sources:
l obsolescence or physical damage
l asset is idle, part of a restructuring or held for
disposal
l worse economic performance than expected
l for investments in subsidiaries, joint ventures or associates,
the carrying amount is higher than the carrying amount of the
investee's assets, or a dividend exceeds the total comprehensive
income of the investee
There is no indication in the above items that any asset may be
impaired for the year ended 31 December 2016.
2.5 Intangible Assets
Intangible assets acquired separately are measured on initial
recognition at cost. The cost of intangible assets acquired in a
business combination is their value at the date of acquisition.
Following initial recognition, intangible assets are carried at
cost less any accumulated amortization and any accumulated
impairment losses.
Intangible assets are amortized through administrative expenses
on a straight-line basis over their estimated useful economic lives
and assessed for impairment whenever there is an indication that
the intangible assets may be impaired. The amortization period and
amortization method for intangible assets are reviewed at least at
each financial year end to ensure that the method and period of
amortisation are consistent with previous estimates.
The estimated useful economic lives of the Group's intangible
fixed assets are as follows:
patented technology 10 years
The gain or loss arising on the disposal of the assets is
determined as the difference between the sales proceeds and the
carrying amount of the asset and is recognized in the consolidated
statement of comprehensive income.
2.6 Impairment of Non-financial Assets
The Group assesses at each reporting date whether there is an
indication that an asset may be impaired. If any such indication
exists, or an annual impairment test for an asset is required, the
Group makes an estimate of the asset's recoverable amount.
An asset's recoverable amount is the higher of an asset's or
cash-generating unit's fair value less costs to sell and its value
in use 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 assessing value in
use, the estimated future cash flow 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 risk specific to the
asset. Where the carrying amount of an asset exceeds its
recoverable amount, the asset is considered impaired and is written
down to its recoverable amount.
As assessment is made at each reporting date as to whether there
is any indication that previously recognized impairment losses
recognized for an asset other than goodwill may no longer exist or
may have decreased. If such indication exists, the recoverable
amount is estimated. A previously recognized impairment loss is
reversed only if there has been a change in the estimates used to
determine the asset's recoverable amount since the last impairment
loss is recognized. If that is the case the carrying amount of the
asset is increased to its recoverable amount. That increased amount
cannot exceed the carrying amount that would have been determined,
net of depreciation, had no impairment loss been recognized for the
asset in prior years. Reverse of an impairment loss is recognized
in the statement of comprehensive income. After such a reversal,
the depreciation charge is adjusted for future periods to allocate
the asset's revised carrying amount, less any residual value, on a
systematic base over its remaining useful life. The Group does not
reverse in a subsequent period, an impairment loss recognized for
goodwill.
2.7 Financial Assets
The Group holds its investments in financial assets in the
category of financial assets as loans and receivables.
Loans and receivables are non-derivative financial assets with
fixed or determinable payments that are not quoted in an active
market. They arise principally through the provision of goods and
services to customers (e.g. trade receivables), but also
incorporate other types of contractual monetary asset. They are
initially recognized at fair value plus transaction costs that are
directly attributable to their acquisition or issue, and are
subsequently carried at amortized cost using the effective interest
rate method, less provision for impairment.
Impairment provisions are recognized when there is objective
evidence (such as significant financial difficulties on the part of
the counterparty or default or significant delay in payment) that
the Group will be unable to collect all of the amounts due under
the terms receivable, the amount of such a provision being the
difference between the net carrying amount and the present value of
the future expected cash flows associated with the impaired
receivable. For trade receivables, which are reported net, such
provisions are recorded in a separate allowance account with the
loss being recognized within administrative expenses in the
statement of comprehensive income. On confirmation that the trade
receivable will not be collectable, the gross carrying value of the
asset is written off against the associated provision.
From time to time, the Group elects to renegotiate the terms of
trade receivables due from customers with which it has previously
had a good trading history. Such renegotiations will lead to
changes in the timing of payments rather than changes to the
amounts owed and, in consequence, the new expected cash flows are
discounted at the original effective interest rate.
Cash and cash equivalents comprise cash in hand and demand
deposits. Cash equivalents are short-term, highly liquid
investments that are readily convertible to known amounts of cash
and which are subject to an insignificant risk of changes in
value.
2.8 Financial Liabilities and Equity
Financial liabilities and equity instruments are classified
according to the substance of the contractual arrangement entered
into. Significant financial liabilities include interest-bearing
short-term bank loans, trade and other payables.
Trade payables and other short-term monetary liabilities are
initially recognized at fair value and subsequently carried at
amortized cost using the effective interest method.
All loans and borrowings are initially recognized at fair value
net of any transaction costs directly attributable to the issue of
the instrument. Such interest bearing liabilities are subsequently
measured at amortized cost using the effective interest rate
method, which ensures that any interest expense over the period to
repayment is at a constant rate on the balance of the liability
carried in the statement of financial position. Interest expense in
this context includes initial transaction costs and premium payable
on redemption, as well as any interest or coupon payable while the
liability is outstanding.
2.9 Inventories
Inventories are valued at the lower of cost and net realizable
value. Cost incurred in bringing the inventories to their present
location and condition is accounted for as follows:
Raw materials * purchase cost on a weighted average basis
Finished goods and work-in-process
* costs of direct materials and labor and a proportion
of manufacture overheads based on normal operating
capacity but excluding borrowing costs.
Net realizable value is the estimated selling price in the
ordinary course of business less estimated costs of completion and
the estimated costs necessary to make the sale.
2.10 Revenue Recognition
Revenue is recognized to the extent that it is probable that the
economic benefits will flow to the Group and the revenue can be
reliably measured. The following specific recognition criteria must
also be met before revenue is recognized.
a) Sales of goods
Revenue is recognized upon the transfer of significant risk and
rewards of ownership of the goods to the customer, which coincides
with delivery and acceptance of the goods sold.
b) Interest income
Interest income is accrued on a time apportioned basis, by
reference to the principal outstanding and at the interest rate
applicable, on an effective yield basis.
2.11 Government Grants
Government grants are not recognized in other operating income
until there is reasonable assurance that the Group will comply with
the conditions for their receipt and that the grant will be
received. In the event that a grant that has been recognized
appears likely to have to be repaid, provision is be made for the
estimated liability.
When a grant relates to an expense item, it is recognized in the
consolidated statement of comprehensive income over the period
necessary to match it on systematic basis to the costs that it is
intended to compensate. Where a grant relates to an asset, it is
included in deferred income and amortized to the consolidated
statement of comprehensive income in equal annual installments over
the expected useful life of the relevant asset.
2.12 Employee Benefits
Obligations for contributions to defined contribution pension
plans are recognized as an expense in the statement of
comprehensive income as incurred.
Bonuses for staff are accrued when the Group has an obligation
to settle the liability for staff's past performance at the
financial year end. The bonus accrual is stated at the present
value of the discounted cash flows based upon the expected timing
of bonus payments.
2.13 Share-based Payments
Where equity settled share options are awarded to employees, the
fair value of the options at the date of grant is charged to the
consolidated statement of comprehensive income over the vesting
period. Non-market vesting conditions are taken into account by
adjusting the number of equity instruments expected to vest at each
reporting date so that, ultimately, the cumulative amount
recognized over the vesting period is based on the number of
options that eventually vest. Where the terms and conditions of
options are modified before they vest, the increase in the fair
value of the options, measured immediately before and after the
modification, is also charged to the consolidated statement of
comprehensive income over the remaining vesting period.
Where equity instruments are granted to persons other than
employees, the consolidated statement of comprehensive income is
charged with the fair value of goods and services received.
The Group also operates a phantom share option scheme (a cash
settled share-based payment). An option pricing model is used to
measure the Group's liability at each reporting date, taking into
account the terms and conditions on which the bonus is awarded and
the extent to which employees have rendered service. Movements in
the liability (other than cash payments) are recognized in the
consolidated statement of comprehensive income.
2.14 Taxation
Current income tax assets and liabilities comprise those
obligations to fiscal authorities in the countries in which the
Group carries out its operations. They are calculated according to
the tax rates and tax laws applicable to the fiscal period and the
country to which they relate. Tax expense recognized in profit or
loss comprises the sum of deferred tax and current tax not
recognized in other comprehensive income or directly in equity.
Current tax assets and liabilities for the current and prior
period are measured at the amount expected to be recovered from or
paid to the taxation authorities. The tax rates and tax laws used
to compute the amount are those that are enacted or substantively
enacted by the reporting date.
Deferred tax assets and liabilities are recognized where the
carrying amount of an asset or liability in the statement of
financial position differs from its tax base, except for
differences arising on:
(2) the initial recognition of goodwill;
(2) the initial recognition of an asset or liability in a
transaction which is not a business combination and at the time of
the transaction affects neither accounting or taxable profit; and
investments in subsidiaries and jointly controlled entities where
the group is able to control the timing of the reversal of the
difference and it is probable that the difference will not reverse
in the foreseeable future.
Recognition of deferred tax assets is restricted to those
instances where it is probable that taxable profit will be
available against which the difference can be utilized.
The amount of the asset or liability is determined using tax
rates that have been enacted or substantively enacted by the
reporting date and are expected to apply when the deferred tax
liabilities/(assets) are settled/(recovered).
Deferred tax assets and liabilities are offset when the Group
has a legally enforceable right to offset current tax assets and
liabilities and the deferred tax assets and liabilities relate to
taxes levied by the same tax authority on either: the same taxable
Group company; or different Group entities which intend either to
settle current tax assets and liabilities on a net basis, or to
realize the assets and settle the liabilities simultaneously, in
each future period in which significant amounts of deferred tax
assets or liabilities are expected to be settled or recovered.
2.15 Segment Reporting
The Group's report segments reflect the internal format provided
to the chief operating decision maker and are as follows:
The chemical segment is a diverse supplier of methyl carbonate,
propylene and relating products which used in the areas of medical,
agriculture, food and textile industry.
The trading segment is a Hong Kong company trades specialty
chemicals.
Measurement of operating segment profit or loss, assets and
liabilities
The accounting policies of the operating segments are the same
as those described in the summary of significant policies. The
Group evaluates performance and operating segment profit or loss
from operations before tax not including non-recurring losses, such
as restructuring costs and goodwill impairment.
Inter-segment sales are priced along the same lines as sales to
external customers. The policy was applied consistently throughout
the current and prior period.
Segment assets exclude tax assets and assets used primarily for
corporate purposes. Segment liabilities exclude tax liabilities.
Even though loans and borrowings arise from finance activities
rather than operating activities, they are allocated to the
segments based are relevant factors (e.g. funding requirements).
Details are provided in the reconciliations from segment assets and
liabilities to the Group position.
3. Revenue and other income
2016 2015
CNY'000 CNY'000
-------------------------------- --------- ---------
Sale of goods 728,274 727,521
-------------------------------- --------- ---------
Other operating income/(Loss)
Government grant income 321 459
Other income/(Loss) (1,391) 26
-------------------------------- --------- ---------
(1,070) 485
-------------------------------- --------- ---------
Finance income
Interest income 11,062 12,790
Exchange gain 2,447 4,739
-------------------------------- --------- ---------
13,509 17,529
-------------------------------- --------- ---------
Total income 740,713 745,535
-------------------------------- --------- ---------
Sale of goods represents the invoiced amount of delivered goods
net of discounts, returns and valued added tax. All intra-group
transactions are excluded from the revenue of the consolidated
Group.
4. Segmental information
a) Operating segment
The following table presents revenue and loss/profit from the
Group's operating segments for the financial years ended 31
December 2016 and 2015
2016 2015
CNY'000 CNY'000
-------------------------------------------- --------- ---------
Sales to external customers
Chemical products 726,138 701,258
Trading 2,136 26,263
728,274 727,521
-------------------------------------------- --------- ---------
Gross profit for the year
Chemical products 114,910 84,930
Trading (3) (500)
114,908 84,429
-------------------------------------------- --------- ---------
Profit /(Loss) before tax
Chemical products 23,132 8,578
Trading (87) (305)
Unallocated expense - Head office cost (2,341) (2,496)
--------------------------------------------- --------- ---------
Profit /(Loss) from operations before tax 20,703 5,777
Income tax expenses (3,757) (1,709)
--------------------------------------------- --------- ---------
Profit for the year 16,946 4,068
--------------------------------------------- --------- ---------
2016 2015
CNY'000 CNY'000
-------------------------------- ----------- -----------
Segment assets
Chemical products 489,324 415,874
Trading 80,703 360,981
Unallocated assets 163,379 163,380
Less: Intersegment balance (150,979) (211,859)
582,454 728,376
-------------------------------- ----------- -----------
Segment liabilities
Chemical products 417,441 363,351
Trading 48,227 328,390
Unallocated liabilities 107,777 105,437
Less: Intersegment balance (120,168) (181,049)
453,277 616,129
-------------------------------- ----------- -----------
Other segment information
Capital expenditures
Chemical products 76,421 12,818
Trading - -
-------------------------------- ----------- -----------
76,421 12,818
-------------------------------- ----------- -----------
Depreciation and amortization
Chemical products 27,493 25,213
Trading 2 2
-------------------------------- ----------- -----------
27,495 25,215
-------------------------------- ----------- -----------
Finance income
Chemical products 13,425 3,974
Trading 84 13,555
-------------------------------- ----------- -----------
13,509 17,529
-------------------------------- ----------- -----------
Finance expense
Chemical products 15,043 8,463
Trading - 12,279
15,043 20,742
-------------------------------- ----------- -----------
Capital expenditures include additions to property, plant and
equipment and intangible assets.
b) Geographical Information
The following table provides an analysis of the Group's sales in
operations by geographical market.
External Non-current External Non-current
Revenue assets Revenue assets
2016 2016 2015 2015
CNY'000 CNY'000 CNY'000 CNY'000
------------------------------ ---------- ------------- ---------- ------------- --------- ---------
People's Republic of China 498,940 192,106 468,115 147,275
Exports 229,334 - 259,406 -
------------------------------ ---------- ------------- ---------- ------------- --------- ---------
728,274 192,106 727,521 147,275
------------------------------ ---------- ------------- ---------- ------------- --------- ---------
Sales to external customers
USA India Korea Pakistan Others Total
2016 2016 2016 2016 2016 2016
CNY'000 CNY'000 CNY'000 CNY'000 CNY'000 CNY'000
------------------------------ ---------- ------------- ---------- ------------- --------- ---------
Export sales to 22,785 14,771 6,249 5,706 179,824 229,334
------------------------------ ---------- ------------- ---------- ------------- --------- ---------
USA Belarus India Australia Others Total
2015 2015 2015 2015 2015 2015
CNY'000 CNY'000 CNY'000 CNY'000 CNY'000 CNY'000
------------------------------ ---------- ------------- ---------- ------------- --------- ---------
Export sales to 18,395 25,050 14,758 9,275 191,927 259,406
------------------------------ ---------- ------------- ---------- ------------- --------- ---------
5 Profit from Operations
2016 2015
CNY'000 CNY'000
------------------------------------------------------- --------- ---------
This has been arrived at after charging/(crediting):
Cost of inventories recognized as
expense 613,367 643,092
Depreciation of property, plant and
equipment 8,200 24,413
Staff costs 27,868 23,857
Remuneration of auditors:
Audit of consolidated financial statements
Amortization of intangible assets 1,291 802
Loss on disposal of property, plant
and equipment 1,448 (51)
------------------------------------------------------- --------- ---------
6. Finance Expenses
2016 2015
CNY'000 CNY'000
---------------------------- --------- ---------
Interest expenses on bank
and other loans 15,043 20,742
Exchange loss - -
15,043 20,742
---------------------------- --------- ---------
7. Earnings per Share
Profit per share has been calculated on the basis of the net
profit attributable to equity shareholders of the parent of
CNY16,920,954 (2015: CNY4,059,000).
The profit for the financial year that is attributable to equity
holders of the parent was as follows:
2016 2015
CNY'000 CNY'000
---------------------------------------- --------- ---------
Profit for the year
attributable to equity holders of the
parent 16,921 4,059
---------------------------------------- --------- ---------
The weighted average number of ordinary shares used in the
calculation of earnings per share has been derived as follows:
2016 2015
--------------------------------------------- ------------ ------------
Weighted average number of ordinary shares
- basic & diluted 38,353,571 38,353,571
--------------------------------------------- ------------ ------------
The effect of the ESOP discussed in note 7 was anti-dilutive for
the year 2015 and 2016.
8. Share-based Payment
The Company operates two share based remuneration schemes for
employees: an equity-settled Employee Share Ownership Plan ("ESOP")
and a cash-settled Phantom Employee Share Ownership Plan ("Phantom
ESOP"). All Directors and part of the management team are eligible
to participate in the ESOP/Phantom ESOP scheme. The only vesting
condition is that the individual remains an employee of the Group
over the 3-year period and the options will lapse if the individual
leaves within 1 year of satisfying this criterion.
2016 2015
Exercise ESOP Phantom Exercise ESOP Phantom
Price Number ESOP Price Number ESOP
(p) Number (p) Number
----------------------- ---------- --------- ----------- ---------- --------- -----------
Outstanding at
beginning of period 58.25 536,950 3,298,407 58.25 536,950 3,298,407
Granted during - - - - - -
the period
Forfeited during - - - - - -
the period
Exercised during - - - - - -
the period
Lapsed during the - - - - - -
period
Outstanding at
the end of period 58.25 536,950 3,298,407 58.25 536,950 3,298,407
----------------------- ---------- --------- ----------- ---------- --------- -----------
The exercise price of options is 58.25p (2011: 58.25p) and
contractual life was 10 years (2011: 10 years). The options are
exercisable in the following installments: 40% on the first
anniversary of the Grant Date; 30% on the second anniversary of the
Grant Date; and the remaining 30% on the third anniversary of the
Grant Date. The Grant Date for the issued Options and Phantom
Options is 1 February 2011.
The fair value of each option at grant date was 25p.
For the Phantom ESOP, the intrinsic value was zero at end of
2016 and 2015 as the market value of the Group's shares was below
the exercise price of the options.
2016 2015
CNY CNY
--------------------------------------- ------ ------
Phantom share option scheme liability
(included within employee benefits) - -
Intrinsic value, at the end of
the period of liabilities for which
the employee's right to payment
had vested - -
--------------------------------------- ------ ------
The following information is relevant in the determination of
the fair value of options granted during the period under the
equity- and cash-settled share based remuneration schemes operated
by HaiKe.
2016 2015
------------------------------------------ --------------- ---------------
Option pricing model used Black-Scholes Black-Scholes
Share price at date of grant (in pence) 12.5 5.75
Exercise price (in pence) 58.25 58.25
Contractual life (in years) -
Expected volatility 80.72% 71.88%
Risk-free interest rate 1.24% 1.96%
------------------------------------------ --------------- ---------------
The volatility assumption, measured at the standard deviation of
expected share price returns, is based on a statistical analysis of
daily share prices over the last two years. (2015: two years).
The share-based remuneration expense comprises:
2016 2015
CNY CNY
--------------------------- ------ ------
Equity-settled ESOP - -
Cash-settled Phantom ESOP - -
--------------------------- ------ ------
- -
--------------------------- ------ ------
The Group did not enter into any share-based payment
transactions with parties other than employees and Directors during
the current or previous period.
9. Property, Plant and Equipment
Buildings Machinery Electronic Motor Land use Total
equipment equipment vehicles rights
CNY'000 CNY'000 CNY'000 CNY'000 CNY'000 CNY'000
---------------------- ----------- ------------ ------------ ----------- ---------- ----------
Cost :
At 1 January 2015 18,806 332,412 5,402 540 3,496 360,656
---------------------- ----------- ------------ ------------ ----------- ---------- ----------
Additions 701 11,959 91 67 - 12,818
Disposals - - - - - -
At 31 December 2015 19,507 344,371 5,493 607 3,496 373,474
---------------------- ----------- ------------ ------------ ----------- ---------- ----------
Additions 1,957 74,021 443 - - 76,421
Disposals - (20,888) (1,034) (177) - (22,099)
At 31 December 2016 21,464 397,504 4,902 430 3,496 427,796
---------------------- ----------- ------------ ------------ ----------- ---------- ----------
Accumulated depreciation:
At 1 January 2015 4,187 204,632 3,345 428 1,305 213,897
---------------------------- -------- ---------- ------- ------- ------- ----------
Depreciation charged
for the year 718 22,726 743 40 186 24,413
At 31 December 2015 4,905 227,358 4,088 468 1,491 238,310
---------------------------- -------- ---------- ------- ------- ------- ----------
Depreciation charged
for the year 750 24,553 675 39 186 26,203
Disposals (16,891) (945) (168) (18,004)
At 31 December 2016 5,655 235,020 3,818 339 1,677 246,509
---------------------------- -------- ---------- ------- ------- ------- ----------
Net carrying amount:
At 31 December 2015 14,602 117,013 1,405 139 2,005 135,164
---------------------------- -------- ---------- ------- ------- ------- ----------
At 31 December 2016 15,809 162,484 1,084 91 1,819 181,287
---------------------------- -------- ---------- ------- ------- ------- ----------
Land use rights have been reclassified to property, plant and
equipment from intangible assets as in the opinion of the Directors
this better reflects the underlying nature of the asset.
Building with carrying value of CNY15.8million had not yet
registered for property certificates as at 31 December 2016.
Assets under Construction
Included in machinery equipment of the Group at 31 December 2016
was an amount of CNY20,708,796 (2015: CNY3,024,401) relating to
expenditure for equipment in the course of construction.
10. Intangible Assets
Industry Software Total
rights
CNY'000 CNY'000 CNY'000
---------------------------- ---------- ---------- ---------
Cost:
At 1 January 2015 5,500 35 5,535
Additions 12,913 - 12,913
----------------------------- ---------- ---------- ---------
At 31 December 2015 18,413 35 18,448
----------------------------- ---------- ---------- ---------
Additions - - -
Deposal (35) 35
At 31 December 2016 18,413 - 18,413
----------------------------- ---------- ---------- ---------
Accumulated amortization:
At 1 January 2015 5,500 35 5,535
Amortisation 802 - 802
----------------------------- ---------- ---------- ---------
At 31 December 2015 6,302 35 6,337
----------------------------- ---------- ---------- ---------
Amortisation 1,292 - 1,292
Deposal (35) 35
At 31 December 2016 7,594 - 7,594
----------------------------- ---------- ---------- ---------
Net carrying amount:
At 31 December 2015 12,111 - 12,111
----------------------------- ---------- ---------- ---------
At 31 December 2016 10,819 - 10,819
----------------------------- ---------- ---------- ---------
Land use rights have been reclassified to property, plant and
equipment from intangible assets as in the opinion of the Directors
this better reflects the underlying nature of the asset.
11. Investment in Subsidiaries
2016 2015
CNY'000 CNY'000
------------------------------------ --------- ---------
Cost at beginning of the financial - -
year
------------------------------------ --------- ---------
Changes during the financial year - -
------------------------------------ --------- ---------
Cost at end of the financial year - -
------------------------------------ --------- ---------
The companies comprised in the Group are as follows:
Proportion
(%) of ownership
interest
activities
Principal andvoting
Name Place and date of incorporation activities rights
---------------------------- ------------------------------------------ ---------------- -------------------
Held by the Company
Cheer Light International
Ltd. BVI March 2014 Holding 100
Held through subsidiaries
Haike Trading Hong Hong Kong September
Kong Limited 2005 Trading 100
Dongying Haike Spring
Commercial Consulting
Co., Ltd. China May 2014 Consulting 100
Dongying Hi-tech Spring China October
Chemical Co., Ltd. 2002 Manufacturing 99.87
12. Inventories
2016 2015
CNY'000 CNY'000
-------------------------------- --------- ---------
Raw materials and consumables 11,627 11,778
Finished goods 26,539 14,898
Goods in transit 1,632 1,919
Work in process - -
-------------------------------- --------- ---------
39,798 28,595
-------------------------------- --------- ---------
13. Trade and Other Receivables
2016 2015
CNY'000 CNY'000
-------------------------------------- --------- ---------
Trade receivables:
Trade receivables 79,136 68,167
Less: provision for impairment of
trade receivables (875) (136)
-------------------------------------- --------- ---------
Trade receivables - Net 78,261 68,031
Other receivables:
Other receivables 36,521 17,539
Less: provision for impairment of (10) -
other receivables
-------------------------------------- --------- ---------
Other receivables - net 36,511 17,539
-------------------------------------- --------- ---------
Total financial assets other than
cash and cash equivalents and due
from related parties classified
as loans and receivables - Current
portion 114,772 85,570
VAT receivable - -
Advance to suppliers / constructors 27,424 15,737
142,196 101,307
-------------------------------------- --------- ---------
2016 2015
CNY'000 CNY'000
----------------------------------------------- --------- ---------
Total financial assets other than cash
and cash equivalents and due from related
parties classified as loans and receivables
- Current portion 114,772 85,570
Amount due from related parties 149,221 402,535
Restricted cash 4,156 13,259
Cash and cash equivalents 54,978 35,405
----------------------------------------------- --------- ---------
Total financial assets classified as
loans and receivables 323,127 536,769
----------------------------------------------- --------- ---------
All trade and other receivables are current. Management
considers the carrying amounts recognized in the statement of
financial position to be a reasonable approximation of their fair
value due to the short term duration.
Trade and other receivables are mainly receivables owed by
customers for goods or services and loans to third parties. Loans
are non-interest bearing and will be paid on demand. The Group does
not hold any collateral as security.
As at 31 December 2016, the ageing analysis of trade and other
receivables is as followings:
2016 2015
CNY'000 CNY'000
-------------------------------- --------- ---------
Neither past due nor impaired 76,914 60,938
3 to 6 months 45,593 23,044
6 to 12 months 6,709 7,442
12 to 24 months 7,217 8,249
>24 months 5,763 1,634
-------------------------------- --------- ---------
142,196 101,307
-------------------------------- --------- ---------
Trade receivables are generally on 90 days' terms.
Movements on the group provision for impairment of trade and
other receivables are as follows:
2016 2015
CNY'000 CNY'000
--------------------------- --------- ---------
At beginning of the year 136 149
Unused amounts reversed (13)
Accrual this year 749 -
885 136
--------------------------- --------- ---------
14. Restricted Cash, Cash and Cash Equivalents
2016 2015
CNY'000 CNY'000
---------------------------- --------- ---------
Cash at banks and in hand 54,978 35,405
---------------------------- --------- ---------
Cash at banks earns interest at floating rates based on bank
deposit rates ranging from 0.35% per annum (2015: 0.35% to 0.50%
per annum).
2016 2015
CNY'000 CNY'000
------------------ --------- ---------
Restricted cash 4,156 13,259
------------------ --------- ---------
The deposits are pledged for the credit facility of loans
payable, with the predetermined rate of 3.5% per annum. The deposit
is solely used for the security and settlement of the loans payable
when they mature.
15. Interest Bearing Loans and Borrowings
2016 2015
CNY'000 CNY'000
------------------------ --------- ---------
Short term loan:
Secured bank loans 80,000 80,000
Other unsecured loans - -
------------------------ --------- ---------
Total loans 80,000 80,000
------------------------ --------- ---------
Average interest rate and maturity of short term loans
Loans are all at fixed rates, the average interest rate and
maturity is as follows:
Short term Long term Short term Long term
2016 2016 2015 2015
---------------------------- ------------- ----------- ------------- -----------
Average annual interest
rate 3.48% 0.00% 5.71% 0.00%
Average maturity (months) 5.3 0.00 2.23 0.00
Range of interest
rate 4.35%-5.22% 0.00% 5.35%-6.06% 0.00%
---------------------------- ------------- ----------- ------------- -----------
Secured short-term loan
Included in the secured short-term bank loans in 2016, CNY80.0
million (2015: CNY80.0 million) is guaranteed by third parties, and
CNY nil (2015: CNYnil million) is secured against bank
deposits.
Long-term loan
Included in the long-term loan, CNY nil (2015: nil) was
guaranteed by third parties. The average maturity of long-term loan
is nil month (2015: nil month).
16. Deferred Income
2016 2015
CNY'000 CNY'000
---------------------------------- --------- ---------
Cost:
Opening balance at 1 January 2,250 900
Received during the year (121) 1,350
Closing balance at 31 December 2,129 2,250
---------------------------------- --------- ---------
Accumulated amortization:
Opening balance at 1 January - -
Recognized in income statement - -
Closing balance at 31 December - -
---------------------------------- --------- ---------
Net Carrying value:
Current - -
Non-current 2,129 2,250
---------------------------------- --------- ---------
2,129 2,250
---------------------------------- --------- ---------
There are no unfulfilled conditions or contingencies attached to
the grants.
17. Trade and Other Payables
2016 2015
CNY'000 CNY'000
----------------------------------------- --------- ---------
Trade payables:
Trade payables 93,581 65,233
----------------------------------------- --------- ---------
Other payables:
Other payables 12,041 9,538
Accruals 4,781 3,984
----------------------------------------- --------- ---------
16,822 13,522
----------------------------------------- --------- ---------
Total financial liabilities, excluding
bank borrowings, due to related
parties and income tax payable,
classified as financial liabilities 110,403 78,755
Advance from customers 11,167 10,427
Other tax payable - -
----------------------------------------- --------- ---------
121,570 89,182
----------------------------------------- --------- ---------
The trade payables are mainly related to the purchase of raw
materials, equipment and construction service. For the purchase of
crude oil, the payment term is usually cash on delivery, for other
materials, the credit period granted by the suppliers usually
ranges from 30 to 90 days, for the purchase of equipment and
construction service, the payment will be made according to the
progress of the construction.
Advances from customers are unsecured, interest-free and
repayable on demand.
Management considers the carrying amounts of financial
liabilities to be a reasonable approximation of their fair
value.
2016 2015
CNY'000 CNY'000
----------------------------------------- --------- ---------
Total financial liabilities, excluding
bank borrowings, due to related
parties and income tax payable,
classified as financial liabilities 110,403 78,755
Due to related parties 241,657 440,029
Interest bearing loans and borrowings 80,000 80,000
----------------------------------------- --------- ---------
Total financial liabilities measured
at amortized cost 432,060 598,784
----------------------------------------- --------- ---------
18. Income Tax
Major components of income tax expense
The major components of income tax expense are as follows:
2016 2015
CNY'000 CNY'000
---------------------------------------- --------- ---------
Current income tax 3,757 1,709
Deferred tax:
Originating and reversal of temporary - -
differences
---------------------------------------- --------- ---------
Income tax recognized in income
statement 3,757 1,709
---------------------------------------- --------- ---------
Reconciliation between tax expense and the accounting profit
multiplied by the applicable corporate tax rate of 25% is as
follows:
2016 2015
CNY'000 CNY'000
------------------------------------------ ----------------------- ---------
Profit before tax 20,703 5,777
Tax at respective companies' domestic
income tax rate 5,176 1,444
Non deductible expenses (1,419) 265
------------------------------------------ ----------------------- ---------
Income tax expense recognized in income
statement 3,757 1,709
------------------------------------------ ----------------------- ---------
The Company and the significant subsidiaries are subject to
income tax on the following bases and at the following rates:
HaiKe Chemical Group Ltd.
The applicable tax rate is nil.
Dongying Hi-Tech Spring Chemical Co., Ltd.
The applicable tax rate is 25%.
Haike Trading Hong Kong Limited
The applicable tax rate is 16.5% for onshore income and nil for
offshore income.
19. Share Capital and Reserve
a) Share Capital - the Company
2016 2015
No. of shares CNY'000 No. of shares CNY'000
------------------------------ --------------- --------- --------------- ---------
Authorized
Ordinary shares of
$0.002 each 43,050,000 668 43,050,000 668
------------------------------ --------------- --------- --------------- ---------
Issued and fully paid
Opening balance at
1 January & at 31 December 38,353,571 598 38,353,571 598
------------------------------ --------------- --------- --------------- ---------
The authorized share capital of the Company is US$86,100 divided
into 43,050,000 ordinary voting shares of a par value of US$0.002
each.
b) Share Premium
Share premium represents the amount subscribed for shares in
excess of the nominal value less expenses incurred on the issue of
shares.
c) Statutory Reserve
According to the Company Law of PRC, the companies operating in
China are required each year to transfer 10% of the profit after
tax as reported in its PRC statutory financial statements to the
statutory common reserve fund, except where the fund has reached
50% of the Company's registered capital. This fund can be used to
make up for any losses incurred or be converted into paid-up
capital, provided that the fund does not fall below 25% of the
registered capital.
d) Foreign Currency Translation Reserve
The foreign currency translation reserve comprises the gains and
losses arising on translating the net assets into CNY.
e) Accumulated Losses
The accumulated losses comprise the cumulative net gains and
losses recognized in the consolidated statement of comprehensive
income.
20. Staff Costs
2016 2015
-------------------------------- ------ ------
Average number of employees
Management and administration 34 24
Sales 61 40
Manufacturing 222 228
317 292
-------------------------------- ------ ------
2016 2015
CNY'000 CNY'000
------------------------ ---------------- ----------------
The staff costs
Wages and salaries 22,931 18,634
Social security costs 2,728 3,333
Housing Fund 2,209 1,890
27,868 23,857
------------------------ ---------------- ----------------
21. Commitments and Contingencies
Capital commitments
Capital expenditure contracted for property, plant and equipment
as at 31 December 2016 but not recognized in the financial
statements was CNY29.4 million (2015: CNY3.5 million).
Contingent liabilities
Up to 31 December 2016, as a guarantor, the Group has guaranteed
the bank loans of third parties to aggregate amount of CNY nil
(2015: CNY nil). It is unlikely that any significant liability to
the Group will arise because the financial statements of the
guarantees indicate that they are able to pay their debts as they
mature. The directors are of the view that they do not expect any
significant liability to arise in respect of the guarantee at the
date of these financial statements.
22. Subsequent Event
No subsequent event occurred for the reporting period.
23. Related Party Disclosures
The immediate and ultimate parent company is Hi-Tech Chemical
Investment Ltd., a company incorporated in British Virgin
Islands.
The Group companies are set out in Note 10, and the directors of
the Company and its subsidiaries have been identified as related
parties. Details of transactions with related parties are as
follows:
Sales, purchase of goods and loans
During the year, the Group made the following sales and
purchases, or provided or received loans with the following related
parties:
Sales Purchase Loan from Loan Loan repayment
to
-------------------------------- --------- ---------- ----------- --------- ----------------
2016 CNY'000 CNY'000 CNY'000 CNY'000 CNY'000
-------------------------------- --------- ---------- ----------- --------- ----------------
Shareholder - - - 8 -
HiTech Chemical Investment - - - 397 -
Ltd.
Haike Holding Hongkong
Limited - - 14,380 83,698 -
Haike International Holding - - - 10 -
Limited
Paragon Lead Holding - - - 3 -
Ltd.
Dongying Hi-tech Qifen
Co., Ltd 824 126,319 - 38,590 -
Shandong Hi-tech Ruilin
Chemical Co., Ltd 568 31,276 83,941 - -
Dongying He-bang Chemical
Co., Ltd - 1,101 53,524 - -
Dongying Tiandong Biochemical
Co., Ltd - - 5,280 3,209 -
Shandong Hi-tech Chemical
Group Ltd - - 77,998 22,224 -
Shanghai Yuanchuan Chemical
Ltd - 1,712 6,217 - -
Shandong Hi-Tech Shengli
Electrochemical Co.,
Ltd. 390
Shandong OBO New Material
Co., Ltd 692
Dongying Hi-tech Transport
Co.,Ltd. - 3 317 - -
1,392 160,412 241,657 149,221 -
-------------------------------- --------- ---------- ----------- --------- ----------------
2015 CNY'000 CNY'000 CNY'000 CNY'000 CNY'000
--------------------------------- --------- --------- --------- --------- ---------
Shareholder - - - 8 -
Bright Century Global Holdings - - 200,966 - -
Limited
HiTech Chemical Investment - - - 397 -
Ltd
Haike Holding Hongkong
Limited - - 14,380 83,698 -
Haike International Holding - - - 10 -
Limited
Haiyuan Trading Pte.Ltd - - 2,429 - -
Jumbo Light Hong Kong Limited - - - 222,923 -
Dongying Hi-tech Qifen
Co., Ltd 667 147,703 - 91,007 -
Shandong Hi-tech Ruilin
Chemical Co., Ltd 514 20,164 41,779 - -
Dongying He-bang Chemical
Co., Ltd - 676 26,460 - -
Dongying Tiandong Biochemical
Co., Ltd - 2,628 6,741 3,209 -
Shandong Hi-tech Chemical
Group Ltd - 204 141,957 1,283 -
Shanghai Yuanchuan Chemical
Ltd 161 4,717 5,063 - -
Dongying Hi-tech Transport - - 253 - -
Co.,Ltd.
1,342 176,092 440,028 402,535 -
--------------------------------- --------- --------- --------- --------- ---------
The sales of goods to the related parties are based on the
market price.
Due from/to related parties
Group Company Group Company
2016 2016 2015 2015
CNY'000 CNY'000 CNY'000 CNY'000
----------------------------------- --------- --------- --------- ---------
Amounts due from related parties
Due from shareholders 405 398 405 398
Due from related parties under
common control 148,816 53,629 402,130 55,961
----------------------------------- --------- --------- --------- ---------
149,221 54,027 402,535 56,359
----------------------------------- --------- --------- --------- ---------
Amounts due to related parties
Due to related parties under
common control 241,657 - 239,063 -
----------------------------------- --------- --------- --------- ---------
Due to other related parties - - 200,966 -
----------------------------------- --------- --------- --------- ---------
241,657 - 440,029 -
----------------------------------- --------- --------- --------- ---------
Key management remuneration
2016 2015
CNY'000 CNY'000
---------------------------------------------------- --------- ---------
Short term employee benefits of the Directors
of the Company 2,754 3,142
Short term employee benefits of the Directors
of the Group 709 618
Short term employee benefits of the Vice General
Manager of the Group 217 191
3,680 3,951
---------------------------------------------------- --------- ---------
Refer to the Directors' Report for details of Directors'
interests in shares of Group's and related party companies.
Refer to the Report of the Remuneration Committee for details of
the remuneration per annum of the Directors in 2016.
24. Fair value measurement
Fair value measurement of financial instruments
Financial assets and financial liabilities measured at fair
value in the statement of financial position are grouped into three
Levels of a fair value hierarchy. The three Levels are defined
based on the observability of significant inputs to the
measurement, as follows:
-- Level 1: quoted prices (unadjusted) in active markets for
identical assets or liabilities
-- Level 2: inputs other than quoted prices included within
Level 1 that are observable for the asset or liability, either
directly or indirectly
-- Level 3: unobservable inputs for the asset or liability.
The carrying amounts reported in the consolidated financial
position for cash and cash equivalents, restricted cash, trade and
other receivables, inventories, amounts due from related parties,
bank loans, trade and other payables, and amounts due to related
parties approximate their fair market value based on the short-term
maturity of these instruments. As of December 31, 2016, the Company
does not have any assets or liabilities that are measured on a
recurring basis at fair value. As of December 31, 2016, the Company
does not have any level 3 financial instruments.
25. Financial Risks Management Objectives and Policies
Financial instruments - Risk Management
The group is exposed through its operations to the following
financial risks:
- Credit risk
- Market risk
- Liquidity risk
The Group is exposed to risks that arise from its use of
financial instruments. This note describes the Group's objectives,
policies and processes for managing those risks and the methods
used to measure them. Further quantitative information in respect
of these risks is presented throughout these financial statements.
There have been no substantive changes in the Group's exposure to
financial instrument risks, its objectives, policies and processes
for managing those risks or the methods used to measure them from
previous periods unless otherwise stated in this note.
Principal financial instruments
The principal financial instruments used by the Group, from
which financial instrument risk arises, are as follows:
- trade and other receivables
- cash at bank and restricted cash
- trade and other payables
- short and long term loans
- loans from related parties
General objectives, policies and processes
The Board has overall responsibility for the determination of
the Group's risk management objectives and policies and, whilst
retaining ultimate responsibility for them, it has delegated the
authority for designing and operating processes that ensure the
effective implementation of the objectives and policies to the
Group's finance function. The Board receives monthly reports from
the Group Financial Controller through which it reviews the
effectiveness of the processes put in place and the appropriateness
of the objectives and policies it sets. The Group's internal
auditors also review the risk management policies and processes and
report their findings to the Audit Committee. The overall objective
of the Board is to set polices that seek to reduce risk as far as
possible without unduly affecting the Group's competitiveness and
flexibility. Further details regarding these policies are set out
below:
Credit risk
Credit risk is the risk of financial loss to the Group if a
customer or counterparty to a financial instrument fails to meet
its contractual obligations. The Group is mainly exposed to credit
risk from credit sales. It is Group policy, implemented locally, to
assess the credit risk of new customers before entering contracts.
Such credit ratings are taken into account by local business
practices.
The Risk Management Committee has established a credit policy
under which each new customer is analyzed individually for
creditworthiness before the Group's standard payment and delivery
terms and conditions are offered. The Group's review includes
external ratings, when available, and in some cases bank
references. Purchase limits are established for each customer,
which represents the maximum open amount without requiring approval
from the Risk Management Committee. These limits are reviewed
quarterly. Customers that fail to meet the Group's benchmark
creditworthiness may transact with the Group on a prepayment
basis.
Credit risk also arises from cash and cash equivalents and
deposits with banks and financial institutions. For banks and
financial institutions, only independently rated parties with
minimum rating "A" are accepted. The Group does not enter into
derivatives to manage credit risk, although in certain isolated
cases may take steps to mitigate such risks if it is sufficiently
concentrated. Quantitative disclosure of the credit risk is as
follows:
2016 2015
CNY'000 CNY'000
---------------------------- --------- ---------
Current financial
assets
Trade and other
receivables 114,772 85,570
Restricted cash 4,156 13,259
Cash and cash equivalents 54,978 35,405
---------------------------- --------- ---------
173,906 134,234
---------------------------- --------- ---------
The maximum exposure to credit risk for each class of asset is
the statement of financial position carrying value as disclosed
above.
The Risk Management Committee monitors the utilization of the
credit limits regularly and at the reporting date does not expect
any losses from non-performance by the counterparties.
Market risk
Market risk arises from the Group's use of interest bearing,
tradable instruments. It is the risk that the fair value of future
cash flows of a financial instrument will fluctuate because of
changes in interest rates (interest rate risk), foreign exchange
rates (currency risk) or other market factors (other price
risk).
I. Interest rate risk
Interest rate risk arises from the potential changes in interest
rates that may have an adverse effect on the Group in the current
reporting period and in future years.
Other than the bank deposits and borrowings, the Group has no
other significant interest-bearing assets and liabilities. Its
interest-bearing assets and liabilities are mainly current bank
deposits and loan from banks and unrelated parties. The Group's
income and operating cash flows are substantially independent of
changes in market interest rates. The Group's policy is to secure
all its borrowings at fixed borrowing rates.
If the Group's average interest rate on short and long term
loans increased by 1%, this would result in Group profit before tax
being CNY0.3 m lower. Conversely a 1% decrease would result in
Group profit before tax being CNY0.3 m higher.
II. Foreign exchange risk
The Group's policy is, where possible, to allow group entities
to settle liabilities denominated in their functional currency with
cash generated from their own operations in that currency.
Foreign exchange risk refers to the risk that movement in
foreign currency exchange rates against the Group's functional or
reporting currency will affect the Group's financial results and
cash flows. The Group has transaction currency exposure, which
arises from sales by an operating unit in currencies other than its
functional currency. Approximately 31.9% (2015: 35.7%) of the
Group's sales are denominated in US$. The Group's policy as it
relates to currency risk is to limit payment to immediate letters
of credit or prepayment before transporting goods to the
clients.
If the exchange rate on uncovered exposure were to move
significantly between the year end and the date of payment or
receipt, there could be an impact on the Group's net income. As the
balance of financial assets and liabilities denominated in US$ is
small and is short term in nature, this risk is not considered to
be substantial.
Liquidity risk
Liquidity risk arises from the Group's management of working
capital and the finance charges and principal repayments on its
debt instruments. It is the risk that the Group will encounter
difficulty in meeting its financial obligations as they fall
due.
The Group's policy is to ensure that it will always have
sufficient cash to allow it to meet its liabilities when they
become due. To achieve this aim, it seeks to maintain cash balances
(or agreed facilities) to meet expected requirements for a period
of at least 45 days.
The Group is reliant on the renewal of the short-term agreed
facilities with their banks. The Group has not had any defaults or
breaches on its financial liabilities.
The following table sets out the contractual maturities
(representing undiscounted contractual cash-flows) of financial
liabilities:
Between Between Between
Up to 3 3 and 12 1 and 2 and Over
2 5
At 31 December months months year years 5 years
2016
----------- ---------- --------- --------- ---------
CNY'000 CNY'000 CNY'000 CNY'000 CNY'000
Trade and other
payables 72,889 41,379 1,616 5,686 -
Loans and borrowings - 80,000 - - -
Future interest
payments 691 1,015 - - -
---------- ---------- --------- --------- ---------
Total 73,580 122,394 1,616 5,686 -
========== ========== ========= ========= =========
Between Between Between
Up to 3 3 and 12 1 and 2 and Over
2 5
At 31 December months months year years 5 years
2015
---------- ---------- --------- --------- ---------
CNY'000 CNY'000 CNY'000 CNY'000 CNY'000
Trade and other
payables 73,104 5,231 5,524 5,324 -
Loans and borrowings 40,000 40,000 - - -
Future interest
payments 755 47 - - -
Total 113,859 45,278 5,524 5,324 -
========== ========== ========= ========= =========
Capital management
The Group considers its capital to comprise its ordinary share
capital, share premium, other reserves, statutory reserves, foreign
currency translations reserve and accumulated retained earnings. In
managing its capital, the Group's primary objective is to ensure
its continued ability to provide a consistent return for its equity
shareholders through a combination of capital growth and
distributions.
The directors continue to monitor the capital requirements of
the Group by reference to expected future cash flows. Capital for
the reporting periods under review is summarized in the
consolidated statement of changes in equity. The directors consider
the capital of the Group to be the total equity attributable to the
equity holders of the parent of CNY129.1 million as at 31 December
2016.
26. Dividend
No dividend was declared for 2016.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR SSDSIFFWSEFM
(END) Dow Jones Newswires
June 01, 2017 02:12 ET (06:12 GMT)
Haike Chemical (LSE:HAIK)
Gráfico Histórico do Ativo
De Jan 2025 até Fev 2025
Haike Chemical (LSE:HAIK)
Gráfico Histórico do Ativo
De Fev 2024 até Fev 2025
