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Investments in subsidiaries | 12 Months Ended
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Dec. 31, 2017
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Investments in subsidiaries |
4. | Investments in subsidiaries
Details of significant subsidiaries of the Group are as follows:
Name of significant subsidiary |  | Place of incorporation/ business |  | Group’s effective equity interest |
|  |  |  | 31.12.2016 |  |  | 31.12.2017 |
|  |  |  | % |  |  | % |
Guangxi Yuchai Machinery Company Limited |  | People’s Republic of China |  |  | 76.4 |  |  |  | 76.4 |
Guangxi Yuchai Machinery Monopoly Development Co., Ltd |  | People’s Republic of China |  |  | 54.9 |  |  |  | 54.9 |
Guangxi Yuchai Accessories Manufacturing Company Limited |  | People’s Republic of China |  |  | 76.4 |  |  |  | 76.4 |
Guangxi Yuchai Equipment Mould Company Limited (formerly known as Guangxi Yulin Yuchai Accessories Manufacturing Company Limited) |  | People’s Republic of China |  |  | 76.4 |  |  |  | 76.4 |
Guangxi Yulin Hotel Company Limited |  | People’s Republic of China |  |  | 76.4 |  |  |  | 76.4 |
Jining Yuchai Engine Company Limited (i) |  | People’s Republic of China |  |  | — |  |  |  | 76.4 |
Yuchai Remanufacturing Services (Suzhou) Co., Ltd. |  | People’s Republic of China |  |  | 76.4 |  |  |  | 76.4 |
HL Global Enterprises Limited |  | Singapore |  |  | 50.2 |  |  |  | 50.2 |
Note:
| (i) | In September, 2014, Yuchai disposed its 70% equity interest in Jining Yuchai. Subsequently, through contractual arrangements, Yuchai obtained 100% control in Jining Yuchai.
In November, 2017, Yuchai acquired 100% equity interest in Jining Yuchai, As a result, Jining Yuchai became a wholly owned subsidiary of Yuchai. For details, please refer to Note 1.2. The Group has the following subsidiary that has non-controlling interests (“NCI”) that are material to the Group.
|  | 31.12.2015 |  |  | 31.12.2016 |  |  | 31.12.2017 |
Proportion of equity interest held by NCI |  |  |  |  |  |  |  |  |  |  |  |
Yuchai |  |  | 23.6 | % |  |  | 23.6 | % |  |  | 23.6 | %
|  | 31.12.2015 RMB’000 |  |  | 31.12.2016 RMB’000 |  |  | 31.12.2017 RMB’000 |  |  | 31.12.2017 US$’000 |
Accumulated balances of material NCI |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Yuchai |  |  |  |  |  |  | 2,253,207 |  |  |  | 2,437,215 |  |  |  | 385,063 |
Profit allocated to material NCI |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Yuchai |  |  | 129,088 |  |  |  | 210,013 |  |  |  | 290,497 |  |  |  | 45,896 |
Dividends paid to material NCI |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Yuchai |  |  | 100,412 |  |  |  | 83,677 |  |  |  | 98,941 |  |  |  | 15,632 |
Summarized financial information including goodwill on acquisition and consolidation adjustments but before intercompany eliminations of subsidiaries with material non-controlling interests are as follows:
|  | 31.12.2015 |
|  | Yuchai RMB’000 |
Summarized statement of comprehensive income |  |  |  |
Revenue |  |  | 13,671,931 |
Profit for the year, representing total comprehensive income for the year |  |  | 547,216 |
Attributable to NCI |  |  | 129,088 |
Summarized statement of cash flows |  |  |  |
Operating |  |  | 1,742,989 |
Investing |  |  | (33,515 | )
Financing |  |  | (659,691 | )
Net increase in cash and cash equivalents |  |  | 1,049,783 |
|  | 31.12.2016 |
|  | Yuchai |
|  | RMB’000 |
Summarized statement of financial position |  |  |  |
Current assets |  |  | 12,448,174 |
Non-current assets, excluding goodwill |  |  | 4,876,773 |
Goodwill |  |  | 212,636 |
Current liabilities |  |  | (7,957,306 | )
Non-current liabilities |  |  | (461,712 | )
Net assets |  |  | 9,118,565 |
Total equity |  |  | 9,118,565 |
Attributable to NCI |  |  | 2,253,207 |
Summarized statement of comprehensive income |  |  |  |
Revenue |  |  | 13,598,487 |
Profit for the year, representing total comprehensive income for the year |  |  | 726,379 |
Attributable to NCI |  |  | 210,013 |
Summarized statement of cash flows |  |  |  |
Operating |  |  | 2,329,367 |
Investing |  |  | (293,477 | )
Financing |  |  | (1,697,173 | )
Net increase in cash and cash equivalents |  |  | 338,717 |
|  | 31.12.2017 |
|  | Yuchai |
|  | RMB’000 |  |  | US$’000 |
Summarized statement of financial position |  |  |  |  |  |  |  |
Current assets |  |  | 14,717,316 |  |  |  | 2,325,231 |
Non-current assets, excluding goodwill |  |  | 4,693,931 |  |  |  | 741,608 |
Goodwill |  |  | 212,636 |  |  |  | 33,595 |
Current liabilities |  |  | (9,344,836 | ) |  |  | (1,476,417 | )
Non-current liabilities |  |  | (495,429 | ) |  |  | (78,274 | )
Net assets |  |  | 9,783,618 |  |  |  | 1,545,743 |
Total equity |  |  | 9,783,618 |  |  |  | 1,545,743 |
Attributable to NCI |  |  | 2,437,215 |  |  |  | 385,063 |
Summarized statement of comprehensive income |  |  |  |  |  |  |  |
Revenue |  |  | 16,165,245 |  |  |  | 2,553,993 |
Profit for the year, representing total comprehensive income for the year |  |  | 1,045,330 |  |  |  | 165,155 |
Attributable to NCI |  |  | 290,497 |  |  |  | 45,896 |
Summarized statement of cash flows |  |  |  |  |  |  |  |
Operating |  |  | 1,385,156 |  |  |  | 218,845 |
Investing |  |  | (165,817 | ) |  |  | (26,198 | )
Financing |  |  | 221,660 |  |  |  | 35,021 |
Net increase in cash and cash equivalents |  |  | 1,440,999 |  |  |  | 227,668 |
Significant restrictions The nature and extent of significant restrictions on the Group’s ability to use or access assets and settle liabilities of subsidiaries with material non-controlling interests are: Cash and cash equivalents of RMB 4,710,158 (US$744,171) (2016: RMB 3,270,182) held in the PRC are subject to local exchange control regulations. These regulations places restriction on the amount of currency being exported other than through dividends, trade and service related transactions. Disposal of a subsidiary in 2015 On September 21, 2015, the Group disposed of one of its wholly-owned subsidiaries, Xiamen Yuchai Diesel Engines Co., Ltd. (“Xiamen Yuchai”) and the disposal consideration was settled in cash. The value of assets and liabilities of the disposal recorded in the consolidated financial statements and the cash flow effect of the disposals were:
|  | 31.12.2015 |
|  | RMB’000 |
Property, plant and equipment |  |  | 66,597 |
Land use rights |  |  | 17,661 |
Inventories |  |  | 6,354 |
Trade receivables and other receivables |  |  | 111,651 |
Deferred taxation |  |  | 244 |
Cash and bank balances |  |  | 18,797 |
|  |  | 221,304 |
Payables and accruals |  |  | (17,161 | )
Provision for taxation |  |  | (996 | )
Carrying value of net assets |  |  | 203,147 |
Total consideration |  |  | 189,500 |
Net asset derecognized |  |  | (203,147 | )
Loss on disposal of a subsidiary (Note 8.2(b)) |  |  | (13,647 | )
Total consideration |  |  | 189,500 |
Cash and bank balances of the subsidiary |  |  | (18,797 | )
Net cash inflow on disposal of the subsidiary |  |  | 170,703 |
Acquisition of ownership in subsidiaries, without loss of control in 2015
| (i) | In July 2015, Yuchai’s subsidiary company, YMMC acquired 40.00% of equity interest in Yunnan Yuchai Machinery Industry Company Limited (“YMMC Yunnan”) by way of offsetting trade receivables from the third party of RMB 18.3 million. As a result, YMMC Yunnan became wholly owned subsidiary of YMMC.
| (ii) | In October 2015, Yuchai acquired 2.86% of equity interest in Guangxi Yulin Yuchai Accessories Manufacturing Company Limited which was renamed to Guangxi Yuchai Equipment Mould Company Limited (“YEMC”) in November 2017, from State Holding Company with a purchase consideration of RMB 4.2 million. As a result, YEMC became wholly owned subsidiary of Yuchai.
Acquisition of additional interest in a joint venture in 2016 In December 2016, Yuchai acquired an additional 32.5% equity interest in its 35% owned joint venture, YC Europe Co., Limited (“YC Europe”) through share allotment transfer and the injection of share capital will be completed in phases. Upon the full injection of capital, Yuchai’s equity interest in YC Europe will increase from 35% to 67.5%. The Group has elected to measure the non-controlling interest at the non-controlling interest’s proportionate share of YC Europe’s net identifiable assets. There was no gain or loss on remeasuring previously held equity interest in YC Europe to fair value at the acquisition date. YC Europe was newly incorporated in April 2015 to market off-road engines (excluding marine engines) in Europe. As at December 31, 2016, YC Europe is a subsidiary of the Group. The contribution from the acquisition to the Group’s financial performance for the year ended December 31, 2016, and net assets as at December 31, 2016 were not material. Goodwill arising from the acquisition of RMB 1,131 was fully written off and recognized in the “other operating expenses” line item in the Group’s profit or loss for the year ended December 31, 2016. Acquisition of ownership in subsidiaries, without loss of control in 2016 In September 2016, YMMC acquired 47.53% of equity interest in Sichuan Yuchai Machinery Industry Company Limited (“YMMC Sichuan”) from non-controlling interest for a cash consideration of RMB 8.9 million. As a result, YMMC Sichuan became wholly owned subsidiary of YMMC. Acquisition of ownership in subsidiaries, without loss of control in 2017
| (i) | In June 2017, GYAMC acquired 25% of equity interest in Guangxi Yuchai Crankshaft Co., Limited (“Crankshaft”) from non-controlling interest for a cash consideration of RMB 1.3 million. As a result, Crankshaft became wholly owned subsidiary of GYAMC.
| (ii) | In October 2017, YMMC acquired 49% of equity interest in Hunan Yuchai Machinery Industry Company Limited (“YMMC Hunan”) from non-controlling interest for a cash consideration of RMB 6.7 million. As a result, YMMC Hunan became wholly owned subsidiary of YMMC.
| (iii) | In November 2017, Yuchai acquired 100% issued shares in Jining Yuchai for a cash consideration of RMB 250. As a result, Jining Yuchai became wholly owned subsidiary of Yuchai.
Prior to the acquisition, Yuchai control 100% of Jining Yuchai through various contractual agreements and consolidated Jining Yuchai’s financial results in the Group’s consolidated financial statements. The acquisition would not have financial impact in the Group’s profit or loss for the year ended December 31, 2017. Disposal of subsidiaries in 2017 On November 22, 2017, HLGE disposed its entire shareholding in its wholly-owned subsidiary, LKN Investment International Pte. Ltd (“LKNII”) together with LKNII’s wholly-owned subsidiary, Shanghai Hutai Real Estate Development Co., Ltd to a third party for a cash consideration of RMB395.0 million (US$62.4 million). The value of assets and liabilities of the disposal recorded in the consolidated financial statements and the cash flow effect of the disposals were:
|  | 31.12.2017 |  |  | 31.12.2017 |
|  | RMB’000 |  |  | US$’000 |
Property, plant and equipment (Note 11) |  |  | 104,844 |  |  |  | 16,565 |
Trade receivables and other receivables |  |  | 3,257 |  |  |  | 514 |
Cash and bank balances |  |  | 9,153 |  |  |  | 1,446 |
|  |  | 117,254 |  |  |  | 18,525 |
Trade and other payables |  |  | (3,737 | ) |  |  | (590 | )
Provision for taxation |  |  | (44 | ) |  |  | (7 | )
Deferred taxation |  |  | (588 | ) |  |  | (93 | )
Carrying value of net assets |  |  | 112,885 |  |  |  | 17,835 |
Gain on disposal: |  |  |  |  |  |  |  |
Total consideration |  |  | 395,000 |  |  |  | 62,407 |
Less: Cost of disposal |  |  | (47,532 | ) |  |  | (7,510 | )
Total consideration less cost of disposal |  |  | 347,468 |  |  |  | 54,897 |
Net assets derecognized |  |  | (112,885 | ) |  |  | (17,835 | )
Realization of foreign translation reserves upon disposal |  |  | (18,468 | ) |  |  | (2,917 | )
Gain on disposal of the subsidiaries (Note 8.2(b)) |  |  | 216,115 |  |  |  | 34,145 |
Total consideration less cost of disposal |  |  | 347,468 |  |  |  | 54,897 |
Add: Transaction cost unpaid |  |  | 33,287 |  |  |  | 5,260 |
Less: Retention sum receivables |  |  | (30,000 | ) |  |  | (4,740 | )
Cash and bank balances of the subsidiaries |  |  | (9,153 | ) |  |  | (1,446 | )
Net cash inflow on disposal of the subsidiaries |  |  | 341,602 |  |  |  | 53,971 |

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