GRANDTOP INT'L<02309> - Results Announcement
Grandtop International Holdings Limited announced on 26/07/2006:
(stock code: 02309 )
Year end date: 31/03/2006
Currency: HKD
Auditors' Report: Qualified
(Audited )
(Audited ) Last
Current Corresponding
Period Period
from 01/04/2005 from 01/04/2004
to 31/03/2006 to 31/03/2005
Note ('000 ) ('000 )
Turnover : 48,428 101,974
Profit/(Loss) from Operations : (60,556) 13,952
Finance cost : (149) (193)
Share of Profit/(Loss) of
Associates : N/A N/A
Share of Profit/(Loss) of
Jointly Controlled Entities : N/A N/A
Profit/(Loss) after Tax & MI : (79,610) 2,160
% Change over Last Period : N/A %
EPS/(LPS)-Basic (in dollars) : (0.2488) 0.007
-Diluted (in dollars) : N/A N/A
Extraordinary (ETD) Gain/(Loss) : N/A N/A
Profit/(Loss) after ETD Items : (79,610) 2,160
Final Dividend : N/A N/A
per Share
(Specify if with other : N/A N/A
options)
B/C Dates for
Final Dividend : N/A
Payable Date : N/A
B/C Dates for (-)
General Meeting : N/A
Other Distribution for : N/A
Current Period
B/C Dates for Other
Distribution : N/A
Remarks:
1. Basis of preparation and presentation
The consolidated financial statements of Grandtop International Holdings
Limited have been prepared in accordance with all applicable Hong Kong
Financial Reporting Standards ("HKFRSs"), which is a collective term that
includes all applicable individual Hong Kong Financial Reporting
Standards, Hong Kong Accounting Standards ("HKASs"), and Interpretations
("Int") issued by the Hong Kong Institute of Certified Public Accountants
("HKICPA"), accounting principles generally accepted in Hong Kong and the
disclosure requirements of the Hong Kong Companies Ordinance and
applicable disclosure provisions of The Rules Governing the Listing of
Securities on The Stock Exchange of Hong Kong Limited (the "Listing Rules
").
The measurement basis used in the preparation of the financial statements
is historical cost convention and modified the revaluation of available-
for-sale financial assets, which are carried at fair value.
In preparing the financial statements, the directors of the Company (the
"Directors") have given consideration to the future liquidity of the Group
in light of the following:
(i) As at 31 March 2006, the Group has net current liabilities
of approximately HK$11,448,000. The Group also incurred a net loss from
ordinary activities attributable to equity holders amounted to
approximately HK$79,610,000 for the year ended 31 March 2006; and
(ii) Tax liabilities in relation to the estimated assessments issued by
the Hong Kong Inland Revenue Department of approximately HK$19,918,000 in
respect of non-taxable claim of non-Hong Kong sourced income for the years
of assessments of 1998/1999 to 2003/2004. Detail of which has been set out
in note 27 to the financial statements.
These financial statements have been prepared on a going concern basis,
the validity of which depends upon the outcome of the Tax Obligations on
the Group and the financial support of a controlling shareholder, at a
level sufficient to finance the working capital requirement of the Group.
The controlling shareholder has agreed to provide adequate funds for the
Group to meet its liabilities as they fall due. If the going concern basis
is not used, adjustments would have to be made to the financial statements
to reduce the value of the Group's assets to their recoverable amounts, to
provide for any further liabilities which might arise and to reclassify
non-current assets and liabilities as current assets and liabilities,
respectively.
The preparation of the financial statements requires management to
exercise its judgment in the process of applying the Company's accounting
policies. The areas involving a higher degree of judgment or complexity,
or areas where assumptions and estimates are significant to the
consolidated financial statements.
From the beginning of the financial year ended 31 March 2006, the Group
adopted the new/revised standards and interpretations of HKFRS below,
which are relevant to its operations. The comparatives figures for the
year ended 31 March 2005 have been restated as required, in accordance
with the relevant requirements. A summary of the new and revised HKFRSs is
set out as below:-
HKAS 1 Presentation of Financial Statements
HKAS 2 Inventories
HKAS 7 Cash Flow Statements
HKAS 8 Accounting Policies, Changes in Accounting Estimates and
Errors
HKAS 10 Events after the Balance Sheet Date
HKAS 12 Income Taxes
HKAS 14 Segment Reporting
HKAS 16 Property, Plant and Equipment
HKAS 17 Leases
HKAS 18 Revenue
HKAS 19 Employee Benefits
HKAS 21 The Effects of Changes in Foreign Exchange Rates
HKAS 23 Borrowing Costs
HKAS 24 Related Party Disclosures
HKAS 27 Consolidated and Separate Financial Statements
HKAS 32 Financial Instruments: Presentation and Disclosure
HKAS 33 Earnings Per Share
HKAS 36 Impairment of Assets
HKAS 37 Provisions, Contingent Liabilities and Contingent Assets
HKAS 38 Intangible Assets
HKAS 39 Financial Instruments: Recognition and Measurement
HKAS 39 Transitional and Initial Recognition of (Amendment)
Financial Assets and Financial Liabilities
HKAS-Int 4 Lease - Determination of the Length of Lease Term in
respect of Hong Kong Land Leases
HKAS-Int 15 Operating Leases - Incentives
HKFRS 2 Share-based Payments
HKFRS 3 Business Combinations
The adoption of new and revised HKASs 1, 2, 7, 8, 10, 12, 14, 16, 18, 19,
21, 23, 24, 27, 33, 37 HKAS-Int4 and 15 did not result in substantial
changes to the Group's accounting policies. In summary:
- HKAS 1 has affected the presentation of minority interest, share of net
after-tax results of associates and other disclosures. In the
consolidated balance sheet, minority interests are now shown within total
equity. In the consolidated income statement, minority interests are
presented as an allocation of the total profit or loss for the year.
- HKASs 2, 7, 8, 10, 12, 14, 16, 18, 19, 23, 27, 33, 37,
HKAS-Int 4 and 15 had no material effect on the Group's policies.
- HKAS 21 had no material effect on the Group's policy. The
functional currency of each of the consolidated entities has been re-
evaluated based on the guidance to the revised standard. All the Group
entities have the same functional currency as the presentation currency
for respective entity financial statements.
- HKAS 24 has affected the identification of related parties and
some other related-party disclosures.
The adoption of revised HKAS 17 has resulted in a change in the
accounting policy relating to the reclassification of leasehold land from
property, plant and equipment to operating leases. The up-front
prepayments made for the leasehold land are expensed in the income
statement on a straight-line basis over the period of the lease or when
there is impairment, the impairment is expensed in the income statement.
A lease of land and building is split into a lease of land and a lease of
building in proportion to the relative fair values of the leasehold
interests in land element and the building element of the lease at the
inception of the lease. The lease of land is stated at cost and amortised
over the period of the lease whereas the building is stated at cost less
accumulated depreciation. In prior years, leasehold land was classified
under property, plant and equipment at cost less impairment.
The adoption of HKAS 32 and 39 has resulted in a change in the
accounting policy relating to the classification of financial assets at
fair value through profit or loss and available-for-sale financial assets.
It has also resulted in the recognition of derivative financial
instruments at fair value and the change in the recognition and
measurement of hedging activities.
The adoption of HKFRS 2 has resulted in a change in the accounting
policy for share-based payments. With effect form 1 April 2005, the Group
recognises the fair value of share options granted as an expense in the
income statement over the vesting period with a corresponding increase
being recognised in share-based payment reserve. The share-based payment
reserve is transferred to share capital and share premium, together with
the exercise price, when the option holder exercise price, when the option
holder exercises its rights.
The adoption of HKFRS 3, HKAS 36 and HKAS 38 results in a change in the
accounting policy for positive goodwill prospective application is
required. Until 31 March 2005, positive goodwill was capitalised and
amortised on a straight line basis over its useful economic life of 15
years and was subject to impairment testing when there were indications of
impairment.
In accordance with the provisions of HKFRS 3:
- the Group ceased amortisation of goodwill from 1 April 2005;
- accumulated amortisation as at 31 March 2005 has been eliminated with a
corresponding decrease in the cost of goodwill;
- from the year ended 31 March 2006 onwards, goodwill is tested
annually for impairment, as well as when there is indication of
impairment;
The Group has reassessed the useful lives of its intangible assets in
accordance with the provisions of HKAS 38. No adjustment resulted from
this reassessment.
All changes in the accounting policies have been made in accordance with
the transition provisions in the respective standards, wherever
applicable. All standards adopted by the Group require retrospective
application other than:
- HKAS 16 - the initial measurement of an item of property, plant
and equipment acquired in an exchange of assets transaction is accounted
at fair value prospectively only to future transactions;
- HKAS 21 - prospective accounting for goodwill and fair value
adjustments as part of foreign operations;
- HKAS 39 - does not permit to recognise, derecognise and measure
financial assets and liabilities in accordance with this standard on a
retrospective basis. The Group applied the previous SSAP 24 "Accounting
for investments in securities" to investments in securities and also to
hedge relationships for the 2004 comparative information. The adjustments
required for the accounting differences between SSAP 24 and HKAS 39 are
determined and recognised at 1 April 2005.
- HKFRS 3 - prospectively after 1 April 2005.
The effect on the adoption of the new accounting policies in consolidated
balance sheet and consolidated income statement were summarised as follow
:-
Consolidated balance sheet
As at 31 March 2006
HKFRS 3,
HKAS 17 HKAS 36 and 38 HKAS 39 Total
HK$'000 HK$'000 HK$'000 HK$'000
Decrease in property, plant and
equipment
(5,757) - - (5,757)
Increase in leasehold land
5,757 - - 5,757
Decrease in investment in securities
- - (35,940) (35,940)
Increase in available-for-sale
financial assets
- - 2,695 2,695
Decrease in trade receivables
- - (4,685) (4,685)
Decrease in goodwill
- (5,524) - (5,524)
Decrease in prepayments, deposits
and other receivables
- - (4,745) (4,745)
___________________________________________________________________
- (5,524) (42,675) (48,199)
===================================================================
Reserve
- (5,524) (42,675) (48,199)
===================================================================
Consolidated income statement
For the year ended 31 March 2006
HKFRS 3,
HKAS 17 HKAS 36 and 38 HKAS 39 Total
HK$'000 HK$'000 HK$'000 HK$'000
Decrease in depreciation
(484) - - (484)
Increase in amortisation of
leasehold lands
484 - - 484
Impairment of goodwill
- 5,524 - 5,524
Impairment loss on available-for-sale
financial assets
- - 33,245 33,245
Impairment loss on trade receivables
- - 4,685 4,685
Impairment loss on prepayments,
deposits and other receivables
- - 4,745 4,745
_________________________________________________________________
Increase in loss attributable to
equity holders of the Company
- 5,524 42,675 48,199
================================================================
Increase in loss per share (HK$)
- 0.017 0.133 0.150
================================================================
Consolidated balance sheet
As at 31 March 2005
HKFRS 3,
HKAS 17 HKAS 36 and 38 HKAS 39 Total
HK$'000 HK$'000 HK$'000 HK$'000
Decrease in property, plant and
equipment
(6,241) - - (6,241)
Increase in leasehold land
6,241 - - 6,241
===================================================================
There was no impact on reserves from the adoption of HKAS 17 as at 31
March 2005.
Consolidated income statement
For the year ended 31 March 2005
HKFRS 3,
HKAS 17 HKAS 36 and 38 HKAS 39 Total
HK$'000 HK$'000 HK$'000 HK$'000
Decrease in depreciation
(119) - - (119)
Increase in amortisation of
leasehold lands
119 - - 119
==================================================================
There was no impact on earnings per share from the adoption of HKAS 17 for
the year ended 31 March 2005.
2. Turnover
The Group's turnover comprised of the followings:
2006 2005
HK$'000 HK$'000
(Restated)
Apparel sourcing services 4,524 81,984
Apparel trading 43,904 19,990
___________________________
48,428 101,974
===========================
Turnover represents the net invoiced value of goods sold, after allowances
for returns and trade discounts. All significant transactions among the
companies comprising the Group have been eliminated on consolidation.
3. (Loss)/profits from operation
Expenses included in cost of goods sold, selling expenses and
administrative expenses are analysed as follows:-
The Group
2006 2005
HK$'000 HK$'000
(Restated)
Cost of inventories expensed 38,892 73,674
Employee benefit expenses 3,172 2,640
Depreciation 3,147 1,098
Amortisation of intangible assets
- 233
Amortisation of goodwill - 271
Amortisation of leasehold lands 484 119
Auditors remuneration 660 500
Impairment loss on property, plant and equipment
436 -
Impairment loss on investment deposits
2,745 -
Impairment loss on loan receivables
2,000 -
Provision for slow moving stock 6,689 -
Operating lease rental respect of rental premises
1,163 516
Irrecoverable bad debts - 3,800
===========================
4. (LOSS)/EARNINGS PER SHARE
The calculation of the basic (loss)/earnings per share is based on the (
loss)/profit attributable to the Company's equity holders of HK$79,610,000
(2005: profit of HK$2,160,000) and on 320,000,000 (2005: 320,000,000)
shares in issue during the year.
There were no potential shares in existence for the year ended 31 March
2006 and 2005, and, accordingly, no diluted loss per share has been
presented.
5. Extract from auditors' report
BASIS OF OPINION
We conducted our audit in accordance with Hong Kong Standards on Auditing
issued by the Hong Kong Institute of Certified Public Accountants. An
audit includes examination, on a test basis, of evidence relevant to the
amounts and disclosures in the financial statements. It also includes an
assessment of the significant estimates and judgments made by the
directors in the preparation of the financial statements, and of whether
the accounting policies are appropriate to the Company's and the Group's
circumstances, consistently applied and adequately disclosed.
We planned our audit so as to obtain all the information and explanations
which we considered necessary in order to provide us with sufficient
evidence to give reasonable assurance as to whether the financial
statements are free from material misstatement. In forming our opinion,
we have considered the adequacy of the disclosure made in note 2 to the
financial statements which explains that the circumstances giving rise to
the fundamental uncertainties relating to the net loss and net current
liability position of the Group and possible obligation arising from tax
liabilities (the "Tax Obligations") imposed by the Inlands Revenue
Department of the Hong Kong Special Administrative Region (the "HKIRD").
These financial statements have been prepared on a going concern basis,
the validity of which depends upon the outcome of the Tax Obligations on
the Group and upon the continuing financial support from the controlling
shareholder of the Company. The financial statements do not include any
adjustments that if the Group failed to obtain the necessary financial
support from its controlling substantial shareholder. We have considered
that appropriate disclosures have been made in the financial statements
concerning this situation, but the evidence available to us was limited.
In the absence of sufficient documentary evidence, we were unable to
ascertain as to whether the assumption made by the directors of the
Company in preparing the financial statements on a going concern basis, as
set out in note 2 to the financial statements, are fair and reasonable.
There were no other satisfactory audit procedures that we could adopt to
satisfy ourselves as to the appropriateness of the going concern basis,
which may have a consequential significant effect on the results for the
year and its liquidity position as at 31 March 2006. These fundamental
uncertainties relating to whether the going concern basis is appropriate
is so extreme that we have disclaimed our opinion.
In forming our opinion we also evaluated the overall adequacy of the
presentation of information in the financial statements. We believe that
our audit provides a reasonable basis for our opinion.
QUALIFIED OPINION: DISCLAIMER ON VIEW GIVEN BY THE FINANCIAL STATEMENTS
Because of the significance of the possible effect of the limitation in
the evidence available to us relating to the matter referred to above, we
are unable to form an opinion as to whether the financial statements give
a true and fair view of the state of affairs of the Company and the Group
as at 31 March 2006 and of its loss and cash flows of the Group for the
year then ended and as to whether the financial statements have been
properly prepared in accordance with the disclosure requirements of the
Hong Kong Companies Ordinance.
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