Listed Company Information
 

GUANGDONG TANN<01058> - Results Announcement

Guangdong Tannery Limited announced on 09/09/2005:
(stock code: 01058 )
Year end date: 31/12/2005
Currency: HKD
Auditors' Report: N/A
Interim report reviewed by: Both Audit Committee and Auditors

                                                        (Unaudited )
                                     (Unaudited )       Last
                                     Current            Corresponding
                                     Period             Period
                                     from 01/01/2005    from 01/01/2004
                                     to 30/06/2005      to 30/06/2004
                               Note  ('000      )       ('000      )
Turnover                           : 95,077             162,836           
Profit/(Loss) from Operations      : 1,328              5,879             
Finance cost                       : (1,788)            (3,104)           
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       : (515)              2,775             
% Change over Last Period          : N/A       %
EPS/(LPS)-Basic (in dollars)       : (0.001)            0.0053            
         -Diluted (in dollars)     : N/A                N/A               
Extraordinary (ETD) Gain/(Loss)    : N/A                N/A               
Profit/(Loss) after ETD Items      : (515)              2,775             
Interim Dividend                   : Nil                Nil
  per Share                                              
(Specify if with other             : N/A                N/A
  options)                                               
                                                         
B/C Dates for 
  Interim 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.  SUMMARY OF INDEPENDENT AUDITORS' REVIEW REPORT

An extract from the independent auditors' review report of the Company for 
the six months ended 30 June 2005 is as follows:

Fundamental uncertainty - Contingent liabilities

In arriving at our review conclusion, we have considered the adequacy of 
the disclosures made in note 19 to the condensed consolidated financial 
statements concerning the irregularities involving certain former 
executives of a former subsidiary of the Company in a previous year and 
the related provision of RMB73,978,000 (equivalent to approximately 
HK$69,600,000) for the tax claim and tax penalty made by the Group as 
detailed in note 15(a) to the condensed consolidated financial statements. 
As more fully explained in note 19 to the condensed consolidated financial 
statements, although judgment for the proceeding in the Guangzhou 
Intermediate People's Court (the "Judgment") has been rendered on 
2 September 2005, the impacts of the Judgment or the ruling in any appeal 
against the Judgment, including the other possible consequential actions 
that may be taken by the PRC authorities for the apparent breaches of 
certain PRC laws and regulations, and the existence or otherwise of any 
other penalties and claims so arising as a result of the aforesaid 
irregularities, remain uncertain.  As of the date of this report, no 
further provision other than that disclosed in notes 15(a) and 19 to the 
condensed consolidated financial statements has been made in the interim 
financial report for such contingencies.  We consider that appropriate 
disclosures and estimates have been made in the interim financial report 
and our review conclusion is therefore not modified in this respect.

Review conclusion
-----------------

On the basis of our review which does not constitute an audit, we are not 
aware of any material modifications that should be made to the interim 
financial report for the six months ended 30 June 2005.

2.  ACCOUNTING POLICIES

The unaudited condensed consolidated interim financial statements are 
prepared in accordance with Hong Kong Accounting Standard ("HKAS") 34
"Interim Financial Reporting".  The accounting policies and basis of 
preparation adopted in the preparation of the unaudited condensed 
consolidated interim financial statements are the same as those used in 
the preparation of the Group's audited annual financial statements for the 
year ended 31 December 2004, except in relation to the following new and 
revised Hong Kong Financial Reporting Standards ("HKFRSs", which also 
include HKASs and interpretations) that affect the Group and are adopted 
for the first time for the current period's financial statements:

-  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 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 28 Investment in Associates
-  HKAS 32 Financial Instruments: Disclosure and Presentation
-  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 40 Investment Property
-  HKFRS 2 Share-based Payment
-  HKFRS 3 Business Combinations
-  HK(SIC)-Int 21   
   Income Taxes - Recovery of Revalued Non-depreciable Assets
-  HK-Int 4     
   Leases - Determination of the Length of Lease Term in respect of Hong 
            Kong Land Leases

The adoption of HKASs 1, 2, 7, 8, 10, 12, 16, 18, 19, 21, 23, 24, 27, 28, 
32, 33, 37, 39, HK(SIC)-Int 21 and HK-Int 4 has had no material impact on 
the accounting policies of the Group and the methods of computation in the 
Group's unaudited condensed consolidated interim financial statements.  
The impact of adopting the other HKFRSs is summarised as follows:

(a)  HKAS 17 - Leases

In prior periods, leasehold land and buildings held for own use were 
stated at valuation less accumulated depreciation.

Upon adoption of HKAS 17, the Group's leasehold interests in land and 
buildings is separated into leasehold land and leasehold buildings.  The 
Group's leasehold land is classified as an operating lease, because the 
title of the land is not expected to pass to the Group by the end of the 
lease term, and is reclassified from fixed assets to land lease payments, 
while leasehold buildings continue to be classified as part of fixed 
assets.  Land lease payments under operating leases are initially stated 
at cost and subsequently amortised on the straight-line basis over the 
lease term.  When the lease payments cannot be allocated reliably between 
the land and building elements, the entire lease payments are included in 
the cost of the land and buildings as a finance lease in fixed assets.

This change in accounting policy has had effects on the unaudited 
condensed consolidated financial statements as follows:

                                   31 December 2004  1 January 2004
                                            HK$'000         HK$'000
                                         (Unaudited)     (Unaudited)
Effect of new policy on equity:                         

Decrease in property revaluation reserve     16,020          17,208
Decrease in accumulated losses               (4,095)         (3,759)
                                          -----------  --------------
Total                                        11,925          13,449
                                            =========       =========
                
                                           Six months ended 30 June
                                               2005            2004
                                            HK$'000         HK$'000
                                         (Unaudited)     (Unaudited)
Effect of new policy on profit/(loss):                  
  Decrease in cost of sales                     168             168
  Decrease in loss/increase 
   in profit for the period                     168             168

  Decrease in basic loss/increase 
   in basic earnings per share         HK$0.03 cent    HK$0.03 cent
                                       ============    ============             
        
(b) HKAS 40 - Investment Properties
        
In prior periods, changes in the fair values of investment properties were 
dealt with as movements in the property revaluation reserve.  If the total 
of this reserve was insufficient to cover a deficit, on a portfolio basis, 
the excess of the deficit was charged to the profit and loss account.  Any 
subsequent revaluation surplus was credited to the profit and loss account 
to the extent of the deficit previously charged.

Upon the adoption of HKAS 40, gains or losses arising from changes in the 
fair values of investment properties are included in the profit and loss 
account in the year in which they arise.  Any gains or losses on the 
retirement or disposal of an investment property are recognised in the 
profit and loss account in the year of the retirement or disposal.

The adoption of HKAS 40 has had no effect on these unaudited condensed 
consolidated interim financial statements because the Group's investment 
properties had a net revaluation deficit position as at 30 June 2005 and 
2004 and 1 January 2005 and 2004 and the changes in valuation thereof had 
been dealt with in the profit and loss account.

(c)  HKFRS 2 - Share-based Payment

In prior periods, no recognition and measurement of share-based 
transactions in which employees (including directors) were granted share 
options over shares in the Company was required until such options were 
exercised by employees, at which time the share capital and share premium 
were credited with the proceeds received.

Upon the adoption of HKFRS 2, when employees (including directors) render 
services as consideration for equity instruments ("equity-settled 
transactions"), the cost of the equity-settled transactions with employees 
is measured by reference to the fair value at the date at which the 
instruments are granted.  The fair value is determined by an external 
valuer using a binominal model.  In valuing equity-settled transactions, 
no account is taken of any performance conditions, other than conditions 
linked to the price of the shares of the Company, if applicable.

The cost of equity-settled transactions is recognised, together with a 
corresponding increase in equity, over the period in which the performance 
and/or service conditions are fulfilled, ending on the date on which the 
relevant employees become fully entitled to the award (the "vesting date
").  The cumulative expense recognised for equity-settled transactions at 
each balance sheet date until the vesting date reflects the extent to 
which the vesting period has expired and the Group's best estimate of the 
number of equity instruments that will ultimately vest.  The charge or 
credit to the profit and loss account for a period represents the movement 
in cumulative expense recognised as the beginning and end of that period.

No expense is recognised for awards that do not ultimately vest, except 
for awards where vesting is conditional upon a market condition, which are 
treated as vesting irrespective of whether or not the market condition is 
satisfied, provided that all other performance conditions are satisfied.

The Group has taken advantage of the transitional provision of HKFRS 2 in 
respect of equity-settled awards and has applied HKFRS 2 only to share 
options granted after 7 November 2002 that had not vested on or before 1 
January 2005.  The adoption of this new HKFRS has no impact to the 
unaudited condensed consolidated interim financial statements of the Group 
as the Group has neither share options granted after 7 November 2002 and 
not vested before 1 January 2005 nor liabilities settled based on shares 
or other rights over shares.

(d)  HKFRS 3 - Business Combinations, HKAS 36 - Impairment of Assets, and 
     HKAS 38 - Intangible Assets

In prior periods, goodwill arising on acquisitions prior to 1 January 2001 
was eliminated against consolidated capital reserve in the year of 
acquisition and was not recognised in the profit and loss account until 
disposal or impairment of the acquired business.

Goodwill arising on acquisitions on or after 1 January 2001 was 
capitalised and amortised on the straight-line basis over its estimated 
useful life and was subject to impairment testing when there was any 
indication of impairment.

Upon the adoption of HKFRS 3 and HKAS 36, goodwill arising on acquisitions 
is no longer amortised but subject to an annual impairment review (or more 
frequently if events or changes in circumstances indicate that the 
carrying value may be impaired).  Any impairment loss recognised for 
goodwill is not reversed in a subsequent period.

The transitional provisions of HKFRS 3 have required the Group to 
eliminate at 1 January 2005 the carrying amounts of accumulated 
amortisation with a corresponding entry to the cost of goodwill and to 
derecognise the carrying amounts of negative goodwill (including that 
remaining in consolidated capital reserve) against retained earnings.  
Goodwill previously eliminated against consolidated capital reserve 
remains eliminated against consolidated capital reserve and is not 
recognised in the profit and loss account when all or part of the business 
to which the goodwill relates is disposed of or when a cash-generating 
unit to which the goodwill relates become impaired.

The change in accounting policy has had no effect on these unaudited 
condensed consolidated interim financial statements.

3.  EARNING /(LOSS) PER SHARE

The calculation of basic earnings/(loss) per share is based on the loss 
for the period of HK$515,000 (2004: profit of HK$2,775,000 (as restated)) 
and 524,154,000 (2004: 524,154,000) ordinary shares in issue during the 
period.

Diluted earnings/(loss) per share amounts for the six months ended 
30 June 2005 and 2004 have not been disclosed as the share options 
outstanding during these periods had an anti-dilutive effect on the 
basic earnings/(loss) per share for these periods, respectively.