GUANGDONG TANN<01058> - Results Announcement
Guangdong Tannery Limited announced on 31/03/2006:
(stock code: 01058 )
Year end date: 31/12/2005
Currency: HKD
Auditors' Report: Modified
(Audited )
(Audited ) Last
Current Corresponding
Period Period
from 01/01/2005 from 01/01/2004
to 31/12/2005 to 31/12/2004
Note ('000 ) ('000 )
Turnover : 258,543 281,951
Profit/(Loss) from Operations : 8,604 11,941
Finance cost : (3,734) (5,734)
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 : 5,403 5,004
% Change over Last Period : +8 %
EPS/(LPS)-Basic (in dollars) : 0.0103 0.0095
-Diluted (in dollars) : 0.0103 N/A
Extraordinary (ETD) Gain/(Loss) : N/A N/A
Profit/(Loss) after ETD Items : 5,403 5,004
Final Dividend : Nil Nil
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 Annual
General Meeting : 14/06/2006 to 15/06/2006 bdi.
Other Distribution for : N/A
Current Period
B/C Dates for Other
Distribution : N/A
Remarks:
1. SUMMARY OF REPORT OF THE AUDITORS
An extract from the report of the auditors to the Company for the year
ended 31 December 2005 is as follows:
Fundamental uncertainty - Contingent liabilities
In arriving at our audit opinion, we have considered the adequacy of the
disclosures made in the financial statements concerning the irregularities
involving certain former executives of a former subsidiary of the Company
in a previous year and the related provisions of HK$71,052,000 for the tax
claim and tax penalty made by the Group as detailed in the financial
statements. As the actions taken by the authorities of the People's
Republic of China (the "PRC") have not yet been concluded, it is not
possible to ascertain with any degree of reasonable certainty the amount
of any tax penalty which may finally be imposed by the PRC authorities and
the other consequential actions that may be taken by the PRC authorities
for the apparent breaches of certain PRC laws and regulations, or the
existence or otherwise of any other penalties and claims arising as a
result of the aforesaid irregularities. As of the date of this report, no
further provision other than that disclosed in the financial statements
has been made in the financial statements for such contingencies. We
consider that appropriate disclosures and estimates have been made in the
financial statements and our audit opinion is therefore not qualified in
this respect.
Opinion
In our opinion the financial statements give a true and fair view of the
state of affairs of the Company and of the Group as at 31 December 2005
and of the profit and cash flows of the Group for the year then ended and
have been properly prepared in accordance with the Companies Ordinance.
2. IMPACT OF NEW AND REVISED HONG KONG FINANCIAL REPORTING STANDARDS
(HKFRSs)
The following new and revised HKFRSs affect the Group and are
adopted for the first time for the current year'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 11 Construction Contracts
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 20 Accounting for Government Grants and Disclosure of
Government Assistance
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 Investments in Associates
HKAS 31 Interests in Joint Ventures
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 39 Amendment Transition and Initial Recognition of
Financial Assets and Financial Liabilities
HKAS 40 Investment Property
HKFRS 2 Share-based Payment
HKFRS 3 Business Combinations
HKFRS 5 Non-current Assets Held for Sale and Discontinued
Operations
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, 11, 12, 14, 16, 18, 19, 20,
21, 23, 27, 28, 31, 32, 33, 36, 37, 38, 39, 39 Amendment, HKFRSs 3 and 5,
HK(SIC)-Int 21 and HK-Int 4 has had no material impact on the accounting
policies of the Group and the Company and the methods of computation in
the Group's and the Company's financial statements.
HKAS 24 has expanded the definition of related parties and affected the
Group's related party disclosures.
The impact of adopting the other HKFRSs is summarised as follows:
(a) HKAS 17 - Leases
In prior years, leasehold land and buildings held for own use were
stated at valuation less accumulated depreciation and any impairment
losses.
Upon the adoption of HKAS 17, the Group's leasehold interest 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 property, plant and
equipment to prepaid land lease payments, while leasehold buildings
continue to be classified as part of property, plant and equipment.
Prepaid land premiums for land lease payments under operating leases are
initially stated at cost and subsequently amortised on the straight-line
basis over the lease term.
The effects of the change in accounting policy are summarized
below.
(b) HKAS 40 - Investment Property
In prior years, changes in the fair values of investment
properties were dealt with as movements in the investment 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 income statement. Any subsequent revaluation surplus was
credited to the income statement 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 income
statement in the year in which they arise. The adoption of HKAS 40 has
had no effect on these financial statements because the Group's investment
properties had a net revaluation deficit position as at 1 January 2005 and
2004 and the changes in fair value thereof had been dealt with in the
income statement.
(c) HKFRS 2 - Share-based Payment
In prior years, no recognition and measurement of share-based payment
transactions in which employees (including directors) were granted share
options over shares in the Company were 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 revised accounting policy for share-based
payment transactions is described in more detail in notes to the financial
statements.
The Group has adopted the transitional provisions of HKFRS 2 under
which the new measurement policies have not been applied to (i) options
granted to employees on or before 7 November 2002; and (ii) options
granted to employees after 7 November 2002 but which had vested before 1
January 2005. The adoption of HKFRS 2 has no impact to the financial
statements of the Group as the Group has neither employee share options
which were granted during the period from 7 November 2002 to 31 December
2004 but had not yet vested as at 1 January 2005 nor employee share
options granted during the year.
Due to the adoption of new HKFRSs during the current year, the accounting
treatment and presentation of certain items and balances in the financial
statements have been revised to comply with the new requirements.
Accordingly, certain prior year adjustments have been made and certain
comparative amounts have been reclassified and restated to conform with
the current year's presentation and accounting treatment.
The Group has not applied those new and revised HKFRSs that have been
issued but are not yet effective in the financial statements.
SUMMARY OF THE IMPACT OF CHANGES IN ACCOUNTING POLICIES
(a) Effect on the consolidated balance sheet
Effect of adopting
_____________________________
HKAS 1# HKAS 17# Total
At 1 January 2005 Prepaid land
Presentation lease payments
Effect of new
policies HK$'000 HK$'000 HK$'000
Assets
Decrease in
property,
plant and
equipment (6,740) (20,000) (26,740)
Increase in
investment
properties 6,740 - 6,740
Increase in
prepaid land
lease payments - 3,828 3,828
________
(16,172)
========
Liabilities/equity
__________________
Decrease in deferred
tax liabilities - (4,247) (4,247)
Decrease in property
revaluation reserve - (16,020) (16,020)
Decrease in accumulated
losses - 4,095 4,095
_________
(16,172)
=========
# Adjustments/presentation taken effect retrospectively
Effect of adopting
_____________________________
HKAS 1# HKAS 17# Total
At 31 December 2005 Prepaid land
Presentation lease payments
Effect of new
policies HK$'000 HK$'000 HK$'000
Assets
Decrease in
property,
plant and
equipment (2,280) (20,000) (22,280)
Increase in
investment
properties 2,280 - 2,280
Increase in
prepaid land
lease payments - 3,825 3,825
__________
(16,175)
=========
Liabilities/equity
Decrease in deferred
tax liabilities - (4,363) (4,363)
Decrease in property
revaluation
reserve - (16,243) (16,243)
Decrease in
accumulated
losses - 4,431 4,431
________
(16,175)
=========
# Adjustments/presentation taken effect retrospectively
(b) Effect on the balances of equity at 1 January 2005 and 2004
Effect of adopting HKAS 17 in respect of prepaid land lease payments:
1 January 2005 1 January 2004
HK$'000 HK$'000
Decrease in property revaluation
reserve (16,020) (17,208)
Decrease in accumulated losses 4,095 3,759
____________ __________
(11,925) (13,449)
============ =========
(c) Effect on the consolidated income statement for the years ended 31
December 2005 and 2004
Effect of adopting HKAS17 in respect of prepaid land lease payments:
Year ended 31 December
2005 2004
HK$'000 HK$'000
Decrease in cost of sales 336 336
Increase in profit for the year 336 336
Increase in basic earnings per share HK$ 0.06 cent HK$0.06 cent
Increase in diluted earnings per share HK$ 0.06 cent N/A
============= ============
3. EARNINGS PER SHARE ATTRIBUTABLE TO ORDINARY EQUITY HOLDERS OF THE
PARENT
The calculation of basic earnings per share amounts is based on the net
profit for the year attributable to ordinary equity holders of the parent,
and the weighted average number of ordinary shares in issue during the
year.
The calculation of diluted earnings per share amounts is based on the net
profit for the year attributable to ordinary equity holders of the parent.
The weighted average number of ordinary shares used in the calculation is
the ordinary shares in issue during the year, as used in the basic
earnings per share calculation and the weighted average number of ordinary
shares assumed to have been issued at no consideration on the deemed
exercise or conversion of all dilutive potential ordinary shares into
ordinary shares.
The calculations of basic and diluted earnings per share are based on:
2005 2004
HK$'000 HK$'000
(Restated)
Earnings
Net profit attributable to ordinary
equity holders of the parent, used
in the basic earnings per share
calculation 5,403 5,004
======== =========
Number of shares
2005 2004
Shares
Weighted average number of ordinary
shares in issue during the year
used in the basic earnings per
share calculation 524,154,000 524,154,000
Effect of dilution - weighted
average number of ordinary shares:
Share options 294,383 N/A
____________ ______________
524,448,383 N/A
=========== =======
A diluted earnings per share amount for the year ended 31 December 2004
has not been disclosed as the share options outstanding during that year
had an anti-dilutive effect on the basic earnings per share for that year.
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