31st Dec 2009 07:00
31 December 2009
LED International Holdings Limited
("LED" or the "Company")
Final Results
For the year ended 30 June 2009
The board of directors of LED (the "Board") is pleased to present the Company's annual report and audited financial statements for the year ended 30 June 2009 (the "Financial Report"). The Financial Report is today being sent to the Company's shareholders.
For further information:
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LED International Holdings Limited |
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Dennis Ow, Deputy Chief Executive Officer |
+852 2810 4470 |
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Strand Hanson Limited |
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James Harris / James Spinney |
+44 (0) 207 049 3494 |
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Table of contents |
Page(s) |
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Board of Directors and professional advisers |
3-4 |
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Directors' biographies |
5-7 |
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Financial highlights |
8 |
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Chairman's statement |
9-13 |
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Report of the remuneration committee |
14 |
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Report on corporate governance |
15-16 |
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Statement of directors' responsibilities |
17 |
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Independent auditor's report |
18-21 |
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Consolidated income statement |
22 |
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Consolidated balance sheet |
23 |
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Balance sheet |
24 |
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Consolidated statement of changes in equity |
25 |
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Consolidated cash flow statement |
26 |
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Notes to the consolidated financial statements |
27-82 |
BOARD OF DIRECTORS AND PROFESSIONAL ADVISERS
BOARD OF DIRECTORS
Thomas Li, Executive Chairman
Yiwei Xiong, Chief Executive Officer (retired after AGM on 6 August 2009)
Dennis Ow, Deputy Chief Executive Director
Stephen Chan, Executive Director (re-appointed after AGM on 6 August 2009)
Ivor Shrago, Non-executive Director (retired after AGM on 6 August 2009)
Kevin Non-executive Director
Harby Janagol, Non-executive Director (re-appointed after AGM on 6 August 2009)
PROFESSONAL ADVISORS
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Nominated Adviser: |
Strand Hanson Limited 26 Mount Row London W1K 3SQ, United Kingdom |
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Independent Auditor: |
HLB Hodgson Impey Cheng 31/F Gloucester Tower, The Landmark 11 Pedder Street, Central Hong Kong |
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Legal Advisor: |
Hammonds Suite 3201 Jardine House 1 Connaught Place, Central Hong Kong |
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Chin & Associates, Solicitors Units B&C, 10/F, Sun House 181 Des Voeux Road, Central Hong Kong |
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Registrars: |
Capita Registrars (Jersey) Limited Victoria Chambers Liberation Square 1/3 The Espanade St. Helier, Jersey, JE2 3QA |
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UK Depositary: |
Capita IRG Trustees Limited The Registry |
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Financial PR Adviser: |
Jovian Corporate Services Limited. Rooms 918-920, Sun Hung Kai Centre 30 Harbour Road, Wanchai Hong Kong |
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Website: |
www.led-intl.com |
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AIM Stock Code: |
LED |
DIRECTORS' BIOGRAPHIES
EXECUTIVE DIRECTORS
THOMAS LI - EXECUTIVE CHAIRMAN
Mr. Thomas Li Xin Li specialises in sales and marketing, product design, development and application of LED products and has substantial experience in the LED sector. Mr. Li also possesses experience of working in high precision instrument sales and marketing. His particular strengths are in LED business development, given his strong background in technology together with well-established experience in international sales and marketing in the LED sector. Mr. Li holds a B.Eng. degree from Guangdong Institute of Technology (now Guangdong University of Technology) and a BBA degree from the Simon Fraser University, Canada.
DENNIS OW - DEPUTY CHIEF EXECUTIVE OFFICER
Mr. Dennis Kian Jing Ow currently is a Managing Director for Old Park Lane Capital Asia based in Hong Kong, a subsidiary of Old Park Lane Capital, London. His role involves developing their business, identifying new deals and assisting companies raise funds in Asia. Prior to joining Old Park Lane Capital Asia, he was the Director for Blue Oar Securities based in Hong Kong. He also worked as the Senior Business Manager of Asia Pacific for the London Stock Exchange for over two and half years in which he successfully brought eight companies from Southeast Asia to AIM and two Main Market listings from Indonesia and the Philippines. Before joining the London Stock Exchange, Mr. Ow worked for five and half years at a public listed American company called First Data Corporation specialising in global credit cards processing and money transfer, and he was in charge of their training and business development for Greater China. Mr. Ow was educated and raised in Australia and gained an Undergraduate in Marketing and a Postgraduate in Management.
Furthermore, Mr. Ow was appointed as Deputy Chief Executive Officer of the Company on 29 May 2009.
STEPHEN CHAN - CHIEF FINANCIAL OFFICER
Mr. Stephen Wing Bun Chan has been appointed to the Board as Chief Financial Officer of the Company, having joined the Company in February 2009, and has assumed prime responsibility for its finance and regulatory functions. Prior to joining the Company, Mr. Chan advised on a number of corporate transactions, including M&A, restructurings and IPOs during his time with LehmanBrown CPA Co., Ltd. Prior to this he was the Finance Controller of Avnet Sunrise Ltd, a wholly-owned subsidiary of Avnet Inc, a global fortune 500 company operating in the electronics industry, where he performed a number of financial and regulatory based roles.
Mr. Chan began his accountancy career at Grant Thornton before moving to Deloitte Touche Tohmatsu in Hong Kong. He is CPA qualified in Hong Kong and ACA qualified in England and Wales. Other professional qualifications he holds include ACCA (1992), AHKSA (1993) and FCCA (1999). He was educated at Hong Kong Baptist University and later received an International Master of Business Administration from the University of South Australia. He has recently completed an LLM at the Renmin University of China.
Mr. Chan was appointed as Executive Director on 29 May 2009 and re-appointed at the AGM on 6 August 2009.
Mr. Chan is also the company secretary of Greens Holdings Limited, a company listed on the Hong Kong Stock Exchange on 6 November 2009.
NON-EXECUTIVE DIRECTORS
HARBY JANAGOL
Mr. Harby Janagol runs a consulting firm, Harvey Best Ltd, which advises on market entry, tax structures, finance and strategy for businesses operating in China, India and the Middle East. In addition, he advises overseas organisations seeking investment opportunities in the UK.
Prior to focusing his business activity in Asia Mr. Janagol worked on a range of consulting projects including software implementation for a US firm, Appmail LLC, social recruitment, mobile interconnect, personal financial advice and property lettings. He has 11 years corporate experience with Cable & Wireless, managing a finance function and thereafter working in a range of senior management roles across Europe; these included supplier contract negotiation, business development, sales & marketing and project finance.
Mr. Janagol has been elected as a CIMA (Chartered Institute of Management Accountants) Council Member effective June 2009 and appointed to the International Development Committee. He currently holds the honorary position as President for CIMA's West Surrey branch supporting over 4000 members.
In his voluntary positions, he has supported the Institute of Directors' China Interest Group to expand its membership. He also acted as Vice Chair for the Social Enterprise Network in Berkshire and has contributed to the Young Enterprise Company Scheme, coaching students with learning difficulties.
He also acts as Chairman of a UK Charity "Now I Eat" (registered number 1129938) which helps underprivileged children in China and India.
Mr. Janagol is a Fellow of the Chartered Institute of Management Accountants and obtained a BA degree in Accounting and Finance from Middlesex University.
Mr. Janagol was appointed as Non-executive Director on 5 June 2009 and re-appointed at the AGM on 6 August 2009.
Mr. Janagol is a member of both the Audit and Remuneration committees.
KEVIN MIU
Mr. Kevin Ka-Keung Miu is an experienced corporate finance practitioner specialising in the PRC market and has over years experience in handling deals relating to PRC businesses. Mr. Miu is currently director of corporate finance at Grand Vinco Capital Limited, a securities broker in Hong Kong. He holds a bachelor's degree in Accounting and a master's degree in Business Administration.
Mr. Miu is a member of both the Audit and Remuneration committees.
FINANCIAL HIGHLIGHTS
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2009 HK$'000 |
2008 HK$'000 (Restated) |
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Continuing operations |
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LED display screens: |
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Revenue |
15,833 |
- |
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Gross loss |
(6,831) |
- |
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Gross profit margin |
-43% |
- |
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LED element products: |
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Revenue |
25,663 |
39,886 |
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Gross profit before impairment and write off |
164 |
8,170 |
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Gross loss after impairment and write off |
(3,067) |
- |
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Gross profit margin before impairment and write off |
1% |
20% |
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Gross profit margin after impairment and write off |
-12% |
20% |
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Discontinued operations |
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LED signboard, lighting and lighting engineering: |
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Revenue |
- |
12,117 |
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Gross profit |
- |
(587) |
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Gross profit margin |
- |
-5% |
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Loss for the year |
(72,485) |
(51,172) |
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Total shareholders' funds |
20,912 |
83,667 |
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CHAIRMAN'S STATEMENT
INTRODUCTION
LED (AIM:LED) and its subsidiaries (together the "Group") specialise in the development, manufacture and sale of LED module and other LED products such as LED screens, advertising displays, outdoor signs, lamps, lighting and building illumination. The Board of Directors (the "Board") is pleased to report on the final results of the Group for the year ended 30 June 2009.
The shareholders shall note that our independent auditor, HLB Hodgson Impey Cheng, was appointed at the last AGM during the financial year and, has qualified certain balances of the consolidated financial statements for the year ended 30 June 2008 audited by Baker Tilly Hong Kong.
QUALIFICATION OF INDEPENDENT AUDITOR'S REPORT
1. Scope limitations - Consolidation of Shenzhen subsidiary, prior year qualification affecting opening balances and impairment loss on other receivables classified under discontinued operation
As contained under the heading of Disposal of Subsidiary below and as previously announced, our independent auditor has qualified the availability of accounting records of Shenzhen China-LED Photo-Technology Limited ('Shenzhen LED') due to the absence of adequate effective controls and high turnover in the management of Shenzhen LED. Shenzhen LED had ceased its business operations by September 2007. Production was transferred elsewhere and no trading by or through Shenzhen LED has been conducted since September 2007. Shenzhen LED previously manufactured LED screens.
Thus the lack of certain useful information in the accounting records and time to complete certain audit procedures, left the independent auditor with no alternative other than to qualify the prior year scope limitation affecting opening balances in respect of financial information of Shenzhen LED.
Since that time, the Board has tightened up its corporate and financial governance, including the appointment of an independent accounting firm to review the controls systems of all operating subsidiaries, so as to ensure that the Group works more cohesively together and that a similar situation will not reoccur.
2. Scope limitation - correction of errors relating to deed of assignment of loan
As contained in note 2(b) to the consolidated financial statements, a loan assigned to the Company in a total amount of approximately HK$45,393,000 was included mistakenly in other payables and accrued expenses as at 30 June 2008 and 2007 as disclosed in the annual report dated 12 February 2009. This fundamental accounting error reported by Baker Tilly Hong Kong in prior years has been dealt with in the current financial year.
Without obtaining any direct confirmation from the loan assignor our independent auditor has no alternative but to qualify on the valuation and existence of the loan.
3. Significant uncertainty relating to the going concern basis of the Group
As contained under the headings of Operating Review and Fund Raising below, the Group has currently been undertaking a number of measures to improve its liquidity and financial position, including diversifying sources of revenue, tightening control of costs and expenses, and capitalising working capital of the Company. The Group operates as a going concern entity on the basis that the Board remains confident in the Group's long-term growth potential in the higher value-added LED products and overseas markets and the ongoing financial support from the Company's a substantial shareholder to finance the Group's future working capital for its continuing operations.
OPERATING REVIEW
The global business environment has deteriorated substantially throughout the period under review and, like many other businesses, our operating performance was significantly affected by the general slowdown in China's domestic and export markets. The Group experienced a loss for the year ended 30 June 2009. This is mainly attributable to a reduction in export and domestic sales orders from the Group's customers as a result of a general economic slowdown during the financial year, and a conservative approach over negotiating sales orders in view of the deteriorating credit quality of overseas customers.
Due to the above factors, the Board is continuing to implement measures to diversify sources of revenue and to reduce expenditure, control production costs and expand the customer base in different areas, such as overseas markets, where there is demand for higher value products. The Board considers that the overall Group's operations remain sound.
FINANCIAL REVIEW
Revenue and loss attributable to shareholders for the year ended 30 June 2009 amounted to approximately HK$41,496,000 (approximately £3,343,000) and HK$72,485,000 (approximately £5,840,000) respectively.
The Group achieved a steady growth in continuing operations upon substantial completion of a contract to supply a LED display screen to be delivered in phases during the financial year ended 30 June 2009, as contained under the heading of Contract Review below. Since September 2007, no business transactions on sales of LED signboards, LED lighting and lighting engineering had been conducted, which represented the Group's discontinued operations.
Operating gross margin of LED element products of 1% was achieved during the financial year, lower than prior periods, due to the significant increase in costs. Overall negative margin of LED element products was 12% caused by impairment and write off of inventories in a total amount of HK$3,231,000 (approximately £260,000) not dealt with in prior years. The significant increase in the Group's loss is primarily attributable to the impairment loss on goodwill, included under operating expenses, from the continuing operations of approximately HK$14,046,000 (approximately £1,131,000), following the substantial deterioration of global business environment, in particular in the LED business sector in the PRC.
In response to the intense competition in LED products in the PRC, the Group has strengthened its research and development capabilities through the acquisition of Strongbase New Shenzhen Limited ('Strongbase New') to further raise its brand profile to distinguish itself from generic LED product suppliers.
CONTRACT UPDATE
Towards the end of financial year, the North Point Project was substantially complete. The final installment of approximately HK$1,129,000 (approximately £90,000), net of deductions and retentions, due to the Company has been delayed due to, certain technical issues. The Board has endeavored to resolve those technical issues with the owner of North Point Project and the Board expects to receive this sum payable immediately upon satisfactory resolution of those technical issues. The Company has applied its best efforts to coordinate with the Project owner to carry out final completion checks with a view to receiving the final sum by the end of the first quarter of 2010.
ACQUISITION OF SUBSIDIARY
On 29 July 2008, the Company acquired a 100 per cent stake in Strongbase New, a specialist in LED and LED related products, accessories and appliances. Strongbase New has both R&D and manufacturing expertise in relation to LED related products and possesses numerous patents and other intellectual property for LED products and LED applications. Its product offering includes LED devices, displays, lighting and appliances. The acquisition of Strongbase New allows the Group to broaden its product offering to include higher specification products for both its domestic markets and international clients. It will also provide the Group with access to new intellectual property for further product development.
The aforesaid acquisition is in the process of application of legal title transfer.
DISPOSAL OF SUBSIDIARY
Following a strategic review by the Board, it was decided that an orderly disposal of Shenzhen China-LED Photo-Technology Limited ('Shenzhen LED') was the best course of action and in the best interests of shareholders. Shenzhen LED had ceased its business operations by September 2007. Production was transferred elsewhere and no trading by or through Shenzhen LED has been conducted since September 2007. Shenzhen LED previously manufactured LED screens.
The Group entered into a sale and purchase agreement with Tian Fu Kai Jia Information Company Limited ('TFKJ') on 13 April 2009 to dispose of Shenzhen LED for a consideration of RMB25 million payable quarterly in four equal tranches of RMB6.25 million commencing from the date of completion of the disposal, subject to certain precedent conditions. The Group has instructed its legal advisors to obtain the relevant approval from the PRC government authorities in relation to the disposal and obtain a charge on 45 per cent. of capital value of certain LED Projects held by TFKJ to secure TFKJ's payment obligations.
The Board has confidence that it will resolve the settlement issue with TFKJ and the Group shall apply the proceeds from the disposal to its working capital in order to enhance its financial position.
FUND RAISING
On 9 September 2008, the Company issued 29,692,084 new ordinary shares of HK$0.1 each to a strategic investor at 1 penny per share for ￡296,921 or equivalent to HK$4,692,000 for cash to increase working capital of the Company.
On 8 September 2009, the Company issued a Convertible Loan Notes to Mr. Thomas Li for the loan by him of a sum of HK$2,500,000 (approximately £197,000) to support the Company's working capital position. Mr. Li has lent to the Company since November 2008 a total sum of HK$9,379,000 (approximately £739,000) and it has been agreed with Mr. Li that of this sum HK$8,500,000 (approximately £670,000) shall be convertible into new shares in the capital of the Company via the issue of convertible loan notes (the "Loan Notes") to him as specified below.
The outstanding loan, amounting to HK$ 3,379,000 (approximately £266,000) due to Mr. Li will attract interest of 4 per cent. above 3 month LIBOR.
The Loan Notes are convertible into ordinary shares of LED on the second anniversary of the date of issue, at a 10 per cent. discount to the volume weighted average price for the 30 days immediately preceding the date of conversion. The Loan Notes are transferable and can be repaid prior to conversion at the discretion of the Company and without penalty.
BOARD CHANGES
Mr. Stephen Wing Bun Chan has been appointed as Chief Financial Officer of the Company, having joined the Company in February 2009, and has assumed prime responsibility for its finance and regulatory functions. On 29 May 2009, Mr. Chan was appointed as Executive Director of the Company.
Mr. Harby Janagol was appointed as Non-executive Director on 5 June 2009 with a view to further improving LED's corporate governance procedures and strengthening its commercial links. Mr. Janagol has significant contacts in India and the UK (where he is based) and is well placed to communicate with LED's stakeholders. Following Mr. Ow's increased contribution to LED's ongoing business activities, he was also appointed as Deputy Chief Executive Officer on 5 June 2009.
Messrs. Yiwei Xiong and Ivor Shargo retired from office at the last Annual General Meeting of the Company.
DIVIDEND
The Directors are not recommending payment of a dividend for the period under review and the Board is committed to an ongoing review of the Company's dividend policy.
PROSPECTS
The Board remains confident in the Group's long-term growth potential and considers that the overall operations of the Group remain sound. Our expertise in the LED sector, as well as our focus on high value added products, can help the Group to focus on the niche markets such as LED based road lighting and variable speed signs for China's highways and road network.
We believe it is a positive indication of our significant progress in the development in higher-end LED products that the Group has been selected by the Research Institute of Highway Ministry of Communications, a division of the Chinese Government's Traffic Department, to develop two projects on the use of LED products for road traffic purposes.
The Group is also looking to develop higher value-added LED products, such as the LED traffic lighting business where competition is weak, and to focus on areas where demand will remain strong. One key objective is to further develop our expertise in producing high quality, reliable and innovative LED products and solutions, and we will exploit this expertise in the LED sector to explore business opportunities in the LED related media business. China has a comparatively low per capita spending in outdoor advertising and, coupled with the Chinese government's determination to maintain domestic consumption in 2010, we believe there are good opportunities for the Group to enter the outdoor media market and to leverage its LED products and established relationships with leading media players.
APPRECIATION
Finally, on behalf of the Board, I would like to thank our customers, suppliers and shareholders for their continued support of LED International Holdings Limited. I would also like to acknowledge the hard work of the management and all the staff for their contribution and dedication to the Company.
Thomas Li
Executive Chairman
For further information:
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LED International Holdings Limited |
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Dennis Ow, Deputy Chief Executive Officer |
+852 2243 3100 |
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Strand Hanson Limited |
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|
James Harris / James Spinney |
+44 (0) 207 049 3494 |
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Jovian Financial Communications Limited |
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KC Cheng / Angel Yeung |
+852 2581 0168 |
Notes to Editors:
LED International Holdings Limited and its subsidiaries specialise in the development, manufacture and sale of low powered / low maintenance LED screens and other LED products such as outdoor signs, lamps, lighting and building illumination. The screens are manufactured in a 'building block' format to a specific design, which allows screens to be assembled to suit a customer's size and definition specifications.
This design also ensures that the screens are relatively easy to transport and assemble. Based in Hong Kong, the Company's primary market has been the People's Republic of China ('PRC'), but it has also supplied end products to Macau, Japan and the USA. Part of the Company's strategy in 2007 was to widen its customer base to markets outside PRC.
The Company was originally listed on AIM, a market operated by the London Stock Exchange, on 23 October 2006. For more information, please visit: http://www.led-intl.com
REPORT OF REMUNERATION COMMITTEE
The Remuneration Committee presents this report to shareholders on behalf of the Board.
MEMBERSHIP OF REMUNERATION COMMITTEE
The Remuneration Committee comprising Mr. Harby Janagol and Mr. Kevin Miu (our Non-executive Directors) is chaired by Mr. Janagol.
POLICY STATEMENT
The Remuneration Committee sets the remuneration and all other terms of employment of the Executive Directors with a vision to provide a package which is suitable for the responsibilities involved. The remuneration of the Executive Directors is determined by the Remuneration Committee having regard to the performance and experience of individuals, the overall performance of the Group and market trends.
DIRECTORS' REMUNERATION
Details of individual Director's remuneration for the financial year are set out in note 8 to the consolidated financial statements.
COMPENSATION FOR PAST DIRECTORS
No awards have been made to any former Directors of the Company by way of compensation for loss of office, pensions or otherwise in the financial year ended 30 June 2009.
PAYMENTS TO THIRD PARTIES
No payments have been made to any third parties for making available services of any of the Company's Directors in the financial year ended 30 June 2009.
REPORT ON CORPORATE GOVERNANCE
INTRODUCTION
The Directors believe that their foremost function is to generate continuous profits for the Company's investors, and that this should be achieved by a policy of high standards of corporate governance, integrity and ethics. As the Company is listed on AIM and not subject to the Listing Rules of the UK Listing Authority, it is not officially required to comply with the provisions detailed in the Combined Code on Corporate Governance. However, it is the intention of the Board to manage the Company affairs in accordance with this Code, in so far as is practical and appropriate for a public company of this size and complexity. The following are a few examples on how the Directors have applied the principles of good corporate governance to manage the Company throughout the financial year.
BOARD OF DIRECTORS
The Board directs and controls the Company and is responsible for strategy and operating performance. It meets regularly throughout the year and has adopted a schedule of matters specifically reserved for its decision.
All Directors are elected by shareholders at the first opportunity after their initial appointment to the Board and to be re-elected thereafter at intervals of not more than three years. Biographical information on all the Directors is listed in the Directors' and Senior Management's Biographies section to the annual report, which may help the shareholders to make a decision at the time of re-election.
Upon their appointments, the Directors are offered an opportunity to request for information and training relevant to their legal and other duties. They are also given written guidelines and rules defining their responsibilities within an AIM listed company.
The Board considers that all Non-executive Directors are independent of management and day-to-day operation, and free from any commercial relationship with the Company. These Non-executive Directors do not participate in any of the Company's pension schemes or bonus. The Chairman of the Audit and Remuneration Committee are both Non-executive Directors.
NOMINATION COMMITTEE
As the Board of Directors of the Company is small, there is no separate Nomination Committee. All nominations to the Board are considered by all of the Directors.
AUDIT COMMITTEE
Our Audit Committee comprising Mr. Harby Janagol and Mr. Kevin Miu (our Non-executive Directors) is chaired by Mr. Miu. The Chairman of the Audit Committee has full discretion to invite any Executive Directors and Chief Financial Officer to attend its meetings. The Audit Committee meets not less than twice per annum.
The responsibilities of the Committee are to:
monitor the quality of the overall internal control system of all financial matters;
review the Company's accounting policies and ensure compliance with accounting standards;
ensure that the financial performance of the Company is properly measured and reported on;
consider the appointment/re-appointment of the external auditor;
review the conduct of the audit and discuss the audit fees; and
review reports from the independent auditor relating to the Company's accounting and internal controls.
REMUNERATION COMMITTEE
Our Remuneration Committee comprising Mr. Harby Janagol and Mr. Kevin Miu (our Non-executive Directors) is chaired by Mr. Janagol.
The responsibilities of the Committee are to:
determine the specific remuneration package for each Director including Director's fees, salaries;
allowances, bonuses, options, benefits-in-kind; and
seek professional advices, including comparison with similar businesses, in order to correctly fulfill its duties, as the Committee deems appropriate.
In discharging its functions, the Committee may obtain independent external legal and other professional advices as it deems necessary. The expenses of such advices shall be borne by the Company.
INVESTOR RELATIONS
The Company realises that effective communication can increase the transparency and accountability to its shareholders; as such, the Company discloses its information to its shareholders through RNS (i.e. the news distribution service operated by the London Stock Exchange plc). The same information can also be found on the Company's website (www.led-intl.com). The Company will make every effort to ensure that all price-sensitive information is released publicly and immediately. If an immediate announcement is not possible, the Company will try to publicise the information at the earliest time possible to ensure that the shareholders and the public will have a fair access to it. The Company will send the Annual Report and the notice of the Annual General Meeting ("AGM") to all its shareholders. This notice is also made available on RNS. The Company recognises the importance of the shareholders' views and encourages them to attend the AGMs where they can share their opinions and direct their queries and concerns towards the Directors, including the chairperson of each of the Board Committees. The shareholders are also welcomed to discuss any issues on an informal basis at the conclusion of the AGMs.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors are responsible for preparing the annual report and the consolidated financial statements in accordance with applicable laws and regulations.
The Directors are responsible for preparing the consolidated financial statements for each financial year which give a true and fair view of the state of affairs of the Company and the Group and of the profit or loss of the Group for that period. In preparing those consolidated financial statements, the Directors are required to:
select suitable accounting policies and then apply them consistently;
make judgements and estimates that are reasonable and prudent;
state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the consolidated financial statements; and
prepare the consolidated financial statements on the going concern basis, unless it is inappropriate to presume that the Company and the Group will continue in business.
The Directors confirm that they have complied with the above requirements in preparing the consolidated financial statements.
The Directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Company and the Group and enable them to ensure that the consolidated financial statements comply with the Hong Kong Companies Ordinance. They are also responsible for safeguarding the assets of the Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
STATEMENT OF DISCLOSURES OF INFORMATION TO INDEPENDENT AUDITOR
So far as each of the Directors in office at the date of approval of these consolidated financial statements is aware:
there is no relevant audit information of which the Company's independent auditor is unaware; and
the independent auditor has taken all the steps that the independent auditor ought to have taken as Directors in order to make themselves aware of any relevant audit information and to establish that the Company's independent auditor is aware of that information.
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Hodgson Impey Cheng Chartered Accountants Certified Public Accountants |
31/F Gloucester Tower The Landmark 11 Pedder Street Central Hong Kong |
INDEPENDENT AUDITORS' REPORT
TO THE SHAREHOLDERS OF
LED INTERNATIONAL HOLDINGS LIMITED
(Incorporated in Hong Kong with limited liability)
We were engaged to audit the accompanying consolidated financial statements of LED International Holdings Limited (the "Company") and its subsidiaries (collectively referred to as the "Group"), which comprise the consolidated and company balance sheets as at 30 June 2009, and the consolidated income statement, the consolidated statement of changes in equity and the consolidated cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory notes.
Management's responsibility for the financial statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.
Auditors' responsibility
Our responsibility is to express an opinion on these financial statements based on our audit and to report our opinion solely to you, as a body, in accordance with section 141 of the Hong Kong Companies Ordinance, and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report. Except for the limitation in the scope of our work as explained below, we conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance as to whether the financial statements are free from material misstatement. However, because of the matter described in the basis for disclaimer of opinion paragraphs, we were not able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion.
Basis for disclaimer of opinion
1. Scope limitation - consolidation of subsidiary in Shenzhen
The Group entered into a preliminary sale and purchase agreement dated 11 February 2009 to dispose of its entire interest in a wholly-owned subsidiary, Shenzhen China-LED Photo-Technology Limited ("Shenzhen LED"). The assets and liabilities of Shenzhen LED had been reclassified as held for sale as at 30 June 2009 and disclosed under discontinued operation in note 10 to the financial statements. The Company has consolidated Shenzhen LED based on the unaudited management accounts of Shenzhen LED for the period from 1 July 2008 to 30 June 2009 and the results thereof have been disclosed in note 10 to the financial statements. Due to the lack of effective control over the planned disposal of the subsidiary, the Company was unable to provide us with the accounting records of Shenzhen LED. Consequently, we were unable to carry out auditing procedures that we consider necessary to satisfy ourselves as to the nature, completeness, accuracy, existence, valuation, classification and disclosures in respect of all the transactions undertaken by Shenzhen LED during the year ended 30 June 2009 and the related balances as at 30 June 2009. There were no other satisfactory audit procedures that we would adopt to satisfy ourselves that there were no material misstatements in the unaudited management accounts of Shenzhen LED. Accordingly, we were unable to satisfy ourselves that the assets and liabilities of Shenzhen LED as at 30 June 2009 included in the consolidated balance sheet of the Group and the loss of Shenzhen LED for the period from 1 July 2008 to 30 June 2009 included in the consolidated income statement of the Group and the related amounts and balances disclosed in the notes to the financial statements are fairly stated.
2. Scope limitation - prior year qualification affecting opening balances
The consolidated financial statements of the Group for the year ended 30 June 2008 were audited by Baker Tilly Hong Kong Limited ("Baker Tilly"). The auditor's report dated 12 February 2009 on the consolidated financial statements of the Group for the year ended 30 June 2008 was qualified on the occurrence and completeness of sales transactions and inventory movements of Shenzhen LED during the year ended 30 June 2008. Baker Tilly was unable to obtain sufficient reliable evidence to satisfy themselves as to the completeness, the appropriate classification and valuation of sales, cost of sales, a resultant net trading loss and trade receivables written off for the year ended 30 June 2008. Due to the same reason as explained in the above paragraph, we were unable to obtain sufficient reliable evidence and information regarding the opening balances of Shenzhen LED and we were unable to satisfy ourselves as to the opening balances of Shenzhen LED as at 1 July 2008.
Basis for disclaimer of opinion (continued)
3. Scope limitation - correction of errors relating to deed of assignment of loan
As further explained in note 2(b) to the financial statements, the Company had made an accounting error in the year ended 30 June 2007 in relation to the treatment of deed of assignment of loan, pursuant to the acquisition of LED International (Far East) Limited. Under the terms of deed of the loan assignment, Genesys Broadcasting Corporation Limited ("Genesys") would assign its benefits of a loan receivable of approximately HK$45,393,000 ("the Loan") to the Company. However, the Company had incorrectly included the Loan in other payables and accrued expenses as at 30 June 2008 and 2007 as disclosed in the annual report dated 12 February 2009. As the fair value of shares issued for the acquisition of LED International (Far East) Limited should have been made by reference to the net assets acquired, the fair value of issued ordinary shares and its share premium was therefore understated by approximately HK$45,393,000. Accordingly, a correction of error has been made for the overstatement of other payables and the understatement of share premium of the Group and of the Company in prior years. The Group's and the Company's other payables and share premium were decreased by approximately HK$45,393,000 and increased by approximately HK$45,393,000 respectively. The comparative figures, including the segmental information, have accordingly been restated. We have been unable to obtain sufficient and relevant audit evidence in respect of the correction of errors, and there were no other satisfactory audit procedures that we could adopt to ascertain the correctness and existence of the Loan and of the share premium account and of the related disclosures as at 30 June 2009 and 30 June 2008.
4. Scope limitation - Impairment loss on other receivables
Other receivables of approximately HK$3,413,000 was impaired in the year ended 30 June 2009, as stated in note 11(c) to the consolidated financial statements. The amount represented an opening balance brought forward from the audited financial statements for the year ended 30 June 2008 but we have been unable to obtain sufficient information and explanations in order for us to verify the existence and valuation of this account balance. In addition, we were unable to ascertain the basis of this impairment and accordingly we were unable to satisfy ourselves as to whether the impairment loss related to this opening balance had been properly recognised in accordance with International Accounting Standard 39 "Financial Instruments: Recognition and Measurement". Any adjustments found to be necessary would affect the Group's net assets as at 30 June 2009 and the Group's loss for the year ended 30 June 2009.
Basis for disclaimer of opinion (continued)
5. Significant uncertainty relating to the going concern basis of the Group
In forming our opinion, we have considered the adequacy of the disclosures made in note 2(b) to the financial statements concerning the adoption of the going concern basis on which the financial statements have been prepared. As explained in note 2 to the financial statements, the Group incurred a consolidated net loss from continuing operations attributable to the equity holders of the Company of approximately HK$37,542,000 for the year ended 30 June 2009 and, as of that date, the Group had consolidated net current liabilities from its continuing operations of approximately HK$12,013,000. The Group is currently undertaking a number of measures to improve its liquidity and financial position. The financial statements have been prepared on a going concern basis, the validity of which depends upon, among other measures, the ongoing financial support from the Company's a substantial shareholder to finance the Group's future working capital for its continuing operations. The financial statements do not include any adjustment that may be necessary should the implementation of such measures be unsuccessful. We consider that this significant uncertainty relating to whether the going concern basis is appropriate is so extreme that we have disclaimed our opinion.
Disclaimer of opinion: Disclaimer on view given by financial statements
Because of the significance of the matters described in the basis for disclaimer of opinion paragraphs, we do not express an opinion on the consolidated financial statements as to whether they give a true and fair view of the state of affairs of the Group and the Company as at 30 June 2009 and of the Group's loss and cash flows for the years then ended in accordance with International Financial Reporting Standards, and as to whether the financial statements have been properly prepared in accordance with the Hong Kong Companies Ordinance.
Report on matters under sections 141(4) and 141(6) of the Hong Kong Companies Ordinance
In respect alone of the limitation on our work relating to the matters as described in the basis for disclaimer of opinion paragraphs above:
- we have not obtained all the information and explanations that we considered necessary for the purpose of our audit; and
- we were unable to determine whether proper books of account had been kept.
HLB Hodgson Impey Cheng (Sgd.)
Chartered Accountants
Certified Public Accountants
Hong Kong, 30 December 2009
LED INTERNATIONAL HOLDINGS LIMITED
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 30 JUNE 2009
|
Note |
2009 |
2008 |
|
|
HK$'000 |
HK$'000 |
||
|
Continuing operations |
(Restated) |
||
|
Turnover |
4 |
41,496 |
39,886 |
|
Cost of sales |
(51,394) |
(31,716) |
|
|
Gross (loss) / profit |
(9,898) |
8,170 |
|
|
Other income |
5 |
48 |
44 |
|
Waiver of debt |
6 |
- |
7,303 |
|
Distribution costs |
(336) |
(281) |
|
|
Administrative expenses |
(11,224) |
(8,035) |
|
|
Other operating expenses |
(16,008) |
(4,288) |
|
|
(Loss) / Profit from operations |
(37,418) |
2,913 |
|
|
Finance costs |
11(a) |
(124) |
(113) |
|
(Loss) / Profit before taxation |
(37,542) |
2,800 |
|
|
Income tax |
7(a) |
- |
(1,400) |
|
(Loss) / Profit for the year from continuing operations |
(37,542) |
1,400 |
|
|
Discontinued operation |
|||
|
Loss for the year from discontinued operation |
10 |
(34,943) |
(52,572) |
|
Loss for the year |
11 |
(72,485) |
(51,172) |
|
(Loss) / Earnings per share |
12 |
||
|
From continuing and discontinued operations |
|||
|
- Basic and diluted (HK cents per share) |
(38.71) |
(35.74) |
|
|
From continuing operations |
|||
|
- Basic and diluted (HK cents per share) |
(20.05) |
0.98 |
LED INTERNATIONAL HOLDINGS LIMITED
CONSOLIDATED BALANCE SHEET
AS AT 30 JUNE 2009
|
Note |
2009 |
2008 |
|
|
HK$'000 |
HK$'000 |
||
|
(Restated) |
|||
|
Non-current assets |
|||
|
Property, plant and equipment |
14 |
8,951 |
9,494 |
|
Goodwill |
15 |
12,832 |
26,878 |
|
Intangible assets |
16 |
- |
- |
|
21,783 |
36,372 |
||
|
Current assets |
|||
|
Inventories |
18 |
4,156 |
9,786 |
|
Trade and other receivables |
19 |
13,514 |
16,711 |
|
Amounts due from related companies |
20 |
- |
- |
|
Cash and cash equivalents |
21 |
320 |
321 |
|
17,990 |
26,818 |
||
|
Non-current assets classified as held for sale |
10 |
33,942 |
65,608 |
|
51,932 |
92,426 |
||
|
Current liabilities |
|||
|
Trade and other payables |
22 |
18,604 |
20,783 |
|
Amount due to a director |
23 |
9,923 |
- |
|
Current taxation |
24 |
1,476 |
1,481 |
|
30,003 |
22,264 |
||
|
Liabilities directly associated with non-current assets classified as held for sale |
10 |
22,800 |
22,867 |
|
52,803 |
45,131 |
||
|
Net current (liabilities) / assets |
(871) |
47,295 |
|
|
NET ASSETS |
20,912 |
83,667 |
|
|
CAPITAL AND RESERVES |
|||
|
Equity attributable to equity holders of the Company |
|||
|
Share capital |
25 |
19,418 |
14,846 |
|
Reserves |
(9,931) |
53,700 |
|
|
Amount recognised directly in equity relating to non-current assets held for sale |
11,425 |
15,121 |
|
|
TOTAL EQUITY |
20,912 |
83,667 |
The financial statements were approved and authorised for issue by the Board of Directors on 30 December 2009 and signed on its behalf by:
Thomas Li (Sgd.) Stephen Chan (Sgd.)
Director Director
LED INTERNATIONAL HOLDINGS LIMITED
BALANCE SHEET
AS AT 30 JUNE 2009
|
Note |
2009 |
2008 |
|
|
HK$'000 |
HK$'000 |
||
|
(Restated) |
|||
|
Non-current assets |
|||
|
Property, plant and equipment |
14 |
- |
- |
|
Investments in subsidiaries |
17 |
10,000 |
24,234 |
|
10,000 |
24,234 |
||
|
Current assets |
|||
|
Trade and other receivables |
19 |
5,720 |
1,268 |
|
Amounts due from subsidiaries |
17 |
18,086 |
64,202 |
|
Cash and cash equivalents |
21 |
83 |
80 |
|
23,889 |
65,550 |
||
|
Current liabilities |
|||
|
Trade and other payables |
22 |
6,267 |
5,647 |
|
Amount due to a director |
23 |
9,923 |
- |
|
16,190 |
5,647 |
||
|
Net current assets |
7,699 |
59,903 |
|
|
NET ASSETS |
17,699 |
84,137 |
|
|
CAPITAL AND RESERVES |
|||
|
Equity attributable to equity holders of the Company |
|||
|
Share capital |
25 |
19,418 |
14,846 |
|
Reserves |
25 |
(1,719) |
69,291 |
|
TOTAL EQUITY |
17,699 |
84,137 |
The financial statements were approved and authorised for issue by the Board of Directors on 30 December 2009 and signed on its behalf by:
Thomas Li (Sgd.) Stephen Chan (Sgd.)
Director Director
LED INTERNATIONAL HOLDINGS LIMITED
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2009
|
Attributable to equity holders of the Company |
||||||||
|
The Group |
Share capital |
Share premium |
Shares to be issued |
Capital reserve |
Exchange reserve |
PRC statutory reserve |
Accumulated losses |
Total equity |
|
HK$'000 |
HK$'000 |
HK$'000 |
HK$'000 |
HK$'000 |
HK$'000 |
HK$'000 |
HK$'000 |
|
|
(Note 25) |
(Note 25) |
(Note 25) |
(Note 25) |
(Note 25) |
||||
|
Balance at 1 July 2007 |
13,687 |
45,520 |
- |
975 |
673 |
104 |
(2,280) |
58,679 |
|
Correction of errors (Note 2(b)) |
- |
45,393 |
- |
- |
- |
- |
- |
45,393 |
|
Balance at 1 July 2007 (Restated) |
13,687 |
90,913 |
- |
975 |
673 |
104 |
(2,280) |
104,072 |
|
Changes in equity for 2008: |
||||||||
|
Issue of new shares |
1,159 |
3,599 |
- |
- |
- |
- |
- |
4,758 |
|
Fair value of consideration shares to be issued in respect of acquisition of a subsidiary (Notes 2(b) & 29) |
- |
- |
15,486 |
- |
- |
- |
- |
15,486 |
|
Appropriation to the PRC statutory reserve |
- |
- |
- |
- |
- |
617 |
(617) |
- |
|
Exchange differences on translation of financial statements of overseas subsidiaries |
- |
- |
- |
- |
10,523 |
- |
- |
10,523 |
|
Loss for the year (Note 2(b)) |
- |
- |
- |
- |
- |
- |
(51,172) |
(51,172) |
|
Balance at 30 June 2008 and 1 July 2008 (Restated) |
14,846 |
94,512 |
15,486 |
975 |
11,196 |
721 |
(54,069) |
83,667 |
|
Changes in equity for 2009: |
||||||||
|
Issue of new shares |
4,572 |
2,619 |
- |
- |
- |
- |
- |
7,191 |
|
Equity-settled share-based transactions (Note 26) |
- |
- |
- |
2,642 |
- |
- |
- |
2,642 |
|
Share options lapsed |
- |
- |
- |
(660) |
- |
- |
660 |
- |
|
Exchange differences on translation of financial statements of overseas subsidiaries |
- |
- |
- |
- |
(103) |
- |
- |
(103) |
|
Loss for the year |
- |
- |
- |
- |
- |
- |
(72,485) |
(72,485) |
|
Balance at 30 June 2009 |
19,418 |
97,131 |
15,486 |
2,957 |
11,093 |
721 |
(125,894) |
20,912 |
LED INTERNATIONAL HOLDINGS LIMITED
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 30 JUNE 2009
|
Note |
2009 |
2008 |
|
|
HK$'000 |
HK$'000 |
||
|
(Restated) |
|||
|
Operating activities |
|||
|
(Loss) / Profit before taxation: |
|||
|
Continuing operations |
(37,542) |
2,800 |
|
|
Discontinued operation |
10 |
(34,943) |
(52,567) |
|
(72,485) |
(49,767) |
||
|
Adjustments for: |
|||
|
Interest income |
5 |
(2) |
(3) |
|
Interest expenses |
11(a) |
124 |
114 |
|
Depreciation of property, plant and equipment |
11(c) |
2,644 |
5,889 |
|
Amortisation of intangible assets |
11(c) |
- |
3,005 |
|
Impairment loss on goodwill |
11(c) |
14,046 |
1,229 |
|
Impairment loss on property, plant and equipment |
11(c) |
15,660 |
11,377 |
|
Impairment loss on intangible assets |
11(c) |
15,870 |
2,147 |
|
Property, plant and equipment written off |
11(c) |
16 |
- |
|
(Gain) / Loss on disposal of property, plant and equipment |
11(c) |
(8) |
44 |
|
Equity-settled share-based payment expenses |
11(b) |
2,642 |
- |
|
Operating loss before movement in working capital |
(21,493) |
(25,965) |
|
|
Decrease in inventories |
5,629 |
6,764 |
|
|
Decrease in trade and other receivables |
3,196 |
21,495 |
|
|
Increase in amounts due from related companies |
- |
(599) |
|
|
(Decrease) / Increase in trade and other payables |
(2,179) |
71 |
|
|
Increase in amount due to a director |
9,923 |
- |
|
|
Net cash (used in) / generated from operating activities |
(4,924) |
1,766 |
|
|
Investing activities |
|||
|
Payment for purchase of property, plant and equipment |
14 |
(2,140) |
(8,790) |
|
Acquisition of a subsidiary, net cash acquired |
29 |
- |
102 |
|
Proceeds from disposal of property, plant and equipment |
8 |
2 |
|
|
Interest received |
2 |
3 |
|
|
Net cash used in investing activities |
(2,130) |
(8,683) |
|
|
Financing activities |
|||
|
Proceeds from issue of ordinary shares |
7,191 |
4,758 |
|
|
Interest paid |
(124) |
(114) |
|
|
Net cash generated from financing activities |
7,067 |
4,644 |
|
|
Net increase / (decrease) in cash and cash equivalents |
13 |
(2,273) |
|
|
Cash and cash equivalents at beginning of the year |
429 |
510 |
|
|
Effect of foreign exchange rate changes |
(14) |
2,192 |
|
|
Cash and cash equivalents at end of the year |
21 |
428 |
429 |
LED INTERNATIONAL HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2009
1. GENERAL INFORMATION
LED International Holdings Limited (the "Company") was domiciled and incorporated in Hong Kong with limited liability under the Hong Kong Companies Ordinance. The registered office and principal place of business of the Company is located at Room C, 11th Floor, CNT Tower, No. 338 Hennessy Road, Hong Kong. Subsequent to the balance sheet date, the Company changed its principal place of business to Suite 911, 9/F Exchange Tower, 33 Wang Chiu Road, Kowloon Bay, Kowloon.
The principal activities of the Company are investment holding, and supply and install of LED display screens. The principal activities of its subsidiaries are set out in Note 17 to the consolidated financial statements.
On 23 October 2006, the Company was admitted to trading on the Alternative Investment Market ("AIM") of the London Stock Exchange.
The consolidated financial statements are presented in Hong Kong dollars ("HK$"), which is the same as the functional currency of the Company, and all values are rounded to the nearest thousand except when otherwise indicated.
2. SIGNIFICANT ACCOUNTING POLICIES
(a) Statement of compliance
These financial statements have been prepared in accordance with all applicable International Financial Reporting Standards ("IFRSs"), which collective term includes all applicable individual International Financial Reporting Standards, International Accounting Standards ("IASs") and Interpretations and comply with the AIM Rules issued by the London Stock Exchange. In addition, the financial statements include applicable disclosures required by the Hong Kong Companies Ordinance. A summary of the significant accounting policies adopted by the Group is set out below.
(b) Basis of preparation of consolidated financial statements
The consolidated financial statements for the year ended 30 June 2009 comprise the Company and its subsidiaries (together referred to as the "Group").
The measurement basis used in the preparation of the financial statements is the historical cost basis except that non-current assets held for sale are stated at the lower of carrying amount and fair value less costs to sell (see Note 2(t)).
The preparation of financial statements in conformity with IFRSs requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.
LED INTERNATIONAL HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2009
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(b) Basis of preparation of consolidated financial statements (continued)
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.
Judgements made by management in the application of IFRSs that have significant effect on the consolidated financial statements and major sources of estimation uncertainty are discussed in Note 33.
Going concern
The Group incurred a consolidated net loss from continuing operations attributable to the equity holders of the Company of approximately HK$37,542,000 for the year ended 30 June 2009 and, as of that date, the Group had consolidated net current liabilities from its continuing operations of approximately HK$12,013,000. The Group is currently undertaking a number of measures to improve its liquidity and financial position. The financial statements have been prepared on a going concern basis, the validity of which depends upon the ongoing financial support from the Company's substantial shareholder to finance the Group's future working capital for its continuing operations.
During the year ended 30 June 2009 and subsequently, management has taken measures to improve the liquidity and financial position of the Group as follows:
1. The Group has been discussing with prospective investors to obtain new working capital;
2. The management has taken action to tighten cost controls over various operating and general and administrative expenses; and
3. Subsequent to the balance sheet date, the Group has issued convertible notes to the Company's director on 8 September 2009 in respect of the amount advanced from a director of approximately HK$9,379,000 and its maturity date is 7 September 2011. The Company will enter into supplemental loan agreement with the director subject to terms and conditions mutually acceptable to both parties.
Accordingly, the directors are of the opinion that it is appropriate to prepare the financial statements for the year ended 30 June 2009 on a going concern basis notwithstanding the Group's liquidity and financial position as at 30 June 2009. However, if these measures were not to be successful or insufficient, or if the going concern basis were not be appropriate, adjustments would have to be made to write down the value of assets to their recoverable amounts, to provide for further liabilities which might arise and to reclassify non-current assets as non-current liabilities as current assets and current liabilities respectively. The effect of these adjustments has not been reflected in the financial statements.
LED INTERNATIONAL HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2009
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(b) Basis of preparation of consolidated financial statements (continued)
Correction of errors
Deed of assignment of loan
The Company entered into a deed of assignment of loan dated 13 October 2006 ("the Loan Assignment") with Genesys Broadcasting Corporation Limited ("Genesys") pursuant to the acquisition of Hong Bang Technology (China) Limited ("Hong Bang"). Pursuant to the Loan Assignment, LED International (Far East) Limited (formerly known as Hong Bang) was indebted to Genesys for the total amount of approximately HK$45,393,000 ("the Loan") and Genesys would assign its benefits under the Loan to the Company. However, the Company had incorrectly included the Loan in other payables and accrued expenses as at 30 June 2008 and 2007 as disclosed in the annual report dated 12 February 2009.
As the fair value of shares issued for the acquisition of LED International (Far East) Limited should have been made by reference to the net assets acquired, the fair value of issued ordinary shares and its share premium was therefore understated by approximately HK$45,393,000.
Accordingly, a correction of error has been made for the overstatement of other payables and the understatement of share premium of the Group and of the Company in prior years. Both the Group's and the Company's other payables and share premium were decreased by HK$45,393,000 and increased by HK$45,393,000 respectively. The comparative figures, including the segmental information, have accordingly been restated.
Acquisition of a subsidiary
Pursuant to the sale and purchase agreement in relation to the acquisition of Kepu Electronic Technology (Shenzhen) Company Limited ("Kepu"), LED International (Far East) Limited acquired the entire issued capital of Kepu from a third party at a total consideration of RMB30,000,000 including a cash consideration of RMB15,000,000 and the balance of the equivalent value of RMB15,000,000 in shares of LED International Holdings Limited ("Shares Consideration"). However, the aforesaid acquisition did not include Shares Consideration in the cost of acquisition at the date of acquisition and, therefore, goodwill arising from the acquisition of Kepu was understated at the date of acquisition.
LED INTERNATIONAL HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2009
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(b) Basis of preparation of consolidated financial statements (continued)
Correction of errors (continued)
Acquisition of a subsidiary (continued)
Accordingly, a correction of error has been made for the understatement of goodwill. The Group's goodwill would increase by approximately HK$15,486,000. Goodwill was allocated to the Group's cash-generating units ("CGU") identified according to the business segment of LED element products. As the recoverable amount of the CGU is greater than its value in use at 30 June 2008, impairment losses on goodwill of approximately HK$1,229,000 were recognised for the year ended 30 June 2008. The Group's loss for the year ended 30 June 2008 was increased by approximately HK$1,229,000 and the Group's equity at 30 June 2008 was decreased by the same amount as a result.
At 30 June 2008, the Shares Consideration for the acquisition of Kepu had not yet been issued and therefore the fair value of such shares to be issued for the acquisition had been recognised as "shares to be issued" in the Company's equity. The equity of the Company and of the Group was increased by approximately HK$15,486,000. The comparative figures, including the segmental information, have accordingly been restated.
(c) Subsidiaries
Subsidiaries are entities controlled by the Group. Control exists when the Group has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that presently are exercisable are taken into account.
An investment in a subsidiary is consolidated into the consolidated financial statements from the date that control commences until the date that control ceases. Intra-group balances and transactions and any unrealised profits arising from intra-group transactions are eliminated in full in preparing the consolidated financial statements. Unrealised losses resulting from intra-group transactions are eliminated in the same way as unrealised gains but only to the extent that there is no evidence of impairment.
In the Company's balance sheet, investments in subsidiaries are stated at cost less impairment losses (see Note 2(h)) unless the investments are classified as held for sale (or included in disposal group that is classified as held for sale) (see Note 2(t)).
LED INTERNATIONAL HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2009
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(d) Goodwill
Goodwill represents the excess of the cost of a business combination over the Group's interest in the net fair value of the acquiree's identifiable assets, liabilities and contingent liabilities.
Goodwill is stated at cost less accumulated impairment losses. Goodwill arising on a business combination is allocated to each cash-generating unit, or groups of cash generating units, that is expected to benefit from the synergies of the combination and is tested annually for impairment (see Note 2(h)).
Any excess of the Group's interest in the net fair value of the acquiree's identifiable assets, liabilities and contingent liabilities over the cost of a business combination is recognised immediately in profit or loss.
On disposal of a cash generating unit, any attributable amount of purchased goodwill is included in the calculation of the profit or loss on disposal.
(e) Property, plant and equipment
Property, plant and equipment are stated in the consolidated balance sheet at cost less accumulated depreciation and impairment losses (see Note 2(h)).
Gains or losses arising from the retirement or disposal of an item of property, plant and equipment are determined as the difference between the net disposal proceeds and the carrying amount of the item and are recognised in profit or loss on the date of retirement or disposal.
Depreciation is calculated to write off the cost of items of property, plant and equipment, less their estimated residual value, if any, using the straight line method over their estimated useful lives. The principal annual rates used for this purpose are as follows:
- Leasehold improvements Terms of lease
- Plant and machinery 10 - 33%
- Furniture, fixtures and equipment 20 - 25%
- LED screens 10%
- Motor vehicles 20 - 50%
Where parts of an item of property, plant and equipment have different useful lives, the cost of the item is allocated on a reasonable basis between the parts and each part is depreciated separately. Both the useful life of an asset and its residual value, if any, are reviewed annually.
LED INTERNATIONAL HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2009
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(f) Intangible assets (other than goodwill)
Intangible assets that are acquired by the Group are stated in the consolidated balance sheet at cost less accumulated amortisation (where the estimated useful life is finite) and impairment losses (see Note 2(h)). Expenditure on renewing technology know-how is recognised as an expense in the period in which it is incurred.
Amortisation of intangible assets with finite useful lives is charged to profit or loss on a straight-line basis over the assets' estimated useful lives. The technology know-how with finite useful lives are amortised from the date they are available for use and their estimated useful lives are 10 years.
Both the period and method of amortisation are reviewed annually.
(g) Leased assets
An arrangement, comprising a transaction or a series of transactions, is or contains a lease if the Group determines that the arrangement conveys a right to use a specific asset or assets for an agreed period of time in return for a payment or a series of payments. Such a determination is made based on an evaluation of the substance of the arrangement and is regardless of whether the arrangement takes the legal form of a lease.
(i) Classification of assets leased to the Group
Assets that are held by Group under leases which transfer to the Group substantially all the risks and rewards of ownership are classified as being held under finance leases. Leases which do not transfer substantially all the risks and rewards of ownership to the Group are classified as operating leases.
(ii) Operating lease charges
Where the Group has the use of assets held under operating leases, payments made under the leases are charged to profit or loss in equal instalments over the accounting periods covered by the lease term, except where an alternative basis is more representative of the pattern of benefits to be derived from the leased asset. Lease incentives received are recognised in profit or loss as an integral part of the aggregate net lease payments made. Contingent rentals are charged to profit or loss in the accounting period in which they are incurred.
LED INTERNATIONAL HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2009
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(h) Impairment of assets
(i) Impairment of trade and other receivables
Trade and other receivables that are stated at amortised cost are reviewed at each balance sheet date to determine whether there is objective evidence of impairment. Objective evidence of impairment includes observable data that comes to the attention of the Group about one or more of the following loss events:
- significant financial difficulty of the debtor;
- a breach of contract, such as a default or delinquency in interest or principal payments;
- it becoming probable that the debtor will enter bankruptcy or other financial reorganisation; and
- significant changes in the technological, market, economic or legal environment that have an adverse effect on the debtor.
If any such evidence exists, the impairment loss is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the financial asset's original effective interest rate (i.e. the effective interest rate computed at initial recognition of these assets), where the effect of discounting is material. This assessment is made collectively where financial assets carried at amortised cost share similar risk characteristics, such as similar past due status, and have not been individually assessed as impaired. Future cash flows for financial assets which are assessed for impairment collectively are based on historical loss experience for assets with credit risk characteristics similar to the collective group.
If in a subsequent period the amount of an impairment loss decreases and the decrease can be linked objectively to an event occurring after the impairment loss was recognised, the impairment loss is reversed through profit or loss. A reversal of an impairment loss shall not result in the asset's carrying amount exceeding that which would have been determined had no impairment loss been recognised in prior years.
Impairment losses are written off against the corresponding assets directly, except for impairment losses recognised in respect of trade debtors and bills receivable included within trade and other receivables, whose recovery is considered doubtful but not remote. In this case, the impairment losses for doubtful debts are recorded using an allowance account. When the Group is satisfied that recovery is remote, the amount considered irrecoverable is written off against trade and other receivables directly and any amounts held in the allowance account relating to that debt are reversed. Subsequent recoveries of amounts previously charged to the allowance account are reversed against the allowance account. Other changes in the allowance account and subsequent recoveries of amounts previously written off directly are recognised in profit
or loss.
LED INTERNATIONAL HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2009
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(h) Impairment of assets (continued)
(ii) Impairment of other assets
Internal and external sources of information are reviewed at each balance sheet date to identify indications that the following assets may be impaired or, except in the case of goodwill, an impairment loss previously recognised no longer exists or may have decreased:
- property, plant and equipment;
- intangible assets;
- investments in subsidiaries (except for those classified as held for sale that is classified as held for sale) (see Note 2(t)); and
- goodwill.
If any such indication exists, the asset's recoverable amount is estimated. In addition, for goodwill and intangible assets that are not yet available for use, the recoverable amount is estimated annually whether or not there is any indication of impairment.
- Calculation of recoverable amount
The recoverable amount of an asset is the greater of its fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows 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 risks specific to the asset. Where an asset does not generate cash inflows largely independent of those from other assets, the recoverable amount is determined for the smallest group of assets that generates cash inflows independently (i.e. a cash-generating unit).
- Recognition of impairment losses
An impairment loss is recognised in profit or loss if the carrying amount of an asset, or the cash-generating unit to which it belongs, exceeds its recoverable amount. Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the cash-generating unit (or group of units) and then, to reduce the carrying amount of the other assets in the unit (or group of units) on a pro rata basis, except that the carrying value of an asset will not be reduced below its individual fair value less costs to sell, or value in use, if determinable.
LED INTERNATIONAL HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2009
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(h) Impairment of assets (continued)
(ii) Impairment of other assets (continued)
- Reversals of impairment losses
In respect of assets other than goodwill, an impairment loss is reversed if there has been a favourable change in the estimates used to determine the recoverable amount. An impairment loss in respect of goodwill is not reversed.
A reversal of an impairment loss is limited to the asset's carrying amount that would have been determined had no impairment loss been recognised in prior years. Reversals of impairment losses are credited to profit or loss in the year in which the reversals are recognised.
(i) Inventories
Inventories are carried at the lower of cost and net realisable value.
Cost is calculated using the weighted average cost formula and comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition.
Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.
When inventories are sold, the carrying amount of those inventories is recognised as an expense in the period in which the related revenue is recognised. The amount of any write-down of inventories to net realisable value and all losses of inventories are recognised as an expense in the period the write-down or loss occurs. The amount of any reversal of any write-down of inventories is recognised as a reduction in the amount of inventories recognised as an expense in the period in which the reversal occurs.
(j) Construction contracts
Construction contracts are contracts specifically negotiated with a customer for the construction of an asset or a group of assets, where the customer is able to specify the major structural elements of the design. The accounting policy for contract revenue is set out in note 2(q)(ii). When the outcome of a construction contract can be estimated reliably, contract costs are recognised as an expense by reference to the stage of completion of the contract at the balance sheet date. When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately. When the outcome of a construction contract cannot be estimated reliably, contract costs are recognised as an expense in the period in which they are incurred.
LED INTERNATIONAL HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2009
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(j) Construction contracts (continued)
Construction contracts in progress at the balance sheet date are recorded in the balance sheet at the net amount of costs incurred plus recognised profit less recognised losses and progress billings, and are presented in the balance sheet as the "gross amount due from customers for contract work" (as an asset) or the "gross amount due to customers for contract work" (as a liability), as applicable. Progress billings not yet paid by the customer are included in the balance sheet under "trade and other receivables". Amounts received before the related work is performed are included in the balance sheet, as a liability, as "advances received".
(k) Trade and other receivables
Trade and other receivables are initially recognised at fair value and thereafter stated at amortised cost less allowance for impairment of doubtful debts (see Note 2(h)(i)), except where the receivables are interest-free loans made to related parties without any fixed repayment terms or the effect of discounting would be immaterial. In such cases, the receivables are stated at cost less allowance for impairment of doubtful debts.
(l) Trade and other payables
Trade and other payables are initially recognised at fair value. Trade and other payables are subsequently stated at amortised cost unless the effect of discounting would be immaterial, in which case they are stated at cost.
(m) Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and on hand, demand deposits with banks and other financial institutions, and short-term, highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value, having been within three months of maturity at acquisition.
(n) Employee benefits
(i) Short term employee benefits and contributions to defined contribution retirement plans
Salaries, annual bonuses, paid annual leave, contributions to defined contribution retirement plans and the cost of non-monetary benefits are accrued in the year in which the associated services are rendered by employees. Where payment or settlement is deferred and the effect would be material, these amounts are stated at their present values.
LED INTERNATIONAL HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2009
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(n) Employee benefits (continued)
(ii) Contributions to defined contribution retirement plan
Contributions to Mandatory Provident Funds as required under the Hong Kong Mandatory Provident Fund Schemes Ordinance are recognised in profit or loss as incurred.
Employees of the subsidiaries established in the People's Republic of China ("PRC") participate in defined contribution retirement plans managed by the local government authorities whereby the subsidiaries are required to contribute to the plans at fixed rates of the relevant employees' salary costs.
The Group's contributions to these plans are charged to profit or loss when incurred. The Group has no obligation for the payment of retirement and other post-retirement benefits of staff other than the contributions described above.
(iii) Share-based payments
The fair value of share options granted to employees is recognised as an employee cost with a corresponding increase in a capital reserve within equity. The fair value is measured at grant date using the Black-Scholes pricing model, taking into account the terms and conditions upon which the options were granted. Where the employees have to meet vesting conditions before becoming unconditionally entitled to the options, the total estimated fair value of the options is spread over the vesting period, taking into account the probability that the options will vest.
During the vesting period, the number of share options that is expected to vest is reviewed. Any resulting adjustment to the cumulative fair value recognised in prior years is charged or credited to the profit or loss for the year of the review, unless the original employee expenses qualify for recognition as an asset, with a corresponding adjustment to the capital reserve. On vesting date, the amount recognised as an expense is adjusted to reflect the actual number of options that vest (with a corresponding adjustment to the capital reserve) except where forfeiture is only due to not achieving vesting conditions that relate to the market price of the company's shares. The equity amount is recognised in the capital reserve until either the option is exercised (when it is transferred to the share premium account) or the option expires (when it is released directly to retained profits).
(iv) Termination benefits
Termination benefits are recognised when, and only when, the group demonstrably commits itself to terminate employment or to provide benefits as a result of voluntary redundancy by having a detailed formal plan which is without realistic possibility of withdrawal.
LED INTERNATIONAL HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2009
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(o) Income tax
Income tax for the year comprises current tax and movements in deferred tax assets and liabilities. Current tax and movements in deferred tax assets and liabilities are recognised in profit or loss except to the extent that they relate to items recognised in other comprehensive income or directly in equity, in which case the relevant amounts of tax are recognised in other comprehensive income or directly in equity, respectively.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.
Deferred tax assets and liabilities arise from deductible and taxable temporary differences respectively, being the differences between the carrying amounts of assets and liabilities for financial reporting purposes and their tax bases. Deferred tax assets also arise from unused tax losses and unused tax credits.
The amount of deferred tax recognised is measured based on the expected manner of realisation or settlement of the carrying amount of the assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date. Deferred tax assets and liabilities are not discounted.
(p) Provisions and contingent liabilities
Provisions are recognised for other liabilities of uncertain timing or amount when the group or the company has a legal or constructive obligation arising as a result of a past event, it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate can be made. Where the time value of money is material, provisions are stated at the present value of the expenditure expected to settle the obligation.
Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated reliably, the obligation is disclosed as a contingent liability, unless the probability of outflow of economic benefits is remote. Possible obligations, whose existence will only be confirmed by the occurrence or non-occurrence of one or more future events are also disclosed as contingent liabilities unless the probability of outflow of economic benefits is remote.
LED INTERNATIONAL HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2009
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(q) Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable. Provided it is probable that the economic benefits will flow to the group and the revenue and costs, if applicable, can be measured reliably, revenue is recognised in profit or loss as follows:
(i) Sale of goods
Revenue is recognised when goods are delivered at the customers' premises which is taken to be the point in time when the customer has accepted the goods and the related risks and rewards of ownership. Revenue excludes value added tax or other sales taxes and is after deduction of any trade discounts.
(ii) Contract revenue
When the outcome of a construction contract can be estimated reliably:
- revenue from a fixed price contract is recognised using the percentage of completion method, measured by reference to the percentage of contract costs incurred to date to estimated total contract costs for the contract; and
- revenue from a cost plus contract is recognised by reference to the recoverable costs
incurred during the period plus an appropriate proportion of the total fee, measured by reference to the proportion that costs incurred to date bear to the estimated total costs of the contract.
When the outcome of a construction contract cannot be estimated reliably, revenue is recognised only to the extent of contract costs incurred that it is probable will be recoverable.
(iii) Rental income from operating leases
Rental income receivable under operating leases is recognised in profit or loss in equal instalments over the periods covered by the lease term, except where an alternative basis is more representative of the pattern of benefits to be derived from the use of the leased asset. Lease incentives granted are recognised in profit or loss as an integral part of the aggregate net lease payments receivable. Contingent rentals are recognised as income in the accounting period in which they are earned.
(iv) Interest income
Interest income is recognised as it accrues using the effective interest method.
LED INTERNATIONAL HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2009
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(r) Translation of foreign currencies
(i) Functional and presentation currencies
Items included in the consolidated financial statements of each of the Group's entities are measured using the currency of the primary economic environment in which the entity operates (the "functional currency"). The consolidated financial statements are presented in Hong Kong dollars, which is the Company's functional and presentation currency, and the functional currency of the principal operating subsidiaries of the Group is Chinese Yuan Renminbi.
(ii) Transactions and balances in each entity's financial statements
Transactions in foreign currencies are translated into the functional currency using the exchange rates prevailing on the transaction dates. Monetary assets and liabilities in foreign currencies are translated at the rates ruling on the balance sheet date. Profits and losses resulting from this translation policy are included in profit or loss.
(iii) Translation on consolidation
The results and financial position of all the Group entities that have a functional currency different from the Company's presentation currency are translated into the Company's presentation currency as follows:
Assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;
Income and expenses for each income statement are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the exchange rates on the transaction dates); and
All resulting exchange differences are recognised in the foreign currency translation reserve.
On consolidation, exchange differences arising from the translation of the net investment in foreign entities and of borrowings are recognised in the foreign currency translation reserve. When a foreign operation is sold, such exchange differences are recognised in the consolidated income statement as part of the profit or loss on disposal.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.
LED INTERNATIONAL HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2009
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(s) Borrowing costs
Borrowing costs are expensed in the period in which they are incurred.
(t) Non-current assets held for sale and discontinued operations
(i) Non-current assets held for sale
A non-current asset (or disposal group) is classified as held for sale if it is highly probable that its carrying amount will be recovered through a sale transaction rather than through continuing use and the asset (or disposal group) is available for sale in its present condition. A disposal group is a group of assets to be disposed of together as a group in a single transaction, and liabilities directly associated with those assets that will be transferred in the transaction.
Immediately before classification as held for sale, the measurement of the non-current assets (and all individual assets and liabilities in a disposal group) is brought up-to-date in accordance with the accounting policies before the classification. Then, on initial classification as held for sale and until disposal, the non-current assets (except for certain assets as explained below), or disposal groups, are recognised at the lower of their carrying amount and fair value less costs to sell. The principal exceptions to this measurement policy so far as the financial statements of the group and the company are concerned61 are deferred tax assets, assets arising from employee benefits, financial assets (other than investments in subsidiaries, associates and joint ventures) and investment properties. These assets, even if held for sale, would continue to be measured in accordance with the policies set out elsewhere in Note 2.
Impairment losses on initial classification as held for sale, and on subsequent remeasurement while held for sale, are recognised in profit or loss. As long as a non-current asset is classified as held for sale, or is included in a disposal group that is classified as held for sale, the non-current asset is not depreciated or amortised.
(ii) Discontinued operations
A discontinued operation is a component of the Group's business, the operations and cash flows of which can be clearly distinguished from the rest of the Group and which represents a separate major line of business or geographical area of operations, or is part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations, or is a subsidiary acquired exclusively with a view to resale.
Classification as a discontinued operation occurs upon disposal or when the operation meets the criteria to be classified as held for sale (see (i) above), if earlier. It also occurs if the operation is abandoned.
LED INTERNATIONAL HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2009
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(t) Non-current assets held for sale and discontinued operations (continued)
(ii) Discontinued operations (continued)
Where an operation is classified as discontinued, a single amount is presented on the face of the income statement, which comprises:
- the post-tax profit or loss of the discontinued operation; and
- the post-tax gain or loss recognised on the measurement to fair value less costs to sell, or on the disposal, of the assets or disposal group(s) constituting the discontinued operation.
(u) Related parties
For the purposes of these financial statements, a party is considered to be related to the group if:
(i) the party has the ability, directly or indirectly through one or more intermediaries, to control the group or exercise significant influence over the group in making financial and operating policy decisions, or has joint control over the group;
(ii) the group and the party are subject to common control;
(iii) the party is an associate of the group or a joint venture in which the group is a venturer;
(iv) the party is a member of key management personnel of the group or the group's parent, or a close family member of such an individual, or is an entity under the control, joint control or significant influence of such individuals;
(v) the party is a close family member of a party referred to in (i) or is an entity under the control, joint control or significant influence of such individuals; or
(vi) the party is a post-employment benefit plan which is for the benefit of employees of the group or of any entity that is a related party of the group.
Close family members of an individual are those family members who may be expected to influence, or be influenced by, that individual in their dealings with the entity.
LED INTERNATIONAL HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2009
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(v) Segment reporting
A segment is a distinguishable component of the group that is engaged either in providing products or services (business segment), or in providing products or services within a particular economic environment (geographical segment), which is subject to risks and rewards that are different from those of other segments.
In accordance with the group's internal financial reporting system, the group has chosen business segment information as the primary reporting format and geographical segment information as the secondary reporting format for the purposes of these financial statements.
Segment revenue, expenses, results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis to that segment. For example, segment assets may include inventories, trade receivables and property, plant and equipment. Segment revenue, expenses, assets, and liabilities are determined before intra-group balances and intra-group transactions are eliminated as part of the consolidation process, except to the extent that such intra-group balances and transactions are between group entities within a single segment. Inter-segment pricing is based on similar terms as those available to other external parties.
Segment capital expenditure is the total cost incurred during the period to acquire segment assets (both tangible and intangible) that are expected to be used for more than one period.
Unallocated items mainly comprise financial and corporate assets, interest-bearing loans, borrowings, tax balances, corporate and financing expenses.
3. CHANGES IN ACCOUNTING POLICIES
The IASB has issued a number of new and revised IFRSs and Interpretations that are first effective or available for early adoption for the current accounting period of the Group and the Company.
However, none of these developments is relevant to the Group's and the Company's operations.
The Group has not applied any new standard or interpretation that is not yet effective for the current accounting period (see Note 34).
LED INTERNATIONAL HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2009
4. TURNOVER
|
2009 |
2008 |
|
|
HK$'000 |
HK$'000 |
|
|
(Restated) |
||
|
Continuing operations |
||
|
Supply and install of LED displays screens |
15,833 |
- |
|
Sales of LED element products |
25,663 |
39,886 |
|
Discontinued operation (Note 10) |
||
|
Sales of LED signboards, LED lighting and lighting engineering |
- |
12,117 |
|
41,496 |
52,003 |
The principal activities of the Group are assembly and manufacturing of LED element products, LED displays screens, LED signboards, LED lighting and lighting engineering.
5. OTHER INCOME
|
2009 |
2008 |
|
|
HK$'000 |
HK$'000 |
|
|
(Restated) |
||
|
Continuing operations |
||
|
Gain on disposal of property, plant and equipment |
8 |
- |
|
Interest income |
2 |
3 |
|
Sundry income |
38 |
41 |
|
48 |
44 |
|
|
Discontinued operation (Note 10) |
||
|
Rental income |
- |
831 |
|
48 |
875 |
6. WAIVER OF DEBT
Pursuant to an agreement entered into between the Group's subsidiary, Kepu Electronic Technology (Shenzhen) Company Limited ("Kepu"), and the former shareholder of Kepu, Sun Wah Enterprise Investment Holdings Limited ("Sun Wah"), dated 30 June 2008, Sun Wah agreed to waive its current account with Kepu of HK$7,303,000. Accordingly, a waiver of debt of HK$7,303,000 was recognised as income in the consolidated income statement for the year ended 30 June 2008.
LED INTERNATIONAL HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2009
7. INCOME TAX IN THE CONSOLIDATED INCOME STATEMENT
(a) Taxation in the consolidated income statement represents:
|
2009 |
2008 |
|
|
HK$'000 |
HK$'000 |
|
|
(Restated) |
||
|
Continuing operations |
||
|
PRC Enterprise Income Tax |
- |
1,400 |
|
Discontinued operation (Note 10) |
||
|
PRC Enterprise Income Tax |
- |
5 |
|
- |
1,405 |
No provision for Hong Kong Profits Tax has been made as the Group did not have assessable profit subject to Hong Kong Profits Tax for the year. Hong Kong Profits Tax is calculated at 16.5% (2008: 16.5%) of the estimated assessable profits for the year. Taxation for overseas subsidiaries is charged at the appropriate current rates of taxation ruling in the relevant countries.
Pursuant to the income tax rules and regulations of the People's Republic of China (the "PRC"), the PRC subsidiaries of the Group are liable to PRC Enterprise Income Tax as follows:
Shenzhen China-LED Photo-Technology Limited and Kepu Electronic Technology (Shenzhen) Company Limited are foreign investment enterprises and are entitled to tax concessions whereby the profit for the first two financial years beginning with the first profit-making year is exempted from income tax in the PRC and the profit for each of the subsequent three years is taxed at 50% of prevailing tax rate set by the local tax authority. The full PRC Enterprise Income Tax rate applicable to Shenzhen China-LED Photo-Technology Limited and Kepu Electronic Technology (Shenzhen) Company Limited is 20% (2008: 18%) and the reduced rate is 10% (2008: 9%) for the year ended 30 June 2009.
On 16 March 2007, the National People's Congress passed the Corporate Income Tax Law of the PRC (the "new tax law"). Under the new tax law, the statutory income tax rate applicable to the Company's subsidiaries in Shenzhen is changed from 15% to 25% progressively within five years from 1 January 2008 (2008: 18%; 2009: 20%, 2010: 22%, 2011: 24%, 2012: 25%). The new tax law has been applied when measuring the Group's current tax payable as at 30 June 2009 and 2008.
LED INTERNATIONAL HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2009
7. INCOME TAX IN THE CONSOLIDATED INCOME STATEMENT (CONTINUED)
(b) Reconciliation between tax expense and accounting (loss) / profit at applicable tax rates:
|
2009 |
2008 |
|
|
HK$'000 |
HK$'000 |
|
|
(Restated) |
||
|
(Loss) / Profit before taxation |
||
|
Continuing operations |
(37,542) |
2,800 |
|
Discontinued operation (Note 10) |
(34,943) |
(52,567) |
|
(72,485) |
(49,767) |
|
|
Notional tax credit on loss before taxation calculated at the rates applicable to losses in the countries concerned |
(13,453) |
(3,227) |
|
Tax effect of non-deductible expenses |
2,806 |
3,602 |
|
Tax effect of temporary differences |
- |
3 |
|
Tax effect of unused tax losses not recognised |
10,647 |
953 |
|
Others |
- |
74 |
|
Actual tax expense |
- |
1,405 |
LED INTERNATIONAL HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2009
8. DIRECTORS' REMUNERATION
Directors' remuneration disclosed pursuant to section 161 of the Hong Kong Companies Ordinance is as follows:
|
Directors' fee |
Salaries, allowances and benefits in kind |
Retirement scheme contributions |
Sub-total |
Equity- settled share-based payments |
2009 Total |
|
|
HK$'000 |
HK$'000 |
HK$'000 |
HK$'000 |
HK$'000 |
HK$'000 |
|
|
(Note) |
||||||
|
Executive directors |
||||||
|
Li, Li Xin Thomas |
- |
40 |
- |
40 |
- |
40 |
|
Ow, Kian Jing Dennis |
- |
480 |
- |
480 |
296 |
776 |
|
Xiong, Yiwei (resigned on 6 August 2009) |
- |
200 |
- |
200 |
- |
200 |
|
Chan, Wing Bun Stephen (appointed on 29 May 2009) |
- |
250 |
- |
250 |
273 |
523 |
|
Independent non-executive directors |
||||||
|
Miu, Ka Keung Kevin |
288 |
- |
- |
288 |
- |
288 |
|
Shrago, Ivor Colin (resigned on 6 August 2009) |
360 |
- |
- |
360 |
- |
360 |
|
Janagol, Harby (appointed on 5 June 2009) |
33 |
- |
- |
33 |
- |
33 |
|
681 |
970 |
- |
1,651 |
569 |
2,220 |
Note:
Equity-settled share-based payments represent the estimated value of share options granted to the directors under the Company's share option scheme. The value of these share options is measured according to the Group's accounting policy for share-based payment transactions as set out in Note 2(n)(iii).
Details of these benefits in kind, including the principal terms and number of options granted, are disclosed in Note 26.
LED INTERNATIONAL HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2009
8. DIRECTORS' REMUNERATION (CONTINUED)
|
Directors' fee |
Salaries, allowances and benefits in kind |
Retirement scheme contributions |
Sub-total |
Equity- settled share-based payments |
2008 Total |
|
|
HK$'000 |
HK$'000 |
HK$'000 |
HK$'000 |
HK$'000 |
HK$'000 |
|
|
Executive directors |
||||||
|
Cragg, Mervyn Russell (resigned on 17 August 2007) |
- |
137 |
- |
137 |
- |
137 |
|
Jim, Ka Lok (resigned on 18 February 2008) |
- |
119 |
- |
119 |
- |
119 |
|
Lee, Man Bun (resigned on 18 February 2008) |
- |
- |
- |
- |
- |
- |
|
Li, Li Xin Thomas (appointed on 18 February 2008) |
- |
- |
- |
- |
- |
- |
|
Ow, Kian Jing Dennis (appointed on 18 February 2008) |
- |
380 |
- |
380 |
- |
380 |
|
Xiong, Yiwei (appointed on 18 February 2008) |
- |
- |
- |
- |
- |
- |
|
Independent non-executive directors |
||||||
|
Chau, Hong Ming Peter (resigned on 18 February 2008) |
- |
46 |
- |
46 |
- |
46 |
|
Martin, Ian Paul (resigned on 18 February 2008) |
148 |
- |
- |
148 |
- |
148 |
|
Miu, Ka Keung Kevin |
288 |
- |
- |
288 |
- |
288 |
|
Shrago, Ivor Colin |
- |
- |
- |
- |
- |
- |
|
436 |
682 |
- |
1,118 |
- |
1,118 |
9. LOSS ATTRIBUTABLE TO EQUITY SHAREHOLDERS OF THE COMPANY
The consolidated loss attributable to the equity shareholders of the Company includes a loss of HK$76,271,000 (2008: HK$35,190,000) which has been dealt with in the financial statements of the Company.
LED INTERNATIONAL HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2009
10. DISCONTINUED OPERATION
On 11 February 2009, the Group entered into a preliminary sale and purchase agreement to dispose of its entire interest in a wholly-owned subsidiary, Shenzhen China-LED Photo-Technology Limited ("Shenzhen LED" or the "Disposal Group"). The consideration is determined by reference to their net asset value as stated in the PRC statutory financial statements as at 15 February 2009, prepared under generally accepted accounting principles in the People's Republic of China. Accordingly, the assets and liabilities of Shenzhen LED were classified as held for sale as at 30 June 2009 and 2008 and stated at the lower of the carrying amount and fair value less costs to sell. Pursuant to extraordinary general meeting passed on 3 April 2009, the Group entered into the sale and purchase agreement on 13 April 2009. Up to the date of this report, the PRC Government's approval of transfer of legal title of Shenzhen LED has not yet been granted.
The results and cash flows of the discontinued operation included in the consolidated income statement and the consolidated cash flow statement are as follows:
|
2009 |
2008 |
|
|
HK$'000 |
HK$'000 |
|
|
(Restated) |
||
|
Results of discontinued operation |
||
|
Revenue - sales of goods (Note 4) |
- |
12,117 |
|
Cost of sales |
- |
(12,704) |
|
Gross loss |
- |
(587) |
|
Other income (Note 5) |
- |
831 |
|
Distribution costs |
- |
(775) |
|
Administrative expenses |
- |
(651) |
|
Other operating expenses |
- |
(5,225) |
|
Impairment loss on trade receivables |
- |
(23,242) |
|
Impairment loss on rental receivables |
- |
(831) |
|
Impairment loss on other receivables |
(3,413) |
(8,562) |
|
Impairment loss on property, plant and equipment |
(15,660) |
(11,377) |
|
Impairment loss on intangible assets |
(15,870) |
(2,147) |
|
Loss from operation |
(34,943) |
(52,566) |
|
Finance costs (Note 11(a)) |
- |
(1) |
|
Loss before taxation |
(34,943) |
(52,567) |
|
Income tax (Note 7(a)) |
- |
(5) |
|
Loss for the year from discontinued operation |
(34,943) |
(52,572) |
|
Cash flows from discontinued operation |
||
|
Net cash inflow from operating activities |
- |
1,514 |
|
Net cash inflow from investing activities |
- |
- |
|
Net cash inflow from financing activities |
- |
- |
|
Net cash inflow from discontinued operation |
- |
1,514 |
LED INTERNATIONAL HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2009
10. DISCONTINUED OPERATION (CONTINUED)
The major classes of assets and liabilities comprising the Disposal Group classified as held for sale as at 30 June 2009 and 2008 are as follows:
|
2009 |
2008 |
|
|
HK$'000 |
HK$'000 |
|
|
(Restated) |
||
|
Non-current assets classified as held for sale |
||
|
Property, plant and equipment |
5,953 |
21,650 |
|
Intangible assets |
- |
15,888 |
|
Trade and other receivables |
14,067 |
14,108 |
|
Amounts due from related companies |
13,814 |
13,854 |
|
Cash and cash equivalents |
108 |
108 |
|
Total |
33,942 |
65,608 |
|
Liabilities directly associated with non-current assets classified as held for sale |
||
|
Trade and other payables |
4,744 |
4,759 |
|
VAT payable |
17,236 |
17,286 |
|
Current taxation |
820 |
822 |
|
Total |
22,800 |
22,867 |
LED INTERNATIONAL HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2009
11. LOSS FOR THE YEAR
|
Continuing operations |
Discontinued operation |
Total |
|||||
|
2009 |
2008 |
2009 |
2008 |
2009 |
2008 |
||
|
HK$'000 |
HK$'000 |
HK$'000 |
HK$'000 |
HK$'000 |
HK$'000 |
||
|
(Restated) |
(Restated) |
(Restated) |
|||||
|
Loss for the year is arrived at after charging / (crediting): |
|||||||
|
(a) |
Finance costs |
||||||
|
Other interest expenses |
124 |
113 |
- |
1 |
124 |
114 |
|
|
(b) |
Staff costs (including directors' remuneration) |
||||||
|
Salaries, wages and other benefits |
8,285 |
8,303 |
- |
1,294 |
8,285 |
9,597 |
|
|
Contributions to defined contribution retirement plans |
95 |
97 |
- |
86 |
95 |
183 |
|
|
Equity-settled share-based payment expenses |
2,642 |
- |
- |
- |
2,642 |
- |
|
|
11,022 |
8,400 |
- |
1,380 |
11,022 |
9,780 |
||
|
(c) |
Other items |
||||||
|
Amortisation of intangible assets |
- |
- |
- |
3,005 |
- |
3,005 |
|
|
Depreciation of property, plant and equipment |
2,644 |
3,195 |
- |
2,694 |
2,644 |
5,889 |
|
|
Impairment loss on: |
|||||||
|
- Trade receivables |
161 |
- |
- |
23,242 |
161 |
23,242 |
|
|
- Rental receivables |
- |
- |
- |
831 |
- |
831 |
|
|
- Other receivables |
74 |
- |
3,413 |
8,562 |
3,487 |
8,562 |
|
|
- Property, plant and equipment |
- |
- |
15,660 |
11,377 |
15,660 |
11,377 |
|
|
- Intangible assets |
- |
- |
15,870 |
2,147 |
15,870 |
2,147 |
|
|
- Goodwill |
14,046 |
1,229 |
- |
- |
14,046 |
1,229 |
|
|
Property, plant and equipment written off |
16 |
- |
- |
- |
16 |
- |
|
|
(Gain) / Loss on disposal of property, plant and equipment |
(8) |
44 |
- |
- |
(8) |
44 |
|
|
Operating lease charges: minimum lease payments in respect of hire of rental premises |
1,173 |
521 |
- |
336 |
1,173 |
857 |
|
|
Net foreign exchange (gains) / losses |
(6) |
1,598 |
- |
13 |
(6) |
1,611 |
|
|
Auditors' remuneration |
600 |
908 |
- |
- |
600 |
908 |
|
|
Cost of inventories (Note) |
51,394 |
31,716 |
- |
12,704 |
51,394 |
44,420 |
|
LED INTERNATIONAL HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2009
11. LOSS FOR THE YEAR (CONTINUED)
Note:
The aggregate amounts of approximately HK$7,367,000 (2008: HK$5,156,000) relating to the respective staff costs, depreciation and operating lease charges were included in cost of inventories.
Inventories amounting to approximately HK$3,231,000 (2008: Nil) were written off and included in cost of inventories during the year ended 30 June 2009.
12. (LOSS) / EARNINGS PER SHARE
From continuing and discontinued operations
The calculation of basic and diluted loss per share is based on the consolidated loss attributable to equity holders of the Company for the year ended 30 June 2009 of approximately HK$72,485,000 (2008: HK$51,172,000) and the weighted average number of shares in issue during the year of 187,253,817 shares (2008: 143,168,257 shares).
As there was no potential dilutive share in years 2009 and 2008, diluted loss per share equal the basic loss per share.
From continuing operations
Basic and diluted (loss) / earnings per share are calculated by dividing the consolidated loss attributable to equity holders of the Company from continuing operations for the year ended 30 June 2009 of approximately HK$37,542,000 (2008: profit of HK$1,400,000) by the weighted average number of shares in issue during the year of 187,253,817 shares (2008: 143,168,257 shares).
As there was no potential dilutive share in years 2009 and 2008, diluted (loss) / earnings per share from continuing operations equal the basic (loss) / earnings per share from continuing operations.
LED INTERNATIONAL HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2009
13. SEGMENT REPORTING
Segment information is normally presented in respect of the Group's business and geographical segments. Business segment information is chosen as the primary reporting format because this is more relevant to the Group's internal financial reporting.
Business segments
The Group comprises three business segments. Segment information about these businesses is presented as follows:
|
Continuing operations |
Discontinued operation |
|||||||
|
LED display screens |
LED element products |
LED signboards, LED lighting and lighting engineering |
Total |
|||||
|
2009 |
2008 |
2009 |
2008 |
2009 |
2008 |
2009 |
2008 |
|
|
HK$'000 |
HK$'000 |
HK$'000 |
HK$'000 |
HK$'000 |
HK$'000 |
HK$'000 |
HK$'000 |
|
|
(Restated) |
(Restated) |
(Restated) |
(Restated) |
|||||
|
Revenue and results |
||||||||
|
External sales |
15,833 |
- |
25,663 |
39,886 |
- |
12,117 |
41,496 |
52,003 |
|
Segment results |
(6,831) |
- |
(21,695) |
2,930 |
(34,943) |
(52,567) |
(63,469) |
(49,637) |
|
Other income |
48 |
44 |
||||||
|
Waiver of debt |
- |
7,303 |
||||||
|
Finance costs |
(124) |
(114) |
||||||
|
Unallocated expenses |
(8,940) |
(7,363) |
||||||
|
Loss before taxation |
(72,485) |
(49,767) |
||||||
|
Income tax |
- |
(1,405) |
||||||
|
Loss after taxation |
(72,485) |
(51,172) |
||||||
|
Assets and liabilities |
||||||||
|
Segment assets |
1,303 |
- |
33,912 |
58,367 |
33,942 |
65,608 |
69,157 |
123,975 |
|
Unallocated assets |
4,558 |
4,823 |
||||||
|
Total assets |
73,715 |
128,798 |
||||||
|
Segment liabilities |
(6,267) |
- |
(13,813) |
(16,617) |
(22,800) |
(22,867) |
(42,880) |
(39,484) |
|
Unallocated liabilities |
(9,923) |
(5,647) |
||||||
|
Total liabilities |
(52,803) |
(45,131) |
||||||
The Group had no inter-segment sales for the year ended 30 June 2009 and 2008.
LED INTERNATIONAL HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2009
13. SEGMENT REPORTING (CONTINUED)
Business segments (continued)
|
Continuing operations |
Discontinued operation |
|||||||
|
LED display screens |
LED element products |
LED signboards, LED lighting and lighting engineering |
Total |
|||||
|
2009 |
2008 |
2009 |
2008 |
2009 |
2008 |
2009 |
2008 |
|
|
HK$'000 |
HK$'000 |
HK$'000 |
HK$'000 |
HK$'000 |
HK$'000 |
HK$'000 |
HK$'000 |
|
|
(Restated) |
(Restated) |
(Restated) |
(Restated) |
|||||
|
Other segment information |
||||||||
|
Capital expenditure |
- |
- |
2,140 |
8,790 |
- |
- |
2,140 |
8,790 |
|
Depreciation and amortisation |
- |
- |
2,644 |
1,648 |
- |
7,240 |
2,644 |
8,888 |
|
Unallocated amounts |
- |
6 |
||||||
|
2,644 |
8,894 |
|||||||
|
Impairment loss on: |
||||||||
|
- Trade receivables |
- |
- |
161 |
- |
- |
23,242 |
161 |
23,242 |
|
- Rental receivables |
- |
- |
- |
- |
- |
831 |
- |
831 |
|
- Other receivables |
- |
- |
74 |
- |
3,413 |
8,562 |
3,487 |
8,562 |
|
- Property, plant and equipment |
- |
- |
- |
- |
15,660 |
11,377 |
15,660 |
11,377 |
|
- Intangible assets |
- |
- |
- |
- |
15,870 |
2,147 |
15,870 |
2,147 |
|
- Goodwill |
- |
- |
14,046 |
1,229 |
- |
- |
14,046 |
1,229 |
|
Property, plant and equipment written off |
- |
- |
16 |
- |
- |
- |
16 |
- |
Geographical segments
In presenting information on the basis of geographical segments, segment revenue is based on the geographical location of customers. Segment assets and capital expenditure are based on the geographical location of the assets.
|
Hong Kong |
PRC |
|||||
|
2009 |
2008 |
2009 |
2008 |
|||
|
HK$'000 |
HK$'000 |
HK$'000 |
HK$'000 |
|||
|
(Restated) |
(Restated) |
|||||
|
Revenue from external customers |
15,833 |
- |
25,663 |
52,003 |
||
|
Segment assets |
5,861 |
4,823 |
67,854 |
123,975 |
||
|
Capital expenditure incurred during the year |
- |
- |
2,140 |
8,790 |
||
LED INTERNATIONAL HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2009
14. PROPERTY, PLANT AND EQUIPMENT
|
The Group |
Leasehold improvements |
Plant and machinery |
Furniture, fixtures and equipment |
LED screens |
Motor vehicles |
Total |
|
HK$'000 |
HK$'000 |
HK$'000 |
HK$'000 |
HK$'000 |
HK$'000 |
|
|
Cost |
||||||
|
At 1 July 2007 |
86 |
26,553 |
178 |
13,778 |
- |
40,595 |
|
Acquisition of a subsidiary |
- |
2,561 |
404 |
- |
1,215 |
4,180 |
|
Additions |
- |
8,640 |
150 |
- |
- |
8,790 |
|
Disposals |
- |
(653) |
(146) |
- |
(313) |
(1,112) |
|
Exchange difference |
82 |
8,068 |
84 |
3,895 |
121 |
12,250 |
|
Reclassified as held for sale |
(168) |
(34,339) |
(220) |
(17,673) |
- |
(52,400) |
|
At 30 June 2008 |
- |
10,830 |
450 |
- |
1,023 |
12,303 |
|
At 1 July 2008 |
- |
10,830 |
450 |
- |
1,023 |
12,303 |
|
Additions |
- |
2,139 |
1 |
- |
- |
2,140 |
|
Disposals |
- |
- |
(23) |
- |
- |
(23) |
|
Write-off |
- |
(1,242) |
(192) |
- |
- |
(1,434) |
|
Exchange difference |
- |
(30) |
(2) |
- |
(3) |
(35) |
|
At 30 June 2009 |
- |
11,697 |
234 |
- |
1,020 |
12,951 |
|
Accumulated depreciation and impairment losses |
||||||
|
At 1 July 2007 |
46 |
3,203 |
23 |
2,810 |
- |
6,082 |
|
Acquisition of a subsidiary |
- |
1,184 |
253 |
- |
489 |
1,926 |
|
Charge for the year |
29 |
3,964 |
136 |
1,499 |
261 |
5,889 |
|
Eliminated on disposals |
- |
(573) |
(138) |
- |
(296) |
(1,007) |
|
Impairment loss |
- |
9,660 |
- |
1,717 |
- |
11,377 |
|
Exchange difference |
80 |
6,207 |
52 |
2,907 |
46 |
9,292 |
|
Reclassified as held for sale |
(155) |
(21,575) |
(87) |
(8,933) |
- |
(30,750) |
|
At 30 June 2008 |
- |
2,070 |
239 |
- |
500 |
2,809 |
|
At 1 July 2008 |
- |
2,070 |
239 |
- |
500 |
2,809 |
|
Charge for the year |
- |
2,319 |
103 |
- |
222 |
2,644 |
|
Eliminated on disposals |
- |
- |
(23) |
- |
- |
(23) |
|
Written back |
- |
(1,226) |
(192) |
- |
- |
(1,418) |
|
Exchange difference |
- |
(9) |
(1) |
- |
(2) |
(12) |
|
At 30 June 2009 |
- |
3,154 |
126 |
- |
720 |
4,000 |
|
Carrying value |
||||||
|
At 30 June 2009 |
- |
8,543 |
108 |
- |
300 |
8,951 |
|
At 30 June 2008 |
- |
8,760 |
211 |
- |
523 |
9,494 |
For the year ended 30 June 2008, an impairment loss of approximately HK$11,377,000 was provided for property, plant and equipment of the disposal group, which were measured by reference to their fair values less costs to sell when these assets were classified as held for sale (Note 10).
LED INTERNATIONAL HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2009
14. PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
|
The Company |
Furniture, fixtures and equipment |
|
|
HK$'000 |
||
|
Cost |
||
|
At 1 July 2007 |
28 |
|
|
Disposals |
(28) |
|
|
At 30 June 2008, 1 July 2008 and 30 June 2009 |
- |
|
|
Accumulated depreciation |
||
|
At 1 July 2007 |
6 |
|
|
Charge for the year |
6 |
|
|
Eliminated on disposals |
(12) |
|
|
At 30 June 2008, 1 July 2008 and 30 June 2009 |
- |
|
|
Carrying value |
||
|
At 30 June 2009 and 30 June 2008 |
- |
15. GOODWILL - THE GROUP
|
HK$'000 |
||
|
(Restated) |
||
|
Cost |
||
|
At 1 July 2007 |
- |
|
|
Arising on acquisition of a subsidiary (Note 29) |
||
|
- amount of goodwill previously stated |
12,621 |
|
|
- correction of errors (Note 2(b)) |
15,486 |
|
|
At 30 June 2008, 1 July 2008 and 30 June 2009 |
28,107 |
|
|
Accumulated impairment losses |
||
|
At 1 July 2007 |
- |
|
|
Impairment loss |
1,229 |
|
|
At 30 June 2008 |
1,229 |
|
|
At 1 July 2008 |
1,229 |
|
|
Impairment loss |
14,046 |
|
|
At 30 June 2009 |
15,275 |
|
|
Carrying value |
||
|
At 30 June 2009 |
12,832 |
|
|
At 30 June 2008 |
26,878 |
LED INTERNATIONAL HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2009
15. GOODWILL - THE GROUP (CONTINUED)
Impairment tests for cash-generating units containing goodwill
Goodwill is allocated to the Group's cash-generating units ("CGU") identified according to business segment as follows:
|
2009 |
2008 |
|
|
HK$'000 |
HK$'000 |
|
|
LED element products - PRC |
12,832 |
26,878 |
The recoverable amount of the CGU is determined based on value-in-use calculations. These calculations use pre-tax cash flow projections based on financial budgets approved by management covering a five-year period. The growth rate used does not exceed the long-term average growth rate for the business in which the CGU operates. In preparing the cash flow projections, management determined budgeted revenue and expenses based on past performance and its expectation for the market development. The cash flows are discounted using a pre-tax discount rate of 22% (2008: 23%). The discount rates used are pre-tax and reflect specific risks relating to the industry and the business segment.
As a result of the above impairment test for goodwill, the Group recognised a goodwill impairment loss of approximately HK$14,046,000 which has been charged to the consolidated income statement for the year ended 30 June 2009 (2008: HK$1,229,000).
LED INTERNATIONAL HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2009
16. INTANGIBLE ASSETS - THE GROUP
|
Technology know-how |
||
|
HK$'000 |
||
|
Cost |
||
|
At 1 July 2007 |
27,601 |
|
|
Exchange difference |
4,289 |
|
|
Reclassified as held for sale |
(31,890) |
|
|
At 30 June 2008, 1 July 2008 and 30 June 2009 |
- |
|
|
Accumulated amortisation and impairment losses |
||
|
At 1 July 2007 |
8,328 |
|
|
Charge for the year |
3,005 |
|
|
Impairment loss |
2,147 |
|
|
Exchange difference |
2,522 |
|
|
Reclassified as held for sale |
(16,002) |
|
|
At 30 June 2008, 1 July 2008 and 30 June 2009 |
- |
|
|
Carrying value |
||
|
At 30 June 2009 and 30 June 2008 |
- |
For the year ended 30 June 2008, an impairment loss of approximately HK$2,147,000 was provided for intangible assets of the disposal group, which were measured by reference to their fair values less costs to sell when these intangible assets were classified as held for sale (Note 10).
LED INTERNATIONAL HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2009
17. INVESTMENTS IN SUBSIDIARIES
|
2009 |
2008 |
|
|
HK$'000 |
HK$'000 |
|
|
(Restated) |
||
|
Unlisted shares, at cost |
53,634 |
53,634 |
|
Less: Impairment loss |
(43,634) |
(29,400) |
|
10,000 |
24,234 |
The amounts due from subsidiaries are unsecured, interest-free and have no fixed terms of repayment. An impairment loss of approximately HK$46,265,000 was charged to the Company's income statement for the year ended 30 June 2009 (2008: Nil).
The details of the subsidiaries at 30 June 2009 are as follows:
|
Name of company |
Place of incorporation/ establishment and operation |
Particulars of issued share capital/ registered capital |
Proportion of ownership interests held by the Company |
Principal activities |
|
LED International (Far East) Limited |
Hong Kong |
10,002 ordinary shares of HK$1 each |
100% (Direct) |
Investment holding |
|
Shenzhen China-LED Photo-Technology Limited |
The People's Republic of China |
Registered capital of RMB50,000,000 |
100% (Indirect) |
Assembly and production of LED signboards, LED lighting and lighting engineering |
|
Kepu Electronic Technology (Shenzhen) Company Limited |
The People's Republic of China |
Registered capital of RMB6,000,000 |
100% (Indirect) |
Manufacturing of LED element products |
|
LED International Green Energy Corporation Limited |
Hong Kong |
1 ordinary share of HK$1 |
100% (Direct) |
Provision for energy savings project |
LED INTERNATIONAL HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2009
18. INVENTORIES
Inventories in the consolidated balance sheet comprise:
|
2009 |
2008 |
|
|
HK$'000 |
HK$'000 |
|
|
(Restated) |
||
|
Raw materials and consumables |
1,376 |
3,749 |
|
Work in progress |
272 |
831 |
|
Finished goods |
2,508 |
5,206 |
|
4,156 |
9,786 |
For the year ended 30 June 2008, the cost of inventories recognised as expenses and included in cost of sales amounted to approximately HK$44,420,000, of which approximately HK$12,704,000 are related to discontinued operation.
19. TRADE AND OTHER RECEIVABLES
|
The Group |
The Company |
||||
|
2009 |
2008 |
2009 |
2008 |
||
|
HK$'000 |
HK$'000 |
HK$'000 |
HK$'000 |
||
|
(Restated) |
(Restated) |
||||
|
Trade receivables |
7,383 |
11,373 |
- |
- |
|
|
Less: allowance for doubtful debts (Note 19(a)) |
(143) |
(109) |
- |
- |
|
|
7,240 |
11,264 |
- |
- |
||
|
Retention receivable |
1,129 |
- |
1,129 |
- |
|
|
Deposit for acquisition of Strongbase New (Note 30(a)) |
4,500 |
- |
4,500 |
- |
|
|
Deposit for development project |
12,321 |
12,357 |
- |
- |
|
|
Other debtors, deposits and prepayments |
2,391 |
7,198 |
91 |
1,268 |
|
|
27,581 |
30,819 |
5,720 |
1,268 |
||
|
Reclassified as held for sale (Note 10) |
(14,067) |
(14,108) |
- |
- |
|
|
13,514 |
16,711 |
5,720 |
1,268 |
||
Trade and other receivables include an amount of approximately HK$21,804,000 (2008: HK$29,493,000) denominated in Chinese Yuan Renminbi.
LED INTERNATIONAL HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2009
19. TRADE AND OTHER RECEIVABLES (CONTINUED)
(a) Impairment of trade receivables
Impairment losses in respect of trade receivables are recorded using an allowance account unless the Group is satisfied that recovery of the amount is remote, in which case the impairment loss is written off against trade receivables directly (see Note 2(h)(i)).
The movement in the allowance for doubtful debts during the year, including both specific and collective loss components, is as follows:
|
The Group |
The Company |
||||
|
2009 |
2008 |
2009 |
2008 |
||
|
HK$'000 |
HK$'000 |
HK$'000 |
HK$'000 |
||
|
(Restated) |
(Restated) |
||||
|
At beginning of the year |
109 |
- |
- |
- |
|
|
Acquisition of a subsidiary |
- |
109 |
- |
- |
|
|
Impairment loss recognised |
161 |
- |
- |
- |
|
|
Uncollectible amounts written off |
(127) |
- |
- |
- |
|
|
At end of the year |
143 |
109 |
- |
- |
|
(b) Trade receivables that are not impaired
The ageing analysis of trade receivables that are neither individually nor collectively considered to be impaired are as follows:
|
The Group |
The Company |
||||
|
2009 |
2008 |
2009 |
2008 |
||
|
HK$'000 |
HK$'000 |
HK$'000 |
HK$'000 |
||
|
(Restated) |
(Restated) |
||||
|
Neither past due nor impaired |
4,960 |
9,494 |
- |
- |
|
|
Less than one month past due |
1,649 |
1,369 |
- |
- |
|
|
One month to three months past due |
439 |
353 |
- |
- |
|
|
Over three months past due |
192 |
48 |
- |
- |
|
|
2,280 |
1,770 |
- |
- |
||
|
7,240 |
11,264 |
- |
- |
||
LED INTERNATIONAL HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2009
19. TRADE AND OTHER RECEIVABLES (CONTINUED)
(b) Trade receivables that are not impaired (continued)
Receivables that were neither past due nor impaired relate to a wide range of customers for whom there was no recent history of default.
Receivables that were past due but not impaired relate to a number of independent customers that have a good track record with the Group. Based on past experience, management believes that no impairment allowance is necessary in respect of these balances as there has not been a significant change in credit quality and the balances are considered fully recoverable. The Group does not hold any collateral over these balances.
20. AMOUNTS DUE FROM RELATED COMPANIES
Details of the amounts due from related companies disclosed pursuant to section 161B of the Hong Kong Companies Ordinance are as follows:
|
Maximum balance outstanding during the year |
2009 |
2008 |
||
|
HK$'000 |
HK$'000 |
HK$'000 |
||
|
(Restated) |
||||
|
Guangdong Yayi Photo Technology Limited ("Yayi") |
7,954 |
7,931 |
7,954 |
|
|
Guangdong Jian Long Da Electro-Optics Science & Technology Co. Ltd. ("PRC Strong Base") |
5,900 |
5,883 |
5,900 |
|
|
13,814 |
13,854 |
|||
|
Reclassified as held for sale (Note 10) |
(13,814) |
(13,854) |
||
|
- |
- |
|||
The amounts due from related companies, denominated in Chinese Yuan Renminbi, were unsecured and interest-free. PRC Strong Base and Yayi were related companies of Shenzhen China-LED Photo-Technology Limited by virtue of interests held by Mr. Lee Man Bun. The entire registered capital of PRC Strong Base and Yayi are indirectly held by Mr. Lee Man Bun, a substantial shareholder of the Company.
LED INTERNATIONAL HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2009
21. CASH AND CASH EQUIVALENTS
|
The Group |
The Company |
||||
|
2009 |
2008 |
2009 |
2008 |
||
|
HK$'000 |
HK$'000 |
HK$'000 |
HK$'000 |
||
|
(Restated) |
(Restated) |
||||
|
Cash and cash equivalents in the balance sheets |
320 |
321 |
83 |
80 |
|
|
Cash and cash equivalents classified as held for sale (Note 10) |
108 |
108 |
|||
|
Cash and cash equivalents in the consolidated cash flow statement |
428 |
429 |
|||
Cash and cash equivalents include an amount of approximately HK$344,000 (2008: HK$348,000) denominated in Chinese Yuan Renminbi ("RMB"). RMB is not freely convertible into foreign currencies and the remittance of funds out of the Mainland China is subject to exchange restrictions imposed by the PRC government.
22. TRADE AND OTHER PAYABLES
|
The Group |
The Company |
||||
|
2009 |
2008 |
2009 |
2008 |
||
|
HK$'000 |
HK$'000 |
HK$'000 |
HK$'000 |
||
|
(Restated) |
(Restated) |
||||
|
Trade payables |
4,701 |
10,734 |
- |
- |
|
|
Other payables and accrued expenses |
12,203 |
9,682 |
3,852 |
3,228 |
|
|
Amount due to a customer for contract work (Note) |
2,220 |
- |
2,220 |
- |
|
|
VAT payable |
18,598 |
17,286 |
- |
- |
|
|
Deposits received |
2,862 |
3,002 |
195 |
295 |
|
|
Receipt in advance |
- |
2,124 |
- |
2,124 |
|
|
40,584 |
42,828 |
6,267 |
5,647 |
||
|
Reclassified as held for sale (Note 10) |
(21,980) |
(22,045) |
- |
- |
|
|
18,604 |
20,783 |
6,267 |
5,647 |
||
Note:
The aggregate amount of costs incurred plus recognised profits less recognised losses to date, included in amount due to a customer for contract work at 30 June 2009, is approximately HK$13,613,000 (2008: Nil). At 30 June 2009, the amount due to a customer for contract work that is expected to be settled within one year is HK$2,220,000. At 30 June 2009, trade and other receivables include retention receivable of HK$1,129,000 (2008: Nil) relating to construction work of LED display screens.
LED INTERNATIONAL HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2009
23. AMOUNT DUE TO A DIRECTOR
The amount due to a director is unsecured, interest-free and repayable on demand.
24. INCOME TAX IN THE CONSOLIDATED BALANCE SHEET
(a) Current taxation in the consolidated balance sheet represents:
|
The Group |
|||||
|
2009 |
2008 |
||||
|
HK$'000 |
HK$'000 |
||||
|
(Restated) |
|||||
|
Provision for PRC Enterprise Income Tax for the year |
- |
1,400 |
|||
|
Exchange difference |
- |
81 |
|||
|
- |
1,481 |
||||
|
Balance of tax provision relating to prior year |
1,481 |
||||
|
Exchange difference |
(5) |
- |
|||
|
1,476 |
1,481 |
||||
(b) Deferred tax assets and liabilities recognised:
No provision for deferred taxation has been made (2008: Nil) as there were no material temporary differences at the balance sheet date.
LED INTERNATIONAL HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2009
25. CAPITAL AND RESERVES
(a) Movements in components of equity
The reconciliation between the opening and closing balances of each component of the Group's consolidated equity is set out in the consolidated statement of changes in equity. Details of the changes in the Company's individual components of equity between the beginning and the end of the year are set out below:
|
Attributable to equity holders of the Company |
||||||
|
The Company |
Share capital |
Share premium |
Shares to be issued |
Capital reserve |
Accumulated losses |
Total equity |
|
HK$'000 |
HK$'000 |
HK$'000 |
HK$'000 |
HK$'000 |
HK$'000 |
|
|
Balance at 1 July 2007 |
13,687 |
45,520 |
- |
975 |
(6,492) |
53,690 |
|
Correction of errors (Note 2(b)) |
- |
45,393 |
- |
- |
- |
45,393 |
|
Balance at 1 July 2007 (Restated) |
13,687 |
90,913 |
- |
975 |
(6,492) |
99,083 |
|
Changes in equity for 2008: |
||||||
|
Issue of new shares |
1,159 |
3,599 |
- |
- |
- |
4,758 |
|
Loss for the year |
- |
- |
- |
- |
(35,190) |
(35,190) |
|
Fair value of consideration shares to be issued in respect of acquisition of a subsidiary (Notes 2(b) & 29) |
- |
- |
15,486 |
- |
- |
15,486 |
|
Balance at 30 June 2008 and 1 July 2008 (Restated) |
14,846 |
94,512 |
15,486 |
975 |
(41,682) |
84,137 |
|
Changes in equity for 2009: |
||||||
|
Issue of new shares |
4,572 |
2,619 |
- |
- |
- |
7,191 |
|
Equity-settled share-based transactions (Note 26) |
- |
- |
- |
2,642 |
- |
2,642 |
|
Share options lapsed |
- |
- |
- |
(660) |
660 |
- |
|
Loss for the year |
- |
- |
- |
- |
(76,271) |
(76,271) |
|
Balance at 30 June 2009 |
19,418 |
97,131 |
15,486 |
2,957 |
(117,293) |
17,699 |
LED INTERNATIONAL HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2009
25. CAPITAL AND RESERVES (CONTINUED)
(b) Share capital
(i) Authorised and issued share capital
|
2009 |
2008 |
||||
|
No. of shares |
HK$'000 |
No. of shares |
HK$'000 |
||
|
Authorised: |
(Restated) |
||||
|
Ordinary shares of HK$0.10 each |
200,000,000 |
20,000 |
200,000,000 |
20,000 |
|
|
Issued and fully paid: |
|||||
|
Ordinary shares of HK$0.10 each |
|||||
|
At 1 July |
148,460,420 |
14,846 |
136,870,065 |
13,687 |
|
|
Issue of new shares |
45,717,084 |
4,572 |
11,590,355 |
1,159 |
|
|
At 30 June |
194,177,504 |
19,418 |
148,460,420 |
14,846 |
|
On 9 September 2008, the Company issued 29,692,084 ordinary shares of HK$0.10 each at HK$0.158 per ordinary share for cash to increase working capital of the Company.
On 29 July 2008, the Company issued 16,025,000 ordinary shares of HK$0.10 each at HK$0.156 per ordinary share as a partial consideration for acquisition of Strongbase New Shenzhen Limited as set out in Note 30(a) to the consolidated financial statements.
On 16 January 2008, the Company issued and allotted 4,746,852 ordinary shares of HK$0.10 each at HK$0.307 per ordinary share for cash to increase working capital of the Company.
On 23 November 2007, the Company issued and allotted 6,843,503 ordinary shares of HK$0.10 each at HK$0.483 per ordinary share for cash to increase working capital of the Company.
The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company. All ordinary shares rank equally with regards to the Company's residual assets.
LED INTERNATIONAL HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2009
25. CAPITAL AND RESERVES (CONTINUED)
(b) Share capital (continued)
(ii) Terms of unexpired and unexercised share options at the balance sheet date.
|
Exercise |
2009 |
2008 |
|||
|
Exercise period |
price |
Number |
Number |
||
|
16 October 2006 to 15 October 2011 |
10.00 pence |
2,737,401 |
2,737,401 |
||
|
16 October 2006 to 15 October 2011 |
12.50 pence |
2,737,401 |
2,737,401 |
||
|
16 October 2007 to 15 October 2011 |
10.00 pence |
456,234 |
4,562,336 |
||
|
16 October 2008 to 15 October 2011 |
10.00 pence |
456,234 |
4,562,336 |
||
|
16 October 2009 to 15 October 2011 |
10.00 pence |
456,233 |
4,562,337 |
||
|
18 May 2009 to 3 June 2019 |
10.00 HK cents |
4,363,539 |
- |
||
|
3 June 2009 to 3 June 2019 |
10.00 HK cents |
17,454,158 |
- |
||
|
28,661,200 |
19,161,811 |
||||
Each option entitles the holder to subscribe for one ordinary share in the Company. Further details of these options are set out in Note 26 to the consolidated financial statements.
(c) Nature and purpose of reserves
(i) Share premium
Share premium comprises the difference between the consolidated shareholders' fund of LED International (Far East) Limited and its subsidiary at the date on which the group restructuring became effective and the nominal amount of the Company's shares issued under the restructuring, and premium arising from issue of shares at a price in excess of their par value per share. The application of the share premium account is governed by Section 48B of the Hong Kong Companies Ordinance.
(ii) Capital reserve
The capital reserve comprises the grant date fair value of unexercised share options granted to Corporate Synergy Plc and the management of the Group recognised in accordance with the accounting policy adopted for share-based payments in Note 2(n)(iii).
(iii) Exchange reserve
The exchange reserve comprises all foreign exchange differences arising from the translation of the financial statements of foreign operations. The reserve is dealt with in accordance with the accounting policy set out in Note 2(r)(iii).
LED INTERNATIONAL HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2009
25. CAPITAL AND RESERVES (CONTINUED)
(c) Nature and purpose of reserves (continued)
(iv) PRC statutory reserve
Transfer from retained profits to PRC statutory reserve is made in accordance with the relevant PRC rules and regulations and the articles of association of the Group's subsidiaries established in the PRC and have been approved by the respective boards of directors.
Subsidiaries in the PRC are required to transfer at least 10% of net profits, as determined in accordance with the PRC accounting rules and regulations, to the general reserve fund until the reserve balance reaches 50% of the registered capital. The transfer to this fund must be made before distribution of dividends to equity holders.
The general reserve fund can be used to make good previous years' losses, if any, and may be converted into paid-up capital provided that the balance of the general reserve fund after such conversion is not less than 25% of their registered capital.
(d) Distributability of reserves
At 30 June 2009, no reserves were available for distribution to equity shareholders of the Company as the Company recorded accumulated losses for the year (2008: Nil).
(e) Capital management
The Group's primary objectives when managing capital are to safeguard the Group's ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders, by pricing products and services commensurately with the level of risk and by securing access to finance at a reasonable cost.
The Group actively and regularly reviews and manages its capital structure to maintain a balance between the higher shareholder returns that might be possible with higher levels of borrowings and the advantages and security afforded by a sound capital position, and makes adjustments to the capital structure in light of changes in economic conditions.
The Group monitors its capital structure on the basis of a gearing ratio, which is the Group's total liabilities divided by the Group's total assets. The Group's policy is to keep the gearing ratio at a reasonable level. The Group's gearing ratio as at 30 June 2009 was 0.72 (2008: 0.35).
LED INTERNATIONAL HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2009
26. EQUITY SETTLED SHARE-BASED TRANSACTIONS
(a) The terms and conditions of the grants that existed during the year are as follows:
|
Number of instruments |
Vesting conditions |
Contractual life of options |
|
|
Options granted to management (Note (ii)): |
|||
|
- on 16 October 2006 |
4,562,336 |
One year from the date of grant |
5 years |
|
- on 16 October 2006 |
4,562,336 |
Two years from the date of grant |
5 years |
|
- on 16 October 2006 |
4,562,337 |
Three years from the date of grant |
5 years |
|
- on 18 May 2009 |
4,363,539 |
- |
10.04 years |
|
- on 3 June 2009 |
17,454,158 |
- |
10 years |
|
Options granted to Corporate Synergy Plc (Note (iii)): |
|||
|
- on 16 October 2006 |
5,474,802 |
- |
5 years |
|
Total share options granted |
40,979,508 |
(b) Movements in the number of share options outstanding and their related weighted average exercise prices attributable to Corporate Synergy Plc and the management of the Group as grantees of the share option scheme operated by the Company are as follows:
|
2009 |
2008 |
||||
|
Weighted average exercise price |
Number of options |
Weighted average exercise price |
Number of options |
||
|
(pence) |
(Note (i)) |
(pence) |
(Note (i)) |
||
|
Outstanding at the beginning of the year |
10.36 |
19,161,811 |
10.36 |
19,161,811 |
|
|
Granted during the year |
0.80 |
21,817,697 |
- |
||
|
Lapsed during the year |
10.00 |
(12,318,308) |
- |
||
|
Outstanding at the end of the year |
3.22 |
28,661,200 |
10.36 |
19,161,811 |
|
|
Exercisable at the end of the year |
3.11 |
28,204,966 |
10.68 |
10,037,138 |
|
* The 12,318,308 share options granted under the share options scheme lapsed upon the resignation of the management of the Group.
LED INTERNATIONAL HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2009
26. EQUITY SETTLED SHARE-BASED TRANSACTIONS (CONTINUED)
The share options outstanding as at 30 June 2009 and 2008 have the following remaining contractual lives and exercise prices:
|
2009 |
2008 |
||||
|
Exercise price |
Number of options outstanding |
Weighted average remaining contractual life |
Number of options outstanding |
Weighted average remaining contractual life |
|
|
10.00 pence |
4,106,102 |
2.3 |
16,424,410 |
3.3 |
|
|
12.50 pence |
2,737,401 |
2.3 |
2,737,401 |
3.3 |
|
|
10.00 HK cents |
21,817,697 |
9.9 |
- |
- |
|
|
Outstanding at 30 June (Note (iv)) |
28,661,200 |
8.1 |
19,161,811 |
3.3 |
|
None of these share options was exercised subsequent to the balance sheet date.
Notes:
(i) The number of options represents the number of ordinary shares in the Company into which the options are exercisable.
(ii) The Company's management option agreement is established for the purpose of providing incentives to the directors and employees of the Group. On 16 October 2006, 13,687,009 share options were granted at an exercise price of 10 pence per ordinary share to the Group's management ("Management Options"). Pursuant to the management option agreement, the share options shall be exercised as follows: (a) the first third of the shares may be subscribed for following the first anniversary of admission to AIM on 23 October 2006; (b) the second third of the shares may be subscribed for following the second anniversary of admission to AIM on 23 October 2006; and (c) the final third of the shares may be subscribed for following the third anniversary of admission to AIM on 23 October 2006.
On 18 May and 3 June 2009, 4,363,539 share options and 17,454,158 share options were granted for nil consideration to the Group's management ("New Management Options") at an exercise price of 10 HK cents per ordinary share respectively. New Management Options shall be exercised in whole or in part at any time in the period of 10.04 years from the date of grant on 18 May 2009 and of 10 years from the date of grant on 3 June 2009 respectively.
(iii) Under the option agreement entered into with Corporate Synergy Plc dated 16 October 2006, 5,474,802 share options were granted to Corporate Synergy Plc ("CS Options") in settlement of their corporate finance fees and commissions at an exercise price of 10 pence per ordinary share in respect of the first 2,737,401 shares and at an exercise price of 12.5 pence per ordinary share in respect of the remaining 2,737,401 shares. The options granted shall be exercised in whole or in part at any time in the period of 5 years from the date of admission to AIM on 23 October 2006.
LED INTERNATIONAL HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2009
26. EQUITY SETTLED SHARE-BASED TRANSACTIONS (CONTINUED)
Notes (continued):
(iv) At 30 June 2009, the number of shares in respect of which options had been granted and remained outstanding under the option agreements was 28,661,200 (2008: 19,161,811), representing approximately 14.7% (2008: 12.9%) of the issued shares of the Company at that date.
(c) Fair value of share options and assumptions
The fair value of services received in return for share options granted is measured by reference to the fair value of share options granted. The estimate of the fair value of the share options granted was measured based on the Black-Scholes option pricing model. The inputs into the model were as follows:
|
Share options granted on |
|||||
|
3 June 2009 |
18 May 2009 |
16 October 2006 |
16 October 2006 |
16 October 2006 |
|
|
New Management Options |
New Management Options |
Management Options |
CS Options |
CS Options |
|
|
Fair value at measurement date |
13.567 HK cents |
6.269 HK cents |
0.3571 to 0.3759 Pence |
0.2308 Pence |
0.3763 Pence |
|
Share price |
16.445 HK cents |
7.735 HK cents |
4.236 Pence |
4.236 Pence |
4.236 Pence |
|
Exercise price |
10.00 HK cents |
10.00 HK cents |
10.00 Pence |
12.50 Pence |
10.00 Pence |
|
Expected volatility |
131.16% |
125.36% |
32.05% |
32.05% |
32.05% |
|
Expected life |
5 years |
5.02 years |
3 to 4 years |
2.5 years |
2.5 years |
|
Risk-free rate |
2.64% |
2.42% |
4.99% to 5.06% |
4.89% |
4.89% |
|
Expected dividend yield |
- |
- |
- |
- |
- |
The expected volatility is based on the historic volatility (calculated based on the weighted average remaining life of the share options), adjusted for any expected changes to future volatility based on publicly available information. Changes in the subjective input assumptions could materially affect the fair value estimate.
LED INTERNATIONAL HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2009
27. FINANCIAL RISK MANAGEMENT
Exposure to credit, liquidity, interest rate and foreign currency risks arises in the normal course of the Group's business. The Group's exposure to these risks and the financial risk management policies and practices used by the Group to manage these risks are described below.
(a) Credit risk
The Group's credit risk is primarily attributable to trade and other receivables. Management has a credit policy in place and the exposures to these credit risks are monitored on an ongoing basis.
In respect of trade receivables, individual credit evaluations are performed on all customers requiring credit over a certain amount. These evaluations focus on the customers' past history of making payments when due and current liability to pay, and take into account information specific to the customer as well as pertaining to the economic environment in which the customers operates. Trade receivables are due within 30 to 90 days from the date of billing. Normally, the Group does not obtain collateral from customers.
The Group's exposure to credit risk is influenced mainly by the individual characteristics of each customer rather than the industry or country in which the customers operate and therefore significant considerations of credit risk primarily arise when the Group has significant exposure to individual customers.
At the balance sheet date, the Group has a certain concentration of credit risk as 68% (2008: 45%) and 85% (2008: 76%) of the total trade receivables was due from the Group's largest customer and the five largest customers respectively.
The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the balance sheet after deducting any impairment allowance. The Group does not provide any guarantees which would expose the Group or the Company to credit risk.
LED INTERNATIONAL HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2009
27. FINANCIAL RISK MANAGEMENT (CONTINUED)
(b) Liquidity risk
The Group's policy is to regularly monitor its current and expected liquidity requirements to ensure that it maintains sufficient reserves of cash to meet its liquidity requirements in the short and longer term.
The following table details the remaining contractual maturities at the balance sheet date of the Group's and the Company's non-derivative financial liabilities, which are based on contractual undiscounted cash flows and the earliest date the Group and the Company can be required to pay:
|
2009 |
2008 |
||||||
|
Contractual undiscounted cash outflow |
Contractual undiscounted cash outflow |
||||||
|
The Group |
Within 1 year or on demand |
Total |
Balance sheet carrying amount |
Within 1 year or on demand |
Total |
Balance sheet carrying amount |
|
|
HK$'000 |
HK$'000 |
HK$'000 |
HK$'000 |
HK$'000 |
HK$'000 |
||
|
(Restated) |
(Restated) |
(Restated) |
|||||
|
Trade payables |
4,701 |
4,701 |
4,701 |
10,734 |
10,734 |
10,734 |
|
|
Other payables and accrued expenses |
12,203 |
12,203 |
12,203 |
9,682 |
9,682 |
9,682 |
|
|
Amount due to a customer for contract work |
2,220 |
2,220 |
2,220 |
- |
- |
- |
|
|
Amount due to a director |
9,923 |
9,923 |
9,923 |
- |
- |
- |
|
|
29,047 |
29,047 |
29,047 |
20,416 |
20,416 |
20,416 |
||
|
2009 |
2008 |
||||||
|
Contractual undiscounted cash outflow |
Contractual undiscounted cash outflow |
||||||
|
The Company |
Within 1 year or on demand |
Total |
Balance sheet carrying amount |
Within 1 year or on demand |
Total |
Balance sheet carrying amount |
|
|
HK$'000 |
HK$'000 |
HK$'000 |
HK$'000 |
HK$'000 |
HK$'000 |
||
|
(Restated) |
(Restated) |
(Restated) |
|||||
|
Other payables and accrued expenses |
3,852 |
3,852 |
3,852 |
3,228 |
3,228 |
3,228 |
|
|
Amount due to a customer for contract work |
2,220 |
2,220 |
2,220 |
- |
- |
- |
|
|
Amount due to a director |
9,923 |
9,923 |
9,923 |
- |
- |
- |
|
|
15,995 |
15,995 |
15,995 |
3,228 |
3,228 |
3,228 |
||
LED INTERNATIONAL HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2009
27. FINANCIAL RISK MANAGEMENT (CONTINUED)
(c) Interest rate risk
As the Group has no significant interest bearing assets and liabilities, the Group's income and operating cash flows are substantially independent of changes in market interest rates.
(d) Foreign currency risk
The Group has minimal exposure to foreign currency risk as most of its business transactions, assets and liabilities are denominated in a functional currency of the operations (i.e. Hong Kong dollars and Chinese Yuan Renminbi). The Group currently does not have a foreign currency hedging policy in respect of foreign currency transactions, assets and liabilities. The Group monitors its foreign currency exposure closely and considers hedging significant foreign currency exposure should the need arise.
(e) Fair values
The carrying amounts of the Group's and the Company's financial instruments carried at cost or amortised cost are not materially different from their fair values as at 30 June 2009 and 2008.
(f) Financial instruments by category
The carrying amounts of each of the categories of the financial instruments as at 30 June 2009 and 2008 are as follows:
|
Financial assets |
|||||
|
The Group |
The Company |
||||
|
2009 |
2008 |
2009 |
2008 |
||
|
HK$'000 |
HK$'000 |
HK$'000 |
HK$'000 |
||
|
(Restated) |
(Restated) |
||||
|
Loans and receivable: |
|||||
|
Trade receivables |
7,240 |
11,264 |
- |
- |
|
|
Retention receivable |
1,129 |
- |
1,129 |
- |
|
|
Financial assets included in other debtors, deposits and prepayments |
441 |
2,224 |
50 |
1,218 |
|
|
Amounts due from subsidiaries |
- |
- |
18,086 |
64,202 |
|
|
Cash and cash equivalents |
320 |
321 |
83 |
80 |
|
|
9,130 |
13,809 |
19,348 |
65,500 |
||
LED INTERNATIONAL HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2009
27. FINANCIAL RISK MANAGEMENT (CONTINUED)
(f) Financial instruments by category (continued)
|
Financial liabilities |
|||||
|
The Group |
The Company |
||||
|
2009 |
2008 |
2009 |
2008 |
||
|
HK$'000 |
HK$'000 |
HK$'000 |
HK$'000 |
||
|
(Restated) |
(Restated) |
||||
|
At amortised cost: |
|||||
|
Trade payables |
4,612 |
10,645 |
- |
- |
|
|
Financial liabilities included in other payables and accrued expenses |
6,792 |
4,206 |
3,852 |
3,228 |
|
|
Amount due to a director |
9,923 |
- |
9,923 |
- |
|
|
21,327 |
14,851 |
13,775 |
3,228 |
||
28. MATERIAL RELATED PARTY TRANSACTIONS
(a) Key management personnel remuneration
Remuneration for key management personnel of the Group, including amounts paid to the Company's directors as disclosed in Note 8, is as follows:
|
2009 |
2008 |
||
|
HK$'000 |
HK$'000 |
||
|
Short-term employee benefits |
2,251 |
1,680 |
|
|
Equity-settled share-based payment expenses |
2,642 |
- |
|
|
4,893 |
1,680 |
LED INTERNATIONAL HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2009
28. MATERIAL RELATED PARTY TRANSACTIONS (CONTINUED)
(b) Other related party transactions
In addition to the transactions and balances disclosed elsewhere in these consolidated financial statements, the Group had the following significant transactions with related parties during the year:
|
2009 |
2008 |
||
|
Note |
HK$'000 |
HK$'000 |
|
|
(Restated) |
|||
|
Sales of raw materials and finished goods to 深圳市富市佳電子科技 有限公司 |
(i), (iv) |
12,364 |
15,141 |
|
Sales of raw materials and finished goods to PRC Strong Base |
(i) |
- |
415 |
|
Purchase of raw materials and finished goods from PRC Strong Base |
(ii) |
- |
256 |
|
Rental income receivable from PRC Strong Base |
(iii) |
- |
831 |
Notes:
(i) Sales to related companies were made at similar terms as the Group granted to other customers.
(ii) Purchases from a related company were made on similar terms as the Group entered into with other suppliers.
(iii) Rental income represents leasing of LED screens to a related company.
(iv) The amount due from a related company, 深圳市富市佳電子科技有限公司, amounted approximately HK$4,920,000 at 30 June 2009 (2008: HK$5,123,000), which is included in trade receivables as set out in Note 19 to the consolidated financial statements. One of the key management personnel of the Company's subsidiary, Kepu Electronic Technology (Shenzhen) Company Limited, has beneficial interests in this related company.
29. ACQUISITION OF A SUBSIDIARY
On 28 July 2007, LED International (Far East) Limited acquired the entire issued capital of Kepu Electronic Technology (Shenzhen) Company Limited ("Kepu") from a third party at a total consideration of RMB30,000,000 including a cash consideration of RMB15,000,000 and the balance of the equivalent value of RMB15,000,000 in shares of LED International Holdings Limited. Kepu is principally engaged in manufacturing LED element products.
LED INTERNATIONAL HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2009
29. ACQUISITION OF A SUBSIDIARY (CONTINUED)
The fair values of the identifiable assets and liabilities of a subsidiary acquired as at the date of acquisition, which has no significant difference from their carrying amounts, are as follows:
|
HK$'000 |
||
|
(Restated) |
||
|
Net assets acquired: |
||
|
Property, plant and equipment |
2,254 |
|
|
Inventories |
7,619 |
|
|
Trade receivables |
8,877 |
|
|
Other receivables, deposits and prepayments |
606 |
|
|
Cash and cash equivalents |
102 |
|
|
Trade payables |
(7,195) |
|
|
Other payables and accrued expenses |
(9,341) |
|
|
Total consideration |
2,922 |
|
|
Goodwill arising on acquisition (Note 15) |
28,107 |
|
|
31,029 |
||
|
Satisfied by: |
||
|
Fair value of 19,320,000 shares of the Company to be issued (Note) |
15,486 |
|
|
Cash paid |
15,543 |
|
|
31,029 |
||
|
An analysis of the net cash inflow on acquisition of a subsidiary is as follows: |
||
|
Purchase consideration satisfied by cash |
(15,543) |
|
|
Deposits paid in previous year |
15,419 |
|
|
Effect of foreign exchange rate changes |
124 |
|
|
Cash acquired |
102 |
|
|
Net cash inflow on acquisition of a subsidiary |
102 |
Note:
At 30 June 2009, the consideration of 19,320,000 shares of the Company for the acquisition had not yet been issued and therefore the fair value of 19,320,000 shares to be issued for the acquisition had been recognised as "shares to be issued" in the Company's equity. Shares to be issued was based the published price of the Company's shares as quoted on the AIM on 19 July 2007.
Kepu contributed approximately HK$39,886,000 and HK$9,961,000 to the Group's revenue and profit respectively for the period from the date of acquisition to 30 June 2008.
LED INTERNATIONAL HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2009
30. COMMITMENTS
(a) Capital commitments outstanding at 30 June 2009 not provided for in the consolidated financial statements were as follows:
|
The Group |
||
|
2009 |
2008 |
|
|
HK$'000 |
HK$'000 |
|
|
Contracted but not provided for |
||
|
- Property, plant and equipment |
2,658 |
4,385 |
|
- Project development |
7,643 |
7,665 |
|
- Acquisition of Strongbase New (Note) |
1,000 |
- |
Note:
On 21 July 2008, the Company entered into an agreement to acquire the entire issued share capital of Strongbase New Shenzhen Limited ("Strongbase New") from a related company, Strongbase Electronic Factory Limited, at a consideration of HK$5,500,000. Mr. Lee Man Bun, a substantial shareholder of the Company, has beneficial interests in this related company. Strongbase New is a specialist in research and development and production of LED related products.
On 29 July 2008, the Company issued 16,025,000 ordinary shares of HK$0.10 each at HK$0.156 as a partial consideration of HK$2,500,000. A partial consideration of HK$2,000,000 was paid in cash to the seller during the year ended 30 June 2009. The remaining balance of consideration HK$1,000,000 will be paid in cash within 3 years from the completion of the acquisition. At the date of this report, the aforesaid acquisition is in the process of application of legal title transfer.
(b) At 30 June 2009, the total future minimum lease payments under non-cancellable opening leases are payable as follows:
|
The Group |
||
|
2009 |
2008 |
|
|
HK$'000 |
HK$'000 |
|
|
Within one year |
264 |
433 |
|
After one year but within five years |
- |
114 |
|
264 |
547 |
|
Operating lease payments represent rentals payable by the subsidiaries for the manufacturing plants and office premises. Leases are negotiated, and rentals fixed, for an average term from one to three years. No arrangements have been entered into for contingent rental payments.
LED INTERNATIONAL HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2009
31. CONTINGENT LIABILITIES
From 2006 onwards, the Group's subsidiary, Shenzhen China-LED Photo-Technology Limited ("Shenzhen LED"), qualified as a small-scale VAT taxpayer by Shenzhen Municipal Nanshan District State Tax Bureau under the PRC tax laws and continues to be subject to 6% VAT on its taxable sales revenue. VAT is payable when the right to receive sale proceeds is established when delivery of goods is made to the buyer. The Group has been delaying reporting and paying VAT to the state tax bureau since 2006 and has carried a VAT payable of approximately HK$17,236,000, equivalent to RMB15,177,000 (2008: HK$17,286,000, equivalent to RMB15,177,000) as at 30 June 2009. No VAT was accounted for in the sales revenue of HK$12,117,000 made by Shenzhen LED for the year ended 30 June 2008. According to the tax laws, a penalty may be charged up to a maximum of five times the VAT tax liability plus late payment interest of 0.05% per day on unpaid VAT amounts may be imposed by the state tax bureau. In addition, those persons involved could be severely punished subject to criminal proceedings. In the absence of any reliable information on penalties and/or late payment interest that the state tax bureau may charge against the Group, the directors of the Company are unable to estimate the amounts potentially payable for the late payment of VAT as at 30 June 2009 and 2008.
32. NON-ADJUSTING POST BALANCE SHEET EVENTS
Pursuant to a loan note instrument and subscription agreement entered into between the Company (the "Issuer") and Li Li Xin Thomas (the "Subscriber"), the Subscriber has advanced HK$9,379,000 (the "Loan Advance") to the Issuer and the Issuer has authorised the creation and issue of HK$8,500,000 interest bearing loan notes due 2011 convertible into ordinary shares of the Issuer (the "Convertible Notes"). The Convertible Notes bear interest at a rate of the 3 month London Interbank Offered Rate (the "LIBOR") plus 2% per annum. The Issuer has issued, and the Subscriber subscribed for the Convertible Notes in the aggregate principal of HK$6,000,000 on 8 September 2009 (the "Issue Date") as partial settlement of the Loan Advance and the balance of the Loan Advance, being HK$3,379,000, with effect from 8 September 2009 carries interest at LIBOR plus 4% per annum and is payable on 7 September 2011 (the "Maturity Date"). Pursuant to the terms and conditions of the Convertible Notes, the Convertible Notes are convertible into new shares of the Company at a conversion price per share equal to 90% of the closing trading price of the shares on the date of receipt of notice of conversion by the Issuer subject to a minimum conversion price of £0.018 per share. The Convertible Notes are convertible at any time from the Issue Date to 7 days before the Maturity Date. The Convertible Notes will be redeemed at 100% of the outstanding principal amount plus any accrued interest up to the date of repayment of the Loan Advance.
LED INTERNATIONAL HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2009
33. KEY SOURCES OF ESTIMATION UNCERTAINTY
Notes 14, 15, 16 and 26 contain information about the assumptions and their risk factors relating to the impairment of property, plant and equipment, goodwill, intangible assets and fair value of share options granted. Other key sources of estimation uncertainty are as follows:
(a) Impairment of property, plant and equipment and intangible assets
The Group assesses annually whether property, plant and equipment and intangible assets have any indication of impairment in accordance with the relevant accounting policies. If such indication exists, the recoverable amounts of the assets would be determined by reference to value in use and net selling price. Value in use is determined using the discounted cash flow method. Owing to inherent risks associated with estimations in the timing and magnitude of the future cash flows and net selling prices, the estimated recoverable amount of the assets may be different from its actual recoverable amount and profit or loss could be affected by accuracy of the estimations.
(b) Impairment of trade and other receivables
If circumstances indicate that the carrying amount of trade and other receivables may not be recoverable, the assets may be considered impaired and an impairment loss may be recognised. The carrying amounts of trade and other receivables are reviewed periodically in order to assess whether the recoverable amounts have declined below the carrying amounts. The recoverable amount of trade and other receivables is the estimated future cash flows discounted at the current market rate of return of similar assets. The Group uses all readily available information in determining an amount that is a reasonable approximation of the recoverable amount.
(c) Income taxes
The Group is subject to income taxes mainly in the PRC. Significant estimates are required in determining the provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will affect the income tax provisions in the period in which such determination is made.
(d) Allowance for slow-moving inventories
An allowance for slow-moving inventories is made based on the ageing and estimated net realisable value of inventories. The assessment of the allowance amount involves judgement and estimates. Where the actual subsequent outcome is different from the original estimate, such difference will affect the carrying value of inventories and any allowance charge or write-back in the period in which the estimate has been changed.
LED INTERNATIONAL HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2009
33. KEY SOURCES OF ESTIMATION UNCERTAINTY (CONTINUED)
(e) Construction contracts
As explained in policy notes 2(j) and (q)(ii) revenue and profit recognition on an uncompleted project is dependent on estimating the total outcome of the construction contract, as well as the work done to date. Based on the Group's recent experience and the nature of the construction activity undertaken by the Group, the Group makes estimates of the point at which it considers the work is sufficiently advanced such that the costs to complete and revenue can be reliably estimated. As a result, until this point is reached the amount due to a customer for contract work as disclosed in note 22 will not include profit or loss which the Group may eventually realise from the work done to date. In addition, actual outcomes in terms of total cost or revenue may be higher or lower than estimated at the balance sheet date, which would affect the revenue and profit recognised in future years as an adjustment to the amounts recorded to date.
34. POSSIBLE IMPACT OF AMENDMENTS, NEW STANDARDS AND INTERPRETATIONS ISSUED BUT NOT YET EFFECTIVE FOR THE YEAR ENDED 30 JUNE 2009
Up to the date of issue of these consolidated financial statements, the IASB has issued a number of amendments, new standards and interpretations which are not yet effective for the year ended 30 June 2009 and which have not been adopted in these consolidated financial statements.
The Group is in the process of making an assessment of what the impact of these amendments, new standards and new interpretations is expected to be in the period of initial application. So far it has concluded that the adoption of them is unlikely to have a significant impact on the Group's results of operations and financial position.
|
Effective for accounting periods beginning on or after |
|
|
IFRS 8, Operating Segments |
1 January 2009 |
|
IAS 1 (Revised), Presentation of Financial Statements |
1 January 2009 |
|
IAS 23 (Revised), Borrowing Costs |
1 January 2009 |
|
IFRS 1 (Revised), First-time Adoption of International Financial Reporting Standards |
1 July 2009 |
|
IFRS 3 (Revised), Business Combinations |
1 July 2009 |
|
IAS 27 (Revised), Consolidated and Separate Financial Statements |
1 July 2009 |
|
Amendment to IAS 39, Financial Instruments: Recognition and Measurement: Eligible Hedged Items |
1 July 2009 |
|
Amendments to IFRS 5 Non-current Assets Held for Sale and Discontinued Operations as a result of Improvements to IFRSs 2008 |
1 July 2009 |
|
IFRIC 17, Distributions of Non-Cash Assets to Owners |
1 July 2009 |
|
Improvements to IFRSs 2009 |
1 July 2009 or 1 January 2010 |
LED INTERNATIONAL HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2009
34. POSSIBLE IMPACT OF AMENDMENTS, NEW STANDARDS AND INTERPRETATIONS ISSUED BUT NOT YET EFFECTIVE FOR THE YEAR ENDED 30 JUNE 2009 (CONTINUED)
In respect of other amendments, new standards and new interpretations, the Group is not yet in a position to state whether they would have a significant impact on the Group's results of operations and financial position.
- End of Notes -
Related Shares:
Led International Holdings