RNS Number:9484Y
Arko Holdings PLC
25 June 2007
For Immediate Release
25 June 2007
Arko Holdings plc ("the Company" or "Arko")
Results of the Company
for the year ended 31 December 2006
The Board of Arko announces the results of the Company for the year ended 31
December 2006, which are set out below. These have today been published and will
be despatched to shareholders.
Copies of these financial statements will be available from the offices of
Nabarro Wells & Co. Limited, Saddlers House, Cheapside, London EC2V 6HS.
RESULTS
I am pleased to make my report to you for the financial year ended 31 December
2006.
During the 12 months to 31 December 2006, turnover increased by 14.8% to US$9.3
million (2005: US$8.1 million). The terminal operating subsidiary, Keen Chance
Terminal Limited remained the principal contributor, providing 86% of Revenue
(2005:84.8%). The balance of turnover was provided mostly from the shipping
logistics business. The gross profit amounted to US$4.2 million (2005: US$3.3
million), representing a growth of 27.3%.
Excluding the amortisation and impairment loss of goodwill as well as
depreciation totaling US$5.7 million (2005:US$3.7 million), the Group generated
a profit of US$2.2 million which was 200% ahead of comparable results in 2006.
The reduction of operating loss by 51.3% comparing to 2005 is driven by a
write-off of US$4.9 million last year. After tax and minority interests, the
Group reduced its losses by 40% to US$3,521,202 for the year ended 31 December,
2006 (2005: US$5,907,500).
As at 31 December 2006 equity shareholders' funds were US$43,513,173.
DIVIDENDS
The Board does not recommend the payment of a dividend (2005: nil).
OPERATIONAL REVIEW
The Group's terminal operating business remains profitable. Both in throughput
and in turnover the terminal has recorded growth up by 28.3% and 17.4%
respectively compared to 2005. With success in reducing operating and
administrative costs in 2006, the operating profit in Keen Chance Terminal
Limited grew by 31.4%.
In contrast, the power plant company suffered a loss of US$3,193,992 in 2006 due
to the rental income received being less than the operating expenses, of which
the depreciation charge accounted for US$1,117,039.
OUTLOOK
The Board believes with continuing growth in the terminal operating business,
the Group will maintain steady growth in the year to come. In order to increase
the efficiency of operation of the terminal, a new 45t/45m rail-mounted gantry
crane had been ordered and a new rail has just started construction. It is
foreseen that another two brand new rail-mounted gantries will be ordered to
coincide with the completion of construction of the rail. Overall, the Board is
optimistic about the prospect of the Group business.
APPRECIATION
The Board would again like to thank all staff for the commitment,
professionalism and loyalty they have shown during the last twelve months.
Qin Shun Chao
Chairman
CONSOLIDATED PROFIT AND LOSS ACCOUNT
Year ended 31 December 2006
Notes 2006 2005
US$ US$
TURNOVER
Continuing operations 1 9,323,102 8,093,986
Cost of sales (5,138,756) (4,783,470)
GROSS PROFIT 4,184,346 3,310,516
Other operating income 2 759,992 809,137
Net operating expenses (2,000,000) (4,858,465)
- exceptional 3
- other (5,538,399) (4,586,887)
OPERATING LOSS 3 (2,594,061) (5,325,699)
Continuing operations (2,594,061) (467,234)
Discontinued operations - (4,858,465)
(2,594,061) (5,325,699)
Interest payable 5 (210,470) (240,451)
LOSS ON ORDINARY ACTIVITIES BEFORE TAXATION (2,804,531) (5,566,150)
Taxation 6 (320,731) (183,757)
LOSS ON ORDINARY ACTIVITIES AFTER TAXATION (3,125,262) (5,749,907)
Minority interests (395,940) (157,593)
LOSS FOR THE YEAR TRANSFERRED TO RESERVES 21 (3,521,202) (5,907,500)
US cents US cents
LOSS PER SHARE
Basic 7 (0.1779) (0.2985)
Diluted 7 (0.1779) (0.2985)
There were no material differences between the reported result and the
historical cost result on ordinary activities before taxation in either of the
above financial years.
CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
Year ended 31 December 2006
2006 2005
US$ US$
LOSS FOR THE FINANCIAL YEAR (3,521,202) (5,907,500)
Currency translation losses on foreign currency net investment (531,364) (247,768)
TOTAL RECOGNISED LOSSES FOR THE YEAR (4,052,566) (6,155,268)
BALANCE SHEETS
Year ended 31 December 2006
Notes Group Company
2006 2005 2006 2005
US$ US$ US$ US$
FIXED ASSETS
Intangible asset 8 19,412,653 22,807,051 - -
Tangible assets 9 32,842,279 33,878,745 - -
Investments in subsidiaries 10 - - 56,014,662 56,014,662
Investments in associate 11 12,082 12,082 - -
52,267,014 56,697,878 56,014,662 56,014,662
CURRENT ASSETS
Stocks and work in progress 12 77,070 144,686 - -
Debtors 13 10,148,114 8,809,812 43,937 26,111
Cash at bank and in hand 838,332 653,062 510 147,978
11,063,516 9,607,560 44,447 174,089
CREDITORS: amounts falling due 14 (3,933,809) (3,494,156) (2,059,895) (1,590,462)
within one year
NET CURRENT ASSETS/ 7,129,707 6,113,404 (2,015,448) (1,416,373)
(LIABILITIES)
TOTAL ASSETS LESS CURRENT 59,396,721 62,811,282 53,999,214 54,598,289
LIABILITIES
CREDITORS: amounts falling due 15 (2,951,389) (2,701,923) - -
after more than one year
NET ASSETS 56,445,332 60,109,359 53,999,214 54,598,289
CAPITAL AND RESERVES
Called up share capital 19 14,921,520 14,921,520 14,921,520 14,921,520
Share premium 20 15,662,031 15,662,031 15,662,031 15,662,031
Merger reserve 20 26,042,970 26,042,970 26,042,970 26,042,970
Other reserve 20 1,681,573 1,681,573 - -
Profit and loss account 20 (14,794,921) (10,742,355) (2,627,307) (2,028,232)
EQUITY SHAREHOLDERS' FUNDS 21 43,513,173 47,565,739 53,999,214 54,598,289
MINORITY INTERESTS 12,932,159 12,543,620 - -
56,445,332 60,109,359 53,999,214 54,598,289
Approved and authorised for issue by the board on 21st June, 2007 and signed on its behalf by:
QIN Shun Chao Zhang Jing
Director Director
CONSOLIDATED CASH FLOW STATEMENT
Year ended 31 December 2006
Notes 2006 2005
US$ US$
Net cash inflow from operating activities 16 1,814,769 1,548,244
Returns on investments and servicing of finance 17 (210,470) (240,451)
Taxation (382,836) (163,011)
Capital expenditure 17 (1,285,659) 176,062
__________ _________
CASH (OUTFLOW)/INFLOW BEFORE FINANCING (64,196) 1,320,844
Financing 17 249,466 (1,088,985)
INCREASE IN CASH IN THE YEAR 185,270 231,859
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
2006 2005
US$ US$
Increase in cash in the period 185,270 231,859
Cash (inflow)/outflow from increase in lease financing (249,466) 1,735
Net cash outflow from net repayment of loan - 1,089,311
Cash (inflow) from (increase in) advances from investors - (2,061)
Change in net debt resulting from cash flows (64,196) 1,320,844
NET DEBT AT 1 JANUARY 2006 (2,048,861) (3,369,705)
NET DEBT AT 31 DECEMBER 2006 18 (2,113,057) (2,048,861)
ACCOUNTING POLICIES
BASIS OF ACCOUNTING
The financial information has been prepared under the historical cost convention
and in accordance with applicable United Kingdom accounting standards.
BASIS OF CONSOLIDATION
On the acquisition of a subsidiary, the assets and liabilities of that
subsidiary are recorded at their fair value, reflecting their condition at the
date of acquisition.
The consolidated profit and loss account and consolidated balance sheet include
the financial statements of the Company and its subsidiary undertakings up to 31
December. The results of subsidiaries acquired are included in the consolidated
profit and loss account from the date on which control passes. Intra-group sales
and profits are eliminated on consolidation.
As permitted by Section 230 of the Companies Act 1985, a separate profit and
loss account is not presented in respect of the Company.
TURNOVER
Turnover comprises the value on delivery of sales relating to the period in
respect of operation of a terminal and provision of shipping logistic services.
GOODWILL
Goodwill arising on consolidation represents the excess of the fair value of the
consideration paid over the fair value of the identifiable net assets acquired
and will be amortised through the profit and loss account over its estimated
useful economic life of 20 years on a straight line basis.
Provision is made for any impairment in the carrying value of the goodwill to
the extent that the asset's recoverable value in use is reduced below its
carrying value.
TANGIBLE ASSETS
Expenditure on additions and improvements is capitalized as incurred. Fixed
assets are included at historical cost less accumulated depreciation and any
impairment losses.
Tangible fixed assets, other than construction in progress, are depreciated over
their estimated useful lives on a straight line basis. The following annual
rates of depreciation have been used.
Land and buildings 20-30 years
Plant and machinery 10-20 years
Equipment, furniture and fixtures 5-10 years
Motor vehicles 5-10 years
Oil storage tanks 15 years
Vessels 10 years
Construction in progress represents a building under construction, which is
stated at cost less any impairment. Cost comprises the direct cost of
construction. Construction in progress is reclassified to the appropriate
category of tangible fixed assets when completed and ready for use.
STOCK
Stock is valued at the lower of cost and estimated net realisable value.
FOREIGN CURRENCIES
Monetary assets and liabilities expressed in foreign currencies are translated
at the rate of exchange ruling at the balance sheet date. Revenues, costs and
non-monetary assets are translated at the exchange rates ruling at the
transaction date.
Profit and losses arising from currency transactions and on settlement of
amounts receivable and payable in foreign currencies are dealt with through the
profit and loss account.
Differences on exchange arising from the translation of the assets, liabilities
and results from subsidiaries are taken directly to profit and loss reserve.
DEFERRED TAXATION
Deferred tax is recognised in respect of all timing differences that have
originated but not reversed at the balance sheet date where transactions or
events that result in an obligation to pay more tax in the future or a right to
pay less tax in the future have occurred at the balance sheet date. Timing
differences are differences between the group's taxable profits and its results
as stated in the financial statements that arise from the inclusion of gains and
losses in tax assessments in periods different from those in which they are
recognised in the financial statements.
Deferred tax is measured at the average tax rates that are expected to apply in
the periods in which timing differences are expected to reverse, based on tax
rates and laws that have been enacted or substantially enacted by the balance
sheet date. Deferred tax is measured on a non-discounted basis.
LIQUID RESOURCES
In accordance with FRS 1 Cash flow statements, for cash flow purposes, cash
includes net cash in hand and bank deposits payable on demand within one working
day, and liquid resources include all of the Group's other bank deposits.
PENSION COSTS
The Group contributes to defined contribution pension schemes including the Hong
Kong Mandatory Provident Fund Scheme and the People's Republic of China Central
Pension Scheme. Contributions are charged to the profit and loss account in the
period as incurred.
LEASED ASSETS AND OBLIGATIONS
Where assets are financed by leasing agreements that give rights approximating
to ownership ("finance leases"), the assets are treated as if they had been
purchased outright. The amount capitalised is the present value of the minimum
lease payments payable during the lease term. The corresponding leasing
commitments are shown as obligations to the lessor.
Lease payments are treated as consisting of capital and interest elements, and
the interest is charged to the profit and loss account in proportion to the
remaining balance outstanding.
All other leases are "operating leases" and the annual rentals are charged to
profit and loss on a straight line basis over the lease term.
SHARE-BASED PAYMENTS
The Company has taken advantage of the exemption in FRS20 Share-based payment
from recognising a charge in respect of share options which were fully vested
before 31 December 2005.
NOTES TO THE FINANCIAL STATEMENTS
For the Year ended 31 December 2006
1 SEGMENTAL ANALYSIS
Turnover Operating (loss)/profit Net assets/(liabilities)
2006 2005 2006 2005 2006 2005
US$ US$ US$ US$ US$ US$
Continuing operations:
Terminal and shipping 9,298,586 8,076,571 3,693,482 2,463,348 28,721,773 27,702,720
logistics
Power plant - - (3,193,992) (1,228,426) 24,390,776 27,694,570
Trading and others 24,516 17,415 (3,093,551) (1,702,156) 7,102,335 8,481,621
Mining - - - - 1,088,913 1,088,913
9,323,102 8,093,986 (2,594,061) (467,234) 61,303,797 64,967,824
Discontinued operations:
Trading and others - - - (4,858,465) (4,858,465) (4,858,465)
Group 9,323,102 8,093,986 (2,594,061) (5,325,699) 56,445,332 60,109,359
Analysis by origin:
Hong Kong 1,327,032 1,227,130 (1,408,225) (1,245,673) 23,083,252 24,221,058
People's Republic of China, 7,996,070 6,866,856 (894,464) (3,918,817) 34,743,404 36,925,369
excluding Hong Kong
United Kingdom - - (291,372) (161,209) (1,381,324) (1,037,068)
Group 9,323,102 8,093,986 (2,594,061) (5,325,699) 56,445,332 60,109,359
The analysis of turnover by destination is not materially different from the
analysis of turnover by origin.
2 OTHER OPERATING INCOME 2006 2005
US$ US$
Rental income 759,992 809,137
759,992 809,137
3 OPERATING LOSS 2006 2005
US$ US$
Operating loss is stated after charging/(crediting):
Fees payable to Baker Tilly UK Audit LLP 38,610 27,027
for the audit of Company's annual financial statements
Fees payable to associates of company's auditors
For other services:
The audit of the Company's subsidiaries 36,036 49,551
Taxation services 31,833 -
Depreciation of tangible fixed assets 2,127,323 2,130,181
- owned assets
- leased assets - 1,014
Amortisation of goodwill 1,593,165 1,591,334
Loss/(gain) on disposal of fixed assets 11,198 (4,290)
Rentals under operating leases 74,862 83,254
- land and buildings
- barges and containers 262,548 275,541
- motor vehicles 26,696 28,846
Directors' remuneration 89,360 54,009
Provision for doubtful debts 411,452 -
Staff costs (including directors' remuneration) - note 4 1,188,787 1,078,886
Exceptional items
Provision against debtor - 4,858,465
Impairment of goodwill 2,000,000 _______-
2,000,000 4,858,465
_ __
4 EMPLOYEES 2006 2005
No. No.
The average monthly number of persons (including directors)
employed by the Group during the year was:
Management and administration 58 32
Sales and distribution 7 -
Operations 503 518
568 550
2006 2005
US$ US$
Staff costs for above persons:
Wages and salaries
- included in costs of sales 738,715 581,471
- included in operating expenses 407,309 474,582
Other pension costs 13,175 16,978
Other staff welfare 29,588 5,855
1,188,787 1,078,886
DIRECTORS' REMUNERATION
Fees of US$47,876 (2005: US$55,598) were paid to certain directors through
Winbest Resources Limited, a company which is ultimately controlled by Chin
Dynasty Foundation Limited (see note 26). These fees are in addition to fees of
US$89,360 (2005: US$54,009) that were paid to the directors by Group companies,
as disclosed in note 3.
5 INTEREST PAYABLE 2006 2005
US$ US$
Bank loans 114,176 113,093
Other loans - 127,276
Finance charges payable under finance lease 96,294 82
210,470 240,451
6 TAXATION 2006 2005
US$ US$
Foreign tax
Current year 320,731 183,757
Tax on profit on ordinary activities 320,731 183,757
2006 2005
Factors affecting tax charge for the year: US$ US$
The tax assessed differs from the standard rate of
corporation tax in the UK (30%). The differences are explained
below:
Loss on ordinary activities before tax (2,804,531) (5,566,150)
Loss on ordinary activities multiplied by standard rate of (841,359) (1,669,845)
corporation tax in the UK of 30% (2005: 30%)
Effects of:
Addition to tax losses 648,032 55,075
Expenses not deductible for tax purposes 1,835,239 2,397,109
Different tax rates on overseas earnings (282,037) (184,295)
Non-taxable income (1,029,899) (414,287)
Utilisation of tax losses previously not recognised (9,245) -
Tax charge for the year 320,731 183,757
In respect of subsidiary companies operating in Hong Kong, provisions for Hong
Kong profits tax are calculated at 17.5% (2005: 17.5%) of the estimated
assessable profits for the year.
Subsidiary companies operating in the People's Republic of China are subject to
Enterprise Income Tax ('EIT') at rates ranging from 15% to 33%. However, certain
subsidiaries are subject to tax holidays from the local tax authorities under
income tax law. Others had tax losses brought forward from previous years.
Accordingly, no provision for EIT has been made for the year.
No deferred tax is recognised on the unremitted earnings of the overseas
subsidiary companies, as no dividend payments due to UK parent company are
expected to be made in the foreseeable future. A deferred tax asset of
US$108,986 (2005: US$71,939) has not been recognised in respect of tax losses
carried forward due to the uncertainty of the timing of future taxable profits
against which these losses can be offset.
7 LOSS PER SHARE
Basic loss per share for the year is based on a loss of US$3,521,202 (2005:
US$5,907,500) and the weighted average number of shares in issue of
1,978,895,097 (2005: 1,978,895,097).
Dilutive loss per share for 2006 and 2005 is equivalent to basic loss per share
as the effect of dilutive potential ordinary shares would decrease the net loss
per share and so the potential ordinary shares are not treated as dilutive in
accordance with FRS22 Earnings per share.
8 INTANGIBLE FIXED ASSET - GROUP Goodwill on
acquisition of
subsidiaries
US$
Cost 27,890,148
At 1 January 2006 and 31 December 2006
Amortisation 5,083,097
At 1 January 2006
Exchange difference (198,767)
Charge for the year 1,593,165
Impairment loss for the year 2,000,000
At 31 December 2006 8,477,495
Net book value 19,412,653
At 31 December 2006
At 31 December 2005 22,807,051
9 TANGIBLE FIXED Land and Plant and Furniture, Oil Motor Construction Total
ASSETS buildings machinery fixtures storage Vessels vehicles in progress
and tanks
equipment
GROUP US$ US$ US$ US$ US$ US$ US$ US$
Cost
At 1 January 2006 22,065,109 21,039,354 7,947,377 173,053 2,446,319 686,941 1,763,903 56,122,056
Exchange differences (300,411) 1,029,229 174,501 - 149,898 16,257 (1,298,269) (228,795)
Transfers - 88,285 - - - - (88,285) -
Additions 140,057 1,249,997 47,111 - - 11,725 327,695 1,776,585
Disposals - - (3,832) - (871,299) - - (875,131)
At 31 December 2006 21,904,755 23,406,865 8,165,157 173,053 1,724,918 714,923 705,044 56,794,715
Depreciation
At 1 January 2006 6,584,126 9,470,807 4,581,278 13,460 1,078,988 514,652 - 22,243,311
Exchange differences (39,442) (64,657) 33,163 - 19,625 6,120 - (45,191)
Charge for the year 416,271 930,283 545,524 - 183,391 51,854 - 2,127,323
Disposals - - (2,705) - (370,302) - - (373,007)
At 31 December 2006 6,960,955 10,336,433 5,157,260 13,460 911,702 572,626 - 23,952,436
Net book value
At 31 December 2006 14,943,800 13,070,432 3,007,897 159,593 813,216 142,297 705,044 32,842,279
At 31 December 2005 15,480,983 11,568,547 3,366,099 159,593 1,367,331 172,289 1,763,903 33,878,745
9 TANGIBLE FIXED ASSETS (continued)
At 31 December 2006, the net book values of land and buildings, plant and
machinery, fixtures and equipment are further analysed as follows:
Terminal Power plant Mining zone Others Total
US$ US$ US$ US$ US$
Land 2,756,615 - - - 2,756,615
- short lease
- unspecified leases 1,378,309 - - - 1,378,309
4,134,924 - - - 4,134,924
Buildings 8,179,494 1,744,954 884,428 - 10,808,876
Land and buildings 12,314,418 1,744,954 884,428 - 14,943,800
Plant and machinery 6,725,987 6,344,445 - - 13,070,432
Furniture, fixtures and 104,188 1,819,517 10,544 1,073,648 3,007,897
equipment
At 31 December 2003, a guarantee was given by the Company's subsidiary, Keen
Chance Terminal (GZ) Company Limited ("KCT") for banking facilities granted to a
fellow investor, Miaotou Economic Development Company Limited ("MEDCL"), in KCT
(see note 25(b)).
The Group obtained land use right and real estates certificates on the
terminal's land under short leases from the local land authority. Land with a
value of US$ 1,378,309 held under unspecified leases of the terminal is land
held for industrial use for which the relevant land use right certificate was
not obtained and thus the term of the lease has yet to be agreed.
Included in the land and buildings of the power plant are short lease land on
which the power plant, related ash storage pools and ancillary facilities are
located. In addition, they also include land held for industrial use in respect
of which the Group has not obtained the relevant land use right certificate.
Under the law of the People's Republic of China, the land held for industrial
use and the buildings without building ownership certificates can only be used
for identified industrial purposes. The Group did not obtain any building
ownership certificates in respect of the buildings of the Group. The Group
cannot legally sell or mortgage such properties until the relevant land taxes
have been paid to the local land authority. However there is no binding
agreement for the taxes to be paid.
At 31 December 2006, the net book value of fixed assets held under finance
leases amounted to US$1,067,981 (2005:Nil).
10 INVESTMENTS Investment in
subsidiaries
COMPANY US$
Cost
At 1 January 2006 and 31 December 2006 56,014,662
At 31 December 2006, the Company held 100% of the ordinary shares of Arko
Offshore Holdings Limited, a company incorporated in the British Virgin Island
("BVI"), whose principal activity was that of a holding company. Arko Offshore
Holdings Limited had the following subsidiaries undertakings:
Name Holding ordinary Business activities Country of
shares/ incorporation
registered
capital
Arko Energy Limited 100% Investment holding British Virgin Islands
Arko Consultants Limited 100% Providing management British Virgin
services Islands
Arko Pacific Limited 100% Investment holding British Virgin
Islands
Long Prosperity Industrial Limited* 100% Investment holding Republic of Seychelles
Arko Silicon (Hubei) Limited* 100% Dormant People's Republic of China
Sanko Mineral Limited* 100% Sub-letting of yachts, British Virgin
ships Islands
and vessels
Arko Logistics Limited* 100% Providing logistics Hong Kong
and related services
Arko Satellite Limited* 100% Dormant British Virgin Islands
Arko Terminal Limited ("ATL")* 100% Investment holding Republic of Seychelles
Changzhou Power Development Company 59.2% Operating a coal-fired People's Republic
Limited* thermal power plant of China
Keen Chance Terminal (GZ) Company 40% Investing in and operation People's Republic
Limited* of a terminal and providing of China
logistics services
Fujian Sanko Mining Limited* 70% Dormant People's Republic
of China
* held by a subsidiary of Arko Offshore Holdings Limited
The 40% equity interest in Keen Chance Terminal (GZ) Company Limited "KCT"
previously held by Keen Lloyd Energy Limited ("KLEL"), a subsidiary of Keen
Lloyd Holdings Limited ("KLHL"), has been transferred to ATL. The transfer has
been submitted for registration to the relevant PRC authorities.
Pursuant to an agreement dated 5 April 2002 entered into between KLEL and
Miaotou Economic Development Company Limited "MEDCL", a shareholder of KCT who
held a 30% equity interest in KCT, MEDCL agreed to vote in accordance with the
instructions of KLEL at board meetings in view of its indebtedness to KLEL, for
an approximate sum of RMB78 million (equivalent to US$9.4 million), and KLEL
intended to convert the outstanding loan into the registered capital of KCT.
On 22 April 2003, KLEL entered into a shareholder agreement with MEDCL and
Harbour Economic Development Company Limited ("HEDCL"), another shareholder of
KCT, whereby all parties agreed that MEDCL has unconditionally transferred the
authority empowered to its directors representative (including their rights and
obligations) to KLEL until KLEL transferred the 40% equity interests in KCL to
ATL to reiterate the aforesaid agreement dated 5 April 2002.
10 INVESTMENTS (continued)
On 16 May 2003, a supplemental agreement was entered into between ATL, KLEL,
MEDCL and HEDCL by which all parties agreed that the above authority transferred
to KLEL would be vested in ATL after KLEL completed the transfer of equity
interests in KCT to ATL.
In accordance with the terms and conditions set out in the above agreements,
KLEL effectively controls the board of KCT and this arrangement has been
confirmed by the shareholders of KCT. In 2002, a Hong Kong lawyer expressed his
view that KCT is a subsidiary of KLEL under Hong Kong Company Law. Control of
KLEL has been transferred to ATL and therefore in the opinion of the directors,
KCT is a subsidiary of ATL under UK Companies Act 1985.
In addition, KCT will be a legal subsidiary of ATL immediately upon the
registration of the transfer of the 40% of equity in KCT from KLEL to ATL.
11 INVESTMENT IN ASSOCIATE 2006 2005
US$ US$
Share of net assets 12,082 12,082
The investment in associate represents 20% of the ordinary shares in a company
incorporated in the People's Republic of China, Guangzhou Keen Lloyd Shipping
Agents Limited, at consideration of RMB 100,000 (US$12,082). The associate is
principally engaged in provision of logistics and related services.
12 STOCKS
Stocks represent coal and consumables. There was no significant difference
between the replacement cost and the value shown in the balance sheet.
13 DEBTORS Group Company
2006 2005 2006 2005
US$ US$ US$ US$
Amounts falling due within one year:
Trade debtors 1,572,751 4,511,313 - -
Other debtors (note i) 8,575,363 4,298,499 43,937 26,111
10,148,114 8,809,812 43,937 26,111
13 DEBTORS (continued)
Notes:
(i) Included in other debtors at 31 December 2006 are amounts due from (non-group) related companies as follows:
- Tanko Electronics Limited - US$38,687 (2005: US$14,114)
- Guangzhou Tung Lloyd Shipping Agency Company Limited - US$328,723 (2005: US$170,172)
- Guangzhou Winko Investment Limited - US$91,680 (2005: US$91,776)
- Guangzhou Keen Lloyd Copper Industry Company Limited - US$81,126 (2005: US$130,351)
- Keen Lloyd Holdings Limited - US$165,166 (2005: Nil)
The amounts are interest free, unsecured and repayable on demand.
14 CREDITORS Group Company
2006 2005 2006 2005
US$ US$ US$ US$
(a) Amounts falling due
within one year:
Trade creditors 492,262 739,070 64,933 -
Amount due to subsidiary - - 1,937,052 1,493,649
Corporation taxes 648,578 710,683 - -
Other creditors and accruals 2,543,503 2,044,403 57,910 96,813
Obligations under finance lease (note 249,466 - - -
iii)
3,933,809 3,494,156 2,059,895 1,590,462
(b) Amounts falling due after
one year:
Bank loan (note i) 1,915,246 1,915,246 - -
Advances from fellow investors in 786,677 786,677 - -
subsidiary companies (note ii)
Obligations under finance lease (note 249,466 - - -
iii)
2,951,389 2,701,923 - -
Notes
(i) The bank loan is unsecured. Interest accrues at the rate of 5.85% per annum.
(ii) An amount was advanced from Miaotou Economic Development Company
Limited of US$718,004 (2005: US$718,004) and a further amount from Walton
Enterprises Limited of US$68,673 (2005: US$68,673).
(iii) Obligations under finance lease are secured on the underlying
assets and repayable between one to three years.
15 Bank LOANS, other loans and financial instruments 2006 2005
US$ US$
Analysis of debt maturity
Amounts payable
Two to five years 2,951,389 2,701,923
2,951,389 2,701,923
Bank, overdrafts, loans and finance leases analysis by origin:
People's Republic of China 2,951,389 2,701,923
2,951,389 2,701,923
The Company had no other financial liabilities.
The Group holds financial instruments in order to finance its operations and to
manage interest rate and currency risks. Group operations are financed by means
of retained profits and a mixture of both short and medium term debts. The
Group borrows, through banks and from related parties, in local currencies at
fixed rates. The Group does not trade in any way in financial instruments.
The principal risks arising from the Group's financial instruments are interest
rate risk, liquidity risk and exchange rate risk. The Group board reviews and
agrees policies for managing each of these risks and these are summarised below.
These policies have been developed during the current accounting period as a
consequence of the Group's expansion.
Financial instruments such as investments in and advances to subsidiary
undertakings and short term debtors and creditors have been excluded from the
disclosures below.
Details of security are given in note 14.
15 Bank LOANS, other loans and financial instruments (continued)
Interest rate risk
Group borrowings are held in local currencies. Current loans are at fixed
rates. The Group's policy for future borrowings will be to take floating rates
unless fixed rate finance is available at particularly attractive rates.
The interest rate risk profile of the Group's financial liabilities and assets
are as follows:
Financial liabilities
Fixed rate
Fixed rate weighted average
weighted period for which
average rate is
Total Interest-free Fixed rate interest rate fixed
Currency at
US$ US$ US$ % Years
2006
RMB 2,951,389 1,036,143 1,915,246 5.85 1
2,951,389 1,036,143 1,915,246
2005
RMB 2,701,923 786,677 1,915,246 5.85 1
2,701,923 786,677 1,915,246
Financial assets
Currency Floating rate Floating rate
2006 2005
US$ US$
Hong Kong dollars 517,214 396,712
RMB 321,062 256,350
GBP 56 -
838,332 653,062
Financial assets represent cash at bank and in hand. There were no fixed rate
financial assets.
The directors consider that the fair value of the Group's financial assets and
liabilities was the same as their carrying value.
Liquidity risk
The Group's policy is to ensure that sufficient facilities would be available to
satisfy its peak borrowing requirements. As at 31 December 2006, the Group was
within its bank borrowing facilities. The Group had drawn down all committed
borrowing facilities at the year end.
Foreign currency risk
All trading is undertaken in local currencies. Funding is also in local
currencies other than inter- company investments and loans and it is not the
Group's policy to cover these amounts as the date of repayment is uncertain.
16 RECONCILIATION OF OPERATING LOSS TO NET CASH FLOW FROM OPERATING ACTIVITIES
2006 2005
US$ US$
Operating loss (2,594,061) (5,325,699)
Depreciation of tangible fixed assets 2,127,323 2,131,195
Amortisation of goodwill 1,593,165 1,591,334
Impairment loss of goodwill 2,000,000 -
(Gain)/loss on disposal of tangible fixed assets 11,198 (4,290)
Decrease in stocks 67,616 119,285
(Increase)/decrease in debtors (1,338,302) 3,957,598
Increase/(decrease) in creditors 439,653 (427,667)
Exchange adjustments (491,823) (493,512)
Net cash flow from operating activities 1,814,769 1,548,244
17 ANALYSIS OF CASH FLOWS FOR HEADINGS NETTED IN THE 2006 2005
CASH FLOW STATEMENT US$ US$
Returns on investment and servicing of finance
Interest paid (210,470) (240,451)
Net cash outflow from returns on investment and servicing of finance
(210,470) (240,451)
Capital expenditure and financial investment
Payments to acquire tangible fixed assets (1,776,585) (389,736)
Sale of tangible fixed assets 490,926 565,798
Net cash (outflow)/inflow from capital expenditure (1,285,659) 176,062
Financing
Capital element of finance lease rental payments 249,466 (1,735)
Net decrease in bank and other borrowings - (1,089,311)
Increase in advances from investors - 2,061
Net cash inflow from financing 249,466 (1,088,985)
18 ANALYSIS OF CHANGES IN NET DEBT
At Cash At
1 January Flows 31 December
2006 2006
US$ US$ US$
Cash in hand and at bank 653,062 185,270 838,332
Advances from investors (786,677) - (786,677)
Other loans (1,915,246) - (1,915,246)
Obligations under finance lease - (249,466) (249,466)
Total (2,048,861) (64,196) (2,113,057)
9 SHARE CAPITAL 2006 2005
Number # Number #
Authorised: 30,000,000,000 150,000,000 30,000,000,000 150,000,000
Ordinary shares of 0.5p each
Equivalent to: US$ US$
265,395,280 265,395,280
Allotted, called up and fully paid: 1,978,895,097 US$ 1,978,895,097 US$ 14,921,520
Ordinary shares of 0.5p each 14,921,520
Share options
The Company operates a share option scheme. During the year ended 31 December
2002, the Company granted share options to its advisors as part of the
remuneration for the services provided. Details of share options transactions
during the year ended 31 December 2006 are set out below:
Number of Number of Number of
Date Exercisable Exercise shares shares shares
granted From To price At 1 January granted/lapsed At 31 December
2006 2006
10.5.2002 27.6.2002 10.5.2007 2p 300,000 - 300,000
20 RESERVES
Share Premium Statutory
account surplus Profit
Merger Reserve and loss
reserve (note i) account
US$ US$ US$ US$
Group
At 1 January 2006 15,662,031 26,042,970 1,681,573 (10,742,355)
Loss for the year - - - (3,521,202)
Exchange movements - - - (531,364)
At 31 December 2006 15,662,031 26,042,970 1,681,573 (14,794,921)
Company
At 1 January 2006 15,662,031 26,042,970 - (2,028,232)
Loss for the year - - - (599,075)
At 31 December 2006 15,662,031 26,042,970 - (2,627,307)
Note:
(i) Statutory surplus reserve:
In accordance with the law of the People's Republic of China and the articles of
association of certain of the Company's subsidiaries, directors of these
subsidiaries may at their discretion make appropriations to a statutory surplus
reserve equivalent to 10% of the subsidiaries' net profits. Appropriations may
also be made to statutory public welfare reserve equivalent to 5 to 10% of the
net profits of these operating subsidiaries. Distribution of profits to
shareholders can only be made after such appropriations.
The statutory surplus reserve may be used to reduce any losses incurred or be
capitalised as paid up capital. The use of the statutory public welfare reserve
is restricted to capital expenditure incurred for staff welfare facilities. The
statutory public welfare reserve is not available for distribution.
21 RECONCILIATION OF MOVEMENT IN EQUITY SHAREHOLDERS' FUNDS 2006 2005
US$ US$
Loss for the financial year (3,521,202) (5,907,500)
Other recognised gains and losses (531,364) (247,768)
Net reduction in shareholders' funds (4,052,566) (6,155,268)
Opening shareholders' funds 47,565,739 53,721,007
Closing shareholders' funds 43,513,173 47,565,739
22 RELATED PARTY TRANSACTIONS
Other than transactions otherwise disclosed in the financial statements, the
Group had the following material transactions which were carried out on an arm's
length basis with related parties during the year:
Year ended Year ended
Name of company Note Nature 31 December 2006 31 December 2005
US$ US$
Guangzhou Tung Lloyd Shipping Agency (a) Agency charges 73,543 72,587
Limited
Winko Metal Limited (b) Hiring charges for Motor 23,144 23,144
Vehicle
Tanko Electronics Limited (b) Management fee received 24,516 17,414
The Company has taken advantage of the exemption conferred in FRS8 Related
parties from disclosing transactions with Group companies.
22 RELATED PARTY TRANSACTIONS (continued)
Notes:
(a) A company in which the Chairman, Mr Qin Shun Chao, is a director.
(b) A company controlled by Keen Lloyd Holdings Limited (see note 26).
23 OPERATING LEASE COMMITMENTS
At 31 December 2006, the Group was committed to make the following payments
during the next year in respect of land and building under operating leases:
2006 2005
US$ US$
Leases which expire:
in the next year 116,098 58,896
in the second to fifth years 56,955 -
173,053 58,896
24 CAPITAL COMMITMENTS
At 31 December 2006, the Group had capital commitments contracted for as
follows:
- in respect of the acquisition of a gantry from a non-related supplier
in the sum of RMB 4,000,000 intended for use by a subsidiary company, Keen
Chance Terminal (GZ) Company Limited. At 31 December, 2006, the group has
settled RMB1,200,000.
The Company had no capital commitments.
25 CONTINGENT LIABILITIES
(a) On 23 July 1998, a subsidiary of the Company, Keen Chance Terminal (GZ)
Company Limited ("KCT"), gave a guarantee for RMB50 million (equivalent to
approximately US$5.9 million) in favour of the Huangpu Branch of the Industry
and Commercial Bank of China for banking facilities granted to Harbour Economic
Development Company Limited ("HEDCL"), a fellow investor in KCT and its ultimate
controlling party, Guangzhou Huangpu Foreign Trade Group Company Limited and
secured over their equity interests in KCT. HEDCL was unable to repay the loans
due to the bank. The bank took action against KCT to enforce the guarantee for
the outstanding loan.
(b) On 9 November 1999, KCT gave a guarantee for RMB18 million (equivalent to
approximately US$2.1 million) in favour of Nangang Rural Credit Co-operation
Bank for banking facilities granted to Miaotou Economic Development Company
Limited ("MEDCL"), a fellow investor in KCT, secured over its equity interests
in KCT. MEDCL was unable to repay the outstanding loan.
25 CONTINGENT LIABILITIES (continued)
On 27 September 2001, the Guangzhou Law Court delivered an order and notice that
the guarantees above were invalid and MEDCL's equity interest in KCT was frozen.
Based on legal advice, the equity interests had no material impact on the
operations of KCT and the directors consider that no provision is required.
KCT maintains that the guarantee given was invalid on the following grounds:
(1) such guarantee did not have approval from the board of directors of KCT;
(2) in accordance with the law of the People's Republic of China, the board
of directors and the management of KCT cannot give KCT's properties for
guarantee to its shareholder; and
(3) the controlling party of HEDCL has not held a valid business licence
since 1998 and ceased operations in 1999. In accordance with the banking
regulations of the People's Republic of China, the bank cannot lend money to
enterprises which do not have a valid business licence.
The legal proceedings are still in progress. Based on legal advice, the
directors are of the opinion that, the loan agreement was void because it was
illegal and accordingly, the guarantee contract was also invalid.
Furthermore, Keen Lloyd Holdings Limited, the Company's parent company, has
indemnified the Group against any loss KCT will suffer should the guarantee be
enforceable.
Accordingly, the directors are of the opinion that no provision should be made
in the financial statements for any possible claim from the bank in respect of
the litigation.
26 ULTIMATE CONTROLLING PARTY
The directors consider that Chin Dynasty Foundation Limited ("CDFL"), a company
incorporated in the British Virgin Islands is the ultimate holding company.
CDFL is controlled by the Chin Dynasty Fund.
The Chin Dynasty Fund is a discretionary trust where Mr Qin Shun Chao is the
settlor. Members of Mr Qin's family are the potential beneficiaries of the
trust.
No group financial statements for CDFL are published.
The company's immediate parent company is Keen Lloyd Holdings Limited, a company
incorporated in the British Virgin Islands.
27 EXCHANGE RATE
The US dollar to sterling exchange rate at 31 December 2006 was US$1.9585/#
(2005: US$1.7168/#).
The announcement set out above does not constitute a full financial statement of
the Company's affairs for the year ended 31 December 2006. The Company's
auditors have reported on the full accounts for the said year and have
accompanied them with an unqualified report. The accounts have yet to be
delivered to the Registrar of Companies. The annual report and accounts will be
available from the Company's nominated adviser, Nabarro Wells & Co. Limited,
Saddlers House, Cheapside, London EC2V 6HS.
Enquiries:
Angela Leung - Arko Holdings plc
Tel: 00 852 2219 9999. Email: angelal@arkoholdings.com
Robert Lo / Marc Cramsie - Nabarro Wells & Co. Limited
Tel: 020 7710 7400. Email: robertlo@nabarro-wells.co.uk /
marccramsie@nabarro-wells.co.uk
This information is provided by RNS
The company news service from the London Stock Exchange
END
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Arko (LSE:AKO)
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