Financials
Half Year Financial Statements And Dividend Announcement for the Financial Period Ended 30 June 2011
Financials Archive
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Consolidated Statement Of Comprehensive Income
Review of Performance
At the Extraordinary General Meeting held on 29 June 2011, the Shareholders of the Company approved the disposal of the Company's entire legal and beneficial interests in Wuxi Dingqiu Silk Co., Ltd. (which includes the subsidiaries of Wuxi Dingqiu) ("Wuxi Dingqiu") for an aggregate cash consideration of S$2,000,000 (approximately RMB10,420,000). For more information on the Proposed Disposal of Wuxi Dingqiu, please refer to the Company's Circular dated 7 June 2011.
In compliance with FRS105 on Non-current Assets Held-for-sale and Discontinued Operations, the assets and liabilities related to Wuxi Dingqiu have been presented as the Company's Disposal Group under "disposal group classified as held-for-sale" ("Disposal Group") on the statement of financial position and the results from the Disposal Group are presented separately on the statement of comprehensive income as "Discontinued operations". The comparative figures in the consolidated statement of comprehensive income for the corresponding financial period ended 30 June 2010 relating to the discontinued operations have been re-presented.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(For the purpose of this review, HY2011 refers to the results of the Group during the six months financial period ended 30 June 2011 and HY 2010 refers to the comparative six months financial period ended 30 June 2010.)
Continuing operations
The Group does not have business or operations other than the Disposal Group. Loss for the financial period from continuing operations arose from administrative expenses incurred by the Group, which had increased by RMB1,238,000 from RMB1,066,000 in HY2010 to RMB2,304,000 in HY2011. These were mainly due to legal and professional fees incurred on the various Corporate Exercises undertaken by the Company during HY2011.
Discontinued operations
Revenue from the Disposal Group decreased by RMB9,149,000 from RMB45,039,000 in HY2010 to RMB35,890,000 in HY2011. The decrease in revenue was due mainly to the decrease in the overall demand of textile products in the industry. The Disposal Group recorded a higher loss of RMB5,339,000 in HY2011, an increase of RMB3,129,000 from RMB2,210,000 in HY2010 contributed by increases in salaries cost, payment of newly introduced environmental tax duty in China and impairment for trade receivables no longer collectible. The performance of the Disposal Group was within the Company's anticipation of the challenges faced by the Disposal Group which formed the basis of the Proposed Disposal.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Current Assets
The Group's current assets including those of Disposal Group amounted to RMB71,151,000 as at 30 June 2011. This was an increase of RMB11,047,000 from RMB60,104,000 as at 31 December 2010 due mainly to classification of the Disposal Group's non-current assets which comprised property, plant and equipment and long-term land use rights as current assets and increase in bank and cash balances; partially offset by decrease in inventories with tighter inventory management, decrease in trade and other receivables as a result of receipts from receivables and impairment allowance for receivables no longer collectible and repayment from transferrable notes receivables.
Current Liabilities
The Group's current liabilities including those of Disposal Group amounted to RMB63,684,000 as at 30 June 2011. This was a decrease of RMB1,187,000 from RMB64,872,000 as at 31 December 2010 due mainly to repayment to trade payables and transferrable notes payables; partially offset by additional bank loans, advance deposit received from the sale of the Disposal Group and accruals for higher legal and professional fees as a result of the Corporate Exercises undertaken by the Company in HY2011.
The bank loans of the Disposal Group were secured by the following:
- Pledge of property of Wuxi Dingqiu Silk Co., Ltd, a subsidiary;
- Pledge of properties and land use rights of Jiangsu Hunting Garment Co., Ltd, a related party;
- Pledge of property and land use rights of Jiangsu Xindingqiu Silk Spinning Science & Technology Co., Ltd ("Jiangsu Xindingqiu"), a related party; and
- Corporate guarantee by Jiangsu Xindingqiu.
These loans are repayable within the next six months.
Shareholders' Equity
Shareholders' equity of the Group was RMB7,467,000 as at 30 June 2011. This was a decrease of RMB5,789,000 from RMB13,256,000 as at 31 December 2010 due mainly to loss attributable to shareholders during HY2011 partially offset by proceeds from the issuance of the Subscription Shares.
CONSOLIDATED STATEMENT OF CASH FLOWS
The Group had cash and cash equivalents of RMB15,557,000 as at 30 June 2011, an increase of RMB11,295,000 from RMB4,254,000 as at 31 December 2010 and after taking into consideration the effect of exchange rate changes on opening cash and cash equivalents of RMB8,000. The increase was due to net cash generated from operating activities of RMB4,889,000, net cash from financing activities of RMB6,428,000, partially offset by cash used in investing activities of RMB22,000.
Net cash generated from operating activities was due mainly to net cash generated from operation, as a result of receipts from trade and other receivables and tighter control over purchases of inventory and partially offset by payments to trade and other payables.
Net cash generated from financing activities was contributed by proceeds from bank loans, proceeds from issuance of Subscription Shares net of share issuance expenses and release of term deposit previously pledged to bank for banking facilities partially offset by interest paid on bank loans.
Net cash used in investing activities arose from purchases of property, plant and equipment.
Commentary
The following are the ongoing Corporate Exercises undertaken by the Company:
(i) Proposed Disposal of the Company's entire legal and beneficial interests in Wuxi Dingqiu Silk Co., Ltd. and Proposed Capital Reduction Exercise to reduce the Company's issued and fully paid-up share capital and (Please refer to the Company's Circular dated 7 June 2011).
- At the Extraordinary General Meeting held on 29 June 2011, the Shareholders of the Company approved the disposal of the Company's entire legal and beneficial interests in Wuxi Dingqiu Silk Co., Ltd. ("Wuxi Dingqiu"). The Company entered into a conditional sale and purchase agreement on 25 May 2011 (as supplemented by the Supplemental Agreement) (the "Agreement") with Hunting (Hong Kong) Company Limited (the "Purchaser"), a company incorporated in the Hong Kong SAR to dispose of the Company's entire legal and beneficial interests of Wuxi Dingqiu (which includes the subsidiaries of Wuxi Dingqiu) for an aggregate cash consideration of S$2,000,000 (approximately RMB10,420,000).
The Consideration was arrived at after arms length negotiations and on a willing-buyer willing-seller basis, taking into consideration, inter alia, the business valuation undertaken by the Valuer. The net Consideration represents an excess of approximately S$1,800,000 over the book value of the Company's investments in the Textile Group as at 31 December 2010, which is nil or an approximately S$558,000 (approximately RMB2,905,000) deficit against the audited consolidated net tangible assets of Wuxi Dingqiu as at 31 December 2010. The Consideration shall be paid in two (2) tranches in the following manners (A) S$500,000 shall be paid as a deposit to the Company's bank account in Singapore within ten (10) days from the time the Agreement was executed (the amount had been received by the Company as at 30 June 2011); and (B) the balance of the Consideration shall be paid to the Company's bank account in Singapore within five (5) days from the date the relevant authorities in the PRC grant approval for the transfer of the interest in Wuxi Dingqiu from the Company to the Purchaser.
The disposal is scheduled for completion in September/October 2011.
- At the same Extraordinary General Meeting, the Shareholders of the Company approved a capital reduction exercise ("Capital Reduction") pursuant to Section 78A read together with Section 78C of the Companies Act (Cap. 50), through the cancellation of the issued share capital of the Company which has been lost or is unrepresented by available assets to the extent of S$14,262,135 (approximately RMB70,691,144) and an amount equal to S$14,262,135 (approximately RMB70,691,144), being the credit arising from the cancellation of the issued share capital of the Company, shall be applied to write off in its entirety the accumulated losses of the Company of S$14,262,135 (approximately RMB70,691,144) as at 31 December 2010 ("Accumulated Losses").
Provided if there is no application made by any creditor of the Company for the cancellation of the Capital Reduction Exercise within the timeframe prescribed by the Companies Act or if such application was made, the dismissal thereof by the judicial authorities; and upon the completion of the lodgment of the relevant documents and approval from relevant regulatory authorities relating to the Capital Reduction with ACRA, the Capital Reduction will be effected likely in August 2011.
After the Proposed Capital Reduction Exercise, the Company will have an issued and paid-up share capital of $396,882. There will be no change in the total number of issued shares in the Company held by Shareholders immediately after the Capital Reduction Exercise, nor will the Capital Reduction Exercise involve the payment to any Shareholders of any paid-up share capital of the Company.
(ii) Proposed Acquisition of the entire issued and paid-up capital of Chaswood Resources Sdn Bhd and Proposed Consolidation of every ten (10) ordinary shares into one (1) ordinary share, fractional entitlements to be disregarded (Please refer to the Announcements dated 25 March 2011, 22 July 2011, 25 July 2011 and 8 August 2011).
On 25 March 2011, the Company entered into a non-binding memorandum of understanding ("MOU") with Posh Corridor Sdn Bhd and Andrew Roach Reddy (collectively, the "Vendors") in respect of the proposed acquisition by the Company of the entire issued and paid-up share capital (the "Sale Shares") of Chaswood Resources Sdn Bhd ("Chaswood") from the Vendors (the "Proposed Acquisition"). The Proposed Acquisition is subject to the Company's satisfactory due diligence and finalization of the terms and conditions relating to the Sale Shares.
On 25 July 2011, the Company announced that it had entered into a sale and purchase agreement on the same date (the "SPA") the Vendors in respect of the Proposed Acquisition for a purchase consideration of S$60,785,347(equivalent to approximately RM150,000,000 based on the exchange rate of S$1:RM2.4677 as at 20 July 2011, published in Bloomberg L.P.) which shall be satisfied in full by the allotment and issue of 2,026,178,233 new ordinary shares in the capital of the Company (prior to the Proposed Share Consolidation (as defined below)) (the "Consideration Shares") to the Vendors at an issue price of S$0.03 per Consideration Share.
In connection with the Proposed Acquisition, the Company proposes to undertake a consolidation (the "Proposed Share Consolidation") of every ten (10) ordinary shares in the issued and paid up share capital of the Company (the "Shares"), held by shareholders of the Company (the "Shareholders") at a time and date to be determined by the Directors of the Company for the purposes of the Proposed Share Consolidation, into one (1) Share (each a "Consolidated Share"), fractional entitlements to be disregarded.
As a result, the Proposed Acquisition, if undertaken and completed, is expected to result in a very substantial acquisition or reverse take-over of the Company pursuant to Rule 1015 of the SGX-ST's Listing Manual Section B: Rules of Catalist ("Catalist Rules").
In connection with the Proposed Acquisition, the Vendors, upon completion of the allotment and issuance of the Consideration Shares, will be required to make a mandatory general offer for all the remaining issued shares in the Company not already owned, controlled or agreed to be acquired by them pursuant to Rule 14 of the Singapore Code on Take-Overs and Mergers (the "Code"). As such, the Vendors, on 8 August 2011, sought a waiver of their obligation to make a mandatory general offer under Rule 14 of the Code from the Securities Industry Council ("SIC").
The completion of the SPA is conditional upon the fulfillment of the conditions precedent set out in Paragraph 4.2 of the Company's announcement dated 25 July 2011 (including, inter-alia, the SIC waiver mentioned above). The Proposed Acquisition will be completed within two (2) weeks from the fulfillment or waiver of all the conditions precedent.
The Proposed Acquisition is ongoing.
(iii) Receipt of Approval for the Continued trading of the Company's shares after the Company becomes a Cash Company (Please refer to the Company's Announcement dated 15 July 2011).
Following the completion of the Proposed Disposal, the assets of the Company will consist wholly of cash and accordingly, the Company will be rendered as a "cash company" within the meaning of Rule 1017 of the Catalist Rules. Pursuant to Rule 1017(1) of the Catalist Rules, upon completion of the Proposed Disposal, the Company must place 90% of its cash and short-dated securities (including existing cash balance and the Consideration) in an account opened with and operated by an escrow agent which is part of any financial institution licensed and approved by the Monetary Authority of Singapore (the "Authority"). The amount that is placed in the escrow account cannot be drawn down until the completion of the acquisition of a business which is able to satisfy the SGX-ST's requirements for a new listing, except for payment of expenses incurred in a reverse takeover approved by shareholders and pro-rata distributions to shareholders.
On 14 July 2011, the Singapore Exchange Securities Trading Limited (the "SGX-ST") advised that it has no objection to the continued trading of the shares ("Shares") of the Company on the Catalist Board of the SGX-ST on the basis that the Company, its Directors and controlling shareholders have undertaken to satisfy all the conditions stated in Rule 1017(1) of the Listing Manual Section B: Rules of Catalist of the SGX-ST (the "Catalist Rules") and subject to the Continuing Sponsor of the Company monitoring the progress of the opening of the escrow account (the "Trading Confirmation").
However, SGX-ST reserves the right to (A) suspend trading of the Shares should the Company fail to comply with Rule 1017(1) of the Catalist Rules; and (B) amend/vary the Trading Confirmation as it deems fit, and the Trading Confirmation is subject to changes in the SGX-ST's policies.
The Company has provided an undertaking to SGX-ST that it shall upon the completion of the Proposed Disposal in compliance with Rule 1017(1) of the Catalist Rules and to provide monthly valuation of its assets and utilization of cash, and quarterly updates of milestones in obtaining a new business, to the market via SGXNET.
Balance Sheet
