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ZBO - Zibao Metals Recycling Holdings News Story

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Last Trade - 20/02/20

Sector
Basic Materials
Size
Micro Cap
Market Cap £488k
Enterprise Value £-251k
Revenue £33.9m
Position in Universe 1820th / 1838

Zibao Metals Rec Hol - Final Results - Part 3

Mon 18th September, 2017 3:14pm
- Part 3: For the preceding part double click  ID:nRSR0692Rb 

a company controlled by him. 
 
8.   Expenses - analysis by nature 
 
                                                                                             2017       2016       
                                                                                             HKD'000    HKD'000    
                                                                                                                   
 Auditors' remuneration for audit services (company only HKD 274,679 (2016: HKD 230,575))    485        450        
 Depreciation on property, plant and equipment                                               857        966        
 Rentals of premises under operating leases                                                  217        278        
 Employee benefits (Note 6)                                                                  2,457      2,679      
 Other expenses                                                                              3,197      3,874      
                                                                                             ───────    ───────    
 Total administrative expenses                                                               7,213      8,247      
                                                                                             _________  _________  
                                                                                                                   
 
 
Notes to the Consolidated Financial Statements (continued) 
 
9.    Taxation 
 
 The charge for the year can be reconciled to the profit before taxation per the consolidated statement of comprehensive income as follows:    
                                                                                                                                                 2017       2016       
                                                                                                                                                 HKD'000    HKD'000    
                                                                                                                                                                       
 Profit before taxation                                                                                                                          1,109      586        
                                                                                                                                                 _________  _________  
                                                                                                                                                                       
 Current income tax expense- Hong Kong                                                                                                           100        -          
 Deferred tax credit                                                                                                                             (20)       (23)       
                                                                                                                                                 ───────    ───────    
 Total income tax expense / (credit)                                                                                                             80         (23)       
                                                                                                                                                 _________  _________  
                                                                                                                                                                         
 
 
The Company is incorporated in the UK but is treated as a Hong Kong resident for tax purposes. 
 
Macau and Hong Kong tax has been provided at a rate of 12% and 16.5% respectively. 
 
There was no unprovided deferred taxation in respect of the year (2016: HKD Nil). 
 
 The reconciliation of the current tax expense and the product of accounting profit multiplied by the applicable tax rate is as follows:  
                                                                                                                                              2017       2016       
                                                                                                                                              HKD'000    HKD'000    
 Accounting profit/(loss)                                                                                                                     1,109      586        
                                                                                                                                              ───────    ───────    
 Tax at the domestic tax rate of 16.5% (2016: 16.5%)                                                                                          183        97         
                                                                                                                                                                    
 Other adjustments                                                                                                                            (83)       (97)       
                                                                                                                                              ───────    ───────    
 Income tax expense                                                                                                                           100        -          
                                                                                                                                              _________  _________  
 
 
The tax payable of HKD 9,670,000 (2016: 9,116,000) disclosed in the Consolidated Statement of Financial Position includes a
liability for the current income tax expense and a provision that has been brought forward as at 1 April 2012 for tax
payable in Macau. 
 
Notes to the Consolidated Financial Statements (continued) 
 
10.  Profit per share 
 
Profit per share data is based on the Group profit or loss for the year and the weighted average number of shares in
issue. 
 
                                                                                                                   2017     2016       
                                                                                                                   HKD'000  HKD'000    
                                                                                                                                       
 Profit for the year from:                                                                                                             
 Continuing operations used in the calculation of basic and diluted earnings per share from continuing operations  1,029    609        
                                                                                                                                       
                                                                                                                   ─────    ─────      
 Profit for the year attributable to owners of Company                                                             1,029    609        
                                                                                                                   ═════    ═════      
                                                                                                                                       
 Weighted average number of ordinary shares for the purposes of basic earnings per share( 000's)                   122,010  122,010    
 diluted earnings per share( 000's)                                                                                125,453  125,453    
                                                                                                                   ═════    ═════      
 
 
                             2017   2016     
                             HKD    HKD      
                                             
 Basic earnings per share    0.008  0.005    
 Diluted earnings per share  0.008  0.005    
                             ═════  ═════    
 
 
11.  Dividends 
 
                            
                   2017     2016     
                   HKD'000  HKD'000  
   Dividends paid                    
   Interim         -        -        
                   ─────         ─────               ─────                   ─────                   ─────               ─────                ─────    
 As at 31 March 2017              44,741              9,495                   488                     566                 1,824                57,114   
                                  ─────               ─────                   ─────                   ─────               ─────                ─────    
 Accumulated depreciation                                                                                                                               
 As at 31 March 2015              5,466               5,768                   452                     552                 1,684                13,922   
 Acquisition of subsidiary        -                   -                       -                       -                   -                    -        
 Charge for the year              1,097               513                     60                      4                   136                  1,810    
 Written back                     -                   -                       (16)                    (18)                -                    (34)     
                                  ─────               ─────                   ─────                   ─────               ─────                ─────    
 As at 31 March 2016              6,563               6,281                   496                     538                 1,820                15,698   
                                                                                                                                                        
 Acquisition of subsidiary                                                                                                                              
 Charge for the year              1,053               450                     1                       5                   24                   1,533    
 Exchange translation difference  (263)               (246)                   (10)                    -                   (73)                 (592)    
                                  ─────               ─────                   ─────                   ─────               ─────                ─────    
 As at 31 March 2017              7,353               6,485                   487                     543                 1,771                16,639   
                                  ─────               ─────                   ─────                   ─────               ─────                ─────    
 Carrying amount                                                                                                                                        
 As at 31 March 2017              37,388              3,010                   1                       23                  53                   40,475   
 As at 31 March 2016              40,042              3,605                   2                       1                   80                   43,730   
                                  ═════               ═════                   ═════                   ═════               ═════                ═════    
                                                                                                                                                        
 
 
16.     Inventories 
 
 Group               2017       2016       
                     HKD'000    HKD'000    
                                           
 Stock in Trade      35,153     26,052     
                     ───────    ───────    
                     35,153     26,052     
                     _________  _________  
 
 
The amount of inventories recognised as an expense during the year is HKD 810,206,000 (2016: HKD 496,858,000). 
 
Notes to the Consolidated Financial Statements (continued) 
 
17.     Trade and other receivables 
 
                                  Group      Company    
                                  2017       2016       2017       2016       
                                  HKD'000    HKD'000    HKD'000    HKD'000    
                                                                              
 Trade receivables                1,685      2,663      -          -          
                                  _________  _________  _________  _________  
 Other receivables:                                                           
 Deposits                         2,301      2,121      -          -          
 Prepayments                      3,333      6,435      119        156        
 Other receivables (non-trade)    27         28         -          -          
 Amounts due from subsidiaries    -          -          45,084     47,104     
                                  ───────    ───────    ───────    ───────    
                                  5,661      8,584      45,203     47,260     
                                  _________  _________  _________  _________  
 
 
Trade receivables represent amounts receivable on the sale of scrap materials and are included at amortised cost. The
average credit period taken is 30 days, there are no provisions for doubtful debts and 2 customers account for 100% of the
total trade receivables. There are no debts past due at the year end based on credit term of 30 days. 
 
18.      Cash and cash equivalents 
 
 Group                                                                               2017       2016       
                                                                                     HKD'000    HKD'000    
                                                                                                           
 Cash and bank balances                                                              1,288      5,289      
                                                                                     ───────    ───────    
 Cash and bank balances as presented in balance sheets                               1,288      5,289      
                                                                                     ───────    ───────    
 Cash and cash equivalents as presented in consolidated statement of cash flows      1,288      5,289      
                                                                                     _________  _________  
                                                                                                           
 
 
19.     Trade and other payables 
 
                                 Group      Company    
                                 2017       2016       2017       2016       
                                 HKD'000    HKD'000    HKD'000    HKD'000    
                                                                             
 Trade payables                  6,106      9,966      -          -          
                                 _________  _________  _________  _________  
 Other payables:                                                             
 -     Accrued expenses          1,256      1,058      240        378        
 -     Trade deposit received    3,818      2,566      -          -          
 -                               ───────    ───────    ───────    ───────    
                                 5,074      3,624      240        378        
                                 _________  _________  _________  _________  
 
 
Trade payables represent amounts due for the purchase of scrap materials and administrative expenses and are included at
amortised cost. The average credit period taken is 10 days. The directors consider that the carrying amount of trade
payables approximates to their fair value. 
 
Notes to the Consolidated Financial Statements (continued) 
 
20.     Deferred tax liability 
 
                                          2017       2016       
                                          HKD        HKD        
 At 1 April                               177        200        
 Arising on acquisition of Zheng Bao      -          -          
 Deferred tax release                     (20)       (23)       
                                          ───────    ───────    
 At 31 March                              157        177        
                                          _________  _________  
                                                                
                                                                    
 
 
The deferred tax liability has arisen in respect of taxable timing differences in relation to the customer relationships
intangible asset as mentioned in note 14. 
 
21.     Share capital 
 
 Group                                                     2017        2016        
                                                           HKD         HKD         
                                  Class     Nominal Value                          
                                                                                   
 Allotted, issued and fully paid                                                   
 122,010,000                      Ordinary  £0.01          15,549,000  15,549,000  
                                                           _________   _________   
 
 
The ordinary shares have attached to them full voting, dividend and capital distribution (including on winding up) rights;
they do not confer any rights of redemption. 
 
22.     Other reserves 
 
Group 
 
                                   2017       2016       
                                   HKD'000    HKD'000    
                                                         
 Group reorganisation reserve      527        527        
                                   _________  _________  
 
 
The Group reorganisation reserve was a result of the group reorganisation of the old Masterpiece Enterprises Group.
Masterpiece Enterprises Limited was formed before the acquisition by Zibao Metals Recycling Holdings Plc to hold the
trading subsidiaries. The difference between the nominal value of the shares acquired of the trading subsidiaries and the
value of the shares issued by Masterpiece Enterprises in exchange is taken as a reserve movement. 
 
Notes to the Consolidated Financial Statements (continued) 
 
22.     Other reserves (continued) 
 
Company 
 
                            2017       2016       
                            HKD'000    HKD'000    
                                                  
 Merger relief reserve      19,516     19,516     
                            _________  _________  
 
 
The merger relief reserve arises from the 100% acquisition of the Masterpiece Group on 10 March 2014 whereby the excess of
the fair value of the issued ordinary share capital issued over the nominal value of these shares is transferred to this
reserve in accordance with section 612 of the Companies Act 2006. 
 
23.     Related-party transactions 
 
During the year, the Group entered into the following trading transactions with related parties that are not members of the
Group: 
 
                                   Sales of goods  Purchase of goods  
                                   2017            2016               2017     2016     
                                   HKD'000         HKD'000            HKD'000  HKD'000  
                                                                                        
 Wang Kei Yip Development Limited  31,541          32,658             -        -        
 
 
The following balances were outstanding at the end of the year: 
 
                                   Amounts owed by related parties  Amounts owed to related parties  
                                   2017                             2016                             2017     2016     
                                   HKD'000                          HKD'000                          HKD'000  HKD'000  
                                                                                                                       
 Wang Kei Yip Development Limited  -                                263                              237      1,866    
                                                                                                                       
 
 
Ben Lee is the brother in law of the director, and is a director of Wang Kei Yip Development Limited. Wang Kei Yip
Development Limited is therefore a related party. The transaction was at arms length. 
 
The parent Company only statement of financial position includes amounts of HKD    45,084,000 (2016: HKD 47,104,000) due
from Masterpiece Enterprises Limited. All entities are wholly owned subsidiaries and all balance are repayable on demand. 
 
Notes to the Consolidated Financial Statements (continued) 
 
24.     Operating lease commitments 
 
The Group has commitments for leases with independent third parties in respect of rented premises and staff quarters. The
leases have varying terms and renewal rights. 
 
The future aggregate minimum lease payments under non-cancellable operating leases contracted for at the balance sheet date
but not recognised as liabilities are as follows: 
 
                                2017       2016       
                                HKD'000    HKD'000    
                                                      
 Within one year                185        180        
 Between two to five years      -          -          
                                ───────    ───────    
                                185        180        
                                _________  _________  
 
 
The lease on the rented premises will expire on 31 January 2018. The current rent payable on the leases ranges from HKD
18,000 to HKD 18,500 (2016: HKD 19,000 to HKD 18,000) per month. 
 
25.     Financial instruments 
 
Financial risk management objectives and policies 
 
The Group's major financial instruments include trade and other receivables, amounts due to/from related companies, bank
balances and cash, trade and other payables, and amounts due to a director. Details of these financial instruments are
disclosed in respective notes. The risks associated with these financial instruments include market risk (foreign exchange
risk), credit risk, interest rate risk, liquidity risk and capital management risk. The Group's overall risk management
programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the
Group's financial performance. The policies for managing these risks are summarised below. 
 
It is the Group's policy not to trade in derivative contracts. 
 
(a) Market risk 
 
Foreign currency risk 
 
Currency risk is the risk that the holding of foreign currencies will affect the Group's position as a result of a change
in foreign currency exchange rates. The Group has no significant foreign currency risk as most of the Group's financial
assets and liabilities are denominated in functional currencies of relevant group entities. Accordingly, no quantitative
market risk disclosures or sensitivity analysis for currency risk have been prepared. 
 
(b) Cash flow and fair value interest rate risk 
 
The Group currently does not have any interest bearing borrowings or financial instruments or any interest rate hedging
policy. The director monitors the Group's exposure on an ongoing basis and will consider hedging interest rate risk should
the need arise. Accordingly, no quantitative market risk disclosures or sensitivity analysis for interest rate risk have
been prepared 
 
Notes to the Consolidated Financial Statements (continued) 
 
25.     Financial instruments (continued) 
 
(c) Liquidity risks (continued) 
 
The Group manages its liquidity risk by maintaining sufficient cash, by monitoring the liquidity requirements in the short
and longer term. 
 
The Group monitors its liquidity risk and maintains a level of cash and cash equivalents deemed adequate by management to
finance the Group's operations and to mitigate the effects of fluctuations in cash flows. Typically, the Group ensures that
it has sufficient cash on demand to meet expected operational expenses including the servicing of financial obligations.   
      Management monitors the Group's liquidity reserve, comprising cash and cash equivalents (Note 18) on the basis of
expected cash flows. 
 
The following tables detail the remaining contractual maturity for non-derivative financial liabilities. The tables have
been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group
can be required to pay. 
 
 2017                        On demand or not later than 1 year  Later than 1 year and not later than 5 years  
                             HKD'000                             HKD'000                                       
                                                                                                               
 Trade and other payables    11,180                              -                                             
 Borrowings                  -                                   -                                             
                             ───────                             ───────                                       
                             11,180                              -                                             
                             _________                           _________                                     
 
 
 2016                        On demand or not later than 1 year  Later than 1 year and not later than 5 years  
                             HKD'000                             HKD'000                                       
                                                                                                               
 Trade and other payables    13,590                              -                                             
 Borrowings                  -                                   -                                             
                             ───────                             ───────                                       
                             13,590                              -                                             
                             _________                           _________                                     
 
 
(d) Credit risk 
 
Credit risk refers to the risk that counterparty will default on its contractual obligations resulting in financial loss to
the Group. The carrying amount of financial assets recorded in the consolidated financial statements, which is net of
impairment losses, represents the Group's maximum exposure to credit risk. The Group has adopted a policy of only dealing
with creditworthy counterparties as a means of mitigating the risk of financial loss from defaults. The Group's exposure
and the credit ratings of its counterparties are continuously monitored. Credit exposure is controlled by counterparty
limits that are reviewed and approved by the management regularly. 
 
Notes to the Consolidated Financial Statements (continued) 
 
25.     Financial instruments (continued) 
 
(d) Credit risk (continued) 
 
The Group has put in place policies to ensure that sales of products are made to customers with an appropriate credit
history and the Group performs periodic credit evaluations of its customers. In this regard, the director of the Group
considers that the Company's credit risk is significantly reduced. 
 
The Group's bank balances and cash are deposited with banks in Hong Kong. The credit risk on liquid funds is limited
because the counterparties are banks with good credit-rating. 
 
(e) Financial instruments by category 
 
The following table sets out the financial instruments as at the statement of balance sheet date: 
 
                                                      2017     2016     
                                                      HKD'000  HKD'000  
 Financial assets:                                                      
 Loans and receivables:                                                 
 Trade receivables                                    1,685    2,663    
 Deposits and other receivables                       2,328    2,150    
                                                                        
 Bank balances and cash                                                 
 - denominated in HKD                                 387      482      
 - denominated in USD                                 719      4,659    
 - denominated in CNY                                 181      147      
 - denominated in JPY                                 1        1        
                                                      ─────    ─────    
                                                      5,301    10,102   
                                                      ═════    ═════    
 Financial liabilities:                                                 
 Financial liabilities measured at amortised cost:                      
 Trade payables                                       6,106    9,966    
 Accrued liabilities and other payables               5,074    3,624    
                                                      ─────    ─────    
                                                      11,180   13,590   
                                                      ═════    ═════    
 
 
(f) Capital management risk 
 
The Group's 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, and to provide an adequate return
to shareholders. 
 
The Group manages its capital structure and makes adjustments to it in the light of changes in economic conditions and the
risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Group may adjust
the amount of dividends paid to shareholders, return capital to shareholders, issue new shares, or sell assets to reduce
debt. 
 
No changes were made in the objectives, policies and processes during the years of 2016 and 2017. 
 
Notes to the Consolidated Financial Statements (continued) 
 
25.     Financial instruments (continued) 
 
(f)    Capital management risk (continued) 
 
The Group monitors capital using a gearing ratio, which is the Group's net debts divided by its 
 
total capital. Net debt is calculated as total liabilities as shown in the statement of financial position less cash and
bank balances. Total capital is calculated as equity, as shown in the statement of financial position, plus net debt. The
Group's gearing ratios are as follows: 
 
                                 2017     2016     
                                 HKD'000  HKD'000  
 Total liabilities               20,850   22,706   
 Less: Cash and bank balances    (1,288)  (5,289)  
                                 ─────    ─────    
 Net debt                        19,562   17,417   
 Total equity                    64,812   65,185   
                                 ─────    ─────    
 Total capital                   84,374   82,602   
                                 ═════    ═════    
 Gearing ratio                   23.2%    21.1%    
                                 ═════    ═════    
 
 
26.     Fair value of financial instruments 
 
Fair value estimates are made at a specific point in time and based on relevant market information and information about
the financial instruments. These estimates are subjective in nature and involve uncertainties and matters of significant
judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect these
estimates. The Group does not currently have any derivative or other financial instruments measured at fair value through
profit and loss and the carrying amounts of financial instruments in the balance sheet approximated their fair values. 
 
27.     Controlling Party Note 
 
The ultimate controlling party is Wenjie Zhou. 
 
Notes to the Consolidated Financial Statements (continued) 
 
28.     Cash generated from operations 
 
                                                                                        2017     2016     
                                                                                        HKD'000  HKD'000  
 Cash flows from operating activities before changes in working capital and provisions                    
                                                                                                                    
 Profit before income tax                                                                        1,109    586       
 Adjustments for:                                                                                                   
 Depreciation on property, plant and equipment                                                   941      966       
 Amortisation                                                                                    101      113       
 Share option payment                                                                            -        73        
 Foreign exchange difference                                                                     -        135       
 (Increase) / decrease in inventories                                                            (9,101)  (8,819)   
 Decrease/(Increase) in trade receivables                                                        978      12,111    
 Decrease / (increase) in prepayments, deposits and other receivables                            3015     15,038    
 Increase in trade payables                                                                      (3,860)  (12,825)  
 Increase in accrued liabilities and other payables                                              1,430    106       
 (Decrease) / increase in amounts due to a director                                              -        (3,004)   
                                                                                                 ─────    ─────     
 Cash used in operations                                                                         (5.387)  4,480     
                                                                                                 ═════    ═════     
 
 
Notes to the Consolidated Financial Statements (continued) 
 
29.     Share options 
 
On 16 June 2014 the Company granted options on 525,000 ordinary shares to certain directors. The options are exercisable at
£0.08 per share after the first anniversary of Admission, provided that the director remains in office until then. 
 
                               Numberof options  Exerciseprice  Weighted averageremainingcontractuallife  
 At 31 March 2015              525,000           £0.08          5 years                                   
 Options issued in the period  -                 -              -                                         
                               ─────             ─────          ─────                                     
 At 31 March 2016              525,000           £0.08          5 years                                   
 Options issued in the period  -                 -              -                                         
                               ─────             ─────          ─────                                     
 At 31 March 2017              525,000           £0.08          5 years                                   
                                                                                                            
 
 
The fair value of the share options issued in the current period is HKD 0.19 and was derived using the Black Scholes model.
The following assumptions were used in the calculation: 
 
 Bid price discount  25%      
 Risk-free rate      1.5%     
 Volatility          60%      
 Expected life       3 years  
 
 
Expected volatility is based on a conservative estimate for a newly listed entity. The expected life used in the model has
been adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions and
behavioural considerations. 
 
A charge of HKD nil (2016: HKD 73,175) has been recognised for the share based payments during the year. 
 
Notes to the Consolidated Financial Statements (continued) 
 
30.     Warrants 
 
On 16 June 2014, the Company granted to ZAI warrants to subscribe for 2,917,500 Ordinary shares at an issue price of £0.08
at any time in the period to 16 June 2019. 
 
                                Numberof warrants  Exerciseprice  Weighted averageremainingcontractuallife  
 At 31 March 2015               2,917,500          £0.08          5 years                                   
 Warrants issued in the period  -                  -              -                                         
                                ─────              ─────          ─────                                     
 At 31 March 2016               2,917,500          £0.08          5 years                                   
 Warrants issued in the period  -                  -              -                                         
                                ─────              ─────          ─────                                     
 At 31 March 2017               2,917,500          £0.08          5 years                                   
                                                                                                            
                                                                                                              
 
 
The fair value of the warrants issued in the current period is HKD 0.19  and was derived using 
 
the Black Scholes model. The following assumptions were used in the calculations: 
 
 Bid price discount  25%      
 Risk-free rate      1.5%     
 Volatility          60%      
 Expected life       3 years  
 
 
Expected volatility is based on a conservative estimate for a newly listed entity. The expected life used in the model has
been adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions and
behavioural considerations. 
 
A charge of HKD nil (2016: HKD nil) has been recognised for the share based payments in the period as the warrants vested
immediately in the prior year upon listing. 
 
31.     Events subsequent to 31 March 2017 
 
There were no subsequent events. 
 
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