SPREADPROSPECTS<00572> - Results Announcement
Spread Prospects Holdings Limited announced on 21/09/2005:
(stock code: 00572 )
Year end date: 31/12/2005
Currency: RMB
Auditors' Report: N/A
Interim report reviewed by: Both Audit Committee and Auditors
(Unaudited )
(Unaudited ) Last
Current Corresponding
Period Period
from 01/01/2005 from 01/01/2004
to 30/06/2005 to 30/06/2004
Note ('000 ) ('000 )
Turnover : 223,710 190,617
Profit/(Loss) from Operations : 59,195 54,463
Finance cost : (2,440) (1,325)
Share of Profit/(Loss) of
Associates : N/A N/A
Share of Profit/(Loss) of
Jointly Controlled Entities : N/A N/A
Profit/(Loss) after Tax & MI : 49,392 42,063
% Change over Last Period : +17.4 %
EPS/(LPS)-Basic (in dollars) : 0.117 0.109
-Diluted (in dollars) : 0.107 N/A
Extraordinary (ETD) Gain/(Loss) : N/A N/A
Profit/(Loss) after ETD Items : 49,392 42,063
Interim Dividend : NIL NIL
per Share
(Specify if with other : N/A N/A
options)
B/C Dates for
Interim Dividend : N/A
Payable Date : N/A
B/C Dates for (-)
General Meeting : N/A
Other Distribution for : N/A
Current Period
B/C Dates for Other
Distribution : N/A
Remarks:
1. BASIS OF PREPARATION
The Company is incorporated as an exempted company with limited liability
in the Cayman Islands on 21 October 2002 under the Companies Law of the
Cayman Islands. Its shares are listed on the Main Board of The Stock
Exchange of Hong Kong Limited (the "Stock Exchange"). The Company's
ultimate holding company is Fu Teng Global Limited ("Fu Teng"), a company
incorporated in the British Virgin Islands.
The condensed financial statements have been prepared in accordance with
the applicable disclosure requirements of Appendix 16 to the Rules
Governing the Listing of Securities on the Stock Exchange and with Hong
Kong Accounting Standard 34 "Interim Financial Reporting" issued by the
Hong Kong Institute of Certified Public Accountants (the "HKICPA").
2. PRINCIPAL ACCOUNTING POLICIES
The condensed financial statements have been prepared under the historical
cost convention except for certain financial instruments, which are
measured at fair value, as appropriate.
The accounting policies used in the condensed financial statements are
consistent with those followed in the preparation of the annual financial
statements of the Company and its subsidiaries (collectively the "Group")
for the year ended 31 December 2004, except as described below.
In the current period, the Group has applied, for the first time, a number
of new Hong Kong Financial Reporting Standards ("HKFRS(s)"), Hong Kong
Accounting Standards ("HKAS(s)") and Interpretations (hereinafter
collectively referred to as "new HKFRSs") issued by the HKICPA that are
effective for accounting periods beginning on or after 1 January 2005.
The adoption of the new HKFRSs has resulted in changes to the Group's
accounting policies in the following areas that have an effect on how the
results for the current or prior accounting periods are prepared and
presented.
Share-based payments
In the current period, the Group has adopted HKFRS 2 "Share-based Payment"
which requires an expense to be recognised where the Group buys goods or
obtains services in exchange for shares or rights over shares ("equity-
settled transactions"). The principal impact of HKFRS 2 on the Group is
in relation to the expensing of the fair value of the directors' and
employees' share options of the Company determined at the date of grant of
the share options over the vesting period. Prior to the adoption of HKFRS
2, the Group did not recognise the financial effect of these share options
until they were exercised. As the share options of the Group were granted
after 7 November 2002 and had vested before 1 January 2005, the Group has
not applied HKFRS 2 in accordance with the relevant transitional
provisions. Accordingly, no comparative figures have been restated.
Financial instruments
In the current period, the Group has applied HKAS 32 "Financial
Instruments: Disclosure and Presentation" and HKAS 39 "Financial
Instruments: Recognition and Measurement". HKAS 32 requires retrospective
application. HKAS 39, which is effective for annual periods beginning on
or after 1 January 2005, generally does not permit to recognise,
derecognise or measure financial assets and liabilities on a retrospective
basis. The principal effects resulting from the implementation of HKAS 32
and HKAS 39 are summarised below:
Convertible notes
HKAS 32 requires an issuer of a compound financial instrument (that
contains both financial liability and equity components) to separate the
compound financial instrument into its liability and equity components on
its initial recognition and to account for these components separately.
In subsequent periods, the liability component is carried at amortised
cost using the effective interest method. The principal impact of HKAS 32
on the Group is in relation to the convertible notes issued by the Company
on 13 December 2004. Previously, certain portion of the convertible notes
was considered to constitute equity component and therefore recognised as
a capital reserve. Deferred tax liabilities thereon were also recognised.
According to HKAS 32, the conversion option should be classified as
equity component only if the option can be converted by exchanging a fixed
amount of cash or another financial asset for a fixed number of the
entity's own equity instruments. During the current period, the Group re
-visited the terms of the convertible notes and determined that the
convertible notes does not contain any equity components because the
conversion price for the convertible notes is subject to change and the
convertible notes cannot be converted into a fixed number of the Company's
shares. Instead the convertible notes contain an embedded conversion
option which is not closely related to the host contract and is required
to be separately accounted for under HKAS 39. Because HKAS 32 requires
retrospective application, comparative figures have been restated to
derecognise the capital reserve and the corresponding deferred tax
liabilities (see note 3 for the financial impact).
Derivatives
From 1 January 2005 onwards, all derivatives that are within the scope of
HKAS 39 are required to be carried at fair value at each balance sheet
date regardless of whether they are deemed as held for trading or
designated as effective hedging instruments. Under HKAS 39, derivatives
(including embedded derivatives separately accounted for from the host
contracts) are deemed as held-for-trading financial assets or financial
liabilities, unless they qualify and are designated as effective hedging
instruments. The Group has applied the relevant transitional provisions
in HKAS 39. The conversion option embedded in the convertible notes is
separately accounted for and measured at fair value as at 1 January 2005,
and the Group recognised the fair value amounting to RMB1,016,000 (see
note 3 for the financial impact). During the current period, there is no
material change in the fair value of the derivative financial instrument.
Owner-occupied leasehold interest in land
In previous periods, owner-occupied leasehold land and buildings were
included in property, plant and equipment and measured using the cost
model. In the current period, the Group has applied HKAS 17 "Leases".
Under HKAS 17, the land and buildings elements of a lease of land and
buildings are considered separately for the purposes of lease
classification, unless the lease payments cannot be allocated reliably
between the land and buildings elements, in which case, the entire lease
is generally treated as a finance lease. To the extent that the
allocation of the lease payments between the land and buildings elements
can be made reliably, the leasehold interests in land are reclassified to
prepaid lease payments under operating leases, which are carried at cost
and amortised over the lease term on a straight line basis. This change
in accounting policy has been applied retrospectively (see note 3 for the
financial impact).
3. SUMMARY OF THE EFFECTS OF THE CHANGES IN ACCOUNTING POLICIES
The cumulative effects of the application of the new HKFRSs as at 31
December 2004 and 1 January 2005 are summarised below:
At Adjust- Reclassi- At At
31.12. ments fication 31.12 Adjustments 1.1.2005
2004 .2004
RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000
(Origin-
ally (Note) (Restated) (Restated)
stated)
Non-current assets
Property, plant and equipment
128,010 (2,110) - 125,900 - 125,900
Prepaid lease payments
- 2,063 - 2,063 - 2,063
Current assets
Other receivables, deposits and
prepayments
10,856 - (2,067) 8,789 - 8,789
Prepaid lease payments
- 47 2,067 2,114 - 2,114
Non-current liabilities
Convertible notes
(30,784) (1,016) - (31,800) 1,016 (30,784)
Derivative financial instruments
- - - - (1,016) (1,016)
Deferred tax liability
(178) 178 - - - -
-----------------------------------------------------------------------
Total effects on assets and liabilities
107,904 (838) - 107,066 - 107,066
=======================================================================
Capital and reserves
Capital reserve
861 (861) - - - -
Accumulated profits
185,947 23 - 185,970 - 185,970
------------------------------------------------------------------------
Total effects on equity
186,808 (838) - 185,970 - 185,970
=========================================================================
Note: It represents the reclassification of the prepaid lease payments
under other operating leases which were previously included in the other
receivables, deposits and prepayments.
4. EARNINGS PER SHARE
The calculation of the basic and diluted earnings per share is based on
the following data:
Six months ended 30 June
2005 2004
RMB'000 RMB'000
Earnings:
Net profit for the period for the purposes of basic
earnings per share 49,392 42,063
======
Effect of dilutive potential ordinary shares:
Interest on convertible notes 892
-----
Net profit for the period for the purposes of
diluted earnings per share 50,284
======
Six months ended 30 June
2005 2004
Number of shares:
Weighted average number of ordinary shares for
the purposes of basic earnings per share
422,800,000 386,536,264
===========
Effect of dilutive potential ordinary shares:
Convertible notes 45,777,427
------------
Weighted average number of ordinary shares for
the purposes of diluted earnings per share
468,577,427
===========
The computation of diluted earnings per share does not assume the
exercise of the Company's outstanding share options as the exercise price
of these options is higher than the average market price for the Company's
shares for both periods.
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