ORIENT POWER<00615> - Results Announcement
Orient Power Holdings Limited announced on 26/04/2006:
(stock code: 00615 )
Year end date: 31/12/2005
Currency: HKD
Auditors' Report: Qualified
(Restated)
(Audited )
(Audited ) Last
Current Corresponding
Period Period
from 01/01/2005 from 01/01/2004
to 31/12/2005 to 31/12/2004
Note ('000 ) ('000 )
Turnover : 3,696,164 4,134,726
Profit/(Loss) from Operations : (1,212,569) 59,233
Finance cost : (49,209) (19,893)
Share of Profit/(Loss) of
Associates : N/A 12,836
Share of Profit/(Loss) of
Jointly Controlled Entities : (32,203) (2,581)
Profit/(Loss) after Tax & MI : (1,254,365) 38,057
% Change over Last Period : N/A %
EPS/(LPS)-Basic (in dollars) : (2.46) 0.075
-Diluted (in dollars) : N/A N/A
Extraordinary (ETD) Gain/(Loss) : N/A N/A
Profit/(Loss) after ETD Items : (1,254,365) 38,057
Final Dividend : N/A 1.5 cents
per Share
(Specify if with other : N/A N/A
options)
B/C Dates for
Final 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. SEGMENT INFORMATION
The Group's operating business are structured and managed separately
according to the nature of their operations and the products they provide.
Each of the Group's business segments represents a strategic business
unit that offers products which are subject to risks and returns that are
different from those of the other business segments. The following tables
present revenue, profit(loss) and certain assets, liability and
expenditure information for the Group's business segments for the year
ended 31 December 2005 and 2004.
(a) Business segments
2005
Network
information/ Corporate
Home In-car entertainment and
enter- elec- solutions Others Elimi- Consoli-
tain- tronics nations dated
ment
HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000
Segment revenue:
Sales to external customers
1,718,336 1,974,407 3,421 - - 3,696,164
Intersegment sales
- 25,668 - - (25,668) -
Other revenue
12,642 8,318 2 - - 20,962
-------------------------------------------------------------------------
Total
1,730,978 2,008,393 3,423 - (25,668) 3,717,126
==========================================================================
Segment results
(705,251) (469,514) (2,751) - - (1,177,516)
==========================================================
Interest income 6,211
Unallocated expenses (41,264)
Finance costs (49,209)
Share of losses of
jointly-controlled entities
(17,935) (14,268) (32,203)
----------
Loss before tax (1,293,981)
Tax 35,040
----------
Loss for the year (1,258,941)
===========
2004
Network
information/
entertainment Corporate Elimi-
Home In-car solutions and na-
enter- elec- Others tions
tain- tronics Consolidated
ment
HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000
(Restated)
Segment revenue:
Sales to external customers
2,249,245 1,879,434 6,047 - - 4,134,726
Intersegment sales
7,741 101,765 - - (109,506) -
Other revenue
11,509 11,676 9 - - 23,194
------------------------------------------------------------------------
Total
2,268,495 1,992,875 6,056 - (109,506) 4,157,920
=========================================================================
Segment results
42,574 46,361 (5,856) 956 - 84,035
===========================================================
Interest Income 8,631
Unallocated expenses (33,433)
Finance costs (19,893)
Share of profit and (losses) of
Jointly-controlled entities
1,853 (4,434) (2,581)
Aassociates
12,836 12,836
--------
Profit before tax 49,595
Tax (11,456)
--------
Profit for the year 38,139
========
2005
Network
information/
entertainment Corporate Elimi-
Home In-car solutions and na-
enter- elec- Others tions
tain- tronics Consolidated
ment
HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000
Segment assets
663,093 503,646 10,595 33,417 - 1,201,751
Interests in jointly-controlled entities
- 6,968 - - - 6,968
Unallocated assets 162,605
---------
Total assets 1,371,324
Segment liabilities
274,975 209,647 11,622 10,014 - 506,258
Unallocated liabilities 1,362,860
---------
Total liabilities 1,869,118
=========
Other segment information:
Depreciation and amortization
89,155 52,658 1,296 - - 143,109
Other non-cash expenses
556,553 273,800 (177) 23,239 - 853,415
Capital expenditure
81,132 67,335 5 - - 148,472
Deferred expenditure written off
29,610 20,427 - - - 50,037
Surplus on revaluation
of property, plant and equipment
credited to the asset
revaluation reserve
(6,473) (5,070) - (6,966) - (18,509)
==========================================================================
2004
Network
information/
entertainment Corporate Elimi-
Home In-car solutions and na-
enter- elec- Others tions
tain- tronics Consolidated
ment
HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000
(Restated)
Segment assets
653,878 689,077 9,180 26,775 - 1,378,910
Interests in jointly-controlled entities
71,593 28,513 (2,174) - - 97,932
Unallocated assets 329,991
---------
Total assets 1,806,833
==========
Segment liabilities
260,081 166,771 5,030 4,217 - 436,099
Unallocated liabilities 626,182
--------
Total liabilities 1,062,281
=========
Other segment information:
Depreciation and amortization
77,468 40,441 1,222 395 - 119,526
Other non-cash expenses
(9,903) 4,952 2,035 - - (2,916)
Capital expenditure
118,035 90,928 675 - - 209,638
Deferred expenditure written off
2,159 2,946 - - - 5,105
Surplus on revaluation
of property, plant and equipment
credited to the asset
revaluation reserve
- (1,240) (72) (3,793) - (5,105)
========================================================================
(b) Geographical segments
The following tables present revenue and certain asset and
expenditure information for the Group's geographical segments for the
years ended 31 December 2005 and 2004.
2005
Central
And Con-
South Elimina- soli-
U.S.A. Europe Asia America Canada Others tions dated
HK$ HK$ HK$ HK$ HK$ HK$ HK$ HK$
'000 '000 '000 '000 '000 '000 '000 '000
Segment revenue:
Sales to external
Customers
1,050,642 1,943,874 163,660 268,462 172,312 97,214 - 3,696,164
==========================================================================
Other segment
information:
Segment assets
202,489 128,832 1,006,854 21,027 10,686 1,436 - 1,371,324
==========================================================================
Capital expenditure
- - 148,472 - - - - 148,472
=========================================================================
2004
Central
And Con-
South Elimina- soli-
U.S.A. Europe Asia America Canada Others tions dated
HK$ HK$ HK$ HK$ HK$ HK$ HK$ HK$
'000 '000 '000 '000 '000 '000 '000 '000
Segment revenue:
Sales to external
Customers
1,333,421 1,876,058 189,002 181,583 430,157 124,505 - 4,134,726
==========================================================================
Other segment
information:
Segment assets
52,513 60,808 1,686,794 - 5,419 1,299 - 1,806,833
==========================================================================
Capital expenditure
201 - 209,437 - - - - 209,638
==========================================================================
2. OTHER INCOME AND GAINS
Year ended 31 December
2005 2004
HK$'000 HK$'000
Tooling and repairing service income 15,751 12,726
Bank interest income 6,211 8,631
Rental income 927 1,827
Sales of scrap materials 1,296 1,676
Gain on disposal of associates - 185
Fair value gain on an investment property
270 700
Others 2,718 6,080
________ ________
27,173 31,825
=======================
3. FINANCE COSTS
Year ended 31 December
2005 2004
HK$'000 HK$'000
Interest on bank loans and overdrafts
wholly repayable within five years
49,209 19,877
Interest on finance leases - 16
_______ _______
49,209 19,893
=======================
4. PROFIT/(LOSS) BEFORE TAX
Profit/(loss) before tax was determined after charging the
following:
Year ended 31 December
2005 2004
HK$'000 HK$'000
Depreciation 102,614 83,749
Provision/(write-back of provision) for obsolete inventories
290,121 (629)
Provision for sales returns and warranty costs
48,830 29,007
Write-off of deposits for product development costs and moulds
26,663 -
Goodwill impairment aising during the year
23,239 -
Provision/(write-back of provision) for doubtful receivables
65,753 (4,352)
Write-off of items of property, plant and equipment
19,949 -
Impairment of items of property, plant and equipment
88,665 -
Write-off of receivables 287,039 -
Amortisation of prepaid land lease payments
171 -
Research and development costs:
Deferred expenditure amortised 40,324 35,777
Write-off of deferred expenditure
50,037 5,105
Current year's expenditure 16,111 14,837
_________ _________
106,472 55,719
======================
5. TAX
Year ended 31 December
2005 2004
HK$'000 HK$'000
(Restated)
Current - Hong Kong
Charge for the year 82 1,275
Under/(over) provision in prior years
(13,659) -
Current - Elsewhere 749 3,454
Deferred (22,212) 6,727
------------------------
Total tax charge for the year (35,040) 11,456
======================
Hong Kong profits tax has been provided at a rate of 17.5% (2004:
17.5%) on the estimated assessable profits arising in Hong Kong during the
year. Taxes on profits assessable elsewhere have been calculated at the
rates of tax prevailing in the countries in which the Group operates,
based on existing legislation, interpretations and practices in respect
thereof.
The tax rate for corporate income tax ("CIT") applicable to the
subsidiaries of the Group operating in Mainland China is 33%. Certain of
these subsidiaries is eligible for exemption from CIT for the two years
starting from the first year in which assessable profits are generated,
and a 50% exemption from CIT for the following three years.
The share of tax attributable to jointly-controlled entities and
associates amounting to nil (2004: HK$168,000) and nil (2004: HK$1,891,
000), respectively, is included in "Share of profit and losses of jointly
-controlled entities and associate" on the face of the consolidated income
statement.
6. DIVIDENDS
Year ended 31 December
2005 2004
HK$'000 HK$'000
Interim - nil (2004: HK0.5cent) per ordinary share
- 2,549
Proposed final - nil (2004: HK1.5cents) per ordinary share
- 7,647
________ ________
- 10,196
========================
7. EARNINGS/(LOSS) PER SHARE
The calculation of basic loss per share amounts is based on the net
profit/(loss) for the year attributable to ordinary equity holders of the
parent, and the weighted average number of ordinary shares in issue during
the year.
Diluted earnings/(loss) per share amounts for the periods ended 31
December 2005 and 2004 have not been disclosed as no dilutive events
existed during these years.
8. DEPRECIATION/AMORTISATION
Year ended 31 December
2005 2004
HK$'000 HK$'000
Depreciation 102,614 83,749
Amortisation of deferred expenditure 40,324 35,777
Amortisation of prepaid land lease payments
171 -
________ ________
143,109 119,526
=======================
9. ACQUISITION OF A SUBSIDIARY
On 15 March 2005, the Group acquired an additional 22.5% interest
in OPWDT by making further capital injection of US$5 million (equivalent
to HK$39 million) into OPWDT. The Group's interest in OPWDT increased
from 55% as at 31 December 2004 to 77.5% upon the completion of the
capital injection and OPWDT has became a subsidiary of the Group since
then. OPWDT is engaged in the manufacture and sale of video products.
The acquisition has been accounted for using the purchase method of
accounting. Further details of the transaction are included in note 19 to
the financial statements.
The fair values of the identifiable assets and liabilities of
OPWDT and the corresponding carrying amounts immediately after the
additional capital injection were as follows:
Fair value
recognised Carrying
on acquisition amount
HK$'000 HK$'000
Property, plant and equipment 71,268 71,268
Prepaid land lease payment 7,373 7,373
Cash and bank balances 41,913 41,913
Inventories 68,917 76,554
Trade receivables 64,149 115,149
Prepayments and other receivables
28,653 28,653
Bank loans ( 38,180) ( 38,180)
Trade payables (223,758) (223,758)
_______ _______
20,335 78,972
_______ _______
_______ _______
Minority interest (4,574)
Goodwill on acquisition 23,239
_______
Satisfied by cash 39,000
_______
_______
An analysis of the net outflow of cash and cash equivalents in
respect of the acquisition of a subsidiary through additional capital
injection into OPWDT is as follows:
HK$'000
Cash consideration ( 39,000)
Cash and bank balances acquired 41,913
_______
Net inflow of cash and cash equivalents in respect of the
acquisition of a subsidiary 2,913
_______
_______
Since its acquisition, OPWDT contributed HK$136,685,000 to the
Group's turnover and HK$88,579,000 to the consolidated loss for the year
ended 31 December 2005.
Had the additional capital injection taken place at the beginning
of the year, the revenue of the Group and the loss of the Group for the
year would have been HK$220,117,000 and HK$91,725,000, respectively.
11. INVENTORIES
Year ended 31 December
2005 2004
HK$'000 HK$'000
Raw materials 110,042 198,948
Work in progress 139,072 35,038
Finished goods 51,066 125,076
________ _________
300,180 359,062
________ _________
________ _________
At 31 December 2005, all the inventories of the Group were pledged
under a floating charge as security for the Group's banking facilities, as
further detailed in note 2.1 to the financial statements.
12. TRADE AND BILLS RECEIVABLES
An aged analysis of the unfactored trade receivables as at balance
sheet date, based on the invoice date, is as follows:
Year ended 31 December
2005 2004
HK$'000 HK$'000
Current to 90 days 478,013 442,081
91 to 180 days 17,687 19,130
181 to 360 days 5,443 10,624
Over 360 days 47,830 22,969
________ ________
548,973 494,804
Less: Provision for doubtful debts
(108,944) ( 12,445)
________ ________
440,029 482,359
________ ________
________ ________
13. TRADE AND BILLS PAYABLES
An aged analysis of the trade and bills payables as at the balance
sheet, based on the invoice date, is as follows:
Year ended 31 December
2005 2004
HK$'000 HK$'000
Current to 90 days 490,461 317,241
91 to 180 days 53,062 3,323
181 to 360 days 9,520 2,775
Over 360 days 3,676 1,413
________________
556,719 324,752
________________
________________
QUALIFIED AUDITORS' REPORT
The Directors would like to draw your attention that the report of the
auditor, Ernst & Young, on the accounts of the Group for the year ended 31
December 2005 has been qualified. The relevant parts of the auditors'
report that dealt with the qualification as well as the relevant notes to
the accounts to which the auditors' report refers to are quoted as
follows:
AUDITORS' REPORT
Basis of opinion
We conducted our audit in accordance with Hong Kong Standards on Auditing
issued by the Hong Kong Institute of Certified Public Accountants, except
that the scope of our work was limited as explained below.
An audit includes an examination, on a test basis, of evidence relevant to
the amounts and disclosures in the financial statements. It also includes
an assessment of the significant estimates and judgements made by the
directors in the preparation of the financial statements, and of whether
the accounting policies are appropriate to the Company's and the Group's
circumstances, consistently applied and adequately disclosed.
We planned our audit so as to obtain all the information and explanations
which we considered necessary in order to provide us with sufficient
evidence to give reasonable assurance as to whether the financial
statements are free from material misstatement, however, the evidence
available to us was limited as further explained below.
(1) Scope limitation - carrying amount and provision/write-off
relating to property, plant and equipment
As at 31 December 2005, included in the consolidated balance sheet of the
Group is property, plant and equipment ("PPE") stated at the net carrying
amount of HK$386,932,000 after an impairment provision and write-off. An
impairment assessment has been performed by the directors of the Company
to determine the recoverable amount either from utilisation of the said
PPE in future operations, or from their disposal, in accordance with the
future production plan of the Group and as further detailed in note 14 to
the financial statements, an impairment provision of HK$88,665,000 and a
write-off of HK$19,949,000 have been made and charged to the consolidated
income statement for the year ended 31 December 2005. In the absence of
sufficient reliable evidence to support the directors' assessment of the
future scaling down of the Group's production operations and consequently
the manner in which the Group's PPE will be recovered, and as a result of
the uncertainties regarding the adequacy of the Group's working capital in
the implementation of its production plan pursuant to the Debt
Restructuring Proposal, as further explained in note 2.1 to the financial
statements, we have not been able to satisfy ourselves as to whether the
impairment provision and the write-off determined by the directors against
the carrying amount of the PPE for the year ended 31 December 2005, and in
consequence the net carrying amount of PPE as at 31 December 2005 are
fairly stated.
(2) Scope limitation - carrying amounts and write-off relating to
deferred product development costs and deposits for product development
costs and moulds
As at 31 December 2005, included in the consolidated balance sheet of the
Group are deferred product development costs capitalised of HK$22,820,000
and deposits for product development costs and moulds of HK$16,105,000,
stated net of amounts written off. An impairment assessment has been
performed by directors of the Company to determine the recoverable amounts
from utilisation of the said deferred product development costs and
deposits for product development costs and moulds in future operations
and, as detailed in notes 18 and 22 to the financial statements,
respectively, deferred product development costs of HK$50,037,000 and
deposits for product development costs and moulds of HK$26,663,000 have
been written off and charged to the consolidated income statement for the
year ended 31 December 2005. In the absence of sufficient reliable
evidence to support the directors' assessment of the carrying values of
the abovementioned deferred product development costs and deposits for
product development costs and moulds and, as a result of uncertainties
regarding the adequacy of the Group's working capital in the
implementation of its production plan pursuant to the Debt Restructuring
Proposal, as further explained in note 2.1 to the financial statements, we
have not been able to satisfy ourselves as to whether the amounts written
-off determined by the directors against the carrying amounts of deferred
product development costs and deposits for product development costs and
moulds for the year ended 31 December 2005, and in consequence their net
carrying amounts as at 31 December 2005 are fairly stated.
(3) Scope limitation - carrying amount and provision relating to
inventories
Included in the consolidated balance sheet as at 31 December 2005 of the
Group are inventories of HK$300,180,000 stated net of a provision for
obsolete inventories of approximately HK$307,600,000, of which HK$290,121
,000 was charged to the consolidated income statement for the year ended
31 December 2005. Due to the lack of sufficient reliable evidence, we
have not been able to perform the procedures we considered necessary to
satisfy ourselves as to whether the provision for obsolete inventories for
the year ended 31 December 2005, and in consequence the net carrying
amount of inventories as at 31 December 2005 are fairly stated.
(4) Scope limitation - carrying amount and provision for impairment of
interests in subsidiaries
Included in the balance sheet of the Company as at 31 December 2005 are
interests in subsidiaries of HK$1, stated net of a provision for
impairment against interests in subsidiaries of HK$1,055,516,000, of which
HK$970,716,000 was charged to the income statement of the Company for the
year ended 31 December 2005, as detailed in note 19 to the financial
statements. Due to the scope limitations in respect of points (1) to (3)
above, we have not been able to satisfy ourselves as to whether the
impairment provision determined by the directors against the carrying
amount of such interests in subsidiaries for the year ended 31 December
2005, and in consequence their net carrying amount as at 31 December 2005
are fairly stated.
We have been unable to carry out alternative audit procedures to satisfy
ourselves as to the matters set out in points (1) to (4) above.
Any adjustment that might have been found to be necessary in respect of
the matters set out in points (1) to (3) above would have a consequential
effect on the net deficiency of the Group as at 31 December 2005, its loss
and cash flows for the year then ended and the related disclosures in the
financial statements.
Any adjustment that might have been found to be necessary in respect of
the matters set out in point (4) above would have a consequential effect
on the net deficiency of the Company as at 31 December 2005, its loss for
the year then ended and the related disclosures in the financial
statements.
In forming our opinion we also evaluated the overall adequacy of the
presentation of information in the financial statements. We believe that
our audit provides a reasonable basis for our opinion.
Fundamental uncertainty relating to the going concern basis
In forming our opinion, we have considered the adequacy of the disclosures
made in note 2.1 to the financial statements which explain the
circumstances giving rise to the fundamental uncertainty relating to the
outcome of the proposed restructuring of the existing outstanding
indebtedness of the Group to replace the Group's existing standstill
arrangement (the "Debt Restructuring Proposal") and the continuous
financial support from the Group's financial creditors. These financial
statements have been prepared on a going concern basis, the validity of
which depends upon the successful implementation of the Debt Restructuring
Proposal and the continuous financial support from the Group's financial
creditors. The financial statements do not include any adjustments that
may be necessary and the Group fail to implement the Debt Restructuring
Proposal or to obtain the necessary financial support from its financial
creditors. We consider that appropriate disclosures have been made in the
financial statements concerning this situation, but this fundamental
uncertainty relating to whether the going concern basis is appropriate is
so extreme that we have disclaimed our opinion.
Fundamental uncertainty relating to the possible outcome of a litigation
In forming our opinion, we have considered the adequacy of the disclosures
made in note 37(c) to the financial statements concerning the outcome of
the litigation against the Company and certain subsidiaries of the Group
for various claims which include a claim for substantial estimated unpaid
royalties. Although the directors of the Company, based on the legal
opinion provided by the Group's legal counsel, are of the view that the
related defendants have valid grounds for defending such claims made by
the plaintiff, with the litigation still ongoing, it is not possible to
ascertain with any degree of reasonable certainty the outcome of this
litigation and the existence or otherwise of any compensation payable
should the related defence become unsuccessful. We consider that
appropriate disclosures and estimates have been made in the financial
statements for such contingencies and our audit opinion is therefore not
qualified in this respect.
Disclaimer of opinion
Because of the significance of (i) the possible effects of the scope
limitations in evidence available to us in each of the areas as set out in
points (1) to (4) under the basis of opinion section of this report; and
(ii) the fundamental uncertainty relating to the going concern basis, we
are unable to form an opinion as to whether the financial statements give
a true and fair view of the state of affairs of the Company and of the
Group as at 31 December 2005 and of the loss and cash flows of the Group
for the year then ended and as to whether the financial statements have
been properly prepared in accordance with the disclosure requirements of
the Hong Kong Companies Ordinance.
In respect alone of the limitations on our work as further set out in the
basis of opinion section of this report, including namely the net carrying
amounts and provisions/write-off relating to property, plant and
equipment, deferred product development costs and deposits for product
development costs and moulds and inventories for the Group, and the
interests in subsidiaries for the Company, we have not obtained all the
information and explanations that we consider necessary for the purpose of
our audit.
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