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JQW PLC (JQW)

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Tuesday 29 April, 2014

JQW PLC

Final Results

RNS Number : 7054F
JQW PLC
29 April 2014
 



 

 

 

Press Release

29 April 2014

 

 

JQW plc

 

("JQW" or the "Company"*)

 

Final Results

 

JQW, the AIM quoted domestic Chinese B2B e-commerce operator, today announces its maiden set of final results for the year ended 31 December 2013.

 

Highlights


·     Revenues increased by 71% to RMB 493.1 million, significantly ahead of market expectations (2012: RMB 287.8 million)

·     Gross profit margin improved to 50% (2012: 47%)

·     Profit before tax more than doubled to RMB 171.4 million (2012: RMB 84.1)

·     Net profit after tax also rose by 104% to RMB 128.4 million (2012: RMB 62.9 million)

·     Fully diluted earnings per share of RMB 0.69 (2012: RMB 0.34)

·     Strong cash position of  RMB 344.1 million up by 218% (2012: RMB 108.1 million) including RMB 67.5 million raised at the IPO

·     Maiden final dividend of 0.5 pence per share proposed, subject to shareholder approval

·      Fee paying members increased by 40% to 197,000 (2012: 140,000)

·      35 sales agencies at the end of March 2014

 

The illustrative exchange rate as at 28 April 2014 is 1 GBP: 10.515 RMB.

* Group, below, is defined as JQW, its subsidiaries and indirect subsidiary

 

Yongde Cai, Chairman of JQW, commented: "The Board is delighted to announce our maiden annual results, which show a considerable uplift in revenue and gross profit, driven by the 40% increase in the number of our fee paying members.  This has been a significant period of growth for the Group, culminating in the admission to AIM on 9 December 2013.  The Board is excited by the opportunities that it has identified in the market, including developing trading services, a bilingual platform as well as a platform for smartphone users and we look forward to providing additional updates as we make further progress in these areas over the coming months."

 

For further information:

JQW plc


Cai Yongde, Chairman

Tel: +44 (0) 20 7398 7709

Chen Daocai, Chief Executive Officer

www.jqw-ir.com

Kooi Wei Boon, Chief Financial Officer


 

Argento Capital Markets Limited


Alan MacKenzie / Jim McGeever

Tel: +44 (0) 20 7093 0353

[email protected]

www.argentocapital.net

 

Cairn Financial Advisers LLP (Nomad & Broker)


Sandy Jamieson / Liam Murray / Jo Turner

Tel: +44 (0) 20 7148 7900


www.cairnfin.com

Media enquiries:

Abchurch Communications Limited


Henry Harrison-Topham / Quincy Allan

Tel: +44 (0) 20 7398 7702

[email protected]

www.abchurch-group.com

 



About JQW plc

 

JQW is a leading domestic business-to-business e-commerce provider based in the Chinese province of Jiangsu.  The Group's core business is its online B2B platform, www.jqw.com, which has been developed to encourage domestic trade by connecting Chinese SMEs with potential trade partners.  Founded in 2004, the platform was developed to help to market Chinese SME's websites.  JQW has evolved rapidly to become the second highest ranked B2B e-commerce website and operates, what the director's believe to be, the first dedicated B2B search engine, www.jqw.cn.

 

JQW offers a low-cost entry point for Chinese SMEs to promote themselves and their B2B products to potential buyers.  In order to increase transaction opportunities, JQW offers its clients a broad range of services including website design, commercial search services and advertising.

 

There are approximately 49 million SMEs in China manufacturing a diverse range of products, accounting for 60% of the country's GDP.  The number of mobile internet-access users in China stood at 839 million at February 2014 and there is a considerable amount being invested into the country's telecommunications infrastructure.  These factors have driven an increased demand for domestic trade of B2B, B2C and C2C e-commerce.  With the majority of these SMEs requiring the use of third party B2B e-commerce platforms to promote their businesses and access trade partners, the Board believes that JQW offers a robust and highly reputable branded platform.  With exposure in over 50 industry sectors and considerable scope for future growth, JQW is in a strong position to capitalise on the development of this market.

 

The Group currently has:

 

10 million

Registered users

5 million

Page views per day

840,000

Sheng-Yi-Tong members with website "shops"

197,000

Fee-paying members

700

Rated in the top 700 websites for global website traffic rankings

35

Sales agencies

2

Second (behind Alibaba) in Chinese B2B website traffic rankings

 



Chairman's Statement

 

JQW is delighted to have joined the AIM market of the London Stock Exchange.

 

As a Chinese-based business in the internet industry we believe that a public profile on an international stock market enhances JQW's reputation and profile in both our home market and internationally.  It will also help the Group attract more customers to jqw.com.

 

We welcome our new shareholders from the UK, Europe, South East Asia and China who bought shares in JQW at the IPO.  We are also delighted that further interest in the Company's shares continues to be seen since our IPO and the Board intends to maintain as much contact as possible with our shareholders.  We believe JQW is in an exciting period of growth and hope that our profile as a quoted company will highlight our prospects to our clients, registered users of jqw.com, sales agents, employees and shareholders.

 

2013 was a transformational year for JQW, culminating in the successful admission to AIM on 9 December 2013.  We are pleased to announce our maiden annual results, which show a considerable uplift in revenue and gross profit, driven by the 40% increase in fee paying members to the platform.  This has, so far, been the most important year in JQW's history.  However, the Board hopes for more exciting years to come.

 

The Group's growth has been driven by a combination of factors, including the ongoing rapid development of the e-commerce industry in China and the increasing importance of e-commerce to China's 49 million SMEs, who are our main target market.  JQW offers a direct, cost effective way for SMEs to engage in e-commerce.  The strength of JQW's position in this market is recognised through awards that the Group has won such as CNIT-Research's top three 'Brands with the most influence in China's B2B industry' (which the Group won alongside Alibaba and HC360).

 

The Board is focused on continuing to increase the number of JQW's fee paying members in a variety of ways including the addition of sales agents in other parts of China and the introduction of our new 'franchise' agency system.  However, there will be many other ways in which the Group can enhance its existing services to our clients including a bilingual site and applications for smartphone users.

 

The Board believes that Chinese SMEs will continue to seek more effective marketing channels, especially through e-commerce, and with JQW's excellent market position in the B2B sector the Board expects the Group to benefit.

 

commitment to delivering shareholder value is reflected in the Board's proposal, subject to shareholder approval at the Annual General Meeting, to pay a final dividend of penceper ordinary share for the financial year ended 312013.

 

I would personally like to thank the Board and all of our employees for their continued hard work, as well as our existing and new shareholders for all their support.  We are excited by the opportunities in our market and we look forward to providing additional updates as we make further progress over the coming months.

 

 

Cai Yongde

Chairman

28 April 2014



Group Chief Executive's Statement

 

JQW has established a very strong position in the B2B e-commerce industry in China.  The Board believes the Group has further strengthened its position through the profile JQW has gained by its Admission to AIM last year on 9 December 2013.

 

The Group has grown rapidly in the past five years, benefitting from: the growth in China's GDP; the penetration of broadband in the country; the adoption of websites by Chinese SMEs (our principle target clients); and the increase in transactions completed through e-commerce.  This positive market background is expected to continue.  Whilst GDP growth in China is planned to slow to more sustainable levels, there remain substantial opportunities for additional growth in internet based services, including e-commerce.

 

The strength of JQW's position in its sector and the quality of its platform is a tribute to the Group's strategy, its management team, employees, agents as well as our research and development capabilities.  This is clearly reflected in the results that the Group has achieved during 2013.

 

Results

Revenue increased by 71.3% to RMB 493.1 million (2012: RMB 287.8 million) and the Group's gross profit margins improved to 50% from 47% in 2012.  This led to pre-tax profits more than doubling to RMB 171.4 million (2012: RMB 84.1 million) and net profit after tax rising by a similar amount, 104%, to RMB 128.4 million (2012: RMB 62.9 million).  Earnings per share on a fully diluted basis went up from RMB 0.34 to RMB 0.69 using a pro forma figure for 2012.

 

JQW remains a highly cash generative business.  During 2013 the Group's cash balances increased by RMB 236 million to RMB 344.1 million (including RMB 67.5 million raised by the IPO).  This provides JQW with the ability to invest in new opportunities to provide further growth for our business.

 

The Group opened a new office in Yangzhou in July 2012 and established it as our headquarters.  The new sales centre which was opened there has proved highly successful and the Group runs its agency business from Yangzhou as well.  Sales generated from agents have continued to grow, up 88% from RMB 206.6 million in 2012 to RMB 388.0 million in 2013, now some 79% of total sales.  Our direct sales have increased 29% from RMB 81.2 million to RMB 105.1 million during the same period.  The Board believes JQW can grow quicker by expanding our agency model, not just in its existing form but also through our newly launched franchised agency model.  This provides capital assistance from JQW to entrepreneurs who want to run their own agency businesses but do not have enough capital of their own.  The Group will continue to expand into other provinces in China by establishing local agencies which are familiar with the dialects and customs in those areas.

 

JQW is targeting to reach a total of at least 60 sales agencies by the end of 2015, from our year end level of 30.  In the first three months of this year, we have added a further five new sales agencies, taking the total number to 35 as at 31 March 2014.  This should continue to assist in the growth in numbers of our fee paying members, which increased by 40% to 197,000 at the year end, which will be one of the Group's Key Performance Indicators for 2014 revenue growth.

 

Platform development

The Group's strategy is to continue to organically grow its successful business model, which is profitable and highly cash generative, and to augment it by adding additional services.

 

By the end of June 2014, JQW intends to launch an English based e-commerce platform, which will add increased functionality that will allow purchasers to place orders and make payments through the platform internationally, using partner firms with which JQW is establishing relationships.  The Group will charge a commission on the value of each transaction undertaken.  This is an important development for the Group in terms of its move towards adding a sales commission-based model, rather than transactions being completed off-platform.  It is the intention to develop this into a bilingual website and the Board will provide further updates as this service is launched.

 

As announced at the time of the Group's IPO, it is intended that a new service will be established to provide access to finance for SMEs from financial institutions.  Development of this service is currently underway and it is anticipated that the prospect of sourcing funding for an SME at a lower interest rate will attract more members to jqw.com.  JQW will act as the agent to bring together the borrower with the financial institution and will therefore not bear any credit risk as part of these transactions, but will receive a commission for the introduction.

 

Dividend


Outlook

E-commerce is a rapidly developing industry.  The transaction value of the Chinese B2B market increased by 18.9% during 2013 to RMB 7,430 billion (source: SOOTOO Research Institute).  Revenue generated by B2B platforms in China increased by 25.8% to RMB 21.0 billion (source: iResearch Consulting Group).

 

With the number of mobile internet-access users in China standing at 839 million as of February 2014 (source: The Ministry of Industry and Information Technology), this presents a significant opportunity for the Group.  In order to ensure that the JQW platform is available to the widest possible audience of SMEs, the Group is currently developing smartphone applications for iOS and Android to address t

 

The SME market in China also continues to grow, with SMEs accounting for 99% of China's total number of enterprises, 60% of the country's GDP and 80% of urban jobs nationwide.  As part of the 12th Five-Year Program which was released by the Ministry of Industry and Information Technology in September 2011, China issued its first nationwide special plan for SMEs.  According to the plan, the number of SMEs in China is expected to grow steadily over the five year period with an average annual growth rate of 8%.  With an increasing focus on online marketing and promotion by SMEs, the Board believes that SME online sales will continue to grow.

 

The current year has started well, and the Board has considerable confidence in the future growth of JQW.  The SME market in China remains buoyant and the internet continues to develop rapidly. JQW is operating in a fast growth market with substantial opportunities which the Group intends to continue to pursue vigorously.

 

 

Chen Daocai

Group Chief Executive Officer

28 April 2014



CONSOLIDATED STATEMENT OF FINANCIAL POSITION

 

 

 






Proforma


 

 

Note


31 December

2013

RMB'000


31 December

2012

RMB'000







ASSETS






NON-CURRENT ASSETS






Property, plant and equipment

3


2,081


3,933




2,081


3,933







CURRENT ASSETS






Trade and other receivables

4


19,861


11,392

Deferred tax asset

10


33,407


14,089

Cash and cash equivalent

5


344,055


108,148




397,323


133,629

TOTAL ASSETS



399,404


137,562







EQUITY AND LIABILITIES






Stated capital account

7


57,912


-

Statutory reserve

8(a)


18,312


500

Foreign exchange translation reserve

8(b)


20


-

Retained profits



155,130


50,565




231,374


51,065

Interests under contractual arrangement



1,000


1,000

TOTAL EQUITY ATTRIBUTABLE TO OWNERS



232,374


52,065







CURRENT LIABILTIES






Trade and other payables

6


19,821


18,694

Deferred revenue



135,419


58,146

Income tax payable



11,790


8,657




167,030


85,497







TOTAL LIABILITIES



167,030


85,497







TOTAL EQUITY AND LIABILITIES



399,404


137,562

 

 



CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

 

 






Proforma




2013


2012


Note


RMB'000


RMB'000













Revenue

17


493,132


287,815







Cost of sales



(248,727)


(151,463)







Gross profit



244,405


136,352







Other income



330


181

Selling and distribution expenses



(61,438)


(42,411)

Administrative expenses



(11,855)


(9,984)

Finance costs



(1)


(1)













Profit before taxation

9


171,441


84,137







Income tax expense

10


(43,064)


(21,199)













Profit after taxation



128,377


62,938







Other comprehensive income (currency translation differences)



 

20


 

-













Total comprehensive income for the financial year



128,397


62,938













Profit after tax attributable to:






Owners of the Group



128,385


62,547

Interests under contractual arrangements



(8)


391
















128,377


62,938













Total comprehensive income attributable to:






Owners of the Group



128,405


62,547

Interests under contractual arrangements



(8)


391
















128,397


62,938













Earnings per share attributable to owners of the Group






Basic, RMB

11


0.70


0.34

Diluted, RMB

11


0.69


0.34

 

 


CONSOLIDATED STATEMENT OF CHNAGES IN EQUITY

 

 


Stated capital

account

Statutory

reserve

Foreign

exchange

translation

reserve

Retained

profits

Attributable

to owners of

the Group

Interests

Under

contractual

arrangements

Total

equity


Note

RMB'000

RMB'000

RMB'000

RMB'000

RMB'000

RMB'000

RMB'000




Note 8(a)

Note 8(b)














Balance at 1 January 2012 (Proforma)


3,000

 

500

-

(12,373)

(8,873)

1,000

(7,873)

 









Profit after taxation


-

-

-

62,938

62,938

-

62,938

 









Other comprehensive









expenses, net of tax









 









Foreign currency  translation

differences for foreign operations

8(b)

 

-

 

-

-

-

-

-

-

 









 









Total comprehensive









income for the financial year


-

-

-

62,938

62,938

-

62,938

 









Issuance of shares


8,507

-

-

-

8,507

-

8,507

Repayment of loan to

ex-shareholders arising from

restructuring exercise


 

 

(11,507)

 

 

-

 

 

-

 

 

-

 

 

(11,507)

 

 

-

 

 

(11,507)



























Balance at 31 December 2012 (Proforma)

-

500

-

50,565

51,065

1,000

52,065

 



 

 

 


Stated capital

account

Statutory

reserve

 

Foreign

exchange

translation

reserve

Retained

profits

Attributable

to owners of

the Group

Interests

under

contractual

arrangements

Total

Equity


Note

RMB'000

RMB'000

RMB'000

RMB'000

RMB'000

RMB'000

RMB'000




Note 8(a)

Note 8(b)













Balance at 1 January 2013

-

500

-

50,565

51,065

1,000

52,065



















Profit after taxation


-

-

-

128,377

128,377

-

128,377










Other comprehensive,









income, net of tax









 









Foreign currency translation differences for foreign operations

8(b)

 

-

 

-

 

20

 

-

 

20

 

-

 

20



















Total comprehensive income for the financial year


-

 

-

20

128,377

128,397

 

-

128,397

 









Transfer to statutory reserve

8(a)

-

17,812

-

(17,812)

-

-

-

 









Transaction with owners, dividend paid


-

-

-

(6,000)

(6,000)

-

(6,000)

 









Issuance of shares (net of issue costs)

7

57,912

-

-

-

57,912

-

57,912



















Balance at 31 December 2013

57,912

18,312

20

155,130

231,374

1,000

232,374



















 

 

 


CONSOLIDATED STATEMENT OF CASH FLOWS

 

 






Proforma




2013


2012


Note


RMB'000


RMB'000







Cash flow from operating activities












Profit before taxation



171,441


84,137







Adjustments for:-






Depreciation of property, plant and equipment

3


2,141


1,936

Loss on disposal of property, plant and equipment



-


4

Interest income



(330)


(181)













Operating profit before working capital changes



173,252


85,896

 

Increase in trade and other receivables

 

 


 

(8,469)


 

(3,061)

Increase in deferred tax asset

10


(19,318)


(7,280)

Increase in deferred revenue



77,273


29,120

(Decrease)/increase in trade and other payables



(5,861)


3,506













Cash flow from operations



216,877


108,181

Income tax paid



(39,931)


(13,886)













Net cash flow from operating activities



176,946


94,295













Cash flow used in investing activities















Purchase of property, plant and equipment

3


(289)


(5,058)

Proceeds from disposal of property, plant and

equipment



 

-


 

3

Interest received



330


181













Net cash flow used in investing activities



41


(4,874)













Cash flow from/(used in) financing activities















Issuance of share capital

7


67,518


8,507

Share issuance costs



(2,598)


-

Dividend paid during the year



(6,000)


(20,000)













Net cash flow from/(used in) financing






activities



58,920


(11,493)







Net increase in cash and cash






equivalents



235,907


77,928







Cash and cash equivalent at beginning of


108,148


30,220

the financial year


















Cash and cash equivalent at end of the financial year

5


 

344,055


 

108,148

 


 

NOTES TO THE FINANCIAL INFORMATION

 

1.         General information

 

JQW plc (the "Company") was incorporated in Jersey on with registration number 113593.  The registered office of the Company is 13-14 Esplanade, St Helier, Jersey JE1 1BD, Channel Islands (PO Box 207).

 

The principal activity is the provision of business-to-business ("B2B") e-commerce service in the People's Republic of China ("PRC").

 

Basis of preparation

 

The consolidation financial statements have been prepared in accordance with IFRS as adopted by the EU issued by the International Accounting Standards Board ("IASB"), including related Interpretations issued by the International Financial Reporting Interpretations Committee ("IFRIC") and using the accounting policies which are consistent with those adopted in the admission document as well as applying the following accounting policy in respect of the basis of consolidation.

 

Business combinations outside the scope of IFRS 3

 

The Directors considered IFRS 3 "Business Combinations" (Revised 2008) as the appropriate accounting treatment. However, they concluded that this Group fell outside of the scope of IFRS 3 (revised 2008) since the Group represents a combination of entities under common control.

 

In accordance with IAS 8 "Accounting policies, changes in accounting estimates and errors", in developing an appropriate accounting policy, the Directors have considered the pronouncements of other standard setting bodies and specifically looked to accounting principles generally accepted in the United Kingdom ("UK GAAP") for guidance (FRS 6 - Acquisitions and mergers) which does not conflict with IFRS and reflects the economic substance of the transaction.

 

Under UK GAAP, the assets and liabilities of the transferee and transferor are recorded at book value, not fair value (although adjustments are made to achieve uniform accounting policies), intangible assets and contingent liabilities are recognised only to the extent that they were recognised by the legal acquirer in accordance within applicable IFRS, no goodwill is recognised, any expenses of the combination are written off immediately to the income statement and comparative amounts, if applicable, are restated as if the combination had taken place at the beginning of the earliest accounting period presented.

 

Therefore, although the Group reconstruction did not become unconditional until 15 October 2013, the consolidated financial statements are presented as if the Group structure had been in place throughout the period under audit, including the activity from incorporation of the Group's subsidiary.  All entities had common management as well as majority shareholders.

 

On this basis, the Directors have decided that it is appropriate to reflect the combination using merger accounting principles as a group reconstruction under FRS 6 - Acquisitions and mergers in order to give a true and fair view.  No fair value adjustments have been made as a result of the combination.

 

The financial statements have been prepared on the going concern basis, which assumes that the Group will continue to be able to meet its liabilities as they fall due for the foreseeable future.

 

The financial information set out above does not constitute the Company's statutory accounts for the year ended 31 December 2013, but is derived from those accounts.  The statutory accounts will be delivered following the Company's Annual General Meeting.  The Auditors have reported on those accounts; their report was unqualified.

 

The directors have recommended the payment of a dividend of 0.5 pence per share subject to shareholder approval.

 

The financial information set out in this announcement was approved and authorised for issue by the board of directors on 28 April 2014.



2.      Critical accounting judgements and key sources of estimation uncertainty

 

In the application of the Group's accounting policies, management made judgements, estimates and assumptions about the carrying amounts of assets and liabilities that were not readily apparent from other sources.  The estimates and associated assumptions were based on historical experience and other factors that were considered to be reasonable under the circumstances. Actual results may differ from these estimates.  These estimates and underlying assumptions are reviewed on an on-going basis.  Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.  There are no key assumptions concerning the future and other key sources of estimation uncertainty at the end of each financial year, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.

 

3.         Property, plant and equipment

 


Furniture

and fittings


Motor

vehicles


Office

equipment


Total


RMB'000


RMB'000


RMB'000


RMB'000









As at 31 December 2013








 

Cost








At 1 January 2013

3,308


490


2,637


6,435

Additions

-


-


289


289

At 31 December 2013

3,308


490


2,926


6,724









Accumulated depreciation








At 1 January 2013

1,326


157


1,019


2,502

Charge for the year

1,359


106


676


2,141

At 31 December 2013

2,685


263


1,695


4,643









Net book value








At 31 December 2013

623


227


1,231


2,081

 

 
















As at 31 December 2012(Proforma)








 

Cost








At 1 January 2012

146


110


1,384


1,640

Additions

3,162


380


1,516


5,058

Disposals

-


-


(263)


(263)

At 31 December 2012

3,308


490


2,637


6,435









Accumulated depreciation








At 1 January 2012

67


63


687


817

Charge for the year

1,259


94


583


1,936

Disposal

-


-


(251)


(251)

At 31 December 2012

1,326


157


1,019


2,502









Net book value








At 31 December 2012

1,982


333


1,618


3,933

 

4.      Trade and other receivables

 


As at 31 December

 






Proforma




2013


2012




RMB'000


RMB'000







Trade receivables



18,968


10,553

Other receivables



893


839




19,861


11,392

 

The carrying amounts of trade and other receivables approximate their fair values.

 

 

 

5.      Cash and cash equivalents

 


As at 31 December

 






Proforma




2013


2012




RMB'000


RMB'000







Cash at banks



343,916


107,993

Cash on hand



139


155




344,055


108,148

 

 

 

6.      Trade and other payables

 


As at 31 December

 






Proforma




2013


2012




RMB'000


RMB'000







Trade payables



2,000


-







Rent incentives



1,993


993

Other payable



1,445


11,510

Other tax payable



1,317


945

Accrued liabilities



13,066


5,246

Other payables



17,821


18,694




19,821


18,694

 

The carrying amounts of other payables approximate their fair values.

 

As at 31 December 2013, accrued liabilities relating to the Initial Public Offering (the "IPO") amounted to GBP 645,000 (31 December 2012: nil)

 



 

7.      Stated capital account

 


The Company

As at 31 December

 




Number






Of shares


RMB'000







Issued:






On incorporation



2


-

Shares issued at IPO



9,549,991


67,518

Share issue expenses



-


(9,606)

Shares issued under the Reorganisation



183,999,998


-




193,549,991


57,912

 

On 26 July 2013, the Company was incorporated with issuance of two ordinary shares at no par value.

 

The admission of the enlarged share capital to trading was effective on 9 December 2013, with a placing of 9,549,991 ordinary shares of no par value at 70 pence per share (totaling RMB 67,518,000) as part of the admission to trading on AIM.  The share issue costs associated with this transaction of RMB 9,606,000 have been deducted from the Company's stated capital.

 

On 3 December 2013, the Company issued 183,999,998 ordinary shares at no par value pursuant to a share swap agreement and subscription agreement.

 

The holders of ordinary shares are entitled to receive dividends from time to time and are entitled to one vote per share at meetings of the Company.

 

Under the terms of a warrant deed dated 9 December 2013 the Company issued a total of 5,080,687 warrants to subscribe for ordinary shares at 70 pence per share to Cairn Financial Advisers LLP and Argento Capital Markets Limited as part of the fee arrangements with those advisers in relation to the Company's IPO. The fair value of the warrants granted have been estimated using a Black Scholes option pricing model with the following inputs: warrant price - 70p, share price - 70p, expected volatility - 50%, risk free rate of interest - 0.5%, expected dividend yield - 0% and expected life - 1-3 years. The fair value of the warrants using the above methodology is RMB 8,628,000.  The fair value of the warrants has been recognised in the stated capital account.

 

 

8.      Reserves

 

(a)     Statutory reserve

 

According to the relevant PRC regulations and the Articles of Association of the subsidiaries, it is required to transfer 10% of each subsidiary's respective profit after income tax to its statutory surplus reserve until its reserve balance reaches 50% of its registered capital.  The transfer to this reserve must be made before the distribution of dividends to equity owners.  Statutory surplus reserve can be used to make good previous years' losses, if any, and be converted into paid-in capital in proportion to the existing interests of equity owners, provided that the balance after such conversion is not less than 25%of the registered capital.

 

(b)        Foreign exchange translation reserve

 

The foreign exchange translation reserves arose from the translation of the financial statements of foreign subsidiaries and are not distributable by way of dividends.

 



 

9.         Profit before taxation

 


Years ended 31 December

 






Proforma




2013


2012




RMB'000


RMB'000







Staff cost



47,483


38,292

Auditors' remuneration - audit services



804


12

Operating lease - buildings



1,688


1,436

Depreciation of property, plant and

equipment



2,141


1,936

 

10.     Income tax expenses

 


Years ended 31 December

 






Proforma




2013


2012




RMB'000


RMB'000







Current income tax



62,382


28,479







Deferred tax






Original and reversal of temporary differences


(19,318)


(7,280)

Income tax expenses recognised



43,064


21,199

 

 

The tax rate used for the reconciliations below is the effective weighted average rate of tax applicable in the jurisdiction concerned.

 

The deferred tax is derived from the deferred revenue stated in the following table:

 

 


Years ended 31 December

 






Proforma




2013


2012




RMB'000


RMB'000







Deferred revenue after balance for the prior year


(58,146)


(29,025)

Deferred revenue balance for the year


135,419


58,146

Temporary difference



77,273


29,121

 

Profit multiplied by standard rate of 25%


19,318


7,280

Deferred tax asset opening balance



14,089


6,809




33,407


14,089

 

 

The inclusion of a deferred tax asset in the accounts for the years ended 31 December 2013 and 2012 was derived from deferred revenue.

 

 

The above deferred tax assets are recognised to the extent that it is probable that the future taxable profits will allow the deferred tax assets to be recovered.

 



 

The charge for each year can be reconciled to the profit or loss per the consolidated income statements as follows:

 

 

 


Years ended 31 December

 






Proforma




2013


2012




RMB'000


RMB'000







Profit before taxation



171,441


84,137

 

Profit multiplied by standard rate of 25%


42,860


21,034

 

Effect of:






Tax impact on different statutory tax rate


57


-

Deferred taxes on temporary differences not recognised


125


-

Tax effect on non-deductible expenses



22


165




43,064


21,199

 

 

 

11.     Earnings per share

 

 

The calculation for earnings per share, based on the weighted average number of shares, is shown in the table below:

 


Years ended 31 December

 






Proforma




2013


2012







Profit after tax attributable to

owners of the Group (RMB'000)









128,385


62,547

 

Weighted average number

of shares ('000)






- Basic



184,576


184,000

- Diluted



184,882


184,000

 

Earnings per share (RMB)






- Basic



0.70


0.34

- Diluted



0.69


0.34

 

 



 

12.     Subsidiaries

 

The details of the Company's subsidiaries are as follows

 

Name of

Place of




Subsidiary

incorporation

Principal activity

Effective equity interest




As at 31 December




2013

2012

Held by the Company





Junde International Holdings Limited ("JIL")

Hong Kong

Investment holdings

100%

Note 1






Held by JIL





Yangzhou Junde Investment Consulting Development Co., Ltd. ("Yangzhou Junde")

PRC

Investment holdings

100%

100%






Held by Yangzhou Junde





Jiangsu Province JQW Technology Co., Ltd. ("Jiangsu JQW")


B2B e-commerce services

100%

100%






Shishi JQW Technology Co., Ltd. ("Shishi JQW")

PRC

B2B e-commerce services

100%

100%






Shenzhen JQW Information Co., Ltd. ("Shenzhen JQW")

PRC

IT support and B2B

e-commerce services

Note 2

Note 2

 

 

Note 1        Previously held in the name of Wang Xiufang.

 

Note 2        Shenzhen JQW is controlled through certain contractual arrangements as described in the Company's AIM Admission Document.

 

13.     Operating lease commitments

 

As at each of the financial position dates, the future aggregated minimum lease payments under non-cancellable operating leases contracted for but not recognised as liabilities, are as follows:

 

 


Years ended 31 December

 






Proforma




2013


2012




RMB'000


RMB'000







Within one year



1,168


1,053

After one year but before five years



2,978


3,970




4,146


5,023

 

14.     Significant related party transactions

 

The ultimate controlling party is JQW plc, with effect from 15 October 2013.

 

There have been no related party transactions that have been material to either party and have therefore, in accordance with IAS 24, have not been disclosed.

 

Key management compensation

 

Key management personnel compensation is analysed as follows:

 

 


Years ended 31 December

 






Proforma




2013


2012




RMB'000


RMB'000







Salaries and other short-term

employee benefits



5,254


3,524

 

15.     Financial risk management

 

The main risks arising from the Group's financial statements are credit risk, liquidity risk and foreign currency risk.  The Group reviews and agrees policies for managing each of these risks and they are summarised below:

 

Credit risk

 

Credit risk refers to the risk that counterparty will default on its contractual obligations resulting in a loss to the Group.  The Group has adopted a policy of only dealing with credit worthy counter parties and obtaining sufficient collateral where appropriate, as a means of mitigating the risk of financial loss from defaults.  The Operating Group performs ongoing credit evaluation of its counter parties' financial condition and does not hold any collateral as security over its customers.  The Group's major classes of financial assets are cash and cash equivalents, trade and other receivables.

 

As at the end of each financial year, the Group's maximum exposure to credit risk is represented by the carrying amount of each class of financial assets recognised in the consolidated statements of financial position.

 

As at 31 December 2012 and 2013 substantially all the cash and cash equivalents as detailed in Notes 5 to the consolidated financial statements are held in major financial institutions which are regulated and located in the PRC, which management believes are of high credit quality.  The management of the Group does not expect any losses arising from non-performance by these counterparties.

 

The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date of the Group is as follows:

 

 


As at 31 December

 






Proforma




2013


2012




RMB'000


RMB'000







Cash and cash equivalents



344,055


108,148

Trade receivables



18,968


10,553

Other receivables



893


839




363,916


119,540

 

 

Credit risk (continued)

 

The Group has no significant concentrations of credit risk.  Cash is placed with established financial institutions.  The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the statement of financial position.

 

Trade receivables not impaired

 

The Group's trade receivables that are not impaired are as follows:

 


As at 31 December

 






Proforma




2013


2012




RMB'000


RMB'000







Current






31 - 60 days



18,968


10,553

61 - 90 days



-


-

91 to 120 days



-


-




18,968


10,553

 

There was no requirement for an allowance for doubtful debts to be provided during the financial year ended 31 December 2013.

 

Currency risk

 

The Group has no significant exposure to foreign exchange risk as its cash flows and financial assets and liabilities are mainly denominated in the respective functional currency of the companies comprising the Group.  Therefore, any increase of decrease in foreign exchange rate against functional currency, assuming such change had occurred as at 31 December 2013, would not have a significant impact on the Group's results of operation and financial position.

 

Interest rate risk

 

The Group has no significant interest rate risk as the Group has no loan facilities, term loans or overdraft facilities as at financial position date.  Therefore, any increase of decrease in interest rate, assuming such change had occurred as at 31 December 2013, would not have a significant impact on the Group's results of operation and financial position.

 

Liquidity risk

 

Liquidity risk arises from the Group's management of working capital.  It is the risk that the Group will encounter difficulty in meeting its financial obligations as they fall due.

 

The Group's policy is to ensure that it will always have sufficient cash to allow it to meet its liabilities when they become due.  The principal liabilities of the Group arise in respect of income tax payables, trade and other payables.  The liabilities of the Group are all payable within 12 months.

 

The Board reviews cash flow projections on a regular basis as well as information on cash balances.

 



 

Financial risk management (continued)

 

Derivatives, financial instruments and risk management

 

The Group does not use derivative instruments or other financial instruments to manage its exposure to fluctuations in foreign currency exchange rates, interest rates and commodity prices.

 

Capital risk management

 

The primary objective of the Group's capital management is to ensure that it maintains a strong credit rating and healthy capital ratios in order to support its business and maximise shareholder value. It is also the Group's objective to manage its capital structure in order to reduce the cost of capital.  The capital structure comprises the shareholders' equity of the Company, borrowings and cash and cash equivalents.

 

The Group manages its capital structure and makes adjustments to it, in light of changes in economic conditions.  To maintain or adjust the capital structure, the Group may adjust the return capital to shareholders or issue new shares.  No changes were made in the objectives, policies or processes during each of the years ended 31 December 2012 and 2013.

 

 

16.     Fair value of financial instruments

 

The carrying amount of the financial assets and financial liabilities in the consolidated financial statements approximate their fair values due to the relative short term maturity of these financial instruments.  The fair values of other classes of financial assets and liabilities are disclosed in the respective notes to the financial information.

 

The fair values of financial assets and financial liabilities are determined as follows:

 

(i)         the fair value of financial assets and financial liabilities with standard terms and conditions and trade on active liquid markets are determined with reference to quoted market prices;

 

(ii)        the fair value of other financial assets and financial liabilities (excluding derivative instruments) are determined in accordance with generally accepted pricing models based on discounted cash flow; and

 

(iii)        the fair value of derivative instruments are calculated using quoted prices.  Where such prices are not available, discounted cash flow analysis is used, based on the applicable yield curve of the duration of the instruments for non-optional derivatives, and option pricing models for optional derivatives.

 

17.     Segment Information

 

Operating segments are based on internal reports about components of the Group which are regularly reviewed by the Board of Directors who are the Chief Operating Decision Maker ("CODM") for strategic decision making and resource allocation, in order to allocate resources to the segment and to assess its performance.

The Group reporting segments are direct sales and distribution sales.  Only segmental revenues are considered by the CODM for strategic decision making purposes.  The activities of the Group took place solely in the PRC and as such no geographical segment information is stated during the financial years.

The segment information provided to management for the reportable segments for the year ended 31 December 2013 is as follows:



 

Segment Information (continued)

 

Year ended 31 December 2013

 


Direct sales

Distribution sales

Total


RMB'000

RMB'000

RMB'000





Revenue and results:




Revenue from external customers

105,118

388,014

493,132

Segment profit



244,405

Unallocated other income

and expenses



 

(72,964)

Profit before taxation



171,441





Assets and liabilities




Assets



399,404

Liabilities



167,030





 

The segment information provided to management for the reportable segments for the year ended 31 December 2012 is as follows:

Year ended 31 December 2012 (Proforma)

 


Direct sales

Distribution sales

Total


RMB'000

RMB'000

RMB'000





Revenue and results:




Revenue from external customers

81,211

206,604

287,815

Segment profit



136,352

Unallocated other income

and expenses



 

(52,215)

Profit before taxation



84,137





Assets and liabilities




Assets



137,562

Liabilities



85,497





 

Revenues from the Group's top three customers represent less than 1% of the total revenue in 2013 (2012: 1.32%).  The top customers were selected based on the values of the packages purchased.

There is no single customer from whom the revenue amounts to 10 per cent or more of the Group's revenue during the financial year.

Segmental information is only presented to the CODM on a revenue basis and as such segmental information is only shown for revenue items.

 

18.     Commitments

 

The Group had not entered into any material capital commitments as at 31 December 2013.



 

 

19.     Contingencies

 

As at 31 December 2013, the Group had a contingent liability of RMB 2 million if it fails to meet certain financial and operational milestones stipulated in the property lease agreement in Jiangsu JQW.

 

- Ends -

 


This information is provided by RNS
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