Gx Cleantech Regulatory News (CTEK)

China Chaintek United Co., Ltd

("Chaintek", the "Company" or the "Group")

Final Results

Chaintek (AIM:CTEK), the provider of logistics services to manufacturers of consumer goods in China, today announces its final results for the year ended 31 December 2014 (the "period").

Financial Highlights

Commenting on the final results, Shufang Zhuang, Executive Director and the Group's founder, said: "During the past financial year, China Chaintek has retained its leading position in logistics services. Group revenues and profit before tax were slightly ahead of last year. This was achieved against a background of slower economic growth in China. In view of this, I am pleased with the continued progress that China Chaintek has made in 2014, and the Group remains focused on expanding capacity and growing its customer base.

"Despite the slowdown in the growth of the China economy and the changes being implemented by our manufacturing customers, the Company remains focused on expanding capacity. The new transit warehouse facility will maintain the high standards of service that our customers expect. In the short term, changes to shoe and apparel manufacturers business model and reduced transport charges will have a significant negative impact on 2015 results and the Board considers that revenues for the current year are likely to be approximately 35% down on 2014 and profit before tax approximately 50% lower than that for 2014.

"Our strategy for growth in logistic and inventory solutions, coupled with e-commerce opportunities, remains unchanged. The delay in the new logistics park is frustrating for all shareholders. But China Chaintek is meeting the challenges caused by the delay. I remain confident that the Company is building a solid foundation to continue the strong growth desired by management and shareholders. We are a profitable cash generative company with very substantial cash reserves."

- Ends -

For further information:

Dividend Timetable

The financial statements for the year ended 31 December 2014 will shortly be available on the Company's website at www.chaintek-united-ir.com

Chairman's Statement

It is with pleasure that I present to you the report and consolidated financial statements of China Chaintek United Co., Ltd for the year ended 31 December 2014, the third since the Group was admitted to trading on the AIM market in August 2012.

Performance

Revenues increased from RMB 350.7 million to RMB 363.6 million and profit before tax from RMB 284.9 million to RMB 287.4 million. As a highly cash generative business, the Company retained a strong year end cash position of RMB 472.1 million after payments in respect of the new transit warehouse facility of RMB 60 million.

Strategy

The Strategic Report, set out after the Chief Executive's Review, is designed to assess and inform you about your Company's approach to its business, business risks, and strategy for the development of the business and management style. In addition to what is in the Report, your Board wishes to emphasise its belief in the logistics sector in China in which the Company is serving. Consumerism and the accelerating use of e-commerce in China are key to the future growth of the Company. Investing now in greater logistical supply capacity and, over time, in the information technology systems that support it is crucial.

Outlook

E-commerce in China proliferates throughout many supply sectors and during 2014 statistical evidence pointed to the activity surpassing that of the United States by volume. This trend is good for your Company. The far-reaching economic and systemic reforms announced following the 2014 third plenum of the General Committee of the Party are enhancing the growth of consumerism generated by the increasing use of mobile telephony by an aspirational generation for ordering goods and services online. It is these trends that are driving the growth of the historically fragmented logistics sector which is a good omen for the growth of Chaintek's business. However, the macro economic slowdown in the economy is resulting in structural changes which are impacting both manufacturers and, in the near term, Chaintek as noted in the Chief Executive's Review.

Revenue and Dividends

On 22 September 2014, the Group announced an interim scrip dividend of 2 pence net per share with a 1 pence per share cash alternative, in respect of the six month period ended 30 June 2014, paid on 17 November 2014 to shareholders.

A maintained final dividend of 4 pence per share is now proposed, which will be by way of scrip dividend only, giving a total dividend of 6 pence per share for this financial year.

Board Governance

The Board meets quarterly with up to two meetings per annum in China. It has also met on an ad-hoc basis on three occasions during the period. Through its Nomination Committee the Board carries out evaluations of each of its Directors, Chairman, the Board itself and its committees. The Board also reviews on an ongoing basis each of its service providers, their scope, cost and quality of service. Regular liaison is maintained between the Board's Audit Committee and the Company's Auditors.

Annual General Meeting

This year's Annual General Meeting will be held at the Company's Head Office at 16.00 hours Beijing time (09.00 hours BST) on 8 May 2015. If you have any detailed questions, you may wish to raise these in advance with the Company Secretary. Shareholders who cannot attend the Annual General Meeting in person are encouraged to use their proxy votes. Shareholders who hold their shares through CREST are able to lodge their votes electronically.

William Knight

Non-Executive Chairman

16 March 2015

Chief Executive's Review

During the past financial year, China Chaintek has retained its leading position in logistics services. Group revenues of RMB 363.6 million and profit before tax of RMB 287.3 million were slightly ahead of last year. This was achieved against a background of slower economic growth in China. In view of this, I am pleased with the continued progress that China Chaintek has made in 2014, and the Group remains focused on expanding capacity and growing its customer base. The Group remains highly cash-generative with a year-end cash position of RMB 472.1 million (2013: RMB 319.3 million) after payments in respect of the new transit warehouse facility of RMB 60 million.

Logistics Services Division

This Division achieved a 3% increase in revenues. The Division added six new customers, including Joeone, a Shanghai Stock Exchange listed men's business and casual wear manufacturer, which contributed approximately 2% to the Division's total revenues. The Group has diversified the Division's customer base, notably into the food and building materials industries which now comprise 23% of the Division's revenues (22% in 2013). Shoes and apparel are an unchanged 69% and other categories 8% of divisional revenue.

As announced on 9 December 2014, the Company has purchased another transit warehouse for the logistics services division, located near the Chaintek head office in Fujian Province and close to a number of factories belonging to Chaintek's major customers. This facility is expected over time to reduce the impact of increasingly stringent daytime travel restrictions on larger lorries used by the Company's third party transport carriers. Operations at the new facility have commenced. In the longer term, the facility should allow the Group to capture an anticipated increase in demand from the market. It is also important in ensuring the Company maintains the high service levels expected by its clients.

Fuel costs in China during 2014 reduced by some 20%. This impacts on the delivery costs charged to the manufacturing customers, which during the current financial year will reduce by 10%, thereby reducing the revenue of the logistics division by the same amount. In addition, the Group will incur some additional costs in addressing such problems as more stringent traffic controls.

Many of the major shoe and apparel manufacturers in Fujian Province have traditionally operated on a business model of producing large volumes sold over a lengthy period with promotions and discounting as appropriate. This traditional model is unsuited to a changing market requiring greater and more timely choice. Accordingly, manufacturers are adapting their business model to one which produces more innovative designs to meet customer demand and capable of shorter production runs requiring timely and efficient delivery. This process is being encouraged by Central Government. During the period while manufacturers implement these changes, they expect their volumes to fall significantly. This reduction in volumes will directly impact the Division and we anticipate revenue in 2015 from such customers will, taken with the affect of reduced delivery costs, decline by approximately 35%. However, these changes will ultimately result in an increased demand for efficient, modern and cost effective logistical services. China Chaintek already has the ability to meet such criteria and intends to increase its capacity to cope with accelerated demand.

Inventory Solutions Business

This Division achieved a 7.3% increase in revenues, despite no new distribution centre being added in the year. The Division accounts for approximately 14% of Group revenues.

Inventory solutions customers are undertaking the same changes as our logistics customers and we are anticipating a reduction of approximately 20% in the Division's revenues in 2015.

New Logistics Park

The Board is most disappointed not to be able to report progress in relation to the planned new Logistics Park over a parcel of land in Cizao Town, Jinjiang City, Fujian Province, China. Prospective development is based on the purchase of certain Land Use Rights ("LUR"), fully paid for during 2013 at a cost of RMB 273 million. Payments were made to Fujian Jinjiang Industrial Park Development and Construction Co., Ltd. ("LDC"), a land development company established and owned by Local Government ("LDC"). The formal LUR Certificate that is required before the Group is able to use the land has still to be issued. Consequent to the delay in the issue of the formal LUR Certificate, the Group has signed a supplementary agreement with the LDC dated 6 March 2015. This agreement confirms inter alia, that the LUR in respect of the parcel of land specified in the initial purchase agreement is not now able to be obtained from the LDC, that the LDC is seeking to locate an acceptable alternate parcel of land for the Group and that the Group has the right to request full payment of RMB 273 million from the LDC at any time up to the date that a formal LUR Certificate is issued by the LDC.

The Company is taking all practicable steps to progress a new logistics park. In the interim, initiatives such as the recent purchase of the additional transit warehouse help to maintain the Company's position.

Outlook

Despite the slowdown in the growth of the China economy and the changes being implemented by our manufacturing customers, the Company remains focused on expanding capacity. The new transit warehouse facility will maintain the high standards of service that our customers expect.

In the light of the factors I have referred to above, the Board considers that revenues for the current year are likely to be approximately 35% down on 2014 and profits before tax approximately 50% lower than those for 2014.

Our strategy for growth in logistic and inventory solutions, coupled with e-commerce opportunities, remains unchanged. The delay in the new logistics park is frustrating for all shareholders. But China Chaintek is meeting the challenges caused by the delay. I remain confident that the Company is building a solid foundation to continue the strong growth desired by management and shareholders. We are a profitable cash generative company with very substantial cash reserves. Finally, my thanks to the Company's management and employees for their hard work.

Meijin Xu

Chief Executive Officer

16 March 2015

Strategic Report

The Strategic Report is used to inform shareholders and to help them to assess how the Directors have performed their duty to promote the success of the Company during the year under review.

Strategy Objective and Operations of the Company

The Company was formed by Shufang Zhuang and Meijin Xu when they created its operational subsidiary, Xingtai Logistics in 2000, principally to provide domestic logistics services to fast moving consumer goods manufacturers in Jinjiang City, Fujian Province, where the Company's main business operations are headquartered. Jinjiang City is a fast-growing and important light manufacturing centre where approximately 70% of the entire production volume of sports shoes and apparel in China is produced.

The Company operates through its two business divisions; its Logistics Services and its Inventory Solutions Services Division. The Logistics Services Division provides logistics connections between the Group's manufacturer customer base and their retail markets in the PRC using a network of eight independent transport agents. Efficiencies are achieved for both the transport agents and the manufacturers by consolidating the goods of several manufacturers to be delivered to similar destinations at the same time, thereby increasing the loading rate on the transport agents' trucks and reducing the per unit transportation cost.

The Inventory Solutions Services Division provides inventory storage and management services including sorting, packaging, labelling and short term storage; an activity that began in 2010 in response to customer needs. It should be noted that manufacturers in China acknowledge that managing logistics and warehousing is not only a complex but relatively costly element of the manufacturing process and by providing these services to its customer base, your Company is assisting them to reduce warehousing costs.

All the Group's logistics' customers are based in Fujian Province, emphasising the importance of operating close to its customer base and seven of the Group's top ten customers are now listed in one or other of the stock exchanges of Hong Kong, Singapore, the PRC and United States. The rapidly expanding requirement for logistics, their supply and related inventory services in China is being enhanced by Central Government initiatives to promote a more efficient manufacturing sector.

Fair Review of the Business

Key Performance Indicators

A comprehensive review of the Group's performance during the year is given in the Chief Executive's Review and referred to in the Chairman's Statement.

Principal Risks and Uncertainties

The Board of Directors has overall responsibility for the establishment and oversight of the Group's risk management framework. The Group's risk management policies are established to set out its overall business strategies, tolerance of risk and general risk management philosophy. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group's activities.

Risks which the Group faces are given in Note 24 to the consolidated financial statements.

The Board is disappointed not to be able to report any progress in relation to its planned new Logistics Park over a parcel of land in Cizao Town, Jinjiang City, Fujian Province, China. Prospective development is based on the purchase of certain Land Use Rights ("LUR"), fully paid for during 2013 at a cost of RMB 273 million. Payments were made to Fujian Jinjiang Industrial Park Development and Construction Co., Ltd. ("LDC"), a land development company established and owned by Local Government ("LDC"). The formal LUR Certificate that is required before the Group is able to use the land has still to be issued. Consequent to the delay in the issue of the formal LUR Certificate, the Group has signed a supplementary agreement with the LDC dated 6 March 2015. This agreement confirms inter alia, that the LUR in respect of the parcel of land specified in the initial purchase agreement is not now able to be obtained from the LDC, that the LDC is seeking to locate an acceptable alternate parcel of land for the Group and that the Group has the right to request full payment of RMB 273 million from the LDC at any time up to the date that a formal LUR Certificate is issued by the LDC. The Board is of the view that the LDC will have the funds available to make such repayment if requested. The Board is unable to say when the formal LUR Certification process will be completed.

People

People are a very important part of China Chaintek and its ability to maintain the shared values that will enable the Company to deliver shareholder value and excellent customer service.

To retain and develop its people, emphasis is placed on greater employee involvement in delivering its vision through continual training, employee feedbacks and dissemination of information through regular employee update meetings.

Gender Representation

As at 16 March 2015, there were five male Directors and one female Director on the Board. The Company's policy on gender is detailed under the Nomination and Remuneration Committee section in the Annual Report.

Social and Environmental Policies

Chaintek United believes that companies should act in a socially responsible manner. Although the Company's priority at all times is to act in the best interests of its customers, it recognises that, increasingly, non-financial issues such as social environmental factors have the potential to impact the share price as well as the reputation of companies. Good practice, honesty and integrity at all times are our stated aims and objectives.

Future Developments

The development of a new logistics park remains important to the Company. Pending that development, the Group has purchased an additional transit warehouse for the logistics services division.

This additional facility, which is located near the China Chaintek Head Office and within proximity of a number of factories belonging to China Chaintek's major customers, became operational in January 2015. The cost of this warehouse is RMB 75.8 million of which RMB 60 million has already been paid to secure the facility.

The Group remains focused on the planned strategy for growth and construction of a new Logistics Park and the delay in land use rights connected to this development is considered in more detail in the section above.

Despite the delays, the Group believes that with its healthy cash-generating financial position, capital expenditure can continue to be financed from within internal financial resources.

William Knight

Chairman

16 March 2015

Consolidated statement of financial position

As at 31 December 2014

(All amounts in RMB unless otherwise stated)

Consolidated statement of comprehensive income

for the financial year ended 31 December 2014

(All amounts in RMB unless otherwise stated)

Consolidated statement of changes in equity

for the financial year ended 31 December 2014

(All amounts in RMB unless otherwise stated)

Consolidated statement of cash flows

for the financial year ended 31 December 2014

(All amounts in RMB unless otherwise stated)

Notes to the final results announcement

for the financial year ended 31 December 2014

1 General information

The financial information for the years ended 31 December 2014 and 31 December 2013 contained in this announcement do not constitute the Group's audited financial statements. The comparative financial information is based on the audited Group financial statements for the financial year ended 31 December 2013. Those financial statements, upon which the auditors issued an unqualified audit opinion, are available on the Company's website. The financial information for the year ended 31 December 2014 has been extracted from the Group's audited financial statements which will be available on the Company's website in due course and which are expected to be posted to shareholders on or around 23 March 2015. The auditors have issued an audit report on the Group's financial statements for the year ended 31 December 2014 which contains an unqualified audit opinion but includes an emphasis of matter paragraph relating to the significant uncertainty (which is explained in the Chief Executives Review and Note 5 to this financial information) whether or not a land use rights contract and supplementary agreement will be completed by the certification by Local Government of an acceptable alternative parcel of land that will available for use by the Group or the Group will request a full refund of the land use rights prepayment made.

China Chaintek United Co., Ltd. ("China Chaintek" or the "Company") was incorporated as an exempted limited liability company in the Cayman Islands on 13 April 2011. The Company's registered office is at Floor 4, Willow House, PO Box 2804, Grand Cayman, KY1-1112, Cayman Islands. The Company's shares were admitted to trading on the AIM market of the London Stock Exchange on 20 August 2012.

The principal activities of the Company are those related to investment holding. The principal activities of the subsidiaries are logistics services and inventory solutions as indicated in Note 4.

2(a) Restructuring exercise and historical information

On 3 March 2000, Fujian Xingtai Logistics Co., Ltd. ("Fujian Xingtai") was incorporated as a limited liability company in the People's Republic of China (the "PRC") controlled by Mr Shufang Zhuang(Mr Zhuang). The registered office is located at Mei Ling Industrial Park, Jinjiang City, Fujian Province, PRC.

On 5 March 2010, Fujian Xingtai became a wholly owned entity of Mr Zhuang and his wife Mrs Meijin Xu (Mrs Xu).

On 7 December 2010, Chaintek United Holdings Ltd ("ChaintekUnited") was incorporated as a limited liability company in Hong Kong SAR. ChaintekUnited, an investment holding company, has its registered office at Room 1613, 16F, Tai Yau Building, 181 Johnson Road, Wan Chai, Hong Kong SAR. ChaintekUnited is wholly owned by Mr Zhuang and Mrs Xu.

On 29 January 2011, ChaintekUnited acquired 100% of the equity interest of Fujian Xingtai for a purchase consideration of RMB 10,204,100, fully paid in cash with an advance from Mrs Xu.

On 13 April 2011, the Company was incorporated in the Cayman Islands for the proposed listing of the Company's shares on the AIM market of the London Stock Exchange. The Company is majority owned and controlled by Mr Zhuang and Mrs Xu.

On 27 June 2011, the Company acquired 100% of the equity interest of ChaintekUnited for a purchase consideration of HK$ 10,000 based on the nominal issued share capital of ChaintekUnited.

The acquisitions of Fujian Xingtai by ChaintekUnited and ChaintekUnited by the Company were a combination of businesses under common control by Mr Zhuang and Mrs Xu. As a result, the Company accounted for the acquisitions in a manner similar to a pooling of interests.

2(b) Basis of preparation

(a) Statement of compliance

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standardsas adopted by the European Union.

(b) Basis of measurement

The financial statements have been prepared on the historical cost basis.

(c) Functional and presentation currency

The consolidated financial statements are presented in Renminbi (RMB), which is the presentation currency of the Group and the functional currency of the principal operating subsidiaries of the Group. All financial information has been presented in RMB, unless otherwise stated.

The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements, and have been applied consistently by Group entities.

(d) Use of estimates and judgements

The preparation of the financial information in accordance with this basis of preparation requires the use of judgements, estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial information and the reported amounts of revenues and expenses during the financial year. Although these estimates are based on management's best knowledge of current events and actions, actual results may differ from those estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.

Critical judgements

Impairment of land use rights and property, plant and equipment

The use of estimates is required in the area of asset impairment, particularly in assessing: (1) whether an event has occurred that may indicate that the related asset values may not be recoverable; (2) whether the carrying value of an asset can be supported by the net present value of future cash flows which are estimated based upon the value-in-use calculation; (3) the appropriate key assumptions to be applied in preparing cash flow projections including whether these cash flow projections are discounted using an appropriate rate. Changing the assumptions selected by management to determine the level, if any, of impairment, including the discount rates or the growth rate assumptions in the cash flow projections could materially affect the net present value used in the impairment test and as a result affects the Group's results. Land use rights and property, plant and equipment are reviewed to determine whether there is any indication that the carrying value of these assets may not be recoverable and have suffered impairment loss. If any such indication exists, the assets are tested for impairment. The recoverable amounts of the assets are estimated in order to determine the extent of the impairment loss, if any. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. Such impairment loss is recognised in profit or loss. The Directors do not consider that any impairment of land use rights is required to be made for 2014.

Further information on the delay in the granting of land use rights related to a specific parcel of land in Jinjiang City is included at note 5.

Classification of land use right prepayments as operating leases

Within the PRC it is the practice for the State to issue land use rights to individuals or entities. Such rights are evidenced through the granting of a land use rights certificate, which gives the holder the right to use the land (including the construction of buildings thereon) for a given length of time. An upfront payment is made for these rights. The Directors judge that the substance of these arrangements is an operating lease over the land, and that the upfront payment represents prepaid lease rentals. As such, a prepayment is recognised in the statement of financial position, analysed between current and non-current assets. The prepayment is amortised to spread the lease cost over the duration of the term of the land use rights, as specified in the lease certificate.

Critical accounting estimates and assumptions

Useful lives of property, plant and equipment

Property, plant and equipment are depreciated on a straight-line basis over their estimated useful lives. The Group performs annual reviews on whether the assumptions made on useful lives continue to be valid. As changes in the expected level of usage, competitors' actions and technological obsolescence arising from changes in the market demands or service output of the assets could impact the economic useful lives and the residual values of these assets, this could lead to potential changes in future depreciation charges, impairment losses and/or write-offs. A 5% difference in the expected useful lives of these assets from management's estimates would result in approximately 0.1% (2013: 0.1%) variance in the Group's profit for the financial year ended 31 December 2014.

Income tax

Judgement is involved in determining the provision for income taxes. There are certain transactions and computations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognises liabilities for expected tax issues based on estimates of whether additional taxes will be due.

Where the final tax outcome of these matters is different from the amounts that were initially recognised, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made.

2(c) New accounting standards and interpretations

a) Standards, amendments and interpretations effective in 2014:

The following new standards and amendments to standards are mandatory for the first time for the Group for the financial year beginning 1 January 2014. The implementation of these standards did not have a material effect on the Group:

IAS 32 (Amendment 2011) Offsetting financial assets and financial liabilities

IFRS 11 Joint arrangements

IFRS 10 Consolidated financial statements

IFRS 12 Disclosure of interest in other entities

IAS 27 (Amendment 2011) Separate financial statements

IAS 28 (Amendment 2011) Investments in associates and joint ventures

IAS 36 (Amendment 2013) Recoverable amount disclosures for non-financial assets

IFRIC 21 Levies

b) Standards, amendments and interpretations that are not yet effective and have not been early adopted:

* Not yet endorsed in the EU.

** Effective date in EU

The Group does not expect the pronouncements to have a material impact on the Group's earnings or shareholders' funds.

3 Summary of significant accounting policies

Basis of Consolidation

Business combinations

The consolidated financial statements relate to the Company and its subsidiaries (together referred to as the "Group"). As explained in note 1 the acquisitions of Fujian Xingtai by Chaintek United and Chaintek United by the Company were a combination of businesses under common control by Mr Zhuang and Mrs Xu and were therefore accounted for in a manner similar to a pooling of interests.

Subsidiaries

Where the Company has control over an investee, it is classified as a subsidiary. The Company controls an investee if all three of the following elements are present: power over the investee, exposure to variable returns from the investee, and the ability of the investor to use its power to affect those variable returns. Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these elements of control. The results of acquired operations are included in the consolidated statement of comprehensive income from the date on which control is obtained. Subsidiaries are deconsolidated from the date on which control ceases.

Transactions eliminated on consolidation

All inter-company balances and significant inter-company transactions and resulting unrealised profits or losses are eliminated on consolidation and the consolidated financial statements reflect external transactions and balances only.

Foreign currency

Foreign currency transactions

Transactions in foreign currencies are translated to the respective functional currencies of the Group entities at the exchange rate at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated to the functional currency at the exchange rate at the reporting date. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction.

Foreign currency differences arising on translation are recognised in profit or loss as incurred.

Property, plant and equipment and depreciation

Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses, if any.

The cost of property, plant and equipment includes expenditure that is directly attributable to the acquisition of the items. Dismantlement, removal or restoration costs are included as part of the cost of property, plant and equipment if the obligation for dismantlement, removal or restoration is incurred as a consequence of acquiring or using the asset.

Depreciation is computed utilising the straight-line method to write off the cost of these assets over their estimated useful lives as follows:

Buildings 30 years

Plant and machinery 10 years

Computers and office equipment 2 - 10years

Motor vehicles 5 - 10 years

No depreciation is provided on construction work-in-progress. Depreciation will commence when the asset is completed and ready for its intended use.

The residual values, depreciation methods and useful lives of property, plant and equipment are reviewed and adjusted as appropriate at the reporting date.

Subsequent expenditure relating to property, plant and equipment that has already been recognised is added to the carrying amount of the asset when it is probable that future economic benefits, in excess of the standard of performance of the asset before that expenditure was made, will flow to the Group and the cost can be reliably measured. Other subsequent expenditure is recognised as an expense during the financial year in which it is incurred.

For acquisitions and disposals during the financial year, depreciation is provided from the month of acquisition and to the month before disposal respectively. Fully depreciated property, plant and equipment are retained in the books of accounts until they are no longer in use.

The gain or loss arising on disposal or retirement of an item of plant and equipment is determined as the difference between the sales proceeds and the carrying amounts of the asset and is recognised in profit or loss.

Land use rights

The land use rights are stated at cost less accumulated amortisation and any impairment losses. Amortisation is calculated on a straight-line basis to write off the cost of the land use rights over the period for which the rights have been granted.

Financial assets

The Group's financial assets include loans and receivables.

The Group initially recognises loans and receivables and deposits on the date they are originated.

Derecognition of financial instruments occurs when the rights to receive cash flows from the investments expire or are transferred and substantially all of the risks and rewards of ownership have been transferred.  An assessment for impairment is undertaken at least at each reporting date whether or not there is objective evidence that a financial asset or a groupof financial assets is impaired.

Receivables

Receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise when the Group provides money, goods or services directly to a debtor with no intention of trading the receivables. They are included in current assets, except for maturities greater than 12 months after the reporting date which are classified as non-current assets.

Receivables are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, loans and receivables are measured at amortised cost using the effective interest method, less provision for impairment.

The Group considers evidence of impairment for receivables at both a specific asset and collective level. All individually significant receivables are assessed for specific impairment. All individually significant receivables found not to be specifically impaired are then collectively assessed for any impairment that has been incurred but not yet identified. Receivables that are not individually significant are collectively assessed for impairment by grouping together receivables with similar risk characteristics.

In assessing collective impairment, the Group uses historical trends of the probability of default, the timing of recoveries and the amount of loss incurred, adjusted for management's judgement as to whether current economic and credit conditions are such that the actual losses are likely to be greater or less than suggested by historical trends.

An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows, discounted at the asset's original effective interest rate. Losses are recognised in profit or loss and reflected in an allowance account against loans and receivables. Interest on the impaired asset continues to be recognised. When a subsequent event (e.g. repayment by a debtor) causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed through profit or loss.

Receivables comprise trade receivables, other receivables, deposits and prepayments, other than land use right prepayments.

Cash and cash equivalents

Cash and cash equivalents include cash and bank balancesthat have maturities of three months or less from inception.

Impairment of non-financial assets

The carrying amounts of non-financial assets subject to impairment are reviewed at the end of each reporting period to determine whether there is any indication of impairment. If any such indication exists, the asset's recoverable amount is estimated.

Dividends

Final dividends proposed by the Directors are not accounted for in Shareholders' equity as an appropriation of retained earnings, until they have been approved by the Shareholders in a general meeting. When these dividends have been approved by the Shareholders and declared, they are recognised as a liability.

Interim dividends are simultaneously proposed and declared, because the Articles of Association of the Company grant the Directors the authority to declare interim dividends. However, interim dividends are not charged to reserves until the relevant date of payment to shareholders.

Where the Company pays its dividends in the form of shares or gives the shareholder the right to receive a dividend in either cash or shares (scrip dividend) the dividend paid is calculated as the value of the cash paid and the value of shares issued with the value of shares issued being calculated at the market value of shares at the date of payment of the dividend.

Statutory common reserve

The subsidiary incorporated in the PRC is required to transfer between 5% and 10% of its profit after taxation to the statutory common reserve until the common reserve balance reaches 50% of the registered capital. For the purpose of calculating the transfer to this reserve, the profit after taxation shall be the amount determined under the PRC accounting standards. The transfer to this reserve must be made before the distribution of dividends to Shareholders. The statutory common reserve can only be used to set off against accumulated losses or to increase the registered capital of the subsidiary, subject to approval from the PRC authorities.

The statutory common reserve is not available for dividend appropriation to the Shareholders.

Share capital

Ordinary Shares are classified as equity.

Incremental costs directly attributable to the issue of Ordinary Shares and share options are recognised as a deduction from equity.

Warrants

The fair value of Warrants issued to vendors and Shareholders is measured using the Black-Scholes option pricing model. Measurement inputs include the share price on the measurement date, the exercise price of the instrument, expected volatility, expected term of the instrument, expected dividend, and the risk-free interest rate.

Financial liabilities

The Group's financial liabilities include trade and other payables.

Trade and other payables are initially recognised at fair value, and subsequently carried at amortised cost using the effective interest method.

Financial liabilities are recognised when the Group becomes a party to the contractual agreements of the instrument. All interest-related charges are recognised as an expense in "finance costs" in profit or loss. Financial liabilities are derecognised if the Group's obligations specified in the contract expire or are discharged or cancelled.

Gains and losses are recognised in profit or loss when the liabilities are derecognised.

Related parties

For the purposes of this consolidated historical financial information, parties are considered to be related to the Group if the Group has the ability, directly or indirectly, to control the party or exercise significant influence over the party in making financial and operating decisions, or vice versa, or where the Group and the party are subject to common control or common significant influence. Related parties may be individuals or other entities.

Leases

Leases of assets in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases.

Rentals on operating leases are recognised in profit or loss on a straight-line basis over the lease term unless another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. Lease incentives received are recognised as an integral part of the total lease expense, over the term of the lease. Penalty payments on early termination, if any, are recognised in profit or loss when incurred.

The land use rights held by the Group are regarded as operating leases. The amounts paid for these rights are treated as lease prepayments and are amortised over the period for which the rights have been granted in accordance with the land use rights certificate.

Government grants

Grants that compensate the Group for expenses incurred are recognised in profit or loss as other income on a systematic basis in the same periods in which the expenses are recognised.

Employee benefits

Short-term employee benefits

Short-term benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided.

Defined contribution plans

Payments made to state-managed retirement benefit schemes, such as the social security plans in the PRC, are dealt with as contributions to defined contribution plans. The contributions were recognized when the payment obligation existed.

The PRC subsidiary is required to contribute a certain percentage of its employees' payroll costs to the state-managed retirement benefit scheme operated by the municipal government.

The local municipal government undertakes to assume the retirement benefit obligations of all existing and future retired employees of the PRC subsidiary. The PRC subsidiary has no further payment obligations once the contributions have been paid.

Key management personnel

Key management personnel are those persons having the authority and responsibility for planning, directing and controlling the activities of the entity. Directors and certain key executive officers are considered key management personnel.

Income taxes

Income tax expense comprises current and deferred tax. Income tax expense is recognised in the income statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity or other comprehensive income.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.

Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for the following temporary differences: the initial recognition of goodwill, the initial recognition of an asset or liability in a transaction that is not a business combination and that affects neither accounting nor taxable profit, and differences relating to investments in subsidiaries to the extent that the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future.

Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted at the reporting date.

A deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets and they relate to income taxes levied by the same tax authorities on the same taxable entity, or on different tax entities, provided they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously.

Earnings per share

The Group presents basic and diluted earnings per share ("EPS") data for its Ordinary Shares. Basic EPS is calculated by dividing the profit or loss attributable to Ordinary Shareholders of the Company by the weighted average number of Ordinary Shares outstanding during the period. Diluted EPS is determined by adjusting the profit or loss attributable to Ordinary Shareholders and the weighted average number of Ordinary Shares outstanding, adjusted for the effects of all dilutive potential Ordinary Shares, which comprise Warrants.

Operating segments

An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group's other components. Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker has been identified as the Chief Executive Officer who makes strategic resources allocation decisions.

Revenue recognition

The Group derives its revenues from two principal sources: 1) logistics services; and 2) inventory solutions.

Logistics services

Logistics services involving land transportation are provided with the use of independent transportation contractors (carriers). The Group bills the carrier its logistics arrangement fee after the goods have been delivered by the carrier but recognises revenue at the date that the logistics arrangement has been completed which is regarded as the date the goods are transferred to the responsibility of the carrier. The carrier bills the receiver directly andbears the risk of loss of the goods during transit to the receiver.

Inventory solutions

Inventory solutions relate to the provision of inventory storage and custody, goods receipts and issues, packaging, changing product labels and related services. The customer is billed a fixed fee per unit of goods managed by the Group for all of these services. The Group bills the customer directly for these services as the goods are delivered to the Group but only recognises revenue over the period that the service is provided.

Interest income

Interest income is recognised on a time proportion basis using the effective interest method.

4 Subsidiaries

5 Land use rights prepayments

During the year, the Group purchased a transit warehouse for the logistics services division from a third party. The warehouse will cost RMB 75.8 million of which RMB 60 million has already been paid to secure the facility. Based on the agreement, the Group had the right to commence the operations on this warehouse from the date the deposit was paid (before the year-end). The outstanding balance of RMB 15.8 million will be paid once the land use rights ("LUR") confirmation and other administrative procedures have been completed (Note 19).

The Company requested an independent market valuation for the newly acquired premises to analyse the total cost of RMB75.8 million between land use rights and property and this valuation shows that the LUR element within total cost paid is in excess of the RMB60 million value shown above. For these accounts the directors have therefore allocated all of the RMB 60 million deposit to land use rights and the final analysis between land use rights and property will be completed in next year's accounts when the residual payment is made. As the warehouse was not in operational use until just before the year end no amortisation has been charged on the allocated land use rights and in the event that some element of the deposit had been allocated to property no depreciation would have been charged on the property and therefore the current method of allocation has no impact on recorded net assets or results.

Included in the above figures is Land Use Rights ("LUR") at a cost and net book value of RMB 273 million which cost was fully paid during 2013 for a parcel of land in Cizao Town, Jinjiang City, Fujian Province, China. The payments were made to Fujian Jinjiang Industrial Park Development and Construction Co., Ltd. ("LDC"), a land development company established and owned by Local Government ("LDC"). The formal LUR Certificate that is required before the Group is able to use the land has still to be issued. Consequent to the delay in the issue of the formal LUR Certificate, the Group has signed a supplementary agreement with the LDC dated 6 March 2015. This agreement confirms, inter alia, that the LUR in respect of the parcel of land specified in the initial purchase agreement is not now able to be obtained from the LDC, that the LDC is seeking to locate an acceptable alternate parcel of land for the Group and that the Group has the right to request full payment of RMB 273 million from the LDC at any time up to the date that a formal LUR Certificate is issued by the LDC. The Board is of the view that the LDC will have the funds available to make such repayment if requested. The Board is unable to say when the formal LUR Certification process will be completed.

6 Property, plant and equipment

Please also refer to Note 5 above in respect of the transit warehouse purchased during the year.

7 Trade and other receivables

The Group allows an average credit period of 90 days to its trade customers.

Trade and other receivables are denominated in RMB,except prepayment of the interim dividend to the share registrar which is denominated in GBP.

Rental deposits relate to refundable security deposits placed with lessors for operating leases of warehousing facilities and fall due for repayment within 12 months.

8 Cash and cash equivalents

As at 31 December 2013 and 2014, bank balances of approximately RMB 319,214,000 and RMB 472,122,000 are interest earning. The weighted average effective interest rate of these interest-earning bank balances as at 31 December 2013 and 2014 was 0.38% and 0.35% per annum, respectively. In both periods the bank balances were available on demand.

Cash and bank balances are denominated in the following currencies:

9 Share capital

In August 2012, the Company issued 4,696,875 shares at £1.60 per share pursuant to its initial public offer of shares on the AIM market of the London Stock Exchange which raised £7,515,000 (equivalent to RMB 75,075,459).

In connection with the IPO, the Company issued 586,913 free Warrants to certain vendors for their services rendered and 1,098,437 free Warrants attached to 2,196,875 Ordinary Shares issued to three new Shareholders. Each Warrant carries the right to subscribe for one new Ordinary Share in the capital of the Company at an exercise price of £1.60. The IPO proceeds of RMB 75,075,459 were allocated to Ordinary Shares and Warrants issued to Shareholders using the fair value of the two instruments on a pro-rata basis on the IPO date. As a result, RMB 66,868,186 was recorded within share capital and share premium and RMB 8,207,273 in the Warrant reserve (Note 13).

The holders of Ordinary Shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company. All shares rank equally with regard to the Company's residual assets.

10 Merger reserve

The merger reserve represented the excess of the purchase consideration for the acquisition of the subsidiaries under common control in the Restructuring Exercise described in Note 2(a) over the combined paid-up registered capital of those subsidiaries.

11 Statutory common reserve

According to PRC Company Law, Fujian Xingtai is required to transfer between 5% and 10% of its profit after taxation to the statutory common reserve until the statutory common reserve balance reaches 50% of its registered capital. The amount of net profit after taxation transferred to the statutory common reserve reached 50% of the registered capital during the year ended 31 December 2009.

12 Other reserves

(i) Capital reserve

*At 31 December 2012, the advance from a Shareholder related to an advance from Mrs Xu to provide working capital for Chaintek United. The advance from a Shareholder was unsecured, interest-free and repayable in cash on demand. Pursuant to an agreement entered into with Mrs Xu, the Shareholder waived a portion of the advance amounting to RMB 9,813,688 during the financial year ended 31 December 2012. The advance amount waived was considered as a capital contribution from the Shareholder and recognised directly in equity under capital reserve. The remaining amount of RMB 6,975,275 has been fully repaid in 2013.

**On 27 June 2011, in connection with the restructuring exercise described in Note 2(a), the Company acquired 100% of the equity interest of Chaintek United for a purchase consideration of HK$10,000 (RMB 8,215) based on the nominal issued share capital of Chaintek United. The purchase consideration was outstanding at 31 December 2011. During the financial year ended 31 December 2012, the former Shareholders of Chaintek United, Mr Zhuang and Mrs Xu, waived the amount which was unsecured and interest free. Mr Zhuang and Mrs Xu are Shareholders of the Company after the restructuring exercise. The amount waived was considered as capital contributions from the Shareholders and recognised directly in equity under capital reserve.

(ii) Share premium

13 Warrant reserve

The Warrant reserve comprises the cumulative value of the portion of IPO proceeds ascribed to the attached Warrants, as described in share capital above. When a Warrant is exercised, the related balance in the Warrant reserve will be transferred to share capital. A number of warrants were granted to certain service providers as part of the listing process in 2012. The Directors consider that these warrants primarily related to services in support of the listing process rather than in supporting the main fund raising process and therefore have recorded the costs as a share based payment expense of RMB 4,977,160 for the year ended 31 December 2012.

Each Warrant carries the right to subscribe for one new Ordinary Share in the capital of the Company at an exercise price of £1.60.

The 1,500 Warrants issued to the vendors are exercisable at any time for a period of three years from 20 August 2012. The fair value of the Warrants was determined using the Black-Scholes option pricing formula with the following assumptions: volatility of 55.71%; risk free interest rate of 0.23%; and expected life of three years.

The 1,683,850 Warrants issued to the Shareholders and vendors are exercisable at any time for a period of five years from 20 August 2012. The share price at date of grant was 160p per share. The fair value of the Warrants was determined using the Black-Scholes option pricing formula with the following assumptions: volatility of 62.80%; risk free interest rate of 0.62%; and expected life of five years.

14 Trade and other payables

15 Revenue

16 Other income

17 Profit before taxation

(a) The following items have been included in arriving at profit before taxation:

Key management personnel include: Xu LiangYi, Group Chief Operating Officer, who is a brother of Mrs Xu. Key management personnel compensation for Chief Operating Officer is as follows:

(b) Amortisation of land use rights, depreciation of property, plant and equipment, operating lease expense and staff costs included in cost of sales, distribution expenses and administrative expenses are as follows:

18 Income tax expense

No deferred tax asset or liability is recognised, principally as a result of the Group's taxable profit equating to its accounting profit, and there being no differences between the tax basis of assets and liabilities and the carrying values in the statement of financial position.

At the reporting date, the Group has unabsorbed tax losses of approximately RMB 19,233,000 (2013: RMB 13,950,000) attributable to a subsidiary. The Group has not recognised a deferred tax asset in respect of the tax losses because the companies have not generated and are not expected to generate taxable profits that would absorb these losses.

19 Commitments

Capital commitment

At the reporting date, the Group was committed to making the following capital commitment in respect of property, plant and equipment.

Operating lease commitments

At the reporting date, the Group was committed to making the following rental payments in respect of operating leases of warehouses.