Mark E Chapman, China Wonder Limited

01483 892 130 / 07918 733111

Daniel Bate, WH Ireland Limited

0161 832 2174

2008

 2007

Note

£

£

REVENUE

3 

2,611,329 

2,336,967 

Cost of sales

(1,542,349)

(1,496,917)

Tax of sales

(901)

-  

GROSS PROFIT

1,068,079 

840,050 

OTHER OPERATING INCOME

3 

5,359 

10,718 

OPERATING EXPENSES

Distribution expenses

(196,297)

(152,818)

Administrative expenses

(831,505)

(385,720)

(1,027,802)

(538,538)

PROFIT FROM OPERATIONS

45,636 

312,230 

Income from subsidies

3 

94,423 

  -  

Finance income

3 

3,510 

3,336 

Finance costs

7 

(14,902)

(8,615)

PROFIT BEFORE TAX

128,667 

306,951 

TAXATION

8 

45,365 

(40,579)

Minority shareholder's profit

(2,658)

  -  

PROFIT FOR THE YEAR ATTRIBUTABLE

TO EQUITY HOLDERS OF THE PARENT

22 

171,374 

266,372 

EARNINGS PER SHARE

9 

Basic

0.95 p

1.65 p

Diluted

0.95 p

1.65 p

All amounts relate to continuing operations.

2008

2007

Note

£

£

£

£

ASSETS

Non-current assets

Property, plant and equipment

13 

999,786 

695,756 

Long term prepaid expenses

6,415 

  -  

Intangible assets

14 

1,449,153 

1,422,375 

Deferred tax asset

8 

65,547 

13,823 

2,520,901 

2,131,954 

Current assets

Inventories

15 

1,642,290 

684,062 

Trade and other receivables

16 

1,676,716 

991,519 

Tax assets

29,854 

-  

Cash and cash equivalents

334,666 

609,391 

3,683,526 

2,284,972 

TOTAL ASSETS

6,204,427 

4,416,926 

LIABILITIES

Current liabilities

Short-term loan

17 

(150,394)

(69,086)

Trade and other payables

18 

(2,122,771)

(1,074,389)

Tax liabilities

-  

(55,789)

(2,273,165)

(1,199,264)

TOTAL ASSETS LESS CURRENT LIABILITIES

3,931,262 

3,217,662 

LONG TERM LOAN

19 

-  

(69,086)

NET ASSETS

3,931,262 

3,148,576 

EQUITY ATTRIBUTABLE TO EQUITY HOLDERS

OF THE PARENT

Share capital

20 

450,000 

450,000 

Share premium

21 

1,935,980 

1,935,980 

Statutory reserves

21 

160,995 

139,615 

Translation reserve

21 

665,720 

79,661 

Retained earnings

21 

644,954 

494,960 

Minority interests

21 

73,613 

48,360 

TOTAL EQUITY

3,931,262 

3,148,576 

Approved and authorised for issue by the Board on 18 May 2009 and signed on its behalf by:

ZENG QINGDONG

MIAO GUOJUN

Director

Director

2008

2007

£

£

£

£

PROFIT BEFORE TAX

128,667 

306,951 

Depreciation of property, plant and equipment

99,316 

56,978 

Amortisation of intangibles

2,857 

1,979 

Provision for warranty

(13,791)

8,191 

Adjustments for:

interest paid

14,902 

8,615 

interest received

(3,510)

(3,336)

Loss on disposal of property, plant and equipment

787 

-  

OPERATING CASH FLOW BEFORE WORKING CAPITAL

229,228 

379,378 

Increase in inventories

(958,228)

(391,280)

Increase in receivables

(685,197)

(353,903)

Increase in payables

1,062,172 

444,738 

Tax (paid)/repaid

(73,255)

52,188 

NET CASH GENERATED/(ABSORBED) BY

OPERATING ACTIVITIES

(425,280)

131,121 

INVESTING ACTIVITIES

Additions of property, plant and equipment

(123,136)

(60,247)

Additions of long term prepaid expenses

(6,415)

-  

Additions to intangibles

-  

(88,209)

Interest received

3,510 

3,336 

Proceeds on sale of property, plant and equipment

2,593 

-  

Net cash used in investing activities

(123,448)

(145,120)

FINANCING ACTIVITIES

Issue of ordinary share capital

-  

202,500 

Costs of issue

-  

(13,750)

Investment from minority interests

-  

48,360 

Interest paid

(14,902)

(8,615)

Proceeds from bank borrowings

73,435 

138,172 

Repayment of bank borrowings

(116,875)

-  

Net cash (used in)/from financing activities

(58,342)

366,667 

NET (DECREASE)/INCREASE IN CASH

AND CASH EQUIVALENTS

(607,070)

352,668 

Cash and cash equivalents

at the beginning of the year

609,391 

262,080 

Effect of foreign exchange differences

332,345 

(5,357)

CASH AND CASH EQUIVALENTS

AT THE END OF THE YEAR

334,666 

609,391 

1.

GENERAL INFORMATION

The Company is a public limited company incorporated in Jersey under Companies (Jersey) Law 1991. The address of the registered office is PO Box 398, 11 Bath Street, St Helier, Jersey JE4 8UT. The nature of the Group's operations and its principal activities are set out in the Directors' Report. The principal place of business of the Group's operations is Qilihe Village Economic Development District, Jinzhou City, Liaoning Province, People's Republic of China.

These financial statements present information about the Company and as a consolidated group of companies, and are set out in pounds sterling reflecting the company's quotation on the UK Alternative Investment Market. The functional currency of the Company's subsidiaries is the Renminbi of the People's Republic of China.

2.

ACCOUNTING POLICIES

Statement of compliance

The financial statements have been prepared in accordance with those International Financial Reporting Standards and Interpretations in force ('IFRSs'), as adopted by the European Union, and in accordance with the provisions of the Companies (Jersey) Law 1991.

In accordance with the transitional arrangements provided in IFRS 2 Share-based payments, IFRS 2 has not been applied to the Company's share options as they had fully vested prior to 1 January 2005.

At the date of authorisation of these financial statements, the following standards and interpretations were in issue but not yet effective:

Standards, amendments and interpretations to published standards not yet effective 

Certain new standards, amendments and interpretations to existing standards have been published that are mandatory for the group's accounting periods beginning on or after 1 January 2008 or later periods and which the Group has decided not to adopt early. These are:  

 - IAS 23, Borrowing Costs (revised) (effective for accounting periods beginning on or after 1 January 2009). The revised IAS 23 is still to be endorsed by the EU. The main change from the previous version is the removal of the option of immediately recognising as an expense borrowing costs that relate to qualifying assets, broadly being assets that take a substantial period of time to get ready for use or sale. The Group is currently assessing its impact on the financial statements. 

- IFRS 8, Operating Segments (effective for accounting periods beginning on or after 1 January 2009). This standard sets out requirements for the disclosure of information about an entity's operating segments and also about the entity's products and services, the geographical areas in which it operates, and its major customers. It replaces IAS 14, Segmental Reporting. The group expects to apply this standard in the accounting period beginning on 1 January 2009. As this is a disclosure standard it will not have any impact on the results or net assets of the Group.

-  Revised IFRS 3, Business Combinations and complementary Amendments to IAS 27, 'Consolidated and separate financial statements' (both effective for accounting periods beginning on or after 1 July 2009). This revised standard and amendments to is still to be endorsed by the EU. The revised IFRS 3 and amendments to IAS 27 arise from a joint project with the Financial Accounting Standards Board (FASB), the US standards setter, and result in IFRS being largely converged with the related, recently issued, US requirements. There are certain very significant changes to the requirements of IFRS, and options available, if accounting for business combinations. Management is currently assessing the impact of revised IFRS 3 and amendments to IAS 27 on the accounts.

- Amendment to IFRS 2, Share-based payments: vesting conditions and cancellations (effective for accounting periods beginning on or after 1 January 2009). This amendment is still to be endorsed by the EU. The Amendment to IFRS 2 is of particular relevance to companies that operate employee shares save schemes. This is because it results in an immediate acceleration of the IFRS 2 expense that would otherwise have been recognised in future periods should an employee decide to stop contributing to the savings plan, as well as a potential revision to the fair value of the awards granted to factor in the probability of employees withdrawing from such a plan. Management is currently assessing the impact of the Amendment on the accounts.

- Amendments to IAS 1, Presentation of Financial Statements (effective for annual periods beginning on or after 1 January 2009). The revised IAS 1 introduces a single 'statement of comprehensive income' incorporating both the profits and losses that have traditionally been reported in the income statement and other gains and losses that are currently reported in the Statement of Changes in Equity. As a result, the 'statement of comprehensive income' reports all non-owner changes in equity. Other non-owner changes in equity include revaluations, actuarial gains and losses, translation gains and losses on foreign subsidiaries, remeasuring available for sale financial assets, and the effective portion of gains and losses on cash flow hedges.

The revised statement of changes in equity only reports transactions with owners (e.g. capital raised and dividends paid) and prior period restatements. It will not report non-owner income and expenses. In addition, the balance sheet will be renamed the statement of financial position and the cash flow statement will become the statement of cash flows. The Group expects to apply this standard in the accounting period beginning on 1 January 2009.

- IFRIC 16 Hedge of a net investment in a foreign operation (effective for annual periods beginning on or after 1 October 2008). The IFRIC clarifies certain aspects of IAS39 with respect to hedge accounting. The impact of this interpretation on the Group's financial statements is not expected to be material.

Critical accounting estimates and judgments 

The preparation of financial statements in conformity with IFRSs requires management to make assumptions that affects the application of accounting policies and the amounts of assets, liabilities, income and expenditure. The estimates and associated assumptions are based on historical experience and other relevant factors, the results of which form the basis for the judgements that underlie the carrying value of the assets and liabilities. Actual results may differ from these estimates. The most significant areas in which judgements are required relate to the estimate of useful economic lives and residual values of non-current assets and the recoverable amount of current and non-current assets (in particular inventories and trade receivables). The 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 if the revision affects only that period, or in the period of revision and future periods if the revision affects both the current and future periods. 

Judgments 

In the process of applying the Group's accounting policies, management has made the following judgment, apart from those involving estimations, which has the most significant effect on the amounts recognised in the financial statements.

The acquisition of Jinzhou Wonder Machinery Equipment co Ltd has been accounted for using the principles of acquisition accounting, which involve the estimation of fair values for separable assets and liabilities acquired.

Having considered that produce of the acquired subsidiary is bespoke, and that the business of the subsidiary is ever changing and with no repeat business being expected from customers, customer contracts are assessed to be generally short-lived as they generally extend for less than six months.

There is considered to be no history or evidence of exchange transactions for the same potential intangible assets and the directors therefore consider that there is no significant value to any such intangible assets. Due to these reasons the fair value of customer lists are not considered to be significant.

Resulting from this estimation, goodwill is recognized as arising from the acquisition in the absence of other separable intangible assets. Review of the potential impairment of such goodwill involves judgements relating to future economic events.

Estimates and assumptions 

Allowance for doubtful trade receivables 
The Group makes sales on credit. A proportion of the outstanding credit sales may prove uncollectible in due course. An estimate is made of the uncollectible portion of accounts receivables using a calculation based on prior experience and an evaluation of the amounts outstanding. In aggregate, £233,576 (2007: £92,555) is considered to be at risk in respect of amounts due from trade customers. There is a degree of uncertainty as to actions the Group is able to undertake to enforce collection of these debts, which may impact the eventual recoverable amounts. Accordingly, the Directors have assessed their best estimate of the recoverability of these debts as nil. More details of the allowance for doubtful trade and other receivables is provided in Note 16.

The company reviews the net realisable value of, and demand for, its inventory on a regular basis to provide assurance that recorded inventory is stated at the lower of cost or net realisable value. Factors that could impact estimated demand and selling prices include the timing and success of future technological innovations, competitor actions, supplier prices and economic trends. Changes of the expected net realizable value of inventory could potentially result in the reduction of the profit for the year. The Group has not made significant provision for slow moving and obsolete stock as its amount was negligible. 

Basis of consolidation

Where the company has the power, either directly or indirectly, to govern the financial and operating policies of another entity or business so as to obtain benefits from its activities, it is classified as a subsidiary. The consolidated financial statements present the results of the Company and its subsidiaries ('the Group') as if they formed a single entity. Inter-company transactions and balances between group companies are therefore eliminated in full.

Goodwill

Goodwill represents the excess of the cost of a business combination over the interest in the fair value of identifiable assets, liabilities and contingent liabilities acquired. Cost comprises the fair values of assets given, liabilities assumed and equity instruments issued, plus any direct costs of acquisition.

Goodwill is capitalised as an intangible asset with any impairment in carrying value being charged to the income statement, through administrative expenses, and is not subsequently reversed.

Where the fair value of identifiable assets, liabilities and contingent liabilities exceed the fair value of consideration paid, the excess is credited in full to the income statement.

Foreign currency

Transactions entered into by Group entities in a currency other than the currency of the primary economic environment in which it operates (the 'functional currency') are recorded at the rates ruling when the transactions occur. Foreign currency monetary assets and liabilities are translated at the rates ruling at the balance sheet date. 

The presentation currency of the Group is pounds sterling and therefore the financial statements have been translated from RMB to pounds sterling at the following exchange rates:

Year-end rates

Average rates

31 December 2007

￡1=RMB14.4747

￡1=RMB15.2451

31 December 2008

￡1=RMB9.9738

￡1=RMB12.9626

On consolidation, the results of overseas operations are translated into sterling at rates approximating to those ruling when the transactions took place. All assets and liabilities of overseas operations, including goodwill arising on the acquisition of those operations, are translated at the rate ruling at the balance sheet date. Exchange differences arising on translating the opening net assets at opening rate and the results of overseas operations at actual rate are recognised directly in equity (the 'Translation reserve'). Exchange differences recognised in the income statement of Group entities' separate financial statements on the translation of long-term monetary items forming part of the Group's net investment in the overseas operation concerned are reclassified to the Translation reserve.

On disposal of a foreign operation, the cumulative exchange differences recognised in the foreign exchange reserve relating to that operation up to the date of disposal are transferred to the income statement as part of the profit or loss on disposal.

Borrowing costs

All borrowings costs are recognised in the income statement in the period in which they are incurred.

Income tax 

Income tax for the financial year comprises current and deferred tax. Income tax is recognised in the income statement except to the extent that it relates to items recognised directly in equity, in which case such tax is recognised in equity.

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

Deferred tax is provided using the liability method, providing for temporary differences as at the balance sheet date between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes except for differences arising on: 

•

the initial recognition of goodwill,

•

the initial recognition of an asset or liability in a transaction which is not a business combination and, at the time of the transaction, affects neither accounting or taxable profit, and

•

investments in subsidiaries and jointly controlled entities where the group is able to control the timing of the reversal of the difference and it is probable that the difference will not reverse in the foreseeable future.

The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date.

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

Dividends

Equity dividends are recognised when they become legally payable. In respect of interim dividends to equity shareholders, this is when they are declared and paid. In respect of final dividends to equity shareholders, this is when they are approved by the members at the Annual General Meeting.

Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. The cost of an asset comprises its purchase price and any directly attributable costs of bringing the asset to its working condition and location for its intended use. Depreciation is calculated so as to write off the cost of an asset, less its estimated residual value, over its useful economic life, using the straight-line method. The estimated useful lives are as follows: 

Buildings

20 years

Plant, machinery, furniture and fixtures

5-10 years

Motor vehicles

5 years

Office equipment

5 years

Land use rights and patent rights

Expenditure on land use rights and patents rights are capitalised and treated as an intangible fixed asset. 

Land use rights and patents are amortised through administrative expenses over the period to which the rights or patent relate.

The estimated useful lives are as follows: 

Land use right

41-43 years

Patent rights

10 years

Impairment of assets

The carrying amounts of assets are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the asset's recoverable amount is estimated. For goodwill, the recoverable amount is estimated at each balance sheet date. An impairment loss is recognised whenever the carrying amount of the asset or its cash-generating unit exceeds its recoverable amount. Impairment losses are recognised through administrative expenses in the income statement.

The recoverable amount is the higher of an asset's net selling price and value in use. The net selling price is the amount obtainable from the sale of an asset in an arm's length transaction. Value in use is the present value of estimated future cash flows expected to arise from the continuing use of an asset and from its disposal at the end of its useful life. Recoverable amounts are estimated for individual assets or, if it is not possible, for the cash generating unit.

An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation, if no impairment loss had been recognised. Reversals of impairment losses are recognised in the income statement. Impairment losses in respect of goodwill are not reversed.

Investment in subsidiary undertakings

Investments in subsidiaries are stated at cost less provision for any impairment in value.

Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is determined using the weighted average cost method. The cost of finished goods comprises raw materials, direct labour, other direct costs and related production overheads but excludes borrowing costs. Net realisable value is the estimated selling price in the ordinary course of business, less the costs of completion and selling expenses.

Financial assets

Financial assets are cash and bank balances and trade and other receivables. 

Trade and other receivables are stated at cost as reduced by appropriate allowances for estimated irrecoverable amounts. 

Known bad receivables are written off as incurred when collection for the full amount is no longer probable, and an estimate for doubtful debts made based on past experience.

Cash and cash equivalents

Cash comprises cash in hand and demand deposits. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. For the purpose of the cashflow statement, cash equivalents would include advances from banks repayable within 3 months from the date of the advance.

Financial liabilities and equity

Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. Financial liabilities include trade and other payables, amounts due to related parties and shareholders, bank borrowings and notes payable.  

Trade and other payables are carried at cost which is the fair value of the consideration to be paid in the future for goods and services received, whether or not billed to the Group.

All borrowings and overdrafts are recorded at fair value, being the proceeds received, net of direct issue costs. Finance charges are charged to the income statement on an accruals basis using the effective interest rate method.

Equity instruments are recorded at the fair value of the consideration received, net of direct issue costs.

Sales revenue recognition

Sales revenue is recognised when goods are delivered and commissioned at the customers' premises which is taken to be the point in time when the customer has accepted the goods and the related risks and rewards of ownership. Sales revenue excludes value added or other sales taxes and is after deduction of any trade discounts.

Government grants

Government grants received on capital expenditure are deducted in arriving at the carrying amount of the asset purchased. Grants for revenue expenditure are presented separately on the face of the consolidated income statement.

Where retention of the government grant is dependent on the Group satisfying certain criteria it is initially recognised as deferred income. When the criteria for retention have been satisfied, the deferred income balance is released to the income statement or netted against the asset purchased as appropriate.

Related parties

Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party, or exercise significant influence over the other party in making financial and operating decisions. Parties are also considered to be related if they are subject to common control or common significant influence. Related parties may be individuals or corporate entities.

3.

INCOME

Income is analysed as follows:  

2008

2007

£ 

£ 

Revenue from the sale of goods

2,611,329 

2,336,967 

Other operating income - government subsidy

94,423 

-

Non-operating income

5,359 

10,718 

Interest received on cash deposits

3,510 

3,336 

2,714,621 

2,351,021 

SEGMENT INFORMATION

Packaging machinery

Moulding Equipment

Bespoke engineering

Unallocated

Total

£

£

£

£

£

Revenue from sale of goods

1,186,063 

75,824 

1,349,442 

2,611,329 

Segment result

32,023 

14,509 

100,887 

(7,360)

140,059 

Finance income

1,973 

1,176 

280 

81 

3,510 

Finance costs

(1,171)

(29)

(13,702)

 -

(14,902)

Profit before income tax

32,825 

15,656 

87,465 

(7,279)

128,667 

Tax expense

29,147 

(5,023)

7,048 

31,172 

Profit from continuing operations

61,972 

10,633 

94,513 

(7,279)

159,839 

Minority interest

(2,658)

(2,658)

Profit attributable to the equity holders of the parent

61,972 

7,975 

94,513 

(7,279)

157,181 

Other segment items included in the income statement are as follows:

Depreciation

61,468 

14,105 

23,743 

-

99,316 

Amortisation

2,857 

-

-

-

2,857 

Provisions for doubtful debts

159,039 

4,538 

69,999 

-

233,576 

Segmental assets and liabilities at 31 December 2008 and capital expenditure for the year ended are as follows:

Total assets (excluding technology)

2,421,243 

286,224 

2,037,195 

1,359,503 

6,104,165 

Technology Segment Assets

100,262 

Total assets  

6,204,427 

Total liabilities

635,939 

(3,689)

1,391,647 

249,268 

2,273,165 

The technology segment of the group has not traded during the current year under review. This segment has no liabilites and only consists of an asset base as disclosed above.

The sales revenue arises from the sale of packaging machinery, machinery equipments, moulds, and relevant spare parts which forms the Group's main business.

All operations and assets are based in Jinzhou Province, People's Republic of China. Revenue from the sale of goods is analysed as follows: