Comtec Solar Systems Group Limited - Annual Report 2018

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卡姆丹克太陽能系統集團有限公司 Comtec Solar Systems Group Limited

(Incorporated in the Cayman Islands with limited liability)

(Stock code: 712)

ANNOUNCEMENT OF ANNUAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2018

HIGHLIGHTS

Revenue for the Period was approximately RMB172.6 million, representing a year-on-year decrease of 64.7% from approximately RMB489.2 million for the year ended 31 December in 2017;
Gross loss for the Period was approximately RMB5.5 million, comparing to gross profit of approximately RMB8.0 million for the year ended 31 December 2017;
Gross loss margin for the Period was approximately 3.2%, decreased from gross profit margin of 1.6% for the year ended 31 December in 2017;
Net losses attributable to the owners of the Company for the Period was approximately RMB179.9 million, increased from net losses of RMB140.3 million for the year ended 31 December 2017;
Net loss margin attributable to owners of the Company for the Period was approximately 104.2%, comparing to net losses margin of 28.7% for the year ended 31 December 2017; and
Our loss per share for the Period was RMB8.58 cents, comparing to the losses per share of RMB8.15 cents for the year ended 31 December 2017.

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CHAIRMAN’S STATEMENT

Dear Shareholders,

On behalf of the Company, I am pleased to present the audited annual results of the Group for the Period. Here are some of our financial and business highlights for the year:

Revenue for the Period was approximately RMB172.6 million, representing a year-onyear decrease of 64.7% from approximately RMB489.2 million for the year ended 31 December 2017;
Gross loss for the Period was approximately RMB5.5 million, comparing to gross profit of approximately RMB8.0 million for the year ended 31 December 2017;
Gross loss margin for the Period was approximately 3.2%, decreased from gross profit margin of 1.6% for the year ended 31 December 2017;
Net losses attributable to the owners of the Company for the Period was approximately RMB179.9 million, increased from net losses of RMB140.3 million for the year ended 31 December 2017;
Net loss margin attributable to owners of the Company for the Period was approximately 104.2%, comparing to net losses margin of 28.7% for the year ended 31 December 2017; and
Our loss per share for the Period was RMB8.58 cents, comparing to the losses per share of RMB8.15 cents for the year ended 31 December 2017.

During the Period, certain new policies were launched by the Chinese government which have caused disruptions in the solar industry. Such new policies reduced solar installation quota and feed-in-tariffs in the PRC during the second half of 2018. Such new policies created uncertainties in the domestic solar market and negatively impacted industry demand and selling price of upstream products.

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In order to remain flexible and rapidly adapt our business to the challenging market environment, we continued to reduce our fixed costs of operations and the level of our fixed assets in the manufacturing business segment. We focused on further strengthening our supply chain management, advanced technological capabilities, high quality product offerings, and premium customer bases to ensure our long-term competitiveness. We also actively looked for opportunities to out-source production procedures to third party processing agents whenever it is in our commercial interest. We believe out-sourcing our production procedures would be more cost effective when there are excess production capacities in the market. We continued to reduce head counts and to dispose of fixed assets which were low in utilization. We also rented out certain idle space in our factories. As our factory in Haian can accommodate all of our remaining manufacturing equipment, we would also consider to dispose our factory in Shanghai which has higher appraised value, if we receive an attractive offer from potential buyer. These measures are aligned with our overall strategy of improving our operating efficiencies.

Throughout the Period, we were free from the impact of long term purchase agreements for polysilicon which led to substantial amount of losses of the Group in the last few years. The absence of commitment to such long term supply contracts gives the Group more flexibility in managing its supply chain to adapt to market situations and the benefit from decreasing spot prices of raw materials. We intend to continuously improve the cost competitiveness of our existing upstream solar manufacturing business as a solid foundation to support the development of our downstream solar businesses. We strive to create synergies among our existing upstream solar business and other new business initiatives in the renewable energies industry in order to create value for our shareholders. In addition, we concluded a renegotiation with a long term supplier in December 2018 which enabled us to substantially realize the remaining amount of our prepayments made to that supplier in previous years. An amount of approximately USD5.1 million has been offset with the full amount of our purchase of polysilicon from the supplier throughout the first quarter of 2019.

We believe the industry demand will continue to grow in the long term as solar PV is becoming increasingly cost competitive and less dependent on government policies and subsidies. We remain confident in the long-term sustainable growth of the industry despite the impact by the recent solar PV policies issued by the Chinese government. We proactively design and execute various strategies to navigate this challenging period in the industry.

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In order to enhance our profit and profitability, the Group also made continuous efforts to develop and expand its new business initiatives. On 18 September 2017, Comtec Renewable Energy and Macquarie Capital entered into a shareholders’ agreement, pursuant to which Comtec Renewable Energy and Macquarie Capital agreed to form Future Energy Capital for the purpose of developing and expanding the downstream solar business. Future Energy Capital specifically focuses on rooftop distributed generation projects on commercial and industrial buildings. It is owned as to 50% by Comtec Renewable Energy and 50% by Macquarie Capital, respectively, and the total subscription amount to be paid by each party for the transaction is up to a maximum of US$5.0 million. Future Energy Capital focuses on the development, project management and construction of distributed solar generated power projects in the PRC with an aggregate capacity of 30 to 40 MW. the Throughout the Period, Future Energy Capital has established its investment platform in the PRC and was in the process to build up its own project portfolio. We believe the cooperation with Macquarie Capital will broaden the Group’s strategic cooperation with international financial institutions, which strengthens and improves the financial resources of the Group.

As of 31 December 2018, the Group has transferred certain grid-connected downstream rooftop distributed generation projects of approximately 5.0 MW in aggregate to Future Energy Capital.

On 25 May 2017, Comtec Renewable Energy (Jiangsu) Limited (卡姆丹克清潔能源(江蘇)有限公司) (as Comtec Clean Energy was then known as) (“ Comtec Renewable (Jiangsu)* ”), Kexin and the vendors of Kexin entered into an equity transfer agreement, pursuant to which Comtec Renewable (Jiangsu) agreed to acquire 70% equity interest of Kexin from the vendors at a cash consideration of RMB14.0 million. Kexin is principally engaged in the research and development, design, integration and sales of lithium battery management systems and lithium battery systems for electric vehicles (including electric cars, electric motors and electric bicycles) to electric vehicle manufacturers and for power storage systems to lithium battery manufacturers and to power storage companies. The acquisition represented an attractive opportunity for the Group to expand into the business of the research and development, design, integration and sales of lithium battery management systems and lithium battery systems for electric vehicles (including electric cars, electric motors and electric bicycles) to electric vehicle manufacturers and for power storage systems to lithium battery manufacturers and to power storage companies, which marked the Group’s continuous efforts in diversifying its business.

We expect the sound developments and growth prospects of the electric vehicle industry and the power storage industry would drive sustainable growth and profitability of Kexin. Throughout the Period, Kexin has achieved remarkable growth of business and it recorded revenue of approximately RMB65.6 million for the year, representing an increase of approximately 1,161.5%, from RMB5.2 million which was included in the consolidated revenue of the Group for the year ended 31 December 2017 since the completion of its acquisition in October 2017.

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On 23 November 2018 (after trading hours), Comtec Clean Energy, Lu Ke Ya and Kexin entered into a capital injection agreement with ISDN in relation to the injection of capital by ISDN to the registered capital of Kexin. Pursuant to the same capital injection agreement, ISDN agreed to subscribe for 10% of the enlarged registered share capital of Kexin. ISDN contributed RMB4,444,444.0 in cash to the capital of Kexin in March 2019 and has been a registered shareholder of Kexin holding 10% equity interest in Kexin. Please refer to the announcement of the Company dated 23 November 2018 for further details.

The above progresses marked the Group’s continuous efforts to develop and expand its new business initiatives in the renewable energy industry. It would fuel the growth of the Group and enhance our profitability in future.

On 18 May 2018 (after trading hours), Putana Limited and the Company entered into a subscription agreement in respect of the issue of convertible bonds (the “ Convertible Bonds ”) in the aggregate principal amount of US$10.0 million due 2021 with interest rate per annum of 10.0%. The conversion price is HK$0.174 per share for a potential maximum amount of 451,137,931 conversion shares (the “ Conversion Shares ”) to be allotted and issued upon exercise in full of the conversion rights attached to the Convertible Bonds which represent (i) approximately 21.5% of the existing issued share capital of the Company as of 18 May 2018, and (ii) approximately 17.7% of the issued share capital as enlarged by the issue of the Conversion Shares in full. No listing of the Convertible Bonds will be sought on the Stock Exchange or any other stock exchanges. The net proceeds from the issue of the Convertible Bonds was approximately US$9.9 million, 80% of which will be used for providing funding for Future Energy Capital and other downstream projects, and 20% of which will be used as general working capital. The issue of Convertible Bonds was completed on 27 July 2018. Please refer to the announcement of the Company dated 18 May 2018 and the circular of the Company dated 9 July 2018 for further details.

Given the current industry environment, it is clear that strict financial discipline is essential to success. Our financial position was and will be further strengthened after issuance of the Convertible Bonds. In addition, we implemented and will continue to implement a balanced financing plan to support our business operation.

On behalf of the Board, I would like to express my sincere gratitude to our Shareholders and business partners for their support and trust in us, and also to our management and employees for their hard work. We look forward to creating greater value and return for our Shareholders.

John Yi Zhang Chairman

Shanghai, 29 March 2019

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ANNUAL RESULTS

The Board is pleased to announce the audited consolidated financial results of the Group for the Period, together with the comparative figures for the corresponding year in 2017. These results have been reviewed by the Company’s audit committee, comprising all the independent non-executive Directors, with one of them chairing the committee.

CONSOLIDATED STATEMENT OF PROFIT OR LOSS

For the year ended 31 December 2018

NOTES Revenue 4, 5 Cost of sales Gross (loss) profit Other income 6 Other gains and losses 7 Impairment losses, net of reversal Distribution and selling expenses Administrative expenses Research and development expenses Share of profit of a joint venture Finance costs Loss before tax 8 Income tax credit (expense) 9 Loss for the year Loss for the year attributable to Owners of the Company Non-controlling interests Loss per share 11 — Basic — Diluted	2018 *RMB’000* 172,617 (178,138) (5,521) 14,403 (64,120) (17,054) (6,012) (92,895) (5,785) 1,339 (23,849) (199,494) 12,912 (186,582) (179,882) (6,700) (186,582) *RMB cents* (8.58) (8.58)	2017 RMB’000 489,208 (481,230) 7,978 29,029 (45,832) (7,690) (11,049) (81,846) (5,865) – (15,925) (131,200) (14,247) (145,447) (140,296) (5,151) (145,447) RMB cents (8.15) (8.15)

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CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

For the year ended 31 December 2018

Loss for the year Other comprehensive income (expense) Items that will not be reclassified to profit or loss: Gain on revaluation of investment properties transferred from property, plant and equipment and prepaid lease payments Deferred tax arising from gain on revaluation of investment properties transferred from property, plant and equipment and prepaid lease payments Other comprehensive income for the year Total comprehensive expense for the year Total comprehensive expense for the year attributable to: Owners of the Company Non-controlling interests	2018 *RMB’000* (186,582) – – – (186,582) (179,882) (6,700) (186,582)	2017 RMB’000 (145,447) 41,387 (10,347) 31,040 (114,407) (109,256) (5,151) (114,407)

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CONSOLIDATED STATEMENT OF FINANCIAL POSITION

At 31 December 2018

		2018	2017
	NOTES	*RMB’000*	RMB’000
Non-current assets
Property, plant and equipment		166,444	142,129
Prepaid lease payments	12	12,933	13,484
Investment properties		86,027	86,027
Goodwill	13	66,892	105,917
Intangible assets	14	5,645	67,757
Interests in a joint venture		10,514	–
Deposits paid for acquisition of property,
plant and equipment		148	22,354
		348,603	437,668
Current assets
Inventories	15	18,788	43,209
Trade and other receivables	16	75,207	131,346
Bills receivable	16	–	1,684
Advance to suppliers		71,611	64,509
Prepaid lease payments	12	549	335
Pledged bank deposits		22,063	20,874
Bank balances and cash		8,020	32,107
		196,238	294,064
Current liabilities
Trade and other payables	17	139,068	131,057
Contract liabilities	18	51,530	–
Customers’ deposits received		–	43,203
Short-term bank loans		170,172	200,339
Tax liabilities		5,785	10,333
Deferred income		287	287
Contingent consideration payables	19	5,936	9,884
Obligations under finance lease		820	–
		373,598	395,103
Net current liabilities		(177,360)	(101,039)
Total assets less current liabilities		171,243	336,629

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NOTES Non-current liabilities Long-term bank loans Deferred tax liabilities 20 Long-term payable Deferred income Contingent consideration payables 19 Convertible bonds 21 Obligations under finance lease Capital and reserves Share capital Reserves Equity attributable to owners of the Company Non-controlling interests Total equity	2018 *RMB’000* 5,400 18,503 4,500 3,725 – 72,902 8,501 113,531 1,807 53,074 54,881 2,831 57,712 171,243	2017 RMB’000 11,950 31,958 4,500 4,011 42,105 – –
		94,524
		1,807 231,337
		233,144 8,961
		242,105
		336,629

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended 31 December 2018

1. GENERAL

Comtec Solar Systems Group Limited (the “Company”) is a public limited company incorporated in the Cayman Island, and its shares are listed on the Main Board of The Stock Exchange of Hong Kong Limited (the “Stock Exchange”) on 30 October 2009. Its parent company and ultimate holding company is Fonty Holdings Limited (“Fonty”) incorporated in the British Virgin Islands with limited liability. Its ultimate controlling party is Mr. John Yi Zhang (“Mr. Zhang”) who is the chairman and director of the Company. The addresses of the registered office and principal place of business of the Company are disclosed in the annual report.

The Company is an investment holding company. The Company and its subsidiaries are principally engaged in research, production and sales of efficient mono-crystalline products, power storage products and lithium battery products and the provision of consulting services for investment, development, construction and operation of solar photovoltaic power stations.

The consolidated financial statements are presented in Renminbi (“RMB”), which is also the functional currency of the Company.

2. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS

The Group experienced a net loss of RMB186,582,000 for the year ended 31 December 2018 and had a working capital deficit (total consolidated current liabilities exceeded total consolidated current assets) of RMB177,360,000 although a net assets of RMB57,712,000 are maintained as at that date. These factors initially raised doubt as to the Group’s ability to continue as a going concern. However, the Group has developed and implemented the following liquidity plan:

The Group currently is negotiating with banks to seek for the renewal of the loans and extension of the maturity date. Historically, the Group has rolled over or obtained replacement borrowings from existing credit for most of its short-term bank loans upon the maturity date of the loans. The Group has assumed it will continue to be able to do so for the foreseeable future;
The controlling shareholder committed to provide necessary financial support to the Group by either subscribing new shares of the Company or to provide shareholder’s loan according to the listing rules requirements;
The existing convertible bonds holder also committed to provide the funding to the Group to improve the Group’s liquidity when necessary;
The Group is adopting strict control of operating and investing activities.

Based on the refinanced short-term bank loans plan, the liquidity plan and the strict control on cash outflow strategy, the directors of the Company are of the opinion that the Group has sufficient working capital for its presentation requirements that is for at least the next 12 months commencing from the date of the consolidated financial statements. Hence the consolidated financial statements have been prepared on a going concern basis.

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3. APPLICATION OF NEW AND AMENDMENTS TO INTERNATIONAL FINANCIAL REPORTING STANDARDS (“IFRSs”)

Amendments to IFRSs that are mandatorily effective for the current year

The Group has applied the following new and amendments to IFRSs issued by the International Accounting Standards Board (“IASB”) for the first time in the current year.

IFRS 9 Financial Instruments IFRS 15 Revenue from Contracts with Customers and the related Amendments IFRIC-Int 22 Foreign Currency Transactions and Advance Consideration Amendments to IFRS 2 Classification and Measurement of Share-based Payment Transactions Amendments to IFRS 4 Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts Amendments to IAS 28 As part of the Annual Improvements to IFRSs 2014–2016 Cycle Amendments to IAS 40 Transfers of Investment Property

As a result of the changes in the entity’s accounting policies above, the opening consolidated statement of financial position had to be restated. The following table show the adjustments recognised for each individual line item.

Current Assets Trade and other receivables Current liabilities Customers’ deposit received Contract liabilities Capital and Reserves Reserves	31 December 2017 (Audited) RMB’000 131,346 43,203 – 231,337	IFRS 15 RMB’000 – (43,203) 43,203 –	IFRS 9 RMB’000 (945) – – (945)	1 January 2018 (Restated) *RMB’000* 130,401
				– 43,203
				230,392

Except as described above, the application of amendments to IFRSs in the current year has had no material effect on the amounts reported and/or disclosures set out in these consolidated financial statements.

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4. REVENUE

A. For the year ended 31 December 2018

Disaggregation of revenue from contracts with customers

Segments Types of goods or service Sales of monocrystalline solar wafers Sales of monocrystalline solar ingots Sales of polysilicon Sales of solar modules Power storage products Consulting services for photovoltaic power stations Revenue on power generation Installation service for photovoltaic power stations Sales of others Total revenue Geographical markets PRC including Hong Kong SAR Philippines and Malaysia Japan Korea Total revenue Timing of revenue recognition At a point of time Overtime Total revenue	For the year ended 31 December 2018 Upstream business Downstream solar and power storage RMB’000 RMB’000 58,805 – 22,697 – 4,633 – 4,564 – – 65,633 – 840 – 9,862 – 5,080 503 – 91,202 81,415 82,030 78,339 – 3,076 9,127 – 45 – 91,202 81,415 91,202 76,335 – 5,080 91,202 81,415	For the year ended 31 December 2018 Upstream business Downstream solar and power storage RMB’000 RMB’000 58,805 – 22,697 – 4,633 – 4,564 – – 65,633 – 840 – 9,862 – 5,080 503 – 91,202 81,415 82,030 78,339 – 3,076 9,127 – 45 – 91,202 81,415 91,202 76,335 – 5,080 91,202 81,415
		81,415
		78,339 3,076 – –
		81,415
		76,335 5,080
		81,415

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B. For the year ended 31 December 2017

An analysis of the Group’s revenue for the year from continuing operations is as follows:

Sales of monocrystalline solar wafers Sales of monocrystalline solar ingots Sales of polysilicon Sales of solar cells Sales of solar modules Sales of power storage products Consulting services for investment, development, construction and operation of solar photovoltaic power stations Sales of others	Year ended 31/12/2017 RMB’000 249,510 45,465 65,295 34,787 37,467 5,187 47,174 4,323
	489,208

5. SEGMENT INFORMATION

The Group is principally engaged in research, production and sales of efficient mono-crystalline products, provision of consulting services for investment, development, construction and operation of solar photovoltaic power stations and the research, production and sales of power storage products. The Group has two operating and reportable segments for financial reportable purpose in 2018. The Group’s segment (loss) profit is the (loss) profit before taxation of the Group.

The Group’s reportable and operating segments are as follows:

i. Upstream — Production and sales of efficient mono-crystalline products, trading of solar products.
ii. Downstream solar and power storage — Provision of consulting services for investment, development, construction and operation of solar photovoltaic power stations, production and sales of the power storage products in the current year.

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Segment revenues and results

For the year ended 31 December 2018: Revenue Cost of sales and services Segment (loss) profit Other income Impairment losses, net of reversal Other gains and losses Distribution and selling expenses Administrative expenses Research and development expenses Share of profit of a joint venture Finance costs Loss before tax For the year ended 31 December 2017: Revenue Cost of sales and services Segment (loss) profit Other income Impairment losses, net of reversal Other gains and losses Distribution and selling expenses Administrative expenses Research and development expenses Finance costs Loss before tax	Upstream *RMB’000* 91,202 (111,018) (19,816) Upstream RMB’000 442,034 (473,380) (31,346)	Downstream Solar and Power Storage *RMB’000* 81,415 (67,120) 14,295 Downstream RMB’000 47,174 (7,850) 39,324	Total *RMB’000* 172,617 (178,138) (5,521) 14,403 (17,054) (64,120) (6,012) (92,895) (5,785) 1,339 (23,849) (199,494) Total RMB’000 489,208 (481,230) 7,978 29,029 (7,690) (45,832) (11,049) (81,846) (5,865) (15,925) (131,200)

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Information about major customers

Details of the customers contributing 10% or more of total revenue of the Group are as follows:

	Year ended	Year ended
	31/12/2018	31/12/2017
	*RMB’000*	RMB’000
Customer A1	58,022	4,566
Customer B2	19,256	57,496

1 Revenue from Downstream Solar and Power Storage Segment

2 Revenue from Upstream Segment

Geographical information

All of the Group’s non-current assets, including property, plant and equipment, prepaid lease payments, investment properties, goodwill, intangible assets, deposits paid for acquisition of property, plant and equipment and interests in a joint venture, are located in the group entities’ countries of domicile at the end of each reporting period. The following table sets forth details:

PRC including Hong Kong SAR Malaysia OTHER INCOME Government grant_(Note)_ Deferred income amortisation Rental income Interest income Others	31/12/2018 *RMB’000* 348,214 389 348,603 Year ended 31/12/2018 *RMB’000* 6,886 287 5,078 382 1,770 14,403	31/12/2017 RMB’000 437,279 389
		437,668
		Year ended 31/12/2017 RMB’000 26,764 287 1,606 296 76
		29,029

6. OTHER INCOME

Note: The government grant mainly represented the amount received from the local government by an operating subsidiary of the Group to encourage activities carried out by the Group in clean energy industry and high-technology advancement. No specific conditions were attached to the grant.

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7. OTHER GAINS AND LOSSES

Net foreign exchange losses Gain on fair value change of contingent consideration payables Loss on disposal of property, plant and equipment Impairment losses recognised in respect of advance to suppliers and deposits paid for acquisition of property, plant and equipment Impairment loss recognised in respect of goodwill_(Note 13) Impairment loss recognised in respect of intangible assets(Note 14) Loss on fair value change of convertible bonds(Note 21) Loss on disposal of subsidiaries Impairment losses recognised in respect of property, plant and equipment Losses recognised in respect of provision for termination of Malaysian plant under construction Losses recognised in respect of provision for compensation to a supplier 8. LOSS BEFORE TAX Loss before tax has been arrived at after charging: Staff costs, including Director’s remuneration Salaries, wages, bonus and other benefits Retirement benefits schemes contributions Share based payments expenses Total staff costs Capitalised in inventories Depreciation of property, plant and equipment Capitalised in inventories Auditor’s remuneration Cost of inventories recognised as expense(Note (i))_ Release of prepaid lease payments Amortisation of intangible assets Research and development expenses Operating lease rentals in respect of rented premises Rental income for investment properties	Year ended 31/12/2018 *RMB’000* (8,763) 46,053 (280) (8,915) (39,025) (48,700) (1,040) (3,450) – – – (64,120) Year ended 31/12/2018 *RMB’000* 36,969 3,397 2,564 42,930 (9,109) 33,821 19,448 (13,500) 5,948 2,140 170,247 337 13,412 5,785 7,731 (5,078)	Year ended 31/12/2017 RMB’000 (3,861) 22,016 (14,796) – – – – – (36,872) (6,200) (6,119) (45,832) Year ended 31/12/2017 RMB’000 43,344 5,188 2,106 50,638 (19,829) 30,809 18,086 (16,930) 1,156 2,100 473,380 551 21,288 5,865 3,803 (1,606)

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Notes:

(i) Included in cost of inventories recognised as expense represented provision of inventories of approximately RMB2,633,000 (2017: RMB17,381,000) to their net realisable values.

9. INCOME TAX (CREDIT)EXPENSE

Current tax: PRC Enterprise Income Tax Under provision in prior years Deferred tax_(Note 20)_: Current year	Year ended 31/12/2018 *RMB’000* – 543 543 (13,455) (12,912)	Year ended 31/12/2017 RMB’000 15,208 – 15,208 (961) 14,247

No Hong Kong Profits Tax was provided for the years ended 31 December 2018 and 31 December 2017 as the group entities either had no relevant assessable profits or incurred tax losses in Hong Kong.

PRC income tax is calculated at the applicable tax rates in accordance with the relevant laws and regulations in the PRC. Under the Law of the PRC on Enterprise Income Tax (the “EIT Law”) and Implementation Regulation of the EIT Law, the tax rate of the PRC subsidiaries is 25%.

During the years ended 31 December 2018 and 31 December 2017, the applicable tax rate of Shanghai Comtec Solar Technology Co., Ltd. (“Comtec Solar”) was 15% as it was qualified as a New High-Tech enterprise for the period of five years form 1 January 2014 to 31 December 2018.

Upon the EIT Law, dividends paid out of the net profits derived by the Company’s PRC operating subsidiaries to non-PRC residents shareholders for financial years since 1 January 2008 are subject to applicable PRC withholding tax in a rate of 10% or lower rates as provided in tax treaties in accordance with relevant tax laws in the PRC. Withholding tax has been provided for based on the anticipated dividends to be distributed by the Company’s PRC operation subsidiaries to non-PRC resident shareholders with relevant withholding tax rate of 10%.

The income tax expense for the year can be reconciled to the loss before taxation as follows:

Loss before tax Tax at domestic income tax rate (25%) (2017: 25%) Tax effect of share of profit of a joint venture Tax effect of expenses not deductible for tax purpose Tax effect of temporary difference not recognised Effect of tax exemption granted to PRC subsidiaries Under provision in prior years Over provision on withholding tax on undistributed dividends Income tax (credit) expense for the year	Year ended 31/12/2018 *RMB’000* (199,494) (49,874) (335) 1,377 36,835 (1,379) 543 (79) (12,912)	Year ended 31/12/2017 RMB’000 (131,200) (32,800) – 14,492 33,516 – – (961) 14,247

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10. DIVIDENDS

No dividend was paid, declared or proposed during the year 2018 and 2017.

The directors of the Company do not recommend the payment of a final dividend.

11. LOSS PER SHARE

The calculation of basic and diluted loss per share attributable to the owners of the Company is based on the following data:

Loss for the year Loss for the year attributable to owners of the Company for the purposes of basic and diluted loss per share Number of shares Weighted average number of ordinary shares for the purpose of basic and diluted loss per share	Year ended 31/12/2018 *RMB’000* (179,882) 2,097,703,580	Year ended 31/12/2017 RMB’000 (140,296) 1,720,898,993

The outstanding share options and conversion option of convertible bonds of the Company have not been included in the computation of diluted loss per share as they are anti-diluted to the net loss for the year ended 31 December 2018 and 31 December 2017.

12. PREPAID LEASE PAYMENTS

Carrying values At 1 January Released to profit or loss Transfer to investment properties At 31 December Current portion Non-current portion	31/12/2018 *RMB’000* 13,819 (337) – 13,482 549 12,933	31/12/2017 RMB’000 23,061 (551) (8,691) 13,819 335 13,484

The lease payments represent the land use rights situated in the PRC which are under medium-term leases.

As at 31 December 2018, prepaid lease payments with carrying amount of approximately RMB13,482,000 (2017: RMB13,819,000) was pledged to banks to secure banking facilities granted to the Group.

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13. GOODWILL

31/12/2018 *RMB’000* At 1 January 105,917 Acquired during the year – Impairment recognised (39,025) At 31 December 66,892 The carrying amounts of goodwill as at 31 December 2018 and 2017 are as follows: 31/12/2018 *RMB’000* Comtec Renewable Energy Group Limited 60,256 Comtec (Asia) Limited – Zhenjiang Kexin Power System Design and Research Company Limited 6,636 At 31 December 66,892	31/12/2017 RMB’000 60,256 45,661 –
	105,917
	31/12/2017 RMB’000 60,256 39,025 6,636
	105,917

The recoverable amounts of the above cash-generating units are determined from value in use calculations. The key assumptions for the value in use calculations are those regarding the discount rates, growth rates and expected changes to selling prices and direct costs during the period. The management estimates discount rates using pre-tax rates that reflect current market assessments of the time value of money and the risks specific to the cash-generating units. The growth rates are by reference to industry growth forecasts. Changes in selling prices and direct costs are based on past practices and expectations of future changes in the market.

Goodwill impairment of Comtec (Asia) Limited

Due to the change of industry environment and the release of new government policy “2018 PV Power Generation Notice (2018光伏發電有關事項的通知)” on 31 May 2018, which has negative impact on installation quotas of distributed generation projects in the foreseeable future, the goodwill arising from the acquisition was fully impaired during the current reporting period as the actual performance in the current reporting period didn’t meet the expectation of the business forecast, in the opinion of the directors of the Company it could not be recovered from the relevant cash generating unit related to the distributed generation projects and fully impaired accordingly.

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14. INTANGIBLE ASSETS

The balance of intangible assets is analysed as follows:

	Cooperative	Non-compete	Franchise
	agreement	agreement	relationship	Backlog	Technology	Total
	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
At 1 January 2017	51,500	11,550	–	–	–	63,050
Additions	–	13,026	5,899	970	6,100	25,995
Amortisation	12,875	4,407	2,731	970	305	21,288
At 31 December 2017	38,625	20,169	3,168	–	5,795	67,757
Amortisation	6,438	4,115	1,639	–	1,220	13,412
Impairment_(Note)_	32,187	14,984	1,529	–	–	48,700
At 31 December 2018	–	1,070	–	–	4,575	5,645

The intangible assets are amortised on a straight-line basis over their estimated useful lives as follows:

Cooperative agreement	4 years
Non-compete agreement	2-5 years
Franchise relationship	1.8 years
Backlog	0.8 years
Technology	5 years

Note:

Due to the change of industry environment and the release of new government policy “2018 PV Power Generation Notice (2018光伏發電有關事項的通知)” on 31 May 2018, which has negative impact on installation quotas of distributed generation projects in the foreseeable future, the intangible assets in the carrying amount of RMB32,187,000 arising from the signed cooperative agreements in the acquisition of Comtec Renewable Energy Group Limited was fully impaired during the current reporting period.

At the same time, the intangible assets in the amount of RMB14,984,000 arising from the non-compete agreement in the acquisition of Comtec Renewable Energy Group Limited and Comtec (Asia) Limited was totally impaired during the current reporting period as the actual performance in the current reporting period didn’t meet the expectation of the business forecast.

– 20 –

15. INVENTORIES

Raw materials Work-in-progress Finished goods	31/12/2018 *RMB’000* 8,555 3,814 6,419 18,788	31/12/2017 RMB’000 13,727 17,430 12,052
		43,209

As at 31 December 2018, the carrying amount of the inventories disclosed above included inventory provision of RMB2,704,000 (2017: RMB17,452,000) and the movements of which are as follows:

At 1 January Written off Provision At 31 December TRADE AND OTHER RECEIVABLES AND BILLS RECEIVABLE Trade receivables Written off Less: expected credit loss Value-added-tax recoverable Other receivables Bills receivable	31/12/2018 *RMB’000* 17,452 (17,381) 2,633 2,704 31/12/2018 *RMB’000* 61,536 (131) (25,558) 35,847 32,412 6,948 75,207 –	31/12/2017 RMB’000 96,599 (96,528) 17,381
		17,452
		31/12/2017 RMB’000 69,269 (5,151) (7,690)
		56,428 43,729 31,189
		131,346
		1,684

16. TRADE AND OTHER RECEIVABLES AND BILLS RECEIVABLE

– 21 –

The Group requested prepayment from customers before delivery of goods and allows a credit period of 7 to 180 days for the remaining balance on case-by-case basis. The following is an aged analysis of trade receivables net of allowance for doubtful debts presented based on the invoice dates at the end of the reporting period, which approximated the respective revenue recognition dates:

Age 0 to 30 days 31 to 60 days 61 to 90 days 91 to 180 days Over 180 days	31/12/2018 *RMB’000* 2,805 7,656 1,052 12,260 12,074 35,847	31/12/2017 RMB’000 18,368 6,167 353 6,438 25,102
		56,428

As at 31 December 2018, included in the Group’s trade receivables balance are debtors with aggregate carrying amount of RMB12,921,000 which are past due as at the reporting date. Out of the past due balances, RMB9,661,000 has been past due 90 days or more and is not considered as credit-impaired as the Group has collaterals over these balances.

As at 31 December 2017, 71% of the trade receivables that are neither past due nor impaired have the high credit scoring attributable under the internal credit scoring system used by the Group.

As at 31 December 2017, included in the Group’s trade receivables are debtors with an aggregate carrying amount of RMB16,448,000 which are past due at the end of the reporting date for which the Group has not provided for impairment loss. The Group does not hold any collateral over these balances.

Aging of trade receivables which are past due but not impaired:

Overdue by: 61 to 90 days 91 to 180 days Over 180 days Movements in the allowance for doubtful debts: 1 January Impairment losses recognised Write offs 31 December	31/12/2017 RMB’000 353 6,120 9,975
	16,448
	31/12/2017 RMB’000 5,151 7,690 (5,151)
	7,690

As at 31 December 2018, the carrying amount of trade receivables amounted to RMB526,000 (31 December 2017: nil) have been pledged as security for the Group’s borrowing.

– 22 –

The Group’s trade and other receivables and bills receivable that were denominated in United States dollars (“USD”), Malaysian Ringgit (“MYR”) foreign currency of the relevant group entities, were re-translated in RMB and stated for financial reporting purposes as:

Trade and other receivables denominated in USD Trade and other receivables denominated in MYR 17. TRADE AND OTHER PAYABLES Trade payables Payables for acquisition of property, plant and equipment Provision for termination costs for termination of Malaysian plant under construction Staff salaries and welfare payables Other payables and accrued charges	31/12/2018 *RMB’000* 289 1,613 31/12/2018 *RMB’000* 79,148 39,177 – 7,412 13,331 139,068	31/12/2017 RMB’000 6,996 –
		31/12/2017 RMB’000 83,947 17,106 1,267 7,430 21,307
		131,057

The following is an age analysis of trade payables presented based on the invoice date at the end of each reporting period:

Age 0 to 30 days 31 to 60 days 61 to 90 days 91 to 180 days Over 180 days	31/12/2018 *RMB’000* 20,788 5,571 2,698 10,173 39,918 79,148	31/12/2017 RMB’000 45,815 11,544 5,604 4,570 16,414
		83,947

The average credit period on purchases of goods is 7 days to 180 days and certain suppliers grant longer credit period on case-by-case basis.

The Group’s trade and other payables that were denominated in MYR and USD, the foreign currencies of the relevant group entities, were re-translated in RMB and stated for reporting purposes as:

	31/12/2018	31/12/2017
	*RMB’000*	RMB’000
Trade and other payables denominated in:
USD	27,226	31,174
MYR	86	1,372

– 23 –

18. CONTRACT LIABILITIES

	31/12/2018	01/01/2018*
	*RMB’000*	RMB’000
Contract liabilities
— third parties	51,530	43,203

The amounts in this column are after the adjustments from the application of IFRS15.

The contract liability is the consideration received from the customers which represents the Group’s obligation to transfer goods to customers has not been completed. All the contract liabilities at the beginning of the period has been realised to revenue in the reporting period.

19. CONTINGENT CONSIDERATION PAYABLES

The balances of the contingent consideration payables are analysed as:

	31/12/2018	31/12/2017
	*RMB’000*	RMB’000
At 1 January	51,989	93,835
Initial recognition	–	45,250
Change in fair value_(Note)_	(46,053)	(22,016)
Transferred to equity	–	(65,080)
At 31 December	5,936	51,989
Analysed as:
Current portion	5,936	9,884
Non-current portion	–	42,105
	5,936	51,989

The contingent consideration arose from the issue of ordinary shares of the Company on earn-out basis in relation to business acquisitions. The contingent consideration is classified as a financial instrument (financial liability at fair value through profit or loss) and recognised in the consolidated statement of financial position at fair value. The fair value of the contingent consideration at the date of initial recognition and as at 31 December 2018 are based on the calculation on the business performance of the acquired companies and the change of stock price and exchange rate.

Note: Due to the change of industry environment and the release of new government policy “2018 PV Power Generation Notice (2018光伏發電有關事項的通知)” on 31 May 2018, which has negative impact on installation quotas of distributed generation projects in the foreseeable future, especially for Comtec (Asia) Limited, the actual performance in the current reporting period didn’t meet the expectation of business forecast, so the contingent consideration payable relating to the acquisition of Comtec (Asia) Limited was almost fully reversed during the current reporting period.

– 24 –

20. DEFERRED TAX LIABILITIES

The following is the deferred tax liabilities recognised by the Group and movements thereon during the year.

	Withholding
	tax on
	undistributed	Fair value
	dividends	adjustment	Total
	RMB’000	RMB’000	RMB’000
At 1 January 2017	(7,880)	(10,403)	(18,283)
Credit to profit or loss	961	–	961
Charge to property revaluation reserve	–	(10,347)	(10,347)
Acquisitions of subsidiaries	–	(4,289)	(4,289)
At 31 December 2017	(6,919)	(25,039)	(31,958)
Credit to profit or loss	79	13,376	13,455
At 31 December 2018	(6,840)	(11,663)	(18,503)

21. CONVERTIBLE BONDS

The Company issued US$ settled convertible bonds (the “Bonds”) at a par value in an aggregate principal amount of US$ 10,000,000 with interest rate of 10% per annum on 27 July 2018.

The principal terms of the Bonds

(i) Denomination of the Bonds — The Bonds are denominated in RMB and settled in US$.
(ii) Maturity date — The third anniversary of the date of issuance, which is 27 July 2021(“Maturity Date”).
(iii) Interest — The interest rate of Bonds carries at 10% per annum to be accrued on a daily basis, of which 3% shall be paid in cash semi-annually in arrears and 7% should be paid in cash upon redemption or maturity.
(iv) Conversion
a) Conversion price — The price is HKD0.174 per share to be issued upon conversion of the bonds, including the consolidation, subdivision and reclassification of the company; capitalisation of profits or reserves; distributions; rights issues of shares or options over shares and other securities; issues and other issues at less than current market price; modification of rights of conversion and other certain events.
b) Conversion period — The bondholder shall have the right, on any business day after the date of issuance until and including the seventh business day immediately preceding the maturity date, to convert the whole or part of the outstanding principal amounts of the bonds.
c) Number of conversion shares issuable — The number of conversion shares which fall to be issued shall be calculated the principal amount of the bonds being converted and the conversion price applicable on the relevant conversion date. No faction of a share shall be issued on conversion of the bonds.

– 25 –

(v) Redemption

a) Relevant event redemption date — A day set by the bondholder that is no later than 6 months after the Relevant Event Redemption Notice has been delivered to the Company.
b) Redemption rights- The bondholder shall have the right to require the Company to redeem all (but not part) of the bonds on the relevant event redemption date.
c) Redemption amount- The outstanding principal amount of the bonds together with all outstanding interest accrued shall be repaid by the Company.

The convertible bonds contain two components, debt component and derivative component. The effective interest of debt component is 12.44%.The derivative component is measured at fair value with changes in fair value recognised in profit or loss subsequently.

The movement of the debt and derivative components of the convertible bonds for the year is set out as below:

As at 1 January 2017 and 31 December 2017 Issued at 27 July 2018 Interest charge Loss arising on changes of fair value Exchange realignment As at 31 December 2018 22. CAPITAL COMMITMENTS Capital expenditure in respect of the acquisition of property, plant and equipment contracted for but not provided in the consolidated financial statements	Debt Component RMB’000 – 61,689 3,275 – 389 65,353 31/12/2018 *RMB’000* –	Derivative Component RMB’000 – 6,476 – 1,040 33
		7,549
		31/12/2017 RMB’000 41,889

– 26 –

MANAGEMENT DISCUSSION AND ANALYSIS

BUSINESS REVIEW

Throughout the Period, the Group was still in a process to restructure its manufacturing business and to expand into the new business initiatives in the renewable industry.

In order to remain flexible and rapidly adapt our business to the challenging market environment, we continued to reduce our fixed costs of operations and the level of our fixed assets in the manufacturing business segment. We focused on further strengthening our supply chain management, advanced technological capabilities, high quality product offerings, and premium customer bases to ensure our long-term competitiveness. We also actively looked for opportunities to out-source production procedures to third party processing agents whenever it is in our commercial interest. We believe out-sourcing our production procedures would be more cost effective when there are excess production capacities in the market. We continued to reduce head counts and to dispose of fixed assets which were low in utilization. We also rented out certain idle space in our factories. As our factory in Haian can accommodate all of our remaining manufacturing equipment, we would also consider to dispose our factory in Shanghai, which has higher appraised value, if we receive an attractive offer from potential buyer. These measures are aligned with our overall strategy of improving our operating efficiencies.

– 27 –

In order to enhance our profit and profitability, the Group also made continuous efforts to develop and expand its new business initiatives. On 18 September 2017, Comtec Renewable Energy and Macquarie Capital entered into a shareholders’ agreement, pursuant to which Comtec Renewable Energy and Macquarie Capital agreed to form Future Energy Capital for the purpose of developing and expanding the downstream solar business. Future Energy Capital specifically focuses on rooftop distributed generation projects on commercial and industrial buildings. It is owned as to 50% by Comtec Renewable Energy and 50% by Macquarie Capital, respectively, and the total subscription amount to be paid by each party for the transaction is up to a maximum of US$5.0 million. Future Energy Capital focuses on the development, project management and construction of distributed solar generated power projects in the PRC with an aggregate capacity of 30 to 40 MW. Throughout the Period, Future Energy Capital has established its investment platform in the PRC and was in the process to build up its own project portfolio. We believe the cooperation with Macquarie Capital will broaden the Group’s strategic cooperation with international financial institutions, which strengthens and improves the financial resources of the Group.

As of 31 December 2018, the Group has transferred certain grid-connected downstream rooftop distributed generation projects of approximately 5.0 MW in aggregate to Future Energy Capital.

On 25 May 2017, Comtec Renewable (Jiangsu), Kexin and the vendors of Kexin entered into an equity transfer agreement, pursuant to which Comtec Renewable (Jiangsu) agreed to acquire 70% equity interest of Kexin from the vendors at a cash consideration of RMB14.0 million. Kexin is principally engaged in the research and development, design, integration and sales of lithium battery management systems and lithium battery systems for electric vehicles (including electric cars, electric motors and electric bicycles) to electric vehicle manufacturers and for power storage systems to lithium battery manufacturers and to power storage companies. The acquisition represented an attractive opportunity for the Group to expand into the business of the research and development, design, integration and sales of lithium battery management systems and lithium battery systems for electric vehicles (including electric cars, electric motors and electric bicycles) to electric vehicle manufacturers and for power storage systems to lithium battery manufacturers and to power storage companies, which marked the Group’s continuous efforts in diversifying its business.

We expect the sound developments and growth prospects of the electric vehicle industry and the power storage industry would drive sustainable growth and profitability of Kexin. Throughout the Period, Kexin has achieved remarkable growth of business and it recorded revenue of approximately RMB65.6 million for the year, increasing of approximately 1,161.5%, from RMB5.2 million which was included in the consolidated revenue of the Group for the year ended 31 December 2017 since completion of its acquisition in October 2017.

– 28 –

On 23 November 2018 (after trading hours), Comtec Clean Energy, Lu Ke Ya and Kexin entered into a capital injection agreement with ISDN in relation to the injected of capital by ISDN to the registered capital of Kexin. Pursuant to the same capital injection agreement, ISDN agreed to subscribe for 10% of the enlarged registered share capital of Kexin. ISDN contributed RMB4,444,444.0 in cash to the capital of Kexin in March 2019 and has been a registered shareholder of Kexin holding 10% equity interest in Kexin. Please refer to the announcement of the Company dated 23 November 2018 for further details.

The above progress marked the Group’s continuous efforts to develop and expand its new business initiatives in the renewable energy industry. It would fuel the growth of the Group and enhance our profitability in future.

On 18 May 2018 (after trading hours), Putana Limited and the Company entered into a subscription agreement in respect of the issue of the Convertible Bonds in the aggregate principal amount of US$10.0 million due 2021 with interest rate per annum of 10.0%. The conversion price is HK$0.174 per share for a potential maximum amount of the Conversion Shares to be allotted and issued upon exercise in full of the conversion rights attached to the Convertible Bonds which represent (i) approximately 21.5% of the existing issued share capital of the Company as of 18 May 2018, and (ii) approximately 17.7% of the issued share capital as enlarged by the issue of the Conversion Shares in full. No listing of the Convertible Bonds will be sought on the Stock Exchange or any other stock exchanges. The net proceeds from the issue of the Convertible Bonds was approximately US$9.9 million, 80% of which will be used for providing funding for Future Energy Capital and other downstream projects and 20% of which will be used as general working capital. The issue of Convertible Bonds was completed on 27 July 2018. Please refer to the announcements of the Company dated 18 May 2018 and the circular of the Company dated 9 July 2018 for further details.

Revenues from our top five customers for the Period represented approximately 66.2% of our total revenues, compared to approximately 46.2% for the year ended 31 December 2017. The sales to our largest customer accounted for approximately 33.6% of our total revenues for the Period, as compared to approximately 17.3% for the year ended 31 December 2017.

We intend to explore further opportunities and make further expansion into the new business initiatives in the renewable energy industry to fuel the growth of our business. To leverage on our advanced technological capabilities, high quality product offerings, premium customer bases and the strategic partnership with reputable institutional investors, we are confident to capture enormous opportunities in the renewable industry and to drive continued and healthy growth for the Group in the future.

– 29 –

FINANCIAL REVIEW

Revenue

Revenue decreased by RMB316.6 million, or 64.7%, from RMB489.2 million for the year ended 31 December 2017 to RMB172.6 million for the year ended 31 December 2018, primarily as a result of the decrease in both selling price and sales volume of most of our upstream solar products, although such decrease was partially mitigated by the increase in revenue from our lithium batteries system and power storage system business acquired in October 2017. Throughout the Period, excess production capacity in market continued and negative policies were issued by the Chinese government. This industry environment created uncertainties in the domestic solar market and negatively impacted industry demand and selling price of upstream products.

Revenue from sales of wafers decreased by RMB190.7 million, or 76.4%, from RMB249.5 million for the year ended 31 December 2017 to RMB58.8 million for the Period. It was primarily due to the decrease in both sales volume and average selling price of 156 mm x 156 mm monocrystalline solar wafers by approximately 61.0% and 26.5%, respectively, as compared to their respective sales for the year ended 31 December 2017. The revenue from 156 mm x 156 mm monocrystalline solar wafers dropped by approximately RMB147.8 million, or 71.5%, from RMB206.6 million for the year ended 31 December 2017. Furthermore, we did not record any shipment of 125 mm x 125 mm monocrystalline solar wafers to the overseas customer for the Period which was primarily due to the major market demand focused on larger-size monocrystalline silicon wafers instead of smaller ones. The revenue from shipment of 125 mm x 125 mm monocrystalline solar wafers was approximately RMB42.9 million for the year ended 31 December 2017.

Revenue from sales of ingots decreased by RMB22.8 million, or 50.1%, from RMB45.5 million for the year ended 31 December 2017 to RMB22.7 million for the Period, mainly due to the decrease of sales volume by approximately 29.9% and the decrease of average selling price by approximately 25.0%. Throughout the Period, we mainly sold the ingots to PRC and Japan-based customer.

Revenue from trading of excess inventory of polysilicon as well as trading of solar cells and modules were approximately RMB4.6 million and RMB4.6 million for the Period, respectively, decreased by approximately RMB60.7 million, or 93.0%, and RMB67.7 million, or 93.6%, respectively, from RMB65.3 million and RMB72.3 million, respectively, for the year ended 31 December 2017. It was mainly due to the decrease of our excess inventory of polysilicons after we ceased to have contractual obligations to purchase further polysilicons and our strategy to minimize exposures to trading solar commodities during the volatile market environments.

– 30 –

Revenue from our downstream solar business mainly included solar project development service income and power generation income. Such incomes decreased by approximately RMB31.4 million, or 66.5%, from RMB47.2 million for the year ended 31 December 2017 to RMB15.8 million for the Period. Such revenues decreased as we focused on developing our own projects instead of providing project development services to third parties during the year. The completed projects can be sold to long term institutional investors in future. As of 31 December 2018, the Group has completed downstream projects with book value of approximately RMB61.2 million in our Consolidated Statement of Financial Positions.

The decreases of revenue from our solar businesses were partially mitigated by the revenue from the lithium batteries and power storage system business which we acquired in October 2017. That business mainly engages in the research and development, design, integration and sales of lithium battery management systems and lithium battery systems for electric vehicles (including electric cars, electric motors and electric bicycles) to electric vehicle manufacturers and for power storage systems to lithium battery manufacturers and to power storage companies. It recorded revenue of approximately RMB65.6 million, representing an increase of approximately 1,161.5%, from RMB5.2 million which was included in the consolidated revenue of the Group for the year ended 31 December 2017 since completion of its acquisition in October 2017.

Revenue by geographical market

In relation to the geographical analysis of our revenue, approximately 92.9% (year ended 31 December 2017: 87.2%) of total revenue for the year was generated from our sales in the PRC. The remaining portion was mainly generated from our sales to the Japan and Malaysia-based customers.

Cost of sales and services

Cost of sales and services decreased by RMB303.1 million, or 63.0%, from RMB481.2 million for the year ended 31 December 2017 to RMB178.1 million for the Period, which was in line with the decrease of revenue during the year. The decrease in cost of sales and services was primarily due to the decrease in sales volume of our upstream solar businesses, including sales of wafers, ingots, trading of excess inventory of polysilicon as well as trading of solar cells and modules which also resulted in decrease in total revenue of approximately RMB316.6 million, or 64.7%, during the Period. The industry landscape for upstream solar manufacturing business deteriorated during the Period and the new policies issued by the Chinese government have negatively impacted industry demand and selling price of upstream products.

Inventory provision of approximately RMB2.6 million was recorded for the Period and was included in the cost of sales and services. Overall, the year-on-year decrease in costs of sales and services of approximately 63.0% was similar to the year-on-year decrease in revenue of approximately 64.7%.

– 31 –

Gross (loss)/profit

The Group recorded gross loss of approximately RMB5.5 million for the Period, representing a turnaround from the gross profits of RMB8.0 million for the year ended 31 December 2017. It was primarily due to the decrease of average selling price and sales volume as well as the inventory provision recorded in the Period.

Other income

Other income for the Period was approximately RMB14.4 million, representing a decrease of approximately RMB14.6 million, or 50.3%, from RMB29.0 million for the year ended 31 December 2017, which was mainly due to the decrease in government subsidy incomes received in the Period.

Other gains and losses and impairment losses

Other losses and impairment losses were approximately RMB81.2 million for the Period, increased by RMB27.7 million, or 51.8%, from RMB53.5 million for the year ended 31 December 2017. For the Period, the amount of other losses and impairment losses mainly included: (i) the impairments on goodwill and intangible assets of approximately RMB87.7 million which was partially offset by the gain on fair value change of contingent consideration payables of approximately RMB46.0 million, (ii) bad debt provisions of approximately RMB17.1 million, (iii) impairment on advance to suppliers of approximately RMB8.9 million, and (iv) net foreign exchanges losses of approximately RMB8.8 million. For the year ended 31 December 2017, the amount of other losses and impairment losses mainly included (i) losses on disposal of fixed assets of approximately RMB14.8 million and (ii) the impairment losses recognized in respect of property, plant and equipment of approximately RMB36.9 million.

Impairments on goodwill and intangible assets

For the purposes of impairment testing, the net carrying amount of the goodwill, which arose from the acquisitions of subsidiaries, has been allocated to the cash generating unit relating to downstream solar service business. The recoverable amounts of the above cash-generating units are determined from value in use calculations. The key assumptions for the value in use calculations are those in relation to the discount rates, growth rates and expected changes to selling prices and direct costs during the Period. The management estimates discount rates using pre-tax rates that reflect current market assessments of the time value of money and the risks specific to the cash-generating units. The growth rates are by reference to industry growth forecasts. Changes in selling prices and direct costs are based on past practices and expectations of future changes in the market.

– 32 –

Due to the change of industry environment and the release of new government policy “2018 PV Power Generation Notice (2018光伏發電有關事項的通知)” on 31 May 2018, which has made negative impact on installation quotas of distributed generation projects in the foreseeable future, the goodwill arising from the acquisition of Comtec (Asia) Limited of approximately RMB39.0 million was fully impaired during the Period as the actual performance in the Period did not meet the expectation and reach the business forecast. Our directors are of the view that it could not be recovered from the relevant cash generating unit related to the distributed generation projects and was thus fully impaired. For the same reason, the intangible assets in the carrying amount of RMB32,187,000 arising from the signed cooperative agreements in the acquisition of Comtec Renewable Energy was fully impaired for the Period well.

At the same time, the intangible assets arising from the non-compete agreement in the acquisition of Comtec Renewable Energy and Comtec (Asia) Limited was fully impaired in the amount of RMB14,984,000 during the Period as the actual performance in the Period did not meet the expectation and reach the business forecast.

Gain on fair value change of contingent consideration payables

The contingent consideration arose from the issue of ordinary shares of the Company on earnout basis in relation to business acquisitions. The contingent consideration is classified as a financial instrument (financial liability at fair value through profit or loss) and recognised in the consolidated statement of financial position at fair value. The fair value of the contingent consideration at the date of initial recognition and as of 31 December 2018 are based on the calculation on the business performance of the acquired companies and the change of stock price and exchange rate of HKD/RMB. The gain on fair value changes of contingent consideration payables was mainly due to the decrease of share price of the Company during the Period.

For the same reasons relating to new governmental policy discussed above and these negative impact on installation quotas of distributed generation projects in the foreseeable future, especially for Comtec (Asia) Limited, the actual performance in the Period did not meet the expectation and reach the business forecast, and the contingent consideration payable relating to the acquisition was almost fully reversed during the Period.

– 33 –

Bad debt provisions and impairment on advance to suppliers and prepayment on property, plant and equipment

The Group performs impairment assessment under ECL model upon application of IFRS 9 since 1 January 2018 on trade receivables individually or based on provision matrix, as for other financial assets at amortised cost mainly comprise of other receivables, pledged bank deposits and bank balances, the loss allowances are measured on 12m ECL basis as there had been no significant increase in credit risk since initial recognition. During the year ended 31 December 2018, an additional loss allowance in the amount of RMB17.1 million was provided which was primarily based on the individually assessment on the debtors with significant balances.

For the Period, impairment of approximately RMB8.9 million was made to advance to suppliers and prepayment on property, plant and equipment which was based on specific assessment on their recoverability.

Net foreign exchange losses

In preparing the financial statements of each individual group entity, transactions in currencies other than the entity’s functional currency (foreign currency) are recorded in the respective functional currency(ies) (i.e. the currency of the primary economic environment in which the entity operates) at the rates of exchange prevailing on the dates of the transactions. At the end of the reporting period, monetary items denominated in foreign currencies are re-translated at the rates prevailing at that date. Non-monetary items that are measured in terms of historical cost in a foreign currency are not re-translated.

Exchange differences arising on the settlement of monetary items, and on the re-translation of monetary items, are included in profit or loss in the period in which they arise.

For the purposes of presenting the consolidated financial statements, the assets and liabilities of the Group’s operations are translated into the presentation currency of the Group (i.e. Renminbi) using exchange rate prevailing at the end of each reporting period. Income and expense items are translated at the average exchange rates for the period. Exchange differences arising, if any, are recognised in other comprehensive income and accumulated in equity under the heading of foreign currency translation reserve. For the Period, the Group recognized net exchange losses of approximately RMB8.8 million.

Distribution and selling expenses

Distribution and selling expenses decreased by RMB5.0 million, or 45.5%, from RMB11.0 million for the year ended 31 December 2017 to RMB6.0 million for the Period, primarily due to the decrease in sales and market expense on the upstream solar manufacturing business in 2018, which was a result of the decrease in sales volume of the upstream solar business.

– 34 –

Administrative and general expenses

Administrative and general expenses increased by RMB11.1 million, or 13.6%, from RMB81.8 million for the year ended 31 December 2017 to RMB92.9 million for the Period, which was mainly due to the increase in professional expenses incurred for business development activities of the Group as well as the administrative expenses incurred for an subsidiary acquired in October 2017 which also expanded its operating scale in 2018.

Interest expenses

Interest expenses increased by RMB7.9 million from RMB15.9 million for the year ended 31 December 2017 to RMB23.8 million for the Period due to increase of borrowings and increase of interest rate during the Period.

Profit (Loss) before taxation

Loss before taxation was approximately RMB199.5 million for the Period, increased by RMB68.3 million, or 52.1%, from approximately RMB131.2 million for the year ended 31 December 2017, due to the aforementioned factors.

Taxation

The Group incurred tax credit of approximately RMB12.9 million for the Period, turnaround from RMB14.2 million for the year ended 31 December 2017. It was mainly due to the impairments on goodwill and intangible assets. Thus, the related deferred tax liabilities were reversed accordingly.

Profit (Loss) for the year

The Group recorded a loss of approximately RMB186.6 million for the Period, increased by RMB41.2 million, or 28.3%, from approximately RMB145.4 million for the year ended 31 December 2017, primarily attributable to the aforementioned factors. Accordingly, the Group recorded net loss margin of 108.1% for the Period, as compared to the net losses margin of 29.7% for the year ended 31 December 2017.

Final dividend

The Board resolved not to declare final dividend for the Period (2017: nil).

Inventory turnover days

There was a decrease in inventory balance of 56.5% from RMB43.2 million as of 31 December 2017 to RMB18.8 million as of 31 December 2018, which was mainly due to the Group’s efforts to downsize the scale of its traditional manufacturing wafer business and to reduce its inventory level. The inventory turnover days as of 31 December 2018 totaled 38 days (31 December 2017: 33 days).

– 35 –

Trade receivable turnover days

There was a decrease in trade receivable balance of 36.5% from RMB56.4 million as of 31 December 2017 to RMB35.8 million as of 31 December 2018, which was mainly due to downsizing of the Group’s traditional manufacturing wafer business and bad debt provisions of approximately RMB23.6 million was made during the year. Nonetheless such decrease was partially offset by the increase of business scale of Kexin and its trade receivable balances. The trade receivable turnover days as of 31 December 2018 totaled 76 days (31 December 2017: 42 days). The Group has closely supervised the repayment status of debtor balances. The credit period granted to customers is approximately 7 to 180 days on case-by-case basis. The average receivable turnover days as of 31 December 2018 were approximately 76 days which was within the credit periods of the Group grants to its customers.

Trade payable turnover days

There was a decrease in trade payable balance of 5.8% from RMB84.0 million as of 31 December 2017 to RMB79.1 million as of 31 December 2018, which was mainly due to the downsizing of the Group’s traditional manufacturing wafer business but such decrease was partially offset by the increase of business scale of Kexin and its trade payable balance during the year. The trade payable turnover days as of 31 December 2018 totaled 162 days (31 December 2017: 64 days). The group has obtained continuous supports from suppliers during the challenging industry environment.

Liquidity and financial resources

The Group’s principal sources of working capital for the Period included cash inflow from operating activities, bank borrowings and the proceeds from issue of equity or debt securities. As of 31 December 2018, the Group’s current ratio (current assets divided by current liabilities) was 0.5 (31 December 2017: 0.7) and it was in a net debt position of approximately RMB145.5 million (31 December 2017: approximately RMB157.6 million). The Group had a working capital deficit (total consolidated current liabilities exceeded total consolidated current assets) of RMB177.4 million as of 31 December 2018 (31 December 2017: approximately RMB101.0 million). However, the Group still maintained net assets of approximately RMB57.7 million as of 31 December 2018 (31 December 2017: approximately RMB242.1 million).

Although there is no assurance that the Group will be able to refinance its short-term bank loans when they become due, historically, the Group has rolled over or obtained replacement borrowings from existing credit for most of its short-term bank loans upon the maturity date of the loans. According to latest discussions with the bank which provides us with short-term bank loans in the PRC, they would still maintain such historical practices and the Group has assumed it will continue to be able to do so for the foreseeable future. Also, we had downstream projects with contract value of approximately RMB61.2 million in our order book as of 31 December 2018. We would consider to dispose of the projects as well as other assets and properties when we receive reasonable offers or require additional funding. As our factory in Haian can accommodate all of our remaining manufacturing equipment, we would also consider to dispose of our Shanghai factory with net book values of approximately RMB124.8 million as of 31 December 2018 (included buildings, investment properties and prepaid lease

– 36 –

payments in the financial statements), if we receive an attractive offer from potential buyer. In addition, we concluded a re-negotiation with a long term supplier in December 2018 which enabled us to substantially realize the remaining amount of our prepayments made to that supplier in previous years. An amount of approximately USD5.1 million has been offset with the full amount of our purchase of polysilicon from the supplier during the first quarter of 2019. The Group would continue to adopt strict controls on our operating and investing activities in order to continuously improve our financial positions.

On 18 May 2018 (after trading hours), Putana Limited and the Company entered into a subscription agreement in respect of the issue of the Convertible Bonds in the aggregate principal amount of US$10.0 million due 2021 with interest rate per annum of 10.0%. The conversion price is HK$0.174 per share for a potential maximum amount of the Conversion Shares to be allotted and issued upon exercise in full of the conversion rights attached to the Convertible Bonds which represent (i) approximately 21.5% of the existing issued share capital of the Company as of 18 May 2018, and (ii) approximately 17.7% of the issued share capital as enlarged by the issue of the Conversion Shares in full. No listing of the Convertible Bonds will be sought on the Stock Exchange or any other stock exchanges. The net proceeds from the issue of the Convertible Bonds was approximately US$9.9 million, 80% of which will be used for providing funding for Future Energy Capital and other downstream projects and 20% of which will be used as general working capital. The issue of Convertible Bonds was completed and closed on 27 July 2018. As of the date of this announcement, approximately USD8 million had been used as funding for Future Energy Capital and other downstream projects and approximately USD2 million had been used as working capital. Please refer to the announcements of the Company dated 18 May 2018 and the circular of the Company dated 9 July 2018 for further details.

Although there is no assurance that the Group will be able to raise capital when we require additional funding, historically, the Group has been able to raise capital in each of last few years when required. The Group has assumed it will continue to be able to do so for the foreseeable future.

The Group would implement a balanced financing plan to support our business operations.

Capital commitments

As of 31 December 2018, the Group’s capital commitments was nil (2017: RMB41.9 million). The Group currently has no plan to further expand its production capacity of traditional solar manufacturing business. In addition, the Group would carefully plan for the expansion of its downstream solar business and power storage business which would depend on and subject to the market conditions and opportunities.

Contingent liabilities

As of 31 December 2018, other than the balance of contingent consideration payables of approximately RMB5.9 million, there was no material contingent liability (31 December 2017: RMB52.0 million).

– 37 –

Related party transactions

Other than the remuneration that the Group paid to the Directors and key management, the Group did not have any related party transactions during the year.

Charges on group assets

As of 31 December 2018, the Group had restricted cash of approximately RMB22.1 million (31 December 2017: RMB20.9 million), and pledged its buildings, investment properties, prepaid lease payments, power station of downstream projects and account receivables of downstream revenue with net book values of approximately RMB90.9 million (31 December 2017: RMB98.5 million), approximately RMB86.0 million (31 December 2017: RMB86.0 million), approximately RMB13.5 million (31 December 2017: RMB13.8 million), approximately RMB7.5 million (31 December 2017: RMB16.9 million), and approximately RMB0.5 million (31 December 2017: nil), respectively, to banks in order to secure banking facilities granted to the Group. Save as disclosed herein, as of 31 December 2018, no other assets of the Group were charged.

Significant acquisition and disposal of subsidiaries

Throughout the Period, the Group did not have any significant acquisition of subsidiaries but has disposed certain subsidiaries.

On 14 February 2018 (after trading hours), Comtec Renewable Energy, Future Energy Capital and Sunny Mega entered into an equity transfer agreement, pursuant to which Comtec Renewable Energy disposed of the entire issued share capital of Sunny Mega at a consideration of approximately RMB4.5 million to Future Energy Capital.

On 2 October 2018 (after trading hours), (i) Comtec Clean Energy, Future Energy Capital (Wuxi) and Wuxi Comtec (Jianyuan) entered into an equity transfer agreement, pursuant to which Comtec Clean Energy disposed of the entire issued share capital of Wuxi Comtec (Jianyuan) at a consideration of approximately RMB2.6 million to Future Energy Capital (Wuxi) and (ii) Comtec Clean Energy, Future Energy Capital (Wuxi) and Wuxi Comtec (Tianhan) entered into an equity transfer agreement, pursuant to which Comtec Clean Energy disposed of the entire issued share capital of Wuxi Comtec (Tianhan) at a consideration of approximately RMB3.7 million to Future Energy Capital (Wuxi).

Immediately after completion of the said disposals, each of Sunny Mega, Wuxi Comtec (Jianyuan) and Wuxi Comtec (Tianhan) ceased to be an indirect wholly-owned subsidiary of the Company and the financial results of Sunny Mega, Wuxi Comtec (Jianyuan) and Wuxi Comtec (Tianhan) will no longer be consolidated into the Group’s financial statements. Please refer to the announcement of the Company dated 2 October 2018 for further details.

– 38 –

Use of proceeds

On 18 May 2018 (after trading hours), Putana Limited and the Company entered into a subscription agreement in respect of the issue of the Convertible Bonds in the aggregate principal amount of US$10.0 million due 2021 with interest rate per annum of 10.0%. The conversion price is HK$0.174 per share for a potential maximum amount of the Conversion Shares to be allotted and issued upon exercise in full of the conversion rights attached to the Convertible Bonds which represent (i) approximately 21.5% of the existing issued share capital of the Company as of 18 May 2018, and (ii) approximately 17.7% of the issued share capital as enlarged by the issue of the Conversion Shares in full. No listing of the Convertible Bonds will be sought on the Stock Exchange or any other stock exchanges. The net proceeds from the issue of the Convertible Bonds was approximately US$9.9 million, 80% of which will be used for providing funding for Future Energy Capital and other downstream projects and 20% of which will be used as general working capital. The issue of Convertible Bonds was completed on 27 July 2018. As of the date of this announcement, approximately USD8 million had been used as funding for Future Energy Capital and other downstream projects and approximately USD2 million had been used as working capital. Please refer to the announcements of the Company dated 18 May 2018 and the circular of the Company dated 9 July 2018 for further details.

Save as disclosed herein, the Company has not conducted any equity fund raising activities in the past 12 months preceding the date of this announcement.

Human resources

As of 31 December 2018, the Group had 166 (31 December 2017: 342) employees. The remuneration of the existing employees includes basic salaries, discretionary bonuses and social security contributions. Payment levels of the employees are commensurated with their responsibilities, performance and contribution.

Details of the future investment plans for material investment

The Group is planning to further expand into downstream solar business and the lithium batteries system and power storage system businesses. Due to the rapid changing market environment, the Group prefers to maintain flexibilities throughout the expansion process and avoid fixing a capacity target under a pre-determined timeline. The Group has yet to make any amount of capital commitments for its downstream solar business, other than the projects under construction, and the lithium batteries system and power storage system businesses which would depend on and be subject to the market conditions and opportunities. We believe this strategy would enable the Group to maximize its advantages from the industry consolidation process.

Exposure to fluctuations in exchange rates and any related hedges

The Group recognized net exchange losses of approximately RMB8.8 million for the Period, which mainly arose from monetary assets and liabilities of the Group denominated in foreign currencies. The Group currently does not have a foreign currency hedging policy but the management has been monitoring foreign exchange exposure and will consider hedging significant foreign currency exposure should the need arises.

– 39 –

CORPORATE GOVERNANCE CODE

The Company is committed to maintaining high standards of corporate governance in the interests of Shareholders. The Company has complied throughout the Period with all code provisions of the Corporate Governance Code.

MODEL CODE FOR SECURITIES TRANSACTIONS BY DIRECTORS OF LISTED ISSUERS

The Company has also adopted the Model Code as its code of conduct regarding securities transactions by the Directors. Having made specific enquiry with all Directors of the Company, all Directors confirmed that they have complied with the required standard set out in the Model Code for the Period.

AUDIT COMMITTEE

The Company established an audit committee pursuant to a resolution of the Directors passed on 2 October 2009 with written terms of reference. The primary duties of the audit committee are to make recommendation to the Board on the appointment and removal of external auditors, review the financial statements and material advice in respect of financial reporting, and oversee the internal control procedures of the Company. Their written terms of reference are in line with the Corporate Governance Code provisions. The audit committee consists of three members, namely, Mr. Leung Ming Shu, Mr. Kang Sun and Mr. Xu Erming, all of whom are independent non-executive Directors. Mr. Leung Ming Shu is the chairman of the audit committee.

The audit committee has reviewed the Group’s audited consolidated financial statements for the Period, including the accounting principles and practice adopted by the Group.

PURCHASE, SALE OR REDEMPTION OF THE COMPANY’S LISTED SECURITIES

During the Period, neither the Company nor any of its subsidiaries has purchased, sold or redeemed any of the Company’s listed securities.

SUFFICIENCY OF PUBLIC FLOAT

Based on the information that is publicly available to the Company and within the knowledge of the Directors as at the date of this announcement, the Company has maintained the prescribed public float of not less than 25% of the Company’s issued shares as required under the Listing Rules for Period.

DIVIDEND

The Board recommended that since the Company plans to reserve the cash for working capital requirement and any potential investment opportunities in the future, no dividend will be declared for the Period. The Company may consider its dividend policy in the future according to the financial results and performance of the Company, and the general industry and economic environment.

– 40 –

SCOPE OF WORK OF MESSRS. DELOITTE TOUCHE TOHMATSU

The figures in respect of the Group’s consolidated statement of financial position, consolidated statement of comprehensive income and the related notes thereto for the Period as set out in the preliminary announcement have been agreed by the Group’s auditor, Messrs. Deloitte Touche Tohmatsu, to the amounts set out in the Group’s audited consolidated financial statements for the year. The work performed by Messrs. Deloitte Touche Tohmatsu in this respect did not constitute an assurance engagement in accordance with Hong Kong Standards on Auditing, Hong Kong Standards on Review Engagements or Hong Kong Standards on Assurance Engagements issued by the Hong Kong Institute of Certified Public Accountants and consequently no assurance has been expressed by Messrs. Deloitte Touche Tohmatsu on the preliminary announcement.

PUBLICATION OF ANNUAL RESULTS AND ANNUAL REPORT

This annual results announcement is published on the websites of the Stock Exchange (www.hkex.com.hk) and the Company (www.comtecsolar.com). The annual report for the Period containing all the information required by Appendix 16 to the Listing Rules will be dispatched to shareholders of the Company and available on the same websites in due course.

APPRECIATION

The Company would like to take this opportunity to express my thanks and gratitude to the Group’s management and staff who dedicated their endless efforts and devoted services, and to our Shareholders, suppliers, customers and bankers for their continuous support.

DEFINITIONS

“Board” or “Board of Directors” the board of Directors “Company” Comtec Solar Systems Group Limited “Comtec Clean Energy” Comtec Clean Energy Group Limited* (卡姆丹克清潔能源有限公司), a company duly incorporated in the PRC and wholly owned by Comtec Renewable Energy “Comtec Renewable Energy” Comtec Renewable Energy Group Limited, a company duly incorporated in Hong Kong and wholly owned by the Company “Corporate Governance Code” Code on corporate governance practices contained in Appendix 14 to the Listing Rules “Directors(s)” the director(s) of the Company “Future Energy Capital” Future Energy Capital Group Limited, a company incorporated in the British Virgin Islands being a coinvestment vehicle established by Comtec Renewable Energy and Macquarie Capital

– 41 –

“Future Energy Capital (Wuxi)”	Future Energy Capital (Wuxi) Co., Ltd.* (福策能源投資
	(無錫)有限公司), a company duly incorporated in the
	PRC and a wholly-owned subsidiary of Future Energy
	Capital
“Group”	the Company and its subsidiaries
“HK$”	Hong Kong dollars, the lawful currency of Hong Kong
“Hong Kong”	The Hong Kong Special Administrative Region of the
	People’s Republic of China
“ISDN”	ISDN Investments Pte Ltd, a company duly incorporated
	in the Republic of Singapore
“Kexin”	Zhenjiang Kexin Power System Design and Research Co.,
	Ltd.* (鎮江科信動力系統設計研究有限公司), a company
	duly incorporated in the PRC
“Listing Rules”	The Rules Governing the Listing of Securities on the
	Stock Exchange
“Macquarie Capital”	Macquarie Corporate Holdings Pty Limited, a company
	duly incorporated in Australia
“Model Code”	Model code for securities transactions by directors of
	listed issuers contained in Appendix 10 to the Listing
	Rules
“MW”	megawatt
“Period”	the year ended 31 December 2018
“PRC” or “China”	the People’s Republic of China, and for the purpose of for
	the purposes of this announcement, excludes Hong Kong,
	the Macau Special Administrative Region and Taiwan
“PV”	photovoltaic
“RMB”	Renminbi, the lawful currency of the PRC
“Share(s)”	ordinary share(s) of HK$0.001 each in the share capital of
	the Company
“Shareholder(s)”	shareholder(s) of the Company
“Stock Exchange”	The Stock Exchange of Hong Kong Limited

– 42 –

“Sunny Mega” Sunny Mega Limited, a company duly incorporated in the British Virgin Islands “USD” United States dollar, the lawful currency of the United States of America “Wuxi Comtec (Jianyuan)” Wuxi Comtec Jianyuan PV Co., Ltd. (無錫卡姆丹克建元光伏有限公司), a company duly incorporated in the PRC “Wuxi Comtec (Tianhan)” Wuxi Comtec Tianhan PV Co., Ltd. (無錫卡姆丹克天漢光伏有限公司), a company duly incorporated in the PRC “%” per cent

By order of the Board of Comtec Solar Systems Group Limited John Yi Zhang Chairman

Shanghai, the People’s Republic of China, 29 March 2019

for identification purpose only

As at the date of this announcement, the executive Directors are Mr. John Yi Zhang, Mr. Zhang Zhen and Mr. Chau Kwok Keung, the non-executive Director is Mr. Wang Yixin, and the independent non-executive Directors are Mr. Leung Ming Shu, Mr. Kang Sun and Mr. Xu Erming.

– 43 –

AI assistant

Comtec Solar Systems Group Limited — Annual Report 2018

49415_rns_2019-03-31_521f2043-5516-4ecd-a797-524bdac30f02.pdf

卡姆丹克太陽能系統集團有限公司 Comtec Solar Systems Group Limited

ANNOUNCEMENT OF ANNUAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2018

HIGHLIGHTS

CHAIRMAN’S STATEMENT

Dear Shareholders,

ANNUAL RESULTS

CONSOLIDATED STATEMENT OF PROFIT OR LOSS

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. GENERAL

2. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS

3. APPLICATION OF NEW AND AMENDMENTS TO INTERNATIONAL FINANCIAL REPORTING STANDARDS (“IFRSs”)

Amendments to IFRSs that are mandatorily effective for the current year

4. REVENUE

A. For the year ended 31 December 2018

B. For the year ended 31 December 2017

5. SEGMENT INFORMATION

Segment revenues and results

Information about major customers

Geographical information

7. OTHER GAINS AND LOSSES

9. INCOME TAX (CREDIT)EXPENSE

10. DIVIDENDS

11. LOSS PER SHARE

12. PREPAID LEASE PAYMENTS

13. GOODWILL

Goodwill impairment of Comtec (Asia) Limited

14. INTANGIBLE ASSETS

Note:

15. INVENTORIES

16. TRADE AND OTHER RECEIVABLES AND BILLS RECEIVABLE

18. CONTRACT LIABILITIES

19. CONTINGENT CONSIDERATION PAYABLES

20. DEFERRED TAX LIABILITIES

21. CONVERTIBLE BONDS

The principal terms of the Bonds

(v) Redemption

MANAGEMENT DISCUSSION AND ANALYSIS

BUSINESS REVIEW

FINANCIAL REVIEW

Revenue

Revenue by geographical market

Cost of sales and services

Gross (loss)/profit

Other income

Other gains and losses and impairment losses

Impairments on goodwill and intangible assets

Net foreign exchange losses

Distribution and selling expenses

Administrative and general expenses

Interest expenses

Profit (Loss) before taxation

Taxation

Profit (Loss) for the year

Final dividend

Inventory turnover days

Trade receivable turnover days

Trade payable turnover days

Liquidity and financial resources

Capital commitments

Contingent liabilities

Related party transactions

Charges on group assets

Significant acquisition and disposal of subsidiaries

Use of proceeds

Human resources

Details of the future investment plans for material investment

Exposure to fluctuations in exchange rates and any related hedges

CORPORATE GOVERNANCE CODE

MODEL CODE FOR SECURITIES TRANSACTIONS BY DIRECTORS OF LISTED ISSUERS

AUDIT COMMITTEE

PURCHASE, SALE OR REDEMPTION OF THE COMPANY’S LISTED SECURITIES

SUFFICIENCY OF PUBLIC FLOAT

DIVIDEND

SCOPE OF WORK OF MESSRS. DELOITTE TOUCHE TOHMATSU

PUBLICATION OF ANNUAL RESULTS AND ANNUAL REPORT

Comtec Solar Systems Group Limited Annual Report 2018