ICO Group Limited - Annual Report 2013

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(Incorporated in Bermuda with limited liability)

(Stock Code : 630)

ANNOUNCEMENT OF RESULTS FOR THE YEAR ENDED 31 DECEMBER 2013

RESULTS

The board (“the Board”) of directors (the “Directors”) of AMCO United Holding Limited (the “Company”) announces the consolidated results of the Company and its subsidiaries (collectively referred to as the “Group”) for the year ended 31 December 2013, together with the comparative figures for the previous year, as follows.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2013

Notes Continuing operations Turnover 3 Cost of sales Gross profit Other income 4 Distribution costs Administrative expenses Impairment losses and write offs 5 (Loss)/Gain on change in fair value of convertible notes Finance costs	2013 HK$’000 89,006 (75,032) 13,974 8,906 (4,443) (48,920) (40,981) (1,597) (1,693)	2012 HK$’000 132,413 (102,469) 29,944 12 (6,881) (57,383) (25,709) 4,868 (634)

For identification purposes only

Loss before income tax expense 6 Income tax credit 7 Loss for the year from continuing operations Discontinued operations Operating loss after income tax expense Gain on disposal of subsidiaries Profit for the year from discontinued operations Loss for the year Other comprehensive income Items that may be reclassified subsequently to profit or loss: Exchange differences arising on translation of foreign operations Reclassification adjustments for amounts transferred to profit or loss – release of translation reserve upon deregistration of subsidiaries – release of translation reserve upon disposal of subsidiaries – release of translation reserve upon disposal of available-for-sale financial assets Reclassification of the cumulative fair value gain attributable to disposal of available-for-sale financial assets to profit or loss Other comprehensive income for the year, net of tax Total comprehensive income for the year Loss for the year attributable to owners of the Company: Continuing operations Discontinued operations Notes	(74,754) 141 (74,613) – – – (74,613) 388 – – – – 388 (74,225) (74,613) – (74,613) 2013 HK$’000	(55,783) 251 (55,532) (3,619) 14,501 10,882 (44,650) (397) 210 (339) 107 (32) (451) (45,101) (55,532) 10,882 (44,650) 2012 HK$’000

Total comprehensive income attributable to owners of the Company: Continuing operations Discontinued operations (Loss)/Earnings per share 8 From continuing and discontinued operations Basic Diluted From continuing operations Basic Diluted From discontinued operations Basic Diluted Notes	(74,225) – (74,225) HK (8.52) cents N/A HK (8.52) cents N/A – N/A 2013 HK$’000	(55,983) 10,882 (45,101) HK (5.10) cents N/A HK (6.34) cents N/A HK1.24 cents N/A 2012 HK$’000

CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT 31 DECEMBER 2013

Notes ASSETS AND LIABILITIES Non-current assets Property, plant and equipment 9 Goodwill 10 Deferred tax assets Current assets Inventories Trade and other receivables 11 Tax recoverable Pledged time deposits Cash and cash equivalents Current liabilities Trade and other payables 12 Bank and other borrowings Amount due to a director Obligation under finance leases Convertible notes Net current liabilities Total assets less current liabilities Non-current liabilities Obligation under finance leases Deferred tax liabilities Convertible notes Net (liabilities)/assets EQUITY Share capital 13 Reserves (Capital deficiency)/Total equity	2013 HK$’000 6,009 11,836 – 17,845 6,952 13,430 291 3,405 4,576 28,654 31,513 16,064 12,150 204 16,112 76,043 (47,389) (29,544) 16 – 7,113 7,129 (36,673) 8,758 (45,431) (36,673)	2012 HK$’000 17,576 45,907 514 63,997 7,532 26,839 813 3,512 10,163 48,859 39,022 9,614 4,000 204 10,314 63,154 (14,295) 49,702 220 616 11,314 12,150 37,552 87,582 (50,030) 37,552

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Preparation and Accounting Policies

The financial statements have been prepared under the historical cost basis except for certain financial instruments, which are measured at fair value.

The financial statements have been prepared on a going concern basis which assumes the realisation of assets and satisfaction of liabilities in the ordinary course of business notwithstanding that the Group has incurred a loss of HK$74,613,000 for the year ended 31 December 2013 and as at that date, the Group had net current liabilities of HK$47,389,000 and a capital deficiency of HK$36,673,000.

Notwithstanding these conditions, the going concern basis has been adopted on the basis set out below:

(i) A director and a certain related party (further details of which are set out in Note 12) have undertaken not to demand repayment of debts due to them at 31 December 2013 of HK$12,150,000 and HK$7,500,000, respectively, until such time repayment will not affect the Company’s ability to repay other creditors in the normal course of business.
(ii) The Company has signed two shares placing agreements in March 2014 which will secure a minimum capital injection of HK$40,000,000 to the Company by April 2014. Further details of these share placements are set out in the section on “Events After The Reporting Date”.
(iii) As at 31 December 2013, included in the current liabilities is the current portion of convertible notes of HK$16,112,000. The convertible notes were issued pursuant to the acquisition of the Titron Group as defined and detailed in the Company’s circular dated 11 August 2011. Under the terms of the convertible note agreement, these notes must be converted into shares of the Company at the agreed (fixed) conversion price. Accordingly, the settlement of these convertible notes will not have any adverse cash flow impact to the Group.
(iv) Looking forward, management plans to improve the Group’s financial performance by:
(a) taking steps to reduce discretionary expenses and administrative costs;
(b) expansion of business in the areas of medical and health care market sector; and
(c) exploring new business which will provide a growing and recurring source of income.

The directors are confident these measures will improve the financial performance of the Group gradually, provide sufficient liquidity to enable the Group to meet its commitments and obligations as and when they fall due and add to shareholders’ value.

Accordingly, the financial statements have been prepared on a going concern basis.

(a) Adoption of new/revised HKFRSs – effective 1 January 2013

HKFRSs (Amendments)	Annual Improvements 2009-2011 Cycle
HKFRSs (Amendments)	Annual Improvements 2010-2012 Cycle
Amendments to HKAS 1 (Revised)	Presentation of Items of Other Comprehensive Income
Amendments to HKFRS 7	Offsetting Financial Assets and Financial Liabilities
HKFRS 10	Consolidated Financial Statements
HKFRS 12	Disclosure of Interest in Other Entities
HKFRS 13	Fair Value Measurement
HKAS 27 (2011)	Separate Financial Statements

Except as explain below, the adoption of these new and revised HKFRSs has no material impact on the Group’s financial statements.

HKFRSs (Amendments) – Annual Improvements 2010-2012 Cycle

The Basis of Conclusions for HKFRS 13 Fair Value Measurement was amended to clarify that short-term receivables and payables with no stated interest rate can be measured at their invoice amounts without discounting, if the effect of discounting is immaterial. This is consistent with the Group’s existing accounting policy.

HKFRS 13 – Fair Value Measurement

HKFRS 13 provides a single source of guidance on how to measure fair value when it is required or permitted by other standards. The standard applies to both financial and non-financial items measured at fair value and introduces a fair value measurement hierarchy. The definitions of the three levels in this measurement hierarchy are generally consistent with HKFRS 7 “Financial Instruments: Disclosures”. HKFRS 13 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e. an exit price). The standard removes the requirement to use bid and ask prices for financial assets and liabilities quoted in an active market. Rather the price within the bid-ask spread that is most representative of fair value in the circumstances should be used. It also contains extensive disclosure requirements to allow users of the financial statements to assess the methods and inputs used in measuring fair values and the effects of fair value measurements on the financial statements. HKFRS 13 is applied prospectively.

HKFRS 13 did not materially affect any fair value measurements of the Group’s assets and liabilities and therefore has no effect on the Group’s financial position and performance.

(b) New/revised HKFRSs that have been issued and have been early adopted

Amendments to HKAS 36 – Recoverable Amount Disclosures

The amendments limit the requirements to disclose the recoverable amount of an asset or cash generating unit (CGU) to those periods in which an impairment loss has been recognised or reversed, and expand the disclosures where the recoverable amount of impaired assets or CGUs has been determined based on fair value less costs of disposal. The amendments are effective for annual periods commencing on or after 1 January 2014. The Group has early adopted the amendments to HKAS 36 in the current period. The disclosures about the impairment of property, plant and equipment in Note 9 and goodwill in Note 10 have been modified accordingly.

(c) New/revised HKFRSs that have been issued but are not yet effective

The following new/revised HKFRSs, potentially relevant to the Group’s financial statements, have been issued, but are not yet effective and have not been early adopted by the Group.

Amendments to HKAS 32	Offsetting Financial Assets and Financial Liabilities1
HKFRS 9	Financial Instruments4
HKFRSs (Amendments)	Annual Improvements 2010-2012 Cycle3
HKFRSs (Amendments)	Annual Improvements 2011-2013 Cycle2

1 Effective for annual periods beginning on or after 1 January 2014
2 Effective for annual periods beginning on or after 1 July 2014
3 Effective for annual periods beginning, or transactions occurring, on or after 1 July 2014
4 Effective for annual periods beginning on or after 1 January 2015

The Group is in the process of making an assessment of the potential impact of these pronouncements. The Directors so far concluded that the application of these new pronouncements will have no material impact on the Group’s financial statements.

2. Segment reporting

The Group determines its operating segments based on the reports reviewed by the chief operating decision-maker that are used to make strategic decisions.

The Group has two reportable segments (2012: 2 continuing and 2 discontinued segments). The segments are managed separately as each business offers different products and services and requires different business strategies. The following summary describes the operations in each of the Group’s reportable segments:

(1) Manufacture and sale of medical devices products; and
(2) Manufacture and sale of plastic moulding products.

Inter-segment transactions, if any, are priced with reference to prices charged to external parties for similar products. Central revenue and expenses are not allocated to the operating segments as they are not included in the measure of the segments’ profit that is used by the chief operating decision-maker for assessment of segment performance.

The Group had disposed of subsidiaries which were engaged in the segment of manufacture and sale of data media products and the segment of distribution of data media products in 2012. These two segments were considered as discontinued operations.

(a) Business segments

For the year ended 31 December 2013

Continuing operations Manufacture and sale of medical devices products Manufacture and sale of plastic moulding products Sub – Total HK$’000 HK$’000 HK$’000 24,684 64,322 89,006 24,684 64,322 89,006 (6,014) (9,687) (15,701) – 38 38 (1,109) (4,310) (5,419) 1 380 381 – (5,679) (5,679) (34,071) – (34,071) – (174) (174) 18,914 16,554 35,468 251 1,922 2,173 2,883 11,786 14,669	Continuing operations Manufacture and sale of medical devices products Manufacture and sale of plastic moulding products Sub – Total HK$’000 HK$’000 HK$’000 24,684 64,322 89,006 24,684 64,322 89,006 (6,014) (9,687) (15,701) – 38 38 (1,109) (4,310) (5,419) 1 380 381 – (5,679) (5,679) (34,071) – (34,071) – (174) (174) 18,914 16,554 35,468 251 1,922 2,173 2,883 11,786 14,669	Discontinued operations Manufacture and sale of data media products Distribution of data media products Sub – Total HK$’000 HK$’000 HK$’000 – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – –	Discontinued operations Manufacture and sale of data media products Distribution of data media products Sub – Total HK$’000 HK$’000 HK$’000 – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – –	Total HK$’000 89,006
Manufacture and sale of medical devices products HK$’000 24,684 24,684 (6,014) – (1,109) 1 – (34,071) – 18,914 251 2,883	Manufacture and sale of plastic moulding products HK$’000 64,322 64,322 (9,687) 38 (4,310) 380 (5,679) – (174) 16,554 1,922 11,786	Manufacture and sale of data media products HK$’000 – – – – – – – – – – – –	Distribution of data media products HK$’000 – – – – – – – – – – – –
				89,006
				(15,701)

				38 (5,419) 381 (5,679) (34,071) (174) 35,468 2,173 14,669

For the year ended 31 December 2012

Continuing operations Manufacture and sale of medical devices products Manufacture and sale of plastic moulding products Sub – Total HK$’000 HK$’000 HK$’000 51,690 80,723 132,413 51,690 80,723 132,413 2,697 (7,422) (4,725) – 27 27 (1,212) (4,848) (6,060) – 174 174 (21,455) – (21,455) – (24) (24) 58,760 31,475 90,235 108 960 1,068 3,370 15,471 18,841	Continuing operations Manufacture and sale of medical devices products Manufacture and sale of plastic moulding products Sub – Total HK$’000 HK$’000 HK$’000 51,690 80,723 132,413 51,690 80,723 132,413 2,697 (7,422) (4,725) – 27 27 (1,212) (4,848) (6,060) – 174 174 (21,455) – (21,455) – (24) (24) 58,760 31,475 90,235 108 960 1,068 3,370 15,471 18,841	Discontinued operations Manufacture and sale of data media products Distribution of data media products Sub – Total HK$’000 HK$’000 HK$’000 17,792 7,650 25,442 17,792 7,650 25,442 12,853 (2,095) 10,758 1 1 2 (163) (2) (165) 1,491 (5) 1,486 – – – – – – – – – – – – – – –	Discontinued operations Manufacture and sale of data media products Distribution of data media products Sub – Total HK$’000 HK$’000 HK$’000 17,792 7,650 25,442 17,792 7,650 25,442 12,853 (2,095) 10,758 1 1 2 (163) (2) (165) 1,491 (5) 1,486 – – – – – – – – – – – – – – –	Total HK$’000 157,855
Manufacture and sale of medical devices products HK$’000 51,690 51,690 2,697 – (1,212) – (21,455) – 58,760 108 3,370	Manufacture and sale of plastic moulding products HK$’000 80,723 80,723 (7,422) 27 (4,848) 174 – (24) 31,475 960 15,471	Manufacture and sale of data media products HK$’000 17,792 17,792 12,853 1 (163) 1,491 – – – – –	Distribution of data media products HK$’000 7,650 7,650 (2,095) 1 (2) (5) – – – – –
				157,855
				6,033

				29 (6,225) 1,660 (21,455) (24) 90,235 1,068 18,841

(b) Reconciliation of reportable segment revenues, profit or loss, assets and liabilities

Revenue Reportable segment revenue Loss before income tax expense and discontinued operations Reportable segment (loss)/profit Segment profit from discontinued operations (Loss)/Gain on change in fair value of convertible notes Impairment losses and write offs Finance costs Unallocated corporate income Unallocated corporate expenses Consolidated loss before income tax expense from continuing operations Assets Segment assets of continuing operations Deferred tax assets Pledged time deposits Cash and cash equivalents Unallocated corporate assets Consolidated total assets Liabilities Segment liabilities of continuing operations Bank and other borrowings Amount due to a director Amounts due to related parties Deferred tax liabilities Convertible notes Unallocated corporate liabilities Consolidated total liabilities	2013 HK$’000 89,006 (15,701) – (1,597) (40,981) (1,693) 8,246 (23,028) (74,754) 35,468 – 3,405 4,576 3,050 46,499 14,669 16,064 12,150 9,200 – 23,225 7,864 83,172	2012 HK$’000 157,855 6,033 (10,758) 4,868 (25,709) (634) 78 (29,661) (55,783) 90,235 514 3,512 10,163 8,432 112,856 18,841 9,614 4,000 9,200 616 21,628 11,405 75,304

Reportable segment (loss)/profit represents the (loss)/profit attributable to each segment without allocation of corporate administrative expenses, (loss)/gain on changes in fair value of convertible notes, impairment losses and write offs, finance costs, corporate directors’ emoluments, loss on disposal of subsidiaries, gain/(loss) on deregistration of subsidiaries, corporate interest income and income tax credit. This is the measure reported to the chief operating decision maker for the purposes of resource allocation and performance assessment.

All assets are allocated to reportable segments other than deferred tax assets, pledged time deposits and cash and cash equivalents.

All liabilities are allocated to reportable segments other than bank and other borrowings, amount due to a director, amounts due to related parties, deferred tax liabilities and convertible notes.

(c) Geographic information

The geographical location of customers is based on the location at which the goods delivered. The geographical location of the non-current assets is based on the physical and operating location of the assets.

The Group’s operations and workforce are mainly located in the PRC (country of domicile), including Hong Kong.

The following table provides an analysis of the Group’s revenue from external customers.

Asia – PRC including Hong Kong – other region Europe North and South America	Continuing 2013 HK$’000 238 39,674 10,967 38,127 89,006	operations 2012 HK$’000 4,174 41,104 12,229 74,906 132,413	Discontinued operations 2013 2012 HK$’000 HK$’000 – 8,956 – 7,514 – – – 8,972 – 25,442	Total 2013 2012 HK$’000 HK$’000 238 13,130 39,674 48,618 10,967 12,229 38,127 83,878 89,006 157,855	Total 2013 2012 HK$’000 HK$’000 238 13,130 39,674 48,618 10,967 12,229 38,127 83,878 89,006 157,855
					157,855

The following table provides an analysis of the Group’s non-current assets other than deferred tax assets.

	Continuing	operations	Discontinued	operations	Total
	2013	2012	2013	2012	2013	2012
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
Asia
– PRC including Hong Kong	17,845	63,483	–	–	17,845	63,483

Information about major customers

Revenue from customers contributing over 10% of the total sales of the Group are set out below:

Customer A – manufacture and sale of medical devices products Customer B – manufacture and sale of plastic moulding products Customer C – manufacture and sale of plastic moulding products Customer D – manufacture and sale of plastic moulding products The percentage of total revenue on major customers is set out Customer A – manufacture and sale of medical devices products Customer B – manufacture and sale of plastic moulding products Customer C – manufacture and sale of plastic moulding products Customer D – manufacture and sale of plastic moulding products	2013 HK$’000 24,685 22,992 17,022 – below: 2013 28% 26% 19% –	2012 HK$’000 51,690 28,563 17,518 17,185

		2012 33% 18% 11% 11%

3. Turnover

Revenue represents the net invoiced value of goods sold, net of value-added tax, returns, rebates and trade discounts. Revenue from the Group’s principal activities recognised during the year is as follows:

	2013	2012
	HK$’000	HK$’000
Continuing operations
– sales of goods	89,006	132,413

4. Other income

Analysis of the Group’s other income recognised during the year is as follows:

Continuing operations Exchange gain, net Interest income Gain/(Loss) on deregistration of subsidiaries Gain on disposal of property, plant and equipment Gain on disposal of available-for-sale financial assets Gain arising from forfeiture of deposit paid for new share subscription Others 5. Impairment losses and write offs Continuing operations Impairment loss on property, plant and equipment (Note 9) Impairment loss on goodwill (Note 10) Trade receivables written off Impairment loss on other deposits, prepayments and other receivables (Note 11)	2013 HK$’000 95 39 4,384 371 – 3,740 277 8,906 2013 HK$’000 5,679 34,071 174 1,057 40,981	2012 HK$’000 17 97 (631) 174 68 – 287 12 2012 HK$’000 – 21,455 24 4,230 25,709

6. Loss before income tax expense

The Group’s loss before income tax expense is arrived at after charging:

Continuing operations Staff costs (including directors’ emoluments) Contribution to defined contribution retirement plan Salaries, wages and other benefits Depreciation of property, plant and equipment – Owned – Held under finance leases Auditor’s remuneration Operating lease charges in respect of properties Cost of inventories recognised as expenses Income tax credit Continuing operations 2013 2012 HK$’000 HK$’000 Current tax – Hong Kong Tax – Tax for the year – 205 – Over provision in respect of prior years (41) (64) (41) 141 Current tax – PRC Enterprise Income Tax – Tax for the year 2 3 2 3 Deferred tax (102) (395) (141) (251)	Discontinued 2013 HK$’000 – – – – – – –	2013 2012 HK$’000 HK$’000 914 1,025 33,562 37,246 34,476 38,271 6,451 6,440 204 204 730 830 4,132 4,131 52,794 86,756 operations Total 2012 2013 2012 HK$’000 HK$’000 HK$’000 – – 205 (132) (41) (196) (132) (41) 9 – 2 3 – 2 3 – (102) (395) (132) (141) (383)

7. Income tax credit

Hong Kong Profits Tax is calculated at 16.5% of the estimated assessable profits for both years.

No Hong Kong Profits Tax has been provided as no estimated assessable profits were derived by the Group in Hong Kong for the years ended 31 December 2013 and 2012.

Under the Law of the People's Republic of China on Enterprise Income Tax (the “EIT Law”) and Implementation Regulation of the EIT Law, the tax rate of the PRC subsidiaries is 25% for both years.

8. (Loss)/earnings per share

(a) Basic (loss)/earnings per share

For continuing and discontinued operations

The calculation of the basic (loss)/earnings per share from continuing and discontinued operations is based on the loss attributable to the owners of the Company of HK$74,613,000 (2012: HK$44,650,000) and the weighted average of 875,823,986 (2012: 875,823,986) ordinary shares in issue during the year.

The weighted average number of ordinary shares for the purpose of basic (loss)/earnings per share has been adjusted for the share consolidation on 26 March 2013 as set out in Note 13.

For continuing operations

The calculation of the basic loss per share from continuing operations is based on the loss attributable to the owners of the Company of HK$74,613,000 (2012: HK$55,532,000) and the weighted average of 875,823,986 (2012: 875,823,986) ordinary shares in issue during the year.

For discontinued operations

For the year ended 31 December 2012, the calculation of the basic earnings per share from discontinued operations is based on the profit attributable to the owners of the Company of HK10,882,000 and the weighted average of 875,823,986 ordinary shares in issue during the year.

(b) Diluted (loss)/earnings per share

No diluted (loss)/earnings per share has been presented because there was no potential dilutive ordinary shares in issue for the years ended 31 December 2013 and 2012.

The Company’s outstanding share options and outstanding convertible notes were not taken into account as both had an anti-dilutive effect for the years ended 31 December 2013 and 2012.

9. Property, plant and equipment

Cost At 1 January 2012 Exchange adjustment Addition at cost Disposals Written off At 31 December 2012 At 1 January 2013 Exchange adjustment Addition at cost Disposals Written off At 31 December 2013 Accumulated depreciation and impairment At 1 January 2012 Exchange adjustment Depreciation Elimination on disposals Written off At 31 December 2012 and 1 January 2013 Exchange adjustment Depreciation Impairment loss Elimination on disposals Written off At 31 December 2013 Net book value At 31 December 2013 At 31 December 2012	Leasehold buildings at revalued amounts HK$’000 194 – – (194) – – – – – – – – – – – – – – – – – – – – – –	Plant and machinery HK$’000 125,899 30 858 (22,982) (84,111) 19,694 19,694 70 2,044 (3,972) – 17,836 107,803 – 4,855 (22,982) (84,091) 5,585 5 4,465 5,679 (741) – 14,993 2,843 14,109	Furniture, fixtures and office equipment HK$’000 9,617 19 261 – (5,700) 4,197 4,197 2 3 (48) (1,136) 3,018 7,219 – 1,360 – (5,689) 2,890 5 762 – (29) (1,136) 2,492 526 1,307	Motor vehicles HK$’000 2,858 4 1,548 (1,419) – 2,991 2,991 – 1,907 – – 4,898 1,499 1 594 (1,263) – 831 (1) 1,428 – – – 2,258 2,640 2,160	Total HK$’000 138,568 53 2,667 (24,595) (89,811) 26,882 26,882 72 3,954 (4,020) (1,136) 25,752 116,521 1 6,809 (24,245) (89,780) 9,306 9 6,655 5,679 (770) (1,136) 19,743 6,009 17,576

The net carrying value of motor vehicle held under finance leases of the Group was approximately HK$305,000 (2012: HK$509,000). The asset is pledged to secure the Group’s obligation under finance leases.

Impairment loss

The Group recorded a segmental loss of HK$9,687,000 (2012: HK$7,422,000) in the segment of manufacture and sale of plastic moulding products. As a result, the property, plant and equipment which relates to this segment, and which also constitutes a cash generating unit (“CGU”), were then assessed for impairment. The recoverable amount of this property, plant and equipment was based on a value in use calculation, using cash flow projection based on estimates and financial budgets approved by the management. These projections cover a five-year period, and have been discounted using a pre-tax discount rate of 15.51%. The value in use calculated was below zero.

All of the assumptions and estimations involved in the preparation of the cash flow projection including budgeted gross margin, discount rate and growth rate are determined by the management of the Group based on past performance, experience and their expectation for market development.

In view of the negative net present value of the future estimated cash flows of this CGU, the property, plant and equipment relating to this CGU were written down to zero, with an impairment loss of HK$5,679,000 recognised in “Impairment losses and write offs” in the current year (Note 5).

10. Goodwill

Cost Less: Accumulated impairment loss Net book value	2013 HK$’000 67,362 (55,526) 11,836	2012 HK$’000 67,362 (21,455) 45,907

Impairment testing on goodwill

All of the goodwill at 31 December 2013 relates to the manufacture and sale of medical devices products business unit acquired as part of the acquisition of the Titron Group in 2011. At the year end, the goodwill relating to this business unit, which is also a CGU is subject to impairment testing.

The recoverable amount of the CGU has been determined using cash flow projections under various scenarios based on estimates and financial budgets approved by the management. These projections cover a five-year period, and have been discounted using a pre-tax discount rate of 18.88%. The cash flows beyond that five-year period have been extrapolated using a zero growth rate.

Based on the assessment, the recoverable amount of the CGU is determined to be HK$14,863,000. The carrying amount of the CGU has been reduced to the recoverable amount and accordingly, an impairment loss of HK$34,071,000 (2012: HK$21,455,000) has been recognised in the current year. This significant impairment loss is primarily due to the performance of this business segment, not matching up to management’s expectations in 2013 and the business unit’s expected performance in 2014 and beyond. Much of the problem arose due to delay of the customer’s production schedules, which was caused by the recall of one of ultimate customers’ products.

11. Trade and other receivables

Trade receivables Other deposits, prepayments and other receivables Less: Impairment loss recognised on other deposits, prepayments and other receivables Total trade and other receivables	2013 HK$’000 10,213 8,504 (5,287) 3,217 13,430	2012 HK$’000 18,059 13,010 (4,230)
		8,780
		26,839

The Group allows an average credit period of 30 to 90 days (2012: 30 to 90 days) to its trade customers. The following is an aged analysis of trade receivables (net of accumulated impairment losses) by invoice date as at the end of the reporting period.

Current 1 to 90 days 91 to 180 days Over 181 days Trade receivables	2013 HK$’000 1 10,027 59 126 10,213	2012 HK$’000 83 17,731 28 217
		18,059

In respect of trade receivables, individual credit evaluations are performed on all customers requiring credit over a certain amount. These evaluations focus on the customers’ past history of making payments when due and current liability to pay, and take into account information specific to the customer as well as pertaining to the economic environment in which the customers operate. The Group does not hold any collateral over these balances. Receivables that were neither past due nor impaired constitute about 73% (2012: 55%) of total trade receivables, and relate to a wide range of customers for whom there was no recent history of default. The Group does not hold any collateral over these balances. The following is an aged analysis of trade receivables (net of accumulated impairment losses) by due date as at the end of the reporting period.

Neither past due nor impaired Less than 3 months past due 3 to 6 months past due Over 6 months past due Trade receivables	2013 HK$’000 7,452 2,606 67 88 2,761 10,213	2012 HK$’000 9,992
		7,827 23 217
		8,067
		18,059

Included in the Group’s trade receivables balance are debtors with aggregate carrying amount of approximately HK$2,761,000 (2012: HK$8,067,000) which are past due as at the reporting date for which the Group has not provided any impairment loss. The Group does not hold any collateral over these balances.

Receivables that were past due but not impaired relate to a number of independent customers that have a good repayment record with the Group. Based on past experience, management believes that no impairment allowance is necessary in respect of these balances as there has not been a significant change in credit quality and the balances are still considered fully recoverable.

Movement in the impairment losses of other deposits, prepayments and other receivables

At 1 January Impairment loss recognised (Note 5) At 31 December	2013 HK$’000 4,230 1,057 5,287	2012 HK$’000 – 4,230
		4,230

Included in other deposits, prepayments and other receivables are refundable earnest monies of approximately HK$5,300,000 paid to the potential vendors (the “Vendors”) for a possible acquisition of a company specialised in clinical studies in various areas of pathology in Germany (the “Investment Project”). A non-legal binding memorandum of understanding was entered into by the Company and the Vendors on 28 September 2012 as per the announcement made by the Company on 2 October 2012. No formal agreement was entered into by the Company and the Vendors as at 31 December 2012. During the year, the management decided to abandon the Investment Project as due diligence revealed that patents of the Vendors legal title problems. As a result, an allowance for impairment of HK$1,057,000 (2012: HK$4,230,000) has been recognised for the year based on an impairment assessment carried out by the management as at 31 December 2013.

12. Trade and other payables

Trade payables Accruals and other payables Amounts due to related parties	2013 HK$’000 6,121 16,192 22,313 9,200 31,513	2012 HK$’000 6,247 23,575
		29,822 9,200
		39,022

As at 31 December 2013 and 2012, included in amounts due to related parties is an amount due to a Titron Group Holdings Limited (“TGHL”), in the amount of HK$1,700,000 (2012: HK$1,700,000). TGHL was the vendor in the acquisition of the Titron Group in 2011, further details of which are set out in Note 10. All of the shareholders of TGHL own shares in the Company, and include Yip Wai Lun, Alvin the Chairman and Managing Director of the Company. This amount was unsecured, interest-free and repayable on demand. Included in accruals and other payables is an aggregate amount of HK$7,500,000 due to TGHL. As set out in Note 1, TGHL has agreed not to demand repayment of this amount until such time when repayment will not affect the Group’s ability to settle its obligations as and when they arise.

The remaining balance of amounts due to related parties were also unsecured, interest-free and repayable on demand.

The following is an aged analysis of trade payables presented based on the invoice date at the end of the reporting period.

Within 3 months Over 3 months but within 6 months	2013 HK$’000 5,760 361 6,121	2012 HK$’000 6,182 65
		6,247

The average credit period on purchases of goods is 30-90 days (2011: 30-90 days).

13. Share capital

Authorised: Balance as at 31 December 2012 and 31 December 2013 Issued and fully paid: Balance as at 1 January 2012 and 31 December 2012 Share consolidation of every ten (10) shares of par value of HK$0.01 each into one (1) consolidated share of par value HK$0.1 each; and reduction par value of each consolidated share from HK$0.1 to HK$0.01 Balance as at 31 December 2013	Par value per share HK$ 0.01 Par value per share HK$ 0.01 0.01 0.01	Number of shares 40,000,000,000 Number of shares 8,758,239,861 (7,882,415,875) 875,823,986	Amount HK$’000 400,000

			Amount HK$’000 87,582 (78,824)
			8,758

Notes:

Save as disclosed in the Company’s circular dated 1 March 2013 in respect of a proposed capital reorganisation (“Capital Reorganisation”) which was approved by the shareholders of the Company in a special general meeting of the Company on 25 March 2013, the Capital Reorganisation has become effective on 26 March 2013 as details below.

(a) Every ten (10) existing shares of HK$0.01 each in the issued share capital of the Company were consolidated into one (1) consolidated share of HK$0.10 each;
(b) The issued share capital was reduced by cancelling of HK$0.09 of the paid-up capital on each issued consolidated share so that the par value of each issued consolidated share be reduced from HK$0.10 to HK$0.01;
(c) The entire amount standing to the credit of the share premium account of the Company was cancelled; and
(d) The credit arising from the share premium account of the Company was transferred to the contributed surplus account of the Company to be applied to set off against the accumulated losses of the Company.

MANAGEMENT DISCUSSION AND ANALYSIS

RESULTS, BUSINESS REVIEW AND PROSPECTS

Results

In 2013, the unstable global economic and decline in the demand of customers’ end products have caused a sluggish business performance of the Group. The Group’s continuing operations recorded a turnover of HK$89 million, representing a decrease of HK$43.4 million or 32.8% as compared to that of last financial year. The Group suffered from the pressure of tough manufacturing conditions, and gross profit margin decreased from 22.6% as recorded in previous year to 15.7% for the year. The erosion in gross profit margin was caused by increased labor and overhead costs, though our ongoing cost reduction programs and sales price adjustments to customers offset part of the impact. The loss from continuing operations for the year of 2013 was HK$74.6 million, an increase of HK$19.1 million or 34.4%, as compared to the loss of HK$55.5 million last year. The loss increased was mainly attributable to the net effect of (i) a decline in turnover and gross profit margin of the Group; (ii) HK$4.4 million gain on deregistration of certain subsidiaries; (iii) impairment losses on property, plant and equipment, goodwill and other deposits, prepayments and other receivables of HK$5.7 million, HK$34.1 million and HK$1.1 million respectively; and (iv) HK$1.6 million loss in fair value of the outstanding convertible notes while HK$4.9 million gain in fair values was recorded in previous year.

During the past two years, the Company has made strategic decision to restructure and streamline the business operations as so to focus its resources in developing on the businesses of manufacture and sale of medical devices products and manufacture and sale of plastics moulding products. During the year under review, the Group did not have any discontinued operating activities while a gain from discounted operations in manufacture and sale of data media products and distribution of data media products was HK$10.9 million in 2012.

The Group’s overall loss attributable to owners was HK$74.6 million (2012: HK$44.7 million) for the year ended 2013, representing an increase of HK$29.9 million or 67.1% as compared to last year.

Business review

Manufacture and sale of medical device products

For the year ended 2013, the manufacture and sale of medical products segment recorded revenue of approximately of HK$24.7 million, accounted for 27.7% (2012: 39.0%) of the Group’s turnover. This business segment represented a decrease of HK$27.0 million or 52.2% from HK$51.7 million in the previous year, which was primarily due to the decrease in sales orders from its key customer in America as a result of the weaken demand of customer’s end products. The Company relies on production schedules provided by its customers to plan and implement production. The sudden drop in the customer orders was mainly due to the recall of one of ultimate customers’ products, which had created production inefficiency for a certain period before proper capacity adjustments. Hence, segment’s performance was turning from gain of HK$2.7 million in 2012 to loss of HK$6.0 million in the current year, which was the result of increased production cost and administrative expenses. An impairment loss on goodwill of HK$34.07 million (2012: HK$21.46 million) has been recognised in the current year.

Manufacture and sale of plastics moulding products

The segment of manufacture and sale of plastics moulding products was still the major contributor of the Group’s turnover, which amounted to HK$64.3 million (2012: HK$80.7 million) and accounted for 72.3% (2012: 61.0%) for the year under review. Owing to a sluggish business environment in the global market which caused the customers to be more conservation in placing order, the segment revenue had recorded a year-on-year decrease of 20.3%. As operating in highly competitive markets with a number of other manufacturers that produce and sell similar products, we primarily compete on the basis of capability, product quality, cost, and delivery to maintain market share. Under this global environment of severe competition, the segmental loss was further deteriorated from loss of HK$7.4 million in last year to loss of HK$9.7 million in 2013 due to increased production cost. As at 31 December 2013, the management had assessed the recoverable amount of this business segment and determined that an impairment loss of HK$5.7 million in respect of property, plant and equipment was recognised in 2013.

Prospects

Rising production cost will remain the major challenge to our performance. To cope with the challenging operational environment in our sector and sharpen our competitive position, the Group is pursuing and evaluating the feasibility of providing integrated services to our customers from design all the way to finish product. Also, we are in process of evaluating the distribution channel and market function for customer products, as well as developing our own products and brands.

The Group will continue to seek opportunities for business integration both with new and within our existing sectors, in order to broaden and improve our sustainable profitability in the future.

FINANCIAL REVIEW

Capital and debt structure

As at 31 December 2013, the Group’s consolidated net liabilities was approximately HK$36.7 million, representing approximately HK$74.2 million, equivalent to a 197.7%, decrease compared with that of 31 December 2012, primarily arising from the operating loss for the year.

As at 31 December 2013, the Company has 875,823,986 shares of HK$0.01 each (the “Shares”) in issue. On 26 March 2013, the Company effected the capital reorganisation, which included:

i. share consolidation of every ten (10) issued shares of par value HK$0.01 each into one (1) issued consolidated share of par value HK$0.10 each;
ii. capital reduction of the par value of each issued consolidated share from HK$0.10 to HK$0.01 by cancellation of HK$0.09 of the paid-up capital on each issued consolidated share; and
iii. cancellation of the entire amount standing to the credit of the share premium account of the Company.

As a result of the capital reorganisation, there were approximately HK$78.8 million from share capital and HK$223.8 million from share premium credited to the contributed surplus account of the Company and was applied for setting off the accumulated loss of the Company.

As at 31 December 2013, the Company has outstanding convertible notes issued as partial consideration for the acquisition of the Titron Group valued at approximately HK$23.2 million, of which, approximately HK$7.1 million was classified as non-current liabilities due to the conversion conditions applicable to their convertibility.

As at 31 December 2013, the Group’s total borrowings from financial institutions amounted to HK$16.3 million, representing an increase by HK$6.3 million from HK$10 million as at 31 December 2012. Over 99.9% of the borrowings were payable within one year. Since most of the borrowings were denominated in Hong Kong dollars, the risk of currency exposure was minimal. The Group’s total cash and bank balances amounted to approximately HK$4.6 million at 31 December 2013, which was about HK$5.6 million lower than the position of HK$10.2 million at 31 December 2012.

The Group recorded a negative figure on total equity and the gearing ratio was not applicable for the year while that of 31 December 2012 was 95.0%. The ratio was determined by bank and other borrowings, amount to a director, obligations under finance leases and convertible notes over shareholders’ equity.

Working capital and liquidity

As at 31 December 2013, the Group’s current ratio and quick ratio were 0.4 and 0.3 respectively (31 December 2012: 0.8 and 0.7 respectively). Inventory turnover on sales of continuing operations increased to 30 days which is 5 days longer than that at 31 December 2012. Receivable turnover of continuing operations was 58 days while it was 57 days at 31 December 2012.

The Group has incurred a loss of HK$74.6 million and at the end of the reporting period, the Group has net current liabilities of HK$47.4 million and a capital deficiency of HK$36.7 million.

Notwithstanding these conditions the going concern basis has been adopted on the basis that a Director and a certain related party have undertaken not to demand for repayment of debts due to them at 31 December 2013 of HK$12,150,000 and HK$7,500,000, respectively, until such time repayment will not affect the Company’s ability to repay other creditors in the normal course of business.

On 24 March 2014, the Company had signed two placing agreements, which secured a minimum capital injection of HK$40 million by April 2014. It is believed that these fund rising exercises will provide an opportunity to broaden the shareholders and strengthened the capital base and working capital of the Group. Further detail of the placing agreements in relation to the placing had been disclosed in an announcement of the Company dated 24 March 2014.

Also, as at 31 December 2013, included in the current liabilities is the current portion of convertible notes of HK$16,112,000. The convertible notes were issued pursuant to the acquisition of the Titron Group. Under the terms of the convertible note agreement, these notes must be converted into shares of the Company at the agreed (fixed) conversion price. Accordingly, the settlement of these convertible notes will not have any adverse cash flow impact to the Group.

Contingent liabilities and charges

As at 31 December 2013, the Group has pledged its assets with an aggregate net book value of HK$3.7 million (31 December 2012: HK$4.0 million) to secure bank facilities granted and finance lease obligations. The Group had no material contingent liabilities at 31 December 2013.

EMPLOYEES AND REMUNERATION POLICIES

As at 31 December 2013, the number of employees of the Group was approximately 150 (31 December 2012: 217). The remuneration packages of the Group’s employees are mainly based on their performance and experience, taking into account the current industry practices. Remuneration packages of employees include salaries, insurance, mandatory provident fund and share option scheme. Other employee benefits include medical cover, housing allowance and discretionary bonuses.

FINAL DIVIDEND

No payment of dividends has been proposed by the Board in respect of the year ended 31 December 2013 (2012: Nil).

CAPITAL REORGANISATION

On 5 February 2013, the Board proposed the capital reorganisation, every ten (10) existing shares of HK$0.01 each in the issued share capital of the Company was proposed to be consolidated into one (1) consolidated share of HK$0.10 (the “Share Consolidation”) and immediately following to the Share Consolidation, the paid-up capital of the Company to the extent of HK$0.09 on each issued consolidated share was reduced from HK$0.10 to HK$0.01 (collectively, the “Capital Reorganisation”). The Capital Reorganisation has been approved by the shareholders of the Company at the special general meeting held on 25 March 2013. Upon the Capital Reorganisation becoming effective on 26 March 2013, the trading board lot size of the share of the Company has also been changed from 2,000 existing shares per board lot to 10,000 new shares per board lot. Details of Capital Reorganisation are set out in the Company’s announcements dated 5 February 2013, 25 March 2013 and 28 March 2013 and circular dated 1 March 2013.

EVENTS AFTER THE REPORTING DATE

Pursuant to an announcement made by the Company on 24 March 2014, the Company and a placing agent (the “Placing Agent”) entered into a placing agreement (the “GM Placing Agreement”) under the general mandate (the “General Mandate”) on the same date, pursuant to which the Company has conditionally agreed to offer for subscription and the Placing Agent has agreed to procure, as placing agent of the Company, not less than six placees to subscribe, failing which, the Placing Agent itself will subscribe for 175,160,000 placing shares (the “GM Placing Shares”) at a price of HK$0.239 per GM Placing Share (collectively, the “GM Placing”). The placees and their ultimate beneficial owners shall be independent third parties. The GM Placing Shares will be allotted and issued pursuant to the General Mandate granted to the Directors at the annual general meeting of the Company held on 31 May 2013. The net proceed of HK$40,300,000, after deducting commission and placing expenses, will be ultilised as general working capital of the Group. The GM Placing is expected to be completed on or before 10 April 2014 subject to fulfilment of the condition of the GM Placing Agreement.

A second placing agreement has also been entered into with the Placing Agent on 24 March 2014 pursuant to which the Company has conditionally agreed to place through the Placing Agent, on a best endeavour basis, up to 175,160,000 placing shares (the “SM Placing Shares”) under a specific mandate (the “Specific Mandate”), to not less than six placees who and whose beneficial owners are independent third parties at a placing price of HK$0.239 per SM Placing Shares by 30 June 2014 or such other date as the parties may agree in writing (collectively,

the “SM Placing”). The SM Placing Shares will be allotted and issued pursuant to the Specific Mandate be obtained at the special general meeting of the Company. Assuming the SM Placing Shares have been placed successfully, the maximum net proceed of HK$40,100,000, after deducting commission and other expenses of the SM Placing, will be used for the development and marketing of medical or healthcare related products.

The GM Placing and the SM Placing are not inter-conditional. Details of the GM Placing and the SM Placing are set out in the Company’s announcement dated 24 March 2014.

CORPORATE GOVERNANCE

The Company has complied with all code provisions of the Corporate Governance Code (“CG Code”) throughout the year ended 31 December 2013 as set out in Appendix 14 to the Rules Governing the Listing of Securities (the “Listing Rules”) on The Stock Exchange of Hong Kong Limited (the “Stock Exchange”), except for certain deviations disclosed herein.

Code Provision A.1.3

Under this code provision, notice of at least 14 days should be given of a regular board meeting to give all directors an opportunity to attend.

During the year, one out of four Board meetings was convened with less than 14 days’ notice to enable the Board members to react timely and make expeditious decisions in respect of urgent corporate transaction which was significant in nature. As a result, the Board meeting was held with a shorter notice period than required with the consent of the Directors. The Board will do its best endeavor to meet the requirement of code provision A.1.3 of the CG Code in the future.

Code Provision A.2.1

Under this code provision, the roles of chairman and the chief executive should be separate and should not be performed by the same individual.

Mr. Yip Wai Lun, Alvin was the Chairman and Managing Director of the Company (the Company regards the role of its managing director to be the same as that of chief executive under the CG Code) during the year ended 31 December 2013.

During the year under review, the Group has been streamlining its operations, including business development, operation efficiency and financial management. The Board considers that it would be in the best interest of its shareholders that the roles of the Chairman and the Managing Director of the Company be combined to enable a strong and dedicated leadership to reposition the Company and implement effective measures to improve shareholders’ value. In this light, the Company has maintained Mr. Yip Wai Lun, Alvin as the Chairman and the Managing Director of the Company. The Company will review the current structure when and as it becomes appropriate.

Code Provision A.6.7

Under this code provision, all independent non-executive directors and non-executive directors should attend general meetings of listed issuers. Mr. Leung Ka Kui, Johnny, an Independent Non-Executive Director, was unable to attend the special general meeting of the Company held on 25 March 2013 due to his personal commitment.

MODEL CODE FOR SECURITIES TRANSACTIONS BY DIRECTORS

The Company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers (“Model Code”) set out in Appendix 10 to the Listing Rules as the code of conduct regarding securities transactions by its Directors. Having made specific enquiry, all Directors have confirmed that they have fully complied with the required standard set out in the Model Code during the year ended 31 December 2013.

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

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

REVIEW OF FINANCIAL STATEMENTS

The audit committee of the Company (the “Audit Committee”) comprises three Independent Non-executive Directors, namely Mr. Chan Kam Kwan, Jason (Chairman of the Audit Committee), Mr. Leung Ka Kui, Johnny and Mr. Lau Man Tak. The Audit Committee has reviewed with the management the accounting principles and practices adopted by the Group, and discussed internal controls and financial reporting matters including the review of the audited results for the year ended 31 December 2013.

REVIEW OF THIS FINAL RESULTS ANNOUNCEMENT

The figures in respect of the preliminary announcement of the Group’s results for the year ended 31 December 2013 have been agreed by the Group’s auditor, BDO Limited, to the amounts set out in the Group’s consolidated financial statements for the year. The work performed by BDO Limited 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 BDO Limited on the preliminary announcement.

APPRECIATION

On behalf of the Board, I would like to express appreciation to colleagues for their hard work and dedication in the past year. We will remain committed to achieving better results and maximising returns to our shareholders.

By Order of the Board AMCO United Holding Limited Yip Wai Lun, Alvin Chairman and Managing Director

Hong Kong, 27 March 2014

As at the date of this announcement, Mr. Yip Wai Lun, Alvin and Ms. Leung Mei Han are the Executive Directors; and Mr. Leung Ka Kui, Johnny, Mr. Chan Kam Kwan, Jason and Mr. Lau Man Tak are the Independent Non-executive Directors.