Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.
JIU RONG HOLDINGS LIMITED
久融控股有限公司
(Incorporated in the Cayman Islands with limited liability)
(Stock Code: 2358)
FURTHER INFORMATION TO THE AUDITED ANNUAL RESULTS ANNOUNCEMENT
Reference is made to the announcement of Jiu Rong Holdings Limited (the "Company") dated 21 May 2020 in relation to the audited annual results of the Company for the year ended 31 December 2019 (the "2019 Audited Annual Results Announcement").
The Board of Directors would like to provide further information in relation to the auditors' qualified opinion as a result of the auditors were unable to obtain sufficient appropriate audit evidence to satisfy themselves as to the recoverability of the trade receivables of approximately HK$177,737,000 derived from the trading business of Soyea Jiu Rong Technology Company Limited (("Soyea Jiu Rong"), an indirect wholly owned subsidiary of the Company) to Cuba. Soyea Jiu Rong received letter of credits from customers with Banco Nacional de Cuba (a state-owned commercial bank which is nationalized by the Government of Cuba on 26 November 1959) undertakes to settle the letters of credit at maturity before arrange shipment of the goods to Cuba. The Group was first aware the default of settlement by Banco Nacional de Cuba in March 2019, the trading manager of Soyea Jiu Rong visited Cuba customers and Banco Nacional de Cuba urging payment of the letters of credit in early April 2019 and approximately Euro 896,000 (equivalent to approximately HK$7,800,000) has been collected after that in 2019. In December 2019, the general manager of Soyea Jiu Rong visited Cuba and had several meetings with customers in relation to the settlement of letter of credits and issued legal letters to several customers urging for the settlements. Those customers immediately forwarded the settlement messages to Banco Nacional de Cuba. The former president of Banco Nacional de Cuba personally met with the general manager of Soyea Jiu Rong to express his sincerely apology for the default of payment and issued an official letter to acknowledge the liabilities and undertakes to settle all the outstanding amount.
The Company withholds the trading business to Cuba in May 2019. As per the 2019 Audited Results, the Cuba trading contributed approximately 7.20% to the turnover, approximately 13.76% to the Group's gross profit
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respectively and Cuba's trade receivables represented approximately 8.67% to the total assets of the Group. The financials and operations of the Group will remain stable and healthy even though excluding the Cuba trading business.
The management agreed with the auditor's point of view in relation to the qualified opinion as the management considered the recovery of the funds from Banco Nacional de Cuba arose from the political issues of Cuba that is out of both Banco Nacional de Cuba and the company's control because Cuba has been running out of foreign currency and the Cuba Government strictly controlled the usage of foreign currency.
The audit committee also agreed with the auditor's point of view as well because they understood the political situations of Cuba with the Cuba Government strictly controlled the usage of foreign currency.
In order to address the audit issues and remove the audit qualification, the Group would like to provide below proposals and actions after discussion with auditors:
Plans | Possible audit opinions | Groups' responses and feasibilities |
1 The Group reaches a Auditors will remove the The Group has been urging the settlement plan with qualified opinion for the outstanding amounts from Banco
expected timetable | with | financial year ending | 31 Nacional de Cuba, our staff in | |||
Banco Nacional de Cuba for | December 2021. | Hangzhou | office | contacted | the | |
the financial year ending 31 | responsible officers for the Asia's | |||||
December 2021, and Banco | division of Banco Nacional de Cuba | |||||
Nacional de Cuba has to | through emails and our staff in Cuba | |||||
follow | the | agreed | office personally visited to Banco | |||
settlement plan to repay its | Nacional de Cuba for repayment on a | |||||
outstanding | debts | monthly basis. To response to the | ||||
accordingly, | then | such | Group, Banco Nacional de Cuba has | |||
repayment | evidences can | issued | its | outstanding amounts | ||
be sufficient to justify the | confirmation to the Group on a | |||||
recoverability | of | the | quarterly basis, i.e. At the end of | |||
outstanding amounts. | March, | June, | September | and | ||
December. The Group also obtained | ||||||
outstanding | amounts confirmation | |||||
letter as at 30 June 2020 from Banco | ||||||
Nacional de Cuba and repayment | ||||||
undertaking letter from the current | ||||||
president of Banco Nacional de Cuba | ||||||
(the "Undertaking Letter") in July 2020 |
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to replace the previous undertaking letter Issued by the former president of Banco Nacional de Cuba and the undertaking will continue in effect until Banco Nacional de Cuba fully repays the outstanding amounts.
The Board has explored all possible ways to recover the outstanding amounts, including the settlement by way of Cuba local currency (CUC). In July 2020, the Group has received
CUC171,000 (equivalent to approximately HK$1,330,000)_from Banco Nacional de Cuba on 13 July 2020, which will be utilized as general working capital of the Group's Cuba representing office for the coming 12 months. However, the Group will not accept the repayment in CUC to settle all the outstanding amounts as CUC is restricted currency which cannot transfer to other countries and can only spend in Cuba domestically. Moreover, the auditors will propose another qualification on CUC in the Group's financial cash and bank balances due to the restriction on CUC which the Group cannot assess the future economic benefits from CUC.
Due to the shortage of the foreign currency and strict control of the usage of foreign currency by Cuba Government as explained in the Undertaking Letter, Banco Nacional de Cuba indicates that it is unable to provide a detailed settlement
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timetable | under | current | foreign | ||||||||||||||
exchange conditions and hence, the | |||||||||||||||||
Group is unlikely to satisfy auditors' | |||||||||||||||||
proposal to provide sufficient audit | |||||||||||||||||
evidences | to | remove | audit | ||||||||||||||
qualification in the financial year | |||||||||||||||||
ending 31 December 2021. | |||||||||||||||||
The Group will continue to urge Banco | |||||||||||||||||
Nacional de Cuba for repayment on a | |||||||||||||||||
monthly basis actively as mentioned | |||||||||||||||||
above, moreover, our senior executive | |||||||||||||||||
responsible for Cuba trading business | |||||||||||||||||
will personally visit the president of | |||||||||||||||||
Banco Nacional de Cuba urging for | |||||||||||||||||
repayment when the COVID-19 | |||||||||||||||||
becomes under control. | |||||||||||||||||
2. | If the Group fails to reach a | Auditors | will | propose | The Group will not consider to provide | ||||||||||||
settlement | plan | with | qualification on (i) the balance | impairment to the trade receivables as | |||||||||||||
expected | timetable | with | of the trade receivables and (ii) | this will not solve the audit issues and | |||||||||||||
Banco | Nacional | de | Cuba | impairment loss of the trade | will lead to other audit qualifications. | ||||||||||||
and | cannot | recover | the | receivables due to | limitation | Moreover, when the Group provides | |||||||||||
outstanding | funds | from | on the amount of the | impairment loss on the trade | |||||||||||||
Banco | Nacional | de | Cuba | impairment loss and whether | receivables, this may mislead Banco | ||||||||||||
before issuance of the 2021 | such | impairment loss should | Nacional de Cuba that they will not | ||||||||||||||
audited annual results and | be recorded in current or prior | need to repay the impairment | |||||||||||||||
the | shortage | of | Cuba | years. This | qualification will | amounts. | |||||||||||
foreign | currency | remains | only be removed when Banco | ||||||||||||||
unlikely to improve in the | Nacional | de | Cuba | indicates | |||||||||||||
foreseeable | future, | the | that it will not settle the | ||||||||||||||
Group | may | consider | to | outstanding amounts and the | |||||||||||||
provide an impairment loss | amounts | of | the impairment | ||||||||||||||
of the outstanding amounts | loss becomes certain. | ||||||||||||||||
due from Banco Nacional de | |||||||||||||||||
Cuba | on | the | Group's | For illustration purpose: | |||||||||||||
financial | statements. | If | the | Group | provides | ||||||||||||
However, | given | that | if | impairment in 2021, auditors |
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Banco Nacional | de | Cuba | will issue qualified opinions on | |||||||||
continues to undertake that | (i) the balance of the trade | |||||||||||
it will settle the outstanding | receivables and (ii) impairment | |||||||||||
amounts | and | Banco | loss of the trade receivables for | |||||||||
Nacional de Cuba is still in | the financial year ending 31 | |||||||||||
normal | operation, | December 2021. | ||||||||||
impairment | is | not | an | |||||||||
appropriate | accounting | If Banco Nacional de Cuba | ||||||||||
treatment. | indicates that it will not settle | |||||||||||
the outstanding | amounts | in | ||||||||||
2023 and that the impairment | ||||||||||||
loss and the balance of trade | ||||||||||||
receivables | becomes certain, | |||||||||||
the audit qualification will be | ||||||||||||
removed for the financial year | ||||||||||||
ending 31 December 2023. | ||||||||||||
3. | If Banco Nacional de Cuba | Auditors | will | propose | The Group will make impairment on | |||||||
indicates that it will not | qualification | on | the | the outstanding amounts when Banco | ||||||||
settle | the | outstanding | impairment loss of the account | Nacional de Cuba indicates that it will | ||||||||
amounts | and the | Group | receivables | due | to | not settle the outstanding amounts. | ||||||
then | provides | an | uncertainties on whether such | Yet, taken into account the current | ||||||||
impairment loss in response | impairment | loss | should | be | negotiation with Banco Nacional de | |||||||
to | that, | auditors | will | recorded in current year or | Cuba, Banco Nacional de Cuba will | |||||||
remove | the | qualified | prior years. This | qualification | keep on issuing its outstanding | |||||||
opinion | on | the | will last for two financial years | amounts to the Group on a quarterly | ||||||||
recoverability | of | the | as the current year's profit and | basis and undertakes to repay the | ||||||||
outstanding balance based | loss will affect the comparative | outstanding amounts. The Group will | ||||||||||
on the situation that no | figures of next year's financial | not provide any impairment on trade | ||||||||||
settlement will be received | report. | receivables until Banco Nacional de | ||||||||||
from | Banco | Nacional | de | Cuba indicates that it will not settle the | ||||||||
Cuba. | For illustration purpose: | outstanding amounts. | ||||||||||
If Banco Nacional de Cuba | ||||||||||||
indicates that it will not settle | ||||||||||||
the outstanding | amounts | in | ||||||||||
2020, auditors will propose | ||||||||||||
qualification | on | the | ||||||||||
impairment loss of the account |
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receivables due to uncertainties on whether such impairment loss should be recorded in current year or prior years in 2020 annual report. This qualification will last for two financial years as the 2020 profit and loss will affect the comparative figures of 2021 financial year.
As a result, the qualification will only be able to remove for the financial year ending 31 December 2022.
Taken into account that (i) Banco Nacional de Cuba will continue to issue its confirmation on the outstanding amounts to the Group on a quarterly basis and the current president of Banco Nacional de Cuba undertake to repay its outstanding amounts; and (ii) Banco Nacional de Cuba will not be able to provide a repayment schedule due to the shortage of foreign currency and strict control of the use of foreign currency by the Cuba Government. Auditors do agree with the Group that impairment is not an appropriate way and will not solve the audit issues and leads to other audit qualifications unless Banco Nacional de Cuba indicates that it will not settle the outstanding amounts.
The Group really wants to recover all outstanding amounts and remove the audit qualifications and try all its means to liaise with Banco Nacional de Cuba, yet, the current foreign currency shortage of Cuba is a political issue which is out of the Group's control, the Group really cannot provide a specific timeline to address the audit issue. Further announcement(s) will be issued by the Company as and when necessary if there are material developments of the auditors' qualified opinion in relation to the trade receivables.
The closing price of Company's shares immediately before the date on which the share options were granted was HK$0.126.
By order of the Board
Jiu Rong Holdings Limited
Siu Chi Ming
Executive Director
Hong Kong, 21 August 2020
As at the date of this announcement, Mr. Siu Chi Ming and Mr. Yin Jianwen are the Executive Directors; Mr. Wang Ning, Mr. Chen Zheng and Mr. Yuan Qian Fei are the Independent Non-executive Directors.
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Jiu Rong Holdings Ltd. published this content on 21 August 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 21 August 2020 09:18:46 UTC