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    2358   KYG5139B1014

JIU RONG HOLDINGS LIMITED

(2358)
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Jiu Rong : FURTHER INFORMATION TO THE AUDITED ANNUAL RESULTS ANNOUNCEMENT

08/21/2020 | 05:18am EDT

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

1

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

2

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

3

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

4

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

5

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.

6

Disclaimer

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


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Sales 2020 722 M 92,8 M 92,8 M
Net income 2020 22,9 M 2,94 M 2,94 M
Net Debt 2020 291 M 37,5 M 37,5 M
P/E ratio 2020 27,0x
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Zheng Chen Independent Non-Executive Director
Chi Ming Siu Secretary & Executive Director
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