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Jarlway Holdings plc (PFIT)

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Wednesday 28 June, 2006

Jarlway Holdings plc

Final Results

Jarlway Holdings plc
27 June 2006

                              JARLWAY HOLDINGS PLC

                  RESULTS FOR THE YEAR ENDED 31 DECEMBER 2005

Highlights for the year ended 31 December 2005

  • Turnover £4,853,000 (2004 - £564,000) and consolidated net profit after
    taxation £294,000 (2004 - £101,000 excluding negative goodwill write-back of
    £2,845,000) (comparative figures are for period from 26 Nov 2004 to 31 Dec
    2004 only);
  • Company remains profitable and cash-positive but trading was below
    directors' expectations;
  • Restrictive Chinese Government macro-economic policies impacted sales and
  • Limited access to fresh capital has tempered expansion plans;
  • £360,000 provision against trade receivables.

Post-period highlights

  • Solid start to 2006;
  • New generation of concrete pumps developed;
  • Contracts won from China Railway Corporation and first export order to 

Chairman Wu Zhi Jia commented, 'We are now confident that three key moves,
namely customer differentiation, product innovation and tailoring and the
strengthening of the internal finance function, including credit control, will
help us achieve our objective of consolidating Jarlway's position as a
recognised and trusted brand name within the industry. Despite the difficulties
encountered during 2005, I look forward to reporting a significantly improved
performance in 2006.'


Full Chairman's Statement and summary Financial Statements follow. Copies of the
Company's audited financial statements are available from the Company's
Nominated Adviser, Nabarro Wells & Co. Limited at Saddlers House, Gutter Lane,
Cheapside, London EC2V 6HS.

For further information, please contact:

Jarlway Holdings PLC        Nabarro Wells & Co. Limited      First City PR
Ng Chi Chor                 Robert Lo                        Allan Piper
Director                    Director                         Director

+86 20 8221 5862            +44 (0) 20 7710 7400             +44 (0)20 7436 7486
+86 13316269616                                              +86 (0)13808007147
                                                             +852 6419 2915

Note to Editors: Jarlway Machinery Inc. ('Jarlway') is one of the
largest concrete pump manufacturers in the People's Republic of China. Jarlway
is engaged in the development and sale of large-scale construction machinery
including trailer concrete pumps, truck mounted concrete line pumps, concrete
boom pumps and concrete mixing stations. Jarlway utilises reliable, patented
technology supported by a network of 27 regional sales and service stations
throughout most of China. Jarlway's products are assembled under processes that
have been certificated to standards similar to ISO9001.

More information about Jarlway Holdings plc and its products can be found on
line at

Chairman's Statement

I am pleased to report on the results of Jarlway Holdings Plc (the 'Company' or
'Jarlway') for the year ended 31 December 2005. While the trading results were
not to the Board's satisfaction, Jarlway remains profitable and cash-positive. I
believe that progress has been made towards ensuring a better financial
performance in the future and I am pleased to be able to report a solid start to


2005 was a challenging year for the Company.  The senior management time
involved in taking the Company onto the Alternative Investment Market ('AIM') of
the London Stock Exchange in July had a detrimental effect on the business, and
this was compounded by the late-stage change of broker prior to the flotation
and ultimately by the disappointing amount raised on flotation. In the meantime,
China's restrictive macro-economic policies have impacted our sales and our

China introduced restrictive macro-economic policies aimed at slowing the growth
in the economy to a more sustainable level. This has resulted in a tightening of
the credit extended by the banks to our customers. In accordance with government
directives, the local banks have cut back on the mortgage finance available to
purchasers of construction machinery by raising more stringent requirements for
credit approvals. This has lead to a decline in the businesses of all
participants in the construction machinery manufacturing industry.

The reduced amount we raised on flotation meant we had to change our plans to
move all operations onto one new, larger site. We also had to delay our plans to
expand the production of line pumps and boom pumps. Our inability to build these
machines, with their enhanced profitability, had a significant adverse impact on
our performance in 2005.

In response to these difficulties, we have taken a number of measures to
minimise the negative effect on Jarlway. We have developed a new generation of
trailer pumps which are both more powerful and efficient, and which have been
well received in the market. We expect to sell these machines for premium prices
and achieve improved gross margins and better payment terms on these sales.
These machines should allow us to penetrate the higher end of the market. We
have also made applications for various patents for our technology innovations,
the approval of which is expected in the second half of 2006.  We have
implemented new recruitment and training plans for our marketing staff as part
of our strategy to target new customers among large enterprises and state-owned

I would like to assure you that the directors and staff are working hard to
restore the confidence of our investors in Jarlway. We realise that 2005 was not
a satisfactory year and we are determined to improve the financial performance
of the Company in 2006.


The consolidated net profit after taxation of the Company and its subsidiaries
in respect of the period ended 31 December 2005 was £294,000 (2004 - £2,946,000,
or £101,000 before a negative goodwill write-back) and the turnover of the
Company was £4,853,000 (2004 - £564,000). The comparative period is only for the
five weeks from 26 November 2004, which is the date the main operating company
in China joined the Group, and the profit is mainly due to the release of
negative goodwill to income.

The results for the year are impacted by additional provisions of £360,000
against receivables.  Like many Chinese companies, a high proportion of the
Group's receivables are significantly overdue although the management expects to
recover most of these receivables. At the year-end, an exercise was undertaken
to examine each receivable and make appropriate provision.

Cash of £239,000 was raised net of expenses when the Company was admitted to AIM
in July 2005.


Looking forward, the management is very positive about Jarlway's prospects;
current trading for 2006 is encouraging. We have a new generation of concrete
pumps and a clearly identified target customer group.

Sales in 2006 have started well and the Company has won contracts from various
parts of China Railway Corporation and its first export order to Dubai.

As the Company indicated in its last trading statement, we have secured an
important role as a supplier of equipment for the construction of China's
planned high-speed rail network, and are also positioning ourselves as suppliers
to wider infrastructure projects and major property developments. We have
implemented new recruitment and training plans for our marketing staff, which
involve a new 'agency development' division whose objective is to
secure reliable agents in cities and regions where Jarlway currently has no
representation.  We are also exploring opportunities for expansion into overseas
markets, where we believe our machines will offer significant cost advantages
over those sold by our competitors, and we have been recruiting sales and
marketing staff to help with this.

We believe our development of innovative equipment tailored to customer needs
means we are well placed to take advantage of current market opportunities. We
have developed a placing boom which combines the attributes of a tower and a
boom so that it can rise with the height of the building and distribute concrete
within a finite area, such as each floor of a skyscraper. In addition we have
developed a new generation of trailer pumps.

As we indicated in our last trading statement, we are already seeing some signs
of success with our moves to tighten financial controls, with greater emphasis
on customer selection, tighter credit terms and stricter rules on the
repossession of equipment from overdue creditors.

In summary, we believe our competitive advantages are:

  • superior product quality
  • strong technical development capability
  • accurate market positioning
  • relatively low operating costs
  • reasonable pricing
  • strong customer loyalty

Overall, despite the difficulties encountered during 2005, we are now confident
that these three key moves - tighter financial controls, customer 
differentiation, and product innovation and tailoring - will help us achieve our
objective of establishing Jarlway as a recognised and trusted brand name within
the industry.


I wish to thank my fellow directors and all our staff who have worked so hard
for the Company during this difficult period. I would also like to thank our
shareholders for their continuing support and understanding, and I look forward
to a significantly improved performance in 2006.

I would like to pay a special tribute to KM Wong, who is not standing for re-
election. KM worked extremely hard to bring the Company to AIM and we all wish
him well in building up his corporate finance practice.

Wu Zhi Jia

Jarlway Holdings Plc

Consolidated Income Statement
Year ended 31 December 2005

                                                   2005              2004
                                                  £'000              £'000

Turnover                                          4,853                564

Cost of sales                                    (3,091)              (326)

Gross profit                                      1,762                238
Other revenue                                         7                  -
Selling and distribution costs                     (636)               (84)
Administrative expenses                            (790)               (45)
Negative goodwill release to income statement         -              2,845

Profit before taxation                              343              2,954

Taxation                                            (49)                (8)
Profit for the year                                 294              2,946

Attributable to:

Shareholders of the Company                         294              2,946

Earnings per share

Basic and diluted                                  1.33p                15p

Jarlway Holdings Plc

Consolidated Balance Sheet
At 31 December 2005

                                                        2005               2004
                                                       £'000              £'000

Non-current assets
Property, plant and equipment                            261                 91
Trade receivables                                        165                651
Restricted bank balance                                  257                772
Deferred tax assets                                       81                 36

                                                         764              1,550
Current assets

Assets held for sale                                     332                  -
Inventories                                              812                321
Trade and other receivables                            5,484              5,157
Financial assets at fair value through profit or loss      5                  5
Cash and cash equivalents                                298                121
Restricted bank balance                                  104                178

                                                       7,035              5,782

Equity and liabilities

Capital and reserves
Share capital                                             61                  -
Other reserves                                         3,762              2,845

Total equity                                           3,823              2,845

Non-current liabilities
Non-current portion of bank borrowings                    89                545

Current liabilities
Trade and other payables                               3,133              2,614
Current portion of bank borrowings                       642              1,217
Income tax payable                                       112                111

                                                       3,887              3,942

Total liabilities                                      3,976              4,487
Total equity and liabilities                           7,799              7,332

WU Zhi Jia       Chairman
NG Chi Chor      Director

26 June 2006

Jarlway Holdings Plc

Consolidated Statement of Changes in Equity
Year ended 31 December 2005

                              Share     Share Option        Share    Exchange     Merger     Retained     Total
                            Capital          Reserve      Premium     Reserve    Reserve     Earnings

                              £'000            £'000        £'000       £'000      £'000        £'000     £'000

Balance at                        -                -            -        (101)         -        2,946     2,845
31 Dec 2004

Changes in equity for 2005

Exchange differences on           -                -            -         438          -            -       438
translating foreign

Merger reserve arising            -                -            -           -        (49)           -       (49)
on consolidation

Employee share option             -                6            -           -          -            -         6

Profit for the year               -                -            -           -          -          294       294

Ordinary shares issued           61                -          228           -          -            -       289
                            _______          _______      _______     _______    _______      _______   _______
Balance at 31 December
2005 carried forward
                                 61                6          228         337        (49)       3,240     3,823

                             ______          ______       ______      ______     ______       ______    ______

Jarlway Holdings Plc

Consolidated Cash Flow Statement
Year ended 31 December 2005

                                                                           2005               2004
                                                                        £'000                £'000


Profit before taxation                                                    343                2,954

Adjustment for:

            Interest income                                                (7)                   -
            Depreciation                                                   29                    1
            Provision for doubtful debts                                  360                   11
            Employee share-based compensation payment                       6                    -
            Negative goodwill                                               -               (2,845)

                                                                          731                  121

Operating profit before changes in working capital

            Increase in assets held for sale                             (332)                   -
            (Increase)/Decrease in inventories                           (445)                 234
            Decrease/(Increase) in trade and other receivables            685               (1,563)
            Increase in financial assets at fair value through              -                   (5)
            profit or loss
            Increase in trade and other payables                          132                  344

Cash generated from/(used in) operations                                  771                 (869)
Interest received                                                           7                    -
Taxation                                                                 (107)                   -

Net cash inflow from/(used in) operating activities                       671                 (869)

Investing activities                             
Acquisition of subsidiaries                                                 -                  (97)
Change in Restricted bank balances                                        726                 (130)
Purchase of property, plant and equipment                                (187)                   -

Net cash from/(used in) investing activities                              539                 (227)

Financing activities
(Repayment)/proceeds of bank borrowings                                (1,285)               1,217
Issue of share capital                                                    239                    -

Net cash (used in)/from financing activities                           (1,046)               1,217

Net increase in cash and cash equivalents                                 164                  121

Cash and cash equivalents at 1 January                                    121                    -

Effect of foreign exchange rate changes                                    13                    -

Cash and cash equivalents at 31 December                                  298                  121

Jarlway Holdings Plc

Notes to the financial information
Year ended 31 December 2005

1.  The financial information set out in this announcement does not
constitute the Company's statutory accounts for the year ended 31 December 2005
and the period ended 31 December 2004. The auditors have reported on the 2005
accounts; their report was unqualified and did not contain a statement under
section 237 (2) or (3) of the Companies Act 1985. The financial information set
out in this announcement was approved by the Board of Directors on 20 June 2006.

2.  Principal accounting policies

General information

The Company is a public listed company incorporated in England and its shares
are listed on the Alternative Investment Market ('AIM') of the London Stock
Exchange.  The principal place of business of the Company is in the People's
Republic of China.  The principal activities of the Company and its subsidiaries
(the Group) are described in note 12.

Statement of compliance

The consolidated financial statements have been prepared in accordance with
International Financial Reporting Standards (IFRSs) as adopted for use in the
European Union.

Transition to International Financial Reporting Standards

The Company's last financial statements to 31 December 2004 were reported under
UK Generally Accepted Accounting Practice. These financial statements are
presented by the Company under International Financial Reporting Standards.  The
date of transition is therefore 11 December 2004, the date of the company's

As the company had not traded in the period to 31 December 2004 there were no
differences between the results reported under UK GAAP and International
Financial Reporting Standards as of that date. There have been no changes to the
previously reported equity of the Company at the beginning of the reporting
period as a result of the adoption of International Financial Reporting

Other than the reclassification of taxation items, there have been no
significant changes to the cash flow statement from that reported under UK GAAP.

Basis of preparation

The measurement basis used in the preparation of the financial statements is
historical cost, except for financial assets at fair value through profit or
loss, which have been measured at fair value.

Jarlway Holdings Plc

Notes to the financial information (continued)
Year ended 31 December 2005

2.   Principal accounting policies (continued)

Basis of consolidation

The consolidated financial statements incorporate the financial statements of
the Company and its subsidiaries made up to 31 December each year. The results
of subsidiaries acquired or disposed of during the year are dealt with in the
consolidated income statement from or up to their effective dates of acquisition
or disposal respectively.

All inter-company transactions and balances within the Group are eliminated on

A share for share exchange agreement between Jarlway Holdings Plc and Jarlway
International Limited took place on 19 April 2005.  As no acquirer and acquiree
were identified, the results of Jarlway Holdings Plc and Jarlway International
Limited have been consolidated on a merger basis, whereby the results and
cashflows of the relevant entities are combined from the beginning of the year
in which the merger occurred, and their assets and liabilities combined at the
amounts at which they were previously recorded.

On 26 November 2004 Jarlway International Limited acquired 100% of the share
capital of Jarlway Machinery Inc.   The results have been consolidated from this

Comparative information

Jarlway Holdings Plc was incorporated on 11 December 2004 and did not trade in
the period to 31 December 2004.  In order to present comparative financial
information that is more meaningful to the users of the financial statements,
proforma financial information is disclosed which reports the results of Jarlway
International Limited and its subsidiary for the period from 26 November 2004
(the date which Jarlway International Limited acquired Jarlway Machinery Inc.)
to 31 December 2004.


Subsidiaries are entities controlled by the Company.  Control exists when the
Company has the power, directly or indirectly, to govern the financial and
operating policies of an entity so as to obtain benefits from its activities.
In assessing control, potential voting rights that presently are exercisable or
exercisable on conversion are taken into account.

Jarlway Holdings Plc

Notes to the financial information (continued)
Year ended 31 December 2005

2.  Principal accounting policies (continued)

Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation
and impairment losses.

The cost of an item of property, plant and equipment comprises its purchase
price and any directly attributable costs of bringing the asset to its working
condition and location for its intended use. Improvements are capitalised only
when it is probable that future economic benefits associated with the item will
flow to the Group and the cost of the item can be measured reliably.
Expenditures incurred in restoring assets to their normal working condition and
other repairs and maintenance costs are charged to the income statement.

Depreciation is charged to the income statement on a straight-line basis over
the estimated useful life of each component of an item of property, plant and

The estimated useful lives are as follows:

Machinery                                5-10 years
Motor vehicles                             10 years
Furniture, fittings and equipment        5-10 years

Gains or losses arising from the retirement or disposal of property, plant and
equipment are determined as the difference between the net sale proceeds and the
carrying amount of the asset and are recognised as income or expense in the
income statement.

Financial instruments

Financial assets and financial liabilities are recognised when the Group becomes
a party to the contractual provisions of the instruments and on the trade date
basis. Financial asset and financial liabilities are measured as follows:

Financial assets at fair value through profit or loss

Financial instruments classified as financial assets at fair value through
profit or loss include financial assets held for trading, and those designated
at fair value through profit or loss at inception. These items are measured at
fair value, with gains or losses recognised in the income statement.

At the balance sheet date, the financial assets are measured at fair value by
reference to the price quotation for equivalent instruments in an active market
provided by financial institutions.  Any changes in fair value are recognised in
the income statements.

Trade and other receivables

Trade and other receivables are initially recognised at fair value and
thereafter stated at amortised cost less provision for impairment.  Loans and
receivables without fixed or determinable repayment terms are stated at cost
less any accumulated impairment loss.  A provision for impairment of receivables
is established when there is objective evidence that the Group will not be able
to collect all the amounts due according to the original terms of receivables.
The amount of the provision is the difference between the assets' carrying
amount and the present value of estimated future cash flows, discounted at the
effective interest rate.  The amount of provision is recognised in the income

Jarlway Holdings Plc

Notes to the financial information (continued)
Year ended 31 December 2005

2.  Principal accounting policies (continued)

Trade and other payables

Trade and other payables are initially recognised at fair value and thereafter
stated at amortised cost.

The derecognition of a financial asset takes place when the Group's contractual
rights to future cash flows from the financial asset expire or the Group
transfers the contractual rights to future cash flows to a third party. The
Group derecognises a financial liability when, and only when, the liability is

Cash equivalents

For the purpose of the consolidated cash flow statement, cash equivalents
represent short-term, highly liquid investments which are readily convertible to
known amounts of cash and subject to an insignificant risk of changes in value,
net of bank overdrafts.

Revenue recognition

Revenue is recognised when it is probable that the economic benefits will flow
to the Group and when the revenue and costs, if applicable, can be measured
reliably and on the following bases.

Sales of goods are recognised on the transfer of the risks and rewards of
ownership, which generally coincides with the time when goods are delivered to
customers and title has passed.

Interest income is recognised by applying the effective interest method to the
net carrying amount of the financial assets.

Foreign currencies

Net assets of overseas subsidiaries are translated into sterling at the rate of
exchange ruling at the year end.  Differences arising from the retranslation of
net assets at the beginning of the year are dealt with through reserves.  The
results of overseas subsidiaries are translated into sterling using the average
rates of exchange during the year; the difference between the results translated
at average rates and closing rates is taken to reserves.

Other assets and liabilities denominated in foreign currency are translated into
sterling at the rate of exchange ruling at the year end except where they are
covered by foreign exchange contracts in which case the rate appropriate to the
forward contract is used.

All other translation differences are taken to income statement, with the
exception of differences on foreign currency borrowings, which are taken to
reserves to the extent that they are used to finance foreign equity investments.

Negative goodwill

The excess of acquirer's interest in the net fair value of acquiree's
identifiable assets, liabilities and contingent liabilities over cost ('negative
goodwill') arising on an acquisition is recognised directly through the income

Jarlway Holdings Plc

Notes to the financial information (continued)
Year ended 31 December 2005

2.  Principal accounting policies (continued)

Impairment of assets

At each balance sheet date, the Group reviews internal and external sources of
information to determine whether the carrying amounts of its property, plant and
equipment, investment in subsidiaries, have suffered an impairment loss or an
impairment loss previously recognised no longer exists or may be reduced. If any
such indication exists, any impairment loss is determined and recognised as

The recoverable amount of the asset is estimated, based on the higher of its
fair value less costs to sell and value in use. Where it is not possible to
estimate the recoverable amount of an individual asset, the Group estimates the
recoverable amount of the smallest group of assets that generates cash flows
independently (i.e. cash-generating unit).

If the recoverable amount of an asset or a cash-generating unit is estimated to
be less than its carrying amount, the carrying amount of the asset or
cash-generating unit is reduced to its recoverable amount. Impairment losses are
recognised as an expense immediately.

A reversal of impairment loss is limited to the carrying amount of the asset or
cash-generating unit that would have been determined had no impairment loss been
recognised in prior years. Reversal of impairment losses in respect of other
assets is recognised as income immediately.


Inventories are stated at the lower of cost and net realisable value.  Cost,
which comprises all costs of purchase and, where applicable, other costs that
have been incurred in bringing the inventories to their present location and
condition, is calculated using the weighted average method.  Net realisable
value represents the estimated selling price in the ordinary course of business
less the estimated costs of completion and the estimated costs necessary to make
the sale.


A provision is recognised when the Group has a present legal or constructive
obligation as a result of past events, it is probable that an outflow of
resources embodying economic benefits

will be required to settle the obligation, and a reliable estimate of the amount
of the obligation can be made. Expenditures for which a provision has been
recognised are charged against the related provision in the year in which the
expenditures are incurred. Provisions are reviewed at each balance sheet date
and adjusted to reflect the current best estimate. Where the effect of the time
value of money is material, the amount provided is the present value of the
expenditures expected to be required to settle the obligation. Where the Group
expects a provision to be reimbursed, the reimbursement is recognised as a
separate asset but only when the reimbursement is virtually certain.

Borrowing costs

Borrowing costs are charged as expenses in the income statement in the period in
which they are incurred, except to the extent that they are capitalised as being
directly attributable to the acquisition, construction or production of an asset
which necessarily takes a substantial period of time to get ready for its
intended use or sale.

The capitalisation of borrowing costs as part of the cost of a qualifying asset
commences when expenditure for the asset is being incurred, borrowing costs are
being incurred and activities that are necessary to prepare the asset for its
intended use or sale are in progress.  Capitalisation of borrowing costs is
suspended or ceases when substantially all the activities necessary to prepare
the qualifying asset for its intended use or sale are interrupted or complete.

Jarlway Holdings Plc

Notes to the financial information (continued)
Year ended 31 December 2005

2.  Principal accounting policies (continued)

Operating leases

Rentals payable under operating leases are charged to the income statement on a
straight-line basis over the term of the relevant lease.

Employee benefits

Salaries, annual bonuses, paid annual leave, leave passage, contributions to
defined contribution plans and the costs of non-monetary benefits are accrued in
the year in which the associated services are rendered by employees of the
Group.  Where payment or settlement is deferred and the effect would be
material, these amounts are stated at their present values.

Contributions to defined contribution retirement plans are recognised as an
expense in the income statement in the period to which they relate.

Termination benefits are recognised when, and only when, the Group demonstrably
commits itself to terminate employment or to provide benefits as a result of
voluntary redundancy by having a detailed formal plan which is without realistic
possibility of withdrawal.

Share-based payment transactions

The Company operates a share option scheme for granting share options, for the
purpose of providing incentives and rewards to eligible employees of the Group.

The cost of share options granted to employees is measured by reference to the
fair value at the date at which they are granted.  It is recognised, together
with a corresponding increase in equity, over the vesting period. The cumulative
expense recognised at each reporting date until the end of the vesting period
reflects the extent to which the vesting period has expired and the number of
shares that in the opinion of the directors of the Group at that date will
ultimately vest.


The charge for taxation is based on the results for the year, adjusted for items
which are non-assessable or disallowed. It is calculated using tax rates that
have been enacted or substantively enacted by the balance sheet date.

Deferred tax is provided using the liability method, on all temporary
differences between the tax bases of assets and liabilities and their carrying
amounts in the financial statements.

The deferred tax liabilities or assets are measured at the tax rates that are
expected to apply to the period when the asset is recovered or liability is
settled, based on the tax rates and the tax laws that have been enacted or
substantively enacted by the balance sheet date. Deferred tax assets are
recognised to the extent that it is probable that future taxable profit will be
available against which the deductible temporary differences, tax losses and
credits can be utilised.

Related parties

For the purposes of these financial statements, parties are considered to be
related to the Group if the Group has the ability, directly or indirectly, to
control the party or exercise significant influence over the party in making
financial and operating decisions, or vice versa, or where the Group and the
party are subject to common control or common significant influence.  Related
parties may be individuals (being members of key management personnel,
significant shareholders and/or their close family members) or other entities
and include entities which are under the significant influence of related
parties of the Group where those parties are individuals, and post-employment
benefit plans which are for the benefit of employees of the Group or of any
entity that is a related party of the Group.

Jarlway Holdings Plc

Notes to the financial information (continued)
Year ended 31 December 2005

2. Principal accounting policies (continued)

Future changes in IFRS

At the date of authorisation of these financial statements, the IASB has issued
certain new/revised IFRSs that are not yet effective. The directors anticipate
that the adoption of these new IFRSs in the future periods will have no material
impact on the result of the Group.

Critical accounting estimates and judgements

Estimates and judgments are currently evaluated and are based on historical
experience and other factors including expectations of future events that are
believed to be reasonable under the circumstances. Apart from information
disclosed elsewhere in these financial statements, the following summarise: (1)
estimates and assumptions that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities within the next
financial year and (2) significant judgments made in the process of applying the
Group's accounting policies.

(i)    Income taxes

       The Group is subject to income taxes in the People's Republic of
China (the 'PRC'). Significant judgment is required in determining the provision
for income taxes. There are many transactions and calculations for which the
ultimate tax determination is uncertain during the ordinary course of business.
The Group recognises liabilities for anticipated tax audit issues based on
estimates of whether additional taxes will be due. Where the final tax outcome
of these matters is different from the amounts that were initially recorded,
such differences will impact the income tax and deferred tax provisions in the
period in which such determination is made.

(ii)   Provision for warranty

       As explained in note 23, the Group makes provision under the
warranties it gives on sale of its large scale construction machinery taking
into account the Group's recent claims experience.  As the Group is continually
upgrading its product designs, it is possible that the recent claims experience
is not indicative of future claims that it will receive in respect of past
sales.  Any increase and decrease in the provision would affect income
statements in future years.

(iii)  Provision for doubtful debts of trade receivables

       The Group makes provision for doubtful debt against trade
receivables based on an assessment of the collectability of trade receivables.
Provisions for doubtful debts are applied to trade receivables where events or
changes in circumstances indicate that the balances may not be collectible.  The
identification of doubtful debts requires the use of judgement and estimates.
Where the expectation is different from the original estimates, such difference
will impact carrying value of receivables and doubtful debt expenses in the
period in which such estimate has been changed.

3. The Directors do not recommend the payment of a dividend.

4. The Group financial information consolidates the financial statements
of the Company and all operating subsidiaries.

5. The profit and loss accounts of subsidiaries reporting in China Yuan
Renminbi have been converted at the average exchange rates prevailing in the
year ended 31 December 2005.

Jarlway Holdings Plc

Notes to the financial information (continued)
Year ended 31 December 2005

6.  Basic earnings per share and diluted earnings per share

    The calculation of basic earnings per share is based on profit after
taxation of £294,000 (2004: £2,946,000) and on 22,007,160 shares (2004:
20,000,000), being the weighted average number of shares in issue during the
year.  These values have been calculated to reflect the 20,000,000 shares issued
and subdivided in 2005 being in existence from 11 December 2004, the Company's
incorporation date.

Diluted earnings per share for the year ended 31 December 2005 are equal to the
basic earnings per shares as the exercise price of the share options granted by
the Company was higher than the average market price for shares during the year.
  In year ended 31 December 2004 there were no dilutive potential ordinary
shares in issue.

7.  Reconciliation of movement in shareholders' funds

                                                               2005         2004
                                                               £000         £000

Profit for the financial year                                   294        2,946

Currency  translation differences on foreign operations         438         (101)

Merger reserve arising on consolidation                         (49)          -

Employee share option benefit                                     6           -

Ordinary shares issued                                          289           -

Net addition to shareholders' funds                             978       2,845

Opening shareholders' funds                                   2,845           -

Closing shareholders' funds                                   3,823       2,845

                      This information is provided by RNS
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