Zhejiang-based private construction firm Baoye Group, which plans to list in Hong Kong, has admitted its bottom line has been bolstered by county government handouts in the past two years, which may or may not recur.
Last year, the former township state enterprise, which is now a management-owned firm, received a grant of 31.27 million yuan (HK$29.3 million) from Shaoxing county, where it is based, which amounted to 25.9 per cent of net profit. A grant of 35.55 million yuan was received in 2001, which contributed 36.05 per cent of net profit.
'While the group believes neither of such grants has violated the policies of any other governmental agencies with authority to supervise the Shaoxing county government, there can be no assurance that such grants will not be revoked by a government authority of a higher level, nor can there be any assurance that the group will continue to obtain any such grant in the future,' the listing prospectus said.
Deputy general manager Wei Falin said the handouts were granted for Baoye's good operating and financial performance, adding that the company believed further grants would be given if it maintained its good results.
Net profit rose from 59.73 million yuan in 2000 to 122.05 million yuan in 2001 and 141.07 million last year.
