REG - APQ Global Limited - Final Results
4 June 2018
APQ Global Limited
("APQ", "APQ Global" or the "Company")
Final results for the year to 31 December 2017
APQ Global, the emerging markets growth company, today announces its audited financial results for the year ended 31 December 2017.
FINANCIAL HIGHLIGHTS
Book Value at 31 December 2017 was $100.0m, an increase from $95.6m since the start of the year. The term "book value" herein includes the assets of APQ Global Limited and its subsidiaries net of any liabilities. The results include the net assets of the Company and its subsidiaries, presented in US dollars.
Book Value per share in the year rose from 122.52 to 128.11 cents.
Earnings per share for the year was $0.06995 (2016 - $0.00999)
Dividends paid in GBP totalled 5 pence (6.54 cent) per share and were declared and paid during the year as follows:
· 0.5 pence (0.63 cent) per share Ex Dividend 26 January 2017
Paid 24 February 2017
· 1.5 pence (1.94 cent) per share Ex Dividend 27 April 2017
Paid 24 May 2017
· 1.5 pence (1.98 cent) per share Ex dividend 27 July 2017
Paid 18 August 2017
· 1.5 pence (1.99 cent) per share Ex dividend 26 October 2017
Paid 27 November 2017
After the year end, a further dividend of 1.5 pence (2.08 cent) per share was declared on 19 January 2018 in relation to the quarter ended 31 December 2017.
In the year covered by these financial statements, the share price of the Company has consistently traded at a premium over the actual Book Value of the Company.
There have been further AIM market trades since 31 December 2017, details of these can be found on the London Stock Exchange website by following the link below. Monthly book values and quarterly reports are also made available as they fall due.
http://www.londonstockexchange.com/exchange/prices-and-markets/stocks/summary/company-summary/GG00BZ6VP173GGGBXASQ1.html
As of 1 January 2017, the Group changed its presentational and functional currency from Pounds Sterling to US Dollars.
On 4 September 2017, the Company raised £20,090,000 ($26,953,749) million before expenses from the issue of 4,018 units of £5,000 ($6,708) nominal convertible unsecured loan stock with a coupon of 3.5% per annum, a conversion premium of 10% and a maturity of 7 years. These are listed and admitted to trading on the International Securities Market of the London Stock Exchange. In addition, post year end on 22 January 2018, the Company raised a further £10,207,300 ($14,492,418) before expenses from the issue of a further 1,982 units of £5,000 ($7,099) nominal convertible unsecured loan stock with a coupon of 3.5% per annum, a conversion premium of 10% and a maturity of 7 years.
For further enquiries, please contact:
APQ Global Limited
Bart Turtelboom - Chief Executive Officer020 3478 9708
N+1 Singer - Nominated Adviser and Broker
James Maxwell / Lauren Kettle020 7496 3000
Carey Group - TISE sponsor
Claire Torode01481 737 279
Buchanan Communication - Financial PR
Charles Ryland / Henry Wilson020 7466 5000
Notes to Editors
APQ Global Limited
APQ Global (ticker: APQ LN) is a global emerging markets income company with interests across Asia, Latin America, Eastern Europe, the Middle East and Africa. The Company's objective is to steadily grow earnings to deliver attractive returns and capital growth to shareholders. This objective is achieved through a combination of revenue generating operating activities and investing in growing businesses across emerging markets. APQ Global run a well-diversified and liquid portfolio, take strategic stakes in selected businesses and plan to take operational control of companies through the acquisition of minority and majority stakes in companies with a focus on emerging markets.
For more information, please visit apqglobal.com.
International Advisory Council (IAC)
Established in February 2017, the IAC assists in locating the best investment opportunities across the globe. The panel of advisors, chaired by Tania Rotherwick, contribute insights from their own areas of geographical and sector expertise to support APQ Global's business strategy.
CHAIRMAN'S STATEMENT
2017 was the first full year of trading for APQ Global, following our successful IPO in August 2016. We are delighted to be able to look back and say we delivered on our income and capital gains goals in the first full year, paying four dividends and putting ourselves on target for a 6 percent dividend yield in 2017. We would like to thank our Board of Directors and management team, who worked hard to make this happen.
In 2017, we achieved an increase in our book value of 4.6 percent and a total return of 9.9 percent.
Over the past year we have also achieved other important milestones in our company's growth. In September, we successfully issued a seven-year convertible bond with a coupon of 3.5% (denominated in Pound Sterling). We are grateful to our new bond holders and look forward to working with them in the years ahead. We have also significantly expanded our International Advisory Council and have gained very valuable expertise in specific geographies and sectors. We welcome all our new members and look forward to working with all of you in 2018.
We have deployed the bulk of our portfolio in liquid instruments in emerging market ("EM") equities, bonds and currencies. While we are eager to expand our activities in more strategic and direct investment opportunities, we have found the expected returns to fall far short of our corporate return objectives. We continue to look out for rewarding opportunities and are confident that we will close some interesting opportunities during the course of the year ahead.
2017 was a year of high correlation across asset classes. G7 equities, G7 government bonds, high yield credit, high-grade credit, emerging markets equities and bonds all posted positive returns. This makes us cautious. At the start of 2016, we saw significant value in emerging markets, particularly in the resources sector, and benefitted handsomely as emerging markets rebounded. In 2017, extraneous factors-mainly the election of President Trump and the continuing environment of extraordinarily low interest rates-appear to have been the main drivers of returns. However, as we enter 2018, both are vulnerable to reversals with the US mid-term elections and further Federal Reserve hikes hanging over the market.
LOOKING AHEAD TO 2018: MANY REASONS TO STAY POSITIVE
Despite this cautious stance on the state of G7 markets, we believe that 2018 will continue to be supportive of emerging markets. Potential GDP growth in emerging markets continues to outpace its G7 peers by a wide margin. Commodity prices will likely support laggard economies such as Brazil, Russia and South Africa. Monetary policy remains attuned to domestic inflation dynamics. Finally, geo-political risks appear to be abating. The conflict between North Korea and the United States appears to be headed to a Cold War equilibrium. Ukraine remains stuck in a similar state. The conflict in Syria appears to be in its end-game with further escalation unlikely. In the G7, Brexit remains a wild card but appears unlikely to have any unfortunate global consequences.
The election cycle in emerging markets will be a dominant factor in 2018 and drive diversification across markets. While President Putin won in Russia it appears, the elections in Brazil and Mexico are likely to throw us some curve balls. In South Africa, Ramaphosa has secured his place as the head of the ANC, but with only three out of six seats on the National Executive Committee on his side, he faces a long and challenging battle in the run up to the 2019 elections. In Brazil, we will not know until the summer how the cards stack up between ex-President Lula, various centre-right candidates and a Trump-style firebrand. The country has recovered from a nasty recession and political scandal and the outcome of the upcoming Presidential election will be crucial to establish the future path of fiscal policy and macroeconomic stability.
Given the positive growth outlook for emerging markets (expected to grow around 5%), we believe keeping our allocation to EM credit in place will deliver positive returns, despite relatively tight spreads (both CEMBI and EMBI stand at around 285bp). EM corporates have started to de-lever in 2017, which combined with a positive economic outlook globally should keep both spreads and default rates well contained. One risk to this outlook is an overly aggressive tightening of monetary conditions by the Federal Reserve. While impacting the default rates less, this tightening should nonetheless lead to wider credit spreads.
We also continue to believe that emerging markets will offer enough idiosyncratic opportunities that can play out independently from global developments or wider financial market conditions. A recent example of this has been the continued strong performance of Argentina as regional elections have given President Macri additional political capital to implement reforms.
The outlook for emerging market currencies and local markets has generally continued to brighten over the course of 2017, and growth figures for the year should come in around 4.5%. Next year's growth forecast is just shy of 5%. This should also lead to a small widening of the positive difference of emerging market versus developed market growth, which should also add support to EM currencies. Against that there will be elections in several key emerging markets - Mexico and Brazil being the major ones. Polls and news flow around these events could lead to heightened volatility. Another key risk to our constructive outlook would be an overly aggressive tightening by the Federal Reserve, which would put pressure on currencies as well as local yield curves. The US aside, another factor supporting the case for emerging market growth should be the still very accommodative policies enacted by central banks in Japan and Europe. While these global influences can distort emerging market asset prices away from their fundamental value temporarily, paying close attention to fundamentals will eventually pay off for longer-term investors.
The outlook for 2018 for emerging market equities looks very strong, with multiple levers of growth all pointing in the same direction. For the first time since the global financial crisis we are experiencing synchronised growth across all the major developed and emerging economies and we believe this will continue in 2018. We expect developed market GDP growth to be between 1.8% and 2.0% in 2018 and emerging markets to post growth of between 4.8% and 5.0%.
Sincerely,
Wayne Bulpitt
Chairman, APQ Global Limited
2017 IN REVIEW
During 2017, the Company returned 9.9% for its shareholders. During 2017, the Company paid four dividends for a total of 5p per share (6.53 $ cents) and its US Dollar book value rose 5.59 $ cents to $1.281 per share. During the quarter, the Company gradually increased its exposure, mainly in currencies and credit. At the end 2017, the Company's funds remained fully deployed, except for cash retained for collateral and working capital purposes.
During 2017, management estimates indicate that the Company's credit exposure generated 6.59%, equity investments returned 6.73% and rates contributed 2.92%. Emerging markets ("EM") Currency exposure lost 6.34%.
Return Contribution for Each Asset Class (in $)
2017
Credit
6.59%
Equity
6.73%
FX
-6.34%
Rates
2.92%
TOTAL*
9.90%
*Note: the contribution for each asset class also includes the relative contribution of other adjustments impacting total return for the year. The overall return to shareholder for the year reflects the movements in book value plus dividends paid.According to management estimates, the Company is comfortably on track to meet its target ongoing annual dividend yield of 6% and the dividend is well covered by income generated by the portfolio. Breaking down our dividend funding, management estimates indicate that 1.7% comes from the Company's equity positions and 3.5% is derived from credit positions. Currency exposure contributes 1.7% with the remaining 2.1% coming from APQ Global's strategic and government bond portfolios.
At the end of 2017, the bulk of the Company's overall exposure was in EM credit and government bonds (66.5% of book value), followed by EM equity exposure (26.8%). EM local currency bond exposure accounted for 25.1% of book value.
Portfolio Breakdown
% of Book Value
EM Credit and Government Bonds
66.5%
EM Local Currency Bonds
25.1%
EM Equities
26.8%
Unemcumbered Cash Holding
20.9%
TOTAL*
139.3%
*Note: this excludes -39.3% of other net liabilities that form part of the book value.
Liquid Markets Portfolio
At the end of 2017, the Company's top 10 holdings in the EM equity portfolio were:
EM Equity Exposure
Security Name
% of Book Value
City of London Investment Group PLC
4.2%
Anglo Pacific Group PLC
1.2%
African Rainbow Minerals Ltd
0.8%
Exxaro Resources Ltd
0.8%
OCI Co Ltd
0.7%
Hyundai Marine & Fire Insurance Co Ltd
0.7%
Tekfen Holding AS
0.7%
United Tractors Tbk PT
0.7%
OTP Bank PLC
0.7%
Petronas Chemicals Group Bhd
0.7%
The largest EM equity positions are now in China and South Korea, followed by Russia and South Africa, due to the Company's bullish view on commodities. The Company believes that the global economic growth outlook will continue to be supportive of commodity markets and that EM equities offer compelling value. From a sector perspective, the bulk of the Company's EM exposure is in energy, industrials and financials, taking into account the sector composition of index exposure in the EM country indices and global EM.
The Company's EM credit book is well diversified for stable income growth and the largest position is Serbian sovereign risk, accounting for 3.1% of book value.
EM Credit Exposure
Security Name
% of Book Value
SERBIA 5 7/8 12/03/18
3.1%
TURKEY 6 3/4 04/03/18
3.0%
AFREXI 3 7/8 06/04/18
3.0%
ITAU 2.85 05/26/18
3.0%
LUKOIL 3.416 04/24/18
3.0%
PEMEX 4 7/8 01/18/24
2.1%
KZOKZ 9 1/8 07/02/18
1.5%
VIP 4.95 06/16/24
1.5%
CAIXBR 4 1/2 10/03/18
1.5%
GMKNRM 4 3/8 04/30/18
1.3%
Geographically, the credit portfolio is also well diversified with the largest positions concentrated in Brazil (14.5%), Russia (13.5%) and Turkey (12.9%).
From a sector perspective, the credit exposure is concentrated in government entities, banks and corporations in the energy sector.
During the last quarter of 2017, the Company significantly paired its direct currency exposure. The largest long positions were held in the Brazilian Real (12%) and the South African Rand (2.5%).
The Company's cautious stance is reflected in its low sensitivity to overall market movements. The stress tests indicate that the Company would marginally lose 0.43% of book value for a 10% sell-off in the S&P equity index, drop 0.96% in value if credit spreads were to widen 10% and lose 2.90% in value if interest rates in the US were to increase by 1%.
Stress Test Scenarios (as of 31 December 2017)
Scenario
Change in % of Book Value
Equity Stress Test (S&P -10%)
-0.43%
Credit Stress Test (Credit Spreads up 10%)
-0.96%
Interest Rates Stress Test (Yields up 1%)
-2.90%
Strategic Investment Portfolio
During the last quarter of 2017, the Company made a $10m investment in the Oppenheimer Emerging Markets Local Debt UCITS Fund. Through this investment, the Company gains access to a diverse pool of local markets debt instruments in a very cost effective manner.In addition, the Company has maintained its investment in City of London Investment Group ('CLIG') representing 4.2% of its overall book value. APQ Global believes that the positive outlook for the EM equity asset class, the prudent management and an attractive dividend yield bode well for the CLIG stock price. During 2017, the Company generated a 24.2% return on this investment.
The Company also holds 3.1% and 4.1% of book value respectively in two publicly listed EM debt funds (EMD US and EDD US). Both funds trade at appealing discounts and have high annual dividend yields in the range of 7.5%. The Company made a 13.8% and 16.2% return respectively on these investments.
The Company also holds a small stake in Anglo Pacific Group of 1.2% of book value, a London Main Market listed mining royalty company, through participation in a rights issue earlier in the year to fund a new royalty agreement with a Canadian mining company. This investment generated a 26.5% return.
Direct Investment Portfolio
The Company is currently evaluating various business opportunities with a focus on EM which are undergoing a process of due diligence and takes a cautious approach to such investments. The Company will update shareholders in due course on its progress with these potential investment opportunities.
Consolidated Statement of Comprehensive Income for the year ended 31 December 2017
Note
Year ended
31 December 2017
Period ended
31 December 2016
Restated in USD
$
$
Turnover
5
10,161,594
-
Net (loss) / gain on financial assets at fair value through profit and loss
12
(2,722,395)
1,288,867
Administrative expenses
6
(1,786,643)
(509,009)
Operating profit for the year/period before tax
5,652,556
779,858
Interest received
7
306,529
-
Interest paid
8
(499,403)
-
Profit on ordinary activities before taxation
5,459,682
779,858
Tax on profit on ordinary activities
-
-
Profit for the financial year/period
5,459,682
779,858
Other comprehensive income
Exchange difference due to change in presentational currency
2.10
-
(4,927,513)
Foreign currency translation difference - foreign operations
2.10
5,737
-
Total comprehensive income for the year/period
5,465,419
(4,147,655)
Basic and diluted earnings per share
9
0.06995
0.00999
Consolidated Statement of Financial Position as at 31 December 2017
2017
2016
Restated in USD
Note
$
$
Assets
Non-current assets
Property, plant and equipment
11
18,046
-
Investments
12
91,923,100
94,645,495
Total non-current assets
91,941,146
94,645,495
Current assets
Trade and other receivables
13
26,597,221
-
Cash and cash equivalents
4,005,434
1,128,771
Total current assets
30,602,655
1,128,771
Total assets
122,543,801
95,774,266
Current liabilities
Trade and other payables
14
(414,908)
(144,137)
Total current liabilities
(414,908)
(144,137)
Long term liabilities
3.5% Convertible Unsecured Loan Stock
15
(22,135,311)
-
Total long term liabilities
(22,135,311)
-
Net assets
99,993,582
95,630,129
Equity
Share capital
17
99,494,707
99,777,784
Equity component of 3.5% Convertible Unsecured Loan Stock
15
4,285,225
-
Retained earnings
1,141,163
779,858
Exchange reserve
2.10
(4,927,513)
(4,927,513)
Total equity
99,993,582
95,630,129
Net asset value per ordinary share
128.11c
122.52c
Consolidated Statement of Changes in Equity as at 31 December 2017
Share capital
CULS equity component
Retained earnings
Exchange reserve
Total
$
$
$
$
$
Balance at 10 May 2016
-
-
-
-
-
Issue of shares
101,355,979
-
-
-
101,355,979
Transaction costs of raising equity
(1,578,195)
-
(1,578,195)
Profit for the period
-
-
779,858
-
779,858
Exchange reserve
-
-
-
(4,927,513)
(4,927,513)
At 31 December 2016 (Restated in USD)
99,777,784
-
779,858
(4,927,513)
95,630,129
Transaction costs of raising equity
(283,077)
-
-
-
(283,077)
CULS equity component
-
4,285,225
-
-
4,285,225
Profit for the year
-
-
5,459,682
-
5,459,682
Foreign currency translation difference - foreign operations
-
-
5,737
-
5,737
Dividends
-
-
(5,104,114)
-
(5,104,114)
As at 31 December 2017
99,494,707
4,285,225
1,141,163
(4,927,513)
99,993,582
Consolidated Statement of Cash Flow for the year ended 31 December 2017
Year ended
31 December
2017
Period ended
31 December
2016
Restated in USD
Note
$
$
Cash flow from operating activities
Profit for the financial year/period
5,459,682
779,858
Adjustments for non-cash income and expenses
Interest received
7
(306,529)
-
Interest paid
8
499,403
-
Depreciation
11
7,350
-
Net loss/(gain) on financial assets at fair value through profit and loss
12
2,722,395
(1,288,867)
Changes in operating assets and liabilities
Increase in trade and other receivables
13
(124,664)
-
Increase in trade and other payables
14
270,771
144,137
Net cash inflow/(outflow) from operating activities
8,528,408
(364,872)
Cash flow from investing activities
Payments to acquire investments *
-
(76,040,176)
Payments to acquire property, plant and equipment
11
(24,902)
-
Loan to APQ Cayman Limited
13
(26,472,557)
Net cash outflow from investing activities
(26,497,459)
(76,040,176)
Cash flow from financing activities
Proceeds from issue of shares *
-
79,112,014
Transaction costs of raising equity
16
(283,077)
(1,578,195)
Equity component of CULS
15
4,285,225
-
Issue of CULS
15
22,135,311
Equity dividends paid
10
(5,104,114)
-
Interest received
7
306,529
-
Interest on CULS
8
(499,403)
-
Net cash inflow from financing activities
20,840,471
77,533,819
Net increase in cash and cash equivalents
2,871,420
1,128,771
Cash and cash equivalents at beginning of year/period
1,128,771
-
Effect of exchange rate fluctuations on conversion of foreign operation
5,243
-
Cash and cash equivalents at end of year/period
4,005,434
1,128,771
* In addition to the cash subscription of $76,040,176 (£58,500,000) for the acquisition of APQ Cayman Limited, the Company also issued shares in the amount $22,243,964 (£17,130,244) for a consideration of investment in APQ Cayman Limited for the period ended 31 December 2016.
Notes to the Financial Statements for the year ended 31 December 2017
1. Corporate information
The financial statements of APQ Global Limited (the "Group") for the year ended 31 December 2017 were authorised for issue in accordance with a resolution of the Board of Directors on May 2018. The Company is incorporated as a limited company in Guernsey. The Company was incorporated on 10 May 2016 for an unlimited duration in accordance with the Companies (Guernsey) Law, 2008. The Company's registered office is at 1st Floor, Tudor House, Le Bordage, St Peter Port, Guernsey, GY1 1DB.
The objective of the Company is to steadily grow its earnings to seek to deliver attractive returns and capital growth through a combination of building growing businesses in emerging markets as well as earning revenue from income generating operating activities.
The Company and its subsidiaries have no investment restrictions and no maximum exposure limits will apply to any investments made by the Group, unless otherwise determined and set by the Board from time to time. No material change will be made to the Company's or subsidiaries objective or investing policy without the approval of Shareholders by ordinary resolution.
The Group's investment activities are managed by the Board.
The shares are quoted on The International Stock Exchange for informational purposes but cannot be traded on this exchange. The ordinary shares are admitted to trading on AIM.
2. Significant accounting policies
2.1 Basis of preparation
The consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union and applicable law. The financial statements have been prepared on a historical-cost basis, except for financial assets and financial liabilities held at fair value through profit or loss (FVPL) that have been measured at fair value.
The principle accounting policies are set out below.
2.2 Functional and presentational currency
As of 1 January 2017, the Company changed its presentational and functional currency from Pounds Sterling to US Dollars.
The Group's main activities and returns for the year ended 31 December 2017 are US Dollars from its subsidiary APQ Cayman Limited. In addition, the Company ceased hedging the FX exposure on their investment in APQ Cayman Limited during the year. As a result, the Board carried out a review of the underlying performance of the Company and concluded that the functional currency should be changed from Pounds Sterling to US Dollars.
During the year, the Company also changed the currency in which it presents its financial statements from Pounds Sterling to US Dollars, to bring the presentational currency in line with its functional currency. A change in presentational currency is a change in accounting policy which is accounted for retrospectively. The financial information for the period ended 31 December 2016 previously reported in Pounds Sterling has been restated in US Dollars using differing exchange rates. The prior period statement of comprehensive income was converted using an average rate for the period. Equity shares were converted using the historical date which was the date of issue of the shares. The assets and liabilities were converted at the closing exchange date at 31 December 2016. Therefore, an exchange reserve of $4,927,513 is included in the comparative period to reflect the fact that the presentational currency differs from the functional currency in that period.
2.3. Standards issued but not yet effective
New and amended standards and interpretations
There were no new standards or interpretations effective for the first time for periods beginning on or after 1 January 2017 that had a significant effect on the Group's financial statements. Furthermore, none of the amendments to standards that are effective from the that date had a significant effect on the financial statements.
2.3. Standards issued but not yet effective (continued)
At the date of authorisation of these financial statements, IFRS 9 "Financial instruments" was issued to replace IAS 39, but will not become effective until accounting periods beginning on or after 1 January 2018 and has not been applied in these financial statements. The Group's financial assets predominantly comprise equity investments held at fair value and the introduction of IFRS 9 is not expected to have a material impact on the reported results and financial position of the Group.
Also, at the date of authorisation of these financial statement, IFRS 15 "Revenue from contracts with customers" was issued but will not become effective until accounting periods beginning on or after 1 January 2018 and IFRS 16 "Leases" was issued but will not become effective until accounting periods beginning on or after 1 January 2019. The Group has limited exposure to revenue from contracts with customers and the Group's lease commitments are disclosed in note 17. The introduction of IFRS 15 and IFRS 16 is not expected to have a material impact on the reported results and financial position of the Group.
Other accounting standards have been published and will be mandatory for the Group's accounting periods beginning on or after 1 January 2018 or later periods. The impact of these standards is not expected to be material to the reported results and financial position of the Group.
2.4 Basis of consolidation
The Directors have concluded that APQ Global Limited has all the elements of control as prescribed by IFRS 10 "Consolidated Financial Statements" in relation to its subsidiaries and that the Company satisfies the criteria to be regarded as an investment entity. For a detailed analysis of the assessment of the criteria please refer to note 3; Significant accounting judgements, estimates and assumptions. Based on this, the subsidiary APQ Cayman Limited is therefore measured at fair value through profit or loss (FVTPL), in accordance with IFRS 13 "Fair Value Measurement" and IAS 39 "Financial Instruments; Recognition and Measurement".
Notwithstanding this, IFRS 10 requires subsidiaries that provide services that relate to the investment entity's investment activities to be consolidated. The subsidiary APQ Partners LLP assists the Board with implementation of its business strategy, provides research on business opportunities in emerging markets and provides support for cash management and risk management purposes. Accordingly, the consolidated financial statements of the Group include the results of the Company and APQ Partners LLP, whilst APQ Cayman Limited is measured at FVTPL. The results of APQ Partners LLP are consolidated from the date control commences. Intra-group balances and transactions and any unrealised income and expenses arising from intra-group transactions are eliminated in preparing these consolidated financial statements.
2.5 Financial instruments
The Group classifies its financial assets and financial liabilities at initial recognition into the following categories, in accordance with IAS 39 Financial Instruments: Recognition and Measurement.
The Group recognises trade debtors, prepayments and accrued income and other debtors as financial assets. Further detail is disclosed in Note 13 in these financial statements. The Group recognises trade creditors, other creditors and accruals as financial liabilities. Further detail is disclosed in Note 13 in these financial statements.
Financial assets and liabilities at FVPL.
The investment in APQ Cayman Limited is designated at fair value through profit or loss upon initial recognition on the basis that they are part of a group of financial assets that are managed and have their performance evaluated on a fair value basis, in accordance with risk management and investment strategies of the Company, as set out in the Company's offering document.
In accordance with the exception under IFRS 10 Consolidated Financial Statement for an investment entity, the Company does not consolidate its investment in APQ Cayman Limited and has designated the investment as fair value through profit or loss in the financial statements.
The investment in APQ Cayman Limited is subsequently measured at fair value with movements in fair value recognised as net gain/(loss) on financial assets at fair value through profit and loss in the consolidated statement of comprehensive income.
All other financial assets and financial liabilities are classified, at initial recognition, as receivables or payables at fair value and are subsequently measured at amortised cost.
A financial asset (or, where applicable, a part of a financial asset or a part of a group of similar financial assets) is derecognised where the rights to receive cash flows from the asset have expired, or the Group has transferred its rights to receive cash flows from the asset, or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a pass-through arrangement and either:
(a) the Group has transferred substantially all of the risks and rewards of the asset; or
(b) the Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
When the Company has transferred its right to receive cash flows from an asset (or has entered into a pass-through arrangement), and has neither transferred nor retained substantially all of the risks and rewards of the asset nor transferred control of the asset, the asset is recognised to the extent of the Group's continuing involvement in the asset. In that case, the Group also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Group has retained.
The Group derecognises a financial liability when the obligation under the liability is discharged, cancelled or expired.
2.6 Fair value measurement
The Company measures its investment in APQ Cayman Limited at fair value at each reporting date, which is considered to be the carrying value of the net assets of APQ Cayman Limited. APQ Cayman Limited measures its underlying investments at fair value.
Fair value is 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. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either in the principal market for the asset or liability or, in the absence of a principal market, in the most advantageous market for the asset or liability. The principal or the most advantageous market must be accessible to the Company. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.
The fair value for financial instruments traded in active markets at the reporting date is based on their quoted price (bid price for long positions and ask price for short positions), without any deduction for transaction costs.
For all other financial instruments not traded in an active market, the fair value is determined by using valuation techniques deemed to be appropriate in the circumstances. Valuation techniques include the market approach (i.e., using recent arm's length market transactions adjusted as necessary and reference to the current market value of another instrument that is substantially the same) and the income approach (i.e., discounted cash flow analysis and option pricing models making as much use of available and supportable market data as possible).
For assets and liabilities that are measured at fair value on a recurring basis, the Company identifies transfers between levels in the hierarchy by re-assessing the categorisation (based on the lowest level input that is significant to the fair value measurement as a whole), and deems transfers to have occurred at the beginning of each reporting period.
2.7 Foreign currency translations
Transactions during the year, including purchases and sales of securities, income and expenses, are translated at the rate of exchange prevailing on the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency rate of exchange ruling at the reporting date.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.
Foreign currency transaction gains and losses on financial instruments classified as at FVPL are included in profit or loss in the statement of comprehensive income as part of the 'net (loss) or gain on financial assets at fair value through profit or loss'.
On consolidation, the income and expense items of APQ Partners LLP are translated into US Dollar at the average exchange rate for the period. All assets and liabilities of APQ Partners LLP are translated at exchange rates prevailing on the statement of financial position date. Exchange differences arising, if any, are recognised in other comprehensive income and accumulated in equity.
2.8 Share capital
In the event of the liquidation of the Company the Ordinary Shares entitle the holder to a pro rata share of the Company's net assets. Shares are issued net of transaction costs, which are defined as incremental costs directly attributable to the equity transaction that otherwise would have been avoided.
2.9 Retained earnings
Retained earnings consists of profit or losses for the financial year as disclosed in the Statement of Comprehensive Income less foreign currency translation differences. Dividends declared by the Board of Directors are paid are accounted for as a deduction from retained earnings.
2.10 Exchange reserve
During the year, the Company changed the functional and presentational currency in which it presents its financial statements from Pounds Sterling to US Dollars. A change in presentational currency is a change in accounting policy which is accounted for retrospectively. The financial information for the period ended 31 December 2016 previously reported in Pounds Sterling has been restated in US Dollars using differing exchange rates. The prior period statement of comprehensive income was converted using an average rate for the period. Equity shares were converted using the historical date which was the date of issue of the shares. The assets and liabilities were converted at the closing exchange date at 31 December 2016. Therefore, an exchange reserve is included in the comparative period to reflect the fact that the presentational currency differs from the functional currency in that period.
2.11 Distributions to shareholders
Dividends are at the discretion of the Company. A dividend to the Company's shareholders is accounted for as a deduction from retained earnings. An interim dividend is recognised as a liability in the period in which it is irrevocably declared by the Board of Directors. A final dividend is recognised as a liability in the period in which it is approved by the annual general meeting of shareholders.
2.12 Cash and cash equivalents
Cash and cash equivalents in the statement of financial position comprise cash on hand and short-term deposits in banks that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, with original maturities of three months or less.
Short-term investments that are not held for the purpose of meeting short-term cash commitments and restricted margin accounts are not considered as 'cash and cash equivalents'.
For the purpose of the statement of cash flows, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts when applicable.
2.13 Property, plant and equipment
Property, plant and equipment is recorded at historical cost less accumulated depreciation and impairment losses.
Depreciation is provided on all property, plant and equipment at rates calculated to write off the cost or valuation of each asset evenly over its expected useful life to estimated residual values, as follows:
Office equipment over 3 years
Furniture and fixtures over 4 years
Leasehold improvements over 2 years
Residual values, useful lives and depreciation method are reviewed, and adjusted if appropriate, at each year end.
2.14 3.5% Convertible Unsecured Loan Stock 2024
3.5% Convertible Unsecured Loan Stock 2024 ("CULS") issued by the Company is regarded as a compound instrument, comprising of a liability component and an equity component. At the date of issue, the fair value of the liability component was estimated by assuming that an equivalent non-convertible obligation of the Company would have a coupon rate of 6.5%. The fair value of the equity component, representing the option to convert liability into equity, is derived from the difference between the issue proceeds of the CULS and the fair value assigned to the liability. The liability component is subsequently measured at amortised cost using the effective interest rate.
Direct expenses associated with the CULS issue are allocated to the liability and equity components in proportion to the split of the proceeds of the issue. Expenses allocated to the liability component are amortised over the life of the instrument.
The interest expense on the CULS is calculated according to the effective interest rate method by applying the assumed rate of 6.5% at initial recognition to the liability component of the instrument. The difference between this amount and the actual interest paid is added to the carrying amount of the CULS.
2.15 Interest revenue and expenses
Interest revenue and expenses are recognised in the statement of comprehensive income for all interest-bearing financial instruments using the effective interest method.
2.16 Dividend income
Dividend income is recognised on the date when the Company's right to receive the payment is established.
2.17 Net gain or loss on financial assets and liabilities at fair value through profit or loss
Net gains or losses on financial assets and liabilities at FVPL are changes in the fair value of financial assets and liabilities held for trading or designated upon initial recognition as at FVPL and exclude interest and dividend income and expenses.
Unrealised gains and losses comprise changes in the fair value of financial instruments for the period and from reversal of the prior period's unrealised gains and losses for financial instruments which were realised in the reporting period. Realised gains and losses on disposals of financial instruments classified as at FVPL are calculated using the first-in, first-out (FIFO) method. They represent the difference between an instrument's initial carrying amount and disposal amount, or cash payments or receipts made on derivative contracts (excluding payments or receipts on collateral margin accounts for such instruments).
2.18 Fee expense
Fees are recognised on an accrual basis. Refer to Note 6 for details of fees and expenses paid in the period.
2.19 Taxes
The Company is taxable in Guernsey at the company standard rate of 0%.
However, in some jurisdictions, investment income is subject to withholding tax deducted at the source of the income. Withholding tax is a generic term used for the amount of withholding tax deducted at the source of the income and is not significant for the Company. The Company presents the withholding tax separately from the gross investment income in the statement of comprehensive income. For the purpose of the statement of cash flows, cash inflows from investments are presented gross of withholding taxes, when applicable.
2.20 Leases
Leases are accounted for in accordance with IAS 17 and IFRIC 4. The leases entered into by the Group are operating leases. The total payments made under operating leases are charged to other administrative expenses in the statement of comprehensive income on a straight-line basis over the period of the lease. When an operating lease is terminated before the lease period has expired, any payment required to be made to the lessor by way of penalty is recognised as an expense in the period in which termination takes place.
2.21 Shared-based payments
During the year, the Company formalised a management share plan. The plan allows for certain members of the management to benefit from 20% of any increase in the year end book value per share for a given year (a performance period). Awards can be issued as an allocation of a specified number of shares or as an option (a right to acquired shares under the plan for nil consideration). Since any awards granted are to be settles by the issuance of equity they are deemed to be equity settled share-based payments accounted for in accordance with IFRS 2.
Equity-settled share-based payments are measured at fair value at the date of grant. The fair value determined at the grant date of the equity-settled share-based payments is expensed over the vesting period, together with a corresponding increase in equity, based upon the Group's estimate of the shares that will eventually vest, which involves making assumptions about any performance and service conditions over the vesting period. The vesting period is determined by the period of time the relevant participant must remain in the Group's employment before the rights to the shares transfer unconditionally to them. Where a service period commences in anticipation of awards to be granted the expense of shares granted should be recognised by the Group over the vesting period from the date of commencement of service.
Where the terms of an equity-settled transaction are modified, as a minimum an expense is recognised as if the terms had not been modified. In addition, an expense is recognised for any increase in the value of the transaction as a result of the modification, as measured at the date of modification.
Where an equity-settled transaction is cancelled, it is treated as if it had vested on the date of the cancellation, and any expense not yet recognised for the transaction is recognised immediately. However, if a new transaction is substituted for the cancelled transaction and designated as a replacement transaction on the date that it is granted, the cancelled and new transactions are treated as if they were a modification of the original transaction, as described in the previous paragraph.
Per the management share plan the vesting period for any awards issued can be up to 5 years and subject to certain conditions. No awards have been granted as of the year end date and no amount in respect of any awards that may be issued in respect of the December 2017 performance period have been recognised in these financial statements.
3. Significant accounting judgements, estimates and assumptions
The preparation of the Group's financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts recognised in the financial statements and disclosure of contingent liabilities. However, uncertainty about these assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amount of the asset or liability affected in future periods.
Judgements
In the process of applying the Group's accounting policies, management has made the following judgements, which have the most significant effect on the amounts recognised in the financial statements:
Assessment as investment entity
The Company owns 100% of the shares of APQ Cayman Limited. Entities that meet the definition of an investment entity within IFRS 10 are required to measure their subsidiaries at fair value through profit or loss rather than consolidate them, except to the extent that the subsidiary provides services that relate to the investment entity's investment activities. The criteria which define an investment entity are, as follows:
• An entity that obtains funds from one or more investors for the purpose of providing those investors with investment management services;
• An entity that commits to its investors that its business purpose is to invest funds solely for returns from capital appreciation, investment income, or both; and
• An entity that measures and evaluates the performance of substantially all of its investments on a fair value basis.
The Company's listing document details its objective of providing investment management services to investors which includes investing in equities, fixed income securities, private equity and property investments for the purpose of returns in the form of investment income and capital appreciation. This is via its subsidiary APQ Cayman Limited.
The Company reports to its investors via quarterly investor information, and to its management, via internal management reports, on a fair value basis. All investments are reported at fair value to the extent allowed by IFRS in the Company's annual reports. The Company has a clearly documented exit strategy for all of its underlying investments (i.e. those investments held by APQ Cayman Limited).
The Board has concluded that the Company meets additional characteristics of an investment entity, in that it has more than one investment; the Companies ownership interests are predominantly in the form of equities and similar securities; it has more than one investor and its investors are not related parties.
The Board has therefore concluded that the Company meets the definition of an investment entity. These conclusions will be reassessed on an annual basis, if any of these criteria or characteristics change and therefore recognises its investment in APQ Cayman Limited at fair value through profit or loss. The Board has also concluded that since APQ Partners LLP provides services related to the Company's investment activities, this subsidiary should be consolidated.
Estimates and assumptions
The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are discussed below. The Group based its assumptions and estimates on parameters available when the financial statements were prepared. However, existing circumstances and assumptions about future developments may change due to market changes or circumstances arising beyond the control of the Group. Such changes are reflected in the assumptions when they occur.
Fair value
The Directors consider that the fair value of the investment in APQ Cayman Limited should be based on the NAV of APQ Cayman Limited, please refer to note 2.6 and note 12 for further discussion regarding the fair value of investments.
4. Segment Information
For management purposes, the Group is organised into one main operating segment, which invests in equities and credit, government and local currency bonds. All of the Group's activities are interrelated, and each activity is dependent on the others. Accordingly, all significant operating decisions are based upon analysis of the Group as one segment. The financial results from this segment are equivalent to the financial statements of the Group as a whole.
The following table analyses the Group's assets by geographical location. The basis for attributing the assets are the place of listing for the securities or for non-listed securities, country of domicile.
2017
2016
Group
$
$
Cayman
118,395,657
94,645,495
United Kingdom
457,254
-
Guernsey
3,690,890
1,128,771
122,543,801
95,774,266
5. Analysis of turnover
Year ended
31 December
2017
Period ended
31 December 2016
$
$
Dividends received from APQ Cayman Limited
10,150,252
-
Rental income
11,342
-
10,161,594
-
6. Analysis of administrative expenses
Year ended
31 December
2017
Period ended
31 December 2016
$
$
Recharge of expenses from APQ Partners LLP
-
271,345
Personnel expenses
380,526
-
Operating lease expenses
91,113
-
Depreciation expenses
7,350
-
Audit fees
78,098
72,974
Non-audit fees from auditor
-
5,560
Nominated advisor fees
98,761
53,018
Administration fees and expenses
116,544
31,582
Director's fees for Bart Turtelboom
118,666
-
Director's fees for Wayne Bulpitt
39,049
19,091
Director's fees for Richard Bray
39,049
19,091
Director's fees for Philip Soulsby
22,842
13,818
Other expenses
427,012
11,412
Professional fees
410,587
6,000
Insurance
12,798
5,118
Net exchange gains
(55,752)
-
1,786,643
509,009
7. Interest received
Year ended
31 December
2017
Period ended
31 December 2016
$
$
Loan interest received from APQ Cayman Limited
306,499
-
Bank interest received
30
-
306,529
-
During the year, the Company provided a loan of $26,472,557 to APQ Cayman Limited from the proceeds of the CULS issue. The loan is repayable on demand and the entire balance is outstanding at 31 December 2017 and is included within trade and other receivables. In addition, the Company charged interest of $306,499 to APQ Cayman Limited for the year ended 31 December 2017. This was fully received during the year and no balance was outstanding at year end. Interest is accrued on the outstanding balance of the loan at such rate as is required to enable the Company to meet its obligations to holders of its convertible unsecured loan stock 2024 in relation to the payment of interest thereon.
8. Interest paid
Year ended
31 December
2017
Period ended
31 December 2016
$
$
Interest on 3.5% Convertible Unsecured Loan Stock 2024
499,403
-
9. Earnings Per Share
The basic and diluted earnings per shares are calculated by dividing the profit or loss by the average number of ordinary shares outstanding during the year/period.
Year ended
31 December
2017
Period ended
31 December 2016
$
$
Total comprehensive income for the year/period
5,459,682
779,858
Average number of shares in issue
78,055,000
78,055,000
Earnings per share
0.06995
0.00999
For the current year and the prior period there was no dilution per ordinary share.
10. Dividends
There were no dividends paid in the period ended 31 December 2016. Dividends were declared in the year ended 31 December as follows:
Ex-dividend date
Payment date
Dividend (£)
Dividend ($)
Dividend per share (£)
Dividend per share ($)
First dividend
26 January 2017
24 February 2017
390,275
491,005
0.005
0.006
Second dividend
27 April 2017
24 May 2017
1,170,825
1,514,755
0.015
0.019
Third dividend
27 July 2017
18 August 2017
1,170,825
1,543,557
0.015
0.020
Fourth dividend
26 October 2017
27 November 2017
1,170,825
1,554,797
0.015
0.020
3,902,750
5,104,114
0.050
0.065
The stated dividend policy of the Company is to target an annualised dividend yield of 6% based on the Placing Issue Price. The past three dividend payments of £0.015 are on target with the stated policy. In addition, the Company declared a further dividend of 1.5 pence (2.08 cent) per share on 19 January 2018 in respect of the quarter ended 31 December 2017.
There is no guarantee that any dividends will be paid in respect of any financial year. The ability to pay dividends is dependent on a number of factors including the level of income returns from the Company's businesses. There can be no guarantee that the Group will achieve the target rates of return referred to in this document or that it will not sustain any capital losses through its activities.
11 Property, plant and equipment
Office
equipment
Furniture and fixtures
Leasehold
improvements
Total
$
$
$
$
Cost
At 1 January 2017
-
-
-
-
Acquired during the year*
90,308
11,449
34,588
136,345
Additions during the year
14,979
2,038
-
17,017
Disposals
(64,473)
-
-
(64,473)
Exchange differences
2,228
1,032
-
3,260
At 31 December 2017
43,042
14,519
34,588
92,149
Accumulated depreciation
At 1 January 2017
-
-
-
-
Acquired during the year*
82,512
11,360
34,588
128,460
Charge for the year
6,913
437
-
7,350
Disposals
(64,473)
-
-
(64,473)
Exchange differences
1,826
940
-
2,766
At 31December 2017
26,778
12,737
34,588
74,103
Net book value
At 31 December 2017
16,264
1,782
-
18,046
At 31 December 2016
-
-
-
*Acquired as part of acquisition of APQ Partners LLP
12. Investments
APQ Cayman Limited
$
At 1 January 2017
94,645,495
Additions
-
Fair value movement
(2,722,395)
91,923,100
APQ Cayman Limited was acquired during the prior year. APQ Global Limited wholly owns APQ Cayman Limited whose registered office of the Company is at the offices of Mourant Ozannes Corporate Services (Cayman) Limited, 94 Solaris Avenue, Camana Bay, PO Box 1348, Grand Cayman KY1-1108, Cayman Islands. The Company meets the definition of an investment entity. Therefore, it does not consolidate APQ Cayman Limited and recognises it as an investment at fair value through profit or loss.
APQ Global Limited is the managing partner of APQ Partners LLP whose registered office is at 22-23 Old Burlington Street, London, W1S 2JJ. This subsidiary is consolidated into the group financial statements. Refer to 2.4 for further detail.
Valuation techniques
APQ Cayman Limited has a portfolio of tradable assets and liabilities which it values at fair value using the same policies as the Company. The Company is able to redeem its holding of APQ Cayman Limited at its net asset value. Fair value of the investment in APQ Cayman Limited is therefore measured at its Net Asset Value.
Unlisted managed funds
The Company classifies its investments into the three levels of the fair value hierarchy based on:
Level 1: Quoted prices in active markets for identical assets or liabilities;
Level 2: Those involving inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices); and
Level3: Those with inputs for the asset or liability that are not based on observable market data (unobservable inputs).
The Company has classified its investment in APQ Cayman Limited as level 3 because its net asset value is deemed to be an unobservable input. The most significant unobservable input used in the fair value of the investment in APQ Cayman is the NAV. The movement in the investments in the year are shown above.
The movement of investments classified under level 3 is the same as the table above.
Sensitivity
The most significant unobservable input used in the fair value is the NAV of APQ Cayman Limited. A reasonable change of 5% in the NAV will have an impact of $4,596,155 (2016 - $4,732,275) on the fair value of the investment.
Further sensitivity to underlying market movements has been noted in the 2017 review.
13. Trade and other receivables
2017
2016
$
$
Trade debtors
8,667
-
Loan to APQ Cayman Limited
26,472,557
-
Prepayments and accrued income
74,730
-
Other debtors
41,267
-
26,597,221
-
During the year, the Company provided a loan of $26,472,557 to APQ Cayman Limited from the proceeds of the CULS issue. The loan is repayable on demand and the entire balance is outstanding at 31 December 2017 and is included within trade and other receivables. In addition, the Company charged interest of $306,499 to APQ Cayman Limited for the year ended 31 December 2017. This was fully received during the year and no balance was outstanding at year end. Interest is accrued on the outstanding balance of the loan at such rate as is required to enable the Company to meet its obligations to holders of its convertible unsecured loan stock 2024 in relation to the payment of interest thereon.
14. Trade and other payables
2017
2016
$
$
Trade creditors
102,944
-
Other creditors
157,421
-
Due to APQ Partners LLP
-
56,656
Accruals
154,543
87,481
414,908
144,137
15. 3.5% Convertible Unsecured Loan Stock 2024
Nominal number
of CULS
Liability
component
Equity
component
$
$
$
As at 1 January 2017
-
-
-
Issue of 3.5% Convertible Unsecured Loan Stock 2024
26,953,749
22,518,898
4,434,851
Expenses of issue
-
(759,757)
(149,626)
Amortisation of discount on issue and issue expenses
-
499,403
-
Interest paid during the year
-
(306,499)
-
Exchange differences
-
183,266
-
26,953,749
22,135,311
4,285,225
At an Extraordinary General Meeting held on 4 September 2017, Resolutions were passed approving the issue of 4,018 3.5 per cent. convertible unsecured loan stock 2024 ("CULS") to raise £20,090,000 before expenses. The CULS were admitted to trading on the International Securities Market, the London Stock Exchange's market for fixed income securities and dealings commenced at 8.00 a.m. on 5 September 2017.
Following Admission there were 4,018 CULS in issue. Holders of the CULS are entitled to convert their CULS into Ordinary Shares on a quarterly basis throughout the life of the CULS, commencing 31 December 2017, and all outstanding CULS will be repayable at par (plus any accrued interest) on 30 September 2024. The initial conversion price is 105.358 pence, being a 10 per cent. premium to the unaudited Book Value per Ordinary Share on 31 July 2017. Following conversion of 80 per cent. or more of the nominal amount of the CULS originally issued, the Company will be entitled to require remaining CULS Holders to convert their outstanding CULS into Ordinary Shares after they have been given an opportunity to have their CULS redeemed.
16. Share Capital
The issued share capital of the Company is 78,055,000 ordinary shares of no par value listed on the Channel Islands Securities Exchange and AIM.
information about the Company's capital is provided in the statement of changes in equity and in the tables below.
The shares are entitled to dividends when declared and to payment of a proportionate share of the Companies net asset value on any approved redemption date or upon winding up of the Company.
The Company's objectives for managing capital are:
• To invest the capital in investments meeting the description, risk exposure and expected return indicated in its listing documents.
• To maintain sufficient liquidity to meet the expenses of the Company, pay dividends and to meet redemption requests as they arise.
• To maintain sufficient size to make the operation of the Company cost-efficient.
• The Board has authority to purchase up to 14.99 per cent. of the issued Ordinary Share capital of the Company. The Board intends to seek a renewal of this authority at each annual general meeting of the Company. No buy backs occurred during the period under review.
Ordinary
shares
No
£
$
As at 1 January 2017
78,055,000
76,839,621
99,777,784
Transaction costs of raising equity
-
(218,000)
(283,077)
At 31 December 2017
78,055,000
76,621,621
99,494,707
16. Business combinations
On 3 February 2017, the Company 100% acquired APQ Partners LLP. The following table summarises the consideration paid, the fair value of the assets acquired, liabilities at the acquisition date.
APQ Partners
LLP
$
Cash
-
Total consideration transferred
-
Recognised amounts of identifiable assets acquired, and liabilities assumed
Cash and cash equivalents
39,862
Tangible fixed assets
7,885
Trade and other receivables
134,259
Trade and other payables
(182,006)
-
17. Commitments
Operating lease commitments
At 31 December 2017, the Group had future minimum lease payments under non-cancellable operating leases in relation to rental of the Group's premises, which fall due as follows:
2017
2016
$
$
Within 1 year
94,693
-
Within 2 to 5 years
188,607
-
283,300
-
18. Financial risk and management objectives and policies
The Group's objective in managing risk is the creation and protection of shareholder value. Risk is inherent in the Group's activities, but it is managed through a process of ongoing identification, measurement and monitoring, subject to risk limits and other controls. The process of risk management is critical to the Group's continuing profitability. The Group is exposed to market risk (which includes interest rate risk, currency risk and price risk), liquidity risk, credit risk and investment holding period risk arising from the financial instruments it holds.
Interest rate risk
Whilst the bank accounts of APQ Global Limited are not interest bearing there is no exposure to interest rate risk. In addition, the CULS are at a fixed interest rate so there is no exposure to interest rate risk.
Currency risk
The Group's functional and reporting currency is denominated in US Dollars. The Group's Ordinary Shares are denominated in Sterling. Through its activities in emerging markets the Group will have underlying exposure to a range of emerging market currencies. Accordingly, the Group's earnings may be affected favourably or unfavourably by fluctuations in currency rates. The impact of an overall increase/decrease in the NAV of APQ Cayman Limited is disclosed on page 41 of the report and accounts. The Board may engage in the future in currency hedging in seeking to mitigate foreign exchange risk although there can be no guarantees or assurances that the Group will successfully hedge against such risks.
18. Financial risk and management objectives and policies (continued)
The Group hold assets and liabilities in Pounds Sterling at year end. The following table detail the Group's assets and liabilities and the currency exposure to Pounds Sterling to the Group:
2017
2016
$
$
Cash and cash equivalents
4,005,286
1,128,872
Trade debtors
8,667
-
Loan to APQ Cayman Limited
26,472,557
-
Accrued income
812
-
Other debtors
41,206
-
Trade creditors
(102,944)
Other creditors
(157,421)
-
Due to APQ Partners LLP
-
(56,656)
Accruals
(154,543)
(87,481)
CULS
(22,135,311)
-
7,978,309
984,735
A reasonable change of 5% in the Group's Pounds Sterling net assets will have an impact of $398,915 (2016 - $49,237) on the value of the net assets.
Liquidity risk
Liquidity risk is the risk that the Group and the Company may not be able to meet a demand for cash or fund an obligation when due. The Board continuously monitor forecast and actual cash flows from operating, financing and investing activities to consider payment of dividends, repayment of the Group's outstanding debt or further investing activities.
The Group may employ borrowings in connection with its business activities. Prospective investors should be aware that in the event that the Group's income falls for whatever reason, the use of borrowings will increase the impact of such a fall on the net revenue of the Group. The Group will pay interest on any borrowing it incurs. As such, the Group is exposed to interest rate risk due to fluctuations in the prevailing market rates. Interest rate movements may affect the level of income receivable by the Group and the interest payable on the Group's variable rate borrowings.
The following table detail the Group's expected maturity for its financial assets (excluding equity) and liabilities together with the contractual undiscounted cash flow amounts:
31 December 2017
Less than 1 year
1 - 5 years
5 + years
Total
$
$
$
$
Assets
Cash and cash equivalents
4,005,434
-
-
4,005,434
Trade debtors
8,667
-
-
8,667
Loan to APQ Cayman Limited
26,472,557
-
-
26,472,557
Prepayments and accrued income
74,730
-
-
74,730
Other debtors
41,267
-
-
41,267
Trade creditors
(102,944)
-
-
(102,944)
Other creditors
(157,421)
-
-
(157,421)
Accruals
(154,543)
-
-
(154,543)
CULS
-
-
(33,528,551)
(33,528,551)
30,187,747
-
(33,528,551)
(3,340,804)
31 December 2016
Less than 1 year
1 - 5 years
5 + years
Total
$
$
$
$
Assets
Cash and cash equivalents
1,128,771
-
-
1,128,771
Due to APQ Partners LLP
(56,656)
-
-
(56,656)
Accruals
(87,481)
-
-
(87,481)
984,634
-
-
984,634
Credit risk
Credit risk is the risk that the counterparty to a financial instrument will cause a financial loss for the Group by failing to discharge an obligation. The Group generate its returns through its investment in APQ Cayman Ltd and is thus exposed to the risk of credit-related losses primarily through that investment. This is a specific investment policy of the Group. The risk of default from the investment is considered minimal because the Group is able to redeem its investment in APQ Cayman Limited at any time. The underlying assets within APQ Cayman Limited are readily tradable and thus liquid.
The Group banks with NatWest, HSBC and Barclays. NatWest has a credit rating of BBB+, HSBC has a credit rating of AA- and Barclays has a credit rating of A.
The Group's maximum exposure to credit risk in relation to the financial assets is the carrying amount as disclosed in the statement of financial position.
The Group is also exposed to the following risks through its investment in APQ Cayman Limited ("Cayman").
• Cayman has investment exposure to emerging markets, which are subject to certain risks and special considerations that are not typically associated with more developed markets and economies.
• Cayman invests in derivative instruments which can be highly volatile and may be difficult to value and/or liquidate.
• Cayman seeks exposure to emerging markets through the use of structured products which carry additional credit risks, are inherently difficult to value, illiquid and subject to counterparty risk on maturity.
• Cayman is subject to the risk of the inability of any counterparty to perform with respect to transactions, whether due to insolvency, bankruptcy or other causes. Where Cayman utilises derivative instruments, it is likely to take credit risk with regard to such counterparties and bear the risk of settlement default.
• Cayman is subject to custody risk in the event of the insolvency of the custodian or any sub-custodians.
The Group intentionally exposes itself to these risks as part of its operations. These risks are managed on an ongoing basis by performance reviews of the underlying portfolio on a quarterly basis by the Board of the Group.
19. Capital Management
The Group can raise new capital which may be implemented through the issue of a convertible debt instrument or such other form of equity or debt as may be appropriate. It also has a buy-back authority subject to a maximum buy-back of 14.99 per cent of the issued Ordinary Shares.
The Group's objectives for managing capital are:
• To invest the capital into investments through its subsidiary, APQ Cayman Limited.
• To maintain sufficient liquidity to meet the expenses of the Group and pay dividends.
• To maintain sufficient size to make the operation of the Group cost-effective.
The Group may utilise borrowings in connection with its business activities. Although there is no prescribed limit in the Articles or elsewhere on the amount of borrowings that the Group may incur, the Directors will adopt a prudent borrowing policy and oversee the level and term of any borrowings of the Group and will review the position on a regular basis.
The Group's capital comprises:
2017
2016
$
$
Share capital
99,494,707
99,777,784
Equity component of 3.5% Convertible Unsecured Loan Stock 2024
4,285,225
-
Retained earnings
1,141,163
779,858
Exchange reserve
(4,927,513)
(4,927,513)
Total shareholders' funds
99,993,582
95,630,129
20. Related party transactions
Richard Bray is also a director of the wholly owned subsidiary, APQ Cayman Limited, as well as being a director of Active Management Services Limited which is part of the Active Group as is Active Services (Guernsey) Limited.
Wayne Bulpitt founded the Active Group; he is also a shareholder of the Company.
Bart Turtelboom founded APQ Partners LLP and is also a director of APQ Cayman Limited as well as the largest shareholder of the Company.
The Directors are remunerated from the Company in the form of fees, payable monthly in arrears. Bart Turtelboom agreed to waive his entitlement to director's fees however with effect from 1 April 2017, Bart Turtelboom received an annual salary of £120,000 as Chief Executive Officer of the Company.
Year ended
31 December
2017
Period ended
31 December 2016
$
$
Bart Turtelboom
Chief Executive Officer
118,666
-
Wayne Bulpitt
Non-Executive Chairman
39,049
19,091
Richard Bray
Executive Director
39,049
19,091
Philip Soulsby
Non-Executive Director
22,842
13,818
219,606
52,000
APQ Global Limited has incurred $116,544 (2016 - $31,582) of fees and expenses to Active Services (Guernsey) Limited as administrator of the Company. As at 31 December 2017, APQ Global Limited owed $26,387 to Active Services (Guernsey) Limited (2016 - $7,683).
During the year, APQ Global Limited provided a loan of $26,472,557 to APQ Cayman Limited from the proceeds of the CULS issue. The entire balance is outstanding at 31 December 2017 and is included within trade and other receivables. In addition, APQ Global Limited charged interest of $306,499 to APQ Cayman Limited for the year ended 31 December 2017. This was fully received during the year and no balance was outstanding at year end.
APQ Global Limited has supported APQ Cayman Limited by paying directors fees of $5,000 (2016 - $1,250) during the year to Richard Bray as he is a director of both entities.
As described in the Listing Document, and under the terms of the Services Agreement, APQ Partners LLP assist the Board and the Group's management based in Guernsey with the implementation of its business strategy, provide research on business opportunities in emerging markets and provide support for cash management and risk management purposes. APQ Partners LLP are entitled to the reimbursement of expenses properly incurred on behalf of APQ Global Limited in connection with the provision of its services pursuant to the agreement. APQ Partners LLP has recharged expenses of $953,588 (2016 - $271,345) to APQ Global Limited during the year. As at 31 December 2017, APQ Global Limited was owed $134,463 from APQ Partners LLP (2016 - $56,656 due to APQ Partners LLP). In the current year amounts have been eliminated on consolidation.
21. Accounting period
The Company was incorporated on 10 May 2016; therefore, the comparatives are a short first accounting period up to 31 December 2016 represented in these financial statements. The current period relates to the results for the year ended 31 December 2017.
22. Events after the reporting period
At an Extraordinary General Meeting held on 22 December 2017, Resolutions were passed approving the further issue of its existing series of 3.5 per cent. convertible unsecured loan stock 2024. On 22 January 2018, the Company raised a further £10,207,300 ($14,492,418) before expenses through the issue of 1,982 units of 3.5 per cent. convertible unsecured loan stock 2024 in denominations of £5,000 ($7,099) nominal each, at an issue price of £5,150 ($7,312) per unit.
After the year end, a further dividend of 1.5 pence (2.08 cent) per share was declared on 19 January 2018 and was paid on 27 February 2018 in relation to the quarter ended 31 December 2017.
23. Availability of the report and accounts
Copies of the Company's report and accounts for the year to 31 December 2018 will be posted to shareholders later today. Copies will also be available to download from the Company's website at https://www.apqglobal.com/.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.ENDFR UOAWRWVANRAR
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